Provisional findings report

Completed acquisition by

Hunter Douglas N.V. of

convertible loan notes and

certain rights in 247 Home

Furnishings Ltd. in 2013 and

the completed acquisition by

Hunter Douglas N.V. of a

controlling interest in 247

Home Furnishings Ltd. in

2019

Provisional findings report

Notified: 16 July 2020

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The Competition and Markets Authority has excluded from this published version

of the provisional findings report information which the inquiry group considers

should be excluded having regard to the three considerations set out in section

244 of the Enterprise Act 2002 (specified information: considerations relevant to

disclosure). The omissions are indicated by []. [Some numbers have been

replaced by a range. These are shown in square brackets.] [Non-sensitive

wording is also indicated in square brackets.]

Contents

Page

Summary .................................................................................................................... 4

Background ........................................................................................................... 5

The Parties ...................................................................................................... 5

The Transactions ............................................................................................. 5

The industry ..................................................................................................... 7

Jurisdiction....................................................................................................... 8

Counterfactual ................................................................................................. 9

Market Definition .............................................................................................. 9

Our approach to assessing the 2019 Transaction ......................................... 10

Countervailing factors .................................................................................... 12

Entry and Expansion ..................................................................................... 12

Provisional findings .................................................................................................. 14

1. The reference ..................................................................................................... 14

2. The Parties ......................................................................................................... 16

Main Parties ........................................................................................................ 16

Hunter Douglas .............................................................................................. 16

247 Home Furnishings .................................................................................. 18

3. The Transactions ................................................................................................ 21

Timeline of events ............................................................................................... 21

Events leading up to the Transactions and valuations ................................... 21

The Parties’ rationale for the Transactions .................................................... 26

4. Industry background ........................................................................................... 29

Window coverings overview ................................................................................ 29

Distribution Channels .......................................................................................... 32

In-store and In-home ..................................................................................... 33

Online ............................................................................................................ 33

Figure 8: 247 Customer Journeys – Devices used March 2013 to April 2020 .......... 34

Competitors and main parties ............................................................................. 36

Trends within the Sector ..................................................................................... 37

Improvements in the customer offering ......................................................... 37

Technology .................................................................................................... 38

5. Relevant merger situation ................................................................................... 39

Relevant Merger Situation – the jurisdictional test .............................................. 39

Enterprises ceasing to be distinct ....................................................................... 40

Enterprises .................................................................................................... 40

Ceasing to be Distinct .................................................................................... 40

The 2013 Transaction .................................................................................... 44

The 2019 Transaction .................................................................................... 48

The Share of Supply Test – Nexus with UK ........................................................ 49

Share of Supply .................................................................................................. 52

Time period for investigating mergers ................................................................. 53

6. Counterfactual..................................................................................................... 55

Introduction ......................................................................................................... 55

The CMA’s counterfactual assessment framework ............................................. 55

Parties’ views on the appropriate counterfactual ................................................ 56

Preliminary assessment ...................................................................................... 57

Scenario 1: Continuation of majority ownership by the 247 Founding

Shareholders ................................................................................................ 58

Scenario 2: Alternative purchaser of Founding Shareholders’ stake in 247 .. 59

Scenario 3: Alternative purchaser for 100% of 247 ....................................... 61

Summary ....................................................................................................... 62

Provisional findings on the most likely counterfactual ......................................... 62

7. Market definition.................................................................................................. 64

Product market definition .................................................................................... 64

Curtains and shutters .................................................................................... 66

Ready-made blinds ........................................................................................ 70

In-store and in-home ..................................................................................... 76

Geographic market definition .............................................................................. 80

Conclusion on market definition .......................................................................... 81

8. Competitive assessment ..................................................................................... 82

Market shares ..................................................................................................... 83

Approach to market share calculations .......................................................... 83

Market share estimates ................................................................................. 84

How competition works in the market ................................................................. 86

Parties’ submissions on the customer journey and importance of online

advertising .................................................................................................... 87

Traffic and marketing spend .......................................................................... 87

Search behaviour and customer journey ....................................................... 91

Conclusion ..................................................................................................... 95

Closeness of competition .................................................................................... 95

The Parties’ service proposition ..................................................................... 96

Online presence .......................................................................................... 100

Survey evidence .......................................................................................... 112

Internal documents ...................................................................................... 114

Pricing Analysis ........................................................................................... 116

Third party evidence .................................................................................... 116

Competitive significance of 247 ................................................................... 117

Provisional conclusion on closeness of competition .................................... 117

Remaining constraints ...................................................................................... 118

Competition from other online M2M blind retailers ...................................... 119

Competition from multi-channel retailers ..................................................... 127

Competition from eBay and Amazon ........................................................... 133

Out-of-market constraints ............................................................................ 137

Provisional conclusion on remaining constraints ......................................... 139

Impact of the Merger ......................................................................................... 139

Parties submissions on the Impact of the merger ........................................ 140

Our Assessment of the Parties’ submissions............................................... 141

Conclusion on competitive assessment ............................................................ 142

9. Countervailing factors ....................................................................................... 145

Entry and Expansion ......................................................................................... 145

CMA framework for assessing entry and expansion .................................... 145

Views of the Parties ..................................................................................... 146

Our assessment of barriers to entry and expansion .................................... 146

Other barriers to entry/expansion ................................................................ 151

Possible sources of entry and expansion .................................................... 153

10. The provisional decision ................................................................................... 161

Appendices

A: Terms of reference and conduct of inquiry

B: Provisional view on the ability of Hunter Douglas to block a sale by the 247

Founding Shareholders

C: CMA analysis of Parties’ survey methodology

D: Price analyses

E: Online presence and the role of Google

F: Generating traffic as a potential barrier to entry and expansion

Glossary

Summary

Overview

1. The Competition and Markets Authority (CMA) has provisionally found that the

completed acquisition by Hunter Douglas N.V. (Hunter Douglas) of a

controlling interest in 247 Home Furnishings Ltd (247 and together with

Hunter Douglas the Parties or the Merged Entity) in 2019 (the 2019

Transaction) has resulted, or may be expected to result, in a substantial

lessening of competition (SLC) in the online retail supply of made-to-measure

(M2M) blinds in the UK.

2. The CMA has also provisionally found that the completed acquisition by

Hunter Douglas of convertible loan notes and certain rights in 247 Home

Furnishings in 2013 (the 2013 Transaction) has not resulted in the creation of

a relevant merger situation within the meaning of the Enterprise Act 2002 (the

Act).

3. This is not our final decision. We now invite submissions from any interested

party on these provisional findings by 17:00 on 6 August 2020. Parties

should refer to the notice of provisional findings for details of how to do this.

4. Alongside these provisional findings, we have published a notice of possible

remedies which sets out our initial views on the measures that might be

required to remedy the SLC we have provisionally found. We also invite

submissions on these initial views by 17:00 on 30 July 2020.

5. We will take all submissions received by these dates into account in reaching

our final decision, which will be issued by 15 September 2020.

Our inquiry

6. On 1 April 2020, the CMA referred the 2013 Transaction and the 2019

Transaction (together, the Transactions) for an in-depth phase 2 merger

inquiry:

7. The CMA is required by its terms of reference to decide with respect to each

of the Transactions:

(a) whether the Transaction constitutes a relevant merger situation;

(b) if so, whether the Transaction has resulted or may be expected to result in

an SLC within any market or markets in the United Kingdom for goods or

services; and

or preventing any SLC or resulting adverse effect we have identified. This

is the subject of the notice of possible remedies we have published

alongside these provisional findings, in which we have discussed what

measures could effectively remedy the SLC we have provisionally found.

8. In addressing the questions above, we have considered a range of different

evidence that we received from the Parties, other retailers and suppliers. This

includes evidence received through submissions, responses to information

requests, telephone calls, and hearings. We have also considered a survey of

their customers prepared and submitted by the Parties that we consider is in

accordance with our best practice. Given that competition in the relevant

market primarily occurs online (as discussed below), we also have analysed

how online search is utilised by the Parties and their competitors in the retail

supply of online M2M blinds.

Background

The Parties

9. The acquirer is Hunter Douglas, a global provider of window coverings,

including blinds, shutters and curtains. In the UK, Hunter Douglas operates

through different companies at manufacturing, wholesale and retail level,

using several different brands. With respect to online M2M blinds, Hunter

Douglas is active in the UK through its subsidiary Blinds2Go Limited

(Blinds2Go). Blinds2Go is the UK’s largest online M2M retailer for blinds. In

2019 Hunter Douglas had global revenues of approximately £3 billion.

10. The target, 247, is a UK-based online supplier of window coverings including

blinds, shutters and curtains. In 2019, 247’s global turnover was £22.2 million.

11. The Parties overlap in the supply of window coverings in the UK (including the

online retail supply of blinds, shutters and curtains). However, the principal

area of overlap between the Parties is between Hunter Douglas’ subsidiary

Blinds2Go and 247 in relation to the online retail supply of M2M blinds in the

UK. Accordingly, this competitive overlap has been the focus of our inquiry.

The Transactions

12. Hunter Douglas acquired its interests in 247 through two separate

transactions in 2013 and 2019, respectively. Notwithstanding these separate

transactions, the Parties submit that they entered into the 2013 Transaction in

the understanding that this was a single acquisition by Hunter Douglas of 247

that would ultimately complete in 2019. The Parties accordingly view the 2019

Transaction as a formality that gave effect to their previous agreement in

2013.

The 2013 Transaction

13. Pursuant to the 2013 Transaction, Hunter Douglas invested in 247 via the

acquisition of convertible loan notes which had been issued by 247 to 247’s

founding shareholders (the 247 Founding Shareholders).

14. Attached to these loan notes were certain rights in 247 granted to Hunter

Douglas, including: (i) 49% of the voting rights and a 49% share of the profits

in 247; (ii) the right to convert the loan notes at any time to ordinary shares;

(iii) the right to nominate a non-executive Director to the 247 Board; and (iv)

certain veto rights in respect of the 247 business.

15. At the same time, reciprocal put and call options were granted to both Hunter

Douglas and the 247 Founding Shareholders. Under the put and call options,

the 247 Founding Shareholders could require the purchase of their shares by

Hunter Douglas and Hunter Douglas could require the sale of the shares held

by the 247 Founding Shareholders by written notice in the period 1 March to 1

June 2019.

16. The terms of the 2013 Transaction prevented either Party from publicising the

transaction. The Parties submitted that the 2013 Transaction was kept

confidential in order to avoid the potential for ‘channel conflicts’ between

Hunter Douglas, as a wholesale supplier, and its customers as retail

suppliers. We understand that Hunter Douglas did not have a retail presence

in the supply of online M2M blinds in the UK prior to the 2013 Transaction.

The 2019 Transaction

17. Pursuant to the 2019 Transaction, Hunter Douglas acquired 100% of the

shares in 247. This followed an indication from the 247 Founding

Shareholders to Hunter Douglas that they intended to exercise their put

options granted in 2013. The 2019 Transaction completed on 28 February

2019.

Other relevant transactions in the period between the 2013 and 2019 transactions

18. Hunter Douglas acquired two additional businesses active in the retail supply

of online M2M blinds in the UK in the intervening period between the

Transactions.

19. On 21 June 2016 Hunter Douglas acquired a 60% stake in Blinds2Go (the

2016 Transaction). Hunter Douglas subsequently acquired a further 5%

interest in Blinds2Go in 2019.

20. On 21 July 2017 Hunter Douglas acquired Hillarys (the 2017 Transaction),

which at the time had a presence in the supply of online M2M blinds through

Web Blinds. Web Blinds has subsequently been incorporated into Blinds2Go.

This acquisition was reviewed and cleared by the CMA at phase 1.

The industry

21. As noted above, the primary area of overlap between the Parties is the online

retail supply of M2M blinds. These products are part of the broader window

coverings sector, which also includes curtains and shutters.

22. Window coverings (including blinds) typically are supplied in either a ready-

made or M2M format. Ready-made products are largely finished and sold in

one of many available sizes, whereas M2M products are tailored to the

specifications of the customer. The main channels through which window

coverings are sold in the UK are the in-home, in-store and online retail

channels.

23. In-store and in-home are traditional retail channels in which customers have

some degree of interaction with the product or a salesperson prior to

purchase. We also note that some of these retailers also have an online

presence, although not all in-store or in-home retailers sell online. Those

retailers who sell in-store/in-home and online are referred to as multi-channel

retailers.

24. With respect to online M2M blinds, these products are purchased through

websites that enable customers to customise blinds in accordance with their

desired measurements and design preferences. This differentiates M2M

blinds from ready-made products. In contrast to the in-home and in-store

channels, the leading retailers of online M2M blinds provide limited sales

advice prior to purchase and typically require customers to fit the blind

themselves once they have received their order. Competition between

retailers primarily occurs online and so retailers’ generation of website traffic

through online search (primarily through Google), their position in search

rankings and the use of online advertisements are of particular competitive

importance in the supply of online M2M blinds. We have therefore considered

this parameter of competition as part of our competitive assessment.

25. In addition to retailers’ websites, online marketplaces (namely Amazon and

eBay) also allow retailers to sell blinds. We understand that the majority of

sales through these channels are for ready-made blinds. This may be

reflective of the fact that these platforms are not well-suited to the

customisation options required for M2M products and are therefore not

directly comparable to online M2M blinds suppliers.

26. The competitive landscape of the window coverings sector differs by product

type and channel. With respect to the broader window coverings sector, multi-

channel retailers are the leading suppliers with Dunelm, Hillarys, John Lewis,

and Next being largest competitors.

27. We note however that the competitive landscape is different for the online

retail supply of M2M blinds. In particular, the leading retail suppliers of online

M2M blinds in the UK are focussed primarily on supplying M2M blinds online

(although they may supply other window coverings to a lesser extent).

Provisional findings

Jurisdiction

28. We have assessed whether each of the 2013 Transaction and the 2019

Transaction created a relevant merger situation (RMS).

29. We provisionally conclude that the 2013 Transaction did not create an RMS.

The rights attached to the convertible loan notes acquired by Hunter Douglas

through the 2013 Transaction were sufficient to give it material influence over

247’s policy. However, we were not satisfied that the share of supply test is

met in relation to the 2013 Transaction, taking account of the particular and

unusual circumstances of this case, in particular, the very lengthy period

which had elapsed since the 2013 Transaction occurred and the lack of

overlap between the Parties at the time of the 2013 Transaction .

30. In contrast, we have provisionally found that the 2019 Transaction created an

RMS. We find that Hunter Douglas’ acquisition of 100% of the shares in 247

clearly amounts to the acquisition of a controlling interest in 247. In particular,

as a consequence of owning 100% of 247, Hunter Douglas acquired the right

to unilaterally determine 247’s strategic policy and increased its share of the

company’s profits. Moreover, we find that the share of supply test is met as a

result of the Parties having a combined share in excess of 25% in the online

retail supply of M2M blinds in the UK.

31. In light of our findings on jurisdiction, our substantive assessment considers

whether the 2019 Transaction has resulted or may be expected to result in an

SLC in the UK.

Counterfactual

32. The counterfactual is an analytical tool used to help answer the question of

whether a merger may be expected to result in an SLC. It does this by

providing the basis for a comparison of the competitive situation in the market

with the merger against the most likely future competitive situation in the

market absent the merger.

33. We may examine several possible scenarios to determine the appropriate

counterfactual. We have found no evidence to suggest that Blinds2Go would

have done anything other than continue to compete in line with the conditions

prevailing at the time of the 2019 Transaction. For 247, we have considered

three scenarios:

(a) Scenario 1: Continuation of majority ownership by 247 Founding

Shareholders

(b) Scenario 2: Alternative purchaser of Founding Shareholders’ stake in 247

34. We provisionally find that, absent the 2019 Transaction, the most likely

scenario is that the 247 Founding Shareholders would have sought to sell

their shares in 247 to a third-party buyer (as per Scenario 2). In our view, it

was the continuing intention of the 247 Founding Shareholders to sell their

shares in 247 and exit the business and that, at the point of the 247 Founding

Shareholders selling their shares, Hunter Douglas would no longer be able to

exercise the veto and other rights it previously held in 247. This would result

in 247 having more independence than it had prior to the 2019 Transaction.

Market Definition

35. Our provisional finding is that the relevant market for the assessment of the

2019 Transaction is the online retail supply of M2M blinds in the UK. This

position is supported by our assessment of the Parties’ own survey, their

monitoring activities, as well as the views received from third parties.

36. We have not included other window covering products, ready-made blinds or

the in-store and in-home channels in the relevant market. However, we note

that market definition does not determine the outcome of our competitive

assessment and we take into the account the constraint of these alternative

products where relevant. With respect to ready-made blinds in particular, we

acknowledge that these products do act as a distant competitor to online M2M

blinds.

Our approach to assessing the 2019 Transaction

37. We have assessed the competitive effects of the 2019 Transaction by

reference to a horizontal unilateral effects theory of harm, that is where one

firm merges with a competitor that previously provided a competitive

constraint, allowing the merged firm profitably to raise prices on its own and

without needing to coordinate with its rivals. In particular, we have assessed

whether Hunter Douglas acquiring 100% control over 247 and increasing its

share of the company’s profits as a result of the 2019 Transaction would likely

result in Hunter Douglas increasing prices and/or lowering the quality of its

products or customer service, and/or reducing the range of its

products/services across the brands it controls.

Competitive assessment

38. We have provisionally found that the 2019 Transaction may be expected to

result in an SLC in relation to the supply of online M2M blinds in the UK.

39. In reaching this view, we found that Blinds2Go is the largest supplier of online

M2M blinds in the UK and several times larger than the second largest

supplier. Further, we also note that 247 is of meaningful scale in this market

as the third largest supplier and is approximately three times larger than the

fourth largest supplier. Outside of the top three suppliers, we have not

identified any other retailers with a market share above 5%, and few retailers

with a market share above 1%. In light of these findings, we find that the

combined share of the Parties is very high, at 60-70%, and that the increment

from 247 is significant in the context of an already concentrated market.

40. We find the Parties to be close competitors and pose a significant competitive

constraint on each other. Overall, we provisionally find that the Parties’

offerings in terms of price, quality and range are similar.

41. Our assessment of the Parties’ online presence in both paid and organic

search results also indicates that the Parties are close competitors. In

particular, our analysis shows that both Parties consistently rank highly in

Google paid search results, indicating that the Parties are both highly effective

at competing for the top positions in paid search results. They also rank highly

in organic search, though to a lesser extent than for paid search.

42. Evidence on the Parties’ monitoring of competitors’ prices is consistent with

the Parties being close competitors, and consistent with there being few other

retailers that the Parties view as a significant competitive constraint. Overall,

our provisional assessment of diversion from the Parties’ survey is indicative

of the Parties being close competitors. We additionally note that the constraint

from Blinds2Go on 247 appears to be stronger than the constraint from 247

on Blinds2Go. Whilst our pricing analysis does not provide strong evidence

that the Parties’ prices follow each other more closely than the prices of other

competitors, there is no indication that either of the Parties’ prices follow the

prices of another competitor more closely.

43. We have also assessed the post-merger constraints on the Parties. With

respect to other suppliers of online M2M blinds, we consider that Interior

Goods Direct, which is only slightly larger than 247, is the only other

significant constraint on the Parties. Whilst we have identified a number of

smaller online M2M blinds retailers, we do not view them as an effective

competitive constraint on the Parties, individually or in aggregate. This is

reflected in their limited share of the market, the fact that they do not appear

to be closely monitored by the Parties, the Parties’ own survey evidence, and

also the limited visibility of smaller suppliers in search results.

44. Further, we find that multi-channel retailers currently exert only a limited

constraint on the Parties and are not an effective alternative for most of the

Parties’ customers. This is reflected in the limited share of multi-channel

retailers in the supply of online M2M blinds, their potentially differentiated

product range (with respect to price and quality), different business models,

limited online range and lack of prominence in online search. We also note

the lack of consistent monitoring of multi-channel retailers by the Parties and

other online suppliers. We also find that the Parties’ survey evidence relating

to multi-channel retailers potentially overstates the strength of their constraint.

In particular, we consider that their appearance in the survey is likely subject

to an upward bias, due to customers being more familiar with these brands

but potentially unaware of the true nature of their offerings. Notwithstanding

this finding, we have assessed whether the constraint they exert may increase

going forward in our assessment of the potential entry and expansion of rivals.

45. We have found that online marketplaces are a weak constraint on online M2M

blinds retailers. In particular, their platforms are not comparable to online

retailers’ websites in terms of functionality, and the majority of their sales are

of ready-made rather than M2M blinds.

46. We find that out-of-market constraints from alternative window covering

products and retail channels are a weak competitive constraint on the Parties

on an individual or aggregated basis. For the same reasons considered in

relation to market definition we note that out-of-market alternatives individually

do not pose a significant competitive constraint on the Parties. When

considering these constraints in aggregate, we also find that the Parties’

survey evidence and monitoring activities indicate other retailers’ online M2M

blinds as being the main competitive constraint on the Parties.

47. As part of our competitive assessment we have found that the 2019

Transaction results in Hunter Douglas having the ability and the incentive to

raise both 247 and Blinds2Go’s prices. This provisional conclusion is informed

by our findings that the Parties are close competitors, with evidence of

diversion between them. Hunter Douglas has acquired the ability to increase

247’s prices as a direct consequence of the 2019 Transaction. In particular,

we find that Hunter Douglas will have a significant incentive to increase 247’s

prices, as Hunter Douglas will benefit from a significant share of sales that

would likely be diverted to Blinds2Go in the case of an increase through its

65% shareholding in Blinds2Go. At the same time, we also find that Hunter

Douglas has an increased incentive to increase Blinds2Go’s prices as Hunter

Douglas now benefits from 100% of the sales diverted to 247.

Countervailing factors

Entry and Expansion

48. We have considered factors that may mitigate or prevent the effect of the

merger on competition and in particular whether entry or expansion by the

Parties’ rivals might prevent the provisional SLC identified. In reaching our

provisional findings we have concluded that no such entry or expansion would

be timely, likely, and sufficient whether as regards any individual current or

potential competitor, or considered in aggregate. In reaching this view, we

have considered both whether any barriers to entry/expansion in the relevant

market exist, and whether there is evidence of actual or planned

entry/expansion by rivals.

49. We have provisionally found that there is some evidence of barriers to entry

and expansion in the retail supply of online M2M blinds. These barriers

appear potentially high in relation to generating website traffic, and to a lesser

extent in relation to website costs and brand awareness and customer loyalty.

Whilst it may be the case that individual barriers may in some circumstances

be overcome, we note that a new entrant to the market will likely find

themselves faced with a series of barriers to entry which might have a

significant cumulative effect on entry. With respect to existing rivals, we find

that barriers to further expansion may not be as high as for new entrants.

50. In any event, we have further found there to be insufficient evidence of actual

and/or planned entry or expansion from third parties in this market.

51. The leading online M2M blinds suppliers contacted in our inquiry have told us

that they do not expect significant further expansion. Whilst one smaller online

M2M supplier indicated that it has ambitious future expansion plans, we find

that its current market position indicates that it is unlikely to expand to a

comparable size to either of the Parties in the near future and we do not have

sufficient evidence as to how this company may achieve its stated growth

plans. We also observe limited growth from smaller existing retailers in recent

years. Indeed, the fact that there has been little change in the identity of the

leading suppliers in the market suggests that there is a degree of incumbency

advantage in the market that may constrain further expansion.

52. The evidence received from multi-channel retailers suggests a variety of

different plans regarding entry, however the evidence does not demonstrate

that any expansion or re-entry into the market will be timely, likely, and

sufficient as they deal with the consequences of the COVID-19 pandemic.

Where there has been entry, or increased presence from multi-channel

retailers, we note they have achieved only a limited market share and sales

as compared to the Parties. Therefore, even if entry or expansion from these

retailers was timely and likely (which we do not consider to be the case), the

evidence currently available to us does not allow us to conclude that this

would be sufficient (either individually or in aggregate) to constrain the

Merged Entity.

53. We do not consider that entry or expansion from manufacturers will

competitively constrain the Merged Entity.

54. In addition, whilst we have considered different potential sources of entry and

expansion in the online M2M blinds market, the evidence available to us

indicates that even if they were to be considered on an aggregated basis, they

would not be timely, likely and sufficient.

Provisional conclusion on the substantial lessening of competition

test

55. We provisionally find that the 2013 Transaction did not create an RMS and

that the 2019 Transaction did create an RMS.

56. For the reasons discussed above, we have provisionally found that the 2019

Transaction has resulted in, or may be expected to result in, an SLC as a

result of horizontal unilateral effects in the online retail supply of M2M blinds in

the UK. In particular, we find that the 2019 Transaction removes a direct

competitor from this market, resulting in an ability and incentive for the

Merged Entity to increase retail prices, lower the quality of its products or

customer service, and/or reduce the range of its products/services

Provisional findings

1. The reference

On 1 April 2020, in exercise of its duty under section 33(1) of the Enterprise

Act 2002 (the Act) the Competition and Markets Authority (CMA) referred:

(a) the completed acquisition by Hunter Douglas N.V. (Hunter Douglas)

of convertible loan notes and certain rights in 247 Home Furnishings

Ltd (247) in 2013 (the 2013 Transaction); and

(b) the completed acquisition by Hunter Douglas of a controlling interest

in 247 in 2019 (the 2019 Transaction) (together with the 2013

Transaction, ‘the Transactions’).

for further investigation and report by a group of independent panel members

(the Inquiry Group).

The terms of reference, along with information on the conduct of the

inquiry, are set out in Appendix A. The Inquiry Group is required to publish

its final report by 5 September 2020.

Section 35 of the Act sets out the statutory questions that the CMA needs

to decide in a Phase 2 inquiry pursuant to, as in this case, a reference

under section 22 of the Act. In this investigation, the Inquiry Group must

decide:

(a) For each of the 2013 Transaction and the 2019 Transaction, whether a

relevant merger situation (RMS) has been created (the First Statutory

Question); and

(b) If so, in each case, whether the creation of that situation has resulted or

may be expected to result in a substantial lessening of competition (SLC)

within any market or markets in the United Kingdom for goods or services

(the Second Statutory Question).

If the Inquiry Group answers both statutory questions in the affirmative in

relation to any of the Transactions, then the Group must also decide what

action the CMA should take for the purposes of remedying, mitigating or

preventing any SLC or resulting adverse effect we have identified. This is

the subject of the notice of possible remedies we have published alongside

these provisional findings, in which we have discussed what measures

could effectively remedy the SLC we have provisionally found.

This document, together with its appendices, constitutes the Inquiry

Group’s provisional findings, published and notified to Hunter Douglas and

247 in line with the CMA’s rules of procedure. Further information relevant

to this Inquiry, including non-confidential versions of the submissions

received from Hunter Douglas and 247, can be found on the CMA’s

website.

Throughout this document we refer to Hunter Douglas and 247 collectively

as the Parties and as applicable, the Merged Entity.

2. The Parties

Main Parties

Hunter Douglas

Hunter Douglas is a global provider of window coverings such as blinds,

shutters and curtains, and is headquartered in The Netherlands. The

company was founded by H. Sonnenberg in 1946, although the origins of

the company go back to 1919. The Hunter Douglas Group went public in

1969; the majority of its shares are owned by the Sonnenberg family.

The

Hunter Douglas Group is comprised of 134 companies with 47

manufacturing and 87 assembly operations and marketing organisations

across more than 100 countries.

In the UK, Hunter Douglas operates through different companies at

manufacture, wholesale and retail level, using several different brands.

the retail level, Hunter Douglas is active in the UK through Thomas

Sanderson Limited, Hillarys Blinds Limited, Blinds2Go Limited (Blinds2Go),

Tuiss LLP and 247 Home Furnishings Limited. This is illustrated in Figure 1

below.

The Sonnenberg Family own 82.68% common shares and 99.4% preferred shares. Hunter Douglas website,

accessed 30 June 2020.

See Hunter Douglas Annual Report 2019, page 1

At wholesale level, Hunter Douglas is active in the UK through: Stevens (Scotland) Limited, Arena Blinds

Limited, Custom West Trading Limited, Holis Industries Limited, Orgon Windows Fashion Limited and Orgon

Limited Sunflex, Luxaflex, and HD Direct. Hunter Douglas used the following brands at wholesale level in the UK:

Sunflex, Luxaflex, and HD Direct.

Figure 1: Blinds, shutters and curtains supply chain and the Parties’ business units active at

each level

Source: CMA’s summary based on Parties’ submissions

In 2019 Hunter Douglas had global revenues of just over £3.0 billion ($3.7

billion

) and UK revenues of £[] in 2019. In the UK, Hunter Douglas

supplies blinds online through the 247 blinds, Blinds2Go and Web Blinds

brands and websites.

Blinds2Go

Established in 2000, Blinds2Go is the UK’s largest online made-to-measure

(M2M) retailer for blinds. Web Blinds was formerly part of the Hillarys

Group, but was subsequently integrated into the Blinds2Go Group by

Hunter Douglas after its acquisition of Hillarys in 2017.

Blinds2Go’s total UK revenue for the financial year (FY) 2019 was £[]

million. Based on the data in table 1 below, Blinds2Go’s total revenue

increased on average by [] % per year between FY 2013 to FY 2019.

The average rate of growth between FY 2018 and FY 2019 has been [],

compared to an average of [] % from FY 2013 to FY 2017. Blinds2Go’s

average gross profit has been []% over the last 7 years.

See Hunter Douglas Annual Report 2019. See also Hunter Douglas’s response to CMA’s request for

information dated 21 February 2020.

Web Blinds is owned by Blinds2Go and Hunter Douglas has a 65% controlling interest in Blinds2Go.

Table 1: Blinds2Go Total Revenue and Profit margin FY 2013 to FY 2019

£ million

2013

2014

2015

2016

2017

2018

2019

Total Revenue

[



]

[



]

[



]

[



]

[



]

[



]

[



]

Gross Profit

[



]

[



]

[



]

[



]

[



]

[



]

[



]

Gross Profit %

[



]

[



]

[



]

[



]

[



]

[



]

[



]

Source: Blinds2Go Management accounts (2013-2019) and financial reports (2008 – 2012)

Figure 2 below shows Blinds2Go’s performance from FY 2008 to FY 2019.

Consistent with Table 1 above, this shows [] over this period.

Figure 2: Blinds2Go UK sales of M2M blinds and gross and net profit margins FY 2008 – FY

2019)

[]

Source: Blinds2Go Management accounts (2013-2019) and financial reports (FY 2008 – FY 2012)

247 Home Furnishings

247 is a UK-based and online supplier of window coverings to retail

customers, including blinds, shutters and curtains. The company was

founded in 1997 by Jason Peterkin and David Maher (247 Founding

Shareholders). The company was a mail-order business for the first 8 years

while the 247 Founding Shareholders built up the web design and e-

commerce aspects before launching their in-house e-commerce project in

2005. This move also included the offer of M2M blinds online. Following the

success of their first two years’ sales of M2M blinds, with second-year

sales exceeding £3 million, in 2007 the company moved to focus

exclusively on selling M2M blinds online.

