The Competition and Consumer Commission of Singapore (CCCS) has given the green signal to NTUC Enterprise to buy over home-grown food operator Kopitiam after finding out that the move will not lead to a “substantial lessening of competition”.
The completion watchdog discovered that NTUC Enterprise and Kopitiam are not each other’s closest competitions as there are other powerful rival groups like Koufu, Food Junction, Food Republic and Broadway.
The decision came three months after NTUC Enterprise revealed its plan for a takeover by the end of the year for an unknown amount.
The commission said that “the barriers to entry and expansion of eating establishments are likely to be low.”
Founded in 1988, Kopitiam operates 80 establishments with 56 food courts, 21 coffee shops, three hawker centres and two central kitchens, serving approximately 350, 000 meals daily. On the other hand, NTUC Foodfare, which is overseen by NTUC Enterprise, manages 14 food courts, 10 coffee shops and nine hawker centres.
Despite the takeover, both parties previously said that they will continue to operate separately with “their respective management teams and employees remaining in place”.
In response to the approval, NTUC Enterprise revealed that the takeover will “strengthen our ability to provide affordable cooked food, thereby furthering our social mission of moderating the cost of living”.
The first step that the operator is looking is to reduce coffee and tea prices, and more details regarding this will be announced in the first quarter of 2019. It is also amplifying its existing initiatives for lower-income consumers to other outlets.
In an article published by TODAYonline, experts were quoted to say that they believe that the move “will lead to better economies of scale that will reduce operational cost, and in turn, keep rental and food prices low. However, some cautioned that it remains uncertain whether low prices will remain in the long run.”
Associate Professor Lawrence Loh, the director of Centre for Governance, Institutions and Organisations at the National University of Singapore’s business school said to the news site that the “takeover will enable better economies of scale. Given the broader base that it will have exercise efficiency, they would be able to sustain the low prices.”
Adjunct associate professor Zafar Momon at Nanyang Technological University’s business school also agrees and said that “since NTUC Foodfare – which is overseen by NTUC Enterprise – is a social enterprise, it would want to keep prices affordable by seeking cost synergies between both parties through its larger footprint.”
However, lawyer Kala Anandarajah who is the head of competition and antitrust and trade practice at law firm Rajah & Tann, disclosed that “with a seemingly stronger bargaining power, there is always a risk of that rentals may go up for stall owners.” But she further added that “NTUC Foodfare’s social mission means it will be under pressure to keep rentals low to enable a friendlier priced environment for consumers.”
Despite having positive feedbacks from experts, many netizens believe that this is not the best move.
Facebook user Wee-How Lim comments that by having a monopolised market will only increase the money and this will not be good for consumers. He added that reducing the price will only be a temporary fix by the company before actually increasing it again.
Another user named Gary Han also feels that the price will shoot up in the future as the cost will increase.
Vincent Lee also opines the price will increase after the merger as hawker tenants will have to survive due to a hike in rent.
In addition to that, one user feels that “NTUC has never been known for its low prices in any of their business” although they’re supposed to benefit the “common worker”. James Lee Says went on further to question the whereabouts of the profits as co-operative aren’t supposed to keep their profits.
Victor Tan and Ab Seet opine that NTUC has monopolised the food industry and the prices will definitely increase as they have paid a large sum for the takeover.