(2004/C 78 E/0825)

WRITTEN QUESTION E-3088/03

by Bruno Gollnisch (NI) to the Commission

(20 October 2003)

Subject:   Pechiney-Alcan merger

Recently, the Commission decided, without further investigation, to authorise the merger of Alcan and Pechiney, which now form the world's leading aluminium group, while concentrating their decisionmaking structures in North America. Whatever the press may say, this is a hostile takeover.

Three years ago a similar merger between the two companies failed after Alcan refused to give up its plant in Norf. However, the Commission is now authorising it to choose between Norf and three of Pechiney's French sites (Neuf-Brisach, Annecy and Rugles). It seems clear that the latter sites will be sold off.

Will the Commission provide the names of the potential buyers of the units to be sold off, specifying in particular whether they are European or non-European?

Will the Commission explain what other fundamental changes have been made to the situation to allow it to alter its opinion on an Alcan-Pechiney merger?

Will it also explain what the condition regarding ‘removal of duplication’ between the two companies' activities means in terms of jobs?

Given that, if Pechiney had taken over Alcan rather than the reverse, it would have come up against the Canadian legal principle of ‘benefit to the country’, does the Commission consider that this operation is of economic benefit to the European Union and to the European aluminium sector?

Answer given by Mr Monti on behalf of the Commission

(28 November 2003)

On 29 September 2003, the Commission has authorised the acquisition of aluminium producer Pechiney by Alcan. Whilst the Commission's investigation of the transaction indicated that the transaction would raise serious doubts in a number of markets, Alcan has proposed undertakings which the Commission considered sufficient to remove the competition problems identified.

Alcan has offered divestment proposals that contain either Alcan assets or Pechiney assets. After having carefully assessed the divestment packages, and only after Alcan had further improved its proposal, the Commission has come to the conclusion that both packages consist of equally viable businesses that are equally capable of removing the competition concerns identified by the Commission. The parties were able to demonstrate to the Commission that there is a wide interest from potential buyers, both European and non-European, for these assets. In this respect, it cannot be taken for granted that only Pechiney assets will be divested. The merging parties will now commence negotiations with potential buyers, and only afterwards, the potential buyer(s) will be presented to the Commission, who will then decide whether the proposed buyer(s) can be accepted. At this stage, it is therefore not possible to indicate who the potential buyer(s) might be.

It is important to stress that this case has benefited from a long pre-notification phase during which the Commission has started its market investigation prior to the actual notification. In addition, the markets investigated are not new to the Commission. A number of transactions in the aluminium industry, not the least the aborted Alcan/Pechiney transaction three years ago, have been investigated by the Commission in the past. What distinguishes this case most from the previously notified Alcan/Pechiney transaction is that this time, Alcan has proposed remedies that clearly aimed at solving the competition concerns on a first assessment basis. As these remedies were proposed early in the process and encompass ambitious, structural and clear commitments, the Commission was able to market test them extensively and improve the effectiveness and attractiveness of the remedy package further.

The effect of the acquisition of Pechiney on the number of people employed by Alcan has not been communicated to the Commission. Indeed, the Commission would like to underline that the objective of merger control is to make sure that, through a negative control, competitive structures are preserved. A regulatory framework that upholds effective competition usually provides appropriate incentives to firms to enhance their efficiency and thus to ensure their better survival in the respective markets. Further, dynamic competition between competitive firms tends to increase the rate of innovation, thereby raising the economy's rate of growth. Ultimately, the protection of competition is a very effective way to ensure growth and, thereby, stable and lasting jobs. Nevertheless, in the short term, efforts to improve the competitiveness of firms by means of mergers or acquisitions may involve restructuring and loss of employment.

In the specific case under consideration, Alcan, in order to obtain Commission's clearance on the operation, has committed to divest businesses and sell them off to independent third parties committed to develop them in order to create viable competitors. Those activities actually represent the largest part of the redundant assets between the two companies. For this reason, the remedy package is likely to limit a possible short-term impact of the transaction on the level of jobs in the Union.

With regard to the consideration of the economic benefits of the operation, the Commission, as also witnessed by the wording of the draft Commission Notice on the appraisal of horizontal mergers, is open to consider the benefits of the operations analysed as a counterbalance to the possible anti-competitive effects that it would create. Efficiencies can be one such mitigating factor, provided that they are at least in part passed on to consumers. However, concerning efficiencies, it belongs to the parties in the operation to put forward convincing arguments.

In this specific operation, the parties have not done so in their notification, although Alcan has communicated to the financial markets that this acquisition will create cost savings and synergies, improving the competitiveness of the company in the long term.

With regard to the national dimension of the operation, the Commission, in its competitive analysis, has to focus on how a transaction could affect the competitive dynamics of the markets concerned, irrespective of the identity and nationality of the notifying party or of the shareholders involved.