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IP/10/45

Brussels, 25 th January 2010

Antitrust: Commission opens formal proceedings concerning iron ore production joint venture between BHP Billiton and Rio Tinto

The European Commission has opened a formal antitrust investigation into Anglo-Australian mining companies Rio Tinto and BHP Billiton under the EU rules on restrictive business practices (Article 101 of the Treaty on the Functioning of the European Union - TFEU). Rio Tinto and BHP Billiton are respectively the second and third largest producers of iron ore in the world. The proposed joint venture between Rio Tinto and BHP Billiton would combine the parties' iron ore assets in Western Australia. The Commission will in particular examine the effects of the proposed joint venture on the worldwide market for iron ore transported by sea (so-called "seaborne iron ore").

Opening of proceedings does not imply that the Commission has conclusive evidence of an infringement but merely that the Commission will investigate the case as a matter of priority.

There is no binding deadline to complete inquiries into anticompetitive conduct. Their duration depends on a number of factors, including the complexity of the case, cooperation from the undertakings concerned and exercise of the rights of defence.

Why has the Commission opened proceedings?

The proceedings concern the agreement signed on 5 December 2009 between BHP Billiton and Rio Tinto to establish a production joint venture covering the entirety of both companies' Western Australian iron ore assets. The Commission will in particular examine whether the joint venture would have a negative effect on competition on the worldwide market for seaborne iron ore.

Iron ore is the main component of steel. Virtually all iron ore mined worldwide is used in steel production. In turn, steel is a key element for the automotive, construction and consumer goods industries. Iron ore is sold in various forms, as finely grained ore (concentrates, fines) and in larger pieces (lumps and pellets). Worldwide iron ore consumption is now picking up again following a slowdown as a result of the economic and financial crisis, and is forecast to grow steadily in the coming years. Three companies, Vale of Brazil, Rio Tinto and BHP Billiton account for most of the iron ore sold worldwide on a seaborne basis.

In 2008, the Commission examined under the EU Merger Regulation the full acquisition of Rio Tinto by BHP Billiton. The transaction was abandoned by BHP Billiton on 26 November 2008 (see IP/08/1798 ).

The current investigation, based on Article 101 TFEU, concerns a different operation as the agreement between the parties now focuses on the establishment of a joint venture for iron ore production, leaving the marketing activities of the companies separate.

What is the legal basis for the decision?

The legal basis for this procedural step is Article 2(1) of Commission Regulation No 773/2004 and Article 11(6) of Council Regulation No 1/2003.

Article 2(1) of Regulation No 773/2004 provides that the Commission can initiate proceedings with a view to adopting at a later stage a decision on substance according to Articles 7-10 of Regulation No 1/2003 at any point in time, but at the latest when issuing a statement of objections or a preliminary assessment notice in a settlement procedure. In the case at stake, the Commission has chosen to open proceedings before such further steps.

Article 11(6) of Regulation No 1/2003 provides that the initiation of proceedings relieves the competition authorities of the Member States of their authority to apply the competition rules laid down in Articles 101 and 102 of the TFEU. Article 16(1) of the same Regulation provides that national courts must avoid giving decisions which would conflict with a decision contemplated by the Commission in proceedings that it has initiated.

The Commission may make public the initiation of proceedings in any appropriate way. Before doing so, it informs the parties concerned. The Competition Authorities of the Member States concerned have also been informed.

The companies' rights of defence will be fully respected.


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