CELEX: 31994M0503
Language: en
Date: 1994-11-07 00:00:00
Title: COMMISSION DECISION of 07/11/1994 declaring a concentration to be compatible with the common market (Case No IV/M.503 - British Steel / Svenskt Stål / NSD) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31994M0503

COMMISSION DECISION of 07/11/1994 declaring a concentration to be compatible with the common market (Case No IV/M.503 - British Steel / Svenskt Stål / NSD) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 350 , 10/12/1994 P. 0003

 COMMISSION  DECISION of 07/11/1994 declaring a concentration to be compatible with the common market (Case No IV/M.503  - British  Steel  / Svenskt Stal / NSD) 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 parties Dear Sirs, Subject :Case no IV/M.503  British Steel/Svensk Staal/NSD 1.  <ind> On 3 October 1994 British Steel plc (BS) and  SSAB Svensk  Staal AB (SSAB) notified a proposed concentration  by which  the two companies will acquire joint control of Norsk Staal A/S (NS). BS and SSAB already own 48% of the shares  in NS  (24% each) and will buy the remaining 52% (26% each)  of the  shares  from  Norsk Jern Holding A/S which  company  at present controls NS. 2.<ind>   The  operation  was  notified  to  the  Commission pursuant  to  Article 66 of the Treaty of <ind>  Paris  (the ECSC  Treaty) and Article 4 of Council Regulation (EEC)  No. 4064/89. This decision is only concerned with those products which  fall  within  the  jurisdiction  of  the  EEC  Treaty (representing approximately 13% of the total  value  of  the transaction). <ind>  After examination of the notification the  Commission has  concluded that the proposed operation falls within  the scope  of  Council Regulation No 4064/89 and does  not  give rise to serious doubts as to its compability with the common market and the EEA Agreement. <ind> I. The parties and the operation 3.<ind>   BS  is  divided  into  three  principal  operating business groupings: British Steel Long Products and  British Steel  Flat  Products which manufacture steel  products  and sell  both  directly  to  customers and  through  the  third business  group, British Steel Commercial and  Distribution; the  last  mentioned  also processes and  distributes  steel products  worldwide  (including  products  produced  outside BS). 4.  <ind>  SSAB  is engaged primarily in the manufacture  of steel  sheet  and  plate through its two  subsidiaries  SSAB Tunnplaat  and  SSAB  Oxeloesund. It also  has  finishing  and coating  operations and distributes steel, other metals  and industrial supplies through its subsidiary Tibnor A.B. 5.  <ind>  NS is a Norwegian steel stockholding and  service centre  operation.  NS  itself is a stockholder  in  general steel  products  while its wholly owned   subsidiary,  Norsk Tynnplater A/S, is a strip products service centre. 6.  <ind> The proposed operation consists of the acquisition of  BS and SSAB of the remaining 52% of the share capital in NS  which they do not currently own. By the operation BS and SSAB will become 50/50 shareholders in NS. <ind> II. Community/EEA dimension   7.   <ind>   The  worldwide  turnover  of  the  undertakings concerned   amounts  to  more  than  5.000   million   Ecus. Communitywide  turnover of each of BS and SSAB  exceeds  250 million Ecus. The undertakings involved do not achieve  more than  twothirds  of  their aggregate Communitywide  turnover within one and the same Member State. The operation thus has a Community dimension. 8. <ind> Because NS is the major steel stockholder in Norway it  was necessary to investigate whether  the operation  was liable  to  create or strengthen a dominant  position  as  a result of which effective competition would be significantly impeded  in  the  territories  of  the  EFTA  States  or   a substantial part thereof. Therefore, it was considered  that the  proposed concentration was a cooperation case according to Article 2(1)(c) of the EEA Agreement. <ind> III. Concentration <ind> Joint control 9.  <ind> The parties have not entered a formal shareholders agreement   but   will   have   50/50   shareholdings    and corresponding voting rights to the joint venture. They  will therefore have joint control over NS. <ind> Full function joint venture 10.  <ind>  Steel stockholding in Norway is a trade  market. There  are  several steel stockholding companies  in  Norway which own depots spread throughout the country and which are surced  by many different steel producers. Furthermore,  the Commission   has   in  previous  cases   held   that   steel stockholding constitutes a distinct product market  (See the decisions  in  case No. IV/M. 073  Usinor/ASD and  case  No. IV/M. 239  Avesta/British Steel/NCC/AGA/Axel Johnson).  11.<ind>  Stockholders  perform the traditional  wholesaling function  of  buying bulk orders from the manufacturers  and reselling   in   smaller  quantities.  In  addition,   steel stockholders   have   developedtheir   inhouse    processing facilities in order to add value and improve their  services to  customers. Such processing includes cutting  to  length, slitting, shearing and polishing.   12.