1999/641/EC: Commission Decision of 25 November 1998 declaring a concentration to be compatible with the common market and the functioning of the EEA Agreement (Case No IV/M.1225 - Enso/Stora) (notified under document number C(1998) 3653) (Text with EEA relevance) (Only the English text is authentic)
Date: 1998-11-25
Institutions: European Commission
Subjects: European Economic Area, agreement (EU), economic concentration, merger control, pulp and paper industry, single market

29. 9. 1999

EN

Official Journal of the European Communities

L 254/9

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 25 November 1998

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

(Case No IV/M.1225 — Enso/Stora)

(notified under document number C(1998) 3653)

(Only the English text is authentic)

(Text with EEA relevance)

(1999/641/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(2)

Having regard to the Treaty establishing the European
Community,

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

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

control of

(3)

Having regard to the Commission decision of 31 July 1998 to
initiate proceedings in this case,

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),

(4)

Whereas:

(1)

On 18 June 1998, the Commission received a noti-
fication of a proposed concentration pursuant to Article
4 of Regulation (EEC) No 4064/89 (hereinafter referred
to as ‘the Merger Regulation’ by which Enso Oyj (Enso)
enters
into a full merger with Stora Kopparbergs
Bergslags AB (Stora). The newly merged company will
be named Stora Enso Oyj (Stora Enso).

(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 275, 27.9.1999.

After examining the notification, the Commission has
concluded that the notified operation falls within the
the Merger Regulation. The Commission
scope of
decided to initiate proceedings pursuant
to Article
6(1)(c) of the Merger Regulation on 31 July 1998.

I. THE PARTIES

Enso is an industrial group active in the forest industry,
in particular in wood-based fibre products. Its activities
consist of wood procurement, paper and board manu-
facturing, pulp and sawmilling. Enso is also active in
merchanting. Enso is incorporated in Finland where it
has its main activities. Enso has production plants in
other European countries as well — in particular,
in
Germany and in the Baltic States — and in Asia.

Stora is an industrial group with operations in the forest
industry. Stora produces pulp, paper and board and is
active in sawmilling. Stora is incorporated in Sweden
where it carries out its main business. Stora has produc-
tion plants also in other European countries too —
in particular — and in Canada.
Germany,

II. THE OPERATION

(5)

The operation is a ‘merger between equals’ and will be
carried out by way of a public bid for all Stora's shares,
announced on 2 June 1998, under which Stora's share-
holders will receive newly issued shares in Enso.

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Following the public bid, Stora will become a wholly
owned subsidiary of Enso. The two major shareholders
in Stora Enso will be the Finnish State, with approxi-
mately 17,6 % of the shares and 21 % of the voting
rights, and Investor AB, currently the largest shareholder
in Stora, with approximately 10,6 % of the shares and
11,3 % of the voting rights.

(11)

(6)

(7)

(8)

(9)

III. COMMUNITY DIMENSION

Enso and Stora have a combined aggregate world-wide
turnover in excess of ECU 5 000 million (Enso: ECU
4 976,3 million; Stora: ECU 5 139,7 million). Each of
them has a Community-wide turnover in excess of ECU
250 million (Enso: ECU [...] (*) million; Stora: ECU [...] *
million), but they do not achieve more than two-thirds
of their aggregate Community-wide turnover within one
and the same Member State. The notified operation
therefore has a Community dimension, but does not
constitute a cooperation case under the EEA Agreement.

IV. COMPATIBILITY WITH THE COMMON MARKET

Relevant product markets

General

The parties have identified the following horizontally
affected markets: newsprint, magazine papers,
fine
papers, corrugating raw materials, consumer packaging
and pulp.

The parties have only limited overlapping activities in
corrugating raw materials. There are two types of corru-
gating raw materials: fluting, which is the rippled middle
layer of a corrugated board, and liners, which are the flat
surface layers of the board glued to each side of the
fluting. Corrugating raw materials are used for manufac-
turing corrugated board and, ultimately, corrugated
boxes and containers, which are mainly used for trans-
port packaging. The only overlap between the activities
of the parties in corrugating raw materials occurs in the
production and sale of fluting to independent conver-
ters. Stora has a market share of 2,1 % at the EEA level,
far behind such international groups as SCA (11,9 %)
and Jefferson Smurfit Group (10,6 %). Enso's market
share in corrugating raw materials is not significant.
Consequently, this market will not be discussed further.

(10)

Both Enso and Stora are engaged in the manufacture of
pulp. The merged entity would have approximately 20,6
of the pulp production market at the EEA level with the
largest competitor yielding 15,2 %. A large part of pulp
produced by the parties is used internally in the parties'
own paper and board production but the statistics do
not exclude such sales. It may therefore be concluded
the parties' pulp production, excluding ‘captive’
that
production, will not result in significant market shares

(*) Parts of this text have been edited to ensure that confidential infor-
mation is not disclosed; those parts are enclosed in square brackets
and marked with an asterisk.

either at EEA or at global level. Therefore, this market
will not be discussed further.

The Commission has in previous decisions identified
four sub-markets for fine paper. These were uncoated
wood-containing, uncoated wood-free, coated wood-
containing and coated wood-free paper. The Commis-
sion has, to date, left open the exact definition of the
product market (4). The precise definition can also be left
open in this case because, in all alternative market defi-
nitions considered, effective competition would not be
significantly impeded in the EEA or any substantial part
of that area. Therefore, this market will not be discussed
any further.

(a) Newsprint

(12) Newsprint is primarily used for publication of newspa-
pers. The manufacturing of newsprint requires mechan-
ical pulp or recycled pulp of at least 65 % by weight.
There are different grades of newsprint, depending for
example on whether the paper is finished or calendered,
white or coloured. The brightness differs between
different grades.

(13) According to the parties, the differences in quality, char-
acteristics and price between different grades of news-
print do not suffice to separate the different grades into
distinct product markets. Therefore, the parties consider
newsprint a single product market. According to the
parties, there is a high degree of both demand-side and
supply-side substitutability between different grades, and
most printers are able to handle different grades without
costly adjustments to their printing machines.

(14)

The Commission has considered newsprint in a previous
decision (5) where it found, inter alia, that there was a
high degree of demand — and supply-side substitut-
ability and that the price differences were not significant.
the Commission considered newsprint a
Therefore,
single product market. Furthermore, in this case, even if
the market were to be further subdivided — for instance
into improved newsprint and standard newsprint — the
assessment of the notified transaction would not be
materially affected. Consequently, for the purpose of this
case, newsprint can be considered one relevant product
market.

