The merger between Finnish grocery wholesalers, Kesko and Heinon Tukku, was prohibited by the Market Court on 17 February 2020. In accordance with the Finnish Competition and Consumer Authority’s (FCCA) proposal, the Market Court found that Kesko’s acquisition of Heinon Tukku would have harmed competition in the market for broadline distribution of groceries to foodservice customers. This is the first time a merger has been prohibited in Finland.
The FCCA concluded its in-depth investigation in November 2019 and, not itself having the authority to block a merger, proposed to the Market Court that the acquisition should be prohibited. According to the FCCA, the merger would have significantly impeded effective competition in the broadline distribution of groceries to Finnish foodservice customers, such as hotels and restaurants.
The FCCA held that the combined market share of the parties ranged between 60 and 70 per cent, and the merger would have created or strengthened Kesko’s dominant position in the market. In addition, the parties were found to compete for the same foodservice customers, a substantial number of whom considered the parties as their first or second choice in the supply of groceries. According to the FCCA, without the competitive constraint from Heinon Tukku, one of the few other full range distributors, Kesko would have been able to increase its prices to the detriment of foodservice customers, and in the end raise the average bill paid by consumers.
The Market Court upheld the FCCA’s definition of the relevant market
The parties disputed the FCCA’s conclusions arguing that they face competition also from specialist distributors and food manufacturers offering a more limited range of products. Moreover, the parties held that they are not close competitors as Kesko is a nationwide distributor serving both small and large customers, while Heinon Tukku focuses on small foodservice customers in the capital region.
The Market Court shared the FCCA’s view that broadline distribution of groceries forms a separate product market. Due to the very high post-merger market share that Kesko would have gained, and the fact that the parties have closely competed for the same customers, the Market Court decided to prohibit the acquisition.
Prohibition only used as a last resort
Competition concerns can often be addressed by commitments offered by the merging parties. The Market Court found that the prohibition of the merger was the only way to safeguard effective competition in this case, as the behavioural remedies offered by Kesko did not adequately address the identified harm to competition.
Merger control was established in Finland in 1998 and this was only the fourth time in its history that a merger was proposed to be prohibited. While the three previous mergers were eventually approved subject to conditions, today’s Market Court ruling marks the first time that a merger has been prohibited in Finland.
The FCCA is pleased with the Market Court’s decision and believes it will have a positive effect on competition benefitting both the Finnish foodservice industry and consumers at large. The Market Court’s decision may be appealed to the Finnish Supreme Administrative Court.
More information:
Chief Economist Olli Kauppi, +358 29 505 3394,
Senior Specialist Pontus Ranta, + 358 29 505 3747,
firstname.familyname@kkv.fi