Aktualita
MERGERS: AMO SR approved the merger of undertakings operating furniture stores KIKA and Möbelix
Content
On 28 November 2019 the Antimonopoly Office of the Slovak Republic, the Division of Concentrations, (hereafter “the Office“) approved a merger grounded in the acquisition of indirect exclusive control of the undertaking XLCEE-Holding GmbH, Austria (hereafter "XLCEE") over undertakings operating in several countries, including also the undertakings Kika Nábytok Slovensko, s.r.o., Bratislava and Sigma Properties Slovakia, s.r.o., Bratislava operating within the Slovak Republic (hereafter "the SR").
The undertaking XLCEE belongs to the group of XXXLutz, the activity of which consists primarily of the operation of retail stores as well as an e-shop with furniture and home accessories in several countries, among others also in the SR. At the time of the merger assessment by the Office, it was operating in the SR through its subsidiary company Möbelix SK, s.r.o., (hereafter "Möbelix"). It operates retail stores as well as an e-shop with furniture and home accessories under the brand name Möbelix, while it operates nine stores in the SR.
Target companies are active in the area of the operation of retail stores and an e-shop with furniture and home accessories in the Czech Republic, Hungary, Romania and the SR, where at the time of the merger assessment five stores under the brand name KIKA were operated.
The merger concerned the retail sale of furniture and home accessories, and these activities, together with the assessment of the area of the wholesale furniture purchase, were in the Office´s focus during its further assessment.
In the framework of the administrative proceedings, by the means of a market survey the Office examined the conditions of competition in the area in question.
Firstly, the survey did not confirm the inclusion of the retail sale of furniture via the Internet and through brick-and-mortar stores in the same market (this issue remained open regarding home accessories, but its further analysis was not necessary). Nor was the inclusion of furniture and home accessories in one relevant market confirmed. It was necessary to deal more closely only with the retail sale of furniture through brick-and-mortar stores (the internet sale of furniture/home accessories, as well as the sale of home accessories were assessed as unproblematic).
In relation to the identification of relevant product market in the area of retail sale of furniture through brick-and-mortar stores, with regard to the character of the merger in question, the Office assessed the position of the participants to the merger and undertakings who likewise offer a complex furniture portfolio, i. e. multiproduct furniture stores. At the same time, competing multi-product furniture retailers addressed did not point to the specifically significant position of the parties to the merger in some of the furniture segments.
Within determining a spatial market, the Office identified the existence of local markets and, while defining them, it took into account the distance travelled to furniture stores in locations (towns), where the stores of Möbelix as well as of KIKA were located at. At the same time, the Office took into account also terrain segmentation and related infrastructure. In this case, local markets were set by the basic criterion of 60 km of a distance from a specific store/60 min. of driving.
In particular, the Office noticed that in the case of some retail stores of the merging parties there was no horizontal overlap between activities.
By evaluating the catchment areas, the Office found out that there was a real local overlap of the stores of Möbelix/KIKA in several locations defined as catchment areas of Bratislava, Nitra, Banská Bystrica and Košice.
In terms of competition assessment, the Office assessed the given merger both from the point of view of the whole Slovakia - especially at the level of inputs purchase, i. e. the wholesale furniture purchase, as well as it defined basic characteristics and the structure of the retail market from the point of view of the whole Slovakia and it assessed its impacts at the level of the aforementioned locations.
From the point of view of the purchasing market, several addressed competitors raised objections to the merger due to the merger of strong players who would cause a change also in relation to wholesale furniture purchases in such a way that competing players would have no one to purchase from, or that they would purchase under less advantageous conditions. In the analysis of power at the level of purchase, the Office took into account the structure of the furniture retail segment and the character of undertakings operating in the area of retail sale of furniture and home accessories, i. e. at the time of the merger assessment it was the merger of the third largest player with the undertaking, which was the sixth strongest player, and after the merger, the entity would become a market leader number two.
