Car dealer merger given the all-clear

Tuesday, March 27, 2007

Office of Fair Trading approves mergers
Companies forced to sell branches before merger
Lack of consumer choice was top concern

Latest News

More car dealership mergers have been given the thumbs-up by competition authorities.

The Office of Fair Trading considered referring the merger of Inchcape and European Motor Holdings to the Competition Commission for investigation, following concerns that consumer choice could be harmed were addressed.

The OFT was worried that the £263 million takeover, which creates a group with around 150 showrooms, would leave Volkswagen owners in the Welsh Marches with no alternative for servicing and repairs at franchised dealerships.

Now the OFT says it won't refer the matter on the condition that one of the company's dealerships is sold.

Vincent Smith, senior director for competition at the OFT said: 'The OFT will now further consider whether the proposed divestment is sufficient to restore competition for the servicing of new and nearly new cars.'

The past 18 months has seen major consolidation of dealerships in the UK, all of which has the potential to undermine competition and leave consumers with less choice.

While prices could be initially forced down by groups looking to increase their market share, motorists could ultimately have to pay more for cars and servicing if there are fewer companies to choose from.

The OFT, however, also considered the £450m merger between Pendragon and Reg Vardy to not threaten consumer choice in four regions of the UK as long as Pendragon sold some dealerships.