Edeka’s acquisition of Real stores only partly cleared – Edeka can only acquire 45 stores without conditions

The Bundeskartellamt has today only partly cleared Edeka’s plans to acquire up to 72 Real stores from SCP Retail S.à r.l. 21 stores cannot be acquired because of the competition authority’s competition concerns. In the case of six other stores carved-out retail space has to be given up to competitors or other Edeka stores in the market area have to be closed.

Andreas Mundt, President of the Bundeskartellamt: “We must ensure that consumers can still choose between different food retailers in future. This availability of alternatives will exert competitive pressure on the suppliers and ensure better prices, more choice and quality. At a number of stores we had the concern that with the acquisition Edeka would become too powerful in the respective regional markets. Edeka thus had to forgo around 30% of the stores it planned to acquire.”

At the end of 2020 the Bundeskartellamt had already examined and cleared Kaufland’s and Globus’s acquisitions of Real stores and had cleared Kaufland’s acquisition only subject to conditions as well (see press release of 22 December 2020).

SCP, which is controlled by the Russian investment company Sistema, had acquired all of the 276 former Real stores from Metro. In 2018/2019 the Real stores achieved a turnover of approx. seven billion euros.

The Edeka group is the leading supplier in the German food retail sector. In addition to Edeka Zentrale, it also includes the discounter Netto Marken-Discount, seven regional companies with stores operated by Edeka managers as well as independent retailers belonging to the nine regional Edeka cooperatives. Edeka has a distribution network across Germany comprising approx. 11,200 food retail markets. In 2019 the Edeka Group achieved a turnover of 55.7 billion euros, 51.7 billion euros of which was achieved in the food retail sector. The Bundeskartellamt regards the entire Edeka group including the independent retailers and regional companies as a single economic entity and as affiliated companies.

In merger control proceedings in the food retail sector the Bundeskartellamt always has to assess the competition effects of a proposed merger for both consumers in the relevant regional markets (sales side) and food manufacturers and suppliers (procurement side) as well as for competing retailers.

On the sales side the authority has analysed the competitive conditions in the sale of food to consumers in the actual regional catchment areas of the 72 Real stores relevant in this case. Based on payback data the authority was able to identify the area in which 90 percent of all customers of the respective Real store are resident. This area constitutes the relevant geographic market of the Real store concerned. Particularly in-depth analyses were carried out in the so-called key area in which two-thirds of all customers are resident. Apart from self service department stores, superstores and supermarkets, organic supermarkets are also included in the market. Not included, however, are specialist shops such as bakeries or drugstores. Consumer behaviour was also examined in the form of a consumer survey. Where the combined market share of the Edeka Group including the Real stores amounts to 35-40 percent or more in a regional sales market, the competition conditions in those markets were examined in more detail.

The Bundeskartellamt has competition concerns regarding the regional sales markets concerning 27 of these stores and foresees that there is a risk of a significant impediment to effective competition resulting from the acquisition of the Real stores in these areas by the Edeka group. As a result Edeka cannot acquire 21 of the 72 Real stores originally notified by the company. In the case of six other stores Edeka has undertaken to carve out retail space to other food retailers for at least 10 years after acquiring them or to close other Edeka stores in the relevant market area. With its commitments Edeka has forgone a total sales volume of approx. 580 million euros.

The Bundeskartellamt also has competition concerns about Edeka’s proposed acquisition on the procurement side. Accounting for more than 75 percent of the total sales, the food retail sector is by far the largest sales channel for food manufacturers. The four big retailers Edeka, Rewe, the Schwarz Group with Lidl and Kaufland, and Aldi account for more than 85 percent of this share of sales. Real’s total share of the procurement side was less than 5 percent.

Andreas Mundt, President of the Bundeskartellamt: “With this acquisition the Edeka Group is further expanding its strong market position in food purchasing. The conditional clearance of the acquisition was possible because in these proceedings, as in the Kaufland merger decision, SCP as the seller undertook to sell Real stores with a total food purchase volume of at least 200 million euros to medium-sized food retailers. This corresponds to a supermarket sales volume of approx. 430 million euros. In this way we are strengthening medium-sized retailers as an important sales alternative for food manufacturers and suppliers in Germany.”

It is not expected from the divestiture process that medium-sized retailers would have been able to acquire any of the stores without the Bundeskartellamt’s intervention. The commitment by SCP is linked to its commitment in the Kaufland/Real proceedings, i.e. it will not be necessary to sell an additional 200 million food purchase volume. However, the clearance of Edeka’s acquisition is now also dependent on the fulfilment of this similar condition.

In spite of the highly concentrated procurement market, it also has to be considered in the assessment under competition law that there is competition in procurement between the four leading retail chains. The commitment undertaken by SCP on the procurement side and Edeka’s commitment not to acquire 21 stores and, in the cases of 6 stores, to carve out retail space to competitors or to close stores, ensure that the increase in procurement volume will be considerably reduced.

Another factor which plays a role in the assessment is that although the procurement markets are still largely national in scope, the investigations also show indications that they are developing into cross-border markets, particularly with regard to fruit and vegetables.

The different stores are listed in the annex to this press release (in German only).

Edeka has stopped its demands for additional conditions from suppliers in connection with its acquisition of the Real stores after the Bundeskartellamt initiated proceedings against the company for violating the prohibition to demand unjustified benefits from suppliers. The Bundeskartellamt has also initiated proceedings against the Schwarz Group because of its demands for additional conditions in connection with its acquisition of Real Stores.