CN12a - The CNMC clears Santa Lucia - Funespana merger

On 7 September 2021, the Spanish Competition Authority ("CNMC") cleared, subject to commitments and conditions, the acquisition by Santa Lucía of exclusive control of almost all assets of Mapfre Group subsidiary Funespaña. The transaction affects the funeral services and funeral planning sectors.

Key takeaways

• The conditions and commitments adopted are aimed at mitigating customer foreclosure and coordinated effects risks arising from the presence of two competing insurance companies in the shareholding of a downstream supplier.
• The CNMC has conditioned clearance on the divestment of Mapfre Group non-controlling share in the Santa Lucía owned entity to which Funespaña assets were transferred ("NNC").
• Non-controlling shareholdings may give rise to competition concerns even if acquired in a downstream supplier.

After an in-depth phase II investigation, the CNMC cleared the acquisition by Santa Lucía of exclusive control over almost all Funespaña assets, contingent on compliance with several conditions imposed by the CNMC and commitments offered by Santa Lucía.

Funespaña, a Mapfre Group subsidiary, is a company active in the funeral services market, along with Albia, a Santa Lucía Group subsidiary. Both Mapfre Group and Santa Lucía are insurance companies active in the vertically related market of funeral planning, a type of insurance guaranteeing coverage of funeral costs and related expenses, such as the costs of the wake, burial fees, cremation costs, and grave-digging charges. Around 60% of the funerals in Spain are covered by funeral plans.

Although after the transaction NNC, the entity to which Albia and Funespaña assets are to be transferred, would manage 278 mortuaries, 61 crematoria and 43 cemeteries in 275 different municipalities, given the highly localised nature of funeral markets, the transaction only gave rise to two horizontal overlaps between Albia and Funespaña.

Rather, the CNMC’s main concerns related to the vertical effects of the transaction, given that Santa Lucía is the leading company in the vertically related market of funeral planning and that Mapfre Group, also present in the funeral planning market, would hold a 25% stake in NNC post-transaction.

According to the CNMC, this interest would provide Mapfre Group with an incentive to channel funeral services covered by their funeral plan policies through NNC, thereby preventing third party funeral service providers from accessing customers. 

In addition, the CNMC considered that the interest would also give NNC the ability to degrade trading conditions or foreclose other insurers, especially in the municipalities where it would become the only funeral service provider as a result of the transaction. 

The CNMC also raised concerns about potential coordinated effects between Santa Lucía and Mapfre Group in the other branches of insurance in which they are both active.

To mitigate the identified competition risks, the CNMC cleared the transaction on the condition that Mapfre relinquished its 25% stake in NNC and subject to certain commitments from Santa Lucía, such as to allow the entry of a competitor in one of the municipalities where there was a horizontal overlap.

With this decision, the CNMC highlights the importance of assessing competition law issues arising from non-controlling shareholdings, even if acquired in a downstream supplier. 

With thanks to Teresa Prado of Ashurst for her contribution.