Brussels, 31/01/2001 (Agence Europe) - After a detailed inquiry lasting four months, the European Commission has decided to block the acquisition of the Finnish tissue paper manufacturer Metsä Tissue by its Swedish rival, SCA Mölnlycke.
This decision is very rare, stressed the spokesman's service charged with this file, as the Commission has only blocked thirteen operations since 1900 out of the 1500 notified, as problematical transactions have mainly been resolved after commitments agreed between the companies involved and the Community Executive. The operation that has just been blocked by the Commission was part of a complex transaction comprising three sections, two of which had been cleared with conditions (the acquisition of Modo by Metsä-Serla and the acquisition of Metsä Corrugated by SCA Packaging - see EUROPE of 12 August, p.3, and 28/29 August, p.6). The deal refused would have conferred exclusive control of Metsä Tissue Corp to SCA, allowing the creation or strengthening of dominant positions on the markets of 26 hygiene tissue paper products in Sweden, Norway, Denmark and Finland. This situation would considerably limit consumer choice for this kind of product, mainly for kitchen towels and toilet paper, with, as a result, an inevitable rise in prices. The new group arising from this merger would have held very high market shares of up to 90% in some sectors throughout the northern region, thus pushing out other suppliers whose purchasing power would have been insufficient to offset the situation.
Furthermore, other possible suppliers wishing to gain a foothold on the market or launch a new brand would have been discouraged from doing so given the exceedingly high investment costs involved. In concrete terms, the move would have given rise to: a) the creation of individual dominant positions on 21 tissue paper product markets in Sweden, Norway and Denmark; b) the creation of a duopolistic dominant position in two tissue product markets in Finland (between the merged entity and Fort James of the United States), and c) the strengthening of dominant positions in three product markets in Finland.
During the second part of the inquiry, the parties had submitted to the Commission the same commitments that they had already proposed during the first phase, namely the sale of certain assets. These were not, however, considered sufficient as, on one hand, they did not resolve the competition problems for certain products, and, on the other, they would not have allowed their eventual buyer to effectively compete with the entity formed from the operation.
Commissioner Monti regretted that the parties had not managed to qualm the fears expressed by his services, leaving the Commission no alternative but to ban the operation.