Anticipated acquisition by Tesco plc of six former Somerfield stores from Co-operative Group Ltd

Affected market: Grocery retail

No. ME/4056-09

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, third party views, assessment and decision.

The OFT's decision on reference under section 33(1) given on 18 March 2009. Full text of decision published 25 March 2009.

PARTIES

Tesco plc (Tesco) is predominantly a grocery retailer with a portfolio of stores across the UK. In addition to its UK grocery retailing business (both food and non-food), Tesco has a number of other operations in the UK, which include petrol retailing, internet shopping and the provision of financial services. Tesco's turnover for the financial year to 23 February 2008 was £51.8 billion, of which approximately £37.9 billion was achieved in the UK.

Co-operative Group Limited (CGL), a grocery retailer, acquired the grocery retailer Somerfield Limited (Somerfield) on 27 February 2009. Tesco proposes to acquire six former Somerfield stores from CGL in Newcastle, Liverpool, Bath, Peebles, Hungerford and Middlewich (the Acquisition Stores).  Four of these are mid-sized stores and two are convenience stores.

TRANSACTION

Tesco notified the transaction to the OFT by a Merger Notice. The period for considering the Merger Notice commenced on 20 February 2009, and the (unextended) statutory deadline expired on 19 March 2009.

JURISDICTION

As a result of this transaction Tesco and the Acquisition Stores will cease to be distinct. The parties overlap in the supply of grocery retailing and together Tesco and the Acquisition Stores will account for over 25 per cent of all grocery retailing in the UK.  As a consequence the share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met. The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.

THIRD PARTY VIEWS

During the course of its investigation the OFT solicited views from a number of grocery retailers. Only one third party raised concerns regarding the effect of the proposed acquisition on competition at the national level. No third party told the OFT that the proposed acquisition raised competition concerns at the local level.

ASSESSMENT

The parties overlap in the supply of grocery retailing in the UK. The OFT has not identified any competition concerns at a national level, given the negligible accretion to Tesco's market share of grocery retailing and to its position relative to its suppliers. At a local level, three of the Acquisition Stores do not overlap with any relevant Tesco store. In the local areas surrounding the three remaining Acquisition Stores, effective competitors will remain in sufficient numbers (that is, three or more) following the acquisition and therefore competition concerns do not arise at a local level.
 
Consequently, the OFT does not believe that it is or may be the case that the acquisition may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This acquisition will therefore not be referred to the Competition Commission under section 33(1) of the Act.

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