Anticipated acquisition by Tesco Stores Limited of a store in Paisley from Somerfield plc

Affected market: Groceries

No. ME/3611/08

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 April 2008. Full text of decision published 14 May 2008.

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

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 £46.6 billion for the year ending 24 February 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.

TRANSACTION

Tesco proposes to acquire a grocery store in Paisley (Acquired Store) currently operated by Somerfield. The Acquired Store is currently trading and has a floor space of 18,748 square feet (1,742 square metres), and a UK turnover of [less than £70 million].

Tesco notified the transaction to the OFT by a Merger Notice. The period for considering the Merger Notice commenced on 3 April 2008, and the (unextended) statutory deadline expires on 30 April 2008.

JURISDICTION

As a result of this transaction Tesco and the Acquired Store have ceased to be distinct. The parties overlap in the supply of grocery retailing and together Tesco and the Acquired Store 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 generally had no concerns regarding the merger. One third party raised a number of general concerns regarding the grocery sector, none of which are materially affected by the merger.

Another third party suggested that their plans to open a store in the local area could be affected by the acquisition. However, the new entrant is not one which the OFT would consider to be an effective competitor to the merging parties in relation to one-stop stores. Hence the potential entry (or otherwise) of the third party would not impact the competitive assessment in this case.

ASSESSMENT

Tesco overlaps with the Acquired Store in grocery retailing. Due to the very small market share increment, the merger does not cause any concerns at a national level. At a local level, the Acquired Store passed each of the established fascia/isochrone tests that have recently been used to test local competition in the grocery sector, and the OFT received no evidence to suggest that there were any local conditions of competition in the Paisley area that would support widening the scope of its analysis in this case.

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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