Irish Competition Authority Decisions

1. Arrangements for the acquisition by Warner Lambert Ireland Ltd. of thirty four percent (34%) of the issued ordinary share capital of Plaistow Limited, (Plaistow), from Fraxinor Anstalt, (Fraxinor), were notified to the Competition Authority on 26 January 1993. The notification requested a certificate, or in the event of a refusal to issue a certificate, a licence. The Authority published notice of its intention to issue a certificate in the Irish Times on 16 September 1994 and invited observations from interested third parties. No submissions were received.

2. The notification relates to a Share Purchase Agreement dated 25 November 1992 between Warner Lambert Ireland Ltd. (the buyer) and Fraxinor (the seller) for the sale by Fraxinor of 34% of the issued ordinary share capital of Plaistow, located at Little Island, Co. Cork to Warner Lambert Ireland Ltd. Fraxinor owned the entire issued share capital of Plaistow with the exception of a small minority of shares with special rights. The acquisition was notified to the Minister for Industry and Commerce under the Mergers Acts and no order was issued.

3. Warner Lambert Company is the ultimate parent of Warner Lambert Ireland Ltd. Warner Lambert's subsidiaries in Ireland are involved in the pharmaceutical and confectionary businesses and manufacture pharmaceutical products for export. One of its subsidiaries is also engaged in distribution. It had a turnover of IR£32.6m in the financial year ended 1991, (IR£25.8m from manufacturing). Warner Lambert Company's turnover worldwide was US$4.8 billion.

4. Fraxinor Anstalt is an investment company based in Liechtenstein. It is not involved in manufacturing of bulk fine chemicals. Plaistow is a bulk fine chemical manufacturing company whose registered office is at Little Island, Co. Cork. At the time of the agreement Plaistow was a subsidiary of Fraxinor Anstalt and its entire share capital was owned by Fraxinor and Alva Holdings Limited, a trust organised under the laws of the British Virgin Islands. The gross profit of Plaistow for the financial year ended 1992 was IR£5,506,808.

5. Warner Lambert Ireland Ltd. submitted that there are two separate distinct markets involved in the arrangements, i.e. the pharmaceutical market and the bulk fine chemical market. Warner Lambert Ireland Ltd. operates only in the pharmaceutical market while Plaistow operates only in the bulk fine chemicals market. The relevant markets are those for pharmaceuticals and bulk fine chemicals.

6. In their submission, Warner Lambert Ireland Ltd. estimated that there were at least 183 pharmaceutical companies either established or operating in the Irish market. Many of these are multinational companies designed to respond to the influences of the volatile international markets as well as the EC's internal structures. Similarly, they estimated that there are 19 bulk fine chemical companies operating in the Irish market, again, many of these are multinational companies operating internationally. They estimated that the total market turnover of the pharmaceutical sector in Ireland was IR£952.9m while the turnover of the bulk fine chemical sector is IR£1,276m. The amount of' bulk fine chemicals' produced by bulk fine chemical companies is quite small in volume and weight as they actually produce the concentrate from which other products are derived.

7. The market in which Plaistow operates is that for the manufacture of custom fine chemicals. There are a large number of firms engaged in the custom fine chemical production business both in Ireland and overseas. Some of these produce specific products for particular customers. Although the chemical products produced by such firms are goods, in reality it appears that producers of this type are engaged in providing a service, namely the production of such chemicals to the customer's specifications. They compete with other similar producers for contracts to produce such goods. The buyers of such products provide the necessary know-how to produce them and, in effect, they are contracting out the task of producing the raw materials which they require. Such producers of custom fine chemicals compete for the business of producing such chemicals. Other fine chemical firms operate plants, designed to produce specific products, either for specific customers or for the market generally. In effect businesses dedicated to producing specific products compete with each other on a worldwide basis. The main users of fine chemicals are pharmaceutical companies, many of which could opt to produce such products themselves.

