Completed merger of Seniorlink Eldercare and Aid Call resulting from the completed merger between Help The Aged and Age Concern England

Affected market: Personal Pendant Alarms

No. ME/4034/09

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(2)(a) given on 21 July 2009. Full text of decision published 26 August 2009.

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

PARTIES

Age Concern England is a large well-known charity. It campaigns in the interests of the elderly and provides a range of services to them. The organisation runs a network of 170 charity shops (mainly in England) and also offers a wide range of commercial products and services to the over 50s. These include insurance, financial advice, holidays and personal pendant alarms (through Aid Call). Age Concern England's turnover in 2008 in the UK was just under £80 million. Of this, just over £33 million was attributable to commercial activities of the charity.

Aid Call was established in 1981 and was subsequently purchased by Age Concern England in 1998, becoming a wholly owned subsidiary. It supplies a variety of products and services to individuals and medical institutions which incorporate assistive technology and are intended to promote safer living primarily for the elderly. Aid Call's turnover was 8.7 million, of which £6.1 million relates to its personal pendant alarm business [see note 1] (the area of overlap).

Help the Aged is an international charity representing the interests of older people. They have over 350 charity shops (again, mainly in England), and supplies a variety of products and services aimed primarily at the elderly. Help the Aged's annual turnover for 2008 was over £74 million.

SeniorLink Eldercare is a Limited Liability Partnership (LLP) which was owned 50:50 by Help the Aged (via its subsidiary 'Intune Group Limited') and Eldercare. [see note 2]. The partnership was set up in August 2006 for a minimum period of five years. SeniorLink Eldercare is active in the provision of personal pendant alarms. The board of the LLP comprises two representatives from each party and profits are split 50:50 between them. The turnover of SeniorLink Eldercare was £3.2 million in the 11 months to March 2009, and the personal alarm business had a turnover of at least £1.2 million. [see note 3]. 

Age UK is the legal name which has been given to the new entity created by the merger of Age Concern England and Help the Aged (the Charities), although some integration of the Charities is in progress re-branding has not yet been undertaken and all the parties above currently operate under their existing names.

TRANSACTION

The Charities merged on 1 April 2009, creating four new national charities which will eventually operate under a new brand ('Age UK' being the current legal name of the merged entity) - one UK wide charity, with further charities covering each of Scotland, England and Wales.

The merger of the Charities was motivated by the desire to provide a more joined up lobbying and information point for older people and their carers. The bringing together of the Charities' respective pendant alarm businesses - the focus of this decision - was not a specific rationale of the overall merger, and could therefore in this sense be viewed as a by-product of the merger. The Charities have, however, stated that, post merger, they will be attempting to align as many of their commercial activities as possible. [see note 4] 

The transaction was notified to the OFT on 1 April 2009 and the extended administrative and statutory deadlines are 21 July 2009 and 11 September 2009 respectively.

JURISDICTION

As a result of the transaction, the Parties - SeniorLink Eldercare and Aid Call - have ceased to be distinct. The Parties have, as a result of the merger between Age Concern England and Help the Aged, both come under the 'common ownership and control' of the merged entity Age UK. The OFT believes that with a shareholding of 50 per cent and equal board representation with Eldercare, Help the Aged had, and now Age UK has, at least, the ability to materially influence [see note 5] the policy of SeniorLink Eldercare for the purposes of section 26(3) of the Enterprise Act 2002 (the Act).

The Act defines an enterprise as 'the activities, or part of the activities, of a business'. [see note 6]. This specifically includes any activity which is carried on for gain or reward or which is carried on by an undertaking in the course of which goods or services are supplied 'otherwise than free of charge'. This does not mean that the business must be profit making, and indeed, it can be 'not-for-profit'. [see note 7]. Internal documents from the Parties indicate that SeniorLink Eldercare and Aid Call were both (generally) operated in a commercial manner for gain and reward. While it is apparent that Help the Aged provided a certain proportion (around 60 per cent) of pendant alarms to SeniorLink Eldercare customers in England free of charge (in terms of initial outlay), these customers still needed to pay a quarterly monitoring charge. Although Help the Aged chose to 'gift' its share of the profits from its shareholding in Seniorlink Eldercare to the charity, the customer was charged a commercial rate for the service provided: the monitoring charge was set at a commercial rate comparable to that of other commercial providers of personal pendant alarm services. The OFT therefore concludes that the Parties' activities in relation to the supply of personal pendant alarms constituted part of a business and therefore were enterprises for the purposes of section 129 of the Act. [see note 8].

