On Tuesday 17 December, the European Commission opened an in-depth investigation to assess the proposed acquisition of Daewoo Shipbuilding & Marine Engineering CO., Ltd (DSME) by another shipbuilding group, Hyundai Heavy Industries Holdings (HHIH).
The Commission is concerned that the merger may reduce competition in several global cargo shipbuilding markets.
Maritime transport represents 30% of EU internal freight trade and 90% of EU external freight trade. European shipping companies represent 30% of worldwide demand for cargo ships and are important customers of DSME and HHIH.
Identified problems. After a preliminary investigation, the Commission has concerns that the proposed transaction may remove DSME as an important competitive force in the following markets: large container ships, oil tankers, liquefied natural gas (LNG) and liquefied petroleum gas (LPG) carriers.
The Commission is concerned that the remaining shipbuilders may not exert sufficient competitive pressure on the merged entity (in the four markets mentioned). It is also concerned that customers may not have sufficient bargaining power to constrain the merged entity. The Commission has also identified significant barriers to entry into these markets, corresponding mainly to know-how, track-record and, in some cases, in mastering the technology used. At this stage, it concluded that it was unlikely that other shipbuilders would make a credible and timely entry into the market, which would counteract the possible negative effects of the transaction.
The transaction is therefore likely to result in higher prices, less choice and reduced incentives to innovate. The Commission will conduct an in-depth investigation to determine whether the transaction is likely to significantly impede effective competition. The Commission now has 90 working days, until 7 May 2020, to make a decision. (Original version in French by Lionel Changeur)