Earlier in the summer, the Federal Trade Commission sanctioned car rental giant Hertz's  $2.3 billion acquisition of Dollar Thrifty, under one main condition: It had to sell Advantage, one of its brands, on the theory that a new private equity owner could create a viable competitor.

“American consumers rent more than 50 million vehicles at airports nationwide each year, spending $11 billion, so this is a real pocketbook issue for everyday people,” said then-FTC Chairman Jon Leibowitz, announcing the divestiture late last year. “Today’s bipartisan action by the FTC will ensure that consumers are not forced to pay higher prices for rental cars when they travel.”

Well, that didn't work out so well. Yesterday, Advantage filed for bankruptcy after its plan to buy 24,000 vehicles from Hertz fell apart over a dispute around the value of the fleet. So now, Hertz has Dollar Thrifty, Advantage might disappear, and there's probably nothing the FTC can do to fix a situation it went to great lengths to avoid.

But wait — when you go to the counters to pick up a car at the airport, there are a bewildering array of options. Is there really a competition problem in this market?

Well, yes and no.

On the one hand, car rentals are a lot more consolidated than they appear. Avis owns Avis, Budget and Zipcar. Hertz now owns Dollar and Thrifty. Enterprise owns National and Alamo. So purely on market share, that creates a big imbalance:

How the car rental world was divided in 2012 — add red and purple to get the combined Hertz/Dollar Thrifty. (data from Auto Rental News)
How the car rental world was divided in 2012 — add red and purple to get the combined Hertz/Dollar Thrifty. (Data from Auto Rental News)

It's important to note, though, that each big company is now competing against the others in all segments of the market. Before the spate of mergers, the individual companies tended to specialize in premium business trips, more price-sensitive leisure travelers and the super-low-budget bargain hunters. Now, the three big players have offerings in most of those niches, and compete on price and service in each of them — they're all even now in the car sharing market, with Hertz on Demand, Enterprise Car Share and Avis' Zipcar. And moreover, they're also able to compete for government and corporate accounts that require a nationwide footprint.

Niches are especially important. When it acquired National and Alamo in 2007, privately held Enterprise thought about merging them under one banner, as would seem to make sense. In September, Enterprise Holdings CEO Andrew Taylor described why he decided not to:

National appealed to business travelers; we referred to them as “rental experts” because they wanted to get in and out of their vehicles as fast as possible, without stopping to fill out forms or deal with customer representatives. And they were willing to pay a premium for those benefits. National’s loyalty program, the Emerald Club, was a major driver of reservations and repeat business. Alamo, on the other hand, was a destination brand for vacationers, often from outside the United States, who were headed to places like Las Vegas and Disney World. Its customers generally looked for bargains on the internet. Meanwhile, Enterprise’s strong track record of affordable pricing in home-city markets attracted customers to its airport locations as well. Each brand had significant value and offered its customers what was most important to them. So we worked to reinforce the distinct character of each.

(It's like how Gap Inc. has Old Navy for the basics, Gap for the slightly more sophisticated and Banana Republic on the high end.)

At the same time, though, Enterprise was merging business operations to find efficiencies for all three, like centralizing back office functions in a Tulsa facility and moving some Enterprise managers into National and Alamo offices (some of which were franchised). Six years later, Enterprise's brands took the top three spots on J.D. Power's 2013 Rental Car Satisfaction Survey. So in this case, consolidation may have lowered prices and made customers more happy.

Enterprise has an "exotic car collection." (Facebook)

The other thing that's important to know: Rates are determined by a whole lot beside any potential price-fixing that market concentration might enable. The FTC evaluates the quality of competition on a market-by-market basis, primarily around airports. The size of an airport will influence the number of parking lots and rental desks it's able to offer, setting supply relative to demand. It's always helpful to have more competitors, but some are small enough that a lot would be impossible to accommodate. The other big cost driver is the price of cars, which larger companies are better able to negotiate with manufacturers. Finally, car rental companies also cut deals with hotels and airlines to offer packages that can bring down costs for the individual traveler.

So while it's still hard to know how the potential disappearance of Advantage might impact the car rental market, there are some bigger forces at play that might cancel it out, or at least make it hard to determine whether its absence made a difference.

One thing's for sure though: The long march towards bigness in the car rental business is probably at an end. Prices have already started to rise, with three main players in the market, and regulators are much more careful about letting a market go from three functional competitors to two than they are letting four go down to three.

"Both the FTC and Department of Justice, knowing nothing else, would take a very close look at that," says Matt Reilly, an antitrust lawyer who used to oversee such things at the FTC.