Summary of Commission Decision of 26 October 2004 relating to a proceeding under Article 81 of the EC Treaty (Case COMP/F-1/38.338 — PO/Needles) (notified under document number C(2004) 4221) (Text with EEA relevance )
Date: 2009-06-27
Institutions: European Commission
Subjects: EU market, competition law, haberdashery, metal product, plastics, report, restriction on competition








C_2009147EN.01002301.xml










27.6.2009   


EN


Official Journal of the European Union


C 147/23






SUMMARY OF COMMISSION DECISION

of 26 October 2004
relating to a proceeding under Article 81 of the EC Treaty
(Case COMP/F-1/38.338 — PO/Needles)
(notified under document number C(2004) 4221)
(Only the English and German versions are authentic)
(Text with EEA relevance)
2009/C 147/15
1.   INTRODUCTION AND INFRINGEMENTS

Three undertakings and their respective subsidiaries, namely William Prym GmbH & Co. KG and Prym Consumer GmbH & Co. KG, Coats Holdings Ltd and J & P Coats Ltd, Entaco Ltd and Entaco Group Ltd entered into a series of written, formally bilateral, agreements between 10 September 1994 (the Heads of Agreement were signed in June but entered into force on 10 September 1994) and 31 December 1999, amounting in practice to a tripartite agreement under which these undertakings shared or contributed to sharing product markets (by segmenting the European market for hard haberdashery products) and geographic markets (by segmenting the European market for needles). In addition, these undertakings participated in bilateral or trilateral meetings between 10 May 1993 and 8 November 2001 (Coats’ participation was limited to preliminary meetings). These concerted practices and agreements constitute an infringement of Article 81(1) of the EC Treaty and had the object and the effect:
For William Prym GmbH & Co. KG and Prym Consumer GmbH & Co. KG and Entaco Ltd and Entaco Group Ltd:






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of sharing the European hard haberdashery market by limiting the business activity of Entaco Ltd to the hand sewing and special needles business, a fact which amounts to product market sharing between the hand sewing and special needles market and the wider markets for needles as well as other hard haberdashery markets,










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of segmenting the European market for needles by restricting Entaco Ltd to the United Kingdom, the Republic of Ireland and (partially) Italy and by preventing that undertaking from entering the Continental European markets for needles (with the exception of so-called label accounts), thereby effectively reserving those markets for William Prym GmbH & Co. KG and its subsidiaries, a fact which amounts to geographic market sharing in the needles market.




For Coats Holdings Ltd and J & P Coats Ltd:






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notably, of protecting the undertakings’ own needle brand (Milward) at the retail level from competition on behalf of Entaco Ltd by way of (i) an exclusive supply and purchasing agreement with Entaco Ltd covering the United Kingdom and (partially) Italy, and (ii) by way of imposing on Entaco Ltd an obligation to respect the geographic market sharing agreement that undertaking had entered into with William Prym GmbH & Co. KG and its subsidiaries.




The present draft decision is based upon the existence of inter-conditional clauses contained in the above-mentioned series of written bilateral agreements and upon certain contemporaneous documents. These clauses were renewed over time.
In this context it should be highlighted that the leniency application submitted on behalf of Entaco Ltd confirms all of the Commission’s findings in these proceedings. Prym in its reply to the Statement of Objections confessed its participation to the infringements but contested the size of the relevant markets.
2.   PROCEDURE

The present findings arise out of investigations carried out by the Commission on 7 and 8 November 2001 pursuant to Article 14(3) of Regulation No 17 at the premises of several Community producers of hard and soft haberdashery (notably Entaco Ltd, Coats plc, William Prym GmbH & Co. KG and the German association of fastening technology producers VBT (Fachverband Verbindungs- und Befestigungstechnik)). By means of said investigations and subsequent enquiries under Article 11 of Regulation No 17, the Commission obtained documentary evidence indicating that infringements of Article 81 of the EC Treaty had been committed by the following undertakings: William Prym GmbH and Co. KG, Prym Consumer GmbH & Co. KG, Coats Holdings Ltd, J & P Coats Ltd and Entaco Ltd. The investigations were a result of information provided by Mr Martin Ellis of Entaco between 23 August 2000 and 6 August 2001. The relevant services of the Commission considered these pieces of information as a leniency application by Mr Martin Ellis of Entaco in a letter dated 21 August 2001.
In April, May, June and October 2003, the Commission sent requests for information under Article 11 to the following hard and soft haberdashery manufacturers in the European Community: Coats plc, William Prym GmbH & Co. KG, Entaco Ltd and to the association VBT and Needle Industries (India) Private Ltd.
On 15 March 2004, the Commission addressed a Statement of Objections to Prym, Entaco and Coats in accordance with Article 2 of Regulation (EC) No 2842/98, which was received by Entaco on 16 March 2004 and by Coats and Prym on 17 March 2004. Access to the file was provided to the parties in electronic form. Each received a CD-ROM with the documents on the Commission’s file on 26 March 2004.
The Hearing took place on 18 June 2004. Directorate A and the Legal Service were consulted on 18 September 2004.
3.   THE RELEVANT MARKETS

