The UK competition authorities appear to be taking an increasing interest in mergers and acquisitions relating to motor dealerships. In the last year alone, the OFT has conducted three investigations into dealership acquisitions by:
- JCT600 Limited of Gilder Group Limited, which owned VW, Audi and SEAT dealerships (September 2013);
- Lookers Group plc of Shields Land Rover (December 2013); and
- Ridgeway Group of Parkview Skoda (March 2014).
Whilst all three acquisitions were ultimately cleared, the Lookers/Shields deal only avoided a reference to the Competition Commission because the OFT decided to exercise its de minimis discretion. The OFT found that there was a realistic prospect of a substantial lessening of competition in the relevant local market for the servicing and non-warranty repair of Land Rovers, but, as the market was small, any harm to consumers would be minimal. Surprisingly, the OFT found that independent garages did not pose a significant competitive constraint on dealerships for this type of work, apparently because consumers were less willing to trust them.
In contrast the OFT had no concerns regarding the retail market, due to the breadth of the market and the number of competitors within it. This echoes the OFT's reasoning in clearing the JCT600/Gilder acquisition, where there was overlap in the new and used car markets, but not in repair or servicing.
The CMA has yet to publish its final decision into Ridgeway/Parkview, but it will be interesting to see whether it again focuses its concerns on the repair and service markets.
Of particular interest is that all three of the above investigations involved completed acquisitions, i.e. where the parties had chosen not to notify before completion. The UK merger control regime is a voluntary one in so far as the parties to a qualifying transaction do not have to seek pre-completion clearance. Where they do so, however, they take the risk of any later investigation by the competition authorities.
In its newly published merger guidelines the CMA has stated that it will be likely, as a matter of course, to impose "hold separate" undertakings during investigations into parties that have failed to notify before completion. These undertakings can be very onerous and intrusive, as they prevent the buyer and the target from taking any action to further integrate their operations and require regular compliance reports to be provided to the CMA until such time as it has completed its investigations.
It is clear that UK competition authorities are looking closely at transactions in this sector. Going forward, parties would be wise to ensure that competition issues have been fully considered, especially the risks (if any) involved in choosing not to notify the CMA in advance of completion.