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Anticipated acquisition by SRCL Limited of Cliniserve Holdings Limited

Affected market: Waste management services

No. ME/3847/08

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, third party views, assessment and decision.

The OFT's decision on reference under section 33(1) given on 21 November 2008. Full text of decision published 22 December 2008.

Please note that square brackets indicate figures or text which have been deleted or replaced at the request of the parties for reasons of commercial confidentiality.


SRCL Limited (SRCL), a subsidiary of US-based company Stericycle Inc, is a UK company providing waste management, processing and related services to the medical and other sectors throughout England and Wales. Its turnover for the financial year ended 31 December 2007 was approximately £21 million.

Cliniserve Limited (Cliniserve) provides waste management and processing services principally to the medical sector. Its focus is on the collection and treatment of healthcare and pharmaceutical waste and disposables. Cliniserve's turnover for the financial year ended 30 April 2008 was £12 million.


SRCL is proposing to acquire the entire issued and allotted share capital of Cliniserve. Initially, the OFT was advised that this would entail the acquisition of (a) Cliniserve's medical waste collection business that operates across the whole of the UK, and (b) a medical waste treatment facility in Littlehampton, West Sussex. It was the intention of the parties that a second facility in Frome would not comprise part of the transaction.

Subsequent to its informal submission for merger clearance, however, SRCL notified the OFT of the prospect that it would also acquire the facility at Frome. As such, it requested that the OFT assess the proposed transaction on the basis that this plant would also be acquired by SRCL as part of the transaction.

The parties notified the transaction on 8 September 2008. The OFT's administrative deadline, as extended, expires on 21 November 2008.


As a result of this transaction SRCL and Cliniserve will cease to be distinct.

The parties submitted that they overlap in and have a combined share of approximately [40-50] per cent of all available alternative technology treatment capacity in the UK and the share of supply test in section 23 of the Enterprise Act 2002 (the Act) is therefore met.

The OFT therefore believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation.


The OFT received a significant number of complaints from both customers and competitors regarding the likely effects of the merger, most of which related to treatment and (derivatively) collection in south east England.  Many complainants were concerned that the removal of Cliniserve as an independent competitor would have a detrimental impact on their ability to get competitive prices for their medical risk waste collection and treatment needs. Third parties noted that choice was already limited in this area and that prevailing capacity constraints were impairing the ability of a number of firms to compete.

One customer raised concerns that the merger would allow SRCL to deny or frustrate access to treatment facilities in the south east of England.

A number of more general, non merger-specific complaints were also received relating to the perceived strength of SRCL's position across the UK.

No specific concerns were raised regarding the potential impact of the merger in south west England or Wales.


In south east England, the merger will transfer to SRCL, the leading player with a very substantial share of existing healthcare risk waste treatment capacity, a potentially significant source of market capacity, going forward, in the guise of Cliniserve's Littlehampton plant. This would not necessarily be problematic if remaining rivals in the market held substantial spare capacity that would incentivise them to bid aggressively to fill it. However, the OFT's evidence is that at present, rivals in the south east are capacity constrained, thereby constricting their ability to discipline the market leader, SRCL, post-merger.

Moreover, given Cliniserve's potential capacity expansion going forward, the merger may well be transferring a significant source of future spare capacity, which - if not in the hands of SRCL, the player with such a large share of capacity already - could be used as an aggressive competitive tool as its operator seeks to fill that capacity and compete hard with SRCL. This is because the supplier with the most (or only) spare capacity will likely determine the prices the customer pays in a given bidding round.

By concentrating further total capacity under the control of SRCL, this increases the likelihood that SRCL will be the player with the largest share of available spare capacity at any given point in time, a situation that will be aggravated if additional free capacity that would have come on-stream at Littlehampton outside SRCL's control absent the merger, is also transferred under SRCL's umbrella. Further, SRCL may have the incentive to withhold additional capacity from the market to take advantage of its position as market leader, with a majority share of spare capacity, in a capacity-constrained market.

In such circumstances, post-merger SRCL may well enjoy an increased ability and incentive to withhold capacity to drive up prices, and/or charge higher prices for the free capacity it does make available in bidding for a customer contract, because capacity-constrained rivals will not be able to compete to soak up all available demand in a market where the supply-demand balance is tight, [ ].

The OFT's concerns in relation to such unilateral effects are particularly acute within the London area over the next two years, where procurement through the LPP is limited to a small number of operators such that entry or expansion by other suppliers is not considered possible.

The OFT was also concerned, for the south east of England as a whole, that new entry and expansion was unlikely to provide a sufficient constraint on the merged entity in the next one to two years. Although the OFT considered certain expansion by a number of competitors likely, it did not consider that their expansion would be sufficient to constrain a post-merger price rise by the merged entity. While the OFT was also made aware of other potential sources of expansion, the OFT could not conclude with a sufficient degree of certainty that such expansion would occur.

In the south west of England, the transaction is likely to result in an increase in SRCL's share of treatment capacity in the region going forward (based on the expected opening of Cliniserve's Frome AT treatment plant). Unlike the south east, however, market enquiries did not reveal any material degree of concern in this region in terms of either collection or treatment.

In Wales, the merger will remove Frome as a potential independent source of treatment capacity that could be used to service customers in that region. Market enquiries revealed, however, that SRCL would be likely to be constrained by other market participants when the All Wales contract is next put out to tender.

The OFT's conclusion in respect of unilateral effects at the treatment level in the south east, and the remedy offered (below), make it unnecessary to reach conclusions in respect of vertical effects.

The OFT was comfortable that the merger was unlikely to increase the likelihood of coordinated effects in any of the relevant markets because in the south east it increases asymmetry in an asymmetric market while not leading to insubstantial increases in concentration in Wales or the south west.


The OFT's duty to refer the anticipated acquisition by SRCL of Cliniserve to the Competition Commission pursuant to section 33 of the Act is suspended because the OFT is considering whether to accept undertakings in lieu of reference under section 73 of the Act.

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