Bundeskartellamt prohibits merger in the surface drainage sector: ACO and BIRCO cannot merge

The Bundeskartellamt has prohibited the planned takeover of BIRCO GmbH based in Baden-Baden (“BIRCO“) by ACO Ahlmann SE & Co. KG based in Büdelsdorf (“ACO“). Both companies are particularly active in the sector of line drainage. The term line drainage refers to surface draining (e.g. roads, public squares, private and commercial properties) where drainage channels collect surface water and conduct it to the sewage system.

Andreas Mundt, President of the Bundeskartellamt: “Our prohibition of the merger between ACO and BIRCO prevents the creation of a dominant position in the drainage channels sector. ACO is already the leading German supplier of drainage channels. By taking over BIRCO, the third-largest supplier in the market, ACO would account for almost half of the market turnover. Buyers such as private house builders, but also commercial and industrial owners and the public sector would lose an important alternative supplier. Furthermore, the company’s much smaller competitors would find it even more difficult post merger to be successful in tender procedures or to have their products stocked by traders of building materials. Our intervention ensures that suppliers will not be able to diminish the intensity of competition, e.g. in terms of the prices and quality they offer.”

Within the context of its examination proceedings the Bundeskartellamt surveyed more than 200 competitors, contracting entities and traders of building materials. It was found that buyers specifically search for line drainage systems for their construction projects and do not consider other surface draining systems (such as open drainage channels without cover, e.g. concrete drainage channels, point drainage systems, eco-friendly paving or concrete grass paving systems) to be equivalent alternatives.

This is mainly due to technical reasons (e.g. performance of drainage systems), economic reasons or design considerations. Due to this very specific demand the Bundeskartellamt has not based its decision on the assumption of an “overall market for surface drainage”, but considers the separate assessment of the market for line drainage to be appropriate. In 2020, the market volume in the German line drainage sector was almost 200 million euros.
ACO and BIRCO achieve joint market shares of 45-50 per cent and would thus have a dominant position. As a joint economic entity they would almost be three times the size of the second-largest player in the market, Hauraton. Other competitors such as Richard Brink, ANRIN, Rinninger or MEA are even significantly smaller, and foreign suppliers only have marginal shares in the German market. Even if open drainage channels were included in the market, the joint ACO-BIRCO market share would still exceed 40 per cent.

By joining forces ACO and BIRCO would be able to have superior access to contracting entities and traders of building materials to the detriment of their competitors. Both companies are already very well positioned in terms of sales activities which they would have been able to intensify post merger (for example by expanding their product portfolio which covers various types of materials and special types of drainage channels). There was also the risk that the companies’ competitors might be less successful in future tender procedures or could be squeezed out of the building materials trade. The authority’s decision can be expected to ensure that ACO’s and BIRCO’s scope of action will continue to be curbed by competition.

The Bundeskartellamt’s decision is not yet final and can be appealed to the Düsseldorf Higher Regional Court.