Anticipated acquisition by Tesco Stores Limited of two former Kwik Save Stores (Audley and Dudley)

Affected market: Grocery retail

No. ME/3343/07

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 30 October 2007. Full text of decision published 7 November 2007.

PARTIES

Tesco Stores Limited (Tesco) is a large national grocery retailer operating grocery stores of various sizes throughout the UK.

Kwik Save Stores Limited (Kwik Save) entered administration on 6 July 2007. FreshXpress Retail Limited and FreshXpress Property Limited (together FreshXpress) are carrying on Kwik Save's business under licence in continuation of and in succession to Kwik Save and with the right to direct the sale of the Kwik Save stores.

TRANSACTION

Tesco proposes to acquire two former Kwik Save stores in Audley and Dudley (the Acquisition Stores) from FreshXpress. The turnover associated with the Acquisition Stores is estimated to be around £2.8 million.

The transaction was notified by merger notice and the Office of Fair Trading's (OFT) statutory deadline for deciding whether to refer the merger to the Competition Commission (CC) is 30 October 2007.

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 post-merger 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 arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation.

THIRD PARTY VIEWS

Some third parties expressed general concerns about the increasing levels of concentration in the supermarket sector but these were not specific to this particular acquisition. One competitor had concerns about acquisition of the Dudley stores.

ASSESSMENT

Tesco overlaps with the Acquisition Stores in grocery retailing. Due to the very small market share increment, the merger does not cause any concerns at a national level. In neither of the local areas will there be, as a result of the merger, less than four effective competitors. Although third parties have expressed concerns about increased concentration in the grocery sector as a whole, any change in this respect as a result of this acquisition is negligible.

Consequently, the OFT does not believe that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

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

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