2005/452/EC: Commission Decision of 6 October 2004 declaring a concentration compatible with the common market and the EEA Agreement (Case COMP/M.3431 — Sonoco/Ahlstrom) (notified under document number C(2004) 3678)
Date: 2004-10-06
Institutions: European Commission
Subjects: economic concentration, merger control, packaging

22.6.2005

EN

Official Journal of the European Union

L 159/13

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 6 October 2004

declaring a concentration compatible with the common market and the EEA Agreement
(Case COMP/M.3431 — Sonoco/Ahlstrom)

(notified under document number C(2004) 3678)

(Only the English text is authentic)

(2005/452/EC)

On 7 January 2004 the Commission adopted a Decision in a merger case under Council Regulation
(EEC) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings (1),
and in particular Article 8(2) of that Regulation. A non-confidential version of the full Decision can be
found in the authentic language of the case and in the working languages of the Commission on the
website of the Directorate-General for Competition, at the following address: http://europa.eu.int/comm/
competition/index_en.html

(1)

(2)

(3)

I. OVERVIEW

The US-based company Sonoco and the Finnish under-
taking Ahlstrom notified to the Commission their
intention to create a joint venture to which they
European
respective
planned
coreboard and cores businesses. Cores
tubes
are
produced from coreboard. They are normally used as
the base around which various products, such as paper,
film and yarn are wound.

contribute

their

to

The investigation identified serious concerns
in the
markets for high-end paper mill cores and low-value
cores in some regions of northern Europe. The parties
submitted remedies to address these concerns in the first
phase. They proposed to divest
in
Norway, which produces both affected products.

the Sveberg plant

The remedy removes, almost completely, the increment
in market shares caused by the merger. However, the
market test conducted in the first phase revealed that
market participants had concerns about the remedy parti-

(1) OJ L 395, 30.12.1989, p. 1. Regulation last amended by Regulation

(EC) No 1310/97 (OJ L 180, 9.7.1997, p. 1).

cularly in regard to its bad geographic location and the
viability of the divested business. Since this remedy did
therefore not clearly remove the serious doubts at this
stage, the Commission opened second phase proceedings
on 5 July 2004.

During the second phase the parties were able remove
the concerns as to the location of the Sveberg plant by
submitting convincing evidence on transportation costs.
In addition, they offered a ‘fix-it-first’ solution so that the
Commission could ensure that a suitable buyer is found
before the parties could complete their deal. This
measure ensured the viability of the business. This was
confirmed by the second market test.

II. THE RELEVANT PRODUCT MARKETS

Coreboard is a paper/board material used primarily for
manufacturing paper cores. The key characteristic of
coreboard is its ability to resist delamination, which is
measured in Joules per square meter (J/m2). There is only
a limited degree of demand-side and supply-side substi-
tutability. The high-grade (delamination resistance >375
J/m2) producers can easily switch production to low-
grade (delamination resistance <375 J/m2),
low-grade

(4)

(5)

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Official Journal of the European Union

22.6.2005

to
producers need to make important
produce high-grade coreboard.
the above,
high-grade and low-grade coreboard can be considered
to constitute the relevant product markets for coreboard.

investments

In light of

supplying plant. Within
500 km away from the
Continent
are
of
indicated, while only minor trade flows occur between
this region, and Scandinavia, Finland or UK/Ireland.

trade-flows

numerous

Europe

(6)

(7)

(8)

(9)

substitutability,

to demand-side

Paper cores are tubes produced from coreboard by spiral
or parallel winding processes, normally used as the base
around which various products (e.g. paper, film, adhesive
fabric, and yarn) are wound. There are clear
tape,
limitations
although
some cores may be suitable for several applications.
The market investigation confirmed that especially for
the production of high-value products, such as high-
end paper mill cores (PMC) and yarn carriers, specific
know-how and machinery are needed. Supply-side substi-
tutability exists to a sufficient degree between the less
sophisticated cores. However,
cores
the
requires some additional investments.

coating of

(11) As a result of the market investigation four geographic
markets were identified: (i) Continental Europe (leaving
open the question whether a further separation in a
is appropriate as was
Northern and a Southern part
suggested by some respondents),
(ii) the Scandinavian
countries (leaving open the question whether Denmark
should be
(iii) Finland and (iv)
UK/Ireland. The division of the Continental market and
the question as to whether Denmark should be included
in the Scandinavian market can be left open, since the
competitive assessment does not change.

included or not),

As a result, three different product markets can be distin-
guished: one for high-end PMC, one for yarn carriers, and
one for low-value cores leaving open whether coated film
cores are included or constitute a separate product
market, as this made no difference to the competitive
assessment.

(12)

In this case the question whether

Yarn-carriers.
the
market should to be defined according to the above
mentioned regions or as EEA-wide can be left open
since the final assessment does not change under either
of both definitions.

III. THE RELEVANT GEOGRAPHIC MARKETS

investigation
Even though the market
Coreboard.
indicated some focus of the suppliers on broad regions,
the markets for coreboard nevertheless have an EEA-wide
dimension. Producers of coreboard have between one
and three plants in the EEA from which they supply
coreboard across Europe.

