2003/26/EC: Commission Decision of 20 December 2001 declaring a concentration to be compatible with the common market and the EEA Agreement (Case COMP/M.2389 Shell/DEA) (notified under document number C(2001) 4526) (Text with EEA relevance)

• Published date: 21 January 2003
• Date of Signature: 14 March 2003
• Official Gazette Publication: Gazzetta ufficiale dell’Unione europea, L 15, 21 gennaio 2003,Journal officiel de l’Union européenne, L 15, 21 janvier 2003,Diario Oficial de la Unión Europea, L 15, 21 de enero de 2003,Diario Oficial de la Unión Europea, L 137, 05 de junio de 2003

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32003D0026

2003/26/EC: Commission Decision of 20 December 2001 declaring a concentration to be compatible with the common market and the EEA Agreement (Case COMP/M.2389 Shell/DEA) (notified under document number C(2001) 4526) (Text with EEA relevance)

Official Journal L 015 , 21/01/2003 P. 0035 - 0061

Commission Decision

of 20 December 2001

declaring a concentration to be compatible with the common market and the EEA Agreement

(Case COMP/M.2389 Shell/DEA)

(notified under document number C(2001) 4526)

(Only the English text is authentic)

(Text with EEA relevance)

(2003/26/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community,

Having regard to the Agreement on the European Economic Area, and in particular Article 57(2)(a) thereof,

Having regard to Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings(1), as last amended by Regulation (EC) No 1310/97(2), and in particular Article 8(2) thereof,

Having regard to the Commission's decision of 23 August 2001 to initiate proceedings in this case,

Having given the undertakings concerned the opportunity to make known their views on the objections raised by the Commission,

Having regard to the opinion of the Advisory Committee on Concentrations(3),

Having regard to the final report of the Hearing Officer in this case(4),

WHEREAS:

I. INTRODUCTION

(1) On 10 July 2001, the undertakings Deutsche Shell GmbH (Deutsche Shell) and RWE Aktiengesellschaft (RWE) notified the Commission, in accordance with Article 4 of Regulation (EEC) No 4064/89 (the Merger Regulation), of a proposed concentration by which Deutsche Shell and RWE acquire, within, the meaning of Article 3(1)(b) of the Merger Regulation, joint control of a newly created joint venture (Shell/DEA or JV) that will combine their respective downstream oil and petrochemicals businesses. After an interim period ending on 1 July 2004 at the latest, Shell will acquire sole control of the combined businesses.

(2) After examination of the notification, the Commission by decision of 23 August 2001 concluded that the notified operation fell within the scope of the Merger Regulation and raised serious doubts as to its compatibility with the common market and the functioning of the EEA Agreement. The Commission accordingly initiated proceedings in this case pursuant to Article 6(1)(c) of the Merger Regulation and Article 57 of the EEA Agreement.

II. THE PARTIES AND THE OPERATION

(3) The Dutch-British Royal Dutch/Shell group of companies (Shell) is active world-wide in the exploration, production and sale of oil and natural gas, the production and sale of chemicals, power generation and the production of energy from renewable resources. Shell's wholly owned subsidiary Deutsche Shell GmbH is active mainly in the refining of crude oil and the distribution and sale of refined products in Germany, in the production, distribution and sale of certain chemicals, in the production and distribution of natural gas and crude oil, and in the solar energy business.

(4) RWE is the ultimate parent company of a group of companies focusing on a multi-utility strategy with activities in energy, water distribution and treatment, mining and raw materials, environmental services, petroleum and chemicals, industrial systems and construction. The upstream and downstream oil and petrochemicals business of RWE is operated via its subsidiary RWE-DEA Aktiengesellschaft für Mineraloel und Chemie (RWE-DEA). The affected downstream oil and chemicals activities are operated via DEA Mineralöl AG, a 100 % subsidiary of RWE-DEA.

(5) The parties will use the existing DEA Mineralöl company as the joint venture vehicle, which will be renamed as Shell/DEA. Shell will separate its downstream oil business in Germany, currently operated by Deutsche Shell, and contribute this business to Shell/DEA, including certain of Shell's petrochemicals assets, namely its aromatics production from its plant at Godorf. As a result, Shell/DEA will include the entire downstream oil business and petrochemicals business of each of Shell and RWE-DEA in Germany. The joint venture will operate its business under the brands of both Shell and DEA. The joint venture will not extend to any upstream oil or any natural gas businesses of the parties.

