CELEX: 31993M0310
Language: en
Date: 1993-04-29 00:00:00
Title: COMMISSION DECISION of 29.04.1993 declaring a concentration to be compatible with the common market (Case No IV/M.310 - HARRISONS & CROSFIELD / AKZO) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31993M0310

COMMISSION DECISION of 29.04.1993 declaring a concentration to be compatible with the common market (Case No IV/M.310 - HARRISONS & CROSFIELD / AKZO) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 128 , 08/05/1993 P. 0000

 COMMISSION DECISION of 29.04.1993 declaring a concentration to  be compatible with the common market (Case No IV/M.310 -  HARRISONS &  CROSFIELD / AKZO) 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.310 - Harrisons & Crosfield/AKZO  <tab>  <ind> Notification of 24.03.1993 pursuant to Council  Regulation (EEC) No. 4064/89  I <ind> THE NOTIFIED OPERATION  1. <ind> The Commission has received the notification of a  series of agreements between Harrisons Chemicals  (UK) Ltd.  (Harcros) and Akzo Chemical International BV (AKZO) under which  they propose to bring together the operations of their groups  relating to the development, manufacture and sale of particular  chemical products, including primarily PVC processing  additives,  in Europe and the United States.  It may be  observed that the transfer of the United States assets is  subject to approval by the US regulatory authorities.  II <tab> THE PARTIES  2. <ind> Harcros is a wholly owned and controlled subsidiary of  Harrisons & Crosfield plc.  The latter is a publicly quoted  company organised into four divisions namely, chemical and  industrial, timber and building supplies, food and agriculture,  and plantations.  Harrisons & Crosfield plc has sales  throughout the world but primarily in the UK and Asia.  3. <ind> AKZO is a wholly owned and controlled subsidiary of  AKZO NV.  The latter is a publicly quoted company  divided into  five divisions, i.e. salt, chemicals, fibres, coatings and  healthcare products.  AKZO NV has sales worldwide, but its  operations are largely concentrated in the Netherlands, Germany  and the United States.   III <ind> COMMUNITY DIMENSION  4. <ind> The worldwide turnover of the undertakings concerned  exceeds 5,000 million ECU (Harrisons and Crosfield plc - 2615  mECU, AKZO Group - 7292 mECU).  Both have a Community-wide  turnover significantly exceeding 250 mECU.  The undertakings  concerned do not achieve more than two-thirds of their  Community-wide turnover in one and the same Member State.   Thus, the operation has a Community dimension.  IV <ind> CONCENTRATIVE JOINT VENTURE   <ind> Joint control  5. <ind> Under the 'Umbrella Joint Venture Agreement' the  appropriate assets and personnel are to be transferred to four  partnerships in the UK, Germany, the Netherlands and the US  (the joint venture entities).  The capital of the individual  partnerships and four existing companies in France, Italy,  Spain and Denmark (the joint venture companies), will each be  individually held on a 50:50 basis by the Harcros and AKZO  groups.  These arrangements will be completed by manufacturing  and operating agreements for the production of specific  chemicals in a number of cases where it is not possible to  fully transfer the necessary plant and personnel.  6. <ind> Although there is no interposition of a holding  company between the various JV entities and companies on the  one hand and the parent groups on the other hand, the whole can  be considered as forming a single joint venture.  In accordance  with paragraph 41 of the Commission notice on concentrative and  cooperative operations the establishment of a holding company  is not necessary to establish the concentrative nature of an  operation.  The operations of the joint venture will be  conducted under the name of 'Akros Chemicals' [Name to be  finalised].  7. <ind> The JV will be controlled by a Governing Board  composed of initially seven, and subsequently five, members.   Harcros and AKZO will each appoint three members during the  first three years and two members thereafter.  The Managing  Director of the JV will be a non-voting member.   The chairman  of the Governing Board will alternate between Harcros and AKZO,  but will have no casting vote.  Decisions will be adopted on  the basis of a simple majority.  All important policy matters  of the JV will be submitted to the Governing Board for prior  approval.  