COMPETITION COUNCIL APPROVES THE ACQUISITION OF BAJAI HŰTŐIPARI GYÁR BY BÉKÉSCSABAI KONZERVGYÁR IN THE FOOD PROCESSING SECTOR
The Competition Council has decided to approve the proposed concentration of Békéscsabai Konzervgyár (Budapest), a subsidiary of Globus Konzervipari Rt. (hereinafter "Globus") and Bajai H_t_ipari Gyár, owned by Unilever Magyarország Kft. (hereinafter Unilever Kft.).
The disposal of Bajai Hűtőipari Gyár forms part of a worldwide restructuring of one of the world`s leading food processing and distributing companies, the British-Dutch Unilever. According to the agreement concluded by the parties all assets, tangible and intangible goods, employees, stocks and contracts of Bajai Hűtőipari Gyár are transferred to Békéscsabai Konzervgyár. The parties have also concluded a separate Sublicensing Agreement for the use of the IGLO trademark, according to which the Globus group can make use of IGLO trademark for a period of 18 months starting on 1 January 2002.
The undertakings concerned
Globus is the leading Hungarian canning company, and its shares are traded on several stock exchanges. The company`s products are present in all major store chains under Globus and DEKO trademarks, and the company has its own distribution chain as well. From July 2000, Globus is the owner of the majority of shares of Békéscsabai Konzervgyár. Globus is the sole owner of DEKO-Food Kft., a canning and cold-storage company, processing and producing a wide range of canned and quick-frozen vegetables and fruits, canned meat, ready-to-eat food, dried soup and sauces. From 1993 Bajai Hűtőipari Gyár operates as a newly structured, independent production unit of Unilever Kft., producing quick-frozen vegetable products under IGLO trademark.
Characteristics of the canning industry
There are currently 83 undertakings operating in the canning industry in Hungary (the number of the undertakings has diminished by 20% during the past 4 years due to the narrowing of the Russian market). The canning industry comprises two, well distinguishable sub-sectors: canning (with an estimated production value of HUF 65-67 billion for the year 2000) and quick-frozen products (with an estimated production value of HUF 33-35 billion for the year 2000). In the past years, Globus has separated the production of the different types of its products among the subsidiaries, thus DEKO has become the quick-frozen products oriented production unit, while the profile of the Békéscsabai Konzervgyár is limited to the production of canned sweet-corn and green peas.
With the purchase of the quick-frozen products oriented Bajai Hűtőipari Gyár by Globus, in all geographical areas of operation of the undertakings involved, it will be possible to buy-up the whole production of vegetables of different quality of a single producer, thus meeting the different requirements of the canning and the quick-frozen food processing. This will enable the undertakings a better organization of the production and to secure the primary products in a more efficient way.
From the demand substitutability side the quick-frozen and the heat-treated canned products are not substitutes due to several factors (physical or chemical changes in the product, time of lasting, stocking conditions). For both products the relevant geographical market is the territory of Hungary, as all products of all the producers can be delivered to each retailer. The processing facilities of the two types of products are very different and not convertible.
The proposed merger would result in a horizontal concentration only on the market of quick-frozen vegetables. Globus has market shares above 30% for some canned products, but for no product on the quick-frozen vegetables market its shares will be higher than 25% after the concentration.
Decision of Competition Council
According to Section 23 (1) a) of the Competition Act, a concentration of undertakings is effected where a part of an undertaking becomes part of another undertaking that is independent of the first one. In terms of Section 23 (5) of the Competition Act, Bajai Hűtőipari Gyár is a part of an undertaking as the purchase of its assets and rights is sufficient for enabling market activities to be pursued. As the net turnover of the undertakings concerned is above the thresholds set out in the Competition Act, the authorization of the Office of Economic Competition is required for the concentration.
According to Section 30 (2) of the Competition Act, the Office of Economic Competition may not refuse to grant authorization for a concentration, where the concentration does not create or strengthen a dominant position, which would impede the formation, development or continuation of effective competition on the relevant market.
The Competition Council has found that the relevant market is the Hungarian market of quick-frozen vegetables. Prior to the proposed concentration, Globus was only a marginal actor on this market, and the market share of Bajai Hűtőipari Gyár was not above 10%. The analysis of market shares is of great importance for the assessment of dominance: if these are not significant, the other assessment criteria will not be attached a great value. The Competition Council has established that as a result of the concentration the Globus group will not possess a market share that would enable it to operate independently from its competitors or buyers in a way that would harm effective competition. The Competition Council has no information indicating that the concentration may have possible portfolio effects. The quick-frozen products of the competitors are present in the whole territory of Hungary, consequently, both the commercial undertakings and the consumers have the possibility to find an other supplier.
Taking into account the above the Competition Council has found that the concentration would not create or strengthen dominant position on the relevant market, therefore it has approved the concentration.