Shoe polish deal is stepped on

The government yesterday ordered Sara Lee Corporation, the American household products group, to divest its Cherry Blossom shoe polish business in the United Kingdom on the advice of the Monopolies and Mergers Commission.

The commission said Sara Lee's acquisition of the Cherry Blossom and Meltonian brands from Reckitt & Colman last October could be expected to operate against the public interest.

The market share of Sara Lee, which already owned the Kiwi brand, increased from 24 per cent to 53 per cent as a result of the acquisition. In supermarkets and other self-service outlets it rose from 44 to 74 per cent.

The commission said: 'On the evidence we have received there is scope, following the merger and the loss of competition between the two dominant brands in this sector, for a substantial increase in prices before Sara Lee's high market share is put at risk.'

Ewan Venters, UK marketing director of Sara Lee, said: 'We're obviously disappointed and surprised.' He declined to comment on the future of the factory at Honley, West Yorkshire, which makes Kiwi and Cherry Blossom.

Professor Patrick Minford, one of the five members of the MMC investigating panel, dissented from its conclusions, arguing that the Cherry Blossom disposal could lead to the closure of Honley, which employs 90 people.

Demand for shoe polish was largely insensitive to price, the MMC said. The market is worth about pounds 13.5m.