After announcing back in June this year that they were concerned about the effects on the supply of heating oil and transport fuel on the Isle of Wight of the proposed takeover of Pace Fuelcare Limited by GB Oils, the Office of Fair Trading (OFT) have announced that they “accepted undertakings” by the companies, so will not refer it to the Competition Commission.
Below is the information that the OFT put out about it yesterday, complete with the details of the undertakings – Ed
The OFT has today accepted undertakings offered by GB Oils Limited to address competition concerns on the Isle of Wight arising from its anticipated acquisition of Pace Fuelcare Limited (Pace), part of MRH (GB) Limited (MRH). As a result, the merger will not be referred to the Competition Commission.
Terms of the undertakings
Under the terms of the undertakings, GB Oils has agreed not to acquire Pace’s oil distribution business on the Isle of Wight or its Cowes Terminal, in order to resolve competition concerns that would be raised by the merger.
The OFT carefully assessed and consulted publicly on the proposed undertakings, as well as on the suitability of Pace Petroleum, a wholly owned subsidiary of MRH, to continue operating the Isle of Wight business as a robust ongoing business over the long term.
Concerns over commitment to the Island
Some third parties raised concerns that, having attempted to sell the Isle of Wight business, MRH/Pace Petroleum may not be committed to it into the future. The OFT considered all the evidence on this point but reached the view that MRH/Pace Petroleum is unlikely to close its Isle of Wight business given the continuing value of its Cowes terminal and the fact that it has the resources, expertise and incentive to continue supplying and distributing oil to its customers on the island.
Arrangement agreed today
Amelia Fletcher, OFT Chief Economist and Decision Maker in this case said:
‘This merger would have led to a virtual monopoly for the supply and distribution of heating oils and transport fuels on the Isle of Wight. However, the arrangement agreed today will maintain pre-merger levels of competition for Islanders. The OFT believes that MRH/Pace Petroleum with its extensive experience of providing this service has the resources, the expertise and the intention to continue to operate its Isle of Wight business on an ongoing basis.’
- The undertakings are below.
- The Reference Test – the OFT has a duty to make a reference to the Competition Commission if the OFT believes that it is or may be the case that a relevant merger situation has been created and the creation of that situation has resulted or may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
- Under the Enterprise Act 2002 a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million, or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced.
- Undertakings in lieu of reference – under section 73 of the Enterprise Act 2002 the OFT may, instead of making a reference to the Competition Commission, and for the purpose of remedying, mitigating or preventing the substantial lessening of competition concerned, or any adverse effect which may be expected to result from it, accept from any of the parties concerned as it considers appropriate undertakings to take any action as it considers appropriate.
- Before accepting the undertakings the OFT gave notice of the proposed undertakings under Schedule 10 of the Enterprise Act 2002.
- The full text of this decision will appear in the mergers section at a later date.
Undertakings offered by GB Oils
To address the OFT’s competition concerns, GB Oils offered not to acquire Pace’s oil distribution business on the Isle of Wight and the Cowes terminal operated by Pace (the Retained Business). In particular, the parties proposed that the Sale and Purchase Agreement (SPA) already signed between GB Oils and Pace be amended so as to exclude the Pace fuel distribution business on the Isle of Wight and Pace’s Cowes Terminal from the scope of the business to be sold to GB Oils and over which completion will occur. This would mean, in effect, that GB Oils does not acquire ownership or control of the Retained Business.
In approving the proposed undertakings, the OFT’s starting position is that it must be confident, without the need to undertake a detailed investigation, that the proposed undertakings will restore pre-merger levels of competition.
Based on the documentation presented to the OFT, the OFT considers that the remedy GB Oils has proposed will restore the competitive level prior to the merger. Pace has confirmed that it has the resources, the expertise and the incentive to operate the Retained business on an ongoing basis, that the Retained Business is profitable and that the existing sales and terminal staff will be retained by the Retained Business.
