CELEX: 31995M0674
Language: en
Date: 1995-12-21 00:00:00
Title: COMMISSION DECISION of 21/12/1995 declaring a concentration to be compatible with the common market (Case No IV/M.674 - Demag / Komatsu) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31995M0674

COMMISSION DECISION of 21/12/1995 declaring a concentration to be compatible with the common market (Case No IV/M.674 - Demag / Komatsu) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 038 , 10/02/1996 P. 0017

 COMMISSION  DECISION of 21/12/1995 declaring a concentration to be compatible with the common market (Case No IV/M.674  - Demag  /  Komatsu) 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 TO THE NOTIFYING PARTIES Dear Sirs, Subject :<ind> Case No IV/M.674  DEMAG/KOMATSU <ind>  <ind>  Notification  of a concentration  pursuant  to Article 4 of Council Regulation No 4064/89 1.<ind>  On  21  November 1995, the  Commission  received  a notification of a proposed concentration pursuant to Article 4  of  Council Regulation (EC) No 4064/89 [OJ No  L  395  of 30.12.1989; Corrigendum OJ No L 257 of 21.09.1990, p.13.] by which  the  undertakings Mannesmann  DEMAG  AG  (DEMAG)  and KOMATSU Ltd. (KOMATSU) acquire within the meaning of Article 3  (1)  b of the Council Regulation joint control of  a  new established  50:50 joint venture, called Demag KOMATSU  GmbH (JV). 2.<ind>   After   examination  of  the   notification,   the Commission  has concluded that the notified operation  falls within  the scope of Council Regulation No 4064/89 and  does not  raise serious doubts as to its compatibility  with  the common  market  and  within  the  functioning  of  the   EEA Agreement. I.<ind> THE PARTIES 3.<ind> Mannesmann DEMAG AG (DEMAG) forms part of the German group  Mannesmann  AG. DEMAG is engaged in the  development, engineering, production and sales of plants and machineries, especially in thefield of metallurgical plants, construction equipment,  mining  equipment,  compression  equipment   and plastics machinery. 4.<ind>  Komatsu  Ltd.  (KOMATSU)  is  the  ultimate  parent company of a Japanese multinational group being active on  a worldwide  scale in the manufacture and sale of construction equipment,   in   the   field  of  civil   engineering   and architectural  construction contracting,  mining  equipment, industrial machinery and other products. II.<ind> THE OPERATION 5.<ind>  The  JVC will develop, manufacture, and  distribute large  sized loading tools primarily for use in  the  mining and  quarry  industry.  DEMAG  will  contribute  its  entire existing   excavator   business  to  an   already   existing subsidiary,  the capital of which will be increased  against contribution  in kind by DEMAG consisting of  the  excavator business  to  be  transferred.  Subsequently,  KOMATSU  will acquire a 50 % interest in the JV. III.<ind> CONCENTRATION 6.<ind>  The operation is a concentration within the meaning of Article 3 of the Merger Regulation. 7.<ind>  DEMAG and KOMATSU will jointly control  the  JV  as they  must  reach a common understanding in determining  its commercial  policy. One half of the JV´s Managing  Directors shall  be  nominated by DEMAG and the other half by KOMATSU. All  resolutions  of  the  Board shall  be  adopted  by  the affirmative  vote of all the Managing Directors  present  at such  meeting.  The presence of at least one DEMAG  Director and  one KOMATSU director will be necessary to constitute  a quorum.  In  addition, the board of Managing Directors  will have  to  obtain prior approval of a shareholders´ committee for   important   strategic  business   decisions   as   the approval/modification  of  the  JV´s  annual  and   longterm business  plans, e.g. the sales plan, the development  plan, the  investment  plan, the personnel plan  and  the  finance plan. The shareholder's committee of the JV shall consist of six  members;  DEMAG  and KOMATSU shall each  appoint  three members.  All  resolutions shall  be  adopted  by  unanimous vote. 8.<ind> The JV will perform on a lasting basis and will have all  the  functions  of  an autonomous  economic  entity  on grounds   of   disposal  of  assets,  staff  and   financial independence.  The  JV  will operate  independently  in  the market.  It will develop, manufacture and sell its  products on  the market through its own sales force and will be  free to operate with independent dealers. 9.<ind>  Coordination between the parent  companies  can  be excluded  as  DEMAG will transfer all its  entire  excavator business to the Joint Venture. [Business secrets.]. IV.<ind> COMMUNITY DIMENSION 10.