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Spanish court probes Russian tycoon’s purchase of supermarket chain Dia

Spain's top criminal court said Thursday it has opened an investigation into whether Russian tycoon Mikhail Fridman artificially depressed the share price of supermarket chain Dia before buying the firm.

Spanish court probes Russian tycoon's purchase of supermarket chain Dia
File photo of a Dia supermarket. Photo: AFP

The Kremlin-friendly oligarch appeared in court in Madrid on Monday as part of a separate similar case in which judges are investigating allegations he acted to bring down the value of another Spanish takeover target, digital entertainment firm Zed Worldwide.   

He denied all charges in that case in a statement released after he was questioned in court.

An investigating judge with the National Court “has begun investigating a complaint” against Fridman and his Luxembourg-based investment company LetterOne “in connection with its acquisition of Dia”, according to a document from the court published Thursday.   

In May, LetterOne secured majority control of the struggling supermarket chain via a hostile takeover following a bitter dispute with its previous management as the firm's share price slumped.

The judge is investigating allegations made in an anonymous complaint that LetterOne “maintained a heightened financial tension to lower the share price, until it managed to buy the company,” the court document said.

Spain's Supreme Court had in September given the National Court a mandate to investigate this case which it said could constitute the crime of “market manipulation” and could have had “serious repercussions on… the national economy” given the size of Dia's supermarket network in the country, the document added.

It cited a police report alleging that Fridman acted in a “coordinated and concerted way” through a network of “criminal associates… to create a situation of conflict… and lack of liquidity in the short term” so as to lower Dia's price and buy the firm.   

In a statement, LetterOne called these allegations “totally false and defamatory”.

“The reality is Dia suffered from mismanagement and accounting irregularities were discovered, which negatively affected all shareholders, including LetterOne,” it added.

LetterOne said it was “committed” to investing 1.6 billion euros to protect jobs, suppliers and keep stores open.

Through LetterOne, Fridman also controls interests in telecoms, banking, oil and healthcare.   

The tycoon, who is reportedly close to the Kremlin and was listed by Forbes this year as London's richest resident, is also one of the founders of Alfa Bank, Russia's largest privately-held lender.

READ MORE: From Russia with love: Tycoon buys out ailing Spanish supermarket

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SHOPPING

‘Harryhandel’: Is the return of cross-border shopping in Norway really a good thing? 

The pandemic cut-off Norway from its neighbours, putting a temporary end to border shopping. Now ‘harryhandel’ trips are allowed again businesses in the country fear they will lose out as shoppers look abroad for cheaper groceries. 

Pictured is Norway and Sweden's border on the old Svinesund bridge.
Will the return of border shopping have a negative affect on the country? Pictured is Norway and Sweden's border on the old Svinesund bridge. Photo by Petter Bernsten/AFP.

In eastern Norway, particularly along the border with Sweden, cross-border shopping has long been common for residents looking for cheaper groceries and a better selection of products. 

Norway’s Covid-19 rules effectively put a stop to that until this summer. The closed border meant a record year for food and beverage sales in Norway. 

“Due to the fact that there was little action and that people did not travel, we noticed that our sales increased greatly during the entire period,” Øyvind Berg, production manager at Norwegian dairy firm Synnøve Finden, explained to public broadcaster NRK.

Now producers and supermarkets fear the impact of cross-border shopping being up and running again. 

“Our challenge is that we see that more than half of the food and beverage producers, i.e. the industrial companies, fear that they will lose market share because cross-border trade will return in full,” Petter Brubakk, director of food and beverage at the Confederation of Norwegian Enterprise (NHO), informed NRK. 

The majority of those who go shopping across borders in Norway will do so in Sweden. However, in the north, some will also venture into Finland or Russia.

Further south people will also travel to Germany or Denmark. 

Why do people go to other countries for shopping? 

Overall the main appeal of cross-border shopping is that its much better for consumers than shopping domestically. 

Norway’s EEA agreement with the EU means that most foods, drinks, tobacco products, alcohol and other agricultural products are more expensive than they are within the EU as custom duties are required to import them into Norwegian supermarkets. 

Not just that, but there is a much wider selection of products than in Norway due to laws that protect Norwegian products. For example, cheeses such as Cheddar are more readily available, cheaper and generally of better quality in other countries than those found in Norway. 

READ MORE: What is ‘harryhandel’, and why do Norwegians love it so much?

Is border shopping a bad thing for Norway?

Norwegian businesses argue that crossing the border to shop affects the whole value chain, negatively impacting everyone from Norwegian farms and producers to supermarket employees, not just companies profit margins. 

“My advice is to encourage Norwegians to buy Norwegian food, and help secure Norwegian jobs throughout the value chain,” food and agriculture minister Sandra Borch told NRK. 

In addition, shopping domestically means more tax revenue for the Norwegian system to use to fund its generous welfare state. 

While shopping domestically protects domestic jobs, shopping abroad protects jobs there, which rely on people hopping the border to get their groceries. 

Coronavirus pandemic restrictions left a black hole in some of these economies reliant on shoppers from the Norwegian side of the border. For example, in Strömstad, a Swedish town close to the border where many travel to shop, unemployment rose by around 75 percent after Norway closed its borders with Sweden. 

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