ACM Investigating Foresco’s Takeover of DWP and Vierhouten: Potential Impact on Competition and Customers

The takeover of pallet retailers DWP and Vierhouten by competitor Foresco requires further investigation. The Dutch Consumer and Markets Authority (ACM) has decided this. Foresco, like DWP and Vierhouten, manufacture and sell various types of wooden pallets, wooden boxes and packaging.

Foresco, like DWP and Vierhouten, also sell plastic bags. Foresco is the largest player in the Netherlands thanks to a series of acquisitions in several of these sectors. In the area of ​​sales of new wooden pallets in the Netherlands, the acquisition of DWP and Vierhouten would further strengthen Foresco’s market position, with a possible negative impact on customers. That is why ACM wants to further investigate the consequences of this.

New wooden pallets

Foresco is currently the largest seller of new wooden pallets in the Netherlands. The acquisition of DWP and Vierhouten strengthens Foresco’s potential position in the field of new wooden pallets. In addition, Forestco has pursued a growth strategy through the acquisition of competitors.

In recent years, Foresco has become a market leader through a number of often small, unknown (‘connecting together’) factors. Of the fifteen acquisitions of pallet companies with locations in the Netherlands that Foresco has made in the 2019 period so far, the ACM has assessed four. The remaining eleven properties fell below the conversion thresholds for mandatory prior notification to the ACM.

When competitors leave the Dutch market and not enough new suppliers come in, Foresco can behave more and more. After the takeover, Foresco may be able to realize price increases. This harms customers. In any ongoing investigation, ACM will examine the threat of competition. In particular, ACM will further investigate the risk of price increases as a result of this takeover strategy or by strengthening Foresco’s possible dominant position.

Experiment with small purchases

The ACM can only assess assets where the acquiring company and the acquired company in the Netherlands have a turnover of at least 30 million euros. Smaller acquisitions can also cause market problems in certain circumstances, for example when the acquisition is part of an acquisition strategy (‘stringing together’) with a major player in the market. This problem has been identified in various European countries and additional legislation is being prepared. The ACM is calling for a ‘call-in authority’ to also be able to assess property that falls below the duty to notify but could harm competition.

Why does ACM investigate takeovers?

With every takeover, the question is whether there is enough competition immediately after the deal and in the years to come. Competition ensures that a product or service is on the market for a good price and quality and that innovation is encouraged. That is why the ACM assesses in advance whether a company can take over another company.

An acquisition must not proceed if the merger of companies adversely affects competition and therefore price, quality or innovation. And this ultimately has a negative impact on the user. The ACM examines whether markets continue to work well for people and companies, now and in the future.