CELEX: 31995M0670
Language: en
Date: 1995-12-20 00:00:00
Title: COMMISSION DECISION of 20/12/1995 declaring a concentrationto be compatible with the common market (Case No IV/M.670 - Elsag Bailey / Hartmann & Braun AG) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31995M0670

COMMISSION DECISION of 20/12/1995 declaring a concentrationto be compatible with the common market (Case No IV/M.670 - Elsag Bailey / Hartmann & Braun AG) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 024 , 30/01/1996 P. 0007

 COMMISSION  DECISION of 20/12/1995 declaring a concentration to be compatible with the common market (Case No IV/M.670  - Elsag  Bailey  / Hartmann & Braun AG) 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 Subject  :<ind> Case No IV/M.670  Elsag Bailey / Hartmann  & Braun AG <ind> <ind> Notification of 17.11.1995 pursuant to Article 4 of Council Regulation No 4064/89 1.<ind>  The  above  mentioned  notification  concerns   the (indirect)  acquisition by Elsag Bailey  Process  Automation N.V.  ("EBPA") of 99.5% of the share capital of the Hartmann &  Braun  AG ("H&B") and eighteen other businesses belonging to  the  H&B  group  of companies from  Mannesmann  AG.  The remaining  0.5%  will  be acquired by  Elsag  Bailey  Invest S.p.A. 2.<ind>  After  the  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.<tab> THE PARTIES 3.<ind>   EBPA,   incorporated  in   the   Netherlands,   is majorityowned by Finmeccanica S.p.A. ("Finmeccanica")  which is  the  engineering  holding company of  IRI,  the  Italian stateowned  conglomerate active in the  sectors  of  energy, transportation,  automation, aerospace  and  defence.  Elsag Bailey  Invest  S.p.A. is a subsidiary of Finmeccanica.  IRI owns  62%  of  Finmeccanica's shares  and  has  a  worldwide turnover  of  ECU  38.2  billion.  Finmeccanica  achieved  a woldwide  turnover of ECU 5,220 million, some  64  per  cent (ECU  3,323 million) of it within the Community. EBPA itself is   a  global  supplier  of  process  control  systems  and instruments. 4.<ind>  H&B  group of companies specialises in the  design, engineering  and  manufacture of industrial process  control equipment,   in   particular   process   control    systems, instruments and process analysers. H&B also has considerable activities  in the field of radiation measuring instruments. The  worldwide turnover of H&B was ECU 690 million, some  79 per  cent  (ECU  546  million) of it  was  achieved  in  the Community.  The  main activities of H&B are concentrated  in Germany. II.<tab> CONCENTRATION 5.<ind>   The  merger  between  two  previously  independent undertakings,   EBPA  and  H&B  group  of   companies   will constitute  a concentration according to Article 3(1)(a)  of the Merger Regulation. III.<tab>COMMUNITY DIMENSION 6.<ind>   The  combined  aggregate  worldwide  turnover   of IRI/Finmeccanica and H&B group of companies in 1994 exceeded ECU  5,000 million. Both IRI/Finmeccanica and H&B  group  of companies achieved a Communitywide turnover in excess of ECU 250  million but do not achieve more than twothirds of their aggregate  Communitywide turnover within one  and  the  same Member  State.  The  operation  therefore  has  a  Community dimension   according  to  Article  1(2)   of   the   Merger Regulation. IV.<tab> COMPATIBILITY WITH THE COMMON MARKET <tab> Relevant product market 7.<ind>  The proposed operation affects the overall  markets for  the  manufacture and sale of industrial process control equipment,  of  process analysers and of  nuclear  radiation measuring instruments. <tab> Industrial process control equipment 8.<ind>  Industrial  process control equipment  is  used  in production processes that involve liquids and gases. Process control  instruments are located throughout a  manufacturing facility  and  measure, record, monitor and adjust  physical parameters related to the production process. These  "field" instruments are connected to a computer based control  unit, that allows the manufacturer to control the instruments from a  central  location  (control room or workstation)  and  to ensure  that the production process proceeds in the required manner. 9.<ind>  The  customers  of process  control  equipment  are active  in  industries using continuous or batch  production processes,   e.g.   the  petrochemical,  power   generation, chemical,  pharmaceutical, steel, pulp and paper,  food  and beverages  industries. Process control  instruments  may  be adapted  in  some way for applications in certain industries and  cannot  be used effectively for applications  in  other industries. For example, refineries ask for a high degree of flexibility of the process control system, whereas customers in the electricity sector focus more on the availability and the  number  of  measuring points.  For  this  reason,  some suppliers  have developed different products  to  serve  the particular  needs  of  customers  in  different  sectors  of industry. However, there still is considerablecommonality in the  function  and  basic design of these  instruments.  