Some local difficulties – managing merger control in retail transactionsAlison Berridge

19 March 2009

Overview

Merger control reminder Local analysis: why? Local analysis: how? Selling outlets

Merger control reminder: the process

Clear withstore sales

NotifyOFT

Initialreview

In-depthreview

Clear

Refer toCC

Clear withstore sales

Clear

Block

30 / 40working days

6 months

Merger control reminder: the thought process

Define the productand geographicmarkets affected

Does the mergersubstantially lessen

competition on any of them?

Have the parties offeredremedies which resolve

the issues?

DIY “shed” retailerswithin 20 minutes drive

time

In Woking the merger reducesthe number of competitors

from 3 to 2

Parties offer to sell oneshed in Woking

Merger control reminderWhy are retail mergers different?

Likely to be analysed on a local basis Requires analysis of multiple markets Process can be slow, expensive and unpredictable Needs good management

Overview

Merger control reminder Local analysis: why? Local analysis: how? Selling outlets Sharing risk

Local analysis: why?Starting point

Strong presumption that there is a local element to consumer goods and services markets

“The OFT’s strong starting assumption for consumer goods and services markets has therefore been – and will continue to be – that there will be material local competition across the relevant area to attract and retain customers, even if not on every parameter of PQRS.”

OFT, Homebase / Focus (DIY) (2008)

Local analysis: why?Scope to challenge

Possibly, in the right case… Economic evidence

Margin concentration analysis

Internal documents / practice Consider previous decisions

Easier if there are few or ambivalent precedents In some cases EC or other countries may have defined

market as national only

Overview

Merger control reminder Local analysis: why? Local analysis: how? Selling outlets Sharing risk

Local analysis: how?Establish general rules to filter out problem areas

Local analysis: how?Filtering: four key questions

How far are consumers prepared to travel (and how)?

Who are the competitors? How many is enough? Whose perspective should we take?

Local analysis: how?Filtering example: groceries

Local analysis: how?Filtering example: retail banks

Local analysis: how?Filtering - choosing the rules

No consistency in approach or depth of analysis Means there is scope to manipulate all those details

to save stores But some losses may be the price of a phase one

clearance - OFT will want cautious approach

Local analysis: how?Filtering: managing data

In mergers between large chains, processing the data also a challenge

Use a good mapping company Run analysis in advance if possible Reserve resources for later reruns (OFT sometimes

changes its mind)

Local analysis: how?After the filters

Individual review of local areas Imminent new entry / exit Closeness of competition – surveys

Local analysis: how?Surveys

Local analysis: how?After filtering and surveys

Overview

Merger control reminder Local analysis: why? Local analysis: how? Selling outlets

Selling outlets: restricted purchaser group

Selling outlets: strategy

The inescapable logic of the “upfront buyer” Strategic games Fighting back:

Resist up-front buyer Expand purchaser set Keep store and UFB lists confidential

Summary

Plan your campaign Pick your battles Make friends with a mapping company And a survey company Don’t forget the endgame (selling outlets)

Discussion and questions

These are presentation slides only. The information within these slides does not constitute definitive advice and should not be used as the basis for giving definitive advice without checking the primary sources.

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