# C_2021483EN.01001301.xml

| 1.12.2021 | EN | Official Journal of the European Union | C 483/13 |
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1.12.2021

EN

Official Journal of the European Union

C 483/13

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SUMMARY OF COMMISSION DECISION

of 18 March 2021

declaring a concentration compatible with the internal market and the functioning of the EEA Agreement

(Case M.9820 – DANFOSS / EATON HYDRAULICS)

(notified under document C(2021) 1697)

(Only the English version is authentic)

(Text with EEA relevance)

(2021/C 483/11)

On 18 March 2021 the Commission adopted a Decision in a merger case under Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (1)
  , and in particular Article 8(2) of that Regulation. A non-confidential version of the full Decision, can be found in the authentic language of the case on the website of the Directorate-General for Competition, at the following address:

http://ec.europa.eu/competition/elojade/isef/index.cfm?clear=1&policy_area_id=2

1.   THE PARTIES

| (1) | Danfoss A/S (‘Danfoss’ or ‘Notifying Party’, Denmark) is a global manufacturer of components and engineering technologies for refrigeration, air-conditioning, heating, motor control and hydraulics for off-road machinery. |
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(1)

Danfoss A/S (‘Danfoss’ or ‘Notifying Party’, Denmark) is a global manufacturer of components and engineering technologies for refrigeration, air-conditioning, heating, motor control and hydraulics for off-road machinery.

| (2) | Eaton Hydraulics (‘Eaton’, Ireland) comprises the hydraulics business segment of Eaton Corporation plc (excluding its golf grips and filtration businesses). It is made of two product divisions, (i) Fluid Conveyance and (ii) Power & Motion Controls, which are both active in the supply of hydraulic components and systems for industrial and mobile equipment. Eaton is a publicly held Irish corporation. |
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(2)

Eaton Hydraulics (‘Eaton’, Ireland) comprises the hydraulics business segment of Eaton Corporation plc (excluding its golf grips and filtration businesses). It is made of two product divisions, (i) Fluid Conveyance and (ii) Power & Motion Controls, which are both active in the supply of hydraulic components and systems for industrial and mobile equipment. Eaton is a publicly held Irish corporation.

2.   THE OPERATION

| (3) | On 17 August 2020, the Commission received notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings (the ‘Merger Regulation’) according to which Danfoss would acquire within the meaning of Article 3(1)(b) of the Merger Regulation sole control of Eaton by way of purchase of stocks and assets (hereinafter referred to as the ‘Transaction’). Danfoss and Eaton are referred to as the ‘Parties’. The entity resulting from the Transaction is designated hereinafter as the ‘Merged Entity’. |
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(3)

On 17 August 2020, the Commission received notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings (the ‘Merger Regulation’) according to which Danfoss would acquire within the meaning of Article 3(1)(b) of the Merger Regulation sole control of Eaton by way of purchase of stocks and assets (hereinafter referred to as the ‘Transaction’). Danfoss and Eaton are referred to as the ‘Parties’. The entity resulting from the Transaction is designated hereinafter as the ‘Merged Entity’.

3.   UNION DIMENSION

| (4) | The Parties have a combined aggregate worldwide turnover of more than EUR 5 000 million. Each of them has a Union-wide turnover in excess of EUR 250 million, while they do not achieve more than two-thirds of their aggregate Union-wide turnover within one and the same Member State. |
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(4)

The Parties have a combined aggregate worldwide turnover of more than EUR 5 000 million. Each of them has a Union-wide turnover in excess of EUR 250 million, while they do not achieve more than two-thirds of their aggregate Union-wide turnover within one and the same Member State.

| (5) | The Transaction therefore has a Union dimension pursuant to Article 1(2) of the Merger Regulation. |
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(5)

The Transaction therefore has a Union dimension pursuant to Article 1(2) of the Merger Regulation.

