IP/99/189

Brussels, 18th March 1999

Commission approves BAT/ROTHMANS merger in the manufactured tobacco sector

The European Commission has decided to clear a merger between the tobacco business of British American Tobacco plc ("BAT"), UK, and Rothmans International B.V. ("Rothmans"), The Netherlands. In the light of the investigation carried out under the Merger Regulation, the Commission found that the concentration will not create or strengthen sole or collective dominance in any of the European countries in the manufactured tobacco sector.

BAT’s group of companies manufacture, market and sell primarily cigarettes, and to a small extent, other tobacco products in Europe, America, Asia and others territories throughout the world. BAT’s most famous cigarette brands include State Express 555, Lucky Strike, Kent, and Barclay. It is the second largest manufactured tobacco company in the world (disregarding the China tobacco monopoly) with a 13% market share. Philip Morris is the world market leader with a 17% market share. Rothmans is a multinational company engaged in the manufacture, distribution and sale of tobacco products, including cigarettes, fine tobacco, pipe tobacco and cigars throughout the world. Its most famous brands include Rothmans, Winfield, Belga, Peter Stuyvesant, Dunhill and Lord Extra. It is the fourth largest manufactured tobacco company in the world with between 3 and 4 % market share. In the EEA the new entity will rank in second place behind the market leader Philips Morris. The latter is present mainly through its brand Marlboro (the most valuable brand in the tobacco sector and one of the most valuable brands in the world). Besides BAT/Rothmans and Philips Morris, in the EEA countries, other international companies also operate, like Reynolds and Japan Tobacco as well as European regional-based companies such as Gallaher, Imperial, Reemtsma, Seita, and Skandinavisk Tobakskompagni. Finally important national companies operate in Austria, Greece, Italy, Luxembourg, Norway, Sweden and Spain. Many of these companies are seeking to expand their geographic reach. The concentration affects the manufactured cigarettes and, to a lesser extent, “roll your own tobacco” (RYO). Although the manufactured cigarette products may be further segmented according to their characteristics relating to their presentation (packsize, length, packaging, diameter) or characteristics relating to the tobacco blend, taste and flavour, tar content, nicotine level, international/national brands, blond/black/menthol, the investigation carried out by the Commission has not found particular competitive concerns under the Merger Regulation in any possible segmentation. In the affected European national markets (Belgium, France, Germany, Greece, Luxembourg, Netherlands, and Norway) the existence of important international and national competitors in both cigarettes and RYO excludes the possibility of the new entity having any position of dominance. In those countries such as Belgium and, in particular, The Netherlands (where the new entity jointly with Philips Morris will have a strong combined market share in manufactured cigarettes) the conditions for collective dominance are not met. This is due chiefly to the fact that the position of the parties and Philips Morris in those markets is not symmetrical (Philips Morris with its brand Marlboro and others has achieved substantial growth in the last decade in European countries against a general decline of the mergers companies). In addition there are other well established competitors in those countries (like Reemtsma and RJ Reynolds). The Commission has therefore approved the operation.

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