Associated British Foods plc / Littlewoods stores
OFT closed case: Completed acquisition by Associated British Foods plc of Littlewoods stores.
Affected market: Clothing retail
No. ME/1838/05
The OFT’s decision on reference under section 22 given on 10 August 2005. Full text of decision published on 17 August 2005.
Please note square brackets indicate information replaced by a range at the request of the parties for reasons of commercial confidentiality.
PARTIES
Associated British Foods plc (ABF) is an international food, ingredients and retail group. It is present in high street clothing retailing in the UK through its chain of Primark stores.
Littlewoods Stores Holdings Limited and St James Street Properties Limited (together Littlewoods) are companies previously owned by LW Finance Limited. Littlewoods comprises 120 Littlewoods stores in high street locations across the UK. Littlewoods' UK turnover in the financial year ending 30 April 2005 was [ ] million.
TRANSACTION
ABF acquired the entire issued share capital of Littlewoods on 29 July 2005. The assets and business of Littlewoods mainly consist of 120 retail high street clothing stores operating under the Littlewoods brand. The home shopping activities of Littlewoods were excluded from the acquisition. The transaction was notified to the OFT on 12 July 2005 and the administrative deadline in this case expires on 7 September 2005.
JURISDICTION
As a result of this transaction ABF and Littlewoods have ceased to be distinct. The UK turnover of Littlewoods exceeds £70 million, so the turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act) is satisfied. The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.
RELEVANT MARKET
The activities of the parties overlap in the supply of retail clothing through high street stores, specifically womenswear and menswear.
Product market
The parties submit that the relevant product market is the retail market for clothing. In our view, this market can be segmented into womenswear and menswear, but given the parties' low share of supply and the small increment resulting from the transaction, this does not affect the substance of the decision.
Geographic market
According to the parties, the geographic market for retail supply of clothing is national in scope. In our view, there are both national and local aspects of competition in retail mergers. We have therefore examined the effect of the transaction on a national as well as local level.
HORIZONTAL ISSUES
Market shares
The parties estimate that their combined share of supply at a national level for retail clothing sold in the high street is approximately [less than 10] per cent (increment of around [less than 2] per cent). Therefore no competition concerns arise at a national level.
There are 38 towns or cities in the UK where there is a Littlewoods store as well as a Primark store (see [note 1]). The information submitted by the parties indicates that a considerable number of significant competitors operate in each of the overlapping locations (see [note 2]). On that basis, competition concerns do not arise at a local level.
Barriers to entry and expansion
Given the lack of horizontal issues in this case, barriers to entry have not been considered.
Buyer power
Buyers are individual consumers who do not have countervailing buyer power.
VERTICAL ISSUES
This transaction does not give rise to vertical competition issues.
ASSESSMENT
The activities of the parties overlap in the supply of retail clothing sold on the high street. At a national level, competition concerns do not arise due to the parties' low share of supply post-merger and the insignificant increment. There are no concerns at a local level because in each location of overlap, a significant number of competitors remains post-merger.
Consequently, the OFT does not believe that it is or may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.
DECISION
This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.
NOTES
- It is noted that ABF may in due course dispose of stores in some of the overlapping locations.
- The following significant competitors were included in the local analysis: [list of at least eight named competitors].