OFT closed case: Joint venture between Best Buy Co Inc and the Carphone Warehouse Group plc.
Affected market: Mobile phone retail
The OFT's decision on reference under section 33(1) given on 19 June 2008. Full text of decision published 3 July 2008.
Best Buy Co., Inc (Best Buy) is a specialist retailer of consumer electronics, home office products, entertainment software, appliances and related services. It operates stores and websites under a number of brand names. In the UK, Best Buy’s activities are limited to its investment in Geek Squad UK Limited (Geek Squad), a 50/50 joint venture with the Carphone Warehouse Group plc. Geek Squad's UK turnover for the financial year 2007/2008 was less than £2 million.
The Carphone Warehouse Group plc (CPW) is an independent retailer of mobile telephones and services, with over 2,400 stores in nine countries including the UK. The business which CPW will contribute to the joint venture (the Distribution Business) includes the sale of mobile handsets and similar devices; the entering into of air time contracts on behalf of mobile networks with non-business customers; the provision of insurance for mobile handsets, air time contacts and accessories; the Geek Squad joint venture with Best Buy Mobile; and a joint venture with Best Buy for mobile telephone retailing in certain Best Buy outlets in the US. For the year ended 31 March 2007, the UK turnover of the Distribution Business amounted to £2,306 million.
On 7 May 2008 the parties entered into a joint venture agreement through which the Distribution Business and CPW’s fixed line telecommunications businesses in Spain and Switzerland (together, the Joint Business) will be owned as to 50 per cent by each of Best Buy and CPW. The transaction is expected to complete by August 2008.
The transaction was notified to the OFT by way of an informal submission on 15 May 2008. The OFT’s administrative deadline to announce its decision is 18 July 2008.
As a result of this transaction Best Buy and the Joint Business will cease to be distinct.
The UK turnover of the Joint Business 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 arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation.
As discussed above, Best Buy’s activities in the UK are limited to its joint venture with CPW, Geek Squad. In the UK, there is no horizontal overlap between Best Buy and the Joint Business, nor are there any vertical links between them. None of the third parties contacted by the OFT disagreed with this proposition, and no third party raised any competition concerns about the merger.
Consequently, the OFT does not believe that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.
This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.