Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE  
Europese Commissie , DG COMP MERGER REGISTRY, 1049 Brussel,   BELGIË  
 
Tel: +32 229 -91111. Fax: +32 229 -64301. E -mail: COMP -MERGER -REGISTRY@ec.europa.eu . 
 
  EUROPEAN COMMISSION  
Brussels , 21.6.2019  
C(2019 ) 4892 final  
     PUBLIC VERSION  
 
To the notifying party  
Subject : Case M. 9234 —  Harris Corporation/L3 T echnologies  
Commission decision pursuant to Article 6(1)(b) in conjunction with 
Article 6(2) of Counci l Regulation No  139/20041 and Article 57 of the 
Agreement on the European Economic Area2 
Dear Sir or Madam,  
(1) On 26 April 2019 , the European Commission received notification of a 
proposed concentration pursuant to Article 4 of the Merger Regulation by which 
Harris Corporation (‘Harris’ , United States ) acquires sole control of the whole 
of L3 Technologies, Inc. (‘L3’ , United States ) within the meaning of Article 
3(1)(b) of the Merger Regulation  (the ‘Transaction’).3 Harris is designated 
hereinafter as the ' Notifying Party ', while Harris and L3 are together referred to 
as the ‘Parties’.  
                                                 
1  OJ L 24, 29.1.2004, p. 1 (the 'Merger Regulation '). With effect  from 1 December 2009,  the Treaty 
on the Functioning of the European Union ( 'TFEU ') has introduced certain changes, such as the 
replacement of 'Community ' by 'Union ' and 'common market ' by 'internal market '. The terminology 
of the TFEU will be used through out this decision.  
2  OJ L 1, 3.1.1994, p. 3 (the 'EEA Agreement').  
3  See publication of the Official Journal of the European Union No C 154/6, 06.05.2019.  

 
 
2 1. THE PARTIES  
(2) Harris is an international aerospace and defence technology company that 
supplies products, systems and services for defence, civil government and 
commercial applica tions. Harris is headquartered in Florida , United States  and it 
is listed on the New York Stock Exchange.  
(3) Harris’ business is structured into three main areas of activity  as follows :4  
i. The communication systems  segment includes Harris’ night vision 
produc ts, tactical radio communications equipment, including hand held 
video data lin ks, for military and commercial customers as well as 
portable radios and other products for police forces.  
ii. The electronic systems segment includes the supply of electronic warfa re 
equipment (radars, radar deception devices and electronic attack systems 
that disrupt adversary signals), avionics (equipment and software used in 
military aircraft), mission networks and other systems.  
iii. The space and intelligence systems  segment include s products such as 
remote sensing antennas, position and navigation solutions (new 
generation GPS), systems supporting missile warning systems, tracking 
software, earth observation solutions, optic solutions for the aerospace 
industry and environmental sol utions (thermometers, barometers etc.).  
(4) L3 is an international aerospace and defence systems company that supplies 
intelligence, surveillance and reconnaissance, communications and electronic 
systems for military, homeland security and commercial aviation customers. L3 
is based in New York , United States  and is listed on the New York Stock 
Exchange.  
(5) L3 is structured into three business segments  as follows:5  
i. The communication and networked systems  segment includes network 
and communication systems, secure c ommunications products, radio 
frequency components, satellite communication (“SATCOM”) terminals 
and space, microwave and telemetry products.  
ii. The intelligence, surveillance and reconnaissance segment  includes 
aircraft missionization and sustainment, as wel l as a broad range of 
sensor systems for airborne, war fighter, space and ground platforms.  
iii. The electronic systems segment includes products and services that serve 
niche markets such as aircraft simulation and training, cockpit avionics, 
airport security and precision engagement weapons and systems.  
                                                 
4  Form CO paragraphs 21 -24 
5  Form CO paragraphs 27 -30 
 
 
3 2. THE CONCENTRATION  
(6) The Transaction will take place pursuant to the Agreement and Plan of Merger 
dated 12 October 2018, which provides that a wholly -owned subsidiary of 
Harris, Leopard Merger Sub Inc., merges  with L3 as a result of which L3 
becomes a wholly owned subsidiary of Harris.6  
(7) Upon completion of the Transaction, L3 will be a wholly -owned subsidiary of 
Harris.  
(8) While this suggests that Harris will have sole control of L3, the question of sole 
or joint cont rol usually depends on the veto rights afforded to the minority 
shareholder or, potentially, to the target of the acquisition. According to the 
Commission’s Consolidated Jurisdictional Notice under Council Regulation 
(EC) No 139/2004 on the control of conc entrations between undertakings 
(‘Consolidated Jurisdictional Notice’) veto rights that confer joint control to the 
minority shareholders typically involve veto over the budget, business plan and 
the appointment of the senior management.7 
(9) In the case at ha nd, prior to becoming a wholly owned subsidiary of  Harris, L3 
will get to appoint six members of the combined entity’s board, the other six 
being appointed by Harris.8 Given that the merged entity’s business plan and 
budget will be decided on by its board , with this possibility to appoint board 
members, the pre -Transaction L3 will have influence over the merged entity9 for 
the period of the mandate of the merged entity’s first board. .  
(10) As all members of the combined entity’s board are elect ed at each annu al 
meeting for terms expiring at the following  annual meeting ,10 this influence will 
not last for more than a year.  After the first year, sharholders will control the 
combined entity and L3 will be under the control of the combined entity as the 
latter’s su bsidiary. Thus the current L3 will not influence the merged entity on a 
lasting basis as required by Article 3 (1) of the Merger Regulation.  
(11) Furthermore, as from the first annual meeting following the completion of the 
Transaction the shareholders that wi ll control the combined entity will be the 
current Harris shareholders . This is because t he pre -completion Harris’s 
shareholders will own approximately 54% of the combined entity11 and will thus 
be able to decide on all matters falling within the responsibi lities of the 
shareholders’ meeting. This includes electing the board members of the 
combined entity, as the latter are elected with a simple majority of shareholder 
votes.12 Given that, as discussed above, control of the board implies the ability 
to decide  on the business plan, budget and the business policy of the combined 
                                                 
6  Form CO paragraph 2  
7  Consolidated Juri sdictional Notice, paragraph 67.  
8  Amended and restated future Certificate of Incorporation of the combined entity . Form CO, 
Confidential Annex RFI1 -3, pages 2 and 4  
9  Amended and restated future Certificate of Incorporation of the combined entity . Form CO, 
Confidential Annex RFI1 -3, page 2.  
10  Amended and restated future Certificate of Incorporation of the combined entity . Form CO, 
Confidential Annex RFI1 -3, pages 2 and 4.  
11  Form CO, paragraph 90  
12  Form CO, paragraph 90  
 
 
4 entity, the current Harris shareholders will control the combined entity as from 
the first annual meeting following the completion of the Transaction.  
(12) In addition, the current Harris CEO  will serve as the chief executive officer of 
the combined entity as well as the executive chairman of the board for period of 
two and three years after closing respectively.13 He can only be removed with a 
supermajority vote of the board members (75% major ity).14 This also implies 
that, in the first year following completion (when half of the board members a re 
appointed by the current L3) the current CEO of Harris cannot be removed from 
the position of CEO of the merged entity without the consen t of the boar d 
members appointed  by Harris.  
(13) Thus, it appears that beyond the first year after the completion of the 
Transaction, Harris will have sole control over L3 and the current Harris 
shareholders will have control over the combined entity.  
(14) The Commission notes  that the current L3 CEO will serve as the vice chairman 
of the combined entity’s b oard for a period of three years, subject to a veto by 
the board taken by a supermajority (75%) vote.15 However, this rule does not 
affect the control of L3 by Harris as the situation remains that, as discussed 
above, beyond the first year following the completion of the Transaction, L3 
will be a subsidiary of Harris with no control over the board (it will appoint  only 
one member, the vice chairman, out of the twelve) and thus  the combined entity. 
It also does not affect the fact that, as discussed above, the current Harris 
shareholders will control the combined entity’s board and thus the combined 
entity as from the first shareholder meeting after completion, which will take 
place one year after completion.  
(15) Finally, a supermajority (75%) of bo ard member votes is necessary for  the 
appointment of the president and the COO of the combined entity in the first 
three years following the closing of the merger.16 These rules also do not  change 
the fact that, following the first year after completion, Harris will control L3 and 
the current Harris shareholders will control the combined entity.  
(16) It follows from the above that the Transaction will lead to a lasting change of 
control through the acquisition by Harris of sole control over L3 within the 
meaning of Article 3(1)(b) of the Merger Regulation.  
3. EU DIMENSION   
(17) The undertakings concerned have a combined aggregate world -wide turnover of 
more than EUR 5 000 million .17 (Harris : EUR 5 185 mi llion; L3 : EUR  8 491 
million.)18 Each of them has an EU -wide turnover in excess of EUR 250 million  
                                                 
13  Form CO, paragraph 93  
14  Form  CO, paragraph 93  
15  Form CO, paragraph 93  
16  Form CO, paragraph 97  
17  Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission 
Consolidated Jurisdictional Notice (OJ C95, 16.4.2008, p. 1).  
18  Form CO, paragraph 113, table 11  
 
 
5 (Harris : EUR  […] million; L3 : EUR  […] million) ,19 but neither of them achieve 
more than two -thirds of its aggregate EU -wide turnover within one and the same 
Member State.20 The notified operation therefore has an EU dimension.  
(18) In the turnover calculation, Harris’ sales to EU customers through the Foreign 
Military Sales (‘FMS’) program of the US government have been allocated to 
Harris’ EEA turnover.  
(19) By way of ba ckground, the FMS program is the US government’s program for 
exporting defence articles and services to foreign countries and international 
organizations.21 Eligible partners, which are designated by the US President and 
currently include approximately 179 foreign countries and international 
organizations, either purchase in -stock surplus defence articles directly from the 
US government or mandate the US Defense Security Cooperation Agency 
(‘DSCA’) to procure supplies on a non -profit basis on their behalf.  
(20) The p urchases by the US Government through the FMS program  (on behalf of 
the eligible partners)  are generally subject to competitive tender procedures.  
Specifically the purchases are governed by the governed by the Federal 
Acquisition Regulation (FAR) and the Defense Federal Acquisition Regulation 
Supplement (DFARS).22 These regulations bind the bind the US government to 
“promote and provide for full and open competition in  soliciting offers and 
awarding Government contracts ”23 Competitive procedures include sealed bids, 
competitive proposals, combinations of competitive procedures like two -step 
bidding, and others.  
(21) There are two exceptions to this general rule. The first exception allows the US 
government to exclude one or more suppliers from the competitive process in 
the interest of increasing or maintaining competition, national defence, or 
security of supply. The second exception allows the US government to negotiate 
(i.e. without a tender) with a single supplier specified at the outset by the foreign 
coun try or international organization. The latter is known as the sole source 
exception.  
(22) [Proportion] of Harris’s FMS sales to the EEA take place under the sole -source 
exception.24 In such cases the non -US, i.e. in this case EU, customer selects 
Harris (mostly , though not always, through a tender) and then mandates the US 
government, more precisely the DCSA, to procure the goods on its behalf.  
(23) According  to the Consolidated Jurisdictional Notice, the main rule of geographic 
revenue allocation is that revenue sh ould be allocated to the country where the 
customer is located, the underlying principle being that turnover should be 
allocated to the country where competition with alternative suppliers takes 
place. This location is normally also the place where the cha racteristic action 
                                                 
19  Form CO, paragraph 113, table 11  
20  Form CO, paragraph 113, table 11  
21  An overview of the FMS program is available at https://www.dsca mil/foreign -custome r-
guide/security -cooperation -overview   
22  See https://www.dsca mil/foreign -customer -guide/security -cooperation -overview  
23  FAR, paragraph  6.101(a), available at  https://www.acquisition.gov/far/html/Subpart%206 1 html .  
24  Form CO , paragraph 111  
 
 
6 under the contract in question is to be performed, i.e. where the service is 
actually provided and the product is actually delivered.25 
(24) It is clear from  the above description that especially in the case of sales to EU 
customers under the sole source exemption the customer is located in the EU, 
the goods are delivered to the EU and the competition with other suppliers takes 
place in the context of a tender run by an EU customer, typically a government 
or a defence contractor. Thus Harris’s sales under the sole source exemption 
should properly be allocated to the EU, even if the ultimate direct purchaser is 
the US government  that acts on behalf on the EU customer . Allocating turnover 
this way results in a turnover in excess of EUR 250 million  for Harris.  
(25) The Commission  notes that L3’s sales in the EU exceed EUR 250 million even 
outside the context of the FMS program.  
4. OTHER MERGER REVIEW P ROCEDURES AND THE SALE OF HARRIS’ NIGHT VISION 
BUSINESS  
(26) The Transaction is subject to mandatory merger c ontrol notifications in Canada, 
Turkey and the US.26 In the context of the US procedure, Harris has offered the 
sale of its night vision devices business as a remedy to address competition 
concerns identified by the US Department of Justice  (‘Do J’).  
(27) At the  time of the notification to the Commissi on, the Notifying Party  had 
already no ted in the Form CO that Harris’  night vision devices business will be 
divested.27 Moreover , on 4 April 2019, that is  several weeks before the formal 
notification to the Commissio n, Harris signed an asset purchase  agreement with 
Elbit Systems of America, LLC, the US subsidiary of Elbit Systems Ltd. 
(“Elbit”)28 pursuant to which Elbit will acquire the divested business.  The 
acquisition of Harris’ night vision devices business by Elbi t has not been 
implemented.  Headquartered in Haifa, Israel, Elbit Systems is a global 
technology and defence company that also has operation s in the EU. In 2018, 
Elbit generated EUR 2.9 billion in revenues, and employed approximately 
12,800 people worldwid e.29 
(28) The Do J’s assessment is without prejudice to the Commission’s assessment. As 
the divestment of Harris’s night vision business has not yet been implemented, 
the Commission has to carry out its assessment on the basis that it is part of 
Harris. Further, even if the same concerns are identified by the Commission and 
the same commitm ents (i.e. the divestment of Harris’s  night vision business) 
fully address these concerns, the Commission has to assess independently 
whether or not Elbit will be a suitable pur chaser. That is to say, should the 
Commission deem the divestment both necessary and sufficient to address a 
competition concern pursuant to its own assessment  of the Transaction , the sale 
to Elbit would be conditional on the acceptance of Elbit by the Com mission.  
                                                 
25  Consolidated  Jurisdictional Notice , paragraph 196  
26  Form CO, paragraph 88  
27  See for example, Form C O, paragraph 9  
28  Form RM, footnote 3  
29  Form CO, paragraph 253  
 
 
7 5. RELEVANT MARKETS AND COMPETITIVE ASSESSME NT  
(29) The Parties’ activities in the EEA overlap in the following business segments: i) 
night vision devices (‘NVD s’), ii) image intensification tubes (‘I2T s’) and iii) 
hand held video data links (‘HH -VDL s’). 
(30) As regards NVDs sales, all but two of Harris’s night vision device product series 
are solely based on Generation III image intensification technology. The 
remaining two are fusion NVDs which Harris previously offered in partnership 
with [partner company]  and today offers in partnership with  [partner company] . 
Harris is not active in the supply of thermal NVDs.30 L3 designs, produces, and 
supplies a range of NVDs based on Generation III image intensification 
technology, thermal imaging technology, and fusio n technology.31  
(31) Both Harris and L3 produce and sell Generation III I2Ts. In addition, Harris is 
currently working on [description of R&D efforts] .32  
(32) Finally, as r egards sales of HH -VDLs, Harris’s EEA portfolio consists of one 
device (RF -7800T).33 L3 supplie s a number of HH -VDLs devices under its 
Rover brand.34 
(33) The Commission will assess whether  the Transaction could potentially give rise 
to horizontal non -coordinated effects  in these segments . The Commission will 
also analyse whether  the Transaction could lea d to horizontal coordinated 
effects in any of the overlap areas.  
(34) Given that I2Ts and certain NVDs are in an upstream -downstream relationship, 
and due to the complementarity of the product portfolios in the broader military 
communications space,  the Commis sion will also assess whether the 
Transaction  would raise vertical or conglomerate concerns.  
5.1. Night vision devices  (NVDs )  
5.1.1.  Market definition   
5.1.1.1.  Product market definition  
A) Introduction  
(35) NVDs are opto -electric devices that provide users with improved vision in l ow-
light en vironments and total darkness. The most common application is nig ht 
vision goggles used by military personne  in night missions , but a rifle’s 
telescopic sight can also be augmented with a night vision device (weapon 
mounted NVDs).  
(36) NVDs can be ca tegorised in several ways:35  
                                                 
30 Form CO, paragraph 136.  
31 Form CO, paragraph 139.  
32 Form CO, paragraph 120.  
33 Form CO, paragraph 275.  
34 Form CO, paragraph 279.  
 
 
8 i. Underlying technology . NVDs can use image intensification technology 
(image intensification NVDs), thermal technology (thermal NVDs), or a 
mixture of both technologies (fusion NVDs). In addition, an emerging 
technology in night  vision is digital low light sensor technology.  
i. Within image intensification NVDs, a further potential distinction can 
be based on technology generations , which correspond to technological 
improvements. Devices currently produced and sold  fall into 
Generat ions I -III, with Generation IV being in advanced stages of 
development.  
ii. Within fusion  NVDs a further potential distinction is whether the 
device uses optical or digital image integration.  
ii. Device type . Regardless of the underlying technology, NVDs can be 
weapon sight (used on wea pons) or goggles (used by troops as eyewear ). 
In addition, there are  other  types of devices, which include thermal NV Ds 
in the form of portable cameras  that work as target detectors and locators; 
NVDs for tank a nd armoured vehicle periscopes and vehicle mounted 
cameras. Goggles can be further classified as follows:  
i. Mount type : goggles  can be hand held, helmet mounted, head -strap 
mounted and even weapon mounted  
ii. Device shape : goggles can be monoculars, bi -ocular monoculars, 
binocular s and panoramic.   
(37) A br ief description of the main NVD  technologies ( i.e. image intensification, 
thermal and fusion as well as the di fferent technology generations  within image 
intensification NVDs ) is provided in the following paragraphs .  
(38) Image intensifi cation technology works by amplifying visible ambient light like 
starlight and near -infrared light with the help of I2Ts. I2Ts convert ambient 
photons that hit a light -sensitive photocathode into electrons, then  multiply these 
electrons as they travel thro ugh a microchannel plate. The latter is a thin glass 
disc with millions of small channels each of which releases several electrons for 
every electron that strikes its inner wall. The multiplied electrons are converted 
back into photons to render an intensi fied image on a phosphor screen. Image 
intensification NVDs thus work  with visible and near -infrared light.36  
(39) By contrast, thermal NVDs work with invisible mid -infrared and far -infrared 
waves. Thermal NVDs use the temperature of objects to render visible t he 
infrared waves they  emit. Infrared detectors capture infrared waves and pass them 
on to processors that  produce and digitally display detailed temperature patterns 
known as thermograms.37 
                                                                                                                                                 
35 The classification here is slightly modified compared t o the version presented by the Notifying Party in 
Form CO, Section 6 -8, Chapter A, section III. The changes take into account the results of the market 
investigation  
36  Form CO, paragraph 157  
37  Form CO, paragraphs 166 and 168  
 
 
9 (40) Both technologies hav e their advantages and disadvantages .38 The ad vantages of 
Therm al NVDs compare d to image intensification NVDs  are as follows : they 
work in complete absence of light solely based on the heat signature of persons 
and animals; they are able to highlight persons through camouflage and light 
foliage, fog, or smoke; and they are more suited to certain covert operations 
because they need not send any signal towards their target. On the other hand 
thermal NVDs have several drawbacks compared to image intensification NVDs : 
as they pick up only heat, they are le ss suited to identify details in the image; they 
cannot look through glass; they do not work with illumination tools like beacons, 
strobes and lasers; they are larger and heavier; they consume more power; they 
are more  difficult to maintain; and their use  require s more training.  
(41) Fusion devices combine image intensification technology and thermal imaging 
technology.39 By merging  the outputs from I2Ts and the thermal images they  
provide the user with a single integrated image. The integration can happen 
throu gh optical and digital means, as discussed above. Fusion NVDs take 
advantage of the strengt hs of each type of technology: t he I2Ts provide an image 
of the surrounding environment under low -light conditions, while the thermal 
imaging sensors allow for the d etection of objects and targets of interest by 
superimposing thermal signatures of the objects in the environment. Although 
fusion devices unite the advantages of both technologies, this comes at the cost of 
being larger and heavier than non -fusion devices . Naturally, combining two 
different technologies increases the cost of the device.  
(42) As discussed above w ithin image intensification NVDs, a  further potential 
segmentation based on technology generations is based on the technology 
generation of the most cr itical component, i.e. the I2T. The US military classifies 
commercially available I2Ts into three different generations , i.e. Generations I -
III40 Generation IV is not yet available on the market and there are ongoing R&D 
efforts to create it. Broadly speaki ng, each generation marks a significant 
development step in tube technology and each generation corresponds to 
minimum performance criteria relating to range of vision, resolution, signal -to-
noise ratio, useful life, or the  amount of light it the device requires to function 
(the lower the better as a new generation device is expected to provide vision in 
circumstances a pproaching total darkness). For example,  a generation III device 
has a range of 270 meters, provides clean and bright images, works in near -
absolute darkness and has a useful life of at least 10 000 hours.   
B)  Notifying Party’s view  
(43) The Notifying Party considers that the relevant product market should comprise 
NVDs as a whole and should not be  further segmented accordin g to the any of the 
above  criteria .  
(44) The Notifying Party submits that customers view all NVDs as interchangeable 
since they all have the same basic function, i.e., providing improved vision.41 
                                                 
38  Form CO, paragraphs 169 a nd 170  
39  Form CO, paragraphs 171 and 173  
40  Form CO, paragraph 159 and table 1 5 
41  Form CO, paragraph s 187 and 195  
 
 
10 Thus the Notifying Party considers that all NVDs are substitutable from a demand 
perspect ive regardless of technology, technology generation, device type, mount 
type or device shape. Further, when it comes to mounting options , the Notifying 
Party notes that most NVDs allow for different mounting options.42  
(45) The Notifying Party further submits t hat the technologies to manufacture different 
NVDs are similar, which results in supply -side substitutability.43 More 
specifically, the Notifying Party submits that switching production from one 
device type to another (e.g. from weapon sight to goggles or v ice-versa) or from 
one technology to another (e.g. from image intensification to thermal technology 
or vice versa) is possible in the ordinary course of business.44 Moreover, if a 
supplier does not have a specific technology type (e.g. has image intensifica tion 
technology but does not have thermal technology) it can still compete for fusion 
opportunities by sourcing the missing technology from thurd party providers . For 
example, Harris sources thermal technology from [supply sources] when it 
competes for fus ion opportunities.45 With regard to NVDs of different shapes, the 
Notifying Party argues that supply -side substitutability is supported by the fact 
that most device manufacturers can and do supply all different NVD shapes and 
that the chassis and optical se tup of NVDs account for a fraction of device cost, 
which is rather driven by the technology (image intensification, thermal or 
both).46 In relation to different mounting options , the Notifying Party points out 
that most suppliers offer multiple mounting opt ions for their NVDs, which makes 
a supply -side distinction unnecessary.47  
C)  Commission’s decisional practice  
(46) In past cases involving NVDs, the Commission has so far left open the precise 
product market definition.  
(47) In Safran/Zodiac  and Daimler Benz/Carl Zei ss, the Commission considered that 
NVDs fall within the category of defence optronics.48 Defense optronics includes 
(i) thermal imaging units, (ii) residual light amplification units, (iii) visors 
mounted on land vehicles, ships, aircraft, or submarines, (i v) laser range finders, 
(v) units for missile guidance systems, (vi) optronic sensors for reconnaissance, 
(vii) navigation and weapon guidance, and (viii) optronic warning sensors.49 In 
this classification  “thermal imaging units” correspond to thermal NVDs,  and 
“residual light amplification units” correspond to image intensification NVDs.  
(48) With regard to further possible segmentation of the category of defence optronics, 
the Commission noted that technologies used to manufacture various types of 
optronics eq uipment are similar but that the supply and demand landscapes are 
                                                 
42  Form CO, paragraph 197  
43  Form CO, paragraph 187  
44  Form CO, paragraph 189  
45  Form CO, paragraph 190  
46  Form CO, paragraph 196  
47  Form C O, paragraph 197  
48  Case COMP/M.8425 Safran/Zodiac, recitals 255 and 257; Case IV/M.598 Daimler Benz/Carl Zeiss, 
recitals 8 -9 
49  Safran/Zodiac, recital 253  
 
 
11 not necessarily the same for all products.50 Ultimately, the Commission left the 
question of finding separate markets within defence optronics open.  
D)  Commission’s assessment  
(49) The Commission will assess demand -side substitution first, followed by supply -
side substitution.  
(a) Demand substitution  
(50) As a preliminary remark, the responses received in reply to the Commission’s 
market investigation show a consistent view regarding possible market 
segman tations . Namely, it appears that there is no dema nd-side substitution across 
the distinctions mentioned in Section 7.1.1.1, except for mounting type within 
goggles (as many goggles are sold with helmet or head -strap mounting options 
and can also be used in  hand ) and possibly for digital and optical integration 
within fusion devices . This is because different NVDs have different 
characteristics or performance parameters, which result in different intended uses 
and different prices. Further, customers always appear to s pecify in detail the 
NVDs they require  (e.g. NVD of a certain technology, of a certain technology 
generation or equivalent performance metrics, of a certai n type, shape ), which 
implies that only NVDs complying with those specifications are compl iant offers 
and thus NVDs with different specifications are not substitutable from a demand 
perspective. In other words, as is typical in bidding markets for specialized goods, 
the tenders (i.e. the demand side) are highl y specific, i.e. often different fr om one 
tender to anothe r and not broad enough to include  different versions of the  same 
basic product . As a result, from a demand perspective tender s often result in 
separate market s and the market definition tends to  turn on supply -side 
substitution: if s uppliers can easily adjust their production to meet the tender 
specifications, the types of devices corresponding to such specifications will 
belong to the same  market; if they cannot, the devices will belong to separate 
markets.  
(51) The detailed evidence rel ating to demand -substitution across different distinctions 
is presented below in respect of each distinction.  
a.i) Distinction based on technology  – main technologies  
(52) The Commission will discuss first the demand substitutability of the main night 
vision t echnologies (image intensification, thermal and fusion).  
(53) With regard to the question whether NVDs of different technology types (thermal, 
image intensification, fusion) can be used interchangeably, a  majority of 
customers51 considered that this is not the case.52. For example, Promoteq AB 
                                                 
50  Safran/Zodiac, recitals 255 -257 
51  When discussing the results of the Commission’s market investi gation, u nless otherwise specified in 
this decision the term “majority” or “minority” is based on a count that excludes respondents who 
replied “I do not know”. E.g. in the case of a yes/no question, if 10 respondents answered “yes”, 6 
respondents answered  “no” and 6 respondents replied “I do not know”, there is a majority of “yes” 
answers.   
52  Q1 Questionnaire to customers, question 4  
 
 
12 submitted that “ the Technologies provide different capabilities and 
functionality. "53 A large majority of customers confirmed that they or , as the case 
may be, the final customer (i.e. defence departments) specify in the ten der the 
type of technology requested .54  
(54) Customers unanimously agreed  that there are significant advantages or 
disadvantages associated with each technology such that the different 
technologies are used for different missions or b y different users (e.g. spe cial 
forces, standard infantry, helicopter pilots, non -military users etc.) .55 Respondents 
pointed out that pilots can use only image intensification NVDs as thermal 
devices do not look through cockpits  or windshields ; that thermal technology has 
low batter y life (2 -3 hours) compared to image intensification NVDs ; that fusion 
devices bring the most advantages but they are bigger, heavier and need more 
power than non -fusion devices; that thermal NVDs are not limited by the amount 
of light available whereas im age intensification NVDs are ; and that, contrary to 
thermal NVDs, image intensification NVDs allow for the identification of people, 
the reading of maps due to the better quality image they provide.56 The 
explanations also highlight that the different techn ologies are used for different 
purposes. For example, Australia’s Department of Defence considered that “ Some 
NVD technologies are reliant on large power and ancillary systems which are not 
suitable for dismounted (non -vehicular) operations. Similarly, equ ipment in some 
vehicles (notably aircraft) requires higher levels of technical performance. 
Hence, different technologies may be used depending on the role or nature of 
use.”57 Tecnex OY submitted that “ Use cases and costs differ currently. ”58 
(55) Competitors’ r esponses were fully in line with those of customers. All 
competitors confirmed that the customers do not consider image intensification, 
thermal and fusion NVDs interchangeable.59 Thales observed in this regard that 
“Those devices integrate different types of technologies, and each technology 
corresponds to different mission -system scenarios. Each of these technologies 
therefore implies different performances, and different prices ”.”60 and that 
“Customers are knowledgeable to select the technology matching be st their key 
criteria for the operational mission and express explicitly their technology 
requirements in their RFI/RFQ ”61. Elbit submitted that “ No, the technologies are 
very different and therefore also the uses. Each technology has it own pros and 
cons. The customer will choose the product according to the mission he needs to 
complete”62, while United Technologies Corporation stated that “ products have 
different tasks and purposes and are not interchangeable....For example, you 
would use different products  depending on the environment, mission, time of day, 
                                                 