4.   THE PROCEDURE

| (6) | By decision dated 21 September 2020, the Commission found that the proposed Transaction raised serious doubts as to its compatibility with the internal market and initiated proceedings pursuant to Article 6(1)(c) of the Merger Regulation (‘the decision opening proceedings’). |
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(6)

By decision dated 21 September 2020, the Commission found that the proposed Transaction raised serious doubts as to its compatibility with the internal market and initiated proceedings pursuant to Article 6(1)(c) of the Merger Regulation (‘the decision opening proceedings’).

| (7) | The in-depth investigation did not allow dispelling the competition concerns preliminarily identified. On 8 December 2020, the Commission adopted a Statement of Objections (the ‘SO’), where it came to the preliminary view that the Transaction would likely significantly impede effective competition in the internal market in relation to the supply of hydraulic steering units (‘HSUs’), electrohydraulic steering valves (‘ESVs’) and orbital motors in the EEA within the meaning of Article 2 of the Merger Regulation due to the creation or strengthening of a dominant market position in the relevant markets. |
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(7)

The in-depth investigation did not allow dispelling the competition concerns preliminarily identified. On 8 December 2020, the Commission adopted a Statement of Objections (the ‘SO’), where it came to the preliminary view that the Transaction would likely significantly impede effective competition in the internal market in relation to the supply of hydraulic steering units (‘HSUs’), electrohydraulic steering valves (‘ESVs’) and orbital motors in the EEA within the meaning of Article 2 of the Merger Regulation due to the creation or strengthening of a dominant market position in the relevant markets.

| (8) | On 28 January 2021, the Notifying Party submitted commitments, pursuant to Article 8(2) of the Merger Regulation, in order to address the competition concerns identified in the SO. On 15 February 2021, the Notifying Party submitted revised commitments pursuant to Article 8(2) of the Merger Regulation to address the competition concerns identified in the SO (the ‘Final Commitments’). |
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(8)

On 28 January 2021, the Notifying Party submitted commitments, pursuant to Article 8(2) of the Merger Regulation, in order to address the competition concerns identified in the SO. On 15 February 2021, the Notifying Party submitted revised commitments pursuant to Article 8(2) of the Merger Regulation to address the competition concerns identified in the SO (the ‘Final Commitments’).

5.   SUMMARY

| (9) | The Commission observed that Danfoss, already prior to the Transaction, has a significant market shares in HSUs, ESVs and orbital motors sold to the EEA market (HSU: [60-70]%, ESV: [50-60]% and orbital motors: [40-50]%). Following the Transaction, the share would further increase to well above 60 % or even close to 80 % (HSU: [70-80]%, ESV: [60-70]% and orbital motors: [60-70]%). |
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(9)

The Commission observed that Danfoss, already prior to the Transaction, has a significant market shares in HSUs, ESVs and orbital motors sold to the EEA market (HSU: [60-70]%, ESV: [50-60]% and orbital motors: [40-50]%). Following the Transaction, the share would further increase to well above 60 % or even close to 80 % (HSU: [70-80]%, ESV: [60-70]% and orbital motors: [60-70]%).

| (10) | In terms of market concentration, for all the three concerned markets the Transaction would also lead to HHIs by far above the value of 2 000 and to an HHI-increment well higher than 150, or above any other threshold values defined in the Horizontal Merger Guidelines. |
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(10)

In terms of market concentration, for all the three concerned markets the Transaction would also lead to HHIs by far above the value of 2 000 and to an HHI-increment well higher than 150, or above any other threshold values defined in the Horizontal Merger Guidelines.

| (11) | The market investigation in Phase II revealed (i) the Parties compete closely, (ii) customers face important impediments in switching suppliers, (iii) competitors are not a sufficient constraint to the Parties’ market power, (iv) across-technology competition is limited, (v) countervailing buyer power would not prevent price increases, and (vi) barriers to entry are high. |
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(11)

The market investigation in Phase II revealed (i) the Parties compete closely, (ii) customers face important impediments in switching suppliers, (iii) competitors are not a sufficient constraint to the Parties’ market power, (iv) across-technology competition is limited, (v) countervailing buyer power would not prevent price increases, and (vi) barriers to entry are high.

| (12) | The market test showed that the Final Commitments submitted by the Notifying Party address the Commission’s concerns – they are structural in nature and remove the entire overlap for HSUs, ESVs and orbital motors in the EEA. The Divestment Business consists of three manufacturing plants with a significant footprint in the EEA and US, offers the full range of HSU, ESV and orbital motor products and commands sales in the EEA that exceed the sales of Eaton pre-Transaction on all three markets. The results of the market test, in particular the customers who responded, support this finding. |
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(12)

