CELEX: 31995M0648
Language: en
Date: 1995-11-27 00:00:00
Title: COMMISSION DECISION of 27/11/1995 declaring a concentration to be compatible with the common market (Case No IV/M.648 - McDermott / ETPM) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31995M0648

COMMISSION DECISION of 27/11/1995 declaring a concentration to be compatible with the common market (Case No IV/M.648 - McDermott / ETPM) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 330 , 08/12/1995 P. 0009

 COMMISSION  DECISION of 27/11/1995 declaring a concentration to be compatible with the common market (Case No IV/M.648  - McDermott / ETPM) according to Council Regulation  (EEC)  No 4064/89  (Only the English text is authentic).  The  paper version of the decision is available through  the sales offices of the Office of Official Publications of  the European Communities PUBLIC VERSION MERGER PROCEDURE ARTICLE 6(1)(b) DECISION To the notifying parties Dear Sirs, Subject: Case N  IV/M.0648McDERMOTT/ETPM 1.<ind>  On  23 October 1995 ETPM S.A. and J. Ray  McDermott International notified a joint venture for the provision  of certain marine construction services to the offshore oil and gas industries.  2.<ind>   After   examination  of  the   notification,   the Commission  has concluded that the notified operation  falls within  the scope of Council Regulation N  4064/89 and  does not  raise serious doubts as to its compatibility  with  the common   market  and  with  the  functioning  of   the   EEA agreement. I <tab> THE PARTIES 3.<ind>  The  parties are J. Ray McDermott Contractors  Inc. (McDermott) a Panamanian company, controlled by  J.  Ray  Mc Dermott International Inc. and J. Ray McDermott S.A.  (J.R.) ultimately controlled by McDermott International  Inc.,  and ETPM  International SAS (ETPM) a French company,  controlled by  ETPM SA and the GTMEntrepose Group ultimately controlled by Lyonnaise des Eaux. 4.<ind>  McDermott  is  active in  the  marine  construction services  for  the  offshore oil and  gas  industry  notably pipelay, fabrication and installation. 5.<ind>  ETPM  is  a member of the GTMEntrepose  Group.  The GTMEntrepose Group is a diversified construction group which through  its  subsidiaries  is  engaged  worldwide  in  most contracting fields.ETPM has for many years been  engaged  in the    design,   engineering,   construction,   fabrication, installation  and  maintenance of, and in  other  work  for, offshore   projects  and  facilities  associated  with   the exploration   for,   and  the  production,   transportation, refining  and distribution of, hydrocarbons. Nowadays,  ETPM SA retains no activities in the relevant marine construction sector,  save  for  automatic welding, data  processing  and project management. 6.<ind>  In  1989   the parties combined certain  of   their activities in the provision of marine construction  services to the Middle East, Europe, the North Sea and Mediterranean, Africa and South America. This Joint Venture was reorganised in  1991  into  three  subsidiaries :  "McDermottETPM  WEST" (operating in the North Sea, West Africa and South America), "McDermottETPM  EAST" (operating in middle East  and  India) and   "McDermottETPM   Main  Office"   (the   administrative centrefor an executive Committee formed by the parties).  On 1  April 1995, the parties agreed to further changes to  the structure  and  scope of their Joint Venture activities.This agreement  rearranges  the  corporate  structure  of   these subsidiaries.  This  element of the 1 April  1995  Agreement does not give rise to a concentration within the meaning  of article 3 of Council Regulation 4064/89, since there  is  no change  in control in respect of the existing joint  venture business.  II<tab> THE OPERATION 7.<ind>  Also under the 1 April 1995 agreement, the  parties agreed   that   J   Ray's  subsidiary   undertaking   marine construction business in the Far East should become part  of the joint venture. This is a concentration under the Council Regulation, for the reason given below. The name of this new operational Joint Venture is McDermottETPM Far East Inc. and it  will  be  active  in  the business  of  fabrication  and installation  services related to the oil and gas  industry, petrochemical  facilities and other industrial  projects  in the Far East zone as described in the 1995 agreement between the parties.The parties have undertaken to withdraw from the relevant  business  in  the Far  East  Zone.  In  fact  only McDermott  had  significant  activities  in  the  Far   East region. III CONCENTRATION JOINT CONTROL 8.