In the platinum group metals (PGM) sector, two companies, Gencor Ltd, South Africa, and Lonrho plc, an England proposed to acquire joint control of the South African mining company Impala Platinium Holdings Ltd "Implants". 46.5% is hold by Gencor. Gencor has also a 27% stake in Eastplats and Westplats (LPD), a South African company, which belongs to Lonrho up to 73%.

This joint control would grant Implants sole control of LPD. Competition would therefore be eliminated between these two companies as regards PGM mining and production in South Africa and the marketing of PGM in the Community where Implants and LPD achieved significant sales.

Although the South African Competition Board did not oppose the concentration, Gencor and Lonrho notified it to the European Commission, as required by Community law.

On 24 April 1996, the European Commission decided that the concentration was incompatible with the common market. A collective dominant position could be created on account of the concentration and Amplats, the leading supplier worldwide in platinum and rhodium market.

Gencor brought an action before the Court of First Instance (CFI) requesting the annulment of that decision, in particular on the ground that regulation N° 4064/89 was concerned only with mergers carried out within the Community, alleging that the Commission was not competent to apply the Merger Regulation in this case as the entities involved and their production operation were based entirely outside the EU. It also argued that a collective dominant position would not have arisen as a result of the notified operation.

The CFI rejected these arguments with several elements. The merger regulation is applicable to any concentration with a " Community Dimension". This is established by thresholds based upon sales in the EEA and not the parties' base of establishment or operation.

Concentrations, which create or strengthen a dominant position and, thus impede effective competition in the common market fall within the scope of the regulation even if their activities are outside the Community.

The fact that the concentration arguably had a greater impact on markets outside the EEA was irrelevant to the application of the merger regulation in this case. The public international law principle of "non-interference" in the international affairs of other states did not preclude the extra- territorial application of the merger regulation, where a Community dimension was established.

The CFI stated, finally, that the Community legislation also applied to collective dominant position. A collective dominant position is created when the dominant position is held by the undertaking, which results from the concentration (Implats and LPD) and one or more not involved in the concentration (Amplats).

For all these reasons, the CFI dismissed the Gencor request and confirmed the European Commission's decision.

Gencor can appeal before the Court of Justice of the European Communities against the decision within two months of its notification, but only for points of law.

This article is based and incorporates information provided by the European Commission (Press Releases) and is intended for general information. Specialist advice should be sought before acting on it.