132992240.qxd

3/26/03

11:31 AM

Pagina
(Nero/Process Black pellicola)
WASHING MACHINE F1045 W F1245 W

AQUACYCLE 1000

FAST COLOUREDS NON FAST COLOUREDS WHITES + PREWASH WHITES HAND RINSES LONG SPIN

F 1045W

C D A B F G
MIXED FABRICS WOOL CARE DELICATES WORN ONCE FRESHEN UP SHORT SPIN DRAIN

H L M J N K P

ON-OFF

SPIN REDUCTION

QUICK WASH

HALF LOAD

132992240

INSTRUCTION BOOKLET

Important Safety Information
It is most important that this instruction book should be retained with the appliance for future reference. Should the appliance be sold or transferred to another owner, or should you move house and leave the appliance, always ensure that the book is supplied with the appliance in order that the new owner can get to know the functioning of the appliance and the relevant warnings. These warnings have been provided in the interest of safety. You MUST read them carefully before installing or using the appliance.

Installation

This appliance is heavy. Care should be taken when moving it. It is dangerous to alter the specifications or attempt to modify this product in any way. All packing and transit bolts must be removed before use. Serious damage can occur to the product and to property if this is not adhered to. See relevant section in instructions. Any plumbing work required to install this appliance should be carried out by a qualified plumber or competent person. Any electrical work required to install this appliance should be carried out by a qualified electrician or competent person. Care must be taken to ensure that the appliance does not stand on the electrical supply cable. If the machine is situated on a carpeted floor, please adjust the feet in order to allow air to circulate freely.

Child Safety

This appliance is designed to be operated by adults. Children should not be allowed to tamper with the controls or play with the product. Pets and children have been known to climb into washing machines. Please check your drum before use. The glass door becomes very hot during the washing cycle. Keep children away from the vicinity of the appliance whilst it is in operation. Keep all packaging well away from children. Keep all detergents in a safe place out of childrens reach.
Always unplug the appliance and turn off the water supply after use. Do not overload the appliance. See relevant section in the instruction book. Only wash fabrics which are designed to be machine washed. If in doubt, consult the care label on the clothes. Before washing, ensure that all pockets are empty and buttons and zips are fastened. Avoid washing frayed or torn articles and treat stains such as paint, ink, rust, and grass before washing. Underwired bras must NOT be machine washed. Any objects such as coins, safety pins, nails, screws, stones or any other hard, sharp material can cause extensive damage and must not be placed into the machine. Garments which have been in contact with volatile petroleum products should not be machine washed. If volatile cleaning fluids are used, care should be taken to ensure that the fluid is removed from the garment before placing in the machine. Wash small items such as socks, laces, washable belts etc in a washing bag or pillow case as it is possible for such items to slip down between the tub and the inner drum. Only use the advised quantities of fabric softener. Damage to the fabric can ensue if you over-fill. Refer to the manufacturers recommendations of quantities. As some duvets and eiderdowns should be washed in large commercial machines because of their bulk, please check with the manufacturer of the item before washing in a domestic machine. Leave the porthole door slightly ajar between washes to preserve the door seal. Under no circumstances should you attempt to repair the machine yourself. Repairs carried out by inexperienced persons may cause injury or serious malfunctioning. Contact your local Service Force Centre. Always insist on genuine Zanussi spare parts.

Contents

For the User
Important Safety Information Your New Washing Machine Description of the Appliance
Detergent dispenser drawer Child safety feature 7-10 11-14-15 16-17 18-20

For the Installer

Installation Instructions Technical Specifications
Unpacking Positioning Water inlet Water drainage Levelling Special conditions In the interest of the environment Electrical connection 23 23-25
The Control Panel Operating sequence
Washing 4.5 kg of white cotton at 95C Load the laundry Measure out the detergent Measure out the fabric softener Select the required option Select the required programme Start the machine At the end of the programme Washing 2 kg of mixed fabrics at 50C Load the laundry Measure out the detergent Measure out the fabric softener Select the required option Select the required programme Start the machine At the end of the programme

Washing Hints

Which detergent?. And in which form?
Wash Care Symbols Washing Programmes Maintenance and Cleaning
Descaling After each wash Maintenance Wash External cleaning Cleaning the dispenser drawer Cleaning the drawer recess Cleaning the pump The dangers of freezing
Something Not Working Service and Spare Parts Guarantee Conditions
Guide to use the Instruction Book
The following symbols will be found in the text to guide you throughout the instructions:
Safety instructions Hints and tips Environmental information

Your New Washing Machine

Your new washing machine meets all modern requirements for effective treatment of laundry with low water, energy and detergent consumption.
Automatic cooling of the wash water to 60C before draining, with the 95C programme. This reduces thermal shock to fabrics, helping to prevent creasing. The special wool programme with its new delicate wash system treats your woollens with extreme care. The ECO VALVE allows total use of detergent and reduces water consumption so saving energy.
In the interest of the environment

Ecological hints

To save water and energy and help protect the environment, we recommend that you follow these hints: Adjust the quantity of detergent according to the hardness of your water supply, the amount of laundry and the degree of soiling. A programme without prewash is sufficient for normally soiled laundry. The machine works more economically if it is fully loaded. With adequate pre-treatment, stains and limited soiling can be removed; the laundry can then be washed at a lower temperature, so saving energy.

Materials marked with the symbol are recyclable. Check with your local Council or Environmental Health Office to see if there are facilities in your area for re-cycling this appliance. When the appliance is to be scrapped, cut off the power supply cable and make the door lock device unusable to prevent young children from being trapped inside. Help to keep your country tidy - use authorised disposal sites for your old appliance.
How do we help to protect the environment? We use recycled paper!

Important

Your machine is fitted with a balance control de vice, which ensures the machine is stable during the spin. If the wash load appears not to have been spun sufficiently at the end of the wash cycle, because it is not evenly distributed in the drum, the balance control device may have operated. It will therefore be necessary to redistribute the wash load manually and select a spin programme. For more detailed information see the section headed "Something Not Working".
Description of the Appliance
1 Detergent dispenser drawer 2 Programme guide 3 Mains-on light 4 ON/OFF button 5 Option buttons 6 Programme selector dial 7 Door opening handle 8 Drain pump 9 Adjustable feet

F 1045 W

Detergent dispenser drawer
Prewash Main wash Fabric softener

Child safety feature

This machine incorporates a special child safety feature to prevent small children from being trapped inside the machine. To activate this device, rotate the button (without pressing it) inside the door clockwise until the groove is horizontal. If necessary use a coin. To disable this device and restore the possibility of closing the door, rotate the button anti-clockwise until the groove is vertical.

The Control Panel

PROGRAMME

Z ANUSSIQ UALITY

1 Programme guide 2 On/Off button
By depressing this button the machine starts operating. When depressed again, the machine stops.

5 QUICK WASH Button

By depressing this button on programmes A, B, C, D and H the wash time is reduced. This is suitable only for garments which are lightly soiled.

3 Mains-on light

This light illuminates when the machine starts working and goes out when the ON/OFF button is released.

6 HALF LOAD button

Select this button to reduce water consumption on the rinse cycle when washing a smaller load of cottons or linens (maximum load size = 2.25 kg).

4 Spin Reduction button

By depressing this button the spin speed is reduced as follows: cottons and linens: from 1000 rpm to 650 rpm for model F1045W and from 1200 rpm to 650 rpm for model F1245W. synthetics, delicates and wool (programme K): from 650 rpm to 450 rpm.
7 Programme selector dial
Turn the dial clockwise to select the required wash programme. Before setting the dial to any position the machine must be switched off by depressing the ON/OFF button again.

Operating Sequence

Before the first wash, we recommend that you pour 2 litres of water into the main wash compartment of the detergent drawer in order to activate the ECO valve. Then run a cotton cycle at 60C, without any laundry in the machine, to remove any manufacturing residue from the drum and tub. Pour 1/2 a measure of detergent into the dispenser drawer and start the machine. WASHING 4.5 KG OF WHITE COTTON AT 95C Suppose you have 4.5 kg of normally soiled laundry to wash. It is white cotton and is suitable for high temperature washing.
3. Measure out the fabric softener
If required, pour fabric softener into the compartment marked (the amount used must not exceed the MAX mark in the drawer). Close the drawer gently.

1. Load the laundry

Open the door by pulling the door handle outwards. Place the laundry in the drum, one item at a time, shaking them out as much as possible. Close the door.
4. Select the required option
Depress QUICK WASH button or SPIN REDUCTION if required.
2. Measure out the detergent
Pull out the dispenser drawer until it stops. Measure out the amount of detergent required and pour it into the main wash compartment. If you wish to carry out the prewash, pour detergent into the compartment marked.
5. Select the required programme
Turn the programme selector dial clockwise to the programme B or A (if you wish to perform a prewash).

