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89/10 10 August 2010
The OFT today referred the completed acquisition by Zipcar, Inc of Streetcar Limited to the Competition Commission for further investigation.
The acquisition, which was completed in April 2010, brings together Streetcar, the largest car club in London, and Zipcar, the second largest. Since Zipcar's entry in London in 2007, it has established itself as Streetcar's main competitor through significant investment and expansion.
Car clubs differ from other forms of transport - including traditional car rental services - in many respects. Car club members pay an annual membership fee. They are able to hire cars by the hour and can pick up the vehicle from convenient residential locations, exploiting the flexibility offered by smart card technology and online and mobile booking tools.
The OFT's investigation highlighted that the merged firm would benefit from the scale of its combined network of members, cars and available parking spaces - all of which are important for successful future growth. It also indicated the difficulty of further entry and expansion in London in the next few years, to the degree necessary to replace the competitive constraint lost through the merger.
The OFT considered the extent of competition to the merged firm from car ownership, traditional car rental and other forms of transport. However, the OFT was not confident that these alternatives would prevent a combined Zipcar and Streetcar raising prices or reducing services in the future.
Amelia Fletcher, OFT Senior Director of Mergers, said:
'The car club model is a relatively recent phenomenon, but one that is expected to continue growing. The fact that the market is nascent means that it is particularly important to protect the competition that exists at this point.
'This merger will bring together the two largest and most closely competing car clubs in London, and our investigation has indicated that, notwithstanding its much smaller size, Zipcar was a particularly strong and dynamic competitor to Streetcar. Given that we have not been able to rule out competition concerns, we are referring the merger for a fuller investigation by the Competition Commission.'
The Competition Commission is expected to report by 24 January 2011.
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