2002/156/EC: Commission Decision of 31 January 2001 declaring a concentration to be incompatible with the common market and the functioning of the EEA Agreement (Case COMP/M.2097 — SCA/Metsä Tissue) (Text with EEA relevance) (notified under document number C(2001) 177)
Date: 2001-01-31
Institutions: European Commission
Subjects: cellulose, dominant position, economic concentration, merger control, pulp and paper industry, wood industry

27.2.2002

EN

Official Journal of the European Communities

L 57/1

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 31 January 2001

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

(Case COMP/M.2097 (cid:151) SCA/Mets(cid:228) Tissue)

(notified under document number C(2001) 177)

(Only the English text is authentic)

(Text with EEA relevance)

(2002/156/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community,

No 4064/89 (the Merger Regulation) of a proposed
concentration whereby SCA M(cid:246)lnlycke Holding BV
(SCA) will acquire sole control of the whole of Mets(cid:228)
Tissue Corporation (MT).

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

(2)

Having regard to Council Regulation (EEC) No 4064/89 of 21
December 1989 on the control of concentrations between
undertakings (1), as
last amended by Regulation (EC) No
1310/97 (2), and in particular Article 8(3) thereof,

Having regard to the Commission’s Decision of 26 September
2000 to initiate proceedings in this case,

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

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

Whereas:

(1)

On 11 August 2000,
the Commission received a
notification pursuant to Article 4 of Regulation (EEC)

After examination of the notification, the Commission
concluded that the notified operation falls within the
serious
the Merger Regulation and raises
scope of
doubts as to its compatibility with the common market,
because it could create or
strengthen a dominant
position as a result of which effective competition
would be significantly impeded in the common market
or in a substantial part of it and in the territory covered
by the EEA Agreement. On 26 September 2000, the
Commission therefore decided to initiate proceedings
pursuant to Article 6(1)(c) of the Merger Regulation and
Article 57 of the EEA Agreement.

I. THE PARTIES

(3)

SCA is a wholly owned subsidiary of Svenska Cellulosa
AB, a forest industry company that specialises in the
manufacture of hygiene products, transport packaging
and graphic papers. SCA manufactures and distributes a
variety of tissue-based hygiene products throughout the
EEA.

(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 52, 27.2.2002.

(4)

MT is active in the production of
tissue products,
baking and cooking papers. It is majority-owned (66 %)
industry
by the Mets(cid:228)-Serla Corp., a Finnish forest

L 57/2

EN

Official Journal of the European Communities

27.2.2002

company. MT has production sites in Sweden, Germany,
Finland, Poland and the Canary Isles.

(b) Production of parent reels (base paper)

from the

treated pulp or waste paper,

(5)

(6)

(7)

(8)

II. THE OPERATION AND THE CONCENTRATION

SCA proposes to acquire sole control of MT. The
operation forms part of an extensive exchange of assets
involving
between Svenska Cellulosa and Mets(cid:228)-Serla,
transactions: Case COMP/M.2020
three
Mets(cid:228)-Serla/Modo (4),
SCA
present
Packaging/Mets(cid:228)
operation.

Case
Corrugated (5)

COMP/M.2032

notifiable

and

the

The proposed transaction, whereby SCA would acquire
sole control of MT, therefore constitutes a concentration
the Merger
within the meaning of Article 3(1)(b) of
Regulation.

III. COMMUNITY DIMENSION

The combined aggregate worldwide turnover of
the
undertakings concerned exceeds EUR 5 000 million
(SCA EUR 7 366 million, MT EUR 586 million). The
aggregate Community-wide turnover of each of
the
undertakings concerned exceeds EUR 250 million (SCA
EUR [(cid:133)]* (*) million, MT EUR [(cid:133)]* million). Neither of
than
the
two-thirds of
its aggregate Community-wide turnover
within one and the same Member State. The notified
operation therefore has a Community dimension within
the meaning of Article 1(2) of the Merger Regulation.

achieves more

undertakings

concerned

to Article 57 of

The notified transaction constitutes a cooperation case
pursuant
the EEA Agreement and
Article 2(1)(c) of Protocol 24 to that Agreement. The
case therefore falls to be assessed by the Commission in
cooperation with the EFTA Surveillance Authority in
accordance with Article 58 of the EEA Agreement.

IV. COMPATIBILITY WITH THE COMMON MARKET

(9)

The parties are both manufacturers of a range of tissue
paper products, such as toilet
tissue, kitchen towels,
handkerchiefs and napkins. The production process
essentially involves a three-stage process.

(c) Conversion of parent

reel

into the various end

products and packaging.

(10)

(11)

Large manufacturers are generally vertically integrated
across these three production stages, whilst
smaller
operators may only be active in the conversion stage.

Parent reel is the raw material for tissue products. Its
production is a scale-intensive activity, which generally
requires production equipment to run continuously near
capacity.

embossed,

(12) At the converting stage, the parent reel is unwound, cut
folded or perforated as
and decorated,
appropriate and packaged. This final production stage is
less scale-intensive than base paper production, but
specialised equipment
required for a number of
products.

is

A. RELEVANT PRODUCT MARKETS

(13)

The parties’ activities overlap in the supply of parent
reels and converted products.

A.1. TISSUE PARENT REELS

(14)

(15)

In line with the definition in the Kimberly-Clark/Scott
case (6), SCA submits that the tissue parent reels should
be seen as a single relevant product market. Tissue
parent reels can be made from pulp or from waste
paper or a combination of both.

The parties produce parent reels, mainly for internal
consumption, but sell excess production to third party
converters. In times of inadequate internal production
the parties may also purchase parent reels from other
tissue producers.

(16)

The relevant product market is considered to be the
supply of parent reels to third parties.

A.2. CONVERTED PRODUCTS

(a) Stock preparation where wood paper

(pulp) or
waste paper is treated so as to make it suitable to be
run on the paper machine,

(17)

(4) Commission Decision of 4 August 2000.
(5) Commission Decision of 25 August 2000.
(*) 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.

products)

The final converted products are supplied to retailers
(consumer
(AFH)
distributors. The latter group includes supplies to hotels,
restaurants and catering firms and other corporate
customers. Although toilet tissue and napkins are both

away-from-home

and

(6) Commission

Decision

96/435/EC

in

Case

M.623

Kimberly-Clark/Scott, OJ L 183, 23.7.1996, p. 1.

27.2.2002

EN

Official Journal of the European Communities

L 57/3

sold as consumer products and AFH products, consumer
products and AFH products constitute separate product
markets as
they are sold via different distribution
channels and to different customers and are therefore
not
the
Commission’s conclusions in the Kimberly-Clark/Scott
decision and has been confirmed by the Commission’s
inquiries.

consistent with

substitutable.

This

is

Consumer products

(18)

In the notification SCA submitted data based on four
separate product markets for consumer products:

(cid:151) toilet tissue;

(cid:151) kitchen towels;

(cid:151) handkerchiefs and facial tissues;

(cid:151) napkins.

(19)

These are considered separate product markets in that
they differ by price, physical characteristics and end use.
these four
investigation confirmed that
The market
products
relevant
should be considered as distinct
product markets.

Branded v. private label

(20) Within each consumer product market there are both
branded and private label products. The parties both
have strong Nordic (7) brands and are also active in the
supply of private label products. Outside Sweden,
Norway and Finland, the parties’ sales are predominantly
made under private label. SCA considers branded and
private label products to be in the same product market.

(21)

In Kimberly-Clark/Scott the issue to what extent final
consumers considered branded and private label tissue
to be in the same market was discussed
products
extensively. The Commission found that in retail stores
in the United Kingdom private label products were
priced relative to leading branded products and that at
least some consumers were willing to switch between
in response to
branded and private label products
promotional campaigns. The parties and third parties
presented various econometric studies based on Nielsen
supermarket scanner data to directly assess whether
prices of branded products were constrained by prices
Commission
products.
of
it
acknowledged that, based on the studies submitted,

private

label

The

(7) For the purpose of
Denmark and Finland.

this decision defined as Norway, Sweden,

could not be excluded that private label competed with
branded products at the retail level. Most respondents in
the Commission’s investigation in the present case have
also been of the opinion that branded products and
private label products are in the same market at the
retail level.

Ireland).

(22) However, in Kimberly-Clark/Scott the Commission also
considered that the true competitive significance of that
operation was its impact on the branded tissue products
market where the new entity would have the two most
important brands in the relevant geographic market (the
The Commission
United Kingdom and
described how the continued presence of brands was
important, even for the major retailers where private
label sales had become increasingly important. Branded
products were seen as necessary to attract shoppers, to
provide an adequate range of choice and to offer the
consumer a reference point against which the merits of
store brands could be evaluated. The large retailers
questioned by the Commission considered the two
major brands of the new entity as essential brands. The
Commission concluded that
retailers would become
dependent on the new entity for essential brands. For
the supply of private label products, however,
the
Commission focused on whether there was an adequate
supply/capacity to meet the requirements of retailers.

(23)

investigation in the present case has
The market
confirmed that for the merging parties’ customers there
is a substantial difference in the way branded products
and private label products are procured. Although
supermarkets are the main buyers of both types of
product, there is a clear distinction in how they are
purchased.

(24)

For branded products, the supermarket chooses to stock
a brand depending on a combination of factors, which
influence the brand’s downstream market position, such
as consumer loyalty, price and promotional activity. The
supermarket can only realistically choose between the
brands that are presently marketed by the manufacturer
in the country where the retailer is located. In certain
countries, where the parties are active, the number of
potential suppliers is very limited.

L 57/4

(25)

EN

Official Journal of the European Communities

27.2.2002

(27)

For private label products, however, the supermarket
determines the quality and quantity of the product, and
the supplier produces to order. The marketing is left to
the retailer who decides on issues such as packaging,
promotional effort, etc. Compared to branded products,
this process allows supermarkets more readily to switch
private label volume between tissue manufacturers with
spare capacity. A customer typically asks for bids from
a number of producers according to the customer’s
specification of the quality of the products and other
In this respect, a private label
terms of the contract.
contract
could be viewed as a toll-manufacturing
arrangement where the contract is awarded through a
bidding process. As the termination period is very short,
this bidding process may be repeated quite often, even
every few months. The number of potential suppliers is
determined by such elements as quality, transport costs,
delivery. Many
spare
respondents underline the importance of
just-in-time
delivery for their choice of supplier. There is, however,
no need for a producer already to be present with sales
or a distribution channel in a certain area in order to be
considered a realistic potential supplier.

reliability of

capacity

and

that

it has

ignores

the fact

SCA claims

the retail
that

to Article 18 of
(cid:145)the Reply(cid:146)),

In its reply to the Commission’s Statement of Objections
the Merger Regulation
pursuant
(hereinafter
the
Commission’s decision to regard private label and
branded products as separate markets at the wholesale
these products are in
that
level
level. The
competition with each other at
Commission does not accept
ignored
competition between the two products at the retail level.
However, the Commission considers that relative price
the wholesale level are not necessarily
changes at
transmitted fully to the retail
level. Retailers may, for
instance, choose to reduce their margins instead of
raising their retail prices fully in line with an increase in
the wholesale price. This possibility was mentioned by
some retailers as a likely response to a 5 % to 10 %
increase in their supply price for private label products.
The Commission therefore considers that branded and
private label consumer tissue products can compete
level, while being in
the retail
with each other at
separate markets at the wholesale level.

(28) On the basis of the above, the Commission considers
that, for the purpose of the present case, branded and
private label consumer products are separate relevant
product markets. In any event, the Commission, even
though it considers that the market investigation does
not support SCA’s product market definition, has also
the notified
examined the competitive impact
operation would have if branded and private label
products constituted one single relevant product market.
The competitive assessment of the notified operation
leads to the same result no matter which product
market definition is adopted.

that

AFH products

(29)

SCA has provided data for
markets within the AFH sector:

the following product

(cid:151) toilet tissue,

(cid:151) hand wiping and drying (hand wiping),

(cid:151) general wiping,

(cid:151) health care (e.g. examination couch covers, patient

washcloths),

(cid:151) napkins.

(30)

that AFH toilet

SCA considers
tissue is a distinct
relevant product market. However, for the other four
AFH product groups, SCA argues that tissue products
compete with products made from other materials. For
hand wiping competing products are said to include
textile products and hot air dryers. For general wiping
SCA would also include textile wipes in the relevant
are
product market. AFH health care products

(26)

This difference in the functioning of the markets for
branded and private is reflected in that the producers’
margins are typically higher for branded products than
for private label products. While it is often technically
possible to switch production between branded and
private-label products, a manufacturer that produces
both branded and private label products would therefore
normally prefer to use its capacity for production of
branded products. As a result, the owners of strongly
positioned tissue brands, such as Kimberly-Clark, Procter
& Gamble and, to a lesser extent, Fort James have a
clear focus on branded production and only produce
private label
to the extent necessary to utilise spare
production capacity and gain economies of scale. A
large number of
Italian manufacturers, on the other
hand, have a clear focus on production of private-label
products. For these manufacturers, the costs of building
brand awareness create important barriers to enter the
branded market. SCA is one of the few players with a
relatively balanced presence
in the branded and
private-label markets, although the respective shares of
brands and private label vary significantly between the
the
different countries where SCA is active. Hence,
supply of branded and private-label tissue products is
characterised by two different sets of competitors which
have only limited economic incentives and financial
capabilities to seriously challenge each other’s product
markets.

27.2.2002

EN

Official Journal of the European Communities

L 57/5

essentially tissue couch covers and wash cloths. In this
sector as well as for AFH napkins, SCA argues that
textile products compete with tissue products and
therefore should be included in the relevant product
market. The market
investigation carried out by the
Commission, however, has shown that the majority of
the respondents consider that tissue products cannot be
substituted easily by products made
from other
materials.

products. This is because the AFH customer is more
likely to choose the products based on quality and price
than to be influenced by a supplier’s brand image.
Branded and private label AFH products are therefore
considered to be in the same product markets.

(34)

The five AFH products identified above are therefore
considered to constitute separate and distinct relevant
product markets.

(31)

(32)

In its Reply SCA reiterates its argument
textile
products compete directly with tissue in the hand
wiping and general wiping markets. SCA also states that
the Commission’s market
many
in
investigation considered textile products
competition with tissue products.

respondents

to be

that

to

for

exist

specific

respondents

to
indeed

confirm that

the Commission’s market
Some
alternative
investigation did
products
applications. However,
customer choice between tissue, textile products and,
where applicable, blow dryers takes place predominantly
based on the specific application and on criteria other
than relative prices. For example, non-tissue products
are generally excluded for reasons of hygiene in health
care and in many restaurants. By contrast, blow dryers
may be preferred where avoidance of paper waste is a
priority. Direct price comparison between the different
products, however, is difficult, even where substitution
may be possible. Switching between the different
materials is complicated by the fact
that most AFH
tissue wholesalers do not carry any of the alternative
products. The Commission recognises that the existence
of textile products may provide a certain competitive
restraint on tissue products. However, the Commission’s
market investigation has not shown that the prices of
tissue products are restrained sufficiently by substitute
products made from other materials that these should
be included in the same product markets. Nor has SCA
provided any such evidence.

(33)

In the notification SCA argues that branded and private
label AFH products are in the same product market. The
majority of AFH sales are branded, SCA’s main brand is
Tork, and MT’s brands include Katrin and Saga. These
brands are used throughout the Nordic region as well as
in other parts of Europe. The market
investigation
confirmed SCA’s view that, although branded products
exist, the distinction between private label and branded
than for consumer
AFH products is less significant

(35)

(36)

(37)

B. RELEVANT GEOGRAPHIC MARKETS

B.1. TISSUE PARENT REELS

the relevant geographic market
for
SCA argues that
parent reels is at
least EEA-wide. The Commission’s
investigation has confirmed this view. Transport costs
than for converted products,
are significantly lower
owing to the more compact nature of the product, and
parent reels can be supplied on at least a European
basis.

