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18 June 2020
The European Commission has opened an in-depth investigation into the merger between PSA Group and Fiat Chrysler Automobiles (FCA).
The two carmakers announced plans last year to create the world’s fourth-largest automotive company – and Europe’s second-largest – with a 50/50 merger that would see annual unit sales of around eight million vehicles worldwide. However, the European Commission is concerned that the proposed transaction may reduce competition for light commercial vehicles (LCVs) below 3.5 tonnes in the European Economic Area (EEA) and, more specifically, in 14 EU member states and the UK.
‘Commercial vans are important for individuals, SMEs and large companies when it comes to delivering goods or providing services to customers,’ commented executive vice-president Margrethe Vestager, responsible for competition policy at the Commission. ‘They are a growing market and increasingly important in a digital economy where private consumers rely more than ever on delivery services.
‘Fiat Chrysler and Peugeot SA, with their large portfolio of brands and models, have a strong position in commercial vans in many European countries. We will carefully assess whether the proposed transaction would negatively affect competition in these markets and ensure that a healthy competitive landscape remains for all the individuals and businesses relying on commercial vans for their activities.’
Market competition
According to the Commission, in many European countries, either PSA Group or FCA is the market leader in LCVs. Therefore, the merger would remove one of the main competitors to the dominant company.
The Commission concerns include that the proposed transaction could significantly reduce competition for certain types of light commercial vehicles in Belgium, Croatia, Czechia, France, Greece, Hungary, Italy, Lithuania, Luxembourg, Poland, Portugal, Slovakia, Slovenia, Spain and the UK.
‘In many of these countries, PSA and FCA combined would hold high market shares, together with the widest range of brands and models across all sizes,’ the Commission states. ‘The parties appear particularly strong in the smaller vans segment. There are fewer competitors in vans than in passenger cars, and in most of these countries, all competitors would be significantly smaller than the merged entity.’
Continued planning
The announcement of an investigation could put back the proposed completion date of the merger. When announced, the two groups were looking to finalise the deal within 12-15 months. In an emailed statement, PSA Group confirmed they were still targeting a Q1 2021 deadline.
‘Both companies will continue to cooperate with the European Commission to answer its questions in the same constructive spirit that has defined our proposed merger from the start,’ the carmaker said. ‘As we continue to make progress through our cross-company project teams, we will be detailing to the Commission, and other regulators, the substantial benefits of the proposed merger to our customers, the European industry and each company.
‘Preparations for the merger are advancing as planned. Antitrust approvals have already been granted in other jurisdictions, including the US, China, Japan and Russia. PSA Group and FCA reaffirm the shared objective to close the transaction by the end of the first quarter of 2021.’
The merger will benefit both businesses in what are increasingly challenging times for the automotive industry. PSA Group will gain access to the US market through FCA’s Jeep brand, a territory is has been looking to re-enter. At the same time, the US-Italian business will take advantage of the French manufacturer’s electric vehicle (EV) technology and platforms.
The Commission will now carry out an in-depth investigation into the effects of the merger to determine the impact on the LCV market through reduced competition. It notes that PSA and FCA have decided not to submit commitments during the initial investigation to address the Commission’s preliminary concerns.
The investigation will last a maximum of 90 working days, meaning a decision should be reached by 22 October 2020.