On Tuesday 11 June, the European Commission banned the proposed creation of a joint venture by Tata Steel and ThyssenKrupp in light of EU competition rules.
This deal “would have harmed European competitiveness in this sector [steel] and led to higher prices for consumers buying canned food and cars”, said Competition Policy Commissioner Margrethe Vestager at a press conference.
The prohibition of mergers is quite rare, as the Commissioner pointed out. “It is only the tenth merger that we have blocked in the last ten years”, she said. “It is the first steel merger to be prohibited”, she added.
The proposed transaction, which was notified to the Commission on 25 September last, was the subject of an in-depth investigation by the institution on 30 October (see EUROPE 12128/13). The aim of this transaction was to combine the activities of the two companies in flat carbon steel and electrical steel in the European Economic Area (EEA). Today, ThyssenKrupp is the second largest producer of flat carbon steel in the EEA, while Tata Steel is in third place.
The Commission initially had initial concerns that the future merger, as notified, would have had the effect of reducing the number of suppliers and increasing prices for metallic coated and laminated steel for packaging applications and galvanised flat carbon steel for the automotive industry. Taking into account possible imports from non-Member States to offset a potential price increase induced by this project, the institution concluded that the competitive pressure in this sector would not have been sufficient to ensure effective competition if this merger had been approved.
In addition, while both companies proposed remedies for the project's defects, they “were limited in scope and scale and they did not fully address our competition concerns”, said Ms Vestager. This applies to both metallic coated and laminated steel for packaging applications and galvanized flat carbon steel for the automotive industry. The opinions of several market players also confirmed the Commission's analysis, which stated that the remedies would not have prevented higher prices and less choice for steel customers.
For this reason, the institution has decided to prohibit this proposed joint venture between the two companies.
It should also be noted that, in her speech, Ms Vestager made it clear that this decision had been taken with particular regard to its impact on the European economy and industry.
Reactions. Tata Steel and ThyssenKrupp were not surprised by this decision. In a statement published the day before, the latter indeed stated that it did “expect” the Commission to veto the proposed merger. With regard to the remedies, the company writes that “further commitments or improvements would adversely affect the intended synergies of the merger to such an extent that the economic logic of the joint venture would no longer be valid”. (Original version in French by Lucas Tripoteau)