4th Aug 2006 12:55
Office of Fair Trading04 August 2006 122/06 4 July 2006 OFT CONSIDERS UNDERTAKINGS INSTEAD OF REFERENCE TO THE COMPETITION COMMISSION IN CAR DEALER MERGER The OFT has decided today not to refer the completed acquisition by PendragonPlc of Reg Vardy Plc to the Competition Commission on the condition thatPendragon provides satisfactory divestment undertakings to address competitionconcerns. The OFT has identified four local areas where the merger of the car dealershipsbusinesses may substantially lessen competition in the provision of servicingand repair for new cars under warranty. Pendragon has offered to divest a numberof dealerships within these areas to address the concerns raised by the OFT.Vincent Smith, OFT Director of Competition Enforcement said: ' The findings of the recent independent evaluation study for the OFT on carwarranties, and evidence from third parties obtained during this investigation,show that customers still predominantly have their new cars serviced andrepaired at franchised dealerships. This merger leads to a substantial lesseningof competition in terms of the choices available to such customers in a smallnumber of local areas. The OFT will now proceed to consider further whether theproposed divestments are sufficient to restore competition for the servicing ofnew cars in these local areas.' For details of the independent evaluation study see notes. NOTES 1. The four local areas where competition concerns have been identified inrelation to the supply of servicing for new cars are the areas around: WestYorkshire (Wakefield, Leeds and Castleford), Central Scotland (Motherwell,Airdrie and East Kilbride), Hartlepool and Northamptonshire. 2. Evaluating the impact of the car warranties market study, June 2006 (OFT 852)(http://www.oft.gov.uk/NR/rdonlyres/295ACBE2-886D-4706-A08A-44CF8E094187/0/OFT852.pdf). This study found that although consumer awareness of alternativeservicing options had increased, 86% of consumers with new cars still went tofranchised dealerships for servicing, partly due to their belief that this wasstill necessary to maintain the warranty. 3. The Reference Test - The OFT has a duty to make a reference to the CC if theOFT believes that it is or may be the case that arrangements are in progress orin contemplation which, if carried into effect, will result in the creation of arelevant merger situation; and the creation of that situation may be expected toresult in a substantial lessening of competition within any market or markets inthe United Kingdom for goods or services. 4. Under the Enterprise Act 2002 a relevant merger situation is created if twoor more enterprises have ceased to be distinct enterprises; and the value of theturnover in the United Kingdom of the enterprise being taken over exceeds £70million; or as a result of the transaction, in relation to the supply of goodsor services of any description, a 25% share of supply in the UK (or asubstantial part thereof) is created or enhanced. 5. Under section 73 of the Enterprise Act 2002 the OFT may, instead of making areference, and for the purpose of remedying, mitigating or preventing thesubstantial lessening of competition concerned, or any adverse effect which hasor may have resulted from it or may be expected to result from it, accept fromsuch of the parties concerned as it considers appropriate undertakings to takesuch action as it considers appropriate. In doing so, the OFT will have regardto the need to achieve as comprehensive a solution as is reasonable andpracticable to the substantial lessening of competition and any adverse effectsresulting from it. 6. Before accepting any such undertakings under Schedule 10 of the EnterpriseAct 2002, the OFT shall give notice of the proposed undertakings and willconsider any representations made in accordance with that notice. 7. The text of these decisions will be placed on the Office of Fair Trading'sweb site at www.oft.gov.uk and will also appear in the Office's Weekly Gazetteas soon as is reasonably practicable. MEDIA enquiries: 020 7211+ Corinne Gladstone 8899 Terence Gibbons 8900Frank Shepherd 8133 Lara Gorman 8901Megan Tudehope 8898 Out of hours: mobile: 07774 134814 fax messages: 020 7211 8961 Copies of press notices: Ext. 8993 http://www.oft.gov.uk PUBLIC enquiries: 0845 7224499 [email protected] OFT reports and consumer information leaflets are available free from: OFT, PO Box 366, Hayes UB3 1XB 0800 389 3158 [email protected] This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
PDG.L