On May 26, 2020, the FCA conditionally approved Bernard Hayot Group’s €219 million acquisition of the Vindémia Group—one of the largest deals in French overseas territories ever reviewed by the FCA.[1] Further to an on-site investigation, the FCA cleared the transaction in Phase I, subject to a fix-it-first remedy and behavioral commitments.

Bernard Hayot Group (BHG) is a large, diversified group active, among other areas, in food and non- food distribution services. BHG sought to acquire sole control of the Vindémia group which belongs to the Casino group and is active in the food and non-food distribution sector in the French overseas territories of Réunion, Mayotte, Madagascar, and Mauritius. According to the FCA’s press release,[2] the proposed acquisition was particularly significant in terms of turnover and number of stores involved (i.e., over 80 hypermarkets, supermarkets, and other stores).

To assess the transaction, the FCA deployed significant investigative resources. In addition to market tests, an investigation team led by the head of the FCA Merger Unit carried out an on-site investigation in Réunion during the pre-notification phrase. The team interviewed the merging parties, a wide range of market participants (competing brands, suppliers, consumer associations), and public and institutional entities (such as the Observatory of Prices, Margins and Revenues (“OPMR”), the local administration, and members of local parliament).

Following its market investigation, the FCA found that the proposed transaction would trigger two main concerns. First, the FCA found that the transaction would leave consumers with no credible alternative to the combined entity in a dozen catchment areas in Réunion for the retail distribution of food products and books. Second, in the upstream market for the supply of supermarkets, the FCA found that the transaction was likely to increase the economic dependence of local suppliers on the parties. As a result, these local suppliers might have had to lower their margins and/or been unable to diversify their customer base.

To address the FCA’s concerns in the retail distribution sector, BHG proposed a “fix-it-first” commitment, i.e., the buyer for the divested assets and the transactional documents are approved in the decision clearing the main transaction. This type of remedy aims to give the competition authority the assurance that the divested business will be sold to a suitable purchaser. It is typically required when competition authorities find that only a small number of potential buyers exists.[3] In this case, BHG committed to sell five stores to Make Distribution and two stores to the Tak group.

Moreover, to address the FCA’s concerns regarding local suppliers, BHG offered a set of tailor-made behavioral commitments. It committed to (i) sourcing 25-35%[4] of its total purchases from local producers each year; (ii) establishing an internal mechanism to identify and assist suppliers in a state of economic dependence;[5] and (ii) allowing suppliers to conclude two-year contracts in place of annual contracts. According to the FCA’s press release, it is the first time that the FCA has accepted such behavioral commitments to protect merging parties’ suppliers.

[1]              Decision No. 20-DCC-72 of May 26, 2020.

[2]              May 26, 2020, FCA press release on the clearance of GHB’s acquisition of the Vindémia Group.

[3]              According to the FCA’s press release, the FCA has accepted fix-it-first remedies in four previous decisions since 2009. Decision No. 09-DCC-67 of November 23, 2009, LDC Volailles/Arrivé; Decision No. 15-DCC-53 of May 15, 2015, UGI/Totalgaz; and Decision No. 19-DCC-15 of January 29, 2019, Dr.Oetker/Alsa.

[4]              The FCA’s press release does not provide the actual percentage.

[5]              The FCA’s press release does not provide further details on this internal mechanism.