In 2019, 247’s total turnover for all products for the year ended 19 February

2019 was £22.2 million, of which £[] was in the UK.

The data in Table 2, and illustrated by Figure 3, set out 247’s total revenue

from selling M2M blinds in the UK. 247’s total revenue increased on

average by 10% from 2008 to 2019. 247’s average gross profit margin has

been around 34% over the same timeframe.

Table 2: 247 UK M2M Blind income and UK M2M blind gross profit margin 2008 to 2019

[]

Source: 247 management accounts 2008 to 2019

Figure 3 : 247 UK M2M Blind income and UK M2M blind gross profit margin 2008 to 2019

[]

Source: 247 management accounts 2008 to 2019

3. The Transactions

Timeline of events

Hunter Douglas acquired its interests in 247 through two separate

transactions in 2013 and 2019, respectively. In the intervening period,

Hunter Douglas made changes to its voting rights in 247, the details of

which are outlined below. Also during this period, Hunter Douglas

expanded its presence in the UK window coverings sector through

separate acquisitions of a majority stake in Blinds2Go and of Hillarys.

These are indicated in the timeline below, which shows developments in

relation to 247 below the timeline, and other Hunter Douglas developments

above the timeline:

Figure 4: A timeline of the Parties’ transactions

Source: CMA analysis of Parties’ submissions

Events leading up to the Transactions and valuations

2013 Transaction

The Parties submitted that the timeline of the events leading up to the

decision to enter into the 2013 Transaction is as follows:

(a) In September 2012 David Sonnenberg (then and currently co-CEO

of Hunter Douglas) initiated discussions with the 247 Founding

Shareholders concerning a possible investment by Hunter Douglas.

This was followed up by another meeting the following month

between David Maher and Michiel de Heer (of Hunter Douglas) to

discuss further details of the investment.

(b) On 18 December 2012, there was a further meeting between David

Sonnenberg, David Maher and Jason Peterkin in Rotterdam to

discuss details of the investment.

agreement of Heads of Terms for the 2013 Transaction on 10

January 2013.

(d) On 30 April 2013, the 2013 Transaction was then implemented by

way of a series of agreements; a [].

Hunter Douglas completed the 2013 Transaction [].This translates to an

Enterprise Value of £[] for 247 at the time of the 2013 Transaction.

Attached to these loan notes were certain rights in 247, which Hunter

Douglas also acquired as a result. These included:

(a) 49% of the voting rights at shareholder level and a 49% share in the

profits in 247;

(b) A right to convert the loan notes at any time to ordinary shares;

(d) Veto rights, notably over the following matters:

(i) Appointment of additional directors (beyond the 247 Founding

Shareholders);

(ii) Approval of the annual budget;

(iii) Acquisitions;

(iv) Entering into new lines of business other than (a) M2M window

coverings, (b) curtain-in-a-box in the UK; standard Velux roof-window

blinds, accessories associated with the above and any other items

sold by 247 on its UK website at the date of the agreement, all of

which are to be sold principally through the internet without

specifically targeting the large scale B2B market (interior designers,

property management companies and letting agents);

(v) Geographic expansion;

(vi) Any backward integration into assembly or production of any of the

products sold by 247;

(vii) Long term agreements (exceeding one year in duration);

(viii) Financing arrangements with banks or other parties;

(ix) Dividends in excess of 35% of profit after tax;

(x) Offers on the website at less than 15% gross profit; and

(xi) Termination of the existing supply agreement with Hunter Douglas.

Notwithstanding the contractual provisions between the Parties, the Parties

have submitted that 247 has been operated as an independent business

since the time of the 2013 Transaction. The Parties stated in their main

submission that Blinds2Go and 247 have continued to compete as

independent rivals from 2016 to the present date.

Hunter Douglas has

said this is a matter of policy and principle; co-CEO David Sonnenberg

stated at the hearing with the CMA ‘we have a very long history, over 60

years, of conducting ourselves in the industry in this way, leaving our

companies alone, very much like the way Berkshire Hathaway manages its

subsidiaries. In practice, the only way I am able to oversee 130 companies

is by running companies independently.’

Reciprocal put and call options were granted to Hunter Douglas and the

247 Founding Shareholders (the Put and Call Options) under separate Put

and Call Option Agreements between Hunter Douglas and the 247

Founding Shareholders. Under the Put and Call Options, the 247 Founding

Shareholders could require the purchase of 100% of their shares by Hunter

Douglas and/or Hunter Douglas could require the sale of the shares held by

the 247 Founding Shareholders, under normal circumstances,

by written

notice, in the period 1 March to 1 June 2019.

A Stakeholders Agreement was entered into between Hunter Douglas

(through Buismetaal), 247 and the 247 Founding Shareholders. Key

provisions of the Stakeholders Agreement included granting the rights set

out at paragraph 3.4 above to Hunter Douglas.

Additionally, two identical ‘Bonus Agreements’ were set up between Hunter

Douglas and each of the 247 Founding Shareholders which paid a bonus of

[]% to the 247 Founding Shareholders for annual purchases of finished

blinds up to £[]within the Hunter Douglas Group, and []% for any

purchases exceeding £[]. This agreement was valid for the financial year

ending 28 February 2014 to the financial year ending 28 February 2017. An

[].

Main Submission, 20 May 2020, paragraph 3.23.

Hearing with Hunter Douglas, p.13 of transcript. We note in this regard that Hunter Douglas did not exercise its

right to appoint a non-executive director to the 247 Board.

Under the bad leaver, death or disability provisions the option can be exercised outside this period.

‘additional bonus payment’ of []% was made on all finished blinds from

within the hunter Douglas Group. in the financial years ending 28 February

2014 and 28 February 2015.

Confidentiality provisions

The terms of the 2013 Transaction prevented either Party from publicising

the Transaction. This allowed Hunter Douglas to keep its investment in 247

confidential.

The Parties told us that the 2013 Transaction was kept confidential in order

to avoid the potential for ‘channel conflicts’ between Hunter Douglas, as a

wholesale supplier, and its customers as retail suppliers. Hunter Douglas

submits that it was concerned about the reaction of (and thus ‘conflict’ with)

its retail level customers to news that Hunter Douglas was itself entering

that market through its investment in 247. 247 submitted that it wished to

keep the 2013 Transaction confidential in order to avoid disrupting its

relationships with suppliers other than Hunter Douglas.

Other relevant Transactions in the intervening period

After the 2013 Transaction, but before the 2019 Transaction, Hunter

Douglas acquired two other businesses who were active in the supply of

window coverings.

On 21 June 2016 Hunter Douglas acquired a 60% equity stake in

Blinds2Go for £[] million (the 2016 Transaction). Hunter Douglas

subsequently acquired a further 5% interest in Blinds2Go in 2019.

Hunter

Douglas has future options to acquire the remainder of the shares in

Blinds2Go; two put and call options have been built into the structure of the

deal for Hunter Douglas to acquire a further 15% equity stake in 2021 and

the remaining 20% in 2026.

On 17 July 2017 Hunter Douglas acquired Hillarys (the 2017 Transaction).

This acquisition was reviewed and unconditionally cleared by the CMA at

phase 1. The Merger Notice submitted by Hunter Douglas in relation to the

2017 Transaction did not disclose the existence of the 2013 Transaction.

The only reference in the Merger Notice to Hunter Douglas having any

relationship with 247 was in a footnote, which stated that: []

Main submission, footnote 26.

Main submission, paragraph 6.10.

Hunter Douglas reduction of voting rights in 247

On 6 December 2016, Hunter Douglas reduced its shareholder level voting

rights in 247 from 49% to 24.9%. Hunter Douglas submits that this arose as

a result of changes to UK corporate governance rules as part of the

implementation of the EU Fourth Money Laundering Directive, specifically

the requirement for UK companies to maintain a register of persons with

significant control (PSC). The CMA understands that reducing its voting

rights in 247 to under 25% allowed Hunter Douglas to maintain

confidentiality over its interest in 247 by avoiding having to be identified on

247’s register of PSCs. The CMA understands that this desire to continue

maintaining the confidentiality of Hunter Douglas’ interest in 247 was

motivated by the perceived risk of ‘channel conflicts’ noted above. Hunter

Douglas’ other rights set out at paragraph 3.4 above remained unchanged.

Subsequently, on 11 May 2017, just prior to the 2017 Transaction, Hunter

Douglas further reduced its shareholder level voting rights in 247 from

24.9% to 4.9%. Again, Hunter Douglas’ other rights, as per paragraph 3.4

above in 247 remained unchanged.

Hunter Douglas submits that its reason for reducing its voting rights was to

avoid having to disclose its interest to the CMA in any investigation of the

2017 Transaction. Hunter Douglas have stated that they were concerned

that the CMA may disclose the 2013 Transaction in the course of any such

investigation, leading to the transaction no longer being confidential:

The reason for this was that Hunter Douglas was aware that the

CMA might investigate its proposed acquisition of Hillarys, a

much larger business with overlaps upstream in components and

assemblers, as well as retail operations including a small online

web brand (Web Blinds) and its main in-home service. Hunter

Douglas was concerned that any such review might lead to the

disclosure in the decision of its interest in 247. This would have

undermined the position so recently taken to reduce its voting

rights from 49% to 24.9% to preserve confidentiality.

2019 Transaction

The Parties submit that the timeline of the events leading up to the decision

to enter into the 2019 Transaction is as follows:

(a) In December 2017 the 247 Founding Shareholders met with Hunter

Douglas to discuss continuation plans if the put or call options were

exercised.

(b) In 2018 the 247 Founding Shareholders made it known to Hunter

Douglas that they would be exercising their respective put options.

structure occurred between the 247 Founding Shareholders and

Hunter Douglas.

(d) On 19 February 2019 the 2019 Transaction was implemented. The

2019 Transaction took place slightly earlier than anticipated in 2019

(as stated above, it was originally planned to take place between

March and June 2019) to ensure it came before the end of 247’s

financial year.

(e) The 2019 Transaction completed on 28 February 2019, at the end of

247’s 2018/19 financial year. The terms of the 2019 Transaction

gave effect to the Put and Call Options, albeit these were not

formally exercised.

The total consideration paid for all the issued share capital of 247 was

£[]. This is consistent with the purchase price that would have been paid

had the Put or Call Option been exercised, the calculation of which was to

be based upon 247’s profits in the two years prior to the exercise of the Put

or Call Option.

The Parties’ rationale for the Transactions

The Parties submit that the 247 Founding Shareholders ‘entered the 2013

Transaction in the belief that they were selling the business to Hunter

Douglas in a staggered transaction that would finally complete in 2019 and

which would ensure the most tax efficient outcome (through entrepreneur

relief) for the individuals.’

As a result, the Parties were not of the view that the 2013 and 2019

transactions were independent. At the main party hearing with 247, Jason

Peterkin stated of his and David Maher’s understanding:

David never considered the 2013 and 2019 transactions to be

distinct from each other. We looked at the 2013 as a single

transaction which ended in 2019... David and myself to a lesser

extent were both very keen to give ourselves an exit plan. The

deal that Hunter Douglas offered us gave us exactly that. It also

gave us access, certainly perceived access, to their resource.

247 has submitted that ‘the structure provided a guaranteed exit route.

David Maher, in particular, was looking to retire and the put option allowed

both of the 247 Founding Shareholders to exit the business whilst

maximising the value which could be achieved.’

Notwithstanding the stated exit plan for the 247 Founding Shareholders,

there were Parties’ submitted the following further considerations

motivating the Transactions.

2013 Transaction

Hunter Douglas submitted the following in relation to the 2013 Transaction:

In 2013, we were aware of the emerging importance of e-com to

our business. Home Depot had bought Blinds.com and we were

supplying them, so we could see the growth. We began to worry

that over the long run we may need to transform into more of a

retailer ourselves, as difficult as that might be given the efficiency

of the direct-to-consumer businesses in e-com, in particular,

versus traditional retail. UK e-com seemed to be emerging and a

good place to learn.

Hunter Douglas [], describing, in Board report at the time of the

Blinds2go acquisition, that [].

The Parties have submitted that another motivation for the 2013

Transaction was to support 247’s expansion overseas,

more specifically

across mainland Europe. Hunter Douglas stated, in internal documents at

the time of the transaction, that:

‘[247] requires a reliable strategic supplier with wide geographic

reach and product breadth as well as additional capital for

geographic expansion on the European Continent.

HD is willing to acquire a 49% stake in [247] to support this

expansion.

The structure of the existing cooperation as well as the expansion

to Continental Europe should be optimized to reflect the fiscal

position of the parties, e.g. to allow for Entrepreneurial Relief for

David and Jason, where possible earning income in a permanent

establishment in a jurisdiction with lower tax rate than the U.K.,

licensing structures for existing and future IP rights, gearing, etc.’

247 submitted that the 247 Founding shareholder were considering expansion plans at the time of the

2013.transaction; an extension into flooring products, or international expansion..

The Strategic Business Plan prepared as part of the 2013 Transaction

states that [].

As a result, a Bonus Agreement was entered into with

247’s Founding Shareholders.

2019 Transaction

As described above, the 2019 Transaction was at the instigation of the 247

Founding Shareholders, and in particular the retirement of David Maher.

The 247 Founding Shareholders discussed potential continuation plans

after the call and put options with David Sonnenberg as early as 2017

before discussing their intention to exercise their put option in 2018 and exit

from the business.

[].

4. Industry background

In this section we provide an overview of the industry in which the Parties

are active. In particular, we will discuss the wider window coverings sector

in the UK, with a focus on the retail market for online M2M blinds, being the

principal area of overlap between the Parties.

Window coverings overview

The window coverings sector includes blinds, curtains, shutters, and

suspension systems. Customers typically purchase products in the sector

in ready-made format (ie a product that is largely finished and available in

one of many available sizes) or M2M (ie tailored to the exact specifications

of the customer). As discussed below, customers in the UK primarily

purchase window coverings through in-home, in-store, and online retail

channels.

Market research reports received from 2018 estimate that in 2018 the size

of the UK window coverings sector was approximately £1.5 billion. AMA

Research, Domestic window coverings market report UK 2018-2022 (the

AMA report), estimated the sector to be approximately £1.5 billion in size

and GlobalData, Window dressings November 2018 (the GlobalData

Report), estimates the sector size at £1.6 billion.

This includes sales for

all channels; online, in-store and in-home. Global Data estimate the total

growth of the sector as a whole between 2018 and 2023 is expected to be

9 to 11%, an annual average growth of approximately 2%.

Window coverings fall in the broader category of home accessories, and

account for the largest proportion of consumer spending within the

category. According to a Mintel report, ‘Accessorising the home – March

2020’, almost half of consumer spending on home accessories in the UK is

on window coverings. Figure 1 below shows that M2M window coverings

(curtains and blinds) is the single largest sub-category within home

accessories, followed by ready-made window coverings (curtains and

blinds).

We note these reports are both now two years old and so their estimates of market size and growth should be

treated with some caution. We note that we do not hold industry reports that contain market data for online M2M

blinds specifically. The industry reports quoted in this paper draw their findings from consumer research,

including consumer surveys, to inform their forecasts data for the wider sector.

Global Data estimates the window coverings sector will grow 9.2% from 2018-2023, Global Data Report, Page

8 and AMA research estimate the market to grow 11% from 2018-2022, AMA report, page 9.

Mintel, Accessorising the home – March 2020, p24.

Figure 5: Consumer spending on accessorising the home, % of total 2019, UK

Source: Mintel Report

As a category of home accessories, the performance of the window

coverings sector is driven to some extent by the performance of the

housing market. AMA Report described growth of the sector as ‘relatively

consistent’ in the period 2012 to 2017 with year on year growth. See Figure

2 below taken from the AMA Report.

Mintel, Accessorising the home – March 2020, p24.

Figure 6: UK Window Coverings Market and Forecasts 2013 to 2022 by value (£m RSP)

Source: AMA Research Ltd/Trade Estimates

The AMA Report states that ‘better performance in the housing market and

wider economy has fuelled demand for both replacement and new window

coverings.’

Further, the report describes the effect that the UK economy

has on UK building and construction as significant, ‘with a sustained growth

in GDP of 2.7% in 2014, 2.2% in 2015, 1.9% in 2016 and 1.7% for 2017.’

However, the GlobalData Report states that ‘2018 has seen the window

dressings category grow by just 0.8%, with a slow housing market and

cautiousness about spending large amounts on homes…with consumers

nervously following Brexit negotiations.’ As a result, ‘the category has been

reliant on sales to “improve not movers.”’

The current COVID-19 pandemic has affected retailers and suppliers in the

sector. Whilst at the beginning of the pandemic, uncertainties led to a

halting of supplier and retail offerings, many online services have now been

resumed. []. However, there has been some knock-on effect for

customers. [].

In Figure 7 below, the GlobalData Report charts the forecast relative

growth and size of each window covering type in the UK across distribution

channels.

This indicates that blinds (ready-made and M2M) are estimated

AMA Research, Domestic window coverings market report UK 2018-2022, page 8.

AMA Research, Domestic window coverings market report UK 2018-2022, page 11.

Global Data, Window dressings November 2018, page 4.

GlobalData, Window dressings November 2018, p16.

to be the highest growth products, with total forecast growth rates of 10.7%

and 9.7% respectively over the period 2018 to 2020 in the UK. M2M blinds

is the largest category at £518.6m, roughly one third of the total window

coverings sector and almost 30% larger than the market for M2M

curtains.

Figure 7: Forecast category growth and size: 2018-20, UK

Source: GlobalData, Window Dressings November 2018, p16

The AMA report states that ‘the window coverings sector faces greater

demand for customisation. Sales of M2M products continue to grow both

in-store and through e-commerce sites, as customers seek a personalised

look.’

This highlights the growing importance of the online retail channel

in the window coverings sector.

Distribution Channels

Distribution within the window coverings sector is highly diverse, with

options available in-store, in-home and online for the relevant products.

These are described as ‘channels’ within the industry. Each channel

presents customers with a different range of potential purchasing options,

as well as service and installation propositions. We discuss the main

features of each below.

GlobalData estimates the M2M curtains market to be £371.5m in 2018.

AMA Research, Domestic window coverings market report UK 2018-2022, p9.

In-store and In-home

The in-store and in-home channels are traditional retail channels in which

customers have a degree of interaction with a salesperson and/or the

products before purchase. These interactions take place either inside the

retailer’s physical store (in-store) or inside the customer’s home (in-home).

Both ready-made and M2M blinds are sold through these channels.

As set out in paragraph 7.54, in-store and in-home retailers appear to

position themselves as full-service providers, offering a more personal

experience and the option of a measuring and installation service. The

evidence we have seen also indicates that in-store and in-home retailers

tend to be more expensive than online retailers.

Retailers in the in-store channel are able to display a variety of window

coverings as well as their range of fabric options, although they are limited

by the available space. As a result, customers can review the colour, style

and materials for their window coverings, whether ready-made or M2M, in

person. Often, there will be a window covering specialist to assist a

customer to design their desired window covering.

As part of a retailer’s in-home offering, a consultant visits a customer’s

home with a limited range of samples in order to review colour, style and

materials for their window coverings, and may offer style advice as part of

the consultation. The consultant may also take measurements for the

customer, and fit the final product once complete.

Some in-store and in-home retailers also have an online presence,

although not all such retailers sell blinds online. Retailers who sell blinds

online and in-store are referred to as ‘multi-channel’ retailers. We note that

no supplier active in the in-store and in-home channel has a significant

position within the online M2M blinds market, and, for some, their online

presence is part of a general online store (ie covering products and

services unrelated to blinds or window coverings).

Online

Customers are able to purchase both ready-made and M2M window

coverings online. However, measuring and fitting typically are not provided

by retailers with an exclusively online presence. Customers select colour,

style and materials for their window covering online using retailer-supplied

photographs. Many online retailers, including the Parties, offer a sample

See paragraph 7.53.

service where fabric swabs can be requested and posted out to the

customer ahead of final product selection.

Online comparison of prices is a key feature of the online channel for

window coverings, including blinds. The GlobalData report states that

64.2% of shoppers start their research online ‘with customers consulting

reviews, comparing prices and scrutinising pictures and videos of the

product they are interested in’.

The large online offering of products

allows customers to easily compare product offers compared to in-store.

[].

The AMA Report states that ‘consumers are becoming more confident in

ordering custom-made products online.’

Hunter Douglas submitted that a

key recent market development is the growing expansion of online sales of

blinds, in particular of M2M blinds. We note, as discussed at 4.7, that the

COVID-19 pandemic has indirectly resulted in a significant increase in

online sales volume.

The growth of online spend has also seen a rise in mobile purchasing, with

smartphones predicted to become even more central to the purchasing

journey within the next two years.

This is in line with the evidence

provided by the Parties, that increased sales through mobile sites has led

to emphasis placed on developing the online mobile sites. []

Figure 8: 247 Customer Journeys – Devices used March 2013 to April 2020

[



]

The COVID-19 pandemic led to closure of physical retail stores and

suspension of in-home sales for a period of time, therefore demand has

increasingly been redirected online. Mintel reports, this ‘should further

catalyse the channel, and favour well-equipped multi-channel and online

only retailers. With current government guidance to self-isolate within the

home... this could actually boost the market over this period, as people

spend more time inside.’

Online M2M blinds

As noted above, the main area of overlap between the Parties is the supply

of online M2M blinds. Online M2M blinds are tailored blinds purchased by

customers online through a retailer’s website. Customers can browse the

GlobalData, Window dressings November 2018, p6.

AMA Research, Domestic window coverings market report UK 2018-2022, p9.

Mintel Report, page 15.

Mintel Report, Accessorising the home – March 2020, page 25.

website for various styles of blind (eg roman, venetian) in a variety of

materials and colours, and usually are able to order a free sample of a

given blind. Having selected their desired blind, customers provide

dimensions, measured in width and drop.

Customers may also be able to

make other customisations, for example by selecting the width of the slats

on a venetian or wooden blind.

On receipt of an order, online M2M retailers source the blind to fulfil the

order and arrange delivery. Some retailers, including both of the Parties,

arrange for delivery directly from manufacturers to customers and do not

hold their own inventory.

Once the customer has received the order, the customer fits the blinds

themselves by either following instructions provided by the retailer, or by

arranging for someone else to fit the blinds independently.

The largest online suppliers of M2M blinds sell exclusively online and do

not have an in-store or in-home presence. As mentioned above, some

multi-channel retailers do supply M2M blinds online, however, their product

offering is to-date more limited and their share of the online market is

modest.

Online platforms

In addition to retailer’s websites, Amazon and eBay are online marketplace

platforms that include ready-made window coverings from multiple sellers

in their listings.

However, third party retailers have not previously had an

effective way of selling M2M blinds on these platforms.

Customers can either search listings on the online marketplace or browse

by type of blind (eg venetian, or roman).

There are various ways listings

allow tailoring – either by requiring that the customer contacts the seller

separately, or (on Amazon) by using the recently-added ‘customise now’

button. Even with these functions, they are not configured particularly

effectively to enable the sale of M2M blinds. Amazon submits that the

‘customise now’ button is a very new feature on Amazon’s website. As a

result, we are aware that currently use of this function is limited.

Instructions on how to take these measurements are usually available on online M2M retailers’ websites.

We note that in addition to hosting third-party sellers, Amazon sells its own ready-made blinds directly on its

platform, but not M2M blinds.

Although the filtering options on online marketplaces are much narrower than on most online M2M blinds

websites.

While some listings on online marketplaces do offer free sample swatches,

we understand that []

As with standard online M2M blinds, once an

order is made online M2M retailers source the blind to fulfil the order and

arrange delivery.

Both the Parties have highlighted Amazon and eBay as growing platforms,

and [].

Swift Direct Blinds submits that ‘a small (currently approx.

[]%) and growing portion of its sales are generated through eBay and

Amazon’.

Competitors and main parties

In the window coverings sector more generally (including in-store and in-

home supply of ready-made and M2M blinds, as well as other types of

window coverings) multi-channel retailers are the leading suppliers, with

Dunelm, Hillarys, John Lewis and Next being the largest retailers.

Describing the retailers who supply window coverings, the 2018 GlobalData

Report states that ‘Dunelm remains the clear leader in the category, with its

market share (17.4%) continuing to dwarf that of second largest player

Hillarys (7.0%)’. These retailers offer both ready-made and M2M window

coverings, although their presence varies by distribution channel.

However, the competitive landscape is different for the online M2M blinds

market, being the principal area of overlap between the Parties.

The main competitors for the online retail supply of M2M blinds are online-

only retailers with none of the in-store or in-home retailers occupying a

significant position in the market. The Parties are two of the largest retail

suppliers M2M blinds online. Hunter Douglas, through its majority owned

subsidiary Blinds2Go, is the largest supplier in the market with 247 being

the third largest. In addition to the Parties, there are a handful of retailers

with revenues over £5 million: these are Interior Goods Direct (which now

includes the Wilsons Online Retail business following a recent acquisition),

Swift Direct Blinds and Bloc Blinds. In addition to these retailers, there is a

long tail of smaller retailers, none of whom has revenues above £5 million.

The Parties’ share of supply in the market for online M2M blinds is further

analysed in the Competitive Assessment section below.

Some multi-channel retailers do have a presence in the online M2M blinds

market (whether click-to-order or otherwise), for example Next and John

[].

Once the customer has received the order, the customer fits the blinds themselves by either following

instructions provided by the retailer, or by arranging for someone else to fit the blinds independently.

Main submission, 24 May 2020, Paragraph 1.11.

[].

Lewis. At the same time, some multi-channel retailers do not have a full-

function online M2M offering.

The multi-channel retailer Dunelm submitted that its website does not

currently offer click-to order functionality for M2M blinds, however, it has

introduced an online consultation service.

Whilst a response to the

current restrictions on in-story shopping, it provides a new level of customer

service to their current online offering and enables the firm to take orders

online without the specialised website functionality. Dunelm describes the

process as follows,

A customer makes an appointment with a Dunelm consultant, and this

is carried out on Microsoft Teams. The consultant will then discuss the

customer’s needs and suggest a solution to them. The consultant will

then assist the customer to place an order. The customer cannot place

an order directly online as yet without the assistance of the consultant,

this requires some Tech development.

Further, in-home retailers Hillarys’ and Thomas Sanderson’s websites only

provide lead generation and enable customers to provide contact details

and request order samples.

The degree of competitive constraint exerted

on the Parties by offline retailers is considered in the Competitive

Assessment section below.

Trends within the Sector

Improvements in the customer offering

The Parties have commented that M2M blinds are increasingly

competitively priced against ready-made blinds online as well as M2M

blinds in-store.

The Parties have said that effective supply-chain

management has enabled these lower prices to be offered and this has

been a key factor in the growth of the online M2M blinds market.

Additionally, online M2M blind specialist websites such as Blinds2Go and

247 blinds offer a large range of products, without the restrictions of

physical space occupied in-store, at various price points with short delivery

times. For example, 247 submitted that their blinds are delivered in 5-7

working days, as compared to four weeks for Dunelm’s M2M service.

It is

noted that there are some instances where delivery times could be

[]

Hillarys and Thomas Sanderson websites, accessed on 23 June 2020.

Main submission, 20 May 2020, paragraph 6.72 and Figures 6.15 and 6.16.

Dunelm website.

shortened by in-store retailers offering a click and collect service.

Nonetheless, the wide product offering online, combined with shorter

timescales attracts those customers who may previously have shopped in-

store for high quality blinds, as well as customers who might have opted for

cheaper ready-made blinds.

Furthermore, retailers of online M2M blinds are increasingly improving the

visual appearance of their websites. While CGI is already common across

many websites, Decora believe that visualisation software will become a

key part of the online offering by retailers. Third parties have indicated that

website quality and appearance matter to customers, we note that this

could affect a retailer's position on Google search results. This is discussed

further in the Competitive Assessment chapter.

Technology

Retailers are increasingly seeing the incorporation of smart technology

within their retail offering. AMA Research observes that, ‘Whilst the window

coverings market can be considered mature, the sector is highly innovative,

with frequent product introductions. These include new materials,

contemporary designs and the uptake of motorised options; the latter are

becoming more affordable and mainstream.’

[].However, no third party

who we spoke to identified motorisation as an important trend.

AMA report, page 8.

5. Relevant merger situation

This section sets out our provisional findings on the First Statutory

Question (see paragraph 1.3 above), namely whether each of the 2013

Transaction and the 2019 Transaction constitutes the creation of an RMS.

This is known as the jurisdictional test.

Relevant Merger Situation – the jurisdictional test

Under section 23 of the Act, an RMS arises when the following conditions

are met:

(a) two or more enterprises have ceased to be distinct enterprises at a time

or in circumstances falling within section 24

of the Act (enterprises have

ceased to be distinct); and

(b) one (or both) of the following conditions is (or are) satisfied:

(i) as a result, a share of supply of 25 per cent or more is created or

enhanced in respect of goods or services of any description which are

supplied in the UK, or a substantial part of the UK (the share of supply

test);

(ii) the value of the turnover in the UK of the enterprise being taken over

exceeds £70 million (the turnover test);

This second element establishes sufficient connection with the UK on a

turnover or share of supply basis.

On the basis of the turnover figures set out at paragraphs 2.5 and 2.8

above, we provisionally find that the turnover test is not met in this case. In

this section we first consider whether enterprises have ceased to be distinct

and, second, whether the share of supply test is met.

Section 24(1) of the Act notes that ‘For the purposes of section 23 two or more enterprises have ceased to be

distinct enterprises at a time or in circumstances falling within this section if…(a) the two or more enterprises

ceased to be distinct enterprises before the day on which the reference relating to them is to be made and did so

not more than four months before that day; or… (b) notice of material facts about the arrangements or

transactions under or in consequence of which the enterprises have ceased to be distinct enterprises has not

been given…’

Enterprises ceasing to be distinct

Enterprises

The first element of the jurisdictional test considers whether two or more

enterprises have ceased to be distinct as a result of each of the

Transactions.

The Act defines an ‘enterprise’ as ‘the activities or part of the activities of a

business’. A ‘business’ is defined as including ‘a professional practice and

includes any other undertaking which is carried on for gain or reward or

which is an undertaking in the course of which goods or services are

supplied otherwise than free of charge’.

The Parties are both active in the online retail supply of different types of

blinds, shutters and curtains. Hunter Douglas is also active at the

manufacturing and wholesale levels of the supply chain for different types

of window furnishings, including assembled blinds, raw materials and

components for blinds.

247 is only present at the retail level of the supply

chain. As noted above, in 2019 Hunter Douglas had global revenues of just

over £3 billion and UK revenues of £[] and in 2019, 247’s total turnover

for the period ended 19 February 2019 was £22.2 million, of which £[]

was in the UK.

