Proposed Acquisition by SembWaste Pte. Ltd. of Veolia ES Singapore Pte. Ltd.

Notifying Party:

SembWaste Pte. Ltd.

Notifying Date:

8 January 2020

Summary of transaction:

(i) the names of the merger parties;

SembWaste Pte. Ltd. ("SembWaste") and Veolia ES Singapore Pte Ltd ("VESS") (collectively, the "Parties").

(ii) a description of the transaction;

The transaction being notified ("Proposed Transaction") involves SembWaste acquiring 100% of the issued shares of VESS from Veolia Environmental Services Asia Pte Ltd ("VESA").

(iii) a description of the business activities of the merger parties worldwide and in Singapore;

SembWaste

SembWaste is part of the Sembcorp Group, a leading energy, urban development and marine group, operating across multiple markets worldwide. SembWaste operates in Singapore only and does not have a presence overseas.

SembWaste is an integrated solid waste management service provider in Singapore. It offers a comprehensive suite of services to the municipal, industrial and commercial sectors. Its range of solid waste management services includes:

(a) Waste collection comprising the

(i) Public waste collection ("PWC"), and

(ii) General waste collection ("GWC"); and

(b) conversion of recycled wood into wood chips.

Additional information on SembWaste is available at https://www.sembcorp.com/

VESS

VESS is part of the Veolia group, which designs and provides water, waste and energy management solutions that contribute to the sustainable development of communities and industries. VESS operates in Singapore only and does not have a presence overseas.

VESS' operations in Singapore include PWC and GWC services.

(iv) a description of the overlapping goods or services, including brand names;

The overlapping services provided by SembWaste and VESS consist of the following:

PWC

The collection of domestic / municipal waste from housing development board, landed properties, condominiums, government properties and small trade premises regulated under a Public Waste Collectors licence; and

GWC

The collection of commercial and industrial waste including but not limited to inorganic waste (e.g. construction and renovation tree trunks and branches, furniture disposal, electrical appliances, wooden crates, pallets and other bulky items for disposal), and organic waste (e.g. food and other putrefiable waste from domestic, trade and industrial premises, markets and food centres) regulated under a General Waste Collectors licence.

(v) a description of substitute goods or services;

There are no close substitutes for PWC or GWC services as these are essential services regulated by the NEA. Notwithstanding this, SembWaste submits that there are numerous entities which are able to participate in tenders conducted by NEA (for PWC services) or other customers (for GWC services).

(vi) The applicant’s views on:

a. definition of the relevant market(s);

SembWaste submits that the relevant markets are:

(a) the provision of PWC services in Singapore; and

(b) the provision of GWC services in Singapore.

b. the way in which competition functions in this market;

PWC

The NEA appoints public waste collectors for the six (6) geographical sectors in Singapore through open tenders which are open to companies that meet the NEA's pre-qualification criteria.

According to SembWaste, each tender will see on average approximately ten (10) applicants meet the NEA's pre-qualification criteria.

GWC

The NEA awards GWC licences based on an application process. Entities requiring GWC services (e.g. businesses, hospitals) typically hold private tender processes or request for quotations from GWC licence holders. The assessment criteria in each private tender process varies between entities. However, as the said tender processes are private, bidders do not have knowledge of the assessment criteria adopted by each entity in their respective tender processes. Typically, however, premium (larger) customers demand eligibility criteria, impose terms and limit negotiation, whereas general (smaller) customers may accept the GWC licence holders' terms and conditions without negotiation.

c. barriers to entry and countervailing buyer power; and

Barriers to entry

PWC

There are no insurmountable barriers to entry. Large global players can, and do qualify to participate in open tenders called by the NEA in Singapore. Any undertaking with the requisite financial resources and meets the pre-qualification criteria would be able to enter the market. It is not prohibitive for a supplier to apply and be granted a licence to offer PWC services.

GWC

The barriers to entry for the GWC sector are low as licence holders serve a smaller customer pool per contract. There are minimum standards required for vehicles and equipment used in the provision of the GWC licence holders' services, and as specified in Code of Practice for GWC licence holders, but these are not difficult to meet.

Countervailing buyer power

PWC

Given the nature of the NEA's open tender process, the NEA has strong buyer power and is in a position to impose its own requirements and conditions for its open tender processes and on its PWC licence holders (including but not limited to the merged entity).

GWC

Buyers in the GWC sector have strong buyer power as buyers typically hold private tenders or requests for quotations in which they are able to impose their own selection criteria, requirements and conditions. In addition, given the short term contracts of one (1) to three (3) years, buyers can and do switch suppliers at the end of the contract period.

It should also be noted that buyers in both the PWC and GWC markets have strong buyer power and are able to impose requirements and conditions through their respective tender processes. From SembWaste’s experience, competition among the bidders in tenders for PWC contracts has been intense, both in terms of price competition (cost to business for buyers), and in innovation or technological competition.

d. the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).

SembWaste submits that the Proposed Transaction is unlikely to lead to non-coordinated effects in the relevant markets, as it will remain constrained by, and subject to strong competition from, existing competitors and potential entrants after the completion of the Proposed Transaction.

SembWaste submits that he Proposed Transaction is also unlikely to lead to coordinated effects in the relevant markets, given (among other things) the fragmented nature of the relevant markets, lack of transparency in respect of negotiated prices and the threat of disruption by new entrants.

Decision:

Following its assessment, CCCS has concluded that the Proposed Transaction, if carried into effect, will not infringe the section 54 prohibition of the Competition Act (Cap. 50B).

 Decision Date:

19 February 2020

Read the media release.

Read the grounds of decision.