Copart has stated its intention to contest Competition and Markets Authority’s (CMA) apprehensions about its acquisition of Hills Motors, according to AM Online.
The CMA conducted a thorough examination and issued an interim report, which found that the merger creates competitive concerns in the UK’s vehicle salvage services sector. As a result, the CMA is advising that Copart be compelled to divest the newly acquired business.
Copart purchased Hills for an undisclosed amount in July 2022, intending to expand its environmentally friendly vehicle parts portfolio.
Speaking to Fleet News, Chief Executive of Copart UK and Ireland, Jane Pocock, said:
“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.”
Both Copart and Hills Motors provide vehicle salvage services, which entail gathering used and damaged vehicles from clients, such as insurance firms, rental car companies, and finance companies, and remarketing them through online auctions. They also handle the disassembly or scrapping of these vehicles, depending on the circumstances.
According to the CMA, Hills Motors specialises in vehicle dismantling, whereas Copart does not.
After its initial investigation, the CMA referred the Copart-Hills Motors acquisition to a more thorough ‘phase two’ inquiry due to concerns about competition in the supply of salvage services, salvage vehicles, and recycled ‘green’ parts. An independent panel spent five months gathering and analysing a variety of data, including site visits, hearings with both companies, engagement with customers and competitors, and analysis of tender and opportunity data.
The CMA has provisionally determined that allowing Copart to acquire Hills Motors could significantly reduce competition in the UK salvage services market, where Copart is currently the dominant player. Hills Motors, with its internal dismantling service and history of successfully competing for large national salvage contracts for insurance firms, is one of only a few companies in the salvage services market.
However, the CMA has provisionally dismissed concerns about the merger’s impact on competition in the supply of damaged and used vehicles or recycled parts in the UK.
Kirstin Baker, chair of the independent panel of experts conducting this Phase 2 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 released a notification of prospective remedies, which proposes that Copart divest the recently acquired business, and has set a deadline of May 19 for comments. The CMA has requested that any concerned parties submit comments on its provisional findings by May 26, 2023.
The statutory deadline for the CMA’s final report is July 20, 2023.