Brussels,14 March 2000
The Commission prohibits Volvo's acquisition of its main competitor Scania
The European Commission has decided to prohibit the acquisition by Volvo of Scania. Both are Swedish manufacturers of trucks, buses and engines. This decision follows an in-depth investigation of therelevant markets for heavy trucks, city buses, inter-city buses and touring coaches. In adopting this decision, the Commission concluded that the remedies proposed by Volvo are insufficient to resolve the competition concerns resulting from the proposed acquisition of Scania.
Both Volvo and Scania are Swedish companies, with activities across Europe and beyond, primarily in the manufacture and sales of trucks, buses and engines.
In its decision, the The Commission has concluded that the concentration as originally notified would have caused serious competition concerns by creating dominant positions in:
The combined market share of Volvo and Scania is very high in each of these markets, ranging from around 90% (in the Swedish heavy truck market and the Finnish and Irish city bus markets) to around 50% (in the UK coach market and the Irish heavy truck market). The parties' market positions have been largely symmetrical in all markets and the merger would in most of these markets combine the 2 largest competitors.
The market investigation conducted by the Commission confirms that Volvo and Scania have been each other's closest competitors and that they competing strongly. They have pursued similar strategies and have a similar brand image, which is based on excellent quality and reliable service. The investigation also showed that the barriers to entry or expansion in these markets are high, in that any high. Any competitor who wanted to challenge the merged entity would have to make large investments over a significant period of time to build up the necessary critical mass of installed vehicles in the relevant markets. By removing the largest and closest competitor, the merger would therefore significantly change the market structure to the detriment of the customers.
On 21 February 2000, Volvo proposed a number of undertakings intended to address these concerns. These included:
In addition, Volvo proposed to use its best efforts to convince the Swedish Government to eliminate a specific Swedish technical safety norm applicable to cabs used on heavy duty trucks (the "cab crash test"). Volvo also proposed to cause its Finnish subsidiary, Carrus OY, to supply bus and coach bodies to Volvo's competitors.
After consulting the other market participants, as well as Member States, the Commission has come to the conclusion concluded that the proposed undertakings are insufficient to resolve the competition concerns resulting from the proposed acquisition of Scania. The undertakings would not significantly facilitate access to the markets where competitors in the relevant markets. The Commissioncompetition concerns have been identified. The Commission also noted that the cab crash test can only be abolished by the Swedish Government.
The measures proposed for the opening of Volvo and Scania's dealer and service networks were also unlikely to have any significant effect on reducing the combined merged company's market share in the foreseeable future. The proposal would leave the existing structure of the Volvo and Scania organisations intact and would not provide ensure that the existing dealers with a strong incentive to change their behaviour in a way that would have compensated for the loss of competition caused by the merger.would start selling the products of competitors.
On 7 March 2000, Volvo submitted a new and quite complex 'package' of undertakings. The Commission did not consider that any exceptional circumstances were present that would justify accepting these undertakings after the deadline for undertakings, which expired on 21 February 2000. Moreover, there was not enough time left for the Commission to evaluate and consult on the new proposal before the legal deadline for a final decision (which cannot be extended). Finally, the new undertakings would not in an obvious and clear-cut way remove all the identified competition concerns.
Given the gravity of the competition concerns resulting from the proposed merger between the two closest rivalscompetitors, and the fact that Volvo was unable to propose undertakings that would have removed all competition concerns, the Commission had no other choice but to prohibit the merger.