COMMISSION DECISION of 18 November 1997 relating to proceedings under Council Regulation (EEC) No 4064/89 (Case No IV/M.913 - Siemens/Elektrowatt) (notified under document number C(1997) 3589) (Only the German text is authentic) (Text with EEA relevance) (1999/229/EC)
THE COMMISSION OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Community,
Having regard to the Agreement on the European Economic Area, and in particular Article 57 thereof,
Having regard to Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings (1), as last amended by Regulation (EC) No 1310/97 (2), and in particular Article 8(2) thereof,
Having regard to the Commission's decision of 28 July 1997 to initiate proceedings in this case,
Having regard to the opinion of the Advisory Committee on Concentrations (3),
Whereas:
(1) On 24 June 1997 the Commission received, pursuant to Article 4 of Council Regulation (EEC) No 4064/89 (the Merger Regulation), notification of a proposed merger, whereby Siemens AG (Siemens) intends within the meaning of Article 3(1)(b) of the Merger Regulation to acquire control of Elektrowatt AG (Elektrowatt) through the purchase of shares.
(2) By letter dated 15 July 1997 the Commission informed the parties of its decision to suspend implementation of the notified merger under Articles 7(2) and 18(2) of the Merger Regulation until a final decision was issued.
(3) After examining the notification, the Commission has established that the notified project falls within the scope of the Merger Regulation and gives rise to serious doubts about its compatibility with the common market and the functioning of the EEA Agreement. By decision dated 28 July 1997, therefore, the Commission initiated proceedings under Article 6(1)(c) of the Merger Regulation.
(4) The Advisory Committee discussed the draft of the present decision on 24 October 1997.
I. THE PARTIES
(5) Siemens is active in many areas. Its operations are basically in the fields of energy production, transmission and distribution, systems engineering, propulsion, circuit and installation engineering, automating engineering, public communications networks, private communications systems, protective engineering, traffic engineering, automotive engineering, medical engineering, semi-conductors, passive construction components and pipes and tubes, electromechanical components, information technology and lighting technology.
(6) Elektrowatt is a Swiss holding company which, via subsidiaries in Switzerland and Germany, is active in electricity generation and supply, building technology, security engineering, telephone installations and general building operations, property management, and engineering services in various fields.
(7) The activities of Elektrowatt which will be taken over by Siemens are:
- commercial building control (essentially through Landis & Gyr/Landis & Staefa),
- security engineering (through Cerberus),
- engineering and general operations for building and property management,
- services, systems, installations and equipment for energy supply companies,
- products, systems and services for telephone installations operators (particularly card- and coin-operated phone booths), and
- visual security devices.
Elektrowatt's activities in the fields of electricity supply and (inter)connection will be sold to firms other than Siemens.
II. MERGER
(8) Siemens intends to purchase the Elektrowatt shares held by the Crédit Suisse Group (CSG), Zurich. Elektrowatt's electricity supply and (inter)connection activities will be split off beforehand and transferred to its subsidiary Watt AG. They will be acquired by a consortium of German and Swiss energy suppliers. CSG currently owns 44,9 % of Elektrowatt; the other shares are widely dispersed. Before its shares are sold to Siemens, CSG will make the general-public shareholders a public offer for all Elektrowatt shares.
(9) The merger is caught by Article 3(1)(b) of the Merger Regulation, since Siemens is acquiring sole control over Elektrowatt. This is still the case if the public offer to acquire further Elektrowatt shares through CSG is completely unsuccessful and Siemens can only purchase the 44,9 % of Elektrowatt already belonging to CSG. Ownership of these shares gave CSG, via a secure majority at the general meeting, de facto sole control of Elektrowatt, since attendance at the general meeting in the last four years was clearly less than 70 % on each occasion and the other shares are widely dispersed.
III. EU-WIDE SIGNIFICANCE
(10) Together, Siemens and Elektrowatt have an aggregate worldwide turnover of more than ECU 5 billion (Siemens ECU 49,98 billion and Elektrowatt ECU 4,58 billion). Each of them has an aggregate EU-wide turnover of more than ECU 250 million (Siemens ECU 30,325 billion and Elektrowatt ECU 2,27 billion). Neither Siemens nor Elektrowatt achieves more than two thirds of its aggregate EU-wide turnover within one and the same Member State. The project therefore has EU-wide significance but does not constitute a case of cooperation under the EEA Agreement.
IV. ASSESSMENT PURSUANT TO ARTICLE 2 OF THE MERGER REGULATION
A. RELEVANT PRODUCT MARKETS
(11) The operations of Siemens and Elektrowatt overlap and are divided by the parties into the following areas of activity:
- commercial building control,
- building security technology (fire alarms, intrusion protection, and other security systems),
- network control technology,
- energy meters, energy management systems, ripple control transmitters and receivers,
- payphones (coin- and card-operated telephones).
