The European Union on Tuesday launched an in-depth probe into the proposed creation of a joint venture between Tata Steel of India and Germany's ThyssenKrupp, saying it could reduce competition.
ThyssenKrupp struck a deal in June to merge its steelmaking business with Tata in response to a flood of cheap Chinese steel unbalancing world markets, with the new venture set to become Europe's second biggest manufacturer of the metal.
Bosses hoped the deal, more than two years in the making, would result in 400-500 million euros ($470-590 million) a year in savings, but the merger has caught the eye of competition officials in Brussels.
"The European Commission has opened an in-depth investigation to assess the proposed creation of a joint venture by Tata Steel and ThyssenKrupp," the European Commission, the bloc's executive arm, said in a statement.
"At this stage, the commission is concerned that the merger may reduce competition in the supply of various high-end steels."
An initial investigation raised possible problems over competition in the supply of certain specialised types of steel, including certain types used for cars, food packaging and engineering products such as electrical transformers.
"At this stage, the commission is concerned that, following the transaction, customers would face a reduced choice in suppliers, as well as higher prices," the commission said.
Customers in this case include various European businesses, ranging from small firms to major corporations.
"Industries dependent on steel employ over 30 million people in Europe and we must be able to compete in global markets," the EU's competition commissioner Margrethe Vestager said.
"This is why we will carefully investigate the impact of the planned combination of Tata Steel's and ThyssenKrupp's steel businesses on effective competition in the steel markets."
The merged firm, to be called "Thyssenkrupp Tata Steel", would be based in the Netherlands and boast 48,000 employees spread around 34 sites, producing around 21 million tonnes of steel per year for revenues of around 15 billion euros.
