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1 Economic Background

Consolidation, market saturation, strong price competition and low prices are key characteristics of the German food retail market. The sector is dominated by four large retail groups. According to the Federal Cartel Office (the “FCO”), the combined market share of these undertakings amounts to roughly 85 % of the food retail market. The major chains face low margins due to fierce price competition in the sector. Specific to the German market is the success of discounters with an overall market share of approx. 40 %. In recent years, there has been a trend in consumer preference towards smaller grocery formats, including convenience stores, small grocery retailers and independents. A further feature of Germany’s food-retailing industry is the relative absence of foreign retail groups.

On the supply side, a number of big multinational groups with branded products are active on the German market, most of them with relatively high market shares. However, most grocery products come from a range of small and medium-sized suppliers with a narrower national or even regional focus and often only minor market relevance. Most of demand is met with domestic products, but Germany remains a net importer of food products. In recent years, there has been a strong trend towards concentration along the supply chain. The broader trend also affects primary agricultural production in Germany. There, the major structural trend in recent years has been the steady decline of the total number of agricultural businesses, while the number of large entities in primary production is growing strongly.

Internet shopping in the food sector has not yet been embraced by consumers in Germany, and none of the four big retail groups offers a nationwide or supra-regional online supply with food and beverages. A market survey conducted by the Gesellschaft für Konsumforschung (the “GfK”) in 2012 found that only 10 % of German consumers had ever shopped online for groceries, beverages or drugstore articles.

The few existing online activities in the grocery sector are mainly operated by small and medium-sized food retailers and have not yet raised relevant competition concerns in relation with their existence. Some of the big retail groups have started limited online activities in select metropolitan areas.

2 Legal Background

2.1 Competition Law

The German Act against Restraints of Competition (the “ARC”) does contain only a few specific provisions aimed at the retail market. Alongside EU competition law, the grocery sector is subject to the general rules of the ARC. In recent years, the relevant cartel provisions in the ARC have been aligned with Art. 101 TFEU. Section 1 ARC prohibits all agreements, concerted practices or decisions by associations that have as their object or effect a restriction of competition. This applies in particular to hard-core restrictions of competition such as price fixing, sharing of customers and markets, allocation of production, market share quotas or bid rigging. In recent years, the FCO has imposed fines for information exchanges between competitors.

Substantive differences exist between German and EU antitrust rules in the area of dominance. According to German law, hindrance and discrimination are also prohibited to undertakings with a relatively strong market position (marktstarke Stellung), i.e. small or medium-sized enterprises, as suppliers or purchasers of certain kinds of goods or commercial services depend on them in such a way that sufficient and reasonable possibilities of resorting to other undertakings do not exist. However, Sections 19 and 20 ARC deal with anticompetitive behaviour only in terms of prohibiting abusive conduct by an undertaking with a dominant or relatively high market position. Section 20(3) ARC explicitly prohibits undertakings with superior market power (überlegene Marktmacht) to abuse their market position towards small and medium-sized enterprises by selling goods or services below cost price without an objective justification.

According to German law, resale price maintenance (the “RPM”) is considered a restriction of competition by object. In a recommendation paper, the FCO has provided some guidance on RPM and a number of other competition law aspects of vertical distribution agreements between manufacturers and retailers. According to the FCO, RPM may under certain circumstances lead to efficiencies, which may result in an exemption under Art. 101(3) TFEU. It is, however, on the parties to demonstrate such efficiencies.

According to German law, there are no specific provisions beyond the ARC aimed particularly at controlling the structure of the retail sector. The general provisions of the German merger control regime apply.

2.2 Exemption from Competition Law

In principle, in Germany, the retail sector is neither fully nor partly exempted from competition law.

However, a sector exemption for certain agreements between producers of agricultural products is contained in Section 28 ARC. The aim of the German Market Structure Act (the “MStG”), which has implemented this provision, is to improve the market position of farms. It enables producer collectives to be set up and permits what is termed “dual membership”, i.e., membership of a cooperative and of a producers’ union.