B.2. CONVERTED PRODUCTS

increased relative to transport costs

SCA submits that the importance of economies of scale
has
since the
investigation in the Kimberly-Clark/Scott case in 1995.
SCA argues that its business today is organised on the
basis that economies of scale derived from specialising
mills in one or two products outweigh the transport
costs incurred in distributing products from these mills
to any location in Europe. SCA also argues
that
consumer markets are increasingly characterised by
cross-border and pan-European mergers and alliances
between retailers and that AFH contracts are similarly
the
pan-European
cross-border
competition, facilitated by e-commerce. SCA, therefore,
sustains that the emergence of an EEA-wide market is
one of a number of factors which mean that certain
high apparent market shares calculated on a national
basis are less reliable indicators of the possible existence
of market power than in other industries.

subject

and

of

and

In the notification SCA also presented an economic
analysis by Prof. Jerry Hausman of Lexecon/Cambridge
Economics. Based on an analysis of SCA profit margins
the study makes the (cid:145)strong conclusion(cid:146) that Finland and
Denmark are not in the same geographic market as
Sweden
Germany,
Belgium/Luxembourg and the Netherlands are not in the
same geographical market as Sweden and Norway.
According to the study it is (cid:145)less clear(cid:146) whether Finland
and Denmark are in the same market as each other, or
in the same market as Germany, Belgium/Luxembourg
and the Netherlands; these countries are (cid:145)more similar(cid:146)
than to Norway and Sweden, but
to each other

Norway

that

and

L 57/6

EN

Official Journal of the European Communities

27.2.2002

differences between their respective gross margins still
exist.

this section on the definition of

However, as competition concerns only arise in the
the
Nordic region,
relevant geographic market will mainly focus on
defining the markets which are
to the
assessment of
the transaction in this
region.

the impact of

relevant

(38)

(39)

(40)

(41)

In the Reply, SCA argues that the study related only to
branded consumer products and does therefore not
allow conclusions on the relevant geographical markets
for private label consumer tissue products and AFH
this
tissue products. The Commission notes
interpretation, which was not presented
in the
notification, of the study is inconsistent with SCA’s view
that branded and private label tissue products are in the
same relevant product market.

that

Logistics

The Commission’s investigation has shown that three to
four first-tier manufacturers are active on a European
level, while a number of smaller competitors achieve
significant market
shares only in a more limited
geographic area. The first-tier group includes SCA,
in some product
James and,
Kimberly-Clark, Fort
markets, Procter and Gamble. MT and a number of
(such as Annunziata, Cartiera
Italian manufacturers
Lucchese, CartoInvest
(Carrara), Delicarta, Linder and
Tronchetti) are among the largest second-tier firms and
have established some more limited market positions
outside their respective home markets, in particular in
the sale of private label products. Furthermore, there are
some local manufacturers, which have only marginal
sales outside their respective home markets. In Sweden
and Norway, Munksj(cid:246) and Skjaerdal are such local
players. However, even the market positions of
the
first-tier manufacturers are by no means uniform across
Europe, and individual country markets are significantly
more concentrated than the EEA shares would suggest.
Manufacturers have so far typically only achieved high
market shares in those countries where they operate
local production plants and in neighbouring countries.
The
the main
competitors differ significantly between Member States,
at
and second-tier
manufacturers.

level of both the

and relative

strength of

identity

first-

the

In the Kimberly-Clark/Scott case, the Commission found
the relevant geographic market to include both Britain
and Ireland, due to the countries’ geographic location
relative to the Continent, common language (that is,
similar media
consumer
preferences (emphasis on high quality tissue products).
For
the geographic
market definition was left open because the operation
primarily concerned the United Kingdom and Ireland.

the remaining parts of Europe,

exposure)

similar

and

(42)

costs

Transport

volume-to-value

Transport costs constitute a significant obstacle to
supplying converted products over large distances due
to the fact that tissue products are characterised by a
per
ratio.
high
kilometre are primarily determined by the quantity of
product that can be loaded on a truck, that is, on the
product’s density relative to sales price. Since the
is higher for folded products
profitability per pallet
(handkerchiefs, napkins) than for rolled products (toilet
tissue, kitchen towels), economic delivery distances tend
to be larger for folded products. Similarly, premium
products can be supplied over longer distances than
lower quality varieties, as the value per unit is higher.

(43)

Citing its own restructuring programme, SCA argues
that economies of scale have gained in importance
relative to transport costs since the Kimberly-Clark/Scott
investigation in 1995 (8). Accordingly, SCA claims that
its activities are currently being reorganised on a
European basis [(cid:133)]*,

(44) Most competitors and customers consider

that

Kimberly-Clark/Scott

the
Kimberly-Clark/Scott distances still apply, although the
majority of the replies tended toward the upper end of
the
range, with maximum
distances of approximately 800 to 1 000 km for full
truckloads. Amongst
the competitors who considered
themselves within the viable distance for delivering to
the Nordic region, the average maximum distance given
was 750 km. The importance to customers of reliable
just-in-time deliveries was stressed repeatedly.
In this
respect it should be noted that long transport distances
increases the lead-time with which an order must be
given. The Finnish consulting firm Jaakko Poyry has
described the importance of just-in-time delivery as: (cid:145)The
market where a producer can deliver
is not only
determined by the transportation costs per tonne of its
tissue products. In customers’ eyes a key buying factor

In the present case, the most significant additions of
market share occur
in the Nordic region (Norway,
Sweden, Finland and Denmark) and in a number of
countries
central
Austria,
and France).
the Netherlands
Belgium/Luxembourg,

(Germany,

European

(8) Respondents

investigation
to the Kimberly-Clark/Scott market
estimated that the various tissue products could be economically
transported over maximum distances of 540 to 865 km (depending
on the product category).

27.2.2002

EN

Official Journal of the European Communities

L 57/7

(45)

(46)

is quick and reliable on time delivery. Replenishing at
retailers’ distribution centres needs to be in 24 to 48
hours. With growing distance of
the
reliability of on time or even just in time delivery to
to
retailers’ distribution centres
is
unless
guarantee
used-which
the
again
producer(cid:146). (9).

is more difficult
etc.
for

additional warehousing
costs
servicing
raise

the producer

Supply to customers in the Nordic region is complicated
by the large distances and low population densities
within these
competitors
countries. A number of
consider that these geographic factors, in addition to the
the
strong
barriers-to-entry to Nordic countries and lead to lower
distances over which customers can be economically
supplied.

incumbent manufacturers,

increase

Italian manufacturers seem to constitute an exception to
the rule of maximum distances of approximately 800 to
1 000 km. The last decade has seen a considerable
expansion of the capacity of Italian tissue production. A
number of these manufacturers, mainly based close to
Lucca in Tuscany, supply significant amounts of private
label
to German and French retail
tissue products
states viable
these
customers. One of
transport distances of up to 2 000 km for toilet tissue
and handkerchiefs, 1 700 km for napkins and 1 500 km
for kitchen towels. However, the most successful Italian
producers have recently established, or are in the
process of establishing, production facilities in France to
serve Northern European customers. Hence, proximity
to markets seems also to be a competitive factor that
these successful Italian manufacturers take into account
once they have established a foothold in an export
market.

companies

The scope for geographic price discrimination

(48)

(49)

of

are

the

areas

conditions

conditions

competition

(47) A relevant geographic market comprises the area in
which the undertakings concerned are involved in the
supply and demand of products and services, in which
the
sufficiently
homogeneous and which can be distinguished from
of
because
neighbouring
competition are appreciably different in those areas. If
customers can buy at
the same prices as customers
located in other areas, such areas should be included in
the geographic market definition. If, however, customers
buying from suppliers located in other areas cannot
necessarily buy at
the same prices as the customers
located in those areas, such areas should not necessarily
be included in the geographic market definition.
In
other words, there can be situations where the fact that
customers are being supplied from a plant in a certain
area does not mean that these customers are getting the

(9)

(cid:145)Market Structure and Competition in the Paper Tissue Industry(cid:146),
draft report of 30 October 2000, p. 10.

prevailing (cid:145)market(cid:146) prices in that area. This could, for
instance, be the case when the suppliers deliver the
products to the premises of the customers. If arbitrage
between customers is not possible, suppliers can then
charge different prices to customers in different areas. In
a prospective analysis, as is carried out in investigations
of
future price
discrimination by undertakings which through a
concentration can achieve a very strong position among
the suppliers that can supply to a certain area, may be a
factor in delineating the relevant geographic
crucial
market to take into consideration.

the possibility of

concentrations,

The extent of
the geographic market may thus be
affected by the existence of customers in a certain area,
which could be subject to price discrimination by a firm
controlling most of the supply into such area. This will
usually be the case when two conditions are met: (a) it
is possible to identify clearly which area an individual
customer belongs to at
the moment of selling the
among
relevant products
customers or arbitrage by third parties should not be
feasible. Such arbitrage is particularly difficult where the
product
is sold on a delivered basis and where the
transportation costs are a significant percentage of the
final cost. The assessment of the competitive impact of
a proposed concentration in such an area should take
into consideration all
suppliers who can in an
economically viable way supply into this area, no matter
where the location of the suppliers production facilities.

to him,

and (b)

trade

Buyers in the Nordic countries generally organise their
purchases on a national basis. This is particularly true
for national supermarket chains but also for smaller
retailers, which often have organised their purchasing
through national purchasing groups. The only example
of a group with a significant share of the retail markets
in more than one Nordic country is ICA in Sweden and
same
Hakon in Norway, which are under
ICA has 39 % of
ownership. According to SCA,
the
Swedish and Hakon 28 % of
the Norwegian retail
market. In the Reply SCA also refers to other examples
of buyers, which, according to SCA, have adopted a
regional or pan-European purchasing strategy. The only
example relevant to the Nordic region is Aldi, which
according to SCA has 4 % of the Danish retail market
and is not present in the other Nordic countries.

the

(50)

The market investigation has shown that buying tissue
products through cross-border purchasing groups such
as AMS, NAF and EMD is not very developed. Although
SCA, both in the notification and in its Reply, stresses
the importance of such international retailer alliances,
these
the Commission’s investigation has shown that

L 57/8

EN

Official Journal of the European Communities

27.2.2002

alliances do not directly purchase tissue products for
their members. Their activities are in coordination and
negotiations on a framework basis covering such items
as bonuses and general conditions of trade, mostly for
private label products. While the activities of
the
alliances in the area of tissue products may change, the
Commission’s market investigation has not provided any
indications of any such changes in the foreseeable future
that
should lead the Commission to modify its
definition of the relevant geographic markets (10).

(54)

itself not
geographical market.

determine

the

scope of

the

relevant

Branded consumer products

For branded products the choice of the supermarkets is
restricted to the products that are presently marketed by
producers in the given country. While many brand
names are used in several countries, there is probably
only one example of a brand name known in all of
Europe, which is Kimberly-Clark’s Kleenex brand. The
typical picture in a country is therefore a mixture of
national and regional brands. Even when brands are
used in more than one country, brand recognition
generally has to be built on a national basis due to the
that media coverage is predominantly national.
fact
Because
advertising
differences,
campaigns, brands and packaging have to be adapted to
national markets. As a result, consumer awareness of
regional
between
differs markedly
neighbouring countries.

language

brands

even

the

of

(55) According

to

by

survey

submitted

spontaneous awareness of

SCA,
data
(spontaneous) awareness of SCA’s Lilla Edet brand in
March 2000 varied between [approximately 50 %]* in
Sweden, [30]* % in Norway and [20]* % in Denmark,
despite the close geographic proximity and cultural and
linguistic similarities between the three Scandinavian
countries. As a result of increased marketing activity, for
the Edet brand
example,
among Norwegian consumers
increased significantly
between December 1999 and March 2000 (from [about
20 % to 30 %]*), while it was stable in Sweden and
declined
awareness
in Denmark.
variations over time occurred for MT’s Lambi brand and
other consumer tissue brands. Overall, brand building
activities in one Nordic country appear to have no effect
on recognition in any neighbouring country, supporting
the hypothesis
for branded consumer
products are national even when the same brand is used
in different countries.

that markets

slightly

Similar

(56) A further

is

by

indication of
geographic markets

the Nordic countries being
separate
the
given
considerable differences in the market shares that the
competitors have in the different countries. The details
of
the distribution of market shares in the various
markets are given in the assessment section below. In
the two largest consumer product markets, toilet tissue
and kitchen towel, a major player like Kimberly-Clark
has a significant presence only in Denmark. Another
major competitor to the parties, Fort James, is strong in
Finland, has a solid presence in Denmark, but much
in Norway and Sweden. A small
smaller positions
regional producer, Munksj(cid:246), has a significant position in
Norway and Sweden, but
almost no position in
Denmark and Finland. Also the parties themselves have
very varying positions in the Nordic countries. SCA has
only small market shares in Finland while it has strong

(51)

(52)

(53)

tissue products

are delivered to customers’
Since
warehouses it is possible to identify clearly to which
country an individual customer belongs at the moment
of selling the tissue products to him. This means that a
producer controlling all supplies to one or more of the
Nordic countries could target a price increase to
customers in one country without affecting prices in
other countries. Arbitrage is not possible as these tissue
products have high transport costs relative to total costs
and customers need just-in-time delivery, often several
times per week, which is not likely to be possible to
achieve through arbitrage buying. Therefore, customers
in one country would not be able to counter such a
price increase through arbitrage with customers
in
another country, where a price increase had not been
applied.

The Commission also notes that, even if cross-border
purchasing, whether by retailer chains or alliances, were
to account for a significant proportion of sales in the
Nordic region,
this would not necessarily imply that
prices would become uniform across this region. The
ability of alliances to negotiate successfully uniform
prices will depend on the availability of alternative
suppliers.

In its Reply SCA claims that most retailers responding
to the Commission’s market investigation also seemed
to share the view that markets are Europe-wide.
the case for the Scandinavian
However,
this is not
respondents. The majority of
these retailers takes a
narrower view and considers the markets to be either
national or Scandinavian. Those who say that they view
the markets as wider than Scandinavian do so because
they source from non-Scandinavian countries. However,
as outlined above, in the specific circumstances of the
present case the geographic location of suppliers does in

(10) In its Decision of 6 April 2000 in Case IV/M.1832 Ahold/ICA
F(cid:246)rbundet/Canica, the Commission found that:
(cid:145)The markets for
wholesale and procurement of daily consumer goods, although
undergoing changes following the introduction of the Euro, can
still be considered as national due to a number of factors such as
consumer preferences
different
distribution channels. Furthermore, many European manufacturers
and wholesalers negotiate with their customers on a national level,
basically via their subsidiaries and branches(cid:146). (Recital 15).

for national products

and

27.2.2002

EN

Official Journal of the European Communities

L 57/9

positions in the other three countries. MT has very high
in Sweden, Finland and Norway and more
shares
moderate shares in Denmark.

the location of production capacity available for private
label production, the quality that the manufacturers are
able to deliver, whether a manufacturer has sufficient
spare capacity and the reliability of delivery that a given
manufacturer offers.

(57)

(58)

The cost of building a new consumer tissue brand from
scratch is considered by most market participants as
prohibitive for all but the largest manufacturers. Few, if
in
that
any, of
private-label production can therefore be expected to
enter new geographical markets with branded products
outside their respective traditional strongholds in the
foreseeable future.

specialise

currently

those

firms

that

a market

is dominated by

Even first-tier competitors have stated that the cost of
strong
entering
incumbents can be prohibitive, because the incumbents’
local manufacturing base
and established supplier
contacts enable them to retaliate against any small scale
entry (which could,
take place through
for instance,
imports). In addition, the barriers to large-scale entry via
new local production capacity are high, and such entry
is not likely to happen in mature markets such as those
in the Nordic region.
In fact, both customers and
competitors have stated that the strong position that a
merged SCA/MT would have in the Nordic region
would create a powerful disincentive for potential new
entrants.

