Reitan Convenience and Uno-X take back 57 service stations and enter into new franchise agreements with a number of 7-Eleven franchisees
21 December 2023
Reitan Convenience Denmark A/S and Uno-X Mobility Danmark A/S will - upon the expiry of a 15-year long lease with DCC Energi - in the beginning of 2024 take over the retail sale of motor fuels at 57 service stations. Following extensive merger control scrutiny, including of the effects on competition in a number of local markets, the Danish Competition and Consumer Authority has now unconditionally cleared the lease expiry and transfer back of the fuel infrastructure at the service stations. As part of the transition, Reitan Convenience and Uno-X will internally transfer the ownership to the service stations and Reitan Convenience has concurrently renegotiated its agreements with the 7-Eleven franchisees operating convenience stores at the service stations. Plesner has assisted Reitan Convenience and Uno-X with both merger control and preparation of agreements.
In December 2022, Reitan Convenience Denmark A/S ("Reitan Convenience") og Uno-X Mobility Danmark A/S ("Uno-X) - both part of Reitan Retail - announced that "Uno-X is moving in with 7-Eleven".
The background for this announcement was that since 2007 Reitan Retail has leased the fuel infrastructure and outdoor areas at 57 service stations first to Dansk Shell and subsequently to DCC Energi Retail A/S ("DCC"). During this period, Reitan Convenience has - via franchisees -operated 7-Eleven convenience stores at the service stations, while the retail sale of motor fuels has been operated under the Shell brand.
The agreements between Reitan Retail and DCC are set to expire on 31 December 2023, and in order to claim the synergies between 7-Eleven and Uno-X, Reitan Retail therefore decided that the retail sale of motor fuels in the future shall be operated by Uno-X.
The lease expiry and transfer back of the fuel infrastructure at the service stations has been subject to extensive merger control scrutiny by the Danish Competition and Consumer Authority ("DCCA"), but the DCCA has now issued an unconditional clearance.
As part of this, Reitan Convenience has entered into new franchise agreements with a number of 7-Eleven franchisees operating convenience stores at the service stations, and moreover Reitan Convenience and Uno-X have internally transferred the ownership to the service stations.
Plesner has with a large cross-practice team led by Jacob Ørskov Rasmussen and Peter E. Stassen assisted Reitan Convenience and Uno-X with merger control, new franchise agreements with the 7-Eleven franchisees as well as the internal framework agreement between Reitan Convenience and Uno-X.
It is, however, less obvious that the mere expiry of a time limited lease agreement constitutes a "merger", but after a jurisdictional consultation with the DCCA, Reitan Convenience and Uno-X chose to notify the lease expiry to the DCCA.
The DCCA's review - which inter alia involved an extensive analysis of the "merger's" effects on competition in a number of local markets - has now been concluded, and the DCCA has issued an unconditional clearance of the lease expiry and the transfer of the fuel infrastructure and outdoor areas at the service stations.
The DCCA's decision has two interesting take aways for future merger control cases:
1. The lease expiry constituted a "merger" as defined in the Danish Competition Act.
The DCCA found that the expiry of the lease agreement , rather than the transfer of retail sale of motor fuels from DCC to Uno-X, as the "merger".
The first implication of this is that if a company (or private person) long term leases out assets (e.g., retail property, fixtures and fittings etc.), the lessor many years later can be under an obligation to notify the lease expiry to the DCCA (or other relevant competition authorities); failure to do so could result in "gun jumping" fines for the lessor. This seemingly would apply irrespective of whether the lessor is active in the same industry as the business leasing the assets or wishes to use the assets for other purposes.
Second, if the transfer back would give rise to competition concerns, the lessor could in a worst case scenario be forced to extent the lease or even divest the assets fully or partialluy.
2. What was the counterfactual scenario?
The DCCA did not conclude on what the right counterfactual scenario was , i.e., which alternative to the lease expiry and transfer of fuel infrastructure the DCCA should assess the "merger's" effects against.
The legal consequence of the lease expire will be that DCC no longer will have a legal right or obligation to operate retail sales of motor fuels from the service stations, and due to the "gun jumping" prohibition set out in the Danish Competition Act, Uno-X would also be legally prevented from commencing operations from said service stations. Thus, from Plesner's perspective the right counterfactual would be a scenario where none of the parties would operate retail sales of motor fuels from the service stations.
