Lloyds Pharmacy’s parent company could be forced into flogging premises in 13 areas of England and Wales if they pursue a Sainsbury’s buyout, the Competition and Markets Authority (CMA) has announced.
Celesio AG operates 1,542 pharmacies across the UK through subsidiary Lloyds Pharmacy Limited, while Sainsbury’s owns 277 pharmacy stores.
It intends to acquire the Sainsbury’s pharmacy stores, which are generally within or next to Sainsbury’s supermarkets.
The CMA referred the deal for a detailed investigation in December 2015 and has now published a summary of their findings.
The inquiry group of independent panel members investigating the merger has identified 13 areas in England and Wales where the two companies’ pharmacies are such close competitors that the merger would be expected to lead to a substantial lessening of competition.
Simon Polito, inquiry chair, said: “This is a market in which the scope for competition is reduced compared with many retail mergers.
“The price of prescription medicines is fixed and there are a number of quality specifications which cannot be reduced below a minimum level because of regulation.
“However, we found that since pharmacies’ total revenue is largely dependent on the number of prescriptions issued, pharmacies have an incentive to compete to try to attract additional customers.”
He noted customers value being able to choose pharmacies based on service quality and that, in turn, gives pharmacies the incentive to compete to attract customers.
Polito said: “We found evidence that there were some differences in the characteristics of Sainsbury’s and Lloyds pharmacy customers but we also found that customers would be willing to switch between Lloyds and Sainsbury’s pharmacies, particularly where the number of convenient competitor pharmacies was low.
“We have provisionally found that after the merger Lloyds will no longer face sufficient competition in 13 areas and expect that in these areas customers will lose out.”
Responses to the initial findings have now been invited.