Affected market: Sales and servicing of cars
No. ME/1652/04
Please note that the full text of the decision can be downloaded by using the link on the right of this page . What follows are extracts regarding the parties, the transaction, jurisdiction, assessment and decision.
The OFT's decision on reference under section 22 given on 24 June 2004
PARTIES
Pendragon plc is active in the UK in the retail sale of new and used vehicles and associated servicing, repair and spare part supply. Prior to the acquisition, CD Bramall was also active in the same sectors in the UK. CD Bramall's UK turnover for the financial year ended 31 December 2002 was £1,388 million.
TRANSACTION
On 26 February 2004, Pendragon acquired the whole of the issued and to be issued share capital of CD Bramall for £231.45 million. Pendragon has cited two main reasons for the purchase of CD Bramall: the high quality of many of CD Bramall's dealerships and the complementary fit of the two companies. The transaction was notified to the OFT on 1 April 2004 and the administrative deadline expired on 11 June 2004. The statutory deadline expires on 25 June 2004.
JURISDICTION
As a result of this transaction Pendragon and CD Bramall have ceased to be distinct. The UK turnover of CD Bramall exceeds £70 million, so the turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act) is satisfied. A relevant merger situation under section 23(1) has therefore been created.
ASSESSMENT
The parties overlap in the sale, servicing, and supply of spare parts for new and used cars and lcvs. These are characterised as dealerships which typically embody all of the aspects mentioned above. At the national level, the industry is still highly fragmented and, in relation to the sale of new and used cars and the supply of spare parts, it is not expected that this merger will result in a substantial lessening of competition. The only potential concern arises at the local level and relates to servicing of nearly new cars of particular makes where consumers appear to be prepared to pay a premium for servicing at a local franchised dealership. Where the merger brings together two franchised dealerships of a particular marque within the same catchment area, then consumer choice may be reduced.
There appear to be only two areas in the UK where the merger might lead to a reduction in choice at the local level. However, the OFT believes that in both these areas the presence of existing alternatives dealers, together with the recent removal of servicing ties from new car warranties - which is expected to increase the likelihood of potential new entry and enable independent garages to be a stronger constraint than they have been in the past – will be a sufficient competitive constraint upon the merged group.
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.
DECISION
This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.
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