CELEX: 31995M0632
Language: en
Date: 1995-09-21 00:00:00
Title: COMMISSION DECISION of 21/09/1995 declaring a concentration to be compatible with the common market (Case No IV/M.632 - Rhône Poulenc Rorer / Fisons) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31995M0632

COMMISSION DECISION of 21/09/1995 declaring a concentration to be compatible with the common market (Case No IV/M.632 - Rhône Poulenc Rorer / Fisons) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 263 , 10/10/1995 P. 0004

 COMMISSION DECISION of 21/09/1995 declaring a concentration to be compatible with the  common market (Case No IV/M.632 - Rhône Poulenc / Fisons) 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 Subject :<ind> Case No IV/M.632 - Rhône Poulenc Rorer / Fisons <ind> <ind> Notification of 18 August 1995 pursuant to Article 4 of Council Regulation No  4064/89 1.<ind> On 18 August 1995 Rhône Poulenc Rorer Inc. (RPR) notified the Commission that they had  made a public offer to acquire control of Fisons plc. (Fisons). 2.<ind> After examination of the notification the Commission has concluded that the notified  operation falls within the scope of application 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.<ind> THE PARTIES 3.<ind> RPR is controlled by Rhône Poulenc SA (RP) and is the human pharmaceuticals arm of  Rhône Poulenc, which holds 68% of its shares. RPR is engaged in the discovery, development,  manufacture and marketing of human pharmaceuticals (prescription medicines, non-prescription  medicines and plasma proteins). In addition RPR makes and markets certain bulk pharmaceuticals  and limited quantities of other chemicals. 4.<ind> RP's only other interest in human pharmaceuticals is through its wholly owned subsidiary  Pasteur Mérieux Sérums et Vaccins whose activities are limited to vaccines and other immunological  products. Neither RPR nor Fisons is involved in this area. 5.<ind> RP has four major areas of activity, bulk and fine chemicals, fibres and polymers, agro (seed  protection, genetics, pesticides, insecticides, etc.) and health. 6.<ind> Fisons is currently engaged in a major reorganisation of its business activities involving the  disposal of major parts of its current activities. At the time of the notification it had four main  business areas: <ind> -<ind> Pharmaceuticals, the development, manufacture and marketing of human  pharmaceuticals. <tab> -<ind> Scientific Instruments, an agreement to sell this business was signed on 1 March 1995  and awaits regulatory approval. <tab> -<ind> Horticultural, the only remaining business in this area is SCAC-Fisons S.A. in  France. <tab> -<ind> Laboratory supplies, an agreement for the sale of the bulk of this business was signed  on 29 August 1995. It is subject to shareholder and regulatory approval. II.<ind> THE OPERATION 7.<ind> The proposed concentration consists of a public offer announced on 18 August for the entire  issued share capital of Fisons. The offer is made through a wholly owned subsidiary of RPR  incorporated in Delaware (USA) and formed for the purpose of making the offer. III.<ind> COMMUNITY DIMENSION 8.<ind> The combined worldwide turnover of the parties exceeds 5.000 million ECU. The aggregate  Community wide turnover of RPR exceeds 250 million ECU.  9.<ind> Fisons argues that the Commission has no jurisdiction in this case. As indicated above, it  signed agreements to sell its Scientific Instruments Division on 1 March 1995 and its Laboratory  supplies division on 29 August 1995. Both these agreements are conditional upon regulatory  approvals to be effective. In the case of the sale of the laboratory supplies business the sale is also  conditional upon approval of Fisons' shareholders. Fisons says that the turnover of these businesses  should be excluded from the calculation of EU turnover because their sale is the subject of firm  contracts. If this view is taken then Fisons' EU turnover, according to information provided by  Fisons, would be below 250 million ECU and the operation would not have a Community  dimension. <ind>  10.<ind> The Commission cannot accept this argument. At the time of the notification and of this  decision the sale of Fisons' laboratory supplies business was still and remains subject to the approval  of the company's shareholders and therefore its turnover must be included in the calculation of  turnover for the purposes of Article 1.2 of the Merger Regulation. Fisons' turnover in the European  Union exceeds 250 million ECU. Neither RPR nor Fisons achieve more than two-thirds of their  turnover in one and the same Member State. The operation therefore has a Community dimension.  11.<ind> This operation is distinguished from the situation in Air France v the Commission [Case  T-3/93 Judgement of 24 March 1994] where the disposal or the cessation of certain activities were  held by the Court of First Instance to be a precondition of the acquisition. IV.<ind> THE RELEVANT MARKETS A.<ind> Relevant Product Markets 12.