The firms now have five days to respond to the CMA’s initial findings; if its key issues are not addressed, then an in-depth phase two investigation will be required
The Competition and Markets Authority (CMA) is “concerned” about broker Ardonagh’s purchase of rival firm Bennetts Motorcycling Services as it believes this could lead to “higher prices, less choice and worse services for motorcyclists in the UK”.
In February this year, Ardonagh confirmed that it had agreed a £26m deal to buy Bennetts – the CMA said this would establish Ardonagh as the largest supplier of motorcycle insurance in the market, at three times the size of its next largest competitor.
This finding was revealed within the CMA’s phase one investigation, which was launched on 21 July as part of the acquisition process.
Prior to the proposed acquisition, Ardonagh – which operates the Carole Nash and Swinton brands – and Bennetts were identified as the two leading distributors of motorcycle insurance to UK private customers.
The phase one investigation further found that currently, Ardonagh and Bennetts compete closely. Therefore, the merged organisation would only encounter limited competition from other much smaller suppliers, such as Bikesure, MCE and Hastings, as well as a range of smaller brokers.
The impact of price comparison websites, which typically increases market competition, is also in favour of Ardonagh and Bennetts, as they both hold “a significant incumbency advantage in the market” and are “less exposed to price competition on [price comparison websites] than other suppliers as they make more of their sales directly to customers or through renewals”.
Price comparison websites have not materially affected the market positions of Ardonagh and Bennetts, the CMA added.
In terms of next steps, Ardonagh and Bennetts now have five working days to propose measures that address the CMA’s concerns. If this is not completed, then the merger will be referred for a more in-depth phase two investigation.
Colin Raftery, senior director at the CMA, said: “Over one million motorcyclists in the UK rely on good value and high-quality insurance to keep them on the road and to provide an effective safety net when things go wrong.
“We’re concerned that Ardonagh buying up its most important competitor could lead to a lack of competition in the market, resulting in a worse deal for customers across the UK when they next come to renew their policies.”