WASHINGTON (CN) - The European Commission has launched a formal antitrust investigation of a proposed merger of the Australian iron-ore mining operations Rio Tinto and BHP Billiton, respectively the second and third largest iron ore producers in the world.
The Commission said it is particularly concerned that the joint business venture will reduce competition for iron ore, which is warehoused on large container ships, called "seaborne iron ore," to be dispatched to foundries throughout the world.
In 2007 Rio Tinto's board rejected as too low BHP Billiton's offer to buy out the Rio Tinto Group. The next year BHP Billiton attempted a hostile takeover of Rio Tinto, and the Commission opened an antitrust probe. It made a preliminary finding that the merger would reduce competition and drive up the price of iron ore.
BHP Billiton abandoned its takeover efforts in November 2008.
The Australian joint venture will merge the extraction operations of the two companies, splitting the production down the middle and allowing their marketing arms to continue operating independently.
Both companies announced record production levels for iron ore recovery in the last quarter of 2009, with Rio Tinto reporting that production was up 49 percent over the previous year-end quarter.
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