The Department of Justice complaint alleges the merger would substantially harm competition and leave Americans with fewer choices, higher prices and lower quality services.
The U.S. Department of Justice filed a lawsuit yesterday aimed at stopping insurance broker Aon's $30 billion acquisition of Willis Towers Watson because it would reduce competition and could lead to higher prices.
The DOJ complaint alleges the merger would “substantially" harm competition in five market segments: property, casualty and financial risk broking for larger 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.
“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," said U.S. Attorney General Merrick Garland in prepared remarks. “Allowing Aon and Willis Towers Watson to merge would reduce that vital competition and leave Americans with fewer choices, higher prices and lower quality services."
The complaint cites an unnamed Aon executive who told colleagues, “We 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."
Though it has been investigating the deal for more than a year, the lawsuit 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, according to various reports.
The deal would combine the second and third largest of the "Big Three" global insurance brokers, the department said. The third is Marsh McLennan.
In a joint statement, Aon and Willis said they “disagree with the U.S. 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 and Willis Towers Watson operate across broad, competitive areas of the economy and our proposed combination will accelerate innovation on behalf of clients creating more choice in an already dynamic and competitive marketplace."
“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," the statement said. “We continue to make material progress with other regulators around the world and remain fully committed to the benefits of our combination."
Since the deal was first announced in March 2020, the two companies have been working to gain regulatory approval around the world. In May, both companies agreed to sell Willis Re and other assets to Arthur J. Gallagher & Co for $3.57 billion to settle antitrust questions raised by European regulators. As recently as this month, Aon announced the sale of some assets to private equity firm Aquiline Capital Partners and tech firm Alight for $1.4 billion in a bid to get U.S. approval.
The deal was expected to get the EU antitrust green light within weeks. Reuters reported on April 28 that the European Commission would clear the mega deal after Aon offered to sell substantial assets. Pending the suit filed yesterday, the deal is in limbo.
Will Jones is IA editor-in-chief.