We are therefore provisionally satisfied that Hunter Douglas and 247 are

each a ‘business’ within the meaning of the Act and that, accordingly, the

activities of Hunter Douglas and 247 are ‘enterprises’ for the purposes of

the Act.

Ceasing to be Distinct

Section 26 of the Act explains the concept of ‘ceasing to be distinct’. Two

enterprises cease to be distinct once they are brought under common

ownership or common control. Control includes situations falling short of

outright voting control, including the ability directly or indirectly to control or

materially to influence the policy of an enterprise, pursuant to section 26(3)

of the Act. Three levels of interest are therefore recognised as being

sufficient to amount to an RMS: a controlling interest; the ability to control

policy (de facto control); and the ability materially to influence policy

Sections 129(1) and (3) of the Act.

At a wholesale level, some wholesalers and retailers purchase or import fully-assembled blinds, while others

purchase components and materials and fabricate the assembled blinds, using machinery or by hand. Most

wholesalers of blinds are able to provide a range of different blind types, although there are some that focus on

specific products.

(material influence). The ability to exercise material influence is the lowest

level of control that may give rise to an RMS.

This interpretation is confirmed by the explanatory Notes to section 26 of

the Act, which state that (emphasis added):

Subsections (3) …envisage three levels of control of an

enterprise. These are: material influence over policy; control of

policy (often called de facto control); and a controlling interest in

the enterprise (often called de jure control). What constitutes

material influence or control will be considered on a case-by-

case basis by the competition authorities according to the

particular circumstances of the case. Under the FTA

the

authorities have treated the acquisition of the ability to appoint a

director or having a 15% shareholding as sufficient to give

material influence for these purposes. De facto and de jure

control will arise at higher levels of shareholding, with de jure

normally requiring more than 50% of the voting rights

The CMA’s view, informed by previous decisional practice, of the distinction

between these levels of control is set out in CMA2 at paragraphs 4.12 to

4.30.

Section 26(4) of the Act allows for a new RMS to be created if the acquiring

firm, which is already able to exert material influence over the policy of a

target firm, acquires ‘de facto’ control or a controlling interest in the target

firm. The same applies to a move from ‘de facto’ control to a controlling

interest.

A key point of difference between the CMA and the Parties concerns the

level of interest acquired by Hunter Douglas in 247 as a result of the 2013

Transaction. The Parties do not dispute that Hunter Douglas and 247

ceased to be distinct as a result of the 2013 Transaction. However, they

claim that the 2013 Transaction should be considered as conferring a

controlling interest in 247 to Hunter Douglas or, at least, ‘de facto’ control,

which the Parties claim should be treated as a controlling interest.

On that

basis, the Parties claim that there could have been no new RMS as a result

Mergers: Guidance on the CMA’s jurisdiction and procedure (CMA2), January 2014, para. 4.14.

This refers to the Fair Trading Act 1973, the predecessor to the Act.

Response to Issues Letter, paras 5.19-5.20.

of the 2019 Transaction under section 26(4)

of the Act as the level of

interest did not change.

However, in the SLC Decision the CMA found that:

(a) the CMA has no ability to treat one level of interest as another for the

purposes of its jurisdictional assessment;

(b) the 2013 Transaction could only have given Hunter Douglas the ability to

materially influence the policy of 247

; and

Douglas held in 247 from material influence to a controlling interest, did

amount to a new RMS.

The Parties’ submissions and our provisional findings on these points are

set out below.

The CMA’s ability to treat one level of interest as another

The Parties submit that the CMA may treat one level of interest as another

for the purposes of the CMA’s jurisdictional assessment. Specifically, they

submit that:

(a) the CMA may treat ‘de facto’ control as a controlling interest under section

26(3) of the Act; and

(b) paragraph 4.29 of the CMA Guidance makes clear that the CMA’s

practice is to treat de facto control as a controlling interest whenever it

considers that the test for reference is met.

The CMA disagrees with the Parties’ interpretation of this section of the Act

and the relevant CMA Guidance.

As a preliminary matter, we note that the purpose of section 26 of the Act

more generally is to specify the circumstances in which enterprises may

cease to be distinct. Sections 26(1) and 26(2) state that enterprises cease

This provision states that ‘For the purposes of subsection (1), in so far as it relates to bringing two or more

enterprises under common control, a person or group of persons may be treated as bringing an enterprise under

his or their control if…(a) being already able to control or materially to influence the policy of the person carrying

on the enterprise, that person or group of persons acquires a controlling interest in the enterprise or, in the case

of an enterprise carried on by a body corporate, acquires a controlling interest in that body corporate; or (b) being

already able materially to influence the policy of the person carrying on the enterprise, that person or group of

persons becomes able to control that policy.’

Response to Issues Letter, para 5.20.

SLC Decision, paragraph 45.

Paras 46-47.

SLC Decision, paragraph 49-50.

to be distinct ‘if they are brought under common ownership or common

control’ as well as the circumstances in which they may be treated as being

under common control.

In this context, the purpose of section 26(3) is to

specify the circumstances in which the CMA may find that sufficient control

had been acquired to conclude that enterprises have ceased to be distinct

for the purposes of Sections 26(1) and 26(2).

This is very clearly set out

in the text of that section which notes that (emphasis added):

A person or group of persons able, directly or indirectly, to control

or materially to influence the policy of a body corporate, or the

policy of any person in carrying on an enterprise but without

having a controlling interest in that body corporate or in that

enterprise, may, for the purposes of subsections (1) and (2),

be treated as having control of it.

Thus section 26(3) of the Act makes clear that each of material influence,

‘de facto’ control or a controlling interest will be sufficient to find that

enterprises have ceased to be distinct in the circumstances specified in the

section. In light of this, we provisionally find that it does not, as suggested

by the Parties, give the CMA the discretion to treat one level of interest or

control as another for the purposes of its jurisdictional assessment.

Further, we note that paragraph 4.29 of the CMA Guidance discusses the

circumstances in which de facto control may be treated as a controlling

interest. Crucially, however, this paragraph of the guidance cites section

26(3) of the Act as its basis and must therefore be interpreted consistently

with that provision. It states (emphasis added):

The CMA has the ability under section 26(3) of the Act to decide

whether or not to treat ‘de facto’ control as a controlling interest

for the purposes of the Act; but, as explained in the context of

material influence…, its practice in the context of Phase 1

decisions is to do so whenever it considers that the test for

reference would be met in the case in question.

To be consistent with section 26(3) of the Act, which is determinative as to

the law on this point, the reference in this paragraph of the CMA Guidance

to a ‘controlling interest’ must be read as a reference to the level of interest

that is sufficient to find that enterprises have ceased to be distinct, not to

any discretion on the part of the CMA that otherwise does not exist for this

section of the Act.

Sections 26(1) and 26(2) of the Act, respectively.

Reference 26(3).

The 2013 Transaction

As noted above, through the 2013 Transaction, Hunter Douglas acquired

convertible loan notes in 247. Attached to these loan notes were certain

rights in 247, which Hunter Douglas also acquired as a result. A summary

of the main rights is set out at paragraph 3.4 above.

As noted above, the Parties have submitted that Hunter Douglas acquired

a controlling interest or, at least, ‘de facto’ control over 247 through the

2013 Transaction. By definition, if a party does not have ‘de facto’ control it

will not have a controlling interest.

CMA2 states that ‘arrangements may give rise to a position of ‘de facto’

control when an entity controls a company’s policy, notwithstanding that it

holds less than the majority of voting rights in the target company (that is, it

does not have a controlling interest).’

Hunter Douglas did not acquire a controlling interest

We understand that Hunter Douglas did not acquire the majority of voting

rights, either at shareholder or board level, in 247 through the 2013

Transaction. It only acquired 49% of voting rights at shareholder level and

the right to appoint a single director, which we understand it never

exercised. Even if it had, this would not have given Hunter Douglas a

majority at board level as the 247 Founding Shareholders, who each held

half the remaining 51% of voting rights, both had seats on the board.

Therefore, we provisionally find that Hunter Douglas did not acquire a

controlling interest over 247 through the 2013 Transaction.

In their submissions the Parties note that paragraph 4.30 of CMA2, which

states that 'A ‘controlling interest’ generally means a shareholding

conferring more than 50% of the voting rights in a company’, means that

‘there is no requirement to have more than 50% of the voting rights in a

company for a controlling interest.’ The caveat in this section of the

guidance is intended to allow for exceptional circumstances where the legal

rights acquired by an entity grant an equivalent level of control to having

the majority of the voting rights in a company. This is why that paragraph of

CMA2 also states that ‘Only one shareholder can have a controlling

interest.’ This is not the case here. While Hunter Douglas did acquire

various rights, including those set out at paragraph 3.4 above, in 247

through the 2013 Transaction, our provisional conclusion is that none of

these individually or collectively gave Hunter Douglas the same legal level

Para 4.28.

of control it would have had from having the majority of the voting rights in

247 as they did not give Hunter Douglas the ability to exercise more than

50% of the voting rights at board or shareholder level.

Hunter Douglas did not acquire ‘de facto’ control

Indeed, as per the finding in the SLC Decision,

our provisional view is that

the rights acquired by Hunter Douglas through the 2013 Transaction were

not even sufficient to give it ‘de facto’ control over 247. CMA2 notes that

the exercise of ‘de facto’ control requires the ability to control i.e.

unilaterally determine (as opposed to just materially influence) the acquired

company’s policy.

In this context, ‘policy’ means ‘the management of

…[the acquired] business, and thus includes the strategic direction of a

company and its ability to define and achieve its commercial objectives.’

As noted in the SLC Decision, examples where this might occur include

where the shareholder has, in practice, control over more than half of the

votes cast at a shareholder meeting or where an investor’s industry

expertise leads to its advice being followed to a greater extent than its

shareholding would seem to warrant.

In submitting that Hunter Douglas

acquired at least ‘de facto’ control through the 2013 Transaction, the

Parties highlighted the following factors:

(a) The rights set out at paragraph 3.4 above, including the veto rights and

the fact that Hunter Douglas had the largest share of the voting rights

;

(b) the relative imbalance in size and influence between the position of

Hunter Douglas and that of the 247 Founding Shareholders;

the 247 business;

(d) the fact that the 247 Founding Shareholders sought guidance from senior

executives at Hunter Douglas on occasion;

(e) the existence of the Put and Call Options;

(f) the bonus arrangements for the 247 Founding Shareholders set out in the

Bonus Agreement; and

SLC Decision, paragraph 46.

Para 4.28.

CMA2, para 4.14.

SLC Decision, paragraph 42 and CMA2, para 4.28.

The founding shareholders of 247 Home Furnishings each held 25.5% voting rights after the 2013.

Transaction.

(g) the fact that 247 was required, from 2013, to attend the same

management review meetings as Hunter Douglas’ wholly owned

subsidiaries

However, our provisional view is that none of these factors, alone or

together, led to Hunter Douglas having the ability to unilaterally determine

247’s policy. Taking each factor in turn:

(a) While Hunter Douglas did acquire extensive rights (including notably

those set out at paragraph 3.4 above) in 247 through the 2013

Transaction, the 247 Founding Shareholders benefitted from the same

veto rights set out at paragraph 3.4 as Hunter Douglas. These equivalent

veto rights mean that Hunter Douglas did not have the ability to

unilaterally determine, and thus control, 247’s policy on any issue as the

247 Founding Shareholders possessed at least as much ability to

determine such policy. In fact, as noted above, it was the 247 Founding

Shareholders, not Hunter Douglas, who held the majority of voting rights

at both board and shareholder level;

(b) The above position does not seem to have been affected by any

imbalance in size and influence between the position of Hunter Douglas

and the 247 Founding Shareholders, any disparity in experience and

resources between Hunter Douglas and the 247 Founding Shareholders

or by the fact that the 247 Founding Shareholders occasionally sought

guidance from senior executives at Hunter Douglas. There does not

appear to be any evidence that any of these factors would have enabled

Hunter Douglas to direct the behaviour of the 247 Founding Shareholders

and given, as noted above, that the 247 Founding Shareholders held the

same veto rights set out at paragraph 3.4 as Hunter Douglas and greater

voting rights at board and shareholder level, these factors would not have

given Hunter Douglas the ability to determine the policy of 247 without the

cooperation of the 247 Founding Shareholders.

At most, we

provisionally consider that these factors could have assisted Hunter

Douglas in influencing 247’s policy;

be exercised unilaterally by the 247 Founding Shareholders and Hunter

Douglas alike and thus seem unlikely to have provided much leverage

over the behaviour of the 247 Founding Shareholders. The anticipated

We have seen no evidence to the contrary. Indeed, we understand that Hunter Douglas never actually

exercised its voting rights at shareholder level or appointed a director at board level.

We have seen no evidence to the contrary. Indeed, we have seen no evidence that Hunter Douglas ever

sought to use its size, influence, experience, resources and/or guidance to actually try and control the policy of

247.

acquisition of the remaining shares in 247 in 2019 seems likely to have

only incentivised the 247 Founding Shareholders to maximise the profits

of 247, rather than necessarily following the direction of Hunter Douglas

;

(d) As noted by the Parties, the effect of the Bonus Agreements, described at

paragraph 3.8 above, was that the 247 Founding Shareholders had [].’

While the Bonus Agreements may have been capable of influencing the

behaviour of the 247 Founding Shareholders in relation to the purchase of

finished blinds by 247, we do not provisionally consider that these

arrangements would have resulted in the 247 Founding Shareholders

necessarily following the direction of Hunter Douglas in relation to their

policy.

In any event, as noted at paragraph 3.8 above, the Bonus

Agreements were only valid between the financial years ending 28

February 2014 and 28 February 2017 and so any incentive effect ceased

as of that latter date. As noted at paragraph 5.27(b) above, Hunter

Douglas did not have the ability to determine the policy of 247 without the

cooperation of the 247 Founding Shareholders; and

(e) Finally, the fact that 247 was required to attend the same management

review meetings as Hunter Douglas’ 100% subsidiaries does not imply

that Hunter Douglas must have had the same level of control over 247.

While these meetings, again, may have influenced the policy of 247 we

are not convinced that their attendance evidences that Hunter Douglas

was, in fact, determining their policy.

Hunter Douglas did acquire material influence

We provisionally find that the rights set out at paragraph 3.4 and the other

factors at paragraph 5.27 , whilst falling short of giving Hunter Douglas the

ability to unilaterally determine 247’s policy, are sufficient to show that

Hunter Douglas acquired the ability to exercise material influence over

247’s policy as a result of the 2013 Transaction, for the reasons set out in

the SLC Decision. This is not now disputed by the Parties. As noted in the

SLC Decision, the 49% of the voting (and economic) rights in 247 acquired

as a result of the 2013 Transaction is well above the 25% threshold for

presuming the existence of material influence.

In addition, as noted at

paragraph 3.4 above, Hunter Douglas acquired the right to nominate a non-

executive director and veto rights covering many aspects of 247’s strategic

decisions (including the appointment of additional senior management,

annual budgets, any financing, expansions into new lines of business and

We have seen no evidence to the contrary. Indeed, we have seen no evidence that Hunter Douglas ever

sought to use the existence of these options to influence, let alone control, the policy of 247.

And there does not appear to be any evidence to the contrary.

CMA2, para 4.20.

pricing offers below 15% gross profit). Even though the 247 Founding

Shareholders benefitted from the same veto rights, these rights (alongside

the other factors set out at paragraph 5.27 above) would likely have given

Hunter Douglas the ability to restrict 247’s autonomy to carry out its

business activities, e.g. by being able to veto key decisions. This is

sufficient to find that Hunter Douglas acquired the ability to materially

influence 247’s strategic direction and commercial objectives as a result of

the 2013 Transaction.

The fact that some of these rights were not

exercised does not affect this finding as establishing that the ‘material

influence' threshold is met does not require the exercise of material

influence, merely the ability to do so.

The 2019 Transaction

As a result of the 2019 Transaction, Hunter Douglas acquired 100% of the

shareholding in 247 and, as such, increased its share in the profits of 247.

We provisionally find that this clearly amounts to the acquisition of a

controlling interest. As the sole shareholder, Hunter Douglas would have

the ability to unilaterally pass any shareholder resolutions allowing it to

unilaterally determine 247’s policy, including all aspects of 247’s

competitive strategy (including the ability to set 247’s prices) . In addition,

Hunter Douglas was no longer subject to any voting or other rights

previously held by the 247 Founding Shareholders, including their previous

veto rights. This is not disputed by the Parties.

As noted above, pursuant to section 26(4) of the Act, an increase in the

level of influence from material influence or ‘de facto’ control to a controlling

interest is sufficient to constitute a new RMS. Therefore, even if the 2013

Transaction conferred ‘de facto’ control over 247, which we do not agree is

the case for the reasons set out above, the acquisition of a controlling

interest in 247 in 2019 is sufficient to find a new RMS. The CMA has

exercised its discretion to assert jurisdiction over such changes in the level

of interest in a number of other cases

and we provisionally see no basis

to not exercise that discretion in this case. Indeed, on the contrary, in our

view, the fact that there has been a substantive change in the rights held by

Hunter Douglas as a result of the 2019 Transaction, e.g. moving from being

subject to the veto and voting rights of the 247 Founding Shareholders after

the 2013 Transaction, to having all the voting rights and no longer being

SLC Decision, paragraph 47.

CMA2, para 4.14.

See for example the Anticipated acquisition by Cavendish Square Partners (General Partner) Limited of a

controlling interest in each of Lakeside 1 Limited (Keepmoat) and Apollo Group Holdings Limited (Apollo)

(ME/5213/11 and ME/5291/11), OFT decision of 24 November 2011 and the Anticipated acquisition by Guardian

Media Group of Trader Media Group, OFT Decision of 29 September 2003.

subject to any vetoes from the 247 Founding Shareholders after the 2019

Transaction, supports the exercise of our discretion in this case.

While Hunter Douglas’s voting rights in 247 decreased following the 2016

Transaction (from 49% to 24.9%) on 6 December 2016

and just prior to

the 2017 Transaction (from 24.9% to 4.9%) on 11 May 2017

, we

provisionally find that these changes did not remove Hunter Douglas’s

ability to exercise material influence over 247’s policy. Indeed, at their

hearing, the representative from Hunter Douglas noted that these

reductions of Hunter Douglas’ voting rights were a purely ‘technical matter’

designed to keep the 2013 Transaction ‘confidential.’

All the other rights

set out at paragraph 3.4 above remained unchanged. As noted at

paragraph 5.29 above, notwithstanding the voting rights acquired by Hunter

Douglas, the other rights acquired through the 2013 Transaction would

likely have given Hunter Douglas the ability to continue restricting 247’s

autonomy to carry out its business activities and enabled Hunter Douglas to

materially influence 247’s strategic direction and commercial objectives.

Even if these changing voting rights had reduced the level of influence

Hunter Douglas over 247’s policy, this would not have affected the analysis

of the 2019 Transaction. The move from a lower level of influence, to a

controlling interest would still be sufficient to constitute a new RMS

pursuant to section 26(4) of the Act.

The Share of Supply Test – Nexus with UK

The second element of the jurisdictional test seeks to establish a sufficient

connection with the UK on a turnover and/or share of supply basis. As

noted at paragraph 5.4 above, the turnover test is not met in this case. Our

provisional findings on whether the share of supply test is met in relation to

the Transactions is set out below. Time at which the relevant thresholds

should be assessed

As noted above, in this case, we are considering the two Transactions, one

of which completed on 19 February 2019 (the 2019 Transaction) just over a

year before the CMA’s decision on 1 April 2020 to refer the Transactions to

a Phase 2 inquiry (the Reference Decision)

and one of which completed

We understand that this was for the reasons set out at paragraph 3.14 above.

The Parties have confirmed that this was for the reasons set out at paragraph 3.16 above.

Despite this, the CMA notes that Hunter Douglas made no mention of either the 2013 Transaction or having

material influence over 247 in their Merger Notice or in any submissions filed as part of the CMA’s investigation

into the 2017 Transaction (https://www.gov.uk/cma-cases/hunter-douglas-bellotto-merger-inquiry).

The CMA’s decision to refer case ME/6867/19 under section 22 of the Act

(https://assets.publishing.service.gov.uk/media/5e8b2c2086650c18cf162793/Decision_to_refer.pdf)

almost seven years prior to the Reference Decision on 30 April 2013 (the

2013 Transaction).

In the SLC Decision, the CMA considered that, for the purposes of

assessing whether the 2013 Transaction amounts to an RMS, it is

necessary, pursuant to section 23(9) of the Act, to assess whether the

share of supply test was met immediately before the CMA’s reference

decision (i.e. in this case, as at the time of the Reference Decision).

The Parties made a number of representations on this issue prior to the

SLC Decision. These were contained in a standalone submission dated 12

February 2020 and the Parties’ response to the CMA’s Issues Letter dated

4 March 2020. These representations were addressed in the SLC Decision.

Following the SLC Decision, the Parties submitted a white paper on 14

April 2020, and a response to our working paper on jurisdiction, on 16 June

2020, containing further representations on this issue as well as repeating

some previous representations.

These representations submitted that, contrary to the CMA’s interpretation,

the share of supply threshold should be assessed at the time the 2013

Transaction completed.

We note that section 23(9) of the Act states that, for completed mergers,

‘the question whether a relevant merger situation has been created shall be

determined as at… immediately before the time when the reference [to a

Phase 2 inquiry – see Section 22] has been, or is to be, made.’ (emphasis

added). In our view this language means that the question of whether an

RMS has been created, which as per sections 23(1) and (2) of the Act

includes the finding that the jurisdictional thresholds are met, is to be

determined ‘as at’ the time immediately before the Reference Decision, not

when the relevant Transaction has completed. This interpretation is

consistent with the body of CMA decisional practice

and the CMA’s

guidance, which notes at footnote 73

that ‘in accordance with section

See for example, Completed acquisition by Tesco Stores Limited of Brian Ford Discount Store Limited,

(ME/3827/08) OFT decision of 22 December 2008; Completed acquisition by Ryanair Holdings plc of a minority

interest in Aer Lingus Group plc (ME/4694/10), OFT decision of 15 June 2012; A report on the completed

acquisition by Intercontinental Exchange, Inc. of Trayport, Final Report of the Competition Commission dated 17

October 2016 (not appealed on this issue); A report on the completed acquisition by Sonoco Products Company

of Weidenhammer Packaging Group GmbH, Final Report of the Competition Commission dated 3 July 2015; A

report on the completed acquisition by Xchanging plc of certain companies comprising all of the European

operations of Agencyport Software Group, Final Report of the Competition Commission dated 29 April 2015; A

report on the completed acquisition by Alliance Medical Group Limited of the assets of IBA Molecular UK Limited

used to manufacture 18F-Fluorodeoxyglucose, Final Report of the Competition Commission dated 15 August

2014; A report on the completed acquisition by Groupe Eurotunnel S.A. of certain assets of former SeaFrance

S.A., Final Report by the Competition Commission dated 6 June 2013; Completed acquisition by MWUK Holding

Company Limited of Dimensions Clothing Limited and Completed acquisition by MWUK Holding Company

Limited of certain assets of Alexandra plc (in administration) ME/4664/10 (MWUK Holding), OFT Decision of 19

November 2010.

CMA2.

23(9) of the Act, the CMA assesses whether the share of supply test is met

at the time of its decision on reference.’

The Parties have disputed the CMA’s reading of section 23(9) of the Act

submitting that the provision is merely one ‘which imposes an obligation on

the CMA to make a determination and is not a provision which determines

the facts that are to be taken into account in making that determination.’

However, the Parties’ reading of section 23(9) is inconsistent with the

natural interpretation of the words ‘as at’ in section 23(9) of the Act, which

is ‘based on the situation at the time’. This supports our view that the share

of supply test should be calculated based on the situation of the Parties at

the time of the Reference Decision. In their WP Response, the Parties

contested the CMA’s interpretation of these words, submitting that they

‘simply mean that the CMA must satisfy itself ‘as at’ the point of reference

that any RMS which arose at the time enterprises ceased to be distinct

persists at the time of the reference.’ However, we find this submission to

be unconvincing as the CMA’s interpretation more closely tracks the natural

interpretation of the words ‘as at’.

The Parties claimed that the CMA’s interpretation of the Act has not

accounted for and is inconsistent with the effect of section 23(2A) of the

Act. This provision states that: ‘The share of supply test is met if… as a

result of the enterprises ceasing to be distinct enterprises, one or both

of the conditions mentioned in subsections (3) and (4) below prevails or

prevails to a greater extent [, which set out the share of supply thresholds]’

(emphasis added). Contrary to the Parties’ interpretation, our view is that

this provision merely requires the CMA to ensure that the share of supply

test is passed as a result of an increment to the shares of supply of the

enterprises that have ceased to be distinct. The provision must also be

read consistently with section 23(9) of the Act, which, for the reasons

stated above, we find specifies the point in time at which the shares of

supply and thus any increment should be assessed.

In their representations the Parties also claimed that the CMA’s

interpretation is contrary to the intention of Parliament. In support, the

representations quote Melanie Johnson MP, then-Minister for Competition

and Consumers, who said, in relation to section 23 of the Act, during its

passage through Parliament: ‘The purpose of the test is to take out of the

scope of merger control a large number of transactions that are of no

economic concern and to give business regulatory certainty that they will

not fall within merger control.’ The Parties also noted that the CAT referred

to business certainty at paragraph 82 of its judgment in the Lebedev

Lebedev Holdings Limited and Independent Digital News and Media Limited v DCMS [2019] CAT 21.

case: ‘Altogether, the merger control regime in the Act is replete with time-

limits for the various subsidiary stages, and very specific prescriptive

provisions regarding the circumstances in which those limits can be

extended and for how long. That approach clearly supports business

certainty regarding potentially major transactions.’ The CMA does not

dispute the importance of business certainty. However, both the quote from

Melanie Johnson MP and the paragraph of the Lebedev case cited by the

Parties, set out above, are concerned with the existence and compliance

with statutory time limits. In this case it is not disputed that the CMA has

complied with the time limits in the Act for making a reference decision.

Indeed, the Parties do not dispute that the CMA was not out of time in

choosing to call in the 2013 Transaction once the CMA became aware of

the material facts about the 2013 Transaction.

Nevertheless, as explained below, in the particular and unusual

circumstances of this case, we consider that the very lengthy period of

almost seven years which elapsed between the 2013 Transaction and the

Reference Decision, combined with the fact that it was clear that any

overlap between the Parties at the time of the 2013 Transaction could not

have satisfied the share of supply test, are matters which we can and

should take into account in interpreting the evidence as to whether the

share of supply test was satisfied ‘as at’ the time of the Reference

Decision.

Share of Supply

The share of supply test will be met if, at the time it is determined, the

merging parties supply or acquire 25% or more of particular goods or

services, in the UK.

At the time of the 2013 Transaction the Parties did not overlap in the online

retail supply of M2M blinds in the UK and it was clear that any overlap

between the Parties at that time could not have satisfied the share of

supply test. As noted by the Parties, the only retail operation of Hunter

Douglas in the United Kingdom prior to the 2013 Transaction was Thomas

Sanderson, who, at that time, did not and continues not to offer its services

online.

However, at the time of the Reference Decision, both Parties were active in

the online retail supply of M2M blinds and had a combined share (by

revenue) of more than 25% in the online retail supply of M2M blinds in the

UK in 2019.

For the reasons set out above, we consider that it is appropriate to assess

whether the share of supply test is met based on the situation as at the

time of the Reference Decision. Therefore, were we to focus solely on the

Parties’ shares of supply as at the date of the Reference Decision, we

would provisionally conclude that the share of supply test is met in relation

to both Transactions.

However, we also note that the facts of this case are unusual. In particular,

there was an exceptionally lengthy period of almost seven years between

the 2013 Transaction and the Reference Decision. In addition, in this case,

it was clear that any overlap between the Parties at the time of the 2013

Transaction could not have satisfied the share of supply test. Thus,

although we disagree with the Parties’ interpretation of the Act, we

recognise the need to take account of this combination of unusual features

in interpreting the evidence in this particular case.

Considering the evidence in the round, we are provisionally not satisfied

that the share of supply test is met in relation to the 2013 Transaction. In

contrast, we provisionally find that the share of supply test is met in relation

to the 2019 Transaction, on the basis of the Parties’ combined shares of

supply by revenue as at the date of the Reference Decision, as noted

above.

While the Parties’ combined share of supply did not increase as a result of

the 2019 Transaction, where, as here, the RMS is the result of an increase

in the level of interest held by a party, we section 26(4) of the Act allows for

the acquirer to be ‘treated’ as bringing the target under its control

(notwithstanding that it already had the ability to exercise material influence

or ‘de facto‘ control over the target’s policy) such that there would therefore

(under such ‘treatment’) be an increment in the share of supply.

Time period for investigating mergers

To meet the criteria for an RMS, the enterprises must have ceased to be

distinct either not more than four months before the date on which the

reference is made or where the Transaction took place without having been

made public and without the CMA being informed of it, or four months from

the earlier of the time that material facts are made public or the time the

CMA is told of material facts.

The four-month period may be extended

under section 25 of the Act.

CMA2, footnote 44.

Section 24 of the Act.

In this case, as noted above, the Stakeholders Agreement entered into as

part of the 2013 Transaction contained confidentiality provisions requiring

both Parties to keep Hunter Douglas’s participation in 247 strictly

confidential. The Parties’ do not dispute that the 2013 Transaction was, as

a result, not subsequently made public and that material facts were not

provided to the CMA at the time the 2013 Transaction completed. We do

not consider that notice of material facts regarding the 2013 Transaction

and the 2019 Transaction was given by Hunter Douglas to the CMA prior to

22 November 2019 and 28 October 2019, respectively. The Parties do not

dispute this.

We therefore provisionally find that the applicable statutory time limits in

relation to this reference have been complied with.

6. Counterfactual

Introduction

The counterfactual is an analytical tool used to help answer the question of

whether a merger has resulted, or may be expected to result, in an SLC.

It does this by providing the basis for a comparison of the competitive

situation in the market with the merger against the likely future competitive

situation in the market absent the merger.

The latter is called the

counterfactual.

As we have provisionally found (at paragraph 5.48 above) that we have no

jurisdiction over the 2013 Transaction, this section only considers the

appropriate counterfactual for the 2019 Transaction.

The CMA’s counterfactual assessment framework

As part of its counterfactual assessment, the CMA may examine several

likely future scenarios, one of which may be the continuation of the pre-

merger situation. The CMA will select the most likely of these, based on the

facts of the case, as the counterfactual scenario.

It will incorporate into

the counterfactual only those aspects of scenarios that appear likely, based

on the facts available to it and the extent of its ability to foresee future

developments.

The foreseeable period can sometimes be relatively

short.

However, even if an event or its consequences are not sufficiently

certain to include in the counterfactual they may be considered in the

context of the competitive assessment.

