The authority said the current proposal would “substantially” lessen competition in the pubs sector.
However, it pointed to difficulties in only 16 locations, which is small considering that Greene King has 1,900 pubs and Spirit 1,227.
The market announcement said that “in a small number of areas, the CMA found that the parties’ pubs were in close proximity, were each other’s key rivals and did not face sufficient competition from other outlets, meaning that the loss of this competition may lead to an increase in prices or a deterioration in the quality of the offering. Given this, at this first phase, the CMA has found that the transaction gives rise to a realistic prospect of a substantial lessening of competition in 16 local areas”.
It warned the deal would be “referred for an in-depth phase 2 investigation”, which typically takes around 24 weeks, if the firms did not offer “acceptable undertakings to address the CMA’s competition concerns in a clear-cut manner” by 18 May.
Greene King chief executive Rooney Anand replied: “This is a sensible decision by the CMA, reflecting a small number of local areas where competition may be diminished as a result of our acquisition of Spirit. We are confident we will be able to offer suitable undertakings, which will keep the number of pubs we need to sell to a minimum and allow the acquisition to complete before the end of June.”