Reuters/Thomson deal could face regulatory hurdles

Aaron Patrick of The Wall Street Journal writes for Wednesday’s paper — available online Tuesday night — that the proposed $17.6 billion deal between Reuters Group Plc and Thomson Corp. could face some regulatory issues because it would eliminate a competitor in the financial information industry.

Patrick wrote, “The deal would also likely have to be cleared by the European Commission’s Competition Directorate, the European Union’s antitrust authority, which is often tougher on big mergers than U.S. authorities. It has a track record of asking for extensive information from merging companies and is likely to ask customers and competitors for their views, competition lawyers said. In 2004, the commission fined Microsoft Corp. €497 million for using its Windows operating software to block competition, for example.

“Simon Baker, an analyst at Credit Suisse in London, said the merger would face close regulatory scrutiny in the U.S. and Europe. ‘The difficulty in convincing the Reuters Trust that Reuters’s independence can be preserved should not be underestimated,’ he wrote in a report yesterday.

“Antitrust regulators typically examine the perceived impact on customers. They would see if traders, for example, would still have ample sources of information or if having fewer players in the market would give the companies too much power to increase prices.

“‘On the surface, it eliminates one competitor,’ said Wassili Papas, a fund manager with the Frankfurt-based Union Investment, which owns about 1% of Reuters as well as a small stake in Thomson. ‘But in reality the overlap isn’t that great. I think the market is signaling it will take 12 months to get approval.'”

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