(4) Decision of 24 February 1992 (IV/M.166 — Torras/Sarrió); OJ C
58, 5.3.1992, p. 20; Decision of 19 September 1994 (IV/M.499 —
Jefferson Smurfit/Saint-Gobain); OJ C 284, 12.10.1994, p. 3; De-
cision of 20 February 1995 (IV/M.549 — Svenska Cellulosa/PWA
Papierwerke); OJ C 57, 7.3.1995, p. 6; Decision of 11 June 1998
(IV/M.1006 UPM-Kymmene — April); OJ C 219, 15.7.1998, p. 9.
(5) Decision of 30 October 1995 (IV/M.646 — Repola/Kymmene); OJ

C 318, 29.11.1995, p. 3.

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(b) Magazine paper

(15) Magazine paper requires mechanical pulp, chemical and
recycled pulp, chemicals,
fillers and pigments. The
parties have identified two main grades of magazine
paper, namely uncoated super-calendered mechanical
printing paper (SC) and coated mechanical paper in
reels. The parties have further divided the coated paper
into lightweight coated (LWC), medium-weight coated
(HWC). The
(MWC) and heavyweight coated paper
parties have submitted wood-free coated paper in reels
(WFC) as competing with coated mechanical paper.

(16) According to the parties,

limited demand-side

there is a high degree of
demand-side substitutability between the different grades
of magazine paper. The general reaction to the invest-
igation carried out by the Commission, however, points
substitutability. The
to more
decision as to what type of paper to use for a publica-
tion depends on a number of criteria, such as the type of
publication, the target group and their willingness to pay
a given price, the balance between the quality and price
of paper, and so on. Furthermore, publishers do not
often change the type of paper used for their publica-
tions.

(17) However, it is not necessary to define exactly the rele-
vant product market further, because the assessment of
the operation would not be affected even if narrower
product markets were considered. For the purpose of
this case the relevant product market
therefore,
considered to be magazine paper.

is,

(c) Consumer packaging board

(18) Within consumer packaging boards a large variety of
different types and grades of boards exist. Boards are
made from either purely virgin fibres or from a mixture
of recycled and virgin fibres. A distinction is normally
made between four main categories of boards: solid
bleached sulphate (SBS), folding box board (FBB), solid
unbleached sulphate (SUS) and white lined chipboard
(WLC). SBS, FBB and SUS are made from virgin fibres,
whereas WLC is made from recycled fibres. The board
materials are converted into cartons or folding boxes
and cups, which are sold to producers of food and
non-food consumer products, including nonliquid and
liquid foods, cigarettes, cosmetics and pharmaceuticals.
The boards are used, to a limited extent, for graphical
applications as well.

(19)

The parties have identified two relevant product markets
for consumer packaging board. The first category
includes both virgin and recycled fibre-based boards,
namely all consumer packaging board grades SBS, SUS,
FBB and WLC. The parties refer to this market as the
‘virgin and recycled market’. Second, the parties have
identified the virgin fibre-based board market, which
only includes the virgin fibre grades SBS, SUS and FBB.
The parties refer to this market as the ‘virgin market’.

(20) According to the parties, virgin fibre-based board can be
used for packaging of both liquid and non-liquid goods,
whereas board based on recycled fibres can only be used
for the packaging of non-liquid goods. WLC has limited
uses in the packaging of non-food liquid products, such
as liquid detergents. The parties submit, however, that
these volumes are insufficient to justify the inclusion of
WLC in the ‘virgin’ market.

D e m a n d - s i d e s u b s t i t u t a b i l i t y

No substitutability between liquid and non-liquid virgin
fibre-based boards

(21)

the

specifications

The parties claim that there is a high degree of demand-
side substitutability between the different virgin fibre-
inter alia, to the same basic raw
based grades owing,
materials and similar manufacturing technology. The
parties acknowledge that, within each grade, board is
produced to meet
set by each
converting customer and that these specifications are set,
at least partly, as a function of the end use of the
packaging. This, according to the parties, results in vari-
ations in the physical characteristics of the board grades
due to the differences in the pulp mixtures, the number
of layers and the chemical additives used. The parties
that converters are capable of
argue, nevertheless,
switching between different grades of virgin fibre-based
boards and do so frequently.

(22)

Liquid packaging applications refer to such end-products
as milk and juice packages. The cartons are filled on
special filling machines. There are two main types of
liquid packaging systems: so-called aseptic packaging
systems and fresh packaging systems. Aseptic packages
have distinctively long shelf lives of up to two years,
whereas fresh packages have to be kept chilled and only
have a shelf life of up to two weeks.

(23) According to the parties, the principal technical differ-
ence between board used for the packaging of liquid
goods and all other goods is the application of a plastic
coating or aluminium laminate on the board.
If the
packaging is used for fresh liquids, the board must be
plastic coated (polyethylene-coated or PE-coated). Board
liquids must be laminated.
for aseptic packaging of
Lamination refers
combination of
to bonding
aluminium and plastic to the board. According to the
parties, the physical characteristics of the ‘base’ board
used in the packaging of liquid foods and other products
are virtually the same. Consequently, the parties main-
tain that the suitability of the board for the packaging of
liquids is mainly achieved through the application of the
plastic coating or the combination of plastic coating and
aluminium lamination. It is the opinion of the parties
that
therefore,
restricted to the production of the base board, which can
be used for packaging of both liquid and non-liquid
goods.

the board producer

the role of

is,

a

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29. 9. 1999

(27)

(28)

(29)

(30)

(24)

The response to the Commission enquiry, however,
showed that the finishing of the board is not sufficient
of itself to produce liquid packaging board and that the
requirements imposed on the base board itself differ
substantially from other
types of virgin fibre-based
board. Both the customers and the producers of liquid
packaging board contacted by the Commission indicated
that liquid packaging is a very demanding end-use and
that there are tougher requirements for several o£. the
characteristics of the board for liquid packaging uses
compared to the other types of virgin fibre-based board.
In general terms, liquid packaging board has numerous
performance requirements related to, inter alia, its ability
to run in a filling machine and to ensure the best
possible packing result. The board has to resist light,
cracking and leakages. It has to resist moisture resulting
from the filling process and has to meet special demands
as to the transportability of the filled product, such as
the cool-chain distribution for
fresh products. The
results of the Commission investigation will be exam-
ined in more detail below.

(25)

The Commission investigation found, first of all, that an
important difference between liquid packaging board
and board for other end uses is that liquid packaging
board must have a particularly high absorption resis-
tance. In order to avoid liquid penetration, sizing (6) is
required. The Commission enquiry found that sizing has
to be particularly thorough in boards used to package
liquids.

