Affected market: Supply of education sector network management software
No. ME/1107/04
Please note that the full text of the decision can be downloaded by using the link on the right . What follows are extracts regarding the parties, the transaction, jurisdiction, assessment and decision.
The OFT's decision on reference under section 22 given on 23 July 2004
PARTIES
Research Machines plc (RM) supplies information and communication technology software, systems and services and also educational services to a wide variety of educational establishments. RM's turnover in the fiscal year ending 31 October 2003 was £215 million. Sentinel Products Limited (Sentinel) supplies computer software. Sentinel's turnover in the year ending 31 December 2003 was £1.39 million.
TRANSACTION
RM acquired Sentinel on 27 February 2004. The statutory deadline, extended by agreement, is 23 July 2004. The administrative deadline is 30 July 2004.
JURISDICTION
As a result of this transaction, RM and Sentinel ceased to be distinct. The parties overlap in the supply of network management software for use in the education sector and 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 transaction qualifies on the share of supply test under the Act. The parties overlap in the supply of NMS to the education sector. The best-available figures suggest that the parties represent 55 per cent (increment of 10 per cent) of the installed base of NMS in primary schools, 50 per cent (increment of 17 per cent) in secondary schools and 25 per cent (increment of 10 per cent) in tertiary institutions. This excludes those institutions that rely on operating system network tools, which may be a constraint.
At a horizontal level, the majority of customers took the view that alternative NMS are available. There appears to have been little direct competition between the parties (i.e. for sales of NMS on stand-alone basis), and entry from firms active in general NMS and expansion by existing firms supplying education-sector NMS appear to be effective post-merger constraints.
In light of certain concerns raised by competitors, the OFT considered the potential for foreclosure by RM of Sentinel dealers, some of whom offer rival IT solutions to RM in which Sentinel products were the NMS component. The evidence suggests that RM intends to retain the dealer network and, above all, that alternative NMS products are or would quickly become available, denying RM any ability to foreclose rivals. The majority of customers did not raise concerns.
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.
This feature requires Javascript and Cookies to be enabled on your browser
Register for email alerts or amend your existing account details here.