As an antitrust practitioner, time and again one might get the impression that some think industries or companies can be too small or niche to have to care about antitrust. In recent weeks, there have been a number of cases that prove the opposite. This post takes a closer look at what can be drawn from them on when antitrust matters.
The cases span a range of activities and issues in what could be perceived as more niche industries and/or concerning small players. Even without venturing back to investigations into pizza, kebabs and ice cream (see here), the lesson regulators are sending is consistent: No Hardly any company is too small for antitrust!
Breaded scampi
One of the things I find most exciting about being an antitrust practitioner is that one gets to deal with a broad range of industries and always has to really understand the markets one’s clients operate in.
However, “breaded scampi” are not something I have dealt with in-depth so far. The same might be true for the UK’s antitrust regulator CMA, which brought the acquisition of Northern-Irish Kilhorne Bay Seafoods by UK rival Whitby Seafoods Limited to collapse in October this year.
The CMA found that the deal could lead to higher prices and reduced quality of breaded scampi for UK pubs and restaurants, and announced that it would open an in-depth investigation into the deal. This led to the parties abandoning their plans for the transaction. The acquirer stated that “the resources required to engage in a CMA phase-two investigation are out of all proportion to any potential benefit from the deal”.
Window blinds
Speaking of Phase 2 investigations, the German Bundeskartellamt is currently conducting an in-depth investigation of the acquisition of Erfal by private equity-owned Hunter Douglas. While Hunter Douglas is a large company with turnover in the billions, Erfal has approx. 450 employees and a turnover of approx. EUR 55 million.
Both companies offer window blinds, which are not unknown territory for the CMA either: In 2020, the UK forced Hunter Douglas (yes, the very same Hunter Douglas now dealing with a German Phase 2) to sell a majority stake in UK rival 247 Home Furnishings, which Hunter Douglas had acquired a year earlier.
Modular expansion joints for bridges
Enough of merger control: Only a few months ago, the Bundeskartellamt fined two manufacturers of “modular expansion joints for bridges” for engaging in a cartel over a period of approx. 15 years.
By the standards of global mega-companies, the fine of EUR 7.3 million was relatively modest, but hit companies with a turnover of apparently slightly over EUR 100 million each, so will have represented an appreciable part of their turnover (even though one of them is private equity-backed) – and it was reduced because both companies cooperated with the Bundeskartellamt.
Beverage pipeline sanitation and eggs
The list could probably be endless, but these two stuck out recently: Earlier this month, the Czech antitrust regulator fined an association of companies for “sanitation of beverage pipelines” for recommending minimum prices for sanitation services. And just a few days earlier and a couple of thousand kilometres east, the Turkish regulator fined producers of eggs (that is not to say sitting hens, but companies owning them) for fixing prices and allocating markets.
Hardly ever too small
The size of a company might be relevant for its antitrust risk exposure in some instances, but generally a small size or a more niche industry do not protect against antitrust enforcement. From time to time, one can observe political and/or lobbying efforts to “better” protect smaller businesses against the “burden” of antitrust compliance, but this is not necessarily gaining traction with antitrust regulators.
However, sometimes the legislator comes to help: Germany and some other countries know so-called “small market exemptions” in merger control. E.g., under the German merger control regime, the Bundeskartellamt cannot prohibit deals in markets that have an overall size of less than EUR 20 million (or less in certain industries).
Just yesterday, the regulator struggled with this exemption, when it had to clear two regional newspaper transactions. The Bundeskartellamt would apparently have liked to prohibit the deals – the press release includes such niceties as the transactions being “competitively very questionable” and leading to a “weakening of competition”. While this does not seem to be on the political agenda, it sounds as if the German regulator would not mind if the legislator decided to abandon the small market exemption in the next amendment to German competition law.
Photo by John Moeses Bauan on Unsplash
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