However, the DCCA considered both this scenario as well as scenarios where the lease agreement with DCC would be extended or where a new lease agreement would be concluded with DCC.
Read the Danish Competition and Consumer Authority's decision of 21 December 2023 (in Danish)
The background for this announcement was that since 2007 Reitan Retail has leased the fuel infrastructure and outdoor areas at 57 service stations first to Dansk Shell and subsequently to DCC Energi Retail A/S ("DCC"). During this period, Reitan Convenience has - via franchisees -operated 7-Eleven convenience stores at the service stations, while the retail sale of motor fuels has been operated under the Shell brand.
The agreements between Reitan Retail and DCC are set to expire on 31 December 2023, and in order to claim the synergies between 7-Eleven and Uno-X, Reitan Retail therefore decided that the retail sale of motor fuels in the future shall be operated by Uno-X.
The lease expiry and transfer back of the fuel infrastructure at the service stations has been subject to extensive merger control scrutiny by the Danish Competition and Consumer Authority ("DCCA"), but the DCCA has now issued an unconditional clearance.
As part of this, Reitan Convenience has entered into new franchise agreements with a number of 7-Eleven franchisees operating convenience stores at the service stations, and moreover Reitan Convenience and Uno-X have internally transferred the ownership to the service stations.
Plesner has with a large cross-practice team led by Jacob Ørskov Rasmussen and Peter E. Stassen assisted Reitan Convenience and Uno-X with merger control, new franchise agreements with the 7-Eleven franchisees as well as the internal framework agreement between Reitan Convenience and Uno-X.
Merger control
The Danish Competition Act's rules on merger control apply to transactions that imply a change of control of undertakings on a lasting basis. Typically, the transactions which must be notified to the DCCA as "mergers" pursuant to the Danish Competition Act are share or asset transfers. However, a "merger" can also consist in the conclusion of agreements which result in a change of control on a "lasting basis", e.g. long term lease agreements; this was for instance the case with the lease agreement for the fuel infrastructure entered into with Dansk Shell in 2007.It is, however, less obvious that the mere expiry of a time limited lease agreement constitutes a "merger", but after a jurisdictional consultation with the DCCA, Reitan Convenience and Uno-X chose to notify the lease expiry to the DCCA.
The DCCA's review - which inter alia involved an extensive analysis of the "merger's" effects on competition in a number of local markets - has now been concluded, and the DCCA has issued an unconditional clearance of the lease expiry and the transfer of the fuel infrastructure and outdoor areas at the service stations.
The DCCA's decision has two interesting take aways for future merger control cases:
1. The lease expiry constituted a "merger" as defined in the Danish Competition Act.
The DCCA found that the expiry of the lease agreement , rather than the transfer of retail sale of motor fuels from DCC to Uno-X, as the "merger".
The first implication of this is that if a company (or private person) long term leases out assets (e.g., retail property, fixtures and fittings etc.), the lessor many years later can be under an obligation to notify the lease expiry to the DCCA (or other relevant competition authorities); failure to do so could result in "gun jumping" fines for the lessor. This seemingly would apply irrespective of whether the lessor is active in the same industry as the business leasing the assets or wishes to use the assets for other purposes.
Second, if the transfer back would give rise to competition concerns, the lessor could in a worst case scenario be forced to extent the lease or even divest the assets fully or partialluy.
2. What was the counterfactual scenario?
The DCCA did not conclude on what the right counterfactual scenario was , i.e., which alternative to the lease expiry and transfer of fuel infrastructure the DCCA should assess the "merger's" effects against.
The legal consequence of the lease expire will be that DCC no longer will have a legal right or obligation to operate retail sales of motor fuels from the service stations, and due to the "gun jumping" prohibition set out in the Danish Competition Act, Uno-X would also be legally prevented from commencing operations from said service stations. Thus, from Plesner's perspective the right counterfactual would be a scenario where none of the parties would operate retail sales of motor fuels from the service stations.
However, the DCCA considered both this scenario as well as scenarios where the lease agreement with DCC would be extended or where a new lease agreement would be concluded with DCC.
Read the Danish Competition and Consumer Authority's decision of 21 December 2023 (in Danish)
