Acquisition of control over Budafesték Kereskedelmi Kft
by Akzo Nobel Coatings International BV


The Competition Council cleared the acquisition of control over Budafesték Kereskedelmi Kft (hereinafter Budafesték) by Akzo Nobel Coatings International BV (hereinafter Akzo).

The parties

Akzo is part of the Dutch Akzo Nobel group, a multinational company with worldwide presence which produces and markets healthcare products, coatings, paints and chemicals. The annual turnover of the Akzo Nobel group reached 14 billion EUR in 2000.

The Akzo Nobel group pursues its activity on the Hungarian market through its subsidiaries Akzo Nobel Coatings Festékgyártó és Kereskedelmi Rt and Akzo Nobel CR Autófesték Kereskedelmi Kft.

The Budafesték group controlled by Budafesték focuses its activities on the production and marketing of paints and chemical products. Budafesték is the manufacturer of the Profikolor paint product line distributed through the own franchise system.

The relevant market

The only significant combination of the parties` activities would be on the market of paints (production, distribution). Typically the market of paints can be divided into three segments: paints for retail users (decorative paints), car refinishes and industrial paints. Decorative paints are normally used on-site to decorate buildings internally and externally. They are supplied through wholesale and retail channels to non professional and professional users, mostly the latter.

Car refinishes are supplied through specialist wholesale channels to car repair shops. Industrial paints can be obtained directly from the manufacturer.

From the demand side there can be drawn a distinction between these types of paints according their ingredients (resin, pigment, solvent, additive). The quality of the paints depends on the granulation of pigment, for car refinishes finer granulation is needed than for the industrial use. Furthermore the other ingredients differ form each other according to the intended use as well as the packaging of the different types of paints.

From the supply side the difference is not of technological nature, only the proportion of the ingredients used is different. The equipment used for the production of industrial paints can be switched easily to the production of decorative paints without significant additional costs. Concerning car refinishes this possibility is limited by economical considerations.

There are no administrative restrictions regarding the import of paints. In determining the relevant market the Competition Council first identified the products which are produced by the two parties, subsequently the unproblematic submarkets were sorted out. Finally it identified the market segments where the concentration would have an appreciable effect and determined the products which could be treated as substitutes but are not produced by the parties concerned.

Accordingly the relevant product market is the market of decorative and industrial paints, the relevant geographic market is the territory of the Hungarian Republic given the fact that both firms market their products throughout the country.

The application

In 2000 the aggregate annual turnover of the parties concerned and the turnover of the undertaking getting under control exceeded the threshold laid down in the Competition Act, therefore the concentration was subject to authorisation.

The decision

Following the concentration the combined market share of the parties would be 52.7 per cent on the market of paints for retail users. The HHI would increase with more than 1058 to 2777. However the high market share does not necessarily results in a dominant position. The products of the parties compete with several domestic and imported products. The costs of a market entry are considerably high for new entrants, however undertakings already active on the market of industrial paints (like Trilak Haering Festékgyártó Kft), due to the demand side substitutability, could enter the market quickly without significant additional costs. The merged parties would be limited in their anticompetitive conduct by the possibility of imports as well.

Having regard to the foregoing considerations there is no threat of creating and strengthening a dominant position therefore the Hungarian competition authority, under Article 30 of the Competition Act, may not refuse to authorise the concentration.

October 19, 2001. Budapest

dr. Bara Zoltán sk. előadó
dr. Berke Barna sk a Versenytanács elnöke
dr. Tóth Tihamér sk.
Horváth Lászlóné