Kaufland/Real and Globus/Real
On December 22, 2020, the FCO cleared the acquisitions of up to 92 “Real” retail stores from SCP Retail S.à.r.l. (“SCP”) by Kaufland Immobilien & Co. KG and Kaufland Dienstleistung GmbH (“Kaufland”) and of up to 24 stores by Globus Holding GmbH & Co. KG (“Globus”). The clearance of Kaufland’s acquisition was subject to Kaufland foregoing the acquisition of nine of the originally planned 101 stores to address concerns in individual local sales markets. Further, SCP undertook to sell Real stores with a total procurement volume of € 200 million p. a. to medium-sized retailers.
Kaufland belongs to the largest food retailer in Europe, the Schwarz Group (which also comprises Lidl). Globus is a German retail chain of hypermarkets, DIY stores and electronics stores. SCP, which is controlled by the Russian investment company Sistema, had taken over the ailing retail chain with its roughly 270 stores from Metro in the spring of 2020 with the aim of breaking it up and selling on the majority of the stores.
The concentration was originally notified to the European Commission. The European Commission referred the case to the FCO in light of the affected German markets—both on the sales and procurement side.
The FCO considered self-service department stores, superstores as well as (organic) supermarkets to form part of the same market, but excluded specialist shops, like bakeries and drugstores. The FCO defined the relevant geographic markets as the catchment areas around the stores concerned in which 90% of all customers of the respective Real store are resident. Within these catchment areas, the FCO took a closer look at those “core areas” around each store in which it achieves two thirds of its sales. The FCO relied on data that was obtained through the “PAYBACK” loyalty program.
The FCO found that Kaufland’s acquisition would have significantly impeded effective competition with respect to only 9 stores as the number of available alternatives in the relevant local sales markets would have been severely restricted and the Schwarz Group as a whole would no longer have been sufficiently restrained by competitors. To remedy the FCO’s concerns, Kaufland offered to forego the acquisition of these nine stores and not to acquire them within the next two years.
Similar concerns on the sales side, however, did not arise in relation to Globus which only operates 47 retail stores throughout Germany.
On the procurement side, the FCO defined sixteen product groups (such as meat, fruits & vegetables, delicacies, or alcoholic beverages), each forming a distinct product market. All of these markets were found to be national in scope.
The FCO was concerned that the transaction would allow the Schwarz Group to further expand its strong market position in these already highly concentrated markets in which Edeka, REWE Group, Schwarz Group and Aldi represent about 85% of demand. In order to remedy these concerns, SCP undertook to sell stores with a total food procurement volume of € 200 million p. a. to medium-sized retailers such as the members of the Retail Trade Group, which includes Globus, as well as to foreign retailers or new market entrants.
On March 17, 2021, the FCO partially and conditionally cleared Edeka’s planned acquisition of Real stores. The FCO conditionally approved Edeka’s acquisition of 51 Real stores subject to the condition that Edeka give up sales space to other food retailers or close other Edeka stores in the relevant core area of six Real stores for a period of at least ten years after the acquisition. However, the FCO blocked the acquisition of 21 additional stores due to competition concerns on the sales side which could not have been rectified through remedies.
The FCO also intervened against Edeka’s as well as the Schwarz Group’s requests for so called “wedding rebates” (Hochzeitsrabatte), i.e., requests for additional advantages from suppliers in connection with the acquisition of the Real stores for violating for violating the ban on demanding unjustified advantages from suppliers (Section 19(2) No. 5 German Act against Restraints of Competition). After the FCO had initiated proceedings, Edeka already abandoned its demands for such rebates.