53  Promoteq AB’s response to Q1 Questionnaire to customers, question 4  
54  Q1 Questionnaire to customers, question 5 
55  Q1 Questionnaire to customers, question 5  
56  Q1 Questionnaire to customers, question 5  
57  Response of the Commonwealth of Australia  Department of Defence to Q1 Questionnaire to 
customers,  question 6  
58  Tecnex OY’s response to Q1 Questionnaire to customers, qu estion 6  
59  Q2 Questionnaire to competitors, question 4  
60  Thales’s response to Q1 Questionnaire to customers, question 4  
61  Thales’s response to Q1 Questionnaire to customers, question 7 
62  Elbit’s response to Q2 Questionnaire to competitors, question 4  
 
 
13 etc.”63 The l arge majority of competitors confirmed that customers specify in their 
tenders the technology requested.64 Competitors also unanimously agreed with the 
statement that there are significant adv antages or disadvantages associated with 
each technology such that the different technologies are used for different 
missions or by  different users.65 For example, PCO submitted that “ there are 
significant advantages and disadvantages associated with each t echnology, 
depending on the situation and mission to be accomplished”66  
(56) In summary , the market investigation confirmed that the different technologies 
cannot be used interchangeably;  that customers specify in their ten der the 
technology they request,  and t hat each technology presents advantages  and 
disadvantages  and that, as a result, NVDs of different technologies are used fo r 
different missions and tasks.  
(57) These results exclude the possibility of demand side substitution across different 
technologies. Alre ady the fact that customers specify in their tenders the 
technology requested rules out the possibility that NVDs of different technologies 
are demand -substitutable. If the tenders specify the type of technology (e.g. image 
intensification NVD), then there  is distinct customer demand for a specific 
techn ology and suppliers cannot successfully offer an NVD based on a different 
technology as such a bid would be non -compliant. Like wise, the confirmed 
advantages and disadvantages  of the different technologies a re also incompatible 
with demand -side substitution. If the customer seeks NVDs for missions where 
there could be no external light or where it is important to see targets behind 
objects, image intensification NVDs are not an option. Likewise, thermal NVDs 
are not an option for drivers and pilots or for missions where a long battery time 
is needed or where the small size of the device is essential. While fusion devices 
can, in principle , be used instead of both thermal and image intensification NVDs, 
they ar e heavier, consume more power and more expensive than image 
intensification NVDs and thus will not be used in missions where long usage time 
and small size is essential or requested in tenders with budget constraints.   
A.ii) Distinction based on technolog y – digital low light sensor technology  
(58) A significant number of  customers and competitors indicated  that currently NVDs 
using digital technology do not match the performance of image intensification 
NVDs and thus cannot be considered  as substitute s.67 For e xample, L.F.E. SAS 
stated that “ The digital hasn't reached the level of resolution ”68 while Safran 
considered that “ We do not believe it is likely that I2T technology will be replaced 
in the near term .”69 Thales submitted that “ Low light sensor technology is  not 
able to meet today I2T performance in low dark, therefore it cannot be a 
substitute to I2T technology .”70 Similarly, Italy’s Land Armament Directorate 
                                                 
63  Response of United Technologies Corporation to Q2 Questionnaire to competitors, question 4  
64  Q2 Questionnaire to competitors, question 5  
65  Q2 Questionnaire to competitors, question 6  
66  PCO’s response to Q2 Questionnaire to competitors, question 6  
67  Q1 Questionnaire to customers, questions 10 and 11, Q2 Questionnaire to competitors, questions 15 
and 16  
68  L.F.E. SAS’s response to Q1 Questionnaire to customers, question 10  
69  Safran’s response to Q1 Questionnaire to customers, question 10  
70  Thales ’s response to Q1 Questionnaire to customers, question 10  
 
 
14 considered that “ NVDs based on digital low -light sensor technology are suitable 
just for moonlight co ndition”71 i.e. they are not suitable for lower light 
environments, such as starlight, in which image intensification NVDs have been 
known to operate. Elbit noted that “ The low light technology at the present can't 
compete with the I2T .”72 
(59) It follows that di gital low light sensor technology is not demand -substitutable 
with image intensification (and thus fusion) technology. As the main shortcoming 
of digital low light technology relative to image intensification technology is that 
it does not perform well in lower light environments, the same problem would be 
even more present relative thermal technology, as one important characteristic of 
the latter is that it operates in conditions of total darkness. Thus digital low light 
technology is not substitutable wit h thermal technology either.  
a.iii) Distinction based on technology generations (only image intensification 
NVDs)  
(60) The majority of customers and competitors confirmed that within image 
intensification NVDs, NVDs of different technology generations are not  
perceived  by customers as interchangeable.73  For example, Safran noted that 
“The varying generations of I2Ts offer increasing levels of performance. 
Moreover, customers usually have specific requirements in terms of technology 
regarding I2Ts. Therefore th ey are not « interchangeable » amongst different 
generations.”74 The technology generations are based on specific technical 
criteria, like range, battery lifetime, figure of merit (FOM, i.e. Resolution x 
signal -to-noise ratio) etc. Indeed, NVDs of substanti ally different performance 
levels cannot be used interchangeably: if the mission requires high or the highest 
available performance level, the newest generation device will be sought. 
Conversely, if for a given mission lower performance level is acceptable  or there 
are budget constraints (older generation products are priced lower than newer 
generation products) an earlier generation NVD will be requested. An NVD not 
meeting the performance criteria, or a costlier NVD with much higher 
performance metrics th an requested will not be accepted.  
(61) In line  with this , both customers and competitors confirm that customers specify 
the relevant technology generation in their tenders or, failing that, the required 
performance levels that the device has to comply with, w hich leads to the same 
result.75  As discussed before this in itself rules out demand -substitution across 
generations: if a certain generation or the equivalent performance level is defined 
in a tender, only devices of the relevant generation will be accept ed as older 
generation devices will not meet the criteria, while newer generation (more 
performant) devices will be disqualified on price or at least will not be price 
competitive.  
(62) Thus the Commission considers that there is no demand substitutability bet ween 
image intensification NVDs of different generations  
                                                 
71  Response of Italy’s Land Armament Directorate  to Q1 Questionnaire to customers, question 1 1 
72  Elbit’s response to Q2 Questionnaire to competitors, question 16  
73  Q1 Questionnaire to customers, questi on 8, Q2 Questionnaire to competitors, question 11  
74  Safran’s response to Q1 Questionnaire to customers, question 8.  
75  Q1 Questionnaire to customers, question 9, Q2 Questionnaire to competitors, question 12  
 
 
15 a.iv) Distinction based on integration technology within fusion devices  
(63) A fusion NVD integrates the image from an I2T (as in an image intensification 
NVD) and thermal sensors (as in thermal devices) into one composite, or fused, 
image. The method to integrate the images can be digital or optical, which raises 
the question of two distinct product markets within fusion devices based on 
integration technology .  
(64) Market feedback in this respect was mixed. While a slight majority of customers 
considered that fusion devices with different integration technologies cannot be 
used interchangeably, competitors had the opposite view. 76  
(65) Certain respondents pointed out that fusion NVDs with digital integration perf orm 
better but are more expensive, consume more power and heavier (as it needs 
larger batteries) than fusion NVDs using optical integration. By contrast fusion 
NVDs using optical integration are less performant but are lighter, more easily 
portable and les s expensive.77 The Night Vision Technologies Handbook of the 
US Department of Homeland Security mentions the same trade -off between the 
two devices.78 However, it is unclear whether such differences result in the lack 
of substitutability from a demand perspe ctive.  
(66) A majority of respondents (majority of customers and half of competitors) 
considered that customers do not specify the integration technology when 
procuring fusion NVDs suggesting that there is no separate demand for fusion 
devices with a particula r integration technology.79 Instead, separate demand can 
potentially manifest itself indirectly, through the performance parameters that 
customers specify in their tenders. However, t here is no clear indication in the 
market investigation whether the requir ed parameters for fusion devices are such 
that only devices with one type of integration technology can comply with them.  
(67) Consequently, the Commission leaves the question o f demand substitutability 
open as it does not influence the competitive assessment.   
a.v) Distinction based o n device type  
(68) As a preliminary remark, the Commission notes that the terminology with regard 
to device type and mounting options is not entirely consistent between the Form 
CO and the respondents of the market investigation. The F orm CO uses the term 
“device type” to distinguish between weapon sights and goggles, and the term 
“mounting ty pe” to distinguish between hand -held, helmet and head -strap 
mounted NVDs. However, when respondents discuss mounting options they often 
include we apon mounted NVDs, which can correspond to weapon sights. Further, 
respondents also mention (thermal) cameras that work as target detectors and 
locators, which  are distinct from hand held gog gle NVDs used by military 
                                                 
76  Q1 Questionnaire to customers, question 13,  Q2 Questionnaire to competitors, questions 19 and 20.  
77  See the responses of L.F.E to Q1 Questionnaire to customers, questions 13 and question 14, Theon’s 
response to Q1 Questionnaire to customers, question 14, Thales’s and United Technologies 
Corporati on’s response to Q2 Questionnaire to competitors, question 20.  
78  https://www.dhs.gov/sites/default/files/publications/NV -Tech -HB 1013 -508.pdf  page 11 
79  Q1 Questi onnaire to customers, question 15, Q2 Questionnaire to competitors, question 21  
 
 
16 personnel . In addition, some NVD goggle s can be mounted on helmet, head -
strap s and even weapons.80     
(69) The responses of the market investigation thus need to be interpreted carefully. 
For the purposes of this decision, the Commission will use these concepts the 
following way. By “ device type ”, the Commission refers to the following 
categories of devices:  
i. “weapon sight NVDs ” – these are NVDs specifically  designed for 
weapons. For example the L3 ’s AN/PVS -24 CNVD is “ part of the 
USSOCOM SOPMOD system for M4 Carbine.81 Likewise L3’s CNVD -
LR is also d esigned specifically as a weapon sight.82 Weapon sight 
NVDs in this sense exclude s googles that have several mounting options 
one of which may include weapon mounting.  
ii. “Goggles ” are eyewear  NVDs worn by military personnel . Most often  
they are helmet mount ed or head -strap mounted . Some models can even 
be weapon mounted, withou t having been specifically designed as a 
weapon sight. For example, Harris’s F6015 model can be hand held, 
helmet mounted, head -strap mounted but can also be weapon mounted as 
a night s cope.83  
iii. There are other types of devices , which include thermal NVDs in the 
form of portable  cameras  that work as target detectors and locators; 
NVDs for tank and armoured vehicle periscopes ; vehicle mounted 
cameras ; NVDs mounted on aircraft and stationiar y NVDs . These types 
are less relevant to the assessment as either one of the Parties or both 
Parties are inactive in these segments.  
(70) By contrast, when the Commission uses the term “ mounting option ” it only refers 
to the different mounting option of NVD go ggles . This excludes weapon sights , as 
indicated above, but includes goggles that come with multiple mounting options , 
one of which can be weapon mounting.  
(71) The Commission follows this terminology because it is useful to distinguish the 
different mounting options within goggl es from weapon sights, portable cameras 
and vehicle mounted came ras even if the terms “portable ” and “vehicle mounted” 
could be also be viewed as mounting options in the broader sense. This is because 
in the case of mounting options wit hin goggles demand substitution does not even 
arise as the device itself can be used in different ways, while, as discussed below, 
the difference appears to be substantial across goggles, weapon sights specifica lly 
designed as such, portable came ras, vehic le mounted cameras, NVDs used as 
periscopes etc.  
                                                 
80  https://www harris.com/sites/default/files/downl oads/solutions/f6015 -gen3 -monocular -night -vision -
anpvs -14.pdf   
81  https://tnvc.com/shop/l3 -anpvs -24-cnvd/   
82  https://tnvc.com/shop/cnvd -lr/  
83  https://www harris.com/sites/default/files/downloads/solutions/f6015 -gen3 -monocular -night -vision -
anpvs -14.pdf   
 
 
17 (72) A majority of both customers and competitors confirmed that weapon sight NVDs 
and goggles  cannot be used interchangeably.84 Indeed, as both types were 
developed so as to be optimally used on weapons or to  be carried by troops, they 
cannot be used interchangeably, save for in an emergency situat ion as a makeshift 
solution. Elbit noted that the uses are very different, that weapon sights are more 
rigid and heavier than goggles that they require more energy and that the 
customer requests different features for weapon sights.85 United Technologies 
Corporation submitted that “ The devices are not interchangeable and have 
different functions .”86 The Ministry of Defence of Lithuania considered that 
weapon sight and goog le NVDs “[serve] different purposes and different tactical 
capabilities”87  
(73) In this case too, a majority of custom ers and all competitors confirmed that 
tenders specify the device type (w eapon sight or goggle ) sought,88 which, as 
discussed before, rules out demand -side substitution in itself.  
(74) Portable c ameras that work as target detectors and locators also appear to be 
different from weapon sights and goggles. As Thales noted “ In Thales’ opinion, 
there are different types of NVDs according to:1. Soldier Nigh t Vision Goggles: 
portable, linked to the helmet on the soldier’s head for the soldier’s mobility. 2. 
Hand -Held Camera: portable, more weight, for target locator. 3. Weapon sights 
using Night Vision for aiming.  Each of these devices are different end produ cts, 
with different capacities and performances according to their contribution to the 
mission. Inside Soldier NVG  [Night Vision Goggles] , we can consider the 
different mountings as interchangeable according to the customer’s 
requirements .”89 Theon also co nsidered that portable cameras are used for long 
range observation purposes and they are different from night vision goggles.90 
Indeed, Thales’s product “ Sophie hand held thermal imagers ”91 is a thermal NVD  
used for day/night observation and accurate target l ocation, which is different 
from goggles worn by combat troops. The same applies to Theon’s DIKTIS -TL92 
These devices are predominantly  thermal NVDs. Unlike goggles worn by combat 
troops, these devices are used in more static situations (i.e. for observatio n). 
Thales’s response also confirms that the different mounting options within goggle 
NVDs should not be distinguished.  
(75) The Commission also considers t hat NVDs for tank periscopes, vehicle mounted 
NVDs, such as Theon’s Urania ,93 NVDs mounted on aircraft an d stationiary 
NVDs are different from the NVD types discussed before as well as from each 
other. An NVD designed to be used on a tank periscope or to be carried by an 
armoured vehicle or an aircraft clearly cannot be used the same way as weapon 
                                                 
84  Q1 Questionnaire to cus tomers, question 16, Q2 Questionnaire to competitors, question 23  
85  Elbit’s response to Q2 Questionnaire to competitors, question 23  
86  Response of United Technologies Corporation to Q2 Questionnaire to competitors, question 23  
87  Response of The Ministry  of Defence of Lithuania  to Q 
88  Q1 Questionnaire to customers, question 17, Q2 Questionnaire to competitors, question 23  
89  Thales’s response to Q1 Questio nnaire to customers, question 19  
90  Theon’s response to Q1 Questio nnaire to customers, question 18  
91  https://www.thalesgroup.com/en/global/activities/defence/land -forces/soldier -
optronics#handheldthermalimagers  
92  https://www.theon.com/diktis   
93  https://www.theon.com/urania  
 
 
18 sight or a goggle mounted on the helmet or the head -strap of a military personnel  
or held by the latter in his hand.  
(76) Consequently, the Commission considers that there is no demand substitutability 
across different device types  
a.vi) Distinction based on mounting opt ions 
(77) As discussed before  in Section 5.1.1.1.D.av.) , mounting option only refers to the 
different mounting possibilities within the goggle type N VDs. As  such goggles 
usually come with multiple mounting options , demand substitutability does not 
even arise as  the device itself can be used differently.  
(78) The Commission therefore considers that within goggles it is not appropriate to 
distinguish mounting options from a demand perspective.  
a.vii) Distinction based on device shape  
(79) As indicated before  in Section 5 .1.1.1.D.av.) , the different device shapes 
(monoculars, bi -ocular monoculars, binocul ars and panoramic) are assessed  only 
within the goggle device type. Other device types usually have a characteristic 
shape (e.g. weapon sights are typically monoculars, ta nk periscopes have a 
particular design) or not produced  in different shapes (portable cameras for 
observation or vehicle mounted NVDs).  
(80) The different shapes have different advantages and disadvantages. Monoculars 
and bi -ocular monoculars are generally smal ler and lighter than binoculars of 
similar optical properties and panoramic NVDs, which makes monoculars easier 
to carry. Binoculars and panoramic NVDs have the advantage of improved depth 
perception at the expense of larger size, weight, and higher power consumption 
from multiple I2Ts.94  
(81) These trade -offs imply that the different sha pes are used by different users  and for 
different missions. A s Griffity Defense Gmbh noted “ For safe driving of vehicles 
and for flying a double -eyed night vision goggles is nec essary. For safe movement 
in the field and possibly for shooting, a night vision goggles in which one side can 
be folded up .”95 Accordingly, depth perception is important for driving and flying 
and thus monoculars and bi -ocular monoculars will not be used f or such purpose. 
At the same, as the quote indicated, it is not possible to fold one side of a 
binocular NVD up, whereas such functionality is sometimes required for safe 
movement and shooting . Panoramic NVDs have been developed to solve the 
limited field of view offered by monoculars, bi -ocular monoculars and binoculars, 
which creates a tunnel vision effect. While the latter have a field of view of 45 
degrees, panoramic NVDs offer a 97 degree field of view, which is similar to 
daylight field o f vision. At the same time a  panoramic device uses 4 I2T s, 
increasing very significantly the cost of the device and its power consumption. 
Having such a wide field of view is important in Closed Quarter Combat 
missions ,96 i.e. in missions involving engagement with the e nemy at very short 
                                                 
94  Form CO, paragraph 195  
95  Griffity Defense Gmbh’s  response to Q1 Questio nnaire to customers, question 18  
96  http://www.americanspecialops.com/equipment/GPNVG/   
 
 
19 range (up to 100 meters) in hand -to-hand combat or using short -range firearms. 
Thus, for such type of missions panoramic devices will be considered despite the 
price and battery consumption. The opposite will be the case for  missions whe re a 
wide field of view is less important than reduced weight and power consumption 
of the device.   
(82) Thus the Commission considers that there is no demand side substitution between 
NVD googles of different shapes.  
a.viii) Conclusion on demand substitutabi lity  
(83) Based on the preceding analysis, with the exception of mounting opti ons within 
the goggle type NVDs and possibly integration technology (digital or optical) in 
the case of fusion devices, none of the distinctions mentioned are demand 
substitutable.  
(b) Supply side substitution  
b.i) Distinction based on technology – main technologies  
(84) Competitors were unanimous in their view that switching from the production of 
NVDs relying on one type of underlying technology to NVDs relying on another 
underlying technol ogy (e.g. from thermal to image intensification or vice versa) 
would imply significant technical difficulties and/or costs.  
(85) For example , Elbit submitted that “ NVD and thermal are very different 
technologies; in order to develop thermal devices you need to develop advanced 
software and develop electronic PCB.  [printed circuit board] The developing time 
can reach to several years depending on the credibility of the systems; for 
military use the required credibility is much higher. ”97 PCO SA considered that 
“according to our best knowledge establishing any entity manufacturing each of 
the mentioned technologies requires investments ca EUR 100M .”98 United 
Technologies Corporation also confirmed that the manufacturing processes are 
different and estimated that swit ching production would require 24 -36 months 
and millions of dollars for the base technology.99 In Safran’s view the 
development of any of the technologies requires significant R&D costs and 
“huge ” investments.100  
(86) It is clear from these responses that switchi ng production between image 
intensification and thermal technologies cannot be done in the short term without 
incurring significant additiona l costs or risks, in line with  the Commission’s 
Notice on the definition of the relevant market.101 The Commission th erefore 
considers that there is no supply -side substitution across NVDs with different 
underlying technologies.  
                                                 
97  Elbit’s response to Q2 Questionnaire to competitors, question 9  
98  PCO S.A.’s response to Q2 Questionnaire to competitors, question 9  
99  Response of United Technologies Corporation to Q2 Questionnaire t o competitors, question 9  
100  Safran’s response to Questionnaire t o competitors, question 9  
101  Commission Notice on the definition of relevant market for the purposes of Community competition 
law, OJ  
 
 
20 (87) A specific question is whether any image intensification NVD supplier or any 
thermal NVD supplier can swiftly create a fusion NVD by sourcing t he other 
technology from an alternative provider. The responses in this regard were close 
to equally split.102 However, the explanations given do not support supply -side 
substitutability .  
(88) Pointing to the example of Harris, Elbit submitted that it is possibl e to be 
competitive in fusion devices by sourcing thermal technology.103 While this is 
true, the response did not reveal whether this is possible at shor t notice and with 
relative ease, so this response does not support clearly supply -side substitution. 
The question essentially is whether fusion devices have their own technological 
challenges or they are very easily put together by combining thermal and image 
intensification technologies. In this regard Thales considered that “ Teaming 
between partners of each  technology will not provide the fusion capabilities. This 
capacity needs to be developed on top of each existing technology.”104 United 
Technologies Corporation noted that sourcing the missing technology could be 
easy but this could involve costs.105 These re sponses suggest that even through 
sourcing the missing technology, switching production to fusion technology based 
devices cannot be done swiftly and without overcoming significant difficulties 
because fusion devices have their own challenges.  
(89) Indeed, as the discussion in Section 5.2.1.4.(B.iv) shows, the market test clearly 
shows that even changing the integration technology within fusion devices (i.e. 
switching to optical integration from digital or vic e-versa) is not possible at short 
notice and without  great difficulties. This strongly suggests that fusion devices 
have their own technological challenges as suggested by Thales. These include, 
but are not necessarily limited to, the integration technology and the need to 
create a new architecture for the device that houses two types of technology.    
(90) The Commission adds that the mere fact of sourcing a technology or partnering 
with another technology provider can, in itself, be an obstacle to exercising 
competitive pressure at short notice as the partner m ay not be available, may not 
have the capacity or may not provide the requested quality at the requested price 
etc. Not having the technology in -house always creates such risks. This does not 
mean that a thermal or an image intensification NVD supplier can not be a 
competitive constraint in fusion devices at all (clearly Harris can) but it does 
make it more difficult to become a credible competitive constraint at short notice 
and at little cost.   
(91) Based on the above the Commission considers that it woul d not  be correct to 
regard image intensification NVD supplier s and thermal supplier s as competitor s 
in fusion NVDs (which would be the case if supply -side substitution is admitted ). 
The competitive reality rather appears to be that these suppliers are well 
positioned to enter the fusion NVD market if they so decide, i.e. they would be 
potential rather than actual competitors if they have the intention to compete.   
                                                 
102  Q2 Questionnaire to competitors, question 10  
103  Elbit’s response to Q2 Questionnaire to competitors, question 10  
104  Thales’s response to Q2 Questionnaire to competitors, question 10  
105 Response of United Technologies Corporation to Q2 Questionna ire to competitors, question 10  
 
 
21 (92) Given the lack of both demand and supply -side substitutability, the Commission 
considers that NVDs  using image intensification, thermal, and fusion 
technologies belong to separate markets.  
b.ii) Distinction based on technology – digital low light sensor technology  
(93) Similar to the distinction between the main technologies, a large majority of 
competitor s considered that switching production between digital low light sensor 
technology and the main technologies implies significant difficulties and costs 
due to different manufacturing processes and know -how.106 Thus, the 
Commission considers that supply side substitution does not apply across NVDs 
of any technology. Given the lack of demand -side and supply -side 
substitutability, NVDs using digital low light sensor technology belong to 
markets separate from thermal, image intensification and fusion NVDs.  
b.iii) Distinction based on technology generations – image intensification 
technology  
(94) A majority of competitors considered that switching production between NVDs 
using different image intensification technology generations would not imply 
significant technical difficulties or costs.107  
(95) Each generation represents a significant improvement in I2T technology, which 
could suggest that supply -side substitution is asymmetric in that producers of the 
more advanced version of the same technology can constrain producers o f earlier 
versions but this would not be true vice -versa. However, the majority of image 
intensification suppliers source their I2T from I2T providers and therefore 
upgrading their devices to a new generation involves only integrating the new I2T 
in their products, which can be done with relative ease. As Thales noted “ Given 
each I2T generation implies some R&D and therefore some capacity 
enhancement, the integrator of the tubes will need to make sure that the rest of the 
NVDs components are adapted to the new generation. This is only an upgrade of 
the NVDs and shall not imply significant difficulties.”108  
(96) In any event, all significant players in image intensification NVD providers (the 
Parties, Theon, Thales, PCO, Elbit) have generation III device capability  and thus 
could, in any case, easily supply previous generation devices.109  
(97) Generation IV is not yet on the market and based on the market feedback it is not 
possible to determine with any certainty when it will be available as a product. 
“Generation IV is largely a marketing description .” according to Australia’s 
Department of Defence110 Similarly, Griffity Defense Gmbh noted that “ There is 
no Generation IV on the World Market. The aggressive advertisement of company 
                                                 
106  Q2 Questionn aire to competitors, question 18  
107  Q2 Questionn aire to competitors, question 14  
108  Thales’s response to Q2 Questionnaire to competitors, question 14  
109  For the Parties  : Form CO paragraphs 177 and 191; for P CO https://www.defence24.com/police -
acquires -night -vision -devices -from -pco; for Theon http://w ww.tacticalstoreusa.com/military -night -
vision -gear ; for Thales see for example 
https://www.thalesgroup.com/sites/default/files/database/d7/as set/document/lucie a4 en 052016.pdf   
110  Response of Australia’s Department of Defence to Q1  Questionn aire to customers , question 8 
 
 
22 Photonis with tube designation "4G" is nev ertheless only an image intensifier of 
the II generation .”111 Thales considered that “ Harris announced it was supported 
by the US army to develop a generation 4 of tubes for night goggles. Those new 
tubes may sustain a lower level of light, which is better. However, the 
development of this new generation of tubes may be only potential .”112 Given the 
uncertainty about the timing and the development of Generation IV technology, 
there is no reason to distinguish markets based on generation on a forward 
looking bas is either.  
(98) Overall therefore , despite the lack of demand -side substitutability,  the 
Commission considers that there are no separate markets within image 
intensification technology based on technology generations.  
b.iv) Distinction based on integration te chnology within fusion devices  
(99) A large majority of competitors considered that the manufacturing process and 
know -how required for the manufacturing of fusion NVDs relying on different 
integration technology (optical or digital) are different such that swi tching from 
one to another would imply significant technical difficulties and/or costs.113 Elbit 
considered that switching from one technology to the other would require 
significant technical R&D, while Safran noted that the different technologies 
require di fferent architectures for the NVD.114 
(100)  While there appears to be no supply -side substitution, demand -side su bstitution 
was ambiguous. As this distinction has no influence on the competitive 
assessment, within fusion devices the Commission leaves the market de finition 
based o n integration technology open.   
b.v) Dist inction by device type  
(101)  The market feedback was mixed on the question whether a supplier that produces 
a certain type of device can switch production to produce another type of device 
without incurr ing significant difficulties and costs.115 While Thales and Safran 
considered that the time and cost implications would be significant, PCO S.A. and 
WB Electronic were of the opposite view.116 Although United Technologies and 
Elbit agreed with the proposition that the manufacturing processes are different 
such that switching implies significant time and cost, their explanations gave a 
more nuanced view. Elbit mentioned both months and years in terms of the time 
necessary to switch, while United Technologies men tioned that from a sensor 
perspective the adjustment would be easy.117  
(102)  The Commission also notes that most major players have in their product 
portfolio weapon sights and googles, the two most common types of devices 
                                                 
111  The response of Griffity Defense Gmbh to Q1  Questionn aire to customers , question 8 
112  Thales’s response to Q2 Questionnai re to competitors, question 11  
113  Q2 Questionnaire to competitors, question 22  
114  Elbit’s and Safran’s response to Q2 Questionnaire to competitors, question 22  
115  Q2 Questionn aire to competitors, question 27  
116  Responses of Thales, Safran, PCO SA and WB El ectronic to Q2 Questionnaire to competitors, 
question 27  
117  Responses of Elbit and Unite d Technologies  
 
 
23 within image intensification NVDs. Likew ise, most thermal suppliers produce 
hand held cameras for observation purposes. The distinction therefore may not 
make a difference with regard to such device types as all major producers would 
constrain one another even in the case of narrower markets.  
(103)  However, the question whether separate markets should be distinguished based on 
device type could be left open as this would not change the competitive 
assessment.  
b.vi) Distinction  by device shape  
(104)  Switching production from one device shape to another app ears to be easier than 
switching production between device types and thus supply side substitution is 
likely to apply across device shapes. Indeed, doubling or halving the number of 
eyepieces or objective lenses requires less effort than switching producti on to 
create a different device type. [Description] an internal Harris presentation that 
discusses the competitive landscape. In this document, Harris notes that 
[description of fused binocular opportunities in the coming years ].118 The 
presentation also rev eals that Harris notices the express demand for this particular 
shaped fusion device around April 2018 and that up to that point it only had 
monocular fusion NVDs but not a binocular product.119 In respect of this new 
opportunity, Harris mentions that [internal Assessment]120 The fact that for the 
next tender a supplier can be competitive in a different device shape strongly 
suggests supply -side substitution: already in the next opportunity (i.e. in the 
context of a bidding market, swiftly) a device maker lacki ng a particular shape 
can be credible competitive constraint.  
(105)  The Parties internal documents also indicate that they do not assess competition 
by device shape. For example an internal Harris SWOT analysis relating to night 
vision makes no mention of speci fic competition dynamics related to device 
shape.121 Likewise, an April 2018 Harris presentation that discusses, inter alia, the 
different segments within the night vision business makes no mention of a 
segment based on device shape.122  
(106)  Moreover, all major NV D suppliers  produce the main device shapes (monocular, 
binocular, or bi -ocular monocular), i.e. they have capabilities to produce all these 
device shapes. This is true even if, as was the case with Harris in fusion devices, a 
given supplier’s product portf olio does not include all device shapes in every 
segment discussed so far (i.e. image intensification, thermal, fusion NVDs and all 
device types within each of these technologies). As a result the supplier base 
would be the same even in the case of narrowe r markets, i.e. it would not be the 
case that in certain device shapes a given supplier would not be a constraint. 
Further, there is no indication in the market investigation that any supplier would 
be particularly strong in one shape versus another or tha t competition would be 
driven by very diffe rent dynamics and parameters depending on different device 
                                                 
118  Form CO Annex RFI1 17, page 29 
119  Form CO Annex RFI1 17, page 33  
120  Form CO Annex RFI1 17, page 33  
121  Annex Form CO 5.4.83  
122  Form CO Annex RFI1 17, page 30  
 
 
24 shap. Thus the competitive landscape would not necessarily be different if 
separate markets were defined based on device shapes instead of a unified marke t.  
(107)  A potential exception is panoramic devices as not all suppliers produce such 
devices. However, even in that case it remains true that suppliers can adjust 
production relatively swiftly and without great difficulties and that suppliers do 
not seem to as sess competition in terms of device shapes . 
(108)  The Commission therefore considers that supply -side substitution applies across 
different device shapes and that, as a result, there is no need to distinguish 
between different markets based on device shape.  
E) Conclusion on product market definition  
(109)  On the basis of the above, the Commission considers that :  
i. NVDs based on different technologies (imag e intensification, thermal, 
fusion and digital low light sensor technology) belong to separate 
product markets.  
 Withi n image intensification NVDs, there are no separate markets 
based on technology generations.  
 Within fusion NVDs,  the possibility whether fusion devices with 
optical and digital integration technology belong to separate 
markets  can be left open .  
ii. The quest ion whether different device types ( goggles, weapon sights, 
hand held cameras for observation, target location and surveillance, 
vehicle mounted NVDs, tank periscope devices etc.) belong to separate 
markets  can be left open .  
 Within goggles there are no se parate markets based on mounting 
options (helmet mounted, head -strap mounted, hand held etc.) .  
 Within goggles there are no separate markets based on device 
shapes (monoculars, bi -ocular monoculars, binoculars and 
panoramic.)    
(110)  This results in the followi ng relevant product markets :  
i. Market for image intensification NVDs, possibly further segmented by 
device type ;  
ii. Market for thermal NVDs, possibly further segmented by device type ;  
iii. Market for fusion NVDs, possibly further segmented by integration 
technolo gy (digital or optical). Within each integration technology, the 
market may be further segmented by device type ;  
iv. Market for digital low light sensor NVDs, possibly further segmented by 
device type.  
 
