Takeover in waste management sector (Veolia/Friedrich Hofmann) cleared subject to conditions

The Bundeskartellamt has today cleared the takeover by Veolia Umweltservice GmbH, Hamburg, of the operating subsidiaries of Friedrich Hofmann GmbH, Büchenbach, subject to a condition precedent. Before the merger can be implemented, one of the parties’ disposal sites in Nuremberg has to be sold to an independent competitor. The Bundeskartellamt must approve that company prior to it acquiring the site.

Andreas Mundt, President of the Bundeskartellamt: “Without this condition, we would have had to prohibit the takeover. Veolia is taking over a medium-sized competitor that is by far the largest provider of such services in the Bavarian region of Middle Franconia. In the greater area of Nuremberg, Fürth and Erlangen the takeover will significantly impede competition in the near-household collection of lightweight packaging and glass packaging on behalf of the operators of the dual system for packaging recycling and in the near-household collection of waste paper on behalf of public waste management authorities. However, selling one centrally located site will allow a new competitor to enter the market. This will offset the negative effects on competition caused by the concentration.”

The company acquiring the site must have adequate financial resources, technical knowledge and incentives to be able to enter the market as an active competitor, and, among other conditions, its previous operations must not have focused on the relevant geographic market in the region of Middle Franconia. In addition to the disposal site, the acquiring company is also to obtain collection contracts for lightweight packaging, glass packaging and waste paper as well as the resources required for performing these contracts, including the necessary staff.

Veolia Umweltservice GmbH is a subsidiary of Veolia Environnement S.A., Paris. Its main activities in Germany include drinking water supply, wastewater treatment, waste management, including materials recycling, and energy supply. Veolia operates approximately 250 sites in Northern, Eastern and Southern Germany. As part of its waste management activities Veolia collects different types of waste on behalf of commercial and industrial customers as well as on behalf of municipalities, dual system operators and final consumers. Other areas of Veolia’s operations include, in particular, plastic recycling, PET recycling, waste paper sorting and recovery, document and storage media disposal, refrigerator recycling and substitute fuel production. In spring 2022 Veolia also acquired the dual system operator BellandVision GmbH, Pegnitz.

Friedrich Hofmann GmbH also collects municipal wastes (residual waste, organic waste and bulky waste), lightweight packaging, glass packaging, waste paper and non-hazardous commercial waste in parts of the Bavarian regions of Franconia and Upper Palatinate. The company is also active in waste paper sorting and has a share in a sorting facility for non-hazardous commercial waste.

The Bundeskartellamt’s investigations have shown that even prior to the concentration the number of bids submitted in tenders for waste collection and the number of changes of contractors have continuously been declining for years. In addition, the number of waste management companies offering near-household collection is relatively small. All of those companies, apart from Veolia, are family-owned, medium-sized companies.

Despite Veolia having increasingly withdrawn from near-household collection in the past few years, both merger parties are among the bidders with the largest numbers of tenders won in the relevant geographic market, which makes them at least potential competitors exerting strong competitive pressure on one another.

The investment that would be required and a lack of suitable waste management sites as well as complex authorisation procedures have made it difficult to attract companies which have so far not operated in the region and to stimulate competition. This is especially true for the very densely populated and economically strong greater Nuremberg area.

Due to the turnovers achieved by the merger parties, the proposed merger first had to be notified to the European Commission, which, upon the parties’ request, referred the examination of the case to the Bundeskartellamt in April.