These include, in particular,  the annual business  and budget plan and also capital expenditure exceeding  approximately 70,000 ECU, the appointment of senior managers,  wage and salary increases, the opening of branches and the  creation of subsidiaries, the acquisition, disposal and  licensing of technical know-how and intellectual property, any  contract or arrangement between any JV entity and any member of  either Party's Group, borrowings, banking arrangements and  dividend policy, and investment policy.  8. <ind> Therefore the JV will be jointly controlled within the  meaning of Article 3 of the Merger Regulation.   <ind> Autonomous economic entity  9. <ind> The JV will operate on an autonomous basis.  To this  purpose, the Parties are transferring to the JV all tangible  and non-tangible assets, subject to the exceptions specified  below, relating to the product groups concerned.  On completion  the JV will have worldwide sales of approximately 300 million  ECU and 1,100 employees at 12 production sites in Europe and  North America.  10. <ind> Within the Community, the Harcros group is  transferring its entire location plus personnel at  Manchester/Eccles and Burnley in the UK, at Greiz/Doehlau in  Germany and at Roermond and Venlo in the Netherlands.   Similarly, the AKZO group will transfer its entire location and  personnel at Dahlem in Germany and at New Brunswick, New Jersey  in the USA.  The existing joint venture in France, between  Harcros and AKZO for the production of tin stabilisers,  Tinstab SA, will also be transferred to the joint venture.   <ind> AKZO will also transfer its plant for the production of  PVC processing additives at Dueren in Germany.  Personnel will  not be included at Dueren, since the plant transferred forms  part of a larger site, and the division of the site workforce  would have a significant adverse impact on overall site  efficiency.  However, the JV will enjoy an operating agreement  with AKZO at this site for an initial 10 year period.   Moreover, according to Article 12.1.3 of the Umbrella JV  Agreement, where plants are operated on behalf of the JV under  an operating/manufacturing agreement, planning production  scheduling and investment are treated in the same way as sites  owned and operated by the JV entities and any change in  production levels at such plants shall be effected only for  good economic reasons relating to the JV.   <ind> The above assets represent more than 95% of the total  plant and equipment for the product groups concerned by the  JV.  11. <ind> The Harcros plant at Durham used for the production  of driers and metal stearates will be the subject of a  manufacturing agreement with the JV.  It is not feasible to  isolate and transfer that part of the Durham plant to the JV,  since it forms part of a much larger multi-product plant and,  in particular, because of safety and security reasons.  12. <ind> On establishment of the JV, there will initially be  either an operating or manufacturing agreement governing three  further plants, covering products which represent a very small  part of the JV's existing sales.  At Deventer, the existing  AKZO plant producing plasticisers and fungicides will be  transferred to the JV, but the plant will initially be operated  by AKZO under an operating agreement on a temporary basis  [Deleted for publication].  At Hillhouse, AKZO currently has a  manufacturing agreement with ICI for the production of bonding  agents at an ICI plant.  The existing manufacturing agreement  will be transferred from AKZO to the JV, [Deleted for  publication.].  Lastly, at Bergen-op-Zoom, the existing AKZO  plant producing radiation cure products will be transferred to  the JV,  but the plant will continue to be operated by AKZO  under the operating agreement [Deleted for publication.].  13. <ind> The vast majority of the necessary human and material  resources are being transferred to the JV, and in those  exceptional cases where full transfer is not feasible,  appropriate operating/manufacturing agreements are being  established.  In addition, the Harcros and AKZO groups have  agreed to transfer all material intellectual property, know- how, etc. required for the business of the JV.  The JV will be  independent of its parents for its commercial activity, making  use of its own distribution and marketing arrangements.  14. <ind> In conclusion, the JV will perform on a lasting basis  all the functions of an autonomous economic entity.   <tab> Absence of coordination of competitive behaviour  15. <ind> Given the transfer of all the necessary plant,  personnel and intellectual property rights by both parents to  the JV, completed by operating and manufacturing agreements  where full transfer is not feasible, it is unlikely that they  will seek to re-enter the product markets of the JV.  16. <ind> One of the less important products produced by the JV  will be anionic surfactants.  