 
25 5.1.1.2.  Geographic market definition  
A)  Notifying Party’s view  
(111)  The Notifying Party considers that the geographic market is EEA -wide.123 First, 
the Notifying Party submits that NVDs have a very low transport -cost-to-price 
ratio and Harris, L3, and their competitors sell NVDs across the EEA irrespective 
of the location of their respective production facilities. Second, the Notifying 
Party argues that EEA customers rarely, if ever, source their NVDs on a national 
basis. Third, the Notifying Party is not aware of any EEA regulatory or national 
security restrictions preventing  suppliers present in one EEA country from being 
active throughout the EEA. Certain tenders de facto eliminate US suppliers such 
as the Parties, as they require suppliers not to be subject to the US International 
Traffic in Arms Regulations (“ITAR”). Howev er, to the extent any tender within 
the EEA would be limited to national or European producers only, then neither L3 
nor Harris would be able to participate, entailing that the Transaction is neutral 
with respect to any such tenders.  
B) Commission’s decision al practice  
(112)  In the past, the Commission has left open the possibility to define markets for 
specific military and defence applications on an EEA -wide or national basis due 
to, e.g., the existence of specific government regulations (such export restriction s) 
or national security -related preferences for local suppliers.124 
(113)  The most recent case involving defence products was Safran -Zodiac case, which 
also concerned defence optronics (i.e. products that include NVDs). In this case 
the Commission followed the sam e approach and left the geographic market 
definition open (EEA or national) with respect to defence optronics.125 In general 
(i.e. not necessarily with regard to defence optronics) the Commission noted that 
the geographic market can vary for differen t defenc e products based on how 
critical the technology is from a strategic and national security point of view. In 
the case of more sensitive systems and products customers can prefer national 
capabilities if they are available.126   
C) Commission’s assessment  
(114)  The ma rket investigation broadly confirmed the views put forward by the 
Notifying Party.  
(115)  A large majority of customers and competitors agreed that NVDs  used in different 
Member States are not significantly different in terms of customer preference, 
technical sp ecifications, and regulatory requirements such that NVDs intended for 
one Member State can be used in another Member State.127 TECNEX OY 
explained that “ Typically the end user needs and use cases are quite similar in 
                                                 
123  Form CO, paragraph 202  
124  Case COMP/M.4653 - MBDA/Bayern - Chemie, paras. 21 and 23; Case COMP/M.5032 –
Roxel/Protac, recital 33; Case COMP/M.1309 – Matra/Aerospatiale, recital 45; Case COMP/M.1745, 
EADS, recital 163  
125  Case  COMP/M.8425 Safran/Zod iac, recital 300  
126  Case  COMP/M.8425 Safran/Zodiac, footnote 203  
127  Q1 Questionnaire to customers, question 20, Q2 Questionnaire to competitors, question 31  
 
 
26 different countries. ”128 Likewise Theon exp lained that “ overall the requirements 
are the same. ”129 The Land Armament Directorate of Italy held similar views: “ In 
the EEA, the regulatory differences among countries are slight ”.130 Elbit 
mentioned that some adjustments may be required (e.g. thermal devic es need to 
be adjusted in countries with colder climates) but this was a minority view.131 
Over all the responses suggest demand -substitutability across the EEA.  
(116)  Moreover, to the extent that there are some demand differences, there was little 
indication tha t suppliers could not make the necessary adjustments without 
incurring significant time or costs. For example, Elbit did not indicate that the 
adaptations it referred to  (e.g. adaptation of thermal devices in countries with 
colder climates)  would require s ignificant time or costs. 132   
(117)  A large majority of customers and competitors confirmed that apart from the 
ITAR restriction, there are no regulatory or national security restrictions that 
would prevent suppliers of NVDs active in one EEA Member State from b eing 
active in another EEA Member State.133 With respect to ITAR , the Commission 
agrees with the Notifying Party that such restriction results in a de facto exclusion 
of US suppliers in EEA tenders. This would normally justify separating an ITAR 
market (firm s active in the EEA without US suppliers) and a non -ITAR market 
(all suppliers active in the EEA) but in the current case this is not important as 
both Parties are subject to ITAR. A majority of competitors also considered that 
the set of competitors is si milar in different EEA countries.134  
(118)  Thus, both from a demand and supply perspective the market appears to be at 
least EEA -wide.  
(119)  As regards a larger than EEA -market, a large majority of customers and 
competitors considered that there are regulatory restric tions that would prevent 
suppliers of NVDs from specific countries outside the EEA from being active in 
tenders in the EEA.135 The explanations, however, were quite vague as they 
referred to “suppliers that belong to black list ”, “countries subjected to 
emba rgos” and “ political agreements ”. A clearer explanation was the already 
discussed ITAR. The Commission considers these responses refer to the 
geopolitical reality that NATO countries have some common standards and 
although  these do not bind NATO members fo rmally, these countries do not 
generally source defence systems from countries that are outside the alliance such 
as, for example Russia, China and India. This practice is shared not only by 
NATO members but also by non-NATO members that are NATO allies or  closely 
cooperate with NATO (together: ‘NATO allies’) such as, for example, Australia, 
Israel, Finland, Sweden etc. For example Sweden’s armed forces actively 
                                                 
128  TECNEX OY ’s response to Q1 Questionnaire to customers, question 20  
129  Theon’s response to Q1 Que stionnaire to customers, question 20  
130  Response s of Italy’s Land Armament Directorate and Bristol Trust LLC to Q1 Questionnaire to 
customers, question 20  
131  Elbit’s response to Q2 Questionn aire to competitors, questions 31 and 3 2  
132  Elbit’s response to Q2 Questionn aire to competitors, questions 31 and 3 2  
133  Q1 Questionnaire to customers, question 21, Q2 Questionn aire to competitors, question 34  
134  Q2 Questionn aire to competitors, question 33  
135  Q1 Questionnaire to customers, question 22  
 
 
27 cooperate with NATO forces and aim to develop interoperable capabilities.136 
Within this block of NATO or NATO allied countries the suppliers that supply 
other armed forces (e.g. Chinese, Russian, Indian armed forces) cannot be 
considered as competitive constraints. There are some exceptions to this rule, as 
can be seen from the fact that a Russian sup plier sold missile systems in Turkey , a 
NATO member . However, these exceptions are limited in number and are met 
with the alliance’s disapproval.137 Thus , NATO and NATO ally countries  are 
also part of the relevant market or suppliers active in these countri es need to be 
taken into account as competitive constraints. Of these two approaches, i.e. EEA -
wide market with acknowledging constraints from suppliers in NATO and NATO 
ally countries or geographic market corresponding to NATO and NATO ally 
countries, the  first approach appears more appropriate as  competitive condition s 
could be more divergent in a large market encompassing not only the EEA but 
also the US, Japan, Turkey and Brazil.   
(120)  Although asked specifically on this point, the respondents of the market  
investigation did not indicate that their responses would differ depending on the 
product ma rket segment. Thus the above mentioned responses  apply to all the 
various product market segmentatio ns retained by the Commission for the 
purpose of assessing the Transaction .    
D) Conclusion on geographic market definition  
(121)  On the basis of the above , the Commission considers that the relevant geographic 
market for all the relevant NVD product markets listed in Section 5.1.1.1.E) 
comprises the EEA including competitive  constraints by firms from NATO or 
NATO ally countries such as Elbit and the Parties. In the rest of Section  5, when 
the Commission uses EEA in the context of geographic market, EEA is to be 
understood in this way.  
5.1.2.  Competitive assessment – horizontal non -coordianted effects  
5.1.2.1.  Notifying Party’s view  
(122)  Although in the Notofying Party’s view there is  a unified NVD market , the 
Notifying Party also puts forward its view on the basis of a segmentation based on 
technology type, i.e. image intensification NVDs, therm al NVDs and fusion 
NVDs.  
(123)  At both of these levels the Notifying Party submits that the Transaction will not 
lead to a significant impediment of effective competition for the following 
reasons :  
i. The combined entity will not have EEA shares indicative of mar ket 
power.138 The combined entity will have a 2018 EEA value share for all 
NVDs of below [10-20]%. Moreover, the combined entity will have 
2018 EEA value shares not exceeding [10-20]%. 
                                                 
136  https://www nato.int/cps/en/natohq/topics 52535 htm   
137  https://www.cnbc.com/2019 /06/04/us -nato-ambassador -turkey -must -cancel -russia -s-400-missile -
purchase html   
138  Form CO, paragraphs 241 -251 
 
 
28 ii. The combined entity will face multiple viable competitors for any future 
night vision device opportunities.139 These include Elbit, Thales, Theon, 
PCO, Qioptiq and others.  
iii. The NVDs space is highly competitive, characterized by tender 
processes.140 NVDs are typically purchased through tender processes. 
Consequently, as with any bid ding market, a small number of 
competitors is sufficient to maintain a competitive outcome. Moreover, 
barriers to switching suppliers of NVDs are typically low in the EEA. In 
addition , the night vision space has been experiencing significant 
overcapacity s ince 2012 and significant pricing pressures as a result.  
iv. The merged entity will face significant buyer power, characteristic of the 
defence sector in general.141 
v. Harris and L3 are not particularly close competitors in the EEA.142 This 
is because they meet in l ess than 20 % of the EEA tenders.  
5.1.2.2.  The Commission’s assessment  
(124)  The Parties ’ activities  overlap in the following relevant markets : 
i. Market for image intensification NVDs in the EEA ; 
ii. Market for fusion NVDs in the EEA ;  
iii. If the market for image intensification  NVDs is further segmented by 
device type, the markets for various image intensification NVD types, 
principally image intensification goggles and weapon sights in the EEA ; 
iv. If the market for fusion NVDs is further segmented based on integration 
technology, the market for optical integration fusion NVDs in the EEA ;  
v. If the market for optical integration fusion NVDs is further segmented by 
device types, the markets for various optical integration fusion NVD 
device types, principally optical integration fusion goggles in the EEA.  
(125)  The Commission will first analyse the horizontal overlaps at the level of image 
intensific ation and fusion NVDs (levels i.  and ii.  above). This will be follo wed by 
a discussion of levels iii. -v.   
A) Image  intensification NVDs  
(a) Relevant ch aracteristics of bidding markets  
(126)  The market for image intensification NVDs is a bidding market, which implies 
lumpy demand, i.e. large and infrequent tenders.  
                                                 
139  Form CO, paragraphs 252 -253 
140  Form CO, paragraphs 254 -258 
141  Form CO, paragraph 258  
142  Form CO, paragraph 259  
 
 
29 (127)  As the Commission explained in Case M.7278 – GE/Alstom,143 in markets 
characterised by tendering, the general mechanism through which a merger can 
influence competitive outcomes is similar to what occurs in mergers in ordinary 
differentiated product industries, where firms also compete on price. That is, a 
merger internalises the competitive pressure t hat two firms exercised on each 
other prior to the merger and can lead each of the remaining firms to bid less 
aggressively post -merger. The precise mechanism through which a merger can 
influence bids and the indicia of potential unilateral effects, depend  on how the 
tendering process is set up and on the information available to bidders.  
(128)  There is no presumption in bidding markets that very few bidders (even as low as 
two bidders) are sufficient to generate a competitive outcome. This extreme result 
would t heoretically only hold if suppliers sell identical products, have identical 
costs, have sufficient capacity to serve the entire market and have reliable 
information on the cost of the rival bidders. However, this result no longer holds 
if firms offer diffe rentiated products, and therefore earn a margin over cost. As in 
the present case, bidding markets where firms offer differentiated products144 are 
not characterised by the stylised perfectly competitive outcome and can generate 
non-coordinated effects if tw o competing firms merge.  
(129)  In bidding markets, prices are individually negotiated with each customer and, 
therefore, suppliers can typically engage in extensive price discrimination across 
customers.  This means that a bid submitted to a customer in a specifi c tender does 
not have to be offered on similar terms to other customers in other tenders. The 
existence of individualised pricing means that the price effects of a merger may 
be targeted at a particular subset of customers, for example those that are more  
likely to substitute between the merging parties absent the merger. This follows 
from the fact that even though a price increase across all customers may not be 
profitable (given that too many customers would be able to substitute away from 
the merging pa rties), a price increase for a specific subset of customers may be so.  
(130)  In image intensification NVD tenders, prospective suppliers form and submit bids 
in a context where there is uncertainty over competing bids. In such settings, the 
pricing incentives of  competing firms resemble those at work in ordinary markets 
with differentiated products. If there is uncertainty on the required price level of 
the winning bid, each firm faces a trade -off between the probability of winning 
the tender and the margin earne d in case of winning the tender. A higher bid 
would reduce the probability of winning the tender but would also increase the 
margin if the bid is successful. This trade -off is equivalent to the standard trade -
off between quantity sold and price in an ordin ary differentiated goods market, 
the difference being that in the case of a tender it is the probability of winning 
rather than actual quantities sold which enters the trade -off. Each bidder therefore 
chooses its optimal bid in order to optimise the trade -off between expected sales 
and price and thereby maximises its expected profits. Pricing incentives and the 
related incentives to exploit market power in bidding markets are therefore 
analogous to those at work in standard pricing of differentiated product s. 
                                                 
143 Commission decision in Case  M.7278 – GE/Alstom (2015), Annex I - The Commission's Economic 
Analysis of Bidding Data, recitals 7 et seq.  
144  NVDs are obviously differentiated goods as firms NVDs are never exactly alike.  
 
 
30 (131)  The incentives to increase the bids145 in bidding markets characterised by 
uncertainty over competing bids following a horizontal merger are very similar to 
those at work in ordinary markets with differentiated products. The primary 
difference is that the  diversion of sales between competing firms should be 
understood in terms of expected sales (the probability of winning the tender) 
rather than actual sales.  The size of the internalisation effect following a 
horizontal merger is thus determined by the clo seness of competition between the 
merging firms, understood as the level of diversion between the merging firms 
before the Transaction (evaluated in terms of winning probabilities), and by the 
level of pre -merger margins.  
(132)  Finally, in situations characteris ed by uncertainty on the quality of rival offerings 
and on the customer evaluation for each of the products offered, the competitive 
constraint faced by each bidder is determined by the ex -ante probability that rival 
bidders may make more attractive offers  and thus win the tender. When multiple 
bidders participate by paying a non -negligible cost, this means that, at the time of 
bid submissions, those bidders believed that they had a positive probability of 
winning. Therefore, facing more than one rival bidd er typically increases the ex -
ante probability that the buyer will prefer a rival offer, and therefore increases the 
competitive constraint on any given bidder. Therefore, it is not only the runner -up 
that represented a competitive constraint on the winnin g bidder, and a decrease in 
the number of remaining bidders due to the merger may result in a reduction of 
the competitive constraint faced by the Merged Entity.  
(133)  In summary, contrary to the arguments of the Notifying Party , just because the 
market for imag e intensification NVDs is organized as a bidding market, it does 
not follow that a low number of suppliers is sufficient to maintain a competitive 
outcome. In fact the effect s of a merger in the market for image intensification 
NVDs are quite similar to th e effects of mergers on ordinary (non -bidding) 
markets with differentiated products.  
(134)  This also implies that contrary to the Notifying Party’s argument, market shares 
are valuable in assessing the market power of a supplier, which  is also recognized 
by the  European Court's case -law. Namely, the Court held that the mere fact that a 
merger takes place on a bidding market, " does not mean that market shares are of 
virtually no value in assessing the strength of the various manufacturers […],"146 
(135)  However, because demand is indeed lumpy, market shares over a longer period 
(multiple years) are more indicative of market power than market shares for a 
given year because large swings of market shares caused by the win or loss of a 
significant tender in a certain year ar e smoothed out. Consequently, the 
Commission will use market shares over a five year period i.e. 2014 -2018.  
                                                 
145  In this decision, t he term s “increased bids”, “increased pric es”, “price increases” in the context of the 
effect of a merger are a shorthand to refer to increased prices, lower quality, less innovation, worse 
customer service or the deterioration of any relevant competitive parameter.  
146 Judgement of 14 December 2005  in case T -210/01 General Electric v Commission, EU:T:2005:456 , 
paragraphs 149 and 150.  
 
 
31 (b) Market shares  
(136)  As discussed in Section 5.1.2.2 .A(a)), due to the characteristics of bidding 
markets, the most useful data to assess the market powe r of suppliers are the 
2014 -2018 market shares. It follows that the Notifying Party’s argument that the 
combined market share of the Parties is as low as [10-20]% in 2018 is not 
relevant. M arket share figure s for all NVDs (i.e. also including thermal and f usion 
NVDs) , including the [10-20]% figure  for 2018, are also irrelevant because they 
do not correspond to the relevant product market retained by the Commission.  
(137)  The appropriate  2014 -2018 market shares for image intensification NVDs are 
presented in Tabl e 1 below.  
Table 1 Market Shares for Image Intensification NVDs  
Company  Market share (EEA) 2014 -2018  
Harris  [20-30]% 
L3 [10-20]% 
Combined  [30-40]% 
Theon  [20-30]% 
Thales  [20-30]% 
PCO S.A.  [5-10]% 
Elbit  [5-10]% 
Qioptiq  [0-5]% 
Others  [0-5]% 
 
(138)  The Transaction thus gives rise to a horizontally affected market. Furthermore , 
the market shares suggest that the merged entity will have significant market 
power, which approaches the level (40%) that , under certain circumstances, may  
be indicative of a dominant position .147 By removing a significant constraint the 
Transaction is likely to lead to a serious loss of competition and a likely price 
increase. By eliminating an important competitive constraint, following the 
Transaction firms  will be able to bid at  a higher price at the same level of 
probability of winning as pre -Transaction.  
(c) The Parties are strong competitive constraints   
(139)  Both Parties appear to be important and strong competitors. Precision Technic 
Defence submitted that “ L3 would be considered the leading in this technology, 
but basically the two main US OEM's of high tech NVD's”148 Safran was of the 
same view: “ To the best of Safran ED's knowledge, L3 is the worldwide 
leader .”149 And “ To the best of Safran ED's knowledge, Harri s is number 2 
worldwide .”150  
(140)  Indeed, among the image intensification NVD competitors L3 and Harris were 
most often considered as “ credible today ” and “ credible in 3 -5 years ”, followed 
                                                 
147  Case 27/76 United Brands Company and United Brands Continentaal BV v Commission of the 
European Communities .  
148  Response of Precision Technic Defence to Q1 Question naire to customers, question 23 
149  Safran’s response to Q1 Questionnaire to customers, question 24 
150  Safran’s response to Q1 Questionnaire to customers, question 25 
 
 
32 by Thales. Theon and Elbit were considered equally often at tied fourth a nd fifth 
place.  
(141)  These result s show that customers and competitors consider the Parties the two 
strongest competitors  on the market for imagine intensification NVDs . The results 
appear to be reliable as the five suppliers that were considered most often as  
credible are the five firms with the highest market shares in the EEA.  
(142)  Moreover, respondents pointed out several strengths of both Harris and L3.151 
With regard to Harris, B.M.A.S.R.L considered that “ Harris offers higher quality 
for Aviation goggles, bett er prices for monocular goggles and image intensifiers, 
past references and servicing capabilities for everything ”152 Bristol Trust 
explained that “ Harris has competitive prices and the products are reliable ”153 
Competitive prices, along with good quality and performance was also 
highlighted by Theon “ Very price competitive with good quality and performance 
products ”154 Italy’s Land Armament Directorate valued Harris’s products because 
they are battle tested: “ Harris’ devices are combat proven and largely used by  the 
US Armed Forces, hence they collect and implement the requirements coming 
from the field in terms of quality, robustness and performances”155 Likewise 
TNVC pointed to Harris’s proven track record “ Harris and fomerly ITT have an 
excellent track record an d I have sold their image tubes for the last 15 years ”.156  
(143)  All of these comments show that Harris scores well on a number of important 
competitive parameters such as price, quality and proven track record. While 
price and quality are important in all differ entiated product markets, the battle 
tested nature of the products is a special asset in the defence sector. Further, a 
positive track record is an important competitive asset in bidding markets, where 
tenders require references and value such track record  highly. This is especially 
true in the case of security related products and risk -averse public sector buyers.   
(144)  With regard to L3, Italy’s Land Armament Directorate also highlighted the battle 
tested nature of the products, their quality and robustness.157 Both L.F.E. SAS and 
Precision Technic Defence pointed to L3’s track record with Special Forces, 
Navy and ground army.158 Theon submitted that L3 has a “ Very price competitive 
with a very large and complimentary range of good quality and performance 
products ”159 TNVC made a more specific comment on the quality of L3’s 
products “ Consistent high spec tubes with very few blemishes”160  
(145)  Thus, just like Harris, L3 also scores high on price, quality and the battle -tested 
nature of its products. Likewise, it also has th e competitive asset of proven track 
                                                 
151  Q1 Questionnaire to customers, question 26  
152  Response of B.M.A.S.R.L to Q1 Questionnai re to customers, question 26 
153  Bristol Trust’s response to Q1 Questionnaire to customers, question 26 
154  Theon’s response to Q1 Questionnaire to customers, question 26  
155  Response of Italy’s Land Armament Directorate to Q1 Question naire to customers, que stion 26  
156  TNVC’s response to Q1 Questionnaire to customers, question 26   
157  Response of Italy’s Land Armament Directorate to Q1 Questio nnaire to customers, question 27  
158  Responses of L.F.E. SAS and Precision Technic Defence  to Q1 Questio nnaire to custom ers, question 
27 
159  Theon’s response to Q1 Questio nnaire to customers, question 27  
160  TNVC’s response to Q1 Questio nnaire to customers, question 27  
 
 
33 record and references and can boast in this regard of such references as the 
Special Forces of the US Army and Navy.   
(146)  Finally, having an own, in -house I2T production (vertical integration) was also 
pointed out as compet itive strength.161 Indeed Harris and L3 are the only image 
intensification NVD suppliers that directly control the key technology of their 
devices. The rest of the image intensification NVD suppliers source I2Ts from 
Photonis.  
(147)  Thus the Commission considers that both Harris and L3 are important 
competitive constraints and possibly the strongest competitors. This reinforces th e 
finding that the Transaction i s likely to lead to a significant impediment of 
effective competition.  
(d) Closeness of competition  
(148)  The Not ifying Party sub mitted that the Parties are not close competitors  as they 
meet in less than 20 % of the EEA tenders. However, this meet rate was counted 
on the basis of all NVDs and not only on the basis of image intensification NVDs. 
When considering only  the latter Harris and L3 bid against each other in [20-
40]% of the tenders.162 Considering that there are 4 large competitors and 2 -3 
smaller ones, this meet rate indicates significant competitive interaction between 
the Parties .  
(149)  Further, the ultimate ques tion with regard to closeness is the degree of 
substitution between the Parties’ products.    
(150)  In this regard, the market investigation produced consistent evidence that the 
products of Harris and L3 are close substitutes. Namely a large majority of 
customer s and competitors considered that the Parties’ products are close 
substitutes.163 Specifically, respondents considered that Harris and L3 produce 
similar devices with similar performance levels164 and that their devices have very 
similar technical parameters.165 Safran submitted that their products are generally 
equivalent.166 In addition, it was pointed out that their products are close 
substitutes because both bid in the tenders of the US Armed Forces and thus both 
have to comply with the US Armed Forces’ standar ds and specifications. 167 
United Technologies Corporation highlighted that the sensors in Harris’s and L3’s 
image intensification NVDs are similar.168 Respondents also provided specific 
examples of close or equivalent product pairs from the Parties’ respectiv e 
                                                 
161  Safran’s responses to Q1 Questio nnaire to customers, questions 26 and 27  
162  Form CO, Annex RFI2 10  
163  Q1 Questionnaire to customers, question 23, Q2 Questionnaire to competitors, question 33   
164  Response of B.M.A.S.R.L to Q1 Questio nnaire to customers, question 23  
165  Response of Lithuania’s Ministry of Defence to Q1 Questio nnaire to customers, question 23  
166  Safran’s response to Q2 Questionnaire to competitors, question 23  
167  Response of L.F.E. SAS to Q1 Questio nnaire to customers, question 23  
168  Response of United Technologies Corporation to  Q2 Questionnaire to competitors, question 33  
 
 
34 portfolios, such as AN/PVS -31(L3) – F5032 BNVD (Harris)169 and M949 (L3) – 
f4949 (Harris).170   
(151)  On the basis of the above , the Commission considers that the  Parties’ are close 
competitors and that, consequently, the price increase that may result  from the 
Transaction would be  significant.  
(e) Buyer power  
(152)  The majority of respondents to the market investigation considered that buyer 
power on the market for all NVDs is strong.171 Purchases in large quantities were 
mentioned as a factor that affords buyers a favourab le negotiating position .172 
However, certain smaller customers, such as the Ministry of Defence of Lithuania 
rated its buyer power as weak .173 
(153)  The number of customers is not large (as in the case of consumer goods) bu t not 
very low either, i.e. the customer ba se is much larger than a few large buyers. In 
the relevant market there are more than 30 governments and each government has 
several bodies (e.g. army, police etc .) that purchase NVDs. There are also  
corporate customers.  The size of the customers also var ies from very large (US 
Department of Defence) to small (smaller armed forces or police forces, small 
corporate customers). Thus, the structure of the demand side does not imply that 
buyer power is strong and the buyer power of certain customers can even b e 
weak. The Commission adds that, as explained in Section 5.1.2.2.A.(a), in 
markets such as the market for image intensification NVDs suppliers can price 
discriminate and thus can exploit the lack of buyer power of smaller customers.  
(154)  In addition, certain respondents pointed out that the reason for buyer power is 
sufficient competition among suppliers174 In other words, buyer power depends 
on a competitive market where the customer can play suppliers off against one 
another. Indeed, if competition weakens as a result of the Transaction , the 
customer has more limited and  worse choices (higher prices, worse quality) than 
pre-Transaction and it is unlikely that it can counterbalance this by being more 
assertive . This is all the more likely given the fact that def ence equipment is by 
definition critical to national security and safety and thus customers are unlikely 
to drive a hard bargain if they think that the lower purchase price could 
compromise performance and quality.  
(155)  For the reasons above,  the Commission co nsiders that buyer power is unlikely to 
mitigate the negative effects of the Transaction.  
                                                 
