CELEX: 31993M0237
Language: en
Date: 1993-05-10 00:00:00
Title: COMMISSION DECISION of 10.05.1993 declaring a concentration to be compatible with the common market (Case No IV/M.237 - DASA / FOKKER) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31993M0237

COMMISSION DECISION of 10.05.1993 declaring a concentration to be compatible with the common market (Case No IV/M.237 - DASA / FOKKER) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 136 , 15/05/1993 P. 0000

 COMMISSION DECISION of 10.05.1993 declaring a concentration to  be compatible with the common market (Case No IV/M.237 - DASA /  FOKKER) 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 By registered mail with advice of delivery To the notifying party Dear Sirs, Subject: <ind> Case No. IV/M.237 - DASA/Fokker <ind> <ind> Notification of 2.4.1993 pursuant to Article 4 of  Council Regulation No. 4064/89  1.<ind> The above operation concerns the acquisition of a  majority interest in NV Koninklijke Nederlandse  Vliegtuigenfabriek Fokker (Fokker) by Daimler-Benz AG.  After  examination of the notified operation, the Commission has  concluded that it 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.  I.<ind> THE PARTIES  2.<ind> Daimler-Benz is a German holding company active in a  variety of sectors such as the manufacture and sale of  passenger cars and commercial vehicles (through its subsidiary  Mercedes-Benz) and the manufacture and sale of automation  equipment and systems, rail transport systems, electronic  equipment and components (through its subsidiary AEG).  <ind> Daimler-Benz is also active in the development,  manufacture and sale of aerospace-related products through its  subsidiary Deutsche Aerospace AG (DASA).  DASA is the second  largest European aircraft manufacturer in terms of turnover.   It is active in all three segments of the aircraft industry, ie  aircraft, propulsion and equipment.  44% of the turnover was  achieved through the production and sale of aircraft.  DASA is  involved in the manufacture of large commercial aircraft as a  member of the Airbus consortium.  The company also produces  regional transport aircraft (DO328).  3.<ind> Fokker manufactures and sells mainly civil aircraft and  related products and services.  Fokker is a major manufacturer  of regional  aircraft with its two models F50 and F100.   Fokker's aircraft activity makes up more than 80% of its total  turnover of 1,794 million ECU (1992), with the F100 business  contributing 68% and the F50 business 14%.  Other activities of  Fokker are the development, production and assembly of space  systems and other machinery, parts and systems in the civil and  military area.  II.<ind> THE OPERATION  4.<ind> The parties have concluded a set of agreements which  will bring about the operation.  The agreements provide for the  acquisition of 51% of the shares of Fokker through Fokker  Holding BV (Holding) which is a subsidiary of ZPG Beteiligungs-  und Verwaltungs GmbH (ZPG), which in turn is a subsidiary of  DASA.  Furthermore, the agreements regulate the complex future  relationship between DASA, Fokker, Holding and the Netherlands  State (the State).  In addition, the possible entry of other  "industrial partners" into Holding has been taken into  account.  5.<ind> DASA, the State and Fokker have concluded a Master  Agreement on the control of Fokker as a result of which the  management board and the supervisory boards of Fokker will be  restructured.  <ind> The management board of Fokker is appointed by the  general shareholders meeting in which DASA, through Holding,  has a majority of the votes.   <ind> The management board's decisions will be adopted by a  simple majority of the votes.  However, the board will need the  prior approval of the supervisory board of Fokker for  fundamental resolutions and major business decisions.   <ind> A qualified majority of seven votes is required of the  supervisory board on the following business matters of Fokker:  <ind> -<ind> changes in the role of Fokker as the lead company  for all present and future business in the field of medium  range jet aircraft for transportation of between 65 and 130  passengers other than the Airbus programme, with the A319 at  the lower end, <ind> -<ind> the termination of existing programmes for jet  aircraft, <ind> -<ind> the acquisition or disposal of assets or  businesses or the entering into joint ventures, <ind> -<ind> the buy-in, cancellation or new issue of Fokker  shares, <ind> -<ind> the reservation of the annual profits, and <ind> -<ind> the changes in the worksharing stipulated by the  Industrial Partners Agreement.  <ind> The composition of the supervisory board allows DASA to  control the simple majority of the board but not the qualified  majority.  