Introduction
By decision dated 20 January 2017, the Competition Authority cleared a merger involving the acquisition, by Via Holdco (Lux) S.à.r.l. (“Via Holdco”), of an outlet centre owned by the companies IRUS Vila do Conde, S.A. (“IRUS I”), IRUS Vila do Conde II, S.A. (“IRUS II”) and IRUS Vila do Conde III, S.A., (“IRUS III”), through the acquisition of the majority of the share capital of the target companies.
In this decision, the Competition Authority reversed its previous position and concluded that the geographic market for the rental of shopping spaces is regional in scope (rather than natio-nal), in a decision that will have a significant impact in assessing the market shares of companies active in this sector.
The decision
In its notification concerning the acquisition of sole control over IRUS I, IRUS II and IRUS III – companies whose object is the acquisition and operation of all kinds of real estate, including, among others, the “Vila do Conde The Style Outlets” –, Via Holdco held, first of all, that the operation fell within the scope of a wider product market for the rental of retail real estate in retail centres and in shopping centres (including, at least, the shopping centre format, retail parks and outlet centres).
In this decision, the Competition Authority started its analysis with the product market definition and rejected the possibility of a wider definition.
In fact, the Authority dismissed the conclusions put forward by Via Holdco concerning the overlap of brands between outlet centres and shopping centres and the alleged substitutability between the different formats of shopping spaces, stating that these formats differ from each other in respect of a variety of characteristics (value of rentals, target customers, sales area, storage area, services provided) that indicate, not the existence of substitutability between those formats, but rather the existence of a complementary relationship. Thus, the Authority defined the relevant product market as the market for rental of shopping spaces (specifically) in an outlet centre format.
However, the main novelty of the decision concerns the definition of the relevant geographic market.
The Notifying Party, relying on studies and on client and owner surveys, sustained that the geographical definition of the market should be assessed by reference to a regional scope based on the “catchment area” of the shopping spaces, defined as an area corresponding to a 60-90 minutes’ travel distance from the respective shopping zone.
Reversing the position it previously sustained (concerning the identification of a national market, in light of the homogeneity of competition conditions throughout the national territory), and in line with the allegations of the Notifying Party, the Authority now concluded that an outlet centre has a “catchment area” which is, at most, regional in scope. Supporting its position with the findings of the market investigations that were carried out, the Authority left open the question of knowing whether that catchment area goes farther than the 60 minutes distance (until a 90 minutes distance) because such specification would not affect the conclusions of its assessment.
Comment
The decisional practice of the Competition Authority regarding the market for rental of shopping spaces evolved towards a narrower definition. After a first analysis under decision 1/2006 (Grosvenor/Sonae/Sonae Sierra), with its decision 8/2006 (Sonae/PT) the Authority established a detailed characterization, segmenting this market into traditional or specialized formats for integrated shopping spaces. This distinction, that the Authority reaffirmed and detailed, among others, in the decisions 27/2007 (Carlyle/Freeport), 73/2007 (Sonae Sierra/Gaiashopping/Arrabidashopping) and 25/2014 (Alaska*Auchan/IA-PAT), was also restated in this January 2017 decision.
As for the geographical market, this new decision in case 62/2016 (Via Holdco/Irus) represented a genuine rupture from the previous position. The adjustment from a market which is national in scope to a regional market will therefore result in an increase of the (regional) market shares of each player active in the rental of integrated shopping spaces, with immediate and important consequences.
On the one hand, this may give rise to market shares being qualified as evidencing a “dominant position” in some regional markets, which would make it advisable for the companies in question to carefully review their business strategy in order to prevent any behaviour from being considered abusive. On the other hand, and in light of the importance of the market share criteria for the jurisdictional purposes of determining when a merger filing is required (article 37 of Law 19/2012, of 8 May), the new position concerning the geographical market will tend to increase the number of operations in the sector subject to mandatory notification to the Competition Authority.
