Cineworld may be forced to sell off cinemas

Cineworld may be forced to sell off cinemas in three areas after regulators deemed a merger with Picturehouse operator City Screen Limited could reduce competition in some areas.

Shares in Cineworld have fallen nearly three per cent - but not enough to offset gains resulting from soaring profits in its first half report.

The Competition Commission provisionally concluded that the merger would lead to higher prices for customers in Aberdeen, Bury St Edmunds and Cambridge.

Cineworld operates 79 cinemas in the UK, primarily in out-of-town centres, while Picturehouse operates 21, usually in city centres.

Alasdair Smith, deputy chairman of the commission and chairman of the Cineworld/City Screen merger Inquiry Group, said:

We found that when setting the price of tickets, exhibitors take account of the prices of competing cinemas operating in their local area.

We focused our detailed analysis on nine of the areas where Cineworld and City Screen/ Picturehouse compete, looking at the extent to which they compete with each other and with other cinemas.

We found that there were three areas—Aberdeen, Bury St Edmunds and Cambridge—where they were in direct competition with each other, and faced limited competition from other cinemas so that the reduction of local competition could lead to higher prices for local cinemagoers. We will now look at ways we can restore competition and protect customers’ interests.

Cineworld chief executive Stephen Wiener said he was “disappointed” with the outcome, and stressed that Cineworld and Picturehouse are two very different businesses.

Nevertheless the combination of the two businesses will remain strategically compelling, as our recent results showed clearly, and we are committed to continuing the expansion and investment into both.

The commission will consider responses to the provisional findings before publishing its final report by 14 October 2013.