On January 12, 2021, the Office for Competition at the Malta Competition and Consumer Affairs Authority received notification of a proposed concen-tration for Lidl Immobiliare Malta Ltd (the purchaser) to buy 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 Investments Ltd (the vendor) and Scotts Ltd (the tenant).
The notification also covered a promise of assignment and transfer of leases duly signed between the above-mentioned parties 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 for Competition was informed that the parties’ intention was for Lidl Immobiliare Malta Ltd to acquire the properties and leases from Scotts Ltd to operate Lidl supermarkets from them. The parties highlighted that the purchaser will not acquire the business carried out by Scotts Ltd; therefore, Scotts Ltd intends to continue operating its current supermarket business under the same brand name.
During the initial market investigation, the Office for Competition expressed serious doubts regarding the compatibility of the proposed concentration with the Control of Concentrations Regulations. It stated that on a prima facie basis, the proposed acquisition could substantially limit competition in the grocery retail market. Primarily, the Office highlighted that the acquisition of the Żabbar grocery retail outlet could lead to horizontal unilateral effects, both existing and future constraints, relating to the elimination of a competitive constraint, thereby restricting customer choice. This would harm competition and consumer welfare in the process.
In line with the Control of Concentrations Regulations, the Office for Competition initiated an in-depth (Phase II) investigation on February 15. Regulation 2 of the Control of Concentrations Regulations states that the turnover threshold test is subject to the activity in the preceding financial year. Given that 2020 was an exceptional year characterised by idiosyncratic shocks, the Office considered that an assessment that relies solely on data for 2020 would risk increasing the margin of error for Type I (false-positive) and Type II (false-negative) errors when taking its decision. As a result, the Office based its assessment on the data for the last two years.
The Office for Competition declared the modified concentration lawful on June 9
The Office gathered and used a broad range of information and evidence for delineating the relevant markets and conduct its competitive assessment, including:
A representative survey of grocery shoppers covering in-store groceries that was conducted in 2020 for COMP/MCCAA/01/2020. This survey helped the Office to properly capture and delineate the demand-side of the grocery market in Malta;
A request for information was sent to the main supermarkets in Malta to obtain the necessary information to assess the supply-side of the market. The information requested covered turnover, sales area, average spending per customer visit, percentage of sales related to food and beverages, product substitutability, price, range, quality, service and online shopping, among others.
In the same correspondence, the Office invited the interested parties to submit their views on the impact that the proposed concentration could have on competition in the grocery market in Malta.
The analysis of this data formed the basis for the Office’s definition of the relevant product and geographical markets and the competitive assessment conducted in this concentration.
Following its competitive assessment, the Office for Competition concluded that the acquisition of the Burmarrad outlet and leases of the Sliema outlet and Burmarrad’s parking area by Lidl Immobiliare Malta Ltd from Said Investments Ltd and Scotts Ltd are not expected to lead to a substantial lessening of competition in the grocery retail market in Malta.
Following several meetings convened between the Office and the notifying party, it was agreed by the parties to modify the original notified transaction and terminate the promise of sale agreement in so far only as it concerns the Żabbar properties. The parties duly signed the modified agreement on May 10.
As a result, in view of the fact that the serious doubts referred in the initiation of proceedings decision have been removed, the Office for Competition declared the modified concentration lawful on June 9.
Further details on the investigation are available on the MCCAA website below. Any relevant queries may be sent either by e-mail on info@mccaa.org.mt or by calling on 2395 2000.
This article is for information purposes only and cannot be seen as a substitute to the decision which can be accessed from the website below.
gilmour.a.camilleri@mccaa.org.mt
Gilmour Camilleri is Director, Communications, Energy, Transport and Financial Services Markets, MCCAA