Mergers: Commission sends warning to Munksjö and Ahlstrom for providing misleading information in a merger case

Press release here.

Mergers: Commission sends warning to Munksjö and Ahlstrom for providing misleading information in a merger case

The European Commission has sent a Statement of Objections (SO) to Ahlstrom Corporation, Munksjö Oyj, both of Finland, and Munksjö AB of Sweden. In October 2012 Ahlstrom and Munksjö, both producers of speciality papers, had notified the Commission of plans to combine their activities in the production of abrasive paper backings. The Commission takes the preliminary view, that the parties provided misleading information with regard to the market for abrasive paper backings. Such behaviour, if established, would be in breach of the companies’ obligation to include their true best estimates of the markets in question in the notification and could result in a fine of up to 1% of turnover. The sending of a Statement of Objections does not prejudge the final outcome of the investigation.

In October 2012, Ahlstrom and Munksjö notified a transaction whereby the label and processing business of Ahlstrom Corporation and Munksjö AB were to be transferred to a new company (“NewCo”), which was later renamed Munksjö Oyj (case M.6576). At the time of the notification, Ahlstrom and Munksjö AB were both producers of heavy weight abrasive paper backings, which are carriers for abrasive products such as sandpaper, sanding discs and sanding belts.

In January 2013, the companies supplied internal documents, which indicate that they estimate the size of the markets for abrasive paper backings and the heavy-weight sub-segment, both with regard to sales in the European Economic Area (EEA) and on a worldwide level, to be significantly lower and, consequently, their own market share significantly higher than what they had stated in the notification.

The notifying companies’ obligation to provide information which is to the best of their knowledge correct and complete is one of the cornerstones of merger control. The provision of misleading information could conceal a competition problem and lead to the clearance of transactions, which are harmful for effective competition.

If the Commission finds that the parties provided at least negligently misleading information, it can impose a fine of up to 1% of the annual worldwide turnover of the companies concerned.

The process of approving mergers in the EU is a complicated one, which involves secret internal information and semi-public other information. The issue of market share is indeed one of the core aspects of approving mergers, and it seems that the DG Competition is well aware of the risks of too-strong conglomerates, especially in fields with specialized products.

I do not as such have an opinion about this merger but this case seems to support the case that you need rules to have a functioning ‘free’ market. And although I have my doubts about the UPM-Kymmene/Myllykoski merger in 2011 (because it was all to clear that UPM would shut down Myllykoski if the merger was accepted), I think in general the EU competition policy apparatus works quite well when it comes to mergers.

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