2000/42/EC: Commission Decision of 9 March 1999 relating to a proceeding under Council Regulation (EEC) No 4064/89 (Case IV/M.1313 - Danish Crown/Vestjyske Slagterier) (notified under document number C(1999) 560) (Only the English text is authentic) (Text with EEA relevance)
Date: 1999-03-09
Institutions: European Commission
Subjects: economic concentration, fresh meat, marketing, meat processing industry, merger control, slaughter of animals

25.1.2000

EN

Official Journal of the European Communities

L 20/1

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 9 March 1999

relating to a proceeding under Council Regulation (EEC) No 4064/89

(Case IV/M.1313 (cid:151) Danish Crown/Vestjyske Slagterier)

(notified under document number C(1999) 560)

(Only the English text is authentic)

(Text with EEA relevance)

(2000/42/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community,

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

Having regard to Council Regulation (EEC) No 4064/89 of 21
December 1989 on the control of concentrations between
undertakings (1), as last amended by Regulation (EC) No 1310/
1997 (2), and in particular Article 8(2) thereof,

Having regard to the Commission decision of 6 November
1998 to initiate proceedings in this case,

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

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

Whereas:

(1) OJ L 395, 30.12.1989, p. 1; corrigendum: OJ L 257, 21.9.1990, p.

13 .

(2) OJ L 180, 9.7.1997, p. 1.
(3) OJ C 21, 25.1.2000.

(1) On 5 October 1998,

the Commission received a
notification of a concentration pursuant to Article 4 of
Regulation (EEC) No 4064/89 (the Merger Regulation)
consisting of
the Danish cooperatives
Slagteriselskabet Danish Crown AmbA (Danish Crown)
and Vestjyske Slagterier A.m.b.A. (Vestjyske Slagterier).

the merger of

(2) By decision dated 6 November 1998, the Commission
found that the notified operation raised serious doubts
as to its compatibility with the common market. The
Commission accordingly initiated proceedings in this
case pursuant
the Merger
Regulation.

to Article 6(1)(c) of

I. THE PARTIES

(3) Danish Crown is

the

largest Danish cooperative
slaughterhouse and has 13 122 members (farmers) who
supply raw materials (pigs and cattle) to the cooperative.
Danish Crown is vertically integrated in slaughtering,
meat processing and meat trading. Its main activities in
the Community are in the United Kingdom, Germany,
France, Denmark and Italy.

(4) Vestjyske Slagterier

second largest Danish
the
cooperative slaughterhouse and has 17 722 members
(farmers) who supply raw materials (pigs and cattle) to

is

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Slagterier

cooperative. Vestjyske

the
vertically
integrated in slaughtering, meat processing and meat
trading.
Its main activities in the Community are in
Denmark, Germany, the United Kingdom, France and
Italy.

is

II. THE OPERATION

(5) The notified operation consists of a combination of the
operations of Danish Crown and Vestjyske Slagterier in
a newly incorporated cooperative society to which
Danish Crown and Vestjyske Slagterier
(hereinafter
collectively referred to as (cid:145)the parties(cid:146)) will transfer all
their activities, assets and liabilities and which the
parties’ members will join collectively as members. The
parties slaughter approximately 16 million pigs and
500 000 cattle per year. The company will be the
largest slaughterhouse in Europe (4) and the world’s
largest pork exporter.

(6)

In addition, the parties are also shareholders in four
other Danish cooperatives: daka a.m.b.a. (daka), Danske
Andelsslagteriers Tarmsalg (cid:151) Schaub & Co. a.m.b.a.
(DAT-Schaub),
F(cid:230)llesindkłbsforening
a.m.b.a. (SFK) and Scan-Hide a.m.b.a. (Scan-Hide). As a
result of the merger, the parties will acquire control of
each of those four cooperatives for the reasons stated
below.

Slagteriernes

(7) Daka is active

It

in animal

rendering (abattoir by-
is owned by Danish Crown (43 %),
products).
Vestjyske Slagterier (34 %), TiCan (3,8 %) and a number
of other slaughterhouses and retailers (12,5 %). After the
merger,
the parties will have five out of 10 board
members. Two members are elected by the employees.
The Articles of Association provide for a specific system
as to the appointment of board members and the
majority of the board appoints the Chairman who has a
casting vote. The Board is responsible for determining
the commercial policy of
the
the parties will be in a position to cast
merger,
approximately 86 out of 114 votes at
the General
Assembly. The Articles of Association require that
amendments of the Articles of Association can only be
independent
decided with the approval of another
member who represents at least three votes.

the company. After

(8) The entity resulting from the merger will be in a
position to cast 75 % of the voting rights in the General
Assembly and will therefore be in a position to decide
on the strategic decisions of the cooperative (budget,
business plan and important investments). Furthermore,
the parties will have half of the votes in the Board and
the Chairman of the Board cannot be appointed against
their will. The parties will acquire decisive influence and

(4) Danish Crown is Europe’s largest pig slaughterhouse and Vestjyske

Slagterier is the third largest pig slaughterhouse in Europe.

thus sole control within the meaning of Article 3 of the
Merger Regulation.

Slagterier

(9) DAT-Schaub is traditionally active in the processing
and sale of natural casings from the animals slaughtered
at the Danish cooperative slaughterhouses. It also trades
in spices, and in meat and meat products (main activity
of the parties). DAT-Schaub is owned by Danish Crown
(49,8 %), Vestjyske
Steff-Houlberg
(13,8 %) and TiCan (5,5 %). After the merger, the parties
will have
and
approximately 80 out of 101 delegates at the General
Assembly. The Articles of Association state that a
minimum of
two independent members must be in
favour of any resolution taken at the General Assembly.
However, a member who represents two thirds or more
of the voting rights, such as the merged entity, can
amend the Articles of Association.

six out of nine board members

(31 %),

(10) The merged entity will be in a position to cast 80 % of
the voting rights at the General Assembly and has a
clear majority in the board. Its majority at the General
Assembly will allow it to change the provision of the
Articles of Association that requires the agreement of
two independent members for all resolutions at
the
General Assembly. Therefore, as a result of the merger,
the parties will acquire sole control over DAT-Schaub.

(11) SFK is a supplier to the meat and food industry of
packaging material, spices and food ingredients, cleaning
products, clothing and tools for the meat industry and
machinery and equipment for the meat industry. SFK is
owned by Danish Crown (42,6 %), Vestjyske Slagterier
(24,7 %), Steff-Houlberg (17,4 %), other slaughterhouses
(14,4 %) and TiCan (1,1 %). The Board consists of a
is
maximum of 12 members. A maximum of eight
appointed by members of Danske Slagterier out of
which the parties would be able to appoint
five
members (5). Two board members are appointed by the
other slaughterhouses while another two members are
appointed by the employees. Decisions of the Board are
adopted by simple majority and the chairman has a
casting vote. The Board determines the commercial
policy of the company. At the General Assembly, the
parties will be in a position to cast 74 % of the votes.
Resolutions of the General Assembly are adopted by
simple majority, but resolutions to amend the Articles
of Association cannot be passed without a minimum of
two independent members being in favour.

(12) The entity resulting from the merger will be in a
position to cast 74 % of the voting rights in the General
Assembly and will therefore be in a position to decide
on the strategic decisions of the cooperative (budget,
business plan and important investments). The parties

(5) Each of

the members of Danske Slagterier

(an Association
consisting of Danish Crown, Vestjyske Slagterier, Steff-Houlberg
and TiCan) appoints one member to the board and the remaining
five are appointed on the basis of the number of votes held by
each member. Votes are calculated on the basis of share capital
(accounting for 50 % of the calculation) and respective purchases
during the previous three years (remaining 50 % of the calculation).

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will thus acquire decisive influence and thus sole control
the Merger
within the meaning of Article 3 of
Regulation.

V. RELEVANT MARKETS

It

and other

is owned by Vestjyske Slagterier

(13) Scan-Hide sells raw, sorted, and salted hides from
(47,3 %),
cattle.
Danish Crown (33,2 %)
slaughterhouses
(19,5 %). Before the operation, none of the parties had
the possibility to exercise
control over Scan-Hide
although exceptionally this year, Vestjyske Slagterier
would be able to cast more than 50 % of the vote at the
General Assembly as it supplied more than half of the
hides in the previous year. After the merger, the parties
will appoint five out of eight members of the Board and
will be able to cast approximately 82 out of 104 votes
at the General Assembly. Therefore, as a result of the
merger, the parties will acquire sole control over Scan-
Hide.

(17) The parties are active in the buying of live animals for
slaughter, the sale of fresh meat for final consumption,
the sale of fresh meat for industrial processing and the
sale of processed meat products. The activities of daka,
DAT-Schaub, SFK and Scan-Hide have been described
above.

(18)

(i) the market for slaughter of

In their notification the parties identified the following
relevant markets:
live
animals (divided into each species, i.e. pigs, cattle and
(i.e. Denmark, Sweden,
lambs)
the
Benelux
Germany
Community-wide market for all types of meat; and (iii)
the Danish market for the collection and processing of
abattoir by-products (rendering).

in (cid:145)Northern Europe(cid:146)
the

countries);

and

(ii)

III. CONCENTRATION

(14) On the basis of the foregoing, the operation can be
considered to lead to a concentration encompassing a
full merger between Danish Crown and Vestjyske
Slagterier within the meaning of Article 3(1)(a) of the
Merger Regulation and the acquisition of control by the
parties in each of the four cooperatives (daka, DAT-
Schaub, SFK and Scan-Hide) within the meaning of
Article 3(1)(b) of the Merger Regulation.

IV. COMMUNITY DIMENSION

the relevant markets

(19) For the reasons stated below, the Commission considers
that
should be defined more
narrowly. However, the Commission considers that the
concentration does not raise concern, irrespective of the
market definition chosen, with regard to the purchase of
lambs and sheep and the sale of their meat. In addition,
the business activities of DAT-Schaub, SFK and Scan-
Hide on markets other than those described below do
not give rise to concern either.

A. RELEVANT PRODUCT MARKETS

(a) The purchase of

live pigs

and cattle for

slaughtering

(15) The operation has a Community dimension pursuant to
Article 1(2) of the Merger Regulation as the combined
the undertakings concerned
aggregate turnover of all
exceeds EUR 5 000 million (Danish Crown: EUR 3 126
million; Vestjyske Slagterier: EUR 1 496 million; daka:
EUR 68 million; SFK: EUR 116,8 million; Scan-Hide:
EUR 39,9 million and DAT-Schaub EUR 589,3
million) (6). Furthermore, Danish Crown (EUR 2 053
million), Vestjyske Slagterier (EUR 865,3 million) and
DAT-Schaub (EUR 328,7 million) have an aggregate
Community-wide turnover of more than EUR 250
million. Danish Crown, Vestjyske Slagterier, Scan-Hide
and DAT-Schaub do not achieve more than two thirds
of their aggregate Community-wide turnover within one
and the same Member State.

(21)

(20) With regard to the slaughtering of

the

killing

stated that

live animals,
lines

the
parties have
in a
slaughterhouse differ for each species and cannot be
changed within a reasonable time-span and without
it will
incurring significant costs.
take up both time and cost
for a farmer to switch
production from the breeding of one species of animal
to another (raising cattle instead of pigs, for example).
substitutability
Therefore,
between the different species at the slaughtering level.
The Commission investigation has confirmed those
findings.

In addition to that,

is no supply-side

there

In conclusion,
respectively,
relevant product markets.

the purchase of

live pigs and cattle,
for slaughtering constitute two separate

(16) The operation does not necessitate cooperation with the
EEA

pursuant

to

EFTA Surveillance Authority
Agreement.

(6) Turnover calculated in accordance with Article 5(1) of the Merger
Regulation and the Commission Notice on the calculation of
turnover (OJ C 66, 2.3.1998, p. 25). To the extent that figures
include turnover for the period before 1 January 1999, they are
calculated on the basis of average ECU exchange rates and
translated into EUR on a one-for-one basis.

(b) Fresh meat markets

Pork and beef are separate relevant product markets

(22) The parties have argued in their notification that all
types of meat such as pork, beef and veal, sheep and
together with processed meat
lamb and poultry,

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products, belong to the same product market as they
are readily substitutable in the diet.

(23) However,

cases

in previous

the Commission has

concerning consumer
found that
products markets,
simple substitutability in functional characteristics is not
to define the relevant product market (7).
sufficient
Similarly in the case of meat the evidence shows that
the different types of meat should not be considered as
part of
the
the same relevant product market
purpose of assessing the impact on competition of the
present merger.

for

(24)

It is first to be noted that the different types of fresh
meat are priced differently, with, on average, beef being
the most expensive, pork 20 to 25 % less expensive and
poultry about half as expensive as beef. Furthermore,
those meats are perceived differently by the consumers,
and therefore have a different position in the market
place. For example, with regard to meat attributes such
as flavour, taste, nutritional value, tenderness, cost, ease
of use, the evidence in the Commission’s file shows that
in Denmark poultry received the highest overall ratings,
particularly high on tenderness and ease of use, whereas
beef scores high on flavour and taste but low on cost.
Pork on the other hand scores high on ease of use,
flavour and taste, but low on leanness.

are

there

indicated that

(25) Those considerations are confirmed by information
from the Danish meat wholesalers and supermarkets,
which have
considerable
underlying differences in the purchase motivation of
consumers for the different meat types. The special taste
and the specific image (seasonal consumption around
Easter) distinguishes lamb from the other meat types.
For poultry, a typical motivation to purchase is the
(cid:145)healthy(cid:146)-(cid:145)low fat(cid:146) image. In the case of Denmark, pork
consumption is heavily motivated by tradition. Given
the price differentials, the perceptions of consumers and
their consumption patterns, it can be concluded that the
different types of meat are only imperfect substitutes for
each other.

types (beef/pork,

(26) The Commission asked the buyers whether in their
opinion a 5 to 10 % price increase in pork or beef
prices respectively would result in substitution of other
meat
lamb, poultry and processed
meat products). The Danish caterers have indicated that
such a price
their
increase would not
consumption patterns.
In the opinion of Danish
wholesalers a switch from beef to pork and from beef
and pork to poultry would only be possible to a certain
extent.
In the opinion of Danish supermarkets the
demand for beef would not be affected by a rise or fall
in beef prices. Some supermarkets indicated that,
in
response to a price increase/decrease, consumers would
rather buy cheaper/more expensive parts of beef. With
regard to pork, supermarkets considered that a price

change

(7) Case IV/M.190 (cid:151) NestlØ/Perrier (OJ L 356, 5.12.1992, p. 1).

In

conclusion,

increase for pork could lead to some switching to
this market
poultry.
information confirms that the different types of meat
are only imperfect substitutes, and accordingly only a
certain degree of
substitution exists between the
different types of fresh meat.

therefore,

(27) The parties have provided a graph on the development
relative
relative prices of pork and the
in the
consumption of pork (see Annex 21 to the notification).
This graph shows that relative prices of pork have
fluctuated relatively strongly without resulting in a large
fluctuation in relative meat consumption. In particular it
is seen that the change in the relative price of pork of 4
percentage points between 1986 to 1988, and the
change of 7 percentage points between 1992 to 1995
resulted in proportionally smaller changes in relative
the
consumption. That graph,
conclusion that
is only limited substitution
between pork and the other types of meat in response
to price changes.

therefore,

supports

there

(28)

the Commission.

In the notification the parties have provided own-price
elasticities for pork of ﬂ 0,35, ﬂ 0,4, ﬂ 0,53. The sources
In
are the OECD and DG VI of
particular for the Community the OECD has estimated
own-price elasticities of ﬂ 0,3 for beef, ﬂ 0,3 for pork,
ﬂ 0,2 for poultrymeat and cross-price elasticities, which
are numerically smaller than 0,3, between each of those
they
three types of meat. According to the parties,
believe that those elasticities reflect the situation on the
Danish market as well. Furthermore, according to the
parties, it is recognised that there is positive cross-price
the
elasticity
Community (see the notification, Section 6, p. 5).

different meat

between

types

in

(29) The Commission acknowledges

it

that

this does not mean that

there may be
positive cross-price elasticities between different types of
meat. This also means that the price developments of
different types of meat are to a certain extent linked.
should be
However,
concluded that all types of meat are part of the same
relevant product market for the purposes of assessing
the competitive impact of the proposed merger. On the
contrary,
the inelastic own-price elasticities for beef,
pork and poultry meat imply that an increase in the
market price for each of those types of meat would only
lead to a limited loss of volume due to substitution of
other types of meat or a reduction in consumption.
therefore,
Those price elasticities,
indicate that beef,
each constitutes a separate
pork and poultrymeat
relevant product market.

(30) The fact

that pork and beef are separate relevant
product markets is also confirmed by the way the
parties have organised the marketing of pork and beef.
Indeed,
their pork and beef sales organisations are
completely separate and there are separate marketing

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for the pork sales staff

strategies for pork and beef. This can best be illustrated
by the fact that the (cid:145)fore-calculation(cid:146) (i.e. a management
support-tool
in assessing the
optimal price for a particular cut) does not contain a
single reference to beef prices or targets. Furthermore,
in the organisational structure of the merged entity (as
well as previously for both parties), there is a Livestock
Committee and a Pig Producers’ Committee that will
separately follow and consider matters of relevance for
the entire livestock (cattle) division and pig division
respectively.

of

the

(CAP)

disposal

In fact,

instruments

common agricultural policy

(31) Also the market organisations for beef and pork under
are quite
the
the pork market organisation is
different.
(cid:145)very liberal(cid:146) with very few market-
described as
regulating
the
at
Commission (no guaranteed minimum prices (cid:151) some
aid for private storage). As a result less than 1 % of the
total EAGGF guarantee budget goes to pork. The Beef
Regime has a system of guaranteed prices for
the
producers, which is now being gradually reduced. Beef
accounts for 14 % of the EAGGF budget and export
refunds play a much more important role for beef than
for pork. The fact that there are different regimes for
pork and beef is a further indication that those products
belong to different markets. If the two products were
part of the same market, then the effect of measures in
one regime would have an important impact on the
other product so that they should then have either the
same regime or a very similar one.

(32) As far as supply-side substitutability is concerned, it is
not easy to change a cutting line for beef to one for
pork. This is due to the fact that pigs supplied to a
slaughterhouse are much more homogeneous
than
cattle. This therefore permits a much higher degree of
automatisation of the pork cutting lines compared to
the beef cutting. In beef cutting, a much more detailed
selection procedure takes place when the carcase arrives,
owing to the numerous breeds of cattle supplied and
the
respective meat characteristics. Therefore,
their
cutting process for beef is less automated than for pork.
Accordingly,
there is no supply-side substitutability
between pork and beef meat.

(33) For all the above reasons it can therefore be concluded
that
fresh pork and fresh beef are separate relevant
product markets for the purpose of the assessment of
the proposed merger. This conclusion has not been
contested by the parties in their reply (hereinafter (cid:145)the
to the Commission’s Statement of Objections
Reply(cid:146))
pursuant
the Merger Regulation
(hereinafter (cid:145)the SO(cid:146)).

to Article 18 of

The sale of fresh meat to industrial processors and the sale of
fresh meat for human consumption (retail and catering) are
separate relevant product markets

(34) The meat resulting from slaughtered animals is either
consumed by the final consumer as (cid:145)fresh meat(cid:146) or

for

supplied to meat processors
the production of
(cid:145)Fresh meat(cid:146) means that the
processed meat products.
meat has not undergone further processing, i.e. no other
ingredients or spices have been added, nor has the meat
been cooked, smoked or dried.

