CELEX: 31995M0620
Language: en
Date: 1995-08-22 00:00:00
Title: COMMISSION DECISION of 22/08/1995 declaring a concentration to be compatible with the common market (Case No IV/M.620 - Thomson CSF / Teneo / Indra) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31995M0620

COMMISSION DECISION of 22/08/1995 declaring a concentration to be compatible with the common market (Case No IV/M.620 - Thomson CSF / Teneo / Indra) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 264 , 11/10/1995 P. 0009

  COMMISSION DECISION of 22/08/1995 declaring a concentration  to be compatible with the common market (Case No IV/M.620 -  Thomson / Teneo / Indra) 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.620  ThomsonCSF/Teneo/Indra  <ind> <ind> Notification of 19.07.1995 pursuant to Article 4  of Council Regulation No 4064/89  1.<ind> The notified operation consists in the acquisition  by THOMSONCSF, a subsidiary of the French company THOMSON  SA, of 25% less one share of the capital stock of INDRA  SISTEMAS SA (INDRA), a subsidiary of the Spanish public  group TENEO SA.  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 the functioning of  the EEA Agreement.  I.<ind> THE PARTIES  3.<ind> Thomson is a holding company controlled by the  French State, with two main subsidiaries. Thomson Consumer  Electronics is active in the design, development and  manufacture of consumer electronic products. ThomsonCSF is  active in professional electronics and defence systems. Its  main strengths are in aircraft equipment, communication and  command networks, detection systems, missile systems,  electronics and information technology.   4.<ind> Teneo is a holding company controlled by the Spanish  State, with a large number of subsidiaries present in  several sectors such as electric power, air transport,  aerospace, engineering, professional electronics and  aluminium. Through its subsidiaryIndra, Teneo is also active  in the business of professional electronics through  subsidiaries operating in the sectors of defence and dual  technologies, consulting and computer services, control and  communication, and space electronics. Indra's activities are  mainly carried out in Spain.  II.<ind> CONCENTRATION  <ind> a) Joint control  5. <ind> The parties have agreed that Thomson will acquire  25% less one share of the capital stock of Indra and the  corresponding voting rights. Such an acquisition will take  place through the subscription by Thomson of a capital  increase of Indra. The proposed concentration is structured  in a Shareholders Agreement between Thomson and Teneo.  6.<ind> According to the terms of the shareholders agreement  Thomson will have the right to appoint members of the Board  of Directors and other corporate bodies in the proportion of  its shareholding in Indra. However important matters are  subject to the joint approval of both Thomson and Teneo.  7.<ind> Such matters include the appointment and removal of  Chief Executive Officers, the annual approval of strategic  and budget plans, [Deleted business secret. Confirms joint  control under the Merger Regulation.].  8.<ind> [Deleted business secret. Confirms joint control  under the Merger Regulation.].  9.<ind> It follows that Indra will operate, under the joint  control of ThomsonCSF and Teneo and that therefore the  operation constitutes a joint venture within the meaning of  Article 3 of the Merger Regulation.  <ind> b) Concentrative joint venture  10.<ind> Indra currently operates as an autonomous economic  entity and will continue to do so under the present  arrangements. The Agreements are for an indefinite period of  time.  11.<ind> No coordination of competitive behaviour between  Teneo and Thomson will result from this operation, since  Teneo participates in Indra's field of activities only  through Indra. For this reason, the acquisition by Thomson  of an interest in Indra will not give rise to coordination  of the competitive behaviour between Thomson and Teneo. The  operation is therefore a concentration within the meaning of  Article 3 of the Merger Regulation.  IV.<ind> COMMUNITY DIMENSION  12.<ind> The undertakings concerned have a combined  aggregate worldwide turnover in excess of 5 000 million ECU  (Thomson 11342 MEcu, Teneo 12330 MEcu). Both Thomson and  Teneo have a Communitywide turnover in excess of 250 million  ECU (Thomson 5229 MEcu, Teneo 10190 MEcu), but 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.   V.<ind> COMPATIBILITY WITH THE COMMON MARKET  13.<ind> Indra is present in the following sectors:  <ind>   <ind>  consulting and computer services,  <ind>  control and communication systems,  <ind>  space systems,  <ind>  air traffic management systems,  <ind>  defence and dual use technologies.  <ind> a) Consulting and computer services  14.