The CMA seeks to avoid importing into the assessment of the appropriate

counterfactual any spurious claims to accurate prediction or foresight.

Given that the counterfactual incorporates only those elements of scenarios

that are foreseeable, it will not in general be necessary to make finely

balanced judgements about what is and what is not included in the

counterfactual.

However, where we consider that the choice between two

or more counterfactual scenarios will make a material difference to the

MAGs, paragraph 4.3.1.

MAGs, paragraphs 4.3.1 and 4.3.6.

MAGs, paragraph 4.3.1.

MAGs, paragraph 4.3.6. In contrast, at Phase 1, the effect of the merger is compared with what is considered

to be the ‘most competitive’ counterfactual (provided that this situation is considered to be a realistic prospect).

MAGs, paragraph 4.3.6.

MAGs, paragraph 4.3.2.

MAGs, paragraphs 4.3.2 and 4.3.6.

competitive assessment, the CMA will carry out additional detailed

investigation before reaching a conclusion on the appropriate

counterfactual.

Depending on the evidence, the choice of the counterfactual could be a

situation either more or less competitive than the competitive conditions

prevailing at the time the merger occurred. Therefore, the selection of the

appropriate counterfactual may increase or reduce the prospects of an SLC

finding.

In reaching its view on the appropriate counterfactual, the CMA determines

what future developments it foresees arising absent the merger based on

the facts available. Insofar as future events or circumstances are not certain

or foreseeable enough to include in the counterfactual, the analysis of such

events can take place in the assessment of competitive effects.

Owing to the

inherent uncertainty of predicting future events, the CMA benefits from a

‘margin of appreciation’ or evaluative discretion, in relation to its conclusions

and is likely to be deemed to have acted rationally provided it has taken

account of all relevant information.

Parties’ views on the appropriate counterfactual

The Parties noted that the pre-merger conditions of competition were those

in which Hunter Douglas had acquired a controlling interest in Blinds2Go

and, at least, material influence over 247 (through the 2013 Transaction)

The Parties therefore submitted that the correct counterfactual was one

where 247 would have continued to exercise the same degree of

competitive constraint that it would have done absent the 2019

Transaction.

Their submissions claimed that 247 exercised only a ‘limited

constraint’ on Blinds2Go before the 2019 Transaction, and that, the

acquisition by Hunter Douglas of a controlling interest in 247 through the

2019 Transaction had no impact on the competitive structure of the market.

In their submissions the Parties cited evidence of competition between

Hunter Douglas and 247 in the period between completion of the 2019

MAGs, paragraph 4.3.6.

MAGs, paragraph 4.3.4.

See BAA Ltd v Competition Commission [2012] CAT 3 at [20] (in the context of a market investigation);

Stagecoach Group Plc v Competition Commission [2010] CAT 14, paragraph 45.

On 21 June 2016 Hunter Douglas acquired 60% equity stake of Blinds2Go for £[].

As noted at paragraph 5.23 above, the Parties have submitted that Hunter Douglas acquired a controlling

interest or, at least, ‘de facto’ control over 247 through the 2013 Transaction. However, for the reasons set out at

paragraph 5.29 above, we provisionally find that Hunter acquired only material influence over 247’s policy

through the 2013 Transaction.

Main submission, 24 May 2020, paragraph 3.36.

Transaction in February 2019 and the imposition of the CMA’s Initial

Enforcement Order

(IEO) in November 2019.

In its response to our working paper, Hunter Douglas submitted that ‘[i]n

respect of the 2019 Transaction, the only plausible counterfactual is the

prevailing conditions of competition, a situation where Hunter Douglas

holds, at the very least, the ability to exercise material influence over the

activities of 247.’

Preliminary assessment

As noted at paragraph 5.29, we have provisionally found that Hunter

Douglas had the ability to exercise material influence over 247’s policy

prior to the 2019 Transaction.

We note the Parties’ submission at paragraph 6.8 above that the correct

counterfactual is one where 247 would have continued to exercise the

same degree of competitive constraint that it would have done absent the

2019 Transaction. This submission, in effect, asks the CMA to adopt the

continuation of the pre-merger situation as the counterfactual for the 2019

Transaction. While this is often the CMA’s starting point, our guidance is

clear that, in a phase 2 inquiry, the CMA ‘may examine several possible

scenarios, one of which may be the continuation of the pre-merger

situation’ and of these ‘only the most likely scenario will be selected as the

counterfactual.’

We are unconvinced by the Parties’ submission that the conditions of

competition in the situation absent the 2019 Transaction should be based

on their evidence regarding competition between 247 and Blinds2Go in the

period between completion of the 2019 Transaction and the CMA’s

imposition of an IEO. At this point, the Parties were under common control

and able to co-ordinate their strategies in response to a potential CMA

investigation of the 2019 Transaction. In our view, there is a material risk

that data submitted by the Parties on the conditions of competition in that

period was affected by the prospect of such an investigation. As such, this

is not persuasive evidence of what the conditions of competition would

have been in the absence of the 2019 Transaction.

We have found no evidence to suggest that Blinds2Go would have done

anything other than continuing to compete in line with the conditions

under section 72(2) of the Enterprise Act 2002. The terms of the order are set out on the CMA’s case page.

Main submission, 24 May 2020, paragraph 3.32.

The policy of the target in this context means the management of its business, and thus includes the strategic

direction of a company and its ability to define and achieve its commercial objectives (See, paragraph 4.14),

MAGs, paragraph 4.3.6.

prevailing at the time of the 2019 Transaction. For 247, we have

considered three scenarios relating to its ownership, which are set out

below.

Scenario 1: Continuation of majority ownership by the 247 Founding

Shareholders

The situation prior to the 2019 Transaction was that Hunter Douglas held

certain rights in 247, which were attached to convertible loan notes it had

acquired in 2013 and set out in a stakeholder agreement (the Stakeholder

Agreement) between Hunter Douglas and the 247 Founding Shareholders.

These convertible loan notes were subject to the terms of the LNI between

the Parties. This instrument provided that ‘Notes shall be repaid in full at

par on 30 June 2020 or (if later) on the tenth business day following

finalization of the audited Accounts of the Company for the fiscal year

ending 28 February 2019.’ The audited Accounts of 247 have been filed for

that fiscal year.

This means that after 30 June 2020, if no other action was taken, the loan

notes would have matured and been redeemed. If this had occurred Hunter

Douglas would no longer have had any interest in 247 and any rights it held

in 247 prior to the 2019 Transaction, attached to the convertible loan notes

it acquired through the 2013 Transaction, would have fallen away. In our

view, 247 would have then competed with Blinds2Go, and any other Hunter

Douglas group companies, as a fully independent rival.

However, the maturing and redemption of the loan notes would have led to

Hunter Douglas losing substantially all of the value of their 2013 investment

in 247.

Hunter Douglas told us that ‘[g]iven that the value of 49% of the

share capital of 247 would have run to many millions of pounds at whatever

point the conversion right was exercised, it would have made no sense to

have redeemed the loan notes in 2020.’ As a result, in our view, Hunter

Douglas would have had a strong incentive to exercise its right under the

LNI to convert its loan notes into 49% of the equity shares of 247.

Therefore, under this scenario:

(a) Hunter Douglas would have initially continued to have the same level of

influence over 247’s policy that it had prior to the 2019 Transaction.

(b) At some point before 30 June 2020, Hunter Douglas would have

exercised its right to convert its loan notes into equity shares, providing it

with a 49% stake in 247. Hunter Douglas would also continue to enjoy the

Under the LNI on maturity the loan notes would have been redeemed for the nominal value of only £98.

voting, veto and other rights that are set out in the Stakeholder

Agreement, summarised at paragraph 3.4 above, which does not have a

termination date and has effect regardless of whether Hunter Douglas’

interest in 247 is held as shares or loan notes. Therefore, on conversion

of the loan notes to equity, Hunter Douglas would have retained a similar

ability to influence 247’s policy

that it did prior to the 2019 Transaction.

As a result, we provisionally find that, under this scenario, the conditions of

competition throughout the counterfactual period may be similar to those

that prevailed prior to the 2019 Transaction. Even after Hunter Douglas

exercised its option to convert the loan notes to equity, which, in our

provisional view, would be likely to happen at some point before 30 June

2020, it would continue to benefit from the additional rights set out in the

Stakeholder Agreement. This would mean that conditions similar to the

prevailing conditions of competition that existed prior to the 2019

Transaction would continue for the foreseeable future.

Scenario 2: Alternative purchaser of Founding Shareholders’ stake in 247

We also considered whether, in the absence of the 2019 Transaction, the

247 Founding Shareholders’ stake would have been acquired by an

alternative purchaser. Given the ability and incentive for Hunter Douglas to

convert its loan notes into equity before 30 June 2020, we provisionally find

that it would also do so under this scenario.

In considering this scenario, in our view, the following evidence clearly

indicates that it was the continuing intention of the 247 Founding

Shareholders to ultimately sell their shares in 247 and exit the business.

Hunter Douglas told us that the 2013 Transaction was structured to provide

for the eventual exit of 247’s Founding Shareholders from the business. It

said ‘From the 247 perspective, the structure provided a guaranteed exit

route. David Maher, in particular, was looking to retire and the put option

allowed both of the 247 founding shareholders to exit the business whilst

maximising the value which could be achieved.’ Moreover, as discussed at

paragraph 3.17(a), the 247 Founding Shareholders also discussed their

intention to exercise the put option, which they acquired in 2013, with

Hunter Douglas in 2017, indicating their continued intention to sell their

shares in 247 and exit the business. This would have required Hunter

Douglas to acquire 100% of the shares in 247 in 2019.

[]

As noted at paragraph 5.29 above, we provisionally find this to be material influence.

The evidence above shows that several potential purchasers were

interested in acquiring 247 around the time of the 2019 Transaction. Given

that, for the reasons set out in paragraph 6.20 above, it was the continuing

intention of the 247 Founding Shareholders to sell their shares and exit the

business, we provisionally find that 247 Founding Shareholders are likely to

have been supportive of any such sale to a third party. The competitive

outcome under this scenario would be similar to Scenario 1 until the sale to

an alternative purchaser. At this point, Hunter Douglas would own 49% of

the equity in 247 with a third party now holding a majority 51% of the

shares in 247.

One of the rights held by Hunter Douglas under the LNI was a veto over

any transfer of the 247 Founding Shareholders’ shares. We provisionally

find that while Hunter Douglas had the benefit of this right it would have

both the ability and the incentive to use it as leverage to impose conditions

or obligations, including imposing the additional rights it held under the

Stakeholder Agreement (summarised at paragraph 3.4 above), against any

third-party buyer.

However, as noted in paragraph 6.17(b) above, in our view it is likely that

Hunter Douglas would have converted its loan notes into equity before they

matured and redeemed on 30 June 2020. At this point, Hunter Douglas

would no longer benefit from the veto right in the LNI over the transfer over

the 247 Founding Shareholders shares for the reasons set out in of

Appendix B.

We also considered whether there were any other terms in the Stakeholder

Agreement, Call Option Agreement or Put Option Agreement that would

have given Hunter Douglas the ability to prevent a sale of the 247 Founding

Shareholders’ shares in 247, and thus provided Hunter Douglas with similar

leverage to impose any conditions or obligations against any third-party

buyer of the 247 Founding Shareholders’ shares. For the reasons set out in

Appendix B once the loan notes either matured, and were redeemed, or

were converted to equity, in our view, Hunter Douglas no longer had such

an ability and, thus, no such leverage.

As such, and because any third-party buyer would not be a party to the

Stakeholder Agreement, we provisionally find that, if the 247 Founding

Shareholders were to sell their shares to a third party after Hunter Douglas

converted their loan notes to equity Hunter Douglas would not be able to

prevent such a sale and would not have any additional rights against that

third party beyond those it has as a result of holding 49% of the shares in

247. This would leave Hunter Douglas with less ability to influence the

policy of 247, including its strategic direction and commercial objectives,

than it had prior to such a sale.

Hunter Douglas told us that this scenario was ‘implausible, since without

those [additional] rights [under the Stakeholders Agreements] Hunter

Douglas could not protect its 49% interest in the profits of 247.’ However,

unless Hunter Douglas was able to negotiate similar rights with a new third-

party buyer of the 247 Shareholders’ majority stake in 247, we cannot see

any mechanism by which they could continue to hold them.

Scenario 3: Alternative purchaser for 100% of 247

Under this scenario, an alternative purchaser would have acquired 100% of

247, as a result of the 247 Founding Shareholders and Hunter Douglas

both selling their stakes in 247.

Given the incentive and stated objective of Hunter Douglas to remain

invested in 247, and given the stated objective of the 247 Founding

Shareholders to exit the business at some point, our initial view is that this

scenario might occur under the following conditions:

Shareholders’ 51% stake; and

(d) The misaligned incentives between Hunter Douglas and the 247 Founding

Shareholders set out earlier in this paragraph were such that they led to a

decline in the performance of 247 to the extent that Hunter Douglas

concluded that the best way to realise the value of its investment would

be through a sale.

Under this scenario, the conditions of competition would be similar to those

prevailing at the time of the 2019 Transaction until 247 was sold, when it

would compete under its new ownership as an independent rival to Hunter

Douglas.

Hunter Douglas submitted that it had never considered the possibility of

selling its stake in 247. At their hearing, the representatives of Hunter

Douglas stated that Hunter Douglas had never sold a core window covering

business and that it saw itself as a ‘permanent home for entrepreneurs who

want to sell their business’. They went on to state that ‘it would cause real

reputational damage if we were to be perceived as people who buy and sell

companies.’

Hunter Douglas also pointed out that 247 had not suffered a decline in

performance and that it was continuing to perform well at the time of the

2019 Transaction.

Summary

For 247, we have considered three counterfactual scenarios:

(a) Scenario 1: Continuation of majority ownership by the 247 Founding

Shareholders;

(b) Scenario 2: Alternative purchaser of the 247 Founding Shareholders’

stake in 247;

We note the Parties’ arguments with respect to Scenario 3. While the

circumstances required for a 100% sale of 247 appear possible, in our view

this scenario is not the most likely counterfactual.

We then considered whether Scenario 1 or Scenario 2 was a more likely

counterfactual. Under both scenarios Hunter Douglas would continue to

own 49% of 247. However, only under scenario 1 would Hunter Douglas

have any additional rights in 247, namely those it held prior to the 2019

Transaction under the Stakeholder Agreement.

We note that 247 is a profitable business with a track record of growth. The

247 Founding Shareholders have already received one formal offer to

purchase the business (from []). We also note the expressed desire of

the 247 Founding Shareholders to exit the business (see paragraph 6.20

above).

Provisional findings on the most likely counterfactual

We provisionally find it most likely that, in the absence of the 2019

Transaction, the shares held by the 247 Founding Shareholders would at

some point have been bought by a third party after Hunter Douglas had

converted their loan notes to equity. For the reasons set out at paragraph

6.20 above, in our view, it was the continuing intention of the 247 Founding

Shareholders to sell their shares in 247 and exit the business. We therefore

provisionally find that, absent the 2019 Transaction, the most likely

scenario is that the 247 Founding Shareholders would have sought to sell

their shares in 247 to a third-party buyer, as per scenario 2. At this point,

for the reasons set out at paragraphs 6.25 and 6.26 above, Hunter Douglas

would no longer be able to exercise the veto and other rights it held under

the Stakeholder Agreement, leading to 247 having more independence that

it had prior to the 2019 Transaction.

7. Market definition

In this section we present our assessment of the relevant product and

geographic market. Market definition provides the appropriate framework

for assessing the competitive effects of the Merger and involves an element

of judgement. The boundaries of the market do not determine the outcome

of the analysis of the competitive effects of the 2019 Transaction, as it is

recognised that there can be constraints on merging parties from outside

the relevant market, segmentation within the relevant market, or other ways

in which some constraints are more important than others. We will take

these factors into account in our competitive assessment.

Product market definition

The relevant product market is a set of products that customers consider to

be close substitutes, for example in terms of utility, brand or quality.

identifying the relevant product market the CMA will pay particular regard to

demand side factors (the behaviour of customers and its effects). However,

the CMA may also consider supply-side factors (the capabilities and

reactions of suppliers in the short term) and other market characteristics.

The Parties overlap in:

(a) the online retail supply of M2M blinds;

(b) the online retail supply of M2M curtains;

(a) the online retail supply of ready-made curtains; and

(b) the online retail supply of shutters.

We have restricted our inquiry to consider the overlap between the Parties

in the online retail supply of M2M blinds, this being the principal area of

overlap between the Parties.

As discussed in the Industry Background section, online M2M blinds are

tailored blinds purchased by customers online through a retailer’s website.

Customers can browse the website for various styles of blind (eg roman,

venetian) in a variety of materials and colours, and usually are able to order

a free sample of a given blind.

100

Having selected their desired blind,

MAGs, paragraph 5.2.2.

MAGs,, paragraph 5.2.5(a).

MAGs,, paragraph 5.2.6.

100

Although some retailers charge a fee for samples.

customers provide dimensions, measured in width and drop.

101

Customers

may also be able to make other customisations, for example by dictating

the width of the slats on a venetian or wooden blind.

On receipt of an order, online M2M retailers source the blind to fulfil the

order and arrange delivery. Some retailers, including both of the Parties,

arrange for delivery directly from manufacturers to customers and do not

hold their own inventory.

Once the customer has received their order, they fit the blinds themselves

by either following instructions provided by the retailer, or by arranging for

someone else to fit the blinds independently.

The Parties submitted that the relevant market to assess the Merger should

be wider than M2M blinds, and also wider than blinds more generally. The

Parties specifically noted the constraint from different window coverings

including curtains and shutters and from ready-made blinds. Additionally,

the Parties noted the constraint from in-store and in-home channels on

M2M blinds supplied through the online channel.

102

The Parties submitted

that even if these are not considered as part of the relevant market, it is

highly relevant to consider how such out-of-market factors exercise a

constraint on their activities.

103

The Parties further submitted a customer survey (the ‘BDRC Survey’),

which was commissioned to understand the purchase journey and choices

of the Parties’ customers.

104

We take into account the survey evidence as

part of our market definition and also assess the general robustness of the

survey results in Appendix C.

In this section, using the online retail supply of M2M blinds as our starting

point, we consider whether the market should be widened to include:

(a) curtains and shutters;

(b) ready-made blinds; and

In addition to our assessment of the relevant market, we will take into

account the strength of the competitive constraint of alternative products

101

Instructions on how to take these measurements are usually available on online M2M retailers’ websites.

102

Main submission, 20 May 2020, paragraph 6.76 and 6.77.

103

Main submission, 20 May 2020, paragraph 6.65.

104

Main submission, 20 May 2020, paragraph 1.8; BVA-BDRC Blinds Survey Final Report_20 May 2020, Main

submission, 20 May 2020, 20 May 2020, Annex 0093.

and retail channels (as noted in paragraph 7.8 above) as part of the

Competitive Assessment (see paragraphs 8.207 to 8.214).

Curtains and shutters

The Parties’ views

The Parties submitted that any competitive analysis must consider the

extent to which retailers of other window covering products exercise a

competitive constraint on the activities of the Parties.

105

The Parties’ argued that there has been a shift in demand from alternative

window coverings to online M2M blinds, and that customers of online M2M

blinds consider other window coverings before purchasing online M2M

blinds:

(a) The Parties submitted that a report by the ‘AMA report

106

highlights

shifts in demand between blinds, curtains and shutters, with blinds

and shutter purchases increasing at the expense of curtains.

107

Additionally, the Parties submitted that Blinds2Go’s growth has not

been based on winning share from other online M2M blinds retailers,

but persuading customers to choose online M2M blinds instead of

alternative window coverings (or instead of ready-made blinds and

in-store M2M blinds).

108

(b) The Parties submitted that customers start their purchase journey by

considering a range of window covering alternatives they find

appealing across blinds, curtains and shutters.

109

In support of this,

the Parties noted that the BDRC Survey shows that 8-11% of their

customers consider curtains and 16-17% consider shutters before

purchasing M2M blinds online.

110

105

Main submission, 20 May 2020, paragraph 6.77 and 6.78.

106

AMA report on domestic window coverings – UK 2018-2022.

107

Main submission, 20 May 2020, paragraph 6.78.

108

Main submission, 20 May 2020, paragraph 1.8.

109

Main submission, 20 May 2020, paragraph 6.20.

110

Main submission, 20 May 2020, paragraph 6.78.

Our assessment

In Hunter Douglas/Hillarys, the CMA concluded that there was a product

frame of reference for the retail supply of blinds, separate from curtains and

shutters.

111

For the reasons set out below, our provisional view is that, consistent with

the finding in Hunter Douglas/Hillarys, curtains and shutters should not

form part of the same product market as M2M blinds.

With respect to demand-side substitution, the BDRC Survey suggests that

the constraint from curtains and shutters on the Parties’ online M2M blinds

offering is weak. When asked what they would do in a hypothetical situation

where the respective Party had stopped selling blinds, only 5% of

respondents for Blinds2Go and only 3% of respondents for 247 said that

they would divert to other window coverings.

While we recognise that, as the Parties have highlighted, the BDRC Survey

shows that a higher (albeit still relatively low) proportion of respondents

considered purchasing curtains or shutters before ultimately purchasing

M2M blinds, the fact that customers ‘considered’ other products does not

allow for strong conclusions regarding their willingness to switch to such

products. In particular, ‘consider’ does not reveal whether a customer

would switch to the product considered in case of a price rise or in case its

preferred option was not available. We therefore provisionally find that the

extent to which customers considered other window coverings is not

particularly informative as to the competitive constraint these products exert

on M2M blinds. Moreover, whilst we note this expression of customers’

‘consideration’ of other products in the BDRC Survey, we are of the

provisional view that this is outweighed by other evidence relating to the

limited constraint of such other products, as discussed below.

In line with the customer evidence from the BDRC Survey, ten out of the

thirteen third parties which commented on this suggested that customers

would not switch from blinds to curtains or shutters if the price of all blinds

increased by 5% (with the remaining three suggesting that customers

would potentially switch).

112

Additionally, John Lewis told us that customers

111

Hunter Douglas/Hillarys, paragraphs 53 to 59. With respect to curtains, the vast majority of retailers

responding to the CMA’s market testing in that case indicated that curtains are not a demand-side substitute for

blinds. The CMA found a similar lack of demand-side substitution between blinds and shutters and also found

limited evidence of supply-side substitution between blinds and shutters (contrary to Hunter Douglas’

submissions at the time).

112

Interior Goods Direct, Laura Ashley, Velux, John Lewis, Next, Blinds4UK, Shuttercraft.co.uk, Plantation

Shutters, IKEA, and MakeMyBlinds told us that they think customers would not switch if the price of all blinds.

increased by 5%. Only Swift Direct Blinds, Wilsons and Concept Blinds suggested that customers would

potentially switch.

typically choose a specific type of interior window covering early on based

on aesthetic and functional considerations and would postpone the

purchase or shop around within a product category in case of a price rise.

We also assessed the extent to which blinds and other window coverings

are taken into account jointly or presented jointly by the Parties as part of

their competitive offering. We provisionally find that blinds are typically

positioned separately from other window coverings, which is consistent with

blinds and other window coverings forming separate relevant markets:

(a) The Parties do not tend to monitor alternative window coverings vis-

à-vis their M2M blinds.

113

This lack of monitoring by the Parties

supports our view that the Parties’ do not consider alternative

window coverings as a material competitive constraint.

(b) The contemporaneous record of the board-level consideration of

Hunter Douglas’ proposed acquisition of Blinds2Go in 2015

discusses the rationale for that transaction by reference to blinds

only (with there being no mention of curtains or shutters). Whilst

acknowledging that this document was prepared in the context of

that acquisition at the time, we have not been presented with any

further internal documents that indicate that, since 2015, curtains or

shutters pose a material constraint on the blinds.

In response to the Parties’ argument on growth in blinds being driven by

migration from other window coverings, we do not consider that this

indicates that other window coverings pose a competitive constraint on

blinds, and the other evidence we have seen indicates that other window

coverings do not pose a material competitive constraint on blinds:

(a) First, even if customers would move from other window coverings to

blinds in response to a small but significant non-transitory increase

in price (‘SSNIP’), this would only indicate that blinds exercise a

competitive constraint on other window coverings, but not

necessarily that other window coverings constrain blinds.

(b) Second, a migration to blinds (to the extent it is actually occurring)

could reflect a shift in customer preferences, rather than a result of

substitution, and therefore does not necessarily support the position

that customers would switch from other window coverings to blinds

in response to a SSNIP.

113

[]

given the Parties submitted that the growth of online M2M blinds has

come primarily at the expense of sales of ready-made blinds as well

as M2M blinds through other distribution channels.

114

Finally, we have considered the possibility of supply-side substitution

between different window coverings based on the evidence available to us.

In particular, we have considered the extent to which suppliers of other

types of window coverings may be readily able to supply online M2M blinds

in response to a change of prices. We note the following in this regard:

(a) At the manufacturing/wholesale level, neither the Parties nor third

parties have provided us with evidence that manufacturers of

different window coverings have the ability or incentive to shift

production between different window coverings, or that they actually

do so currently. Further, we also note that window covering retailers

purchase the different types of window coverings from different

manufacturers and that not all of these suppliers supply blinds,

shutters and curtains. This therefore indicates that it may not be

straightforward to use an existing supply chain to be able to supply

different types of product.

115

(b) At the retail level, whilst we acknowledge that certain retailers may

supply more than one type of window coverings, we also note that

suppliers’ market positions (as evidenced by shares of supply) in

blinds, curtains and shutters appear to be materially different.

116

This

material difference between product category shares indicates that

the conditions of competition for different product categories are

different, which is consistent with separate markets for different

products.

Overall, we provisionally find that curtains and shutters do not form part of

the same product market as M2M blinds. We take into account any out-of-

market constraint exerted by curtains and shutters in the competitive

assessment section, paragraphs 8.207 to 8.214.

114

Main submission, 20 May 2020, paragraph 4.16.

115

For example, we understand (i) that Rectella and J Rosenthal & Sons, two key suppliers of ready-made

curtains, do not supply blinds; (ii) that fabric suppliers play an important role for made-to-measure curtains but not

for M2M blinds and (iii) that TCMM Shutter Group and Plantation Shutters, two key supplier of shutters, do not

supply blinds.

116

For example, the main retailers of shutters are diyshutters.co.uk, Californiashutters.co.uk,

shutterlyfabulous.com, shuttercraft.co.uk and Plantation Shutters, neither of which has any significant position in

M2M blinds. Diyshutters.co.uk, Californiashutters.co.uk, shutterlyfabulous.com, shuttercraft.co.uk and Plantation

Shutters.

Ready-made blinds

The Parties’ view

The Parties also submitted that M2M blinds compete directly with ready-

made blinds.

117

In this regard, the Parties submitted that the BDRC Survey shows that 26%

of Blinds2Go’s customers and 30% of 247’s customers consider ready-

made blinds before purchasing M2M blinds online.

118

The Parties also

submitted that, in addition to multi-channel retailers that sell both M2M and

ready-made blinds, the BDRC Survey identifies B&Q, Ikea, Homebase and

Argos as retailers that the Parties’ customers are considering during their

purchase journey and would divert to in the event the Parties were

unavailable. Additionally, the Parties noted that Google Trends data for

searches related to ‘blinds’ also identifies Ikea and Argos.

The Parties also submitted that M2M blinds purchases are increasing

primarily at the expense of ready-made blinds (as well as M2M blinds

through other distribution channels) and that Blinds2Go’s growth has been

based on persuading customers to choose online M2M blinds instead of

ready-made blinds.

119

The Parties submitted that a high proportion of the

Parties’ products have a ready-made equivalent and noted that the leading

ready-made blinds retailers offer, in total, 352 different size combinations,

with an additional 93 combinations available from eBay.

120

The Parties also

noted that if customers were only interested in blind dimensions, 48% of

Blinds2Go’s and up to 54% of 247’s products would be available in a

ready-made equivalent, while almost 40% of Blinds2Go’s and 45% of 247’s

would have a ready-made equivalent if customers wanted a particular type

of blind (e.g. roller or roman).

121

The Parties noted that these percentages

are likely to significantly understate the competitive constraint imposed by

ready-made blind retailers due to the analysis only including approximately

70% of the market, the ability for customers to modify ready-made blinds to

suit their needs, and the ability for blinds to be fitted outside the recess,

where tolerances for width and drop dimensions are much wider.

122

Further, the Parties submitted that, with respect to range, even if customers

viewed colour and/or pattern as an important feature, the majority of M2M

117

Main submission, 20 May 2020, paragraphs 6.76 and 6.77.

118

Main submission, 20 May 2020, paragraph 6.66.

119

Main submission, 20 May 2020, paragraphs 1.8 and 4.16.

120

Main submission, 20 May 2020, paragraph 6.68.

121

Main submission, 20 May 2020, paragraph 6.70.

122

Main submission, 20 May 2020, paragraph 6.71.

blind sales are in ‘neutral colours’ that are readily available in ready-made

alternatives.

Finally, the Parties submitted that ready-made blind alternatives are priced

very competitively compared with M2M and provided a comparison of

Blinds2Go’s average retail prices with ready-made average retail prices,

both by type of blind and by type of blind and retailer.

123

The Parties noted

that while there are differences in quality between M2M blinds and some

ready-made products, even for products with comparable quality, ready-

made blinds are still priced to undercut Blinds2Go’s M2M products.

124

Our assessment

In Hunter Douglas/Hillarys, the CMA adopted a product frame of reference

for the retail supply of M2M blinds, separate from ready-made blinds, on

the basis that the majority of third parties did not consider ready-made

blinds to be a substitute for M2M blinds and evidence indicating that the

conditions of competition for M2M and ready-made blinds are different.

125

For the reasons set out below, our provisional view is that, consistent with

the finding in Hunter Douglas/Hillarys, ready-made blinds should not form

part of the same product market as M2M blinds.

With respect to demand-side substitution, the BDRC Survey submitted by

the Parties shows that only 13% of respondents for Blinds2Go and 12% of

respondents for 247 would divert to ready-made blinds when asked what

they would do in a hypothetical situation where the respective Party had

stopped selling blinds.

126

These percentages are higher than the proportion

of respondents indicating they would divert to other window coverings,

suggesting that ready-made blinds are a more important constraint on the

Parties than other window coverings. However, the percentages for ready-

made blinds are still small compared to the proportion of respondents

indicating they would divert to other retailers of online M2M blinds, namely

66% for Blinds2Go and 75% for 247. This suggests that ready-made blinds

are a significantly weaker constraint on the Parties than online M2M blinds

offered by other retailers.

Additionally, we note that the proportion of respondents that said that they

would divert to ready-made blinds is small when compared to the relative

size of sales of ready-made blinds. In particular, our market share

123

Main submission, 20 May 2020, paragraph 6.72 and Figures 6.15 and 6.16.

