June 14, 2012

German cartel office bares teeth to retailers

Alain Caparros, Rewe CEO (photo: Rewe Group)
Not amused, Rewe CEO Alain Caparros: "What future for Dohle, Coop, Wasgau?"
The Bundeskartellamt (Federal Cartel Office) seems determined to prove to Germany's retail oligopoly that it is not a paper tiger.

To date, the competition authorities seemed content to bridle Edeka-Gruppe, Germany's largest food retailer with a 20.2 per cent market share, imposing strict conditions on its purchase of discounter Netto and regional retailers Ratio and Trinkgut.

Now, however, they have turned their guns on Rewe Group, Germany's no. 2 food retailer with a 16.7 per cent market share.

The bone of contention is Rewe's buying co-operation with regional multiple Wasgau which both parties had wanted to start on July 1.

A written reply by the cartel authorities to an enquiry by Lebensmittel Zeitung did not pull any punches:

Contravenes cartel law?

"The Federal Cartel Office has come to the provisional conclusion that (this) purchasing cooperation contravenes cartel law...(it could lead to) a marked limitation of competition on purchasing and sales markets."

Any such reservations could also place a question mark over Rewe's 25.1 minority stake in Wasgau, which seemed to have gained the nod from the Federal Cartel Office (FCO) in October 2011. This will make Rewe CEO Alain Caparros anything but happy.

"What is the future for Dohle, Coop, Wasgau? No one can strike," Caparros said in evident irritation at a trade meeting in Germany at the end of April.

Rewe and Wasgau now have until June 29 to restate their case. They will need to do some convincing as the FCO appears to have changed its tune.

Up till now, its legal eagles have remained unperturbed regarding recent small takeovers by Rewe, including "Sky" stores in the south-west of Germany and some Tengelmann sites in the Rhine-Main area.

Rewe has also been able to increase its buying volume through cooperating with department store group Karstadt, Coop Kiel and regional multiple Dohle. Apparently, the Cologne-based group is also flirting with the idea of cooperating with regional retailer Klaas & Kock.

Concentration end game

As we approach the end game of German retail concentration, Rewe and Edeka have seemed increasingly like cowboys trying to corral as many horses into their enclosure as possible. Often, regional multiples have found refuge by becoming members of Markant, the Swiss-based buying group.

Over the years, some of the small guys have played a very clever game jumping back and forth between the Rewe, Edeka and Markant folds. They have been courted by all, but remain resolutely promiscuous when opting for the best buying terms & conditions.

This game could go on for a little while longer, but it is now evident that an increasingly confident and ambitious FCO is determined to dictate the rules. The international consequences are also clear: Edeka will surely have no choice but to try its luck abroad again soon, and Rewe will have to push even harder beyond German borders.
Related article in German: Lebensmittel Zeitung, no. 24, 15.06.2012, by Annette C. Müller

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