98/327/EC: Commission Decision of 11 September 1997 declaring a concentration to be compatible with the common market and the functioning of the EEA Agreement (Case No IV/M.833 - The Coca-Cola Company/Carlsberg A/S) (Only the English text is authentic) (Text with EEA relevance)
Date: 1997-09-11
Institutions: European Commission
Subjects: Denmark, United States, agreement (EU), beer, beverage industry, economic concentration

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 11 September 1997

declaring a concentration to be compatible with the common market and the
functioning of the EEA Agreement

(Case No IV/M.833 (cid:190) The Coca-Cola Company/Carlsberg A/S)

(Only the English text is authentic)

(Text with EEA relevance)

(98/327/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community,

Having regard to the Agreement on the European
Economic Area, and in particular Article 57 thereof,

Having regard to Council Regulation (EEC) No 4064/89
of 21 December 1989 on the control of concentrations
between undertakings (1), as amended by the Act of
Accession of Austria, Finland and Sweden, and in par-
ticular Article 8(2) thereof,

Having regard to the Commission Decision of 2 May
1997 to initiate proceedings in this case,

Having given the undertakings concerned the oppor-
tunity to make known their views on the objections raised
by the Commission,

Having regard to the opinion of the Advisory Committee
on Concentrations (2),

Whereas:

(1)

On 25 March 1997, the Commission received a
notification of a proposed concentration pursuant
to Article 4 of Council Regulation (EEC) No 4064/
89 (the Merger Regulation) by which The Coca-

Cola Company (TCCC) and Carlsberg A/S (Carls-
berg) will set up a jointly-owned company, Coca-
Cola Nordic Beverages (CCNB). This joint venture
will own interests in various soft drink entities in
the Nordic region, including certain assets that will
be transferred from Carlsberg to TCCC pursuant to
a licence agreement. The notification concerns
Denmark and Sweden.

By decision of 14 April 1997, the Commission
ordered the continuation of the suspension of the
notified concentration, pursuant to Article 7(2) and
Article 18(2) of the Merger Regulation, pending its
final decision.

After examination of the notification, the Commis-
sion concluded that
the notified operation fell
within the scope of the Merger Regulation and
raised serious doubts as to its compatibility with
the common market and with the functioning of
the EEA Agreement. The Commission decided to
initiate proceedings pursuant to Article 6(1)(c) of
the Merger Regulation on 2 May 1997.

(2)

(3)

I. THE PARTIES

TCCC

(1) OJ L 395, 30. 12. 1989, p. 1; corrigendum OJ L 257, 21. 9.

1990, p. 13.

(2) OJ C 149, 15. 5. 1998.

(4)

TCCC, a US company, is a major brand owner and
global supplier of soft drink concentrates and

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syrups used to produce certain carbonated soft
drinks
including Coca-Cola, Coca-Cola
Light, Fanta and Sprite, as well as other non-alco-
holic beverages (NABs).

(CSDs),

Carlsberg

Carlsberg is the Danish registered parent of a group
of companies that are active primarily in the
production and wholesale distribution of beer, but
also in other drinks-related operations, including
NABs. One of Carlsberg’s subsidiaries, Dadeko A/S
(Dadeko), is the largest bottling company of CSDs
in Denmark. In addition Carlsberg has interests in
other
in
Denmark and in Sweden.

soft-drink and brewing

companies

II. THE OPERATION

A. General

CCNB will be 51 % owned by Carlsberg, with the
remaining 49 % held ultimately by TCCC. CCNB
will be based in Denmark and its main business
will be to invest and hold interests in national
bottlers with respect to the preparation, packaging,
marketing, distribution and sale of NABs and other
related activities. CCNB will at the outset cover
Denmark and Sweden but will also cover Finland,
Norway, Iceland, Estonia, Latvia, Lithuania and
possibly Greenland and St. Petersburg, Russia (the
CCNB territory) at a later stage.

The operation involves: (i) the creation of CCNB,
(ii) the transfer of national bottling companies in
Denmark and Sweden to CCNB, that is, Carlsberg
will contribute its wholly owned Danish subsidiary,
Dadeko, and TCCC will contribute its recently
established wholly owned Swedish subsidiary,
Coca-Cola Drycker Sverige AB (CCDS),
(iii) two
agreements governing the transfer and licensing of
certain brands in those countries, and (iv) the cre-
ation of a distribution company in Sweden.

(5)

(6)

(7)

(8)

In Denmark, Dadeko, which renewed its bottling
agreement with TCCC in 1994, will continue a
40-year relationship for bottling mainly TCCC’s
CSD products. At present, Dadeko is responsible

for preparing and packaging the CSD brands of
both Carlsberg and Tuborg, together with those
Cadbury Schweppes brands that are present
in
Denmark. Currently Dadeko only distributes
TCCC products to the retail sector, while Carlsberg
and Tuborg distribute their own CSD brands,
together with those of Cadbury Schweppes to the
retail
sector. Moreover, Carlsberg and Tuborg
currently share responsibility for distributing their
own CSD brands, together with those of TCCC and
Cadbury Schweppes, to the hotel, restaurant and
catering (Horeca) sector. After implementation of
the operation, Dadeko will continue to bottle
TCCC brands, and those remaining [ . . . ] (1) brands.
It will be responsible for the distribution of [ . . . ]
brands
sector, while [ . . . ] will
distribute those brands to the Horeca sector.

to the retail

(9)

In Sweden, TCCC has recently established CCDS
which has been marketing and selling TCCC’s
products since 1 April 1997. From 1 January 1998,
CCDS will take over the preparation and packaging
of TCCC’s products, which at present is carried out
by Pripps Ringnes. DryckesDistributoren AB
(DDAB), a 50/50 joint venture between CCDS and
Falcon Bryggerier AB (itself
jointly owned by
Carlsberg and Oy Sinebrychoff Ab, a Finnish
the physical distribution
brewer), will carry out
(storage,
on an
transportation and delivery)
exclusive basis of CCDS’ NABs, Falcon’s NABs
and Falcon’s beer to customers in Sweden.

(10) CCNB will

form the ninth ‘anchor bottler' of
TCCC products. The term ‘anchor bottler' identi-
fies certain bottling companies in which TCCC
holds a minority equity interest and which are
strongly committed to the strategic goals of TCCC
and to furthering the interests of TCCC’s world-
wide production, distribution and marketing
systems. They tend to be large and geographically
diverse, and have strong financial and management
resources.

B. The Master

Shareholders’ Agreement

(MSA)

(11)

The MSA between TCCC and Carlsberg provides
for the establishment of CCNB and sets out the
terms under which the parties will control CCNB,
how CCNB will function and provides the frame-
work for all future national bottling entities in the
CCNB territory. The MSA also contains the non-
competition obligations of TCCC and Carlsberg.
Another important provision is the arrangement
[ . . . ]. Finally the MSA refers to [ . . . ].

(1) In the published version of the Decision, some information
has hereinafter been omitted for reasons of confidentiality.

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(12)

C. The Licence Agreement in Denmark

and sell

certain [ . . . ] NABs

TCCC, Carlsberg and Dadeko have signed a [ . . . ]
year Licence Agreement
(renewable for another
[ . . . ] years) under which Carlsberg grants an
authorisation to TCCC and TCCC in turn grants
an authorisation to Dadeko to produce, market,
distribute,
in
Denmark. The [ . . . ] licensed products are [ . . . ].
Carlsberg will make available to TCCC [ . . . ]
relating to those products with a view to TCCC
providing [ . . . ]. TCCC will become the brand
manager for the [ . . . ] brands. Carlsberg will retain
[ . . . ].
some right
CCNB will be responsible for [ . . . ]. Carlsberg
undertakes not to [ . . . ] any other party those prod-
ucts, or any other [ . . . ], in Denmark.

in order to protect

to [ . . . ]

(13)

In addition, Carlsberg will discontinue the produc-
tion of its [ . . . ] brands [ . . . ]. Therefore, as a con-
sequence of the operation only [ . . . ] will be kept
by the Carlsberg organisation.

(14)

(15)

D. Arrangements in Sweden

In addition to the transfer of CCDS to CCNB,
notified under the Merger Regulation, other agree-
ments setting up DDAB and a Trademark Purchase
and Supply Agreement
(TPSA) governing the
transfer of certain brands from Falcon to TCCC
were notified to the Commission under Council
Regulation No 17 (1) on 18 April 1997. Those
agreements are being assessed separately.

E. Conclusion

The operation will lead to a structural change in
the soft drinks business operations of Carlsberg and
TCCC, at both a regional level in the Nordic coun-
tries, and a national level in Denmark and Sweden.
In particular Carlsberg will have no CSD interests
in competition to CCNB. TCCC’s position changes
from that of a simple licensor of its CSDs in those
markets to being a co-owner of the joint venture
that produces CSDs.

III. THE CONCENTRATION

A. The scope of the concentration

(16) Apart from the setting up of CCNB, which consti-
tutes the essence of the operation, the parties have
also notified the licence agreement between Carls-
berg, TCCC and Dadeko in Denmark under the

Merger Regulation. The notifying parties consider
specific provisions,
such as non-competition
clauses and exclusivity provisions in the licence
agreement,
to be ancillary restrictions directly
related and necessary to the implementation of the
concentration. However, the Commission considers
that the licence agreement is necessary in order for
TCCC and Carlsberg to concentrate the prepara-
tion, packaging, distribution, marketing and sales of
all the TCCC and Carlsberg brands in CCNB in
order to bring Carlsberg’s Danish NAB business
into line with the TCCC anchor bottler principles.
The licence agreement is, therefore, one of the
elements constituting the concentration, which will
establish economic unity between Carlsberg and
TCCC and should also be considered to be an
essential and integral part of the concentration.

B. Assessment of the concentrative nature of

CCNB

B.1. Joint control

(17) CCNB will be owned 51 % by Carlsberg and 49 %
indirectly by TCCC. Relations between Carlsberg
and TCCC will be governed by the MSA. Carlsberg
will nominate [ . . . ] directors and TCCC [ . . . ]
directors to CCNB’s supervisory board. TCCC will
nominate CCNB’s [ . . . ] and Carlsberg will nom-
inate its [ . . . ]. CCNB’s Chief Executive Officer,
responsible for the day-to-day management, will be
nominated by [ . . . ] and the Chief Financial
Officer by [ . . . ]. To ensure that each parent has to
consent to certain decisions affecting the strategic
‘key decisions' by the share-
behaviour of CCNB,
holders on matters related to corporate structure
and policies, [strategic decisions], the adoption of
business plans and budget require the unanimous
approval of both parents. If the supervisory board is
unable to agree [ . . . ]. According to the parties
there are, however, significant incentives for the
parties to avoid a situation in which the termina-
tion provisions of their agreement will come into
operation. CCNB will
to joint
control by TCCC and Carlsberg.

thus be subject

B.2. Full function on a lasting basis

(1) Council Regulation No 17 of 6 February 1962, First Regula-
tion implementing Articles 85 and 86 of the Treaty (OJ 13,
21. 2. 1962, p. 204/62).

