CELEX: 31990M0026
Language: en
Date: 1990-12-20 00:00:00
Title: COMMISSION DECISION of 20.12.1990 declaring a concentration to be compatible with the common market (Case No IV/M.0026 - CARGILL / UNILEVER) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31990M0026

COMMISSION DECISION of 20.12.1990 declaring a concentration to be compatible with the common market (Case No IV/M.0026 - CARGILL / UNILEVER) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 327 , 29/12/1990 P. 000

 COMMISSION DECISION of 20.12.1990 declaring a concentration to be compatible with the common market  (Case No IV/M.0026 - CARGILL / UNILEVER) 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 Registered with advice of delivery To the notifying party Dear Sirs, Subject: Case No. IV/M.026 - Cargill / Unilever  1.<ind> On 20 November 1990 Cargill plc notified an operation by which it will acquire the entire issued share  capital of United Agricultural Merchanting Limited (UAM) from Unilever plc. The economic sector directly  affected by the operation is agricultural merchanting in Great Britain.  2.<ind> After full examination of the notification, the Commission has come to the conclusion that the operation  falls within the scope of Council Regulation No. 4064/89 and does not raise serious doubts as to its compatibility  with the common market.  I. Parties to the concentration  Cargill plc is a wholly owned subsidiary of Cargill Incorporated, Minnesota, a US- company with worldwide  activities primarily in commodity trading and the processing and distribution of foodstuffs. Its consolidated  worldwide turnover in 1989/90 exceeded 5 billion ECUS, its Community wide turnover exceeded 250 million  ECUS.   In the UK, Cargill operates in commodity trading and related businesses including agricultural merchanting in  the North-East of England.   UAM is a wholly owned subsidiary of Unilever plc. Its business is agricultural merchanting throughout Great  Britain.  UAM's turnover amounted to 291 million ECUS in 1989.   II. Application of the merger regulation The takeover of UAM by Cargill through acquisition of total share capital is a concentration in the sense of  Article 3, para. 1 b) of the merger Regulation. The thresholds of Article 1 of Regulation 4064/89 are met and the  two-thirds rule does not apply as Cargill's Community wide turnover is not primarily realised in the UK.   III. Compatibility  The acquisition does not raise serious doubts as to its compatibility with the common market. Both parties are  active in the agricultural merchanting sector. Cargill operates only in the North-East of England whereas UAM  is active throughout Great Britain.   As far as the horizontal effects resulting from the operation are concerned, it does not lead to significant market  positions in the relevant markets. Cargill is also active in some up-stream and down-stream markets such as  animal feed production, oilseed crushing and international grain trading. But the effect of the merger on the  vertical side, such as better access to sales or supply markets in Great Britain,  does  not create or strengthen  a   dominant  position  in  these markets nor in those in  which horizontal consequences exist.  1. Relevant markets <tab> a)<ind> Agricultural merchanting covers a range of different activities. It is a dual-function business. It  comprises the supply of seed, fertilizers, agro-chemicals and animal feed to farmers, including an advisory  service on all aspects of crop treatment. It also covers the trading of the farmers' crop to the market. In   the    agricultural merchanting sector seven different relevant  product <tab> <tab> markets have to be distinguished: <tab> <tab> -<ind> the production and sale of agricultural seed (cereals, oilseed, <tab> <tab> <tab> linseed, herbage and pulses) <tab> <tab> -<ind> the purchase and sale of fertilizers <tab> <tab> -<ind> the purchase and sale of agro-chemicals <tab> <tab> -<ind> the purchase and sale of animal feed <tab> <tab> -<ind> the purchase and sale of grain and pulses <tab> <tab> -<ind> the purchase and sale of oilseed rape.  <ind> b)<ind> Agricultural merchanting in its various forms, being mainly a retail activity, is a locally  orientated business. Traditionally farmers are served by local representatives of agricultural merchants within a  radius of around 100 miles from the merchant's outlet station. Seed, feed, fertilizers and agro-chemicals are  delivered to farm by the merchants within such radius and the same applies for cereals, pulses and oilseed rape,  which are picked up from farms. Consequently farmers use the services of local representatives within the same  radius from their farm.  <ind> <ind> Nevertheless the parties consider the relevant geographic market for the different product markets  to be Great Britain and not local or regional markets. The relevant geographic market can be defined as the area  where the undertakings concerned are involved  in  the supply and demand of products or  services,  in which the  conditions  of competition are sufficiently homogeneous and which can be distinguished from neighbouring  areas because conditions of competition are appreciably different in those areas.  <tab> <ind> Because of the following specificities of the agricultural merchanting business in Great Britain the  national market could be considered as the relevant geographical market:  <tab> <tab> -<ind> the different local areas in which each outlet of the parties concerned provides services to  the farmers are so strongly interlinked  that  a  segmentation  into  different  markets   with <tab> <tab> <ind> significantly different conditions  of  competition is difficult to be shown. On the facts of the  case the Commission has no indication that appreciably different conditions of competition exist in the various  agricultural areas of Great Britain. <tab> <tab> -<ind> There are two other agricultural merchants, Dalgety and Kenneth Wilson, who are, together  with UAM, equally represented throughout Great Britain. Furthermore several competitors such as Allied Grain,  Lillico and Usbourne are active in a significant number of localities. The parties compete with the  abovementioned competitors in a large number of different localities, Dalgety and Wilson being located in  practically every agricultural area where UAM or Cargill are represented.  <tab> <tab> -<ind> The absence of appreciably different conditions of competition in the various regions of  Great Britain in the affected product markets can further be explained by the low barriers to entry existing on  these markets (see below). As barriers are low, suppliers who are already acting on a local or regional level can  with ease extend their activities into other areas. The ability of merchants to move into other areas without  difficulty reduces the possibility that different conditions of competition can be established.  <tab> <ind> The question of the definition of the relevant geographic market can remain open in this case. Even  if one looks at the local areas in which each outlet of the parties provides services to farmers, thus considering  the narrowest possible definition of the relevant geographic market, the merger does not raise serious doubts as  to its compatibility with the common market.  2. Market shares <ind> The region where both parties to the concentration are involved in agricultural merchanting and where as  a consequence the concentration has horizontal effects covers the North-East of England (Lincolnshire,  Leicestershire, Northamptonshire, Bedfordshire, Nottinghamshire, Yorkshire, Northumberland, Durham and  Humberside).  <ind> In this region the aggregate market shares of the parties in the different product markets are all below  12% except for the oilseed rape market where the aggregate market shares amount to 26%.  On  the  basis  of the  information available to the Commission, there are no indications that the aggregate market shares of the parties  in the local areas refered to above could lead to the conclusion that the parties have a dominant position in a  substantial part of the common market.   <ind> This conclusion is reached in particular in the light of the following:  3. Market structure <ind> The market is characterized by low concentration in the affected markets. There are about 200  agricultural merchanting businesses operating in Great Britain. In practically every important agricultural area  farmers have the choice between at least 8 -10 agricultural merchants, including the 3 national players. This  holds as well for the areas directly affected by the merger.  4. Barriers to entry <ind> The significance of the market shares achieved by the parties through the merger is further weakened by  the fact that entry barriers to the relevant product markets are very low. It is possible to start up in this business  on a small scale and to subsequently expand because of low capital start-up costs, the absence of any need for  technical know-how, the small scale of operations, and the local character of the business. Furthermore,  suppliers who are already acting on a local or regional level can easily move into other local areas if conditions  of competition change. The most recent important entry was Allied Grain in 1983. In spite of the maturity of the  relevant markets, Allied Grain succeeded in becoming one of the most important players in the grain, retail seed  and fertilizer markets.  5. Vertical integration <ind> On the vertical scale the improved access of Cargill to the UK grain and oilseed rape market does not lead  to an impediment of  effective competition on down-stream markets.  <ind> In the oilseed rape crushing market, Cargill has about 23 % of UK crushing capacity, competing with  Archer-Daniels-Midland company (ADM) and BEOCO (both between 30 and 40%) and BOCM (Unilever).  Furthermore, oilseed rape crushers compete with other oilseed processors like soya bean or corn processors.  <ind> In international grain trading, Cargill, covering 20% of total UK exports, competes with other big  international grain trading organisations like Mark Rich, Toepfer, Dreyfus, Ferruzzi and Soufflet. The improved  access to British grain and oilseed rape markets does not therefore raise any serious doubts as to the creation or  strengthening of a dominant position which significantly impedes effective competition on the down-stream  market.   IV. Comments of third parties The notification of the proposed operation was published in the Official Journal of the European Communities  on 23.11.1990 [OJ No. C 293 of 23.11.1990.]. No comments of third parties were received following this  publication.  For the above reasons the Commission has decided not to oppose the notified operation and declares it  compatible with the common market. This decision is adopted pursuant to Art. 6 para. 1(b) of Council  Regulation No. 4064/89.  For the Commission