CELEX: 31992M0236
Language: en
Date: 1992-07-08 00:00:00
Title: COMMISSION DECISION of 08.07.1992 declaring a concentration to be compatible with the common market (Case No IV/M.236 - ERICSSON / ASCOM) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

Avis juridique important

|

31992M0236

COMMISSION DECISION of 08.07.1992 declaring a concentration to be compatible with the common market (Case No IV/M.236 - ERICSSON / ASCOM) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 201 , 08/08/1992 P. 0000

 COMMISSION DECISION of 08.07.1992 declaring a concentration to  be compatible with the common market (Case No IV/M.236 -  ERICSSON / ASCOM) 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 Dear Sirs, Subject: Case No. IV/0.0236 - Ericsson/Ascom <ind>  <ind> Your notification pursuant to Article 4 of Council  Regulation (EEC) No. 4064/89  1.<ind> The proposed concentration, notified on the 9th June  1992, concerns a joint venture Ascom Ericsson Transmission AG  (AET), between a Swedish company, Telefonaktiebolaget LM  Ericsson AB (Ericsson), and a Swiss company, Ascom Holdings AG  (Ascom).  2.<ind> After examination of the notification, the Commission  has concluded that the notified operation falls within the  scope of the Merger Regulation, and that it does not raise  serious doubts as to its compatibility with the common market.  The parties and the operation  3.<ind> Ericsson is a Swedish group which operates in the  telecommunications sector and related fields such as public  telecommunications, radio communications, business  communications, cable and network, electronic components and  defence systems.  4.<ind> Ascom is a Swiss electronics group whose ultimate  parent company is the Hasler Foundation holding a 54% stake of  the former. Ascom is involved in the following electronics and  telecommunications business: public telecommunication  equipment, private networks (mainly through Ascom Timeplex),  personal and business communications, radio communications and  service automation.  5.<ind> Ericsson and Ascom agreed to form the joint venture,  AET, which will be engaged in the field of public line  transmission.  6.<ind> Ascom will transfer all of its assets and goodwill  pertaining to its previous transmission division to the new  company. This transfer will comprise both tangible and  intangible assets associated with that business: machinery,  equipment, customer projects, stock, trademarks, trade names,  patents, human resources and know-how.  7.<ind> Ericsson will acquire a 40% stake in AET and will have  32.9% of the voting rights. Ascom will hold the balance, i.e.  60% of the share capital and 67.1% of the voting rights.  I.<ind> COMMUNITY DIMENSION  8.<ind> The operation has a Community dimension. The worldwide  turnover of the two undertakings concerned, Ericsson and Ascom,  amounted to 6,178 million ECU and to 1,724 million ECU  respectively in the last financial year.  <ind> The aggregate Community-wide turnover of each party is  more than 250 million ECU. They do not achieve more than two- thirds of their Community turnover in one and the same Member  State.  II.<ind> CONCENTRATION  <tab> Joint Control  9.<ind> The joint venture agreement between the parties  provides for joint control in respect of fundamental decisions  regarding the business as well as the management of the new  venture.  10.<ind> The approval of the Board of the Directors or of the  shareholders is required for the adoption of decisions  concerning increasing or decreasing the share capital, approval  of the annual accounts and distribution of profits, and any  capital and operating budgets (including the allocation of  resources for development and manufacturing of products).  <ind> Moreover, the approval of both parties is required for  other important decisions such as the granting of licences or  any major agreement with any third party. The appointment of  the persons empowered to represent AET and their respective  powers, including the General Manager, must also have the  agreement of both shareholders.  <tab> Full function JV  11.<ind> AET will continue Ascom's activities in the area of  public transmission equipment in Switzerland. It will, as  before, develop, manufacture and market these products. In  addition, it will be engaged in the adaptation and marketing of  Ericsson transmission equipment for the Swiss market, and in  research and development assigned by Ericsson. For this purpose  AET will receive licences from the latter making the required  technology available. Outside Switzerland, AET will undertake  its own marketing activities but will make use of Ericsson's  distribution outlets for sales.  <ind> The new company is thus a joint venture that will perform  all the functions of an autonomous entity on a lasting basis.  <tab> Absence of risk of coordination  13.<ind> Ascom will not retain any activities in the field of  public line transmission equipment after the transfer to AET.  After transferring its know-how and experience, Ascom will not  be a realistic potential entrant in the market because of the  existing high entry barriers and the financial resources  necessary to undertake the R&D required to be an effective  competitor in this field.  14.<ind> Ericsson is active in public line transmission in  various countries but not in Switzerland.   15.<ind> A "competence center" set up within AET will develop,  market and maintain new public line transmission products. AET  will undertake these activities based on Ericsson's platforms  in close cooperation with product management and development  within Ericsson.  <ind> In view of the above the creation of AET will not give  raise to coordination of the competitive behaviour of  independent undertakings within the meaning of Article 3(2) of  the Regulation.  