Competition Commission finds merger could lead to price hike for landlords
Competition ruling threat after SitexOrbis merger
The Competition Commission is threatening to break up the merger of the UK’s two largest vacant property security companies on the grounds it could lead to higher prices for social landlords.
On the back of a referral from the Office of Fair Trading on 5 March, the commission has ruled the merger between SitexOrbis and VPS Holdings last September could result in a substantial lessening of competition.
As a result, the Competition Commission has suggested forcing a sale of part or the whole of, the UK SitexOrbis business.
The move comes just weeks after Inside Housing revealed concerns over competition which prompted the OFT to investigate the merger of Harvest Housing Group and Arena Housing Association to become 32,000-home Your Housing Group.
Reports from the Competition Commission reveal it found the merger between SitexOrbis and VPS Holdings had given it a greater than 25 per cent share of the UK social housing market and that the rivals ‘competed across the UK’ for social housing customers.
Competition Commission investigations are triggered when a merger creates a 25 per cent market share together with a turnover of more than £70 million. Combined, SitexOrbis and VPS are thought to have around 400 UK social housing customers. The takeover by VPS created a combined turnover for the European businesses of £100 million.
The Competition Commission reports said: ‘The evidence we considered indicated that the merging parties are, for most customers, each other’s closest competitor.
‘We formed the view that we would expect the merged company to have the incentive and ability to raise prices to most social housing customers.’ It added that it expected the merger to lead to price increases in the absence of ‘countervailing factors’.
The commission said it did not expect the merger to result in a reduction in competition in Northern Ireland because VPS did not have a presence there before the merger.
It now suggests several courses of action including the sale of the UK business and assets of SitexOrbis, the sale of the Great Britain business and assets of SitexOrbis - excluding the assets and business of the company in Northern Ireland - or a sale of a package of assets.
The commission, which has the power to force a sale, is consulting on these options before reaching a final decision by 19 August.
David Walker, chief executive of SitexOrbis, said: ‘Since we were acquired we have been kept completely separate from VPS apart from feeding information to the commission and VPS. There should be no change at all as far as our customers are concerned.’
VPS Group chief executive, Mark Silver, said: ‘The CC’s findings have not cleared the transaction. The CC have suggested a number of remedies to address a perceived lessening of competition and we will now work closely with them to address their concerns.’