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FTC approves Hertz takeover of Dollar Thrifty

Hertz and Dollar Thrifty LogosThe Federal Trade Commission (FTC) has given approval for Hertz Global Holdings to take over Dollar Thrifty Automotive Group.  After years of on-and-off bidding and making some concessions to gain antitrust approval, the $2.3 billion transaction has been given the go ahead.

As part of the proposed settlement, the FTC is requiring that Hertz sell its low-cost Advantage Rent a Car subsidiary to Franchise Services of North America (FSNA) and Macquarie Capital.  It will also sell the rights to operate 29 Dollar Thrifty on-airport locations across the US.  Sixteen of these airport locations aren’t operated by Advantage yet and will be sold to FSNA and Macquarie as well.  The other 13 airport locations will be sold to FSNA and Macquarie or another buyer approved by the FTC if the transaction closes.

Hertz and Dollar Thrifty both offer car hires to leisure and business consumers, as well as provide this service to passengers arriving at airports throughout the country.  They are two of the four major car rental operators that compete at the nation’s airports as well, so their merger means that only three will be left to compete.  Together with Enterprise Holdings (which operates the Enterprise Rent-A-Car, National Car Rental and Alamo Rent A Car brands) and Avis Budget Group (which operates the Avis Rent a Car System and Budget Rent a Car System), they account for about 98% of total airport hires in the US.

Because of their close rivalry in the US airport hire market, the FTC was concerned that a merger between Hertz and Dollar Thrifty would have hurt competition by allowing the merged company to raise prices, reducing the number of competitors and diminishing competition for the future.  The FTC said that Hertz’s initial proposed takeover of Dollar Thrifty would violate Section 7 of the Clayton Act and Section 5 of the FTC Act, as well as be anticompetitive, in several airport rental markets.

By forcing Hertz to sell its Advantage subsidiary and several on-airport locations, these concessions will replace the current and future competition that would have been lost as a result of the merger.  They will also eliminate the likelihood of coordinated interaction after the acquisition.  The FTC says the settlement will allow Advantage to become the fourth biggest car hire operator in the US, as well as give it the chance to compete effectively for the business of passengers arriving at airports across the country.

An interim monitor has been appointed by the FTC to oversee the sale of Advantage and the 29 on-airport locations.  If it finds that Hertz hasn’t complied with the order within ten days of it being finalised, it has the power to seek civil penalties.  The proposed order is subject to public comment until 17 December before the FTC decides if it will be made final.

FTC chairman John Leibowitz said that Americans hire over 50 million vehicles at airports throughout the US and spend $11 billion every year.  Competitive pricing had been a concern for everyday consumers.  However, the settlement will ensure consumers aren’t made to pay higher rates for rentals.

Not everyone is happy about the settlement, with a vote of four to one.  FTC commissioner J. Thomas Rosch says that he voted against accepting the consent decree, as he doesn’t believe it’s enough to resolve the competitive concerns at the dozens of other airports that will be affected by the merger.  He would have voted to challenge the transaction due to the substantial risk of coordinated interaction among the remaining rivals after the merger.

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