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Brussels, 19 May 2011

Mergers: Commission clears proposed joint venture between Dutch pharma company DSM and Sinochem

The European Commission has cleared under the EU Merger Regulation the proposed joint venture between the Dutch pharmaceutical company DSM and Sinochem, a Chinese state-owned conglomerate. The joint venture will primarily be active in the field of certain antibiotics and other anti-infective products used for treating bacterial, fungal and other infections. The Commission carefully examined the effects of the proposed transaction, including the issue of possible coordination by the Chinese state of the market behaviour of different state-owned firms. The Commission concluded that even if all Chinese state-owned firms acted as one, there would still be a sufficient level of competition in the markets concerned.

DSM is an international company headquartered in the Netherlands which is active in particular in the sectors related to nutrition and pharmaceuticals, performance materials and industrial chemicals. Sinochem is a Chinese state-owned company which has active units in agriculture, energy, chemistry, real estate and business finance.

The products concerned by the merger are for a range of upstream active pharmaceutical ingredients in the field of anti-infectives and antibiotics.

As for all state-owned companies, the Commission assessed whether Sinochem operated independently of the state, or whether there was scope for the state to coordinate the behaviour of the state-owned companies in the sector. If the behaviour of all Chinese state-owned companies in the sector were co-ordinated, then the companies would need to be treated as one entity. The market investigation was inconclusive on this point.

This question was ultimately left open as the competition analysis showed that, even if the market shares of all Chinese state-owned firms in the sector were taken together, the combined market shares would remain moderate. In addition, a range of large players which are independent of the merging parties would remain on the market and be able to constrain their behaviour. The proposed joint venture therefore would not lead to any competition concerns.

In light of the above, the Commission concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.

The transaction was notified to the Commission for regulatory clearance in the EEA on 8 April 2011.

Merger control rules and procedures

The Commission, in 1989, was given the power to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Art 1 of the Merger Regulation). The Commission clears the vast majority of mergers without conditions and only accepts remedies or prohibits mergers when the notified transaction would lead to a significant impediment to competition and make consumers worse off.

From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).

Further information on the case will be available at:

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