(59) Hence,

the Commission concludes that

the relevant
geographical markets for branded consumer products in
the Nordic countries are national. The Commission has,
however, also examined the competitive impact that the
notified operation would have if Sweden and Norway
constituted one single relevant geographic market. The
competitive assessment of the notified operation leads
to the same result even if this wider geographic market
definition is adopted. Outside the Nordic countries it
can be left open whether
the relevant geographic
markets are national or wider than national, as the
proposed
competition
problems outside the Nordic countries even if each
country is considered under the narrowest geographic
market definition.

transaction does not

raise

Private label consumer products

(61)

(62)

(63)

Italian manufacturers are important
in private label
production and routinely supply German retailers,
although it appears that due to transport costs they
usually do not deliver beyond Northern Germany. The
substantial private label capacity in the Lucca region
significant competitive pressure on the
thus exerts
in a number of other
German market as well as
European countries (Austria, Belgium/Luxembourg, the
Netherlands, and France). Similarly, private label trade
from a number of other
flows emanate (mainly)
production
include
especially Germany, and to a smaller extent the Benelux
and France.

clusters, which

outside

Italy

Supplies to the Nordic region to a large extent come
from Swedish and Finnish plants. The exception is
tissue paper
Denmark, where substantial amounts of
countries.
products are imported from non-Nordic
Denmark has no local plants, while there are two small
local plants in Norway. Sweden and Norway are mostly
supplied from plants in either Sweden or Norway with
the possibility of some further supplies arriving from
Finland. Finland is primarily supplied from MT’s M(cid:228)ntt(cid:228)
plant and from a Fort James plant in Nokia.

label markets

in Denmark is

In contrast
to the other Nordic countries, significant
imports arrive to Denmark from non-Nordic production
facilities. The main competitor to the parties in the
private
a German
company, Wepa, which does not deliver to other Nordic
countries; Denmark is at the limit of what Wepa itself
considers the maximum transport distance for tissue
products. MT also delivers
substantial quantities of
private label
tissue products from its German mills,
basically continuing the supply relationships carried
over from its recent acquisitions of two German tissue
structure and
producers. This
conditions of
are
that
substantially different from neighbouring Sweden and
Norway, where only supplies originating from Nordic
countries are available. The ability of other potential
suppliers to influence the competitive conditions in
Denmark is considered in the assessment of this market.

competition in Denmark

in a market

results

(60) As for branded products, the buyers of private label
products typically organise their purchases on a national
basis. A major difference to branded products
is,
however, that for private label products, any marketing
and promotional activities are carried out by the
customers (the retailers). The customers therefore often
have a wider choice of
for private label
products. The main parameters that determine the set of
potential suppliers for a customer are transport costs,

suppliers

(64)

The competitive conditions in Denmark can also be
clearly distinguished from Germany by the fact that the
Italian manufacturers cannot effectively compete due to
transport costs. Trade flows underline the Italians’
diminishing competitiveness in areas north of Germany
(even after allowing for the different market sizes).
toilet
While Germany imported EUR 110 million of

L 57/10

EN

Official Journal of the European Communities

27.2.2002

tissue from Italy in 1998, the corresponding figure for
Denmark was only EUR 362 000, a much smaller
percentage of
the total domestic market. The Italian
manufacturers are considered by market participants to
have a major impact on competitive conditions for
supply of private label products in Germany, because
they have substantial production capacity to supply
private label products. They are seen as main alternative
suppliers
to SCA and MT in Germany. Danish
customers, by contrast, depend almost entirely on
northern European suppliers.

(65)

The competitive conditions in Finland differ from those
the strong
in the other Nordic countries because of
presence of the American producer, Fort James, and (cid:151)
compared to the other Nordic countries (cid:151) the very
small presence of SCA. SCA has [practically no]* private
label sales in Finland. The small Swedish producer
Munksj(cid:246) has a minor presence in private label sales. The
competition in Finland therefore mainly takes place
between MT and Fort James, which together have [more
than 90]* % of private label sales.

(66)

The competitive conditions in Norway and Sweden
differ in that SCA is not present in private label sales in
Norway while it is the second largest player in the main
(toilet tissue and kitchen towels) in Sweden.

(69)

(70)

(67) Hence, the Commission concludes that the customers in
each of
the Nordic countries constitute a distinct
relevant geographical market for private label consumer
products. The Commission has, however, also examined
the notified operation
that
the competitive impact
in Sweden and Norway
would have if customers
relevant geographic
constituted one
market. The competitive assessment of
the notified
operation leads to the same result even if this wider
geographic market definition is adopted. Outside the
Nordic countries
the
relevant geographic markets are national or wider than
national, as the proposed transaction does not raise
competition problems outside this region, even if each
country is considered under a national geographic
market definition.

it can be left open whether

single distinct

AFH products

(68)

of

and

subject

SCA argued in the notification that AFH contracts are
pan-European
the
cross-border
competition. The Commission’s market
investigation
has, however,
shown that AFH customers do not
normally negotiate contracts on a wider-than-national
basis. The main customer group for AFH products
consists of wholesalers operating on a national or
sub-national level. The tissue suppliers usually provide a
instance, paper
package solution that
largest AFH
towels

and a dispenser

system. The

includes,

for

in

are

the

customers of SCA and MT in the Nordic region
predominantly
notification
identified
wholesalers, which are on average significantly smaller
than retail chains, with annual turnover not exceeding
double-digit million euro figures. The wholesalers
like
mostly supply to smaller
cleaning service companies that again deliver the tissue
product as part of a service package to the customer.
While some of these dealers are specialised on specific
customer groups like hospitals, their market is mostly
defined in geographic terms (11).

servicing companies

In its Reply SCA disputes the Commission’s preliminary
finding in the Statement of Objections
the
geographical markets for AFH products in the Nordic
than national. SCA notes the
region are no wider
cross-border buying by multinational
presence of
enterprises, such as transport and catering groups.
It
claims
that both SCA and MT have evidence of
customers seeking suppliers for more than one country.

that

of

future

seeking

companies

by multinational

The Commission does not consider that the examples of
cross-border
companies
buying
the geographic
provided in the Reply indicate that
markets for AFH products are wider than national
in
the Nordic region. SCA has in its Reply only given
examples
contracts
covering more than one country, but no evidence of
a
existing contracts. The only example given of
company seeking a future Nordic cross-border contract
is a catering company, which is not mentioned in the
notification as a large customer of either SCA or MT in
the Nordic region. However,
the vast majority of
customers in the Nordic region covered by the market
investigation have confirmed that the market for AFH
tissue products is no wider than national. Very few of
these companies are active in more than one Nordic
country.

(71)

The same transport cost constraints as for private label
products also limit the potential scope of the geographic
market in the AFH segment. However, maximum viable
transport distances tend to be shorter than for consumer
products, due to the product characteristics and lower
average order
size. A certain minimum density of
customers in a given geographical area is thus necessary
and the cost of expanding into new geographical
markets is higher than in the private label consumer
segment. Due to the low population density and large

(11)

(cid:145)Market Structure and Competition in the Paper Tissue Industry(cid:146)
(see footnote 9), p. 12.

27.2.2002

EN

Official Journal of the European Communities

L 57/11

extent,

combined with the

geographical
region’s
considerable distance from the main continental tissue
production clusters,
the Nordic countries constitute
particularly difficult markets in this respect.

(72) As for branded products, the market positions of the
main players vary considerably in the Nordic countries.
When considering the three large AFH markets, toilet
tissue, hand wiping and general wiping, SCA and MT
both have strong positions in Sweden, Norway and
Denmark. SCA has only a small presence in Finland,
where MT and Fort James are strong. In Denmark Fort
James and Kimberly-Clark have some presence while
they are both weak in Norway and Sweden. Of the
smaller players, Munksj(cid:246) has a limited position in
Norway and Sweden and a very minor position in
Finland.
is
present in general wiping and napkins.

In Norway, a local company, Skjaerdal,

volume and value. The sale of parent reels to third
parties does not constitute a core activity of SCA and
MT. The market investigation has confirmed that the
proposed transaction would not create or strengthen a
dominant position in the market for tissue parent reels.

C.2. CONVERTED PRODUCTS

(76)

SCA has production capacity in Austria, Belgium,
France, Germany,
the Netherlands, Sweden, Portugal,
Poland, Russia, Spain and the United Kingdom. MT has
plants in Germany, Finland, Sweden, Poland and the
Canary Isles.

Consumer products

(77)

(73) Hence,

that

have

Sweden

the Commission concludes that

the relevant
geographical markets for AFH products in the Nordic
region are national. The Commission has, however, also
the notified
examined the competitive impact
operation would
and Norway
if
constituted one single relevant geographic market. The
competitive assessment of the notified operation leads
to the same result even if this wider geographic market
definition is adopted. Outside the Nordic region it can
be left open whether the relevant geographic markets
are national or wider than national, as the proposed
transaction does not raise competition problems outside
this region even if each country is considered under a
national geographic market definition.

C. ASSESSMENT

C.1. TISSUE PARENT REELS

(74)

reels primarily

The integrated tissue manufacturers, including SCA and
internal
MT, produce parent
consumption. Sales to, or purchases from, third parties
take place mainly in cases where base paper and
converting capacities cannot be matched exactly, due to
the different manufacturing economics prevailing at the
two production levels.

for

for handkerchiefs/facial

in the Nordic countries,
investigation has shown that

For consumer products, competition concerns arise in
toilet tissue and kitchen towels in the Nordic region. In
tissues and for
the markets
the Commission’s
napkins
market
there are other
competitors present with significant market shares. SCA
has limited sales in these two product categories and the
proposed transaction would at most
lead to a small
addition of market share. Furthermore, in napkins Duni,
a specialised Swedish producer, which is the market
leader in Northern Europe, has a strong position in all
four Nordic countries as well as in handkerchiefs/facial
tissues
tissue,
Kimberly-Clark has, with Kleenex, the strongest brand in
the EEA. Kimberly-Clark’s sales of handkerchiefs/facial
tissues are larger than the combined sales of the parties
in Norway and Denmark and larger than SCA’s sales in
Sweden. Both SCA and Kimberly-Clark have negligible
the
Finland. Consequently,
positions
detailed
the proposed
the impact of
assessment below of
transaction on the
in the Nordic
countries concern only toilet tissue and kitchen towels.

handkerchiefs/facial

tissue markets

in Sweden.

In

in

Sweden

(78) According to SCA,

total

tissue
products in Sweden in 1999 were EUR [110-130]*
million, of which approximately [80]* % were branded
products and [20]* % private label products.

sales of consumer

(75) According to SCA the combined EEA market share of
the parties for parent reel sales to third parties was
[10-20]* % by volume (SCA [0-10]* %, MT [10-20]* %)
and
(SCA [0-10]* %, MT
value
[10-20]* %)
in 1999. In 1997 and 1998, the parties’
combined market share was below [10-20]* % by both

[10-20]* % by

(79) Among branded consumer products, toilet tissue was
the biggest market with approximately EUR [50-60]*
the kitchen towels market was worth EUR
million,
that of handkerchiefs/facial
[20-30]* million while

Branded consumer products

L 57/12

EN

Official Journal of the European Communities

27.2.2002

tissues was EUR [0-10]* million and napkins EUR
[0-10]* million.

(80)

SCA’s estimates of the parties’ market shares (measured
by volume) for the markets for branded toilet tissue and
kitchen towels in Sweden in 1999 are set out in Table
1.

Table 1: SCA’s estimates (cid:151) branded products Sweden

Market shares

SCA

MT

SCA/MT

Toilet tissue

[20-30]* % [60-70]* % [80-90]* %

Kitchen towels

[30-40]* % [50-60]* % [80-90]* %

awareness research is made in order to get an indication
of how well known the actual advertising for a
particular brand is. The information is only given for
Edet, Lambi, Leni, Serla and Lotus; the Munksj(cid:246) brands
are not included. This information clearly shows that
Lotus is not nearly as well known as the parties’ brands.
Less than [5]* % of the respondents were apparently
aware of the brand name Lotus. Around [50]* % of the
respondents were aware of the Edet brand, over [40]* %
knew Lambi, over [20]* % Serla, and over [10]* % Leni.
The brands of the parties are clearly all better known
than Lotus, and Fort James would have to invest in a
major promotional effort
to increase the
market share of Lotus in Sweden.

in order

(81)

(82)

(83)

The market shares estimated by SCA for 1998 are
similar to the 1999 figures. Value based market shares,
given by SCA, also indicate the same market structure.
The Commission has compared the sales figures of the
parties with those of their competitors and its market
investigation confirms that the merged entity would be
by far the market leader. The main competitors in toilet
tissue and kitchen towels are Munksj(cid:246) with at most
[around 20]* % (volume based)
tissue and
[around 15]* % in kitchen towels and Fort James with
[less than 5]* % in toilet tissue and kitchen towels.

in toilet

(84)

Swedish customers have confirmed the importance of
the brands of the parties. Some have even suggested
that Munksj(cid:246)’s products are low price products that
should not be considered branded products in the same
way as the products of the parties and Fort James (12).
The majority of customers express worries about the
effects of the proposed transaction.

Countervailing buyer power

three main brands,

in Sweden. MT has

SCA’s only brand for toilet tissue and kitchen towels is
Edet, which is mainly produced in SCA’s plant in Lilla
Edet
the
premium brands Lambi and Leni and the basic brand
Serla. Lambi has [somewhat higher sales]* than Serla for
both toilet tissue and kitchen towels, while the sales of
Serla are [about three times higher]* than those of Leni.
All
three brands are mainly produced in MT’s three
Swedish plants, Katrinefors, Paulistr(cid:246)m and Nyboholm.
Fort James sells toilet tissue and kitchen towels under its
Lotus brand. Munksj(cid:246) sells under its Munksj(cid:246) brand
products
in
J(cid:246)nk(cid:246)ping in Sweden.

that are mainly produced in its plant

(85)

contains

SCA states in the notification that the existing demand
structure
enough buyers with sufficient
strength to be able to resist any attempt to raise prices
the merger. The
above the competitive level after
Commission does not accept
for the
following reasons.

this argument,

some Munksj(cid:246) brands and Lotus

The parties’ brands are generally considered to be the
strongest brands in Sweden. SCA distinguishes between
(cid:145)A brands(cid:146) and (cid:145)B brands(cid:146).
(cid:145)A brands(cid:146) are actively
promoted and advertised manufacturer brands. Among
(cid:145)A brands(cid:146) in Sweden SCA counts Leni, Lambi, Serla and
(cid:145)B brands(cid:146) are other manufacturers’ brands which
Edet.
for example Billigt&Bra,
are not actively promoted,
Vivette, Dax,
in
Sweden. SCA has also provided information about the
(cid:145)brand awareness(cid:146)
that
certain brands have had in Sweden in the period
March/June 1998 to March 2000. SCA measured brand
awareness by asking the respondents questions
like
(cid:145)Which brands of toilet paper do you know?(cid:146) or (cid:145)Do you
know a brand called Edet?(cid:146) Brand awareness research is
made in order to get an indication of how well known a
particular brand is. Advertising awareness is measured
by asking the same type of questions regarding the
actual advertising for each relevant brand. Advertising

and (cid:145)advertising awareness(cid:146)

(86) According to SCA, among its largest customers in
Sweden, ICA Handlarnas AB account for about [40]* %
of the retail market. Dagab AB accounts for [around
30]* %, KF Kategoriteam Papper [15]* % and Bergendahl
Grossist AB [<5]* %.

(87)

Buyer power can only be exercised effectively if the
buyer has an adequate choice of alternative suppliers. In
the Commission’s view,
the choice is limited as the
parties would have around [80-90]* % of current sales
in the markets for toilet tissue and kitchen towels and
the brands with the strongest brand recognition in
Sweden.

(12) Munksj(cid:246) confirms that it sells basic brands at low prices; it does

not engage in serious advertising for its products.

27.2.2002

EN

Official Journal of the European Communities

L 57/13

(88)

(89)

(90)

Furthermore,
it is easy to price discriminate between
different customers as tissue products are delivered to
the customers. Customers would not be able to counter
price discrimination through arbitrage,
since tissue
products have high transport costs relative to total costs
and customers need just-in-time delivery, often several
times per week. Hence, even if the largest customers
would be able to exercise some countervailing buyer
power this would not protect smaller customers, and
the new entity would still be able to raise prices above
the pre-merger level.

(92)

In its Reply, SCA argues that a buyer would need to
switch away only a small share of
its purchases to
(cid:145)punish(cid:146) a large supplier and that such smaller volumes
could be handled by an alternative supplier. Further,
SCA claims that the current over-capacity in the market
means that suppliers need as much volume as possible
to be profitable. The
passing through their mills
Commission notes that for branded products switching
volumes between suppliers can only be a credible threat
if other comparable brands are available. This is not the
case in Sweden. Furthermore, even if other, comparable
brands were available, competitors would need to have
sufficient
switching
spare capacity for a threat of
volumes to be credible. In Sweden the relative size of
the merging parties and their competitors is such that
only very limited switching could occur.

