Investigation into Zipcar takeover

Zipcar's $50m (£32m) acquisition of Streetcar faces a Competition Commission inquiry amid concerns of the impact of the deal on London's fast-growing "car club" market.

Zipcar – which is largely based in the US but has 370 cars in Britain – bought its 1,400-strong UK rival in April, creating a fleet that dwarfs the new group's nearest competitor, City Car Club.

The market for car rental in very short time slots is currently small but it has enormous growth potential and must be protected, the Office of Fair Trading (OFT) said yesterday, referring the deal on for formal investigation by the Competition Commission.

"The fact that the market is nascent means it is particularly important to protect the competition that exists at this point," Amelia Fletcher, the OFT's senior director of mergers, said.

"This merger will bring together the two largest and most closely competing car clubs in London, and our investigation has indicated that Zipcar was a particularly strong and dynamic competitor to Streetcar."

Scott Griffith, chairman and chief executive of Zipcar, said he was confident the investigation will conclude the deal does not result in less competition in the sector. "We're disappointed by the decision of the OFT, which imposes a delay on a transaction from which consumers and the environment stand to benefit," he said.

The Competition Commission is expected to publish its findings in January.