Commission Decision of 04/04/2002 declaring a concentration to be compatible with the common market (Case No IV/M.2740 - SCOTTISH & NEWCASTLE / HARTWALL) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

Brussels, 04.04.2002

SG (2002) D/229217

To the notifying party:

Dear Sir/Madam,

Subject: Case No COMP/M.2740 - SCOTTISH & NEWCASTLE/HARTWALL Notification of 01-03-2002 pursuant to Article 4 of Council Regulation No 4064/89 [1]

[1] OJ L 395, 30.12.1989 p. 1; corrigendum OJ L 257 of 21.9.1990, p. 13; Regulation as last amended by Regulation (EC) No 1310/97 (OJ L 180, 9. 7. 1997, p. 1, corrigendum OJ L 40, 13.2.1998, p. 17).

1. On 01.03.2002, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EEC) No 4064/89 ("the Merger Regulation"), whereby Scottish & Newcastle plc ("S&N"), the United Kingdom, intends to acquire within the meaning of Article 3(1)(b) of the Merger Regulation sole control of the Finnish company Oyj Hartwall Abp ("Hartwall").

2. After examination of the notification, the Commission has concluded that the notified operation falls within the scope of the Merger Regulation and does not raise serious doubts as to its compatibility with the common market and the functioning of the EEA Agreement.

I. THE PARTIES

3. S&N is a public limited company registered in Scotland and listed on the London Stock Exchange. It is the holding company of the S&N Group.

4. The activities of the S&N Group are as follows. S&N brews beer and wholesales beer and other beverages in the UK, Republic of Ireland, France and Belgium. It also has joint control over the Portuguese brewer Centralcer with brewing and wholesaling activities in Portugal. The activities in France, Belgium and Portugal were acquired in 2000 and involved two transactions cleared by the Commission under the EC Merger Regulation. [2] In addition, S&N brews and distributes other major brands under licence from non-UK brewers. It also operates pubs, restaurants and lodges in the UK.

[2] Case No. COMP/M.1925 - S&N/ Groupe Danone; and COMP/M.2152 - S&N/JV/Centralcer.

5. Hartwall is the parent company of the Hartwall Group, which consists of a number of wholly owned subsidiaries and a 50% stake in the Swedish joint venture company, Baltic Beverages Holding AB ("BBH"). Carlsberg holds the remaining 50%. BBH is active in the manufacturing and wholesaling of beer and soft drinks in Russia, Ukraine, Lithuania, Latvia and Estonia. It is the market leader in Russia and the Baltic States, and ranks third in Ukraine. In also owns malt houses in Russia, Lithuania and Ukraine.

6. The Hartwall Group is active in the manufacture and wholesaling of alcoholic beverages, including beer, cider and "long drinks" (mixed beverages with low alcohol levels), mineral water and soft drinks in Finland. All Hartwall's brewing operations are based in Finland. Whilst Finland is Hartwall's principal market, the Group exports alcoholic beverages and soft drinks to other EU and Eastern European countries.

II. THE OPERATION AND THE CONCENTRATION

7. The notified operation consists of the acquisition by S&N of sole control of the whole of Hartwall. The operation therefore constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

III. COMMUNITY DIMENSION

8. The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 billion (S&N EUR [...] million and Hartwall EUR [...] million) [3]. Each of S&N and Hartwall have a Community-wide turnover in excess of EUR 250 million (S&N EUR [...] million and Hartwall EUR [...] million), but they do not achieve more than two-thirds of their aggregate Community-wide turnover within one and the same Member State. The notified operation therefore has a Community dimension.

[3] Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission Notice on the calculation of turnover (OJ C66, 2.3.1998, p25). To the extent that figures include turnover for the period before 1.1.1999, they are calculated on the basis of average ECU exchange rates and translated into EUR on a one-for-one basis.

IV. COMPATIBILITY WITH THE COMMON MARKET

A. Relevant Markets

Relevant Product Markets

9. As S&N has no cider, "long drinks", soft drinks or mineral water businesses, the interesting product market in this case is the market for the supply of beer. In Orkla/Volvo, [4] the Commission held beer was a separate market from wine and carbonated soft drinks. There appears to be no reasons in this particular case to deviate from the Commission's previous practice. Furthermore, in Stergio Delimitis, [5] the European Court of Justice ("ECJ") held that, as far as beer sale and consumption are concerned, the "off-trade" sector and the "On-trade" or "Horeca" channels constitute separate product markets.

[4] Case IV/M.582.

[5] Case C-234/89, Stergio Delimitis v Henninger Braü AG, Judgement of the Court of February 28, 1991.

10. Both S&N and Hartwall are active at different stages of the chain of supply, namely brewing, wholesaling and the retail of beer. The parties propose to distinguish between on-trade (e.g. pubs and "Horeca") and off-trade (e.g. off-licences and supermarkets). This is in line with the Stergio Delimitis decision (see above). For the purposes of this decision it is not necessary to examine whether this distinction applies, as the analysis would be substantially the same under each of the alternative definitions.

Relevant Geographic Markets

11. The parties indicate that the geographic market is national for the supply of beer and refers to the Decision in Stergio Delimitis by the ECJ. In previous decisions the Commission has supported national geographic markets for the supply of beer in reference to the fact that consumer preferences still vary considerably between different Member States and the fact that there are still relatively few brands that have a significant presence in more than one Member State. For the purposes of this case it appears to be no reasons to deviate from the Commission's previous practice.

B. Assessment

12. The parties' businesses are complementary and there are no substantial overlaps. The only national markets where the parties' combined market share exceeds a 25% market share are in Finland [40-50]% (S&N [<0.1%] and Hartwall [40-50]%), France [40-50]% (S&N [40-50]% and Hartwall [<0.1%]), Portugal [30-40]% (S&N [30-40]% and Hartwall 0%) and the UK [20-30]% (S&N [20-30]% and Hartwall [<0.1]%). As this shows, even in the markets where there are overlaps, the size of these overlaps is nowhere greater than 0.1%. Even if one were to separate the "off-trade" sector and the "On-trade" or "Horeca" channels the market share addition would still be minimal. Furthermore, there are no reasons to consider that absent the concentration either S&N or Hartwall would have been in a position to exert particular competitive pressure on the other party through the threat of potential entry into these markets where there are overlaps.

V. CONCLUSION

13. For the above reasons, the Commission has decided not to oppose the notified operation and to declare it compatible with the common market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of Council Regulation (EEC) No 4064/89.

For the Commission