Market entry

of

consumption

Entry with new capacity in Sweden (in fact in the entire
is unlikely. The Nordic tissue paper
Nordic region)
markets are considered mature and saturated markets
with high per capita consumption. They have, therefore,
lower growth rates than countries in other regions of
products
tissue
Europe where
traditionally has been lower. Furthermore,
there are
significant costs and lead-time involved in establishing
new production capacity. SCA estimates that it will take
18 to 24 months to set up a parent reel facility. A
50 000 tonnes (13) plant installation will cost between
EUR [50]* million and EUR [80]* million depending on
the technology,
(cid:145)Through Air Dried(cid:146) being the most
expensive. A de-inking plant costs EUR [around 10]*
million. Installing converting facilities for a similar sized
plant will cost between EUR [30]* million and EUR
[45]* million depending on the quality. This takes 12 to
18 months to install. If installing conversion facilities
also requires purchase of a site, Fort James estimates
that the total project/installation costs would increase by
the
50 to 100 %, depending on the total scope of
operation. For these reasons, the Commission concludes
that entry with new capacity in Sweden is unlikely and
that in any event it would take several years before a
new competitor entering with new capacity could exert
an effective competitive restraint on the parties.

international

SCA furthermore argues that international retailers, or
members of
retailing associations, may
choose to retaliate against SCA by taking action in other
geographical markets. The Commission does not accept
this argument because there are very few international
retailers present in the Nordic region. The international
retailing associations do not at present engage in
tissue
detailed cross-border price negotiations
products. SCA also claims that retailers could threaten
to take action against other SCA products such as baby
diapers or feminine protection products. Such a threat
would, however, not seem credible as SCA also has very
strong positions and well-known brands in these areas.
For example, SCA states in the notification that it had in
1999 in Sweden a market share of [60-70]* % in adult
incontinence care,
[40-50]* % in feminine protection
products and [50-60]* % in baby diapers.

for

could deliver

(93) Any new entry into Sweden would thus have to come
from manufacturers
from their
that
existing plants. This is, however, also unlikely because
of the combination of high transportation costs and the
high costs of entering with branded products in a
stagnating market with strong established brands.
Market participants do therefore not consider it likely
that
the two other large-scale producers with strong
brands, Kimberly-Clark and Procter & Gamble would
enter the Swedish markets for toilet tissue and kitchen
towels. In fact, some market participants consider that
the proposed transaction could raise the barriers of
entry for the Nordic markets. The difficulties of entering
in Sweden is further illustrated by the fact that Fort
James, which has production facilities in neighbouring
Finland, has only achieved a very moderate market
share in Sweden.

Conclusion

(94)

The proposed operation would, therefore, combine four
leading brands in one single company, resulting in a
very strong market position. Customers would have
little choice of other brands with the same attributes
and ability to attract customers. The proposed operation

(91)

In the Commission’s view, such (cid:145)buyer power(cid:146) as may
exist would not prevent
the creation of a lasting
dominant position as a result of the merger.

(13) SCA and MT presently have production capacity of more than

100 000 tonnes each in Sweden alone.

L 57/14

EN

Official Journal of the European Communities

27.2.2002

would eliminate the main source of competition in the
Swedish markets for toilet tissue and kitchen towels and
would leave the new entity in a position that could not
be challenged by competitors or customers.

Countervailing buyer power

(95)

The Commission, therefore, concludes that the proposed
operation would result in the creation of a dominant
position in the markets for branded toilet tissue and
kitchen towels in Sweden.

Private label consumer products

(96) According to SCA toilet tissue was, in 1999, the largest
private label market in Sweden with approximately EUR
[10-20]* million. The kitchen towels market was worth
EUR [0-10]* million while that of handkerchiefs/facial
tissues was EUR [0-10]* million and that of napkins
EUR [0-10]* million.

(97)

SCA’s estimates of the parties’ market shares (measured
by volume) in the private label toilet tissue and kitchen
towels markets in Sweden in 1999 are set out in Table
2.

Table 2: SCA’s estimates (cid:151) private label products Sweden

SCA

MT

SCA/MT

Toilet tissue

[30-40]* % [30-40]* % [60-70]* %

Kitchen towels

[30-40]* % [50-60]* % [80-90]* %

(98)

(99)

1999.

[30-40]* % in

their
those
investigation has confirmed that

For kitchen towels, the market shares of the parties in
1998, as given by SCA, are very similar to the 1999
figures. For toilet tissue, the market shares for SCA are
quite similar in 1998 and 1999, while MT in 1998 had
The
[50-60]* % against
the
Commission has compared the sales figures of
The
of
parties with
Commission’s
the
parties have a very large combined share in these
markets. The main competitors in toilet
tissue and
kitchen towels are Fort James with [around 10]* % in
both toilet tissue and kitchen towels and Munksj(cid:246) with
[less than 10]* % in both markets. The new entity
would be [about than six times]* as large as Fort James
and [more than ten times]* as large as Munksj(cid:246) in these
markets.

competitors.

the

For both toilet tissue and kitchen towels SCA mainly
products
Swedish market
supplies
manufactured in SCA’s plant in Lilla Edet in Sweden and
MT with products mainly manufactured in MT’s three
Swedish plants, Katrinefors, Paulistr(cid:246)m and Nyboholm.
Munksj(cid:246) sells products that are mainly produced in its
plant in J(cid:246)nk(cid:246)ping in Sweden.

with

contains

(100) SCA states in the notification that the existing demand
enough buyers with sufficient
structure
strength to be able to resist any attempt to raise prices
the merger. The
above the competitive level after
Commission does not accept
for the
following reasons.

this argument,

(101) According to SCA, among its largest customers in
Sweden, ICA Handlarnas AB account for about [40]* %
of the retail market. Dagab AB accounts for [30]* %, KF
Kategoriteam Papper [15]* % and Bergendahl Grossist
AB [< 5]* %.

(102) Buyer power can only be exercised effectively if the
buyer has an adequate choice of alternative suppliers. In
the Commission’s view,
the choice is limited as the
parties would have around [80-90]* % of current sales
in the markets for private label toilet tissue and kitchen
towels in Sweden.

(103) Furthermore,

it is easy to price discriminate between
different customers as tissue products are delivered to
the customers. Customers would not be able to counter
price discrimination through arbitrage,
since tissue
products have high transport costs relative to total costs
and customers need just-in-time delivery, often several
times per week. Hence, even if the largest customers
would be able to exercise some countervailing buyer
power this would not protect smaller customers, and
the new entity would still be able to raise prices above
the pre-merger level.

(104)

In its Reply, SCA argues that a buyer would need to
its purchases to
switch away only a small share of
(cid:145)punish(cid:146) a large supplier and that such smaller volumes
could be handled by an alternative supplier. Further,
SCA claims that the current over-capacity in the market
means that suppliers need as much volume as possible
passing through their mills
to be profitable. The
Commission notes
switching volumes between
suppliers can only be a credible threat if competitors
have sufficient spare capacity.
In Sweden the relative
size of the merging parties and their competitors is such
that only very limited switching could occur.

that

(105) SCA furthermore argues that international retailers, or
members of
retailing associations, may
choose to retaliate against SCA by taking action in other
geographical markets. The Commission does not accept
this argument because there are very few international

international

27.2.2002

EN

Official Journal of the European Communities

L 57/15

for

retailers present in the Nordic region. The international
retailing associations do not at present engage in
detailed cross-border price negotiations
tissue
products. SCA also claims that retailers could threaten
to take action against other SCA products such as baby
diapers or feminine protection products. Such a threat
would, however, not seem credible as SCA also is a
major supplier of these products and has well-known
brands. For example, SCA states in the notification that
it had in 1999 in Sweden a share of [60-70]* % of sales
[40-50]* % of
of adult
feminine protection products and [50-60]* % of baby
diapers.

incontinence care products,

An alternative product market comprising both
branded and private label

(110) For the purposes of the present case, the Commission
that branded and private label consumer
considers
are
product markets.
products
However,
the Commission has also considered the
parties’ position if the relevant product markets were to
comprise both branded and private label consumer
products.

separate

relevant

(106)

In the Commission’s view, such (cid:145)buyer power(cid:146) as may
exist would not prevent
the creation of a lasting
dominant position as a result of the merger.

Market entry

(111) SCA’s estimates of the parties’ market shares (measured
by volume)
toilet
tissue and kitchen towels markets in Sweden in 1999
are set out in Table 3.

in combined branded/private label

Table 3: SCA’s estimates (cid:151) branded/private label products Sweden

SCA

MT

SCA/MT

Toilet tissue

[20-30]* % [50-60]* % [80-90]* %

Kitchen towels

[20-30]* % [50-60]* % [70-80]* %

(107)

(cid:145)local(cid:146) producers

In the section on branded consumer products it
is
explained why entry with new capacity in Sweden is
unlikely. The same arguments apply in respect of
private label products. Any new entry would therefore
have to come from manufacturers that could deliver
from their existing plants. No manufacturer other than
the four
in
Finland) has entered the Swedish markets for private
label sales of
tissue and kitchen towels. The
Commission’s market investigation has shown that none
of the other producers of private label products, such as
Italian or smaller German producers, would be able to
enter the Swedish market with anything other than
small and sporadic deliveries because of the significant
transportation costs.

(including Fort

James

toilet

Conclusion

their

those

competitors.

(112) The Commission has compared the sales figures of the
The
of
parties with
Commission’s investigation confirms that
the merged
entity would be by far the market leader. The main
competitors
tissue and kitchen towels are
Munksj(cid:246) with [around 15]* % (volume based) and Fort
James with [less than 5]* % in both toilet tissue and in
kitchen towels. Such a market position would in itself
be indicative of dominance.

in toilet

(113) The

unlikely,

strength of

the parties’ brands,

lack of
countervailing buyer power and the fact that new entry
is
These
considerations reinforce the conclusion that the merger
would lead to the creation of a dominant position in
these markets.

explained

above.

been

have

the

(108) The long term prospects in Sweden would be the same
as for branded products with the entity much larger
than the only other national producer, the small
local
James
manufacturer Munksj(cid:246),
disadvantaged by being situated further from the market
than the new entity. The proposed operation would
eliminate the main source of competition in the
Swedish private label markets
tissue and
kitchen towels and would leave the new entity in a
position that could not be challenged by competitors or
customers.

and with

toilet

Fort

for

Conclusion

(114) The proposed operation would eliminate the main
source of competition in the Swedish markets for toilet
tissue and kitchen towels and would leave the new
entity in a position that could not be challenged by
competitors or customers.

(109) The Commission therefore concludes that the proposed
operation would result in the creation of a dominant
position in the markets for private label toilet tissue and
kitchen towels in Sweden.

(115) Even on the basis of a wider market definition the
proposed operation would result in the creation of a
dominant position in combined markets for branded
and private label
tissue and kitchen towels in
Sweden.

toilet

L 57/16

EN

Official Journal of the European Communities

27.2.2002

Norway

(116) According to SCA,

total

tissue
products
in 1999, EUR [60-80]*
million, of which approximately [90]* % were branded
products and [10]* % private label products.

sales of consumer

in Norway were,

Branded consumer products

(117) Among the branded consumer products,

tissue
was the largest market in 1999 with approximately EUR
[40-50]* million. The market for kitchen towels was
worth
of
handkerchiefs/facial tissues was EUR [<5]* million and
napkins EUR [<5]* million.

[10-20]* million while

toilet

EUR

that

(118) SCA’s estimates of the parties’ market shares (measured
by volume) in the markets for branded toilet tissue and
kitchen towels in Norway in 1999 are set out in Table
4.

Table 4: SCA’s estimates (cid:151) branded products Norway

Market shares

SCA

MT

SCA/MT

Toilet tissue

[10-20]* % [40-50]* % [60-70]* %

Kitchen towels

[20-30]* % [50-60]* % [70-80]* %

competitors.

those
their
investigation has confirmed that

(119) The market shares provided by SCA for 1998 are quite
similar to the 1999 figures. Value based market shares
given by SCA indicate the same market structure. The
the
Commission has compared the sales figures of
The
parties with
of
the
Commission’s
parties would be the clear market
in both
markets. The merged entity would become [more than
twice]* as large as its main competitor, Munksj(cid:246), and
[several times]* larger than Fort James in both markets.
tissue Munksj(cid:246) has [around
In the market
20]* % (volume based) and Fort James [less than 5]* %.
In kitchen towels Munksj(cid:246) has [around 25]* % while
Fort James has [less than 10]* %. Kimberly-Clark is not
present in Norway in these two markets.

for toilet

leader

(120) SCA’s only brand for both toilet

three main brands,

in Sweden. MT has

tissue and kitchen
towels is Edet, mainly produced in SCA’s plant in Lilla
Edet
the
premium brands Lambi and Leni and the basic brand
Serla. In toilet tissue Serla achieves the highest sales in
Norway with [about 30]* % higher sales than Lambi,
while Leni has very small sales. In kitchen towels Lambi
sells [about three times]* as much as Serla and Leni,
which have [about the same sales]*. All three brands are
mainly produced
Swedish plants,
Katrinefors, Paulistr(cid:246)m and Nyboholm. Fort James sells
toilet tissue and kitchen towels under its Lotus brand.

in MT’s

three

Munksj(cid:246) sells branded products mainly produced by its
subsidiary A/S Sunland-Eker Papirfabrikker in Drammen
in Norway.
It uses the brand name (cid:145)Classic(cid:146), which,
however, is not considered a strongly promoted brand
name.

(121) Together, SCA and MT will have the strongest brands in
Norway. SCA has provided the same information about
brand awareness and advertising awareness as
for
Sweden. In Norway, the information is given for Edet,
Lambi, Leni, and Lotus; Serla and the Munksj(cid:246) brands
are not included. [Less than 5]* % of the respondents to
the survey were aware of the brand name Lotus. Lambi
is the best known brand with [around 40]* % of the
respondents aware of
it; Edet was the second best
known with [about 30]* % and Leni third with [over
10]* %. These three brands of SCA and MT are thus all
better known than Lotus.

the merger would result

(122) The large market shares of the merging parties indicate
that
in the creation of a
dominant position. This conclusion is reinforced by the
fact that the merged entity’s brands are by far the best
known.

Countervailing buyer power

(123) According to SCA, among its largest customers in
Norway, Norges Gruppen accounts for about [30]* % of
the retail market. Hakan Gruppen accounts for [30]* %,
NKL [25]* % and Reitan [15]* %.

(124)

In the section on the Swedish markets for branded
consumer products,
the Commission explains why it
does not accept the arguments given by SCA in the
Reply for the existence of significant buyer power. The
arguments presented by the Commission are equally
valid for the Norwegian market. In particular, SCA has
well-known brands in Norway and is a major supplier
of those other products where it claims that retailers
would retaliate against it. In Norway in 1999 SCA had a
share of [60-70]* % of sales of adult incontinence care
feminine protection products
products, [70-80]* % of
and [70-80]* % of baby diapers.

(125)

In the Commission’s view, such (cid:145)buyer power(cid:146) as may
exist would, for the same reasons as explained for the
Swedish markets, not prevent the creation of a lasting
dominant position on the Norwegian markets
for
branded toilet tissue and kitchen rolls as a result of the
merger.

Market entry

(126) For reasons similar to those outlined in the assessment
of
the Swedish market, entry with new capacity in
Norway is unlikely. Any new entry into Norway
therefore would have to come from manufacturers that

27.2.2002

EN

Official Journal of the European Communities

L 57/17

from their

existing plants. This

could deliver
is,
however, also unlikely because of the combination of
high transportation costs and the high costs of entering
with branded products in a stagnating market with
established brands. Market participants do
strong
the two other
therefore not consider
large-scale producers with strong brands, Kimberly-Clark
the Norwegian
and Procter & Gamble would enter
In fact,
markets for toilet
some market participants consider that
the proposed
transaction could raise the barriers of entry for the
Nordic markets.

tissue and kitchen towels.

likely that

it

Conclusion

(127) The

same

combine

proposed

four
operation would
well-known brands, resulting in a very strong market
position. Customers would have little choice of brands
with the
to attract
consumers. The proposed operation would eliminate the
main source of competition in the Norwegian markets
for branded toilet tissue and kitchen towels and would
leave the new entity with a strong position that could
not be challenged by competitors or customers.

attributes

ability

and

(128) The Commission, therefore, reaches the conclusion that
the proposed operation would result in the creation of a
dominant position in the markets for branded toilet
tissue and kitchen towels in Norway.

