98/475/EC: Commission Decision of 11 February 1998 declaring a concentration to be compatible with the common market and the functioning of the EEA Agreement (Case No IV/M.986 - Agfa-Gevaert/DuPont) (notified under document number C(1998) 1290) (Only the English text is authentic) (Text with EEA relevance)
Date: 1998-02-11
Institutions: European Commission
Subjects: European Economic Area, common market, competition, economic concentration, fine arts, thin sheet

L 211/22

EN

Official Journal of the European Communities

29. 7. 98

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 11 February 1998

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

(Case No IV/M.986 (cid:190) Agfa-Gevaert/DuPont)

(notified under document number C(1998) 1290)

(Only the English text is authentic)

(Text with EEA relevance)

(98/475/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(2)(a) 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 partic-
ular Article 8(2) thereof,

Having regard to the Commission Decision of 9 October
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 8 September 1997 the Commission received a
notification of a proposed concentration pursuant
to Article 4 of Regulation (EEC) No 4064/89 (‘the

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

1990, p. 13.

(2) OJ C 238, 29. 7. 1998.

(2)

(3)

Merger Regulation'), by which the undertakings
Agfa-Gevaert AG and Agfa-Gevaert NV (‘Agfa'),
which belong to the Bayer group, were to acquire
within the meaning of Article 3(1) of the Merger
Regulation the graphic arts film and offset printing
plates businesses belonging to the group of E. I.
DuPont de Nemours & Company (‘DuPont').

By decision of 29 September 1997, the Commis-
sion ordered the continuation of the suspension of
the notified concentration pursuant to Article 7(2)
and Article 18(2) of the Merger Regulation. On 9
October 1997, the Commission decided to initiate
proceedings pursuant
the
Merger Regulation. On 24 November 1997 the
Commission, in accordance with Article 18(1) of
the Merger Regulation, submitted its objections to
the notifying party.

to Article 6(1)(c) of

I. THE PARTIES

Bayer AG is a diversified chemical and pharma-
ceutical
company
belonging to the Bayer group. Agfa produces
photographic products, technical imaging systems

company. Agfa AG is

a

29. 7. 98

EN

Official Journal of the European Communities

L 211/23

(4)

(5)

(6)

and graphic systems, amongst others through its
subsidiaries Agfa-Gevaert AG (Germany) and Agfa-
Gevaert NV (Belgium).

DuPont, which has its corporate headquarters in
the United States of America, is an internationally
diversified group of undertakings concerned with
chemicals and energy.

Both Agfa and DuPont are active worldwide in the
production of graphic arts film and offset printing
plates. They also deliver products, equipment and
chemicals for graphic arts purposes and provide
maintenance services.

II. THE OPERATION

On 29 July 1997, Agfa and DuPont entered into an
agreement by which DuPont’s worldwide graphics
and press room business would become wholly
the
owned by Agfa. The agreement consists of
acquisition of
the graphic arts and press room
activities of the US undertaking E. I. DuPont de
Nemours & Company. The operation is carried out
through the abovementioned subsidiaries of Agfa
AG, Agfa-Gevaert AG and Agfa-Gevaert NV, which
will acquire the graphic arts and press room busi-
nesses (including R&D, production, distribution,
services, chemicals and services) of DuPont. The
principal locations of the assets are in Germany for
the production of graphic arts film and distribu-
tion/service facilities, and in the United Kingdom
for offset printing plates. The operation also
concerns the acquisition of all inventory, all tech-
nology and other industrial property rights relating
to the operation of the business and goodwill and
customer information, as well as the purchase of all
shares and partnership interests in a company
providing equipment services (DuPont Printing &
Publishing GmbH & Co. KG.). DuPont’s so-called
proofing activities, which form part of the graphic
arts process whereby the ultimate presswork is
simulated, are not part of the takeover.

III. CONCENTRATION

(7)

above described operation constitutes

The
a
concentration within the meaning of Article 3 of
the Merger Regulation, since Agfa acquires control
of a part of the undertaking of DuPont within the
meaning of Article 3(1) of the Merger Regulation.

(8)

(9)

IV. COMMUNITY DIMENSION

concerned

The combined aggregate worldwide turnover of the
undertakings
exceeds ECU 5 000
[ . . . ] (1) million). The aggregate
million (Bayer
Community-wide turnover of each exceeds ECU
250 million (Bayer: ECU [ . . . ] million, sold assets
of DuPont: ECU [ . . . ] million). They do not
achieve more than two-thirds of their turnover in
one and the same Member State. The operation
therefore has a Community dimension within the
meaning of Article l(2) of the Merger Regulation
and constitutes a cooperation case under Article 58
of the EEA Agreement.

V. COMPETITIVE ASSESSMENT

1. Relevant product markets

The concentration affects the sectors of graphic arts
film and offset printing plates. Graphic arts film
and offset printing plates are used for the reproduc-
tion of text and images onto paper or other mate-
rial. These form part of the larger economic sector
of printing and publishing and, more specifically,
the so-called pressroom and pre-pressroom opera-
tions.

(10) Graphic arts film and offset printing plates are used
at different stages of the printing process. Graphic
arts products are used to convert text and artwork
into images on film in preparation for their transfer
onto an (offset) printing plate. Although other
means exist for reproduction of text and/or image,
such as ink-jet printing, offset printing technology
is considered to provide a clearer printed product
and it is used when larger numbers of printed
copies are needed. In any event, neither the noti-
fying party nor any of
the competitors and
customers whom the Commission questioned in its
investigation claimed that other printing techno-
logies should be included in the definition of the
relevant product market.

(11)

In the pre-press room and press room sector,
graphic arts film and offset printing plates are sold
either direct to end-users or to dealers. End-users
are found in the printing and publishing industries,
for example newspaper printers, commercial print-
ers and printers of packaging. Dealers are also
referred to as wholesalers, distributors or retailers.
The notifying party considers that, even though
such dealers are of varying size and may offer a
smaller or larger range of products and/or services,
they should be regarded as a homogeneous group

(1) In the published version of this Decision, some information
has been omitted or replaced by approximations, pursuant to
Article 17(2) of
the Merger Regulation (EEC) No 4064/89
concerning non-disclosure of business secrets.

L 211/24

EN

Official Journal of the European Communities

29. 7. 98

for the competitive analysis. According to the noti-
fying party, they all perform basically the same
function, namely reselling, and are basically subject
to the same conditions, except that (for example)
larger distributors who also perform certain after-
sales services may benefit from more favourable
conditions
retailers. The
enquiry of the Commission has shown that the
assessment as presented by the notifying party is
reasonable. Hereinafter the term ‘dealers', will be
used for all parties performing reselling functions.

than smaller

(prices)

(12)

(13)

in those

Furthermore, the enquiry of the Commission has
shown that both dealers and end-users benefit from
similar conditions, any variations being largely
decided on the basis of objective conditions (such
as rebates linked to volume of purchases or to
additional
services being provided by dealers).
Moreover, in certain geographic areas of the EEA,
sales by dealers are carried out on the basis of
territorial exclusivity, which excludes competition
in that geographic area between producer and
dealer. Furthermore,
a
areas where
customer
the choice between
purchasing direct from the producer or from a
dealer, the data made available by Agfa and DuPont
show that certain categories of customers, such as
larger newspaper printers, are supplied direct by
the producer and that competition between direct
sales by producers and sales via dealers is only
marginal,
in respective sales
conditions hardly exist. Consequently, the defini-
tion of a separate market at the distribution level
would not be justified. In view of that conclusion,
the term ‘customers' is used when referring both to
end-users and to dealers.

since differences

theoretically has

the fact

The notifying party has distinguished five relevant
product markets within the graphic arts film sector
and four relevant product markets within the offset
printing plates sector. The distinction is made on
the basis of technical characteristics of the base
material, the production technique (conventional or
digital) being used and the different applications of
the various types of film and plate. According to
the parties,
that certain products may
generally be used for similar purposes from a
customer point of view, is outweighed by the fact
that those products nevertheless have specific qual-
ities and are ‘system-bound', which means that
expensive product specific equipment is needed for
the processing of a particular type of film or plate.
Nearly all of the competitors and customers who
replied to the Commission’s enquiry agreed that
the products which are described in recital 14 et
seq. are not interchangeable and belong to separate
product markets.

(14) Consequently, the notifying party has stated that
the following nine product markets can be defined:

Graphic arts film:

(cid:190) camera film

(cid:190) contact film

(cid:190) blue laser recorder film

(cid:190) red laser recorder film

(cid:190) infra-red laser recorder film.

Offset printing plates:

(cid:190) positive plates

(cid:190) negative plates

(cid:190) plates for computer to plate (CtP) technology

(cid:190) electrostatic plates.

In general, when referring to graphic arts films and
offset printing plates in a more general sense, the
term ‘consumables' is used in this Decision.

