The OFT appears to be signalling its intention to take a more aggressive role in policing the multiples. John Wood reports
In a further development, the Secretary of State for Trade and Industry Patricia Hewitt “clarified” her position on the sale of Safeway. She softened the original stance on the disposal of Safeway assets by giving the new owner the option to sell stores or depots to bidders originally blocked from acquiring “any part of Safeway”.
The major multiples have already spent huge amounts of time and money to satisfy the competition authorities over various deals in the past 12 months.
A busy year started with OFT investigations into the acquisitions of T&S by Tesco and Alldays by Co-operative Group, both of which were approved. The proposed takeover of Safeway sparked a massive inquiry by the Competition Commission, leaving the top five retailers all locked in talks with the OFT, and a proposal by Sainsbury to buy 171 Somerfield stores was dropped after the OFT said that deal would be also referred.
But a low key announcement by the OFT on Monday, followed by a Safeway “clarification” by the DTI on Tuesday suggest the current regulatory activity may only be the tip of the iceberg, with the OFT, in particular, looking to take a far more aggressive role in the multiple market.
Unlike all the other deals investigated, which involved hundreds of stores, Monday’s announcement concerned an investigation into the acquisition of just two Co-op stores by Tesco, and was the extension of an investigation initiated in September which was looking into the acquisition by Tesco of a single Co-op store in Slough. In each case the OFT said it was investigating whether the deal was covered by the Enterprise Act 2002, and if so whether it might “be expected to result in a substantial lessening of competition within any market”. In other words the OFT was now considering whether single deals could cause a local monopoly.
Although none would go on the record, the directors of many of the leading retailers were shocked to hear of the September investigation, because it suggested they might have to go through the complex process of obtaining OFT approval for every single proposed acquisition, and even risk referral to the Competition Commission.
The extension of the investigation into two more deals, concerning the Tesco Extra store at Toton in Nottinghamshire and the Tesco store at Towers Place at South Shields in Tyne & Wear, suggests the OFT is growing confident and believes it has a role to play.
An OFT spokesman said there had not been a conscious change of policy, and although it was using powers under the Enterprise Act, which recently came into operation, it had the same powers under previous legislation.
He said the initial investigation in Slough was not an OFT initiative but had been sparked by “complaints” it had received. He also made the point that the OFT’s new focus on local markets was consistent with the line taken by the Competition Commission in its report on the proposed takeover of Safeway, where it had studied the isochrone of each store.
However, each bid - even for a single store or lorry - would have to be scrutinised individually by the OFT.
Whoever wins the battle for Safeway, the legacy for the industry could be almost suffocating interference by the OFT.
In a further development, the Secretary of State for Trade and Industry Patricia Hewitt “clarified” her position on the sale of Safeway. She softened the original stance on the disposal of Safeway assets by giving the new owner the option to sell stores or depots to bidders originally blocked from acquiring “any part of Safeway”.
The major multiples have already spent huge amounts of time and money to satisfy the competition authorities over various deals in the past 12 months.
A busy year started with OFT investigations into the acquisitions of T&S by Tesco and Alldays by Co-operative Group, both of which were approved. The proposed takeover of Safeway sparked a massive inquiry by the Competition Commission, leaving the top five retailers all locked in talks with the OFT, and a proposal by Sainsbury to buy 171 Somerfield stores was dropped after the OFT said that deal would be also referred.
But a low key announcement by the OFT on Monday, followed by a Safeway “clarification” by the DTI on Tuesday suggest the current regulatory activity may only be the tip of the iceberg, with the OFT, in particular, looking to take a far more aggressive role in the multiple market.
Unlike all the other deals investigated, which involved hundreds of stores, Monday’s announcement concerned an investigation into the acquisition of just two Co-op stores by Tesco, and was the extension of an investigation initiated in September which was looking into the acquisition by Tesco of a single Co-op store in Slough. In each case the OFT said it was investigating whether the deal was covered by the Enterprise Act 2002, and if so whether it might “be expected to result in a substantial lessening of competition within any market”. In other words the OFT was now considering whether single deals could cause a local monopoly.
Although none would go on the record, the directors of many of the leading retailers were shocked to hear of the September investigation, because it suggested they might have to go through the complex process of obtaining OFT approval for every single proposed acquisition, and even risk referral to the Competition Commission.
The extension of the investigation into two more deals, concerning the Tesco Extra store at Toton in Nottinghamshire and the Tesco store at Towers Place at South Shields in Tyne & Wear, suggests the OFT is growing confident and believes it has a role to play.
An OFT spokesman said there had not been a conscious change of policy, and although it was using powers under the Enterprise Act, which recently came into operation, it had the same powers under previous legislation.
He said the initial investigation in Slough was not an OFT initiative but had been sparked by “complaints” it had received. He also made the point that the OFT’s new focus on local markets was consistent with the line taken by the Competition Commission in its report on the proposed takeover of Safeway, where it had studied the isochrone of each store.
However, each bid - even for a single store or lorry - would have to be scrutinised individually by the OFT.
Whoever wins the battle for Safeway, the legacy for the industry could be almost suffocating interference by the OFT.
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