(18) CCNB will have all

the resources necessary to
operate its business activities on a lasting basis.
First, the parties will transfer their existing bottling

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in Denmark and Sweden to CCNB,
entities
including
the plants, distribution equipment
(trucks, warehouses and so forth), employees and
other investments such as vending and fountain
equipment. Second, CCNB will be responsible for
the production, marketing, distribution and sale of
NABs in the Nordic region and will thus not be
limited to one specific function on the market.
Also, CCNB and its bottlers will add considerable
value to the concentrate provided by TCCC. Third,
even though TCCC will supply concentrates and
authorise the bottling of such NABs, and Carlsberg
has a 50 % shareholding in Falcon and will retain
[ . . . ] in Denmark, such presence of the parties in
the market of CCNB and its subsidiaries does not
affect the characterisation of CCNB as a concen-
trative joint venture. The MSA is signed for [ . . . ]
years with a possibility of renewal for a further
[ . . . ] years.

C. Conclusion

(21)

The notified joint venture,
together with the
licence agreement in Denmark, forms a concentra-
tion within the meaning of Article 3 of the Merger
Regulation.

IV. COMMUNITY DIMENSION

(22)

The concentration has a Community dimension as
defined in Article 1(2) of the Merger Regulation.
TCCC and Carlsberg have an aggregate world-wide
turnover of more than ECU 17 billion, which is
above the ECU 5 billion specified in the Merger
Regulation. The undertakings concerned each have
a Community-wide turnover of more than ECU
250 million (TCCC: ECU 4 046 million, and Carls-
berg: ECU 1 952 million), of which not more than
two-thirds
is achieved in one and the same
Member State.

B.3. Absence of coordination

V. RELEVANT MARKETS

(19)

In Denmark, TCCC has no presence as a producer
or distributor, only as a brand owner. Apart from
being a concentrate supplier, TCCC will, broadly
speaking, only be present
in Denmark through
CCNB. According to the parties the prospects of
TCCC entering the Danish market other than
through CCNB would be extremely remote. Carls-
berg will discontinue [ . . . ] of its present NAB
brands. However, it will retain certain NAB acti-
vities which will [ . . . ] to the sale and distribution
of [ . . . ], limited distribution in the [ . . . ] and that
of
[ . . . ] NABs and a 50 % shareholding in
Rynkeby A/S (producing juices and dilutables).
to a non-competition
Carlsberg will be subject
clause according to which it cannot compete in
[ . . . ]. TCCC has never directly bottled in the
Danish market and presently has no available
facilities for doing so. Therefore the activities kept
outside CCNB cannot be seen as an instrument for
producing or
reinforcing coordination between
Carlsberg and TCCC.

(20) As in Denmark, Carlsberg will also be bound by its
obligation not to compete in [ . . . ] activities in
Sweden. Based on the above information, CCNB
cannot be seen as an instrument for producing or
reinforcing coordination between Carlsberg and
TCCC.

(23)

(24)

A. Relevant product markets

In the Nordic countries the majority of producers
of CSDs and other NABs like juices and packaged
waters have traditionally been brewers. The brewers
have thus been able to offer a wide portfolio of
commercial beverages encompassing beers, CSDs
and packaged waters to their customers. However,
the fact that a product is sold as a part of a larger
portfolio of beverages does not mean that the port-
folio as such should be considered the relevant
product market for anti-trust purposes. A distinc-
tion has to be made between various categories of
commercial beverages. This analysis should not
ignore the fact that at the bottling level, it increases
the market power of a supplier to be able to offer
customers
a broader beverage portfolio. The
economic advantages that flow to bottlers who offer
both CSDs and beers in their system will be
discussed in the assessment of this operation.

the parties state that

In their notification,
the
affected product markets ‘are at least as wide as
those for the supply of NABs' in Denmark and
Sweden. Such a market would encompass a wide-
ranging variety of beverages, including CSDs, still
drinks, fruit juices, packaged waters, coffee, tea and
milk. An examination of the soft drinks industry
indicates that the market definition proposed by
the parties is too broad for analysing the likely
competitive consequences of the notified operation.

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For the reasons discussed below, it appears appro-
priate to assess the operation, at both the brand and
bottling levels, in the context of an overall CSD
market. A number of elements suggest that there is
a separate relevant product market for colas, but it
should be noted that whether the operation is
analysed in terms of colas alone, or in terms of all
CSDs, the assessment would not materially change.

A.1. The CSD production stream

cinema, the press, and sponsorship of activities
such as music and sport. Such advertising is
normally devised, carried out and financed by
the brand owner.

(cid:190) ‘Below-the-line' marketing: Promotion of prod-
is referred to in the
ucts at the trade level
‘below-the-line' marketing.
as
industry
‘Below-the-line' marketing consists of two main
types of activities: promotional discounts (such
as multi-buy offers, price
and
customer discounts); and trade marketing (such
listings, shelf
to customers for
as payment
displays and in-store advertising).

reductions

(25)

(26)

(27)

(28)

The supply of colas and other flavoured CSDs to
retail customers consists of two interrelated acti-
vities: brand ownership and bottling. The brand
owner creates and promotes the beverage brands,
provides the supply of concentrate (or authorises its
production),
to
prepare, package, market, distribute and sell the
beverages. In this respect it is TCCC’s strategy, as a
brand owner, to create consumer demand, whereas
the role of
the
demand.

the TCCC bottlers is to meet

and authorises

local bottlers

Brand owners of international brands (cid:190) such as
TCCC, PepsiCo and Cadbury Schweppes (cid:190)
produce CSD concentrates in a limited number of
locations throughout the world and supply their
bottlers on a global basis from these production
facilities. In comparison, smaller companies may
use ‘flavour houses' to produce their concentrate.

The term ‘bottling' is generally applied throughout
the CSD industry to encompass the preparation,
packaging, sales, marketing and distribution of
CSDs. A bottler is typically assigned a geographic
territory by the brand owner within which it is
responsible for these functions.

The responsibility for the marketing and promo-
tion of CSDs is normally shared between the brand
owner and bottler. Marketing activities are a com-
bination of brand-specific advertising and trade-
oriented promotion. In the CSD industry, a distinc-
tion is generally made between these areas as
follows:

(cid:190) ‘Above-the-line' marketing: The CSD markets
are characterised by powerful brands, with the
leading brands being advertised on an inter-
national basis. This brand-specific advertising is
referred to in the industry as ‘above-the-line'
and is mainly carried out through TV, radio,

depending

upon market

(29) Distribution of CSDs is carried out through various
channels, which differ somewhat from country to
structure
country
(including such factors as location of customer
warehouses and retail outlets, geographic dispersion
of population, and whether CSDs are co-distributed
with beers or not). In Denmark and Sweden, CSDs
are mainly distributed through the retail channel
which may be sub-divided into the grocery channel
(supermarkets and so forth) and a service trade
channel (comprising petrol stations, kiosks and so
forth) and the horeca channel (hotels, restaurants
and catering). However, for the purpose of assessing
the proposed transaction these distinctions do not
make a separate assessment necessary for either the
Swedish or the Danish market, since the conclu-
sions resulting from the analysis would be the same
whether the channels were considered as separate
relevant product markets or not. Therefore the
question as to whether the channels are separate
relevant product markets can be left open.

(30)

In the present case the impact of the operation is
integration into
on TCCC’s
forward vertical
bottling, on TCCC’s acquisition of brands
in
Sweden and on its gaining the licence for brands in
Denmark. Because the impact of the changes in
brand ownership and TCCC’s vertical integration
are substantial at both the brand and bottling
levels, the assessment of the impact of the opera-
tion will be analysed at both levels.

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A.2. Product market definition: all CSDs

different growth rates for the various categories of
soft drinks.

(a) The distinction between CSDs and other NABs

(34)

(31) According to the most recent Canadean data avail-
able (Annual Report (cid:190) 1996 Cycle, Canadean), it
appears that CSDs have continued to grow at a
different rate from the overall beverages and soft
drinks categories in both Denmark and Sweden.

(32)

total sales of soft
In Denmark, data show that
drinks grew by 5,5 % annually between 1990 and
1995. Packaged waters grew by about 7 %, and
CSDs ‘soared' by 10 %. Canadean reported that
‘carbonate sales in the 1990’s were particularly
good, growing by nearly 65 % between 1990 and
1995.' In comparison, the report stated that ‘the
performance of fruit drinks, which are primarily
targeted at
the youth market, has been pretty
lacklustre throughout the decade,' being perceived
as the ‘poor relation' among soft drinks, and that
the soft drink ‘market growth was driven by car-
bonates [and syrups/squashes].' The consumption
of fruit juices thus fell by 2 % annually between
1990 and 1995. If packaged waters and juices were
part of the same product market as CSDs, it would
be expected that price developments could explain
the difference in growth rates. However, that is not
the case since, according to Canadean data on retail
prices, relative prices for the various types of soft
drinks have changed little in the last four years, and
so different price developments do not explain the
different growth rates for the various categories of
soft drinks.

(33)

In Sweden, too, Canadean data showed different
rates of growth between the soft drink category and
CSDs. Total soft drink sales grew by 1 % and pack-
aged water by 9 %, while juice and nectar sales
declined by 2 % and CSD sales remained ‘static.' If
packaged waters and juices were part of the same
product market as CSDs, it would be expected that
price developments could explain the difference in
growth rates. However, as for Denmark, that is not
the case since, according to Canadean data on retail
prices, relative prices for the various types of soft
drinks have changed little in the last four years, and
so different price developments do not explain the

The parties have argued in their response to the
Statement of Objections (‘the Response') that the
Canadean price data represent only a limited
number of brands, packages and distribution chan-
nels and that it is unclear how the price data has
been collected. The Commission recognises that
the Canadean price data are selected retail prices
which do not cover all distribution channels and
packages. However, the Canadean price data are
typical market prices which cover the most im-
portant brands, packages and distribution channels.
It is, therefore, not unreasonable to conclude that
the Canadean prices reflect the general develop-
ment in market prices for CSDs, juices and pack-
aged waters. Consequently,
the Commission
concludes, that changes in relative prices cannot
explain the different growth rates of CSDs, juices
and packaged waters in the last
four years in
Denmark and Sweden. This is an indication that
there is not a high level of price competition
between CSDs, packaged waters and juices. In other
words, it is not prices which cause customers to
purchase, for example, a higher volume of CSDs,
and less juice.

