Retail Therapy: a Cross-Country Comparison of Merger Control

Retail Therapy: A cross-country comparison of merger control remedies practice and experience in the wholesaling and retailing sectors of France, Germany, Italy, the Netherlands, Spain and the United Kingdom

Thomas Hoehn, Suzanne Rab and Grant Saggers

Reprinted from European Competition Law Review Issue 4, 2009

Sweet & Maxwell 100 Avenue Road Swiss Cottage London NW3 3PF (Law Publishers)

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review of over 500 merger remedy decisions across 30 Retail Therapy: A European countries, including all the European Union Member States (referred to as ‘‘the Europe 30’’), to cross-country examine trends in the number of interventions and types of remedies. It so far has focused only on merger cases examined by the national competition authorities and comparison of merger not those multinational mergers which fall exclusively within the jurisdiction of the European Commission control remedies under Regulation 139/2004 (European Community Merger Regulation (ECMR)) [2004] OJ L24/1.2 practice and To undertake a comparative sectoral analysis, it was necessary to select a group of ‘‘European peers’’ with experience in the broadly similar states of economic development and with advanced merger control regimes over a long period. The wholesaling and detailed review therefore focused on six major European competition law regimes, which form the case studies for this article: France, Germany, Italy, the Netherlands, retailing sectors of Spain and the United Kingdom (referred to in this article as ‘‘the Big 6’’). A review of the Big 6 is interesting given France, Germany, that, as a block, they account for over 40 per cent of all merger remedy cases reviewed in the project, and for Italy, the Netherlands, over 60 per cent of the 30 reviewed countries in Gross Domestic Product (GDP) terms. Spain and the United As merger remedies could be likened, in many respects, to a sort of industry ‘‘restructuring’’ by the authorities, a sector-based approach, taking account Kingdom of the specific features of the relevant market, would seem to be a productive area of inquiry. Understanding Thomas Hoehn, Suzanne Rab and Grant common themes and trends within a particular sector has relevance and value to market participants, deal Saggers* makers and regulators in that sector. Further, this more in-depth and focused investigation allows us to tune the analysis into the process of competition that prevails in a particular sector, and to understand how that process Competition policy; EC law; Economic may differ from those of other sectors. conditions; France; Germany; Italy; Mergers; National An analysis of 172 merger remedy decisions in the Big competition authorities; Netherlands; Remedies; Retail 6 between 2000 and 2007 shows that ‘‘wholesale and trade; Spain retail’’ has been the sector with the greatest number of merger remedy cases, reflecting the importance Introduction of this sector in the relevant economies and the fact that concentration in this sector can lead to This article is the first in a series of articles that competition concerns given the local nature of the provide a comparative analysis of national merger markets involved. Wholesale and retail—the focus of remedies decisions in six major European countries from this article—represents a relatively ‘‘traditional’’ sector, an industry perspective. The analysis builds on data where competition is effected largely on the basis collected in the course of the e-Competitions Merger of price, location, product variety and service. In a Remedies Matrix project.1 The project has entailed the companion article we explore merger remedies in the information and communication sector. Information * Thomas Hoehn and Grant Saggers are partner and senior and communication was chosen to contrast with associate respectively in the Economics practice at Pricewater- wholesale and retail as a more diverse and dynamic houseCoopers LLP. Suzanne Rab is counsel in the Antitrust practice at Hogan & Hartson LLP in London. The authors sector, where technological innovation and product would like to thank Olga Nuryaeva of PricewaterhouseCoopers LLP, for her comments and assistance in the preparation of this article. The views expressed remain those of the authors. 2 However, some cases in our review concerned referrals back 1 The e-Competitions Merger Remedies Matrix is sponsored to the national authorities under art.9 of the ECMR, for example by Clifford Chance LLP and PricewaterhouseCoopers LLP. Carrefour/Promodes, decision of July 5, 2000 (France), and Cie For further details see http://www.concurrences.com [Accessed des Salins du Midi (CSME)/MDPA-SCPA-ROCK, decision of January 26, 2009]. September 1, 1999 (France).

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Table 1: Merger remedies interventions—Big 6

Country Earliest 2000 2001 2002 2003 2004 2005 2006 2007 Total case in review France January 7 7 7 6 7 7 4 6 51 26, 2000 Germany May 2, n/a n/a n/a 6 2 5 6 8 27 2003 Italy February n/a 1 4 2 0 2 5 4 18 28, 2001 Netherlands March 13, 3 1 1 1 1 1 3 1 12 2000 Spain May 4, 2 3 3 2 3 3 6 4 26 2000 United Kingdom January 9, n/a n/a n/a n/a 8 8 11 11 38 2004 Big 6 12 12 15 17 21 26 35 34 172 Source: Authors’ calculations based on data from Merger Remedies Matrix http://www.concurrences.com. Cases are categorised by decision date rather than notification date. convergence are key drivers of the competitive process. this being a natural start date given the implementation The sector also raises issues beyond competition, notably of new merger control legislation, the Enterprise Act of the need to safeguard media plurality. 2002, in 2003. This article is organised as follows: There are some interesting trends. First, bearing in mind that we do not have data for some countries in the • Section 1 provides a brief overview of the earlier years, there is still a discernible increase in the methodology used in our analysis and the merger number of merger remedy cases each year in the Big 6. remedies experience across the Big 6 to set the This is as expected, given the peak of the merger cycle in context to the sector review that follows. 2006/2007. Secondly, from 2004 onwards we see that • Section 2 gives a brief overview of some of the the UK competition authorities have had significantly evolving competitive experience in the wholesale more merger remedy cases than the other countries in and retail sector in the Big 6, and some specific the review. Thirdly, France appears to have had a stable economic issues that drive consolidation in this (even marginally weakening) number of merger remedy sector and which frame the assessment of mergers cases. and merger remedies by the competition authorities. As discussed in more detail in our Merger Reme- • Section 3 analyses the merger remedies experience dies Matrix Synthesis Report,3 our research across the in this sector. Big 6 indicates a tendency to accept structural over • Section 4 draws together the broad conclusions behavioural remedies but there are some idiosyncrasies, of the article and areas for future inquiry. as illustrated in Figure 1. Structural only remedies dom- • Annex 1 sets out the cases in our review. inate in Germany, the Netherlands and the United Kingdom. However, the authorities in Spain, France and Italy appear to show a tendency towards behavioural 1. Merger remedies interventions in the Big 6 commitments, often in conjunction with structural commitments. by sector Figure 2 sets out the number of merger remedy cases by industry sector across the Big 6 between 2000 and Focusing on the period 2000 to 2007, our analysis 2007. It shows that the wholesale and retail sector has includes some 172 merger remedy decisions in the Big the highest number of merger remedy cases, reflecting 6. Table 1 sets out the number of merger remedy cases the nature and importance of the sector. in each country. It must be noted that the time-series Our sector review of national remedies cases is based for each country is different (this is indicated by the on the classification in the UK Standard Industrial earliest case in our review). For example, we focused on the period 2004 onwards for the United Kingdom, 3 http://www.concurrences.com.

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70 Structural only Behavioural only Mixed

Number of Cases 30

0 France Germany Italy Netherlands Spain UK Big 6

Figure 1: Merger remedies by type across the Big 6 Source: Authors’ calculations based on data from Merger Remedies Matrix http://www.concurrences.com.There are different lengths of time-series for each country as per Table 1.

Wholesale and retail trade; repair of motor vehicles and motor cycles 17.8%

Information and communication 15.0%

Transport and storage 10.0%

Manufacturing 8.9%

Arts, entertainment and recreation 8.3%

Financial and insurance services 6.7%

Electricity, gas steam and air conditioning supply 6.7%

Professional, scientific and technical activities 5.6%

Human health and social work activities 4.4%

Other service activities 4.4%

Construction 3.9%

Water supply, sewerage, waste management and remediation activities 3.9%

Agriculture, forestry and fishing 2.8%

Public administration and defence; compulsory social security 1.1%

Mining and quarrying 0.6%

Figure 2: Merger remedies by major sector across the Big 6 Source: Authors’ calculations based on data from Merger Remedies Matrix http://www.concurrences.com.Where a case spans two or more sectors, it has been counted in each.

