La Coop fédérée has agreed to terminate franchises in four Quebec towns in order to receive Competition Bureau approval of its acquisition of a minority interest in Groupe BMR (BMR). LCF entered into a consent agreement with the Bureau on November 1, following the Bureau’s review of the proposed acquisition.
La Coop’s franchise system includes 175 hardware stores and home renovation centres in Quebec, New Brunswick and Eastern Ontario.
During the merger review process, the Bureau concluded that the proposed transaction would likely lead to a substantial lessening or prevention of competition in the retail sale of hardware products and building materials in the areas surrounding four municipalities in Quebec: Saint-Pamphile, Sant-Cyprien, Lac-Megantic and Montmagny. As a result, the consent agreement calls for LCF to terminate a franchise agreement with one of their franchised retailers in each of the four affected municipalities.
The Bureau’s concerns were based on the large influence that the parties would have over their franchisees. As a result of this influence, if the transaction was to go through as originally planned, LCF would have been able to materially influence the economic behaviour of all of its franchisees.
Although La Coop only bought a minority interest in BMR, the transaction documents and their post-merger business plans led the Bureau to treat the transaction as if it was a full merger.
The Bureau concluded that relevant product market was the retail sale of hardware products and building materials. Relevant geographic markets were local. The Bureau concluded that in four municipalities, there would likely be a substantial lessening or prevention of competition. The Consent Agreement requires termination of franchise agreements in these four municipalities, which, the Bureau says, will facilitate the entry of new competition in the retail sale of hardware products and building supplies.