Translation from Romanian

ROMANIA THE COMPETITION COUNCIL

DECISION No. 245/22 December 2006 on the authorization of the economic concentration by takeover of sole control over S.A. Luxembourg by NV, the Netherlands

THE COMPETITION COUNCIL based on:

Presidential Decrees no. 57/17.02.2004, 1087/06.09.2006, 1088/06.09.2006 and 1089/06.09.2006 on the appointment of members in the Plenum of the Competition Council;

Competition Law no. 21/1996, as republished;

The Regulation for the organization, operation and procedure of the Competition Council, as further amended;

The Regulation on the authorization of economic concentrations, as further amended;

The Guidelines on the definition of the relevant market in order to determine a substantial part of the market;

The Notification of the economic concentration, registered under no. RS-892/11.09.2006 with the Competition Council; The acts and papers to the case file no. RS-892/11.09.2006;

The Note of the Industry and Energy Department in relation to the notified economic concentration, registered under no. AG/478/21/012/2006 Considering the following:

1. On 11 September 2006, the Competition Council received a notification on a proposed economic concentration to be made at an international level, by the acquisition of sole control over Arcelor SA, Luxembourg, hereinafter called “Arcelor”, by Mittal Steel Company NV, the Netherlands, hereinafter called “Mittal”, via a public offer announced on 27 January 2006 and finalized on 28 August 2006. The notification was made in accordance with the provisions of art. 10 para. 2 let. b of Competition Law no. 21/1996, as republished, and it became effective on 11 December 2006.

2. The concentration operation was submitted to the review of the European Commission, according to the provisions of Regulation no. 139/2004 on economic concentrations. Further to the review of the operation and corrective measures proposed by Mittal, the European Commission did not oppose the notified operation, declaring that it is compatible with the common market and the European Economic Agreement (EEA); in this respect, it issued a decision to which Mittal’s commitments became conditions and obligations (Case No. COMP/M.4137-MITTAL/ARCELOR). I. PARTIES

Mittal Steel, controlled by Mittal family, is the largest world steel producer. Mittal is a company registered in the Netherlands and listed on the New York and Amsterdam stock exchanges. By the controlled companies, its core activities include the production and trade with semi-finished steel products, flat steel products, long steel products, as well as welded and non-welded pipes. Mittal Steel is also active in the production and sale of raw materials used in the steel production, such as iron ore and coke, and in the upstream operations, such as wire processing. Arcelor is the largest European steel producer and the second world steel producer. Arcelor Group was created in 2002 by the merger of the European steel producers Acelaria, and Usinor. Arcelor is listed on the Brussels, Luxembourg, Paris and Madrid stock exchanges. By the controlled companies, its main activities include the production and trade with semi- finished steel products, long and flat products, carbon steel, stainless steel and high alloy steel. II. NATURE OF THE CONCENTRATION OPERATION

Further to the acquisition of 93.72% of the issued share capital and a total of 93.8% of Arcelor’s voting rights, Mittal acquired the sole control over Arcelor, the operation being qualified as an economic concentration made in accordance with the provisions of art. 10 para. 2(b) of the law.

III. SIZE OF THE ECONOMIC OPERATION The transaction was notified to the Competition Council in accordance with the provisions of art. 15 para. 1 of Competition Law no. 21/1996, as republished, the parties involved in the concentration operation realizing in year 2005 global turnovers of more than EUR 10 million and two of them realizing during the same period in Romania turnovers exceeding EUR 4 million.

IV. RELEVANT MARKETS The relevant market is the context in which the market power of the economic entity resulting from the economic concentration is assessed.

THE RELEVANT PRODUCT MARKET The operation refers to the production and direct sale of steel products and other collateral activities, including steel raw materials and distribution of steel products.

As regards the production and sale of steel products, in its previous decisions1, the Commission drew a distinction between 4 categories of finished products: (I) carbon steel, (II) stainless steel, (III) high alloy steel and (IV) electrical steel. The steel products thus classified are different in terms of chemical composition, price and final applications. Mittal’s and Arcelor’s businesses overlap only in respect to carbon steel products, therefore this decision refers only to them.

