11/03/2005

Competition Commission blocks brewers' merger proposal

The Competition Commission (CC) has blocked a proposed merger between three major brewers, saying that it would reduce competition.

Serviced Dispense Equipment Limited (SDEL), a joint venture between the technical services businesses of Scottish Courage and Carlsberg UK, had proposed to take over the technical services function of Coors.

The CC said that there were around 149,000 outlets in the UK with technical services equipment (TSE) for dispensing draught beer and cider, which was valued at around £350 million. The CC said that the merger would have increased SDEL's share of the TSE market to between 55% and 60%, making them several times larger than their nearest providers.

The Commission decided that this would lead to less competition, as well as lower standards and a rise in the prices of TSE and related servicing, and blocked the merger.

Commenting on the decision, Paul Geroski, Chairman of the CC and the SDEL/Coors inquiry group said: " Our view is that by blocking this merger it is more likely that a fully functioning market for technical services equipment and related servicing will develop. This will be good news for both pub companies and their customers. "

The CC said that competition was currently limited in the TSE market, mainly due to the brewer's strategy of bundling the provision of the equipment and services in with the price of beer and their ownership and control of this equipment.

The Commission has called on the Office of Fair Trading to consider conducting an investigation into the pricing and supply of beer, with specific reference to these and related market features.

(KMcA/SP)

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