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Table 2: Remedies interventions in wholesale and Some features of the sector retail mergers—Big 6 Role of retailers and wholesalers SIC division Remedies cases Retailers respond to the needs of the end consumer who can typically be characterised as small (a given purchase 45 Wholesale and retail trade and 2 forms a small part both of the consumer’s expenditure repair of motor vehicles and motor- and of the retailer’s total sales), immobile (unwilling cycles. to travel long distances to find cheaper products), and 46 Wholesale trade, except of motor 9 relatively uninformed (consumers might not know about vehicles and motorcycles. all products on offer or the prices of these products, or 47 Retail trade, except of motor 25 be unable to easily differentiate the quality of different vehicles and motorcycles. products).7 Therefore, retailers tend to be located near the customers and compete on the basis of price, quality Source: Authors’ calculations based on data from Merger Remedies Matrix http://www.concurrences.com. The choice and service. Wholesalers, on the other hand, are more of SIC division is based on the relevant market in which the likely to face larger and better informed customers (the remedy was applied. Some cases cross more than one SIC retailers themselves), who also control the gateway division. to the final consumers but provide essential logistical functions as well as bargaining power with upstream manufacturers. Classification of Economic Activities (SIC). The SIC is reasonably consistent with other international norms in Retailer concentration is high within most this area.4 However, it must be recognised that the SIC Member States classifications by their nature are wide and that finer The retail sector is typically highly concentrated, disaggregation would be required to examine merger particularly in the groceries segment. For example, remedies in a particular case. research by Defra in 2004 showed that across the EU15, Table 2 identifies the number of merger remedy cases on average, the top five grocery retailers in a country in the wholesale and retail sector in the period 2000– had a combined market share of around 50 per cent, 2007 across the Big 6,5 a total of 32 cases.6 It is and the top three grocery retailers in a country had noteworthy that the majority of merger remedy cases a market share of just under 40 per cent.8 The levels are at the retail level rather than the wholesale level. of concentration (for 5-firm and 3-firm concentration This might be explained by, amongst other things, ratios) in the United Kingdom, France and Germany competition taking place in narrower (local) markets exceed this average. Italy is a notable exception with at the retail level, and the fact that wholesalers are more its top five largest grocery retailers occupying only 20 likely to face customers with buyer power. per cent of the market, indicating that within Italy, the segment remains fragmented with the greater prevalence of traditional retail formats and a substantial degree of regional diversity. Similarly, the markets in the 2. Some sector specific perspectives Member States that have joined the European Union more recently tend to be less mature and are usually less As a backdrop for the analysis that follows, we identify concentrated. a number of important structural and competitive trends As grocery retailers expand into non-grocery product or ‘‘stylised facts’’ relating to the wholesale and retail lines (toiletries, electronics, clothing), the pressure markets in the Big 6, as well as some of the regulatory for greater efficiency and consolidation among other and competition issues that play out in this sector. retailers also tends to increase. These not only provide colour for our analysis but also permeate the approach of the competition authorities Retailersellerpowermaygohandinhandwith when looking at mergers in this sector. buyer power The high degree of concentration and the sheer scale of the leading retailers afford them, potentially, a strong 4 The Standard Industrial Classification of Economic Activities bargaining position against suppliers. The buyer power (SIC) system is identical to the NACE (statistical classification of economic sectors) system at the four digit class level. 5 The reader is reminded that for Germany and the UK, the data 7 See London Economics, ‘‘Competition in Retailing’’ (Research series start in 2003 and 2004, respectively. Report No.13 prepared for the UK Office of Fair Trading, 6 The number of remedies cases for a particular division will not London, 1997). necessarily correlate with the number of actual remedies cases 8 Department for Environment, Food and Rural Affairs (Defra), (as cases may straddle a division), nor with the number of actual ‘‘Economic Note on UK Grocery Retailing’’ (2006), available at: remedies (as multiple remedies may have been imposed in an https://statistics.defra.gov.uk/esg/reports/Groceries%20paper% individual case). 20May%202006.pdf [Accessed January 26, 2009].

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Table 3: The number of countries of operation for from economies of scale in purchasing, distribution and the global top 100 retailers by sales marketing, as well as more simplified store formats that offer a narrower range of choice on each product and Number of countries of 1986 1996 2004 typically the discounters’ own-branded products (which operation are typically cheaper than the equivalent branded prod- 1534029uct). Figure 3 demonstrates the strong presence that discount stores (like Lidl and Aldi) have already achieved 2–4 31 25 21 in Germany and Norway. With the weakening economic 5–9 11 17 18 situation across Europe, the importance of discount 10–19 4 13 20 retailing and the market shares of large discounters are likely to grow. 20+ 1512 Average number of coun- 2.8 5.5 10.0 tries of operation for top Legal and regulatory framework 100 retailers Source: Dawson, ‘‘Retailer internationalisation: What In the absence of a sector-specific regulation for mergers is being internationalised?’’ (Workshop on Globaliz- in the wholesale and retail sector, such mergers are ing Retail: Transnational Retail, Supply Chains and the Global Economy, University of Surrey School considered under the normal merger control rules of the of Management, July 17–18, 2006), available at: Big 6. There are no specific ownership restrictions on http://www.som.surrey.ac.uk/research/groups/globalizing mergers in the sector in the Big 6, albeit expansion of retailseminar/Dawson.pdf [Accessed January 26, 2009]. retail outlets may require specific planning approvals.10 It is noteworthy that the Big 6 competition authorities exercised by the large retailers is beneficial to consumer have also considered competition in the retail sector as interests as long as the lower supplier prices are passed part of their mainstream competition powers, quite apart on to consumers in lower retail prices. Buyer power from merger control proceedings. This makes for an also encourages suppliers to be efficient, competitive interesting interplay between the authorities’ assessment and market-orientated. Nevertheless, there have been of mergers in the sector and their wider competition law concerns that retailers may transfer excessive risk or enforcement. unexpected costs on to their suppliers, which may The UK competition authorities have been particularly lessen suppliers’ incentives to invest in new capacity active in this sector outside the area of merger 9 and products. control, and have repeatedly put the spotlight on the grocery market through market inquiries and cartel Cross-border operations are expanding investigations.11 With domestic markets often already relatively concen- In 1999, the Competition Commission’s inquiry trated, many larger retailers in the European Union investigated public concerns that the grocery prices Member States (and around the globe) are increasingly in the United Kingdom were significantly above prices looking towards cross-border expansion as a growth observed in other apparently comparable countries, and strategy. Table 3 shows that whereas in 1986 the top that supermarkets were not passing on the reductions in 100 retailers in the world (by sales) operated in, on farm-gate prices to their consumers. The Competition average, fewer than three countries each, by 2004 this Commission found no evidence that the higher prices in figure had risen to an average of 10. The grocery retailers the United Kingdom were a result of grocery retailers Carrefour, Tesco, Aldi and Lidl have been amongst the acting in an anti-competitive manner or that the lower leaders in this cross-border expansion, each significantly farm prices were not in fact passed on. The Competition increasing their international presence in recent years. Commission was further concerned about the practices of below-cost selling of certain products and differential The role of the discounters is expanding as a prices in different regions. However, no remedial actions competitive force were recommended to address this behaviour because Large discount retail chains are rapidly gaining strength all potential remedies were considered undesirable, in the markets across Europe. These stores can some- disproportionate or impractical. The Competition times offer substantially lower prices than ordinary inde- Commission did, however, recommend introducing a pendent supermarkets. These larger discounters benefit

10 For example, there are particular provinces in Spain in which 9 See, for example, the UK Competition Commis- licences are required for the opening or expansion of large retail sion’s ‘‘Market investigation into the supply of gro- stores. ceries in the UK’’, (April 20, 2008). Available 11 For example, the Ofﬁce of Fair Trading has conducted in- at: http://www.competition-commission.org.uk/rep pub/reports/ depth investigations into alleged collusion in the sale of tobacco 2008/538grocery.htm [Accessed January 26, 2009]. and in the sale of milk.

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Discount stores, market share in 2007 (%) 5

0 Norway Germany Austria Belgium Spain France Italy Britain

Figure 3: Market share of discount stores Source: ‘‘The Germans are coming’’, The Economist, August 14, 2008, available at: http://www.economist.com/ business/displaystory.cfm?story id=11920665 [Accessed January 26, 2009].