(26)

food-law and environmental

Liquid packaging board has to meet higher bacteriolog-
ical,
requirements. The
industry generally follows the American FDA rules (7)
and German BgVV rules (8). According to customers
certain Community Directives (9) are applicable,
too.
According to customers and certain producers, the regu-
lations concerning liquid applications are more restric-
tive than those for non-liquid applications.
It is the
general perception of customers and certain producers
that these rules are more difficult to meet for liquid than
for non-liquid food packaging.

In the case of aseptic food packaging the board material
has to be sterilised. The sterilisation is carried out usually
by treating the board with peroxides (10). Peroxide is an
aggressive substance and imposes extra high demands
on sizing, which has to be adequate to make the fibres
repellent to the peroxide solution. In this respect sizing
is not, according to customers and some producers, as
critical for nonliquid food packaging.

The investigation showed further that crack resistance is
more critical for liquid packaging board than for other
types of board. The ability of the board to be folded is
important, as liquids will escape easily through the
smallest cracks, which is not the case with solids. Cracks
will reduce gas tightness of the package and expose
unsterilised material,
for instance fibres, which may
cause unsterile matter to dissolve in liquids. Further-
more, in the case of aseptic packaging a long shelf life
(up to two years) imposes special requirements on the
hoard material as the package has to be able to avoid
cracking throughout the entire shelf life of the product.

Third parties indicated also that organoleptic qualities,
such as taints and odours, are more difficult to meet for
liquid food packaging board than for other types of
board. Liquid food products, especially milk, are very
sensitive in this respect and will easily absorb taints and
odours, while solid foods withstand unsterile influences
better than liquid foods.

the

the

The parties admit that the packaging of liquid foods is
one of the most demanding end-use applications and
acknowledge
characteristics
importance of
described at paragraphs 25 to 29 for liquid packaging
board. The parties argue, nevertheless, that a number of
the abovementioned requirements apply to board used
in the packaging of other types of goods as well. The
Commission acknowledges that while it may be correct
instance the organoleptic requirements for
that
board used for packaging of cigarettes and chocolate
may be similar to those that apply to liquid packaging
board, it should also be noted that some other require-
ments imposed on liquid packaging board, such as resis-
tance to the absorption of liquid, are not. No other
end-use for consumer packaging board requires the
fulfilment of all these requirements together, and within
such narrow tolerances.

for

(6) Sizing refers to a process of impregnating the board with a form of
glue which binds the fibres of the board. Sizing is added to the
pulp before the pulp is fed to the head box of the board machine.
Food, Drug and

(7) US Food and Drug Administration:

Federal

Cosmetic Act.

(8) BGA (Bundesgesundheitsamt), Bundesinstitut für gesundheitlichen Verbrau-

cherschutz in Veterinärmedizin.

(9) For example Council Directive 92/46/EEC of 16 June 1992 laying
down the health rules for
the production and placing on the
market of raw milk, heat-treated milk and milk-based products (OJ
L 268, 14.9.1992, p. 1).

(31) On the bases of the above, it is concluded that liquid
packaging board forms a distinct
relevant product
market from non-liquid packaging board from the point
of view of demand-side substitutability.

(10) Peroxide is applied by submerging the packaging material through
a hot bath of peroxide or by spraying peroxide into the formed
carton.

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No substitutability between liquid packaging board and
other packaging materials

S u p p l y - s i d e s u b s t i t u t a b i l i t y

(37)

(38)

(39)

(32) According to the parties,

there is a high degree of
demand-side substitutability between board used for the
packaging of liquid goods and other packaging mate-
rials, such as glass and plastic. This inter-material substi-
tution claim put forward by the parties has, however,
been clearly dismissed by customers of packaging board.

(33)

(34)

The customers of the liquid packaging board producers
are converters such as Tetra Pak, SIG Combibloc and
Elopak and not the final customers, such as dairies.
Converters are not able to switch to other packaging
materials within the existing packaging systems. More
precisely, replacement of board by other materials would
not be a viable solution, owing inter alia to production
technology and the existing machinery. Changing the
packaging product would require heavy investments in
the existing filling and packing machinery. Customers of
liquid packaging board do not therefore switch back and
forth between different packaging materials
(board,
plastic and glass) in response to short-term price move-
ments.

The parties argue that a change in demand by customers
further down in the distribution chain, such as dairies or
retailers, would force converters to switch their produc-
tion to plastic. The Commission is of
the opinion,
however, that a decision on the part of a food manufac-
turer to switch from liquid packaging board to plastic
would be a one-step change.
the
decision to switch would be normally made for the
whole application and would mean a lasting change in
the demand pattern. Accordingly, the Commission notes
that the demand for liquid packaging board may be
affected by plastic only in the long run and on a lasting
basis. Consequently, plastic is not considered to be a
direct substitute for liquid packaging board for the
purpose of defining the relevant product market.

In other words,

(35)

The findings in this case are in line with previous deci-
sions (11) concerning food and beverage packaging,
where the Commission did not find that the relevant
product market included all packaging materials.

No substitutability between liquid and non-liquid virgin
fibre-based grades

and

similar manufacturing

The parties claim that there is a high degree of supply-
side substitutability between the different virgin fibre-
based grades, owing inter alia to the same basic raw
materials
technology.
According to the parties, the fact that the same machine
can be used for the production of more than one grade
is evidence of supply-side substitutability. Furthermore,
the parties argue that there are no serious technical
barriers to the production of liquid packaging board and
that other producers of virgin fibre-based board would
be able to produce liquid packaging board.

The investigation showed that it is, indeed, theoretically
possible to produce different grades of virgin fibre-based
board with the same machine from a technical point of
view. However, the enquiry showed that there is a high
degree of specialisation — for instance,
in particular
grades of liquid packaging board among the suppliers.
The leading board manufacturers tend to specialise in
certain categories of end uses either for strategic reasons
or for established patterns of producing for certain
converters. Both the parties and the customers have..
confirmed that the underlying reason for streamlining
the board machines is to avoid switching costs and
thereby to achieve economies of scale. [...] *.

The investigation showed further that switching the
production to new grades of liquid packaging board is
not simple and takes time even for experienced produ-
cers of liquid packaging board. For example, according
to customers of liquid packaging board, to find a new
producer for the production of a new board would
require elaborate planning, development, testing, trial
production and field test procedures before commercial
production could be launched. This, according to
customers, could take up to 36 months. There is no
reason to believe that
the time period for initiating
commercial production of liquid packaging board would
be shorter for an existing producer of non-liquid pack-
aging board, since such a producer would have to go
through the same steps. The parties argue that a
producer who has not previously produced liquid pack-
aging board would be able to start commercial produc-
tion in a period of 12 to 18 months. The Commission
enquiry showed further that the existing producers of
non-liquid packaging board would only be able to
switch production at a significant cost.

