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OFT welcomes CAT judgment on Celesio judicial review

85/06    10 May 2006

The OFT welcomes the judgment given yesterday by the Competition Appeal Tribunal (CAT) on the judicial review application brought by Celesio AG against the OFT's decision on the merger involving Boots Group plc and Alliance UniChem plc.
 
On 6 February 2006 the OFT decided to negotiate undertakings instead of referring the Boots / UniChem merger to the Competition Commission. The CAT unanimously dismissed Celesio's application for review of this decision. Therefore, the OFT's decision on the merger stands.
 
The Enterprise Act 2002 provides for the OFT to obtain and review information relating to merger situations in the UK. In the case of anticipated or completed mergers, the OFT can negotiate undertakings in lieu of a reference to the Competition Commission where it considers that there are competition concerns resulting from the merger. In this case, the OFT considered that the anticipated Boots/Unichem merger raised the realistic prospect of a substantial lessening of competition in the supply of retail pharmacy services in certain localities in the UK. Boots and Unichem have indicated that they would be prepared to offer undertakings that would address the competition concerns raised by the merger. The consultation process on the draft proposed undertakings is currently underway.
 
Welcoming the judgment, John Fingleton, OFT Chief Executive, said:
 
'We are immensely pleased that the CAT has upheld our decision in this case. The OFT carried out a thorough analysis of the case and carried out a detailed consultation before coming to its decision. The CAT has upheld that decision and the analysis on which it is based. This decision shows that the UK merger review regime can deal with even complex cases without a reference to the Competition Commission.'

NOTES

1. 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.

2. 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.

3. 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.

4. 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.
 
5. On 21 March 2006 Celesio AG applied for judicial review of the OFT's 6 February 2006 decision on the anticipated acquisition by Boots Group plc of Alliance UniChem plc. The OFT's decision is available from the mergers area of this website. 

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