CELEX: 31993M0318
Language: en
Date: 1993-04-14 00:00:00
Title: COMMISSION DECISION of 14.04.1993 declaring a concentration to be compatible with the common market (Case No IV/M.318 - THOMSON / SHORTS) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

Avis juridique important

|

31993M0318

COMMISSION DECISION of 14.04.1993 declaring a concentration to be compatible with the common market (Case No IV/M.318 - THOMSON / SHORTS) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 136 , 15/05/1993 P. 0000

 COMMISSION DECISION of 14.04.1993 declaring a concentration to  be compatible with the common market (Case No IV/M.318 -  THOMSON / SHORTS) 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.318 - Thomson/Shorts  <tab>  <ind> Your notification of 08.03.1993 pursuant to  Article 4 of Council Regulation No. 4064/89  1. <ind> The operation was notified on 8 March 1993 and  consists in the creation of a joint venture between Thomson-CSF  S.A. ("Thomson"), a subsidiary of the French company Thomson  S.A., and Short Brothers PLC ("Shorts"), a U.K. subsidiary of  the Canadian company Bombardier Inc.  The joint venture, Shorts  Missile Systems Limited ("SMS") will be engaged in the  development and production of Close Air Defense Systems  activities ("CADS"), which consist of very short range  missiles, electronic command and control systems and firing  units.  2. <ind> After examination of the notification, the Commission  has concluded that the notified operation falls within the  scope of the Council Regulation No. 4064/89 and does not raise  serious doubts as to its compatibility with the common market.  I <ind> THE PARTIES  3. <ind> Thomson is active in high technology military  products.  Its main strengths are in aircraft equipment,  communication and command networks, detection systems, missile  systems (excluding CADS missiles) and technical components  including semiconductors.  It is also involved in computer  equipment, software and technical services.  Thomson S.A.,  which is controlled by the French State, holds 59 % of Thomson- CSF S.A. and 75 % of its voting rights.  4. <ind> Shorts is involved in the design, development,  manufacture and sale of aircraft, aircraft components, guided  missiles, aerial targets, internal security vehicles and  training and simulation products.  Its main strenghts are in  aeronautical engineering and CADS missiles.  II <ind> CONCENTRATION  a) <ind> Joint control  5. <ind> The parties have agreed that Thomson will acquire 49 %  of the equity share capital of Shorts Missile Systems Limited,  a wholly owned subsidiary of Shorts into which the whole of its  CADS related activities have been hived down prior to creation  of the joint venture; Shorts will retain the other 51 % of the  shares in Shorts Missile Systems Limited.  6. <ind> Shorts will acquire a shareholding of 43.75 % in a  newly created subsidiary of Thomson, Thomson Shorts Systèmes  S.A. ("TSS"), into which Thomson will transfer certain CADS  related activities, Thomson holding the other 56,25% of the  shares.  7. <ind> [Deleted for publication.]. The effect of these  arrangements is that Shorts and Thomson will each have from the  outset an equal investment in economic terms in the joint  ventures, exercised through their equal representation on the  board of SMS and TSS (see below).  8. <ind> As regards SMS, Thomson and Shorts will from the  outset have equal rights of management of the joint venture,  exercised through their equal representation on the board,  which will have eight members, four appointed by Thomson and  four by Shorts.  The chairman will be proposed by Shorts  subject to approval by Thomson.  He will not have a second or  casting vote.  Day-to-day management of SMS will be carried out  by an Executive Committee.   [Deleted for publication.  The  composition of the Executive Committee is consistent with the  existence of joint control.]  9. <ind> Day-to-day management of TSS will be carried out by a  Conseil d'Administration consisting of a President Directeur  Général proposed by Thomson and subject to approval by the CEO  and the board of SMS, the CEO and two members, one proposed by  the CEO and subject to approval of Thomson and the other  proposed by Thomson and subject to approval of the CEO.  10. <ind> The effect of the above arrangements is that Shorts  and Thomson will from the outset exercise joint control, via  the board, of Shorts Missile Systems Limited, which will have  operational control of TSS.  After a brief transitional period  of a few months, TSS will become a wholly-owned subsidiary of  SMS, in which Thomson's and Shorts' shareholdings will be  equalised.  