Office of Fair Trade Merger Update

  Office of Fair Trade - Merger Update

RNS Number : 6812P
Office of Fair Trading
26 October 2012




99/12 26 October 2012 





OFT CONSIDERS REMEDIES IN ELECTRICAL WHOLESALING MERGER





The OFT is  considering undertakings offered  by Rexel UK  Limited (Rexel)  to 
sell branches in six local areas in order to remedy local competition concerns
arising from  its  completed acquisition  of  the Wilts  Wholesale  Electrical 
Company Limited business (Wilts).

 Rexel is one of the  largest electrical wholesalers in the UK.  It 
is part of a worldwide distributor  of electrical products and has around  360 
branches across the UK under the banners Newey & Eyre, WF Senate and  Denmans. 
Wilts has around 60 branches in the southern half of the UK.

 The OFT concluded that the merger did not give rise to competition
concerns at a national level because Wilts did not have a national presence or
customer base. The OFT's investigation also did not find competition  concerns 
at a regional level, because in the main region of overlap, the South West  of 
England, sufficient competitors would remain.

However, the OFT did find evidence that the merger could reduce competition in
six local areas in England  and enable the parties  to raise prices or  reduce 
quality, range or service to customers.

To resolve these competition concerns  Rexel has offered undertakings to  sell 
all of the  seven Wilts  branches in  the six  affected local  areas. The  OFT 
considers that it is appropriate in this  case to require an upfront buyer  to 
be identified before finally accepting  undertakings from Rexel to sell  these 
branches.

Ali Nikpay, OFT Senior Director and Decision Maker in this case, said:

'The OFT is  concerned that  in six local  areas customers  could face  higher 
prices and a  reduction in  choice following  this deal.  Rexel has,  however, 
offered to sell branches in these areas. If an appropriate buyer or buyers are
found we believe  that these  disposals would solve  the competition  problems 
which our investigation identified.'

While the undertakings in lieu of a reference are being considered, the  OFT's 
duty to refer the merger to the Competition Commission is suspended.



NOTES



1. The Reference Test - The OFT has a duty to make a reference to the
Competition Commission if the OFT believes that it is or may be the case that
a relevant merger situation has been or will be created, and as applicable,
the creation of that situation has resulted, or may be expected to result, in
a substantial lessening of competition within any market or markets in the
United Kingdom for goods or services.



2. Under the Enterprise Act 2002 a relevant merger situation is or will be
created if two or more enterprises have ceased or will cease to be distinct
enterprises, and the value of the turnover in the United Kingdom of the
enterprise being taken over exceeds £70 million; or as a result of the
transaction, in relation to the supply of goods or services of any
description, a 25 per cent share of supply in the UK (or a substantial part
thereof) is created or enhanced.



3. Section 73 of the Enterprise Act 2002 provides for the option of
accepting undertakings, instead of making a reference, for the purpose of
remedying, mitigating or preventing the substantial lessening of competition
concerned, or any adverse effect which has or may have resulted from it or may
be expected to result from it. The Act provides that for such a purpose, the
OFT may accept from such of the parties concerned as it considers appropriate
undertakings to take such action as it considers appropriate. In doing so, the
OFT will have regard in particular to the need to achieve as comprehensive a
solution as is reasonable and practicable to the substantial lessening of
competition and any adverse effects resulting from it. The OFT is required to
consult publicly before accepting any such undertakings.



4. Upfront  buyer requirement  - the  OFT  considered in  this case  that  a 
necessary precursor to accepting undertakings in lieu is that the  divestiture 
should be agreed up-front to a suitable buyer approved by the OFT. This  means 
that the OFT consults  publicly on the suitability  of the proposed buyer,  as 
well as  all  other aspects  of  the  draft undertakings,  during  the  public 
consultation period.



5. The text of this decision will be placed on the OFT web site at
www.oft.gov.uk as soon as is reasonably practicable.





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           The company news service from the London Stock Exchange

END


MERFEUFLMFESEES -0- Oct/26/2012 15:30 GMT
 
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