As regards the production, there are two production procedures:

1 Case No. IV/ECSC.1268-Usinor/Cockerill Sambre., Case No. COMP/ECSC.1351-Usinor/Arbed/Acelaria

2 - the integrated system, involving the highest investments and the production of liquid steel from iron ore and coal, which is then transformed in an electric converter; the chemical composition is adjusted immediately or subsequently;

- the electric system, where scrap iron and sometimes cast iron are melted; the chemical composition is adjusted subsequently. The resulting liquid steel is continuously cast, in order to obtain semi-finished products, which are then rolled in order to get the various steel products.

There are various types of semi-finished products, obtained by the continuous casting of liquid steel. According to the previous decisions of the Commission2, the following categories of semi-finished products may be taken into account: (I) blooms – used for the manufacture of heavy sections, (II) billets – used for the manufacture of bars, wire rod and light sections and (III) slabs – used for the manufacture of flat products. The Commission did not determine whether all the three types of semi-finished products represent a single relevant product market3. However, the accurate definition of the relevant product market, for the purpose of this transaction, may remain open, since Mittal and Arcelor do not overlap on this product market in Romania.

The finished products, under the form of flat products (the raw material being slabs) and long products (the raw material being blooms and billets), are obtained through the subsequent rolling of semi-finished products.

The Commission deemed, in the previous cases, that flat products represent a relevant product market which is different from the long products market4. These two types of carbon steel products are manufactured on different rolling mills and they are used for different final applications. 1. Flat carbon steel products

There are 3 stages in the manufacture process of flat carbon steel products: (I) hot rolling, (II) cold rolling and (III) coating. The finished products may be sold in any of these stages, which accounts for the distinction made among these 3 categories of flat products. Mittal informs that the hot rolled products (HRP), the cold rolled products (CRP) and coated products (CP) differ from one another in terms of their technical features. Especially the surface quality and the corrosion strength of HRP and CRP are lower than CP’s. The price level differs from one category to another. Considering the above, it may be concluded that there are no competitive constraints among said products and therefore they represent different relevant product markets. Mittal’s and Arcelor’s businesses overlap on these markets in Romania.

1.1. Hot rolled flat products

2 Case No. COMP/ECSC. 1351-Usinor/Arbed/Acelaria 3 Case IV/ECSC.1310-British Steel/Hoogovens 4 Case No IV/ECSC.1329- Usinor/Cockerill Sambre, Case No. IV/ECSC.1268-Arbed/Acelaria, Case No IV/ECSC.1243 Krupp Hoesch/Thyssen, Case No IV/ECSC.1264-Acelaria/Aristrain.

3 HRPs are used in the automotive and construction industries, as well as in the manufacture of pipes and tubes for the transportation of petrochemical products, in the naval industry and generally in the machine industry.

HRPs are manufactured under the form of heavy plates and strips of various rolled widths and thicknesses. According to the decision-making practice of the European Commission5, heavy plate is a relevant product market differing from hot rolled strips. The two categories of products are manufactured on different rolling mills, have other sizes, especially the thickness, and they are used in different applications and at different prices. Mittal’s and Arcelor’s businesses overlap on the hot rolled strips market and therefore, for the purpose of this transaction, the effect of the concentration on this market is assessed from a competitive point of view. 1.2. Cold rolled flat products

CRPs are actually hot rolled products which have been subsequently processed. Cold rolling reduces the thickness of hot rolled flat products and provides a higher accuracy as regards size, a smoother surface and higher resistance.

