Tag Archives: DG Competition

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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‘Commission approves amendments to Finnish scheme supporting investment in cleaner ships’

This is a positive development – state aid is a tricky thing, even when the competitiveness of the own industry is only a secondary effect of the state aid.

The European Commission has found amendments to an existing Finnish scheme supporting investment in cleaner ships to be in line with EU state aid rules. In particular, the amendments aim at giving ship-owners incentives to use less polluting fuel, ahead of the entry into force of EU standards to that effect.

Obviously, this scheme is to mediate the impact of the Sulphur Directive, and as such is to be applauded. The fact that the EC approves this scheme is an important moment in the Finnish debate on the impact of the Sulphur Directive, as the industry still insists that the Finnish state should do more to diminish the impacts.  From the original decision on this scheme (from 2011) we can see that this investment support is not quite negligible:

2.3.5. Aid intensity
14. In line with the provision of the Environmental guidelines, aid granted by virtue of the
present scheme may total a maximum of 50 per cent to large enterprises, 60 per cent to
medium-sized enterprises and 70 per cent to small enterprises of extra investments
included in the vessel project6. The maximum aid rate may be increased if the project
meets the definition of eco-innovation as defined by the above said guidelines.

Furthermore:

41. The Commission notes furthermore that the scheme is open to all operators in a nondiscriminatory
way.

In other words, it is not only open to Finnish operators, but to all operators. This is an obvious requirement, because otherwise it would be totally discriminatory. And, as said, this state aid can be used either for new vessels or upgrading old vessels. Thus, this can be seen as an important incentive to invest in new technology – whether through new ships or updated technology.

I expect, nonetheless, that the Finnish industry will not be satisfied with this. I assume that transport of the industry’s products is not done by the companies themselves but by specialized transport companies. So for the Finnish industry, this means they have to consider whether they change contracts now to companies which invest in clean ships, with the aid of this state aid scheme or whether they will pay much more for transport starting from 2015, when the Sulphur Directive enters into force.