The European Commission unconditionally clears the Vinci’s acquisition of the UK-based Gatwick Airport

The European Commission has recently published the public version of its decision made in the Vinci Airports/Gatwick Airport (Case M.9270) that approved a vertical merger in the airport sector. By the proposed merger, Vinci Airports (Vinci) acquired the sole control of Ivy Topco Limited (ITL) that indirect controls Gatwick Airport Limited (GAL), the manager of the London-based Gatwick Airport. The Commission took the view that this merger operation did not rise any serious competition concerns and authorized it without imposing any conditions on the merging parties.

Quite oddly, in spite of the fact that Vinci manages and operates several airports in the EU, the Commission did not believe that the transaction would have horizontal anti-competitive effects in the market for management and operation of airport infrastructures. Instead, the Commission was worried about the possible vertical anti-competitive effects. In that regard, it identified two vertical relationships between the merging parties through which the merger may restrain competition. To assess the competition impact of the merger, the Commission employed the vertical merger framework set out in its Non-Horizontal Merger Guidelines. Under this framework, a merger may restrict competition where it is conducive to input foreclosure or customer foreclosure. The likelihood of foreclosure must be assessed having regard to the ability and incentive of the merging parties to foreclose and to whether the foreclosure strategy has a significant detrimental effect on competition.

The two vertical relationships between the merging parties which attracted the attention of the Commission are:

·        The relationship between the upstream markets for construction and maintenance services on which Vinci is active and the downstream market for the management and operation of airport infrastructures and provision of ground-handling services in which ITL trades;

·        The upstream non-residential markets for electrical and mechanical engineering services in the infrastructure and tertiary sectors on which Vinci is active and the aforementioned downstream markets for the management and operation of airport infrastructures and provision of ground-handling services in which ITL trades.

Considering the evidence and data submitted by the merging parties, the Commission came the conclusion that any risk of foreclosure in the above markets was highly unlikely for the following reasons:

·        First, the merged entity would have no ability to restrict access to input, which were the construction and maintenance services as well as the electrical and mechanical services supplied by Vinci. Indeed, Vinci has very small shares in the upstream markets where there are many other alternative suppliers. Hence, input foreclosure would be unlikely.

·        Second, input from the above upstream markets are not airport-specific. Because the portion of such input purchased by GAL are rather small, GAL could not be considered as a significant customer base for the service providers operating in the downstream markets. And that also rules out the risk of customer foreclosure.

What the Commission found was that any post-merger foreclosure strategy was unlikely and, accordingly, the implementation of the merger would not give rise to vertical anti-competitive effects. Hence, the Commission gave an unconditional go-ahead to the merger.

In conclusion, the key factors in Vinci Airports/Gatwick Airport were the very small market share of the acquirer in the upstream market and the very small quantities of input purchased by the target in the downstream markets. These factors ruled out from the outset any risk of input or customer foreclosure since the merging parties would not have the ability to engage to successful foreclosure strategies due to their weak market position. Assessing whether the parties have the incentive to foreclose and the competition impact of their foreclosure practices was then superfluous.