(36)

For the reasons stated above, the Commission does not
consider other packaging materials to belong to the
same relevant product market as liquid packaging board.

(11) Decision of 6 June 1991 (IV/M.081 — VIAG/Continental Can), OJ
C 156, 14.6.1991, p. 10; Decision 96/222/EC (IV/M.603 — Crown
Cork & Seal/Carnaud MetalBox), OJ L 75, 23.3.1996, p. 38; De-
cision of 21 April 1998 (IV/M.1109 — Owens Illinois/BTR Pack-
aging), OJ C 165, 30.5.1998, p. 7.

(40) On the basis of the above, it must be concluded that a
quick supply response would not be possible. Conse-
quently, the Commission does not consider supply-side
substitutability in the market definition but
rather
considers these elements under potential competition
(see below).

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Official Journal of the European Communities

29. 9. 1999

C o n c l u s i o n

(41) Owing to the

substitutability
limited demand-side
between liquid and non-liquid packaging board as well
as other packaging materials and the limited supply-side
substitutability between liquid and non-liquid packaging
board, the relevant product market for the purpose of
this case is considered to be the market for liquid pack-
aging board.

(42) As regards the non-liquid packaging board it cannot be
ruled out that this should include recycled fibre-based
board. Moreover it is not inconceivable that a further
sub-division into board for different applications such as
cigarette cartons, cupstock, cosmetics, graphic purposes,
etc. might be warranted. However, these questions do
not have to be resolved finally in this case, since the
operation would not lead to the creation or strength-
ening of a dominant position even on the narrowest
possible market definition in the non-liquid packaging
board area.

Relevant geographic markets

EEA are not exactly identical to the qualities produced in
North America. For instance, there are some imports
from Canada, but the quality is perceived as inferior to
the European quality and ‘cheap’. As to imports from
Russia, customers said that the quality delivered was not
adequate for their purposes. Finally, customers also
stated that price movements do not indicate that North
America and the EEA are part of the same relevant
geographic market, since prices according to customers
can vary quite considerably between these two conti-
nents.

(46)

The parties have argued that, in the event of a temporary
over-capacity and, therefore, over-supply in other parts
of the world, these over-supplies will be offered for sale
on the EEA market. The parties have argued that this is
evidence of a global market. The Commission does not
agree that such sales are necessarily an indication of a
global market. Furthermore, at this stage of the invest-
igation there is no evidence that this has ever happened
and the argument, therefore, seems purely hypothetical.

(47)

Therefore, on the basis of the above and for the purpose
of
for
this Decision the relevant geographic market
newsprint is not considered to be wider than the EEA.

(a) Newsprint

(b) Magazine paper

(43) According to the parties, the relevant geographic market
for newsprint
is world-wide. The parties argue that
newsprint is an internationally traded product and that
there are substantial imports and exports to and from
the EEA. In the view of the parties, the majority of
customers source from both national and international
suppliers,
the
supplier. Finally, the parties claim that the prices do not
differ to a significant degree between continents and that
there are no particular barriers to trade.

irrespective of

location of

the actual

(44)

cases (12)

In previous
the Commission held that
competition in newsprint takes place at least at the EEA
level. In a recent case involving the Canadian producer
Abitibi Consolidated the Commission found strong indi-
cations of an EEA market (13). The investigation carried
out by the Commission in this case confirms the thesis
of an EEA-wide market rather than a global market. In
particular, imports of newsprint into the EEA have been
small and relatively stable in the past ten years. In 1997
they represented 744 000 tonnes or only 7,6 % of
consumption, and came mainly from Canada and only
to a smaller extent from Russia and the USA (14).

(45)

Comments obtained from newsprint customers show
that the location of the mills in relation to the location
of the printing site is important and that, generally, no
significant
imports were made from outside Europe.
Duties and transport costs were regarded as increasing
the price of newsprint and a barrier to sourcing from
outside Europe. Furthermore, the qualities used in the

(12) Decision of 12 May 1992 (IV/M.210 — Mondi/Frantschach), OJ C
124, 16.5.1992, p. 19; also IV/M.646 — Repola/Kymmene — see
footnote 5.

(13) Decision of 14 September 1998 (IV/M.1296 — Norske Skog/

Abitibi/Hansol Paper), OJ C 306, 6.10.1998, p. 11.

(14) Imports are subject to a duty of 3,5 %, which will be phased out
by the year 2002. There is a duty-free quota for imports from
Canada of 630 000 tonnes.

(48) According to the parties, there are substantial exports
from the EEA. The parties therefore consider the market
for magazine paper to be worldwide.

(49)

Exports from the EEA constitute, according to the
parties, some 13 % of the total production. The imports,
however, are currently limited and the share of imports
into the EEA is negligible. In an earlier decision (15), the
Commission defined the relevant geographic market as
at
Information obtained from third
parties confirms that this is so in this case as well.

least EEA-wide.

(50)

the
Therefore, on the basis of
purposes of this case the relevant geographic market for
magazine paper is considered to be at least EEA-wide.

the above and for

(c) Non-liquid packaging board

(51)

The indications are that the market for non-liquid pack-
aging board is at least EEA-wide. However,
it is not
necessary for the purpose of this case to define the
geographic market for non-liquid packaging board, since
the operation would not lead to the creation or strength-
ening of a dominant position, even on the narrowest
possible market definition.

(d) Liquid packaging board

(52) According to the parties, there are substantial global
trade flows in liquid packaging board and, therefore, the
parties submit the relevant geographic market is global.

(15) IV/M.646 — Repola/Kymmene — see footnote 5.

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(53)

(54)

(55)

(56)

The parties argue that a high level of exports from the
EEA is an indication of a global market. As an example
of this, the parties' exports of liquid packaging board
amounted to some [between 20 % and 30 %] * of their
total production in 1997. However, high exports of
board by the parties cannot alone be taken as proof of a
global market. On the basis of information provided by
the parties, total exports from the EEA in 1997 were
only about 10 % of the total market. It should also be
noted that in the case of liquid packaging board, exports
mainly go to Asia, where there is virtually no production
of liquid packaging board at all.

