Competition Authority Notification - Moulinex SA / Glen Dimplex / Irish Sugar Plc
Decision No. 556
Competition - Joint venture - Joint venture company established called GMX - Company supplies intermediate and finished products to Molineux - Molineux shareholder in GMX - Product market in kitchen appliances - Prime objective of agreement to supply parts to Molineux - Whether GMX can be regarded as having a market share - Whether agreement in reality a joint venture - Whether joint ventures between competitors necessarily anti-competitive - Competition Act 1991.
Competition Authority decision No 556 27 May 1999.
In general a co-operative joint venture between actual or potential competitors would contravene s. 4(1) of the Competition Act 1991 if it led to co-ordination on the part of the parties in the production of goods which either or both of them could produce themselves. However, the agreement in the present case is not a joint venture in the true economic or legal sense and GMX acts primarily as an intermediate producer and therefore the agreement does not contravene s. 4(1) of the 1991 Act.
Notification was made by Moulinex S.A., Glen Dimplex and Siuicre Eireann cpt on 30 September 1992 with a request for a certificate under Section 4(4) of the Competition Act, 1991 or, in the event of a refusal by the Competition Authority to grant a certificate, a licence under Section 4(2) in respect of a joint venture agreement.
(a) Subject of the Notification
2. The notification concerns an agreement dated 20 June, 1989, under which Moulinex SA, Glen Dimplex and Irish Sugar plc established a joint venture company, GMX Limited (“GMX”). The purpose of the joint venture is to manufacture certain electrical goods in Ireland.
3. There have been three Supplemental Agreements to the joint venture agreement since 1992. The first (November 1992) concerned clarification of profit share, the second (December 1992) related to change of year-end within the Moulinex Group and the third (April 1994) was a Deed of Adherence concerning the transfer of the Glen Dimplex Holding in GMX from Ahona Ltd to GD Design Ltd., a wholly-owned company within the Glen Dimplex group.
(b) The Parties
4. Moulinex is the parent company of the Moulinex Group. Moulinex operates primarily as a manufacturer and supplier of small household appliances, supplying products worldwide, but primarily in Europe.
5. Glen Dimplex also operates primarily as a manufacturer of household appliances and sells throughout Europe. Its brands include Belling, Burco, Dimplex and Morphy Richards.
6. Irish Sugar is a sugar processor and is a wholly-owned subsidiary of Greencore Group Plc. Greencore Group Plc is a major supplier of primary foods and related products, food ingredients and prepared foods to industrial and consumer markets. Irish Sugar does not operate in the market for electrical components.
7. The Annual Report and Accounts of GMX for the financial year to 31 March, 1995, show a turnover of£9,475,950and gross assets of £13,126,250. Most of the components made by GMX are used by Moulinex in the manufacture of such products.
(c) The Products and the Markets
8. Since its formation, GMX has manufactured and sold the following products:
(1) Mechanical Timers for Microwave Ovens(2) Motors for Krups(Limerick)(3) Motors for Barilla (Italy)(4) Coffee Grinders(5) Baby Chef (Mini Mixer)(6) Mini Hachoir (Mini Chopper)(7) Mixer Assembly(8) Moulded Blades(9) Sundry Components Parts(10) Electric Kettles (since 1996 only).
9. The vast bulk of GMX’ sales are to the Moulinex Group, which includes Moulinex S.A., Krups Ireland, Krups Germany and Swan. In the 12 months to end-March 1996, for example, non-Moulinex-Group sales accounted for only 2% of total GMX sales.
10. At the time the agreement was made, none of the finished products manufactured by GMX for Moulinex competed with products supplied by Glen Dimplex. However, GMX began to manufacture electric kettles at its plant in 1996 and, accordingly, from that point, was then producing a product for Moulinex which would compete with products from the Glen Dimplex range.
11. The parties claimed that GMX does not compete in a “market”, as such, its main purpose being the supply of components, and in recent years finished products, to its major shareholder. The supply of finished products (mixers, coffee grinders, Baby Chefs and Electric Kettles) has only become prominent since 1995/1996. The parties claim that, as GMX supplies the vast bulk of its output to Moulinex, it cannot be said to compete in any real sense in a “market” and they do not, therefore, consider it appropriate to speak of it having a “market share”.
(d) The Notified Arrangements
12. The notification concerns a Joint Venture Agreement (incorporating, at Schedule 7 thereto, a Licence Agreement between Moulinex and GMX for the licensing to GMX of certain patents owned by Moulinex and for the provision of know-how and assistance by Moulinex to GMX). The crucial participation in the joint venture is by Moulinex - without access to its know-how and intellectual property rights, and the ready market it provides for GMX’ products, the joint venture would not have been possible. The prime objective of the joint venture is to supply parts to Moulinex. GMX is effectively controlled by Moulinex, since the Agreement gives the latter a majority of its voting rights. GMX is, therefore, a subsidiary of Moulinex from the company law and accounting standpoints.
13. Glen Dimplex’s contribution to the joint venture comprised (in addition to a minority shareholding) the provision of expertise on the development of a greenfield electrical goods factory, and its in-depth knowledge of the business environment in Ireland.
14. Irish Sugar became involved in GMX as a result of its commitment to set up replacement industries in Thurles following the closure of its sugar plant there. Other than its investment in GMX, it has no involvement in the manufacture of electrical appliances or electrical components.
(f) Submissions by the Notifying Parties
15. The parties pointed out that none of the joint...
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