Spirit and Asco are both active in the aerospace equipment industry worldwide. Both companies supply aerostructures, which are components for wings, fuselage, and nacelles, for aircraft manufacturers such as Airbus and Boeing.
The Commission's investigation
The Commission's investigation found that the proposed merger would raise no competition concerns regarding vertical supply relationships or horizontal overlaps in the same markets because:
- in markets where the companies' activities overlap (for example, on a very broad market for wing aerostructures), Spirit and Asco are not close competitors, and the merged entity will continue to face strong competition from other suppliers;
- in markets where the companies' activities are at different levels of the supply chain, the merged entity would have neither the ability nor the incentive to shut out competing suppliers or customers.
However, the Commission was concerned that the proposed acquisition, as originally notified, would significantly reduce competition in the worldwide market for the supply of slat systems in general and of slats in particular. This is because the proposed merger would have increased the likelihood of companies in this market being able to coordinate their behaviour (so-called “coordinated effects”).
Slat systems allow the wing of an aircraft to operate at a higher “angle of attack” (i.e., the angle at which the wing meets oncoming air). This improves the lifting ability of the wing and enables aircraft to fly at lower speeds, during take-off and landing. Slat systems include several components such as slats, slat supports, and racks and pinions.
Spirit and Asco operate at different levels of the supply chains for slat systems.
Asco is a member, together with Sonaca and BMT Eurair, of a joint venture named Belairbus. Through Belairbus, the three parent companies participate in the development and production of slat systems for all the main commercial Airbus planes. The joint venture manages the commercial, financial and administrative aspects of contracts for the supply of slat systems to Airbus.
Sonaca, one of Asco's partners in Belairbus, is also a leading supplier of slats and the only competitor of Spirit in this market. Therefore, by acquiring Asco, Spirit would have also become a shareholder of Belairbus, alongside its sole competitor for slats, Sonaca.
The Commission was concerned that, following the transaction, Belairbus would become a vehicle for increased transparency between the companies and would increase the likelihood of coordinated behaviour between Spirit and Sonaca, the only two worldwide suppliers of slats.
This would have had negative effects on competition for manufacturing and supply of slats, and slats systems as a whole, to the detriment of Airbus and other aircraft manufacturers sourcing slats worldwide.
The proposed remedies
The Commission's concerns related to the operation of the Belairbus Joint Venture, which would enable coordination between its participants.
To address the Commission's competition concerns, Spirit offered to structurally modify the set-up of Belairbus to permanently eliminate its role as a commercial and technical platform for negotiations with Airbus. As a result, all future contract negotiations will be carried out bilaterally and independently between each supplier and Airbus.
As a supplementary commitment, the companies have set up mechanisms to destroy any existing commercially sensitive information of Sonaca held by Asco, so this will not be transferred to Spirit after the transaction. The flow of Sonaca's commercially sensitive information will be structurally cut off for the future.
On this basis, the Commission concluded that the proposed acquisition, as modified by the commitments, would no longer raise competition concerns. The decision is conditional upon full compliance with the commitments.
Companies and products
Spirit, headquartered in the US, designs, manufactures and sells aerostructures for commercial and military aircraft worldwide.
Asco, based in Belgium, is active in the machining, treatment and assembly of hard metal, steel and aluminium alloys, and the sale of components and sub-components for the aerostructures of commercial aircraft and military aircraft.
Merger control rules and procedures
The transaction was initially notified to the Commission on 17 September 2018 and subsequently withdrawn. The transaction was notified to the Commission again on 30 January 2018.
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II). This deadline is extended to 35 working days in cases where remedies are submitted by the parties, such as in this case.