Machinery parts cleaning merger faces in-depth investigation
Safetykleen’s anticipated acquisition of Pure Solve faces being referred for an in-depth investigation by the CMA.
Both companies supply parts washing machines and associated services in Great Britain. Parts washing machines are used to clean parts and components in machinery (such as nuts, bolts and screws, engine blocks and related parts, bearings, gear boxes and machine assemblies). They can include spray cleaning equipment for cleaning paint from spray guns and specialised cleaning machines such as those for brakes, clutches and de-rusting machines.
The evidence gathered by the Competition and Markets Authority (CMA) suggests the companies are each other’s closest competitors and that there might be insufficient rivalry from other suppliers or new entrants to offset this loss of competition.
As a result the CMA is concerned that the merger might lead to price rises, especially for single site customers, who make up the majority of customers for whom the companies compete.
Safetykleen now has 5 working days to offer undertakings to resolve the competition concerns identified by the CMA. If it does not offer undertakings, or they are not acceptable, the CMA will refer the acquisition for an in-depth phase 2 investigation.
Sheldon Mills, Senior Director, Mergers and decision-maker in the phase 1 investigation case said:
These companies provide a specialist but essential service for small businesses across the country in a market worth approximately £100 million. Safetykleen is currently the market leader in this market, followed by Pure Solve. If that existing competition is lost and without any potential new entrants, our concern is that the merged company could raise prices to those customers. We have decided a detailed investigation is needed to look at these concerns unless Safetykleen can offer suitable undertakings.
Notes for editors
- The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law. For more information on the CMA see our homepage or follow us on Twitter @CMAgovuk, Flickr and LinkedIn. Sign up to our email alerts to receive updates on merger cases.
- Under the Enterprise Act 2002 (the Act) the CMA has a duty to make a merger reference, resulting in an in-depth phase 2 merger investigation, if the CMA believes that it is or may be the case that a ‘relevant merger situation’ has been created, or arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and that the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
- Under the Act a ‘relevant merger situation’ is created if 2 or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million (‘the turnover test’) or as a result of the transaction, in relation to the supply of goods or services of any description, a 25% share of supply in the UK (or a substantial part of the UK) is created or enhanced (‘the share of supply test’).
- The CMA’s duty to refer the merger for a phase 2 investigation under the Act is not exercised whilst the CMA is considering whether to accept undertakings (if offered) in lieu of a reference. Safetykleen and Pure Solve have until 18 May 2016 to offer undertakings to the CMA that might be accepted by the CMA. The CMA then has until 25 May 2016 to decide whether these might be acceptable as a suitable remedy. If this is the case, it will consult on Safetykleen’s proposed undertakings before accepting them. If no undertakings are offered and accepted, then the CMA will refer the merger.
- All the CMA’s functions in phase 2 merger investigations are performed by Inquiry Groups chosen from the CMA’s panel members. The appointed Inquiry Group are the decision-makers on merger investigations.
- The CMA’s panel members come from a variety of backgrounds, including economics, law, accountancy and/or business; the membership of an Inquiry Group usually reflects a mix of expertise and experience (including industry experience).
- The text of this decision will be placed on the case page as soon as is reasonably practicable.
- Enquiries should be directed to Siobhan Allen (email@example.com, 020 3738 6460).