<ind> The Commission has already stated in its Decision  of 19.05.1993 in Case N IV/M336IBM France/CGI that in the  information technology (IT) software and services business a  distinction has to be made between the IT services market on  the one hand, which includes consultancy services,  operational support services and applications and delivery  services, and the IT software market on the other hand,  which includes the applications software. The IT services  market is basically a services market requiring a close and  constant relationship between the service provider and the  client while the IT software market is a product market in  which the product can be sold or licensed to the clients  through independent distributors [See in particular points 8  and 9 of the IBM/CGI Decision.].  15.<ind> Within the IT services market, the Commission did  not decide if consultancy services, operational support  services and applications and delivery services constituted  distinct product markets given the market position of the  parties [See point 8, last paragraph of the IBM/CGI  Decision.].  16.<ind> The Commission, although not deciding definitely,  expressed the view that the geographic market for IT  services should be national given the need to communicate in  the customer's own language and to be present locally,  whilst the geographic market for IT software products could  be wider as these products can be easily imported/exported  and distributed after linguistic and regulatory adaptations.  17.<ind> In the present case, Indra is mainly active in the  IT services market in Spain. Its market share in this  country is less than 5% and insignificant in any other  member State. Thomson is only present in Spain in the IT  services market through a subsidiary. Its market share is  less than 1%. Given the market position of the parties both  in the general market for IT services and in any of its  segments, there is no need to decide what is the exact  delimitation of the IT services market. Therefore, this  concentration does not raise competition concerns in the IT  services business or in any individual segment covered by  the operation.  <ind> b) Control and communication systems  18.<ind> Control systems are systems able to perform remote  sensing, local and central data processing, data display,  management aid service support and, occasionally, control  over distributed activities. They are used with a high  degree of specialization in the transport, energy, water,  environment and security sectors.  19.<ind> The parties argue that the geographic market for  control systems is worldwide. In any case, it is not  necessary to decide on this aspect since even on a national  scale the operation does not lead to the creation or the  strengthening of a dominant position.  20.<ind> Indra is a small player in control systems with a  market share in Spain of less than [Deleted business secret.  Between 3 and 10%.]. It is not present anywhere else in the  European Union. Thomson is marginally active in Spain and  its market share is minimal. Therefore, no competition  concern is anticipated.  21.<ind> The same applies to communication systems given  that there is no overlap since Thomson is not present in  Spain. Furthermore, the activities of Indra are limited in  this field and confined to Spain where significant players  such as Alcatel, Nokia, Philips and Marconi are present. At  European level, the relatively small overlap does not modify  the present structure of the markets.  <ind> c) Space systems  22.<ind> In the space systems sector neither Thomson nor  Indra [Except for minor programs where Indra acted as prime  contractor.] are prime contractors [See Commission Decisions  of 23.8.1994 in Case No IV/M.437Matra Marconi Space/British  Aerospace Space Systems and of 5.9.1994 in Case No  IV/M.496Marconi/Finmeccanica.]. This means that they do not  hold overall responsability for a space system project but  supply subsystems, equipment and components to the prime  contractors. At such a level, there are even within Europe,  in addition to the prime contractors themselves, numerous  competitors such as DASA/AEG, Alcatel, Aérospatiale, Alenia,  Saab/Ericsson, ANT Nachrichtentechnik, Gilardi and Sextant  Avionique/CIR. Furthermore, Indra's activities in this field  are very minor with a turnover amounting in 1994 to [Deleted  business secret. ] million Ecus which represents [Deleted  business secret. Less than 1%.] of the overall European  sales in this sector. Given that Thomson's sales represent  3% of the same overall European sales and that Thomson is  present through some specific niches in which Indra is not  active and given the market position of the parties in the  space systems sector and any of its segments, it is not  necessary to define more precisely the product markets as  the operation will not lead to the creation or the  strengthening of a dominant position.  <ind> d) Air traffic management systems and equipments  23.<ind> Air Traffic Management Systems and Equipment (ATM)  provide full coverage of an airspace area to ensure the  security of the Civil Air Transport activities.  24.