Following an extensive analysis of the relevant markets in Germany and in Europe over a period of nearly 4 months, the BKartA has prohibited the acquisition of Karmann GmbH's ("Karmann") European convertible roof systems business (currently in insolvency) by the Canadian automotive component supplier Magna International Inc. ("Magna").

The President of the BKartA, 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."

Currently, there are three producers of convertible roof systems in Europe; Karmann, Magna and Webasto/Edscha. At the time of the merger between Edscha and Webasto in 2009, then the number one and number four suppliers of convertible roof systems respectively, the BKartA remarked that any further consolidation on the market would result in competition problems.

In the current case, the BKartA believes that further consolidation would encourage parallel conduct and harm competition. Existing market transparency would mean that competitive 'thrusts' by one of the remaining companies would be immediately recognised and directly sanctioned by its competitor, thus rendering internal competition between them unlikely. Further, new entrants are not expected as they would need to have a minimum company size together with a great propensity to invest as well as specialised experience.

With a total market volume in 2009 of €600 million, the market for convertible roof systems in Europe is highly concentrated and very transparent. There are no imports from Asia or the USA and all car manufacturers purchase their convertible roof systems from specialised suppliers, as it is uneconomical to develop and manufacture their own. Volkswagen, which has previously acquired a part of Karmann, has not shown any interest in acquiring the convertible roof systems business as well.

The decision has been criticised by the leader of the German Federal State of Lower Saxony, where 700 jobs are at stake, as well as by the powerful union IG Metall (the metal and engineering union). However, the BKartA remains of the view that Karmann's convertible roof systems business has potential and has confirmed that there are other serious bidders who are interested in acquiring this business. CIE, a Spanish automotive component supplier, has been named in the press as a possible interested party. However, some of Karmann's larger customers such as BMW, Mercedes and Renault have already signalled that they will withdraw their orders, should the merger between Magna and Karmann not go ahead as planned

To view Community Week, Issue 473, 28 May 2010 in full click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.