11. <ind> It follows that the joint venture ultimately  resulting will operate in all respects as a single entity,  under the joint control of Thomson and Shorts and therefore the  operation is a joint venture within the meaning of Article 3 of  the Merger Regulation.  b) <ind> Concentrative joint venture  12. <ind> SMS will perform on a lasting basis all the functions  of an autonomous economic entity.  All Shorts' CAD-related  activities will be transferred to the joint venture, including  land, buildings, state of the art plant and machinery and  intellectual  property.  Shorts' CADS products consist almost  exclusively of CADS missiles; it has also developed an armoured  firing unit ('SP Startreak').  Shorts will retain no CADS- related activities.  13. <ind> Having transferred all of its expertise and  facilities to the joint venture, it would be economically  unfeasible for Shorts to re-enter the domain of the joint  venture independently.  This would result in particular from  the following factors :   <ind> - <ind> the existence of technological barriers to  entry; although Shorts and Bombardier retain certain activities  relating to general aircraft design and production, these  resources are not applicable to missile technology (such as  missile aerodynamics, propulsion technology, warhead  technology, systems engineering, detailed guidance and control  engineering); and a very small research and development group  retained by Shorts will not be product-dedicated, but will be  concerned with general electronics research;  <ind> - <ind> the need for investment at a level that Shorts  could not afford independently.  The Starstreak production  facility created at a cost of [a substantial amoun] will be  transferred to the joint venture, which will have full  responsibility for all aspects of research, development and  production relating to its products;  <ind> - <ind> the time scale for developing new products and  showing a profit (at least [a significant time period];  14. <ind> Consequently, since Shorts will withdraw from the  market of the joint venture with little realistic prospect of  re-entering the market, there is no danger of any coordination  between Shorts and the joint venture.  15. <ind> Thomson does not produce CADS missiles.  The main  product of Thomson which will be transferred to the joint  venture is a command and control system, 'Samantha' (and a  light- weight version, 'Clara') which coordinate the operation  of different air defence units; it is capable of being used not  only in connection with CADS but with other air defence  systems.  Thomson also produces a non-armoured vehicle system  with a lightweight turret, ASPIC, which will be transferred to  the joint venture.  16. <ind> Thomson will continue to be involved in defence- related electronics activities, and in particular [Deleted for  publication] and non-CADS missiles (shortand medium-range  missiles).  However, these sectors are not directly related to  the JV's field of activity.  17. <ind> For these reasons, the creation of the joint venture  will not give rise to coordination of the competitive behaviour  of the parties amongst themselves or between them and the joint  venture.  The joint venture is therefore a concentration within  the meaning of Article 3 of the Merger Regulation.  III <ind> COMMUNITY DIMENSION  18. <ind> The combined aggregate worldwide turnover of Thomson  S.A., which controls Thomson-CSF, and Bombardier Inc., which  controls Shorts, exceeds 5,000 million ECU, and the Community- wide turnover of both Thomson S.A. and Bombardier Inc. exceeds  250 million ECU.  The parties 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> COMPATIBILITY WITH THE COMMON MARKET   <ind> Relevant product markets  19. <ind> The products affected by the joint venture are Close  Air Defence Systems, or CADS, which comprise CADS missiles, and  may include CADS firing units and CADS Command and Control  ("C2") systems.  These are "modular" products which can be sold  separately, in association with each other, or as a single  integrated system.  a) <ind> CADS missiles  20. <ind> CADS missiles constitute a separate product market.   On the demand side, CADS are distinguished from other  categories of air defence systems (short range ('SHORADS') and  medium range ('MSAM')) by their function, price and technical  characteristics.  Thus CADS have a range of up to 5 kilometres,  SHORADS up to 12 kilometres and MSAM up to 100 kilometres.   Again, CADS, SHORADS and MSAM differ markedly in price, which  increases by a factor of about [a significant amount] with each  move to a higher level.  