The Competition and Markets Authority (CMA) said it has found competition concerns in 35 local areas following its initial investigation into Morrisons’ purchase of McColl’s shops.
The watchdog, which launched its investigation in July after the companies submitted the reported £190 million deal for review, added that the deal would not harm the vast majority of shoppers or other businesses.
McColl’s operates convenience newsagent shops, with over 1,100 stores across England, Scotland, and Wales, while Morrisons, now owned by private equity firm Clayton, Dubilier & Rice (CD&R) has around 500 grocery stores in the UK. CD&R is also the parent company of the Motor Fuel Group (MFG), which owns over 800 convenience stores, the vast majority of which are attached to its petrol stations.
Following its Phase 1 investigation, the CMA has found that the merger between Morrisons and McColl’s raises competition concerns in 35 areas, where McColl’s or MFG convenience stores will face reduced competition if the deal is allowed to go ahead as planned. Weaker competition could lead to higher prices or a lower quality service for the customers in these areas who rely on their local shops for groceries, it added.
The CMA revealed that, during the investigation, the companies accepted that the merger would raise concerns in some areas, asking the CMA to move straight to a discussion of remedies to address these concerns.
“As the cost of living soars, it’s particularly important that shops are facing proper competition so that customers get the best prices possible when picking up essentials or doing the weekly shop,” Sorcha O’Carroll, CMA Senior Director of Mergers, said.
“While the vast majority of shoppers and other businesses won’t lose out, we’re concerned that the deal could lead to higher prices for people in some areas. If Morrisons and McColl’s can address these concerns, then we won’t need to move on to an in-depth investigation.
“In the meantime, we’re working closely with Morrisons to ensure that it can provide the support that McColl’s needs to continue to operate during our investigation.”
Morrisons now has five working days to offer proposals to the CMA to address the competition concerns identified. The CMA would then have a further 5 working days to consider whether to accept these in principle instead of referring the case to a Phase 2 investigation.
The CMA previously investigated CD&R’s purchase of Morrisons and approved the deal subject to the divestment of 87 MFG petrol stations to address competition concerns.
