Affected market: Forestry
The OFT's decision on reference under section 33 given on 19 August 2004
The Royal Institution of Chartered Surveyors (RICS) is a chartered membership organisation for professionals involved in land, property and construction. It represents, regulates and promotes chartered surveyors and technical surveyors and is a not-for-profit organisation. It has a Rural Faculty which deals with, amongst other things, forestry and woodland management. In the year ended 31 July 2003 its UK turnover was £32.9m.
The Institute of Chartered Foresters (ICF) is also a chartered body with a public interest remit. It has 775 Chartered Forester members. ICF regulates and promotes forestry and arboriculture to ensure the sustainable development of forests, woodlands and trees in the UK. ICF sets standards for education, training, experience and qualification for its members. In the year ended 31 December 2003 its UK turnover was £252,000.
ICF will invite its members to approve the winding up of its activities in return for an offer of membership on agreed terms from RICS. The parties notified the Office on 2 February 2004 ([see note 1]). The administrative deadline expires on 20 August 2004.
As a result of this transaction RICS and ICF will cease to be distinct. The parties overlap in the supply of professional services to Foresters and the share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met. A relevant merger situation is likely to be created.
The parties overlap in the supply to foresters in the UK of certain professional services, specifically the regulatory, accreditation and promotional services.
The specific nature of professional services provided to foresters dictate that, such services are the relevant product frame of reference for considering this transaction.
The parties provide professional services to foresters throughout the UK. There appears to be no need to have a local presence. This suggests that the relevant geographic frame of reference is the UK.
The ICF currently has 775 Chartered Forester members, of which up to 10 per cent are estimated to be members of RICS. RICS estimates that forestry represents a material element of the practice of about 0.1 per cent (100 out of its total of 96,000) members. There are therefore only about 20 members of RICS who practice forestry who are not already members of the ICF.
These figures indicate that the scope for competition between the two bodies is very limited. Indeed, third parties support the parties' view that there is, in fact, no competition between the two bodies for members. While employers may encourage foresters they employ to become ICF members for the reputational benefits involved, no forestry-sector third party contacted regarded membership of RICS as required or desirable as it did not cater specifically or exclusively to foresters.
Furthermore, universities running professionally accredited forestry courses primarily considered ICF accreditation. One university had in the past considered RICS accreditation but decided against it because in its view the RICS forestry curriculum did not offer sufficient scientific content.
Finally, in contrast to surveyors, where chartered status is often a prerequisite of employment, third parties did not believe that membership of a professional body was essential to work as a forester, as the vast majority of forestry employers require only degree-level qualifications.
Barriers to entry and expansion
The parties submit that historically it has taken Chartered Bodies a number of years and significant financial resources to obtain chartered status, a view supported by other relevant bodies. They point out that the ICF regards its present annual turnover of £250,000 as insufficient to provide the range of services members now demand of it.
The evidence suggests that the requirements of know-how coupled with financial resources amount to significant barriers to entry for the supply professional services to foresters.
According to the parties, both RICS and ICF are 100 per cent membership-owned and member-led organisations. Both bodies have similar governance structures whereby members have total control and influence over the running of the organisations. Therefore, customers (members) appear to have a significant degree of influence on the membership services and commercial activities of their respective organisations.
This transaction does not raise any vertical issues.
THIRD PARTY VIEWS
Third party respondents did not regard the parties as in competition with one another and, accordingly, had no competition concerns about the transaction.
The weight of evidence gathered during the course of this investigation
suggests an absence of material competition between the services offered
by RICS and ICF for the supply of professional services and
accreditation to foresters. Other factors explaining a lack of third
party competition concerns may be that membership of the merged
organisation is not a prerequisite of forestry employment and that
members themselves will run the relevant services of the merged
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.
- The parties emphasised that notification was undertaken as a precautionary measure before seeking a vote from the ICF membership to proceed, without pre-judging the outcome of the vote of the ICF membership.