CELEX: 31993M0342
Language: en
Date: 1993-11-15 00:00:00
Title: COMMISSION DECISION of 15.11.1993 declaring a concentration to be compatible with the common market (Case No IV/M.342 - FORTIS / CGER) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31993M0342

COMMISSION DECISION of 15.11.1993 declaring a concentration to be compatible with the common market (Case No IV/M.342 - FORTIS / CGER) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 023 , 27/01/1993 P. 0000

 COMMISSION DECISION of 15.11.1993 declaring a concentration to  be compatible with the common market (Case No IV/M.342 - FORTIS  / CGER) 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, Re: <ind> Case Nº IV/M. 342 - Fortis/CGER  <ind> Notification of 11.10.1993 pursuant to Council  regulation (EEC) Nº 4064/89  I. <ind> THE OPERATION AND THE PARTIES  1. <ind> On 11 October 1993, the Commission received the  notification of an operation by which the Group Fortis  (Fortis), controlled by AG and AMEV, will acquire 49.9% of  ASLK-CGER Bank and ASLK-CGER Insurance from ASLK Holding  N.V./CGER Holding S.A. (Holding) a "Holding bancaire d'intérêt  public", wholly owned by the Belgian State. Holding will retain  49.9% of ASLK/CGER Insurance. 0.2% of ASLK/CGER Insurance will  be held in autocontrol. 0.1% of ASLK/CGER Bank will held in  autocontrol (shares in autocontrol have no voting rights) and  the remaining 0.1% of ASLK/CGER Bank will be held by ASLK/CGER  Insurance. The present operation is to be placed within the  context of a privatisation programme of the Belgian  State.  2. <ind> Fortis have a right to purchase a further 0.1% in both  undertakings between 1 January 1995 and 31 December 1998 and  Holding have a right to require Fortis to purchase a further  9.8% between 1 January 1995 and 31 December 1999. If  these  options are exercised, the representation of Holding in the  board of directors of ASLK/CGER Bank and ASLK/CGER Insurance  and voting mechanisms will remain unchanged.  3. <ind> The main activity of Fortis is insurance, it also has  operations in banking and other financial services. Its  operations are principally based in Belgium and in the  Netherlands, with a presence in some other Member States.  Fortis was formed by the merger between Compagnie Financière et  de Réassurance du Groupe AG (AG) and N.V. AMEV (AMEV) in 1990  (see Case IV/M.O18 AG/AMEV -21.11.1990).  4. <ind> Holding wholly owns ASLK/CGER Bank and ASLK/CGER  Insurance. Holding's principal activities through these  companies are insurance, banking and financial services.  Holding also holds 100% shareholdings in the Caisse Nationale  de Crédit Professionel (CNCP) and the Institut National de  Crédit Agricole (INCA), two small public interest aimed credit  institutions whose partial sale is being negotiated at the  present.  II. <ind> COMMUNITY DIMENSION  5. <ind> The undertakings concerned have a combined aggregate  worldwide turnover in excess of 5,000 million ECU. Fortis,  Holding and ASLK/CGER Insurance have a Community turnover in  excess of 250 million ECU but do not both achieve more than two  thirds of their aggregate Community-wide turnover within one  and the same Member State. The notified operation therefore has  a Community dimension.  III. <ind> CONCENTRATION  6. <ind> According to the agreements between the notifying  parties, as reflected in the proposed articles of association  of the new entities to be set up, the business conduct is to be  carried out in a spirit of partnership. Both parties have equal  shareholdings and they both have equal numbers of directors on  the boards of both ASLK/CGER Bank and ASLK/CGER Insurance.  These elements all would point to joint control of both by  Fortis and Holding. However, the decision making mechanisms of  the boards of the two entities are very different and are  therefore considered separately [Business secret. As a result,  a casting vote is conferred on Fortis in the case of ASLK/CGER  Insurance and one of the Fortis representatives has a double  vote in the case of ASLK/CGER Bank..]   <ind> Voting mechanisms   <ind> ASLK/CGER Insurance  7. <ind> In the case of ASLK/CGER Insurance, decisions are  taken by simple majority. Where deadlock is reached matters are  referred to the Concertation Committee described in paragraph 9  below. Only if the Concertation Committee is deadlocked,  is  the Fortis casting vote  used.   <ind> ASLK/CGER Bank  8. <ind> So far as ASLK/CGER Bank is concerned, the board of  ASLK/CGER Bank (the Conseil d'administration - which defines  the general policy of the bank) is composed of [It concerns   the number of members of the board.] representatives from each  of Fortis and Holding (with one of the Fortis representatives  having a double vote). The board proposes appointments to the  [It concerns  the number of members of the board.] places on  the Comité de direction (which is responsible for day to day  management) who become members of the board. Their appointment  is subject to the approval of the Belgian Banking and Financial  Commission. A qualified majority  is required for decisions of  strategic importance. [In the case of  ASLK/CGER Bank, the  board structure and voting mechanisms of the board are  different, as a result of which Fortis and Holding have joint  control of ASLK/CGER Bank. The existence of joint control in  the bank is based on the possibility for Holding to block a  Fortis proposal, taking into account the votes of the Comité de  Direction.].   