(12) The procedure was initiated on account of possible competition problems in the fields of fire alarms, electricity and heat meters, ripple control transmitters and receivers, and payphones.
1. Commercial building control
(13) By commercial building control is meant the measuring, control, regulation and management of heat, ventilation, air-conditioning and other technical installations, such as building systems, in commercial buildings. Commercial building control, therefore, includes electronic and electronic data-processing systems and their components (excluding the heating, ventilation and air-conditioning equipment itself) which are used for the economic and energy-efficient control and regulation of the operational installations in commercial buildings, including the preparation and commissioning of such building management systems and showing operators how to use them.
(14) A distinction should be made between the market for building management systems as such, the markets for equipment and components (hardware) needed for such systems, and the market for servicing the systems (4).
(a) Equipment and components for building management systems
(15) Equipment and components for building management systems can be divided into different groups of appliances and components that are not interchangeable, for example cables, valves and valve mechanisms. These markets are upstream of that for building management systems per se, since hardware is a primary product for the suppliers of such systems. In the markets for equipment and components for building management systems, only Elektrowatt is active on a significant scale. For all practical purposes, Siemens does not supply equipment and components outside its own building management systems. No further discussion is needed, therefore, of the markets for equipment and components for building management systems.
(b) Building management systems
(16) The market for building management systems as such covers the development and manufacture of systems for the control and regulation of heating, ventilation and air-conditioning (HVAC) in commercial buildings, their commissioning and showing operators how to use them. Building management systems are developed and supplied on a customised basis in the light of the particular requirements of each case. Supply to final customers and commissioning are carried out either by the product manufacturer itself or its subsidiaries/branches, or through wholesalers and undertakings in the HVAC sector. The following client segments can be differentiated: office buildings, hospitals, universities and schools, specialised industries and hotels. In purely residential buildings, however, complex building management systems are not normally used.
(c) Servicing of building management systems
(17) Downstream of the market for building management systems is the market for servicing such systems. This covers the maintenance, repair, replacement, modernisation, operational control and debugging of the building's installations. System manufacturers or companies working for them supply servicing for their 'own` building management systems, especially as part of the guarantee for newly installed systems. 'Other people's` building management systems are also serviced by competitors, however. Customers conclude contracts with suppliers for all these services. The market for servicing building management systems therefore covers all the said services.
2. Building security technology
(18) Building security technology covers fire alarm and intrusion protection (burglar alarm) systems, access control and other security systems. Building security technology installations are used primarily in office and industrial buildings, hospitals and hotels. In this field, too, a distinction must be made between the market for equipment and components, the market for systems and installations as such, and the market for servicing.
(a) Equipment and components for building security technology
(19) Only Elektrowatt is significantly active on the markets for building security technology equipment and components. Siemens basically manufactures such equipment and components only for its own use (it also sells to third parties, but on a small scale and only in Germany). The aggregate market shares of Siemens and Elektrowatt/Cerberus in Germany are less than 15 %, however. In the other Member States and throughout the EEA, Elektrowatt's market shares for equipment and components are less than 25 %; market share aggregation does not apply. No further discussion is needed therefore of the markets for equipment and components for building security systems.
(b) Building security installations: fire protection installations, intrusion protection and other building security installations
(20) The market for building security installations/systems as such covers modification of the plant in accordance with the specific requirements of each customer, fitting and commissioning, and showing operators how to use the installations/systems. The Commission has ascertained that fire alarm installations form a separate product market to intrusion protection and other systems. Such installations serve different purposes in each case and are not interchangeable from the customers' point of view. In contrast to other building security installations, fire protection installations are frequently required by law and/or insurance companies. The sensors they use (ionisation, optical, thermal) are different to those in, say, intrusion protection installations (sound, ultrasound, infrared, radar). There are also customers who only, or primarily, require straightforward fire protection systems, for example hospitals or small commercial establishments.
(21) There is admittedly a tendency for fire alarm systems to be integrated with other building security installations. In particular, relatively large firms and government offices, etc. generally require intrusion protection and access control as well as fire protection, and the different systems must work together as smoothly as possible. To achieve this, however, it does not seem necessary for fire alarm and other safety installations to be purchased from the same source, since (part) installations from different manufacturers can be used together. Customer preferences are not clear: some customers prefer to buy all their security technology from the same manufacturer, while others attach importance to buying from several suppliers. In any event, large suppliers are able to deliver fire protection, intrusion protection and other building security installations. Despite the tendency towards integration, separate product markets for fire protection installations on the one hand and for intrusion protection and other security installations on the other should be assumed.
