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Issue 268
24 March 2006
CONTENTS
EU Developments
A victory of pre-notification talks - the Adidas / Reebok clearance
French parliament votes to break Apple’s market position
UK Developments
OFT raids five building firms over price rigging as construction industry investigation is widened
Celesio to appeal against OFT decision not to refer Boots/UniChem merger
Competition in the 2006 budget
French Developments
The French Competition Council orders Gîtes de France to delete or amend the exclusivity clauses imposed
on its members
Spanish Developments
Commercial Court in Madrid grants Endesa interim measures against Gas Natural's takeover bid
Summary of EU, UK, French and German Merger Notifications, Clearances and Invitations to
Comment
EU DEVELOPMENTS
A victory of pre-notification talks - the Adidas / Reebok clearance
Last week, the European Commission (the “Commission”) published its clearance decision in
Adidas/Reebok following a Phase I (one month) investigation. Adidas and Reebok are global players active
in the supply of sports and leisure footwear, clothing and equipment.
The Commission's investigation focused only on the market for athletic footwear in Europe. The
Commission examined the features of the athletic footwear market, such as the role of fashion, of
advertising and endorsement by "trend-setters", brand recognition, technological innovation and low-cost
labour manufacturing. The Commission focused both on the wide "athletic footwear" market definition, as
well as on narrower markets where the parties had higher overlaps, such as tennis and work-out footwear.
Its investigation revealed that the two merging companies have different brand and pricing positions,
targeting different customer groups. In addition, the Commission found intense competition from several
players with significant market shares and strong brands, including Nike. Finally, the Commission found that

often shoes in one category constrain the pricing of other categories. On this basis, the Commission cleared
the merger in Phase I without undertakings.
This decision evidences the importance of effective pre-notification discussions in getting the deal cleared
swiftly in a Phase I investigation. Although this merger was announced in August, it was only notified to the
Commission in mid-December, thus allowing five months during which the Commission reviewed the athletic
footwear section and the impact of the merger on competition. The Commission had time to look into
market shares in categories of sports footwear in national markets, to use an econometric model in order to
understand the demand for athletic footwear and to assess consumer preferences and brand perceptions in
relation to the parties' position in the market.
This case is an example of how a fairly complicated deal can achieve clearance avoiding a Phase II
investigation if the parties are prepared to “front-load” their case and assist the Commission in developing its
understanding of the markets and competitive assessment prior to notification.
French parliament votes to break Apple’s market position
On Tuesday 21 March, the French parliament voted in favour of legislation that would require companies to
remove copy-protection technology from their online music stores. Currently, technologies such as Apple’s
FairPlay format and Sony’s ATRAC3 code prevent consumers playing music purchased from one
company’s store on another company’s music player. The legislation would also legalise software which
translates music downloads from one format to another. The legislation was seen as an attempt to weaken
Apple’s market position in the online music market.
Renaud Donnedieu de Vabres, the French culture minister, said he would press for the new laws to be
adopted across the EU. Some commentators have suggested that Apple may close down its French iTunes
store if the legislation is passed by the French Senate.
UK DEVELOPMENTS
OFT raids building firms over price rigging
Following a raid on Mowlem, the construction group owned by Carillion plc since 23 February 2006, the OFT
has raided Bluestone, a subsidiary of Morgan Sindall plc, and the offices of three other construction and
services companies.
The raids are part of an OFT investigation into alleged price rigging in the construction industry, particularly
in the area of public sector contracts. The OFT is thought to be focusing on cover-pricing, which occurs
where competing companies purposefully submit inferior bids in order to assist another company secure the
work.
The OFT investigation is ongoing and further raids on construction companies are possible, particularly as
the OFT has identified the construction sector as a priority area in its latest Annual Plan (see Community
Week issues 167, 177, 216 and 219).
Celesio to appeal against OFT decision not to refer Boots/UniChem merger
Celesio, the German owner of the Lloyds high street pharmacy brand, is to challenge the OFT’s decision not
to refer the proposed merger between Boots Group Plc and Alliance UniChem Plc, to the Competition
Commission for further consideration under Section 33(1) of the Enterprise Act 2002. The OFT’s decision
announced on 6 February 2006, was subject under Section 73 of the Enterprise Act, to commitments from
the merging parties to divest pharmacies in those areas where the OFT concluded that there would be a
substantial lessening of competition. The OFT is currently consulting on draft commitments, under which
the merging parties would sell 98 such pharmacies. Interested third parties have until 29 March 2006 to
make their views on the proposed commitments known to the OFT.

