Property Security Merger Could Shut Out Competition

June 26, 2012 /

The Competition Commission (CC) has provisionally decided that the completed acquisition by VPS Holdings Limited of SitexOrbis Holdings Limited could harm competition and lead to higher prices for many of their customers.

The parties are the country’s two leading suppliers of vacant property security services to local authorities and businesses (including residential and commercial landlords, retailers, facilities management companies and insurance firms). Vacant property security services involve the securing of vacant social housing and commercial properties through the provision of steel screens, doors and wireless alarms.

In its provisional findings, the CC has found that the merger has given the parties a very high share of the market for social housing, with limited competition from rivals or alternatives for customers from providers in adjacent markets.

Whilst some commercial customers may have competitive supply options post-merger, competition is not uniform across the country so there would be areas where customers could also lose out from the merger, in addition to those who require nationwide coverage.

The CC has also published a notice of possible remedies to address the loss of competition, including the sale of all or part of the UK SitexOrbis business, and will consult on these before coming to its final decision.

CC Deputy Chairman and Chairman of the VPS/SitexOrbis Inquiry Group, Professor Alasdair Smith, said: “Had it not been purchased by VPS, it seems likely that SitexOrbis would have remained as an independent company or been taken over by another buyer and so continued to act as VPS’s closest competitor. Particularly in social housing, customers are now faced with little in the way of alternatives—either from existing competitors or potential new entrants—to prevent the merged company from raising prices or worsening its service in other ways.

“The picture is slightly different for commercial customers, but the nationwide reach of the merged company means that it will also face insufficient competition in some regions and among those customers who require coverage across the whole of the country.

“We are now seeking views on the best way to restore competition in these markets, which could include a requirement for the sale of all or part of the SitexOrbis business.”

The CC’s provisional finding is that the merger may be expected to result in a substantial lessening of competition leading to higher prices than would otherwise be the case in the supply of security services for vacant properties (SSVP):

to social housing customers across Great Britain; and
to commercial customers in some parts of Great Britain (namely, in Scotland, South Wales, south-west England and north-east England); and
to commercial customers with national requirements.
The CC’s provisional finding is that the merger may not be expected to result in a substantial lessening of competition in the supply of SSVP in Northern Ireland.

 

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