P1006S

6. Start the machine
Before starting up the machine check that: the appliance is plugged in the water supply taps are turned on the drain hose is correctly and securely positioned the door and the detergent dispenser drawer are closed. Depress the ON/OFF button: the mains-on light will illuminate and the machine starts operating.

ON OFF

T0001S
7. At the end of the programme
The machine stops automatically. The door is controlled by a safety device which releases 2 minutes after the end of the programme. Switch the machine off by depressing the ON/OFF button again. The mains-on light goes out. When the programme has finished you are advised to unplug the appliance and turn off the water taps.
WASHING 2 KG OF MIXED FABRICS AT 50C Suppose you have 2 kg of Mixed fabrics to wash. They are rather delicate fabrics and should not be washed at a high temperature.
Depress the QUICK WASH or SPIN REDUCTION button if required.
Turn the programme selector dial clockwise to the programme H.

Pull out the dispenser drawer until it stops. Measure out the amount of detergent required and pour it into the main wash compartment.

M0017S

After the last rinse, the machine stops with the water left in the wash tub, to prevent the fabric from creasing. To drain the water, select programme K (short spin) or P (drain). The door is controlled by a safety device which releases 2 minutes after the end of the programme. Switch the machine off by depressing the ON/OFF button again. The mains-on light goes out. When the programme has finished you are advised to unplug the appliance and turn off the water taps.
Do NOT overload the machine. Weigh the laundry the first few times you use the appliance. The average weights of the most common items are listed below as a guide: 1000g = 1 kg Sheet Pillow case Tablecloth Serviette Tea towel Linen hand towel Towelling hand towel Towelling bath towel Bath robe Mans shirt Apron 700-1000 g 100-200 g 400-500 g 50-100 g 70-120 g 100-150 g 150-250 g 700-1000 g 1000-1500 g 200-300 g 150-200 g
For wool, use gentle detergent only in small quantities. Bleach is very corrosive; it should be used with care and kept out of reach of children. Some stains such as fruit, wine, grass, rust etc. are difficult to remove and should be treated before washing with specific products, which can be found in most household shops. In some cases it may help to soak the stain before washing with a special presoak product or biological detergent. Only wool marked Pure New Wool - washable, preshrunk can be washed in the machine using the wool programme; other types of wool should be washed by hand or dry cleaned. If you have used the machine to wash, rinse or spin only non-colour fast garments, there may be dye left in the sump. To ensure any subsequent wash is not contaminated with the dye, select and carry out a rinse and spin programme, without any garments, to ensure that any dye is removed from the sump. Once you have finished using the machine, you are advised to unplug it and turn off the water taps.
Load the laundry loosely alternating large items with small ones. Sort the laundry according to the type of fabric, colour-fastness and how dirty it is. Avoid washing unhemmed or torn items as they may unravel. Before washing, empty all pockets of small objects which may have been left inside (coins, keys, screws etc). as these could damage the drain pump. When washing curtains, remove the hooks. Close poppers and zips and fasten loose buttons. It is essential to wash new coloured items separately when washing for the first time. When washing fabrics requiring different wash temperatures together, always select the lowest temperature. White items should not be washed with coloured items. Very small items (handkerchiefs, ribbons, socks etc) should be washed in a washing bag or a pillow case. Use a good quality detergent suitable for automatic washing machines. Use the correct quantities of detergent.

11:32 AM

Which detergent?.
To ensure you obtain the best wash results from your appliance, it is important to use the right detergent in your everyday wash, and only detergents recommended for use in automatic machines. To maintain the appearance of your clothes and household textiles and to make them last longer you should use different types of detergent for different washes, whether for whites, colours or delicates.

And in which form?

Not only are there different types of detergent, but they are also available in different forms. Whether you chose a powder or liquid in traditional or compact form is your own personal choice.

TRADITIONAL POWDERS

Pour the powder directly into the dispenser drawer. Do not sprinkle powder onto clothes in the machine drum.

WHITES

We recommend the Ariel product range which is biological and designed to provide excellent cleaning and stain removal even at low temperatures.

TRADITIONAL LIQUIDS

Liquid can be placed in the main wash compartment of the detergent drawer marked with the symbol , start the machine immediately upon placing the detergent in the dispenser drawer. Alternatively the detergent is measured into the specially designed dosing device* which should be placed on top of the laundry, and at the back of the machine drum.

NON BIOLOGICAL

If you prefer to use a non biological detergent, which does not contain enzymes we recommend Fairy. Fairy provides good cleaning and stain removal.
COMPACT POWDERS AND LIQUIDS
Compact detergents (or concentrates as they are also known) are available in liquid or powder form, and generally require a smaller dosage. Follow the manufacturers instructions to ensure the most economical usage. Pour the detergent directly into the dispenser drawer, or alternatively measure the detergent into the specially designed dosing device* which should be placed on top of the laundry, and at the back of the machine drum. * If you use a dosing device in a washer dryer, please ensure the dosing device/ball is removed before carrying out a drying programme.

COLOUREDS

For coloured items you should use a detergent which is designed to clean while maintaining the original colour. Ariel Color does not contain bleach and therefore helps to preserve colours.

DELICATE ITEMS

When washing delicates such as woollens, you should use a product which is specially designed to care for fine fabrics. Dreft Automatic is suitable for woollens and other delicates.

FABRIC CONDITIONERS

These are ideal for improving softness, and also reduce static cling on synthetics and make ironing easier. They are available in two types: For example Lenor liquid fabric softener, for use in the washing machine/washer dryer. The liquid fabric softener should be poured into the compartment marked with the symbol. Follow the manufacturers dosage instructions and never exceed the MAX level. Bounce conditioning sheets for use in a tumble dryer. We recommend the conditioning sheets are pinned (using a safety pin) to an article of laundry and placed in the tumble dryer. 12

LAUNDRY BLEACH

For additional stain removal you may wish to use a product such as Ace Gentle Bleach which is used in addition to your chosen detergent. Ace is suitable for all washable fabrics including silks, woollens and coloureds.

Wash Care Symbols

Wash care labels inside garments recommend how to launder your clothes with the best results. The care labelling code is in line with care labelling used in the rest of Europe. The symbols used make it easy to select the correct programme on your washing machine.

WASHING SYMBOL

WASH ACTION
Normal (Maximum) Normal (Maximum)

FABRIC

White Cotton or Linen without Special Finishes Cotton, Linen or Viscose without Special Finishes Colourfast at 60C. Nylon, Polyester/Cotton, Viscose with Special Finishes, Cotton/Acrylic Mix. Cotton, Linen or Viscose Colourfast at 40C but not 60C. Acrylics, Acetate, Triacetate, Wool mixes, Polyester/wool blends. Wool, wool mixtures, Silks Do not machine wash

Reduced (Medium) Normal (Maximum) Reduced (Medium) Much Reduced (Minimum) Hand wash only
BLEACHING Chlorine bleach may be used IRONING Hot iron Warm iron Cool iron DRY CLEANING May be dry cleaned. Other letters and/or a bar beneath the circle will indicate the required process to the dry cleaner. TUMBLE DRYING with high heat setting with low heat setting May be tumble dried Cotton, Linen, Viscose Polyester mixtures, Wool Acrylic, Nylon, Polyester
A cross through any symbol means DO NOT fabric conditioner to avoid the conditioner entering the machine prematurely. When using liquid detergent and a prewash programme, place the detergent into the correct compartment in the dispenser drawer, after the prewash has finished. 13

Important Notes

For best results, always use the dispenser drawer for dispensing detergents and liquid additives. Once the dispenser has been filled, close it by pushing it in gently. This is particularly important if you are using

Washing Programmes

Programmes for cotton and linen
Wash programme/ Washing symbol WHITES + PREWASH Degree of soil and type of laundry Programme dial position Description Possible options Max Progr. time Load mins. Prewash at 40 C QUICK WASH Wash at 95C HALF LOAD 4.5 kg 3 rinses SPIN RED. Long spin
For heavy soiled cotton items.
White cotton, for example normally soiled work garments, sheets, household linen, underwear, towels.
Wash at 95 C 3 rinses Long spin
QUICK WASH HALF LOAD 4.5 kg SPIN RED.
Fast coloured cotton or FAST COLOUREDS linen fabrics, shirts, underwear, towels. Non fast coloured NON- FAST cotton or linen fabrics, COLOUREDS shirts, blouses, underwear. HAND RINSES Separate rinse cycle for hand washed cotton and linen items Separate spin for cotton and linen items
Wash at 60 C 3 rinses Long spin
Wash at 40 C 3 rinses Long spin

4 rinses Long spin

SPIN RED.

