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Document 52009XC0627(04)

Summary of Commission Decision of 5 May 2008 declaring a concentration compatible with the common market and the functioning of the EEA Agreement (Case COMP/M.4956 — STX/Aker Yards) (Text with EEA relevance)

OJ C 147, 27.6.2009, p. 14–18 (BG, ES, CS, DA, DE, ET, EL, EN, FR, IT, LV, LT, HU, MT, NL, PL, PT, RO, SK, SL, FI, SV)



Official Journal of the European Union

C 147/14


of 5 May 2008

declaring a concentration compatible with the common market and the functioning of the EEA Agreement

(Case COMP/M.4956 — STX/Aker Yards)

(Only the English version of the decision is authentic)

(Text with EEA relevance)

2009/C 147/11

On 5 May 2008 the Commission adopted a Decision in a merger case under Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings, and in particular Article 8(1) of that Regulation. A non-confidential version of the full Decision can be found in the authentic language of the case and in the working languages of the Commission on the website of the Directorate-General for Competition, at the following address:

This summary only constitutes a simplified outline of the main aspects of the decision; it has no legal force and serves for information purposes only.



On 16 November 2007 the Commission received a notification of a proposed concentration by which STX Corporation (‘STX’, South Korea) notified its acquisition of control of Aker Yards A.S.A (‘Aker Yards’, Norway) by way of purchase of shares.


The Commission found that the proposed operation constitutes a concentration within the meaning of Article 3(1)(b) of Council Regulation No (EC) 139/2004.


STX is a South Korean holding company active in three main areas: shipbuilding and marine equipment (including engines), shipping and logistics and energy and construction. As part of its shipbuilding activity, STX designs and builds various types of commercial vessels. STX currently has two shipyards located in South Korea and another one under construction in China.


Aker Yards is a Norwegian company active in the shipbuilding industry and focused on the construction of sophisticated vessels, including cruise ships and ferries, commercial vessels, offshore production and specialised vessels. Cruise ships and ferries accounted for approximately 44 % of Aker Yards’ total sales in 2006. Aker Yards comprises eighteen ship yards in various European countries, Vietnam and Brazil.


The notified transaction consists of the acquisition by STX of a minority shareholding of 39,2 % in Aker Yards, resulting from a two-day book building process on the Oslo Stock Exchange in the meaning of Article 7.2 of the Merger Regulation. Therefore, the exercise by STX of the voting rights attached to its shares in Aker Yards is subject to the clearance by the European Commission.


Given the shareholding structure of Aker Yards and the exercise of voting rights in the last three shareholders’ meetings, the minority shareholding of 39,2 % is highly likely to allow STX to exercise the majority of the voting rights to acquire effective de facto control of Aker Yards. The transaction therefore constitutes a concentration within the meaning of Article 3(1)(b) of the EC Merger Regulation.


After the examination of the notification, on 20 December 2007, the Commission decided to initiate proceedings pursuant to Article 6(1)(c) of the Merger Regulation.


The Commission concluded that the notified concentration would not significantly impede effective competition in the common market or a substantial part thereof, and can therefore be declared compatible with the common market and the EEA agreement. Therefore, it on 5 May 2008 it declared the concentration compatible with the common market pursuant to Article 8(1) of the Merger Regulation and with the EEA Agreement pursuant to Article 57 thereof.


A.   Relevant product markets

Commercial shipbuilding


The activities of the parties overlap in the area of shipbuilding of commercial vessels, in the following categories of ships: container ships and liquid natural gas (‘LNG’) carriers (these are both non-affected market), chemical and oil tankers and product tankers. In addition, Aker Yards is a major player in cruise ships and ferries.

Product tankers and chemical/oil tankers


The notifying party submitted that in practice the chemical/oil tankers and product tankers can serve the transportation of several types of substances and therefore they can be considered as a single relevant product market. The investigation has shown a large degree of demand-side substitutability. However, the question whether chemical/oil tankers and product tankers should be considered as forming one single product market or separately can be left open since the transaction does not lead to any competition concerns under either alternative market definition.

