OFT refers treasury management services merger to Competition Commission

The Office of Fair Trading (OFT) has referred the merger of the number one and two suppliers of treasury management consultancy services to local authorities to the Competition Commission for further investigation.

The OFT said that the now-completed acquisition by Sector Treasury Services Ltd of ICAP plc's treasury management consultancy services business Butlers, had led to the merged entity having a market share in excess of 70 per cent. The OFT said that Sector Treasury Services and Butlers are considered by many customers to be each other's closest competitors and that it believed that the remaining suppliers of these services are unlikely to be able to constrain the merged entity and that barriers to entry in this market are high.

It continued: “The OFT is therefore concerned that the merger may lead to local authorities paying higher prices or experiencing a reduction in quality, range or service. This view is consistent with the significant number of third party concerns received by the OFT.”

Sheldon Mills, OFT Director of Mergers said: "Our investigation identified concerns about the potential impact of this transaction on local authorities, and we also received a significant number of submissions to this effect. We therefore believe this is an appropriate case to refer to the Competition Commission for a fuller investigation.2

The Competition Commission is expected to report by 14 September 2011.

Treasury management consultancy services to local authorities include the supply of information and advice on, for example, investment and debt management, legal and regulatory compliance, risk assessment, and debt and investment accounting.

The OFT has a duty to make a reference to the Competition Commission if the OFT believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.

Under the Enterprise Act 2002 a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million; or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced.