CCCS clears merger in highly watched food and beverage retail sector
10 January 2019
The Competition and Consumer Commission of Singapore (“CCCS”) has cleared the proposed acquisition by NTUC Enterprise Co-operative Limited (“NTUC Enterprise”) of Kopitiam Investment Pte Ltd and its subsidiaries (“Kopitiam”) (collectively, “Parties”) (“Proposed Transaction”). CCCS assessed that the Proposed Transaction, if carried into effect, is unlikely to lead to a substantial lessening of competition within the relevant markets in Singapore, and accordingly, will not infringe section 54 of the Competition Act (“Act”) which prohibits anti-competitive mergers.
The unconditional Phase 1 clearance, after extensive scrutiny and public engagement, was secured by the Allen & Gledhill Competition & Antitrust Practice.
NTUC Enterprise is a social enterprise under the National Trades Union Congress (“NTUC”) and is the holding co-operative for the Singapore-based Group of NTUC Social Enterprises. The food and beverage retail business of NTUC Enterprise is conducted through Foodfare Co-operative Limited (“Foodfare”). Kopitiam is a Singapore-based private limited company whose primary business activity is in food and beverage retail. Following the completion of the Proposed Transaction, NTUC Enterprise will operate Foodfare and Kopitiam as separate entities due to the current separate and different branding, operating procedures and corporate culture.
CCCS’ assessment and findings for each relevant market
- Market for sale of hot meals to consumers in hawker centres, coffee shops and food courts (collectively, “Street Stalls”), within catchment areas of 500 metres radius (from the Parties’ premises)
CCCS found that the merged entity will face sufficient competition without even considering the competing stalls in other Street Stall premises within the catchment areas because (i) the Parties only directly sell hot meals in a sufficiently limited number of stalls located mainly within the Street Stall premises they operate, and (ii) in most of these premises, the Parties compete with many stalls operated by third-party food vendors within their own premises.
CCCS also included the sale of drinks into the relevant market to check for any potential competition concern and found that the combined market share of the Parties in all the overlapping catchment areas fell below CCCS’ indicative thresholds for a merger situation that may raise competition concerns.
- Market for rental of stalls in hawker centres within Singapore to food vendors
Due to the sufficiently marginal number of hawker centres operated by the merged entity relative to the total number of hawker centres in Singapore and the regulatory oversight by the National Environment Agency, CCCS found that there is little prospect of a substantial lessening of competition occurring in the market for the rental of stalls in hawker centres.
- Market for rental of stalls in coffee shops and food courts to food vendors, within catchment areas of 500 metres to 1 kilometre radius (from the Parties’ premises)
CCCS found that the Proposed Transaction would not substantially lessen competition in the market for rental of stalls in coffee shops and food courts to food vendors because: (i) the combined market shares of the Parties in most catchment areas for the rental of stalls in coffee shops and food courts to food vendors fell below CCCS’ indicative thresholds of a merger situation that may raise competition concerns, (ii) the Parties are not each other’s closest competitor, as many other strong competing operators will remain post Transaction, (iii) food vendors will have some economic bargaining power, (iv) barriers to entry and expansion are likely to be sufficiently low, (v) Street Stalls of a specific format that NTUC Enterprise gains from Kopitiam will not give NTUC Enterprise additional market power over landlords of the other two formats of Street Stalls, (vi) collusion between operators of food courts and coffee shops is unlikely, and (vii) the merged entity has no ability or incentive to shut out competitors and to mandate purchases through central kitchens and supply chain networks.
The following materials are available on the CCCS website www.cccs.gov.sg:
- Media release
- Grounds of Decision
- Public register: Proposed Acquisition by NTUC Enterprise Co-Operative Limited of Kopitiam Investment Pte Ltd