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Veolia-Suez merger challenged by UK regulator

Veolia's facility in Leeds

The competition regulator in the UK has made a provisional ruling that the proposed merger of Veolia and Suez would lead to a loss of competition in the supply of several waste and water management services in the UK.

The Competition and Markets Authority (CMA) believes the loss of competition could mean more costly and lower quality services, and higher local bills as boroughs and some businesses would have less choice when procuring key waste and water management services.

Based on 2020 revenue reports, Veolia (£1 929 million – EUR 2 274 million) is the biggest supplier of waste management services to councils and businesses in the UK while Suez (£720 million) is fourth largest. Both are active across the supply chain, from collections to the operation of facilities for composting and incineration, to landfill sites. The companies also supply water and wastewater management services to industrial customers.

The deal, effectively a takeover of Suez in the face of its bitter opposition, was struck in April 2021. The CMA launched an investigation, led by an independent group, in December. The findings apply only to the French-owned groups’ business in the UK. One result may be a sell-off of all or part of UK operations to permit the wider merger.

‘In carrying out its assessment, the CMA has taken into account that Veolia and Suez, which are the only suppliers in the UK who are active across the entire waste management chain, are two of the few companies that are able to service the largest and most complex waste management contracts with councils,’ the CMA says.

Competition concerns

It has provisionally found that the merger raises competition concerns in seven of the eight markets within the waste and water management sector on which its in-depth investigation has focussed. In each of these markets, it concluded, the merging businesses currently compete closely and would face limited competition after the merger.

These were:

  • collection of non-hazardous waste for municipal customers
  • operation and maintenance services for sorting of waste for municipal customers
  • operation and maintenance of Energy Recovery facilities (ie incineration) for municipal customers
  • supply of incineration services for customers in 2 local areas
  • collection of non-hazardous waste for commercial and industrial customers
  • operation and maintenance services for water and wastewater treatment facilities to industrial customers
  • provision of mobile water services to industrial customers

Stuart McIntosh, chair of the CMA inquiry group, said: ‘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.’

A final report, which will assess responses to the provisional findings, is due in July.

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