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Justice Department Sues to Block Aon’s $30B Purchase of Willis Towers Watson

The government says the $30 billion merger would squash competition in five major product markets, driving up costs and leaving little hope that another business could step up and compete against the insurance broking giant.

(CN) --- The U.S. Department of Justice Wednesday filed an antitrust lawsuit to block the merger of two of the world’s biggest insurance brokers, a transaction the government says threatens to eliminate competition, reduce innovation and raise prices for businesses, employees and retirees that rely on the companies’ services.

In a complaint filed in federal court in Washington, D.C., the Biden administration alleged that Aon’s proposed $30 billion acquisition of rival Willis Towers Watson would eliminate competition in five markets.

Aon and Willis compete with Marsh McLennan, the other broker in the “Big Three,” to provide services for the largest companies in the United States.

According to the complaint, the merger would “substantially” reduce competition in multiple product markets in the United States: property, casualty and financial risk broking for large customers; health benefits broking for large customers; actuarial services for large single-employer defined benefit pension plans; the operation of private multicarrier retiree exchanges; and reinsurance broking.

The two companies’ combined market share in each of those five markets already exceeds 40%, with Aon and Willis representing 95% of the market for private multicarrier retiree exchanges.

“The proposed Merger would essentially transform private multicarrier retiree exchanges from a duopoly into a monopoly,” the complaint states.

The lawsuit claims that the companies are highly aware of the benefits of remaking the “Big Three” into the “Big Two.”

Aon’s Chief Broking Officer allegedly explained to colleagues: “[W]e have more leverage than we think we do and will have even more when [the] Willis deal is closed… we operate in an oligopoly which not everyone understands.”

The complaint points to Aon and Willis’ “key advantages” over other firms as the reason behind their high market shares: the companies have nearly unmatched access to data assets and industry expertise and possess “extensive global networks” which include offices all over the globe.

With over $11 billion in reported revenues last year, Aon has offices in approximately 120 countries. Willis Towers Watson reported revenues of more than $9 billion in 2020 and has offices in more than 80 countries.

If the merger is allowed to proceed, the government says competition in these highly concentrated markets would plummet.

Attorney General Merrick Garland said the lawsuit “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. 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,” Garland said.

The complaint also points out that it would be unlikely another business could compete and draw clients away from a merged Aon and Willis, citing high barriers to entering the market, existing market share and the prevalence of post-employment non-compete and non-solicit clauses in the insurance broking industry.

In a joint statement issued Wednesday evening, Aon and Willis said the lawsuit “reflects a lack of understanding of our business, the clients we serve and the marketplaces in which we operate.”

The companies said the proposed merger “will accelerate innovation on behalf of clients creating more choice in an already dynamic and competitive marketplace.”

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Categories / Business, Courts, Government

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