Markets for graphic arts film

(15) Camera film and contact film are used in tradi-
tional, analogue processes, whereby images or text
are transposed onto a film. With camera film,
images are produced onto the film by (photo-
graphic) exposure, creating a film on which the
images are reproduced in so-called half
original
tone images. Contact film may be used to manip-
ulate existing half
for example to
correct colour on images which have previously
been put onto camera film and/or to assemble
images. Exposure to the original information takes
place by direct contact in a so-called contact frame.
Since contact film uses different machinery and has
different
(downstream) applications from camera
film and is only substitutable to a limited extent,
the notifying party has submitted that separate
product markets exist, which is confirmed by
competitors and customers alike.

tone images,

(16)

films

are used in so-called digital
Recorder
processes whereby exposure to light takes place by
laser. In these digital processes,
the images are
manipulated by computer. Because of the different
techniques and equipment being used as compared
to the above analogue processes, recorder films
should generally be distinguished from camera film
and contact film. Three types of recorder film exist:
blue laser, red laser and infra-red laser. The three
laser techniques are the products of technological
advancements from one to another and can be used
for varying quality applications and thus respond to
laser
different customer needs. Each type of

29. 7. 98

EN

Official Journal of the European Communities

L 211/25

(22)

the end-user

film requires

to apply
recorder
specific equipment, depending on the type of laser
used. For example, blue laser film cannot be used
with red laser equipment. For these reasons, blue,
red and infra-red recorder films are not regarded as
interchangeable from the end-user’s point of view,
and belong to separate product markets. The
Commission’s investigation has confirmed Agfa’s
viewpoint.

(17) On the basis of the above, the Commission can
agree with the notifying party that for the purpose
of this proceeding, within the graphic arts film
sector the above described five different product
markets can be distinguished.

Markets for offset printing plates

(18)

The Commission has considered whether it can
agree with the distinction of four different product
markets, and notably the distinction between pos-
itive and negative printing plates, as presented by
the notifying party, and has in this respect assessed
elements on the demand and supply side.

(19) On the demand side, the overwhelming majority of
customers (end-users and dealers) expressed their
agreement with the thesis that different product
markets exist for positive and negative plates (as
well as for CtP and electrostatic plates). Positive
plates have a high light-sensitive coating and are
exposed to positive film originals and so-called
positive developer (chemicals). Positive plates can
generally be used for high-quality (colour) printing.
With negative plates, the sensitivity of the chemical
layer of the printing plate is different and negative
film and negative developer are used. Negative
plates are used for different applications from pos-
itive plates, in particular for newspaper printing,
where speed and reliability are more important
than image quality. The two types of plate therefore
meet different customer needs.

(20)

Furthermore, once the choice of a particular type of
plate has been made, Agfa has stated that a change
from positive to negative plates or vice versa would
normally never occur, since the client’s whole
including the plate-processing equip-
workflow,
ment used, as well as films and chemicals to be
applied, are adapted to using either negative or
positive plates. Even though no exact data are avail-
able, switching will indeed involve substantial cost,
the cor-
for example relating to a change of
responding processing equipment for film, which
in itself represents a cost of some ECU 10 000 per
processor.

(21) As a result of the above factors, from the viewpoint
of demand, positive printing plates and negative
printing plates form separate product markets.

is

are

the

laser,

technology
(CtP)

following additional points

Regarding plates for CtP and electrostatic plates,
the
relevant.
‘Direct-to-plate' technology is different in that it
eliminates the use of
film and the images are
directly transferred to the printing plate. When the
original is derived from digital data, transferred via
a
as
referred
‘computer-to-plate'
technology. CtP tech-
nology requires specific equipment (digital plate-
types of printing plates,
setters) and particular
different
from traditional positive and negative
printing plates. For these reasons, plates for CtP
technology have to be regarded as forming a sep-
arate product market from positive and negative
printing plates. This view corresponds with that of
the notifying party and nearly all competitors and
customers.

to

(23) With CtP technology there are basically five
different
systems which can be distinguished:
photopolymer, silver, hybrid (mixture of photopo-
lymer and silver), thermal on-press and thermal
off-press. These systems generally answer the same
customer need: the advantage of CtP technology for
the customers is that it eliminates the use of film in
offset-plate production. Given that CtP technology
has only been introduced relatively recently and
the different systems are seen, both from a custom-
er’s point of view and a producer’s point of view as
directly competing, and given that at this stage of
foreseen
it
market development
whether any one or more of the CtP technologies
will develop as a trendsetter, all CtP plates are, for
the purpose of
regarded as
belonging to one relevant product market. Compet-
itors and customers agree with that position as well.

this proceeding,

cannnot be

(24) Another direct-to-plate technology is based on the
use of electrophotography, which is applied in
combination with electrostatic plates. This
is
another non-contact process, but
is considered
inferior
to the newer CtP technology. Since
DuPont is not present on the market for electro-
static plates, this market is not affected by the
merger.

(25)

From a supply side point of view, a number of
factors were considered. The great majority of
suppliers (seven out of nine) communicated to the
Commission their agreement with the contention
that different product markets exist for positive and
negative plates (as well as for CtP and electrostatic
plates). In spite of the fact that for certain produ-
cers production of different types of plates may
take place using the same production lines, the
opportunities for producers actually to switch are
limited for the following reasons:

L 211/26

EN

Official Journal of the European Communities

29. 7. 98

(26)

(27)

(28)

(29)

(30)

First, it appeared from the investigation that only
some producers actually manufacture all types of
plates. According to data available for 1996, only
three suppliers (Agfa, DuPont and Polychrome)
produced in the EEA plates for CtP, and two
suppliers (Agfa and Polychrome) produced electro-
static plates.

Secondly, not all the installed lines of production
have the capacity for producing negative and pos-
itive plates as alternatives. For example, out of
DuPont’s capacity of
lines of production,
[ . . . ]
[ . . . ] can actually produce either negative or pos-
itive plates. For Agfa, [ . . . ] out of [ . . . ] production
lines are unable to produce all four kinds of plate.

Thirdly, in so far as production lines can actually
be used to make positive and negative (and other)
plates as alternatives, production has to be halted
and a switch at least requires the adjustment of the
chemical mix for the coating to be applied and
recalibration of the machinery. Agfa/DuPont have
stated that this is technically not very complicated,
but have not supplied any cost data in this respect.
However, according to one producer, although
technically not very complicated, such a switch
would involve costs of between ECU 350 000 and
800 000.

Fourthly, in addition to the direct switching costs, a
producer who would be willing to switch to
producing and selling either more negative or pos-
itive plates will encounter costs of establishing a
(new) customer base through creating or expanding
its own sales network, as positive and negative
plates are generally sold to different types of users
and negative plate sales are largely based on direct
sales by producers and to a lesser extent on sales via
(existing) dealer networks. One competitor replied
that owing to the additional distribution costs
encountered in the negative plates market,
it is
concentrating its sales on the market for positive
plates where it can use existing dealer channels. A
further cost for developing a customer base lies in
the existence of so-called package deals with end-
users as explained in Section V.3.A.

In addition to the above factors, one would expect,
in view of the fact that production costs for the
different types of plates are more or less equal
according to the notifying party, that in case of
immediate substitutability,
there would, on a
market such as the one concerned, normally be
competitive pressure for the average sales prices
and margins
to
converge. However, price levels and margins show
in 1996 the average price for
clear differences:

types of plates

for different

negative plates on the EEA market was at ECU
6,54, for positive plates ECU 6,07, namely a differ-
ence of 7,2 %, for CtP plates ECU 9,61 (31,9 %
difference) and for electrostatic plates ECU 9,14
regards margins, Agfa’s
(28,4 % difference). As
margins on positive and negative plates differed by
[ . . . ] %, whereas DuPont’s margins
showed a
difference of as much as [ . . . ] %. Moreover, there
are important differences in terms of market shares.
For example, in 1996 DuPont held [< 15] %, Agfa
[< 20] %, Horsell-Anitec
[< 17] % and Lastra
[< 13] % of the positive plates market and they
attained respectively [< 30] %,
[< 7] %
and [< 5] % of the negative plates market.

[< 30] %,

(31)

Taking into account all the above characteristics,
the Commission considers that in addition to argu-
ments relating to the absence of demand-side
immediate supply
substitutability,
substitutability
that distinct product
markets exist for positive, negative, CtP and elec-
trostatic offset printing plates.

the lack of
confirms

Markets for equipment, chemicals and servicing

(32) According to the notifying party, the provision of
equipment, chemicals and servicing are simply to
be considered ‘ancillary' to the consumable markets
of graphic arts film and offset printing plates. The
notifying party does not submit that these are sep-
arate product markets. However, from the informa-
tion received from various
and
customers, it would also appear that there could be
separate markets for equipment, for chemicals and
for servicing, and that within these markets a
further subdivision is conceivable.

competitors

(33)

Equipment includes imaging equipment, such as
cameras used to capture images and/or text, and
(digital) equipment needed to transfer images or
text onto film. Also, specialised equipment is avail-
able for processing printing plates, so that they can
be used on printing machinery. Both DuPont and
Agfa are suppliers of such equipment, which is
partly produced by the companies themselves or is
produced for them by third parties (original equip-
ment manufacturers, or ‘OEMs'). The ability of
producers of film and plates to supply equipment
in addition means that customers can be served on
the basis of a ‘one-stop-shop' approach. Apart from
the producers of film and plates who also offer
equipment,
there are in addition independent
specialised equipment producers.

