WIREDGOV

The OFT has yesterday referred to the Competition Commission the completed acquisition by Alliance Medical Limited (Alliance) of the manufacturing assets of IBA Molecular UK Limited used to produce Fluorodeoxyglucose 18F (FDG-18). This comes after the OFT identified competition concerns in the south of England which could lead to an increase in the price of FDG-18 and a decline in the reliability of supplies.

FDG-18 is a radioactive tracer used in medical imaging scans for the diagnosis of cancer and is purchased by NHS England, hospitals and other diagnosis centres. It can only be used for a limited time after it is made because it is radioactive and has a two hour half-life.

The evidence in this case indicated that the parties competed before the merger for customer contracts within a two hour drive of their production sites in Sutton and Guildford where there is only one other supplier of FDG-18 to third parties. The market share of the combined parties in this area is estimated to be over 45 per cent.

Customers complained to the OFT that the merger may result in higher prices for FDG-18 and a decline in the reliability of supplies.

Chris Walters, OFT Chief Economist and Decision Maker in this case, said 'FDG-18 is essential to medical imaging scanning for the diagnosis of cancer. This merger removes one of the few firms supplying it to hospitals and other healthcare organisations in the south of England. This could lead to an increase in cost to the NHS and a reduction in the reliability of supply.

'Alliance told the OFT that the merger would secure supply of FDG-18, creating benefits for patients. Though plausible, we did not have sufficient evidence to be confident that this would outweigh the possible harm. A more in-depth assessment is therefore needed.'   

The Competition Commission, which will be replaced by the Competition and Markets Authority on 1st April 2014, is expected to issue its report by September 2014.

NOTES

1. Alliance Medical Limited provides diagnostic imaging services. Its wholly owned subsidiary, Erigal Limited, produces FDG -18 at Keele, Preston and Sutton. The merger comprises assets in Guildford and Dinnington formerly owned by IBA Molecular UK Limited and used to produce FDG-18.
2. 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 a relevant merger situation has been created; and the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
3. 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 share of supply in the UK (or a substantial part thereof) of at least 25 per cent is created or enhanced. 
4. The OFT investigated this case on its own initiative. The OFT (and after the 1 April the CMA) has a dedicated Mergers Intelligence Team responsible for monitoring non-notified merger activity and liaising with other competition authorities. The team can be contacted confidentially at mergers.intelligence@cma.gsi.gov.uk if any interested party wishes to inform it of a merger that it considers might be anti-competitive.
5. The text of this decision will be placed online by the CMA as soon as is reasonably practicable.
6. On 1 April 2014, the Competition and Markets Authority (CMA) will become the UK's lead competition and consumer body. The CMA will bring together the existing competition and certain consumer protection functions of the Office of Fair Trading and the responsibilities of the Competition Commission, as established by the Enterprise and Regulatory Reform Act 2013.