169  Response of Italy’s  Land Armament Directorate to Q1 Questio nnaire to customers, question 25  
170  Response of L.F.E. SAS to Q1 Questio nnaire to customers, question 25  
171  Q1 Questionnaire to customers, question 36, Q2 Questionnaire to competitors, question 51  
172  Response of Aust ralia’s Department of Defence  
173  Responses of the Lithania’s Ministry of Defence and Precision Technic Defence to Q1 Questio nnaire 
to customers, question 36  
174  See the responses of Safran, Thales and PCO S.A. to Q2 Questionnaire to competitors, question 5 2 
 
 
35 (f) Entry and expansion  
(156)  Respondents of the market investigation pointed to several barriers to entry .175  
(157)  First, any entrant needs to develop an advanced technology, whic h involves 
significant R&D spending .176 In addition any entrant would face considerable 
uncertainty since developing the underlying I2T technology is very challenging, 
which is shown by the fact that there are only three suppliers in the relevant 
market  for I2Ts. Even if the I2T could be  sourced  froma third party , developing a 
device that fulfils all use r needs at the level required for  modern military 
applications is a complex task in itself. Further, a new entrant has no order 
backlog to support R&D costs w hile it competes with incumbents that already 
have the technology and can support their R&D from revenues from their order 
backlog.  
(158)  Second, even if an entrant develops the relevant technology, it has to be credible. 
As Elbit put it “ you'll need to show pr oduct credibility if you want to sell to the 
governmental market .”177 Indeed the product needs to work reliably in practice in 
the various, often extreme, situa tions and circumstances that armed forces  have to 
be prepared for . This also involves significant development work, practical testing 
and requires familiarity with mission situations from the perspective of a device 
used, which is hard to acquire as a new entrant.  
(159)  Third, tenders require references,178 which a new entrant lacks by definition. This 
makes it challenging to win the first contract, which in turn makes it challenging 
to acquire the relevant references. Breaking this negative fe edback loop is a 
significant barrier. In addition , the breadth and quality of the portfolio of 
references is also v alued, which further reinforces the negative feedback loop for 
the entrant and positive feedback loop for the incumbent.  
(160)  Fourth, tender procedures are costly and complex,179 which increases the 
transaction costs an entrant has to support with little or no orde r backlog.  
(161)  Fifth,  a new entrant has to build a sales and repair network,180 which increases 
substantially the initial investments nece ssary to enter. In this respect also , 
incumbents support such fixed costs much easier than new entrants.  
(162)  Sixth, a majority  of respondents considered that suppliers that have already 
supplied a customer have an advantage with that customer relative to other 
suppliers.181 This is due to familiarity resulting from existing relationships, 
proven track record with the specific custo mer, or preference for a certain 
supplier f or other reasons. Contrary to a new  entrant, all incumbents enjoy this 
advantage to a certain extent due to their existing track record of deliveries.  
                                                 
175  Q1 Questionnaire to customers, question 33, Q2 Questionnaire to competitors, question 46  
176 Responses of Safran and Italy’s Land Armament Directorate to Q1 Questionnaire to customers, 
question 33, Elbit’s response to Questionnaire to competitors, quest ion 46  
177  Elbit’s response to Q2 Questionnaire to competitors, question 46  
178  Theon’s response to Q2Questionnaire to competitors, question 46  
179  Thales’s response to Q2 Questionnaire to competitors, question 46  
180  PCO S.A.’s response Q2 Questionnaire to co mpetitors, question 46  
181  Q1 Questionnaire to customers, question 29, Q2 Questionnaire to competitors, question 42  
 
 
36 (163)  The very same factors also make significant expansion difficul t.  
(164)  In addition , there has not been large scale entry or expansion in the last ten 
years.182 Current suppliers entered the market a deca de or more than a decade  
ago.183 Thus the market has been stable for a long time and has been characterised 
by the presence of the same firms as today. Moreover, a majority of respondents 
do not expect large scale entry or expansion in the next 3 -5 years.184 
(165)  The Commission notes that certain barriers would be lower in the case of existing 
thermal NVD providers as these providers have experience in designing NVDs, 
have some order backlog to support development and tender costs and already 
have a sa les and repair network and some customer relationships. In other words , 
the first barrier (technological bar rier) the fourth barrier (te nder costs), the fifth  
barrier (sales and repair network) and sixth barrier (customer relationships) would 
be lower for a thermal NVD provider. The first, fourth and fifth barriers barriers 
would be lower but not be non -existent because a new technology re quires a new 
architecture for the device  (first barrier), the tender costs would still have to be 
supported (fourth barrier) and the sales and repair network needs to be retrained 
(fifth barrier). In addition, even a thermal provider would face the second and 
third barriers (credibility of the device and references).   Thus, even in such a case 
the barriers would be considerable, which is shown by the fact that the set of 
firms supplying image intensification NVDs has been stable for a long time.  
(166)  Based on the above, the Commission considers that entry or expansion is unlikely 
to mitigate the likely anticompetitive effects of the Transaction.  
(g) Conclusion on image intensification NVDs  
(167)  On the basis of the above the Commission considers that in relation to the market 
for image intensification NVDs, the Transaction raises serious doubts as to its 
compatibility with the common market.  
A)  Fusion NVDs in the EEA  
(a) Market shares  
(168)  For the reasons discussed in relation to image intensification NVDs, market 
shares on the b asis of a five year period are also the best indicators of market 
power in the case of fusion NVDs. The relevant market shares are presented 
below.  
  
                                                 
182  Responses of Promoteq and Italy’s Land Armament Directorate to Q1 Questionnaire to customers, 
question 33, Q2 Questionnaire to competitors , question 47  
183  Q2 Questionnaire to competitors, question 50 
184  Q1 Questionnaire to customers, question 35, Q2 Questionnaire to competitors, question 48  
 
 
37  
Table 2 Market Shares in fusion NVDs  
Company  Market Share (EEA) 2014 -2018  
Harri s  [0-5]% 
L3 [20-30]% 
Combined  [20-30]%  
Thales  [40-50]% 
Qioptiq  [30-40]% 
Source: Form CO paragraph 223, table 20  
(169)  The Transaction thus gives rise to an affected market in fusion NVDs. As the 
market shares show, the Transaction reduces the number of c ompetitors from four 
to three, which generally implies a serious loss of competition and a likely price 
increase. However, in this case the increment is minor, only [0-5]%, as Harris has 
a minimal market share. Based on market shares it does not appear to have market 
power in the EEA. Given the small market share, if L3 raised its price pre -
Transaction few customers would switch to Harris due to its small presence in the 
market. Thus, in the case of a significant post -merger price increase, few 
customers wo uld remain in -house and the merged entity would likely lose 
customers to the remaining competitors such that its overall profit would 
decrease. This limits the incentives of the the merged entity to increase its price 
post-Transactuon.   
(b) Other  aspects   
(170)  The assessment as regards the market for fusion NVDs is similar to the 
assessment with respect to image intensification NVDs. This is because certain 
factors in the assessment ar e the same (for example, the nature of bid ding markets 
or buyer power). Also, the responses in the market investigation did not differ on 
the basis of the underlying techno logy used in the device  even though respondents 
were asked to highlight differences between different potential NVD markets, if 
any. Thus the Commission briefly revi ews the main points of the assessment by 
reference to the results discussed in relation to image intensification NVDs, 
indicatin g the differences  where necessary.  
(171)  However, there are important differences affect the Commission’s assessment of 
the likely ef fects of the Transaction on the market for fusion NVDs.  
(172)  Market characteristics . As discussed in Section 5.1.2.2.A(a)  the fact that the 
NVD markets are bidding markets does not imply t hat a low number of suppliers  
is sufficient to guarantee a competitive o utcome. Thus it does not imply that a 
merger cannot have negative effects on such markets.  
(173)  Parties ’ competitive strength . For the reasons discussed in Section 5.1.2.2.A(c)  
the Parties are important and strong competitors  in image intensification NVDs . 
The responses of the market investigation reviewed in that section also apply to 
the market of fusion NVDs as respondents did not differentiate in their replies 
between NVDs of different technologies. However, there are two important 
differences. First, in im age intensification NVDs the competitive advantage of 
having the technology in -house (vertical integration)  applies to both Parties  but in 
fusion NVDs it only applies to L3 as Harris sources it from third party  providers. 
Thus Harris is a less strong compe titor in fusion NVDs as it does not control one 
 
 
38 of the core technologies in these devices, including its costs. Second, although 
Section 5.1.2.2.A(c) showed  that the Parties are strong competitors , this is only 
true in the sense that Harris is a capable co mpetitor in all NVDs  globally but not 
necessarily in the EEA . Harris’s small mark et share in the relevant market 
indicates that it is not focused on the EEA.  Further , the Commission’s 
investigation did not find indications that Harris wants to significantl y expand its 
activities in the EEA.  It follows from the above that due to these differences 
Harris is not a strong competitor in fusion NVDs in the EEA.   
(174)  Closeness . The respondents in  the market investigation did not differentiate their 
responses on the b asis of NVDs of different technologies also in the case of 
closeness. Thus, as discussed in in Section 5.1.2.2.A(d) , the Parties are close 
competitors because their devices have similar performance levels and technical 
parameters, use similar sensor techno logy and both complies with the 
specifications of the US military. However, closeness only applies in the sense of 
their products but not in terms of geography. Because Harris is not focused on the 
EEA, the Parties are not close competitors in the geograph ic sense.  
(175)  Buyer power . Buyer power does not depend on the technology employed in the 
device . The structure of demand for fusion NVDs is the same as for image 
intensification NVDs and thus the results of the analysis in relation to image 
intensification NV Ds ( 5.1.2.2.A(e)) apply also to fusion NVDs . Thus, for the 
reasons explained, some customers have a degree of market power but some do 
not and in any case customers are unlikely to be able to counteract a price 
increase resulting from the loss of competiti ve pressure  via the Transaction .  
(176)  Entry and expansion. In Section 5.1.2.2.A(f) , the Commission explained that  the 
barriers to entry to and expansion in image intensification NVDs are high.  The 
results of the market investigation apply also to fusion NVDs a s the respondents  
did not differentiate their responses on the basis of technology . Thus the barriers 
are high, especially for new entrants.  Just like in the case of image intensification 
NVDs, the barriers are somewhat lower for suppliers that already hav e 
capabilities in NVDs. As discussed in relation to market definition, it is easier to 
enter the fusion NVD market for standalone thermal NVD and standalone image 
intensification by sourcing the missing technology, the same way as Harris did. 
While the ana lysis on image intensification NVDs indicates that the barriers 
remain considerable even for existing NVD providers, the example of Harris 
suggests that the barriers in this case are easier to overcome.     
(c) Conclusion on fusion NVDs  
(177)  The Transaction involves  the reduction of the number of suppliers of fus ion 
NVDs from four to three , which can potentially imply a significant loss of 
competition  Further, just like in the case of image intensification NVDs buyer 
power cannot be relied on to mitigate the effects of the Transaction  and entry 
barriers are considerable.  
(178)  However, the combined market shares for fusion NVDs are much lower than in 
image intensification NVDs and just above the threshold where generally 
competition concerns can be expected to arise. Furth er, th e market share 
increment is very s mall, suggesting that the market power of the merged entity 
will only be marginally higher  as a result of the Transaction and is unlileky to 
 
 
39 increase incentives to increase  prices. In addition , the Parties are not cl ose 
competitors in the geographic sense and there is no indication that Harris will 
become a more important competitor in the EEA in the future. Moreover , the 
example of Harris’s entry by sourcing thermal technology suggests that entry 
barriers may be some what lower than in image intensification NVDs.  
(179)  Based on the above considerations, on balance the Commission is of the view that 
the Transaction does not give rise to serious doubts as to its compatibility with the 
internal market in relation to fusion NVD s.  
B) Assessment under other relevant  market definitions  
(180)  As explained in Section 5.3.2 , the Transaction gives rise to additional overlaps if 
alternative plausible market definitions were retained. These additional overlaps 
would arise in the following marke ts:   
i. If the market for image intensification NVDs is further segmented by 
device type, the markets for various image intens ification NVD types, 
namely  image intensification goggles and weapon sights in the EEA185; 
ii. If the market fusion NVDs is further segmen ted based on integration 
technology, the market for optical integration fusion NVDs in the EEA ;  
iii. If the market for optical integration fusion NVDs is further segmented by 
device types, the markets for various optical integration fusio n NVD 
device types, na mely optical integration fusion goggles and optical 
integration fusion weapon sights in the EEA.  
(181)  In this respect the Commission notes that pursuant to the serious doubt s raised in 
this decis ion, including in the relevant  market  for image intensification N VDs, the 
Notifying Party offered commitments to address any competition concerns related 
to this market. These commitments  consist of the divestment of Harris’s entire 
night vision business including both NVDs and I2Ts. As discussed in detail in 
Section 6 , these commitments remove the entire overlap in all possible night 
vision market segments and they are well designed to address the competition 
concerns in the area of night vision, regardless of any other alternative 
segmentations. It is thus not necessar y to carry out a competitive  assessment 
under the alternative market definitions relating to NVDs.  
5.1.3.  Competitive assessment – horizontal coordinated effects  
5.1.3.1.  The Notifying Party’s view  
(182)  The Notifying Party submits that the Transaction will not give rise to c oordinated 
effects.186 First, it considers that the lack of product homogeneity renders 
implausible any implicit coordination, especially in a tender market. Second, the 
market is not transparent as it is to a large extent a bidding market, rendering any 
implicit collusion inherently unstable. Third, the market is driven by innovation 
                                                 
185  As discussed in Section 5.1.1.1.D (a.v), there is no overlap between the Parties in device types ot her 
than goggles and weapon sights.  
186  Form CO, paragraph s 260 -261 
 
 
40 given the technological features of the products. This feature too prevents the 
possibility of implicit and sustainable coordination for any significant period of 
time.  
5.1.3.2.  Commiss ion’s assessment  
(183)  The Commission agrees with arguments put forward by the Notifying Party. It is 
indeed the case that NVDs are a heterogeneous product group with various 
functionalities and multiple parameters (i.e. not only price but also quality, 
perform ance levels, energy consumption, shape, weight etc), which makes it 
difficult for competitors to implicitly reach a common understanding on the terms 
of coordination.  
(184)  Maintaining the coordination also appears difficult for several reasons. First the 
marke t is indeed not transparent, which makes montoring the deviations from the 
agreed terms of coordination difficult. Second, the lumpy nature of demand 
incentives firms to cheat on the agreed terms. Third, it is indeed the case that 
NVD markets are character ised by innovation, which renders any tactic 
coordination unstable.  
(185)  The assessment applies to image intensification NVDs, fusion NVDs and the 
other alternative relevant product markets discussed in Section 5.1.2.2.B)  
(186)  In any event, the commitments offered by the Notifying Party remove the entire 
overlap in the night vision space and thus the Transaction will not give rise to any 
horizontal coordinated effects in any NVD market.  
5.2. I2Ts   
5.2.1.  Market definition  
(187)  I2Ts are devices that intensify an image by convertin g photons to electrons, 
multiplying the electrons and reconverting them to photons. I2T s are the core 
component of an image intensification NVD as the y constitute the core 
technology on which an image intensification NVD is based.  
5.2.1.1.  Product market definitio n 
A) Notifying Party’s view  
(188)  The Notifying Party considers that I2Ts are components and the key input for 
image intensification night vision. The Notifying Party does not consider any 
further segmentation within I2Ts.187 
B) Commission’s decisional practice  
(189)  The Com mission has never considered I2Ts separately from the broader category 
of defence optronics and thus the precedents are the same as those discussed in 
relation to NVDs  in Section 5.1.1.1.C) above . Namely, in Safran/Zodiac  and 
Daimler Benz/Carl Zeiss  the Co mmission has distinguished defence optronics, a 
                                                 
187  Form CO, paragraph 192  
 
 
41 category that includes thermal NVDs, image intensification NVDs, visors 
mounted on land vehicles, ships, aircraft or submarines and a range of other 
products unrelated to image intensification NVDs or I2Ts. 188 With regard to 
further possible segmentation of the category of defence optronics, the 
Commission noted that technologies used to manufacture various types of 
optronics equipment are similar but that the supply and demand landscapes are 
not necessarily th e same for all products.189 Ultimately, the Commission left the 
question of finding separate markets within defence optronics open.  
C) Commission’s assessment  
(190)  As a preliminary remark, in Section s 5.1.1.1.D)-E) the Commission concluded 
that NVDs of different un derlying technologies (image intensification, thermal, 
fusion and digital low light sensor technology) belong to separate markets. It 
follows that I2Ts, which are a key component of NVDs using image 
intensification technology, are also not substitutable wi th the key components of 
thermal technology or digital low light technology.  
(191)  Thus t he only question with regard to product market definition is whether 
different generations of I2Ts (generation I -III) belong to the same market. This is 
in line with the ma rket investigation, which did not indicate that any other 
segmentation would need to be considered. To the extent that there are size and 
weight differences these are already captured by the distinction between I2Ts of 
different generations, as discussed i n the following recital.  
(192)  In Sections 5.1.1.1.D(a.iii)  the Commission concluded  that there is no demand 
substitution across image intensification NVDs using different generations of 
I2Ts due to different performance levels. This is equivalent to saying tha t image 
intensification I2Ts of different generations are also not demand substitutable. 
Other than different performance levels, respondents added that I2Ts of different 
generations are used for different purposes and have different sizes and weights, 
the latter of which also implies that they cannot be used for the same device.190 It 
was also confirmed by a large majority of respondents that customers either 
specify the technology generation in their tenders or specify the performance 
criteria corresponding  to a particular generation of I2Ts.191 It follows that in I2T 
tenders I2Ts of a previous generation compared to the I2T that is required would 
not be accepted as they do not meet the performance specifications and later 
generation I2Ts would not be competit ive on price. Indeed, respondents 
confirmed that I2Ts of later generations are significantly more expensive than 
those of earlier generations.192 The fact that only an I2T of a particular generation 
is acceptable in response to an I2T tender rules out demand  substitution.   
(193)  As regards supply side substitution, respondents were equally split on the 
question whether a supplier of a certain generation of I2T can produce another 
                                                 
188  Case COMP/M.8425 Safran/Zodiac, recitals 255 and 257; Case IV/M.598 Daimler Benz/Carl Zeiss, 
recitals 8 -9 
189  Safran/Zodiac, recitals 255 -257 
190  Q1 Questionnair e to customers, question 38, Q2 Questionnaire to competitors, question 54  
191  Q1 Questionnaire to customers, question 39, Q2 Questionnaire to competitors, question 55  
192  Q2 Questionnaire to competitors, question  56 
 
 
42 generation within a short time and without substantial difficulties.193 The 
respondents  supporting easy switching are actually NVD suppliers that procure 
I2Ts and it appears that they replied to the question from their own perspective. 
Indeed, as discussed in Section 5.1.1.1.D(b.iii),  for an NVD maker it is easy to 
switch between NVDs of dif ferent devices as they procure the I2Ts and just 
adjust the other aspect of the device. This, however, may not apply to I2T 
manufacturers . Indeed, the technological advances represented by each new 
generation suggest that supply substitution is likely to b e asymmetrical in that 
producers of later generation I2Ts can easily produce earlier generations but not 
vice-versa because it requires substantial R&D efforts to develop a new 
generation. For example, as discussed in Section 5.1.1.1.D(b.iii)  there is no 
certainty whether ongoing efforts to develop a generation IV I2T will bear fruit 
and when.  
(194)  However, for the purpose of the assessment of the Transaction, the question is 
moot as there are only three suppliers of I2Ts i n the EEA  and all three suppliers 
are able to produce the latest generation (g eneration III ) tubes and thus are able to 
switch easily to producing earlier generation I2Ts. Further, as mentioned in the 
previous recital , there is no supplier that will be able to produce generation IV 
I2Ts within  the next 2 -3 years with a reasonabl e degree of certainty and thus 
generation IV technology also does not serve a distinguishing factor among 
suppliers.  
D) Conclusion on product market definition  
(195)  Based on the above, the Commission considers that it is not ne cessary to 
distinguish separate markets for I2Ts of different generations. The relevant 
product market is therefore the market for  I2Ts without any further segmentation.  
5.2.1.2.  Geographic market definition  
A)  Notifying Party’s view  
(196)  With regard to geographic marke t definition, the Notifying Party treats NVDs and 
I2Ts the same way and considers that the market is EEA -wide for the same 
reasons as the ones it put forward in the case of NVDs.194 As explained in Section 
5.1.1.2.A , these reasons include the low transport -cost-to-price ratio, the absence 
of national sourcing by customers and the lack of regulatory or national security 
restrictions.  
(197)  Certain tenders de facto eliminate US suppliers such as the Parties, as they require 
suppliers not to be subject to the US Inte rnational Traffic in Arms Regulations 
(“ITAR”). However, to the extent any tender within the EEA would be limited to 
national or European producers only, then neither L3 nor Harris would be able to 
participate, entailing that the Transaction is neutral wit h respect to any such 
tenders.  
                                                 
193  Q2 Questionnaire to competitors, questi on 57 
194  Form CO, paragraph 202  
 
 
43 B)  Commission’s decisional practice  
(198)  The Commission precedents are the same as in the case of image intensification 
NVDs (Section 5.1.1.2.C)) as so far the Commission has only considered broader 
categories.  
(199)  To recall, in the ca se of military and defence applications and products in general 
the Commission has left open the possibility to define markets for specific 
military and defence applications on an EEA -wide or national basis due to, e.g., 
the existence of specific governmen t regulations (such export restrictions) or 
national security -related preferences for local suppliers.195 
(200)  The most recent case involving defence products was the Safran -Zodiac case, 
which also concerned defence optronics (i.e. products that  include NVDs and 
I2Ts). In that  case the Commission followed the same approach and left the 
geographic market definition open (EEA or national) with respect to defence 
optronics.196 In general (i.e. not necessarily with regard to defence optronics) the 
Commission noted that the geographic market can vary for different defence 
products based on the how critical the technology is from a strategic and national 
security point of view. In the case of more sensitive systems and products 
customers can prefer national capabilities if  they are available.197   
C)  Commission’s assessment  
(201)  A large majority of respondents agreed that , within the EEA , regulatory 
requirements, customer preferences and specifi cations are similar and as a result 
the same I2Ts can be used  throughout the EEA .198 This m eans that there is 
demand -substitutability in the EEA and there are no country -specific I2Ts. In 
addition, United Technologies Corporation considered that even if this were not 
the case, suppliers could easily adapt their products to the national specifici ties.199 
Thus it appears that demand and supply substitution applies across the EEA. 
These responses also confirm that that there are no regulatory barriers that would 
prevent suppliers from being active across the EEA with the same product. Thus 
the market is at least EEA -wide.  
(202)  In addition , the example of the Parties – two US firms supplying I2Ts from the 
US to the EEA without having productio n capacities in the EEA – indicates that 
the market may even be larger than the EEA. However, in line with the 
Commi ssion’s assessment in Section 5.1.1.2.C, the market cannot be larger than 
the circle of NATO and NATO ally countries because these countries de facto  do 
not source defence products from outside the alliance, i.e. from China, Russia, 
India etc. In other wor ds, I2T  suppliers from non -NATO or non -NATO ally 
countries are not constraints within the alliance and in the EEA. As discussed in 
Section 5.1.1.2.C , there are exceptions to this practice, such as Turkey’s purchase 
                                                 
195  Case COMP/M.4653 - MBDA/Bayern - Chemie, paras. 21 and 23; Case COMP/M.5032 –
Roxel/Protac, recital 33; Case COMP/M.1309 – Matra/Aerospatiale, recital 45; Case COMP/M.1745, 
EADS, recital 163  
196  Case  COMP/M.8425 Safran/Zodia c, recital 300  
197  Case  COMP/M.8425 Safran/Zodiac, footnote 203  
198  Q1 Questionnaire to customers, question 40, Q2 Questionnaire to competitors, question 58  
199  Response of United Technologies Corporation to Q2 Questionn aire to competitors, question 58  
 
 
44 of Russian weapons but these are limited in number and are met with the 
alliance’s disapproval. Thus NATO and NATO ally countries are also part of the 
relevant market or firms suppling from these countries need to be taken into 
account as competitive constraints.  
(203)  Just like in the case of NVDs, t he Commission notes that, in line with the view of 
the Notifying Party, certain tenders de facto exclude US firms by requiring that 
the bidders not be subject to ITAR. Given, however, that  both Parties are subject 
to ITAR, neither of the Parties could part icipate in such tenders and thus the 
Transaction has no impact on these tenders.  
D) Conclusion on geograhpic market definition  
(204)  On the basis of the above the Commission considers that the rel evant geographic 
market for I2Ts comprises the EEA including competi tive constraints by firms 
that supply the EEA from NATO or NATO ally countries such as Elbit and the 
Parties. In the rest of this section, when the Commission uses EEA in the context 
of geographic market, EEA is to be understood this way.  
5.2.2.  Competitive asses sment – horizontal non -coordinated effects  
5.2.2.1.  Notifying Party’s view  
(205)  The Notifying Party considers that the Transaction will not lead to competition 
concerns in I2Ts for the following reasons.  
(206)  First, the combined entity will not have EEA shares indicative o f market 
power.200 The combined entity will have a 2018 EEA value share below [20-30]% 
in I2Ts.   
(207)  Second, L3 is not a significant competitor in the EEA201 as it has participated in 
only a few tenders and was especially absent in large tenders in the last four 
years. Furthermore, [L3’s market position].  The Notifying Party considers that by 
2030 Generation IV tubes will almost entirely replace Generation III tubes.  
(208)  Third, the combined entity will face Photonis, the market leader in the EEA.202 
The Notifying Party expects Photonis to compete strongly in the future as it 
claims to have Generation IV technology.203 In addition, other providers, like 
Katod, a Russian I2T supplier, could start supplying I2Ts into the EEA. 204 The 
Notifying Party also expects that digital lo w light sensor technology will replace 
I2Ts in the long term.205 
(209)  Fourth,  the Notifying Party argues that  the I2T space is highly competitive, 
characterized by tender processes.206 Consequently, as with any bidding market, a 
                                                 
200  Form CO, paragraphs 241  
201  Form CO, paragraphs 235 -236 
202  Form CO, paragraphs 234 
203  Form CO, paragraph 237  
204  Form CO, paragraphs 234 
205  Form CO, paragraph 238  
206  Form CO, paragraphs 254 -258 
 
 
45 small number of competitors is suffi cient to maintain a competitive outcome. 
Moreover, barriers to switching suppli ers of I2T s are typically low in the EEA. In 
addition the night vision space has been experiencing significant overcapacity 
since 2012 and significant pricing pressures as a res ult. 
(210)  Fifth, the merged entity will face significant buyer power, characteristic of the 
defence sector in general.207 
(211)  Sixth, Harris and L3 are not particularly close competitors in the EEA as they 
meet in only a few tenders.208 
5.2.2.2.  The Commission’s assessment  
A) Relev ant characteristics of bidding markets  
(212)  As discussed in Section 5.1.2.2.A(a) in relation to NVDs the fact that the market 
for I2Ts is a bidding market does not imply t hat a low number of suppliers  is 
sufficient to guarantee a competitive outcome. Thus it do es not imply that a 
merger cannot have negative effects on such markets.  
B) Market shares  
(213)  For the reasons discussed in relation to image intensification NVDs, market 
shares on the basis  of a five year period are also the best indicators of market 
power  in th e case of I2Ts . The Parties’ combined market shares for I2Ts are 
presented below.  
Table 3 Market sha res in I2Ts  
Company  Market Share (EEA) 2014 -2018  
Harris  [20-30]% 
L3 [0-5]% 
Combined  [20-30]%  
Photonis  [70-80]% 
Source: FORM CO, paragraph 231, Table 21  
(214)  Thus , the Transaction gives rise to a horizontally affected market in I2Ts. As 
shown by the market shares, the market is extremely concentrated and comprises 
only three players. The Transaction results in a 3 -to2 merger. The re duction of the 
number of market players from three to only two implies a serious loss of 
competition even if L3’s market share is relatively low. If L3 is a credible 
competitor, its disappearance as an independent competitive force on such a 
concentrated m arket is likely to lead to significant price increases. Furthermore, 
Photonis is likely to be to be a dominant player, which implies that competition is 
already weak in this market. Consequently, any further reduction of competitive 
constraints implies sig nificant harm  to competition .  
                                                 
