3/09    15 January 2009

The OFT has today accepted the undertakings offered by Co-operative Group Limited (Co-op) to address the competition concerns arising from its proposed acquisition of Somerfield Limited. As a result, the merger will not be referred to the Competition Commission.

Under the terms of the undertakings, the Co-op will divest stores in 133 areas across the UK to resolve competition concerns raised by the merger.

The OFT carefully assessed and consulted publicly on the proposed undertakings, as well as on the identity of the buyers in the 24 local areas that were subject to an up-front buyer provision.

John Fingleton, OFT Chief Executive, said:

'This divestment package ensures that consumers will continue to enjoy strong competition in local grocery markets across the UK, while at the same time allowing a strategically important and likely pro-competitive merger in the UK grocery sector to go ahead.'

This is the largest divestiture package accepted in UK merger control, and is the result of a constructive working partnership between the OFT and the parties throughout the OFT's review.

NOTES

1. The Reference Test - the OFT has a duty to make a reference to the Competition Commission if the OFT believes that it is or may be the case that arrangements are in progress or in contemplation which if carried into effect will result in the creation of a relevant merger situation, and the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.

2. Under the Enterprise Act 2002 a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises, and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million, or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced.

3. Undertakings in lieu of reference - under section 73 of the Enterprise Act 2002 the OFT may, instead of making a reference to the Competition Commission, and for the purpose of remedying, mitigating or preventing the substantial lessening of competition concerned, or any adverse effect which has or may have resulted from it or may be expected to result from it, accept from such of the parties concerned as it considers appropriate undertakings to take such action as it considers appropriate.

4. Upfront buyer - the OFT considered that, given the limited number of potential purchasers that might be interested in buying the divested store and who were able to do so in 24 local areas, a necessary requirement to suspend the duty to refer and consider undertakings in lieu is that divestiture of these particular stores should be to a suitable purchaser approved in principle by the OFT before the OFT consulted on the undertakings prior to acceptance. This is the first 'partial' up-front buyer remedy under the Act.

5.  Before accepting the undertakings the OFT gave notice of the proposed undertakings under Schedule 10 of the Enterprise Act 2002, and considered any representations made in accordance with that notice. It also subsequently gave notice of some proposed modifications to the undertakings and considered any representations made.

6. The full text of this decision will appear in the mergers section.