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OFT accepts undertakings in garage merger

151/06    20 October 2006

The OFT has decided today to accept undertakings offered by Pendragon plc which it considers address the competition concerns which arose from the completed acquisition by Pendragon plc of Reg Vardy plc. As a result, this transaction will not be referred to the Competition Commission.

The transaction raised competition concerns in relation to the supply of servicing for new cars in four local areas in the UK, namely Vauxhall dealerships in West Yorkshire, Central Scotland, and Hartlepool, and a Land Rover dealership in Northamptonshire. In lieu of reference to the Competition Commission, Pendragon offered to divest its dealerships in these areas. The OFT considers that this proposed undertaking will clearly address the concerns identified in its decision of 4 August 2006.

Vincent Smith, Senior Director for Competition at the OFT said:

'The findings of the recent independent evaluation study for the OFT on car warranties, and evidence from third parties obtained during this investigation show that customers still predominantly have their new cars serviced and repaired at franchised dealerships. The loss of Reg Vardy as a competing dealership in the four local areas would have reduced choice for customers in those areas. However, we are content that the divestments offered by Pendragon plc will, when implemented, address our competition concerns in this transaction.'
 
NOTES

1. The Reference Test - The OFT has a duty to make a reference to the CC 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. Under section 73 of the Enterprise Act 2002 the OFT may, instead of making a reference, and for the purpose of remedying, mitigating or preventing the substantial lessening of competition concerned, or any adverse effect which has or may have resulted from it or may be expected to result from it, accept from such of the parties concerned as it considers appropriate undertakings to take such action as it considers appropriate. In doing so, the OFT will have regard to the need to achieve as comprehensive a solution as is reasonable and practicable to the substantial lessening of competition and any adverse effects resulting from it.

4. Before accepting any such undertakings the OFT shall give notice of the proposed undertakings under Schedule 10 of the Enterprise Act 2002, and considered any representations made in accordance with that notice.

5. The text of this decision will be published in the mergers section as soon as is reasonably practicable.

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