COMMISSION DECISION of 29/10/1999 declaring a concentration to be compatible with the common market (Case No IV/M.1687 - ADECCO /OLSTEN) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

Brussels, 29.10.1999

SG (99) D/8683

To the notifying party

Dear Sirs

Subject: Case No IV/M. 1687 - ADECCO/OLSTEN

Notification of 28 September 1999 pursuant to Article 4 of Council Regulation No 4064/89.

1. On 28 September 1999 Adecco SA notified an operation by which it will acquire sole control of Olsten Corporation.

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

I. THE PARTIES AND THE OPERATION

3. Adecco is a Swiss company, primarily engaged in the supply of temporary staff to businesses through employment agencies. Olsten is a US-domiciled company primarily engaged in similar activities. Adecco will acquire the whole of the business of Olsten (except for its health services business, which will be divested before completion) via the merger of Olsten into a specially created subsidiary.

II. CONCENTRATION AND COMMUNITY DIMENSION

4. Adecco will acquire sole control of Olsten, giving rise to a concentration under Article 3(1) of the Merger Regulation. The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 billion [1], Adecco EUR 10,332 million and Olsten EUR 4,105 million. Each of them has Community-wide turnover in excess of EUR 250 million (Adecco EUR 6,190 million and Olsten EUR 834 million) and they do not achieve more than two-thirds of their aggregate Community-wide turnover within one and the same Member State.

[1] 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.

III. COMPETITIVE ASSESSMENT

5. Relevant Product Markets. The parties' activities overlap principally in the supply of temporary and permanent employment services, throughout the EEA. Previous cases in this sector [2] have identified a separate product market for each of these, mainly on the grounds of a lack of demand-side substitutability. No indications to the contrary have been found in the present case.

[2] Eg, IV/M 765 Addia/Ecco, IV/M 879 Vedior/Bis, IV/M 1476 Adecco/Delphi and IV/M 1702 Vedior/Select.

6. Relevant Geographic Markets. The previous cases referred to above identified relevant geographic markets as no wider than national, principally on grounds of the differing legal regimes for employment in Member States. No indications to the contrary have been found in the present case.

7. Assessment. In permanent employment services the combined share would be insignificant at either EEA or national levels. In temporary employment services, the operation adds some 2% to Adecco's current share of c.15% in the EEA. Nationally, the parties would achieve combined market shares of 15% or more in Denmark (33.6%, increment 16.1%), France (32.7%, increment 3.2%), Norway (26.6%, increment 2.4%) and Spain (30.2%, increment 1.4%) [3]. Shares on a narrower basis (eg distinguishing specialist staff such as accountancy, IT, etc from general office staff) would not, on the information available, be significantly larger. In all these countries, there are several substantial actual and potential competitors, such as Manpower, Randstad, and Vedior, as well as a number of smaller ones. Entry appears to be relatively easy. The main resources required are understood to be suitable office accommodation in population centres, IT systems for recording and matching staff profiles, payroll etc, and appropriately qualified and experienced supervisory and sales staff. Accordingly, the notified operation does not create or strengthen a dominant position as a result of which competition would be significantly impeded in the common market or a substantial part of it.

[3] All data parties' estimates from Form CO, 1998 by value.

IV. ANCILLARY RESTRAINTS

8. Adecco asks that the following matters be covered by this decision as restrictions ancillary to the concentration, on the grounds that they are directly related and necessary to it (Article 6(1)(b) Merger Regulation). It has entered into agreements with five senior executives of Olsten under which the executives will provide Adecco with consultancy services associated with implementing the merger, for a period of five years from completion. The relevant provisions require, in summary, that the executives will not, for a period of four years from completion (in the case of one of them, five years) accept employment or office in, solicit employees from, or supply services to any competing business in any of the countries in which the Adecco group operates. The executives are also required not to disclose, without Adecco's prior approval, any confidential information concerning Adecco. Adecco considers these restrictions to be directly related to the notified operation, and necessary to it in order to preserve the value of the business - in which 'know how' and 'goodwill' are very important. In particular, it considers their duration to be appropriate in view of the executives' continuing relationship with Adecco as consultants for that period. The Commission accepts these arguments and accordingly agrees to Adecco's request in respect of these provisions, to the extent that they could be in breach of the prohibition established in Article 81 paragraph 1 of the Treaty.

V. CONCLUSION

9. 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,