Completed acquisition by Interfloor Limited of Stikatak Limited

Affected market: Flooring accessories

No. ME/3666/08

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 comments, assessment and decision.

The OFT's decision on reference under section 22(1) given on 23 July 2008. Full text of decision published 31 July 2008.

PARTIES

Interfloor Limited (Interfloor) is primarily a supplier of carpet underlay but is also a manufacturer, importer and distributor of flooring accessories - mainly for carpet but also for vinyl, wood and laminate.

Stikatak Limited (Stikatak) is a manufacturer, importer and distributor of flooring accessories, primarily for carpet but also for other types of flooring including, vinyl, wood and laminate. Stikatak's turnover during the year ending December 2007 was £14.5 million.

TRANSACTION

Interfloor has acquired the entire issued share capital of Stikatak. The transaction completed on 7 April 2008.  The parties notified the merger to the OFT on 15 May 2008. The extended administrative target date and the statutory deadline for the OFT's decision are 23 July 2008 and 11 August 2008 respectively.

JURISDICTION

As a result of this transaction Interfloor and Stikatak have ceased to be distinct. The parties' overlap in the UK supply of carpet gripper amounts to a combined share of around [75-85] per cent. Consequently 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.

THIRD PARTY COMMENTS

The OFT directly approached 30 customers and received comments on the merger from a total of 13, the majority of whom were unconcerned. Three customers raised concerns with regard to the reduction in the number of competitors. These concerns have been addressed in the context of this decision.

The OFT also spoke to 11 competitors, three of whom raised concerns. One considered itself to be a specialist provider of metal edging who perceived an increasing trend for customers to procure all their carpet accessories from one single source. That third party felt that the merger would make it easier for Interfloor (as a volume supplier of carpet edging) to expand into that third party's niche products than it would be for itself to expand into volume supplies. The evidence before the OFT, however, indicates a preference amongst some customers for a consolidated supply base offering a 'one-stop shop'. The OFT therefore considers that any expansion by the merged entity along the lines proposed by the third party would be driven by demand, and would not of itself raise competition concerns. Another competitor submitted that Interfloor's 'Gripperrods' range may give Stikatak products extra competitive edge if similarly branded. Such a concern was not raised by any customers, and so the OFT can attribute only limited weight to such a speculative theory of harm. Finally a third competitor (who sourced product from the merging parties) also raised concerns as to the reduction in the number of suppliers, and these have been addressed above. 

ASSESSMENT

The parties overlap in the supply of carpeting accessories, including flooring tapes, flooring tools, carpet gripper and metal edging.

On the basis of the parties' combined shares of supply and third party comment, the OFT has assessed the impact of this merger in detail on the carpet gripper and metal edging segments only.

In carpet gripper, the parties' combined share of supply amounts to some [75-85] per cent. However, taking account of evidence of a continual decline in the parties' combined share of supply, customers' ability to switch to alternative UK suppliers and low barriers to market entry and expansion through imports of the product, the OFT considers that this merger does not lead to a substantial lessening of competition in the supply of carpet gripper in the UK. 

In metal edgings, the parties' combined shares of supply are approximately [40-50] per cent. On the basis of customers' ability to switch to alternative UK suppliers and the evidently surmountable barriers to market entry and expansion through imports, the OFT considers that this merger does not lead to a substantial lessening of competition in the supply of carpet gripper in the UK.

Consequently, the OFT does not believe 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 under section 22(1) of the Act.

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