CP - Tesco deal approved

[dtaai-maai]

Once Tesco took over in 1998 there were large new builds going up and then it became obvious ( and welcome) that something new and convenient was happening in towns everywhere. The death knell started to ring at that moment for small Thai owned and operated food and goods shops.

Which is exactly what happened in the UK 50+ years ago.

[PeteC]

Trade watchdog clears CP-Tesco deal

Done deal.

https://www.bangkokpost.com/business/20 ... tesco-deal

The government’s competition watchdog has approved the Charoen Pokphand Group’s US$10.6-billion acquisition of the local retail business of the UK retailer Tesco, with some conditions.

Among them is a ban on CP entering any other modern-trade retailing mergers for three years, excluding e-commerce, the Office of the Trade Competition Commission (OTCC) said on Friday.

As well, the company will be obliged to buy more products from local small and medium enterprises, and to honour existing contracts with suppliers for at least two years.

The transaction will result in “increased market power but not a monopoly”, the agency said in a statement. “The deal may significantly lower competition but won’t create major damage to the economy or consumers’ benefits.”

CP already operates the 7-Eleven convenience store chain with nearly 12,000 branches, as well as the 134-branch Siam Makro wholesale chain.

Under the agreement first announced almost eight months ago, CP Group will gain control of a network of about 2,000 Tesco Lotus hypermarkets and smaller stores across the country. CP also acquired a smaller number of stores in Malaysia as part of the transaction with the British retailer.

The OTCC approval marks the end of Tesco’s 22-year-presence in Thailand under the Tesco Lotus brand and cements CP Group’s position as the country’s dominant retailer by far.

CP is controlled by the Chearavanont family, the wealthiest in Thailand with a net worth of $27.3 billion according to Forbes magazine. Bloomberg estimates the family is the 13th richest in the world.

CP patriarch Dhanin Chearavanont has long wanted to buy back the retailer that he founded in 1994 and had to sell to Tesco four years later during the Asian financial crisis. In 2013, he reclaimed control of Siam Makro by paying $6.6 billion to buy out a stake from Netherlands-based SHV Holdings.

Other conditions set by the OTCC are:

CP All Plc and Ek-Chai Distribution System, the conglomerate’s main retail business units, must increase the proportion of product sales from small- and medium enterprises at 7-Eleven stores and all Tesco outlets by at least 10% year-on-year for five years;
The merged entity is barred from sharing any trade secrets with manufacturers or distributors of goods or raw materials;
Ek-Chai, which runs the Tesco Lotus business, must maintain contract terms and agreements with existing manufacturers and suppliers of products or raw materials for two years;
CP All, which operates 7-Eleven, and Ek-Chai must report business performance on a quarterly basis, or in a period specified by the commission for three years.
CP Group did not immediately respond to a request from Reuters for comment. Tesco said it had noted the regulator’s statement and was waiting for CP to receive the formal regulatory approval notice from the OTCC.

The Tesco deal is the first major test of the new Trade Competition Act that was passed in 2017. It was billed as a tougher version of a law passed in 1999, under which not a single successful prosecution ever took place. Consumer advocates and others criticised the old law because its definitions of "market dominance" were not clear.

Sakon Varunyuwatana, the OTCC chairman, said last month that the agency had been consulting extensively with many parties, including SMEs that might be affected, given the size and economic significance of the deal.

The key question, he said, was whether it could lead to “a monopoly or undue market dominance against consumer interests” under the 2017 law.

Somchai Pornrattanacharoen, president of the Thai Retailers and Wholesalers Association, served on a committee established by the OTCC to vet the deal. He said his personal view was that it should not be approved, since no country in the world lets a single business group control comprehensive businesses from production to retail, wholesale and modern trade.

“Currently we’ve started seeing direct express delivery services to buyers by some convenience stores,” Mr Somchai said last month. “This practice has affected existing small-scale retail shops and may eventually lead some large retail groups to dominate the country’s overall retail market.”

[buksida]

Translation: the govt received a massive donation from Mr Chearavanont, who also provided a massive donation to get the coup-makers into power.

[PeteC]

I'm curious as to what they will now name the stores. Maybe we should have a competition.

[Groodman]

Will they keep the smaller stores open when a Tesco's is close by a 7/11 or merge the two into one to increase more profit.

[Dannie Boy]

Will they keep the smaller stores open when a Tesco's is close by a 7/11 or merge the two into one to increase more profit.

You’d expect there to be some rationalisation but then again, you can find two 7/11’s in close proximity


Sent from my iPhone using Tapatalk

[PeteC]

I think the 7-11's are sold as franchises in many cases, just like they are in other countries.

