Anticipated acquisition by Co-operative Group Ltd (formerly Co-operative Wholesale Society Ltd) of the funeral business of George Burgess & Son Ltd

Affected market: Funeral and related services

No. ME/3953/08

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 33(1) given on 12 January 2009. Full text of decision published 27 January 2009.

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

PARTIES

Co-operative Group Limited (CGL) is the UK's largest co-operative society with some 4.5 million members. It is active in food retail, pharmacy, banking, and travel agency (amongst other businesses). It is also active in the supply of funeral directing services through its Funeralcare business. It is the UK's largest provider of 'at need' funerals [see note 1]  in the UK, handling close to 100,000 arrangements in 2007.

George Burgess & Son (Burgess) is an established funeral directing business operating from one location at Ellon, some 15 miles to the north of Aberdeen, in Scotland. In 2007 it conducted [  ] 'at need' funeral arrangements.

TRANSACTION

CGL proposes to acquire the funeral directing business of Burgess. CGL notified the proposed transaction on 26 November 2008 and the administrative deadline for a decision is 29 January 2009.

Following the Monopolies and Mergers Commission (MMC) investigation into the Co-operative Wholesale Society's (CWS) acquisition of the funeral undertaking business of House of Fraser, the Secretary of State for Trade and Industry accepted undertakings from CWS on 27 November 1987 to notify the OFT of any future proposed acquisitions of funeral undertaking businesses in Scotland. CGL has complied with its obligations under the 1987 undertakings (which are still in place) in respect of this transaction.

JURISDICTION

As a result of this transaction CGL and Burgess will cease to be distinct. The parties overlap in the supply of 'at need' funeral arrangements and the share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met in respect of such services in Scotland, a substantial part of the UK. 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

A limited number of third parties responded to the OFT's questionnaire. Those that did - two out of the four local funeral businesses representing three branches out of the six branches within 13.5 miles of Burgess - did not raise any competition concerns about this transaction. These third parties did not consider that they were competitors with Burgess or that Burgess and CGL's branches were competitors.

ASSESSMENT

The parties overlap in the provision of 'at need' funeral services in the Aberdeen area. Following the previous cases in this market, the transaction has been examined at a local level, based an 80 per cent catchment area centred on the target business.

Market shares, calculated as the number of funerals conducted by the parties in the area divided by total number of deaths as recorded by ONS, are estimated at [30-40] per cent with an increment of less than [5] per cent.

Although the combined market share for the whole 80 per cent catchment area will be over the 25 per cent 'rule of thumb' used in previous cases (when considering multiple overlaps), the OFT notes that the combined market share remains relatively modest at [30-40] per cent and that there is additional information that the OFT is able to consider given that it is examining the acquisition of a single funeral business.

That additional evidence indicates that, on balance, CGL and Burgess were not close competitors to each other pre-merger. In geographic terms, in the majority of the postcode bricks which go to make up the 80 per cent catchment area CGL conducted [ ] fewer funerals in 2007. In the remaining two postcode bricks the combined market shares were [25-35] per cent and [20-30] per cent. In the former postcode brick there are four third party businesses, with six branches, within five mile of the boundary of this postcode brick, and all closer to the area than Burgess' business.

This position was fully substantiated by third parties that responded to the OFT's questionnaire, who did not consider that CGL and Burgess were in competition with each other and had no competition concerns about the transaction.

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.

1. 'At need' funeral services are organised following a bereavement, in contrast to those organised 'pre need' through a pre-paid funeral plan.

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