The Commission has identified three relevant product markets: (i) the European market for hand sewing and craft needles (including notably special needles), in which the product and geographic market sharing took place (market value around EUR 30 million), (ii) the European market of ‘other sewing and knitting products including pins, knitting pins/knitting needles’ (market value around EUR 30 million), and (iii) the European market for other hard haberdashery products including zips and other fasteners (EUR 1,5 billion), in both of which the product market sharing only took place from 10 September 1994 to 13 March 1997. The market for hand sewing and craft needles must be distinguished from the market for industrial machine needles which were not manufactured by the undertakings during the infringement period. Prym maintains that hand sewing and craft needles are to be regarded as separate relevant markets. However, this view cannot be sustained as the other undertakings do not support that view and the infringing agreements refer to both types of needles.
4.   THE MECHANISM OF THE INFRINGEMENTS







1.


Coats was protected against Entaco and Prym competition at the retail level (for its Milward brand) since:






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Entaco could not compete with Coats by virtue of the agreements it had signed with both Coats and Prym respectively for the UK and Continental Europe at the retail level.
Under clause 2.2 of the Supply and Purchase agreement, Entaco is restricted from supplying Coats customers in the UK: ‘Entaco shall not supply products to a customer of a UK Purchaser other than those customers to whom the Supplier supplies Products prior to the date hereof at existing business levels’.
Under clause 2.2 of the Distribution agreement between Prym and Entaco, Entaco is restricted from selling to customers of Coats and Prym in Continental Europe: ‘Entaco will not sell products to any person in the territory [Europe excluding the United Kingdom and the Republic of Ireland] other than the label accounts and/or the Distributor [Prym Consumer] and/or the Coats group.’
Therefore Entaco was not an independent force in the market since it could effectively only sell to Coats or Prym.










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Prym needed the support of Coats to stop Entaco entering the Continental European market.
It must also be remembered that to enforce the market sharing agreements, all Coats (as the overwhelming buyer in UK) had to do was to buy from Entaco rather than Prym. This kept Prym limited to low activity in the UK while it disciplined Entaco to remain outside Continental Europe, because if it did not then Coats would stop considering Entaco as an exclusive supplier, a fact which is contained in clause 2.2 of the Supply and Purchase agreement between Entaco and Coats:

‘[…] (b) fulfil its obligations of cognate nature pursuant to an Agreement between the Supplier and Prym dated [10 September 1994]/[1 April 1997].’

In addition, Coats as the main distributor in Europe was in a position by using its orders of products to ‘play off’ Entaco and Prym against each other, which represented another mode to discipline Prym.














2.


Entaco wanted to be the exclusive supplier of Coats in the UK as a security for its production; otherwise it would not have entered into the product market sharing agreement, limiting its business development. Indeed Entaco agreed to a very substantial limitation of its activity:
In the Heads of Agreement: ‘Entaco agrees to restrict its manufacturing and distribution activities in the haberdashery sector to needles only, and not to widen its activities to include pins, safety pins, four-piece fasteners, knitting pins, or any other haberdashery product without the prior agreement of Prym’ (in addition to clause 2.3 of the Purchasing agreement between Prym and Entaco).
In the Distribution agreement under clause 2.2 as quoted above which amounts to a geographic market sharing agreement.
Entaco did not receive a similar guarantee from Prym. It needed as a consequence the security of an outlet for its production in the UK from Coats, which is what it received.
Entaco, being a management buy-out of Coats’ former needle business, was facing competition from two major companies, Prym and Coats which were linked by shareholding interests and a ‘special partnership’. For Entaco, entering in this tripartite agreement was the best possible deal since it gained a secure outlet by just offering ‘a face of independence to the market’ in exchange.










3.


Prym, without the approval, of Coats would not have entered a market sharing agreement to the potential detriment of its main shareholder and its main partner (Coats) in the European haberdashery market.




5.   CONCLUSION

The infringements committed by the addressees (1) are considered as ‘very serious’ as they have the object of partitioning national markets and sharing product markets, thereby restricting competition and affecting trade between Member States.
As Entaco was the only undertaking to inform the Commission of the existence of the market sharing agreements and to bring decisive evidence without which the market sharing agreements might not have been disclosed, and in the light of its continuous co-operation, it is proposed to make it benefit from full immunity of fines.


(1)  William Prym GmbH & Co. KG and Prym Consumer GmbH & Co. KG, Coats Holdings Ltd and J & P Coats Ltd, Entaco Ltd and Entaco Group Ltd.