They've been Tangoed: OFT refers Barr Britvic merger to Competition Commission

14-Feb-2013 - Last updated on 14-Feb-2013 at 09:40 GMT

Related tags Coca-cola

Britvic Barr Soft Drinks: Signed, sealed, but not yet delivered due to UK competition concerns

Uncertainties over the $2.2bn merger of AG Barr and Britvic remain, as the Office of Fair Trading (OFT) yesterday referred the deal to the UK Competition Commission, citing concerns over the closeness of Britvic brands Pepsi and Tango to Barr staples.

The companies said jointly yesterday that the £1.4bn ($2.2bn) merger - to create the UK's second player in Barr Britvic Soft Drinks - has now lapsed and they will now review OFT's decision before making a further announcement.

In a statement issued yesterday justifying its referral to the CC, the OFT noted that Barr and Britvic were two of the three main players in the UK soft drinks market along wit Coca-Cola Enterprises (CCE).

"The OFT's investigation found that the acquisition raised competition concerns with respect to the loss of the competitive constraint from some of Britvic's brands on Barr's IRN-BRU and Orangina brands," the body said.

Consumer survey evidence submitted by Barr and Britvic showed that Coca-Cola and other CCE brands were important alternatives for drinkers of Barr's IRN-BRU and Orangina brands, the OFT said.

"However, it also showed that some of Britvic's brands - in particular Pepsi and Tango - were also sufficiently close alternatives to raise competition concerns," the body added.

"As a result, the OFT could not rule out the possibility of higher prices post-merger."

Amelia Fletcher, OFT chief economist, said: "In addition, we could not rule out the possibility of further competition concerns arising from combining the overall Britvic portfolio of soft drinks with the entire Barr portfolio. We are therefore referring the merger to the Competition Commission for an in-depth investigation."

In a related development, Britvic yesterday announced that Paul Moody would step down as CEO to make way for Simon Litherland.