Cleaning companies fined more than £1.6m after breaking competition law

News.
News.

Two cleaning companies, one of which has a base in the Skegness area, have been fined more than £1.6m for breaking competition law after being found to be market sharing, it has been confirmed.

The Competition and Marketing Authority fined Micronclean Limited, of Roman Bank, Ingoldmells, £510,118 and Berendsen Cleanroom Services Limited, of Faraday Road, Newburym after it was found they had agreed not to compete for each other’s customers.

The specialist laundry services they supply include the cleaning of garments worn by people working in ‘cleanrooms’.

These are highly sanitised environments used by businesses such as pharmaceutical and medical device manufacturers as well as NHS pharmacies.

According to the report by the CMA, both businesses had been trading under the ‘Micronclean’ brand since the 1980s in a ‘longstanding joint venture agreement’.

The report says that in May 2012 the companies entered into ‘new, reciprocal trademark licence arrangements under which they agreed not to compete against each other’.

The agreement saw Micronclean Limited serve customers in an area north of a line drawn broadly between London and Anglesey, while Berendsen Cleanroom Services Limited served customers located south of that line.

The companies also agreed not to compete for certain other customers, irrespective of their location.

The CMA report said: “Market-sharing arrangements like these are generally illegal under competition law. For customers, these arrangements prevented them from shopping around to get a better deal and that can lead to higher prices, less choice and less innovation in the market.

“In reaching its decision, the CMA considered whether the wider joint venture between the companies, including any benefits which flowed from it, meant that these market-sharing arrangements were necessary or justified. The CMA concluded that they were not.”

The case looked at the period from the signature of the trademark licences on May 30, 2012 until the trademark licences were terminated and the related joint venture was disbanded on February 2, 2016.

Micronclean was, until July 1, 2016, as Fenland Laundries Limited (Fenland) while Berendsen Cleanroom Services Limited, was, until September 15, 2015, known as Micronclean (Newbury) Limited (Berendsen Newbury).

This most recent case came to the CMA’s attention following two related merger reviews.

In one, the CMA investigated and cleared a merger between the joint venture vehicle then jointly owned by Fenland and Berendsen Newbury, ie Micronclean Limited (since re-named, as of 1 July 2016, Fenland Laundries Limited), and Guardline Technology Limited.

The CMA also investigated a proposed merger between Fenland and Fishers Cleanroom, which was ultimately abandoned.

Ann Pope, CMA Senior Director for Antitrust Enforcement, said: “Market-sharing agreements are well established and serious breaches of competition law.

“Organisations like the NHS rely on the cleanroom laundry services provided by these companies, but we have found the 2 biggest players were dividing customers between them, leaving those customers with very little choice in service provider.

“Companies must regularly check their trading arrangements, including long-running joint ventures and collaborative agreements, to make sure they’re not breaking the law. The entry into new trade mark licence agreements in 2012 was an opportunity for the businesses to consider the competition law implications of their commercial arrangements.”

As the parent company of Berendsen Cleanroom Services Limited for the latter part of the period during which the law was broken, Berendsen plc is jointly and severally liable for £1,028,671 of Berendsen Cleanroom Services Limited’s fine.