Bundeskartellamt clears merger between sanitary wholesalers

16.03.2017

The Bundeskartellamt has cleared the acquisition of the business operations of Wilhelm Gienger GmbH, Stuttgart, by Cordes & Graefe KG, Bremen, after the companies changed their original plans in response to concerns expressed by the authority.

The merger affects the wholesale of sanitary, heating and air-conditioning products. Cordes & Graefe is the market leader in this sector in Germany. Both Cordes & Graefe and Wilhelm Gienger are members of the purchasing and marketing cooperative GC Großhandelscontor GmbH ("GC Group").

Andreas Mundt, President of the Bundeskartellamt:"Whereas Wilhelm Gienger is mainly active in the federal state of Baden-Württemberg, Cordes & Graefe only has a few business locations there. However, the companies would have reached high market shares in the region around the city of Ulm where their distribution areas overlap. Here we had some competition concerns. However, as the companies have since divested a subsidiary in this region, we have now been able to clear the merger."

The merger project was initially notified in autumn 2016. The Bundeskartellamt had then started extensive investigations in second phase examination proceedings. After the authority had given the companies its preliminary assessment of the project the parties withdrew their notification in order to re-notify the proposed merger in a modified form that would be unproblematic under merger control rules.

Markets in the sanitary wholesale sector are defined as regional markets. On average 80 % of Wilhelm Gienger's turnover from deliveries from its individual sites is achieved within a radius of up to 50 kms.

An examination of the actual supply streams showed that there was a critical overlap in supply in the Ulm region, where the areas of activity of the two companies converge. Other competitors are not as strong in this region. Consequently Wilhelm Gienger decided to divest one of its subsidiaries active in this region. This amendment to the project was sufficient to allay the Bundeskartellamt's competition concerns.

The examination of the procurement markets raised no competition concerns which would have justified a prohibition. In earlier merger control proceedings it was established that Cordes & Graefe is the clear market leader on the procurement side and nothing has changed in this respect. However, the merger is not expected to increase its buyer power because Cordes & Graefe and Wilhelm Gienger already pool their demand in the purchasing cooperation of the GC Group. Another factor which also needs to be considered is that manufacturers in the sanitary sector could potentially use alternative sales channels such as e.g. building supply stores and Internet dealers. However, little use is currently made of these alternatives because the manufacturers still maintain the three-tier distribution system (manufacturer - wholesaler - installer).

Further information on the case is available in a case summary (in German) on the Bundeskartellamt's website.


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