CADS missiles are available  seperately, whilst SHORADS and MSAM are always integrated with  firing units and 'C2' systems.  On the supply side, no CADS  manufacturer produces SHORADS or MSAM, and vice versa.  b) <ind> CADS firing units   <ind> CADS firing units comprise a launching turret for CADS  missiles incorporating a fire control system and a display  console, which are designed to optimise the range and accuracy  of the missiles.  21. <ind> Shorts has developed an armoured firing unit (SP  Starstreak) and Thomson, a non-armoured one (ASPIC).  SP  Starstreak has been selected by the UK MOD to satisfy the  British Army's operational requirement for a Close Air Defence  Vehicle offering crew protection through its armour, and heavy  terrain mobility through the use of a tracked under-carriage.   ASPIC, by contrast, is an altogether more lightweight, less  expensive, highly mobile system, designed to meet different  military operational requirements, which call for the Close Air  Defence of assets some distance from the heavy fire experienced  in the forward battlefield area.  By reason of the differences  in their prices, functions and characteristics, SP Starstreak  and ASPIC are distinct products.  c) <ind> CADS Command and Control ("C2") systems  22. <ind> These are distinct from firing units, but communicate  with them by radio or automated data transmission : C2's  comprise systems which detect, identify, and select targets.   CADS-dedicated C2 systems constitute a distinct product, since  they are "modular" (see above) whilst SHORADS and MSAM C2's are  necessarily integrated into a missile/firing unit/C2 package.   <ind> Relevant geographic markets  23. <ind> Markets for defence equipment within and outside the  Community, tend to remain closed to foreign suppliers, and  therefore remain national where a domestic supplier exists.   However, where there is no domestic supplier, then, subject to  other barriers such as export restrictions and national  preferences, CADS suppliers compete with each other worldwide.  24. <ind> Since the concentration does not lead to any product  overlap, the exact geographic market definition may be left  open, since no dominant position is created or reinforced (see  below).   <ind> Assessment   <ind> The joint venture will comprise :   <ind> - <ind> Short's CADS missiles production facilities;  <ind> - <ind> Short's 'SP Starstreak' firing unit and  Thomson's 'ASPIC' firing unit;  <ind> - <ind> Thomson's 'SAMANTHA' and 'CLARA' CADS-dedicated  C2 systems.  a) <ind> CADS missiles  25. <ind> Shorts' main activity is the design, development and  manufacture of CADS missiles.  Thomson does not produce CADS  missiles and hence no horizontal overlap exists.  In the event  that hitherto national markets should become more open in  future, there exist strong competitiors in this sector, such as  Hughes (USA), Bofors (Sweden) and Matra (France).  26. <ind> Thomson is not a significant supplier of components  for CADS missiles, the only such product supplied by it being a  fuze, [Deleted for publication] its production capacity in  respect of this product representing only about 1 % of  available worldwide capacity.  Shorts does not supply any CADS  missile components as a subcontractor.  There will therefore be  no adverse vertical effects on competition.  b) <ind> CADS firing units  27. <ind> As described above, Shorts, 'SP Startreak' and  Thomson's 'ASPIC' are different in terms of price, function and  characteristics.  They would not be regarded by a prospective  purchaser as being in competition with each other, and hence no  horizontal overlap exists.  [Deleted for publication].  c) <ind> 'C2' systems  28. <ind> Shorts does not produce C2 systems.  Thomson produces  "SAMANTHA' and 'CLARA' C2 systems, which are solely dedicated  to CADS.  There is no overlap between the parties with regard  to these products.  29. <ind> There is no overlap between the CADS activities of  Shorts and Thomson.  The complementarity of their products  means that the transaction will not give rise to any increase  of any market share irrespective of the definition of the  relevant geographic market.  Moreover, the existence of  competition from financially strong enterprises would limit any  possible conglomerate effects of the combination of Thomson's  and Shorts' financial resources.  V <ind> CONCLUSION  30. <ind> Therefore, the concentration will not create or  strengthen a dominant position as a result of which effective  competition will be significantly impeded in the common market  or in a substantial part of it.   <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