4.5 kg

LONG SPIN

Long spin

(*) This programme at 60C with cold water filling and a wash load of 4.5 kg is the reference programme for the Energy label according to EEC Directive 92/75. 30-40 programmes: cold water filling 50-60 programmes: hot and cold filling 95 programme: hot water filling The programme times are intended as a guide only. The actual time will vary depending on incoming water temperature and pressure. Important! Some programmes when selected may start with a short drain. This is quite normal and not a fault with the appliance. When a programme is selected, the selector dial will advance to the water filling position. E.g. Programme B is selected, there is a short drain. The appliance takes in water and the selector will appear to move to the C position. The appliance will have memorised the programme selected, in this case B, and will run the correct programme even though the selector dial appears to be at position C.

Water filling:

We recommend you not to switch the appliance off and on during its operation. This would modify the memorised programme in progress with unsatisfactory washing results. 14
Programmes for synthetics, mixed fabrics, delicates and wool
Wash programme/ Washing symbol Degree of soil and type of laundry Synthetic or mixed fabrics, underwear, coloured garments, non-shrink shirts, blouses. Lightly soiled synthetic or mixed fabrics Programme dial position Description Possible options Max Load Progr. time mins. Wash at 50 C 3 rinses Stop with water in tub Wash at 30 C 3 rinses Stop with water in tub Draining of water and short spin SPIN RED.

MIXED FABRICS

WORN ONCE

SHORT SPIN

Separate spin for hand washed delicate items Specially tested programme for wool garments bearing the Pure new wool, nonshrink, machine washable label. Delicate fabrics, for example curtains

WOOL CARE

Wash at 40 C 3 rinses Stop with water in tub Wash at 40 C 3 rinses Stop with water in tub 1 rinse, with fabric softener, if required Stop with water in tub Draining of water

DELICATES

This programme can be FRESHEN UP used for softening hand washed garments. For emptying out the last rinse water of these programmes
Important! Some programmes when selected may start with a short drain. This is quite normal and not a fault with the appliance. When a programme is selected, the selector dial will advance to the water filling position.
We recommend you not to switch the appliance off and on during its operation. This would modify the memorised programme in progress with unsatisfactory washing results.

Maintenance and Cleaning

Before any maintenance or cleaning is carried out you must DISCONNECT the appliance from the electricity supply.

Descaling

The water we use normally contains lime. It is a good idea to periodically use a water softening powder in the machine. Do this separately from any laundry washing, and according to the softening powder manufacturer's instructions. This will help to prevent the formation of lime deposits.

C0072 C0073

Cleaning the drawer recess
Having removed the drawer, use a small brush to clean the recess, ensuring that all washing powder residue is removed from the upper and lower part of the recess. Replace the drawer and run the rinse programme without any clothes in the drum.

After each wash

Leave the door open for a while. This helps to prevent mould and stagnant smells forming inside the appliance. Keeping the door open after a wash will also help to preserve the door seal.

Warning

When the appliance is in use and depending on the programme selected there can be hot water in the pump circuit. Never remove the pump cover during a wash cycle, always wait until the appliance has finished the cycle, and is empty. When replacing the pump cover, after a cleaning inspection, ensure it is securely retightened so as to stop leaks and young children being able to remove it.
Cleaning the water inlet filters
If your water is very hard or contains traces of lime deposit, the water inlet filters may become clogged. It is therefore a good idea to clean it from time to time. Turn off the water taps. Unscrew the water inlet hoses.

Something Not Working

Certain problems are due to lack of simple maintenance or oversights, which can be solved easily without calling out an engineer. Before contacting your local Service Force Centre, please carry out the checks listed below. IMPORTANT: if you call out an engineer to a fault listed below, or to repair a fault caused by incorrect use or installation, a charge will be made even if the appliance is under guarantee.

Symptom

The machine does not start

Possible causes

The door has not been closed. The plug is not properly inserted in the power socket. There is no supply at the socket The main fuse or the fuse in the plug has blown. The selector dial is not correctly positioned. The ON/OFF button has not been depressed. Ensure the water taps are open. The filters in the inlet hoses are blocked. The inlet hoses may be squashed or kinked. The door has not been closed. The end of the drain hose is too low. The end of the drain hose is submerged in water. There is no vent in the end of the drain hose. The drain hose may be squashed or kinked. The drain pump may be blocked. The drain hose extension, if fitted, is not correct. Follow the instructions for connecting to the waste. The drainage system pipes are blocked. The wash load is unbalanced: redistribute the clothes inside the drum to allow the machine to spin. A programme which ends with water in tub has been selected. Too much detergent or unsuitable detergent has been used (creates too much foam). Check whether there are any leaks from one of the inlet hose(s) fittings. It is not always easy to see this as the water runs down the hose; check to see if it is damp. The drain hose may be damaged or not securely positioned. The detergent dispenser drawer or recess is clogged. The drainage system pipes are blocked. Too little detergent or unsuitable detergent has been used. An insufficient amount of detergent leaves the laundry looking grey and causes lime scale to form. Stubborn stains have not been treated prior to washing The correct wash programme has not been selected. Too much laundry has been placed in the drum. The internal packing has not been removed. The machine is in contact with the wall or furniture. The machine is not stable and level (check diagonally). The washing load is badly distributed in the drum. Maybe there is very little laundry in the drum. 18

Mod.. Prod. No.

P0042 BD

Ser. No.

Customer Care Department
For general enquiries concerning your Zanussi Electrolux appliance or for further information on Zanussi Electrolux products, please contact our Customer Care Department by letter or telephone at the address below or visit our website at www.zanussi.co.uk Customer Care Department Zanussi Electrolux 55-77 High Street Slough Berkshire SL1 1DZ Tel 08705 727727* * calls to this number may be recorded for training purposes.

Guarantee Conditions

Standard guarantee conditions
We, Zanussi Electrolux, undertake that if, within 12 months of the date of the purchase, this ZANUSSI ELECTROLUX appliance or any part thereof is proved to be defective by reason only of faulty workmanship or materials, we will, at our option repair or replace the same FREE OF ANY CHARGE for labour, materials or carriage on condition that: The appliance has been correctly installed and used only on the electricity supply stated on the rating plate. The appliance has been used for normal domestic purposes only, and in accordance with the manufacturers instructions. The appliance has not been serviced, maintained, repaired, taken apart or tampered with, by any person not authorised by us. All service work under this guarantee must be undertaken by a Service Force Centre. Any appliance or defective part replaced shall become the Companys property. This guarantee is in addition to your statutory and other legal rights. Home visits are made between 8.30am and 5.30pm Monday to Friday. Visits may be available outside these hours in which case a premium will be charged.

Exclusions

This guarantee does not cover:
Damage or calls resulting from transportation, improper use or neglect, the replacement of any light bulbs or removable parts of glass or plastic. Costs incurred for calls to put right an appliance which is improperly installed or calls to appliances outside the United Kingdom. Appliances found to be in use within a commercial environment, plus those which are subject to rental agreements. Products of Zanussi Electrolux manufacture which are NOT marketed by Zanussi Electrolux.

Fill all the holes with the plastic plugs supplied with the instruction booklet.
Important ! You are advised to keep all the packaging for re-use in case the machine is to be transported again. If the appliance is to be moved, the precautions listed under The dangers of freezing must be carried out i.e. the residual water in the hoses must be pumped out.

Positioning

Install the machine on a flat hard floor. Make sure that air circulation around the machine is not impeded by carpets, rugs etc. Check that the machine does not touch the wall or other kitchen units. Never place cardboard, wood or similar materials under the machine to compensate for any unevenness in the floor. Your new washing machine has been designed to be permanently plumbed in to your homes water supply and drainage system. However, if this is not possible, it may be connected to suitable existing taps with the drain hose discharging into a sink. The appliance has two inlet hoses, hot and cold, with female 3/4 BSP thread connectors. If this connection is not compatible with the plumbing of the existing installation, a variety of connectors are available from good hardware stores and plumbers merchants to suit most domestic plumbing. Any alteration to your existing plumbing must be carried out by a competent person, or qualified plumber.
Remove the polystyrene block from the bottom of the machine and release the two plastic bags. Very carefully slide out the left polythene bag, removing it towards the right and then downwards.
Repeat the operation for the right polythene bag, removing it towards the left and then upwards.
Installation on a Suspended Floor
Remove the polystyrene base. Set the machine upright and unscrew the remaining rear screw. Slide out the relevant pin.
Suspended wooden floors are particularly susceptible to vibration. To help prevent vibration we recommend you place a waterproof wood panel, at least 15 mm thick under the appliance, secured to at least 2 floor beams with screws. If possible install the appliance in one of the corners of the room, where the floor is more stable.

Water inlet

The inlets on the back of the appliance are colour coded, blue for cold and red for hot. Connect the hoses to a tap with a 3/4 thread. Do not use already employed inlet hoses.

Water drainage

Before connecting up the machine to new pipework or to pipework that has not been used for some time, run off a reasonable amount of water to flush out any debris that may have collected in the pipes. For a correct functioning of the machine the drain hose must be hooked on the proper support piece situated on the top of the back side of the appliance.
Washing machines and dishwashers should be connected to the FOUL drainage system, the water will then be taken to a sewage works for treatment before being discharged safely into a river. It is essential that these appliances are not connected to the surface water drainage system as this water is discharged directly into a river or stream and may cause pollution. If you require any further advice please contact your local water authority.

Levelling

Level the washing machine by raising or lowering the feet. The feet may be tight to adjust as they incorporate a self locking nut, but the machine MUST be level and stable.

SHOWER

Any necessary adjustment can be made with a spanner. Accurate levelling prevents vibration, noise and displacement of the machine during operation. Some vibration is inevitable, especially if mounted on a wooden floor. Sprung wooden floors are particularly susceptible to vibration. For advice, consult a builder. If possible, always place the machine on a solid floor.

SINK BATH

TOILET BIDET
WASHING MACHINE RAINWATER 'RUN-OFF'

DISHWASHER

FOUL DRAIN SURFACE WATER DRAINS & SEWERS FOUL SEWERS SEWAGE TREATMENT WORKS TREATED DISCHARGE RIVER RIVER

UNTREATED DISCHARGE

Electrical connection
Any electrical work required to install this appliance should be carried out by a qualified electrician or competent person. WARNING: THIS APPLIANCE MUST BE EARTHED. The manufacturer declines any liability should this safety measure not be observed. Before switching on, make sure the electricity supply voltage is the same as that indicated on the appliances rating plate. The rating plate is located at the top of the rim of the open door.
The wire coloured brown must be connected to the terminal marked L or coloured red. Upon completion there must be no cut, or stray strands of wire present and the cord clamp must be secure over the outer sheath. WARNING: A cut off plug inserted into a 13 amp socket is a serious safety (shock) hazard. Ensure that the cut off plug is disposed of safely. Should the appliance power supply cable neeed to be replaced, this should be carried out by our Service Force Centre. Note When the appliance is installed the power supply cable must be accessible.

6.22. The parties concluded that in the absence of the merger, the outlook for customers of the GUS AMO business would have been bleak. GUS had specifically declined to invest in the maintenance and development of the business. No other investor had shown interest in doing so, and given the unattractive economics of this declining market segment, the commercial reasons for this attitude were easy to understand. 6.23. The interests of AMO users were best served by an owner committed to the business. Under such ownership, AMO would be sustained for longer, efforts would continue to attract customers to more attractive home shopping formats, and prices and service quality would become more competitive. But under an owner whose objectives were directed towards exit or wind-down, consumers faced the prospect of losing access to AMO altogether, and would in the meantime have been customers of a business which had no strong incentive to maintain their long-term goodwill. 6.24. It was in the interests of home shopping customers, the owners of existing home shopping assets, and the people who worked in these businesses, as well as to the benefit of competition in retailing as a whole, that a new and more dynamic home shopping business should emerge from an industry that had been wedded for too long to an outmoded business model.
The limited relevance of the MMCs 1997 report
6.25. The parties submitted that any approach that relied on an updating of the 1997 MMC report risked using inappropriate views and conclusions. The market today was very different from that found to exist in 1997. In 1997, the MMC was looking at a mature but broadly static AMO sector. In contrast, over the four-year period 1998 to 2002, the AMO sector had declined by nearly 24 per cent, with the rate of decline accelerating over 2003 to date. This represented a fundamentally different market environment from that examined by the MMC in 1997. 6.26. In 1997, the MMC had relied on the fact that there was no decline in AMO as indicating that it was not part of the same market as direct home shopping. In 1996, the year relied on by the MMC, AMO accounted for 56 per cent and DMO accounted for 44 per cent of catalogue mail-order retailing. In 2002, the situation was reversed with AMO representing 42 per cent and DMO representing 58 per cent of catalogue mail-order retailing. The OFT advice to the Secretary of State in this case had accepted that DMO placed some competitive constraint on AMO and probably a stronger constraint now than in 1997. 6.27. In 1997, the MMC thought that the high street represented some general constraint on pricing but not a tight constraint. Over recent years, high street retailing had grown at the same time as AMO had declined. In fashion and footwear, the greatest growth had been in the supermarket multiples such as Tesco and Asda and the value retailers such as Matalan, Primark and Peacocks. There was now clear evidence of the direct and tight pricing constraint thereby imposed. The same was true of high street competition, including from catalogue retailers such as Argos, in the home and leisure sector. 6.28. Even in 1997, the MMC had concluded that credit considerations were not enough to identify AMO as a separate market. That held all the more true today given the greatly increased availability of consumer credit in its various formscredit cards, store and budget cards, personal loans, overdrafts across the whole of the mainstream and near-prime parts of the market which represented the mail-order companies target customer base; for example, Experian analysis showed that 66 per cent of GUS customers had a credit card. If credit availability had ever been a distinguishing feature of AMO, it now no longer was. 6.29. The impact of these changes on the profitability of the GUS home shopping business, which was dominated by its AMO business, had been dramatic. From a position where GUS home shopping made profits of 120 million in 1996/97, it had declined to a position of reported profits of only some 22 million in 2002/03. Senior GUS management had themselves concluded that the business faced declining volumes, declining average prices and a very large fixed cost infrastructure; sales would continue to decline and a marginally profitable business would become irreversibly unprofitable. In fact, on the parties analysis, on a like-for-like basis, reversing release of provisions and other accounting treatments, the GUS home shopping business was in loss over 2002/03. The adverse trend in the Littlewoods home shopping business was similar, if less dramatic. 157

6.30. A further concern was that the 1997 report was in several key respects constructed on a misapprehension of the facts, and thus badly flawed. The MMC had underestimated the number of agents who were personal shoppers and had greatly overestimated the value of sales per customer accounted for by true or proactive agents. 6.31. The parties submitted that, given these issues, the approach of the OFT to the 1997 report had much to commend it. The OFT had said in its advice to the Secretary of State: The AMO sector has changed since 1997 and while we have had due regard to the 1997 report, we have not rooted our analysis in it. The approach we have taken has been to analyse the competition effects of the merger from the current position of the sector, having due regard to trends over time.
The role of the CC and the burden of proof
6.32. The parties submitted that the OFT, in assessing the possibility of a substantial lessening of competition or its equivalent of a public interest detriment under the Act, applied a lesser standard than was required of the CC. 6.33. In its advice to the Secretary of State, the OFT was meticulous in identifying the standard applied. Thus the OFT had talked in terms of a significant prospect that the constraint from DMO is not sufficiently strong to constrain the competitive behaviour of AMO, although further investigation may show that it is. The significant prospect test had been applied again in relation to competition from the high street and overall; and in relation to competition in third party B2C deliveries. 6.34. The standard to be applied by the CC, as the review body, was significantly higher; under section 84 of the Act, the test was whether the merger may be expected to operate against the public interest. This had been explained in the MMCs Berisford and British Sugar report1 as being a test in which the evidence was such as to constitute an expectation that the merger would operate against the public interest. The parties noted that the expectation test was also included in the Enterprise Act merger provisions.

