The Commission acted on concerns that the transaction may reduce competition in the global cruise shipbuilding market.
‘Demand for cruise ships is booming globally. Chantiers de l'Atlantique and Fincantieri are two global leaders in this sector. This is why we will carefully assess whether the proposed transaction would negatively affect competition in the construction of cruise ships to the detriment of the millions of Europeans taking cruise holidays every year,’ said Commissioner Margrethe Vestager, responsible for competition policy.
An 'already concentrated and capacity constrained market'
At this stage, the Commission is concerned that the proposed transaction may remove Chantiers de l'Atlantique as an important competitive force in an already concentrated and capacity constrained market.
The Commission has identified high barriers to entry in this market, related to the very complex nature of cruise shipbuilding — it requires specific infrastructure, established engineering and design capabilities as well as important project management skills to coordinate hundreds of suppliers and subcontractors all along the construction process.
Risk of higher prices, reduced incentives to innovate
The Commission has preliminarily concluded ‘it is unlikely that a timely and credible entry from other shipbuilders would counteract the possible negative effects of the transaction. The transaction may therefore significantly reduce competition in the market for cruise shipbuilding, which could lead to higher prices, less choice and reduced incentives to innovate.’
The Commission also preliminarily concluded that large customers would not have sufficient buyer power to counteract any risk of price increases as a result of the transaction.
As a result, an in-depth investigation will be carried out to determine whether Fincantieri’s takeover of Chantiers de l’Atlantique would be likely to significantly reduce effective competition.
On Tuesday, Fincantieri issued a statement voicing its objection to a deeper probe, particularly if this were baed on ‘alleged reduction of the European players from three to two ... Following the transaction, there would still be three cruise shipbuilders in Europe, as opposed to the current four,’ the statement said.
The transaction was notified to the Commission on Sept. 25.
Decision due by March 17
Chantiers de l'Atlantique and Fincantieri have decided not to submit commitments during the initial investigation to address the preliminary concerns. The Commission now has 90 working days, until March 17, to take a decision. This follows the Jan. 8 request from France and Germany to assess the deal under the EU Merger Regulation.
The proposed transaction was initially notified to France and Germany for regulatory clearance since it did not meet the turnover thresholds of the EU Merger Regulation. France and Germany subsequently submitted a referral request to the Commission.
The Commission said the opening of an in-depth investigation does not prejudge the outcome of the investigation. It added that the ‘vast majority of notified mergers do not pose competition problems and are cleared after a routine review.’
From the moment a transaction is notified, the Commission generally has 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).