Increased Scrutiny = High Quality Merger Determinations in Ireland? the Q-Park/Tazbell Transaction

Introduction

Ireland’s national competition authority, the Competition and Consumer Protection Commission (“CCPC”), has recently increased scrutiny of mergers using Assessments (i.e. a Statement of Objections in European Commission parlance).  Other things being equal, the greater use of Assessments should lead to well-reasoned merger determinations supporting, where appropriate, effective remedies. But is this the case? The agency’s August 2023 determination of the proposed acquisition by Q-Park Ireland Limited (“Q-Park”) of Tazbell Services Group DAC (“Tazbell”) suggests not: the determination is fatally flawed.

The CCPC had competition concerns in three local markets in the supply of off-street car parking spaces to the public: Galway; Drury Street, Dublin; and Fleet Street, Dublin.  The transaction was cleared with two sets of remedies.  One set related to Galway, the other to the two Dublin City markets.  An examination of the CCPC’s determination finds, however, that there was no substantial lessening of competition (SLC), the competition test in Ireland’s competition statute, in any of the three markets where the CCPC had competition concerns.  Even if it were accepted that the agency’s competition concerns have merit, the remedies were inadequate. 

Raising Barriers to Transparency, Accountability and Legitimacy: Unwarranted CCPC Redactions

Independent external analysis of the CCPC’s almost 400 page written Q-Park/Tazbell merger determination was impeded by the agency’s unwarranted redactions of publicly available information (e.g. the capacity of individual off-street car parks), the agency’s rationale for excluding a set of close competitors in the Galway City market, the masking of the Dublin City centre remedy, and the unprecedented redaction of why this remedy mitigated the agency’s competition concerns.

None of these omissions accords with the CCPC’s policy on redactions.  The redacted material is not “commercially confidential.”  After several Freedom of Information Act requests, the CCPC released the previously unredacted material.  Such unjustifiable redactions not only lessen agency transparency, accountability and legitimacy, but also make it difficult for legal advisors and others providing guidance on CCPC practice to establish what precedent is being set by a particular merger determination. Policy-induced uncertainty needlessly increases the costs of doing business in Ireland, thus unnecessarily raising prices for consumers.

Market Definition

The CCPC defined the relevant product market as the supply of off-street car parking spaces to the public. The CCPC’s product market definition is too narrow.  It should also include on-street parking and public transport.  The CCPC’s analysis of whether off-street and on-street parking are in the same market, for example, either mischaracterised the importance of on-street parking, failed to consider information that suggested a contrary conclusion or applied faulty reasoning.

The reasonable relevant geographic market adopted by the CCPC is an 800-metre isochrone or catchment area, centred on a Tazbell car park. 

Unilateral Theory of Harm

Introduction

The CCPC’s unilateral theory of harm is that the proposed transaction involves the loss of a close competitor in a highly concentrated market that will likely lead to an increase in the price of off-street parking. The unilateral theory of harm tests whether the merged entity’s car park at the centre of the Galway, Drury Street and Fleet Street markets has the ability and incentive to raise price, all other prices remaining constant. Off-street car parks are differentiated from each other based on, inter alia, location, opening hours, and price. Attention here is confined to the Galway market.

The Galway Market

The Galway market centres on Hynes Yard off-street car park that Tazbell owns and operates. The merged entity would operate not only Tazbell’s Hynes Yard car park, but also Q-Park’s Eyre Square Centre car park. The evidence suggests that competition in the Galway market would not be substantially lessened because of the proposed transaction.

While the HHI and delta for off-street parking exceeded the threshold that according to the CCPC’s Merger Guidelines “would enable the Commission to conclude … that the Proposed Transaction is unlikely to cause concern,” if the market is defined to also include on-street parking then the proposed transaction would be unlikely to cause concern.

The merged entity will only account for 28.5 per cent of the off-street (and 23.5 per cent of the off-street plus on-street and 20.4 per cent of the off-street plus on-street plus public transport) Galway market.  The European Commission presumes that if the merged entity is below 25 per cent, then it is unlikely to impede competition.

The merged entity faces several significant competitors that is likely to limit its ability to raise prices. If a significant competitor is one with a market share of 5 per cent or more then it is a 7→ 6 merger for the off-street parking in the Galway market and 9 → 8 for the off-street plus on-street parking in the Galway market.  The number of remaining competitors exceeds the thresholds set by the CCPC in other local markets below which the competition concerns are likely to arise.