(c) Servicing building security installations
(22) It could not be clearly established whether the servicing of fire alarm installations and intrusion protection and other security systems forms an independent product market or is to be classed with the systems market. Servicing includes the maintenance, repair, replacement, modernisation, performance monitoring and debugging of the security installations. Often, the maintenance of building security installations is carried out by the manufacturer. The customer often prefers this, since the reliable, bug-free operation of the installation and the fastest possible debugging are extremely relevant for security. However, there are also other (smaller) firms which carry out maintenance services. The question whether the servicing of building security installations forms an independent market does not have to be decided, however, since even if a separate market is assumed there are no problems of competition.
3. Energy meters, ripple control technology, energy-management systems, network control technology (command and control equipment for energy suppliers)
(23) Command and control equipment for power supply companies covers equipment, systems and installations which are used (a) to monitor and control power and other energy networks (network control systems) and (b) to record and control energy consumption. The command and control equipment in the second product group all uses number recording technology, but can be further divided according to its different applications.
(24) Energy meters are mechanical and electronic meters and metering systems which record the quantities of electricity, gas or heat consumed. As explained by the parties, electricity, gas and heat meters form independent relevant product markets, since both the technology used and the customer categories differ. The customers for energy meters are the respective energy suppliers, i.e. electricity, gas and district heating companies.
(a) Gas meters
(25) The market for gas meters is not affected by the merger, since only Siemens with a market share of 22 % in the United Kingdom is active in this sector and Elektrowatt does not manufacture gas meters.
(b) Electricity meters
(26) The market for electricity meters covers mechanical meters (built on the Ferraris principle), electromechanical meters ('hybrid meters`) and electronic meters. A distinction can be drawn, on the basis of the application, between meters for tariff customers (households and small consumers), meters for industrial customers and 'high-end` meters. The high-end domain comprises fields of application with special, particularly high technical requirements (e.g. meters for measuring the exchange of current in the high-voltage grid between different electricity producers). In the case of households and small consumers, which use only low-voltage electricity and are subject to at the most two tariffs, it is mostly mechanical meters that are still used, at any rate in western and central Europe with the exception of France, the Netherlands and the United Kingdom. In Scandinavia, by contrast, it is electronic meters which are primarily being used, and in households too. Among industrial final consumers, electronic meters primarily are being used throughout the EEA. In the high-end category, only electronic meters are used.
(27) Meters with electronic measuring systems and counting mechanisms are in competition in terms of price and function with traditional equipment built on the Ferraris principle. Because electronic meters have a greater functional range, they can be used in a broader applications spectrum than mechanical or electromechanical meters. Thus the technical implementation of tariff schedules, for example the introduction of complex customer charging, which is facilitated by electronic meters, is highlighted as a substantial advantage by the majority of customers surveyed. Compared with mechanical ones, moreover, electronic meters are more sensitive. Their operability is less affected by fluctuations in voltage, frequency or temperature. Further advantages of electronic over mechanical meters are a lack of sensitivity to their environment, smaller dimensions (space-saving equipment), multifunctional installation possibilities (e.g. combination meters with ripple control receivers or timer) and the use of cost-saving reading techniques (remote reading). Among the disadvantages, however, can be reckoned shorter calibration periods, a higher breakdown rate and a currently higher purchase price than the mechanical alternating current or three-phase meter built on the Ferraris principle.
(28) A narrower definition of the market on the basis of fields of application, however, is inappropriate, even taking account of the differences between mechanical and electronic meters. Even though in the domestic field it is principally Ferraris meters which continue to be used, at any rate in central Europe, the generally expected diversification of tariffs will accelerate the spread of electronic meters, which have in any case been manufactured for two decades. The higher cost at present of electronic meters compared with alternating current or three-phase meters is not an obstacle to their increasing use, even in households. Their use may even prove to be more economic on a total cost basis, if the lower installation and administrative outlay compared with mechanical meters is taken into account. A further argument for the increased use of electronic as opposed to mechanical meters is that their prices generally have fallen in the past five years as a result of constant technical improvement and greater competition from new suppliers. The customer expectation is that this trend will continue. The Commission therefore assumes a uniform market covering all types of electricity meter, from the traditional Ferraris via the hybrid to the electronic.
(c) Heat meters
(29) Heat meters are appliances which measure and indicate the consumption of thermal energy in flats and houses and in industrial and municipal buildings. The equipment used is either mechanical (vane mechanism) or electronic (measurement by ultrasound). Mechanical meters are being increasingly replaced in all spheres by electronic ones. The Commission is therefore assuming a uniform market covering mechanical and electronic heat meters.
(d) Energy management systems
(30) Energy management systems are installations for recording, controlling and monitoring electricity consumption. The customers for such systems are principally power supply companies and relatively large industrial firms, which use energy management systems to optimise consumption. The aim, for instance, is to try and exploit cheap-rate periods and avoid or flatten consumption peaks.
