UK protects weak O&G companies from mighty helicopter operators
The UK’s Competition and Markets Authority (CMA) has told CHC that it cannot own Babcock’s UK offshore business that it acquired last year.
You can read the full 227-page report here.
To summarise, it basically says that oil companies need at least four helicopter operators to choose from. CHC can still integrate Babcock’s Danish and Australian businesses.
“Competition is vital to avoid higher prices or poorer quality, problems that ultimately increase costs to UK consumers,” said Kip Meek, chair of the CMA inquiry group. “The sale of Babcock’s UK oil and gas offshore helicopter services business will support competition in future tenders for these important services.”
It is easy to make fun of the CMA stepping in to save the super profitable major oil companies (who are well known for passing on savings to customers) from much smaller offshore helicopter companies with much smaller margins. But this is exactly what it has done.
In its report the CMA also admits that the market is not attractive to new offshore operators. It says: “Our view is that the combination of a decline in the industry to date, an unclear path to recovery of the O&G [oil and gas] market, alongside low margins and significant barriers to entry, means that it is unlikely that new entrants will be looking to enter the market in response to the Merger or that there will be significant expansion of suppliers in the market.” So who do they think will want to buy the Babcock offshore business?
Every industry thinks it is different and the CMA has to apply the same criteria to each one. But this does seem like a terrible decision. It is unclear if CHC can appeal.
CHC could, however, challenge the whole concept of the CMA. When decisions are as important as this, surely there should be more than one regulator. How can one organisation have a monopoly? Have they not heard of competition?
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