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Completed acquisition by Inchcape plc of European Motor Holdings plc

OFT considers undertakings instead of reference to the Competition Commission

52/07    26 March 2007

The OFT has decided today not to refer the completed acquisition by Inchcape plc (Inchcape) of European Motor Holdings plc (EMH) to the Competition Commission on the condition that Inchcape provides satisfactory divestment undertakings to address competition concerns.

The OFT has identified that in the Northern Welsh Marches the merger may substantially lessen competition in the provision of servicing and repair for new and nearly new Volkswagen (VW) cars under warranty. Inchcape has offered to divest one of its dealerships within this area to address the concerns raised by the OFT.

Vincent Smith, OFT Senior Director for Competition said:

'The OFT's decision will protect owners of new and nearly-new VWs from higher repair and servicing charges in the area around Wrexham and Oswestry. The merger between Inchcape and EMH would put the only two authorised dealerships for VW's in that area under common ownership, and this may lead to a substantial lessening of competition in terms of the choices available to customers. Previous investigations into car dealerships and evidence from third parties obtained during this investigation show that customers still predominantly have their cars serviced and repaired under warranty at authorised dealerships. The OFT will now further consider whether the proposed divestment is sufficient to restore competition for the servicing of new and nearly new cars in the Northern Welsh Marches area.'

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 under Schedule 10 of the Enterprise Act 2002, the OFT shall give notice of the proposed undertakings and will consider any representations made in accordance with that notice.

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