CELEX: 31995M0548
Language: en
Date: 1995-03-14 00:00:00
Title: COMMISSION DECISION of 14/03/1995 declaring a concentration to be compatible with the common market (Case No IV/M.548 - Nokia Corporation / SP Tyres UK LTD ) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31995M0548

COMMISSION DECISION of 14/03/1995 declaring a concentration to be compatible with the common market (Case No IV/M.548 - Nokia Corporation / SP Tyres UK LTD ) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 163 , 29/06/1995 P. 0009

 COMMISSION  DECISION of 14/03/1995 declaring a concentration to be compatible with the common market (Case No IV/M.548  - Nokia  Corporation / SP Tyres UK LTD ) 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)(a) DECISION To the notifying party Dear Sirs, Subject:<ind>  Case No.IV/M.548  NOKIA CORPORATION/SP  TYRES UK LTD <ind>  <ind>  Notification of 13 February 1995  pursuant  to Council Regulation (EC) No. 4064/89 1.<ind>  On  13 February 1995 the Nokia Corporation  (Nokia) and  SP  Tyres  UK  Ltd  (SP  Tyres)<tab>  notified  to  the Commission  an operation whereby Nokia, which holds  80  per cent  of  the  shares  in  Nokia  Tyres  Ltd,  reduces   its shareholding by means of a public share offering,  with  the result   that  the shares in Nokia Tyres are held  by  Nokia (25   40 per cent), SP Tyres UK (20 per cent) and others (40 55  per cent).  The exact reduction depends upon the success of the offering. 2<ind> After examination of the notification, the Commission has  concluded  that the notified operation  does  not  fall within  the  scope of application of Council  Regulation  No 4064/89. I.<ind> THE PARTIES 3.<ind>  Nokia  is incorporated in Finland.   Its  principal activities are in the field of  telecommunications,  but  it also  supplies tyres.  SP Tyres, incorporated in the  United Kingdom, is a member of the Sumitomo Rubber Industries group (Sumitomo),  which  is incorporated in Japan;   it  supplies tyres  under  the  Dunlop  and other  brands.   Nokia  Tyres (incorporated in Finland) also supplies tyres. II.<ind> THE OPERATION 4.<ind> Although at present SP Tyres can nominate two of the six   directors  of  Nokia  Tyres,  Nokia  can  unilaterally determine the major strategic decisions made by the company. Nokia  Tyres is thus under the sole control of  Nokia.   The share  offering will result in a share structure under which Nokia  hold  between 25 and 40 per cent of  the  shares,  SP Tyres hold 20 per cent, and the remaining 40 to 55 per  cent are  distributed among the new investors.  According to  the parties  the  new  investors are likely to be  institutions, employees of Nokia Tyres (total 3 per cent) and the  general public;   no  investor will hold more than 5  per  cent  and general   experience   of  Finnish  company   administration suggests  that very few will take any other than a financial interest  in the company.  The board of directors will  have no  more than seven members;  the effect of the shareholders agreement between the parties is that two directors must  be nominees of Nokia and two must be nominees of SP Tyres. III. <ind> COMMUNITY DIMENSION 5.<ind>  The  notified operation constitutes a concentration within the meaning of Article 3(1)b of the Regulation. 6.<ind>  Nokia  Corporation and  Sumitomo  have  a  combined aggregate worldwide turnover in excess of 5000 million  ECU. Each  has 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> CONCENTRATIVE JOINT VENTURE 7.<ind>  The  parties contend that the operation  creates  a concentrative  joint venture within Article 3(1)(b)  of  the Regulation. 8.<ind>  As  a  result of the operation Nokia and  SP  Tyres would in practice be able to control the company if they  so chose.  Relations  between the parties  are  governed  by  a shareholders  agreement, which provides that the  Nokia  and the  SP  Tyres nominees on the board of directors  will  use their best endeavours to achieve a mutual understanding with regard  to  all  strategic policy issues, in particular  the business plan, the investment budget and the appointment  of the  managing  director.  This obligation  the only  express indication  of  joint control  falls short of  the  absolute mutual   veto  over  strategic  policy  issues   which   the Commission normally considers an essential element of  joint control of an undertaking. 9.