DOJ Sues to Block Aon/Willis Towers Watson ‘Oligopoly’

The U.S. Department of Justice (DOJ) has filed a civil antitrust lawsuit to block Aon’s proposed $30 billion acquisition of Willis Towers Watson (WTW), a transaction that would bring together two of the “Big Three” global insurance brokers. The largest broker currently is Marsh McLennan, which owns Mercer, followed by Aon and WTW.

Meanwhile, WTW and Aon issued a statement saying the DOJ’s action “reflects a lack of understanding of our business, the clients we serve and the marketplaces in which we operate.”

The firms add that the combination will “accelerate innovation on behalf of clients, creating more choice in an already dynamic and competitive marketplace.” WTW and Aon say the pandemic’s impact has underscored “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 DOJ’s complaint, filed in the U.S. District Court for the District of Columbia, says the merger would eliminate competition, raise prices and reduce innovation for American businesses, employers and unions that rely on the brokers’ services. More importantly, the complaint alleges, it would reduce the companies’ insurance choices for health benefits and commercial risk broking. The DOJ says it has “significant concerns.”

Attorney General Merrick B. Garland said in a statement, “Today’s action demonstrates the Justice Department’s commitment to stopping harmful consolidation and preserving competition that directly and indirectly benefits Americans across the country. 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. 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 DOJ points out that America’s largest companies rely on Aon and WTW to “craft and administer health and retirement benefits, and to keep their costs down by managing complex and evolving risks. They compete head-to-head to provide these services, which helps ensure businesses obtain innovative, high-quality broking services to manage their risks and provide critical health and retirement benefits to their employees at a reasonable cost. As the complaint alleges, the merger would eliminate this important competition in five markets, resulting in higher costs to companies, higher costs to consumers, and decreased quality and innovation.”

The DOJ goes on to say that thousands of America’s largest corporations—along with their customers, employees and retirees—rely on Aon and WTW for “global service, sophisticated data and analytics, and a breadth and depth of knowledge and expertise that other brokers do not offer. As alleged in the complaint, Aon and [WTW] operate ‘in an oligopoly’ and ‘will have even more [leverage] when [the] Willis deal is closed.’”

The DOJ says that while WTW and Aon have agreed to “certain divestitures in connection with investigations by various international competition agencies, the complaint alleges these proposed remedies are inadequate to protect consumers in the United States.”

The Department of Justice’s press release notes that “the complaint also alleges the U.S.-focused divestitures in health benefits and commercial risk broking, in particular, are wholly insufficient to resolve the department’s significant concerns.”

Aon, incorporated in Ireland and headquartered in London, has 50,000 employees operating out of 120 countries, with more than 100 offices in the U.S. It reported revenues of more than $11 billion last year.

WTW is also incorporated in Ireland and has its HQ in London, with approximately 45,000 employees operating out of more than 80 countries. It has more than 80 U.S. offices. In 2020, WTW reported revenues of more than $9 billion.

When Aon and WTW first announced the proposed merger in March 2020, the companies said that upon close of the transaction, 63% of the combined company would be owned by Aon shareholders and 37% by WTW shareholders. It said the joint company would be called Aon and would be based in London.

Under the proposal, each Willis Towers Watson share would be exchanged for 1.08 shares of Aon at a fixed exchange ratio. The total consideration of $231.99 per WTW share would be based on Aon’s closing stock price on March 6, 2020. This implied a premium of 16.2% to WTW’s closing share price on March 6, 2020.