The market test showed that the Final Commitments submitted by the Notifying Party address the Commission’s concerns – they are structural in nature and remove the entire overlap for HSUs, ESVs and orbital motors in the EEA. The Divestment Business consists of three manufacturing plants with a significant footprint in the EEA and US, offers the full range of HSU, ESV and orbital motor products and commands sales in the EEA that exceed the sales of Eaton pre-Transaction on all three markets. The results of the market test, in particular the customers who responded, support this finding.

| (13) | The Divestment Business will also be viable and able to compete effectively on all three product markets. The divested products are well-known in the market and the divested manufacturing sites are largely self-sustaining with growth potential. The addition of the Eaton’s HSU and orbital motor products will further increase the competitiveness of the Divestment Business. The safeguards foreseen in the commitments submitted by the Notifying Party mitigate, to the extent possible, the risks associated with the transfer of production lines, the replication of certain production steps and the transfer of customer contracts. |
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(13)

The Divestment Business will also be viable and able to compete effectively on all three product markets. The divested products are well-known in the market and the divested manufacturing sites are largely self-sustaining with growth potential. The addition of the Eaton’s HSU and orbital motor products will further increase the competitiveness of the Divestment Business. The safeguards foreseen in the commitments submitted by the Notifying Party mitigate, to the extent possible, the risks associated with the transfer of production lines, the replication of certain production steps and the transfer of customer contracts.

| (14) | Therefore, a clearance decision pursuant to Article 8(2) of the Merger Regulation was adopted. |
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(14)

Therefore, a clearance decision pursuant to Article 8(2) of the Merger Regulation was adopted.

6.   EXPLANATORY MEMORANDUM

6.1.   The relevant product markets

| (15) | The Transaction concerns components for hydraulic power systems (‘HPS’). HPS are used in machines or in industrial plants for transferring mechanical energy from a certain mechanical energy source (e.g. from a diesel engine) to a certain point of use. The main customers of HPS and their components are OEMs, active in the production of (i) agricultural machinery (e.g. tractors and harvesters) or (ii) construction machinery (e.g. excavators and lifts) and the respective distributors. Additional downstream industries include forestry, oil & gas and mining. |
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(15)

The Transaction concerns components for hydraulic power systems (‘HPS’). HPS are used in machines or in industrial plants for transferring mechanical energy from a certain mechanical energy source (e.g. from a diesel engine) to a certain point of use. The main customers of HPS and their components are OEMs, active in the production of (i) agricultural machinery (e.g. tractors and harvesters) or (ii) construction machinery (e.g. excavators and lifts) and the respective distributors. Additional downstream industries include forestry, oil & gas and mining.

| (16) | The Commission finds, based on the evidence gathered during its investigation, and in line with the arguments of the Notifying Party, that each individual HPS component constitutes a separate product market. |
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(16)

The Commission finds, based on the evidence gathered during its investigation, and in line with the arguments of the Notifying Party, that each individual HPS component constitutes a separate product market.

| (17) | The Parties’ activities overlap in relation to a number of HPS components markets, including: (i) the market for hydraulic steering units (‘HSUs’) for off-road machinery (ii) the market for electrohydraulic steering valves (‘ESVs’) for off-road vehicles; the market for orbital motors; and the market for hydraulic pumps. |
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(17)

The Parties’ activities overlap in relation to a number of HPS components markets, including: (i) the market for hydraulic steering units (‘HSUs’) for off-road machinery (ii) the market for electrohydraulic steering valves (‘ESVs’) for off-road vehicles; the market for orbital motors; and the market for hydraulic pumps.

| (18) | The Commission’s investigation has indicated that the markets for HSUs, ESVs, and orbital motors all constitute single, but nevertheless, differentiated product markets. Distinctions can be made in these product markets according to end-use, sales channel, quality or ‘tier’ of products, amongst other factors. |
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(18)

The Commission’s investigation has indicated that the markets for HSUs, ESVs, and orbital motors all constitute single, but nevertheless, differentiated product markets. Distinctions can be made in these product markets according to end-use, sales channel, quality or ‘tier’ of products, amongst other factors.

| (19) | In relation to the market for pumps, while finding it to also be a differentiated market, the Commission left open the possible further segmentation of the market, given that the Transaction does not give rise to competition concerns under any possible delineation. |
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(19)

In relation to the market for pumps, while finding it to also be a differentiated market, the Commission left open the possible further segmentation of the market, given that the Transaction does not give rise to competition concerns under any possible delineation.

