[The following update has been brought to you by our Editor, Saumya Raizada.]
The European Commission (EC) in a press release dated 11 June 2019 noted that it had blocked the merger of India’s largest steelmaker, Tata Steel and Thyssenkrup (a German MNC, also engaged in steel production). The proposed transaction was notified to the EC on 25 September 2018 and an in-depth investigation was opened on 30 October 2018. ThyssenKrupp is estimated to be the second largest producer of flat carbon steel in the EEA whereas Tata Steel is the third largest. The two companies are significant producers of metallic coated and laminated steel for packaging applications and of galvanised flat carbon steel for the automotive industry. The EC’s decision to block the merger comes after a detailed investigation which revealed that the parties did not offer adequate remedies for the EC to believe that the merger would not cause competitive concerns in the market for steel, if allowed.
The main areas of concerns identified by the EC with the proposed merger were:
In the metallic coated and laminated steel products for packaging, the proposed merger would lead to the creation of a market leader in an already highly concentrated industry, particularly in tinplate which is one of the most important steel products used in the industry. High market concentration beyond a certain extent signifies market power which may be abused by the merged entities, if unregulated by anti-trust authorities around the globe.
In automotive hot dip galvanised steel products, the proposed merger would have eliminated an important competitor in a market where only a few suppliers could offer significant volumes of this steel. As a result, the customers would have been forced to purchase the products at any rate which the merged entity would propose, significantly reducing prevailing competition in the market.
The proposed merger is only the tenth merger to be blocked by the EC which believed that the proposed merger would adversely impact the bargaining power of the customers of steel and would lead to a drastic increase in steel prices. The merged entity was being pitched to create the second largest European steel producer, only behind ArcelorMittal.