An alternative product market comprising both
branded and private label

(129) SCA’s estimates of the parties’ market shares (measured
by volume)
toilet
tissue and kitchen towels markets in Norway in 1999
are set out in Table 5.

in combined branded/private label

Table 5: SCA’s estimates (cid:151) branded/private label products Norway

Market shares

SCA

MT

SCA/MT

Toilet tissue

[10-20]* % [40-50]* % [60-70]* %

Kitchen towels

[10-20]* % [50-60]* % [70-80]* %

(130) The Commission has

sales

compared the

figures
provided by SCA and MT with those of
their
competitors. The Commission’s investigation confirms
the merged entity would be by far the market
that
leader. The main competitors in toilet tissue and kitchen
towels are Munksj(cid:246) with [around 25]* % (volume based)
in toilet tissue and [around 30]* % in kitchen towels and
Fort
tissue and
[10]* % in kitchen towels.

James with [around 5]* % in toilet

(131) The

strength of

lack of
countervailing buyer power and the fact that new entry
is unlikely, have been explained above.

the parties’ brands,

the

Conclusion

(132) The proposed operation would eliminate the main
source of competition in the Norwegian markets for
toilet tissue and kitchen towels and would leave the new
entity in a position that could not be challenged by
competitors or customers.

(133) Even on the basis of a wider market definition the
proposed operation would result in the creation of a
dominant position in combined markets for branded
and private label
tissue and kitchen towels in
Norway.

toilet

An alternative, wider Swedish-Norwegian geographic market

in the
the Commission considers that

(134) SCA presented in the notification an econometric study,
according to which Denmark and Finland are not in the
same geographic market as Sweden and Norway. As
section on geographic market
described
there are
definition,
several arguments that point
to the conclusion that
geographic markets are national. However, even if
Sweden and Norway were considered one geographic
market,
the proposed operation would lead to the
creation of a dominant position in the markets for
consumer toilet
tissue and kitchen towels in such a
geographic market.

(135) Many market characteristics such as the strength of the
parties’ brands compared to those of their competitors,
the fact that entry is unlikely, the large capacity of the
parties relative to that of
their competitors and the
transport cost advantage relative to the only large-scale
competitor, Fort James, have already been described in
the assessment of
the Swedish and the Norwegian
markets. These market characteristics are equally valid
for a combined Swedish-Norwegian geographic market.

Branded consumer products

in such a

(136) The Commission’s market investigation has shown that
in branded consumer
the parties
the position of
combined Swedish-Norwegian
products
market would be very strong. The parties would have a
combined market share of around [70-80]* % in the
markets for both toilet tissue and kitchen towels. The
main competitor would Munksj(cid:246) with [around 20]* %
in both markets, while Fort James would have [around

L 57/18

EN

Official Journal of the European Communities

27.2.2002

5]* % in both markets. The parties would therefore be
the largest
[more than three times]* as
competitor. Furthermore, Munksj(cid:246) is a small
local
player, and Fort
is disadvantaged by having
production facilities further away from Sweden and
Norway than the parties.

large as

James

(137) These market shares indicate that even on the basis of a
wider market definition the proposed operation would
result in the creation of a dominant position in the
markets for branded toilet tissue and kitchen towels.

Private label consumer products

(138) The

a

in

of

the

parties

position

combined
Swedish-Norwegian market for private label consumer
products would be very strong. The parties would have
a combined market share of [around 70]* % in the
markets for both toilet tissue and kitchen towels. The
only competitors would be Fort James and Munksj(cid:246),
both with [around 15]* % in both product markets. The
parties would be [more than four times]* as large as the
largest competitor.

Branded consumer products

(143) Among the branded consumer products,

tissue
the biggest market with approximately EUR
was
[30-40]* million, the kitchen towels market was worth
EUR [10-20]* million while that of handkerchiefs/facial
tissues was EUR [< 5]* million and napkins EUR [< 5]*
million.

toilet

(144) SCA’s estimates of the parties’ market shares (measured
by volume) in the markets for branded toilet tissue and
kitchen towels in Finland in 1999 are set out in Table
6.

Table 6: SCA’s estimates (cid:151) branded products Finland

Market shares

SCA

MT

SCA/MT

FJ (14)

Toilet tissue

[< 5]* % [50-60]* % [50-60]* % [40-50]* %

Kitchen towels

[< 5]* % [50-60]* % [50-60]* % [40-50]* %

(139) Even on the basis of a wider market definition the
proposed operation would result in the creation of a
dominant position in the markets for private label toilet
tissue and kitchen towels.

(145)

An alternative product market comprising both
branded and private label

In these two markets Finland is characterised by the
very strong position of the two domestic producers MT
and Fort James. SCA is, by its own admission, the only
other producer achieving some sales in these markets.
The Commission has compared the sales figures of the
The
parties with
Commission’s investigation has confirmed this picture of
two large and more or less evenly sized competitors,
although the market shares of MT and FJ seem to be
more equally balanced than suggested by the parties.
The overall picture of two similar sized competitors also
emerges if value-based market shares or data from
previous years are considered.

competitors.

those

their

of

(140) The

in

of

the

parties

position

combined
a
Swedish-Norwegian market
for branded and private
label consumer products would be very strong. The
parties would have a combined market share of [around
75]* % in the markets for both toilet tissue and kitchen
towels. The only competitors would be Munksj(cid:246) with
[around 20]* % and Fort James with [around 5]* % in
both product markets. The parties would be [about four
times]* as large as the largest competitor.

(141) Even on the basis of a wider market definition the
proposed operation would result in the creation of a
dominant position in the Swedish-Norwegian markets
for branded and private label toilet tissue and kitchen
towels.

(147)

Finland

(146) SCA is clearly the company best placed to challenge the
strong positions of the two domestic producers and to
them from having a duopolistic dominant
prevent
the
In fact,
position.
proposed transaction would lead to the loss of the only
realistic competitor to MT and Fort James, and to the
creation of a duopolistic dominant position by MT and
Fort James in these product markets.

the Commission considers that

In its Reply SCA contests that it has a special position
as a competitive restraint in Finland by virtue of
its
the
small market share in Finland. SCA claims that
Commission argues that entry barriers are so high that
entry either by new capacity or by supply from existing
plants is unlikely. SCA therefore considers that
is
questionable whether
constraining
it
influence on current Finnish supplies. The Commission,
however, considers that SCA is in a unique position to

represents

it

a

(142) According to SCA,

total

tissue
products in Finland in 1999 were EUR [70-80]* million,
of which approximately [80]* % were branded products
and [20]* % private label products.

sales of consumer

(14) Fort James’ share is calculated by the Commission as the rest of

the market.

27.2.2002

EN

Official Journal of the European Communities

L 57/19

act as a competitive restraint on MT and Fort James in
Finland compared to other producers with small
positions elsewhere. Not only does SCA have a strong
presence in tissue products in neighbouring Sweden, it
also has strong positions in several other consumer
product markets in Finland and therefore an established
distribution network with knowledge of
the Finnish
retailing market and indeed relationships with the major
retailers. SCA had, for example, in 1999 a market share
of [70-80]* % in adult incontinence care, [30-40]* % in
feminine protection products and [50-60]* % in baby
diapers with well-known brands in these markets.

(148) The markets for tissue products possess many of the
characteristics that are considered to make markets
conducive to collective dominance. The market demand
for these products is generally considered to be rather
inelastic (15). Furthermore,
like the other Nordic tissue
markets the Finnish market is a mature market with low
growth prospects. Tissue production is, moreover, a
market where technical innovation is relatively moderate
and takes time to have a strong influence on markets,
partly due to the long life of tissue machines.

(149) The Finnish market would be transparent after the
merger in that only two producers would be present.
Any lost contract would therefore have to go to the
other producer. The markets for tissue products are
characterised by frequent contacts between producers
and buyers. Formal long-term contracts are rare. Instead
relationships are more (cid:145)fluid(cid:146) with continuous orders
from the buyers, while price negotiations are taken up
by one of the parties when (cid:145)circumstances(cid:146) encourage it.
Many buyers have stated that
they would normally
expect an explanation of why a price rise is asked.
Increasing pulp prices were mentioned as one such
explanation often given for recent price rises. In such a
market with constant feedback from the customers, no
large long-term contracts, only one competitor on the
market and more or less accepted standards for how to
pass cost increases on to customers, MT and Fort James
would not find it difficult to form precise ideas about
the conditions offered by the other to its customers. The
main factor, which could prevent
them from easily
inferring whether the other had gained market share,
would be the existence of one or more smaller
competitors. The only competitor able to exert such a
restraining influence is SCA.

(150) SCA is likely to have played such a restraining role in
the past. SCA has been trying actively to gain position
in the Finnish market. Thus its advertising expenditure
as a proportion of sales is [more than seven times]*

(15) This was also found in the econometric studies made for the

Kimberly-Clark/Scott case.

[(cid:133)]* % for consumer

larger in Finland than in Sweden. Furthermore, SCA has
provided data to the Commission showing a [(cid:133)]*
EBITDA (16) margin of
tissue
products
in Finland, while the EBITDA margin in
Sweden was [(cid:133)]* %. SCA has explained that the [(cid:133)]*
EBITDA margin in Finland is due to the small volume
of SCA sales combined with advertising and promotion
activities that lead to a [(cid:133)]* margin. SCA’s advertising
and promotion expenditure is thus [around one third]*
of total sales. SCA only entered the Finnish market for
In fact, SCA had
consumer products quite recently.
either no or negligible sales in the years 1995 to 1997.
However,
from 1997 to 1998 the sales of SCA in
branded toilet tissue increased from EUR [25 000]* to
EUR [1 500 000]* and in kitchen towels from EUR
[20 000]* to EUR [1 000 000]*. SCA’s [(cid:133)]* EBITDA
margin should therefore be seen in the context of SCA’s
brand
and
promotion.

advertising

building

through

efforts

(151) Both MT and Fort James are able to offer the same
in Finland. There are no
the
differences

range of
important
products they are able to offer their customers.

tissue products
technological

between

(152) Therefore, the merger would lead to the creation of a
collective dominant position held by the merged entity
and Fort James.

Countervailing buyer power

contains

(153) SCA states in the notification that the existing demand
structure
enough buyers with sufficient
strength to be able to resist any attempt to raise prices
the merger. The
above the competitive level after
Commission does not accept
for the
following reasons.

this argument,

(154) According to SCA, among their largest customers in
Finland, Kesko Oyj accounts for about [40]* % of the
retail market. INEX partners account for [30]* %, Tuko
for [20]* %, Tarjoustalo Oy and Jukka Saastamoinen Oyj
[< 5]* % each.

(155) Buyer power can only be exercised effectively if the
buyer has an adequate choice of alternative suppliers. In
the Commission’s view,
the choice is limited as the
parties and Fort James together would hold 100 % of

(16)

(cid:145)EBITDA(cid:146) margin,
is an acronym for Earnings Before Interest,
Taxes and Depreciation/Amortisation, and as such represents a
pure estimate of how much profit the company obtains compared
to its sales; in other words, it is an indicator of a company’s core
profitability.

L 57/20

EN

Official Journal of the European Communities

27.2.2002

current sales in the markets for toilet tissue and kitchen
towels in Finland.

James in Finland in the markets for branded toilet tissue
and branded kitchen towels.

between

discriminate

(156) Furthermore, it would be easy for firms in a dominant
price
different
position
to
customers as
tissue products are delivered to the
customers. Customers would not be able to counter
price discrimination through arbitrage,
since tissue
products have high transport costs relative to total costs
and customers need just-in-time delivery, often several
times per week. Hence, even if the largest customers
were able to exercise some countervailing buyer power
this would not protect smaller customers and the parties
would still be able to raise prices above the pre-merger
level.

An alternative product market comprising both
branded and private label

(161) SCA’s estimates of the parties’ market shares (measured
toilet
by volume)
tissue and kitchen towels markets in Finland in 1999
are set out in Table 7.

in combined branded/private label

Table 7: SCA’s estimates (cid:151) branded/private label products Finland

Market shares

SCA

MT

SCA/MT

FJ (17)

Toilet tissue

[< 5]* % [50-60]* % [50-60]* % [40-50]* %

Kitchen towels

[< 5]* % [40-50]* % [50-60]* % [50-60]* %

(157)

In the section on the Swedish markets for branded
consumer products,
the Commission explains why it
does not accept the arguments given by SCA in the
Reply for the existence of significant buyer power. The
arguments presented by the Commission are also valid
for
SCA has
well-known brands in Finland and is a major supplier of
those products where it claims that retailers would
retaliate against it.

Finnish market.

In particular,

the

(162)

In these two markets Finland is characterised by the
very strong position of the two domestic producers MT
and Fort James. SCA is, by its own admission, the only
other producer achieving some sales in these markets.
The Commission has compared the sales figures of the
parties with
The
Commission’s investigation has confirmed this picture of
two large and more or less evenly sized competitors.

competitors.

those

their

of

(158)

In the Commission’s view, such (cid:145)buyer power(cid:146) as may
exist would, therefore, not prevent the creation of a
lasting dominant position as a result of the merger.

Market entry

(159) For similar

from their

existing plants. This

reasons as in Sweden, entry with new
capacity in Finland is unlikely. Any new entry into
Finland would have to come from manufacturers that
could deliver
is,
however, also unlikely because of the combination of
high transportation costs and the high costs of entering
with branded products in a stagnating market with
established brands. Market participants do
strong
therefore not consider
the two other
large-scale producers with strong brands, Kimberly-Clark
and Procter & Gamble would enter the Finnish markets
for toilet tissue and kitchen towels. In fact, some market
participants consider
the proposed transaction
could raise the barriers of entry for the Nordic markets.

likely that

that

it

Conclusion

(163) The lack of countervailing buyer power and the fact
that new entry is not likely have been explained above.
Likewise,
tissue
the reasons why the markets
products possess many of the characteristics that are
considered to make markets conducive to collective
dominance have been explained.

for

Conclusion

(164) Even on the basis of a wider product market definition
comprising both branded and private label products, the
proposed operation would result
in a duopolistic
dominant position of SCA/MT and Fort James in Finland
in the markets for toilet tissue and kitchen towels.

Denmark

(165) According to SCA,

total

sales of consumer

tissue
products in Denmark in 1999 were EUR [70-80]*
million, of which approximately [30]* % were branded
products and [70]* % private label products. This is a
the other
considerably different picture from that of
three Nordic countries where the sales of branded

(160) The Commission, therefore, reaches the conclusion that
the proposed transaction would lead to the creation of a
duopolistic dominant position of SCA/MT and Fort

(17) Fort James’ share is calculated by the Commission as the rest of

the market.

27.2.2002

EN

Official Journal of the European Communities

L 57/21

products account for [more than 80 %]* of total sales of
consumer tissue products. In Denmark only in napkins
are branded products sales larger than those of private
label products.

(170)

Branded consumer products

In Denmark the parties have the best known brands.
SCA has provided the same information about brand
awareness and advertising awareness as for Sweden and
Norway. In Denmark, the information is given for Edet,
Lambi, Leni, Lotus and Kleenex. Lambi
is the best
known brand with the awareness fluctuating between
[30]* % and [50]* % of the respondents; Edet was the
second best known with about
[30]* %. Lotus and
Kleenex both are in the range of [5 to 10]* %, while
Leni is hardly known in Denmark.

(166) Among the branded consumer products,

tissue
was
the biggest market with approximately EUR
[10-20]* million, the kitchen towels market was worth
EUR [5-15]*million while that of handkerchiefs/facial
tissues was EUR [< 5]* million and napkins EUR [< 5]*
million.

toilet

(167) SCA’s estimates of the parties’ market shares, measured
by volume, in the markets for branded toilet tissue and
kitchen towels in Denmark in 1999 are set out in Table
8.

