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RENTOKILL & CANNON HYGIENE ORDERED TO SELL OFF SUPPLY CONTRACTS BY CMA OVER MERGER DEAL

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RENTOKILL & CANNON HYGIENE ORDERED TO SELL OFF SUPPLY CONTRACTS BY CMA OVER MERGER DEAL

Gavin Nicholls

Competition and Markets Authority (CMA) have ordered Rentokil Initial to sell several large supply contracts in order to satisfy their concerns of the over its merger with Cannon Hygiene.
This decision by the regulator comes after an in-depth phase two investigation into the completed merger between two of the UK’s largest suppliers of washroom services.
Rentokill Initial and Cannon Hygiene supply commercial, industrial and public buildings with items and services such as soap dispensers, air sanitisers and sanitary waste disposal.
The CMA’s group of independent panel members found that the deal is likely to result in higher prices or a worse service for customers seeking a single supplier of waste disposal services at multiple locations across the whole or a large part of the UK.
The findings show that the merger of Rentokil and Cannon, who are two of the three major suppliers of washroom waste disposal, would reduce the choice of suppliers available to these customers.
This effect would not be offset by competition from other suppliers, according to the CMA. Nor did it find evidence that future entrants into the market would have enough impact in the foreseeable future.
To offset the loss of competition resulting from the merger, the CMA has decided Rentokil/Cannon must sell all contracts with customers that have premises nationally and across multiple regions, which were serviced by Cannon prior to the merger.
These contracts will be sold to a different company to recreate the pre-existing competitive intensity for future national contracts. This company would need to be approved by the CMA. The new washroom services supplier will also, should it so require, be able to acquire Cannon infrastructure such as vehicles and equipment to enable it to provide an effective service to these customers.
Inquiry chair Anne Lambert said: “Our decision will preserve competition and choice for customers seeking a single supplier of washroom services across multiple locations.
“Where the CMA concludes that a merger will have a significant impact on competition, it will take action to restore that competition – regardless of whether a merger has been completed.”

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