The Co-operative Group’s acquisition of Southern Co-op could be referred for an in-depth investigation after the Competition and Markets Authority (CMA) identified potential competition concerns around 19 convenience stores and two funeral sites.
The CMA has concluded its Phase 1 investigation into the merger and found a realistic prospect of a substantial lessening of competition (SLC) in local markets for convenience grocery retail and funeral services.
The businesses have until 22 September 2026 to offer undertakings in lieu (UILs) to address the CMA’s concerns. If no remedies are offered, or if the CMA considers them insufficient, the merger will be referred for an in-depth Phase 2 investigation under the Enterprise Act 2002.
The CMA’s concerns relate to horizontal unilateral effects in the retail supply of groceries in convenience stores in local areas centred around nine Co-op Group stores and 10 Southern Co-op stores.
The regulator has also identified a potential SLC in the supply of attended at-need and pre-paid funeral services in local areas centred around one Co-op Group site and one Southern Co-op site.
The finding follows the statutory transfer of Southern Co-op’s business to Co-op Group on 26 July. The CMA said the transfer created a relevant merger situation, giving it jurisdiction to review the transaction.
During the Phase 1 investigation, the parties formally conceded that the test for a Phase 2 reference was met in relation to the identified local markets. They subsequently asked the CMA to fast-track the case to consideration of potential UILs.
The merger brings together Southern Co-op’s 173 food stores, 83 Starbucks coffeehouses, 69 funeral homes, three crematoria, four burial grounds and 77 Welcome franchise stores with Co-op Group’s estate of more than 2,300 food stores and around 800 funeral homes.
Southern Co-op members approved the transaction in May. The society had been facing significant financial challenges, having reported losses for the past three years and previously warned that operating losses could exceed £20 million in the current financial year.
Both organisations have said the combination is intended to create a larger and more resilient co-operative business while retaining co-operative ownership and supporting members and communities.