Cores. The parties proposed an EEA-wide geographic
market for all cores. However, they also recognised that
certain regions in the EEA have particularly intense trade
flows of cores, which could possibly lead to regional
relevant geographic markets. These regions are (i) Conti-
nental Europe (1); (ii) the Scandinavian countries (2); (iii)
Finland and (iv) the United Kingdom and Ireland.

(13)

Low-value cores. The market
investigation did not
confirm the EEA-wide market definition proposed by
the parties. Most customers who replied to the market
investigation defined regional markets and even indicated
that they purchase low-value cores on a national level.

(i) UK/Ireland,

activities. Therefore,

(14) As with high-end PMC the Continental region shows
comparably
intense
the
trade
following markets can be defined:
(ii)
(iii) Continental Europe including Denmark,
Finland,
leaving open the question whether it should be split
into a Northern one or several Southern parts, and (iv)
Norway and Sweden leaving open the question whether
they constitute national markets or a combined regional
one. The definition may be left open as the competition
assessment is not changed whichever market definition
used.

(10) High-end PMC. The parties sell [80-100 %] (*) of their
total sales volume to customers who are at maximum

IV. AFFECTED MARKETS

(1) Continental Europe comprising: Germany, Austria, France, Benelux,

Italy, Spain, Portugal and Greece.

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

(15)

The notified transaction gives risk to affected markets in
the Scandinavian market for high-end PMC, the possible
regional or EEA-wide markets for yarn carriers and the
Norwegian market or a market consisting of Norway and
Sweden for low-value cores.

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Official Journal of the European Union

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V. ASSESSMENT

(16) High-end PMC. In the Scandinavian market Ahlstrom is
by far the leading supplier with a market share of
[70-80 %] *, Sonoco ([0-10 %] *) however, is a relatively
small supplier comparable to Corenso and Paul. As a
result of the merger, one of the at present four existing
supply possibilities for high-end PMC is eliminated in this
region. Because of high quality requirements in this
cannot be
product market, new market
expected in the short-run.
It was feared that with its
increased strength Sonoco/Ahlstrom would be more
indispensable
and would
larger
therefore have power to squeeze smaller suppliers.

customers

entrants

the

for

(17)

(18)

Yarn carriers. The only region where major concerns
might arise is Finland (Ahlstrom [60-70 %] *, Sonoco:
[20-30 %] *). The Finnish market is limited by size to
less than 0,5 % of the European market. The present
and potential competitors have large overcapacities that
would allow them to serve any new demand in Finland.
The market
significant
concerns in relation to this product.

investigation did not

raise

Low-value cores. The transaction gives rise to concerns
on the market comprising Norway-Sweden (Ahlstrom:
[40-50 %] *, Sonoco: [10-20 %] *) and on the possible
national market of Norway (Ahlstrom:
[30-40 %] *,
Sonoco:
[40-50 %] *). The gap between the smaller
players and the larger ones is already significant and
to the merger. The
will
market investigation identified concerns of rising prices
in these markets due to the merger.

significantly due

increase

(19)

The notified concentration raised serious doubts as to its
compatibility with the Common Market with regard to
the markets for high-end PMC in Scandinavia and for
low-value cores
in the possible national market of
Norway and a market comprising Norway and Sweden.

VI. COMMITMENTS OFFERED BY THE PARTIES

(20)

In the second phase,
divestment of

the parties again proposed the
the Ahlstrom’s core production facility

(21)

(22)

located at Sveberg, Norway, to an up-front buyer (1). The
main issues which led the Commission to refuse the
divestment of Sveberg the first time in the first phase
related to its isolated geographic situation and the uncer-
tainty with respect to its financial viability.

VII. ASSESSMENT OF THE COMMITMENTS SUBMITTED

benefits

impediment.

rates are significantly lower

The parties provided credible evidence showing that the
geographic location of the plant does not constitute a
major
from the
Sveberg
in Scandinavia, north-south
phenomenon whereby,
freight
than south-north
rates. This is advantageous for Sveberg which is located
in the North of Norway, since many actual and potential
customers are located in the South. The divestment of
Sveberg to a suitable and independent up-front buyer, to
be approved by the Commission ensures
the
Commission ensure the viability of the business. In the
Phase I market test, a possible stand-alone solution for
the divestment of Sveberg was clearly rejected. Many of
the critical respondents, however,
they
would have the Sveberg providing divestment that an
appropriate buyer could be found.

indicated that

that

eliminate

divestment of

Sveberg would

The
the
increment in market shares for all markets for which
concerns were raised except for the Norwegian/Swedish
market for low-value cores. There, the increment would
be reduced from [10-20 %] * to [0-10 %] *, leaving the
merged entity with a market share of [40-50 %] *. Even if
the increment would not be totally removed, the under-
taking would allow a new player to enter the Norway-
Sweden market. The reduction in the number of players
in this market would thus be offset. Should one of the
smaller competitors already active in the markets buy the
Sveberg facility, the result would be a more balanced
market structure, and would create adequate competitive
restraints on Sonoco/Ahlstrom.

(23) On the basis of

the commitments submitted by the
Parties, the notified concentration does not raise serious
doubts as to its compatibility with the common market
and the EEA Agreement. The decision was adopted under
Article 8(2) of Council Regulation (EEC) No 4064/89 and
Article 57 of the Agreement on the European Economic
Area.

(1) A binding purchase agreement for the sale of Sveberg has to be
concluded with a suitable buyer before the JV can be created.