The Curious Case of the Norwegian Grocery Chain Market

...

ICA and NorgesGruppen notified the NCA of their intentional deal in accordance with the Competition Act. However, the NCA eventually ruled against the deal and effectively discontinued the acquisition and any further cooperation between the two parties as of the 19th of April 2013. The ruling marked the first time in history that the NCA had employed the authority given to them by the recently revised Competition Act.

The NCA´s verdict stated that NorgesGruppens acquisition of a substantial share of ICA´s distribution would hurt competition, and ultimately the consumers. Moreover, the NCA called attention to the fact that NorgesGruppen already was the largest corporation in the market, and that the potential deal with ICA could yield them access to strategic information from a direct competitor.

Fast forward to 2014, ICA was still actively looking for a way to back out of the Norwegian market. Hence, they reached out to Coop with a proposition to sell the entirety of their Norwegian operation. As expected, the NCA expressed their concerns. However, Coop anticipated the NCA´s inevitable involvement in the potential acquisition and outlined an interesting and quite original proposition.

Coop suggested selling a limited number of their own stores to the remaining competitors after ICAs demise. The proposition would ultimately cause the NCA to approve of the deal in March 2015, leading Coop to acquire ICA´s approximately 550 stores. The approval was based on the following condition:

- Coop would sell 93 of their own stores. 43 would be acquired by Bunnpris, 50 by NorgesGruppen.

As NCA stated in the aftermath of the acquisition, the condition stated above safeguarded the national competition, and henceforth the consumers best interest.

I would greatly appreciate your feedback on these two separate incidents, that caused quite the turmoil in Norway. As I have no prior experience with M&As, I found this acquisition very interesting. Have you seen similar deals being made, involving a legislative body and an acquirer? Moreover, do you think that access to a competitor’s strategic information is a valid reason for discontinuing an M&A?

Furthermore, what are your thoughts regarding the conditions for Coop´s acquisition of ICA? Is selling a relatively small portion of your assets, to acquire a much large amount of new assets really safeguarding competition?

Another interesting topic is the Norwegian grocery chain market in itself. The German discount supermarket chain Lidl ventured into the Norwegian market, only to withdraw in the same fashion as ICA. Does this imply that the Norwegian market has become somewhat of a monopoly for the few, but exceptionally strong corporations? If this is the case, shouldn’t the NCA have intervened a long time ago, or was Lidls departure simply a result of bad timing, and an oversaturated market?

(If you want sources, most of it is in Norwegian. However, I will try to provide what I can upon request).