99/12    26 October 2012

The OFT is considering undertakings offered by Rexel UK Limited (Rexel) to sell branches in six local areas in order to remedy local competition concerns arising from its completed acquisition of the Wilts Wholesale Electrical Company Limited business (Wilts).

Rexel is one of the largest electrical wholesalers in the UK. It is part of a worldwide distributor of electrical products and has around 360 branches across the UK under the banners Newey & Eyre, WF Senate and Denmans. Wilts has around 60 branches in the southern half of the UK.

The OFT concluded that the merger did not give rise to competition concerns at a national level because Wilts did not have a national presence or customer base. The OFT's investigation also did not find competition concerns at a regional level, because in the main region of overlap, the South West of England, sufficient competitors would remain.

However, the OFT did find evidence that the merger could reduce competition in six local areas in England and enable the parties to raise prices or reduce quality, range or service to customers.

To resolve these competition concerns Rexel has offered undertakings to sell all of the seven Wilts branches in the six affected local areas. The OFT considers that it is appropriate in this case to require an upfront buyer to be identified before finally accepting undertakings from Rexel to sell these branches.

Ali Nikpay, OFT Senior Director and Decision Maker in this case, said:

'The OFT is concerned that in six local areas customers could face higher prices and a reduction in choice following this deal. Rexel has, however, offered to sell branches in these areas. If an appropriate buyer or buyers are found we believe that these disposals would solve the competition problems which our investigation identified.'

While the undertakings in lieu of a reference are being considered, the OFT's duty to refer the merger to the Competition Commission is suspended.

NOTES

1. 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 or will be created, and as applicable, 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.
2. Under the Enterprise Act 2002 a relevant merger situation is or will be created if two or more enterprises have ceased or will cease 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.
3. Section 73 of the Enterprise Act 2002 provides for the option of accepting undertakings, instead of making a reference, 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. The Act provides that for such a purpose, the OFT may 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 in particular 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. The OFT is required to consult publicly before accepting any such undertakings. 
4. Upfront buyer requirement - the OFT considered in this case that a necessary precursor to accepting undertakings in lieu is that the divestiture should be agreed up-front to a suitable buyer approved by the OFT. This means that the OFT consults publicly on the suitability of the proposed buyer, as well as all other aspects of the draft undertakings, during the public consultation period. 
5. The text of this decision will be placed in the mergers section as soon as is reasonably practicable.