Furthermore, Section 3 ARC contains a specific provision for small and medium-sized enterprises with requirements that, if they are fulfilled, justify an exemption from the cartel prohibition. Systematically, this provision constitutes a legal fiction with the content that the general exemption requirements of Section 2(1) ARC in general are fulfilled if the requirements of Section 3 ARC are fulfilled. However, this provision regulates only cases without any interstate effect and applies to all sectors.

In addition, German law permits certain forms of cooperation of small and medium enterprises. The FCO has published guidelines on the criteria for agreements that are de minimis and thus fall outside the scope of the prohibition to restrict competition in Section 1 ARC. The scope of the exemption is limited as the FCO has to apply Art. 101 TFEU in cases where an agreement affects trade between member states.

2.3 Other Regulations

In Germany, there exists also no specific regulation applying to retail grocery market structures or behaviours beyond the general rules of the ARC that have any appreciable effect on competition.

The ARC deals with the accumulation and abuse of market power and the anticompetitive coordination of business decisions of companies. However, it does not stipulate a general ban on unfair competition. Whether commercial practices by dominant or non-dominant undertakings against competitors, consumers or other market participants are improper is determined by the Act against Unfair Competition (the “AUC”), which applies to the grocery retail sector in the same way as to other sectors. The anticompetitive effect of the AUC is quite low because it restricts the retailers only regarding a number of unfair and abusive practices.

Also beyond the AUC, in Germany there is no sector-specific regulation that, for example, provides an administrative price control, the prohibiting of the passing on of discounts or rebates to consumers or special provisions regarding internet retail stores.

3 Sector Enquiries in the Grocery Sector

On February 2011, the FCO has initiated a sector enquiry into the food retail sector. The investigation is focused on the competitive conditions in the markets for the procurement of food and beverages by food retailers. The authority has sent questionnaires to 21 food retailers and 200 manufacturers of food and beverage products on September 2011. The enquiry into the food retail market is still ongoing. [Addendum: The FCO has finished its sector enquiry and published the results in September 2014.]

On January 2012, the FCO completed a sector enquiry on market power in the milk industry. The enquiry was already launched in 2008, and an interim report was published in 2010.

3.1 Reasons for the Sector Enquiries

The sector enquiry into the food retail sector has been initiated against the backdrop of the high level of concentration in the retail market and frequent contacts between suppliers and retailers. The FCO saw a necessity to get a better overall picture of the market situation in retailing and the relations between retailers and manufacturers. According to the public statements, the FCO has received several complaints by food suppliers in recent years. Moreover, several high-profile horizontal cases among suppliers highlighted competition concerns in the food sector.

To clarify allegations of abusive behaviour, the authority has also started investigations concerning the procurement practices of two leading retailers. Moreover, in a prominent case opened in 2010, the FCO is investigating the vertical relations between the agro-food industry and the retailers. On January 2010, the authority raided the premises of 11 retailers and 4 manufacturers of branded consumer goods based on allegations of price fixing between retailers and suppliers. The ongoing cartel investigation has been focused at the beginning on the product categories “confectionery”, “coffee” and “pet food” but has ultimately been extended to the product groups “body care”, “baby food” and “beer”.

The sector enquiry on market power in the milk sector was triggered by complaints the FCO received from various market participants. According to the authority, the complaints covered a wide range of allegations, including price fixing and sales below cost price in the retail sector, difficulties in switching to competing dairies and abusive long-term supply contracts with dairies.

At the same time, allegations of an unfair calculation model for and the low level of milk prices, which allegedly threatened the very existence of small milk producers, were widely discussed in the German public after farmers had organised a fully fledged boycott of milk deliveries to dairies on May 2008. The FCO later found that with its call for a boycott, the milk farmers association violated competition law.

