Affected market: Marketing and communication services
The OFT’s decision on reference under section 33 given on 26 May 2005.
Full text of decision published 3 June 2005.
Huntsworth plc (Huntsworth) is a public relations-focused marketing
services group with 46 offices in 11 countries worldwide. In the year
ending 31 December 2003 Huntsworth had a UK turnover of £23.3 million.
Incepta Group plc (Incepta) is an international marketing and
communications group with 79 offices across 20 countries. In the year
ending 29 February 2004 Incepta had a UK turnover of £133.9 million.
This transaction is being implemented by means of a recommended share
for share offer for 100 per cent of the share capital in Incepta. The
parties notified the OFT on 15 April 2005. The statutory deadline
expires on 27 May 2005.
As a result of this transaction, Huntsworth and Incepta will cease to be
distinct. The UK turnover of Incepta exceeds £70 million, so the
turnover test in section 23(1)(b) of the Enterprise Act 2002 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.
The parties overlap in the supply of marketing communications services,
including segments involving information and consultancy; public
relations; identity and design; healthcare and specialist communication
The parties, and some third parties, endorse the view taken by the
European Commission in its recent decisions (see [note 1]) that
all segments of marketing communications services should be categorized
within the same product scope. However, many customers saw the purpose
of each campaign as dictating the choice of segment or segments in
combination. This suggests little demand side substitutability between
segments, and although third parties generally supported Huntsworth’s
belief that there was supply side substitutability between segments,
there was no evidence as to ease and speed as to which switching could
occur. Within a segment such as public relations, the parties argued
that there was supply side substitutability between different customer
sub-segments (e.g. financial, corporate, consumer, public affairs,
integrated healthcare and technology public relations sectors) as
switching was easy and swift. As the outcome of the competition
assessment is the same whichever product frame of reference is used, the
merger is examined with regard to (i) marketing communication services
as a whole and; (ii) specific marketing communication service segments
where the parties overlap.
The supply of both marketing communication services and specific
marketing communication service segments would appear to be at least
national, as concluded by the parties, third parties and in previous
European Commission decisions. This is due to such factors as language
differences, differing media conditions and pricing differences across
various countries, as well as different national reporting requirements.
However, some third parties pointed out that customers may require
suppliers who operate at a European or international level, and not all
suppliers active on a national level will be able to provide services on
an international scale. A cautious view has therefore been taken and
both national and international frames of reference are considered.
In marketing communication services, the merged entity will face five
major international competitors post-merger: WPP, Omnicom, Interpublic,
Publicis and Havas (see [note 2]). On a narrower, national
frame of reference, the parties estimated their combined share at less
than 10 per cent. Third parties have raised no concerns and in the main
viewed this industry as highly fragmented and dynamic, pointing
particularly to the presence of numerous national suppliers post
In considering the narrower service segments comprising marketing
communication services, there is only a minimal overlap in information
and consultancy, identity and design, healthcare and specialist
communication services, and public relations. In the case of information
and consultancy, Huntsworth is active only in healthcare research, where
Incepta has no presence. In the remaining segments the parties estimate
their combined share as no more than 10 per cent on a national or
international basis. The highest share of supply figures are in public
relations, where post transaction there will remain the five major
competitors identified above.
Third parties raised no concerns in relation to these segments. Many saw
the public relations segment in particular as fragmented, dynamic and
allowing customers to switch easily, with the parties aiming at
different types of customer.
Barriers to entry and expansion
Huntsworth submits that barriers to entry are low and suppliers are able
to expand their businesses quickly and easily either through the
recruitment of new personnel or the development of the business into new
fields of activities. Although there has been a general consolidation of
the industry, third parties provided evidence of numerous small start-up
companies entering or exiting this sector over the last five years, many
as result of the mobile work force moving in and out of the established
There were no vertical issues raised by this transaction.
As to portfolio concerns, there is no basis for concluding that the
merged entity would have the ability or incentive to engage in tying or
anticompetitive bundling strategies. There is no evidence of ‘must
have’ customer preferences; the merged entity does not appear to enjoy
market power; numerous suppliers are active throughout all segments of
this industry, and no third party raised this issue as a concern.
THIRD PARTY VIEWS
Third parties had no concerns about this transaction.
The parties overlap on a national and international basis in the supply
of marketing communication services and various service segments within
it, in particular, public relations services. The OFT has no reason to
doubt the low share of supply figures provided by the parties (no more
than 10 per cent for all frames of reference) given that third parties
raised no concerns and generally characterised the industry as highly
fragmented and dynamic, with numerous competitors of varying sizes and
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.
- Eurocom/RSCG (case IV/M. 147); and WPP/Young & Rubicam (case
- This view is supported by evidence derived from Huntsworth’s
internal documents, which cite these as significant competitors.
Industry journals state that these 5 own 15 of the largest PR agencies
in the UK.