The UK Competition and Markets Authority has fined Copart UK, after it identified breaches in the mergers process during the Copart UK acquisition of Hills. Here’s an extract from the CMA update below, which is quite long-winded and packed with notes and addendum as you’d expect.
The full CMA statement can be found here by the way;
On 14 December 2023, the Competition and Markets Authority (the CMA) gave notice to Copart, Inc., CPRT LLP, Copart UK Limited (together Copart) that it has decided to impose a penalty on Copart, Inc., CPRT LLP, Copart UK Limited jointly and severally under section 94A of the Enterprise Act 2002 (the Act) because it considers that Copart has, without reasonable excuse, failed to comply in certain respects with the requirements imposed on it by the initial enforcement order issued by the CMA under section 72 of the Act on 9 August 2022 to Copart (the IEO).
The cumulative amount of the penalties in respect of all the breaches identified in the penalty notice is £2.5 million, comprising the following: a) £650,000 for the Insurer 1 Breach;
b) £650,000 for the Insurer 2 Breach;
and c) £1.2 million for the Insurer 3 Breach. Failure to comply with the IEO 3.
SUMMARY
On 5 July 2022, Copart UK Limited, a wholly owned subsidiary of Copart, Inc., acquired the entire issued share capital of Green Parts Specialist Holdings Ltd (Hills Motors and together with Copart, the Parties) (the Merger). On Friday, 5 August 2022, the CMA notified Copart of its intention to impose an initial enforcement order and requested certain corporate details.
On Tuesday, 9 August 2022, the CMA imposed the IEO. 4. The IEO required, among other things, that during the specified period (which in this context means the period from 9 August 2022 to 14 July 2023), except with the prior written consent of the CMA, Copart:
a) refrain from taking any action which might have prejudiced a reference of the Merger under section 22 of the Act or might have impeded the taking of any action under the Act by the CMA which may have been justified by the CMA’s decisions on such a reference, including any action which might have led to the integration of the Hills Motors business and the Copart business (paragraph 4);
b) take all necessary steps to ensure that the Copart and Hills Motors businesses were carried on separately and that the Hills Motors business’s separate sales identity was maintained (paragraph 5(a)) and any negotiations with any existing or potential customers in relation to the Hills Motors business were carried out by the Hills Motors business alone, and Copart did not enter into any joint agreements with the Hills Motors business (paragraph 5(g));
and c) provide to the CMA periodic compliance statements to verify compliance with the IEO (paragraph 7) and, at all times, actively keep the CMA informed of any material developments relating to the two businesses (paragraph 8).
5. On 3 October 2022, the CMA launched a phase 1 merger investigation, which on 28 November 2022 concluded that there was a realistic prospect of a substantial lessening of competition (SLC) within, among others, the market for the supply of salvage services in the UK. The CMA referred the Merger for further investigation and report by a group of CMA panel members on 9 December 2022. The CMA issued its Final Report, which resulted in the Merger being cleared unconditionally, on 14 July 2023.
6. The CMA finds that Copart has, without reasonable excuse, failed to comply with the IEO during the specified period by reason of its conduct in relation to three requests for proposals (RFPs) for the supply of salvage and related services issued by each of Insurer 1, Insurer 2 and Insurer 3.
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