IP/99/923
Brussels, 1 december 1999
Commission approves Sanitec’s acquisition of
Sphinx subject to substantial divestiture in the
bathroom products sector
The European Commission has decided to approve the acquisition of the
Dutch bathroom products manufacturer N.V. Koninklijke Sphinx Gustavsberg
(«Sphinx») by the Finnish Sanitec Ltd Oyj Abp («Sanitec»). The approval
follows an in-depth inquiry into the transaction, where the Commission was
concerned by the companies’ combined strong position in ceramic sanitary
ware products, bathtubs and shower screens in particular in the Nordic
countries. In reaction to the competition concerns raised by the Commission,
Sanitec offered a comprehensive package proposing the entire divestment of
the Gustavsberg business. Mr. Mario Monti, the commissioner for
competition, expressed his satisfaction and said that he is confident that the
divestiture will restore effectively the competitive situation in the Nordic
countries.
The Commission decided to open an in-depth investigation following complaints that
the operation would lead to adverse competition effects in the Nordic countries, in
other words, in Sweden, Finland, Norway, Denmark and Iceland. The Commission
also examined the effects of the operation in continental Europe, in particular in the
Benelux area. Sanitec is one of the main suppliers of ceramic sanitary ware,
bathtubs, shower trays and shower screens in Europe and has its traditional
stronghold in the Nordic countries. Sphinx, who is the leading supplier in the
Netherlands, has also a significant presence in the Nordic countries via its subsidiary
Gustavsberg.
The investigation confirmed that the combined entity would have reached very high
market shares, up to 90%, in bathroom products in the Nordic countries. The
Commission found further that the Nordic customers, i.e. wholesale trade companies
as well as installers and plumbers, do not have enough buying power to offset the
market power of the new entity. Moreover, other competitors are only marginally
present in the Nordic countries and do not constitute a viable alternative to Sanitec
and Sphinx. The investigation showed that should the price level for bathroom
products rise, competitors could not, in a relatively short period of time, increase their
presence in the Nordic countries. Brand loyalty was found to be strong in the Nordic
countries and this, together with national standards, was found to constitute a
powerful barrier to entry into the Nordic market.
The Commission subsequently concluded that the elimination of the only viable
alternative supplier with significant presence in the Nordic countries would have lead
to the strengthening of a dominant position in the ceramic sanitary ware market or,
alternatively, in the markets for WCs, WC cisterns and washbasins.
The investigation revealed that a dominant position would have been created in the
market for bathtubs in the Nordic countries both at the national and regional level.
With regard to shower screens, the Commission found that the operation would have
lead to the strengthening of a dominant position in Norway or, alternatively, it would
have lead to the creation of a dominant position in the market for shower screens in
the Nordic countries.
Following the serious competition concerns raised by the Commission in its
investigations, Sanitec offered a full divestiture of the entire Gustavsberg business
and the brand name to remedy the competitive situation in the Nordic countries. The
undertakings offered by Sanitec will ensure that Sanitec’s present position will not be
altered in the Nordic countries and that a viable competitor will remain on the market.
The investigation also showed that competition concerns are not likely to arise in the
Benelux area. Although the parties’ combined market shares were found to be
relatively high in particular in the Netherlands, the investigation showed that there is
actual and potential competition in the Benelux countries and competitive market
conditions prevail there. The Commission therefore concluded that should the parties
raise prices, most of the competitors have the readiness, capacity and financial
strength to improve their market position in the Benelux area.
The Commission considers the undertakings given to be appropriate in order to
address the competition concerns arising from the operation in the Nordic countries
and has decided to declare the notified concentration compatible with the common
market and the functioning of the EEA agreement.
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