by ARG Finance was reviewed. It was concluded that the fix option, which would have involved the investment programme prepared by Accenture, was not viable. Accordingly, GUSs senior management decided to explore the alternatives in the home shopping business. The options were, as they had been in 1999, either to sell or close the business. The acquisition of Littlewoods by the Barclay brothers was seen possibly to open the way to further consolidation in the sector. 6.43. In reviewing the options, the clear need was to maximize GUSs shareholder value while protecting the remaining ARG businesses which were, to a greater or lesser extent, dependent on the infrastructure of GUS home shopping. The remaining ARG businesses included, notably, the Argos retail catalogue stores. 6.44. GUS had over 2002 made it clear that it would consider offers for its home shopping business, including Reality, as this was trailed in trading statements and analyst briefings. However, the business was always going to be difficult to sell, with a limited number of potential buyers. Nonetheless, it was decided to explore the industry consolidation option, and then if that did not materialize, other options. The options for sale that were explored included sale (a) to private equity, (b) to a UK retailing group, (c) to a non-UK home shopping group and (d) to a UK home shopping company. However, for different reasons, neither option (b) or (c) was seen as realistic. 6.45. As regards private equity, GUS received several unsolicited offers from private equity players which, following initial discussions, were not pursued by any of them. In particular, in the third quarter of 2002 discussions were held with a consortium of interested parties considering a leveraged buyout. These were abortive. 6.46. Information packs relating to the GUS home shopping business were prepared for possible purchasers who might wish to consider the consolidation opportunities. Given the internal issues facing Pinault-Printemps-Redoute SA and Otto Versand, both of which had UK AMO businesses, GUS believed it would be unlikely that they would be interested in purchasing the business, and no expression of interest was received from them. 6.47. In addition to March, another trade bidder expressed an interest. But the March initial offer was much higher and the trade bidder did not revise the indicative offer. No substantial negotiations took place with the trade bidder. Instead, GUS entered into negotiations exclusively with March, which culminated in a sale at an agreed price of 590 million. The sale to March was viewed by GUS management as not only maximizing shareholder value, but also offering GUS home shopping customers and employees the best chance of continuing to engage with a going concern. There would be rationalization opportunities to help stabilize the combined business and provide job security. GUS therefore believed that it was in the best interests of customers, employees and shareholders to sell the business as agreed to March. 6.48. In seeking to maximize shareholder value, the alternative to sale was to wind down the GUS home shopping business. GUSs evaluation was that an orderly wind-down of the business could be obtained over a period of two to three years. The current debtor book was over [ ] million and the parties had been told by GUS that it believed that, allowing for winding-up costs, administrative costs and likely bad debts, it would be able to collect between 640 million and 780 million in cash over a two- to three-year period. This option was not without risks. However, in reviewing the sale options, this was the benchmark valuation against which all other options were compared. 6.49. GUS made a copy of its wind-down calculations available to the parties. The wind-down value was that which GUS used in its negotiations to secure the most favourable price with March. GUS had had previous experience in winding down a business to collect the receivables. GUS told March that the decision to wind down the home shopping business would have been very similar to the decision made in 2000 to wind down the motor vehicle financing operation, GGF. This wind-down had been initiated in August 2000 following an auction of the business conducted during the preceding six months. The offers received at the end of the auction had not been attractive. 6.50. The GUS board had decided during the period of negotiations that if it proved not to be possible to sell the home shopping business in excess of a threshold price, the intention would be to reconsider the wind-down option. Conversely, the plan to stabilize profits in the business and try to grow sales through the launch of DMO catalogues was no longer considered by management to be a more viable option than the alternatives. 160

6.68. The parties said that in this case, there was some very clear evidence of changes in market structure. Over recent years, there had not been a dramatic change in the socio-economic composition of the adult UK population. Also, average household disposable income and non-food retail expenditure had increased. Yet at the same time, AMO sales had plummeted. Between 1996 and 2002, average household disposable income had grown by 35.22 per cent; non-food retail spending had grown by 32 per cent; total spending in the home shopping catalogue market had grown by 28.7 per cent; consumer credit had grown by 43 per cent; and AMO sales had declined by 22 per cent, as illustrated by Figure 6.1. That change, a 22 per cent drop in AMO over the period 1996 to 2002, and also a decline of 24 per cent since its peak in 1998, clearly suggested, at a broad, intuitive level, that the AMO proposition was under intense competitive pressure from alternative sources.

FIGURE 6.1

The scale of the problem

% change % change 20 30

Growth in average household disposable income 35.22 Growth in non-food retail spending 32 Total spending in home shopping catalogue market 28.7 Growth in consumer credit (over the last 4 years) 43 Decline in agency sales

% change 19962002

Agents
6.69. The parties said that AMO was about personal shopping. The numbers of agents had declined rapidly over recent years, as had the numbers of customers of those agents. In 1996, the total number of AMO users was 20,936, 000; in 2002, the total was 13,601,000. The average number of customers per agent, including the agent, had been 2.8 in 1996 and had come down to 2.4 in 2002. 6.70. At the same time as overall numbers had declined, the nature of the role played by the agent had changed. Increasingly, the agent had ceased to be an entrepreneur, placing orders on behalf of an arms length customer, but instead had become a personal shopper buying on behalf of herself and her family. There had been a decline in the number of true agents, that is, agents who, in addition to personal shopping, placed orders on behalf of paying third parties. There had been a corresponding decline in sales to true agents, such that today the vast bulk of AMO business was about personal shopping. 6.71. At the time of the MMCs 1997 report, the potential significance of the distinction between a personal shopping agent and a true or proactive agent was recognized. But the MMC had made errors which had resulted in a wholly distorted picture being presented, even at that time. In analysing the data and, in paragraphs 4.38 to 4.45 of the 1997 report, making various hypothetical calculations, the MMC made three errors. First, it underestimated the number of agents who were personal shoppers only for themselves and their families, and thus correspondingly overstated the number of true or proactive agents. Second, the MMC ignored the fact that even proactive agents were personal shoppers who purchased for themselves and their families. Third, the MMC greatly overestimated the value of sales per customer accounted for by true or proactive agents. 6.72. The MMC had correctly used GfK 1996 data in estimating the number of agents and of their customers. However, it did not utilize all the data that was available from GfK. In consequence, the MMC did not use available GfK data allowing a distinction between customers within the household and customers outside the household. This resulted in a substantial overestimate of the number of so-called traditional agents. The MMC had made assumptions about how many customers a personal shopper would typically shop for, using an upper bound of one customer and a lower bound of two customers. In other words, any agent shopping for more than one or two customers was defined as a traditional agent irrespective of whether those customers were inside or outside the household. A customer was classed as a traditional agent as soon as she bought shoes for her oldest child and a dressing gown for her husband. That could not be right; purchases for members of the household were almost certainly personal shopping. No account was taken by the MMC of the fact that agents also personally shop for people 164

6.76. The parties gave more detail about these two assumptions. On the first assumption, it was uncontroversial that purchases within the household were likely to be personal shopping. The assumption therefore related to the level of personal shopping for customers outside the household. GfK data showed that agents with only one customer outside the home were predominantly buying for other family members. Even proactive agents, which the assumption related to true agents, would to a large extent be purchasing on behalf of other family members. Only a small proportion of customers of proactive agents were AMO customers in the traditional sense. GfK data for October 2002 showed that 68 per cent of proactive agents customers were members of their household or family; 19 per cent were friends; 10 per cent were neighbours; and 3 per cent were colleagues at work or other people.
6.77. On the second assumption, the parties said that the assumption that proactive agents spend the same on themselves and their family as agents with no external customers should not be controversial. GfK data did not show how much proactive agents spent on themselves. But there was nothing to suggest they spent less; on the contrary, the way that commission was paidnamely, 12.5 per cent when spent on goods and only 10 per cent if taken in cashincentivized agents to spend more on themselves and their families.
6.78. The parties provided a table comparing the results of the flawed 1997 MMC analysis with GfK data as analysed by Littlewoods. This is set out below. 165
TABLE 6.1 Comparison of GfK data with 1997 MMC report per cent MMC report (midpoint estimate) Number of agents Personal shoppers Traditional agents Proportion of spend Personal shoppers Traditional agents Personal shopping by agent Sales to end-customers Source: The parties. GfK data GfK data 12 14
6.79. The parties submitted that a number of key points should be noted. The MMCs flawed methodology had led it to overestimate the number of traditional agents at 33 per cent, rather than 18 per cent, and worse, spend by traditional users at 70 to 75 per cent rather than 23 per cent. The proportion of traditional users had fallen since 1996. Only 12 per cent of agents in 2002 were proactive or traditional customers, a fall from 18 per cent in 1996. The proportion of spend by traditional agents had also fallen markedly since 1996. Sales to traditional agents and their customers accounted for only 14 per cent of AMO spend in 2002, a fall from 23 per cent in 1996. 6.80. Three key consequences flowed from an understanding that AMO was overwhelmingly a form of personal shopping. The first concerned credit. Agents were rigorously credit-screened using creditindustry standard techniques before and during their agency relationship. They were creditworthy. Access to credit not otherwise accessible by the agent was not a distinguishing feature of the AMO proposition. AMO targeted mainstream and near-prime customers, not sub-prime customers; there was no point in recruiting agents who would default. The second consequence concerned the bundled package. AMOs selling proposition today was simply that it offered agents a bundled package which included home delivery and free credit. But agents understood the bundled package and they were aware that they could get all the components of the bundled offer from other home shopping formats or on the high street, namely the same goods, similar credit and home delivery. Indeed, for the vast majority of agents, spend on AMO was only a small part of their overall total non-food shopping basket. The third consequence concerned the channel of distribution. The ability and willingness of agents to shop elsewhere both constrained the price of AMO and drove the shape of the AMO offer. Verdict in its most recent newsletter had stated that ultimately mail order was a primary channel of distribution rather than a market in its own right. 6.81. We put it to the parties that data gathered from survey evidence and submissions showed that there was a very significant variability in the amount spent by AMO users. In particular, the NOP survey (see Appendix 4.1) showed that 20 per cent of AMO users accounted for 67 per cent of agency revenue. The parties commented that the same was true of DMO; 20 per cent of users accounted for 70 per cent of revenue; and that the NOP report acknowledged that this was typical of many markets with a small proportion of respondents responsible for a relatively large share of expenditure. Moreover, the NOP survey indicated that the socio-demographic profile of these highest-spending customers was very small to the general profile of all AMO users and there was no evidence to suggest that this group was in any way constrained in its shopping patterns. 6.82. We put it to the parties that the incentives that firms had to increase price were determined by the amount of revenue that would be lost following a price increase, and for this reason it was important to gather detailed information about matters such as price sensitivity and credit constraints about those consumers who accounted for the higher proportion of revenue. The parties said that they had provided a number of natural experiments showing dramatic falls in sales where AMO prices were out of line with the high street. The NOP report had suggested that if AMO catalogue prices were to go up 5 per cent, 67 per cent of AMO users would actively resist this price increase. The parties estimated that this would account for around 60 per cent of sales. Littlewoods and GUS home shopping already priced their AMO products against the high street. AMO prices would have to come down further if the decline in AMO sales were to be reversed. The parties concluded by saying that the incentives that firms had to increase price were determined by the aggregate amount of revenue that would be lost following a price increase. 166

