Commission Decision

of 26 July 2000

declaring a concentration compatible with the common market and the EEA Agreement

(Case COMP/M.1806 - AstraZeneca/Novartis)

Council Regulation (EEC) No 4064/89

(notified under document number C(2000) 2309)

(Only the English text is authentic)

(Text with EEA relevance)

(2004/310/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community,

Having regard to the Agreement on the European Economic Area, and in particular Article 57 thereof,

Having regard to Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings(1), as amended by Regulation (EC) No 1310/97(2), and in particular Article 8(2) thereof,

Having regard to the Commission decision of 21 March 2000 to initiate proceedings in this case,

Having given the undertakings concerned the opportunity to make known their views on the objections raised by the Commission,

Having regard to the opinion of the Advisory Committee on Concentrations(3),

Whereas:

(1) On 18 February 2000, the Commission received notification of a proposed concentration by which the undertakings Novartis AG (Novartis) and AstraZeneca plc (AstraZeneca) would spin off and merge their activities in the area of crop protection into a newly incorporated company, Syngenta AG (Syngenta). Novartis would also transfer its seeds business to Syngenta.

(2) After examination of the notification, the Commission concluded that the notified operation falls within the scope of the Merger Regulation and raises serious doubts as to its compatibility with the common market. Therefore, on 21 March 2000, the Commission decided to initiate proceedings pursuant to Article 6(1)(c) of the Merger Regulation.

THE PARTIES

(3) Novartis was created by the merger between Ciba-Geigy and Sandoz in December 1996(4). Novartis is a multinational group of companies operating worldwide in the field of life sciences. Its focus is on health care (pharmaceuticals, generics), agribusiness (crop protection, seeds, animal health) and consumer health (nutrition, self-medication).

(4) AstraZeneca was created by the merger between Astra AB and Zeneca Group plc in spring 1999(5). The business activities of AstraZeneca are the research, development, production and marketing of pharmaceuticals and agrochemicals.

CONCENTRATION

(5) Novartis will undertake an internal reorganisation so that its non-American agrochemicals business as well as its non-American seeds business are held by a newly created company, Novartis Agribusiness AG, and its American agrochemicals business as well as its US seeds business are held by a US corporation, Novartis US Co. Novartis' animal health business will not be included in the transaction. Novartis will then demerge Novartis Agribusiness AG in favour of its shareholders, by way of a rights offering and Novartis US Co. will be demerged by a distribution of its shares to Novartis shareholders (or to a trustee acting for all Novartis shareholders). Novartis Agribusiness AG will merge into Syngenta under a Swiss statutory merger process and Novartis US Co. will merge into Syngenta by a United States triangular merger. Therefore, Novartis' shareholders will, on completion of the transaction, hold shares in Syngenta as well as in Novartis.

(6) AstraZeneca will undertake an internal reorganisation in order to divide its agrochemicals business from its retained business so that its agrochemicals business can be transferred to Syngenta. AstraZeneca will declare a dividend to its shareholders which will be satisfied by the transfer of shares in Syngenta. Therefore, AstraZeneca's shareholders will, on completion of the transaction, hold shares in Syngenta as well as in AstraZeneca.

(7) Therefore, the notified operation constitutes a concentration within the meaning of Article 3(1)(a) of the Merger Regulation.

COMMUNITY DIMENSION

(8) The combined aggregate worldwide turnover in 1998 of the concerned businesses exceeds EUR 5000 million (Novartis, [...](6), AstraZeneca [...]*. The EC-wide turnover of the relevant businesses of both Novartis and AstraZeneca exceeds EUR 250 million (Novartis, [...]*, AstraZeneca [...]*. Neither Novartis nor AstraZeneca achieves more than twothirds of its aggregate EC-wide turnover within one and the same Member State. Therefore, the concentration falls within the scope of the Merger Regulation.

(9) The operation qualifies for cooperation with the EFTA Surveillance Authority pursuant to Article 2(1)(c) of Protocol 24 of the EEA Agreement as the concentration is liable to create or strengthen a dominant position as a result of which competition would be significantly impeded in the territories of the EFTA States or a substantial part thereof.

COMPETITIVE ASSESSMENT

(10) The merger concerns the economic sectors of crop protection chemicals (crop protection) and seeds. Novartis will transfer its activities in the areas of crop protection and seeds to Syngenta, while AstraZeneca will only transfer its activities in the area of crop protection.

(11) Crop protection products protect crops against all forms of damage which might be caused by weeds, insects or fungi. Crop protection products are normally subdivided according to what they are designed to control. The parties suggest that the main product groups are the following:

- fungicides (for disease control),

- herbicides (for weed control),

- non-selective herbicides (for weed control),

- insecticides (for insect control),

- nutrients (trace elements) to overcome deficiency symptoms, e.g. iron deficiency,

- seed treatment for the protection of seeds and subsequent plants against disease and insects,

- plant growth regulators,

- industrial weed control products,

- non-agricultural insecticides,

- active substances.

In addition to crop protection products, Syngenta will also be active on the seeds markets.

(12) The concentration does not raise competition concerns in the markets for nutrients, industrial weed control products, non-agricultural insecticides and active substances. In the decision under Article 6(1)(c), the Commission had also expressed serious doubts concerning the rodenticides markets. These doubts were based on the fact that although Novartis' business is not transferred to Syngenta, Novartis managers will be represented on the Syngenta corporate governance structures. Furthermore, according to a competitor, the combined market share of the two entities would be considerable. However, the total sales of Novartis for rodenticides is small (EUR [...]*) and [...]*. Therefore, the serious doubts that the merger might lead to the creation of a duopolistically dominant position on some of the rodenticides markets, expressed in the Article 6(1)(c) decision, are unfounded.

(13) For the reasons indicated below, the concentration would have given rise to the creation or strengthening of a dominant position in the following markets:

fungicide markets:

- cereal fungicides in France, Germany, the United Kingdom, Denmark, Sweden and Finland,

- sugar beet fungicides in France, Italy, Spain and Belgium,

- potato fungicides in Sweden,

- fungicides to treat powdery mildew in grapes in Austria and fungicides to treat botrytis in grapes in Austria and France;

herbicide markets:

- maize herbicides in France, Germany, the Netherlands and Belgium,

- potato herbicides in Belgium and France,

- post-emergence graminicides in potatoes in Denmark,

- post-emergence graminicides in sugar beets in the United Kingdom, Belgium and Denmark,

- post-emergence graminicides in oilseed crops in Germany, the United Kingdom and Denmark,

- herbicides for fruits and nuts in France;

foliar insecticide markets:

- cereals in Belgium, Denmark, France and Germany,

- forage crops in France,

- potatoes in France,

- vegetables in France;

seed treatment markets:

- cereals in Spain;

plant growth regulators:

- ornamentals in Belgium, the Netherlands and France.

SEEDS

(14) Novartis' seeds business is transferred to Syngenta. AstraZeneca operates its seeds business via a joint venture with Cosun. This joint venture is named Advanta. This business will not be transferred to Syngenta and the shareholding thus remains with AstraZeneca. However, there are some continuing relations between the AstraZeneca business that will be transferred to Syngenta and the Advanta joint venture. [AstraZeneca business secret - contractual relations]*.

(15) [AstraZeneca business secret - contractual relations]* This obligation is not applicable to the seeds business of Novartis that will be transferred to Syngenta. [AstraZeneca business secret - contractual relations]*.

(16) [AstraZeneca business secret - contractual relations]*.

(17) The existing contractual relationship between the Zeneca Group and Advanta creates a link between Syngenta and Avanta, two seed companies producing sugar beet seeds. [...]* There are only two other important competitors for sugar beet seeds, KWS and Danisco.

(18) AstraZeneca will ensure that [AstraZeneca business secret - contractual relations]* This means that [AstraZeneca business secret - contractual relations]*.

(19) The Commission considers that in view of the above [AstraZeneca business secret - contractual relations]* the consequences of the merger on the seeds markets does not need to be further investigated as [AstraZeneca business secret - contractual relations]* eliminates the advantage that Syngenta would have received from [AstraZeneca business secret - contractual relations]*.

A. RELEVANT PRODUCT MARKETS

FUNGICIDES

FUNGICIDES AND THEIR USE

(20) Fungicides are agents used to control plant diseases caused in particular by fungi. The diseases attacking a crop, such as a wheat crop, will vary according to the variety planted in that year, the weather conditions and the husbandry of the crop. The crop variety will determine the susceptibility of the crop to attack by a range of diseases such as powdery mildew, rust, Septoria or eyespot. The weather conditions will influence the type and the intensity of the attack, for example, a wet season will encourage diseases such as Septoria and a dryer season brown rust. Husbandry of a crop can diminish the risk that certain diseases will develop. For instance, proper crop rotation or ploughing of the field reduces the risks of certain diseases.

(21) As a consequence of these complexities it is usual for a farmer to use a programme of sprays which will be adjusted in its intensity and in the types of active ingredient used depending on local weather conditions and disease susceptibility of the crop. This choice may be influenced by distributors, technical experts and Member State officials who have a detailed knowledge of diseases and their epidemiology and of the best fungicides to control these diseases depending on predicted outbreaks (protective control) or the presence of disease in the crop (curative control).

(22) If there is a range of diseases present and this range is not controlled by a single active ingredient, a farmer will either tank-mix a number of single active products, or use a pre-formulated product containing a mixture of a number of active substances. Such a pre-formulated mixture is, in general, some 5 to 15 % cheaper than a tank-mixture of the active substances. As the disease spectrum alters throughout the season in response to changing weather conditions, the products will be altered to suit the prevailing disease conditions.

(23) The farmer, based on advice from local experts and recommendations from bodies such as the Fungicide Resistance Action Committee (FRAC), will also be trying to prevent the onset of resistance to particular active ingredients by alternating between and/or combining active substances of different chemical classes throughout the season if the same disease is present for a long period and multiple applications are required. In some cases, resistance to some active classes will already be present in the local disease population and the farmer will need to use active substances which are still effective against that particular disease population.