| (20) | Following its market investigation, the Commission observed strong indications that competition takes place on an EEA level as regards the manufacturing and supply of HSUs, ESVs, orbital motors and hydraulic pumps for mobile applications and any plausible sub-distinctions thereof. |
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(20)

Following its market investigation, the Commission observed strong indications that competition takes place on an EEA level as regards the manufacturing and supply of HSUs, ESVs, orbital motors and hydraulic pumps for mobile applications and any plausible sub-distinctions thereof.

| (21) | The results of the investigation indicate that there are significant obstacles for EEA-based customers to source from outside the EEA and constraints for intercontinental supply, rendering an EEA-based supplier highly preferable. Considering all evidence available to it, the Commission concludes that the markets for the production and supply of HSUs, ESVs, orbital motors and hydraulic pumps for mobile applications and any plausible sub-distinctions thereof are all EEA-wide in scope. |
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(21)

The results of the investigation indicate that there are significant obstacles for EEA-based customers to source from outside the EEA and constraints for intercontinental supply, rendering an EEA-based supplier highly preferable. Considering all evidence available to it, the Commission concludes that the markets for the production and supply of HSUs, ESVs, orbital motors and hydraulic pumps for mobile applications and any plausible sub-distinctions thereof are all EEA-wide in scope.

6.2.   Competitive Assessment

| (22) | The Commission found competition concerns in the production and supply of HSUs, ESVs and orbital motors in the EEA. The Commission’s concerns are based on a number of considerations and findings, including the ones laid out in the following paragraphs. |
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(22)

The Commission found competition concerns in the production and supply of HSUs, ESVs and orbital motors in the EEA. The Commission’s concerns are based on a number of considerations and findings, including the ones laid out in the following paragraphs.

| (23) | The Commission did not find competition concerns in relation to hydraulic pumps in light of Eaton’s limited activity and market share in the EEA. |
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(23)

The Commission did not find competition concerns in relation to hydraulic pumps in light of Eaton’s limited activity and market share in the EEA.

6.2.1.   The Transaction leads to very high combined sales in the three markets, suggesting the creation or strengthening of dominance and increasing concentration in these already concentrated markets

| (24) | The Commission observes that Danfoss, already prior to the Transaction, has a significant market shares in HSUs, ESVs and orbital motors sold to the EEA market (HSU: [60-70]%, ESV: [50-60]% and orbital motors: [40-50]%). Following the Transaction, the share would further increase to well above 60 % or even close to 80 % (HSU: [70-80]%, ESV: [60-70]% and orbital motors: [60-70]%). |
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(24)

The Commission observes that Danfoss, already prior to the Transaction, has a significant market shares in HSUs, ESVs and orbital motors sold to the EEA market (HSU: [60-70]%, ESV: [50-60]% and orbital motors: [40-50]%). Following the Transaction, the share would further increase to well above 60 % or even close to 80 % (HSU: [70-80]%, ESV: [60-70]% and orbital motors: [60-70]%).

| (25) | In terms of market concentration, for all the three concerned markets the Transaction would also lead to HHIs by far above the value of 2 000 and to an HHI-increment well higher than 150, or above any other threshold values defined in the Horizontal Merger Guidelines. |
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(25)

In terms of market concentration, for all the three concerned markets the Transaction would also lead to HHIs by far above the value of 2 000 and to an HHI-increment well higher than 150, or above any other threshold values defined in the Horizontal Merger Guidelines.

6.2.2.   For the three concerned markets, the Transaction is likely to result in higher prices

| (26) | In relation to all the three markets, the Commission found that (i) the Parties compete closely, (ii) customers face important impediments in switching suppliers, (iii) competitors are not a sufficient constraint to the Parties’ market power, (iv) across-technology competition is limited, (v) countervailing buyer power would not prevent price increases, and (vi) barriers to entry are high.