9. <ind> The shareholders agreement together with the proposed  articles of association defines the relationship, which is to  be built around the concept of partnership, between both  shareholders in terms of management of the two companies. The  preponderant voting rights conferred to Fortis have to be read  in conjunction with Article 3.3 of the Shareholders Agreement  which provides that when a dispute arises between the two  groups of Board Members regarding a Board matter [In the case  of  ASLK/CGER Bank, the board structure and voting mechanisms  of the board are different, as a result of which Fortis and  Holding have joint control of ASLK/CGER Bank. The existence of  joint control in the bank is based on the possibility for  Holding to block a Fortis proposal, taking into account the  votes of the Comité de Direction.], it is submitted to a  Concertation Committee. If the Committee is unable to resolve  the dispute, the matter is then referred to the Board which  then takes the decision using, if necessary, the casting vote.     <ind> Control  10. <ind> The two different board structures and voting  mechanisms of ASLK/CGER Insurance and ASLK/CGER Bank lead to  different conclusions over control.  11. <ind> In the case of ASLK/CGER Insurance, because of the   casting vote conferred on Fortis in the event of deadlock,  Holding will not have  the means to oppose the majority voting  powers of Fortis and therefore, Fortis alone will ultimately  have the possibility of exercising a decisive influence on the  affairs of the company.  12. <ind> [[Business secret] In the case of  ASLK/CGER Bank,  the board structure and voting mechanisms of the board are  different, as a result of which Fortis and Holding have joint  control of ASLK/CGER Bank. The existence of joint control in  the bank is based on the possibility for Holding to block a  Fortis proposal, taking into account the votes of the Comité de  Direction.]. This conclusion is based solely on the criterion  of the possibility of exercising a decisive influence laid down  in Article 3(3) of Regulation 4064/89 and has no bearing on the  concept of control under national legislation or in the  understanding of the parties.   <ind> Joint venture performing on a lasting basis all the  functions of an autonomous economic entity.  13. <ind> ASLK/CGER Bank will act on the Belgian market as an  independent and autonomous economic entity. Every means will be  given to it to develop its business and its commercial policy  independently and for an unlimited time.   <ind> Absence of coordination of competitive behaviour  14. <ind> Holding will also remain active in the financial  services sector in Belgium through Caisse Nationale de Crédit  Professionnel (CNCP) and Institut National de Crédit Agricole  (INCA). The aim of CNCP is to finance and to assist privately  owned institutions specializing in credit to small and medium  sized companies. INCA manages agricultural funds set up by the  State and acts as a clearing basis and fund manager for  privately owned agricultural banks, which collect funds and  grant loans to their own clients through their own networks.  INCA itself has no network. The Royal Decree of 29 September  provides that 50% of the shares in those two companies will be  transferred to private credit institutions. Both undertakings  have no direct presence in the fields of activities of  ASLK/CGER Bank. As a result, there is no risk of coordination  between these public credit institutions and ASLK/CGER Bank.  15. <ind> Also, the Belgian State is still present in the  banking sector through the "Office Central de Crédit  Hypotécaire" (OCCH), a mortgage institute, which the Belgian  State intends to dispose of and which in the meantime is  managed by the "Crédit Communal", a bank owned by the  "Communes" and the "Provinces". Given this and without  prejudicing the decision as to whether ASLK/CGER Bank and OCCH  are part of a single decision-making authority there is no risk  of co-ordination between the OCCH and ASLK/CGER Bank.  16. <ind> Fortis will be present in the Belgian financial  markets through the ASLK/CGER Bank, in which it will play a  determinant role, and to a  very limited extent through its  wholly owned subsidiary Metropolitan Bank. Metropolitan Bank  accounts for a small share of the Belgian retail banking market  (of the order of [Less than 5%]). There is insignificant  competition between Metropolitan Bank and ASLK/CGER Bank.  17. <ind> As a result, it is considered that the present  operation does not have as its object or effect the co- ordination of the competitive behaviour of undertakings which  remain independent.  18. <ind> Thus, the notified operation constitutes a  concentration within the meaning of Article  3(1)b of the  Regulation.   IV. <ind> COMPATIBILITY WITH THE COMMON MARKET   <tab> RELEVANT PRODUCT AND GEOGRAPHICAL MARKETS   <tab> BANKING  19. <ind> The banking sector can be divided into three broad   subsectors: retail banking, corporate banking and financial  markets.   20. <ind> Retail banking can be further divided into a number  of individual product groups. These product groups include  current accounts, savings accounts, bonds, pension funds, short  term and long term loans, mortgages and SICAVs (sociétés  d'investissement à capital variable).   21. <ind> Each banking product is distinct, but the degree of  substitutability between different products is difficult to  appreciate. There is no substitutability between certain  banking product groups but the divisions between other are far  less clear. Banks do not generally offer only one type of  account or loan so there is a strong linkage between the  different product groups within the retail banking sector.   22. <ind> Corporate banking includes domestic corporate  banking, banking for the public sector and international  credits to public companies. Financial markets includes  activities related to government funds and money markets.  23. <ind> From the geographical point of view, although a  growing internationalisation of the sector can be observed, the  activities of the retail banking sector will for a certain  period still be national in scope.   