EUROPEAN COMMISSION C(2017) 5763 final In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and other confidential information. The omissions are shown thus […]. Where possible the information omitted has been replaced by ranges of figures or a general description. Public version To the notifying parties Subject:Case M.8468 - Norgesgruppen/Axfood/Eurocash

Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004 and Article 57 of the Agreement on the European Economic Area Dear Sir or Madam, (1)On 10 July 2017, the Commission received notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 by which the undertakings NorgesGruppen ASA ('NorgesGruppen', Norway) and Axfood AB ('Axfood', Sweden) acquire within the meaning of Article 3(1)(b) of the Merger Regulation joint control of the undertaking Eurocash Food AB ('Eurocash', Sweden) by way of purchase of shares ('the Transaction'). NorgesGruppen and Axfood are collectively referred to as 'the Parties'. 1.The parties (2)NorgesGruppen is a food retailer active in food procurement, wholesale and retail distribution in Norway. NorgesGruppen is the largest grocery retailer in Norway and operates both through wholly-owned stores and through agreements with store owners (franchise). A total of 1,850 grocery stores are run in Norway under one of NorgesGruppen's brand profiles (Spar, Meny, Joker, Kiwi and Naerbutikken). (3)Axfood is a food retailer active in food procurement, wholesale and retail distribution in Sweden. Axfood is the third largest grocery retailer in Sweden. The retail business is conducted through the wholly owned store chains Willys and Hemköp, comprising 263 stores. (4)Eurocash is active in retail distribution in 8 supermarkets located in Sweden at a short distance from the Norwegian border which are primarily aimed at Norwegian consumers crossing the border to buy cheaper daily consumer goods. Eurocash has a turnover of EUR 128 million. 100 per cent of the shares in Eurocash are owned by the holding company NAX. 2.The concentration (5)On 18 January 2017, NorgesGruppen and Axfood signed two share and purchase agreements and one shareholding agreement that will affect the structure of ownership and control over NAX and consequently Eurocash. After the completion of the concentration Axfood and NorgesGruppen will hold 51% and 49% of the shares in NAX respectively. Pursuant to the shareholders’ agreement, each of the Parties shall appoint two board members and one deputy board member. Under Section 8.3 of the Shareholders Agreement, several Board decisions require unanimity among the board members appointed by the Parties, including strategic issues such as decisions on or amendments to business plans, yearly budget and the company's overall strategy. (6)As a consequence of the Transaction, NAX and Eurocash will be jointly controlled by NorgesGruppen and Axfood. The Transaction constitutes therefore a concentration pursuant to Article 3(1)(b) of the Merger Regulation. 3.EU Dimension (7)The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million (NorgesGruppen EUR 9,747 million, Axfood EUR 4,410 million, Eurocash EUR 128 million). Two of them have an EU-wide turnover in excess of EUR 250 million (NorgesGruppen EUR 1,233 million, Axfood EUR 4,410 million), but they do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State. The notified operation therefore has an EU dimension.

4.Application of the EEA agreement (8)The concentration concerns the distribution of daily consumer goods mainly to Norwegian consumers. Competence of the Commission as regards Norway is defined in the EEA agreement. Article 8(3)(a) of the EEA Agreement states that products falling within Chapters 1 to 24 of the Harmonised Commodity Description and Coding System ("Combined Nomenclature") are not covered by the EEA Agreement, unless such products are listed in Protocol 3 of the said Agreement. Products listed in Chapter 1 to 24 that are not covered by the EEA agreement include in particular meat, fish and seafood, milk and dairy products, eggs, fruit and vegetables, coffee and tea, flour and pastry sugar and cocoa, edible oils, beverages, alcohol and tobacco. Some food products are listed in Protocol 3 and fall therefore within the scope of the EEA agreement such as inter alia sugar and confectionary, pasta, ice cream and mineral water. (9)Products in the 'non-food' category are included in chapter 25 – 97 of the Nomenclature, and thus fall within the scope of the EEA Agreement and the Commission's jurisdiction. This includes in particular clothes, tableware, electric equipment and batteries, office accessories, domestic appliances, paper and plastic foils, textiles, cleaning products, papers, magazines and books, audio-visual equipment, child care and toys hygiene and sanitary products. (10)The concentration thus affects distribution of consumer goods which are within and or outside the scope of the EEA agreement. In cases involving both products falling within and outside the scope of the EEA-agreement, the proper functioning of the EEA mergers rules requires that the entire transaction has to be notified to the competition authority competent to deal with the case under EEA Agreement, namely in the present case to the Commission. Whether the transaction has to be notified to national authorities in the EFTA states depends on national notification rules. (11)In terms of the substantive analysis to be carried out, the Commission will assess the merger in relation to Norway, with regard to all products falling within the scope of the EEA-agreement. However, in the definition of the relevant markets and their assessment, the Commission applies the established approaches and rules as set out in its guidelines. 