(e) Ripple control transmitters and receivers
(31) With the aid of ripple control transmitters and receivers, multi-tariff meters and consumption equipment can be centrally controlled and switched on and off. The transmission device of the ripple control unit is installed at the power supply company and the receivers at the site of the multi-tariff meters or consumption equipment. Ripple control transmitters are increasingly incorporated in the metering systems installed in the current-consuming devices. The customers for ripple control transmitters and receivers are chiefly power supply companies.
(f) Network control technology
(32) By network control technology is meant the development, engineering, delivery/installation, maintenance and servicing of control systems for public power, gas, water and district heating networks. Such installations consist of computerised central control stations (network control stations) and facilities with which the geographically separate parts of a network, for example transformer substations, switchgear and power stations can be remotely controlled (remote control or station control technology). Network control technology does not include equipment, controlled by network control systems, in the power supply field such as switching installations, overload protection equipment and transformers. The customers for network control technology are essentially power supply companies.
(33) Network control technology installations must be tailored to the specific requirements of individual customers, whose networks have usually developed over time and also differ from each other in terms of commercial organisation. Nevertheless, there is no justification for dividing the sector into separate relevant product markets according to the type of network to be controlled, since the basic control technology for network control installations does not differ. In view of the complexity and size of the equipment, the design, installation and maintenance are carried out by one supplier. According to the Commission's investigations, there are no smaller firms in the network control technology field which simply carry out the maintenance of network control technology installations. The Commission is therefore assuming an overall market for network control technology for public and industrial power, gas, water and district heating networks, which comprises the design, installation and maintenance of the installations.
4. Payphones
(34) Payphones are publicly accessible telecommunications terminal equipment, through which the general public is supplied with telecommunications services for consideration. Payphones can be distinguished firstly by mode of payment. There are coin-operated phones, phones using prepaid phone cards and credit-card telephones. There are also combined telephones, for example combined coin and card phones, or phones which take different types of card. This circumstance does not mean, however, that separate markets could be formed depending on the mode of payment. All manufacturers supply phones for the important payment modes (coin, phonecard and credit-card phones). Customers, too, usually ask for telephones with several or all of the abovementioned payment modes. Thus the conditions of competition for payphones with different modes of payment do not differ. It is to be expected, moreover, that payphones with different modes of payment will continue to be demanded (thus, for instance, phonecard telephones and credit-card telephones sometimes appeal to different end users; even coin-operated telephones will not disappear entirely).
(35) A distinction must be made, however, between 'public` and 'private` payphones. 'Public` payphones are telephone installations, operated by telecoms companies that are still State-owned or by private operators of the public telephone network authorised to do so as a result of liberalisation, which are principally located in public, unsupervised places (outdoors) and mostly accessible round the clock. 'Private` payphones are terminal equipment operated both by the telephone companies and by private undertakings, with independently set rates often higher than those of 'public` payphones; they are usually located on private property indoors and are often accessible only during certain times. Even after the complete liberalisation of telecommunications, it will be necessary to maintain a telephone installations network consisting of 'public` payphones as part of the basic supply. 'Private` payphones will, by definition, be used for profit and are therefore not suited to ensuring a nationwide basic telephone supply for the population. The Commission is therefore assuming different product markets for 'public` and 'private` payphones.
(36) A further fundamental difference between 'public` and 'private` payphones lies in the additional security measures that are needed for 'public` payphones. 'Public` payphones must also clearly be more robust than payphones installed indoors, for example in restaurants, airports and government buildings, where there is less danger of vandalism. The manufacturing costs of unsupervised 'public` payphones are therefore clearly higher than those for 'private` payphones (two or three times as high). The Commission is therefore assuming different product markets for 'public` and 'private` payphones.
(a) Public payphones
(37) 'Public` payphones are to be found in the public domain, principally on streets and in public places. Telecoms companies are frequently subject, even when they are already privatised, to State regulations, which oblige them to provide a basic supply of payphones in the public domain. In addition, because extra security measures are required, the manufacturing costs of unsupervised 'public` payphones are clearly higher than those of 'private` ones. Also, the operation of 'public` payphones is often not very profitable on account of higher costs and declining demand (inter alia, owing to the growing spread of mobile phones). In this field there are only a few large customers, who (may) take their decisions not just on the basis of market criteria. The market for 'public` payphones is essentially determined by these customers, whose procurement policy and purchasing decisions have a decisive influence on market share.
(b) Private payphones
(38) The market for 'private` payphones is completely different in competitive structure to that for 'public` payphones. 'Private` payphones are operated on private property by a wide variety of firms. For instance, 'private` payphone operators may be owners of restaurants, pubs or hotels. There could also be 'private` payphone networks in, for example, service stations. Operators of 'private` payphones are free to decide whether they want to operate payphones or not and will do so only if they expect a direct or indirect profit from them.
