In a letter to Sir John Vickers, Chairman of the Office of Fair Trading, Professor Christine Oughton, director of the centre has stated that the OFT should refer the takeover of Manchester United Plc by Red Football Ltd for investigation.
Professor Oughton claims the takeover is anti-competitive because it is expected to result in annual compound ticket price increases of around 9 per cent over the next 4-5 years (amounting to 54 per cent) that appear unrelated to increases in costs of production (wage and non-labour costs) and significantly greater than predicted inflation. These price increases will not reflect any increase in the quality of the product.
This is on top of a price increase for next season of 24 per cent that was introduced by the pre-takeover board of Manchester United in a bid to protect the club from takeover. Taken together these prices increases amount to 90 per cent (almost double over 5 years) and "seem excessive".
"Pre-takeover, the company was already maximising long run profits earning the highest profits in the industry, considerably above those of all other companies in the industry in the UK, Germany, Italy, Spain and France," Oughton said.
The Prof also believes that Glazer is exploiting United supporter's loyalty to their club, further underlining the Not for Sale coalition's stance that no customers equals no profits.
She also feels that Glazer's plans could have a knock-on effect meaning that other clubs will charge more for tickets and merchandise than they otherwise would have done before the invasion of the ginger gnome.
"U-S-A!" indeed.
"Manchester United Plc made £27m pre-tax profits in 2003-04, the next most profitable club made £11m," she added, before referring to reports that circulated in the press last week, which claimed to outline Glazer's business plan.
"The price increases built into the takeover bid reflect the predicated decline in efficiency and competition associated with the fact that the takeover is highly leveraged with interest payments under the proposed new company on bank loans of £265m and imputed rates on a further £210m and £65m of PIK debt instruments of 20 per cent and 14 per cent, respectively.
"If the reports of the business plan are correct, the new owners are planning to exploit their local monopoly power by raising prices significantly above the rate of inflation. They are also seeking to exploit the highly inelastic demand curve that they face as a result of exceptional brand loyalty that is a peculiarity of the football industry.
"The rise in ticket prices and merchandise prices may trigger similar price rises across the industry resulting in a further decline in competition and efficiency.
"Consumers will be worse off as a result of this takeover and prices will be higher than they would otherwise have been. The pre-takeover board of Manchester United Plc described these plans as 'aggressive' and refused to endorse the business proposals despite the offer price being 'fair'.
"The takeover will also turn a debt-free company into a company saddled with £540m of debt."
Recently, the OFT acted to prevent price-fixing of replica football shirts. The Chairman, John Vickers said then that "before the OFT began its investigation, it was very difficult to buy an adult short-sleeved England shirt for less than £39.99. By the time of Euro 2004, England shirts were widely available for as little as £25. That's a real saving for fans."
Commenting on this, Professor Oughton stated:
"Fans do not have to buy a shirt to watch the match but they do have to buy a ticket. Most fans are unlikely to buy more than one shirt in a season, so the OFT action, while welcome, gave fans a saving of around £15 a year.
"Having acted correctly in this case, it would be bizarre if the OFT failed to act to protect fans from next season's price increase and planned future price increases on which the Glazer bid is built. Season ticket holders are going to be worse off to the tune of hundreds of pounds."
IMUSA has urged all Reds to write to the OFT to get them to act. It's not too late, so click the link at the bottom of the page and do your bit. If nothing else you could be saving yourself a a lot of money, not least your football club.