16.<ind> The creation of AET will furthermore not lead to any  spill-over effects on the neighbouring market for private  networks, where its parent companies Ericsson and Ascom are  active.  17.<ind> The principal differences between private network  products and public transmission products can be summarised as  follows:  <tab> -<ind> private networks can be distinguished from public  networks in that the former are accessible only to a closed  user group whereas the latter are accessible to any user  through a connection that is itself part of the public  network; <tab> -<ind> the technology is considerably different in that  public network products have a capacity in excess of the range  of private network products; <tab> -<ind> public network products adhere to common standards  whereas proprietary standards are the rule for private network  products; <tab> -<ind> customers in the two markets are different and  most of the suppliers differ as well.  <ind> In view of the technical and economical differences  between public and private network products  any spillover  effects from AET into the private transmissions markets in  which Ericsson and Ascom will continue to compete are not  likely to occur.  18.<ind> Finally, Ascom is an Ericsson licensee for public  switching and mobile telephone. This technological  subordination will not be changed due to the creation of AET.  19.<ind> In view of the above, there are no grounds to believe  that the establishment of AET will result in a coordination of  competitive behaviour between the parent companies and the  joint venture or between the parent companies themselves.   <ind> Thus, the notified operation constitutes a concentration  within the meaning of Article 3 of the Merger Regulation.  III.<tab> COMPATIBILITY WITH THE COMMON MARKET  <tab> Affected Product Market  20.<ind> AET will mainly be involved in the production of  public transmission equipment and systems.  <tab> Geographic Reference Market  21.<ind> The proposed operation has its main impact on  competition in the public line transmission markets in  Switzerland. 75% of Ascom's Transmission Division (the  forerunner of AET) sales are to the Swiss telecom operator. The  remaining 25% of sales are to telecom operators outside the  Community. Competition in the Community may only be affected in  the long term, when AET starts to sell its newly developed  products to telecom operators inside the EC.  <ind> It can be left open whether the relevant geographic  market is pan-European, as the notifying parties submit, the  Community  or each Member State because the proposed operation  does not raise serious doubts as to its compatibility with the  common market even on the basis of the narrowest possible  market definition.  <tab> Dominance  22.<ind> According to the figures supplied by the notifying  parties the overall market for public line transmission  equipment in Switzerland and in the Community is estimated at  1.8 billion ECU per annum. It is expected that the demand will  increase in the coming years at a rate of more than 6% per  annum.  23.<ind> Two factors seem to affect considerably the public  line transmission market. On the one hand, the new generation  of products and systems introduced into the sector as a  consequence of digitalization and new public telecom network  structure philosophy and, on the other hand, the rapid  changeover from copper and coaxial cables to fibre-optic  cables. The resulting effect is a declining demand for  traditional transmission products and a rapidly expanding  market for digital line transmission products.  24.<ind> Ericsson is present in some Member States markets in  the public line transmission sector. Its overall market share  in the Community is estimated to be around 7% in a total sales  market of 1.681 million ECU in 1991. Ericsson however holds  important market shares, of around 61% and 40%, in Denmark and  Spain respectively.  25.<ind> As stated before (see paragraph 20), the Ascom  Transmission Division has been mainly active in Switzerland in  the past. AET may in the longer term become a seller in the  Community. Since it is a relatively small manufacturer of  telecommunication equipment compared to its competitors with a  turnover of less than 100 million ECU, the combination of  Ericsson's and AET's business does not give rise to any concern  regarding competition.  26.<ind> This is reinforced by the following additional  considerations:  <tab> -<ind> Alcatel and Siemens are, among others, important  actual competitors of Ericsson and AET in the Community; <tab> -<ind> strong players like AT&T, Northern Telecom/STC and  ECI (Israel) have recently entered Community markets. Fujitsu  and NEC (Japan) are further potential market entrants.  IV.<tab> ANCILLARY RESTRAINTS  27.<ind> The joint venture agreement contains a non-competition  clause by which Ascom is prohibited from conducting, directly  or indirectly, operations in competition with AET, as long as  Ascom is bound by the agreement, but in any event during a  period of at least five years.  <ind> This non-competition clause is seen as a restriction  directly related and necessary to the implementation of the  concentration.  V.<tab> FINAL ASSESSMENT  28.<ind> Based on the above findings, the Commission has come  to the conclusion that the proposed concentration does not  raise serious doubts as to its compatibility with the common  market.  <ind> For the above reasons, the Commission has decided not to  oppose the notified concentration and to declare it compatible  with the common market. This decision is adopted in application  of Article 6(1)b of the Council Regulation No. 4064/89.  For the Commission,