Rethmann Group / Remondis: Bundeskartellamt examines preconditions for extended obligation to notify future takeovers (Section 39a German Competition Act, GWB)

The Bundeskartellamt has initiated a further sector inquiry in the waste management sector. The authority is going to examine whether the Rethmann Group can be obliged to also notify future takeovers of smaller companies.

Andreas Mundt, President of the Bundeskartellamt: “In some sectors large companies buy a great number of small companies without the Bundeskartellamt being able to examine such takeovers. This situation results in growing concentration outside of the Bundeskartellamt’s control. We fear that this might apply to the numerous acquisitions by Rethmann/Remondis in the waste management sector. The lawmaker gave us the possibility to examine smaller takeovers precisely in such cases, provided that we conduct a special sector inquiry. We have now initiated such an inquiry with a view to waste management and the specific market position of the Rethmann Group. “

In principle merger control does not apply until the participating undertakings achieve certain minimum turnovers and thus have a certain economic significance. The new provisions of Section 39a GWB, which entered into force with the 10th amendment to the GWB in early 2021, allow the Bundeskartellamt to oblige companies to also notify takeovers of smaller companies, i.e. companies that do not reach the normal turnover thresholds, in certain economic sectors.

The new provisions apply if the acquirer has a Germany-wide share of more than 15 per cent of sales in the affected economic sectors, the target company achieved revenues of at least 2 million euros in the last business year and at least two thirds of its total turnover in Germany, and if there are objectively viable indications that future concentrations could considerably impair effective competition in Germany. For this obligation to apply the Bundeskartellamt must first carry out a sector inquiry in one of the affected economic sectors. The obligation will then initially apply for a duration of three years. The authority has now initiated such a sector inquiry in the area of household waste collection.

The current inquiry is to update some of the authority’s findings from the sector inquiry into household waste collection, which was published on 21 December 2021 (see press release of 21 December 2021), and from investigations into several merger projects in recent years and specify these findings with regard to the requirements of Section 39a GWB.

The first inquiry showed that in Germany the Rethmann Group is one of the market leaders far ahead of its competitors, especially when it comes to collecting different types of household waste and processing near-household glass packaging. In particular with regard to the collection of household waste the number of competitors steadily decreased between 2014 and 2018. In this period, no competitor managed to catch up with the market leader to a noteworthy extent.

Andreas Mundt: “Especially the waste management sector is characterised by regional markets on which the municipalities as opposite market side often have little choice. If smaller competitors, mostly small and medium-sized companies, are acquired one by one without merger control, this can result in an overall structural competition issue. If a company is able to achieve a dominant position by way of such acquisitions, its market power is consolidated. We must confront this development by consistently applying merger control.”

In a first step, the authority will interview the 15 most important competitors in the areas of household waste, residual waste, organic waste and paper, cardboard and cardboard packaging (German abbreviation: PPK). The Bundeskartellamt will also look into the processing of packaging and waste glass