104/07    23 July 2007

The OFT has today decided not to refer the anticipated merger between Co-operative Group (CWS) Limited and United Co-operatives Limited to the Competition Commission (CC), provided that satisfactory undertakings are given to resolve competition concerns. The OFT intends to further consider the parties' divestiture package offer which will encompass around two dozen or more local Co-op retail outlets - eight supermarkets, 14 or more funeral service branches and two or more pharmacies - to address its concerns in particular local overlap areas across the UK in each of grocery retailing, funeral services and pharmacy services. If the parties do not agree to suitable undertakings then the transaction will be referred. 
 
Simon Pritchard, OFT Director of Mergers, said:

'An agreed package of Co-op divestments in this case will directly protect thousands of local consumers across the UK. At the same time, it will provide excellent return on investment to the parties and the taxpayer by avoiding a CC inquiry and unnecessary action by the OFT in many cases. The parties and OFT team in this case worked together very constructively, and the OFT particularly welcomes the parties' use of consumer survey and other economic data for affected grocery markets at local level. This meant that in many markets - around two-thirds of so-called '4 to 3' areas - we could avoid costly enforcement action where there was, in fact, no competition problem created by the merger. We strongly encourage parties in other mergers affecting UK retail markets to follow suit, starting with pre-notification dialogue.'

NOTES

1. The Reference Test - the OFT has a duty to make a reference to the CC if the OFT 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; and the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.

2. Under the Enterprise Act 2002 a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million; or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced.

3. Under section 73 of the Enterprise Act 2002 the OFT may, instead of making a reference, and for the purpose of remedying, mitigating or preventing the substantial lessening of competition concerned, or any adverse effect which has or may have resulted from it or may be expected to result from it, accept from such of the parties concerned as it considers appropriate undertakings to take such action as it considers appropriate. In doing so, the OFT will have regard to the need to achieve as comprehensive a solution as is reasonable and practicable to the substantial lessening of competition and any adverse effects resulting from it.

4. Before accepting any such undertakings under Schedule 10 of the Enterprise Act 2002, the OFT shall give notice of the proposed undertakings and will consider any representations made in accordance with that notice.

5. The full text of this decision will appear in the mergers section.