German Federal Minister of Economic Affairs Sigmar Gabriel announced his long-awaited statement on the Edeka/Kaiser’s Tengelmann acquisition. 

Last April, Germany’s biggest grocer, Edeka, had reported its intention to acquire all stores of the loss-making Kaiser’s Tengelmann (KT) supermarket chain.

Though Gabriel acknowledges that the Cartel Authorities have ruled against this acquisition, he made the point that protecting 16,000 jobs would be in the best interests of everyone concerned – should the mentioned number of labour-related conditions be fulfilled. Such higher interest, by German law, would allow the minister to overrule the Cartel Authorities’ decision.

Gabriel said he would give the go-ahead for the acquisition if a number of employment conditions were met. These conditions include the undertaking of agreements with unions ensuring no redundancies owing to business operations for five years.

These contracts must guarantee that former KT employees’ status remains corporate, and that they will not become employed by independent shop owners, who tend to operate outside collective wage agreements, unless under on an exceptional basis and with very strict exceptions.

The consequences for consumers

This decision will have several consequences. First, consumer choice will obviously be reduced if the acquisition really goes ahead. Leaving aside that discounters are increasingly behaving like full-range supermarkets, it is now a fact that there are now only two Germany-wide supermarkets left for consumers to shop at: Edeka and Rewe. There is also a risk that prices may now increase in the three former KT heartlands of Berlin, Munich/Upper Bavaria and North Rhine.

Even if the addition of 450 stores will not significantly impact Edeka’s German market share, it still means its buying power will increase – not least because one of the final back-ups for smaller manufacturers will be removed with KT’s extinction. Proof for this can be seen in Rewe’s efforts to scupper this merger and acquisition.

The deal will enable Edeka to compare current KT’s buying conditions and maybe request the better terms from its business partners across the entire group.

Edeka has already indicated that it is agreeable to complying with Gabriel’s demands as soon as possible in order to take control of the KT stores. While some independent Edeka shopkeepers in the regions in question may not be happy with the new in-house competition, Edeka’s victory can still be seen as a long-term win.

All involved parties of this case have now time to consider their moves until January 26. Only then, the minister will rule his final decision.