Passenger ships


In the decision Aker Yards/Chantiers de l'Atlantique the Commission considered it appropriate to distinguish the market for cruise ships and the market for ferries from the overall commercial shipbuilding market, taking into account both demand and supply side considerations. The notifying party agrees with this distinction. The market investigation has not indicated that the Commission should depart from its previous practice in this respect.


Within the area of cruise ships, the market investigation provided indications that small cruise ships of capacity below 20-30 gt form different market than medium and large size cruise ships of above 30 gt, as already suggested in the above mentioned decision. Aker Yards is only active in the segment above 30 gt, and this market was considered for the competitive assessment of the present case. However, there is no need to ultimately decide on this point as the competitive assessment would not be changed.


For the purposes of the competitive assessment of the present transaction, the following relevant product markets have been considered (i) cruise ships, (ii) ferries and (iii) chemical/oil tankers and product tankers (either considered separately or as one single market).

Ship engine manufacturing


STX is also active in the area of ship engine manufacturing through its subsidiaries Engine Co., Ltd. and STX Heavy Industries Co., Ltd.


According to the notifying party, the market for ship propulsion main engines forms one single product market since in general engines are technically interchangeable for all types of commercial vessels and producers typically manufacture the whole range of marine engines. The only exception mentioned by the notifying party are specific dual fuel engines suited for LNG carriers. The market investigation suggested that ship propulsion engines could be divided in two main categories according to the fuel used for the propulsion: diesel engines and dual fuel engines. In the present case, the exact scope of the product market definition can however be left open.

B.   Relevant geographic markets


The notifying party has submitted that the relevant geographic market for commercial shipbuilding and for ship engines is global in scope. The Commission's market investigation has supported the view expressed by the parties.



The main concerns raised during the market investigation were focussed on the impact that the transaction may have on the cruise and ferries markets. These concerns were based on the elimination of STX as a potential entrant and on the advantages that STX would allegedly have compared to other shipbuilders in terms of subsidies granted by the South Korean government, other cost advantages and its vertical integration in the production of ship engines, which may be used by STX to undercut prices, with a result of marginalizing the current competitors and finally leading to anticompetitive effects on the market by the creation of a dominant player. These concerns are dealt with below.

Cruise Ship Market

Elimination of STX as a potential entrant


Based on the investigation it appears that STX is not very advanced in entering the cruise ship market and becoming a significant competitor in the short time. The Commission has been informed during the investigation that STX has participated in a bid for a cruise ship organised by a customer called Saga Lines and this is why in some instances some market participants associate STX with the cruise ship market. However, its participation in that tender is limited to the submission of very initial documents and the aim of participating in the bid is presented rather to be to start learning about the market in view of possible entry in the longer term. The investigation has shown that STX has not participated in any other bid, preliminary contacts or conversations for the construction of a cruise ship, and the market participants generally do not perceive STX as an actual competitor but rather as a potential entrant alongside a number of other Asian shipbuilders. In conclusion, several elements confirm that STX is not better placed than a number of other Asian shipbuilders to enter the market.


Furthermore, the market investigation has shown there is a sufficient number of other potential competitors which are at least equally well placed as STX to enter the cruise ship market, i.e. other shipbuilders from the Far East such as Mitsubishi (Japan) and Korean companies such as Samsung and Daewoo. Mitsubishi has been already active in the recent past and in 2004 it delivered two large cruise ships. The other Korean shipbuilders have until now never been awarded any cruise ship building project (similarly to STX), but the investigation has confirmed that the Korean shipbuilders, especially Samsung and Daewoo, are considered by the market participants as the most credible potential new entrants in the market.


Given that STX does not currently exert any significant competitive constraint in the cruise ship market, that there are no reasons to believe that it would become an effective competitive force in the near future and that, post merger, there will remain a sufficient number of other possible entrants, the proposed concentration would not significantly impede effective competition on the cruise ship market as a result of the elimination of a potential competitor.

Competition concerns on the basis of subsidies


During the market investigation, the complaint was raised that together with a number of other alleged advantages, such as low labour, energy and steel costs, the merged entity would benefit from subsidies from the Korean state and would therefore be able to use unfair subsidies to undercut the prices with a result of marginalizing the existing competitors and finally leading to a dominant position on the market for cruise ships. The complainant argued that the Commission is obliged to take into account state aid into its merger control proceedings and has to make an independent assessment of whether state aid was granted or not.