<ind> Up to now, the geographic market for ATM systems  and equipments has been national, as ATM is linked to  national security. Nevertheless recent development in  technology and the new public procurement rules in the air  transport sector (in particular Council Directive 93/38)  could facilitate new entries in the future.  25.<ind> ATM systems and equipment form a growing market  (growth rate of 5% p.a.) because of the need to modernise  air traffic management and in view of the emergence of new  technologies. In this context, it should be noted that  Thomson is active mainly in France while Indra is active  mainly in Spain and that their respectivemarket shares in  these two countries are [Deleted business secret.]  decreasing. The operation does not materially modify the  present structure of national markets since the possibility  for other strong competitors and new entrants to expand or  enter the market remains basically unchanged. Thomson, with  a [Deleted business secret. Between 30% and 50%.] market  share ([Deleted business secret. Between 50% and 70%.] in  1992) is confronted by Alcatel, Capsesa (joint venture  between Matra and Cap Gemini Sogeti) and other SSIIs. Indra,  with a [Deleted business secret. Between 40% and 70%.]  market share ([Deleted business secret. Between 50% and  80%.] in 1993) has to face Page Iberica, while [Deleted  business secret. Two major electronic European companies.]  are considered as serious potential competitors. Therefore,  no competition concern is expected.  <ind> e) Defence and dual use technologies  <ind> General outlines  26.<ind> Markets for defence products and services tend to  remain national where a domestic supplier exists  [Notwithstanding a certain movement towards a wider European  market as a result of common defence programmes and European  alliances. On these questions, see Commission Decision of  2.12.94 in Case No IV/M.527Thomson CSF/Deutsche Aerospace,  point 25.]. However, where there is no domestic supplier,  then, subject to other barriers such as export restrictions  and national preferences, suppliers of defence products and  services compete with each other worldwide [See for instance  Commission Decision of 14.4.1993 in Case No  IV/M.318Thomson/Shorts, point 23.]. In the present case  therefore the affected markets are principally France and  Spain. In this context, it should be stressed that the  parties to the present concentration are generally operating  in different geographic markets. Consequently there is no  addition of market share. Furthermore, the operation does  not materially modify the present structure of national  markets since the possibility for other strong competitors  and new entrants to expand or enter the markets remains  basically unchanged.  <ind> When assessing the market position of a firm in the  defence industry, account must be taken of the bargening  power of its main client(s): the ministry of defence (MOD)  of the State(s) concerned [See for instance Commission  Decision of 24.3.1995 in Case No IV/M.571CGI/Dassault, point  19.]. In recent years, MODs, which generally formulate the  operational requirements and technical specifications of  armaments, have been successful in keeping down market  prices. As a consequence of the reduction in national  defence budgets, there is a tendency for the MODs to require  higher technical specifications with lower levels of  manpower and lower overall costs and to be reluctant to bear  the risks associated with R&D. Finally, the general views of  the MOD concerned is also of relevance for the assessment of  an operation in the defence industry [See for instance the  Report of the Science Board Task Force on Antitrust Aspects  of Defense Industry Consolidation. April 1994. Office of the  Under Secretary of Defense for Acquisition & Technology of  the United States.]. In the present case, it should be noted  that the French and Spanish MODs, to which a questionnaire  has been sent by the Commission, have expressed a positive  view on the operation.  <ind> The present operation concerns seven distinct product  markets.  <ind> Simulators  27.<ind> As regards military simulators, the parties  distinguish between indoor simulators and outdoor  simulators. Indoor simulators represent either an aircraft,  a tank or a submarine. They embody a small part of the  components of the real equipment, but simulate their  reactions. They are located in specific rooms. They enable  the Armed Forces of all countries to carry out indoor  training, reducing the risks and the costs of the training  itself. They are either prototypes or very short  manufacturing series. By contrast, outdoor simulators are  added to real equipment such as real weapon systems. They  incorporate advanced technologies such as laser  technologies. They are used for Land Forces operations by  certain countries only. They are usually produced in  relatively large series. They are much cheaper than indoor  simulators. In view of these differences, the Commission  agrees with the parties and the French and Spanish  Ministries for Defence which have been consulted that indoor  and outdoor simulators represent distinct product markets.  <ind> As regards civil simulators, a distinction must be  made between flight or aircraft simulators and nuclear  plants simulators. The latter reproduce the complete control  room of the power plant.  28.<ind> The definition of the geographic market for  military products in general and, therefore, for military  simulators is given at point 26 above. There is no need to  define precisely the geographic market for civil simulators  given that Indra is not present in this sector. According to  the parties, the flight simulators market is worldwide and  the nuclear plant simulators market is at least European.  29.<ind> In any of the markets as defined at points 27 and  28 above does the operation result in the addition of market  shares. Although both parties have occasionally sold in  Portugal where no simulators' manufacturer exists, they have  never achieved market shares above [Deleted business  secret.]. Furthermore, for the reasons outlined at point 26  above, the Portuguese market could be considered as a market  open to competition. For indoor simulators, Thomson is  present in France (market shares below [Deleted business  secret.]), United Kingdom and Germany while Indra is present  in Spain (market shares above [Deleted business secret.])  and Portugal. In all these countries there exist active  competitors such as Sogitec, DCN and Sagem in France,  [Deleted business secret. One local company.] in Spain. In  addition to this in the other European counties already  operate, and must be seen as significant potential  competitors in both Spanish and French markets, Saab, Loral  Corporation and CAE Industries. The French and Spanish  ministries of defence have confirmed their positive view of  the operation, including the aspects concerning simulators.  In the UK, the defence procurement policy is more liberal.  Therefore there will not be creation or strengthening of a  dominant position.  <ind> Air Command and Control Systems   30.<ind> These are systems needed by the government to carry  out the defence of its territory. Their principal tasks are:  detection and identification, mission controls,  communication essential to real time reporting to higher  level of command and good interoperability with allied  forces.  31.<ind> The market for Air Command and Control Systems  (ACCS) is a growing market because of the need to increase  compatibility among systems used by the various NATO Armed  Forces, which leads to the renewal of present ACCS. There is  no overlap as a result of the concentration as Thomson is  present only in France ([Deleted business secret.] market  share) and Indra only in Spain [Deleted business secret.].  In France, Thomson, [...], is faced by powerful competitors  such as Alcatel, Sagem and CSEE. In Spain, Indra has  increased its market share, but [Deleted business secret.  One major European player.] was able to enter the market in  1994 and to gain a [Deleted business secret.] market share  within one year and there remain effective competitors such  as Page Iberica [Deleted business secret.] market share) and  several small players ([Deleted business secret.] market  share together). Therefore, a dominant position will not be  strengthened or created in this market as a result of the  operation.  <ind> Electronic Warfare  32.<ind> This equipment enables the military to detect the  existence of and identify enemy communications, to analyse  their content or direction and to jam them [See Commission  Decision of 5.9.1994 in Case No IV/M.496  Marconi/Finmeccanica, point 27.].   33.<ind> The electronic warfare (EW) market is not a  declining market, the main reason being that EW happened to  be a key component on the battlefield during the Gulf War.  The life cycle of the product is short. The operation does  not result in any overlap in France and the overlap in Spain  is minimal. In particular, Thomson's presence in Spain is  sporadic and limited to certain very specific installations.  Dassault Electronique is an actual competitor in France and  in Spain. In addition, Litton is also present in Spain.  Alternative suppliers in Europe include Elletronica SpA and  GEC. Therefore, the operation will not create or strengthen  a dominant position.  <ind> Automatic Test Equipment   34.<ind> Automatic Test Equipment is designed to test the  full electronic onboard equipment and avionics systems of  military and civil aircraft.  35.<ind> At present, Indra operates only in the military  sector in Spain whilst Thomson operates mainly in the  military sector and to a small extent in the civil one, both  in France. Consequently there is no overlap as a result of  the operation. The Spanish market is a very small one  [Deleted business secret.] and there existscompetition from  aeroplane manufacturers such as Harris, Aerospatiale and Mac  Donnell Douglas. In France, Aerospatiale and Matra are  active competitors of Thomson.  VI.<ind> CONCLUSION  36.<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.  <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.  For the Commission,