Ecolab-Holchem decision exposes frictions over CMA's use of questionnaires

10 October 2019 11:31am

9 October 2019, by Victoria Ibitoye

Ecolab and Holchem's merger block by the UK competition regulator has exposed frictions over its use of customer surveys.

The Competition and Markets Authority — which ordered the breakup of the cleaning chemicals companies after finding their merger would result in higher prices and lower quality of service for customers — has defended its reliance on a small sample of customer responses in the full text of its final decision.

Ecolab and Holchem have strongly criticized the CMA’s decision, arguing the merger would deliver benefits for customers through better service and innovation. They also hit out at how the CMA handled its investigation, last month accusing the regulator of “cherry picking” customer feedback to build a case against the deal.

In a statement on 7 October, Ecolab said it is “reviewing the full report” and will “carefully consider” its options and next steps.

Companies aggrieved by a CMA decision can seek judicial review at the Competition Appeal Tribunal, the UK's specialized antitrust court. The scope for appeal is more limited than a full-merits review.

Customer questionnaires

In the full text of the CMA's decision, published on 8 October, it defended its use of customer surveys which appeared, in parts, to conflict with data commissioned by Ecolab and Holchem.

To inform its in-depth investigation, the CMA sent two customer questionnaires, one to small customers and another to large customers. It received more than 150 responses from small customers, a response rate of about 15 percent, and 23 responses from the 152 large customers it sampled, a similar response rate.

In a response to the CMA’s provisional findings Ecolab and Holchem expressed “serious concerns” about the regulator's level of engagement with third parties, arguing that the majority of the feedback had been favorable or neutral in their own survey.

Their survey of large customers, undertaken by market research company Survation, attracted 30 responses, they said, 70 percent of which expressed no concerns about the impact of the transaction given alternative suppliers in Diversey and Christeyns, and the ability to switch easily.

The CMA, however, disagreed with the view in its final findings, arguing that non-responses do not equal support for a transaction.

“Non-responses could be for a range of reasons including the quality of contact details provided to us, other time pressures on potential respondents and the extent to which the customer participated in the CMA’s phase 1 investigation. Indeed, we are aware of some customers who expressed concern about the merger to the CMA in its phase 1 investigation who did not respond to our questionnaire,” the CMA said in its full-text decision.

“Although it may be that customers who are concerned about the merger respond in higher proportions than customers who are not, we do not have sufficient information to quantify this effect and we do not agree that non-responses should be interpreted as those customers are unconcerned about the merger,” it added.

Even so, the CMA’s handling of customer questionnaires has drawn criticism in recent months.

Swedish optical-technology maker Tobii, which is challenging the legality of the CMA’s approach at the CAT after it was ordered to sell off its acquisition of Smartbox Assistive Technology, said there were “material errors” in the regulator’s collection of evidence. It is set to square off against the CMA next month.