CELEX: 31995M0511
Language: en
Date: 1995-01-09 00:00:00
Title: COMMISSION DECISION of 09/01/1995 declaring a concentration to be compatible with the common market (Case No IV/M.511 - Texaco / Norsk Hydro) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

Avis juridique important

|

31995M0511

COMMISSION DECISION of 09/01/1995 declaring a concentration to be compatible with the common market (Case No IV/M.511 - Texaco / Norsk Hydro) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 023 , 28/01/1995 P. 0003

 COMMISSION DECISION of 09/01/1995 declaring a concentration to be compatible with the common market  (Case No IV/M.511 - Texaco/Norsk Hydro) 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. MERGER PROCEDURE ARTICLE 6(1)B DECISION PUBLIC VERSION To the notifying parties  Dear Sirs, Subject:<ind> Case N* IV/M.511 - Texaco/Norsk Hydro <ind> <ind> <ind> Notification  of  1.12.1994  pursuant to Article 4 of Council Regulation N* 4064/89 I.<ind> INTRODUCTION 1.<ind> On 1 December 1994 the Commission received a notification under the Merger Regulation, concerning  the acquisition by Texaco a/s (DK) and Norsk Hydro a.s. (Norway) of a joint venture (JV) operating in the  business of distribution of i.a. refined oil products. The notification has been made jointly by Texaco Inc., the  mother company of Texaco a/s, and Norsk Hydro a.s. II.<ind> THE PARTIES 2.<ind> Texaco a/s (DK) ("Texaco") belongs to Texaco Inc., a worldwide fully integrated oil company.  Texaco  is active in the field of exploration and production, and operates refineries, trading companies and distribution  companies. 3.<ind> Norsk Hydro a.s (Norway) ("Norsk Hydro") is also a fully integrated oil company active in the field of  exploration and production owning refinery capacity, running a trade company and operating distribution  companies.  In addition, it is among others active in the production and sale of fertilizers, and in the production  and trade of aluminium products. Norsk Hydro is controlled by the Norwegian State, which holds 51% of its  shares. III.<ind> THE OPERATION 4.<ind> The operation consists of the creation of JV by Texaco Inc. and Norsk Hydro. <ind> The parties will combine their activities in the field of distribution of gasoline, diesel, heavy fuel oils and  lubricants and activities incidental to the operation of service stations, such as the sale of anti-freeze and  automotive accessories. The activity of the JV will be limited to Denmark (including Greenland and the Faroe  Islands), Norway and Iceland.  [...](Deleted as business secret). <ind> The mother companies will withdraw from these businesses in Denmark, Norway and Iceland. IV. CONCENTRATION <ind> Joint control 5.<ind> The joint venture shall be 50% owned by each of the parent companies who shall have joint control of  the joint venture. According to the Shareholders Agreement, the board of the directors will decide the most  important issues and strategic decisions related to the running of the joint venture. These include: business plan  and budget; investments; major supply or service agreements. All resolutions of the Board of Directors will need  the consent of both parents. <ind> Full function joint venture <ind> The market of the JV: distribution market 6.<ind> The joint venture will operate on the following two distribution markets: (i)  distribution and sale of  diesel and oil for heating purposes and lubricants directly to end-users, and (ii)  distribution and sale through  service stations of gasoline, diesel and lubricants and other activities incidental to the operation of service  stations. For the purpose in this section - to  assess the concentrative and cooperative aspects of the operation - it  is not necessary to make a distinction of the two markets; as a rule all the distribution companies operate on both  markets. In the following, the term "distribution" refers to the functions on both markets mentioned above.  7.<ind> Distribution of oil products in Norway and Denmark constitutes a separate market in which there are  several distribution companies in Norway and Denmark (including non-integrated companies but only in  Denmark), which specialise in the selling and distribution of oil products and which are sourced by many  different suppliers. The distribution companies purchase the products in large quantities on the upstream market  and sell on in smaller quantities.  To do so they  have to operate storage and transport facilities, service stations  and employ personnel specialised to run these activities and, consequently, the distribution activities add   considerable value to the products in question. 8.<ind> On the market for distribution of oil products the joint venture, which comprises two existing  companies, will have all the assets and resources necessary to enable it to perform all the functions of an  autonomous economic entity, including storage and transport facilities, 476 company-owned and 676 dealer- owned service stations and marketing resources. <ind> The upstream trading market: supplies of refined products by traders to distribution companies. 9.