The Portuguese Competition Authority adopts a clearance decision on the SUMA/EGF merger

Press Release 17 /2015
The Portuguese Competition Authority adopts a clearance decision on the SUMA/EGF merger
 
 
The Portuguese Competition Authority adopted a clearance decision on the merger concerning the acquisition of sole control of EGF – Empresa Geral do Fomento, S.A. (EGF) by SUMA – Serviços Urbanos e Meio Ambiente, S.A. (SUMA).

On the 17th of March 2015, the Portuguese Competition Authority, based on the information gathered up to that date, initiated an in-depth investigation to the proposed merger as it considered that there were serious doubts as to the possibility significant impediments to effective competition in some of the identified relevant markets.
 
During the second phase of investigation, the Portuguese Competition Authority conducted a series of initiatives necessary to clarify the concerns identified, in particular with regard to the risks of market foreclosure resulting from the integration, in a single economic group, of complementary activities in the sector of collection and treatment of solid urban waste.
 
As a result of the in-depth investigation, the Portuguese Competition Authority concluded that the doubts and concerns initially raised proved to be either unfunded or unlikely to occur in a sufficient extent to create significant impediments to effective competition, in particular due to:
 
• The low barriers to entry and expansion in the provision of services of collection and transportation of solid urban waste of municipal responsibility; 
• The regulatory framework - which prevents cost allocation from the provision of services of collection and transportation of solid urban waste of municipal responsibility to the activities of waste treatment conducted in EGF’s treatment facility stations – reinforced by a monitoring action by the various municipalities, as minority shareholders in EGF’s subsidiaries;
• The non-alignment of incentives between the various municipalities and SUMA/EGF, especially considering that the economic interest of the former, while acting as clients of the regulated solid waste treatment system (provided by EGF) and financial impact of regulated tariffs payed as a result of it surpasses its economic interest as minority shareholders in EGF’s subsidiaries. 
• The countervailing negotiating power enjoyed by municipalities, as adjudicators in public procurement procedures.

All relevant elements to assess the merger in accordance with competition law were analysed and taken into account when adopting the final decision.
 
During the proceedings, besides SUMA as the Notifying Party, the following third-party entities were accepted to intervene: Lisbon Municipality, Loures Municipality, Vila Franca de Xira Municipality, Mealhada Municipality, Almada Municipality, Amadora Municipality, Barreiro Municipality, Palmela Municipality, Seixal Municipality, Sesimbra Municipality, Setúbal Municipality, as well as the undertakings Fomento de Construcciones y Contratas, S.A., Cespa Portugal, S.A., Citri – Centro Integrado de Tratamento de Resíduos Industriais, S.A., Hidurbe – Gestão de Resíduos, S.A., Recolte – Serviços e Meio Ambiente, S.A., Fomentinvest Ambiente S.G.P.S., S.A., Rede Ambiente – Engenharia e Serviços. S.A., Semural – Waste & Energy, S.A., Recivalongo – Gestão e Tratamento de Resíduos, Lda. and Retria – Gestão e Tratamento de Resíduos, Lda..