The Co-operative Group’s planned takeover of rival Southern Co-op could face a full-scale investigation after the UK’s competition watchdog warned over the tie-up.
The Competition and Markets Authority (CMA) said the deal between the mutuals, which was announced in April, could “substantially” lessen competition in the sector.
It said the firms now have until September 22 to put forward measures to resolve any potential competition issues.
If it does not accept the proposals, it will refer the planned acquisition for a so-called phase two investigation.
The CMA said: “The CMA has decided, on the evidence currently available to it, that it is or may be the case that this merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.
“This merger will be referred for an in-depth, phase two investigation unless the parties offer an acceptable undertaking to address these competition concerns.”
The Co-op’s move would add Southern Co-op’s 330,000 members to its existing seven million, as well as about 300 food, funeral and Starbucks coffeehouse sites.
The firms, which have not disclosed the value of the deal, are continuing to be run separately while the CMA investigations continue, but had been hoping to complete the merger towards the year end after approval by members in May.
A spokesperson for the Co-op Group said the CMA’s concerns were focused on a “small number” of locations where there was overlap between stores owned by both brands.
The spokesperson said: “We are pleased that, as anticipated, the CMA hasn’t identified competition concerns at a national level.
“It has identified a small number of locations where there is both a Southern and Co-op Group presence and where they believe there may be an adverse impact on competition for consumers.
“We will continue to engage and work with the CMA on the proposed remedies.
“There are no changes for colleagues, members or customers at this stage.”