For the latter, DASA will always need the votes of  two independent directors or one independent director and the  State director.  6.<ind> With this operation, DASA pursues the objective of  becoming a prime contractor for a major aircraft programme.   The company regards this capability as essential for its  viability and long term profitability as an aircraft  manufacturer.  As Fokker is an established and highly regarded  manufacturer of regional aircraft, DASA regards the acquisition  of a controlling interest in Fokker as  a step which will  fulfil its objective.  It brings DASA closer to becoming the  European centre of production for "narrow bodies" for aircraft.   DASA already does the final assembly for the A321.  In addition  Fokker could provide appropriate product support and marketing  for DASA's turboprop aircraft DO328 for which the first  deliveries are expected this year.  III. COMMUNITY DIMENSION  7.<ind> The aggregate worldwide turnover of the Daimler-Benz  group and the Fokker group in 1992 amounted to more than 5  billion ECU (Daimler-Benz: 48,779 million ECU; Fokker: 1,794  million ECU).  Both had a Community-wide turnover of more than  250 million ECU (32,134 billion ECU for Daimler-Benz and 447  million ECU for Fokker) and they did not achieve more than two- thirds of their Community-wide turnover in one and the same  Member State.  IV.<ind> CONCENTRATION  8.<ind> As a result of the operation, Daimler-Benz will acquire  control of Fokker.  Through Holding, the company will control a  majority of voting rights in Fokker's shareholders meeting.   Furthermore, Daimler-Benz will exercise control over most of  Fokker's business decisions.  It needs the support of  independent directors for only a few resolutions of the  supervisory board.  The qualified majority rule for these  decisions does diminish DASA's degree of influence on Fokker.   However, it does not deprive Daimler-Benz of decisive  influence.  <ind> The voting rights of the State do not confer decisive  influence.  The State does not have the power to veto any  decision on its own.  In addition, it should be noted that the  State has undertaken, by way of contract, not to oppose  decisions related to the termination of any existing aircraft  programme where such aircraft programmes are uneconomical for  reasons of "market demand", competition or costs".  <ind> It follows that the notified operation will give rise to  a concentration within the meaning of Article 3 of the Merger  Regulation.  V.<ind> COMPATIBILITY WITH THE COMMON MARKET  <ind> Relevant markets  9.<ind> The main economic sector concerned by the transaction  is the regional aircraft business for both jets and turboprops.   In addition, both DASA and Fokker are active in space systems  as well as defence systems.  i)<ind> Regional aircraft business  <ind> Relevant product markets  10.<ind> In its de Havilland decision of 02.10.1991, the  Commission found a distinct market existed for regional  turboprop aircraft and stated that neither regional jet  aircraft nor jet aircraft developed for short and medium haul  flights should be included in this market.  <ind> In fact, with regard to regional jet aircraft, there are  significantly higher acquisition and operating costs.  In  addition, the time-saving is not significant on routes of less  than 400 nautical miles while the average distance operated by  turboprops is less than half of this distance.  <ind> In addition, these jet aircraft are approximately twice  the price of the largest turboprop aircraft.  It applies even  more to the bigger jets.    a)<ind> Regional turboprop aircraft  11.<ind> In the same decision, turboprop aircraft with fewer  than 20 seats were excluded from the market for reasons of  certification security requirements, level of comfort, use,  etc.  With regard to aircraft with more than 20 seats, on the  basis of information supplied by the industry concerned, the  Commission made a distinction between commuter aircraft with 20  to 39 seats, 40 to 59 seats and 60 seats and over.  In  particular, it was found that the airline companies define the  basic approximate capacity required for a specific use and then  choose aircraft that provide the required capacity range.  <ind> Specifically, the airline companies appeared to take into  account the route characteristics (in particular the expected  passenger traffic and the frequency of flights), the level of  business travel and the number of slots.  The principal factor  dictating the airline's fleet requirement was thus found to be  the number of seats.  As a result, the airline companies  usually make their choice from aircraft grouped together in the  relevant markets defined above.  b)<ind> Regional jet aircraft  12.<ind> In the notification, the parties assume that the  relevant product market as regards jet aircraft is the market  for jet aircraft of a seating capacity ranging from 70 to 130  seats.  