(24) The farmer, when deciding how much to spend on fungicides, will compare the total cost of his fungicide programme with the expected yield increase and the resulting increase in revenue, which depends on the price he will receive for his crop. In view of the inherent uncertainty as to disease pressure, the expected yield increase and the price for the crop, the additional benefit to be expected of a (more expensive) fungicide programme has to be considerably higher than the fungicide price (premium).

OVERVIEW OF MARKET DEFINITIONS

(25) The parties refer to previous decisions(7) where the Commission has considered that a breakdown of fungicides by type of plant is appropriate, since the various plants display differing (albeit partly overlapping) disease patterns. On this basis, the parties have identified separate affected product markets for fungicides for each of cereals, sugar beets, oil seed crops, forage crops, potatoes, tobacco, fruit and nuts, vegetables and ornamentals. The market investigation has generally confirmed that an assessment of the fungicide sector by crop is an appropriate starting point.

(26) However, it also results from the market investigation that the markets as proposed above could be divided by a further split of the crop (for instance, cereals split into wheat, barley, oats, rye and triticale(8)) and/or by reference to a particular disease (for instance, the main diseases for wheat are powdery mildew, rusts, eyespot and septoria; the main diseases for barley are powdery mildew, rusts, eyespot, Rhynchosporum and Pyrenopora).

(27) It appears that the only crop where such a further "split" of the crops, as defined by the parties, is appropriate relates to "fruits and nuts" where, for the reasons indicated in recitals 44 to 46, fungicides for each of the major grape diseases should be considered as separate product markets.

(28) The parties claim that there is an overall cereal fungicide market. Third parties have claimed and provided information indicating that the market could be narrower, namely a market for strobilurin-based cereal fungicides. On such a market, the parties would achieve a dominant position on several national strobilurin-based cereal fungicide markets. However, since the Commission has come to the conclusion that on the overall cereal fungicide markets the parties would be dominant, the Commission has adopted, for the purposes of this Decision, the overall cereal fungicide markets as relevant product market.

(29) Finally, although it is technically speaking feasible to switch production between one fungicide and another, there is hardly any supply-side substitutability between these products. This is due to the existence of patents and the official registration process for crop protection products (to be discussed in more detail in recitals 84 to 88). This remark also holds for the other crop protection products discussed in this Decision.

STROBILURIN-BASED CEREAL FUNGICIDES

(30) In this section dealing with formulated products, "strobilurins" refer to formulated products containing an active substance of the strobilurin chemical class. The formulated product is either a "straight" strobilurin, i.e. it contains only one active substance, namely one of the strobilurin class (e.g. AstraZeneca's Amistar product, whose only active substance is azoxystrobin) or a mixed product, i.e. containing an active substance of the strobilurin class and one or more active substances from other classes (e.g. BASF Juwel Top product, containing a mixture of kresoxim methyl (strobilurin) and epoxiconazole (of the "triazole" chemical class(9)) and fenpropimorph (of the "morpholin" chemical class(10)). It can be noted that in the industry's perception and in the parties' internal market strategy all these formulated products are referred to as "strobilurins".

(31) Strobilurin active substances are the most recent class of fungicide active substances. They are broad spectrum (active against several diseases) foliar fungicides (fungicides sprayed on leaves) and can be used on a wide range of crops worldwide, particularly wheat, barley, rice, grapevines, banana, top fruit, turf and a range of vegetables. Strobilurin active substances are active at low use rates and control fungi by disrupting the energy production. Although strobilurin active substances can be systemic(11) and/or vapour active(12), they have limited curative activity. So far, strobilurins based products have been introduced within Europe in the cereal (mainly wheat and barley) crops and for grapes.

(32) In addition to their broad spectrum disease control activity, strobilurin-based fungicides (i.e. the formulated products) are reported to be the only products that have, when used on cereals, important yield increasing activities even in the absence of disease. The products based only on the other fungicide classes, mainly (tri)azoles and morpholines, do not have this yield enhancing activity. It has thus been argued that these other classes do not easily replace strobilurins. In other terms, according to third parties, although strobilurins were (and continue to be) able to replace triazoles and morpholines in the main cereal markets, the converse is unlikely to happen. For this reason, third parties have argued that there is a separate product market for strobilurin-based fungicides in cereals.

(33) With regard to cereals, there is ample data on the increased yield resulting from strobilurin usage and, together with the broad disease spectrum, these benefits figure widely in the promotion literature for strobilurin products. Farmers recognise these benefits as they are prepared to pay a considerable price premium of between 50 and 150 % for strobilurin products compared to non-strobilurin products.

(34) According to a Novartis document of March 2000(13), strobilurins have, as a rule of thumb, resulted, on average over the last three years, in an increased yield of 1 t/ha compared to triazoles in the United Kingdom. "Even when grain filling was shortened in 1999, strobilurins still added an extra 0,7 t/ha over triazoles. With wheat prices predicted to be around GBP 65/t in the autumn, then 0,7 t is worth GBP 45. With fungicide programmes based on strobilurin fungicides costing around GBP 20/ha more than a triazole based programme, this results in a healthy return on investment." For barley, the other main cereal, the profit coming from strobilurins is smaller: an extra GBP 32/ha income for GBP 22/ha extra fungicide spend for winter barley and an additional spend of GBP 20/ha for spring barley. These United Kingdom data seem to be valid also for France(14) and Germany(15). These are the three main cereal fungicide countries accounting for almost 90 % of total EEA consumption and considerably over 90 % of strobilurin consumption.

(35) There are strong indications that, on the basis of the above data, a hypothetical monopolist of strobilurin-based cereal fungicides could profitably raise prices by 5 to 10 % in a non-transitory way for these products. A 5 % price increase of a strobilurin programme would add some GBP 2,5/ha to the cost price. The margin for the farmer would remain some GBP 22,5/ha for wheat and GBP 7,5/ha and GBP 9,5/ha for winter and spring barley respectively. With a 10 % price increase, the margin for the farmer would remain GBP 5/ha for winter barley. The 5 to 10 % price increase would thus still allow a higher margin for the farmer compared to the use of a non-strobilurin fungicide programme and could thus, for the hypothetical monopolist of strobilurins, be a profitable course of action.

(36) In addition, a competitor has calculated, on the basis of the parties' information on yield increases, that in a typical three spray programme (see recitals 111 to 113), the farmer would receive the same net margin from the use of a strobilurin programme compared to a pure non-strobilurin programme even if a monopolist-producer would have increased the prices of strobilurins with 77 %.

Observations from the parties

(37) In their reply to the statement of objections (hereinafter the reply), the parties indicate that strobilurins cannot constitute a separate market as they need to be mixed with other products to give satisfactory disease control in all situations and against all pathogens. Whilst being factually correct, this argument related to the end-use of strobilurins is not relevant for product market definition as it does not address the question whether a hypothetical monopolist can profitably increase its price.

(38) The parties indicate in the reply that substitution from strobilurins to triazoles and/or morpholines has taken place in Germany in the 1999 season where the total acreage treated with strobilurins has decreased compared to 1998 (see also "the German strobilurin-based cereal fungicide market"-section, part of the assessment). As indicated further below, this is an exceptional feature due to the development of resistance to BASF's strobilurin product whilst AstraZeneca, the producer of the only other strobilurin in 1999, still faced capacity constraints. Furthermore, it appears from the documents submitted by the parties, that strobilurin-based fungicides are still expected to increase their share of the total cereal fungicide products, to the detriment of the other chemical classes.

(39) In the reply, the parties dispute that strobilurins are able to significantly increase yield in the absence of diseases and point out that the yield increase is the result of a better disease control. However, the parties' promotional literature refers to the so-called "greening effect" resulting from strobilurin usage. This greening effect, totally unrelated to disease control, will give the cereal a longer period to increase the weight of the grain and thus the total yield. Although it is argued that this greening effect as such does not justify alone the use of strobilurin-based fungicides (as the additional yield that can be attributed to the greening effect alone does not offset the strobilurin price), it is an important and unique element of these fungicides compared to the other chemical classes.

(40) Finally, the parties dispute that a hypothetical monopolist would be in a position to raise prices by 10 % in a non-transitory manner. The parties argue that if strobilurins cost, as indicated above, between 50 to 150 % more than non-strobilurin treatments, the overall cereal market should have increased by 7 to 15 % p.a. in view of the strobilurin penetration rate. However, the overall market value has declined. The Commission does not consider that on the basis of relative price differences and penetration rates, a mathematical conclusion as to the overall market size can be correctly made in the absence of information on other variables such as a diminution of the cereal acreage, changing weather and other conditions leading to a decreased need for fungicide treatment, decrease in price of the non-strobilurin formulations and so on.

(41) Furthermore, the parties argue that the example for barley described above (on the basis of Novartis' promotional literature) is weaker than the case for wheat. This is acknowledged by the Commission. The parties state in the reply that the benefit to the farmer would become marginal, but that the same risks as for wheat would still remain, and that such an increase would lead to the producer sacrificing his barley market share. However, this is not substantiated. The remaining margin would still be one based on the rather exceptional 1999 circumstances. Therefore, the risk that the farmer takes, gives him a minimal margin of GBD 5/ha (10 % price increase). In better weather circumstances, this would be more. Therefore, a price increase of between 5 to 10 % could be a profitable course of action for a hypothetical monopolist as, in view of the minimum margin that the spring barley farmer would have, the spring barley farmer would not switch away from strobilurins to such an extent that the price increase would be unprofitable.

(42) Finally, the parties indicate that, with respect to the example supplied by a competitor that the farmer would achieve the same net margin if the strobilurin prices were increased with 77 %, no farmer would make an investment equivalent to the income forecast without taking account of the risks involved. This is acknowledged by the Commission. However, the example shows that, if the total additional margin is only flattened-out when the price of strobilurin fungicides is increased with 77 %, a 5 to 10 % price increase is profitable.