<ind> The upstream trading market comprises the business of purchasing refined oil products from refineries  and selling the products to distribution companies, either according to a long-term contract or "spot".  Fully  integrated oil companies as well as independent companies operate trade companies.  As a rule, the trade  companies belonging to integrated oil companies purchase the products not only from the parents' refineries, but  also from refineries belonging to other companies and, in addition, also sell the products to distribution  companies which are not owned by the parents. 10.<ind> The joint venture will get supplies from its parents but, as will be shown, it is likely that it will obtain a  substantial proportion of its supplies from other trading companies.  The distribution companies of Norsk Hydro  and Texaco purchase from their parents the following percentages of  refined oil products in relation to their  total purchases:  <tab> Hydro distribution (purchase from parent) % of total purchase <tab> <tab> <tab> Texaco distribution  (purchase from parent) % of total purchase  <tab> Denmark (Exact figures deleted as business secrets.  Around 50%.) <ind> Norway (Exact figures deleted  as business secrets.  Between 25 and 40%.) <tab> Denmark (Exact figures deleted as business secrets.  Around  75%.) <tab> Norway (Exact figures deleted as business secrets.  Between 40 and 75%.) 1992 <tab> [...] <tab> - <tab> [...] <tab> [...]  1993 <tab> [...] <tab> [...] <tab> [...] <tab> [...]  1994 <tab> [...] <tab> - <tab> [...] <tab> [...]   <ind> These figures show considerable variations in the amount of supplies by the parents, which reflect the  competitive conditions prevailing in the market for supply even to "own" distribution companies.  As a rule, the  supply contracts run for one year, and, for instance, for 1995 Esso Norway has got a contract for substantial  supplies to the JV at the expense of Norsk Hydro's trading company. <ind> Other important suppliers of the respective distribution networks of the parents have been Statoil ([...]  (Exact figures deleted as business secrets.)  Texaco's total purchase from 1992 to 1994; [...](Exact figures deleted  as business secrets) Norsk Hydro's total purchase), Esso ([...] (Exact figures deleted as business secrets) Texaco  Norway and [...] (Exact figures deleted as business secrets) Norsk Hydro Norway) and Dofas ([...] (Exact figures  deleted as business secrets) for Norsk Hydro Denmark). 11.<ind> The Texaco group owns several Northern European refineries but none in the Scandinavian area. For  commercial reasons oil products refined on Texaco's refineries are not sold in the Scandinavian area and,  consequently, Texaco's distribution companies in Denmark and Norway does not purchase products which come  from Texaco' refineries. However, Texaco's distribution companies in Denmark and Norway purchase parts of  their requirements from Texaco trading companies, which are in the business of buying products from refineries  and selling it on to distribution companies. The Hydro group owns refinery capacity in Scandinavia (Hydro owns  21,5% of the Swedish refinery, Scanraff) and Hydro's distribution companies in Denmark and Norway are partly  supplied by products coming from that refinery. It is the parents intention to continue to trade with the joint  venture. However, this trade will be on an arm's length basis and it is not likely that the operation will give rise  to a change in the extent of supplies from the parents to the two joint venture companies. For 1995 the parties  have estimated that the parents  will supply the joint venture companies in Denmark and in Norway with  approximately [...] (Exact figures deleted as business secrets.  Around 50%.) and [...](Exact figures deleted as  business secrets.  Around 25%.) respectively of the joint ventures total needs of refined oil products. 12.<ind> For the above mentioned reasons, the joint venture can be regarded as a full-function joint venture  operating on a separate distribution market and performing the functions normally carried out by other  undertakings operating on the same market. <ind> Absence of coordination of competitive behaviour between the parents <ind> No coordination on the market of the JV: distribution market 13.<ind> There is no scope for coordination on the distribution market in Denmark and Norway since both  parents will withdraw from all distribution activities in that geographical area. Furthermore, there is no scope for  coordination neither at the borders (Norway/Sweden and Denmark/Germany) nor at a broader European basis  since Texaco is not present in Sweden and  Hydro is only present in Denmark, Norway and Sweden.  <ind> No coordination on the upstream market: trading market 14.<ind> Both parents are present on the upstream market of supply of oil products by trading companies to  distribution companies; however, it has to be taken into consideration that the two parent companies are very  different players on this market. The purpose of Norsk Hydro's trading activities, which are concentrated on the  Scandinavian market, is to transport refined oil products produced at Scanraff, firstly Hydro's distribution  companies in Denmark, Norway and Sweden and, secondly, to other companies not belonging to Hydro.  