BRUSSELS (Thomson Financial) - The European Commission said it has cleared South Korea-based STX Shipbuilding Co. Ltd.'s proposed acquisition of Norwegian peer Aker Yards ASA.

Following an in-depth inquiry launched in December last year, the commission said that 'effective competition' on the shipbuilding markets would not be significantly impeded as a result of the transaction.

The commission had concerns that the merger might, in particular, remove STX as a potential new market entrant into a concentrated cruise ship manufacturing market.

However, the EU executive said that by itself STX is 'still far from close to becoming an effective competitive constraint' on the existing cruise ship construction market.

The in-depth investigation also showed that STX is not the only possible market entrant and that, post-merger, a number of other Far-East shipbuilders would be 'equally well placed' as STX to enter the market.

The commission also examined a concern brought forward by a third party related to subsidies, that South Korea might have granted or might grant in the future to the merged entity and that might enable the latter to undercut prices and monopolise the cruise ship market.

The commission found that, regardless of whether any of the financial instruments granted to STX in the past were subsidies, the current financial position of STX would not give the merged entity a dominant position.

In addition, it found no evidence indicating that STX was likely to receive subsidies in the future which could significantly strengthen its financial position and enable it to impede competition in the markets concerned.

In particular, the commission found that even if the type of future hypothetical subsidies identified by the third party (subsidised loans and guarantees) were granted, the advantage would not be such as to enable the merged entity to acquire a dominant position on the cruise ship market.

The in-depth investigation also confirmed that there are no competition concerns arising from minor overlaps of the merging companies' activities in the area of certain types of cargo ships or from the vertical integration of STX into engine production or shipping services.

simon.zekaria@thomsonreuters.com