August 30, 2022 by Joshua Doherty

CMA publishes final Veolia/Suez report

The Competition and Markets Authority (CMA) has released the full final report of its ruling against Veolia’s acquisition of Suez in the UK.

Veolia has begun the process of selling Suez recycling and recovery UK

And, in the report, the CMA said while it accepts that Biffa’s deal to acquire Viridor’s recycling assets in 2021 had led to a more “concentrated” market, it stands by its decision not to further probe that £126 million acquisition.

The 530-page document into Veolia/Suez was published on Friday (26 August) and provides further insight into the CMA’s thinking and that of competitors in their submissions.

The notable aspects of the report include the CMA admitting that its probe into Veolia’s proposed acquisition of Suez was taking place “within the context of a market that is more concentrated” after Biffa’s acquisition of Viridor’s recycling assets in 2021.

Veolia was concerned that this acquisition wasn’t called in at the time and said the CMA’s approach to its deal with Suez was not “consistent “with the approach taken with Biffa and Viridor.

In response, the CMA concluded: “While each case turns on its own facts, we note that our assessment takes place within the context of a market that is more concentrated than that at the time of the consideration of the Biffa/Viridor transaction, given the increase in market concentration brought about by that transaction.”

Interest

Meanwhile, FCC Environment said that it, along with Biffa and Viridor, was interested in offering Suez UK but had doubts about passing competition hurdles.

Also in the report it is revealed that Viridor had told the CMA that a sale of Suez’s UK operations was the “only solution”.

Report

The final report provides more details about the exact reasons why the transaction creates a substantial lessening of competition in the UK waste market.

For household collections, the CMA said it found that the two together served 30-40% of households that have outsourced non-hazardous municipal waste collection.

Under the final CMA ruling, Veolia will need to sell the businesses it took over when it acquired Suez UK

“This is a materially larger position than any other supplier – FCC serves 20-30% of households while Biffa and Serco each serve 10-20% of households,” the report explained.

The CMA also examined 11 ‘complex’ contracts, and found that, on average, there were fewer than three bidders identified by local authorities in the final round.

No local authority identified any more than four bidders for any of the contracts and Veolia and Suez, together with Serco and Biffa, “were identified as bidders more frequently than any other supplier”.

The only segment of the market highlighted in the report where competition would remain was in open windrow composting services, “where the parties only overlap in four local areas”.

Commercial

For commercial and industrial contracts, the CMA confirmed that Biffa and Veolia are “by some distance” the largest suppliers for national customers.

Biffa alone accounts for 50-60% of the market and “collectively Biffa and Veolia account for 70-80%”. Suez has an estimated share of 5-10%.

The CMA said: “The Merger will therefore result in further consolidation of an already highly concentrated market. Novati and DS Smith (both brokers) have similar shares to Suez. All other competitors have very low market shares.”

Biffa/Viridor

Veolia had submitted that the CMA’s concerns over competition created by Veolia’s deal with Suez “are inconsistent with the CMA’s approach to the Biffa/Viridor transaction”.

The lack of a probe into the sale of Viridor’s assets to Biffa was criticised by Veolia

The body explained that in assessing whether the Biffa/Viridor transaction should be called in for a formal investigation, its mergers intelligence committee considered whether there was (at that time) a reasonable chance that the test for a reference to an in-depth phase 2 investigation would be met.

The report said: “We do not believe it is appropriate to conduct the kind of comparative assessment suggested by the Parties [Veolia and Suez] in relation to the respective roles that each of Veolia and Biffa and Suez and Viridor play within the market.

“Each transaction considered by the CMA is examined based on the specific characteristics of the merger parties in the market and market dynamics at the relevant time. We note that our assessment takes place within the context of a market that is more concentrated than that at the time of the consideration of the Biffa/Viridor transaction.”