(6) Shell and RWE-DEA signed a Joint Venture Agreement on 5 July 5 2001.Pursuant to this agreement, the shares in Shell/DEA will be held 50/50 by RWE-DEA and Shell for an initial period. RWE-DEA will have a first put option to sell its 50 % stake in the JV to Shell between [...]*(5) and [...]*. If the put option is not exercised, RWE-DEA will be legally bound to sell and Shell will be legally bound to purchase [...]* % of the shares in Shell/DEA effective [...]*. In addition, Shell will grant RWE-DEA a second put option for RWE-DEA's remaining shares in the JV, to be exercised between [...]* and [...]*, effective [...]*. Given this structure, Shell will in any case have a [...]* % stake in Shell-DEA by 1 July 2004 if it has not acquired the whole share capital of this company by then.

III. CONCENTRATION

(7) The transaction consists of two subsequent steps, namely an initial period which will end either with the exercise of the first put option by RWE-DEA or, at the latest, with the purchase of the additional [...]* % of Shell/DEA's shares by Shell effective 1 July 2004, and the period after that date.

(8) During the initial period, the members of the management board which is in charge of Shell/DEA's day-to-day operation will be equally appointed by each shareholder via the JV Committee and Shell/DEA's supervisory board. The chairman of the management board will have a casting vote and will be a nominee of Shell. Resolutions in the shareholders' meeting will be taken by simple majority. As each party will hold 50 % of the voting rights, decisions can be blocked by either party. During the initial period certain decisions within Shell/DEA will be taken by a JV Committee composed of six members, three nominated by each shareholder. Decisions will require unanimity. The JV Committee will have sole discretion and authority for a number of strategic decisions such as the business plan, the annual operating budget, structural changes in the JV, investments above a certain threshold and the appointment of members of the management board. In the light of these veto rights of both parties safeguarding their decisive influence in the JV, it can be concluded that during the first period, Shell and RWE will have joint control over Shell/DEA.

(9) After 1 July 2004, unless RWE-DEA exercises the first put option, which will transfer sole control to Shell even earlier, Shell will hold [...]* % of the shares in Shell/DEA. Shell will control the decisions of the shareholders' meetings as far as they are taken by simple majority, as well as the day-to-day management of Shell/DEA through the management board. It is foreseen that Shell's majority in the shareholders' meeting will translate into an appointment of its representatives for the management board at this stage. The JV Committee will remain in place, but the reserved items, requiring a unanimous decision, will become limited to core arrangements concerning issues such as changes in the articles of association of the JV or in the JV agreement, restructuring with a project value above significant thresholds, dividend policies and cash calls on partners. Veto rights in these areas do not appear to confer on RWE-DEA the ability to exercise a decisive influence over Shell/DEA. They appear to be limited to issues necessary to protect the financial interests of RWE-DEA as a minority shareholder. It can therefore be concluded that Shell will acquire sole control over Shell/DEA after 1 July 2004 at the latest, resulting in a concentration within the meaning of Article 3 (1) (b) of the Merger Regulation.

(10) The transaction can be considered as one single concentration consisting of the acquisition of sole control over Shell/DEA by Shell, although effectuated in two consecutive steps, with a starting-up period of joint control. Point 38 of the Commission notice on the concept of concentration under Regulation (EEC) No 4064/89 on the control of concentrations between undertakings(6) states that an operation will normally be considered to be an acquisition of sole control, where it leads to joint control for a starting-up period of up to three years, but according to legally binding agreements this joint control will be converted into sole control by one of the shareholders.

(11) In the present case, from today on, the acquisition of sole control by Shell within less than three years is a legal certainty. [Shell will also have a strong influence in the operational management of the JV]*.

IV. COMMUNITY DIMENSION

(12) The undertakings concerned have a combined aggregate worldwide turnover of more than EUR 5 billion(7). Shell, RWE and DEA each have an aggregate Community-wide turnover in excess of EUR 250 million. Not all of the undertakings concerned achieve more than two-thirds of their aggregate Community-wide turnover within one and the same Member State. The notified operation therefore has a Community dimension within the meaning of Article 1(2) of the Merger Regulation.

V. PROCEDURE

(13) On 3 August 2001 the German competition authority, the Bundeskartellamt, informed the Commission that the concentration threatens to create or to strengthen a dominant position as a result of which effective competition would be significantly impeded on a market within Germany, which presents all the characteristics of a distinct market pursuant to Article 9(2) of the Merger Regulation, requested the Commission to partly refer the case. The request related to the markets for downstream mineral oil products in Germany, including...