Aircraft de-icing fluids merger faces in-depth investigation
Clariant’s anticipated acquisition of Kilfrost’s de-/anti-icing fluids business faces being referred for an in-depth investigation by the CMA.
Both companies supply aircraft de-/anti-icing fluids (ADF) in the UK. ADF is sprayed onto aeroplanes while on the ground in order to prepare them for take-off and flight in winter conditions.
The merger involves the 2 largest suppliers of ADF in the UK and the evidence gathered by the Competition and Markets Authority (CMA) shows that customers are concerned about the loss of competition and choice that could result if the merger is completed. The CMA believes that there could be insufficient rivalry from other suppliers to offset this loss of competition and that expansion or new entry by other ADF suppliers is also uncertain.
The CMA has found that the transaction therefore gives rise to a realistic prospect of a substantial lessening of competition (SLC) in the supply of ADF, which could lead to higher prices or a reduction in choice and quality for customers nationally. Other factors important to customers such as security of supply and innovation could also be negatively affected as a result of the merger.
The merger will therefore be referred for an in-depth phase 2 investigation by an independent group of CMA panel members unless Clariant offers undertakings which address the competition concerns (see notes for editors).
Andrea Coscelli, Executive Director, Markets and Mergers, and decision-maker in the phase 1 investigation, said:
This transaction will bring together the 2 largest suppliers of ADF in the UK. If Clariant no longer has to face its closest competitor and with lack of rivalry from other suppliers, our concern is that the merged company could raise prices or otherwise downgrade its service offering to customers – airlines, airports de-icing service providers and ground handlers.
We therefore plan to refer the merger for an in-depth investigation unless Clariant offers acceptable undertakings to address our concerns.
Notes for editors
- The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law.
- The Reference Test: under the Enterprise Act 2002 (the Act) the CMA has a duty to make a reference to phase 2 if the CMA believes that it is or may be the case that a relevant merger situation has been created, or arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
- Under the Act a relevant merger situation is created if 2 or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million (‘the turnover test’) or as a result of the transaction, in relation to the supply of goods or services of any description, a 25% share of supply in the United Kingdom (or a substantial part thereof) is created or enhanced (‘the share of supply test’).
- The CMA’s duty to refer the merger for a phase 2 investigation under the Act is not exercised whilst the CMA is considering whether to accept undertakings (if offered) in lieu of a reference. Clariant has until 16 February 2016 to offer undertakings to the CMA that might be accepted by the CMA. If no undertakings are offered and accepted, then the CMA will refer the merger.
- All the CMA’s functions in phase 2 merger inquiries are performed by inquiry groups chosen from the CMA’s panel members. The appointed inquiry group are the decision-makers on phase 2 inquiries. The CMA’s panel members come from a variety of backgrounds, including economics, law, accountancy and/or business. The membership of an inquiry group usually reflects a mix of expertise and experience (including industry experience).
- The full text of this decision will be placed on the merger case page as soon as is reasonably practicable.
- Enquiries should be directed to Rory Taylor (email@example.com, 020 3738 6798).
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