Completed acquisition by Tesco plc of five stores (Thurso, Bedlington, Little Lever, Ramsbottom and North Hykeham) from Somerfield plc

Affected market: Grocery retail

No. ME/3313/07

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 22(1) given on 4 December 2007. Full text of decision published 19 December 2007.

Please note that square brackets indicate text or figures which have been deleted or replaced with a range at the request of the parties and third parties for reasons of commercial confidentiality and clarity.

PARTIES

Tesco plc (Tesco) is a large grocery retailer with a portfolio of stores across the UK. In addition to its UK grocery retailing business (both food and non-food), it has various other operations in the UK, which include petrol retailing, internet shopping and the provision of financial services. Tesco's turnover was approximately £46.6 billion in the year ending February 24 2007, of which approximately £35.6 billion was generated in the UK.

Somerfield plc (Somerfield) is also a large grocery retailer operating grocery stores of various sizes throughout the UK. The five 'mid-range' stores acquired by Tesco are grocery retail outlets, selling a range principally consisting of food products along with a smaller range of non-food items.

TRANSACTION

Tesco has acquired five stores from Somerfield, one in each of Thurso, Bedlington, Little Lever, Ramsbottom and North Hykeham (the Acquired Stores). The turnover associated with these stores is estimated to be around £[ ] million.

Completion of this transaction occurred on 4 October 2007. The extended administrative deadline is 4 December 2007 and the statutory deadline expires on 3 February 2007.

JURISDICTION

As a result of this transaction Tesco and the Acquired Stores have ceased to be distinct. The parties overlap in the supply of grocery retailing and together Tesco and the Acquired 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

Third parties raised concerns about the acquisition of the stores in North Hykeham, Thurso and Ramsbottom. These concerns have been referenced and addressed in the relevant sections of the competitive analysis above.

ASSESSMENT

Tesco's acquisition of five stores (Thurso, Bedlington, Little Lever, Ramsbottom and North Hykeham) from Somerfield has given rise to an overlap in grocery retailing. With regards the acquisition of Bedlington, Little Lever and North Hykeham, there is no loss of close competition given the distance between the parties and the number of effective competitors present in these local areas, such that no competition concerns are considered to arise.

The acquisition of the store in Thurso results in the loss of a small competitive constraint imposed on the acquired store by the Tesco store in Wick (the only large grocery store in this area of Scotland) on the acquired store. However, based on the evidence provided, the OFT considers that the rivalry between the parties lost by the merger is too minor to conclude that the merger results in a realistic prospect of a substantial lessening of competition.

Similarly, with regard to Ramsbottom, the merger likewise does not combine close competitors; although third parties raised concerns about increased concentration in the local area, the effect of the acquisition on concentration is limited. Furthermore, there are effective competitors present in the local area who will continue to act as a constraint post-merger.

Consequently, the OFT does not believe that it is or may be the case that the merger has resulted or 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 22(1) of the Act.

Back to top