OFT clears Nike's acquisition of Umbro

8/08 16 January 2008

The OFT today cleared the anticipated acquisition by Nike, Inc (Nike) of Umbro plc (Umbro).

The OFT has decided that the merger raises no competition concerns in any market. In the UK, Nike and Umbro overlap in the supply of athletic apparel (including replica football kit), sports footwear (football boots and trainers) and sports equipment, and both also bid to secure kit deals with football teams. In most sectors, the parties' shares are low.

While the parties do have a high combined market share - over 45 per cent - in replica kit sales, the OFT found that this overstates rivalry between them. Club kits and England kits are not significant competitive alternatives, and Umbro's leading position is principally based on its England kit deal, while Nike's sales derive from its club kit deals.

Kit sales directly reflect the relative success of suppliers in securing kit deals with various European football teams, and bidding data shows that the parties, with a combined share of around 26 per cent, have not been closely competing bidders, while football teams have considerable strength in negotiating these deals.

The OFT also considered the issue of collusion. In 2003, the OFT fined Umbro and other members of a price-fixing cartel in replica football kit around the time of Euro 2000, leading to a substantial fall in retail prices paid by football fans. However, merger analysis is forward-looking and the OFT has ruled out concerns that placing Umbro under Nike's control would make tacit or explicit collusion between rivals more likely post-merger.

Chris Walters, Assistant Director of Mergers at the OFT, said:

'Our principal focus was replica kits, not least given Nike's high post-merger share. But as market share is only a starting point, we went on to conduct quantitative analyses due to a wealth of data provided by the parties and other market participants. This confirmed other evidence that the merger will not harm competition at any level of the sportswear supply chain.'

NOTES

1. In 2007 the House of Lords rejected the appeal by some of the retailers against this decision (see press release 17/07), which the Court of Appeal had upheld (see press release 149/06). See also the original OFT decision (press release 107/03).

2. The Reference Test - the OFT has a duty to make a reference to the Competition Commission 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 full text of this decision will appear in the mergers section.

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