Completed acquisition by Thermo Electron Manufacturing Limited of GV Instruments Limited

Affected market: Mass spectrometers

No. ME/2669/06

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 15 December 2006. Full text of decision published 10 January 2007.

PARTIES AND TRANSACTION

Thermo Electron Manufacturing Limited (Thermo) is a subsidiary of U.S.-based Thermo Electron Corp., a worldwide supplier of various analytical instruments, scientific equipment, services, software solutions and consumables. It provides instruments for a variety of manufacturing processes and in-the-field applications, including mass spectrometry. Thermo's worldwide turnover for the financial year ended 31 December 2005 was approximately $2.6 billion.

GV Instruments Ltd (GVI) is a UK company and worldwide supplier of a range of mass spectrometers. It sells mass spectrometry instruments, spare parts, services and upgrades. Its total UK turnover for the financial year ending 28 February 2006 was less than £70 million.

Thermo acquired the entire issued share capital of GVI on 20 July 2006.
 
JURISDICTION

As a result of this transaction Thermo and GVI have ceased to be distinct. The parties overlap in the supply of Isotope Ratio Mass Spectrometers (IRMS) with UK shares of supply in Gas IRMS of between 94 per cent and 97 per cent, 100 per cent in Thermal Ionization Mass Spectrometers and 60 per cent in Multicollector-Inductively Coupled Plasma-MS respectively.

The share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met. The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.

UNDERTAKINGS IN LIEU

Where the duty to make a reference under section 22(1) of the Act applies, pursuant to section 73(2) of the Act the OFT may, instead of making such a reference, and for the purpose of remedying, mitigating or preventing the substantial lessening of competition concerned or any adverse effect which has or may have resulted from it or may be expected to result from it, accept from such of the parties concerned undertakings as it considers appropriate.

The OFT has therefore considered whether there might be undertakings in lieu of reference which would address the competition concerns outlined above. The OFT's Mergers Substantive Assessment Guidance states that, 'undertakings in lieu of reference are appropriate only where the competition concerns raised by the merger and the remedies proposed to address them are clear cut, and those remedies are capable of ready implementation.'

Thermo offered assurances that it would continue to maintain after sales service facilities for GVI customers. It also submitted that it did not have the intention to discontinue GVI's Gas IRMS product. However, these proposed undertakings do not restore competition between independent suppliers of IRMS and do not address the competition concerns identified.

ASSESSMENT

The parties overlap in the supply of IRMS products in the UK, in particular in Gas IRMS, TIMS and MC-ICP-MS. As a result of the transaction, the merged entity holds a monopoly or near monopoly share of between 94 per cent and 97 per cent in Gas IRMS, 100 per cent in TIMS and 60 per cent in MC-ICP-MS respectively. Neither entry or buyer power alleviate the concerns raised by this degree of concentration. Indeed, a large majority of third party respondents were concerned about this transaction and submitted that they expect it to impact adversely on competition.

As a result, the OFT believes that with the loss of GVI as its main competitor Thermo may post-merger have the incentive to raise prices, decrease product or service quality and diminish its rate of innovation.

However, the OFT has concluded that the typical benchmark against which merger effects are assessed – prevailing conditions of competition – is inappropriate here, because Thermo has provided sufficient compelling evidence that GVI would have exited regardless of the merger. Given GVI's position, the question therefore is whether there may be a less anti-competitive alternative to the merger or whether competitive harm would have occurred in any event.

On this critical question, the OFT has not been able to conclude that there was no realistic prospect of an alternative buyer whose purchase of the business or its assets would represent an outcome significantly better for competition than the sale to Thermo.
 
In the absence of sufficient compelling evidence that a better outcome for competition than the merger could not have been achieved, the OFT is under a duty to refer this transaction pursuant to Section 22(1) of the Act.

Consequently, the OFT believes that it is or may be the case that the merger has resulted in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore be referred to the Competition Commission under Section 22(1) of the Act.

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