CELEX: 31993M0293
Language: en
Date: 1993-01-18 00:00:00
Title: COMMISSION DECISION of 18.01.1993 declaring a concentration to be compatible with the common market (Case No IV/M.293 - PHILIPS / THOMSON / SAGEM) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31993M0293

COMMISSION DECISION of 18.01.1993 declaring a concentration to be compatible with the common market (Case No IV/M.293 - PHILIPS / THOMSON / SAGEM) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 022 , 26/01/1993 P. 0000

 COMMISSION DECISION of 18.01.1993 declaring a concentration to  be compatible with the common market (Case No IV/M.293 -  PHILIPS / THOMSON / SAGEM) 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 Registered with advice of delivery To the notifying party Dear Sirs, Subject: <ind> Case No. IV/M.293 - Philips/Thomson/SAGEM  <ind>  <ind> Your notification of 8 December 1992 pursuant to  Article 4 of Council Regulation No. 4064/89  1. <ind> On 8 December 1992, Philips Electronics N.V., Thomson  Consumer Electronics S.A. and SAGEM notified an agreement by  which they will create a joint venture company called Flat  Panel Display Co. B.V. ("FPD") which will be active in the  development, design, manufacture and sale of active matrix  liquid crystal displays ("AM-LCD").  2. <ind> After examination of the notification, the Commission  has concluded that the notified operation does not fall within  the scope of Council Regulation No. 4064/89.  I. <ind> THE PARTIES AND THE AGREEMENT  3. <ind> Philips Electronics N.V. ("Philips") is one of the  major electronics companies in the world.  Its activities  include lighting, consumer electronics, electronic components,  communications systems and domestic appliances.  4. <ind> Thomson Consumer Electronics S.A. ("TCE") is a  subsidiary of Thomson S.A. whose activities include consumer  electronics, professional broadcast products and tubes and  display components.  5. <ind> SAGEM is a French company which manufactures a wide  range of products in the professional electronics and  electromechanics area.   6. <ind> The joint venture agreement signed by Philips, TCE and  SAGEM on 25 November 1992 concerns the creation of a joint  venture which will manufacture and sell AM-LCD display  components for direct view TV modules (portable TVs, games,  automotive dashboard panels, videophones, etc), consumer and  professional projection displays and datagraphic modules  (notebooks, laptops and portable workstations).  Philips will  transfer to FPD all its activities related to the AM-LCD  technology.  In early 1993, Philips will sell to each of the  other parties a 10% stake in the joint venture and will retain  an 80% shareholding.  II. <ind> COMMUNITY DIMENSION  7. <ind> The operation has a Community dimension.  The  worldwide turnover of all the undertakings concerned, in their  respective last financial years, amounts to more than 5,000  million ECU.  The Community-wide turnover of each of Philips,  Thomson and SAGEM exceeds 250 million ECU and the undertakings  concerned do not achieve more than two-thirds of their  aggregate Community-wide turnover within one and the same  Member State.  III. CONCENTRATION   <ind> Joint control  8. <ind> The company will be managed by a chief executive  officer (CEO) who will head a management team, and there will  be a board of directors which will be subject to the directives  of a policy committee (PC) which will supervise the joint  venture.  9. <ind> The Joint Venture Agreement provides for the  establishment of the PC.  Each shareholder with at least 10% of  the shares will appoint a representative who will have voting  rights in proportion to its shareholding.  As a result,  Philips, TCE and Sagem representatives will, respectively have  80%, 10% and 10% of the voting rights in the PC.  10. <ind> Any decisions of the CEO and the board in respect of  fundamental issues affecting FPD require the prior approval by  a majority of more than 80% in the PC.  These fundamental  issues include the issue of new shares; any change in the scope  or activity of the joint venture; any acquisition, merger,  reorganisation or dissolution of the joint venture or any of  its subsidiaries; establishment of subsidiaries; investments or  disinvestments; conclusion of material contracts out of the  ordinary business; acquisition, disposal or licensing of  industrial or intellectual property rights.  Moreover, approval  of an annual, detailed business plan and expenditures in excess  of 10% of any item contained in the approved current business  plan are fundamental issues in the meaning of the Joint Venture  Agreement.  The appointment and dismissal of members of the  board and management team (other than the appointment or  dismissal of the CEO) have also to be agreed by a majority of  more than 80%.  11. <ind> As a result of the above, major strategic decisions  concerning the joint venture will require the prior approval of  Philips plus either TCE or Sagem.    <ind> It follows that FPD will be an undertaking jointly  controlled within the meaning of the Merger Regulation [See  decision in case no. IV/M.239 - Avesta/British  Steel/NEC/AGA/Axel Johnson.].   <ind> Full function joint venture  12. <ind> The joint venture presents all the formal  characteristics of a full function business undertaking.  It  will be a separate legal entity which will have its own plant,  equipment, properties and business contracts related to its  activities transferred from Philips.  Philips will also  transfer to the joint venture all personnel currently employed  in development,  manufacturing, marketing and sales departments  in the activities related to the scope of FPD.  The joint  venture will also acquire from Philips exclusive licensing  rights related to know-how with regard to the products to be  manufactured and will also be able to develop its own process  and product development activities as well as entering into  European wide R&D projects such as ECAM or acquire know-how  from third parties under licensing agreements.  