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OFT considers grocery and pharmacy divestments in Lothian and Angus Co-op merger

27/09    6 March 2009

The OFT is considering an offer by the Co-operative Group Limited (Co-op) to divest grocery and pharmacy stores in 12 local areas following its completed acquisition of Lothian Borders & Angus Co-operative Societies Limited (LBA).

LBA is an independent co-operative society trading across many parts of Scotland. Its primary business is food retailing, although it also provides pharmacy, funeral and services such as petrol stations.

The OFT found that the merger raised competition concerns within the grocery sector in 12 local areas in Scotland where Co-op already had a presence - including in areas covered by its recent acquisition of Somerfield plc. In addition, the OFT identified a concern regarding pharmacy services in one of those areas.

Amelia Fletcher, OFT Senior Director of Mergers said:

'Our priority is to secure a package that will safeguard the welfare of Scottish consumers by restoring grocery and pharmacy competition to pre-merger levels in the areas affected.'

If the divestments are not accepted, then a referral to the Competition Commission will be necessary.

NOTES

1. Co-op and LBA are separate independent corporate bodies registered under the Industrial and Provident Societies Act 1965. Co-op is the manager and representative member of the Co-operative Retail Trading Group (CRTG), a buying group that comprises the major co-operative societies engaged in grocery retailing in the UK (including LBA).

2. Following Co-op's acquisition of Somerfield plc, the Co-op agreed to divest stores in 133 local areas. These undertakings were accepted by the OFT in January 2009 and the merger itself was completed on 27 February 2009. See the full text on this decision.

3. The reference test - the OFT has a duty to make a reference to the Competition Commission if it believes that it is or may be the case that a relevant merger situation has been created, and the  creation of that situation has resulted or may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.

4. 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.  

5. Undertakings in lieu of reference - under section 73 of the Enterprise Act 2002 the OFT may, instead of making a reference to the Competition Commission, 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. The OFT is required to consult publicly before accepting any such undertakings.

6. For reasons of confidentiality, the OFT will not currently disclose which stores Co-op has proposed to divest. Details on how the OFT identified the local areas to be divested will follow in the full text of the decision and in public consultation on the undertakings in lieu.

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

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