EU opens in-depth investigation into Fincantieri’s Chantiers deal

The European Commission announced that it opened an in-depth investigation to assess the proposed acquisition of Chantiers de l’Atlantique by Fincantieri, under the EU Merger Regulation, following its concerns that the transaction may reduce competition in the global cruise shipbuilding market.

This comes in opposition to what Fincantieri stated, as the company denied the “rumours” of an additional examination.

Commissioner Margrethe Vestager, responsible for competition policy commented

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.

The possibility of a further investigation began when the European Commission conducted a preliminary examination of the transaction, the competition authority allegedly decided to continue with a full-scale antitrust investigation.

Thus, the Commission issued a statement presenting its preliminary competition concerns; In essence:

1. 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.
2. The Commission has identified high barriers to entry in this market, related to the very complex nature of cruise shipbuilding. Cruise shipbuilding requires, in particular, specific infrastructure, established engineering and design capabilities as well as important project management skills to coordinate hundreds of suppliers and sub-contractors all along the construction process.
3. The Commission has concluded that 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.
4. The Commission has also concluded that large customers would not have sufficient buyer power to counteract any risk of price increases as a result of the transaction.
5. The Commission will now carry out an in-depth investigation into the effects of the proposed transaction to determine whether it is likely to significantly reduce effective competition.

Moreover, the Commission is responsible for assessing mergers and acquisitions that have been referred to it by EU Member States and also halt those that will significantly compete in the EEA or any substantial part of it.