CELEX: 31993M0360
Language: en
Date: 1993-09-23 00:00:00
Title: COMMISSION DECISION of 23.09.1993 declaring a concentration to be compatible with the common market (Case No IV/M.360 - ARVIN / SOGEFI) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31993M0360

COMMISSION DECISION of 23.09.1993 declaring a concentration to be compatible with the common market (Case No IV/M.360 - ARVIN / SOGEFI) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 305 , 11/11/1993 P. 0000

 COMMISSION DECISION of 23.09.1993 declaring a concentration to  be compatible with the common market (Case No IV/M.360 - ARVIN  / SOGEFI) 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/M.0360 - ARVIN/SOGEFI  <ind>  <ind> Notification of 23.8.1993 pursuant to Article 4  of  Council Regulation No. 4064/89.  1. <ind> The above mentioned notification concerns an agreement  between Arvin Industries Inc. ("Arvin") and Sogefi S.p.A.  ("Sogefi") to form a joint venture in which the parties would  concentrate their interests in the manufacture and sale of  exhaust systems for the free aftermarket ("AM") which is the  replacement market serviced by independent repairers.  2. <ind> After examination of the notification, the Commision  has concluded that the notified operation 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 AND THE OPERATION  3. <ind> Arvin is a US company which manufactures original  equipment ("OE") and replacement automobile components and  precoated metal coils for architectural and furniture uses.  Apart from subsidiaries manufacturing shock absorbers in France  and Spain, Arvin's EC activities include two companies based in  the UK, Timax Exhaust Systems ("Timax") which makes AM exhaust  systems and Cheswick which makes OE exhaust systems, and  Masterparts B.V. a Netherlands distributor of automotive and  motorcycle parts.  4. <ind> Sogefi is an Italian company which manufactures  filters, rear view mirrors and springs for automobiles as well  as having two subsidiaries making AM exhaust systems - Ansa  Marmitte ("Ansa") in Italy and Etablissements Rosi S.A.  ("Rosi") in France. Sogefi is owned by the Compagnie  Industriali Riunite ("CIR") which is part of the de Benedetti  Group. CIR has a 36% stake in Valeo, an important supplier of  automotive parts, such as clutches and electrical components.   5. <ind> Through the notified agreements, the parties intend  to form a joint venture holding company for the manufacture,  sale and distribution of AM exhaust systems and components. The  JV will own Ansa and Rosi outright and 75% of the shares of  Timax and Masterparts.  II. <ind> COMMUNITY DIMENSION  6. <ind> The aggregate worldwide turnover of Arvin and Sogefi  (including other companies in the De Benedetti group) in their  respective last financial year exceeded 5.000 million Ecus.  Their respective Community-wide turnover exceeded 250 million  Ecus. The parties did not achieve more than two thirds of their  Community-wide turnover within one and the same Member State.  Consequently, the proposed operation has a Community  dimension.  III. <ind> CONCENTRATION   <tab> Joint Control  7. <ind> Under the terms of a Shareholders' Agreement, each  party will own 50% of the shares of the joint venture company  and will appoint three directors to the board of the JV, with  the appointment of a seventh director who is also the Managing  Director to be agreed jointly.  Decisions are by simple  majority except that the agreement of both parties is required  for the approval of major business decisions, including the  budget and long range business plan.  8. <ind> Whilst the JV will hold 100% of Ansa and Rosi,  it  will hold only 75% of the shares of Timax and Masterparts. The  boards of these latter two subsidiaries will consist of two  directors appointed by Sogefi and two by Arvin.  Under the  terms of the shareholders' agreement the Sogefi directors will,  however,  vote in accordance with the votes cast by the Arvin  shareholders on the following matters:   <ind> - <ind> long-term strategic plan (but not the operating  plans or budgets);  <ind> - <ind> any change in accounting policy, auditors,  bankers, accounting reference date or bank mandates;  <ind> - <ind> certain taxation decisions; and  <ind> - <ind> decisions relating to the technical/product  information to be developed or acquired by Timax.   <ind> The above elements are strong indicators of the fact  that Arvin will continue to exercise sole control over Timax  and Masterparts, in spite of the 75% shareholding of the JV in  these two subsidiaries. In addition Arvin is expected to take a  leading role in the management of the JV. [Deletion - business  secret].  