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Norwegian Competition authority prohibits consumer health merger

June 2009 - EU & Competition. Legal Developments by Schjødt.

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The proposed acquisition of the Sunkost chain of consumer health products by Validus ASA, the major wholesaler of consumer health products on the Norwegian market, was prohibited by the NCA on 29 JUne. The parties to the merger have a last chance of appeal to the Ministry of Government Administration and Reform. This will delay the final outcome with another 60 working days, in a case that commenced by a simplified notification on September 24th 2008.

The acquisition of Sunkost by Validus would create a monopoly within the wholesale level of trade, as Sunkost owns the only other existing wholesaler, Økogrossisten. Furthermore, the parties have also acquired most of the individual shops from another distribution franchise, Naturli'vis, while the NCA had the original transaction under assessment. The accumulated effect of that transaction was to create a market share well in excess of 50% on the distribution market for consumer health products in Norway.

The acquisition has been strongly opposed by the remaining competitors within the retail level of trade, with Schjødt representing the sole remaining major retail franchise chain, Life Scandinavia AB. Life has voiced their concerns at an early stage, focusing on providing the NCA with information regarding the assessment of the relevant market definition at the retail level - specialist shops - and the barriers of entry to the wholesale market. Life did also involve specialist economic advice at an early stage. This facts-based approach has been successful as the NCA has found Life's arguments substantiated by the results of their own market testing and the prohibition is based on the detrimental effects of the acquisition on all levels of trade; wholesale as well as retail. The parties have not been heard with their argument that the market is wider than specialist shops, nor were their last minute remedy of offering to sell Økogrossisten successful."

Jan Magne Juuhl-Langseth

jan.magne.juuhl-langseth@schjodt.no

www.schjodt.no/en/       

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