(35)

In addition, the Commission has considered the
Canadean data relating to selected retail prices for
Denmark and Sweden. Waters and CSDs appear to
be at similar price levels but both are cheaper than
fruit juices. Furthermore it is clear that CSDs are
more expensive than milk, tea and coffee, thereby
indicating that CSDs are in a separate relevant
product market from all NABs. However, waters do
not have the same characteristics as CSDs:
for
example, they do not contain added sugar.

(36)

Both in Denmark and Sweden CSDs are not
displayed, in supermarkets, on the same shelf as
other NABs such as coffee, tea, milk, or juices,
indicating that CSDs and NABs are in different
product markets. Products competing directly with
each other would normally be expected to be
displayed next to each other.

(37)

[Certain studies] show that the timing of consump-
tion of CSDs, compared to other NABs,
is
different.

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(%)

At breakfast

Between breakfast
and lunch

At lunch

Between lunch
and dinner

At dinner

After dinner

DK

S

DK

S

DK

S

DK

S

DK

S

DK

S

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

Coffee, tea, milk

Tap water

Alcoholic drinks

CSDs

(38)

(39)

These and similar studies indicate that CSDs are
often drunk during leisure times unlike other
NABs which are more functional in nature. There-
fore, the different consumption patterns of CSDs
from other NABs indicate that they are not both in
the same product market.

In respect of consumption patterns the parties have
argued that the Commission has failed to address
the key issue of whether consumers of CSDs find
other beverages to be demand substitutes, and that
it is difficult to conclude anything about the timing
or consumption of CSDs compared to other NABs
from the above table (Response, p. 41). However,
the parties have not disputed the fundamental
conclusion from their own studies that CSDs are
often drunk at leisure times, unlike other NABs
which are more functional in nature. Therefore, the
Commission maintains that the different consump-
tion patterns indicate that CSDs and other NABs
are not in the same relevant product market.

(40)

Finally, responses from customers and competitors
in both Sweden and Denmark indicate that CSDs
are not part of the same relevant product market as
other NABs. In this respect the parties have argued
that it is wrong to attach much, if any, importance
to the impressions of retailers, wholesalers and
competitors (Response, p. 42). However, retailers,
wholesalers and competitors normally do have a
thorough knowledge of their businesses and there-
fore have a clear view on, for example, the impact
of a promotion of Coca-Cola on the sales of other
drinks.

aged waters are concerned, it would be easier to
package CSDs on the same equipment as is used
for the production of packaged waters. However,
the fact that a range of soft drinks can be produced
on the same equipment is insufficient to create a
single relevant product market for all soft drinks
for the purpose of assessing the notified operation.
The need to create and position a CSD, to advertise
and promote a new product or a new brand, and to
obtain access to distribution outlets means that
supply-side flexibility is not a sufficient criterion
upon which to expand the relevant product market.
The mere physical capability of production equip-
ment to produce a number of different products is
not sufficient for the conclusion to be drawn that
different beverages should be grouped into a single
relevant product market.

(42)

In conclusion, therefore, for the purpose of the
application of the Merger Regulation, NABs as a
whole cannot be regarded as being the relevant
product market
in either Sweden or Denmark.
Rather it is concluded that CSDs are distinct from
juices and
other NABs such as coffee, tea, milk,
packaged waters and do,
form a
separate relevant product market.

in themselves,

(b) The differentiation of colas from all other

CSDs

(43) With respect to drawing a differentiation between
colas and all other CSDs, the Commission’s earlier
decisions (1) indicate that a wide variety of factors
show that in the beverage industry a distinction
may be made between different flavours of CSDs. A
wide range of evidence including industry state-
ments and market studies supported the Commis-
sion’s finding of a distinct relevant product market

(41) As to supply-side considerations, other NABs such
as milk, coffee, tea and juices are produced in a
completely different way from CSDs and no
supply-side substitution is possible. As far as pack-

(1) Decision 97/540/EC, Case IV/M.794 (cid:190) Coca-Cola Enterprises,
Inc./Amalgamated Beverages GB (OJ L 218, 9. 8. 1997, p. 15);
Decision 92/553/EEC, Case IV/M.190 (cid:190) Nestl(cid:130)/Perrier (OJ L
356, 5. 12. 1992, p. 1); Case IV/M.289 (cid:190) PepsiCo/KAS (21.
12. 1992) and Decision 96/204/EC, Case IV/M.582 (cid:190) Orkla/
Volvo (OJ L 66, 16. 3. 1996, p. 17).

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for cola CSDs in Great Britain (1). This conclusion
was based on factors including consumer prefer-
ence, and differences in marketing and pricing
between colas and non-cola flavoured CSDs. In the
present case a number of elements suggest that
there is a separate relevant product market
for
colas, but
it should be noted that whether the
operation is analysed in terms of colas alone, or in
terms of all CSDs, the assessment would not ma-
the
terially change. The competitive effects of
present operation can thus be analysed in a product
market encompassing all CSDs.

B. Relevant geographic markets

(44)

(45)

It has been the Commission’s practice to analyse
the supply of beverages on a national basis (2). The
same analysis is relevant in the present case, since
the bottlers in question have been licensed by
brand owners to sell a product within the limits of
a national geographic territory.

The finding of national CSD markets for Denmark
and Sweden is supported by the low rate of imports
and exports of CSDs. According to Canadean,
imports of CSDs were less than 2,5 % in Sweden
and less than 2 % in Denmark in 1995. Exports
were even lower than imports in Sweden, whereas
Danish exports were only 4 %.

(46) Differences

in list prices

for TCCC products
between Sweden, Denmark, Norway, Finland,
Germany, Netherlands, the United Kingdom and
Belgium are an indication that Sweden and
Denmark are two separate relevant geographical
markets. The Norwegian list prices are the lowest
in the Nordic countries. Danish list prices are
about 20 % higher than in Norway, and Swedish
list prices about 40 % higher than in Norway.
Furthermore, Danish prices are significantly higher
than in areas such as Germany and the Benelux.

(48)

(49)

systems and differences in distribution costs can
explain part of
in list prices.
the differences
However,
the recycling systems in the Nordic
countries are comparable for the greater part of the
volume of CSDs, since most CSDs are sold in
refillable bottles. As far as distribution costs are
concerned,
it would be expected that Norway
would have the highest distribution costs and in
this respect be comparable to Finland and Sweden
due to the similarities in the geography of these
countries. Denmark would, on the other hand, be
expected to be more similar
the
United Kingdom and the Benelux countries in this
respect. However, contrary to what would be
expected if distribution costs explained the differ-
ences in list prices, Sweden and Denmark have
higher list prices than Norway. As far as the other
explanations offered in the parties’
letter (com-
parisons based on purchasing power parities and
the fact that price variations on similar consumer
goods are the norm with the Community),
the
Commission is of the opinion that they are not
relevant
relevant
the delineation of
geographic market.

to Germany,

the

for

In addition, as regards Denmark, laws relating to
in Europe;
beverage packaging are the strictest
refillable bottles are mandatory for domestic sales
of locally produced CSDs and beers. There is also a
total ban on cans. Therefore, in practice imports are
restricted unless a satisfactory deposit/returnable/
recycling system is in place. The national ban on
one-way containers acts as a barrier to imports, by
imposing obligations on the industry to use the
designated
bottles
produced.

system for

recycling

all

Therefore,
the Commission
that
relevant
Denmark and Sweden are
geographic markets for the purposes of assessing
this operation, a conclusion that has not been
contested by the parties.

concludes

separate

(47)

The parties have indicated in their letter of 28 May
1997 that list prices do not necessarily correspond
to transaction prices due to discounts. However,
discounts are a normal feature of CSD markets in
all these countries and it seems that differences in
discounts cannot explain the whole difference
between the list prices. The parties have argued in
their letter of 28 May 1997 that different recycling

VI. COMPATIBILITY WITH THE COMMON
MARKET AND THE FUNCTIONING OF THE
EEA AGREEMENT

A. Overview: the impact of the operation

(1) Decision 97/540/EC.
(2) Decision 97/540/EC and Decision 92/553/EEC.

(50)

The impact of the notified operation would be felt
at both the brand and bottling levels. Specifically,

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L 145/49

the operation would have the following competitive
effects on the markets:

(a) at the brand level, TCCC would acquire the
know-how and production rights for certain
CSDs (and concentrates) from Carlsberg and
Falcon in Denmark and Sweden respectively (in
Denmark, TCCC will reassign the rights to
produce the CSDs
in
Sweden it will retain these rights); and

to Dadeko, whereas

(b) at the bottling level, there would be two effects:

(cid:190) the overall strengthening of TCCC’s market
power through its forward vertical integra-
tion, in that it is moving from its role as a
licensor to that of being the co-owner and
co-decision maker of bottling operations,
and

(cid:190) the strengthening of the dominant position
of Dadeko, control over which passes to
CCNB, at the bottling level in two ways:
TCCC’s brand portfolio would be enlarged
by the operation, and at the same time, the
Carlsberg portfolio would be eliminated in
Denmark. Furthermore,
the Falcon port-
folio would be weakened in Sweden.

(51) As a result of these structural changes, the opera-
tion would lead to the elimination of both actual
and potential competition from Carlsberg in both
Denmark and Sweden, in the following ways:

(a) elimination of actual
Denmark and Sweden:

competition in both

in Denmark: Carlsberg has stated its intention
(in the notification) to discontinue production
of certain [ . . . ]
flavours which it currently
produces and markets, including in particular,
[ . . . ] in the portfolio; and in Sweden: TCCC
would acquire certain [ . . . ] brand CSDs from
Falcon; and

(b) elimination of potential competition in both

Denmark and Sweden:

in Denmark: Carlsberg is bound by the MSA
not to introduce any new [ . . . ] flavours in [ . . . ]
in the future; and in Sweden: Falcon (50 %
owned by Carlsberg) is bound by [ . . . ] non-
competition agreements not
the
CSD markets in [ . . . ].

to re-enter

(55)

(52)

The parties have asserted that the concentration has
no appreciable effect on competition. Their main
lines of argument are that the relevant product
market is at least as wide as all NABs (a notion
dismissed above), that there will be no material
change in the competitive structure in Denmark,

and that there will be a more competitive market
in Sweden. This ‘lack of change' scenario ignores
the fundamental structural alterations that would
take place: TCCC and Carlsberg become partners
in CCNB, replacing the current licensor/licensee
arrangement; the TCCC CSD brand portfolio is
enlarged by the operation, and at the same time,
the Carlsberg CSD portfolio is eliminated and the
Falcon CSD portfolio is weakened. Finally,
the
to entry in Denmark
operation raises barriers
(discussed below).

