CELEX: 31995M0565
Language: en
Date: 1995-04-24 00:00:00
Title: COMMISSION DECISION of 24/04/1995 declaring a concentration to be compatible with the common market (Case No IV/M.565 - Solvay / Wienerberger) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31995M0565

COMMISSION DECISION of 24/04/1995 declaring a concentration to be compatible with the common market (Case No IV/M.565 - Solvay / Wienerberger) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 170 , 06/07/1995 P. 0006

 COMMISSION  DECISION of 24/04/1995 declaring a concentration to be compatible with the common market (Case No IV/M.565  - Solvay / Wienerberger) 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.565  SOLVAY/WIENERBERGER <ind>  <ind> Notification of 17.03.1995  pursuant to Article 4 of Council Regulation No 4064/89 1.<ind>  On  17  March  1995, Solvay S.A.  and  Wienerberger Baustoffindustrie  AG notified jointly  a  concentration  by which  Wienerberger  acquires 50%  of  the  shares  in  four whollyowned subsidiaries of Solvay S.A.. Simultaneously with this  acquisition, the notifying parties agree  to  transfer these  companies to the control of a Joint Venture Agreement (JVA) into which they entered in 1989. 2.<ind>   After   examination  of  the   notification,   the Commission has concluded that the operation falls within the scope of application of Council Regulation (EEC) No. 4064/89 and  does  not  raise serious doubts as to its compatibility with  the  common  market  or the  functioning  of  the  EEA Agreement . I.<ind>  THE PARTIES 3.<ind>  Solvay S.A. is a Belgian company which through  its international group is present, primarily in Western  Europe and the Americas, in five sectors of activities : chemicals, plastics processing and health. 4.<ind>  Wienerberger Baustoffindustrie AG  is  an  Austrian company   which is mainly active in Europe in the  following sectors  :  wall, ceiling and roofing systems, pipe  systems and sewage technology and real estate/property.  II.<ind>  THE OPERATION 5.<ind>  The  proposed operation consists in the acquisition by  Wienerberger  of 50% of the shares in  four  whollyowned subsidiaries of Solvay. These companies constitute  all  the interests  which Solvay still owns in the field  of  plastic pipes  and fittings for building and agriculture in  Europe. They are the following : <ind> <ind>  Draka Polva & Co SNC in Belgium, <ind> <ind>  Polva Pipelife BV in The Netherlands, <ind> <ind>  Tubos Y Repuestos De Plasticos SA in Spain, <ind> <ind>  Maiaplas SA. in Portugal.  6.<ind> The share purchase agreement by which  Solvay  sells and   Wienerberger  purchases  50%  of  the  shares  in  the companies  mentioned above, includes the parties' commitment to  subject  them  to  the provisions  of  a  Joint  Venture Agreement (JVA), which was signed  by the parties in 1989. 7.<ind>  The JVA relates to the parties' activities  in  the field  of  plastic  pipes  and  fittings  for  building  and agriculture. The companies originally subject to the to  the JVA  are  the  following: <ind> <ind>  Pipelife  Rohrsysteme GmbH, Bad Zwischenahm; <ind> <ind>  Pipelife France S.A., France <ind> <ind>  Pipelife Rohrsysteme Ges.m.b.H., Austria; <ind> <ind>  Pipelife Rohrsysteme Golzau, Germany; <ind> <ind>  Société Méditerranéenne de Plastiques Agricoles (MPA), France; <ind> <ind>  France Tube, France; <ind>  <ind>  PetzetakisPipelife Polyethylene Pipe  Systems, Greece. 8.<ind>  Other  joint  venture agreement  with  local  third parties were concluded by Solvay and Wienerberger in Turkey, Hungary and the Czech Republic. III.<ind> CONCENTATION <ind> Joint Control 9.<ind> On 22 December 1994, Solvay and Wienerberger entered into  a  Share Purchase Agreement ( the Notified  Agreement) which  provides for the transfer by Solvay of 49.5%  of  the shares in the four companies, mentioned at point 5 above, to Wienerberger. Moreover, the Notified Agreement provides that 1% of the shares in each of these companies is to be held by Pipelife International Holding Company ("PIH"). This holding company  is a 50/50 joint venture established by the parties under  the JVA (under the name Management Services Ges.m.b.H ("MSG"))  in order to facilitate communications between  the shareholders  and to give general advice as  to  investment, marketing, supply, purchasing and technology