Competition & Markets Authority: Merger Could Worsen Vehicle Salvage Service Options for UK Car Insurers

LONDON, England, May 6 -- The British Department for Business, Innovation and Skills' Competition and Markets Authority issued the following news release on May 5, 2023:

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The CMA has provisionally found that Copart's completed purchase of Hills Motors raises competition concerns in the supply of vehicle salvage services in the UK.

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An in-depth investigation by the Competition and Markets Authority (CMA) has provisionally found that the completed acquisition by Copart of Hills Motors could result in a substantial lessening of competition in the market for the supply of salvage services in the UK.

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 referred the deal to an in-depth Phase 2 inquiry after identifying competition concerns in the supply of salvage services, salvage vehicles and recycled ('green') parts during its initial, Phase 1, investigation. Over the past 5 months, an independent CMA 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. 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.

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 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 published a notice of possible remedies with a deadline for comments by 19 May and asked for any interested parties to make submissions on its provisional findings by 26 May 2023. The statutory deadline for the CMA's final report is 20 July 2023.

For more information, visit the Copart/Hills Motors case page (https://www.gov.uk/cma-cases/copart-slash-hills-motors-merger-inquiry).

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Original text here: https://www.gov.uk/government/news/merger-could-worsen-vehicle-salvage-service-options-for-uk-car-insurers