CMA provisionally rules out UK Veolia and Suez merger

And, subject to further discussion, it is recommending that Veolia – which has a global operation with its headquarters in Paris – should either sell off Suez UK or even sell Veolia UK to ensure there is sufficient competition in the UK’s waste and recycling marketplace.

The CMA also said that the merger would lead to a loss of competition in the supply of several water services in the UK.

The government body claimed: “This loss of competition could then lead to more costly and lower quality services, and in turn to higher council tax bills, as local councils and some businesses would have less choice when procuring key waste and water management services.”

Local authority budgets

Stuart McIntosh, Chair of the CMA inquiry group, said: “We all use waste and recycling services in some way, so it’s vital that these markets are competitive and provide good value for money. This is all the more important at a time when local authority budgets are already stretched and waste management services have to evolve to help achieve Net Zero targets.

We’ve heard from a number of customers, including local authorities, who are concerned that this merger could reduce competition

Stuart McIntosh, CMA

“We’ve heard from a number of customers, including local authorities, who are concerned that this merger could reduce competition in markets where choice is already limited, leading to higher prices or poorer services.

“We share those concerns and want to make sure that commercial customers and councils don’t get a worse deal – leaving taxpayers to foot the bill at a time when household budgets are already under huge pressure.”

18 regions

The Competition and Markets Authority (CMA) launched an inquiry into the deal in October 2021 and it was referred for an in-depth Phase 2 investigation, which is led by an independent inquiry group, in December 2021. The UK is thought to be the only region of 18 where Veolia operates which has seen the company face a ruling to sell off of either the whole local Suez or Veolia business.

In its remedies notice today, the CMA said that its initial view is “that a divestiture of the UK Waste Division of either Veolia or Suez to a purchaser approved by the CMA represents the only effective remedy to the Provisional Waste SLCs.” [SLC=Substantial lessening of competition]

Reactions

Immediate reactions to the ruling are expected to be one of disappointment at Veolia with the hard-line stance taken by the CMA. The company is expected to have offered to divest some of its infrastructure or activities in the UK to meet CMA expectations. For Suez, while it could mean that the company is not acquired by Veolia, it would appear likely that the business could be sold on the open market or even split-up. In the first instance, the CMA has said it would want the Suez (or Veolia business) to be sold as a whole under a process approved by it – but in the future there is likely to be the option for any purchaser, such as an investment fund, to sell off parts of the business. [updated 19 May]