98/666/EC: Commission Decision of 6 May 1998 declaring a concentration to be compatible with the common market and the functioning of the EEA Agreement (Case No IV/M.970 - TKS/ITW Signode/Titan) (notified under document number C(1998) 1257) (Only the English text is authentic) (Text with EEA relevance)
Date: 1998-05-06
Institutions: European Commission
Subjects: European Economic Area, common market, competition, economic concentration, merger control, metallurgical industry

25.11.98

EN

Official  Journal  of  the  European  Communities

L 316/33

COMMISSION  DECISION

of  6  May  1998

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

(Case  No  IV/M.970  —  TKS/ITW  Signode/Titan)

(notified  under  document  number  C(1998)  1257)

(Only  the  English  text  is  authentic)

(Text  with  EEA  relevance)

(98/666/EC)

THE  COMMISSION  OF  THE  EUROPEAN  COMMUNITIES,

Having  regard  to  the  Treaty  establishing  the  European
Community,

Having  regard  to  the  Agreement  on  the  European
in  particular  Article  57(2)(a)
Economic  Area,  and 
thereof,

Having  regard  to  Council  Regulation  (EEC)  No  4064/89
of  21  December  1989  on  the  control  of  concentrations
between  undertakings (1),  as  last  amended  by  Regulation
(EC)  No  1310/97  (2),  and  in  particular  Article  8(2)
thereof,

Having 
22  December  1997  to  initiate  proceedings  in  this  case,

the  Commission  Decision  of

regard 

to 

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

Having regard to the opinion of the Advisory Committee
on  Concentrations (3),

Whereas:

(hereinafter 

(1) On 20 November 1997, the Commission  received a
notification  under  Article  4  of  Council  Regulation
(EEC)  No  4064/89 
‘the  Merger
Regulation’)  of  a  proposed  operation  by  which  the
German  undertakings  Thyssen  Krupp  Stahl  GmbH
(‘TKS’)  and  ITW  Signode  Holding  GmbH  (‘ITW
Signode’)  were  to  acquire  joint  control  of  the
German  company  Titan  Umreifungstechnik  GmbH
(‘Titan’).

(2) After 

examination  of 

the
the  notified
Commission  has  concluded 
operation  constitutes  a  concentration  falling  within
the  Merger  Regulation.  On
the 

the  notification 

scope  of 

that 

(1) OJ  L  395,  30.12.1989,  p.  1;  corrected  version:  OJ  L  257,

21.9.1990,  p.  13.

(2) OJ  L  180,  9.7.1997,  p.  1.
(3) OJ  C  363,  25.11.1998.

22  December  1997,  the  Commission  decided  to
initiate  proceedings  pursuant  to  Article  6(1)(c)  of
the Merger Regulation after finding that the notified
concentration  raises  serious  doubts  as 
its
compatibility  with  the  common  market.

to 

I. THE  PARTIES

(3) TKS is a joint venture company into which Thyssen
Stahl  AG  and  the  Krupp-Hoesch  Stahl  AG  have
merged  their  activities 
in  the  production  and
distribution  of  quality  steel  flat  products (4).  The
business  areas  which  are  merged  into  TKS  achieved
a  total  worldwide  turnover  of  approximately  ECU
2 880  million  in  1996,  of  which  ECU  [. . .] (5)
million  were  achieved  within  the  Community  and
ECU  [. . .]  million  were  achieved  in  the  EFTA
States.

(4)

ITW  Signode  is  a  fully-owned  holding  company  of
the  US  undertaking  Illinois  Tool  Works,  Inc.
(‘ITW’)  and  the  sole  owner  of  the  Signode  System
GmbH.  The  business  activity  of  Signode  System
GmbH  essentially  consists  in  the  production  and
distribution  of  strapping  band  made  of  steel  and
plastic  as  well  as  seals  for  their  closure.  The  ITW
group  achieved  a  total  worldwide  turnover  of  ECU
3 935 million in 1996, of which approximately ECU
[. . .]  million  were  achieved  within  the  Community
and  ECU  [. . .]  million  were  achieved  in  the  EFTA
States.

(5) Titan  is  currently  a  fully-owned  subsidiary  of  the
Krupp-Hoesch  group  and  possesses  two  production
facilities  in  Germany,  one  production  facility  for
steel  strapping,  balelocks  and  seals 
in
Hagen-Kabel  and  one  operating  branch  located  in
Schwelm for the design, manufacture and marketing

located 

(4) The  creation  of  this  jointly  controlled  company  was  the
subject  of  proceedings  under  the  Merger  Regulation  and
Article  66  of  the  ECSC  Treaty.  See  Commission  Decision  in
Case  IV/M.925  —  Krupp  Hoesch/Thyssen,  (OJ  C  285,
20.9.1997,  p.  14)  and  Case  IV/ECSC.1243  respectively.
(5) This  version  of  the  Decision  has  been  edited  to  ensure  that

confidential  information  is  not  disclosed.

L 316/34

EN

Official  Journal  of  the  European  Communities

25.11.98

of  strapping  equipment (6).  However,  only  the
production  facilities  in  Hagen-Kabel  are  subject  to
the  concentration  (see  point  7).  Titan  achieved  a
total  worldwide  turnover  of  ECU  55,5  million  in
1996.  The  Hagen-Kabel  production  facilities  which
will be retained by the future joint venture achieved
a total worldwide turnover of ECU [. . .] million, of
which  approximately  ECU 
[. . .]  million  were
achieved  within  the  Community  and  ECU  [. . .]
million  were  achieved  in  the  EFTA  States.

II. THE  OPERATION

(6) The  Krupp-Hoesch  group  in  October  1996  decided
to  sell  Titan  in  order  to  withdraw  from  the
packaging business. ITW Signode and TKS intend to
acquire all of the shares of Titan and thus to form a
joint  venture.  ITW  Signode  will  hold  65 %  of
Titan’s  share  capital  whereas  TKS  will  hold  35 %.
In addition, ITW Signode will contribute its German
lines,
steel  and  plastic 
operated  by 
in
Dinslaken,  to  the  joint  venture  (see  Chart  A  in  the
Annex).

the  Signode  System  GmbH 

strapping  production 

(7) On  18  November  1997,  Titan  entered  into  a  sales
and transfer contract by which, simultaneously with
the  acquisition  of  its  shares  by  ITW  Signode  and
TKS,  it  would  sell  its  strapping  machinery  and
equipment  operation  located  in  Schwelm  as  well  as
the related industrial property rights, the Titan trade
marks  and  its  domestic  and  foreign  distribution
organisation  to  a  subsidiary  of  the  medium-sized
German  undertaking  P.  W.  Lenzen  GmbH  &  Co.
KG  (‘Lenzen’).  The  entry  into  force  of  this  sales
contract  is  conditional  upon  the  implementation  of
the  acquisition  of  joint  control  of  Titan  by  ITW
Signode  and  TKS.

III. THE  CONCENTRATION

Joint  control

(8) The  managing  directors  (‘Geschäftsführer’)  of  the
proposed  joint  venture  will  be  appointed  on  a
proposal from ITW Signode, by unanimous consent
of 
(‘Gesellschafter-
shareholders’  assembly
versammlung’). 
establishes a board of administrators (‘Verwaltungs-
rat’) in order to supervise the board of directors and
to determine the business policy of the joint venture,
ITW  Signode  will  appoint  two  out  of  the  three

the  shareholders’  assembly 
If 

the 

(6) The  manufacture  of  strapping  machines  was  outsourced  to

independent  assemblers  at  the  end  of  1993.

members of the board of administrators, which will
take  its  decisions  by  simple  majority.

the  appointment  of 

(9) However,  certain  strategic  commercial  decisions
require  the  unanimous  consent  of  the  shareholders’
assembly,  especially 
the
managing  directors,  the  approval  of  the  annual
financial  and  business  plans  including  investments
and their modification as well as the approval of the
extension  of  the  board  of  directors’  powers.  These
veto  rights  are  related  to  strategic  commercial  and
financial  decisions  on  the  future  joint  venture’s
business  policy  and  surpass 
the  usual  rights
protecting 
rights  of  minority
shareholders (7).  Thus,  TKS  has  rights  within  the
meaning  of  Article  3(3)  of  the  Merger  Regulation
which  confer  the  possibility  of  exercising  decisive
influence  on  the  strategic  behaviour  of  the  joint
venture.  Therefore,  the  proposed  joint  venture  will
be  jointly  controlled  by  ITW  Signode  and  TKS.

financial 

the 

Autonomous  full  function  entity  on  a  lasting  basis

in 

joint  venture  agreement 

(10) The  proposed  joint  venture  brings  about  a  lasting
the  undertakings
the  structure  of 
change 
concerned.  The 
is  of
indefinite duration and includes call and put options
which,  if  exercised,  would  allow  or  force  ITW
Signode to acquire all the shares that TKS will have
in  the  joint  venture.  These  options  cannot  be
exercised  before  30  November  2002.  Even  if  the
options  were  exercised  at  the  earliest  possible  date,
the  joint  venture  would  exist  for  at  least  five  years.
This  period  is  considered  to  be  sufficiently  long  to
bring  about  a  lasting  change  in  the  structure  of  the
undertakings  concerned (8).

