BRUSSELS - EU regulators launched an investigation into whether a planned $116 billion iron ore production joint venture between BHP Billiton and Rio Tinto, criticised by steelmakers, will curb competition. Rio, the world's second-largest iron ore producer, and BHP, the third-largest, said they would keep their marketing separate to try to ease regulatory concerns when they unveiled the agreement to combine their Western Australian iron ore operations in December.
The European Commission, the EU executive, said on Monday it would investigate whether the planned joint venture breached EU antitrust rules which prohibit companies from fixing prices and sharing markets, and that the case would be a priority.
The Commission said in a statement it would in particular examine the effect of the venture on the market for ore transported by sea but did not set a deadline for completing the investigation.
It said worldwide consumption of iron ore was picking up after a slowdown due to the economic and financial crisis, and was forecast to grow steadily in the coming years.
Rio Tinto said it would seek to convince the European Union executive of the benefits of the joint venture and it still aimed to close the deal in the second half of the year.
The pricing is to be decided by the market. We will continue to compete with each other in terms of marketing and pricing, Rio spokesman Nick Cobban said.
Rio shares closed 2.2 percent down at 3,220 pence, erasing earlier gains, and BHP ended 1 percent lower at 1,914.50 pence by 1135 GMT, versus a 1.2 percent lower DJ Stoxx basic resources index .SXPP.
INDUSTRY GROUPS OPPOSE PLANNED JOINT VENTURE
Eurofer, European steelmakers' lobbying group whose members include ArcelorMittal, the world's largest steel company, and Germany's ThyssenKrupp, reiterated its opposition to the proposed deal.
We remain convinced that the joint venture would be an unacceptable concentration which will significantly restrict competition in the seaborne iron ore market, Gordon Moffat, Eurofer's director general, said in a written statement.
The World Steel Association has also criticised the proposed joint venture, on the same grounds.
Investors have said securing regulatory approval could be the main stumbling block to the proposed joint venture.
The companies last week notified the German competition authority, which will review the deal under merger rules, a source close to the transaction told Reuters.
BHP, which failed in a bid to take over Rio in 2008 after objections from the European Commission, and Rio have said they also plan to seek approval for the joint venture from the Australian Competition and Consumer Commission.
The companies have forecast annual savings of at least $10 billion in capital and operational costs from the joint venture.
(Editing by David Cowell)