The essential  features of, for example a pressure  transmitter, are  the same, regardless of whether the transmitter is used in a pharmaceutical plant, a chemical plant or other process industries. The main differences in process control  systems supplied to certain industries concern the software and  the knowhow  that  is  applied  in  the  process  control  unit. However,  the  customisation  of  process  control  software depends more on the specific application of the system  than on   the   particular   industry   sector   concerned.   The Commission's    investigation   has   shown    that    while manufacturers  of process control equipment, for  historical reasons,  may  focus  on  sales  to  certain  categories  of customers, however, they also tend to supply a wide  variety of  industries  [For example, EBPA was originally  a  boiler control  specialist  whose  traditional  customer  base  was utilities. Today, EBPA sells its process control systems  to many   customers   in  other  industries.  Similarily   ABB, concentrates on the energy sector. Foxboro first focused  on the  petrochemical  industry, but  is  now  reinforcing  its position in the power station business.]. For these  reasons the   markets   for  process  control  equipment   are   not differentiated by the different end user industries. 10.<ind>  The  electricity industry may be an  exception  to this  finding because the properties of the process  control instruments used in this industry differ to a larger  extent from  the  instruments used in other industries. This  could result   from   special  safety  standards   and   equipment identifier  codes  for process control instruments  used  in power  plants and electric utilities. However, the  question of  the  definition  of  the relevant  market  in  the  last analysis  can  be  left open here, because even  if  process control equipment for power plants and electricity utilities is  taken  as a relevant market, the concentration will  not create or strengthen a dominant position. 11.<ind>  A  complete process control system consists  of  a central  control unit, control room instruments and  "field" instruments.  Process control instruments  may  be  marketed together  with  a  central  control  unit  or  may  be  sold separately.  The  procurement decisions in  both  cases  are based  on  different factors. Furthermore,  central  control units  and  process  control  instruments  are  sold  to   a significant  extent  to different categories  of  customers. Instruments  are  bought  by suppliers  of  process  control systems who do not provide the broad range of instruments by themselves  and  by  engineering firms,  plant  builders  or companies  active in the field of servicing and maintenance. Against that central control units are predominantly  bought directly   by  the  end  users  active  in  the   processing industries. As a result one has to divide the overall market for  industrial process control equipment into a market  for the  manufacture and sale of central control  units  (system market)  and  for  distinct markets for the manufacture  and sale of control room instruments, of process control "field" instruments  and  of  control valves and  valve  instruments (instrument markets). 12.<ind>  The  process control "field" instruments  and  the central  control unit are linked by a standard communication system,  or  "protocol". The protocol used  by  the  process control industry as a means by which the various instruments can  communicate with each other was developed in the  1960s and  is known as the 420mA (milliamperes) signal. Since  the traditional  standard was not able to meet the communication needs  of  advanced  instruments  some  suppliers  developed communication systems that necessitate the use of  the  same supplier  of  "field" instrumentation and  control  systems. However,   at   present  time  there  a   several   advanced communication standards that are available to all  suppliers and customers of process control equipment, for example HART protocol  [The HART (Highway Addressable Remote  Transducer) communication  protocol  was  developed  in  the  1980s   by Rosemount and was made available to all other suppliers  and customers  of  process control equipment  through  the  HART Foundation.  ].  All suppliers asked by the Commission  have emphazised that their process control equipment is  able  to communicate with all the different types of process  control equipment manufactured by competitors. 13.<ind>  The  characteristics and usage of process  control "field"  instruments  differ with  regard  to  the  physical parameters  they are designed to monitor. As the  respective instruments  are  not interchangeable  in  usage  there  are distinct  markets for the measurement of the rate  of  fluid flow  ("flow"),  of absolute pressureat a single  point  and pressure differential ("pressure"), of fluid level ("level") and  of  temperature. Although on the one hand from a  users point  of view there might be distinct markets on the  other hand from a point of supply side substitutability there  are some indications that these markets are only segments of  an overall   market   for  process  control  instruments.   The investigation has found, that most suppliers are  active  in all   of  the  market  segments.  Therefore  they  have  the technical  capability as well as the access to the customers to   adjust   their  production  structure   if   profitable opportunities  arise  in  certain  segments.  