OFT Considers Remedies in Electrical Wholesaling Merger
The OFT is considering the undertakings offered by one of the largest electrical wholesalers in the UK having a national network of branches in connection with its acquisition of another retailer.
Edmundson Electrical Limited (EEL), a Knutsford-based electric equipment retailer, submitted its undertakings to the OFT to sell a branch in each of four local areas in England and Scotland to remedy competition concerns raised by its completed acquisition of Electric Center (EC), formerly part of the Wolseley Group.
In July 2011, Wolseley sold Electric Center to Edmundson Electrical, adding over 90 branches to its current network. EEL has a chain of 249 branches and EC has 83 branches. The transaction generated around £29m in gains.
The OFT’s study eased doubts that the merger would be fair at a national or regional level to competitors. The OFT concluded that sufficient retailers would remain in the market.
However, having considered comprehensive evidence, including the results of a local survey carried out by the parties, the OFT has concluded that the transaction raised competition concerns in four local areas in England and Scotland as there were few remaining electrical wholesalers in these local areas. The OFT said these are the only competitors that are capable of competing strongly against the parties, and the OFT was concerned that customers might therefore see an increase in prices or a deterioration in service as a result of the merger.
In order to meet the OFT’s concerns, EEL has offered undertakings to divest either the EEL or the EC branch in each of the four affected local areas to a suitable purchaser (or purchasers) approved by the OFT to restore pre-merger competition levels.
Ali Nikpay, OFT Senior Director and Decision Maker in this case, said: “Whilst we concluded that the merger raised no competition issues on a national or regional basis, we were concerned that customers 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.”