(11) Furthermore,  the  notified  joint  venture  constitutes
an  autonomous  economic  entity,  as  it  will  operate
on  the  strapping  markets,  performing  all  the
functions  normally  carried  out  by  undertakings
operating  on  these  markets.  The  joint  venture  will
continue  to  carry  out  its  activities  with  its  own
management and with access to sufficient resources,
including  finance,  staff  and  assets.  In  the  future  the
joint  venture’s  production  will  be  undertaken  at  its
facilities  in  Hagen-Kabel  and  in  Dinslaken,  while
the  distribution  will  be  carried  out  primarily  by  the
joint venture itself and, additionally, by independent
distributors  and  the  distribution  subsidiary  of  the
ITW  group.

(7) See  Commission  Decision 

IV/M.897  —
Stinnes/Haniel  Reederei  (OJ  C  289,  24.9.1997,  p  3,  at
paragraphs  7-17).

in  Case 

(8) Commission  notice  on  the  distinction  between  concentrative
and  cooperative  joint  ventures  under  Council  Regulation
(EEC)  No  4064/89  (OJ  C  385,  31.12.1994,  p.  1,  at
paragraph  16).  See  further  Commission  Decision  in  Case
IV/M.823  —  John  Deere  Capital  Corp./Lombard  North
Central  plc, 
(OJ  C  359,  28.11.1996,  p.  11,  at
paragraph  9).

25.11.98

EN

Official  Journal  of  the  European  Communities

L 316/35

all 

conditions, 

at  market 

(12) The  Thyssen  and  Krupp-Hoesch  groups  will  be
major customers of the future joint venture for steel
strapping.  However,  even  if  both  groups  were  to
purchase, 
their
requirements  for  steel  strapping  from  the  joint
venture,  the  parents  would  account  for  only
between  25 %  and  30 %  of  Titan’s  current
worldwide  sales.  In  addition,  there  is  a  [. . .]  year
supply agreement which will oblige the joint venture
to  purchase  cold-rolled  pre-material  from  a  joint
venture company in which the Krupp-Hoesch group
currently has a controlling interest. These purchases
will  represent  less  than  40 %  of  the  total  raw
materials  requirements  of  the  future  joint  venture.
TKS  also 
substantial  quantities  of
hot-rolled  coil  (about  [. . .]  tonnes  p.a.)  to  the
operation  that  ITW  Signode  is  contributing  to  the
joint  venture.  However,  as  there  is  no  supply
contract  between  ITW  Signode  and  TKS  for  this
tonnage  the  joint  venture  will  be  free  to  buy  from
any  supplier.  Therefore,  the  joint  venture  will  be
sufficiently  independent  of  its  parents  in  relation
its
to  the  supply  of  raw  materials  to  ensure 
independence.  Finally, 
the
pre-material  accounts  for  between  15%  and  30 %
of total production costs, further indicating that the
joint  venture  will  operate  an  autonomous  business.

supplies 

added 

value 

to 

Absence  of  coordination  of  competitive  behaviour

(13) As TKS and the Thyssen and Krupp-Hoesch groups
do  not  retain  any  activities  in  the  production  and
distribution  of  strapping  band  and  strapping
equipment,  the  future  joint  venture  will  not  bring
about  a  coordination  of  the  competitive  behaviour
of  independent  undertakings.

Conclusion

(14) For the above reasons the joint venture arising from
the  notified  operation  constitutes  a  concentration
within the meaning of Article 3(1)(b) of the Merger
Regulation.

IV. COMMUNITY  DIMENSION

(15) The  combined  aggregate  worldwide  turnover  of  all
the  undertakings  concerned  exceeds  ECU  5 000
million.  Two  of  the  undertakings  concerned,  ITW
Signode and TKS, have a Community-wide turnover
in  excess  of  ECU  250  million,  but  they  do  not
achieve  morethan  two  thirds  of  their  aggregate
Community-wide turnover within one and the same
Member  State.  The  notified  operation  therefore  has
a  Community  dimension  according  to  Article  1(2)
of  the  Merger  Regulation.  It  does  not  qualify  for
cooperation  with  the  EFTA  Surveillance  Authority
pursuant  to  Article  2  of  Protocol  24  to  the  EEA
Agreement.

V. COMPATIBILITY  WITH  THE  COMMON
MARKET

(16) The  proposed  joint  venture,  after  the  acquisition  of
the  strapping  business  of  Signode  System  GmbH,
will  be  active  in  the  production,  marketing  and
distribution  of  steel  and  plastic  strapping  band,
balelocks  and  seals.  As  far  as  balelocks  are
concerned  no  competition  concerns  arise  from  the
proposed  concentration,  because  balelocks  are  sold
exclusively  to  customers  outside  the  EEA.  Seals  are
used  to  join  the  ends  of  the  strap  and  maintain  its
tension.  Their  sales  are  therefore  directly  realted  to
the  sale  of  the  strapping  with  which  they  will  be
used,  and  do  not  require  separate  examination.
However,  as  ITW  Signode  has  important  activities
in 
strapping
equipment,  in  particular  in  the  markets  for  sealing
heads  for  strapping  machines,  these  activities  must
also  be  taken  into  consideration  when  assessing  the
effects  of  the  proposed  concentration.

the  neighbouring  markets 

for 

A. RELEVANT  PRODUCT  MARKETS

A.1. The  market  for  strapping  band

1.

Introduction  into  the  strapping  market

(17) Steel and non-metallic strapping is used to secure, to
close,  to  unitise  or  to  strengthen  packages  or  to
reduce  package  volumes;  it  is  applied  under  tension
by  hand  tools  or  automatic  machines.  Basically,
there  are  four  different  types  of  strapping  for
industrial packaging applications: high-strength steel
strapping,  regular  duty  steel  strapping,  polyester
plastic 
and  polypropylene  plastic
strapping.

strapping 

is 

to  meet 

(18) Steel  strapping  is  produced  from  cold-rolled  steel
strip  and 
the
further  processed 
requirements  of  its  intended  applications.  For  use
is
in  heavy  duty  applications  steel  strapping 
manufactured 
strip  with  a  high
steel 
proportion  of  manganese  which  undergoes  special
heat  treatment.  The  majority  of  steel  strapping
however,  is  used  in  regular  duty  applications  which
do  not  call  for  special  requirements  as  to  tensile
strength  or  break  strength.

from 

(19) Plastic  strapping  is  produced  in  extrusion  lines
either  from  polypropylene  or  polyester  resins.
Polyester  strapping  (hereinafter  ‘PET  strapping’)
is
provides 

for  high-strength  applications  and 

L 316/36

EN

Official  Journal  of  the  European  Communities

25.11.98

characterised  by  a  high  impact  resistance,  whereas
polypropylene  strapping  (hereinafter  ‘PP  strapping’)
offers  the  highest  elasticity.  Plastic  strapping,  on
account  of  its  resistance  to  corrosion,  its  superior
elongation,  improved  safety  features  (being  less
dangerous  when  the  strapping  is  removed  from  the
load)  and  lower  weight  provides  benefits  which
cannot  be  achieved  by  steel  strapping.

fracture.  The  tensile  strength  corressponds  to  the
maximum stress that can be sustained by a structure
in  tension.  The  elongation  is  the  relative  change  in
length caused by tensional stress. Finally, the impact
resistance  designates  the  energy  (stress 
impact)
which  can  be  imposed  from  the  initial  tension  up
to  a  pre-selected  portion  of  the  minimum  break
strength.

(20) The  parties  suggest  that  while,  in  the  past,  it  may
have  been  appropriate  to  define  a  separate  product
market  for  steel  strapping,  owing  to  economic  and
technological  developments,  such  market  definition
may  no  longer  be  upheld.  In  their  view,  therefore,
the  relevant  product  market  in  this  case  includes  at
least  both  steel  and  plastic  strapping,  and  may
include  packaging  films  (stretch  and  shrink  films).

(21) However,  the  results  of  the  Commission’s  market
investigation show that packaging films do not form
part  of  the  same  relevant  product  market  as  steel
strapping.  Stretch  or  shrink  films  are  widely
considered  by  customers  to  be  complementary
products which serve as protection for the packaged
goods  from  damage,  contamination  or  the  weather
rather  than  being  direct  substitutes  for  strapping.
Even  the  parties  in  their  notification  said  that  the
vast  majority  of  packaging  films  are  used  for  other
reasons  than  those  associated  with  strapping (9).
Furthermore, according to the results of the parties’
customer  survey,  only  one  out  of  168  end-users
who  were  considering  changing 
the  strapping
material  they  use  indicated  that  he  would  replace
strapping  band  by  packaging  film.  Packaging  films,
therefore,  do  not  form  part  of  a  market  for
strapping  band,  regardless  of  whether  or  not  it
covers  only  steel  strapping  or  includes  certain  types
of  plastic  strapping.