8. The arrangements relate to the sale by Fraxinor of 34% of the issued share capital of Plaistow to Warner Lambert Ireland Ltd. Plaistow is located at Little Island, Co. Cork and is involved in the business of manufacturing bulk fine chemicals. The notified arrangements consist of a Share Purchase Agreement, dated 25 November 1992, which provided for the acquisition by Warner Lambert Ireland Ltd. of 34% of the issued share capital of Plaistow under the terms and conditions set out in the agreement. The notified arrangements contained 14 Annexes as follows:

I Certified Copy of Buyers Board of Directors Resolutions

II Certified Copy of Sellers Board Of Directors Resolutions

III List of Shareholders of the Company as of Date of Execution of the Agreement

IV Draft Amended Articles of Association

V Initialled copy of Shareholders Agreement

VI Initialled Copy of Option Agreement

VII List of Company's Subsidiaries

VIII List of entities with 10% investment

IX List of Shareholders of the Company as of Closing Date

X 1991 Financial Statements

XI Environmental Exceptions

XII List of Material License Agreements an Material Contracts

XIII List of Affiliate Transactions

XIV Conduct of Business Exceptions

An ancillary Agreement, the Shareholders Agreement contained in Article V of the Share Purchase Agreement, provides for the transfer of the shares of Plaistow to Warner Lambert Ireland Ltd. In addition the Option Agreement in Article VI provides for the option to purchase 51% of the total share capital of Plaistow. There are no restrictive provisions in the arrangements.

Arguments in support of a certificate

9. Warner Lambert Ireland Ltd. submitted that the arrangements did not have the object or effect of preventing, restricting, or distorting competition within the State to any significant extent and that it was not abusing any dominant position. They pointed out that as the parties essentially operated in separate markets there was no appreciable effect on trade in either market. Alternatively they submitted that the benefits created by the link between the parties would allow for a strengthening of the companies in the respective markets. In support of their argument for a certificate, Warner Lambert Ireland Ltd. referred to the Authority decisions in Woodchester/UDT, General Semiconductor and ACT/Kindle, stating that the issuance of a certificate in each of these cases justified the issuing of a certificate in this case. In addition they indicated that the issuance of a certificate to the notified arrangements would be the most appropriate course of action as licences are an unsatisfactory and impractical method of dealing with concentrations due to the time restraints attached to a licence.

10. Section 4(1) of the Competition Act states that 'all agreements between undertakings, decisions by associations of undertakings and concerted practices which have as their object or effect the prevention, restriction or distortion of competition in trade in any goods or services in the State or in any part of the State are prohibited and void'.

11. Section 3(1) of the Competition Act defines an undertaking as ´a person being an individual, a body corporate or an unincorporated body of persons engaged for gain in the production, supply or distribution of goods or the provision of a service.' Warner Lambert Ireland Ltd. is a corporate body engaged for gain in the manufacture of pharmaceutical products and is therefore an undertaking. Fraxinor is engaged for gain in the manufacture of bulk fine chemicals through its ownership of Plaistow and is also an undertaking. Therefore the arrangements constituted an agreement between undertakings.

12. Under the terms of the agreement, Warner Lambert Ireland Ltd. has purchased 34% of the ordinary issued share capital of Plaistow. In addition the Option Agreement provided an option for the purchase of 51% of the total share capital by Warner Lambert Ireland Ltd. In the Authority's opinion the acquisition had no effect on competition in either the pharmaceutical or bulk fine chemical markets within the State since neither firm was engaged in the market of the other. The number of competitors in the market and the degree of concentration remains unchanged by the transaction. On the basis of the facts in its possession, the Authority does not believe that the agreement will restrict other firms' access to supplies of raw materials. Thus, in the Authority's opinion, the arrangements do not offend against Section 4(1).

13. In the Authority's opinion, Warner Lambert Ireland Ltd.and Fraxinor are undertakings within the meaning of Section 3(1) of the Competition Act, and the notified arrangements for the acquisition of 34% of the issued share capital of Plaistow by Warner Lambert Ireland Ltd. constitutes an agreement between undertakings. The Authority believes that the arrangements have no effect on competition within the State and do not offend against Section 4(1).

14. The Competition Authority has issued the following certificate:

The Competition Authority certifies that in its opinion, on the basis of the facts in its possession, the agreement between Warner Lambert Ireland Limited and Fraxinor Anstalt for the acquisition by Warner Lambert Ireland Limited of 34% of the issued share capital of Plaistow Limited, (notification no. CA/5/93), notified on 26 January 1993 under Section 7, did not offend against Section 4(1) of the Competition Act, 1991.

For the Competition Authority

Patrick Massey

Member

28 October, 1994.