On 18 November 2019, The Finnish Competition and Consumer Authority (FCCA) has proposed the Market Court to prohibit the merger between Kesko Oyj and Heinon Tukku Oy. According to the FCCA’s investigation, the merger would significantly impede effective competition in the sale of daily consumer goods to foodservice customers.
The Kespro business unit, which is a part of Kesko’s daily consumer goods sector, provides services for foodservice customers and is engaged in wholesale trade of daily consumer goods. Heinon Tukku is also a daily consumer goods wholesale business whose main customers are active in the foodservice sector. Foodservice customers include for example restaurants, hotels, catering businesses, service stations and kiosks.
The FCCA opened an in-depth investigation into the merger on 17 June 2019. Based on its initial investigation, the FCCA considered that the merger might have a negative impact on competition for foodservice customers within the daily consumer goods wholesale sector. The Market Court extended the time limit for the proceedings twice: first, until 24 October 2019 and then until 18 November 2019.
The merger would lead to a dominant position
The merging parties are broadline distributors offering a broad range of products and serving foodservice customers nationally. Other large broadline distributors are Wihuri’s Metro wholesale business and Meira Nova, which is a part of the S Group. In addition, three smaller broadline distributors operate in the market.
In addition to the broadline distributors, a large number of smaller specialist suppliers, are active in the supply of one product category only. Companies manufacturing daily consumer goods also supply products to foodservice customers. However, the specialist suppliers and manufacturers do not impose significant competitive constraint on the broadline distributors from whom customers procure most, approximately 70–80 percent, of their purchases.
According to the FCCA’s investigation, the merged entity would have a dominant position in the market for broadline distributors and therefore the merger would lead to a significant impediment of effective competition. According to the FCCA’s assessment, the merged entity would have a market share of up to 60–70 percent in the market. The exact market share is confidential information. The FCCA’s investigation indicates that prior to the merger Kesko and Heinon Tukku have been competing closely for the same customers in Uusimaa, Heinon Tukku’s traditional area of operations, as well as elsewhere in Finland.
The competition concerns raised by a merger may often be addressed with remedies. In this case, the proposal to prohibit the merger was the only option available as the remedies submitted to the FCCA by Kesko were not sufficient to address the competition concerns.
Prohibition decisions are rare
Merger control began in Finland in 1998. This proposal for prohibition is the fourth that the FCCA has ever made.
According to the Competition Act, the Market Court shall issue its decision within three months. The Market Court can either prohibit the merger, approve the merger as such or impose remedies. A decision adopted by the Market Court may be appealed to the Supreme Administrative Court.
The FCCA’s proposal contains confidential business secrets of the parties involved. The proposal cannot therefore be made public until after the business secrets have been removed.
For more information
- The time limit for processing the proposed merger of Kesko Oyj and Heinon Tukku Oy has been extended until 17th November 2019, the FCCA’s press release dated 29 October 2019
- The time limit for in-depth investigation into Kesko’s proposed acquisition of Heinon Tukku has been extended to 31 October, the FCCA’s press release dated 13 September 2019
- FCCA opens in-depth investigation into Kesko’s proposed acquisition of Heinon Tukku, the FCCA’s press release dated 18 June 2019
Director Sanna Syrjälä, tel. +358 29 505 3385
Chief Economist Olli Kauppi, tel. +358 29 505 3394
Senior Specialist Pontus Ranta, tel. +358 29 505 3747