CELEX: 31993M0320
Language: en
Date: 1993-04-19 00:00:00
Title: COMMISSION DECISION of 19.04.1993 declaring a concentration to be compatible with the common market (Case No IV/M.320 - AHOLD / JERONIMO MARTINS / INOVACAO) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31993M0320

COMMISSION DECISION of 19.04.1993 declaring a concentration to be compatible with the common market (Case No IV/M.320 - AHOLD / JERONIMO MARTINS / INOVACAO) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 117 , 28/04/1993 P. 0000

 COMMISSION DECISION of 19.04.1993 declaring a concentration to  be compatible with the common market (Case No IV/M.320 - AHOLD  / JERONIMO MARTINS / INOVACAO) according to Council Regulation  (EEC) No 4064/89  (Only the English text is authentic)  The paper version of the decision is available through the  sales offices of the Office of Official Publications of the  European Communities. PUBLIC VERSION MERGER PROCEDURE ARTICLE 6(1)(b) DECISION Registered with advice of delivery To the notifying party Dear Sirs, Re: <ind> Case No. IV/M.320 - AHOLD/ Jerónimo Martins/  Inovação  <ind> Your notification of 12.3.1993 pursuant to article 4 of  Council Regulation nº 4064/89 (Merger Regulation)  1. <ind> The notified operation concerns the proposed  acquisition by Jerónimo Martins Retail, S.A. (JMR) of the total  share capital of Inovação, Sociedade Gestora de Participações  Sociais, SGPS (Inovação Holding), a Portuguese holding company  which controls two companies active in the Portuguese food  retail distribution market, INO Supermercados S.A. and FEIRA  NOVA Hipermercados S.A. (FEIRA NOVA).  2. <ind> After examination of the notification, the Commission  has concluded that the notified operation falls within the  scope of the Merger Regulation and does not raise serious  doubts as to its compatibility with the common market.  I. <ind> The parties  3. <ind> JMR is a joint venture between Koninklijke AHOLD N.V.  (Ahold) and Estabelecimentos Jerónimo Martins & Filho,  Administração e Participações S.A. (J.M. Holding) which is  active in the Portuguese food retail market. The creation of  JMR was notified to the Commission and cleared by it in  September 1992 (see Case nº IV/M. 263 - AHOLD/ Jerónimo  Martins).  4. <ind> AHOLD is a dutch company with important food retail  operations in the Netherlands and the U.S.A.  5. <ind> J.M. Holding is a Portuguese holding company with  interests in food retailing and wholesaling as well as food  production in Portugal.  6. <ind> Inovação Holding is a Portuguese holding company  which, in addition to its controlling stake in the two  Portuguese food retail companies mentioned above, Ino  Supermercados (50,83%) and Feira Nova (60,5%), also had  interests in other business areas such as food wholesaling,  domestic appliances retailing, insurance broking and property.  II. <ind> The operation  7. <ind> The acquisition of Ino Supermercados and Feira Nova by  JMR will include several transactions.  8. <ind> As a first step, on January 29, 1993 JM Holding  acquired the total share capital of Inovação Holding. This  operation was notified to the Portuguese merger control  authorities which gave its approval on 12.3.1993.  9. <ind> JM Holding will then sell all the non-food retail  activities of Inovaçao Holding, acquire the remaining 39.5%  shareholding of Feira Nova held by the minority shareholders  and launch a public bid for the 49.17% share of Ino  Supermercados held by the public in order to acquire the  totality of the share capital. The launching of a public bid is  mandatory under Portuguese company law when in a single  transaction a company acquires more than 20% of the share  capital of another company whose shares are held by the public  and quoted in the stock exchange. Thus, JM Holding's intention  in launching the public bid is not to acquire control of Ino  Supermercados, which it already had through its acquisition of  Inovação Holding, but to comply with the provisions of article  313 of Portuguese company law.  10. <ind> Finally, after implementation of the operations  mentioned in paragraphs 8 and 9, JMR will acquire from JM  Holding total ownership of Inovação Holding whose scope of  activity will then be limited to food retailing and will  include a 100% shareholding of Feira Nova and control of Ino  Supermercados (and maybe total ownership depending on the  outcome of the public bid). The acquisition of Inovação Holding  by JMR constitutes the operation notified under the Merger  Control Regulation.  III. <ind> Comunity dimension  11. <ind> The aggregate worldwide turnover of Ahold, JM Holding  and Inovação Holding exceeds 5 billion Ecu in 1992. The  aggregate Community wide turnover of each of at least two of  the undertakings concerned is  more than 250 million Ecu and  they did not achieve more than two thirds of their Community  wide turnover in one and the same member state. Therefore, the  proposed operation has a Community dimension in accordance with  article 1(2) of the Merger Regulation.  