Code of Practice to regulate the conduct between the As in its previous investigation, the Competition supermarkets and their suppliers. Commission also found transfer of excessive risk and In another major inquiry into the groceries market, unexpected costs by grocery retailers to their suppliers the Competition Commission in 2008 concluded through various supply chain practices and created that the market was broadly competitive, but that a strengthened Code of Practice to protect grocery several grocery retailers had strong positions in a suppliers. number of local markets. The Competition Commission In Germany, the competition authorities have not expressed concern that entry barriers around these recently undertaken a similar in-depth sector investiga- local markets might prevent competing grocery retailers tion, but have expressed concern about concentration in entering these markets. The Competition Commission, the retail sector.13 The German competition authorities therefore, required large grocery retailers to release have pursued a number of cases based on complaints land agreements which were likely to restrict entry of by affected parties into the alleged exploitation of buyer competitors in a number of local markets, and also power by grocery retailers in Germany. In several cases, recommended the inclusion of a ‘‘competition test’’ in the German competition authorities have closed pro- planning decisions in relation to larger grocery stores ceedings after the retailers concerned agreed to stop to encourage entry of new competitors. At the time pressuring their suppliers to pass on to them certain of writing, Tesco was in the process of challenging refunds granted by other ﬁrms. the Competition Commission’s recommendation with In France, the competition authorities have not respect to the planning process to the Competition conducted an in-depth sector review, but have examined Appeal Tribunal.12 The outcome will be informative in practices within the sector through a number of determining the extent to which the Competition Appeal cases concerning below-cost selling by grocery retailers Tribunal will review decisions of the Competition (a practice which is prohibited in France) and 14 Commission on market investigations and also the scope discriminatory pricing by wholesalers. As in some for further consolidation among the largest retailers. regions of Spain, there are regulations in France This is effectively the ﬁrst challenge to any decision by the Competition Commission in a market investigation 13 For example, ‘‘Der Lebensmitteleinzelhandel in Deutschland hat in den letzten Jahren einen sehr hohen Grad der under the Enterprise Act 2002. Konzentration erfahren.’’ [Translation ‘‘During the last years the food retail sector in Germany has become highly concentrated.’’] in EDEKA/Tengelmann (case number: B2-333/07), June 30, 12 The main hearing in this matter took place between 2008, at 35. November 11 and 13, 2008. At the time of writing, judgment 14 The prohibition on below-cost selling had been blamed for was still pending. high food prices in France, as grocery retailers are not able to

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regarding the need to acquire permission before opening Access to quality infrastructure and brand a new large grocery store. The ability to reach customers and compete may be The Netherlands has not, as yet, had an in-depth affected by access to outlets/sites or distribution net- market investigation into the retail and wholesale sector works. Certain brands might also be important gateways but has reviewed the sector in some high-profile retail to particular segments of customers. Therefore, a com- mergers. pany may aim to acquire a target company that already has an existing strong infrastructure or ‘‘following’’ amongst customers. For example, a key advantage of The economic drivers of mergers in the wholesale and the ROCK joint venture between Cie des Salins du retail sector Midi (CSME) and MDPA in France in 1999 was that it created a nationwide distribution network for de-icing salt.15 De-icing salt cannot be transported over long dis- There are a number of drivers for consolidation affecting tances, so access to storage depots in key locations is mergers in the wholesale and retail sector. Some of the critical to any company’s ability to compete. The French key drivers (which have permeated the cases we have competition authorities cleared the joint venture subject reviewed) include: to commitments to divest a number of storage depots and to supply competitors from ROCK’s depots under Buyer power certain conditions. Compared to two separate firms, a larger merged entity can be expected to have a stronger negotiating Diversification and growth position with its suppliers. The cost savings that would The retail and wholesale transactions covered in this be afforded to the larger firm through this increased study are mostly national in scope and involve the negotiating power and access to volume discounts could mergers between parties whose operations overlap in enhance its profitability, either through it keeping the a single country. However, many acquisitions in this cost-saving for itself or by it passing some of the savings sector have been transnational and aimed at extending on to its customers through lower prices that allow it to the companies’ retail (or wholesale) footprint into other gain market share. A further way in which larger size countries. For example, in 1999, the US giant Wal-Mart may increase the merged entity’s negotiating power is acquired Asda—a leading UK supermarket group— through it rolling out its own private label products. The to bolster its presence in Europe. Such transactions likelihood that a private label strategy would be viable enable companies to diversify their portfolio (across tends to be increased for a larger merged firm (compared both products and locations) and capture growth in less to two smaller independent operators) as size allows it mature markets. to reap the benefits of increased production efficiency.

Cost synergies Competition issues in wholesale and retail mergers As with mergers in most sectors, the merged entity could potentially realise cost savings by removing the duplica- As discussed earlier, the merging parties may realise tion of certain expenditures. However, these cost syn- significant cost savings and efficiencies that make them, ergies could be particularly substantial in the wholesale as a merged entity, a stronger competitor that delivers and retail sector, where marketing/advertising, distribu- better prices and choice to consumers. Given the tion, and administrative costs are likely to be significant. often concentrated national markets and in some cases The parties could expect significant cost savings to result vertically-integrated company structures, competition from elimination or reduction in the cost of duplicated authorities are naturally sensitive to the possibility that services. The parties to the merger may also be able certain mergers may lead to harm to competition and to achieve some savings through closing overlapping consumers. Here we comment on the issues that can outlets and the headquarters or other administration arise in this sector, and which are reflected in the cases functions of one of the parties. we have reviewed. This is not to comment on the extent to which such concerns are borne out in practice, merely to highlight the competition challenges that mergers in pass rebates on to customers. The Loi Chatel, adopted in January the wholesale and retail sector have tended to present. 2008, now allows retailers to subtract the value of all rebates The principal competition concerns arising from and commercial services from the invoice price, which has had the effect of lowering the threshold below which below-cost mergers in the wholesale and retail sector have been selling is prohibited. In its recent report, the Attali Commission horizontal in nature. recommended the abolition of the law prohibiting below-cost selling of groceries (Sourced from UK Competition Commission, ‘‘Market investigation into the supply of groceries in the UK’’ 15 Cie des Salins du Midi (CSME)/MDPA-SCPA-ROCK, 2008, p.25). decision of September 1, 1999 (France).

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Unilateral effects retailers and wholesalers may have a great deal of buyer The bringing together of two previously direct (or power in relation to their suppliers. The logic of this potentially direct) competitors may give the merged concern is that through their size, these wholesalers entity the ability to unilaterally raise its prices to and retailers are able to buy in bulk from suppliers consumers (or equivalently, reduce the scope of choice, (who in turn benefit from greater economies of scale) quality or services to consumers). and therefore negotiate lower priced goods. These firms Retail markets are often narrow in geographic scope, can then pass on lower prices to consumers, whilst still as customers tend to be unwilling to incur the costs of retaining good profit margins, raising concerns that their searching and travelling far afield for the small volume of smaller competitors, who cannot sell at these prices, are goods that they buy (wholesale customers may in general forced out of the market. Whilst low prices may be be willing to travel further as they will be purchasing beneficial to consumers in the short run, over the longer larger volumes of product, and therefore will realise term, as smaller retailers exit the market, consumers greater savings if they find marginally cheaper products may face reduced choice and higher prices. Large from suppliers outside of their local area). For example, retailers and wholesalers might also be able to use their markets for groceries are typically defined very narrowly favourable negotiating position to transfer excessive (often in terms of isochrones around the affected branch risks or unexpected costs to their suppliers through or store measured by kilometres or driving/walking strict contracts. If these firms own the ‘‘gateways’’ to the times). These local markets may then be considered customers of the suppliers’ product, the suppliers may susceptible to competition problems, as consumers may not have alternative ways to reach customers. This may be limited in their choice of stores and entrants may be be likely to reduce the suppliers’ incentive to invest in limited in the available sites where they could open new capacity, products and production processes. For new stores. Mergers that bring together established the consumer, this may ultimately mean lower quality competitors in these local markets could augment the goods and less choice. merged entity’s market power if the merging parties were close competitors beforehand and few alternative Co-ordinated effects suppliers would remain for customers post-transaction. Oligopolistic market structures raise the possibility that A related concern is that the merged entity—if it were firms can co-ordinate their activity. There is also concern to become a very large presence in the local market— that in markets with only a few large players, the might also have the power to distort competition participating firms will recognise the interdependence further through predatory strategies (such as below- of their prices and sales, and that they will find it in cost pricing). These practices may exclude existing their common interest to avoid mutually destructive smaller competitors, and can augment barriers to entry rivalry. Recognition of their common interest in such entrenching the merged entity’s incumbency. circumstances may be sufficient to lead to increased In the local market, another barrier to entry which prices (or deterred price cuts) even without explicit large, horizontally-integrated firms may be able to collusion. exploit is the shortage of available land for new stores, Mergers in oligopolistic markets may at times be arising in part from the planning system. Large firms scrutinised for potential co-ordinated effects. are better able to absorb the costs associated with site The merger of the beer manufacturers Mahou and San assembly and submitting a planning application, as well Miguel in Spain in 2000 raised concerns of collective as the risk of planning applications being rejected. It dominance for the Spanish competition authorities.17 is likely, also, that they will have substantially more The merged entity, together with another competitor, experience of the planning system than new entrants. Damm, would control over 80 per cent of the Spanish The incumbent wholesale or retail store owner may also hospitality market. Given the low price elasticity of buy up land that may be an attractive plot for a new demand in the market, the homogenous nature of entrant, directly preventing their entry into the market. the product, and the existence of sizeable barriers to An example from Germany is the Globus/hela entry (for example, the exclusive contracts between beer Profizentren merger, in which divestiture remedies producers and distributors in the hospitality sector), included the transfer of the lease, goodwill, and the the Spanish authorities were concerned that the merger operating permissions of several buildings held by the would give the merged entity and Damm substantial parties in question to their competitors, to prevent collective pricing power. The merger was ultimately them from gaining a dominant position in the relevant approved, subject to commitments that facilitated entry regional markets.16 into the market and enhanced the incentives of the A further concern about strong concentration at merged entity actively to compete with Damm. the retailer and wholesaler levels is that the large Similar concerns that concentrated markets would lead to co-ordination were at the heart of the 16 Globus/hela Profizentren, decision of December 5, 2007 (Germany). 17 Mahou/San Miguel, decision of October 10, 2000 (Spain).

