The competition authority has stopped Lidl from buying a Scotts Supermarket in Żabbar, citing concerns about the budget retailer becoming too dominant in the southern area.
In a decision handed down this week, the Malta Competition and Consumer Affairs Authority said it was prohibiting the acquisition - proposed in 2021 - by Lidl Immobiliare Malta Limited of the Żabbar property on Triq Il-Mina Ta' Hompesch belonging to Said Investments Limited.
According to the competition office, the purchase by Lidl of the existing Scotts supermarket would have allowed Lidl to strengthen its position in the grocery retail market within a 15-minute drive radius. This would limit market competition in the area.
Lidl already operates stores in Burmarrad, Santa Venera, San Ġwann, Żejtun, Safi, Luqa, Qormi, Mosta, Sliema and Victoria.
It is currently building a new one in Żebbuġ and has just been given the go-ahead to open a twelfth one in Qormi.
The MCCAA's probe into the Żabbar purchase started in January 2021.
Back then the authority had been informed of Lidl's purchase of two divided portions of undeveloped land in Attard, as well as the Burmarrad and Żabbar grocery retail outlets with their operational permits and with vacant possession from Said.
The notification also covered a promise of assignment and transfer of leases for the portion of land situated near Scotts Supermarket in Burmarrad and leased by Scotts Ltd as a parking area and the premises in Sliema.
The office was told Lidl would not be acquiring the business carried out by Scotts Ltd - Scotts intended to continue operating its current supermarket business under the same brand name.
That same year, the MCCAA gave its go-ahead to Lidl's acquisition of the Burmarrad outlet, a lease of a parking area there and its lease of an outlet in Sliema, saying it did not expect those to damage competition within the grocery retail market.
However, it expressed reservations about Lidl acquiring the Żabbar property.
Three years on, the MCCAA this week said it was blocking the deal.
It noted it had received feedback from various stakeholders, including those active in the grocery retail market about the proposed Żabbar store.
"Market participants were concerned that the proposed transaction would strengthen Lidl’s position in the grocery retail market, reduce competition, affect the viability of other players in the grocery retail industry and erode consumer welfare.
"The office completed a comprehensive analysis to classify grocery stores with a sales area of 200 square meters or more based on their ability to impose competitive constraints in the market. The analysis evaluated stores on price, range, service and quality, determining that 53 out of 87 stores meet the competitive criteria across at least two of these categories, thus classifying them within the relevant product market."
The office also assessed the topography of Żabbar, customers’ willingness to travel, diversion ratios derived from an exit-store survey at the current Scotts store and the supermarket's catchment area.
"Based on this analysis, the office considers that a 15-minute driving time is a true representation of reality for the willingness to travel for shoppers to do their groceries," it said on Friday.
"In its competitive assessment, the office also evaluated the potential for entry, exit, and expansion by new entrants and existing players in the market," MCCAA added.
"This assessment considered the likelihood of such changes materialising, the timeliness of entry or expansion, and their sufficiency – meaning that any change must have adequate scope, effectiveness, and the ability to be sustained over time to meaningfully influence the competitive landscape."
It ruled that the transaction would have solidified Lidl’s market position, widening the gap between its competitors and limiting market competition.
Furthermore, the current levels of market concentration, as well as the increase in the concentration post-acquisition, indicated a substantial lessening of competition, it said.
This supported the prohibition of the acquisition due to market concentration concerns.
"The remedies offered by Lidl during the period of investigation did not adequately address the office’s competition concerns so that it could be concluded that competition would be preserved on a lasting basis.
"As a result, the office has decided to prohibit the proposed transaction."