CELEX: 31992M0152
Language: en
Date: 1992-01-14 00:00:00
Title: COMMISSION DECISION of 14.01.1992 declaring a concentration to be compatible with the common market (Case No IV/M.152 - VOLVO / ATLAS) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31992M0152

COMMISSION DECISION of 14.01.1992 declaring a concentration to be compatible with the common market (Case No IV/M.152 - VOLVO / ATLAS) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 017 , 23/01/1992 P. 0000

 COMMISSION DECISION of 14.01.1992 declaring a concentration to be compatible with the common market  (Case No IV/M.152 - VOLVO / ATLAS) 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: <tab> Case No. IV/M152 - Volvo/Atlas <tab> Council Regulation No. 4064/89  1.<ind> The notification of 6.12.1991 pursuant to Article 4 of Council Regulation No. 4064/89 (Merger  Regulation) concerns the creation of a joint venture (VOAC Hydraulics AB, "VOAC") by Volvo Flygmotor AB  ("VFA") and Atlas Copco ("ATLAS"), to which the parties intend to transfer all of their respective worldwide  activities for hydraulic components.  2.<ind> After examination of the notification, the Commission has concluded that the notified operation falls  within the scope of the Merger Regulation, and that it does not raise serious doubts as to its compatibility with  the common market.  I.<ind> THE PARTIES  3.<ind> VFA is a wholly owned subsidiary of AB Volvo which is the ultimate parent of the Volvo group. Volvo's  activities include the manufacture and retailing of motor vehicles and parts and accessories thereto.  <ind> VFA is the parent company in a group active on a worldwide scale in the design, manufacture and  distribution of air and space propulsion products, vehicle components and hydraulic products. It conducts its  activities in the market of hydraulic equipment through a wholly owned subsidiary, Volvo Hydraulic AB, the  activities of which will be transferred to VOAC.   4.<ind> Atlas is the ultimate parent company of the Atlas Copco group. It is active on a worldwide scale in the  design, manufacture and distribution of air and gas compressors, construction and mining equipment and power  tools, including hydraulic and pneumatic components. Atlas conducts its activities in the market for hydraulic  components through Monsun-Tison AB, a wholly owned subsidiary.  II.<ind> COMMUNITY DIMENSION  5.<ind> The combined aggregate worldwide turnover of AB Volvo and Atlas in the last financial year was above  5 billion ECU. Both parties meet the requirements of Article 1(2)(b), each having had an aggregate Community- wide turnover in excess of 250 million ECU, the parties do not achieve more than two-thirds of their turnover  within one and the same Member State. The proposed concentration thus has a Community dimension.  III.<ind> CONCENTRATION  Joint Control  6.<ind> Upon completion of the proposed transaction, each of the notifying parties will hold a 50% interest in  VOAC. The Shareholders Agreement provides for unanimous decisions on Shareholders Meetings. In addition  to Board Members appointed by the trade unions by virtue of law, the Supervisory Board shall consist of four  members, each party nominating two, its Chairman being elected by the Board. The Managing Director of  VOAC shall be approved by both parties.  <ind> It follows from the 50/50 shareholding and the Shareholders Agreement that the two parties have to agree  on all major decisions concerning VOAC. Thus, VOAC is jointly controlled by VFA and Atlas.  Autonomous economic entity  7.<ind> VOAC will perform on a lasting basis all the functions of an autonomous economic entity with its own  accounts, assets, staff, management, Supervisory Board, etc. All new products will be marketed under the name  of the joint venture, "VOAC Hydraulics".  <ind> Products currently marketed under the Volvo and Atlas trade names will continue to be marketed under  these names for a period of 4 years due to an exclusive license given by the parents to VOAC for the relevant  products. Thereafter, they too will be sold under the VOAC Hydraulics trade name. Although some sales will be  made to both Volvo and Atlas, approximately 90% of VOAC's sales will be external.  8.<ind> The Shareholders Agreement is valid for five years, and thereafter extended for subsequent periods of  three years unless terminated by either party. This will not, however, affect the status of VOAC as an  autonomous economic entity on a lasting basis. The possible withdrawal of either of the parties from the  Shareholders Agreement affects only this party's participation in VOAC as a shareholder, i.e., the party (parties)  can sell their holding to the other party or third parties, but VOAC will continue as a full  functioning company.    