The parties argue that
liquid packaging customers
significant amounts of board from North
import
America. Based on the information provided by the
parties, the overall imports of liquid packaging board as
a whole from North America into Western Europe in
1997 were around 8 % of the total market. The imports
are unevenly divided between the buyers, in that some
firms import substantial amounts and others virtually
nothing. While this may be seen as an indication that
importing is not prohibitively expensive or difficult, the
Commission also found that board from North America
was imported rather for strategic reasons.

that

argue

further

The parties
in Decision 92/
163/EEC (16) (Tetra Pak II), the Commission has recog-
nised the fact that competition in the sale of board for
liquid packaging applications occurs at worldwide level.
However, the market for liquid packaging board was not
the subject of
the investigation in this particular
decision, which concerned the downstream market for
liquid packaging board. Furthermore,
relevant
geographic market was not stated explicitly in the
decision nor factors such as imports/exports, duties or
non-tariff barriers to trade were examined. Therefore,
the Commission cannot take into account the parties'
submission that the Commission has already accepted
the relevant geographic market as worldwide.

the

is

that
The general view expressed by customers
sourcing from outside Europe is not attractive, on
account of duties, transport costs and environmental
regulations in some Member States. Fibre costs are lower
in North America than in the EEA. However, currently
there are duties of between 4,0 % and 6,6 % on imports
of liquid packaging board. The duties will be phased out
by the end of 2003. Furthermore, on the basis of in-
formation provided by the parties transportation costs
from the United States of America are more than
[between 5 and 15 %] * higher resulting in a further
price increase of approximately [between 1 % and 5 %] *
per tonne.

to a limited extent, owing inter alia to its higher weight
as compared to European grades. This aspect comes into
play in those Member States where the reduction of
waste is an important environmental
issue, such as
Germany, Austria, the Netherlands and Scandinavia. In
particular, the environmental regulations in Germany
and the Netherlands are both based on the weight of the
board. In Germany, the ‘DSD Duales System Deutsch-
land’ collects a recycling fee per kilogram of board. In
the Netherlands the ‘Integratiecovenant Verpakkingen’
including
requires a source reduction of all packages,
board, of 10 % by the year 2001. Source reduction aims
at reducing the weight of the board while maintaining
the same performance requirements. In both cases the
use of the American board will be an economic disad-
vantage. According to data submitted by the parties,
North American board sold in the EEA is more expen-
sive per square metre.

(58)

together with the duties and
The demand structure,
environmental requirements in the EEA renders it there-
fore difficult for the United States suppliers to export
into the EEA, even if there are some indications that
fibre costs are lower for United States producers than for
the EEA producers. These difficulties are underlined by
the fact that imports from the United States of America
have been stable over the past seven years at below 10 %
of total consumption in the EEA. Lastly, the Commis-
sion enquiry found that sourcing from Eastern Europe is,
in general, not considered viable due to the inferior
quality of the board. There are currently no imports of
liquid packaging board from Eastern Europe.

(59) Given the relatively low level of imports, duties, trans-
port costs, non-tariff barriers in the field of environ-
mental legislation and the evidence of a different supply
structure in North America, Eastern Europe and in the
EEA, the relevant geographic market for the liquid pack-
aging board is not considered to be wider than the EEA.
the factors discussed above, such as the
Some of
phasing-out of customs duties, may point to a gradual
shift towards a wider market. However, these factors are
not sufficient to prove conclusively at the present stage
that the market is wider than the EEA. The role played
by imports from outside the EEA will, however, be
discussed in the part of
the assessment devoted to
potential competition.

V. ASSESSMENT

(a) Newsprint

Current competition

(57)

The Commission found further that board grades in the
EEA are developed to meet certain environmental
requirements, which is not necessarily the case outside
Europe. As far as liquid packaging board is concerned
the Commission found in its investigation that there are
considerable differences in the boards sold in the United
States of America and in the EEA. The United States
suppliers produce a grade which is used in Europe only

(16) Case IV/31.043, (OJ L 72, 18.3.1992, p. 1).

(60)

The parties estimate the total consumption of newsprint
in the EEA to amount to 9,7 million tonnes. Their
combined market share in the EEA is estimated to be
[between 20 and 30 %] * (Enso [between 10 and
15 %] *, Stora [between 10 and 15 %] *). The parties
have been unable to provide market shares for their
competitors on the basis of sales, either in terms of
volume or in terms of value. They have been able to
provide shares of installed capacity in the EEA. The

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Official Journal of the European Communities

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figures
Commission has verified with confidential
supplied by the main competitors that the shares of
capacity broadly reflect the shares in terms of sales.
Furthermore, public statistics from the Confederation of
the European Paper
(CEPI) confirm that
Industries
overall capacity and consumption in the EEA are basi-
cally in balance. On the basis of this, the following table,
therefore, represents the relative position of the leading
suppliers in the EEA.

Table

Market position of the main suppliers, 1997

Enso

Stora

[between 10 and 15 %] *

[between 10 and 15 %] *

Combined

[between 20 and 30 %] *

UPM-Kymmene

[between 15 and 20 %] *

Norske Skog

[between 10 and 15 %] *

Haindl

MoDo

[between 10 and 15 %] *

[between 10 and 15 %] *

It may be noted that there are a number of smaller
suppliers in the EEA, such as SCA, Myllykoski, Palm, etc.
Furthermore, imports of newsprint in the EEA, primarily
from Canada and Russia, represented about 7,6 % of
consumption in 1997.

(61) As may be seen from the above, the supply of newsprint
appears to be fairly concentrated. The six leading produ-
cers account for about 75 %. The largest of the smaller
producers account for less than 5 % of the capacity and
is less than half of the size of the smallest of the six big
producers.

(62)

(63)

the
Competitors have expressed no concerns about
customers have
current operation. A number of
the trend
expressed some general concerns about
towards concentration in the newsprint industry, but no
specific concerns over the present merger. Furthermore,
some customers have even indicated that they believe
the market is currently rigged.

In this case, the Commission found that the competition
between the six largest suppliers is crucial for the overall
market outcome. The demand-side consists of some very
large buyers such as the Murdoch Group and the Axel
Springer Verlag as well as a great number of medium-

(64)

(65)

(66)

(67)

sized and small buyers. The parties estimate that the
largest buyers account
for some [between 25 and
35 %] * of the market. Some of the largest buyers of
newsprint buy volumes that could fill
the complete
capacity of some of the large producers.

