Anticipated acquisition by West Corporation of Genesys S.A.

Affected market: Conferencing services

No. ME/3544/08

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 views, assessment and decision.

The OFT's decision on reference under section 33(1) given on 18 April 2008. Full text of decision published on 1 May 2008.

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

PARTIES

West Corporation (West) is a US corporation operating mainly in the US but also with activities worldwide, including the UK. It provides, among other things, audio, video and web conferencing services on a global basis through its InterCall subsidiary.

Genesys S.A. (Genesys) is a French Société Anonyme (a form of limited liability stock company). It offers various audio, web and video conferencing services worldwide. Trained coordinators can additionally be hired to manage conferencing at large or high profile events. In the year ending December 2006, Genesys generated UK turnover in the amount of £[ ].

TRANSACTION

West proposes to acquire Genesys by means of a public offer under French law. The parties plan on completing the transaction on or around 15 May 2008.

An informal merger submission was received from West on 21 February 2008 and the OFT's administrative target date to announce its decision is 18 April 2008.

JURISDICTION

As a result of this transaction West and Genesys will cease to be distinct.

The parties overlap in the supply of conferencing services, namely audio conferencing, video conferencing and web conferencing services. In relation to each of audio conferencing and video conferencing services in the UK, the parties' combined share of supply exceeds 25 per cent. Therefore, 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 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

The OFT contacted customers and competitors of the merging parties. Amongst the 11 customers from whom the OFT received responses, there were generally no concerns about the transaction. The OFT sought views from both large and small customers, for each of audio, web and video conferencing services. A number of customers considered that the merger will be pro-competitive. Amongst six competitor respondents, two expressed concerns over the economies of scale which will be achieved by the merged entity. Otherwise, the vast majority of third parties expressed little or no concerns with regard to the proposed transaction. Any concerns that were expressed by third parties have been addressed in the OFT's analysis.

ASSESSMENT

The parties overlap in the provision of conferencing services, which comprise audio conferencing, web conferencing and video conferencing services. The OFT has considered the impact of this transaction on each of these segments as well as the market for conferencing services as a whole in the UK. The parties submitted that the geographic market was likely to be wider than national. Given the lack of competition concerns on even the narrow UK basis, the OFT does not consider it necessary to conclude on the exact scope of either the product or the geographic market in this case.
 
In relation to audio conferencing services, the merging parties will face competitive constraints from a significant number of alternative providers. This competition comes from telecommunications companies such as BT, Verizon and AT&T, dedicated conferencing service providers such as Premiere, Arkadin, ACT and Conference Plus, as well as a number of newer entrants into the sector. Comments from third parties indicate that the costs of entering the audio conferencing market are not high and customers declared themselves to be willing to switch in the event of a small but significant price rise by their current supplier ([ ]). The OFT found that there had been significant entry in recent years by specialist companies such as MeetingZone, Ring2 Conferencing, Aduno Teleconferencing Services and PowWowNow.

In the web conferencing sector, as well as competition from telecommunications companies, established dedicated conferencing service providers and new entrants into the market, the parties also compete against large software companies including WebEx (Cisco) and Microsoft. The evidence before the OFT indicates that the costs of entering the market are not such as to deter entry and this is confirmed by the fact that there has been new entry into this sector in recent years.

The available evidence indicates that both audio and web conferencing services in the UK are expanding sectors and consequently will be attractive to future potential entrants. Third parties did not raise any significant concerns about the impact of the transaction on the audio and web conferencing sectors. Given the competitive constraints which the parties will face in each of the audio and web conferencing segments from existing competitors, as well as the apparent ease of entry into the market, the OFT concludes on the basis of the evidence available that no competition concerns arise in these segments as a result of this merger.

As regards video conferencing services, the parties will combine to form the second largest competitor in the UK market after BT. Evidence from third parties indicates that the costs of entering the market for video services may be higher than those for entering audio and web conferencing. The OFT has seen no evidence of entry into the video segment in recent years and considers that, in the absence of significant growth in this segment, it is less attractive to potential new entrants. However, the available evidence indicates that the merged entity will continue to face competition from a number of other capable video conferencing service providers, including BT, Wire One, ACT, Global Crossing and Verizon. This continuing level of competition, combined with the fact that the OFT received no indication from third parties that the transaction would have a negative impact on this sector, leads the OFT to conclude that no competition concerns arise in relation to video conferencing as a result of this merger.

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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