Picture: AFP/HAROLD CUNNINGHAM AND DANIEL ROLAND
Picture: AFP/HAROLD CUNNINGHAM AND DANIEL ROLAND

Brussels — Fiat Chrysler Automobiles and PSA Group face a lengthy EU investigation into their deal to create the world’s fourth-biggest carmaker after regulators said the tie-up could reduce choice for small vans.

The European Commission set an October 22 deadline to examine concerns that the transaction would remove one of the main producers of light commercial vehicles in several European countries, it said in an e-mailed statement on Wednesday.

Commercial vans “are a growing market and increasingly important in a digital economy in which private consumers rely more than ever on delivery services”, EU Competition Commissioner Margrethe Vestager said in the statement. “We will carefully assess whether the proposed transaction would negatively affect competition.”

The EU frequently demands the sale of overlapping businesses to prevent a merged entity from becoming too powerful and has been unafraid of wielding its ultimate threat to veto deals, such as Siemens and Alstom’s plan to create a European rail behemoth.

Fiat and Peugeot said they “will continue to co-operate” with the regulators to answer their questions, according to an e-mailed statement.

“Preparations for the merger are advancing as planned,” the companies said. “Groupe PSA and FCA reaffirm the shared objective to close the transaction by the end of the first quarter of 2021.”

The two vehiclemakers would hold high market shares in France, Germany, Poland, Spain, the UK and several other countries, regulators said. They “appear particularly strong in the smaller vans segment” in which there are fewer competitors and any new rival seems unlikely. The two producers often compete head-to-head for vans with similar prices and the deal would remove an important rival for both.

While longer investigations raise the potential risk of blocking a deal, they can also be beneficial by allowing companies to argue for fewer concessions, or to hammer out more complicated divestments or changes to licensing or distribution.

The companies agreed, in December, to merge and have so far kept the deal afloat through the course of the coronavirus pandemic’s immense disruption to automotive production and sales around the world.

In the case of the Fiat-PSA deal, it’s unclear how the EU will take into account plummeting automotive demand in the region due to the pandemic. Regulators often try to forecast the companies’ future sales as they try to see how a deal might harm rivals, suppliers and customers.

Bloomberg