SG competition watchdog raises concern on BreadTalk's proposed buy of Food Junction

The Competition and Consumer Commission of Singapore (CCCS) has called for public feedback on the proposed acquisition by BreadTalk Group's subsidiary, Topwin Investment Holding of Food Junction Management, which it said will infringe competition in Singapore. The section 54 of the Competition Act (Cap. 50B), prohibits mergers that have resulted, or may be expected to result, in a substantial lessening of competition within any market in Singapore.

In response to the call for public feedback, BreadTalk's Topwin said that it primarily overlaps with Food Junction Management in two markets - the sale of drinks, fruits, snacks, desserts and hot meals to individual consumers in food court premises and the rental of stalls to food vendors located within food court premises. According to Topwin in a statement on CCCS' website, its proposed acquisition will not result in a substantial lessening of competition in these markets in Singapore as both markets are highly competitive and the merged entity will continue to be constrained by a large number of competitors.

In addition, Topwin said the countervailing buyer power of customers in both markets are high as there is minimal cost associated for individual consumers of hot meals switching across multiple alternative suppliers of hot meals within walking distance. Meanwhile, food vendor tenants are able to switch to other coffee shop and food court premises if rental terms offered are not competitive.

"The barriers to entry and expansion are low as it is not unduly restrictive or onerous for food vendors and food court operators to obtain the necessary operating licenses from the government and it is not overly costly for food vendors to set up new food stalls in food courts, coffee shops and hawker centres," Topwin explained. It also said the merged entity also faces strong countervailing constraints by landlords, who may choose not to renew the master lessor if the rental rates imposed on food vendor tenants are too high, which translates to fewer food vendors and consequently lower foot traffic to the landlords’ premises.

Through the proposed acquisition, Topwin aims to streamline Food Junction Management’s head office operations with BreadTalk’s centralised shared services team for support functions such as finance, human resources, information technology, and business development, which will be more cost-efficient. According to Topwin, the enlarged network of outlets is expected to result in the merged entity being able to optimise its food offerings and present a better value proposition in attracting more chain operators of food stall tenants.

Members of the public can provide feedback between 11 to 24 September 2019 through the CCCS website. The competition watchdog aims to evaluate public's feedback on whether switching to competitors of Food Junction and/or Food Republic is "easy" if the prices of the merged entity were to increase by 10% post-merger. In addition, CCCS also looks to assess the impact of the acquisition on prices and service quality for the sale of food and beverage in food court premises.

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