The cold rolled strips and sheets are subsequently processed by the steel producers into coated carbon steel products. The remaining quantity is sold for various final applications, to the automotive, packaging, transportation industries, machine-tools producers, constructions, furniture and welded pipes products. A small quantity is also sold to distributors, which resell it for the same final applications, but in small quantities. According to the previous decisions of the Commission6, cold rolled strips are a distinct relevant product market within the flat steel products. The cold rolled strips market is assessed from a competitive point of view, since both Mittal and Arcelor are active on this market in Romania. 1.3. Coated flat products

Metallic coated steel products – the metallic coating may be obtained by two distinct processes: hot dip (“HD”) and electrical galvanizing (“EG”). Based on the latter process, the hot or cold rolled steel enters a zinc bath at 460°C, which thus coats all exposed areas with zinc. In certain cases, the metal subsequently receives an additional treatment, which converts the coating into a zinc/iron alloy (8-12% iron), facilitating the welding at the customer’s premises (“galvanizing-annealing”). The EG steel is obtained by applying an electrolytic coating at one or both band ends, which are then coated in either pure zinc, or a zinc/nickel alloy. The metallic coated steel is mainly used in 3 end sectors: the automotive industry, constructions and home appliances. In its previous decisions7, the Commission deemed that, no matter which are processes further to which the zinc coating is obtained, the metallic coated steel products represent a distinct relevant product market. Organic coated steel products – hot dipped galvanized steel (or, more rarely, cold rolled steel) may be further processed by adding a thin layer of organic coating (in most cases,

5 Case No. COMP/ECSC. 1351-Usinor/Arbed/Acelaria 6 Case No. COMP/ECSC. 1351-Usinor/Arbed/Acelaria 7 Case No. COMP/ECSC. 1351-Usinor/Arbed/Acelaria, Case No. IV/ECSC.1268-Usinor/Cockerill Sambre, Case No IV/ECSC.1269-Solac/Acelaria/Solmed.

4 paint). The organic coating steel sheets may be used for many applications requiring corrosion resistance and an attractive appearance. The organic coated steel is traded in the construction industry (e.g. for roofs, drain pipes, garage doors, etc.) and, to a lesser extent, it is traded by furniture and home appliances producers.

In its previous decisions8, the Commission deemed that metallic coated steel products represent a distinct product market.

For the purpose of this transaction, an assessment shall be made on the coated carbon steel products, generically called the galvanized products market, since Arcelor and Mittal are active on this market.

2. Long carbon steel products

The manufacture of long steel products involves different equipment and manufacture procedures. For the manufacture of long products, the billets and blooms and initially reheated and then repeatedly rolled in order to obtain the exact form which is required. There are several categories of long products: sections, which may be light and heavy, wire rod, reinforcing bars and merchant bars.

In its previous decisions9, the Commission defined as distinct relevant product markets each of the said categories. For the purpose of this transaction, the product markets on which Mittal’s and Arcelor’s businesses overlap in Romania shall be analyzed.

2.1. The merchant bars are manufactured from billets, on the bar or medium section rolls and may have round, square or hexagonal shapes. Merchant bars are generally sold to producers, steel service centres and other manufacturers for cutting, bending and shaping into a variety of products. The final applications are in the automotive and machine and construction industries.

2.2. Sections

The sections are manufactured by the repeated passing of billets and blooms through the rolling mill, thus decreasing the size of the steel and changing its shape. The sections may have various shapes (“I”, “H”, “T” and “U”). Depending on their size, the sections are divided into: (I) light sections and (II) heavy sections, which in their turn also include (III) medium sections.

2.2.1. Light sections have in general a size below 80 mm; the main three shapes are: angles, “T” and “C” and they are widely used in constructions. All light sections may be manufactured at the same rolling mill.

2.2.2. Heavy sections (beams) are manufactured from re-heated blooms are they are especially used in the constructions industry. They include structure sections (“I”, “H” and “U”), mine shaft beams, rails and sheet piling. The top association in the steel industry, Eurofer, classifies as heavy sections all sections exceeding 80 mm. However, from the point of view of production, sales and specific uses, the sections with sizes ranging from 80 mm to

8 Case No. COMP/ECSC. 1351-Usinor/Arbed/Acelaria 9 Case Rautarruki/SKF/JV, LNM/PHS-Case no. M 3747 and Acelaria/UCIN-Case ECSC.1313

5 250 mm may be defined as medium sections (they are also produced on medium rolling mills) and those exceeding 250 mm are produced only from blooms on heavy sections rolling mills.