The Office also found out that there were no more significant obstacles to furniture import and that concluding exclusive contracts is not standard for the market of the wholesale furniture purchase. Furthermore, it is also true that several companies operating in the territory of the SR on the market of retail sale of furniture are vertically integrated with the furniture producer, so they can purchase a part of the products from their own production. Also, as far as Slovak suppliers are concerned, already before the realization of the merger, the parties purchased a small proportion of their sales from Slovak furniture producers. Already before the merger, its parties decided on the wholesale purchase globally. On the basis of the aforementioned facts, the Office came to the conclusion that the merger concerned does not represent a competition risk from the point of view of the wholesale purchase of furniture/home accessories.
As far as the retail sale of furniture is concerned, the Office took into account mainly the characteristics of individual undertakings, while taking into account the multi-product sales networks, which sell both furniture and home accessories (more or less complex furniture assortment) and which were operating in the SR at the time of the merger assessment. The survey showed out that, at that time, the undertaking operating under the brand name IKEA was the largest furniture seller in terms of the revenues in the whole SR both before the merger assessed and after the merger completion, also despite the fact that it does not have a large network of stores as its competitors. From the whole Slovak point of view, in terms of the amount of revenues for furniture sales, the undertaking Merkury Market follows and one of the parties to the merger - Möbelix.
To assess the merger impacts, the Office further relied on local markets of retail sale of furniture through brick-and-mortar stores, in the framework of which it identified the largest players and expressed the position of undertakings operating as multi-product furniture stores, particularly in terms of revenues achieved from the sale of furniture for multi-product stores offering (almost) complex furniture assortment. At the same time, it took into account the number, the character and the location of individual players' stores in terms of the location of the overlap of the parties' stores. At the same time, the Office took into account also the estimated revenues of stores that were on the market for less than a year and examined also the possibilities of the entrance and the expansion of competing players in the given location.
Regarding specific overlapping locations, within the catchment area of Bratislava and Nitra, already from the existing structure of retail furniture stores operating here, the Office came to the conclusion that the merger does not raise any competition concerns in the given locations in terms of the possible creation or strengthening of dominant position. For the catchment area of Bratislava, the Office took into account in particular the existence of the strongest player who operates the store IKEA and also the presence of almost all players operating multi-product large-format furniture stores (Sconto, Asko, Mercury Market, JYSK, Black Red White, Tempo Kondela and Drevona). For the catchment area of Nitra, the merging parties would be on the top place if counting the newly opened store Möbelix in 2019 (including its estimated revenues); however, the market structure is characterized by a higher number of balanced players, likewise they are multi-product large-format stores.
Regarding the catchment area of Banská Bystrica and Košice, the Office analysed them in more details. Within the catchment area of Banská Bystrica, during the assessment of the given merger, the activities of the merging parties were overlapped directly in the city of Banská Bystrica. There is situated one store KIKA and one store Möbelix. The Office found out that if there were no other facts related to the entrance of a new significant player into market in the catchment area of Banská Bystrica, the strongest furniture seller would be the post-transaction entity. At the same time, the largest furniture store in this catchment area would belong to merging parties. However, in June 2019 a store in Banská Bystrica was opened by the undertaking Asko. For this reason, for the complete, objective assessment of competition conditions in the catchment area of Banská Bystrica and for the assessment of not only the past, but also the current market structure and future prospects, the Office took into account also the operation of the store of the undertaking Asko as a fully effective competitor.
The market structure ascertained by the Office reflects the situation on the market of furniture sale in the catchment area of Banská Bystrica after the opening of Asko store, as well as the development in the nearest future, when it is possible to expect competitive pressure from the undertaking Asko as a store of a format comparable to merging parties. After the merger, the post-transaction entity will therefore still continue to be the strongest player, which right in the city of Banská Bystrica will have two stores. Regarding the position of the merging parties and other players, however, the distance that existed before the undertaking Asko entered the local market has been lost by Asko's entry. Thus, the Office found out that the merger is unlikely to give rise to a dominant position of a post-transaction entity in the area of retail sale of furniture in the catchment area of Banská Bystrica, as there is a counterbalance in the form of at least the strong independent competing furniture retailer in the large-format multi-product store.