<ind> The concentration has a Community dimension  within the   meaning   of  Article  1  of  the  Merger  Regulation. Mannesmann  AG  and  KOMATSU Ltd. have a combined  worldwide turnover exceeding 5000 million ECU (Mannesmann Group 15.795 million  ECU  and Komatsu Group 7574 million ECU).  Each  of them has a Communitywide turnover exceeding 250 million  ECU (Mannesmann Group 10.397 million ECU and Komatsu  Group  485 million  ECU),  of which they do not achieve more  than  two thirds within one and the same Member State. V.<ind> COMPATIBILITY WITH THE COMMON MARKET <ind> A.<ind> RELEVANT PRODUCT MARKETS 11.<ind>  According  to the parties,  the  relevant  product market is the market of largesized digging and loading tools primarily  for  use in the mining and quarry  industry.  The parties distinguish in this market three different types  of machines  which would be interchangeable from the customers' point of view: <ind>  Hydraulic excavators having a weight of more than  90 metric tons; <ind>   Rope  shovels  with a capacity  of  15  cubic  yards upwards; <ind>   Wheel  loaders having an engine power exceeding  500 horse power. 12.<ind>  The  three systems identified by  the  parties  as pertaining  to a single product market can fulfil  the  main functions  of  digging  (including  loosening)  as  well  as loading  (including  eventual  transporting  over  a   short distance) of certain materials such as minerals, coal,  rock and  overburden. The differing loading tools systems present largely  identical  physical and technical  characteristics. The  parties  provide  evidence of a significant  number  of mines  and quarries which operate the three systems  at  the same  time and of some mines which have replaced one  system of digging and loading tools by another. 13.<ind>  However, some significant differences  notably  on terms  ofthe  specific jobs to be done by the  machines  are apparent,  especially  with regard to wheel  loaders.  Wheel loaders  are  weaker  in  hard materials  and  working  with unblasted rock compared with hydraulic excavators  and  rope shovels.  They  do  not  seem to be capable  of  digging  at benches  of more than 8 meter height and are less economical in  combination with very large dumpers with more  than  130 tons. By contrast with hydraulic excavators and rope shovels of  the  size  mentioned above, the wheel loaders  are  more mobile  and so capable to cover short distances to discharge the  loaded  bucket  and  are  more  suitable  for  specific auxiliary  mining tasks such as cleaning the ground  in  the working area. Furthermore, Excavators can go deeper into the ground  than wheel loaders. Therefore, on the one hand,  all three  types of products are partly interchangeable. On  the other  hand,  in  some  areas they can hardly  replace  each other. 14<ind>  With  respect  to  the  three  differing  technical solutions  each  of them represented by  one  of  the  above mentioned  types  of machines, it also seems  reasonable  to regard largesized hydraulic excavators as a separate market. In this case, Wheel loaders and Rope shovels are products of neighbour markets. 15.<ind> In any case, a decision is not necessary as,  given the  respective  market  positions of  the  parties  in  the activities concerned, it would not alter the outcome of this case. <ind> B.<ind> RELEVANT GEOGRAPHIC MARKET 16.<ind> The parties contend that the business with  loading tools  of such size and capacity is worldwide. Several facts underlie a definition of the relevant geographical market as worldwide.  There  are worldwide only  a  few  manufacturers which  produce these machines and distribute them worldwide. The  customers  are  well informed  big  mining  and  quarry companies which buy worldwide. The transportation  costs  (4 to  6%),  in comparison with the product price, are low  and thus do not hinder worldwide distribution. There are also no trade  barriers  or substantial price differences.  ECimport tariffs   for   hydraulic   excavators   would   amount   to approximately 5'2% and those for wheel loaders to some  4'8% of  the sales price. With regard to prices, the U.S. do have the  highest price level, followed by Australia,  Japan  and Western Europe. 17.<ind>  All  customers  and  competitors  of  the  parties contacted  by  the  Commission shared  the  opinion  of  the notifying  parties  on  the global  nature  of  the  market. However, given that the operation does not lead to a  market dominant position neither european nor worldwide, it is  not necessary  to define the precise relevant geographic  market in  the  present  case  because at least  the  existence  of national markets can be excluded. <ind> C.<ind> ASSESSMENT 18.