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Brussels, 05 July 2012
Mergers: Commission approves acquisition of Georgia-Pacific's European tissue business by Swedish rival SCA, subject to conditions
The European Commission has cleared under the EU Merger Regulation the proposed acquisition of the US company Georgia-Pacific's European consumer products business ("GPE") by Svenska Cellulosa Aktiebolaget SCA AB ("SCA") of Sweden. Both SCA and GPE produce toilet paper and other tissue-based products. The clearance is conditional upon the divestment of a number of business activities in the UK, Ireland, Sweden and the Netherlands, where the transaction would have resulted in eliminating a credible competitive constraint to the merged entity. The commitments offered by the parties address these concerns.
"This transaction will bring together two important producers of tissues which are on every European consumer's shopping list. The commitments offered by the parties will ensure that consumers do not face higher prices as a result of this deal", commented Commission Vice-President in charge of competition policy Joaquín Almunia.
The Commission found that the proposed transaction, as initially notified, would have raised competition concerns in the UK and Ireland regarding the production and the supply of both manufacturer branded and private label toilet paper and household towels (also known as kitchen roll) as the merged entity would not have faced sufficient constraint from competitors. The Commission identified similar concerns in Sweden for the production and supply of private label toilet paper and household towel and in the Netherlands for the production and supply of branded household towel.
To address the concerns in the UK and Ireland, the parties offered to divest a production facility and a range of toilet paper and household towel brands including Thirst Pockets, Inversoft, Kittensoft, Nouvelle and Dixcel. For retailer branded products, the parties will divest a tissue making plant and associated paper making capacity. These divestments remove the increment in market share resulting from the merger in these areas. To address the concerns in Sweden, the parties will divest one of their integrated production facilities in Scandinavia which has paper making capacity and several production lines for the conversion of paper into final tissue products. To address the concerns in the Netherlands, the parties offered to grant a licence for their Lotus and Lotus Moltonel brands to a buyer who would then undertake a re-branding exercise. In order to protect the viability of this commitment, the licence would also cover Belgium and Luxembourg.
The Commission's investigation showed that the divested businesses would be viable and that the commitments would resolve all identified competition concerns.
In the other markets where the parties' activities overlap, the Commission's investigation showed that the merged entity would continue to face a number of credible competitors and that competition concerns could therefore be excluded.
In view of the remedies proposed, the Commission concluded that the proposed transaction, as modified, would not significantly reduce competition in all or part of the European Economic Area (EEA). This decision is conditional upon full compliance with the commitments.
The proposed transaction was notified to the Commission on 15 May 2012.
Companies and products
Both SCA and Georgia Pacific-Europe are active in the hygiene and paper industry.
SCA is a global hygiene and paper company that develops, produces and markets personal care products, tissue, publication paper and solid wood products. SCA's tissue brands include Edet, Zewa, Plenty and Tork.
Georgia-Pacific Europe is part of the US group Georgia-Pacific which is in turn a wholly-owned subsidiary of Koch Industries, Inc. GPE's tissue brands include Lotus and Lotus Professional.
Both companies produce manufacturer branded tissue as well as private label products. Manufacturer branded tissue products are sold under the brand name of the manufacturer, for example SCA's Plenty brand. Private label products, in contrast, are produced by tissue manufacturers on behalf of major retailers who own the rights to the brand.
Merger control rules and procedures
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. 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).
The transaction was notified to the Commission on 15 May 2012. More information on the case is available at: