As UK's fair trade watchdog OFT continues to probe Diageo's purchase of controlling rights in United Spirits Ltd from Vijay Mallya's UB group, the regulator has released a 53-page report detailing concerns posed by this deal to competition in the British whisky market.
The Office of Fair Trading (OFT) had decided on November 25, 2013 to have a fresh look at the USD 2 billion deal, after Diageo offered to divest bulk of Whyte & Mackay (W&M) business to address anti-competition concerns posed by this merger.
OFT yesterday made public the "full text" of its November 25 decision, wherein it said that "the OFT is concerned only by the impact of the transaction".
"The focus of the competitive assessment is therefore on the incremental effect on competition of Diageo's shareholding and the control this confers on Diageo.
"... A significant number of third parties raised the concern that the parties would restrict the supply and/or increase prices of private label blended Scotch whisky," the 53-page order said.
The OFT had received comments from a wide range of customers and competitors of Diageo and W&M and their views have been incorporated appropriately in its decision.
The regulator said that it "found that the merger gives rise to a realistic prospect of a substantial lessening of competition" and subsequently the merged parties offered an undertaking "to divest the entirety of the W&M business apart from two malt distilleries and the associated brands of those two distilleries".
Diageo plc manufactures and supplies spirits, wine and beer in the UK and around the world. It owns a number of spirits brands both worldwide and in the UK, including Smirnoff vodka, Bell's and Johnnie Walker Scotch whisky, Baileys liqueur, Tanqueray gin and Captain Morgan rum.
On the other hand, India-based United Spirits, part of Vijay Mallya-led UB Group, manufactures and supplies spirits in the UK and in other countries. All of its sales of products in the UK are made through its UK subsidiary W&M.
United Spirits had acquired W&M for about 595 million pounds (then nearly Rs 5,000 crore) in 2007.
In July 2013, Diageo completed acquisition of a 25.02 per