124

Main submission, 20 May 2020, paragraph 6.74.

125

Hunter Douglas/Hillarys, paragraphs 64 to 65.

126

Main submission, 20 May 2020, paragraph 6.59.

estimates show that sales of online M2M blinds by Blinds2Go’s competitors

amounted to £84 million in 2019 (see paragraph 8.10), while the Parties

estimated that sales of ready-made blinds amounted to £125 million in

2019. Despite ready-made sales being significantly larger, Blinds2Go’s

customers were substantially more likely to switch to other retailers selling

online M2M blinds than to ready-made blinds. This suggests that ready-

made blinds would at best be a distant competitive constraint.

127

While we recognise that, as the Parties have highlighted, the BDRC Survey

shows that a material proportion of respondents considered purchasing

ready-made blinds instead of M2M blinds, the fact that customers

‘considered’ ready-made blinds does not allow for strong conclusions

regarding their willingness to switch and hence the competitive constraint

ready-made blinds exert on M2M blinds. This is consistent with the view

that customers may consider the option of ready-made blinds but ultimately

decide at an early stage that they are not suitable for their requirements.

With respect to the Parties’ submission that Google Trends data for

searches related to ‘blinds’ also identifies Ikea and Argos, we note that this

data could primarily be driven by customers looking exclusively for ready-

made blinds, and therefore does not necessarily demonstrate that Ikea or

Argos are posing a competitive constraint on the Parties. On the basis of

the other evidence we have received, we provisionally find that Ikea and

Argos are not posing a relevant constraint on the Parties: these retailers

are not monitored by the Parties or other online M2M retailers. Additionally,

the BDRC Survey shows that only a very small proportion of respondents

would switch to Ikea and Argos.

Third party views on the propensity of customers to switch to ready-made

blinds tended to suggest that ready-made blinds should not form part of the

same relevant product market as M2M blinds. In particular, of the retailers

that expressed a view and sell both categories of blinds, [] and [].

128

Notably, 247 also mentioned that customers that ended up buying M2M

blinds from 247 may well need M2M, which suggests that these customers

would not switch in response to a SSNIP.

We further assessed the propensity of customers to switch by considering

to what extent ready-made blinds offer the same dimensions as M2M

127

In particular, if ready-made blinds were as close a competitor as online M2M blinds, we would expect

diversion rates to be in line with the magnitude of sales, ie we would expect higher diversion to ready-made

blinds than to online M2M blinds.

128

Interior Goods Direct, [], Swift Direct Blinds and MakeMyBlinds all submitted that customers would not

Switch. However, Concept Systems noted that customers would possibly switch, while Wilsons Blinds submitted

that customers would switch.

blinds. In this regard, we note that evidence from customers and third

parties suggests that the need for specific dimensions is a key reason for

customers to choose a M2M blind. For example, the BDRC Survey shows

that 37% of Blinds2Go’ respondents and 36% of 247’s respondents

selected ‘specific dimensions needed made-to-measure’ as a reason for

purchasing M2M blinds rather than alternative window coverings.

129

Similarly, two M2M blind retailers – both of which sell both M2M and ready-

made blinds – []. No third party provided a view to contradict this.

While the Parties submitted that 40% of Blinds2Go’s and 45% of 247’s

sales of M2M blinds have a ready-made equivalent, the analysis on which

the Parties base these results applies tolerances which appear to be very

generous in terms of which sizes would still constitute an ‘equivalent’.

130

131

We have not received any evidence that customers would be willing to

accept such tolerances. We also note that the claimed availability of ready-

made equivalents calls into question why customers purchase M2M blinds

when ready-made blinds are considerably cheaper even for comparable

quality (see paragraph 7.40). When instead only counting those ready-

made blinds that have exactly the same dimensions, we find that only

around 2% of the Parties’ sales of M2M blind have a ready-made

equivalent. If we allow for a tolerance of +/-1cm for each of width and

length, around 5% of the Parties’ sales of M2M blinds have a ready-made

equivalent.

132

We note the Parties’ argument that M2M blinds are just cut-down ready-

made blinds and that customers are able to modify ready-made blinds to

suit their needs. However, it is irrelevant for a customer if the retailer from

which the customer purchases the product obtains the product by

modifying an existing ready-made product or by sourcing an entirely new

M2M product. With respect to the prospect of the customer modifying the

ready-made product themselves, we have not received any evidence to

suggest that a significant proportion of customers would be willing to do

129

Similarly, market research submitted by Swift Direct Blinds shows that ‘made to measure’ was selected as the

single most important factor in the respondent’s decision making by the highest proportion of respondents

(namely 25.4%) and further scored highest in terms of importance to the respondents’ buying decision, Swift

Direct Blinds Brand Bible V3, page 6.

130

In particular, depending on the type of blind, the positive width or drop tolerance amounted to up to 50cm.

131

Additionally, we note that, as explained by the Parties, the analysis for 247 relies on applying the uplift factor

from Blinds2Go between inside recess vs outside recess. Without this modification, only []% of 247’s sales of

M2M blinds have a ready-made equivalent (if otherwise following the Parties’ methodology).

132

Our analysis is based on the sales data submitted by the Parties and on the measures of ready-made blinds

available submitted by the Parties. We note that the Parties submitted that the measures of ready-made blinds

available only consider the 11 top ready-made blinds retailers (representing the 80% of the ready-made market in

2018). With respect to the Parties’ argument that only the 10 top ready-made blind retailers (representing

approximately 70% of the market in 2018) were included in the analysis, we do not think that this is likely to

substantially bias the results, as we would reasonably expect the 10 top ready-made blind retailers to most of the

available sizes.

this. Additionally, the only third-party retailer of M2M blinds to provide a

view on this question told us that, although some ready-made blinds can be

cut to size, there is a question about whether a customer is likely to do this

effectively.

In addition to the evidence on relative dimensions and the survey evidence,

the []

133

- although the Parties submitted that the majority of customers

purchase ‘commodity products’ (by which the Parties appear to mean

standard products).

134

A comparison of the number of stock keeping units (SKUs) for each of

M2M blinds and ready-made blinds that are offered by different online

retailers suggests that [].

135

136

We consider that this may further limit the

competitive constraint from ready-made blinds on M2M blinds.

The Parties submitted in this regard that []% of M2M blinds sold in March

2020 (by value) were blinds in neutral colours which are readily available

as ready-made blind However, we consider that the Parties’ assessment of

‘neutral colours’ does not take into account nuances in colour, patterns,

fabrics and other options (such as DuoShade

or DuoLuxe) available for

M2M blinds. These variables allow for a degree of customisation in the

product that otherwise would not be available in ready-made options. As

such, we are not convinced that this submission demonstrates that there is

not significantly less choice with respect to ready-made blinds.

We also considered how the prices of M2M blinds and ready-made blinds

compare. The Parties submitted a comparison of Blinds2Go’s prices for

M2M blinds with other retailers’ prices for ready-made blinds for a number

of different types of blinds (including the key types, ie venetian, roller,

vertical and roman blinds). This comparison indicates that M2M blinds are

significantly more expensive than ready-made blinds. We note that there

are a number of examples where Blinds2Go’s average price for a specific

type of blind is more than twice as high as the average ready-made price of

a specific retailer for the same type of blind.

137

Additionally, even for

133

The BDRC Survey highlighted that a more suitable design was the key purchase reason for the majority of

both Parties’ customers. Moreover, ‘had what specifically wanted’ and ‘good/wide product range’ was selected by

a significant proportion of respondents as a reason influencing the choice of retailer. Market research submitted

by Swift Direct Blinds further shows that ‘good selection of colours’ was the product unique selling proposition

that obtained the second highest score with respect to the impact it would have on buying decisions. [].

134

Main submission, 20 May 2020, paragraph 6.17.

135

We note that while e.g. different colours and fabrics constitute different SKUs, different sizes do not constitute

different SKUs. Our comparison takes into account the Parties for M2M blinds and Dunelm, John Lewis, Next and

Argos for ready-made blinds (i.e. the key retailers that offer online ready-made blinds excl. Amazon).

136

[].

137

We note that the price comparisons submitted by the Parties in phase 1 show a similar picture of M2M blinds

tending to be substantially more expensive than ready-made blinds, although the Parties argued ‘this price

differential has materially fallen’.

products with reportedly comparable quality (the Parties indicate that this

would be products sold by John Lewis and Dunelm),

138

Blinds2Go’s M2M

blinds are still significantly more expensive than the equivalent ready-made

blinds: the lowest price difference amounts to £9 (or 19%) for John Lewis’

venetian blinds, with price differences amounting to more than £50 (or

more than 100%) for John Lewis’s and Dunelm’s roman blinds. While price

differences in and of themselves do not necessarily imply that products are

not part of the same relevant market, we consider that such large-scale

price differences, especially for products of similar quality, do indicate that

ready-made blinds do not compete directly with M2M blinds.

We also considered the extent to which the Parties and other retailers of

M2M blinds monitor the prices of ready-made blinds. Such monitoring

appears to be limited, suggesting that M2M blinds retailers do not consider

ready-made blinds to be an important competitive constraint to M2M blinds.

(a) While the Parties [].

(b) All other online M2M blind retailers that provided evidence on the

subject told us that they do not monitor the prices of ready-made

blinds and that they do not consider pure ready-made blind retailers

as competitors.

With respect to supply-side substitution, we note that suppliers of online

M2M blinds appear to be distinct from suppliers of ready-made blinds:

(a) None of the four largest online retailers of M2M blinds (ie Blinds2Go,

247, Interior Goods Direct and Swift Direct Blinds) sells ready-made

blinds, and more generally, none of the online M2M retailers we

contacted sell ready-made blinds. We also note that there are

differences further up the supply chain, with Decora, a key

manufacturer of M2M blinds, not manufacturing any ready-made

blinds.

(b) While Hunter Douglas told us that there is a very large business in

the US of providing cut-down services in the stores, the fact that the

largest ready-made retailers have a relatively weak position with

respect to online M2M blinds suggests that this is not a common

phenomenon in the UK.

Indeed, Hunter Douglas told us that Dunelm

is not currently doing this in the UK.

138

Main submission, 20 May 2020, paragraph 6.74.

Finally, in response to the Parties’ argument that M2M blinds purchases

are increasing primarily at the expense of ready-made blinds and that

Blinds2Go’s growth has been based on persuading customers to choose

online M2M blinds instead of ready-made blinds,

139

in our view this does

not imply that ready-made blinds pose a competitive constraint on M2M

blinds such that they should be included in the same relevant market:

(a) First, even if customers would move from ready-made blinds to M2M

blinds in response to a SSNIP, this would only indicate that M2M

blinds exercise a competitive constraint on ready-made blinds, but

not vice versa.

140

(b) Second, a migration to M2M blinds does not support the position that

customers would switch to M2M blinds in response to a SSNIP.

Overall, we provisionally find that ready-made blinds should not form part of

the same product market as online M2M blinds. Notwithstanding this

provisional view, we acknowledge that ready-made blinds do act as a

distant competitor to online M2M blinds and we have taken any out-of-

market constraint exerted by ready-made blinds into account in the

competitive assessment section, see paragraphs s 8.207 to 8.214 below.

In-store and in-home

The Parties’ view

The Parties submitted that they currently compete directly with offline

retailers of M2M blinds, both in-store and in-home.

141

In this regard, the

Parties made the following points:

(a) First, and on the basis of substitution away from the offline channel

to the online channel, the Parties argued that customers are

increasingly seeing these channels as readily interchangeable.

142

(b) Second, the Parties submitted that Blinds2Go offers a range of

products that compete with in-store and in-home products both in

terms of price and quality.

143

139

We note, however, that we have received mixed evidence on this. See for example paragraph 4.8, which

indicates higher rates of growth ready-made products as compared to M2M.

140

By the same token, we do not consider that the increase in sales of wooden blinds for certain retailers of M2M

blinds after IKEA ceased to sell ready-made corded blinds (as eg pointed out by 247 during the main party

hearing) shows that ready-made blinds constrain M2M blinds.

141

Main submission, 20 May 2020, paragraph 6.76.

142

Main submission, 20 May 2020, paragraph 6.76.

143

Main submission, 20 May 2020, paragraph 5.12.

Additionally, the Parties submitted that customers consider and interact

with different channels as part of their purchase journey.

144

They submitted

that the BDRC Survey shows that the Parties’ customers also considered

purchasing in-store and that 19% of Blinds2Go’s customers and 24% of

247’s customers visited physical stores before placing their online orders.

145

At least with respect to in-store, the Parties argue that this suggests that

online retailers are constrained by the window covering offers available

through the offline channel.

146

Our assessment

In Hunter Douglas/Hillarys, the CMA adopted, on a cautious basis,

separate product frames of reference for the retail supply of M2M blinds by

sales channel (ie separate frames of reference for online, in-store and in-

home). The CMA’s conclusion in that case was based on evidence from the

merging parties’ internal documents as well as third parties, which indicated

that there was a distinction between online, in-store and in-home sales. In

particular, third-party evidence in that case indicated that constraints for

online retailers come from other online retailers rather than from physical

stores (ie in-store) and in-home.

147

For the reasons set out below, our provisional view is that, consistent with

the finding in Hunter Douglas/Hillarys, M2M blind sales through in-store

and in-home channels should not form part of the same product market as

M2M blinds sold through the online channel.

In relation to demand-side substitutability, the BDRC Survey submitted by

the Parties indicates that the constraint from the in-store and in-home

channels on the Parties’ online M2M blinds offering is weak. When asked

what they would do in a hypothetical situation where the respective Party

had stopped selling blinds, only 7% of respondents for Blinds2Go and only

4% of respondents for 247 would divert to the in-store M2M channel. The

equivalent figures for the in-home channel are 6% for Blinds2Go and 3%

for 247.

The Parties submitted that store closures in the context of COVID-19 may

have affected these answers and that the survey responses are therefore

likely to understate in-store diversion (ie understate the number of

customers that would switch to in-store if their current option was no longer

144

Main submission, 20 May 2020, paragraphs 4.7 and 6.44.

145

Main submission, 20 May 2020, paragraphs 1.8 and 6.43.

146

Main submission, 20 May 2020, paragraph 6.44.

147

Hunter Douglas/Hillarys, paragraphs 72 to 79 and 80 to 84.

available).

148

We acknowledge that store closures at the time at which the

survey was conducted may have affected survey results. However, the

survey was carefully drafted to explore consumers’ recent purchase

journeys pre-COVID-19 (as the Parties point out),

149

and therefore

designed to minimize any bias resulting from store-closures.

We recognise that, as the Parties have highlighted, the BDRC Survey

indicates that a material proportion of online customers visited physical

stores before placing their online orders (looking for a similar product or

comparing the price of a similar product).

150

However, we consider that

customers visiting stores does not necessarily imply that customers would

switch to the in-store channel in response to a price increase and that the

in-store channel constrains online retailers. Indeed, and as discussed in

paragraph 7.49 above, the survey shows that the Parties’ customers are

unlikely to switch to the in-store channel.

Evidence collected from online M2M blind retailers during the course of our

investigation shows relatively low levels of engagement with retailers in

other channels, which indicates that in-store and in-home retailers are

unlikely to pose a significant competitive constraint on online M2M blind

retailers. []. While the Parties submitted that Blinds2Go also frequently

visits physical stores that sell M2M blinds, Blinds2Go explained that the

purpose of these visits was [].

151

Second, the Parties submitted that they

are not able to estimate market shares for the in-store M2M segment

because they are not active in this channel.

[].

152

As part of our investigation, we also compared the retailers active in the

different (ie, online, in-home, in-store) channels. This comparison revealed

significant differences in the business model and service proposition of

online retailers compared to in-store and in-home retailers. Both in-store

and in-home retailers appear to position themselves as full-service

providers, offering a more personal experience (including in-person advice)

and the option of an at-home measuring and installation service. In

contrast, online retailers appear to be more focused on price, with the

148

Main submission, 20 May 2020, paragraph 6.62.

149

Main submission, 20 May 2020, paragraph 6.62.

150

With respect to the Parties’ submission that that the Parties’ customers consider purchasing in-store, we note

that the BDRC Survey does not appear to explore whether customers considered other channels. In any case,

even if customers did ‘consider’ purchasing in-store, this would not allow for strong conclusions regarding their

willingness to switch to purchasing in-store and hence the competitive constraint thein store-channel exerts on

M2M blinds.

151

Main submission, 20 May 2020, paragraph 6.79.

152

[].

evidence we have seen showing that online retailers tend to be

substantially cheaper than in-store retailers:

(a) Blinds2Go states on its website that it compared its prices with the

five main M2M blind retailers on the high street and that ‘in almost

25% of cases we were cheaper by 60% or more’. It further

advertises on its website that ‘you can also save up to 60% off High

St. prices’.

153

(b) John Lewis noted that in relation to price, its products tend to fall

within the mid-range to higher end of the market, due to its use of

higher quality materials relative to some of its competitors and its

higher overheads compared to online competitors.

However, Next told us that it charges the same prices for its M2M blinds

online and in-store, with the price comparison submitted by the Parties in

phase 1 suggesting that Next prices are towards the higher end compared

to other online M2M retailers.

We do not consider that differences in business model and service

proposition do not necessarily imply a lack of competitive constraint, given

that customers may, in principle, be willing to substitute between paying

more for more service and less for less service. A similar point is made by

the Parties themselves, as they argue that customers are likely to be

making a quality-price trade-off. However, we note that the Parties also

submitted that ‘in-home and in-store products are considered over-priced

when faced with a comparable product at significantly lower price which

can be measured and fitted with little effort.’

154

With respect to supply-side substitution, we note that suppliers’ market

positions in the different channels appear to be materially different. In

particular, whilst some in-store retailers have established an online

presence in the sale of blinds (both ready-made and, to a lesser extent,

M2M), we observe that none of the in-store or in-home retailers have a

significant position within the online M2M blinds market. In particular, we

note that in-store retailers selling M2M blinds online typically have a much

smaller product range than exclusively online retailers. Moreover, we also

note that some in-store and in-home retailers do not have any online sales.

For example, for the in-home retailers Hillarys and Thomas Sanderson,

their websites only provide lead generation and enable customers to

153

Blinds2Go website, accessed 23 June 2020.

154

Main submission, 20 May 2020, paragraph 5.16.

provide contact details and request order samples.

155

Additionally, the

multi-channel retailer [].

156

Finally, we are unconvinced by the Parties’ argument that the increase in

M2M blinds purchases are increasing due to substitution away from the in-

store and in-home channels to the online channel, we do not consider that

this implies that offline channels pose a competitive constraint on the online

channel:

(a) First, a migration to online M2M blinds does not prove that

customers would switch to online M2M blinds in response to a

SSNIP.

(b) Second, even if customers would migrate to the online channel in

response to a SSNIP, this would only show that the online channel

exercised a competitive constraint on the offline channel, but not

vice versa.

Overall, we provisionally find that the in-store and in-home channels should

not form part of the same product market as online M2M blinds. We take-

into account any out-of-market constraint exerted by M2M blinds sold

through the in-store and in-home channels in the competitive assessment

section, see paragraphs 8.207 to 8.214 below.

Geographic market definition

The Parties submitted that any retail product market identified should be

considered national in scope.

In Hunter Douglas/Hillarys, the CMA assessed the online retail supply of

M2M blinds on a national basis.

157

We have not received any evidence to suggest that an alternative

geographic market definition would be more appropriate.

We therefore provisionally find that a national market definition is

appropriate.

155

Hillarys and Thomas Sanderson websites, accessed on 23 June 2020.

156

[].

157

Hunter Douglas/Hillarys, paragraph 99.

Conclusion on market definition

For the reasons discussed above, we provisionally find that the appropriate

market definition in this case is the online retail supply of M2M blinds in the

UK.

8. Competitive assessment

Paragraph 1.3 above sets out the statutory questions that the CMA needs

to decide in this phase 2 inquiry. The following sections set out our

provisional findings on the Second Statutory Question. Specifically,

whether the RMS we provisionally found to have been created by the 2019

Transaction, which involved an increase in Hunter Douglas’ level of control

in 247 from material influence to a controlling interest (see paragraphs 5.30

to 5.32 above), has resulted or may be expected to result in an SLC within

any market or markets in the United Kingdom for goods or services.

In this section, we assess the competitive effects of the 2019 Transaction

as they relate to the online retail supply of M2M blinds in the UK. To inform

this assessment and our answer to the Second Statutory Question we have

assessed below (see paragraphs 8.216 to 8.232), whether Hunter Douglas’

ability to unilaterally determine all aspects of competitive 247’s strategy

(including the ability to set 247’s prices), as well as its increased interest in

the profits of 247, would have the effect of removing a direct competitor

from the market and/or would likely allow the Merged Entity to increase

prices and/or lower the quality of its products or customer service, and/or

reduce the range of its products/services.

158

This is a horizontal unilateral

effects theory of harm.

This section is structured as follows:

(a) We first discuss our market share estimates for the Parties and their

competitors in the online retail supply of M2M blinds in the UK.

(b) We then describe the key characteristics of competition with respect to the

retail supply of online M2M blinds.

(d) We assess the extent of the competitive constraint on the Parties from

other competitors.

(e) Finally, we set out our provisional assessment of the impact of the Merger

on competition.

158

MAGs, paragraphs 4.2.3 and 5.4.1.c.

Market shares

In this section we consider the market shares of the Parties and other

suppliers in the market for the online retail supply of M2M blinds in the UK.

Approach to market share calculations

The Parties submitted market share estimates for the online retail supply of

M2M blinds in the UK in 2019 based on their own sales data and their

estimates for the sales of third parties. With respect to third-party sales

estimates, the Parties initially estimated the sales of third parties for 2018

and then applied the growth rate of Blinds2Go in 2018 to these estimates to

obtain 2019 values.

159

However, it is in our view more reliable to base our assessment on market

shares calculated using the Parties’ and third parties’ actual sales data for

2019, as opposed to estimates,

160

for the following reasons:

(a) A comparison of the Parties’ estimates with actual sales data obtained

from third parties revealed substantial differences. For example, the

Parties estimated that eBay’s sales of online M2M blinds in 2019

amounted to £34.8 million, [].

161

Similarly, the Parties estimated that

Swift Direct Blinds’ sales of online M2M blinds in 2019 amounted to £10.7

million, while Swift Direct Blinds submitted that its total sales of online

M2M blinds in 2019 were lower than the Parties’ estimates at £[]. We

therefore find that we cannot rely on the Parties’ estimates given the

differences between these estimates and third parties’ actual sales data.

(b) We also reviewed information contained in market reports. However, we

have not received any market reports that contain a market size estimate

for online M2M blinds. We also find that it is not possible to obtain a

reliable estimate for online M2M blinds in the UK by triangulating different

market reports.

While there are retailers listed in the Parties’ market share estimates from

whom we did not receive actual sales data, we do not consider it

appropriate to include the Parties’ estimates for these retailers in our

market share calculations for the reasons set out above. Nevertheless, and

159

The sources used by the Parties in these estimates include publicly available information on the retailers’

liabilities and assumptions on the minimum turnover necessary to be viable or deriving sales from the number of

reviews on Amazon and eBay.

160

The actual sales data from third parties in our shares incorporates all retailers that the Parties identified as

their ‘main competitors’ and that, based on the Parties’ estimates, had sales of more than £2 million in 2019 (with

the exception of Powered Blinds, a retailer only supplying electric blinds).

161

[]. We note that, in the context of the CMA investigation on Hunter Douglas/Hillarys, an [].

as part of our market share calculations, we also assessed what the

Parties’ position would have been had we included these estimates.

Overall, and for the reasons set out above, it is our provisional view that the

CMA’s market share estimates calculated using actual sales data are more

reliable than the Parties’ estimates. At the same time, we have conducted a

sensitivity assessment of our market share estimates which reflects the

Parties’ estimates.

Market share estimates

Table 3 below shows the estimated market shares of retailers supplying

M2M blinds in the UK for 2019.

Table 3: 2019 market shares of online M2M blinds retailers in the UK

£m

Retailers

Revenues

Blinds2go (incl. Web Blinds)

[]

[50 - 60]

247

[]

[5 - 10]

Combined

[]

[60 - 70]

Interior Goods Direct (incl. Wilsons)

[]

[10 - 20]

Swift Direct Blinds

[



]

[0 – 5]

Bloc Blinds

[]

[0 – 5]

[



]

[0 – 5]

MakeMyBlinds

[



]

[0 – 5]

Dunelm

[



]

[0 – 5]

Order Blinds Online Ltd

[



]

[0 – 5]

Blinds4UK

[



]

[0 – 5]

Meadow Blinds Ltd / Lifestyle Blinds Ltd

[]

[0 – 5]

John Lewis

[



]

[0 – 5]

eBay (incl. ready-made and shutters)

[



]

[5 - 10]

Amazon Marketplace (incl. ready-made)

[]

[5 - 10]

Others (with turnover <0.5m)

[



]

[0 – 5]

Total

175.9

100.0

Notes: The Parties’ sales exclude any sales from Velux, namely £

[] for Hunter Douglas and £[] for 247.

From these market share estimates, we note that:

(a) Blinds2Go is by far the largest retailer and is several times larger than

Interior Goods Direct, the second largest retailer;

(b) 247 is the third largest retailer and is approximately three times larger

than Swift Direct Blinds, the fourth largest retailer;

162

from 247 is significant in the context of an already concentrated market;

(d) Other than the Parties and Interior Goods Direct, there are no other online

M2M retailers with a market share above 5%, and few retailers with a

market share above 1%;

(e) None of the multi-channel retailers has a market share above 2%; and

(f) While the market shares of the marketplaces eBay and Amazon are not

insignificant, their shares are likely to be significantly over-estimated as

sales of ready-made blinds (and in the case of eBay also shutters) are

included, and these are likely to account for a large proportion of their

sales.

163

Further, we note that, as marketplaces, their share is attributable

to collections of individual retailers rather than reflecting their share as a

single retailer; as such, their individual shares would be much lower. Both

of these factors mean that the shares of Amazon and eBay in the above

table are likely to significantly overstate their competitive constraint.

We also note that including the Parties’ estimates for the retailers for whom

we do not hold actual sales data does not significantly change the position

of the Parties or our views set out in paragraph 8.10 above. Based on the

Parties’ estimates, these retailers would jointly account for only £39 million

in revenue. Even if we added this £39 million to the total market size, the

Parties’ combined market share would still exceed 50%.

The Parties argued that Velux should be included in the market share

calculations as it is a competitor to the Parties. However, we do not agree

because Velux sales do not appear to constitute a M2M product. In

particular, Velux told us that it does not sell any M2M blinds and that it

considers its products to be ready-made rather than M2M products. This is

consistent with the Parties’ own submission that the dimensions of Velux

blinds are determined by a window code, rather than being specified by the

customer, which indicates that they are ready-made rather than M2M

162

Although Amazon and eBay appear to have larger shares than Swift Direct Blinds in Table 3, we note that

these are marketplace retailers, not a single retailer, and that their respective shares are likely to be significantly

over-stated, as set out at 8.10(f).

163

While unable to provide a clear split, eBay told us that M2M blinds account for only a small proportion of its

overall blind sales. In particular, eBay noted that only around 18% of blind listings on eBay relate to M2M blinds.

products. Accordingly, we excluded Velux as a competitor from the market

share estimates and any sales of Velux products from the Parties’ sales.

164

While we did not calculate market shares for previous years, the CMA’s

assessment of the Hunter Douglas/Hillarys merger in 2017 showed that ,in

2017, Blinds2Go was already, by far, the largest retailer of M2M blinds

online, with 247 and Interior Goods Direct being the next largest

respectively.

In sum, our assessment of market shares above indicates that the Parties,

together with Interior Goods Direct, are the largest suppliers of online M2M

blinds and that other suppliers are, by comparison, of much smaller scale.

Further, the Merged Entity is of significant scale in comparison to both

Interior Goods Direct and all other retailers in the market.

How competition works in the market

As discussed in previous sections (see paragraphs 4.21 to 4.24), the retail

supply of online M2M blinds involves customers measuring their window

and then ordering their preferred choice of blinds directly from retailers’

websites. As a result, a significant aspect of competition between retailers

of online M2M blinds occurs online.

In order to be successful, retailers of online M2M blinds need both to attract

customers to their websites, and to convert these visits into sales. A

number of factors determine whether a customer ‘converts’ once they have

navigated to a given website (including price, perceived quality of product,

quality of website, etc), but prior to that, a significant aspect of competition

in this market is competition for visibility in web search results, given the

importance of traffic from this channel in generating revenues.

165

In the section that follows, we assess the Parties’ submissions on the

customer journey and the importance of online traffic. We then present our

views on how competition for traffic works, including our assessment of the

evidence we have seen on; sources of traffic for online M2M blind retailers,

their marketing spend, and customer search behaviour.

164

We note that sales of Velux products may be included in the sales of third parties. However, we did not

consider this undermined our ability to give weight to the shares set out in Table 3, because the inclusion of any

Velux product sales would mean that the share estimates for the Parties were understated.

165

Search engines account for 75% of traffic by revenue across the online M2M retailers based on those

responses received by the CMA.

Parties’ submissions on the customer journey and importance of online

advertising

The Parties submitted that advertising in search engines is important for

their businesses, since, as small online mono-line retailers, they do not

have strong brand names, with this particularly being the case for 247.

166

However, they also argued that customers’ purchasing journeys are not

limited to paid Google Ads for generic terms such as blinds,

167

and that

customers will conduct extensive research to decide upon the product that

they think will best suit their window, often visiting large home stores such

as Next, John Lewis and Dunelm, high street blind and curtain specialists

and online blind and curtain sites.

168

In support of their argument, the

Parties submitted that:

(a) The BDRC Survey shows that approximately three quarters of the Parties’

customers spend more than an hour researching and comparing products

before purchasing;

(b) Google Analytics data shows that the average customer makes their

purchase 10 days after the first website interaction and after having visited

the website on three different occasions;

169

across many websites;

170

and

(d) The low session conversion (ie, proportion of single website visits that end

up in a purchase) the Parties achieve (ranging from [])indicates that

customers shop around before buying, and ultimately are not making

purchasing decisions based on Google prominence.

171

In assessing the Parties’ submissions, we have considered the importance

of traffic and marketing spend, as well as search behaviour and customer

journeys when purchasing online M2M blinds.

Traffic and marketing spend

There are several channels that can be used by customers to reach a

retailer’s website, including:

166

Main submission, 20 May 2020, paragraph 6.27.

167

Main submission, 20 May 2020, paragraphs 6.27 and 6.28.

168

Main submission, 20 May 2020, paragraph 4.4.

169

Main submission, 20 May 2020, paragraph 6.22.

170

Main submission, 20 May 2020, paragraph 6.40.

171

Main submission, 20 May 2020, paragraph 6.36.

