Edeka Tengelmann deal

Watchdog Quits Amid Supermarket Takeover Row

kaisers
Kaiser's Tengelmann has been a pawn in the power battle between the government and monopoly commission.
  • Why it matters

    Why it matters

    The government has overruled the monopoly commission, worrying opposition parties.

  • Facts

    Facts

    • Edeka, Germany’s largest supermarket company, has been given final approval to takeover rival Kaiser’s Tengelmann.
    • The decision overruled advice from the monopoly commission, leading to chief Daniel Zimmer resigning.
    • Rewe, another leading supermarket chain,has also launched a legal appeal against the takeover.
  • Audio

    Audio

  • Pdf

Germany’s monopoly commissioner quit in protest yesterday after economics minister Sigmar Gabriel approved the controversial takeover of superamarket chain Kaiser’s Tengelmann by rival Edeka.

Daniel Zimmer, whose agency had opposed the deal on competition grounds, said he was resigning to make a point.

“By stepping down I want to show that I do not agree with Gabriel’s decision,” Mr. Zimmer told Handelsblatt. “The detrimental impact of the fusion on competition will not be offset by benefits to the public welfare.”

Regulators had worried that the merger of two large supermarkets would stifle competition, but Mr. Gabriel said the deal could go through, on the proviso that jobs are not lost.

Last year, Germany’s federal cartel office froze the deal between the two chains, saying it would hamper competition in big cities such as Berlin and Munich and could fuel rising prices. Edeka is Germany’s biggest grocer, with a 24 percent share of the market. Kaiser’s Tengelmann has only a 1.1 percent share, but dominates in some affluent urban pockets.

Mr. Zimmer worked for the monopoly commission for seven years, three of which he served as its boss. He told Handelsblatt that his exit was “no spontaneous decision. I had a few weeks to think about it as the minister had revealed his preference to allow the deal some weeks ago.”

In August 2015, the monopoly commission wrote a lengthy report advising the minister against allowing the supermarket deal.

On Thursday, Mr. Gabriel attached some tough conditions to his approval, forcing Edeka to maintain 16,000 Kaisers’ Tengelmann workers for at least five years, to make wage agreements with the unions and preserve existing organizational structures.

Legal experts warned that Mr. Gabriel's conditions designed to safeguard jobs would be difficult to impose in practice.

While Edeka and Kaisers’ Tengelmann cheered the minister’s decision and promised to fulfill the conditions, Rewe, another leading supermarket chain, launched an appeal.

“We always said we will use all legal means to protect Rewe Group’s interest in this merger process,” said Rewe boss Alain Caparros, adding that Mr. Gabriel had failed to consider better solutions to enhance competition.

Mr. Caparros said Mr. Gabriel had “simply swept aside the monopoly commission’s serious reservations.” In the past, Rewe had repeatedly attempted to takeover Kaiser’s Tengelmann itself.

The German Farmers’ Association also warned that agricultural suppliers and workers would pay the highest price for the takeover. Meanwhile, legal experts warned that Mr. Gabriel’s conditions designed to safeguard jobs would be difficult to impose in practice.

“From a judicial viewpoint, it doesn’t make sense to impose controls on behavior when granting conditional permission… such cases are also not part of merger law,” said Maxim Kleine from the solicitors’ firm Norton Rose Fulbright.

Mr. Gabriel was also the target of vitriolic political attacks. Agriculture Minister Christian Schmidt added his voice to the barrage of criticism. “I view Edeka’s takeover of Kaisers Tengelmann with much skepticism,” he said, stressing that he feared for shoppers and suppliers alike.

And outrage came from across the party spectrum, including the Green party, the ruling Christian Democratic Union and the liberal FDP party, which branded Mr. Zimmer’s decision to step down as a “unique event”.

FDP leader Christian Lindner criticized the decision, saying that it was bound to backfire: “Gabriel may have the noble goal to save jobs, but he is ignoring warnings that his special allowance will weaken competition, lead to less choice and rising prices, and eventually, will cause job losses.”

 

Dana Heide is a correspondent for Handelsblatt in Berlin, focusing on energy policies, small and medium-sized companies and innovation. Florian Kolf leads a team of reporters covering the retail, consumer goods, luxury and fashion markets. To contact the authors: d.heide@vhb.de and kolf@handelsblatt.com

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!