EC Opens Investigation against BHP, Rio Tinto JV

The European Commission (EC) has opened an investigation into the proposed joint venture between BHP Billiton, Melbourne, Australia, and Rio Tinto, London. The EC is using Article 101 of the Treaty on the Functioning of the European Union (TFEU) on the impact on the common market as the reason for the investigation.

BHP Billiton and Rio Tinto have market shares of seaborne iron ore of 17 percent and 19 percent respectively. Vale, the largest iron ore producer, controls 33 percent of the iron ore market.

Article 101 TFEU “prohibits as incompatible with the internal market all agreements between undertakings, decisions by associations of undertakings and concerted practice which may affect trade between member states and which have as their object or effect the prevention, restriction or distortion of competition within the internal market”.

“We very much welcome the decision of the Commission”, says Gordon Moffat, director general of EUROFER (The European Confederation of Iron and Steel Industries). “We remain convinced that the joint venture would be an unacceptable concentration that will significantly restrict competition in the seaborne iron ore market.”

EUROFER maintains its view that the effect of the joint venture on the global iron ore market would not be materially different from the full merger, which had been proposed in 2008. The resulting restriction in competition, moving from a position of market dominance of three companies to only two, will substantially reduce the consumer choice of supplier. It effectively creates a duopoly with the iron ore market for the entire world in the hands of just two companies, EUROFER says.