Affected market: Retail of Children's toys and games
The OFT's decision on reference under section 22 given on 12 May 2004.
Eagle Retail Investments Ltd (Eagle) is a newly incorporated
company. The principal shareholders in Eagle Retail Investments Limited
include DC Thomson & Co Ltd and other investors, and a management
team including Tim Waterstone. Chelsea Stores Ltd, a subsidiary of
Eagle (see [note 1]), is a retailer of children's toys, clothes
and shoes, and nursery products through five retail outlets under the
name of 'Daisy and Tom'. DC Thomson & Co Ltd is a publisher of
newspapers, magazines and comics. It is not active in the manufacture or
retail of children's toys.
Early Learning Holdings Ltd (ELH) is the parent company of Early
Learning Centre (ELC). ELC manufacture and retail children's toys in
the UK. ELH reported a UK turnover of £164.7 million for the year ending
3 May 2003.
Eagle acquired 100 per cent of the issued share capital of ELH on 2
April 2004. The transaction was notified on 13 April 2004. The statutory
deadline expires on 1 August 2004 and the 40 day administrative deadline
is 10 June 2004.
As a result of this transaction Eagle and ELH have ceased to be
distinct. The UK turnover of ELC exceeds £70 million, so the turnover
test in section 23(1)(b) of the Enterprise Act 2002 (the Act) is
satisfied. A relevant merger situation has been created.
The parties overlap in the supply of children's toys and games in the
UK. ELC and Chelsea Stores are active in the retailing of traditional
toys and games in the UK. This segment was estimated by Keynote Limited
to be worth approximately £2.0 billion per annum, of which the
pre-school sector accounts for some 60 per cent. These figures exclude
the electronic games, video and book segments, which are estimated to be
worth a further £1.6 billion.
ELC is active in the 0-6 years pre school toy sector. NPD Consumer Panel
data estimates that ELC's share of supply of the total UK toy retail
sector for the year to December 2002 was approximately 8.6 per cent and
that its share for the 0-6 years pre school toy retail sector for the
same period was 13.2 per cent.
Chelsea Stores share of supply for the retail sales of toys in the UK is
estimated to be less than 1 per cent. Its sales of children's clothes
are estimated to be less than 0.1 per cent of the total supply UK
clothes and shoes.
Barriers to entry and expansion
Barriers to entry at retail level are considered to be low, particularly
given the emergence of supermarkets selling children's toys and, over
the last decade, the development of toy superstores.
The main customers are consumers, who do not have any individual buyer
ELC manufactures own brand toys, sales of which account for some [ ]
per cent (see [note 2]) of its turnover. NPD Consumer Panel data
estimates that ELC's share of supply in the UK pre-school market,
expressed as a manufacturer, was 11.5 per cent for 2002. Given this low
share of supply, no increment and lack of concern from third parties,
vertical issues are negligible.
THIRD PARTY VIEWS
Of the third parties' contacted – both customers and competitors – none
raised any concerns about the merger. The Consumers Association viewed
it as being positive.
Given the parties relatively small shares of supply, 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.
This merger will therefore not be referred to the Competition Commission
under section 22(1) of the Act.
1.Ownership of Chelsea Stores was transferred to Eagle on 2 April 2004.
Previously, it had been partially owned by Tim Waterstone, DC Thomson
and other investors.
2. Actual figures replaced by a range, or deleted for reasons of