The fate of Aon’s combination with Willis Towers Watson has been thrown into doubt after the US Department of Justice sued to block the deal over concerns it would eliminate vital competition in the market.
The DoJ said the "harmful" merger of the two broking giants would lead to higher prices and reduced innovation for US businesses. The brokers have criticised the legal action stating that it reflects the department's "lack of understanding".
According to the antitrust lawsuit, filed in the US District Court for the District of Columbia, the proposed $30 billion of WTW by Aon would combine two of the "Big Three" global insurance brokers, creating a broking behemoth that would eliminate competition in five markets.
"The merger threatens to eliminate competition, raise prices, and reduce innovation for American businesses, employers, and unions that rely on these important services," the department said, adding that it is committed to stopping "harmful consolidation and preserving competition that directly and indirectly benefits Americans across the country."
Attorney General Merrick Garland further explained that 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. He believes that if the merger goes ahead it "would reduce that vital competition and leave American customers with fewer choices, higher prices, and lower quality services."
"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 statement said.
Although Aon and Willis Towers Watson have agreed to certain divestitures in connection with investigations by various international competition agencies, the complaint alleges that these proposed remedies are "inadequate to protect consumers in the United States". The complaint also alleges the US-focused divestitures in health benefits and commercial risk broking, in particular, are "wholly insufficient to resolve the department’s significant concerns."
In a joint statement on Wednesday, Aon and WTW criticised the US Department of Justice’s decision to block its pending merger, asserting that the combination will in fact "accelerate innovation on behalf of clients creating more choice in an already dynamic and competitive marketplace."
"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," Aon-Willis said. "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.
"We continue to make material progress with other regulators around the world and remain fully committed to the benefits of our combination."
Aon is incorporated in Ireland and headquartered in London. It has approximately 50,000 employees and offices in approximately 120 countries, including over 100 offices in the US. In 2020, Aon reported revenues of more than $11 billion.
Willis Towers Watson is incorporated in Ireland and headquartered in London. It has approximately 45,000 employees and offices in more than 80 countries, including over 80 offices in the US. In 2020, Willis Towers Watson reported revenues of more than $9 billion.
Aon, Wilis Towers Watson, US Department of Justice