The Safeway auction entered its most critical phase today as the Competition Commission published its remedies statement.
The10-page, 8,000-word statement identifies the issues that now concern the Commission and the ways in which they could be tackled - although it stresses all these remedies are “hypothetical”. The statement is the public version of the remedies letter which has been sent to those retailers who have signalled their interest in acquiring Safeway. These retailers will now meet with the Commission.
Other interested parties can also comment on the statement but they must do so by July 4.
Reading between the lines, the Commission’s statement suggests that it already believes the market is highly concentrated and that further consolidation could have significant side-effects including loss of consumer choice, less intense competition in the long run (both locally and nationally) and an adverse impact on suppliers.
In particular, the Commission makes it clear that the issues surrounding local and national competition are inter-related and cannot be treated in isolation. And it says this inter-relationship is so important that even if a particular retailer agreed to divest stores in certain regions that may still not be enough to solve all competition issues at a national level.
Two other clues are offered as to the possible outcome of the inquiry.
For starters, the Commission says the acquisition of Safeway by Morrisons could be pro-competitive in that it would create a powerful fourth national player. That’s the nearest it has got to identifying an eventual winner.
Perversely it also raises the prospect of the exact opposition happening, with all retailers being blocked from acquiring the chain. And on that note it poses an interesting question: if Safeway is not, in the strictest financial sense, a failing firm, could a different management team do better with the business?
A copy of the statement can be found at www.competition-commission.org.uk
The10-page, 8,000-word statement identifies the issues that now concern the Commission and the ways in which they could be tackled - although it stresses all these remedies are “hypothetical”. The statement is the public version of the remedies letter which has been sent to those retailers who have signalled their interest in acquiring Safeway. These retailers will now meet with the Commission.
Other interested parties can also comment on the statement but they must do so by July 4.
Reading between the lines, the Commission’s statement suggests that it already believes the market is highly concentrated and that further consolidation could have significant side-effects including loss of consumer choice, less intense competition in the long run (both locally and nationally) and an adverse impact on suppliers.
In particular, the Commission makes it clear that the issues surrounding local and national competition are inter-related and cannot be treated in isolation. And it says this inter-relationship is so important that even if a particular retailer agreed to divest stores in certain regions that may still not be enough to solve all competition issues at a national level.
Two other clues are offered as to the possible outcome of the inquiry.
For starters, the Commission says the acquisition of Safeway by Morrisons could be pro-competitive in that it would create a powerful fourth national player. That’s the nearest it has got to identifying an eventual winner.
Perversely it also raises the prospect of the exact opposition happening, with all retailers being blocked from acquiring the chain. And on that note it poses an interesting question: if Safeway is not, in the strictest financial sense, a failing firm, could a different management team do better with the business?
A copy of the statement can be found at www.competition-commission.org.uk
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