On July 11, 2019, the FCO prohibited waste disposal company Remondis SE & Co. KG’s (“Remondis”) acquisition of the dual system for packing recycling DSD – Duales System Holding GmbH & Co KG (“DSD”).[1]
Dual systems organize the collection and recycling of packing waste for manufacturers and distributors of packaged goods.[2] They then commission waste disposal companies with the actual collection and recycling process. According to the FCO, DSD is the largest dual system for packaging recycling in Germany, whereas Remondis is the largest German waste disposal company. Both companies are also active in the marketing of cullet for the glass recycling industry.
The FCO found that the vertical integration of DSD and Remondis would have significantly impeded competition between the dual systems in Germany: The FCO considered it likely that the merged entity would have used its strong position on the downstream waste disposal market to significantly increase the prices for DSD’s competitors, thereby strengthening DSD’s market position on the upstream market. In addition, the FCO was concerned that the transaction would have enabled the merged company to foreclose competing waste disposal companies, which would have indirectly led to an additional price increase for DSD’s competitors.
Further, the FCO found that the transaction would have created a dominant position in the marketing of cullet because DSD and Remondis were the number one and two players with a combined market share exceeding 40% at national level, even close to 60% in some regions.
The parties had offered to divest two glass processing plants in addition to commitments on the merged entity’s future conduct. However, the FCO considered these commitments neither suitable nor sufficient to eliminate the FCO’s concerns. Remondis appealed the FCO decision before the DCA.
[1] Remondis/DSD (B4-21/19), FCO decision of July 11, 2019, only available in German here; see also FCO Press Release, July 11, 2019, available in English here.
[2] Under the German Packaging Act (Verpackungsgesetz), manufacturers and distributors of packaged goods are responsible for taking back and recycling their product’s packaging. They pay a license fee to dual systems for their services, which exempts the producers of their legal obligation to collect and recycle such packaging waste themselves.