Anticipated acquisition by DCC plc of CPL Petroleum Ltd

Affected market: Oil distribution

No. ME/3186/07

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 24 August 2007. Full text of decision published on 4 September 2007.

Please note that 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

DCC plc (DCC) is a procurement, sales, marketing, distribution and business support services group. DCC has five core businesses: DCC Energy, DCC SerCom, DCC Healthcare, DCC Food and Beverage and DCC Environmental. DCC Energy distributes liquefied petroleum gas (LPG) and oil products in Great Britain & Ireland. GB Oils Limited (GB Oils) is DCC's oil distribution business in Great Britain. It distributes oil products to domestic, commercial, industrial and agricultural customers in GB.

CPL Petroleum Ltd (CPL) is a distributor of oil products and is wholly owned by CPL Industries Holdings Ltd, a privately owned company. The turnover of CPL for the financial year ending 31 March 2007 was £418 million.

TRANSACTION

DCC proposes to acquire 100 per cent of the issues share capital of CPL for a consideration of £50 million on a debt free/cash free basis. The transaction was notified by way of a merger notice on 27 July 2007. The statutory deadline expires on 24 August 2007.

JURISDICTION

As a result of this transaction DCC and CPL will cease to be distinct. The UK turnover of CPL 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

We contacted several competitors located across England and Wales and the majority that responded stated that customers can and do switch regularly if prices increase and that there would be no cost to switching supplier. Similarly, the majority of customers in England and Wales considered switching to be relatively easy.

The vast majority of customers and competitors considered that local and regional suppliers compete effectively with national providers and that national customers can and regularly do split their contracts between a number of suppliers.

We also contacted competitors and customers in Scotland. No competitors raised concerns in relation to Scotland including the Highlands & Islands. Of those serving central and southern Scotland, one stated that customers regularly switch supplier for as little as a 0.1 per cent differential in price.

Customer comments in relation to Scotland were more mixed, however, and two customers raised concerns. They considered that if prices increased they would switch suppliers but were concerned that the market is already quite small and the merger would limit competition further. Whilst they considered that switching suppliers was an option, it would be costly in terms of time spent conducting a tender exercise and that the merger would reduce their ability to negotiate. In contrast, the other customers we spoke to had no concerns and considered there to be lots of independents they could use.

ASSESSMENT

The parties overlap in the supply of heating oils and transport fuels in GB. Their combined share of supply will not exceed 10 per cent on a national level and 22 per cent in any of the four areas identified. No competitors raised concerns in relation to the acquisition generally or in relation to any specific localities within England & Wales. The few concerns raised by consumers in relation to competition in Scotland, and specifically the Highlands & Islands, were considered but analysis found that post-merger a number of strong competitors will remain. The OFT does not, therefore, believe that the merger will result in a substantial lessening of competition in any market in Scotland.

On the basis of the number of other suppliers, the ease of switching and the lack of third party concerns, 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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