Sat. Dec 4th, 2021

WASHINGTON—The Justice Department on Wednesday filed an antitrust lawsuit challenging insurance broker Aon PLC’s proposed $35 billion acquisition of rival Willis Towers Watson PLC, alleging the tie-up would lead to higher prices and reduced innovation for U.S. businesses, employers and unions that rely on their services.

The department, which filed the case in a Washington federal court, said the merger would eliminate competition in several different U.S. product markets, including brokering services for property, casualty and liability insurance, as well as health benefits for large corporate customers.

The lawsuit, coming after an investigation of more than a year, marks the Justice Department’s first major antitrust action during the Biden administration, which is poised to take an aggressive stance against mergers in industries that already have few competitors.

President Biden’s full antitrust-enforcement team is still taking shape, but indications so far are that he wants his nominees to challenge potentially anticompetitive business practices by powerful companies and hold the line against the formation of new mega-firms with an unchecked ability to impose prices and terms that hurt consumers.

“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,” Attorney General

Merrick Garland

said. “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.”

The companies in a joint statement said they disagreed with the government’s lawsuit, “which reflects a lack of understanding of our business, the clients we serve and the marketplaces in which we operate.”

An Aon-Willis combination would create an insurance brokerage giant with more than $20 billion in revenue; the Willis Tower in Chicago, where Willis Towers Watson is a tenant.



Photo:

Taylor Glascock/Bloomberg News

“We continue to make material progress with other regulators around the world and remain fully committed to the benefits of our combination,” the companies said.

Aon and Willis Towers, both registered in Ireland, are two of the world’s biggest insurance brokerages by revenue, alongside New York-based Marsh & McLennan Cos.

In March 2020, Aon and Willis Towers announced their deal, which would create a giant with total annual revenue of more $20 billion, compared with Marsh & McLennan’s $17.2 billion. The brokerages help companies buy insurance and advise them on risk management.

Both companies are also major consultants to businesses on health and other benefit packages for their employees.

Currently, Aon, Willis Towers and Marsh & McLennan each have the global reach and diversity of products to offer a one-stop shop of broker services that many companies operating internationally rely on to buy insurance.

Aon and Willis Towers have aggressively sold off assets in recent weeks to smaller rivals to create new and larger competitors, in a bid to appease regulatory concerns over competition in the U.S., the European Union and Asia. Some analysts have said these deals could be seen by regulators as too small to make a meaningful difference in the ability of buyers of the assets to rival a combined Aon-Willis Towers and Marsh & McLennan globally on price.

The Justice Department in its lawsuit argued the companies’ divestitures fell far short of what is needed to address the harms posed by the merger.

Aon, the department said, had been disciplined by the competition provided by Willis Towers since 2016, when the latter firm was created by the merger of Willis Group and Towers Watson, a combination that created a company with broader scale and capabilities to match Aon.

An Aon executive, according to the lawsuit, told colleagues that the Willis Towers acquisition would give the company considerable leverage in the marketplace beyond what it already possessed. “We operate in an oligopoly which not everyone understands,” the executive said, according to the suit.

Career Justice Department staff have been investigating the transaction and its potential impact, as is typical in merger cases. Mr. Biden hasn’t yet nominated a political official to lead the department’s antitrust division, but its work has continued steadily during the transition between administrations.

On Tuesday, the president named Lina Khan, a progressive who favors much stronger antitrust enforcement, to lead the Federal Trade Commission, which shares authority with the Justice Department.

Antitrust officials with the European Commission, the EU’s executive body, also have expressed concerns that the merger, if left unchecked, could narrow customer choice and give the combined entity too much sway over the prices that clients have to pay for financial protection against property and casualty damages, trade tensions and cybercrime.

The European Commission is expected to make its decision on whether to approve the merger by Aug. 3.

Failure to complete the deal would put at risk the financial advantages the two companies expected to gain from it. Aon and Willis Towers said the acquisition would generate annual cost savings of $800 million and boost revenue through the sale of new products to help clients manage risks in connection with areas including climate change and intellectual property.

In early June, Aon Chief Executive Greg Case announced additional divestitures that the company said were intended to address questions raised by the Justice Department, and he expressed confidence the deal would be wrapped up. “These agreements further accelerate our momentum to close our proposed combination with Willis Towers Watson,” he said at the time.

While the timing of the transaction’s close has remained uncertain, numerous Wall Street analysts have considered the deal on track though possibly requiring more divestitures related to antitrust concerns.

Write to Brent Kendall at [email protected] and Ben Dummett at [email protected]

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