Competition ruling could unravel healthcare waste merger

Speaking to letsrecycle.com on Wednesday, the Competition Commission said American-owned Stericycle International LLC may be forced to sell all, or part, or its new acquisition Sterile Technologies Group arm.

” We have provisionally concluded that there would be insufficient competitive constraints on the merged company “
– Diana Guy, Competition Commission
The merger took place in February, unusually before any ruling from the competition authorities.

The Competition Commission has provisionally ruled that the merger between the two companies would remove competition for healthcare waste services requiring incineration in some parts of the UK, and could drive up service prices.

Despite the existence of around 25 providers of healthcare risk management, the merging parties now hold over 50% of the UK market for healthcare waste.

The announcement on the merger comes before a final report on December 12, which could require a partial or complete unwinding of the merger through an Unravelling Order.

Under the Enterprise Act 2002, any mergers that create or enhance a 25% share of any UK market, or where the turnover acquired is over 70 million, the case must be reviewed by the Competition Commission.

Prices
The Commission's inquiry chairman, Diana Guy, explained that since suppliers needed to use incinerators within 100 miles of customers to offer competitively priced services, very few providers were left to compete in some parts of the country.

She said: “Prior to the merger, these were the two largest suppliers of healthcare risk waste services in the UK. As a result of the merger customers in several areas of the UK face a reduction in the number of competing providers from two to one, whilst in other areas the reduction is from three to two.

“Given the barriers restraining entry or expansion into this market by other providers, we have provisionally concluded that there would be insufficient competitive constraints on the merged company. As a result we believe that the merger could lead to higher prices for customers,” Ms Guy added.

Tribunal
In September, the Competition Appeal Tribunal ruled that Stericycle International LLC and Sterile Technologies Group could not integrate any of their businesses before the Competition Commission inquiry had been completed.

The company, which is a subsidiary of American medical waste management giant Stericycle Inc, already offers services to a range of NHS and other customers in Great Britain.

However, a spokesman for the Commission explained that it would take a “significant” piece of evidence to change the outcome of the investigation, which suggests ways for Stericycle International to restore competition in affected areas such as northern England and the North and West Midlands.