The Swedish Competition Authority clears merger despite competition concerns
On 1 November 2023, the Swedish Competition Authority (the “SCA”) unconditionally approved Remondis Group’s (“Remondis”) acquisition of Delete Group (“Delete”) (jointly “the Parties”), despite having concerns that the transaction could restrict competition. In its reasons, the SCA stated that due to the statutory deadlines, it did not have enough time to investigative the concentration closely enough to provide sufficient support for an intervention, nor to dismiss the concerns about competition problems. The SCA therefore had to clear the merger. It is unfortunate that a merger is cleared due to lack of time, rather than its lack of effect on competition.
The decision in full is available in Swedish here.
The concentration in brief
Remondis, a provider of recycling, industrial and scaffolding services, notified its acquisition of Delete, a provider of environmental and cleaning services, on 7 June 2023. In its notification, Remondis identified a horizontal overlap regarding industrial cleaning services, but argued that these services were part of the larger relevant product market of cleaning services and that the relevant geographic market was at least national in scope. The Parties did not identify any affected markets.
The SCA’s assessment
After its initial assessment, the SCA declared that it did not agree with Remondis on the market definitions and that they were narrower in scope than Remondis had argued. According to the SCA, the relevant product market should be limited to industrial cleaning services and could possibly be segmented even further. Furthermore, the SCA assessed that the geographic market likely consisted of five regional markets rather than one national market. Based on these narrower market definitions, the SCA saw indications that the Parties would gain significant market power on some of the markets.
When the Parties were informed of the SCA’s concerns, they demanded that the SCA stopped the clock. As the SCA’s concerns remained even after the expiry of the extended phase I investigation, the SCA decided to conduct a phase II investigation. During the investigation, the SCA could not rule out that the acquisition would affect competition in two or potentially three geographic regions.
The SCA sent a statement of objections to the Parties where it provisionally considered prohibiting the concentration. In its comments on the draft, Remondis criticised the SCA’s definition of the relevant market, arguing that the competitive conditions did not vary enough between the regions to justify the geographic market definitions suggested by the SCA. Remondis also criticised the SCA’s estimate of the total size of the market as well as the limitation of the product market to only comprise industrial cleaning services.
In its decision, the SCA concluded that the investigation still contained ambiguities, including regarding the total size of the market, and that it was not sufficiently robust for the SCA to intervene against the concentration. Due to the statutory deadline, the SCA did not have sufficient time to undertake further investigative measures to complete the investigation. The SCA therefore cleared the concentration on 1 November 2023.
Concluding remarks
The SCA was unable to finalise its investigation within the statutory deadline. As a result, it could not intervene against the concentration, despite having identified a risk that the concentration could hinder the development of effective competition in certain markets.
If the SCA is unable to intervene against concentrations that may harm competition, it is a cause for concern. The legitimacy of the merger control system is based on the SCA being able to prohibit concentrations that may harm the market. We have yet to see whether this will lead to the SCA taking specific action to address its future ability to carry out an effective merger control, but we will continue to monitor any new developments.