Why CP group got the nod for takeover of Tesco

[rooster59]

Why CP group got the nod for takeover of Tesco

By THE NATION

 

 

The Office of Trade Competition Commission (OTCC) on Friday published a report on its decision regarding Charoen Pokphand’s (CP) acquisition of Tesco’s Thailand business from Ek-Chai Distribution System.

 

 

The OTCC on November 6 voted 4:3 in favour of the US$10-billion (Bt302.5 billion) takeover deal.

 

According to the report, the majority of the commissioners who voted for the acquisition argued that the acquisition was necessary for business operation and would help create revenue for the country’s economy. It would also help preserve the sales channels of domestic products as well as expand exports to Malaysia, as CP would also acquire Tesco Lotus in Malaysia under this deal.

 

“The deal would subsequently increase domestic sales and exports, create more employment and promote both retail and manufacturing industries,” said the commissioners.

 

The majority of the commissioners also said that the deal would not create serious negative impact on the economy, as it would not create unemployment in other related sectors, such as wholesale, which is responsible for 50 per cent of the country’s GDP.

 

“The deal would instead create up to 1.1 million jobs in the small, medium and large industrial supply chain while keeping the manufacturing sector uninterrupted,” they added.

 

“It will not add to the impact of Covid-19 that has resulted in recession in the macro economy and caused uncertainty among future investors, both domestic and overseas.”

 

Meanwhile, a minority of commissioners who voted against the acquisition argued that the acquisition could affect Thailand’s economy as it could lead to monopoly, unfair market dominance and socio-economic disparity, as CP is already the largest manufacturer of agricultural and consumer products that are vital to daily life, while the acquired party holds a large market share in wholesale and retail modern trade.

 

“The acquisition could also result in an obstacle for new entrepreneurs to enter the market, while other businesses would need to adjust their strategies and lower their costs and selling price to remain in the market,” said the minority of commissioners.

 

“As the biggest player in the market, CP will have more bargaining power against suppliers of products and raw materials, while SME manufacturers will be at a disadvantage when negotiating trade terms with suppliers.

 

“Furthermore, the acquisition will result in fewer number of competitors, and in the long term consumers will have limited choices of products and prices,” they added.

 

The OTCC also set terms and conditions that the acquisition parties: CP Retail Development Ltd and Tesco Stores (Thailand) Ltd, as well as their parent companies: CP All and Ek-Chai Distribution System, must follow:

 

1. The acquisition parties must not acquire other businesses in a similar sector for three years, excluding those in e-commerce.

 

2. CP All and Ek-Chai must increase the sales of SME products, including agricultural products, community products and OTOP in 7-Eleven and Tesco Lotus stores by at least 10 per cent annually for a period of five years.

 

3. The acquisition parties must not share related marketing information to product distributors, manufacturers or suppliers of raw materials. The information shall be classified as a trade secret.

 

4. Ek-Chai will abide by conditions stated in the contract or agreement that they have made with product distributors or manufacturers for a period of two years, unless product distributors or manufacturers agree to change the terms of the contract or agreement.

 

5. CP All and Ek-Chai must promote SMEs by providing credit terms of 30 days for agricultural products, community products and OTOP, and 45 days for other types of products for a period of five years.

 

6. CP All and Ek-Chai must submit their business operations report to the OTCC every three month for a period of three years.

 

7. Acquisition parties must set the business code of conduct to be displayed to the public, while they shall uphold the code of conduct as well as abide by regulations stated in the Trade Competition Act BE 2560.