<ind> The activities of RPR and Fisons overlap in the following sectors:  <ind> - Medicines <ind> - Horticultural products <ind> The proposed operation will also result in vertical integration in the laboratory supplies area. <ind> Medicines  13.<ind> Medicines can be broken down into therapeutic classes according to the Anatomical  Therapeutic Classification ("ATC") which is recognized and used by the World Health Organization.  This classification, previously used by the Commission [Decision IV/M.072 - Sanofi/Sterling Drug  (10.6.91) - Decision IV/M.323 - Procordia/Herbamont (20.04.93) - Decision IV/M.426 - Rhône  Poulenc/Cooper (18.04.94) - Decision IV/M.457 - La Roche/Syntex (20.06.94) - Decision IV/M.500  - AHP/American Cyanamid (19.09.94) - Decision IV/M.555 - Glaxo/Wellcome (28.02.1995)],  enables medicines to be grouped according to their composition and therapeutic properties. 14.<ind> The third level classes of the ATC classification provide a grouping of medicines  according to their therapeutic properties, that is, their intended use and therefore may be accepted as  an operational market definition. It may be necessary, however, to carry out analyses at other levels  of ATC classification where it is appropriate to group particular third level categories together or to  descend to narrower classes at the fourth level. This will be the case where products from different  ATC classes compete as possible treatments for a specific diagnosed medical condition. 15.<ind> Furthermore, medicines may be subdivided into different segments on the basis of different  criteria which may lead to distinctions, essentially from a demand-side point of view. A distinction  may be made between medicines which are subject to medical prescription ("prescription-only"  medicines) and medicines which are not subject to medical prescription ("non-prescription"  medicines). A distinction may also be made between medicines which are wholly or partially  reimbursed under the health insurance system and medicines which are not reimbursed. These  segments overlap to a certain extent. Most of "prescription only" medicines are reimbursed and most  of "non-prescription" medicines are not reimbursed. Moreover, the presence of one medicine in one  segment is not permanent to the extent it is linked to decisions of national authorities which can lead  to switches between these segments. 16.<ind> In the pharmaceutical sector, in order to be complete a competition assessment will require  scrutiny of products which are not yet on the market but which are at an advanced stage of  development (normally after a very considerable investment of resources of time and money). Such  products will not yet have been allocated an ATC classification and their potential to compete with  other products, either in development or already on the market, can only be assessed by reference to  their characteristics and intended use. In some areas, any such attempt at product market definition  may be problematical (in the HIV/Aids area, for example.) One possible alternative approach to  defining the markets for such products would be the diagnosis category ("ICD Code"). 17.<ind> Horticultural Products <ind> Fisons is active in three areas, lawn care, slug and weed killers and growing media. The  effects of the proposed operation will be examined for these products sectors, if there are no concerns  using these narrow product definitions the question of the relevant product market may be left  open. 18.<ind> Laboratory Supplies <ind> Only Fisons has a laboratory supplies so there is no overlap at the distribution level. The  question of the relevant market is confirmed to the vertical aspects of the supply of certain organic  and inorganic chemicals to Fisons for sale in their distribution network. <ind> Active ingredients for Pharmaceutical 19.<ind> RP supplies bulk aspirin and paracetamol while Fisons supplies sodium cromoglycate.  There is no overlap at the production level for these products, however they are used in the  preparation of medicines by both RPR and Fisons. B. <tab> Geographical Reference Market <tab> Medicines 20.<ind> The harmonisation of technical legislation within the Community and the entry into force  on 1.1.1995 of new marketing authorization procedures for medicines represent the completion of  the Single Market Programme from the point of view of scientific and technical requirements for  medicines. Since the beginning of 1995 pharmaceutical companies have the option (and indeed the  obligation as far as biotechnology products are concerned) to submit an application for authorization  of new medicines to the European Medicines Evaluation Agency (EMEA), which latter will make a  recommendation to the Commission, whose decision is binding on all Member States. 21.<ind> However, the geographic reference markets for the sales of medicines remain for the  purposes of a competition assessment essentially national, for the following reasons. 22.