The anticipated acquisition by Poundland plc of 99p Stores Limited will be referred for an in-depth investigation by the CMA unless acceptable undertakings are offered.
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Poundland and 99p stores are 2 large national discount retail chains with a combined network of around 800 stores located throughout the UK.
They both supply general merchandise at a single price point, ranging from stationery, homeware, gardening and seasonal merchandise to groceries and other fast moving consumer goods – meeting the needs of a wide range of customers who seek convenience and value at low and consistent prices.
Poundland and 99p compete closely and can be distinguished from other value general merchandisers since they sell nearly all products at a single price point.
Following an initial investigation, the Competition and Markets Authority (CMA) has found that the transaction gives rise to a realistic prospect of a substantial lessening of competition in 80 local areas where the companies currently overlap – and in a further 12 areas where they will be competitors in the near future.
The CMA found that the parties are each other’s closest competitors and that after the transaction they will only face close competition from one other single price retailer with national scale, Poundworld, and from other discounted retailers such as B&M, Home Bargains, Wilko and Poundstretcher.
In the problematic areas, the parties will only be constrained by 3 or less of their competitors and it is so far unclear whether they would provide the same level of competition that currently exists between Poundland and 99p.
The CMA found that the loss of competition between the companies may lead to a worsening of their offer locally, through a reduction in quality, fewer promotions or closure of their stores.
The transaction will therefore be referred for an in-depth phase 2 investigation by an independent group of CMA panel members unless the parties offer acceptable undertakings to address the CMA’s competition concerns in a clear-cut manner. ■