IV. <ind> Compatibility with the common market  12. <ind> Food retailing in Europe is characterised by marked  disparities of structure and level of development and although  there may be convergences concerning forms of distribution and  modes of consumption, national peculiarities linked to the  history and culture of each nation must be taken into account.  It is therefore necessary to analyse the main characteristics  of the Portuguese food retail market before analysing the  notified concentration in detail.   <ind> Structure of the Portuguese food retail market  13. <ind> Five different types of food retail shops can be  distinguised:   <ind> Hypermarkets:  <ind> Self-service stores handling food, toiletries, household  cleaning products and possibly other goods, and with a selling  area equal to or bigger than 2,500 m2.   <ind> Supermarkets:  <ind> Stores belonging to the chains: A.C.Santos, Europa,  Expresso, Inô, Mini Preço, Pingo Doce, Saco Cheio, and other  self-service stores with a selling area of between 400 and  2,499 m2 which handle the product classes mentioned in the  definition of grocers below.   <ind> Self-services:  <ind> Remaining stores handling the same product classes as  the grocers, with a selling area between 50 and 399 m2 and  working on a self-service basis. Stores belonging to the chains  mentioned in the definition of supermarkets are excluded.   <ind> Grocers:  <ind> Shops handling at least eight food product classes and  three toiletry or household products. Large grocers are those  who fulfill at least one of the two following conditions: to  have one checkout and a selling area smaller than 50 m2, or  disregarding the selling area to have more than 2 employees  (counting as 1/2 each part-time employee).   <ind> Pure food stores:  <ind> Stores handling, at least, five food product classes and  no toiletries or household products (an exception is made for  razor blades). These stores typically also handle dehydrated  soups, instant puddings, fortifying drinks, instant blended  coffee or powder soft drinks and have a significant percentage  of sales of products for consumption out of the store. Included  under this category are pastry shops, dairies, sausage shops  and sweet shops.   <ind> It must be noted that a considerable number of food  retail stores included in the supermarket category have a  selling area of less than 400 m2 (in certain cases less than  200 m2) but were included in this category as they belong to  the major retail chains listed under this heading.   14. <ind> In analysing the Portuguese food retail market 5  different geographical areas can be identified. There are two  big urban areas (Lisbon and Oporto) and 3 other mainly rural  areas, the first one corresponding to the Portuguese Atlantic  Coast north of Setúbal, the other 2 regions being the  northeastern and southern regions respectively.  15. <ind> Taking into account the types of retail stores and  the geographic areas within the Portuguese territory as defined  in paragraphs 13 and 14 and considering available data covering  years 1987 to 1991 one may reach the following conclusions:   <ind> - <ind> There is a growing trend towards concentration,  as the total number of food retail stores has consistently  decreased since 1987.   <ind> - <ind> The hypermarket segment is having a sustained  growth and became in 1991 the most important type of retail  outlet. In 1991 the hypermarket segment accounted for 25% of  total food retailing compared to 5.4% in 1987. These gains in  market share have been made entirely at the expense of  traditional forms of retailing (self services, grocers and pure  food shops), as the supermarket segment maintained its market  share during this period (20.7% in 1991 against 20.4% in  1987).   <ind> - <ind> Modern distribution outlets have a particularly  strong market share in the urban areas of Lisbon and Oporto  where they accounted respectively for 76.2% and 63.4% of total  food retail business to be compared with less than 26% in any  of the 3 other geographic areas defined above.   <ind> - <ind> In spite of this remarkable growth of modern  outlets since the mid-eighties this trend is likely to continue  in the forseeable future as Portugal remains one of the EEC  countries (together with Greece) where modern food retailing  outlets (hypermarkets and supermarkets) are least developed  with a total market share below 46% of total food retailing.   <ind> Product (Service) markets  16. <ind> The concentration affects the retail food trade and  within this market the hypermarket and supermarket segments. In  spite of existing differences both between hypermarkets and  supermarkets and between these two types of retail distribution  and more traditional forms of retail trade as regards, inter  alia, prices, size and available choice of goods, the question  of whether these distribution forms constitute distinct  relevant product markets can be left open for the reasons  mentioned below.   <ind> Geographic markets  17. <ind> From a consumer point of view retail markets are  generally considered to be local markets. For this purpose,  local markets can be defined as those areas within 20 minutes  driving distance of each sales outlet concerned. From the  supply point of view main distributors such as JMR deploy their  activities throughout the territory of Portugal, wherever  existing or potential demand would justify the  creation of  retail oulets. After the present concentration JMR will be  present in all geographic areas as defined in paragraph 14 with  a strong presence in the urban areas of Lisbon and Oporto but  also in the Western Atlantic Area.   <ind> Assessment of the concentration  18. <ind> In assessing a concentration in the retail business  sector it is necessary to consider the market power that can be  exercised both towards consumers and suppliers.  19. <ind> JMR prior to the acquisition of Inovação Holding was  only present in the supermarket segment in Portugal. By  acquiring Inovação Holding JMR will control two retail  companies, Ino Supermercados which is only active in the  supermarket segment and Feira Nova, which is only active in the  hypermarket segment.  20. <ind> Taking into account all food retailing in Portugal,  JMR will have a    [Business secret - between 5% and 10%]  market share. If the hypermarket and the supermarket segments  are considered together, JMR will reach a market share of    [Business secret - between 15% and 20%]. JMR in this case will  become the third retail distribution player in the market  behind Sonae [Business secret - between 25% and 35% ] and Supa  [ Business secret - between 20% and 25%].  21. <ind> However, if the supermarket segment is considered  alone JMR, which was already the largest player in this market  segment with a [Business secret - between 20% and 25%]  market  share, will increase its leadership by acquiring an important  competitor with an [Business secret - between 10% and 15%]  market share, Ino Supermercados, which ranked 3rd in this  market segment. The new entity with [Business secret - between  30% and 40%] will have a market share which will be the double  of that of its nearest competitor Sonae [Deleted].  22. <ind> Even if we consider the supermarket segment of food  retailing as a distinct market the concentration would not lead  to dominance at a national level as a result of which effective  competition would be significantly impeded in a substantial  part of the common market. There are no legal or other barriers  to entry in this segment (a retail outlet of less than 2,000 m2  does not need prior specific administrative approval by  Portuguese authorities) and there are available alternatives  such as hypermarkets or traditional retail stores.  23. <ind> Pursuing further the analysis in order to consider  the local markets affected, only 6 locations outside Lisbon and  Oporto (where all the major players in retail food are present)  should be taken into account, that is, Alverca, Caldas da  Raínha, Aveiro, Vila Nova de Gaia, Figueira da Foz and  Famalicão, where JMR and Ino Supermercados were already  established. Market share statistics at local level were not  available but in all locations but one (Aveiro), the  main  competitors Sonae and Supa are already present. Supa have  supermarkets in Alverca and Famalicão and Sonae in Alverca,  Caldas da Raínha, Vila Nova de Gaia and Figueira da Foz in  addition to a big hypermarket (10,000 m2) in Vila Nova de Gaia.  Therefore, only in Aveiro a small town with less than 50,000  inhabitants, will JMR not be challenged by a major competitor.  However, that does not mean that competition from traditional  types of retail stores does not exist.  24. <ind> Concerning the market power that could be exercised  towards suppliers it is not likely that this concentration will  substantially modify the buying power JMR already had prior to  the concentration in order to enable it to dictate terms to  their suppliers if we take into account the following: [The  participation of Ahold and JMR in a cooperative agreement known  as Associated Marketing Services (AMS) that has been notified  to the Commission on April 5, 1991 (Case IV/33.360) can be  assessed separately under Regulation 17.]   <ind> - <ind> Major suppliers of JMR have sufficient  alternative outlets, such as Sonae, Supa, Carrefour or major  wholesale chains like Makro and Grula.  <ind> - <ind> Furthermore, the new entity will not  significantly alter the structure of demand for the suppliers'  products.  V. <ind> Conclusion  25. <ind> On the basis of the above findings and considerations  the Commission has come to the conclusion that the proposed  concentration does not create or strengthen a dominant position  as a result of which effective competition  would be  significantly impeded in the common market or in a substantial  part of it.   <ind> For the above reasons, the Commission has decided not to  oppose the notified concentration and to declare it compatible  with the common market.  This decision is adopted in  application of Article 6(1)(b) of Council Regulation No.  4064/89.  For the Commission