CELEX: 31993M0382
Language: en
Date: 1993-12-03 00:00:00
Title: COMMISSION DECISION of 03.12.1993 declaring a concentration to be compatible with the common market (Case No IV/M.382 - PHILIPS / GRUNDIG) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31993M0382

COMMISSION DECISION of 03.12.1993 declaring a concentration to be compatible with the common market (Case No IV/M.382 - PHILIPS / GRUNDIG) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 336 , 11/12/1993 P. 0000

 COMMISSION DECISION of 03.12.1993 declaring a concentration to  be compatible with the common market (Case No IV/M.382 -  PHILIPS / GRUNDIG) 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 parties Dear Sirs, Re:  <ind> Case No. IV/M.382 - PHILIPS/GRUNDIG  <ind> Notification of 29.10.1993 pursuant to Article 4 of  Council Regulation No. 4064/89 (Merger Regulation)  I. <ind> THE OPERATION   <ind> On 29 October 1993 Philips Electronics N.V. notified its  proposed acquisition of 60% of the shares in Grundig  Verwaltungs GmbH (GVG) which controls Grundig AG. The shares in  question are held by 3 banks and, with the acquisition, Philips  - which presently owns 40% of GVG - will obtain sole control of  GVG and thereby the controlling majority of the shares in  Grundig AG.  II. <ind> THE PARTIES   <ind> Philips Electronics N.V. (Philips), established in 1891  and with headquarters in Eindhoven, The Netherlands, is one of  the major electronic enterprises in the world. It is active in  the areas of lighting, consumer electronics, components, semi- conductors, communication systems, medical systems, industrial  electronics, personal care and small domestic appliances.   <ind> Grundig AG is a major European enterprise active in the  field of consumer electronics, communication products,  industrial electronics and office desk electronics.   <ind> The 3 banks:   <ind> - <ind> The Dresdner Bank AG, Frankfurt through its 100%  subsidiary Sueddeutsche Industriebeteiligungs GmbH, Frankfurt.  <ind> - <ind> Bayerische Vereinsbank AG, Munich, through its  100% subsidiary Bethmann Vermoegensbeteiligungs GmbH, Nuernberg.  <ind> - <ind> Schweizerische Bankgesellschaft, Zurich, through  its 100% subsidiary Thesaurus Continentale Effecten  Gesellschaft, Zurich.  III. <ind> COMMUNITY DIMENSION   <ind> The worldwide turnover of the undertakings concerned  exceeds  5,000 million ECU. The combined turnover of  Philips/Grundig in 1992 was 25,783 million ECU.   <ind> With regard to the aggregate Community-wide turnover  each of the two undertakings exceed the 250 million ECU  threshold laid down in the Regulation. Philips has a Community- wide turnover on 12,077 million ECU and Grundig 1,589 million  ECU. And none of the undertakings achieves two-thirds of its  turnover within one and the same Member State.  IV. <ind> CONCENTRATION  A. <ind> Joint control prior to the acquisition   <ind> Since 1984 Grundig AG has been controlled by the limited  partnership  EMV & Co KG (EMV) which holds 76,5% of the total  capital in Grundig. The limited partners of EMV are the Dr. Max  Grundig Stiftung and Grundig Beteiligungs GmbH (the latter a  100% subsidiary of Philips).   <ind> The managing partner in EMV is Grundig Verwaltungs GmbH  (GVG), which is a company formed by Philips and 3 banks. The  field of activities of GVG is the assumption of liability and  management - directly and indirectly - of EMV.  Philips holds  40% of the share capital of GVG while the remaining 60% are  held by (through subsidiaries) Dresdner Bank AG (22%),  Bayerische Vereinsbank AG (19%) and Schweizerische  Bankgesellschaft (19%).   <ind> Being the only managing partner, GVG exercises the  voting rights attached to EMV's shares in Grundig AG (76,5%)  and is able to give mandatory instructions to the management of  Grundig AG. Since 1984 the management of Grundig AG has been  controlled solely by GVG.   <ind> GVG has two managing directors who can only represent  GVG jointly; it has always been the rule that one of the  directors is appointed by the Banks and the other by Philips.  The two managing directors need prior written approval of the  general meeting of shareholders of GVG for exercising the  rights attached  to EMV's participation in Grundig AG.   <ind> There exists no formal agreements between the banks to  pool their votes, but in all likelihood the three banks would  come to a common view on financial matters central to the  protection of the assets in Grundig.   <ind> Furthermore, the decision-making structures built in the  shareholders agreement of GVG strongly favour and even imply  agreement between the Banks. The Banks have to agree on the  appointment of one of the two directors in GVG. It must be  assumed that the Banks lacking managerial expertise in the  field of producing and selling consumer electronics will act  according to the advice of the managing director appointed by  the three banks. The director can be seen as the Banks' common  representative in GVG promoting a common understanding among  the Banks.   <ind> The Banks can therefore be seen as acting as a unity -  that is, as the one part of the joint venture- and it has  always been necessary for Philips to consider the common  position of the Banks on central financial matters.   <ind> In the shareholders meeting of GVG, Philips (according  to the shareholders agreement) always has a right of veto, and  the 3 banks together can veto a proposal from Philips.   <ind> Accordingly, since 1984 the Banks together had the  possibility to block any actions Philips would have liked the  Board of Management of Grundig AG to take. They were therefore  in a position to exercise joint control of Grundig AG together  with Philips.  B. <ind> Sole control of GVG after the acquisition   <ind> Philips will acquire from the Banks all their shares in  GVG and by that it will be the only managing partner of EMV,  which controls the majority of the shares in Grundig AG.   <ind> In conclusion, the acquisition by Philips of the shares  of GVG corresponds to a transition from joint to sole control  and is a concentration within the meaning of Article 3(1)(b) of  the Merger Regulation.  V. <ind> COMPATIBILITY WITH THE COMMON MARKET  A. <ind> Relevant product markets   <ind> According to the parties, the relevant product markets  correspond primarily to television sets, videorecorders,  camcorders, Hifi,  audio systems as well as car radios. In  addition, particular overlaps between the two undertakings  exist concerning communication electronics and industrial  electronics such as production automation, security   technologoy, etc. It is likely that these markets can be  subdivided further, but for the purposes of the present case,  the question can be left open.  B. <ind> Geographic reference market   <ind> The parties point to the fact that the industry is  global to support the view that markets are international.  However, from the demand side point of view, eventual  differences between national standards have to be taken into  account. Within the Community, most standards have been or are  being harmonised and it seems therefore, that the relevant  geographic market is at least Community-wide. However, the  merger does not alter substantially Grundig AG's and Philips  presence on the market and therefore, does not create or  strengthen a dominant position, even if the relevant market  were considered national (see below).  C. <ind> Assessment of the transaction   <ind> The parties identified the markets related to consumer  electronics as the main affected markets. The analysis will  focus on colour television sets, videorecorders, audio systems  and car radios.   <ind> Within the European Community, the undertakings  concerned face competition by several big players, including  Sony, Matshushita, Thomson and Nokia. The merged entity Philips  and Grundig AG accounts for the most important market share  value-based in the market of colour TV sets with [Less than  30%] (Philips: [Less than 20%], Grundig: [Less than 15%], while  Thomson has [Less than 20%] and Sony [Less than 10%]. Broken  down by Member States, the undertakings concerned have [Less  than 50%] of the sales of colour TV in the Netherlands ([Less  than 50%]), where Sony commands a market share of [Less than  15%], while Thomson is ranked third with a share of [Less than  10%]. Philips/Grundig  has a slightly less important share of  sales of colour TV  in France ([Less than 45%]), but it is  still the market leader before Thomson ([Less than 25%]) and  Sony ([Less than 15%]). Furthermore, Philips/Grundig  is also  the market leader in Germany, Italy and Spain, where its sales  of colour TV sets account for over a fourth of the markets   ([Between 25% and 30%]).   <ind> As for audio systems, the undertakings concerned have  [More than 15%] (Philips: [More than 10%], Grundig: [Less than  10%] of the Community market, where they rank behind the market  leader Sony. In the videorecorder market, Philips and Grundig  AG together have approximately the same market share as the  Matsushita group, that is [Between 15% and 20%] (Philips: [Less  than 12%], Grundig [More than 5%]) whereas the remaining  important competitors have each less than 10%. The result of  the analysis does not change significantly if the geographic  reference market were considered national.    <ind> Finally, it should be noted that Grundig AG  and Philips  have together [Less than 10%] of the market of car radios  (Philips: [Between 4% and 7%], Grundig: [Between 3% and 5%]),  if the Community territory is taken as a reference market. The  result of the analysis does not change significantly if the  geographic reference market were considered national.   <ind> When considering the importance of the market shares  involved, it has to be borne in mind, that Philips had joint  control of GVG before the operation and indeed, assumed the  industrial leadership of Grundig AG.   <ind> Philips' acquisition of all the shares in GVG has been   motivated mainly by Philips' intention to assume full control  of Grundig AG. The parties seek to obtain economies of scale,  and  the manufacturing of videocassette recorders and Grundig's  activities in the field of cordless telephones have already  been integrated with those of Philips. Therefore, it cannot be  excluded that Philips will strengthen its presence on the  market after it has become sole owner of GVG. But the change in  the situation of Philips and Grundig AG is not of such  importance as to raise any serious doubts under the Merger  Regulation in the presence of the strength of the other market  players and the considerable bargaining power of large  distribution or buying groups.  VI.  <ind> CONCLUSION   <ind> Based on the above findings, the proposed concentration  does not raise serious doubts as to its compatibility with the  common market.   <ind> The Commission has therefore 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 Council Regulation No. 4064/89.  For the Commission,