16 February 2005

FT: OFT retains control of bid for LSE

Competition issues raised by two prospective bids for the London Stock Exchange from Deutsche Börse and Euronext will be considered by the UK's Office of Fair Trading and will not be referred to European regulators. A referral to Brussels could have left a considerable degree of uncertainty surrounding the fate of both prospective bids for months. The OFT must still decide whether to refer either bid to the Competition Commission, or to approve either bid, or to approve either bid with modifications. It must do so within the next 40 business days.

The OFT said that after careful consideration and discussion with its counterparts elsewhere in Europe, it had decided that the competition issues would be best aired in the UK.

“After careful deliberation, including discussions with the EC and German counterparts, the OFT has concluded that the UK remains the appropriate forum for competition review in this instance,” the OFT said.

It said its decision reflected the fact that the LSE, its primary customers and the main competitive impact of a merger would fall in the UK.

However, many of the competition issues raised by customers in connection with an acquisition of the LSE concern cross-border share trading in Europe.

In particular, customers have expressed concern about Deutsche Börse's ownership of its own post-trade services business and the ability of that business model to suppress competition.

Alan Yarrow, chairman of the London Investment Banking Association and vice-chairman at Dresdner Kleinwort Wasserstein, said a review of the prospective mergers by UK competition authorities was to be welcomed.

“I am very excited that this is our chance as a European market to assess where the road blocks lie that are preventing us from developing a fully-fledged seamless capital market,” said Mr Yarrow.

Deutsche Börse has already submitted its plans for a bid to the German competition authorities.

Germany's Bundeskartellamt, or federal cartel office, said the OFT's decision would have no bearing on its review. Last week it said it would conduct a full four-month investigation, which will run until mid-May, rather than an expedited one-month inquiry.

But the office made clear that a referral to the European Commission was no longer possible, since the deadline for such an action expired after the first three weeks of its investigation on February 4.

Deutsche Börse welcomed the OFT's decision and said: “We have filed our applications with the responsible national authorities and we are confident of receiving clearance of our case within the given time frame.”

© Financial Times