The Competition and Markets Authority has ordered bathroom services giant Rentokil Initial to sell off several large supply contracts as a condition of its merger with Cannon Hygiene, after deciding the deal would cause “higher prices or a worse deal for customers”.
The watchdog ruled this morning the tie-up – between two of the three major suppliers of washroom waste disposal – would reduce the choice of suppliers available to these customers.
Rentokil and Cannon provide nappy bins, soap dispensers and other bathroom products in public and industrial buildings across the country. The CMA has been looking into the merger which the firms clinched January 2018 for an undisclosed amount.
The first stage of the investigation finished last April, prompting competition concerns. When Rentokil Initial did nothing to address the concerns, the CMA moved the inquiry onto its second phase. Today's announcement is the result of this.
In an effort to provoke more competition in the market, the CMA today ruled Rentokil and Cannon must sell all contracts with Cannon's old UK customers who have premises in more than one region.
It is unlikely the move will hit the newly-formed company hard, however. City A.M. understands the contracts up for sale make up less than 10 per cent of Rentokil Initial and Cannon’s combined business.
A spokesperson for Rentokil Initial said: “While pleased that the CMA has found no substantial lessening of competition in the vast majority of the deal, we will now review the decision in detail and consider our next steps.”
Inquiry chair Anne Lambert said the decision would "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.”
The contracts will be sold to a different company to make sure there is still sufficient competition for similar contracts in future, the watchdog said. This company would also need to have the CMA's blessing.
Support services group Rentokil is best-known for providing pest control, which makes up a large proportion of its business globally.