Affected market: Cinema exhibition of films
Full text of the decision: terra.pdf
Undertakings in lieu of reference: terraundertakingsinlieu.pdf
Undertakings accepted decision
The OFT's decision on reference under section 22 given on 7 January 2005. Full text of decision published 13 May 2005.
Terra Firma Investments (GP) 2 Ltd (Terra Firma) manages a number of private equity funds. On 2 September 2004, Terra Firma acquired Odeon Equity Co. Limited (Odeon), the largest cinema exhibitor in the UK, with 95 cinemas.
United Cinemas International (UK) Limited and Cinema International Corporation (UK) Limited (collectively 'UCI') operate multiplex cinemas in the UK. Prior to the merger, UCI was the fourth largest cinema exhibitor in the UK, with 32 cinemas nation-wide. Its UK turnover in the year to 31 December 2003 amounted to £123 million.
On 28 October 2004, Terra Firma acquired sole control of UCI through its wholly-owned subsidiaries.
As a result of the transaction, Terra Firma and UCI ceased to be distinct. The UK turnover of UCI exceeds £70 million, so that 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 a relevant merger situation has been created.
By way of a decision of 7 January 2005 (the Decision) the OFT announced that, on the evidence available to it, the OFT believed that it is or may be the case that the merger may be expected to result in a substantial lessening of competition in 11 areas, covering 13 UCI cinemas (see note 1). A copy of the decision is attached at Annexe 1.
On this basis, the OFT decided that the merger would be referred to the Competition Commision unless Terra Firma gave suitable undertakings pursuant to section 73 of the Enterprise Act to address the competition concerns arising from the merger.
Terra Firma indicated a willingness to give undertakings to make divestments in each of the 11 localities where Odeon and UCI cinemas overlap and the OFT believes that it is or may be the case that a substantial lessening of competition will, or may be expected to, arise as a result of the merger.
On 7 April 2005, the OFT published the proposed undertakings inviting interested third parties to give their views on them to the OFT. The OFT did not receive any responses to suggest that the proposed undertakings were not appropriate to remedy, mitigate or prevent the competition concerns identified.
The merger would have been referred to the Competition Commission if Terra Firma had failed to give suitable undertakings pursuant to section 73 of the Act to address the competition concern outlined above. The OFT has decided to accept the proposed undertakings in lieu of reference as they address that competition concern.
This merger will therefore not be referred to the Competition Commission and the undertakings, which have been signed by Terra Firma and its subsidiary, Corleone Capital Limited, the text of which is attached as Annexe 2 to this decision, came into effect on 9 May 2005.
- Clydebank, Newcastle Gateshead/Silverlinks, Poole, Sutton, Tamworth, High Wycombe, Dudley, Hatfield, Surrey Quays/Greenwich, Basildon, and Leicester Square