Summary of Commission Decision

of 9 July 2021

declaring a concentration compatible with the internal market and the functioning of the EEA Agreement

(Case M.9829 – Aon/Willis Towers Watson)

(notified under document number C(2021) 5009)

(Only the English version is authentic)

(Text with EEA relevance)

(C/2024/4363)

On 9 July 2021, the Commission adopted a Decision in a merger case under Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (1) , and in particular Article 8(2) of that Regulation. A non-confidential version of the full Decision, as the case may be in the form of a provisional version, can be found in the authentic language of the case on the website of the Directorate-General for Competition, at the following address: https://competition-cases.ec.europa.eu/search.

I. THE PARTIES

(1)

Aon plc (‘Aon’ or the ‘Notifying Party’, Ireland) is a publicly traded global professional services firm domiciled in Ireland, headquartered in London and listed on the New York Stock Exchange. Aon is active in more than 120 countries. Its activities include: (i) commercial risk brokerage, (ii) reinsurance brokerage, (iii) investment solutions, (iv) retirement solutions, (v) health & welfare benefit solutions and (vi) human capital consulting.

(2)

Willis Towers Watson Public Limited Company (‘WTW’, Ireland) is a publicly traded global professional services firm headquartered in London and listed on the NASDAQ Global Select Market. WTW is active in more than 140 countries. Its activities include: (i) commercial risk brokerage, (ii) reinsurance brokerage, (iii) investment solutions, (iv) retirement solutions, (v) health & welfare benefit solutions and (vi) human capital consulting.

II. THE OPERATION

(3)

On 16 November 2020, the Commission received a formal notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 (the ‘Merger Regulation’), by which Aon acquires sole control of WTW, by way of acquisition of the entirety of the issued and outstanding shares of WTW (the ‘Transaction’) (2). Hereinafter, Aon and WTW are designated as the ‘Parties’ and the entity resulting from the Transaction is designated as the ‘Merged Entity’.

III. SUMMARY

(4)

The Commission found that the Transaction as initially notified would have raised competition concerns because of the horizontal overlaps between the Parties’ activities in the provision of commercial risk brokerage, reinsurance brokerage, and retirement solutions.

(5)

The Commission’s market investigation revealed that the Transaction as initially notified would have significantly impeded effective competition because of horizontal, non-coordinated effects in the relevant markets listed below:

a)	commercial risk brokerage for large multinational customers (‘LMCs’), who source services from within the EEA, for the following risk types: property & casualty, financial and professional services (‘FinPro’), and cyber, at global level;

b)	commercial risk brokerage for all other customers than LMCs (‘non-LMCs’) for the following risk types: property & casualty in the Netherlands, and cyber in Spain;

c)	commercial risk brokerage for all customers for the following risk types: aerospace manufacturing and space, both at global level;

d)	treaty non-life reinsurance brokerage and facultative non-life reinsurance brokerage, both at global level; and

e)	pension administration services in Germany.

(6)

On 12 May 2021, the Notifying Party submitted a comprehensive set of commitments in order to remedy the Commission’s concerns listed above (the ‘Commitments’).

(7)

Therefore, a conditional clearance decision pursuant to Article 8(2) of the Merger Regulation was adopted.

IV. ASSESSMENT

A. THE RELEVANT PRODUCT AND GEOGRAPHIC MARKETS

(8)

This Section presents the relevant (product and geographic) market definitions for the markets where the Commission found that the Transaction as initially notified would significantly impede effective competition.

1. Commercial risk brokerage

(9)

Commercial risk brokerage concerns the provision of brokerage services for non-life insurance coverage of commercial risks for companies. Generally, commercial risk insurances encompass broad categories of liability cover, for example for property & casualty risks, financial and professional risks (‘FinPro’), as well as other speciality risk types, such as aviation, energy, and marine. The Parties are both active in the provision of these services as insurance brokers servicing, particularly, LMCs, by placing their risk in the insurance market.

