OFT considers undertakings in lieu of reference in Lloyds/IPCC pharmacy merger

81/07 8 June 2007

The OFT has decided today not to refer the anticipated acquisition by Lloyds Pharmacy Limited (Lloyds) of Independent Pharmacy Care Centres plc (IPCC) to the Competition Commission, provided that satisfactory undertakings to address the competition concerns arising from the supply of retail pharmacy services in certain localities in the UK are given. If the parties do not give such undertakings, then the transaction will be referred.

Simon Pritchard, Director of Mergers, said:

'The OFT has competition concerns in four areas in which consumers will face a so-called '3 to 2' reduction in choice of community pharmacy in a given one mile area. However, Lloyds has offered to divest relevant pharmacies, which if transferred to suitable purchasers, would restore competition and consumer choice to its pre-merger level. Accordingly, the OFT has suspended its duty to refer under the undertakings in lieu procedure - the first time it has done so on a fast-track statutory timetable. Although these undertakings will address the effects of the merger, we reiterate that there is a strong case on behalf of consumers for the government to reconsider its restrictions on new entry into this sector.'

NOTES

1. See press release 23/06 and statement by John Fingleton, Chief Executive, OFT.

2. The 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 arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and the creation of that situation 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. Under section 73 of the Enterprise Act 2002 the OFT may, instead of making a reference, and for the purpose of remedying, mitigating or preventing the substantial lessening of competition concerned, or any adverse effect which has or may have resulted from it or may be expected to result from it, accept from such of the parties concerned as it considers appropriate undertakings to take such action as it considers appropriate. In doing so, the OFT will have regard to the need to achieve as comprehensive a solution as is reasonable and practicable to the substantial lessening of competition and any adverse effects resulting from it.

5. Before accepting any such undertakings under Schedule 10 of the Enterprise Act 2002, the OFT shall give notice of the proposed undertakings and will consider any representations made in accordance with that notice.

6. The text of this decision will be published in the mergers section as soon as is reasonably practicable.

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