Heineken to Address Competition Concerns from UK Regulators

15 Jun 2017 --- The Competition and Market Authority (CMA) has found that Heineken’s proposed purchase of part of the Punch Taverns estate could reduce competition in 33 local areas across Britain.

The CMA is warning the Dutch brewer and pub operation it will face an “in-depth investigation into the merger”, unless it submits proposal which addresses concern by June 20.
 
Heineken is proposing to buy approximately 1,900 pubs from Punch Taverns.
 
As part of an initial investigation, the CMA has looked in detail at areas where pubs operated by Heineken and Punch currently compete. It has identified 33 local areas where their pubs would not face sufficient competition after the merger, which could lead to price increases or a deterioration in the quality of the service on offer.
 
The CMA also says that concerns were raised that the merger would close off an important route to market for brewers that compete with Heineken. 
 
However, the UK government authority found that the pubs being acquired are only a very small part (4%) of the UK market and are therefore not a major route to market for brewers - which was backed by evidence from brewers showing that these Punch pubs typically account for only a small proportion of all of their sales to pubs.
 
The CMA also looked closely at whether the acquisition by Heineken could lead to a reduction in the choice of beer and cider on offer in the Punch pubs. 
 
It found that any potential reduction would be limited, taking into account the drinks that Punch currently stocks and the range of drinks available in Heineken-owned pubs. 
 
The CMA also found that Heineken would not have a strong incentive to reduce the range of beer and cider, in part because doing so would risk losing business in pubs where this is important to customers.
 
“We have listened very carefully to a range of concerns about this merger. The companies will own less than 10% of all British pubs after any deal, but we are concerned about the loss of competition for pub goers in a number of local areas. Without sufficient competition from rivals, pubs in these areas might be able to raise prices or worsen the service they offer customers,” says Andrea Coscelli, CMA Acting Chief Executive and decision maker in the case.

“Heineken will now have the chance to offer proposals to address these concerns, otherwise we will carry out an in-depth investigation.”
 
The merger will be referred for an in-depth phase 2 investigation by an independent group of CMA panel members, unless Heineken is able to offer undertakings which sufficiently address the CMA’s competition concerns by the June deadline. 
 
Heineken says it intends to offer “acceptable undertakings” and is confident that these will enable the transaction to be approved by the CMA without a phase 2 referral.

“We welcome this positive step towards completing our acquisition of Punch A. This decision by the CMA acknowledges that there are only a small number of local areas where competition may be diminished due to our acquisition of the pubs in Punch A. We are confident we can offer the CMA suitable undertakings to satisfy their concerns,” says David Forde, Managing Director for Heineken UK.