THE EUROPEAN COMMISSION said today that the proposed merger of distributors Avnet and Horizon might break competition rules. But it was undecided. So it opened a consultation to see what the market thought.

In a statement, the Commission said: "On preliminary examination, the Commission finds that the notified transaction could fall within the scope of Regulation (EC) No 139/2004," which concerns the distortion of the European market. However, the final decision on this point is reserved."

It gave competitors 10 days to raise objections: "The Commission invites interested third parties to submit their possible observations on the proposed operation to the Commission."

Alastair Edwards, an analyst with market research firm Canalys, said the Commission had probably not been able to get its head around the implications of the deal. "I can't see why there would be an issue with Avnet buying Horizon," he said, "they're complementary."

Horizon, a €288m UK and Ireland distributor, agreed to a €100m offer from US multinational Avnet, a $15.7bn firm, in April. Both firms have been acquiring hungrily in recent years, as have their competitors, smaller specialists like Horizon being the delicacy of choice.

Pradip Somaia of Regent Associates, recently brokered the recent EU acquisitions of Centia and AKS for DNS, a division of Arrow, Avnet's closest international rival. He said the consolidation was being driven by a desire for distributors to stock up for the onset of winter by snapping up distributors with high value contracts. "Distribution rights for Citrix and VMware are like gold dust," he said. "With the credit crunch, companies are not wanting to invest in new infrastructure."

Neither Avnet nor Horizon were available for comment. µ