Monday, 3 November 2008

OFT vs. Northgate/Anite and Capita/IBS

The OFT has published the full text of its decision not to refer Northgate’s proposed acquisition of Anite’s Public Sector business to the Competition Commission. A summary of the text, and a link to the full text can be found here.

Much as
predicted, the focus of their investigation was on the Revenues & Benefits market, the two other areas (of Local Government Social Housing and Criminal Justice) rightfully only requiring minimal investigation to confirm there were no serious competition concerns.

In the R&B market, the OFT seems to have drawn the conclusion that Anite represented no real competition– noting that the “majority of authorities contacted that have recently tendered their R&B business have told the OFT that they do not consider the Pericles product as a viable alternative”. Going on to conclude “bidding data indicate that Anite does not operate as a key competitor in the market. Having assessed the competitive interaction existing between Northgate and Anite, and taking into account Anite's position in the market going forward, the OFT believes that Anite does not place a significant competitive constraint on Northgate and is unlikely to do so in the future. Accordingly, no realistic prospect of substantial lessening of competition arises as a result of unilateral effect concerns in the R&B market.”

Interestingly the full text does refer to the current Capita/IBS investigation. Reading between the lines of the full text (and with knowledge of some of the figures hidden from public view), although the Northgate/Anite OFT text makes it clear that “the OFT does not prejudge the outcome of its investigation in that case”, if it is to follow the same argument that in the end allowed the Northgate/Anite acquisition to proceed, then it seems highly likely that there will be a “substantial lessening of competition” in the R&B market and therefore the Capita/IBS acquisition will be referred.

The Northgate/Anite OFT text noted that “Civica appears not to be interested in bidding for any offer, after having failed to develop a system to meet customer requirements”. So there really are only two suppliers now – Northgate/Anite and Capita/IBS – and on the basis of new business wins over the past few years it seems clear that IBS did indeed place ”significant competitive constraint” on Capita.

It seems likely that the Capita/IBS deal will wind up on the Competition Commission’s desk after all.........

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