The Competition and Markets Authority (CMA) has announced that Ecolab must sell off Holchem to prevent potential price rises or a lower quality of service as a result of their merger.
The decision follows an in-depth Phase 2 investigation by the Competition and Markets Authority (CMA), which concluded that the merged organisation is likely to face limited competition from other suppliers.
Ecolab and Holchem, who completed their merger in November 2018, are two of the largest suppliers of cleaning chemicals to food and drink manufacturers in the UK. The merger, according to the CMA will create a new organisation which is much larger than any of its remaining competitors and would leave only three players of any significant size competing in the UK market.
Food and drink manufacturers place a high value on their cleaning chemical supplier’s reputation and experience in keeping food and drink safe and free from contamination. This merger reduces the choice available to these customers. The CMA is concerned that this could mean food and drink manufacturers face higher prices or a lower quality of service for cleaning chemicals.
Whilst the group of independent CMA panel members considered alternative ways of addressing its concerns about the merger (as set out in their provisional findings published in August) it has concluded that the only effective way of addressing the significant loss of competition is to effectively block the merger. Now, Ecolab must sell off Holchem to a new owner, which must be approved by the CMA.
Kirstin Baker, the Inquiry Chair said: “We have carried out a thorough investigation analysing a large amount of data from the companies as well as evidence collected from both customers and competitors. We concluded that these two companies compete closely and this deal could have very serious effects – prices could go up or quality standards in crucial support services could get worse.
“Having carefully considered how these issues could be resolved, we decided that only blocking the merger and requiring Ecolab to sell Holchem would address our concerns.”
In response, Ecolab has said it “strongly disagrees” with the CMA’s decision.
Douglas M. Baker Jr, Chairman and Chief Executive of Ecolab stated: “We strongly believe that the UK market would remain highly competitive following the merger and are disappointed with the CMA’s findings. We are reviewing the full report provided by the CMA in detail and will carefully consider our options and next steps.”
Further details on this case can be found on the CMA website.