Superstore mega-merger faces in-depth competition probe

Date: 13/01/2000

By Peter Chapman

RETAIL experts believe the planned mega-merger between France's supermarket giants Carrefour and Promodes is heading for an in-depth four-month investigation by EU anti-trust regulators.

The prediction comes as the European Commission prepares to deliver its preliminary verdict on the deal, which would create Europe's most powerful retailer, by 25 January.

Even though the two firms are believed to have offered key concessions in a bid to secure swift approval for the merger, analysts say enough regulatory doubts remain to warrant a detailed probe. "The feeling is that this deal will go to a second-stage review," said one.

The Commission must also decide whether to refer parts of the deal which would have an impact on regional markets to France and Spain for scrutiny, as requested by Paris and Madrid. "If there are markets that are of local importance, then we may do that," said a spokesman this week.

He said one scenario could see Commission officials investigating the effect of the planned new firm's massive buying power on EU retail markets, leaving other issues for national regulators.

Whoever takes the reins in the investigation, it is the deal's impact on France which poses the most competition concerns. "The companies have agreed to offer some remedies, which I cannot comment on but I think everyone is aware that the concentration would really give them a dominant position in some French towns that would have to be addressed either by the French authorities or by us," said the Commission spokesman.

Experts have mixed views on how national regulators would treat any other parts of the merger which they are given responsibility for investigating.

Many expect French officials to approve any aspects of the deal they preside over, but most question Madrid's enthusiasm for a huge French-run retailing giant ruling its domestic market.

As part of their €16-billion deal, which was announced last August, Carrefour and Promodes said they planned to merge Promodes' Spanish operator Continente with Carrefour's local Pryca chain.

"The French want a national champion, and this is it," said one analyst. "But the question remains: does Spain want a French national champion?"

Another factor is Spain's general antipathy towards the 'grande surface' supermarkets which Carrefour and Promodes operate. The country has already passed laws which place a raft of restrictions on the sector, including a ban on the creation of hypermarkets and predatory pricing campaigns.

The new company would oust Germany's Metro as the EU's biggest supermarket chain, with annual sales of €52 billion. It would also challenge local players for leadership of the Belgian, Portuguese and Greek markets. However, a Commission spokesman rejected reports that the institution had concerns over the merger's impact on the Italian market.

Retail experts believe the planned mega-merger between France's supermarket giants Carrefour and Promodes is heading for an in-depth four-month investigation by EU anti-trust regulators.