CELEX: 31996M0729
Language: en
Date: 1996-04-18 00:00:00
Title: Commission Decision of 18/04/1996 declaring a concentration to be compatible with the common market (Case No IV/M.729 - GEC Alsthom / Tarmac / Central IMU) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31996M0729

Commission Decision of 18/04/1996 declaring a concentration to be compatible with the common market (Case No IV/M.729 - GEC Alsthom / Tarmac / Central IMU) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 226 , 03/08/1996 P. 0004

  COMMISSION DECISION of 18/04/1996 declaring a concentration to be compatible with the  common market (Case No IV/M.729 - GEC Alsthom / Tarmac / Central IMU) 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:  Dear Sirs,  Subject : Case No IV/M.729 - GEC Alsthom/Tarmac/Central IMU  <ind> <ind>  Notification of 14 March 1996 pursuant to Article 4 of Council Regulation No  4064/89  1.<ind> On 14 March 1996 the Commission received a notification by which GEC Alsthom Ltd and  Tarmac Construction Ltd acquire within the meaning of Article 3(1)b of the Council Regulation  joint control of Central Infrastructure Maintenance Company Ltd.  2.<ind> After examination of the notification, the Commission has concluded that the notified  operation falls within the scope 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  3.<ind> GEC Alsthom Ltd (GEC Alsthom) is wholly owned subsidiary of GEC Alsthom NV and  acts as that company's UK holding company. GEC Alsthom NV is an industrial holding company  jointly owned by the General Electric Company plc and Alcatel Alsthom GCE. GEC Alsthom is  primarily active in the energy and transport fields.  4.<ind> Tarmac Construction Ltd (Tarmac) is a diversified building construction company. It is a  wholly owned subsidiary of Tarmac plc, a holding company with interests in construction related  activities. As part of the privatisation of the British railway system Tarmac has acquired the Central  Track Renewal Unit (CTRU). It also has a small trackwork unit.  5.<ind> GT Railway Maintenance Ltd (GTRM) is a company established by GEC Alsthom and  Tarmac for the purpose of acquiring CIMHOCO Ltd.  6.<ind> CIMHOCO Ltd is a newly established holding company for the entire issued share capital of  Central Infrastructure Maintenance Company Ltd (CIMU) which provides "live" railway  infrastructure services. CIMHOCO is a wholly owned subsidiary of the British Railways Board  (BRB).  II.<ind> THE OPERATION  7.<ind> The notified operation consists of the acquisition by GTRM of the entire issued share capital  of CIMHOCO and hence of its subsidiary CIMU.  III.<ind> COMMUNITY DIMENSION  8.<ind> The undertakings concerned have a combined aggregate worldwide turnover in excess of  5000 million ECU. Both Tarmac and GEC Alsthom have a community-wide turnover in excess of  250 million ECU, but do not achieve more than two thirds of aggregate community-wide turnover  within one and the same Member State. The notified operation therefore has a Community  dimension, but does not constitute a cooperation case under the EEA Agreement.  IV.<ind> JOINT CONTROL  9.<ind> The issued share capital of GTRM will be owned 51% by GEC Alsthom and 49% by  Tarmac.  10.<ind> The board of GTRM which will decide the general policy of the company will be made up  of three directors appointed by each shareholder. The Articles of Association of GTRM ensure that  at all board meetings the directors appointed by either shareholder will exercise sufficient votes to  veto any proposed decision of the board.  11.<ind> Furthermore, major business decisions will require the consent of both shareholders. [  Deleted, business secrets.] GTRM is therefore jointly controlled by GEC Alsthom and Tarmac.  V.<ind> ABSENCE OF COORDINATION  12.<ind> As only Tarmac is engaged in the same product markets as CIMU, that for "live" railway  infrastructure services (see points below) there can be no coordination between the parents as a result  of the creation of the joint venture.  VI.<ind> COMPATIBILITY WITH COMMON MARKET  <ind> A.<ind> Relevant Product Market  13.<ind> The continuing privatisation of BRB has led to a radical restructuring of its operations.  As  part of this process virtually all of BRB's track network and associated infrastructure was vested in  Railtrack plc (Railtrack), a government owned company independent of BRB in April 1994.  14.<ind> At the same time, BRB set up British Rail Infrastructure Services (BRIS) to provide  Railtrack with infrastructure maintenance, track renewal and other services under contract.  15.<ind> Subsequently, BRIS was divided into thirteen units, six track renewal units (TRUs) and  seven infrastructure maintenance units (IMUs). The contract between Railtrack and BRIS was  disaggregated into thirty-six separate contracts which were shared amongst the IMUs and TRUs.  The contracts have between three and five years to run.  16.<ind> There had not previously been any competition in the provision of infrastructure  maintenance services to the railway sector. All the necessary services were provided by the BRB.  17.<ind> The work carried out by IMUs and TRUs falls into two distinct classes, the provision of  "live" railway services and the provision of normal maintenance.  18.<ind> The maintenance of "live" railways, that is railways upon which trains continue to operate  while the work is carried out, may be distinguished from other types of major infrastructure work by  the requirement for companies to have the licences, safety accreditation and permits for this type of  work and a skilled workforce capable of carrying out this specialised work.  19.<ind> There appears to be only a difference of degree between the IMUs and the TRUs.  IMUs  carry out some track replacement, TRUs undertake some infrastructure maintenance activities.  