Software Acquisition Anti-Competitive, Says Regulator As Partial Sale Is Forced On Capita

A software company must sell one of the divisions of a recently acquired former rival immediately or it will be forced to sell the whole company, the Competition Commission has ruled. The merger would damage competition in a specialised software market, it said.

The Competition Commission (CC) investigated Capita's purchase of IBS OPENSystems. Each company had divisions which made and sold software for revenues and benefits (R&B) systems, which are used by local authorities to collect council tax and distribute benefits. They also both make software for the operators of social housing.

The CC has ruled that the deal would diminish competition in the market for R&B software to an unacceptable degree, and that Capita must immediately sell the parts of IBS OPENSystems that deal in revenues and benefits software.

"This merger combines two closely competing suppliers of R&B software to local authorities, leaving only one other supplier actively competing for business," said Christopher Clarke, who was the chairman of the CC inquiry committee. "In a stable market with little prospect of entry by new suppliers, our conclusion is that the enlarged Capita R&B business will be able to take advantage of the lack of competition, for example by increasing prices or reducing levels of service to its customers."

"We consider that the adverse effects of the merger will have an impact on all customers, whether they are in the process of tendering for new R&B software or already have a contract for such software in place," said Clarke. "We believe that the only way in which we can restore competition for the benefit of customers is by requiring Capita to sell off at least the R&B business of IBS."