The European Commission has opened an in-depth investigation to assess the proposed acquisition of Chantiers de l’Atlantique by Fincantieri, under the EU Merger Regulation. The Commission is concerned that the transaction may reduce competition in the global cruise shipbuilding market.
Commissioner Margrethe Vestager, responsible for competition policy, said: “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 Commission’s preliminary competition concerns
At this stage, 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.
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.
The Commission has preliminarily 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.
The Commission has also preliminarily concluded that large customers would not have sufficient buyer power to counteract any risk of price increases as a result of the transaction.
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.
The transaction was notified to the Commission on 25 September 2019. Chantiers de l’Atlantique and Fincantieri have decided not to submit commitments during the initial investigation to address the Commission’s preliminary concerns. The Commission now has 90 working days, until 17 March 2020, to take a decision. The opening of an in-depth investigation does not prejudge the outcome of the investigation.
Companies and products
Chantiers de l’Atlantique is a French shipbuilding company mainly active in the construction of cruise ships and the provision of related services to ship owners. The bulk of its capital is held by the Agence des participations de l’État (the French Government Shareholding Agency). Chantiers de l’Atlantique’s shipyard is located in Saint-Nazaire, France.
Fincantieri is an Italian shipbuilding group mainly active in the design and construction of cruise ships, merchant vessels, military vessels and specialised high-end offshore vessels. It also provides services to ship-owners and designs and manufactures certain mechanical equipment. The bulk of Fincantieri’s capital is held by Cassa depositi e prestiti, which is majority-owned by the Italian State. Fincantieri is Europe’s largest shipbuilder.
On 8 January 2019, the Commission accepted a request from France and Germany to assess the acquisition of Chantiers de l’Atlantique by Fincantieri under the EU Merger Regulation. The proposed transaction was initially notified to France and Germany for regulatory clearance, as the transaction did not meet the turnover thresholds of the EU Merger Regulation. France and Germany submitted a referral request to the Commission pursuant to Article 22(1) of the EU Merger regulation.