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competition authorities’ assessment of the bids for the In 2000, the retailer Casino proposed to acquire the Safeway retail chain in the United Kingdom in 2003.18 Monoprix supermarket chain.20 The French competition Safeway, the United Kingdom’s fourth-largest grocery authorities noted that Casino might use Monoprix’s retailer, had been underperforming and was approached links with the downstream central purchasing agency for takeover by each of the other large retailers Francap and its own existing links to the other in the United Kingdom—Asda Group Ltd (Asda); J central purchasing agency Opera to reduce competition Sainsbury Plc (Sainsbury); Wm Morrison Supermarkets with other retailers. This indirect affiliation with a Plc (Morrisons); and Tesco Plc (Tesco). Tesco, Sainsbury competitor was considered by the competition authority and Asda were the top three national grocery chains in to potentially lead to collective dominance in the Paris the United Kingdom, while Morrisons was considered a market. To remedy this, the parties offered to renounce strong regional player rather than a national player. The restrictive clauses on Francap’s behaviour. Competition Commission assessed each of the potential combinations with Safeway and found that mergers with Tesco, Asda, or Sainsbury would significantly enhance 3. Remedies landscape the potential and likelihood of co-ordinated behaviour at the national level. This was because of the already As shown in Figure 2, wholesale and retail mergers were concentrated market, the high entry barriers involved the sector with the largest number of merger remedy in retailing, and the already high level of monitoring of cases in the Big 6. competitors’ price and non-price offerings by each of the For this sample of 32 cases, divestiture has been the big firms. Therefore, the merger between Morrisons and preferred remedy to resolve competition issues. This is Safeway was allowed subject to a divestment remedy. shown in Figure 4. The reason for the prevalence of structural remedies derives to a large extent from the Vertical issues local features of retail markets and the fact that horizontal competition issues tend to be confined to specific There are a number of advantages that vertically inte- areas of overlap. This makes divestiture of outlets a typi- grated firms in the wholesale and retail market may have cal remedy in our sample of cases, with examples spread over their non-integrated competitors. This is mainly due across the sector and including specialist wholesale,21 to the increased control they have over their products food retailing,22 DIY retailing,23 retail pharmacy,24 (from factors such as design to timing of delivery), from motor vehicle retailing25 and other consumer goods.26 manufacturing through to retailing. Vertical integration A classic example is the merger between the two typically delivers efficiencies to the merging parties that French-based multinational companies Carrefour and can result in lower priced and better quality products to Promodes in 2000. Both companies were active in the the consumer. However, in some cases where the merg- retailing of daily consumer products in hypermarkets, ing entity has strong market power at a particular level of supermarkets and discount stores in several European the production chain, a concern arises that it can use this countries. The European Commission concluded that the power to strategically soften competition through fore- operation was compatible with the Common Market, closure of rivals and potentially facilitating collusion. subject to commitments given by Carrefour.27 At the Vertical concerns are highlighted in the 2003 French French Government’s request the European Commission merger of two wholesale distributors of suspended ceilings and general construction materials, Point P, referred the transaction to the French competition a subsidiary of Saint Gobain, and Dubois Materiaux.19 authorities for review of 99 local market areas identified. The merger had both vertical and horizontal dimensions. The French competition authorities concluded that the The vertical issue concerned the possibility that the merger would give Carrefour strong market positions in merged entity might foreclose a rival of Saint Gobain. Dubois Materiaux was a main distributor for the 20 Casino/Monoprix, decision of October 2, 2000 (France). 21 For example, DISA/Shell, decision of December 20, 2004 only significant competitor to Saint Gobain in the (Spain). suspended ceiling manufacturing market. The merger 22 For example, Galeries Lafayette/Marks and Spencer, decision could therefore potentially foreclose this competitor’s of December 24, 2001 (France). 23 For example, Leroy-Merlin/OBI, decision of February 10, access to wholesale distribution of its products. 2003 (France). 24 For example, Boots/Alliance UniChem, decision of July 19, 18 On March 19, 2003, the Secretary of State for Trade 2006 (UK). and Industry made four references to the Competition 25 For example, Pendragon/Reg Vardy, decision of October 18, Commission under the Fair Trading Act 1973. Although this 2006 (UK). case was not considered under the Enterprise Act 2002, 26 As examples, Somerfield/Wm Morrison, decision of Septem- we allow ourselves a reference to it given its interest for ber 2, 2000 (UK) and Carrefour/Promodes, decision of July 5, the point at issue. See the UK Competition Commission 2000 (France). website at http://www.competition-commission.org.uk/inquiries/ 27 European Commission Decision of 25 January 2000 completed/2003/safeway/ [Accessed January 26, 2009]. declaring a concentration to be compatible with the Common 19 Point P/Dubois Materiaux, decision of August 7, 2003 Market according to Council Regulation (EEC) 4064/89 (France). (COMP/M.1684- Carrefour/Promodes).

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27 local areas, and required the parties to divest 34 stores retail sales areas in a fourth local area (Istres) as through sales or the termination of franchise agreements, well as in Strasbourg, where the overlap remained as well as a commitment to restrict the opening of new, significant even after the divestment. or the expansion of existing, stores in areas in which • A case from the United Kingdom indicates that the parties had divested stores.28 The transaction was quite extensive divestiture remedies may be required also reviewed in Spain where the Spanish competition to remove concerns in local markets. In relation to authorities ultimately cleared the merger subject to the the merger between Boots and Alliance UniChem, divestiture of hypermarkets and supermarkets in 17 the Office of Fair Trading considered the sectors of geographic areas.29 retail pharmacy and wholesaling of pharmaceuti- We observe that although the Spanish competition cals, as well as contract manufacturing of certain authorities showed a preference for behavioural com- beauty and personal care products.32 The Office mitments overall, they have frequently used structural of Fair Trading identified a substantial lessening remedies in this sector. However, France demonstrates of competition in 38 local overlap areas (within a a bias for behavioural remedies (either standalone or one mile radius) where there would be no other mixed with a structural commitment) in this sector. Italy competitor post-merger (2:1 overlaps) and 61 areas does not have any merger remedy cases in the whole- where there would remain only two competitors sale and retail sector across the time-series reviewed, (3:2 overlaps). The Office of Fair Trading accepted potentially reflecting the more fragmented and less con- the divestiture of 95 stores, most of which were centrated state of its sector. owned by UniChem, to avoid a reference to the However, while divestiture of overlapping interests Competition Commission. Celesio AG applied to in affected markets may be the most effective method the Competition Appeal Tribunal for judicial review to restore pre-merger competition levels, the approach of the Office of Fair Trading’s decision. The Com- to the appropriate divestiture remedy and its scope petition Appeal Tribunal dismissed the application may be more nuanced depending on (i) the level of for judicial review and the Office of Fair Trading’s existing concentration; (ii) the extent to which the decision stands.33 merger consolidates the market; and (iii) the degree of actual or potential competition post-merger. Non-divestiture remedies • In 2007 the German competition authorities While divestiture is by far the preferred remedy it is not approved the acquisition by Douglas of Hela, sub- the only one acceptable to the competition authorities in ject to divestment of one shop in Darmstadt.30 The the wholesale and retail sector. Other examples, typically merger concerned the retail supply of perfumes and to support a divestiture remedy, include: cosmetics. The geographic market was identified as encompassing a 30 km radius around Darmstadt. Non-expansion According to the German competition authorities, Competition authorities may often feel the need to the merger would have strengthened the dominant enhance divestiture remedies with commitments not to position of Douglas in the Darmstadt area with a expand the parties’ presence in affected markets post- market share nearly three times higher than that merger through opening new, or extending the floor- of its closest competitor. The remedy in this case space of existing, outlets. Examples of cases in which was clear-cut and confined to the specific area of this type of behavioural commitment has been used are overlap. the French cases Galeries Lafayette/Marks and Spencer, • In the DIY sector, the acquisition by Leroy Mer- Carrefour/Promodes and Vivarte/Super Sport and the lin of OBI was approved by the French Minister of German case Douglas/Hela.34 While this type of commit- Economy subject to a package of divestiture reme- ment might reduce the possibility that the merged parties dies and a commitment not to expand new sales might extend their market power in an affected market, areas.31 In order to remove the overlap in two local the competition authorities have exercised some caution retail markets (La Rochelle and Compiegne),` the in applying this type of commitment, as this might pre- parties offered to divest the outlets owned by OBI. vent the firms from expanding their operations for pro- In a third local market, the parties committed to competitive reasons that would benefit the consumer. divest an outlet, thus reducing (but not completely