Table 8: SCA’s estimates (cid:151) branded products Denmark

(171) Several of the parties’ Danish customers have expressed
concerns about
the proposed
the consequences of
operation. They state that they will have problems in
finding alternative suppliers and that they consequently
expect less competition and higher prices.

(172) The large market shares of

the merging parties,

the
significant difference in weight compared to their
competitors, combined with the fact that the merged
entity would own the best known brands by far in the
Danish market, indicate that the merger would result in
the creation of a dominant position in branded toilet
tissue and kitchen towels.

Market shares

SCA

MT

SCA/MT

Countervailing buyer power

Toilet tissue

[20-30]* % [20-30]* % [40-50]* %

Kitchen towels

[20-30]* % [30-40]* % [50-60]* %

in 1999,

the parties with those of

(168) The market shares given by SCA for the parties for
1998 are quite similar to the 1999 figures. Measured by
value, SCA estimates that,
the parties had
[50-60]* % in toilet tissue and [50-60]* % in kitchen
towels. The Commission has compared the sales figures
their competitors. The
of
Commissioninvestigation has shown that
the parties
would be the market leader in both markets. The main
competitors are Kimberly-Clark with around [10]* %
(volume based) in both toilet tissue and kitchen towels
and Fort James with around [30]* % in toilet tissue and
[35]* % in kitchen towels. The combined market share
of the parties would be [about twice]* as large as Fort
James’ in toilet tissue and more than [25]* % larger in
kitchen towels; it would be [about three times]* as large
as Kimberly-Clark in both markets. The parties have also
submitted that
the Italian producer Delicarta has a
certain presence in branded consumer tissue products in
Denmark. This has not been confirmed by
the
Commission’s market investigation.

(173) According to SCA, among their largest customers in
Denmark, FDB accounts for about [40]* % of the retail
for
market. Supergros
[<5]* %, Edeka for [< 5]* % and Kłbm(cid:230)ndenes for
[< 5]* %.

[25]* %, Aldi

accounts

for

(174)

the Danish market.

In the section on the Swedish markets for branded
consumer products,
the Commission explains why it
does not accept the arguments given by SCA in the
Reply for the existence of significant buyer power. The
arguments presented by the Commission are also valid
for
SCA has
well-known brands in Denmark and is a major supplier
the products where it claims that retailers would
of
retaliate against it.
In Denmark in 1999 SCA had a
share of [50-60]* % of sales of adult incontinence care
products, [30-40]* % of
feminine protection products
and [40-50]* % of baby diapers.

In particular,

(175)

In the Commission’s view, such (cid:145)buyer power(cid:146) as may
exist would, for the same reasons as explained for the
Swedish markets, not prevent the creation of a lasting
dominant position on the Danish markets for branded
toilet tissue and kitchen rolls as a result of the merger.

(169) SCA’s only brand for both toilet

tissue and kitchen
towels is Edet. Edet is mainly produced in SCA’s plant
in Lilla Edet in Sweden. MT has three main brands, the
premium brands Lambi and Leni and the basic brand
Serla. All
three brands are produced in MT’s three
Swedish plants, Katrinefors, Paulistr(cid:246)m and Nyboholm.

(176) For similar

reasons as in Sweden, entry with new
capacity in Denmark is unlikely. Any new entry into
Denmark would have to come from manufacturers that
from their existing plants. The only
could deliver

Market entry

L 57/22

EN

Official Journal of the European Communities

27.2.2002

large-scale producer with strong brands not present in
Denmark is Procter & Gamble. Market participants take
the view that it is not likely that Procter & Gamble will
enter the Danish market. Procter & Gamble confirms
that
entering into supplier
for
relationships in countries where it has so far not been
active. In fact, some market participants consider that
the proposed transaction could raise the barriers of
entry for the Nordic market.

it has no plans

Conclusion

(177) The proposed operation would,

therefore, combine
three well-known brands, resulting in a very strong
market position. Customers would have little choice of
brands with the same attributes and ability to attract
consumers. The new entity would also benefit from a
closer geographic position to the market than its two
main competitors. The new entity would therefore be in
a strong position that could not easily be challenged by
competitors or customers.

(178) The Commission, therefore, concludes that the proposed
operation would result in the creation of a dominant
position in the markets for branded toilet tissue and
kitchen towels in Denmark.

Private label consumer products

(179) According to SCA,

toilet

private

tissue was,

label market

in 1999,
the
biggest
in Denmark with
approximately EUR [30-40]* million, the kitchen towels
market was worth EUR [10-20]* million while that of
handkerchiefs/facial tissues was EUR [< 5]* million and
napkins EUR [< 5]* million.

(180) SCA’s estimates of the parties’ market shares (measured
by volume) in the markets for private label toilet tissue
and kitchen towels in Denmark in 1999 are set out in
Table 9.

Table 9: SCA’s estimates (cid:151) private label products Denmark

Market shares

SCA

MT

SCA/MT

Toilet tissue

[20-30]* % [30-40]* % [60-70]* %

Kitchen towels

[20-30]* % [20-30]* % [40-50]* %

[50-60]* % in toilet

(181) SCA estimates that the parties’ combined share based on
value would be
and
[30-40]* % for kitchen towels. SCA has also provided its
estimates of
the
competitors in toilet tissue as Delicarta and Wepa with
[10-20]* % each, Munksj(cid:246) with [0-10]* % and Fort
James with [0-10]* %. These figures have not been
investigation.
confirmed by the Commission’s market

the market shares (value based) of

tissue

When the Commission compared sales figures of the
parties with those of their competitors it found that the
parties
in 1999 had [approximately two thirds]*
(volume based) of the markets for both toilet tissue and
kitchen towels. Fort James had no sales and Delicarta
and Munksj(cid:246) both had insignificant market presence.

(182) Tissue supply to Denmark mainly originates

the next

from
Sweden, Germany, Belgium or the Netherlands. The
parties account for almost all the Danish private label
imports that originate from Sweden and Norway. The
joint production capacity of SCA and MT in Sweden is
247 000 tonnes, whilst
largest producer,
Munksj(cid:246), with plants in both Sweden and Norway, has
a capacity of less than 60 000 tonnes. The combined
capacity of the parties in Germany and the Netherlands
is over 600 000 tonnes, whilst none
their
competitors has capacity in this area in excess of
160 000 tonnes. The spare capacity of the parties in
this area is larger than the combined spare capacities of
their five major competitors. In line with the principles
in recitals 47 and 48 the Commission has
set out
located
considered the competitive impact of mills
within a distance from where the Danish market can be
economically supplied.

of

(183) The only larger existing competitor

km.

150

in Denmark entails

in Denmark is
Wepa, which has two plants in Germany in Arnsberg
and Giershagen, both situated about 650 km from the
German/Danish border. Delivering to any of the four
least
travelling at
major cities
another
Commission’s market
The
investigation has shown that Wepa would not have the
capacity, in terms of both scale and product range, to
expand significantly beyond its current presence in the
Danish market. Wepa’s strength lies in private label
tissue products made from recycled paper. However, the
Finnish consulting firm Jaakko Poyry in a study (18)
notes with regards to this segment that (cid:145)The highest
share of transportation costs in total product value is
for non-branded toilet paper based on recovered paper,
which is normally not worth shipping more than
500 km. Even here, Wepa supplying some amounts to
northern European markets
represents a remarkable
exception.(cid:146) Wepa is among the companies, which have
indicated 800 km as the distance that tissue products
economically can be supplied. Since Wepa is located
around 800 to 900 km from the major cities
in
Denmark, Denmark is at the limit of what Wepa itself
tissue
considers
products. Growth in German tissue product demand has

transport distance for

the maximal

(18)

(cid:145)Market Structure and Competition in the Paper Tissue Industry(cid:146)
(see footnote 9), p. 9.

27.2.2002

EN

Official Journal of the European Communities

L 57/23

over a period been larger than the average in Western
Europe, partly due to the impact of the reunification,
after which the demand structure in the new L(cid:228)nder has
been adapting
to western consumption patterns.
Germany will also in the foreseeable future account for
a large part of the growth of European tissue demand.
Wepa may therefore find opportunities
to use its
capacity in its home market within a close distance
from its plants, rather than shipping tissue products to
Denmark.

(184) Danish customers have expressed concerns that

this
strong concentration would lead to higher prices and
the market investigation has confirmed that it is unlikely
that competitors would be able to constrain the new
entity’s behaviour
in these markets. The proposed
operation would eliminate a main source of competition
in the Danish private label markets for toilet tissue and
kitchen towels and would leave the new entity in a
position that cannot be challenged by competitors or
customers.

Countervailing buyer power

(185) The structure of

the buyer side in the Danish retail
market is described in the section on branded consumer
products. For reasons similar to those given in that
section the Commission concludes that such (cid:145)buyer
power(cid:146) as may exist would not prevent the creation of a
lasting dominant position as a result of the merger.

Market entry

(186) For similar

reasons as in Sweden, entry with new
capacity in Denmark is unlikely. Any new entry into
Denmark would have to come from manufacturers that
could deliver from their existing plants.

(187)

In its Reply SCA argues that the Commission does not
take into account that the Danish market is contestable
in the supply of private label toilet tissue and kitchen
rolls. In particular, SCA argues that hit-and-run entry is
possible and sufficient to constrain the merged entity
from raising prices. The Commission considers that this
might have been a valid proposition if there had been
manufacturers with spare capacity for private label
production of the required quality close to the Danish
market and logistics arrangements that would permit
them to profitably supply this market. The Commission
has, however, carefully examined the potential for such
hit-and-run entry by existing manufacturers located in

Northern Germany, the Netherlands and Belgium and
concluded that none of these manufacturers are likely to
represent a constraining influence on SCA.

(188) The closest plant owned by one of the competitors is
located around 500 km from the German/Danish
border, a Procter & Gamble plant in Witzenhausen in
Germany. Procter & Gamble also has a plant in Neuss in
Germany, about 600 km from the border. Procter &
Gamble has, however, no sales of tissue products in
Denmark and has no plans for entering the Danish
market in the near future.

(189) Fort

James’ has a plant close to Nijmegen in the
Netherlands, around 630 km from the German/Danish
border. It has no other plants in this area. Fort James
considers that Denmark is substantially further away
than the distance that it can viably transport private
label toilet tissue and kitchen towels.

plants

km from the

it can profitably export

(190) Kimberly-Clark has three plants in Germany (D(cid:252)sseldorf,
Koblenz and Mainz) and one plant in Belgium (Duffel).
These
are 700 to 750 km from the
German/Danish border. Kimberly-Clark states that the
in Europe to the
distance from its existing mills
Scandinavian region limits both the type and volume of
products
into the region.
Kimberly-Clark is not active in sales of private label in
Denmark. However, it does sell premium branded toilet
tissue manufactured at the Duffel mill, approximately
750
border.
Kimberly-Clark has submitted that, because of transport
distances, a manufacturer without a source mill and
warehouse coverage in the Nordic area can only
effectively compete in facial tissues and not in any of
the other categories with the possible exception of the
highest value toilet tissue. Kimberly-Clark furthermore
the Nordic Swan qualification, which
considers that
environmental
local
means
requirements,
is an entry barrier in Sweden and is
becoming one in Denmark and Norway. According to
Kimberly-Clark
Scandinavian manufacturers
produce in such a way that they can get the Swan
stamp.

German/Danish

satisfying

certain

only

(191)

Italian producers

In its Reply SCA also asked the Commission to consider
supplying the
the possibilities of
Danish market
from production facilities in France,
although these plants are further away from the Danish
market than the maximum transport distances indicated
by most market participants. The Commission does not
consider that the hit-and-run entry referred to by SCA
in the Reply is feasible for the Italian producers in
France. The Italian company, which mentioned longer
to the
transport distances
than other
these
Commission’s market
using
distances
transportation by train to external warehouses
in
Germany, France and Spain. The necessity of setting up
such a network would make hit-and-run entry into
Denmark unlikely. Another Italian producer mentioned

investigation,
logistic

respondents

achieves

network

through

a

L 57/24

EN

Official Journal of the European Communities

27.2.2002

tend to look for

that
it did not consider Denmark a natural market
tissue
because Danish customers
products based on recycled paper. The Commission
therefore does not consider that hit-and-run entry by
Italian producers will be
competitive
restraint on the new entity in the Danish market for
private label toilet tissue and kitchen towels.

an effective

Conclusion

(192) The Commission, therefore, concludes that the proposed
operation would result in the creation of a dominant
position in the markets for private label toilet tissue and
kitchen towels in Denmark.

An alternative product market comprising both
branded and private label

(193) SCA’s estimates of the parties’ market shares (measured
toilet
by volume)
tissue and kitchen towels markets in Denmark in 1999
are set out in Table 10.

in combined branded/private label

Conclusion

(196) The proposed operation would eliminate a main source
of competition in the Danish markets for toilet tissue
and kitchen towels and would leave the new entity in a
position that could not be challenged by competitors or
customers.

(197) Even on the basis of a wider market definition the
proposed operation would result in the creation of a
dominant position in combined markets for branded
and private label
tissue and kitchen towels in
Denmark.

toilet

Conclusion on consumer products

(198) The Commission reaches

the

conclusion that

the
proposed operation would result in the creation of a
dominant position in the markets for branded consumer
toilet tissue and kitchen towels in Sweden, Norway and
Denmark,
creation of a duopolistic dominant
position in the markets for branded consumer toilet
tissue and kitchen towels in Finland, and the creation of
a dominant position in the markets for private label
consumer toilet tissue and kitchen towels in Sweden and
Denmark.

the

Table 10: SCA’s estimates (cid:151) branded/private label products
Denmark

AFH products

Market shares

SCA

MT

SCA/MT

General

Toilet tissue

[20-30]* % [30-40]* % [50-60]* %

Kitchen towels

[20-30]* % [20-30]* % [40-50]* %

their

those

competitors.

(194) The Commission has compared the sales figures of the
The
of
parties with
Commission’s investigation has shown that the parties
would be the market leader in both markets. The main
competitors are Wepa with around [20-30]* % (volume
based) in toilet tissue and [20-30]* % in kitchen towel,
tissue and
Fort
[15]* % in kitchen towels, and Kimberly-Clark with
around [5]* % in both toilet tissue and kitchen towels.
The parties’ combined market share would be [more
than twice]* that of Wepa, [more than four times]* that
James and [more than ten times]* that of
of Fort
Kimberly-Clark in both markets.

James with around [10]* % in toilet

(195) The

strength of

the parties’ brands,

lack of
countervailing buyer power and the fact that new entry
is not likely, as described in more detail in the separate
sections on branded and private label also applies to the
combined product market.

the

(199) SCA and MT are both active in the AFH markets, which
account for [50-60]* % and [30-40]* % of their Nordic
sales respectively by value. For AFH the customers are
mainly wholesalers who in turn supply smaller servicing
companies like cleaning companies that again deliver
the tissue product as part of a service package to the
(institutional) customer. Access to wholesalers is
final
and
to be
vital
wholesalers will only carry and market a supplier’s
products through their catalogues and networks if the
suppliers
sufficiently. Such
their products
support includes product innovation, category support
and direct contact between the supplier’s sales force and
end-users.
In addition the supplier must be able to
supply in a reliable manner and (cid:145)just-in-time(cid:146).

in the AFH markets

successful

support

(200) MT’s warehouse in Mariestad, next

to its Katrinefors
plant in Sweden, acts as the distribution centre for AFH
sales to Sweden, Norway and Denmark. Distribution
goes mainly through wholesalers, where the actual
the
to
products
warehouses of wholesalers. MT’s warehouse at
the
M(cid:228)ntt(cid:228) mill acts as the distribution centre for sales in
Finland. SCA produces AFH products at several of its
plants including those in Sweden, Germany and the
Netherlands. Both parties are able to offer whole

from Mariestad

delivered

are

27.2.2002

EN

Official Journal of the European Communities

L 57/25

package solutions, offering dispenser systems along side
rented or
their product
provided free on loan to the final customer, depending
on the country in question.

range. Dispensers are sold,

Sweden such that they are within relatively close reach
of Denmark and Norway.