(35) Most of the different parts of a slaughtered animal are
sold to meat processors or for fresh meat consumption,
taking into account the specific cutting requirements of
those buyers. The Commission does not contest that the
cutting specifications can be changed relatively easily.
However, once the meat is cut by the slaughterhouse,
there is for those cuts no more possibility for arbitrage.
The parties have identified a limited number of cuts that
are sold to both processors and for fresh consumption.
There are, therefore, limited theoretical possibilities for
arbitrage between the two channels. However, before
that arbitrage could represent a competitive constraint
on the parties’ competitive behaviour vis-(cid:224)-vis
the
supermarkets (see below), the processors would have to
start to perform wholesale functions. This is not evident
in a market where the (cid:145)freshness(cid:146) of the meat is crucial.
Furthermore, the high level of purchasing from other
Member States by processors is also an indication that
the competitive market conditions in this market are
different. Therefore, the Commission considers that the
sale of fresh meat to industrial processors constitutes a
different market.

Catering, supermarket, butchers and farm sales are separate
relevant product markets but supermarkets and butchers can
be considered together

(36) The sale of both fresh pork and fresh beef for human
consumption can be further distinguished into a retail
market and a catering market. Furthermore, the retail
market can be split into the sale of fresh meat through
supermarkets, butchers and farmers (farm sales).

(37) The parties have contested that split. They claim that
there is full supply and demand substitutability between
those channels. Furthermore, their price structure would
be identical as there is one basic weekly price list from
which negotiations on price
the
Commission considers that the fact that there is a basic
price list
those
different channels should be considered as one market.
First, the basic price list already consists of different
columns with reductions or increases in view of the
different clients or categories. Second, the parties often
in dealing with individual
deviate from the (cid:145)columns(cid:146)
that a basic price list
customers. Therefore,

is not necessarily an indication that

start. However,

the fact

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Official Journal of the European Communities

25.1.2000

exists is no indication that the parties could not price-
discriminate between those channels.

(38) The catering market is defined as the sale of fresh meat
to restaurants, canteens, government
institutions and
ship and airport chandlers. The distinction between a
retail and a catering market is based, firstly, on the fact
that the origin of the meat is less important for the
caterers than for the retailers. The caterers prepare the
meat to serve it to the final consumer as part of a
ready(cid:150)cooked meal and do not sell the fresh meat as
such. Therefore consumer preferences with regard to
origin are less important. This has led to a greater share
imports in the catering market than in the retail
of
there is no realistic possibility for
market. Secondly,
arbitrage between the two markets in view of
the
differences in distribution (specialised distribution to
caterers via relatively small wholesalers (cid:151) direct supply
by slaughterhouses
to retail) and packaging (meat
supplied to supermarkets is to a large extent already
pre-packed and labelled with the necessary information
for the supermarket client). Thirdly, the retail market
needs to be supplied at all times with a full assortment
of the different cuts of fresh pork and beef. Caterers
typically only need the cuts for the meals included on
their menus. Fourthly, it results from the Commission’s
catering
few large
investigation that
market
[less than 10 %] (*)
wholesalers who buy their meat
cheaper than some of the retail clients,
in particular
smaller supermarkets and butchers, do not sell a single
kilogram of pork to the retail market.

the

(39)

is sold to the final
fresh meat
In the retail sector,
consumer through supermarkets and butchers. Those
channels differ in so far as a substantial part of butchers
(some 100 out of the around 820 Danish butchers (8)
themselves slaughter the live animals or purchase their
meat
from local private slaughterhouses operated by
butchers. Although the parties state that the fresh pork
products supplied to butchers and supermarkets are the
same, butchers buy more half- or quarter-carcases or
the sales
main cuts than supermarkets. Furthermore,
the slaughterhouses to butchers is typically
price of
some [less
than the price to
supermarkets, including small supermarket outlets. The
parties consider that those price differences are a result
trade structure (spot- or
of differences
framework-agreement basis) and buying power. The
butchers’
retail prices are some 20 to 25 % more
expensive for pork, beef and lamb than those charged
by supermarkets and up to 50 % more expensive for
poultry and processed meat products.

than 10 %] (*) higher

in volume,

(40) The Commission considers that it can be concluded on
the basis of the above that butchers and supermarkets
constitute a distinct market. However, it can be noted
that the competitive assessment would remain the same
whether one considers a separate supermarket market
or a combined retail market since butchers account only
for around 10 % of the combined retail market (9).

(41) So-called farm sales whereby

final

directly

farmers

to the

consumer

sell bigger
quantities of up to a half or quarter carcase of their own
animals
can be
distinguished from the retail market. Whereas both
supermarkets and butchers sell meat in various cuts and
offer the consumer the possibility to purchase relatively
small quantities (typically covering the required quantity
for one family meal), farm sales, whether further cut or
not, will have to be stored in the consumer’s freezer.
Farm sales do not therefore constitute a direct substitute
for the (cid:145)typical(cid:146) buyer of small quantities and obviously
do so even less for consumers living in cities (10).

(42)

In conclusion catering and farm sales constitute separate
relevant product markets. The same conclusion can be
reached for supermarkets and butchers; however, the
competitive assessment would not be different
for a
separate supermarket market or a combined retail
market.

(c) Processed meat

(43) A processed meat product can be defined as meat from
mammals or birds, containing external ingredients such
as salt or spices, being raw, dried, smoked or cooked. In
view of that additional processing of the meat, whereby
up to 20 % of the weight of the final processed product
ingredients and whereby meat
comes from external
from different species is often mixed, the Commission
considers
that processed meat products are to be
distinguished from fresh meat. This view has been
confirmed by the Commission’s market
investigation
where a substantial majority of meat wholesalers,
supermarkets, meat
have
processors
indicated that consumers, when faced with a 5 to 10 %
price increase for fresh pork or fresh beef, would not
switch to processed meat products.
the
the processed
ultimate consumer does not
meat product as resulting from a slaughtered animal
and is not able,
for a large part of processed meat
products, to see the intrinsic qualities of the originating
meat (leanness, colour, tenderness, type of breed and
very often even the type of
species (cid:151) pork/beef/
poultry).

In addition,

(cid:145)perceive(cid:146)

cutters

and

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

(8) This number is the estimate of Danske Slagterier, based on their
investigation and marketing activities. The two largest associations
of butchers estimate the total number of Danish butchers to be
between 500 and 550.

(9) On the separate butchers market, the concentration does not raise

concerns.

(10) According to the GfK Household Panel data, farmers account for
0,1 % of pork sales and 3,4 % for beef in small quantities, but
account for the bulk of so-called (cid:145)slaughter parcels(cid:146). As the parties
are not active on this market, the concentration does not raise
concerns.

25.1.2000

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Official Journal of the European Communities

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(44) With

to

regard

indicates

from the

products,
that

processed meat
parties

the
all
information
processors are able to use all processing techniques
(drying, smoking and cooking) on meat from all species.
That supply-side substitutability would, therefore, tend
there is an overall
the conclusion that
to support
processed meat product market. However,
is not
necessary for the purpose of the present assessment to
this
reach a final conclusion on the exact scope of
market, as it will not affect
the
the assessment of
operation.

it

(d) Collection of abattoir by-products

(45) This activity concerns the collection, processing and
inedible animal waste/by-products from
marketing of
farms and the meat industry as well as the collection
and destruction of dead animals. Those by-products are
converted into meat meal, bone meal, animal fat, hides
from dead animals and blood products.

(46) With regard to the collection of abattoir by-products,
Community legislation distinguishes high-risk material
from low-risk material. To obtain high-risk material, a
rendering plant must be licensed for that purpose. A
high-risk licensed plant has a general duty to receive
and process
specified risk material. All parts of
slaughtered animals that are not veterinary-approved
after
(cid:145)by
slaughter are high-risk. High-risk material
nature(cid:146) is thus, for example, blood waste, animals dead
from natural causes, pig hair,
rejected
carcases.

floor waste,

Potential

approval.

veterinarian

(47) Low-risk material is material that is separated and has
received
low-risk
material is, for example, offal, head and fat, bones, rind
and blood. It does not necessarily have to be delivered
to a (cid:145)high-risk licensed renderer(cid:146), but can be supplied to,
for
that
potential low-risk material is not separated or has not
received veterinarian approval,
is also high-risk
material.

instance, pet-food producers. However,

it

if

is

the

sale

sold

final

to the latter,

to industrial processors

fresh pork and beef, respectively, can be subdivided into
and for human
the
consumption. With respect
retail and
catering are distinct markets. In the retail sector, fresh
meat
through
to
It can be left
supermarkets, butchers and farm sales.
open whether
supermarkets and butchers constitute
distinct markets, since the assessment would not be
limited
significantly different owing to the butchers’
share of
to
abattoir by-products, the relevant product market is the
high-risk material market. For the remaining products
the market definition can be left open.

the retail market. Finally, with respect

consumer

B. RELEVANT GEOGRAPHIC MARKETS

(a) The purchase of live pigs for slaughtering

(50) The parties consider that

In this context

the geographic market

live pigs is (cid:145)Northern EC(cid:146),

for
including
slaughtering of
Denmark, Germany,
the Benelux countries and the
southern part of Sweden (12). This geographic market
definition is based on the possibility of transporting live
it has been
animals for slaughtering.
argued by the parties that: (i) the cost of transport is
limited given that, for a distance of 1 000 km, the cost
would only amount to around 5 to 6 % of the product
value; (ii) although Community legislation provides that
animals have to be rested, fed and watered if they are
transported for more than eight hours, specially adapted
trucks make a 24-hour
journey possible permitting
transport distances of 1 500 to 1 600 km including
loading and unloading, and (iii)
it is the loading and
unloading of the pigs, as opposed to the transport itself,
which is the primary concern for the development of
stress.

(48) As high-risk material can only be supplied to a high-risk
renderer, the relevant product market, for the purpose
is the high-risk material market (11). The
of this case,
parties agree with this conclusion.

(e) Conclusion

(49) On the basis of the above, it is concluded that there are
separate markets for the purchase of live pigs and cattle
for slaughtering, fresh pork and fresh beef. Furthermore,

(11) The Danish Competition Council reached the same conclusion in
its decision of 22 March 1995 which was upheld by the Appeal
Instance on 9 February 1996.

(51) The parties have also referred to the fact that the export
of live slaughter pigs from Denmark mainly to Germany
has increased from 188 000 pigs in 1996 to around
307 000 in 1998. Furthermore, it has been argued that
the commercial reasons for transporting live animals
from Denmark
significant
overcapacity of German slaughterhouses (around 30 %)
exists and that German slaughterhouses and other

to Germany

that

are

(12) The parties have indicated that currently veterinary regulations, in
particular concerning salmonella, make export to Sweden difficult.
However, those rules will be easier to overcome as the Danish
the Swedish (cid:145)level(cid:146) and other
(cid:145)salmonella level(cid:146) approaches
veterinary restrictions for import are limited in time. Furthermore,
the parties observe that
the new bridge between Sweden and
Denmark will make it easy to transport pigs to and from Sweden.
However,
for
approximately 70 % of pig slaughters in Sweden, has stated at the
hearing that it will not buy Danish pigs.

Swedish Meats,

accounting

company

the

L 20/8

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Official Journal of the European Communities

25.1.2000

Community slaughterhouses pay more than Danish
in one
slaughterhouses, although price fluctuations
Member State are followed by the same trend in other
Member States. Finally, it has been submitted that more
than 5 million slaughter pigs are exported from one
Member State to another of which, in 1996, some 2,8
exported
million
from the
Netherlands
including almost 2
million to Germany (the bulk of those exports might be
to slaughterhouses some 50 to 80 km from the Dutch
border), but also some 360 000 to Italy.

slaughter pigs were

to other countries,

(52) However, the Commission investigation has resulted in
the following findings with regard to the definition of
the relevant geographic market.

(53) The first element is the (cid:145)catchment area(cid:146), i.e. the distance
from which slaughterhouses obtain their pigs. The
Commission’s investigation has shown that Danish and
foreign pig slaughterhouses buy 90 % of their live pigs
within 120 km of their slaughterhouses.

the observed pattern of

sourcing reflects historical

(54) The parties have argued in the Reply (pp. 37 to 38) that
this fact (cid:145)is not sufficient to conclude that there is a
separate Danish market for live pigs for two reasons.
First,
local sourcing is quite
consistent with effective substitution within the wider
Northern European market in view of the low level of
transport costs. Secondly, the parties contend that this
pattern of
supply
local
arrangements and does not
indicate the absence of
effective competitive constraints over a wider area(cid:146).
However,
it is the view of the Commission that the
possibility for effective substitution and the resulting
competitive
are
considerably limited for 94 % of Danish pig production
as the farmers are subject to the cooperative obligations
(see below). Even on the basis of a 120 km catchment
area, the sourcing by Danish slaughterhouses of foreign
pigs and by foreign slaughterhouses of Danish pigs is
limited as can be seen from the import and export
figures described below.

constraints

a wider

over

area

(55) Secondly, there are limited exports of Danish slaughter
pigs and the exports are almost all
to Germany.
Moreover, those exports have remained rather limited
despite relatively important price differentials between
Denmark and Germany in 1996 and 1997.
In 1995
exports accounted for less than 1 % of total production
and the price differential with Germany was 0,57 %. In
1996 188 000 slaughter pigs were exported accounting
for
total Danish slaughter pig
production (13) and the price differential was 4,3 %. In

than 1 % of

less

1997 the figures were 245 000 pigs accounting for less
than 1,3 % of total production and a price differential of
4,9 % (14). For 1998, exports totalled 307 000 pigs,
accounting for less than 1,6 % of total production and a
price differential of 2,5 % for the first 37 weeks (taken
over the whole year the prices in Denmark were 0,24 %
higher than in Germany).

(56) The parties contend that the above figures indicate a
significant increase in the level of exports to Germany
in the period 1995 to 1998 and that the total number
further increased in 1998 when price differentials were
considerably smaller than in 1996 to 1997 when the
larger price differences were due to largely unanticipated
special factors (BSE and Dutch swine fever).

(57) The Commission recognises that exports have further
increased. However, they are still extremely limited if
compared, for instance, with exports of Dutch pigs to
Germany. For instance in 1996, the price in Germany
was only 1,5 % higher
than in the Netherlands
(compared to the 4,3 % price difference with Denmark)
and the Netherlands exported 1 916 201 slaughter pigs
to Germany. Those exports account for some 15 % of
the Dutch production of slaughter pigs, compared to
less than 1 % of Danish production.
It can thus be
concluded that consistently higher prices in Germany
during three years have not affected Danish exports to
any significant extent.

(58)

It can be noted that there is virtually no import of pigs
for slaughtering into Denmark (almost 3 000 pigs in
1997 and only 210 in 1998 (cid:151) all from Sweden). This
is probably the consequence of rules adopted by Danske
Slagterier to avoid (cid:145)contagious pig diseases(cid:146). Those rules
include the necessity for a slaughterhouse to have
facilities that allow for the separation of foreign pigs
from local pigs, and a price reduction of some 20 % for
imported pigs. The parties submit that those rules do
not prohibit the import of pigs for slaughter, but merely
ensure that
the veterinary status associated with for
example United States Department of Agriculture
(USDA) veterinary authorisations can be maintained at
slaughterhouses. The USDA veterinary
the relevant
authorisations would allow for imports from Sweden,
the United Kingdom and Ireland. The Commission
recognises that those rules do not theoretically prohibit
imports by the cooperative pig slaughterhouses, but, in
they make imports very difficult. The parties
reality,
further state that private slaughterhouses, most of which
have no USDA authorisation, can freely import animals
for slaughter with no price deduction. Such imports
have not taken place in the past as the relative prices
have not provided an incentive to import pigs. The

(13) The supplies of slaughter pigs to private slaughterhouses are not
included in the figure for
the total Danish slaughter pig
production. The percentage figure is, therefore, preceded by (cid:145)less
than(cid:146).

(14) This difference has even been around 30 % during some weeks in
April and May 1997 when prices peaked in Germany and the
Netherlands as a consequence of Dutch swine fever.

25.1.2000

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Official Journal of the European Communities

L 20/9

however,

Commission accepts that
the private slaughterhouses,
accounting for 4 % of Danish slaughters, can import. It
can,
such
slaughterhouses, of which the largest slaughters less
than 200 000 pigs per year, have the organisational
structure to start such imports.

questioned

whether

be

(59) Thirdly, no pig farmer joined a foreign cooperative or
started export operations despite the opportunity given
to the members of
to terminate their
the parties
membership with immediate notice during a period of
two weeks after the agreement of the parties to merge
reached on 29 September 1998. The parties have
informed the Commission that Steff-Houlberg benefited
from that opportunity by accepting farmers,
from
Jutland and Funen, as members. Those members are
expected to produce more than 600 000 pigs.

(60) The parties submit that this phenomenon is not relevant
as at that time German pig prices were below Danish
prices and producers might have chosen a (cid:145)wait and see(cid:146)
approach especially under the present weak market
conditions. The Commission considers that
this (cid:145)wait
and see(cid:146) approach could be taken as a further expression
of the traditional preference of the Danish pig producer
for the stability associated with long-term contracts (i.e.
membership of a cooperative (cid:151) see below) versus the
opportunities and risks associated with the spot market
(i.e. non-membership). It can be observed that,
in the
past, if a cooperative was less successful than others, the
matter was always
resolved by a merger between
(cid:145)neighbouring(cid:146) (Danish) cooperatives, rather than by the
cooperative
to private
slaughterhouses or to export markets.

starting to deliver

farmers

(61) The Commission considers that the above factors are all
the cooperative
the importance of
an expression of
structure of pig slaughtering in Denmark and that,
therefore, as far as buying live pigs in Denmark is
concerned, the relevant geographical market is, at most,
national (15). The four Danish cooperatives cover 94 %
of slaughters of Danish pigs and that figure has been
more or less the same for at least the last five years. The
farmers, members of a cooperative, are subject to (a) an
exclusive supply obligation vis-(cid:224)-vis their cooperative,
(b) a 12 to 24 months notice of leaving period and (c) a
bonus payment accounting for 4 to 8 % of their total
payment for the pigs supplied that will be handed out
only once a year (see below).
In addition to those
(cid:145)structural links(cid:146), pig prices are very cyclical. The farmer
therefore has to strike a balance between his position as

(15) In this

it

should

context

the German
Bundeskartellamt concluded in a prohibition decision (Moksel/
S(cid:252)dfleisch of 21 August 1997)
the relevant geographical
markets were certain regions within Germany.

be noted

that

that

a

in

uncertain

a member of the cooperative today and his position as a
economic
relatively
non-member
environment. Thus, the cooperative farmer will have no
opportunity to give any immediate response to a
possible price change in the market. The fact that the
farmer can, if he has given his notice to leave, withdraw
his notice up to three months before it would take
effect, does not change that conclusion because the
farmer can still only leave once a year.

live pigs

(62) At the oral hearing the parties presented data showing
that prices of live pigs in Denmark in the past have
in other
moved together with prices of
northern European countries.
In particular the parties
showed a graph of the quarterly price development of
live pigs in Denmark, Germany, France, the Netherlands
and Sweden, a graph showing the weekly German price
relative to the Danish price, and a
for
calculation of the correlation coefficients on quarterly
average prices of
live pigs between Denmark and
respectively Germany (0,97), the Netherlands (0,98) and
those price
Sweden (0,93). According to the parties,
developments and correlation coefficients are evidence
that prices for pigs in different countries show a marked
tendency to move together over time, and this suggests
that competitive constraints keep prices in line.

live pigs

(63) The Commission has examined those data and has come
the price developments and
to the conclusion that
correlation coefficients presented by the parties are not
evidence of any competitive constraints on the parties
on the Danish market for purchase of live pigs. First, it
is noted that there may be common factors such as the
development in feed prices, which to a certain extent
cause the correlations. More importantly, as noted in
recital 55, Danish exports of live pigs have only been in
the range of 0 to 2 %. The low level of exports even in
periods of price differences between Denmark and
Germany is mainly due to the contractual obligations
on farmers to deliver their pigs to the cooperative
slaughterhouse of which they are members. Therefore,
farmers in reality do not have the possibility to export
live pigs in response to short-term price differences.
Consequently, exports of
live pigs do not have an
impact on Danish prices of live pigs. In particular this
means
in
Germany than Denmark, then Danish prices will not
increase in response to an increase in exports of live
pigs to Germany owing to the restrictions on farmers
which prevent such exports.

for example, prices are higher

that

if,

(64) Rather than competitive constraints the Commission
found that
the correlations between Danish live pig
prices and the live pig prices in other countries can be
explained by the way the Danish price is calculated. In
particular it is noted that the weekly Danish price is a
weighted
the
slaughterhouses achieve for meat on their various
export markets. The Danish price is, therefore, owing to

prices which

average

the

of

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Official Journal of the European Communities

25.1.2000

the

transmission mechanism for

the high export share, mainly dependent on export
prices rather than on domestic prices. The Danish price
for live pigs is, therefore, automatically correlated with
the prices of live pigs on the export markets. In other
words
price
fluctuations on the Danish market for live pigs goes via
the price fluctuations on the downstream fresh meat
markets abroad and is fed back on to the Danish market
for live pigs through the weekly price quotation in
Danske
price
explains
it also means that the parties’
correlations. However,
price correlations cannot be taken as evidence that the
Danish market for live pigs is part of a wider northern
European market for live pigs.