As regards the catchment area of Košice, during the Office´s assessment, the brand name KIKA had one furniture store in the city of Košice and Möbelix had one store in the city of Košice and one store in the city of Prešov. In the given catchment area, in 2018 the largest multi-product furniture retailers were the undertakings Möbelix, KIKA, Mercury Market, Asko and Decodom. Thus, in terms of the existing market structure, the largest share of incomes was achieved by the post-transaction entity, with a distance from other competitors.
Within the framework of assessing the effect of the given merger on the conditions of competition, the Office dealt with the issue, whether the entrance of potential competitor to the relevant market could be reasonably expected. Only input that is sufficiently probable, sufficiently timely and to a sufficient extent can be taken into account. The Office found out that two major players are planning to open stores in the catchment area, namely the undertaking Asko in Prešov (the undertaking has one store in the city of Košice) and the undertaking Sconto in the city of Košice (the undertaking does not have a store in the catchment area of Košice). In the view of the dates of opening Sconto store in Košice and its expected start-up, it was not possible to include, with the necessary degree of certainty, any planned sales volume of the store of Sconto in the city of Košice in the analysis of the future competitive environment on the given relevant market. However, in the case of the store of Asko Prešov, it could be stated that the entry of the undertaking Asko in question is probable, timely and sufficient, and therefore the Office included this fact in the analysis of the future development of competition in the catchment area of Košice.
Given that in the catchment area of Košice beyond the entity created by the merger also the undertakings Asko and Merkury Market will operate as the stores of a similar format in terms of product range and the size of floor area and also the undertaking Decodom, the Office found out that it is unlikely that that merger in question would cause the creation or the strengthening of a dominant position. Thus, in the given case it was not showed that the entity created by merging would not be exposed to significant competition and that in the view of its economic strength it would be able to behave independently on the given relevant local market.
After the comprehensive assessment of unilateral as well as coordinating effects in the given area, the Office evaluated that the merger concerned is in accordance with the wording of the Article 12 Paragraph 1 of the Act on Protection of Competition.
The decision came into force on 29 November 2019.
The undertaking XLCEE belongs to the group of XXXLutz, the activity of which consists primarily of the operation of retail stores as well as an e-shop with furniture and home accessories in several countries, among others also in the SR. At the time of the merger assessment by the Office, it was operating in the SR through its subsidiary company Möbelix SK, s.r.o., (hereafter "Möbelix"). It operates retail stores as well as an e-shop with furniture and home accessories under the brand name Möbelix, while it operates nine stores in the SR.
Target companies are active in the area of the operation of retail stores and an e-shop with furniture and home accessories in the Czech Republic, Hungary, Romania and the SR, where at the time of the merger assessment five stores under the brand name KIKA were operated.
The merger concerned the retail sale of furniture and home accessories, and these activities, together with the assessment of the area of the wholesale furniture purchase, were in the Office´s focus during its further assessment.
In the framework of the administrative proceedings, by the means of a market survey the Office examined the conditions of competition in the area in question.
Firstly, the survey did not confirm the inclusion of the retail sale of furniture via the Internet and through brick-and-mortar stores in the same market (this issue remained open regarding home accessories, but its further analysis was not necessary). Nor was the inclusion of furniture and home accessories in one relevant market confirmed. It was necessary to deal more closely only with the retail sale of furniture through brick-and-mortar stores (the internet sale of furniture/home accessories, as well as the sale of home accessories were assessed as unproblematic).
In relation to the identification of relevant product market in the area of retail sale of furniture through brick-and-mortar stores, with regard to the character of the merger in question, the Office assessed the position of the participants to the merger and undertakings who likewise offer a complex furniture portfolio, i. e. multiproduct furniture stores. At the same time, competing multi-product furniture retailers addressed did not point to the specifically significant position of the parties to the merger in some of the furniture segments.
