CELEX: 31996M0724
Language: en
Date: 1996-05-15 00:00:00
Title: Commission Decision of 15/05/1996 declaring a concentration to be compatible with the common market (Case No IV/M.724 - GEC / Thomson-CSF (II)) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31996M0724

Commission Decision of 15/05/1996 declaring a concentration to be compatible with the common market (Case No IV/M.724 - GEC / Thomson-CSF (II)) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 186 , 26/06/1996 P. 0002

 COMMISSION DECISION of 15/05/1996 declaring a concentration to be  compatible with the common market (Case No IV/M.724 - GEC / Thomson-CSF  (II)) 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.724  GEC/ThomsonCSF (II) <ind> <ind> Notification of 11 April 1996 pursuant to Article 4 of Council  Regulation No 4064/89 1.<ind> On 11 April 1996 the General Electric Company p.l.c. (GEC) and  Thomson SA jointly notified a transaction whereby they will acquire joint  control of a newly created company into which they will merge their sonar  activities. This notification relates only to nonmilitary activities; the  Governments of the United Kingdom and France, relying upon Article  223(1)(b) of the EEC Treaty, have instructed GEC and Thomson respectively  not to notify the militaryactivities of the joint venture. 2.<ind> After examination of the notification, 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. I.<ind> THE PARTIES, THE OPERATION AND THE CONCENTRATION 3.<ind> GEC has activities in the following fields: electronic systems,  power systems, telecommunications and information technology, consumer  goods, electronic metrology, office equipment and printing, medical  equipment, electronic components and industrial apparatus. 4.<ind> Thomson has activities in the following fields: professional  electronics and defence systems, development and manufacture of consumer  electronic products. 5.<ind> The proposed merger will bring together GEC and Thomson's  capability in sonar systems design, development and production, including  airborne sonar and sonar for surface ships and submarines.  6.<ind> The joint venture will be formed by a holding company in which  Thomson will hold 50.1% and GEC 49.9%. Thomson and GEC will each have  three directors on the board of the joint venture. Voting on the board  will be by simple majority with no casting vote in the event of deadlock.  A number of reserved matters will require either approval on the board by  at least one Thomson appointee and one GEC appointee or the unanimous  prior consent of the shareholders. These matters will include the approval  of annual operating plans and budgets. Accordingly, the joint venture will  be jointly controlled by GEC and Thomson. 7.<ind> The joint venture will perform all the functions of an autonomous  economic entity and will be established on an indefinite basis. All the  physical assets, staff and intellectual property necessary for it to carry  on its business will be transferred or licensed to it. The joint venture  will be active in all phases from research and development through  production to marketing and aftersales service. 8.<ind> With minor exceptions, the parent companies intend to exit their  sonar activities permanently. Given the essential close linkages between  all the electronic systems fitted in any naval vessel, there is inevitably  a small degree of overlap between the substantial business of the parent  companies and the particular sonar activities in which the joint venture  will operate. However, since the areas of overlap are insignificant the  operation neither has the object nor the effect of coordination of the  competitive behaviour between the parent companies or between them and the  joint venture.  II.<ind> COMMUNITY DIMENSION 9.<ind> The combined aggregate worldwide turnover of GEC and Thomson is  more than ECU 5000 million.  Each of GEC and Thomson has an aggregate  Communitywide turnover of more than ECU 250 million. The parties do not  both achieve more than twothirds of their aggregate Communitywide turnover  within one and the same Member State. The notified operation therefore has  a Community dimension. III.<ind> APPLICATION OF ARTICLE 223(1)(b) EC 10.<ind> As already stated in paragraph 1 of this decision, the  notification received relates only to the nonmilitary activities of the  two parent companies as the governments of United Kingdom and France,  relying upon Article 223(1)(b) EC, has instructed GEC and Thomson  respectively not to notify information which relates to military  activities of the two companies. 11.<ind> The civil sonar activities of the proposed joint venture are  insignificant in relation to the military aspects and currently represent  less than [Deleted business secret], ie. less than  [Deleted business  secret] of the joint venture's turnover.  12.<ind> The Commission has considered the applicability of Article  223(1)(b) EC in the  present case.  