Slagterier. This

link

the

(65) On the basis of the above, it can be concluded that the
purchase of live pigs for slaughtering is limited at most
to Denmark.

(b) The purchase of live cattle for slaughtering

also argued that
for the purchase of

(66) The parties have
the
relevant
live cattle is
geographic market
Northern Europe for the same reasons as indicated
above for pig slaughtering. They have submitted that
the cost of transporting cattle is somewhat greater, but
that cattle can be transported more easily. The parties
also estimate that the overall market will continue to
decrease owing to Community milk quota limitations
and the increased export of male calves from Denmark
to the Netherlands.

(67) The Commission has examined the same factors for
cattle as for pigs and has come to the conclusion that
the indications in favour of a national geographical
market are less clear.

(68) First of all,

the (cid:145)catchment area(cid:146)
200
larger

for cattle could be
somewhat
other
and
to
slaughterhouses have indicated that transport could be
made profitably from a distance of 300 to 350 km.

km)

(up

(69) Second, only half of the Danish cattle for slaughtering
are produced by members of
three Danish
cooperative cattle slaughterhouses (the parties and NV-
OX (16). Therefore, half of the Danish cattle production
is not subject to the cooperative rules (obligation to
supply and notice to leave period), compared with 6 %
of the pig production.

the

(16) The three cooperatives slaughter some 66 % of cattle of Danish
origin. It can thus be noted that some 15 % of cattle slaughtered
by the cooperative slaughterhouses is supplied by non-members. It
should also be noted that there are on-going negotiations between
the parties and NV-OX concerning the possible acquisition of NV-
OX by the parties.

(70) Third, the price differences with Germany have been
smaller for cattle than for pigs but, nevertheless, there is
somewhat more cross-border movement. Exports of live
cattle from Denmark accounted for some 9 000 head in
total Danish cattle production for
1997, 1,2 % of
into
slaughtering (731 600 in 1997) and imports
Denmark accounted for around 1,5 % in 1995 and
1996. With a few exceptions, prices have in general
been higher in Denmark than in Germany.

(71)

(72)

the parties are both active in North
In addition,
Germany where Vestjyske
a
slaughterhouse and Danish Crown has a substantial
number of cattle slaughtered on contract.

Slagterier

operates

In contrast to pig farmers, Danish cattle farmers do not
need themselves to set up a direct contract with a
foreign buyer of their animals. They can sell their cattle
on (Danish)
live cattle markets where approximately
20 % of Danish cattle is currently traded. On those
markets
private
slaughterhouses and supermarkets) can buy the cattle.

(as well

foreign

buyers

as

(73) However,

it is not necessary for the purpose of the
present assessment to reach a final conclusion on the
relevant geographical market, as even on the narrowest
market, i.e. Denmark, the merger would not lead to a
dominant position as a result of which effective
competition would be significantly impeded in the
common market.

(c) Fresh pork (cid:151) supermarkets

(74) The parties argue that the geographic market for fresh
pork covers, in view of the trade flow across Member
States for pork (24 %) and in view of the CAP, at least
the Community and that there is a trend leading to a
world market. A few years ago there were larger
differences in the products bought in the Community,
the USA and eastern Europe. Today, most of
Japan,
those differences are said to be smaller.
In all those
markets pork products are bought in different cuts, but
the cuts show only small variations in the same basic
products.

(75) The parties play down the

issue of national or
geographic consumer preferences for meat as those
preferences can be associated with:

(a)

the consumer’s intention to support
the national
industry: the parties acknowledge that at times of an
agricultural crisis, national forces can be mobilised
to support the national industry but such situations
are generally short-lived as the social links between
the modern consumer and the local agricultural
sector are disappearing;

25.1.2000

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Official Journal of the European Communities

L 20/11

(b) tradition:

the professional retail buyer is looking
increasingly international. In addition, the parties are
increasing their own sales in Germany and refer to
the large imports of beef and processed meat
products in Denmark, and

related difference as to the preferred slaughter weight of
pigs (lighter pigs in Denmark than in for example
Germany), (b) differences in the typical consumption of
specific parts of the pig, and (c) differences in the cuts
of the same piece of meat.

(c)

the degree of consumer confidence in the safety or
quality associated with the product:
this issue is
losing its link with geographical preferences (origin
of
and more
associated with objectively based quality-assurance
systems such as those of the UK retail industry.

the meat), but becomes more

(79) Moreover, there are other reasons, which explain why
imports of pork into Denmark have been virtually non-
existent in the past.

that: wholesale

show a
States;

prices
between Member

(76) Furthermore, according to the parties there are no
barriers to entering the Danish market. In particular it is
argued
similar
development
veterinary
controls
in individual Member States are based on
Community law and are non-discriminatory; and finally
pork can be imported into the Danish market by simply
delivering to the distribution centres of supermarkets,
which could then distribute the fresh pork to individual
stores.
be
should
relevant geographic market.
considered a
Rather there is a Community-wide market for pork.

conclusion, Denmark

separate

not

In

total sales of

been markedly

(77) The Commission investigation has not confirmed the
in the past
the parties. Danish pork has
view of
accounted for 99 % of
fresh pork in
supermarkets. This has not changed even when short-
term price developments, say over a period of three to
different
six months,
on
have
neighbouring geographic markets.
In truly integrated
it would be expected that price
geographic markets,
least some trade flows
fluctuations would cause at
simply in response to short-term price differences.
However, this has not been the case. The parties have
also produced price data based on the invoiced prices of
the main cuts in countries such as Denmark, Sweden,
Germany, and the United Kingdom. According to the
parties those figures show that there has been a parallel
development of prices on those markets. According to
the parties it is always sought to sell a given product in
a given week on the market which gives the highest
The
price.
prices move
Commission recognises this mechanism. However,
it
does not exclude that a dominant company on the
Danish market
for pork could keep a small but
significant price difference between the Danish market
and export markets, if there are barriers to imports (see
below).
It is, therefore, difficult to accept those price
data as evidence of a market wider than Denmark.

Therefore,

parallel.

in

(78) Furthermore,

it

consumer
preferences vary between countries. Differences occur at
all levels: (a) preferred type of pork (lean/fat) with the

seems quite

clear

that

(80) First,

it

as

via

centres

imports

distribution

claimed by

in this case, only for a part of

is not possible for
the

simply to be
the
of
distributed
supermarkets,
the parties. Rather
according to the Commission investigation only the
largest supermarket chain would have this possibility
their volume.
and,
Virtually all fresh pork sold in Danish supermarkets is
distributed directly from the slaughterhouses to the
stores either by the Danish slaughterhouses or by
hauliers hired by the supermarkets. Therefore,
the
Danish supermarkets would have to invest in additional
refrigeration and distribution facilities in order to import
fresh pork.

(81) Second, all

fresh pork (foreign and local)

sold in
Denmark is subject to a veterinary control for a special
form of salmonella, namely Salmonella DT 104. The
parties have stressed that this test is not discriminatory.
However, no other country specifically tests this form of
salmonella. In addition, only in Denmark and Sweden
are there national programmes in place to contain
salmonella levels in pork (the programmes cover farms
importers (other than
and slaughterhouses). Therefore,
Swedish) face an increased risk, compared to the Danish
producers, of being caught positively by the Salmonella
DT 104 test as they do not routinely test for it in their
total production, nor do they have in place a general
salmonella reduction programme. The Salmonella DT
104 test is thus another barrier for imports of fresh
pork.

(82) Finally, Danish consumer preferences for Danish pork
are very strong. Danish supermarkets indicate the origin
of the meat on the product because they consider that
this is valuable information for their customers. This
consumer preference, based, inter alia, on confidence in
the strict Danish veterinarian regulations, makes
it
extremely difficult to convince consumers to purchase
imported fresh meat. In the view of a clear majority of
Danish supermarkets, and more than for any other meat
type, the origin of pork is a relatively important to very
important factor in the average consumer’s purchasing
decision. (see also Section VI.E.c below)

(83) At

the oral hearing the parties presented data from
Danish Crown showing that in the past, prices of fresh
meat have shown similar movements in countries such

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Official Journal of the European Communities

25.1.2000

(86)

hams,

fore-ends,

of middles,

as Denmark, Germany, Sweden and France. In particular
the parties presented graphs showing the quarterly price
development
and
tenderloins in Germany, Denmark, Sweden and France.
Furthermore, graphs were produced of
the monthly
price development of collarjoints, shoulders, and loins in
Denmark and Germany. Finally, a number of correlation
coefficients for those cuts between Danish prices and
prices in Germany, Sweden and France were presented.
Those correlation coefficients were in most cases higher
than 0,9. Those data according to the parties show that
wholesale prices for fresh pork products in different
countries show a marked tendency to move together
over time. This suggests, according to the parties, that
competitive
in line across
countries.

constraints keep prices

and

transported

the Commission recognises that

fresh
In conclusion,
internationally.
traded
is
pork
Therefore, as a matter of principle,
fresh pork from
other Member States could be offered to Danish
consumers through the Danish supermarkets. However,
as set out above it is also recognised that there are
barriers to imports which make it unlikely for imports
to have a competitive impact in the short term on the
Danish market for pork sold through supermarkets. This
is also evident from the fact that international price
fluctuations have not in the past resulted in any imports
into the Danish market.
than
considering the market for pork to be a Community-
wide market,
is more appropriate to consider the
Danish market for fresh pork sold through supermarkets
to be a separate relevant geographic market, and assess
the potential
imports under potential
competition (see below).

In conclusion,

impact of

rather

it

(84) The Commission does not agree that the data presented
by the parties are indications that the Danish market for
fresh pork sold through supermarkets is part of a wider
Northern European or Community market
for pork.
the data are only from Danish Crown and
First,
therefore do not necessarily represent the overall market
situation. Second, correlations are likely to reflect, at
least partly, the price development in common input
factors between countries, such as feed prices. Third, the
prices are to some extent based partly on sales to
processors as well as sales for human consumption
(retail and catering). Since for sales to processors the
market is wider than Denmark, this also explains some
of the correlation between Danish prices and prices in
other countries. Fourth, and most important, the Danish
prices are to a certain extent automatically correlated
with export prices owing to the way the Danish
slaughterhouses
stream.
optimise
revenue
the sales department of a
According to the parties,
slaughterhouse will always sell a given quantity of meat
wherever it will receive the best price. This creates an
incentive for the slaughterhouse not to sell at a cheaper
price in Denmark than on its export markets. Therefore,
prices in Denmark and on export markets would be
expected to move together.

their

(85)

In any event, in this particular case past movements in
prices cannot be taken as evidence that the geographic
is wider than Denmark for the purpose of
market
assessing the competitive impact of
the proposed
there are barriers to trade.
merger. As noted above,
Consequently, imports have only been around 1 % and
imports have not taken place in response to short-term
price differences between Denmark and other countries.
In conclusion, due to the existence of barriers to trade,
it is not credible that a higher price on fresh pork in
Denmark than, for example, in Germany would lead to
imports which would align Danish and German prices
in this short term. Therefore, it is more appropriate to
potential
assess
competition. It is noted that the Commission did not
find it likely that a dominant company on the Danish
market would be challenged by imports if it attempted
to maintain a higher price on the Danish market
compared to its export markets (see Section VI.E.c).

imports

impact

under

the

of

(d) Fresh pork (cid:151) farm sales and butchers

(87) Those markets do not extend beyond Denmark since
local private
they are mainly supplied by small
slaughterhouses. The parties are not active on the farm
sales market.

(e) Fresh pork (cid:151) the catering market

(88)

the

the

sector,

catering

they bought up to 20 % of

In
competing Danish
slaughterhouses consider that at least 85 % of the pig
meat sold to caterers is Danish. The larger caterers
indicated that
imported
meat, the smaller caterers somewhat less (1997 figures
resulting from the Commission’s market investigation).
The parties claim, on the basis of an estimate from their
own sales people and some contacts with some of the
larger catering-wholesalers that, at
the end of 1998,
imports accounted for around 50 % of total sales (17).
The origin of the meat is, according to wholesalers, a
relevant
the
caterers for pork, especially for government institutes
and hospitals for which it is very important. However,
none of the caterers indicated the origin of the meat to
faced any
the final consumer, and they had not
demands from their consumers to do so.

in the purchasing decisions of

factor

(89)

is not necessary for the purpose of

the present
It
assessment to reach a final conclusion on the relevant

(17) In the course of its investigation, the Commission has not been

able to confirm this figure.

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Official Journal of the European Communities

L 20/13

geographical market
even on the narrowest
geographic market, namely Denmark, the merger will
not lead to a dominant position.

as

(f) Fresh beef (cid:151) supermarkets

(90) The Commission investigation indicates that there are
strong consumer preferences in Denmark for beef of
Danish origin. A clear majority of
the responding
Danish supermarkets, including the two most important
supermarkets accounting for around half of the sales,
consider the origin of the beef a relatively important to
very
customer’s
purchasing decision for beef. This consumer preference
is also reflected in studies presented by the parties.
Furthermore, the BSE-crisis has had almost no impact
on beef consumption in Denmark. This can probably
also be attributed to the strong confidence of
the
Danish consumer in the Danish veterinarian system.

important

average

in the

factor

(91) However,

is

the

and

catering)

imported

the Commission’s investigation has shown
that some 24 % of the consumption of fresh beef (retail
and
responding
supermarkets sell around 20 % of beef of foreign origin.
Although supermarkets and wholesalers alike have
consumer
indicated
preferences for beef of Danish origin, they must import
beef because there is not enough high-quality Danish
beef (18), the imported meat is sold in the supermarket
at the same price and with the same presentation to the
are
consumer. This
alternatives for the consumer.

to indicate

despite

strong

those

tends

that,

they

that

meat to the final consumer, and they had not faced any
It appears,
demands from their consumers to do so.
therefore,
the catering
market is wider than Denmark.

the geographic scope of

that

(i) Sale of fresh meat to processors

(95) The Commission investigation showed that, in general,
meat processors can and do source their meat regardless
of its origin. The geographic market is, therefore, wider
than national.

(j) Processed meat products

(96) Although the origin of the processed meat products has
been raised as a choice factor for certain processed meat
products, consumer preference seems to be, overall,
much less important than it is for fresh meat. Also the
origin of the product is normally not indicated and even
where it is, such as the sale of Danish origin bacon in
the United Kingdom, it seems possible to exchange, to a
large extent, bacon of Danish origin with, for instance,
bacon of Dutch origin. Also in Denmark, supermarkets
sell processed meat products (on the basis of pork)
supplied directly by foreign processors and processed
meat products of Danish processors that contain meat
of non-Danish origin. The geographic market
is,
therefore, wider than national.

(92) On the basis of the above, it is appropriate to consider
that the relevant geographic market for fresh beef sold
through supermarkets is wider than Denmark.

(k) Collection of abattoir by-products

(g) Fresh beef (cid:151) farm sales and butchers

(93) Those markets do not extend beyond Denmark since
local private
they are mainly supplied by small
slaughterhouses. The parties are not active on the farm
sales market.

(97) Community legislation prohibits the export of high-risk
material. On the other hand, low-risk material may be
exported and there is some import of low-risk material
into Denmark.

(98) With regard to high-risk material, it can be concluded
that, for the purpose of this assessment, the geographic
market is at most Denmark.

(h) Fresh beef (cid:151) the catering market

(l) Conclusion

factor

in the purchasing decisions of

(94) The origin of the meat is, according to wholesalers, a
the
relevant
caterers for beef, especially for government
institutes
and hospitals for which it is very important. However,
In
imports are higher
addition, none of the caterers indicated the origin of the

supermarkets.

than in the

(18) This is said to be a consequence of the Danish cattle sector’s main
focus on milk production and not meat production, resulting in
less tender meat.

(99)

and the market

It can be concluded that the market for slaughtering of
live pigs
for high-risk material,
respectively, is at most Denmark. The market for fresh
pork sold through supermarkets is Denmark while the
for fresh beef sold through supermarkets is
market
considered to be wider
the
remaining products the geographic market definition
can be left open.

than Denmark.

For

L 20/14

EN

Official Journal of the European Communities

25.1.2000

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

A. OVERALL MARKET STRUCTURE

85 % of pork is exported). Foodane is a sales company
fully owned by Vestjyske Slagterier and ESS-Food is
owned by the three other cooperatives Danish Crown
(70 %), Steff-Houlberg (17 %) and TiCan (13 %).
In
addition to ESS-Food, export sales of
the two small
cooperatives are channelled through DAT-Schaub, Tulip
International
(a meat processing company owned by
Danish Crown) and their subsidiaries. In sum, the two
remaining cooperative slaughterhouses will depend for a
substantial part of their exports on the merged entity.

(100)

present Denmark

In 1960, 62 cooperative slaughterhouses existed in
Denmark. Over the years the number of cooperative
slaughterhouses has decreased as a result of mergers and
at
pig
has
slaughterhouses (i.e. Danish Crown, Vestjyske Slagterier,
Steff-Houlberg and TiCan). There are also 127 smaller
private slaughterhouses. The four cooperatives account
for 94 % of the slaughters of slaughter pigs, sows and
boars of Danish origin (19 153 000 pigs in 1997) (19).

cooperative

four

six times more pigs

(101) Danish Crown and Vestjyske Slagterier are by far the
leading slaughterhouses in Denmark.
In comparative
terms, they have a combined turnover which is almost
10 times larger than that of Steff-Houlberg and more
than 30 times larger than that of TiCan. In terms of
market share for the buying of live pigs, the parties
than Steff-
slaughter almost
Houlberg and 15 times more than TiCan. As
to
slaughter facilities, Danish Crown has 12 facilities and
located in the
Vestjyske Slagterier seven facilities, all
western part of Denmark. Steff-Houlberg has
two
slaughter facilities east of the Great Belt (Sealand and
Bornholm) and TiCan has one slaughter facility in the
to
north western part of Denmark. With respect
distribution,
and Vestjyske
both Danish Crown
Slagterier, as well as Steff-Houlberg, have their own
distribution systems covering Denmark while TiCan
does not have its own distribution system.

