Ecolab’s merger with Holchem has been blocked by the Competition & Mergers Authority (CMA).
The authority ruled that the combination of two of the largest suppliers of cleaning chemicals to the food and drink industry would leave just three players of any significant size competing in the market.
It has announced its opposition to the merger completed in November last year and instructed Ecolab must sell off Holchem.
Kirsten Baker, who chaired the inquiry on behalf of the CMA said:
"We concluded that these two companies compete closely and this deal could have very serious effects – prices could go up or quality standards in crucial support services could get worse.
"Having carefully considered how these issues could be resolved, we decided that only blocking the merger and requiring Ecolab to sell Holchem would address our concerns.”
The inquiry panel pointed out that food and drink manufacturers placed a high value on their cleaning chemical supplier’s reputation and experience in keeping food and drink safe and free from contamination.
The merger reduced the choice available, it said and added that this could mean food and drink manufacturers face higher prices or a lower quality of service for cleaning chemicals.
A group of independent CMA panel members had considered alternative measures but concluded that the only effective way of addressing the significant loss of competition was to block the merger.
The CMA added that it must approve any new buyer for Holchem in the event of a sale.