CELEX: 31994M0465
Language: en
Date: 1994-08-29 00:00:00
Title: COMMISSION DECISION of 29/08/1994 declaring a concentration to be compatible with the common market (Case No IV/M.465 - GE / CIGI) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31994M0465

COMMISSION DECISION of 29/08/1994 declaring a concentration to be compatible with the common market (Case No IV/M.465 - GE / CIGI) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 271 , 29/09/1994 P. 0003

 COMMISSION DECISION of 29/08/1994 declaring a concentration to be compatible with the  common market (Case No IV/M.465 - GE / CIGI) 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 PARTY Subject:<ind> Case No.IV/M.465 -GE/CIGI. <ind> Notification of 25.07.1994 pursuant to Council Regulation (EC) No. 4064/89  1.<ind> The above mentioned notification concerns the agreement signed on the 18th of July 1994  between CIG Acquisition Corporation Inc, a wholly owned subsidiary of the General Electric  Company (GE), and Consolidated International Group, Inc. (CIGI) whereby GE acquires CIGI after  reorganization with respect to certain assets and subsidiaries. 2.<ind> After examination of the notification, the Commission has concluded that the notified  operation falls within the scope of application of Council Regulation No 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 AND THE OPERATION 3.<ind> GE is a large and diversified industrial corporation. GE is active in the European Insurance  sector through Financial Insurance Group Ltd (FIG), its UK based wholly owned subsidiary. CIGI is  the U.S. holding company of a number of European, Canadian and Caribbean subsidiaries engaged  in general insurance, life assurance and reinsurance. 4.<ind> The operation involves the acquisition by GE of the entire issued share capital of CIGI by a  merger between CIGI and a newly formed subsidiary of GE. CIGI will have been reorganised prior  to the merger so as to remove the reinsurance and most of its non-European business. In the event  that less than 98% of CIGI's shareholders approve the merger and reorganisation, the transaction  will be restructured as a direct acquisition by the newly formed subsidiary of GE. II.<ind> CONCENTRATION  5.<ind> The notified operation constitutes a concentration within the meaning of Article 3(1)b of the  Regulation. III.<ind> COMMUNITY DIMENSION 6.<ind> The undertakings concerned have a combined aggregate worldwide turnover in excess of  5000 million ECU. Both GE and CIGI have a Community-wide turnover in excess of 250 million  ECU, but do not 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. IV.<ind> COMPATIBILITY WITH THE COMMON MARKET A.<ind> THE RELEVANT PRODUCT AND GEOGRAPHICAL MARKETS 7.<ind> The principal business of FIG and CIGI is the provision of creditor insurance, also known  as payment protection insurance. Creditor insurance is in its most usual form a mixture of life,  disability and unemployment cover. It is a protection product without any investment element of the  type associated with life assurance. <ind> Consequently policies are most usually short term and for a duration of less than five years.  Cover is usually sold alongside or at the same time as the grant of a credit facility to an individual. It  may, however, also be sold at a later date or as a stand-alone product. The aim of the product is to  protect those credit payments due to the lender in the event that the insured customer dies, becomes  sick or unemployed.  8.<ind> Traditionally the Commission has distinguished between life insurance, general insurance  and reinsurance. Reinsurance constitutes a separate market because of its purpose of spreading risk  between insurers. It is more specialised and conducted between insurers and reinsurers on an  international basis because of the need to pool risks. The regulatory framework is also less stringent.  This gives rise to different conditions of competition compared to life and general insurance. 9.<ind> On the demand side, life and general insurance can be divided into as many product  markets as there are insurances covering different kinds of risk. Their characteristics, premiums and  purposes are distinct and there is typically no substitutability for the consumer between the different  risk insured. Nevertheless it can be left open in the present case whether each specific type of life  and non-life insurance constitutes a separate product market because, even on the basis of the  narrowest definition, the operation does not raise serious doubts as to its compatibility with the  common market. 10.