(102) Furthermore, Danish Crown and Vestjyske Slagterier are
vertically integrated for both pork and beef, in the sense
that they are also active in the downstream markets for
fresh meat, meat processing and meat
the sale of
In comparison, TiCan is much less vertically
trading.
integration in
integrated than the parties. The vertical
the private slaughterhouses and NV-OX stops at
the
cutting of the carcases of the slaughtered animals.

(103) Both parties

an important
also control or have
shareholding in a number of sales companies which,
apart from their own products, also sell products from
the
cattle
slaughterhouses, mainly to export markets such as the
rest of Europe, Japan and the USA.

competing Danish

other

and

pig

(104)

In this context it should be noted that, prior to the
merger, there were two main channels for the important
export business of the Danish pig cooperatives (around

(19) As indicated above, exports total 1,6 %. The remaining 4 % of
slaughters (798 000 pigs) are slaughtered in the 127 (cid:145)private(cid:146)
slaughterhouses, of which only nine are authorised to export their
meat.
those nine export-slaughterhouses slaughtered
550 953 slaughter pigs and the other 118 all together 220 312
slaughter pigs.

In 1997,

(105) Furthermore, as mentioned above,

the

cooperative
resulting from the merger will also acquire sole control
over a number of other companies in related markets
which the other (cooperative) pig slaughterhouses have
significant commercial relationships with: abattoir by-
products (daka), casings (DAT-Schaub) and packaging
materials, etc.
(SFK). Steff-Houlberg is a member of
DAT-Schaub and SFK while TiCan is a member of daka,
DAT-Schaub and SFK.

(106) Finally, Danske Slagterier

the

(Danish Bacon and Meat
four
is an association consisting of
Council)
cooperative Danish pig slaughterhouses whose overall
aim is to safeguard the interests of the cooperative pig
slaughterhouses. The board consists of 12 members of
which four members are the chairmen of
the four
cooperatives, and the other eight members are elected
on the basis of
the number of slaughters in each
cooperative. In 1998, Danish Crown had five members
(including the chairman), Vestjyske Slagterier had four
members (including the vice-chairman), Steff-Houlberg
had two members and TiCan one member. On that
basis,
the parties will clearly have the majority of
members following the merger.

(107)

In the Reply,
the parties have submitted that all
members of Danske Slagterier have minority rights in
the most
the
association, namely the Assembly of Delegates. No
the
decision can be passed without
majority of the delegates of at least two members.

important decision-making body of

the consent of

(108) First, it should be noted that without prejudice to the
said rule, decisions by the Assembly of Delegates are
the delegates are
adopted by simple majority. As
appointed by the members of Danske Slagterier
in
proportion to the number of pigs slaughtered in the
previous accounting year, the parties will control a clear
majority of the votes and have, therefore, the possibility
to block the adoption of any proposal. Secondly, the
powers of the Assembly of Delegates are limited to the
election of the accountant, the approval of the annual
accounts, the adoption of any submitted proposal, and
amendment of the Articles of Association and winding
up, which, however, requires a two-thirds majority.
Furthermore, the Assembly may at the proposal of the
Board of Directors elect two members of the Board of
Directors. If no such proposal is made, all members of
the Board are appointed by the members in accordance
with
the
abovementioned majority. The Board of Directors can
decide on all
issues. Decisions are taken by simple
majority. There is thus no minority protection at this

formula,

parties

giving

fixed

the

a

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Official Journal of the European Communities

L 20/15

level. Therefore, the parties have the power to adopt
the same time ensure that no
any decision and at
conflicting decision is adopted by the Assembly of
Delegates. Against this background, it is the view of the
Commission that the parties will be able to exercise
decisive influence in Danske Slagterier.

Authority,

(109) The activities of Danske Slagterier relate to the entire
supply chain from primary production to marketing.
Those activities include a national breeding programme,
which is at present being reviewed by the Danish
health
Competition
programmes, meat
the
industry
framework of the Danish Meat Research Institute, trade
and consumer information, and promotion of Danish
pork on export markets. The activities of Danske
Slagterier are funded from three main sources: a
statutory production levy on all slaughter pigs produced
in Denmark, a rebate from Danish land tax, and a
membership fee.

research within

veterinary

and

(110) Thus, Danske Slagterier provides essential functions and
constitutes a very important and integral part of the
the nature and
entire Danish pig sector. Moreover,
strong links and
extent of
create
those activities
cooperatives.
four
common interests between the
Following the merger, Danish Crown and Vestjyske
Slagterier will control Danske Slagterier and thus also
those activities of the main competitors, Steff-Houlberg
and TiCan, which are carried out by Danske Slagterier,
including the promotional activities on export markets.

(111) Furthermore, a national price quotation system has been
established within the framework of Danske Slagterier.
Thus, a Price Committee each week fixes a price per
kilo, which according to the agreement must be paid by
the four cooperatives to their members. This price is
calculated on the basis of
sales prices
obtained by the cooperatives. Every Wednesday, each
company reports the prices obtained for ham, middles
and fore-ends. The quotation is published each Friday
with effect for the following week. In addition, Danske
Slagterier
the
deduction for weight above or below the standard 67 to
78,9 kg for a pig and payment for meat percentage. The
Price Committee is composed of the chairman and the
managing director of each of the four cooperatives.

fixes other price parameters

the actual

such as

(112) The agreement establishing the national price quotation
system has been notified to the Commission by Danske
Slagterier. The agreement
to a
separate procedure under Article 85 of the Treaty. In
that context a warning letter has been issued.

is currently subject

(113) Given that the parties, after the merger, will be in a
position to control Danske Slagterier, they will also have
control over the price quotation system.

B. THE COOPERATIVE STRUCTURE

and

cooperative

can therefore prevent

(114) According to the parties, the farmers are in control of
any
the
exploitation of a dominant position vis-(cid:224)-vis themselves.
This would imply that the assessment of the competitive
impact of
the transaction on the farmers should be
excluded from the present assessment. In order to assess
this contention, account must be taken of the Danish
cooperative structure.

(115) Danish cooperatives are in general not subject to any
specific statutory company law and hence all relevant
provisions governing the activities of the cooperatives
are laid down in the Articles of Association of each
cooperative. The main characteristic of
a Danish
the farmer is both a co-
cooperative society is that
owner of and a supplier to the cooperative. The largest
members
total
supplies. A member is obliged to deliver all the animals
intended for slaughtering to that slaughterhouse on an
exclusive basis while the latter in turn is obliged to buy
the member’s production. The cooperative
100 % of
slaughterhouses
from non-
members even though this is rare for pigs (20).

significantly below 1 % of

can also buy animals

supply

as

cannot

leave his

cooperative

(116) Every farmer can become, on simple request, a member
of the cooperative for a particular species. However, a
member
easily.
According to the Articles of Association of Danish
Crown as well as Vestjyske Slagterier, members can
leave the cooperative with one year’s notice expiring on
1 April without any penalty. A farmer has, therefore, to
give 12 to 24 months’ notice before he can leave. This
notice can be withdrawn by the farmer up to three
months before the expiry of the notice (1 April). If he
rejoins, the farmer is tied back to the cooperative for
another full notice period.

(117) All members of a Danish cooperative receive the same
base price for their supplies, namely the price resulting
from the weekly quotation organised by Danske
Slagterier (see recital 111). In addition to this base price,
a member receives also a share of the overall profit of
the cooperative that
is paid out once a year. This
(cid:145)residual payment(cid:146) or (cid:145)bonus(cid:146) is set by the cooperative as
an amount of x DKK/kg for each kilogram of carcase
weight supplied by the farmer in the respective year.
The residual payment
for pigs has accounted in all
cooperatives, during the last years, for between 4 and
8 % of the total price per kg paid to the farmer.

(118)

In comparison and although there are some similarities
between the Danish cooperative structure and those in
other countries, the Danish system appears to impose

(20) Of

the four cooperatives, only Danish Crown received pig
deliveries from non-members in the years 1995, 1996 and 1997.
However,
(between 22 836 and
31 935 out of 9,5 million.)

the quantities were minimal

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Official Journal of the European Communities

25.1.2000

more constraints on the farmer. By way of illustration, a
Dutch slaughterhouse cooperative does not provide for
exclusive supply and there is no term of notice to leave
the cooperative. However, the cooperative is under an
obligation to buy what the members wish to supply. If a
the
member
cooperative, he is entitled to an annual bonus payment.
However, this payment is only a fraction of the bonus
payment
that the Danish cooperatives pay out (NLG
0,40 or +/ﬂ EUR 0,18 per pig compared to DKK 0,50
per kg or +/ﬂ EUR 5 per pig), and therefore it
constrains the farmer’s freedom to supply much less.

his whole

production

supplies

to

market shares have been very stable (21). The remaining
127 private slaughterhouses buy and slaughter 4 % of
Danish slaughter pigs and 1,6 % of Danish pigs are
exported.

(b) Actual competition

(119) The merged entity will have a total of some 30 000
members which means that the direct influence of the
individual farmer is limited. The members will belong to
one of a number of regional assemblies that, inter alia,
elect a total of 509 members to the committee of
delegates. Each farmer will have one vote. The
committee of delegates is the decision-making organ of
the cooperative, which appoints the members of the
board and decides,
inter alia, on the appropriation of
profits. Each member of the committee has one vote.
Decisions are taken by simple majority, except decisions
on amendment of
the statutes and merger, which
require a two-thirds majority. Therefore, the vote of one
member cannot be exercised directly, but only through
It would thus
a number of elected representatives.
appear that
farmer has no real direct
the individual
influence on the commercial conduct of the cooperative,
let alone control over it.

(122) The private Danish slaughterhouses are not realistic
to the new entity. The 118 small
alternatives
fewer pigs than the
slaughterhouses kill, on average,
Even the nine
typical Danish farmer produces.
to
slaughterhouses licensed to export are too small
constitute a serious alternative to the new entity, as the
largest of them accounts for only around 0,8 % of total
slaughters. Steff-Houlberg and TiCan will not be
sufficient alternatives to the parties in the future in
to avoid the creation of a dominant buying
order
position. Both companies are working at full capacity.
TiCan has had a waiting list for years and, in view of
the location of its slaughterhouse in the middle of a
town, it has limited possibilities to expand further. The
intake of new members by Steff-Houlberg following the
parties’
the
possibilities of this company to expand capacity further
with relatively modest investment levels.

to merge has

agreement

exhausted

(120) Furthermore,

the

owns

neither

the
cooperative
individual farmer nor does it assume any liability for his
operations. Hence,
farmers and the
the individual
cooperative constitute separate legal and economic
entities and thus the sale and purchase of pigs and cattle
are not done internally within one group. Therefore, it
is necessary for the purpose of the present assessment
also to take into account the buying position of the
merged entity vis-(cid:224)-vis the Danish pig farmers, including
cooperative members,
the
competitive impact of the transaction.

assessment of

in the

C. THE PURCHASE OF LIVE PIGS FOR SLAUGHTERING

(a) Market shares

(121) The new entity will buy 76 % of

the production of
In this
Danish live (slaughter) pigs (sows and boars).
the addition of market shares is substantial
context,
given that Danish Crown at the moment has a share of
47 % while Vestjyske Slagterier has a share of 29 %.
Their closest competitors,
the two other cooperative
slaughterhouses, have respectively 13 % (Steff-Houlberg)
those
and 5 % (TiCan) of

the market. Historically,

(123) The parties argue that capacity can be expanded with
limited costs (cost calculations have been provided) and
that capacity will be increased when raw material
supply is available. The Commission does not dispute
that capacity has increased in Denmark in line with the
increase in pig production. However, a distinction has
to be made between the obligation for the cooperative
slaughterhouses to increase their capacity to take on the
increased production of their existing members and a
capacity expansion to accommodate supplies of new
the
members. The latter increase will only occur if
receive
slaughterhouse can be certain that
increased supplies in the short to medium term. Given
that potential new members would normally be bound
they have previously been a
by a notice period if
member of another cooperative,
it is far from certain
that the slaughterhouse would receive the supplies in
question once the capacity has been increased. Such an
investment would involve a considerable risk since it
would involve important sunk costs.
It can in this
respect be noted that pig production in Sealand, the
decreased
(cid:145)home
proportionally compared to Denmark as a whole. This
reduction
now been
indicated
(cid:145)compensated by the
approximately 600 000 pigs
produced by members who used the opportunity to
in the
leave Danish Crown or Vestjyske Slagterier

Steff-Houlberg,

it will

above,

base(cid:146)

has,

has

of

as

(21) Based on data submitted by the parties, the changes have at most
been 4 % in an individual company’s share (including market
shares of pre-merger companies) over a 10-year period.

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Official Journal of the European Communities

L 20/17

two-week period following the announcement of the
merger to join Steff-Houlberg. Those additional supplies
have exhausted the possibilities of Steff-Houlberg to
increases capacity at relatively modest investment costs.
It is, therefore, unlikely that Steff-Houlberg will increase
its capacity further to an appreciable extent in order to
accommodate supplies of new members.(cid:146)

(124)

In conclusion, the competitors currently present on the
market will not be able to prevent the creation of a
dominant position.

different
It would,
framework to the Danish system.
therefore, be a major decision for a Danish farmer to
enter into the German system. Due to the uncertainties
and risks associated with such a decision, it is unlikely
that
the German market will become an attractive
alternative. Even the cooperative farmers who would
want
remain
considerably hindered in their opportunities to do so in
view of the exclusive supply obligation and the long
notice period.

the German market will

to (cid:145)test(cid:146)

(c) Potential competition

(d) Conclusion

(and represent 94 % of

(125) One of the effects of the exclusive supply obligation
imposed on the farmers who are members of
the
cooperatives
the Danish
is that other Danish as well as
production of pigs)
foreign slaughterhouses may
from
obtaining supplies, or increasing present supplies of
Danish live pigs because the farmer can only deliver to
his respective cooperative. Only if he terminates his
the
membership, can he export, deliver
private slaughterhouses or deliver to one of the other
Danish cooperatives (provided that
they have excess
capacity). And the termination of the membership will
take between 12 to 24 months.

to one of

foreclosed

be

(126) Furthermore, if the farmer were to switch, that would
involve certain costs. Delivering to a Danish cooperative
as a non-member means that the farmer foregoes the
annual profit share (4 to 8 % of
total payments to
In practice, the farmer will thus be faced
members).
with the
remaining a member of his
choice of
cooperative or of exporting everything to Germany (the
cooperative Swedish Meats, accounting for 70 % of
slaughters in Sweden, does not buy imported pigs). It is
therefore not surprising that exports of live slaughter
pigs from Denmark are so limited in spite of relatively
long periods of consistently higher prices in Germany,
where the slaughterhouses at present operate below full
capacity utilisation. Consequently, for the vast majority
of Danish pig farmers there are no real alternatives
other than to remain a member of their cooperative.

for

(128) On the basis of the above, the Commission considers
the merger would lead to the creation of a
that
dominant position on the Danish market
the
purchase of live pigs for slaughtering. The concerns that
the Commission identifies with regard to the creation of
this dominant position do not relate to the possibility
for the parties to extract monopsonistic profits from
their suppliers as such profits would be shared out back
the (cid:145)residual
to the farmer-members in the form of
(cid:145)bonus(cid:146). The Commission’s
payment(cid:146) or
concerns
actually relate,
inter alia, to: (a) the parties’ control of
innovation in the Danish pig industry; (b) the reduction
of choice for the farmers; and (c) the possibility for the
parties to drive private slaughterhouses out of business.
This latter strategy would enable the parties to capture
the private slaughterhouses’ market shares both on the
Danish market for fresh pork sold through supermarkets
and on the market for the purchase of live pigs.

(129)

In recent years there has been a trend towards more
innovation in product development involving breeding
pigs, animal feed, etc. This should be seen against the
background that consumers demand a larger variety of
products
than
previously. The parties have indicated that they are at
the forefront of product innovation in Denmark with
products for export as well as for the home market and
that there is no reason why they should deviate from
this strategy.

products)

example

organic

(for

the

that

export

infrastructure

(127) The parties have indicated that Danish cooperative pig
farmers are very well informed about live pig prices in
(transport
Germany,
companies who also act as middleman) is in place and
term could be
that delivery contracts of a longer
negotiated. The underlying idea is,
that
therefore,
exports to Germany should be considered as a realistic
form of potential competition. However, the German
market is to a very large extent a (cid:145)spot market(cid:146). The
German slaughterhouses thus have to compete by way
of their (weekly) prices for deliveries with neighbouring
slaughterhouses and the farmers will thus decide who to
supply on the basis of those prices. This is a completely

(130) However,

for

control

specific

achieve

schemes

the parties will

over
innovation in the Danish pig industry. Pig cooperatives
the
that wish to introduce
production of speciality pigs (organic pigs, free-range
pigs, and so forth) need to have the price rules for the
payment of such pigs approved by the Board of Danske
Slagterier. The parties’ control of the Board gives them,
control over
therefore,
innovation in the Danish pig industry. In view of the
Danish consumers’ preferences
for meat of Danish
origin (see below), this could lead to less innovation
addressed to the specific needs of the Danish market. In
some Danish
can be noted that
this

the possibility to achieve

respect,

it

L 20/18

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Official Journal of the European Communities

25.1.2000

supermarkets have, in the past, initiated direct contact
to
with farmers (outside the cooperatives)
develop
of
supermarkets.

in order
specifications

new products

the

to

Slagterier,
the cooperatives are obliged to follow its
including the weekly price quotation.
settlement rules,
Those rules, which are adopted by the Board of
Directors of Danske Slagterier, provide that all members
are paid the weekly quotation and that non-members
cannot be paid more than the quotation.

(131) Furthermore,

If one of

the merger will significantly reduce

the
choice of the farmers. Prior to the merger a farmer had at
least the choice of supplying either Danish Crown or
the
Vestjyske, both based on Jutland.
cooperatives were to become less profitable than the
others or if a (substantial) minority of
the members
were otherwise dissatisfied with its commercial strategy,
they would have the possibility of
terminating their
membership and joining another cooperative. Following
the merger, a substantial minority of the members of
the new entity would in effect have no alternative. As
indicated above, the two remaining cooperatives, Steff-
Houlberg and TiCan, both run at full capacity and have
waiting lists and the private slaughterhouses are not a
real alternative. Following the merger, existing members
would therefore be effectively locked into the new
entity.

for

the

fresh

domestic market

(132) The 127 private slaughterhouses, which collectively
slaughter 4 % of Danish pig production, hold less than
40 % of
pork
consumption (retail plus catering). The nine export-
licensed slaughterhouses, accounting for three quarters
of the production of the private slaughterhouses, depend
on a very limited number of farmers for their supplies.
those limited product
By capturing a proportion of
volumes,
the new entity would be able both to
substantially increase its share of the domestic market
for fresh pork and to increase its market share at the
buying level. It should be noted that: (a) deliveries from
such suppliers are the only way in which a cooperative
can attract new supplies of Danish pigs in the short
term, since all other farmers are tied to a cooperative;
and (b) capacity utilisation is very important in terms of
profitability, making the private slaughterhouses all the
more vulnerable if one of their few important suppliers
fall away. Furthermore, by offering contracts to such
non-members for the production of speciality pigs, the
new entity could pay a higher price to those producers,
in
without having to increase its purchase prices
the same time address specific and
general, and at
increasing demand in the market
for such products,
without destabilising the cooperative structure of the
company.
It would therefore appear to be a rational
strategy for the new entity to exercise its economic
power on the market for the purchase of live pigs for
slaughtering by offering higher prices to farmers who
currently
private
slaughterhouses, depriving them of
their commercial
basis and thereby driving the latter out of business.

economically weak

supply

the

It

is

letter has been issued.

