CELEX: 31993M0336
Language: en
Date: 1993-05-19 00:00:00
Title: COMMISSION DECISION of 19.05.1993 declaring a concentration to be compatible with the common market (Case No IV/M.336 - IBM FRANCE / CGI) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31993M0336

COMMISSION DECISION of 19.05.1993 declaring a concentration to be compatible with the common market (Case No IV/M.336 - IBM FRANCE / CGI) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 151 , 02/06/1993 P. 0000

 COMMISSION DECISION of 19.05.1993 declaring a concentration to  be compatible with the common market (Case No IV/M.336 - IBM  FRANCE / CGI) 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 party Dear Sirs, Subject: <ind> Case No. IV/M336 - IBM France/CGI  <ind>  <ind> Your notification of 16.4.93 pursuant to Article  4 of Council Regulation No. 4064/89  1. <ind> On 16.4.93, IBM France notified a public tender other  than for cash ("offre publique d'échange", hereafter OPE) which  had been previously announced at the Paris stock exchange and  by which newly issued IBM France convertible bonds will be  exchanged for the outstanding ordinary shares of Compagnie  Générale d'Informatique (CGI).  2. <ind> After examination of the notification, the Commission  has concluded that the notified operation falls within the  scope of the Merger Regulation and does not raise serious  doubts as to its compatibility with the common market.  I. <ind> THE PARTIES  3. <ind> IBM France, a French société anonyme, is part of the  IBM group of which the ultimate parent company is the US  company IBM Corporation.  It is active mainly in France within  the information technology business including hardware,  software and services.  4. <ind> CGI, a French société anonyme whose capital is widely  spread, is active mainly in France in the information  technology software and services business.   II. <ind> THE OPERATION  5. <ind> The OPE, which is amicable, has been preceded by a  private agreement by which IBM France has secured from three  CGI key  shareholders an initial minority stake representing  25.37% of CGI's equity.  Furthermore, IBM France has the right  not to purchase the shares offered within the OPE if less than  66.67% of CGI voting rights are obtained.  III. CONCENTRATION  6. <ind> If the OPE succeeds the operation will give rise to a  concentration within the meaning of Article 3(1)(b) of the  Merger Regulation as, clearly IBM will acquire control of CGI.  IV. <ind> COMMUNITY DIMENSION  7. <ind> The combined aggregate worldwide turnover of the IBM  group and CGI in their last financial year exceeds 5000 million  ECU (IBM group: 49,706 million ECU; CGI: 291 million ECU).   Their Community-wide turnover is more than 250 million ECU (IBM  group: 15,412 million ECU; CGI 254 million ECU).  The IBM group  and CGI do not achieve more than two-thirds of their aggregate  Community-wide turnover within one and the same Member State.   Therefore, the proposed concentration has a Community  dimension.  V. <ind> COMPATIBILITY WITH THE COMMON MARKET   <ind> Product and geographic markets  8. <ind> The Commission recognises that there are different  segments within the information technology software and  services domain which can be differentiated by a number of  characteristics such as capital investment requirements, role  of brand image, development costs, switching costs (installed  base effect), etc.   <ind> Four areas of activity within the IT software and  services domain have been identified by the parties where both  companies, target and acquirer, are involved:   <ind> - <ind> Consultancy services: activities performed by  certified consultants which frequently precede other activities  and may take the form of advice on the best way to address  fundamental issues for business undertakings such as overall IT  strategy and planning, management of change, quality control  and production, administrative and human resources productivity  improvements.   <ind> - <ind> Operational support services: included in this  category are services performed on behalf of customers, ie  installation, operation and optimisation of their information  systems network and may include contracting out certain data  processing needs ("facilities management").   <ind> - <ind> Applications development and delivery services:  these include the analysis, planning, design and implementation  of specific projects which are tailor-made in response to the  particular requirements of a user or closed user group.  This  activity may also be designated "customised software" or  "systems integration and development".   <ind> - <ind> Applications software: products which enable a  user or group of users to support and perform an operational or  administrative  process.  Applications software is a package of  software which is generally sold or licensed in multiple,  identical copies that cannot be modified in substance by the  user.  Applications software products may include both cross  industry products such as spreadsheets, word processors, and  data bases as well as accounting, human resources, planning and  analysis and engineering and scientific tools and also industry  specific packages for manufacturing industries, banking,  insurance, etc.   <ind> Nevertheless, taking into account the market position  held by the parties in each of the segments defined above, it  is not necessary in the present case to decide if these  segments (even if some of them, like applications software,  could be further segmented) constitute distinct product markets  within the meaning of the Regulation.  9. <ind> However, a major conceptual distinction should be made  between IT services and IT software which should be assessed  separately in the context of the present notification.   <ind> (a) the IT services market which includes consultancy  services, operational support services and applications and  delivery services is basically a services market requiring a  close and constant relationship between the service provider  and the client, and   <ind> (b) the IT software market which includes the  applications software (and also the systems software market  which is not affected by the present concentration) is a  product market in which the product (package) can be sold or  licensed to the clients through independent distributors.  10. <ind> With regard to geographic markets, the parties claim  that usually the geographic markets for services (consultancy,  operational support services and applications development and  delivery) are national markets as the ability to communicate in  the customer's own language is essential and the close  relationship with clients often requires a local presence.  On  the contrary, software products can easily be imported/exported  from one country to another and distributed after linguistic  and regulatory adaptations have been made, usually by the  national distributor.  Nevertheless, the precise definition of  geographic markets can be left open since the operation does  not raise serious doubts as to its compatibility with the  common market even on a national basis.   <ind> Assessment  11. <ind> Information technology services accounted for about  60% of the total Community-wide turnover of CGI (the remaining  40% being accounted for by IT software products).  The  concentration affects mainly France where 80% of CGI's IT  services' turnover is made.  At the European level, IBM, the  largest service provider, has a market share below 5%.  In  France, the combined market share of IBM and CGI will not  exceed 5% and IBM, with the acquisition of CGI, will rank  second behind Cap Gemini Sogeti.  Comparable market shares  would be held by IBM in each of the IT services segments  mentioned in paragraph 8.  12. <ind> Prior to the concentration, IBM was already the  largest applications software product supplier in the EC with a  market  share just exceeding 4% [Input figures] and one of the  most important players on the French market.  IBM markets a  large number of packages mainly in the areas of graphic  applications, computer integrated manufacturing, executive  decision and office management.  A large number of these  applications software packages are used on IBM systems software  but there are also applications which are used on open systems  like Unix and MS-DOS.  CGI has approximately a 3% [Input  figures] market share of the French applications software  market and under 2% at Community level and is mainly active in  the areas of human and financial resources management and  computer aided software engineering with two families of  products, SIGAGIP and PACBASE respectively.  These packages are  marketed in several versions in order to be operated in a  number of operating systems both of a proprietary - IBM but  also other hardware manufacturers' proprietary systems - and  open nature.  13. <ind> Therefore, it is unlikely that this concentration  could raise competition concerns in the overall IT software and  services markets or in any individual segment covered by the  present operation, either in the EC or in France.  VI. <ind> CONCLUSION  14. <ind> Based upon the above findings and considerations, the  Commission has come to the conclusion that the proposed  concentration does not create or strengthen a dominant position  as a result of which effective competition would be  significantly impeded in the common market or in a substantial  part of it.   <ind> 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 Council Regulation No.  4064/89.  For the Commission