(10)

Product market definition. The Commission considers that it is appropriate to define a relevant product market for insurance distribution distinct from other risk management alternatives, namely risk retention and alternative capital markets. Moreover, the Commission considers that it is appropriate to distinguish the distribution of insurance through brokers from the direct placement of insurance with insurers. The Commission has also assessed whether it is appropriate to distinguish a separate market for LMCs for each underlying risk type, as further detailed below.

LMCs. The supply of commercial risk brokerage services to large multinational companies with highly technical operations account for a significant portion of the Parties’ overlapping activities. This consideration, combined with the Phase I market investigation results, where a considerable number of large customers with complex and global insurance needs submitted that they could only use the Parties and Marsh & McLennan Companies, Inc. (‘Marsh’) as brokers, led the Commission to investigate during the Phase II whether defining a market for LMCs would be appropriate. Based on the Phase II market investigation results, the Commission considers that it is appropriate to distinguish a separate market for the supply of brokerage services for certain commercial risks for LMCs that source their worldwide needs from within the EEA. Nevertheless, the Commission acknowledges that such segmentation is not warranted for all risks types, as specified below.

Risk types.

i)	Property & casualty. The Commission considers that property & casualty risk brokerage constitutes a separate product market and further finds that, within property & casualty risk insurance brokerage, a separate market for LMCs exists.

ii)	FinPro. The Commission considers that FinPro risk brokerage constitutes a separate product market and further finds that, within FinPro risk insurance brokerage, a separate market for LMCs exists.

iii)	Cyber. The Commission considers that cyber risk brokerage constitutes a separate product market and further finds that, within cyber risk insurance brokerage, a separate market for LMCs exists.

iv)	Aerospace manufacturing. The Commission considers that it is appropriate to distinguish a separate product market for commercial risk brokerage for aerospace manufacturing risk and that a further segmentation based on the type of customers is not appropriate.

v)	Space. The Commission considers that it is appropriate to distinguish a separate product market for commercial risk brokerage for space risk and that a further segmentation based on the type of customers is not appropriate.

(11)

Geographic market definition.

i)	Property & casualty. The Commission considers that the geographic scope of brokerage services for LMCs for property & casualty risk is likely global. The Commission considers that the geographic market for property & casualty brokerage services for non-LMCs is narrower and is likely national.

ii)	FinPro. The Commission considers that the geographic scope of brokerage services for LMCs for FinPro risk is likely global. The Commission considers that the geographic market for FinPro brokerage services for non-LMCs is narrower and is likely national.

iii)	Cyber. The Commission considers that the geographic scope is likely global for LMCs for cyber risk. The Commission considers that the geographic market for cyber brokerage services for all customers except for LMCs is narrower and is likely national.

iv)	Aerospace manufacturing. The Commission considers that the geographic market definition for commercial risk brokerage services for aerospace manufacturing risk is global.

v)	Space. The Commission considers that the geographic market definition for commercial risk brokerage services for space risk is global.

2. Reinsurance brokerage

(12)

Reinsurance brokerage covers advice on and intermediation in reinsurance placements. Reinsurance constitutes insurance for insurance companies, by which insurance companies cede risk to a reinsurance company. Both Aon and WTW are active in reinsurance brokerage globally.

(13)

Product market definition. The Commission had previously concluded that reinsurance brokerage constitutes a separate market from commercial risk brokerage. In its market investigation, the Commission found that the appropriate product markets are non-life treaty reinsurance brokerage and non-life facultative reinsurance brokerage. The Commission found that, as for commercial risk brokerage, direct placement is not part of the product market definition.

(14)

Geographical market definition. In line with the Commission’s precedent, the Commission concluded that the appropriate geographic scope for non-life facultative reinsurance brokerage and non-life treaty reinsurance brokerage is global in scope.

3. Retirement solutions

(15)

Retirement solutions consist in providing companies’ employees with benefits and services relating to their retirement and can be grouped into three different categories: (i) retirement benefits consulting; (ii) pension administration; and (iii) group pension products. No significant impediment of effective competition was identified in any of the markets for group pension products, therefore, the following paragraphs will focus only on retirement benefits consulting and pension administration.

a) Retirement benefits consulting

(16)

Retirement benefits consulting consists in the provision of advisory services to pension fund trustees, corporate entities and public authorities administering pension schemes in relation to the design and/or review of the retirement benefits they provide to their employees, who are the pension funds members.

