Galvanising merger in West Midlands faces in-depth investigation unless undertakings offered
The proposed acquisition by Joseph Ash of W Corbett will be referred for an in-depth investigation unless acceptable undertakings are offered.
Joseph Ash Ltd (Joseph Ash), a subsidiary of Hill & Smith Holdings plc, and W Corbett (Galvanizing) Ltd (W Corbett) offer steel galvanising services to customers within the Midlands area of Great Britain. Galvanising is a process used to protect steel from corrosion and is an important input for a number of products, including products used in infrastructure projects.
The Competition and Markets Authority (CMA) has found that the proposed acquisition may be expected to result in a substantial lessening of competition in the supply of galvanising services in the West Midlands region around the Corbett galvanising plant in Telford. This represents an important regional market for these services.
During its investigation, the CMA received a number of concerns from customers that the proposed acquisition would lessen competition and lead to higher prices. Other evidence gathered by the CMA indicated that the companies compete closely and are 2 of the 3 main galvanisers in the area served by W Corbett. The CMA found that the competition provided by other galvanisers in the area may not be sufficient to take away the competition concerns arising from the merger.
Andrea Coscelli, CMA Executive Director of Markets and Mergers and decision-maker in this case, said:
A number of important manufacturers in the United Kingdom rely on competitively priced inputs such as this for the production of their goods. When competition is reduced and results in higher prices, the ability of these manufacturers to compete nationally and internationally can suffer – and can in turn lead to increased prices for their own customers.
We are concerned to preserve the existing level of competition in the West Midlands region where Joseph Ash and W Corbett currently compete. W Corbett is a large independent player and has provided a strong competitive constraint to its established rivals for many years.
Unless Joseph Ash offers undertakings that resolve the competition concerns, this transaction will face an in-depth investigation to assess whether this merger might result in higher prices for manufacturers using these services.
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. In April 2014, the CMA took over the functions of the Competition Commission and the competition and certain consumer functions of the Office of Fair Trading.
- Under the Enterprise Act 2002 (the Act) the CMA has a duty to make a merger reference, resulting in an in-depth 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 section 33(1) of the Act. However, the duty to refer is not exercised while the CMA is considering whether to accept undertakings in lieu of a reference. Joseph Ash has until 2 July 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 by 9 July 2015 refer the merger for a phase 2 merger investigation.
- All the CMA’s functions in phase 2 merger investigations are performed by inquiry groups chosen from the CMA’s panel members. The appointed inquiry group are the decision makers on merger investigations.
- The CMA’s panel members come from a variety of backgrounds, including economics, law, accountancy and/or business; the membership of an inquiry group usually reflects a mix of expertise and experience (including industry experience).
- 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 (firstname.lastname@example.org, 020 3738 6460).
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