Ibid, page 40.

prime part of the market. AMO companies were not soft sources of credit; their credit-screening procedures were extremely rigorous and relied, like other credit providers, on the databases of credit reference agencies such as Experian and Equifax. The rejection rate for GUS mail order was 57 per cent. Littlewoods targeted more creditworthy potential AMO recruits (undertaking pre-vetting exercises before sending potential recruits a catalogue) but even its aggregate rejection rate was nearly 34 per cent. Evidence available to Littlewoods was that its AMO customers would also qualify for alternative sources of credit; 95 per cent of its current active agents would be entitled to DMO credit from Littlewoods, and some 75 per cent would be eligible for Littlewoods Personal Finance Visa card provided through a joint venture with Barclaycard. Furthermore, the majority of AMO customers also had a credit card. 6.132. The analysis in paragraph 6.131 was necessarily concerned with those customers who were agents. However, the benefit of credit access for agents automatically accrued to all their personal shopping customers, that is, their family. Sales to true third party customers of agents, that is subcustomers, were estimated by Littlewoods to account for no more than 14 per cent of all AMO customers in 2002, down from 23 per cent in 1996. A postcode analysis undertaken by Littlewoods during the OFT investigation suggested that only some 20 per cent of the residents at non-agent addresses would fail the Littlewoods pre-vetting procedures for opening an account. These procedures were a good predictor of whether Littlewoods would ultimately extend credit. 6.133. The second concern of the OFT was that switching from AMO might not be an option for credit-constrained customers. The parties submitted that this concern did not withstand scrutiny. It should not be assumed that other sources of credit were not available to AMO customers; TGI1 estimated that credit card penetration for customers of the main AMO companies in 2002 ranged from 54 to 66 per cent, which was comparable to the TGI estimate for the UK population as a whole at 57 per cent. It should also be noted that an analysis by Experian found that 66 per cent of GUS mail-order customers also had a credit card (see paragraph 6.28), whilst 81 per cent of applicants for GUS mail-order credit had access to other forms of credit in the same household. 6.134. No constraint on switching was apparent. AMO sales were down by 24 per cent over four years, whilst corresponding sales through other trade channels had increased. That pattern of substitution indicated that either consumers were using alternative sources of credit to pay for those purchases, or they were not using credit at all and instead paying cash. Either way, AMO credit had not proved a constraint on their changed shopping habits. 6.135. There were no grounds for any belief that the majority of currently retained AMO customers might not equally change their shopping habits in the future. The OFT had suggested that only 22 per cent of mail-order catalogue users did not have access to alternative credit. If there was a residual group which was credit-constrained, Littlewoods and GUS home shopping were in no position to identify them as a group or to discriminate against them; the mail-order companies competitive behaviour must be determined having regard to the great majority of customers who did have alternative sources of credit or were prepared to change their shopping patterns. 6.136. The OFTs third concern was about the disinclination of mail-order customers to use credit card credit. The OFT had referred in its advice to the fact that only 31 per cent of mail-order users owed money on a credit card. The significance of this was not immediately apparent. It was not clear that the 31 per cent figure was out of line with that for the population as a whole. TGI suggested that credit card penetration across the population as a whole was some 57 per cent. The proportion of credit card users who did not always pay off their card in full was somewhere around 50 to 55 per cent. Combining those two percentages would produce a figure of around 28 to 31 per cent of the total population who did not always pay off their card in full. 6.137. Those customers who did not have outstanding card credit might in any event be using alternative sources of credit or simply be managing their credit card exposure by paying off their card before credit charges were incurred. All AMO customers had decided to take credit in the form of a bundled AMO price. In opting for AMO, the customer had thereby reduced the need for alternative credit sources; so a marginally lower percentage of AMO customers might be expected to have outstanding card credit than for the population as a whole.

TABLE 6.4 AMO customer analysis in 1996 and Customers of agents 13,536 7,901 41.6 Total agents and customers, ie all AMO users 20,936 13,601 35.0
Agents % change 7,400 5,700 23.0

Source: GfK.

6.150. One reason for the decline in agent numbers was more focused recruitment. The parties said that agents would in the future only be recruited when the scoring techniques used suggested that their future spend would cover the costs of recruitment. 179
6.151. It appeared that an argument was being put by third parties to the effect that credit was not an important part of DMO, in contrast to AMO. The parties said that any distinction was not correct. Most of the larger, well-established DMO catalogues did contain credit offerings, although within the direct sector, a number of more recently launched products did not. There was no evidence to support the suggested dramatic decline in DMO customer usage of credit. According to GfK, the proportion of DMO customers who used instalment cash/cheque/debit or instalment credit card had been 32 per cent in the spring/summer season 1996, and this had fallen only marginally to 29 per cent by the spring/summer season 2003. However, at individual DMO catalogue level, credit usage was much higher than 29 per cent. For example, the proportion of Fashion World customers using credit in spring/summer 2003 was 68 per cent, and the proportion of N Brown customers using credit was 42 per cent, according to GfK, March 2003. The parties gave other examples also. 6.152. In response to a suggestion that AMO operators, in contrast with DMO, appeared to be expanding their credit offerings, the parties said that they were aware of no evidence to suggest that AMO operators had reduced the monetary thresholds for interest-free terms. As for buy now, pay later campaigns, these were periodically run by some AMO companies to respond to similar campaigns mounted by high street retailers. 6.153. In response to the argument that customers of DMO catalogues tended to come from higher SEGs, the parties pointed out that 50 per cent of DMO customers came from the C2, D and E socioeconomic groups (see Table 6.3). It could not be concluded that DMO and AMO catalogues were not in competition, by reason of appealing to different SEG profiles; the overlap was much too extensive for that. This was supported by the CCs own NOP survey. 6.154. It was appropriate to distinguish, as did GfK, between proactive agents who had two or more customers outside the household and personal shoppers. This was because many sales even outside the household were to family members. Proactive agents accounted for only 12 per cent of the total. But even looking at the household/non-household split, 75 per cent of all agents shopped only for themselves and members of their household; so only 25 per cent of agents had sub-customers outside the household. This was supported by the NOP survey (see Appendix 4.1). 6.155. The parties provided details of AMO spend in 1997 and 2002, as shown in Table 6.5.