<ind> On the trade market for steel stockholding NS is an existing company with all the assets and resources necessary to  enable  it to perform all the functions of an autonomous economic  entity, including depots and marketing  resources. Moreover,  NS is able to obtain supplies not only  from  its parents but also from other manufacturers of steel products: NS   currently  purchases  [deleted  as  a  business  secret between  20  and 40%] of its products from BS and  SSAB  and [deleted  as  a  business secret  between 40 and  80%]  from other companies. It is the parents intention to continue the present  practice  of  arm's length  sales;  for  commercial reasons  the  parties do not expect  the current  extent  of supplies  from  the  parents to NS  to   change  drastically because of the operation.  13.<ind> For the above mentioned reasons, NS can be regarded as  a fullfunction joint venture operating on a trade market performing  the  functions normally  carried  out  by  other undertakings operating on the same market. <ind> Absence of coordination of competitive behaviour 14.<ind>   Coordination  between  BS   and   SSAB   on   the stockholding market as such can be excluded because  neither of  the  parents  play  an active role  on  that  market  in Norway. 15.<ind>  Given the particular characteristics of the  steel industry  it  is relevant to examine potential  coordination between  the parents in the upstream market for EEC products in  Norway  as  a result of their activities  in  the  joint venture. However, given that there is no overlap in the  EEC products  they supply in Norway  whether through  the  joint venture,to other steel stockholders or directly to end users any potential coordination between the parents in regard  to these products can also be excluded. <ind> IV. Compatibility with the common market <ind> A. Relevant product market 16.  <ind> The operation concerns the distribution of  steel products to end users through steel stockholders and service centres. As mentioned above, steel stockholders perform  the wholesale  function of buying  bulk from the  manufacturers, reselling in smaller quantities and of processing the  steel products. 17.  <ind>  The  majority of steel stockholders  carry  most steel  product  groups and hence perform the same  wholesale functions.  Therefore, it seems reasonable to conclude  that steel stockholding constitutes a single market  rather  than individual  markets  for each product  (see  the  Commission decisions in the cases mentioned above in paragraph 10.)  18.  <ind>  For the purpose of an analysis under the  Merger Regulation,  only  the  stockholding  of  EEC  products  is, however,   relevant. This operation concerns  the  following EEC products only: welded tubes, aluminium, cold rolled flat products  (less  than  500mm wide)  and  rectangular  hollow sections. <ind> B. Relevant geographic market 19.  <ind>  According to the parties, the geographic  market for  steel  stockholding is regional  and,  because  of  its elongated coastal geography, stockholders in Norway tend  to be   more  regional  than  in  most  other  countries.   The Commission has in previous cases held that stockholding is a local  or  regional  service (see  the  Commision  decisions mentioned above in paragraph 10).  This view is supported by the  structure  of distribution in Norway where  depots  are spread  over  the  country. According to  the  parties,  the maximum   radius  covered  from  depots  to  end  users   is approximately 200 km.  20.<ind>  Consequently,  it appears  that  the  geographical market for steel stockholding is regional or local where the geographical  area serviced by an individual depot  will  be determined  by  transport costs or delivery times.  However, since  neither  of  the parents are active  players  on  the market for steel stockholding in Norway  the operation  will not  add  to  NS'  market shares. Consequently,  it  is  not necessary to reach an exact geographic market definition.  <ind> C. Assessment <ind> i) Stockholding  of   EEC and  ECSC products  21.  <ind>  In 1993 the total supply of steel products  (EEC and  ECSC  products) in Norway amounted to 1370Kt  of  which approximately 40% was sold by stockholders. There  are  more than  10 stockholders in Norway distributing a typical range of  stockholding products. NS is the major steel stockholder in  Norway  with  a share of [deleted as a  business  secret less  than  40%] by value. Three stockholders haveshares  of [deleted as a business secret  less than 20%] the rest  have shares below 5%. 22.  <ind>  In order to guarantee reasonable delivery  times even for smaller quantities and to reduce transport costs it is  necessary for stockholders which operate on  a  national basis  to  have  depots spread throughout  the  country.  NS operates  across  the  country from  11  depots;  two  other stockholders operate across the country from seven and  five depots respectively. Other stockholders cover only parts  of Norway with two or three  depots while  the rest operate  on a local basis.  23.  <ind>  The  barriers to entry are low:  in  particular, entry into general steel stockholding on a regional basis is relatively easy. Entry on a national basis is more difficult because of the need to invest in several depots to cover the whole territory.  <ind> ii) Stockholding of EEC products 24.<ind>  The operation concerns the following EEC  products only:  welded tubes, aluminium, rectangular hollow  sections and cold rolled flat products (less than 500mm wide). As  to the  last  mentioned  products,  the  Commission  has  in  a previous   case   (   Case   No.  IV/M.239    Avesta/British Steel/NCC/AGA/Axel  Johnson)  held  that  cold  rolled  flat products  less  than  500mm wide (EEC  products)  cannot  be separated  from cold rolled flat products above  500mm  wide (ECSC  products) because of the high degree of  supply  side substitutability. The split between material under 500mm and over   500mm  is  an  artificial  division  relating  to   a production  technology of the time of the  Treaty  of  Paris (1951).  Today,  mills can roll widths of  below  500mm  and above and material of less than 500mm can be slit from wider coils.  Consequently, assessing the market  shares  in  this case,  cold  rolled flat products above 500mm wide  will  be considered as belonging to the market of stockholding of EEC products.  On  that basis, NS' share of the market  for  EEC products in Norway is [deleted as a business secretless than 20%]. <ind> iii) Stockholding of individual EEC products 25.  <ind>  As  mentioned above, in this case  the  relevant product  market  is  steel  stockholding  rather  than   the individual products. However, an analysis based  on  a  more narrow  product  market  definition will  not  significantly change  NS' market position. As to the distribution of  cold rolled  flat  products  (both EEC and  ECSC)  NS'  estimated market  share  in  Norway is [deleted as a  business  secret approx. 40%].  In welded tubes NS has a share of [deleted as a business secret  approx. 25%] of which the market share of rectangular hollow  sections can be estimated to [deleted as a  business  secret  less than 50%].  In aluminium  products the market share is [deleted as a business secret  less than 20%]. <ind> iv) Vertical and horizontal aspects    26.  <ind>  Both  parents  are  as  manufacturers  of  steel products   active   in   the  upstream   market   of   steel stockholding.  However, there seems to be  little  incentive either  for the joint venture to cease selling the  products of  other  steel producers or for the parents  to  cease  to supply  to  other stockholders in Norway. In the first  case steel   producers  would  still  have  acess  to   competing stockholding  outlets while in the second case  stockholders would  have  acess to alternative suppliers. The market  for steel  products  is  at least Western Europe  in  scope  and stockholders,  including  NS,  purchase  steel  products  at competitive  conditions on a European  basis.  Consequently, any  such practice would be more likely to reduce NS'  share of the stockholding market than to harm its competitors.  27.<ind>   SSAB,  through  its subsidiary  Tibnor,  holds  a relatively strong position on the Swedish market  for  steel stockholding with several depots spread over Sweden. Because the geographic market for steel stockholding is regional  in scope  it  is  not likely that SSAB's horizontal integration into  steel  stockholding  in  Norway  will  give  rise   to competition  problems. However, on the basis  of  a  maximum radius  of  200km  for  deliveries from steel  stockholders' depots  there  is in an area in SouthWest   Sweden   overlap between  some  of NS' Norwegian depots and Tibnor's  Swedish depots. The overlap is limited and it is not likely that  it will  give  rise  to  competition problems  because  of  the existence of several competitors in this area.  In addition, as  mentioned  above,  there are   low  barriers  to  entry, especially on a regional basis.  <ind> V. Conclusion 28.  <ind> In view of the fact that the operation  will  not add  to  NS'  market  shares, and taking  into  account  the structure  of the Norwegian steel stockholding  market  with several   competitors   and  lowbarriers   to   entry,   the transaction  will  not  create  or  strengthen  a   dominant position   such   as   to  significantly  impede   effective competition with regard to steel products falling within the scope of the EEC Treaty. <tab> VI. Ancillary restraints 29.  <ind> According to the Share Purchase Agreement,  Norsk Jern Holding A/S and any subsidiary company in which it owns more  than  50%  agrees, for a period  of  two  years  after Closing   Day,  to  refrain  from  directly  or   indirectly conducting  any  business that will compete  with  NS.  This provision  seems  to  be reasonable  and  necessary  to  the implementation  of  the  concentration  and  is,  therefore, ancillary within the meaning of the  Merger Regulation. For  the  above reasons, the Commission has decided  not  to oppose   the  notified  concentration  and  to  declare   it compatible  with  the common market and the  EEA  Agreement. This  decision is adopted in application of Article  6(1)(b) of  Council Regulation No. 4064/89 and Article 57 of the EEA Agreement. <tab> For the Commission,