CELEX: 31996M0765
Language: en
Date: 1996-06-24 00:00:00
Title: Commission Decision of 24/06/1996 declaring a concentration to be compatible with the common market (Case No IV/M.765 - ADIA / ECCO) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31996M0765

Commission Decision of 24/06/1996 declaring a concentration to be compatible with the common market (Case No IV/M.765 - ADIA / ECCO) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 226 , 03/08/1996 P. 0005

  COMMISSION DECISION of 24/06/1996 declaring a concentration to be compatible with the  common market (Case No IV/M.765 - ADIA / ECCO) 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.765 - ADIA/ECCO  <ind> <ind> Notification of 20.05.1996 pursuant to Article 4 of Council Regulation No 4064/89  1.<ind> On 20 May 1996 Adia s.a. (ADIA) and Ecco s.a. (ECCO) have notified an operation by  which ADIA will acquire sole control of ECCO.  2.<ind> After examination of the notification the Commission has concluded that the notified  operation falls within the scope of application of Council Regulation N* 4064/89 and does not raise  serious doubts as to its compatibility with the common market or with the functioning of the EEA  Agreement.  I.<ind> THE PARTIES  3.<ind> ADIA is a Swiss company, which  is engaged primarily in the provision of temporary  personnel services to businesses.   4.<ind> ECCO is a French company, which is engaged primarily in the provision of temporary  personnel services to businesses. It also provides other services, including industrial security  monitoring and contract cleaning.  II.<ind> THE OPERATION  <ind>   5.<ind> The agreement being notified has been entered between ADIA, ECCO, Klaus J. Jacobs  Holding AG (KJJ), holding company which is the controlling shareholder of ADIA, and Finecco s.a.  (FINECCO), holding company which is the controlling shareholder of ECCO. The agreement  obliges ADIA to launch a French public exchange offer (Offre Publique d'Echange - OPE) for all the  stock of ECCO and obliges FINECCO to make an irrevocable tender into the offer of its 45.57%  controlling minority interest in ECCO.   6.<ind> The offer will be made to all of ECCO's shareholders on the same terms. All shareholders  except FINECCO (which will irrevocably elect to receive stock) will have a choice as to whether to  accept cash or ADIA shares in exchange for their ECCO shares.  7.<ind> The agreement notified provides that, following the acquisition, the contract cleaning  business of ECCO will be retransferred to FINECCO.  III. CONCENTRATION  8.<ind> FINECCO currently holds 45.57% of the total voting rights in ECCO. None of the shares  currently held by FINECCO carry double voting rights. Nonetheless, FINECCO has consistently  held a majority of the votes present at ECCO's annual general meetings. For example, in 1995  FINECCO's shares in ECCO represented 88.9% of the shares actually voted, in 1994 90.0% and in  1993 88.5%. ECCO remaining share capital is widely dispersed. The acquisition of FINECCO's  stake in ECCO will thus confer sole control to ADIA.  9.<ind> ADIA's acquisition of sole control of ECCO constitutes a concentration within the meaning  of Article 3(1)(b) of the Merger Regulation.  IV.<ind> COMMUNITY DIMENSION  10.<ind> The worldwide turnover of ADIA and ECCO in year 1995 was respectively ECU 2.4  billion and ECU 3.1 billion. The combined aggregate turnover of the undertakings concerned  exceeds therefore 5,000 million ECU. The aggregate Community wide turnover of each party  exceeds 250 million ECU, being in year 1995 ECU 965.13 million for ADIA and ECU 2,857.0  million for ECCO. ADIA and ECCO did not both of them achieve more than two thirds of 1995  Community-wide turnover in one and the same Member State. The operation has therefore a  Community dimension.  V.<ind> COMPATIBILITY WITH THE COMMON MARKETS  A. <ind> Relevant product market   11.<ind> The activities of ADIA and ECCO only overlap in the business of the provision of   temporary employment services to undertakings.   12.<ind> It appears that this business constitutes the relevant product market. Within this market a  very large number of firms operate in supplying  workers to undertakings that use such firms to  manage part of their human resources function by temporary staff.  13.<ind> Information provided by competitors and customers shows that a more narrow market  definition is not appropriate. Some firms specialise in providing certain types of employees (eg.  provision of temporary secretaries). However, in general, temporary employment services firms do  not seek to specialise and  customers can get a broad range of different types of employees from the  same temporary employment services firm. Furthermore, seen from the supply side, most firms could  within a short time extend their range of types of employees if necessary.  14.<ind> The parties have suggested broader market definitions: (i) all temporary employment,  regardless of whether they are hired directly by their ultimate employer or through temporary  employment services firms or  (ii)  the supply of labour, regardless of whether the workers are hired  through a private or  public firm or directly, or whether the workers are permanent or temporary.   15.<ind> Temporary employment services firms perform a variety of services (eg. training services)  to undertakings which differentiate them from permanent employment firms and from direct  employment. Also, they normally establish a direct, long lasting and in some circumstances even  exclusive relationship with workers seeking employment. These workers are in most Member States  receiving wages and benefits directly from temporary employment services firms. As a matter of fact,   permanent employment firms and other forms of labour supply function on a rather different basis.  