CMA raises local authority concerns on Veolia/Suez deal

The Competition and Markets Authority (CMA) has ruled that Veolia’s proposed takeover of Suez could lead to a “substantial lessening of competition” in the UK.

Veolia Suez
Both the EU and UK competition authorities are looking at the Veolia/Suez merger

In a statement this morning (07 December), the UK’s competitions body raised concerns that the deal could lead to a loss of competition for council contracts, leading to higher prices for local authorities, leaving taxpayers to foot the bill.

The CMA has now referred the merger for a phase 2 investigation, “unless the parties offer acceptable undertakings to address these competition concerns”.

The deadline for undertakings is 14 December.

Veolia and Suez reached an “historic agreement” on a deal worth upwards of £10 billion in April after a very public row spanning several months (see letsrecycle.com story).

Under the terms of the agreement, all of Suez’s operations in the UK will be transferred over to Veolia, subject to regulatory approval.

The CMA said Veolia and Suez are one of a few companies able to bid for ‘complex’ council contracts

CMA

In a statement this morning, the CMA said that “in particular”, the deal could hit council contracts for waste management services.

The competitions body said: “The CMA is concerned that Veolia and Suez are two of only a small number of suppliers active within the UK that are able to service the largest and most complex waste management contracts with councils.

“As a result, the merger could lead to higher prices and lower quality services across a range of waste management activities in the UK”.

 It is vital this deal is subject to more detailed scrutiny if our concerns aren’t addressed

– Andrea Coscelli, chief executive of the CMA

‘Higher prices’

Andrea Coscelli, chief executive of the CMA, said: “Councils spend hundreds of millions of pounds on waste management services. Any loss of competition in this market could lead to higher prices for local authorities, leaving taxpayers to foot the bill, and reduced innovation to achieve Net Zero targets.

“Everyone in the UK uses waste and recycling services in some way, it is therefore vital that this deal is subject to more detailed scrutiny if our concerns aren’t addressed.

“The CMA also identified competition concerns in several water management markets, where insufficient competition after the merger could mean that industrial customers would also have to pay higher prices.

“Veolia and Suez now have 5 working days to submit proposals to address the CMA’s concerns. If suitable proposals are not submitted, the deal will be referred for an in-depth Phase 2 investigation.”

Concern

In the summary of the decision, the CMA explained that waste management services are becoming “increasingly important as the UK Government …implement their net zero strategies, and move towards a circular economy”.

Competition in the ‘increasingly important’ waste market could be lessened by the deal, the CMA said

To achieve these strategic priorities, the CMA claimed, it is “crucial that sufficient competition remains” in UK waste management markets.

The decision said the CMA reviewed a substantial amount of evidence, including internal documents from each of Veolia and Suez, as well as data on tenders the parties competed in.

It found that often, waste management contracts can be “complex”, including several services in one tender, which the CMA said both Veolia and Suez are “particularly strong suppliers” of.

The CMA said it received a “large number of complaints” from local authorities, who said the merged entity would be “the only company which could credibly” bid for a contract.

The decision said: “The CMA is therefore concerned that the merger would remove an important competitor from the market and give rise to a realistic prospect of an SLC [substantial lessening of competition], which could manifest itself through higher prices, lower quality of service and/or less innovation, affecting potentially millions of UK households and businesses.”

Also, the deal could lead to an SLC for the two companies’ commercial and industrial customers, the CMA added.

EU

The CMA noted that the decision has also been subject to competition probes from its counterparts across the world.

Last month, both Veolia and Suez submitted proposals to the European Commission’s competition body, linked to receiving approval for Veolia’s acquisition (see letsrecycle.com story).

The CMA began its probe in October 2021 in relation to the completed 29.9% stake in the company, and the anticipated public takeover bid (see letsrecycle.com story).

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