207  Form CO, paragraph 258  
208  Form CO, paragraphs 235 -236 
 
 
46 C) The Parties’ competitive strength  
(215)  Not surprisingly, Harris, which has a significant market share in the EEA, was 
considered a strong competitor by respondents  to the market investigation .209 
B.M.A.S.R.L considered that “Harris'  competitive strengths are high quality, 
price, past references, customisation and servicing capabilities for all devices ”210 
Bristol Trust and Theon submitted that Harris is strong on both price and 
quality/performance.211 Other than quality, Italy’s Land Arm ament directorate 
also highlighted Harris’s track record “Harris’ competitive strengths are the 
quality and the past reference”212, a point echoed by TNVC.213  
(216)  Despite its relatively low market share, L3 was also considered a strong 
competitor.214 For example, E lbit’s considered that L3 is a major player in 
I2Ts.215 More specifically, Griffity Defense was of the view that L3’s products 
have the same quality as Harris’s: “L3 and Harris Generation 3 Image Intensifier 
have the same quality. The L3 Image Intensifier sh ow a more amber display 
whereas Harris is more green .”216 Theon told the Commission that, just like 
Harris, L3 is strong on both quality/performance and price.217 TNVC submitted 
that L3 has “Consistently high spec clean tubes.”218 The fact that L3’s tubes are 
“unfilmed” was referred to as a particular strength in quality by L.F.E. SAS.219 
PCO highlighted that thanks to its US based operations L3 benefits from scale 
economies. 220  
(217)  Furth ermore is discussed in Section 5.2.2.2.D) below respondents considered that 
L3 off ers products that are very similar in price and quality to Harris’ s products.   
(218)  The Commission also notes that, as discussed in Section Section 5.1.1.1.D(b.iii)  
respondents to the market investigation were sceptical of Photonis’s claims to 
have generation IV technology and generally considered that it is uncertain when 
and Generation IV I2Ts will be brought to market and by which supplier. 
Accordingly,  L3 cannot be considered to be weaker and Photonis cannot be 
considered to be a stronger competitor on this  basis. Likewise, the relative 
immaturity of digital low light  sensor technology discussed in Section 
5.1.1.1.D(a.ii) implies that the loss of L3 as a competitive force will not be 
compensated by suppliers of this technology.  
(219)  On the basis of the above, des pite its relatively low market share in the EEA, L3 
is a credible competitor in I2Ts. Thus, the Commission considers that its 
disappearance in a very concentrated market where one player is likely to be 
dominant is likely to lead to a serious loss of compe tition .  
                                                 
209  Q1 Ques tionnaire to customers, question 44, Q2 Questionnaire to competitors, question 63  
210  B.M.A.S.R.L response to Q1 Questionnaire to customers, question 44  
211  Responses of Bristol Trust and Theon to Q1 Questio nnaire to customers, question 44  
212  Response to Ita ly’s Land Armament Directorate to Q1 Questio nnaire to customers, question 44  
213  TNVC’s response to Q1 Questio nnaire to customers, question 44  
214  Q1 Questionnaire to customers, question 45, Q2 Questionnaire to competitors, question 64  
215  Elbit’s response to  Q2 Questionnaire to competitors, question 64  
216  Respons e of Griffity Defense Gmbh to Q1 Questio nnaire to customers, question 45  
217  Theon’s response to Q1 Questio nnaire to customers, question 45  
218  TNVC ’s response to Q1 Questio nnaire to customers, question  45 
219  Respons e of L.F.E. SAS to Q1 Questio nnaire to customers, question 45  
220  PCO SA’s response to Q2 Questionnaire to competitors, question 64  
 
 
47 D) Closeness of competition  
(220)  With regard to closeness, t he market investigation produced consistent evidence 
that the products of Harris and L 3 are close substitutes. A  large majority of 
customers and competitors considered that the Parties’ products  are close 
substitutes.221 Specifically, respondents considered that the technology and 
quality levels of their products are similar222 and that they have comparable 
performance levels.223 A respondent considered that Harris’s and L3’s  products 
are generally equ ivalent.224 In addition, it was pointed out that their products are 
close substitutes because both supply NVDs to the US Armed Forces and thus 
both firms have to comply with the US Armed Forces’ standards and 
specifications. For example, L.F.E SAS submitted that “ They have the same 
products due to the US tenders which request them to be interchangeable (size, 
electronics, mechanics)”225 TNVC was of the same view: “ They produce image 
tubes for the same military contract. If that isn't interchangeable I don't kno w 
what is .”226 United Technologies Corporation highlighted that the sensors in 
Harris’s and L3’s image intensification NVDs are similar.227 
(221)  Thus, with regard to the substitutability of their products Harris and L3 are close 
competitors, which exacerbates the h arm that is likely to follow from the 
Transactions.  
(222)  Given that L3’s products are close substitutes of Harris’s  products , L3’s relatively 
small market share can be explained by its more modest presence in the EEA. In 
other words , the Parties are less close  competitors in the geographic sense. 
However, in the context of a very concentrated market where there is a dominant 
player, the disappearance of every credible competitive constraint (like the 
constraint exercised by L3) is likely to lead to a significan t impediment of 
effective competition.  
E) Buyer Power  
(223)  The majority of respondents to the market investigation considered that buyer 
power on the market for I2Ts is strong.228 However a significant minority 
considered that such buyer power is weak or medium.  
(224)  The number of customers is smaller than in the case of NVDs as the customer 
base mainly consists of NVD producers. Thus the demand side consists of a few 
large buyers, which in general implies some buying power.  
(225)  However, buyer power is bound to be limited  if theer are only three alternatives 
and this is even more the case if the number of alternatives is reduced from 3 to 2. 
                                                 
221  Q1 Questionnaire to customers, question 41, Q2 Questionnaire to competitors, question 60   
222  Response of B.M .A.S.R.L to Q1 Questionnaire to customers, question 41  
223  Response of Italy’s Land Armament Directorate to Q1 Questio nnaire to customers, question 41  
224  Safran’s response to Q2 Questionnaire to competitors, question 33  
225  Response of L.F.E. SAS to Q1 Quest ionnaire to customers, question 41  
226  TNVC’s response to Q1 Questionnaire to customers, question 41  
227  Response of United Technologies Corporation to  Q2 Questionn aire to competitors, question 60   
228  Q1 Questio nnaire to customers, question 50, Q2 Questionna ire to competitors, question 69  
 
 
48 Further , I2T is the single most critical input to image intensification NVDs, which 
reduces buyer power.  
(226)  In addition, as discussed i n Section 5.3.2.1. buyer power depends on a 
competitive market where the customer can play suppliers off against one 
another. Indeed, if competition weakens as a result of the Transaction and all 
suppliers submit wor se bids, the customer is left with worse  choices than pre -
Transaction and higher prices than pre -Transaction. Thus it is unlikely that its 
limited buyer power will counteract these effects. This is all the more likely given 
that I2Ts are a critical input to NVDs.    
(227)  Therefore, the Commission con siders that while some customers have some buyer 
power customers, generally customers are unable to contain the price increases 
resulting from the Transaction. Consequently, buyer power is unlikely to mitigate 
the negative effects of the Transaction.  
F) Entry and expansion   
(228)  Respondents to  the market investigation pointed to significant  barriers to entry.229 
These barriers are very similar to the barriers in the case of image intensification 
NVDs with the difference that they appear to be even higher for I2Ts.  
(229)  First, any entrant needs to develop an advanced technology, which involves 
significant R&D spending .230 This also involves significant amount of uncertainty 
since developing I2T technology is very challenging, which is shown by the fact 
that there are only three suppliers in the relevant market. Further, a new entrant 
has no order backlog to support R&D costs while it competes with incumbents 
that already have the technology and can support their R&D from revenues from 
their order backlog. This barrier appea rs to be higher than the same barrier in 
NVDs as the core technology cannot be sourced  from third parties .  
(230)  Second, even if an entrant develops the relevant technology, the supplier has to 
demonstrate that the I2T works reliably in practice.231 Indeed, this aspect is 
important as the tube is critical to mission performance and missions involve 
various, often extreme, situations and circumstances. This also involves 
significant development work, practical testing and requires familiarity with 
mission situation s from the perspective of a device used, which is hard to acquire  
for a new entrant.  
(231)  Third, respondents pointed out that entry requires very substantial investments in 
manufacturing equipment,232 which further increases the fixed costs that a new 
entrant wo uld have to support without existing order backlog and scale.  
(232)  Fourth, tenders require references, which a new entrant lacks by definition. This 
makes it challenging to win the first contract, which in turn makes it challenging 
                                                 
229  Q1 Questionnaire to customers, question 47, Q2 Questionnaire to competitors, question 66  
230 Theon’s response to Q1 Questio nnaire to customers, question 47, Responses of Elbit and Safran to  to 
Questionnaire to competitors,  question 66  
231  Thales’s response to Q2 Questionnaire to competitors, question 66  
232  Response of Theon to Q1 Questio nnaire to customers, question 47, Elbit’s response to to 
Questionnaire to competitors, question 66  
 
 
49 to acquire the relevant refer ences. Breaking this negative feedback loop is a 
significant barrier. In addition, the breadth and quality of the portfolio of 
references is also valued, which further reinforces the negative feedback loop for 
the entrant and positive feedback loop for the  incumbent.  
(233)  Fifth, tender procedures are costly and complex,233 which increases the 
transaction costs an entrant has to support with little or no order backlog.  
(234)  Sixth,  a new entrant has to build out a sales and repair network,234 which 
increases substantiall y the initial investments necessary to enter. In this case too, 
incumbents support such fixed costs much easier than new entrants.  
(235)  Seventh, a majority of respondents considered that suppliers that have already 
supplied a customer have an advantage with th at customer relative to other 
suppliers.235 This is due to familiarity resulting from existing relationships, 
proven track record with the specific customer, or preference for a certain 
supplier f or other reasons. Contrary to a new  entrant, all incumbents en joy this 
advantage to a certain extent due to their track record of deliveries.  
(236)  With the exception of the initial investment in manufacturing capabilities, all of 
these factors also make significant expansion difficult.  
(237)  The Commission notes that unlike in  the case of image intensification NVDs 
(where some of these barriers would be somewhat lower for thermal NVD 
suppliers) , in the case of I2Ts  there is not a group o f firms for which some of the 
above mentioned barriers would be lower.  
(238)  In addition there ha s not been large scale entry or expansion in the last ten 
years236 and a majority of respondents do not expect large scale entry or 
expansion in the next 3 -5 years.237 
(239)  Based on the above, the Commission considers that entry or expansion is unlikely 
to mitigate  the effects of the Transaction.  
G) Conclusion on on horizontal non -coordinatd effects as regards I2Ts  
(240)  For the reasons explained above, the Commission considers that the Transaction 
raises serious doubts as to its compatibility with the internal market in t he market 
for I2Ts . 
5.2.3.  Competitive assessment – horizontal coordinated effects  
5.2.3.1.  Notifying Party’s view  
(241)  The Notifying Party considers that the Transaction will not lead to coordinated 
effects in I2Ts exectly for the same reasons as in the case of NVDs. Namely  as 
                                                 
233  Thales’s response to Q2 Questionnaire to competitors, question 66  
234  PCO S.A.’s response Q2 Questionnaire to competitors, question 66  
235  Q1 Questionnaire to customers, question 46, Q2 Questionnaire to competitors, question 65  
236  Q1 Questionnaire to customers, question 48, Q2 Questionnaire to c ompetitors, question 67  
237  Q1 Questionnaire to customers, question 49, Q2 Questionnaire to competitors, question 68  
 
 
50 discussed in Section 5.1.3.1 it considers, first that the lack of product 
homogeneity renders implausible any implicit coordination, especially in a tender 
market. Second, the market is not transparent as it is to a large extent a bidding 
market, rende ring any implicit collusion inherently unstable. Third, the market is 
driven by innovation given the technological features of the products. This feature 
too prevents the possibility of implicit and sustainable coordination for any 
significant period of ti me. 
5.2.3.2.  Commission’s assessment  
(242)  The Commission agrees with the Notifying Party largely for the same reasons as 
in the case of NVDs (Section 5.1.3.2)  
(243)  I2Ts are a heterogeneous product group with vmultiple parameters (i.e. not only 
price but also durability, reso lution, noise -to-signal ratio, range, energy 
consumption), which makes it difficult for competitors to implicitly reach a 
common understanding on the terms of coordination.  
(244)  Maintaining the coordination also appears difficult for several reasons. First, th e 
market is indeed not transparent, which makes montoring the deviations from the 
agreed terms of coordination difficult. Second, the lumpy nature of demand 
incentives firms to cheat on the agreed terms. Third, it is indeed the case that the 
market for I2T  is characterised by innovation, which renders any tactic 
coordination unstable.  
(245)  In any event, the commitments offered by the Notifying Party remove the entire 
overlap in the night vision space and thus the Transaction will not give rise to any 
horizontal coordinated effects in any NVD market.  
5.3. I2Ts and NVDs – Non-horizontal effects  
(246)  Both Parties are active on the upstream market of I2Ts and the downstream 
market of image intensification NVDs, which raises the possibility of both input 
foreclosure and custo mer foreclosure.  
5.3.1.  Input foreclosure  
5.3.1.1.  Notifying Party’s view  
(247)  The Notifying Party submits that the Transaction does not raise any vertical 
concerns because the combined entity, the shares of which are not exceeding [20-
30]% on the relevant market, will not h ave either the ability or the incentive to 
engage in input foreclosure. More specifically, the Notifying Party considers that 
the combined entity will not be able to engage in input foreclosure (i.e., restricting 
competitors’ access to I2Ts) because it lac ks the market power to do so . The 
Parties’ combined 2018 EEA market share for I2Ts amounts to no more than [20-
30]%. Any supplier of NVDs will be able to easily source I2Ts from Photonis. In 
addition, the Transaction does not bring about any incentive to e ngage in input 
foreclosure. Photonis, which is not present on the downstream market for NVDs, 
would use any attempt at input foreclosure by the Parties to expand its market 
position upstream.  
 
 
51 5.3.1.2.  Commission’s assessment  
(248)  The Commission notes that, as discussed in Section 8.2.2. B), using the correct 
methodology, the combined entity’s market share is [20-30]%. According to the 
Non-Horizontal Merger Guidelines, non -horizontal concersn are unlikely, where 
the market share post -merger of the new entity in each of th e market concerned is 
below 30 % and the post -merger HHI is below 2 000.238 Thus although [20-30]% 
is below one of the usual indicative thresholds, the post -merger HHI of [6000 -
7000]  is significantly above 2000. Thus it is not the case that input foreclosure  
concerns cannot arise on account of the lack of market power. Indeed, the  very 
concentrated nature of the upstream market does in fact result in a situation where 
an input foreclosure strategy could be both feasible and profitable. That is to say 
the merg ed entity is likely to have both the ability and the incentive to engage in 
such a strategy.  
(249)  This is because the merged entity is certainly able to raise input prices or decide 
not to deal with downstream NVD competitors. If it did so, the only other optio n 
for the NVD suppliers would be Photonis, which would give significant pricing 
power to Photonis as the latter would be the sole remaining supplier. This in turn 
could lead to significant price increases downstream, such that the overall impact 
of the str ategy on the me rged entity could be positive. This in turn implies that the 
merged entity would also have the incentive to engage in this strategy.  
(250)  Thus, the Commission considers that the Transaction raises serious doubts as to 
its compatibility with the internal market on the basis of non -horizontal effects, 
more precisely input foreclosure, in relation to I2Ts and image intensification 
NVDs.  
5.3.2.  Customer foreclosure  
5.3.2.1.  Notifying Party’s view  
(251)  The Notifying Party submits that the Transaction does not give rise  to any 
customer foreclosure risks. Both Parties are already vertically integrated and, 
therefore,  the Transaction does not in practice remove any customer base for tube 
suppliers. Neither Party purchases any I2Ts from third parties. In any event, the 
Parties’ 2018 combined EEA shares for all NVDs is [10-20]%, meaning that a 
significant portion of the downstream customer base remains accessible for 
suppliers of I2Ts.  
5.3.2.2.  Commission’s assessment  
(252)  The Commission agrees with the Notifying Party. Although, as discu ssed in 
Section 7.2.2.2 B), based on the correct methodology the combined market share 
of the Parties is [30-40]% on the downstream market of image intensification 
NVDs both Parties self -supply I2Ts and thus the Transaction would not remove 
any customer fr om the sole remaining supplier, Photonis.  
                                                 
238  Non-Horizontal Merger Guidelines paragraph 25  
 
 
52 (253)  Consequently, the Commission considers that the Transaction does not lead to 
serious doubts as to its compatibility with the common market on account of 
customer foreclosure.   
5.3.3.  Conglomarate concerns within NVDs an d I2Ts  
5.3.3.1.  Notifying Party’s view  
(254)  The Notifying Party considers that the combined entity would not have the ability 
or incentive to foreclose its rivals by tying or bundling.239 Tenders do not tend to 
cover a broad range of products, but are narrow in scope an d product -specific. 
Thus a bundling strategy would not be profitable. In addition, the range of 
products in the combined entity’s portfolio is matched by a number of 
competitors.  
5.3.3.2.  Commission’s assessment  
(255)  The Commission agrees with the Notifying Party. I2Ts and image intensification 
NVDs are unlikely to be bundled as they are in an upstream downstream 
relationship. Within NVDs, the discussion on demand substitution (Section 
5.1.1.1.D(a)) showed that tenders are indeed narrow in scope and product -
specific, whi ch was the reason why generally there was no demand substitution 
across the different segmentations. It follows that a bundling strategy is unlikely 
to be feasible or profitable. Further, in each segment where the merged entity 
would have some market power  (image intensification NVDs, fusion NVDs) 
there are competitors such as Thales and Elbit that also have a wide product range 
and can produce similar bundles.  
(256)  In any event, the commitments offered by the Notifying Party remove the entire 
overlap in the ni ght vision space and thus the Transaction will not give rise to any 
conglomerate effects in relation to I2Ts or any NVD market.  
5.4. Hand held video data links  
5.4.1.  Market definition  
5.4.1.1.  Product market definition  
A) Introduction  
(257)  Hand Held Video Data Links (‘ HH-VDLs ’) fal l into wider category of tactical 
communication devices, which are essentially products that provide secure 
telecommunications to soldiers  in the battlefield or in areas in proximity to 
combat (so called forward areas).240 Tactical communication must have a low 
probability of detection and interception by a third party. Tactica l communication 
devices transmit  communications between users of the device using 
waveforms.241 Waveforms are a type of transmission mode that operate over a 
specific range of radio frequ encies and use various encryption and decryption 
                                                 
239  Form CO, paragraph 263  
240  Form CO, paragraph 310  
241  Form CO, paragraph 311  
 
 
53 solutions. There are many different types of waveforms and each type has its 
advantages and disadvantages. For example, a specific waveform can transmit 
data at high rates but may be limited in its geographi cal range. Thus the choice of 
waveform in a particular device will depend on factors such as such as , for 
example,  distance to the intended recipient (e.g., ground -to-ground, air -to-ground, 
and beyond -line-of-sight) or bandwidth requirements (e.g., narrowb and 
commun ications suitable for voice communication or high bandwidth 
communication suitable for transmission of data intensive video images).   
(258)  HH-VDLs were developed for air -to-ground high -bandwidth communications 
such as streaming video and are typicall y used in Intelligence, Surveillance, and 
Reconnaissance (‘ISR’) missions.242 HH-VDLs enable the transmission of high -
bandwidth, real -time full motion video from aircraft, including drones, to soldiers 
on the ground.243 Full motion video in this sense is digit al video data that is 
transmitted for real time reproduction on a multimedia system at a rate of no less 
than 25 frames per second. HH-VDLs allow for a faster and more widely 
disseminated ISR information than  previous technologies , i.e. more soldiers can 
get ISR data directly where as previously a satellite had to receive the information 
and then disseminate it to a soldier with a device capable of receiving and 
displaying satellite -transmitted video.244   
(259)  HH-VDLs are just one among the many tactical communica tion products, which 
include air -to ground hand held devices using narrow bandwidth suitable for 
voice transmission; ground -to-ground and satellite -to-ground hand held devices;  
manpack radios; radios fixed to vehicles such as naval, air and ground forces 
platforms (tanks, airplanes, helicopters, ships, jeeps etc); fixed systems; tactical 
communication networks and embedded high -grade encryption solutions. The 
Parties overlap only in HH -VDLs.245  
B) Notifying Party’s view  
(260)  The Notifying Party considers that the  relevant product market for the purpose of 
assessing the Transaction is the market for HH -VDLs.246 However, the Notifying 
Party submits that the  precise product market definition can be left open as the 
Transaction raises no competition concerns even under th e most narrow market 
definition, being that of HH -VDLs.247  
(261)  The Notifying Party refers to the Commission’s precedent EADS ,248 in which the 
Commission assesse d secure radio communications systems used by armed forces  
and distinguished three separate markets for  (i) mobile systems (carried by 
troops), (ii) transportable systems (carried by military vehicles), and (iii) fixed 
systems.249 However , the Notifying Party submits that the EADS precedent is too 
old and keeping the markets defined there without further dist inctions would lead 
                                                 
242  Form CO, paragraph 313  
243  Form CO, paragraph 313  
244  Form CO, paragraph 315  
245  Form CO, paragraph 308  
246  Form CO, paragraph 336  
247  Form CO, paragraph 340  
248  Case M.1745 EADS, Comm ission decision of May 11, 2000.  
249  Case M.1745 EADS, Comm ission decision of May 11, 20 00, paragraph 202  
 
 
54 to markets that are too wide.250 For example, systems carried by troops would 
include hand held as well as much larger devices that cannot be hand held (e.g.  
transceivers ), although these are clearly not interchangeable from the point of  
view of troops. 251  
(262)  The Notifying Party submits that even within hand  held devices, Harris’ ground 
radios never compete d with L3’s HH -VDLs (i.e. they are not demand -
susbtitutable) and while some ground radio suppliers entered the HH -VDL space 
such entry re quires time and efforts that are not compatible with supply -side side 
substitution with the meaning of the Commission’s Notice on the definition of the 
relevant market.252  
(263)  Indeed, even this market (i.e. hand held communication devices) would 
encompass very different devices which are not substitutable for end -users 
(troops). This is because such devices operate on different waveforms which 
notably limit (i) the type of communications (e.g., ground -to-ground, air -to-
ground, and beyond -line-of-sight satellite)  and (ii) the type of information 
transmitted and/or bandwidth requirements (for instance, narrowband voice or 
data communications versus high -bandwidth data such as full motion video).253 
C) Commission’s decisional practice  
(264)  The Commission has not previously ad dressed HH -VDLs as such in its decisional 
practice. However,  as the Notifying Party mentioned,  in EADS ,254 the 
Commission assessed secure telecommunications and secure radio 
communications systems used by  armed forces and distingushed three separate 
markets for (i) m obile systems (carried by military personnel ), (ii) transportable 
systems (carried by military vehicles), and (iii) fixed systems (i.e. non -
transportable communication systems).255    
(265)  The Commission also consider ed previously military communication systems 
based on functionality, the platform type (ground, air, sea), and the force for 
which they are intended (i.e. air forces, ground forces and naval forces).256  
Namely, in the 2005 Finmeccania  decisions, referring to the Alcatel257 precedent 
the Commissi on distinguished between communication systems used by ground 
forces and communications systems used by naval forces. 258 In these decisions 
the Commission noted that the market investigation confirmed the distinction 
based on the platform type (ground, sea,  air) or based on the force for which they 
are intended (i.e. naval, ground and air forces) and that  respondents also argued 
                                                 
250  Form CO, paragraphs 327 -335 
251  Form CO, paragraph 334  
252  Form CO, paragraphs 328 and 331  
253  Form CO, paragraph 329  
254  Case M.1745 EADS, Comm ission decision of May 11, 2000.  
255  Case M.1745 EADS, Comm ission decision of May 11, 2000, pa ragraph 202.  
256  Case M.3649 Finmeccanica / Baes Avionics & Communications, Commission decision of March 14,  
2005, paragraphs 12 -15; and Case M.3735 Finmeccanica / AMS, Commission decision of March 14,  
2005, paragraphs 12 -15. 
257  Case M.1121 Alcatel / Thomso n SA  Thomson CSF  
258 Case M.3649 Finmeccania / Baes Avionics & Communications, Commission decision of March 14, 
2005.  
 
 
55 for narrower segmentations with regard to some equipment. However, the 
Commission ultimately left the market definition open.  
D) Comm ission’s assessment  
(266)  The Commission will consider a number of distinctions mentioned by the 
Notifying Party in the Form CO and the preceden ts. Below the Commission will 
discuss the possible  distinctions as follows :  
i. Distinction between tactical and  non-tactical communication equipment;  
ii. Within tactical communication  equipment , distncton between land, sea and 
air communication equipment, i.e. equipment used by ground, naval and air 
forces;  
iii. within tactical communication equipment used by ground forces, distin ction 
between devices carried by military personnel , platforms and fixed 
equipment ;  
iv. within devices carried by military personnel  (tactical communication, ground 
forces) distinction between hand held devices and other devices ;   
v. within hand held devices  (tactical communication, ground f orces, devices 
carried by military personnel ), distinction between devices for ground -to-air, 
air-to-ground  and satellite -to-ground communication; and   
vi. within air -to-ground  devices (tactical communication, ground forces, dev ices 
carried by troops , handheld devi ces) between low and high bandwidth 
capabilities.  
(267)  Additional distinctions, e.g. those within tactical equipment used by naval force s, 
or within tactical equipment used by ground forces and carried by platforms etc . 
are not of interest as in those segments there is no overlap between the Parties in 
the EEA.    
(268)  Following the same approach as in the case of NV Ds Section 5.1.1. , the 
Commission will first consider demand substitutability, to be followed by supply -
side assessme nt.   
(269)  As a preliminary remark the Commission notes that the responses on demand side 
substitution show a similar pattern across all distinctions. Namely, similar to 
NVDs (Section 5.1.1.1(D)), it appears that there is no demand -side substitution 
across the distinctions mentioned, in particular because the devices in the 
different categories have different intended uses or very different performance 
metrics on  different parameters, which in turn leads to different uses. Further, 
customers always appear to sp ecify in detail in their tenders the devices sought, 
which implies that only devices complying with those specifications are 
compliant offers and devices with different specifications are not substitutable 
from a demand perspective. This again reflecs the fact that in bidding markets for 
specialized goods, as is the case for HH -VDLs, the tenders (i.e. the demand side) 
are often highly specific such that the different but related products are not 
eligible. As a result, the market definition tends to turn on supply -side side 
considerations, such as, for example, the ability of suppliers to adjust their 
 
 
56 production to meet the various tender specifications or to  produce the related 
product.  
(a)  Demand side substitution  
a.i) Distinction  between tactical communicat ion and non -tactical communication  
devices and systems   
(270)  Tactical communication devices systems are used by the military to provide 
secure communications to soldiers in the battlefield or in areas in proximity to 
combat (so called forward areas).259 Tactical communications is usually 
contrasted with strategic communications, which are backhaul communications 
that form the backbone communications infrastructure and consist of 
predominantly stationary assets.  
(271)  None of the competitors considered that tactical com munication devices/systems 
and non -tactical (strategic) communication devices/systems would be 
interchangeable.260 Safran indicated that tactical and non -tactical communication 
devices must comply with different operational patterns and requirements such as 
COMSEC (communication security) performance levels, while Leonardo noted 
that they have different functional and operational requirements and costs.261 
Thales considered that there is no interchangeability due to at least five different 
factors, including i)  frequency band, bandwidth and related waveform; ii) security 
and encryption (NATO and other national security restrictions); iii) Dedicated 
standards; iv) System integration on a platform (soldier, vehicle, shelter); and v) 
operational mission requirement s such as range, autonomy etc.262   
(272)  A large majority of customers also considered that tactical and non -tactical 
communication systems are not interchangeable as the two types of device have 
different uses and different performance levels.263 
(273)  The Comission the refore considers that there is no demand substitution across 
tactical and non -tactical communication systems and devices. From a demand 
side perspective , a further sub -segmentation of communication devices depending 
on their tactical/non -tactical character istics is therefore possible. However, for the 
purpose of this decision, it can be left open as the Transaction would not raise 
serious doubts as to its compatibility with the internal market under any plausible 
market definition.  
a.ii) Distinction  between  land, sea and air communication systems and devices 
(within tactical communications)  
(274)  As noted above in Section 5.4.1.C,  in the Finmeccania  cases the Commission 
drew a distinction between military communication systems based on the 
platform (ground, air, sea) and the force for which they are intended (e.g., ground 
forces, navy, air forces) , but without concluding that separate markets existed.  
                                                 
259  Form CO, paragraph 310  
260 Response to Q2 questionnaire to competitors (II), question 3.  
261 Responses of Safran and Leonardo to Q2 questio nnaire to competitors (II), question 3  
262 Thales’s response to Q2 questionnaire to competitors (II), question 3.  
263  Responses to Q1 questionnaire to customers, question 53  
 
