SUMMARY OF TIPHOOK PLC AND TRAILERENT PLC: A REPORT ON THE PROPOSED MERGER

On 14 December 1989 the Secretary of State for Trade and Industry asked the Commission (Appendix 1.1) to investigate and report on the acquisition of Trailerent Ltd (Trailerent) by Tiphook plc (Tiphook). Trailerent is a subsidiary of Mercantile Group Plc (Mercantile) which, in turn, is owned by Barclays Bank PLC (Barclays). Trailerent is solely a trailer rental company and carries on its business entirely in the United Kingdom. Tiphook's principal businesses are container rental, trailer rental and rail wagon rental. Its trailer rental division, Central Trailer Rentco (CTR), carries on business in the United Kingdom and nine other European countries.

A little over 10 per cent of the goods moved by road in the United Kingdom (the wider road transport market) is carried in rented trailers. The trailer rental fleet is around 42,000 and accounts for about a fifth of the total United Kingdom trailer parc. Trailer rental is broadly split between transient (hire for periods of less than a year) and contract (hire for periods of a year or more). The current leader of the trailer rental market is TIP Europe plc, with about a 31 per cent share. Tiphook and Trailerent are the second and third largest operators with around 23 per cent and 11 per cent respectively. After the proposed merger, therefore, Tiphook would overtake TIP and become the market leader with around 34 per cent of the market.

The concern, more particularly in the transient segment of the market, is that the merger would leave two strong specialist trailer rental operators (TROs), Tiphook and TIP, with approaching a two-thirds share of the market. The third ranking firm would be BRS Trailer Rental with around an 8 per cent share and there is a host of smaller firms. The merged companies and TIP would together have over 70 per cent of the refrigerated trailers (reefers) available for rental. The degree to which the behaviour of Tiphook and TIP, given their strong position in the trailer rental market, would be constrained by the presence of the large number of smaller firms and by competition in the wider road transport market was the major public interest issue we faced.

Despite the increased concentration caused by the combination of the second and third largest operators, we believe that the trailer rental market will continue to be competitive. There is vigorous price competition in the industry and, stimulated by a knowledgeable group of customers who are industry professionals used to shopping around for the best prices, it may be expected to continue. Prices in the contract rental segment of the market are constrained by the alternative options available to customers of leasing or purchasing. As to the transient rental segment of the market, competition will continue to come from the smaller TROs with the additional constraint of the customer's option to subcontract in the wider road transport market. Regarding reefer rental, at the expensive end of the market, we expect this to provide an attractive niche for existing TROs and possible new entrants. Finally, barriers to entry into the growing trailer rental market are low.

We conclude, therefore, that the merger should not be prevented.

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Last Revised: June 1999