COMMERCIAL-IN-CONFIDENCE
Merchant acqusition
As we have suggested earlier, the reduction in the number of large acquirers gives prima facie cause for concern in this market. The big four dominate this market and a merger would give Lloyds between a quarter and a third share.
58. Competition issues of this order in the above markets might suggest that a reference to the MMC is the most appropriate course to follow. Only a thorough examination, it might be argued, by the MMC would reveal whether such concerns were justified. The argument by Lloyds that recent developments in banking necessitate major changes in the structure of UK banking eg rationalisation is also one that would appear to be more properly addressed by the MMC in the usual way by weighing concerns and detriments on competition on the one hand against the possible benefits of the rationalisation of branch structure (as proposed by Lloyds) on the other.
ARE DIVESTMENTS APPROPRIATE IN THIS CASE?
59. The main thrust of Lloyds' argument against a reference has been that a merger would produce benefits through much needed rationalisation at Branch level. Lloyds has not therefore - until the few days - addressed the question as to whether the new powers under Section 75g of the Fair Trading Act are appropriate to remedy any perceived detriments to competition. Its first submission to the Office said that any discussion of disposals would be "premature". However they have revised their position, and it is now as set out in Appendix II. Their proposals would appear to meet the Office's concerns on factoring and merchant acquiring. regard to small business lending some dififcult questions arise over the suitability of an undertaking to divest branches- such as:
1
But in
at which " cut off point" should a branch be seen as "local" to one business?
Can personal services be separated from small business services?
Are the adverse effects of the merger identifiable in sufficient detail?
Could a branch's assets and liabilities be readily transferred to another branch?
What scale of branch disposals is requisite to remedy the perceived adverse effects of the merger?
Would it be feasible to "hive-off" the small firm lending activity as a separate enterprise? Or would such surgery emasculate the retail
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COMMERCIAL-IN-CONFIDENCE
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