 
57 (275)  A large majority of customers and competitors confirmed that communication 
equipment used by different military fo rces (i.e., land, sea and air) is  not 
interchangeable.264 United Technologies Corporation considered that the 
communication needs and equipment specifications are different in each domain 
(land, air, sea),265 while WB Electronics pointed out that communication  
equipment used by naval forces require extended ranges and thus transmission 
power.266 Safran emphasized that land, sea and air communication systems must 
comply, with different operational patterns and requirements.267 Thales referred to 
the same factors as in the case of the distinction between tactical and non -tactical 
communication equipment, i.e. differences in frequency band, encryption, 
standards, platform integration and operational mission requirements (range, 
autonomy).268 Thus, in Thales’s opinion  there is significant variance in these 
factors not only between tactical and non -tactical communication equipment but 
also between equipment used by ground, naval and air forces. B.M.A.S.R.L 
submitted that the different forces use different applications and t he devices need 
to meet different performance levels.269 
(276)  The Commission therefore considers that there is no demand -side substitutability 
across tactical communication devices and systems used by different forces 
(ground, naval and air forces).  From a demand  side perspective, a further sub -
segmentation of tactical communication devices depending on the use by different 
forces is therefore possible. However, for the purpose of this decision, it can be 
left open as the Transaction would not raise serious doubts  as to its compatibility 
with the internal market under any plausible market definition.  
a.iii) Distinction b etween devices carried by military personnel , platforms and 
fixed equipment  
(277)  As noted above in Section 5.4.1.C , in the EADS case the Commission asse ssed 
telecommunications and secure radio communications systems used by armed 
forces and considered three separate segments, namely (i) mobile systems (carried 
by troops); (ii) transportable systems (carried by military vehicles); and (iii) fixed 
systems.  
(278)  A majority of respondents considered that this distinction remains relevant 
today270 and a very large majority considerd that the distinction is relevant 
specifically witing tactical communication used by ground forces.271 For example, 
Italy’s Land Armament Directorate considered that mobile, transportable and 
fixed equipment are very different applications with different costs and 
                                                 
264  Responses to Q1 questionnaire to customers, question 52, Q2 questionnaire to compe titors (II), 
question 1  
265  Response of United Technology Corporation to Q2 questionnaire to competitors (II), question 1  
266  Response of WB Electronics to Q2 questionnaire to competitors (II), question 1  
267  Safran’s response to Q2 questionnaire to competito rs (II), question 1  
268  Thales’s response to Q2 questionnaire to competitors (II), question 1  
269  Response of B.M.A.S.R.L  to Q1 questionnaire to customers, question 52  
270  Responses to Q1 questionnaire to customers, question 54.1 and Q2 questionnaire to comp etitors (II), 
question 5.1  
271  Responses to Q1 questionnaire to customers, question 54.2 and Q2 questionnaire to competitors (II), 
question 5. 2 Q2 questionnaire to competitors (II), question 5. 2 
 
 
58 constraints.272 Safran considered that the segmentation applies, even if 
interoperability needs to be ensured between mobile and tra nsportable systems.273  
(279)  Furthermore, the market feedback shows that the weight and size of tactical 
communication equipment is important to its demand -side substitutability – as 
discussed in Section 5.4.1.1.D.a.iv ) below, even within the category of equipmen t 
carried by troops, hand held devices are not considered substitutable from a 
demand perspective with larger devices such as manpack radios.274 This is 
consistent with the market feedback on the distinction between mobile, 
transportable and fixed systems an d thus confirms that there is no reason to depart 
from the precedent although the categories of mobile, transportable and fixed 
systems can be subject to further distinctions.  
(280)  Thus the Commission considers that within tactical communication systems used 
by ground forces, there is no demand -side substitutability between mobile 
(carried by troops), transportable (carried by vehicle) and fixed systems.  From a 
demand side perspective, a further sub -segmentation of tactical communication 
devices by ground forces  into mobile, transportable and fixed systems is therefore 
possible. However, for the purpose of this decision, it can be left open as the 
Transaction would not raise serious doubts as to its compatibility with the internal 
market under any plausible marke t definition.  
a.iv) Distinction between hand held and other devices  
(281)  As already mentioned in 5.4.1.1.D.a.v)  above, the market feedback clearly 
indicated that within the category of equipment carried by troops  hand held 
devices are not considered substituta ble from a demand perspective with larger 
devices such as manpack radios.275 Indeed it appers that  a combat troop’s 
mobility and fighting capacity would be significantly reduced if he had to carry a 
large manpack radio. As both Thales and  Safran noted, ther e is a trade -off 
between hand held and manpack radios: hand held radios are small, light and use 
little energy but their range and performance is limited, whereas the opposite 
applies to manpack radios in that they are more powerful and longer range at the  
expense of being heavy and requiring more energy.276 Leonardo made essentially 
the same point “ Handheld and manportable are not considered interchangeable 
in the usual operational scenarios, because of their different SWaP (size weight 
and power) and commun ication functionalities .”277 as did United Corporation 
Technologies: “ The capability requirements for a handheld versus a larger device 
such as manpack is different due to the support of multiple communication 
channels and the distance of communication neede d which increases the 
complexity, power and the size of the radio .”278 This trade -off results in different 
intended uses as combat troops cannot use manpack radios whereas 
                                                 
272  Response of Italy’s Land Aramament Directorate to Q1 questi onnaire to customers, question 54.1  
273  Safran’s response to  
274  Responses to Q1 questionnaire to customers, question 55 and Q2 questionnaire  to competitors (II) 
question 6  
275  Responses to Q1 questionnaire to customers, question 55 and Q2 questionnaire  to competitors (II) 
question 6  
276  Safran’s and Thales’s responses to Q1 questionnaire to customers, question 55  
277  Leonardo’s response to Q2 questionnaire  to competitors (II) question 6  
278  Response of United Corporation Technologies to Q2 questionnaire  to comp etitors (II) question 6  
 
 
59 communication personnel cannot use hand held radios for long range 
communication.  
(282)  Based on the above , the Commission considers that within the category of 
comm unication systems carried by troops (tactical communication, ground 
forces) there is no demand substitution between hand held devices and larger 
devices such as manpack radios. From a demand side perspective, a further sub -
segmentation of communication systems carried by troops into hand held devices 
and larger devices such as manpack radios is therefore possible. However, for the 
purpose of this decision, it can be left open as the T ransaction would not raise 
serious doubts as to its compatibility with the internal market under any plausible 
market definition.  
a.v) Distinction based on sender/receiver type - ground -to-air, air -to-ground and 
satellite -to-ground devices  
(283)  Virtually all respondents to the market investigation considered that within hand 
hand held devices (tactical communication, ground forces, devices carried by 
troops) devices that communicate air -to-ground, ground -to-ground and beyond 
line-of-sight satellite to ground a re not interchangeable.279 Italy’s Land Armament 
Directorate considered that these devices are used in different tactical scenarios 
and hence they are not interchangeable.280 Safran submitted that “ Such 
communication devices must comply with different operatio nal use cases, 
performance levels relating to the range, waveform, modulation, etc. ”281 
Leonardo explained that “ Air-ground (ground based) and beyond line of site hand 
held radios are dedicated equipment with high complexity and high -grade 
security requireme nts and consequent at high cost. Ground to ground radios are 
more massively distributed to the soldiers/riflemen, thus have a significantly 
lower price.”282 Thales highlighted that these devices incorporate different 
functions.283 
(284)  Moreover, the market feedback  shows that customers typically include in their 
tender specifications the type of sender / receiver for the tactical handheld 
communication device requested (i.e., whether it should be air -to-ground, ground -
to-ground etc.).284 As discussed in Section 5.1.1. 1, this ipso facto excludes 
demand -side substitution as a ground -to-ground device will not be accepted in a 
tender seeking air -to-ground devices.  
(285)  Thus the Commission considers that within hand hand held devices (tactical 
communication, ground forces, devi ces carried by troops), air -to-ground, ground -
to-ground and  beyond line -of-sight satellite -to-ground devices are not demand -
                                                 
279  Responses to Q1 questionnaire to customers, question 56 and Q2 questionnaire to competitors (II), 
question 8 
280  Response of Italy’s Land Armament Directoarte to Q1 questionnaire to customers, question 56  
281  Safran’s response to Q2 questionnaire to competitors (II), question 8 
282  Leonardo’s response to Q2 questionnaire to competitors (II), question 8. Leonardo also noted that the 
waveform could be changed by changing the software but that this does not result substitutability from 
an operational point of view  
283  Thales’s response to response to Q2 questionnaire to competitors (II), question 8 
284  Reponses to Q1 questionnaire to customers, question 57 and Q2 questionnaire to competitors (II), 
question 9. 
 
 
60 substitutable. From a demand side perspective, a further sub -segmentation of 
hand held  devices into air -to-ground, ground -to-ground and beyond line -of-sight 
satellite to ground  devices is therefore possible. However, for the purpose of this 
decision, it can be left open as the Transaction would not raise serious doubts as 
to its compatibility with the internal market under any plausibl e market definition.  
a.vi) Distinction between low and high bandwidth capabilities  
(286)  The market feedback was unanimous that within hand held air -to-ground devices 
(tactical communication, ground forces, devices carried by troops), there is no 
interchageablit y between devices based on data bandwidth, i.e. between devices 
designed for narrowband communications (permitting the exchange of voice, text 
and low quality images) and those designed for high bandwidth data 
communications (permitting the exchange of ful l motion video and high quality 
images).285 
(287)  Respondents pointed out that the two types of devices use different waveforms 
and modulation solutions and thus occupy different frequencies.286  Further, the 
narrowband and wideband features are required for differe nt operational 
scenarios,287 which excludes inte rchangeability. In addition, respondents 
submitted that narrowband and highbandwith devices require different software 
and hardware capabilities.288  
(288)  Respondents also confirmed with near uninamity that high and l ow bandwidth 
devices are rarely in competition with each other having regard to the difference 
of users (e.g. special forces or ordinary troops) and the difference in costs and 
functionalities.289 
(289)  Thus the Commission considers that within the category of han d held air -to-
ground devices ((tactical communication, ground forces, devices carried by 
troops) there is no demand substation across high and low bandwidth devices i.e. 
across devices capable of transmitting only voice, text and low quality image and 
devices capable of transmitting full motion video and high quality images. In 
other words , HH-VDLs (high bandwidth, air -to-ground devices) are not 
substitutable from a demand perspective neither with low bandwidth hand held 
devices, nor with ground -to-ground o r satellite -to-ground hand held devices.  
From a demand side perspective, a further sub -segmentation of hand held air -to-
ground devices depending on the bandwidth is therefore possible. However, for 
the purpose of this decision, it can be left open as the Transaction would not raise 
serious doubts as to its compatibility with the internal market under any plausible 
market definition.  
                                                 
285  Reponses to Q1 questionnair e to customers, question 58 and Q2 questionnaire to competitors (II), 
question 11 
286  Thales’s and Safran’s responses to Q1 questionnaire to customers, question 58  
287  Leonardo’s response to Q2 questionnaire to competitors (II), question 11 
288  Response of Un ited Technologies Coroporation to Q2 questionnaire to competitors (II), question 11 
289  Reponses to Q1 questionnaire to customers, question 59 and Q2 questionnaire to competitors (II), 
question 12 
 
 
61 (b) Supply side substitution  
b.i) Distinction between tactical communication and non -tactical communication 
devices and systems  
(290)  From a supply side perspective, a majority of competitors was of the view that 
that switching production between tactical and non -tactical communications 
systems would imply significant technical difficulties.290  
(291)  As United Technologies Corporation explained  “due to the constraints and 
security requirement differences between these communication devices/systems, 
switching production from tactical to non -tactical would require a different 
manufacturing process and know -know especially from a security and 
expor tability aspect and military versus commercial use.”291 It was also 
mentioned that manufacturing assets are very different even if the technologies 
are similar.292  
(292)  These views appear to be in line with the fact that tactical and non -tactical 
communication dev ices have different costs, use different frequency bands, 
waveforms, encryption and standards.293 Especially the different costs and the 
different technologies (standards, encryption) suggest different production 
processes and know -how.    
(293)  Based on the above  feedback it is highly unlikely that a supplier without any 
experience in manufacturing tactical communication equipment could swiftly 
start to produce tactical equipment in response to a tender w ithout significant 
investments. Thus the Commission consider s that there is no supply -side 
substitution between tactical and non -tactical communication devices and 
systems. However, for the purpose of this decision, it can be left open as the 
Transaction would not raise serious doubts as to its compatibility with t he internal 
market under any plausible market definition.  
b.ii) Distinction between land, sea and air communication systems and devices  
(294)  The market feedback shows that switching production between the manufacture 
of communication devices for ground, for nav al and for air force communications 
would imply significant technical difficulties and/or costs. No respondents 
considered that the switch could be made without incurring significant technical 
difficulties and/or costs.294  
(295)  Safran submitted that “ Waveforms c an differ from one environment to another 
(for example ground to ground communications are not the same as ground to 
air). Therefore, this would need specific production capacities and additional 
cost, as well as different system integration needs to take into account .”295 Thales 
considered that “ Requirements for each domain in terms of performance, 
                                                 
290  Response to Q2 questionnaire to competitors (II), questio n 4 
291  Response to United Technologies Corporation Response to Q2 questionnaire to competitors (II), 
question 4  
292  Leonardo’s response to Response to Q2 questionnaire to competitors (II), question 4  
293  See Section Section 7.1.1.4 a)  
294  Responses to  Q2 que stionnaire  to competitors (II), question 2  
295  Safran’s response to  Q2 questionnaire  to competitors (II), question 2  
 
 
62 compactness, components, certification, can impact significantly the 
manufacturing process and tools depending on the domain, in particular for aero 
products ”296  United Technologies Corporation submitted that “ The 
manufacturing process and know -how required to manufacture communication 
devices is dependent on which domain (ground, sea or air) they operate from as 
they differ based on the type of platforms (e.g. ship , aircraft, land vehicle) to be 
integrated on and communication requirements (e.g. distance, power, latency) 
vary due to domain differences .”297 
(296)  These responses indicate significate differences in the relevant production 
processes, which are unlikely to be o vercome within a short period of time and at 
little or no cost.  
(297)  Consequently the Commission considers that there is no supply -side substitution 
across tactical communication devices and used by ground, naval and air forces.  
However, for the purpose of th is decision, it can be left open as the Transaction 
would not raise serious doubts as to its compatibility with the internal market 
under any plausible market definition.  
b.iii) Distinction b etween devices carried by military personnel , platforms and 
fixed  equipment  
(298)  As exlplained in Section 5.4.1.1.D(a) , respondents to the market investigation 
considered that the Commission precedent establishing the distinction between 
mobile systems (carried by troops), transportable systems (carried by military 
vehicles)  and fixed systems ( EADS,298 ) is still valid. This also implies that within 
the category of tactical communication devices used by ground forces there is no 
supply -side substitution across mobile, transportable and fixed systems.    
(299)  Further, competitors als o confirmed that even within mobile systems (carried by 
troops), switching production between hand held devices and larger and heavier 
devices such as manpack radios would imply siginifcant difficulties and costs.299 
It follows that switching production betw een products that are much more 
divergent in size, weight, performance and specifications also cannot be done 
swiftly and with minimal costs and especially no sunk costs.  
(300)  Thus the Commission considers that within the category of tactical 
communication dev ices used by ground forces there is no supply -side substitution 
across mobile, transportable and fixed systems. However, for the purpose of this 
decision, it can be left open as the Transaction would not raise serious doubts as 
to its compatibility with th e internal market under any plausible market definition.  
b.iv) Distinction between hand held devices and other devices  
(301)  As already discussed in Section 5.4.1.1(b.iii) , competitors considered that 
switching production between hand held devices and larger an d heavier devices 
such as manpack radios would imply siginifcant difficulties and costs.  
                                                 
296  Thales’s response to  Q2 questionnaire  to competitors (II), question 2  
297  Response of United Technologies Corporation to Q2 questionnai re to competitors (II), question 2  
298  Case M.1745 EADS, Comm ission decision of May 11, 2000.  
299  Responses to Q2 questionnaire  to competitors (II), question 7  
 
 
63 (302)  Leonardo explained that “ Manufacturing processes of the two types of equipment 
are usually different .”300 Safran considered that “ This would indeed imply 
significant tec hnical difficulties and additional costs.”301 This was echoed by 
United Technologies Corporation.302 
(303)  Consequently, the Commission considers that within within the category of 
commincation systems carried by military personnel  (tactical communication, 
ground fo rces) there is no supply substitution between hand held devices and 
larger devices such as manpack radios.  
b.v) Distinction based on sender/receiver type (ground -to-air, air -to-ground and 
satellite -to-ground devices)  
(304)  The majority of competitors considered  that switching production would imply 
significant technical difficulties and/or costs.303 Safran considered that switching 
would imply significant difficulties and costs while United Technologies 
Corporation submitted that the know -how and the manufacturing  processes are 
different.304  
(305)  These views appear to be in line with the fact that these devices have different 
performance levels and different complexity (air -to-ground and satellite to ground 
being signficiantly more complex than ground -to-ground)305   
(306)  Furth er, there are differences in the supplier landscape as well. For example, as 
discussed in Section 5.4.2.2. Harris is the market leader in ground -to-ground 
radios and L3 is not present in this segment. By contrast in HH -VDLs, which is 
an air -to-ground devic e L3 is the market leader and Harris has minimal presence. 
Different market strength in different segments also indicates that suppliers 
cannot switch effortlessly between these segments.  
(307)  Thus the Commission considers that within hand hand held devices (t actical 
communication, ground forces, devices carried by troops), air -to-ground, ground -
to-ground and beyond line -of-sight satellite to ground devices are not supply -
substitutable.  However, for the purpose of this decision, it can be left open as the 
Trans action would not raise serious doubts as to its compatibility with the internal 
market under any plausible market definition.  
b.vi) Distinction between low and high bandwidth devices  
(308)  As regards the distinction between high and low bandwidth devices (within  air to 
ground hand held devices - tactical communication, ground forces, devices 
carried by troops) from a supply perspective, responses were mixed. Safran 
considered that switching the production between these device types would 
                                                 
300  Leonardo’s response to Q2 questionnaire  to competitors (II), question 7  
301  Safran’s response to  Q2 questionnaire  to competitors (II), question 7  
302  Response of United Technologies Coroporation to Q2 questionnaire  to competitors (II), question 7  
 
303  Reponses to Q2 questionnaire  to competitors (II), question 10  
304  Responses of Safran and United Techno logies Corporation to Q2 questionnaire  to competitors (II), 
question 10  
305  See Section 5.4.4.1.(a.v)  
 
 
64 involve significant time and costs,306 while Thales and United Technologies 
Coproration considered that the production process and know -how is similar for 
both types.307 Leonardo was of the view that “ Manufacturing is not strictly 
different, but the development and the basic know how at the basis of it is largely 
different. Please also consider that, for instance, also in the case of some radio 
components to be used in the production there are differences (e.g. in terms of 
bandwidth management capability) .”308 
(309)  As the results of the marke t investigation are inconclusive, the Commission 
leaves the question open. However, this does not affect the competitive 
assessment as the Transaction does not raise serious doubts regardless of this 
distinction.  
(c) Conclusion  on product market definition  
(310)  Based on the above the Commission considers that , while many possible 
distinctions may exist,  for the purpose of this decision there is no need to 
conclude on any of those possible distinctions given that the Parties’ activities 
only overlap in the possible  market for  (i) HH-VDLs ; and (ii) hand held tactical 
air-to-ground communication devices used by ground forces (hereinafter these 
will be ref erred to as “HH A2G” devices) and the Transaction does not give rise 
to serious doubts as to its compatibility with the internal market in these markets .  
5.4.1.2.  Geographic market definition  
A) Notifying Party’s view  
(311)  The Notifying Party considers that the relevant geographic market is at least 
EEA -wide, for the similar reasons as in the ca se of NVDs. First, it points out that 
HH-VDLs have a very low transport -cost-to-price ratio and Harris, L3, and their 
competitors sell HH -VDLs across the EEA irrespective of the location of the 
production facilities. Second, it submits that EEA customers rarely if ever source 
their HH -VDLs on a n ational basis. Third, the Notifying Party considers that there 
are no regulatory or national security restrictions preventing a suppliers present in 
one EEA country from being active throughout the EEA. Just like in the case of 
NVDs the Notifying Party not es that certain tenders de facto eliminate US 
suppliers such as the Parties, as they require suppliers not to be subject to ITAR. 
To the extent any tender within the EEA would be limited to national or European 
producers only, then neither L3 nor Harris wo uld be able to participate, entailing 
that the Transaction is neutral with respect to any such tenders.  
                                                 
306  Safran’s response to Q2 questionnaire  to competitors (II), question 14  
307  Responses of Thales and United technologies corporation to Q2 questionnaire  to competitors (II), 
question 14  
308  Leonardo’s response to Q2 questionnaire  to competitors (II), question 14  
 
 
65 B) Commission’s decisional practice  
(312)  The Commission previously found that the markets for secure communications 
are national in scope, even though it noted a certain development towards an 
EEA -wide market, resulting from common defence programs and alliances.309  
C) The Commission’s assessment  
(313)  The results of the market investigation were similar to the results for NVDs and 
thus broadly confirmed the views put forw ard by the Notifying Party.  
(314)  A large majority of customers and competitors agreed that HH -VDLs used in 
different Member States are not significantly different in terms of customer 
preference, technical specifications, and regulatory requirements such that HH-
VDLs intended for one Member State can be used in another Member State.310 
Italy’s Land Armament Directorate explained that there are very few producers of 
HH-VDL and the devices are broadly comparable.311 Thales submitted that “ HH-
VDLs from any EEA country  can be used in any EEA country .”312 While Safran 
mentioned that certain national specififcities exist, it considered that HH -VDLs 
are not significantly different across the EEA as a common body of requirements 
apply. 313 
(315)  Moreover, United Technologies Corporat ion also was of the view that HH -VDLs 
are not significantly different across the EEA and while it raised that there can be 
certain “ tailoring requirements that vary country to country ”, the same suppliers 
bid in all EEA countries and these suppliers addres s these specific security related 
requirements.314 This suggests that to the extent there are some demand 
differences, suppliers can adjust their products to meet these specific 
requirements with relative ease.  
(316)  The respondents confirmed that their responses  apply not only to HH -VDLs but 
also to the product market encompassing all air -to-ground hand held devices 
regardless of data bandwidth.315 
(317)  Competitors also confirmed that the same competitors are active in all EEA 
Member States,316 (with regard to both altern ative product markets, i.e. HH -VDLs 
and hand held air -to-ground devices317 regardless of data bandwidth) which 
suggests that the supply landscape is similar across the EEA.  
(318)  A majority of the respondents considered that, there are no regulatory or national 
security restrictions that would prevent suppliers of HH -VDLs active in one EEA 
                                                 
309 Case M.1745 EADS, Commission decision of May 11, 2000, para. 204 . 
310  Q1 Questio nnaire to customers, question 64 , Q2 Questionnaire to competitors  (II), question 20  
311  Response of Italy’s Land Armament Directorate to Q1 Questio nnaire to customers, question 64  
312  Thales’s response to Q2 Questionnaire to competitors  (II), question 20  
313  Safran’s response to Q2 Questionnaire to competitors  (II), question 20 
314  Response of United Technologies Corporation to Q2 Questionnaire to competitors  (II), question 20  
315  Q1 Questionnaire to customers, question 64.2, Q2 Questionnaire to competitors (II), question 20.3  
316  Q2 Questionnaire to competitors (II), question 21  
317  Outside the product definition section the term “hand held air -to-ground devices” is a shorthand for 
hand held air -to-ground devices within the larger group of tactical communication devices used by 
ground forces, devices carried by troops.  
 
 
66 Member State from being active in another EEA Member State.318 L.F.E. SAS 
mentioned that there are “ No restrictions for NATO”319, while Bristol trust 
submitted that the market for HH -VDLs is an “ open market ”.320 Italy’s Land 
Armament Directorate mentioned that “ No, the the HH -VDLs procured by Italian 
MoD are compliant with some of international military and/or civilian 
standards ”321. Thales submitted that “ Despite normal export control ru les, there 
are no regulatory or national security restrictions which prevents a European 
supplier from supplying different EU Member States .”322 Respondents confirmed 
that their responses apply not only to HH -VDLs but also to the product market 
encompassing all air -to-ground hand held devices regardless of data bandwidth.323 
(319)  Some exceptions mentioned. First, US Type 1 cryptography capable devices can 
only be sold, including within the EEA, only with the approval of the US 
government. Such equipment is used some times by certain Member States, for 
example the United Kingdom. This has the effect that in some cases US type 1 
cryptography is required in the United Kingdom, which then excludes some 
European suppliers  as they lack access to that technology .324 However, t he effect 
of this exception is limited in scope (concerns only the United Kingdom and only 
in certain tenders)  
(320)  Second, ITAR was mentioned in this respect as a regulatory restriction that 
prevents US companies from being active in certain EEA tenders. In th is regard 
the Commission agrees with the Notifying Party that such restriction results in a 
de facto exclusion of US suppliers in EEA tenders. This would normally justify 
separating an ITAR market (firms active in the EEA without US suppliers) and a 
non-ITAR market (all suppliers active in the EEA) but in the current case this is 
not important as both Parties are subject to ITAR.  
(321)  Therefore, on the basis of the above, the market for HH -VDLs and for HH A2Gs  
appears to be at least EEA -wide.  
(322)  As regards a larg er than EEA -market, several respondents mentioned restrictions 
stemming from NATO membership. Safran considered that competition is 
“Unrestricted among NATO countries ”,325 while Thales submitted that “ NATO 
security restrictions prevent non NATO country’s sup plier to compete in NATO 
countries market  “326 Similarly, United Technologies Corporation also submitted 
that NATO security restrictions based on NATO standards for crypto and 
waveform interoperability can preclude suppliers from outside the EEA/NATO 
from be ing active in tenders in the EEA.327  
                                                 
318  Q1 Quest ionnaire to customers, question 65 , Q2 Questionn aire to competitors (II), question 22  
319  Response of L.F.E. SAS to Q1 Questio nnaire to customers, question 65  
320  Response of Bristol T rust to Q1 Questio nnaire to customers, question 65  
321  Response of Italy’s Land Armament Directorate to Q1 Questio nnaire to customers, question 65  
322  Thales’s response to Q1 Questio nnaire to customers, question 65  
323  Q1 Questionnaire to customers, question 65.2, Q2 Questionnaire to competitors (II), question 22.2 
324  Thales’s resp onse to Q1 Questio nnaire to customers, question 65  
325  Safran’s response to Q1 Questio nnaire to customers, question 66  
326  Thales’s response to Q1 Questio nnaire to customers, question 66  
327  Response to United Technologies Corporation to Q2 Questionnaire to c ompetitors (II), question 23 
 
 
67 (323)  Indeed, just like in the case o f NVDs the Commission considers that firms that 
supply the militiaries non -NATO or non -NATO ally militaries (Russia, China, 
India) cannot be considered constraints in NATO and NATO -ally cou ntries, 
including the EEA. Thus the geographic market cannot be larger than NATO and 
NATO ally countries. On the other hand the responses indicate that the market 
could also be larger than EEA or, alternatively, the market is EEA -wide but 
constraints outsi de the EEA but within the bloc of NATO and NAT O ally 
countries need to be acknowledged. The presence of the Parties in the EEA as a 
competitive constraint is a clear demonstration of this point.  
(324)  Restrictions preventing a NATO -wide markets (including NATO -ally countries) 
were also mentioned. These included ITAR ; however, as discussed before, this is 
of limited relevance. Further, Thales reiterated its point that US Type 1 
cryptography capable devices can only be sold only with the approval of the US 
governm ent. This restriction is likely to have bigger significance in a NATO wide 
market in comparison with an EEA -market  as such a market would include also 
the US . 
(325)  Overall, the two most appropriate approaches are either an EEA -wide market, 
including the acknowl edgement of constraints by firms based in the bloc of 
NATO and NATO -ally countries or a wider market corresponding to the bloc of 
NATO and NATO -ally countries. Due to the restriction resulting from US Type 1 
cryptography, the former approach appears more a ppropriate.  
(326)  Thus , the Commission considers that the geographic market is EEA -wide with the 
qualification that firms based outside the EEA but within the bloc of NATO and 
NATO ally countries can, just like the Parties, also be competitive constraints . 
This applies to both relevant  product markets i.e. to HH -VDLs and to  HH A2Gs . 
5.4.2.  Competitive assessment  – horizontal non -coordinated effects  
5.4.2.1.  Notifying Party’s view  
(327)  The Notifying Party submits that the Transaction does not give rise to any 
competition concerns in the HH -VDL space. Harris is an insignificant player 
whose market shares do not exceed [0-5]% over the last three years. L3’s market 
shares fluctuate from one year to another, which illustrates the characteristics of a 
competitive tender market and evidence s that the combined entity will be 
constrained by global established players such as Thales, Elbit, Rohde -Schwartz 
and Leonardo. Other than in 2017, Thales and Elbit had a larger share than L3. In 
any event, Harris and L3 are not close competitors in the E EA. Indeed, the Parties 
have not competed against each other in any HH -VDL tenders in the EEA in the 
last three years.  
5.4.2.2.  Commission’s assessment  
A)  Relevant characteristics of bidding markets  
(328)  Both the market  for HH -VDLs and the market for HH A2Gs  are bidding m arkets. 
Accordingly,  contrary to the Notifying Party’s opinion, this fact does not imply 
that a low number of suppliers is sufficient to guarantee a competitive outcome. 
 
