BRUSSELS- European Union regulators opened an antitrust investigation on Monday into a planned $116 billion (71.8 billion pounds) iron ore production joint venture between BHP Billiton and Rio Tinto.

The plan by Rio, the world's second largest iron ore producer, and BHP, the third largest, to combine their Western Australian iron ore operations has been criticised by industry groups which say it would restrict competition.

The European Commission, the EU executive, said 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 it would in particular examine the effect of the venture on the market for ore transported by sea.

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 shares were up 0.8 percent to 3,319 pence and BHP were 0.8 percent higher at 1,948 pence by 1135 GMT, broadly in line with the 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.
Investors have said securing regulatory approval could be the main stumbling block to the proposed joint venture.

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, which hope to close the deal in the second half of this year, have forecast annual savings of at least $10 billion in capital and operational costs from the joint venture.

(Editing by David Cowell)

Germany