6.165. The parties summed up by saying that the principal competitive constraint on the merged entity would come from the high street and alternative home shopping channels. The precipitous decline of the AMO sector had made intra-AMO competition at best an irrelevance and at worst a damaging distraction, akin to rearranging the chairs on the deck of the Titanic. Further, the CCs concern should be with the protection of competition, not of competitors. In so far as Otto and La Redoute were concerned, they too must face up to the competitive challenges of the high street and other home shopping formats. In doing so, they would enjoy the benefit of the financial strength and international spread of operations of the groups to which they respectively belonged.
Comments on the submission by Professor Elaine Kempson
6.166. We sent the parties the submission by Professor Elaine Kempson, summarized in paragraphs 7.200 to 7.208. The parties made the following comments. 6.167. The parties said that the evidence of Professor Kempson represented only a small proportion of the available data on credit use in the UK. The parties indicated other credit studies. They said that the sample sizes underlying Professor Kempsons data were significantly smaller than the sample sizes of other data on credit use in the UK. In a number of key respects, the findings from the Kempson survey were at odds with the evidence from larger datasets. The parties said that Professor Kempson had relied on a number of qualitative studies. These studies considered the use of credit by various disadvantaged groups, such as users of pawnbrokers, moneylenders and the Social Fund. The parties said that the findings from these studies were not relevant to the issues raised by the inquiry because these disadvantaged groups were not in any way representative of AMO users as a whole. This was evident from the results of the NOP survey which showed that use of these types of sub-prime credit among AMO users was extremely limited (see paragraph 6.162). 6.168. The parties also gave further information about AMO users, and stated that low-income families were not disproportionately represented across the AMO customer base. AMO customers had a variety of other credit options to choose from, as credit providers continued to target the mainstream and near-prime sectors of the population comprising the agency target group. 6.169. The parties comments on the Kempson research are reproduced in Appendix 6.1. They also drew our attention to the Families and Children Survey. See Appendix 6.2.

Comments on the NOP survey
6.170. The parties commented on the NOP survey (see Appendix 4.1). 6.171. In summary, the parties believed that the NOP report provided an effective overview as to the current structure and role of AMO in the UK retail marketplace. The parties provided detailed comments on the NOP findings. 6.172. The parties said that the results of the NOP survey provided strong and incontrovertible evidence to support the assertion by leading industry commentators that AMO was now essentially all about personal shopping. From the report, it could be calculated that the agent and her family at home accounted for 77 per cent of total AMO users; that the agent and her wider family accounted for 91 per cent of total AMO users; and that AMO customers who were not related to the agent accounted for only 7 per cent of total AMO users. 6.173. Those numbers endorsed the results of the GfK survey, which showed that in October 2002, the agent and her family at home accounted for 78 per cent of total AMO users; the agent and her wider family accounted for 91 per cent of total AMO users; and AMO customers not related to the agent accounted for only 9 per cent of total AMO users. Traditional AMO customers therefore accounted for a very small proportion of all AMO users. Agents and their customers were essentially personal shoppers, who made use of an AMO catalogue as part of their overall shopping repertoire. 6.174. Whilst the profile of AMO users was slightly skewed to the DE SEGs, this largely reflected the fact that the AMO product offer was less appealing to the AB SEGs and so they tended to use it less.
The NOP report confirmed that by far the principal driver of AMO usage was the convenience of home shopping and delivery, not credit, and this was true across all household income bands. Customers used the agency format because they had a preference for it, not because they were in any way constrained. The NOP report found that 90 per cent of AMO catalogue users had no persistent financial difficulties. 6.175. The income profile of agents was similar to the national average. A relatively small proportion of agents (20 per cent) accounted for a relatively large proportion of AMO sales (67 per cent). However, this was also true for DMO catalogue users, and NOP acknowledged that it was also true for all retailers in general. Such statistics could not be interpreted to suggest that these customers were in some way constrained or wedded to the agency format. The NOP report showed that these customers were keen shoppers, making active use of the high street and the Internet. They just liked shopping. They were not distinctive in demographic terms and bought similar products for similar reasons to other groups. The spend profile of AMO users appeared to be broadly consistent across all income groups. 6.176. As regards substitution of home shopping and the high street, the NOP report illustrated that AMO users would actively resist any attempt to raise prices in the industry by switching to DMO, to the high street or by reducing spend. In total, 67 per cent of AMO users would switch following a 5 per cent price increase. These accounted for 59 per cent of spend. This answer had been obtained notwithstanding that the question had been framed in a way omitting to prompt high street as an alternative to paying higher prices. Similar statistics were apparent across SEGs and all bands of household income. This demonstrated that AMO users found the high street and DMO to be a real substitute for AMO, and such levels of substitution would make any attempt to raise prices in the industry uneconomic. 6.177. The parties added that because of the design and structuring of the questionnaire, it was difficult to derive meaningful conclusions about a number of issues, in particular the frequency of customer price comparisons between different home shopping catalogues and between home shopping and the high street; the access and usage of alternative sources of credit; and the importance of weekly payments for sub-customers of agents.

6.185. The parties submitted that there was no such thing as a standard B2C delivery service. Instead, there was a pick-and-mix process leading to differentiated products which consisted of a number of discrete service elements put together by B2C operators in different combinations, including subcontracting, so as to meet the particular service requirements specified by the customer. That led to the conclusion that the market was best viewed as being a single B2C market populated by a number of differentiated service offerings. 6.186. The B2C delivery service represented a combination of discrete service elements put together as a package for the customer. Among the service elements were the scope of geographic coveragethe service might involve delivery nationwide, regionally or locally. With regard to delivery location, issues might arise in relation to the readiness to deliver to particular locations such as remote households, areas with difficult vehicle access, and sink housing estates. The weights, sizes and convenience of handling parcels were also relevant. Business Express had estimated that [ ] per cent of home shopping traffic was between 300 g and 2 kg; [ ] per cent was between 2 kg and 10 kg; [ ] per cent was between 10 kg and 15 kg; and [ ] per cent was between 15 kg and 25 kg. The period for delivery varied, as did special services offered. 6.187. The parties said that B2C carriers combined the service elements in different ways to provide a delivery product. They gave illustrative examples. With regard to geographic coverage, there was always a choice between providing the geographic coverage or subcontracting to a third party. Many B2C companies, including Business Express and Reality, had outsourced deliveries in Northern Ireland to Famac. Both Business Express and Reality outsourced deliveries in remote geographic areas to local specialists, and as volumes declined this process was likely to be extended and Business Express would shrink its network still further. Mail-order companies with their own in-house or primary distribution capability might still outsource some of the geographic coverage; for example, Next and N Brown used Business Express, and Redcats and Otto used Reality, for parcels which they could not deliver through their own delivery businesses. N Browns delivery service, Zendor, took the process further and effectively operated as a virtual B2C delivery company, outsourcing many of its deliveries to a multiplicity of service providers chosen on location, price, convenience and so on. 6.188. Different B2C delivery companies had different strengths and abilities to handle traffic of different types. As an estimated 65 per cent of all mail-order deliveries were under 2 kg, Royal Mail, with its nationwide delivery network to support its USO for letters, had obvious strengths and attractions. Lightweight parcels, for example up to 3.5 kg in the case of Reality, might be well suited for delivery by courier networks, that is, independently contracted drivers with their own cars, especially in areas of high delivery density. Networks with an extensive courier element were operated by Parcelnet, N Brown, Redcats and Reality. Larger or heavier parcels were more suited for van-based delivery, of the type provided by Parcelforce, Business Express and the B2B-based operators. 6.189. As to the period for delivery, most B2C carriers offered a choice of delivery periods, at varying rates, but might have a particular emphasis on a given delivery period, which was sometimes affected by the network configuration. As to special services and service levels, B2C operators might choose to offer a particular service as standard, for example proof of delivery, or it might be offered as a bespoke service for a particular customer, for example for delivering mobile phones. Frequently, service standards were agreed and monitored in the context of service level percentage targets which were contractually agreed. As to returns, these could be and frequently were dealt with by the customer taking the parcel to the post office and returning it via Post Office Counters and Royal Mail/Parcelforce. 6.190. The customers of B2C operators had greatly different requirements and attached different values to particular elements of the service. For some, price was more important than the standard of the service; for those selling high-value items, emphasis might be placed on security measures, track-andtrace facilities and on proof of delivery; for those selling flowers, speed of delivery was the critical issue. Many customers split their traffic so as to obtain the optimal configuration of B2C services to meet their own requirements. The split could be with reference to weight, for example using Royal Mail for packages up to 2 kg and Parcelforce or another carrier for heavier traffic; or with reference to geographic area or delivery location, for example the outsourcing of more expensive traffic by companies such as Next, N Brown and Redcats; or with reference to the period for delivery, for example by giving urgent traffic to carriers who promised time-banded or next-day delivery, and the remainder to another carrier. 6.191. The parties submitted that there was no budget B2C delivery market. It would be wrong to conclude that Business Express and Reality competed in some budget B2C delivery market in which they 185

6.226. In order to achieve synergies and derive financial benefit, ShopDirect had to be owned by an existing home shopping company. The other AMO operators had not shown any of the necessary desire or willingness and commitment to investing in and reinvigorating the agency model. There were significant doubts about Pinault-Printemps-Redoute SAs financial position. Similarly, the Grattans/ Freemans business had been a financial drain on Otto for a number of years. In any event, if the primary concern with the merger was the issue of market share, then the same concerns would apply to a combination of ShopDirect and either of Pinault-Printemps-Redoute or Otto. 6.227. The Barclay family could not afford to let AMO fail. The overseas competitors of Otto and Pinault-Printemps-Redoute SA had substantially larger businesses in their home countries and would be less committed to supporting poorly-performing businesses in the UK. 6.228. There had been no other genuine expressions of serious interest in the purchase of the GUS business. Expressions of interest were not credible without due diligence and financial understanding. It was therefore entirely possible, indeed probable, that, if the merger were prohibited, the company might ultimately simply be wound down or put into receivership, with the customer base disappearing to the high street. 6.229. Conversely, if the merger were cleared, the available merger benefits arising from the synergies of both mail-order companies, which were in many ways unique, would provide the opportunity to put investment back into the business which it desperately required. This investment would take the form of employment, investment in systems, in the products, in the catalogues, and, most importantly, in reducing the prices available to the customers. It was only through this action that the home shopping business, as currently constituted, had a future in the UK retail market environment. 6.230. In conclusion, Aidan Barclay suggested in his letter that if there were concerns about a minority that needed protection, their interests were best served by a merger. Alternatively, to block the merger, the CC would have to believe that the company had a viable option elsewhere; however, the evidence suggested that this was not the case.