(53) As is evident

from parties’

internal papers,
establishing CCNB is

the
to
overall purpose of
strengthen the TCCC brands and bottling opera-
tions in the CCNB territory and thereby capture a
higher share of beverage sales.

[ . . . ].

(54)

The impact of the establishment of CCNB can
only be understood against the background of the
outlook for the Nordic market. The parties have
provided projections (in millions of litres) for sales
in Denmark and
of cola and non-cola CSDs
Sweden:

1995

1998

1999

2000

Denmark

Colas

207

[. . .]

[. . .]

[. . .]

Non-colas

192

[. . .]

[. . .]

[. . .]

Sweden

Colas

233

[. . .]

[. . .]

[. . .]

Non-colas

306

[. . .]

[. . .]

[. . .]

The forecast compound annual growth rates for the
period between 1998 and 2000 in Denmark are
[ . . . ] for colas and [ . . . ] for non-cola flavoured
CSDs, and for Sweden [ . . . ] for colas and [ . . . ] for
non-cola flavoured CSDs. In general, based on the
current annual per capita consumption, the parties
consider the Danish and Swedish markets have
considerable growth potential for both colas and
non-cola flavoured CSDs.

In conclusion, the strategic aim of TCCC in estab-
the
lishing CCNB is to capture the growth of
market for the brands owned by or licensed to
TCCC. Although this is a legitimate objective as
such, as will be seen from the following discussion,
the creation of CCNB as a joint venture with Carls-
berg is not a matter of internal restructuring, but is
a new transaction putting into effect
the joint
strategy of two competitors which will have struc-
tural effects on the industry.

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15. 5. 98

B. Denmark

B.1. Overview of the industry

(56)

(57)

The total volume of CSDs consumed in Denmark
in 1995 was 399 million litres with colas
accounting for 52 % and non-colas for 48 % of
this total volume. The retail channel accounted for
64 % of CSDs consumed and the Horeca channel
for 36 % of the total volume consumed in 1995.

TCCC is the brand owner and supplier of
the
concentrate for Coca-Cola, Coca-Cola Light, Fanta,
Sprite and other TCCC brands which are being
bottled exclusively by the Carlsberg subsidiary
Dadeko. PepsiCo is the brand owner and supplier
of the concentrate for Pepsi Cola, 7-Up and other
PepsiCo brands whose products are bottled by the
brewer Bryggerigruppen A/S (Bryggerigruppen), as
discussed below. Cadbury Schweppes is the brand
owner and concentrate supplier of the Schweppes
and Sunkist brands. In addition, it owns Dr Pepper,
which is not on the Danish market. The Cadbury
Schweppes brands are packaged by Dadeko and
distributed through the Carlsberg distribution
system.

(58) Carlsberg is the largest supplier of beer, CSDs and
packaged waters in Denmark. Carlsberg is the
brand owner of the Tuborg Squash CSDs. It has a
75 % stake and sole control over Dansk Coladrik,
which owns and bottles Jolly Cola, the third largest
cola brand in Denmark. Furthermore, Carlsberg is
the 100 % owner of the brewer Wiibroe, which
supplies the Neptun CSD brands. Carlsberg also
has joint control over the largest Danish producer
of juice products. It is foreseen as a consequence of
the operation, that Dansk Coladrik will be sold (see
below).

(59)

(60)

Bryggerigruppen is the second largest brewer and
bottler of soft drinks in Denmark. It is the bottler
of the PepsiCo brands, and supplies a full range of
its own non-cola flavoured CSDs. It is, for example,
the brand owner of the lemon-lime CSD ‘Faxe
Kondi', which competes directly with TCCC’s
Sprite brand.

The shares of Bryggerigruppen are held by the two
holding companies, Jyske Bryg Holding AS (Jyske
Bryg) and Faxe Bryg Holding A/S (Faxe Bryg), in
which Carlsberg has minority shareholdings. Carls-
berg holds 37 % of the shares and 48 % of the
votes in Jyske Bryg and, based on the votes cast at
the last three annual general meetings of the share-
holders, Carlsberg has cast more than 50 % of the
votes present at the meetings.

Total votes

Voted
at meeting

Carlsberg
holding

Carlsberg
(per-
centage)

1994 AGM 2 777 525 1 810 122 1 335 995

74

1995 AGM 2 777 525 1 837 422 1 335 995

73

1996 AGM 2 777 525 1 478 738 1 335 995

90

1997 AGM 2 777 525 1 595 090 1 335 995

84

(61)

(62)

Therefore, Carlsberg has the possibility of exer-
cising decisive influence and consequently control
over Jyske Bryg.

Jyske Bryg holds, directly and indirectly, 62 % of
the shares and 49 % of
the votes of Bryggeri-
gruppen. Furthermore, it appears that [ . . . ]. The
remaining shares of Bryggerigruppen are held by
Faxe Bryg (49 % of the votes) and BG Bank which
holds 2 % of the votes. According to the parties,
[ . . . ].

If a disagreement were to arise between Jyske Bryg
and Faxe Bryg, the leading position of Carlsberg in
the beer and CSD markets would play an im-
portant role in any negotiations to resolve the
differences. It would be in the economic interests
of Bryggerigruppen, and its shareholders, to find an
accommodation with Carlsberg to avoid retaliation
in the markets where Bryggerigruppen operates
leadership. For these
and Carlsberg has market
reasons, it appears that Carlsberg has substantial
influence over Bryggerigruppen and therefore that
Bryggerigruppen offers
reduced competition to
Carlsberg.

(63) Others: A number of other smaller brewers exist.
The most important are Harboe, in which Carls-
berg has 25 % of the shares and a member of the
board, and Albani in which Carlsberg has a 15 %
shareholding, but only 8,75 % of
the votes.
Furthermore, the company Saltum-Houlbjerg Bryg-
gerier (Saltum) has developed into an important
supplier of discount and distributors’ own brands
is a small company
(DOBs)
which does not have its own distribution network.

in recent years. It

B.2. Market structure

(a) Market positions

(64)

The impact of the operation is felt at the brand and
bottling levels. The market positions of the brand
owners and bottlers on the overall CSD market are
shown in the following tables, which set out the

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Official Journal of the European Communities

L 145/51

shares
and

for 1995 on a value basis

in
market
Denmark
shares
following the creation of CCNB (based on data
provided by the parties):

estimated market

the

owner and Carlsberg is almost four times bigger
than the next largest bottler. The rest of the produ-
cers mainly produce discount brands and DOBs,
which have achieved a certain success, mainly in
the retail channel.

B r a n d o w n e r s

(%)

All CSDs
1995

All CSDs
post CCNB

(b) Conditions of competition

TCCC
Carlsberg
Dansk Coladrik

Total Parties

PepsiCo
Albani
Harboe
Bryggerigruppen
Schweppes
Others

[40 to 45]
[5 to 10]
[5 to 10]
[55 to 60]

[5 to 10]
[0 to 5]
[0 to 5]
[5 to 10]
[5 to 10]
[10 to 15]

[40 to 45]
[5 to 10]
[5 to 10]
[55 to 60]

[5 to 10]
[0 to 5]
[0 to 5]
[5 to 10]
[5 to 10]
[10 to 15]

B o t t l e r s

Dadeko
Carlsberg/Tuborg
Carlsberg/Wiibroe
Carlsberg/Dansk
Coladrik

(%)

All CSDs
1995

All CSDs
post CCNB

[40 to 45]
[10 to 15]
(*)
[0 to 5]

[50 to 55]
[0 to 15]
(cid:190)
[0 to 5]

Total Parties

[60 to 65]

[50 to 55]

Bryggerigruppen
Albani
Harboe
Others

[15 to 20]
[0 to 5]
[0 to 5]
[10 to 15]

[15 to 20]
[0 to 5]
[0 to 5]
[20 to 25]

(*) Included in the Carlsberg/Tuborg figures.

(65)

TCCC had a market share of [40 to 45 %] at the
brand level and the Carlsberg operations had a
share of [10 to 15 %] in 1995. As regards bottling,
Dadeko bottles [40 to 45 %] of CSDs and Carls-
berg’s other operations a further [15 to 20 %]. The
second largest brand owner is PepsiCo with [5 to
10 %], and the second largest bottler is the PepsiCo
bottler Bryggerigruppen with [15 to 20 %] of the
market. Carlsberg and TCCC are therefore more
than five times larger than the next largest brand

(66) Access

to brands and to distribution are key
competitive factors in the CSD industry. Dadeko
holds the licence for the dominant TCCC brands,
the Cadbury Schweppes brands, and its parent,
Carlsberg, is the owner of the important national
brand in Denmark (cid:190) Tuborg Squash. The produc-
tion of Dadeko, together with the other Carlsberg
bottlers, is more than four times that of its nearest
competitor.

(67) Colas are the largest selling CSD flavour and are
sometimes referred to as a ‘traffic builder' which
drives the overall CSD volume of a supplier. There-
fore, it is a considerable advantage for a supplier to
have a strong cola brand in its portfolio. Further-
more, the inclusion of strong beer and packaged
water brands, such as those of Carlsberg, in the
beverage portfolio gives each of the brands in the
portfolio greater market power than if they were
sold on a ‘stand-alone' basis. It is almost inconceiv-
able that a Danish outlet for beverages such as
packaged waters, beers and CSDs would not carry
TCCC and Carlsberg brands. No other Danish
supplier has a beverage portfolio which would
enable it effectively to challenge Carlsberg and
Dadeko.

(68)

(69)

The distribution of CSDs is characterised by high
economies of scale. In particular it is crucial to
unload a sufficiently high volume at each truck
stop to bring down the average cost of delivery to
individual customers. Generally this means that
companies with the highest volume and the
broadest portfolio of beverages in their distribution
system will have the lowest costs and be able to
reach the highest number of customers.

