Antitrust Challenges to Avis-Dollar Merger

SEATTLE (CN) – Avis Budget Group’s acquisition of Dollar Thrifty Automotive Group “would create the largest airport car rental firm in the United States, with 41 percent of the airport car rental market” and “substantially reduce competition by combining the Avis, Budget, Dollar, and Thrifty brands under single ownership,” Dollar Rent-A-Car franchisees claim in a federal antitrust complaint.




     Plaintiff James Cassan runs a Dollar Rent-a-Car outlet in Seattle, with an outlet at the airport, and leases a fleet of rental cars to the Dollar outlet at the airport in Portland, Ore. Suing for his three corporations and himself, Cassan says the merger could put him out of business.
     “The car rental industry in the United States is marked by an increasing rate of market concentration in the past fifteen years,” the complaint states. “The significant increase in market concentration that will result from the proposed acquisition is likely to substantially lessen competition, in violation of Section 7 of the Clayton Act by increasing the ability and likelihood that the three remaining market participants will expressly or tacitly coordinate reductions in supply and increases in price, resulting in injury to consumers such as plaintiffs.
     “As franchisees of Dollar/Thrifty doing business as Dollar Rent-A-Car in Seattle-Tacoma and Portland, plaintiffs are further threatened with damage in the form of lost revenues, lost profits, decreases in the values of their businesses as going concerns, and the forced closure of their businesses resulting from exclusionary conduct including, but not limited to, predatory bidding, predatory pricing, diverted rental reservations, increased fees, business harassment and the pretextual elimination of plaintiffs as franchisees.”
     Airport car rentals bring in 80 percent of U.S. car-rental revenue, according to the complaint, and four firms control 98 percent of the airport care rental market. Avis/Budget controls 29% and Dollar/Thrifty 12%. Enterprise Holdings (National, Alamo and Enterprise brands) is the biggest, with 31%, and Hertz has 26%. The merger of Avis/Budget and Dollar/Thrifty would create a new leader for the industry, and reduce the number of competitors to three.
     Cassan adds that the supply of rental cars, known as “program cars,” would be jeopardized by the merger because Avis/Budget and Dollar/Thrifty are major suppliers.
     “The high level of market concentration created by the proposed merger will facilitate and is likely to lead to collusion among sellers in the used program car market, resulting in lower supply and higher prices. Moreover, there is a strong likelihood that, post-merger, the Avis/Budget-Dollar/Thrifty combination will merge their fleets, significantly reduce the number of vehicles in their fleets and reduce the number of program cars purchased – or reduce the number of program cars expected to be purchased by Avis/Budget and Dollar/Thrifty – resulting in fewer used program cars available for sale and higher prices for used program cars. As consumers of used program cars, plaintiffs will suffer injury in the form of higher prices and fewer consumer options,” the complaint states.
     Cassan says that Avis/Budget and Dollar/Thrifty agreed to the merger but Avis/Budget would not make a formal offer so the parties would not be “subject to substantial disclosure obligations.”
     He wants the merger restrained, and the defendants ordered to hold their assets separately pending final disposition, or an order of divestiture to reduce the anticompetitive effects of the merger.
     He is represented by John Houlihan Jr. of Seattle and Joseph Alioto of San Francisco.

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