Red Football Ltd / Manchester United plc
OFT closed case: Completed acquisition by Red Football Ltd of Manchester United plc.
Affected market: Football
The OFT’s decision on reference under section 22 given on 5 August 2005. Full text of decision published 12 August 2005.
Red Football Ltd (Red Football) is an acquisition vehicle established by the Glazer Family Trust (Glazer) for the purposes of this transaction. Glazer's chief holdings are in the US: real estate (First Allied Holdings); marine protein production and automotive products (Zapata Corporation); and American football (Tampa Bay Buccaneers).
Manchester United plc (Manchester United) is the holding company for Manchester United Football Club, Manchester United Catering (Agency Company) and Manchester United Interactive. It also has a 33.3 per cent holding in MUTV, the club's official television channel, which is a joint venture with ITV and BSkyB. For the year ended 31 July 2004 Manchester United had a UK turnover of £169.1 million.
Red Football acquired the shareholding of Cubic Expression Company Limited, conferring on it a controlling interest in Manchester United of 56.9 per cent of shares. The transaction completed on 12 May 2005. Subsequent acquistions of shares by Red Football do not result in a further change in control.
The administrative deadline expires on 5 August 2005. The statutory deadline will expire on 9 September 2005.
As a result of this transaction Red Football and Manchester United have ceased to be distinct. The UK turnover of Manchester United 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 a relevant merger situation has been created.
Glazer has no holdings in the UK, other than its shareholding in Manchester United. No Glazer business currently co-operates with Manchester United. It is therefore unnecesary to reach a conclusion on the frame of reference under which this merger should be considered, as no overlap is created by the merger.
HORIZONTAL AND VERTICAL ISSUES
Under the Act, in order to refer a merger the OFT must have a reasonable belief objectively justified by the facts that there is a realistic prospect of a substantial lessening of competition in a market or markets in the UK resulting from that merger (see [note 1]). For there to be a substantial lessening of competition, there must have been some pre-merger competitive interaction between the merging parties, either horizontally within the same sector (eg. a merger of two manufacturers of replica football kit) or vertically between sectors at different levels (eg. owning and buying TV rights to football matches) to be reduced substantialy as a result of the merger. Given the acquirers’ lack of related holdings in the UK, there is no horizontal overlap between the activities of the parties; there are no vertical links between them; and there is no risk of any conglomerate effects arising. Therefore, the merger does not appear to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
The Act makes provision for the Secretary of State for Trade and Industry to refer a merger on particular specified public interest grounds, namely national security and media plurality in the UK. Neither are applicable here as the acquirer’s other media interests are in the US and related to sports other than football (see [note 2]).
The Act also permits the government to add other gateways to allow references in the public interest. To faciliate this, the OFT makes the Secretary of State for Trade and Industry aware of representations that it receives that a new criterion should be added (such as those representations noted below). The government has confirmed it does not propose to seek to add a new public interest consideration under the Act enabling changes in ownership of football clubs to be referred at on non-competition grounds.
THIRD PARTY VIEWS
In the course of our invitation to comment period we received some 1700 representations from concerned third parties. The concerns raised may be grouped into:
- the way shares were acquired, which falls outside our considerations under the Act;
- public interest issues, such as the impact changes at Manchester United may have on the local community and the impact of a possible withdrawal from the TV rights collective selling agreement on other clubs. These were conveyed to the Secretary of State and fall outside the specified public interest issues in the Act;
- consumer harm from possible ticket price increases and a move to pay per view. However, such increases would not arise from a lessening of competition resulting from the merger itself.
There is no overlap or vertical link between the activities of the parties.
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 United Kingdom.
This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.
1. For further information download Mergers: sustantive assessment guidance (pdf 234 kb) 2. In British Sky Broadcasting Group Plc and Manchester United Plc: a report on the proposed merger, April 1999, the Competition Commission considered the wider public interest (as well as competition issues relating to vertical links concerning broadcasting rights). Under the previous Fair Trading Act 1973, the Secretary of State could make a reference on any public interest grounds.