5.Competitive assessment (12)The target business consists of 8 supermarkets located in the Swedish municipalities of Svinesund (one store), Strömstad (two stores), Töcksfors (two stores), Charlottenberg (one store), Storlien (one store) and Åmål (one store). These stores are located in close proximity to the Norwegian border and the vast majority of their customers (between 67% and 95%) are Norwegian – the only exception being the supermarket in Åmål, which is located more than 80 km from the border and whose customer base is predominantly Swedish. (13)Like other Swedish supermarkets close to the Norwegian border, the business of Eurocash is principally aimed at Norwegian consumers who cross the border from Norway to buy cheaper Swedish groceries, alcohol and tobacco. The product assortment and marketing of Eurocash is primarily aimed at Norwegian consumers, who are also responsible for the major part of the stores’ turnover. The map below shows the location of the Eurocash stores in the border region between Norway and Sweden. (14)Prior to the acquisition of Eurocash, Axfood had a very limited market presence at the retail level in the municipalities where Eurocash operates and it has no presence in Norway or Denmark. Similarly, NorgesGruppen is not active in Sweden. The only potential overlap between the Parties' and Eurocash activities relate to retail distribution to Norwegian consumers and procurement of daily consumer goods in Norway, where NorgesGruppen and Eurocash are both active. 5.1.Market definition 5.1.1.Product market 5.1.1.1.Retail distribution of daily consumer goods (15)Cross border shopping in retail distribution is a phenomenon which occurs particularly between countries where there are differences in prices or in range of products. In the case of Norway and Sweden, differences in agricultural policy, custom barriers, cost level and exchange rates contribute to making cross border trade attractive. Price differences between Norway and the other Nordic countries are significant, with Norway being markedly more expensive than its neighbours. Food products and non-alcoholic beverages are in general 22.5 % cheaper in Sweden than in Norway. For milk, cheese and eggs the price level in Sweden is 45-50% lower and for meat 25-30% lower. Alcohol and tobacco are 57% less expensive in Sweden than in Norway. (16)Cross-border shopping between Sweden and Norway is particularly relevant because of the long common border and the fact that a large part of the Norwegian population lives close to this border. In 2015 Norwegians spent approximately EUR 1,430 million on cross border shopping on day trips to Sweden (which includes more than only grocery shopping). The total sales of groceries sales in the Swedish border municipalities are estimated to be approximately EUR 1,206 million, which represents approximately 6 per cent of Norwegians' total grocery spend. The vast majority of the consumers who cross the border to shop reside in the south-eastern part of Norway (including the Oslo area) and the average travel distance for those cross-border trips is 83.4 km. (17)The Commission has in previous cases considered that there is a distinct relevant product market for the retail sale of daily consumer goods mainly carried out by retail outlets such as supermarkets, hypermarkets and discount chains. The Norwegian Competition Authority has taken the same approach in a recent case. However, neither the Commission nor national competition authorities have previously assessed a merger where cross border shopping is as significant as at the border between Norway and Sweden. (18)The Parties take the view that for Norwegian consumers cross-border shopping in Sweden does not belong to the same antitrust market as regular shopping in Norway. On the demand side, cross-border shopping has a lower frequency. Furthermore, the average shopping basket is larger and includes a more significant share of alcohol and tobacco. On the supply side, retailers in border areas mainly set their prices based on competition locally from competing Swedish grocery chains and conversely Norwegian retailers do not take into account Swedish border shops when setting their prices and marketing policies. (19)Respondents to the market investigation have not confirmed that cross-border shopping is not in competition with traditional grocery shopping. These respondents indicated that Norwegians tend to shop for everyday consumption in Sweden, although probably in greater proportions to benefit from lower prices. Frequency of shopping trips goes from once a month to once a week for consumers depending on the distance to be travelled to the border. (20)On the supply side, the border grocery stores in Sweden advertise through Norwegian newspapers and media (including social media) to attract consumers. The advertisement is directed towards consumers living close to the border, but also further away from the border regions such as in the Oslo area. In addition, Norwegian national newspapers do general surveys on the price level in the Swedish border grocery stores up against Norwegian grocery stores. Consequently, Norwegian grocery stores tend to take cross-border competition into account when setting prices and developing marketing policies. (21)Consequently the Commission takes the view that regular trips to shop in Sweden may substitute to some extent daily shopping in Norway for Norwegian consumers living relatively close to the border (see below for a discussion of the relevant geographic market) and that for these customers border shops in Sweden constitute alternatives from Norwegian stores. The issue can however be left open since the Transaction does not lead to serious doubts as to its compatibility with the internal market and the EEA Agreement even if shopping in border stores in Sweden by Norwegians is deemed to fall into the same relevant product market as shopping in Norwegian retail stores.