3.2 Outcome of the Sector Enquiries

With its sector enquiry on the food retail sector, the FCO is currently analysing the effects of the concentration among retailers for smaller competitors and suppliers. The aim is to determine whether and, if so, to what extent the leading food retailers enjoy purchasing advantages over their smaller competitors. Furthermore, the investigation will address the effects of purchasing advantages in procurement markets on competition in the sales markets. In this regard, the development of buying alliances as a specific form of cooperation among retailers in procurement markets seems to be of particular importance. According to the FCO, the scope of the enquiry is limited to the clarification of specific questions and certain product groups.

The authority announced to investigate the structure of the procurement markets in the food sector in a first step before turning its attention to the procurement practices of the large retailers. According to the FCO, the procurement shares of the retailers will be investigated both with regard to larger product categories and, in a sample survey, with regard to nine product markets (tinned vegetables, milk, butter, cold coffee beverages (with milk), ketchup, frozen pizza, roasted coffee, sparkling wine and jam).

To date, no conclusions or recommendations on the investigation of the food retail sector investigation have been published. [Addendum: The FCO has published the results of its sector enquiry in September 2014; they are available for download at: http://www.bundeskartellamt.de/Sektoruntersuchung_LEH.html?nn=4592442]

Generally, the milk sector enquiry encompassed the market levels of the milk producers, the dairies and the food retail sector and focused on the downstream (dairy/retail relationships) and upstream (producer/dairy relationships) markets for milk. While the main focus of the enquiry in the milk sector was on the examination of market power on various levels of the supply chain, a major part of the investigation concerned the retail level. In particular, the FCO was concerned that the market power of retailers vis-à-vis the more fragmented dairy cooperatives would give them an overly strong negotiating position on the procurement market.

In its final report on the structure of the milk sector, the FCO concluded that power imbalances between dairies and the food retail sector exist but have to be addressed individually. According to the authority, the market position of dairies depends strongly on the share of sales to retailers, the product portfolio and distribution alternatives. Evidence for anticompetitive behaviour from retailers was not found in the investigation.

In addition, the FCO announced to further examine the payment terms that retailers requested from dairies. The FCO recommended action to avoid further market transparency, in particular with regard to market information systems that publish current and dairy-specific data on the price of raw milk. The exchange of such data permits competing dairies to align prices for milk and further strengthens the bargaining position of retailers.

4 Competition Law Enforcement Regarding Anticompetitive Horizontal and Vertical Agreements

4.1 General Provisions and Responsibilities

Section 1 ARC prohibits all agreements, concerted practices or decisions by associations that have as their object or effect a restriction of competition and is therefore consistent with Article 101 TFEU. It applies to all anticompetitive horizontal and vertical agreements. Even anticompetitive practices at the local level are generally not exempted from the cartel prohibition clause in Section 1 ARC.

However, the German competition authorities are not subject to any obligation to take action against possible violations of the German antitrust regime. The question whether they start formal proceedings is subject to their own discretion. The FCO has published general guidelines regarding its policy on how to apply this discretion. According to these guidelines, the FCO in general will not start any proceedings under Section 1 ARC if the combined market share of the undertakings is below 10 % (horizontal agreements) or 15 % (vertical agreements) and if the agreement does not contain any hard-core restrictions (such as price fixing, geographic market sharing or customer sharing). In all other cases, the FCO exercises its discretion in each particular case. This is also true for the competition authorities of the federal states that are responsible for infringements with only local or regional effects. However, according to the previous decision-making practice, the competition authorities focus their resources on cases with certain significance.

4.2 Enforcement of Anticompetitive Agreements

As far as it is possible to analyse the published decision-making practice of the FCO and the courts, no grocery retailer has been sanctioned for a horizontal agreement, in particular to limit competition on prices.

