Corporación Favorita obtains unconditional approval for acquisition of delivery platform Tipti

Compass Lexecon assisted Ecuador’s largest retailer, Corporación Favorita, during the merger review by the Ecuadorian competition authority related to the retailer’s acquisition of a controlling majority share of delivery platform Tipti. Following the Phase 2 investigation by the authority, the First Instance Resolution Commission unconditionally approved the transaction in June 2024.

Situation

Corporación Favorita (‘Favorita’) is Ecuador's largest retailer and a major Latin American conglomerate. Tipti is an Ecuadorian e-commerce company, providing home delivery services for supermarkets and specialty stores. Favorita has held a minority stake in Tipti since 2021, and has a commercial agreement whereby both companies agreed to jointly develop and improve the online sales channel for Favorita's supermarkets. In September 2023, the parties notified a transaction to the Superintendency of Economic Competition (‘SCE’) through which Favorita increased its stake in Tipti, becoming the majority shareholder with 56.13% of the company’s share capital and gaining control over its strategic decisions.

Our role

The investigation by the SCE focused on the possible effects of the resulting vertical integration between physical retail services (by Favorita) and home delivery services (by Tipti). Favorita submitted an economic report by Compass Lexecon as an Annex to Notification, in which we assessed the competitive dynamics and the absence of exclusion risks in interrelated markets. Our report was instrumental in supporting the conclusion of the SCE, and, subsequently, the final decision of the First Instance Resolution Commission (‘CRPI’) to authorize the concentration. We also analyzed the efficiencies from the deal. Although the CRPI considered that it was not necessary to delve deeper into the analysis of efficiencies as it did not identify any significant risks, it mentioned that the transaction would generate efficiencies that would be passed on to consumers, which are the same as those presented in our report.

Outcome

The SCE conducted an exhaustive Phase 2 investigation into the effects of the acquisition. The CRPI, to which the SCE reports with recommendations, issued a final decision on 21 June 2024, authorising the transaction. The Commission concluded that the transaction did not raise significant competition concerns and would not lead to the strengthening of market power in any of the relevant segments. The decision by the CRPI made reference to the Compass Lexecon Economic Report, as the SCE’s analysis aligned closely with the key arguments presented in it.

The team

The Compass Lexecon team, headed by Fernando Coloma Ríos, included Carlos Noton, Gabriel Fernandez and Diego Felipe Tello.

We assisted Corporación Favorita’s counsel, Lexvalor Abogados, led by Ricardo Peñaherrera, with support of Camila Sánchez, Mariela Camacho and Kevin Ortiz.