Affected market: Supply of technical services equipment and technical services for beer and cider
No. ME/1587/04
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 33 given on 24 March 2004.
PARTIES
Scottish Courage Limited (SCL) is a subsidiary of Scottish & Newcastle plc (S&N). S&N, through its subsidiaries, brews beer and wholesales beer and other beverages in the UK and elsewhere.
Carlsberg-Tetley Brewing Limited (CTB) (see note 1) is a subsidiary of Carlsberg-Tetley plc (CT) and ultimately Carlsberg Breweries A/S. The Carlsberg Group's core business is the production, sale and distribution of beer but it is also active in the supply of soft drinks, wines and spirits.
Serviced Dispense Equipment Limited (SDEL) is a subsidiary of Serviced Dispense Equipment (Holdings) Limited, which is a new joint venture company owned by SCL (45 per cent), CTB (45 per cent), Mordaunt and Foster Limited (controlled by Mr Mike Foster and his wife) (5 per cent) and Hallriver Limited (controlled by Mr Nick Bryan) (5 per cent).
Innserve Limited (Innserve) is a newly formed services company, wholly owned by Mr Bryan (60 per cent) and Mr Foster (40 per cent).
TRANSACTION
For consideration of around £140 million, SDEL will:
The parties notified the transaction by way of a merger notice on 28 January 2004. This notice was withdrawn on 25 February 2004 and the OFT continued its assessment of the transaction as an informal submission. The 40-day administrative deadline will expire on 24 March 2004.
JURISDICTION
In the context of this merger, the parties overlap in the supply of technical services equipment and technical services. They are likely to supply more than 25 per cent of such equipment and services relating to the dispense of draught beer, cider and wine in Great Britain. The share of supply test in section 23 of the Enterprise Act 2002 (the Act) is likely to be met. The OFT therefore believes that it is or may be the case that a relevant merger situation will be created.
ASSESSMENT
The merger of SCL's and CTB's technical services divisions creates a joint venture company that will supply technical services equipment and technical services for draught beer and cider to on-trade outlets nationally.
The effect of the joint venture is to separate the supply of technical services equipment and technical services from the supply of beer and cider: traditionally, the two have been provided by brewers as a bundle. This separation follows recent developments in the industry which have seen a number of pub companies invite tenders for the sole supply of technical services to all their outlets.
The parties submit that the joint venture represents a natural evolution of the FBI (although it does not replace that initiative). They claim that, although the FBI is an improvement on the previous situation, its procedures are cumbersome, inefficient and time consuming. SCL and CTB believe that the merging of their technical services functions into a single dedicated service provider is likely to result in higher quality equipment installed, lower costs, higher standards of cellar management and improved product dispense.
Given the history of technical services equipment and technical services as a bundled product, shares of supply are not readily available. Depending on the method used, estimates of the joint venture's share of supply range from [15-25 per cent] to [25-35 per cent] (see note 3).
The supply of technical services is not, in itself, a sector in which the brewers actively compete against each other for custom. The brewers compete to supply beer and cider to pubs and in so doing may need to take on the obligations of being the principal supplier to that pub. The requirements of doing so, however, are prescribed by the FBI which sets out the 'must buy-must sell' price at which technical services equipment is transferred and the cost at which the principal supplier will provide services to other suppliers to that pub.
In any case, the OFT's enquiries indicate that there are a number of actual and potential suppliers of technical services equipment and technical services, and the barriers to entry do not appear to be significant. Additionally, some of the joint venture's potential customers appear to possess countervailing buyer power, as evidenced by the recent switching of a major pub company between a brewer and an independent supplier of technical services.
The merger generated a large degree of interest from third parties with different views, who provided comments on a wide range of issues. However, the OFT was not provided with any convincing evidence to support any of the possible competition concerns identified.
Consequently, the OFT does not believe that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the UK.
DECISION
This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.
1. Since the date of the decision, the parties have advised that Carlsberg-Tetley Brewing Limited has been renamed Carlsberg UK Limited and Carlsberg-Tetley plc has been renamed Carlsberg UK plc.
2. For the purposes of this decision, the arrangements between SDEL and Innserve will be referred to as the 'joint venture'.
3. The parties noted that their share of supply in the 'open market' may be around [1-10 per cent] but for the purposes of this analysis the OFT focussed on the estimates in the higher range.
This feature requires Javascript and Cookies to be enabled on your browser
Register for email alerts or amend your existing account details here.