SUMMARY OF
MICHELIN TYRE PLC AND NATIONAL TYRE SERVICE LTD: A REPORT
ON THE MERGER SITUATION
Contents
Car Tyres
Truck Tyres
On 31 October 1989, the Secretary of State
for Trade and Industry asked the Commission (see Appendix
1.1) to investigate and report on the acquisition by Michelin
Tyre PLC (Michelin) of National Tyre Service Ltd (NTS). Michelin
is the leading manufacturer of tyres in the United Kingdom.
Its subsidiary Associated Tyre Specialists Ltd (ATS) is the
largest distributor of replacement tyres, and NTS is the
second largest distributor by turnover.
The supply of tyres is a substantial and
important economic activity. The value of new tyres supplied
in the United Kingdom is estimated at almost 900 million
in 1988, about one-quarter of which was supplied as original
equipment (OE) for fitting on new vehicles, the balance as
replacement tyres. We have had to consider the effects of
the merger on competition in the distribution of replacement
tyres; and the implication of Michelin's position as leading
manufacturer of both OE and replacement tyres.
Car tyres
Car tyres account for over one-half of the
value of replacement tyre sales, and Michelin as manufacturer
and importer supplies about a fifth of the car tyre market.
ATS and NTS together distribute some 26 per cent by value
of replacement car tyres. This combination of strength as
a manufacturer and distributor, which is enhanced by the
merger, raises several concerns.
There are, however, a number of effective
competitors, including several independent of any manufacturer,
which have recently entered the market or expanded rapidly
by combining the fitting of car tyres with other services
to motorists, and which plan to expand further. There are
also many local firms. We do not believe there are significant
barriers to entry to the car tyre market. The effects of
the merger on local competition are also likely to be limited.
We do not therefore believe that the merger will significantly
affect competition in the supply of replacement car tyres.
Truck
tyres
We are, however, concerned about the effect
of the merger on the supply of replacement truck tyres which
account for about one-third of the value of replacement tyre
sales. Michelin has somewhat over one-third of the value
of sales of replacement truck tyres manufactured or imported
into the United Kingdom. ATS and NTS together distribute
some 33 per cent of replacement truck tyres by value. Competition
to the combined group would be much less than in car tyres.
The combined company with almost 700 truck tyre outlets
would be some four times larger than its nearest competitor
and there are only three other competitors with more than
50 outlets, only one of which is independent of any
manufacturer. Although there are many local firms in the
industry, the larger distributors are at an advantage particularly
in servicing customers who require coverage nation-wide or
over a large region. In some local areas, there would be
little competition to the merged group. Unlike car tyres,
there has also been little new entry into distribution of
truck tyres, and there is little prospect of new entry on
a significant scale.
We believe that the merger will reduce competition
in the distribution of replacement truck tyres in the United
Kingdom, particularly for national accounts and in a number
of local areas. We also believe that the vertical integration
between Michelin as the leading manufacturer and the leading
distributor of replacement truck tyres will strengthen Michelin's
position further, enabling it to reduce competition both
between distributors and between manufacturers.
In the replacement truck tyre market, Michelin
would both have acquired its major competitor in distribution,
and have consolidated its position as a manufacturer with
adverse effects on competition. We have therefore concluded,
with one member dissenting, that the merger may be expected
to operate against the public interest. In order to remedy
these adverse effects on competition we have recommended that
Michelin be required to divest as a going concern those NTS
outlets which, at the time of our report, were involved in
the distribution of replacement truck tyres.
Back To The Top
Last Revised: May 1999
|
