PRESS RELEASE No 87/02
25 October 2002
Judgments of the Court of First Instance in Case T-5/02 and Case T-80/02
Tetra Laval BV v Commission
THE COURT OF FIRST INSTANCE ANNULS A COMMISSION DECISION
PROHIBITING THE MERGER OF TETRA LAVAL AND SIDEL AND THE RELATED DIVESTITURE
DECISION.
The economic analysis of the immediate anti-competitive effects, of conglomerate
effects and of the foreseeable conduct of the companies in question is based
on insufficient evidence and some errors of assessment. However, Tetra Laval's argument concerning infringement of the right
of access to the file is rejected.
The merger at issue concerns the liquid food packaging sector and, according
to the Commission, could have negative repercussions on competition in several
overall markets in that sector: the PET packaging machines market, on which
Sidel holds a leading position, the market for aseptic production machines and
aseptic carton packaging, on which Tetra Laval holds a dominant position and
the one for high-density polyethylene (HDPE) plastic and the machines which
produce HDPE packaging.
In the judgment annulling the first decision, the Court finds, notwithstanding Tetra Laval's claims, that the Commission did not infringe its right of access to the file.
However, Tetra Laval's arguments regarding the substance of the case are upheld.
The Court holds, first, that the anti-competitive effects of the merger were
overestimated on the markets identified by the Commission, in so far as the
Commission justifies its prohibition, at least in part, by the likely immediate
horizontal (control of the PET equipment market) and vertical (risk of creation
of a vertically-integrated structure) effects resulting from the merger.
The Court then examines the Commission's analysis of the merger's conglomerate
effects, that is to say, the effects of the merger of undertakings which are
basically active on different markets (carton and PET) and which do not compete
directly with each other.
The Commission argues, in support of the core justification for its prohibition,
that it cannot be ruled out that the merger would give rise to anti-competitive
repercussions in future. Its reasoning is based on leveraging, elimination of
potential competition and strengthening of the merged entity's overall position.
The Court, however, although confirming that it is permissible for the Commission
to examine future conglomerate effects created by a new structure when assessing
whether competition would be seriously impeded by a merger, does not agree with
the conclusions reached by the Commission in this particular case.
As regards leveraging, the Commission starts from the premise that the current
overlaps in the markets in question will, in the medium- to long-term, have
a tendency to grow, so that Tetra Laval, from its strong dominant position on
the carton market, will probably put pressure on its current carton packaging
and packaging equipment customers wishing to switch over to PET packaging to
use equipment produced by Sidel when they make that switch. The Court agrees,
in principle, that the putting into effect of the merger could allow such leveraging
to occur, but finds that the Commission has not proved that the merged entity
would have an incentive to utilise that possibility.
In this regard, the Court rejects inter alia the Commission's forecast
of strong growth in the PET market, because analysis of the liquid dairy products
(LDP) segment does not support it and because the Commission's analyses in regard
to fruit juices were inadequate to support a finding that the glass containers
currently used would be replaced by other packaging materials in PET rather
than in carton or HDPE. The Court also finds that the Commission does not provide
sufficiently convincing evidence in its examination of the potential leveraging
methods which, according to the Commission, if exercised between now and 2005
from the aseptic carton markets, would enable the merged entity to acquire a
dominant position on the various markets for PET packaging equipment. As for
the market for high-capacity Stretch Blow Moulding (SBM) machines, where Sidel
is by far the market leader, the Commission's prohibition is undermined by a
number of defects in its analysis (notably in regard to beer and juices) and
errors of assessment as regards the marginalisation of Sidel's competitors and
intermediaries (known as converters).
As regards the elimination of potential competition on the aseptic carton
markets represented by indirect competition from undertakings active on the
PET equipment markets, the Court finds that the evidence provided is insufficient
to support the Commission's conclusion that Tetra Laval's dominant position
will be strengthened.
As regards the strengthening of the merged entity's overall position, the
Court finds that this basis for the prohibition cannot be separated from the
Commission's reasoning relating to leveraging and the elimination of potential
competition, and, therefore, rejects it without going into a detailed examination.
Case T-80/02 concerns the Commission's second decision ordering the separation
of Tetra Laval and Sidel, which has as its legal basis the earlier decision
prohibiting the merger. The annulment of the prohibition decision leads in consequence
to the annulment of the second decision, since it deprives it of any legal basis.
Note: An appeal, limited to points of law, may be brought before the Court
of Justice against the judgments of the Court of First Instance within two months
from their notification.
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