Aon-Willis Towers Watson Call Off Planned Merger After DOJ Lawsuit

July 27, 2021

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Source: The Seattle Times, by Ephrat Livni

Two of the world’s largest insurance brokers, Aon and Willis Towers Watson, announced Monday that they had called off a planned $30 billion merger, just a little more than a month after the Department of Justice sued to block the union.

The announcement was a victory for the Biden administration. The case against the proposed merger was the first big trustbusting move by the administration, which has signaled a willingness to be tough on corporate consolidation.

President Joe Biden signed a sweeping executive order to address competition in industries as diverse as tech, railroads, and meat and poultry. And last week, he named Jonathan Kanter, an antitrust lawyer who has spent much of his career fighting Big Tech, to run the Justice Department’s antitrust division. Biden has also named other critics of Big Tech to prominent roles, such as Lina Khan to lead the Federal Trade Commission, and Tim Wu to an economic policy role at the White House.

But the White House has faced setbacks in its push to rein in the power of technology giants. Last month, a federal judge threw out an antitrust lawsuit against Facebook brought by the FTC. The agency was given 30 days to amend and refile its lawsuit, and Friday it asked for a three-week extension, to Aug. 19, which the judge has granted.

On Monday, Aon and Willis Towers Watson said they had decided to end the Justice Department’s litigation rather than face a lengthy court battle.

“We reached an impasse with the U.S. Department of Justice,” Aon’s CEO, Greg Case, said in a statement.

“This is a victory for competition and for American businesses, and ultimately, for their customers, employees and retirees across the country,” Attorney General Merrick Garland said in a statement.

The merger, first proposed in March 2020, faced scrutiny from regulators around the world. Some, including officials in the European Union, granted conditional approval based on various concessions and divestments.

But the Justice Department’s lawsuit was not scheduled to head to trial until at least November, which would have postponed the deal until the first quarter of 2022 at the earliest, a delay that was untenable for Aon, a company spokesman told The New York Times.

The government’s complaint argued that the combined companies would “eliminate substantial head-to-head competition and likely lead to higher prices and less innovation.” It said the companies dominated markets for risk and reinsurance brokering, health and pension benefits brokering, actuarial services for employer benefit programs and private exchanges that offer retiree benefits.

The government said previously the companies were aware they already operated in an oligopoly.

“If permitted to merge, Aon and Willis Towers Watson could use their increased leverage to raise prices and reduce the quality of products relied on by thousands of American businesses — and their customers, employees and retirees,” the Justice Department wrote last month.

Aon argued that the government misunderstood its businesses.

“We are confident that the combination would have accelerated our shared ability to innovate on behalf of clients, but the inability to secure an expedited resolution of the litigation brought us to this point,” Case said in the statement.

The decision to abandon the deal “highlights one of the possible implications of more aggressive enforcement” as Biden makes good on campaign promises to be tough on companies, said A. Douglas Melamed, a law professor at Stanford University and former acting chief of the Department of Justice’s antitrust division.

The FTC and the Justice Department are likely to look for ways to have an impact without being subject to judicial review, Melamed said, and one way to do that is by challenging mergers in general, whether or not a case has a good chance of winning.

“The risk and time delays of a merger challenge often cause the parties to abandon a deal even if the government’s case is weak,” he said.

The decision to block the merger sends a clear signal that the White House is willing to take a stronger stand on competition than the Trump administration, which reviewed the deal but did not take steps to fight it.

The firm stance also involves more trans-Atlantic cooperation between U.S. and European regulators. For instance, after the European Union in April challenged the $8 billion merger of the life sciences companies Illumina and Grail, the FTC announced that it was dropping a request in federal court to block the deal, a strategy that helps preserve agency resources. And European antitrust officials have said they expect more cooperation as the two governments’ perspectives increasingly align.

With the merger between the insurance brokers terminated, a slew of contingent deals will be called off, too. Some of the regulatory approvals that the combined companies received, for example in South Africa and the European Union, were dependent on Aon and Willis getting rid of some business units.

Aon said it would pay a $1 billion termination fee to Willis Towers Watson.

Both companies are incorporated in Ireland and have headquarters in London. Aon, which reported revenue of more than $11 billion last year, has around 50,000 employees around the world and more than 100 offices in the United States. Willis Towers Watson employs about 45,000 people globally, with more than 80 offices in the United States. It reported revenue of more than $9 billion in 2020.

 

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