The OFT is concerned about competition issues arising from the deal

The OFT is concerned about competition issues arising from the deal

It would not appear to be over just yet.

AG Barr and Britvic came out fighting today (14 February), after the UK's Office of Fair Trading gave them a bloody nose yesterday by referring their proposed merger to the competition authorities.

In a bullish joint-statement, the companies said that they are hopeful they can show the Competition Commission the deal will not cause competiton issues. The full details of the OFT's concerns are not expected to emerge publicly for "a few weeks", I'm told. But, the authority gave a few hints about the problems in its press release.

The OFT suggested that Barr's Irn Bru and Orangia and Britvic brands Pepsi Cola and Tango are "close alternatives" to Coca-Cola and its brands. Essentially, it fears that, with the two UK companies getting together it will weaken the competition against the might of the Coca-Cola Co, and lead to higher prices for consumers.

But Britvic sees it another way.

As company chairman Gerald Corbett was none-too-cryptically reported as saying: "The winners today are cracking open bottles of Champagne in Atlanta, Georgia."

However, on reflection, Corbett's reaction could be seen as slightly reactionary. Company sources I spoke to appeared rather more phlegmatic about the referral, portraying the news more as a "setback" than a deal breaker.

The OFT is seen as a cautious body that acts as a backstop to the Competition Commission. In essence, its threshold is lower than the commission's. So, concerns, which may prove to be relatively minor, can trigger a referral.

As has been seen with the proposed Anheuser-Busch InBev and Grupo Modelo deal in the US, regulators are in muscle-flexing mood at the moment. Perhaps this is inevitable as consolidation in all sectors continues apace.

At the same time, could it be that public bodies are feeling the need to justify their existence more than ever in the current cost-cutting climate? 

The Barr, Britvic deal faces a lengthy delay. But, now they've been invited to deal with the organ grinder, rather than his monkey, it could yet be that something fizzy is served in the joint-boardroom this time next year.

Irn Bru, of course.

To see just-drinks' full coverage of AG Barr and Britvic's proposed merger, click here.