<ind>  McDermottETPM Far East Inc.forms part of the  Joint Venture  as  it has been organized under the 1995  Agreement between  the parties which includes four basic joint venture entities (McDermottETPM Inc. Main Office,McDermottETPM  West Inc., McDermottETPM Mid East Inc. and McDermottETPM Far East Inc.). Article IV and in particular articles 4.1(a),(b), and (f),  of  this  Agreement provide for control of  the  Joint Venture  activities,  including those of  McDermottETPM  Far East,  through  an  executive committee  composed  of  equal numbers  from each party and all decisions of the  executive committee requiring unanimity. FULL FUNCTION 9.<ind>  In as much as McDermottETPM Far East forms part  of the  Joint Venture organized in the 1995 Agreement, it  will have,  according to article V of this Agreement, control  of its  main assets and equipment, because the parent companies have  chartered  into  it  various  vessels,  equipment  and facilities  and lease certain facilities (fabrication  yards and related assets) on a long term basis. 10.<ind>   Moreover,appendices  2,a,b,c  of  the   Agreement referred  to above, set out a number of Management  Services Agreements  which establish that the parent  companies  will provide staff to the Joint Venture, including ETPMFar  East, although this staff would not be employed by the JV as such. However,   McDermott  and  ETPM  undertake   through   these Management Services Agreements to provide their employees on a  continuing basis to allow the Joint Venture to accomplish its functions. 11.<ind>  ETPMFar  East is financially  independent  of  its parents (Article VI of the Agreement) and it bills customers separately  from  the  parents  and  receives  all  revenues directly. 12.<ind>  Therefore, it can be concluded that  ETPMFar  East performs,  on  a  lasting basis, all  the  functions  of  an autonomous   economic   entity  for  the   relevant   marine construction sector on grounds of disposal of assets,  staff and financial independence. ABSENCE OF SCOPE FOR COORDINATION OF COMPETITIVE BEHAVIOUR 13.<ind>  ETPM  SA  has  withdrawn from  the  Joint  Venture Business,   defined in article II of the 1995  Agreement  as business of fabrication and installation services related to the oil and gas industry, petrochemical facilities and other industrial  projects in the territory of the  Joint  Venture which includes the Far East Zone. ETPM International retains no  fabrication interests outside the Joint Venture. Indeed, according  to  the  parties  ETPM  never  had  any  relevant activity in the Far East area. 14.<ind>  McDermott remains in the market in  certain  areas outside  the Joint Venture Territory defined in article   II of  the  1995  Agreement as (i) the Middle East which  shall include  all  countries  along the coast  from  Tanzania  to Bangladesh,  (ii)  Western   consisting  of  a   number   of countries in Europe bordering the Mediterranean Sea and  the North Sea, South America and the Western coast of Africa and (iii)  the Far East consisting of all countries from Myanmar to  Korea.  McDermott  operates  a  large  fleet  of  marine construction   equipment  in  the  United   States   and   a fabrication  yardin  Morgan  City  in  Louisiana.  McDermott International  is  involved in projects  related  to  marine construction  services in the former Soviet Union  as  well. Thus,  it  is  clear that McDermott has withdrawn  from  the market in the far East Zone in favour of ETPMFar East. 15.<ind> Therefore it can be concluded that there is no risk of  coordination  of the competitive behaviour  between  the parent companies through this operation.  IV COMMUNITY/EEA DIMENSION 16.<ind>   The  undertakings  concerned  have   a   combined aggregate worldwide turnover in excess of 5,000 million  ECU (Lyonnaise  des  Eaux:  15,186  million  ECU  and  McDermott International:  2,483  million ECU, following  their  latest reports and accounts). 17.<ind>  The aggregate Communitywide turnover of  Lyonnaise des Eaux is of [More than ECU 250 million.] million ECU.  18.<ind>  According to the figures provided by the  parties, the    aggregate   Communitywide   turnover   of   McDermott International is  [More than ECU 250 million.] ECU. In  this turnover  [Deleted; business secret.] ECU, which  correspond to  a  half of the turnover of McDermottETPM West Inc.,  has been  included.  Taking  into  account  article  5.5.(b)  of Council  Regulation N  4064/89 and the Commission Notice  on calculation of turnover (94/C 385/04) notably its  paragraph 40, half of the turnover of McDermottETPM West Inc in Europe should be attributed to McDermott. In conclusion, it must be considered  that  McDermott has an  aggregate  Communitywide turnover of more than 250 million ECU. 19.