Conclusion

(43) The parties claim that there is an overall cereal fungicide market. Third parties have claimed and provided information indicating that the market could be narrower, namely a market for strobilurin-based cereal fungicides. There are, for the reasons indicated above, strong indications that there is a separate market for strobilurin-based fungicides. If these were to exist, the parties would achieve a dominant position on several such national markets. However, since the Commission has come to the conclusion that on the overall cereal fungicide markets, the parties would be dominant, the Commission has adopted, for the purposes of this Decision, the overall cereal fungicide market as relevant product market.

FUNGICIDES FOR POWDERY MILDEW, DOWNY MILDEW AND BOTRYTIS IN GRAPES

(44) The parties consider that grape fungicides are part of the "fruits and nuts" market as all these perennial crops (grapes, pome and stone fruits, citrus, olives and nuts and berries) have the following common elements: long-term horizons (high cost to plant, time lag before first harvest, barriers to exit leading to the crops being considered as an asset); high value crop (the liability cost for crop protection producers where their product has some unexpected negative consequences can being quite high); most farmers sell their production themselves and have direct contacts with end customers and/or food distribution channels; subsidies level being quite low; and many agrochemical products being used are the same.

(45) The Commission considers that grape fungicides have to be assessed separately as the formulated products used as well as the active substances included differ to a very large extent between grapes and the other crops. For instance, of the six AstraZeneca active substances used in grapes, only one is also used for pome and stone fruit and one other for olives. Of the six Novartis active substances, one is used in both pome and stone fruits, another in stone fruit and one other for citrus. On the other hand, there are also active substances used on the other crops that are not used on grapes. Therefore, the competitive conditions differ substantially between grapes and the other perennial crops.

(46) Grapes are threatened by a large number of diseases. The three most important diseases are downy mildew, powdery mildew and grey mould or botryits. The parties have stated that fungicides used to treat each of the diseases are different and specific, with the exception of three active substances (dichlofluanid, thiphanate methyl and azoxystrobin) that have an effect on at least two diseases. However, products containing these active substances as well as all pre-formulated mixtures that are registered for more than one disease account only for about 5 % of all grape fungicides. The parties' statements have been confirmed by the market investigation. It can, therefore, be concluded that fungicides for each disease threatening grapes, and in particular for downy mildew, powdery mildew and botrytis, constitute different product markets.

CONCLUSION ON PRODUCT MARKETS FOR FUNGICIDES

(47) The relevant product market definitions proposed by the parties, namely a different market by type of plant, is appropriate. This is the case for the following markets further dealt with in the assessment: sugar beet fungicides, vegetable fungicides, and potato fungicides. The Commission considers that there are strong indications that there is a separate market for strobilurin-based cereal fungicides. However, if this were not the case, and if the market were, as the parties have argued, a market for all cereal fungicides, then the concentration is equally likely to create a dominant position on this market. Lastly, there are separate markets for fungicides treating each disease affecting grapes: powdery mildew, downy mildew and botrytis.

HERBICIDES

(48) Herbicides are agents that control weeds. Usually a first distinction is made between selective herbicides and non-selective herbicides. The latter, non-selective herbicides, are effective against many types of plant, including cultivated crops, which they kill if applied to them. Non-selective herbicides are generally applied to fields in order to clear them of weeds after the harvest of one crop and prior to the sowing of the next. Only AstraZeneca, not Novartis, manufactures non-selective herbicides. Therefore, with one exception to be discussed below (herbicides for vineyards and orchards), there are no overlaps in this area.

(49) Selective herbicides, on the other hand, are designed to kill only the weeds, and to leave intact the crop to which they are applied. Clearly, from the viewpoint of the farmer, the type of crop on which a selective herbicide is used, is the most important factor in determining product substitutability.

(50) Farmers also consider the particular weed types against which the crop needs protection at any given time. With a few exceptions, the active substances contained in the herbicide product formulations are mainly effective against weeds within one of the two principal categories of weeds: broadleaf weeds and grass (gramineous) weeds(16).

(51) As specific types of plant are mostly affected by mixed "weed populations" comprising both grasses and broadleaf weeds, there is a need for treatments that kill both types of weeds. Two options are then available to the farmer. Either he purchases a number of herbicides with specific selectivities and mixes these in accordance with the types of weeds that appear, or he buys a ready-made product that contains the desired mixture of active substances for grass control and broadleaf weed control. In the remainder of this Decision, a herbicide product that is mainly active against grass weeds will be called a grass weed herbicide or graminicide. A product that is mainly active against broadleaf weeds will be referred to as a broadleaf herbicide. A product that is active against both types of weeds (without being mainly active against grass weeds or against broadleaf weeds) will be referred to as a broad spectrum herbicide(17) genannt.

(52) Another important selection criterion for the farmers is the time of application of the product, relative to the emergence of the crop: it is common to distinguish between pre-sowing, pre-emergence and post-emergence herbicides. Pre-sowing herbicides are applied to the soil immediately before the seed is sown. In pre-emergence treatment, the herbicides are applied immediately before germination of the seed, i.e. about eight days after sowing. Post-emergence herbicides are applied to the soil or the plants after germination of the crop.

(53) In addition, herbicidal products differ to the extent that they are based on different classes of chemical active substances. This is particularly important in the domain of resistance management. Weeds that are treated frequently with the same types of herbicide tend to develop resistance against these herbicides over time, by a process of self-selection. It is therefore important to counter this tendency of resistance by carefully choosing the (combinations of) herbicides to use during the season and from one season to another. For this reason, herbicides are marketed by the manufacturer and the distributor on the basis of both the protective and the resistance characteristics of the chemicals contained. In addition, the procedures for treatment, including the number of applications and the feasibility of mixing with other products to achieve a broader range of protection, are of importance.

(54) The Commission has concluded in previous decisions that non-selective herbicides and selective herbicides are not in competition with each other, with the exception of a few cases (to be discussed below). Furthermore, selective herbicides which protect distinct types of crop form part of distinct relevant product markets (see IV/M.1378 Hoechst/Rhône Poulenc (Aventis), recitals 29 et seq., IV/M.737 Ciba Geigy/Sandoz (Novartis), recitals 109 et seq.; IV/M.392 Hoechst/Schering(18), recitals 16 et seq., and IV/M.354 American Cyanamid/Shell(19), recitals 11 et seq.).

(55) The Commission has in those decisions discussed whether further subdivisions should be made for the purpose of product market definition (for example, on the basis of the spectrum of control or the timing of the application). In Case IV/M.737 Ciba Geigy/Sandoz (Novartis), the Commission did not make such further subdivisions. First, it considered that, in view of the fluid dividing lines between graminicides, broad spectrum herbicides and broadleaf herbicides, it was impossible to draw up a hard-and-fast product market classification. Furthermore, it considered that a breakdown based on the time of application should also be disregarded since, before sowing at least, pre-sowing, pre-emergence and post-emergence herbicides are substitutable as far as the farmer is concerned.

(56) For maize herbicides, the approach adopted in IV/M.737 Ciba Geigy/Sandoz (Novartis), i.e. to define the relevant product markets by type of crop, appears to be appropriate in the current merger case as well. However, in order to allow for a proper understanding of the competitive relationships between the different types of selective herbicides, the following qualifying remarks on this product market definition are in order.

(57) First, it should be realised that a broadleaf weed herbicide is no substitute for a graminicide, or vice versa. When a farmer is faced with harmful grass weeds in his crop fields, he needs to use herbicides which are capable of controlling these weeds, i.e. he needs either graminicides or broad spectrum herbicides; broadleaf weed herbicides are not active (or, at least, not active enough) against grass weeds. For that reason, from a demand perspective, graminicides and broad spectrum herbicides may be substitutable, but graminicides and broadleaf herbicides are not(20). The same arguments apply, mutatis mutandis, for the control of broadleaf weeds. In fact, to the extent that grass weeds and broadleaf weeds occur together (which is usually the case), graminicides and broadleaf weed herbicides are complementary products. As a consequence, the two types of product are not in competition with each other.

(58) It is only through the presence of broad spectrum herbicides, allowing for both grass weed control and broadleaf weed control, that the two complementary market segments are linked. To see this, it is useful to recall the purpose of using product market definitions. The objective of defining a market (in both its product and geographic dimension) is to identify those actual competitors of the undertakings involved that are capable of constraining their behaviour and of preventing them from behaving independently of an effective competitive pressure(21).

(59) One way to think of a relevant product market is that it is the smallest set of products for which a company, should it be the only firm to offer these products, would find it profitable to impose a small but significant (5 to 10 %) and permanent price increase. If this hypothetical company were not to find it profitable to do this, then the conclusion should be that there is somehow enough competitive pressure from other products and that the relevant product market is therefore wider than presumed.

(60) In this case, a natural question to ask would be whether a hypothetical sole supplier of all herbicides capable of controlling grasses (i.e. graminicides and, to a lesser extent, broad spectrum herbicides) would find it profitable to increase prices for these products in the way described above. This is not necessarily the case. After all, given that broad spectrum herbicides are competing with broadleaf weed herbicides, an increase in the price of the first would not only lead to a drop in sales stemming from farmers no longer using the broadspectrum product for grass control, but also stemming from farmers that used to buy the product for broadleaf weed control switching to "pure" broadleaf herbicides. To the extent that many buyers of broadspectrum herbicides buy the product to control both types of weeds and the value of broadspectrum products is substantial in comparison with grass weed herbicides, broadleaf weed herbicides do exercise a competitive pressure on the prices of broad spectrum herbicides and, hence, on the prices of graminicides. This is the chain of substitution effect(22).

(61) The market investigation in the present case has indicated that broad spectrum herbicides for maize effectively derive substantial part of their sales values both from their capacity to control grass weeds and from their capacity to control broadleaf weeds. A product market definition based on the type of crop (maize) is therefore warranted, but as far as the assessment of the impact of the present merger is concerned, it should be kept in mind that the competitive relationships between the products in question are different from those prevailing in circumstances where all products are truly substitutable.

