Diageo has offered to sell three of the distilleries in its Whyte & MacKay portfolio to remedy competition concerns raised by the OFT.
The drinks giant acquired Whyte & MacKay when it became the majority shareholder in Indian-spirit company United Spirits Limited (USL) in July, but the deal was referred to the OFT after a number of retailers expressed concern about the implications for bottled and blended whisky.
The OFT has now found the merger between the two companies is likely to reduce competition for bottled whisky and cause higher price rises for retailers. Its investigation suggested there was “substantial competition” in the UK retail sector between Diageo’s Bell’s whisky brand, and Whyte & Mackay’s own-label and branded blended whisky.
“Our investigation considered a wide range of evidence and we concluded that the likely loss of competition could give rise to higher prices for retailers, and ultimately consumers,” OFT chief economist Chris Walters said.
“The OFT considered to what extent other manufacturers of blended whisky were capable of competing with the merged business. The evidence showed that other manufacturers did not have, and could not quickly reach, sufficient capacity to offset the loss of competition likely to result from the merger.”
Diageo is offering to sell three of W&M’s distilleries – Invergordon, Jura and Fettercairn – as well as W&M’s central operations, to address the competition concerns. However, a spokeswoman from the company said it would retain the inventory and assets associated with malt distilleries that supply USL and primarily international markets, including the Dalmore and Tamnavulin distilleries.
“Diageo will be assisting the OFT with its on-going work,” she said. “Full details of the remedy will be made available by the OFT shortly and will be subject to formal consultation.”
While the OFT considers the offer, its duty to refer the merger to the Competition Commission has been suspended.