Copart has said it is ready to challenge concerns from the Competition and Markets Authority (CMA) over its Hills Motors acquisition.
Following an in-depth investigation, the CMA has found in an interim report that the merger raises competition concerns in the supply of vehicle salvage services in the UK and is recommending that Copart be forced to sell the newly acquired business.
Copart acquired Hills for an undisclosed sum in July 2022, with plans to scale up its green vehicle parts offering.
Jane Pocock, chief executive of Copart UK and Ireland, told AM sister publication Fleet News: "We are midway through 'phase two' and at long last we have just received the report from the CMA.
"The CMA have already dropped two of their theories of harm, with only one now remaining.
"We can focus, now we have information to their line of thinking, on compiling our response to their competition point.
"We remain very optimistic we can now challenge the remaining point.
"It is important to the insurance market that their salvage partners can also dismantle cars and provide green parts, we are fully committed to ensuring we provide this service.”
Copart and Hills Motors both supply vehicle salvage services.
This involves collecting damaged and other used vehicles on behalf of customers – including insurance companies, finance companies and rental car companies – and remarketing them for sale via online auction or, in some cases, managing their dismantling or scrapping.
Hills Motors is active in vehicle dismantling whereas Copart is not, the CMA says.
'Substantially lessen competition'
The CMA referred the deal to an in-depth ‘phase two’ inquiry after identifying competition concerns in the supply of salvage services, salvage vehicles and recycled ‘green’ parts during its initial, ‘phase one’, investigation.
Over the past five months, the CMA explained that an independent panel has gathered and examined a wide range of evidence to better understand the markets and potential impact of the deal.
This included holding site visits and hearings with Copart and Hills Motors, extensive engagement with customers and competitors, analysis of tender and other opportunities data submitted by the merger parties and third parties and analysis of the merger parties’ internal documents.
Following this further investigation, the CMA has now provisionally found that allowing Copart to purchase Hills Motors could “substantially lessen competition” in the market for the supply of salvage services in the UK.
Copart is currently the market leader by a significant distance, says the CMA.
Hills Motors, which has an in-house dismantling service and is an important supplier of recycled parts, is one of a small number of players in the market for salvage services that have a track record of successfully competing for and servicing large national salvage contracts for insurance companies, it added.
The CMA has provisionally dismissed concerns that the merger would substantially lessen competition in the supply of damaged and other used vehicles or the supply of recycled parts in the UK.
Kirstin Baker, chair of the independent panel of experts conducting the latest investigation, said: “Vehicle insurance is a significant cost for many individuals and businesses and there is increasing demand for insurers to minimise their environmental impact, while keeping prices low.
“There are very few salvage companies who have a track record of servicing large national contracts for insurance companies, so we are concerned this deal could reduce the options for customers and this could lead to higher prices or lower quality services.
“We invite views on both our provisional findings and the possible remedies we have identified to address our concerns.”
The CMA has published a notice of possible remedies, which includes Copart being forced to sell off the newly acquired business, with a deadline for comments by May 19, and asked for any interested parties to make submissions on its provisional findings by May 26, 2023.
The statutory deadline for the CMA’s final report is July 20, 2023.
Author: Gareth Roberts
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