(62) Second, as for the possible distinction between pre-sowing, pre-emergence and post-emergence herbicides, the following qualifying remarks can be made. As the three types of herbicides are all used to treat the same types of weeds and display the same degree of effectiveness, the farmer has, before sowing at least, a certain degree of flexibility in choosing the time of application. A product market definition that comprises all three types of herbicides is for this reason warranted. Furthermore, as time goes by and weed problems occur in the crop fields, pre-sowing herbicides or even pre-emergence herbicides are no longer substitutes for post-emergence herbicides. Furthermore, it is also worth noting that the "wait and see what emerges" approach underlying the use of post-emergence herbicides in weed control may not always be the best strategy with regard to resistance management.

(63) The degree of substitution between pre-emergence applications and post-emergence applications of maize herbicides is not always very strong(23). In general, according to the information provided to the Commission, both the weed pressure and the weed diversity in maize are increasing, necessitating more complex weed control strategies requiring the use of both pre- and post-emergence products. In the southern regions, when pre-emergence treatment is not sufficient, post-emergence treatments are necessary as well. In the northern regions, even when early post-emergence treatments are a possibility, the use of pre-emergence treatments is advised to weaken the weeds and make them more vulnerable to post-emergence treatments (especially in areas suffering from grasses). Also in the decision on the timing of the application, therefore, it appears that the relationship between the two main available products, pre-emergence and post-emergence herbicides, is not always just one of substitutability, but also one of complementarity. Nonetheless, the degree of substitutability appears to be sufficient to warrant a broad market definition.

(64) Also for cereal herbicides, broad spectrum products appear to derive substantial part of their sales values both from their capacity to control grass weeds and from their capacity to control broadleaf weeds. Equally, there appear to be sufficient substitution possibilities between pre-sowing, pre-emergence and post-emergence applications. A product market definition based on the type of crop (cereals) is therefore warranted. None the less, as far as the assessment of the impact of the present merger is concerned, it should again be kept in mind that the competitive relationships between the products in question are different from those prevailing in circumstances where all products are truly substitutable. Similarly, rice herbicides constitute a relevant product market.

(65) In the markets for herbicides for potatoes, vegetables, sugar beets, oil seeds and soy beans, the market investigation has shown that a refinement of the market definition is appropriate, as market participants do not consider that for post-emergence control of grasses broad spectrum herbicides are good substitutes for graminicides(24). The parties have indicated that, generally speaking, the five mentioned crops are treated first in pre-emergence to control all types of weeds(25). The pre-emergence treatment provides weed control until the time of crop emergence when the crop canopy closes over the inter-rows (particularly the case for potatoes and sugar beet). Later sprays are, however, often required, notably if there is a failure of the pre-emergence treatment (dry soil conditions, heavy weed pressure, wrong dose rates or choice of herbicide) to control a grass weed problem. In this latter case, a post-emergence graminicide treatment has to be applied, because broad spectrum herbicides do not provide enough control. That the graminicide products have specific properties which distinguish them from broad spectrum herbicides follows from the fact that, according to the parties, they are the only herbicides which can control the grass weeds Agrostis stolonifera, Arrhenatherum elatius, Bromus sterilis and Phalaris spp. These facts show that the competitive pressure on the products within the group of post-emergence graminicides come from other products in the group. The conclusion is that within the herbicides markets for potatoes, vegetables, sugar beets, oil seeds and soybeans, separate markets exist for post-emergence graminicides.

(66) Only AstraZeneca, not Novartis, manufactures non-selective herbicides. Therefore, where selective and non-selective herbicides cannot both be used on crops, there are no overlaps in this area. The parties claim that there is one domain in which selective herbicides and non-selective herbicides are competing with each other and that is in herbicides for use in vineyards and orchards(26). The parties have argued that non-selective herbicides have to be included in this market as they can be used between the rows of vines without killing them. Whereas this view has been generally confirmed, it has been remarked that just around the vines, selective herbicides have to be used. A competitor has pointed at the fact that, rather than selective and non-selective herbicides being substitutable, they are in fact complementary as they are always used in combination. According to this competitor, the non-selective herbicide (e.g. paraquat, glyphosate, sulphosate) serves to kill all weeds existing at the time of application and the selective herbicide (e.g. a residual herbicide, such as atrazine), serves to kill weeds germinating after application. The Commission has addressed these opposing views and has concluded that, for the purpose of the present case, herbicides for use in vineyards and orchards (or "herbicides for fruits and nuts", the term used by the parties) constitute a relevant product market.

(67) A final word ought be devoted to the developments taking place in the domain of genetic modification of crops. The most remarkable technological innovation in the crop protection business in recent years has been the development of herbicide-tolerant crops. These are crops, e.g. in maize, that have been genetically modified to be resistant to non-selective herbicides (previously so considered). This means that non-selective herbicides, which are by themselves very powerful herbicides, can be safely applied to them. In principle, therefore, they could be a clear challenge to conventional selective herbicides. However, because of continuing opposition to these innovations in many European societies, the parties do not believe that these types of crops can be introduced before 2005. For the time frame relevant to the assessment of the current merger case, the advent of genetically modified crops has no bearing on the prevailing product market definitions for herbicides.

Conclusion on product market definitions for herbicides

(68) In view of the role of broad spectrum products in maize herbicides and the sufficient degree of substitutability between pre and post-emergence applications, it is appropriate, for the purpose of the present case, to consider the market for (selective) maize herbicides as a relevant product market. The same holds for the markets for cereal and rice herbicides. However, in addition to separate relevant markets for herbicides in potatoes, vegetables, sugar beets, soy bean and oil seeds, there also exist separate relevant markets for post-emergence graminicides in these crops.

INSECTICIDES

(69) Insecticides are products used to control insects that damage cultivated plants. The Commission has found in previous decisions (see IV/M.737 Ciba Geigy/Sandoz (Novartis), recitals 116 et seq.) that a breakdown of insecticides by type of plant rather than by insects is appropriate in general. The main reason is that there is only one plant-specific insect that affects a major crop, namely the cornborer affecting maize. For all other main crops a variety of insects infests the plant. Therefore, most insecticides combat a range of insects.

(70) However, in Hoechst/Rhône-Poulenc (recital 36), the Commission indicated that a further breakdown seems to be appropriate with regard to crops such as potatoes and sugar beets. Some of the potato or beet insecticides solely treat nematodes and soil insects within the soil and are applied by bringing them on or into the soil. These products are called nematicides. Other products are designed to protect potato or beet plants against lice and other foliar insects and are applied to the leaves by spraying. These products are called foliar insecticides. The two different kinds of products are based on different active substances, are applied in different ways and are not substitutable for each other.

(71) Another differentiation could be envisaged between sucking and chewing insects. Chewing pests such as caterpillars damage crops by eating them up, whereas sucking pests such as aphids transmit viral diseases and thereby reduce crop quality. However, this describes rather the way of feeding than the mode of action of insecticides. In any event, the question of whether such a breakdown is appropriate can be left open in this case, since it would not materially change the competitive assessment.

(72) It is also conceivable to further separate the market for insecticides along the lines of chemical classes. The following table shows the most important chemical classes used as insecticides in Europe:

>TABLE>

(73) As can be seen from the above table, organophosphates (OPs), pyrethroids and carbamates are the three main chemical classes of insecticides. It has been argued by third parties that pyrethroids constitute a separate submarket within the insecticides because of their very broad spectrum of activity, high speed of action and advantages for environmental stewardship, since the compound is a synthesised natural product. Pyrethrum is a toxic hydrocarbon of the kerosene type which is derived by extraction of chrysanthemum flowers. However, for a given crop category, the farmer selects insecticides on the basis of the spectrum of pests which need to be combatted. For some crops like cereals or forage crops pyrethroids are the main class used to combat insects. Therefore, the breakdown of markets by type of plant already contains a breakdown of insecticides by spectrum.

(74) Therefore, for the purpose of this Decision, the relevant market for insecticides is defined by type of crop and subdivided into foliar and soil insecticides.

SEED TREATMENT

(75) Seed treatment means the treatment (dressing) of seeds with plant protection products in order to protect them mainly against seed/soil borne diseases and soil insects.

(76) In Ciba-Geigy/Sandoz (recitals 118-121), the Commission has concluded that there are no separate markets for seed treatment, since treated seed is, from the farmer's point of view, ultimately substitutable for fungicides and insecticides applied to the soil or sprayed. Seed treatment is considered to be a particular type of application of insecticides and fungicides.

(77) However, this conclusion has not been confirmed by the current market investigation for seed treatment products for cereals in Spain, the only activity that AstraZeneca has with regard to seed treatment. The diseases and the insects that are targeted with seed treatment products differ from those dealt with by spraying programmes. In Spain, these diseases and insects are treated with different active substances. Furthermore, products used for seed treatment must be registered separately and be coloured with a dye. There is, therefore, no supply-side substitution between products registered as an insecticide or fungicide (as defined above) and those registered for seed treatment. Also the customers for seed treatment products differ from those for insecticides and fungicides. Insecticides and fungicides are finally purchased by the farmer. A clear majority of seed treatment products is sold to seed producers and propagators. These customers own dressing plants where they dress the seeds with seed treatment products. Therefore, seed treatment products for cereals in Spain are a distinct product market.

