The UK's Office of Fair Trading (OFT) on Friday said it had decided not to refer the completed acquisition by dealer group Pendragon of rival Reg Vardy to the Competition Commission on the condition that Pendragon provides satisfactory divestment undertakings to address competition concerns.

The OFT has identified four local areas where the merger of the car dealerships' businesses may substantially lessen competition in the provision of servicing and repair for new cars under warranty.

Pendragon has offered to divest a number of dealerships within these areas to address those concerns, the OFT said.

Vincent Smith, OFT director of competition enforcement said: "The findings of the recent independent evaluation study for the OFT on car warranties, and evidence from third parties obtained during this investigation, show that customers still predominantly have their new cars serviced and repaired at franchised dealerships.

"This merger leads to a substantial lessening of competition in terms of the choices available to such customers in a small number of local areas.

"The OFT will now proceed to consider further whether the proposed divestments are sufficient to restore competition for the servicing of new cars in these local areas."