A concentration between two national grocery retailers conditionally cleared by the Italian Competition Authority


In the Conad/Auchan merger case, the Italian Competition Authority (ICA) conditionally approved the acquisition of the seventh largest grocery retailer, Auchan, by the largest Italian supermarket chain, Conad. By the proposed acquisition, Conad will acquire 291 points of sale of different size and format owned by Auchan in Italy.
Relying on the collective market shares of the merging parties combined with the measures of diversion ratio and GUPPI (Gross Upward Pricing Pressure Indicator), the ICA identified 33 problematic local markets for retailing of food products and non-food products. The theory of competition harm employed by the ICA is that the implementation of the merger would bring about unilateral anti-competitive effects. To address these competition problems, Conad and the ICA agreed on the structural remedy of divestment of 29 outlets by an undisclosed deadline.  
The conditional clearance decision in Conad/Auchan is consistent with the latest decisional practice of the ICA on the vetting of concentration in the retailing sector. The key take-home lessons from the decision are:
- An extensive definition of the relevant product markets for retailing of food products and non-food products. Alongside the segments of hypermarkets, supermarkets and convenience stores, theses markets also include discount stores in light of the high degree of substitutability among them.
- The relevant markets have a local geographic dimension. The relevant geographic markets of supermarket and hypermarkets are determined by isochrones corresponding to 15 minutes travelling time by car from the outlets of Auchan. In the case of convenience stores, the isochrones are reduced to 10 minutes.
- To filter out the local markets where post-merger competition would not be softened, in addition to the market shares of the parties, the ICA also considered the quantitative measures of GUPPI and diversion ratios. With this analytical framework the ICA identified the problematic local markets in those ambits where the collective market shares of Conad and Auchan, the diversion ration and the GUPPI exceeded the thresholds of 25%, 20% and 5%, respectively.

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June 23, 2021 at 10:18 PM
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