WRITTEN QUESTION E-2924/96 by Cristiana Muscardini (NI), Guido Podestà (UPE), Carlo Secchi (PPE) and Gastone Parigi (NI) to the Commission (8 November 1996)

Subject: Dominant position on the European fertilizer market

The Italian company Enichem, belonging to the ENI group, has put its agriculture division up for sale. It is Italy's leading producer of fertilizers and is to be purchased by a Norwegian multi-national.

Can the Commission say whether it gave it approval for this transaction? If so, can it say:

1. whether it is true that the non-Community multi-national purchasing the company would then hold 90% of the European market in nitrates and 100% of the Italian market?

2. whether it knows about an anti-competition clause in the contract of sale, according to which for five years no company in the ENI group will be allowed to sell fertilizers or ammonia (a raw material for nitrogenous fertilizers)?

3. whether it does not consider that since the fertilizer sector has been given over to the largest producer in Europe a de facto monopoly has been created in Italy (who will control prices?) and a dominant position in the same sector in Europe?

4. whether it has assessed the consequences for Italian farmers and producers of urea glues, since being subject to a monopoly situation in their own country, they would be dependent on extra-Community decisions for their production needs and would be generously helping to increase the profits of Norwegian monopolists?

Answer given by Mr Van Miert on behalf of the Commission (12 December 1996)

The Commission has examined the sale by Enichem of its agriculture division on two occasions recently.

Enichem first announced the sale to Norsk Hydro of its plants in Ferrara, Ravenna and Barletta, which produce nitrogenous fertilizers in various forms. This initial sale was vetted by the Commission in the light of the rules set out in Council Regulation (EEC) No 4064/89 on the control of concentrations between undertakings. ((OJ L 395, 30.12.1989. )) The Commission concluded its analysis with a decision that the sale was compatible with the common market.

The decision in question is dated 29 June 1996. The sale was declared compatible with the common market because the Commission concluded that the resulting merger would neither create nor strengthen a dominant position for Norsk Hydro in the common market.

Enichem subsequently announced the sale, also to Norsk Hydro, of another plant belonging to its agriculture division that was located at Terni. The Commission completed an investigation into this second sale and decided on 25 October 1996 that it was compatible with the common market.

The points raised by the Honourable Members in connection with Hydro's market position resulting from the aforementioned acquisitions are the same as those examined by the Commission when the two cases were investigated. The Commission considers that it has provided appropriate answers to these points.

In particular, when the Commission vets mergers, it is obliged to determine whether they may result in the creation or strengthening of a dominant position in the common market. The investigations conducted by the Commission led it to conclude that there was no question of such a dominant position being created or strengthened. The specific grounds underlying the Commission's conclusion are set out in the decision of 29 June 1996. The Commission is sending copies of the public version of the decision direct to the Honourable Members and to Parliament's Secretariat.

Consequently, it is not correct to state that Norsk Hydro would hold 90% of the European market in nitrates and 100% of the Italian market. The Commission's analysis led it to conclude that Norsk Hydro would not obtain these market shares. The Commission also took the view that Italy could not be considered a separate market. Accordingly, the shares held by Norsk Hydro as a result of the two acquisitions, together with the assessment of the impact of these acquisitions on the market, led the Commission to rule out the possibility of Italian farmers and producers of urea glues being subjected to consequences that were specific to certain typical monopoly situations.

The anti-competition clause in the contracts of sale was assessed by the Commission and deemed to be complementary and ancillary to the sale transactions. It is standard practice for the Commission (this practice being confirmed by the Court of Justice) to take the view that the anti-competition obligations incumbent on the seller in respect of the products forming the object of the sale must be justified and strictly limited to the sale transaction. These clauses are designed to protect the acquirer (Norsk Hydro in this instance) from any competition on the part of the seller for a certain period deemed necessary to guarantee the transfer to the acquirer of the full value of the assets transferred (a five-year period can be considered acceptable in this sector). This anti-competition clause applies solely to Enichem (this company being the direct seller) and does not concern the whole of the ENI group.