4th Feb 2008 15:00
Office of Fair Trading04 February 2008 15/08 4 February 2008 OFT PREFERS UNDERTAKINGS TO 'DE MINIMIS' EXCEPTION IN BERKSHIRE NEWSPAPER MERGER The OFT is considering whether to accept undertakings instead of referring thecompleted acquisition by Dunfermline Press Ltd (DPL) of eight Berkshirenewspaper titles from Trinity Mirror plc. If satisfactory undertakings are notgiven, the merger will be referred to the Competition Commission (CC).The OFT opened its own inquiry into this completed merger and put in place'hold-separate' undertakings as the deal gives DPL control over the only twolocal newspapers in the Slough/Windsor/Eton area. While the OFT believes thatDPL may lack monopoly power over local advertising - because of internetcompetition - it may still be able to raise prices and reduce service as themerger eliminates close competition between the parties' Observer and Expressseries of newspapers. The OFT's use of its discretion to accept undertakings in lieu of reference hasresolved competition concerns in 22 merger cases in less than five years underthe Enterprise Act regime. Following publication of its revised merger guidancelast November, the OFT has revitalised another means to spare a CC reference -the 'de minimis' exception. As the affected market size in this case is below the revised de minimisthreshold of £10 million per year, the use of this exception to a CC referencewas also considered. However, the OFT has today explained that as a generalpolicy matter it will not exercise its discretion via the de minimis exceptionwhen the harm to competition could, in principle, clearly be remedied byclear-cut undertakings in lieu of reference. Only one out of the eight acquired Berkshire newspaper titles creates aproblematic overlap in this case. Unlike in the three previous de minimis cases,the OFT has judged that in principle it was open to DPL to offer a clear-cut -that is, effective and proportionate -undertaking. The OFT will now considerremedies further, as DPL has chosen to offer to divest relevant assets to aspecified purchaser instead of a CC reference. Simon Pritchard, OFT Senior Director of Mergers said: 'In an obvious case like this, our aim will still be to spare the costs ofreference while restoring the benefits of competition lost by the merger. We oweit to consumers to make clear-cut remedies the preferred exception to referencein all suitable cases. Equally, UK business has strongly encouraged the OFT tosolve cases via undertakings in lieu, and clarity on this issue helps companiesplan merger activity with the right incentives in mind.' NOTES 1. Own-initiative merger inquiries - While the majority of mergers reviewed bythe OFT arise from voluntary notification by the parties, the OFT'sown-initiative inquiry programme has led to remedial action by the OFT or CC ineleven cases under the Enterprise Act regime. In some of these cases, it isalways possible that the parties would have voluntarily notified the OFT oftheir merger at a later date; in other cases, it was clear to the OFT that thiswould not have been the case. 2. Initial or 'hold-separate' undertakings - Under the UK's voluntarynotification regime, the OFT nevertheless has a power to accept initialundertakings (or impose an initial order) to prevent pre-emptive action by theparties - such as integration of assets, closure of facilities and staffredundancies - that would prejudice possible remedial action by the CompetitionCommission (or by the OFT in an undertakings in lieu case). 3. Undertakings in lieu - Under section 73 of the Enterprise Act 2002 the OFTmay, instead of making a reference, and for the purpose of remedying, mitigatingor preventing the substantial lessening of competition concerned, or any adverseeffect which has or may have resulted from it or may be expected to result fromit, accept from such of the parties concerned as it considers appropriateundertakings to take such action as it considers appropriate. In doing so, theOFT will have regard to the need to achieve as comprehensive a solution as isreasonable and practicable to the substantial lessening of competition and anyadverse effects resulting from it. OFT Guidance specifies that undertakingsshould be clear-cut, which means they must be effective and proportionate, andcapable of ready implementation. Before accepting any such undertakings underSchedule 10 of the Enterprise Act 2002, the OFT shall give notice of theproposed undertakings and will consider any representations made in accordancewith that notice. 4. Undertakings in lieu cases - The OFT's undertakings in lieu cases includeamong others, divestitures of supermarkets (Co-operative Group Ltd/UnitedCo-op), pharmacies (Boots/Alliance Unichem, Lloyds/IPCC), cinemas (Terra Firma/Odeon/UCI, Blackstone/UGC), betting shops (William Hill/Stanley, Ladbrokes/JackBrown), car dealerships (Pendragon/Reg Vardy, Inchcape/EMH) and funeral homes(Co-operative Group Ltd/Fairways). For a full list, go to the OFT website. 5. De minimis guidance and early cases - For more details of the OFT's revisedde minimis guidance of 15 November 2007, and its use of the exception in threecases since, see today's parallel decision - press notice 16/08and earlier pressnotices 180/07and 156/07). 6. The reference test - The OFT has a duty to make a reference to the CC if theOFT believes that it is or may be the case that a relevant merger situation hasbeen created; and the creation of that situation has resulted, or may beexpected to result, in a substantial lessening of competition within any marketor markets in the United Kingdom for goods or services. 7. Merger jurisdiction - Under the Enterprise Act 2002 a relevant mergersituation is created if two or more enterprises have ceased to be distinctenterprises; and the value of the turnover in the United Kingdom of theenterprise being taken over exceeds £70 million; or as a result of thetransaction, in relation to the supply of goods or services of any description,a 25% share of supply in the UK (or a substantial part thereof) is created orenhanced. 8. Publication - The text of these decisions will be placed on the Office ofFair Trading's web site at www.oft.gov.uk as soon as reasonably practicable. MEDIA enquiries: 020 7211+ Corinne Gladstone 8899 Alex Hunter 8900 Jonathan Marciano 8898 Nnenna Oleforo 8993 Out of hours: mobile: 07774 134814 fax messages: 020 7211 8961 Copies of press notices: Ext. 8993 http://www.oft.gov.uk PUBLIC enquiries: 0845 7224499 [email protected] OFT reports and consumer information leaflets are available free from: OFT, PO Box 366, Hayes UB3 1XB 0800 389 3158 [email protected] This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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