Affected market: Pubs
Full text of the decision: Annexe 1
Undertakings in lieu of reference: Annexe 2
Undertakings acceptance decision
The OFT's decision on reference under section 22 given on 6 October 2004.
Greene King plc (Greene King) is an integrated brewer, beer distributor and pub company.
Laurel Pub Holdings Limited (Laurel) was a subsidiary of The Laurel Pub Company Limited, which in turn is owned by Morgan Grenfell Private Equity Limited. Laurel was a vehicle to enable the transfer of the 432 pubs that constitute the Neighbourhood division of The Laurel Pub Company Limited. The UK turnover attributable to Laurel for the year ended 29 February 2004 has been calculated as £235.4m.
Greene King has acquired Laurel. The parties notified the transaction to the OFT by a merger notice submitted on 9 July 2004. The parties withdrew the merger notice and the transaction completed on 6 August 2004.
As a result of this transaction Greene King and Laurel have ceased to be distinct. The UK turnover of Laurel 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.
By way of a decision of 9 August 2004 (the 'Decision') the OFT announced that, on the evidence available to it, the OFT believed that it may be the case that the merger may be expected to result in a substantial lessening of competition in the operation of pubs in seven petty sessional division (PSDs). For the reasons set out in the Decision, the OFT was concerned that the acquisition by Greene King of a number of pubs in these seven PSDs would create or increase a combined share of suppy of 25 per cent, such that the merger may give rise to less competition at the local level to offer customers value for money. A copy of the Decision is attached at Annexe 1 of this decision.
On this basis, the OFT decided that the merger would be referred to the Competition Commission unless Greene King gave suitable undertakings pursuant to section 73 of the Enterprise Act to address the competition concerns arising from the merger.
Greene King offered to give undertakings to divest 13 pubs in seven PSDs to a purchaser or purchasers to be approved by the OFT.
On 27 August 2004, the OFT published the proposed undertakings inviting interested parties to give their views on them to the OFT. The OFT did not receive any responses to suggest that the proposed undertakings were not appropriate to remedy, mitigate or prevent the competition concerns identified.
The merger would have been referred to the Competition Commission if Greene King had failed to give suitable undertakings pursuant to section 73 of the Act to address the competition concern outlined above. The OFT has decided to accept the proposed undertakings in lieu of reference as they address that competition concern.
This merger will therefore not be referred to the Competition Commission and the undertakings which have been signed by Greene King, a copy of which is attached at Annexe 2 of this decision, will come into effect from this date.