NCC acquisition shock

05 August 2011

In a surprise move, the proposed acquisition by NCC (Nordic Construction Company) of the Destia asphalt paving operation is being opposed by the Finnish Competition Authority (FCA) ­- only the second such move in Finland since merger control was introduced to the country in 1998.

The FCA said the merger would have led to a joint dominant position between NCC Roads and Lemminkäinen Infra, which would have "significantly impeded competition in the asphalt mix market in the capital city area".

It said that apart from NCC Roads and Lemminkäinen, Destia was the only company in the capital city region with a fixed asphalt station. The other contractors depend on bought asphalt mix and, therefore, on the sellers of the mix.

The FCA felt that following the deal, asphalt mix would only have been sold by NCC Roads and Lemminkäinen in the capital city area, which both compete with their asphalt mix customers for the paving contracts of the municipalities and private companies.

As a result of the deal, it said, the sellers of asphalt mix could have either refused to sell the mix at all, or to have kept prices above the competitive level and thus to have harmed the activities of their competitors in the asphalt paving market.

This would, in turn, have led to increased contract prices and, therefore, have been detrimental to the interest of the municipalities, housing organisations and others contracting asphalt paving work.

Göran Landgren, business area president of NCC Roads, said, "The negative response was unexpected. We must now examine the material together with the other parties involved in the transaction before we decide what the next step will be for us."

In March 2011, NCC signed an agreement to acquire the asphalt and paving operations of Destia, which is wholly owned by the Finnish government.

The acquisition will now be reviewed by Finland's Market Court, which must announce its decision within three months. The decision by the Market Court may be appealed to the Supreme Administrative Court.

The FCA said that competition problems resulting from a merger could often be eliminated through the imposition of remedies. It said making a prohibition proposal remained the only option in this case, as the remedies submitted by the parties to the FCA were not considered to be addressing the competition concerns resulting from the merger effectively.

The FCA also investigated the competitive impacts of the merger on the asphalt paving markets for the state, municipal and private contracts as well as the asphalt mix market elsewhere in Finland. It said that in these markets, the threshold for intervention defined in the Competition Act was not exceeded.


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