(wrt an industry.market’s: sales, expenses, price, position):
- MAPOS = market.position = a company’s ability to influence customers’ perceptions
- MAP = Market power = ability of a firm to influence D or S >> gws.price, above or below, competitive levels (ex sumitomocorp)
- REVENUE = [(gws.sales=gws.income=MAS) + gws.expenses] >> growing MAS >> growing REVENUE
IP.DSMITH. PROPOSED.MERGER
PROS: there is low risk of regulators blocking or requiring divestitures (as conditions for transaction approval, becos:
-the proposed merging.cos’ complementary geographies and the very nature of the corrugated board market is such that their gws barely overlap>> the merging.co would not have excessive MAPO
-the industrial, financial, and efficiency benefits anticipated from the combination: sustainability-minded packaging process >> unparalleled geographic and product diversity (segm.fragm)
DS Smith PLC (LSE:SMDS) and International Paper. PROPOSED MERGER
OBSERVATIONS
For the below reasons, it is our observation that the commission should review to block, or require divestitures to clear.
1-The proposing companies’ main pro-clearing argument is that the deal would result in no significant overlap between their products and services, and consequently, would not result in significant market position. However, deal clearance would afford the merged company a tool much more harmful to competition than market position. Indeed, the merged company would have a level of market share and market power that would afford the potential to influence not just Demand but also Supply, and therefore would also afford the potential to influence prices, both, above or below, competitive levels. IP is already the second-biggest corrugated packaging market in the world. More than 85% of IP’s revenues come from the U.S. market, and 8% comes from Europe. On the other hand, DS Smith alone gets about 70% of its revenue from the eu market and the uk market
2-If cleared, the merging.cos would cement IP’s already dominant position in the global box volumes market. The companies, together, would amount to close to 18 million tons of corrugated container board capacity. Such international megacompany for fiber packaging, if allowed to exist in the internal market, would be pose an ever-present potential for abuse of dominant position in the paper packaging industry in Europe
3-The relevant industry is already very consolidated. Stealth consolidation and commission-reviewed consolidation has been creeping into this industry for too long. An example of the latter is the commission’s recent decision to clear the WestRock and Smurfit Kappa merger, which, sadly for the internal market, has resulted in a combined figure of 23 million tons of corrugated container board capacity
4-The possible consumer and public benefits of the proposed deal, namely, sustainability-minded packaging process and geographic and product diversity, do not really benefit the european consumer or the european public interest. The reasons:
4.1-Blocking the proposed deal would promote the birth of new european companies active in the industry. Also, existing european firms that are actual or potential competitors of the proposing companies, would be able to expand into new internal markets within the industry.
4.2-European firms are also bound by the 2030 Agenda and therefore are also bound to produce high quality sustainable packaging.
4.3-Geographic and product diversity is best attained by promoting it amongst european companies already trading or with potential to start trading between member states. They already offer sufficient geographic and product segmentation in the internal market.
4.4-The commission erred in law, in clearing Smurfit Kappa and Westrock. The commission failed its core duties, in its decision in Smurfit Kappa and Westrock, as it failed to give preference to the internal market’s health and survival, and, instead, gave preference to extraneous and harmful political and lobbying interests pressing for a clearing decision. Lobbies pay big money to increase the already high consolidation levels in the industry. In turn, this is corroding our internal market, which, as the commission forgot, is the overarching principle of the EU Treaty
4.5-The excessive level of consolidation in the industry, has already reached a level that is significantly contributing to the ongoing and gradual deterioration in the quality of the goods and services provided in the industry. This , in turn, increases the risk of harm to the public interest, in particular it raises the risk of harm against the public interests of national security, safety and health
4.6- IP is a U.S. national champion, frequent recipient of state aid also from other nations. Allowing IP access to the internal market would further consolidate the relevant industry and import the proposing companies’ existing selective and competitive advantages into the internal market. Clearance would therefore also increase the risk to the national security of EU Member States, and the risk to the internal market