Hmv Group Regulatory News (HMV)

28 Apr 2009 16:00



The OFT has cleared the proposed acquisition of 15 former Zavvi stores by HMV plc.

The OFT investigated the merger on its own initiative. Prior to Zavvi going into administration at the end of last year, both parties were leading national retailers of entertainment products, with overlapping stores in a large number of local areas across the UK. Following its investigation, the OFT has decided that a reference to the Competition Commission is not be necessary as the 'failing firm defence' is met.

A merger based on a 'failing firm' claim can be allowed by the OFT if evidence clearly shows that, without it, a business would have exited the market completely, and that no realistic alternative to the merger was available. The rationale for accepting such claims is that any harm to competition would result even without the merger, and so should not be attributed to it.

In light of the difficult economic climate, the OFT issued a restatement of its position on 'failing firms' in December 2008. 

In this case, the OFT received compelling evidence that:

without the merger the stores would inevitably have exited the entertainment retail market as a result of Zavvi's collapse, and 

there was no less anti-competitive alternative to the merger in the overlap areas, and this included no other realistic entertainment retail purchaser for the stores.

Although members of the previous management of Zavvi have acquired ex-Zavvi stores in other areas, there was clear evidence that the landlords of the stores to be acquired by HMV would not have reached agreement on acceptable tenancy terms with this new management group. 

John Fingleton, Chief Executive of the OFT, said:

'Although the current economic climate may result in an increase in the number of failing firm cases, we will continue to scrutinise such claims carefully to ensure competition is protected. 

'Given the overwhelming evidence pointing in favour of a failing firm defence in this case we did not consider it necessary to undertake a detailed market analysis, enabling us to carry out our investigation in a more proportionate and timely manner'.

This is the fifth time that the OFT has cleared a transaction using the failing firm defence, and the first since the December restatement.

MEDIA enquiries: 020 7211+

Corinne Gladstone 8899  Kasia Reardon 8901

Jonathan Marciano 8898 John Fearn 8708

Out of hours: mobile: 07774 134814 fax messages: 020 7211 8961

Copies of press notices: Ext. 8993 

http://www.oft.gov.uk

PUBLIC enquiries: 0845 7224499  enquiries@oft.gov.uk

OFT reports and consumer information leaflets are available free from: 

OFT, PO Box 366, Hayes UB3 1XB 0800 389 3158 oft@ecgroup.uk.com