Completed acquisition by Lex Vehicle Leasing Limited of FCE Bank PLC’S vehicle fleet contract hire business

Affected market: Vehicle hire

No. ME/1625/04

The OFT's decision on reference under section 22(1) given on 18 May 2004

Please note that the full text of the decision can be downloaded from the link on the right . What follows are extracts regarding the parties,  jurisdiction, conclusion and recommendation.

PARTIES

Lex Vehicle Leasing Limited ('Lex') is active in the leasing of motor vehicles to commercial customers and individual consumers.  It is a 50/50 joint venture controlled by RAC plc and Halifax Bank of Scotland ('HBOS').  In addition to Lex, HBOS is also active in the supply of vehicle leasing through two other companies. It fully owns a company called Bank of Scotland Vehicle Management and has a 50/50 joint venture with RCI Banque in Renault Financial Services ('RFS'). 

FCE Bank Plc  ('FCE') is owned by the Ford Motor Company.  Under the trading name 'Business Partner', FCE leases fleets of motor vehicles to commercial customers.

The parties maintain that the transaction is difficult to characterise as a straight- forward acquisition.  The implemented agreement has been described as an 'outsourcing contract'.  However, assets in the form of Business Partner's existing contract hire portfolio and fleet of 24,000 vehicles have been transferred to Lex.  Lex will provide funding and maintenance services under the Business Partner brand, whilst FCE will continue to provide sales and marketing support. 

The transaction was completed on 2 February 2004.  The statutory deadline in this case is therefore 1 June 2004.   A satisfactory submission was received on 22 March 2004. The administrative target is therefore 18 May. 

JURISDICTION

As a result of this transaction, Lex and Business Partner have ceased to be distinct.  The UK turnover of Business Partner exceeds £70 million.  The turnover test in section 23(1)(b) of the Enterprise Act 2002 ('the Act') is therefore satisfied.  A relevant merger situation has been created.

CONCLUSION AND RECOMMENDATION

The parties overlap in the supply of vehicle leasing, vehicle finance and support services to commercial and private customers.  For the purposes of this assessment, the transaction is considered at the narrowest level, i.e. the supply of Fleet Contract Hire vehicles to commercial customers within the UK.

If account is made for HBOS' activities in other vehicle leasing companies, post merger the merged entity is now the largest supplier of FCH services in the UK with 12.6 per cent of supply.  The increment is small at 1.5 per cent.  Overall the supply side – as evidenced by the low HHIs – is highly fragmented.  Third parties confirm that suppliers are selected through a competitive tendering process.  Given the small increment, it is unlikely that the acquisition will have adverse effect. 

There is evidence of new entry within the past two years and buyers are considered to hold a certain amount of power through their size (in the case of large customers) and/or through their ability to switch suppliers (in the case of smaller organisations). 

Consequently, the OFT does not believe that it is or may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.

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