For the suppliers the biggest buyers are a source of
stability, and therefore security, since losing or partly
losing a large customer could cause substantial problems
for a supplier to fill
its mill capacity. Suppliers are,
therefore, very sensitive to losing large customers. On
the other hand,
for the largest buyers the six large
suppliers in reality represent the only source of supply.
This was evident from the Commission's investigation,
which showed that the largest buyers mainly buy from
the largest producers, and basically only consider these
companies as actual or potential suppliers.

suppliers

The conditions achieved in the contract negotiations
between the biggest customers and the six big suppliers
have an significant effect on the rest of the market, not
least because the six suppliers account for 75 % of the
market, but also due to the sheer size and volume of
these buyers. As a result,
the contract negotiations
between the suppliers and the large buyers play a pivotal
role in the functioning of the market for newsprint. The
six largest
(UPM-Kymmene, Enso, Stora,
Norske Skog, MoDo and Haindl) effectively constitute an
oligopoly, and the competition between the oligopoly
members for the large contracts is crucial for the market
outcome. Consequently, there are reasons to believe that
the oligopoly succeeded in increasing the prices
if
vis-à-vis
in an
increase in the overall price level of the market. The
Commission therefore examined whether the operation
was likely to lead to the creation or strengthening of an
oligopolistically dominant position.

the largest buyers,

this would result

Oligopolistic dominance

In Decision 97/26/EC (Gencor/Lonrho) (17), the Commis-
sion noted the following: ‘Similar negative effects which
arise from a dominant position held by one firm arise
from a dominant position held by an oligopoly. Such a
situation can occur where a mere adaptation by
members of the oligopoly to market conditions causes
anti-competitive
the
oligopoly becomes dominant. Active collusion would
the
therefore not be required for
oligopoly to become dominant and to behave to an
remaining
appreciable extent
competitors,
the
their
consumers’.

independently of
customers

their
and, ultimately,

behaviour whereby

the members of

parallel

In this case, the Commission found that the characte-
ristics of the newsprint market indicate a market with
few incentives for the members of the oligopoly to
compete. Rather, the market has several of the character-
istics of an anti-competitive oligopolistic market: there is
only moderate growth on the demand-side, the supply-
side is highly concentrated, the product is homogeneous,
the production technology is mature, there are high
entry barriers and similar cost structures. The Commis-
sion also noted that the operation would lead to an
increase in the Herfindahl-Hirschman Index of 313
points, which is a significant change.

(17) Case IV/M.619, (OJ L 11, 14.1.1997, p. 30, paragraph 140).

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Official Journal of the European Communities

L 254/17

(71)

(72)

(73)

(74)

(68) After a detailed examination of the market, however, the
Commission has concluded that the operation would
not lead to the creation or strengthening of an oligopol-
istically dominant position. In particular, according to
the parties the market for newsprint is not transparent
on such key parameters as supplies and prices and that,
particularly concerning prices, secret discounts indicate
that the market lacks transparency. Furthermore, the
Commission noted that apparently there is some poten-
tial competition, notably from Canada. Some counter-
vailing purchasing power of the largest buyers appears
to exist, too. Therefore, on balance, the Commission has
found that the change from six to five members of the
oligopoly is not significant in order to lead to the crea-
tion or strengthening of an oligopolistically dominant
position under the circumstances of the present case.

(b) Magazine paper

(69)

The parties estimate the total consumption of magazine
paper in the EEA at 7,94 million tonnes. The parties'
combined market share is estimated at [between 20 and
25 %] * (Enso [between 5 and 10 %] *, Stora [between
10 and 15 %] *). The parties have been unable to
provide market shares for their competitors on the basis
of sales, either in terms of volume or value. They have
been able to provide shares of installed capacity in the
EEA. On the basis of this, the following table represents
the relative position of the leading producers in the EEA
by reference to capacity.

Table

Market position of the main suppliers, 1997

Enso

Stora

[between 5 and 10 %] *

[between 10 and 15 %] *

Combined

[between 15 and 25 %] *

UPM-Kymmene

[between 20 and 25 %] *

Metsä-Serla

[between 15 and 20 %] *

Burgo

Haindl

[between 5 and 10 %] *

[between 5 and 10 %] *

Norske Skog

[between 5 and 10 %] *

SCA

MoDo

[between 5 and 10 %] *

[between 1 and 5 %] *

(75)

(70) After the merger, the two leading suppliers of magazine
paper would account for 45 % of capacity in the EEA
and the three leading suppliers would account
for
around 60 % of capacity.

For the same reasons as regards newsprint, the Commis-
sion examined the question of oligopolistic dominance
in relation to the magazine paper market. The Commis-
sion has concluded for essentially the same reasons as in
newsprint that the present operation does not lead to
the creation or strengthening of an oligopolistically
dominant position in the market of magazine paper.

(c) Non-liquid packaging board

In this market, the parties would only achieve a market
share of about [between 25 and 35 %] * in the EEA. If
the market were to be split further according to applica-
tions such as cigarettes, cupstock, etc. there would either
be no or only limited market overlaps between the
parties depending on the particular application, since
Stora and Enso do not produce non-liquid consumer
packaging board for exactly the same applications.
Consequently, the merger would not lead to the creation
or strengthening of a dominant position in the non-
liquid packaging board market.

(d) Liquid packaging board

Market shares

for

The parties have been unable to provide an estimate of
liquid packaging board. The
the total market
Commission roughly estimates the value of the overall
EEA virgin fibre market to be in the range of ECU 2 to
2,5 billion, of which liquid packaging board forms a
substantial part.

The total volume of the liquid packaging board market
in 1997, as estimated by the parties, was 1 062 700
tonnes in terms of deliveries. The Commission has veri-
fied the parties' estimate with confidential
figures
provided by third parties and concluded that this figure
broadly reflects the estimates of third parties. In terms of
deliveries by consumption, the parties have estimated
their joint deliveries in 1997 at [between 500 000 and
1 000 000 tonnes] *. On this basis, the parties' market
share in liquid packaging board applications would be
[between 50 and 70 %] *, a position far ahead of the
other players in the market. According to the parties'
estimates, the corresponding market share of Korsnäs
would be [between 10 and 20 %] * and that of Assi-
Domän [between 10 and 20 %] *. The Commission has
verified the parties' estimates of the market shares with
confidential sales figures provided by the customers of
liquid packaging board.

Potential competition

(i) Barriers to entry

The entry barriers to the virgin fibre-based board market
are high. In particular, there are substantial costs asso-
ciated with building a board machine. The parties esti-
mate these costs to be about [between ECU 300 and
400 million] *. Entry is risky also due to the significance
of economies of scale: minimum viable sales are esti-
mated to be in the region of 50 000 to 200 000 tonnes
per year, depending on the mill. Furthermore,
the
modest growth of demand (in the region of 1 to 2 % per
year) makes entry even less attractive.

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Official Journal of the European Communities

29. 9. 1999

to entry. Most

(76) With regard to the liquid packaging board market, there
are additional barriers
importantly,
producing liquid packaging board requires in practice an
integrated long-fibre pulp mill. In addition, the parties
have identified the following technical equipment/
processes needed to produce liquid packaging board:
enhanced pulp-washing capacity, an increase in the
pulp-beating capacity, modifications to the white-water
circulation system and the installation of a pH control
system.