For the purpose of this transaction, the two markets, as they were also defined by the European Commission, and on which Mittal’s and Arcelor’s businesses overlap in Romania, i.e.: light sections market and heavy sections market, shall be assessed.

In the submitted notification, the parties identify other two relevant product markets:

3. Construction steels

Within the sector of steel elements for construction, two distinct product markets can be considered relevant: the market for construction sheets (or profiles) and the market for panels10. Sections are flat steel products, galvanized and pre-coated, used in the construction industry for cladding, roofing and decking. They are produced by passing coated strip through profiled rollers. They do not have thermal insulation properties.

Sandwich panels are made of an insulating core (generally polyurethane foam but also mineral wool or other materials), coated by two steel facings and aimed at guaranteeing good thermal insulation. Panels are mainly used for cladding or roofing and are used in the construction of industrial and agricultural buildings. They are used less frequently for public buildings. The main users of panels are therefore carpenters, roofing companies and stockholders.

The following elements are different for construction sheet profiles on the one hand and sandwich panels on the other hand: (i) technical characteristics of the products: as indicated above, contrary to panels, profiles do not have thermal insulation properties; (ii) average price: the average price of sections is two or three times lower than the average price of sandwich panels.

Both types of products are used in the construction of industrial, agricultural, public and residential buildings. On the construction steel market, there are no overlaps between the activities of the two companies, only Arcelor, through its subsidiary Kontirom, being active in Romania.

4. Distribution of steel products

The distribution is different from the production and direct sale of steel products. This approach is based on the rationale that those two markets differ on several points: the number of customers, the size of order, the ability to respond rapidly to customer requirements (delivery times from steel mills are usually measured in weeks if not months, while distributors work in hours or days), the geographic scope of the business and the number of companies involved in the business11.

10 Decision of 11/08/97 in Case IV/M.925 Thyssen/Krupp, Decision of 15/07/99 in Case IV/M.1595 British Steel/Hoogovens at §§8-9 and also Commission Decision of 04/02/99 in case IV/M.1329 Usinor/Cockerill at §§13- 15. 11 Decision of 04/02/99 in Case IV/M.1329 Usinor/Cockerill at §17; Decision of 20/08/96 in Case IV/M.760 Klöckner/Arus at §10.

6 This conclusion is reinforced by the fact that whilst steel producers generally have a fully- fledged range of distribution activities, there are many independents operating on the steel distribution market. The Commission, in its previous decisions12, divides the steel distribution market in tree sub- markets: (1) steel service centres; (2) stockholding centres; and (3) oxycutting centres (steel cutting centers by thermal means). These distribution channels shall be further divided depending on the traded group of products.

For the purpose of this transaction, the accurate definition of the market may remain open, because only Arcelor is active in Romania on this market.

Therefore, the relevant product markets, for the proposed concentration, are defined as follows: 1. Hot rolled carbon steel strips market

2. Cold rolled carbon steel strips market

3. Coated carbon steel plates and strips market 4. Carbon steel merchant bars market

5. Light carbon steel sections market

6. Heavy carbon steel sections market 7. Construction steels market

8. Stockholding market

GEOGRAPHICAL MARKET For the purpose of this transaction, the Romanian territory shall be deemed as the relevant geographical market.

V. ASSESSMENT OF COMPETITIVE ENVIRONMENT As it is upheld in Mittal’s notification, but also on the basis of the Romanian market research by the Competition Council, on six product markets, as they were defined, for the purpose of this transaction, there are horizontal overlaps between Mittal’s and Arcelor’s businesses, which were subject to a careful assessment of the concentration effects on these markets. Mittal ensures more than 95% of the necessary products for the domestic offer and only a small quantity from its subsidiaries in Poland, the Czech Republic or France, while Arcelor is present in Romania only through imports from its subsidiaries from outside Romania (Arcelor does not hold production capacities in Romania).

