Press release

Car auction merger prompts competition concerns in north-east

BCA’s acquisition of SMA faces an in-depth merger inquiry unless it offers a solution to competition concerns in car auctions in Newcastle.

Cars parked in a row

BCA Marketplace plc (BCA) and SMA Vehicle Remarketing Ltd (SMA) both provide used vehicle auction services in the UK. Over 7 million used cars change hands each year in the UK, with 1.4 million of these sold through an auction at some stage. BCA operates 17 auction sites and SMA operates 5.

The Competition and Markets Authority (CMA) found that BCA faces strong competition from another national car auctioneer and a range of other local used car auctioneers in most UK regions. Customers and competitors raised concerns with the CMA during the investigation that the merger might lead to increased prices or reduction in services in the north-east of England and Scotland.

In Scotland the CMA found that, following the merger, the merged parties will face competition from 4 other competitors and that as a result, no concerns arose in this area.

In the Newcastle area, the CMA found that BCA and SMA were close competitors, and that following the merger the merged entity will face competition from only one other physical auction site.

The CMA has therefore found that the merger may lead to higher prices or a reduction in choice or quality of service for customers of used vehicle auction services at physical auction sites in the Newcastle area.

The CMA did not consider the merger raised national competition concerns.

This merger will be referred for a phase 2 investigation unless BCA offers acceptable undertakings to address the competition concerns in the north-east in a clear-cut manner.

Sheldon Mills, Senior Director of Mergers and decision-maker in this case, said:

Used vehicle auction services are vital for businesses involved in the buying and selling of used vehicles. We found a significant competitive overlap between the merging parties in the north-east of England which could drive higher auction prices or reduced services or quality.

BCA has the opportunity to avoid a full phase 2 investigation by offering a solution that clearly addresses these concerns and safeguards the interests of customers.

Notes for editors

  1. The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law.
  2. Under the Enterprise Act 2002 (the Act) the CMA has a duty to make a merger reference, resulting in a full phase 2 merger investigation, if the CMA believes that it is or may be the case that a ‘relevant merger situation’ has been created, or arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and that 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.
  3. Under the Act a ‘relevant merger situation’ is created if 2 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 (‘the turnover test’) or as a result of the transaction, in relation to the supply of goods or services of any description, a 25% share of supply in the UK (or a substantial part of the UK) is created or enhanced (‘the share of supply test’).
  4. The CMA considers that it is under a duty to make a phase 2 merger reference in this case under section 22(1) of the Act. However, the duty to refer is not exercised pursuant to section 22(3)(b) while the CMA is considering whether to accept undertakings under section 73 of the Act in lieu of a reference. Pursuant to section 73A(1) of the Act, BCA has until 24 November 2015 to offer an undertaking to the CMA that might be accepted by the CMA under section 73(2) of the Act. If no undertaking is offered or accepted, then the CMA will refer this merger pursuant to sections 22(1) and 34ZA(2) of the Act.
  5. All the CMA’s functions in phase 2 merger investigations are performed by inquiry groups chosen from the CMA’s panel members. The appointed inquiry group are the decision-makers on merger investigations.
  6. The CMA’s panel members come from a variety of backgrounds, including economics, law, accountancy and/or business; the membership of an inquiry group usually reflects a mix of expertise and experience (including industry experience).
  7. The inquiry group may extend the 24-week period within which it is required to publish its report by no more than 8 weeks if it considers that there are special reasons why the report cannot be published within that period.
  8. The text of this decision will be placed on the case page as soon as is reasonably practicable.
  9. For information on the CMA see our homepage, or follow us on Twitter @CMAgovuk, Flickr and LinkedIn. Sign up to our email alerts to receive updates on merger cases.
  10. Enquiries should be directed to Simon Belgard (simon.belgard@cma.gsi.gov.uk, 020 3738 6472).
Published 17 November 2015