CMA could block de-icing merger

Clariant’s anticipated acquisition of Kilfrost’s de-/anti-icing fluids business could be blocked by the CMA.

19 May 2016 - The merger involves the 2 largest suppliers of aircraft de- and anti-icing fluids (ADF) in the UK and the rest of the European Economic Area. ADF is sprayed onto aeroplanes while on the ground in order to prepare them for take-off and flight in winter conditions. ADF removes and protects against the formation of frost or ice and slush or snow.

The group of independent panel members investigating the merger has provisionally found that the transaction could lead to higher prices for ADF or a reduction in choice and quality, particularly in relation to security of supply – a key requirement for UK customers. Other factors such as innovation could also be affected as a result.

The group also believes that there would be insufficient rivalry in the UK from other suppliers – or from expansion and new entry – to offset this loss of competition. The evidence gathered by the Competition and Markets Authority (CMA) has shown that customers are concerned about the loss of competition and choice that could result if the merger is completed.

As well as the summary of its provisional findings report published today, the CMA has published a notice of possible remedies which could address its concerns. These include the prohibition of the merger, which the group currently considers might be the only effective remedy. The group has also considered other possible options including licensing and behavioural measures (such as price controls), but at this stage it believes that they may not be effective in addressing the loss of competition.

John Wotton, Inquiry Chair, said:

“This transaction will bring together the 2 largest suppliers of de-icing fluids in the UK and will deprive customers of an alternative secure source of supply. With Clariant no longer facing its closest competitor and with lack of rivalry from existing or new suppliers, our provisional view is that the merged company would be placed in a particularly strong position and would be able to raise prices charged to customers – ground handlers, airlines and specialist de-icing service providers.

“A number of customers indicated to us that Clariant and Kilfrost were the only suppliers that could meet all their requirements and customers had been able to use the rivalry between them to achieve better prices. Clearly that wouldn’t be possible in future if the merger went ahead.

“As well as considering responses to our provisional findings we will now look at whether there are any measures other than prohibition of the merger that could address our concerns – should our provisional decision remain unchanged.”

All information relating to the investigation is available on the case page.

Anyone wishing to respond to the provisional findings should do so in writing, by no later than 10 June 2016. Anyone wishing to respond to the notice of possible remedies should do so by 3 June 2016. Please email clariant.kilfrost@cma.gsi.gov.uk or write to:

Clariant/Kilfrost merger inquiry
Competition and Markets Authority
Victoria House
Southampton Row
London
WC1B 4AD

Notes for editors
1.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. For more information on the CMA see our homepage or follow us on Twitter @CMAgovuk , Flickr and LinkedIn . Sign up to our email alerts to receive updates on merger cases.
2.The merger was referred for a phase 2 investigation in February 2016. The deadline for the final report is 3 August 2016.
3.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.
4.The CMA’s panel members come from a variety of backgrounds, including economics, law, accountancy, business; the membership of an inquiry group usually reflects a mix of expertise and experience.
5.The members of the inquiry group are: John Wotton (Chair), Jayne Scott, Michael Hutchings and Tim Tutton.
6.Enquiries should be directed to Siobhan Allen (siobhan.allen@cma.gsi.gov.uk, 020 3738 6460).

Source: Gov.uk (Contains public sector information licensed under the Open Government Licence v3.0.)