Germany Edeka Takeover Tender

Edekas plan to have up to 72 Real locations from SCP Retail S.r.l. The Federal Cartel Office has only partially approved the takeover today. 21 locations cannot be taken over due to competition concerns of the office. At six other locations partial areas have to be given to competitors or Edeka has announced that other branches will be closed.Andreas Mundt President of the Federal Cartel OfficeWe have to ensure that consumers will continue to be able to choose between different food retailers in the future. This choice creates competitive pressure on providers and thus ensures better prices selection and quality. At a number of locations we were concerned that the takeover would make Edeka too strong in the respective regional markets. Edeka therefore had to forego around 30 percent of the planned takeovers. SCP which is controlled by the Russian investment company Sistema has acquired all of the formerly 276 Real locations from Metro. The Real locations achieved sales of around seven billion euros in 20182019.The Edeka group is the leading provider in the German food retail trade LEH. In addition to the Edeka headquarters it includes the discounter Netto Marken-Discount the seven regional companies with directors and the nine regional Edeka cooperatives independent retailers. Edeka has a Germany-wide sales network with around 11200 grocery stores. The Edeka Group achieved a turnover of 55.7 billion euros in 2019 of which 51.7 billion euros came from food retailers. The Bundeskartellamt regards the entire Edeka group including the independent retailers and regional companies as an economic unit and as an affiliated company.In merger control proceedings in the food retail sector the competitive effects of a project both on consumers in the relevant regional markets sales side and on food manufacturers and suppliers procurement side as well as on competing trading companies must always be assessed.On the heel sidethe Federal Cartel Office analyzed the competitive situation in the sale of food to consumers in the actual regional catchment areas of the 72 Real locations relevant here. The office used Payback data to determine the area from which 90 percent of all customers of the respective Real location come. This area represents the relevant geographic market of the Real location concerned. Particularly in-depth analyzes were carried out for the so-called core area from which two thirds of all customers come. In addition to self-service department stores hypermarkets and supermarkets organic supermarkets are also included in the market but not specialist shops such as bakeries or drug stores. Consumer behavior was also examined in the context of a consumer survey.The Federal Cartel Office had competition concerns in the regional sales markets of 27 of these locations and saw an impending significant impediment to effective competition through the acquisition of the Real locations there by the Edeka Group. Edeka can therefore not take over 21 of the 72 registered Real locations. For a further six locations Edeka has committed itself to handing over parts of the area to other food retail companies for at least 10 years after acquiring the locations or Edeka has made a binding announcement that it intends to close other locations. Overall with these commitments Edeka is foregoing a sales volume of approx. 580 million euros.On the procurement sidethe Federal Cartel Office also had competition concerns about the Edeka acquisition project. For food manufacturers food retailers are by far the most important sales channel with over 75 percent of total sales. The four leading retail chains Edeka Rewe the Schwarz Group with Lidl and Kaufland and Aldi account for more than 85 percent of this share. Reals total procurement share was less than 5 percent.Andreas Mundt President of the Federal Cartel OfficeWith the takeover the Edeka Group is further expanding its strong market position in food purchasing. The conditional approval of the project was possible because as in the Kaufland merger decision the seller SCP undertook to sell Real locations with a food procurement volume totaling at least 200 million euros to medium-sized food retail companies . This corresponds to a sales volume in the supermarkets of approx. We are thus strengthening medium-sized businesses as an important sales alternative for manufacturers and suppliers of food in Germany. After the course of the sale process it could not be assumed that medium-sized dealers would have been able to acquire locations at all without the influence of the Federal Cartel Office. The commitment from SCP corresponds to the commitment from the Kaufland Real process - so no additional 200 million food procurement volumes will have to be sold. The approval of the takeover of Edeka is now also dependent on the fulfillment of this condition.Despite the high concentration of the procurement market the antitrust classification must also take into account that there is competition between the four leading retail chains in purchasing. The surrender obligation on the procurement side and the commitment not to take over 21 locations and to hand over partial areas to competitors at six locations or to close locations ensure that the growth in the procurement volume is reduced considerably.In the assessment it also played a role that the procurement markets are still strongly national in character but the investigations have also shown indications of a development towards cross-border markets clearly visible in the case of fruit and vegetables.