8 April 2021 by Joshua Doherty

UK competition body enters Suez/Veolia battle

The UK’s Competitions and Markets Authority (CMA) has published the latest in a series of derogation notices around Veolia’s part ownership of Suez.

The CMA issued an enforcement order into the merger in February 2021

The CMA issued an initial enforcement order on 1 February 2021 concerning Veolia’s UK operations. This was triggered by Paris-based Veolia’s acquisition of a 29.9% stake in its French counterpart Suez last year.

The enforcement order prevents merging parties from taking ‘pre-emptive action’, which the CMA describes as  “action that might prejudice the outcome of the reference and/or impede” its investigation.

The move is not thought to be a surprise given the size of the two companies in the UK market, but it could be another twist in what has become a long and bitter row between the two waste giants.

Since the order was issued, the CMA has issued a number of derogation notices which gives consent to the merging parties to undertake certain actions that would otherwise be prohibited by the order.

A total of seven notices have been issued since February, with the latest coming on 26 March.

Both Veolia and Suez  have been approached for comment.

Appointment

The latest derogation on 26 March allowed Veolia to make a  “key appointment”, but the name of the individual involved was redacted.

Documents said Veolia had argued that the appointment “has been in progress for several months” and the CMA accepted that “the proposed change in key staff will not impact the viability or ongoing operation of the Veolia business”.

It added that “no other organisational or key staff changes will be made to the Veolia UK business or UK-related assets”.

Non-UK business

The first two notices were issued on the day of the enforcement order (1 February) and allowed a derogation in relation to Veolia’s non-UK business.

This said Veolia had argued that its UK business is run independently of the Veolia Non-UK business with the Veolia UK management taking operational decisions independently of the Veolia Non-UK business.

The two companies have been locked in a bitter war of words since Veolia announced its intention to acquire Suez in August 2020

The derogation said: “The CMA considers that a derogation related to the Veolia Non-UK business (excluding the UK-related assets) …is appropriate given the aims of the Initial Order and the particular circumstances of this case, and will significantly ease the administrative burden on Veolia in a proportionate manner”.

Suez

The second notice was also issued on 1 February and said the order will exclude material developments arising in the ordinary course of business; and/or  to the business of Suez and its subsidiaries carried out outside the UK.

The third notice was published on 5 March and saw the CMA accept Veolia’s submission that the order should exclude “material developments arising in the ordinary course of business”.

This includes the exclusion of joint tendering agreements with Suez made in the ordinary course of business.

On 9 March, a further derogation was granted to Veolia in relation to IT improvements.

Revoked

However, in a redacted document the CMA said some aspects of the derogation for Suez have now been revoked. An asterisk has been placed where information is redacted.

In a derogation notice on 19 March, the CMA said: “Having carefully reviewed the information made available to the CMA following the granting of the derogations in the Derogation Letter, the CMA considers that allowing certain of these derogations to continue in force would give rise to a material risk of pre-emptive action.

“In particular, the CMA is now aware of [*]. The CMA was not aware of [*] at the time of the Derogation Letter. In these circumstances, and in light of the legitimate precautionary aims of the Initial Order, the CMA considers that it is necessary and proportionate to reimpose the requirements for Suez to comply with various obligations in respect of which the CMA previously granted derogations under the Derogation Letter. This is without prejudice to the CMA’s ability to grant specific consent in future for actions that would otherwise be prohibited by the application of these obligations”.

Useful links

The CMA’s full case can be seen here.

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