ACCC rules against rental car bargaining

The competition watchdog has upheld a decision not to allow five car rental companies the ability to collectively bargain with Westralia Airport Corporation over licence renewal terms at Perth Airport.

In May the Australian Competition and Consumer Commission (ACCC) said that it had received submissions from national car rental service Redspot and Westralia Airport Corporation opposing the collective bargaining agreement between Hertz, Thrifty, Avis, Budget and Europcar.

At the time ACCC chairman Graeme Samuel said, "The ACCC is concerned that collective bargaining by the group of car rental companies could undermine the Request for Proposal process being run by Westralia Airports."

In its submission to the ACCC Redspot strongly objected to the collective bargaining application claiming that it would lessen competition.

Redspot also drew to the ACCC's attention that recent collective bargaining by the same group of companies with Mackay Airport in Queensland had put Redspot at a disadvantage.

Redspot's managing director Dan Mekler said, "before Redspot commenced its on-airport operations Australian airports were a closed shop reserved for the major international brands. The barriers to entry were and remain high due to the high financial thresholds and concentration of market power to the five international brands."

The ACCC formed the view that a competitive tender process would be a more efficient mechanism for the allocation of limited terminal space than collective bargaining.

See full statement below:

The ACCC has announced its decision to uphold its earlier objection to collective bargaining by five car rental companies. The group comprising Hertz, Thrifty, Avis, Budget and Europcar applied to the ACCC for immunity to collectively bargain with Westralia Airport Corporation (WAC) over licence renewal terms for Perth Airport.

Westralia Airport Corporation (WAC) recognised the competitive nature of the car rental industry when in March this year it requested competitive tenders for terminal desk sites and parking bays in a licence renewal for Perth Airport. Competitive tendering means the better desk site and parking bay positions are auctioned to the highest bidder.

In a press release dated 13 May 2010 the ACCC noted,
"The members of the proposed bargaining group, Hertz, Thrifty, Avis, Budget and Europcar, all currently offer car rental services at the airport. These businesses lodged a notification with the ACCC on 3 May so that they could collectively bargain to assist them in their negotiations with the airport."

"However, the ACCC received submissions opposing the collective bargaining notification from Redspot, a national car rental company that offers car rental services at the airport, and Westralia Airports Corporation, the operator of Perth Airport."

"The ACCC is concerned that collective bargaining by the group of car rental companies could undermine the Request for Proposal process being run by Westralia Airports. In this context, the ACCC has moved quickly to prevent collective negotiations from taking place while the ACCC further considers the notification," ACCC chairman Graeme Samuel said on May 13, 2010.

In a submission to the ACCC Redspot strongly objected to the collective bargaining application claiming that it would lessen competition. Redspot claimed that its on-airport competitors "are not prepared to negotiate on, pay a premium or compete for the desk site positions they currently hold. Their preference is for the allocation of facilities to be awarded on the basis of market share".

In its submission Redspot drew to the ACCC's attention that recent collective bargaining by the same group of companies with Mackay Airport had put Redspot at a disadvantage.

Redspot's managing director Dan Mekler said, "before Redspot commenced its on-airport operations Australian airports were a closed shop reserved for the major international brands. The barriers to entry were and remain high due to the high financial thresholds and concentration of market power to the five international brands".

Redspot is Australia's largest independent car rental company with locations on and off-airports across Australia. It has grown its business over the past twenty one years through its delivery of value and transparency in car rental service and pricing and through gaining exposure to airline passenger markets.

At Mackay, Perth and other Australian Airports there are significant differences between Redspot and its on-airport competitors. Redspot offers airport concession recovery fees, registration fees, liability reduction, additional drivers and other inclusions in its all-inclusive Drive-Away rates while its competitors separate and add these charges on to a base rental charge.

Mr Mekler noted that with the proposed merger of Dollar / Thrifty Rent A Car and Hertz there may soon be just 3 parent companies controlling Avis/Budget, Hertz Thrifty, and Europcar which will further reduce competition in the car rental industry.

The ACCC 's view is that a competitive tender process is a more efficient mechanism for the allocating limited terminal space than through collective bargaining. A competitive tender process will allow all providers of car rental services to bid for space with the resultant public benefit.
The competitive tendering process at Perth Airport resulted in Redspot moving to premium rental desks in Terminal 2 (domestic) and Terminal 1 (international) while Hertz and Thrifty moved to inferior rental desks.