CELEX: 32021M10141
Language: en
Date: 2021-03-08 00:00:00
Title: Commission Decision of 08/03/2021 declaring a concentration to be compatible with the common market (Case No COMP/M.10141 - SANACORP PHARMAHANDEL / LEOPOLD FIEBIG AND GERDA NÜCKEL) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 8.3.2021
                                                                C(2021) 1619 final
                                                                                 PUBLIC VERSION
                                                                 In the published version of this decision,
                                                                 some information has been omitted
                                                                 pursuant to Article 17(2) of Council
                                                                 Regulation (EC) No 139/2004 concerning
                                                                 non-disclosure of business secrets and other
                                                                 confidential information. The omissions are
                                                                 shown thus […]. Where possible the
                                                                 information omitted has been replaced by
                                                                 ranges of figures or a general description.
                                                                Sanacorp Pharmahandel GmbH
                                                                Semmelweisstraße 4
                                                                82152 Planegg
                                                                Germany
Subject:            Case M.10141 - Sanacorp Pharmahandel / Leopold Fiebig and Gerda
                    Nückel
                    Commission decision pursuant to Article 6(1)(b) of Council Regulation
                    No 139/20041 and Article 57 of the Agreement on the European Economic
                    Area2
Dear Sir or Madam,
(1)       On 1 February 2021, the European Commission received notification of a proposed
          concentration pursuant to Article 4 of the Merger Regulation by which Sanacorp
          Pharmahandel GmbH (‘Sanacorp’) would acquire sole control of the whole of
          Leopold Fiebig GmbH & Co. KG (‘Fiebig’) and Gerda Nückel GmbH (‘Gerda
          Nückel’, and together with Fiebig the ‘Target’) (the ‘Transaction’).3 Sanacorp is
          designated hereinafter as the ‘Notifying Party’ and together with the Target as the
          ‘Parties’ or the ‘Merged Entity’.
1    OJ L 24, 29.1.2004, p. 1 (the ’Merger Regulation’). With effect from 1 December 2009, the Treaty on the
     Functioning of the European Union (‘TFEU’) has introduced certain changes, such as the replacement of
     ‘Community’ by ‘Union’ and ‘common market’ by ‘internal market’. The terminology of the TFEU will
     be used throughout this decision.
2    OJ L 1, 3.1.1994, p. 3 (the ‘EEA Agreement’).
3    Publication in the Official Journal of the European Union No C 47, 10.2.2021, p.10.
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak--- 1.      THE PARTIES
(2)     Sanacorp is a full-service wholesaler of pharmaceuticals operating on the German
        market. Sanacorp is ultimately controlled by astera SA (France) and Sanacorp eG
        Pharmazeutische Großhandlung (Germany), which are both pharmacist cooperatives.
(3)     Fiebig is a full-service wholesaler of pharmaceuticals based in Rheinstetten,
        operating in central and southern Germany.
(4)     Gerda Nückel is the general partner of Fiebig.
2.      THE OPERATION
(5)     On 19 December 2020, Sanacorp entered into an agreement to purchase all shares of
        Fiebig and Gerda Nückel. Sanacorp therefore acquires sole control over the Target.
        Consequently, the Transaction would give rise to a concentration within the meaning
        of Article 3(1)(b) of the Merger Regulation.
3.      UNION DIMENSION
(6)     The undertakings concerned have a combined aggregate worldwide turnover of more
        than EUR 5 000 million4 (the Sanacorp group: EUR 9 682 million; the Target:
        EUR […] million, in 2019). Each of them has a Union-wide turnover in excess of
        EUR 250 million (the Sanacorp group: EUR […] million; the Target: EUR […]
        million, in 2019). The Sanacorp group did not achieve more than two-thirds of its
        aggregate Union-wide turnover within one and the same Member State. The notified
        operation therefore has an EU dimension within the meaning of Article 1(2) of the
        Merger Regulation.
4.      COMPETITIVE ASSESSMENT
4.1.    Market definitions
4.1.1. Product market definition
(7)     Pharmaceutical wholesaling comprises the delivery of pharmaceutical products to
        customers such as pharmacies, hospitals or doctors (but not to end-customers) by
        wholesalers (as opposed to pharmaceutical manufacturers). Both full-service
        wholesalers (also referred to as full-liners), which aim at supplying customers with a
        full array of pharmaceutical products, and short-liners, which only offer a limited
        product range to their customers, are active in pharmaceutical wholesaling.
