COMMISSION DECISION of 20/12/1999 declaring a concentration to be compatible with the common market (Case No IV/M.29 - LAFARGE / READYMIX) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

Brussels, 20/12/1999

To the notifying parties

Dear Sirs,

Subject: Case No COMP/JV.29 - Lafarge / Readymix

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

1. On 22/11/1999, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EEC) N°4064/89 [1] (Merger Regulation) by which Lafarge Beton GmbH ("LBG") and Readymix Beton Rhein-Ruhr GmbH ("RBRRG") acquire, within the meaning of Article 3(1)(b) of the Merger Regulation, joint control of the newly created company Lafarge Beton Rheinland GmbH & Co KG with Lafarge Beton Rheinland Verwaltungs GmbH as sole unlimited partner. LBG and RBRRG have each taken 50 % of the statutory capital of the unlimited partner and 50 % of the partnership shares of the limited partnership, both constituting joint ventures.

[1] O.J. L 395 of 30 December 1989, p.1; corrected version O.J. L 257 of 21.9.1990, p.13; as last amended by Regulation (EC) No. 1310/97, O.J. L 180 of 9.7.1997, p.1; corrigendum in O.J. L 40 of 13.2.1998, p.17.

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 doubt as to its compatibility with the Common Market.

I. THE PARTIES

3. LBG belongs to the French Lafarge Group which is active in the production and sale of building materials, in particular cement and ready-mixed concrete.

4. RBRRG is the German subsidiary of the British Readymix Group which is also active in the production and sale of building materials such as cement, ready-mixed concrete and asphalt.

5. RBRRG will transfer to the newly created joint venture Lafarge Beton Rheinland GmbH & Co KG six production facilities for ready-mixed concrete. These production facilities are located in the Rhine-Ruhr region, i.e. roughly around Cologne/Düsseldorf. RBRRG and LBG will each hold a 50 % share in the new company.

II. CONCENTRATION

6. RBRRG and LBG will each hold a 50 % share in the newly created company Lafarge Beton Rheinland GmbH & Co KG. Since decisions regarding the strategical behaviour of the joint venture require a common understanding of the parent companies, they will have joint control of it.

7. Since the newly created company Lafarge Beton Rheinland GmbH & Co KG will have at its disposal the necessary personnel and other means to carry out its business, it will perform on a lasting basis all the functions of an autonomous economic entity.

8. The operation thus constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

III. COMMUNITY DIMENSION

9. Lafarge Beton GmbH (including Lafarge Group) and Readymix Beton Rhein-Ruhr GmbH (including Readymix Group) have a combined aggregate worldwide turnover [2] in excess of EUR 5,000 million (Lafarge 9,802 million and Readymix 6,615 million). Each of them has a Community-wide turnover in excess of EUR 250 million (Lafarge 5,309 million and Readymix 5,130 million) and achieves neither more than two thirds of its aggregate Community-wide turnover in one and the same Member State. Therefore the operation has a Community dimension.

[2] 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. THE RELEVANT MARKETS

A. " Relevant product market

10. The notified operation affects the ready-mixed concrete market.

11. Concrete is produced by mixing cement with aggregate and water. It can be mixed at a specific concrete plant ("ready-mixed concrete") and subsequently transported to the point of use in specific vehicles ("mixer trucks").

12. Ready-mixed concrete is sold and delivered in a semi-wet form. It consists of cement (15 %, aggregates 85 %) together with water and additives. The product is used as a base for on-site moulded concrete constructions.

Ready-mixed concrete is perishable and is normally delivered in large volumes by mixer-trucks.

13. The users of ready-mixed concrete are essentially building contractors, utilities and public authorities. In Cases No. IV/M.460 - Holdercim/Cedest, No. IV/M.1030 - Lafarge/Redland and N° IV/M.1157 Skanska/Scancem, the Commission has assessed that ready-mixed concrete market constitutes a relevant product market. Since no contrary indications have been supplied to the Commission in the present case, it is considered, for the purpose of this assessment, that ready-mixed concrete constitutes the relevant product market.

