ACM: Further investigation needed into yet another acquisition by pallet seller Foresco
The Netherlands Authority for Consumers and Markets (ACM) has decided that further investigation is needed into the acquisition of pallet sellers DWP and Vierhouten by rival Foresco. Like DWP and Vierhouten, Foresco manufactures and sells different types of wooden pallets, wooden crates, and wooden packaging. In addition, Foresco, like DWP and Vierhouten, also sells plastic pallets. Foresco is the largest competitor in the Netherlands following a series of acquisitions in several of these segments. With regard to the sale of new wooden pallets in the Netherlands, the acquisition of DWP and Vierhouten would further strengthen Foresco’s market position, having possibly adverse consequences for consumers. That is why ACM wishes to investigate the acquisition’s consequences further.
New wooden pallets
At the moment, Foresco is, by far, the largest seller of new wooden pallets in the Netherlands. The acquisition of DWP and Vierhouten will strengthen Foresco’s possible dominant position on the market for new wooden pallets. In addition, Foresco has pursued a growth strategy of acquiring competitors. Over the past few years, Foresco has evolved into the market leader through several, often small acquisitions that did not meet the notification threshold (‘roll-up acquisition strategy). ACM has assessed four of Foresco’s fifteen acquisitions of pallet companies with locations in the Netherlands between 2019 and today. The other eleven acquisitions were below the turnover thresholds for mandatory notification to ACM. If competitors leave the Dutch market and not enough new suppliers enter the market, Foresco will be able to act more and more independently. After the acquisition, Foresco would then possibly be able to introduce price increases. This will come at the expense of consumers. In a further investigation, ACM will assess the risk to competition. In particular, ACM will further assess the risk of price increases resulting from this acquisition strategy or from strengthening Foresco’s possible dominant position.
Assessing smaller acquisitions
ACM is only able to assess acquisitions where both parties to the acquisition each have turnovers in the Netherlands of at least 30 million euros. In some situations, smaller acquisitions can also result in market problems, for example, when the acquisition is part of a strategy of acquisitions (‘roll-up acquisition strategy’) by a larger competitor. In various European countries, this problem has been identified, and additional legislation is being drafted. ACM argues for a so-called ‘call-in power’, which allows it to also assess acquisitions that fall under the notification threshold, yet that are able to harm competition anyway.
Why does ACM assess acquisitions?
With every acquisition, there is the question of whether sufficient competition remains, directly after the transaction as well as in the subsequent years. Competition ensures that products or services are of high quality, and that they are offered on the market at competitive prices. Competition also promotes innovation. That is why ACM decides in advance whether or not businesses are allowed to join forces. An acquisition is not cleared if a merger has negative effects on competition and, by extension, on prices, quality, and innovation, and if, ultimately, it also harms consumers. ACM assesses whether markets will continue to work well for people and businesses, now and in the future.