Furthermore, neither the FCO nor the courts have so far dealt with the internal governance of grocery retail networks from the point of view of competition law or at least published a respective decision. In Germany, the question of the legality of anticompetitive agreements between members of retail networks (such as franchises or cooperatives) is covered by the general cartel prohibition clause of Section 1 ARC. With regard to such networks, it has to be noted that Section 1 ARC only applies to agreements between commercially independent undertakings. Companies that are part of a retail network are considered by the authorities to be independent if they bear the entrepreneurial risk of their business.

With regard to vertical agreements, in the grocery retail sector the enforcement focuses on two case groups.

4.2.1 Hub-&-Spoke Agreements

In 2010, the FCO started an investigation into the vertical relations between the agro-food industry and the retailers. On January 2010, the authority raided the premises of 11 retailers and 4 manufacturers of branded consumer goods based on allegations of price fixing between retailers and suppliers (hub & spoke). The ongoing cartel investigation has focused primarily on the product categories “confectionery”, “coffee” and “pet food” but has been extended to other product groups, i.e., “body care”, “baby food” and “beer”. The retailers include leading grocery retailers as well as smaller retail companies, a drugstore chain and a pet food retailer, while on the suppliers’ side there are involved several producers for all kinds of these products. The proceedings have not yet been concluded.

4.2.2 Retail Price Maintenance and Resale Price Recommendations

With the exception of books, magazines and drugs, which are regulated by specific price regulations, resale price maintenance in general violates German antitrust law.

According to the decision-making practice of the FCO and the FCJ, the pure sending of resale price recommendations, however, does not infringe German antitrust law even if the retailers follow these recommendations. It has to be noted that the FCO as well as the FCJ have adopted a restrictive interpretation of this exemption. In cases where manufacturers do anything more than the pure sending of price lists with the aim of bringing the retailers to follow these recommendations (such as contacting the retailer to address the difference between the recommended resale price and the actual resale price), the FCO and the FCJ consider this as a violation of the German cartel prohibition clause.

Actually, several cartel proceedings are in progress with regard to resale price recommendations in the retail grocery sector but not yet decided. However, besides the retail sector, the FCO and the FCJ have decided several cases in the last 5 years relating to resale price recommendations.

For example, in 2012, the FCJ held in a civil law case that a manufacturer who contacted a retailer and questioned why the retailer defined his resale prices below the recommended prices violated German antitrust law.Footnote 1 Also in 2012, the FCO imposed a fine of EUR 8.2 million on a German tool manufacturer who financially penalised retailers who did not follow his price recommendations.Footnote 2

According to publicly available resources, neither the FCO nor the courts have dealt with the issue of punishments of grocery food retailers by several suppliers, for example by withdrawing quantities. Such retaliatory measures may infringe either the cartel prohibition clause or (if their combined market power leads to a dominant market position of this association) the prohibition of the abuse of a dominant position if the suppliers use their combined market power to influence the resale prices or the procurement policy of the retailers. Furthermore, such retaliations might violate Sections 3, 4 no. 1 AUC.

As far as the case law is published, there has also never been a case in which the FCO or a German court dealt with suppliers who punished food retailers for selling low-priced imported agricultural products cheaply. The only known retaliation measure by small suppliers was an agreement of dairy farmers in 2008 to boycott all creameries that pay less than the price demanded by the farmers.

5 Abuse of Buying Power, Abuse of Dependency

The German competition law does not provide a definition of “buying power”. It has a general approach prohibiting, according to Section 19 ARC, abuse of a dominant market position on the one hand and, according to Section 20 ARC, active and passive discrimination and unfair impediment of dependent undertakings on the other hand, both aiming at, inter alia, the control of buying power.

5.1 Dominant Undertakings and Undertakings with Strong or Superior Market Power

5.1.1 Market Dominant Undertakings

As regards the definition of a dominant market position, the German competition law distinguishes between single and collective dominance.