projects of the joint  venture companies. Basically, the purpose of the  JVA (article 2) is to "provide for the establishment , ownership and  operation  by the parties (Solvay and Wienerberger)  of Joint  Venture  Companies  having  their  main  activity  in Austria, the Federal Republic of Germany,and France" in  the field  of  manufacture and distibution of plastic pipes  and fittings  and to provide for further developments  of  joint activities in this field". MSG has a Managing Board  and  an Advisory Board. The Advisory Board consists of four persons; two   are   executive  and  two  nonexecutive,  each   party designating  one of each kind. One of the members  of  MSG's Advisory  Board  is  appointed as its president  for  a  two yearperiod. Designation is made alternately by Solvay and by Wienerberger.  The president does not have a  casting  vote. The  Managing Board  consists of two managing directors, one to be designated by Wienerberger and Solvay. <ind>  The directors of the Joint Venture Companies have  to inform   the   MSG   about   any  decision   requiring   the shareholders'  approval.  Theshareholders  use  the  MSG  to inform the directors about their discussions. 10.<ind>  It  follows from the above that the created  joint venture  companies owned by the Notified Agreement and  also the  existing joint venture companies are jointly controlled by  their  parents Solvay and Wienerberger through  the  JVA into which they entered in 1989. <ind> Autonomous full function joint venture 11.<ind> Like the existing joint venture, each of the  newly created  joint venture companies will have all the resources and  assets necessary to enable it to perform on  a  lasting basis  all  the functions of an autonomous economic  entity, including   production   facilities,  marketing   resources, personnel  and  the appropriate knowhow and technology.  All the  joint  venture  companies will be free  to  obtain  raw materials  from  whatever  source  they  choose.  The  Share Purchase  Agreement provides for the transfer by  Solvay  to each   of  them  of  all  the  assets  and  industrial   and intellectual rights required for the operation. <ind> Absence of risk of coordination 12.<ind>  The Joint Venture Agreement and the Share Purchase Agreement  provide that Solvay  will withdraw entirely  from the  territory in which the existing joint ventures and  the newly  created joint venture companies are or will be active ( as regard Wienerberger, it is not active in the markets of the  new  joint  venture  companies).  Furthermore,  in  the agreements  mentioned  above the parents  undertake  not  to compete with any of their joint venture companies.  13.<ind>  The Notified Agreement provides that Solvay  shall grant  to Wienerberger a nonexclusive licence in the  sector of  plastic  pipes and fittings for the world excluding  the territory of the joint venture companies. And finally Solvay and   Wienerberger   has  concluded  other   joint   venture agreements with local third parties in Turkey , Hungary  and the Czech Republic. <ind>  Because, the relevant geographic market for pipes  is mainly  regional  and  that  for  fittings  European,   this nonexclusive licence and the existing Joint Venture  outside the  territory of the notified Joint Venture  do  not  raise concerns  about  the  risk of coordination  of   competitive behaviour. 14.<ind>  In conclusion there is no risk of coordination  of the competitive behaviour of the parents. <ind> Conclusion 15.<ind>  It  follows  from the above that  the  four  newly created joint venture companies which are transferred to the existing  JVA   and   the  seven  existing   joint   venture companies  acquired  since  1989 under  the  JVA  constitute together  a single economic entity, with a common  structure and  acting  as a single operator in the markets of  plastic pipes and fittings. III.<ind> COMMUNITY DIMENSION 16.<ind> The combined aggregate turnover of the undertakings concerned  is more than ECU 5,000 million ( in 1993,  Solvay had  a  total  worldwide turnover of ECU 6,045 million;  for Wienerberger  it  was  ECU  716.5  million).  The  aggregate Communitywide turnover of each is more than ECU 250  million (  in  1993,  for  Solvay  it was  ECU  4,004  million,  for Wienerberger ECU 578 million).  