29 June 2007

EC taking 'stricter' line on independence of supply in merger divestments

The European Commission is taking a stricter approach to ensuring operations divested in the course of a merger clearance have access to independent suppliers, according to the head of DG Competition's merger control policy unit.

DG Comp official Carles Esteva Mosso stressed that the European Commission was “enforcing in a more strict way” an approach whereby a business sold off as part of a merger deal is “ensured independent sources of supply” to guarantee its viability.

Mosso referenced various cases where the commission had been developing this stance over the past years, most notably the cleared merger in the nickel sector of Inco and Falconbridge where the divested entity had to have access to an independent mine. That deal eventually fell through as a result of a rival bid for Falconbridge.

“This is the type of more strict approach that we have been following recently in issues of supply,” said Mosso, speaking at a seminar in Brussels hosted by the Global Competition Law Centre.

He also made reference to this approach in the Evraz-Highveld deal where access to an independent supply of vanadium – a product used in the strengthening of steel – was crucial.

As part of that deal, Evraz offered to divest an equity interest or a proportion of Highveld's iron and vanadium mine in Mapoch, South Africa, together with Highveld's vanadium oxides and vanadium finished products activities.

A similar approach was taken for Gaz de France's tie-up with Suez which paid special attention to independent access to gas contracts.

By Lewis Crofts

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