In addition, they stressed that, in its second  Communication on "the European aircraft industry", the  Commission drew a distinction between regional jet aircraft  (between 70 and 130 seats) and large commercial aircraft (over  130 seats).  It should be noted that the Commission, in the  same Communication, pointed out that such a distinction is  "relatively arbitrary".  <ind> Currently, Boeing, McDonnell Douglas (MDD) and Airbus  sell or intend to sell aircraft with a capacity of around 130  seats which belong to the lower end of the large commercial  aircraft range.  Specifically, the Boeing B737 has a variety of  configurations in order to provide various seating capacities  (some of them being more than 130 and some fewer) and thus  there appears to be a link between regional and large  commercial aircraft.  The same conclusion can be drawn for MDD  which manufactures the MD87, a 130-seat jet aircraft.  Equally,  Airbus plans to launch the Airbus A319, a 125 to 135-seat jet  aircraft stemming from the bigger A320.  <ind> At present, a comparison of cost and performance data of  those large commercial aircraft and the biggest existing  regional jet aircraft (manufactured by Fokker and British  Aerospace) only partly supports the parties' conclusion that  both belong to the same product market.    <ind> In addition, a smaller jet aircraft, the Canadair 50-seat  regional jet has been brought to the market recently (the first  delivery took place in late 1992).  <ind> However, it is not necessary to decide in the present  case whether all the above jet aircraft belong to the same  market as the exact definition of the relevant product market  for regional jet aircraft will not affect the subsequent  competition analysis.  <ind> Relevant geographical market  13.<ind> The aircraft markets are considered to be world  markets.  There are no tangible barriers to the importation of  aircraft in the Community, the costs of transportation are  negligible and there is a significant mutual penetration  between North America and Europe [See the de Havilland decision  of 2.10.1991.].  ii)<ind> Defence activities  14.<ind> Fokker and DASA's defence activities only overlap to a  very limited extent in this field (see below).  Therefore, the  exact definition of the relevant product and geographical  markets in the defence field can be left open since even on the  narrowest possible definition no dominant position is created  or strengthened.  iii)<ind> Space systems  15.<ind> The satellite business includes both the institutional  programmes which accounts for two-thirds of the global  satellite business and the commercial business.  In both cases,  satellite consortia compete with each other offering the  customers complete satellite systems.  These consortia use the  in-house production of their members as well as purchasing sub- systems and components from specialised producers.  In  addition, institutional programmes are governed by specific  rules (eg the geographical return per state rule) which to a  certain extent limit free competition.  However, the precise  definition of the relevant product and geographical markets for  satellite systems may be left open as even on the narrowest  possible definition no dominant position is created or  strengthened.  <ind> Assessment  i)<ind> Regional aircraft  a)<ind> Regional turboprop aircraft  16.<ind> In view of the fact that DASA and Fokker produce  different aircraft (with DASA's DO328 and Fokker's F50), an  overlap would only result if the overall turboprop aircraft  market is regarded as the relevant product market (which the  Commission did in its de Havilland decision in an alternative  assessment of the competition effects of the proposed merger).   Assuming this is the case, the combined market share for  DASA/Fokker is 13%.  17.<ind> In view of the fact that the market shares of DASA and  Fokker on all markets are below 25% and that ATR (the joint  venture of Aérospatiale and Alenia) holds stronger positions on  each of the affected markets, there is no indication that the  concentration will create a single dominant position of  DASA/Fokker.  18.<ind> However, in 1991 Aérospatiale, Alenia and DASA entered  into a Memorandum of Understanding with the objective of  forming an alliance in the field of regional aircraft.  <ind> These plans for an alliance between the parent companies,  ATR and DASA, led the Commission to question DASA's status as a  significant competitor of ATR in its de Havilland decision on  the basis of the above Memorandum of Understanding.  <ind> Co-operation between DASA and Aérospatiale/Alenia was  abandoned in 1992 as the heavy investment needed for the  development of the Regioliner was not supported sufficiently by  market needs.  