The parties did not  achieve more than two thirds of their Communitywide turnover in  one and  the  same  Member State. Consequently the concentration has  a  Community dimension. The operation  is  not  an  EEA "cooperation"  case. IV.<ind> COMPATIBILITY WITH THE COMMON MARKET <ind> (a) <ind> Relevant product markets 17.<ind>  The  existing joint venture  companies  and  those which   are  created  under  the  notified  Share   Purchase Agreement  operate in the sectors of the plastic  pipes  and fittings.  These products are mainly used for transport  and distribution   of   water   and   gas,   sewage,   drainage, electroprotection and irrigation. 18.<ind>   As   regard   plastic  pipes,  it  is   generally recognised that the relevant product markets are constituted on  the  basis  of  each  specific application  (i.e.  water pressure,  gas pressure, sewage, drainage, electroprotection and irrigation).  <ind>  Plastic pipes consist mainly of LLDPE/MDPE/HDPE,  PVC and  PP.  Most actors on the market are present in both  PVC and  PE pipes, while concentrating on one or other of  them. Whereas the production of PE is determined (compliance  with technical   specifications  and  norms)   by  the   relevant authorities  both at the level of resin andat  the  finished product level, PVC resin is freely available. Therefore  new applications are expected to be mainly developed for PE. 19.<ind> The notifying parties argue that plastic pipes  are substitutable   between  themselves   and   for   the   main applications (i.e. water pressure, gas pressure, sewage)  to a  large  extent  substitutable  with pipes  made  of  other materials. <ind>  As  regards sewage, it appears that for approximately 10 years, due to the development of structured walled pipes, plastic pipes have become more competitive visàvis concrete, abestos cement and clay pipes of larger diameter. As far  as soil  is concerned, although most of the plastic pipes  used are  presently  made  of PVC, this may  be  replaced  by  PP because of the latter's higher resistance to temperature. In high  buildings, it may be replaced by HDPE because  of  its better   sound  insulation  properties  and  resistence   to temperature. <ind> For gas pressure, the parties argue that HPDE and MDPE compete with ductile iron and PVC almost everywhere  in  low pressure distribution networks in cities. For highand medium pression  steel and ductile iron are still predominant.  for approximately  5  years,  highresistance  PE   resins   have replaced  progressively  ductile iron  for  medium  pressure range  (up to 8 bars). The next generation of PE pipes  will extend to pipes of 20 bars or more. <ind> For water pressure, the parties point out that PVC  is replacing  asbestos  and cement large diameter  pipes  which have to be withdrawn for health reasons. Moreover, as  users have gained more experience with PVC pipes, they have become more  confident  with  the  product.  This  has  allowed  an improvement  in the competitiveness of PVC in largerdiameter pipes  against Glass Fibre Reinforced Polyester (GRP), fibro cement  and ductile iron pipes up to pressures of  10  bars. Due  to the development of new resins, HDPE has improved its competitiveness visàvis GRP, fibro cement and  ductile  iron in very large diameter pipes (up to 6000 mm). <ind>  Concerning the other applications where  the  parties are active (i.e. drain, electroprotection, cable protection, and  irrigation),  the parties stress that  substitutability between  plastic and other materials is limited. 20.<ind>  As  regard fittings, these constitute  a  separate market  as their characteristics are very different  :  they are  less  voluminous, have a higher  added  value  and  are intended to be adapted to various types of pipes. 21. <ind> However, the precise market definition can be left open,  as  even on a narrow market definition  the  proposed operation will not lead to the creation or strengthening  of a dominant position. <ind> (b)<ind> Relevant geographic  markets 22.<ind>   Concerning  fittings,  because   they   are   not voluminous  and  their transport cost is relatively  low  in comparison  with  their  high added  value,  they  therefore travel  over  the distances as long as 1.000  km.  Thus  the relevant  geographic market for these  products  has  a  EEA dimension. 23.