B. RELEVANT GEOGRAPHIC MARKETS
1. Commercial building control
(a) Building management systems
(39) According to the undertakings involved, the market for commercial building control covers the entire EEA. They reason that barriers to market entry are low and that products and services are basically the same throughout the EEA. Any differentiation is basically order, not country, specific. Differences might also arise as a result of climatic conditions. The statutory and administrative provisions in the individual Member States, however, are not so different as to affect cross-border trade. In addition, Europe-wide standards drawn up by the European Committee for Standardisation (CEN) will shortly come into force in this field.
(40) In its decision in Elektrowatt/Landis & Gyr (5), the Commission mentioned a few other reasons for accepting national markets, without however conclusively defining the geographic market. The Commission's more recent enquiries have essentially confirmed the parties' submission. With the introduction of CE standards, which also cover product documentation and service manuals, the regulatory differences between the Member States will become increasingly smaller. Global manufacturers point out in this respect that progressive standardisation is leading to different product designs in the United States and the EEA.
(41) Moreover, local presence/proximity to the customer continues to be advantageous, particularly as far as maintenance is concerned. This is why internationally active suppliers have a combination of central production plants and national sales organisations. Differences in the distribution of market share between Member States can therefore be put down to the historical presence of a number of nationally established suppliers. However, this does not argue against accepting an EEA-wide market. There is demand for the development and installation of complex building management systems throughout the EEA. Severe restrictions of a technical or a legal nature do not exist. As already assumed in the abovementioned decision, any price differences are also not that significant, because the services (installation of the equipment, maintenance work) are carried out on site and prices are therefore strongly influenced by nationally different labour costs. Geographical peculiarities, such as climate conditions in southern Member States, do not warrant a narrower definition of the market. The building management systems of the large suppliers are adapted to different conditions. In the same way as the operational requirements for each project, which differ markedly from each other, climate-related requirements affect only the final configuration of the overall system and not its basic functions. For these reasons, the Commission is assuming at least an EEA-wide market for building management systems.
(b) Servicing building management systems
(42) As already mentioned, the local presence of the supplier is advantageous as far as servicing is concerned, since, in the event of a malfunction, customers require a response in not more than half a day and are generally not satisfied with advice given over the telephone. Building management systems are principally serviced, therefore, by nationally active, often relatively small undertakings, which are not associated with the international system manufacturers. The Commission is therefore assuming national markets for servicing.
2. Building security technology
(43) The parties designate the entire area of the EEA as the relevant geographic market for building security technology. They reason that the building security products supplied and demanded are basically the same and that any differences are not country, but order, specific. In some fields, however, different forms for the equipment are required because of the differences in national provisions. Furthermore, in this field, there is already one European standard in force, and an additional one is expected shortly, which will lead to further harmonisation.
(44) The Commission's enquiries have confirmed that there is a trend towards Europeanisation in this area also. There is, however, still strong evidence of the existence of national markets. In particular, many European countries have their own approval and recognition systems in the security technology field, which means that in each country a separate test and recognition procedure has to be initiated.
(a) Fire alarms
(45) There is a European standard (EN 54) for fire alarms, but it can be regarded only as a 'lowest common denominator` and as a rule does not suffice on its own to secure recognition in a Member State as a supplier. In Germany, France and Belgium especially, additional local requirements have to be met. In Germany, for example, approval/recognition by the VDS (Verband der Sachversicherer) is necessary. In the United Kingdom, France, Austria, Italy, Spain and Scandinavia local installation standards exist. Fire alarm systems must fit into the local fire brigade infrastructure; in Ireland and Greece, for example, the local fire brigade must be involved at the planning stage. The Commission is therefore assuming that the markets for fire alarm systems are still national.
(b) Intrusion protection and other building security installations
(46) Intrusion protection and other building security installations must bear the CE mark throughout Europe. The hardware as such can then be traded across Europe. The actual use of such hardware is, however, still governed in the individual countries as a rule by additional requirements. National authorisations, either by authorities or by insurance associations, exist in Belgium, Germany, Spain, France, Ireland, the Netherlands and the United Kingdom. In Belgium, France, Greece and Ireland, transmission equipment still has to be approved by the respective telecoms company. Intrusion protection systems must, moreover, fit into the national police infrastructure. The Commission has therefore come to the conclusion that the markets for intrusion protection and other building security installations are likewise still national.
(c) Servicing of fire alarm, intrusion protection and other building security installations
(47) As with equipment markets, the markets for the servicing of building security installations are also national. Even more so than in the case of the equipment market itself, geographical proximity to the customer plays an important part in the case of servicing. Such proximity is especially necessary when faults have to be put right quickly.