<ind> The sale of medicines is influenced by the administrative or purchasing policies adopted in  member States by national health services. For example, some countries take direct or indirect  measures to influence prices mechanisms (for example, there is direct price fixing (as in France,  Italy or Spain), overall control of companies' profits (as in the UK) and special provisions affecting  the reimbursement of the cost of drugs by the national health insurance systems (as in Germany)). In  addition, there are different levels of reimbursement by the social security system for different  categories of medicines. For these reasons pharmaceutical prices may differ from one Member State  to another. In addition there exist widespread different branding and sizing strategies and  distribution systems, which further indicate national market characteristics. stated in the  Commission's previous decisions (see footnote 1). In the Notification form Rhône-Poulenc refers to  the same source without taking any particular point of view on it. 23.<ind> As a result of these conditions, there are appreciable differences of the undertakings'  market shares and substantial price differences for similar or identical products between  neighbouring areas. 24.<ind> For the above reasons the impact of this concentration has to be assessed in relation to  national markets. <tab> Horticultural Products 25.<ind> Fisons horticultural activities are almost entirely confined to France. The proposed  transaction will be examined in relation to France, the narrowest market definition. If it does not  give rise to competition concerns at this level it will not give rise to difficulties at the Community or  EEA level. <tab> Laboratory supplies 26.<ind> The organic and inorganic chemicals concerned are not patent protected and may be  obtained from a large number of suppliers inside and outside the Community. It is reasonable to  suppose that relevant market is at least the Community. <ind> Active Ingredients for pharmaceuticals 27.<ind> None of the compounds concerned are protected by patent and there are a large number of  alternative suppliers both within and outside the Community. The products are of comparatively  high value and transport costs are unlikely to be a significant hindrance to their movement over long  distances. It is reasonable to assume that the market is at least the EU V.<tab> ASSESSMENT <tab> Pharmaceuticals 28.<ind> In the present case, there are 10 horizontal affected markets on the basis of the product and  geographic markets definitions indicated above : <ind> <ind> Other mineral supplements <ind> A12C <tab> France <ind> <ind> Anticoagulants <ind> B1B <tab> Ireland <ind> <ind> Diuretics <tab> C3A <tab> Ireland, UK <ind> <ind> Non-narcotic Analgesics <tab> N2B <tab> France <ind> <ind> Antitussives <tab> R5D <tab> France <ind> <ind> Xanthines <tab> R3B <tab> France <ind> <ind> Preparations for the treatment of non-specific conjunctivitis <tab> S1G <tab> Belgium,  France, UK <ind> Each of these markets is discussed in detail below. <tab> Other Mineral Supplements (ATC.3 A12C) 29.<ind> This category covers all mineral supplements other than calcium and potassium. They are  mainly preparations containing magnesium and would be prescribed for patients with difficulties in  absorbing this element. 30.<ind> There is one affected market, France where RPR has [15-25%] to which will be added [0- 5%] from Fisons. Two competitors Sanofi and Labcatal have larger market shares than the merged  group, RPR/Fisons.  <ind> Injectable Anticoagulants (ATC.3 B1B) 31.<ind> The ATC.3 category B1B includes injectable anticoagulants that are used to break down  potentially fatal blood clots and which are also injected before general surgery to prevent thrombosis  or embolism and also products for the maintenance of intravenous lines. 32.<ind> At ATC level 3 the only affected market is Ireland where the combined RPR/Fisons  operation would have a market share of [35-45%] made up of [35-45%] from RPR and [0-5%] from  Fisons. However, the Fisons' product, Hepsal, may be used in Ireland only for the maintenance of  intravenous lines and has no other therapeutic use, it falls into ATC level 4 category B1B1. On the  other hand RPR's product "Clexane" is used for prophylaxis against deep vein thrombosis (R1B 3).  These two products are not substitutable. 33.<ind> There is therefore no overlap at the ATC level 4 and the merger will not change the  competitive situation in relation to the Irish market for injectable anticoagulants. <ind> Diuretics (ATC-3 C3A) 34.<ind> This category covers a wide variety of products all of which share the therapeutic effect of  causing the body to lose water by urination. The most common reason for its use is congestive heart  failure. 35.<ind> Two markets are affected. Ireland where [0-5%] is added to RPR's existing [25-35%]  giving a combined share of [25-35%] and the United Kingdom Fisons has [0-5%] and RPR [25- 35%]. In each country there are two competitors with over 10% market shares (Leo and Servier in  Ireland and Leo and Ivax in the United Kingdom). 