(34) Given the link between certain types of equipment
and the products used with them (films and plates),
it is conceivable that a narrower definition than
that proposed by the notifying party regarding

29. 7. 98

EN

Official Journal of the European Communities

L 211/27

markets for equipment used for the particular types
of film and plate (such as image setters for red laser
film and processors for printing plates), is appro-
priate. However,
the definition of one or more
product markets for equipment can be left open,
since a competition problem would not arise even
on the basis of this potential narrower market def-
inition.

(35) Chemicals consist mainly of developers and fixers.
Chemicals are supplied by Agfa and DuPont, as
well as by producers of other graphic arts films and
offset plates, and by other suppliers. As for equip-
ment, chemicals are often purchased from the same
supplier as delivers the consumables (films and
plates). For chemicals, due to their specific applica-
tions for the particular films and plates, it is also
conceivable that a narrower definition of
the
market is appropriate. However, the definition of
one or more product markets can be left open,
since a competition problem would not arise even
on the basis of this narrower possible market def-
inition.

(36) As regards servicing, this concerns in particular
after-sales (maintenance) service on the equipment.
This can be done by a variety of suppliers, but is
often carried out by the suppliers of the equipment
and could therefore be considered to be directly
linked to the equipment sales. However, certain
providers offer services independently of equip-
ment sales and a separate market may therefore
exist, even at the level of servicing of particular
types of equipment or of equipment brands. Never-
theless, the definition of the market for equipment
services can be left open, since a competition
problem would not arise even on the basis of such
a market definition.

are no legislative or technical barriers to imports.
Furthermore, price
various
Member States, measured over the last three years,
have to a large extent shown a similar
trend
throughout the EEA.

tendencies

in the

(40) As

regards

the possible definition of wider
geographic markets, customers in general do not
consider that suppliers who do not sell from within
the EEA are alternative sources. The main reasons
given are: the proximity to the customer and the
necessity to respond rapidly to customer demand.
Furthermore, an analysis of market price trends in
different world regions over the period 1992 to
1996 has shown that in the EEA there has been a
steady decrease in prices, whereas for example in
the United States of America, prices in 1996 were
higher than in 1992.

(41)

(42)

For these reasons the Commission can agree with
the definition of geographic market proposed by
the notifying party. Moreover, customers
and
competitors questioned by the Commission have
nearly all confirmed that the geographic market in
question is the EEA.

Markets for equipment, chemicals and servicing

The definition of the geographic market for equip-
ment, chemicals and servicing can be left open,
since on all alternative narrower market definitions
considered (namely national for services and EEA
for equipment and chemicals), no competition
problem would arise.

2. Relevant geographic markets

(43)

Markets for graphic arts films and offset printing
plates

(37) According to the notifying party the relevant
geographic markets for graphic arts films and offset
printing plates are EEA-wide.

(38) During its enquiry the Commission considered
whether the relevant geographic market could be
narrower (national) or wider.

(39) As regards the possible definition of narrower
geographic markets, the enquiry has shown that on
the affected product markets there are
each of
trade flows between Member States.
substantial
There are a limited number of production sites
throughout
in various
Member States buy direct from those sites. There

and dealers

the EEA,

3. Assessment

It is concluded that the notified concentration will
create a dominant position for Agfa on the EEA
markets
for negative printing plates. On the
markets for graphic arts film and the markets for
positive offset printing plates and plates for CtP, it
is considered that the operation does not lead to
the creation or the reinforcement of a dominant
position.

General remarks

(44) According to the parties and almost all

the
suppliers,
the reported market size and market
shares are more reliable when calculated on the
basis of volume (in square metres) rather than on
the basis of estimates on value. From the Commis-
sion’s enquiry it can be concluded that there are
generally no significant price differences between
competitors which would render the use of volume
as a base, rather than value, less reliable.

L 211/28

EN

Official Journal of the European Communities

29. 7. 98

A. Effects of the concentration on the market

Position of the new entity

of negative printing plates

Market size

(45) On the basis of the sales provided by Agfa and
DuPont as well as their main competitors,
the
Commission estimates that total sales of negative
plates in the EEA amounted to some 30,9 million
square metres (Mm2) in 1996. According to a fore-
cast estimated by the notifying party, the market
for negative plates will continue to increase by 2 to
3 % a year, at least for the next five years.

(46)

Market shares

the Commission (1)

The cumulated market shares in the EEA of Agfa
and DuPont and its main competitors are as given
in the table below. It is noted that on 1 December
1997 Kodak and Sun Chemical, the owner of Poly-
the
chrome, notified to
merging of their activities in the graphic arts sector
(including offset printing plate activities), through
the creation of a joint venture named ‘Kodak Poly-
chrome Graphics'. Accordingly,
the position of
Kodak and Polychrome is assessed jointly in this
document, both as regards the negative plates
market and as regards the other films and plates
markets.

Negative plates

Volume

1994

1995

1996

Agfa

[:30] % [:30] % [:30] %

DuPont

[:35] % [:35] % [:30] %

Agfa and DuPont

[:60] % [:60] % [:55] %

Kodak/Polychrome

:19 % :20 % :23 %

Fuji

Horsell

Lastra

Others

:8 % :10 % :10 %

:7 % :7 % :7 %

:5 % :5 % :5 %

(47)

The cumulated market share of Agfa and DuPont
was at [< 55] % in 1996. Between 1994 and 1996
Agfa was able to slightly increase its market share,
whereas DuPont’s market share decreased from
[< 35] % to [< 30] %, the largest decrease being
noted in 1996. In spite of the decrease of their
combined market share, the new entity will be 2,5
times larger (in terms of market share) than the
next largest competitor (Kodak/Polychrome), the
other competitors having shares of less than 10 %.

(48) Agfa states that after the operation the joint market
shares of Agfa and DuPont would decrease by
several percentage points as a result of the imple-
mentation of the transaction, the reason being that
customers who were previously sourcing from both
Agfa and DuPont (in particular newspaper printers),
would, in order to ensure an alternative of supply,
decide to start purchasing from a different supplier.
Agfa showed that sales representing some [< 5] %
of the combined Agfa and DuPont market share
could be affected by such decisions. However, Agfa
has informed the Commission of its intention to
continue selling the plate types of DuPont through
the existing sales channels of DuPont, so that
DuPont plates will remain as a separate source of
supply to those end-users. Furthermore, it may be
expected that as a result of other alliances, namely
the recently announced joint venture between
Kodak and Polychrome and the decision of Inter-
national Paper taken in October 1997 to divest
itself of
its subsidiary Horsell-Anitec, a similar
customer reaction will take place, as a result of
which Agfa and DuPont may be expected to pick
up market share.

(49)

The combined EEA capacity of Agfa and DuPont
is at [. . .] Mm2. The capacity utilisation of Agfa and
DuPont was at [ . . . ] % and [ . . . ] % respectively,
whereas that of its main competitors was higher
(see below under position of competitors). The new
entity will therefore have sufficient capacity avail-
able to respond to the expected increase in
demand.

:6 % :6 % :6 %

Position of competitors

Total

100 % 100 % 100 %

(50)

Total 000 m2

28 950

30 064

30 964

(1) OJ C 372, 9. 12. 1997, p. 19.

The main competitors on the market for negative
printing plates
are Kodak/Polychrome, Fuji,
Horsell-Anitec and Lastra. Of these competitors,
most held stable market shares over the period
1994 to 1996, except Kodak/Polychrome and Fuji,
which increased their shares by 4 and 2 % re-
spectively. It is noted that, in contrast with the

29. 7. 98

EN

Official Journal of the European Communities

L 211/29

the addition of
markets for graphic arts film,
market shares is not such that
the new joint
venture between Kodak and Polychrome has
become a much stronger competitor, Kodak having
had a market share of less than 4 % in 1996.

(51)

The EEA capacity of the largest competitor was less
than 35 Mm2 in 1996, compared to [< 80] Mm2 for
the new entity. Capacity utilisation of the main
competitors was between 75 and 95 %. This shows
that, as for the new entity, competitors also have
capacity to respond to an increase in market
demand, but that in comparison Agfa would have
more incentive to do so.

Loss of DuPont as a competitor

DuPont plates represent only [< 20] % of the neg-
ative plates sales of Agfa and [< 20] % of DuPont.
These newspaper customers generally do not keep
any significant stock of negative plates and are
hence dependent on producers who can ensure
rapid supplies and security of supplies. In addition,
the end-users, including newspaper printers, gener-
ally do not have a very important position on their
own markets, which could otherwise give them a
better negotiating position. Therefore, given the
level of fragmentation of customers, it cannot be
maintained that customers have appreciable buying
power.

