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Merger of electronic toy suppliers subject to UK competition investigation

The proposed merger of two suppliers of electronic gadgets for children will be the subject of an in-depth competition investigation in the UK.

The Competition and Markets Authority (CMA) confirmed its plans to investigate VTech's acquisition of LeapFrog after announcing that VTech had failed to offer undertakings to it that would address concerns it has about the impact the merger would have on competition.

VTech and LeapFrog both supply toddler electronic learning toys, child laptops/tablets and child electronic reading systems in the UK.

The CMA said in mid-August that it was concerned that a merge of the "close competitors" could "lead to a substantial lessening of competition in the market", potential price increases and reduced choice and quality of products for consumers.

As a result it invited VTech to make commitments to address its concerns. However, the regulator has now confirmed that the company did not offer any undertakings to it before its 25 August deadline. The CMA has therefore confirmed its intention to refer the merger for in-depth investigation.

A final report on the investigation is scheduled to be issued by 13 February next year. A "group of independent panel members supported by a case team of CMA staff" will be responsible for making a decision in the case.

Following the CMA's initial investigation into the deal previously, Kate Collyer, deputy chief economic adviser at the CMA and decision maker in the case, said: "VTech and LeapFrog are two of the largest and best known brands supplying electronic toys and learning products for children. Retailers see them as close rivals and rely on competition between the companies to keep prices down."

"We are concerned that the merger could lead to prices rising, the quality of products going downhill or the range on offer being reduced," she said.

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