In Denmark beer and packaged waters are often
co-distributed with CSDs. This is an advantage for
both the brewers and the customers. For
the
brewers it
increases the economies of scale in
distribution, and allows a wider distribution than
would otherwise have been possible. For customers
it is an advantage to be able to buy a complete
portfolio from one supplier, since it involves fewer
deliveries. The Carlsberg group is
the largest
supplier of beer and packaged waters with more

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Official Journal of the European Communities

15. 5. 98

it

than 50 % and 45 % of the respective volumes
consumed in Denmark. In view of their market
shares in CSDs,
is clear that Carlsberg and
Dadeko have by far the most extensive distribution
systems, giving their products the best market
coverage when compared to the other suppliers. By
way of comparison with other breweries, Carlsberg
and Dadeko distributed some 344 million litres of
beer and 163 million litres of colas and other CSDs
in 1996; all other breweries together distributed
volumes of beers and CSDs totalling between 85
and 100 million litres,
respectively. Carlsberg/
Dadeko was therefore almost three times bigger
than the other brewers as a whole.

Finally, it is important to consider the effect of
Carlsberg’s holding in Jyske Bryg, which holds,
directly and indirectly, 62 % of the shares in Bryg-
gerigruppen. Carlsberg, through Jyske Bryg, has
substantial
influence over Bryggerigruppen. This
brewer is the largest competitor to Dadeko, TCCC
and Carlsberg at both the brand and bottling levels
and the only other company bottling premium
brands in Denmark. Furthermore, Carlsberg has
shareholdings
and Harboe, which
together with Saltum are the largest producers of
discount CSDs.

in Albani

risks, costs and the time needed to launch an inter-
national brand it is likely that only the existing
three international brand owners would be able to
launch new international CSD brands
in any
country. On the Danish market only Carlsberg and
Bryggerigruppen have, in the past, been able to
launch national premium brands. Therefore,
it
appears that only the existing brand owners in
Denmark would be able to launch new brands.

(73) CSDs rely heavily on brand image to drive sales,
and companies like TCCC and PepsiCo have estab-
lished brand loyalty through heavy investments to
maintain the high profile of
their brands. The
introduction of a new brand would thus require
heavy expenditure on advertising and promotion in
order to persuade brand-loyal consumers to switch
away from their usual CSD brand. Moreover,
consumer loyalty to the established brands would
make it difficult for a new supplier to persuade
retail customers to change suppliers and would
thus further hinder entry. Such advertising and
promotion expenditures are sunk costs and add
substantially to the risk of entry.

(70)

(71)

In conclusion, in view of the brands owned by
TCCC and Carlsberg, it is unlikely that they would
be restrained by their current competitors in the
overall CSD market. As regards bottling, given the
market shares of Dadeko and the other Carlsberg
operations, their portfolios of brands, their distribu-
tion systems and Carlsberg’s shareholdings in other
the current
brewers,
competitors would be able to constrain the actions
of Dadeko in the CSD market.

that none of

it appears

(74)

In addition, any potential entrant would also be
hindered by the need for access to bottling and to a
distribution system. Each of the major brewers in
Denmark has its own distribution system, meaning
that any new entrant would have to either incur the
significant cost of setting up its own system or
negotiate with a competitor for the use of their
system. It is unlikely that a new entrant would find
it economically viable to set up a new distribution
operation, since the entrant would have to include
beers and packaged waters in its system in order to
achieve a sufficient volume of distribution. The
brewers’ power in this field is reinforced by the fact
that CSDs are distributed in refillable containers
and any new entrant’s bottles would have to
comply with the relevant standards. Therefore, a
new entrant’s products would have to be distributed
by one of the existing brewers as is today the case
for TCCC and Cadbury Schweppes products, which
are distributed by Carlsberg, and PepsiCo brands,
by Bryggerigruppen.
which

distributed

are

(c) Barriers to entry for potential competitors

(72)

The main barriers to entry to the CSD market are
access to brands and to a distribution network, as
well as to shelf space, a sales and service network,
brand image and loyalty and advertising sunk costs.
TCCC, PepsiCo and Cadbury Schweppes are the
only international brand owners. In view of the

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L 145/53

for a new entrant

However, as the existing brewers are well estab-
lished, and have their own line of soft drinks, it
to find
would be difficult
distribution. Moreover, Carlsberg’s holdings
in
several other Danish brewers makes it less likely
that any potential entrant would be able to co-
operate or otherwise form an alliance with a
Danish
as
company.
mentioned above, it should be noted that Carlsberg
has by far the best and most wide-ranging distribu-
tion system on the Danish market. For a new
entrant the most efficient way to enter the Danish
market would be to be distributed by Carlsberg.

Furthermore,

brewing

(75)

(76)

Finally, even if a new entrant were to obtain access
to an adequate distribution network, the firm would
still have to obtain shelf space and incur the
expenses of supporting a sales and service network
in order to ensure that its products were properly
stocked and positioned. The Commission has
recognised (1) the importance of having a sales and
service network to induce customers to take on a
product line.

The Commission recognises that entry may be
possible on a smaller scale, for example by deliv-
eries of DOBs directly to a supermarket chain with
distribution completed through the supermarket
chain’s distribution system. This strategy has been
used by Saltum. It is a strategy which does not
involve heavy advertising costs or major investment
in a distribution system. Saltum has in the period
1990 to 1995 been able to increase its CSD volume
from 19 to 54 million litres. This increase in
volume arises from sales of Saltum’s own brands, an
increase in its supplies of DOBs to a supermarket
chain and the acquisition of another producer of
discount CSDs. In comparison, Bryggerigruppen,
the PepsiCo bottler, increased its volume from 39
to 58 million litres in the period 1990 to 1995.
However, an assessment of the competitive impact
of a producer like Saltum cannot be made simply
by looking at the increase in its volume sold, as
argued by the parties at the Hearing and in the
Response (p. 52). It must be noted that the growth
of Saltum has mainly been achieved through an
acquisition and the production of DOBs for one
supermarket chain. Moreover, it is incorrect to say

(1) Decision 96/204/EC, Orkla/Volvo.

the three largest Danish
that Saltum is one of
brands by considering its total production, as one
third of its production is of DOBs and one fifth
represents
acquired
recently by Saltum. Finally, it is necessary to look
at the impact of discount brands and DOBs on the
whole market.

discount

another

brand

(77) Discount brands and DOBs have achieved a certain
success in the retail channel, but are of little impor-
tance in the service trade and Horeca. Discount
brands and DOBs therefore only have an impact
on specific parts of the market. It is correct as the
parties stated at the Hearing that discount brands
have increased their volume share of the market in
the period 1986 to 1996. However, more impor-
tantly, in value terms the share of discount brands
and DOBs actually decreased from 24 % of the
market in 1993 to 21 % of the market in 1995.
Furthermore, it is clear from Nielsen data that the
average retail price for all CSDs has not decreased
in the last two years. Finally, the price differences
between Denmark and neighbouring countries (see
section V.B above) are substantial. This is evidence
that discount brands and DOBs have not been able
to create competition which has led to a lower
price level for consumers. It, therefore, appears that
branded CSDs are of
importance to enable a
producer to be an effective competitor. In any case,
the most likely companies to enter the CSD market
with discount brands or DOBs are the established
brewers who are already on the market with such
products.

(78)

For these reasons there do not appear to be any
potential competitors who would or could enter the
Danish overall CSD markets at either a brand or
bottling level.

(d) Countervailing buyer power

(79) Major retail chains have a need to stock leading
brands such as those owned by TCCC and Carls-
berg. The Coca-Cola brand, in particular, is consid-
ered a ‘must stock' brand; and CSDs in general are
of strategic importance to grocery retailers in that
they are fast-moving consumer goods that ‘build
traffic'. One retailer noted that if Coca-Cola were

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Official Journal of the European Communities

15. 5. 98

(80)

(81)

delisted, a certain volume of consumers would be
lost to another retail outlet, indicating the strong
demand for the Coca-Cola brand. Consequently,
retailers cannot use the threat of increasing volume
of other brands as leverage. Therefore, it appears
that little, if any, countervailing buyer power arises
between the customer and either the brand owner
or bottler.

In the Response the parties have argued that
Dadeko is constrained by powerful buyers and that
Dadeko’s five largest retail customers account for
around [35 to 40 %] of TCCC’s total sales of NABs
in Denmark. Furthermore, retailers control shelf
space and product promotions and would be able
to meet CSD requirements from sources other than
Dadeko. The parties also mention examples of the
power of supermarket chains: a delisting of [ . . . ]
by the [ . . . ] chain for a period in [ . . . ] and a
reduction in shelf space by [ . . . ] in [ . . . ].

TCCC is dominant on the CSD market at the
brand level. For similar reasons the Commission
considers that Dadeko, as licensee of TCCC,
is
dominant on the market for CSDs at the bottling
level.

B.3. Strengthening of a dominant position on
the overall CSD market in Denmark

(83) With the creation of CCNB, the brands, the portfo-
lios and distribution system of TCCC and Carls-
berg/Dadeko come under the joint strategy and
common ownership of the parties. Consequently
the Commission has concluded that the creation of
CCNB will give rise to the strengthening of the
dominant positions of TCCC and Dadeko on the
CSD market at
the brand and bottling levels
respectively.

available

to smaller

The Commission recognises that the big super-
market chains have more negotiating power than
smaller retailers, and that this results in the super-
market chains being able to negotiate discounts
which are not
retailers.
However, in an assessment of dominance the ques-
tion is whether there is sufficient countervailing
buyer power to neutralise the market power of the
parties. This is not the situation in the present case.
First, the concentration ratio on the supply-side is
much higher than on the buyer side. Second,
retailers are not able to meet the demand for the
dominant ‘must stock' TCCC brands from other
suppliers. Consequently, they are not able to find
other suppliers for their CSD requirements to such
an extent that it could remove the dominance of
the parties. In the absence of any other specific
reasons for the presence of countervailing buyer
power, it can only be concluded that little counter-
vailing buyer power exists. This is also clear from
the fact that Danish CSD prices are very high
compared to neighbouring countries. See section
V.B above.

