European Commission Opens In-depth Investigation into Proposed Merger Between UPM-Kymmene and Myllykoski

The European Commission has opened an in-depth investigation under the EU Merger Regulation into the planned acquisition of sole control by UPM-Kymmene Corporation (UPM) of Myllykoski Corporation (Myllykoski, both of Finland, and Rhein Papier GmbH (Rhein Papier), of Germany, all active in the paper industry. The Commission’s initial market investigation indicated that the proposed merger could raise serious competition concerns, in particular because the merged entity's behaviour may not be sufficiently constrained by competitors on the market for magazine paper.. The decision to open an in-depth inquiry does not prejudge the final result of the investigation. The Commission now has 90 working days, until 19 July 2011, to take a final decision on whether the merger would significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.

On 28 January 2011 the European Commission received a notification of a proposed concentration by which the undertaking UPM-Kymmene Corporation (UPM) would acquire sole control of Myllykoski Corporation (Myllykoski) and Rhein Papier GmbH (Rhein Papier).

UPM is a worldwide company headquartered in Finland active in paper products, pulp, electricity, label-stock, sawn timber and wood panel products. Myllykoski is also a Finnish company active in paper products and pulp, with production sites in Finland, Germany and the United States and worldwide sales. Rhein Papier, which is managed by Myllykoski, manufactures paper and forest products in Germany and has sales worldwide.

The Commission’s initial investigation examined the situation in the publication paper market which consists of newsprint and magazine papers. Magazine papers include a number of types and qualities of paper used for printing, flyers, brochures, catalogues and magazines. It found that the proposed transaction would lead to high market shares in magazine paper overall and very high market shares in one segment, supercalendered papers. Supercalendered paper is a smooth paper used for magazines and catalogues and is obtained by pressing the paper between cylinders or rollers.

At this stage of the investigation, the resulting company would not appear to be sufficiently constrained in these market segments by the remaining competitors. The large majority of the customers that responded to the Commission's market investigation have expressed concern that the proposed operation could lead to higher prices for magazine paper.

The Commission will investigate the impact if the merger in-depth to see whether such initial concerns are confirmed or not.

Merger control rules and procedures

The Commission, in 1989, was given the power to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Art 1 of the Merger Regulation). The Commission clears the vast majority of mergers after a one-month review, but if it has competition concerns it must open an in-depth investigation (Phase II review).

The opening of a full probe does not prejudge its outcome.

There are currently two other Phase II investigations. They concern the proposed acquisition of the Sara Lee household insect control business by SC Johnson (see IP/10/1770 of 22 December 2010; deadline is 12 May) and the proposed joint venture between Citovita and Citrosuco, two Brazilian producers of orange juice (see IP/11/16 of 11January 2011; deadline is 19 May).

For statistics on EU merger control activity in 2010, including number of clearances with and without conditions, see:

http://ec.europa.eu/competition/mergers/statistics.pdf

More information on the case is available at:

http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=2_M_6101