Comment: OFT may spoil fun and games at the chemist

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The Independent Online
OFT may spoil fun and games at the chemist

Don't be so sure that the two rival bids for Lloyds Chemists are going to escape a Monopolies and Mergers Commission reference. The Government's mergers panel met this week. Word is that spurred on by a legion of complaints from small independent pharmacies, there is now a real possibility of the Office of Fair Trading calling a halt to the fun and games.

UniChem has always been confident of avoiding a reference. Any concern about increased concentration in drug wholesaling ought to be answered by selling off a couple of depots, UniChem believes. The trouble is that this is not the main focus of concern with the competition authorities about this bid. Rather, it is our old friend "vertical integration". Independent pharmacies believe they could be disadvantaged if either of their two main suppliers, UniChem and Gehe, also becomes Britain's leading retailer of pharmaceutical products.

We are going to know soon enough which way the OFT wants to jump for there is in this bid battle a slight jurisdictional problem. The UniChem bid for Lloyds comes under the OFT's jurisdiction, but the Gehe bid, because it is cross border, is being judged in Brussels. Gehe may be a German company, but its interests in Britain mirror almost exactly those of UniChem. Plainly it would be a nonsense if the OFT was to refer UniChem while Brussels cleared Gehe. Not only would Gehe win by default, but we would also end up with a merger which by implication the OFT feels uncomfortable with.

Ergo, if the OFT wants to refer UniChem, it is going to have to claim back jurisdiction over Gehe from Brussels. If it does attempt to claim jurisdiction, which we will know probably next week, then that tells us the authorities want to refer. Poor Allen Lloyd. He may have to wait rather longer than he expected for his pounds 46m.