Morrisons’ takeover of convenience store chain McColl’s creates competition concerns in only a small number of local areas, according to the UK competition watchdog, paving the way for clearance of the £190m rescue deal.
The Competition and Markets Authority (CMA), which said its initial investigation had found concerns in 35 local areas where the two brands competed, said the overall the deal “would not harm the vast majority of shoppers or other businesses”.
Morrisons, which in May beat the owner of Asda to buy McColl’s after the 1,100-store chain fell into administration, is the UK’s fourth biggest grocer, operating 500 stores. Under a previous arrangement, about 270 of McColl’s shops operate as Morrisons Daily outlets.
The probable green light after competition concerns will be welcomed by the newspaper and magazine industry, with the McColl’s store network an important local distribution network for newsstand sales beyond the big supermarkets and chains such as WH Smith.
Morrisons was acquired by the US private equity group Clayton, Dubilier & Rice (CD&R) in a £7bn takeover battle last year. CD&R is also the parent company of the Motor Fuel Group (MFG), which operates more than 800 convenience stores, the vast majority of which are part of its petrol stations.
“The CMA has found that the merger between Morrisons and McColl’s raises competition concerns in 35 areas where McColl’s or MFG convenience stores will face reduced competition if the deal is allowed to go ahead as planned,” the regulator found.
“Weaker competition could lead to higher prices or a lower quality of service for the customers in these areas who rely on their local shops for groceries.”
The CMA launched its phase one investigation of Morrisons and McColl’s in July, after they submitted the deal for review and asked the regulator to move to a discussion on remedies to get it through.
Morrisons has five working days to submit proposals to solve the competition issues, and the CMA has another five working days to consider whether to accept them instead of referring the deal to a lengthy in-depth phase 2 investigation.
“As the cost of living soars, it’s particularly important that shops are facing proper competition so that customers get the best prices possible when picking up essentials or doing the weekly shop,” said Sorcha O’Carroll, a senior director of mergers at the CMA.
“While the vast majority of shoppers and other businesses won’t lose out, we are concerned that the deal could lead to higher prices for people in some areas. If Morrisons and McColl’s can address these concerns, then we will not need to move on to an in-depth investigation.”