Guinness deal faces big EC objections

Guinness and Grand Metropolitan are to defend their pounds 24bn drinks merger before the European Commission at a crunch meeting next week after officials yesterday confirmed that there were serious objections to the deal on competition grounds.

The statement of objections from the competition commissioner, Karel van Miert, was received by the companies a few days ago. It is understood to confirm concerns raised by the EC in June over the combined group's dominance in European spirits markets.

The companies will attend oral hearings with the EC next Thursday and Friday, where they are unlikely to offer immediate concessions. The Commission has until 27 October to complete the investigation and announce any conditions for approving the merger. Guinness yesterday declined to comment on the discussions. "It's a confidential process," said a spokesman.

The EC is worried that GrandMet and Guinness, the second and third largest suppliers of spirits in the European Union, would be able to manipulate prices in some of the biggest national markets. It would give the merged company, to be renamed GMG Brands, more than a 40 per cent share of the Scotch whisky market in several EU countries.

Another concern is that GMG Brands would have vastly increased bargaining power with big retailers because of its huge list of famous name brands. The EC probe is one of several facing the two companies, who must also overcome the opposition of Bernard Arnault, the outspoken head of LVMH, the French luxury goods group and major shareholder in both Guinness and GrandMet.

Canadian spirits giant Seagram, has already launched a strong attack on the deal, which is also being investigation by the US watchdog, the Federal Trade Commission.

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