Council “actively engaging” with ACCC after Citywide sale blocked

City of Melbourne CEO Alison Leighton says it is still in active discussions with Australia’s competition watchdog after it blocked the council’s sale of Citywide to private waste management giant Cleanaway late last year.

In June last year the council made the surprise announcement that it was selling Citywide, and that ASX-listed Cleanaway had been “chosen as the best operator to deliver world-class waste collection services.”

The deal included Cleanaway’s $110 million purchase of Citywide’s waste and recycling business and assets, as well as a $35 million investment to redevelop the aging waste transfer station at Dynon Rd in West Melbourne. The redevelopment was to be boosted by a further $10 million from the council. 

But with the sale subject to regulatory approval, the Australian Competition and Consumer Commission (ACCC) in November said that the “proposed acquisition of Citywide Waste raises concerns”.

“We are concerned that the acquisition will extend Cleanaway’s already strong position in Melbourne by expanding Cleanaway’s existing network of waste disposal facilities,” ACCC Commissioner Dr Philip Williams said.

“Our preliminary view is that the proposed acquisition would remove the close competitive tension between Cleanaway’s and Citywide Waste’s waste disposal facilities, particularly in the central and west regions of metropolitan Melbourne.”

We are concerned that the expansion of Cleanaway’s waste disposal network may enable Cleanaway to charge downstream collection providers higher prices and reduce service quality.

“Rival waste collectors, particularly commercial and industrial collectors, require access to waste disposal facilities at competitive rates, and competitive service levels, to compete effectively for customers.”

During public question time at the February 18 Future Melbourne Committee (FMC) meeting, former City of Melbourne councillor and shareholder activist Stephen Mayne asked the council how it signed the deal without any public consultation or disclosure.

With Citywide, which is chaired by former Premier John Brumby, having recorded a near $8 million loss during the 2023/24 financial year, Mr Mayne asked the council whether this was the reason behind the sale of its “crown jewels”.

“It looks like you’ve suffered an unprecedented loss, and you've decided to sell off the crown jewels,” Mr Mayne said. “What's happening with the deal and why did you do it so secretly?”

The council’s CEO Alison Leighton responded by saying that the matter was still under active consideration by the ACCC after it released a statement of issues with the sale in November.

“There is an active dialogue taking place right at the moment between the City of Melbourne and also Cleanway in relation to their [the ACCC’s] assessment of the proposed transaction,” Ms Leighton said.

“It's fair to say that given that there was a very significant degree of commercial in confidence information in relation to the process that council undertook to assess its options and to engage with the market around potential bidders … meant that it was appropriate that it was a confidential consideration.”

“As soon as there was an ability to make a statement to the public around council’s intention, that was done.”

But Mr Mayne said after his efforts to sell Citywide during his time as the council’s finance chair had fallen on deaf ears, “I fell off my chair when they just announced a done deal with no public consultation and no advertising process.”

“I thought it was a very untransparent process. Really shocking,” Mr Mayne told Ali Moore’s ABC Drive program on February 20. “Then the ACCC comes out and said ‘no … you're creating a monopoly, and everyone's prices are going to go up.’”

“Why are you [the council] doing this deal if you're going to put everyone's prices up just because you're embarrassed you've lost $8 million?”

Citywide is a wholly owned subsidiary of the City of Melbourne, which established the business in 1995 after then Premier Jeff Kennett implemented compulsory competitive tendering (CCT) to force local governments to compete for contracts. 

Having invited public submissions on its statement of issues until November 28, the ACCC originally said that it expected to publicly announce its final view by February 13 but that this “timeline may change”.