<ind> Although insurance markets are becoming more open to intra-community competition as a  result of current and future measures to facilitate cross-border selling, geographical markets seem at  present to be mainly national in view of the established market structures, the need for adequate  distribution channels, fiscal constraints in some cases and differing national systems of regulatory  supervision. B.<ind> COMPETITIVE ASSESSMENT 11.<ind> The only current area of overlap in the businesses of GE group and CIGI is for creditor  insurance in the UK, where market shares of both groups are respectively [between 15 and 25]  (deleted business secrets) and [between 15 and 15%](deleted business secrets). Strong competitors in  this segment include General Accident [between 15 and 25%](deleted business secrets), London &  Edinburgh [between 5 and 15%](deleted business secrets) and Sun Alliance [between 5 and  15%](deleted business secrets). If market shares were calculated in relation to the wider insurance  segments of life, disability and unemployment corresponding to the component risks covered in  creditor insurance, these would be very much smaller.  12.<ind> Even if considered as a separate product market, creditor insurance is a relatively new  product and composite insurers are capable of offering creditor insurance alongside other insurance  products and entering the market both quickly and effectively. 13.<ind> Given the degree of existing competition and the low barriers to entry, the merged entity  will be unable act independently of competitors and consumers. The proposed concentration will  therefore not 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. V.<ind> ANCILLARY RESTRAINTS 14.<ind> The notifying parties have requested that certain restrictions be considered as ancillary to  the concentration. 15.<ind> First, there are restrictions relating to the period between the date of the agreement and the  completion of the transaction. During that period CIGI will not conduct its business except in the  ordinary course and will not enter into transactions inconsistent with the merger. Nor will it solicit  or entertain competing bids or disclose information for the purpose of doing so. 16.<ind> Secondly, there are restrictions on a variety of former shareholders in CIGI who were  principally responsible for its past management. They will: <ind> (i) offer consultancy services exclusively to CIGI for six months, if so required. <ind> (ii) not solicit specified staff and specified customers of CIGI or its subsidiaries or compete  with those subsidiaries in specified territories where the subsidiaries are or shortly will be active for  two years. <ind> (iii) accept restraints on the disclosure of confidential information about CIGI. 17.<ind> Thirdly, there are restrictions with regard to the use of the logo of CIGI (which is  unregistered) and the use of the name "Consolidated". First Delaware Financial Group Inc, the  holding company of various companies in the former CIGI group, and CIGI assign to each other any  right in the logo for use in the other's territory and exchange reciprocal covenants agreeing not to  use the name in a competing business outside specified territories for an indefinite period. Similarly,  certain named shareholders who were principally responsible for the management of CIGI will not  use the logo or the name for an indefinite period. The reciprocal assignments of the logo are in part  equivalent to a transfer of rights and in part intended to ensure the full value of the assets  transferred. 18.<ind> Protection by law of a general term such as "Consolidated", which forms only part of the  name of any of the companies concerned and is in common use among insurers, is much more  limited. An indefinite restriction on the use of such a name exceeds what is necessary to guarantee  the value of the assets transferred and cannot be considered ancillary to the concentration. The  parties have accordingly agreed to amend the agreements so that the restrictions as to the use of the  name are limited to five years from the date of completion. 19.<ind> Fourthly, for tax reasons GE undertakes for 18 months on behalf of itself and its  subsidiaries not to make specified changes to the existing share structure of CIGI, to limit their  power to cause CIGI to dispose of its assets and not to merge CIGI with any other corporation. 20.<ind> These restrictions are necessary to guarantee the transfer to GE of the full value of the  assets purchased or are otherwise directly related to and necessary for the successful implementation  of the concentration. They can therefore be treated as ancillary to the concentration. VI.<ind> CONCLUSION 21.<ind> For the foregoing reasons, the proposed concentration does not raise serious doubts as to its  compatibility with the common market and with the functioning of 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. <tab> For the Commission