The other two identified relevant product markets, i.e.: the construction steel market and the stockholding market are not horizontally affected, because there are no overlaps between the businesses of the two companies and therefore they do not raise any competitive issues.

1. Market of hot rolled carbon steel strips

12 Case No IV/M.918-Klockner/ODS. Case No. IV/M971-Klockner/Comercial de Laminados. Case No IV/M.1329 Usinor/Cockerill Sambre.

7 The market leader is Mittal Steel, which, by the Galati works, ensures, even before the concentration operation, more than 70% of the Romanian market needs, (…). The consumers have the tendency, but also the sure possibility to purchase supplies from other sources (import); according to the statistics, approx. 30% of the imports come from EU member states and approx. 55% from other countries with which Romanian has bilateral agreements; no customs duties apply to these imports (Turkey, Norway, Bulgaria, etc.). Approx. 10% of the imports come from the former CIS countries (Russia, Ukraina) and they are subject to 20% customs duties. On the market of hot rolled strips, the proposed transaction does not lead to the consolidation of Mittal’s position or to the significant change or distortion of competition environment, because Arcelor’s presence is below 3%. Therefore, the operation does not raise competition issues on the Romania hot rolled bands.

2. Market of cold rolled carbon steel strips

The need of consumers on the cold rolled strips market is ensured both from Romania and from imports, the highest percentage of imports coming from UE member states and Turkey.

The concentration operation does not raise competition issues, Arcelor’s presence being below 2% of the total apparent consumption, and the new entity Arcelor Mittal will have a percentage below 35%. Mention must be made that this market has also opened more in 2005 as compared to 2004, (…). This is due to the competitive pressures of imports.

3. Market of carbon steel coated plates and strips The offer on the relevant market, no matter if we refer to metallic (galvanized) or non- metallic covering, is ensured by the sole Romanian producer, Mittal Steel Galati, which prior to the operation held a market share of approx. 40%, (…), but also by many imports, mostly from UE member states. As on the hot rolled strips market, Arcelor’s presence is low, below 7%, therefore the operation does not lead to the significant consolidation of the new entity and does not amend or distort competition on the relevant market.

4. Heavy sections market

The main players on the market hold the following market shares:

2004 2005 Company’s Name Market share (%) Market share (%)

Mittal Hunedoara [15-25] [15-25]

Mittal Poland (import) [0-10] [0-5]

Mittal the Czech Republic (import) [0-5] [0-2]

8 Arcelor (import) [0-5] [10-15]

Combined [35-40] [35-40]

Mechel Steel Group [0-20] [0-20]

TMK-Resita [0-10] [0-10]

Laminorul [10-15] [0-10]

Laminate [15-20] [15-20]

Other imports [0-10] [0-10]

Prior to the performance of the concentration operation, the necessary commodities on the heavy sections market was ensured, in a balanced manner, but Romanian producers and imports, each with market shares below 30%. After the operation, the new entity would increase its market share with approx. 10%. The consolidation of the new entity’s position also raised competitive issues on the common market of the Economic European Area, where the concentration would have offered Mittal Arcelor enough market power (share above 45%) to prevent its competitors from answering to the unilateral decisions of price increase or production decrease. Moreover, the Commission took into account that no increases in the competitors’ capacities are expected on the heavy sections market, and that, due to the high level of investments for these types of rolling mills, no Greenfield operations are forecasted either. To eliminate the Commission’s concerns, Mittal presented a package of remedies, which became conditions of the Commission decision, and which envisaged the transfer of three heavy sections producers belonging to the group: Mittal Poland (Huta Bankowwa), Stahlwerk Thuringen GmbH (Arcelor) and Travi e Profilati di Pallanzeno S.p.A. (Arcelor).

From the review, it followed that, by the remedies provided to the Commission, the Competition Council’s concerns are also eliminated, taking into account that a significant percentage in the consolidation of the new entity’s position (approx. 10%) were the imports made from Huta Bankowa (approx. 5%) and from Stahlwerk Thuringen GmbH (approx. 3%).