(55) Moreover, the relative purchasing volume of end-
users and dealers of Agfa/Dupont will diminish
after the operation in view of the larger overall sales
volume of the new entity and the fact that larger
customers are generally not the same for Agfa and
for DuPont.

(56)

(52) DuPont, with [< 30] % of the EEA market, has,
like Agfa, a leading position ([< 30] %), and is an
important force on the market for negative plates.
This is confirmed by a significant proportion of
dealers and end-users. Of those having sent in a
reply to the Commission enquiry, 42 % of dealers
and 31 % of end-users expressly commented on
this point. Their replies show that after the merger,
and with the absence of DuPont as a competitor,
they will have less choice and that price decay will
stop or that they will have to accept price increases.

the

end-users

taking into account
individual

the small
In conclusion,
and
proportion that
dealers represent in the sales of Agfa and DuPont,
it does not appear that customers have currently, or
would have in the future, appreciable buying
power. This has also been confirmed by the replies
in
of customers to the Commission’s enquiry,
which 16 % of them indicated that they would
have to accept price increases after the operation.

(53)

In relation to the decrease of DuPont’s market
share, it is important to note that the decision of
DuPont to divest itself of its graphic arts film and
offset printing plates business dates from 1994 and
that this fact has been public knowledge, as a result
of which customers will have looked for other
suppliers. A further explanation for the loss of sales,
according to DuPont, lies in the fact that in 1996,
DuPont increased by [ . . . ] % its average price of
negative plates, whereas average prices on the
market decreased by [ . . . ] %.

Potential competition

(57)

In the present case, in the analysis of potential
competition, regard was had, first, to the level of
competition potentially being exercised by produ-
cers already having a market presence and who
could develop additional production capacity, and,
secondly, to the possible entry of new competitors
on the EEA market.

Buying power

(54) According to Agfa around [> 50] % of Agfa and
DuPont negative plates sales are made direct to
end-users, such as newspaper printers, who account
for the greatest part of those sales. However, at the
same time Agfa also submits that the total number
of newspaper printers in the EEA is 1 900, whilst
there are no less than 32 080 end-users, essentially
book printers, commercial printers and packaging
printers. Furthermore, there are over 700 dealers. It
has to be noted that for end-users, negative plates
generally only account for 1 to 5 % of their total
production costs. Moreover, a combination of the
(newspapers) of Agfa and
10 largest end-users

Current competitors

(58)

In assessing whether
future competition from
existing competitors on the offset printing plates
markets would form a sufficient restraint on the
position of the new entity the current competitors
were analysed.

(a) A p p l i c a t i o n o f p r o d u c t i o n c a p a -

c i t y

(59)

The major existing suppliers on the markets for
printing plates are Kodak/Polychrome, Fuji, Lastra
and Horsell. As regards Kodak/Polychrome, Kodak
does not have a production capacity in the EEA.

L 211/30

EN

Official Journal of the European Communities

29. 7. 98

Polychrome had a capacity utilisation in 1996 of
more than [ . . . ] %. It also has significant sales in
positive plates and in CtP and will therefore also
have to keep capacity available to respond to
demand for these products. It is noted that plates
for CtP is a rapidly growing market where margins
are higher than in the market for negative plates, so
that there will be more incentive to apply produc-
tion capacity to CtP plates. Its flexibility to further
increase its production of negative plates will there-
fore be restricted. Fuji, which mounted a produc-
tion plant in the EEA in 1993, has already achieved
a capacity utilisation of more than [ . . . ] %. As far
as the Commission is aware, they are not planning
any further construction of production capacity.
Fuji sells three times as many positive plates as
negative and has started selling CtP plates, so they
would also have to keep the bulk of their capacity
available for an increase in positive plates and
plates for CtP. Incidentally, Fuji has stated that it
does not have the scale in both production and
sales to make further significant inroads into the
negative plates market within the next two to three
years. Horsell, which principally sells on the pos-
itive plates market (more than [ . . . ] % of its sales)
had a capacity utilisation of more than [ . . . ] %. It
is noted that in the last quarter of 1997 it became
known that
the owner of
International Paper,
Horsell, had decided to divest this business, so it
cannot be expected to undertake important ex-
penditure to expand its business in negative plates,
given that it is primarily a positive plate supplier.
Lastra, who also sells principally on the positive
plates market (more than [ . . . ] % of its total plate
sales) had a capacity utilisation of more than
[ . . . ] %.

(60)

for negative plates

In addition to the above factors, and as regards
Lastra and Horsell specifically, in order to be able
to apply any additional capacity for production and
sales of negative printing plates, they would have to
set up a new customer base, since the majority of
are newspaper
end-users
printers, which are generally supplied directly by
the producers. In order to increase their sales of
negative plates, they would have to set up such a
network, the construction of which is considered to
involve high costs. Lastra, for example, does not
have a direct sales force, except in Italy. Incid-
entally, even in Italy, DuPont has, according to its
lost only two customers to Lastra,
submissions,
whereas DuPont has argued that
faces fierce
competition from Lastra.

it

(61)

In comparison with the position of its competitors,
Agfa/DuPont have a far higher level of unused

(62)

(63)

(64)

capacity and, post-transaction, the DuPont share of
this capacity is no longer burdened by a high
depreciation cost. They will have a scale advantage
both for production and sales, which many
competitors have identified as a key element in the
strong position for the new entity. Since DuPont’s
loss of market share will be halted and is expected
to be reversed, the possibility for the other incum-
bents to bid away the customers of DuPont
is
eliminated, unless they have a better scale ad-
vantage or can provide a better range of products.
This is all the more unlikely since DuPont and
Agfa, as the two first competitors on the market,
will complement their product ranges, which were
already the most extensive on the market. In addi-
tion, the new entity will have the most competitive
cost conditions for any growth in output. Further-
more, its distribution network and customer base is
more developed than any of its competitors, Agfa/
DuPont having a well-developed presence in all the
plates markets.

the

lack

distribution network

The above factors demonstrate that competitors
which have a significant position on the negative
plate market already have a high capacity utilisa-
tion and that competitors with more available
and
capacity
customer base to increase sales. Especially since the
position of the new entity in terms of available
capacity, distribution network, access to customers
and product coverage will be far better than for the
other companies, potential competition is con-
sidered to exert insufficient competitive pressure
for restraining the new entity’s market power.

(b) A c c e s s

t o c u s t o m e r s

plates

The majority of end-users and dealers questioned
by the Commission saw difficulties in switching
negative
The Commission
considers that, although it is theoretically possible
to switch to a negative plate supplied by other
limited by the
in practice is
producers,
following factors.

supplier.

this

First, changing supplier is more difficult when the
end-user has concluded a ‘package deal'. Typically,
suppliers enter into an agreement whereby they
agree to provide equipment free of charge or on
favourable conditions, but whereby the customer
agrees to purchase its consumables (films and
plates) from the equipment supplier for a period of
time, generally two to three years, the cost of the

29. 7. 98

EN

Official Journal of the European Communities

L 211/31

(65)

(66)

equipment being assimilated into the prices
charged for the consumables. According to the
Commission’s enquiry, this type of agreement is
common in the sector of graphic arts and printing
plates and competitors have informed the Commis-
sion that these types of deals are increasing.

Figures supplied by the notifying party indicate
for Agfa [< 10] % and for DuPont around
that
[< 30] % of
total sales are linked with package
deals. These figures are higher for new contracts,
for instance in the United Kingdom for DuPont
nearly [> 50] % of new contracts contain such
clauses against nearly [< 40] % of current contracts.
Agfa has not supplied figures in this respect.

its

that

and its

The main purchasers of negative printing plates are
newspaper printers, book printers, commercial
printers and packaging printers as well as trade
shops. According to Agfa and DuPont, customers
are under no legal obligation to continue buying
consumables from the manufacturer who provides
the equipment and arranges
financing. A
customer can decide at any time to pay off the
outstanding debt for the equipment and purchase
consumables from another supplier. However, the
Commission considers,
enquiry has
for end-users who have limited
confirmed,
financial capacity,
the
the ability to pay off
remaining debt is restricted. It is probable that the
end-user will wait until the ‘package deal' expires
to find another equivalent supplier of equipment
and consumables, and even then the readiness to
especially
switch
if a competitor cannot offer the same package due
to a more limited product range. In this respect,
figures supplied by the notifying party indicate that
less than [ . . . ] % of end-users that enter into this
type of contract decide to switch supplier before
the contract expires and that only [ . . . ] % of end-
users actually switch suppliers after expiry of the
contract. The existence of such contracts therefore
constitutes a barrier for competitors wishing to
challenge the position of Agfa/DuPont.

