UK: OFT Decision in Zipcar/Streetcar Highlights Complexities of UK's "Voluntary" Merger Review Regime

On 10 August 2010, the UK Office of Fair Trading (OFT) referred Zipcar's already-completed acquisition of Streetcar to the UK Competition Commission (CC) for an in-depth investigation. Zipcar and Streetcar now must suspend further integration of their businesses, pending the outcome of the CC's investigation. The OFT's reference decision is an important reminder that – although merging parties may complete UK transactions without UK merger clearance – the competition authorities still may investigate the transaction, suspend further integration of the businesses, and in exceptional circumstances require the completed transaction to be unwound.

Zipcar/Streetcar completed prior to notification

Zipcar operates the world's largest car club service. It started operations in the UK in 2007 and had grown to be the second largest car club operator in London. In April 2010, Zipcar completed its acquisition of Streetcar, the largest London car club operator.

Zipcar and Streetcar chose to complete the transaction without notifying it to the OFT, which they were entitled to do under the UK merger control regime. Even where the OFT has jurisdiction to investigate a merger – which in this case it did because the merger created a 25% share in UK car club services – there is no obligation to notify and no obligation to suspend completion pending receipt of merger clearance. Some other regimes require that the parties notify and then suspend closing pending government review, as is the rule in the European Union, some other EU Member States, and the United States, if the transaction meets jurisdictional thresholds. By contrast the decision whether to notify UK authorities before or after completion, or at all, is a strategic one that merging parties must make case-by-case.

When should a notification be made?

The OFT is under a statutory duty to refer to the CC mergers that it believes may substantially lessen competition, although no reference can be made more than four months after the later of closing or publication of a transaction. Therefore, the OFT carefully monitors press and industry reports for news of transactions that may affect UK competition but that have not been notified to it. It is quite common for the OFT to contact merging parties that have not notified to request information about their deals.

The decision when or whether to notify a transaction within the OFT's jurisdiction may turn on a number of factors. If the potential competition concerns are insignificant or non-existent, merging parties may conclude that the OFT is not likely to be interested in the merger, in which case notification often is ruled out. By contrast, if a merger may raise competition concerns, the decision whether to notify generally is determined by commercial imperatives. For example, a bidder in an auction process may be disadvantaged if it makes merger clearance a condition of its bid and therefore may agree to complete the deal without notifying, taking the risk of subsequent intervention by the OFT. More often merging parties condition completion on merger clearance, in order to benefit from the certainty offered by pre-completion notification.

Zipcar and Streetcar have not disclosed why they decided to complete without notifying the transaction to the OFT.

What are the consequences of not notifying?

If Zipcar/Streetcar had not given rise to any competition concerns, the OFT could have chosen to ignore it, allowing the four-month CC reference deadline to expire. However, as noted in the OFT's press release, the transaction combined "the two largest and most closely competing car clubs in London, and...notwithstanding its smaller size Zipcar was a particularly strong and dynamic competitor to Streetcar." Given the transaction's high profile, intervention by the OFT may have seemed quite likely.

The UK authorities have made clear they prefer merging parties to notify potentially problematic mergers prior to completion and have expressed concern that an increasing proportion of completed mergers are being referred to the CC. Investigating completed mergers is more resource intensive and more risky for all concerned. Of the 15 merger cases referred by the OFT to the CC since April 2008, eight were completed mergers and the majority of those investigations were started at the initiative of the OFT. This has led Peter Freeman, Chairman of the CC, to recommend a mandatory UK notification system.

When it initiates investigation of a completed merger, the OFT will as a matter of course require the merging parties to suspend further integration – to make "hold-separate undertakings." After the OFT requested information about their deal, Zipcar and Streetcar gave hold-separate undertakings to the OFT. The CC is expected to issue its final decision in January 2011; therefore, almost eight months after completing their deal, the parties will be no closer to integrating their operations. Zipcar commented, "Naturally, we're disappointed by the decision of the OFT, which imposes a delay on a transaction from which consumers and the environment stand to benefit enormously."

What now for Zipcar/Streetcar?

Zipcar and Streetcar now must demonstrate to the CC that their combination will not result in a substantial lessening of competition. If the CC concludes that the transaction will lessen competition, it may accept commitments from the parties to remedy the CC's concerns (such as divestments or behavioural undertakings). The suitability of remedies in a given case depends on their effectiveness in resolving the CC's concerns and on the willingness of the parties to make those sacrifices. If the CC believes this transaction is anticompetitive and no remedies are offered by the parties to restore the lost competition, the CC will prohibit the transaction, requiring that Zipcar and Streetcar unwind the deal.

Parties to a merger that triggers UK jurisdiction must consider carefully how the particular circumstances of their transaction will affect their decision whether and when to notify the OFT of the deal, taking into account the risks of uncertainty, delay, and possible imposition of remedies or prohibition of their proposed combination.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.