Affected market: Lifts / Elevators
The OFT’s decision on reference under section 22 given on 7 June 2005.
Full text of decision published 29 June 2005.
Please note square brackets indicate information excised or replaced
by a range at the request of the parties for reasons of commercial
Otis Limited (Otis) is active in the manufacture (see [note
1]), installation, upgrading, repair and maintenance of
passenger and goods lifts and escalators. It is ultimately owned by
.U.S.-based United Technologies Corporation.
Excelsior Lifts Ltd (Excelsior) installs new lifts and provides lift
refurbishment and maintenance services. It does not manufacture
equipment itself but supplies new equipment assembled from components
bought from third parties. Excelsior is based in Peterborough and
provides regional coverage in the Midlands. Its customers are mostly in
the government (eg local authority housing) and residential business
sectors (eg care homes and hotels). In the year ending 31 May 2003 its
UK sales were £4.5 million.
Excelsior was acquired on 28 February 2005 for a consideration of £ [
]. The statutory deadline expires on 27 June 2005 and the OFT’s 40 day
administrative deadline is 7 June 2005.
Over the past two years, the OFT has considered and cleared the
acquisitions by Otis of Oakland Elevators Limited, Key Elevators Limited
and Estec Limited. Both Oakland and Key specialized in lifts work
whereas Estec was an escalator service and repair company. The OFT has
drawn on these previous cases in carrying out its assessment of the
current case. As with the Oakland and Key mergers, the main rationale
for this acquisition is to enable Otis to expand its provision of lift
maintenance and service contracts to a wider range of customers.
As a result of this transaction Otis and Excelsior have ceased to be
distinct. The parties overlap in the supply and refurbishment of new
lifts in the UK and the share of supply test in section 23 of the
Enterprise Act 2002 (the Act) is met, with an estimated combined share
of supply of [25 per cent - 35 per cent] in the lift refurbishment
sector. A relevant merger situation has been created.
In the previous merger cases considered in this sector, a cautious view
was taken with three separate frames of reference being considered:
- the supply (i.e. installation) of new lifts;
- the provision of refurbishment services; and
- the provision of maintenance, including repair, services.
In the current case, the OFT has also considered whether it would be
appropriate to focus on certain customer groups due to Excelsior's
focus on particular types of customers. Such a distinction is backed by
comments from third parties which suggest that certain residential
business, government and retail (see [note 2]) sector customers
do tend to be attracted to smaller suppliers who they believe offers
them a more competitive and flexible service (see [note 3]).
However, no firm conclusion is necessary on these issues because even by
focusing narrowly on supply to specific customers no competition
For the installation of new lifts and the refurbishment of old lifts
local presence by the lift company is unlikely to be necessary, as
response time by suppliers is less of a concern than in the case of
maintenance services. Thus, for these services the OFT considers that
the appropriate frame of reference is UK-wide.
Conversely, it is necessary for a lift company (or its representative)
to be situated locally to the customer in order for them to attend
promptly to certain maintenance requests (eg a breakdown). In this
particular case, government and residential business customers in
particular will depend on the local supply of these services and are
unlikely to require national coverage. It could therefore be suggested
that customers served by Excelsior (whose activities are almost entirely
limited to the Midlands) would not turn to suppliers outside the region
in response to price increases.
It is not necessary to conclude on the geographic scope of the
competitive constraints in relation to maintenance and repair services,
since no competition concerns arise under any reasonable definition.
Installation and refurbishment of lifts
Limited share of supply data is available in the lift sector. On a UK
basis the parties estimate their share of the refurbishment sector to be
around [25 per cent - 35 per cent] and for installation to be around
[20 per cent - 30 per cent] with the acquisition of Excelsior
increasing these figures by well under 1 per cent.
In these sectors Otis competes on a UK basis against full service global
lift companies such as Kone, Schindler and Thyssen, as well as against
medium-sized and smaller local UK companies, such as Pickering,
Jacksons, Stannah and Excelsior. Given the low increment to the share of
supply on a UK basis and the existence of numerous other competitors the
OFT does not consider that competition concerns will arise in the
installation and refurbishment sectors.
