Concerns have been raised by the Office of Fair Trading over the acquisition of Streetcar, the British car club, by US rivals Zipcar. The deal was agreed last April and was worth £32 million. The OFT is worried that the deal will result in less competition in a nascent, but potentially huge, section of the car hire market.

Car clubs are becoming increasingly popular as they allow members access to vehicles for short periods of time meaning that drivers no longer have to pay for a full days rental if they only need a vehicle for an hour. Membership has the added bonus of meaning that fuel, insurance and other potentially costly additional services are all included.

Zipcar has its main operation in the US but runs a fleet of 370 cars in the UK. By purchasing Streetcar it increased that fleet by 1,400 vehicles. This means that it is now substantially larger than its nearest rival in the UK, City Car Club.

The OFT has asked the Competition Commission to conduct a formal investigation into the deal. Senior director of mergers at the OFT, Amelia Fletcher, said that it was important that the short term car rental sector, because it is in its infancy and because it has such a tremendous potential for growth, should be protected now.

Zipcar’s chairman and chief executive, Scott Griffith, said he was disappointed by the request for a formal investigation. He added that he was confident that the outcome would find that the merger did not have any negative impact on competition in the UK car club sector.