Poundworld recently announced a £55million takeover of rival bargain chain 99p Stores, but this new acquisition is now under review by the Competition and Markets Authority.
The CMA are considering whether by buying 99p Stores, Poundworld will no longer face direct competition and therefore have the power to reduce quality, offer fewer promotions, or close stores. They are also considering whether the buyout will have a negative impact on customers who no longer have the option to shop in two different places for different products.
In the case of Poundworld and 99p Stores, the CMA have identified 80 local areas where the companies overlap and, therefore, when Poundworld takes over, 99p Stores in those areas will cease to exist. This would give Poundworld dominance in those areas and reduce the options for consumers.
Under Competition Law, the CMA may review a merger where the merger may have a detrimental effect on the market. They have the power to investigate any merger or acquisition where two or more enterprises cease to be distinctive from one another and the UK turnover of the acquired company exceeds £70million.
The CMA can also investigate if the two firms supply at least 25% of the same goods or services supplied in the UK.
If you are considering a merger you will need legal advice to ensure you don’t fall foul of competition law. Our team of Corporate Law Solicitors at Slater and Gordon offer expert legal advice.
Call us on freephone 0800 916 9052 or contact us online.