Municipal markets “have changed”, according to Veolia

Veolia spared no effort in its response document, made public by the CMA on June 16. The CMA is considering whether Veolia UK can ‘merge’ with Suez UK and has tentatively decided that such a merger would result in a substantial lessening of competition and should therefore not proceed.

In its response to this tentative view, Veolia, which is largely French-owned and headquartered in Paris, argues that CMA’s position in the UK waste market stems from an “outdated” perspective. , which ignores the landscape and complexities of a changing market. One aspect in particular that Veolia did not like was the CMA’s view of local authority contracts.

The regulator called them “complex”, referring to a set of waste management services for which few operators can apply and compete, and said joining Veolia and Suez could lead to “insufficient” competition. for these agreements.

This view was disputed by Veolia, which asserted that “there was no identifiable subset of ‘complex’ contracts and certainly no recognized industry definition”.

Accordingly, the CMA leaned towards the argument that “complexity” may be a feature of different waste management markets, such as the municipal collection market, and should therefore be taken into account when examination of competition in these markets.

Infrastructure

However, the waste management company pointed out that the CMA has not carried out any systematic assessment that would justify defining the market segment as complex.

She pointed out that the authority’s understanding of “complexity” was linked to the inclusion of infrastructure in contracts. “Embedded contracts for all waste management services, including construction and operation facilities, are a thing of the past,” Veolia added.

The argument was reinforced by responses from Beauparc, Amey, Urbaser and Biffa, all of which linked contract complexity to infrastructure.

Similarly, Veolia said local authorities describe complex contracts as those “involving significant capital expenditure” and “larger contracts requiring infrastructure investment”.

Development

Veolia went on to describe how the market, and subsequently how municipal waste management contracts are awarded, has grown significantly. This is partly due to the fact that significant local authority infrastructure has been built. “Coupled with the end of the Private Finance Initiative (PFI) scheme, contracts for waste treatment infrastructure are now rare,” explained Veolia.

In today’s market, it is more common for local authorities to unbundle waste management procurement and tendering for individual services.

Veolia said that today it is more common for local authorities to put out tenders for individual services

Veolia said the CMA’s analysis focused on contracts made more than 10 years ago, with third-party responses also based on their bidding experience at the time.

internally

The company reported that the majority of local authorities in the CMA sample have considered self-provision of collection services.

He said: “Of 19 respondents from local authorities who currently outsource collection, 14 have considered providing collection services themselves. This number would likely have been even higher if the CMA had asked whether local authorities would consider self-provision of waste collection services, which is more relevant to competition for future contracts.

“Self-supply is not just a ‘benchmark’, it is a real constraint for bidders,” he added.

Competition

Veolia’s response indicates that the competitors’ responses identify eight competitors other than Veolia and Suez, including internal supply.

The company also seems upset that Biffa’s acquisition of Viridor has not been called upon to be assessed by the CMA.

According to Veolia, Biffa was identified as having “a lot of know-how” and other contractors such as Serco as winning “many new and large contracts” and Urbaser as “strengthening its presence in the United Kingdom”, to say the least. cite just a few.

The waste management company concluded that there was no prospect of a “significant lessening of competition” in the market for municipal waste collection services. He said evidence in the interim findings depicts a competitive bidding market where local authorities can choose from at least eight credible suppliers, appoint a local authority-owned trading company or in-house services .

The response concluded: “The CMA’s attempt to carve out a subset of ‘complex’ municipal collection contracts for which the parties could compete more closely is methodologically flawed and unsupported by evidence.

“Veolia has shown that there are enough bidders for municipal collection contracts, whatever their presentation.”

All eyes will now be on the July 17 deadline for a final CMA decision on the future of Veolia/Suez. The first has already planned to sell the waste activity of Suez UK if the provisional decision becomes final.

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Melissa C. Keyes