(17)

Product market definition. In line with its practice and in view of the market investigation results, the Commission concludes that it is appropriate to distinguish a separate product market for retirement benefits consulting services. Due to supply-side substitutability, the Commission does not consider appropriate to distinguish further separate markets for retirement benefits consulting depending on the specific type of service provided or on the type of scheme to which the service is provided.

(18)

Geographic market definition. The Commission concludes that the relevant geographic market for retirement benefits consulting services is national in scope. The Commission considers that the ability to provide services on a broader geographical level to customers with a multinational presence represents a competitive differentiating factor, rather than amounting to a separate relevant market.

b) Pension administration

(19)

Pension administration consists in providing clients, such as pension fund trustees, corporate entities and public authorities, with the administration of the pension fund(s) that they have set up to the benefit of their employees.

(20)

Product market definition. In line with its precedents and based on the results of the market investigation, the Commission considers that the relevant product market definition encompasses the provision of pension administration services for group pension products without any further segmentation.

(21)

Geographic market definition. Based on the results of the market investigation, the Commission considers that the appropriate geographic market definition for pension administration services is national.

B. COMPETITIVE ASSESSMENT

1. Non-coordinated horizontal effects in the provision of commercial risk brokerage

a) Commercial risk brokerage for property & casualty risk for LMCs

(22)

The Commission considers that the Transaction as initially notified will lead to the creation of a dominant position in the global market for commercial risk brokerage for property & casualty risk to LMCs, and thus likely result in a significant impediment to effective competition. This is because, amongst other factors, (i) the Merged Entity would have a combined market share of [70-80]%, which is above the level indicative of a dominant market position; (ii) the market investigation indicates that WTW is a close competitor and an important competitive constraint on Aon and other remaining competitors – a constraint that will be lost following the Transaction; and (iii) the absence of significant other suppliers (other than the competitor Marsh) or other competitive constraints. Moreover, the countervailing factors to the extent they exist, such as buyer power, are not sufficient to counter the negative effects due to a reduction of choice. Further, the Commission received significant negative feedback from customers and competitors concerning this market.

b) Commercial risk brokerage for property & casualty risk for non-LMCs in the Netherlands

(23)

The Commission considers that, in the Netherlands, it is likely that the Transaction as initially notified will result in a significant impediment to effective competition in the market for property & casualty risk for non-LMCs. The Parties are close competitors and the Transaction would result in the loss of the important competitive constraints that WTW exercised on Aon pre-Transaction. According to a significant share of non-LMCs responding to the market investigation, only one competitor would remain in the market post-Transaction to fulfil their needs. Furthermore, countervailing factors are limited, barriers to entry are significant, and customers show significant concerns regarding the impact of the Transaction on choice and prices.

c) Commercial risk brokerage for FinPro risk for LMCs

(24)

The Commission considers that the Transaction as initially notified will lead to the creation of a dominant position in the global market for commercial risk brokerage for FinPro risk to LMCs and thus likely result in a significant impediment to effective competition. This is because, amongst other factors: (i) the combined market share of the Merged Entity will be [50-60]%, which is above the level indicative of dominance; (ii) the market investigation indicates that WTW is a close competitor and an important competitive constraint on Aon and other remaining competitors – a constraint that will be lost following the Transaction; and (iii) absence of significant other suppliers (other than Marsh) or other competitive constraints. Moreover, the countervailing factors to the extent they exist, such as buyer power, are not sufficient to counter the negative effects due to a reduction of choice. Further, the Commission received significant negative feedback from customers and competitors concerning this market.

d) Commercial risk brokerage for cyber risk for LMCs

(25)

