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DOJ Moves to Block $30B Aon-Willis Towers Merger

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What You Need to Know

  • Aon and Willis have agreed to sell some assets to resolve antitrust concerns in Europe.
  • Aon has agreed to sell two retirement-related businesses to address U.S. Department of Justice concerns.
  • Lina Khan took over as FTC chair Tuesday.

The U.S. Justice Department sued to block Aon PLC’s proposed $30 billion acquisition of Willis Towers Watson, saying the deal to create the world’s largest insurance brokerage is anticompetitive.

The department’s antitrust division filed a lawsuit in federal court in Washington asking a judge to stop the deal, arguing that it would create too much concentration in the market and hurt businesses, their employees and retirees.

“If allowed to merge with WTW, Aon likely would use that leverage against American businesses,” the complaint said. “Businesses likely would pay the price in the form of higher fees for lower-quality services for the management of their most complex and expensive commercial risks through insurance and reinsurance.”

Shares of both companies tumbled on the news. Aon shares closed down 3.1%, the most since January. Willis shares fell more than 7% to the lowest point since late April.

The case marks the first lawsuit by the Justice Department to stop a merger under the Biden administration, which has yet to nominate someone to take over the department’s antitrust division. On June 15, the Senate confirmed a Biden nominee, Lina Khan, a Columbia Law School professor, to be the chairwoman of the Federal Trade Commission, which shares antitrust enforcement duties with the Justice Department.

The proposed Aon-Willis deal would combine the second-and third-largest brokers and would allow the new firm to overtake market leader Marsh & McLennan Co.

In a statement, R.J. Lehmann, executive editor and senior fellow at the International Center for Law & Economics, said: “The COVID-19 pandemic and the continued need for more robust cyber insurance products both demonstrate how much the commercial insurance industry has been falling behind in providing new products to meet clients’ emerging risk management needs. Competition regulators should tread carefully before interfering in a deal that could help produce exactly that sort of innovation, by creating a major global firm with unparalleled scale and expertise across a broad range of industries and geographies.”

Insurance agencies and brokerages have been aggressively merging to diversify, boost commissions and serve customers who increasingly want to deal with fewer intermediaries.

Aon and Willis have agreed to sell a portfolio of assets to resolve antitrust concerns in the European Union, which is reviewing the deal. Earlier this month, Aon agreed to sell two retirement-related businesses — the Aon Retiree Health Exchange, which sells Medicare plans, and Aon’s U.S. pension and retirement plan administration business — to address questions raised by the Justice Department related to the transaction. The Justice Department’s complaint alleges that divestitures agreed to by the two firms didn’t go far enough to protect American consumers.

A representative for Willis declined to comment. A representative for Aon didn’t immediately respond to a request for comment.

(Photo: Brent Lewin/Bloomberg)

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