(a) Internet search results – arrivals at the website by entering search terms

into search engines (such as Google) and clicking on the results

generated. Internet search results can be either:

(i) Paid search – paid search is where the retailer has paid to feature

prominently in search results.

(ii) Organic search – results which are not influenced directly by

advertising expenditure (although retailers may improve their ranking

by investing in search engine optimisation (‘SEO’));

(b) Direct – Arrivals at the website by entering the retailer’s address in the

URL bar;

customers;

(d) Referral – Referrals to the retailer’s website from external websites; and

(e) Affiliates – Referrals to the retailer’s website from external websites who

are paid commission.

For the reasons set out at paragraph 8.30 below, paid search is a

significant source of traffic for online M2M blinds retailers. On Google,

where the majority of this search activity takes place, there are several

options advertisers can select including:

172

(a) Google Ads – Links shown on both the top and bottom of a page of

search results. Advertisers set up ‘campaigns’ where they select which

search words they would like to target, as well as targeting specific

locations, devices, times of day, and customer profiles. Advertisers ‘bid’

on key words by indicating what they would be willing to pay for each click

on its advertisement. Advertisers pay every time a consumer clicks on

their advertisement – such advertising is referred to as ‘pay-per-click’

(PPC) advertising.

(b) Product Listing Ads (PLA) – Short advertisements that include images and

which are shown next to search results. Ads are for specific products

rather than brands or websites, and advertisers must provide Google a

products ‘feed’. Like Google Ads, this also works on a PPC basis –

advertisers pay Google every time a customer clicks on their

advertisement.

172

See Appendix E for more information.

advertise products rather than websites or brands. Consumers access

Google Shopping results by clicking on the ‘shopping’ link at the top of the

search results page. Users can filter listings by price, product category,

and brand.

In order to understand the relative importance of the above marketing

channels, we have looked at two important sources of evidence, namely:

(a) the sources of traffic to a retailer’s website; and

(b) a retailer’s expenditure on marketing.

With respect to sources of traffic, it appears that, for each of the main

online M2M blind retailers, paid search generated the largest proportion of

traffic in 2019 (both by traffic volume and revenue).

173

More specifically, it

appears that:

(a) Paid search accounted for []% of revenue for Blinds2Go and []% of

revenue for 247 in 2019.

(b) While we do not hold data to split paid search into Google and other

search engines, the widespread use of Google indicates that traffic from

paid search almost exclusively comes from Google.

relates to Google Shopping and PLA.

After paid search, organic search is the next biggest source of traffic,

accounting for [] % of revenue for Blinds2Go and [] % of revenue for

247 in 2019.

174

173

In each of 2017 and 2018, paid search generated the largest proportion of traffic across the main online M2M

blind retailers in aggregate, while it ranked either first or second for each of these retailers individually in these

years.

174

A relatively high proportion of organic search does not necessarily suggest good performance in organic

search, but could also be an indication of bad performance in other channels.

Table 4: Proportion of revenues by channel in 2019

Channel

Blinds2Go

247

Interior

Goods Direct

Swift

Direct

MakeMyBlinds

Combined

Paid search

[



]

[



]

[



]

[



]

[



]

56%

Organic

[]

19%

Direct

[



]

[



]

[



]

[



]

[



]

10%

[



]

[



]

[



]

[



]

[



]

Referral

[



]

[



]

[



]

[



]

[



]

Affiliates

[



]

[



]

[



]

[



]

[



]

Other

[



]

[



]

[



]

[



]

[



]

Total revenue

[]

Notes: All retailers use the same attribution model

175

except []– so the data is comparable against all retailers except []

Retailers’ revenues include VAT and shipping costs, except for

[]. However, this should not affect the distribution across

channels.

Revenue from samples is unlikely to affect these results.

176

While we do not hold the same source-of-traffic data on multi-channel

retailers, the third-party evidence we have obtained indicates that paid

search is an important source of traffic for them, too. For example:

(a) [].

177

(b) [] told us that it occasionally bids for key search words related to M2M

blinds to help improve customers’ awareness, but that its marketing is

often more general.

178

uses it in a more general way for its entire product range.

179

In relation to retailers’ expenditure on marketing, Table 5 sets out the main

online M2M blind retailers’ expenditure by marketing channel. Consistent

with the data on traffic, we also find that, for each of the main online M2M

blind retailers, Google PPC accounted for the majority of marketing spend

in 2019, often amounting to around or more than 80% of their total

marketing spend. While there is some variation over time, Google PPC is

always by far the largest source of spending. Further details are set out in

Appendix E.

175

An attribution model is ‘the rule, or set of rules, that determines how credit for sales and conversions is

assigned to touchpoints in conversion paths.’ See https://support.google.com/analytics/answer/1662518?hl=en

176

The only case in which this could potentially affect our analysis is if samples are mainly requested through

some particular channels versus others. However, revenues from samples are likely to constitute a very small

percentage of revenues and, therefore, this is unlikely to create any significant bias.

177

[].

178

[].

179

[].

Table 5: Proportion of marketing spend by channel in 2019

Channel

Blinds2Go

Web Blinds*

247

Blinds

Direct**

Swift Direct

Blinds

Make My

Blinds

Google PPC

[



]

[



]

[



]

[



]

[



]

[



]

Bing/Yahoo PPC

[



]

[



]

[



]

[



]

[



]

[



]

Facebook

[



]

[



]

[



]

[



]

[



]

[



]

Agency

[



]

[



]

[



]

[



]

[



]

[



]

Other categories

[



]

[



]

[



]

[



]

[



]

[



]

Total

[]

Notes: * Operated by Blinds2Go ** []

The proportion of Google Shopping and PLA spend varies by retailer, with

[] and []spending 5% or less of their online marketing expenditure on

these categories, Web Blinds, 247 and [ ]around []% and Blinds2Go

almost []%.

In 2019, marketing expenditure by the main online M2M blind retailers as a

proportion of turnover tended to be around 15% (or higher for []), with the

exception of [] and spending only around 9%.

Overall, the above source-of-traffic and marketing spend analysis shows

the importance of online marketing for online M2M blind retailers. Paid

search appears to be the most important source of traffic, particularly for

the Parties for whom traffic obtained through paid search accounts for over

half of their revenues. Organic search appears to be the second most

important source of revenues for online M2M blind retailers. Consistent with

the source-of-traffic data above, it appears that, for each of the main online

M2M blind retailers, Google PPC accounted for the majority of marketing

spend in 2019, often amounting to around or over 80% of their total

marketing spend. As discussed at paragraph 8.37(a) below, large

proportions of customers found the websites of Blinds2Go and 247 through

generic search words such as ‘blinds’.

Search behaviour and customer journey

Given the importance of online search for retailers of online M2M blinds,

described above, we have reviewed the following sources of evidence on

customer search behaviour:

(a) the CMA’s literature review on online search;

180

(b) the EC’s Google Search (Shopping) decision

181

; and

180

CMA, April 2017, ‘Online search: Consumer and firm behaviour - A review of the existing literature’.

181

EC, June 2017, Case AT.39740, Decision on Google Search (Shopping). This decision focuses on the

positioning and display by Google, in its general search results pages, of its own comparison shopping service

compared to competing comparison shopping services.

Both the CMA’s literature review and the EC’s Google Shopping decision

consider general search behaviour, rather than searches specific to blinds.

However, the BDRC Survey specifically addresses customer search

behaviour in relation to M2M blinds sold online.

The CMA’s literature review takes into account studies that assess the

entire page of search results (ie jointly assessing paid and organic search).

It found that customers consider on average 2.1 – 3.0 brands when wanting

to purchase a product online and that there is evidence that customers

spend more time searching for complex or differentiated products. It further

found that customers disproportionately focus their attention, clicks and

purchases on links at the top of the returned search results. In particular:

(a) On average, the first three links account for 40-65% of the total clicks on

desktop devices.

(b) On mobile devices, this tendency is even more accentuated, with the top

three links, on average, accounting for more than 70% of the total clicks.

fact that top links are more likely to be relevant to customers’ searches,

but also by the fact that customers seem to display an inherent bias

towards clicking on links in higher positions.

The EC’s Google Shopping decision found that organic search results

generate significant traffic to a website when ranked within the first 3 to 5

organic search results, while customers pay little attention to the remaining

results. However, the EC decision does not make clear how clicks for

organic search compare to paid search, in particular Google Ads, which

tend to be positioned above the organic search results.

The EC’s decision also found that the rank of a given link in organic search

results on the first general search results page has a major impact on the

click rates of that link, irrespective of the relevance of the underlying page.

In line with this, the EC’s decision further found that moving the first ranked

result to the third ranked resulted in a reduction in clicks of about 50%,

while the effect was even stronger if the website was moved lower in the

search rankings.

Overall, both the CMA’s literature review and the EC’s Decision indicate

that customers do not tend to click beyond first results on the results page.

This implies that if a website does not feature in the top results, it is unlikely

to obtain significant traffic and therefore will be unable to effectively

compete.

The BDRC Survey submitted by the Parties provides an overview of the

customer search journey for online M2M blinds. In particular, the survey

shows the following:

(a) Large proportions of customers found the websites of Blinds2Go and 247

through generic search words such as ‘blinds’ or similar ([] % for

Blinds2Go / [] % for 247); though a notable number of customers were

aware of the brand prior to purchase and searched by name or went

directly to the Parties’ websites ([]% of Blinds2go customers / []% of

247 customers).

(b) Over 70% of Blinds2Go and 247’s customers spend more than an hour on

research prior to purchase.

other websites (naming Blinds Direct, Dunelm, John Lewis, Blinds4UK,

Amazon Marketplace, Next and eBay) prior to purchase. The proportions

of respondents who looked in-store prior to purchase were lower: 19% of

Blinds 2Go and 24% of 247 customers (naming Dunelm, John Lewis,

B&Q, Ikea, Next and local blinds/curtains shops).

(d) Customers tended to visit at most three other websites or fewer: Of the

customers who looked at other websites before purchasing (52% for

Blinds2Go and 65% for 247), most visited a maximum of three other

websites (71-77% visited three other websites or fewer; half of Blinds2Go

customers and 41% of 247 customers visited only one or two websites

before purchasing).

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With respect to the time spent on research prior to purchase, the BDRC

Survey does not provide further details of what this research entails. The

response options suggest that the question was not necessarily exploring

continued search, but time between first search and purchase. Moreover,

time spent researching does not necessarily reflect time comparing prices

across retailers, it may also include significant within-website research (for

instance, time taken to choose a design), and therefore, in our view, does

not provide reliable insights into the level of competitive constraint of

different search options.

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There may be some under-reporting as it is possible that some respondents may not have been able to recall

all the websites they visited.

As noted above (at paragraph 8.19), the Parties submitted that the BDRC

Survey shows that customers conduct extensive research to decide upon

the product that they consider will best suit their window. They also

submitted Google Trends data for 2019 with respect to the search term

‘blinds’, which shows that users were also searching for Dunelm, Ikea, and

Argos in the same search session, with 247 being outside the top 20

associated search terms. However, we note that visiting several websites

does not necessarily mean that those websites all exert a competitive

constraint on the Parties – it may simply indicate that there is a long

customer journey in which customers visit various websites which they

might dismiss altogether once they have a better view of the offering. With

respect to the Google Trends data, we consider that this evidence is

misleading because it covers all search sessions related to ‘blinds’, and

hence will include the searches of customers looking for ready-made blinds

instead of M2M blinds.

Further, we note that the BDRC Survey shows that the large majority of

customers visited three other websites or fewer prior to purchasing, which

is consistent with the findings of the CMA research on customer search

behaviour. This indicates that, as per the CMA research and the EC

Google Shopping decision, being ranked highly on search engines (paid

and organic) is likely to be important in order to be successful in this

market.

This is in line with comments we received from third parties:

(a) Swift Direct Blinds told us that the number of advertisements and ranking

position on Google has a massive impact on visibility and thus customer

conversion.

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[] further told us that without visibility on the first page of

Google search results, ‘you are at a very large disadvantage’.

184

(b) [] told us that the ‘only way to survive’ as an e-commerce site is to

be on the first page of Google’s organic search results.

185

Additionally, we note that the number of search results shown on mobile

devices without scrolling is very limited, given the typically small screen

sizes of such devices. As such, positioning is likely to be even more

important for traffic originating from mobile devices. With mobile devices

playing an increasing role in generating traffic, this would suggest ranking

is likely to become even more important going forward.

183

[].

184

[].

185

[].

Conclusion

Overall, we provisionally find that paid search is the most important source

of traffic for online M2M blind retailers (with paid search primarily relating to

Google Ads), followed by organic search and, of considerably less

importance, direct search. We also provisionally find that online M2M blind

retailers spend the majority of their marketing spend on Google PPC,

underlining the importance of paid search as a source of traffic.

The importance of these sources of traffic is also confirmed by the BDRC

Survey, which shows that customers primarily reach the Blinds2Go’s and

247’s websites through either searching for a generic term such as ‘blinds’

(44% of Blinds2Go customers and 59% of 247 customers) or searching for

the brand / going to the website directly (41% of Blinds2Go customers and

26% of 247 customers).

The BDRC Survey also shows that customers typically visit only a limited

number of websites prior to making a purchasing decision. This is

consistent with the findings from the CMA’s literature review on online

search and the EC’s Google Search (Shopping) decision, which indicate

that customers focus their attention and clicks on links at the top of the

returned search results.

Taken together, these factors suggest that ranking highly on search

engines is likely to be an important factor in order to be able to effectively

compete. Price, quality, range and service are also important aspects of

competition. Our assessment of the closeness of competition between the

Parties therefore takes into account these parameters as well as the

competition for online traffic.

Closeness of competition

Our guidelines note that the closeness of competition between the Parties

is one factor to be taken into consideration for the assessment of horizontal

unilateral effects. The guidelines state: ‘If the products of the merger firms

are close substitutes, unilateral effects are more likely because the merged

firm will recapture a significant share of the sales lost in response to the

price increase, making the price rise less costly.’

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The Parties submitted that 247 is not a particularly close competitor to

Blinds2Go.

187

The Parties further submitted that 247 is ‘not of any unique

186

Merger Assessment Guidelines (OFT1254), paragraph 5.4.9.

187

Main submission, 20 May 2020, paragraph 6.3.

or special importance’.

188

Additionally, they submitted that the competitive

pressure 247 exerts on Blinds2Go is, at most, limited and declining.

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Before setting out our analysis, we note as a preliminary response to the

Parties’ submission that mergers may give rise to an SLC in situations

where merging parties are not each other’s closest competitors.

In this section we assess how closely the Parties compete with one

another, as well as relative to the competitive constraint from other retailers

of M2M blinds online. In our assessment, we consider:

(a) The Parties’ service proposition;

(b) The Parties’ online presence;

submitted by the Parties;

(d) Internal documents;

(e) Pricing data included in Blinds2Go’s internal documents; and

(f) Views of the Parties’ competitors.

We further discuss the Parties’ submission that the competitive pressure

247 exerts on Blinds2Go is declining.

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The Parties’ service proposition

We have looked at several different aspects of the Parties’ service

proposition with respect to online M2M blinds.

At a general level, the Parties’ product and service propositions are very

similar to one another. Both Parties offer the same types of M2M blinds (ie

roller blinds, wooden blinds, vertical blinds, roman blinds, venetian blinds,

day and night blinds and conservatory blinds) through the online sales

channel.

At a more granular level, we assessed the Parties’ offering in terms of

price, quality and product range. These are key characteristics that

customers consider when purchasing online M2M blinds. This is evidenced

by the BDRC Survey, which shows that more than 40% of respondents

188

Main submission, 20 May 2020, paragraph 8.6.

189

Main submission, 20 May 2020, paragraph 1.7.

190

Main submission, 20 May 2020, paragraph 1.7.

indicated that each of ‘good prices/offers’, ‘product quality’ and ‘good/wide

product range’ were reasons for their choice of retailer. Each of these

factors were also listed amongst the top five in terms of the ‘one main

reason’ that respondents identified for their choice of retailer.

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Price

With respect to price, Blinds2Go monitors a number of retailers in the

ordinary course of business, namely []. For each of these retailers it

collects their prices [] (alongside its own prices).

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On the basis of this

data, we compared the prices of different retailers. The details of this

analysis are set out in Appendix D.

From this analysis, we see that the Parties’ prices are generally

competitive, in the sense of their prices being generally at the lower end of

the market, but that they do not consistently stand out as the cheapest

retailers. We also note that the Parties’ prices are neither consistently

closer to each other than to those of other retailers, nor are they

consistently further apart from each other than from those of other retailers.

We further note that, with the exception of [] (which tends to be among

the more expensive retailers), none of the other competitors included in the

price data collected by Blinds2Go stands out as consistently more

expensive. However, some retailers are more expensive for certain

products. For example, Wilsons Blinds (part of Interior Goods Direct) is

significantly more expensive than the Parties for a number of products

(including 25mm slats white venetian, standard white roman and blackout

white roman blinds), Interior Goods Direct’s prices are also significantly

higher than those of 247 and Blinds2Go for faux wooden blinds (with the

exception of prices in 2020, when they align with the Parties), while Swift

Direct Blinds’ prices are significantly higher than those of either of the

Parties for venetian blinds.

Our observation that certain retailers are more expensive for certain

products than Blinds2Go and 247 is consistent with comments we received

from third parties. In particular, Swift Direct Blinds told us that it sometimes

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Similarly, two market reports submitted by the Parties indicate the following: the Verdict HRS Window

Dressing Report 2016 identifies ‘price’, ‘quality’ and ‘design’ as the three main factors that customers consider

important when shopping for M2M blinds, while the Global Data report indicates the same but with respect to

shopping for window dressings; We further note that these three factors are largely considered the main factors

for customer choice by the Parties and third parties. Parties’ main submission, 20 May 2020, paragraph 6.17.ii

and 6.20 and [].

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The data covers the period from May 2016 until February 2020 (although for some competitors, only more

recent data is recorded). Blinds2Go additionally collects data for [] (but only for one shutter product) and []

and [] (but only for three motorised blind products).

cannot match the prices of Blinds2Go or 247 because of higher costs to

obtain the blinds, while MakeMyBlinds told us that it no longer matches the

price of Blinds2Go and 247.

Quality

With respect to quality, the Parties submitted that product quality is ‘key’

and an important consideration for customers.

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This is consistent with the

results from the BDRC survey: 44% of respondents quoted product quality

as one of the reasons that influenced their choice of retailer, with 16% of

respondents for Blinds2Go and 13% of respondents for 247 citing product

quality as the main reason.

We have received mixed evidence regarding the product quality of

Blinds2Go and 247. On the one hand, the Parties submitted that [] (and

other competitors) and noted that they largely attribute the success of

Blinds2Go to delivering quality products at the lowest possible price.

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the other hand, Interior Goods Direct told us that Blinds2Go and 247 both

use lower quality fabrics than they do.

We note that customers may take into account a number of other aspects

of overall quality, including, for example, website quality, customer reviews

for the retailer and a retailer’s position on Google search results. This is

either because the customers value these aspects in and of themselves or

because they treat them as proxies for product quality. We assess these

different aspects of overall quality below.

(a) Four third parties indicated that website quality matters to customers,

specifically referring to ‘clean design’ and ‘look’. Similarly, the Parties

submitted that visual merchandising and imagery is key, which implies

that website quality is important.

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Additionally, we note that a website’s

quality is likely to impact its ranking on Google search results (see

Appendix E). We note that while the Parties’ websites have similar setups,

looks and functionality (eg chat functionality or customer service number),

this is also the case for each of the other six online M2M retailers with

sales of more than £1 million in 2019. However, the websites of some of

the smaller online M2M retailers may have a significantly different (and

arguably less appealing) look.

196

193

Main submission, 20 May 2020, paragraph 6.17.

194

Main submission, 20 May 2020, paragraphs 5.4 and 5.5.

195

Main submission, 20 May 2020, paragraph 6.17.

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For example, https://www.conceptblindsdirect.co.uk/.

(b) Two online M2M retailers told us that customer satisfaction scores,

especially those on Trustpilot, are important. Based on evidence

submitted by the Parties, each of Blinds2Go and 247 has more than

10,000 reviews and excellent Trustpilot ratings, and there are only two

other online M2M retailers with more than 10,000 reviews, namely Swift

Direct Blinds and Interior Goods Direct – both of which also have an

excellent rating. There are also at least four further online M2M retailers

with excellent Trustpilot ratings and more than 1,000 reviews.

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results as an indicator of the quality of the website. When asked whether

appearing high up Google rankings was a signal of quality to customers,

247 said that appearing at the top of organic listings ‘create[s] some

credibility’, whereas with respect to paid rankings ‘there is an increasing

awareness now of the way paid search marketing works and they [ie the

customers] know what they are actually looking at is an advert’. We note

that the Parties, alongside Interior Goods Direct and Dunelm, feature

frequently in the top positions on Google’s organic search results (see

paragraph 8.89).

Range

With respect to range, we note that the Parties submitted that product

choice is key.

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We have compared the overall number of SKUs as well as

the number of SKUs relating to wooden venetian blinds (the top-selling type

of blind for each of the top four online M2M blind retailers) offered by a

number of different online M2M blind retailers, including each of Blinds2Go

and 247. Table 6 shows this comparison.

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This statistic excludes Bloc Blinds, a niche player for specialised roller blinds.

198

Main submission, 20 May 2020, paragraph 6.17.

100

Table 6: Number of SKUs for different online retailers of M2M blinds

Retailers

# of SKUs

(all blinds)

# of SKUs

(wooden venetian blinds)

Blinds2Go

4,497

225

Interior Goods Direct

4,014

247

2,823

245

Swift Direct

2,454

222

Wilsons Blinds*

1,778

MakeMyBlinds

700

Blinds4uk

2,228

So Easy Blinds

3,730

Blinds UK

2,570

117

Concept Blinds

1,637

English Blinds

1,305

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Terrys Fabrics

1,300

Unbeatable Blinds

668

Source: Data based on Parties’ desk research.

Note: []submitted data on number of SKUs that was broadly in line with these estimates; however []submitted that it sells a

much larger number of SKUs (~[]) in total.

Note: *Part of Interior Goods Direct since April 2020.

Each of Blinds2Go and 247 appears to offer a very wide range of products

and several competitors offer a much narrower range than the Parties,

albeit there are also at least six competitors that offer a broadly comparable

overall range. Each of Blinds2Go and 247 also appears to offer a

particularly wide range of wooden venetian blinds, which is the top-selling

type of blind for each of the top four online M2M blind retailers. With

respect to the ten competitors for whom we hold information on the number

of SKUs relating to wooden venetian blinds, only two competitors have a

broadly similar range to the Parties for this type of blind.

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Conclusion on price, quality and range

Overall, we provisionally find that the Parties’ offerings in terms of price,

quality and range are similar. While, as illustrated by paragraphs 8.140 and

8.148 below, Interior Goods Direct and Swift Direct Blinds have a broadly

similar offering to the Parties, we also find that the Parties’ offering is, in

some respects, differentiated to that of other online M2M blind retailers.

Online presence

As explained above (see paragraphs 8.15 and 8.16), competition between

retailers of online M2M blinds is likely to be heavily influenced by how

effective a retailer is at attracting customers to its website. This in turn

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These two retailers are Swift Direct Blinds and English Blinds.

101

depends on how well a retailer ranks and performs on search engines

(especially Google).

We therefore undertook a range of analyses of Blinds2Go and 247’s online

presence, to understand how effective each of them is when competing in

the market as compared to their competitors. The results will provide an

indication of the closeness of competition between Blinds2Go and 247 and

the strength of the competitive constraint exerted by other M2M blind

suppliers. These analyses consist of:

(a) an analysis of how well Blinds2Go, 247 and their competitors rank on

Google paid search and Google organic search;

(b) an analysis of Blinds2Go and 247’s Google Ad campaigns performance

and how this compares to their competitors; and

bidding behaviour.

In relation to the relevance of such analyses, the Parties submitted that:

(a) Google is neither the only source of traffic nor the only or most important

determinant of competitive outcomes; and

(b) attracting traffic does not mean that the website will be successful at

converting this traffic into sales.

In response, we note that:

(a) Google remains a very important route to market, not just when it comes

to attracting traffic but also in terms of generating conversions – albeit not

being the only one, as explained in paragraphs 8.43 to 8.46. We note that

Blinds2Go and 247 generate the most of their revenue from customers

sourced through paid and organic Google searches - from []% (for

Blinds2Go) to []% (for 247).

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Even [], a much smaller retailer,

generates over []% of its revenue from these sources.

(b) We recognise that attracting traffic to a website is only one (albeit an

important) way in which retailers compete, and elsewhere in our

competitive assessment, we have analysed other aspects of competition

in the market for the retail supply of M2M blinds online. Our analysis of

Blinds2Go’s, 247’s and other retailers’ online presence therefore only

constitutes part of our evidence basis.

200

We note that these values include all search engines, not just Google.

102

The Parties also submitted that our analyses failed to take into account the

fact that non-Google spending is likely to affect retailers’ rankings and

performance on Google and that, therefore, any comparisons between

Blinds2Go, 247 and other retailers must take this into account. As an

example, the Parties noted [].

We acknowledge that non-Google spending may be impacting the results

of our analyses to some extent, including the analysis of ranking (see

paragraph 8.66(a) above and paragraphs 8.74 – 8.94 below), the analysis

of performance on Google Ads (see paragraph 8.66(b) above and

paragraphs 8.96 to 8.104 below) and the analysis of ROI/CPA (see

Appendix F) – however, in our view, it is unlikely that non-Google spending

is the only or main driver for the results we observe. Therefore, we are

satisfied that the results of our analyses are still valid.

Below, we describe the results of our analyses of online presence and our

respective provisional conclusions.

Ranking in Google search results

As explained above (paragraphs 8.31 to 8.43) the search behaviour of

customers indicates that if a website is not well represented on the first

page (and to some extent even the first two or three results) it is unlikely to

attract significant traffic and therefore be able to effectively compete in the

market.

We therefore conducted an analysis of Google rankings. This analysis, set

out below, covers analysis of rankings in search results, separately with

respect to:

(a) Google Ads; and

(b) organic links.

Google Ads

We analysed four different sets of data on rankings in Google Ads:

(a) The first consisted of rankings we were able to observe directly from

Google web results with respect to the top 10 search words in the industry

related to blinds (not M2M specific) based on Google Trends in 2019 as

explained in paragraph 8.75 below;

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(b) The second consisted of ranking data provided by Blinds2Go and 247 and

two other retailers with respect to the top 10 search words used in their

Google Ads campaigns for the period of 2017-2019.

than the data in (b)) provided by Blinds2Go and 247 and two other

retailers with respect to the search words used in their Google Ads

campaigns for the period of 2019.

(d) The fourth consisted of ranking data found in Blinds2Go’s internal

documents, for a number of standalone periods covering 2016, 2017 and

2018.

The first piece of analysis consisted of recording the position of the Parties

and competitors in the first page of Google Web results. In particular, this

analysis systematically recorded results for:

201

blinds’, ‘venetian blinds’, ‘roman blinds’, ‘vertical blinds’, ‘wooden blinds’,

‘blackout blinds’;

202

and

(d) Four different times per day for a period of one week - 18 May 2020 to 24

May 2020 at 10h, 13h, 16h, and 19h (except Saturday and Sunday, when

only 16h and 19h were considered).

203

Details of this analysis are presented in Appendix E. The results for Ads

shown at the top of the page are summarised below.

201

This analysis therefore considerably expanded on the analysis of rankings done at P1 which covered only one

search word and two dates.

202

We obtained this list of search words by analysing the most popular related search queries (excluding

branded search queries) for the word ‘blinds’ (based on Google Trends data for 2019, UK). We also checked that

these search queries broadly coincide with the non-branded Google Ads search words the Parties and their

largest competitors (ie Interior Goods Direct and Swift Direct Blinds) get most impressions from and spend the

largest amount of money on in 2019.

203

To establish timings for the analysis, we looked at times of day there seemed to be more traffic on Parties’

sites and simultaneously including other times in case those times corresponded to heavier traffic in the case of

other retailers. The timings recorded also were chosen to accommodating team availability.

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Table 7: Google Ads on top of page - Proportion of time and search word combinations that a

given retailer ranked in a certain position in first page of results

Retailer

Position

Blinds2go

38%

39%

247

51%

22%

11%

Wilsons*

Terrys Fabrics

Blinds Direct*

12%

30%

Make My Blinds

Blindsbypost

Swift Direct Blinds

22%

BlindsUK

No Ad**

19%

37%

54%

Source: CMA analysis of publicly available data.

Notes:

Other retailers that never feature in the top position and have a share of lower than 5% in all other positions are not shown

*Part of Interior Goods Direct

**While we have excluded time and search word combinations where no ads were shown at all, combinations where just

certain ad position were missing were kept in the analysis.

Table 7 above sets out, for each retailer, the proportion of times its ads

appeared in first to fourth position in Google Ads, across the 10 search

words we searched for. From these results, we note the following:

(a) Blinds2Go and 247 rank very frequently among the top two positions of

Google Ads (with respect to the first ad position, Blinds2Go shows up

38% of the times, whereas 247 appears 51% of the times; regarding the

second ad position, Blinds2Go appears 39% of times and 247 22% of

times). Interior Goods Direct (in this case, comprising Blinds Direct and

Wilsons Blinds) is the only competitor that has a notable share of the two

top positions (appearing in the first ad position 6% of times and second

position 17% of times). Interior Goods Direct outperforms all other

retailers regarding the third ad position, whereas Swift Direct Binds

outperforms all other retailers regarding the fourth ad position.

(b) Blinds2Go and 247’s brands tend to appear in several of the top ads

results.

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When more than one ad is shown on the first page, Blinds2Go

and 247 feature in at least 2 of them in most cases (corresponding to a

minimum of 50% share of top ads for most cases).

205

For completeness, we have also assessed the ranking of retailers with

respect to Google Ads at the bottom of the page. While the details of this

204

Including the several Hunter Douglas’ brands (Blinds2Go, Web Blinds, Hillarys, Thomas Sanderson and

Tuiss) and 247.

205

This is because there can be only a maximum of four ads show on the top ads of Google search results

pages. This might however include situations where two brands of Hunter Douglas are present rather than both

Parties per se.

105

analysis are set out in Appendix E, we note that there appear to be no

further competitors that feature frequently in Google Ads at the bottom of

the page. Additionally, featuring in Google Ads at the bottom of the page is

less relevant than featuring in Google Ads at the top of the page for the

reasons discussed in paragraphs 8.31 to 8.39 above. We have taken this

into account when weighing this evidence.

The second piece of analysis involved looking at ranking metrics for the top

10 search words by number of impressions for each of Blinds2Go, 247,

[]in the period 2017 to 2019 with respect to their Google Ads

campaigns.