PLANT GROWTH REGULATORS

(78) Plant growth regulators are agrochemicals that inhibit, stimulate or modify plant growth and development. They have different modes of action, depending on their chemical class. One of their most important effects is the inhibition of vegetative growth of crops. As indicated in Ciba-Geigy/Sandoz (recital 123) and confirmed by the market investigation, growth regulators for individual crop types form separate relevant markets

B. RELEVANT GEOGRAPHIC MARKETS

(79) The parties submit that the markets for formulated products and growth regulators are at least EEA-wide since they maintain that conditions of competition are not appreciably different across the EEA. As support for their position the parties argue that numerous large, international manufacturers are present throughout the world; that the distribution channel is characterised by large distributors that have little brand loyalty; that farmers are price conscious; that processors and retailers are setting broad European standards in crop management; and that major food retailers are increasing their international purchasing power. Furthermore, the parties argue that national patents and trademarks do not constitute a barrier to EEA-wide distribution and that Council Directive 91/414/EEC of 15 July 1991 concerning the placing of plant protection products on the market(27), as last amended by Commission Directive 99/80/EC(28) has harmonised national regulations laying down requirements for the registration of crop protection products and that the corresponding national registration procedures have largely been harmonised. The parties also maintain that the marketing of crop protection products has been largely harmonised and that it is therefore easy to resort to parallel imports. According to the parties, transport costs are low, corresponding to 1 % of total costs. Finally, the parties claim that there has been a noticeable trend towards convergence of prices between Member States, and that this convergence is facilitated by the price transparency and the stability of cross-exchange rates created by the launch of the euro.

(80) The Commission has in its previous decisions in this sector (Ciba-Geigy/Sandoz, point 128; Hoechst/Rhône-Poulenc, recital 48) left open the precise definition of the geographic markets for formulated products and growth regulators in the agrochemical sector.

(81) Several competitors agree with the parties that the geographic markets for formulated products and growth regulators are wider than national. Some competitors argue for European-wide markets while others argue that markets may usually be defined by certain climatic regions rather than by national borders. Competitors arguing for European-wide markets refer to the effects of Directive 91/414/EEC. However, others emphasise that formulated products still have to be registered in Member States before they can be marketed. The fact that products are, in most cases, covered by EEA-wide patent protection was mentioned as an element arguing in favour of a finding that markets are EEA-wide. Some competitors do not see that transportation costs constitute a hurdle to trade although others say that they may be relevant. Furthermore, some competitors argue that cross border sales are growing and that prices are converging. While acknowledging that cross-border shipments do occur, another competitor points to registration requirements, different languages, etc., rendering the cross-national marketing of products difficult.

(82) However, a large number of customers, farmers' associations and crop consultants have brought forward arguments that point to the conclusion that markets are still national. Crop protection products must still be registered in a Member State before they may be marketed. Distribution is organised on a national basis, with suppliers having in most cases national sales organisations or distributing via the sales organisation of another manufacturer operating in the relevant Member State. Parallel-imported products are seen as difficult to commercialise, among other reasons because brand names and formulations may vary between Member States, because registration fees may be high, and because it may take a long time to register the products.

(83) The market investigation has shown that the markets for formulated products and growth regulators must be analysed at a national level. The various arguments for this conclusion are given below.

REGISTRATION OF PRODUCTS

(84) The Commission notes that Directive 91/414/EEC harmonises national regulations. The Directive, and later amendments and implementing directives, establishes a positive Community list of active substances whose use can be deemed in advance to be acceptable for human or animal health or the environment (the Annex I list). It furthermore establishes a system for the authorisation by the Member States of different formulations containing the active substances in the positive list, in accordance with the requirements laid down in the Directive and according to uniform principles; the mutual recognition of acceptance by the Member States, provided that the plant health, agricultural and environmental conditions are comparable in the regions concerned; harmonised rules concerning the requirements on information, protection of information and confidentiality; harmonised rules concerning labelling and packaging; harmonised rules concerning the development of plant protection products; and provisions on the exchange of information between Member States and the Commission.

(85) However, the full effects of the Directive are still not being felt. For the moment, less than 10 active ingredients have been registered at European level (Annex I). The approximately 800 other active substances on the market are not yet covered by the Community-wide system. Over time, companies will, however, have to re-register all the active ingredients that they want to continue selling. The continuing process of screening the existing active substances for inclusion in Annex I requires that large amounts of information have to be produced by the companies. The full information packages for the majority of the existing active ingredients will have to be produced by May 2003.

(86) The harmonisation of national registration procedures referred to by the parties concerns active ingredients included in Annex I. Since the number of active ingredients already in Annex I is very limited, clearly the national registration systems are still the important step for companies.

(87) It should also be noted that a product has to be registered by the national authorities before farmers in that Member State can use the product. Furthermore, even if the exact same product is available in another Member State, farmers are typically not allowed to buy a product in another Member State and use it in their home country without asking permission by their national authorities.

(88) Finally, it is the producers that decide which products to register in which countries. Often, products which are available in one Member State cannot be bought in the next, or similar products based on the same active ingredients may be introduced in different formulations in different Member States. Hence, even when all active ingredients are entered in Annex I and the harmonisation of registration procedures envisaged by Directive 91/414/EEC is complete, crop protection companies will still have the opportunity to segment the European market. A concrete investigation of the way in which competition works will therefore still be necessary at that point.

PARALLEL IMPORTS

(89) The rules for parallel imports vary from country to country. Some countries have only recently introduced legislation (France) while others still have no legislation in place (Finland and Greece). In some countries a separate permit is requested for each batch (Belgium) while for others a parallel import registration lasts as long as the original product is registered (Denmark). In most countries the product has to be exactly the same as the original registered products, while in others small differences are allowed. According to the parties, the average time from request to decision varies from two weeks (Belgium) to three to five months (Italy) while the costs vary from zero (Denmark) to 2000 EUR (Austria).

(90) Generally, the market investigation has shown that there are still many practical difficulties for parallel importers, both in getting import permits and in finding reliable and stable sources of supply. In particular producers can and do establish systems so that they can trace Europe-wide the final destination of their product. The overall level of parallel imports is therefore quite low, and the wide price differences for identical products between the various Member States (see recital 98) show clearly that parallel imports do not effectively restrain producers from segmenting the European market for pricing purposes.

DISTRIBUTION

(91) Crop protection distribution systems vary widely between Member States. In Denmark, cooperatives and smaller dealers have formed buying groups. The three largest distributors, which operate in all of Denmark, represented, according to AstraZeneca, [90 to 100]* % (respectively [30 to 40]* %, [30 to 40]* % and [20 to 30]* %) of total sales in 1999. Furthermore, one of these three distributors in 1999 created a joint purchasing company with a major Swedish distributor. Italy is at the other end of the spectrum with [more than 5000]* distributors (according to AstraZeneca), no distributor operating on a national level, the largest distributor having [0 to 5]* % of total sales and the top 10 distributors together around [10 to 20]* %. France, Greece, Spain and Portugal also have quite fragmented distribution systems, Austria, Finland, Norway and Sweden have quite concentrated systems while Belgium, Germany, Ireland, the Netherlands and the United Kingdom are somewhere in between. The distribution systems also vary with respect to that part of crop protection sales that goes through cooperatives, from [0 to 5]* % in the United Kingdom and [5 to 10]* % in Belgium to [60 to 70]* % in France and [60 to 70]* % in Norway.

VARIATIONS IN USE

(92) Climatic conditions have an influence both on which crops are grown and on the levels of crop protection which are needed in the various Member States. A good example of this is cereal fungicides. A farmer will decide on the optimal number of treatments, the diseases o target, the resulting products and the dosage with which the products would be used. His decision will depend on the seed variety, the soil, the climatic conditions, previous disease occurrence and other relevant factors. The outcome of these decisions is closely linked to the intensity of cereal farming, with yields ranging from 6 t/ha or less up to 10 t/ha or more.

(93) The importance of disease varies between areas. Powdery mildew, septoria leaf and glume blotch, and fusarium head blight occur frequently in all EEA countries. Eyespot occurs frequently in the United Kingdom, Ireland, northern Germany and northern France, yellow rust in the same countries and Belgium, while septoria leaf spot or blotch occurs frequently in the United Kingdom, Ireland, Germany, France, Belgium, the Netherlands, Scandinavia and Austria. On the other hand, brown rust occurs frequently in France, southern Germany, Italy, Spain, the southern United Kingdom, and Belgium.

(94) Another way to approach this is to look at the most important diseases in different Member States. In Denmark, Germany, the Netherlands, Norway, Sweden and the United Kingdom the two most important diseases are septoria and powdery mildew. In France they are septoria and rust, in Italy rust and fusarium and in Spain rust and powdery mildew. Products which are particularly strong against the most important diseases that occur in a Member State will obviously have a strong competitive position in that country.

(95) The number of spray programmes also varies between Member States. In particular, the number of fungicide treatments is related to the intensity of cereal farming, ranging from zero in the whole of Greece up to three (or four) sprays for wheat and two for barley in the most productive areas such as northern France, the southern United Kingdom, Germany and Belgium.

(96) A further reason for the existence of national variations in use is the significant impact of technical product evaluations by independent research institutes, as indicated by the parties as an argument for national markets for sugarbeet seeds. These institutes publish recommendations for the use of crop protection products, which are widely consulted by both farmers and crop consultants. These independent research institutes are typically national and a recommendation by a given institute will therefore primarily influence use in one Member State only.

DIFFERENCES IN MARKET SHARES

(97) Another indication that the geographic markets are not EEA-wide is the large variation in market shares between the different Member States that not only the parties but also their competitors have in many product markets. The parties admit in the notification that there are differences in the undertakings' market shares between Member States but do not regard this as evidence supporting a national market definition. According to the parties, these differences can partly be attributed to the different product requirements created by climatic conditions, etc., across Europe. The Commission finds that this is an argument in favour of narrower geographic market definitions than the (at least) EEA-wide definition advocated by the parties. Furthermore, it should be noted that often the identity of the participants in the various national markets is not the same. As was explained above, the companies decide in which countries to try to register their products. Sometimes the companies decide not to register the product in all countries, and typically companies will not introduce their products simultaneously in all the countries where they plan to register their products. There may be a lag of several years between the first and the last registration of a product.

