Computer-based testing merger could lessen competition
Pearson VUE’s anticipated acquisition of the computer-based testing business of learndirect could face in-depth phase 2 investigation.
Following its initial phase 1 investigation, the Competition and Markets Authority (CMA) has found that the acquisition might lead to price rises and lower service quality for customers, including examination boards and the Driver and Vehicle Standards Agency (DVSA).
Unless Pearson Professional Assessments Limited (Pearson VUE) offers acceptable undertakings to address the loss of competition that could result from the merger, the CMA will refer it for an in-depth phase 2 investigation, carried out by a group chosen from its independent panel members.
The merging companies both supply end-to-end post-school (16+) invigilated computer-based testing (CBT) services to organisations that issue certifications and accreditations in the UK.
Pearson VUE is the current provider of the DVSA driving theory test across the UK – however learndirect is due to take over from Pearson VUE in September 2016. If learndirect’s CBT business were acquired by Pearson VUE, it would leave Pearson VUE as the only viable provider with the necessary technical capabilities and national network of test centres to service the contract with the DVSA.
The evidence gathered by the CMA suggests that, as a result of this merger, Pearson VUE would not face sufficient competitive constraints in the end-to-end invigilated CBT market overall, either through existing competitors or through any new entrants.
Given its concerns, the CMA considers it appropriate to undertake an in-depth investigation into this matter unless Pearson VUE offers acceptable undertakings to address the CMA’s competition concerns in a clear-cut manner.
Sheldon Mills, Senior Director of Mergers and decision maker in this case, said:
Computer-based testing is an efficient way to provide a secure, consistent environment for certification and accreditation across the UK. So it is important for both examination boards and candidates that there is sufficient competition in this market.
As the DVSA driving theory test illustrates, high service level and technical requirements can mean a limited number of companies are equipped to tender for contracts in this market. The fact that learndirect won the tender to service the DVSA driving theory test from the incumbent, Pearson VUE, as of September next year, shows that the merging parties compete closely. If learndirect exits the market, we are concerned that the merged entity will face insufficient competition from other suppliers to prevent higher prices, or lower service quality.
We therefore plan to refer the merger for an in-depth investigation unless Pearson VUE offers acceptable undertakings to address our concerns.
Notes for editors
- The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law.
- Under the Enterprise Act 2002 (the Act) the CMA has a duty to make a merger reference, resulting in a full phase 2 merger investigation, if the CMA believes that it is or may be the case that a ‘relevant merger situation’ has been created, or arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and that the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
- Under the Act a ‘relevant merger situation’ is created if 2 or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million (‘the turnover test’) or as a result of the transaction, in relation to the supply of goods or services of any description, a 25% share of supply in the UK (or a substantial part of the UK) is created or enhanced (‘the share of supply test’).
- The CMA considers that it is under a duty to make a phase 2 merger reference in this case under the Act. However, the duty to refer is not exercised while the CMA is considering whether to accept undertakings in lieu of a reference. Pearson VUE has until 9 December 2015 to offer an undertaking to the CMA that might be accepted by the CMA. If no undertaking is offered or accepted, then the CMA will refer this merger for a phase 2 investigation.
- All the CMA’s functions in phase 2 merger investigations are performed by inquiry groups chosen from the CMA’s independent panel members. The appointed inquiry group are the decision makers on merger investigations.
- The text of this decision will be placed on the case page as soon as is reasonably practicable.
- Enquiries should be directed to Siobhan Allen (siobhan.allen@cma.gsi.gov.uk, 020 3738 6460).
- For information on the CMA see our homepage, or follow us on Twitter @CMAgovuk, Flickr and LinkedIn. Sign up to our email alerts to receive updates on merger cases.