3. Energy meters, ripple control technology,energy management systems, network control technology (command and control equipment for energy suppliers)
(a) Electricity meters
(48) The parties maintain that the EEA is the relevant geographic market for electricity meters, for the following reasons. Whereas up until about 10 years ago the markets for electricity meters were still separate national markets with predominantly national production and a company like Landis & Gyr could do business throughout Europe only by maintaining its own manufacturing plants in 10 European countries, conditions have now changed fundamentally. Customers no longer attach any importance to the presence of a manufacturer in their country, but demand quality, service, short delivery periods, a high degree of functionality and greater economy, that is say an altogether more favourable price/performance ratio. This is leading to a levelling of market prices in Europe and to a concentration of production among suppliers. Market entry costs have, at all events, fallen considerably in the case of electronic meters. National authorisation or standardisation provisions do not constitute significant market entry barriers as they do not affect the fundamentals of the development and construction of energy meters.
(49) The Commission's enquiries have revealed that there is already a strong trend towards Europeanisation in respect of electricity meters. Besides the parties there are a number of other suppliers who are active throughout Europe or at least in several Member States. The successful placing on the market of Iskra Emeco, a company from Slovenia, shows that the market for electricity meters is becoming increasingly international. What is more, customers are obliged, at least in the case of large procurement contracts, to tender on a Europe-wide basis pursuant to the Utilities Directive.
(50) Although the larger electricity supply companies invite tenders for their electricity meter requirements on a Europe-wide basis, the contract will still be performed at national level. Nearly all suppliers therefore have in each Member State an establishment or at least a local sales agency, or else they market their products through the sales organisation of another manufacturer who has a presence in the Member State concerned. Although they did not regard the presence of such a national representation as a decisive factor in their choice of a particular supplier, the customers surveyed stated that they considered it at least highly advantageous when it came to working together, especially over the timely delivery of spare parts.
(51) As far as the technical standards governing electricity meters are concerned, a distinction has to be made. There are European standards for electricity meters, such as, for example, EN 60521 for mechanical alternating current and active-power meters of categories 0,5, 1 and 2, EN 61036 for electronic alternating current and active-power meters (precision categories 1 and 2), EN 60687 for electronic alternating current and active-power meters (precision categories 0,2 and 0,5) and EN 601268 for electronic alternating current and reactive energy meters (precision categories 2 and 3). In some Member States (e.g. Germany, Austria and the United Kingdom), these are coupled with a national standard (e.g. DIN EN provisions, BS EN provisions). There are also national provisions on meters, for example concerning the particulars which may be noted down when meter readings are made or transcribed.
(52) In most Member States, with the exception of Denmark, Finland and Luxembourg, electricity meters must be approved. In Denmark, national approval provisions for electricity meters are scheduled to enter into force in August 1998. The approval conditions are laid down in the respective national provisions. In some cases there are detailed, type-specific approval provisions (e.g. Germany, the Netherlands and Austria). Calibration and the fixing of tolerances for electricity meters, which guarantee the accuracy of the meter reading and hence serve to protect the final consumer, are also the subject-matter of national rules. Calibration and recalibration periods and tolerances for electricity meters therefore differ from one Member State to another.
(53) The need to have a branch at national level, the special technical requirements, the special statutory provisions for calibration and tolerances, and the national approval procedures are so many reasons for a narrower, national market delimitation. Whether, given that demand is exercised through Europe-wide tenders, they are sufficient for justifying the acceptance of meter markets which are currently still national in character can remain an open question, since the proposed merger does not result, either in the EEA or in the individual Member States, in the creation or strengthening of a dominant position.
(b) Heat meters
(54) The legal and factual framework for heat meters corresponds to that for electricity meters. There are special national technical requirements, special statutory provisions governing calibration and tolerances, and national approval procedures. Customers, at least in the case of relatively large procurement procedures, are obliged to tender on a Europe-wide basis in accordance with the Utilities Directive. Furthermore, as well as the parties, there are a number of other suppliers, who are active throughout Europe or at any rate in several Member States. It can remain undecided, however, whether the markets for heat meters are currently still national or whether there is already an EEA market, since the proposed merger does not result, either in the EEA or in the individual Member States, in the creation or strengthening of a dominant position.
(c) Ripple control transmitters and receivers
(55) Ripple control transmitters and receivers are used in most Member States. The Commission's enquiries have established that the requirements governing ripple control transmitters and receivers are largely the same throughout Europe. There are no market entry barriers due to country-specific technical requirements or national approval provisions. The Commission therefore assumes that there is at least an EEA-wide market for ripple control transmitters and receivers.