(e) Conclusion

(84)

[ . . . ],

the licensing of

to [50 to 55 %]

The parties have argued that the intended divest-
iture of Jolly Cola,
the
discontinuation of certain [ . . . ] brands, as well as
[ . . . ] would have reduced their market share from
[55 to 60 %] to [50 to 55 %] at the brand level in
1995. These actions would have led to a reduction
in market share, at the bottling level, from [60 to
65 %]
in 1995. However, as
discussed below it is not likely that the operation
will lead to the parties giving up this [5 to 10 %]
market share. More importantly, the parties have
forecast that the overall CSD market in Denmark is
expected to grow. Rather,
the
purpose of the operation is to position TCCC and
this
CCNB/Dadeko to capture the majority of
growth. For the following reasons, TCCC’s dom-
inant position will be strengthened at the brand
level and Dadeko’s at the bottling level through the
creation of CCNB.

it appears

that

(a) The change from a licence agreement to a joint

venture arrangement

(85)

Bottlers may be either independent companies,
licensed by TCCC to produce its products, or en-
tities which are either partly or wholly owned by
TCCC. In some cases, the bottling arrangement
between TCCC and the licensee matures into the
creation of a joint venture between the two parties,
a relationship which may subsequently be ter-
minated upon the former
licensee becoming
subject to the sole control of an ‘anchor bottler' (1).

(82)

In the overall market for CSDs, TCCC’s market
share, the strength of its brand, the barriers to entry
for competitors and the lack of countervailing
buyer power, lead the Commission to conclude that

(1) Such was the case in IV/M.794 (cid:190) Coca-Cola Enterprises,
Inc./Amalgamated Beverages GB (Decision 97/540/EC). In the
present operation, there is already a provision in the MSA in
case of dissolution of CCNB,
in which event CCNB would
pass under
the full control and ownership of TCCC (as
discussed in paragraph 11).

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(86) As far as the present arrangements are concerned,
the operation results in a change from a licence
agreement to a structural joint venture. The present
licence agreement between TCCC and Dadeko is
based on TCCC’s standard Bottler’s Agreement
known as its European Community Standard Inter-
national Bottler’s Agreement (‘ECSIBA') which was
notified under Regulation 17 to the Commission
on 7 September 1992 (1).

agreement
Dadeko in two ways.

to a joint venture will

strengthen

(87)

(88)

In general terms, the present agreement provides
that TCCC’s role is confined to selling and deliv-
ering beverage bases and to approving certain deci-
sions. Dadeko’s role is confined to preparing and
packaging TCCC beverages for distribution and
sale in Denmark. Dadeko is obliged [ . . . ]. The
bottling agreement obliges Dadeko, for example, to
[ . . . ]. Dadeko is further identified as being [ . . . ].
Thus, the Bottler’s Agreement provides for a formal
division of responsibilities between Dadeko and
TCCC. Moreover, under the present arrangement
[ . . . ].

The post-merger arrangement will be based on a
Bottler’s Agreement (2), the MSA and the licence
agreement concerning the [ . . . ] CSD brands. The
last two agreements will thus involve additional
contractual obligations on the parties in addition to
the bottling provisions, described above. Some of
the main changes that will ensue in the relation-
ship between the parties are: (i) TCCC will become
fully involved in all decision-making bodies at
[certain] brands will now
different
become a part of the joint venture and thus subject
to joint decision-making, (iii) Carlsberg must not,
directly or indirectly, undertake any act or activity
in relation to [ . . . ] within [ . . . ] and (iv) the MSA
introduces [ . . . ].

levels (3),

(ii)

(89)

The parties have recognised that the concentration
will lead to a structural change but have maintained
that the structural change will have no appreciable
impact on the parties’ business
relationship.
the structural change from a licence
However,

(1) Case IV/34.460, which is still pending.
(2) The parties have submitted that the Bottler’s Agreement to be
executed between TCCC and Dadeko following the imple-
mentation of the notified operation will be identical to [ . . . ]
in all material respects.

(3) This means that TCCC will be represented at:

(i) the share-
the supervisory board which,
holders’ general meeting,
jointly with the executive board, is in charge of the manage-
ment affairs, is responsible for the proper organisation of the
activities and supervises the activities of the executive board;
(iii)

[other day-to-day management functions].

[ . . . ]; and (iv)

(ii)

(cid:190) It will allow TCCC to take a more long-term
view. The Commission appreciates that TCCC
and other brand owners have historically
licensed bottlers for long periods. However,
licence agreements are intrinsically not struc-
tural and therefore more limited in their
contractual obligations and they are also a more
short-term means of cooperation than a joint
venture. In this respect it is instructive to note
that TCCC terminated its licence agreement
with Pripps in Sweden to facilitate the creation
of CCNB and that TCCC recently established a
joint
long-term
PepsiCo licensee in Venezuela. Such transac-
tions would be more difficult to achieve in the
case of a joint venture agreement as compared
to a licence arrangement. In the present case,
[ . . . ].

venture with the

former

(cid:190) It will harmonise the goals of TCCC and
Carlsberg. The parties have recognised that
there can be conflicting interests between
TCCC as a brand owner and Carlsberg as a
bottler. The creation of CCNB will give TCCC
joint control over production, below-the-line
marketing, distribution and sales of both TCCC
and [certain other] brands. The operation will
remove potential areas of conflict between
TCCC and Carlsberg, for example, in the allo-
cation of production capacity and advertising
strategies. At present TCCC and Carlsberg
could, for example, have different interests in
advertising and point-of-sales
the mix of
promotions, since TCCC is basically paying for
the above-the-line advertising, whereas Carls-
berg/Dadeko is paying for the point-of-sales
advertising and has other brands being sold
outside the influence of TCCC. In the future,
with the creation of the joint venture, such
areas of conflict will be eliminated through the
pooling of the brands under TCCC and the
joint control over CCNB. In this sense, the
operation will create a ‘seamless' structure with
better coordination between the brand and
bottling levels.

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15. 5. 98

(90)

the foregoing,

the
Therefore, on the basis of
Commission does not accept
the ‘no change
scenario' presented by the parties who consider that
the creation of CCNB will not significantly change
the present situation and that TCCC will have no
new decision-making power or influence over its
bottler beyond the influence that it currently exerts.

Denmark, even if the brand were to be licensed to
Bryggerigruppen. For these reasons, it cannot be
taken for granted that [ . . . ] would be licensed to
Bryggerigruppen. In fact, the brand may be with-
drawn from the Danish market.

(b) Strengthening at the brand level

(91)

(92)

important

Jolly Cola will remain in the CCNB brand port-
folio despite [ . . . ]. In the Response the parties
have argued that Jolly Cola is a brand in decline
which has lost considerable market share and has
become less
in recent years. The
Commission recognises the difficulties faced by the
Jolly Cola brand and the fact that the market share
of Jolly Cola has decreased to about only 5 %.
However, there is not at present any agreement to
sell
the stake in Dansk Coladrik, and any sale
would be complicated by a pending court case over
the disposal process. Consequently, the Commis-
sion has combined the market share appertaining
to Jolly Cola with that of the parties.

Similarly it has been argued that the [ . . . ] brand
should not be included in the parties’ market share
since Carlsberg is to license its production to [ . . . ].
However,
its exclusion would be inappropriate
since Carlsberg plans to continue to distribute the
[ . . . ] brand. In the Response the parties have
argued that [ . . . ]. The Commission agrees that the
brand is not
in an overall market
context, but notes that Carlsberg will continue to
distribute the [ . . . ] brand.

important

(93) As regards [ . . . ], there is a risk that [ . . . ] may leave
the overall CSD market in Denmark because, as a
consequence of the operation,

[ . . . ].

(94)

The parties claim that it is likely that the [ . . . ]
brand will be able to find another bottling arrange-
ment:
in reality the only available alternative is
Bryggerigruppen. While it is not impossible that
Bryggerigruppen would become the future bottler
[ . . . ]. Finally, as noted above, Carlsberg has
of
influence over Bryggerigruppen. The
substantial
establishment of CCNB will mean that,
in any
conflicts between the interests of [ . . . ] and those of
TCCC, Carlsberg is
likely to support TCCC
because the strategic interest of Carlsberg in CCNB
is much greater than its interest in the CSD busi-
ness of Bryggerigruppen. This will constrain the
[ . . . ] brand in
competitive potential of

the

(95)

(96)

The operation will result in reduced competition
and Cadbury
between the TCCC, Carlsberg
Schweppes brands. At present
the capacity of
Dadeko is allocated between the production of
TCCC, Tuborg, Carlsberg and Cadbury Schweppes
brands and, at the marketing level, coordination is
undertaken at the Carlsberg Group level through
the Carlsberg Soft Drink Coordination Committee.
However, Dadeko is currently an exclusive TCCC
sales and distribution organisation, which is sep-
arate from the Tuborg and Carlsberg sales and
distribution organisations. Therefore,
a certain
degree of competition between the brands of
TCCC, Carlsberg and Cadbury Schweppes takes
place.

The operation will lead to a structural change in
this relationship. First, the brand management and
the above-the-line marketing for all the TCCC,
[ . . . ] and [ . . . ] brands will be handled by TCCC,
and the [ . . . ] brands by CCNB. Second,
the
distribution and below-the-line marketing will be
carried out by Dadeko for all the TCCC, Carlsberg,
the operation will
and [ . . . ] brands. Therefore,
create one focused organisation which has all the
TCCC, Carlsberg,
[ . . . ] and [ . . . ] brands in its
portfolio, and which carries out all the distribution,
marketing and sales activities of TCCC and Carls-
berg for all the brands (including the [ . . . ] brands).
Consequently,
the present competition between
TCCC, Carlsberg and [ . . . ] brands will be elimin-
ated. Moreover, TCCC would acquire the power to
give
promotional
advertising
support to the CSDs it prefers and to weaken, or
totally eliminate, support for other flavours. This
means it would be able to ‘manage out' flavours
from the Carlsberg and [ . . . ] portions of
the
CCNB portfolio to the advantage of TCCC brands.

additional

and

(97) As discussed above, Carlsberg has substantial influ-
ence over Bryggerigruppen. It is clear [ . . . ] that the
link between Bryggerigruppen/Pepsi and Carlsberg
[ . . . ] could cause conflicts of interest for Carlsberg.
future stake in
[ . . . ]. Furthermore, Carlsberg’s
CCNB may further constrain the competitive
potential of Bryggerigruppen on the Danish CSD
market. In particular in cases of conflict between

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TCCC and PepsiCo, Carlsberg would have a greater
incentive to support TCCC after the operation. The
reason is that Carlsberg’s stake in CCNB is of
much greater strategic importance than its stake in
the CSD business of Bryggerigruppen.

influence over which new brands will be launched
on the Danish market. Therefore the likelihood
that a major international brand, such as Cadbury
Schweppes’ Dr Pepper brand, would enter
the
market is reduced.

