Two franchisees and a property owner have filed an anti-trust lawsuit against Hertz Global Holdings Inc. and Dollar Thrifty Automotive Group Inc. on Sept. 23 in the San Francisco Federal Court.
The lawsuit, brought by Cassan Enterprises Inc., CMC Investments Inc. and Todd Investments Co., contests Hertz's recent proposed acquisition of Dollar Thrifty at $50 per share, which the plaintiffs claim is in violation of Clayton Antitrust Act.
Cassan Enterprises and Todd Investments each operate a Dollar rental franchise, at Seattle-Tacoma International Airport in Wash., and in Portland, Ore., respectively. CMC Investments owns a piece of property in Seattle on which a Dollar rental franchise is located, the value of which, it fears, would be diminished by the merger.
"The acquisition, or the attempted acquisition, by Hertz of Dollar is, in our judgment, a blatant violation of the anti-merger statute which is section seven of the Clayton Anti Trust act," says Joseph Alioto, an antitrust attorney representing the plaintiffs, told Auto Rental News.
The proposed acquisition of Dollar Thrifty by Hertz would create the largest car rental firm in the United States. It would also mean that 98 percent of the market would be controlled by three companies: Enterprise Holdings, Avis Budget Group Inc. and Hertz.
"When there is a merger, people are fired, prices are increased, service goes down, innovation gets wiped out and supply and capacity is substantially reduced," explained Alioto, who claims the merger would result in diminished product quality for consumers, as well as the potential termination of franchise contracts or increased fees and diverted reservations for other car rental companies.
According to the complaint filed by the plaintiffs, Hertz would dominate 38 percent of the car rental market after a merger with Dollar Thrifty. Currently, Hertz controls 25.7 percent of the market.
The complaint also states that the proposed acquisition would place Hertz's Herfindahl-Hirschman Index (HHI) value at 3242 - a 617 point increase and 742 points over what is considered "extremely concentrated" according to Horizontal Merger Guidelines.
"There is a real, substantial, economic threat to the plaintiffs as well as to all of the people of the United States, especially the business people who rely heavily on the rent a car business on the airports," said Alioto of the merger.