Property security merger could shut out competition

25 Jun 2012

The parties are the country’s two leading suppliers of vacant property security services to local authorities and businesses (including residential and commercial landlords, retailers, facilities management companies and insurance firms). Vacant property security services involve the securing of vacant social housing and commercial properties through the provision of steel screens, doors and wireless alarms.

In its provisional findings, a summary of which has been published today, the CC has found that the merger has given the parties a very high share of the market for social housing, with limited competition from rivals or alternatives for customers from providers in adjacent markets. Whilst some commercial customers may have competitive supply options post-merger, competition is not uniform across the country so there would be areas where customers could also lose out from the merger, in addition to those who require nationwide coverage.

The CC has also published a notice of possible remedies to address the loss of competition, including the sale of all or part of the UK SitexOrbis business, and will consult on these before coming to its final decision.

CC Deputy Chairman and Chairman of the VPS/SitexOrbis Inquiry Group, Professor Alasdair Smith, said:

‘Had it not been purchased by VPS, it seems likely that SitexOrbis would have remained as an independent company or been taken over by another buyer and so continued to act as VPS’s closest competitor. Particularly in social housing, customers are now faced with little in the way of alternatives—either from existing competitors or potential new entrants—to prevent the merged company from raising prices or worsening its service in other ways.

‘The picture is slightly different for commercial customers, but the nationwide reach of the merged company means that it will also face insufficient competition in some regions and among those customers who require coverage across the whole of the country.

‘We are now seeking views on the best way to restore competition in these markets, which could include a requirement for the sale of all or part of the SitexOrbis business.’

The CC’s provisional finding is that the merger may be expected to result in a substantial lessening of competition leading to higher prices than would otherwise be the case in the supply of security services for vacant properties (SSVP):

• to social housing customers across Great Britain; and
• to commercial customers in some parts of Great Britain (namely, in Scotland, South Wales, south-west England and north-east England); and
• to commercial customers with national requirements.

The CC’s provisional finding is that the merger may not be expected to result in a substantial lessening of competition in the supply of SSVP in Northern Ireland.

A summary of the provisional findings report, the notice of provisional findings and a notice of possible remedies are available on the VPS/SitexOrbis inquiry page along with all other information relating to the investigation. A copy of the full provisional findings report will be published as soon as possible.

Any interested party is invited to respond to the provisional findings (in writing) by no later than 5pm on Monday 16 July and to the notice of possible remedies (in writing) by no later than 5pm on Monday 9 July 2012. To submit evidence, please email:
VPS_SitexOrbis@cc.gsi.gov.uk

or write to:

Inquiry Manager, VPS/SitexOrbis
Competition Commission
Victoria House
Southampton Row
LONDON
WC1B 4AD

Notes for editors

1. The CC is an independent public body, which carries out investigations into mergers, markets and the regulated industries.

2. The OFT referred the merger on 5 March 2012 and the CC is required to publish its final report by 19 August 2012. 

3. The members of the VPS/SitexOrbis Inquiry Group are: Professor Alasdair Smith (Group Chairman and CC Deputy Chairman), Katherine Holmes, Anthony Stern and Professor Puliyur Sudarsanam.

4. The Enterprise Act 2002 empowers the OFT to refer to the CC completed or proposed mergers for investigation and report which create or enhance a 25 per cent share of supply in the UK (or a substantial part thereof) or where the UK turnover associated with the enterprise being acquired is over £70 million.

5. The CC has a 24-week period in which it is required to publish its report, which may be extended by no more than eight weeks if it considers that there are special reasons why the report cannot be published within that period.

6. Enquiries should be directed to Rory Taylor or Siobhan Allen or by ringing 020 7271 0242.