2004/276/EC: Commission Decision of 30 January 2002 requiring undertakings to be separated adopted pursuant to Article 8(4) of Council Regulation (EEC) No 4064/89 (Case COMP/M.2283 — Schneider/Legrand) (notified under document number C(2002) 360) (Text with EEA relevance)

• CELEX: Regulation (EEC) No 4064/89
• Articles: 3

Article 1

To restore effective competition, Schneider Electric is required to demerge from the Legrand group in accordance with Annex II.

Article 2

This Decision is addressed to:

SCHNEIDER ELECTRIC S.A. 43-45, Boulevard Franklin Roosevelt F 92500 RUEIL-MALMAISON France

Done at Brussels, 30 January 2002.

For the Commission

Mario Monti

Member of the Commission

(1) OJ L 395, 30.12.1989, p. 1.

(2) OJ L 180, 9.7.1997, p. 1.

(3) OJ C 86, 6.4.2004.

(4) OJ C 86, 6.4.2004.

(5) In this Decision, "Legrand" refers to the whole of the Legrand group as it existed at the time Schneider's offer closed.

(6) OJ L 61, 2.3.1998, p. 1.

(7) Parts of this text have been omitted in order to ensure that no confidential information is disclosed; these are contained in square brackets and marked with an asterisk.

(8) It should be stressed that Schneider acquired its stake in Legrand by means of a public offer for the exchange of shares. Announcement of the bid before the Commission had taken its decision on the compatibility of the planned merger with the common market is allowed by Article 7(3) of the Merger Regulation; such action does not constitute an infringement of the competition rules and should not therefore be sanctioned. However, Schneider has to take the normal business consequences of its deliberate decision to go ahead with the operation in the climate of uncertainty as to the outcome of the Commission's investigation. Schneider was free to notify an agreement before announcing a bid, as other companies listed on the Paris stock exchange have done. It should also be pointed out that, after the Commission had raised serious doubts under Article 6(1)(c) of the Merger Regulation as to the compatibility of the planned merger between Schneider and Legrand, Schneider was in a position, following a dispute with Legrand's minority shareholders, to withdraw from the operation. It nevertheless decided to maintain its bid.

(9) Under French law a blocking minority corresponds to 33 % of a company's capital. Taking account of a 50 % quorum for shareholders' meetings, this is equivalent to a stake of more than 16 %.

(10) See points 511-516 of the incompatibility decision.

(11) The Herfindhal-Hirschman Index (HHI) of market concentration is calculated by summing the squares of the individual market shares of the firms present in a given market. Under certain conditions it can be demonstrated that the Index reflects the average level of margins in an industry. The change in the Index caused by a transaction can be equated with a change in margins and is therefore a useful indicator of the potential effect of the transaction on prices. The HHI is therefore used to measure the intensity of competition on a particular market or the changes thereto caused by a transaction (see, for example, Case COMP/M.1383 - Exxon/Mobil or the Horizontal Merger Guidelines issued by the US Department of Justice and Federal Trade Commission: http://www.usdoj.gov/atr/public /guidelines/horiz_book/toc.html). The maximum Index is 10000 points (the square of 100 percentage points), and a value of over 3000 indicates a highly concentrated market where competition can be very limited.

(12) See points 689-691 of the incompatibility decision.

(13) See point 537 of the incompatibility decision. Schlumberger and Hager are present on this market, but only as resellers of products made by Legrand and Schneider respectively.

(14) These calculations are based on an extension of the HHI (by Timothy F. Bresnahan and Steven C. Salop, "Quantifying the competitive effects of production joint ventures ", International Journal of Industrial Organisation, 1986) to take account of the existence of shareholdings between competitors. In a situation where company A holds x % of the shares in company B, company A will endeavour to maximise not just its own profits but the sum of its own profits and x % of the profits of company B. According to the reasoning developed in point 15, company A will thus gain further room for manoeuvre for increasing its prices. Introducing this profit function for company A in the calculation of the HHI, all other things being equal, gives: [modified HHI] = [standard HHI] + [Schneider's market share] x [Legrand's market share] x [Schneider's stake in Legrand].

(15) The appeal was lodged on 13 December 2001.

Schedules & Appendices

ANNEX I

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ANNEX II

Point 1

Schneider Electric (hereinafter "Schneider") shall demerge from the Legrand group (hereinafter "Legrand"), without hiving off any individual businesses of Legrand, within [...]* of the date of reception of this Decision.

The demerger may be carried out as Schneider determines, provided that the principles laid down in point 2 are adhered to.

Point 2

1. If Schneider chooses to sell, or have sold, the shares it owns in Legrand's capital to one or more buyers, it shall sell the requisite number of shares that will enable the buyer(s) to make a public repurchase offer followed by a squeeze-out so that the Legrand shares can be withdrawn from the official list of securities.

