Grocery chain ICA wins a reprieve

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The Norwegian government has temporarily approved a controversial purchasing agreement between struggling grocery store chain ICA Norge and the rival NorgesGruppen, which dominates the Norwegian grocery market. ICA has claimed the deal is the only way it can keep doing business in Norway, but other rivals contest it.

ICA Norge will now be able to purchase goods from NorgesGruppen, which also is a major wholesaler in Norway in addition to running a long list of other grocery store chains including Meny, Kiwi and Centra. Norwegian competition authorities had blocked the purchasing deal while they reviewed the case, fearing it was illegal because it further expands NorgesGruppen’s already dominant market share.

‘Glad and grateful’
The authorities (Konkurransetilsynet) said they understood the government’s decision to temporarily allow the deal to function because ICA will retain its own distribution, and competition thus shouldn’t worsen. The government’s decision, however, is merely viewed as a temporary reprieve while the authorities continue to examine the deal between ICA and NorgesGruppen.

ICA officials nonetheless celebrated the decision. “We are very glad and not least grateful that the government has given us the possibility to cooperate with NorgesGruppen,” said Thorbjørn Theie, head of the Swedish-controlled ICA Norge. “ICA Norge’s and our employees’ future is at stake, and this agreement will be an important contribution to the efforts to turn around the company.”

Theie earlier has warned that it will need to at least shut down all its ICA-, Rimi and Matkroken stores in Northern Norway, if not all its Norwegian stores, if the state disallows its cooperation with NorgesGruppen. That would leave NorgesGruppen’s stores with even even more market power, because ICA may disappear from the market altogether.

Political dilemma
Other players including the other large grocery chain REMA 1000 and Norway’s consumer protection agency continue to blast the deal, saying it also would give NorgesGruppen far too much market power. It’s a dilemma for politicians, newspaper Dagens Næringsliv (DN) reported, who meanwhile are anxious to hear what the competition authorities decide later this fall.

Grocery store prices in Norway are among the highest in the world, a result of the country’s high taxes and costs, protectionist agricultural policies, a lack of economy of scale and market concentration within wholesaling and retailing. ICA’s presence in the market is seen as important, both in terms of customer choice and price, but NorgesGruppen appears poised to increase its hold on the market no matter what the authorities decide. A decision is expected by September 30.

Views and News from Norway/Nina Berglund

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