The Philippine Competition Commission approved the acquisition of Goldilocks Bakeshop Inc. by SM Retail Inc. after the two companies committed to address potential competition issues in the transaction.
The SM Group made the voluntary commitment after PCC’s mergers and acquisitions office issued a statement of concerns about the competition issues resulting from the transaction.
“While selection of tenants in a mall is market-driven and based on consumer preferences, a mall operator should not be allowed to discriminate mall tenants and lease applicants, especially those that compete with stores owned by the mall itself,” said PCC chairman Arsenio Balisacan.
The SM Group made the commitment after a series of hearings and discussions
The PCC expressed concerns about the possibility of partial or total foreclosure in the supply of retail space in SM malls to competitors of Goldilocks after its acquisition by the SM Group.
“Such discrimination or unfair treatment can come in the form of arbitrarily assigning competitor tenants to disadvantageous locations or unfavorable lease terms, which amounts to partial foreclosure. It can also come in the form of giving less favorable lease terms or completely refuse them lease space in the mall, which amounts to total foreclosure,” Balisacan said.
Another major concern raised by the PCC was the possibility of the SM Group sharing business information on competing mall tenants with Goldilocks. The mall operator, through its point-of-sale system, has access to sales records of tenants.
“Every mall goer knows that location is important, while every businessman knows that data informs business strategy. In this transaction, what we want is fair opportunities for big and small players,” Balisacan said.
In a voluntary commitment approved by the commission in a decision issued on December 29, 2017, SM Prime Holdings Inc. vowed to give Goldilocks’ competitors a fair shake in their lease at all times.
It also committed data protection with an assurance it would not give Goldilocks access to information on competing mall tenants, including sales data captured by the POS system of SM Prime tenants, whether referring to consolidated sales, product category level or stock keeping unit level information, such as prices or quantities sold.
Maintaining the “information firewall” between SM Prime and SM Retail/Goldilocks is aimed at ensuring that SM Retail/Goldilocks will not be able to use sales data or information to their advantage.
“The Commission appreciates SM’s move to make these voluntary undertakings–proof that PCC and the business community can work together to promote a culture of competition,” Balisacan said.
SM Retail is a subsidiary of SM Investments Corp., which through another subsidiary, SM Prime, develops, owns and operates shopping malls.
SM Prime operates close to 70 malls in the Philippines, while Goldilocks has a network of over 500 stores, including some in SM malls.