Furthermore, the expertise permits, licences etc. are essentially the same for the two types of  operation. The relevant product market is therefore the provision of all "live" railway infrastructure  services.  <ind> B.<ind> Geographic Market  20.<ind> The conditions of competition in Great Britain, where the various IMUs and TRUs will  operate are not replicated elsewhere, as the operation of railways in other Member States is carried  out by single entities which own the track and rolling stock and carry out all the necessary  maintenance.  21.<ind> Within Great Britain (different conditions apply in Northern Ireland) the market  conditions are homogenous. The work required from the IMUs and TRUs is essentially the same  wherever it is located. The relevant geographic market for "live" railway maintenance services is  therefore Great Britain.  22.<ind> In relation to the other work carried out by the IMUs and TRUs it is not necessary to  exactly define the geographic market since if no problems arise on the United Kingdom market,  where competition conditions are homogenous, there will be no competition concerns on any larger  market.  <tab> C.<ind> Assessment  23.<ind> Any assessment of the market shares of Tarmac and CIMU is made difficult by the fact  that these services have until very recently been carried out by the BRB which made no distinction in  its statistics between work carried out on "live" railways and other work.   24.<ind> This market is estimated at between £780 million and £1500 million. The higher figure  represents BRB's total expenditure on rail infrastructure services. The lower figure is that taken up  in the BRB contracts for infrastructure services. It does not take into consideration "live" railway  infrastructure services supplied to London Underground, Eurotunnel and other light railways and  metro systems. It is not necessary to include these other consumers since if there are no competition  problems on the narrowly defined total market  value there will be no problems if a larger market is  considered.  25.<ind> The total turnover of CIMU for the year ended March 1995 was some £162.6 million of  which £119 related to "live" railway infrastructure services. The "live" railway infrastructure  services turnover of Tarmac's operations were, CTRU £40 million and its trackwork unit £16  million. The total turnover was about £175 million which represents approximately 22.4% of the  lowest estimate of the total market for these services.  26.<ind> The group will face competition from other newly privatised IMUs and TRUs including at  least four with more than 10% of the market. Furthermore these market shares are artificial in the  sense that for the duration of the contracts (3 to 5 years) they will be fixed, thereafter there will be  free competition for new contracts. The operation will not therefore create a dominant position.  27.<ind> The other infrastructure maintenance carried out by the CIMU forms an extremely small  part of the UK non-housing construction market. Taken together with Tarmac' activities in this field  the combined market share will be less than 5%. The operation will not create or strengthen a  dominant position in the market for these services (see points 28 and 29 below).  28.<ind> Both Tarmac and GEC Alsthom provide goods which are used by CIMU in the provision  of services to Railtrack. Tarmac provides concrete sleepers and cable troughs, GEC Alsthom  provides signalling equipment. However these goods make up only a small proportion of the sales of  both the supplying company and of CIMU's sales.  29.<ind> Tarmac is an important supplier of both concrete sleepers and concrete cable troughs in the  United Kingdom. Both these products are used by companies providing infrastructure services for  railways. However Tarmac's total turnover from these products is only £4.4 million. As this  represents only a small (less than 0.5%) proportion of the overall turnover of the railway  infrastructure operations (at least £1,500 million) and because Tarmac will have to sell a large part  of its output of these products to the other IMUs and TRUs the operation will not create or  strengthen a dominant position in the supply of these goods by vertical integration.  30.<ind> Similarly GEC Alsthom and a subsidiary of Alcatel Alsthom CGE are important suppliers  of signalling equipment to the UK market. However only a very limited proportion of CIMU's  turnover is derived from signalling work. In the case of maintenance rather than new equipment the  supplier is already defined by the original equipment supplier which is outside CIMU's control.  CIMU anticipates that the supply and installation of new signalling equipment will account for just  over 1% of its turnover. These sales represent [Deleted, business secrets.] of GEC Alsthom and  Alcatel Alsthom CGE's United Kingdom sales.  <ind> D.<ind> Contracts  31.<ind> CIMU, like other infrastructure maintenance and track replacement companies, was given  a number of pre-existing contracts with Railtrack. Without these contracts CIMU would have no  business and indeed without some assurance of future work the privatisation of the maintenance and  track renewal operations of BRB would not have been possible. Furthermore Railtrack had to ensure  the safe and orderly transition from a closed procurement market to a fully open and competitive  one.   32.<ind> The contracts which are for a limited duration (three to five years) cover the provision of  the necessary infrastructure maintenance services to specific parts of the Railtrack network. When  they expire the work will be put out to tender and any suitably qualified company will then be able to  offer its services to Railtrack for the work in question.These contracts may therefore be regarded an  integral and essential part of the operation.  33.<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.  <tab> <tab> <tab> For the Commission,