• MMG buy of Anglo American mines puts supply security in spotlight
• Resilience concerns can militate both for and against a merger
• Geopolitical issues are for political actors, not merger watchdogs

MMG’s effort to take over Anglo American’s Brazilian nickel mines demonstrates just how easily the “resilience” factor can distort European Commission (EC) merger control reviews.

That’s particularly true, it seems, when the buyer is majority-owned by the Chinese state and geopolitical concerns seep into the assessment.

When it opened an in-depth investigation of the deal in early November, the EC said MMG might divert ferronickel (FeNi) supply away from European markets in favour of the group’s own downstream activities.

As EU competition commissioner Teresa Ribera put it: “Ferronickel is a key input for European producers to manufacture high-quality, low-emission stainless steel at competitive prices, which is critical for many sectors. Our investigation aims to verify whether this concentration could jeopardise continued and reliable access in Europe to this important resource.”

But MMG, a Hong Kong-listed metals and mining company, doesn’t have downstream uses for FeNi, according to a source close to the company. The company is majority-owned by state-owned China Minmetals Corporation (CMC), but CMC doesn’t have downstream businesses that use FeNi either, the same source added.

Rather, the EC’s hangup seems to be less about the actual transaction and more about China as a geopolitical entity securing its supply of a (somewhat) strategic resource, potentially leaving EU stainless steel makers in the lurch. (For the purposes of this discussion, let’s assume there is a degree of tightness in the FeNi supply chain, something State of Play understands MMG contests.)

If so, merger control probably isn’t the right tool to secure “resilience”, as alluded to by two competition officials at last week’s annual Charles River Associates (CRA) competition conference.

“Resilience is everywhere in the political discussion,” said Benoît Cœuré, president of the French competition authority. “There is no single definition of what it implies, and there is no clear understanding of how competition can help – and to what extent it can help.”

He gave the example of a merger that could help secure France’s supply of a rare earth mineral, and noted that when the issue is more of a question of industrial policy, it’s not something you can leave to a competition enforcer.

“That should be a political decision, and the minister should be publicly accountable,” Cœuré said.

Joel Bamford, executive director for mergers at the UK Competition and Markets Authority echoed that position: “There are elements related to industrial strategy, related to resilience, related to security of supply, which are outside the competition framework. It is best for those who are governing to make those decisions,” he said.

State of Play chased Ribera on the sidelines of the same conference and asked whether concerns about resilience are heightened when the buyer of a resource is Chinese. Her reply? The EC “is not against any country or jurisdiction”.

“An increasing point of concern, interest and attention,” she added, “is how we understand economic security, how we can prevent being locked in a system where we change dependencies from one side to another side, [or] from one material to another material or service.”

“We need to update the way we relate in a very open economy that operates in global markets”, Ribera said.

That sounds more like a conversation under the foreign subsidies regulation (FSR), about not letting subsidised foreign companies out-compete EU companies held to a higher bar.

In fact, rather than trying to shoehorn a ‘security of supply’ concern into a merger review, perhaps the Commission should look at whether there are other tools that are more appropriate.

The FSR doesn’t seem to have been an option for the Commission in MMG’s case. No FSR notification is required because MMG funded the acquisition through its own resources, not subsidies, said the source close to the company.

Foreign direct investment (FDI) rules? In 2024, the Italian FDI authority asserted jurisdiction over acquisitions of non-Italian defence companies with no permanent presence in Italy on the grounds that they were selling directly to Italian defence contractors (thanks, Jones Day).

Alas, the EU doesn’t have FDI powers of its own. EC’s head of mergers, Guillaume Loriot, brought this up at the CRA conference where he noted that contrary to the FDI regulations in the US (CFIUS), in Europe FDI isn’t handled at the EU level, but rather at the national level.

Meanwhile, dealmakers are working hard to convince the EC, through numerous workshops and contributions to the public consultation, to have “resilience” feature prominently in the merger guidelines that the agency is currently revising, hoping this would ease merger clearances.

Be careful what you wish for, MMG might say. As Loriot warned last week, resilience can “cut both ways”.

by Natalie McNelis

State of Play is a weekly column that offers commentary from our editorial team on the main deals undergoing regulatory reviews. The opinions expressed here are those of the writers only.