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Lovefilm Amazon deal approved by UK's OFT

Monday, April 21, 2008

Lovefilm's 'asset-swop' with Amazon has finally happened. The UK Office of Fair Trading (OFT) has cleared Lovefilm's acquisition of Amazon's DVD rental business despite significant earlier competition concerns. Under the deal Amazon is handing over its UK and German DVD mail order business to Lovefilm, after taking a majority stake in LoveFilm.
The complex deal will give Amazon and Lovefim control over 90 percent of the UK market, leading the OFT to fear the firm could worsen its retail offer. For example, Lovefilm also operates the white-label DVD service for Tesco. However, LoveFilm managed to convince the OFT that  it faces competition from an array of other providers of video content. In particular, the OFT noted that retail stores such as Blockbuster, private DVD ownership, Pay Per View services, cable and satellite film channels, Video on Demand services and Online IPTV channels constitute significant competition.
The OFT ruling, which will be noted in other jurisdictions, effectively accepted Amazon and Lovefilm's wider definition of the changing competitor landscape, and recognised that the DVD rental market cannot be treated in isolation.