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
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.
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
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.
MEDIA enquiries: 020 7211+
Pritie Billimoria 8708 Kasia
Russell Guthrie 8899 Frank Shepherd
Elliott Ball 8898
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PUBLICenquiries: 0845 7224499 email@example.com
This information is provided by RNS
The company news service from the London Stock Exchange
MERFEUFLMFESEES -0- Oct/26/2012 15:30 GMT
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