A single undertaking being a buyer (or supplier) of specific products or services has a dominant market position insofar as it does not have any competitors at all, is not exposed to considerable competition or has an outstanding market position compared to other competitors. In this regard, the German competition law provides for an (rebuttable) assumption stating that an undertaking is dominant if it has a market share of at least 40 %.

In principle, the aforementioned definition applies also to two or more undertakings. Additionally, it is required that there is no considerable competition between those (two or more) undertakings. The statutory (rebuttable) assumption defines that a number of undertakings is dominant if it is comprised of 3 or less undertakings having a combined market share of at least 50 % or if it is comprised of 5 or less undertakings having a combined market share of at least two-thirds.

Notwithstanding the fact that the above-mentioned statutory assumptions state clear and simple rules to determine the market position of an undertaking or of a few undertakings, in practice these assumptions are rebutted very often. Therefore, the test applied by the German competition authorities in order to find a single or collective dominance is an overall consideration of all relevant market structure factors and competition conditions, such as market share, financial power, access to buying and sales market, integration with other undertakings, market access barriers for other undertakings, factual or potential competition of undertakings outside Germany, ability to switch its offer or demand on other products or services as well as the possibility of the market opposition to switch to other undertakings.

A dominant position is assumed if the competition authority comes to the conclusion that it is in a position in which it does not have to expect considerable control of the market opposition and thus may act independently as regards its pricing policy, amount and selection of production, quality of products or innovation efforts (which is quite similar to the ECJ’s approach). With regard to the grocery retail sector, this question arises because of the concentration in this sector.

5.1.2 Relatively Strong or Superior Market Position

As mentioned before, according to German competition law, not only undertakings with a dominant market position but also undertakings with a relatively strong market position (marktstarke Stellung) are subject to legal control of conduct. An undertaking has such a relatively high market position if small or medium-sized enterprises depend on it for certain kinds of input or output.Footnote 3

Furthermore, undertakings having a superior market power (überragende Marktmacht) towards small and medium-sized enterprises may not sell food below costs.

In cases of active discrimination and unfair impediment, there is a specific statutory rebuttable assumption stipulating that a supplier of specific products is dependent on a buyer if this buyer regularly receives benefits from the supplier in addition to usual rewards and that are not granted to similar buyers. When assessing the dependency of undertakings in cases of passive discrimination, competition authorities are allowed to act on presumptions based on (buying share) thresholds, taking into account the entire grocery sector. However, the buyer concerned may refute such presumption if it demonstrates that the specific competition situation on the specific product market is different or if due to the importance of a specific product the buyer may not abstain from it.

5.2 Abusive Behaviour

Abuses of a dominant market position, e.g. active and passive discrimination and unfair impediment of dependent undertakings, are prohibited per se because they imply a competition restriction for the undertaking concerned. A detection of a competition restriction referring to the entire relevant market is not required.

The German competition law provides for an exemplary list of market behaviours constituting abuses of a dominant market position. The most important abusive market behaviours that may become relevant in the retail grocery market are the following:

  • firstly, the request of rewards or other business conditions diverging from those that most likely would result from an effective competition (the so-called exploitation abuse);

  • secondly, the request of rewards or business conditions that are unfavourable in comparison to those that the dominant undertaking requests from comparable purchasers on comparable markets, if the difference is not justified objectively (the so-called abuse by discrimination in price);

  • thirdly, the discrimination or impediment of other (dependent) undertakings; in this respect, the German competition law provides for statements of rather general nature, stating only that dominant undertakings or undertakings with a dominant or a relatively high market position are not allowed to:

    1. 1.

      unfairly impede other undertakings in the course of business that usually is accessible to similar types of undertakings;

    2. 2.

      unfairly impede small and medium-sized competitors, in particular, by selling goods or services permanently below cost price;

    3. 3.

      treat undertakings of similar type differently without objectively justified grounds, i.e., so-called active discrimination; and

    4. 4.

      prompt undertakings to grant them financial benefits without objectively justified grounds, i.e., so-called passive discrimination. In this regard, it is commonly understood that addressees of this provision are buyers only.