  (a) | The Parties compete closely. The Commission’s investigation suggested that the Parties are close, if not each other’s closest, competitors in HSUs, ESVs, and orbital motors. Quantitative economic analysis showed that the Parties frequently compete for the same opportunities in these markets. Moreover, the market investigation confirmed that competitors and customer’s view the Parties’ product offerings as largely similar and substitutable. There are also factors that distinguish Danfoss and Eaton from other market players, such as the comprehensive range of their portfolios and quality of their products, which also lead to a conclusion that they compete closely. |
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(26)

In relation to all the three markets, the Commission found that (i) the Parties compete closely, (ii) customers face important impediments in switching suppliers, (iii) competitors are not a sufficient constraint to the Parties’ market power, (iv) across-technology competition is limited, (v) countervailing buyer power would not prevent price increases, and (vi) barriers to entry are high.

(a)

The Parties compete closely. The Commission’s investigation suggested that the Parties are close, if not each other’s closest, competitors in HSUs, ESVs, and orbital motors. Quantitative economic analysis showed that the Parties frequently compete for the same opportunities in these markets. Moreover, the market investigation confirmed that competitors and customer’s view the Parties’ product offerings as largely similar and substitutable. There are also factors that distinguish Danfoss and Eaton from other market players, such as the comprehensive range of their portfolios and quality of their products, which also lead to a conclusion that they compete closely.

| (b) | Customers face important impediments in switching suppliers. There are technical and practical limitations to switching, particularly at the production phase of a machine. OEMs also typically have only one homologated supplier for each component of a certain machine in production. There are also sometimes barriers to switching at the design phase of a machine due to cost factors and time required for homologation and therefore for new machines OEMs tend to use HSUs, ESVs or orbital motors that were already homologated for other machines. |
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(b)

Customers face important impediments in switching suppliers. There are technical and practical limitations to switching, particularly at the production phase of a machine. OEMs also typically have only one homologated supplier for each component of a certain machine in production. There are also sometimes barriers to switching at the design phase of a machine due to cost factors and time required for homologation and therefore for new machines OEMs tend to use HSUs, ESVs or orbital motors that were already homologated for other machines.

| (c) | Competitors are not a sufficient constraint to the Parties’ market power. All three markets contain a very small number of credible competitors to the Parties. The market investigation indicated that these existing competitors would be unlikely to sufficiently constrain the Merged Entity post-Transaction, given (i) their limited market shares and (ii) distinctions between the Parties offerings and those of competitors, e.g. on the basis of product portfolio or quality. This distinction of products lead to the conclusion that not all the demand would be contestable in the event of a price increase by the combined entity. |
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(c)

Competitors are not a sufficient constraint to the Parties’ market power. All three markets contain a very small number of credible competitors to the Parties. The market investigation indicated that these existing competitors would be unlikely to sufficiently constrain the Merged Entity post-Transaction, given (i) their limited market shares and (ii) distinctions between the Parties offerings and those of competitors, e.g. on the basis of product portfolio or quality. This distinction of products lead to the conclusion that not all the demand would be contestable in the event of a price increase by the combined entity.

| (d) | Across-technology competition is limited. Across-technology alternatives (for HSUs these are electric steering and electrohydraulic steering solutions, for ESVs a particular steering solution developed by Ognibene, and for orbital motors electric motors and cam-lobe piston motors) exert a limited competitive constraints on the Parties mainly because (i) OEMs face difficulties or are reluctant to switch technology and/or (ii) competition with other technologies regard only a limited part of the market. |
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(d)

Across-technology competition is limited. Across-technology alternatives (for HSUs these are electric steering and electrohydraulic steering solutions, for ESVs a particular steering solution developed by Ognibene, and for orbital motors electric motors and cam-lobe piston motors) exert a limited competitive constraints on the Parties mainly because (i) OEMs face difficulties or are reluctant to switch technology and/or (ii) competition with other technologies regard only a limited part of the market.

| (e) | Countervailing buyer power would not prevent price increases. Small and medium OEMs typically purchase HSUs, ESVs and orbital motors through distributors. Neither these OEMs nor distributors appear to have enough countervailing buyer power to prevent price increase. Larger OEMs, which purchase directly from the Parties, possess, to some extents, a relatively higher degree of buyer power. However, barriers to switching suppliers, the lack of credible alternatives to the Parties, and past instances in which the Parties successfully managed to increase price with large OEMs indicate that also large OEMs would not be able to prevent a price increase. |
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(e)