 
68 Consequently it is not the case that a merger cannot have negative effects on such 
markets.328 
B) Market shares  
(329)  For the reasons discussed in relation to image intensification NVDs, notably 
lumpy demand in the context of bidding markets, market shares on the basis of a 
five year period are also the best indicators of market power. The relevant m arket 
shares for both plausible relevant markets are indicated below.  
Table 4 – Market shares in HH -VDLs  
Company  Market Share (EEA) 2014 -2018  
Harris  [0-5]% 
L3 [20-30]% 
Combined  [20-30]%  
Thales  [10-20]% 
Elbit  [10-20]% 
Rohde Schwartz  [5-10]% 
Leonardo  [5-10] 
Others  [20-30]% 
Source: Form CO, Table 26  
Table 5 - Market shares in HH A2Gs  
Company  Market Share (EEA) 2014 -2018  
Harris  [30-40]% 
L3 [0-5]% 
Combined  [40-50]%  
Thales  [5-10]% 
Elbit  [5-10]% 
Leonardo  [5-10]% 
Rohde Scwartz  [0-5]% 
Others  [30-40]% 
Source: Notifying Party’s response to RFI 6, Table 5  
(330)  In both relevant markets  the Transaction gives rise to a horizontally affected 
market. However, in both cases the Transaction has a small effect. In the case of 
HH-VDLs the increment is a mere [0-5]% as Harris is a small market player. In 
this market L3 is the leader and the largest player but it is constrained by several 
significant competitors such as Thales, Elbit, Rohde Schwartz and Leonardo. Th e 
market also  comprises a large number of other competitors  that together add up to 
[20-30]% market share.  
(331)  The reverse applies in the case of the relevant market for HH A2Gs . Harris is the 
market leader and L3 is small competitor with only [0-5]% market s hare. This 
market also  comprises a number of small firms with small market shares, such as 
Rohde Schwartz ( [0-5]%) and “others” ( [30-40]%), the latter of which includes 
Mesit ( [0-5]%), WB ( [0-5]%), Kongsberg ( [0-5]%) Bittium ( [0-5]%) among 
others. The more  significant competitors are Thales, Elbit and Leonardo, all of 
which will continue to constrain the merged entity. In summary, the effect of the 
Transaction is the same as the disappearance of on e of the smaller firms .   
                                                 
328  See Section 5.1.2.2.A(a)  
 
 
69 (332)  Thus , in both cases the Transactio n leads t o the disappearance of a small 
competitor with limited market share and in both cases at least three significant 
competitors remain. The reason for the radically different market positions of the 
Parties is that HH -VDLs, which are high data bandwi dth devices capable of 
transmitting full motion video, are more niche products than low data bandwidth 
radios in the air -to-ground segment. HH A2Gs (which transmit voice, text and, at 
best, low quality images) are more traditional tactical radios with air -to-ground 
capabilities and more widely distributed among soldiers.  
(333)  By way of background, typical users of VDL equipment are Joint Terminal 
Attack Controller (“JTAC”) operators, who direct the action of combat aircraft 
engaged in close air support and othe r offensive air operations. These JTAC 
operators use both an HH -VDL to communicate high quality, real -time 
transmission of full motion video and a low bandwidth (ground -to-ground) radio 
to communicate voice messages.329 This shows that HH -VDLs have very spec ial 
usage and not as widely distributed among soldiers as air -to-ground low 
bandwidth radios . Indeed , the total market size of HH -VDLs in reference period 
(2014 -2018) in the EEA was around EUR 98 million whereas the comparable 
figure for  HH A2Gs  was around  EUR 935 million.330  
(334)  Thus, o n the basis of market shares and market structure, the  Transaction is 
unlikely to lead to a serious impediment of effective competition in the markets 
for HH -VDLs or in the market for HH A2Gs .331  
C) Competitive strength of t he Partie s  
(335)  The feedback from the market investigation on the strength of the Parties and 
competitors was not very informative and contained a lot of poor quality answers 
or “I do not know ” replies. The few pieces of clear information were in line with 
the as sessme nt based on market shares and market structure.  
(336)  For example, L.F.E SAS considered that the Rover product line, L3’s flagship 
HH-VDL products, are L3’s competitive strength.332 Safran considered that “ With 
the ROVER product line, L3 has pioneered the HH VDL domain and established 
many of its proprietary waveforms as de facto standards”333  
(337)  By contrast, in the case of Harris, there was no respondent that highlighted a 
strength specific to HH -VDLs. While L.F.E. SAS highlighted the strength of L3’s 
Rover products,  in respect of Harris it replied that it “ does not know ” the strengths 
                                                 
329 Form CO, paragraph 349  
330 Form CO, Table 26 , Notifying Party’s response to RFI 6, Table 5  
331 The Commission notes that similar conclusions could be drawn even if there was no distinction made 
across all hand held devices used by the ground forces, i.e. if all hand held tactical communication 
devices belonged to one single product market regardless of data bandwidth (high or low data rate 
transmission) and regardless of sender receiver type (air -to-ground, ground -to-ground, or satellite -to-
ground).  In that case the market shares would be Harris [20 -30]%, L3 [0 -5]%. ( Notifying Party’s 
response to RFI 6, Table 4 ). In addition the same conclusion would hold in the even wider hypothetical 
product market enc ompassing all tactical mobile systems (i.e. systems carried by troops) used by 
ground forces. In such a hypothetical market the market shares would be Harris [30 -40]% and L3 [0 -
5]%. ( Form CO, Table 23 )  
332  Response of L.F.E SAS to Q1 Questio nnaire to custo mers, question 71  
333  Safran’s response to Q1 Questio nnaire to customers, question 71  
 
 
70 of Harris’s HH -VDLs.334 Safran considered that Harris is generally strong in 
tactical communications, without any reference to HH -VDLs.335  
(338)  Although L3 and Harris were both named most frequ ently as credible HH -VDL 
providers,336 this was not consistent with the explanations. There were a lot of “ I 
do not know ” explanations and the other explanations  indicated that the Parties or 
Harris were named not exclusively based on their HH -VDL strengths.  For 
example, Safran explained that in general both Parties offer devices with a large 
choice of waveforms in several frequency bands.337 Italy’s Land Armament 
Directorate specifically added that it only purchased HH -VDL only from L3 and 
it estimated Harris’ s strength on the basis of other products.338 
(339)  Thus the responses, although generally not very informative or poor quality, 
indicate, in line with the assessment based on market shares, that L3 is strong in 
HH-VDLs, while Harris is strong in general in tactic al communications, including 
hand held devices (with the exception of HH -VDLs).  
D) Closeness of competition  
(340)  While the rate of poor responses was high, they indicate the  lack of closeness. 
B.M.A.S.R.L indicated that, while both Parties’ devices perform well “Harris is 
more tactical ”,339 which is a reference to Harris’s strength in tactical hand held 
radios in general (i.e. in  HH A2Gs  or in all hand held devices) as opposed to 
strength in HH -VDLs in particular. L.F.E. SAS considered that Harris’s and L3’s 
produc t line are not the same.340  Thales was of the view that Harris’s and L3’s 
HH-VDL products are not even interchangeable “ L3 is focussed on ROVER HH -
VDL products while Harris is working on more versatile HH -VDL solutions. They 
are not interchangeable .”341 By co ntrast, Safran and United Technologies 
Corporation considered that the Parties’ products  are close substitutes.342  
(341)  Moreover, the Parties have not competed against each other in an HH -VDL 
tender in the last three years,343 which shows that competitive interac tion between 
them is minimal. This fact also makes it unlikely that their products are close 
substitutes.   
(342)  The Commission therefore considers that the Parties are no t close competitors in 
HH-VDLs.  
(343)  If the market were more broadly defined and included all HH A2G s, the Parties 
would be very distant competitors as in such a market Harris would specialize on 
                                                 
334  Response of L.F.E SAS to Q1 Questio nnaire to customers, question 70  
335  Safran’s response to Q1 Questio nnaire to customers, question 70  
336  Q1 Questio nnaire to customers,  question 72, Q2 Questionnaire to competitors  (II), question 29  
337  Safran’s response to Q1 Questio nnaire to customers, question 72  
338  Response of Italy’s Land Armament Directorate to Q1 Questio nnaire to customers, question 72  
339  Response of B.M.A.S.R.L  to Q1 Questio nnaire to customers, question 67  
340  Response of L.F.E. S.A.S to Q1 Questio nnaire to customers, question 72  
341  Thales’s response to Q1 Questio nnaire to customers, question 72  
342  Safran’s response to Q1 Questio nnaire to customers, question 72, Resp onse of United Technologies 
Corporation to Q2 Questionnaire to competitors  (II), question 26  
343  Form CO, paragraph 364  
 
 
71 the low data bandwidth devices while L3 on the high data bandwidth devices. If 
the market were defined even more broadly and inclu ded all hand held tactic al 
devices used by ground forces, the Parties would be even more distant 
competitors with L3 occupying the niche of air -to-ground high bandwidth 
segment and Harris dominating most other segments.  
E)  Entry and expansion  
(344)  The market investigation highlighted certain barriers to entry such as incumbency 
effects344 (due to interoperability requirements) and the  high level of 
technology,345 which implies significant R&D investment and uncertainty. The 
Commission adds that due to the simi larities of the market charac teristics , the 
other barriers mentioned in regard to image intensification NVDs ( Section 
5.1.2.2.A(f))  also apply.  This is because both markets are bidding markets and 
thus in both cases entrants need to have references and face the costs and 
complexity of  tenders. Also, both markets involve the purchase of complex 
military equipment and thus in both cases the entrant needs to demonstrate that 
the products work  reliably in battle and has to build out a sales and repair 
network.  
(345)  Of the se barriers the buildin g out sales and repair network would be easier for a 
supplier already present in a neighbouring tactical communication equipment 
market. Further, the order backlog of such a player would help in supporting the 
fixed costs of en try. However, even these barr iers would not disappear (there 
would still be fixed costs including R&D, tender costs and the repair network 
needs to be retrained) and the rest of the barriers (uncertainty, references, need to 
have a credible, battle tested product) would apply. Thus, e ven for such a player 
entry is not easy. For example Harris has significant assets, experience in markets 
neigbouring to HH -VDLs but it has not penetrated HH -VDLs to any significant 
degree.   
(346)  Due to the similar market structure, this applies not only to th e HH -VDL market 
but also to the HH A2G s market .  
(347)  High entry barriers do not imply in themselves that the Transaction leads to a 
significant competitive harm. They only indicate that the harm from a Transaction 
would not be compensated by entry as a counter vailing factor. However, in the 
case of HH -VDLs and HH A2G s this is not the case as the Transaction does not 
lead to competitive harm in the first  place based on Sections 5.4.2.2.B -D.  
F)  Buyer power  
(348)  When rating buyer power, the most frequent rating responde nts gave with respect 
to buyer power was medium.346  
(349)  The market charactristics relevant to buyer power (few suppliers, bidding market, 
mainly public sector purchasers, military equipment, complex products) are 
                                                 
344  Responses of Thales and United Technologies Corporation to Q2 Questionnaire to competitors  (II), 
question 31  
345  Safran’s response to Q1 Questio nnaire to customers, question 74  
346  Q1 Questio nnaire to customers, question 74, Q2 Questionnaire to competitors (II), question 34  
 
 
72 similar in the case of image intensification NVD s and HH -VDLs and HH A2G s. 
Thus the discussion in relation to buyer power in image intensification NVDs 
generally apply to HH -VDLs and HH A2G s as well, which implies that buyer 
power would be insufficient to remedy a competitive harm.347 One difference is 
that that specifically for HH -VDLs the purchases are smaller, which gives less 
bargaining power to buyers. In the case of HH A2G s this difference would not 
apply as the purchases involve larger volumes.  
(350)  However, the lack of countervailing buyer power does n ot imply in itself that the 
Transaction leads to a significant competitive harm. It only indicates that the 
harm from a Transaction would not be compensated by this countervailing factor. 
However, in the case of HH -VDLs and HH A2G s this is not the case as the 
Transaction does not lead to competitive harm in the first place base d on Sections 
5.4.2.2.B -D. 
G)  Conclusion  
(351)  Based on the above considerations, the Commission is of the view that the 
Transaction does not give rise to serious doubts as to its compatibil ity with the  
internal market  as regards the markets for HH -VDLs and HH A2G s. In particular, 
as explained in detail in Sections 5.4.2.2.B -D the overlap is minimal, the Parties 
do not compete closely and a suffient number of strong and smaller competitors 
remain on the market. In addition Harris is not strong in HH -VDLs while L3 is 
not strong in HH A2G s.   
5.4.3.  Competitive assessment – horizontal coordinated effects and non -horizontal 
effects  
5.4.3.1.   Horizontal coordinated effects  
A) Notifying Party’s view  
(352)  The Notifying P arty submits that the Transaction will not give rise to any 
coordinated effects in HH -VDLs as the EEA market for HH -VDLs both today 
and post -Transaction does not exhibit the characteristics that facilitate 
coordination.348 First, the lack of product homogene ity renders implausible any 
implicit coordination, especially in a tender market. Second, the market is not 
transparent as it is to a large extent a bidding market, rendering any implicit 
collusion inherently unstable. Third, the market is driven by innova tion given the 
technological features of the products. This feature too prevents against the 
possibility of implicit and sustainable coordination.  
B) Commission’s assessment  
(353)  The Commission agrees with the Notifying Party. It is indeed the case that HH -
VDLs a nd HH A2G s are heterogeneous product group with various 
functionalities and multiple parameters of competition (i.e. not only price but also 
quality, weight, performance levels, energy consumption, range, interceptability, 
reliability, resistance to extrem e weather conditions  etc), which makes it difficult 
                                                 
347  See Section 5.1.1.2 A(g)  
348 Form CO, paragraph 379  
 
 
73 for competitors to implicitly reach a common understanding on the terms of 
coordination.  
(354)  Maintaining the coordination also appears difficult for several reasons. First, the 
markets for HH -VDLs and HH A2 Gs are indeed not transparent, which makes 
montoring the deviations from the agreed terms of coordination difficult. Second, 
the lumpy nature of demand incentivizes firms to cheat on the agreed terms. 
Third, it is indeed the case that markets for HH -VDLs a nd HH A2G s are 
characterised by innovation, which renders any tacit coordination unstable.  
(355)  Therefore the Commission considers that the Transaction does not raise serious 
doubts as to its compatibility with the common market on account of horizontal 
coordin ated effects in the markets for HH -VDLs and HH A2G s. 
5.4.3.2.  Non-horizontal effects  
(356)  There are no vertical relationships between the Parties in HH -VDLs, HH A2Gs or 
indeed in any tactical communication equipment and thus the potential non -
horizontal effects can onl y be conglomerate effects.  
A) Notifying Party’s view  
(357)  The Notifying Party considers that given the that the combined entity will have an 
2018 EEA market share of well below 30 % in the HH -VDL’s segment, the 
Transaction will not give rise to foreclosure conce rns.349 
B) Commission’s assessment  
(358)  The Commission notes that in this Section it only assesses bundling possibilities 
within tactical communication equipment used by ground forces. Bundling across 
the sea, air and land domains is analysed in Section 5.5.  
(359)  The C ommission notes that, as discussed before in Section 5.1.2.2.A(a)), market 
share in a single year is not suitable to assess market power in bidding markets. 
Using correct market shares Harris does have some market power in HH A2Gs 
([30-40]% as indicated in  Section 5.4.2.2). In addition given its general strength 
in tactical communications used by ground forces,350 it can have market power in 
other markets too.  
(360)  However, a bundling and tying strategy by the merged entity is unlikely to be 
successful for two re asons.  
(361)  First, the customer demand is very specific and focused on narrow product 
segments, which was amply demonstrated by the fact that there was no demand 
suctsitution across the distinctions discussed in Section 5.4.1.1.D(a).  Customers 
do not purchase  broad categories of equipment but specify the detailed parameters 
of the equipment they buy. For example, they specify that the device should be 
hand held, suitable for air -to-ground communication, have certain data bandwidth 
                                                 
349 Form CO, paragraph 381  
350 Q2 Questionnaire to competitors (II),  question 36  
 
 
 
74 capacities (ie it should be c apable of video transmission), and the corresponding 
waveforms, frequencies. It is also likely that the tenders contain minimum 
requirments for range, battery life, durability etc. Thus there appears to be no 
demand for bundled solutions, which makes a bun dling strategy unlikely to 
succeed. Further, the market investigation contained no indication that this is 
going to change in the medium term with tactical communications used by ground 
forces.  
(362)  Second, there are a number of competitors that are active in multiple markets in 
the domain of tactical communication equipment used by ground forces and thus 
these firms can replicate the bundles. For example Thales and Elbit are active in 
HH-VDLs,351 HH A2Gs352 as well as in other hand held devices353 and in mobile 
systems carried by military personnel.354 Leonardo is active in HH-VDLs,355 HH 
A2Gs356 as well as in other hand held devices.357. Thus, even if there was demand 
for such bundles these firms could match the bundles offered by the merged 
entity, which would defeat a for eclosure attempt.  
(363)  The Commission also adds that while respondents to the market investigation did 
raise conglomerate concerns across sea, land and air domains (analysed in Section 
5.5), they did not do so with regard to products within the universe of tac tical 
communication devices used by ground forces.  
(364)  Therefore the Commission considers that the Transaction does not raise serious 
doubts as to its compatibility with the common market on account of non -
horizontal effects.  
5.5. Potential conglomerate effects  involving broad military communication 
portfolios  
(365)  In view of the complementarity of the Parties’ product portfolios in the broade r 
secure military communications space, the Transaction could potentially entail 
conglomerate effects.  As discussed in this Sect ion, these potential concerns were 
put forward by certain respondents to the market investigation.  
(366)  Namely, it was brought to the Commission’s attention that Harris’ product 
offering in tactical communication, and in particular tactical radios used by 
ground forces, and L3’s offering for maritime and airborne platforms and 
including also HH -VDLs, could be considered to be complementary within the 
meaning of paragraph 91 of the Non -Horizontal Merger Guidelines.  
(367)  Based on the information provided by the Notif ying Party, the Parties have a 
common pool of customers, in particular other military technology providers and 
ultimately the ministries of defence in NATO or NATO allied countries.  In 
particular , military customers with gro und, naval and air capabilities could in 
                                                 
351  Section 5.4.2.2.B  
352  Section 5.4.2.2.B  
353  Notifying Party’s response to RFI 6, Table 4  
354  Form CO, Table 23  
355  Section 5.4.2.2.B  
356  Section 5.4.2.2.B  
357  Notifying Party’s response to RFI 6, Table 4  
 
 
75 theory be interested in purchasing  a bundle of military c ommunication products 
that are designed for all three domains (i.e. land, sea and air) .  
5.5.1.  Notifying Party’s view  
(368)  The Notifying Party considers that the Transaction will not lead to conglomera te 
concerns as the merged entity would have neither the ability nor the incentive to 
foreclose its rivals by tying or bunding.  
(369)  The Notifying Party submits that customer s are not interested in tied or bundled 
offerings, and a corresponding strategy would th erefore not be profitable.358 
(370)  The Notifying Party explains that given the different technical and mission 
requirements in the different domains of land, sea, and air, there is no demand for 
a bundled solution. In any event, it is argued by the Notifying Part y, the merged 
entity would not be “ uniquely positioned to offer such bundles ”. Other players 
could also offer such bundled solutions either alone or through sub -contracting. 
The Notifying Party refers in this context to Thales, Rockwell Collins, and ViaSat  
as players that would be capable to offer combinations of ground, air, and 
maritime communication solutions.359 
(371)  The Notifying Party further submits that tenders do not tend to cover a broad 
range of products but are rather narrow in scope as well as product -specific.  In 
addition, customers are  sophisticated with significant buyer power. Consistent 
with this approach, the Notifying Party further explains that customers generally 
seek to ensure that none of the waveforms they specify in tender requirements are  
patent protected and are therefore accessible to all suppliers.360 
(372)  According to the Notifying Party, while modernisation programmes currently 
undertaken or planned to be undertaken by military forces may cover a wide 
range of products, they are typically di vided into individual tenders for specific 
product s over a period of years, and customers tend to award the various tenders 
of such modernisation programmes to several suppliers over a period of time.361  
5.5.2.  Commission’s assessment  
5.5.2.1.  Analytical framework  
(373)  Conglome rate mergers consist of mergers between companies that are active in 
closely  related markets, for instance suppliers of complementary products or of 
products which belong to a range of products that is generally purchased by the 
same set of customers for t he same end use.362 
                                                 
358 Form CO, paragraph 384.  
359 Form CO, para graph 65.  
360 Form CO, paragraph s 66, 384 . 
361 Form CO, paragraph 67.  
362 See Non -Horizontal  Merger Guidelines, paragraph 91.  
 
 
76 (374)  According to the Non -Horizontal Merger G uidelines , in most circumstances , 
conglomerate mergers do not lead to any competition problems.363 
(375)  However, foreclosure effects may arise when the combination of products in 
related markets may confer  on the merged entity the ability and incentive to 
leverage a strong market position from one market to another closely related 
market by means of tying or bundling or other exclusionary practices.364  
(376)  The Non -Horizontal Merger Guidelines distinguish between  bundling , which 
usually refers  to the way products are offered and priced by the merged entity and 
tying, usually referring to situations where customers that purchase one good (the 
tying good) are required to also purchase another good from the producer (the tied 
good).365  
(377)  While tying and bundling have often no anticompetitive consequences, in certain 
circumstances such practices may lead to a reduction in actual or potential 
competitors' ability or incentive to compete. This may reduce the competitive 
pressure on the merged entity allowing it to increase prices.366  
(378)  In assessing  the likelihood of such a scenario, the Commission examines, first, 
whether the merged firm would have the ability to foreclose its rivals367, second, 
whether it would have the economic  incentive to do so368 and, third, whether a 
foreclosure strategy would have a significant detrimental effect on competition, 
thus causing harm to consumers.369 In practice, these factors are often examined 
together as they are closely intertwined.  
5.5.2.2.  Market powe r 
(379)  According to the Non -Horizontal Merger Guidelines, the main concern stemming 
from conglomerate mergers is that the merged entity could leverage its strong 
market position from one market to the other by means of tying, bundling or other 
exclusionary prac tices. In order to be able to foreclose competitors, the new entity 
must have a significant degree of market power, which does not necessarily 
amount to dominance, in one of the markets concerned.370  
(380)  Market shares provide useful first indications of the mar ket power and the 
competitive importance of both the merging parties and their competitors.371 
(381)  Respondents to the market investigation indicated that Harris is a market leader in 
tactical communications devices used by ground forces such as, for example, 
hand held ground -to-ground radios, hand held air -to-ground (low data bandwidth) 
                                                 
363 See Non -Horizontal Merger Guidelines, paragraph 92.  
364 See Non -Horizontal Merger Guidelines, paragraph 93.  
365 See Non -Horizontal Merger Guidelines, paragraph 97.  
366 See Non -Horizontal Merger Guidelines, paragraphs 91 and 93.  
367 See Non -Horizontal Merger Guidelines, paragraphs 95 to 104.  
368 See Non -Horizontal Merger Guidelines, paragraphs 105 to 110.  
369 See Non -Horizontal Merger Guidelines, pa ragraphs 111 to 118. 
370 Non-Horizontal Merger Guidelines, paragraph 99.  
371 See Non -Horizontal Merger Guidelines, paragraph 24.  
 
 
77 radios, manpack radios, vehicle mounted radios etc.372 Respondents also 
considered that L3 is leader in naval communications, ISR data links, including 
HH-VDLs and string in airborn e communications.373 Respondents considered that 
the merged entity would have an incentive to bundle these products.374 
(382)  Accordingly, the Commission requested approximate market share data for broad 
product categories that correspond to the highlighted conglome rate concerns. The 
various different cuts are presented below  
i. On the overall market for tactical communication devices used by 
ground forces in the EEA Harris has a market  share of [40-50] %  (and 
[30-40]% for the ground tactical communications for special  forces).375 
This very broad market would include all tactical communication 
devices used by ground forces without distinguishing between mobile, 
transportable and fixed systems. L3 is not a significant player in this 
segment.376 
ii. In mobile systems carried by t roops (ground forces) Harris’s market 
share in the EEA is [30-40]%.377 This would include all mobile tactical 
communication systems i.e. both manpack and hand held devices. L3 is 
not a significant player in this segment.378 
iii. In hand held devices (tactical equip ment used by ground forces without 
further distinction according to data bandwidth capability or sender -
receiver type) Harris has a market share of [30-40]%. 379 L3 is not a 
significant player in this segment.380 
(383)  As regards L3, its postion is very modest in th e EEA in the maritime and airborne 
communication space.  Harris is also not a significant player in these segments.381 
While it is one of the leading players in its US home market with [30-40]% 
market share in 2018, the company has only [0-5]% EEA market shar e for 
maritime and airborne communications taken together.382 
(384)  On the basis of the market shares provided by the Parties, Harris may have some 
market power in the ground tactical communication space, while L3 is a marginal 
player in maritime and airborne comm unications in the EEA.  This implies that the 
merged entity could have market power in the ground tactical communication 
space in the EEA.  
                                                 
372  Q2 Questionnaire to competitors (II), question 36  
373  Q2 Questionnaire to competitors (II), questio n 37 
374  Q2 Questionnaire to co mpetitors (II), questio n 37 
375  Form CO, Table 4  
376 Form CO, Table 3  
377  Source: Form CO, Table 23  
378  Form CO, Table 3  
379  Notifying Party’s response to RFI 6, Table 4  
380  Form CO, Table 3  
381 Form CO, Table 3  
382 Form CO, paragraph 58 -60, Tables 5 -6. The Notifying  Party indicates that L3 is not able to provide 
market share figures for maritime and airborne communications separately.  
 
 
78 5.5.2.3.  Ability  and incentive to  foreclose competitors    
(385)  The Commission considers that the merged entity would have neither t he ability 
nor the incentive to engage in anti -competitive tying or bundling or other 
exclusionary practices which would result in conglomerate foreclosure effects.  
(386)  First, the Commission recalls that, as explained in relation to the market definition 
of re levant to HH -VDLs, in particular in relation to demand side substitution 
(Section 5.4.1.D)(a)), the demand side in military communication equipments is 
very specific. Customers do not purchase broad categories of equipment but 
specify the detailed paramete rs of the equipment they buy. For example, as 
explained in Section 5.4.1.D)(a) in the context of HH -VDLs, they specify that the 
device should be hand held, suitable for air -to-ground communication, have 
certain databandwidth capacities (ie it should be cap able of video transmission), 
and the corresponding waveforms, frequencies. It is also likely that the tenders 
contain minimum requirments for range, battery life, durability etc. In other 
words the Notifying Party is correct in pointing out that submits th at tenders do 
not tend to cover a broad range of products but are rather narrow in scope as well 
as product -specific. It follows that there appears to be no demand for bundled 
solutions and thus a bundling strategy would be unfeasible or unprofitable or 
both.  
(387)  This conclusion is reinforced by the responses of customers to the questions 
whether they would purchase bundles. Customers indicated that they are typically 
not interested in such bundled offerings, with tenders generally not covering a 
broad range o f products but instead being narrow in scope and product specific.383 
None of the customer respondents indicated that they would even consider 
purchasing such bundles.384 
(388)  Thus, even though competitor respondents, on the one hand, generally considered 
that the merged entity would have the ability and incentive to bundle Harris’ 
tactical communication products with some of L3’s products and indicated that 
such a bundled proposition would be welcomed by customers,385 the market 
practice evident from the discussion o n the market definition of HH -VDLs and 
customer responses suggest otherwise.  
(389)  Some respondents mentioned a trend, coming from the US, to create multi -
domain communication solutions,386 ie. coordination between ground forces and 
aviation or helicopters to get  multi -domain collaborative combat systems. 
However, it was also noted that the demand is not there yet and will not 
necessarily affect the whole of EEA.387 Further, customers did not confirm such a 
trend.388 Thus even the advance of these multi -domain communi cation solutions 
appears uncertain at this stage, let alone the possibility that this will change 
current purchasing patterns, which does not follow automatically from the former. 
This is because as the Notifying Party noted, even if customers wish to appl y a 
                                                 
383 Questionnaire to customers, question 83.  
384 Questionnaire to customers, question 82.  
385 Questionnaire to competitors, questions 38 -40. 
386  Thales’s response to Q2 Questionnaire to competitors (II), question 41  
387  Thales’s response to Q2 Questionnaire to competitors (II), question 42  
388  Questionnaire to customers, question 82  
 
 
79 multi -domain solution, it is still possible that they purchase the necessary 
equipment over  a longer period of time in smaller, specific tenders.    
(390)  Second, even if there were to be customer demand for such bundles or such 
demand would emerge in the f oreseeable future, there would be viable alternative 
suppliers on the market which could offer similar bundled solutions, either alone 
or in consortia with others, and thus meet such demand from customers. For 
example Thales considered that Leonardo and Ro hde Shwartz and itself are all 
active in all three domains (i.e. land, sea and air) and would be capable of 
replicating the merged entity’s bundle that would include Harris’s tactical 
communication products and some of L3’s products from the sea and airbor ne 
domain.389 United Technologies Corporation, indicated similarly that such 
competing bundles could be offered “ via partnership ” by others.390 On the 
customer side, a number of respondents indicate the existence of competing 
suppliers that could offer such bu ndles, were there to be demand for such 
offers,391 without, however, naming them.  
(391)  Thus the Commission considers that even if the merged entity could sell such 
bundles, other competitors could match the offer, implying that the foreclosure 
strategy is unlike ly to be successful.  
(392)  Third, customer reactions should also not be discounted. It may very well be that 
faced with a bundling strategies customers devise counterstrategies such as 
devising an interoperable system and specifying in tenders the interoperabili ty 
requirements.  
(393)  The market investigation as a whole, therefore,  provides insufficient evidence that 
the merged entity would hav e the ability to foreclose competing suppliers through 
anti-competitive bundling or tying practices , notably through the bundli ng of 
naval, air and ground communications solutions . The reasons include the lack of 
demand for such bundles, the existence of competitors that can match the bundled 
offers and possibly customer counter -strategies.  
5.5.2.4.  Conclusion  
(394)  Based on the above considera tions, the Commission is of the view that the 
Transaction does not give rise to serious doubts as to its compatibility with the 
internal market in relation to anti -competitive conglomerate effects  involving 
broad military communications portfolios .  
6. COMMIT MENTS  
(395)  In order to remove the serious doubts arising from the Transaction in relation to 
the markets for image intensification NVDs and I2Ts,  as well as non -horizontal 
concerns related to NVDs and I2Ts  on 28 May 2019 the Notifying Party 
submitted commitment s pursuant to Article 6(2) of the Merger Regulation (the 
                                                 
389 Thales’s response to Q2 Questionnaire to competitors (II), que stion 41  
390 Thales’ and United Technologies’ responses to queationnaire to competitors, question 41.1.  
391 Questionnaire to customers, question 85.  
 