(134) However, the Commission does not consider that the
settlement rules necessarily and effectively preclude a
differentiation of the price paid to the farmers. First of
all, as mentioned above, the settlement rules including
the weekly price quotation have been notified to the
the Treaty and a
Commission under Article 85 of
warning
therefore
questionable whether those rules can provide a valid
basis for the argument put
forward by the parties.
Furthermore, the Articles of Association of the parties
merely refer to the settlement rules. The settlement rules
themselves are adopted by the Board of Directors of
Danske Slagterier and may be amended by the Board
without necessitating an amendment of the Articles of
Association of Danske Slagterier. It should be recalled
that the parties appoint a clear majority of the members
of the Board of Directors. The parties can thus amend
the settlement rules at any time. Under the current
settlement
to
rules a slaughterhouse may,
approval by Danske Slagterier
(the Board) conclude
special contracts for the production of certain types of
pigs and pay the farmer a supplement in addition to the
weekly quotation to compensate him for the additional
cost of producing such pigs. The parties claim that such
contracts
as
otherwise they would receive a price exceeding the
weekly quotation,
the supplement not
only covers actual costs but also includes an additional
interpretation is to be
that
price incentive. Even if
accepted,
be
settlement
the present
amended, allowing such contracts to be granted to non-
members,
to be in their
commercial interest to do so. Finally, it is not obvious
why it would not be in the interest of the members to
accept the payment of a premium to non-members in
if by doing so, the cooperative could
the short term,
increase its market share on the Danish market to the
benefit of all members.

cannot be offered to non-members,

the parties considered it

implying that

subject

could

rules

if

D. THE PURCHASE OF LIVE CATTLE FOR SLAUGHTERING

(a) Market shares

(133)

to farmers

In the Reply, the parties submitted that it would be
contrary to the Articles of Association to offer higher
prices
currently supplying private pig
slaughterhouses and that in fact none of the members
of the parties would accept non-members being offered
such contracts. More specifically, the parties argue that,
according to the Articles of Association of Danske

(135) As indicated above, even if

the relevant geographic
market is limited to Denmark, the merger would not
lead to a dominant position as a result of which
effective competition would be significantly limited in a
substantial part of the common market.

(136) The parties will buy, as a result of the merger, 58 % of
Danish live cattle for slaughter. The addition of market

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Official Journal of the European Communities

L 20/19

by

supplies

(cid:145)guaranteed(cid:146)

shares is substantial given that Vestjyske Slagterier at
present accounts for 36 % of the market while Danish
Crown has a market share of 22 %. As 45 % of supplies
of cattle to Danish Crown are made by non-members,
the
cooperative
parties’
for 48 % of Danish live cattle for
members account
slaughter. The nearest competitors slaughter 9 % and 8 %
of Danish live cattle for slaughter respectively. The
competitor with 8 % is NV-OX with whom the parties
are in merger negotiations. If the merger with NV-OX
goes through, the parties would increase their market
share by a further 4 to 5 % accounted for by the direct
to the slaughterhouse by the cooperative
supplies
non-members (22).
other
members
slaughterhouses with an export licence have a market
share of between 1 and 3 %. The remaining 10 % of
slaughters take place at non-export slaughterhouses and
farm slaughters. Steff-Houlberg and TiCan do not have
cattle slaughter activities.

The

and

six

(b) No significant limitation of effective

competition even on a Danish market

(137)

It is acknowledged that the other cattle slaughterhouses
all have market shares below 10 % and that all, with the
exception of NV-OX, are private slaughterhouses (23)
with the competitive disadvantage that their supply is
less secure than that of
the parties which can rely
heavily on the guaranteed supplies from their members.

compared

consumption is

to only 6 % of

(138) However, cattle production in Denmark is decreasing
and expected to continue to decrease. On the other
hand,
stable. The private Danish
slaughterhouses have access to half of the Danish cattle
production that is accounted for by non-members of a
cooperative,
the pig
production. From the perspective of the farmers, it can
be concluded that the non-members supplying cattle to
a cooperative and the individual cooperative cattle
farmers (or a substantial minority (24) of them) have a
viable alternative in selling their production on live
cattle markets where currently 20 % of cattle are already
sold (and typically bought by private slaughterhouses,
supermarkets and possibly exporters) (25) or directly to
the private slaughterhouses.

(22) The parties have indicated that

in the
the supplies that are purchased on live cattle

they have no interest

remainder of
markets.

(23) In fact, the slaughterhouse with a market share of 9 % is a public

slaughterhouse.
(24) The majority of
cooperative.

the farmers can change the policy of

the

(25) In the course of the Commission’s investigation, concerns were
raised that the parties would buy up all the high-quality Danish
cattle, and thereby foreclose the access to raw material. However,
the Commission considers that this is not realistic in view of the
fact that foreign beef is an alternative on the Danish fresh beef
market
fresh beef would
constrain the parties in their pricing policy to Danish farmers for
live cattle.

(see below). Therefore,

imports of

(139)

(140)

In addition, one of the larger Danish supermarkets is
It purchases itself Danish
also active in this market.
cattle on the cattle markets and has them contract-
slaughtered at
is also
directly involved in contract-production of calves.

the private slaughterhouses.

It

is,

therefore, concluded that, even if

It
the relevant
geographical market is Denmark, the merger would not
lead to a dominant position as a result of which
effective competition would be significantly limited.

E. DANISH MARKET FOR FRESH PORK SOLD THROUGH
SUPERMARKETS

(a) Market shares

(141) The parties estimate that the total Danish fresh pork
market (retail plus catering) is at least 111 000 t. The
Commission subsequently attempted to verify this figure
and to establish the main sources of uncertainty
affecting
estimate. The Commission’s market
investigation confirms that the figure of 111 000 t is a
realistic
total Danish fresh pork
consumption.

estimate of

the

the

(142) The parties have expressed doubts as to the reliability of
parts of the calculation concerning sales of fresh pork
in
final consumption (see the table at Annex),
for
particular with regard to the estimate that imports in
supermarkets account for only 1 %. In particular, they
questioned whether
correctly
allocated the estimated total imports of 42 000 t pork
in Denmark in 1997 over the different markets and
whether the Commission has included in its calculation
certain information which the parties obtained from
several supermarket chains.

the Commission has

(143) The Commission’s market

to

some

supermarket

chains plus

all
questionnaires
to all meat wholesalers

investigation consisted in
Danish
sending
out
slaughterhouses,
(including
importers and (cid:145)cutters(cid:146)) known by the parties and to all
the major
smaller
supermarket chains. A limited number of questionnaires
has been sent to Danish meat processors and Danish
meat exporters. This has enabled the Commission to
estimate: (a) the total sales of pork of Danish origin over
the different
total
purchases by supermarkets (Danish and imported meat);
and (c) sales through caterers and butchers. 20 500 t
sales of fresh pork to butchers have been reported by
the cooperative slaughterhouses, a butcher association’s
private
wholesaler
the
slaughterhouses
replies of
the
figure of 20 500 t has been halved in the table in the

(based on the extrapolation of
the private slaughterhouses). However,

retail and catering markets;

(Mesterslagteren)

and

the

(b)

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EN

Official Journal of the European Communities

25.1.2000

Annex in view of double counting with regard to the
Mesterslagteren’ sales and in view of the fact that a
substantial part of the meat sold to butchers is further
processed by them. Indeed, the highest estimate of sales
by butchers is that they account for 10 % of total retail
sales. Also the meat resulting from (cid:145)contract-slaughters(cid:146)
by the private slaughterhouses for the owner of the
animal where the meat would be consumed by the
owner (or sold as (cid:145)farm sales(cid:146)) and the sales by the
cooperative slaughterhouses to their employees have
been taken out of the total 111 000 t.

(144) On the basis of the replies of the parties, the other
cooperative slaughterhouses, the private slaughterhouses
(extrapolation), the wholesalers and the supermarkets, it
can be concluded that supermarkets sell at least some
76 300 t of fresh pork. Sales of pork of foreign origin
the Danish
account, on the basis of
the replies of
supermarkets,
for less than 1 % (volume and value).
Based on the assumption that the total market accounts
for 111 000 (26), that catering accounts for 15 % and
that butchers account for around 10 % of retail, total
for 84 350 t. The
supermarket sales would account
Commission considers that it is reasonable to assume
that the purchases of supermarkets that did not reply to
the Commission’s questionnaires and from wholesalers
that did not reply to the Commission’s questionnaires
account for the (cid:145)missing(cid:146) 8 050 t (27).

(145) As the Commission’s market investigation did not focus
on imports by meat processors and meat exporters
(who also re-export meat
the
Commission cannot allocate the total estimated imports
of
trade
fresh pork in Denmark over the different
responding
imports
channels. However,
supermarkets, covering small, medium-sized and large
supermarket chains, account for 1 % of their total fresh
pork sales (28).

they imported),

that

the

by

(146) On the basis of the above methodology, it is estimated
that Danish supermarkets sell around 84 350 t of pork.
The parties will account for a market share of around
40 % (direct and via wholesalers). The addition of
market
important: Danish Crown [20 to
25 %] (*) and Vestjyske Slagterier [15 to 20 %] (*).

shares

is

(26) This estimate is considered reasonable on the basis of the total
sales by Danish slaughterhouses over the different channels and
indications as to the levels of
imports in supermarkets and
caterers.

(27) The Commission has not approached the individual supermarkets
belonging to (cid:145)central buying(cid:146) organisations that were unable to
indicate the amounts of pork sold through their shops. However,
this segment has not been omitted from the figures as, apart from
the 8 050 t, sales by Danish slaughterhouses and responding
wholesalers to those shops are included in the reported 76 300 t.

(28) With regard to specific doubts expressed by the parties,

the
Commission can confirm that
sales by Edeka and Aldi are
included in the 76 300 t reported sales. Also, the Commission’s
investigation has confirmed that sales to FDB are larger than the
estimate of
through the whole
for
organisation, including the independent cooperative retailers.

their buyer

sales

the

(b) Actual competition

([less

(147) As a result of the merger, the supermarkets will only
the other
have one other main alternative supplier,
cooperative, Steff-Houlberg, which accounted in 1997
for less than 30 % of their purchases. Furthermore,
it
should be noted that
the third major cooperative
slaughterhouse TiCan does not constitute a real supply
than 5 %] (*)
alternative to the supermarkets
market share). TiCan only has a small product portfolio
compared to the other cooperatives which only allows it
to compete on the Danish market in the local market of
north west Jutland and its supplies to (cid:145)retail-wholesalers(cid:146)
slaughterhouses
are also limited. The 127 private
together account for less than 30 %. Although some of
the larger of those slaughterhouses can to some extent
serve as a third, fourth or fifth supplier to local outlets
of a particular supermarket chain, none of them has the
necessary volume, cutting, packaging or distribution
facilities to enable them to compete on an equal basis
with the parties. Actual competition will, therefore, only
come from Steff-Houlberg. The merger will, therefore,
result in the creation of a duopoly consisting of the
parties and Steff-Houlberg, which together will have
about 70 % of the market.

the Commission, no major

(148) The Commission considers that it is unlikely that Steff-
Houlberg will be able to further increase its market
share as a result of the merger, since to the knowledge
of
supermarket has
previously had only Danish Crown and Vestjyske
Slagterier as their main suppliers. Accordingly, Steff-
Houlberg will not be able to attract new customers who
want
a
to maintain a multi-sourcing policy
consequence of the merger. Furthermore, Steff-Houlberg
the
already has,
slaughtering level (13 % of all slaughtered pigs), a very
strong position in the home market. It is also located on
Sealand, close to the major population area in Denmark
(Copenhagen) where it has a very strong position.

its overall position at

in view of

as

(149) The Commission has

examined the

future
competitive relationship between the parties and Steff-
Houlberg. As set out below, rather than a competitive
duopoly, the operation is more likely to lead to the
creation of a duopolistically dominant position, where
the duopolists together have about 70 % of the market.

likely

(c) Potential competition

(150) The Danish slaughtering sector has undergone

a
consolidation process over the last 40 years leading to a
higher and higher concentration of the sector. There
have been no significant new entrants to the industry
other than small scale entries (a butcher requesting his
slaughter permission). Furthermore, as a result of the
operation the parties will effectively control access to
the necessary raw materials owing to the structure of
the cooperatives (see the market for purchasing live pigs

25.1.2000

EN

Official Journal of the European Communities

L 20/21

above). It is, therefore, unlikely that there will be any
new entrants in the future.

Distribution

(151)

Imports are the most
important source of potential
competition. The Commission has, therefore, examined
the possibility for slaughterhouses in countries such as
Germany,
Sweden to start
exporting pork to Denmark for sale through the Danish
supermarkets. The Commission found that there are a
number of barriers to such imports.

the Netherlands

and

Adaptation of
specifications

the supply of pigs and cutting to Danish

(152) On the production side, to start exporting to Denmark,
non-Danish slaughterhouses would need to adapt their
supply of pigs to the type of pork demanded on the
Danish market. They would also need to train their
personnel
to Danish specifications. Moreover,
cutting to Danish specifications would require non-
Danish slaughterhouses to re-optimise their production,
since cutting to Danish specification will have some
impact on the cutting of products for other purposes
and markets (29).

to cut

(153) The parties have argued that (cid:145)there are no significant
differences between Danish pigs and pigs reared in
other Northern European countries. It is not relevant to
consider any difference in slaughtering weight between
countries since it is very easy for producers to adjust
weight by altering the length of the fattening period by
a few weeks(cid:146). (Reply, p. 36.) Furthermore, the parties
have argued that (cid:145)foreign slaughterhouses can readily
switch sales to the Danish segment in response to a
increase in Danish fresh pork
small but permanent
prices(cid:146). According to the parties this is also in line with
the responses from foreign slaughterhouses, for example
the Commission during
Dumeco
its market
to
investigation:
(cid:145)Cutting to Danish specification (and
breeding of special pigs for the UK bacon market) is no
problem if necessary volume can be reached(cid:146). (Reply, p.
100.)

(154) The Commission recognises that it would be possible
for pig farmers to adapt their breeding of pigs to the
specific requirements of particular markets. Moreover,
export-oriented
the
their
companies
production to Danish specifications. However, for this
to be economically viable, the necessary volume needs
to be achieved.

recognises
as Dumeco

Commission
such

that
could

adjust

(29) Put in simple terms cutting meat is not only a matter of cutting to
a certain specification, but also how to use the cut off pieces.
Cutting to Danish specifications may,
therefore, change the
composition of the (cid:145)by-products(cid:146), which will, therefore, require a
certain re-optimisation of the sales mix, but possibly also the
scheduling on the cutting lines and the types of pigs slaughtered.

(155)

(156)

to

directly

distribute

from its

distributed

In Denmark pork sold through supermarkets is, with
from the
few exceptions,
slaughterhouses to the individual stores through the
distribution systems of the parties. Among the Danish
supermarkets only FDB would currently have
the
logistic facilities in terms of refrigeration capacity and
distribution
pork
trucks
centres (30). According to the parties, FDB at present
undertakes own distribution for about 40 % of the pork
sold in FDB stores via its own distribution centres, while
the remainder is accounted for by direct distribution
stores.
from the slaughterhouses
Consequently, in Denmark the overwhelming volume of
pork sold through supermarkets is distributed directly
from the Danish slaughterhouses to the individual stores
through the distribution systems of the slaughterhouses.
The supermarkets, therefore, depend to a large extend
on the slaughterhouses for distribution of fresh pork.

to the individual

as

to

have

non-Danish

slaughterhouse

In terms of distribution the most obvious possibility for
a
its meat
distributed in Denmark would be to deliver it to the
distribution centres of major Danish supermarket
chains. However,
the Danish
set out
system of direct
supermarkets mainly rely on a
distribution from the slaughterhouse to the individual
stores.
this possibility does not
exist. For imports to have an impact on the market,
distribution would have to be arranged. This would
imply either the creation of a distribution system or the
creation of additional distribution facilities by the
supermarkets.

In reality,

therefore,

above,

Hjemmemarkedsselskabet

(157) The parties have argued that it would be easy for a non-
Danish slaughterhouse either to set-up a distribution
system for the Danish market by contracting directly
with independent hauliers or by arranging distribution
or
through
(cid:145)wholesalers with terminal facilities, who could also offer
a viable alternative for some suppliers(cid:146). (Reply p. 57.)
However, Hjemmemarkedsselskabet Danmark is owned
by the main dairy cooperative, MD Foods, and the
system is mainly focused on dairy products. As far as
the wholesalers
those distribution
are
facilities are more scattered and limited.

concerned,

Danmark

Controls for salmonella DT 104

(158) The additional veterinary control

for salmonella (DT
104) on imported pork makes it less attractive for non-
to Denmark. More
Danish slaughterhouses to export
such as
importantly,

the main potential exporters

(30) According to the parties, Dansk Supermarket would also have this
possibility for about one third of its volume. This was not borne
out by the Commission investigation.

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Official Journal of the European Communities

25.1.2000

are

the

exports

increases

currently

costs of

and the Netherlands

Germany
less
advanced in actions aimed at a general reduction (31) of
all types of salmonella and they do not have specific
veterinary controls for salmonella DT 104. Obviously,
this
to Denmark
compared to exports to other countries. Furthermore, it
involves an increased economic risk compared to that
borne
general
by Danish slaughterhouses, where
salmonella reduction plans are well advanced and
specific DT 104 tests are routinely done. The importers
thus face, in general, a greater risk that they will not
pass those controls with the consequence that the whole
shipment of pork, which may already to some extent
have been distributed to the
to be
withdrawn.

stores, has

(159) The Swedish producers are quite confident that they
in their production.
have salmonella under control
However, the largest Swedish producer, Swedish Meats,
has stated at the oral hearing that its potential exports
to Denmark will be niche products in view of the fact
that
their production costs are higher than those of
Danish producers.

Consumer preferences for Danish meat

(160) Third parties have

is a major barrier

stated that Danish consumer
preferences for Danish pork are very strong, and that
to selling imported pork.
this
According to the parties consumer preferences are not
that strong. In particular the parties have presented two
studies showing that there is a group of consumers who
do not put any emphasis on the country of origin in
their purchasing decision:

(cid:151) the objective of the first study (cid:145)Den Danske Gris (cid:151)
forbrugerholdninger til svineproduktion of svinekłd(cid:146)
by GfK was to analyse consumer attitudes to the
Danish pig and in particular the factors on which
consumers
purchasing
ecological pork. The study is based on panel data
from 1 022 households. This study shows that there
is a group of consumers encompassing about 23 %
of all households which are more price-sensitive and
are not happy with Danish pigs. Those households
are not heavy consumers of pork,

emphasis, when

put

(cid:151) the second study (cid:145)Consumer choice criteria, when
buying meat(cid:146) by AIM Nielsen is based on interviews

with 929 people. The objective of the study was to
analyse which criteria consumers emphasise when
buying meat. The study was produced for
the
purpose of the current proceedings and, therefore,
not prepared in the normal course of business for
the adoption of business decisions (32). In any event,
according to this
is a group of
consumers of about 20 to 25 % which attaches little
or no importance to the country of origin of pork.

study there

(161)

In the SO the Commission stated that
from those
studies it can be concluded that it is possible that there
is a group of Danish consumers who do not place any
great emphasis on the country of origin in their
purchasing decisions concerning pork.