2. Comparison  of  steel  and  plastic  strapping

Physical  and  mechanical  product  characteristics

(22) Strapping products can be distinguished by the type
of  material  and  certain  physical  and  mechanical
properties, 
in  particular  their  minimum  break
strength,  their  tensile  strength,  their  elongation  and
their 
impact  resistance.  The  minimum  break
strength  designates  the  force  (load)  that  can  be
applied  to  the  strapping  material  without  inducing

(9) According to the parties, of the total estimated EEA turnover
of ECU 808 million, some 15 % of the stretch film and 20 %
of  the  shrink  film  is  used  in  applications  which  are  directly
competitive  with  strapping.

(23) Steel strapping has a tensile strength of between 700
newton (hereinafter ‘N’) per mm2  (regular duty) and
1 250  N/mm2  (high-tensile  strength),  whereas  the
tensile  strength  of  PET  strapping  ranges  between
330  and  600  N/mm2  and  the  tensile  strength  of  PP
strapping  ranges  between  280  and  380  N/mm2.
Depending  on  its  size  and  thickness,  regular-duty
steel  strapping  has  a  minimum  break  strength  of
between  3  and  14  kg  newton  (hereinafter  ‘kN’),
whereas  the  break  strength  of  heavy  duty  steel
strapping  ranges  between  12  and  28  kN,  in  special
qualities  up  to  55  kN  at  maximum.  In  contrast,
while PET strapping has a minimum break strength
of between 2 and 10 kN at maximum, PP strapping
has  a  relatively  low  break  strength  of  between  0,5
and  6  kN.

show 

strapping 

(‘relaxation 

effect’).  According 

significant  differences 

(24) Furthermore,  steel  strapping,  PET  strapping  and
PP 
in
the  reduction  of  the  initial  applied  tension  over
time 
the
to 
the  Verband
Richtlinienarbeit  Nr.  3968  of 
Deutscher Ingenieure (VDI) (Association of German
Engineers),  while  the  tension  of  steel  strapping  is
still the same after six days after it has been applied,
the  tension  of  PET  strapping  is  reduced  by  about
20 %  and  the  tension  of  PP  strapping  by  up  to
80 % (10). Therefore, if the same impact resistance is
required, in particular PP strapping must be applied
to  the  packaged  goods  with  a  much  higher  initial
tension.  This  would  often  require  pneumatically
or  electrically  powered  tools  instead  of  simple
manually  operated  tools.  In  addition,  whereas  PET
straps  recover  up  to  95 %  of  their  initial  elastic
strain  after  a  stress  impact  has  occurred,  PP  straps
regain  only  75 % (11).

(25)

resistance 

In  certain  applications  heat 
is  a
precondition  for  strapping  to  be  used.  Wheras  steel
strapping  resists  temperatures  of  up  to  600-750 °C,
plastic  strapping  may  weaken  considerably  at
elevated temperatures. According to Euronorm CEN
T261,  PET  strapping  is  permitted  for  temperatures
of  up  to  90 °C,  but  the  material  will  soften  and

(10) See  Richtlinienarbeit  VDI  Nr.  3968,  paragraph  3.2
‘Kunststoff-Verpackungsbänder’. 
studies
presented by the parties do not deal with physical properties
such  as  creep  effect  and  stress  relaxation  over  time.

expert 

The 

(11) Titan Umreifungstechnik GmbH: Technische Spezifikationen

—  Kunststoffverpackungsband.

25.11.98

EN

Official  Journal  of  the  European  Communities

L 316/37

strapping 

contrast,  PP 

increase  its  elongation  characteristics  even  at  lower
temperatures.  By 
is
recommended  for  applications  the  temperature  of
which does not exceed 35 °C. In certain applications
in the steel industry, i.e. strapping of hot steel coils,
the  temperature  of  the  product  is  a  determinant
factor. However, such applications account only for
between  3 %  and  10 %  of  total  steel  strapping
consumption  in  Western  Europe.

(26) From  the  comparison  of  physical  and  mechanical
product  characteristics  it  appears  that  while  PET
strapping  provides  characteristics  comparable  to
those  of  steel  strapping,  in  particular  regular  duty
steel strapping. PP is a less satisfactory substitute for
steel  strapping  particularly  in  heavy  applications
where  the  strapping  is  intended  to  last  for  a  longer
time  and  rigidity  and  low  elongation  is  decisive,  or
in  applications  at  higher  temperatures.  Differences
in  the  physical  characteristics  of  products  and  their
intended uses can provide important information as
to  the  definition  of  the  relevant  product  market (12)
but  are  not  themselves  sufficient  to  exclude  the
possibility 
that  customers  and  end-users  view
those  products  as  being  effective  alternatives (13).
Therefore  it  is  necessary  to  evaluate  to  what  extent
these differences would prevent a significant number
of  steel  strapping  customers  from  switching  to
plastic  strapping,  in  particular  PP  strapping,  if  the
relative  price  for  steel  strapping  were  to  increase
permanently  by  a  small  amount.

Areas  of  usage  and  categories  of  consumers

strapping 
in  value 

accounted 
terms  of 

(27) According  to  the  results  of  the  Commission’s
for
investigation, 
steel 
total
approximately  55 % 
strapping  consumption  in  Western  Europe  in  1997,
PET  strapping  for  11,5 %  and  PP  strapping  for
34 %.  In  Western  Europe,  more  than  75 %  of  total
steel  strapping  consumption  is  used  in  basic  steel
and non-ferrous production (steel coils, metal sheet,
billets, ingots and slabs) and metal working industry
(flat  products,  pipes  and  tubes,  profiles),  building
materials  industry  (bricks  and  blocks),  agriculture
and  forestry  (lumber,  wood  panels),  textile  and
the  automobile  and
in 
staple 
components  industry,  and  in  the  transport  and
ocean  shipping  sector.

industry, 

fibre 

in 

industry. 

the  automobile 

(28) Steel  strapping  accounts  for  approximately  97 %  of
total  strapping  consumption  (by  value)  in  the  steel
and  non-ferrous  metal  production,  92-95 %  in  the
steel  working  sector,  90 %  in  the  ocean  shipping
and  transport  sector,  77-80 %  in  the  staple  fibre
industry,  69-75 %  in  the  brick  and  block  sector,
58-65 %  in  the  other  building  materials  industries
and  56-70 % 
In
contrast,  PP  strapping  is  predominantly  used  in  the
newspapers  and  printing  industry  (90-93 %),  in  the
food  and  beverages  industry  (60-65 %),  and  in  the
cardboard  and 
industry
(45-46 %).  PP  strapping  currently  is  not  used  to  a
significant  extent  in  the  steel  production  and  steel
working  industries  and  in  the  staple  fibre  industry,
industry,  PP
while 
strapping  accounts  for  less  than  15 %  of  total
strapping  consumption.  In  most  cases  where  steel
and  PP  strapping  are  used  in  the  same  consumer
industry,  the  strapping  materials  are  used  for
different  applications (14).

the  building  materials 

corrugated  products 

in 

Evidence  of  substitution  in  the  recent  past

(29) The  notifying  parties  take  the  view  that  today  in
nearly  every  field  of  application,  steel  strapping
could  be  replaced  by  plastic  strapping.  Plastic
strapping first replaced steel in relatively simple and
undemanding  applications  where  the  high  strength
of  steel  was  not  required.  In  the  last  decade,
however, because of the development of high-tensile
PET  strapping  and  the  improvement  of  packaging
increasingly
technology,  plastic  materials  have 
been  used  and  have  made  their  way  into  all
applications.

(30) This  view  appears 

to  be  supported  by 

the
contrasting  development  of  consumption  of  steel
and  plastic  strapping  in  recent  years.  According  to
the parties, in value terms total consumption of steel
strapping  in  Western  Europe  diminished  by  ECU
38,6  million  (11,7 %)  between  1987  and  1997.
Total consumption of plastic strapping increased by
ECU  128,6  million  (73,8 %)  in  the  same  period.
in
As  a  result,  the  share  of  steel  strapping 
total 
from
strapping  consumption  diminished 
approximately  65 %  to  49 %  (by  value)  between

(12) See  Commission  Decision  93/9/EEC  in  Case  IV/M.214  —
Du  Pont/ICI  (OJ  L  7,  13.1.1993,  p.  13,  paragraphs  21-22);
Commission  Decision  97/610/EC  in  Case  IV/M.774  —
Saint-Gobain/Wacker-Chemie/NOM  (OJ  L  247,  10.9.1997,
p.  1,  paragraph  83).

(13) See  Commission  notice  on  the  definition  of  relevant  market
for the purposes of Community competition law (OJ C 372,
9.12.1997,  p.  5,  paragraph  36).

