Midcounties’ ‘long hard road’ to competition law compliance

“Co-operatives confuse regulators,” explained Edward Parker, Secretary and Head of Governance at Midcounties Co-operative, as he discussed competition law for co-ops at the Co-operatives UK Practitioners Forum.

Mr Parker was describing Midcounties’ acquisition of the Harry Tuffins chain, a family business with 10 branches across Shropshire, which was referred to the Office of Fair Trading (OFT) under competition rules last year.

Midcounties completed purchase of the chain in April 2012 but immediately became embroiled in OFT ‘jurisdiction’, which continued until April 2013. “We couldn’t do anything to Tuffins or integrate it into Midcounties in that period,” said Mr Parker.

One of the key issues, he said, was whether co-operatives competed with each other. “The OFT has looked at the co-operative sector a lot. Do we compete? It’s a very confused picture, which is unhelpful.

“In the case of United it’s yes, in the case Somerfield it’s no, and in the case of Lothian and Borders it’s yes and no.”

The OFT decided that in the Tuffins case, the level of rivalry between Midcounties and the Co-operative Group was likely to be higher than at the time of the Co-operative Group and Somerfield assessment of 2008. They were, in OFT parlance, ‘partially effective competitors’.

With help from consultants Oxera, Midcounties provided evidence of different prices, different ranges, different opening hours, different local sourcing, different formats, a different cost base, a different member programme, a different dividend rate, a different board and different management.

The process cost Midcounties £60,000 in fees to the OFT alone, and led to disposal of four stores.

The OFT’s cautious approach and it’s insistence on evidence and process was also a challenge. “That was hard for us because it’s not our style,” said Mr Parker, adding that Harry Tuffins, being a family business, did not keep the sort of documentation the OFT required.

“It was complex, expensive and time consuming,” he said. “It was a long, hard road.”