Article 2
This Decision is addressed to: The notifying parties Done at Brussels, 21 November 2001. For the Commission Mario Monti Member of the Commission (1) OJ L 395, 30.12.1989, p. 1; corrected version published in OJ L 257, 21.9.1990, p. 13. (2) OJ L 180, 9.7.1997, p. 1. (3) OJ C 206, 30.8.2002. (4) OJ C 206, 30.8.2002. (5) Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission Notice on the calculation of turnover (OJ C 66, 2.3.1998, p. 25). (6) Parts of this text have been edited to ensure that confidential information is not disclosed; those parts are enclosed in square brackets and marked with an asterisk. (7) See footnote 5. (8) Case IV/M.646 - Repola/Kymmene, OJ C 318, 29.11.1995, p. 3. (9) Most suppliers are able to handle different grades without costly adjustments to their printing machines. (10) Decision of 25 November 1998, OJ L 254, 29.9.1999, p. 9. (11) Cases IV/M.646 Repola/Kymmene, at point 20; IV/M.1225 Enso/Stora, at point 17. (12) A price correlation analysis is designed to measure the sensitivity of the price of one product to the price of an alleged substitute. The higher the degree of correlation is for two products (that is to say, the closer the coefficient is to 1), the more likely is the existence of a combined product market including both of them. The coefficient of correlation between LWC and SC is 0,85 whereas it is in the range of [0,45 and 0,55] between SC/LWC and WFC. A correlation coefficient of less than 0,55 is not conclusive to support that WFC is in the same market than SC/CMR. (13) This has already been recognised by the Commission in its decision IV/M.646 Repola/Kymmene, at point 16. (14) Rapport Annuel 2000, Matussière & Forest SA, p. 16. (15) Demand-Supply Report June 2001, p. A.2. (16) There seems to be only one machine in operation in Europe, which has been installed by Perlen Papier in 2000 with a capacity of 150000 tonnes. (17) See: http://www.sca.se, and Pulp & Paper International, June 2001:23 (18) Both the production joint ventures and the sales agreement have been notified to the Commission on 4 March 1996 (Case IV/35931 Metsä-Serla and Myllykoski). The Commission sent a comfort letter dated 8 May 1996. (19) M-Real, Annual report 2000, p.13. (20) See: http://www.storaenso.com. (21) Jim Kenny: "Searching for Stability", in PPI, June 2001, p. 41. (22) It is possible to increase capacity by an extra 1 % on existing machinery each year by running them slightly faster or making continuous small improvements in the production process in the mills. However, capacity creep is done by all competitors. Therefore, capacity creep should not change market shares and can be ignored for the calculation of future market shares. (23) Cepiprint Demand - Supply Report Newsprint and Magazine Paper Grades 2001-2003, March 2001, p. 4. (24) R. James: Stora Enso aims to be leader of the pack. PPI June 2001, p. 29. (25) R. James: UPM-Kymmene stays cool when the heat is on. PPI June 2001, p.16. (26) See PPI This Week, Volume No 23, of 11 June 2001. (27) The terms collective, joint and oligopolistic dominance are used as synonyms in this Decision. (28) OJ L 356, 5.12.1992, p. 1. (29) OJ L 11, 14.1.1997, p. 30. (30) OJ L 93, 13.4.2000, p. 1. (31) Source: UPM-Kymmene, reply to the SO, p. 58. (32) See for example IV/M 1313 - Danish Crown/Vestjyske Slagterier; IV/M.1524 - Aitours/First Choice. (33) Decision of 25 November 1998, OJ L 254, 29.9.1999, point 68. (34) EUWID (Europäischer Wirtschaftsdienst); price quotes are obtained from both customers and suppliers. (35) The Commission has estimated a simple model of supply and demand. The analysis has been carried out by Bruno Jullien of the University of Toulouse. The model is derived by combining the work of Christensen and Caves (1997) and of Pesendorfer (2000) on the pulp and paper industry. A demand has been estimated using two stage least square, accounting for the endogeneity and serial correlation of prices and based on quarterly data starting first quarter 1992 and ending the third quarter 1999. Cost analysis as well as an economic support for the analysis of collective dominance has been also carried out by Professor Jullien. (36) Source: the data bases have been constructed from the replies to the different Commission' s questionnaires of phase I and phase II investigation, OECD data and PPI data base. (37) Labour has been considered as fixed costs. Results of the analysis do not change when marketing and sales are considered as variable costs along with raw material and energy. (38) Form CO UPM-Kymmene/Haindl, p. 85. (39) Reply to Article 6(1)(c) decision, 24 August 2001, p. 17. (40) There exist two remaining paper-machine manufacturers worldwide: Valmet and Voith Sulzer. (41) Capacity figures are given for capacities installed in western Europe. About 10 % of the production is exported. (42) Capacity figures are given for capacities installed in western Europe. About 23 % of the production is exported. (43) Three of the top-suppliers have swing machines (Stora Enso, Haindl and Myllykoski). After the two mergers both UPM-Kymmene and Norske Skog would also have swing machines. Swing machines are paper machines which are able to produce either newsprint or magazine paper (in most cases SC-B). The time needed to implement a swing is limited (from a couple of hours to 1 to 2 weeks) and costs are not great. The advantage is to have more flexibility to shift capacities from one paper grade to another. As mentioned by the parties, the impact of swing machine on existing capacity may be significant. Such swing capacities may provide a possibility for short-run retaliation measures among the top-suppliers. (44) In the EEA, 10 % of newsprint production is exported; more than 20 % of wood-containing magazine paper production is exported. (45) Norske Skog-Lexecon (p. 31) stated that "As far as yearly contracts are concerned, there is no possibility of down time affecting prices". (46) UPM-Kymmene, response to the SO, p. 11.