The European Commission announced on 26 February 2016 that it was opening an in-depth phase II investigation into the proposed acquisition of Arianespace by Airbus Safran Launchers (ASL) under the EU Merger Regulation.
Arianespace is a global leader for launches of commercial satellites to geostationary transfer orbits. It has a de facto monopoly in the European markets for institutional launches and is entrusted by the European Space Agency (ESA) with the commercial exploitation of the two ESA-funded launchers, Ariane and Vega. ASL, on the other hand, is a 50/50 joint venture between Airbus and Safran. Airbus is one of the leading global satellites manufacturers while Safran is active in aerospace propulsion, aircraft equipment and defence and security.
The Commission is concerned that the proposed transaction could lead to higher prices, less customer choice and a reduction and research and development efforts in the satellite, launcher and launcher equipment and launch services markets. It identified the following three potential concerns raised by the merged entity:
- it could discriminate against satellite manufacturers competing with Airbus reducing the incentives of Airbus' rivals to invest and innovate in satellite manufacturing;
- it could give priority to launch services connected to Ariane launchers since ASL produces this launcher to the detriment of the competing launcher Vega; and
- it could procure payload adapters and dispensers exclusively from Airbus and ASL, regardless of the price and quality offered by competitors.
It is important to note that the Commission's announcement is simply a decision to take a closer look at the proposed transaction. It is not an indication of the outcome of the investigation, which is now expected by 12 July 2016.
In terms of possible remedies, the outcome of the investigation could be a complete clearance, a clearance subject to conditions and obligations or the transaction could be blocked. Only a minority of notified mergers have resulted in outright prohibition by the Commission. The outcome is usually clearance with or without conditions and/or obligations. It will be up to notifying parties to offer remedies and these will be closely discussed and negotiated with the case team. Remedies could include divestments and/or behavioural obligations. Crucially, the remedies will need to address the competition concerns identified by the Commission.
Third parties with a legitimate interest in the outcome of the case have a right to make their views on the proposed transaction known in writing and potentially have a hearing if the Commission decides their contribution to be of sufficient importance. The Commission is also likely to send questionnaires to competitors and customers. Finally, interested parties will have an opportunity to comment on potential commitments. Third party submissions at any stage of the Phase II investigation will need to be carefully prepared with the input from competition legal advisers.