While the alleged low labour, energy and steel costs may differ geographically, all competitors are free to realise such advantages by taking a corresponding decision on the location of their production. These aspects are therefore not merger-specific. As to the alleged subsidies, it is worth noting that the financial transactions indicated by the complainant — which are also in no way triggered by the merger — cannot be identified as evident subsidies. It is also noted, that no procedure at the WTO, which would be a competent body to assess alleged subsidies in non-Member States, is currently taking place against Korea concerning subsidies for shipbuilding companies. It can be concluded that it was, therefore, not established within this merger investigation that the financial transactions indicated by the complainant constitute subsidies (1).


Even though this lack of evidence for the existence of subsidies already indicates that on this basis no increase in financial strength on part of the merged entity can be assumed, additional steps were undertaken to evaluate the likelihood and the potential effects of the indicated past and future financial transactions. This investigation showed that even if the indicated transactions contained elements of subsidies, they would in any case not alter the merged entity's financial strength to a significant extent.


The complainant stated that past subsidies were granted to STX in the form of (i) programs in support of technological knowledge and (ii) advantageous conditions for a particular loan that STX received in the past. The market investigation has, however, shown that the particular research program covered numerous projects and participants. The share that could be allocated to STX’ shipbuilding activities would be only very limited. Moreover, the loan which was indicated by the complainant was granted by a consortium of banks including private banks. Since all members of the consortium granted the same amount to the same conditions, it is prima facie unlikely that the loan could contain subsidies. Since the subsidy would in any case cover only the difference between the market interest rate and the subsidised interest rate, the total amount of such a subsidy would, moreover, not be likely to significantly increase the financial strength of the merged entity.


The alleged future subsidies would, according to the complainant, mainly be granted in the form of pre-shipment loans (PSLs) and advanced payment refund guarantees (APRGs) for the merged entity’s ship-building projects, and would be extended by KEXIM, the State-owned Korean Export Bank. The market investigation has shown that, throughout the world, including in Europe, shipyards typically use similar types of instruments to finance their working capital. Moreover, the alleged subsidies which are claimed to cause anti-competitive effects in this case are only future, uncertain and speculative since it is not possible to forecast future decisions of the Korean government on the subsidisation of the shipbuilding industry. A past WTO-procedure, moreover, confirmed that KEXIM's programs do not per se contain elements of subsidies. There is, therefore, also no evidence that Korea will in the future subsidize the merged entity in breach of its WTO-obligations.

Even if assuming alleged unfair subsidies, STX would not be able to exert market power on the cruise ship market


The Commission has also assessed whether STX, even assuming that it would have access to the alleged subsidies, would be in a position to exert market power on the cruise ship market.


The main financial indicators of STX and the complainant indicate that the financial power of STX is not (and will not be following the transaction) significantly strengthened.


The Commission has considered that the above alleged subsidisation of the financing instruments would only allow the merged entity to reduce the price of prototype ships built on the facilities in Korea by reducing the financing costs due to better interest rates and guarantee premiums. Even if assuming that the financial instruments would be extended below market conditions, the reduction of the costs by these subsidies would be very limited compared to the total costs for building a cruise ship. This cost reduction does not appear to be enough to lead to systematic undercutting of prices resulting in a monopolisation of the cruise ship market.


Indeed, the market investigation has shown that this is not likely to happen. In particular, (i) the merged entity does not currently enjoy substantial market power (Aker Yard's position in the cruise shipbuilding market is [30-35] %, while Fincantieri's position is [40-45] % and Meyer-Werft's position is [25-30] %), (ii) customers are large and sophisticated (the four main customers are Carnival, Royal Caribbean, MSC and STAR/NCL, who control around 80 % of the cruise ships demand at world-wide level) and will be able to mitigate any anticompetitive behaviour, and (iii) competitors will not be unable to react and, in the extreme, keep re-entry as a credible threat.