The Commission considers that the Transaction as initially notified will lead to the creation of a dominant position on the global market for commercial risk brokerage for cyber risk to LMCs and thus likely result in a significant impediment to effective competition. This is because, amongst other factors: (i) the combined market share of the Merged Entity will be [70-80]%, which is above a level indicative of dominance; (ii) the market investigation indicates that WTW is a close competitor and an important competitive constraint on Aon and other remaining competitors – a constraint that will be lost following the Transaction; and (iii) the absence of significant other suppliers or other competitive constraints. Moreover, the countervailing factors, such as buyer power (to the extent it exists), are not sufficient to counter the negative effects due to a reduction of choice. Further, the Commission received significant negative feedback from customers and competitors concerning this market.

e) Commercial risk brokerage for cyber risk for non-LMCs in Spain

(26)

The Commission considers that the Transaction will result in the creation of a dominant position in the market for commercial risk brokerage for cyber risk to non-LMCs in Spain and thus likely result in a significant impediment to effective competition. In particular, the Transaction will result in combined market shares of [50-60]%, a level which is indicative of dominance. The market investigation revealed that there would be only a limited number of competitors specific for cyber risk in Spain, and the next largest competitor to the Merged Entity would be Marsh, with a significantly smaller market share of only [10-20]%. In addition, the market investigation indicates the existence of certain barriers to entry and expansion, which could hinder market entry in a timely fashion to counteract potential price increase by the Merged Entity.

f) Commercial risk brokerage for aerospace manufacturing risk

(27)

The Commission considers that, in view of the level of the combined market shares, the closeness of competition between the Parties, the resulting loss of the important competitive constraint that WTW exercised on Aon pre-Transaction, the lack of other credible competitive constraints on the Parties (other than Marsh), the limited countervailing factors, the high barriers to entry and expansion and the negative feedback received from market participants, it is likely that the Transaction will significantly impede effective competition on the market for commercial risk brokerage for aerospace manufacturing to all customers at the global level.

g) Commercial risk brokerage for space risk

(28)

The Commission considers that, in view of the level of the combined market shares, the closeness of competition between the Parties, the resulting loss of the important competitive constraint that WTW exercised on Aon pre-Transaction, the lack of other credible competitive constraints on the Parties (other than Marsh), the limited countervailing factors, the high barriers to entry and expansion and the negative feedback received from market participants, it is likely that the Transaction as initially notified will significantly impede effective competition on the market for commercial risk brokerage for space to all customers at the global level.

2. Non-coordinated horizontal effects in the provision of reinsurance brokerage

(29)

The Commission considers that, in view of the level of the combined market shares, the closeness of competition between the Parties, the resulting loss of the important competitive constraints that WTW exercised on Aon pre-Transaction, the lack of other credible competitive constraints on the Parties (other than Marsh), the limited countervailing factors, the high barriers to entry and expansion and the negative feedback received from market participants, it is likely that the Transaction as initially notified will significantly impede effective competition on the markets for the supply of non-life treaty reinsurance brokerage services at worldwide level, and for the supply of non-life facultative reinsurance brokerage services at worldwide level.

3. Non-coordinated horizontal effects in the provision of retirement solutions

a) Retirement benefits consulting

(30)

The Commission considers that it can be left open whether the Transaction as initially notified would lead to a significant impediment of effective competition on the market for retirement benefits consulting in Germany. It can be left open as, whilst there is some evidence that the Transaction as initially notified may give rise to horizontal non-coordinated effects on this market, the final commitments submitted by Aon on 12 May 2021 with a view to addressing the competition concerns on the market for pension administration in Germany would, in any event, also effectively address any competition concerns on the market for retirement benefits consulting in Germany.

b) Pension administration

(31)

The Commission considers that the Transaction as initially notified would lead to significant horizontal non-coordinated effects in the form of higher prices, less choice, and worsened quality in the market for pension administration in Germany, by creating a dominant position (the Merged Entity would hold a combined market share above [50-60]% post-Transaction). The Commission, moreover, considers that the Parties are particularly close competitors in the market for pension administration in Germany, so that the Transaction could potentially give rise to significant price effects by removing the constraint pre-Transaction exerted by the Parties on each other and due to the lack of choice in the market. Furthermore, switching is difficult, barriers to entry are high and customers’ countervailing power is not sufficiently strong to exert competitive pressure on the Parties. Finally, the Commission received significant negative feedback from customers and competitors concerning this market.

