Liquor giant Diageo's USD 2 billion United Spirits buyout hit a regulatory hurdle today after UK fair trade watchdog found it to be anti-competitive, forcing the company to offer selling bulk of Whyte & Mackay business.
The Office of Fair Trading (OFT) would have a fresh look at the Diageo Plc-United Spirits Ltd deal in the wake of a new proposal made to sell bulk of Whyte & Mackay business to address the competition issues in the British whisky market.
In the UK, United Spirits' subsidiary, Whyte & Mackay, is primarily active in the supply of whisky, besides being a player in other spirits, including vodka.
Also Read
The regulator said the merger may lead to a substantial lessening of competition in the supply of blended whisky to retailers.
OFT came to the conclusion after analysing evidence including data on consumer switching between brands, economic modelling and internal documents.
Vijay Mallya-led United Spirits had snapped up Whyte & Mackay for about 595 million pounds (then nearly Rs 5,000 crore) in 2007.
A leading distiller of Scotch whisky, Whyte & Mackay's brands include The Dalmore, Isle of Jura, Glayva, Fettercairn, Vladivar vodka and Whyte & Mackay blended Scotch.
Chris Walters, OFT's Chief Economist and Decision Maker in this case, said the two companies are leading suppliers of blended bottled whisky in the UK, especially to supermarkets and other large retailers.
"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," he said in a statement.
In February this year, the Competition Commission of India (CCI) had approved Diageo' majority stake purchase in United Spirits and the deal was worth about USD 2 billion.
