Affected market: Womenswear
The OFT’s decision on reference under section 33 given on 26 September
2006. Full text of decision published 29 September 2006.
Please note square brackets indicate information replaced by a range
at the request of the parties for reasons of commercial
Mosaic Fashions HF (Mosaic) is a company listed on the Icelandic
stock exchange. Baugur Group hf (Baugur) is Mosaic’s main
shareholder. Both Mosaic and Baugur are active in the UK in the retail
supply of womenswear, the latter via its interests in JN Group Limited
and Lear Holdings Limited.
Rubicon Retail Limited (Rubicon) is a privately owned UK company
active in the retail supply of womenswear and footwear in the UK.
Rubicon’s UK turnover in the financial year 2005/2006 was around £371
On 8 September 2006, Mosaic agreed to acquire the whole of the issued
share capital of Rubicon. Mosaic submitted a Merger Notice on 16 August
2006; the statutory deadline expires on 28 September 2006.
As a result of this transaction Mosaic and Rubicon will cease to be
distinct. The UK turnover of Rubicon 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.
In the UK, Mosaic owns the womenswear brands Oasis, Coast, Karen Millen
and Whistles. Baugur has a controlling interest in JN Group Limited and
Lear Holdings Limited, owners of womenswear brands Jane Norman and MK
(formerly MK One). Rubicon owns the following UK womenswear brands:
Principles, Warehouse and Shoe Studio. (see [Note 1]) The activities of the
parties therefore overlap in the management of womenswear brands and the
operation of retail outlets for their sale in the UK. (see [Note 2])
Womenswear comprises a wide range of offerings in price, style,
occasion, and fashionability. The parties submit that the sector may be
segmented as follows: (i) value segment; (ii) mid-range segment; and
(iii) premium segment.
According to the parties, the overlap between their activities occurs in
the mid-range segment. In this case we have focused the horizontal
competition assessment on the extent to which the merging parties are
close competitors (considering various elements of brand positioning),
and the constraints that they face from other suppliers of womenswear.
It has therefore not been necessary to conclude on the precise product
The parties submit that the relevant geographic frame of reference for
womenswear is national because they, and their major competitors, are
active across the UK, and because branding, advertising, pricing, and
the nature of the product offering are determined nationally.
Competitors who responded to our inquiries generally agreed with this
In our view, demand for womenswear retail appears to be predominantly
local. We considered whether there are any local dimensions of
competition between womenswear retailers. Some evidence from third
parties who responded to our enquiries indicated that decisions relating
to staff numbers and opening hours may have a local dimension. We
consider that local competition, if present, would take place across the
relevant high streets or shopping centres. [ ].
In view of the above, we considered the competitive effects of the
merger at a national and local level. However, in this case it has not
been necessary to conclude on the precise geographic scope since
concerns do not arise in any event.
On a national basis, the merged entity’s share of supply in the
mid-range womenswear segment is around [0-10] per cent (increment
[0-10] per cent). The post-merger share of supply of all womenswear
is similar. (see note 3) In a fragmented market, these shares
of supply do not give rise to competition concerns because they indicate
that there are numerous competitors that will constrain the merged
Given the extent of product differentiation in this sector, we also
considered the closeness of competition between the parties’ respective
brands. The parties’ internal documents and the responses received from
third parties indicate that of the brands owned or controlled by the
parties, Oasis and Warehouse compete most closely. However, both the
merging parties’ internal documents and third party responses suggest
that Oasis and Warehouse face competition from a number of competing
brands, for instance Mango, Zara, River Island and Topshop. These
competitors will continue to provide a post-merger constraint on Mosaic.
On the available evidence, the parties’ other brands are not
particularly close competitors to each other, and they also face
competition from a number of other brands. (see [Note 4])
Therefore, if this merger were to give rise to competition issues on a
local level, they would be most likely to arise in locations where Oasis
and Warehouse outlets are both present.
We therefore carried out a local competition analysis based on areas
where Warehouse and Oasis outlets are located within a 1.5 mile linear
distance of one another. (see [Note 5])
Based on a narrow competitor set consisting of closely competing brands,
(see [Note 6]) we found that in more than 98 per cent of areas,
the merged entity will face at least three competing outlets. In the
areas where the merged entity would face fewer than three competing
outlets from the narrow competitor set, we found that at least four
other competitors were present (for example: Gap, Marks & Spencer
(Per Una), Next, Pilot, Dorothy Perkins).
Furthermore, the evidence available to us indicates that expansion by
existing retailers into local areas is not unduly difficult, and sunk
costs associated with store opening are relatively low. The parties and
third parties mentioned examples of recent or planned store openings, as
well as relatively large scale expansion in the UK by European brands
such as Zara and Mango.
On this basis, we do not expect competition concerns to arise either on
a national or local level.
THIRD PARTY VIEWS
Third parties who responded to our inquiries did not raise horizontal
competition concerns. Where relevant, third party views have been
referenced in the decision.
It should be noted that a small number of third parties raised the issue
of upstream buyer power, suggesting that the merger may provide Mosaic
with a larger portfolio of concessions in department stores, which may
enable it to secure better terms (at the expense of its competitors). We
found no evidence to support this proposition. In particular, the merged
entity’s share of supply in womenswear is very low, indicating that the
merged entity does not have significant buyer power with respect to
concessions in department stores. Furthermore, the evidence available to
us did not suggest that any of the parties’ brands are ‘must-have’
brands for department stores.
In any event, even if the merged entity were able to secure better terms
from department stores, the evidence indicates that the effect on
consumers may well be positive because the significant level of
post-merger competition between womenswear retailers indicates that cost
savings may be passed on to end consumers.
The activities of the parties overlap in the management of womenswear
brands and the operation of retail outlets for their sale in the UK. The
merger brings the following brands under common ownership or control:
Oasis, Coast, Karen Millen, Jane Norman, MK and Principles and
Warehouse. Out of all of these, we found that Oasis and Warehouse
compete most closely.
Womenswear retail is a fragmented market, and the merged entity's share
of supply at a national level is low ([0-10] per cent, increment
[0-10] per cent). While Oasis and Warehouse are close competitors,
they will continue to face competition from a number of other competing
brands. We found that some aspects of competition may be local and the
evidence suggested that if any competition concerns were to arise, this
would be in local areas where Oasis and Warehouse are both present. Our
analysis of local overlap areas did not identify any locations where the
merged entity would not face significant competition, and in any case we
found that barriers to entry at the local level are relatively low. We
therefore conclude that the merger does not give rise to competition
The majority of third parties did not any raise competition concerns. A
small number of third parties noted that the merged entity may have
upstream buyer power vis-à-vis department stores; we found no evidence
of this, inter alia, on the basis of the merged entity's low share of
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.
- Shoe Studio is a collection of seven brands, four of which are owned
(Pied a Terre, Bertie, Roland Cartier and Roberto Vianni) and three of
which are licensed (Nine West, Easy Spirit and Kenneth Cole).
- Some footwear is sold under the MK brand. Since the overlap in
respect of footwear is insignificant it is not considered further.
- Source: the parties.
- Key competitors of the Karen Millen and Whistles brands include:
FCUK, Phase 8, Hobbs, Jigsaw, Bromley, East, Episode and Monsoon.
- The analysis was centred on both the Warehouse and the Oasis
- The narrow competitor set was selected on the basis of evidence from
the internal documents submitted by the parties as well as third party
responses. It consisted of the following brands: Kew, Monsoon, FCUK,
Morgan, Mango, Zara, River Island, Topshop, Miss Selfridge, Bershka,
H&M and New Look.