Cendant said unless background operations at the two firms could be merged, the bid for RAC Motoring Services was void and it pulled out of the deal. Howells said that allowing the two rival services to come under single ownership would have weakened competition in the market and risked creating a 'duopoly' with the AA, the market leader.
He said: 'Cendant and the RACMS submitted that the merger would benefit competition by creating a stronger second force to compete with the AA. I agree with the MMC's view that RACMS has great strengths of its own and that, managed in a commercial manner, it is capable of competing effectively with the AA without the benefit of a merger with Green Flag.'
With the possibility of growth through a merger within the 'big three' effectively blocked by the Government, RAC Motoring Services and Cendant have put partnership behind them and begun work on battle plans against each other and the AA for market share. Lex Service is rumoured to be willing to invest £400 million in RACMS, with a ready-made base of customers for breakdown services available through its other vehicle services divisions, including Lex Vehicle Leasing and Lex Transfleet. The company refused to comment.