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US DOJ files antitrust lawsuit to block $30bn Aon / WTW combination

17th June 2021 - Author: Luke Gallin

The U.S. Department of Justice (DOJ) has filed a civil antitrust lawsuit to block the proposed $30 billion combination of Aon and Willis Towers Watson (WTW), stating that the merger threatens to eliminate competition, increase prices, and ultimately create a “broking behemoth.”

aon-willis-towers-watson-merger-antitrustIn response to the DOJ’s announcement, Aon and WTW have said that they disagree with the action, “which reflects a lack of understanding of our business, the clients we serve and the marketplaces in which we operate.”

The announcement from the DOJ will come as a blow to Aon and WTW as they look to get their proposed combination completed.

After submitting concessions to the European Commission (EC) in order to satisfy EU competition concerns, reports emerged claiming the mega-merger is expected to gain the approval needed to go ahead in Europe.

Following the news of Aon’s EU remedy package, which includes the sale of Willis Re and other WTW assets to Arthur J. Gallagher & Co., the broker announced a further $1.4 billion divestment to appease U.S. regulators. But it appears as though this has not been enough.

RMS

“Today’s action demonstrates the Justice Department’s commitment to stopping harmful consolidation and preserving competition that directly and indirectly benefits Americans across the country,” said Attorney General, Merrick B. Garland.

“American companies and consumers rely on competition between Aon and Willis Towers Watson to lower prices for crucial services, such as health and retirement benefits consulting. Allowing Aon and Willis Towers Watson to merge would reduce that vital competition and leave American customers with fewer choices, higher prices, and lower quality services,” he added.

According to the DOJ, Aon’s proposed remedies are inadequate to protect consumers in the U.S. Within its compliant, the DOJ adds that the recent U.S.-focused divestments in both health benefits and commercial risk broking, “are wholly insufficient to resolve the department’s significant concerns.”

The complaint filed by the DOJ states that Aon and WTW operate in an oligopoly and that by coming together, will have even greater leverage to increase prices and lower the quality of products relied on by thousands of U.S. businesses, as well as their customers, employees, and retirees.

The DOJ goes further to explain that ultimately, the merger would remove important competition in five markets. This includes property, casualty, and financial risk broking for large customers; health benefits broking for large customers; actuarial services for large single-employer defined benefit benefit pension plan; the operation of private multi-carrier retiree exchanges; and reinsurance broking.

In response to the action taken by the DOJ, Aon and WTW commented: “Aon and Willis Towers Watson operate across broad, competitive areas of the economy and our proposed combination will accelerate innovation on behalf of clients creating more choice in an already dynamic and competitive marketplace.

“While this proposed combination was not developed with the pandemic in mind, the impact of the pandemic underscores the need to address similar systemic risks including cyber threats, climate change and the growing health and wealth gap which our combined firm will more capably address.

“We continue to make material progress with other regulators around the world and remain fully committed to the benefits of our combination.

“We are grateful to our respective colleagues for the work they have done to support our respective clients and each other throughout this process, as evidenced by the excellent performance of Aon and Willis Towers Watson since the announcement of the proposed combination.”

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