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Merger investigation opened into Halliburton acquisition of Baker Hughes

The European Commission has begun an investigation into the proposed acquisition of US oilfield service supplier Baker Hughes by its rival, Halliburton.14 Jan 2016

The oilfield service market has high technological and financial barriers to entry and currently has three global competitors: Halliburton, Baker Hughes and Schlumberger. Halliburton and Baker Hughes both supply tools and services for drilling and evaluation plus completion and production of oil and gas wells, the Commission said.

A preliminary investigation suggested there were serious potential competition concerns in 30 product and service lines, both offshore and onshore, the Commission said. The two companies "seem to be close competitors, both in terms of tenders and innovation", it said.

Competition from other, smaller competitors is limited due to the importance of quality and reputation, especially for offshore projects, the Commission said. Offshore operations tend to involve greater complexity, more challenging conditions and higher running costs than onshore, which changes the conditions of competition, it said.

Halliburton, Baker Hughes and Schlumberger are the only companies currently able to provide integrated services across many product and service lines, which gives them a significant competitive advantage due to cost savings, the Commission said. The purchase of Baker Hughes by Halliburton would therefore reduce the number of providers from three to two, leading to less choice and potentially higher prices for customers, it said.

The Commission is also concerned that a reduction in the number of competitors would also reduce the incentive to innovate, it said.

The Commission will work closely with several competition authorities, including the US Department of Justice, on the investigation.