Brussels, 10/10/2001 (Agence Europe) - It came as no surprise when the Commission decided to prohibit the merger between the Schneider Electric and Legrand groups, the two main French manufacturers of electrical equipment. Commissioner Mario Monti told the press that the decision was unanimous. The merger would have given rise to a heavyweight that would have considerably weakened the operation of the market for electrical equipment in many countries, including France where the two partners were hitherto the mainstay of competition. Mr Monti deplored the fact that, aware of the serious competition problems caused by the concentration, Schneider and Legrand were not able to put forward in good time adequate undertakings to ensure effective competition conditions. This is the sixteenth operation banned by the Commission since the entry into force of the 1990 Regulation on Mergers, out of the 1800 merger projects submitted to it for approval.
Notified on 16 February this year, the operation had given rise to a large number of questions at the Commission, which had decided, on 30 March, to open a detailed investigation. The negative effect of the merger above all concerned ll low voltage electrical equipment, that is, all the systems used for the distribution of electricity and the control of electrical circuits in homes, offices or factories. Such equipment covers many different types of products, ranging from electrical distribution boards and sockets and switches to cable trays. More especially, the merger would have given rise to combined market shares of between 40% and 70% depending on the country on the electrical switchboard markets and from 40% to 90% on the market for wiring accessories, as well as substantial market shares for some other products for industrial use or for more specific applications. Such a situation would have raised serious problems in France for almost all the products concerned. Obvious competition distortion would have been produced in Denmark, Spain, Greece, Italy, Portugal and the United Kingdom. In order to remedy this, Schneider had submitted an in initial series of undertakings to the Commission on 14 September 2001, the deadline for presenting undertakings. These initial undertakings, however, did not calm the Commission's fears. In the same way, other proposals presented ten days later were not accepted by the Commission. Mr Monti recalled in this connection that so-called "last minute" undertakings, that is after the date of submission, could be accepted exceptionally if they immediately and beyond a shadow of a doubt restored free competition conditions. In the case in question, however, factual uncertainties linked to the fact that these were last minute proposals were not clarified in the necessary time. Mr Monti said that "this unfortunate outcome illustrates the absolute need for the partners in a merger which involves clear competition problems to give thought, at a very early stage in the project, to possible remedies and to enter into discussion without delay with the competition authorities". The Commission also stressed the additional difficulties raised at competition level by a concentration between two companies from one and the same State aiming to create a "national champion". In some cases, for example, the merger between TotalFina and Elf, the operation is authorised as long as strict guarantees such as equitable consumer price levels continue or are swiftly re-established.
In other cases, as in the case of Volvo and Scania, this was not possible. Speaking of the particular conditions in which merger had been envisaged (Schneider had, after the public exchange offer, claimed 98% of Legrand's shares), Mr Monti declared that the Commission was "willing to examine the practical arrangements for rebuilding effective competition conditions". Schneider feared being compelled by the Commission to sell up shares acquired in Legrand.
Reacting immediately to the European veto, the French groups declared that they challenged the validity of the decision. Schneider Electric decided, moreover, to safeguard the rights of its shareholders and its employees, and to prepare all appropriate appeals for having its rights recognised at the Court of First Instance of the European Communities in Luxembourg.