Sweden

restraining factor

(201) The transport costs involved in moving AFH products
are considered an important
for
suppliers’ ability to compete effectively in the AFH
market. The distances quoted for AFH products by
suppliers, during the Commission’s market investigation,
are on average shorter than those for branded consumer
products. One company quoted the distances it can
economically transport AFH products in the 500 to 600
km range, whilst another estimates up to 800 km.
SCA’s and MT’s distribution facilities are located in

(202) According to SCA, in 1999 the largest AFH market in
Sweden was for hand wiping products which was worth
EUR [30-40]* million, and the markets for toilet tissue
and general wiping products
accounted for EUR
[20-30]* million and EUR [10-20]* million respectively.
The health care tissue market was EUR [<5]* million
and the napkin market was EUR [10-20]* million.

(203) SCA’s estimates of the parties’ market shares (measured
by volume) for AFH products in Sweden in 1999 are set
out in Table 11.

Table 11: SCA’s estimates (cid:151) AFH Sweden

Market shares

SCA

MT

SCA/MT

FJ

KC

Munksj(cid:246)

Other

Toilet tissue

[40-50]* % [40-50]* % [90-100]* %

[< 5]* %

[< 5]* %

[0-10]* %

0[< 5]* %

Hand wipe

[50-60]* % [20-30]* % [70-80]* %

[< 5]* %

[< 5]* %

[10-20]* %

[10-20]* %

General wipe

[40-50]* % [30-40]* % [80-90]* %

[< 5]* %

[< 5]* %

[10-20]* %

2[< 5]* %

Health care

[40-50]* %

[0-10]* % [50-60]* %

[< 5]* %

[< 5]* %

[0-10]* %

[30-40]* %

(204) The structure shown in Table 11 remains

largely
unchanged irrespective of whether value based data or
data from 1997 or 1998 are studied. The Commission’s
market
investigation has also confirmed this market
a very strong
structure. The parties would have
combined position in toilet tissue ([90-100]* %), hand
wiping ([70-80]* %) and general wiping ([80-90]* %). In
health care, based on SCA’s market data, they would
equally have a strong position ([50-60]* %).

(205) The next largest competitor in the tissue markets for
tissue, hand wiping and general wiping is
James nor Kimberly-Clark has

toilet
Munksj(cid:246). Neither Fort
gained foothold in the AFH market in Sweden.

(206)

In health care, the parties’ market share of [50-60]* %,
as
estimated by SCA, would already lead to a
presumption of dominance. According to SCA, Munksj(cid:246)
is the next largest competitor. A large proportion of the
market has been attributed to (cid:145)other’ competitors, but
the parties have only been able to identify one small
company in this segment. The Commission’s market
sizeable
investigation did not
competitor exists in the AFH health care market that
would be able to restrain the combined market power
of SCA and MT. Munksj(cid:246)’s market share amounts to
only [one eighth]* of that of SCA/MT ([0-10]* % versus
[50-60]* %, according to SCA data). The Commission,

confirm that

any

share

therefore, concludes that the, already high, AFH health
care market
notification
provided
significantly understates SCA/MT’s true market position.
In the absence of any credible competitors, the notified
lead to the creation of a
operation would, therefore,
dominant position in the market for AFH health care
products in Sweden.

the

in

a

at

(207) SCA produces the majority of its AFH products at its
Swedish plant, Lilla Edet, and MT produces most of its
AFH products at the Katrinefors mill in Sweden. With
the exception of Munksj(cid:246) other competitors must
from production sites outside
transport products
Sweden and
competitive
thus placed
are
disadvantage. For AFH customers a key factor is the
supplier’s ability to supply just-in-time in a reliable
manner. A potential entrant must therefore have a local
presence in the form of a warehouse or a production
plant. Given the high transport costs associated with
tissue products the only large competitor with the
potential of competing effectively in Sweden is Fort
James, yet it has not been able to gain a significant part
of the market. AFH customers and competitors have
expressed
proposed
concentration. The customers’ main concerns were the

concerns

serious

about

the

L 57/26

EN

Official Journal of the European Communities

27.2.2002

(208)

creation of a monopoly situation with higher prices, less
choice to offer their own customers and making it
increasingly difficult for foreign competitors to enter the
Swedish market.

In Sweden, as elsewhere, AFH products are mainly sold
through wholesalers and access to such wholesalers is of
vital importance for any potential entrant. The proposed
concentration would
a
stranglehold on the wholesale channels, as it would be
supplier. The
the wholesalers’ main,
additional
to win
wholesalers’ confidence to switch to new suppliers
would create a barrier to entry thereby making market
entry or growth more difficult for new competitors.

if not only,
be

the merged

that must

incurred

entity

give

cost

(209) The proposed concentration would result in the creation
of a single firm with market shares in excess of [75]* %
in three AFH markets (toilet tissue, hand wiping and
general wiping) and in excess of [50]* % in the health
real or
care tissue market, with little prospect of
potential competition. The present consumers express
serious concerns about
the proposed concentration,
which they predict will result in higher prices and less
choice for the final consumer.

Market entry

(211) New entry into the Swedish market is not likely for the
reasons outlined in the sections on consumer tissue
products. Any new entry into Sweden would have to
come from manufacturers that could deliver from their
existing plants. This is, however, also unlikely because
of the combination of high transportation costs and the
difficulty of developing a distribution network through
wholesaler who are already supplying the parties’
products. The obstacles to entering the Swedish AFH
market are further compounded by the country’s low
population density,
long transport distances and the
smaller order sizes typical for AFH customers. Market
participants do therefore not consider it likely that other
large-scale producers with a wide
range of AFH
products would enter the Swedish AFH markets. In fact,
the proposed
some market participants consider that
transaction could raise the barriers-to-entry for
the
Nordic markets. The difficulties of entering in Sweden
are further illustrated by the fact that Fort James, which
has production facilities in neighbouring Finland, has
hardly achieved any market share in Sweden.

Countervailing buyer power

Conclusion

more

in the

segment,

dispersed

consumer

(210) According to SCA, the demand side in the AFH markets
is not as concentrated as that in the consumer product
markets. This is due to the number and variety of the
different distribution channels in the AFH markets. As
outlined above in the section on geographic markets,
the majority of AFH customers are wholesalers, which
are on average much smaller than the major retail
to a
leading
chains
base.
significantly
customer
Multinational corporate buyers only account
for a
minority of purchases in the AFH segment and cannot
significantly alter the overall distribution of bargaining
power
and AFH
between
customers. Furthermore,
the operation would create
strong or dominant market positions of SCA across a
in Sweden. Therefore, as
wide range of products
explained in the section on the Swedish markets for
branded consumer products, the Commission finds that
such (cid:145)buyer power(cid:146) as may exist would not prevent the
creation of a lasting dominant position as a result of the
merger.

tissue manufacturers

(212) The Commission, therefore, concludes that the proposed
operation would result in the creation of a dominant
position in the markets for AFH toilet
tissue, hand
wiping tissue, general wiping tissue and health care
tissue in Sweden.

Norway

(213) According to SCA,

in 1999 the AFH hand wiping
market was the largest with EUR [20-30]* million,
followed by the toilet tissue market, which was worth
EUR [10-20]* million, and the general wiping market of
EUR [5-15]* million. The markets of health care and
napkins were worth EUR [< 5]* million and EUR
[0-10]* million respectively.

(214) SCA’s estimates of the parties’ market shares (measured
by volume) for AFH products in Norway in 1999 are
set out in Table 12.

27.2.2002

EN

Official Journal of the European Communities

L 57/27

Table 12: SCA’s estimates (cid:151) AFH Norway

Market
shares

SCA

MT

SCA/MT

FJ

KC

Munksj(cid:246)

Skjaerdal

Other

Toilet tissue

[10-20]* % [40-50]* % [60-70]* %

[< 5]* %

[< 5]* %

[5-15]* %

[< 5]* % [20-30]* %

Hand wipe

[40-50]* % [50-60]* % [90-100]* %

[< 5]* %

[< 5]* %

[< 5]* %

[< 5]* %

[< 5]* %

General
wipe

[30-40]* % [30-40]* % [60-70]* %

[< 5]* %

[< 5]* % [20-30]* % [10-20]* %

Health care

[0-10]* % [10-20]* % [10-20]* %

[< 5]* %

[< 5]* %

[< 5]* %

[< 5]* % [80-90]* %

(215) The general structure remains the same irrespective of
whether value based data or data from 1997 or 1998
are studied. The Commission’s market investigation has,
with the
also broadly
confirmed the parties relative market shares. The parties’
own figures indicate that they would have very strong
combined positions in the markets for
tissue
([60-70]* %), hand wiping ([90-100]* %) and general
wiping ([60-70]* %).

exception of health care,

toilet

(216) For health care products SCA estimates

that

through

distributors.

the
combined market share of the parties is [10-20]* %
The
sales
all
with
going
contacted all manufacturers with
Commission has
known sales of
in Norway. These
tissue products
companies all responded that they had no sales of AFH
health care tissue products. The parties’ Norwegian
customers did not indicate any other companies with
sales of AFH health care products. SCA, when
approached by the Commission, did not subsequently
identify any other tissue product manufacturer with
confirmed sales in this product market. Nor did SCA in
the Reply identify any such manufacturer. Based on the
information from manufacturers with known sales of
in Norway and the parties’ AFH
tissue products
the Commission’s market
customers
the
investigation therefore indicates
merger would be the only supplier in the AFH health
care market in Norway.

that SCA after

in Norway,

(217) However,

very

even if

there were other

small
manufacturers, unknown to the Commission and the
parties, with some sales of AFH health care products in
Norway, they would not be in a position to provide a
competitive constraint on the parties. AFH health care
products (e.g. examination couch covers) are sold to
hospitals along with other AFH tissue products such as
toilet tissue and hand wiping. Since none of the parties’
competitors in these markets have any presence in
health care and SCA would be dominant in the three
major AFH tissue products markets (toilet tissue, hand
the
wiping

and general wiping),

results of

the

Commission’s investigation can only lead it to conclude
that SCA would after the merger be the dominant
supplier of AFH tissue products to the health care
sector.

(218)

In the markets for toilet tissue, hand wiping and general
wiping the parties are at present
the two largest
competitors and the only other competitors with market
presence are Munksj(cid:246) and Skjaerdal, who are both small
local players with little ability or capacity to challenge
the parties. Fort James and Kimberly-Clark are barely
present in these AFH markets in Norway.

(219) The Commission’s market

investigation has indicated
serious concerns from AFH customers. One wholesaler
said: (cid:145)this merger will not be good for competition and
the development of tissue products in Scandinavia (cid:133)
prices will
increase (cid:133) consumers will not have the
same choice as today(cid:146). Another said: (cid:145)It will take a long
time for new competitors to become established in the
market. It must have access to production capacity in
Scandinavia.(cid:146)

Countervailing buyer power

(220) According to SCA, the demand side in the AFH markets
is not as concentrated as that in the consumer product
markets. This is due to the number and variety of the
different distribution channels in the AFH markets. As
outlined in the section on geographic markets,
the
majority of AFH customers are wholesalers, which are
on average much smaller than the major retail chains in
the consumer segment, leading to a significantly more
dispersed customer base. Multinational corporate buyers
only account for a minority of purchases in the AFH
the overall
segment and cannot
tissue
distribution
manufacturers and AFH customers. Furthermore,
the
operation would create strong or dominant market
positions of SCA/MT across a wide range of products in
Norway. Therefore, as explained in the section on the

significantly alter
power

bargaining

between

of

L 57/28

EN

Official Journal of the European Communities

27.2.2002

Norwegian markets for branded consumer products, the
Commission finds that such (cid:145)buyer power(cid:146) as may exist
would not prevent the creation of a lasting dominant
position as a result of the merger.

creation of a dominant position in the markets for AFH
toilet tissue, hand wiping tissue, general wiping tissue
and health care tissue in such a geographic market.

Market entry

(221) New entry into the Norwegian market is not likely for
the reasons outlined in the sections on consumer tissue
products. Any new entry into Norway would have to
come from manufacturers that could deliver from their
existing plants. This is, however, also unlikely because
of the combination of high transportation costs and the
difficulty of developing a distribution network through
wholesalers who are already supplying the parties’
products. The obstacles to entering the Norwegian AFH
market are further compounded by the country’s low
population density,
long transport distances and the
smaller order sizes typical for AFH customers. Market
participants do therefore not consider it likely that other
range of AFH
large-scale producers with a wide
products would enter the Norwegian AFH markets. In
fact,
the
proposed transaction could raise the barriers of entry
for the Nordic markets. The difficulties of entering in
Norway is further illustrated by the fact that Fort James,
which has production facilities in neighbouring Finland,
has hardly achieved any market presence in Norway.

some market participants

consider

that

Conclusion

(222) The proposed concentration would result in the creation
in excess of
of a single firm with market
[55-65]* % in three AFH markets (toilet
tissue, hand
wiping and general wiping). The present competitors in
this market are unable to provide sufficient competitive
restraint on the parties and new entrants are unlikely to
emerge in the near future.

shares

(223) The Commission, therefore, concludes that the proposed
operation would result in the creation of a dominant
position in the markets for AFH toilet
tissue, hand
wiping tissue, general wiping tissue and health care
tissue in Norway.

their

competitors

(225) Many market characteristics such as the fact that entry
is not likely, the large capacity of the parties relative to
that of
cost
advantage relative to the large-scale competitors, Fort
James and Kimberly-Clark, have already been described
in the assessment of the Swedish and the Norwegian
markets. These market characteristics are equally valid
for a combined Swedish-Norwegian geographic market.

transport

and the

less

and

than

[5]* % in

(226) The Commission’s market investigation has shown that
the position of
in such a combined
the parties
Swedish-Norwegian market would be very strong. The
parties would have a combined market share of around
[70-80]* % in the market for toilet tissue, [80-90]* % in
the market for hand wiping and [70-80]* % in general
wiping. Munksj(cid:246) would be the largest competitor with
around [15]* % in toilet tissue and general wiping and
around [10]* % in hand wiping. Skjaerdal would have
around [10]* % in general wiping. Fort
James would
have around [5]* % in both toilet tissue and general
wiping
hand wiping.
Kimberly-Clark would have less than [5]* % in toilet
tissue, hand wiping and general wiping. The parties
would have [more than four times]* the market share of
three product markets.
the largest competitor in all
Furthermore, Munksj(cid:246) and Skjaerdal are small
local
manufacturers, while Fort James and Kimberly-Clark are
disadvantaged by having production facilities further
away from Sweden and Norway than the parties.
In
AFH health care the Commission’s market investigation
has shown that the parties would be by far the largest
supplier with a market share over [50-60]* % and with
no competitor with more than [5]* %. As explained in
the assessment of the Norwegian AFH markets, AFH
health care tissue products are purchased with other
AFH tissue products. Since SCA would be dominant in
the three major AFH tissue products markets (toilet
tissue, hand wiping and general wiping), this reinforces
the conclusion that SCA would after the merger be the
dominant supplier of AFH tissue products to the health
care sector.

(227) Even on the basis of a wider geographic market
definition the proposed operation would result in the
creation of a dominant position in the markets for AFH
toilet tissue, hand wiping tissue, general wiping tissue
and health care tissue.

An alternative, Swedish-Norwegian geographic market

Finland

the Commission considers that

(224) As described in the section on geographic market
there are
definition,
several arguments that point
to the conclusion that
geographic markets are national. However, even if
Sweden and Norway were considered one geographic
the proposed operation would lead to the
market,

(228) According to SCA,

the hand wiping market of EUR
[10-20]* million in 1999 was the largest AFH market,
followed by the toilet tissue market, which was worth
EUR [10-20]* million and the general wiping market of

27.2.2002

EN

Official Journal of the European Communities

L 57/29

EUR [10-20]* million. The markets of health care and
napkins were worth EUR [< 5]*million and EUR [< 5]*
million respectively.

(229) SCA’s estimates of the parties’ market shares (measured
by volume) for AFH products in Finland in 1999 are set
out in Table 13.