PRICE DIFFERENCES

(98) The market investigation has shown that prices can vary substantially between Member States. The parties' internal documents refer on some occasions to the need to have price convergence; however, it also appears from their internal documents that there are still important price differences(29). In the notification AstraZeneca gave examples of the variations in price per kg active ingredient in the EU and Norway for several of its most important active ingredients. In 1999 the ratio of the highest price to the lowest price was [ >1]* for Azoxystrobin, [ >1]* for chlorothalonil, [ >1]* for fluazinam, [ >1]* for flutriafol, [ >1]* for hexaconazole [ >1]* for diquat, and [ >1]* for fluazifop-p-butyl. The parties argue that some of these differences are due to different pack sizes, smaller pack sizes having a higher price per kg active ingredient. However, AstraZeneca has also provided pricing on a brand-specific basis. For azoxystrobin, the two brand names for which prices are given, are Amistar and Quadris. For Amistar the ratio highest/lowest price differential in 1999 was [ >1]*, for Quadris [ >1]*. For the active ingredient hexaconazole, the ratio was [ >1]* for the brand name Anvil, and [ >1]* for the brand name Planete (where, however, figures are given for two countries only). Some examples of the same ratio for Novartis are [ >1]* for the product Topik EC240, [ >1]* for the product Moddus 250ME and [ >1]* for the product Mavrik 240.

CONCLUSION

(99) For the purpose of the assessment of this case the markets for formulated products and growth regulators must be considered national in scope.

C. ASSESSMENT

C.1 FUNGICIDES

CEREAL FUNGICIDES

Disease control in cereals

(100) The cereals market consists of crops such as wheat, barley, oats, rye, triticale and a number of other crops such as mixed grain, sorghum, buckwheat, millet and others. Wheat and barley are the two most important crops and they account for some 87 % of the total cereals cultivated area in the EU and for some 95 % of cereal fungicide consumption. The other crops are grown mostly in Nordic countries and Portugal, where they are used for direct farm consumption as cattle feed. The use of fungicides in these other crops is lower because the crops are grown on a fairly extensive basis and on less productive soils. Only in Sweden, Germany and Finland are these crops estimated to account for more than 10 % of fungicide consumption. These crops will not be dealt with further below, as wheat and barley are considered to be representative for all cereals, even for Sweden, Germany and Finland, since the diseases and the fungicides are the same for these crops as for wheat and barley. In addition, the availability of market data for these other crops is limited.

(101) The main diseases in wheat are eyespot (Pseudocercosporella herpotrichoides), powdery mildew (Erisiphe graminis), brown rust (Puccinia recondita, Puccinia hordei), yellow rust (Puccinia striiformis), Septoria leaf spot or blotch (Septoria tritici), Septoria leaf and glume blotch (Septoria nodorum) and Fusuarium head blight (Fusarium culmorum, F graminearum, F avenaceum, Microdochium nivale). The main diseases in barley are eyespot, powdery mildew, brown rust (also wheat diseases), net blotch (Drechslera teres) and leaf blotch or scald (Rhynchosporium secalis).

(102) These diseases occur under different circumstances relating to climatic optimum and sensitivity to the seed variety. Their presence and importance differs to some extent in the different Member States. What they have in common is that they all can lead to important yield decreases when they occur in the crop. A rough subdivision can be made between diseases attacking the stem base, the leaves and the ear of the plant. The relevance of this distinction is that this influences the optimal date for treating the crop, and hence in which spray (if multiple sprays are made) a fungicide targeted at the specific disease is best used (see section "spray programmes" below).

(103) Eyespot is a disease attacking the stem base of the plant. Its climatic optimum for development is cold and wet weather. It therefore does not occur in southern Europe, but occurs frequently in the United Kingdom, Ireland, northern Germany and northern France. It also occurs in the rest of Germany and France, as well as in Austria and Scandinavia. The disease has an impact on the ear filling (i.e. weight of grain on the plant), causes shrivelled grain and can lead to the crop falling down before harvesting (lodging). Yield decreases can be in the range of 5 to 20 %.

(104) The group of fusarium pathogens can cause stem or ear diseases. They are difficult to predict, but wetness is a guide to potential infection (more important on the ear in wet years and on stem bases in warm, dry soils). The disease has become more prevalent in recent years and can cause lodging of the crop (stem base related) or can reduce the quality of the grain and cause toxin production. It occurs in all countries.

(105) The leaf diseases on wheat and barley are powdery mildew and brown rust. Powdery mildew is a leaf and ear disease occurring with warm weather (12 to 20 °C) and high relative humidity. It is inhibited by temperatures above 25 °C and by heavy rain. It frequently occurs in all EEA countries. The influence of the seed variety on the disease occurrence is high. It strikes at the green leaf area and the grain filling with yield decreases of some 10 to 15 %, and sometimes up to 40 %.

(106) Brown rust develops in warm weather (15 to 22 °C). Dry and windy conditions favour the spread of the disease. It occurs more predictably in the warmer climates of southern Europe, and more rarely in cooler northern Europe. It is less important in barley than in wheat. It reduces the number and size of the grain and can give yield decreases of some 10 to 15 % with sometimes up to 50 %.

(107) The leaf diseases that only occur on wheat are the septorias and yellow rust. Net blotch and scald are barley leaf diseases, but they can also infect the ear.

(108) Septoria tritici is currently the most important wheat disease in Europe. The further north, the more common it becomes. Its development is favoured by 15 to 20 °C and rainfall to spread infection. Its cultural optimum is linked to early sowing and high nitrogen fertilisation. Septoria nodorum is favoured by warmer conditions than tritici (18 to 25 °C) and also infects the ear. It is now less common and less predictable than septoria leaf spot.

(109) Yellow rust occurs primarily on the leaf, but may also infect the ear. It is favoured by 10 to 15 °C with dry, windy days for spore dispersal. It occurs more in the United Kingdom and Ireland and the influence of the seed variety seed on the prevalence of the disease is very high.

(110) The barley diseases net blotch and scald are both favoured by cool and wet conditions. For both, the influence of the seed variety is high. Especially net blotch can cause important yield decreases (10 to 40 %). Both diseases frequently occur in the United Kingdom, Ireland, northern Germany, northern France, Belgium and Scandinavia. Net blotch also occurs frequently in Austria and scald frequently in the Netherlands.

Spray programmes

(111) The farmer, advised by his distributor, independent crop consultant or technical institute, decides on the optimal number of treatments and the diseases to target. This decision is based on the seed variety, the soil, the climatic conditions, previous disease occurrence and other relevant factors. After this decision is made, the products to include in his spray programme are determined as well as the dosage with which the products should be used.

(112) The outcome of these decisions differs substantially among the different Member States and is closely linked to the intensity of cereal farming with yields from six tons/ha or less up to 10 t/ha or more. Related to the intensity is the number of fungicide treatments, ranging from none, as in the whole of Greece, up to three (or four) sprays for wheat and two for barley in the most productive areas. Expressed as expenditure on cereal fungicides per hectare, this goes from EUR 0/ha in Greece up to EUR 68/ha in the Benelux countries and Ireland.

(113) In a triple-treatment programme for wheat, the stem base treatment (T1) would target eyespot and fusarium, the leaf treatment (T2) powdery mildew, septoria and yellow and brown rust, whereas the ear treatment (T3) would be aimed at fusarium and septoria. In some circumstances, a very early spray (T0) is done to target eyespot. In a typical double-treatment programme for barley, the T1 stem and leaf treatment would target eyespot, rhynchosporium and powdery mildew, the T2 leaf/ear treatment net blotch, scald and rust.

Technical strength of the active substances used for cereal crops

(114) Each active substance has a typical activity vis-à-vis a particular disease in a cereal crop, and this will influence the farmer's choice. The activity of a substance relates to the efficacy with which it can prevent and/or cure the disease and the duration of the protection (for curative substances this relates to the maximum period during which the disease is already present in the crop but can still be cured by the fungicide; for protective substances this relates to the maximum period of remaining protection). Other factors that are taken into account are the potential of the product to be mixed by the farmer with other products containing other active substances in his spraying tank.

(115) The active substances currently used as cereal fungicides belong mainly to three different chemical classes. The morpholines are the oldest of these classes, introduced in 1969, and mainly active against powdery mildew and, for this reason, still part of modern mixture products. They have some curative effect. In 1976 active substances of the triazole chemical class were introduced. There are around 15 active substances of this class currently on the market, with some being introduced only in recent years. Their main strength is with septoria, rusts and fusarium. The most recent chemical class, the strobilurins, introduced in 1996 combine a broad spectrum (powdery mildew, rusts, septoria) with yield increase. In addition to these three classes, there are some other active substances, the most important being cyprodinil, the "gold standard" to treat eyespot, and quinoxyfen, the most effective substance against powdery mildew. The following table classifies most active substances according to their efficacy using the following classification (source: ITCF/parties):

XXXX Excellent efficacy - the best active substance for this disease

XXX Good efficacy-important active substance for controlling this disease

XX Some efficacy

X Side effect only

0 No useful efficacy on this disease.

>TABLE>

(116) The active substances shown in bold in the above table are the parties' substances. The first group are the strobilurins together with famoxadone, which is technically not a strobilurin (and also lacks the greening effect found with strobilurins), but which because it has the same mode of action as strobilurins, is governed by the same resistance-management rules. The second group is the morpholines and the third group is the triazoles.

Strobilurin-based cereal fungicides

(117) The strobilurin-based products that are on the market today contain one of three strobilurin active substances. These are BASF's kresoxim methyl (hereafter KM), AstraZeneca's azoxystrobin and Novartis' trifloxystrobin. The first two were introduced in 1996 and 1997. Trifloxystrobin has received registration in the relatively small Norwegian and Belgian markets in 1999 and in March 2000 it obtained registration in the United Kingdom, a major cereal market. It is expected to be registered in France and Germany in 2000.

(118) BASF has introduced KM only in co-formulations with one or two of its active ingredients belonging to other chemical classes. It has three different formulations: one consisting of KM and its triazole epoxiconazole; one with the morpholin fenpropimorph; and one consisting of the three active substances.