removing) the competitive overlap (Strasbourg). 32 Boots/Alliance UniChem, decision of July 19, 2006 (UK) The parties also committed not to expand their 33 Celesio AG v Ofﬁce of Fair Trading (Case No.1059/4/1/06), decision of May 9, 2006, Competition Appeal Tribunal (UK). 34 Galeries Lafayette/Marks and Spencer, decision of December 28 Carrefour/Promodes, decision of July 5, 2000 (France). 24, 2001 (France), Carrefour/Promodes, decision of July 5, 29 Carrefour/Promodes, decision of May 4, 2000 (Spain). 2000 (France), Vivarte/Super Sport, decision of April 30, 30 Douglas/Hela, decision of March 8, 2007 (Germany). 2008 (France), and Douglas/Hela, decision of March 8, 2007 31 Leroy-Merlin/OBI, decision of February 10, 2003 (France). (Germany).

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Structural only Behavioural only Mixed

10 Number of Cases

0 France Germany Italy Netherlands Spain UK Big 6

Figure 4: Merger remedies in the wholesale and retail sector (Big 6)—structural v behavioural Source: Authors’ calculations based on data from Merger Remedies Matrix http://www.concurrences.com. Note: The German and UK data series start only in 2003 and 2004, respectively.

Termination of exclusive vertical agreements Withdrawal/non-use of trade mark In the Casino/Monoprix merger, the French authorities An incumbent’s established and trusted trade mark were concerned that Casino might use Monoprix’s links may, in rare circumstances, represent an entry barrier with the downstream central purchasing agency Francap to companies hoping to attract customers from the and its own existing links to the other central purchasing incumbent firm. The French decision in 1999 on the agency, Opera, to harm competition with other retailers. ROCK joint venture between the companies Cie des The merger remedy involved the parties agreeing to Salins du Midi (CSME) and MDPA is an interesting renounce clauses limiting the freedom of Francap to early case where the competition authorities attempted choose its suppliers.35 to ameliorate competitor entry into the French market In 2002, the French competition authorities examined for de-icing salt by requiring the parties to withdraw use the merger between two companies active in the sale of their trade mark.38 and distribution of DIY products, Mr Bricolage and Tabur, that both had networks of franchisees at the Unenforceability of non-compete clauses retail level.36 There were 11 local markets affected by Some takeovers or acquisitions may contain ‘‘non- the transaction and in one in particular there was a compete’’ provisions that, for a defined period, restrict concern that the combined market share of the parties the ability of key personnel of the acquired business (through their franchisees) would be over 80 per cent. from leaving the merged entity post transaction and To remedy the competition concern in this market, starting up their own rival company. These types of the parties committed that Tabur would terminate its clauses may have particular relevance in markets in franchise agreement with its franchisee in this market. which the employee’s know-how or contact network Similarly, the Spanish merger of the beer manufactur- are key inputs into the final product. However, these ers Mahou and San Miguel in 2000 was cleared subject clauses, while preserving the profitability of the merged to a remedy (amongst others) that the parties terminate business, can restrict the development of competition in their licence agreements for the production and distribu- that market, and therefore can attract the concern of tion of third-party foreign beer brands (other than the competition authorities. agreement with Carlsberg). This remedy was aimed at A merger remedy case involving a non-compete was reducing market concentration and fostering entry for the 2002 merger between the building material retail- new rivals.37 ers and wholesalers Point P and Ardi. In this case the French authorities were concerned that technical skills may be a barrier to entry into the market. A commitment not to enforce the non-compete clause against 35 Casino/Monoprix, decision of October 2, 2000 (France). 36 Mr Bricolage/Tabur, decision of September 29, 2002 (France). 38 Cie des Salins du Midi (CSME)/MDPA-SCPA-ROCK, 37 Mahou/San Miguel, decision of October 10, 2000 (Spain). decision of September 1, 1999 (France).

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the Ardi staff was considered an appropriate remedy. that Lesieur extended to supermarkets in exchange for This gave entrants the opportunity to hire qualiﬁed and better exposure of its products. experienced staff.39

Non-discrimination Commitments not to favour the merged entity (for 4. Implications and conclusions example, a downstream distribution company) have been adopted as merger remedies in the wholesale Our review of merger remedies in the wholesale and retail sector. In 2004, the French competition and retail sector of the ‘‘Big 6’’ European countries authorities cleared a vertical merger in which a large pro- began with an overview of the economic theory of ducer of tableware, Group Arc International, acquired consolidation, before confronting the evidence on how four specialised wholesalers/distributors of tableware the competition authorities have approached mergers in products.40 The authorities believed the transaction the sector. The evidence we examined was investigated raised concerns in one segment of the French market— in two complementary ways—a statistical analysis of the provision of drinking glasses to retailers. Arc com- the actual experience, supplemented with case studies mitted to maintain, for a period of two years, existing on individual cases and countries. Our conclusions are commercial relations with its other wholesaler clients, similarly two-pronged in the sense that we identify (i) and committed to supply the quantity of products key trends in the decided cases; and (ii) areas for future ordered (within the limits of its capacity) by these rival inquiry. wholesalers on fair and non-discriminatory terms. A Spanish case from 2005 dealt with similar issues when Shell Espana˜ and CEPSA proposed a joint venture Key trends (SIS) to provide kerosene and lubricants to civil aircraft at airports.41 The Spanish competition authorities were Our review demonstrates a number of key trends, but concerned that, amongst other things, the parties’ also that there are significant differences between the Big rights to be served by SIS could be used to foreclose 6. Drawing on the insights from our remedies mapping, competition, to the detriment of third parties. The joint the more detailed review of the cases and the market venture was approved on the condition that it did not analysis, a number of key themes emerge. discriminate in its service in favour of the parties. A creative example of the use of mixed remedies Divestiture is the 2004 Lesieur/Unilever Bestfoods case in France, The cases demonstrate an overwhelming preference where the olive oil producer Lesieur acquired a selection for divestiture remedies, particularly in narrowly of olive brands from Unilever Bestfoods, France.42 The defined local markets where the competition issues merger affected the sale of olive oil to end customers in are considered to be clear-cut. The loss of the target a market that spanned France, and regions of Spain as an independent player may be compensated by a and Italy. To address competition concerns raised divestiture in terms of specific outlets, if the overlap is by the transaction, Lesieur committed to divest two reasonably clear and contained and the divested business olive oil brands ‘‘Ol´ı’’ and ‘‘Jardin d’Orante’’. The can operate on a standalone basis. Divestiture remedies divestiture was to include, amongst other things, all have varied from single store disposals (Douglas/Hela43) intellectual property (IP) rights and know-how related to to around 100 outlets (Boots/Alliance UniChem44). This the production of the two products and, especially, the highlights the importance of identifying upfront the local drawings and models of the bottles and labels (the areas that really matter from a competition perspective drawings and models for the bottles of Jardin d’Orante and providing the supporting economic analysis that were excluded). The French competition authorities will be at the analytical core of a divestiture remedy also attached two further behavioural conditions to designed to solve local market overlaps. the clearance. First, the parties committed to terminate the exclusive distribution contract between Lesieur National peculiarities and the oil distributor Carapelli in France. Secondly, Some features of food and consumer products retailing Lesieur committed to stop applying its favourable are particularly noteworthy. France, Germany and the commercial policy (especially non-financial advantages) United Kingdom saw a large number of merger remedies cases in this area.45 This may be in part related to

39 Point P/Ardi, decision of December 13, 2002 (France). 40 Group Arc International/Callens Lesage Laurent Vachaud 43 Douglas/Hela, decision of March 8, 2007 (Germany). Piffaut, decision of November 24, 2005 (France). 44 Boots/Alliance UniChem, decision of July 19, 2006 (UK). 41 Shell Espana/CEPSA˜ , decision of March 9, 2005 (Spain). 45 For Germany and the UK we had shorter data-series (starting 42 Lesieur/Unilever Bestfoods, decision of November 18, 2004 in 2003 and 2004, respectively), so the total number of cases in (France). these countries between 2000 and 2007 would have been higher.