Nevertheless,  the parties will continue to carry out the research and  development applicable to manufacturing AM-LCD displays.  13. <ind> All the parent companies are potential clients of the  joint venture and the agreement states that priority shall be  given to serving the supply requirements of the parties.  The  parent companies will have the right to purchase part of the  output of FPD up to the same percentage as the percentage of  their shareholding under preferential treatment as regards the  pricing of the products.  At the present time, the parties are  absent from the main downstream market - the portable PC market  - and therefore they do not expect to purchase more than 30% of  FPD's output.  14. <ind> However, in the context of a joint venture  established primarily to meet the requirements of its parent  companies, the possibility remains that FPD will supply a  larger part of its output to its parent companies.  In the  light of the high degree of supply side substitutability  between the products produced by FPD, the above mentioned  possibility is underlined by the right given to the parties by  the joint venture agreement to purchase all the output of FPD  at preferential prices.  Consequently, the autonomy of the  joint venture could be called into question.  However, it is  not necessary to consider the matter further in view of the co- ordination of competitive behaviour which is discussed in the  following section.   <ind> Risk of co-ordination of competitive behaviour  15. <ind> Display components are the second largest electronic  components market after integrated circuits.  Cathode ray tubes  ("CRTs") are currently the dominant display components  technology but the general tendency towards portable use of all  kinds of equipment for entertainment, communication and  information as well as the development of applications where  space is restricted such as automotive, avionics and possibly  desk top PCs and the development of HDTV, has led to the launch  of several flat panel alternatives.  These alternatives are  principally AC and DC plasma technology, electroluminescence,  microtip display and deformable mirrors.  For  the time being,  only DC plasma technology seems to be a commercially viable  alternative to AM-LCDs for replacing CRTs in the field of some  computer screens.  With regard to HDTV, DC plasma technology,  microtip display and electroluminescence seem to be able to  meet the HDTV technical requirements although no commercial  application has taken place to date.  16. <ind> AM-LCDs are generally regarded as one of the most  promising flat panel alternatives and the only one in  commercial production in the TV field.  Most AM-LCDs are  currently supplied by Japanese companies and this is not  expected to change in the foreseeable future.  Apart from the  joint venture, which will start mass production in 1993, the  parties expect that there will be mass production in Taiwan and  Korea in the next few years.  A production start in the USA is  unclear.  17. <ind> Philips and Thomson are major worldwide manufacturers  of CRTs.  The notifying parties agree that CRTs on the one hand  and all flat panel display products (including AM-LCDs) on the  other hand belong to the category of display components and  that AM-LCDs may partially replace CRTs in some segments of the  market in the future.  Nevertheless, they consider that each  technology presents its own characteristics, strengths,  weaknesses, costs and areas of application and, therefore,  cannot be considered as belonging to the same product market.  18. <ind> The Thomson group is involved in research in plasma  screens.  Moreover, Thomson is engaged in the commercial  production of plasma screens for military uses.  Although  Thomson cannot currently use these technologies without  transformation for civilian applications, they will remain an  important player in the display system field with access to  this research.  Consequently, in view of the uncertainties  surrounding future technological developments in the display  components sector, Thomson has to be considered as a potential  competitor of the joint venture in the long term.  19. <ind> Although AM-LCDs allow the development of new  products such as pocket-sized TVs, they are also expected to  replace some existing TV and computer applications of CRTs, as  confirmed by the parties.  As the price of AM-LCDs falls, the  replacement process, which is still subject to technological  developments, will mean that AM-LCDs will be competing with  existing display technologies where the parties are important  players [See the definition of the relevant market adopted in  Article 3(2) of Commission Regulation (EEC) No. 418/85 on the  application of Article 85(3) to categories of research and  development agreements.].  In the former case, even if there  are separate new product markets, there will nevertheless be a  degree of interdependence between the new and the existing  display technologies. It follows that two of the parent  companies and the joint venture will be active in the same  market and/or in closely related markets and as a result it is  reasonably foreseeable that their competitive behaviour will be  co-ordinated.  For the above reasons, the Commission has decided that the  notified agreement does not constitute a concentration within  the meaning of Article 3 of the Merger Regulation and thus does  not fall within the scope of the Regulation.  This decision is  adopted pursuant to Article 6(1)(a) of the Merger Regulation.  The Commission will treat the notification pursuant to Article  5 of Commission Regulation No. 2367/90 as an application within  the meaning of Article 2 or a notification within the meaning  of Article 4 of Council Regulation No. 17/62 as requested by  the parties in their notification.  For the Commission