* Most antitrust experts believe deal will be approved
* Fast-growing Zipcar is car-sharing market leader
* Deal announced on Jan 2 worth about $500 million
By Diane Bartz
WASHINGTON, Jan 13 When car rental giant Avis
announced in early January that it planned to buy Zipcar,
hipsters across the United States gnashed their teeth in unison.
But an informal poll by Reuters of nine antitrust experts,
many of whom lamented the deal privately for the feared loss of
a lively upstart, found that eight of the nine expect U.S.
regulators to approve the deal.
The quirky Zipcar is admired for its new approach to car
rental. Young, monied professionals who have decided to live
car-free and broke college students can join and then rent a car
for $11.25 an hour, often without leaving their neighborhood.
Beyond convenience and attentiveness to customers, there are
the whimsical elements, like nicknaming the cars. There is, for
example, a Toyota Tacoma pickup truck in Berkeley, California
Avis Budget Group Inc said on Jan. 2 that it would
pay about $500 million in cash, a 49 percent premium, for Zipcar
Inc, thereby taking the top spot in the fast-growing
U.S. car-sharing market.
With Zipcar in its stable Avis is poised to zoom past larger
rivals Hertz Global Holdings Inc and Enterprise Holdings
"My first reaction was concern because I have been very
excited to see the significant growth of startups (like Zipcar
and other car-sharing companies)," said Ilana Preuss, 40, a
Washington community development advocate who uses Zipcar.
"One nightmare would be they ruin the customer service of
Zipcar, the friendliness of Zipcar," she said. "I'm hopeful that
Avis will be able to add to what Zipcar does. I would hate to
see it change for the worse."
The 12-year-old Zipcar charges more than traditional rental
car companies for longer rentals but makes up for the high price
with convenience for its members, who now number more than
760,000 in 37 U.S. states after the company's start in
Its niche - and one which it more or less created - is in
rentals as short as an hour for users who, for example, may want
to run a few errands, drive to business meetings or deal with an
Once signed up for Zipcar, members who reserve a car find it
waiting for them in a designated parking spot with no need to
wait in a slow-moving line at a car rental counter to fill out
And no need for city slickers to trek to the airport: Zipcar
has vehicles stashed in spots around many city and inner
suburban areas. It also has a strong presence in college towns
like Bloomington, Indiana, and Chapel Hill, North Carolina.
Its fleet is stocked with premium cars like BMWs or Audis,
fun cars such as the Mini Cooper, and larger vehicles like the
Ford E-150 cargo van for that weekend apartment moving project.
Each vehicle is returned back to its designated spot at the
end of the rental. Availability of each car is shown online, and
renters can specify a block of time - say, from 10am to 2pm.
Avis, which declined to be interviewed for this story, has
said it expects the deal to close in the spring of 2013. Zipcar
will operate as a unit of Avis and Scott Griffith will remain
the unit's chief executive officer, Avis said this month.
Hertz and Avis have made small efforts to get into the
car-sharing business but neither have come close to challenging
Zipcar's lead in this market.
In the rapidly consolidating world of car rentals, Avis has
been relegated to No. 3 in the $22 billion U.S. industry. Hertz
vaulted into the No. 2 spot with its acquisition of Dollar
Thrifty Automotive Group, with Enterprise atop the pack.
While travelers landing at major airports see a profusion of
car rental counters, at this point there are three giant
nationwide rental companies. Avis previously bought Budget Rent
a Car, Hertz owns the brands Dollar and Thrifty, and Enterprise
owns Alamo and National.
Zipcar did not return telephone calls seeking comment.
FTC'S BRIEF TO CONSIDER IMPACT ON INNOVATION
The Federal Trade Commission is likely to review the Zipcar
deal for antitrust concerns since it also looked at the Hertz
acquisition of Dollar.
It could decide to challenge the proposed transaction under
2010 guidelines which allow regulators to oppose a deal if it
would hurt competition in innovating, said Herbert Hovenkamp,
who teaches antitrust at the University of Iowa College of Law.
"The government has said that it will challenge a merger on
those grounds. It seems to me to fit with the Zipcar story.
That's what I'm suspecting is going to emerge in this," said
But most other antitrust experts did not expect Avis to face
stiff regulatory headwinds.
"I don't think there's any barriers to entry here," said
David Balto, a veteran of the FTC and Justice Department now in
In order to stop a proposed merger the FTC and Justice
Department usually show that prices will go up because of the
deal. They must also show that if prices go up that there is
little likelihood that newcomers will move into the business.
Peter Carstensen, who teaches at the University of Wisconsin
Law School, believes the merger will be approved, and it angers
"It's the decline and fall of merger law," he said. "It's on
top of a lot of other consolidation in the auto rental business.
If it (the deal) has any economic effect, it will be an adverse
one but there's no way we can prove an immediate substantial
probability of an effect on price. I don't like it."
Still, Zipcar member Mike Bennett, a 35-year-old contractor
who works on projects for the U.S. Agency for International
Development, is a prime example of why the deal may win
Bennett, who lives in Washington, uses Zipcar about once a
month to visit family in the Maryland suburbs. He likes the
service but if it deteriorates on Avis' watch, would happily
switch to an upstart that is challenging Zipcar.
"I hope that the level of service and the availability of
cars stays the same or improves," he said. "(But) I can always
cancel and go to those little Smart Car ones, Car2Go."