(119) AstraZeneca sells azoxystrobin mainly as a straight product under the brand name Amistar. It also has a mixture product with its triazole flutriafol (Amistar Pro) and is introducing in France a mixture with its other triazole hexaconzole (Amistar Ter). Until 1999, AstraZeneca had capacity constraints on its strobilurin products, so that the sales potential of the products could not be fully exploited.

(120) Novartis will launch trifloxystrobin as a straight product (Twist/Flint), but also in mixtures with its strongest triazoles, cyproconazole (Sphere/Dexter) and propiconazole (Rombus/Stratego).

(121) The introduction of strobilurin-based cereal fungicides has had an enormous impact on the cereal fungicide markets. Their spectacular growth and the relative weight of the existing active ingredients can be illustrated by the following table, containing the market share of strobilurin-based products in cereals in France, Germany, United Kingdom, Denmark, Belgium and the Netherlands:

>TABLE>

>TABLE>

(122) The abovementioned countries account for over 90 % of total cereal fungicide consumption in the EEA. It is evident from these figures that BASF's overall share has decreased from [60 to 70]* % in 1997 to [50 to 60]* % in 1999. AstraZeneca has increased its share from [20 to 30]* % to [40 to 50]* %.

(123) As France, Germany and the United Kingdom account for considerably over 90 % of strobilurin-based cereal fungicide use, these will be discussed in more detail below. An overview will also be given for the Nordic markets.

Strobilurin-based cereal fungicides in France

(124) France is by far the largest cereal fungicide market with total strobilurin sales accounting for almost EUR 200 million in 1999, some [40 to 50]* % of total cereal fungicide sales in France. The strobilurin sales were evenly shared between BASF and AstraZeneca. Compared to 1998, AstraZeneca increased its sales with [...]* whereas BASF's sales [BASF business secret]*.

(125) The introduction of the strobilurin-based products in 1997 had an important impact on the French market. After two campaigns (1997 to 1998 and 1998 to 1999), some three-quarters of farmers already use these products. In addition, the influential independent technical institute ITCF recommends strobilurins for all the different regional programmes as it is economically viable for the farmer to include the maximum number of strobilurins in his spraying programme(30) (in a one spray programme, a strobilurin should be included; in a two sprays programme, it should be included twice and in a three-spray programme, it should be included twice(31) as well). As there are currently, on average, 2,25 sprays in France and strobilurins are only used in 0,98 sprays, it can be concluded that there is considerable scope for a further increase in the importance of strobilurins in France.

(126) BASF has, in line with its general European policy, introduced its strobilurin (kresoxim-methyl or KM) only in co-formulations with other active ingredients. In 1997, it has introduced a mixture of KM with its triazole epoxiconazole (generally recognised as the best triazole on the market), sold under the brand names Ogam and Ludion. In 1998, BASF has introduced a mixture of KM with fenpropimorph, a morpholin with good curative activity against powdery mildew to complement KM in the face of resistance issues (brand names Senso and Larso). In 2000, BASF has introduced its three-way mixture of KM, epoxiconazole and fenpropimorph. However, it is not expected that it will lead to a major increase in sales as the tests undertaken by the ITCF give similar results to those of Ogam (KM + EPOXI). It might be used instead of Ogam in the event of severe powdery mildew occurrence. Ogam accounts for almost all sales of KM in France in 1999 and overall, BASF's sales remained stable from 1998 to 1999. Ogam is used in all treatments and to a very large extent without any other tank mixing.

(127) AstraZeneca introduced in 1997 both its straight azoxystrobin product (Amistar) and a mixture with fenpropimorph (Amistar Pro). It introduces in 2000 a third product, Amister Ter, a mixture of azoxystrobin and its triazole hexaconazole. This mixture will only be introduced in France, because hexaconazole is not registered outside Belgium and France. It is expected by the ITCF that this mixture will further increase the penetration of azoxystrobin in view of the curative activity of the triazole, and the test results show superior results to straight azoxystrobin on septoria and the rusts. Total azoxystrobin sales increased by more than [20 to 30]* % in 1999 compared to 1998, and some [60 to 70]* % of AstraZeneca's strobilurin sales are the straight Amistar. Azoxystrobin is mostly used in wheat as a T3 treatment and it sets the "gold standard" for barley. Overall, Amistar is mostly used in tank mixes with other products.

(128) Novartis will introduce its trifloxystrobin products in 2001. It expects sales in this first year to reach [...]*, increasing to [...]* in 2004.

Strobilurin-based cereal fungicides in Germany

(129) In Germany, too, the introduction of the strobilurin in 1996 had a major impact on cereal fungicide competition, with strobilurin-based products accounting in 1999 for about half of the around EUR 240 million total expenditure on cereal fungicides. BASF's strobilurin sales were until 1999 considerably greater than AstraZeneca's sales. However, the rapid development of powdery mildew resistance with the first resistant strains being found in 1998 in northern Germany, and what the market considers to be an inappropriate strategic reaction by BASF, seems to have tarnished BASF's product positioning to the benefit of AstraZeneca. In 1998, BASF sold Juwel (a mixture of KM and epoxiconazole) and recommended its use in T1 and T2. As a reaction to the growth of powdery mildew resistance, in 1999 it withdrew its Juwel product (and withdrew its stocks, a very exceptional course of action in the crop protection business) and replaced it by Juwel Top (three-way mixture of KM + epoxiconazole + fenpropimorph). The product is positioned as a T1-only treatment; for T2 BASF recommends the use of Opus Top (epoxiconazole + fenpropimorph). Juwel Top is considered by leading advisors to be an inappropriate anti-powdery mildew resistance product, as the content of fenpropimorph in the mixture is too low. BASF also promotes a tank mixture of its Juwel Top with Dow's Fortress (quinoxyfen). For the 1999 to 2000 campaign, BASF and Dow have launched a twin pack of Juwel Top and Fortress, called Juwel Forte, that is recommended in T1, while Juwel Top is recommended for T2. This package is considered by an independent expert(32) to reach almost the powdery mildew efficacy of the original Juwel product, but with less residual activity against septoria and rusts. BASF has thus changed its product portfolio and positioning with every annual cycle.

(130) AstraZeneca has had a very consistent approach with Amistar, positioned for all sprays. A particular element for Germany is that tank-mixing recommendations with other products is more prescriptive of dose and that these doses have to be agreed by the two companies. Amistar's recommended partners for T1 wheat is Bayer's tebuconazole (Pronto) prior to 1999 and Pronto Plus (tebuconazole + spiroxamine) for 1999. For T1 barley, the recommended partner is Dupont's Harvesan (flusilazole + carbendazim). In 2000, Amistar is recommended in wheat with Agent (Novartis' propiconazole and fenpropidin mixture) for T1 and with Gladio (Novartis' propiconazole, fenpropidin and tebuconazole mixture) for T2. These mixtures are recommended at lower dosages of fenpropidin than competitors offering fenpropimorph and quinoxyfen products are allowed. The AstraZeneca-Novartis mixtures are thus cheaper than the mixtures that Novartis' competitors (offering fenpropimorph, quinoxyfen) are allowed to recommend for tank-mixing with Amistar. In their Reply, the parties have indicated that the tank-mix recommendation with Pronto Plus is cheaper than that with Gladio. It can be noted that Pronto Plus does not contain fenpropimorph, fenpropidin or quinoxyfen. Moreover, the tank-mix with Agent is cheaper than that with Pronto Plus. For T3, Amistar is recommended on its own.

(131) The total acreage treated with strobilurins has, as a consequence of the resistance issues, decreased in 1999 compared to 1998, an exceptional feature within the European countries. The increase, by around onethird, of the surface area treated with Amistar (from [...]* to [...]* hectares) has not compensated the decline of BASF products from [...]* (including [...]* treated by Jewel in 1998) to [...]* (including [...]* with the new Juwel Top). However, for the first time Amistar accounts for more than [...]*, compared to around [...]* in previous years. Amistar could have been more successful if it had not faced capacity constraints. In total sales, BASF's products are still somewhat more important (as BASF's products are mixture products, they are priced higher than Amistar).

(132) It can be noted that the independently recommended treatments consist typically of one of the Juwel mixtures as T1 and Amistar as T2. The mixing partner changes according to circumstances. This "natural division" will be challenged by Novartis (see recitals 134 to 137).

(133) According to Novartis' marketing plan, its trifloxystrobin products will be introduced in 2001. Sales in that year are estimated to account for [...]*, thus accounting for [10 to 20]* % of the German strobilurin-based cereal fungicide sales.

Strobilurin-based cereal fungicides in the United Kingdom

(134) In the United Kingdom, too, strobilurins, introduced in 1997, had the significant impact on the market that they had in the other major cereal-producing countries (accounting for almost [40 to 50]* % of value in 1999). As powdery mildew resistance is less of a problem in the United Kingdom than in Germany (the anti-resistance strategy of a maximum of two strobilurin treatments remains), the progress of strobilurin usage continues.

(135) There appears to be a "natural division" between the two producers' products, with BASF's products forming part of the first spray and AstraZeneca's Amistar in the later spray. In 1999, BASF had somewhat higher sales than AstraZeneca. [Competitor business secret]*.

(136) A specific feature of the United Kingdom market is that it is the first major market where Novartis' strobilurin, trifloxystrobin, under the brand name Flint is being introduced following registration in March 2000. It is thus the first market where the "natural division" is being challenged by a new market entrant. According to provisional sales estimates, Flint achieved sales of some [...]*. Despite the late introduction, these sales account for an estimated [10 to 20]* % of strobilurin sales. The merged entity can thus be expected to account, in 2000, for over [50 to 60]* % of strobilurin sales.

(137) Based upon its technical profile as a very broad spectrum fungicide with excellent activity on septoria (just as azoxystrobin) combined with mildew activity (contrary to azoxystrobin, but slightly inferior to KM), Novartis endeavours to position [...]*. Overall, Novartis claims that its product [...]*. Another big benefit compared to Amistar, with which it has to rival to provide the best tank-mixing solution (as opposed to KM that is only sold in pre-formulated mixtures), is said to be its increased dose flexibility [...]*. On barley, where Amistar's lead was unrivalled by KM, trifloxystrobin has [...]*. An additional advantage of Novartis' trifloxystrobin is that it will also be offered in pre-formulated mixtures with Novartis' strongest triazoles, cyproconazole and propiconazole.

