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FNE clears the purchase of OK Market by OXXO, subject to structural and behavioral remedies

26 / 11 / 2021

The Chilean National Economic Prosecutor’s Office (FNE) cleared in Phase II, subject to compliance of structural and behavioral remedies, the acquisition of a convenience store chain −OK Market S.A.− controlled by one of the main supermarket chains in Chile, SMU, by a Mexican business group Femsa (Fomento Económico Mexicano S.A.B de C.V.), the controlling group of the convenience store chain OXXO, with activities in Mexico, Perú, Colombia and Chile.

The transaction involves the purchase of the 126 OK Market convenience stores, which are located in three regions of Chile.

The FNE concluded that the operation implies the concentration of the closest rivals in the convenience store market, players that mutually exert the greatest competitive pressure on each other, despite competitive pressure exerted by and over other related players −such as convenience stores in gas stations, local grocery stores and similar.

The FNE considered that the merger would raise antitrust concerns particularly in several geographical markets in which the parties would face low or no competitive pressure after closing (‘concerned markets’). Aiming at addressing those concerns, OK Market and OXXO offered a structural remedy consisting in the divestiture to a suitable buyer of a package of assets comprised by 16 convenience stores of both brands, located in concerned markets.

The divestiture will take place once the FNE approves the identity of the suitable buyer. Since the merger control regime started operating in Chile in 2017, this is the first case the FNE issues a conditional clearance subject to an up-front-buyer solution.

Additionally, the companies offered to withdraw all exclusivity clauses agreed in the stores’ lease agreements (of both brands), together with a 10-year commitment not to include such clauses in future contracts with third parties. Also, the parties offered the obligation to keep open certain convenience stores that they planned to close upon completion of the transaction, for a period of 36 months.

The FNE considers that these measures are effective, since they respond directly to the source of the identified competitive concerns, allowing the suitable acquirer of the divested package to restore the competitive pressure lost due to the transaction.

To ensure compliance, the FNE will monitor the remedies through its newly-created Enforcement Division.


The investigation and main concerns

During the investigation, the FNE concluded that the concentration would provide OXXO, the acquirer, with the incentives and ability to raise prices.

In addition, the FNE verified that, without the transaction, the companies involved planned to open new stores in areas where the other company already active, therefore, the acquisition would reduce dynamic competition by eliminating OK Market as a potential competitor in new markets. Also, the concentration would entail the closure of some stores currently operated by OK Market.

The FNE also detected exclusivity clauses in at least 56 lease agreements of OK Market and OXXO stores. Considering the resulting market position of merged entity, the FNE concluded that such clauses would artificially hinder the entry or expansion of other players in the convenience store segment in those areas.

The resolution and the approval report of this transaction will be published on the FNE’s website once the public version of these documents has been made public.