Conclusion on the cruise ship market


On the basis of the above, it is to be concluded that the proposed transaction does not give rise to any competition concerns in relation to the construction of cruise ships.

Construction of ferries


The in-dept market investigation also analysed the potential impact of the merger on the market for ferries where Aker Yards is one of the major players in that business and STX not yet present. However, the market situations for ferries and for cruise ships are different. In comparison to the highly concentrated market for cruise ships, there are much more players present on the ferries market. Beside Aker Yard (with a market share of about [10-15] %), there is a large number of other shipbuilders present on the market, such as Fincantieri, Flensburger, Visentini, Apuania, Barreras an many others including Japanese Mitsubishi and Korean companies Hyundai, Samsung and Daewoo, which makes any possible anti-competitive effects highly unlikely.


STX has so far not built any ferry, nor was it awarded any contract for ferries. In any event, even if STX would be a potential entrant its entry would not bring about any significant change in the market structure. There is, therefore, no reason to believe that the removal of STX as a potential entrant would lead to a significant impediment of effective competition on the ferry market.

Construction of product tankers


If product tankers were to be considered one product market with chemical/oil tankers the combined average market share of both companies in the period 2004-2007 would be 14,75 % in terms of deliveries based on tonnage and 11 % in terms of orders based on tonnage. Also on the basis of a narrower product market definition (a market for product tankers alone), the combined market shares of the parties would be limited and below 15 % (with an overlap of no more than 1,5 %).


On the basis of the limited impact of the transaction on this market and the results of the market investigation, it is to be concluded that the proposed transaction does not give raise to competition concerns in relation to construction of product tankers.

Vertical aspects

Diesel ship propulsion engines manufacturing


During the market investigation some concerns have been raised on possible negative effects as a result of the vertical relationship created by the current transaction, since STX is active in the production of marine engines.


The market investigation has shown that the market for marine engines in general is not concentrated. In the overall marine diesel engines market, STX's market share at world-wide level in 2007 was around [15-20] %. Other important competitors are Wärtsilä [15-20] %, Yanmar [15-20] %, Daihatsu [25-30] %, Doosan [5-10] %) or Mitsui [5-10] %.


STX does not produce or sell engines for cruise ships, a segment dominated by two companies, MAN B&W Diesel Group (‘MAN’) and Wärtsilä Corporation (‘Wärtsilä’). STX cannot produce engines suitable for use in cruise ships and/or ferries with its own technology and it has never supplied, either directly or indirectly, such engines. It rather uses technology licensed by MAN for the production of engines for commercial vessels. However, under the license agreement, STX has never manufactured or supplied either directly or indirectly engines which would be suitable for cruise ships or ferries. It is to be concluded that STX would not be at present in a position to supply engines for its own cruise ships.


It is to be concluded that vertical relationships created by the current transaction are not likely to give rise to competition concerns in the cruise ships market.

Shipping services


STX is further active, through its subsidiary STX Pan Ocean, in the area of shipping services, primarily in the area of dry bulk tankers.


The notifying party has stated that for the shipping services related to dry bulk tankers, STX had a market share of around [0-5] % on the world level during the period of 2004-2007. Considering that shipbuilding markets are worldwide in scope and that vessels are procured on a world-wide level, the very limited presence of STX on the downstream shipping markets does not give rise to concerns relating to possible customers’ foreclosure of the merged entity's competitors on the upstream ship building market.



The Commission has decided not to oppose the notified operation and to declare it compatible with the common market and with the EEA Agreement. This Decision is adopted in application of Article 8(1) of Regulation (EC) No 139/2004.

(1)  Contrary to the complainant's view, the Commission is not obliged to conduct a parallel independent analysis in order to conclude on the existence of alleged subsidies — comparable to a State Aid procedure under Article 88 EC Treaty — within a merger procedure, in particular if the alleged subsidies were granted by a country which is not a Member State. The case-law (in particular the judgement RJB Mining) which suggests that also supposed State Aid needs to be considered within merger control procedures referred to very specific circumstances, in which the Commission was conducting in parallel a merger control and a State aid procedure, which do not apply in this case. See Case T-156/98 RJB Mining vs. Commission [2001] ECR II-337.