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This analysis therefore covers the [] in the market in terms

of market share, although, as shown in Table 3 we note that Swift Direct

Blinds’ market share is significantly smaller than the market shares of the

other retailers considered. In conducting this analysis, we looked at the

following metrics, which are held by each retailer both in relation to itself

and other retailers:

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(a) Impression share – Percentage of impressions that a retailer’s ad

receives compared to the total number of impressions that the retailer’s

ad is eligible for.

208

An impression share provides information on how

often an ad is shown rather than on the positions in which it is shown.

(b) Overlap rate – How often another retailer’s ad received an impression

while a given retailer also received an impression

(within the group of top ads – rather than the first ad that shows) above

the organic results for a particular search word.

(d) Absolute top of page rate – How often a retailer’s ad shows at the

absolute top of the search page (first ad that shows) above the organic

results for a particular search word.

The main results of this analysis are summarised below (further details are

presented in Appendix E):

209

206

This includes Blinds-related search words only. Number of impressions means how often the ad is shown. An

impression is counted each time the ad is shown on a search result page or other site on Google. For the

avoidance of doubt, this analysis focused on the search words of each retailer as opposed to just looking only at

the search words of Blinds2Go and 247. The top 10 search words assessed represent a large proportion of

overall impressions for each retailer in this period ([]% for 247, []% for Blinds2Go, []% for

Web Blinds,

[]% for Blinds Direct and []% for Swift Direct Blinds).

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Additional metrics that were provided are ‘position above rate’, ‘absolute top of page rate’ and ‘outranking

share’, but we did not think they were as insightful and have therefore not analysed them in further detail.

208

‘Eligible for’ in this case means that the given retailer participated in the auction for this search word.

209

The analysis is for the period 2017 to 2019 combined (we do not hold the data separately for each year),

meaning that any recent growth of competitors may be underrepresented. We understand that both Interior

Goods Direct and Make My Blinds have grown significantly in the last three years.

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(a) Blinds2Go consistently (ie across all retailers’ data) has the highest

average impressions share ([]%), average top of page rate ([]%) and

average absolute top of page rate ([]%).

(b) 247 is typically the runner up to Blinds2Go, although it is sometimes

outperformed by Blinds Direct (part of Interior Goods Direct) in terms of

impression share and top of page rate. Blinds Direct (part of Interior

Goods Direct) always outperforms 247 when it comes to absolute top of

page rate.

perform highly on any of the metrics analysed.

The third piece of analysis involved analysing metrics related to ranking for

the search words of each of Blinds2Go, Web Blinds, 247, [] [] and []

in the year of 2019.

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In particular, we assessed:

(a) Impression share.

(b) Quality score – this provides insights on the quality of a certain retailer’s

ad. The score has values of 1-10 (1 lowest, 10 highest) and is reported for

each search word, providing an estimate of the quality of a retailer’s ad

and the landing pages triggered by it. Three factors determine quality

score: expected click-through rate, ad relevance, landing page

experience.

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We focused our analysis on each retailer’s top 3, 5, 10, 30 and 50 search

words (by number of impressions in the year) as well as all search words in

2019.

Impression shares provide information on the extent to which a retailer’s

ads are shown and therefore allow inferences to be drawn about the extent

to which a retailer is able to reach visibility, but they do not provide

information on how well the retailer ranked. Quality scores are also

informative in the sense that, despite not being directly used in the ad

ranking algorithm,

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they are based on much of the same data that is

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This includes blinds-related search words only. For the avoidance of doubt by this we mean that the analysis

focused on the search words of each retailer as opposed to just looking only at the search words of Blinds2Go

and 247. There are several reasons why the results of this analysis may differ from the results of our previous

analysis discussed above in relation to the metrics they both cover (in this case, impression shares). These

reasons include that: (i) the top 10 search words for each retailer do not necessarily need to be the same when

considering overall period of 2017 to 2019 versus the top 10 words in 2019 only; (ii) the previous analysis shows

simple averages of impression shares, whereas this analysis shows weighted averages (weighted on the basis of

impressions); and (iii) there might in general be some differences in impression shares even for same search

words over the years.

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https://support.google.com/google-ads/answer/7050591

https://support.google.com/google-ads/answer/2454010

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https://support.google.com/google-ads/answer/140351?hl=en-GB

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considered regarding quality in the Ad ranking algorithm, as explained in

Appendix E.

With respect to the top 10 search words of each retailer, [] and

Blinds2Go are the best performing retailers when it comes to both

impression shares ([]%) and quality scores ([]). 247 performs

comparatively worse on both bases ([]% impression share and []

quality score). [] performs the worst, with a []% impression share.

We found similar results when we ran the analysis for all search words of

each retailer, rather than just the top ten. Further details are set out in

Appendix E.

The fourth piece of analysis involved a review of the ‘Auction Insights’

reports and ‘Account Health’ reports contained in Blinds2Go’s internal

documents. These reports show a number of different metrics related to

ranking.

We have only identified three complete ‘Auction Insights’ reports and two

‘Account Health’ reports, each covering a week to a few months within the

period from 2016 to 2018. As such, this evidence is likely to show an

incomplete and outdated picture, and we have therefore placed limited

weight on it. []. More details on the analysis of these internal documents

can be found in Appendix E.

Organic search

With respect to rankings in organic search results, we considered the

rankings we were able to observe directly from Google Web results with

respect to top 10 search words in the industry related to blinds (ie not

made-to measure specific search words) based on Google Trends in 2019,

as explained in paragraph 8.75 above.

The details of this analysis are set out in Appendix E. Below, we

summarise the results of this analysis:

(a) Each of the Blinds2Go, 247, Dunelm and Interior Goods Direct features

frequently in the top three positions. The only other competitors that rank

frequently, but only in lower positions, are Argos, Swift Direct Blinds, The

Range and Next. However, we note that some of these retailers (Dunelm,

Argos, The Range, and Next) have a strong ready-made blind offering

(and some of these, eg Argos and The Range, do not sell M2M blinds).

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In the vast majority of cases (94%), the Parties’ brands show in at least 2 of

the top 5 organic links and show in 3 of the 5 top organic links in 30% of the

cases.

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We also found an internal document commissioned by 247 []. [] (see

paragraph 8.149). More details on this can be found in Appendix E.

Provisional Conclusion on Google rankings

Overall, this analysis shows that both Parties’ brands consistently rank

highly in paid search, and across a number of different metrics, indicating

that the Parties’ brands are both highly effective at competing for the top

positions. They also rank highly in organic search, though to a lesser

extent. Additionally, the analysis shows that the Parties’ brands tend to

consistently rank the highest relative to other retailers, although with

Interior Goods Direct outperforming 247 in some cases.

The results of our analysis on online presence, namely that the Parties

consistently appear in the highest rankings relative to other retailers, with

only Interior Goods Direct outperforming 247 in some cases, closely align

with the market shares we found for different retailers in the online M2M

blinds market (see table 3). They further indicate that (i) the Parties,

together with Interior Goods Direct, are the leading suppliers in this market

and close competitors to each other and (ii) other online M2M blinds

suppliers (including Swift Direct Blinds) may be a less effective constraint.

Comparison of performance on Google Ads

Given the importance of Google Ads in obtaining traffic in this market, the

extent to which retailers are able to perform well in Google Ad campaigns

can provide an indication of how effective the Parties and their competitors

are at obtaining traffic, which in turn provides an indication of closeness of

competition. For example, if two retailers within a market are able to

perform well on this metric whereas others are not, this might suggest that

the former two will be closer competitors with each other and that the

others pose a relatively less significant constraint in the market and are

likely to be more distant competitors.

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The Parties’ brands include the several Hunter Douglas’ brands (Blinds2Go, Web Blinds, Hillarys, Thomas

Sanderson and Tuiss) and 247. This might however include situations where two brands of Hunter Douglas are

present rather than both Parties per se.

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In the previous section, we have assessed the extent to which retailers

perform differently with respect to relative positioning in Google Ad ranks,

including considering the impact of quality on rankings.

However, it is also relevant to look at other aspects of performance that, to

some extent, will reflect the impact of such rankings (through clicks and

click-through rates, which are likely to depend on ad position, and

consequently impact conversions).

We have therefore also analysed the performance of different retailers'

Google Ad campaigns by looking at a number of performance metrics for

these campaigns. In particular, we assessed data on Google Ad search

words from each of Blinds2Go, Web Blinds, 247, Blinds Direct (part of

Interior Goods Direct) and Swift Direct Blinds. We focused our analysis on

the following performance metrics:

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(a) Costs;

(b) Impressions, ie views – how often the ad is shown. An impression is

counted each time the ad is shown on a search result page or other site

on Google.

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in this case, clicks.

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(d) Conversions, ie sales – an action that has been defined as valuable to the

business, such as an online purchase.

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(e) Costs per impression, per interactions and per conversions.

We focused our analysis on the performance of each retailer’s top 3, 5, 10,

30 and 50 search words (by number of impressions in the year) as well as

all search words in 2019.

Details of our analysis are set out in Appendix E. Below we summarise the

main results with respect to the top 10 search words of each retailer in

2019:

(a) Blinds2Go spends the most on Google Ads (over £[]), whereas 247

spends slightly over £[]. [] spends a similar amount to Blinds2Go and

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Blinds-related search words only. For the avoidance of doubt by this we mean that the analysis focused on the

search words of each retailer as opposed to just looking only at the search words of Blinds2Go and 247.

215

See https://support.google.com/google-ads/answer/6320?hl=en-GB

216

See https://support.google.com/google-ads/answer/6281923?hl=en-GB

217

See https://support.google.com/google-ads/answer/6365?hl=en-GB

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significantly more than 247. [] spends much less than all other retailers

(less than £[]).

(b) Blinds2Go’s and 247’s ads outperform those of both [] and [] on

number of views by a large extent ([]). [] has the most interactions

and conversions, followed by [] and [].

amounts per interaction to those of the Parties. However, they pay much

more per conversion than the Parties, suggesting that other retailers are

not as successful at converting sales than the Parties [].

We find broadly similar results when the analysis is done for the top 10

search words or when it is done for all search words. The only notable

differences are that:

(a) overall spend on Google PPC[]. [] spends around £[] (much less

than Blinds2Go in contrast with top 10 search words analysis). []

spends much less than all other retailers (less than £[]).

(b) costs per interaction and costs per conversion are always higher for

competitors compared to the Parties.

We note that retailers’ values for conversions were not all provided on the

same basis. In particular, conversions included revenue from providing

samples to customers for all retailers except [] and 247 (for which

samples were excluded from conversions). This suggests that the number

of conversions for the other retailers is likely to be overestimated compared

to [] and 247 – leading, in turn, to an underestimation of costs per

conversion for Blinds2Go, Web Blinds and []. However, even if we were

to adjust conversions,

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the costs per conversion would still be smaller for

the Parties than for other competitors.

Overall, this analysis indicates that Blinds2Go tends to perform better on

Google Ads than the other online M2M blind retailers (247, []). Blinds2Go

performs best on all metrics analysed (overall spend, number of views,

interactions, conversions and costs per conversion and interaction). 247

performs less well than [], but better than [], in terms of number of

interactions and conversions; however it outperforms [] and [] when it

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Conversions can be adjusted to exclude the provision of samples to customers as we have information on the

percentage of conversions that represent samples for these retailers. Consistent with their responses to the

CMA’s Questionnaires on number of sales and samples in 2019, we have assumed that []% of conversions

corresponded to samples for both Blinds2Go and Web Blinds and []% for [] (part of []).

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comes to number of views and costs per conversion. This indicates that the

Parties are likely to be close competitors.

Ad search words bidding behaviour

We assessed the Parties’ and other retailers’ bidding behaviour, with

respect to:

(a) the extent to which the search words

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they bid on overlap; and

(b) the extent to which branded search words are bid on and the non-brand

bidding agreements (‘NBBAs’) are present in the market.

With respect to search word overlap, the analysis does not give a clear

indication that there is one retailer that has a particularly high overlap with

either of Blinds2Go and 247. Blinds2Go and 247 overlap with [] to a

broadly similar extent as they overlap with each-other. Therefore, this

analysis does not allow us to draw any clear conclusions with respect to

relative closeness of competition between Blinds2Go and 247 and between

either of them and [].

Similarly, the analysis of brand bidding and NBBAs, does not allow us to

draw any clear conclusions on the effectiveness and strength of

competition between the Parties and between the Parties and other

retailers. Although we find that [],

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this does not provide information on

the strength of such retailers as a competitive force in the market or the

extent to which they are able to successfully compete against the either

Blinds2Go or 247.

Further details of these analyses are set out in Appendix E.

Provisional conclusions on online presence

Overall, our analysis of the Parties’ online presence indicates that the

Parties are close competitors. Although the above analysis of search words

overlap and brand bidding/NBBAs does not allow us to reach clear

conclusions on the closeness of competition between the Parties and

effectiveness of other retailers as competitors, our analysis of Google

rankings, which includes all retailers present online, shows that both

Parties consistently rank highly, indicating that the Parties are both highly

effective at competing for the top positions, with only Interior Goods Direct

outperforming 247 in some cases. Our analysis of Google Ads performance

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We have considered blinds-related search words only.

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According to the Parties, all these agreements are informal rather than formal written agreements.

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also finds that the Parties tend to perform better than [], the [], and

[], the [].

Survey evidence

As previously noted, the Parties submitted a survey, the BDRC Survey,

which they commissioned to understand the purchase journey and choices

of the Parties’ customers.

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The Parties submitted that the BDRC Survey

indicates that only a small proportion of Blinds2Go’s customers, 12%,

would switch to 247 if Blinds2Go stopped selling blinds – and that diversion

to Dunelm (at 17%), Blinds Direct (part of Interior Goods Direct) (14%) and

John Lewis (12%) are higher. The Parties submitted that this is further

evidence supporting their view that 247 is not an important competitor to

Blinds2Go.

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The Parties further submitted that with respect to diversion from 247 to

Blinds2Go, one would expect relatively high diversion from small

competitors to market leaders, simply reflecting relative market shares. The

Parties argued that if 247 were to have a 7% share of online M2M blinds

and Blinds2Go 55% and out-of-market constraints are very limited, then

based on relative market shares one would expect diversion of about 59%

(55%/(1-7%)). The Parties noted that substantially fewer of 247’s

customers, namely 33%, stated that they would switch to Hunter Douglas

brands (predominantly Blinds2Go) if 247 stopped selling blinds.

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With respect to diversion from Blinds2Go to 247, the BDRC Survey implies

a diversion ratio of 13%. We note that, while this diversion ratio is not

particularly high, it is still the second highest diversion to an online M2M

blind retailer, closely behind Blinds Direct (part of Interior Goods Direct).

Additionally, we note that the third highest diversion to an online M2M blind

retailer, namely Blinds4UK, only amounts to 4%. In our provisional view,

this confirms that there are only a small number of credible online M2M

blind retailers, namely Blinds2Go, 247 and Interior Goods Direct.

While we acknowledge that the survey results show that diversion to

Dunelm and John Lewis (combining diversion to both their online and their

offline offering) is higher or similar to the diversion to 247, we consider that

reported diversion to large multi-channel retailers (and, in particular, the

diversion to the online offering of Dunelm and John Lewis) is likely subject

to an upward bias (and hence that diversion to Blinds2Go and 247 and

221

Main submission, 20 May 2020, paragraph 1.8;

222

Main submission, 20 May 2020, 8.18.

223

Main submission, 20 May 2020, paragraph 8.19.

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other online M2M blind retailers is likely subject to a downward bias) for the

following reasons:

(a) Customers are likely to be more familiar with the brands of large multi-

channel retailers, given these are household names and customers may

have shopped at them before for other products. In contrast, the brands of

online M2M blind retailers tend to be less well known, and, indeed, the

Parties submitted that there is relatively little brand recognition with

respect to online M2M blind retailers.

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Accordingly, when asked to

indicate which other retailer they would have purchased from,

respondents, not being able to do further research in the course of

responding to the survey, are more likely to have selected a familiar brand

name than an unfamiliar brand name (or a brand name they encountered

during their research process but subsequently forgot about).

(b) However, respondents may have chosen Dunelm or John Lewis on the

basis of brand familiarity, unaware of the true nature of their offerings. For

example, Dunelm requires a virtual appointment and does not have an

immediate option to order online M2M blinds while John Lewis only has a

very limited offering online compared to its in-store range. In this regard,

we note that the BDRC Survey shows that only 38% of Blinds2Go’s

customers and 43% of 247’s customers that said they would divert to

Dunelm indicated that they had visited Dunelm’s website. Similarly, only

43% of Blinds2Go’s customers and 48% of 247’s customers that said they

would divert to John Lewis indicated that they had visited John Lewis’

website.

With respect to diversion from 247, the BDRC Survey implies a diversion

ration of 34% to Blinds2Go and of 36% across all mentioned Hunter

Douglas brands (Blinds2Go, Hillarys and Web Blinds). This diversion ratio

is, as the Parties submitted, smaller than market shares suggest. However,

we note that the survey results still imply that by far the largest proportion

of 247 customers would divert to Blinds2Go / Hunter Douglas brands,

suggesting that Blinds2Go / Hunter Douglas is the key competitive

constraint on 247. Additionally, we consider that, as discussed in paragraph

8.110 above, the reported diversion to large multi-channel retailers is likely

subject to an upward bias, implying that reported diversion to the

Blinds2Go and 247 (and other online M2M blind retailers) is likely subject to

a downward bias, which may at least in part explain the discrepancy

between diversion ratio and market shares.

224

Main submission, 20 May 2020, paragraph 7.73 and Figure 7.10.

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The BDRC Survey also indicates which websites the Parties’ customers

visited prior to placing their order. The results show a similar picture to the

diversion ratios. While a higher proportion of Blinds2Go’s customers visited

the website of Blinds Direct (part of Interior Goods Direct) and Dunelm, a

significant proportion, namely 12%, visited 247’s website. The survey also

shows that Blinds2Go was the website visited by the highest proportion of

247’s customers, namely 33%.

Overall, we provisionally find that the results of the BDRC Survey are

consistent with the Parties being close competitors. We additionally note

that the competitive constraint from Blinds2Go on 247 appears to be

stronger than the constraint from 247 on Blinds2Go.

Internal documents

In the course of our inquiry we have reviewed more than 1,200 documents

provided by the Parties at phase 2.

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These were provided in response to

requests for internal documents relating to:

(a) Internal e-mails from the Parties discussing competitors, monitoring, and

the competitive landscape;

(b) Data and internal documents that show the monitored products and

respective prices of competitors;

Google advertising; and

(d) A small number of Board reports and strategic documents related to the

rationale for the Transaction.

The Parties have told us that neither of the Parties’ strategic decision-

making is usually documented in board reports or other strategic

documents, but rather that decisions tend to be taken ad-hoc and by small

groups of individual decision-makers. In general, the internal documents

have been of a day-to-day rather than strategic nature.

We have received a large number of internal documents on the Parties’

monitoring activities. These internal documents show, in line with the

Parties’ submissions, []. Blinds2Go records the prices of [] for a

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While we set out below our analysis of the internal documents we have reviewed as they relate to the

closeness of competition between the Parties, we also note that the internal documents do not in general support

the Parties' submissions that ready-made blinds, blinds sold through alternative channels and alternative window

covering pose a competitive constraint on the Parties.

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number of different M2M blinds of a certain size on a weekly basis. 247

scrapes the website of [], collecting the prices of [].

These internal documents further show that the Parties also monitor certain

other retailers. In particular:

(a) Blinds2Go records similar price information to that collected for []

[];

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and

(b) [].

While this implies that Blinds2Go and 247 do not only monitor the prices of

each other, the set of other retailers monitored is relatively small. In

particular, 247 is one of []retailers whose prices Blinds2Go regularly

monitors (for non-motorised M2M blinds), while Blinds2Go is one of

[]retailers that 247 monitors. 247 submitted that it only monitors

Blinds2Go and [] because it sees them as a ‘proxy’ for all of its

competitors. In our view, this approach to monitoring indicates that 247

sees Blinds2Go and [] as its key competitive constraints.

Overall, we provisionally find that the evidence on the Parties’ monitoring is

consistent with the Parties being close competitors, and consistent with

there being few other retailers that the Parties view as a significant

competitive constraint.

We have identified two further internal documents that speak to the

closeness of competition between the Parties. We provisionally find that

these also indicate that the Parties are close competitors:

An email from [] (both 247) from December 2018 requests that 247’s

prices for entry level roller blinds should be adjusted []. The email also

refers to a similar adjustment for []). These adjustments show that 247

used the price scraping information it collects to adjust its prices,

positioning itself as marginally cheaper than Blinds2Go and Interior

Goods Direct.

An internal 247 email from July 2020 notes that [].The expectation that

a coordinated price increase by the Parties would not result in a decrease

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Additionally, Blinds2Go monitors [] (but only for one shutter product) and [] and [] (but only for three

motorised blind products). While Blinds2Go further told us that it regularly visits John Lewis, it also explained that

these visits are primarily for []. Moreover, we have not seen any evidence of output that is produced following

these visits or how any information obtained during these visits is used within the Blinds2Go business.

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in sales indicates that the main competitive constraint on each of

Blinds2Go and 247 is the respective other Party.

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While internal documents are not a critical part of our overall assessment in

this case, these documents are consistent with our provisional finding that

Blinds2Go and 247 closely monitor online M2M blind retailers, and do not

monitor other retailers closely. They are also consistent with the Parties

being close competitors.

Pricing Analysis

The Parties submitted that they used the pricing information collected by

Blinds2Go through its monitoring of competitors (see paragraphs 8.118 and

8.119) to assess pricing trends over time:

(a) The Parties assessed the extent to which weekly price changes by

Blinds2Go correspond with other retailers moving their prices in the same

direction across the various product categories.

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(b) The Parties calculated the correlation between the weekly percentage

changes of prices for each retailer pair.

Our assessment of this analysis, as well as our own analyses, are set out

in Appendix D.

Overall, in our view the analysis submitted by the Parties is not suitable for

determining the extent to which the prices of different retailers move

together. We also find that our own analyses do not provide strong

evidence that Blinds2Go and 247’s prices follow each other more closely

than the prices of other retailers. However, there is no indication that there

is another retailer that Blinds2Go and 247 follow more closely.

Third party evidence

Comments from third parties on how they perceive Blinds2Go and 247

suggest that they are close competitors with each other:

(a) Interior Goods Direct told us ‘Most online customers value a good value

product and will then shop from Blinds2Go or 247 because of their lower

prices in comparison to competitors.’

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The CMA notes that any agreement between Hunter Douglas or Blinds2Go and 247 to fix or coordinate their

retail prices may breach the Chapter I prohibition in the Competition Act 1998 (as well as the equivalent EU

prohibition). These provisional findings do not consider whether this correspondence discloses behaviour that is

contrary to the Competition Act 1998.

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Main submission, 20 May 2020, paragraph 6.81.

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(b) Others, including MakeMyBlinds, said that Blinds2Go and 247 are

frequently ‘ranked number one and two on Google for most search

queries’.

close competitors. All four confirmed that they did.

All online M2M blind retailers that submitted information on which retailers

they monitor told us that they monitor both Blinds2Go and 247. Notably, the

only other retailer apart from the Blinds2Go and 247 that was monitored by

all of these online M2M blind retailers is Interior Goods Direct. While this

alone does not necessarily imply that the Parties are close competitors, it

shows that Blinds2Go and 247 are, alongside Interior Goods Direct,

considered by other online M2M blind retailers to be the key retailers of

online M2M blinds.

Lastly, we note that no third party we spoke to provided evidence that

conflicted with our view that Blinds2Go and 247 are close competitors.

Competitive significance of 247

The Parties submitted that the market share of 247 has steadily declined.

They submitted that 247’s market share was in a range of between 10 to

20% in 2016, and that it declined to a range of between 5 to 10% in 2019.

The Parties further submitted that there is only a limited and declining

competitive constraint from 247 on Blinds2Go.

However, in our view this decline in market share is not particularly

significant for the following reasons:

(a) First, despite a loss in market share, 247 is still the third largest retailer in

the market for online M2M blinds, and in terms of sales, is relatively close

behind the second largest retailer, Interior Goods Direct.

(b) Second, in absolute terms, 247’s sales of online M2M blinds have grown

by more than []% in each of the last two years.

20]% in 2016 to [5-10]% in 2019, hence only amounting to less than []

percentage points over a period of three years.

Provisional conclusion on closeness of competition

Based on the assessment set out above, we find that:

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(a) Blinds2Go and 247 have a similar service proposition, in terms of price,

quality and product range;

(b) Both feature prominently in Google search results;

customers is consistent with them being close competitors with each other

(high rates of diversion from 247 to Blinds2Go at 34% and lower but still

significant diversion from Blinds2Go to 247 at 13%), with the constraint

from Blinds2Go on 247 appearing to be stronger than the constraint from

247 on Blinds2Go;

(d) Blinds2Go and 247 monitor each other’s prices and each is part of a

relatively small set of retailers that the respective other regularly monitors;

and

(e) Third parties have told us that they see Blinds2Go and 247 as being close

competitors to each other.

Overall, we therefore provisionally find that the Parties are close

competitors.

Remaining constraints

Unilateral effects are more likely where customers have little choice of

alternative supplier. In this section, we consider the strength of the

competitive constraint on the Merged Entity from alternative retailers. In

their submissions, the Parties identified the following constraints:

(a) Other online M2M blind retailers, including Interior Goods Direct, Swift

Direct Blinds, MakeMyBlinds and a number of smaller online M2M blind

retailers;

(b) Multi-channel retailers, including Next, Dunelm and John Lewis;

(d) Out-of-market constraints.

We assessed the level of constraint from each of these alternatives by

taking into consideration:

(a) The similarity of their service proposition compared to the Parties;

(b) Their online presence;

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Survey submitted by the Parties;

(d) Evidence on monitoring; and

(e) Views from third parties.

Competition from other online M2M blind retailers

With respect to competition from other online M2M blind retailers, the

Parties submitted that Blinds2Go and 247 are constrained not only by

larger online M2M blind retailers, but also by smaller ones, that can and do

compete with Blinds2Go and 247 given the lack of economies of scale and

capacity constraints.

We assess each of Interior Goods Direct, Swift Direct Blinds and

MakeMyBlinds in turn below. With the exception of BlocBlinds, a niche

player for specialised roller blinds, these are the only online M2M blind

retailers with a market share of more than 1%. We subsequently also

consider the level of constraint from other smaller online M2M blinds

retailers.

Interior Goods Direct

Interior Goods Direct is the second largest retailer in the online M2M blinds

market, with sales of online M2M blinds amounting to £[] million in 2019.

Interior Goods Direct has grown significantly over the last years, with its

sales of online M2M blinds growing by []% and []% in 2017 and 2018,

respectively. Additionally, in April 2020, Interior Goods Direct acquired

Wilsons Blinds, a smaller retailer with online M2M blind sales of £[]

million in 2019. Interior Goods Direct is vertically integrated and has been

trading blinds exclusively online since 2003.

The Parties submitted that Interior Goods Direct is an important and

growing competitor, with survey evidence indicating significant diversion

from the Blinds2Go and 247 to Interior Goods Direct. The Parties further

submitted that the vertical integration of Interior Goods Direct allows it to

stock over 1,000 M2M products offering next day delivery. The Parties

noted that they expect that Wilsons Blinds will benefit from accelerated

growth through the benefits of Interior Good Direct’s vertical integration.

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Main submission, 20 May 2020, paragraphs 6.46.

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The offering of Interior Goods Direct is broadly similar to that of Blinds2Go

and 247. In particular:

(a) Our analysis of prices (see paragraph 8.125) indicates that the prices of

Interior Goods Direct are similar to those of Blinds2Go and 247.

(b) In terms of quality, Interior Goods Direct markets itself as a slightly higher

quality producer, noting that manufacturing its products in the UK helps in

this regard. However, Interior Goods Direct has a lower Trustpilot score

than either Blinds2Go or 247.

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delivery, a review of the Interior Goods Direct website showed that it only

offers a ‘fast track’ option – which guarantees dispatch within 2 to 3

working days for orders made before 12pm at an extra cost (£4.95).

Interior Goods Direct also states on its website that the estimated dispatch

time does not include the delivery time (one day for deliveries to the UK

Mainland).

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(d) In terms of range, while Interior Goods Direct has a larger overall range

(in terms of SKUs) than Blinds2Go and 247, it offers significantly fewer

SKUs for wooden blinds – which is, as discussed in paragraph 8.63

above, the top-selling type of blind for each of the top four online M2M

blind retailers.

232

Interior Goods Direct appears to be less successful than either Blinds2Go

or 247 at ranking highly on Google paid search, although it does

outperform 247 in some cases: our analysis of Google paid search

(paragraph 8.77) found that Interior Goods Direct features significantly less

frequently (and in lower positions) in the paid Google Ads search results

than Blinds2Go and, to a lesser extent, 247 (Interior Good Direct does

outperform 247 in some cases). Interior Goods Direct’s performance

regarding organic search is better, with it tending to appear more frequently

than 247 (though still less frequently than Blinds2Go) in the top positions.

The BDRC Survey submitted by the Parties shows significant diversion

from each of Blinds2Go and 247 to Interior Goods Direct – 16% for

Blinds2Go customers and 14% for 247 customers. We further note that

34% of Blind2Go customers and 25% of 247 customers indicated that they

visited the website of Blinds Direct (part of Interior Goods Direct) prior to

230

Interior Goods Direct has a Trustpilot score of 87%, while Blinds2Go and 247 have a Trustpilot score of 97%

and 91%.

231

Parties’ main submission para 6.46, and Direct Blinds website, accessed on 30 June 2020.

232

In particular, while the Parties offer more than 200 SKUs of wooden blinds each, Interior Goods Direct only

offers 80. Comparison of number of SKUs based on Parties’ submission.

121

their purchase, while only very small proportions of either Blinds2Go and

247 customers indicated that they visited the website of Wilsons Blinds.

With respect to evidence on monitoring, we note []. However, and as

discussed in Annex D, we found little correlation between the prices of

Interior Goods Direct and those of the Parties. Additionally, we note that

Interior Goods Direct is monitored by all online M2M retailers that submitted

information on which competitors they monitor. Interior Goods Direct is

further monitored by [] (it is the only online M2M retailer other than the

Parties that is monitored by []) but not by [].

Finally, we note that the conversion rates of Interior Goods Direct are

significantly lower than those of Blinds2Go and slightly lower than those of

247.

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This suggests that Interior Goods Direct is significantly less

effective than Blinds2Go at converting visitors to its websites to sales.

Based on the evidence set out above, we provisionally find that Interior

Goods Direct is a significant competitive constraint on the Parties, and that

its constraint on Blinds2Go is similar to the constraint 247 poses on

Blinds2Go: Interior Goods Direct has a similar offering to the Parties, it is

the second largest supplier in the market and of similar size to 247, and

survey evidence shows significant diversion to Interior Goods Direct –

although we do note that Interior Goods Direct is less often ranked highly

on paid search than the Parties and is also less effective than the Parties in

terms of conversion.

