Dixons doesn't dominate UK PC market

Updated This may come as a surprise to its competitors but the Dixons Group doesn't dominate the UK market in home PCs.

This is according to an Office of Fair Trading investigation, which also concludes Dixons hasn't infringed competition law by securing exclusive deals to sell certain Compaq PCs and all Packard Bell's products.

In case you didn't know, Dixons Stores Group runs Dixons, Currys, PC World, and the Link chain of stores. There are 323 Dixons shops, 309 Currys outlets, 95 branches of PC World, and 263 Link shops, There are also 15 stores at airports. Not to mention the online stores connected to its high steet brands. And according to reports in the Financial Mail on Sunday, Dixons is preparing to bid for Action Computer Supplies, the big but ailing direct marketing computer reseller.

"Dixons' share of this market is considerably below the 40 per cent threshold we would normally regard as an indicator of dominance," said Penny Boys, deputy director general of the Office of Fair Trading, in a statement.

The OFT statement also said the barriers to entry into the home PC supply market "are not high".

And that "a wide range of well known brands of PCs are available from manufacturers through a variety of outlets. In general, consumers do not appear to have a strong preference for any one brand in particular, nor for purchasing through any one type of outlet".

A spokesman for Dixons said: "We maintain the PC market is highly competitive and dynamic."

The OFT investigation was prompted by UK retailers Comet and John Lewis, which were angry about the Compaq and Packard Bell deals. Comet and John Lewis said these deals restricted consumers' choice and could lead to higher prices and poorer service.

Boys went on to say: "In assessing its position we have also considered whether the company is able to act to an appreciable extent independently of competitors and consumers.

"Taking all these factors into account, this leads to the conclusion that Dixons is not dominant and has not infringed competition law by entering into these agreements."

Back in October 1999 the OFT cleared UK PC retailers - and more specifically Dixons Stores Group - of making excessive profits.

That OFT enquiry was sparked off by an intervention by Peter Mandelson, the trade and industry secretary at the time. His interest was piqued by a ludicrous attack by Intel's Craig Barrett on Dixons. British PC sales were lower than in some other European territories because Dixons margins were too high, he claimed. A few weeks later Barrett was forced to eat humble pie - his grovelling letter of apology to Dixons somehow made its way to the press. ®

Office of Fair Trading statement

DIXONS NOT DOMINANT IN THE SUPPLY OF HOME PCs

The OFT has found that Dixons is not dominant in the supply of home PCs.

It has also found that Dixons has not infringed competition law by concluding agreements appointing it as sole distributor for certain Compaq PCs and exclusive distributor for certain Packard Bell products including home PCs.

The decision follows a comprehensive analysis of the market for the supply of home PCs to UK consumers. This includes supply through high street retailers, specialist retailers, retail parks, mail order, the Internet and other direct methods of sale. The market is not highly concentrated and barriers to entry are not high, the OFT said today.

A wide range of well known brands of PCs are available from manufacturers through a variety of outlets. In general, consumers do not appear to have a strong preference for any one brand in particular, nor for purchasing through any one type of outlet. Dixons is thus not dominant in this market.

Vertical agreements - those between businesses at different levels of the supply chain such as the agreements between Dixons and Compaq and Packard Bell - are excluded from the Competition Act's prohibition on agreements that affect competition.

In the case of Dixons' agreements with Compaq and Packard Bell, there were insufficient grounds to exercise the power to withdraw the exclusion.

Penny Boys, Deputy Director General of Fair Trading, said: 'Dixons' share of this market is considerably below the 40% threshold we would normally regard as an indicator of dominance. In assessing its position we have also considered whether the company is able to act to an appreciable extent independently of competitors and consumers. Taking all these factors into account, this leads to the conclusion that Dixons is not dominant and has not infringed competition law by entering into these agreements.'

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