Under the new circumstances, the new entity will not consolidate its position on the market and will continue to face the competitive pressure of the other players on the heavy sections market, as they were presented in the table above.

5. Light sections market The concentration operation on the light sections market does not raise competitive issues, the combined shares of the new entity amounting to approx. 20% of the aggregate consumption. 6. Merchant bars market

As in case of the light sections market, the concentration operation on the merchant bar market does not raise competitive issues, the combined shares of the new entity amounting to approx. 16% of the aggregate consumption.

9 For the definition of relevant markets, two other markets were identified, which however do not raise competitive issues, only Arcelor being active in Romania on such markets, therefore there are no horizontal overlaps, and their presence on the market is below 3%.

7. Construction steel market

Arcelor is active on this market by its subsidiary Kontirom. It produces and distributes folded plate, thermal insulating panels, sheet metal elements, galvanized accessories and sections for metallic structures. The main beneficiaries are residential and industrial construction companies. According to the information sent in the notification, the main competitors are Romanian companies: Metal Plast, Romatermit Construct, Korau-European Panel, Oltchim, Mega Profil, Lindab, Ranila Romania, Coil Profil, as well as foreign companies: Isobau Hellas – Greece, Kingspan – the Czech Republic, Montecno and Isopan SPA – Italy, Hoesch – Germany, Ruuki – Sweden, Salzgitter and Montana – Austria.

According to the notifying party, Kontirom may range 8th on this market.

8. Stockholding distribution market Arcelor is active on this market by its subsidiary Arcelor Distributie. This imports various steel products from the producer companies in the group, which it resells to beneficiaries from Romania. There are no statistics on the size of the stockholding distribution market but, as the parties are held and as it also follows from the Competition Council research, there are many wholesale distributors of steel products in Romania which create a high competitive pressure on this market: Mairon, Baduc, All-Pic, Constam, Tirana Export, Bad, Ramoss, Kronmat, Adimet 2005, Melinda 2004, Andamid, Metabrass, Transcom, etc. According to Arcelor’s estimates, its distribution activity holds less than 3% of the aggregate market.

Considering that the proposed economic concentration does not lead to a change in the structure of markets of flat carbon steel products, light sections and rolled bars, construction steels and stockholding distribution, and, on the heavy sections market, further to the conditions imposed by European Commission decision and therefore it does not lead to the consolidation of the new entity position and does not have as effect the restraining, hindering or distortion of competition on the relevant markets,

It hereby decides:

Art. 1. According to the provisions of art. 46 para. 1 let. b of Competition Law no. 21/1996, as republished and point 138 let. b) of the Regulation on the authorization of economic concentrations, a non-objection decision is issued, finding that, although the notified economic concentration operation falls under the scope of the law, there are no doubts on its compatibility with a normal competitive environment on the relevant markets.

Art. 2. The authorization fee, provided at art. 32 para. 2 of Competition Law no. 21/1996 as republished, amounts to RON (…) and shall be paid within no more than 30 days as of the communication of this Decision, by treasury payment order to the State budget. A copy of the payment order shall be sent immediately to the Competition Council.

Art. 3. This Decision becomes applicable as of the date of its communication to the parties.

10 Art. 4. The Decision of the Competition Council may be challenged, according to art. 47 para. 4 of Competition Law no. 21/1996, as republished, within 30 days as of its communication, with the Bucharest Court of Appeal, Administrative Claims Division.

Art. 5. According to the provisions of art. 57 para. 1 of Competition Law no. 21/1996, as republished, this Decision shall be published on the internet page of the Competition Council. Art. 6. The Department of Industry and Energy and the General Secretariat shall supervise the enforcement hereof.

Art. 7. This Decision shall be communicated by the General Secretariat of the Competition Council to:

Mittal Steel Company NV, the Netherlands, By Raluca Tiparu – lawyer at TUCA ZBARCEA & ASOCIATII Law Firm. Bucharest, America House, 8th floor, sector 1 Tel: (21) 204 88 90 Fax: (21) 204 88 99 Mihai Berinde

President

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