<ind> The parties underline that the operation has little effect  in  Europe  and it is intended to  strengthen  their position   outside  the  EEA  territory  aiming  at   better penetrating the mining and quarry market in North and  South America, Australia, South Africa and Asia. 19.<ind>  The parties´ market shares depend on the  relevant market  definition.<ind>  The following  market  shares  are based  on  the information provided by the parties. However, the  investigations of the Commissions have shown that  they give a proper view of the market situation. 20.<ind>  According  to  the  information  provided  by  the parties and taking the narrowest possible market definition, a  European  market for excavators having a weight  of  more than 90 metric tons, the average market share of the parties in  the last three years is about [above 30%], but there  is only  a  little  overlap of the parties´  activities  (DEMAG about  [above 30%] and KOMATSU about [below  5%]). Taking  a market  for  bigsized  loading tools containing  excavators, rope  shovels  and wheel loaders, the market shares  of  the parties decrease. European-wide they have a market share  of about  [below  30%]  (DEMAG [above 20%] and  KOMATSU  [below 10%]). 21.<ind>  This  figures  show  that  the  operation  is   of complementary  character  with  relation  to  the   relevant product   market  and  the  current  geographic   field   of activities of the parties concerned as KOMATSU's presence is Europe is weak. KOMATSU's [below 10%] market share in the EC in  the  market  of  large sized digging  an  loading  tools mentioned  above can only be attained because  of  KOMATSU's sales in the field of wheel loaders. DEMAG did not sell  any wheel  loader  machine in Europe in the  last  three  years. According  to  the information provided by the  parties,  no rope shovels have been soldby any supplier in Europe in  the last three years. 22.<ind>  The  new JVC will have three main  competitors  in Europe: <ind> <ind> the Swiss enterprise Liebherr (about [below 30%] for  excavators  and  about [below  20%]  market  share  for loading tools). <ind> <ind> the German enterprise O&K (about [above 30%] for excavators  and about [above 20%] market share  for  loading tools), <ind>  <ind>  the  American  enterprise  Caterpillar  (about [below   5%]  for  excavators and about [above  20%]  market share for loading tools). 23.<ind> Therefore, also after the concentration independent and  strong  competitors exist on the European level,  which limit  the market power of the parties. The effects  of  the operation  are  insignificant also in terms of  addition  of market  shares  on the European market if the  situation  is analysed with regard to Wheel Loaders and Rope shovels. With regard to Hydraulic excavators having a weight of more  than 90  tons  KOMATSU did not sell in the EC area  any  unit  in 1992,  two in 1993 and only one in 1994 in relation  with  a market volume in units in 1994 of 46 Hydraulic excavators. 24.<ind> With regard to Hydraulic excavators having a weight of more than 90 metric tons, the market share of the parties is  about [above 35%] worldwide (DEMAG about [above 20%] and KOMATSU  about  [above 10%]). According to  the  information provided  by the parties, the most important competitors  on the world market are <ind> <ind> Hitachi (19921994 about [above 20%]), <ind> <ind> O&K (19921994 about [above 20%]), <ind> <ind> Liebherr (19921994 about [above 10%]), <ind> <ind> Caterpillar (19921994 about [ below 5%]). <ind>  According to newspaper figures for 1990 to 1992,  the situation has not changed very much in the last years (DEMAG [above  20%] and KOMATSU [above 10%]).  Hitachi had a market share  of  about  [  above 20%], O&K of about  [above  15%], Liebherr  of  about [above 15%] and Harnischfeger  of  about [below 5%]. 25.<ind> With regard to bigsized loading tools, the combined market share of the parties in the period 19921994 is  about [above  15%] worldwide (DEMAG [above 5%] and KOMÀTSU  [above 5%]).  The strongest competitor is Caterpillar with a market share of about [above 25%]. 26.<ind>  In  the light of the above considerations,  it  is considered  that there is neither creation nor strengthening of  a  dominant  position in the market as a result  of  the present  operation. In addition, if only Excavators are  the relevant product market, one will have to take into  account that  there  is  also  competition  pressure  from  the  two neighbour  markets  as  the products  are  at  least  partly interchangeable. VI.<ind> ANCILLARY RESTRAINTS 27.<tab> [Business secret] VII.<ind> CONCLUSION 28.<ind> The proposed concentration therefore does not raise serious  doubts  as  to its compatibility  with  the  common market. 29.<ind>  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  N 4064/89. For the Commission,