Partner Article

Frozen out: CMA could block anticipated acquisition of Newcastle de-icing firm

The proposed merger of Newcastle-based Kilfrost into Clariant, a Swiss-headquartered specialty chemical company, could be blocked by the Competition and Markets Authority (CMA).

The group of independent panel members investigating the merger has provisionally found that the transaction could lead to higher prices for anti-icing fluids (ADF).

The panel also argue that the merger could lead to a reduction in choice and quality, particularly in relation to security of supply, a key requirement for UK customers.

With the coming together merger involving the two largest suppliers of ADF, there is further cause for concern that there would be insufficient rivalry in the UK from other suppliers, or from expansion and new entry, to offset this loss of competition.

Evidence

The evidence gathered by the CMA has shown that customers are concerned about the loss of competition and choice that could result if the merger is completed. As well as the summary of its provisional findings report published yesterday, the CMA has published a notice of possible remedies which could address its concerns.

These include the prohibition of the merger, which the group currently considers might be the only effective remedy. The group has also considered other possible options including licensing and behavioural measures (such as price controls), yet at this stage it believes that they may not be effective in addressing the loss of competition.

John Wotton, Inquiry Chair, said: “This transaction will bring together the 2 largest suppliers of de-icing fluids in the UK and will deprive customers of an alternative secure source of supply.

“With Clariant no longer facing its closest competitor and with lack of rivalry from existing or new suppliers, our provisional view is that the merged company would be placed in a particularly strong position and would be able to raise prices charged to customers – ground handlers, airlines and specialist de-icing service providers.

“A number of customers indicated to us that Clariant and Kilfrost were the only suppliers that could meet all their requirements and customers had been able to use the rivalry between them to achieve better prices. Clearly that wouldn’t be possible in future if the merger went ahead.

“As well as considering responses to our provisional findings we will now look at whether there are any measures other than prohibition of the merger that could address our concerns – should our provisional decision remain unchanged.”

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