In all these cases, the detection of an unfair impediment or discrimination is made on the basis of a weighting of interests of all undertakings concerned. In case of the aforementioned passive discrimination, the decisive question is whether the buyer is requesting for benefits that gear into existing agreements and thus have no equivalent.

For example, a dominant buyer fulfils a passive discrimination if it requests from its suppliers retroactive bill reductions in order to “ensure collective growth”.

Price marking performed by suppliers may constitute an example for an unjustified request for benefits only if it is done free of charge and thus not part of the overall conditions agreed between the buyer and its supplier.

5.3 Case Law on Abuse of a Dominant or Superior Market Position

In 2007, the FCO accused the drugstore chain Rossmann for selling several products below cost price and imposed a fine on Rossmann of EUR 300,000. According to Section 20(3) ARC, undertakings with a superior market position are prohibited to sell articles regularly below cost price without a reasonable justification. However, as a result of the subsequent court proceedings in 2009, the Higher Regional Court of Düsseldorf acquitted the defendant and reversed the fine by rejecting the approach of the FCO to calculate the cost price.Footnote 4 In light of this decision, the prohibition to sell below cost price is widely seen as of very limited scope. According to informal statements from the FCO, further enforcement action in this area is unlikely as it is deemed too complex to prove a sale below cost price, given the extensive number of discounts and conditions agreed upon between retailers and suppliers.

The most prominent example considered an abuse of buying power is the request for so-called Hochzeitsrabatte (wedding rebates) as defined by the FCO: a buyer that purchased a competing company and thus gained insight into its price conditions bargained with its suppliers is not allowed to request from those suppliers retroactively the same price conditions. In 2013, the FCO issued a statement of objections against EDEKA after its takeover of the retailer shops PLUS as the FCO considers EDEKA’s demands on suppliers abusive.Footnote 5 It has to be seen whether the FCO will take a formal decision in this case.

6 Merger Control

In Germany, the general merger control regime applies also to transactions in the (grocery) retail sector. There exist no special thresholds.

6.1 The Merger Control Thresholds

In general, a merger has to be notified to the FCO if in the last business year the combined aggregate worldwide turnover of all undertakings concerned exceeded EUR 500 million and the domestic turnover of at least one undertaking concerned exceeded EUR 25 million and that of another undertaking concerned exceeded EUR 5 million (Section 35(1) ARC). These thresholds also apply to mergers in the retail (and thus the grocery retail) sector, but according to Section 38(2) ARC only three-quarters of the turnover generated through trade in goods (i.e., buying and reselling of goods) have to be taken into account.

As opposed to other areas of competition law, e.g. cartels or abuse of dominance, the FCO has exclusive jurisdiction to decide merger control cases where the German merger control thresholds are exceeded (unless the case falls within the jurisdiction of the European Commission). Therefore, the FCO is also in charge of assessing mergers at a purely local level if the turnover thresholds are exceeded.

6.2 The Definition of Relevant Markets

The ARC does not contain a legal test to define the relevant markets, but such a definition has been established by long-standing case law of the FCO and the Federal Court of Justice (the “FCJ” or Bundesgerichtshof, the “BGH”). According to the FCJ,Footnote 6 the product market has primarily to be defined according to the demand-side oriented market concept. Pursuant to this case law, all products belong to one market, which are substitutable from the view of the consumers, taking into account the product characteristics, the purpose of use and the price.

The German FCO has a well-established practice relating to mergers and market definitions in the grocery sector, reaching back as far as the early 1980s. According to the FCO,Footnote 7 the product market in the grocery sector is subdivided into a market for general grocery retailers (such as supermarkets or discount stores) and markets for the different types of specialised food stores (such as bakeries, butcheries or street market traders) and the cash and carry market. In the view of the FCO, the overall market for general grocery retailers cannot be further subdivided into separate markets for the different distribution channels, e.g., full-range supermarkets, discount stores and self-service department stores.