Strobilurin-based cereal fungicides in the Nordic countries

(138) In Denmark, Sweden and Finland, AstraZeneca accounted in 1999 for over [70 to 80]* % of sales in each of these markets [Competitor business secret]*. As BASF's strobilurin products are not registered in Finland, AstraZeneca has [90 to 100]* % of strobilurin sales in Finland. Novartis expects to register its trifloxystrobin in Sweden and Finland in 2001.

New strobilurin-based products

(139) Following the first patents, the industry quickly recognised the broad spectrum disease coverage of strobilurins in many different crops, so that all R & D based crop protection companies have been or are active in strobilurin research. Whilst the market investigation has enabled the Commission to have a good overview of the current position of each of the major companies in this respect, this information is confidential and can, therefore, not be disclosed as such in the following description. However, it can be concluded that from now until at least 2004 strobilurin products will come only from the merged entity and BASF.

(140) Novartis is gradually introducing its new strobilurin, trifloxystrobin, on the EEA markets.

(141) AstraZeneca, too, has a new strobilurin under development, the first second generation strobilurin. The product's name is picoxystrobin. The product is expected to be launched in [...]*. It is indicated in the investment proposal for picoxystrobin manufacture presented to the AstraZeneca board on 30 September 1999, that [...]*.

(142) Both parties' internal documents indicate that they expect that BASF will [...]* launch in [...]* its second-generation strobilurin, BAS500F. As stated in the previous recital, the technical merits of this compound are less than that of picoxystrobin, with the exception of eyespot. It can be expected, in view of the narrower spectrum of KM and the problems caused by the powdery mildew resistance management, that BASF will position this product to replace its KM product portfolio and, if possible, expand further. [BASF business secret]*.

(143) [...]*

(144) [Competitors' business secrets]* Bayer has a strobilurin in development and expects [Bayer business secret]* first market launches in the year [Bayer business secret]*, thereby confirming the parties' estimate. However, this time horizon is considered too distant for the Commission to take into account for the purpose of assessing the consequences of this operation, in view of the uncertainties related to the outcome of the additional registration data that Bayer will have to collect between now and the year [Bayer business secret]*. The uncertainty is probably best illustrated by reference to the experiences of [...]*. Not much is known about the technical performance of the Bayer substance, but an AstraZeneca estimate shows that the substance will not be better than picoxystrobin. [Bayer business secret]*.

(145) Bayer has entered into a [...]* supply agreement for [...]* azoxystrobin with AstraZeneca to develop a mixture with its spiroxamine active substance. The territories would be limited to [...]* and Bayer will be the [...]* distributor of the product. The product has been registered in Sweden since February 2000. [Bayer business secret]*.

(146) The parties have also referred to the launch of products that, whilst technically not strobilurins, have the same mode of action as strobilurins. It relates to the substances famoxadone from Dupont and fenamidone from Aventis. However, it appears from the public documents submitted by the parties that fenamidone is not active on cereals (its uses being downy mildew on grapes and vegetables and late blight on tomatoes). Furthermore, AstraZeneca internal testing results and the ITCF classification indicate that famoxadone has at most weak to average results in cereal diseases. This is also explicitly confirmed by internal AstraZeneca documents(33) and finds confirmation in the low sales results of the product in the markets where it has been launched.

Strobilurin sales forecasts

(147) Novartis' marketing plan foresees steadily increasing sales of its strobilurins. With sales in 2000 in Belgium and the United Kingdom of [...]* up to sales in 2003 for a total of [...]*. These EEA sales projections for 2003 are estimated to account for [10 to 20]* % of total cereal fungicide sales.

(148) Probably the highest-level overview of the parties' expected future market share in Europe in cereals comes from the document of September 1999 by which AstraZeneca's board was requested to agree to a picoxystrobin investment. Translating the data in this document into strobilurin-based cereal fungicides gives the following table:

[table based on internal AZ document]*

>TABLE>

(149) The above overview gives the merged entity a combined share of above [ >50]* % of strobilurin-based products. It may be noted that a competitor foresees similar market shares for the merged entity for 2003. Furthermore, most competitors expect that, instead of a penetration rate of [...]* strobilurin-based products will account for some 60 to 70 % of total sales.

(150) The following table provides the forecast of future market shares of the merged entity(34) and BASF, the only companies offering these products up to 2004 (at least), for the EEA and for each of France, Germany and the United Kingdom for the years 2000 to 2004. The forecast is based on the companies' projected sales.

>TABLE>

(151) On the basis of the sales forecasts of each of AstraZeneca, Novartis and BASF as summarised in the above table, it is plain that the merged entity would be the clear market leader in the EEA as a whole, France, the United Kingdom and Germany(35) with sales accounting for more than [ >50]* % in the years to come in the EEA, France and the United Kingdom.

(152) A substantial number of the respondents in the market investigation have expressed concerns as to the future market position of the new entity in the domain of strobilurin-based cereal fungicides. All comments point to the fact that the already strong position of the parties in strobilurins in terms of market shares will be cemented by Syngentas opportunitities for mixing and bundling its strong strobilurins with its strong non-strobilurin-based fungicides. To further develop this argument, it is necessary to consider first the overall market context of the cereal fungicides markets.

Overall cereal fungicides markets

EEA Market Shares

(153) In 1998, the global fungicide markets were worth about EUR 5 billion, and [40 to 50]* % of this market was in Europe (EUR 2134 million). Fungicide applications in cereals represent [40 to 50]* % of the total European fungicide market with a value of EUR 934 million (875 million according to the parties) and some [10 to 20]* % of total crop protection expenditure in Europe. Cereal fungicides and cereal herbicides (EUR 943 million) are by far the most important crop protection markets.

(154) For cereal fungicides in the EEA, the parties estimate that, in 1998, they commanded a combined market share of [30 to 40]* % (N [10 to 20]* % + AZ [10 to 20]* %) with sales of EUR [...]*. BASF had [30 to 40]* % (sales of EUR [...]*). Bayer, with sales of EUR [...]*, would be the third player with [5 to 10]* %. Other competitors were Aventis with EEA sales of EUR [...]* giving it a [5 to 10]* % market share and DuPont with EEA sales of EUR [...]* giving it a [0 to 5]* % market share. The Commission's market investigation broadly confirms this estimate. The main difference is that Syngenta and BASF realised similar sales [Competitors' business secrets]*.

(155) For 1999, the EEA sales remained stable. From the information available to the Commission, it seems that all companies except AstraZeneca and Bayer have lost sales. BASF has lost some sales. Novartis has lost some [10 to 20]* % of its sales. However, the increase in sales by AstraZeneca (more than [20 to 30]* %) means that the merged entity market's lead is further increased. The merged entity has a [30 to 40]* % market share (N [10 to 20]* % + AZ [20 to 30]* %). BASF has [30 to 40]* %. Bayer has [5 to 10]* %, followed by Aventis [5 to 10]* % and the others each less than [0 to 5]* %.

(156) The three most important national cereal fungicide markets are France, Germany and the United Kingdom. They account for almost 90 % of total cereal fungicide sales in the EEA. These markets are the best documented and will be described in recitals 157 to 173. In addition to these three national markets, a short description will also be given of the Nordic markets, where the concentration is considered to lead to the creation of a dominant position.

The French cereal fungicide market

Market share figures

(157) As indicated above, France is by far the largest cereal fungicide market. This is shown by the large cereal acreage of around 7,5 million hectare, of which 5,2 are wheat and 1,6 barley, and one of the most intensive uses of fungicides, with around EUR 49/ha. Only in the smaller Benelux and Irish market is there a more intensive use of cereal fungicides (around 68 EUR/ha). This overall figure for France hides some considerable regional differences. In the South of France, only one to two sprays are used, whereas in the north three sprays are the norm with sometimes even an additional early "eyespot" treatment.

(158) The parties estimate that in 1998 total sales were some EUR [...]*. According to their estimate, they have a combined market share of [30 to 40]* % (N [20 to 30]* % + AZ [10 to 20]* %), BASF has [30 to 40]* %, Aventis [5 to 10]* %, Bayer [5 to 10]* % and DuPont [0 to 5]* %. The Commission's market investigation, based on the replies of the above companies as well as Dow and American Cyanamid, indicates that estimated sales of the responding companies are slightly above the parties' estimate for the total market. On the basis of the market investigation, the market shares of Syngenta and BASF would be somewhat higher, but the percentage difference remains broadly the same. It also appears that the respective sales of N and AZ are more even than suggested by the parties' estimate. The market shares of the other companies are broadly confirmed. - Syngenta would appear to have [40 to 50]* % (N [20 to 30]* % + AZ [20 to 30]* %), followed by BASF with [30 to 40]* %. Bayer has [5 to 10]* %, Aventis [5 to 10]* %, Cyanamid and Dupont [0 to 5]* % and Dow [0 to 5]* %.

(159) The 1999 French market grew by [0 to 5]* % compared to 1999. Novartis has suffered a loss of sales accounting for some [0 to 5]* % market share. However, this loss has been almost totally offset by the increase in sales of AstraZeneca. BASF's sales have remained stable compared to 1999. Of the other companies, DuPont's sales have decreased substantially. Syngenta would have [30 to 40]* % (N[10 to 20]* % + AZ [20 to 30]* %). BASF has [30 to 40]* %. Bayer has [10 to 20]* %, Aventis [5 to 10]* %, Cyanamid [0 to 5]* %, Dupont [0 to 5]* % and Dow [0 to 5]* %.

Products and companies

(160) With regard to the continuously growing importance of the strobilurins, reference is made to the recitals 124 to 128 dealing with strobilurin-based ce