However,   the question  of the definition of the relevant markets  can  be left  open  to  that extent, because even  if  the  relevant markets  are  assumed  to  be  the  product  segments,   the concentration  will  not  create or  strengthen  a  dominant position. 14.<ind>  Control valves and valve instruments are  used  to control  the  rate of flow of a fluid. When  the  production parameters   deviate   from   those   required,   electronic instruction  signals from the control unit are sent  to  the instruments which convert them into  pneumatic signals which in turn cause the valve to open or close. <tab> Process analysers 15.<ind> Process analysers are used for the measurement  and monitoring  of  the  chemical  composition  and  density  of liquids  and gases. Therefore the overall market for process analysers could be divided into distinct product markets for the analysis of liquids and of gases. Gas analysers could be further  divided into markets for continuous  gas  analysers and  for gas chromatographs. Although from a technical point of  view  there may be no basic differences between the  two kinds of gas analysers they are used for different purposes. Simple gases can be analysed with a continuous gas analyser, whereas  the  analysis of a complex liquid  or  gas  mixture requires the use of a gas chromatograph. <tab> Radiation measuring instruments 16.<ind>  Instruments for measuring radiation  are  used  in nuclear power plants and in laboratories. In both cases  the instruments  collect, display and monitor nuclear  radiation parameters.  Instruments  for  nuclear  power   plants   are required  to  meet specialised norms and obtain approval  by the national authorities responsible for the supervision  of nuclear  power  plants. In Germany e.g. permission  for  the operation  of nuclear power plants will only be  granted  if the  radiation measuring instruments meet the standards  set by  the Kerntechnischer Ausschuss (Nuclear Committee);  as  a result  the  instruments for nuclear power plants  are  more expensive  and  can not easily replaced by  those  used  for applications in laboratories. The total market for radiation measuring  instruments  for nuclear power  plants  could  be further  divided  into  distinct  markets,  particular   for radiation  detectors  ,  ionisation chambers,  contamination monitors  and filters for the particles and iodine. However, the  question of the definition of the relevant markets  can be  left  open to that extent, because even if the mentioned products   are   assumed   to  be  relevant   markets,   the concentration  will  not  create or  strengthen  a  dominant position. <tab> Relevant geographic market 17.<ind>  In  the  overall markets  for  industrial  process control  equipment, process analysers and nuclear  radiation measuring instruments differences in the respective national market shares will not usually be considered as an indicator for  the existence of national markets. However, where there are  extreme  differences in national market shares  further investigation  on  a Member State basis  rather  than  on  a Communitywide basis was neccessary to come to an appropriate assessment of the likely effects of the concentration. <tab>  Industrial  process  control  equipment  and  process analysers 18.<ind> The Commission's investigation has found, that  the individual  suppliers  of  process  control  equipment   and analysers currently focus on certain Member States. Although there  are  no  obvious barriers to entry  the  longstanding relationships  with customers still have an  impact  on  the geographical  scope  of the supplier's activities.  However, the  major customers are large multinational companies  that purchase  on  a European basis. The parties claim  that  the geographic   scope  of  the  markets  for  process   control equipment and process analysers were at least Communitywide. Transportation costs of the products under consideration are relatively low [It should be mentioned here that  both,  H&B and  EBPA, manufacture the process analysers sold within the Community  totally in the USA.] and there are no substantial entry  barriers  because  ofthe  harmonisation  of  relevant product  standards  at  Community level  [The  marketing  of process control equipment across the Community was eased  by several   harmonisation  measures  such  as  the   Directive 73/23/EEC  on  the harmonisation of the laws of  the  Member States  relating  to electrical equipment designed  for  use within  certain voltage limits and the Directive  89/336/EEC on  the  approximation  of the laws  of  the  Member  States relating  to  electromagnetic  compatibility.].  The   major competitors are active in several Member States  of  the  EC and  usually  also  on  a  global basis.  The  price  levels throughout Europe are roughly the same and becoming more and more equal. Nevertheless the Commission considered that  the definition  of  the  geographic scope  of  the  markets  for process control equipment and process analysers can be  left open,  since even assuming the existence of national markets the  concentration would not create or strengthen a dominant position. 