The FCO emphasises that this market definition corresponds with the view of most of the consumers who would expect their nearby grocery retailers to offer a full range of food and so-called near-food products for everyday consumption. For that reason, general grocery retailers would not compete with specialised food stores that offer a restricted range of food. On the other hand, the FCO states that most consumers would regard the different types of general grocery retailers (supermarkets, discounters…) as substitutable; hence, they form a uniform market.

Both the FCO as well as the German courts have decided that the market for general grocery retailers consists of regional markets.Footnote 8 In its decision-making practice, the FCO has used radii of 20 km or 20 driving minutes around the regional centres in which the grocery stores are situated to define the regional markets.Footnote 9 However, this radius might be adjusted in individual cases if the economic geography of the region concerned necessitates it.

On this basis, the FCO has identified 345 geographic markets for the retail grocery sector in Germany. The FCO links these markets to postal area codes and has published a list of these postal codes, as well as a map showing all identified geographic markets as annexes 1 and 2, respectively, to its EDEKA/Tengelmann decision.Footnote 10

Furthermore, it is also an established practice of the FCO in the retail grocery sector not to make an isolated assessment of the conditions in a regional market and to also take into account the market conditions on neighbouring regional markets when assessing the conditions on a regional market (so-called cluster assessment).

6.3 Concentration of Grocery Retail Networks

In Germany, the grocery retail sector has been characterised by a high degree of concentration for several decades now. The FCO has assessed that the four largest retail companies (EDEKA, Schwarz-Group, REWE, ALDI) have a combined market share of roughly 85 % of the food retail market.Footnote 11 From the point of view of the FCO, these high market shares cause problematic market imbalances between grocery retailers and food manufacturers. For this reason, the FCO has initiated a sector enquiry into the grocery sector to analyse the competitive conditions in this sector, especially with regard to the relations between retailers and manufacturers. On the purchasing side of the market, however, the FCO recognises a high level of competitive pressure between these four grocery retailers, resulting in very low prices for end consumers.

The only legal instrument in Germany to control the concentration of the grocery sector is the merger control regime. There exist no further instruments like divestiture proceedings or similar structural controlling instruments.

On the other hand, and as far as it is possible to analyse the sparsely published merger decision practice of the FCO, the high degree of concentration of the retail grocery sector has so far not been used as an argument to clear a (problematic) merger on the supply side among grocery suppliers.

6.4 Remedies in Merger Control Cases

If a notified concentration significantly impedes effective competition, especially by creating or strengthening a dominant position, the FCO has to prohibit it. If the parties nonetheless proceed to implement the concentration (or should have failed to notify such an inadmissible merger in the first place), the FCO will order the divestiture of the merged undertaking.

To avoid a prohibition decision, the parties to the transaction and the FCO can agree on conditions and obligations to a clearance decision. In practice, the FCO expects the parties to submit adequate commitments. In the published decision practice of the FCO, there have been two decisions over the last 5 years where the FCO issued a conditioned clearance decision for a concentration in the food retail sector.Footnote 12 In both cases, with the leading German grocery retailer EDEKA being involved in each of them, the parties were obliged to sell a considerable number of stores and to make certain behavioural commitments for the time after this sale. In another case, EDEKA withdrew a notification after having been confronted with the FCO’s concerns on some regions and successfully re-notified a modified transaction excluding the stores in the problematic regions. Similarly, in another case, EDEKA excluded one market from the transaction to avoid a phase 2 investigation.

7 Conclusion

From our point of view, legislative changes in Germany are not necessary with regard to the grocery retail sector. However, the FCO and the national courts are invited to consider the economic and commercial needs and requirements of the stakeholders in the grocery retail sector by applying the existing competition law.