(14) The  [. . .]  tin-plate  works  in  [. . .]  only  use  small  quantities
of  PET  strapping  for  internal  handling  between  processes.
Such  applications  encompass  one  circumferential  strap  on
coils  of  tin-plate  and  two  vertical  straps  on  palletised
tin-plate  bulks.  External  despatch  packaging  still  requires
steel  strapping;  the  polyester  strap  is  removed  prior  to  this
final packaging.

L 316/38

EN

Official  Journal  of  the  European  Communities

25.11.98

(31)

1987  and  1997.  The  Commission  acknowledges
that  total  sales  of  plastic  strapping  have  increased
strongly  in  recent  years  and  that  in  particular  PET
strapping  has  made  considerable 
into
applications in which previously steel strapping had
been  used  (see  point  37).

inroads 

Absolute  price  differences

to 

the  results  of 

It  is  difficult  to  make  a  direct  comparison  of  prices
for  the  various  types  of  strapping  as  there  are  a
large  number  of  variables  which  need  to  be  taken
into consideration. For a given application it may be
possible  to  replace  strapping  of  one  type  with
another type of the same dimensions, though this is
unlikely.  Similarly,  when  using  different  materials
different  configurations  may  be  the  best  solution,
for  example  four  PP  straps  might  be  replaced  by
three  PET  straps  of  different  dimensions.  However
indicative  comparisons  may  be  made.
some 
According 
the  Commission
investigation,  the  price  of  steel  strapping  was
between  ECU  60  and  ECU  400  per  1 000  metres,
whereas plastic strapping cost between ECU 15 and
ECU 90 per 1 000 metres depending on dimensions.
Richtlinienarbeit  Nr.  3968  of 
the  Verband
that  when
Ingenieure 
Deutscher 
comparing  strapping  of  the  same  dimensions,  PET
strapping  is  20 %  and  PP  strapping  40 %  cheaper
than  steel (15).  Finally,  the  notifying  parties  gave
examples  of  differences  in  the  costs  of  the  different
strapping  materials  for  applications  for  which  steel,
PET  and  PP  were  suitable.  For  these  applications,
PET was on average 7 % cheaper and PP over 50 %
cheaper  than  steel.

(VDI)  states 

Long-term  development  of  prices

(32) The  parties  have  presented  a  chart  which  has  been
prepared  on  the  basis  of  the  official  statistics  of
the  British  Tensional  Strapping  Association  which
shows  the  comparative  development  of  British
market  prices  for  steel,  PET  and  PP  strapping  from
1987  to  1996.  This  chart  shows  clearly  a  parallel
development  of  prices  of  steel  and  PET  strapping,
whereas  the  prices  of  PP  strapping  seem  to  have
developed more independently of the prices for their
potential  substitutes.

Switching  costs  and  lead  times

(33) Costs associated with switching from steel strapping
the  capital

to  plastic  alternatives  encompass 

(15) See  Richtlinienarbeit  VDI  Nr.  3968,  table  ‘Bandeigen-

schaften  im  Vergleich  (Allgemeine  Übersicht)’.

investment  for  new  strapping  equipment  as  well  as
the  expenses  resulting  from  operator  training  and
the  reorganisation  of  the  strapping  processes  at  the
end-users’  production  sites.  Strapping  tools  usually
are  designed  to  be  used  with  either  steel  or  plastic
strapping  with  the  result  that  changing  the  type  of
strapping  would  require  the  replacement  of  the
complete  tool.  Strapping  machines,  on  the  other
hand,  can  in  many  cases  be  operated  with  either
material,  as  the  so-called  sealing  head  can  be
replaced  separately.  Switching  costs  appear  to  be
moderate and generally seem not to be a significant
factor.  For  example,  the  costs  of  hand  tools  range
from  about  ECU  80  for  a  simple  manual  seal
combination tool through to about ECU 2 000 for a
modern  electrically  operated  portable  tool  and  can
reach  up 
if  an  electronically
controlled  tool  is  used.  Steel  sealing  heads  cost
between  ECU  15 000  and  ECU  25 000  and  plastic
sealing  heads  vary  between  ECU  4 000  and  ECU
5 000.

to  ECU  5 000 

Views  of  customers

(34) The  views  of  end-users  and  of  customers  and
competitors  of  the  undertakings  concerned  are  of
particular  importance  for  the  delineation  of  the
relevant  product  market.  In  the  present  case,  to
verify the views of the parties, the Commission first
undertook  a 
inquiry  among  48
customers  of  the  parties  to  the  concentration  for
strapping  band.  Altogether,  the  purchases  of  those
customers  represent  approximately  14 %  of  total
consumption  in  Western  Europe.

small-scale 

its 

exceptional 

rigidity  and 

(35) Almost  all  of  those  customers  stated  in  their  replies
to the Commission that they could not without any
significant  problems  replace  steel  strapping  in  all  of
their  strapping  applications.  When  asked  for  their
reasons,  most  end-users  referred  to  the  superior
tensile strength and very high break strength of steel
strapping,  its  temperature  resistance  compared  to
its  resistance  to  sharp  edges  (abrasion
plastic, 
resistance), 
low
elongation,  and  its  better  recycling  characteristics.
Major  customers  in  the  steel  producing  industry
have  stated  that  in  60-70 %  or  even  more  of  their
current  strapping  applications  they  can  only  use
steel  strapping  because  of  product  temperature  and
the break strength and abrasion resistance required.
Companies  active  in  the  concrete  block,  limestone,
and  brick  industries  which  currently  use  both  types
of  strapping  band  have  stated  in  their  responses  to
the  Commission’s 
inquiry  that  they  could  not
replace  either  material  in  all  of  their  applications
but  consider  steel  and  plastic  strapping  to  be
complementary  rather  than  substitute  products.
Customers  in  the  limestone  industry  have  stated

25.11.98

EN

Official  Journal  of  the  European  Communities

L 316/39

that  they  cannot  replace  steel  strapping  by  plastic
alternatives  in  90-100 %  of  their  current  package
strapping applications.

(36) However,  the  parties  to  the  concentration  have
forwarded  to  the  Commission  the  results  of  an
inquiry  among  518  consumers  of  strapping  band,
according  to  which  companies  which  currently  use
steel  strapping  already  use  ‘plastic’  alternatives  to  a
significant  extent  and  would  consider  switching
from  steel  to  ‘plastic’  substitutes.  To  verify  these
results, the Commission undertook a second inquiry
to  which  191  strapping  customers  replied,  covering
the  major  steel  strapping  consuming  industries;
further,  the  survey  is  widely  drawn  across  Western
Europe.

(37) Of  the  total  of  69  companies  which  have  changed
their  strapping  materials  in  the  past  three  years,  39
(20,4 %  of  the  total  sample)  have  switched  from
steel  to  PET  strapping  but  only  20  (10,5 %)  have
switched  from  steel  to  PP  strapping.  This  switching
pattern  is  not  the  same  in  all  industries  using
strapping,  but  switching  from  steel  to  PP  strapping
is considerably lower in the timber and forestry and
in the staple fibre and textile industries (none of the
contacted  companies  in  these  sectors  switched  from
steel  to  PP  strapping)  as  well  as  in  the  metals  and
steel  working  industries  (only  8,6 %  have  switched
from  steel  to  PP  strapping).  In  contrast,  in  the
building materials industry 15,3 % of the consumers
in  this  sector  have  switched  from  steel  to  PP
strapping  and  in  the  automobile  industry  16,7 %  of
the  consumers  in  this  sector.

(38) A  total  of  59  companies  (30,9 %  of  the  total
sample)  told  the  Commission  that  they  were
their  strapping
currently  considering  changing 
materials. Of this total, 49 (25,7 %) companies were
considering  switching  from  steel  to  PET  strapping
but  only  17  (8,9 %)  customers  were  considering
switching from steel to PP strapping. The pattern of
future  switching  is  not  the  same  for  all  sectors.  In
the  timber,  staple  fibre  and  automobile  sectors
none  of  the  companies  who  responded  to  the
Commission’s  inquiry  is  considering  a  switch  from
steel  to  PP  strapping.  In  the  building  materials
industry  2,6 %  of  those  responding  are  considering
switching  from  steel  to  PP  strapping.  In  the  metals
and 
the
customers  are  considering  switching  from  steel  to
PP  strapping.

industries  11,6 %  of 

steel  working 

(39)

In  addition,  it  has  to  be  taken  into  consideration
that  a  considerable  proportion  of  the  switching
customers  do  not  use  steel  strapping  and  plastic
alternatives  in  similar  applications  (similar  pack

goods, similar pack weight). In the metals industries
only 32,1 % of the customers noted that they would
use  plastic  strapping  in  similar  applications  for
which  they  use  steel  strapping.  However,  most  of
these customers (61,1 %) use PET strapping whereas
only  38,9 %  (12,5 %  of  the  total,  excluding  those
who  currently  use  only  plastic  strapping)  use  PP
strapping  as  a  direct  substitute  for  steel  strapping.
Similarly,  in  the  building  industries,  only  14,8 %
of  the  customers  use  plastic  strapping  in  similar
applications  to  steel  strapping  and  all  of  them  use
only  PET  strapping  as  a  substitute  for  steel
strapping.  In  the  timber  and  fibre  industries,  only
10,5 %  use  PP  strapping  in  applications  for  which
they  currently  also  use  steel  strapping.