Swift Direct Blinds

With sales of online M2M blinds amounting to £[]million in 2019, Swift

Direct Blinds is the fourth largest retailer in the online M2M blinds market

and has a considerably smaller share than 247 (the third largest retailer).

234

Swift Direct Blinds’ sales of online M2M blinds decreased [] in 2019, by

£[]million compared to 2018, and [] [Another retailer] told us that Swift

Direct Blinds has been struggling over the last year or two.

235

Swift Direct

Blinds is a vertically integrated supplier. While it was active as an in-store

retailer in the 2000’s, Swift Direct Blinds moved online in 2010.

236

233

For user conversion, the rates are []% for Blinds2Go, []% for 247 and []% for Interior Goods Direct. For

session conversions, the rates are []% for Blinds2Go, []% for 247 and []% for Interior Goods Direct. While

Blinds2Go told us that the e-commerce conversion rates for Blinds2Go are not reliable as Google Analytics

counts sample orders as transactions, the figures shown above were submitted by the Parties without this

caveat, so we understand these to be reliable and not include samples as transactions. Main submission, []

234

Main submission, 20 May 2020, para 7.47.ii and [].

235

[].

236

[].

122

The Parties submitted that Swift Direct Blinds is a key online retailer of

M2M blinds and that it has registered significant growth since its launch in

2012. The Parties further submitted that Swift Direct Blinds concentrated its

efforts on the Google organic channel and regularly featured in the number

one position.

237

Finally, the Parties submitted that Swift Direct Blinds’

confidence in the quality of their blinds is such that they offer a five-year

guarantee on all products.

238

Swift Direct Blinds’ offering is broadly similar to that of the Parties. In

particular:

(a) Our analysis of prices (see Annex D) indicates that the prices of Swift

Direct Blinds are similar to those of the Parties, although we note that

Swift Direct Blinds’ prices are significantly higher than those of either of

the Parties for venetian blinds;

(b) In terms of quality, Interior Goods Direct told us that the product quality of

Swift Direct Blinds is similar to that of the Parties. We also note that Swift

Direct Blinds’ Trustpilot score is similar to those of the Parties. We

acknowledge the Parties’ submission that Swift Direct Blinds offers a five-

year guarantee on all products. However, we note that offering several

years guarantee is a common practice in the market, and therefore we do

not consider it as a significant element of differentiation.

239

of SKUs as the Parties, both overall and with respect to wooden blinds,

the top-selling type of blind for each of the top four online M2M blind

retailers.

Swift Direct Blinds is less successful than the Parties at ranking highly on

Google paid search, with our analysis of Google paid search showing that

Swift Direct Blinds very rarely features in the top positions of paid Google

Ads.

With regard to organic search, our analysis of Google organic rankings

shows that, contrary to the Parties’ submission, Swift Direct Blinds does not

feature prominently: the highest position in which Swift Direct Blinds

showed was the fourth position, and Swift Direct Blinds occupied this

position in only 4% of the conducted searches. We also note that Swift

Direct Blinds told us that its organic positioning on Google suffered after it

changed its website URL (from Direct Blinds to Swift Direct Blinds) in

237

Main submission, 20 May 2020, paragraph 7.19.

238

Main submission, 20 May 2020, paragraph 6.49.

239

247 offers three years guarantee, MakeMyBlinds four years and Swift Direct Blinds, Interior Goods Direct and

Blinds2Go five years.

123

August 2019, and provided us with the respective underlying data (see

Appendix F).

The BDRC Survey submitted by the Parties shows very limited diversion

from each of the Parties to Swift Direct Blinds – less than 1%. We consider

this to be strong evidence of the limited constraint imposed by Swift Direct

Blinds on the Parties. We further note that only 2% of Blinds2Go’s

customers and 3% of 247’s customers indicated that they visited Swift

Direct Blinds’ website prior to their purchase. This is further evidence that

Swift Direct Blinds only poses a limited competitive constraint on the

Parties.

With respect to evidence on monitoring, we note that [], other online

M2M retailers ([]) and multi-channel retailers do not tend to monitor Swift

Direct Blinds. The only exception to this is [].

240

[], and as discussed in

Appendix D, we found little correlation between the prices of Swift Direct

Blinds and Blinds2Go (and likewise 247).

Finally, we note that the conversion rates of Swift Direct Blinds are

significantly lower than those of the Parties. This implies that Swift Direct

Blinds is significantly less effective than the Parties at converting visitors to

its website to sales.

241

Based on the evidence set out above, we find that while Swift Direct Blinds

appears to have a similar offering to the Parties, it performs significantly

less well in terms of its online presence and its effectiveness in terms of

conversion. We also find that its revenue and market share are significantly

smaller than 247’s, and that its sales have significantly decreased in 2019.

We therefore provisionally conclude that the competitive constraint from

Swift Direct Blinds on the Parties is limited.

MakeMyBlinds

MakeMyBlinds is a relatively new and small player in the online M2M blinds

market, having entered the market in 2015. In 2019, MakeMyBlinds’ sales

of online M2M blinds amounted to £[], leading to a market share of []

[0-5]%.

242

240

[]

241

For user conversion, the rates are []% for Blinds2Go, []% for 247 and []% for Swift Direct Blinds. For

session conversions, the rates are []% for Blinds2Go, []% for 247 and []% for Swift Direct Blinds. While

Blinds2Go told us that the e-commerce conversion rates for Blinds2Go are not reliable as Google Analytics

counts sample orders as transactions, the figures shown above were submitted by the Parties without this

caveat, so we understand these to be reliable and not include samples as transactions. Main submission, 20 May

2020.

242

[].

124

The Parties submitted that MakeMyBlinds’ growth has been due, in part, to

an effective online marketing strategy that has focussed not just on PPC

advertising but also on social media, in particular Instagram. Consistent

with this, Interior Goods Direct told us that MakeMyBlinds targets younger

customers.

While MakeMyBlinds offers all main types of blinds and has a website with

similar functionalities to those of the Parties, there appear to be certain

differences between MakeMyBlinds’ offering and those of the Parties:

(a) While we do not hold detailed pricing data from MakeMyBlinds,

MakeMyBlinds told us that it ‘used to be very price conscious against

Blinds2Go and 247’, but that it was not making the required margin and

therefore no longer price matches. Instead, it tries to position its blinds as

quality products.

(b) MakeMyBlinds’ range in terms of SKUs is significantly more limited than

those of the Parties: MakeMyBlinds offers 820 SKUs, while Blinds2Go

and 247 offer 4,497 and 2,823 SKUs, respectively.

However, we note that MakeMyBlinds has significantly fewer reviews,

namely around 1,000 while Blinds2Go and 247 each have more than

10,000 reviews. This is likely to be a function of MakeMyBlinds having

been in the market less long. However, the fact that they have been active

less long and hence have fewer reviews is itself likely to disadvantage

them to some extent over more established firms.

MakeMyBlinds appears to be less successful than the Parties at ranking

highly on Google search: our analysis found that MakeMyBlinds only

features sporadically in the paid Google Ads search results and never

appears among the organic Google search results on the first page. While

we acknowledge that MakeMyBlinds spends a higher proportion of its

marketing spend on social media as compared to other online M2M blind

retailers, we note that Google paid and organic search are still the largest

two sources of revenue for MakeMyBlinds, with Google paid search being

the channel on which MakeMyBlinds spends the largest proportion of its

marketing spend.

With respect to evidence on monitoring, we note that [] even though []

(see paragraph 8.119). This indicates that MakeMyBlinds is not seen as a

strong competitive constraint by either Blinds2Go or 247. For

completeness, we note that MakeMyBlinds is monitored by [].

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The BDRC Survey submitted by the Parties shows very limited diversion

from each of the Parties to MakeMyBlinds – less than 1%. We consider this

to be strong evidence that MakeMyBlinds imposes only a limited

competitive constraint on the Parties. We further note that only 2% of

Blinds2Go’s and 1% of 247’s customers indicated that they visited

MakeMyBlinds’ website prior to their purchase. This is further evidence that

MakeMyBlinds only poses a limited competitive constraint on the Parties.

Based on the evidence set out above, MakeMyBlinds appears to have a

similar offering to the Parties, albeit its range is more limited.

MakeMyBlinds also appears to be less successful than the Parties at

ranking highly on Google search and it currently is a small player in the

online M2M blinds market.

243

We therefore provisionally find that

MakeMyBlinds currently only poses a limited competitive constraint on the

Parties. However, we note that MakeMyBlinds has experienced significant

growth in the past years, and that it has plans for significant further growth.

We consider this in more detail in our assessment of entry and expansion

(see paragraph 9.46 below).

Other smaller online M2M blind retailers

In addition to the online M2M blind retailers discussed above, the Parties

submitted that there is a large number of other online M2M blind retailers

with a similar offering and that the aggregate competitive constraint from

‘many smaller players’ should not be ignored. The Parties provided a

selection of screenshots of the websites of such other online M2M retailers

and further specifically discussed the following retailers:

(a) The Parties submitted that Blinds4UK has over 35 years’ experience in

window coverings, that its blinds featured on BBC Grand Designs and In-

House Beautiful magazine and that it has an excellent rating on Trustpilot,

with over 3,000 reviews.

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The Parties further submitted that the BDRC

survey shows that approximately a quarter of customers visited Blinds4UK

before making their purchase with the Parties, and that this is evidence of

Blinds4UK’ competitive constraint.

245

(b) The Parties submitted that Terrys Fabrics was established 46 years ago,

that it offers payment through a credit provider and that it has been

featured on ITV’s This Morning and in the Good Housekeeping

243

We do not hold data on MakeMyBlinds’ conversion rates and are hence unable to comment on the

effectiveness of MakeMyBlinds in terms of converting visitors to its website into sales.

244

Main submission, 20 May 2020, paragraph 6.47.

245

Main submission, 20 May 2020, paragraph 6.47.

126

magazine.

246

The Parties further submitted that in August 2019, Terrys

Fabrics released an augmented reality window dressing app to help

customers visualise its blinds in their home before placing an order.

247

Trustpilot and has been online for 14 years.

248

The Parties further

submitted that Concept Blinds claims to have the lowest UK prices and

that it does its best to match any listed price for an equivalent product on

another online site 48 hours after purchase.

249

Whilst we acknowledge that there are a number of smaller online M2M

blind retailers, we note the following:

(a) With the exception of Interior Goods Direct, Swift Direct Blinds and

MakeMyBlinds (and the specialised retailer Blocblinds), all other online

M2M blind retailers are small and have remained small, despite having

been active in the market for a number of years. Even the largest of the

other online M2M blind retailers, OrderBlindsOnline, has a market share

of less than []%, with sales of online M2M blinds amounting to only

£[]million in 2019. The Parties submitted that the combined market

share of these smaller retailers was 20%. However, the evidence we have

seen does not support such a high estimate. Based on the actual sales

data we received from some of these smaller retailers, we estimate that

the other online M2M blind retailers only account for a market share of

2%.

(b) The Parties do not consider these smaller retailers in their strategic

decision making. For example, with the exception of [].

paid Google Ad search results or the first page of Google organic search

results.

(d) The BDRC Survey submitted by the Parties shows limited diversion from

each of the Parties to the other online M2M retailers. The highest

diversion is to Blinds4UK (4% for Blinds2Go customers and 5% for 247

customers), with diversion to all other online M2M retailers in aggregate

amounting to less than 1% for Blinds2Go and 247 customers. Additionally,

the survey shows that the Parties’ customers did not tend to visit the

websites of the other online M2M retailers prior to their purchase. The

exception is Blinds4UK, although we note that, in contrast to the Parties’

246

Main submission, 20 May 2020, paragraph 6.50.

247

Main submission, 20 May 2020, paragraph 6.50.

248

Main submission, 20 May 2020, paragraph 6.51.

249

Main submission, 20 May 2020, paragraph 6.51.

127

submission that around a quarter of customers visited Blinds4UK, the

BDRC Survey actually shows the proportions were lower: 11% of

Blinds2Go customers visited Blinds4UK and 18% of 247 customers visited

Blinds4UK.

250

Based on the above, we provisionally find that the smaller online M2M blind

retailers do not, either individually or in aggregate, constitute a significant

competitive constraint on the Parties: they have not managed to grow

despite having been active in the market for a number of years, they are

not able to attract a significant number of potential customers and they do

not appear to influence the Parties’ behaviour.

Provisional conclusion on constraint from online M2M blind retailers

We provisionally find that Interior Goods Direct is a significant competitive

constraint on the Parties, and that its constraint on Blinds2Go is similar to

the constraint 247 poses on Blinds2Go.

Apart from Interior Goods Direct, the constraint from other online M2M blind

retailers on the Parties is relatively weak. This is consistent with the view

that there are few credible larger online M2M blind retailers.

Competition from multi-channel retailers

Multi-channel retailers are retailers that are active in several channels,

namely both the offline channel (in-store and/or in-home) and the online

channel. In this section, we focus on the online M2M blind offering of these

retailers.

On the basis of the Parties’ submission and responses from third parties,

we understand that Next, Dunelm and John Lewis are the only multi-

channel retailers with an online offering of M2M blinds (although we note

that Dunelm’s website currently does not have click-to-order functionality,

see paragraph 4.33).

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We note that, as set out in paragraph 8.10 above

the sales of online M2M blinds for each of these multi-channel retailers are

small: in 2019, the sales of online M2M blinds for Next, Dunelm and John

Lewis amounted to £[], £[]and £[], respectively.

252

250

The Parties’ appear to only count customers that in a preceding question indicated that they visited other

websites, rather than counting all customers.

251

While the Parties further included Laura Ashley in the online M2M market shares, it does not appear to be

possible to order M2M blinds through the Laura Ashley website.

252

Corresponding to market shares of [0-5]%, [0-5]%, and [0-5]% respectively.

128

Similarity of service proposition

We assessed the similarities between the online offering of the multi-

channel retailers and online M2M blind retailers. In particular, we focus on

the most important factors that affect a customers’ choice of retailer: price,

quality and range.

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Overall, we provisionally find that multi-channel retailers’ service

propositions tend to be very different from those of online M2M blind

retailers when assessed on the above parameters.

Multi-channel retailers tend to price higher than online retailers.

(a) Price comparisons submitted by the Parties suggest that the prices of

John Lewis are significantly higher than those of online M2M retailers

(between 70% more and more than double), although we note that these

comparisons only assess two M2M blind products for John Lewis, namely

roller blinds and roman blinds.

(b) John Lewis noted that its products tend to fall within the mid-range to

higher end of the market pricewise due to a range of factors including its

use of higher quality materials relative to some of its competitors and its

higher overheads compared to online competitors.

of Blinds2Go, tends to be among the more expensive online M2M blind

retailers.

(d) Blinds2Go states on its website that it compared its prices with the five

main M2M blind retailers on the high street and that ‘in almost 25% of

cases we were cheaper by 60% or more’. It further advertises on its

website that ‘you can also save up to 60% off High St. prices’.

254

While the Parties agreed that multi-channel retailers tend to charge higher

prices, the Parties submitted that the price differential does not suggest that

multi-channel and online M2M blind retailers do not compete. The Parties

argued that customers are likely to make a quality-price trade-off as a

brand like John Lewis has built a reputation for the quality of their products

over time. However, in our view, the price differentials indicate that multi-

253

When asked about the reasons that influenced the choice of the retailer, the majority of the Parties’ customers

interviewed responded ‘Good prices/offer’, followed by ‘Had what specifically wanted’, ‘Website easy to use’,

‘Product quality’, and ‘Good/wide product range’.

254

Blinds2Go website, accessed 23 June 2020. Although these comparisons refer to the in-store prices of the

multi-channel retailers, the multi-channel retailers tend to apply the same price online as offline. Next told us that

it charges the same price for its M2M blinds online and in-store. John Lewis states on its website that ‘We apply

the same national price to products in our shops and online.’ https://www.johnlewis.com/customer-

services/prices-and-payment/never-knowingly-undersold

129

channel retailers (in particular John Lewis) may have a potentially

differentiated (with respect to price and quality) online offering which may

limit the multi-channel retailers’ competitive constraint on the Parties.

In terms of quality, multi-channel retailers may benefit from brand

recognition and the perception that they offer higher quality. For example,

John Lewis noted that it considers itself to be a very trusted brand, taking

pride in quality and design. It also noted that it uses higher quality materials

relative to some of its competitors.

Multi-channel retailers offer a significantly smaller online range than the

Parties. In particular, while Blinds2Go and 247 respectively offer 4,497 and

2,823 SKUs, the Parties submitted that Next offers 844 SKUs online, John

Lewis 511, and Dunelm

285.

We note that the more limited range of multi-channel retailers seems to be

driven by system and/or website functionality. For instance, one multi-

channel retailer ([]) told us that whilst it sold some types of blinds online,

it was still not able to provide a full offering via this channel. [] told us that

its webstore is not currently versatile enough to offer larger ranges of highly

bespoke products, such as M2M blinds, and that it currently offers only

[]% of its made-to-measure products online.

255

Both Next and John Lewis have told us that they would like to increase

their range going forward. However, the significance and/or timing of such

any increase remains unclear, particularly given the technical difficulties of

system and/or website functionality noted above, the competing priorities

resulting from selling products other than M2M blinds within these

businesses and the impact of the current COVID-19 pandemic. This is

discussed in further detail in paragraphs 9.50 to 9.63.

The Parties submitted that the importance of range as a competitive

constraint should not be overstated and that the top nine variants of blinds

account for []% of sales. However, we note that the Parties aggregated

different SKUs based only on the blind type and a typically high-level colour

(eg white, grey, blue).

256

This assessment does not take into account

nuances in colour, fabrics and other options available for M2M blinds.

257

Therefore, these top nine variants may actually include a large number of

255

[]

256

For example, for a certain type of blind, any blind that in its description contained the word ‘white’ was

aggregated as the ‘white’ variant of such blind type.

257

For example, the presence of patterns, the colour of some parts, the dimension of the slats for venetian blinds,

and the option such as ‘Enjoy’ or ‘DuoShare’ for rollers.

130

SKUs. In addition, survey results showed that design was the key driver of

customers’ choice.

The Parties submitted that Next materially improved its offering in Autumn

2019. However, we note that Next was selling online M2M blinds

throughout 2019 and its sales did not change substantially in the course of

2019. Moreover, Next forecasted similar revenues for 2020.

We finally note that Dunelm exited the market for the online retail supply of

M2M blinds, although it plans to re-enter. Dunelm currently does not offer

click-to-order functionality and is offering online consultations via Microsoft

Teams. Customers have to look through a catalogue of c.300 pages to

browse the selection and cannot place an order without the assistance of a

consultant.

258

Dunelm told us that they have put their plans for online click-

to-order functionality for M2M blinds on hold as a result of the current

COVID-19 pandemic.

259

Brand recognition

The Parties submitted that the multi-channel retailers have the ability to

attract customers directly to their websites, that they have a natural

competitive advantage in that customers will frequently visit their websites,

and that they can run large scale email marketing campaigns.

We note that, while in principle this could be the case, in practice we

observe that the multi-channel retailers achieve very low sales in online

M2M blinds despite this advantage.

Additionally, we note the following comments from third parties:

(a) Only one third party considered that high street retailers with well-known

brands may have some advantages in online advertising because of

brand recognition.

(b) One multi-channel retailer told us that it appears in a relatively low

position in the organic search results on Google for the search word

’blinds’ and received only a limited number of site visits through that

search word.

258

[]

259

[]

131

Survey evidence

The Parties submitted that the BDRC Survey shows that the multi-channel

operators are a constraint on the Parties.

260

The Parties submitted that

17% of Blinds2Go’s customers and 15% of 247’s customers would divert to

Dunelm, and that 12% of Blinds2Go’s customers and 9% of 247’s

customers would divert to John Lewis.

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The Parties also submitted that

Dunelm’s and John Lewis’ websites feature strongly in the BDRC Survey

as websites where the Parties’ customers compare products and prices.

262

We acknowledge that the BDRC Survey submitted by the Parties shows a

relatively high diversion to the multi-channel retailers. However, and as set

out in paragraph 8.119, in our view, that diversion to large multi-channel

retailers (and in particular the diversion to the online offering of Dunelm and

John Lewis) is likely subject to an upward bias, due to customers being

more familiar with these brands but potentially unaware of the true nature

of their offerings (ie that Dunelm required a virtual appointment and that

John Lewis only has a very limited offering online compared to its in-store

range).

Additionally, we note that the diversion to multi-channel retailers includes

diversion to M2M blinds bought online, M2M blinds bought in-store or in-

home, as well as ready-made blinds bought through any of these

distribution channels – and therefore aggregates a number of different

constraints. While we accept that overall diversion is relevant, in our view,

the cited diversion overstates the constraint from the multi-channel

retailers’ online M2M offering (the diversion to the online M2M offering of

these retailers amounts to 10% of Blinds2Go customers and 7% of 247

customers for Dunelm and 8% of Blinds2Go customers and 4% of 247

customers for John Lewis).

With respect to visiting websites, we note that the Parties’ appear to only

count customers that, in a preceding question, indicated that they visited

other websites, rather than counting all customers. As a proportion of all

customers, we note that only 25% of Blinds2Go customers and 28% of 247

customers visited the Dunelm website, while 16% of Blinds2Go and 14% of

247 customers visited the John Lewis website.

260

Main submission, 20 May 2020, paragraph 6.41.

261

Main submission, 20 May 2020, paragraphs 6.53, 6.60 and 6.61.

262

Main submission, 20 May 2020, paragraph 6.40.

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Third party views

The competitors identified by multi-channel retailers were different to those

identified by online M2M blinds retailers, and included both online and in-

store retailers. Multi-channel M2M blinds retailers generally identified other

multi-channel retailers and in-home retailers as their main competitors.

However, they also identified some online M2M blind retailers as

competitors:

(a) One multi-channel M2M blinds retailer, [] identified the Parties and

Interior Goods Direct as competitors, although [] also told us that they

were not significant competitors to either of the Parties due to their limited

online presence in M2M blinds.

(b) Another multi-channel retailer, Next, considered Blinds2Go to be the only

online M2M retailer that is a close competitor.

Multi-channel retailers appear to have a different commercial focus than

online M2M retailers. In particular, rather than marketing online M2M blinds

specifically, their approach to marketing tends to encompass a broader

range of interior products:

(a) John Lewis told us that its online competitors can focus on M2M blinds

while John Lewis is a department store selling many products. Its

marketing efforts are focused more on the entire home as opposed to

blinds specifically.

(b) Dunelm told us that it has a wider range of products to promote using its

marketing spend.

interior products. Next told us that its catalogue contains its entire product

range and it is not specific to blinds. Next also told us that it performs

general market research and not specific to M2M blinds nor blinds. Next

told us that it places emphasis on its ready-made fabrics and in-house

design. Finally, we note that Next told us that it is focused on selling M2M

products to expand the ready-made selection with additional sizes.

Internal documents and monitoring

The Parties do not consistently monitor the prices of multi-channel retailers.

[].

133

The Parties submitted that Blinds2Go monitors multi-channels retailers, but

on a more informal basis (and therefore that these suppliers would not be

expected to appear extensively in internal documents).

[].

We note that such ‘informal’ monitoring would tend to suggest that multi-

channel retailers impose a less significant constraint than those whose

prices are monitored on a more formal and regular basis.

Provisional conclusion on multi-channel M2M blinds retailers

Based on the evidence set out above, we note that multi-channel retailers

had very limited online sales of M2M blinds in 2019. We further note that

they have a potentially differentiated (with respect to price and quality)

online offering, offering online M2M blinds at an often substantially higher

price point than online M2M retailers, and that their online range is limited.

Compared to online M2M blind retailers, multi-channel retailers have a

different business model and commercial focus, which is not specifically on

the M2M blinds product category, and they feature significantly less

prominently in online search results.

While survey evidence indicates material diversion to Dunelm and John

Lewis online, these results may be biased upwards due to customers being

more familiar with these brands and/or customers not realising that Dunelm

no longer offers a click-to-order functionality, while John Lewis’ range

online is very limited.

Finally, we note that multi-channel retailers are not consistently monitored

by the Parties and most other online M2M blind retailers (although [], and

Interior Goods Direct monitors various multi-channel retailers).

We therefore provisionally find that multi-channel retailers only exert very

limited competitive constraints on the Parties and are not an effective

alternative for most of the Parties’ customers. However, we assess in more

detail in paragraphs 9.50 to 9.63whether the constraint they exert may

increase going forward.

Competition from eBay and Amazon

In the UK, the main marketplaces on which retailers sell M2M blinds are

eBay and Amazon. Marketplaces are primarily e-commerce sites that

provide a platform for other retailers (ie marketplaces do not tend to be

retailers in their own right). While we note that Amazon also directly sells

certain products on its platform (‘first-party sales’), Amazon does not have

any first-party sales of M2M blinds.

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As set out in paragraph 8.68.6(a), eBay and Amazon submitted that sales

of blinds (including both M2M blinds and ready-made blinds, and in the

case of eBay further including shutters) on their marketplaces amounted to

[] and [], respectively, in 2019. While neither eBay nor Amazon was

able to provide a separate sales figure for M2M blinds only, eBay noted

that only approximately 18% of the blinds listed on eBay are M2M.

All of the main types of M2M blinds (ie venetian blinds, wooden and faux

wooden blinds, roller blinds, roman blinds and vertical blinds) appear to be

available on each of eBay and Amazon. However, it appears that eBay is

currently not configured to effectively sell M2M products in a way that is

comparable to the Parties’ own websites. In particular:

(a) eBay told us that within a sellers’ listing, it is not possible to have a data

field for buyers to specify the exact dimensions of the blinds. eBay further

told us that the only way to sell M2M products on its platform is for the

seller to state in its listing that the buyer should message the seller with

their exact measurement requirements. One retailer that used to sell on

these platforms told us that this is a slow and cumbersome way to sell.

Another retailer which currently sells on these platforms confirmed that it

considers this to be a ‘messy process’.

(b) While sellers can alternatively display several drop-down menus with a

large number of entries on the product pages (which would in principle

allow for an offering that to some extent resembles M2M), we consider

this option to not be particularly user-friendly. Indeed, eBay confirmed that

sellers do not tend to provide too many increments on their listings since

this is considered to be not appealing to customers.

eBay, and hence not possible to offer a free sample. While some sellers

may offer samples for a small fee and then reimburse that fee to the

customer later, eBay submitted that this process is less attractive for

customers than being able to receive a free sample.

(d) Finally, we note that contacting a seller on eBay is more complex than

contacting an online M2M blind retailer. First, it is only possible to contact

the seller on eBay if the buyer has an eBay account. Second, eBay does

not offer instant chat functionality. Third, eBay submitted that the platform

is not quite designed for potential buyers to contact sellers and that there

could be practical issues. However, we acknowledge the Parties’

submission that Blinds2Go and 247 introduced chat functionality on their

websites only recently and that only a very limited amount of customers

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used it which may indicate that chat functionality is not a decisive factor

for many customers.

With respect to Amazon, we note that Amazon has only recently introduced

a ‘customise now’ button, which allows customers to enter the desired

measurements of a product before the purchase. The Parties further

submitted that Amazon offers a free sample service. However, it appears

that it is not possible to directly order a free sample: Amazon told us that

sellers wanting to offer free samples would have to do so via the ‘contact

the seller’ features. Amazon was not aware of a functionality that enable

free samples to be offered otherwise.

Additionally, we note that the options to filter results on Amazon are very

limited compared to websites of online M2M blind retailers. For example, it

is not possible to filter by colour, and other filters (eg for fabric) either do

not exist or are limited to few choices. In our view, this to be an important

limitation, given that the BDRC Survey shows that 45% and 47% of

respondents for Blinds2Go and 247, respectively, indicated that ‘website

easy to use’ is a factor that influenced their choice of retailer. Also, and

similar to eBay, Amazon does not offer instant chat functionality.

We therefore provisionally find that while Amazon in principle offers

functionality to sell M2M blinds, there are several factors that in practice

limit the attractiveness of Amazon for both buyers and sellers.

In line with the above, the Parties’ customers do not appear to see eBay

and Amazon as close substitutes for the offering of the Parties. In

particular, the BDRC Survey shows that only 1% of respondents for

Blinds2Go and 3% of respondents for 247 would divert to eBay if the

respective Party was no longer selling blinds. For Amazon, the percentage

is 4% for both Blinds2Go and 247.

Similarly, comments from third parties indicate that online M2M blind

retailers do not tend to see selling through eBay or Amazon as a substitute

for selling through their own website, highlighting a number of limitations

with these marketplaces:

(a) Two retailers of M2M blinds (Blinds4UK and Dunelm) pointed to high

costs of selling on Amazon and eBay. For example, Blinds4UK told us

that the marketplaces take a big cut from sellers and Dunelm told us that it

considers that Amazon charges a high commission rate.

(b) MakeMyBlinds, an online M2M blind retailer that used to sell on eBay and

Amazon, told us that one of the reasons for ceasing to sell on these

platforms was their refunding policies. The same retailer told us that it

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does not see Amazon or eBay as useful long-term engagements,

although it did consider eBay and Amazon useful to ‘get started’, to

initially generate some extra volume and to gain experience of the

industry. It also told us that one advantage of selling on eBay as a new

entrant to the market was that it was able to use eBay as a testbed, as

poor reviews wouldn’t affect its Trustpilot score.

not successful because customers tried to make an excuse not to pay.

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It further told us that it would rather keep Amazon as only a small part of

its revenue to reduce the risk of dependency on another business and

that it currently sells only end of line products that it wants to get rid of on

Amazon.

Additionally, it told us that using platforms such as Amazon and

e-Bay means losing control over the brands,

and that it considers Amazon

as generally offering ‘cheap and cheerful’ products.

Finally, we note that the Parties do not appear to monitor the offerings on

eBay and Amazon. In particular, we are aware of only two instances where

Blinds2Go conducted some research on Amazon and eBay sales.

However, we note that these were in relation to the CMA’s investigation

into the Hillarys’ acquisition and the current CMA investigation.

Similarly, none of the other M2M blind retailers we spoke to indicated that

they are monitoring eBay or Amazon or that they consider marketplaces as

competitors:

(a) One competitor that works with Amazon and eBay considered that these

marketplace platforms mainly ‘compete with Dunelm, Argos and B&Q’.

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(b) Three retailers of M2M blinds (Blinds4UK, Dunelm, and Swift Direct

Blinds) told us that they think only a very limited amount of M2M blinds

are sold on Amazon or eBay. In particular, Blinds4UK told us that the

platforms are not big players in the market and that sellers on Amazon

and eBay sell only ready-made products. Dunelm told us that it does not

believe that there are any M2M products available on Amazon. Swift

Direct Blinds told us that Amazon and e-Bay are active in this sector but