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the level of concentration of food retailing in the remedy package may be received) rather than having various countries and also the drive by the larger the competition concerns remedied in different ways by French and German retailers to expand their operations. each individual national authority. It may well be the case that there will be further consolidation in retailing in the years to come. There is Politically charged, often emotional, environment continuing evidence of further consolidation, which has Wholesale and retail mergers often take place in a highly been approved by the competition authorities, either in charged environment, especially where they concern discrete markets or where there is a realistic prospect of consumer products. In simple terms, everything that potential competition serving as a countervailing force.46 a consumer may want to buy—food, vehicles, designer In Italy, by contrast, there is scope to move towards clothing, sports shoes and DIY products—can attract the position in countries such as France, Germany and strong emotions and interest. Opposition may be likely the United Kingdom. It is worth noting that, outside from competitors, suppliers, customers and consumers. our focus on the Big 6, some of the smaller countries, The hotly contested bid for the Safeway supermarket especially in Scandinavia, do raise similar issues.47 Their chain in the United Kingdom by all the major players in small national markets inevitably lead to very high retail the UK grocery sector is a case in point. Merging parties concentration and have been relatively immune from will need to develop a careful communications strategy incursions by foreign entrants. to ensure that all the relevant interest groups are taken into account and to ensure that appropriate remedies Cross-border operations are found to deal with these third party concerns. The national merger remedies cases already reveal a trend towards companies expanding their operations internationally. A number of cases were originally Issues for further inquiry notified to the European Commission under the ECMR but then referred back to the national authorities.48 It is inevitable that a focused project such as this leaves This is partly explained by the nature of the markets open a number of avenues which other researchers, concerned, which tend to be local in character. Multi- competition practitioners and the competition author- jurisdictional filings and analysis of national markets ities may want to explore further. Taking a step back will need to be considered where the parties compete from the numerous and even competing sources of within smaller geographic regions even where the information, and seeking to reconstruct an integrated transaction is of such a size and scope that it falls overview of some key themes for future inquiry, yields within the jurisdiction of supra-national European the following ‘‘headline’’ areas that may provide some Community merger control. It is also noteworthy that pointers where competition authorities, policy makers multi-country wholesale and retail mergers that require and practitioners may want to look: remedies in more than one country may see different types of remedies used in each, for example, the Consolidation and concentration French competition authority may favour behavioural We have seen consolidation increasing within the commitments, where the German authorities may wholesale and retail sector. Mergers have fallen into choose structural remedies. This may affect the strategy broad types: (i) as a means of cross-border entry for large of transaction notification, i.e. whether to try and ‘‘bump multi-national firms; (ii) ‘‘within country’’ acquisitions up’’ multi-jurisdictional transactions to the European by medium-sized competitors at the horizontal level; Commission where a transaction requires filings in at and (iii) mergers among national market leaders. Each least three Member States49 (where a more homogenised of these types of consolidation raises different issues. While the latter may rightly attract close scrutiny by 46 For example, although strictly outside of our time-series, the national competition authorities due to a significant see Vivarte/Supersport, decision of April 30, 2008 (France). In increase in concentration alone, the two former types this case the authorities were happy that, even if the divested outlets went to a retail company that did not already operate in require a different analytical framework, where an the parties’ relevant market of low cost shoe retail, the threat analysis of concentration alone will not be dispositive of potential competition and entry would discipline the parties’ of all the issues raised. Other potential issues include pricing post transaction. the impact of cross-border alliances, the creation of 47 For example, Sweden, Norway and Denmark have amongst the most highly concentrated grocery markets. stronger medium-sized players to challenge incumbents, 48 In the European Commission decision of COMP/M.1684- and the implications for consumer choice arising from Carrefour/Promodes (January 25, 2000), the European Com- consolidation across, rather than within, retail formats mission concluded that the Europe-wide transaction would be compatible with the Common Market, subject to commitments (i.e. acquisitions of convenience stores by larger grocery offered by Carrefour. However, at the French Government’s retail operators). This confirms that a simple blanket request, the European Commission referred the case back to policy to retail consolidation, as in any other sector, the French competition authorities to review the merger’s likely competitive effects in a large number of French local markets. where a divestiture might be viewed as the preferred 49 Using the procedure under art.4(5) of the ECMR. remedy, will often involve evaluating the trade-off

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between efﬁciencies, the potential for the exercise of private label brands. These are relevant to buyer power market power, and local, regional and, in some cases, as they change the relative bargaining positions of pan-European competition perspectives. manufacturers of branded products and retail buyers. In the short term, they provide consumers with more Buyer power choice on price and are another constraint to be taken The grocery sector in Europe is characterised by into account when evaluating increased consolidation at concentrations within both the industry producing the the retail level. Also, some remedies cases encapsulate products (foodstuffs) and the retail industry selling the inherent trade-offs raised by any increase in those products to ﬁnal consumers. Both sectors are concentration and buyer power. In particular, a number experiencing noticeable structural change, as noted of the French merger remedies cases have involved earlier. A recurring concern raised in the merger cases, commitments not to expand output.50 Future case and also sector-wide competition investigations outside studies could usefully explore the relative effects of such the merger control area, is the potential that retailer remedies in terms of consumer choice and in reducing buyer power may have adverse impacts on producers prices, against seller power increasing prices. Whilst this (food manufacturers and farmers). Therefore, a number was not the scope of our brief, such analysis could of areas are suggested for future evaluation: provide additional insights for the design of remedies.

• The role of strong retail buyers might be positive, Remedies or prohibition at least in the short term, if faced by increasing In our analysis we have looked at those merger concentration in manufacturing. This could have a cases cleared subject to conditions, short of outright positive impact on consumers, if reduced prices for prohibition. It would also be productive to look at other intermediate goods lead to lower retail prices. types of decision (unconditional clearance or outright • The main issue is whether retailer buyer prohibition) in the wholesale and retail sector to get a power has damaging long-run effects in reducing better understanding of all the challenges that regulators, choice in products and retail offers. This focuses practitioners and merging parties face in this sector. An attention on barriers to entry into retailing. Recent example of an effective prohibition decision in this sector cases have suggested that these may not be low is the UK case in which Tesco acquired a grocery store for institutional reasons (including planning and from the Co-operative Group in Slough.51 This was zoning restrictions) and strategic aspects (including an unusual case in that the Competition Commission incumbency advantages arising from investments ordered the divestiture of the store some three years after in physical and human capital and distribution the acquisition had taken place. Another potentially logistics). interesting set of cases to examine, given the current • Evidence on numbers of producers exiting and tough retail environment brought about by the credit entering might prove relevant. Future research crunch and recession, is cases that have ‘‘failing ﬁrm’’ could usefully focus on structural developments dimensions (i.e. that absent the merger the assets of the in manufacturing with an emphasis on smaller target would inevitably exit the market and the merger producers and secondary brands. under review is the least anti-competitive outcome). In the United Kingdom, for example, the competition Impact on consumer welfare authorities apply very strict criteria to allowing a failing In this study we have not sought to explore the ﬁrm ‘‘defence’’, but have done so on one occasion in this welfare implications of retail merger remedies in detail. sector.52 However, section 2 noted the growth of retailer’s

50 See, for example, Mr Bricolage/Tabur, decision of September 29, 2002 (France). 51 Tesco/CWS, decision of November 28, 2007 (UK). 52 Tesco/Kwik Save, decision of December 11, 2007 (UK).

