,3 Brussels, 08 May 2002

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7KH(XURSHDQ&RPPLVVLRQKDVJLYHQFRQGLWLRQDODSSURYDOWRWKH SURSRVHG DFTXLVLWLRQRI*HUPDQFLJDUHWWHPDQXIDFWXUHU5HHPWVPD&LJDUHWWHQIDEULNHQ *PE+ E\ ,PSHULDO 7REDFFR *URXS 3OF RI WKH 8QLWHG .LQJGRP 7KH DFTXLVLWLRQZKLFKZLOOSURSHO,PSHULDO7REDFFRWRWKHILIWKSODFHLQWKHZRUOG FLJDUHWWH PDUNHW DQG WKLUG LQ WKH (XURSHDQ 8QLRQ UDLVHG FRPSHWLWLRQ FRQFHUQV LQ WKH 8. PDUNHW IRU ORZ SULFHG FLJDUHWWHV EXW WKH XQGHUWDNLQJV RIIHUHGIXOO\DGGUHVVHGWKHVHFRQFHUQV7KH&RPPLVVLRQ¶VDQDO\VLVLVDOHJDO RQHEDVHGRQWKHFRPSHWLWLYHDVVHVVPHQWRIWKHWUDQVDFWLRQFRQFHUQHGDV UHTXLUHGXQGHUWKH(8¶VPHUJHUFRQWUROODZ Imperial Tobacco is the world’s ninth biggest cigarette manufacturer with a leading position in Britain. Imperial Tobacco manufactures and sells a range of tobacco products, including Superkings, Lambert and Butler, Embassy, John Player Special, Regal and Richmond cigarette brands, Drum “roll-your-own” tobacco and Rizla cigarette papers. Reemtsma is currently the world’s fifth largest cigarette manufacturer and a leading supplier in Germany and in several Eastern European countries. It supplies the leading West and Davidoff cigarette brands. Whilst the acquisition will result in substantial additions of market shares in several product markets in Germany, Italy and the United Kingdom, the activities of the parties are mostly complementary and the investigation did not reveal any substantial competition concerns, with the exception of the UK cigarette market. A close analysis showed that Imperial Tobacco and Gallaher are the clear leaders in the UK cigarette market with Gallaher being particularly strong in the premium brand segment whereas Imperial Tobacco’s strength is more in the low priced sector. Competitors Philip Morris, BAT and Reemtsma have comparatively small market shares despite the first two being world leaders in the sector. However, Reemtsma’s UK business occupies an interesting place in the market, as it is mostly focused on the supply of own-label cigarettes to the UK supermarket and cash-and-carry chains, for which it is the only significant supplier at present. Own-label usually refers to products whose trademark is exclusive to the distributor who owns it. Contrary to this usual situation, Reemtsma owns many of the own-label cigarette trademarks such as Red Band in the United Kingdom, even if exclusivity is granted in the short term to distributors. This is because supermarkets, although willing to sell cigarettes, are reluctant to see their name associated with this particular product. Imperial Tobacco’s acqusition of Reemtsma would risk putting these distributors in a weak negotiating position YLVjYLV Imperial Tobacco, as they could experience significant difficulty in changing their supplier. The acquisition of Reemstma would therefore give Imperial Tobacco not only a strong position in the low priced cigarette sector but would also establish it as the only supplier of own-label cigarettes. As “own-label“ cigarettes are a significant source of competition in the UK market and particularly in the lower priced sector, this situation gave rise to serious competition concerns. To alleviate these concerns Imperial Tobacco has undertaken not to develop the trademarks for its own account and to maintain the exclusivity distributors currently enjoy. It also undertook that in the event ‘own-label’ distributors were to find other suppliers in the future, they would retain the trademarks at stake. These undertakings remove the dependency of distributors on Imperial Tobacco by allowing them to change supplier easily and will ensure that “own-label” cigarettes continue to be an effective source of competition in the UK market.

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