CMA relaunches merger inquiry into acquisition of three supermarkets – six months after clearance

The CMA is investigating grocer Netto’s completed acquisition of three stores from Co-Operative Group.  The announcement of a fresh UK merger control investigation comes in the wake of the CMA’s July 2015 clearance of the transaction and after learning that it should have been notified to the European Commission under the EU Merger Regulation.

The case was referred back to the CMA from the European Commission on 22 January and the CMA has revoked its initial clearance decision with effect from 1 February.  The three UK stores, located in Leeds, Doncaster and Hull are not currently trading pending the CMA’s decision.

The CMA has not commented further on the circumstances of the referral back, yet it is rare for a case that should have been notified to the European Commission to be reviewed at national level and then to find it being re-examined by the same national authority months after that authority’s initial clearance.

It is not entirely clear how this state of affairs arose, although the CMA’s original clearance decision could not remain in place because it did not have jurisdiction.  It is only now, following the referral back to the UK from the European Commission’s original jurisdiction that the CMA has authority to review the transaction under domestic competition law.

It is for the notifying parties to determine where they need to file a merger and to satisfy the authority that it has jurisdiction.  There may have been some difficulties in determining whether or not the EU thresholds were triggered, not least in view of Netto’s joint venture with Sainsbury’s.  Another issue relates to the potential application of the ‘two thirds rule’ whereby there is no EU dimension if each of the undertakings concerned achieves at least two thirds of its EU turnover in the same member state.

The CMA has done its assessment once and absent a material change in circumstances that is not expected to change.  However, the second review brings with it delay and expenditure of duplicated resources for both the merging parties and the authority.