COMMISSION DECISION of 26/04/1999 declaring a concentration to be compatible with the common market (Case No IV/M.1481 - DENSO / MAGNETI MARELLI) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

Brussels, 26/04/1999

To the notifying party

Dear Sirs,

Subject: Case No IV/M.1481 - DENSO/Magneti Marelli

Notification of 19.03.1999 pursuant to Article 4 of Council Regulation No 4064/89

1. On 19/3/1999 the Japanese Company DENSO notified an operation by which it will acquire 80 % of the Italian undertaking Magneti Marelli Manufacturing. This operation constitutes a concentration within the meaning of Article 3(1) (b) of Council Regulation (EEC) No 4064/89.

2. After the examination of the notification, the Commission has concluded that the notified operation falls within the scope of application of Council Regulation (EEC) No 4064/89 but does not raise serious doubts as to its compatibility with the common market and the functioning of the EEA Agreement.

I. THE PARTIES AND THE OPERATION

3. DENSO Corporation (hereafter referred to as DENSO") is mainly active in the automobile related business, where it is engaged in the research and development, production and quality control of automobile components and automotive parts. Furthermore, DENSO is also active in the transportation equipment business, the development of intelligent transport systems, mobile communications products, environmental systems, and information processing devices and factory automation products.

4. Magneti Marelli Manufacturing S.p.A. is a subsidiary of Magneti Marelli S.p.A. (hereafter referred to as Magneti Marelli") which in turn is a 60% subsidiary of Fiat and a producer of a wide range of automotive parts and electric components.

5. According to the Acquisition Agreement concluded between DENSO and Magneti Marelli on 11 March 1999 DENSO shall acquire through its wholly owned subsidiary DENSO Holdings Italia S.r.L. a controlling interest of 80% of the capital stock of Magneti Marelli Manufacturing (MMM) (1), which will include the newly incorporated limited liability companies located in the United Kingdom, Poland and Brazil. Magneti Marelli will continue to own 20% of MMM and will nominate one director to the board. DENSO, controlling both the shareholders meeting and the board of directors, shall determine the commercial policy and strategy of MMM. Magneti Marelli will be having the rights usually granted to a minority shareholder in order to protect its financial interests as an investor. [ ]. DENSO according to the Shareholders Agreement will exercise sole control over MMM. The concentration can be regarded as a concentration in the meaning of Article 3 (1) (b) of the Council Regulation No. 4064/89.

(1) [ ]

III. COMMUNITY DIMENSION

6. The combined aggregate worldwide turnover of the undertakings concerned exceeds 5 billion EUR (DENSO 11,36 billion EUR; Magneti Marelli Manufacturing 328,7 million EUR). Both parties have a Community-wide turnover, which exceeds 250 million EUR (DENSO [ ] million EUR; Magneti Marelli Manufacturing [ ] million EUR). None of the parties to the merger achieves more than two thirds of its aggregate Community-wide turnover in one and the same Member State. Therefore, the operation has a Community dimension. It does not constitute a co-operation case under the EEA-Agreement, pursuant to Article 57 of that Agreement.

IV. COMPATIBILITY WITH THE COMMON MARKET

Relevant product markets

7. The parties have overlapping activities on the following markets:

1) starters,

2) alternators,

3) windscreen wiper motors,

4) air conditioning fan motors and

5) radiator fan motors.

At the moment DENSO has no production facilities in Europe but is importing components basically produced in Japan. Magneti Marelli is operating factories in Italy, Poland, Great Britain and Brasilia.

Relevant geographical markets

8. In previous decisions (2) the Commission concluded that the relevant geographic market for the products mentioned in para. 7 is at least the EEA. This definition is based on the following reasons: transportation costs within the EEA are not significant, there are no obstacles to intra-EEA trade, prices are similar throughout Europe, given that OEM/OES sales are usually made to the European production sites of the automobile manufacturers, suppliers tend to serve the entire EEA from only a few plants located within the EEA, there is extensive inter-state trade and similar conditions of competition apply throughout the EEA, suppliers tend to treat the EEA as a distinct product market in planning their production, sales and marketing activities and imports from outside the EEA represent only a small percentage of trade.

(2) For example, Case IV/M.768 Lucas Varity, Case IV/M.139 Viag/EB Brühl, Case IV/M.536 Torrington/NSK, Case IV/M.666 Johnson Controls/Roth Freres

9. In the present case, however, the final definition of the geographical market can be left open since the concentration does not impede effective competition on any alternative geographical market examined.

V. ASSESSMENT

10. In none of the markets concerned the parties achieve combined market shares exceeding 15%. In alternators the parties' combined shares amount to [10-20] %, the increment being [5-15]. The parties' main competitors, Bosch and Valeo, have shares of [40-50]% and [20-30]% respectively.

11. On all other markets concerned DENSO and Magneti Marelli have combined market-shares below 10%. In starters DENSO and Magneti Marelli achieve combined shares (3) of [