Will the Hertz-Thrifty Deal Hurt Rental Competition?

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After two years of talks, the Federal Trade Commission has finally proposed a working settlement for the $2.3 billion acquisition of Dollar Thrifty Automotive Group (NYSE:DTG) by Hertz Global Holdings (NYSE:HTZ). The deal has been delayed because of concerns that the acquisition would harm competition at 72 airports around the United States where the two companies were the only rental services available.

The settlement proposed by the FTC will have Hertz sell its entire Advantage rent-a-car business as well as the rights to operate 29 airport locations. Under this arrangement, the new entity will only operate in locations where other rental companies such as Avis Budget Group (NYSE:CAR) have a presence.

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“American consumers rent more than 50 million vehicles at airports nationwide each year, spending $11 billion, so this is a real pocketbook issue for everyday people,” said FTC chairman Jon Leibowitz in a statement. “Today’s bipartisan action by the FTC will ensure that consumers are not forced to pay higher prices for rental cars when they travel.”

Hertz already has a 26-percent share of the rental market at U.S. airports, while Dollar Thrifty has a 12-percent share. The FTC will pass final judgment on the proposed settlement after December 17. If approved, Avis, Hertz, and privately-held Enterprise Holdings will control over 95 percent of the U.S. car rental market, a $22 billion industry.

Commissioner Thomas Rosch was the only member of the 5-member commission to vote against the settlement. “I found it inadequate to resolve the competitive concerns at several dozen other airports affected by the transaction,” he explained. “I would have instead voted to challenge the transaction because of the significant risk of post-merger coordinated interaction among the remaining competitors.”

The proposed settlement will be open for public comment for 30 days before a final decision is made.

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