3. Conclusion  on  the  strapping  market

the  Commission’s 

(40) Based  on  the  above  the  Commission  has  come  to
the  conclusion  that  PET  strapping  clearly  is  an
immediate  and  satisfactory  substitute  for  steel
strapping  in  most  of  the  applications  in  which
consumers  currently  use  steel  strapping.  PET
strapping  therefore  forms  part  of  the  same  relevant
product  market  as  steel  strapping.  In  particular  the
findings  of 
survey  among
suppliers  and  end-users  of  strapping  support  the
view  that  PET  plastic  strapping  in  almost  all
strapping  applications  is  considered  an  effective
substitute for steel strapping except for applications
where 
required.  Those
applications,  however,  account  for  only  3-10 %  of
total  steel  strapping  consumption 
in  Western
Europe  and  price  discrimination  between  different
groups  of 
to
whether  they  use  steel  strapping  in  hot  applications
or  not,  generally  seems  not  to  be  feasible.

individual  customers,  according 

resistance 

heat 

is 

(41) As to whether PP plastic strapping forms part of the
same relevant product market as steel strapping, the
Commission has doubts due to the differences in the
product’s  physical  and  mechanical  characteristics,
absolute prices and the development of prices in the
recent past. Furthermore, results of the Commission
survey  among  end-users  in  various  industries  seem
to  indicate  that  if  consumers  consider  switching
from  steel  to  PP  strapping,  in  most  cases  factors
other than relative prices are of decisive importance.
However,  the  Commission  is  aware  of  a  significant
number  of  customers  who  have  switched  from  steel
to  PP  strapping  in  the  past  three  years  or  currently
are  considering  such  a  switch.  In  a  number  of
consumer  industries  these  customers  account  for
more  than  10 %  of  the  total  number  of  end-users
whose views were obtained. This proportion can be
considered  sufficient  to  prevent  producers  of  steel

L 316/40

EN

Official  Journal  of  the  European  Communities

25.11.98

strapping  from  raising  prices  permanently  by  a
small  but  significant  amount,  particularly  as  the
Commission’s investigations did not show that steel
strapping  producers 
could  price  discriminate
between  the  various  end-user  applications.  In  view
of this conflicting evidence the  Commission has not
been  able  to  prove  beyond  doubt  that  PP  strapping
does  not  form  part  of  the  same  relevant  product
market  as  steel  strapping.  Therefore,  in  this  case  a
wider  product  market  for  steel  strapping  including
to  be
PET  and  PP  plastic 
considered.

strapping  had 

A.2. Sealing  heads  for  strapping  band  are  a

relevant  product  market

(42) Sealing  heads  are  the  most  sophisticated  and
complex  device  at  the  heart  of  the  automated
strapping
strapping  machines  and  engineered 
systems  which  apply  tension  to  the  strapping  band
and  make  the  joint.  Hand-operated  tools  do  not
have  a  sealing  head;  rather  the  strapping  band  is
manually  fed  into  the  tool  and  jointed  together.
Sealing heads can be distinguished from the machine
body  because  they  are  regularly  sold  individually
to  independent  machine  assemblers  who  do  not
manufacture  sealing  heads  themselves  or  produce
only  a  limited  number  of  heads  or  a  narrow
range (16). 
In  1995-97,  sales  of  single  sealing
heads  to  independent  assemblers  and  competitors
accounted  for  between  15 %  and  25 %  of  the  total
number  of  sealing  heads  produced  by  the  ITW
group  and  for  between  80 %  and  90 %  of  Titan’s
production  of  sealing  heads.

(43) From  the  demand  side  point  of  view,  sealing  heads
for  steel  strapping  applications  cannot  be  replaced
by  sealing  heads  for  plastic  strapping  applications
nor  vice  versa,  because  of  specific  characteristics  of
each  type  of  strapping  and  the  different  way  in
which  they  are  joined  —  either  through  stamping
the  steel  band  or  through  applying  heat  to  the
plastic  band.  However, 
technical
characteristics  of  sealing  heads  and  the  engineering
their  production  are
for 
know-how  required 
generally  comparable.  Furthermore,  most  of  the
producers  of  sealing  heads  manufacture  both  types
of  sealing  heads  although  in  differing  ratios.  For
these reasons, from a supply side point of view, the
Commission  has  come  to  the  conclusion  that  both
types  of  sealing  heads  belong  to  the  same  relevant
product  market.

the  basic 

(16) Main  customers  for  single  sealing  heads  for  strapping
machines  are  Itipack  (Italy),  AmCa  Machinery  Inc.  (USA),
Sorsa  (Spain)  and  Samuel  Strapping  Systems  (Canada).

B. RELEVANT  GEOGRAPHIC  MARKETS

B.1. The  market  for  steel  and  plastic  strapping

1. The  relevant  market  is  wider  than  national

(44) The  relevant  geographic  market  for  strapping  goes
beyond  the  geographic  boundaries  of  the  individual
Member  States  of  the  Community  and  EFTA,  given
that strapping is offered cross-border in all of those
States.  Both,  ITW  Signode  and  Titan,  supply
customers  in  all  Member  States  of  the  Community.
Furthermore,  with 
specific
situations  in  Sweden,  Finland  and  Norway,  no
major  differences  in  the  parties’  market  shares  exist
between the major Community countries and EFTA
States (17).

the  exception  of 

(45) Strapping  band  is  subject  to  several  internationally
accepted  norms  and  standard  specifications  or  to
established  selection  guides  and  packaging  and
loading  requirements (18).  The  notifying  parties,
therefore, take the view that within the Community
and 
there  are  no  relevant
differences  as  regards  the  nature  and  characteristics
of  the  products  concerned.

the  EFTA  States 

2. The  relevant  market  is  not  wider  than  the  EEA

and  Switzerland

Proximity  to  end-users  and  consumer  preferences
for  Western  European  suppliers

(46) Strapping  band 

is  ordered  by 

the  end-users
according  to  their  actual  consumption,  in  several
instalments  over  the  year.  Since  any  interruption  in
the  delivery  of  strapping  band  will  have  a  severely
damaging  effect  on  the  production  process  of
end-users,  customers  rank  the  supplier’s  reliability
and  security  of  delivery  among  the  most  important
criteria  by  which  they  choose  their  suppliers.  For
these  reasons,  based  on  the  results  of  the  market

(17) The  significantly  higher  market  shares  of  ITW  Signode,  of
up  to  70 %,  in  the  Scandinavian  countries,  reflects  the
acquisition of Burseryds by ITW in 1995 and the continued
transitional  sales  to  the  independent  re-seller  Cyklop,  the
former  owner  of  Burseryds.

(18) For 

European 

example,  Draft 

Standard  CEN
TC261/SC3/WG3  (January  1998)  and  corresponding  norms
‘Packaging — Specification for tensional steel strapping’ and
‘Packaging  —  Specification 
tensional
strapping’.

for  non-metallic 

25.11.98

EN

Official  Journal  of  the  European  Communities

L 316/41

inquiry  of  the  Commission,  customers  do  not  seem
to  consider  suppliers  established  outside  the  EEA
and  Switzerland  to  be  readily  available  alternatives
to  their  present  suppliers.  None  of  the  end-users
who  have 
the  Commission’s
questionnaires  have  imported  any  strapping  band
from  suppliers  outside  Western  Europe.

responded 

to 

Transport  costs

the  US 

to  Europe  would  amount 

(47) According  to  the  parties,  costs  for  transportation
from 
to
approximately  5-10 %  of  the  final  prices  for  steel
strapping,  the  exact  proportion  depending  on
the  value  of  the  product  and  the  means  of
transportation. Transport costs for plastic strapping
would  amount  to  less  than  5 %.  Futhermore,  from
information  provided  by  ITW  Signode  it  appears
that total freight and insurance expenses, in general,
exceed  10 %  of  customer  steel  strapping  prices  for
long-distance  or  overseas  transport.  Although  the
transport  and  insurance  costs  appear  modest  it
should be remembered that strapping is a low-value
product  for  which  the  value  added  to  the  raw
materials  is  15-30 %.  In  this  context,  supplies  will
be  sensitive  to  transport  costs.

imports  are  believed 

20 000  tonnes  of  steel  strapping  and  about  2 000
tonnes  of  plastic  strapping  were  imported  into  the
EEA  in  1996,  accounting  for  approximately  6 %
and  3 %  in  total  EEA  sales  respectively.  Together
these 
for
approximately  5 %  of  the  total  strapping  market.
Because  of 
imports  of
strapping band have not had a significant impact on
the conditions of competition in Western Europe, in
particular on the price-setting of the major suppliers
in  this  area.