19.<ind>  The electricity industry may be an exception  from these  findings  because the operators of  power  plant  and electric utilities may favour national providers and require technical specifications favouring local suppliers. However, the  question of the definition of the geographic  scope  of the relevant market can be left open to that extent, because even  if  the  sale  of process control equipment  to  power plants  and  electric utilities is assumed to be a  national market,  the  concentration will not create or strengthen  a dominant position. <tab> Radiation measuring instruments 20.<ind>  As  far  as  radiation measuring  instruments  are concerned the parties consider the geographical scope of the relevant market to be national. The survey by the Commission of the customers for these products has supported that view. Instruments  for nuclear power plants are required  to  meet specialised  norms and obtain an approval  by  the  national authorities responsible for the supervision of nuclear power plants (see No. 16). <tab> Assessment <tab> Industrial process control equipment 21.<ind>  Both  parties  are leading  suppliers  of  process control equipment and market their products worldwide. As  a result of the operation EBPA will widen its product range as well  as increase its market shares. Through the acquisition of  H&B,  EBPA  will  forward its  strategy  of  becoming  a "onestop   shop"  vendor  for  industrial  process   control equipment.  On  a worldwide basis the leading suppliers  for process  control equipment besides H&B and EBPA are Siemens, Honeywell,   FisherRosemount   (Emerson   Electric),    ABB, FoxboroEckardt (Siebe) and Yokogawa. 22.<ind>  The  parties  to the concentration  estimate  that total  sales  in  the overall market for industrial  process control   equipment   in   the  Community   in   1994   were approximately  ECU  5,324 million [Other suppliers  estimate total  sales  in  the overall market for industrial  process control  equipment between ECU 5,040 million and  ECU  5,494 million.]. According to the parties about ECU 2,146  million of  it  was  achieved in the sale of process control  units, about  ECU  1,054  million in the sale of control  room  and workstation instruments, about ECU 1,637 million in the sale of  process  control "field" instruments and about  ECU  167 million in the sale of control valves. 23.<ind> On a Communitywide basis the concentration will not raise  serious competition concerns as even after the merger there  will be several suppliers and market shares  will  be relatively widely spread. The parties will reach a  combined market share of about 9.5% of the overall market for process control   equipment.  Besides  H&B  and  EBPA  the   largest suppliers are Siemens, ABB [The total sales of ABB group  of companies   have   been  only  partially  determined.]   and Honeywell  (between 10 and 20%), followed by  FoxboroEckardt and  FisherRosemount (between 5 and 10%). Further  suppliers active in the Community are Endress & Hauser and Yokogawa. 24.<ind>  These  figures  do  not  change  significantly  if central  control  units, control room  instruments,  process control  "field"  instruments and control valves  and  valve instruments  are  considered as  distinct  markets.  On  the market for process control units (system market) the parties will  reach  a  combined market share of about  9,7%  behind Siemens  and Honeywell (between 10 and 20%) and followed  by ABB, FisherRosemount and FoxboroEckardt (between 5 and 10%). On  the market for control room instruments the parties will have  a  combined  market share of 8,1% behind  Siemens  and followed by Honeywell, ABB, FoxboroEckardt and Yokogawa.  On the   market  forprocess  control  "field"  instruments  the parties  will  reach  a market share  of  8,8%  followed  by FisherRosemount,  Siemens,  ABB, FoxboroEckardt  (more  than 5%),  Honeywell  and Yokogawa. Finally, on  the  market  for control valves and valve instruments H&B has a market  share of  about 15%; however, since EBPA has only negligible sales in  this  area the poposed concentration has no  significant effect on this market. 25.<ind>   From  a  national  point  of  view  the  proposed concentration will have only limited effects on most of  the national markets as the parties' activities are to  a  large extent, concentrated on different Member States. In only two national  markets  for process control  equipment  does  the parties'  combined market share exceed 20%. On  the  Italian market  for  central control units EBPA and H&B have  market shares  of 15.5% and 11% respectively. Although the combined market  share  will  reach  26.5% there  are  several  other suppliers  of  central control units  active  in  Italy,  in particular     FisherRosemount,     Honeywell,     Yokogawa, FoxboroEckardt  and  ABB. On the German market  for  control valves and valve instruments H&B has a market share of  26%; since  EBPA  is  not active in this area there  will  be  no cumulation of market share resulting from the merger. 26.<ind>  According  to  the  parties,  EBPA  and  H&B  have combined shares of 35.5% and 45.7% of the market for process control equipment for the electricity generating industry in Germany  and  Italy respectively.  