B. " Relevant geographic market

14. As regards the geographical dimension of the market, the Commission has found in previous cases that from an economic viewpoint the market for ready-mixed concrete is normally local in scope. This is due to the fact that ready-mixed concrete perishes when beeing transported for more than about one hour. However, in certain countries, these local markets could also be assessed at national level when, in particular, the local areas overlap to such an extent as to leading to equivalent conditions of competition throughout the entire country. In the Skanska/Scancem case the exact scope of the relevant geographic market was not finally defined. In the absence of such overlaps, the Commission has assessed that the geographic scope of ready-mixed concrete is local (Case Lafarge/Redland). In the German area, where the newly created joint venture will be active, overlaps seem to occur only within the Rhine-Ruhr area. Therefore, in the absence of other particular indications, the geographic market may be seen as a set of markets centered around the six factories to be transferred to the joint venture and covering all the Rhine-Ruhr area.

It can be left open, however, if the geographic markets, in the present case, only comprise the catchment areas around each of the six production facilities of the joint venture, or whether one geographic market comprising the entire Rhine-Ruhr area is relevant. Since the Lafarge Group has no ready-mixed concrete activities in the Western part of Germany, the competitive assessment remains the same on each of the possible geographic markets.

V. COMPETITIVE ASSESSMENT

A. " Dominance

15. Only the Readymix Group is presently active on its own in any possible local relevant market for ready-mixed concrete in the West part of Germany. In particular, the Readymix Group has a market share of 19 % in the Rhine-Ruhr area. The six Readymix production facilities to be transferred to the new joint venture represents approximately 4,5% of the ready-mixed concrete market in the Rhine-Ruhr area.

16. In view of the market position of the parties to the concentration, and in particular of the fact that there is no overlap between the activities of the parent companies in the joint venture relevant market, it appears that the notified operation will not create or strengthen a dominant position in the relevant geographic market. Consequently, for the needs of the present case, the question of knowing if each of the possible concerned geographic areas constitute a substantial part of the common market can be left open.

B. " Co-ordination of competitive behaviour

17. Pursuant to Article 2(4) of Merger Regulation a joint venture having as its object or effect the co-ordination of the competitive behaviour of undertakings that remain independent has to be appraised in accordance with the criteria of Article 81(1) and 81(3) of the EC Treaty. In order to establish a restriction of competition in the meaning of Article 81(1), it is necessary that the co-ordination of the parent companies' competitive behaviour is likely and appreciable and that it results from the creation of the joint venture, be it as its object or its effect.

18. According to Article 2 (4) (2) of the Merger Regulation, the Commission shall, when making the said appraisal, take in to account in particular whether two or more parent companies retain to a significant extent activities in the same market as the joint venture or in a market which is downstream or upstream from that of the joint venture or in a neighbouring market closely related to the relevant market. Therefore candidate markets for co-ordination are those on which the joint venture and at least two parent companies are active or on an upstream, downstream or closely related neighbouring market where at least two parent companies remain active.

19. In view of the fact that only one parent of the proposed joint venture is presently active on its own in the possible local relevant markets for ready-mixed concrete (while both Groups -Lafarge and Readymix- are active in East German market(s) for ready-mixed concrete), it appears that the notified operation has not as its object or effect the coordination of the competitive behaviour of the parents on the local relevant market for ready-mixed concrete.

20. Moreover, it appears that the notified operation has not as its object or effect the coordination of the competitive behaviour of the parent companies in the upstream cement market, where both remain active, because of the different geographic dimension of the joint venture ready-mixed concrete market or markets (in any case local) and of the market for cement (regional/national with overlaps that may cover the whole of Europe as assessed by the Commission in Cases IV/ 33.126 and 33.322-Cement and Case IV/M.1157-Skanska/Scancem). Finally, from an economic point of view, it seems unlikely that a concrete ready-mixed joint venture active in a local market will lead the parent companies to pursue a behaviour in their principal cement business contrary to European competition law. In fact it has to be noted, in particular, that both parent companies will need numerous other channels to sell their cement production and that, in any case, the possible effects of the new joint venture in the wider cement market will be not appreciable.

VI. CONCLUSION

21. In the light of the above, the setting up of the notified joint venture does not raise serious doubts as to its compatibility with the Common market.

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

For the Commission,

(Signed by)

David BYRNE

Member of the Commission