MMC launches second inquiry into condoms

THE Monopolies and Mergers Commission has launched an inquiry into the British condom market for the second time in 11 years after a reference from the Office of Fair Trading, the consumer watchdog.

Industry estimates suggest that about 153 million condoms were sold in Britain last year, valuing the market at about pounds 45m. The sector is dominated by Durex, the brand owned by London International, which has a 75 per cent market share.

However, it has been losing ground to Mates, the brand that has captured one- fifth since its launch five years ago with the backing of Richard Branson, the founder of Virgin Group. The brand was acquired from a health charity for pounds 1m by Ansell, an Australian company, in October 1988.

The condom market was last investigated by the MMC in 1982 when Durex held about 95 per cent of the market. That inquiry concluded that the brand's monopoly had operated against the public interest in that 'its prices might be expected to become excessive'.

As a result, the company was told to restrict its price increases to 1.5 per cent below an index of costs.

However, the OFT said yesterday that it has decided to call for another inquiry to review the market after a 10-year spell. Sir Bryan Carsberg, the director-general, said: 'Although the price control arrangements have restrained the rate of increase of average realised prices, I believe that the market has changed and the price control arrangements now need to be reviewed.

'I shall be particularly interested in the MMC's view on the way in which the price control mechanism has been applied and whether this has damaged the prospect of successful competition from Mates and other suppliers.'

It is understood that the inquiry has not been triggered by any complaints to the OFT regarding uncompetitive practices. A spokeswoman for the OFT said that the inquiry may not necessarily lead to tighter controls on existing suppliers.

Demand for condoms in the past few years has grown significantly due to the spread of Aids. The market grew by about 15 per cent in 1989 and 1990 but has since stabilised to around 10 per cent a year.

London International shares closed unchanged at 220p yesterday.