restricted,

suppliers

is

is

It

(67) A further element in the assessment of switching of
the existence of exclusivity
supplier concerns
arrangements with suppliers of equipment, which
are important in relation to the ability of the new
entity and its competitors to conclude package
furthermore noted that Agfa and
deals.
DuPont also sell equipment for platesetting and
processing. This equipment
is either produced
internally (DuPont) or obtained, often on an OEM
basis,
suppliers.
Moreover, Agfa has included, in contracts with two
of its independent equipment suppliers, exclusivity
arrangements whereby these producers cannot sell
the equipment concerned to competitors of Agfa

from independent

equipment

when equipment has been produced on the basis of
Agfa specifications. The fact that post-transaction
Agfa will be able to propose package deals using
equipment produced in-house, whereas certain of
(e.g. Kodak/Polychrome, Lastra,
its competitors
Konica), are unable to do so, puts Agfa in a
stronger position to conclude such package deals.
Consequently,
for delivering
the opportunities
equipment directly and the relationship of Agfa/
DuPont with suppliers of equipment constitutes an
additional barrier
competitors wishing to
contest the position of Agfa/DuPont by offering
similar package deals.

for

(68)

(69)

Secondly, a limiting factor for switching suppliers,
at least for a number of dealers, are existing exclu-
sive distribution arrangements: those dealers may
only carry Agfa or DuPont products respectively.
Agfa has contended that such arrangements are
since only [ . . . ] Agfa
relatively unimportant,
dealers and only [ . . . ] dealers of DuPont out of a
total of 700 dealers in the EEA are bound by such
clauses. However, such dealers are often significant
as they cover a large area, often the whole territory
of a Member State, and hence represent an impor-
tant part of the turnover of Agfa and DuPont. Agfa
has submitted that [< 60] % of Agfa’s sales of offset
printing plates to dealers and [< 10] % of DuPont’s
sales in the EEA are made on an exclusive basis.
Specific figures for negative plates sales were not
provided by Agfa and DuPont. These existing
exclusivity arrangements are considered to consti-
tute further barriers for existing competitors to
challenge the position of Agfa/DuPont.

Thirdly, as has been argued by a number of end-
users, a switch of suppliers would more funda-
mentally affect their production process. According
to Agfa, switching to a different negative plate
supplier can be carried out within a matter of hours
by recalibrating the existing equipment. However,
customers have stated that they effectively would
need a period of one to three months in order to
carry out evaluation tests with recalibrated equip-
ment or new equipment before
considering
changing their supplier of negative plates, since
they would have to be sure that with different
the
plates and potentially different equipment
same quality of end-result would be obtained, and
since a change would have an impact on other
parts of their printing process (such as modification
of substrates, inks, temperature) which would have
to be adapted. A factor which is considered im-
portant in this respect relates to the exclusivity
clauses that Agfa maintains with certain equipment
suppliers, as explained in recital 68, as a result of

L 211/32

EN

Official Journal of the European Communities

29. 7. 98

which Agfa’s equipment is preset to Agfa’s negative
plate specifications, making it more difficult for
end-users to consider using plates of a different
manufacturer. Furthermore, a significant quantity
of end-users buy their negative plates supplies from
dealers with whom they have long-standing rela-
tions. Both Agfa and DuPont maintain exclusivity
clauses with a number of those dealers, who are
hence precluded from offering negative plates from
alternative suppliers to such end-users.

(70) As regards the possibility for end-users to switch,
Agfa has further submitted that certain clients, for
example larger newspaper printers, have a second
source of
supply policy, which would in fact
confirm that switching to plates from a different
supplier is not a problem. However, the Commis-
find this argument convincing.
sion does not
Indeed, only a
limited amount of end-users
(primarily newspaper printers) appear to pursue
such a policy, and it is not a general phenomenon
on the negative plates market. According to figures
supplied by Agfa, [ . . . ] clients who purchase at the
same time from Agfa and DuPont
represent
[< 5] % of the total EEA plates market. The fact
that certain larger customers have a second supply
source is due to their need to continue production
when the original source of supply is not available.
This means nevertheless that in order to go to a
new supplier, the above described barriers would
exist.

(71)

In conclusion, the Commission considers that not
only the disruptive effect of switching suppliers for
end-users but also the practice of tying sales of
consumables to sales of equipment, and the ex-
clusivity arrangements with dealers, are factors
which limit the possibilities for current competitors
to challenge the position of the new entity. As
regards package deals, such competitors would
either have to be able to provide financing for the
existing equipment and take over any (financial)
obligations entered into, and/or be able to offer a
similar package to the end-user. The relative
stability of market shares illustrates that under the
present conditions, longstanding competitors who
have sufficient market experience, will not be able
to do so.

New competitors

(72) According to the notifying party, entry into the
affected product markets for potential newcomers
requires significant capital investment for manufac-
in offset printing plates, even
turing facilities
though no precise figures have been submitted as
to the cost of setting up a production line for
it requires a high
negative plates. Furthermore,

degree of manufacturing know-how, but, according
to the notification, this is not primarily dependent
on technology covered by patents. Competitors
agree that this is the case for mature technologies
like negative plates.

(73) As mentioned above, a significant proportion of
competitors and dealers have stated that end-users
request their supplies from a source which could
provide a full range of products (films, plates,
equipment,
and services). A new
producer would only be likely to succeed if it were
able to provide a similar full range of products/
services. Consequently, no new entrant could move
into the negative plates market on the basis of a
limited investment, (cid:190) that is, without being able
to offer a significantly full range of products.

chemicals

(74)

Furthermore, both for new entrants and existing
competitors, a degree of
investment would be
needed in order to finance equipment purchases by
end-users, owing to the increasingly common prac-
tice of selling on the basis of ‘package deals', as
explained above.

(75) No firms have entered the films markets over the
last five years and competitors consulted by the
Commission have stated that
the entry of new
competitors on the negative plates market is not
foreseeable. Agfa has claimed that a new compet-
itor from the media industry will enter the market,
but neither in the notification nor during the
proceeding have they provided any name of a
potential new entrant or stated when such an
entrant would enter the market.

Presence in related markets

(76) As was stated above, Agfa and DuPont also have a
strong presence in related markets for graphic arts
film and other kinds of offset printing plates, as
well as a significant presence on the markets for
equipment, chemicals and services, as will be
analysed in recitals 78 to 108. Post-transaction Agfa
will be able to offer an even wider range of prod-
ucts. The presence in related markets presents a
clear advantage in comparison with competitors
such as Lastra, Horsell, and others who sell a more
limited product
It must be taken into
account that 66 % of competitors and 78 % of
dealers (out of nine competitors and 26 dealers who
replied to the Commission enquiry) have stated
that end-users seek their supplies from a source
capable of providing a full range of products (films,
plates, equipment, chemicals and services). Con-
sequently, the presence of Agfa/DuPont on related
markets represents another reason why, in com-
bination with the other above factors, Agfa/DuPont
could resist losing market share to any competitor.

range.

29. 7. 98

EN

Official Journal of the European Communities

L 211/33

Conclusion

Position of the new entity

(77)

The Commission considers that the concentration
of
the negative plates businesses of Agfa and
DuPont will result in the creation of a dominant
position on the EEA market. This conclusion is
based on the high combined market shares attained
by Agfa and DuPont, the distance between the new
entity and other competitors, the loss of DuPont as
competitor, the insufficient countervailing power
on the demand side, the existence of barriers to
entry and the difficulty to switch suppliers (due to
package deals and exclusivity arrangements), the
strong overall presence on other related markets
and the lack of potential competition, as described
above.

B. Effects of the concentration on the market

for positive offset printing plates

Market size

(78)

The market size in value and in volume for positive
printing plates for the period from 1994 to 1996
are set out in Annex III (1). In 1996, it was the most
important market of the affected markets in terms
of sales (ECU 385 million). Since 1994, the EEA
market has decreased in value but increased in
volume.

Market shares

(79)

In comparison with the market for negative plates,
both Agfa and DuPont have much lower individual
market shares. In 1996, Agfa was the second player
in terms of market share and DuPont only the
sixth. Both Agfa and DuPont lost market share
between 1994 and 1996. Their combined market
share was at [< 30] % in 1996, decreasing from
[< 35] % in 1994.

(80) Also, the relative size of the new entity on this
market would be much smaller than in the market
for negative plates, Agfa/DuPont being only 1,3
times as large as the first competitor, with three
other companies having significant market shares
of around 12 % or more.

(81)

(82)

Position of competitors

The position of competitors on the market
for
positive plates is much more balanced than on the
market for negative plates. Apart from Agfa and
DuPont, four other main competitors are present,
the market leader being Kodak/Polychrome with
around 24 % of the market. In addition, Horsell,
Lastra and Fuji have significant market shares from
around 12 to 17 %.

Furthermore, a number of Agfa and DuPont
competitors gained market share between 1994 and
1996 (around 3 percentage points for Polychrome
and around two percentage points for Fuji and
Lastra).