24. <ind> The precise delimitation of the relevant product  market need not to be further defined in the present case  because even on the basis of a narrower definition, the  operation does not raise serious doubts as to its compatibility  with the common market.   <tab> Insurance  25. <ind> It is considered that there exist as many product  markets as there are insurances for different kinds of risk,  since their characteristics, premiums and purposes are quite  distinct from the  consumer's viewpoint. Consequently they are  not to any great extent substitutable for one another. Thus,  life insurance and each type of non life insurance seem to  constitute separate product markets. Reinsurance constitutes  another market because of its purpose of spreading the risks  between insurers. Although insurance markets may become more  open to intra-community competition in the foreseeable future,  geographic markets seem at present to be mostly national in  view of differences of national regulatory systems.   <tab> COMPETITIVE ASSESSMENT  26. <ind> The market where a significant overlap arises from  the concentration is Belgium. Outside this member State there  is no or only insignificant overlap of activities of the  parties to the concentration.   <tab> Banking  27. <ind> Société Générale de Belgique (SGB), a major player in  Belgian financial markets, holds a 19.96% shareholding in, and  is represented by three members on the board of AG, which in  turn holds a 11.8% stake in SGB. This does not allow SGB the  possibility to exercise decisive influence on the business  operation of AG or on Fortis. The market shares of SGB are  considered to be separate from those of Fortis and ASLK/CGER  Bank for the purposes of competitive assessment.  28. <ind> The activities of the Belgian banking subsidiary of  Fortis, Metropolitan Bank, only overlap to a minor extent with  those of ASLK/CGER Bank which has a relatively strong position  in Belgian banking markets. The increase of market shares will  be well below[Less than 5%.] except for the following retail  banking product groups: high return saving accounts [Less than  5%.], pension funds [Less than 5%.] and mortgages[Less than 5%]  giving the new entity combined market shares of [Less than  20%], [Less than 20%] and [Less than 20%] respectively.  29. <ind> There are a number of strong players well established  in the Belgian market who have the ability to compete  effectively with the combined entity including: Générale de  Banque, Crédit Communal de Belgique, Banque Bruxelles Lambert  and Kredietbank. Each of these competitors offers a comparable  product range to the combined entity.  30 <ind> As a result, it is not expected that the proposed  concentration will create or strengthen a dominant position in  any of the affected banking markets.   <tab> Insurance  31. <ind> Fortis, through its 50% stake in Delta Capital, the  remaining 50%  being held by AGF,  holds a 56.5%  stake in  Assubel-Vie, Assubel-Vie is a Belgian company particularly  strong in life insurance in Belgium where it holds a market  share of approximately [Less than 15%] for life, sickness and  work accident insurance. A further 18% of Assubel-Vie is held  by COBEPA. Taking into account the role of COBEPA in the  business conduct of Assubel-Vie, this shareholding does not  give Fortis the possibility of exercising a decisive influence  on Assubel-Vie. Assubel-Vie is considered to be in a   competitive relationship with Fortis and, therefore, the market  shares held by Assubel-Vie are are not added to those of Fortis  for the purposes of competitive assessment.  32. <ind> The affected insurance product groups and the  combined market shares of the new entity are: life (group)  [Between 20% and 30%.], life (individual) [Between 20% and  30%.], sickness [Between 20% and 30%.], fire [Between 20% and  30%.], credit [Between 10% and 20%.], non-vehicle legal  expenses [Between 10% and 20%], accident [Between 10% and  20%.], liability [Between 10% and 20%], financial losses  [Between 10% and 20%], motor hull [Between 10% and 20%] and  vehicle legal expenses [Between 10% and 20%]9. The parties are  not active in reinsurance.  33. <ind> Although the combined entity will have significant  economic and financial power and it will achieve rather high  market shares, it will remain exposed to the competition of  other strong operators. Well established insurers are already  present in the Belgian market.   34. <ind> As to potential competition, Belgium is often used by  the large European insurers as a test market and it is highly  probable that some of them will remain in the Belgian market.  It is also possible that others will enter the market in the  future.   35. <ind> Whilst there are a number of insurance companies who  offer a broad product range, few operate in every market. There  are also a number of specialist companies in particular product  groups. Different product groups address different types of  risks - the administration of insurance policies is similar  regardless of the product group. Nevertheless from a supply  side perspective, any insurance company which is not involved  in a particular product group could diversify relatively easily  into another group to compete with the combined entity.  36. <ind> Thus, it is not expected that the proposed  concentration will create or strengthen a dominant position in  any of the affected insurance markets.  V. <ind> CONCLUSION  37. <ind> For all the foregoing reasons, the proposed  concentration does not raise serious doubts as to its  compatibility with the common market.  For the above reasons, the Commission has decided not to oppose  the notified operation 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