Antitrust Clears Takeover of Mega

Grocery chain will have to end produce wholesale joint venture and sell stores before it can move ahead with the merger.

Ofer Vaknin

Israel’s Antitrust Authority announced yesterday the approval of supermarket chain Yenot Bitan’s takeover of rival Mega on condition that it ends its partnership with Israel’s largest produce wholesaler and sells stores in eight parts of the country.

The agency stipulated that the conditions, whose purpose it said was to alleviate concerns about the possible creation of local monopolies and guarantee competition in produce wholesaling, must be met before the takeover could be completed.

The approval clears the way for Yenot Bitan, a medium-sized supermarket chain, to emerge as Israel’s second largest, with nearly 200 stores, after No. 1 Super-Sol. Yenot Bitan beat out rivals that included Rami Levy in a court-sponsored auction to buy the bankrupt Mega chain.

The authority said Yenot Bitan would have break up its joint venture with Bikurey Hasade, called Bikurey Bitan, which supplies fresh fruits and vegetables to Yenot Bitan stores.

In addition, it will have to sell supermarkets in Ra’anaa, Herzliya, Shoham-Airport City, Kiryat Shmona, Eilat, Migdal Ha’emek, Tel Mond-Kadima and Kiryat Ata.

“In most of these areas an economic study conducted by the authority raised concerns that the merged chain would be able to raise prices and exploit its market power due to the large market share it would hold,” the authority explained.

“Likewise, in most of these areas there was also a fear that excessive market power would be created in coordination with Super-Sol because together they would enjoy an extraordinarily big share of the market,” it said.

Regarding the joint venture with Bikurey Hasade, the authority expressed concern that the combined buying power of Mega and Bikurey Bitan would hurt growers by reducing the potential number of buyers.

The agency came under fire for allegedly blocking the bid by Rami Levy, Israel’s largest supermarket discounter, by warning that it would not pass antitrust scrutiny even though it has fewer stores than Yenot Bitan.

The authority defended its actions, saying it never precluded a Rami Levy bid. “The authority never barred Rami Levy from buying Mega, but only expressed on a preliminary basis its view that prima facie buying Mega’s operations and assets together by Rami Levy would have aroused serious competition concerns,” it said.