(8)     In its decisional practice, including in its recent Alliance / Gehe decision, with
        respect to Germany specifically, the Commission concluded that pharmaceutical
        full-line wholesaling is a distinct product market from pharmaceutical short-line
        wholesaling, in particular due to the applicable legal framework.5 The Commission
4   Turnover calculated in accordance with Article 5 of the Merger Regulation.
5   See Commission decision of 17 August 2020 in case M.9711 - Alliance Healthcare Deutschland AG /
    GEHE Pharma Handel GmbH, para. 19, Commission decision of 4 May 2011 in case M.6044 - Alliance
                                                          2
 ---pagebreak---         also considered further segmenting of the market based on (i) the products supplied
        (prescription medicine, over-the-counter products, generics or parallel imports etc.),
        and/or (ii) the customer supplied (retail pharmacies, doctors or hospitals).6
(9)     The results of the market investigation did not provide any reason to depart from
        these precedents. While wholesalers (including the Notifying Party) indicate that the
        relevant market should include direct supplies by pharmaceutical manufacturers,
        customers’ feedback was mixed, with a significant number of respondents indicating
        that they only procured a small share of their supply directly from manufacturers
        (between 5% and 20%) and a majority indicating that they would not be able to
        source significantly more.7 According to a submission by a market participant, in
        addition to pharmacies, doctors and hospitals (identified in precedents), short-line
        wholesalers and parallel importers can represent additional categories of customers.8
(10)    As a result of the above, for the purposes of the decision, the Commission considers
        that the relevant product market is the wholesale supply of pharmaceutical by full
        line wholesaler. Whether such a market should be segmented based on the type of
        product or customer supplied can be left open as the Transaction does not raise
        concern regardless of the precise market definition.
4.1.2. Geographic market definition
(11)    The Commission has consistently considered pharmaceutical wholesaling national or
        regional in scope in its decision practice. With respect to Germany specifically, the
        Commission has considered, including in its recent Alliance / Gehe decision, that the
        geographic scope of the market for pharmaceutical wholesaling to be 2 hours
        14 minutes of driving time around the warehouses of pharmaceutical wholesalers, in
        line with the practice of the German competition authority. 9
(12)    The results of the market investigation did not provide any reason to depart from
        these precedents.10
(13)    As a result of the above, for the purposes of the decision, the Commission considers
        that the relevant geographic market is delimited by a driving time of 2 hours
        14 minutes from the depot of Fiebig located in Rheinstetten (Fiebig’s only depot).
    Boots / Andrae-Noris Zahn, para.14; and Commission decision of 19 March 2009 in case M.5433 -
    Sanacorp / V.D. Linde, para. 8.
6   See Commission decision of 17 August 2020 in case M.9711 - Alliance Healthcare Deutschland AG /
    GEHE Pharma Handel GmbH; and Commission decision of 6 April 2016 in case M.7818 - McKesson /
    UDG Healthcare, para. 15.
7   Q2 - Fragebogen Kunden, replies to question 8 and 9.
8   Email from a market participant, 4 February 2021.
9   See Commission decision of 17 August 2020 in case M.9711 - Alliance Healthcare Deutschland AG /
    GEHE Pharma Handel GmbH, para. 27; and Commission decision of 19 March 2009 in case M.5433 -
    Sanacorp / V.D. Linde, paras. 9-10.
10 Q1 - Fragebogen Wettbewerber, replies to question 4.
                                                         3
 ---pagebreak--- 4.2.     Competitive assessment
4.2.1. Horizontal effects
(14)     The Transaction gives rise to one horizontally-affected market for full-line
         pharmaceutical wholesaling to pharmacies in the area of 2 hours and 14 minutes
         driving time around the Fiebig depot in Rheinstetten, Germany.11
(15)     As shown in Table 1, the Merged Entity would have a market share of [20-30]% in
         the affected market. A number of significant competitors would remain, namely
         Phoenix with [20-30]%, Noweda with [10-20]%, Alliance Healthcare with [10-20]%
         and Gehe with [10-20]%. While Alliance Healthcare and Gehe continue to operate
         with separate branch offices and brands, Alliance Healthcare acquired sole control
         over Gehe in 2020.12
Table 1 - Market shares - Full line wholesaling to pharmacies in the area around
Fiebig’s Rheinstetten depot, by value (Q1-Q3 2020)13
                                      Market shares (Q1-Q3 2020)
                   Sanacorp                                                       [20-30]%
                   Fiebig                                                          [5-10]%
                   Merged Entity                                                  [20-30]%
                   Phoenix                                                        [20-30]%
                   Noweda                                                         [10-20]%
                   Alliance Healthcare                                            [10-20]%
                   Gehe                                                           [10-20]%
                   AEP                                                               [0-5]%
                                        Source: Form CO, Table no.7.
(16)     All competitors listed in Table 1 operate depots in the relevant geographic market
         around Fiebig’s Rheinstetten depot and supply pharmacies in the affected market
         several times a day (with the exception of AEP).
