The rental car business is a highly concentrated industry controlled by four companies. It’s about to get much more concentrated, if Hertz’s $2.3 billion bid for Dollar Thrifty passes its antitrust reviews.
The merger’s potential effects on competition and consumer prices should be a primary focus of news coverage of the deal. Relatively few people hold Hertz or Dollar Thrifty shares. Lots of people rent cars.
While most of the coverage I saw was workmanlike if uninspired, The New York Times‘s story, written by its DealBook group, which focuses on investors, is awfully weak.
The paper’s story doesn’t mention the consolidation of the car-rental industry until the seventh paragraph, and even then it’s only in passing and after two graphs of corporate press release blather that tells us absolutely nothing. Contrast that to The Wall Street Journal, which puts consolidation in the lede:
Hertz Global Holdings Inc. said late Sunday it agreed to buy Dollar Thrifty Automotive Group Inc. in a deal valued at about $2.3 billion, a move that would cap more than a decade of consolidation in the U.S. rental-car industry and bring the number of major players to three from what was once nine.
While the NYT has room for the standard grease-your-sources two paragraphs of information about which lawyers and banks advised the parties on the deal, there’s no detail about what most New York Times readers would actually care about: the concentration of a $23 billion-a-year industry.
So here’s some: The top three companies in that industry—Enterprise, Hertz, and Avis—already control 87 percent of sales, according to AutoRentalNews numbers. By gobbling up No. 4, Dollar Thrifty, the top three would then control 94 percent of sales.
A decade ago there were nine major car-rental companies competing against each other. Now there would be three.
Fewer competitors usually means higher prices for consumers and higher profit margins for the remaining players in an industry, which is a primary motivation for consolidating an already-concentrated business.
That’s why shares in Avis Budget Group (as you can see, itself a product of consolidation) jumped 10 percent at the opening bell and settled up 4 percent for the day. Or as Reuters, in a weak piece, euphemistically put it, “In a sign that investors welcomed consolidation of the industry, Avis shares also rose 4 percent to $16.63.”
It’s context readers need to know much more than “Hertz was advised by Lazard, Barclays, Bank of America Merrill Lynch, Deutsche Bank and the law firms Cravath, Swaine & Moore, Debevoise & Plimpton and Jones Day,” which seems to be a problem caused by having DealBook cover the news for the general paper.
Some wire copy would have been better.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.