After a review of over two years, on January 13, 2022, the Commission prohibited Hyundai Heavy Industries Holdings’ (“HHIH”) acquisition of Daewoo Shipbuilding & Marine Engineering (“Daewoo”).[1] This is only the tenth prohibition decision in ten years, and the first since 2019.[2]

The Commission opened an in-depth investigation on December 17, 2019, raising concerns in four markets related to the construction of cargo ships.[3] The prohibition decision relates to the market for the construction of large liquefied natural gas (“LNG”) carriers, where HHIH and Daewoo are two of the three largest players worldwide. According to the Commission, large LNG carriers are essential in the supply chain of LNG, which in turn is important for Europe’s energy security. Over the past five years, EU customers accounted for almost 50% of global orders.

The Commission found that the transaction would have created a “dominant” undertaking with a market share of at least 60% and facing only one large competitor. This market concentration would have occurred in the context of market- wide capacity constraints, high barriers to entry, and lack of buyer power.[4]

During the lengthy review,[5] remedies were apparently discussed but never formally submitted. This is unusual in Phase II investigations, particularly those leading to a prohibition decision (where merging parties would typically either submit formal undertakings, abandon the deal altogether, or do both to avoid receiving a prohibition).[6] Instead, HHIH and Daewoo reportedly focused on their core arguments that the market shares do not accurately reflect market power in the shipbuilding industry, which is a bidding market where shares can easily be lost after the next bidding round. The parties also maintained that the Commission was wrong to dismiss competition from Chinese companies (an argument which had a low success rate with the Commission in past cases).

The parties will now have an opportunity to test these arguments in a new forum as HHIH has indicated that it will appeal.

Editors: Conor Opdebeeck-Wilson and Thorsten Schiffer

[1]      Commission Press Release IP/22/343, “Mergers: Commission prohibits proposed acquisition of Daewoo Shipbuilding & Marine Engineering by Hyundai Heavy Industries Holdings,” January 13, 2022.

[2]      The Commission adopted three prohibition decisions in 2019: Wieland/Aurubis/Schwermetall (Case COMP/M.8900), Commission decision of February 5, 2019; Siemens/Alstom (Case COMP/M.8677), Commission decision of February 6, 2019; and Tata Steel/Thysenkrupp/JV (Case COMP/M.8713), Commission decision of June 11, 2019. These decisions are reported in our February 2019 and June 2019 EU Competition Law Newsletters. The number of prohibition decisions does not provide the full picture, however, as a larger amount of proposed transactions was abandoned during the same timeframe.

[3]      Commission Press Release IP/19/6792, “Mergers: Commission opens in-depth investigation into proposed acquisition of DSME by HHIH,” December 17, 2019.

[4]      The Commission also found that demand was not affected by the Covid-19 pandemic.

[5]      The Commission suspended the review three times due to HHIH’s failure to provide requested information on time.

[6]      Almost 80% of all Phase II investigations opened since February 2012 at some point involved a formal remedy submission, either in Phase I or in Phase II. Additionally, before HHIH/Daewoo, a formal remedy proposal had been submitted in each of the cases that ultimately led to a prohibition within this timeframe.