Objections revealed on Guinness merger

Companies involved in three different areas of the drinks industry lodged objections with the Competition Authority on the proposed buyout by Guinness of United Beverages Holdings (UBH), it emerged yesterday in the authority's "Summary of Facts". Murphy Brewing, Irish Distillers and a wholesalers group submitted statements to the authority, stating their opposition to Guinness Ireland Group (GIG) increasing its share of UBH from the present 30.76 per cent to 100 per cent. The Competition Authority has stated its intention to refuse to issue a certificate on the proposed deal, but has allowed a four-week period for the main parties to make further submissions before making a final decision.

According to Murphy Brewing, if the takeover was permitted Guinness could merge UBH with its wholly-owned beer and soft drink wholesaling businesses, Deasy and Connacht Mineral Water, "without any redress available to the Minister for Enterprise, Trade and Employment (under the Mergers Act) or the Competition Authority".

The Cork-based company further stated that efficient gains from the deal would not be passed on to the consumer "because GIG had no competitive spur" due to its dominance.

Guinness, however, said that the merger would not have competitive implications in the most contentious area - the wholesale distribution of packaged beer and soft drinks market. "GIG did not envisage any change in the day-to-day activities of UBH. Employment levels and the management team at UBH would not be significantly affected by the acquisition," it stated.

In any future submission, Guinness is likely to strengthen its case through its agreement with the European Commission to dispose of its 49.6 per cent interest in C&C Wholesale, which distributes beer and soft drinks, so that its merger with Grand Met is approved.

Earlier this week, a spokesman said that the extent of the disposal of the C&C interest and the 33 per cent shareholding in spirits distributor Edward Dillon was being reviewed.

Irish Distillers stated that the proposed acquisition of UBH would "prevent, restrict and distort competition", as Guinness "was dominant in the brewing and distribution of drinks in the State". The submission by three wholesaler parties stated that the number of wholesalers had fallen from 100 to about 30 in the past 20 years and that Guinness had a large stake in four of the largest six.

The Competition Authority agreed with Guinness that the draught beer market be excluded from analysis of the deal because breweries carry out their own deliveries. But it "disagrees with the views expressed on a broader market definition which purports to include all alcoholic and non-alcoholic drinks", considering that there are two markets, "the production of soft drinks, and the wholesaling of packaged beer and soft drinks".

Guinness, in making its case, stated that neither it not UBH had a share of 35 per cent or more "of the relevant market", that it had "little or no influence over product strategy or the management of C&C".