Occasionally, Hydro's trading company purchases small quantities of oil products from from other Scandinavian  refineries but then only for the purpose of supplying its distribution companies. In contrast, Texaco conducts a   business of trading in Scandinavia by buying all the refined oil products from refineries belonging to other  companies and selling them to its own or other distribution companies. 15.<ind> Information from competitors shows that only small quantities of refined oil products consumed in  Scandinavia are imported from non-Scandinavian refineries. This is mainly because there is an excess of  refining capacity in Scandinavia (which has been the case since 1975) and products are available in sufficient  quantities. Since transport costs is an important factor the Scandinavian refineries will have an competitive  advantage in this area and in most cases it will be uneconomical for non-Scandinavian refineries to transport  products to the Scandinavian countries. In this case, therefore, the relevant geographical market for supply of  refined oil products by trading companies to distribution companies can be considered to be Scandinavia. 16.<ind> Of the Texaco trading company's total sales of refined products on the Scandinavian market in 1994,  [...] (Exact figures deleted as business secrets.  Around 60%.) went to the Texaco distribution companies in  Denmark and Norway.  For 1995, Texaco estimates that the figure will be approximately the same.  As for Norsk  Hydro's trading company, in 1994 [...] (Exact figures deleted as business secrets.  Between 10 and 20%.) of its  total sales of refined oil products on the Scandinavian market was sold to Norsk Hydro's distribution companies  in Norway and Denmark.  For 1995, Norsk Hydro estimates that [...] (Exact figures deleted as business secrets.   Less than 15%.) of the trading company's total sales will be sold to the joint venture.  Consequently, the JV will  not be the main customer of each of the parents.  [...] (Information deleted as business secret.) 17.<ind> Taking into account the fact that the JV will not be the main customer of each of the parents, the very  different character of the the two parents' activities as well as their limited presence (on the Scandinavian market  for supply of refined products by trading companies Texaco and Hydro have market shares of approximately 3%  and 6% respectively) on the upstream market for supply of refined oil products to distributors, there is no  realistic scope for coordination between the parents on this upstream market.  V.<ind> COMMUNITY DIMENSION 18.<ind> The concentration will have a Community dimension. The combined aggregate turnover of Texaco and  Norsk Hydro  in 1993 exceeded ECU 5.000 million. The aggregate Community turnover of each of them was  also higher than ECU 250 million and the two companies did not achieve more than two-thirds of their  respective Community-wide turnover in one and the same Member State. VI.<ind> RELEVANT PRODUCT MARKETS 19.<ind> The market on which the JV operates is the distribution of gasoline, diesel, heavy fuels and lubricants  (all together refined oil products). 20.<ind> The distribution to the end user of these products can be achieved through two different channels:  <ind> i.<ind> <ind> either, the products are delivered, at the care of the distribution company (in this case, the  JV) from the terminals or depots directly to the end user,  <ind> ii.<ind> or they are transported, at the care of the distribution company, from these terminals or depots to  the service stations, which in their turn sell the products directly to the consumer. 21.<ind> Gasoline, is distributed mainly through service stations (for 98% of the total demand in the countries  concerned by the operation). It is mainly used by cars. <ind> Diesel is distributed in both the manners indicated at point 20.<ind> The first way of distribution  (illustrated at point 20.i.), which accounts for approximately 50% of the total demand of this product in the  countries concerned by the operation, applies either when delivered to large customers (for example, transport  companies) or when diesel is used for heating purposes, and it is thus delivered by the distribution company  directly to the customer. <ind> The second way of distribution (illustrated at point 20.ii), which accounts for the remaining 50% of the  total demand, is used when diesel is used in cars or trucks, and is delivered through the service stations. <ind> Heavy Fuels, which is needed for heating purposes, is mainly sold directly from the depots or terminals to  the end users by way of trucks (as per point 20.i). <ind> Lubricants are sold by service stations, supermarkets etc. and directly to large end users. 22.