Absence of risk of coordination  9.<ind> The notifying parties intend to transfer all their activities and assets in the sector for hydraulic  components to the joint venture, VOAC, including all intangible assets such as general goodwill, patents, patent  applications, licences, logos, model nominations, copyrights, etc. The parties will also transfer all their  marketing, sales and service operations concerning the affected products to VOAC.   <ind> There is no realistic possibility for the parents to re-enter the joint venture markets. In addition to that the  parties are bound by the Shareholders Agreement which foresees that they will not conduct operations which  compete, directly or indirectly, with the businesses transferred to the joint venture.  10.<ind> Volvo and Atlas will withdraw from the markets of VOAC, but certain vertical relations will remain in  the form of sales between VOAC and its parents. For example, some of the products concerned can be installed  in Volvo trucks. However, none of Volvo's trucks are supplied with the hydraulic components concerned as  standard equipment.  <ind> The parties have informed the Commission that between 5% and 11% of the products concerned are sold  to the parent companies, without any exclusive sales agreement, and that such sales take place on normal market  conditions.  <ind> Due to the fact that:  <ind> -<ind> approximately 90% of VOAC's sales will be external; <ind> -<ind> the sales by VOAC  to the parent companies represent respectively less than 0,05% and 0,5% of  the purchases of Volvo and Atlas;  <ind> the vertical relationships are considered insignificant. Thus it can be reasonably assumed that there will  not be coordination of the competitive behaviour as between the parents themselves or between any one of them  and the JV.  11.<ind> In view of the above it can be concluded that the notified operation constitutes a concentration within  the meaning of Article 3 of the Merger Regulation.  IV.<ind> COMPATIBILITY WITH THE COMMON MARKET  Affected Product Market  12.<ind> The notifying parties will transfer to VOAC their respective operations in the area of hydraulics: Volvo  will transfer its pump and motor activities, and Atlas will transfer its valve and cylinder operations.  13.<ind> Hydraulic is a technology based on the use of an incompressible fluid to transmit energy in a controlled  manner so that hydraulic components will behave in a predictable way. Hydraulics are  normally divided into  industrial hydraulics and mobile hydraulics. The former are normally used in industries such as plastics, the  latter are used in, inter alia, larger road and off road vehicles (e.g. trucks and excavators) and other work  functions.  14.<ind> The notifying parties are predominantly working for the mobile hydraulic industry. A mobile hydraulic  system normally consists of the following components which are linked together by tubes, hoses or electrical  wiring:  <ind> -<ind> one or several pumps to establish a pressure in the oil circuit; <ind> -<ind> one or several valves to give direction to the oil flow, restrict pressure, etc.; <ind> -<ind> one or more motors causing wheels to revolve; <ind> -<ind> oil tanks, filters, accumulators, etc.; <ind> -<ind> one or more cylinders causing shovels to tip, etc.  <ind> The notifying parties consider that each of these components represent a unique product which perform a  specific function. They are sold separately to manufacturers of certain machines, e.g., excavators, forest  machines, etc. The affected relevant product markets are therefore the following mobile hydraulic components:  pumps, motors, valves and cylinders.  Geographic Reference Market  15.<ind> The geographic reference market appears to be the Community. According to the notifying parties, the  majority of the hydraulic components are made to meet international standards accepted throughout the  Community. There are no tariff or non-tariff barriers to trade within the EC, and transport costs seem to be  insignificant for the final price of the products. Price differences are mainly due to the degree of service  demanded such as stockholding, installation service or financial conditions.  <ind> Furthermore, there is considerable cross-border trade. According to figures available to the Commission,  imports coming from Member States or third countries represented in 1988 more than 60% of the Community's  market value for the relevant products.  16.<ind> Finally, there is a significant number of manufacturers involved in the distribution of the relevant  products due to the technical and customized character of the products which are normally sold to original  equipment manufacturers and other intermediaries throughout the Community.   Assessment of compatibility  17.<ind> The estimated value of the relevant product markets within the Community in 1990, and the annual  growth for the period 1988-1990, were approximately the following:  <ind> Pumps      - 550 million ECU and -1,1% <ind> Motors     - 220 million ECU and -0,7% <ind> Valves     - 600 million ECU and -0,9% <ind> Cylinders  - 375 million ECU and +0,1%  <ind> The notifying parties do not expect these markets to grow in the near future; on the contrary the  downward trend is likely to continue.  18.<ind> The Commission has examined the horizontal and vertical relationships between the product ranges of  the parties concerned.  <ind> i)<ind> Horizontal  19.<ind> In view of the fact that Volvo is active in the pump and motor markets, and Atlas is active on the  markets for valves and cylinders, the market position of VOAC will be that currently held by each party as the  products in question are complementary and not substitutable or overlapping.  <ind> The shares of the parties within the Community on the relevant product markets are between 0,2% and  9,4%.  <ind> ii)<ind> Vertical  20.<ind> As regards the vertical links, the concentration is not likely to significantly strengthen the market  position of VOAC on the markets of hydraulic pumps, motors, valves or cylinders for the following reasons:  <ind> <ind> -only a small percentage of valves and cylinders (11%) is sold to the Atlas Copco group; such sales  to the Volvo/Renault joint venture in the field of trucks [Commission's Decision of 6.11.1990, case No.  IV/M004: Volvo Lastvagnar AB is owned by Volvo AB (55%) and Renault (45%).] are insignificant; <ind> -<ind> the percentage of sales of pumps and motors to the Volvo/Renault group is less than 5%; such  sales to the Atlas Copco group are insignificant. <ind> -<ind> the concentration will not lead to an appreciable foreclosure effect on the markets where VOAC  will operate.  <ind> -<ind> in any case the Volvo/Renault joint venture is controlled by Volvo and Renault which means that  its JV will have less incentive to favour VOAC than in the case of a Volvo fully owned subsidiary.  21.<ind> It is very unlikely that the proposed operation will strengthen the market position of the parent  companies significantly. Atlas does not hold a market share above twenty-five % in any product incorporating  the relevant products. As regards VOAC's relationship with the Volvo/Renault joint venture  <ind> -<ind> none of the products of the Volvo/Renault joint venture are supplied with hydraulic products as  standard equipment; <ind> -<ind> products such as pumps can be installed at clients' request after or before delivery; <ind> -<ind> 50% of those pumps are installed after delivery;  <ind> -<ind> the clients have the choice to have that done either by the Volvo/Renault joint venture or  independent companies; <ind> -<ind> the sale of valves and cylinders to the Volvo/Renault joint venture is insignificant.  V.<ind> ANCILLARY RESTRAINTS  22.<ind> The Shareholders Agreement contains a non-competition covenant by which the parties are prohibited  from directly or indirectly conducting operations in competition with the businesses of VOAC for as long as they  are bound by this Agreement and this for a minimum period of five years. This non-competition clause is aimed  at expressing the reality of the lasting withdrawal of the parents from the market assigned to the joint venture  and is therefore recognised as an integral part of the concentration.  VI.<ind> FINAL ASSESSMENT  23.<ind> Based on the above findings the Commission has come to the conclusion that the proposed operation  does not raise serious doubts as to its compatibility with the common market.  For the above reasons the Commission has decided not to oppose the notified concentration and to declare it  compatible with the common market. This decision is adopted in application of Article 6(1)(b) of the Council  Regulation No. 4064/89.  For the Commission,