Positive plates

Volume

1994

1995

1996

Conclusion

Agfa

DuPont

[:20] % [:20] % [:20] %

[:15] % [:15] % [:15] %

Agfa and DuPont

[:35] % [:35] % [:30] %

Kodak/Polychrome

:20 % :22 % :24 %

(83) Given the more limited market position of Agfa/
DuPont on the market for positive printing plates
as compared to their position on the market for
negative printing plates and the stronger presence
of competitors, the Commission considers that the
operation will not
lead to a situation where
competition will be significantly impeded as a
result of the creation of a dominant position on the
EEA market for positive offset printing plates.

:10 % :10 % :12 %

C. Effects of the concentration on the market

for plates for CtP technology

:11 % :12 % :13 %

General

Fuji

Lastra

Horsell

Konica

Others

:18 % :15 % :17 %

(84)

:5 % :5 % :5 %

:6 % :6 % :6 %

The market for computer-to-plate technology is a
rapidly developing market, both in terms of the
volume of plates being sold and in terms of the
number of suppliers entering the market, as is
further explained below. Competitors and potential
competitors in this market consider that it will take
some five years for CtP to become an established
technology. Estimates by competitors of what
percentage the CtP plates market will by then
represent of the overall offset plates sector vary, but
it is expected that by the year 2001 CtP plates will
have a share of the EEA market of between 11 and
14 %, whereas it is expected that eventually 25 %
of the metal offset plates market will consist of CtP
plates. The reason why predictions are difficult to

Total

100 % 100 % 100 %

Total 000 m2

69 142

73 703

79 516

(1) Business secret: all annexes are deleted for publication.

L 211/34

EN

Official Journal of the European Communities

29. 7. 98

give is that growth is limited due to the fact that
CtP technology is not yet mature and that
customers are still awaiting further product devel-
opments, especially in light of
to
switch to CtP technology would require substantial
investment
in new equipment, CtP platesetters
currently costing between ECU 100 000 and ECU
500 000.

the fact

that

(85) As regards technological developments, various CtP
technologies can be distinguished, as explained in
the above section regarding the product market
definition. Even though silver, photopolymer and
hybrid plates were already sold between 1994 and
1996, thermal plates, first sold by Kodak in the
United States of America, were only introduced in
the EEA in 1997. No precise data exist as yet on
sales of this type of technology, but a number of
current and potential competitors have expressed
the view that thermal plate technology will become
the most commonly used. This results from the fact
that
the distinct
advantage for customers that processing can take
place under normal daylight conditions, whereas
the case for the other CtP plates.
this is not
Thermal CtP plates would, according to estimates
presented to the Commission, eventually represent
some 50 to 80 % of total CtP plate sales.

thermal CtP technology has

Market size

(86) Consumption was calculated on the basis of the
sales figures of the parties active in sales of plates
for CtP. Sales in the EEA amounted to less than 1,6
Mm2 and ECU 15,6 million in 1996. Even though
sales of CtP plates represented, in 1996, only some
2 to 3 % of overall sales in the markets for offset
printing plates, sales in 1996 in volume were more
than 250 % higher than in 1994.

Market shares

(87) On the basis of the sales figures submitted by Agfa,
DuPont and Polychrome,
the market shares as
given in the table below were calculated for 1994 to
1996.

CtP

Volume

1994

1995

1996

Agfa

DuPont

[:30] % [:20] % [:25] %

[:75] % [:75] % [:60] %

Agfa and DuPont

100 % [:90] % [:75] %

The position of the new entity and of compet-
itors

(88)

are

strong players

In view of their market shares in 1996, Afga and
especially DuPont
in the
emerging market for CtP plates. The operation,
when assessed on the basis of
figures of 1996,
means that DuPont, as a market leader in CtP, will
be taken over by one of its only two competitors.
As a result, the combined market share of Agfa and
DuPont is nearly three times higher than that of
Polychrome. However,
in this
market which shows such strong development,
account must also be taken of recent and future
developments in order to assess the strength of the
new entity after
the operation. The following
factors are important in this respect:

in the analysis

(89) Agfa and DuPont were the first to introduce CtP
technology in the EEA. However, as can be seen
from the table above, Polychrome, who entered the
market on the basis of its own hybrid CtP tech-
nology in 1995, was able to gain substantial market
share, mostly from DuPont. This indicates that it is
likely that other new competitors will also be able
to gain market share when entering the market.

(90)

That likelihood is based in part on the fact that
thermal CtP technology has only recently made its
entry on the EEA market and is expected to
become the most widely used. DuPont and Agfa do
not yet have thermal CtP plates commercially
available, as opposed to four other competitors
(Kodak, Polychrome, Presstek and Printing Devel-
opment Inc.). Agfa has stated that it foresees the
introduction of its thermal plate [ . . . ]. It has been
estimated that in 1997, Kodak, which is apparently
successfully selling CtP plates in the United States
of America, has already gained a market share of
some 10 % in the EEA and is expected to make
further inroads into the market. Given the techno-
is in any event
logical advantage of Kodak,
expected that its market share in CtP plates (or that
of Kodak Polychrome Graphics
following the
formation of the joint venture) will become more
important than that in the other plates markets,
its CtP plates
especially when it can market
through the existing sales channels of Polychrome.

it

Polychrome

0,0 % :14 % [:30] %

(91)

Others

0,0 % 0,0 % 0,0 %

Total

100 % 100 % 100 %

Total 000 m2

381

:800 :1 600

It was demonstrated that in 1997 at least three large
producers other
than Agfa, DuPont and Poly-
chrome have started selling CtP plates on the EEA
market (Kodak, Fuji and Mitsubishi). At the begin-
ning of 1998, other producers were expected to
enter the market within a period of a few months
to two years (Horsell, Lastra, etc.). In the investiga-
tion, a number of dealers and end-users also

29. 7. 98

EN

Official Journal of the European Communities

L 211/35

(92)

stated that they foresee several other new entrants
on the market for CtP (within a maximum of two
to three years). According to Agfa and DuPont, a
total number of 15 producers are either already
selling or have announced their market entry, 14 of
which would be capable of offering thermal CtP
technology. Most of these entrants possess their
own CtP technology and have confirmed that
patents do not prevent access to the market.

from Agfa, certain of

Furthermore, apart
the
competitors in CtP plates have their own equip-
ment manufacturing (such as Fuji and Presstek).
Also, a large number of independent producers of
equipment are present on the market (including
more than 25 producers of platesetters for CtP).
Therefore, the availability of equipment for CtP
plates would appear to be sufficient, especially in
view of the apparent necessity for competitors to
combine plate sales with equipment, in order to be
able to propose package deals.

Other factors

Barriers to entry

(93) According to the notifying party, entry into the CtP
market requires significant research and develop-
ment and investment, although to what extent this
would be necessary depends on whether a potential
new entrant would attempt to develop its own tech-
nology or whether it would try to purchase the
technology from third parties. The notifying party
has stated that entry into the CtP market would
cost around three to five years of research and some
ECU [ . . . ] million. In capital investment, it would
also require some ECU [< 20] million, with a
potential ECU [< 5] million should the technology
be obtained through licensing. Competitors which
have recently entered the market or who are plan-
ning to do so have stated that
the investment
needed may be considerably more limited. In any
event,
the appearance in 1997 of a number of
competitors on the market for CtP plates, as well as
the imminent entry of others, demonstrates that
the investment required is not an insurmountable
barrier to entry on the market for CtP plates. It is
recalled that Agfa and DuPont as well as their
competitors have expressed that patents are not an
impediment
to market access, most producers
having developed their own technology.

Choice of supplier

(94)

The market for CtP plates is still at a developing
stage and the installed equipment base is as yet
limited. No industry standard for CtP technology
has emerged. Consequently, at the current level of
market development, competition in CtP tech-
nology takes place at the level of the different
kinds of systems which are being introduced, rather
than at the level of CtP plates itself. It does appear,

that plates for CtP are more system-
however,
bound than conventional plates, which makes it, in
comparison with conventional plates, more difficult
for end-users to change to a plate from a different
supplier, if this supplier does not offer plates for
the same CtP system. For example, a silver CtP
plate cannot easily be exchanged for a polymer
plate, given the different equipment used. Never-
theless, at the present stage of market evolution and
from
in view of
different producers as well as the entry of a signi-
ficant number of suppliers on the CtP plates
market, as was explained at recital 93, a number of
alternative suppliers of different
types of CtP
systems and plates will become available.

the availability of equipment

Conclusion

(95) Given the above aspects of

the emerging CtP
market, the Commission considers that the rapid
shift in market shares with the arrival of Poly-
chrome as a competitor indicates the likely down-
ward movement of Agfa/DuPont’s market share.
This trend will no doubt continue with the entry of
a number of competitors.
In recent months,
companies like Kodak have entered the market and
appear
to have already acquired a significant
market share, and other competitors will also arrive
with competing products, thereby exerting signific-
ant competitive pressure on Agfa/DuPont. Under
these circumstances, it is considered that the posi-
tion of Agfa/DuPont, in spite of its current high
market shares, will not be such as significantly to
impede competition on the EEA market of CtP
plates.

