The Competition and Markets Authority’s (CMA) initial investigation into Morrisons’ completed purchase of the McColl’s chain has found concerns in 35 local areas where the two brands compete.
However, the regulator stated the deal stuck in May to rescue McColl’s from collapse would not harm the vast majority of shoppers or other businesses.
McColl’s operates over 1,100 convenience stores, while Morrisons (now owned by CD&R) has around 500 outlets. CD&R is also the parent company of the Motor Fuel Group (MFG), which owns over 800 convenience stores on petrol forecourts.
Following its Phase 1 investigation, the CMA said it had 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. It stated that 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.
During the investigation, the CMA revealed that the retailers accepted that the merger would raise concerns in some areas and asked it to move straight to a discussion of remedies to address these concerns.
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 five days to consider whether to accept these in principle instead of referring the case to a full Phase 2 investigation.
“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,” said Sorcha O’Carroll, CMA Senior Director of Mergers.
“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.”
The CMA issued an initial enforcement order at the end of May, which meant both chains had to continue operating separately until the investigation was completed. O’Carroll noted that the regulator had been working closely with Morrisons to ensure that it can provide the support that McColl’s needs to continue to operate during the investigation.
Morrisons welcomed the findings and said it will now work closely with the CMA on its proposed remedies in these 35 local areas and “look forward to a swift conclusion of the process.”