 

Related Story: OTCC sets new criteria for businesses to be considered monopolies

 

Source: https://www.nationthailand.com/business/30399872

 

-- © Copyright The Nation Thailand 2020-12-20

 

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[jadee]

Hope they drop 'Tesco' from the name as every time I try to say it to a Thai person they don't understand what I'm trying to say. I just try to say "Lotus" with my best Thai pronunciation "Rlow-dadt" 

[1FinickyOne]

12 minutes ago, jadee said:

Hope they drop 'Tesco' from the name as every time I try to say it to a Thai person they don't understand what I'm trying to say. I just try to say "Lotus" with my best Thai pronunciation "Rlow-dadt" 

not sure what Rlow-dadt sounds like but I speak Thai and so there is context, but I find that everyone understands "Lotus" pretty much as in English, maybe drawn out a bit... 

[ChakaKhan]

22 minutes ago, jadee said:

Hope they drop 'Tesco' from the name as every time I try to say it to a Thai person they don't understand what I'm trying to say. I just try to say "Lotus" with my best Thai pronunciation "Rlow-dadt" 

Just start shopping at Biiig Ceeeeeeeeeee  Suu-Paaaaahhhhh-Cent-Taaaaaaaaah....many proo-mo-shuuuuunns!

 

*taught to me from screaming cuties in tight dresses shouting into disorted blown speakers outside Big C ????

[phetphet]

Looks like all the old Tesco items are being sold off cheap as their sell by date passes. Don't see much replacement of imported foreign goods. Hardly worth visiting now, except for veg.

Only Tops and Big C for those bits and pieces that I miss from back home. Less choice, less competition.

[Deli]

Not good. Liked to shop there much more than at Big C. Carrefour was even better but lon gone. All a monopole now.

[Bob12345]

3 hours ago, rooster59 said:

the majority of the commissioners who voted for the acquisition argued that the acquisition was necessary for business operation and would help create revenue for the country’s economy. It would also help preserve the sales channels of domestic products as well as expand exports to Malaysia, as CP would also acquire Tesco Lotus in Malaysia under this deal.

I am a simple person: i thought that the office of trade competition has to look at competitive forces in the market and protect consumers. If a merger/takeover is necessary for business operations, if it helps create revenue for the country, and if it helps expands exports should not be even considered in the decision. The only question they should ask is: will the consumers be screwed over in the short or long run? The commissioners voting against are correct and look at the right points: unfair competition, monopoly, blocking entry to other companies, etc.

 

Since some time I have wondered why a country so inefficient and corrupt as Thailand can still survive. The overall standard of life is increasing and ultra-rich people are created. In economics I was always told that competitors would take over and decimate the local players. The answer is actually simple: producers are protected by the government. If the country was opened up for foreign companies and imports without ridiculous tariffs and rules, not a single Thai company would exist anymore. That is also why barely any Thai company is doing well abroad: they simply cannot compete on a level-playing field. Even if they keep exisiting abroad, it is probably mostly because their Thai operations make enough profits and they can afford to bleed some money abroad or they adopted a foreign company-style abroad with foreign top management and foreign ideas (it is barely a "Thai company" anymore at that point - compare that to the Japanese who export their business and production style around the globe: a Toyota factory in thailand is more japanese than it is thai).

 

The same is happening here: a large company takes over another large company almost cornering the market. What will happen next? They will increase profits and consumers will gain nothing. Good chance consumers will even be off worse. But it is only a small amount... every product gets a few baht more expensive and consumers will barely notice it. Or as the article mentions: "The majority of the commissioners also said that the deal would not create serious negative impact on the economy". A few billionaires will get even richer, the consumers pay for that: everyone a few baht on every shopping trip.

 

Thailand is a country without any innovation, but it still creates some extremely wealthy people while barely venturing over the borders. Compare that to the USA, where almost everyone in the top 50 of richest people got there with some innovative idea (online shopping, first supermarkets, computer operating systems, social media platform, electric cars and space rockets, producing cutting-edge technology, etc.) that they used to make profits all around the globe. In Thailand they all got rich by getting monopolies from the government while copying products from abroad: tax-free shopping, selling alcohol, chicken and chicken products (CP), banks&insurance, etc.

