The findings mean Heineken must offer proposals to address the authority’s concerns by 20 June or the deal will be subject to a second “in-depth investigation”.
CMA’s decision comes after an initial investigation into areas where pubs operated by Heineken and Punch currently compete. It identified 33 areas where these pubs “would not face sufficient competition after the merger, which could lead to price increases or a deterioration in the quality of the service on offer” (details of the 33 areas in question were not available at the time this article was published).
Not a major route for brewers
However, CMA said that further concerns that the deal could block market access for brewers that compete with Heineken were unfounded. It said: “The [Punch] pubs being acquired are only a very small part (4%) of the British market and are therefore not a major route to market for brewers.”
CMA added that this conclusion was backed by evidence from brewers showing that these Punch pubs account for a small proportion of all of their sales to pubs.
Choice concerns unfounded
Concerns that the acquisition could lead to a reduced choice of beer and cider in the Punch pubs affected was also found to be unlikely.
CMA said that “any potential reduction would be limited, taking into account the drinks that Punch currently stocks and the range of drinks available in Heineken-owned pubs”.
It said Heineken was unlikely to reduce the range of beer and cider because that would risk losing business in pubs where this is important to customers.
CMA acting chief executive and case leader Andrea Coscelli said: “We have listened very carefully to a range of concerns about this merger.
"The companies will own less than 10% of all British pubs after any deal, but we are concerned about the loss of competition for pubgoers in a number of local areas.
"Without sufficient competition from rivals, pubs in these areas might be able to raise prices or worsen the service they offer customers.”
He said that if Heineken failed to address concerns about competition in the 33 local areas the merger would be referred for an in-depth Phase 2 investigation by an independent group of CMA panel members.
Responding to the decision in a statement Heineken said it “intends to offer acceptable undertakings and is confident that these will enable the transaction to be approved by the CMA without a Phase 2 referral”.
Heineken UK managing director David Forde said: "We welcome this positive step towards completing our acquisition of Punch A.
"This decision by the CMA acknowledges that there are only a small number of local areas where competition may be diminished due to our acquisition of the pubs in Punch A. We are confident we can offer the CMA suitable undertakings to satisfy their concerns.”