D. Effects of

the
markets of graphic arts film

concentration on the

(96)

The markets of graphic arts film generally have
regards
similar characteristics,
the
competitors present and the distribution of
products,
below
and hence
comprises all five relevant markets.

for example as

assessment

the

Market size

(97) According to Agfa,

the markets of
camera, contact, blue laser, red laser and infra-red
laser films was as follows in 1996:

the size of

Camera film: 17 Mm2/ECU 93,6 million

Contact film: 17,4 Mm2/ECU 100,5 million

Blue laser
million

Red laser
million

recorder

film: 12,5 Mm2/ECU 56,1

recorder

film: 51,2 Mm2/ECU 272

Infra-red laser recorder film: 13,1 Mm2/ECU 72,5
million

L 211/36

EN

Official Journal of the European Communities

29. 7. 98

(98)

The markets for camera, contact and blue laser recorder film are all decreasing rapidly. The
market for infra-red laser is showing a rather stable trend, whereas the market for red laser
film is increasing strongly (see Annex II). The notifying party has submitted market data
which illustrates that the current trend for sales of the different types of film will continue
at least until the year 2002 (see Annex I).

Market shares

1996

Camera

Contact

Blue laser

Red laser

Infra-red laser

Agfa

DuPont

[:30] %

[:30] %

[:20] %

[:35] %

[:30] %

[:15] %

[:15] %

[:25] %

[:10] %

[:10] %

Agfa and DuPont

[:40] %

[:45] %

[:40] %

[:45] %

[:40] %

Kodak/Polychrome

:33 %

:24 %

:27 %

:27 %

:32 %

Fuji

Konica

Imation

Horsell

:7 %

:8 %

:11 %

:9 %

:11 %

:5 %

:7 %

:6 %

:5 %

:6 %

:3 %

:5 %

:5 %

:5 %

:6 %

:7 %

:7 %

:7 %

:6 %

:6 %

Mitsubishi

:2 %

:2 %

:2 %

:3 %

:2 %

Others (estimates)

:12 %

:12 %

:12 %

:12 %

:12 %

Total

100 %

100 %

100 %

100 %

100 %

Total 000 m2

16 606

17 560

12 857

52 428

11 967

Source: Agfa/DuPont and competitors.

Position of the new entity

(99)

In 1996, Agfa and DuPont had cumulated market
shares of between [< 40] % and [< 45] %. During
the period 1994 to 1996 cumulated market share
decreased by between 2 and 5 % on each of the
markets, with the exception of the market for red
laser film. On this market, the new entity increased
its position somewhat (see Annex II).

Position of competitors

(100) The addition of market shares of Kodak and Poly-
chrome has significantly diminished the distance
that exists in terms of market share between Agfa/
DuPont and the first competitor, Kodak/Poly-
chrome holding shares in 1996, on each of the
markets, of between < 24 and < 33 %. The other
competitor with the most important market shares
in the EEA is Fuji, with shares of between < 7 and
< 11 %. Further, competitors
such as Konica,
Imation, Horsell and Mitsubishi, held shares of
between < 2 and < 7 %. During the period 1994 to

1996, the main competitors (Kodak/Polychrome,
Fuji) were generally able to gain market share. The
recent concentration between Kodak and Sun
(Commission Decision of 15 January
Chemical
1998 in Case IV/M.1042 (1)) has created,
in the
graphic arts film markets, a powerful competitor
which will be an important source of competition
in the EEA and which will be sufficiently capable
of challenging Agfa’s position.

It is noted that as regards red laser film, in the only
film market
increase in
in which a significant
volume is taking place and where Agfa/DuPont are
particularly strong and have increased their market
position somewhat, the next largest competitor has
some 27 % of the market and other competitors of
international size are also developing their sales.
Hence the above conclusion is also valid for the red
laser film market.

(101)

Buying power

(102) According to Agfa and DuPont, there are 1 170
dealers and a total of 42 750 end-users of graphic

(1) OJ C 32, 30. 1. 1998, p. 5.

29. 7. 98

EN

Official Journal of the European Communities

L 211/37

film (150 book printers, 1 300 newspaper
arts
printers, 30 000 commercial printers, 300 pack-
aging printers and 11 000 trade shops or service
bureaux). On the market where the new entity will
the
have the strongest position (red laser film),
biggest customer of DuPont in terms of turnover
represents [ . . . ] % of DuPont’s total red laser film
sales. In the case of Agfa, the biggest end-user of
graphic arts films accounts for only [ . . . ] % of its
graphic arts film sales. As regards the dealers, the
biggest one represents only [ . . . ] % for DuPont
and only [ . . . ] % of Agfa’s sales in the EEA.

(103) Taking into account the small proportion that end-
users and dealers represent in the sales of Agfa and
DuPont, as well as the fact that, since clients of
Agfa and DuPont are generally not
the same,
purchases by those customers would represent an
even smaller proportion of the sales of the new
entity,
it would not appear that customers have
currently, or would have in the future, appreciable
buying power. This has also been confirmed by the
replies of customers to the Commission’s enquiry.

Potential competition and barriers to entry

(104) Concerning the capacity to switch supplier, invest-
ment, presence in related markets and absence of
foreseeable new competitors, reference is made to
the analysis on the negative printing plates market,
since in these respects the negative plates market
and the markets for graphic arts film generally
show similar characteristics.

Conclusion

red laser

(105) The combined market position of Agfa/DuPont on
the markets for graphic arts film, the reduction of
its market shares over the last three years (with the
exception of
film) compared to the
stability of the market shares of their main compet-
itors, and the recent creation of a powerful compet-
itor, are the most important factors in the above
analysis. In view of these factors, which counter-
balance the limited buying power of customers and
the absence of foreseeable new competitors, the
Commission considers that the operation will not
lead to a situation where competition will be signi-
ficantly impeded as a result of the creation of a
dominant position on these markets.

E. Markets for equipment, chemicals and

services

(106) Both Agfa and DuPont also offer chemicals and
equipment and provide equipment services as a
necessary support for their film and plates business.
Equipment and chemicals are in principal open for
the use of film or plates from all manufacturers,
although switching suppliers may present diffi-
culties as machinery may be pre-set to a particular
kind of film or plate. Their film and plates compet-
itors also offer equipment, chemicals and services,
but to a smaller extent.

it has estimated that

(107) The notifying party has submitted that due to the
fact that the provision of equipment, chemicals and
services is regarded as an ‘ancillary' activity, no
separate market research data are available. Never-
theless,
the overall EEA
market for equipment, chemicals and services for
graphic arts film and plates is of some ECU 910
million, of which Agfa sales were at ECU [< 100]
million and DuPont sales were at ECU [< 50]
million. On the markets for equipment, chemicals
and servicing, the new entity would be subject to a
greater variety of competitors than on the other
affected markets. Other
than the suppliers of
graphic arts films and/or offset printing plates
(such as Kodak/Polychrome and Fuji), a consider-
able number of manufacturers and dealers who are
independent from consumable producers, exist. As
regards equipment, manufacturers exist such as
Man Roland, Heidelberg, Rockwell, Presstek,
Scitex, Creo and Dainippon who all have world-
wide activities. Even though no market data are
available, Agfa has estimated that the position of
the new entity will be strongest for image setters
for red laser film where it will have a share of
[< 40] % in the EEA, at least for other competitors
having shares of between 10 and 20 %. In proces-
sors for printing plates the new entity will be the
market leader with [< 30] %, but a range of signi-
ficant competitors exist as well. As regards chem-
icals, Agfa estimates that the highest share of the
new entity can be found in the area of chemicals
for graphic arts film, with a maximum of [< 45] %
in the EEA, and that for other chemicals its posi-
tion is more limited. For servicing it is estimated
that the new entity will not exceed [< 25] % of the
overall EEA market, and that at national
levels
numerous local competitors exist providing main-
tenance services. Competitors and customers who
replied to the Commission’s enquiry did not
consider that the position of the new entity would
present competitive concerns on any of the above
markets, defined in recitals 9 to 42, taken in isola-
tion.

L 211/38

EN

Official Journal of the European Communities

29. 7. 98

(108) Therefore, even though the above data indicate that
the new entity will have a strong position on the
markets for equipment, chemicals and services the
new entity would not achieve a dominant position
the
on these markets, even on the basis of
narrowest market definition considered.