Within determining a spatial market, the Office identified the existence of local markets and, while defining them, it took into account the distance travelled to furniture stores in locations (towns), where the stores of Möbelix as well as of KIKA were located at. At the same time, the Office took into account also terrain segmentation and related infrastructure. In this case, local markets were set by the basic criterion of 60 km of a distance from a specific store/60 min. of driving.
In particular, the Office noticed that in the case of some retail stores of the merging parties there was no horizontal overlap between activities.
By evaluating the catchment areas, the Office found out that there was a real local overlap of the stores of Möbelix/KIKA in several locations defined as catchment areas of Bratislava, Nitra, Banská Bystrica and Košice.
In terms of competition assessment, the Office assessed the given merger both from the point of view of the whole Slovakia - especially at the level of inputs purchase, i. e. the wholesale furniture purchase, as well as it defined basic characteristics and the structure of the retail market from the point of view of the whole Slovakia and it assessed its impacts at the level of the aforementioned locations.
From the point of view of the purchasing market, several addressed competitors raised objections to the merger due to the merger of strong players who would cause a change also in relation to wholesale furniture purchases in such a way that competing players would have no one to purchase from, or that they would purchase under less advantageous conditions. In the analysis of power at the level of purchase, the Office took into account the structure of the furniture retail segment and the character of undertakings operating in the area of retail sale of furniture and home accessories, i. e. at the time of the merger assessment it was the merger of the third largest player with the undertaking, which was the sixth strongest player, and after the merger, the entity would become a market leader number two.
The Office also found out that there were no more significant obstacles to furniture import and that concluding exclusive contracts is not standard for the market of the wholesale furniture purchase. Furthermore, it is also true that several companies operating in the territory of the SR on the market of retail sale of furniture are vertically integrated with the furniture producer, so they can purchase a part of the products from their own production. Also, as far as Slovak suppliers are concerned, already before the realization of the merger, the parties purchased a small proportion of their sales from Slovak furniture producers. Already before the merger, its parties decided on the wholesale purchase globally. On the basis of the aforementioned facts, the Office came to the conclusion that the merger concerned does not represent a competition risk from the point of view of the wholesale purchase of furniture/home accessories.
As far as the retail sale of furniture is concerned, the Office took into account mainly the characteristics of individual undertakings, while taking into account the multi-product sales networks, which sell both furniture and home accessories (more or less complex furniture assortment) and which were operating in the SR at the time of the merger assessment. The survey showed out that, at that time, the undertaking operating under the brand name IKEA was the largest furniture seller in terms of the revenues in the whole SR both before the merger assessed and after the merger completion, also despite the fact that it does not have a large network of stores as its competitors. From the whole Slovak point of view, in terms of the amount of revenues for furniture sales, the undertaking Merkury Market follows and one of the parties to the merger - Möbelix.
To assess the merger impacts, the Office further relied on local markets of retail sale of furniture through brick-and-mortar stores, in the framework of which it identified the largest players and expressed the position of undertakings operating as multi-product furniture stores, particularly in terms of revenues achieved from the sale of furniture for multi-product stores offering (almost) complex furniture assortment. At the same time, it took into account the number, the character and the location of individual players' stores in terms of the location of the overlap of the parties' stores. At the same time, the Office took into account also the estimated revenues of stores that were on the market for less than a year and examined also the possibilities of the entrance and the expansion of competing players in the given location.
Regarding specific overlapping locations, within the catchment area of Bratislava and Nitra, already from the existing structure of retail furniture stores operating here, the Office came to the conclusion that the merger does not raise any competition concerns in the given locations in terms of the possible creation or strengthening of dominant position. For the catchment area of Bratislava, the Office took into account in particular the existence of the strongest player who operates the store IKEA and also the presence of almost all players operating multi-product large-format furniture stores (Sconto, Asko, Mercury Market, JYSK, Black Red White, Tempo Kondela and Drevona). For the catchment area of Nitra, the merging parties would be on the top place if counting the newly opened store Möbelix in 2019 (including its estimated revenues); however, the market structure is characterized by a higher number of balanced players, likewise they are multi-product large-format stores.
