Withdrawal of merger notification in scrap recycling sector due to competition concerns

The companies TSR Recycling GmbH & Co. KG, Lünen, and Rhein-Main Rohstoffe GmbH, Frankfurt, withdrew their notification of the formation of a joint venture on 8 December 2021. The Bundeskartellamt had presented its competition concerns about the merger to the parties in late October and had given them an opportunity to comment on the matter.

Andreas Mundt, President of the Bundeskartellamt: “Our investigations suggested that the companies which are active in the Rhine-Main region would have achieved a dominant position on the market for purchasing scrap iron for the processing with scrap shears.”

TSR Recycling GmbH & Co. KG is the parent company of the TSR Group, an association of undertakings active in the field of trading in secondary raw materials. TSR belongs to the Remondis Group, which is an independent division of the Rethmann holding company and the majority shareholder of TSR. Rhein-Main Rohstoffe GmbH is a Frankfurt-based waste-disposal company specialising in scrap metal.

Following the notification of the merger on 10 March 2021, the Bundeskartellamt carried out extensive market investigations which have shown that scrap iron can only partly be sold directly to steel mills and other end customers. A large part of the iron scrap has to be cut into predetermined sizes before it can be sold to end customers as secondary raw material. For this purpose scrap shears are used to process the material.

The Bundeskartellamt’s investigations suggest that the added value created with the shears cannot be achieved through other means. Cutting torches to manually process scrap iron, which is time and labour intensive, are rarely used, just like other scrap iron processing systems (shredders). Suppliers of scrap iron therefore depend on shear operators that buy and process the material.

In the course of the investigations, the supply streams of the companies active on this market were analysed in detail. The results have shown that scrap iron which is to be processed with scrap shears is traded regionally, especially since the high costs involved in transportation make it economically unviable to trade it over longer distances.

TSR and Rhein-Main Rohstoffe would have merged on the regional market around Frankfurt where both companies operate large shears and are the leading providers of such services on the market. In its preliminary assessment, the Bundeskartellamt assumed that the merger would have resulted in the parties achieving a dominant position with a joint market share of around 50%. In addition to the parties’ market position, the competitive pressure exerted by the remaining companies on the market as well as the legal and actual barriers to the market entry of new competitors were also decisive. The financial strength of TSR, a member of the Rethmann Group, was also taken into account in the preliminary assessment since it is used to achieve external company growth.

In future proceedings, the Bundeskartellamt will have to clarify whether it is also necessary to take account of other processing forms or how the markets for non-ferrous scrap, such as aluminium, copper and other metals, are to be assessed in order to ensure sufficient competitive pressure also on these markets.