CELEX: 31994M0499
Language: en
Date: 1994-09-19 00:00:00
Title: COMMISSION DECISION of 19/09/1994 declaring a concentration to be compatible with the common market (Case No IV/M.499 - Jefferson Smurfitt / Saint Gobain) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

Avis juridique important

|

31994M0499

COMMISSION DECISION of 19/09/1994 declaring a concentration to be compatible with the common market (Case No IV/M.499 - Jefferson Smurfitt / Saint Gobain) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 284 , 12/10/1994 P. 0003

 COMMISSION  DECISION of 19/09/1994 declaring a concentration to be compatible with the common market (Case No IV/M.499  - Jefferson  Smurfitt  /  Saint Gobain) 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 partiy Dear Sirs, Subject  :<ind>  Case  No  IV/M.499   Jefferson  Smurfit/St. Gobain <ind> <ind> Notification of 16.08.1994 pursuant to Article 4 of Council Regulation No 4064/89 1.<ind> On 16 August 1994 Jefferson Smurfit Group plc  (JSG) notified to the Commission its intended acquisition  of  the paper  and  packaging interests of Compagnie  de  St  Gobain Group (St Gobain). 2.<ind>   After   examination  of  the   notification,   the Commission  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   and   with   the functioning of the EEA Agreement. I.<ind> THE PARTIES 3.<ind>  JSG,  incorporated  in Ireland,  is  an  integrated manufacturer  and  converter of paper and  paperboard  whose main operations are located in Europe, the United States  of America  and  Latin  America.   During  the  course  of  the examination of this case the Commission was informed of  the proposed   acquisition  by  JSG   of   a   27.5   per   cent noncontrolling   interest   in   an   Austrian   competitor, Nettingsdorfer BeteiligungsAG (Nettingsdorfer). 4.<ind>  The principal activity of St Gobain, whose ultimate holding   company  is  incorporated  in   France,   is   the manufacture  of glass.  It conducts its paper and  packaging interests  through  a division of the group  (the  Division) consisting  of  seven companies which are controlled  by  La Cellulose  du Pin SA and Cristaleria Espanola SA  and  which operate in France, Italy and Spain. II.<ind> THE OPERATION 5.<ind>  JSG will acquire from La Cellulose du Pin and  from Cristaleria  Espanola their shares in the companies  in  the Division. III.<ind> CONCENTRATION OF COMMUNITY DIMENSION 6.<ind>  The  notified operation constitutes a concentration within the meaning of Article 3(1)b of the Regulation. 7.<ind> The undertakings concerned have a combined aggregate worldwide turnover in excess of 5000 million ECU.  Both  JSG and the Division have a Communitywide turnover in excess  of 250 million ECU, but they do not achieve more than twothirds of their aggregate Communitywide turnover within one and the same  Member State. The notified operation therefore  has  a Community dimension. IV.<ind> COMPATIBILITY WITH THE COMMON MARKET <ind> a) Relevant product markets 8.<ind>  JSG  and  the Division are both active  in  several product  markets involving the supply of paper and packaging corrugated  case materials, corrugated cases, coated  paper, sack kraft  and paper sacks. <ind> Corrugated case materials 9.<ind>  Corrugated  case  materials  (CCM)  are  the  paper products  used to create corrugated board  sheets  of  paper linerboard  enclosing  a  layer of fluted  undulating  paper which is itself converted into corrugated cases. 10.<ind> CCM is produced from either virgin or waste  fibre. A high degree of crosssubstitutability exists between virgin fibre and waste fibrebased material due to a high degree  of crosssubstitutability of both supply and demand.   Important factors   in  demand  crosssubstitutability  are  cost   and performance characteristics such as compression strength and porosity.      Purchasers    usually    specify    objective characteristics   rather  than   relying   on   a   specific manufacturing  process;   prices for  both  types  of  fibre therefore tend to follow similar patterns.  However, as  the operation  will not result in the creation or  strengthening of  a  dominant position it can be left open whether  virgin and waste fibrebased CCM belong to the same product market. <ind> Corrugated cases 11.<ind>   Corrugated   cases,   the   packaging   materials constructed out of sheets of corrugated board, compete  with other  types  of packaging, in particular wood  and  plastic packaging.  However, as even on the narrow definition  of  a market for corrugated cases the operation does not create or strengthen   a   dominant  position,  the   precise   market definition can be left open. <tab> Coated paper 12.<ind>  Coated papers are superior grades of printing  and writing  paper  which are coated on one  or  both  sides  to produce  a  glossy surface.  They are used  in  advertising, magazine  publishing, book publishing and  photocopying  and for   business   forms.    In  its  decision   Torras/Sarrio (IV/M.166,  24 February 1992) the Commission recognised  the existence  of  four separate markets within the  fine  paper market  (which  is  itself distinct  from  the  markets  for selfadhesive   paper  and  selfcopying   paper)     uncoated woodcontaining  paper,  uncoated  woodfree   paper,   coated woodcontaining paper, and coated woodfreepaper.  JSG and the Division each supply only coated woodfree paper. <tab> Sack kraft 13.<ind>  Sack kraft is strong brown paper made from  virgin pulp  and  used for the production of paper sacks.   It  has lower grammage per square metre than CCM and is produced  on different  machines.  It is therefore not substitutable  for CCM  either  on the demand side or on the supply  side.   It accordingly forms a distinct market from CCM. <ind> Paper sacks 14.<ind>  Paper sacks, made from sack kraft,  are  used  for packaging  a  wide  range  of  products.   Among  the   most important  such  products in Europe are cement,  gypsum  and other construction materials. <tab> b) Geographical reference markets <ind> Corrugated case materials and sack kraft 15.