March 21, 2014 — OTTAWA, ON — Competition Bureau
The Competition Bureau announced today that it has reached a Consent Agreement with Loblaw Companies Limited (Loblaw) to remedy competition concerns related to its proposed acquisition of Shoppers Drug Mart Corporation (Shoppers). The Consent Agreement will require the sale of 18 retail stores, and 9 pharmacies within a Loblaw store to an independent operator. It also contains certain behavioural restrictions on Loblaw programs and agreements with suppliers.
The Consent Agreement, filed with the Competition Tribunal today, follows an extensive review of the proposed transaction during which the Bureau concluded that Loblaw’s acquisition of Shoppers would likely result in a substantial lessening or prevention of competition in the retail sale of pharmacy products and drugstore-type merchandise in Canada, and in respect of certain Loblaw programs and agreements with suppliers.
Through the analysis of the proposed merger transaction, the Bureau has been made aware of certain conduct by Loblaw with respect to its suppliers that could raise concerns under the Competition Act. The Bureau determined that without restrictions on certain Loblaw programs and agreements, the proposed transaction would likely lead to higher wholesale prices paid by other retailers to suppliers and, in some circumstances, higher retail prices for consumers.
In order to address concerns resulting from the merger, the Consent Agreement contains behavioural restrictions on certain Loblaw programs and agreements on the supply of products for retail sale lasting as long as five years from the date of closing the proposed transaction. However, the Bureau will continue to investigate Loblaw programs, agreements and conduct related to pricing strategies and programs with suppliers that reference rivals’ prices.
The Bureau determined that, without this Consent Agreement, Loblaw’s acquisition of Shoppers would likely have led to increased prices, decreased service, and less product variety and innovation.
- The proposed transaction would combine Loblaw, Canada’s largest grocery chain, with Shoppers, Canada’s largest drugstore chain. The combined retailer would operate approximately 2,738 stores and 1,824 pharmacies across the country.
- Mergers in Canada are subject to review by the Bureau under the Competition Act to ensure that they will not result in a substantial lessening and/or prevention of competition.
- The merger review process involves collecting information from, and conducting interviews with, a wide range of industry participants, including the parties, suppliers, competitors, customers and industry experts.
"This Agreement addresses the most significant negative competitive effects of the merger by ensuring that consumers continue to benefit from competitive prices in the retail sale of drugstore and pharmacy products in Canada. The Bureau will continue to investigate Loblaw’s programs related to its relationship with suppliers to ensure that Canadian consumers benefit from vigorous competition."
- A copy of the Consent Agreement will be available shortly on the Competition Tribunal Web site.
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