OFT refers cinema merger to the Competition Commission

176/05 23 September 2005

The OFT today referred the completed acquisition of Vue Entertainment Holdings (UK) Limited of A3 Cinema Limited (including its subsidiary, Ster Century (UK) Limited) to the Competition Commission (CC).

The OFT has decided that the test for reference is met in relation to the supply of cinema exhibition services in Basingstoke and Romford, on the basis of concerns that the combination of the Vue and the Ster Century cinema chains in these areas may be expected to lead to a substantial lessening of competition to the detriment of cinema-goers. Concerns were also raised in relation to Leeds.

The OFT has decided that the parties have not given satisfactory divestment undertakings to address all the competition concerns arising from the merger and, therefore, that the transaction will be referred to the CC.

Sir John Vickers, OFT Chairman, said:

'Recent cinema merger cases where local competition concerns were found to exist were not referred to the CC because the parties offered to divest cinemas to meet all such concerns. In this case, however, the parties have not offered divestments that meet all concerns, so the merger needs full investigation by the CC.'

The CC is expected to report by 9 March 2006.

NOTES

1. Recent cinema merger cases examined by the OFT include the acquisition by Terra Firma Investments (GP) 2 Ltd of United Cinemas International (UK) Limited and Cinema International Corporation (UK) Limited (see press release 03/05), and the acquisition by the Blackstone Group of UGC Cinemas Holdings Limited (see press release 78/05).

2. Reference Test — The OFT has a duty to make a reference to the CC if the OFT believes that it is or may be the case that a relevant merger situation has been created; and the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.

3. Under the Enterprise Act 2002 a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million; or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced.

4. The CC may extend the 24 week period within which it is required to publish its report by no more than eight weeks if it considers that there are special reasons why the report cannot be published within that period.

5. The text of this decision is available from the Mergers section.

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