The European Commission has launched an investigation into the proposed iron ore joint venture between Rio Tinto and BHP Billiton.
The investigation is according to Article 101 of the Treaty on the Functioning of the European Union which “prohibits as incompatible with the internal market all agreements between undertakings, decisions by associations of undertakings and concerted practise 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”.
Regulators are concerned that the JV will restrict competitiveness and will look at the impact of the proposed JV on the global market for iron ore transported by sea.
Gordon Moffat director general of EUROFER, the European Confederation of Iron and Steel Industries welcomed the decision of the Commission.
“We remain convinced that the joint venture would be an unacceptable concentration which will significantly restrict competition in the seaborne iron ore market," he said.
EUROFER maintains its view that the effect of the JV 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.
According to EUROFER, It effectively creates a duopoly with the iron ore market for the entire world in the hands of just two companies.
BHP Billiton and Rio Tinto have market shares of seaborne iron ore of 17 % and 19 % respectively, while Vale, the third mining giant, controls 33 % (2008).