[2009] E.C.L.R., ISSUE 4  2009 THOMSON REUTERS (LEGAL) LIMITED AND CONTRIBUTORS HOEHN, RAB AND SAGGERS: RETAIL THERAPY: [2009] E.C.L.R. 167 stores into supermarket formats tion of certain stores, as well as arose in five local markets. These ood retailing in certain stores. oncerned. The central purchasing The transaction affected the retailEuropean of Commission daily concluded consumer that goods. the The compatible operation with was the Common Market,given subject by to Carrefour. commitments At theEuropean French Commission Government’s referred request, the the transactioncompetition to authorities the for French review ofThe 99 French local competition market authorities areas notedgive identified. that Carrefour the strong merger market would positionsand in required 27 the local parties areas, totermination divest of 34 franchise stores agreements, through asrestrict sales well the or as opening the a of commitment new, to areas or in the which expansion the of parties existing, had stores divested in stores. Galeries Lafayette acquired 18 Frenchassets M&S was stores. limited The to transfer the of excluded building all owned other by liabilities M&S andtrade and assets mark). therefore of Competition M&S concerns (includingconcerns the were M&S remedied with commitmentsindependent by management Galeries and to opera have commitments not to convert certain and to restrict the floor space for f Remedy The transaction affected the marketgoods. for The the French retail competition of authorities dailypost-merger observed consumer the that new entity wouldtwo hold Paris a districts. dominant To position removedivest in this two concern outlets the in parties the offered areas to c agency Francap, to which theaffiliated competitor with G20 Casino—meaning was that affiliated, there wasforeclosure. were also The concerns parties of had vertical toFrancap renounce to clauses choose limiting its the suppliers. ability of Competition issue (Horizontal and/or Vertical) Horizontal Horizontal Vertical Horizontal Date July 5, 2000 October 2, 2000 December 24, 2001 47.1 Retail sale in non-specialised stores 47.1 Retail sale in non-specialised stores SIC sub-division affected* 47.1 Retail sale in non-specialised stores Case France Carrefour/Promodes Casino/Monoprix Galeries Lafayette/Marks and Spencer (M&S) Annex I: Merger remedies in the wholesal e and retail sector (Big 6)—overview

[2009] E.C.L.R., ISSUE 4  2009 THOMSON REUTERS (LEGAL) LIMITED AND CONTRIBUTORS 168 HOEHN, RAB AND SAGGERS: RETAIL THERAPY: [2009] E.C.L.R. rks. Eleven local markets were ocurement market. To remedy The transaction affected the marketproducts. for The the merged retail entity sale would oflocal hold DIY areas a where strong there position wereparties in found committed four to to be divest barriers the tofour outlet entry. local owned The markets by affected. OBI Into in the divest two third a of area, third the the outlet partiesthe though committed overlap. not In completely the removing fourththeir area ﬂoor the space parties for committed three not years. toCarrefour expand had to divest onethe of Belfort the territory. two retail food discount stores in Remedy Both parties were active inintegrated the franchises distribution and of netwo DIY products through The transaction affected the retailthe market wholesale for market building for products insulationto and materials. a The number transaction of led horizontalvertical overlaps relationship on on the the retail pr concerns market Saint-Gobain and (Ardi’s to parent a company)supply committed products to to any newconditions entrant as on Point the P. same Asmarket, competitive technical the skills parties were also a agreed barriernon-competition to not clause entry to against in enforce the this the Ardi staff. affected by the merger, butsubstantial only competition in concern. one The market parties wasterminate committed there Tabur’s to agreement with its franchisee in this market. Competition issue (Horizontal and/or Vertical) Horizontal Vertical Horizontal Vertical Horizontal Horizontal Date September 29, 2002 December 13, 2002 February 10, 2003 November 7, 2003 47.1 Retail sale in non-specialised stores 47.5 Retail sale of other household equipment in specialised stores 47.5 Retail sale of other household equipment in specialised stores 46.7 Other specialised wholesale SIC sub-division affected* ) Continued Case Mr Bricolage/Tabur Point P/Ardi Leroy Merlin/OBI Carrefour/ED-Treff Annex I: (

[2009] E.C.L.R., ISSUE 4  2009 THOMSON REUTERS (LEGAL) LIMITED AND CONTRIBUTORS HOEHN, RAB AND SAGGERS: RETAIL THERAPY: [2009] E.C.L.R. 169 pecialised in the distribution om Unilever Bestfoods. The parties al merger raised concerns in the o to produce a yearly report on all n exchange for better exposure Douglas and Lavigne specialise inThe perfume transaction and raised cosmetics competition marketing. concernsThe in parties two committed French to cities. divestto perfume remove shops overlaps. in these two areas Carrefour committed to divest eightin Penny markets Market affected businesses by theto transaction, rental and management, also three to further divest, Penny or Market contract businesses. Group Arc International, an importantproducts, producer acquired of four tableware wholesalers s of tableware products. The vertic market for the provision ofArc drinking committed glasses to to maintain retailers. itsterms Therefore, existing with commercial independent relations wholesalers and competing in this market. Remedy Lactalis, a milk and cheesebusiness producer, in purchased a South small East family-owned France.market Both for parties uncooked were pressed active cheeseconcern in paste. was the The that competition Lactalis mayits post-merger sales bundle of or various tie cheeses.these together Lactalis types committed of not agreements to and enter als into Lesieur acquired olive oil brandsagreed fr to divest certain brandsthe and bottles all and IP labels necessary for toapplying these produce its brands. favourable Lesieur commercial committed policyadvantages) to (especially to stop non-ﬁnancial supermarkets, i of its products, so as to make entry easier for other brands. the commercial conditions attached to the cheese Reblochon. Competition issue (Horizontal and/or Vertical) Horizontal Vertical Horizontal Vertical Vertical Horizontal Horizontal Date November 5, 2004 November 18, 2004 November 24, 2004 October 22, 2005 November 10, 2005 SIC sub-division affected* 47.1 Retail sale in non-specialised stores 47.1 Retail sale in non-specialised stores 46.9 Non-specialised wholesale trade 47.7 Retail sale of other goods in specialised stores 47.1 Retail sale in non-specialised stores ) Continued Case Lactalis/Pochat Callens Lesage Laurent Varchaud Lesieur/Unilever Bestfoods Group Arc International/Callens Lesage Laurent Vachaud Piffaut Parfumerie Douglas/Lavigne Carrefour/Penny Market Annex I: (

[2009] E.C.L.R., ISSUE 4  2009 THOMSON REUTERS (LEGAL) LIMITED AND CONTRIBUTORS 170 HOEHN, RAB AND SAGGERS: RETAIL THERAPY: [2009] E.C.L.R. ition authorities cleared the etailing perfume and cosmetics. ts. The purchasers of the four Praktiker and Max Bahr operateand in DIY the products. market The for Germanmerger building compet subject supplies to divestiture ofBahr three store Praktiker in stores four and regionalstores one marke were Max required to beand independent Praktiker of was Praktiker, required notstores to for re-establish a links period with of the 10 divested years. DBH is a joint ventureHugendubel between (a Weltbild retailer (a active publishing inwas house) full-line cleared and bookselling). subject The to merger thein divestiture Hannover. of The a parties large wereinterest Weiland prohibited in bookshop from the acquiring bookshop any for a periodDouglas of and four Hela years. are involvedThe in merger r would strengthen thethe position Darmstadt of area. the The merged mergerdivestiture entity was of in cleared one subject shop to in the Darmstadt. The transaction affected the retailhardware market goods. for The DIY transaction products raised and certain competition regional concerns markets. in The mergerdivestiture was of cleared several subject shops to in the to affected include areas. the These transfer divestitures of had permissions the according lease, to the the goodwill, applicabledecoration, the building the operating laws, goods the and interior thethe personnel operation and of all each assets divested necessary building for centre. Remedy Competition issue (Horizontal and/or Vertical) Horizontal Horizontal Horizontal Horizontal Date January 10, 2007 January 16, 2007 March 8, 2007 December 5, 2007 47.5 Retail sale of other household equipment in specialised stores 47.7 Retail sale of other goods in specialised stores SIC sub-division affected* 47.6 Retail sale of cultural and recreation goods in specialised stores 47.5 Retail sale of other household equipment in specialised stores ) Continued Case Germany Praktiker/Max Bahr Weltbild/ Hugendubel— Weiland Douglas/Hela Globus/hela Proﬁzentren Annex I: (

[2009] E.C.L.R., ISSUE 4  2009 THOMSON REUTERS (LEGAL) LIMITED AND CONTRIBUTORS HOEHN, RAB AND SAGGERS: RETAIL THERAPY: [2009] E.C.L.R. 171 e, therefore, required to divest on authority identified concerns . The transaction would create a nce products in hypermarkets, The merger involved the acquisitionsupermarkets. by The Ahold Dutch of competiti 29 Konmar Carrefour and Promodes were French-basedactive multinational in companies the retailing ofsupermarkets convenie and discount stores merged company that would beThe the transaction overall raised market competition leader concernsmarkets. in in The Spain. a parties number therefore of hadsupermarkets local to in divest 17 hypermarkets geographic and areas.assets The had acquirer to of be the independentCarrefour divested of group any and company had belonging toproven to have experience the sufficient to financial be resources an and effective competitor in the market. in a number of marketslocal for supermarkets. the The sale parties of wer daily consumer goods via certain stores in the affected markets. Remedy Mahou and San Miguel werethe two Spanish of market. the The main Spanishmerger beer competition in manufacturers authority Phase in blocked II, the butthis the decision Council and of approve Ministers theincluded decided merger the to with reverse removal remedies. of Remedies exclusiveforeign agreements beer with brands. distributors The and partiesshareholdings were in also their ordered main to competing divest beer their producer Damm. Competition issue (Horizontal and/or Vertical) Horizontal Horizontal Horizontal Vertical Date October 26, 2006 May 4, 2000 October 10, 2000 47.1 Retail sale in non-specialised stores 46.3 Wholesale of food, beverages and tobacco SIC sub-division affected* 47.1 Retail sale in non-specialised stores 47.1 Retail sale in non-specialised stores ) ´ es Continued Case The Netherlands Ahold/Konmar Superstores Spain Carrefour/Promod Mahou/San Miguel Annex I: (

