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EDEKA and Tengelmann satisfy preconditions to put EDEKA/Plus merger into effect

Date of issue: 09.12.2008

EDEKA is now able to take over Tengelmann’s discount activities in the food retail sector (Plus) and continue them under the name “Netto Marken-Discount”. The Bundeskartellamt had cleared the merger on 30 June 2008 subject to suspensive conditions. The fulfilment of the conditions now ensures that competition in the food retail sector will be maintained in spite of the existing high concentration and EDEKA's market leadership.

The commitment solution provided that those Plus outlets be sold which were problematic under competition law in regions in which EDEKA had high market shares even before the merger and where its market shares would have been considerably increased as a result of the merger. Of the 357 outlets for sale, 313 were taken over by REWE, six by Okle and one by Lidl. All three purchasers demonstrated their interest to the Bundeskartellamt to maintain the outlets acquired in competition with EDEKA. This will prevent an increase in EDEKA’s market share in the regional markets affected.

Furthermore, the notified concentration would have intensified the already high level of market concentration in the procurement of goods, leading to an even greater dependence of the suppliers. A significant expansion of EDEKA’s position in the procurement markets would have also further strengthened its market position in the sales markets. This is especially true since EDEKA would have largely adapted the newly acquired supermarkets, even in regions with an already high level of concentration, to the Netto Marken-Discount concept, which has been more economically successful. The Bundeskartellamt has therefore insisted that EDEKA and Tengelmann do not embark on a purchasing cooperation for their supermarket business. As already announced, Tengelmann is to look for another partner for a purchasing cooperation. Due to the restructuring of the transaction, Kaiser’s business will also be kept separate from EDEKA’s business. The combination of outlet divestment and a separate purchasing arrangement for Kaiser’s supermarkets will make any increase in EDEKA’s goods purchasing power resulting from the merger insignificant.

In the divestiture negotiations the Bundeskartellamt made sure that ultimately approx. 90 % of Plus outlets in the regions affected are sold to third food retailers. As a consequence only 37 outlets have to be closed. In the cases of these outlets, which have remained unsellable, the parties concerned and potential purchasers have submitted operating figures which justifiably appear to indicate that maintaining them would be uneconomical (especially due to high rents, unfavourable shop space and inadequate catchment areas). All potential purchasers have argued that the outlets affected could not be maintained as economic viable entities even if Tengelmann were to provide considerable investment contributions. The option of managing the shop space for other purposes by Tengelmann (e.g. kik) or by third companies outside the food retail sector is, of course, still possible.

The Bundeskartellamt has made completion of the merger dependent upon fulfilment of the conditions as otherwise there would have been no time pressure on the divestment negotiations. This would have considerably impaired the overall value of the Plus outlet network.

The Bundeskartellamt’s decision is not yet final. The parties to the merger have fulfilled the condition although they had previously appealed against clearance subject to conditions at the Düsseldorf Higher Regional Court.