Remondis, Germany’s largest waste management group, may soon face greater scrutiny of its takeovers. The German Federal Cartel Office is considering subjecting even small acquisitions by Remondis' parent company Rethmann Group to merger control procedures after a new study confirmed the concern's position as the "clear market leader". This announcement was made as the Cartel Office (Bundeskartellamt) published the findings of its waste management sector inquiry, which specifically examined the markets for the collection of domestic waste and the processing of waste glass packaging in Germany.
"The Rethmann Group has a very strong market position in particular with regard to the collection of residual waste and the collection and recycling of waste glass," commented Cartel Office President Andreas Mundt in a 28 December press release. In view of the inquiry's findings, the German anti-trust authority would now also consider whether to oblige Rethmann to notify takeovers of smaller companies in future, he added. "This would allow us to also examine the effects smaller takeovers have on competition and control the growing concentration of the market," Mr Mundt said. While most of Rethmann's waste activities are organised under Remondis, the group is also active on the waste market through the logistics company Rhenus and the subsidiary Saria, which manages animal by-products, food waste and other organic materials.
As a rule, only takeovers of companies that exceed a certain revenue threshold are subject to merger control procedures, so deals involving smaller companies often do not need to be notified to the Cartel Office. "In the German waste management sector, where small and medium-sized businesses predominate, there is a danger that larger companies can acquire a substantial number of smaller companies without the Bundeskartellamt being able to monitor the effects of those concentrations on competition," the authority said. "The experience of recent years has shown that larger service providers have made numerous acquisitions below the relevant thresholds and thus outside the scope of merger control." Remondis has in fact snapped up numerous smaller companies in various sub-segments of the market over the past years.
The "Remondis clause" to be used for the first time – on Remondis
A recent amendment to the German Competition Act (GWB) gives the Cartel Office the power to order certain companies to notify all concentrations if certain conditions are met. This amendment, which many experts dubbed the "Remondis clause", is now apparently being used for the first time and applied to the company for which it is named. Economic operators can only be subject to the more onerous notification obligations if a sector inquiry has shown that there are "objectively plausible indications that future concentrations could significantly impede effective competition in Germany."
Following the publication of the results of its sector inquiry in late December, the Cartel Office is now soliciting input from the market as a next step. Market participants and "representatives of business sectors interested in the case" can submit written comments on the sector study until the end of February. After assessing these comments, the Federal Cartel Office "intends to examine whether it should initiate a proceeding to impose this obligation on the Rethmann Group".
Results of sector study confirm high market share for Rethmann group
There were few surprises in the most recent study of conditions in the German waste management market. Compared to the analysis published two years ago, "the market conditions in the domestic waste collection sector have remained very constant," the Cartel Office said.
Rethmann group companies continue to have market shares of 25-30 per cent at a national level in the markets for the collection of residual waste, organic waste and bulky waste. In the markets for collecting separately collected waste fractions, such as recovered paper and board, mixed packaging/recyclable materials and container glass, the group’s market share ranges from 20 to 25 per cent. When it comes to collecting packaging waste on behalf of extended producer responsibility (EPR) system operators ("dual systems"), the Rethmann Group has achieved a share of 25-30 per cent for lightweight packaging (plastic and metal packaging and beverage cartons) and 35-40 per cent for container glass, the study found.
In most sectors, "the Rethmann Group has a substantial lead over its closest competitors" and its position had not changed significantly since the last market study was conducted. In some of Germany’s federal states, Rethmann Group companies have achieved market shares "that come close to or exceed the threshold for the presumption of market dominance under the German Competition Act".
The findings of the Cartel Office inquiry are broadly consistent with the results of a 2023 EUWID evaluation of market share for the collection of various waste streams in Germany. According to the assessment, Remondis had a market share of more than 30 per cent in the collection of household and bulky waste and a share of slightly less than 30 per cent for biowaste and recovered paper and board collections. The group reached 40 per cent in the waste glass collection segment and accounted for one-third of the market for lightweight packaging.
Cartel Office study does not take account of market share of municipally owned entities
However, if the activities carried out by local authorities are taken into consideration, Remondis’ share of the collection market shrinks considerably. Municipal entities account for around 45-50 per cent of collections of household and bulky waste, organic waste and recovered paper. Taking this into account would reduce Remondis’ share of the overall market by roughly half. The group has therefore repeatedly urged the Cartel Office to consider these municipally-owned activities when evaluating the overall waste management market in the sector inquiries.
In its most recent sector study, the Cartel Office recognises that publicly owned waste firms collect a "significant share" of waste volumes across the country, thereby reducing the volumes available for privately-owned companies to collect. However, the Cartel Office study does not consider publicly-owned waste management entities to be "suppliers" competing on the market for municipal waste collection, provided they collect the waste of local residents, either themselves or in cooperation with other local authorities, without any prior public tender. They are only deemed to be suppliers if they, for example, participate in tenders in competition with other companies to secure contracts from third parties, according to the report.
However, municipally-owned waste management operations are "rarely active" as competitors on the markets for the collection of residual, organic and bulky waste, according to the Cartel Office. Of the six largest municipally-owned waste management operations in Germany, only Krefeld-based EGN offers collection services for residual, organic or bulky waste outside of the municipality to which it belongs, where it competes directly with private-sector firms.