Countervailing buyer power would not prevent price increases. Small and medium OEMs typically purchase HSUs, ESVs and orbital motors through distributors. Neither these OEMs nor distributors appear to have enough countervailing buyer power to prevent price increase. Larger OEMs, which purchase directly from the Parties, possess, to some extents, a relatively higher degree of buyer power. However, barriers to switching suppliers, the lack of credible alternatives to the Parties, and past instances in which the Parties successfully managed to increase price with large OEMs indicate that also large OEMs would not be able to prevent a price increase.

| (f) | Barriers to entry are high. Entering any of the markets for HSUs, ESVs or orbital motor takes a long time and is very challenging due to the required technical know-how, expertise, R&D as well as certification, validation and testing processes of OEMs. Other requirements such as economies of scale, breadth of portfolio, sales and support systems and reputation are very difficult to meet for new market entrants. In line with this, the Commission did identify neither recent market entries nor foreseeable market entries in the near future (including by manufacturers located outside the EEA). |
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(f)

Barriers to entry are high. Entering any of the markets for HSUs, ESVs or orbital motor takes a long time and is very challenging due to the required technical know-how, expertise, R&D as well as certification, validation and testing processes of OEMs. Other requirements such as economies of scale, breadth of portfolio, sales and support systems and reputation are very difficult to meet for new market entrants. In line with this, the Commission did identify neither recent market entries nor foreseeable market entries in the near future (including by manufacturers located outside the EEA).

| (27) | The Commission therefore concludes that the notified concentration raises serious doubts as to its compatibility with the internal Market with regard to HSU, ESVs and orbital motors. |
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(27)

The Commission therefore concludes that the notified concentration raises serious doubts as to its compatibility with the internal Market with regard to HSU, ESVs and orbital motors.

6.3.   The Commitments

| (28) | In order to remove the aforementioned competition concerns in the supply of HSUs, ESVs and orbital motors in the EEA, the Parties submitted the undertakings described below. |
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(28)

In order to remove the aforementioned competition concerns in the supply of HSUs, ESVs and orbital motors in the EEA, the Parties submitted the undertakings described below.

| (29) | The Notifying Party undertakes to divest, or ensure the divestment of, parts of Danfoss’ Business Unit Motors and parts of Danfoss’ HSU and ESV business (together the ‘Divestment Business’). This translates into the divestment of Danfoss’ entire manufacturing plants in Wroclaw (Poland), Parchim (Germany) and Hopkinsville (US) including all tangible and intangible assets (products, customer contracts, credit and other records, functions and personnel, patents and other know-how). |
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(29)

The Notifying Party undertakes to divest, or ensure the divestment of, parts of Danfoss’ Business Unit Motors and parts of Danfoss’ HSU and ESV business (together the ‘Divestment Business’). This translates into the divestment of Danfoss’ entire manufacturing plants in Wroclaw (Poland), Parchim (Germany) and Hopkinsville (US) including all tangible and intangible assets (products, customer contracts, credit and other records, functions and personnel, patents and other know-how).

| (30) | The Divestment Business is complemented by certain Eaton products, namely (i) all tangible and intangible assets (including production lines) necessary for the manufacture and sale of Eaton’s Series 10 and S70 HSU as well as Eaton’s HP and VIS medium power orbital motors; (ii) the technology related to Eaton’s Series 20 HSU; and (iii) tangible and intangible assets necessary for the manufacture of certain Eaton ESV. |
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(30)

The Divestment Business is complemented by certain Eaton products, namely (i) all tangible and intangible assets (including production lines) necessary for the manufacture and sale of Eaton’s Series 10 and S70 HSU as well as Eaton’s HP and VIS medium power orbital motors; (ii) the technology related to Eaton’s Series 20 HSU; and (iii) tangible and intangible assets necessary for the manufacture of certain Eaton ESV.

| (31) | The commitments submitted by the Notifying Party lay down a number of further safeguards to ensure the viability and competitiveness of the Divestment Business, in particular the following: |
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(31)

The commitments submitted by the Notifying Party lay down a number of further safeguards to ensure the viability and competitiveness of the Divestment Business, in particular the following:

| (32) | The Notifying Party commits that the Divestment Business will not be dependent on any plant that Danfoss will retain. In particular, the production at each of the plants in Hopkinsville, Parchim and Wroclaw should be fully self-sustained post-divestiture. In order to preserve the Divestment Business viability in the short-term (i.e. until the Divestment Business is able to procure or to produce in-house similar products or services), Danfoss will supply transitional services at cost. In order to support the Purchaser to replace certain transitional service agreements Danfoss commits to establish an escrow with a certain amount of funding. |
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(32)

