Morrisons to face Competition Commission probe
Northern chain referred along with ‘big three’
March 19 2003
The DTI is to refer Morrisons’ bid for Safeway to the Competition Commission along with Tesco, Asda and Sainsbury’s.
However, the potential bid by Bhs and Arcadia owner Philip Green through investment vehicle Trackdean will not be referred, giving the retail entrepreneur a window of opportunity to tempt Safeway shareholders.
Trade and industry secretary of state Patricia Hewitt said there were “reasonable grounds” to assume that a Morrisons/Safeway merger would result in a substantial lessening of competition in sector. The decision, based on possible local conflicts rather than the national picture, will be a substantial blow to Morrisons’ hopes of acquiring Safeway, as it is now working to the same timescale as bidders with deeper pockets. The Competition Commission has until Auguts 12 to report back.
Hewitt said: “I have decided to accept the advice of the deputy director general of fair trading in these cases. I have therefore decided not to refer the bid from Trackdean Investments Limited, after the DDGFT advised that the merger raised no competition concerns.
“However, she has concluded that, in the cases of Tesco, Sainsbury’s and Asda, there is a significant prospect that these mergers may be expected to result in a substantial lessening of competition. Moreover she has concluded that there are reasonable grounds for believing that there will be the same outcome in the case of Morrison. In light of her advice I have decided to refer these four bids to the Competition Commission for an in-depth inquiry.”
The deputy director general believes that at a local level the loss of competition between Safeway and any of the four other players existing could be substantial. The potential number of conflicts meant a full referral rather than simply accepting undertakings to sell stores.
Nationally, the deputy director general “concluded that the acquisition of Safeway by Asda, Sainsbury’s or Tesco would raise additional competition concerns. In particular, such acquisitions would lead to a significant increase in concentration, with Asda, Sainsbury’s and Tesco together supplying over 85 per cent of all one-stop grocery shopping. In the case of Morrisons she concluded that the merger seemed unlikely to raise additional competition concerns over and above the effects at local level.”