<ind> Pipes are voluminous and low valueadded products of which transport is costly (transport for distances exceeding 300400  km  is  not economic). Moreover, they  are  made  to satisfy local requirements and standards. <ind> There is no European product standard in the field  of pipes  (but rather a voluntary standardisation plan  at  CEN level  with  a  target  date of the year  2000  promoted  by TEPPFA). Every country has its own specifications as well as its  own  technical approval procedure and type of pipe.  As regards specifications, the EU can be roughly divided   into 4  blocks : the DIN specifications influenced zone (Germany, Austria);  French  specifications influenced  zone  (France, Italy,  Spain and Portugal); UK  specifications;  and  Dutch specifications.  On  top of these technical  specifications, pipe  producers also have to deal with national  preferences such  as  colour  and  way  of  laying.  Moreover,  in  some countries  technical  approval of the  relevant  authorities must  be obtained not only of the raw materials but  of  the pipes  including  approval for each diameter  and  for  each production line as well. 24.<ind>  Therefore the market for pipes is  probably  still mainly regional and characterised by a national approach. 25.<ind> However, in this case it is not necessary to decide whether  the geographic market for plastic pipes  is  local, national or EEAwide.  Even on the basis of local or national markets,  the  proposed  operation  will  not  lead  to  the creation or strengthening of adominant position. <ind> (c)<ind> Competitive assessment <tab> A. EEA Level 26.<ind>  If  the market for plastic pipes is considered  as Community  wide, the notified operation does not  create  or strengthen a dominant position since the market  is  not  an affected  market.  Even if the narrowest product  markets  ( i.e.  segmentation  of the market by applications  point  20 above)  are  taken  into account, the new entity  after  the completion of the notified operation will not hold more than 15% of any of these narrowest markets.. 27.<ind>  As regard fittings, the combined market shares  of the new entity are far below 15% (estimate for 1994 [Deleted business secret  Below 10%. ] of the EEA market. <ind> B. Member State level or local level 28.<ind>  At  Member  State  or local  level,  the  notified operation does not create or strengthen a dominant  position since  there  is no overlap betwen the newly  created  joint venture companies and the existing  joint venture companies. They operate in different local and national markets. Indeed the existing joint venture companies have not developed  any activity  in  the  countries  where  Solvay  maintained   an independent  activity  and  Solvay  was  prevented  by   JVA Agreement  from  distributing its products in  the  European countries  where the existing joint venture  companies  were active.  Moreover, Wienerberger is not active in the markets of the Solvay subsidiaries in which it acquires shares under the present operation. 29.<ind> Although the existing joint venture companies  hold relatively  significant market shares in  certain  countries for  some  specific  pipes  (in 1994,  in  Austria  [Deleted business  secret   Between 30% and 40%.]  for  gas  pressure pipes  and  [Deleted business secret  Between 20% and  30%.] for   sewage  pipes,  in  France  [Deleted  business  secret Between  20%  and  30%.] for gas pressure pipes,  in  Greece [Deleted  business  secret  Between 30% and  40%.]  for  gas pressure  pipes) and the new joint ventures  companies  will have  a  relative  high market share in The Netherlands  (in 1993,  [Deleted business secret  Between 30% and  40%.]  for gas pressure pipes and [Deleted business secret  Between 30% and  40%.]for water pressure pipes), the notified  operation results only in the transfer of the subsidiaries'shares,  in distinct  geographical markets, to the newly  created  joint venture companies. IV.<tab> CONCLUSION 30.<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 EEA  Agreement.  This decision is adopted in application  of Article 6(1)b of Council Regulation No. 4064/89. <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 EEA  Agreement.  This decision is adopted in application  of Article 6(1)b of Council Regulation No. 4064/89. For the Commission,