Anticipated joint venture between Menzies Distribution Limited and Eason and Son (NI) Limited

Affected market: Newspaper / magazine wholesaling

No. ME/2863/07

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 5 April 2007. Full text of decision published 18 April 2007.

PARTIES

Menzies Distribution Limited (Menzies), a wholly owned subsidiary of John Menzies plc, is the second largest wholesaler of newspapers and magazines in the UK. It operates throughout the UK as well as in County Donegal in the Republic of Ireland (RoI).

Eason and Son (NI) Limited (Eason), a wholly owned subsidiary of the Irish company Eason and Son Limited, operates four lines of business throughout Northern Ireland (NI) and RoI. These lines comprise: retailing of books, magazines and stationery; wholesaling of books; wholesaling of stationery; and wholesaling of newspapers and magazines. In NI, Eason retails books, magazines and stationery, and wholesales newspapers and magazines. Eason’s NI, and hence UK, turnover was £18.2 million in the year to January 2007.

TRANSACTION

Menzies and Eason intend to form a joint venture company called EM News Distribution (NI) Limited (EMND) to which each will transfer their wholesale newspaper and magazine distribution businesses in NI. EMND will be owned equally by Menzies and Eason (the Parties).

The Parties made an informal submission to the OFT on 2 February 2007. The OFT's administrative target date for announcing a decision was 30 March 2007.

JURISDICTION

The OFT 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. The Parties’ wholesale newspaper and magazine distribution businesses will come under common ownership in NI and the Parties’ combined share of supply of wholesale newspaper and magazine distribution in NI, a substantial part of the UK, exceeds 25 per cent, satisfying section 23 (2) (b) of the Enterprise Act 2002 (the Act).

THIRD PARTY VIEWS

Third party views have been discussed above. The majority of third parties were unconcerned or neutral on the proposed merger.

ASSESSMENT

The majority of third parties are unconcerned with the proposed merger. Although the Parties are close competitors both News Speed and WNS are sizeable competitors in NI in some wholesaling segments and are able to cover sub NI or all of NI publisher territories. The majority of third parties support the finding that News Speed and WNS will provide a sufficient competitive constraint to the Parties whether on a sub NI or on all NI publisher territory basis and that alternatives would also be available. Third parties also confirmed that switching is possible and has recently occurred. In addition, third parties submitted that large publishers have some degree of countervailing buyer power.

The OFT notes that although gaining distribution contracts sufficient to provide economies of scale and scope has been identified as the main barrier to entry in this case, third parties confirm that once obtained, the availability and costs of the remaining infrastructure required are unproblematic.

Finally, the OFT does not consider that that the merger will impact adversely on retailers. For those retailers which are currently customers of both Menzies and Eason (and so pay two sets of carriage charges), they will in future only deal with one, which may result in some savings in their carriage charges.

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.

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