On June 11, 2019, the Commission prohibited the then-proposed joint venture between Tata Steel and Thyssenkrupp as the parties failed to provide commitments that fully addressed the Commission’s concerns. In Thyssenkrupp’s view, offering commitments would have “adversely affected the intended synergies of the merger to such extent that the economic logic of the joint venture would no longer be valid.”
The Commission’s concerns
The transaction would have combined the second and third largest steel producers in Europe. The Commission’s concerns focused on the creation of the leading position in the steel-packaging sector, especially in the metallic coated and laminated steel packaging sub-segments. The Commission also outlined concerns in the automotive hot dip galvanized segment where, despite combined shares being below 30%, the Commission was concerned that the parties were particularly close competitors.
The parties argued that concerns were mitigated by competitive pressure from imports. The Commission was not convinced. As in the ArcelorMittal/Ilva transaction conditionally approved just one year earlier, the Commission argued that imports from outside the EEA could not sufficiently constrain the merged entity due to, in particular, long delivery lead times, low security of supply, and lower service quality for imported steel.
On this basis, the Commission concluded that the transaction would lead to a reduced choice of suppliers, as well as to higher prices for European consumers.
The parties offered to divest their automotive and packaging plants in Spain, Belgium, and the U.K. The steel packaging divestments were to be paired with a three-year tolling arrangement, under which the companies would use their “best efforts” to convince existing customers to transfer their contracts to the purchaser of the plants, and then provide the finished products to the buyer on a pre-determined pricing formula (reflecting processing costs as well as a fixed markup).
The Commission found these commitments did not fully address its concerns. First, it observed that the divested assets represented only a small part of the competitive overlap in the steel packaging segment, and therefore only partly addressed the Commission’s concern. In particular, with regard to “tinplate steel,” Europe’s most important steel packaging product by volume due to its use for tin cans, the parties would have continued to exercise considerable market power. Second, the commitments did not resolve the Commission’s concerns with respect to the competitive overlap in hot-dip galvanized steel. This specialty steel is particularly important for car manufacturers, and the commitments did not provide for the divestment of hot-dip galvanized finishing assets in areas where the parties compete most intensively. Third, the Commission was concerned that the parties did not commit to divesting assets for the production of the necessary input for packaging as well as hot-dip galvanized steel.
In light of the parties’ refusal to agree to more far-reaching commitments, such as divesting Tata
Steel’s and Thyssenkrupp’s “crown jewel assets” in Germany and the Netherlands, the Commission prohibited the transaction. In doing so, the Commission highlighted the negative feedback received from customers, again underlining the importance of customer and competitor interviews in EU merger proceedings. This is the Commission’s third prohibition decision this year following Siemens/Alstom and Wieland/ Aurubis/Schwermetall, which were discussed in February’s EU Competition Law Newsletter.
 Tata Steel/Thysenkrupp/JV (Case COMP/M.8713), decision not yet published.
 See Thyssenkrupp, Press Release of May 10, 2019, available at: https://www.thyssenkrupp.com/en/newsroom/press-releases/press-release-146592. html?id=182402.
 ArcelorMittal/Ilva (Case COMP/M.8444), Commission decision of May 7, 2018.
 Siemens/Alstom (Case COMP/M.8677), decision not yet published.
 Wieland/Aurubis/Schwermetall (Case COMP/M.8900), decision not yet published.