(77) Owing to high investment costs and the fact

that
producing liquid packaging board requires a certain level
of production capacity and sales, the potential entrant
would need secured contracts with customers even
before investing in the machinery. Given the problems
connected to switching and the fact that the relation-
ships between the existing producers and the customers
of liquid packaging board tend to be well established
and traditionally long-term, this would appear to be
difficult. There have been no new entries into the liquid
packaging board market in the EEA over the last 10
years.

(82)

(83)

showed that a considerable amount of this new capacity
already has buyers.

The Commission has consulted other paper and board
manufacturing companies such as MoDo and Metsä-
Serla whether these would consider entering the liquid
packaging board market. These companies are currently
producing non-liquid packaging board. MoDo and
Metsä-Serla could theoretically start production of liquid
packaging board in the medium term on their existing
machines. Having consulted MoDo and Metsä-Serla, the
Commission has, however, concluded that none of these
producers are likely to enter the market within the fore-
seeable future.

The Commission notes that the potential for further US
imports brings a limited, but not insignificant, competi-
tive pressure to bear on the market. This pressure is
likely to increase in the future due to the phasing-out of
the duties on imports over the next years. The under-
taking by the parties not to oppose any application for a
duty-free quota for liquid packaging board would help
to make it possible for this effect to come about more
if such a quota is adopted (see below).
rapidly,

(ii) Potential competitors

(78) Given that the construction of a new board mill takes
several years and that the investment costs are substan-
tial, no green-field entrants are likely to emerge in the
overall virgin fibre-based board market or in the liquid
packaging board market in the foreseeable future.

(84)

(79)

(80)

(81)

The parties have identified International Paper's mill in
Svetogorsk, Russia, as a viable potential competitor in
the liquid packaging board market. The Commission
investigation showed, however, that the board produced
at the mill is of inferior quality and not suitable for the
currently
Western European market. The mill
supplying board mainly for the Russian market. The
Commission enquiry confirmed that it would require
significant investments and would take several years to
produce board at the Svetogorsk mill for the Western
European market.

is

The parties have argued that a mill in Kwidzyn, Poland,
also belonging to International Paper, is delivering liquid
packaging board to a converting facility in France.
However, the Commission knows that this mill is not
producing liquid packaging board and will not be able
to export liquid packaging board to the EEA within the
foreseeable future.

the current

The parties argue that
increases in the
capacity of the rival liquid packaging producers, Korsnäs
and AssiDomän, will further intensify competition in the
EEA. According to the parties,
the current capacity
exceeds demand. Comments obtained from third parties
suggest, however,
the recent capacity increases
merely respond to the increasing demand for liquid
In particular, the investigation also
packaging board.

that

Countervailing buyer power

The liquid packaging board market is characterised by
few large producers and few large buyers. In addition to
Stora and Enso, the producers of liquid packaging board
in Europe include only Korsnäs and AssiDomän. Buyers
of liquid packaging board are few and the market is
dominated by Tetra Pak, which represents an estimated
market share of close to [between 60 and 80 %] *. The
other main buyers of liquid packaging board are Elopak
and SIG Combibloc with about [between 10 and 20 %] *
of the EEA market each. After the merger the structure
of
the
the supply-side will mirror the structure of
demand-side of the market for liquid packaging board,
with one large supplier and two smaller suppliers facing
one large buyer and two smaller buyers.

(85) According to the parties, the three large customers, and
Tetra Pak in particular, exercise considerable buyer
power that prevents the producers of liquid packaging
board from increasing prices.

(86)

The investigation showed that the relationship between
the suppliers and the customers is one of mutual
dependency. In the liquid packaging board market the
relationships between suppliers and buyer are of a long-
term nature and switching supplier of liquid packaging
board is
rare. The customers have indicated that
switching the supplier would lead to delays, is costly and
technically demanding due to the fact that the evaluation
process for liquid packaging board is complex and time-
consuming. In particular, the investigation showed that
to become a supplier for a specific type of liquid pack-
aging board requires considerable investment from both
the producer and the customer in terms of machinery,
technical support production and product trials as well
as human resources.

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Official Journal of the European Communities

L 254/19

(87) As

evidence

regarding

long-term relationship
the
between the producers and the buyers, it is noted that
in the case of Enso the longest customer relationship
goes back 40 years. Further evidence of the long-term
and mutually dependent supplier-buyer relationships in
the industry is the fact that Enso has divided its research
and development activities into units, which specialise
in developing boards for Tetra Pak, Elopak and SIG
Combibloc respectively.

(93)

Elopak and SIG Combibloc are buying much smaller
volumes of
liquid packaging board than Tetra Pak.
Furthermore, in particular where Elopak is concerned, it
is noted that Elopak and Enso's subsidiary Pakenso at
present run joint converting activities in Lahti in Finland
[...] *. These joint converting activities represent a signifi-
cant proportion of
cartons
converted by Elopak. This link to the parties could
weaken the buyer power of Elopak following the
merger.

amount of

total

the

(88) An examination of each of the main buyers confirms
that the demand-side has countervailing buyer power.

(89)

(90)

(91)

(92)

Tetra Pak buys about [more than 500 000 tonnes] * of
liquid packaging board per year for use in the EEA. This
volume is bought from Enso, Stora, AssiDomän and
Korsnäs. Outside the EEA, Tetra Pak also uses other local
suppliers. Tetra Pak has in the past been instrumental in
developing several of its current suppliers into producers
of liquid packaging board.

Tetra Pak buys about [more than 50 %] * of its require-
ments in the EEA from Stora Enso. The purchases of
Tetra Pak represent the whole output of several board
machines and about [more than 50 %] * of the parties'
it has to be
total output for the EEA. Furthermore,
liquid packaging
the production of
considered that
board is a high fixed-cost industry, where high rates of
capacity utilisation are necessary in order to achieve
satisfactory levels of profitability. To lose the large
volumes purchased by Tetra Pak would therefore mean
that the parties would have to find other customers in
order to fill the capacity. This would not be an easy task
in the short term.