(162) The parties contend in the Reply (p. 63)

very

in a

strong

that those
surveys support the view, (cid:145)that national preferences are
not
significant proportion of
consumers(cid:146). However, even supposing that 20 to 25 %
of consumers attach little or no importance to the
country of origin of pork, it is not possible, as was said
in the SO, to conclude on this basis that it is, therefore,
commercially viable to import pork to the Danish
market. The relevant question in this respect is whether
in the overall population of
consumer preferences
is
sufficiently weak that
is
Danish consumers
commercially viable for a potential competitor to enter
the Danish market through imports of non-Danish pork.
None of the studies answer this question.

it

(163) The studies presented by the parties cannot, therefore,
it would be a simple
be accepted as evidence that
matter to sell imported pork in a commercially viable
way on the Danish market. On the contrary real market
evidence from Danish supermarkets suggest that it is
extremely difficult to sell imported fresh pork to Danish
consumers. On the very few occasions, when it has
been tried, it has almost always only been possible to
sell
imported pork at a heavily discounted price.
Therefore, imports are not realistic in the face of a small
but significant price increase. Furthermore, according to
Danish supermarkets the consumer preferences are so
strong that they would not even consider advertising
imported pork. In this respect it is of course obvious
that a decision to start to import pork cannot only be
some consumers may not
based on the fact
consider the country of origin to be important in their
purchasing
only
decisions. A supermarket
commercially defend a decision to start imports, which
will require additional distribution logistics, shelf space
and advertising, if it believes that a sufficient volume of

that

can

(31) There

are no countrywide

and the
Netherlands aimed at reducing salmonella.
In Germany some
regions have a test project going on and in the Netherlands there
are voluntary programmes in some slaughterhouses.

in Germany

actions

(32) See also point 41 of the Commission notice on the definition of
relevant market for the purposes of Community competition law
(OJ C 372, 9.12.1997, p. 5).

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Official Journal of the European Communities

L 20/23

sales could be achieved. This is not expected to be the
case, even in the face of a small and non-transitory, but
significant, price increase in Danish pork compared to
non-Danish pork.

barriers create a situation making it unlikely that
imports would take place in response to a small but
significantly
on
higher
neighbouring geographic markets.

in Denmark

price

than

(164) The parties consider

that

the Commission has put
undue weight on the submissions from supermarkets,
and that the Commission is not in compliance with its
obligation to be objective as regards its burden of proof.
However, the Commission has carefully examined what
weight to put on the statements of supermarkets. In this
respect the Commission does not see why it should not
believe supermarkets when they say that past attempts
to import pork have proved that it is very difficult to
is heavily discounted.
sell
is
Furthermore,
that
contradictory
(cid:145)the
supermarkets have a vested interest in maintaining the
present imbalance of negotiations with the supply side(cid:146).
(Reply, p. 59.) There is no reason why the supermarkets
should have an interest
in maintaining the current
supply structure, if they had alternatives to the parties
readily available.

the Commission
the parties
for

imported pork unless

to claim that

finds

it

it

(165) The parties have argued that there are large imports of
tenderloins to the Danish market. Apparently this is
explained by the fact that the Danish exporters prefer to
sell their tenderloins on overseas markets. As far as the
Commission is aware none of the major supermarket
chains sell imported tenderloins to any large extent.

(166) Moreover,

the

the

and

pigs

breeding

the parties believe

that neither Dansk
Supermarked or FDB have until now mounted a full-
scale attempt to market imported pork (Reply, p. 59).
Furthermore, the parties have argued that the fact that
Denmark imports beef, poultry and lamb and pork to
caterers (Reply, p. 62)
is evidence that imports could
also take place over time for pork. The Commission
recognises that it is technically possible for importers to
cutting
of
change
specifications, to ensure compliance with the salmonella
DT 104 test, to arrange distribution and possibly over
time also to change consumer preferences sufficiently
for imports of pork to become commercially viable.
a
Therefore,
determined effort by importers or the supermarkets
could over time lead to more imports of pork. The
Commission believes that the example of beef shows
that this could be done. In this respect it is important to
note that imports of beef have only been undertaken in
response to a shortage on the Danish market of Danish
beef. Furthermore, even if it was decided, for example
by supermarkets, to undertake such an effort, then this
could only be undertaken over time and at substantial
cost, which would have to be paid by the supermarkets
and eventually the Danish consumers. Such costs are a
direct
on
of
competition on the Danish market of this merger.

the Commission also believes

consequence

negative

impact

that

the

(168)

In particular it should be noted that a potential importer
would have to make substantial investments in order to
enter the Danish market. Part of
those investments
would represent sunk costs. First, a potential importer
would need to invest in the creation of the physical
facilities for selling on the Danish market. In this respect
the importer would need to create cutting lines for
Danish specifications, distribution facilities
the
Danish market would have to be arranged (either by the
Danish supermarkets or the importers), and over time
its production
the importer would have to adapt
systems in order
failing the
salmonella DT 104 test.

to reduce the risk of

for

(169) Second, a certain marketing activity would be necessary
in order to convince a sufficient number of Danish
to buy imported pork. This marketing
consumers
activity would have to be undertaken either by the
supermarkets or the non-Danish supplier or by both in
combination. A large part of those marketing activities
would be sunk costs. Such marketing activities would
have to be undertaken in the knowledge that a large
majority of Danish consumers have a preference for
Danish pork and in the knowledge that the existing
Danish suppliers would have an interest in retaliating
for example through
against such an entry attempt,
targeted
the Danish
promotional
market (33).

activities

on

(170) Consequently,

the Commission finds it unlikely that
in
non-Danish meat would enter the Danish market
reaction to a small but
significant price difference
between Denmark and neighbouring countries. On the
that
contrary
supermarkets would simply pass on the higher prices to
the consumers in view of the price-inelastic demand.

Commission

likely

finds

the

it

(d) Countervailing buyer power

(171) The parties have argued that

the supermarkets have
countervailing buyer power. The Commission recognises
that the demand side is relatively concentrated in the
Danish market
fresh pork with the two main
supermarket chains, Dansk Supermarked and FDB,
accounting together for about 50 % of the sales of fresh
pork. In particular, the parties claim that the fact that
the supermarkets achieve special conditions outside the

for

(167)

In conclusion, none of
taken
individually constitute insurmountable barriers to the
through
fresh
Danish market
the
the cumulative effect of
supermarkets. However,

factors

above

pork

sold

the

for

(33) Those activities can be undertaken with state aid (the statutory
production levy on all slaughter pigs produced in Denmark,
managed by Danske Slagterier).

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25.1.2000

normal contractual relationship such as reductions from
that FDB and Dansk
the
Supermarked have countervailing buying power.

list price are

evidence

(172) The Commission is

the

that

that

the fact

two main
aware
supermarket chains are able to purchase under more
favourable conditions than smaller chains and stores.
However,
the big chains are able to
purchase under more favourable conditions than the
small chains does not necessarily imply that the big
chains have enough countervailing power to remove a
dominant position. In the present case it is in particular
noted that the parties will be much less dependent on
the supermarkets than the supermarkets will be on the
parties, since the parties have alternative outlets for their
pork on the export markets, whereas the supermarkets
will have no alternative to Danish pork in the face of a
small but significant price increase on Danish pork. The
parties claim that they depend on the supermarkets as
important channels for their sales. However,
in the
overall sales of
the Danish supermarkets
the parties,
account for less than 5 % and the parties regularly shift
the emphasis from one geographic market to another
according to where they can obtain the best price (e.g.
tenderloin to Japan). Therefore, clearly the parties have
alternative outlets on export markets whereas
the
supermarkets have to buy Danish pork. Furthermore,
the fact that the parties will be the only supplier of both
beef and pork will add to their position vis-(cid:224)-vis the
the
supermarkets, and increase the dependency of
supermarkets on the parties. Consequently,
is not
credible that even the largest Danish supermarkets
would have countervailing buyer power. Rather any
price increases are more likely to be passed on to the
consumers. The cyclical
fluctuations of pork prices
would make it a simple matter to implement such price
increases.

it

(173)

In summary, the Commission recognises that the large
supermarket chains have more buyer power than the
small supermarket chains. However,
the Commission
does not find that the buyer side has sufficient buyer
power to remove the dominant position. In particular
the Commission is of
the Danish
supermarkets are dependent on supplies of fresh Danish
pork, which is a (cid:145)must
for a Danish
the slaughterhouses have the
supermarket, whereas
possibility to export. The slaughterhouses are not,
therefore,
the Danish
supermarkets as those supermarkets are on them.

the opinion that

stock item(cid:146)

dependent

nearly

on

as

(e) Duopolistic dominance

buyer

power.

(174) There is an absence of potential competition and
countervailing
actual
competition in the market between the existing players
on the market will be the only source of competition. In
this respect
the competitive relationship between the
duopolists, Steff-Houlberg and the parties, will be
crucial, since the other suppliers are too small to be
anything but followers of the duopoly.

Therefore,

(175)

the Commission the

In the view of
competitive
relationship between the parties and Steff-Houlberg will
not be characterised by strong competition, but rather
by anti-competitive parallel behaviour, which will result
in the creation of a duopolistically dominant position.
The creation of dominance is not a result of explicit
collusion between the duopolists, but will simply be the
result of their adaptation to market conditions, which
provide no incentive for Steff-Houlberg and the parties
In particular,
to compete.
it would not be in the
interest of Steff-Houlberg to engage in
commercial
competition with the parties to an extent that would
remove their duopolistic dominance for the reasons set
out below.

(176) The structural characteristics of

the pork industry
provide little incentive for competition. In particular it is
noted that:

(cid:151) the pork market is a mature market. The market
therefore, not provide any
to the market, which could in turn

growth in itself will,
dynamics
provide an incentive to compete,

in all

advantages

competitive

competitive dynamics

slaughtering industry. As

(cid:151) the technology used in slaughterhouses is mature.
New technological developments are, therefore, not
sources of
to
such as
provide
to the market.
Obviously, this does not mean that the Commission
believes that there are no new technologies being
introduced in the
is
are
normal
industries new technologies
introduced on a continuous basis. However,
the
change is only gradual and relatively slow compared
such as
example, high-tech industries
for
to,
computers.
technological
improvements will be shared by the parties and
Steff-Houlberg since a major part of the innovation
in the Danish meat
industry is done by, or
channeled via Danske Slagterier, which the merged
entity will control,

case many

any

In

(cid:151) there is less scope for price competition between the
cooperatives due to the pig quotation system. As a
result of the system all the cooperatives buy live
pigs from the farmers at the same price. Sourcing of
raw materials cannot,
therefore, be a source of
competition between the slaughterhouses,

(cid:151) the market for fresh pork is transparent. It would
thus not be possible to start on any large scale a
confidential rebate policy on the Danish market as
this would immediately be detected by the merged
entity via the weekly price quotation meetings that
are based on a summary of the income stream of
sales of the main cuts. The merged entity is also
aware that Steff-Houlberg is more home-market
oriented. Furthermore, there is no market on which
Steff-Houlberg is active (independently or via an
organisation controlled by the parties) on which the
parties are not also active.

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Official Journal of the European Communities

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(177) Furthermore, the competitive position of Steff-Houlberg
vis-(cid:224)-vis the parties is not strong enough to provide any
incentive for Steff-Houlberg to engage in competition
with the parties on the Danish market:

(179) The parties contest the reasoning of the Commission. In
particular the parties have argued that (Reply, pp. 127
to 128):

(cid:151) the merged entity would be able to retaliate on the
export markets, if Steff-Houlberg were to compete
on the Danish market,

(cid:151) there are structural links between Steff-Houlberg and
the parties on export markets. In particular Steff-
Houlberg will continue in the future to channel a
large volume of meat through companies controlled
by the parties. In addition, Steff-Houlberg has been
invited by the parties to join the merger. The parties
argue that both TiCan and Steff-Houlberg have
recently set up a certain number of new export
companies. According
those
developments clearly indicate the independence of
the merged entity’s competitors. The Commission
has noted those
the
Commission has
found that Steff-Houlberg and
TiCan will continue to be dependent on the parties
for a substantial proportion of their exports through
the company ESS-Food,

developments. However,

parties,

the

to

it

In particular

(cid:151) Steff-Houlberg has no advantages in terms of cost
structure.
is noted that Steff-
Houlberg buys its raw materials at the same price as
the parties, uses the same production technology,
and to a large extent sells its production through the
it has
same channels as the parties. Furthermore,
little possibility of achieving advantages
in the
future. According to the Gira-report, Steff-Houlberg
has already reached the optimum scale economies in
terms of operating costs,

(cid:151) Steff-Houlberg faces the competitive disadvantage,
compared to the merged entity, that it cannot offer
beef. The merged entity therefore has, vis-(cid:224)-vis the
the possibility to offer substantially
supermarkets,
more in overall
turnover-related discounts to the
supermarket buyers, and could use beef to push the
sales of pork,

(cid:151) the merged entity will be overwhelmingly more
powerful economically than Steff-Houlberg.
It will
for example receive almost six times as many pigs
and have a turnover that is almost 10 times greater
than that of Steff-Houlberg.

(178)

In conclusion, on the basis of the market structure and
the overall market position of Steff-Houlberg vis-(cid:224)-vis
the parties it is unlikely that Steff-Houlberg would have
any interest in engaging in competition with the parties.
On the other hand, the merged entity will not be able
to act without considering the actions of Steff-Houlberg,
particularly in view of the latter’s overall capacity and
its strong market position on Sealand. Therefore, the
operation is more likely to lead to anti-competitive
parallel behaviour between Steff-Houlberg and the
parties.

the point

(a) competition becomes stronger, when the market is
mature as the only way to increase sales is by
winning market share from competitors. However,
the Commission has not said that mature markets
cannot be competitive. Within the assessment of the
the
oligopoly,
market will provide an incentive to compete. The
parties have not contested that the pork market is
mature. The main point
therefore,
whether the market for other reasons than market
growth will be competitive. As set out above the
Commission has not found it likely that the Danish
market for fresh pork will be competitive after the
merger,

is whether growth of

to assess is,

if

inform the suppliers

(b) the market is transparent due to the fact that the
they are more
retailers
therefore, contributes to
expensive. Transparency,
competition. The Commission notes that the parties
acknowledge
transparent.
However,
the Commission has not disputed that
there is competition in the market at present, but
the Commission is of the view that it is likely that
lead to anti-competitive parallel
the operation will
behaviour
the
reasons set out above,

and duopolistic dominance

the market

that

for

is

(c)

if

it

is necessary for

the
the parties argue that
Commission to prove structural
links between the
companies alleged to be duopolistic and collectively
the Commission applies the Merger
dominant,
Regulation (Reply, p. 128). The Commission
considers that collective dominance can exist with
and without structural links and that both types of
situations are covered by the Merger Regulation. In
there are
the Commission finds that
any event,
strong structural links between the parties and Steff-
Houlberg in the present case notably through
Danske Slagterier and ESS-Food. It is correct as the
parties have stated that Steff-Houlberg has taken
important steps to find alternative export channels.
However, Steff-Houlberg will still depend on ESS-
Food for a substantial part of its turnover.

(d) Finally, the parties have submitted a table showing
that an increase in the price of pork of DKK 1 per
kilogram would benefit Steff-Houlberg and TiCan
more than the parties owing to the fact that the
Danish market make up a proportionately higher
share of the turnover of Steff-Houlberg and TiCan.
In particular it is shown that an increase of DKK 1
on the basis of 1996/1997 figures (Reply, p. 90)
would have increased the payments per kilogram to
the farmer by DKK 0,04 for the parties, DKK 0,09
for Steff-Houlberg,
and DKK 0,07 for TiCan.
Therefore, according to the parties, they would have
an incentive
to compete with Steff-Houlberg.
However, the Commission does not find it plausible

L 20/26

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Official Journal of the European Communities

25.1.2000

that the parties should not try to maximise their
profits on the Danish market as they do on all other
markets. Indeed according to the parties, the sales
departments are asked to maximise the price on any
given cut by selling it
in the market where it
receives the best price (34).

(185)

(180) The parties have not contested the other elements in the

Commission reasoning.

(f) Conclusion

(181) For the above reasons, the Commission concludes that
a
the operation would lead to the
duopolistically dominant position on the Danish market
for fresh pork sold through supermarkets.

creation of

H. THE MARKETS FOR FRESH BEEF SOLD THROUGH
SUPERMARKETS, BUTCHERS, CATERERS

It has not been possible, on the basis of the market
investigation to estimate in a reliable way market shares
for the sales of beef in Denmark through supermarkets,
butcher and caterers. Furthermore, no data are available
for other Member States as to the split in the markets
for those products and for fresh beef sold to processors.
However, the parties’ overall sales outside Denmark are
much more limited. Therefore,
it can, owing to the
limited market shares of the parties outside Denmark,
be concluded that the merger will not lead to a creation
of a dominant position as a result of which effective
competition will be significantly impeded.

I. SUPPLY OF FRESH MEAT TO MEAT PROCESSORS AND
PROCESSED MEAT PRODUCTS

F. FRESH PORK (cid:151) CATERING

(186) As both those markets are wider than Denmark and in
view of the limited market shares of the parties outside
Denmark, the merger will not lead to the creation of a
dominant position on those markets.

(182) On the Danish market for fresh pork for catering, the
parties are estimated to account for around 10 % of the
market with the bulk of the market share (over 50 %)
realised by a multitude of wholesalers which source
their meat from the private slaughterhouses. On this
market, the merger will thus not lead to a creation of a
dominant position as a result of which effective
competition will be significantly impeded.

G. FRESH PORK (cid:151) BUTCHERS

(183) On this market,

the parties will become the market
leader with around 20 to 25 % of the market. However,
over 50 % of
supplies will be made by private
slaughterhouses. Many of the 118 non-export licensed
private slaughterhouses are operated by butchers or by a
local butchers. Furthermore the largest
grouping of
a
national Danish butchers’
wholesaler that supplies around 15 % of
the market.
This association purchases a substantial proportion of
the meat from the private slaughterhouses.

association also has

J. DANISH COLLECTION OF ABATTOIR BY-PRODUCTS
(HIGH-RISK)

(187) As a result of the merger, the parties will control the
dominant Danish renderer, daka, a company collecting
79 % of Danish high-risk abattoir by-products. Kambas
is the only competitor that also takes on material from
other companies (35). It is a subsidiary of Steff-Houlberg
(17 % market share).

(188) The parties claim that Kambas can increase capacity and
that abattoir by-products can be transported from west
of the Great Belt to Kambas at low costs. Kambas does
not currently obtain abattoir by-products from west of
the Great Belt and works at
It can,
therefore, be doubted whether, having regard to the low
profitability of rendering, capacity will be increased in
order to accommodate supplies from west of the Great
Belt.

full capacity.

(184) On the basis of the above, it can be concluded that the
merger will not
lead to a creation of a dominant
position as a result of which effective competition will
be significantly impeded.

