The Bundeskartellamt has cleared the launch of a joint venture between EDEKA and Budnikowsky.

Andreas Mundt, President of Bundeskartellamt: "When we assess mergers in the retail sector we always have to examine the competitive conditions on the procurement and sales markets affected. On the procurement side both companies have less than a 15 per cent share of the German market for all drugstore products. Budnikowsky's increase in market share on the procurement side is quite small. On the sales side the companies achieve significantly higher market shares in Hamburg. However, Budnikowsky is increasingly exposed to fierce competition in the Hamburg market area, in particular from the market leaders in the rest of Germany, dm and Rossmann. The cooperation with EDEKA will enable Budnikowsky to minimise structural disadvantages it has in procuring goods in relation to these competitors. According to our assessment this will have a positive effect on competition and therefore also benefit consumers."

With 49.6 billion euros turnover EDEKA is the largest food retailer in Germany. Budnikowsky is a drugstore company with 181 outlets in the Hamburg metropolitan area and a turnover of approx. 480 million euros. By next year at the latest the two companies plan to hive off Budnikowsky's procurement, IT, e-commerce, administrative and logistic activities in a separate new company in which EDEKA will also have a share. Joint purchasing activities are to begin this year already. The operation of the drugstore outlets are to remain the sole responsibility of the family-owned company Budnikowsky. It is to be expected that EDEKA will be able to exert a competitively significant influence on Budnikowsky post merger. EDEKA plans to set up its own chain of drugstores nationwide, which will be made easier due to the cooperation with Budnikowsky.

This is the first time in years that the Bundeskartellamt has examined the drugstore markets in Germany. After the insolvency of Schlecker, the market leader, its market shares passed over to the remaining competitors; dm and Rossmann have expanded significantly.

Not only drugstore chains but also food retailers are active as suppliers of drugstore products. They are thus to be regarded as competitors of the drugstores not only on the procurement but also on the sales markets. However, as the food retailers cannot offer the same depth and diversity of range of drugstore products as the drugstores, the Bundeskartellamt assumes a graduated competitive relationship between these two groups. Both groups each account for a roughly equally large share of the total market. In its geographic definition, the authority divides the sales markets like the food retail markets into a total of 345 market areas, dividing large cities into municipal districts.

In the city of Hamburg Budnikowsky has an overall market share of 30-35 per cent. Here EDEKA's share is 5-10 per cent. These market shares vary in the individual municipal districts of Hamburg. Since the opening of branches of dm und Rossmann in Hamburg, Budnikowsky's market share has significantly fallen in the last few years. Compared with these two much larger companies, Budnikowsky has considerable procurement and cost disadvantages. As Budnikowsky is not active outside the metropolitan area of Hamburg, it is unable to compensate for these disadvantages on its own. In this respect the cooperation with EDEKA can be expected to reduce these structural disadvantages. Unlike in the food retail sector, EDEKA does not have a particularly strong position in the drugstore market in Hamburg. The Bundeskartellamt therefore did not expect the merger to significantly impede effective competition in this market which would justify its prohibition.

In reviewing the merger the authority conducted extensive preliminary investigations in which, in addition to the parties themselves, other market players such as dm and Rossmann cooperated with the authority. It was also able to make use of statistics gained in the REWE/Coop merger case. On this basis it was able to conclude its examination of the case within the one-month first phase. In its competitive assessment it also considered the comments of other companies, some of which had filed applications for admission to the proceedings.