Cineworld deal may face full probe

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Cineworld is facing a potential full competition investigation over its £47 million takeover of art house cinema chain Picturehouse amid concerns over the impact of the deal.

The Office of Fair Trading (OFT) has referred the acquisition to the Competition Commission after uncovering potential issues in five local areas that it fears could limit choice and increase prices for cinema-goers.

Cineworld's takeover of the 22-strong Picturehouse chain, which was announced last December, could substantially reduce competition in Aberdeen, Brighton, Bury St Edmunds, Cambridge and Southampton, where both brands overlap, according to the OFT.

The watchdog said initial research, including surveys of 35,000 cinema-goers, showed a sufficient number of customers see their local Cineworld as an alternative to Picturehouse, and that Cineworld "may find it profitable to raise prices after the merger".

Jackie Holland, OFT senior director and decision maker in the case, said: "Our investigation found that although Picturehouse cinemas show art house and foreign language films, a large proportion of Picturehouse's revenue comes from more mainstream films, in direct competition to Cineworld.

'We are concerned that as a result of the merger, cinema-goers in five local areas could face higher ticket prices and a significantly reduced choice of cinemas and films."

The Competition Commission is expected to report back by October 14.

The deal saw Cineworld add 22 Picturehouse cinemas and more than 60 screens to its existing network of nearly 80 cinemas, including the Cameo in Edinburgh, Picturehouse in Stratford, east London, and the Phoenix in Oxford - the chain's founding cinema, bought in 1989.

It also netted Picturehouse co-founder and managing director Lyn Goleby a multimillion-pound fortune, as she was one of the company's major shareholders. The Arts Alliance and investment firm Albion Venture Capital also held significant stakes in Picturehouse.

Cineworld said on announcing the deal that it would help it tap into ''new audiences in a high value and growing part of the market''.

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