The Office of Fair Trading has cleared the proposed acquisition of 15 former Zavvi music stores by HMV.
The OFT investigated the potential for a merger between HMV and Zavvi last year, prior to Zavvi going into administration at the end of last year. The OFT said: ‘Both parties were leading national retailers of entertainment products, with overlapping stores in a large number of local areas across the UK.’
Following its investigation, the OFT decided that a reference to the Competition Commission is not necessary as the 'failing firm defence' is met.
A deal based on a 'failing firm' claim can be allowed by the OFT if evidence clearly shows that, without it, a business would have exited the market completely, and that no realistic alternative to the merger was available.
Although members of the previous management of Zavvi have acquired ex-Zavvi stores in other areas, there was clear evidence that the landlords of the stores to be acquired by HMV would not have reached agreement on acceptable tenancy terms with this new management group.
John Fingleton, chief executive of the OFT, said: 'Although the current economic climate may result in an increase in the number of failing firm cases, we will continue to scrutinise such claims carefully to ensure competition is protected.’
HMV is in the midst of an expansion plan. It is opening music venues and is planning a cinema concept.
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