The Office for Competition prohibits the proposed acquisition by Lidl Immobiliare Malta Limited of Property at Zabbar Belonging to Said Investments Limited to operate Lidl Supermarket (COMP/MCCAA/13/2023)

The Office for Competition (hereinafter “the Office”) has prohibited, under the Control of Concentration Regulations, the proposed acquisition of Property at Scotts (Ħaż-Żabbar) belonging to Said Investments Limited to operate Lidl Supermarket by Lidl Immobiliare Malta Limited (‘Lidl’). According to the findings of the Office, the acquisition would have allowed Lidl to strengthen its position on the grocery retail market in the southern part of Malta, defined as 15-minutes driving time away from Scotts (Ħaż-Żabbar). The Office deems that Lidl did not offer commitments that were sufficient enough to address the substantial lessening of competition concerns as identified by the Office for Competition.

The Office for Competition investigation

The decision, issued to Lidl on 18 September 2024, follows an in-depth investigation by the Office of the proposed transaction, which would have allowed the acquisition by Lidl Immobiliare Malta Limited of properties at Scotts (Ħaż-Żabbar) belonging to Said Investments Limited and leases belonging to Scotts Limited.

As per the Office’s definition, Lidl is the leading supermarket chain in the market while Scotts currently operates four active stores across Malta.

During the investigation, the Office received feedback from various stakeholders, including those active in the grocery retail market. Market participants were concerned that the proposed transaction would strengthen Lidl’s position in the grocery retail market, reduce competition, affect the viability of other players in the grocery retail industry and erode consumer welfare.

The Office completed a comprehensive analysis to classify grocery stores with a sales area of 200 square meters or more based on their ability to impose competitive constraints in the market. The analysis evaluated stores on price, range, service and quality, determining that 53 out of 87 stores meet the competitive criteria across at least two of these categories, thus classifying them within the relevant product market.

Additionally, the Office also assessed, in particular, the topography of Ħaż-Żabbar, customers’ willingness to travel, the diversion ratios derived from an exit-store survey at Scotts (Ħaż-Żabbar) and the supermarkets’ catchment area. Based on this analysis, the Office considers that a 15-minute driving time is a true representation of reality for the willingness to travel for shoppers to do their groceries.

In its competitive assessment, the Office also evaluated the potential for entry, exit, and expansion by both new entrants and existing players in the market. This assessment considered the likelihood of such changes materialising, the timeliness of entry or expansion, and their sufficiency – meaning that any change must have adequate scope, effectiveness, and the ability to be sustained over time in order to meaningfully influence the competitive landscape.

The Office for Competition decision

The Office found that the transaction would have strengthened Lidl’s market position in the grocery retail market. More specifically, the Office found that the acquisition of Scotts (Ħaż-Żabbar) by Lidl would have solidified Lidl’s market position, widening the gap between its competitors and limiting market competition. Furthermore, the current levels of market concentration as well as the increase in the concentration post-acquisition, indicates a substantial lessening of competition. This supports the prohibition of the acquisition due to market concentration concerns.

The remedies offered by Lidl during the period of investigation did not adequately address the Office’s competition concerns so that it could be concluded that competition would be preserved on a lasting basis. As a result, the Office has decided to prohibit the proposed transaction.

Concentration control rules and procedure

The concentration notification form was deemed complete by the Office on 14 November 2023, and the Office opened an in-depth investigation on 29 December 2023. On 25 July 2024, the Office sent a Statement of Objections to the Notifying Party.

The Office has the duty to assess mergers and acquisitions in terms of the Control of Concentrations Regulations to prevent concentrations that would lead to a substantial lessening of competition in Malta or any substantial part of it.

Most of the notified concentrations do not pose competition problems and are cleared after a routine review. Once a transaction is notified, the Office usually has four weeks to evaluate it if it qualifies for a fast-tracked process, or six weeks in Phase 1 to consider if the concentration raises serious doubts as to its lawfulness. If further investigation is needed, a Phase II decision must be taken as soon as it appears that the serious doubts as to the lawfulness have been removed or addressed and at the latest within four months from the date when the Phase II proceedings began. If the parties involved offer remedies during Phase II, but no later than three months after the process starts, they can ask to extend the four-month deadline by up to one month to allow more time to review their proposed commitments.

In the past 10 years, the Office has approved nearly 180 concentrations. In 2022, the Office cleared a proposed transaction after determining that the remedies offered by the notifying party were sufficient to resolve competition concerns.

For more information

The public version of the decision will be made available on the website of the Office for Competition, once any confidential and business secrets are removed from the original decision.

The Press Release contains, in summary form, the findings of the Office and is not to be considered a substitute to the original decision.

The decision may be appealed.