The Bundeskartellamt has today prohibited the proposed acquisition by REMONDIS SE & Co. KG of all the shares in the dual system DSD - Duales System Holding GmbH & Co. KG.

Andreas Mundt, President of the Bundeskartellamt: “The proposed merger would have significantly impeded competition between the dual systems for packaging recycling. It would have led to higher costs for DSD’s competitors, significant market share gains for DSD and finally higher prices for the disposal of sales packaging. A further problematic aspect is the fact that the two companies achieve joint market shares of 40 to 60 per cent in the marketing of recycled glass. The commitments offered by the companies were not suitable to eliminate the competition concerns."

Remondis is by far Germany’s largest waste management company and is active on nearly all waste management markets. These include the collection, sorting and reprocessing of sales packaging and its subsequent marketing or recycling.

DSD is the largest dual system for packaging recycling in Germany. The dual systems organise the recycling of packaging waste on behalf of the manufacturers, importers and retailers who, as distributors, were originally responsible for the recycling. This service is provided by the dual systems against payment of a fee by the distributors (so-called licence fees). Dual systems such as DSD then commission the actual waste management companies like e.g. Remondis with the collection, sorting and reprocessing of the packaging waste.

The proposed concentration mainly concerns the disposal of household packaging waste and the distribution of recycled hollow glass cullet (e.g. drink bottles or food jars) to glassworks.

Andreas Mundt, President of the Bundeskartellamt: “The concentration would change the entrepreneurial conduct of the merged company Remondis/DSD. Contracts to provide input services such as the collection of sales packaging are put out to tender by dual systems like DSD. Waste management companies tender for these contracts. As a waste management company, Remondis would have a post-merger incentive to charge DSD’s competitors higher prices for the collection, sorting and reprocessing services than before the merger in order to place them at a disadvantage to its own company, DSD. This strategy of raising the costs of DSD’s rivals could enable Remondis/DSD to gain significant additional market shares, squeeze out competitors and, ultimately, enforce higher prices on the market for dual systems for packaging recycling. This would translate into higher prices for packaging which consumers would end up paying.”

Moreover, DSD would be able to use its significant demand volume to squeeze Remondis’ competitors out of the market. Due to its high market share, DSD has high-level access to quantities of sales packaging placed on the market by the manufacturers, importers and retailers for sorting, reprocessing and recycling. The merged company Remondis/DSD could divert these waste quantities to Remondis’ plants for further processing and strategically subcontract remaining quantities for reprocessing to competitors.

Furthermore, both companies are active in the marketing of recycled hollow glass cullet. A merger would create a dominant position on this market. Here the two companies would achieve joint market shares of 40 to 60 per cent.

In mid-April the Bundeskartellamt had informed the parties that it took a critical view of the proposed mergersee (press release of 15 April 2019). Reacting to the Bundeskartellamt’s competition concerns, Remondis and DSD offered commitmentsincluding the sale of two glass recycling plants as well as further commitments concerning the company’s future conduct. However, an overall assessment showed that these commitments were neither suitable nor sufficient to eliminate the Bundeskartellamt’s competition concerns. Moreover, some of the commitments concerning the companies’ future conduct would have required the agreement of other dual systems. It is generally applicable that commitments which would make it necessary to subject a company’s conduct to continued control are not deemed to be a suitable remedy by law (Section 40(3) sentence no. 2 of the German Competition Act, GWB).

The prohibition decision is not yet final. The parties have a month to appeal against the decision to the Düsseldorf Higher Regional Court.