Following its examination of the effects on local competition of a takeover by rivals of supermarket group Safeway, Britain’s Office of Fair Trading will this week recommend a revision of the geographic boundaries within which supermarket competition is defined.
Should these recommendations be accepted by the final arbiter, the Competition Commission, control of Safeway could effectively be handed to retail wheeler-dealer Philip Green, owner of the BHS and Arcadia chains – all of which operate in different sectors to Safeway.
If the boundary revamp is applied, Safeway immediately becomes far less of an attractive proposition for its three supermarket suitors, Tesco, J Sainsbury and Wal-Mart owned Asda. The OFT’s present rules define a competitive local market as one in which there are three or more different supermarkets within a 15-minute drive of each other.
But its recent deliberations have led the OFT to believe that this criterion should be amended – in rural areas only – to four different supermarkets within 20 minutes of each other. On this basis Sainsbury, for example, would have to sell 180 of Safeway’s 485 outlets rather than the 90 stores predicted in January by Sainsbury ceo Sir Peter Davis. Tesco and Asda would be similarly affected.
William Morrison, the Bradford-headquartered chain which operates primarily in the north of England, and whose bid in January originally sparked the free-for-all, was thought to be too small to trigger competition concerns. Under the new rules, however, it would have to dispose of some 30 Safeway sites rather than the handful predicted.
Meanwhile, Safeway ceo Carlos Criado-Perez ruefully reflected that the firm’s UK financial and legal advisers – HSBC, Schroder Salomon Smith Barney and Clifford Chance – “got it wrong” when they reassured the board that the Morrison bid would be cleared by the OFT. However, unlike the supermarkets they serve, these Masters of the Universe don’t offer a money back guarantee.
Data sourced from: Telegraph.co.uk; additional content by WARC staff