By Claire West
The Office Of Fair Trading (OFT) is considering undertakings offered by Asda in relation to its proposed acquisition of Netto's 194 groceries stores in the UK.
Asda has offered to sell 47 Netto stores across the UK to resolve local competition concerns raised by the merger.
The OFT concluded that the acquisition would not give rise to competition concerns at a national level because Netto's market share in the UK as a whole amounts to less than one per cent. However, the OFT was concerned that competition could be substantially reduced in around one in four of the local areas where there are overlapping stores.
As in previous grocery retailer merger cases, such as Co-Op/Somerfield, the OFT's local analysis drew upon evidence of consumers' preferences from face-to-face surveys at Asda and Netto stores. The OFT built on its past analysis by allowing for the fact that Asda is a stronger competitor to Netto than Netto is to Asda.
The OFT also accepted that there would be some efficiency savings from the merger, which would benefit consumers, but these were not in practice sufficient to negate the OFT's concerns in any local areas.
While the OFT is satisfied that many of the stores that Asda has offered to divest are likely to be of interest to multiple eligible buyers, the OFT is concerned that this may not necessarily be true for all stores. Before the OFT finally agrees to a divestment package, therefore, Asda will need to find suitable up-front buyers for a number of the stores.
The form of the proposed divestment undertakings will be the subject of public consultation prior to the OFT accepting the undertakings in lieu.
Amelia Fletcher, Senior Director of Mergers for the OFT, said:
"Although Asda and Netto offer somewhat different propositions for customers, the evidence from our investigation indicated that Asda did provide a significant competitive constraint on Netto in a number of local areas where they overlapped. The OFT is confident that, if agreed, this package of remedies will safeguard competition in 47 such areas, to the benefit of local shoppers, while allowing the remaining store purchases to go ahead."