The Berendsen (Elis)/Kings Laundry transaction: an ex post assessment of the contract divestment remedy

Abstract

An article published in 2020 in the Competition Law Journal argued that, on an ex ante basis, the contract divestment remedy package agreed by Ireland’s competition agency in the Berendsen (Elis)/Kings Laundry transaction would be unlikely to mitigate the agency’s competition concerns. In particular, the remedy package would not lead to successful entry into the supply of flat linen rental services for hospitals. This article is an ex post assessment of that remedy. Given the remedy’s fix-it-first nature, the agency was satisfied that entry was both likely and timely. However, the evidence to date – more than 12 months after the entrant took title to the contracts – suggests that entry has not been sufficient. Indeed, the entrant is conspicuous by its absence from the supply of flat linen rental services for hospitals. Such an outcome is consistent with the incentives of the merged entity to select a weak competitor, reinforced by the excessively narrow set of assets that constituted the contract remedy package. Prohibition or a strengthened contract divestment package would have been better alternatives. Such an apparent relaxation of merger control suggests that Ireland’s competition agency needs to reassess its approach to problematic mergers that are likely to damage consumer welfare.