Earlier this week, the German Federal Cartel Office cleared Edeka’s acquisition of 178 Tegut supermarket stores subject to divestiture commitments (see also our earlier post). The decision might not be a landmark merger control case but the discussion that followed offers an interesting opportunity to revisit a question that competition regulators increasingly face: How should regulators assess small yet additional consolidation in sectors that are already highly concentrated?
Germany’s grocery sector has long been characterised by a relatively small number of major players. Edeka, Rewe, Aldi and the Schwarz Group (Lidl/Kaufland) account for a significant share of grocery sales and have shaped the competitive landscape for decades. As a result, virtually every significant grocery transaction receives close scrutiny.
Some readers from the early days may recall the Edeka/Kaiser’s Tengelmann saga which was ultimately cleared by way of a ministerial permission and was one of the most closely watched merger cases in modern German competition law. Although the current transaction is far less controversial, it once again raises familiar questions regarding further consolidation in a market that is already relatively concentrated.
Against this backdrop, the Federal Cartel Office analysed the competitive impact of the acquisition inter alia on numerous local retail markets but also on the national procurement market. Consistent with its long-standing practice, the authority focused primarily on local shopping alternatives available to consumers and noted the low procurement volume of Tegut. Following an in-depth investigation, the authority concluded that the transaction could be cleared subject to remedies in a number of local markets where competition concerns had arisen.
In many respects, this is a fairly traditional merger-control story. The authority identified local competition concerns, negotiated remedies and ultimately approved the transaction. What happened afterwards was perhaps more interesting.
Concerns beyond the transaction
Shortly after the clearance decision, the German Monopolies Commission published a statement expressing concerns about the transaction and warning against further concentration in the grocery sector.
To be clear, the Monopolies Commission did not expressly suggest that the Federal Cartel Office had misapplied the law or conducted an inadequate review. Rather, its statement should be understood as a broader policy intervention. The Monopolies Commission essentially argued that developments in the grocery sector deserve continued attention and suggested that further consolidation should be viewed critically.
Viewed from that perspective, the discussion is less about the legal assessment of a particular transaction and more about how one views the long-term evolution of the sector. This distinction is important. Merger control authorities are required to assess the transaction before they are concluded and determine whether any resulting competition concerns can be addressed. Advisory bodies and market observers, by contrast, are often more focused on longer-term developments and broader market trends.
A broader discussion
That discussion extends well beyond the German grocery sector. Regulators increasingly encounter transactions in industries that are already concentrated but continue to experience incremental consolidation. Such cases rarely involve transformative mergers that fundamentally reshape a market. More often, they concern the acquisition of regional businesses, specific assets or portfolios of outlets. The challenge lies in determining at what point individual transactions become part of a larger trend.
Viewed in isolation, a particular acquisition may not significantly alter competitive conditions. Viewed over a longer period, however, a series of individually manageable transactions can gradually reshape market structures. The Monopolies Commission’s opinion appears to reflect precisely that concern. While the Federal Cartel Office assessed the competitive effects of the transaction and imposed remedies where necessary, the Monopolies Commission focused not only on the individual transaction but also on the broader direction of travel within the industry.
Neither perspective is especially surprising. Indeed, both play an important role in modern competition policy. Merger control necessarily focuses on specific transactions and evidence. At the same time, policymakers and commentators inevitably ask broader questions about how markets evolve over time.
Looking beyond the transaction
This is perhaps what makes the Edeka/Tegut case noteworthy. The legal issues raised by the transaction are relatively conventional. The case was investigated, competition concerns were identified in certain local markets, remedies were agreed and the transaction was cleared.
The ensuing discussion concerns a different question altogether: How should policymakers think about further consolidation in sectors that are already highly concentrated? Across many industries, competition authorities are increasingly required to assess transactions that may appear manageable on a standalone basis but nevertheless form part of a longer-term pattern of consolidation.
The Monopolies Commission’s statement can be read in that context. Less as a commentary on the specifics of Edeka/Tegut and more as a reminder that market structures evolve incrementally. Significant changes in concentration are often not the result of a single transformative merger but of a series of smaller transactions over time.
The Edeka/Tegut decision is unlikely to reshape German merger control. Yet the discussion surrounding it highlights an issue that competition authorities will continue to encounter: At what point does an individually acceptable transaction become part of a broader structural trend that warrants closer scrutiny and are regulators equipped to step-in?
Photo from Tim Mossholder on Unsplash
