Completed acquisition of the members’ agency business of Christie Brockbank Shipton Private Capital Limited by Hampden Agencies Limited

Affected market: Members' agency services to members of Lloyd's of London

No. ME/2437-06

Please note that the full text of the decision can be downloaded by using the link on the right of this page. 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 14 July 2006. Full text of decision published 11 August 2006.

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

PARTIES

Hampden Agencies Limited (Hampden) is the largest members' agent at Lloyd's of London (Lloyd's). It is wholly owned by Hampden Holdings Limited. Hampden's UK turnover for the financial year to 31 December 2005 was approximately £15.5 million.

Christie Brockbank Shipton Private Capital Limited (CBSPC) was, prior to the transaction, the third largest members' agent at Lloyd's. It is wholly owned by Christie Brockbank Shipton Insurance Holdings plc (CBSIH). CBSPC's UK turnover for the financial year to 31 December 2005 was approximately £5.5 million.
 
TRANSACTION

Hampden acquired CBSPC's members' agency business (CBS) on 1 April 2006. Post-merger, CBSIH is concentrating its business activities on the management of its own corporate underwriting vehicle, Insurance Capital Partners LP.

Hampden notified the transaction on 12 May 2006 and the statutory deadline for consideration is 31 July 2006.

JURISDICTION

As a result of this transaction, Hampden and CBS have ceased to be distinct. Hampden and CBS overlap in the supply of members' agency services to members of Lloyd's and the share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met as their combined share of the supply of members' agency services to members of Lloyd's exceed 25 per cent as a result of the merger. The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.

THIRD PARTIES

A number of customers were concerned and believed that the merger would reduce their degree of choice. Customers and other third parties also expressed concerns that post-merger Hampden will be able to increase price or reduce quality of service. These concerns have been considered above in the non-coordinated effects section.

One customer raised the concern that a reduction in the number of members' agents may increase the possibility of coordination between the two remaining competitors. This concern has been addressed above in the coordinated effects section.

Some third parties raised a concern that post-merger Hampden will have a much wider scope for influencing managing agency's fees, voting arrangements or the conduct of syndicates by threatening to starve them of capital. The OFT has not reached a conclusion on this issue, as the reference test is met in respect of the non-coordinated effects described above.

ASSESSMENT

The parties overlap in the supply of members' agency services to members of Lloyd's. The transaction has brought together the first and third largest members' agents at Lloyd's and reduced the number of competitors from three to two.

There is evidence that pre-merger Hampden and CBS were competing on price and non-price factors for both active and newly admitted members of Lloyd's. This competition will be lost as a result of the merger, which has led to customers expressing concern. In the view of the OFT, Hampden may not be sufficiently constrained by Argenta, the remaining competitor, other intermediaries, Lloyd's corporate underwriting vehicles or existing Lloyd's regulation. Indeed it is possible that the regulatory environment may give rise to barriers to market entry. As a result, the OFT believes that Hampden may be able to profitably increase fees or reduce quality of service to a greater degree than it otherwise would have been able to absent the merger.
 
Consequently, the OFT believes that it is or may be the case that the merger has or may be expected to result in a substantial lessening of competition in the supply of members' agency services to members of Lloyd's.

DECISION

Despite the fact that this is a completed merger and that the businesses of Hampden and CBS have to a large extent already been integrated, the OFT remains under a duty to refer the merger where it 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.

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

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