EU Opens Antitrust Probe into FCA-PSA Merger
Would competition suffer if PSA and Fiat Chrysler Automobiles merge?
The European Commission, which considers antitrust issues on behalf of the European Union, is launching a four-month-long investigation to find out.
The commission’s primary concern is Europe’s market for small commercial vans, where FCA and PSA compete with the likes of Ford and Renault (each with 16% shares of the market), Volkswagen (12%) and Daimler (10%).
An FCA-PSA merger would spawn a company that controls one-third of Europe’s light van market, more than twice the share of its nearest rivals. Sources told Reuters that EC regulators expressed their concern two weeks ago about that possible outcome.
Nix the Quick Fix
The would-be merger partners could have shortstopped a probe last week by quickly agreeing to broad brush actions, such as divestitures, to address the issue. That option expired today as the EC completed its preliminary review.
But experts say the decision to face an in-depth probe was a good strategic move. An extended investigation, they explain, will give FCA and PSA more wiggle room in which to minimize the necessary concessions with a more nuanced but favorable solution.
The companies may need similar maneuvering room elsewhere as well. Bloomberg News calculates that even bigger competitive questions loom in the minicar and small crossover sectors.
The news service says an FCA-PSA union could hike their share in that corner of the European car market to 65%. But it also says the potential antitrust issues in cars and vans are relatively small, compared with the overall size of the $47 billion deal.
Antitrust questions are inevitable for a merger this big. After all, the outcome will be the world’s fourth-largest car company after Volkswagen, Toyota and the Renault-Nissan-Mitsubishi alliance.
But none of the challenges aired to date seems significant enough to sink the deal. The new probe may push back hopes of finalizing the merger next spring. But the plan itself is still on track.
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