<ind>  In addition, according to the parties,  more  than two  thirds  of Lyonnaise des Eaux turnover is  achieved  in France  and  McDermott  has more  than  two  thirds  of  its aggregate  Communitywide  turnover  within  UK.  Thus,   the undertakings  concerned  do  not  both  achieve  more   than twothirds of its aggregate Communitywide turnover within one and the same Member State. 20.<ind>   Therefore,   the  operation   has   a   Community dimension. V COMPATIBILITY WITH THE COMMON MARKET Product and geographic market 21.<ind>  The  activities of McDermottETPM Far East  involve various  marine construction services and products   ranging from pipelay and derrick work to the fabrication of some  of the  structures involved in the Far East Zone defined by the parties  as the area covering all countries from Myanmar  to Korea   including  Japan,  Taiwan,  Indonesia,  Philippines, Brunei,  Papua  New  Ginea,  New Guinea,  New  Zealand,  New Caledonia,  Malaysia,  Thailand,  Vietnam,  Singapore,   and Australia and the Pacific Islands. 22.<ind> The main construction activities are:  <ind>  fabrication  (of steel jackets,  decks,  modules  and related  steelwork such as piles, bridges, subsea  templates and manifolds); <ind>  pipelay  (to  link offshore production  platforms  to receiving  facilities onshore or to link  separate  offshore structures together); <ind>   installation  (lifting  of  various  components   of offshore  platforms  or decks into place  offshore  and  the setting  of  subsea  manifolds and  templates;  as  well  as installation  of offshore jackets by piledriving  so  as  to secure the jackets to the seabed); and <ind>  subsea (the subsea structure which is placed  on  the sea  bed  to control the wellhead is then linked by pipeline to  processing  capabilities either  installed  on  a  fixed platform,  or alternatively linked to a floating  production unit). 23.<ind>  It is not necessary in the present case to  decide if these segments of marine construction services constitute distinct   product  markets  within  the  meaning   of   the Regulation,  as  the operation currently analysed  does  not have any impact in the EEA/EU area.  24.<ind>  With  regard  to geographic  markets  the  parties contend  that  the  market is global. However,  the  precise definition of geographic markets can be left open since  the concentration does not raise serious doubts in relation   to its  compatibility with the common market  as  McDermottETPM Far  East has no economic activities in the common market  [ or EEA]. 25.<ind>  The concentration will not create or strengthen  a dominant  position  in  the common  market  [or  EEA]  or  a substantial   part  of  it  as  McDermottETPM's   Far   East activities have no ramifications for competition within  the EEA/EU. VI  ANCILLARY RESTRICTIONS 26.<ind>   The   Joint   Venture   involves   noncompetition obligations  on  the parties to the Joint  Venture  (J.  Ray McDermott  Contractors Inc and ETPM International)  and  the undertakings of the groups theybelong  to withdraw from  the Joint  Venture Business in favour exclusively of  the  Joint Venture (Articles 3.1 and 3.2 of the 1995 Agreement).  27.<ind>  These  noncompetition  obligations  reflects   the lasting  withdrawal of the parents from the market  assigned to  the  Joint Venture, and they can be, therefore, regarded as an integral part of the concentration.   28.<ind>  The parties have also notified as  an  ancillary restraint some arrangement  between the parties relating  to the  subsea  market.   McDermott  Subsea,  a  subsidiary  of McDermott, has vessels capable of laying flexible  pipelines and  smalldiameter rigid pipelines.  There is thus a limited degree  of  potential overlap between the  rigid  pipelaying which  the Joint Venture is capable of carrying out  at  the lower   end  of  the  market  and  the  smalldiameter  rigid pipelaying which McDermott Subsea can carry out.   The  1995 Agreement contains provisions indicating how pipelaying work will  be  done  by  the Joint Venture and McDermott  Subsea. These  provisions reflect the division of tasks  within  the group  of  undertakings controlled by one of the parties  to the  Joint  Venture.  However, in so far as  they  could  be regarded  as  restrictive they are an integral part  of  the concentration and must be considered ancillary. VII  CONCLUSION 29.<ind> Based upon the above considerations, the Commission has  concluded  that the notified operation does  not  raise serious  doubts  as  to its compatibility  with  the  common market. This decision is adopted in application of article 6 (1) (b) of Council Regulation N  4064/89. For the Commission