The Notifying Party commits that the Divestment Business will not be dependent on any plant that Danfoss will retain. In particular, the production at each of the plants in Hopkinsville, Parchim and Wroclaw should be fully self-sustained post-divestiture. In order to preserve the Divestment Business viability in the short-term (i.e. until the Divestment Business is able to procure or to produce in-house similar products or services), Danfoss will supply transitional services at cost. In order to support the Purchaser to replace certain transitional service agreements Danfoss commits to establish an escrow with a certain amount of funding.

| (33) | The Notifying Party also commits to ensure the transfer of customer and distributor contracts to the Divestment Business by, inter alia, a non-solicitation obligation, the lifting of exclusivity provisions and the obligation to purchase products from the Divestment Business and pass them on to customers who do not wish to transfer to the Divestment Business. |
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(33)

The Notifying Party also commits to ensure the transfer of customer and distributor contracts to the Divestment Business by, inter alia, a non-solicitation obligation, the lifting of exclusivity provisions and the obligation to purchase products from the Divestment Business and pass them on to customers who do not wish to transfer to the Divestment Business.

Assessment of the undertakings submitted

| (34) | The commitments submitted by the Parties address the Commission’s concerns – they are structural in nature and the size of the structural divestment would be the equivalent to that of Eaton, or even larger in the three concerned markets identified as being of concern. |
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(34)

The commitments submitted by the Parties address the Commission’s concerns – they are structural in nature and the size of the structural divestment would be the equivalent to that of Eaton, or even larger in the three concerned markets identified as being of concern.

| (35) | The Divestment Business consists of three manufacturing plants with a significant footprint in the EEA and US, offers the full range of HSU, ESV and orbital motor products and commands sales in the EEA that exceed the sales of Eaton pre-Transaction on all three markets. The results of the market test, in particular the customers who responded, support this finding. |
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(35)

The Divestment Business consists of three manufacturing plants with a significant footprint in the EEA and US, offers the full range of HSU, ESV and orbital motor products and commands sales in the EEA that exceed the sales of Eaton pre-Transaction on all three markets. The results of the market test, in particular the customers who responded, support this finding.

| (36) | The Divestment Business will also be viable and able to compete effectively on all three product markets. The divested products are well-known in the market and the divested manufacturing sites are largely self-sustaining with growth potential. The addition of the Eaton’s HSU and orbital motor products will further increase the competitiveness of the Divestment Business. The safeguards foreseen in the commitments submitted by the Notifying Party mitigate, to the extent possible, the risks associated with the transfer of production lines, the replication of certain production steps and the transfer of customer contracts. |
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(36)

The Divestment Business will also be viable and able to compete effectively on all three product markets. The divested products are well-known in the market and the divested manufacturing sites are largely self-sustaining with growth potential. The addition of the Eaton’s HSU and orbital motor products will further increase the competitiveness of the Divestment Business. The safeguards foreseen in the commitments submitted by the Notifying Party mitigate, to the extent possible, the risks associated with the transfer of production lines, the replication of certain production steps and the transfer of customer contracts.

7.   CONCLUSION

| (37) | The Commission concludes that, subject to full compliance with the conditions and obligations set out in the commitments entered into by the Notifying Party, the proposed concentration will not significantly impede effective competition in the internal market in relation to the market for the supply of HSUs, ESVs and orbital motors or of any of the other markets where the Parties are active. |
| --- | --- |

(37)

The Commission concludes that, subject to full compliance with the conditions and obligations set out in the commitments entered into by the Notifying Party, the proposed concentration will not significantly impede effective competition in the internal market in relation to the market for the supply of HSUs, ESVs and orbital motors or of any of the other markets where the Parties are active.

| (38) | Consequently, the concentration is declared compatible with the Internal Market and the functioning of the EEA Agreement, in accordance with Article 2(2) and Article 8(2) of the Merger Regulation and Article 57 of the EEA Agreement. |
| --- | --- |

(38)

Consequently, the concentration is declared compatible with the Internal Market and the functioning of the EEA Agreement, in accordance with Article 2(2) and Article 8(2) of the Merger Regulation and Article 57 of the EEA Agreement.

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(1)  OJ L 24, 29.1.2004, p. 1.

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