OFT Considers Remedies in Builder’s Merchants Merger
The OFT is considering an offer by Jewson Limited (Jewson) to sell a branch in each of 22 local areas to remedy competition concerns raised by its completed acquisition of Build Center.
Jewson and Build Center are two of the country’s largest general builder’s merchants. Jewson has a chain of 510 general builder’s merchants in the UK operating under the Jewson and ‘Gibbs and Dandy’ brands and also operates some specialist building materials distribution businesses.
Jewson is part of the group of companies ultimately controlled by Compagnie de Saint-Gobain (Saint-Gobain), the French multinational active in many building materials sectors.
There are 149 Build Center branches in the UK, trading primarily under the Build Center brand, including a number of specialist glass, ironmongery and timber outlets.
The OFT concluded that the merger would not give rise to competition concerns nationally because sufficient competitors would remain in the market. The OFT also found that the presence of Saint-Gobain companies upstream of general builders merchants (for example, in the plasters and plasterboard sectors) would not give rise to competition concerns.
However, having considered a large volume of evidence including a survey of nearly 10,000 builders, the OFT concluded that the deal raised substantial competition concerns in 22 local areas in England, Wales and Scotland. This was because there were few remaining general builders merchants in these local areas and the OFT was concerned that builders and other tradesmen might see an increase in prices for building materials as a result.
In order to address these concerns, Jewson has offered undertakings to divest at least one branch in each of the 22 affected local areas to restore pre-merger competition levels.
Ali Nikpay, OFT Senior Director and the Decision Maker in this case, said: “Whilst we concluded that the merger raised no competition issues on a national basis, we were concerned that builders in some local areas could lose out as a result of reduced competition. We are therefore considering branch sales offered by the parties to resolve these issues.”
The OFT is required to consult publicly on draft provisional undertakings provided in lieu of a reference to the Competition Commission (CC) prior to taking any decision to accept such undertakings.
While the undertakings in lieu are being considered, the OFT’s duty to refer the merger to the CC is suspended.