November 25, 2013 – The UK’s Office of Fair Trading has concluded that Diageo’s acquisition of a controlling stake in India’s United Spirits Ltd. (USL) would likely reduce competition in the Scotch whisky market, and Diageo has offered to sell most of USL’s Whyte & Mackay unit to satisfy those concerns. The OFT’s issue was primarily over bottled blends, with the tie-up of Diageo’s Bell’s blend and the Whyte & Mackay-labeled blend seen as having the potential to cause price increases and reduce competition.  The agency has put plans to refer the case to the UK’s Competition Commission on hold while it reviews Diageo’s proposal.

In the OFT’s news release, Chief Economist Chris Walters said his analysis found that other blended Scotch whisky producers would not be able to overcome the competitive disadvantage that the combination of Bell’s and Whyte & Mackay would create.

“These companies are two of the leading suppliers of blended bottled whisky in the UK, especially to supermarkets and other large retailers. Our investigation considered a wide range of evidence and we concluded that the likely loss of competition could give rise to higher prices for retailers, and ultimately consumers. We are now considering Diageo’s offer to sell the bulk of the Whyte & Mackay business with the exception of two malt distilleries, to address our concerns.”

Diageo proposes to keep the Dalmore and Tamnavulin malt whisky distilleries and brands (including the maturing whisky inventory of both distilleries), while selling off the rest of Whyte & Mackay. That would include the Whyte & Mackay blended Scotch brand, the Invergordon grain whisky distillery, the Jura and Fettercairn malt whisky distilleries, and all of Whyte & Mackay’s private-label business.

In an email to WhiskyCast’s Mark Gillespie, Diageo director of whisky outreach Dr. Nick Morgan explained that Dalmore and Tamnavulin are needed to supply whisky for USL’s operations in India and other markets. The decision must still be approved by the Office of Fair Trading and the UK’s Competition Commission.

Editor’s note: This story was updated with additional comment from Diageo. 

Links: Office of Fair Trading | Diageo | Whyte & Mackay