Commission Clears the Acquisition by Pernod Ricard and Diageo of The

,3 Brussels, 08 may 2001 &RPPLVVLRQFOHDUVWKHDFTXLVLWLRQE\3HUQRG5LFDUG DQG 'LDJHR RI WKH VSLULWV DQG ZLQH EXVLQHVV RI 6HDJUDP 7KH (XURSHDQ &RPPLVVLRQ KDV DSSURYHGWKH DFTXLVLWLRQ E\ 3HUQRG 5LFDUG 6$ RI )UDQFH DQG %ULWLVKEDVHG 'LDJHR 3OF RI WKH ZRUOGZLGH VSLULWV DQG ZLQHEXVLQHVVRIWKH6HDJUDP&RPSDQ\/WG&DQDGDIURP )UDQFH¶V 9LYHQGL 8QLYHUVDO 6$ $FFRUGLQJ WR D )UDPHZRUN $JUHHPHQW DJUHHG EHWZHHQ WKH DFTXLULQJ SDUWLHV PRVW LPSRUWDQW EUDQGV DQG DVVHWV RI 6HDJUDP ZLOO EH GLYLGHGEHWZHHQ3HUQRG5LFDUGDQG'LDJHRZKLOHDQXPEHURIRWKHUEUDQGV DQG DVVHWV ZLOO EH VROG WR WKLUG SDUWLHV ZLWKLQ D GHILQHG WLPH SHULRG 7KH &RPPLVVLRQ¶V FOHDUDQFH LV FRQGLWLRQDO RQ WKH IXOILOPHQW RI WKH VDLG DJUHHPHQW WKH VDOH RI WKH µ)RXU 5RVHV¶ %RXUERQ ZKLVNH\ EUDQG WR D WKLUG SDUW\DQGRQWKHVHSDUDWLRQRIWKHGLVWULEXWLRQRIWKHµ&DSWDLQ0RUJDQ¶UXP EUDQGLQ,FHODQGIURPWKHGLVWULEXWLRQRIRWKHU'LDJHREUDQGVWKHUH The Seagram Spirits & Wines Group is the owner of a number of leading spirits brands, for example, “Chivas Regal”, “Glenlivet” and “Bourbon Four Roses” whiskies, “Captain Morgan” rum and “Martell” cognac. Seagram’s spirits division is part of the Seagram company which also includes the Universal film unit and which was bought by Vivendi in December 2000. Both Pernod Ricard and Diageo also produce and distribute spirits world-wide. The main spirits brands of Pernod Ricard include “Clan Cambell” Scotch whisky, “Bisquit” brandy and “Ricard”, the leading flavoured spirit in France. Diageo was created in 1997 through the merger between *UDQG0HWURSROLWDQSOFDQG*XLQQHVV SOF. Diageo owns a number of leading spirits brands such as “Johnnie Walker” Scotch whisky, “Smirnoff” vodka, “Baileys” liqueur and Gordon’s Gin. The operation arises from a joint bid by Pernod Ricard and Diageo for the world- wide spirits and wine business of the Seagram Company Ltd. The commercial rational of the transaction is to enable each of the notifying parties to acquire and retain certain parts of Seagram for integration into their respective businesses. The remaining parts of Seagram will be sold to third parties within a fixed time period. The parties’ intentions as to the destination of each brand are set out in the Framework Agreement. Commission decision of 15 October 1997 in Case IV/M.938 - *XLQQHVV*UDQG 0HWURSROLWDQ The Commission’s investigation confirmed that the spirit market can be segmented into individual spirit categories such as whiskey, rum, gin, vodka, tequila, and flavoured spirits. In the case of whiskey and brandy these categories may be further subdivided (Scotch whisky, Cognac/Armagnac for example). In past cases concerning spirits and alcoholic beverages, and in particular in *XLQQHVV*UDQG 0HWURSROLWDQ, the Commission considered the relevant geographical markets to be essentially national in scope due to differences in consumption patterns, logistic and distribution networks, marketing strategies, taxation, excise duties, legislation, etc. This market definition was confirmed by the Commission’s inquiry in the present case. The six-week examination of the transaction identified competition concerns in two areas. First, the Commission found that, in Iceland, the addition of the locally dominant rum brand “Captain Morgan” to the already strong position held by Diageo might give rise to competition problems. Secondly, it was considered that the acquisition by either Diageo or Pernod Ricard of “Four Roses” Bourbon whiskey could give rise to competition concerns in a number of national markets. To address these potential concerns, the parties undertook that the distribution of the “Captain Morgan” rum brand in Iceland would be separated from the distribution of other Diageo brands and that the “Four Roses” Bourbon whiskey brand would be sold to third parties. The parties also pledged to fulfil the Framework Agreement. They also undertake to put in place specific safeguards and firewall measures and procedures to avoid any potential competition concerns during the allocation of the assets and their management during the transition period. An independent Trustee will be appointed to monitor the allocation of the Seagram brands and the operation of the firewalls. The Commission concludes that the commitments given by the parties are sufficient to remove the competition concerns identified by the Commission during its investigation. The Commission examined the impact of the joint acquisition only in the European Economic Area, which is made up of the 15 European Union states plus Norway, Iceland and Liechtenstein. The review has been carried out in close co-operation with the EFTA Surveillance Authority. The case is also being examined by the US Federal Trade Commission. 2.

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