[hhinner]

I'm curious as to what they will now name the stores. Maybe we should have a competition.

Lotus, as they were before Tesco, possibly. Many (some, anyway) Thais seem to refer to them as Lotus.

[PeteC]

I'm curious as to what they will now name the stores. Maybe we should have a competition.

Lotus, as they were before Tesco, possibly. Many (some, anyway) Thais seem to refer to them as Lotus.

Yes, you're probably right and it makes my teeth grind. They have a golden opportunity to rebrand themselves and bring some much needed excitement into the retail sector here. Especially true as they all fight on-line purchasing. Do something different, bring in new products and practices and not just be the same old ..."we're going to Lotus..." place. Chances like this don't come around often or at all.

[HHTel]

Well it started as Lotus Superstore (owned by CP).
Tesco bought into it and it became Tesco Lotus.
Lotus sold their shares leaving Tesco as the majority shareholder.
Now being bought by CP.

Seems to have gone full circle.

[europtimiste]

Richest man of Thailand will be owner of 7/11, Makro, Tesco. Less places for competition and choice. Scandalous.

[buksida]

I think its called a 'food dictatorship' - CP can now literally dictate what Thais pay for food.

[PeteC]

Once again the horse is out of the barn, and it will be hard to get him back in.

https://www.nationthailand.com/business/30397580

Public outrage over approval for CP Group's acquisition of Tesco Lotus

Academics and netizens have expressed their frustration after the Office of Trade Competition Commission (OTCC) approved conglomerate Charoen Pokphand's acquisition of retail giant Tesco Lotus.

The commission voted 4:3 in favour of the US$10-billion takeover deal.

The OTCC on Friday gave the green light to CP Group’s deal to buy Tesco Stores (Thailand).

“The decision fails to build trust among consumers and other parties, as it can potentially damage trade competition,” Nipon Poapongsakorn, distinguished fellow at the Thailand Development Research Institute, told the Nation on Sunday.

“It is not in line with the spirit of the competition law, which aims to prevent companies having market dominance to unfairly enjoy an advantage over other competitors,” said Nipon, a former member of the competition committee when it was under the supervision of the Commerce Ministry.

It reminded him of the past two disputed cases when a giant alcoholic beverage company forced small shops to buy its beer by bundling it with liquor products, and the former cable network operator, UBC Cable TV, which charged excessively high fees from subscribers, Nipon said.

The two cases damaged the reputation of the competition committee, leading to legal amendments that paved the way for creating the current independent trade competition commission.

“In the controversial CP case, the majority of the commissioners failed to take into consideration the possible risky behaviour of the powerful companies in the future,” Nipon lamented.

He pointed out that the commissioners apparently failed to carefully look at the big picture where CP, via the 7-Eleven convenience store chain, and its targeted acquisition of Tesco Lotus, can dominate in all three market segments: wholesale, discount, and convenience stores.

CP Group already operates 7-Eleven convenience stores and the Siam Makro chain, a wholesale trading business.

In some provinces, their combined market share would be between 80 to 90 per cent, he said.

He also does not agree with the seven conditions set by the commission. These are minor issues, he said.

"The important condition they should have set is prohibited the group from opening new stores in provincial areas,” he noted.

He urged the commission to release the full details of their decision and the individual opinions both of those who voted for and against the acquisition.

It is unusual for the commission to not release much details when the OTCC issued a press release on Friday, he noted.

Sakon Varunyuwatana, chairperson of the commission, who voted against the decision said that the individual opinion of the minority commissioners would be released soon.

Suppliers, or small and medium-sized enterprises are adversely affected by the decision and they could lodge a complaint in the Administrative Court, he said about the next legal procedure.

They, however, must, convince the court on how it would damage their businesses, he added.

Netizens expressing their opposition via social media have also cited their concerns about the potential of rising prices of goods and how the bargaining power of suppliers and small businesses, in particular, could be affected.

[handdrummer]

It's the Walmart syndrome. Walmart enters a small market, opens a mid-sized store, lowers prices, customers go to Walmart, local businesses fail, Walmart builds a bigger store and raises prices.
I lived in a small, 10,000 population, town in NW Florida and that's what happened. The downtown area collapsed, and the town was full of empty stores.

Walmart not only, temporarily, lowers prices, it provides jobs in areas where there aren't many. It's sort of a poisoned chalice.

[buksida]

Except that prices in Thai Tesco are usually higher than elsewhere, we try to do as much as we can at local markets. CP can now set whatever prices they want because the country no longer has a choice, if they were super cheap nobody would be complaining about the monopoly.