| Synopsis: |
The majority of the investigating group of the Competition Commission recommend that Interbrew should be required to divest the UK business of Bass Brewers to a buyer approved by the Director General of Fair Trading. The acquisition of the brewing interests of Bass PLC, Bass Brewers, by Interbrew SA, was referred to the UK competition authorities by the European Commission in July 2000. Interbrew is a quoted Belgian company which had also acquired the Whitbread Brewing Company (WBC), the brewing interests of Whitbread PLC, in May 2000. Prior to the WBC acquisition, Interbrew's involvement in the UK brewing market was mainly through a licence agreement with Whitbread to brew and distribute Stella Artois. The current merger would make Interbrew the largest brewer in Britain, with an overall market share of 33 to 38 per cent, and a portfolio of leading beer brands. In wholesaling and distribution, Interbrew's market share would be about 35 per cent. The merger would lead to the creation of a duopoly in the brewing industry between Interbrew and Scottish and Newcastle plc (S&N). The Competition Commission concluded that the merger would have adverse effects in the UK.It expected the result to be an increase in net wholesale prices, with these rises passed through to the consumer. Competition between the two major players would be more non-price oriented (marketing and advertising), with more emphasis on promotion of leading brands, which in turn would see some brand rationalisation and less consumer choice than would otherwise occur. Interbrew and S&N would effectively control the route to market for any new entrants or smaller brewers. Interbrew also offers more favourable prices to multiple retailers than it does to the independent trade sector, and the merger would enhance its ability to price discriminate. The Commission examined nine behavioural and structural remedies, but nearly all were either difficult to enforce or would not address the adverse effects of this merger. The possible divestment of WBC (including the licence rights to Stella Artois) was considered, but most members did not consider this sufficient to remedy the adverse effects.The majority believe Bass Brewers is a viable business that can be disposed of without complications, leaving Interbrew with its existing brands, and WBC, wholly owned by Interbrew, as a stronger competitor than it would be as a stand alone business. |