Anticipated acquisition by Moto Hospitality Limited of First Motorway Services Limited

Affected market: Motorway service areas

No. ME/3799/08

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, third party views, assessment and decision.

The OFT's decision on reference under section 33(1) given on 22 September 2008. Full text of decision published 6 October 2008.

Please note that square brackets indicate figures or text which have been deleted or replaced at the request of the parties for reasons of commercial confidentiality.

PARTIES

Moto Hospitality Limited (Moto) operates Motorway Service Areas (MSAs) and non-MSAs throughout the UK. Its MSAs offer fuel stations, public lavatory facilities, parking areas, picnic areas, catering and retail outlets, business lounges and meeting rooms and overnight accommodation to travellers.

First Motorway Services Limited (FMS) was established in 1996, and also provides MSA services in the UK.  FMS operates two MSA sites, at Bolton and Magor, and a truck stop on the A40 at Whitchurch (Symonds Yat).  FMS's UK turnover for the year ended 31 March 2007 was [  ].

TRANSACTION

Moto has agreed to purchase the whole of the share capital of FMS for a consideration of [  ].  The acquisition is conditional on the Vendors, being the shareholders of FMS, entering into an agreement to (re)acquire the Bolton MSA from Moto by way of an assets sale for the purchase price of  [  ], simultaneously or immediately subsequent to the acquisition by Moto of FMS.  Therefore the acquisition of the Bolton MSA (by Moto) is not considered further.

The transaction was notified by a merger notice on 6 August 2008. The (extended) statutory deadline expires on 22 September 2008.

JURISDICTION

As a result of this transaction Moto and FMS will cease to be distinct. The parties overlap in the operation of motorway service areas and the share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met. The OFT therefore believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation. 

THIRD PARTY VIEWS 

Third party comments have been discussed above. Relatively few third parties responded. Third party customers were either unconcerned or raised issues that were not merger specific.

ASSESSMENT

Moto is acquiring Magor MSA on the M4 in Wales  and a truck stop on the A40 at Symonds Yat. The parties both compete in a GB market for MSA services and the truck stop may also compete with a wider pool of facilities for HGV drivers although, apart from Symonds Yat, none has been identified in this local market.  However, the conclusions arising from this do not rely on the precise market definition.

Pre-merger the closest competitor to both the acquired sites is the Welcome Break MSA at Cardiff Gate (which has opened since the 1995 merger). This site is not capacity constrained and is just 21 minutes from the acquired MSA along the M4. Users of the Magor MSA may also pass other Welcome Break MSAs on the M5, and are unlikely to drive past the Moto Severn View MSA on the same journey (but may be able to use this as an off-route alternative). Moto also own the next MSA on the M4 driving East from Magor (Leigh Delamere) at a distance of nearly 33 miles. Given the proximity (and number) of the Welcome Break alternatives it is not considered that these two MSAs in sequence would create a realistic prospect of a substantial lessening of competition. A significant amount of traffic (perhaps half) going east from Magor will use the M5 and so will, in any case, not pass these two consecutive Moto MSAs on the same journey.

Most customers are individuals so buyer power is low and the barriers to entry are such that firms can probably set short-term prices at profit maximising levels until entry appears likely (for example, planning permission is granted).

The market is relatively transparent to the competing firm and could be conducive to tacit coordination. [  ].

Prices at Magor are not monitored by Moto and so it is unlikely to have played a maverick role in the price setting. Price comparisons between MSAs may be difficult for customers who are a diverse and irregular group and so punishment (in the event of 'cheating') may be difficult with no easy means of attracting new customers quickly. In light of this it appears the change in the local area from a three MSA operator market to a duopoly between Moto and Welcome Break would not pose a realistic prospect of a substantial lessening of competition from coordinated effects.

Consequently, the OFT does not believe that it is or may be the case that the merger 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 33(1) of the Act.

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