Notice pursuant to Article 19 (3) of Chapter II of Protocol 4 to the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice concerning case COM 020.0018 - Holmsund Golv AB (94/C 398/03)

A. THE APPLICATION AND NOTIFICATION

1. The EFTA Surveillance Authority received on 30 June 1994 an application pursuant to Article 2 and a notification pursuant to Article 4 of Chapter II of Protocol 4 in the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice (SAC-A), concerning two agreements on the distribution of certain floor covering plastic products between Holmsund Golv AB (Holmsund) and Armstrong World Industries Ltd (Armstrong UK). A joint product development agreement between Holmsund and Golv-Gripen AB (Golv-Gripen) on the one hand and Armstrong World Industries Inc. (Armstrong USA) on the other was also notified.

B. THE PARTIES

2. Holmsund and Golv-Gripen are both joint-stock companies incorporated in Sweden and belonging to the Swedish Skåne-Gripen AB Group (Skåne-Gripen). Armstrong UK is incorporated in the United Kingdom. Armstrong USA is a Pennsylvania corporation from the United States of America. All these companies have manufacturing activities in the floors field.

3. Golv-Gripen is also the parent company of Leksells Golv AB, which is a carpet wholesale company and AB Gustaf Kähr, which manufactures parquet floors. Skåne-Gripen is a listed company quoted at the Stockholm Stock Exchange. Its a largest shareholder on 31 December 1993, was Investment AB Cardo that held 32,6 % of the votes and 15,4 % of the equity. The majority of the votes and the equity is spread among small private investors.

4. Armstrong UK is a wholly owned subsidiary of Armstrong USA, which is listed at the New York Stock Exchange. The EFTA Surveillance Authority lacks information on the ownership structure of the Armstrong Group.

5. The aggregated turnover of Skåne-Gripen is SKr 4 748 million. The EFTA Surveillance Authority lacks information on the world-wide turnover of the entire Armstrong Group.

C. THE AGREEMENTS

6. By a distributorship agreement entered into on 14 April 1994, Holmsund appoints Armstrong UK to be its exclusive distributor in the entire world, except for Denmark, Finland, Norway and Sweden. In Denmark and Finland, Armstrong UK is appointed exclusive agent.

7. This agreement between Holmsund and Armstrong UK concerns resident carpets. It is valid until 31 December 1996, whereafter automatic prolongations for successive periods of two years each are provided for.

8. By a distributorship agreement into on 11 May 1994 Armstrong UK appoints Holmsund to its exclusive distributor for consumer carpets in Sweden.

9. By an additional 'letter settlement` referred to in the first agreement and entered into on 12 April 1994 and as for France on 11 May 1994, Armstrong UK is appointed Holmsund's non-exclusive agent in Norway, its non-exclusive distributor in the United Kingdom and its exclusive distributor in France for certain agreement products.

10. In both distributorship agreements the parties thereto have committed themselves to exchange information on their retail prices with the respective supplier.

11. By the joint product development agreement, Armstrong USA on the one hand, and Holmsund and Golv-Gripen on the other hand, enter into an agreement regarding the joint commercialization of new sheet flooring products. It covers the entire world. No commercialized products exist yet. When commercialized products have been jointly developed, the agreement grants Holmsund an exclusive royalty-free manufacturing licence for the whole of the EEA and Switzerland for five years, whereas Armstrong UK is correspondingly granted a manufacturing licence for the rest of the world.

12. The product development agreement has a post-termination clause that states that neither 'contracting party` shall, after the termination, dispose of the 'development product technology` in favour of a third party, without granting a right of first refusal to the other party that occurs in the form of a redemption. This jointly controlled disposal continues for an indefinite period.

D. THE PRODUCT AND THE MARKET

13. The notification only concerns floor carpets made of a polymer based materials. Carpets can also be understood as floor pieces.

14. Polymer floor carpets can be divided into two product groups. Residence carpets and consumer carpets. Residence carpets are resistant and intended for long-term use on non-consumer projects. Residence carpets are installed by an trained workman and delivered in short roll-packages, maximum two metres. The workmen performing the cutting and the edging have the special tools. Wet-room carpets, irrespective of where they are placed, are residence carpets. Consumer carpets are intended for consumer premises such as private homes. The cutting and edging can be performed with normal home-tools. The width of the roll never exceeds four metres. The reverse side of a consumer carpets is normally soft consisting for instance of a foamed polymer coating.

15. The Armstrong Group has its operational focus on consumer carpets, whereas the Skåne Group has its operational focus on residence carpets. Both groups do, however, also have some limited activities in the product segments of one another.

16. Within the EEA the annual market for residence carpets is 100 million m² and for consumer carpets 200 million m².

17. According to the notifying companies the market is very competitive. Four to five of the largest undertakings are assessed to be in the range of 10 to 15 % in both product groups. Competitors to the notifying undertakings in consumer and residence carpets are: Forbo (Dutch-Swedish), Sommer (French), Gerland (French) and Tarkett-Pegulan (Swedish-German). The Finnish Upofloor and the German DLW are also important players on the market for residence carpets.

18. The market share of Holmsund for residence carpets within the EEA, excluding Sweden, is much lower. In Sweden, Holmsund's estimated market share for resident carpets is 15 to 20 %. Holmsund's EEA market share in consumer carpets is almost non-existent.

19. Armstrong UK's market share within the EEA in the market for floor covering of plastics in rolls or in the form of tiles is below 5 %. Its market share for residence carpets is below 5 %.

E. THE INTENTIONS OF THE EFTA SURVEILLANCE AUTHORITY

20. The EFTA Surveillance Authority has not made any finding indicating that the geographical market would be narrower than the European Economic Area.

21. The EFTA Surveillance Authority believes, from the information that it has received, that competition on the market for floor covering of plastics in rolls or in the form of tiles within the EEA is strong. The fact that a handful of undertakings are more or less equally influential on the market confirms this assumption. The market shares of the undertakings concerned by the notified agreements are moderate. The possible restrictive effects of the agreements therefore seems to be limited.

22. The EFTA Surveillance Authority intends to take a favourable view to the agreements summarized above. Before doing so it invites interested parties to send their comments within one month from the date of publication of this notice, quoting reference number COM 020.0018, to the address below:

EFTA Surveillance Authority

Competition Directorate

1-3 rue Marie-Thérèse/Maria-Theresiastraat 1-3

B-1040 Brussels.