Home
Menu
Top industry news
Brewery news
Malt news
Barley news
Hops news
More news
All news
Search news archive
Publish your news
News calendar
News by countries


#
E-Malt.com News article: UK & India: UK Office of Fair Trading concerned about the impact of Diageo’s deal with United Spirits

Despite Diageo offering to divest bulk of Whyte & Mackay business to address anti-competition concerns posed by its deal with United Spirits, the UK OFT expressed concern about the impact of the deal, Money Life reported on February 7.

The Office of Fair Trading (OFT) in the UK has released a 53-page report detailing concerns posed by the Diageo-United Spirits deal to competition in the British whisky market.

On 25 November 2013, the OFT decided to have a fresh look at the $2 billion deal, after Diageo offered to divest bulk of Whyte & Mackay (W&M) business to address anti-competition concerns posed by this merger.

The regulator on February 6 made public the “full text” of its 25th November decision, wherein it said that “the OFT is concerned only by the impact of the transaction“.

“The focus of the competitive assessment is therefore on the incremental effect on competition of Diageo’s shareholding and the control this confers on Diageo.

“... A significant number of third parties raised the concern that the parties would restrict the supply and/or increase prices of private label blended Scotch whisky,” the 53-page order said.

The OFT had received comments from a wide range of customers and competitors of Diageo and W&M and their views have been incorporated appropriately in its decision.

The regulator said that it “found that the merger gives rise to a realistic prospect of a substantial lessening of competition” and subsequently the merged parties offered an undertaking “to divest the entirety of the W&M business apart from two malt distilleries and the associated brands of those two distilleries”.

Diageo manufactures and supplies spirits, wine and beer in the UK and around the world. It owns a number of spirits brands both worldwide and in the UK, including Smirnoff vodka, Bell’s and Johnnie Walker Scotch whisky, Baileys liqueur, Tanqueray gin and Captain Morgan rum.

On the other hand, India-based United Spirits, part of Vijay Mallya-led UB Group, manufactures and supplies spirits in the UK and in other countries. All of its sales of products in the UK are made through its UK subsidiary W&M.

United Spirits had acquired W&M for about £595 million (then nearly Rs5,000 crore) in 2007.

In July 2013, Diageo completed acquisition of a 25.02% interest in United Spirits, while it has now raised its stake to close to 30 per cent.

While the deal has been cleared by various regulators, including Competition Commission of India (CCI), OFT ruled in November last that the merger may substantially lessen competition in the supply of blended whisky to retailers.

OFT came to this conclusion after analysing evidence including data on consumer switching between brands, economic modelling and internal documents.

“Our investigation considered a wide range of evidence and we concluded that the likely loss of competition could give rise to higher prices for retailers, and ultimately consumers,” OFT had said earlier.


07 February, 2014

   
| Mail your friend | Printer friendly |
Copyright © E-Malt s.a., 2001-2008