9. <ind> In the light of this, it is concluded that Ansa and  Rosi will be jointly controlled by Arvin and Sogefi through the  JV but that Arvin keeps sole control over Timax and  Masterparts.   <tab> Autonomous full function joint venture  10. <ind> The parents will contribute four existing businesses  to the joint venture, which will thus have the necessary assets  (notably manufacturing facilities and distribution network),  personnel and expertise (Arvin is to license to the JV its AM  exhaust technology and manufacturing know-how for an indefinite  period terminable only in limited circumstances such as  insolvency/liquidation, termination of the JV)) to perform on a  lasting basis all the functions of an autonomous economic  entity.   <tab> Absence of coordination  11. <ind> Sogefi will completely withdraw from the AM car  exhaust market in Western Europe by contributing its relevant  subsidiaries to the joint venture.  12. <ind> As to the possibility of Sogefi re-entering the  market, it would make little commercial sense for it, having  contributed its subsidiaries to the JV, then to re-enter the  market  in competition with the JV.  Sogefi will no longer have  any expertise in the sector.  Furthermore, should [Deletion -  business secret] the joint venture be otherwise terminated,  Sogefi has committed itself not to compete with Arvin in the AM  exhaust business for five years.   <ind> Arvin will remain active in the AM exhaust systems  market in Western Europe. However, Arvin is expected to take a  leading role in the management of the JV.  13. <ind> Arvin will also remain active in the OE exhaust  system market in Europe, and will thus retain expertise  relevant to the AM market.  However, while OE and AM exhausts  are functionally similar, they are considered to constitute two  separate markets because of the different production processes  and distinct supply and demand characteristics. For the reasons  set out at paragraph 15 below, it is not reasonable to expect  that there will be any appreciable coordination between Arvin  and the JV company on the neighbouring market for OE exhaust  systems as a result of Arvin's involvement in both markets.  14. <ind> Therefore the proposed operation constitutes a  concentration in accordance with Article 3 of the Regulation.  IV. <ind> COMPATIBILITY WITH THE COMMON MARKET   <tab> Relevant product market  15. <ind> The businesses being combined in the joint venture  are active in the production of car exhaust components and  systems for the free aftermarket (Timax, Ansa and Rosi) and the  distribution of motor vehicle spare parts in the Netherlands  (Masterparts).  The free aftermarket consists of the supply of  spare parts to independent wholesalers and distributors or  direct to end-users, such as fitting centres, which are outside  the car manufacturers' franchised dealer network. This  aftermarket for automotive components is distinct from the  market for the supply of components  to car manufacturers for  inclusion in a new car or distribution as a spare part through  its franchised dealer network [See the decision of the ECJ in  Case No 322/81 NV Nederlandsche Banden- Industrie  Michelin v  Commission (1983) ECR 346 and the Commission decision  Mannesmann/Boge, Case No IV/M134 of 23.09.91].  The different  conditions of competition in the two markets are based on  distinctions between   <ind> - <ind> customers (OE - a few large car manufacturers;  AM - numerous wholesalers, distributors and fitters);  <ind> - <ind> production (OE suppliers produce large numbers  of a small range of parts for a limited number of models; AM  suppliers produce a vast range of components for a wide range  of different makes and models);  <tab> - <ind> product (AM exhausts are generally made to a  lower material specification than OE exhausts);  <ind> - <ind> delivery (just-in-time delivery to a car  manufacturer's plant as opposed to a sophisticated distribution  system to numerous customers).  16. <ind> Exhaust systems comprise a number of different parts,  many of which are unique in their exact dimensions and thus  specific to a particular model of car.  