In this context it has noted, on the  basis of the information provided by the Governments of the United Kingdom  and France, that: <ind> <ind> the part of the concentration which has not been notified only  relates to the production of or trade in arms, munitions and war material  which are mentioned in the list referred to in Article 223(2) EC; <ind> <ind> the measures taken by the United Kingdom and France appear to  be necessary for the protection of the essential interestsof its  security; <tab> <ind> there are no spillover effects from military activities on  nonmilitary activities of GEC and Thomson; <ind> <ind> the merger will have no significant impact on suppliers and  subcontractors of the undertakings concerned and on Ministries of Defence  of other Member States as neither GEC nor Thomson has made any significant  sales of relevant products in other Member States.  Furthermore, there are  no intermediate consumers in the sector involved. 13.<ind> Therefore, the Commission has made no observations on the  measures taken by the United Kingdom and France and sees no need to invoke  Article 225(1).  This decision is restricted to the nonmilitary activities  of GEC and Thomson. IV.<ind> COMPATIBILITY WITH THE COMMON MARKET <ind> A. Relevant product and geographic markets 14.<ind> It appears that civil applications of sonars include the  following activities: ocean science/environment/offshore which includes  acoustic instruments intended to monitor and measure sea water and sea  bottom characteristics; mercantile marine navigation systems which include  acoustic equipment used for navigation and docking on mercantile ships;  fishery which includes acoustic instruments  for commercial fishing (fish  detectors, trawl monitoring equipment, etc.) and for fishfarming (fish  counters, protection systems, etc.); and landbased which includes seismic  tools for the oil industry, acoustic telemetry, perimeter intruder  detection systems and noise control devices. 15.<ind> According to the parties, procurement for civil applications of  sonar technologies takes place on a worldwide basis. Light civil products  are sold mainly through distributors and agents while larger and more  expensive equipment is sold more often directly to the customer. 16.<ind> However, it is not necessary to define the relevant product and  geographic markets since even on the widest and narrowest possible  definition of these markets the present concentration does not lead to the  creation or strengthening of a dominant position. <ind> B. Assessment 17.<ind> In relation to the market value of the civil sonar business,  Communitywide or worldwide, GEC and Thomson are only minor players and, in  addition, there is only minimal overlap between the parties in these civil  applications. Competitors on the civil sonar markets include STNAtlas  Electronik, EDO, Sperry, Simrad and Furuno. Therefore, the merger does not  raise any competition concern.  V<ind> ANCILLARY RESTRICTIONS 18.<ind> The parties have notified as ancillary restrictions Clause 13 of  the Joint Venture Agreement and Clause 5.5 and Clause 7 of the Framework  Agreement. 19.<ind> In Clause 13 of the Joint Venture Agreement each party has agreed  not to compete with the business contributed by it to the joint venture  for the duration of the joint venture. The parties have further agreed in  this Clause to procure their requirements of certain products from the  joint venture provided inter alia that the terms and services or goods  offered by the joint venture are competitive. This restriction is  necessary to avoid the sudden disruption of traditional lines of internal  procurement and supply between the joint venture and its parents. The  parties argue that the 5 year duration of this clause reflects the need  for a start up period for the joint venture.  The Commission accepts the  need for this start up period but can only consider this clause to be  ancillary to the concentration for a period of three years. 20.<ind> In Clause 5.5. of the Framework Agreement the parties have agreed  to transfer and licence to the joint venture intellectual property and  trade marks. Clause 7 of the Framework Agreement concerns a restriction to  ensure that the business to be contributed to the joint venture undergo no  material change prior to completion.  21.<ind> In so far as the above mentioned provisions can be considered as  restrictive to competition they aim at expressing the reality of the  lasting withdrawal of the parents from the market assigned to the joint  venture or they protect the legitimate interests of the parent companies  in the identity of their partner in the joint venture. Thus, these  provisions can be recognized as  integral parts of the operation and hence  ancillary.  VI<ind> CONCLUSION 22.<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. <tab> For the Commission, <tab> (signed) <tab> Karel VAN MIERT