limited  volume, 

to  account 

their 

3. Conclusion

(50) On the basis of the above findings, the Commission
has  come  to  the  conclusion  that  the  relevant
geographic  market  for  steel  and  plastic  strapping  is
limited to the EEA area and Switzerland (hereinafter
the  conditions  of
‘Western  Europe’)  because 
sufficiently
competition 
this 
homogeneous  and  can  be  distinguished 
from
neighbouring areas and because, taken together, the
transport  costs  and  duty  payable  place  imports  at  a
significant  disadvantage  to  producers  based  in  the
EEA.

area 

are 

in 

Import  duties  and  other  non-tariff  barriers  to
trade

B.2. The  market  for  sealing  heads  for  strapping

machines

(48) The  duty  on  imports  into  the  Community  from
member  countries  of  the  WTO  (conventional  duty
rates),  applicable  since  1  January  1998,  are  3,2 %
for  steel  strapping,  10,1 %  for  PP  strapping  and
10,4 %  for  PET  strapping.  The  duties  on  imports
from  other  countries  (autonomous  duty  rates)  are
10 %, 23 % and 20 % respectively. At least the duty
rates  on  plastic  strapping  are  quite  significant  in
view  of  the  modest  value  added  to  these  products
and  make  it  rather  unlikely  that  imports  would
increase  considerably  in  response  to  a  small  but
significant  increase  of  relative  prices  in  Western
Europe.

(51) The  geographical  scope  of  the  markets  for  sealing
heads is worldwide. There are no significant barriers
to imports into the Community and as sealing heads
are  a  relatively  high  value-added  product,  transport
costs do not affect the scope of activity of suppliers
and  the  purchase  decisions  of  their  customers.
Furthermore,  both  ITW  Signode  and  Titan  sell
sealing  heads  to  customers  all  over  the  world.  In
1995-97, Titan achieved between 50 % and 80 % of
its  total  sales  of  single  sealing  heads  outside  the
EEA.

Trade  flows  and  imports

(49) Official figures on trade flows of strapping band are
not  available  because  the  tariff  and  statistical
nomenclature of the European Community does not
provide  for  a  separate  customs  code  for  strapping
band (19).  However,  according  to  the  parties,  about

(19) The  parties  have  identified  customs  tariff  classification
numbers  which,  in  their  view,  would  cover  the  trade  flows
of  the  products  under  consideration:  steel  strapping  —
72124098;  PP  strapping  —  39202079;  PET  strapping  —
39206290.  These  customs  codes,  however,  do  not  represent
strapping  band  only.

C. ASSESSMENT

in  the  notification  that, 

(52) This  assessment  is  carried  out  on  the  basis  of  the
parties’  statement 
in
accordance with their sale and purchase contract, at
the same time as they acquire joint control of Titan
that  company  will  sell  its  strapping  machinery  and
equipment  operation  to  an  independent  company,
Lenzen  (see  point  7).  According  to  the  parties,  on
the  basis  of  the  turnover  attained  in  1996,  their
future joint venture company is expected to reach a
total  turnover  in  the  EEA  of  approximately  ECU
[. . .]  million  assuming  full  retention  of  current
volumes.  Of  this  turnover  approximately  ECU  [. . .]
million would stem from the current Titan company

L 316/42

EN

Official  Journal  of  the  European  Communities

25.11.98

and ECU [. . .] million from the production facilities
to  be  transferred  from  ITW  Signode.

Intended  purpose  of  the  notified  operation

(53) The  proposed  concentration  results 

from 

the
Krupp-Hoesch  group’s  intention  to  withdraw  from
the  production  and  distribution  of  strapping
and  strapping  equipment.  Krupp-Hoesch  initially
intended  to  split  the  business  activities  of  Titan,  its
subsidiary in this field, between ITW Signode which
would take over all the company’s activities outside
Germany,  and  the  German  undertaking  Lenzen
which  would  take  over  the  German  part  of  the
business.  This  operation,  which  was  notified  under
German  competition  law,  was  abandoned  in  April
1997  after  the  Bundeskartellamt  had  expressed
serious  competition  concerns  in  a  warning  letter.

ITW  Signode  acquiring 

(54) The  operation  under  consideration  is  structured
differently,  with 
joint
control of Titan’s strapping band business only (see
point  7).  From  the  perspective  of  ITW  Signode  the
proposed  joint  venture  is  a  reflection  of  the  current
changes  on  the  German  and  European  steel  and
strapping  markets.  Within  the  context  of  the  joint
venture,  ITW  Signode  will  complete  its  production
plants  in  Germany  by  the  addition  of  the  existing
lines  of  Titan  which  are  partially
production 
complementary 
in
its  production 
Dinslaken.

lines 

to 

C.1. The  major  suppliers  of  strapping  band  in

Western  Europe

(55)

is  the  world’s 

ITW  group 
largest  supplier  of
strapping  and  related  equipment  and  is  active  in
Western  Europe  through  its  subsidiaries  Burseryds
Bruk  AB 
(Sweden),  Signode  Systems  GmbH
(Germany) and Orgapack Holding AG (Switzerland)
with  subsidiaries  in  France,  Scotland  and  the  USA.
Burseryds  and  Orgapack  were  acquired  by  ITW  in
1995  and  1996  respectively.  ITW  also  is  active  in
the  neighbouring  markets  for  wrapping  products
and  considers  itself  to  be  a  worldwide  leader  in
offering  customers  a  single  source  for  stretch
wrapping  machinery  and  stretch  film (20).  ITW
group  achieved  a  total  worldwide  turnover  of  ECU
3 935  million  in  1996.

(56) Titan has two production facilities in Germany, one
for steel strapping and seals located in Hagen-Kabel

and  one  located  in  Schwelm  for  the  design  and
manufacture  of  strapping  equipment (21).  However,
only  the  production  facilities  in  Hagen-Kabel  are
subject  to  the  concentration,  because  the  Schwelm
business  unit  will  be  divested  to  the  Lenzen  group.
Titan  has  licensed  both  the  ITW  group  and  Lenzen
for  the  use  of  a  patent  related  to  a  method  of
securing balelocks.

(57) The  most  important  supplier  of  steel  strapping
besides  the  parties  to  the  concentration  is  the
family-owned  company  M.  J.  Maillis  SA  (‘Maillis’),
which  operates  three  production  lines  for  steel
strapping  in  Greece.  Since  1996,  the  company  has
also  operated  a  production  line  for  PP  and  PET
plastic  strapping.  In  1997 
installed  a  new
heat-treatment  line  which  enables  it  to  produce
high-strength  steel  strapping  and  a  production  line
for  stretch  film.  As  Maillis  does  not  have  a
distribution  organisation  of  its  own  outside  Greece,
most  of  its  strapping  sales  are  made  through
independent  distributors.  Maillis  achieved  a  total
worldwide  turnover  of  about  ECU  35  million  in
1996.

it 

and 

also  manufactures 

(58) Cyklop  International  is  a  major  supplier  of  plastic
strapping
strapping 
equipment. At present, Cyklop’s biggest suppliers of
steel  strapping  are  ITW  Signode  and  Titan.  Cyklop
is  also  the  exclusive  distributor  in  Sweden  and
Finland  for  sealing  heads  and  steel  strapping
machines  manufactured  by  Orgapack,  a  company
belonging  to  the  ITW  group,  and  also  sells
Orgapack  tools  on  a  non-exclusive  basis  in  other
Member  States.  In  addition,  Cyklop  and  ITW
recently  have  formed  a  joint  venture  company,  CS
Packaging  Corporation,  to  act  as  a  base  for  serving
potential markets in the Far East. The Cyklop group
achieved  a  total  worldwide  turnover  of  about  ECU
150  million  in  1996.

(59) Brevetti  Signode  Labea  SpA  is  a  producer  of  both
steel  and  plastic  strapping  and  of  strapping
equipment  using  manufacturing  technology  licensed
by  ITW.  The  ITW  group  does  not  have  a  share
holding  in  Brevetti,  but  has  granted  Brevetti  the
exclusive right to supply the Italian market. Brevetti
achieved  a  total  worldwide  turnover  of  about  ECU
30  million  in  1996.

(60) Samuel Strapping Systems Company, part of Samuel
Manu-Tech  Inc.  of  Canada,  is  a  leading  supplier  of
steel  and  plastic  strapping  and  strapping  equipment
in  North  America.  In  Western  Europe,  Samuel  is
active  in  the  steel  and  plastic  strapping  markets

(20) See  ITW’s  Annual  Report  1996,  p.  19.

(21) The  manufacture  of  strapping  machines  was  outsourced  to

independent  assemblers  at  the  end  of  1993.

25.11.98

EN

Official  Journal  of  the  European  Communities

L 316/43

through  its  UK  subsidiaries  Acme  Gerrard  Ltd  and
Pakseal  Industries  Ltd.  The  Samuel  group  achieved
a 
turnover  of  about  ECU
total  worldwide 
304  million  in  1996.

(61) Lenzen,  a 

family-owned  German  undertaking,
produces  steel  strapping  and  designs  strapping
machines. It has achieved a global turnover of about
in  1996.  The  undertakings
ECU  21  million 
Brockhaus  and  Theis  are  family-owned,  medium-
sized  companies  which  operate  cold-rolling  mills  in
Germany.  Etilam/Sollac  belong  to  the  French  steel
producer  Usinor  SA.

taken 

and resellers, as they purchase their materials almost
exclusively  from  Western  European  producers.  The
Commission  has  estimated  the  sales  generated  by
smaller  producers  and  has  also 
into
consideration  the  size  of  imports  estimated  by  the
notifying  parties  (see  point  49).  As  a  result,  the
Commission  estimates  that  total  sales  of  steel  and
plastic strapping band in Western Europe amounted
to  approximately  ECU  489,4  million  in  1997,  the
margins 
and
resellers (22). Of that total approximately ECU 267,4
million  were  sales  of  steel  strapping.  ECU  56,3
million  were 
strapping  and
sales  of  PET 
approximately  ECU  165,7  million  were  sales  of  PP
strapping.

independent 

distributors 

of 

C.2. The  market  for  steel  and  plastic  strapping

Market  shares

1. The  present  market  position  of  the  parties

Size  of  the  market

(62) The  Commission  knows  of  no  statistics,  whether
official or unofficial (compiled by trade associations
etc.),  relating  to  the  size  of  the  strapping  market.
Furthermore,  the  sales  figures  of  major  strapping
producers  are  not  readily  comparable,  since  some
suppliers  do  not  have  a  sales  organisation  of  their
own  but  make  use  of  independent  distributors  and
resellers.  Hence,  the  Commission  has  had  to  make
various  calculations  in  order  to  establish  its  own
estimate  of  the  market  size,  based  on  the  sales
figures of all major producers in Western Europe. In
particular,  the  Commission  has  eliminated  the
double  counting  of  sales  resulting  from  deliveries
between  competitors  and  has  not  taken 
into
consideration  the  sales  of  independent  distributors

(63) Total  strapping  sales  of  ITW  Signode  in  1997
amounted  to  about  ECU  [. . .]  million,  of  which
ECU  [. . .]  million  (74,2 %)  were  steel  strapping,
ECU  [. . .]  million  (8,2 %)  PET  strapping  and  ECU
[. . .]  million  (15,6 %)  from  PP  strapping.  Those
sales  represent  a  market  share  of  approximately
[30-35 %]  of  the  total  market  for  steel  and  plastic
strapping in Western Europe. Titan achieved a total
turnover  of  about  ECU  [. . .]  million  (only  steel
strapping) 
share  of
approximately  [5-10 %].  The  next  largest  suppliers
of  strapping  in  Western  Europe  can  be  seen  from
Table  1  below.  None  of  them  have  market  shares
exceeding 10 % and most have market shares below
5 %.

representing 

a  market 

(22) According 

to 

strapping
the  notifying  parties, 
consumption  in  Western  Europe  amounted  to  ECU  593,2
million in 1997. Of this total, steel strapping sales accounted
for ECU 290,3 million and plastic strapping sales accounted
for  ECU  302,9  million.  On  this  basis  the  parties’  market
share  would  be  [30-35 %].

total 

L 316/44

EN

Official  Journal  of  the  European  Communities

25.11.98

(64)

Table  1

Leading  producers  of  steel  and  plastic  strapping  in  Western  Europe  —  Shares  in  total  sales
(in  value  terms)

(%)

Suppliers

Steel
strapping

PET
strapping

PP  strapping

Total  steel  and
plastic  strapping

1997

[. . .]

[. . .]

1997

[. . .]

1997

[. . .]

1996

[. . .]

1997

[. . .]

0

0

[. . .]

[. . .]

Total  parties

[50-60]

[20-25]

[15-20]

[35-45]

[35-45]

ITW  Signode

Titan (Hagen)

Strapex  (CH)

Samuel/ACME  Gerrard  (UK)

Cyklop  (D)

Maillis  (GR)

Brevetti  (I)

Teufelberger  (D)

Lenzen  (D)

Sekisui  Jushi  (NL)

Kaltwalzwerk  Brockhaus  (D)

Theis-Gruppe  (D)

Jäger  (D)

Etilam/Sollac (F)

Sander  (D)

PP  Payne  (UK)

Plastic  Extruders  (UK)

0

, 10

, 10

, 3

0

20-30

, 10

, 3

, 5

0

, 5

0

, 5

, 5

0

, 5

0

0

0

0

0

0

0

0

0

0

0

, 5

, 5

, 5

10-20

, 5

, 10

, 3

, 5

, 10

0

, 10

0

0

, 10

0

, 5

, 5

, 5

, 10

, 5

, 10

, 5

, 5

, 5

, 5

, 5

, 5

, 5

, 5

, 5

, 5

, 5

, 5

, 10

, 10

, 10

, 5

, 5

, 5

, 5

, 5

, 5

, 5

, 5

, 5

, 5

, 5

, 5

Source:

Market  inquiry  of  the  Commission  (only  producers  with  a  total  market  share  above  1 %).

Remarks:

The  figures  are  based  on  the  total  sales  of  the  companies  after  the  elimination  of  double  counting
resulting  from  deliveries  between  competitors.  The  Cyklop  group  does  not  produce  steel  strapping
itself but is active in this market as a distributor only; its sales in this segment therefore have not been
shown in the above table. The market shares were calculated on the basis of an estimated market size
(see  point  62).

25.11.98

EN

Official  Journal  of  the  European  Communities

L 316/45

Capacities  and  production

a 

steel 

total 

strapping 

the  parties’  production 

(65) The notifying parties have estimated, total capacities
for  steel  strapping  in  Western  Europe  at  between
410 000  and  450 000  tonnes  a  year  during  the  last
three  years.  This  has  been  confirmed  by  the
Commission’s  market  inquiry,  the  results  of  which
gave 
capacity  of
approximately  437 300  tonnes  in  1997.  Of  this
total, 
together
lines 
[45-55 %].  The  biggest
accounted 
its  steel
competitor,  Maillis,  recently 
strapping 
to
capacity 
80 000  tonnes  a  year  or  about  18 %  of  total
capacity.  Overall  capacity  utilisation  in  Western
Europe  was  approximately  84 %  in  1997.  In  view
of  an  anticipated  stagnant  demand 
for  steel
strapping  in  the  next  two  to  four  years  there  does
not  appear  to  be  any  significant  spare  capacity
which  could  effectively  constrain 
the  parties’
behaviour  after  the  concentration.

from  60 000 

for  about 

increased 

tonnes 

strapping 

(66) Total  capacity  for  plastic  strapping  amounted  to
approximately  100 000  tonnes  in  1996.  Of  this
total,  ITW  Signode’s  production 
lines  together
account  for  15-20 %.  As  a  result  of  the  recent
capacity  by
expansion  of  plastic 
competitors, the parties’ current share of capacity is
likely  to  be  below  15 %.  The  biggest  plastic
competitors,  Strapex  and  Cyklop,  together  account
for  between  20 %  and  30 %  of  total  plastic
strapping  production  capacity.  Total  production
capacity 
to
approximately  20-25 000  tonnes,  the  utilisation  of
which  averaged  between  60 %  and  70 %.  Maillis
has  recently  started  PET  and  PP  plastic  strapping
production and Brevetti has concrete plans to invest
in  new  PET  strapping  lines.

amounted 

strapping 

PET 

for 

2. The  market  position  of  the  parties  concerned

after  the  concentration

Market  shares

(67) As  a  result  of  the  proposed  concentration,  on  the
basis  of  the  Commission’s  estimates  for  the  market
size,  ITW  Signode  and  the  proposed  joint  venture
would achieve a combined market share, by value in
1997,  of  about  [35-45 %]  at  the  maximum  in  the
for  steel  and  plastic  strapping.
total  market 
However,  ITW  Signode  expects  to  lose  between
[. . .] %  and 
[. . .] %  of  Titan’s  current  steel
strapping  sales  as  the  result  of  the  transfer  of
Titan’s  sales  organisation  and  trade  marks  to
Lenzen.  This  expected  loss  appears  far  too  high,
given  the  fact  that  Titan  has  no  established  sales
organisation  outside  Germany.  The  Commission

expects  that  the  Lenzen  group  will  manage  to  enter
into  supply  contracts  with  some  former  customers
of  Titan  in  Germany.  In  view  of  the  special
circumstances  in  the  present  case,  the  sales  that  the
future joint venture will lose to Lenzen are expected
to  amount  to  [. . .] %  of  Titan’s  current  sales.
Therefore,  taking  into  consideration  this  loss  of
market  shares,  the  combined  market  share  would
probably  be  [less  than  40 %].  The  parties  to  the
concentration would have a combined market share
which  is  about  5-6  times  higher  than  the  market
share  of  their  next  largest  competitor.  In  addition,
the  notifying  parties  after  the  concentration  would
be  the  largest  supplier  of  strapping  worldwide.