Boots operates health and beauty stores in the UK the majority of which contain pharmacies. UniChem is
an international pharmaceutical distribution company with over 900 pharmacies in the UK. According to the
OFT’s decision, the merger would create the largest retail pharmacy chain with 19% of outlets in the UK.
Section 120(1) of the Enterprise Act provides that any person aggrieved by an OFT decision may apply to
the Competition Appeals Tribunal for a review of that decision. In the appeal notice, Celesio argues that the
OFT incorrectly based its assessment of competitive concerns on the local retail market, erred in its
reasoning, and failed to consider material factors relevant to the identification of competitive concerns
arising from the merger.
This is the third time such a third party appeal has been made to the Competition Appeal Tribunal. In the
two previous cases where third parties have been given leave to appeal, the OFT has been forced to reexamine
its decision not to refer.
In Case C1/2003/2771 IBA Health Limited v OFT (iSOFT/Torex), a case concerning the very nature of the
test to be applied by the OFT, the OFT was directed to reconsider its decision not to refer the proposed
merger between iSOFT Group Plc and Torex Plc. After an appeal to the Court of Appeal, the OFT
consequently decided not to refer on condition that certain commitments were given in respect of divestiture.
However, in Case 1049/4/1/05 UniChem Limited v OFT (Phoenix Healthcare Distribution/East Anglican
Pharmaceuticals) which concerned the proposed merger between Phoenix Healthcare Distribution Limited
and East Anglican Pharmaceuticals Limited, the OFT was directed to look again at its decision but did not
change its conclusions.
Competition in the 2006 budget
The Budget Report 2006 (the “Budget”) has discussed how competition in the EU internal market should be
strengthened and how action will be taken to ensure that barriers to competition are removed.
The Budget acknowledged that as competition is a key driver of productivity in the United Kingdom it ought
to be encouraged. The energy sector was one area in which active steps are to be taken towards
liberalisation. It was suggested that where the energy and other sectors fail to liberalise and open up to
competition they should be subject to independent investigation and enforcement.
The report, “Productivity in the UK”, which accompanies the Budget, concludes that the reform of the
competition regime has promoted consumer choice and protection and encouraged flexible markets and fair
dealing. The government have committed to monitor the progress made by the UK competition authorities
in their continuing attempts to remove barriers to competition.
FRENCH DEVELOPMENTS
The French Competition Council orders Gîtes de France to delete or amend the exclusivity clauses
imposed on its members
The French Competition Council (the “Council”) has imposed a fine of €10,000 on Gîtes de France for abuse
of a dominant position in the markets for branded self-catering cottages and guesthouses. The Council
considered that due to Gîtes de France’s dominant position (a market share of at least 70 per cent), the
exclusivity clauses it imposed on its members were abusive as they rendered Gîtes de France’s customer
base captive and allowed Gîtes de France to control all the marketing of accommodation under its brand.
The Council ordered that Gîtes de France delete or amend certain exclusivity clauses in the agreements it
enters into with its members. It further demanded that Gîtes de France allow its longer-standing members to
list their properties with rival organisations that also grade and advertise gîtes and chambres d’hotes. Gîtes
de France has four months in which to perform these measures or risk a periodic penalty payment of €150
per day for delay.

SPANISH DEVELOPMENTS
Commercial Court in Madrid grants Endesa interim measures against Gas Natural's takeover bid
Madrid’s Third Commercial Court (the “Commercial Court”) has ordered a suspension of Gas Natural’s
€22 billion (£15 billion) takeover bid for Endesa, Spain’s biggest power company. As part of the takeover
bid, Gas Natural offered to sell up to €9 billion in surplus assets to Iberdrola. It was intended that this asset
sale would eliminate possible regulatory hurdles and raise financing for the deal. Endesa alleged that the
asset sale agreement was an attempt to eliminate Endesa from the market and consequently was in breach
of Article 81 of the EC Treaty.
The Commercial Court granted an interim injunction against Gas Natural’s takeover offer pending a decision
on whether the side-deal with Iberdrola falls foul of competition law. Endesa must now decide whether to
deposit the €1 billion bond which would make the injunction effective. It is conceivable that Gas Natural will
now appeal the decision. Should it decide to do so, this will further delay not only Gas Natural’s takeover
bid, but also the rival bid of E.ON (see Community Week issue 264).