(189)

It has been indicated, in the course of the Commission’s
investigation,
private
slaughterhouses that the parties would be in a position
to use their control over daka to their detriment. The

number

the

by

of

a

(34) If anything, the figures illustrate that Steff-Houlberg does not have
an incentive to compete vigorously on the Danish market since
Steff-Houlberg would lose proportionally more than the parties
through such price competition.

(35) There is one other rendering company in Denmark with a 4 %
market share. However, this company exclusively takes in fresh
poultry waste products. It is, therefore, not an alternative for more
than 90 % of supplies to daka.

25.1.2000

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Official Journal of the European Communities

L 20/27

the

collection at

the premises of

parties could reduce the service by,
for example,
the
stopping
slaughterhouse or reducing the frequency of collection.
The parties could also affect daka’s revenue stream vis-(cid:224)-
vis its suppliers (decrease payment
for the waste or
request a fee for accepting the waste, combined with a
strategy of not sharing the resulting profit of daka with
the members).

(190) Before the merger, no company was in control of daka.
As a result of the merger, the acquisition of control in
daka will make it possible, as well as create an incentive,
for the parties to exercise the market power of daka. In
particular, by increasing the costs of their competitors
or making collection more difficult, the parties could
make the smaller slaughterhouses less competitive as
buyers of live animals from the farmers. This would
squeeze the smaller slaughterhouses and thereby reduce
for
the alternatives
purchasing of live pigs. The operation therefore leads to
the creation of a dominant position in the market for
abattoir by-products. Over time this would also lead to
a strengthening of the dominant position of the parties
on the market for the purchasing of live pigs and fresh
pork sold through supermarkets.

to the parties on the markets

VII. OVERALL ASSESSMENT

(191) The proposed operation affects a number of different
markets. At the upstream level it has an impact on the
Danish market for the purchasing of live pigs. At the
downstream level
it has an impact on the Danish
market for fresh pork as well as on the market for
abattoir by-products.

The market for live pigs

It

the main part of

(192) As far as the upstream markets for the purchasing of
live pigs are concerned it is to be noted that the parties
will achieve market shares as buyers of 76 %.
is
the parties will be able to act as
concluded that
dominant buyers on this market. However,
it is also
noted that the parties are owned by their members, and
that
the
slaughtering houses has in the past been distributed to
the members in proportion to the deliveries by each
member. Consequently, because of
the cooperative
structure, it is not possible for the slaughtering houses
to exploit
their members-suppliers in the traditional
sense of a dominant purchaser. However, other negative
effects may result from the merger. In particular it is
noted that:

the yearly profits of

(cid:151) the

operation will

of
slaughterhouse for the farmer. Effectively,
farmers
will be forced to accept the business ideas of the
parties and streamline their production of animals

reduce

choice

the

accordingly. A substantial minority will have no real
alternatives if they disagree with the management or
business philosophy of the parties,

(cid:151) the parties will control, through Danske Slagterier,

innovation in the Danish pig industry,

(cid:151) the parties could offer higher prices to farmers who
currently supply the economically weak private pig
slaughterhouses, depriving them of their commercial
basis and thereby driving the latter out of business.

The market for fresh pork

(193) As

far as

the downstream markets

for pork are
concerned the parties will achieve a market share of
about 40 % of the sales to the supermarket channels,
which constitute 76 % of the overall volume of fresh
pork sold in Denmark. The only other major supplier
on the Danish market is the cooperative Steff-Houlberg
with close to 30 % of the market. The operation will,
therefore, result in a duopolistic market structure, where
the duopoly will hold 70 % of the market. The duopoly
will behave as a dominant duopoly rather
than a
competitive duopoly. In particular it is noted that Steff-
Houlberg will not provide competition to the parties to
it will remove dominance. The
such an extent
reasons are first of all the superior size of the parties
(with almost 10 times the turnover). Second, Steff-
Houlberg will be linked with the parties through the
joint export activities, which will be controlled by the
parties, and the activities of the trade association Danske
Slagterier, which will effectively be controlled by the
parties as well. Consequently, rather than competition
between the new entity and Steff-Houlberg, the merger
will lead to duopolistic dominance.

that

(194) Potential competition will not prevent the parties from
keeping a small but
significant and non-transitory
higher price on the Danish market compared to
neighbouring geographic markets. The reasons are
mainly the need for importers to set-up a distribution
system, additional veterinary controls for salmonella DT
104 for imported pork, and strong Danish consumer
preferences for Danish pork, which has deterred and
importers from entering the
will continue to deter
Danish market. Countervailing buyer power
is not
present in this market. First, Danish supermarket chains
will need to purchase Danish pork owing to the strong
consumer preferences. Secondly,
there is no mutual
dependency, since Danish supermarket chains will be
much more dependent on the slaughterhouses than the
slaughterhouses
the
on
slaughterhouses will have alternative sales channels on
the export markets. The Danish supermarket chains will,
therefore, simply pass on a price increase to the final
consumer. Consequently, as a result of the merger there
will be no effective competition on the Danish market
for pork.

because

them,

are

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Official Journal of the European Communities

25.1.2000

Abattoir by-products

of

share

achieve

a market
today

receive payments
as

(195) As far as abattoir by-products are concerned, the parties
The
will
their
slaughterhouses
rendering products. However,
the
operation it would be possible for the parties to ask for
a fee to collect rendering products. Furthermore,
it
would be possible for the parties to reduce the service
level for small independent slaughterhouses. As a result
the change in control over daka increases the scope for
abuse on this market.

79 %.
for

result of

a

technical and economic progress only to the extent that
it is to consumers’ advantage and does not form an
obstacle to competition. The creation of a dominant
relevant markets
position in the
identified above,
therefore, means
the efficiencies argument put
that
forward by the parties cannot be taken into account in
the assessment of the present merger. In addition, it is
noted that the majority of the cost savings listed by the
parties would seem to be at least partially achievable
without
the synergy-related cost
reductions directly attributable to the merger are, in the
view of the Commission, likely to be less than [(cid:133)] % (*).
Furthermore,
is not clear why it would not be
possible for each of Danish Crown and Vestjyske
Slagterier
to envisage mergers with other partners,
whereby benefits similar to the current merger could be
achieved.

the merger so that

it

Conglomerate effects

(196) The parties will be the only major slaughterhouse selling
fresh beef and pork on the Danish market. Relative to
other slaughterhouses only active in either fresh beef or
this will give the parties an additional
fresh pork,
advantage vis-(cid:224)-vis the supermarkets, because the parties
will be the only supplier able to offer both beef and
pork. The parties will, for example, be able to introduce
discounting schemes relating to the total volume of beef
and pork sold, thus giving the parties the possibility to
push the sale of pork using beef as a lever and vice
versa.

IX. COMMITMENTS PROPOSED BY THE PARTIES

(199)

In order to resolve the competitive concerns raised by
received 18
the Commission,
February 1999 (36), have offered to enter
into the
following commitments.

the parties, by letter

A. ARTICLES OF ASSOCIATION OF THE PARTIES

(197)

to

the

small

squeeze

In addition, the acquisition of control over daka in the
abattoir by-products market will give the parties the
opportunity
independent
slaughterhouses by charging a fee for the collection of
abattoir by-products or reducing the level of service.
Another mechanism to
private
slaughterhouses is by attracting, by means of special
contracts,
supplying them. This would
further contribute to the creation of dominant position
of the parties on the markets for live pigs and fresh
pork sold through supermarkets.

the farmers

squeeze

those

VIII. ECONOMIC AND TECHNOLOGICAL PROGRESS

result
[(cid:133)] % (*) per year of

(198) According to the parties, the concentration has three
in important cost
main effects. First,
it will
savings (on average about
the
turnover viewed over a period of three to five years).
Second, the concentration will achieve volumes which
will make it possible to move from the present indirect/
narrow-assortment sales to the retail sector to a full-
assortment, direct supplier status for retailers in some of
the major European markets. Third, the concentration
will achieve volumes which will enable the parties to
maintain the market position on the Japanese market in
the face of competition from US producers. As far as
those efficiencies are concerned, it should be noted that
under Article 2(1)(b) of
the Merger Regulation the
Commission may take account of the development of

(200) Subject

restrictions

supply without

to the Commission’s adoption of a positive
the parties will amend their Articles of
decision,
Association so that no later than 1 October 2001 all
pig-producing members will by individual notification
be permitted to supply up to 15 % of the individual
member’s weekly
to
competitors to the merged entity. Permission to exempt
pigs from the exclusive obligation will be given to all
members applying for this with a six weeks’ notice. If
the merged entity, regardless of the permission of the
individual member to sell
the pigs to an alternative
buyer, receives those pigs, the merged entity will not be
obliged to pay residual payments on those pigs. If he so
wishes, the individual farmer can re-enter on a three
months’ notice into an obligation to supply all pigs and
receive residual payment for all pigs. The merged entity
has the obligation to receive also the pigs which are
exempted from the supply obligation, however,
in
situations where capacity is insufficient, with a non-
discriminatory delay of up to two weeks.

(201) The parties undertake with effect from 1 October 1999
to amend paragraph 9.1 of the Merger Agreement (and
thereby the Articles of Association), in order to allow
members to resign from the cooperative at 12 months’
written notice to expire on the last day in any month.

(36) On 4 March 1999,

the parties submitted clarifications of

its

originally submitted commitments.

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B. PROVISION OF SLAUGHTER CAPACITY

(205)

If no Competitor has taken advantage of the (cid:145)contract
for slaughter(cid:146)-offer within the [(cid:133)] (*) period beginning
[(cid:133)] (*) from the Commission’s adoption of a positive
decision, the parties are no longer obliged to maintain
this offer of contract slaughtering.

Contract for slaughter

(202) At the latest [(cid:133)] (*) after the Commission’s adoption of
a positive decision and for a period of [(cid:133)] (*),
the
parties will offer to slaughter, chill and primal cut, at
the parties’ Danish slaughterhouses on terms necessary
to maintain full EU, USDA and other usual export
authorisations, up to 5 000 pigs per full working week
for sale on the Danish market of fresh pork through
supermarkets and unconnected to and independent of
the parties and Steff-Houlberg (37) (the Competitor), on
behalf of an existing or prospective, viable competitor
to the parties and Steff-Houlberg, nominated and
approved by the Commission.

(203)

In the initial [(cid:133)] (*) of the [(cid:133)] (*) period beginning at
the latest [(cid:133)] (*) after the Commission’s adoption of a
positive decision, the price setting in the contract for
slaughter is to be agreed between the parties and the
If no agreement has been entered into
Competitor.
during the first [(cid:133)] (*),
the parties will have in the
remaining [(cid:133)] (*) of the [(cid:133)] (*) period the right to set a
price per kilo for each pig slaughtered and cut in primal
cuts or half carcases which covers all
the parties’
documented costs connected to the slaughter and
cutting and a reasonable profit of [(cid:133)] % (*) of
total
costs. If the Competitor so wishes, the cost calculation
chartered
can be audited by the merged entity’s
accountant or at the Competitor’s expense by another
chartered accountant approved by the merged entity
and the Competitor.

(204) The Competitor must

inform the parties at

to take place, however, using

least six
weeks in advance of the calendar week the slaughter is
to take place, of how many pigs the Competitor wishes
to be slaughtered and cut and whether the pigs are to
be cut in half carcases or in primal cuts. The parties
have the right to decide where the slaughter and cutting
to
is
accommodate the wish from the Competitor to have the
to the
slaughter
is
Competitor’s own facility(ies). The Competitor
responsible
the
of
live
the fresh pork half
slaughterhouse and transport of
carcases or primal cuts from the slaughterhouse. The
parties will pay the transport costs for transport
to
to another
another
the
slaughterhouse
control of the parties.

is due to circumstances under

slaughterhouse if

conducted as

as possible

transport

transfer

efforts

close

pigs

that

for

all

to

(37) One or a combination of Danish or foreign slaughterhouses,
wholesalers, supermarkets or other companies active in the meat
industry.

Sale of a slaughterhouse

(206) As of two weeks after the Commission’s adoption of a
positive decision and in the period of [(cid:133)] (*) in which
the parties offer the contract for slaughter, the parties
also undertake to offer for sale a pig slaughterhouse on
the following conditions.

(a) Two weeks after the adoption of a positive decision,
the merged entity will appoint an independent
trustee (who must be an investment banker, an
investment bank or similar institution) (the Trustee)
who will act for the Commission. The Trustee shall
be deemed approved by the Commission if
the
Commission has not responded in writing to the
parties within two weeks after the appointment has
been announced to the Commission.

(b) If

if

to

decides

purchase

Competitor

the Competitor has decided to enter into an
agreement on contract slaughter, the Competitor has
also the option to purchase the slaughterhouse. If
the
the
slaughterhouse, the parties are no longer obliged to
maintain the offer of contract slaughtering and the
contract slaughter agreement shall be terminated at
the transfer of the slaughterhouse. If the parties wish
to sell the slaughterhouse to a third party within
[(cid:133)] (*) after the Commission’s adoption of a positive
the
decision or
slaughterhouse to a third party pursuant to recital
207 in the remaining [(cid:133)] (*) period of the [(cid:133)] (*)
period in which slaughter on contract is offered, the
Competitor shall have a right of
to
purchase the slaughterhouse at same terms and
price as offered by a third party. The Competitor
must respond within two weeks after he has been
offered the exercise of his right of first refusal. If the
Competitor declines to make use of his right of first
refusal and the parties sell the slaughterhouse, the
contract on slaughter at the premises of the parties
shall be terminated with three months’ notice.

the Trustee wishes

first refusal

to sell

actual

ownership

transfer
to

(c) The slaughterhouse must be a pig slaughterhouse
situated in Denmark and operational at the time of
the
of
the
slaughterhouse
The
the
slaughterhouse must have a capacity of slaughtering
approximately 5 000 pigs per full working week
(the Slaughterhouse). The parties foresee offering the
pig slaughterhouse in Alling(cid:229)bro for sale but may
instead
approved
offer
slaughterhouse.

Commission

Competitor.

another

of

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25.1.2000

(d) The Slaughterhouse is to be sold by the parties at a
fair and reasonable market price set by the parties
taking into account all
in the
evaluation of a Danish pig slaughterhouse and
transferred on normal
as
generally applied within this industry in connection
with the transfer of ownership of a slaughterhouse.

relevant aspects

conditions

and fair

(207)

the Commission,

the parties have not

If
succeeded in selling the
Slaughterhouse prior to the expiration of [(cid:133)] (*) after
the positive decision of
the parties
undertake to give the Trustee an irrevocable power of
attorney to sell the Slaughterhouse to a Competitor at a
fair and reasonable market price for the parties before
the end of the remaining [(cid:133)] (*) of the [(cid:133)] (*) period in
which the slaughter capacity is offered on contract as
set out in recital 202. This period can be extended by
the Commission on reasonable grounds on application
from the parties or at the request of the Commission.
the
The parties
assistance and information necessary for the execution
of the sale or whatever his specific task is.

shall provide the Trustee with all

(208)

to sell

If the Slaughterhouse has not been sold at the end of
this period at a fair and reasonable price, the Trustee
will have [(cid:133)] (*)
the Slaughterhouse without
fixing a minimum price to any Competitor apart from
the Competitor who has entered into an agreement on
contract slaughter as set out above. At the transfer of
the Slaughterhouse, the agreement on contract slaughter
shall terminate.

(209) The parties or the Trustee will inform the Commission
of all material developments and in any event every
three months, of the status as regards the sale of the
Slaughterhouse and inform the Commission of any
plans to sell the Slaughterhouse to a Competitor. In this
connection the parties must provide the Commission
with necessary information for
the Commission to
assess whether the Competitor satisfies the conditions of
being a viable Competitor. At the latest two weeks after
Commission receiving the information in writing the
Commission will inform the parties or the Trustee if it
finds that the Competitor is not a viable Competitor to
the parties and Steff-Houlberg on the Danish market for
the sale of fresh pork through supermarkets and in this
case the Slaughterhouse cannot be sold to the proposed
Competitor.
responded
within the two weeks, the parties or the Trustee are/is
free
to the proposed
Competitor.

the Commission has not

the Slaughterhouse

to sell

If

purchaser of the slaughter capacity,
if he so wishes,
5 000 pigs per week. The price for the pigs shall be the
full market price i.e. a price equal
to the price the
parties have paid for the pigs with an addition of DKK
[(cid:133)] (*)
/kilogram to cover the residual payment and
share of consolidation for the supplying farmers or a
price equal to the price the parties have paid for the
pigs with an addition of DKK [(cid:133)] (*) /kilogram. The
parties shall not be responsible or cover the cost for
transport of the pigs from the farmer to the purchaser.

C. DANSKE SLAGTERIER

Removal of control in Danske Slagterier

(212) No later than three months after the Commission’s
adoption of a positive decision, the parties will propose
and vote in favour of a resolution to amend clause 7.10
of the Constitution of Danske Slagterier. According to
the amended provision all matters shall be decided by
simple majority. No resolution shall, however, be valid
unless board members from at least two Section 3.1.1
members
(currently the parties, Steff-Houlberg and
TiCan) have accepted the resolution. If a resolution on
(a) the increase or decrease of membership fees by more
than a percentage warranted by the inflation,
(b) the
adoption of the business plan, (c) the adoption of the
yearly budget, (d) essential changes in the equity capital,
(e) approval of new Section 3.1.1 members,
(f) any
resolution to be taken pursuant to clauses 4.1, 4.2 and
4.3, (g) recommendation to the Ministry of Agriculture
and Fisheries of members of the Board of Directors of
the
or
appointment of members of other external Board of
Directors to which Danske Slagterier has a right
to
recommend or appoint board members, (i) appointment
of members of the independently acting companies, or
(j) any resolution that has significant financial and/or
commercial implications for at least one of the Section
3.1.1 members, has been blocked twice within three
months by the parties solely or the other Section 3.1.1
members in common, the member who has put forward
the proposal shall be entitled to submit the matter to
arbitration.

recommendation

reserve(cid:146),

levy

(cid:145)Pig

(h)

(210) The

parties

Slaughterhouse
Commission.

undertake
sold

not
unless

to
buy
approved

back
by

the
the

(213)

Supply of live animals

(211) From entering into an agreement on transfer of capacity
to slaughter 5 000 pigs weekly in Denmark and until 1
to the
October 2001,

the parties undertake to sell

If the parties have not within 14 days after the last of
the two votes agreed on the choice of a sole arbitrator,
the President of the Maritime and Commercial Court in
Copenhagen shall act as sole arbitrator. The arbitrator
shall give the parties a fair hearing but is entitled to
conduct the arbitration in such manner as he thinks fit.
The arbitration award shall be final. The Section 3.1.1
member(s) whom the arbitration award has decided
against may resign from Danske Slagterier provided
notice in writing is given no later than 30 days after the
arbitrator’s decision is taken. The resigning members’

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L 20/31

Special Accounts I and II shall be paid out with the
entire balance as if the membership had ceased on the
dissolution of Danske Slagterier.
the
resigning members’
share of The Catastrophe and
Activity Reserve of Danske Slagterier shall be paid out
as provided for in the statutes governing the Reserve.

Furthermore,

delivery(cid:146). Finally clause 5.3 will be amended to (cid:145)If a
delivery of pigs is advanced more than one day at the
request of a slaughterhouse, the weight shall be raised
with the number of grams set out by the settlement
committee. Where delivery is advanced to the preceding
week, payment shall be made according to the highest
of
in the week of
notification or week of delivery(cid:146).

the members’ price on account

(214)

If the parties choose to resign from Danske Slagterier,
the remaining Section 3.1.1 members may decide not
later than 30 days after the Board of Directors has
received notice on resigning that Danske Slagterier shall
be dissolved. All members shall receive their share of
the proceeds from the liquidation calculated according
to the Constitution of Danske Slagterier once the
liquidation has been completed.

