The major multiples fear the Office of Fair Trading is threatening to interfere in the market on a massive scale after developments this week.
The first occurred on Monday when it announced it was extending an investigation it began in September. The original investigation was into a deal where Tesco bought a single Co-op store in Slough, and was looking into whether it had
“produced a substantial lessening of competition” within the local market (The Grocer, September 6, p4).
Directors of the major multiples were alarmed by the original investigation because it suggested the OFT was extending from its usual role of looking at major deals to assessing individual store deals. This appeared to be confirmed on Monday when the OFT said it was extending the investigation to look at two more stores that Tesco bought from the Co-op, at Toton in Nottinghamshire, and South Shields, Tyne & Wear. The following day DTI secretary of state Patricia Hewitt relaxed some of the restrictions on the unsuccessful bidders for Safeway - Tesco, Asda and Sainsbury - which would have prevented them from buying any parts of the business other than the 53 stores Morrisons has to divest.
However she massively increased the influence of the OFT by saying that if new owners of Safeway wanted to sell any assets to one of the three companies, even if it was a single store, then the deal would have to be cleared by the OFT.
Property expert Stephen Clarke, director financial consulting of DTZ, said the tightening up by the OFT had been inevitable following the Competition Commission report on the takeover of Safeway.
He said: “The report made it clear it wanted four major players in the one-top shopping market, and it focused on local competition on a store by store basis. This kind of scrutiny by the OFT is going to be a fact of life and the four major players are going to have to get used to it. They will not be able to make a move without the potential of a referral.”
The investigation into the Co-op deals could also prove an extra problem for Tesco because if the OFT finds against it, it could be required to sell the stores in a deal vetted by the OFT. The Toton store, a Tesco Extra, would be a particular loss as it is rated high in Tesco’s top 100 stores by CACI.
However an OFT spokesman said it was too early to consider the outcome.
Tesco said it was co-operating with the OFT, but emphasised it had been running the Toton and South Shields stores for nearly two years.
>>p35 The poisoned legacy
John Wood
The first occurred on Monday when it announced it was extending an investigation it began in September. The original investigation was into a deal where Tesco bought a single Co-op store in Slough, and was looking into whether it had
“produced a substantial lessening of competition” within the local market (The Grocer, September 6, p4).
Directors of the major multiples were alarmed by the original investigation because it suggested the OFT was extending from its usual role of looking at major deals to assessing individual store deals. This appeared to be confirmed on Monday when the OFT said it was extending the investigation to look at two more stores that Tesco bought from the Co-op, at Toton in Nottinghamshire, and South Shields, Tyne & Wear. The following day DTI secretary of state Patricia Hewitt relaxed some of the restrictions on the unsuccessful bidders for Safeway - Tesco, Asda and Sainsbury - which would have prevented them from buying any parts of the business other than the 53 stores Morrisons has to divest.
However she massively increased the influence of the OFT by saying that if new owners of Safeway wanted to sell any assets to one of the three companies, even if it was a single store, then the deal would have to be cleared by the OFT.
Property expert Stephen Clarke, director financial consulting of DTZ, said the tightening up by the OFT had been inevitable following the Competition Commission report on the takeover of Safeway.
He said: “The report made it clear it wanted four major players in the one-top shopping market, and it focused on local competition on a store by store basis. This kind of scrutiny by the OFT is going to be a fact of life and the four major players are going to have to get used to it. They will not be able to make a move without the potential of a referral.”
The investigation into the Co-op deals could also prove an extra problem for Tesco because if the OFT finds against it, it could be required to sell the stores in a deal vetted by the OFT. The Toton store, a Tesco Extra, would be a particular loss as it is rated high in Tesco’s top 100 stores by CACI.
However an OFT spokesman said it was too early to consider the outcome.
Tesco said it was co-operating with the OFT, but emphasised it had been running the Toton and South Shields stores for nearly two years.
>>p35 The poisoned legacy
John Wood
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