The European Commission has opened an in-depth investigation to assess the proposed acquisition of Eaton’s hydraulics business by Danfoss. In a statement Monday, the Commission said it is concerned that the proposed acquisition may reduce competition in the supply of certain hydraulic components for mobile machinery.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said, ”Danfoss and Eaton are both strong players in hydraulic components globally. Manufacturers and distributors active in agricultural and construction machinery depend on access to these components at fair prices for their businesses to thrive. We have opened an in-depth investigation to assess carefully whether the transaction could lead to negative effects for competition, less choice and higher prices for European customers.”
Danfoss and Eaton are both leading manufacturers of hydraulic components globally and the merger would remove one of the main competitors.
The Commission’s initial market investigation identified a number of preliminary concerns in relation to the combination of the companies’ hydraulic components businesses for mobile machinery.
At this stage, the Commission is concerned that the transaction may lead to a reduced choice in suppliers, as well as higher prices, for certain hydraulic components for mobile applications, including hydraulic steering units, electrohydraulic steering valves and orbital motors.
For each of the above hydraulic components the transaction would lead to high combined market shares, in already concentrated markets, where limited credible alternative suppliers to the companies are present. The Commission is however also continuing to investigate the effects of the acquisition on other hydraulic components.
Furthermore, the initial market investigation suggests customers would not have sufficient buyer power to counteract any risk of price increases.
The Commission will now carry out an in-depth investigation into the effects of the proposed transaction to determine whether it is likely to significantly reduce effective competition. The Commission now has until February 3, 2021, to take a decision. The opening of an in-depth investigation does not prejudge the outcome of the investigation.
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