A Streetcar They Desired

Zipcar Inc., the worldwide leader in car-sharing with over 500,000 members and 8,000 vehicles, was granted approval in its bid to acquire Streetcar Limited, a leading car-sharing company in the UK.  The Competition Commission, the UK’s independent public body responsible for investigating mergers, found it unlikely that the merger would lead to a decrease in competition, thereby permitting the acquisition to advance.

On April 21, 2010, Zipcar acquired all of the issued share capital of Streetcar.  Given the size of these two companies in the relevant market, the UK’s antitrust watchdog, the Office of Fair Trading, referred the matter to the Competition Commission for investigation and report, pursuant to the Enterprise Act of 2002.

Car-sharing companies, or car clubs, allow members to access available vehicles 24 hours a day, without the hassles or high costs of car ownership.  A recent article found at www.prnewswire.com cites an independent study commissioned by Zipcar for the proposition that “Millennials” (18 to 34-Year Olds) are generally driving less and seeking alternative access to automobiles.  Car-sharing companies may satisfy this growing demand.

The Competition Commission found that notwithstanding the merger of two large competitors in the relevant market, the industry was poised for substantial growth and entry.  “All, else being equal, a growing market will encourage new entrants, as new entrants can gain members without having to win them away from existing relationships with other car club operators,” the Provisional Findings Report states. 

The Report made particular note of the relatively low barriers to entry given that car-sharing companies are “not high-fixed-cost businesses relative to the size of the market.”  The likelihood and magnitude of entry would compensate for any foreseeable loss of competition.