Proposed acquisitions of Safeway plc

No. ME/1041/03

A report under section 125(4) of the Fair Trading Act 1973 of the advice, dated 8 September 2003, to the Secretary of State for Trade and Industry under section 86(1) of the Act

Please note that the full text of the decision can be downloaded by using the link on the right. What follows is an extract from the advice.

In this submission the OFT advises under section 86(1) of the Fair Trading Act 1973 (FTA) on the report by the Competition Commission (CC) on the proposed acquisitions of Safeway plc (Safeway). 

The CC concluded that the proposed acquisition of Safeway by each of Asda Group Limited (Asda), Wm Morrison Supermarkets plc (Morrisons), J Sainsbury plc (Sainsbury), and Tesco plc (Tesco) (each a proposed acquisition) qualifies for investigation and may be expected to operate against the public interest. It recommended that, in order to address the adverse effects of the proposed acquisitions:

a) the proposed acquisition by each of Asda, Sainsbury, and Tesco of the whole or part of Safeway should be prohibited, other than Safeway stores which Morrisons divests to remedy the adverse effects resulting from its acquisition of Safeway (and subject to the conditions specified in relation to divestment following an acquisition by Morrisons of Safeway); and

b) the proposed acquisition by Morrisons of Safeway should be allowed subject to the divestment of one-stop grocery stores in the 48 localities identified by the CC along the broad lines of the divestment framework and five smaller grocery stores identified by the CC where adverse effects would result from the merger.

RECOMMENDATION

The OFT recommends that when publishing this CC report you announce that you accept the CC's findings and recommendations (as set out in para. a) and b) above). Furthermore, in relation to para. b), we recommend that:

a) In assessing whether any representation in relation to the CC's one-stop analysis by the prospective buyer, Morrisons or other interested party is new or additional, we recommend that you invite us to liaise with the CC where we consider appropriate. 

b) We recommend that you invite us to seek undertakings that the divestment of the five smaller grocery stores should be to a purchaser approved by the OFT within a time-limit to be agreed by the OFT. 

c) We recommend that you invite us to consult with the CC in connection with its isochrone analysis when we consider it appropriate to do so. 

d) The CC recommended that an eligible purchaser of a one-stop store to be divested could include a buyer which satisfies the OFT that it will operate the store as a one-stop shop. To facilitate this, we recommend that Morrisons and the proposed buyer of each divested store or block of stores should send us information which may include the rationale of the deal for the proposed buyer, a long-term business plan and evidence of the proposed buyer's commitment to operate the store as a one-stop shop, its intention to integrate the store into its business and to operate as a viable competitor in that local area.

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