There has been a considerable amount of churn in the Galway market. Q-Park lost two-thirds of its market share between 2016 and 2022. City Park founded in only 2018 was the largest car park operator in the Galway market prior to the proposed transaction.

Plausible estimates of demand elasticity, diversion ratios, and mark-ups, suggest that it would be unprofitable for the merged entity to raise Hynes Yard car parking charges.  This finding is reinforced by the presence of excess off-street parking capacity, substantial on-street parking and public transport that is likely to become in the near to medium term a much more attractive alternative to entering the Galway market than by car.

Remedies

Introduction

The CCPC assessed the proposed remedies with respect to the Galway and two Dublin City centre markets by drawing on the criteria set out in the European Commission Remedies Notice:

(i) Are the proposals comprehensive and effective?

(ii) Are the proposals capable of being implemented effectively within a short period of time?

(iii) Do the proposals eliminate the competition concerns entirely?

While the proposals satisfy the second condition, they are neither effective nor do they eliminate the “competition concerns entirely.”

Galway Proposal: Leasing the Top Floor of Tazbell’s Multi-Storey Hynes Yard Car Park

The Proposal

To meet the CCPC’s competition concerns in the Galway market Q-Park agreed to lease the 86 spaces on the top floor of Tazbell’s Hynes Yard multi-storey car park to a competitor: SkyPark Rooftop CarPark (“SkyPark”) opened in May 2024 as Galway’s first digital car park.

Effective & Remove Competition Concerns Entirely?

It is difficult to see how a small reduction in the merged entity’s off-street car parking capacity will alleviate the CCPC’s competition concerns “entirely.”  Under the CCPC-agreed Q-Park/SkyPark leasing agreement, Q-Park will increase its share of the Galway off-street parking market from 13.4 per cent to 25.8 per cent rather than 28.5 per cent; for off-street plus on-street parking the corresponding percentages are 11.1 per cent, 21.3 per cent and 23.5 per cent, respectively. Hynes Yard customers have shown a distinct disinclination to pay online or park on the top floor.  Pre-merger 98 per cent of Hynes Yard customers paid at the car park rather than online.  Hynes Yard customers pre-merger typically did not park on the top floor: occupancy rates in 2022 varied between 0 per cent and 2.3 per cent. 

Implications

Policy Recommendations

The quality of merger control can be improved, inter alia, by:

· expanding the number of CCPC executive board members to reduce governance overload;

· encourage diverse internal views and peer review in the development of merger analysis.  The CCPC might consider – consistent with the practice elsewhere - of appointing a chief economist, even if it is only on a part-time basis;

· market test all remedies, preferably publicly.  The UK’s Competition and Markets Authority current practice in this regard is one such model; and

· ensure merger determination redactions are consistent with the CCPC’s declared policy on commercial confidentiality.

Wider Implications

The Q-Park/Tazbell transaction is, of course, a non-random sample of one. As a result, it could be argued, caution should be exercised in generalising from this case study. However, the findings, conclusions and suggestions for improvement in the instant case are consistent with a broader critical narrative that has developed of CCPC merger control on both procedural (e.g. the CCPC view that it need not – and on occasion did not  - provide feedback on its competition concerns to the parties to a proposed transaction until the issuance of the Assessment) and substantive (e.g.  the acceptance of inadequate remedies when the CCPC had demonstrated that the proposed transaction would result in an SLC) grounds. The CCPC’s annual Mergers and Acquisition Report provides a vehicle for the CCPC to address these comments, concerns and criticisms.

Disclaimer: This blog is based on the author’s Munich Personal RePEc Archive paper: https://mpra.ub.uni-muenchen.de/80787/.  The author was a member of the Competition Authority ( 2000 – 2008), a Research Professor at the ESRI (2009 - 2013) and an Adjunct Lecturer, Department of Economics at TCD (2013-2019). The author was not involved in any capacity in the Q-Park/Tazbell transaction. The usual disclaimer applies. The blog does not pay attention to the CCPC’s analysis of the market for car park management services which includes management of the car park, its signage, payment collection, and customer service.  The CCPC expressed no competition concerns in this market.  No AI or AI assisted technologies were used in the preparation of this Blog.