CELEX: 31993M0292
Language: en
Date: 1993-03-12 00:00:00
Title: COMMISSION DECISION of 12.03.1993 declaring a concentration to be compatible with the common market (Case No IV/M.292 - ERICSSON / HEWLETT-PACKARD) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31993M0292

COMMISSION DECISION of 12.03.1993 declaring a concentration to be compatible with the common market (Case No IV/M.292 - ERICSSON / HEWLETT-PACKARD) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 083 , 24/03/1993 P. 0000

 COMMISSION DECISION of 12.03.1993 declaring a concentration to  be compatible with the common market (Case No IV/M.292 -  ERICSSON / HEWLETT-PACKARD) 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: <ind> Case No. IV/M.292 - Ericsson/Hewlett-Packard  <ind>  <ind> Notification of 11.02.1993 pursuant to Article 4  of Council Regulation No. 4064/89  1. <ind> Telefonaktiebolaget LM Ericsson ("Ericsson") and  Hewlett-Packard Company ("HP") notified on 11.02.1993 their  intention to form a joint venture for the supply of telecom  network management products serving "multi-vendor network  environments", i.e. networks comprising equipment from more  than one supplier.  I. <ind> THE PARTIES  2. <ind> Ericsson is a Swedish supplier of telecommunications  equipment and systems for wired and mobile communications and  for both public and private networks.  Ericsson also  manufactures electronic components and cables for power supply  and distribution and airborne electronic defence systems.  3. <ind> HP is an international manufacturer of measurement and  computer products, including the equipment and systems used for  design, manufacturing, office automation and information  processing, hand-held calculators, computer peripherals (e.g.  printers), medical electronic equipment, analytical  instrumentation and certain electronic components (microwave  semi-conductor and optoelectronic devices).   II. <ind> THE OPERATION  4. <ind> Under the terms of a Joint Venture Agreement, Ericsson  will set up a company under Swedish law ("the JV") to which it  will transfer and sell all assets and goodwill pertaining to  its multi-vendor telecom network management systems ("TNM"s).   HP will purchase a 40% stake in the new joint venture company,  the balance being held by Ericsson.  At the same time, Ericsson  will sell to HP a 40% beneficial ownership right to certain  software and other technology in the field of telecom network  management systems.  This intellectual property will then be  made available to the JV by means of a licence entitling HP to  40% of royalty payments and Ericsson 60%.  III. COMMUNITY DIMENSION  5. <ind> The combined worldwide turnover of Ericsson (6,178  million ECU) and HP (12,912 million ECU) in their respective  last financial years exceeded 5,000 million ECU while both  parties' Community-wide turnover exceeded 250 million ECU.  The  undertakings involved do not achieve more than two-thirds of  their aggregate Community-wide turnover within one and the same  Member State.  IV. <ind> CONCENTRATION   <ind> Joint control  6. <ind> Ericsson will hold 60% and HP 40% of the JV's capital  and four out of seven of the directors on the JV's board will  be nominated by Ericsson (although HP will have the right to be  consulted about the identity of the General Manager).   Decisions in both board and shareholder meetings are by simple  majority, except for important issues requiring unanimity:  major expenditure loans or disposals; change in company  statutes; distribution of profits; merger or winding up of the  JV; appointment of auditors; approval of accounts and the  approval of any business plan or budget.  Given this last  point, both HP and Ericsson will have to agree on fundamental  business decisions and the JV's commercial and competitive  strategy.  Each thus exercises joint control with the other  over the JV.   <ind> Joint Venture performing on a lasting basis all the  functions of an autonomous economic entity  7. <ind> Ericsson is to transfer to the JV its existing  activities in multi-vendor TNMs, including both tangible and  intangible assets.  The joint venture agreement provides for  Ericsson's existing personnel to be offered employment with the  JV and for the JV to be endowed with substantial capital  resources as well as authorisation to raise debt finance in the  usual way.   <ind> Under a separate licensing agreement the parents will  license their intellectual property relating to technology and  software in the TNMS field to the JV on an irrevocable basis.   <ind> Furthermore, the duration of the joint venture is  effectively indefinite.  The JV will thus have the resources at  its disposal to be a durable full function joint venture  engaging in product development, manufacturing, marketing and  maintenance.    <ind> Absence of risk of coordination  8. <ind> HP is active in the area of computer networking  systems but it does not produce management systems for telecom  networks.  Ericsson will place its activities relating to  multi-vendor TNM systems in the JV whilst retaining its  proprietary TNM business.  The end use of proprietary TNM  systems is clearly distinct from that of multi-vendor TNM  systems, and as the market evolves, users of the two different  products are likely to become increasingly distinct as well.   <ind> Co-ordination would thus only arise were either parent  to enter the JV's market independently of the joint venture.   This would not, however, appear a commercially reasonable step  for either parent to take.  Having made a sizeable investment  in the JV, there would appear to be little motivation for  either parent to establish an independent rival to the joint  venture.  Such independent entry would thus seem neither  reasonable nor likely.  V. <ind> COMPATIBILITY WITH THE COMMON MARKET   <ind> Relevant product market  9. <ind> Until recently, operation support systems for telecom  networks were essentially limited to, and designed as an  integral part of, individual network elements such as switches  or transmission systems.  These systems were in general  proprietary, developed by public operators or equipment  suppliers, and unable to interact with other network elements.   Against a background of deregulation and technological advances  in telecommunications, new network operators and suppliers have  emerged.  There is now a need for flexible TNM systems which  can support and integrate equipment from a range of  manufacturers, and it is this market for which the JV is  intended to cater.   <ind> Relevant geographic market  10. <ind> The JV's potential customers are telecommunication  network operators across the globe.  Customer contracts being  transferred from Ericsson to the JV include ones in several  European countries and in Asia and South America.  The relevant  geographic market is thus at least the Community if not the  world, although the precise definition can be left open since  it does not influence the competition analysis.   <ind> Assessment  11. <ind> The worldwide market for multi-vendor TNM systems is  in its infancy.  The parties estimate that total investment by  all public telecom operators in TNM systems will amount to  approximately [Precise figure deleted] billion ECU in 1993.   The major part, however, of this investment is likely to be  spent in-house on proprietary system development and  maintenance and on systems embedded in network elements.  The  accessible part of this total investment for multi-vendor  systems is estimated to be between 20% and 30% but is expected  to increase to 50% over a period of five years.   12. <ind> The parties were unable to provide market share  figures for Ericsson's multi-vendor business given the early  stages of development of the market but there is, in any case,  no overlap between the parent companies and thus no change in  market share arising from the concentration.  Furthermore, the  proposed concentration does not create any significant vertical  or conglomerate links between the parent companies and the  joint venture.  13. <ind> The concentration will not, therefore, create or  strengthen a dominant position as a result of which effective  competition will be significantly impeded in the common market  or in a substantial part of it.  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 Council Regulation No. 4064/89.  For the Commission