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Press releases 2010 -

OFT refers car club merger to the Competition Commission

unlocking car door

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.

NOTES

  1. The Reference Test - The OFT has a duty to make a reference to the Competition Commission if the OFT believes that it is or may be the case that a relevant merger situation has been created; and the creation of that situation has resulted or may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
  2. Under the Enterprise Act 2002 a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million; or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced.
  3. The Competition Commission may extend the 24-week period within which it is required to publish its report by no more than eight weeks if it considers that there are special reasons why the report cannot be published within that period.
  4. The text of these decisions will be placed on this web site as soon as is reasonably practicable.



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