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OFT refers North London cinema merger to Competition Commission

37/08    17 March 2008

The OFT has today referred to the Competition Commission (CC) the anticipated acquisition by CineWorld Group Plc of the cinema business at the Hollywood Green Leisure Park, Wood Green, previously operating under the Showcase brand.

The OFT has decided that the merger is likely to substantially lessen competition between cinemas in the relevant North London area centred on Wood Green, worth over £15m in box office revenues annually. The two merging cinema businesses are located only a few hundred yards from each other, and while there will be two rival operators in the relevant market post-merger, their relative proximity and consumer switching evidence demonstrate that the parties are by far each other's closest competitors, facing much weaker competitive pressure from rivals, and possible new entrants.

Simon Pritchard, OFT Senior Director of Mergers, said:

'This local merger, while small, matters to the relevant London consumers from whom we received unsolicited complaints. Close competition between the parties in Wood Green has contributed to some of the lowest ticket prices in London, and we have unusually clear evidence that the rivalry lost by the merger would make it profitable for CineWorld to charge local cinema-goers significantly more. As such, we have little doubt that the merger substantially lessens competition, and merits consideration afresh by the CC.'

The CC is expected to report by 29 August 2008.

NOTES

1.  The acquisition is formally by CineWorld's UK subsidiary, Cine-UK.

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. 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.

4. The full text of the decision will appear in the mergers section.

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