(17)     Competitors presently active in the area around Fiebig’s Rheinstetten depot submit
         that they have available capacities to increase supplies to existing customers as well
         as to start supplying new customers.14
11  No affected market would arise when looking at the supply of pharmaceuticals to doctors and hospitals.
    Sales of the Parties to hospitals and extern hospital pharmacies account for less than 1% of their average
    monthly sales. Further, if considering a further segmentation according to the category of product supplied
    (i.e. prescription medicine, over-the-counter products, generics or parallel imports etc.), the Notifying
    Party submits that market shares would not meaningfully diverge from the overall market (see Table 1).
    Therefore, the outcome of the competitive assessment would also apply in case of further segmentation of
    the product market by type of product or customer.
12 See Commission decision of 17 August 2020 in case M.9711 - Alliance Healthcare Deutschland AG /
    GEHE Pharma Handel GmbH.
13 No complete data available for 2020. The Parties’ combined market share in 2019 does not materially
    differ from the Q1-Q3 2020 combined market share.
14 Q1 - Fragebogen Wettbewerber, replies to questions 7 and 8.
                                                           4
 ---pagebreak--- (18)   Customers (pharmacies) submit that they have access to sufficient alternative full-
       line wholesale suppliers other than the Parties. All pharmacies responding to the
       market investigation explain that they have access to at least two full-line
       wholesalers other than the Parties, which could supply them at customary market
       conditions. A majority of responding pharmacies even states that they have access to
       at least four such alternative full-line wholesalers.15
(19)   A majority of pharmacies responding to the market investigation further submits that
       they would be able to switch full-line wholesaler without significant effort.16 In fact,
       a majority of pharmacies responding to the market investigation reports having
       switched from one to another full-line wholesaler in the past five years.17
(20)   It therefore appears that effective alternative full-line wholesale suppliers are
       available to pharmacies in the region around Fiebig’s Rheinstetten depot.
(21)   In addition to this constraining influence of competitors, certain market
       characteristics would, in any case, significantly limit the Merged Entity’s ability to
       exert market power post-Transaction.
       (a)      Firstly, full-line pharmaceutical wholesaling in Germany is highly regulated.
                Wholesalers require a wholesale licence to operate and the price of
                prescription pharmaceuticals (which according to the Parties account for
                [80-90]% of the sales in the pharmaceutical wholesale sector),18 is subject to
                regulation.19 This view of market dynamics is shared by competitors of the
                Parties. One competitor in this context notes that ‘in particular the
                pharmaceutical price regulation sets a narrow framework for the pricing
                ability in the main product range of prescription pharmaceuticals’.20
       (b)      Secondly, direct supply to pharmacies from pharmaceutical manufacturers as
                well as short-line pharmaceutical wholesalers exerts some degree of
                competitive pressure on full-line wholesalers. A competing full-line
                wholesaler submits (as the Notifying Party) that direct deliveries from
                pharmaceutical manufacturers to pharmacies have increased significantly and
                therefore represent significant competition for wholesalers.21 A majority of
                responding pharmacies submit that they are sourcing more than 5% directly
                from manufacturers (with some even sourcing between 10% and 20%, and
                one respondent between 20% and 30% directly).22 Similarly, short-line
                wholesalers that may be focused on a specific product segment of the market
                to some extent also compete for the supply to pharmacies with full-line
                wholesalers.23 While direct deliveries and supply by short-line wholesalers
                cannot provide the same service to pharmacies as full-line wholesalers
15 Q2 - Fragebogen Kunden, replies to question 12.
16 Q2 - Fragebogen Kunden, replies to question 10.
17 Q2 - Fragebogen Kunden, replies to question 9.
18 Form CO, paragraph 137.
19 According to the Arzneimittelpreisverordnung.
20 Q1 - Fragebogen Wettbewerber, reply to question 11. Courtesy translation. The original German text
   reads: ‘Insbesondere die Arzneimittelpreisverordnung setzt einen engen Rahmen für die Preisgestaltung
   im dominierenden Sortimentsbereich der verschreibungspflichtigen Arzneimittel‘.
21 Q1 - Fragebogen Wettbewerber, reply to question 12.
22 Q2 - Fragebogen Kunden, replies to question 8.
23 See e.g. Form CO, paragraphs 109 and 130.
                                                       5
 ---pagebreak---                   (e.g. multiple deliveries per day of entire product portfolio – a service that
                  pharmacies are reliant upon, even if they purchase some products directly),
                  they constitute a limited out-of-market constraint.
         (c)      Thirdly, all competing full-line wholesalers responding to the market
                  investigation submit that customers have significant bargaining power.24
(22)     Overall, competitors and customers responding to the market investigation do not
         expect the Transaction to have a negative impact on their business or on competition
         in the market.
