“We disagree with the US Department of Justice’s action, which reflects a lack of understanding of our business, the clients we serve, and the marketplaces in which we operate.”
Those were the words of global insurance broking giants Aon Plc and Willis Towers Watson (WTW) in a joint statement following the Justice Department’s move to block the companies’ closely watched mega-merger through a civil antitrust lawsuit filed in the US District Court for the District of Columbia.
In a DOJ release, Attorney General Merrick B. Garland said the case “demonstrates the Justice Department’s commitment to stopping harmful consolidation and preserving competition that directly and indirectly benefits Americans across the country.”
“American companies and consumers rely on competition between Aon and Willis Towers Watson to lower prices for crucial services, such as health and retirement benefits consulting,” stated Garland. “Allowing Aon and Willis Towers Watson to merge would reduce that vital competition and leave American customers with fewer choices, higher prices, and lower quality services.”
The DOJ – which noted that Aon and WTW have more than 100 and 80 offices, respectively, in the US – is of the strong view that the groups’ planned divestitures, both in the US and globally, are not enough as far as the US market is concerned.
In its 35-page complaint, the DOJ alleged: “The proposed merger would combine two of the three largest insurance brokers in the world, and two of the three largest competitors in each of the five relevant markets. Each of these markets is responsible for hundreds of millions, if not billions, of dollars in fees paid by American businesses every year, and the defendants’ proposed divestitures leave much of the harm from the proposed merger unremedied.
“Because a likelihood of substantial lessening of competition in any relevant market is a violation of Section 7 of the Clayton Act, the Court should enjoin the proposed merger in its entirety.”
The five product markets being referred to are (1) property, casualty, and financial risk broking for large customers; (2) health benefits broking for large customers; (3) actuarial services for large single-employer defined benefit pension plans; (4) the operation of private multicarrier retiree exchanges; and (5) reinsurance broking.
In response, Aon and WTW – which are both domiciled in Ireland and headquartered in the UK – declared: “Aon and Willis Towers Watson operate across broad, competitive areas of the economy, and our proposed combination will accelerate innovation on behalf of clients, creating more choice in an already dynamic and competitive marketplace.
“While this proposed combination was not developed with the pandemic in mind, the impact of the pandemic underscores the need to address similar systemic risks including cyber threats, climate change, and the growing health and wealth gap which our combined firm will more capably address.”
Meanwhile, it was also highlighted that Aon and WTW are continuing to make “material progress” with other regulators around the world.
Remaining “fully committed” to the benefits of the pending merger, Aon and WTW added: “We are grateful to our respective colleagues for the work they have done to support our respective clients and each other throughout this process, as evidenced by the excellent performance of Aon and Willis Towers Watson since the announcement of the proposed combination.”
As separate entities, Aon and WTW are the second and third biggest insurance brokers, respectively, behind top-ranked Marsh McLennan, a New York-headquartered group.