The Commission has concerns that the proposed transaction may result in less innovation and higher prices in the satellite and launch service markets.
Commissioner Margrethe Vestager, in charge of competition policy, said: “A competitive space industry has a crucial role in strengthening the EU’s industrial base and boosting our global competitiveness. The Commission therefore needs to make sure that all players in the space industry continue to have strong incentives to innovate”.
Arianespace is the global leader for launches of commercial satellites to geostationary transfer orbits. Its main competitors are the US-based companies ILS and SpaceX. In addition, Arianespace has a de facto monopoly in the European markets for institutional launches. For its services, Arianespace uses launchers produced by three different companies, including the Ariane launcher manufactured by ASL.
ASL is a 50/50 joint venture controlled by Airbus and Safran. Airbus is also one of the leading satellite manufacturers worldwide. Both Airbus and ASL are manufacturers of payload adapters and dispensers, which are components sourced and used by launch service providers.
The Commission’s concerns
The Commission has concerns that the transaction might lead the merged entity to:
- discriminate against satellite manufacturers competing with Airbus on price or other terms regarding their access to Arianespace’s launch services (slot allocation, access to technical information on launcher developments). This would reduce the incentives of Airbus’ rivals to invest and innovate in satellite manufacturing. Moreover, aligning the incentives of Airbus, ASL and Arianespace might also lead to critical information about satellites or launch service competitors being shared between Arianespace and Airbus.
- give priority to launch services connected to Ariane launchers since ASL produces this launcher. This would be to the detriment of the competing launcher Vega, which is manufactured by ELV and currently can only be commercialised by Arianespace.
- procure payload adapters and dispensers exclusively from Airbus and ASL, regardless of the price and quality offered by competitors. This would be detrimental to these competitors.
Overall, the Commission is at this stage concerned that the transaction might lead to higher prices, less customer choice and a reduction in research and development efforts in the satellite, launcher and launcher equipment and launch services markets.
The Commission will now investigate the transaction in-depth in order to determine whether its competition concerns are confirmed.
The transaction was notified to the Commission on 8 January 2016. The Commission now has 90 working days, until 12 July 2016, to take a decision. The opening of an in-depth investigation does not prejudge the outcome of the investigation.
Companies and Products
Arianespace is a French company offering satellite launch services to private and institutional satellite operators. Arianespace is entrusted by the European Space Agency (ESA) with the commercial exploitation of the two ESA-funded launchers: Ariane, which is developed and manufactured by ASL, and Vega, which is developed and manufactured by ELV, a joint venture between Avio and the Italian Space Agency. In addition, Arianespace also offers the possibility to launch with the Soyuz launcher, which is developed and manufactured by TsSKB of Russia.
ASL, a 50/50 joint venture between Airbus and Safran, manufactures the Ariane launcher.
Airbus is a Dutch-based company active in aeronautics, space and defence. Within its Defence and Space division, Airbus is active in: (i) satellites; (i) sub-systems for launchers, namely adapters and dispensers for European launchers; and (iii) satellite operations for telecommunication and Earth observation satellites.
Safran is a French company active in aerospace propulsion, aircraft equipment and defence and security.
Merger Control Rules and Procedures
The Commission has the duty to assess mergers and acquisitions involvingcompanies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).
There are currently three other on-going phase II merger investigations:
- The proposed acquisition of Telefónica UK by Hutchinson 3G UK, with a decision deadline on 22 April 2016.
- The proposed acquisition of oilfield provider Baker Hughes by rival Halliburton.
- The proposed acquisition of the Greek gas transmission system operator DESFA by the Azeri state oil company SOCAR.