These represent about 7.5% of the  JV's sales.  Surfactants are products  employed across the  industrial sector as processing aids where their surface-active  properties (foaming, wetting, emulsification, solubilisation,  dispersion, etc.) are used to facilitate processing.  They are  divided into three product areas: anionics, cationics and  amphoterics.  They are not substitutable.  Harcros is only  active in anionics and is transferring this activity to the  JV.  17. <ind> AKZO is retaining its surfactants business, which is  mainly focused on cationics and amphoterics, but it also  produces some anionics.  However, in terms of sectoral  application, AKZO sells anionics mainly for use in the  manufacture of detergent and personal care products, whereas  Harcros sells into other industrial markets.  Therefore, in  terms of end use, Harcros and AKZO are not direct competitors  in anionics.  There is no indication that the situation is  likely to change in the foreseeable future.  18. <ind> Harcros is not transferring to the JV those metal  octoates which are not used as paint driers.  AKZO is  transferring all its production of metal octoates, all of which  are used as paint driers.  As regards the metal octoates  retained by Harcros, although technically these could be used  in paint driers, they are in fact sold for other applications,  such as catalysts in the manufacture of a wide range of  petrochemicals.  19. <ind> As regards vertical relationships, paint driers  corresponding to about [A relatively minor percentage.] of the  JV's paint drier sales are currently sold  to the AKZO group.   The latter will only purchase if supply terms are competitive.   [Deleted for publication.].  20. <ind> Consequently, the establishment of the JV will not  give rise to the coordination of the competitive behaviour of  independent undertakings within the meaning of Article 3(2) of  the Regulation.  21. <ind> Therefore, the whole constituted by the various  partnerships and companies is to be considered as a  concentrative JV within the meaning of Article 3(2) of the  Regulation.  V. <ind> COMPATIBILITY WITH THE COMMON MARKET  A. <ind> Relevant product market  22. <ind> In their notification, the parties have identified  the following affected relevant product markets:   <ind> (i) <ind> PVC processing additives (stabilisers)   <ind> These are chemical products which are added to PVC in  order to stabilise it (that is, prevent it from deterioration  during processing) and to give it particular properties, such  as plasticity, rigidity, transparency and flexibility.  The  parties believe that there are four different markets in PVC  processing additives:   <ind> - <ind> Solid stabilisers are used mainly where rigidity  is required in, for example, window frames and piping.  <ind> - <ind> Tin stabilisers are used where transparency in  the final product is desired.  <ind> - <ind> Liquid stabilisers are used in the manufacture  of flexible PVC products such as sheeting, leathercloth and  traffic cones.  There are two main types of liquid stabilisers:  calcium/zinc and barium/zinc.  <ind> - <ind> Epoxy plasticisers/stabilisers are used as  synergistic co-stabilisers with liquid stabilisers in order to  achieve an enhanced flexibility and stability.  There are two  main types of epoxy plasticiser/stabiliser: oil-based epoxies  (using soya bean or linseed oil) and ester or fatty acid-based  epoxies.   <ind> (ii) <ind> Radiation cure products  23. <ind> These comprise certain oligomers and monomers used in  the formulation of inks and coatings - largely used in the  graphic arts and wood-finishing trades - which are "cured" by  use of ultraviolet light or electron beams.  This process is  far faster than conventional drying methods and there is no  (harmful) evaporation of solvents.  The parties have divided  these into four different markets.   <ind> - <ind> Multifunctional monomers are a range of  multifunctional acrylic monomers used as "reactive diluents" in   inks and coatings for the graphic arts and coatings industry.   <ind> - <ind> Epoxy acrylates are used to give a hard gloss  finish.   <ind> - <ind> Urethane acrylates are generally used where the  properties of the cured coating are more demanding - for  example, where improved flexibility, adhesion, or scratch  resistance is sought.  Uses include solder-resist resins, vinyl  floor wear layers and metal decorative inks.  It is the  highest-priced performance-related product of the main groups.  <ind> - <ind> Amine acrylates are used to catalyse or speed up  the rate of cure in ultraviolet processes.  They are  incorporated into varnishes for papers and plastics but are  also used as a building block in ultraviolet curing wood  coatings.   <ind> (iii) <ind> Paint driers  24. <ind> In relation to paint driers, the product market is  that for natural and synthetic octoates of barium, calcium,  cerium, cobalt, manganese, lead, strontium, zinc and zirconium,  used alone or in various combinations to promote the oxidative  drying of solvent/alkyd resin-based paints.  25. <ind> There are a number of other products produced by the  JV.  These do not give rise to affected product markets since  there is no product overlap.  Possible vertical links are non- existent or of negligible importance.  B. <ind> Geographical reference market  26. <ind> For all three relevant product market groups (PVC  additives, radiation cure products and paint driers) the  relevant geographical market is Community-wide in view of the  following factors:   <tab> <tab>- <ind> a high level of intra-Community shipments  <tab> <tab>- <ind> the presence of the major suppliers in  several or more Member States, with significant market shares  <tab> <tab>- <ind> relatively low transport costs  <tab> <tab>- <ind> a hitherto relatively modest level of trade  between the EC and the rest of the world as well as the  existence of an EC external tariff (6.5% to 8.4% dependent upon  the specific product concerned).  27. <ind> Based on the data provided by the parties as well as  a survey by the Commission of the main producers and users,  there appears to be a degree of price variation between Member  States.  However, this is due to factors such as differences in  technical specifications dependent upon the specific  application (e.g. different mixes of ingredients and variations  in product quality) and differences in batch volumes sold.  C. <ind> Competition Assessment   <ind> PVC additives  28. <ind> The total market value amounts to some 330 mECU, of  which about 50% consists of sales of solid stabilisers, whilst  tin, liquid and  epoxy products each account for approximately  one-third of the remaining 50%.  29. <ind> Post-concentration, the 'Akros Chemicals' joint  venture will not have more than approximately a one-quarter  share in any product market, except in solid stabilisers, where  its market share will still be less than one-third.  'Akros  Chemicals' will have a somewhat higher share than its main  competitors in the solid and epoxy stabiliser markets but there  still remain powerful competitors (e.g. Baerlocher, Chemson,  Reagens for solid stabilisers and Ciba-Geigy, Henkel and  Atochem for epoxy stabilisers) each with up to one-fifth of the  market themselves.  As far as tin stabilisers are concerned,  Ciba-Geigy will remain the leading supplier with a  substantially higher market share.  30. <ind> There is in general a high degree of market  concentration for all four categories of PVC additives.   However, the stated view of the overwhelming majority of  customers consulted in these markets is that there is, and will  continue to be, a wholly adequate choice of suppliers, each  following an independent pricing policy.  31. <ind> At the same time, there is a high likelihood that the  existing market structure will be disrupted in the short term  by a switch from heavy metal stabilisers (i.e. those containing  toxic substances such as barium, cadmium and lead) to more  environmentally acceptable alternatives (e.g. those containing  calcium and zinc), particularly in the solid stabiliser sector,  which accounts for about half of the total market for  additives.  This innovative process will open up new  opportunities for both existing producers and possible new  entrants.  32. <ind> Finally, there is some evidence that imports from  outside the EC are increasing, particularly from North America  and Brazil.  This is especially true in the tin stabiliser  sector where the degree of concentration in the EC market is  highest.   <ind> Radiation cure products  33. <ind> The total market value amounts to some 75 mECU.   Post-concentration the 'Akros Chemicals' joint venture will  have less than a one-quarter share of each product market, in  each of which there exist financially strong competitors with  higher market shares (in particular UCB, which has shares  upwards of [A market share higher than that of 'Akros  Chemicals'] and is the market leader).  34. <ind> There is also a high degree of market concentration  for all four categories of radiation cure products.  However,  demand is dominated by large companies, for example big inks  manufacturers for graphic art applications.  