36.<ind> In addition, in both countries there are high levels of generic prescribing and generic sales  (including branded generics) now account for nearly half of the market by value. In the face of this  competition both RPR and Fisons sales and market shares have fallen and are likely to continue to  do so. <tab> Non-Narcotic Analgesics (ATC-3 N2B) 37.<ind> The products in this ATC level 3 category include a number of common products for pain  relief including aspirin and paracetamol when used to reduce high temperatures. 38.<ind> The only affected market is France where RPR has a market share of [15-25%]. The  additional market share resulting from the merger with Fisons will be less than [0-5%]. 39.<ind> Three other companies, Bristol-Meyers, Hoechst and L'Oreal Synthelabo, have market  shares of between 10% and 30%. The effect of the merger on this product category will be  insignificant and will not create or strengthen a dominant position. <tab> Antitussives (ARC-3 R5D) 40.<ind> Antitussives are given to prevent or ease coughs. They are generally used for the treatment  of simple coughs and are available through pharmacies without prescription. 41.<ind> France is the only horizontally affected market where RPR and Fisons have market shares  of [15-25%] and [0-5%] respectively. Two other companies, Sanofi and Bouchers, have market  shares above 10% and remainder of the market is widely dispersed. The effect of the merger on this  product category will therefore be insignificant.  <tab> Xanthines (ATC-3 R3B) 42.<ind> These products are used to relieve bronchospasm, usually a result of asthma. They are an  old class of compounds and are being replaced by newer therapies. In 1994 RPR had a [45-55%]  share of the only affected market, France, to which the merger would add [0-10%] from Fisons. 43.<ind> In France the change to more modern therapies has been slower than in many other EU  countries. Between 1992 and 1994 the French market declined by [5-15%] a year as French doctors  moved to newer treatments. 44.<ind> As a result of supply difficulties RPR has in 1995 ceased to supply its leading xanthine,  slophyllin which had a market share of [35-45%]. Although it is not possible to say to what extent  other RPR or Fisons xanthines will be substituted for slophyllin it is clear that the combined share of  RPR and Fisons will fall significantly. The fact that RPR could discontinue its market leading  product illustrates that it does not regard this market as one which will be important for its future.  45.<ind> Both Altana and Pierre Fabre had market shares exceeding that of the remaining RPR  products and one Altana had a share exceeding the aggregate of Fisons and the remaining RPR  products. <ind> Preparations for the Treatment of Non Specific Conjunctivitis (ARC-3 SAG) 46.<ind> The products in this group are generally used for the treatment of conjunctivitis, the  inflammation of the membranes covering the cornea and the inside of the eyelid. The most common  active ingredient is sodium cromoglycate, patented by Fisons in 1965 and which is no longer  protected. <ind> There are three affected geographical markets, France, Belgium and the United Kingdom. <ind> France 47.<ind> In France Fisons will add [10-20%] to RPR's [5-15%] market share giving a total of [20- 30%], which will be insufficient to create a dominant position for this product. Furthermore the  merged companies will face competition from four companies, Martin de Moulins, Thea, Nestlé and  Chauvin Blanche, with market shares of between 10% and 20%. <ind> Belgium 48.<ind> The merged companies will have a [30-40%] share of the Belgian market for this product,  [15-25%] from RPR and [10-20%] from Fisons. Two other manufacturers have market shares of  between 10% and 25% (Johnson and Johnson and Boehringer Ingelheim). 49.<ind> The RPR products are essentially eyewashes for soothing tired or irritated eyes while  Fisons products act against allergies. RPR and Fisons products are at best static or declining in  market share. There are two major competitors one of whom Johnson & Johnson has increased its  market share in the last three years to its present level of 20%. Neither of the main competitors  believe that the merger will have anticompetitive effects. <tab> United Kingdom 50.<ind> In the United Kingdom, Fisons has a market share of [55-65%] of the supply of these  products to which RPR adds a further [0-5%]. 51.<ind> In 1994 products containing sodium cromoglycate were approved for non-prescription  sales in the United Kingdom. As a result of this development a number of companies launched new  products based on this compound for non-prescription sales. In this market it is not necessary to  distinguish between prescription and non- prescription sales as the market appears to be is in  transition to a situation were many sufferers from conjunctivitis will purchase anon-prescription  remedy in the same way as sufferers from headache purchase aspirin or paracetamol. Competition  from generics is therefore increasing substantially. Fisons' market share had already fallen from [65- 75%] in 1992 to [55-65%] in 1994. <ind> Conclusion 52.