Affected market: Systems software
No. ME/1007/04
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.
Square brackets indicate figure excised at the request of the parties or paragraph excised at the request of the parties.
The OFT's decision on reference under section 22(1) given on 13 July 2004
PARTIES
International Business Machines Corporation (IBM) is a global developer and supplier of information technology (IT) products and services, including hardware and software. In the fiscal year ending December 2003, IBM's worldwide turnover was approximately $89 billion.
Candle Corporation (Candle), based in California, is active in the developing and marketing of system infrastructure software, which allows customers to track and maximize return from IT investments. In the fiscal year ending June 2003, Candle's UK turnover was £ [ ] million.
TRANSACTION
IBM agreed to acquire the stock of Candle for $[ ] million on 12 March 2004. The transaction closed on 7 June 2004. The OFT's respective administrative and statutory deadlines for this case are 13 July 2004 and 6 October 2004.
JURISDICTION
As a result of the transaction, IBM and Candle have ceased to be distinct. The parties overlap in certain systems management software and it appears the share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met. The OFT believes that it is or may be the case that a relevant merger situation has been created for the purposes of section 22(1)(a) of the Act.
ASSESSMENT
On the basis of the share of supply data given above, the OFT has reason to believe that the transaction may satisfy the share of supply test in relation to categories of systems management software for mainframe platforms in the UK. Although the transaction gives rise to significant combined shares of supply in these sectors on a global and European basis, market participants raised no horizontal concerns.
Certain ISV competitors submitted that the merger would lead to their foreclosure in providing IBM mainframe-compatible software in Candle's product areas, either through denial of access to APIs or through product bundling. The weight of evidence, however, suggested that the merger will not create or increase the ability or incentives of IBM to engage in exclusionary conduct and harm consumers.
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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