Rockware – through parent group Ardagh Glass – agreed to buy Redfearn for 50 million in cash, but the Office of Fair Trading decided in August to refer the matter to the Competition Commission, the new guise of the Monopolies and Mergers Commission.
”Although we were concerned by the loss of an independent competitor, a number of factors meant that we could not conclude with any certainty that Ardagh would have the incentive and ability to use the position it acquired through the merger to the detriment of customers“
– Diana Guy, Competitions Commission
Both companies are renowned as major users of recycled glass in their containers.
The Commission has concluded that the acquisition cannot be expected to result in a substantial lessening of competition within the market for the supply of glass containers in the UK.
Ardagh informed the Commission that Redfearn had been in decline, analysis by the Commission then confirmed this. The Commission concluded that it was unlikely that Redfearn's parent company, Rexam, would have been willing or able to sell Redfearn to anyone other than Ardagh.
Effects
The principal effect of the merger has been to remove an independent competitor from the market, and thus to reduce the number of substantial UK manufacturers from four to three. The other two are Quinn and United Glass, a division of Owens Illinois Inc.
It has also led to an increase in the share of productive capacity held by the market leader. The Commission thinks that Ardagh, following the merger, will have 40-45 per cent of UK productive capacity once a new plant planned by Quinn is fully operational.
Diana Guy, chairman of the inquiry group, said: “Although we were concerned by the loss of an independent competitor, a number of factors meant that we could not conclude with any certainty that Ardagh would have the incentive and ability to use the position it acquired through the merger to the detriment of customers.
“We have therefore concluded that the merger cannot be expected to lead to a substantial lessening in competition,” she added.
Factors
The Commission also added that three factors led it to doubt that competitive harm might arise from unilateral action by Ardagh to withdraw capacity in order to bring a period of overcapacity to an end.
These were the existence of a viable alternative strategy for Ardagh, the lack of any evidence that Ardagh intended or intends to close capacity and the degree of uncertainty about the current levels of overcapacity in the market and the period for which such an imbalance may be expected to persist.
The Commission stated: “We conclude that there is insufficient evidence to form an expectation that competitive harm would result from the merger in a period of overcapacity.”
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Redfearn – formerly known as Rexam Glass Barnsley – was a wholly owned subsidiary of Rexam plc, but the packaging giant decided to move out of glass-making in the UK in May.
The Commission now invites responses from the main parties and other interested parties on the provisional findings, in writing, by December 6 2005.
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