The OFT has today cleared the acquisition by Kingfisher plc, the parent company of B&Q, of 30 former Focus DIY stores.

This merger is one of several transactions involving the store portfolio of Focus which went into administration on 5 May 2011. The OFT completed its investigation 19 working days after receiving the necessary information from Kingfisher.

During its inquiry, the OFT found that in 20 geographic areas the merger did not create any competition problems because B&Q was not present in the local market. A core issue with regard to the remaining 10 areas was whether the OFT could be totally satisfied that there was no less anti-competitive alternative to this merger.

After assessing the available evidence, and following discussions with the administrator, investment bankers, Focus' former senior management and its owners, possible purchasers and other relevant parties, the OFT concluded that that there was no alternative purchaser which would result in a less anti-competitive outcome.

Kingfisher originally notified the OFT of its intention to acquire 31 stores. However, after the OFT's preliminary review, the company chose to withdraw from the purchase of the Focus store in Dorchester since evidence suggested that there could be a rival national DIY purchaser for that store. The store will now be released back to the administrator who can now market it to other potentially interested buyers.

The OFT's extensive experience in considering retail mergers, as well as the prompt replies it received from third parties have enabled it to conclude its investigation swiftly.

Sheldon Mills, OFT Director of Mergers said:              

'Even where firms have gone into administration, it remains vital that we rigorously assess whether a merger is likely to result in a substantial lessening of competition to ensure that consumers are protected. At the same time, we have carefully targeted our investigation on the key issues, enabling us to come to a swift conclusion in the interests of everyone involved.'

NOTES

1.   The twenty non-overlapping stores are located at: Ashington, Cardigan, Chard, Fakenham, Gainsbourough, Goole, Harrowgate, Haverhill, Kendal, Launceston, Louth, Malvern, Melton Mowbray, Newark, Pembroke Dock, Skegness, Spalding, Sudbury, Thetford and Witney.

2.   The ten stores which raised preliminary competition concerns are located at: Buxton, Consett, Devizes, Ebbw Vale, Huntingdon, Leominster, Leven, Shepton Mallet, Stroud and Uttoxetter.

3.   In cases involving the retail supply of DIY products by one of the three national DIY retail chains (Kingfisher's B&Q, Home Retail Group's Homebase and Travis Perkins' Wickes), the OFT has cautiously considered the impact of the merger in a 5 and 10 miles radii distance and 20 minutes driving time.

4.   The Reference Test- the OFT has a duty to make a reference to the Competition Commission if it believes that it is or may be the case that arrangements are in progress or contemplation which, if carried into effect, will result in the creation of a relevant merger situation, and the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.

5.   In assessing the 'failing/exiting firm' defence, the OFT assesses the following three criteria:

·    whether the firm would have exited (through failure or otherwise)- the fact that a company goes into administration by itself does not mean that this criteria is necessarily met;

·    whether there would have been an alternative purchaser for the firm or its assets to the acquirer under consideration, which would result in a less anti-competitive outcome;

·    what would have happened to the sales of the firm in the event of its exit; in some occasions, albeit not usually in retail cases, the competition authorities might conclude that competition can become more fierce following the demise or exit of one of the competitors.

They all must be met for the OFT to accept the 'failing/exit firm' defence.

6.   The evidence available to the OFT shows that there was a national DIY retailer interested in purchasing the Focus store in Dorchester, an area in which an initial analysis raised prima facie competition concerns.  Kingfisher released the Dorchester store to the administrator who is now free to market it to any other interested purchaser including national DIY firms.   

7.   The text of this decision will be placed on the Office of Fair Trading's web site at www.oft.gov.uk as soon as is reasonably practicable.

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