The takeover of “La Cocoș” by the owner of Lidl and Kaufland is “almost ready”: “The idea is that the low-cost model is not killed”

The acquisition of the La Cocoș store chain by the German Schwarz group, which owns the Lidl and Kaufland hypermarkets, is conditional on keeping prices low and opening new such stores, Bogdan Chirițoiu, the president of the Competition Council, announced on Monday. “The idea is for the 'La Cocoș' model not to be killed, but to be developed,” he said.

The Competition Council is “almost ready” to approve this transaction, after the German group accepted a series of conditions requested by the authority, Chirițoiu said on Monday.

“There we have already reached some commitments that we requested from the Kaufland group. They were presented publicly, we will make certain changes, but in essence they seem to be ok, that is, we have not received hostile reactions from the market and we will soon complete this operation. There we want the low cost La cocoș model to be preserved and to be developed”, said Bogdan Chirițoiu.

The authority asked the German group “to guarantee that they will keep this low cost model”.

The commitments are to keep the current average commercial additions to La Cocoș products and to make investments in opening new such stores.

“The idea is for the La Cocoș model not to be killed, but to be developed. So it should be low-cost as it is now and there should be more La Cocoș stores than there are now,” said Bogdan Chirițoiu.

What fears did the Competition Council raise?

The Competition Council announced in November of last year that it had identified “a series of competitive concerns” related to this transaction, according to Startupcafe.ro.

The Schwarz Group is present, through Kaufland and Lidl stores, in all the local markets where La Cocoș operates or will operate. In this context, the transaction could lead to “strengthening the position of the resulting entity and reducing the options available to consumers”.

At the same time, the operation could have a negative impact on the suppliers, given that in the case of some of them sales to La Cocoș can reach up to 90% of their turnover, the competition authority emphasized at the time.

“We want the business model of La Cocoș to be preserved, based on low margins and low prices for consumers. Therefore, our main concern is that the format and policy of low prices could be changed following the acquisition, which could lead to an increase in prices, affecting consumers,” said Bogdan Chirițoiu, the president of the Competition Council.

What commitments has the group that owns Lidl and Kaufland made

At the end of December last year, the Competition Council submitted to public debate the commitments made by the German Schwarz group to eliminate competition fears.

“Thus, the Schwarz group is committed to continuing the current business model of the La Cocoș network, which offers customers products at low and competitive prices in the local markets where it is present, by capping the gross margin at an average level for the period, as well as by continuing the expansion policy, while maintaining the business format and operational and commercial independence.

The level of the gross margin will be established in such a way as to ensure a minimum profitability, and any change to it can only be implemented in objective situations, after the approval of the competition authority, considering that an increase in it can lead to an increase in prices”, announced the authority at that time.

Also, the Schwarz group undertakes not to acquire smaller stores (retailers) – with a turnover of less than 4 million euros, in areas where it has a market share of more than 40%, provided that these transactions do not have to be notified to the competition authority, and to inform the Competition Council about the purchase or lease of commercial premises and the plans to open shops in these premises.

At the same time, the proposed commitments aim to protect exclusive La Cocoș suppliers, by implementing a clear procedure that includes the rules for delisting suppliers within the La Cocoș network, regardless of whether they sell food or non-food products.

Thus, the Schwarz group undertakes to apply to the exclusive suppliers of La Cocoș a procedure that establishes the conditions they must meet in order not to be delisted, which will be applied for a period of two years from the completion of the transaction. Thus, it undertakes not to delist/remove from the network the products of exclusive suppliers, except under certain clearly established conditions, which include legal provisions or the situation in which the products become irrelevant on the market, the demand for them decreasing substantially.

The procedure also provides for a partial delisting, Supermarket La Cocoș having the obligation to maintain at least 80% of product purchases from the relevant suppliers, for a period of two years.