<ind> Distribution of refined oil products and lubricants is basically a service (See, for a similar position,  CAMPSA decision of 19.12.1991 (IV.M.138) and Elf Aquitaine-Thyssen/Minol (decision of 4.9.1992  IV.M.235)). Thus, the affected markets are to be considered: <ind> i)<ind> <ind> the distribution of refined oil products and lubricants from the depots and terminals  directly to the end users by way of trucks; <ind> ii)<ind> the distribution of refined oil products and lubricants by way of service stations. 23.<ind> In this perspective, the further assessment of the proposed operation will have to be based more on the  type and characteristics of the service rendered than on technical or physical distinctions of the product sold. VI.<ind> GEOGRAPHIC REFERENCE MARKET <ind> Deliveries by trucks 24.<ind> The relevant geographic market for the service consisting in deliveries by trucks from the terminal or  depots to the end user is considered to be at least regional and in some cases national. <ind> From the end user's point of view, this kind of distribution is essentially a national or in some cases a  regional activity; what in practice happens is that the end user calls by phone or letter the company in charge of  this distribution, which then will deliver the products directly at the premises or houses indicated. <ind> Depending on the company providing this service, it will have either one office in the country concerned  (which in this case can be either Denmark or Norway) or more offices spread at a regional level. <tab> Deliveries by service stations 25.<ind> The relevant geographic market for the service consisting in deliveries to the consumer by service  stations is considered to be local. <ind> From the end user's point of view, this kind of distribution is essentially a local activity, as consumers'  choices are restricted by transport constraints. VII.<ind> ASSESSMENT 26.<ind> As mentioned, the Norwegian State owns 51% of Norsk Hydro.  In this connection it has ben relevant  to investigate whether Norsk Hydro operates as an autonomous entity independently of the Norwegian State  because the State owns 100% of Statoil, which is the major player on the same markets where the JV will  operate. <ind> Norsk Hydro has declared that the Norwegian State does not take and has not taken part in decisions  regarding Norsk Hydro's commercial activities and that there are no formal or informal relations between Norsk  Hydro and Statoil at any level pertaining to their position as companies in which the Norwegian State is a  shareholder.  As a result of its investigation, the Commission has  grounds to believe that the commercial  activities of these two companies are not coordinated through the intervention of their common shareholder, the  Norwegian State.  This leads to the conclusion that the market position of Norsk Hydro has to be evaluated  independently from that of Statoil. <ind> Consequently, for the purposes of this assessment, Norsk Hydro is to be regarded as an autonomous  economic unit with an independent power of decision separate from Statoil, irrespective of the capital holding of  the Norwegian State in both companies. 27.<ind> Before the common acquisition of the JV, the parties' presence on the relevant markets as defined  above, in relation to the presence of the other competitors, was the following (based on number of outlets): <ind> Deliveries from the terminals to the consumer <ind> Denmark (Exact figures deleted as business secrets.)  Texaco + Norsk Hydro <tab> Statoil <tab> Shell <tab> Q8 <tab> OK <tab> Others ±15% <tab> ±20% <tab> ±15% <tab> ±10% <tab> ±5% <tab> ±30%  <ind> Norway (Exact figures deleted as business secrets)  Texaco + Norsk Hydro <tab> Statoil <tab> Shell <tab> Esso <tab> Fina <tab> Others ±20% <tab> ±20% <tab> ±25% <tab> ±25% <tab> ±5% <tab> ±10%  <ind> Service stations market <ind> Denmark (Exact figures deleted as business secrets) Texaco + Norsk Hydro <tab> Statoil <tab> Shell <tab> Q8 <tab> OK ±25% <tab> ±15% <tab> ±15% <tab> ±20% <tab> ±10%  <ind> Norway (Exact figures deleted as business secrets)  Texaco + Norsk Hydro <tab> Statoil <tab> Shell <tab> Esso <tab> Fina ±20% <tab> ±25% <tab> ±20 <tab> ±20% <tab> ±15%  Following the acquisition, the parties combined market shares on the above markets will be:  <tab> Deliveries from the terminals to the consumer <tab> Denmark  [±15%] (Exact figures deleted as business secrets.) <tab> Norway    [±20%] (Exact figures deleted as business secrets.) <tab> Service stations market <tab> Denmark  [±25%] (Exact figures deleted as business secrets.) <tab> Norway    [±20%] (Exact figures deleted as business secrets.) 28.<ind> These shares at the level of the whole territory of Norway and Denmark are substantially the same at  the regional or local level; in both countries the presence of the parties' service stations and depots and terminals  is homogeneously spread, together with that of a sufficient number of competitors. 29.<ind> On the affected markets the presence of the parties does not exceed 25%, and there are a sufficient  number of important competitors, like Shell, Esso, Statoil. It is thus concluded that the creation of the JV does  not give rise to doubts as to its compabitility with the common market and the EEA-Agreement. 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 and Article 57 of the EEA Agreement. For the Commission