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Vol. 1, N° 2, Summer 1994 EC COMPETITION POLICY NEWSLETTER PAGE 33

AN OVERVIEW OF MERGER CONTROL DURING THE 2nd QUARTER

Mergers

Application of Council Regulation 4064/89

Main developments between 1st April and 30th June 1994

by Milvia van Rij, DG IV - Merger Task Force

During the second quarter of 1994,the Commission took

some 27 decisions on mergers, of which five according to

Art. 7.2 of Council Regulation n° 4064/89. As a follow up

to the 1993 Report to the Council on the application of the

Merger Regulation it also initiated a wide-ranging

consultation on a series of draft documents which aim to

define more precisely its policy with respect to various

aspects of merger control, starting with legal and technical

issues. At the same time it is proposing changes to the

implementing provisions of the Merger Regulation and to

notification requirements (Form CO).

An article on oligopolistic dominance is published in this

issue of this Newsletter. It will be followed up by articles on

other substantive policy issues.

I. CASES

With respect to cases, four mergers were of particular

importance.

In the first case, Shell

Petroleum NV (holding company of

the Royal Dutch Shell group) and Montedison

Nederland

(belonging to the Ferruzzi group) notified their agreement

relating to the creation of a joint venture, Sophia. The

products involved were polyolefins, a family of

thermoplastics including polyethylene (PE) and

polypropylene (PA). The parties would contribute to the joint

venture essentially all of their world-wide interests in that

sector including the corresponding production and marketing

assets, intellectual property rights and R&D functions.

After examination of the notification the Commission

concluded that serious concerns were raised in relation to

two related, but distinct markets. These were first, the

market for the production and sale of polypropylene (PP) in

Western Europe and secondly, the market for the

development and licensing of PP technology which was

considered to be a world market.

This was the first case under the Merger Regulation in which

a separate technology market was defined. The competition

problem posed by the merger at the technology level was

that Shell Oil, a fully-owned subsidiary of the Royal Dutch

Shell Group, had a partnership agreement with Union

Carbide Corporation for the development and licensing of a

PP technology, called Unipol. At the same time Montedison

had its own PP technology business called Sheripol which

was marketed through Montedison's US subsidiary, Himont.

Toghether, these two technologies covered about two-thirds

of third-party technology licensing needs and represented the

main competitive relationship in the market. Although there

were other PP technology providers, the Commission

concluded that these would be unable to adequately constrain

a combination of the two main technologies which would

fall under the effective control of a single decision centre,

namely Shell.

Furthermore, on the PP production market, although the

market share of Sophia would not be of itself very high (about

30%), the parties' leading position in technology, combined

with a number of other factors - that is the considerable gap

between the market share of Sophie and that of the next

largest competitor, Sophia's high level of product coverage

and the existence of joint ventures between Shell or

Montedison and other important PP manufactures, would

substantially reinforce the partie's position on that market.

In order to remove the Commission's competition concerns

the parties offered commitments modifying the original

concentration plan. These involved the transfer of

Montedison's worldwide PP technology business to a

separate company, in which Shell had no influence or

financial interest. The Commission considered that this

remedy would maintain effective competition on the PP

technology market. It imposed reporting requirements to

monitor the rapid establishment of the PP technology

company and to check that it was endowed with all the

necessary resources for full-function, autonomous operation

including further PP technology development.

At the same time, the Commission also took note of the

notifying parties' modifications with regard to the PP

production market. These involved the withdrawal of

Montedison from its joint venture with Petrofina called

Montefina for the production of polypropylene.

In the light of these modifications, and in particular the

remedy for the PP technology market, the Commission

cleared the deal on 8 June.

The operation fell under the concurrent jurisdiction of the

European Union and that of the United States, where the

case is still pending.

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