<ind> The parties however contend that (in accordance with the   Commission's  revised  notice  on  the  notion  of   a concentration  paras  30  ff) joint  control  is  implicitly established by the strong common interests which the parties have  in not exercising their votingrights adversely to each other,   and  that  if  necessary  the  explicit,  even   if qualified,  joint  control  conferred  by  the  shareholders agreement  should be taken into account in support  of  that conclusion.  These common interests are said to be: <ind>  Prior  links:   The existing arrangement  whereby  SP Tyres  effectively  nominate two directors  of  Nokia  Tyres dates  from  1987.   But  SP  Tyres  and  Nokia  Tyres  have cooperated  in the development, production and  distribution of tyres for a longer period under a series of agreements  a technical  aid  agreement  (1982),   two  manufacturing  and supply  agreements  (1987) and an agreement  on  development cooperation and testing (1987). <ind>  These  arrangements continue with  some  enhancements under the present operation.  The parties argue that neither of them would endanger the advantages which they obtain from them by voting against the other's interests. <ind>  Common interests:  In the opinion of the parties  the success  of  the  joint  venture depends  upon  the  synergy created by combining the competitive advantages of SP  Tyres (expertise in the manufacture of summer tyres) with those of Nokia  Tyres  (expertise in the manufacture of winter  tyres and  tyres for forestry machinery, the goodwill of the Nokia name   and   an   established   distribution   network    in Scandinavia).  These complementary advantages are  reflected in  the  exclusive distributorship in Finland which  by  the present operation SP Tyres confers on Nokia Tyres. <ind>  The  parties  contend that the combination  of  their individual strengths creates a degree of interdependency the effect  of  which  is  that each of them  must  respect  the interests  of  the  other.  Nokia's interest  in  the  joint venture is primarily financial;  it would have no reason  to compromise  the competitive advantage which it obtains  from the  operation (especially since SP Tyres can terminate  the joint  venture) or to risk the reputation of the Nokia  name (which  it will continue to use for other activities).   The parties  rely  upon the Commission's decisions  in  Fletcher Challenge/Methanex (IV/M.331) and Philips/Grundig (IV/M.382) in support of their argument. 10.<ind> However in the view of the Commission the operation does not result in joint control of Nokia Tyres.  The powers conferred  by  the shareholders agreement are inadequate  to achieve  that result.  The representation given to SP  Tyres on the board of directors, although generous for a holder of 20  per  cent  of the shares, indicates minority  protection rather  than  joint  control.  The  implicit  joint  control argued  for  by  the  parties  is  based  upon  the  alleged existence  of a common interest shared by the parties.   But the  parties  have  not shown a sufficiently  strong  common interest  to  establish  joint control,  particularly  since Nokia, which will withdraw from the tyre markets and is  not active  in  any market upstream or downstream of them,  will have  a  primarily financial interest in Nokia  Tyres.   The addition   of  the  powers  conferred  by  the  shareholders agreement   is   not  significant  enough  to   alter   this conclusion.   The  facts in the Fletcher  Challenge/Methanex decision  (where  the relevant parties had  greater  control over  the  composition of the board of  directors  and  were obliged to exercise their voting rights on important  issues jointly  and to vote in shareholders meetings in  favour  of proposals adopted by the board even if they had opposed  the proposal  in the board) and in the Philips/Grundig  decision (where  all the relevant parties had identical interests  as bankers  and could exercise control only by all  voting  the same way) are in important respects different from those  of the  present operation. The effect of the operation  is that control  of Nokia Tyres is retained by the Nokia Corporation or that Nokia Tyres is subject to no overall control. 11<ind>   The  operation  accordingly  does  not  create   a concentrative  joint venture within Article 3(1)(b)  of  the Regulation. VII.<ind> CONCLUSION 12.<ind>  For  the  foregoing  reasons  the  Commission  has concluded  that the notifiedoperation does not  fall  within the scope of application of Council Regulation No 4064/89. For the Commission,