The Parties overlap in the supply of personal pendant alarms. Their combined share of supply in each of (a) Northern Ireland (NI), and (b) Great Britain (GB) in relation to the provision to private customers is estimated to be greater than 25 per cent in each case. [see note 9]. As a result the share of supply test in section 23 of the Act is regarded as being met.

The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.

THIRD PARTY VIEWS

Third Party views have already been discussed in other parts of the decision where appropriate. The majority of third party respondents were generally unconcerned about the transaction. One party had concerns focusing on the combined strength of the Parties in the charities sector.

ASSESSMENT

The Parties main area of overlap is in the provision of personal pendant alarms to individuals in GB and in NI which are considered separate markets. While there is some suggestion that the market within GB could be viewed from the demand side as being more local, the balance of the evidence indicates that it is more appropriate to consider the market as being GB wide.

Great Britain

While the Parties share some commonalities, in particular the backing and support of charities supporting the elderly, consideration of a range of factors, including pricing structures, routes to market and customer demographics all suggest that competition between them is muted.

Post merger the Parties will be constrained in GB by the presence of both other private providers and local authorities, most of which provide pendant alarm services, to some degree, to paying customers.

Moreover, SAGA has been able to enter the market in the last two to three years and is looking to expand its business. It predicts it will gain a similar number of new connections to SeniorLink Eldercare over the next year.

On the balance of all the evidence it has received, the OFT believes that there is no realistic prospect of a substantial lessening of competition arising in relation to GB.

Northern Ireland

In NI, the Parties have very high market shares in the supply of pendant alarm services to paying customers but, significantly, unlike in GB there is little or no local authority provision of such services. There is also a lack of strong competition from other sources, with only Fold Housing Association, and potentially to a much lesser extent several other smaller providers providing connections to individual customers. The evidence available to the OFT suggests that the prospects of new entry and/or potential expansion in NI are limited (more so than for GB).

While the OFT has considered that competition generally between the Parties is somewhat muted, it nevertheless has concerns that the complete removal of any such competition between the parties in NI raises a realistic prospect that prices for personal pendant alarms will rise or services deteriorate to individual customers.

Consequently, in relation to NI, the OFT believes 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 pursuant to section 22(2)(a) of the Act.

1. The OFT believes that this £6.1 million figure relates primarily to Aid Call's supply to private customers.
2. Eldercare is the trading name of New Church Housing Services Limited, a limited company business based in Manchester.
3. The OFT believes, based on what the parties have told us, that the £1.2 million figure relates to SeniorLink Eldercare's supply of personal pendant alarms to private customers and does not include revenue associated with the supply to either Housing Associations or Local Authorities.
4. Age UK will only control 50 per cent of the joint venture, with Eldercare controlling the other 50 per cent, so that any integration plan would necessarily require the approval of Eldercare as a pre-requisite.
5.The OFT has, for the purpose of simplicity of analysis in this decision, treated Age UK as if it had a controlling interest in Seniorlink Eldercare. The OFT's decision on reference in this case is not in fact impacted by the fact that SeniorLink Eldercare actually is also controlled by Eldercare.
6. Section 129(1) of the Act.
7. In OFT decision of 26 March 2002, Completed Merger between the Imperial Cancer Research Fund and Cancer Research Campaign, the OFT decided that charitable activities which involve the provision of goods and services free of charge fall outside the scope of the Act. In this case, the retailing activities of the Parties are for gain or reward, and so are within the OFT's jurisdiction.
8. The OFT was not aware of any other activities that would constitute parts of a business for the purposes of the Act other than pendant alarm services in relation to which competition concerns potentially arise as a result of the merger. Further, no other activities were mentioned in this respect by third parties during the OFT's investigation.
9. Although a completed merger, the OFT understands that the re-branding to Age UK is only in the process of being implemented and will not complete for some time. In the meantime, the Help the Aged and Age Concern brands will continue in existence. For this reason, the decision refers to Help the Aged and Age Concern in the present (and not the past) tense.

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