(23)     While a majority of competitors expects the Transaction to lead to more intense
         competition, only one competitor expects the Transaction to have a negative impact
         for its business.25 A large majority of customers expressing an opinion expect the
         Transaction to have a neutral or positive impact on their business.26 More
         specifically, a majority of customers also do not expect negative developments with
         respect to the service level and the number or cost of deliveries.27
(24)     Therefore, based on the considerations in this Section 4.2.1, in particular the
         presence of a number of effective competitors that customers could readily switch to
         and, in any case, the limited pricing power of full-line wholesalers in Germany, the
         Commission considers that the Transaction does not raise serious doubts as to its
         compatibility with the internal market in relation to full-line pharmaceutical
         wholesaling in the Region around Fiebig’s Rheinstetten depot.
4.2.2. Foreclosure effects
(25)     Both Parties are active, to a limited extent, in the supply of pharmaceuticals to short-
         line wholesalers and parallel importers. For at least some products, short-line
         wholesalers and parallel importers may be unable to source directly from
         pharmaceutical manufacturers. As a result, a vertical relationship may arise between
         the full-line wholesaling of pharmaceutical products (upstream) and the short-line
         wholesaling of pharmaceuticals and parallel importing (downstream).28 However,
         such potential vertical relationships do not raise any competition concern in this
         case.
(26)     Firstly, the Parties do not have the ability to foreclose short-line wholesalers and
         parallel importers. Pursuant to the Commission Guidelines on the assessment of non-
         horizontal mergers under the Council Regulation on the control of concentrations
         between undertakings (the “Non-Horizontal Merger Guidelines”),29 for input
24  Q1 - Fragebogen Wettbewerber, replies to question 9.
25  Q1 - Fragebogen Wettbewerber, replies to questions 15.1 and 16.
26  Q2 - Fragebogen Kunden, replies to question 13.
27  Q2 - Fragebogen Kunden, replies to questions 14 and 15.
28  A company active as a short-line wholesaler and parallel importer contacted the Commission and raised a
    concern in relation to the proposed Transaction. The company explained that it had been supplied by
    Fiebig with pharmaceutical products, but that Fiebig recently terminated the supply relationship with
    reference to the proposed Transaction. The company further explained that it would likely be unable to
    find alternative suppliers for these pharmaceutical products, as many pharmaceutical manufacturers or
    full-line wholesalers are not willing to supply short-line wholesalers/parallel importers. See Email from a
    market participant, 4 February 2021.
29  OJ C 265, 18.10.2008, p. 6.
                                                            6
 ---pagebreak---        foreclosure to be a concern,30 the vertically integrated firm resulting from the merger
       must have a significant degree of market power in the upstream market.31 The
       Merged Entity’s market share in a hypothetical upstream market for the full-line
       wholesale supply to short-line wholesalers and parallel importers is limited (below
       30%). In any case, a number of other full-line wholesalers active in Germany submit
       that they do supply non-pharmacy customers, (e.g. short-line wholesalers), and
       would in principle be able to supply further such customers.32
(27)   Secondly, the Parties would not have an incentive to foreclose short-line wholesalers
       and parallel importers from access to pharmaceutical products. While full-line
       wholesalers like the Parties compete to some extent with short-line wholesalers, the
       Parties are ultimately not active on the short-line wholesaling or parallel import
       markets.33
(28)   In any case, given the limited activities of the Parties with respect to sales to short-
       line wholesalers and parallel importers (less than [0-5]% of each of Sanacorp’s and
       Fiebig’s total sales),34 a termination of supply could not be expected to have a
       meaningful impact on competition and on end-customers of pharmaceutical
       products.
(29)   Therefore, based on the considerations in this Section 4.2.2, the Commission
       considers that the Transaction does not raise serious doubts as to its compatibility
       with the internal market in relation to input foreclosure of short-line wholesalers and
       parallel importers.
5.     CONCLUSION
(30)   For the above reasons, the European Commission has decided not to oppose the
       notified operation and to declare it compatible with the internal market and with the
       EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the
       Merger Regulation and Article 57 of the EEA Agreement.
                                                                  For the Commission
                                                                  (Signed)
                                                                  Margrethe VESTAGER
                                                                  Executive Vice-President
30 As the Parties are not present on the downstream markets and the market participant expressing concerns
   expressed concerns in relation to input foreclosure, the remainder of the section will only assess potential
   input foreclosure strategies and not customer foreclosure.
31 Non-Horizontal Merger Guidelines, para. 35.
32 See Emails from competitors, 9, 10 and 12 February 2021.
33 This also applies to the situation of the undertaking raising concerns in this case. […].
34 The turnover generated by Fiebig with the company raising concerns in this case is even more limited,
   […].
                                                            7