EC Opens Investigation into BHP’s Proposed Acquisition of Rival Rio Tinto

The European Commission (EC) has opened an in-depth investigation into BHP Billiton’s proposed acquisition of Rio Tinto, it announced Friday. The move follows an initial investigation, which indicated that the proposed takeover “raises serious doubts as to its compatibility with the Single Market,” the EC said in a release.

Particular concerns arise, the EC said, in relation to the iron ore, coal, uranium and aluminum and mineral sands markets, “because the proposed takeover could result in higher prices and reduced choice for these companies’ customers.”

The decision to open an in-depth inquiry, however, does not prejudge the final result of the investigation, the release stated. A final decision by the EC will be made by November 11, or within 90 working days, on whether the merger would “significantly impede effective competition within the European Economic Area, or a substantial part of it.”

EC Competition Commissioner Neelie Kroes commented, “The commodities produced by BHP Billiton and Rio Tinto are basic inputs for major industrial sectors and are therefore crucial for Europe's competitiveness. The recent surge in commodity prices has had a serious impact on the industries buying these commodities, their customers, and ultimately all the consumers in Europe and elsewhere in the world.

“In this very sensitive context any change making the situation worse could be extremely harmful. Therefore the Commission will pay particular attention to ensure that this takeover does not adversely affect competition in Europe,” Kroes concluded.

Just one day before the EC announcement was made, the U.S. Department of Justice and the Federal Trade Commission granted early termination of the Hart-Scott-Rodino waiting period for BHP’s proposed acquisition of Rio Tinto, a move that satisfied part of the U.S. merger control pre-condition to the acquisition.