VI. CONCLUSION

(109)

follows from the foregoing that

It
the notified
operation will lead to the creation of a dominant
position on the EEA market for negative offset
printing plates as a result of which effective
impeded,
competition would be
within the meaning of Article 2(3) of the Merger
Regulation.

significantly

VII. UNDERTAKINGS SUBMITTED BY THE

PARTIES

(110) With a view to removing the competition concerns,
into the following

Agfa has offered to enter
commitments:

(a) Afga-Gevaert will

release all of

its OEM-
suppliers of processing equipment for negative
plates from any contractual provisions whereby
such suppliers of Agfa-Gevaert would be
prevented from selling such processing equip-
ment to any third party of their choice. More-
over, as far as processing equipment for ne-
gative plates incorporates know-how owned by
Agfa-Gevaert, Agfa-Gevaert will release all of its
OEM-suppliers of negative plates processing
equipment from their obligations not to use
such know-how for sales to third parties and
will
reasonable
commercial conditions, namely at a fee which
would not exceed [ . . . ] % of the sales of the
licensed products, to such OEM-suppliers for
incorporation in negative plates processing
equipment to be sold to third parties. Such
licences shall be granted on the basis of a most-
favoured-licensee clause, which shall
secure
non-discriminatory treatment.

license such know-how at

(b) With regard to negative plates, Agfa-Gevaert
will release all existing exclusive dealers and
distributors of DuPont, who will continue to be
supplied by Agfa-Gevaert post-transaction, from
any restraint with regard to the sale of
competing products.

are

plates

(c) Agfa-Gevaert will release all of its dealers in
negative
contractually
who
committed to sell exclusively negative plates
supplied by Agfa-Gevaert from such exclusivity.
This undertaking of Agfa-Gevaert does not
apply to (i) exclusive distributors of Agfa-
Gevaert for territories where Agfa-Gevaert has
no distribution organisation of its own capable
of acting as a substitute for
that exclusive
distributor ([ . . . ]), (ii) agents of Agfa-Gevaert for
negative plates, where the main function of
such agents is to perform logistical services for
Agfa-Gevaert ([ . . . ]).

(d) The undertakings pursuant to paragraphs (a) to
(c) will apply for a period of five years from the
clearance of the notified concentration by the
Commission.

(e) Agfa will provide the Commission with copies
of correspondence documenting the implemen-
tation of
their obligations, no later than 31
March 1998. For each period of 12 months
following this Decision, Agfa will also provide
the Commission with a report monitoring their
compliance with the proposed undertakings as
well as a report upon request by the Commis-
sion.

VIII. ASSESSMENT OF THE UNDERTAKINGS

(111)

In the assessment of undertakings the question has
been whether, as a result of the undertakings, the
market power of the new entity would be suffi-
ciently restrained and the competition concerns
would be resolved. As has been described in the
above assessment, the structural links that Agfa/
DuPont have built up with end-users through the
use of package deals, as well as the existing struc-
tural relations with dealers based on exclusivity
arrangements, are important elements
in this
respect. Consideration was given to potential
divestment and sale to a third party or to third
parties, of certain production facilities or produc-
tion lines of negative plates. Such a measure would,
however, not sufficiently address the competition
concerns, as the structure of the market would not
be significantly affected. Agfa itself already has
considerable excess capacity. DuPont has, given its
planned exit from the market, not made consider-
able investment in modernisation of its production

29. 7. 98

EN

Official Journal of the European Communities

L 211/39

lines. Competitors have not expressed the view that
they would have an interest in buying up any part
of DuPont’s business in negative plates. Further-
more, one competitor (International Paper) is itself
in the process of selling its graphic arts (including
negative printing plates) business (Horsell-Anitec).
Hence, a divestment by Agfa of part of the DuPont
business would have little effect on the market
structure, as opposed to the expected impact of
undertakings assessed below.

Package deals

supplied with Agfa or DuPont products. Hence, as
a result of
the undertaking more outlets will
become available for Agfa and DuPont products,
which will enhance intra-brand competition at the
same time as improving inter-brand competition.

(114) As regards DuPont dealers, existing contracts of
this kind are found in six EEA Member States
([ . . . ]) and have been concluded, except for [ . . . ],
with dealers responsible for sales covering the
whole of the Member State concerned, DuPont not
having a parallel network of its own. This confirms
the importance of these outlets.

to offer

for competitors

(112) The first undertaking regarding exclusivity with
equipment suppliers is considered important since
most of the major suppliers of printing plates have
no equipment production of their own and are
therefore dependent on such equipment suppliers
in order to supply similar package deals as Agfa
the Commission
offers to end-users. Therefore,
considers that by opening up the structure of the
supply of equipment, namely by breaking up those
relations where independent suppliers of equip-
ment are tied to sell certain equipment to Agfa
similar
only, barriers
package deals comprising a full range of products
will be lifted, as access by competitors to equip-
ment needed for processing negative printing
plates will be facilitated. Agfa has stated that in
sales
1996 some
consisted of equipment procured from suppliers
bound by exclusivity arrangements. Competitors
will now have the possibility of procuring equip-
ment with the same specifications from Agfa’s
equipment suppliers, and they will hence be able
to offer to their clients, the same type of equipment
in package deals (or separately) to end-users. Where
competitors can offer more attractive package deals,
readily
end-users may be
consider a switch of supplier, since their costs for
switching are reduced. The significance of
this
undertaking should also be seen in the light of the
fact
the
that competitors have emphasised that
offering of package deals is an increasing phenom-
enon on the market for printing plates.

expected to more

[ . . . ] % of

equipment

its

Dealer exclusivity

dealers

important

(113) The undertaking first of all concerns the existing
arrangements whereby
are
currently foreclosed to competitors of DuPont and
Agfa. Post-concentration, a number of important
dealers will be allowed to sell products of compet-
itors as well, which will increase the level of inter-
brand competition. Furthermore, Agfa has stated
that the existing network of DuPont dealers will
remain in place, so that dealers will continue to be

(115) For Agfa, contracts containing exclusivity clauses
are found in five countries:
[ . . . ]. According to
information from Agfa, in three of those countries
([ . . . ]), dealer channels exist in parallel with Agfa’s
own direct sales channel. In [ . . . ], these contracts
concern [ . . . ] dealers, in [ . . . ] [ . . . ] major dealer
with several sales outlets covering different parts of
[ . . . ], and in [ . . . ] one dealer with [ . . . ] as its sales
territory. Given that such dealers have longstanding
relations with
of
competing products in the portfolio of such dealers
will be important
for competitors of Agfa. As
regards the existing exclusivity arrangements in
[ . . . ], Agfa has stated that these have been made in
relation to sole distributorship (i.e. the dealer being
the sole outlet for Agfa products on this market),
whereas in [ . . . ] exclusivity arrangements relate to
i.e. sales are effected by Agfa
agency contracts,
itself, the agents performing certain selling and
for which they receive a
logistical
functions,
commission. Those
remain
arrangements will
intact.

end-users,

inclusion

the

(116) The undertaking will improve access to a number
of important dealers for Agfa’s competitors. This is
in
considered especially important given that,
comparison with Agfa and DuPont, those compet-
itors are more dependent on dealers for sales of
negative plates.

Duration of the undertakings and monitoring

(117) The Commission considers that the above under-
takings will have immediate effects on the opening
up of marketing structures: existing barriers to
competitors to effectively compete with Agfa will
be lifted instantly. The period of validity of five
years as proposed by Agfa is considered appro-
priate, since where the undertakings may have a
more delayed effect, such as for package deals with
the five year
their two to three year duration,
validity of the undertakings will ensure that the
opportunities for competitors to gain access to end-
users and dealers remain real.

L 211/40

EN

Official Journal of the European Communities

29. 7. 98

(118) Given the immediate effect of the undertakings,
the need for close monitoring is limited. Neverthe-
less, for the Commission to be able to enforce strict
compliance by Agfa of its undertakings, Agfa needs
to submit a report containing copies of the relevant
correspondence of Agfa with the
equipment
suppliers and dealers concerned, and to inform the
Commission on a yearly basis as to whether or not
the undertakings are being observed.

Conclusion

(119) The Commission considers that the above under-
takings, through the opening up of structural rela-
tions for the distribution of Agfa/DuPont products,
will have positive effects for competition on the
negative plates market. By reducing the cost to
end-users of switching and by ensuring that dealers
(and thus their customer base) can benefit from
offers from competitors, possibilities for competi-
tors to make inroads into the market share of Agfa
after the merger will be considerably enhanced.

IX. FINAL CONCLUSION

(120) Consequently,

the Commission concludes

that,
subject to full compliance with the above undertak-
ings, the concentration will not create a dominant
position as a result of which effective competition
would be significantly impeded on the common
market or a substantial part of it,

HAS ADOPTED THIS DECISION:

Article 1

Subject to their fulfilment of the conditions in Article 2,
the concentration by which Agfa-Gevaert AG and Agfa-
Gevaert NV (hereinafter referred to as ‘Agfa'), propose to
take over the graphic arts business of E. I. DuPont de
Nemours & Company is hereby declared compatible with
the common market and the functioning of the EEA
Agreement.

Article 2

Agfa shall comply fully with the commitments set out in
paragraphs (a) to (e) of recital 110.

Agfa shall submit to the Commission, on the first occa-
sion by 31 March 1998 and thereafter once every year, a
report and enclosures as described in recital 118.

Article 3

This Decision is addressed to:

Bayer AG
D-51368 Leverkusen.

Done at Brussels, 11 February 1998.

For the Commission

Karel VAN MIERT

Member of the Commission