Tetra Pak, on the other hand, buys such volumes of
liquid packaging board that it would have the option of
developing new capacity with other existing or new
suppliers, should the parties attempt to exercise market
power. In addition, Tetra Pak, through close cooperation
with the producers of liquid packaging board, has an
intimate knowledge of the cost structure of the parties.
Furthermore,
the liquid packaging board represents
the blank
about [more than 50 %] * of
supplied by Tetra Pak to its customers. The Commission
has also noted that plastic may to a certain extent be a
substitute for liquid packaging board in the long term in
the downstream market for the packaging of liquids.
Tetra Pak, therefore, has every incentive to seek to exer-
cise its countervailing buyer power.

the cost of

for all

the reasons stated above,

Consequently,
is
concluded that Tetra Pak has countervailing buyer
power to such an extent that it will neutralise the poten-
tial
increase in market power of the merger between
Stora and Enso.

it

(94) However, it also has to be considered that both com-
panies place orders large enough to fill the capacity of a
board machine. This would in itself make it difficult for
Elopak and SIG Combibloc to switch a significant
proportion of volumes sourced to alternative suppliers
at short notice. However, it also means that a large shift
of volumes to alternative suppliers such as AssiDomän
and Korsnäs, who could in principle switch WTL
capacity to the production of liquid packaging board,
could hurt Stora Enso significantly, should the parties
to exercise market power. Elopak and SIG
attempt
Combibloc both also source strategic volumes from the
United States, which strengthens their countervailing
buyer power. Both of them also have significant opera-
tions outside the EEA. Finally, as for Tetra Pak, both
Elopak and SIG Combibloc have detailed knowledge of
the cost structure of the parties. They also have the same
incentives as Tetra Pak to exercise their buyer power.

(95)

(96)

Compared to Tetra Pak, both companies are, neverthe-
less, in a weaker position in the short to medium term
vis-à-vis Stora Enso, since they will have only one EEA
supplier after the merger, whereas Tetra Pak will have
three. Furthermore, Elopak and SIG Combibloc source
much smaller volumes than Tetra Pak. Therefore, while
it is true that Elopak and SIG Combibloc are not without
any means to counter a price increase, it seems that the
proposed merger will shift the balance of power towards
Stora Enso in its relationship with Elopak and SIG
Combibloc.

in order to not

Furthermore, in the case of Elopak and SIG Combibloc,
it also has to be considered that the parties will have an
incentive to have both companies as major players in
the market
to become completely
dependent on Tetra Pak. Therefore, while the concern
that Elopak and SIG Combibloc could be disadvantaged
by the merger in comparison with Tetra Pak is not
completely removed, it also has to be recognised that
the countervailing buyer power of Tetra Pak will for this
reason, to a certain extent, spill over to Elopak and SIG
Combibloc as well. In addition, the undertakings given
by the parties are an attempt by the parties to address
these concerns (see paragraph 101). It is in particular
noted that Enso's divestiture of its share in the joint
converting activities with Elopak in Lahti in Finland will
remove any concerns that this link could have given the
parties an increased leverage over Elopak.

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(97)

(98)

In conclusion, the merger will result in a market struc-
ture with one large and two smaller suppliers facing one
large and two smaller buyers. This is a rather exceptional
market structure. On balance, the Commission considers
that the buyers in these rather special market circum-
stances have sufficient countervailing buyer power to
remove the possibility of the parties' exercising market
power.

Reactions from third parties

The customers, in particular, have ranged from neutral
to positive in their reaction. According to customers a
major long-term strategic issue for the liquid packaging
board industry is the possibility that plastic will over
time replace paper for more and more applications. The
liquid packaging board industry as such, therefore, needs
to become more competitive. The merger between Stora
and Enso should allow a more efficient production of
liquid packaging board and will, therefore, contribute to
improving the long-term competitiveness of liquid pack-
aging board vis-à-vis plastic packaging materials.

the effects of

(99) A Finnish organisation, The Central Union of Agricul-
tural Producers and Forest Owners (‘MTK’), has raised
concerns over
the merger on wood
procurement in Finland. MTK considers the merger to
strengthen the position of the parties in that the parties
would have greater opportunities for sourcing wood
from outside the EEA — in particular from the Baltic
States — but also from Sweden. According to MTK, this
would put considerable pressure on the Finnish supply
market and allow the parties to control price levels. The
Commission does not agree with this view. In particular,
the Commission found that
the merger would have
virtually no effects on the Finnish wood procurement
market.

Conclusion

(100) Based on the above, it may be concluded that the parties
will have a large market position in the market for liquid
packaging board. There will be only limited potential
competition. However, the demand-side is as concen-
trated as the supply-side, and the countervailing buyer
power of the main buyers, in particular Tetra Pak, means
that
lead to the creation or
strengthening of a dominant position in the market for
liquid packaging board.

the operation will not

largest customer will not be smaller, in percentage
terms, than any increase in the prices to the smaller
customers. Similarly, any percentage price decrease
to the largest customer will not be greater than any
percentage price decrease to the smaller customers.
Deviations from this rule are possible within a
certain limited tolerance margin and also where
special
factors such as objective cost differences
warrant a difference in the percentage increase or
decrease in price paid by the largest and the smaller
customers. The parties will notify the Commission of
any differences in the percentage price increase or
decrease which are not within the tolerance margin
or justified by objective cost differences. The price
protection mechanism will be audited annually by
an independent auditor working under a strict ob-
ligation of confidentiality.

(b) In the

event of a request by one or more
Community processors or manufacturers for the
opening of a duty-free quota on imports of liquid
packaging board, the parties have undertaken to use
their best efforts to facilitate the opening of such a
quota and not to oppose such a quota. In addition,
the parties have provided letters from the Finnish
and Swedish Governments showing that the Finnish
and Swedish Governments would not oppose the
opening of such a quota.

(c) Enso has certain joint converting activities with
Elopak in Lahti in Finland. Enso has undertaken to
sell its entire interest in these activities to Elopak.
Such a sale would remove any concerns that this
link would reduce the countervailing buyer power of
Elopak. Should Elopak and Enso fail to reach an
agreement on the sale, Enso has undertaken not to
extend the current agreement when it expires. In this
sold to Elopak
event,
the contract between
according to the terms of
Elopak and Enso.

these activities will be

VI. CONCLUSION

(102)

In conclusion, the notified operation will not create or
strengthen a dominant position in any market as a result
of which effective competition would be significantly
impeded in the common market or in a substantial part
of it. The operation is, therefore, compatible with the
common market and the functioning of the EEA Agree-
ment,

Undertakings given by the parties

(101) The Commission notes that, in reaction to the statement
of objections, the parties have submitted the following
undertakings:

HAS ADOPTED THIS DECISION:

Article 1

(a) The parties have undertaken to provide a price-
protection mechanism for the smaller customers for
a period of five years from the date of the comple-
tion of the merger. In particular, the parties have
undertaken that any increase in their prices to the

The concentration notified by the parties on 18 June 1998
relating to the full merger of Stora Kopparbergs Bergslags AB
and Enso Oyj is hereby declared compatible with the common
market and the functioning of the EEA Agreement.

29. 9. 1999

EN

Official Journal of the European Communities

L 254/21

Article 2

This Decision is addressed to:

Enso Oyj
Kanavaranta 1
FIN-00160 Helsinki

Stora Kopparbergs Bergslags AB Group Head Office
S-79180 Falun

Done at Brussels, 25 November 1998.

For the Commission

Karel VAN MIERT

Member of the Commission