Trade Secretary Stephen Byers announced this morning (Wednesday) that he is blocking the £2.3bn takeover of Bass Brewers by Belgium's Interbrew.
Byers said he accepted the conclusions of the Competition Commission, contained in its report also published today, and the advice of the Director General of Fair Trading, that the merger would likely operate against the public interest.
He concluded that Interbrew should be required to sell the Bass business to a buyer approved by the Office of Fair Trading.
Byers said: "I accept the conclusions that the merger would be against the public interest." It would reduce competition in the market, lead to higher prices for end consumers, and reduce consumer choice, he added.
The Competition Commission found that the merger would make Interbrew the largest brewer, wholesaler and distributor of beer in Great Britain and would would strengthen Interbrew's UK market position, with four of the ten top selling beer brands, including two of the top three, Carling and Stella Artois. An effective duopoly in the industry, between the two largest brewers/distributors, Interbrew and Scottish and Newcastle, would be created.
The Commission expected this to cause higher prices for end consumers, as net wholesale prices would likely increase as discount levels fell, a concentration on leading brands leading to reduced consumer choice, and reduced competition in retail, again to the detriment of consumers.
The report also found Interbrew charged different prices according to the type of customer with whom it was dealing, offering more attractive prices to multiple retailers than to independent free trade or independent wholesalers.
The only remedy which dealt adequately with those adverse effects was for Interbrew to divest itself of Bass Brewers in the UK.
The Commission said it had given careful consideration to whether the divestment by Interbrew of the Whitbread Brewing Company, which it bought in May, would remedy the adverse effects, but concluded that it would not be a sufficient remedy.
In a statement, Interbrew, the world's second largest brewer, said it is "currently reviewing the full text of the Secretary of State's statement and the Competition Commission report.
Shares in Interbrew, which were suspended in Brussels ahead of the announcement, while trading at 37.30 euros, were expected to fall by about 20% when dealing is reopened at midday. The shares were listed last month at 34 euros.
• Interbrew is now left in the worst of all positions, writes Peter Martin, with seemingly not even the option of dumping its Whitbread business as a way of keeping Bass. This begs the question of who now will be able to take on the Bass business in its entirety?
Carlsberg is presumably already ruled out as a merger between Bass and Carlsberg-Tetley has already been blocked. That leaves South African Breweries or Heineken as the leading contenders. But if Interbrew minus Whitbread has been effectively blocked surely Heineken would also stand little chance of passing the competition test.
One thing is clear, the balance of power in the beer market is now firmly with the retailers. Strong opponents of the deal, such as Wetherspoon's Tim Martin and Punch's Hugh Osmond, will be celebrating.
Byers said he accepted the conclusions of the Competition Commission, contained in its report also published today, and the advice of the Director General of Fair Trading, that the merger would likely operate against the public interest.
He concluded that Interbrew should be required to sell the Bass business to a buyer approved by the Office of Fair Trading.
Byers said: "I accept the conclusions that the merger would be against the public interest." It would reduce competition in the market, lead to higher prices for end consumers, and reduce consumer choice, he added.
The Competition Commission found that the merger would make Interbrew the largest brewer, wholesaler and distributor of beer in Great Britain and would would strengthen Interbrew's UK market position, with four of the ten top selling beer brands, including two of the top three, Carling and Stella Artois. An effective duopoly in the industry, between the two largest brewers/distributors, Interbrew and Scottish and Newcastle, would be created.
The Commission expected this to cause higher prices for end consumers, as net wholesale prices would likely increase as discount levels fell, a concentration on leading brands leading to reduced consumer choice, and reduced competition in retail, again to the detriment of consumers.
The report also found Interbrew charged different prices according to the type of customer with whom it was dealing, offering more attractive prices to multiple retailers than to independent free trade or independent wholesalers.
The only remedy which dealt adequately with those adverse effects was for Interbrew to divest itself of Bass Brewers in the UK.
The Commission said it had given careful consideration to whether the divestment by Interbrew of the Whitbread Brewing Company, which it bought in May, would remedy the adverse effects, but concluded that it would not be a sufficient remedy.
In a statement, Interbrew, the world's second largest brewer, said it is "currently reviewing the full text of the Secretary of State's statement and the Competition Commission report.
Shares in Interbrew, which were suspended in Brussels ahead of the announcement, while trading at 37.30 euros, were expected to fall by about 20% when dealing is reopened at midday. The shares were listed last month at 34 euros.
• Interbrew is now left in the worst of all positions, writes Peter Martin, with seemingly not even the option of dumping its Whitbread business as a way of keeping Bass. This begs the question of who now will be able to take on the Bass business in its entirety?
Carlsberg is presumably already ruled out as a merger between Bass and Carlsberg-Tetley has already been blocked. That leaves South African Breweries or Heineken as the leading contenders. But if Interbrew minus Whitbread has been effectively blocked surely Heineken would also stand little chance of passing the competition test.
One thing is clear, the balance of power in the beer market is now firmly with the retailers. Strong opponents of the deal, such as Wetherspoon's Tim Martin and Punch's Hugh Osmond, will be celebrating.