MERGER NOTIFICATIONS
UK
Carphone Warehouse Group / Tele2 UK Communications Limited - telecommunications
Carphone Warehouse Group / Onetel - telecommunications
FRANCE
GGBA / SAIP - retail sales of cars
Honeywell / Gardiner - distribution of alarm and security equipment
Vivendi Universal / Canalsat / TPS - pay TV
Deutsche Bank / Mi 29 / Bigben - production and distribution of video games
Vermilion / Esso - production and retail sale of oil products
GERMANY (including acquisition of shares or assets)
Ceram Tec AG / American Standard - ceramic sealing discs
Heraklith AG / Eurovek - rock wool
SEB / Berliner Ärzteversorgung (acquisition of assets) - real estate
Logistique 2 / LEG Stadtentwicklung (acquisition of assets) - real estate
Coherent, Inc. / Excel Technology, Inc. - laser products
Colony Investors u. Kingdom Hotels Inter. / Fairmont Hotels & Resorts - hotels
Agamemnon Vermögensverwaltung / Schuberth-Gruppe - manufacture and distribution of crash helmets
C.R.Bard / Venetec Int. - medical products
NTN Corp. / IFA-Antriebstechnik GmbH - car parts
DMT / Krombacher / Heinemann - drinks wholesaling
MUK Markt- u. Kühlhallen Bet. GmbH / Frigostar TK Logistik Spedition - logistics
Vattenfall Europe Power-Consult / Lausitzer Analytik GmbH - substance analysis
REMONDIS GmbH & Co. KG Südwest / AKM Limburg-Weilburg GmbH - waste disposal
The Scotts Company / Turf-Seed - turf seed
Saint Louis Cucre S.A. / Compagnie Financiere de L'Artois, Marconne - bioethanol
Silgan Holdings Inc. / Amcor Limited - packaging
DZ Equity Partner / Titan-Aluminium-Feinguss GmbH - foundry
Solar World AG / Shell Solar GmbH - solar energy
Microsoft Corp. / Vexcel Corporation - mapping software
3i Group plc / Marken Ltd., Marken S.A. - parcel delivery
P.H.Glatfelter Comp. / Simpson Clough Papierfabrik - non-woven fabrics
ISS Facility Services / Münchner Kindl Gebäudereinigung - industrial cleaning
Gagfah / LEG NRW u.a (acquisition of assets) - real estate
Bostik GmbH / Paso Vertrieb chem. techn. Produkte GmbH - sealants
General Dynamics / SNC Technologies - ammunition
Verlag Lensing-Wolff+Thomas Loop / Verlags- u. Vertriebsgesellschaft Münster mbH - classified
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EADS Space Transportation N.V. / Dutch Space B.V. - aerospace

VR-Leasing FAGURA KG / AS Privatstiftung, WSF Privatstift (acquisition of assets) - real estate
Kuok Oils & Grains / Clever Stolz Lebensmittelwerke - oils
ABN Ambro / Remy Cointreau S.A. and Avandis - alcohol, spirits
Cheil Industries Inc. / Agfa Photo GmbH - film
IMI plc / Truflo Group Ltd. - valves
Tuchenhagen / Huppmann and others. - food production machines
Honeywell Int. / Gardiner Groupe Europe - security systems
Remondis Prützke / Schweriner Abfallentsorgungs- u. Straßenreinigungsges. mbH - industrial cleaning
MERGER CLEARANCES
EU
Bain / Texas Instruments - manufacture of computers and other information processing equipment
Cegelec Holdings SAS / SAS Cegelec Financière - electrical and mechanical contracting services, project
management, maintenance services
Stadtwerke Düsseldorf AG / EnBW Energie Baden-Württemberg AG - energy and water supply, power
generation and distribution, supply of gas
United Broadcast Facilities / Allianz Capital Partner GmbH / Sofinim NV - telecommunications
Warner Bros. Entertainment Inc / CBS Corporation - online services, filmed entertainment, operation of
cable systems, production and delivery of television
UK
W&J Dunlops Ltd / Genusexpress Ltd - veterinary pharmaceuticals
FRANCE
Commerz Bank / Eurohypo - financial services
Cdc Capital Entreprises / Marc Orian - retail sale of articles of clock and watchmaking, jewellery and
goldsmithery
Barclays Private Equity France / Sogetrel - telecommunication network
Aalberts Industries / Comap - domestic fittings and devices for fluid regulation
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