The OFT today referred the anticipated acquisition of the political intelligence division of DeHavilland by Dods Group PLC (Dods) to the Competition Commission. The evidence before the OFT suggests that, as a result of this merger, Dods will not face sufficient competitive constraints and this could result in higher prices or less quality for UK customers procuring political intelligence services.
Political intelligence companies monitor and track political issues on behalf of customers. A wide range of companies, public and voluntary sector organisations, as well as communications and public affairs consultancies, rely on the provision of regular, accurate and timely political intelligence.
The OFT’s investigation found that the merger parties are the two largest dedicated suppliers of these services and that close competition between them is a very important tool for UK customers to benefit from competitive prices and valued services. The merger parties’ competitors are smaller in size, scale and scope. These findings were informed by the OFT’s market investigation and an extensive customer survey submitted by the merger parties.
As a result, it is the OFT’s view that removing such significant rivalry between the merger parties might substantially lessen competition and lead to higher prices, a decline in the quality of those services or both.
Given its concerns, the OFT therefore considers it appropriate for the Competition Commission to undertake a further investigation into this matter.
The OFT further considered whether the case should not be referred to the Competition Commission on the basis that the markets were of insufficient importance, but did not find that the deal met the relevant criteria for such an exception.
Ali Nikpay, OFT Senior Director and Decision Maker in this case, said:
‘This merger would bring together by far the two largest players in the UK market. The evidence also suggests that DeHavilland and Dods are each other’s closest rivals. Based on the information before us we do not believe that this loss of competition would be compensated through expansion by smaller rivals, entry by new players or customers switching to self-supply. As such, we consider it appropriate to refer the merger to the Competition Commission for further investigation.’
Guido warned about this back in February. Lobbyists who are the main subscribers to the monitoring service have been telling Guido they feared a quasi-monopoly would lead to price gouging. So it seems do the authorities…