Zipcar Inc., the U.S. car-sharing company that rents vehicles by the hour, is being investigated by a U.K. antitrust regulator over concerns its acquisition of London-based Streetcar Ltd. may hurt competition.
The process could involve blocking the companies, which merged in April, from integrating too closely until the investigation is complete, Competition Commission spokesman Rory Taylor said in an interview today in London.
“Some sort of order will be put in place to ensure that the companies are run separately and don’t integrate irreversibly,” Taylor said. “That way, if it turns out to be necessary, we can unwind the merger.”
The investigation comes two months after Zipcar, based in Cambridge, Massachusetts, said it would seek to raise as much as $75 million through an initial public offering. The company, which entered the U.K. market in 2007, was the second-biggest car-sharing company in London when it bought its larger rival.
The merger was referred to the regulator after an investigation by another agency, the Office of Fair Trading, which said in a statement today that the joined company could eventually use its dominance to raise prices or reduce service.
“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,” Zipcar Chief Executive Officer Scott Griffith said in a statement. “We intend to cooperate fully.”
The combined company would reduce car ownership and congestion and offer consumers access to more vehicles, locations and enhanced technology, Zipcar said in its statement. Zipcar has more than 400,000 members and about 7,000 vehicles in the U.S., Canada and the U.K.
“We are confident that once a more detailed review is undertaken, the Commission will conclude that the acquisition does not give rise to a substantial lessening of competition,” Griffith said.
Zipcar’s competition after the merger would be limited to direct car ownership, public transportation and traditional car- rental companies, the OFT said.
“The fact that the market is nascent means that it is particularly important to protect the competition that exists,” Amelia Fletcher, a merger director at the OFT, said in the statement.