The Office of Fair Trading has sprung a major surprise on its detractors in the c-store and wholesale sectors, by denying it segments the grocery industry when assessing takeovers.
In a letter responding to representations from the Federation of Wholesale Distributors, the OFT stated: “We do not accept that in assessing mergers in this market the OFT has sought to segment the grocery retailing market into two distinct sectors.”
It said it based its analysis on consumer shopping habits, adding: “Convenience shopping can be carried out at a wide range of grocery outlets and in considering any loss of competition at the local level we take into account very large grocery stores as well as smaller
stores.” It also pointed out that in considering buying power, large groups did not buy separately for different sized stores.
Until now leaders in the wholesale and c-store sectors believed the OFT had approved a succession of takeovers of c-store chains by the major multiples because it was treating c-stores and one-stop shops as separate sectors.
This would have accorded with the grocery market structure defined by the Competition Commission in its 2000 report. If used, it would mean no multiple would ever approach the 25% market share in the c-store sector, which could trigger an inquiry into a deal.
However, with Tesco currently holding 27.9% of the UK grocery market, the new OFT definition could cause it problems.
FWD director-general Alan Toft said: “This makes a major difference to the whole debate.
“It shows the OFT is listening to our campaign and we are now very optimistic that it will institute a moratorium on superstore acquisitions.”
John Wood