Does a supermarket chain abuse its dominant position by impeding competitors form purchasing plots of land to build supermarkets ?

According to the Italian Competition Authority (ICA), this may be so. Following a complaint filed by a supermarket chain, Esselunga, the Italian Competition Authority (ICA) has opened investigations into two foreclosing conducts affecting retail markets. In the first case (A437) the ICA considered the conduct carried out by UniCoop Tirreno (UCT). UCT has a dominant position in the market for supermarkets and hypermarkets in the Tuscany province of Livorno. Here there exists high entry barriers due to the dearth of land available for the construction of shopping centers. A further entry barrier is the need for an obtain an authorization from the public administration before taking up commercial activities.

The Municipality of Livorno had awarded a developer an authorization to build a supermarket. Esselunga offered to buy the piece of land where the construction of the supermarket was authorized. Yet the developer sold the land to UCT, though its offer was lower than that submitted by Esselunga. Considering that UCT already operated two supermarkets close to this area, the ICA took the view that the only reason why UCT bought the plot of land was to impede Esselunga from entering the market.

The second investigation (A437B)is about two conducts put in place by COOP Estense (CE) to the detriment of Esselunga in the province of Modena. In 2000 Esselunga bought a share of a rundown area within the Municipality of Modena at the time when the Municipality was consider to redevelop that area. Some years later, CE bought a small share in the area paying much higher price that the effective value of it. Then, CE objected to the approval of the redevelopment plan by the local authorities. And then, the Municipality of Modena changed the destination of the area, thereby depriving Esselunga of the possibility to build there a supermarket. By the second conduct, CE sent the Municipality of Vignola, a letter by which it proposed to contribute to the welfare of the inhabitants of Vignola by helping building a school. The letter was sent ater the Mayor of Vignola convened a meeting to sign a contract with Esselunga for the construction of a supermarket. Unsurprisingly, the mayor withdrew the proposal made to Esselunga, which, as a result, could not build its supermarket. CE, on the other hand, have never realized any infrastructure in Vignola.

The ICA concluded that these conduct were part of a complex strategy of CE aimed at encumbering the administrative procedure for the grant of authorization to take up new commercial activities. The likely effects of that was to impede or frustrate the entry of a competitor in the market.

The common element in these conducts is that they are aimed at foreclosing a competitor by impeding it from having access to what is a finite resource in retail markets due to licensing and planning laws: land to build supermarkets. In one case, the only reason why the dominant firm bought a piece of land was that it would have been otherwise purchased by its competitor, Esselunga. As for the second case, the acquisition of land by the dominant player was instrumental in having a stand to administrative procedure having as object the grant of planning permissions to competitors. Therefore, the dominant firm had strategically exercised its right within these procedures to the effect that eventually the acting authority did not grant such permission to competitors.

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