Two of the world’s largest insurance brokers, Aon and Willis Towers Watson, announced on Monday that they had canceled a $ 30 billion merger plan, just over a month after the Justice Department had filed a lawsuit to block the union.
The announcement was a victory for the Biden administration. The case against the proposed merger was the administration’s first big confidence boost, which signaled a willingness to be tough on corporate consolidation.
President Biden signed an executive order aimed at fighting competition in industries as diverse as technology, railroads, meat and poultry. And last week, he appointed Jonathan Kanter, an antitrust lawyer who has spent much of his career fighting Big Tech, to head the Department of Justice’s antitrust division. Mr Biden has also appointed other Big Tech critics to leading roles, such as Lina Khan as head of the Federal Trade Commission and Tim Wu to an economic policy role in the White House.
But the White House has seen setbacks in its drive to harness the power of tech giants. Last month, a federal judge dismissed an antitrust lawsuit against Facebook brought by the FTC. the judge granted.
On Monday, Aon and Willis Towers Watson said they decided to end the Justice Department litigation rather than face a lengthy court battle.
“We have reached an impasse with the US Department of Justice,” Aon Chief Executive Officer Greg Case said in a statement.
“This is a victory for the competition and for American businesses, and ultimately, for their customers, employees and retirees across the country,” Attorney General Merrick B. Garland said in a statement.
The merger, first proposed in March 2020, has come under intense scrutiny from regulators around the world. Some, including officials from the European Union, have granted conditional approval on the basis of various concessions and assignments.
But the Justice Department’s lawsuit was not due until at least November, which would have postponed the deal until the first quarter of 2022 at the earliest, an untenable delay for Aon, a company spokesperson told the New York Times.
The government complaint argued that the combined companies “would eliminate substantial direct competition and likely lead to higher prices and less innovation.” He said the companies dominated the markets for risk and reinsurance brokerage, health and pension benefits brokerage, actuarial services for employer benefit programs and private exchanges that provide benefits to retirees.
The government has previously said the companies know they are already operating in an oligopoly. “If allowed to merge, Aon and Willis Towers Watson could use their increased leverage to raise prices and reduce the quality of products that thousands of American businesses rely on – and their customers, employees and retirees. “the Department of Justice wrote last month.
Aon argued that the government misunderstood his businesses. “We are confident that the merger would have accelerated our joint ability to innovate on behalf of our clients, but the inability to achieve expedited dispute resolution has brought us to this point,” Case said in the statement.
The decision to drop the deal “highlights one of the possible implications of more aggressive enforcement” as Mr Biden keeps his campaign promises to be tough on business, said A. Douglas Melamed, professor of law at Stanford University and former acting head of the Department of Justice’s antitrust division.
The FTC and the Justice Department will likely look for ways to make an impact without being subject to judicial review, Mr. Melamed said, and one way to do that is to challenge mergers in general, whether a case has or not a good chance of winning.
“The risk and delays of a merger challenge often lead parties to abandon a deal even if the government’s record is weak,” he said.
The decision to block the merger sends a clear signal that the White House is willing to take a stronger stance on competition than the Trump administration, which has reviewed the deal but has taken no action to combat it.
The firm position also requires greater transatlantic cooperation between American and European regulators. For example, after the European Union challenged the $ 8 billion merger of life science companies Illumina and Grail in April, the FTC announced it was dropping a petition in federal court to block the deal. , a strategy that helps preserve the agency’s resources. And European competition officials have said they expect more cooperation as the two governments’ prospects increasingly align.
With the end of the merger between insurance brokers, a host of contingency agreements will also be canceled. Some of the regulatory approvals the combined companies received, for example in South Africa and the European Union, were dependent on the removal of certain business units by Aon and Willis.
Aon has said he will pay Willis Towers Watson a $ 1 billion termination fee.
Both companies are incorporated in Ireland and have their headquarters in London. Aon, which reported sales of more than $ 11 billion last year, has approximately 50,000 employees worldwide and more than 100 offices in the United States. Willis Towers Watson employs approximately 45,000 people worldwide, with more than 80 offices in the United States. It reported sales of over $ 9 billion in 2020.