(98) As concerns raising barriers to entry,

the only
likely to launch new CSD
Danish companies
brands would be Carlsberg or Bryggerigruppen.
However, Carlsberg will be eliminated as a compet-
itor at this level in the future. This is particularly
important since Carlsberg is one of the few compa-
nies which would be able to challenge TCCC as a
supplier of new brands. Furthermore, it cannot be
excluded that Carlsberg’s substantial influence over
Bryggerigruppen could constrain the launch of a
new brand by this company. Therefore, in effect,
the operation gives TCCC decisive influence over
which new brands will be launched on the overall
CSD market in Denmark in the future. In this
respect it should be noted that [ . . . ], especially
since TCCC has recently launched the [ . . . ] brand
on the Danish market.

(c) Strengthening at the bottling level

(99)

thereby allowing it
leverage of

The operation will allow TCCC to have direct
contact with customers,
to
its global
employ the commercial
system in relation to its
customers, greatly
increasing its bargaining position in the market.
Consequently, TCCC will also be in a position to
implement
volume
discounts and rebate schemes more easily.

programmes,

exclusivity

(100) The operation forecloses the Carlsberg distribution
system to brands other than those owned by or
licensed to TCCC and CCNB. The Carlsberg and
Tuborg distribution systems are still today available
for other brands. This is demonstrated by the fact
that,
in 1993, Carlsberg launched the Cadbury
Schweppes Sunkist brand, which is distributed by
Carlsberg and Tuborg. As a consequence of the
operation, such product launches would no longer
be possible for Carlsberg. Since the Carlsberg
distribution system is the largest in the country,
that foreclosure has serious consequences for other
brand owners, especially given Carlsberg’s substan-
tial influence over Bryggerigruppen, which is the
only realistic alternative to Carlsberg as a licence
holder and distributor of a new international brand
for colas and other CSDs. Thus the operation will
further increase the likelihood of CCNB increasing
its market share and in reality gives TCCC decisive

B.4. Conclusion

(101) For

the above reasons,

the Commission has
concluded that, at the brand level TCCC is domi-
nant and at the bottling level Dadeko (as bottler for
TCCC and Carlsberg CSDs) is dominant. With the
creation of CCNB,
the dominant positions of
TCCC and Dadeko (control over which passes to
CCNB) are strengthened. In reality, the operation
will give TCCC decisive influence over which new
CSD brands are launched on the Danish market.

C. Sweden

C.1. Overview of the industry

(102) The total volume of CSDs consumed in Sweden, in
1995, was some 542 million litres of which 239
million litres (44 %) were cola flavoured CSDs.
Some 77 % of all CSDs in Sweden were sold by the
retail trade in 1995, with the balance being sold in
the Horeca channel.

the largest of

(103) Prior to the establishment of CCDS, three brew-
eries were primarily responsible for the production,
distribution and sale of CSDs and packaged waters
in Sweden. Pripps, a subsidiary of the Norwegian
conglomerate Orkla, was
these
companies. As well as producing a range of beers,
Pripps was the licensee for TCCC’s brands and is
the franchisee for Cadbury Schweppes’ mixers, in
addition to producing its own CSDs and packaged
waters. The second largest brewer was Spendrups
Bryggeri AB, which is independently owned and
holds, at present, the licence for PepsiCo brands in
Sweden and Norway. The smallest of the three
brewers, Falcon, currently holds the licence to
produce Dr Pepper. Falcon will jointly own, with
CCDS, the distribution joint venture, DDAB.

(104) As already mentioned, since 1 April 1997, CCDS
has been marketing and selling the full range of
TCCC’s products on the Swedish market. As of 1
the
January 1998, CCDS will also take over
bottling of those products, which is being carried
out by Pripps until its bottling agreement expires
on 31 December 1997.

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C.2. Market structure

C.3. Conclusion

(105) The market positions of the brand owners and
bottlers on the overall CSD market in Sweden are
shown in the following tables, which set out the
market shares for 1995 on a value basis and the
estimated market shares following the creation of
CCNB (based on data provided by the parties):

B r a n d s

(%)

All flavoured
CSDs 1995

All flavoured
CSDs post
CCNB

[40 to 50]
[0 to 5]
[50 to 55]

[5 to 10]
[0 to 5]
[10 to 15]
[5 to 10]
[15 to 20]

[50 to 55]
[0 to 5]
[50 to 55]

[5 to 10]
[0 to 5]
[10 to 15]
[5 to 10]
[15 to 20]

TCCC
Falcon

Total parties

PepsiCo
Schweppes
Pripps
Spendrups
Others

NB: The ‘Others' category includes DOBs and the like.

B o t t l e r s

recognises that

(107) On the basis of the information provided by the
parties,
together with the Commission’s invest-
igation, there are indications that TCCC is domi-
nant at the brand level and CCDS is dominant at
the bottling level on the CSD market in Sweden.
The Commission, however,
the
formation of CCDS, together with the termination
of TCCC’s licence agreement with Pripps, will add
new bottling capacity to the Swedish CSD market.
Consequently, the concentrative elements of the
operation will not lead to a strengthening of the
present positions of either TCCC or CCDS. The
cooperative elements of the operation (the TPSA
and the creation of DDAB) are being assessed
under the separate proceedings pursuant to Article
85 of the EC Treaty. In this context, the Commis-
sion notes that certain undertakings have been
given during the course of the procedure under the
Merger Regulation with respect to the TPSA (see
below).

VII. UNDERTAKINGS SUBMITTED BY THE

PARTIES

(108)

In the light of the competition concerns identified
by the Commission, the parties have offered to
modify the original
concentration plan. The
wording of the two main divestiture undertakings is
as follows:

(%)

(109) Divestiture of Carlsberg’s shareholding in

Jyske Bryg

All flavoured
CSDs 1995

All flavoured
CSDs post
CCNB

[5 to 10]
[5 to 10]

[60 to 65]
[15 to 20]
[15 to 20]

[50 to 55]
[5 to 10]
[55 to 60]

[15 to 20]
[15 to 20]
[15 to 20]

CCDS
Falcon

Total parties

Pripps
Spendrups
Others

NB: The ‘Others' category includes DOBs and the like.

(106)

In the context of the market structure, it should be
taken into account that in August 1997 Pripps and
PepsiCo agreed to enter into an exclusive franchise
bottling agreement for the production, distribution
and sales of Pepsi-Cola and Seven-Up products in
Sweden. The agreement will come into force on 1
January 2001, after the expiry of PepsiCo’s existing
bottling agreement with Spendrups. According to
the parties, preliminary discussions are also under
way regarding a similar alliance in Norway.

‘In order to meet the requirements of the Commis-
sion to facilitate the development of a viable
competitor with adequate resources in the CSD
sector, Carlsberg A/S hereby gives the following
undertaking to the Commission with respect to its
shareholding in Jyske Bryg Holding A/S:

1. If, within [ . . . ] from the date of the Commis-
sion adopting a favourable decision under Regu-
lation (EEC) No 4064/89, Carlsberg A/S has not
sold its shares in Jyske Bryg Holding A/S (such
shares hereinafter referred to as the “Shares”) to
one or more viable industrial undertakings
unconnected to Carlsberg A/S or The Coca-Cola
Company, such purchaser being in a position to
maintain and develop Bryggerigruppen as an
active competitive force in competition with
Dadeko, Carlsberg A/S will:

(a) appoint an independent firm of accountants,
lawyers,
similar
investment bankers or
consultants (such firm hereinafter referred to
to be approved by the
as the “Trustee”),
Commission, and to act on the Commis-
sion’s behalf in overseeing the ongoing inde-
pendent and separate management of the

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Shares and the continued efforts by Carls-
berg A/S to divest
the shares within the
further period set out in (b) below; and

(b) be allowed a further period of [ . . . ] to nego-
tiate a sale of the Shares to a purchaser or
purchasers unconnected to Carlsberg A/S or
The Coca-Cola Company.

2. Should divestiture according to paragraph 1
above not have been accomplished within the
further period set out in paragraph 1(b) above,
Carlsberg A/S will give the Trustee an irrevoc-
able mandate to find purchaser(s) for the Shares,
such sale to be made at a fair and reasonable
price within an additional extension period of
[ . . . ] (or such further period to be agreed with
the Commission) to a purchaser or purchasers
unconnected to Carlsberg A/S or The Coca-Cola
Company. Carlsberg A/S will provide
the
Trustee with all the assistance and information
necessary for the execution of such sale and for
the obtaining of such terms and conditions.

3. In the event that the Trustee has not sold the
Shares by the end of the period described in
paragraph 2, he shall sell the Shares on the best
to an
possible terms and conditions subject
absolute and unconditional obligation on Carls-
berg A/S to divest at no minimum price. Such
sale to take place prior to the end of the period
described in paragraph 2.

4. Carlsberg A/S or the Trustee (as appropriate) will
notify the Commission of any proposal within
their knowledge for a sale of Shares to a single
purchaser by Carlsberg A/S where such sale is in
respect of Shares amounting to [ . . . ] per cent or
more of the total number of issued shares in
Jyske Bryg Holding A/S. The Commission will,
within [ . . . ] weeks of receipt of such notifica-
tion, inform Carlsberg A/S or the Trustee (as
appropriate) in writing if it considers that the
proposed purchaser does not fulfill the condi-
tions set out in paragraphs 1, 1(b) or 2 (as appro-
priate), in which case a sale to such proposed
purchaser shall not proceed. Otherwise, at the
end of the [ . . . ] week period Carlsberg A/S will
be free to sell its shares to such purchaser.

5. Carlsberg A/S further understands that any sale
of shares amounting to less than [ . . . ] per cent
of the total issued shares in Jyske Bryg Holding
A/S shall also be to a purchaser which to the
best of Carlsberg A/S’s knowledge is uncon-
nected to it or The Coca-Cola Company. When

its

shares

in Jyske Bryg
the divestiture of
Holding has been accomplished, Carlsberg A/S
undertakes to report
to the Commission the
identity of the buyer(s) of the shares, provided
that the identity of the buyer(s) of the shares is
known to Carlsberg A/S, and as may be neces-
sary, provide the information, to the best of its
knowledge, necessary to judge whether
the
buyers are unconnected with Carlsberg A/S and
The Coca-Cola Company.

6. Carlsberg A/S, or alternatively the Trustee,
undertakes not to vote the Carlsberg A/S shares
in Jyske Bryg Holding A/S during the divest-
iture periods except with the prior approval of
the Commission. The Commission will not
unreasonably withhold its approval for Carlsberg
A/S, or alternatively the Trustee, to vote the
shares. Carlsberg A/S will provide the necessary
information for the Commission to make an
evaluation in this respect.

