Rhythmless Blues for Capita

June 4, 2009

Capita Group plc (Capita) is being required to sell part of the IBS OPENSystems plc (IBS) software business it acquired last year after an investigation by the Competition Commission.


In its final report, the Commission has confirmed that the completed acquisition by Capita of IBS is expected to result in a substantial lessening of competition in the market for revenues and benefits (R&B) software systems, used by local authorities to collect council tax and distribute benefits. This decision confirms the Commission’s preliminary conclusions at the provisional findings stage.


The merger brought together Capita and IBS, both of which supplied R&B and social housing software systems to local authorities and social housing organisations respectively. The CC does not have concerns about the market for SH software, where there are considerably more suppliers in competition with the merged company.


The Commission is now requiring Capita to sell the R&B business of IBS as soon as possible but, if no suitable sale is achieved, the Commission will require Capita to sell the entire IBS business.


Inquiry Group Chairman, Christopher Clarke, said:

This merger combines two closely competing suppliers of R&B software to local authorities, leaving only one other supplier actively competing for business. 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.

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.’

The full report of the Commission can be accessed via www.competition-commission.org.uk