OFT finds tracking data market ‘insufficiently important’ despite parties’ monopoly

The Office of Fair Trading (“OFT”) has provided an interesting example of how it can exercise its discretion when applying the ‘de minimis’ exemption even where significant competition law issues arise in a transaction.  The ‘de minimis’ principle provides the OFT with a discretionary exemption to its duty to refer a merger to the Competition Commission if it deems that the market concerned is of “insufficient importance”.

Acquisition of Prozone Group Limited by Sports Universal Process S.A.S.

The case related to Sports Universal Process S.A.S. (“SUP” also operating under the brand name Amisco), which acquired Prozone Group Limited (“Prozone”) on an unconditional basis on 21 June 2011.  

The parties overlapped in the supply of performance data capture and analysis of footballers for the English Premier League and Championship.  Under section 23 of the Enterprise Act (the “Act”) parties may voluntarily notify a transaction to the OFT if one of the parties has a turnover in the UK exceeding £70 million (“the turnover test”) or if the parties, as a result of the merger, will hold a combined share of at least 25% of the relevant market (“the share of supply test”).  The transaction was brought to the attention of the OFT by a third party and Prozone and SUP were deemed to hold a combined share in excess of 25% of the market for the supply of performance data capture and analysis for UK football leagues.  Therefore, the share of supply test was met and the OFT had jurisdiction under the Act to investigate whether the acquisition of Prozone by SUP would result in a substantial lessening of competition in the market.

OFT’s assessment of the market

SUP and Prozone supply sports performance data and analysis software products to sports clubs, leagues and federations, and media and commercial customers.  The data is analysed to produce an objective assessment of player performance which is used by sports teams for match and training performance analysis of players, opposition teams, and potential signings.

The OFT defined the relevant market as the supply of ‘non-invasive tracking data and associated products to professional football clubs in the UK’ (“the tracking data market”).  At the time of the transaction Prozone and SUP were considered the only suppliers of tracking data in the UK.  The acquisition would result in a monopoly of UK tracking data.  The OFT was concerned that customer choice would therefore be reduced following the merger, and on this basis felt its duty to notify the Competition Commission (“the Commission”) under s.33 (1) of the Act had been triggered.  However, the OFT has the power to decline to make a referral under s.33 (2) (a) of the Act where it concludes the market concerned was not of sufficient importance (i.e. to exercise the de minimis exemption).

Application of the de minimis exemption

In the OFT’s Guidance on exceptions to the duty to refer (“the Guidance”), mergers affecting markets worth less than £10 million may not be of sufficient importance to justify a reference.  However, the OFT may still refer a merger in a market below this threshold, if the impact of the merger is likely to be significant. 

The OFT valued the tracking data market at approximately £2.85 million in the UK, and determined that although Prozone and SUP would become the two main suppliers of tracking data, the prospect of actual harm to customers as a result was substantially lower than one would expect, due to mitigating factors considered by the OFT.  Prozone and SUP’s contracts were typically for three years thus presenting a regular opportunity for customers to seek alternatives without being constrained for an unreasonable length of time.  Furthermore, although there were no other competitors active in the UK, there were a number of potential entrants or actual competitors to the tracking data market operating in other Member States, including Vistrack and Venatrack.  Finally, given the insignificant value of the market, the OFT decided that the public cost of a Commission investigation could not be justified.  The OFT therefore exercised the exemption to its duty to refer.

Points of interest

The OFT will always consider competition within the market when considering whether to apply the de minimis exemption, even when the market meets the relevant threshold.  Some of the factors that are taken into account include:

• the size of the market concerned, and whether any competitive harm will affect the whole or part of the market;
• existing competitors and potential new entrants;
• whether there are any significant barriers to entry;
• the availability of alternatives or substitute products to customers; and
• how long any competitive harm is likely to last.

It is important to note that parties to a transaction must always be prepared to present evidence to the OFT based on the factors above in order to mitigate any theories of harm.  Parties should not focus solely on the value of the market when raising the de minimis exemption to avoid a referral.  The OFT appears to be prepared to apply the de minimis exemption, even where the transaction will result in a significant market share, so long as the parties can show some competition will remain on the market post acquisition.

Lawyers Robert Vidal, Louisa Penny, Richard Craig