On 17 April 2020, the Finnish Competition and Consumer Authority (FCCA) conditionally approved the merger in which Donges Teräs Oy will acquire Ruukki Building Systems Oy. The competition problems identified in the investigation were resolved by commitments given by the parties. As a precondition for the approval of the acquisition, Donges Teräs Oy undertook to sell Normek Oy’s Oulu production plant, which is part of the Donges Group.
The FCCA has investigated the competition effects of the acquisition between Donges Teräs Oy and Ruukki Building Systems Oy. Both parties are steel structure suppliers. FCCA was initially in-formed of the merger on 29 November 2019, with the FCCA opening further investigation into the merger on 9 January 2020, in the course of which the merger’s effects on competition were clarified in more detail.
According to the Authority’s investigations, the merger will have restrictive competition effects on the market of steel frame structures for business premises and industrial buildings, as well as on the market of turnkey deliveries of steel bridge structures. In addition to the parties, only a handful of large steel construction companies in Finland deliver turnkey solutions, and the market share of the parties of the merger is remarkably high, especially regarding steel bridge structures. In the steel frame structures of commercial and industrial buildings, the negative competitive effects particularly affect large steel frame structures or structures that are otherwise demanding.
According to customers consulted by the FCCA, after the merger, they would have fewer alternatives to suppliers of steel structures. Furthermore, due to reduced competition, an increase in steel structure prices would be a likely result, which would lead to a cost increase in construction projects that use steel frame structures.
Sales of Normek Oy’s Oulu production plant as a condition for approval of the merger
Competition issues arising from a corporate acquisition can often be eliminated by setting conditions for the acquisition. In mergers between competitors, competition problems are primarily eliminated through structural commitments, such as the sale of the business or its parts. The FCCA considers that the commitments presented by Donges Teräs are sufficient to eliminate the competition issues caused by the merger and to ensure that there will remain a competitive structure on the market.
Under the terms and conditions, Donges Teräs undertakes to sell the business of Normek’s Oulu manufacturing plant, part of the Donges Group, to a party that has the prerequisites for maintaining and developing the business. The part of the business to be sold is capable of operating as an independent unit and delivering turnkey solutions of various steel bridge structures and commercial and industrial buildings.
The FCCA decision issued contains business secrets concerning the parties, and it will be published only after the secrets have been removed.
Senior Specialist Jenna Huttu, tel. +358 29 505 3576
According to the Competition Act, a merger must be reported to the FCCA if the combined turnover of the parties to the concentration exceeds 350 million euros and the turnover of at least two of the parties resulting from Finland exceeds 20 million euros for both. The FCCA approves the merger provided that it will not result in any of the negative impacts mentioned in the Competition Act. The FCCA will intervene in the merger if its investigation indicates that the merger would significantly impede effective competition on the Finnish market or a substantial part thereof, in particular as a result of the creation or strengthening of a dominant position. If required, the processing of the mer-ger notification is carried out in two phases. The first stage lasts a maximum of 23 workdays. If the processing of the first stage reveals that the merger may have adverse effects on competition, the Authority will make a decision on transferring the matter for further processing, during which the merger and its competitive effects will be thoroughly investigated. The second stage lasts a maximum of 69 workdays. The Market Court may extend the deadline for the second phase by a maxi-mum of 46 working days. After the second stage has been completed, the FCCA may approve the merger as such if it will not cause harmful competitive effects. The FCCA will intervene in the mer-ger if it deems that it would have a significant anticompetitive effect on the Finnish market. The primary method for preventing any anticompetitive effects is to impose conditions, such as the obliga-tion to sell some part of the business. If the imposition of conditions does not result in a satisfactory result, the Market Court may, on the basis of a proposal submitted by the FCCA, prohibit the merger in its entirety.