Magna/Karmann Merger stopped: Bundeskartellamt prohibits merger of convertible roof manufacturers

26.05.2010

The Bundeskartellamt has prohibited the automotive component supplier Magna from acquiring Karmann's European convertible roof systems business.

The Canadian automotive supplier Magna International Inc. planned to acquire the convertible roof systems business of Karmann GmbH i.I. (in insolvency), Osnabrück, via its German subsidiary Magna Car Top Systems GmbH. On 21 May 2010, following almost four months of examination under merger control, the Bundeskartellamt decided to prohibit the acquisition project. The competition authority’s decision was based on extensive analysis of the relevant market in Germany and Europe.

The President of the Bundeskartellamt, Andreas Mundt, stated: “The merger between Magna and Karmann would have left only two major suppliers of convertible roof systems European-wide in a market which is already highly concentrated. The high transparency in this market would have encouraged parallel conduct between the remaining suppliers which would have been damaging to competition, especially since new market entries are not expected. We could not accept such a harmful impact on competition. The consumer would ultimately have to pay for this in the form of higher prices”.

Highly concentrated market for convertible roof systems in Europe
With Karmann, Magna and Webasto/Edscha there are only three companies in Europe which produce convertible roof systems. Last year the total volume of the Europe-wide market amounted to approx. € 600 million. There are no imports of convertible roof systems from Asia or the USA. Convertible roof systems are purchased by virtually all car manufacturers. Tenders are invited for systems required for certain car model series resulting in some orders running for several years. It is uneconomical for the car manufacturers to develop and manufacture their own convertible roof systems. The entry of newcomers to the market is highly unlikely because this would require great propensity to invest and a minimum company size as well as specialized expertise.

In 2009, Edscha and Webasto, at the time the number one and four suppliers of convertible roof systems, merged and the project could only be cleared by the Bundeskartellamt after a very intensive examination. Already then the authority had made it clear that a further concentration of the market would result in competition problems.

Not only would a merger between Magna and Karmann cut the number of competitors down to two. The two remaining competitors would also have similarly strong market shares and a comparable company size. Due to the existing market transparency competitive thrusts by one of the remaining companies would be immediately recognised and directly sanctioned by the other competitor. Internal competition between the almost equally strong companies would thus be unlikely. Some car manufacturers also expect the merger to have anticompetitive effects and expressed their scepticism during the investigations.

Alternative interested parties
The Bundeskartellamt intensively examined and weighed up the special aspects raised by Karmann’s insolvency proceedings. President Andreas Mundt: “We are well aware of the company’s precarious situation. In our decision we took into account that Karmann’s convertible roof systems business obviously has market potential. To our knowledge, apart from Magna, there have been and still are several serious bidders.” Logo: Offene Märkte | Fairer Wettbewerb