Table 13: SCA’s estimates (cid:151) AFH Finland

Market shares

SCA

MT

SCA/MT

FJ

Other

Toilet tissue

[< 5]* %

[30-40]* %

[40-50]* %

[20-30]* %

[20-30]* %

Hand wiping

[0-10]* %

[60-70]* %

[60-70]* %

[30-40]* %

[< 5]* %

General wiping

[< 5]* %

[30-40]* %

[40-50]* %

[20-30]* %

[30-40]* %

(230)

In Finland, as in Sweden and Norway, the market is
characterised by the very strong position of the two
domestic producers, which here, however, are MT and
James. SCA can only be described as a minor
Fort
its largest
player on the Finnish AFH tissue markets,
position being in the hand wiping market where it
accounts for [0-10]* % of the market. The volume based
market shares given by SCA for toilet tissue and general
wiping for 1998 are very similar to those given for
1999. In hand wiping, however, SCA gives the parties a
combined position of
[70-80]* % in 1998 and Fort
James [20-30]* %. If value figures are used SCA gives
MT’s market
in 1999 as
for
[50-60]* % and for general wiping as [20-30]* %.

tissue

share

toilet

(231) The Commission has

contacted all manufacturers
tissue
identified by the parties as having sales of
products in Finland. Besides the parties and Fort James,
only two of those manufacturers have confirmed that
they have sales in the AFH markets in Finland. These
two manufacturers together have [less than 5]* % of the
total sales of
the five manufacturers with confirmed
sales
in Finland. The remaining sales are divided
between the parties and Fort James, with MT having
[around 60]* % for general wiping and [around 60]* %
for toilet tissue and hand wiping, SCA [above 5]* % in
all three markets, and Fort James [around 25]* % in
toilet tissue and hand wiping and [30]* % in general
wiping.

(232) The Commission’s market

investigation

therefore
indicates that MT already holds a dominant market
the
position in these three AFH markets and that
addition of SCA’s market share will strengthen this
position.
sizeable
competitor in these markets, but it has substantially less
market presence than MT and it is unlikely that Fort
James could restrain the behaviour of the merged entity.

the only other

James

Fort

is

to the

segment,

consumer

Fort James and MT have at present over capacity in
their Finnish plants and with the exception of SCA there
little prospect of new significant-scale entry in
is
Finland. Similarly
the
geographic proximity of SCA’s Swedish operations
places the company in a much stronger position than
any other company to effectively compete in Finland.
The parties’ argument in their Reply that Kimberly-Clark
and Procter & Gamble constitute equally likely entrants
to the Finnish market can therefore not be confirmed.
In addition, both Kimberly-Clark and Procter & Gamble
emphasised in their replies to the Commission’s market
investigation that they consider the barriers of entry to
the Nordic tissue markets as higher
than in other
regions.

Countervailing buyer power

(233) According to SCA, the demand side in the AFH markets
is not as concentrated as that in the consumer product
markets. This is due to the number and variety of the
different distribution channels in the AFH markets. As
outlined in the section on geographic markets,
the
majority of AFH customers are wholesalers, which are
on average much smaller than the major retail chains in
the consumer segment, leading to a significantly more
dispersed customer base. Multinational corporate buyers
only account for a minority of purchases in the AFH
the overall
segment and cannot
tissue
distribution
manufacturers and AFH customers. Furthermore,
the
operation would create strong or dominant market
positions of SCA across a wide range of products in
Finland. Therefore, as explained in the section on the
the
Finnish markets for branded consumer products,

significantly alter
power

bargaining

between

of

L 57/30

EN

Official Journal of the European Communities

27.2.2002

Commission finds that such (cid:145)buyer power(cid:146) as may exist
would not prevent the creation of a lasting dominant
position as a result of the merger.

transaction could raise the barriers of entry for the
Nordic markets.

Market entry

(234) New entry into the Finnish market is not likely for the
reasons outlined in the sections on consumer tissue
products. Any new entry into Finland would have to
come from manufacturers that could deliver from their
existing plants. This is, however, also unlikely because
of the combination of high transportation costs and the
difficulty of developing a distribution network through
wholesaler who are already supplying MT’s and/or Fort
James’ products. The obstacles to entering the Finnish
AFH market are further compounded by the country’s
low population density, long transport distances and the
smaller order sizes typical for AFH customers. Market
participants do therefore not consider it likely that the
other large-scale producers with a wide range of AFH
products would enter the Finnish AFH markets. In fact,
the proposed
some market participants consider that

Conclusion

(235) The Commission, therefore, concludes that the proposed
operation would result
in the strengthening of a
dominant position in the markets for AFH toilet tissue,
hand wiping tissue and general wiping tissue products
in Finland.

Denmark

(236) SCA provides

sizes

for AFH
the following market
products in Denmark in 1999: hand wiping was the
largest AFH market worth EUR [10-20]* million, the
toilet tissue market was worth EUR [10-20]* million
and the general wiping market was EUR [10-20]*
million. The market for health care tissue products was
EUR [< 5]* million and the napkin market was EUR
[5-15]* million.

(237) SCA’s estimates of the parties’ market shares (measured
by volume) for AFH products in Denmark in 1999 are
set out in Table 14.

Table 14: SCA’s estimates (cid:151) AFH Denmark

Market share

SCA

MT

SCA/MT

FJ

KC

Other

Toilet tissue

[20-30]* %

[20-30]* %

50-60]* %

[10-20]* %

[10-20]* %

[20-30]* %

Hand wipe

[30-40]* %

[30-40]* %

[60-70]* %

[10-20]* %

[10-20]* %

[< 5]* %

General wipe

[20-30]* %

[10-20]* %

[40-50]* %

[10-20]* %

[10-20]* %

[20-30]* %

investigation has confirmed that

(238) The general pattern emerging remains unchanged if
value based data or data from 1997 or 1998 are
studied. It should be noted, however, that SCA’s figures
indicate that MT has been losing market share in toilet
tissue (from [40-50]* % in 1997). The Commission’s
market
the parties
would have a strong combined position in toilet tissue,
hand wiping and general wiping. In all three markets
the new entity would have [more than 50]* % market
share and be [more than twice]* as large as the next
considerably
competitor,
overestimated the market shares of Kimberly-Clark;
in
fact, the combined market share of SCA and MT would
be [more than ten times]* that of Kimberly-Clark in all
three markets. The other two manufacturers, which
have indicated sales of AFH tissue products in Denmark,
each sell [less than 10]* % of the combined sales of SCA
and MT

SCA has

James.

Fort

(239) Denmark is supplied mainly with AFH products from
SCA and MT warehouses in Sweden, although some
products could originate from the German or Dutch
plants. Kimberly-Clark and Fort James supply the market
from further afield and can not be relied upon to
provide sufficient competitive restraint on the merged

entity. Kimberly-Clark, for example, does not believe it
competes significantly on the AFH markets in Denmark.
This is because Denmark is situated at the boundary of
the distance where Kimberly-Clark can economically
supply. Second-tier companies located in Germany, the
Netherlands or Belgium can similarly not be relied upon
to provide competitive restraint on the Danish AFH
market. They are unlikely to be able to gain access to
wholesalers owing to their inability to provide the range
of products and the level of service required and they
mainly operate in niche markets (such as products made
from recycled paper or supplies to smaller customers).

(240)

costs

limited

transport

flexibility

In addition, the second-tier firms are disadvantaged by
high
in
and
production. Given their more limited scale and scope
(both with regards to product range and geographic
coverage), most second-tier players consider that any
attack on the first-tier firms in their core markets would
be met with retaliatory action (such as targeted price
reductions)
that could ultimately drive them out of
business. Contrary to the view expressed by the parties
in the Reply,
it is therefore unlikely that any of the
smaller companies located further away would be able

27.2.2002

EN

Official Journal of the European Communities

L 57/31

to compete effectively against a merged SCA/MT on the
Danish market.

it likely that other large-scale producers with a wide
range of AFH products would enter the Danish AFH
markets. In fact, some market participants consider that
the proposed transaction could raise the barriers of
entry for the Nordic markets.

(241) The Commission’s market

investigation revealed that
several wholesalers had serious concerns as
to the
impact of the merger, because the choice of suppliers
would become extremely narrow if the operations of
SCA and MT were combined.

Conclusion

(242) The AFH hand wiping market is the most important
AFH market in Denmark. The merger would combine
the two largest competitors, which would then control
[more than two thirds]* of the market. Even now each
of SCA and MT are [more than twice]* the size of their
closest competitors. For AFH toilet tissue SCA would
have a combined market share [over three times]* the
size of
for
general wiping SCA would be [more than twice]* the
size of its competitors.

its next competitor, and in the market

Countervailing buyer power

(243) According to SCA, the demand side in the AFH markets
is not as concentrated as that in the consumer product
markets. This is due to the number and variety of the
different distribution channels in the AFH markets. As
outlined in the section on geographic markets,
the
majority of AFH customers are wholesalers, which are
on average much smaller than the major retail chains in
the consumer segment, leading to a significantly more
dispersed customer base. Multinational corporate buyers
only account for a minority of purchases in the AFH
the overall
segment and cannot
distribution
tissue
the
manufacturers and AFH customers. Furthermore,
operation would create strong or dominant market
positions of SCA across a wide range of products in
Denmark. Therefore, as explained in the section on the
the
Danish markets for branded consumer products,
Commission finds that such (cid:145)buyer power(cid:146) as may exist
would not prevent the creation of a lasting dominant
position as a result of the merger.

significantly alter
power

bargaining

between

of

Market entry

(244) New entry into the Danish market is not likely for the
reasons outlined in the sections on consumer tissue
products. Any new entry into Denmark would have to
come from manufacturers that could deliver from their
existing plants. This is, however, also unlikely because
of the combination of high transportation costs and the
difficulty of developing a distribution network through
wholesaler who are already supplying the parties’
products. Market participants do therefore not consider

(245) The proposed transaction would bring together the two
largest AFH suppliers in Denmark setting them apart
from the rest of the competitors, thereby substantially
In the
changing the market
absence of strong competitive restraint from the present
incumbents or from potential entrants the proposed
transaction would give rise to a dominant position of
SCA.

structure in Denmark.

(246) The Commission, therefore, concludes that the proposed
operation would result in the creation of a dominant
tissue, hand
position in the markets for AFH toilet
wiping tissue and general wiping tissue in Denmark.

Conclusion on AFH products

(247) The Commission concludes that the proposed operation
would result in the creation of a dominant position in
the markets for AFH toilet
tissue, hand wiping and
general wiping in Sweden, Norway and Denmark and in
the health care tissue market in Sweden and Norway
and in the strengthening of a dominant position in the
markets for AFH toilet tissue, hand wiping tissue and
general wiping tissue products in Finland.

V. COMMITMENTS

the Commission’s investigation pursuant

(248) Commitments were offered by SCA during the first
phase of
to
Article 6(2) of the Merger Regulation to form the basis
for a decision pursuant
to Article 6(1)(b). Those
commitments were rejected as they did not fully address
the concerns identified by the Commission. The same
commitments were re-submitted on 10 January 2001
with a view to obtaining a decision pursuant to Article
8(2) of
the Merger Regulation. They comprised the
following divestitures: .[(cid:133)]*.

that

these remedies are sufficient

(249) SCA submits in its Reply to the Commission’s Statement
to
of Objections
resolve the concerns
raised by the Commission in
branded consumer tissue products in Sweden, Norway
and Denmark, private label consumer tissue products in
Sweden and AFH tissue markets in Sweden, Norway and
Denmark. SCA furthermore argues that no remedies are

L 57/32

EN

Official Journal of the European Communities

27.2.2002

necessary for private label consumer tissue products in
Denmark and for Finnish tissue products.

(250) However,

from the competitive assessment made in
Section IV it follows that the Commission considers the
proposed commitments insufficient because they do not
the competition issues identified for
address any of
consumer and AFH tissue products in Finland or for
private label consumer tissue products in Denmark.

(251) For

other markets

offered would

SCA submits
to
lead

that
the
the
commitments
substantial
reductions in market shares and would therefore remedy
the problems identified. The Commission considers that
the divested production capacity would not be sufficient
for the buyer to compete effectively with the merged
entity. The historic market shares of the divested brands
do therefore not reflect the competitive restraint that
the buyer of the divestment package would be able to
exert in these markets.

high

[(cid:133)]*

quality

is not

package,

that a buyer of

(252) Of MT’s three Swedish mills, only [(cid:133)]* are configured
to produce high quality virgin fibre-based consumer
products. Both [(cid:133)]*, the major brands included in the
divestment
virgin
require
fibre-based inputs.
included in the
divestment package while capacity figures provided by
the divestment
the parties suggest
package relying only on the capacity of the [(cid:133)]* to
produce high quality consumer tissue products would
constrained in satisfying the
be
current
capacity
demands of
[(cid:133)]* and other high quality consumer
tissue products from MT’s Swedish mills. A new owner
would therefore not have the capacity to compete
aggressively in the markets for branded consumer toilet
tissue and kitchen towels
in Sweden, Norway and
Denmark, since it would not have the spare capacity to
it
meet additional demand. By the same reasoning,
would not have the capacity to enter the Finnish market
with high quality consumer products or to compete for
high quality virgin fibre-based private label contracts
anywhere in the Nordic region.

(253) The Commission considers that

these products

the buyer could not
economically produce high quality virgin fibre-based
consumer products at the [(cid:133)]*. The production process
for
to the production
is different
processes for AFH grade virgin fibre based tissue and
recycled fibre based tissue, which are the products
produced
the
Commission that producing premium quality virgin
fibre-based consumer products at the [(cid:133)]* would as a
minimum involve changing the configurations of the

SCA has

informed

[(cid:133)]*.

the

at

[(cid:133)]* paper machines and adapting the machinery used
in the converting lines. However, the current converting
machines at [(cid:133)]* would not be optimal in producing
small series of high-quality products; therefore, it would
be better for such machines to be replaced with more
in
flexible converting equipment. According to SCA,
order to produce a substantial quantity of high-quality
virgin-fibre based consumer tissue at the [(cid:133)]* mill the
new owner would be likely to find it economically
preferable to replace one of the current paper machines,
of
a
which would
approximately EUR 50 million.
the
operation of the [(cid:133)]* mill is optimised to utilise fully
its de-inking capacity in order to produce recycled
fibre-based tissue. Changing that structure in order to
produce more high quality virgin fibre-based tissue may
mean that
the de-inking plant and
energy plant would not be fully used.

investment
Furthermore,

the capacity of

involve

total

(254)

In addition, the buyer of the divested assets would not
be able to compete in the Finnish markets for consumer
since SCA
and AFH products using [(cid:133)]* brands,
proposes to divest these brands only in Sweden, Norway
and Denmark. The buyer of the divested assets would
therefore not be in a position to exert
the same
competitive restraint that SCA exerts today on the two
main competitors in Finland (MT and Fort James).

(255) For these reasons, the Commission concludes that the
commitments offered are not sufficient to address all
competition problems identified.

VI. CONCLUSION

since it would create or

(256) For all the above reasons, the Commission concludes
that the notified concentration is incompatible with the
common market and the functioning of
the EEA
strengthen a
agreement,
dominant position in the markets for branded consumer
toilet tissue and kitchen towels in Sweden, Norway and
Denmark, a duopolistic dominant position in the
markets for branded consumer toilet tissue and kitchen
towels in Finland, a dominant position in the markets
for private label consumer toilet
tissue and kitchen
towels in Sweden and Denmark, AFH toilet tissue, hand
wiping and general wiping in Sweden, Norway and
Denmark and the AFH health care tissue markets in
Sweden and Norway and in the strengthening of a
dominant position in the markets for AFH toilet tissue,
hand wiping tissue and general wiping tissue products
in Finland, as a result of which effective competition
would be significantly impeded in the common market.

27.2.2002

EN

Official Journal of the European Communities

L 57/33

The operation is therefore to be declared incompatible
with the common market pursuant to Article 8(3) of
the Merger Regulation and with the functioning of the
EEA Agreement pursuant to Article 57 thereof,

HAS ADOPTED THIS DECISION:

Article 2

This Decision is addressed to:

SCA M(cid:246)lnlycke Holding BV
Arnhemse Bovenweg 120
670 AR Zeist
The Netherlands

Article 1

Done at Brussels, 31 January 2001.

The operation notified by SCA M(cid:246)lnlycke Holding BV (SCA)
on 11 August 2000, whereby SCA would acquire sole control
of Mets(cid:228) Tissue Corporation, is hereby declared incompatible
with the common market and the functioning of the EEA
Agreement.

For the Commission

Mario MONTI

Member of the Commission