Antitrust Law Daily Wrap Up, TOP STORY: U.K., U.S. antitrust concerns doom merger in shipping container handling equipment industry, (Mar 29, 2022)

By Jeffrey May, J.D.

Cargotec and Konecranes abandon deal after U.K. Competition & Markets Authority blocks their merger and U.S. Department of Justice balks at settlement proposal.

Antitrust concerns raised by the U.K. Competition & Markets Authority (CMA) and U.S. Department of Justice have forced shipping equipment giants Cargotec Corporation and Konecranes Plc to cancel their planned merger. After the CMA announced on March 29 that it had blocked the merger, Cargotec said in a statement that the companies did not see a way to satisfy the competition concerns of the CMA that would have been in the best interest of the shareholders and “without jeopardizing the rationale of the proposed merger.” The deal also raised antitrust concerns on the other side of the Atlantic. According to a Justice Department announcement, one day before the planned merger agreement was terminated, the Justice Department’s Antitrust Division informed the parties that their settlement proposal was not sufficient to address concerns.

Cargotec and Konecranes, both based in Finland, offer a range of container handling equipment and services to port terminals and other industry customers worldwide, according to the CMA’s findings. The CMA determined that the loss of competition resulting from the merger could have serious consequences for U.K. port terminals and other customers, including higher prices and lower quality products and services across a wide range of container handling products.

According to the Justice Department, the merger impacted the manufacture and supply of four types of container handling equipment: straddle carriers, rubber-tired gantry cranes, automated stacking cranes, and rail-mounted gantry cranes. “Each piece of equipment has a unique design that allows the equipment to move containers between different modes of transportation in the supply chain,” the Justice Department added.

Earlier settlement found insufficient. The questions raised by the CMA and Antitrust Division came despite an earlier settlement of European Commission (EC) competition concerns. According to Cargotec, in addition to the EC, China and nine other jurisdictions had signed off on the deal.

In February, the EC cleared the proposed merger, conditioned on the divestiture of certain businesses. The EC said that the divestitures of a number of container and cargo handling equipment types satisfied concerns over the combination of the companies—both leading global manufacturers of container and cargo handling equipment and providers of terminal automation solutions.

According to Cargotec, the CMA rejected the EC settlement as insufficient to protect U.K. competition. The EC settlement would have removed the overlapping businesses of the two companies. The company added that the boards of directors of Cargotec and Konecranes considered but rejected offering alternative remedy packages to address the CMA’s concerns.

The CMA concluded that the EC remedies would not allow buyers of the divestiture assets to become strong competitors of the merged business. “As Cargotec and Konecranes declined to consider alternative remedies that would have involved the sale of one of their existing container handling equipment divisions, the CMA concluded that only the prohibition of the merger could effectively address the wide-ranging concerns that have been identified.”

Separately, the Australian Competition & Consumer Commission (ACCC) sought views on remedies similar to those submitted to the EC. The ACCC’s preliminary competition concerns focused on the reduction of straddle and shuttle carrier suppliers in Australia from two to one, and in gantry cranes suppliers from three to two.

Supply chain concerns. Both the U.K. and U.S. agencies noted the deal’s potential threat to the supply chain in announcing their views on the proposed merger.

“The proposed merger of these two shipping equipment giants would have harmed American consumers, said Attorney General Merrick B. Garland. “It threatened the global supply chain and the free and fair markets upon which the integrity of our economy depends. I commend the outstanding work of our Antitrust attorneys and investigators that led to this outcome and the cooperation of our enforcement partners around the world.”

Martin Coleman, chair of the CMA inquiry group, said: “Container handling equipment is key to the smooth running of UK ports, and events in recent years have shown us how quickly problems in the supply chain can cause problems for UK consumers and businesses.”

Companies: Cargotec Corp.; Konecranes Plc

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