ACM blocks acquisition of waste-management company AEB by rival company AVR
The Netherlands Authority for Consumers and Markets (ACM) blocks the acquisition of Amsterdam-based waste-management company Afval- en Energiebedrijf (AEB) by rival company Afvalverwerking Rijnmond (AVR). If the acquisition had gone through, too powerful a company would have emerged. That would have led to higher prices for the processing of household waste and low-level hazardous waste. Municipalities and waste collectors pass on such price increases to residents and customers, respectively.
AVR is part of Hong Kong-based company Cheung Kong. AEB Holding N.V. is, at the moment, still owned by the municipality of Amsterdam. If they had merged, AVR and AEB together would have become by far the largest waste-management company in the Netherlands. Their combined processing capacity is twice the capacity of their nearest competitor. A combined AVR/AEB would have had a market share of 60 percent on the market for household waste in the densely populated western part of the Netherlands.
Martijn Snoep, chairman of the Board of ACM, explains: “Municipalities in the western provinces of North-Holland, South-Holland and Utrecht in particular would have had to pay more for the processing of household waste if the acquisition had gone through. That is why ACM has blocked this acquisition. In the densely populated western part of the Netherlands, there are insufficient alternatives to a combined AVR/AEB, and it costs more to transport household waste to waste-processing plants elsewhere. The combination AVR/AEB could have raised the prices for processing household waste. People living in those western provinces would have seen their waste disposal fees go up. Competition in this market will keep prices competitive.”
ACM: AEB is privatized, becomes competitor in waste-management tender processes
In 2021, the municipality of Amsterdam decided to privatize AEB. Multiple businesses expressed their interest. The municipality opted for AVR’s bid, and notified ACM of the planned acquisition.
ACM subsequently conducted an extensive investigation into this acquisition, which included an assessment of the claimed benefits with regard to sustainability. As part of the investigation, various economic analyses were conducted, documents were requested, and data was analyzed. In addition, ACM sat down with competitors, municipalities, waste collectors, and other parties involved.
Investigation into processing of household waste
AVR is currently the largest processing company of household waste in the Netherlands. Next to its ‘own’ waste from Amsterdam, AEB also processes waste from other municipalities. AEB won those contracts in tender processes. In those tender processes, AVR was one of its competitors. In the Netherlands, there are few other competitors that are able to process waste on a large scale. Their waste incineration plants are located much farther than those of AVR and AEB from the perspective of most municipalities in the western part of the Netherlands, which would have meant that their costs for waste transport would have gone up. The combination AVR/AEB could thus have charged higher prices for waste processing. Municipalities would have passed on such increases to their residents.
Investigation into low-level hazardous waste
The investigation into the processing of low-level hazardous waste revealed that the combination AVR/AEB would also have had a dominant position. Their combined market share would have been over 80 percent. Low-level hazardous waste includes, for example, cleaning cloths or personal protective equipment that have been contaminated by hazardous materials. There are few other incineration plants in the Netherlands that are able to process this type of waste. And the alternatives that do exist have limited additional capacity to take on new customers. In addition, processing this type of waste abroad at comparable prices is not an alternative. Taking everything together, the combination AVR/AEB is able to raise prices for processing this type of waste.
Sustainability in waste processing
AVR/AEB argue that the acquisition will accelerate their efforts of making their waste processing more sustainable. ACM sees that sustainability measures, such as separation plants or CO2 capture, need to be implemented anyway. Also, sustainability goals can be achieved through collaborations. Any other acquisition partner would also need to implement sustainability measures. And tender processes more and more often include a criterion that the processing of waste must take place as sustainably as possible.
ACM’s concentration control: mergers, acquisitions, and joint ventures
With any merger or acquisition, there is the question of whether sufficient competition will remain on that market, right after the transaction as well as in the future. Competition ensures that products are of high quality and that they are offered on the market at competitive prices. Competition also promotes innovation. That is why ACM decides in advance whether or not companies are allowed to merge or acquire another company. ACM assesses whether the markets involved will continue to work well for people and businesses, now and in the future.
- Further investigation needed into acquisition of waste-management company AEB by AVR | ACM.nl
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