[kiwikeith]

3 hours ago, phetphet said:

Looks like all the old Tesco items are being sold off cheap as their sell by date passes. Don't see much replacement of imported foreign goods. Hardly worth visiting now, except for veg.

Only Tops and Big C for those bits and pieces that I miss from back home. Less choice, less competition.

Lotus will take a hit from no tourists shopping.

Cp dont care, they are waiting for the vaccines for covid to kick in then they will move to selling more Chinese specials.

Cp has big friends specially the enlightened one.

[brommers]

It does not get my approval. CP already has too large a share of my discretionary wallet and for some time I have actively avoided purchasing any more of their products and services. I never liked Tesco Lotus but on occasion would make small purchases there, but that has now ceased. The CP octopus has too many tentacles into people's lives and government agencies will not take action to limit this so the consumer must do so.

[Burma Bill]

3 hours ago, phetphet said:

Only Tops and Big C for those bits and pieces that I miss from back home

If you live in the Chiang Mai area, Rimping Supermarkets are excellent for International brands.

[Andy from Kent]

7 minutes ago, Burma Bill said:

If you live in the Chiang Mai area, Rimping Supermarkets are excellent for International brands.

 

"it could will lead to monopoly, unfair market dominance and socio-economic disparity, as CP is already the largest manufacturer of agricultural and consumer products that are vital to daily life, while the acquired party holds a large market share in wholesale and retail modern trade.

 

It's never good for the consumer to have fewer choices in the marketplace.

 

I wish Rimping would expand more throughout Thailand as I find it an excellent supermarket.

[AhFarangJa]

Here in Hua Hin we have a Farang run restaurant that also specialises in most products from the U.K. all at reasonable prices. He is also expanding the choices on a nearly weekly basis. I understand he, and a couple of others from Pattaya and elsewhere bring shipping containers from U.K.

Not sure of the rules so will not put the name here. ( there is of course always the private message system )  But I much prefer it to Tesco that has gone downhill at an alarming rate.

[JimHuaHin]

'The majority of the commissioners also said that the deal would not create serious negative impact on the economy, as it would not create unemployment in other related sectors, such as wholesale, which is responsible for 50 per cent of the country’s GDP.

 

“The deal would instead create up to 1.1 million jobs in the small, medium and large industrial supply chain while keeping the manufacturing sector uninterrupted,” they added.'

 

I really do not see this happening.  CP already has a large retail management and logistics network - the Tesco-Lotus operations will be most likely absorbed into the existing CP system, with the resultant loss of employment.  Unemployment will also increase if CP cuts out some of the existing Thai suppliers to Tesco-Lotus.

 

I have also noticed in recent weeks how some cheap good quality European manufactured produce is slowly disappearing from Tesco-Lotus shelves - is this because the products cannot be imported due to COVID-19, or does the incoming management team prefer to import cheap poor quality Chinese made produce, or .....

[TigerandDog]

A bad decision from a customers perspective. Already prices have increased and some brands of items are no longer being stocked. Macro was always cheaper than Tesco anyway, so will be shopping even less at Tesco now and moreso at Macro. Unfortunately no Big C here.

[roger101]

17 minutes ago, TigerandDog said:

A bad decision from a customers perspective. Already prices have increased and some brands of items are no longer being stocked. Macro was always cheaper than Tesco anyway, so will be shopping even less at Tesco now and moreso at Macro. Unfortunately no Big C here.

Makro is also owned by CP

[ChipButty]

22 minutes ago, TigerandDog said:

A bad decision from a customers perspective. Already prices have increased and some brands of items are no longer being stocked. Macro was always cheaper than Tesco anyway, so will be shopping even less at Tesco now and moreso at Macro. Unfortunately no Big C here.

