A bid by Poundland to buy the Northampton-based 99p Stores chain has been called in for review over fears the buy-out could see a company monopolising the ‘single price’ market.
The Competition and Markets Authority (CMA) says it is to conduct an ‘in-depth investigation’ on the buy-out unless ‘acceptable undertakings’ are offered.
After the transaction, Poundland will no longer face competition from its closest rival.CMA mergers director Sheldon Mills
It says that as there are 80 ‘local areas’ where both a 99p Stores shop and Poundland sit close to each other, those shopping centres would see a ‘substantial lessening of competition’.
The CMA does not believe Poundland’s nearest competitor Poundworld, would be able to compete if the deal goes through as the former company would have more than 800 stores across the UK.
CMA’s senior director of mergers and decision maker in this case, Sheldon Mills, said: “After the transaction, Poundland will no longer face competition from its closest rival, and following our initial investigation, it is unclear whether the constraint posed by remaining retailers is sufficiently strong to mitigate our concerns over how the transaction might affect choice, value and service for shoppers.”
The CMA says that without competition from 99p Stores, which is based at Swan Valley in Northampton, there is the possibility Poundland could ‘deteriorate its offer’ in these areas ‘to the disadvantage of customers’.
It says this could mean Poundland offers less quality, fewer promotions and may even close stores.
Both Poundland and 99p Stores supply general merchandise at a single price point, ranging from stationery, homeware, gardening and seasonal merchandise to groceries and other fast moving consumer goods.
The CMA found that the parties are each other’s closest competitors and that after the transaction they will only face close competition from one other single price retailer with national scale, Poundworld, and from other discounted retailers such as B&M, Home Bargains, Wilko and Poundstretcher.
A Poundland spokesperson said: “Poundland is carefully considering the CMA’s announcement, together with the full detail behind it and will make a further announcement in due course.”