Many companies active in chemicals, steel and other basic industries are no strangers to the need to factor in merger control risk when assessing the feasibility of a strategic transaction. In recent years, however, the EC's approach to merger control enforcement in these sectors has evolved, with new analytical metrics coming to the fore.
In summary, when assessing the competitive impact of M&A in an industrial context, the EC now focuses on the share of capacity of the parties and their rivals (placing less weight on market shares based on sales to third parties). A more sophisticated approach to geographic market definition has also been adopted in recent years, using catchment areas determined by measurable distance or time rather than national- or EEA-wide markets.
And, significantly, the EC now refers to a concept of "pivotality". A merged firm may be considered pivotal when all other competitors are unable, together, to cover the entire demand in the market. Deals between pivotal companies are more likely to raise antitrust concerns.
Overall, this focus on physical structural metrics has important implications for deal planning and the role of imports in the assessment. It could give rise to hurdles in markets even where there is spare capacity.
Our recent alert examines these issues in more detail. Based on analysis by EC officials, alongside our observations of the authority's enforcement practice, we give insights on the EC's current approach to merger control assessment in basic industries. We look at the challenges that may arise, especially in the context of today's uncertain geopolitical environment. We also set out key practical considerations for parties considering industrial and manufacturing deals, including useful factors for assessing deal feasibility and how any antitrust concerns may be addressed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
