Concerns the proposed $70bn coming together of Praxair, Inc. and The Linde Group may reduce competition in the supply of several crucial gases have been raised by the European Commission as it opens an in-depth investigation into the merger.

The Commission said it was particularly concerned about the merger’s impact in the oxygen (O2) and helium (He) markets.

Commissioner Margrethe Vestager, responsible for competition policy, said, “Gases – like O2 and He – are crucial inputs for a large variety of products we use every day. Manufacturers need to buy these gases from a small number of suppliers. We will carefully assess whether the proposed merger between Praxair and Linde would lead to higher prices or less choice for European consumers and businesses.”

The transaction would reduce the number of major players active worldwide and in Europe for the supply of carbon dioxide (CO2), O2, He and many other gases to just three. Other players in the market only have regional, national or local presense and lack the technical and financial capabilities to compete on an equal footing, the Commission explained in a press release.

In addition, there is no indication that competition could be fostered by new entrants, due to the very high investment necessary to establish a meaningful position in the market.

The Commission’s preliminary competition concerns

At this stage, the Commission said it is concerned that the proposed transaction would reduce the competitive pressure in markets covering a significant part of the activities of Praxair and Linde. 

“Gases – like O2 and He – are crucial inputs for a large variety of products we use every day. Manufacturers need to buy these gases from a small number of suppliers. We will carefully assess whether the proposed merger between Praxair and Linde would lead to higher prices or less choice for European consumers and businesses.”

Commissioner Margrethe Vestager

A press release stated, “In particular, the Commission is concerned that there is a risk of price increases due to the increased market power of the merged entity, or the increased likelihood of coordination between the remaining players in the markets. In particular, the Commission’s initial market investigation raised competition concerns for the supply of industrial gases, medical gases (and related services), speciality gases, as well as the supply of helium.”

The market investigation confirmed that only the four main players have the engineering capabilities necessary to bid for the largest tonnage projects (i.e. the construction of dedicated gas production units on customer manufacturing sites). It also confirmed that only they have the necessary access to sources of helium worldwide to be competitive. Customers fear that the reduction of the major players from four to three would significantly deteriorate their ability to obtain critical inputs and products at competitive prices.

The Commission will now carry out an in-depth investigation into the effects of this transaction to further explore its initial concerns.

The transaction was notified to the Commission on 12th January 2018. The Parties have decided not to submit commitments to address the Commission’s preliminary concerns. The Commission now has 90 working days, until 4th July 2018, to take a decision. The opening of an in-depth investigation does not prejudge the outcome of the investigation.