5.1.1.2.Procurement of daily consumer goods (22)In its previous practice, the Commission considered a distinct market for the procurement of daily consumer goods by retailers and wholesalers from producers and upstream suppliers. (23)The Commission – although it has ultimately left the exact product market definition open in its previous cases – has considered that the procurement market for daily consumer goods should be defined with reference to different product groups given the limited supply-side substitutability. The Parties agree with this approach. 5.1.2.Geographic market 5.1.2.1.Retail distribution of daily consumer goods (24)The Commission has in its practice delineated the geographic market for retail sale of daily consumer goods, according to demand side considerations, by the boundaries of a territory where the outlets can be reached easily by consumers (radius of approximately 20 to 30 minutes driving time). The Commission has stressed that the delineation of each local area should be undertaken on a case by case basis by taking into account specific local circumstances. In the Coop/ICA decision, the Norwegian Competition Authority defined a radius of 10 to 20 minutes driving time but stressed that the precise delimitation of the local markets would vary in each area based on local factors such as topography, demography and the stores' relative location. (25)With respect to cross-border trade , the average travel distance for the cross-border shopping trips is 83.4 km, meaning that a proportion of the customers travel even further (up to 120 km) and this has been confirmed by respondents to the market investigation. It appears therefore fair to assume that in relation to cross-border shopping, a driving time of maximum 30 minutes is a less suitable parameter to assess competition for Norwegian consumers. (26)Assuming a maximum distance of 120 km, the catchment area for the Eurocash stores in the south of Sweden (Svinesund, Strömstad, Töcksfors and Charlottenberg) includes Norwegian consumers residing in South Eastern Norway, i.e. in the regions Oslo, Ostfold and Akershus and the southern parts of Hedmark and Oppland, as well as parts of Vestfold, Telemark and Buskerud. A similar assumption can be made for the catchment area for the Eurocash store in Storlien which includes Norwegian customers residing in the Trøndelag region, including northern parts of Hedmark and Oppland, as a proxy. NorgesGruppen is also present in these regions with its network of stores. The activities of the Parties therefore overlap in large stretches of the Norwegian territory. (27)Respondents to the market investigation have confirmed that due to their attractiveness to Norwegian consumers living up to 120 km from the border, the catchment areas of Eurocash stores cover the Norwegian regions mentioned above. For the purpose of this decision, the Commission will therefore assess the impact of the Transaction in retail distribution of daily consumer goods in all these regions. 5.1.2.2.Procurement of daily consumer goods (28)The Commission has previously considered the scope of the procurement market as national and the Parties agree with this approach. 5.2.Assessment 5.2.1.Retail distribution of daily consumer goods (29)If, in line with the Parties ‘arguments, for Norwegian consumers cross-border shopping in Sweden does not belong to the same relevant product market as regular shopping in Norway, there is no overlap between Norgesgruppen and Eurocash’activities. (30)If on the contrary for some consumers located in Norway cross-border shopping and regular grocery shopping constitute alternatives, they may choose between shopping for these products in Norway or take a special longer trip to one of the grocery stores in Sweden close to the border aimed at Norwegian clients, there is an overlap between Norgesgruppen and Eurocash for these consumers. The question here is to determine whether these border stores exert on Norgesgruppen’s stores a competitive constraint on Norgesgruppen’stores – and if the elimination of this constraint would have a detrimental effect on competition, in the absence of relevant alternatives. (31)The Parties have therefore identified all 622 NorgesGruppen stores which are within 120 km (the assumed maximum travel distance) from any of the eight Eurocash stores. The Parties subsequently provided market shares for retail distribution in the 622 catchment areas around each store and took into account the sales made by the Eurocash stores within 120 km from them. (32)The results of this analysis show that 595 out of these 622 catchment areas will be horizontally affected as a result of the Transaction, with combined market shares ranging from 20.4% to 78.6%. In 535 of these catchment areas, the combined share is above 40% and in 185 of these catchment areas, the combined share is above 50%. (33)However, in each of these 595 catchment areas, the increment would be less than 3.5% and in all the catchment areas where the combined share is more than 40%, the increment is systematically below 3%. The competitive constraint exerted by Eurocash stores or Norgesgruppen’s supermarkets appear therefore relatively limited with modest overlaps brought by the border stores (34)It appears moreover that in three of the four Swedish towns where Eurocash stores are located, other retail stores targeting mainly Norwegian consumers are active and could therefore provide a suitable alternative for these consumers, reflecting the dynamic character of these cross-border markets. (35)In Svinesund-Strömstad (three Eurocash stores), there are 96 catchment areas where the combined share is above 40% but three other stores are active in this border region. These three stores belong to Coop Sweden and two of them achieve a turnover which is three times higher than the Eurocash stores together. These border stores will continue to exert on Norgesgruppen a competitive constraint post-transaction.