Completed acquisition by IBM United Kingdom of Schlumberger Business Continuity Services

Affected market: Business continuity services

No. ME/1045/03

Please note that the full text of the decision can be downloaded from the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, assessment and decision.

Please note that square brackets indicate figures which have been deleted at the request of the parties for reasons of commercial confidentiality.

The OFT's decision on reference under section 22 given on 6 August 2004

PARTIES

IBM Corporation (IBM) is a worldwide supplier of computer products (personal computers, servers, storage systems, software) and services (business consultancy and IT infrastructure services), including business continuity and disaster recovery services. In the year ending 31 December 2003, IBM's worldwide turnover was approximately $89 billion. IBM's worldwide turnover in the area of overlap – business continuity and disaster recovery services (BCDR) – was approximately £[  ]m, around [  ] per cent of which was generated in the UK.

Schlumberger Business Continuity Services (SBCS) is the BCDR unit of SchlumbergerSema, itself the IT division of Schlumberger Limited, a U.S.-based global oilfield and information services company. In the year ending 31 December 2002, SBCS had UK turnover of approximately £[  ]m.

TRANSACTION

The UK business of SBCS was offered for sale by SchlumbergerSema by way of competitive tender, won by IBM's UK subsidiary, IBM United Kingdom Ltd. The statutory deadline is 7 August 2004.

JURISDICTION

 As a result of this transaction, IBM and SchlumbergerSema's BCDR services have ceased to be distinct. The share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met. A relevant merger situation has been created.

ASSESSMENT

The parties overlap in the supply of BC and ITDR services. No substantiated concerns were raised in relation to BC services. As to ITDR, evidence suggests a general continuum of services across which there are trade-offs in price and quality; customers can switch between different services, and purchase a complete package of services from a variety of suppliers provided that they continue to meet their disaster recovery objectives. In addition, in-house provision of various such services is increasingly viable and the threat of firms switching to self-supply acts as some constraint on the parties. Third party inquiries did not elicit significant concerns in relation to ITDR or any segments thereof except IBM mainframe hotsite services.

It is unclear whether sufficient IBM mainframe hotsite customers in the UK have economic substitutes from among other ITDR services to render a price increase by one or more external suppliers unprofitable. It was unnecessary to take a firm view, however, as affected UK customers did not generally regard Schlumberger as an important competitive constraint lost through the merger. The above analysis considers in more detail various factors that may contribute to UK customers' general lack of concern.

Consequently, the OFT does not believe that it is or may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.

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