(68) Although  the  parties  will  have  a  high  market  share
there  are  a  large  number  of  other  suppliers,  in
particular  in  the  plastic  strapping  segment.  In  view
of  the  fact  that  the  overall  market  for  strapping  is
growing  at  about  3 %  a  year  and  the  steel  segment
is in relative decline (see point 30), the market share
of  the  merging  parties  is  expected  to  decline  over
time  as  their  presence  in  the  plastic  strapping
segment  is  relatively  weaker.  Furthermore,  since
there  are  continuing  improvements  in  materials  and
technology,  particularly  for  plastic  strapping  and
equipment,  the  smaller  competitors  are  likely  to  be
able  to  further  develop  their  businesses.  Several
competitors  have  been  installing  additional  capacity
in  recent  years, 
in  particular  Maillis,  Lenzen,
Teufelberger  Strapex,  Sander  and  Plastic  Extruders.
Even in the steel strapping area where the long-term
trend  in  consumption  is  downwards  at  least  two
competing  producers  are 
installing  additional
capacity.

customers  with  a 

(69) At  present,  none  of  ITW’s  competitors  is  capable
of  providing 
comparably
comprehensive  product  range  of  steel  and  plastic
strapping  as  the  notifying  parties.  However,  the
Samuels/Acme group and Maillis both have recently
entered  the  plastic  strapping  market;  Samuel  group
took over the plastic strapping business of Interlake
Corp which is mainly focused on the US market and
Maillis  started  plastic  strapping  production  at  the
end  of  1996.  Both  companies  have  emphasised  that
they  would  actively  seek  to  increase  their  market
shares  in  plastic  strapping,  in  particular  in  PET
strapping  in  the  coming  years.

(70)

ITW  Signode  is  one  of  the  leading  suppliers  of
strapping  equipment  and  has  a  unique  product
range of strapping tools and machines both for steel
and  for  plastic  strapping.  Its  major  competitors  in
the  strapping  equipment  markets,  however,  are  the
plastic strapping producers Cyklop and Strapex and
the  engineering  firms  Fromm  and  Mosca.  These
companies  are  widely  considered  capable  of
providing  strapping  users  with  a  sufficient  selection
of  strapping  equipment  and  have  the  necessary

L 316/46

EN

Official  Journal  of  the  European  Communities

25.11.98

know-how  and  techical  experience  to  establish
themselves  as  a  reliable  alternative  to  ITW  Signode
in  the  equipment  markets.  Since  the  Commission’s
inquiry has shown that customers in their strapping
equipment  can  fairly  easily  use  strapping  materials
from  different  producers,  the  strong  position  in  the
markets 
strapping  equipment  cannot  be
considered  a  significant  advantage  for  the  sale  of
strapping consumables.

for 

Potential  competition

(71) Entry  into  the  steel  strapping  segment  of  the
relevant  product  market  appears  to  be  difficult,  at
least for newcomers who do not have access to steel
processing  technology.  Furthermore,  as  demand  for
steel strapping is likely to decrease in the long term,
any  newcomer  would  have  to  take  sales  volumes
from the present suppliers. According to the parties,
there  have  been  no  new  entrants  into  the  steel
strapping  business  in  the  last  five  years.  According
to  the  information  available  to  the  Commission  at
present,  effective  potential  competition,  whether  in
the form of establishing new production facilities in
Western  Europe  or  through  increased  imports  into
this  market  segment  is  unlikely  in  the  foreseeable
future.

(72) By  contrast,  as  far  as  the  segment  for  plastic
strapping  is  concerned,  the  barriers  to  market  entry
appear  to  be  comparatively  modest.  According  to
the  parties,  total 
investment  cost  for  a  new
high-strength  PET  line  is  estimated  to  cost  about
including  the  costs  for
ECU  1,1  million  (not 
installation, for land and buildings) and a combined
PP/PET  line  would  not  cost  very  much  more.  The
strong  increase  in  demand  for  plastic  strapping,  in
particular  PP  strapping,  would  make  investments  in
and  offer
new 
opportunities  for  a  profitable  entry  plan.  This  has
already been proven by the recent investments made
by  Maillis.  In  addition  it  has  to  be  taken  into
consideration  that  capital  cost  necessary  for  the
conversion  of  specialised  PP  strapping  lines  into
combined  PP/PET  extrusion  lines  appears  to  be
below  even  the  abovementioned  figures.  Therefore,
the  first  to  invest  in  new  PET  production  lines  are
the  current  producers  of  PP  strapping.

reasonable 

extrusion 

lines 

Current  customers

(73) Strong  market  positions  of  suppliers  can  also  be
counterbalanced  by  powerful  purchasers  who,
because  of  the  volume  of  their  requirements  and
their  size  and  resources,  can  prevent  a  producer
with  a  strong  market  position  from  exploiting  it.

This  is  particularly  so  in  this  case,  where  the
products  are  largely  homogeneous  and  where  a
substantial  proportion  of  sales  are  made  through
distributors.  Distributors  serve  a  wide  variety  of
customers  and  make  it  more  difficult  for  suppliers
such  as  ITW  Signode/Titan  to  discriminate  between
different  groups  of  customers.

(74) The  major  consumers  of  strapping  materials  are
concentrated  in  industrial  sectors  such  as  steel  and
metals  industries,  glass  manufacture,  construction
materials,  paper  production,  printing  and  synthetic
fibres, which are characterised by large sophisticated
from  positions  of
buyers  who  can  negotiate 
comparative  strength  and  who  have  the  resources
and  experience  to  find  alternative  suppliers.  At
present,  because 
is  not  usually  a
strapping 
significant  cost,  purchase  decisions  may  be  made  at
in  an  organisation.
level 
a  comparatively 
However,  should  there  be  any  important  price
increase, these customers would bring their size and
experience  to  bear  on  the  suppliers.  Customers  in
the  steel  industry  have  additional  advantages.  They
supply  the  raw  material  for  the  production  of  steel
strapping  and  so  have  a  detailed  knowledge  of  the
most  important  cost  component  of  the  strapping
manufacturers.  In  addition  they  also,  in  their  own
businesses  slit,  heat-treat  and  coat  steel  strip.  These
are  the  other  important  operations  carried  out  by
steel  strapping  producers.

low 

Conclusion

(75) The  above  results  of  the  Commission’s  market
investigation  show  that  the  proposed  operation
would not lead to the creation or strengthening of a
dominant position on a relevant product market for
steel  and  plastic  strapping.

C.3. The  market  for  sealing  heads  for  strapping

machines

(76) The  notified  concentration  will  not  lead  to  any
addition  of  market  shares  in  the  market  for  sealing
heads  for  strapping  machines.  The  current  business
activities  of  Titan  immediately  after  the  completion
of  the  concentration  will  be  divested  to  the
independent  German  company  Lenzen.  Lenzen’s
position  in  a  combined  market  for  both  steel  and
plastic  heads  would  be  stronger  than  its  position  in
a  market  for  steel  heads  alone  and  therefore  it  will
be  a  serious  competitor  to  the  parties.  The  creation
or strengthening of a dominant position on the part
of ITW Signode in the market for sealing heads as a

25.11.98

EN

Official  Journal  of  the  European  Communities

L 316/47

result  of  the  concentration  can  therefore  be  ruled
out.

GmbH  and  Thyssen  Krupp  Stahl  GmbH  is  declared
compatible with the common market and the functioning
of  the  EEA  Agreement.

VI. FINAL  CONCLUSION

(77) On  the  basis  of  the  results  of  the  investigation  as
outlined  above,  the  Commission  has  come  to  the
conclusion  that  on  the  relevant  product  market  for
steel and plastic strapping as well as on the relevant
product  market  for  sealing  heads,  the  proposed
concentration  would  not  lead  to  the  creation  or
strengthening  of  a  dominant  position  as  a  result  of
which  effective  competition  would  be  significantly
impeded  within  the  common  market  or  the  EEA,

Article  2

This  Decision  is  addressed  to:

1. Thyssen  Krupp  Stahl  GmbH
Kaiser-Wilhelm-Straße  100
D-47166  Duisburg;

2.

ITW  Signode  Holding  GmbH
Magnusstraße  18
D-46535  Dinslaken.

HAS  ADOPTED  THIS  DECISION:

Done  at  Brussels,  6  May  1998.

Article  1

joint  control  of  Titan
The  notified  acquisition  of 
Umreifungstechnik  GmbH  by  ITW  Signode  Holding

For  the  Commission

Karel  VAN  MIERT

Member  of  the  Commission