Lift maintenance and repair services
For the supply of maintenance and repair services to all customers in
the UK, Otis has a [15 per cent - 25 per cent] share of supply with
Excelsior again having a share of well under 1 percent. Although
regional share of supply figures are not available, Excelsior's
customer list and third party responses suggest that Excelsior's share
of supply of maintenance services to retail, residential business and
government sector customers in the Midlands are significantly higher
than its share of supply of these services to all customer groups in the
Our assessment of the sector shows that smaller lift companies in
general have a strong presence in the supply of maintenance services to
government, retail and residential business customers due to the
perception that smaller operators are often more able to meet specific
customers requirements at the lowest cost. The parties themselves
distinguish their offerings between ‘top of the range service
packages’ and ‘lower level service packages’ (see [note
4]). While large lift companies offer mainly top of the range
packages, smaller companies offer the lower level service packages. The
parties further submit that local government, housing authorities,
private owners and volume retailers are among the customers who are
likely to opt for a lower level service package as they are likely to
place less emphasis on image and reliability but face pressure to
minimize up front costs. It is this lower level sector which Otis seeks
to expand in by its purchase of companies such as Excelsior.
The OFT has sought to assess whether the removal of a relatively strong
local competitor, which Excelsior is considered to be, by a larger
national competitor could substantially reduce competition in the supply
of maintenance services to customers in the Midlands region. Customers
of Excelsior who responded to our questionnaires mention a number of
other lift companies as potential suppliers of lift maintenance
services. These included the large lift companies Thyssen, Kone,
Schindler and Otis but also a number of smaller competitors, namely,
Lifts and Engineering Services, Concept Elevators, Pickerings Europe,
Jackson, Moris Vermaport, Appollo, Rubax Lifts and Stannah. These
customer comments suggest a significant number of competitors of a
similar size and competitive strength as Excelsior operating in the
region. Of these, the parties submit that Lifts and Engineering Services
and Concept Elevators are particularly strong competitors to Excelsior
in the Midlands.
Barriers to entry and expansion
The assessment in this case indicates that, as found in the previous
decisions in this sector, barriers to entry in the provision of lifts
and associated services are low. There are a number of examples of
recent entrants into the provision of repair and maintenance, for which
there are very few requirements to meet in order to be able to begin
No vertical competition issues arise as a result of this transaction.
THIRD PARTY VIEWS
A number of Excelsior customers, competitors and industry
representatives were contacted to supplement the extensive third party
representations undertaken in the previous cases. While concerns were
raised by some customers about the loss of a supplier the above analysis
shows that sufficient competition remains even on a regional basis.
In installation and refurbishment of lifts, the merger raises no
competition concerns due to the number of competitors remaining and the
low increment to share of supply on a UK basis. For the supply of
maintenance and repair services, it is also clear that post-merger
sufficient competitors remain who are able to meet customer requirements
in Excelsior's principal supply area, the Midlands. Barriers to entry,
particularly to the provision of maintenance, are low.
Consequently, 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
This merger will therefore not be referred to the Competition Commission
under section 22(1) of the Act.
1.Otis Ltd notes that it does not manufacture lifts and other equipment
itself which are bought in from other members of the Otis group or from
2. Excelsior serves retail customers to a lesser extent than government
and residential business customers.
3. The parties submit that because smaller companies tend to have
shorter management chains, with perhaps a direct link between the
engineer and the owner, they may sometimes be perceived to be faster
than larger companies in evaluating the engineering viability of a
non-standard request and that customers may, therefore, on occasion feel
they get more responsive service from smaller companies. The view that
smaller companies are more customer focused and can better adapt to
specific customer needs is supported by most customers who responded,
who also stress that smaller companies are able to offer less costly
4. Top of the range refers to a comprehensive maintenance package which
guarantees continuity of service and where the supplier fixes a price up
front, assuming the risk of unexpected or unusual repairs, parts or
servicing needs. Lower level service packages entails fewer up front
benefits and require the customer to take the risk of having to pay as
they go for additional spare parts, breakdowns, repairs, etc.