2. Once the disposal has been carried out, Schneider and the other minority shareholders should between them have less than 5 % of Legrand's capital and the voting rights attached thereto. If the buyer(s) does/do not ask to be allowed to make a public repurchase offer followed by a squeeze-out, Schneider may keep a stake of less than 5 % in Legrand's capital.

3. If Schneider decides to place, or have placed, on a stock market shares in Legrand or another entity that controls Legrand, it shall assure the Commission in advance that as a result of this flotation no shareholder or group of shareholders common to Schneider and Legrand will exert a major influence over one of the two companies. Neither may Schneider keep a stake of 5 % or more in the capital.

4. If Schneider chooses a demerger arrangement other than those referred to in paragraphs 1 and 2, it shall seek the Commission's prior approval for that arrangement, with special reference to any possibility for Schneider of retaining for a limited period a limited number of instruments ranking as a claim on Legrand or on any other company acquiring control of Legrand. The Commission may in that case impose further requirements on Schneider to ensure that effective competition is restored. Prior to the sale of Legrand, and provided - especially in the event of a flotation - that Schneider can identify the purchasers of Legrand, Schneider shall ask the Commission to approve any purchaser.

The approval request shall contain the information that will allow the Commission to check whether the purchaser(s) meet(s) the purchaser standards laid down in point 49 of the Commission Notice on remedies acceptable under Council Regulation (EEC) No 4064/89 and under Commission Regulation (EC) No 447/98(1).

Any transaction which would lead to the subsequent transfer by one or more purchasers of any individual businesses of Legrand to Schneider shall disqualify those purchasers.

Point 3

Schneider shall submit to the Commission at the earliest opportunity:

(a) the draft(s) of the information document intended for potential purchasers or investors;

(b) a list of the potential buyers which Schneider intends to contact and information on the outcome of such contacts.

These documents shall be deemed to have been accepted by the Commission if the latter has not given its opinion on them within five working days of the date of delivery.

Point 4

1. Schneider shall, within five working days of the date of receipt of this Decision, submit for the Commission's approval an amendment to the contract binding it to the trustee appointed in accordance with the Commission Decision adopted on 4 December 2001 in this case pursuant to Article 7(4) of Regulation (EEC) No 4064/89.

If no draft amendment is forthcoming by the end of that period, or if the Commission and Schneider do not agree on the draft amendment, the Commission may impose such an amendment after consulting the trustee.

2. The amendment referred to in paragraph 1 shall be drawn up in accordance with the following principles:

(a) the power of attorney shall be extended until the demerger between Schneider and Legrand is complete;

(b) the trustee shall ensure that Schneider does not take any action which is in breach or in excess of this Decision;

(c) the trustee shall take part in Schneider's preparations for and implementation of the demerger;

(d) the amendment shall include any other measure deemed necessary for the implementation of this Decision and the preservation of the independence and room for manoeuvre that will enable Legrand to remain a competitor in its own right on all the relevant markets.

3. If Schneider does not respect its commitments in practice, the Commission may extend the trustee's powers to include all possible means of ensuring that this Decision is complied with.

4. As soon as the tasks which have been assigned to it have been accomplished, Schneider shall request the Commission to authorise it to discharge the trustee.

Point 5

The time limit laid down in point 1 shall cease to run when an irrevocable sale agreement is signed, a public offering of shares is published or the general meeting of Schneider's shareholders decides on a division.

The effective demerger of Schneider and Legrand shall occur within [...]* of that date.

Point 6

1. If Schneider is not able to sign an irrevocable sale agreement with a third party or to publish a public offering of shares within the [...]* time limit referred to in point 1, it shall give irrevocable, exclusive power to the trustee referred to in point 4 to carry out the demerger between Schneider and Legrand at the best possible price, without stipulating a minimum price.

To that end, Schneider shall, not later than ten working days before the expiry of the time limit, submit for the Commission's approval an amendment to the trustee contract.

If no draft amendment is forthcoming not later than ten working days before the expiry of the time limit, or if the Commission and Schneider do not agree on the draft amendment, the Commission may impose such an amendment after consulting the trustee.

2. The trustee shall have [...]* in which to sign an irrevocable sale agreement with a third party or to publish a public offering of shares.

Point 7

If exceptional circumstances should prevent the signing of an irrevocable sale agreement with a third party or the publication of a public offering of shares by Schneider or the trustee referred to in point 4, the time limit mentioned in point 1 or the time limit mentioned in point 6(2) may be extended, at the Commission's discretion, on a duly substantiated request from Schneider or the trustee. Such a request shall be submitted immediately after the exceptional circumstances have occurred and shall show that every effort has been made to meet the deadlines.

(1) OJ C 68, 2.3.2001, p. 3.