(d) Energy management systems
(56) The Commission's enquiries have established that the requirements governing energy management systems are to a large extent similar throughout Europe. Such different requirements as do exist are mostly company, and not country, specific. There are no market entry barriers due to country-specific technical requirements. The Commission is therefore assuming at least an EEA-wide market for energy management systems.
(e) Network control technology
(57) The parties maintain that the relevant geographic market for network control technology is the EEA, and for the following reasons. Intermediary trade within the EEA is not hindered by import restrictions and low transport costs make it financially worthwhile to supply goods from a central manufacturing plant. This can be seen from the organisation and marketing policy of the major suppliers. Network control technology is characterised by a uniform industry standard resulting from the universally used electronic data-processing and data-systems technology. The remaining national approval requirements or standards affect the bases neither of the development nor of the construction of network control systems, and all suppliers are able to meet national specificities. The deregulation and liberalisation of the energy markets is exerting additional price pressure on the purchasers of network control technology, and this spells the end of national procurement preferences. Lastly, the Commission has already recognised, in its Decision of 3 September 1996 in Case No IV/M.706 - GEC Alsthom NV/AEG (6), a comparable effect of deregulation in the market for network control components of power generation plants.
(58) The Commission's enquiries have confirmed the parties' standpoint. The technical standards of network control technology are largely identical. Where they still exist, country-specific requirements no longer play any decisive role. The procurement policy of power supply companies is based on Europe-wide calls for tenders which encompass the planning, design, building and commissioning of complete or partial network control systems. The determining factors when it comes to deciding what to buy are price, specifications and the quality of the products and services. Company-specific requirements may, however, lead to a preference for one manufacturer, especially in the event of the extension or replacement of existing systems. This may help explain the different market shares in the individual Member States. Both the customers and the suppliers surveyed share the parties' point of view. The Commission accordingly assumes there is at least an EEA-wide market for network control technology.
4. Payphones
(59) The notifying parties consider the geographic market for payphones to be at least EEA-wide. The reason they give is the largely identical technology for payphones worldwide. Differing national access conditions or standards do not constitute barriers to market entry since they do not affect the bases of payphone development, construction and technology. The leading suppliers of payphones can produce equipment which satisfies national approval criteria and customer requirements. Differing market share levels in different European countries can be explained historically by the purchasing behaviour of the mostly State-owned monopoly telecommunications operators. With the increasing liberalisation of telecommunications markets, this is becoming less significant, however, inasmuch as growing competitive pressure will lead to a more cost-conscious purchasing behaviour on the part of telecoms operators.
(a) Public payphones
(60) In the past, markets for 'public` payphones were national. 'Public` payphones were operated by State-owned telephone authorities. National product specifications made it difficult for suppliers of 'public` payphones to supply in other Member States. Orders were always given to a small group of domestic suppliers, which is why such suppliers usually have high market shares in their countries. Foreign suppliers could supply non-domestic markets only through national subsidiaries established in those markets. This procurement policy promoted the emergence of different payphone network specifications and technical standards, which are still in existence today.
(61) In almost all the Member States the 'public` payphones field has not yet been liberalised (exceptions: Finland, Sweden and the United Kingdom). In every country, even those in which the sector has already been liberalised, the respective (still or previously State-owned) telecoms company exerts a strong influence. These telecoms companies operate all or (in liberalised markets) most 'public` payphones and are therefore able to demand for their payphone networks specifications and technical standards which payphone suppliers have to fulfil. These specifications and technical standards, and in particular the 'security philosophy`, differ so markedly from one country to another that a separate payphone model has to be developed for each major Member State.
(62) The question whether national markets must be assumed, as before, for 'public` payphones can be left open at this point. The merger of Siemens and Elektrowatt has appreciable competition effects only on the market for 'public` payphones in Germany. It is sufficient, therefore, to examine whether Germany should be regarded as a separate relevant geographic market.
(63) The most important structural features of the 'public` payphones sector in Germany are:
- that Deutsche Telekom has in the past procured, and is today procuring, 'public` payphones exclusively from undertakings established in Germany,
- that changes in this behaviour over the forecast period are not to be expected, since the contract for the development and manufacture of the new cardphone system, which will replace the current generation of card phones, has already been given by Deutsche Telekom to domestic suppliers, Siemens and Landis & Gyr,
- that there was no Europe-wide tender for the award of this contract in 1992 and that, hence, there is in Germany no genuine Community competition as yet in the 'public` payphones sector; nor, given that the contract for the development and manufacture of the new cardphone system has been awarded to Siemens and Landis & Gyr, will there be a Europe-wide tender for the procurement of 'public` payphones during the forecast period.
(64) In view of the current structural features of the 'public` payphones sector in Germany, the German market should be regarded as a separate relevant geographic market for the purpose of whether the merger could create a dominant position which would significantly impede effective competition.
