Heineken’s takeover of Punch Taverns, a pub and bar operator in the United Kingdom with around 3,350 leased and tenanted pubs may be stopped by concerns of the UK competition watchdog. The deal, which was announced in January, includes the purchase of approximately 1,900 pubs, which are directly owned by Punch (inside.beer, 5.1.2017).
As part of an initial investigation, the Competition and Markets Authority (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.
Concerns were also raised with the CMA that the merger would close off an important route to market for brewers that compete with Heineken. However, the CMA found that the pubs being acquired are only a very small part (4%) of the GB 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. The CMA 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. It 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.
Dr Andrea Coscelli, CMA Acting Chief Executive and decision maker in the case, said:
“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. 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. Heineken has until 20 June 2017 to do so.
The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law.