The Memorandum of Understanding between DASA and  Aérospatiale/Alenia thus expired at the end of 1991.  <ind> Thus the proposed alliance between DASA and  Aérospatiale/Alenia has not materialised.  19.<ind> DASA has taken preparatory steps in its agreements  with Fokker, the Holding and the State for the future entry of  "other industrial partners".  These preparatory steps could  allow Aérospatiale/Alenia indirectly to become a shareholder in  Fokker through a joint participation of 50% in Holding.   However, Aérospatiale and Alenia are not the only possible  industrial partners of DASA for the control of Fokker.  <ind> Finally, it is unlikely that other existing links between  Aérospatiale/Alenia and DASA will create a competitive unity  between them on turboprop aircraft markets.    20.<ind> Thus, DASA and Aérospatiale currently have to be  regarded as independent competitors on the turboprop aircraft  market.  b)<ind> Regional jet aircraft  21.<ind> In their notification, the parties assume that the air  carriers require jet aircraft with a seating capacity of  between 70 and 130 to meet their specific requirements of  point-to-point traffic between secondary airports serving  routes with short and medium distances and a varying number of  passengers.  On the basis of this broad definition of the  market, the market shares (total sales and firm order by seat  including the B737-300 up to its 130-seat configuration) would  be the following:   <tab> World <tab> EEC BAe <tab> 11% <tab> 13% Boeing <tab> 69% <tab> 62% MDD <tab> 5% <tab> 14% Fokker <tab> 15% <tab> 11%  22.<ind> No horizontal overlap will result from the proposed  concentration since DASA has no activity in the regional jet  aircraft field.  In  addition, Airbus (in which DASA is a  partner) is not active at present in this market.  The decision  to launch the A319 should be taken by mid-1993 depending on the  number of orders received by Airbus.  At present, the actual  number of orders received is far too low to take such a  positive decision.  Even if the A319 were launched, Boeing  would remain the undisputed market leader through its B737  family of aircraft (B737-500: 120 seats; B737-300: 136 seats).  23.<ind> If the relevant product market was considered to be,  on the one hand, jet aircraft with an approximate seating  capacity of 100 and on the other hand jet aircraft with an  approximate seating capacity of 130, no horizontal overlap  would result from the proposed concentration.  With regard to  100-seat aircraft, neither DASA nor Airbus are actual or  potential competitors in this market.  However, Airbus and  Fokker (through its F130 project) are potential entrants into  the market for jet aircraft with an approximate seating  capacity of 130 where only Boeing and MDD are currently present  and Boeing holds a market share of more than 90%.  ii)<ind> Defence activities  24.<ind> Both DASA and Fokker are involved in defence  activities.  Fokker is a contractor in the manufacture of the  NH 90 helicopter project launched by the governments of France,  Germany, Italy and the Netherlands.  In addition, Fokker is  active in mobile military command posts and components for  weapons systems.  DASA is mainly active in the production and  sale of missiles, radar and military microelectronics.  DASA is  also a partner in the NH 90 project.  25.<ind> As a result, Fokker and DASA's defence activities only  overlap to a limited extent in the field of helicopters where  Fokker had never been active prior to its appointment by the  State in the framework of the NH 90 international co-operation.   In addition, it should be noted that given the particular  conditions of competition in the defence industry, Fokker and  DASA are neither actual nor potential competitors in the field  of military helicopters.  Furthermore, co-operation at European  level for the next 10 to 15 years (such as the NH 90) has  already been decided.  Thus the concentration would not  significantly affect the structure of co-operation at European  level.  iii) Space systems  26.<ind> Although both DASA and Fokker are active in both  institutional and commercial satellite business, their  activities only overlap, from a technical point of view, in the  solar sub-systems for satellites range.  However, DASA is  active as a prime contractor offering complete satellite  business meanwhile Fokker's activities only relate to the  manufacture and sale of sub-systems and components for sub- systems.  As a result, no horizontal overlap will result from  the proposed concentration.  VI.<ind> CONCLUSION  27.<ind> It can, therefore, be concluded that the proposed  concentration does not lead to the creation or strengthening of  a dominant position as a result of which effective competition  will 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