(b) Private payphones
(65) In the 'private` payphones sector, market and competitive conditions also still differ considerably from one Member State to another, for example in relation to payphone density. This sector has, of course, already been liberalised in all Member States except Italy. Here, too, the (still or previously) State-owned telecoms companies continue to control a large part of the market, but competition from private suppliers is increasing. 'Private` payphone networks also need security measures and a control station linking the network, together with appropriate software. The 'private` supplier is free here, however, to choose his standards and software. A multinational 'private` supplier can therefore, for example, operate in different countries with the same systems. All that then has to be installed is an interface with the respective communications network. The Commission is therefore assuming there is at least an EEA-wide market for 'private` payphones.
C. ASSESSMENT
1. Commercial building control
(a) Building control systems
(66) Both Siemens and Elektrowatt are active in the market for building control systems. According to the parties' estimates, the volume of the market in the EEA may be put at some ECU 1,6 billion. The merger will result in an aggregate market share of [30 % to 40 %] (7*) (Elektrowatt through Landis & Staefa [25 % to 35 %], Siemens [0 % to 10 %]).
(67) Besides the parties, Honeywell Inc., USA (Honeywell) and Johnson Controls Inc., USA (Johnson) are leading suppliers of building control systems. Honeywell and Johnson are regarded as the world market leaders. In the EEA, Honeywell and Johnson have market shares of approximately [10 % to 20 %] and [5 % to 15 %] respectively. Other significant competitors are TA Control and Danfoss, which operate chiefly in the Scandinavian countries where, according to the Commission's estimates, they have market shares of up to 20 %. In the remainder of the EEA there are active competitors who often focus clearly on one or two Member States in which they achieve market shares of from 5 % to 15 %. This category includes Satchwell in the United Kingdom and France, Kieback & Peter in Germany, Sauter (8) in Germany and France, and Priva in the Netherlands.
(68) The commercial building control market overlaps with a number of neighbouring, markets such as, for example, heating, ventilation and air-conditioning installations, computer and software technology, electrical installation technology, industrial process control technology and building security technology. Companies which are active in these areas are potential competitors, and some of them have already entered the commercial building control market.
(69) In view of the existence of a number of competitors, including several financially strong companies which are world market leaders, and having regard to further potential market entries from neighbouring sectors, it is not to be expected that Siemens and Elektrowatt will occupy a dominant position in the market for building control systems as a result of the merger.
(b) Servicing
(70) The same holds true for the market for the servicing of building control systems. Servicing is often carried out by the company which supplied/installed the system. There are, however, a number of, mainly small, regionally active, companies which specialise in servicing. Of the parties, only Elektrowatt/Landis & Staefa is active to any extent in the servicing field (EEA market share [10 % to 20 %]). Siemens carries out servicing only in Germany and Belgium/Luxembourg, where its market shares are [0 % to 10 %] and [0 % to 10 %] respectively.
2. Building security technology
(a) Fire alarms
(71) The Community-wide market volume for fire alarms is, according to the notifying parties, approximately ECU 1,8 billion. The largest national market is Germany (market volume approximately ECU 550 to 600 million), followed by France (approximately ECU 300 million) and the United Kingdom (approximately ECU 250 to 300 million). There will be significant increases in market shares in this area only in Germany and Denmark.
(72) Although Siemens has market shares of more than 30 % in Luxembourg, the Netherlands and Austria, Elektrowatt is not active in those countries. Equally, Elektrowatt has market shares of more than 30 % in Finland, France, Portugal and Sweden, where Siemens is not active. In these countries, there will be no increase in market shares. There is no likelihood that the mere disappearance of a potential competitor will lead to the creation of a dominant position. Nor is there any evidence to suggest that Siemens or Elektrowatt already occupies a dominant position in one of these countries. In each of these markets there are a number of competitors with market shares in excess of 10 %, and from time to time newcomers have entered the market, including the American firms Tyco and Notifier, the latter being a particularly aggressive competitor. The position in the relevant national markets may be assessed as follows:
- Germany
(73) Siemens has a market share for fire alarms in Germany of approximately [35 % to 50 %] and is hence the market leader. Elektrowatt/Cerberus is hardly represented in this field in Germany (its market share is [
Article 1
The notified merger between Siemens AG and Elektrowatt AG is hereby declared compatible with the common market and with the functioning of the EEA Agreement, subject to the condition that the commitment given by the parties and set out in recitals 123 to 132 of this Decision is fulfilled.
Article 2
The parties shall be required to report to the Commission on the fulfilment of the condition in Article 1 of this Decision.
Article 3
This Decision is addressed to:
Siemens AG
Wittelsbacherplatz 2
D-80333 München.
Done at Brussels, 18 November 1997.