Makro is owned by CP lots of CP branded items in there

[Curmudgeonly59]

C.P.   Chinese Personnel

[worgeordie]

As CP used to own Lotus before the had to sell it to TESCO during

the financial bubble burst of 1997 , they are only taking back control

of what they used to own, now they control food products from 

manufacturer, wholesale and retail they have it all covered.

regards worgeordie

 

 

[ThaIrish Sean]

I never understood why there was only 1 mergers and monopolies commission? ????

[connda]

10 hours ago, rooster59 said:

Why CP group got the nod for takeover of Tesco

Because everyone loves a big monopoly?

 

[Traubert]

2 hours ago, Curmudgeonly59 said:

C.P.   Chinese Personnel

Oh.  I see what you did there.

 

You took the initials and made them into Chinese Personnel.

 

Very amusing.

[Classic Ray]

Just need to look at the price of a carton of Meiji milk around 91 baht in every outlet from 7/11, Big C, Tesco, Tops, Central etc etc to realise there is no price competition here, no discounters. You are subject to whatever they feel the market will bear, no shopping around necessary or possible. That is why Aldi, Lidl etc avoid the place, no chance of a level playing field.

[Venom]

CP chicken group continues to consolidate their power in an endless quest to control all aspects of the Thai economy. ????

[Disparate Dan]

Why? Are you serious?

"When China opened up its economy in 1978, the CP Group was the first foreign investor in the country and became the first foreign company registered in the special economic zone of Shenzhen, Guangdong. The company is the single largest investor in Mainland China today".

The controlling family is "one of the richest ethnic Chinese families in the world" as well, of course, as being one of the inner circle in Thailand that we dare not discuss here.

You think any of them give a rat's about whether we can buy French cheese?

 

[curlylekan]

16 hours ago, rooster59 said:

According to the report, the majority of the commissioners who voted for the acquisition argued that the acquisition was necessary for business operation and would help create revenue for the country’s

The authors of this article forgot a few words, so I decided to help them out:

 

"...Argued that the acquisition was necessary for" the country's elite to stay at the top and for the everyday Thai to remain poor, while thinking that making 35kbht is a lot..."And would help create revenue for the country's elite", but do little to help the country as a whole of the majority of Thai people. Innovation will be stifled and other country's in the region will gain the upper hand for the region. Vietnam is the first country to come to mind.

[curlylekan]

17 hours ago, rooster59 said:

 

 

Edited December 20, 2020 by curlylekan
I accidently posted the same thing 2x, but I can't figure out how to delete the second post

[Susco]

4 hours ago, Classic Ray said:

Just need to look at the price of a carton of Meiji milk around 91 baht in every outlet from 7/11, Big C, Tesco, Tops, Central etc etc to realise there is no price competition here, no discounters.

 

4 hours ago, Classic Ray said:

That is why Aldi, Lidl etc avoid the place, no chance of a level playing field.

 

Don't you contradict yourself there?

 

If prices were really set that high because there is no competition, Aldi and Lidl with their lower prices would have a field day here, every day.

[Susco]

9 hours ago, TigerandDog said:

Macro was always cheaper than Tesco anyway, so will be shopping even less at Tesco now and moreso at Macro.

 

Makro is cheaper because they are a cash and carry, you can't buy 1 bottle of coke or 1 tin of beans there, hence they are cheaper.

 

But good to hear that you are well informed, because Makro and Tesco-lotus, are owned by the same company

[ChakaKhan]

16 hours ago, Curmudgeonly59 said:

C.P.   Chinese Personnel

Communist Propaganda  ????

[ChakaKhan]

12 hours ago, Classic Ray said:

Just need to look at the price of a carton of Meiji milk around 91 baht in every outlet from 7/11, Big C, Tesco, Tops, Central etc etc to realise there is no price competition here, no discounters. You are subject to whatever they feel the market will bear, no shopping around necessary or possible. That is why Aldi, Lidl etc avoid the place, no chance of a level playing field.

Love Love Love Aldi and Lidl!!!!!! ❤️   Lidl even a bit more if I had to choose..