[2009] E.C.L.R., ISSUE 4  2009 THOMSON REUTERS (LEGAL) LIMITED AND CONTRIBUTORS 172 HOEHN, RAB AND SAGGERS: RETAIL THERAPY: [2009] E.C.L.R. tailing of convenience products. s would increase the likelihood of competition authorities accepted products). In order to reduce the res fuel and fuel products. DISA Pio Coronado is a largeCanary wholesale Islands. and The retail Spanish distributor competitionproduct on authority market the found to the be self-service re Logista had a monopoly instamps the and distribution official of documents. tobacco Incross-subsidisation, products, order the to Spanish prevent account and management separation ondistribution the business tobacco as product a remedy. The merger affected hypermarkets, s upermarkets,smaller discount self-service stores outlets. and The transactionconcerns raised in competition one region whereper the cent merged market entity share. would Regulationsignificant hold of entry a retail barrier 52 distribution into created thistherefore a market. required The to parties divest were one hypermarket in this region. Divestment was required in onea municipality combined where market the share parties ofauthority had 44 also per noted cent. that The inbarriers Spanish one for competition municipality larger there stores, were andcarry legal so store entry the was divestment required. of one cash and owns a network of petrolSpain. stations According on to the the Islands Spanishacquisition and competition of in authority, the mainland the Shell businesse co-ordination between DISA and CEPSAcompany (a that vertically was integrated the oil monopolistwholesale in procurement the of upstream fuel marketprobability for of collusion, the authorityboards required of the CEPSA executive and DISAa to period remain of completely five independent years. for Remedy DISA is a group ofdistributes, companies transports active and in sto the Canary Islands that chiefly Competition issue (Horizontal and/or Vertical) Horizontal Horizontal Horizontal Horizontal Vertical Date April 27, 2001 March 18, 2002 May 28, 2002 December 20, 2004 47.1 Retail sale in non-specialised stores 46.9 Non-specialised wholesale trade 46.3 Wholesale of food, beverages and tobacco 46.9 Non-specialised wholesale trade 47.6 Retail sale of cultural and recreation goods in specialised stores, (Retail distribution of fuel) 46.7 Other specialised wholesale (Wholesale of fuel and related products) SIC sub-division affected* 47.1 Retail sale in non-specialised stores 46.9 Non-specialised wholesale trade ) Continued Case Pio Coronado/ Cemetro Logista/Burgal Caprabo/Enaco DISA/Shell Annex I: (

[2009] E.C.L.R., ISSUE 4  2009 THOMSON REUTERS (LEGAL) LIMITED AND CONTRIBUTORS HOEHN, RAB AND SAGGERS: RETAIL THERAPY: [2009] E.C.L.R. 173 ˜ na and ˜ na and CEPSA were active in ˜ na had a significant combined eir requirements each year fects in the market for kerosene erged entity and reducing the y services at airports, and the products and aircraft refuelling ˜ na and CEPSA. SIS was a provider of kerosene and lubricants Remedy The transaction created SIS, aEspa joint venture controlled by Shell The transaction would create apharmacy new products. wholesale In distributor Spain, of thethe majority pharmacy of sector wholesalers (including active Cofaresco-operatives in and formed Hefame) by are groups ofco-operatives pharmacy contain retailers. clauses These that makepurchase it a mandatory certain for proportion members of to th and also that oblige membersat to least remain five part years. of Thelevels the remedies of co-operative included purchases for reducing from the the mandatory membership m requirement to one year rather than five. to civil aircraft at airports. Shell Espa supply, where CEPSA and Shell Espa the distribution of refined oil services at airports. The remediesrefuelling affected and the lubricants markets suppl for kerosene Spanish market for kerosene supply.authority The was Spanish concerned competition about thecompetition possible and lessening co-ordinated of ef market share. SIS was orderedlubricants not for to aircraft market at kerosene airports, and essential except technical for necessities. covering The minimum authoritiesthe also parties required to remove anyCEPSA preferential to rights be of served Shell byremedy Espa SIS was to aimed the at detriment removingconsequence of any of third risk the parties. of vertical This foreclosure relationship ascompanies between a and the the controlling new joint venture. Competition issue (Horizontal and/or Vertical) Horizontal Vertical Horizontal Vertical Date March 9, 2005 June 6, 2006 46.7 Other specialised wholesale 19.2 Manufacture of refined petroleum products 47.6 Retail sale of cultural and recreation goods in specialised stores (Retail distribution of fuel) 46.7 Other specialised wholesale (Wholesale of fuel and related products) 52.2 Support activities for transport (sale of fuel to airports) SIC sub-division affected* ) ˜ na/CEPSA Continued Case Shell Espa Cofares/Hefame Annex I: (

[2009] E.C.L.R., ISSUE 4  2009 THOMSON REUTERS (LEGAL) LIMITED AND CONTRIBUTORS 174 HOEHN, RAB AND SAGGERS: RETAIL THERAPY: [2009] E.C.L.R. Despite the fact that thetriggered merger the between ECMR, these Dia discount requestedexamined stores that by the the transaction Spanish be competitionaffected authorities competition as in the Spain. transaction TheSpanish merger competition was authorities cleared subject by to the Plus the stores divestiture and of one six Dia outlet. The transaction affected the groceryCommission market. approved The the Competition merger subjectstores to in divestment affected of local 12 markets.of Somerfield’s this application decision for was review dismissed by theThe Competition Office of Appeal Fair Tribunal. Tradingto accepted the undertakings Competition in Commission lieu amounting of(mostly to reference UniChem) divestiture stores of to 95 an approved purchaser. The transaction affected the retailTrading market accepted for undertakings cars. in The lieu OfficeCompetition of of Commission reference Fair and to decided the thatcar the dealership divestiture businesses of in four fourcompetition affected concerns. areas would remedy Remedy Competition issue (Horizontal and/or Vertical) Horizontal Horizontal Horizontal Horizontal Date October 30, 2007 September 2, 2005 February 2, 2006 October 18, 2006 45.1 Sale of motor vehicles 45.2 Maintenance and repair of motor vehicles 45.3 Sale of motor vehicle parts and accessories 47.1 Retail sale in non-specialised stores 47.1 Retail sale in non-specialised stores SIC sub-division affected* 47.1 Retail sale in non-specialised stores 47.7 Retail sale of other goods in specialised stores ) Continued Case Dia/Plus United Kingdom Somerfield/Wm Morrison Boots/Alliance UniChem Pendragon/Reg Vardy Annex I: (

[2009] E.C.L.R., ISSUE 4  2009 THOMSON REUTERS (LEGAL) LIMITED AND CONTRIBUTORS HOEHN, RAB AND SAGGERS: RETAIL THERAPY: [2009] E.C.L.R. 175 the Office of , the Office of ces remedies in the Boots/Alliance Unichem Boots/Alliance Unichem, Fair Trading accepted undertakings inCompetition lieu Commission of in reference the to formpharmacy the of in divestiture two of affected one areassupermarkets retail and in divestiture eight of local eight areas.accepted The also Office the of divestiture Fair of Trading 14 funeral service branches. The transaction affected the retailTrading market accepted for undertakings cars. in The lieu OfficeCompetition of of Commission reference Fair in to the the formdealership of in divestiture one of affected a area. car In a decision similar toFair that Trading in accepted undertakings inCompetition lieu Commission of in reference the to formeach the of of divestiture four of local a areas. store in In a decision similar to that in Remedy Competition issue (Horizontal and/or Vertical) Horizontal Horizontal Horizontal Date March 26, 2007 June 8, 2007 July 23, 2007 vision based on the relevant product markets affected by competition concerns and in some instan 45.1 Sale of motor vehicles, 45.2 Maintenance and repair of motor vehicles 45.1 Sale of motor vehicles 47.1 Retail sale in non-specialised stores 47.7 Retail sale of other goods in specialised stores 64.1 Monetary intermediation 64.3 Trusts, funds and similar financial entities 79.1 Travel agency and tour operator activities 96.0 Other personal service activities SIC sub-division affected* 47.7 Retail sale of other goods in specialised stores ) Continued Case Inchcape/EMH Admenta— Lloyds/IPCC CGL/United case. Annex I: ( * This places the merger in the appropriate SIC sub-di

[2009] E.C.L.R., ISSUE 4  2009 THOMSON REUTERS (LEGAL) LIMITED AND CONTRIBUTORS