V. COMMITMENTS

1. Undertakings submitted by the Notifying Party

(32)

In order to address the competition concerns in the aforementioned markets, the Notifying Party has submitted the undertakings described below.

(33)

For commercial risk brokerage, the Notifying Party commits to divest to Gallagher:

a)	WTW’s full commercial risk brokerage country organisations in France, Germany, the Netherlands and Spain;

b)	WTW’s entire EEA, US, Brazil and Hong Kong / Singapore business for LMCs for risk types property & casualty and FinPro in the four above-mentioned countries;

c)	WTW’s UK cyber specialty business and a set of large UK FinPro customers […];

d)	Brokers in key global locations at the option of the purchaser […];

e)	WTW’s entire global commercial risk brokerage businesses for aerospace manufacturing and space risks.

(34)

The remedy package for commercial risk brokerage for LMCs aims at bolstering an existing broker (i.e., Gallagher) and because the Parties have signed a binding agreement with Gallagher, Gallagher’s existing capabilities (including geographic reach) can be taken into account in the assessment of the Commitments for the commercial risk brokerage.

(35)

For reinsurance brokerage, the Notifying Party commits to divest to Gallagher:

a)	WTW’s entire global treaty reinsurance brokerage organisation (Willis Re); and

b)	WTW’s entire global facultative reinsurance brokerage organisation (Global Fac).

(36)

For pension administration in Germany, the Notifying Party commits to divest to a suitable purchaser:

a)	Aon’s entire German retirement benefits consulting and pension administration businesses, as well as Aon’s German investment solutions business.

2. Assessment of the undertakings submitted

(37)

The undertakings submitted by the Notifying Party eliminate the entire increment resulting from the Transaction in the markets for pension administration in Germany, treaty and facultative reinsurance broking globally, commercial risk brokerage for aerospace manufacturing and space risk globally, for commercial risk brokerage for property & casualty risk in the Netherlands and for cyber risk in Spain. For the markets for commercial risk brokerage for LMCs for risk types property & casualty, FinPro and cyber, the Commitments eliminate a significant portion of the overlap.

(38)

The divestment businesses relating to commercial risk brokerage and reinsurance brokerage will be sold to Gallagher, with which Aon entered into a binding sales agreement. Gallagher is an existing broker with a significant international footprint, and existing capabilities to serve LMCs, such as central coordinating organisations in the US and UK. The assets, brokers and customers included in the remedy package will further bolster Gallagher as a credible broker for LMCs. The market test identified Gallagher as the most suitable purchaser of the remedy.

(39)

The market test results were positive for all remedy packages, with a majority of respondents confirming that the proposed remedy is suitable to address competition concerns and the divestment business in the hands of a suitable purchaser would be a credible supplier.

(40)

The market test also confirmed that the divestment businesses are viable. The divestment businesses are profitable, and will be bought by purchasers with existing presence in the respective markets. The market test confirmed that the assets, personnel, restrictive covenants and transitional service agreements included in the remedy package are appropriate in scope.

(41)

The Commission, therefore, concludes that, on the basis of the undertakings submitted by the Notifying Party, the Transaction as amended by the Commitments will not lead to a significant impediment of effective competition in any of the aforementioned markets.

VI. CONCLUSION

(42)

For the reasons mentioned above, the decision concludes that, subject to the full compliance with the undertakings given by the Parties, the proposed concentration will not significantly impede effective competition in the Internal Market or in a substantial part of it.

(43)

Consequently, the concentration was declared compatible with the Internal Market and the functioning of the EEA Agreement, in accordance with Article 2(2) and Article 8(2) of the Merger Regulation and Article 57 of the EEA Agreement.

(1) OJ L 24, 29.1.2004, p. 1.

(2) OJ C 398, 23.11.2020, p. 18.