<ind> The merger will not create or strengthen a dominant position for any of the above  pharmaceutical products on the affected markets. <ind> Horticultural Products 53.<ind> It is estimated that Fisons has approximately [0-10%] of the overall French market for  horticultural products and that Rhône Poulenc has [25-35%]. Only the three product areas in which  there is an overlap were considered, lawn care products, slug and weed killers and growing media.  Only in the case of growing media where it was about [15-25%] did the combined market share  exceed 15%.  54.<ind> Growing media are essentially mixtures of compost and fertilisers and present very low  barriers to entry. With only [15-25%] RPR/Fisons would have insufficient market power to be able to  act independently of their competitors. <tab> Research and development 55.<ind> As Fisons has sold the bulk of its research activities to Astra it has retained only a very  limited pipeline of products in development. Of these only two are in phase III or nearer the market.  These are nedocromil sodium (the active ingredient in Tilade) for use in preparations for the relief of  allergy in the eyes or nose and the combination of Tilade with a Beta 2 agonist for the treatment of  asthma in patients requiring both prophylactic and symptomatic products. 56.<ind> As regards Fisons' work on combining Tilade with a Beta 2 agonist RPR has no projects  and no existing sales in the relevant ATC level 3 category, (R3E). At the European market level (the  narrowest geogrphic definition of the market that can be considered for research and development)  the existing combined market shares for all the ATC level 3 categories where nedocromil sodium  might be used for the relief of allergies are low, less than 25% and less than 10% in all categories  except preparations for the treatment of non-specific conjunctivitis, (S1G). For reasons discussed  above no serious competition concerns arise for this product category on narrower geographic  market definitions and there is no reason to suppose that Fisons' development work on nedocromil  sodium (should it prove successful) would change that position. In addition there must be  considerable uncertainty as to whether the products under development will eventually reach the  market. 57.<ind> RPR has no phase III or more developed products in areas where Fisons is also active other  than those in the preceeding paragraphs. 58.<ind> The effect of the proposed merger in the research and development area will not therefore  create or strengthen a dominant position. <ind> Laboratory supplies 59.<ind> Fisons buys the chemicals from a wide variety of suppliers and repackages them in small  quantities for laboratory use. Its total sales of such chemicals in the EU are extremely small, less  than [10-30] million ECU, in relation to Rhône Poulenc's sales of bulk chemicals, in the EU, more  than [1000-3000] million ECU. Furthermore Fisons' contracts for the sale of laboratory supplies  business have been signed and RPR have indicated that they would not rescind the sale. <ind>  60.<ind> Even in the event that this sale is not completed the proposed operation would not put the  merged companies in an artificially privileged position in relation to outlets for bulk chemicals or  supplies of chemicals for distribution to laboratories etc. <ind> Active ingredients for pharmaceuticals 61.<ind> Although RP is a major supplier of both aspirin and paracetamol the proposed operation  will have a negligible effect on the market for the supply of these products as Fisons share of the  market medicines incorporating these active ingredients is minute, less than [insignificant] at the EU  level. the merger will not therefore in any significant way increase the tied outlets for aspirin and  paracetamol available to RP. 62.<ind> Fisons is the major EU supplier of sodium cromoglycate. RPR has downstream products in  ATC level 3 category S1G. however RPR's share of the EU market for S1G (including products not  containing) is less than [0-10%]. In 1994 RPR's requirements for sodium cromoglycate were [0-10]  kilograms insufficient to affect the market which is estimated at over [5-15] tonnes. CONCLUSION 63.<ind> It follows from the above that the proposed concentration would not create or strengthen a  dominant position as a result of which competition would be significantly impeded in the common  market or in a substantial part of it. <ind> For the above reasons, the Commission has decided not to oppose the notified operation and  to declare it compatible with the common market and with the functioning of the EEA Agreement.  This decision is adopted in application of Article 6(1)(b) of Council Regulation No 4064/89. For the Commission,