CHICAGO and SAN DIEGO — CCC Information Services and Mitchell International reaffirmed their commitment to their planned merger and intend to contest the Federal Trade Commission’s decision to oppose it. CCC and Mitchell reiterated their commitment to the value of the proposed merger and the competitive industry in which they serve.
MORE ON THE MERGER
“While we are disappointed and disagree with the FTC’s position, we intend to vigorously challenge the FTC in court,” says Githesh Ramamurthy, CEO of CCC Information Services.
Alex Sun, president and CEO of Mitchell International, says, “The driving force behind the proposed merger is the many benefits and innovations it can deliver to our customers. Our industry is – and will remain – intensely competitive. This is something that continues to be one of its defining characteristics.”
The Federal Trade Commission filed suit to block the merger of the two companies last week. It charged that the merger would hinder competition in the market for electronic systems used to estimate the cost of collision repairs, known as “estimatics,” and the market for software systems used to value passenger vehicles that have been totaled, known as total loss valuation (TLV) systems.
The FTC’s administrative complaint alleges that the merger, which is valued at $1.4 billion, would harm insurers, repair shops and, ultimately, U.S. car owners by reducing from three to two the number of competitors in the two related businesses.
“These estimating and valuation solutions are key tools in the auto insurance and collision repair industries,” says David P. Wales acting bureau of competition director. “There is no doubt that this merger would reduce competition that benefits auto insurers and auto body shops and ultimately would lead to higher prices and less innovation for consumers.”
According to the FTC, the merger of CCC and Mitchell would eliminate head-to-head competition between the two companies and leave the combined company with a market share of far more than half of the sales of estimatics, and a market share of far more than half of the sales in the market for TLV systems, creating a likelihood of adverse unilateral effects. The merger also would facilitate coordination among the remaining two competitors, CCC/Mitchell and Audatex, the FTC said in its complaint.
The commission vote to issue the administrative complaint was 3-0, with commissioner J. Thomas Rosch recused. The commission also has authorized the staff to file a complaint in federal district court seeking a temporary restraining order and preliminary injunction to preserve the competitive status quo, pending an administrative trial on the merits.
Issuing a complaint is the first step in the administrative trial process. CCC and Mitchell will be offered FTC’s “Fast Track” administrative trial procedure. The commissioners are committed to a just and expeditious resolution of any potential appeal that may be taken to the full commission. The commissioners commit to make every effort to issue an appellate decision no later than 90 days after receiving a notice of appeal if there is no cross-appeal, or 120 days if there is a cross-appeal.
The commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law.
The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the commission take law enforcement action.
Mitchell and CCC listed the following benefits of the proposed merger:
• an expanded communication network to deliver greater connectivity between insurers, repair facilities, and other industry service providers and suppliers;
• expanded research and development resources and a greater ability to enhance current products and services, deliver new technology-based claims solutions, and provide faster time-to-market product delivery;
• an expanded sales and service organization, providing broader and better customer service across North America; and
• a larger, more comprehensive data warehouse that will improve the company’s ability to deliver industry insights through benchmarking, data analytics and predictive modeling.
The two companies said they remain confident that this merger is pro-competitive and ultimately will be recognized as such.
Chicago-based CCC Information Services Inc., a subsidiary of CCC Holdings Inc., was founded in 1980 and has approximately 1,300 employees. Mitchell International Inc., primarily owned by Aurora Equity Fund III L.P., is part of the Aurora Capital Group, was founded in 1946 in San Diego and has about 650 employees. The companies announced their planned merger on April 11, 2008. Both companies provides estimatics and TLV systems.
The markets for estimatics and TLV systems are already highly concentrated, according to the complaint filed by the FTC. Audatex is the only other significant competitor in both lines of business, the complaint states. CCC, Mitchell, and Audatex have long provided the estimatics market with solutions. Mitchell recently entered the TLV systems market with a new solution that has increased competition in that market, according to the complaint.
