• The Monopolies Commission recommends that the ministerial authorisation sought by Edeka and Tengelmann should not be granted.  
• The Monopolies Commission also sees no possibility of granting the ministerial authorisation subject to conditions and obligations.  

The Monopolies Commission has submitted a special report to the Federal Minister for Economic Affairs and Energy on the ministerial authorisation procedure relating to the proposed merger between Edeka and Kaiser’s Tengelmann. In its report, the Commission weighs up the expected restrictions on competition arising from the planned merger against any potential benefits to the public interest. It concludes that the benefits to the public interest do not outweigh the restrictions on competition. Ministerial authorisation should not be granted. 

When assessing the restrictions on competition, the Monopolies Commission is bound – in the absence of any obvious errors – by the factual and legal findings of the Federal Cartel Office. The significance of the restrictions on competition must be assessed in relation to the significance of the benefits to the public interest. In the Monopolies Commission’s view, the restrictions on competition in the food retail sales and procurement markets are significant. The takeover would have considerable economic significance, measured against the volumes of the affected markets and the turnover of the undertakings involved. The merger with Kaiser’s Tengelmann would strengthen and consolidate Edeka’s strong market position in the regional supply markets of the German food retail sector. In the procurement markets, the acquisition of Kaiser’s Tengelmann would remove a retail company that has hitherto procured goods partly independently, thereby eliminating a sales alternative for many manufacturers. Edeka’s negotiating position vis-à-vis manufacturers would thus be strengthened. 

These disadvantages are not offset by the companies’ claim that around 5,700 full-time jobs would be safeguarded. “Even in the event of a full takeover by Edeka, there would still be a need for restructuring, which would lead to job losses. Experience to date suggests that it is precisely the central structures duplicated by a merger – for example, in production, logistics and administration – that offer potential for synergies. It should also be noted that a takeover of Kaiser’s Tengelmann by the company with the densest branch network – Edeka – would lead to ‘duplicate locations’, i.e. locations with two branches of the same company. ‘At such dual locations, there are incentives in the longer term, for cost reasons, to close one branch, resulting in job cuts,’ said the Chairman of the Monopolies Commission, Prof. Daniel Zimmer. 

The job security arguments put forward by the applicants have not been demonstrated with sufficient certainty. A binding guarantee of the long-term preservation of jobs cannot be derived either from the fact that Edeka is acquiring Kaiser’s Tengelmann in its entirety by way of a share deal (acquisition of a stake) or from the provisions of Section 613a of the German Civil Code (BGB). It is true that, in the event of an acquisition of shares, existing employment relationships and individual employees’ rights remain unaffected for the time being. Existing rights under collective agreements and works agreements, as well as existing co-determination structures, are also retained. However, the acquiring company is not prevented from implementing restructuring measures, which may also result in job cuts. Furthermore, collective bargaining agreements between the employee representatives and Edeka headquarters regarding the long-term safeguarding of jobs would be rendered ineffective insofar as they do not bind the independent Edeka retailers to whom the branches are to be transferred. 

Nor has it been sufficiently demonstrated that, following ministerial authorisation, Edeka would preserve more jobs in the long term than would be the case under alternative scenarios arising if ministerial authorisation were not granted. Given the large number of locations, other retail companies also have an interest in taking over and continuing to operate the Kaiser’s Tengelmann branches. In the case of less attractive branches, even if Edeka were to take over the entire business, there would still be a need for restructuring, which would lead to job losses on a scale that is by no means insignificant. It is not possible to predict with the necessary certainty that these job losses will be offset by the creation of additional jobs through the opening of new branches and sales growth at the acquired branches. The planned establishment of a outplacement agency already indicates that not all jobs within the company can be retained. Furthermore, insofar as some of the employees find new employment on the general labour market via the outplacement agency, the planned merger would not be the cause of job retention. Finally, when taking the overall employment effects into account, as required, it must be borne in mind that the potential preservation of jobs at a company with significant market power may be linked to the threat to jobs at its competitors. 

The application for ministerial authorisation put forward further benefits to the public interest which either cannot be recognised as such or whose existence has not been proven. The preservation of works council structures, such as those currently in place in the branches of Kaiser’s Tengelmann and in other areas to be acquired, could be considered a benefit to the public interest. In the present case, however, it cannot be assumed that these co-determination structures will be preserved, as a ‘privatisation’ – i.e. the takeover of a large number of branches by independent retailers belonging to the Edeka Group – is planned.  

At most, the relief for public finances in the form of increased corporate tax revenue could, in exceptional cases, be recognised as a benefit to the public interest. The high standards that would need to be met to substantiate such an argument have not been fulfilled in the present case. 

Nor should the ministerial authorisation be granted subject to conditions or obligations. Ancillary provisions that necessitate ongoing monitoring of conduct would be incompatible with the Act. This category includes, for example, ancillary provisions relating to measures to safeguard employment or the waiver of price adjustments by manufacturers. Ancillary provisions relating to the disposal of parts of the business would be compatible with the law. In the Monopolies Commission’s view, even such an ancillary provision would not result in the public interest considerations outweighing the competitive disadvantages.