Anticipated acquisition by Barclays Bank plc of the Goldfish business of Discover Financial Services

Affected market: Credit card and related services

No. ME/3532/08

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, third party views, assessment and decision.

The OFT's decision on reference under section 22(1) given on 7 March 2008. Full text of decision published on 13 March 2008.

Please note that square brackets indicate text or figures which have been deleted or replaced with a range at the request of the parties and third parties for reasons of commercial confidentiality.

PARTIES

Barclays Bank plc (Barclays) is a global financial services provider engaged in retail and commercial banking, credit cards, investment banking, wealth management and investment management services.

Discover Financial Services (Discover) is a US-incorporated credit card issuer and electronic payment services company. The core activity of Discover's Goldfish business (Goldfish) is the issue and operation of personal credit cards to consumers in the UK under the Goldfish and Morgan Stanley brands.

TRANSACTION

Barclays will purchase Goldfish from Discover pursuant to a sale and purchase agreement dated 7 February 2008. The parties notified the transaction to the OFT by way of Merger Notice on 11 February 2008. The OFT's statutory deadline is 10 March 2008.

JURISDICTION

As a result of this transaction Barclays and Goldfish will cease to be distinct. The UK turnover of Goldfish exceeds £70 million, so the turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act) is satisfied. The OFT therefore believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation.

THIRD PARTY VIEWS

No third party raised competition concerns in relation to the transaction.

ASSESSMENT

The parties overlap in the provision of credit card services to both consumers and third party partners and the distribution of certain insurance products to consumers. Consistent with previous OFT decisions, each was assessed on a national level (i.e. the UK).

The OFT distinguished between the supply of credit card services to third party partners (retailers) and the supply of credit card services to consumers. In relation to the former, the OFT also considered whether there was a distinction between affinity and co-branding relationships. However, the parties' share of supply was relatively small in whatever way the market was defined, and there were a number of strong competitors with substantially higher shares of supply in relation to both affinity and co-branding relationships. The OFT therefore had no competition concerns in relation to the supply of credit card services to third party partners.

In line with past OFT cases, the OFT took a cautious approach and considered credit card services to consumers separately from other payment mechanisms such as store cards, debit cards, cheques, cash, hire-purchase and overdrafts. On this market, post-merger Barclays would become the leading provider of credit card services to UK consumers. However, this leading share, and the increment arising from the transaction, would be relatively modest. There would continue to be a number of strong competitors post-merger, and no third party expressed concerns in relation to this market. The OFT therefore had no competition concerns in relation to the supply of credit card services to UK consumers.

The parties each supply a number of life and non-life insurance products. However, with the exception of payment protection insurance (PPI) the parties have a market share of [0 - 10] per cent for each of these products, and as such the OFT did not consider that competition concerns arose as a result of the transaction. In relation to PPI, the Competition Commission is currently considering the appropriate market definition in the context of a market study. Their preliminary view is that each credit card provider enjoys a monopoly over sales of PPI to its own credit card customers. This approach would result in there being no overlap between the parties' PPI activities on any relevant market. Even if there is a wider market, the distribution of PPI to consumers, the parties' combined market share would be [10 - 20] per cent, with an increment from the transaction of less than one per cent. Given this relatively small market share and increment, and the presence of a large number of stronger competitors, the OFT did not consider that competition concerns arose in relation to PPI, even if considered on the basis of this wider market.

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 United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.

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