Moreover, the  overall annual rate of growth for the radiation cure market is  estimated at over 5% for the next few years, with estimates of  15% annual growth for urethane acrylates and 20-25% annual  growth for amino acrylates.  Again, both urethane and amino  acrylates are considered to have high innovative potential (for  flooring coating lacquer, for example).    <ind> Paint driers  35. <ind> The total market value amounts to about 40 mECU.   'Akros Chemicals' will have less than one fifth of the total  market, which is not highly concentrated, and in which there  are financially strong competitors with significant market  shares.   <tab> Conclusion on competition assessment  36. <ind> Therefore, whilst the proposed concentration has the  result of further increasing the degree of concentration in the  various product markets for PVC additives and radiation cure  products, having regard to the number of alternative suppliers,  the available evidence collected from surveys with product  users, expected future changes in the market brought about by  environmental pressures and the trend of increasing imports for  certain products from producers outside the EC, it cannot be  considered that the structure of supply will be sufficiently  narrowed that effective competition would be significantly  impeded in the common market or in a substantial part of it as  a result of single or collective dominance.  VI <ind> ANCILLARY RESTRICTIONS  37. <ind> The parties have submitted that the following clauses  are to be considered as ancillary restraints within the meaning  of the Merger Regulation.  38. <ind> Under Clause 2.1 of the Manufacturing Agreements at  Deventer and Durham, AKZO and Harcros respectively agree not to  sell or supply any of the products concerned to any person  other than the partnership, for so long as the Agreement  remains in force.  Since it is not feasible to transfer the  plant concerned to the joint venture, these restrictions have  the effect of placing the plant concerned fully under the  control of the joint venture as regards supply of the products  concerned to third parties.  The restriction on the parent  manufacturing expresses the reality of the lasting withdrawal  of the parents from the markets assigned to the joint venture  and can therefore be considered as directly related to the  concentration and necessary for its implementation.  39. <ind> Under Clause 6.1 of the Umbrella JV Agreement, the  Harcros and AKZO Groups are to contribute to the joint venture  all material Intellectual Property used in the businesses of  the joint venture.  Clause 6.2 of the same Agreement provides  that, on request, the JV will license the Harcros and AKZO  Groups to make use of intellectual property owned by the JV in  specified product areas.  Where the original intellectual  property is contributed by the parent, the licence shall be  free of charge and in other cases a fee representing a market  rate shall be paid.  Clause 6.3 of the Agreement provides that  each licence granted shall contain such provision as is  reasonably necessary to protect the Intellectual Property and  commercial interests of the licensor, including such provision  for the duration, exclusivity (if any) and territorial grant of  the licence and competition with the licensor and third parties  in the use of the Intellectual Property.  40. <ind> In order to ensure the successful establishment of  the JV, the parents are contributing the necessary intellectual  property.  At  the same time, it is reasonable for the parents  to wish to be able to benefit in the future from intellectual  property transferred to and developed by the JV in specific  business areas.  Furthermore, to promote the transfer of  intellectual property by one parent to the JV, it is also  reasonable for certain restrictions to be placed upon the grant  of intellectual property licences to the other parent by the  JV.  Therefore, the general principle of limitation on the  award of a licence can, as set out in Clause 6.3, be considered  to be directly related to the concentration and necessary for  its implementation to the extent that it facilitates the  transfer of intellectual property from the parents to the JV.   However, the specific restrictions contained in any specific  future licence agreement are not covered by the present  decision and must be examined separately.  40. <ind> Therefore all the above restrictions are covered by  the present decision to the extent described above.  VII <ind> CONCLUSION   <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