Hypothetical remedies

6.231. The parties made observations on hypothetical remedies contained in the CCs Remedies Letter of 18 November 2003.

Home shopping

6.232. The parties indicated that they did not regard any of the four structural remedies identified in the CCs Remedies Letter in relation to home shopping as being either practicable or proportionate. Nor did they think there were satisfactory behavioural remedies. The parties commented on each in turn. 6.233. As regards the possibility of divestment of the GUS AMO home shopping business alone, the parties did not believe there existed an alternative purchaser for the GUS AMO home shopping business who would be prepared to take it on with a view to running the business over the long term, making any necessary investments for that purpose, including improving the consumer offer through lower prices; the state of the AMO home shopping business in general and GUS home shopping in particular was too dire. 6.234. The outcome would equally be unattractive for March and Littlewoods. Not only would March be asked to implement a remedy it believed would be likely to be impossible to achieve, but it would be left with a rump of DMO titles accounting for only some [ ] per cent of turnover and 100 per cent of the back-end cost base in warehousing, sortation and fulfilment, as well as many of the currently shared front-end costs in purchasing, catalogue production and so on. Without the volume represented by the AMO titles, the rump of the business was simply not viable. The closure of the infrastructure, with associated job losses, would inevitably follow, whilst the future of the DMO titles would be uncertain. 6.235. Significant merger synergies would not be achievable without the volumes represented by the GUS AMO business. Those synergies were conservatively estimated at some 58 million a year. This 191

had implications not only for the remainder of GUS home shopping but also for Littlewoods home shopping, whose medium-term prospects were also substantially affected by the need to restructure its operations. 6.236. With regard to the possible divestment of the GUS home shopping business, including both the AMO and DMO businesses, the parties said that there did not appear to be any likely acceptable purchaser. Moreover, March would be left with Reality which currently accounted for the greater proportion of the costs of the entire business, many of which were unlikely to be required by a purchaser of the home shopping business (other than perhaps on a short-term transitional basis). Littlewoods already had excess capacity in these areas. The Reality business was not viable on a stand-alone basis. Significant merger synergies would not be achievable without the volumes represented by the GUS home shopping business. 6.237. With regard to the possible divestment of all the GUS businesses acquired by March, this remedy was not practicable. There was no alternative purchaser for these businesses who would commit to the maintenance of AMO home shopping over the medium to long term. GUS had found no purchasers. Only the Barclay family with their existing Littlewoods operation had the commitment and incentive to take the GUS home shopping business on. Any sale would result in the loss of all merger synergies and would constrain Littlewoods own ability to improve its customer proposition through lower prices and improved choice and standards. 6.238. With regard to the possible divestment of particular assets of the GUS home shopping business, for example particular catalogue titles, the parties did not see this as practicable. There was no prospect of new entry into UK AMO home shopping, and existing home shopping operators would be unlikely to wish to take on one or more of the GUS AMO home shopping titles and could certainly not be obliged to agree to such a course of action. A remedy of this description would be damaging to March as it would be deprived of the volume represented by the catalogues sold, whilst being left with all the back-end costs. It would also reduce opportunities to achieve scale economies and make it much more difficult to turn around the remaining ShopDirect and Littlewoods home shopping businesses. 6.239. With regard to the possibility of alternative behavioural remedies, the parties stated that it was their case that the merger was good for home shopping customers. No behavioural remedies were appropriate.

Parcel delivery

6.240. The parties stated that it was their position that remedies in relation to third party B2C deliveries were unnecessary. A remedy involving divestiture of either Realitys home delivery activities or Business Express would be wholly disproportionate having regard to (a) the very limited extent and area of competitive concern that the CC might have identified, (b) the legitimate interest of Business Express and Reality in concentrating on servicing the needs of their in-house shopping operations and (c) the disruption to the home shopping businesses and to the achievement of merger synergies that any structural remedy would involve. Against that background, the parties made the following comments on hypothetical remedies. 6.241. With regard to the possibility of the divestment of Business Express or Reality, the parties said that any divestment would have to be accompanied by a contract for at least the medium term, say three to five years, to carry the current in-house volume carried by either Reality or Business Express. Inhouse deliveries accounted for 60 to 65 per cent of current volumes of each business and the networks would not be viable without that volume initially, and for so long as was necessary to replace it. It was intrinsically unlikely that any purchaser would replicate the errors committed previously by Parcelforce, Reality and Business Express of continuing to price at unprofitable levels, and therefore divestiture was not a means of preserving the status quo so far as pricing was concerned. Subject to those two points, it would be feasible to divest either Reality or Business Express to an existing industry participant or venture capital or private equity purchaser. Such a sale might take some months to organize and, in the case of Reality, an internal corporate reorganization to separate out the B2C delivery activity would need to be completed. 6.242. However, such a remedy would be disproportionate and highly damaging to the merger. Full value would be difficult to obtain in a forced sale. Moreover, the need to give a contract covering in192

house deliveries would bring additional detriments. The network needed to be configured to meet the requirements of the home shopping business for a low-cost and efficient delivery system; the delivery function was too integral to the home shopping activity readily to outsource. Furthermore, to achieve the synergistic benefits of the merger, worth some [ ] million a year on a conservative basis, it was necessary to have the volumes represented by the in-house delivery activity, which was large-scale and certain. These synergistic benefits needed to be obtained as rapidly possible in order to effect a turnaround of the merged business. Given the need over time to keep the core distribution activity in-house, reinvestment in new network assets would be required to replace at least some sold under divestiture of Reality or Business Express. Replacement costs would almost certainly be higher than those associated with the assets to be sold. 6.243. In the event that the CC were to require divestment of Business Express or Reality, the parties requested that the remedy be structured on an either/or basis. The decision as to which to divest would be affected by issues of saleability, separability and which of the two different cost models was more appropriate for the in-house home shopping business. There would also need to be clarity in defining exactly what was to be divested: for Business Express it could be the corporate entity, but for Reality, which currently included other aspects of fulfilment such as call centres and warehouses, it would have to be defined more narrowly, perhaps using the phrase The distribution arm of Reality, previously called White Arrow.1 6.244. As to the possibility of divestment of particular assets of Business Express or Reality, the parties said that it was difficult to see how divestment of particular assets could meet the alleged concern about the availability of a national network service for B2C parcels delivery. 6.245. As to the possibility of behavioural remedies to address possible adverse effects on users of B2C parcel delivery services, the parties said that it would be possible to devise a behavioural undertaking to address the CCs concerns; this would be more proportionate and less intrusive than any structural remedy involving divestiture. The parties put forward a proposal which was essentially an undertaking not to discriminate. To that end, they provided a commitment to establish Reality and Business Express as separate stand-alone businesses; to allocate central costs on a transparent and costreflective basis; to provide in-house services on an arms length basis; to price in such a way that there was no discrimination against third party businesses; to set third party prices in 2004 no higher than the average prices charged to respective third parties over the last three months of trading plus 15 per cent; to develop an activity-based costing model in 2004; to apply that costing model to both third party in-house pricing in 2005 to reach a price permitting full recovery of the underlying costs associated with the traffic in question, plus a margin of 15 per cent; but in the event that an activity-based costing model was not available for use in 2005, to ensure that prices would not exceed 2004 maximum charges plus 10 per cent (with the possibility of adjustment where costs associated with servicing 2005 traffic flows differed significantly from those in 2004). This could be monitored by an appropriate accounting firm.