<ind>  CCM and sack kraft have high density and are  thus easily  transportable.  According to the parties the markets are  global.  About 70 per cent of virgin fibrebased and  40 per  cent  of  waste fibrebased CCM consumed in  the  EU  is imported from outside;  about 30 per cent of all CCM used in the  EU is produced in another member state.  Almost 50  per cent  of the sack craft used in the EU is imported from  the EFTA.  The reference markets can thus be considered to be at least the EEA area. <ind> Corrugated cases and paper sacks 16.<ind>  Corrugated cases and paper sacks have low  density and  thus incur relatively high transport costs which  limit delivery  ranges  to  a  radius  of  between  200  and   300 kilometres.   The  parties stressed that as major  customers seek  supplies  of corrugated cases from a  single  supplier with  local operations the market is increasingly at   least Europewide.   However,  as  even  on  the  narrower   market definition,  the operation will not create or  strengthen  a dominant position, the precise market definition can be left open. <ind>  <tab> Coated papers 17.<ind>   Because   of   high   density   and   thus   easy transportability printing and writing paper are supplied  on a  worldwide  market.  But the quality of paper produced  in Europe is generally higher than that produced elsewhere,  so that imports into Europe are not significant.  The reference market is thus the EEA area. <ind> c) Competitive assessment <ind> Corrugated case materials 18.<ind> The combined shares of JSG and the Division of  the EU  market for CCM are less than 12 per cent and of the  EEA market  11  per  cent.   If  virgin  fibrebased  and   waste fibrebased  materials  are considered  as  separate  markets these proportions are roughly similar.  Nettiingsdorfer  has less than a 2 per cent share of the EU market and of the EEA market  for  CCM;  even, if therefore the market  shares  of JSG,  the Division and Nettingsdorfer were to be aggregated, the total would not exceed 14 per cent in the European Union and 13 per cent in the European Economic Area. <ind> Corrugated cases 19.<ind>  The parties' share of the EU and the  EEA  markets for  corrugated  cases will be about 10 per  cent.   If  the local  areas  are  considered, the parties' activities  will overlap  only in Italy and (to a lesser extent) France;   in both  these  areas  they will face a number  of  established competitors.   In Italy the leading suppliers are  Italcarta (part  of  SCA,  Sweden) [ ], Guisti [ ]  and  International Paper  (USA)  [  ]  (deleted business secrets   their  total market share is about 30%).  In France the leading suppliers are  Otor [ ], International Paper (USA), Rossmann [  ]  and Groupe  Giepac [ ] (deleted business secrets   they  have  a total  market share of about 35%).  The overall market share of  JSG  following the operation will amount to  [less  than 10%]   in   Italy   and   [less   than   25%]   in   France. Nettingsdorfer's activities overlap with those of  JSG  only in  Italy;  however, even if the market shares of  JSG,  the Division  and Nettingsdorfer in Italy were to be aggregated, the  total  would  not exceed 15 per cent.  Furthermore  the market is characterised by low cost of entry;  thus it could be  easily  entered  by any of the European  competitors  of JSG. <ind> Coated papers 20.<ind> The combined shares of the parties of the EU market for coated woodfree papers is about 3  per cent. <ind> Sack kraft 21.<ind> The combined shares of the parties of the EU market for sack kraft will not exceed 6 per cent. <ind> Paper sacks 22.<ind>  JSG  produces paper sacks only in  Ireland;   they export  only  a  small  amount  to  Northern  Ireland.   The Division supplies paper sacks only in France and Spain.   On the  basis  of  the  narrower  market  definition  there  is accordingly no overlap between their geographic markets.  If however  the  market  was considered to  be  Europewide  the aggregated market shares of the parties would amount  to  12 per cent. 23.<ind>  The  proposed  concentration  will  not  therefore create  or  strengthen 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. V.<ind> ANCILLARY RESTRAINTS 24.<ind> The parties have asked that certain restrictions be considered as ancillary to the concentration. 25.<ind>  By  section  6.8 of the Share  Purchase  Agreement companies in the St Gobain group agree to maintain  existing levels  of the purchase of goods from the Division  provided that   prices   and   conditions  are   competitive.    This restriction lasts for five years and is intended  to  reduce disruption  to the activities of the Division following  the acquisition.   In  its  absence the concentration  could  be implemented only with considerably less prospect of success.  26.<ind>  By  section  10  of the Share  Purchase  Agreement companies  in  the  St Gobain group accept  restrictions  on competing  with  businesses  carried  on  by  the  Division, specifically by providing advice to competitors,  soliciting customers or soliciting employees.  These restrictions  last for  five  years and are intended to ensure the transfer  of the goodwill of the Division to JSG. 27.<ind>  These  restrictions are directly  related  to  and necessary   for   the  successful  implementation   of   the concentration and can thus be treated as ancillary to it. VI.<ind> CONCLUSION 28.<ind>   For   the   foregoing   reasons,   the   proposed concentration  does  not  raise serious  doubts  as  to  its compatibility   with  the  common  market   and   with   the functioning of the EEA Agreement. For  the  above reasons, the Commission has decided  not  to oppose  the  notified operation and to declare it compatible with  the common market and with the functioning of the  EEA Agreement.  This  decision  is  adopted  in  application  of Article 6(1)(b) of Council Regulation No. 4064/89. <tab> For the Commission