Abolishment of the national price quotation system

(215) No later than three months after the Commission’s
adoption of a positive decision, but prior to the decision
concerning the parties’ removal of control
in Danske
Slagterier, the parties undertake to propose and vote in
favour of a resolution to amend, with effect from the
start of the financial year 1999/2000, clause 2.3 and
clause 4.3 of the Constitution of Danske Slagterier in
order to abolish any commitment
for the parties as
members of Danske Slagterier to follow a common
price quotation. In the future the parties will have no
coordination of the prices for example the overall price
grid. Immediately after Danske Slagterier has decided on
amending the Constitution of Danske Slagterier,
the
Supervisory Board of Danske Slagterier will with effect
from the start of the financial year 1999/2000 amend
the (cid:145)Rules governing settlement for pigs (cid:146) and the (cid:145)Rules
governing settlement of sows(cid:146) accordingly.

In clause 1.3,

follows: References

(216) The changes to the (cid:145)Rules governing settlement for pigs(cid:146)
can be summarised as
to (cid:145)the
national quotation committee(cid:146) will be replaced by (cid:145)the
settlement committee(cid:146). Clauses 1.2, 3.5, 4.2, 4.7 and 7.0
will be deleted.
the words (cid:145)and the
national quotation(cid:146) will be deleted. Clause 3.4 will be
amended to (cid:145)The settlement committee shall
fix the
weight limits, the basis for lean meat content and all
other objective criteria for the settlement for pigs(cid:146). The
first paragraph of clause 3.6 will be amended to (cid:145)The
Supervisory Board of Danske Slagterier shall
fix the
objective basis for adjusting the settlement of pigs in
and
special
slaughtering. Those are for time being:(cid:146) The second
sentence of clause 5.2 will be amended to (cid:145)If this results
in delivery taking place in the next week, payment shall
be made according to the highest of the member’s price
on account in the week of notification or the week of

concerning

collecting

quality,

cases

D. ESS-FOOD

(217) After the Commission’s adoption of a positive decision,
the parties undertake to enter into negotiation with
Steff-Houlberg and TiCan with the aim of reaching an
agreement on the dissolution of the joint ownership in
ESS-Food. The agreement may entail sale of parts of
ESS-Food to either one of the owners or to a third party
on terms and conditions to be agreed on by the parties.

(218) No later

than two weeks after

the Commission’s
adoption of a positive decision, the parties will submit a
list of prospective trustees, who must be investment
bankers,
investment banks or similar institutions ((cid:145)the
Trustee(cid:146)), for the approval of Steff-Houlberg and TiCan.
If Steff-Houlberg and TiCan have not approved of the
appointment of either of
the prospective Trustees
proposed by the parties within eight days of the receipt
of the list, Steff-Houlberg and TiCan must within eight
days make a list with alternative proposals for a Trustee
and submit the list to the parties for their approval
within eight days of the receipt of the list.

(219)

If the parties and Steff-Houlberg and TiCan can agree on
the appointment of a Trustee, the parties shall announce
the appointed Trustee to the Commission. The Trustee
shall be deemed approved by the Commission if the
Commission has not responded in writing to the parties
within two weeks of
appointment has been
the
announced by the parties to the Commission.

(220)

Steff-Houlberg
together with

If the parties and Steff-Houlberg and TiCan cannot agree
on the appointment of a Trustee, either of
those
proposed by the parties or Steff-Houlberg and TiCan,
the parties will submit the lists of proposals from the
parties
the
and
Commission
relevant material
including the
reasons why the parties and Steff-
Houlberg and TiCan have not been able to agree on the
appointment
the
Commission on the basis of the material presented to it
will within two weeks appoint a Trustee. The same
procedure will apply mutatis mutandis to the contents of
the mandate of the Trustee.

the Trustee.

and
all

TiCan

case

this

to

of

In

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EN

Official Journal of the European Communities

25.1.2000

the

final

(221) The Trustee will act for the Commission, in accordance
with his mandate approved by the Commission, and
ensure that
the parties use all efforts to reach an
agreement with Steff-Houlberg and TiCan as set out in
recital 217 and that reasonable proposals in this context
from Steff-Houlberg and TiCan and the merged entity
are not turned down. Further, the Trustee shall ensure
that the owners of ESS-Food at all times preserve the
value of ESS-Food, and maintain ESS-Food as a going
concern to the extent that this is commercially viable
evaluation of ESS-Food has been
until
completed, see recital 223. However, the preservation of
value may entail
the Trustee will
[(cid:133)] (*). Moreover,
ensure that the merged entity does not abuse its sole
control to the disadvantage of the minority members.
the
The parties will provide the Trustee with all
assistance
including
information
information on volumes and prices of supply from the
members of ESS-Food to ESS-Food,
to
allow the Trustee to fulfil his tasks. The parties or the
inform the Commission of all material
Trustee will
developments on at
intervals as
three months’
regards the dissolution of the joint ownership in ESS-
Food and later as regards the sale of ESS-Food.

if necessary,

necessary,

least

and

(222)

If an agreement between the owners of ESS-Food
according to recital 217 has not been reached before
[(cid:133)] (*) after the adoption of a positive decision by the
Commission, according to recital 217, which period on
application from the merged entity can be extended by
the parties
the Commission on reasonable grounds,
undertake
and TiCan’s
(remaining) shares of ESS-Food no later than [(cid:133)] (*)
after the expiration of the first period of [(cid:133)] (*) after the
Commission’s adoption of a positive decision.

Steff-Houlberg

acquire

to

(224) For a period of [(cid:133)] (*) after the merged entity has
acquired Steff-Houlberg’s and TiCan’s (remaining) shares
of ESS-Food, the parties undertake to offer on a non-
discriminatory basis
and under
supervision of the Trustee to carry out distribution and
sale of pig meat or other existing products on markets
where ESS-Food is active from Steff-Houlberg and TiCan
through ESS-Food. This period can be extended by
another [(cid:133)] by the Commission on reasonable grounds
on request of Steff-Houlberg and TiCan.

(including pricing)

E. DAT-SCHAUB

(225) The merged entity will propose and vote in favour of a
resolution to amend the Articles of Association of DAT-
Schaub leading to the following: the equity in DAT-
Schaub less
the A- and B-share capital as at 30
September 1999 shall be distributed between the A-
(currently the parties, Steff-Houlberg and
members
TiCan) and paid into personal
liable accounts to the
credit of the A-members. Distribution shall take place in
proportion to the A-members’ supply of sets of casings
during the three financial years 1996/1997, 1997/1998
and 1998/1999. All
future increases or decreases of
thereafter in each year be distributed on
equity will
personal
liable accounts according to the members’
supply of casings in the relevant fiscal year of which the
profits have been achieved.

(223) The purchase price shall be a fair and reasonable price,
based on an evaluation of ESS-Food as a going concern
(cid:151) except for [(cid:133)] (*). The evaluation of ESS-Food shall
be carried out by an independent expert to be agreed on
by all owners of ESS-Food. The expert shall act under
the supervision of the Trustee in accordance with the
mandate of the Trustee. The evaluation of the parts of
ESS-Food which shall be evaluated as a going concern
shall be based on the price-earning principle applied
according to generally accepted international evaluation
practice and if this evaluation principle is impossible to
apply, then the evaluation shall be based on the net
book value as set out in accounts prepared at the time
of transfer of ownership. The expert may be the Trustee,
provided all owners can agree to this. The parties and/or
Steff-Houlberg and/or TiCan will each have the right to
have a second opinion on the evaluation of ESS-Food by
an expert Danish chartered accountant. If the evaluation
of this/these expert(s) deviates from the first evaluation
by more than 10 %, the evaluation shall be settled finally
and made binding by a court of arbitration consisting of
one arbitrator who must be a chartered accountant
independent of and unconnected to any owner of ESS-
Food and member of and appointed by Foreningen af
Statsautoriserede Revisorer in Denmark.

(226) A-members who resign from DAT-Schaub shall be
entitled to claim payment of their A-share capital at par
and their personal
liable accounts to the extent those
are intact according to the first accounts adopted at the
the resignation. The A-share
General Meeting after
capital shall be paid as at the day of resignation. The
balance on the personal liable account shall be settled in
five equal yearly instalments. The resignation payment
paid in five yearly instalments shall bear interest on the
unpaid balance equal to 50 % of the average interest
paid by DAT-Schaub on its short
term loans. DAT-
Schaub shall at all times, however, have the right to
settle any outstanding amounts in one payment. An A-
member who resigns from DAT-Schaub according to
the above shall have the right to purchase all of DAT-
Schaub’s machinery and working tools, present and in
use at this particular A-member’s slaughterhouse(s) at
the market price to be determined on reasonable and
objective terms taking into account all relevant aspects
including the value of
intellectual property rights
connected to this machinery and working tools. The
evaluation shall be carried out by an expert who shall
be
and appointed by
Foreningen af Statsautoriserede Revisorer in Denmark.

an accountant member of

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L 20/33

F. DAKA

(227) After the Commission’s adoption of a positive decision,
the parties will invite third parties to buy a sufficient
share of the parties’ ownership in daka. The parties will
thus transfer so many shares or accept that a third party
subscribes for so many new shares in daka that the
parties on one side lose their sole control over daka but
on
other
slaughterhouse-shareholders maintain a majority of
votes at daka’s general assembly. A third party shall in
this context mean any party unconnected to and
independent of the parties.

together with

other

side

the

the

(228) No later

that

than two weeks after

the Commission and ensure

the Commission’s
adoption of a positive decision, the parties will appoint
an independent trustee, who must be experienced with
the slaughterhouse industry (the Trustee) who will act
for
the parties’
ownership of daka is not used to reduce the service
raw
level or change the price-setting systems
materials to the disadvantage of any competitor of the
parties and to ensure that the parties use all efforts to
transfer a sufficient share of ownership. The Trustee
shall be deemed approved by the Commission if the
Commission has not responded in writing to the parties
within two weeks after
the appointment has been
announced to the Commission.

for

(229) The Trustee shall have the right to exercise the voting
right on the parties’ votes in the Board of Directors and
the General Assembly of daka to the extent
is
necessary to deprive the parties their sole control over
daka. The parties will provide the Trustee with all the
assistance and information necessary to exercise his
task. The parties or
inform the
Commission in writing of all material developments on
at least a three months’ interval.

the Trustee will

that

(230)

If transfer of a sufficient share of the parties’ ownership
in daka has not taken place before [(cid:133)] (*) after the
Commission’s adoption of a positive decision,
the
parties will give the Trustee an irrevocable power of
attorney to transfer a sufficient share of ownership to
one or more third parties on terms and conditions
which are
the
and reasonable
Commission’s adoption of a positive decision. On
application from the merged entity, this period can be
extended by the Commission on reasonable grounds.

[(cid:133)] (*)

after

fair

(231)

If the Trustee has not transferred a sufficient share of
ownership in daka before the time limit set out
in
recital 230, the Trustee must sell a sufficient share of
the parties ownership on best obtainable terms and
conditions. This
transfer must be concluded before
[(cid:133)] (*) after the expiration of the time limit set out in
recital 230, and at
the period at no
the end of
minimum price.

satisfies

purchaser

criteria
the
capital, management,
the latest

(232) The parties or the Trustee will inform the Commission
of any plans to transfer a sufficient share of ownership
in daka to any third party. The parties or the Trustee
will provide
the Commission with all necessary
information on a proposed purchaser of shares in daka
in order to allow the Commission to assess whether the
on
proposed
and
independence,
viability,
experience. The Commission will, at
two
the information has been received in
weeks after
the
writing,
Commission finds that the proposed purchaser does not
satisfy the requirements of independence of the parties,
and in this case the share of ownership cannot be
transferred
the
proposed
Commission has not responded within the time limit,
the parties’ share of ownership can be transferred to the
proposed third party. The parties or the Trustee will
inform the Commission of the transfer when it has been
concluded.

inform the parties or

the Trustee,

purchaser.

the

to

If

if

(233) The merged entity will

refrain from regaining sole
control over daka, as long as the Commission is not
satisfied that the parties would not acquire a dominant
market position.

X. ASSESSMENT OF THE COMMITMENTS

A. DANISH MARKET FOR THE PURCHASE OF LIVE PIGS
FOR SLAUGHTER

(234) The commitments given by the parties are such as to
the creation of a dominant position on the
for

the purchase of

live pigs

for

prevent
Danish market
slaughter.

(cid:151) The possibility for the members of the parties to
supply up to 15 % (38) of
their weekly supply,
subject to a six weeks’ notice period, to other buyers
will create more possibilities for Danish and foreign
to a substantial
to have access
slaughterhouses
number of (Danish origin) pigs,

(cid:151) the setting of the notice period at 12 months will
change

farmer

easier

the

for

to

it
make
slaughterhouse.

(235) Consequently,

that

the Commission considers

the
operation will not lead to a foreclosure of the Danish
market for the purchase of live pigs. Furthermore, the
commitments will remove the control of the parties on
innovation in the Danish pig industry. In particular, it
such as
will
farmers with
supermarkets

interested parties
approach

be possible
to

for
directly

(38) 15 % equals 2,4 million pigs per year which again equals
approximately enough raw material to supply 140 % of the Danish
market for sale of fresh pork to supermarkets.

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Official Journal of the European Communities

25.1.2000

In addition,

proposals for different productions.
the
commitments will increase the farmers’ choice of outlet.
Finally, it would be much more difficult for the parties
to squeeze the private slaughterhouses by attracting a
the 4 % (800 000 pigs) of Danish pig
proportion of
the private slaughterhouses currently
production that
purchase. This is because the private slaughterhouses
would potentially have an additional pool of up to
2 400 000 pigs resulting from the 15 % pigs free of
sales
the
lead to the
the operation will not
commitments,
creation of a dominant position on the market for the
purchase of live pigs for slaughter.

restrictions. Therefore,

result of

as

a

B. DANISH MARKET FOR THE SALE OF FRESH PORK
THROUGH SUPERMARKETS

(237)

(236) The Commission finds that the commitments offered by
the parties are sufficient to remove the creation of the
duopolistically dominant position on the Danish market
for fresh pork sold through supermarkets. In particular
the Commission has noted that:

(cid:151) there will be more scope for price competition,
since the abolition of the pig quotation system will
give the cooperative slaughterhouses more flexibility
in their pricing to the farmers. Sourcing of raw
material can, therefore, in the future be a source of
competition
cooperative
slaughterhouses,

between

the

and the fact that in the future Steff-Houlberg will
not sell through the same channels as the parties,

(cid:151) finally, the commitment to contract-kill and to sell
slaughter capacity to a competitor will make it
possible to strengthen the alternative suppliers in
the market sufficiently to create an important third
alternative to the parties and Steff-Houlberg. In this
respect it is also noted that the loosening of the
supply obligation on the upstream market for live
pigs will contribute to secure the raw material
supplies for such a third alternative in the market
and that before this
the
parties will supply, if necessary, the live animals to
be slaughtered.

loosening takes effect,

that

the Commission considers

the pricing on the market,

In conclusion,
the
increased scope for price competition, the decrease in
the transparency of
the
removal of the structural links between the parties and
the increased scope for differences in
Steff-Houlberg,
cost structures, and the strengthening of the alternatives
in the market by providing slaughter capacity in
combination with a loosening of the supply obligation
of farmers are sufficient to remove the creation of a
position, which would
duopolistically
otherwise have resulted from the operation in this
market.

dominant

(cid:151) the market will become less transparent due to the

abolition of the pig quotation system,

C. DANISH MARKET FOR HIGH-RISK ABATTOIR
BY-PRODUCTS

(cid:151) the dissolution of co-ownership of ESS-Food and the
opportunity to leave DAT-Schaub removes
the
structural
links between the parties and Steff-
Houlberg. In particular it is noted that as a result
Steff-Houlberg will become less dependent on the
parties. However,
the Commission is aware that
Steff-Houlberg will need to develop alternative sales
channels after the dissolution of co-ownership of
to sustain the investments
ESS-Food.
needed for the development of new sales channels,
and therefore to maintain Steff-Houlberg as a viable
it is important that the dissolution of
competitor,
co-ownership of ESS-Food is not detrimental
to
the
Steff-Houlberg. The Commission finds
procedure set out in the commitments is sufficient
to safeguard Steff-Houlberg,
in particular since the
Commission will have to approve the mandate of
the Trustee,

In order

that

(cid:151) there is more scope for differences in the cost
structure of Steff-Houlberg and the parties due to
the increased flexibility on input prices (see above),

(238) The commitment will mean that the parties will not
acquire sole control over daka. Therefore, there will be
no creation of a dominant position on this market.

XI. CONCLUSION

(239) For the above reasons, the Commission has come to the
conclusion that the notified concentration, as modified
by the commitments, will not create a dominant
position in the Danish markets for the purchasing of
live pigs
fresh pork sold through
supermarkets and abattoir by-products as a result of
which effective
significantly
impeded in the common market or in a substantial part
of it. The operation is, therefore, on condition that the

competition would be

slaughtering,

for

25.1.2000

EN

Official Journal of the European Communities

L 20/35

commitments are adhered to, compatible with the
the EEA
common market and the functioning of
Agreement,

HAS ADOPTED THIS DECISION:

Article 1

Subject to full compliance with the commitments, as set out in
recitals 200 to 233, the concentration notified by the parties
on 5 October 1998 relating to the merger between
Slagteriselskabet Danish Crown AmbA and Vestjyske Slagterier
A.m.b.A. and the acquisition of control by Slagteriselskabet
Danish Crown AmbA and Vestjyske Slagterier A.m.b.A. of
daka a.m.b.a., Danske Andelsslagteriers Tarmsalg (cid:151) Schaub &
Co a.m.b.a., Slagteriernes F(cid:230)llesindkłbsforening a.m.b.a. and
Scan-Hide a.m.b.a.
is declared compatible with the common
market and the functioning of the EEA Agreement.

Article 2

This Decision is addressed to:

1. Slagteriselskabet Danish Crown AmbA

Marsvey 43
DK-8900 Randers

2. Vestjyske Slagterier A.m.b.A.

Havnevey 8
DK-7600 Struer

Done at Brussels, 9 March 1999.

For the Commission

Karel VAN MIERT

Member of the Commission

L 20/36

EN

Official Journal of the European Communities

25.1.2000

ANNEX

Sales of fresh pork for final consumption

Supermarkets

Butchers

Retail

Caterers

Grand total

Danish Crown

[20-25] % *

[5-10] % *

[20-25] % *

[5-10] % *

[15-20] % *

Vestjyske

[15-20] % *

[10-15] % *

[15-20] % *

[< 5] % *

[10-15] % *

[< 5] % *

[< 5] % *

DAT-Schaub

The parties

p.m.

40 %

Steff-Houlberg

< 30 %

TiCan

Private

Mesterslagteren

[< 5] % *

< 30 %

Imports

1 %

22 %

< 5 %

< 5 %

+ 50 %

< 20 %

Total

76 %

9 %

p.m.

11 %

< 5 %

< 5 %

[< 5] % *

34 %

< 25 %

< 5 %

38 %

> 25 %

[< 5] % *

> 30 %

+ 50 %

< 40 %

< 5 %

1 %

85 %

p.m.

< 5 %

111 000 t

20 %

15 %

The sales of the different slaughterhouses include direct sales and sales via wholesalers.