The Guardian in the UK reports that, apparently because of a last-minute appeal by Wal-Mart, the country's Competition Commission said that it needed an extra week to complete its examination of how the sale of Safeway Plc will affect food retailing competitive issues.
The commission was scheduled to deliver its report to Patricia Hewitt, the nation's trade secretary, yesterday. She is scheduled to make a ruling next month. But the commission asked for extra time because of a "further meeting requested by one of the parties last week".
The Guardian reports, "Sources suggested that Asda had put a proposal to the commission that would have allowed Safeway's 460 stores to be divided up between all the trade buyers. It is thought also to have been trying to convince the commission that if it was allowed to bid for Safeway intact its potential duopoly position with Tesco would not be bad for competition.
"A combined Asda-Safeway would have a national share of the supermarket sector very similar to market leader Tesco which controls more than 25% of the UK market."
The companies being examined by the commission include Tesco, Wal-Mart's Asda group, Sainsbury, and William Morrison Supermarkets. Until now, the conventional wisdom has been that Morrison - the nation's fifth-ranked food chain - was the only company likely to be approved to make a bid for fourth-ranked Safeway. The theory was that a Morrison purchase of Safeway would actually create a stronger company to be a fourth alternative to the other three major food retailers.
The commission was scheduled to deliver its report to Patricia Hewitt, the nation's trade secretary, yesterday. She is scheduled to make a ruling next month. But the commission asked for extra time because of a "further meeting requested by one of the parties last week".
The Guardian reports, "Sources suggested that Asda had put a proposal to the commission that would have allowed Safeway's 460 stores to be divided up between all the trade buyers. It is thought also to have been trying to convince the commission that if it was allowed to bid for Safeway intact its potential duopoly position with Tesco would not be bad for competition.
"A combined Asda-Safeway would have a national share of the supermarket sector very similar to market leader Tesco which controls more than 25% of the UK market."
The companies being examined by the commission include Tesco, Wal-Mart's Asda group, Sainsbury, and William Morrison Supermarkets. Until now, the conventional wisdom has been that Morrison - the nation's fifth-ranked food chain - was the only company likely to be approved to make a bid for fourth-ranked Safeway. The theory was that a Morrison purchase of Safeway would actually create a stronger company to be a fourth alternative to the other three major food retailers.
- KC's View:
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Wal-Mart's low-pricing policy is good for Wal-Mart. In such a small country with so few major competitors, we're not sure that allowing it to buy Safeway does anything other than give it a boost in its stated goal of overtaking top-ranked Tesco.
The competitive balance in the UK would be far better served by having a strong Morrison-Safeway combination.
One wonders what sort of legal actions Wal-Mart might be threatening if the government rules against it in the Safeway matter. Somehow, unless Wal-Mart gets its way, we have a feeling that this story may not be close to coming to a denouement.