In Germany, EBPA's  sales are   marginal  so  that  the  position  of  H&B   will   be strengthened  only insignificantly by the merger.   Although the  parties  in Italy, reach a sizeable market share  there are  several large suppliers already active in the  sale  of process  control systems and instruments to the  electricity industry,  in  particular FoxboroEckardt, ABB,  Siemens  and Honeywell.   Furthermore due to a certain degree  of  supply side  substitutability other producers may be able to  enter the Italian market. 27.<ind> According to the parties total sales in the overall market  for  process  control  "field"  instruments  in  the Community  in  1994  were approximately ECU  1,637  million. About ECU 774 million of it was achieved in the sale of flow instruments,  about ECU 205 million in  the  sale  of  level instruments, about ECU 313 million in the sale  of  pressure instruments  and  about  ECU 281  million  in  the  sale  of temperature instruments [Source: Estimations of the  parties and  of  Frost & Sullivan: World Flow Sensors Market,  1994; European Pressure Instrumentation Market, 1995.]. 28.<ind> On a Communitywide basis the parties reach  in  the overall  market  for process control "field"  instruments  a combined market share of 8.8% (see No. 24). This figure does not  change significantly if instruments for the measurement of  flow, level, pressure and temperature are considered  as distinct  markets.  On the market for flow  instruments  the parties  to the concentration reach a combined market  share of  about 9.9%. On the market for level instruments H&B  and EBPA  achieve a combined market share of about 4.7%. On  the market for pressure instruments the parties reach a combined market  share  of  about 7.8%. Finally, on  the  market  for temperature  instruments  H&B and EBPA  achieve  a  combined market  share  of  about 10.2%. In all markets  for  process control "field" instruments the new entity will face  direct competition  from  several  large suppliers,  in  particular FisherRosemount, Siemens, FoxboroEckardt, ABB and  Honeywell as  well  as  from  a  number of smaller suppliers  such  as Endress, Hauser, Yokogawa. 29.<ind>   Because  the  market  share   of   the   combined undertakings will remain relatively limited and  there  will be  several  suppliers of more or less  the  same  size  the proposed  concentration is not likely  to  impede  effective competition within the different markets for process control equipment. <tab> Process analysers 30.<ind> Since H&B does not manufacture liquid analysers the only  overlap  is  in  the markets for  gas  analysers.  The parties  estimate  that the total sales  in  continuous  gas analysers  in  the Community in 1994 were approximately  ECU 177 million and in gas chromatographs were approximately ECU 40  million. On a Communitywide basis H&B has a market share of about 24% for continuous analyses; however, since EBPA is not  active  in  this field there will be no  cumulation  of market  shares by the merger.  By a wide margin the  leading supplier  of  continuous gas analysers is  Siemens.  On  the market  for gas chromatographs the market share of H&B  will increase only slightly to a total of about 22.3%. Even after the  concentration  the new entity will  have  lower  market shares than its main competitors ABBand Siemens. <tab> Radiation measuring instruments 31.<ind>  H&B  has marketed radiation measuring  instruments only  in Germany and in Belgium; EBPA is not active in  this field.  According  to  the parties  H&B's  market  share  in Belgium  does  not  exceed 20%. On  the  German  market  for radiation  detectors H&B reaches a market share of  40%,  on the  market for ionisation chambers a market share of  about 70% and on the market for filters for particles and iones  a market   share  of  about  50%.  H&B  does  not  manufacture contamination monitors. 32.<ind>  H&B  may hold a dominant position  in  the  German markets for radiation measuring instruments mentioned above. This  question can, however, be left open here, because  any existing  dominant  market  position  of  H&B  will  not  be strengthened  by the concentration. In none of the  affected markets  under  consideration there will be a cumulation  of market  shares  since  EBPA neither manufactures  nor  sales radiation  measuring instruments. The transfer of  H&B  from Mannesmann  AG  to EBPA will not result in  an  increase  of financial  ressources that may be accessible  to  H&B  since Finmeccanica's   turnover   is  significantly   lower   than Mannesmann  AG's. Even spillover effects that  could  result from  the knowhow of EPBA in the markets for process control equipment will not strengthen the market position of H&B  in radiation  measuring instruments because H&B already  itself has a recognized competence in this field. V.<tab> CONCLUSION 33.<ind>  It  follows  from  the  above  that  the  proposed concentration  would  not create or  strengthen  a  dominant position   as  a  result  of  which  competition  would   be significantly  impeded  in  the  common  market  or   in   a substantial part of it. 34.<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. For the Commission,