On January 31, 2008, the Competition Tribunal decided not to clear the merger of Falabella and D&S, since, in its opinion, this operation is not compatible with free competition.
The Tribunal’s main arguments to justify its decision were the following:
- The materialization of the inquired operation would produce an enormous change in the market structure, creating a firm that would be the dominant actor in integrated retail and in practically all its segments –department stores, home improvement stores, supermarkets, real estate, credit cards– and that would have the capacity to transfer this market power to other retail areas in which it could choose to enter in the future.
- In that scenario, given the size of the Chilean economy and the relevance of the barriers to entry in the different business areas that conform the integrated retail market, it is unlikely that an entrant, if there is one, can impose competitive pressure in a reasonable period of time.
- If the merger had been approved, there would have been a substantial and lasting decrease in the competition conditions in a market that represents a very relevant part of the consumption decisions of Chileans, with expected harmful effects –in terms of welfare– over prices, quantities and quality of the products involved.
- The efficiencies and synergies that the inquiring firms presented were not well enough proved, and even if they had been, they would not have complied with the minimum requirements to be accepted in a concentration analysis, because they could not have compensated the anticompetitive risks that the operation would have generated, had it been approved.
- Lastly, the Tribunal stated that there are no conditions or mitigation measures that are sufficient and effective enough to compensate or minimize the risks to free competition of the operation.