7. Carlsberg A/S or the Trustee, as the case may be,
will notify the Commission of all material devel-
opments in relation to the sale of the Shares
and, in any event, will report on relevant devel-
opments at [ . . . ] intervals.'

(110) Divestiture of Carlsberg’s shareholding in

Dansk Coladrik (Jolly Cola)

‘Carlsberg A/S hereby gives the following under-
taking to the Commission with respect to its share-
holding interests in Dansk Coladrik A/S:

a

adopting

1. Carlsberg A/S will, within [ . . . ] of the date of
the Commission
favourable
decision under Regulation (EEC) No 4064/89,
seek to sell its shareholding in Dansk Coladrik
A/S, it being understood that any purchaser
should be a viable existing or prospective
competitor independent of Carlsberg A/S and
The Coca-Cola Company and possessing the
financial resources and proven expertise in the
NAB market, enabling it
to maintain and
develop Dansk Coladrik A/S as an active
competitive force in competition with Dadeko
A/S in relation to the bottling of cola CSDs
(such purchaser hereinafter referred to as a
“Purchaser”).

2. If Carlsberg A/S does not divest

its share-
holding in Dansk Coladrik A/S by the end of
the period set out in paragraph 1 above, Carls-
berg A/S will appoint an independent trustee

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15. 5. 98

to be approved by the Commission (hereinafter
referred to as “the Trustee”) to act as described
below.

3. The Trustee will on Carlsberg A/S’s behalf
oversee the ongoing management of Dansk
Coladrik A/S to ensure its continued viability
and market value and the rapid and effective
sale of the Carlsberg A/S shares in Dansk Cola-
drik A/S at a fair and reasonable price.

4. Carlsberg A/S will give the Trustee an irrevoc-
able mandate to find a Purchaser for its share-
holding in Dansk Coladrik A/S within an
(or such further
extension period of
period to be agreed with the Commission).
Carlsberg A/S agrees to undertake to give, on
an arms-length basis and subject to Carlsberg
A/S’s reasonable secrecy interests, all assistance
requested by the Trustee prior to the sale of the
Carlsberg A/S shareholding to a Purchaser.

[ . . . ]

5. Carlsberg A/S or the Trustee will report to the
Commission on whether it believes that one or
more proposed purchasers fulfil the description
of a Purchaser set out in paragraph 1 above.
The Commission will, within [ . . . ] weeks of
receipt of such report, inform Carlsberg A/S or
in writing if
the Trustee (as appropriate)
it
such proposed
reasonably
that
considers
purchaser or purchasers do not
the
fulfil
description of a Purchaser set out in paragraph
1 above, in which case a sale to such proposed
purchaser or purchasers
shall not proceed.
Otherwise, at the end of the [ . . . ] week period
Carlsberg A/S will be free to sell its shares to
such purchaser.

6. Providing the offers concerned have been
received from Purchasers and the procedure
described in paragraph 5 has been complied
with, Carlsberg A/S alone will be free to accept
any offer or to select the offer it considers best
in case of a plurality offer.

7. In the event that the Trustee has not sold the
Carlsberg A/S shareholding in Dansk Coladrik
A/S by the end of the period described in
paragraph 4, he shall sell the shareholding on
the best possible terms and conditions subject
to an absolute and unconditional obligation on
Carlsberg A/S to divest at no minimum price.
Such sale to take place prior to the end of the
period described in paragraph 4.

in order

8. Prior to the completion of the sale of the Carls-
berg A/S shareholding in Dansk Coladrik to a
Purchaser, Carlsberg A/S will ensure that
Dansk Coladrik A/S is managed as a distinct
and saleable entity with its own management
accounts, and that the management of Dansk
Coladrik A/S are instructed that
the Dansk
Coladrik A/S business will be managed on an
independent basis
to ensure its
continued viability and market value, and this
will take place under the guidance and control
of the Trustee following his appointment as
described in paragraph 2 above. Prior to the
completion of the sale of the Carlsberg A/S
shareholding to a Purchaser, Carlsberg A/S will
not integrate the Dansk Coladrik A/S business
into any Carlsberg A/S business unit, nor will it
appoint or second any Carlsberg A/S employee
to the Dansk Coladrik A/S business. Carlsberg
A/S also undertakes that it will make no struc-
tural changes to the Dansk Coladrik A/S busi-
ness without prior Commission approval.

9. Carlsberg A/S will not obtain from Dansk
Coladrik A/S management
business
secrets, know-how, commercial information or
information or property
any other industrial
rights of confidential or proprietary nature
relating to the Dansk Coladrik A/S business.

any

10. Carlsberg A/S undertakes that, prior to the sale
of the Carlsberg A/S shareholding in Dansk
Coladrik A/S, all existing agreements between
Carlsberg A/S and Dansk Coladrik A/S relating
to the sale of Jolly Cola concentrate by Dansk
Coladrik A/S to Carlsberg A/S will continue in
force and, in the event that any such agreement
will expire prior to the sale of the Carlsberg
A/S shareholding, it will be renewed by Carls-
berg A/S without any material change to the
terms of the contract unless such change is
approved by the Commission.

11. Carlsberg A/S or the Trustee as the case may
be will notify the Commission of all material
developments in relation to the sale of the
Carlsberg A/S shareholding in Dansk Coladrik
A/S and, in any event, will report on relevant
developments at [ . . . ] intervals.'

(111) Other undertakings

In addition, the parties have proposed three other
undertakings. First, the parties will change the noti-
fied licence agreement relating to the [ . . . ] NAB
brands in order to enable Carlsberg to have control

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EN

Official Journal of the European Communities

L 145/61

their brand management. Carlsberg will
over
provide Dadeko with [ . . . ]. Second, the MSA will
be amended to enable Carlsberg to compete in the
CSD market within the CCNB territory. Third, the
TPSA will be amended so that TCCC will not
purchase the [ . . . ]
trademark from Falcon, nor
supply [ . . . ].

(115) Carlsberg’s undertaking to divest itself of its share-
holding in Dansk Coladrik addresses the Commis-
sion’s concern about an effective and timely
disposal of that holding by the parties’ proposal to
appoint a trustee to oversee the management and
sale of Dansk Coladrik. It is noted that the other
three shareholders in Dansk Coladrik have rights of
first refusal to Carlsberg’s shares in the company.
The Commission considers that under the present
circumstances and in view of the total package of
undertakings, Carlsberg or the trustee can sell the
shares in Dansk Coladrik to one or more of the
other existing shareholders in Dansk Coladrik.

VIII. ASSESSMENT OF THE UNDERTAKINGS

(112)

In the light of the assessment of the operation, the
Commission considers that the proposed under-
takings are adequate to prevent the strengthening
of a dominant position as a result of which effective
competition would be significantly impeded.

(113) At present, TCCC is dominant at the brand level
and Dadeko is dominant at the bottling level. The
operation will lead to TCCC’s forward vertical in-
tegration into bottling and thereby link TCCC and
Bryggerigruppen through Carlsberg’s shareholding
in Bryggerigruppen, the second largest brewer and
in Denmark. Only the
soft drinks producer
removal of this link would make Bryggerigruppen
free of TCCC and Carlsberg and enable it to be
established as the second independent player in the
Danish CSD market. The Commission considers
Bryggerigruppen to have the necessary resources to
become a viable second force in the Danish CSD
market since, among other things, it has a suffi-
ciently broad range of products in its portfolio, it
holds the licence for the PepsiCo brands, and it has
an adequate nationwide distribution system.

(114)

the Commission, Carlsberg’s
In the opinion of
undertaking to divest itself of its shareholding in
Jyske Bryg is crucial to counterbalance the anti-
competitive impact arising from the creation of
CCNB. In particular, the undertaking compensates
for the de facto elimination of Carlsberg as an
actual and potential competitor at the brand level
and for the foreclosure of Carlsberg’s distribution
system, since it will allow Bryggerigruppen to
develop into a real alternative to the parties on the
Danish market. The undertaking,
for example,
makes it more likely that
[ . . . ], and that new
brands can be launched in competition with the
brands of TCCC. Therefore, given the specific
the
circumstances of
Commission considers the undertaking to be an
essential remedy to prevent a strengthening of a
dominant position.

the Danish CSD market,

(116) Finally,

impact of

anti-competitive

the other undertakings offered by the
parties are not adequate in themselves to redress
the
the proposed
concentration. First, the undertaking designed to
give Carlsberg certain supervisory responsibilities
over the [ . . . ] NAB brands will lead to increased,
though not
from TCCC.
Second, the new limitation imposed on the non-
competition clause will have only a limited impact,
if any, in the marketplace. Third, the undertaking
relating to the TPSA solely concerns the arrange-
ments in the Swedish market. The Commission,
therefore, notes the existence of these undertakings,
but does not assess them further.

independence

full,

IX. ANCILLARY RESTRAINTS

(117) The parties have requested that clause [ . . . ] of the
MSA, which sets out the non-competition obliga-
tions of TCCC [ . . . ] and Carlsberg [ . . . ] and
which are coterminous with the lifetime of the
joint venture, be considered as ancillary to the
concentration. These provisions are directly related
and necessary to the implementation of
the
concentration and, accordingly,
the Commission
recognises their ancillary character.

X. OVERALL CONCLUSION

(118) Consequently the notified operation, as modified
by the divestiture package, will not strengthen a
dominant position in the Danish CSD market as a
result of which effective competition would be
significantly impeded in the common market or in
a substantial part of it. The operation is, therefore,
on condition that the undertakings are adhered to,
compatible with the common market and the func-
tioning of the EEA Agreement,

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Official Journal of the European Communities

15. 5. 98

HAS ADOPTED THIS DECISION:

Article 1

Subject to full compliance with the divestiture under-
takings concerning Jyske Bryg Holding A/S and Dansk
Coladrik A/S, as set out above in paragraphs 109 and 110,
the concentration notified by the parties on 25 March
1997 relating to the creation of Coca-Cola Nordic Bever-
ages is declared compatible with the common market and
the functioning of the EEA Agreement.

Article 2

This Decision is addressed to:

The Coca-Cola Company
One Coca-Cola Plaza, N.W.
Atlanta GA 30013
USA

Carlsberg A/S
Vesterfælledvej 100
1799 Copenhagen V
Denmark

Done at Brussels, 11 September 1997.

For the Commission

Karel VAN MIERT

Member of the Commission