Generally these parts  are sold on the AM as components and not as systems which means  that a full-line supplier might have over 5.000 different  parts, although a number of these parts might be sourced from  other manufacturers. Given that the majority of manufacturers  have the technical ability to manufacture most of these  components, it is not necessary to examine the market position  of each individual component but rather to look at the market  as a whole. The relevant product market is thus that for car  exhaust components for the free aftermarket.   <tab> Relevant geographic market  17. <ind> The parties state that the geographic market for AM  car exhaust components extends over Western Europe (EEC +  EFTA), with a number of major suppliers (eg Walker, Bosal,  Sogefi and to a lesser extent Timax) with market positions in  most EC and EFTA Member States, including countries where they  have no production facilities.  That said there are differences  in the market between some Member States, notably in Germany  and Italy where a higher quality product closer in  specification to an OE product, is demanded and there are  domestic industries specialising in the supply of such products  to the home market. Although the parts most in demand vary from  country to country according to the car population, the need to  supply a wide range of parts means that product lines broadly  overlap.  Imports from outside Western Europe are minimal and  tend to be for speciality products (eg for US-made cars).   There are also differences in the channels of distribution with  the traditional route of manufacturer - third party distributor   wholesaler - garage being replaced by direct sales to fitting  chains in the UK, France and Benelux.  Notwithstanding these  differences, the issue of relevant geographic market definition  can, however, be left open since the conclusions of the  competitive analysis would be the same in either case.   <tab> Assessment  18. <ind> Market shares for AM exhaust components in Western  Europe (EEC + EFTA) by volume are estimated by the parties to  be as follows [Business secrets]:   <tab> <tab> Walker  <tab> <tab> Bosal  <tab> <tab> Timax  <tab> <tab> Sogefi  <tab> <tab> Eberspacher / CIA <tab>   <tab> <tab> Others*  <tab> <tab> <tab> <tab> <tab> -----  <tab> <tab> <tab> <tab> <tab> 100%   <tab> * <ind> (more than 12, only six of which have shares  above 1% and none above 3%).  19. <ind> Market shares in Member States where there is an  overlap between the parties are estimated by the parties to be  as follows [Business secrets]:   <tab> <tab> <tab> <tab> <tab> Timax <tab>  <tab> Sogefi <tab>   <tab> Total  <tab> Denmark  <tab> Germany  <tab> Netherlands   <tab> Spain  <tab> UK  20. <ind> As can be seen, at a European level this operation  will give the merging parties a market share of [Business  secret - under 25%], bringing it alongside the two market  leaders, Bosal and Walker.  The table shows that with regard to  the market share increments in Member States, the merger is  broadly complementary in terms of geographical presence, the  main overlaps occurring in Germany, Denmark and the Netherlands  although in none of these Member States will the JV have more  than a [Business secret - under 25%] share.  Timax's strong  position in the UK predated the concentration and is not  appreciably changed by it.  21. <ind> With market shares resulting from the concentration  at both EC and Member State level below 25%, it would seem  highly unlikely that this operation would give rise to the  creation of a solely dominant position.  22. <ind> At the EC level the three largest competitors will  have symmetrical market shares totalling [Business secret -  over 50%] of the market. However, the creation or strengthening  of a jointly dominant position between these three companies,  whether at an EC or Member State level would appear very  unlikely given the characteristics of the market:   <ind> - <ind> the very large number of smaller competitors,  particularly the specialists with good positions in regional  markets such as Germany, Italy and Spain;   <tab> - <ind> a highly fragmented product range with  components varying between not only different models of car but  also between different versions of the same model;  <tab> - <ind> the increasing use of catalytic converters which  will involve products with a much higher technological input;  <ind> - <ind> the fact that the product range offered is only  one element of competition between AM suppliers; other areas in  which suppliers also compete include innovation, distribution  (daily delivery); Timax, for example, delivers daily to over  2.000 customer sites in the UK.  V. <ind> CONCLUSION  23. <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 4064/89.  For the Commission