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Further investigation needed into acquisition of laundries

04-06-2019

Active Capital Company wishes to acquire LIPS+. Active Capital Company is an investment firm. One of its portfolio companies is laundry service company CleanLease with laundries in the Netherlands and in Belgium. LIPS+ is a large laundry service provider with laundries across the Netherlands. Both companies clean textile, such as bed sheets, clothes, and towels for businesses in, among other sectors, the hospitality industry, health care, and the hospital industry. After its first investigation, the Netherlands Authority for Consumers and Markets (ACM) is unable to rule out that the planned acquisition may negatively affect competition. Therefore, ACM wishes to investigate the acquisition’s effects further.

Follow-up investigation needed into hospital-textile laundries

Both companies have large market shares in the potential hospital-textile laundry sector. The combined market share of these two companies on the potential hospital-textile laundry market is over 40%. After the acquisition, other laundries (often smaller ones) will remain in the market, but mostly the larger laundries will be the ones taking care of hospital textiles.

In the second-phase investigation, ACM will assess whether sufficient competition will remain after the acquisition, for example because hospitals are able to develop sufficient countervailing power when buying laundry services. As part of that more detailed investigation, ACM will look, for example, at tender processes for laundry contracts organized by hospitals. If too little competition remains in the market after the acquisition, hospitals may, for example, have a harder time negotiating with laundries, as a result of which prices for laundry services may rise or quality may decline.

What are the next steps of the investigation?

ACM will further investigate the effects of this acquisition if the companies decide to pursue their merger plans. In the follow-up investigation, ACM will, in any case, ask further questions to hospitals and competitors about the possible effects of this acquisition.

What does ACM do with mergers and acquisitions?

ACM assesses in advance whether businesses that wish to join forces do not become too powerful. This has been laid down in the Dutch Competition Act. The objective of that act is to protect people and businesses against higher prices, lower quality, and/or reduced innovation.