From the demand side, although a certain degree of substitutability can certainly be noticed between  permanent and temporary employment, they can hardly be considered as belonging to the same  market.  They normally respond to different needs of the customers in respect of the time horizon to  be regarded when seeking to cover a vacant position. Also, legal and regulatory requirements are  still substantially different between permanent and temporary employment. Consequently, the  relevant product market is the provision by employment services firms of temporary personnel to  undertakings.  B.<ind> Relevant geographic market   16.<ind> According to information provided by the parties, competitors and customers, the relevant  geographic market is not wider than national. This geographic definition is suggested by several  factors such as language differences personal preferences regarding relocation and differing legal  and regulatory regimes between Member. Indeed, the temporary personnel service industry appears  highly fragmented. However, although the smaller firms tend to operate on a local or regional basis  basically all larger firms operate throughout the  national market with offices in several different  regional areas. Consequently, the relevant geographic market for  the provision by employment  services firms of temporary personnel services to undertakings appears to be national.   VI.<ind> ASSESSMENT  17.<ind> At an EU level the new company will have a share of approximately [business secrets -  between 10 - 20%] (ADIA and ECCO  [between 0 - 10%] and [between 5 - 15%] respectively).  Number two will be the US company Manpower with an EU share of approximately [between 10 -  20%]. No other companies reach a [between 5 - 15%] EU share or higher.   18.<ind> The affected markets are the provisions by employment services firms of temporary  personnel to undertakings  in Denmark , France, Luxembourg and Spain.  19.<ind> In Denmark the new company obtains a market share of approximately [between 10 -  20%] (ADIA and ECCO  respectively [between 10 - 20%] and [between 0 - 10%].  The competitors  include major players like Attention ([between 10 - 20%] market share) and Manpower ([between 10  - 20%] market share).   20. <ind> The new company will be the market leader in France with a share of  approximately  [between 20 - 30%] (ADIA [between 0 - 10%] and ECCO [between 20 - 30%])  followed by  Manpower  [between 20 - 30%] and BIS ([between 10 - 20%]).   21.<ind> In Luxembourg the new company will obtain a market share of  approximately  [OJ C 203,  14.8.1990, p.5] (ECCO and ADIA have respectively [between 10 - 20%] and [between 10 - 20%]).  No other competitor reach a [between 5 - 15%] share.  22.<ind> In Spain the new company will have a market share of approximately  [between 20 - 30%]  (ECCO and ADIA's respective market shares are  [between 20 - 30%] and [between 0 - 10%]). No  other competitor reach a [between 5 - 15%] share.  23.<ind> The temporary personnel services market over the last years has been characterized by  substantial growth. At the EU level, in terms of sales, the market has increased by approx. 53% from  1993 to 1995. This growth reflects changing social patterns regarding employment. Employees are  increasingly finding that temporary employment provides a better fit with their needs. Employers are  also looking at a temporary workforce as a means of boosting productivity while, at the same time,  lowering labour and administrative costs. Market growth has also been favoured by the liberalization  from legal restrictions in various Member States, and by entries of new operators allowed by low  entry cost barriers.  24.<ind> In fact, the main entry costs for temporary personnel firms are related to administrative  and staff expenses, without major investments being necessary. Entry and growth can occur rapidly  and with minimal financial risk.  25.<ind> In conclusion, in view of the fact that the new company's market shares on any of the  affected markets will not exceed 28% and that competition is guaranteed by substantial growth and  low barriers to entry, the Commission concludes that the transaction does not raise doubts as to its  compatibility with the common market.  VII. <ind> ANCILLARY RESTRAINTS  26.<ind> A non-competition clause has been agreed upon, by which  [business secrets] FINECCO  undertake not to compete for a five year renewable period in the field of the business transferred to  ADIA. Since the operation consists of the transfer of ECCO from FINECCO to ADIA, the  Commission considers that only the non competition oblligation of FINECCO in the business  transferred is directly related and necessary to the concentration. With regard to its duration, a five  years period is appropriate. A longer duration does not appear necessary in order to protect the  acquiror, since the business concerned does not show particular features such as long persistence of  customer loyalty or long life cycle of the products. Therefore, the Commission considers that the said  clause, limited to a five year duration, complies with the criteria laid down in point III.A. of the  Commission notice regarding restrictions ancillary to the concentration [OJ C 203, 14.8.1990,  p.5].On the other hand, KJJ's [business secrets] obligation is not directly related to the concentration,  and is therefore not covered by the present decision.  27.<ind> KJJ, ADIA and ECCO have also agreed not to compete [business secrets]. This clause  regards a business which is not directly related to the concentration, and therefore is not covered by  the present decision.  VII.<ind> CONCLUSION  28.<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 No  4064/89.  <tab> <tab> <tab> For the Commission,