Regarding the catchment area of Banská Bystrica and Košice, the Office analysed them in more details. Within the catchment area of Banská Bystrica, during the assessment of the given merger, the activities of the merging parties were overlapped directly in the city of Banská Bystrica. There is situated one store KIKA and one store Möbelix. The Office found out that if there were no other facts related to the entrance of a new significant player into market in the catchment area of Banská Bystrica, the strongest furniture seller would be the post-transaction entity. At the same time, the largest furniture store in this catchment area would belong to merging parties. However, in June 2019 a store in Banská Bystrica was opened by the undertaking Asko. For this reason, for the complete, objective assessment of competition conditions in the catchment area of Banská Bystrica and for the assessment of not only the past, but also the current market structure and future prospects, the Office took into account also the operation of the store of the undertaking Asko as a fully effective competitor.
The market structure ascertained by the Office reflects the situation on the market of furniture sale in the catchment area of Banská Bystrica after the opening of Asko store, as well as the development in the nearest future, when it is possible to expect competitive pressure from the undertaking Asko as a store of a format comparable to merging parties. After the merger, the post-transaction entity will therefore still continue to be the strongest player, which right in the city of Banská Bystrica will have two stores. Regarding the position of the merging parties and other players, however, the distance that existed before the undertaking Asko entered the local market has been lost by Asko's entry. Thus, the Office found out that the merger is unlikely to give rise to a dominant position of a post-transaction entity in the area of retail sale of furniture in the catchment area of Banská Bystrica, as there is a counterbalance in the form of at least the strong independent competing furniture retailer in the large-format multi-product store.
As regards the catchment area of Košice, during the Office´s assessment, the brand name KIKA had one furniture store in the city of Košice and Möbelix had one store in the city of Košice and one store in the city of Prešov. In the given catchment area, in 2018 the largest multi-product furniture retailers were the undertakings Möbelix, KIKA, Mercury Market, Asko and Decodom. Thus, in terms of the existing market structure, the largest share of incomes was achieved by the post-transaction entity, with a distance from other competitors.
Within the framework of assessing the effect of the given merger on the conditions of competition, the Office dealt with the issue, whether the entrance of potential competitor to the relevant market could be reasonably expected. Only input that is sufficiently probable, sufficiently timely and to a sufficient extent can be taken into account. The Office found out that two major players are planning to open stores in the catchment area, namely the undertaking Asko in Prešov (the undertaking has one store in the city of Košice) and the undertaking Sconto in the city of Košice (the undertaking does not have a store in the catchment area of Košice). In the view of the dates of opening Sconto store in Košice and its expected start-up, it was not possible to include, with the necessary degree of certainty, any planned sales volume of the store of Sconto in the city of Košice in the analysis of the future competitive environment on the given relevant market. However, in the case of the store of Asko Prešov, it could be stated that the entry of the undertaking Asko in question is probable, timely and sufficient, and therefore the Office included this fact in the analysis of the future development of competition in the catchment area of Košice.
Given that in the catchment area of Košice beyond the entity created by the merger also the undertakings Asko and Merkury Market will operate as the stores of a similar format in terms of product range and the size of floor area and also the undertaking Decodom, the Office found out that it is unlikely that that merger in question would cause the creation or the strengthening of a dominant position. Thus, in the given case it was not showed that the entity created by merging would not be exposed to significant competition and that in the view of its economic strength it would be able to behave independently on the given relevant local market.
After the comprehensive assessment of unilateral as well as coordinating effects in the given area, the Office evaluated that the merger concerned is in accordance with the wording of the Article 12 Paragraph 1 of the Act on Protection of Competition.
The decision came into force on 29 November 2019.