 
80 "Commitments"). The Commitments are annexed to this decision and form an 
integral part thereof.  
6.1. Description of the Commitments  
(396)  The Commitments consist of the divestment of Harris’  entire  night vision  
business  (hereinafter also referred to as the "Divestment Business").  The 
Divestment Business includes all of Harris’s NVDs (i.e., Harris’s image 
intensification NVDs and Harris’s fusion NVDs), all of Harris’s I2Ts, and all 
associated spare parts and serv ice sales .  
(397)  The Divestment Business is based out of a single production facility located in 
Roanoke, Virginia (USA) and includes all assets and staff that contribute to the 
current operation or are necessary to ensure the viability and competitiveness of 
the Divestment Business, in particular:   
i. all tangible and intangible assets (including intellectual property rights) 
necessary for the operation of the Divestment Business in substantially 
the same manner as immediately prior to the Closing;   
ii. all licences , permits and authorisations issued by any governmental 
organisation for the benefit of the Divestment Business;  
iii. all contracts, leases, commitments and customer orders of the 
Divestment Business, as well as all customer, sales, supplier, accounting, 
finan cial and other business records primarily used in the Divestment 
Business (other than certain excluded business records); and  
iv. Personnel  
(398)  Finally, the Commitments contain related commitments, including those  
regarding the separation of the Divestment  Busine ss from the  retained businesses, 
the preservation of the viability, marketability and competitiveness of the 
Divestment Business, including the appointment of a monitoring trustee and, if 
necessary, a divestiture trustee.  
6.2. Commission’s assessment of the Com mitments  
6.2.1.  Framework for the C ommission’s assessment of the commitments  
(399)  According   to   the   Commission's   notice   on   remedies   acceptable   under   
Council   Regulation (EC) No 139/2004 and under Commission Regulation (EC) 
No 802/2004 (the  "Remedies   Notice"),  where  a  concentration  raises  serious  
doubts  as  to  its  compatibility  with  the  internal  market,  the  parties  may  
undertake  to  modify  the  concentration so as to resolve the competition 
concerns identified by the Commission and  thereby gain clearance of their 
merger.  
(400)  It  is  for  the  parties  to  the  concentration  to  put  forward  commitments.392 
The Commission  only has the power to   accept  commitments  that  are  deemed  
                                                 
392 Remedies Notice, paragraph 6.  
 
 
81 capable  of  rendering  the  concentration  compatibl e  with  the  internal  
market.393   In  Phase  I,  commitments   can   only   be   accepted   where   the   
competition   problem   is   readily  identifiable  and  can  easily  be  remedied.  
The  competition  problem  therefore  needs  to  be  so  straigh tforward  and  the  
remedies  so  clear -cut  that  it  is  not  necessary  to  enter  into  an  in -depth  
investigation. The  commitments  must be  sufficient  to  clearly  rule  out  serious  
doubts  within  the  meaning  of  Article  6(1)(c)  of  the  Mer ger  Regulation.  
Where  the  assessment  indicates  that  the  proposed  commitments  remove  the  
grounds  for serious doubts on this basis, the Commission clears the merger in 
phase I.394 
(401)  In assessing whether or not commitments will restore effective comp etition, the 
Commission considers their type, scale and scope by reference to the structure 
and characteristics of the market in which the Commission has identified serious 
doubts as to the compatibility of the notified concentration with the internal 
mark et.395  
(402)  Divestiture commitments are the best way to eliminate serious doubts resulting 
from horizontal overlaps of the merging parties’ activities.396 The divested 
business must consist of a viable business that if operated by a suitable purchaser, 
can compete  effectively with the merged entity on a lasting basis and that is 
divested as a going concern.397  
(403)  The business to be divested must include all the assets which contribute to its 
current operation  or  which  are  necessary  to  ensure  its  viability  and  
competitiveness  and  all personnel which are currently employed or which are 
necessary to ensure the business' viability   and   competitiveness.  Personnel   and   
assets   which   are   currently   shared between  the  business  to  be  divested  and  
other  businesses  of  the  parties,  but  which contribute  to  the  operation  of  the  
business  or  which  are  necessary  to  ensure  its viability  and  competitiveness,  
must  also  be  included.  Otherwise, the viability and  competitiveness of the 
business to be divested would be endangered.  
(404)  Furthermore, the intended effect of the divestiture will  only  be  achieved  if  and  
once the  business  is  transferred  to  a  suitable  purchaser  with  proven  relevant  
expertise  and ability  to  maintai n  and  develop  the  business  to  be  divested  as  
a  viable  and  active competitive  undertaking.  This may imply that some 
specific  purchaser requirements are  included in the commitments to ensure that 
the transferred business remains viable.  The pot ential of a business to attract a 
suitable purchaser is an important element of the Commission’s assessment of the 
appropriateness of the proposed commitment.398  
                                                 
393 Remedies Notice, paragraph 9.  
394 Remedies Notice, paragraph 81.  
395 Remedies Notice, paragraph 12.  
396 Remedies Notice, paragraph17.  
397 Remedies Notice, paragraph 23.  
398 Remedies Notice, paragraph 47.  
 
 
82 6.2.2.  Assessment of the Commitments  
(405)  The competition concerns in this case are readily identifiable  in respect of the 
relevant markets for image intensification NVDs and I2Ts,399 as well as non -
horizontal concerns relationg to NVDs and I2Ts, given the Parties’ high market 
shares, the closeness of their offering, the characteristics of the markets at stake, 
the limited number of competitors , lack of countervailing buyer power  and the 
high barriers to entry identified.  
(406)  The Commission's assessment of the  Commitments focuses on (i) whether the 
Commitments are suitable and sufficient to remove the comp etition con cerns 
caused by the T ransaction; (ii) whether the Divestment Business constitutes a 
viable business able to compete effectively with the merged entity on a lasting  
basis;  (iii)  whether  there  are  specific  conditions  that  a  potential  purchaser 
should  fulfil, (iv)  whether  the  Divestment  Business  is sufficiently attractive to 
find a suitable purchaser . On 4 April 2019 Harris signed an asset purchase 
agreement with Elbit pursuant to which Elbit will acquire the Divestment 
Business. However, the Commitments are not submit ted as a fix -it-first solution  
and therefore the Commission will carry out a separate assessment of Elbit’s 
suitability as a purchaser following the closing of the acquisition of L3 by Harris. 
In any event , and without prejudice t o this separate assessment that the 
Commission will carry out at the time of the purchaser approval, the 
Commission’s assessment of the C ommitments include a preliminary overview  of 
Elbit’s suitability as a purcha ser of the Divestment Business.  
Suitabilit y and viability of the Divestment Business  
(407)  In order to carry out this assessment, the Commission launched a market test of 
the Commitments on 29 May 2019 . The results of the market  test, which was 
addressed to competitors and customers, are generally posit ive and confirmed that 
the Commitments are suitable to eliminate  the competition concerns identified  by 
the Commission.  
(408)  First, t he Divestment B usiness consists of the divestment of  Harris’ global night 
vision business which eliminates the entire overlap be tween the Parties in night 
vision devices more broadly and in the markets for  image intensification NVDs 
and I2Ts  where the Commission’s investigation has revealed that the Transaction 
would raise competition concerns .  
(409)  Second, the Divestment Business is a  standalone business, which was  previously  
acquired as such by Harris from Exelis in 2015 as a self -standing business 
division. Prior to Exelis’  ownership, the Divestment B usiness had been operated 
by ITT Inc. for several decades.400 It therefore appears to be a complete, 
standalone business with all the necessary assets and resources to be a viable 
force on the market, including engineering, operational, manufacturing, sales, 
HR, finance, contracts, and management personnel. This was confirmed by the 
market test, where a ll the respondents which expressed a view on the suitability of 
the C ommitments, considered that, subject to  it being  divested to a suitable 
                                                 
399 Including also the other alternative relevant product markets discussed in Section 5.1.2.2.B), e.g. image 
intensification NVDs fur ther segmented by device type.  
400 Form RM, paragraphs 2 and 9.  
 
 
83 purchaser , the Divestment Business include s all the necessary assets to  operate 
and effectively compet e on the markets for image intensification NVDs and 
I2Ts.401 One responde nt to the remedies market test highlighted in this sense the 
fact that “ this business has sold twice in recent times, and demonstrated an ability 
to not only continue, but lead the indu stry.402  
(410)  The Divestment Bus iness includes the transfer of key pe rsonnel currently working 
at the Divestment Business and of all personnel currently working at or assigned 
to the Divestment Business who accept a n offer of employment with the 
purchaser . In th is regard, a significant number of respondents to the remedies 
market test identified the role of Senior International Business Development 
Manager as an important part of Harris’s current night vision business. This 
person is responsible for developing st rategy and capturing international business 
opportunities at Harris’s night vision business. The person currently holding this 
posit ion has not been identified as k ey personnel by Harris but is nevertheless part 
of the Divestment Business and will be transf erred subject to acceptance of a n 
offer of employment with the p urchaser. In any event, the Senior International 
Business Development Manager reports to the Director of Sales , which is in turn 
included as key p ersonnel in the Divestment Business.  
Purchase r criteria  
(411)  As regards the criteria to identify a suitable purchaser for the Divestment 
Business, the majority of respondents to the market test consider that previous 
knowledge,  experience and reputation  in the defence industry are required in  
order to run  the Divestment Business viably and competitively .403 The 
Commission considers that the purchaser criteria foreseen in the Commitments 
are sufficient.  
Attractiveness of the Divestment Business  
(412)  The Divestment Business appears to be an attractive  and profita ble business with 
expected revenue growth. The divestment business had a total turnover of EU R 
[…] in 2018, which is expected to grow  significantly  in the next two years. The 
earnings before interest, tax, depreciation and amortisation ("EBITDA") were 
[…] in that period. The projected revenue and EBITDA increases are due in part 
to a number of growth initiatives  undertaken by Harris.404 The first such growth 
initiative involves [description of growth initiative] . The second initiative is  
[description of growt h initiative] . This intiative implies [description of growth 
initiative] .405 
(413)  The Parties claim that the Divestment Business has generated large interest, as a 
result of which Harris has already been able to swiftly reach an agreement with 
Elbit on April 4, 2 019.406 In their view, in the hypothetical scenario where Elbit 
would not acquire the Divestment Business, the remaining bidders would 
                                                 
401 Responses to question 3 of the Commission’s electronic market test of the commitments.  
402 Transaero’s response to question 5 of the Commission’s electronic market test of the commitments.  
403 Responses to question 6  of the Commission’s electronic market test of the commitments.  
404 Form RM, paragraph 32.  
405 Form R M, confidential Annex 2 0 
406 Form RM, paragraph 36.  
 
 
84 continue to be interested  in acquiring it , and thus the Divestment Business would  
nevertheless within a short time -frame be  acquired by a suitable purchaser .407   
(414)  While a number of respondents to the market test indicated that, due to their 
smaller size or different business focus, they would not be interested to acquire 
the Divestment Business, the majority of respondents that expressed a view do 
consider it an attractive business. Respondents pointed to the fact that the 
Divestment Business includes leading edge technology and that the market trends 
and the positioning of Harris in the NVDs and I2Ts business make the 
Divestment  Business attractive.408 Moreover, the Commission has been able to 
confirm that sufficient interest in acquiring the Divestment Business still remains 
in the market.  In the context of the market test ing of the Commitments , the 
Commission contacted the other interested bidders in order to verify whether such 
appetite for the acquisition of the Divestment Business remained. In addition to 
Elbit ’s interest , [description of the action process] .409  A financial investor with 
expertise in the defence sector also indi cated that the Divestment Business is an 
attractive package and confirmed  an interest to purchase it.410  
Preliminary assessment  of Elbit’s suitability  as purchaser of the Divestment 
Business  
(415)  Given that  Harris  has signed an asset purchase agreement with Elbi t pursuant to 
which Elbit will acquire the Divestment Business , the Commission’s market test 
of the remedies included a number of questions about Elbit’s suitability as a 
purchaser of the Divestment Business.   
(416)  Elbit is an Israel -based global technology and  defence company which  supplies  
NVDs, among other products for the defence industry. Elbit’s EEA  sales consist 
of thermal NVDs ( which the Divestment Business does not produce ), and image 
intensification NVDs  (which the Divestment Business does produce) . Elbit does 
not produce I2Ts or fusion NVDs (which the Divestment Business produce s).411 
(417)  The market test revealed that market participants perceive Elbit as a solid player 
already active in the defence business, with previous experience in NVDs and 
other relate d products. The majority of respondents that expressed a view 
perceive Elbit as a suitable purchaser , with the required financial resources and 
capabilities to maintain and develop the Divestment business as a viable 
competitive force on the market.412  
(418)  Thus , given its financial resources, experience in NVDs and defence business, 
Elbit appears to be suitable from the point of view of maintaining and developing 
the business as a viable competitive force.  
                                                 
407 Form RM, paragraph 38.  
408 Responses to question 5 of the Commission’s electronic market test of the commitments . 
409 Email of 12 June 2019 in r esponse to question 14 of the Commission’s electronic market test of the 
commitments .  
410 Email of 13 June 2019 in r esponse to question 14 of the Commission’s electronic market test of the 
commitme nts.  
411 Harris’ response to RFI 5.  
412 Response to question 13  of the Commission’s electronic market test of the commitments .  
 
 
 
85 (419)  This preliminary assessment is without prejudice to the  Commission’s final 
assessment of the suitability of Elbit as the purchaser of the Divestment Business 
which shall be conducted separately at a later stage.  
6.2.3.  Conclusion  
(420)  For t he reasons outlined above, the Commission considers that the C ommitments 
entered in to by the Notifying Party  are sufficient to eliminate the serious doubts 
as to the compatibility of the T ransaction with the internal market.  
(421)  The remedies  in section B  of the Annex constitute conditions attached to this 
decision, as only through full compl iance therewith can the structural changes in 
the relevant markets be  achieved. The other remedies  set out in the Annex 
constitute obligations, as they concern the implementing steps which are 
necessary to achieve the modifications sought in a manner compa tible with the 
internal market.  
7. CONCLUSION  
(422)  For the above reasons, the Commission has decided not to oppose the notified 
operation as modified by the commitments annexed to this decision and to declare 
it compatible with the internal market and with the fun ctioning of the EEA 
Agreement, subject to full compliance with the conditions in section  B of the 
commitments annexed to the present decision and with the obligations contained 
in the other sections of the said commitments. This decision is adopted in 
application of Article 6(1)(b) in conjunction with Article 6(2) of the Merger 
Regulation and Article 57 of the EEA Agreement.  
For the Commission  
 
 
(Signed)  
Margrethe VESTAGER  
Member of the Commission  
 
 
  
 
 
 
CASE  COMP  / M.9234  
 
 
 
 
 
 
 
 
 
 
PROPOSED ACQUISITION OF S OLE CONTROL BY HARRIS CORPORATION OF L3 
TECHNOLOGIES, INC.  
 
 
 
 
 
 
 
 
REVISED NON -CONFIDENTIAL COMMITMENTS  
 
 
 
 
 
 
NOTIFICATION OF A CONCENTRATION PURSUANT TO 
COUNCIL REGULATION (EC) 139/2004  
 
 
 
 
 
May 28, 2019  
 
 
 
 
 

1  
 MAY 28, 2019  
Case M.9234 – Harris Corporat ion / L3 Technologies, Inc. 
REVISED COMMITMENTS TO THE EUROPEAN  
COMMISSION  
 
Pursuant  to Article  6(2) of Council  Regulation  (EC)  No 139/2004  (the “Merger  Regulation ”), Harris 
Corporation (the “ Notifying Party ”) hereby enters into the following Commitments ( the 
“Commitments ”) vis -à-vis the European Commission (the “ Commission ”) with a view to rendering 
its acquisition of L3 Technologies, Inc. (the “ Concentration ”) compatible with the internal market 
and the functioning of the EEA  Agreement.  
 
This text shall b e interpreted in light of the Commission’s decision pursuant to Article 6(1)(b) of the 
Merger Regulation to declare the Concentration compatible with the internal market and the 
functioning of the EEA Agreement (the “ Decision ”), in the general framework of  European Union 
law, in particular in light of the Merger Regulation, and by reference to the Commission Notice on 
remedies  acceptable  under  Council  Regulation  (EC)  No 139/2004  and under  Commission  Regulation 
(EC) No 802/2004 (the “ Remedies  Notice ”). 
 
Section A.     Definitions  
 
1. For the purpose of the Commitments, the following terms shall have the following  meaning:  
 
Affiliated Undertakings : undertakings controlled by the Parties and/or by the ultimate parents 
of the Parties, whereby the notion of control shall be interpreted pursuant to Article 3 of the 
Merger Regulation and in light of the Commission Consolidated Jurisdictional Notice under 
Council  Regulation  (EC)  No 139/2004  on the control  of concentrations  between  undertakings  (the 
“Consolidated Jurisdi ctional  Notice ”). 
 
Assets : the assets that contribute to the current operation or are necessary to ensure the viability 
and competitiveness of the Divestment Business as indicated in Section B, paragraph 6 (a),   (b),  
(c) and (d) and described in the Schedule.  
 
Closing : the transfer of the legal title to the Divestment Business to the Purchaser.  
 
Closing Period : the period of 3 months from the approval of the Purchaser and the terms of sale 
by the Commission.  
 
Confidential Info rmation : any business secrets, know -how, commercial information, or any 
other information of a proprietary nature that is not in the public domain.  
 
Concentration : the Notifying Party’s acquisition of sole control over L3 Technologies, Inc.  
 
Conflict of In terest : any conflict of interest that impairs the Trustee’s objectivity and 
independence in discharging its duties under the Commitments.  
 
Divestment Business : the Notifying Party’s night vision business as defined in Section B and in 
the Schedule which th e Notifying Party commits to divest.  
 
Divestiture Trustee : one or more natural or legal person(s) who is/are approved by the 
Commission  and appointed  by the Notifying  Party  and who has/have  received  from  the Notifying 
Party the  exclusive  Trustee  Mandate   to  sell  the  Divestment  Business  to  a  Purchaser  at  no 
2  
 minimum price.  
 
Effective Date : the date of adoption of the Decision.  
 
First Divestiture Period : the period of [CONFIDENTIAL] from the Effective Date.  
 
Hold Separate Manager : the person appoin ted by the Notifying Party for the Divestment 
Business to manage the day -to-day business under the supervision of the Monitoring Trustee.  
 
Key Personnel : all personnel necessary to maintain the viability and competitiveness of the 
Divestment Business, as l isted in the Schedule, including the Hold Separate Manager.  
 
Monitoring  Trustee  (or Trustee) : one or more  natural  or legal  person(s)  who is/are  approved  by 
the Commission and appointed by the Notifying Party, and who has/have the duty to monitor the 
Notify ing Party’s compliance with the conditions and obligations attached to the  Decision.  
 
Notifying Party: Harris Corporation.  
 
Parties : the Notifying Party and L3 Technologies, Inc.  
 
Personnel : all staff currently employed by or assigned to the Divestment Bus iness.  
 
Purchaser : the entity approved by the Commission as acquirer of the Divestment Business in 
accordance with the criteria set out in Section D.  
 
Purchaser Criteria : the criteria laid down in paragraph 16 of these Commitments that the 
Purchaser must f ulfil in order to be approved by the Commission.  
 
Schedule : the schedule to these Commitments describing more in detail the Divestment Business.  
 
Trustee(s) : the Monitoring Trustee and/or the Divestiture Trustee as the case may be.  
 
Trustee Divestiture Per iod: the period of [CONFIDENTIAL] from the end of the First 
Divestiture Period.  
 
Section B.  The commitment to divest and the Divestment Business  
 
Commitment to divest  
 
2. In order to maintain effective competition, the Notifying Party commits to divest, or pr ocure the 
divestiture of the Divestment Business by the end of the Trustee Divestiture Period as a going 
concern to a purchaser and on terms of sale approved by the Commission in accordance with the 
procedure described in paragraph 17 of these Commitments. To carry out the divestiture, the 
Notifying Party commits to find a purchaser and to enter into a final binding sale and purchase 
agreement for the sale of the Divestment Business within the First Divestiture Period.1 If the 
Notifying Party has not entered into such an agreement at the end of the First Divestiture Period, 
the Notifying  Party  shall  grant  the Divestiture  Trustee  an exclusive  mandate  to sell the Divestment  
 
1 As the Commission  is aware,  following  an auction  process, on April  4, 2019,  the Notifying  Party  entered  into a sale 
and purchase agreement with Elbit Systems of America, LLC (“ Elbit ”) for the sale of the Divestment Business. 
For the avoidance of doubt, the following sections on Due diligence and Reporting, a nd similar provisions, apply 
in the event the Commission rejects Elbit as the  Purchaser.  
3  
 Business in accordance with the procedure described in paragraph 29 in the Trustee Divestiture 
Period.  
 
3. The Notifying Party shall be de emed to have complied with this commitment  if: 
 
(a) by the end of the Trustee Divestiture Period, the Notifying Party or the Divestiture 
Trustee  has entered  into a final binding  sale and purchase  agreement  and the Commission 
approves the proposed purchaser and  the terms of sale as being consistent with the 
Commitments in accordance with the procedure described in paragraph 17; and 
 
(b) the Closing of the sale of the Divestment Business to the Purchaser takes place within 
the Closing  Period. 
 
4. In order to maintain the structural effect of the Commitments, the Notifying Party shall, for a 
period of 10 years after Closing, not acquire, whether directly or indirectly, the possibility of 
exercising influence (as defined in paragraph 43 of the  Remedies Notice, footnote 3) over the 
whole  or part of the Divestment  Business,  unless,  following  the submission  of a reasoned  request 
from the Notifying Party showing good cause and accompanied by a report from the Monitoring 
Trustee (as provided in para graph 43 of these Commitments), the Commission finds that the 
structure of the market has changed to such an extent that the absence of influence over the 
Divestment  Business  is no longer  necessary  to render  the proposed  conc entration  compatible  with 
the internal  market.  
Structure and definition of the Divestment Business  
 
5. The Divestment Business encompasses the Notifying Party’s night vision business,2 which is 
based out of a single production facility with a registered place  of business and management at 
7635 Plantation Road, Roanoke, Virginia 24019, USA. The Notifying Party designs and 
manufactures all of its night vision products in this facility. The Divestment Business includes 
the rights and benefits in and to all custom er and supplier contracts entered into by the Notifying 
Party and primarily related to the Divestment Business, as well as all operating permits, licenses, 
and authorizations,  to the extent  transferable  under  applicable  law held by the Notifying  Party  that 
are primarily used in the Divestment Business or for the production facility or the ownership or 
current operation  thereof.  
 
6. The legal and functional structure of the Divestment Business as operated to date is described in 
the Schedule. To the extent tran sferable under applicable law, the Divestment Business includes 
all assets and staff that contribute to the current operation or are necessary to ensure the viability 
and competitiveness of the Divestment Business, in  particular:  
 
(a) all tangible and intangib le assets (including intellectual property rights) necessary for 
the operation of the Divestment Business in substantially the same manner as 
immediately prior to the  Closing;  
 
(b) all licences,  permits  and authorisations  issued  by any governmental  organisatio n for the 
benefit of the Divestment  Business;  
 
2 Night vision equipment and components include, in particular, image intensification night vision  devices,  fusion  
night vision devices, and image intensifier  tubes.  
4  
 (c) all contracts, leases, commitments and cu stomer orders of the Divestment Business, as 
well as all customer, sales, supplier, accounting, financial and other business records 
primarily used in the Divestment Business (other than certain excluded business 
records);  and 
 
(d) the Personnel.  
 
7. In addition,  the Divestment Business includes the benefit, for a transitional period of 6 to 12 
months (depending on the service concerned) after Closing and on terms and conditions 
equivalent to those at present afforded to the Divestment Business, of arrangements un der which 
the Notifying Party or its Affiliated Undertakings supply certain support services to the 
Divestment Business,3 as detailed in the Schedule, unless otherwise agreed with the Purchaser. 
Strict firewall procedures will be adopted so as to ensure th at any competitively sensitive 
information  related  to, or arising  from  such supply  arrangements  (for example,  product  roadmaps) 
will not be shared with, or passed on to, anyone outside the business units  concerned.  
 
Section C.  Related commitments  
 
Preserva tion of viability, marketability and competitiveness  
 
8. From the Effective Date until Closing, the Notifying Party shall preserve or procure the 
preservation of the economic viability, marketability and competitiveness of the Divestment 
Business, in accordan ce with good business practice, and shall minimise as far as possible any 
risk of loss of competitive potential of the Divestment Business. In particular the Notifying  Party 
undertakes:  
 
(a) not to carry out any action that might have a significant adverse imp act on the value, 
management or competitiveness of the Divestment Business or that might alter the 
nature  and scope  of activity,  or the industrial  or commercial  strategy  or the investment 
policy of the Divestment  Business;  
 
(b) to make available, or procure to  make available, sufficient resources for the 
development  of the Divestment  Business,  on the basis  and continuation  of the existing 
business  plans;  
 
(c) to take all reasonable steps, or procure that all reasonable steps are being taken, 
including  appropriate  incentive  schemes  (based  on industry  practice),  to encourage  all 
Key Personnel to remain with the Divestment Business, and not to solicit or move 
any Personnel to the Notifying Party’s remaining business. Where, nevertheless, 
individual members of the Key P ersonnel exceptionally leave the Divestment 
Business, the Notifying Party shall provide a reasoned proposal to replace the person 
or persons concerned to the Commission and the Monitoring Trustee. The Notifying 
Party must be able to demonstrate to the Comm ission that the replacement is well 
suited to carry out the functions exercised by those individual members of the Key 
Personnel.  The replacement shall take place under the supervision of the  Monitoring  
 
3 [CONFIDENTIAL]  
5  
 Trustee, who shall report to the  Commission.  
 
Hold -separate obligations  
 
9. The Notifying Party commits, from the Effective Date until Closing, to keep the Divestment 
Business separate from the business it is retaining and to ensure that unless explicitly permitted 
under these Commitments: (i) management and staff of the businesses retained by the Notifying 
Party have no involvement in the Divestment Business; (ii) the Key Personnel and Personnel of 
the Divestment  Business  have  no involvement  in any business  retained  by the Notifying  Party  and 
do not report to any individual outside the Divestment  Business.  
 
10. Until Closing, the Notifying Party shall assist the Monitoring Trustee in ensuring that the 
Divestment Business is managed as a distinct and saleable entity separate from the businesses 
which the Notifying Party is retaining. Immediately after the adoption of the Decision, the 
Notifying Party shall appoint a Hold Separate Manager. The Hold Separate Manager shall be 
part of the Key Personnel, shall manage the Divestment Business independent ly and in the best 
interest of the business with a view to ensuring its continued economic viability, marketability 
and competitiveness and its independence from the businesses retained by the Notifying Party. 
The Hold Separate Manager shall closely cooper ate with and report to the Monitoring Trustee 
and, if applicable, the Divestiture Trustee. Any replacement of the Hold Separate Manager shall 
be subject  to the procedure  laid down  in paragrap h 8(c) of these  Commitments.  The Commission 
may, after having heard the Notifying Party, require the Notifying Party to replace the Hold 
Separate  Manager.  
Ring -fencing  
 
11. The Notifying Party shall implement, or procure to implement, all necessary measures to ensure 
that it does not, after the  Effective Date, obtain any Confidential Information relating to the 
Divestment Business and that any such Confidential Information obtained by the Notifying  Party 
before  the Effective  Date  will be eliminated  and not be used by the Notifying  Party.  This includes 
measures vis -à-vis the Notifying Party’s appointees on the supervisory board and/or board of 
directors of the Divestment Business, if any. In particular, the participation of the Divestment 
Business in any central information technology network shal l be severed to the extent possible, 
without compromising the viability of the Divestment Business. The Notifying Party may obtain 
or keep information relating to the Divestment Business which is reasonably necessary for the 
divestiture  of the Divestment  Business  or the disclosure  of which  to the Notifying  Party  is required 
by law. 
Non-solicitation and no -hire clause  
 
12. The Notifying Party undertakes, subject to customary limitations, not to solicit, and to procure 
that its Affiliated Undertakings do not indu ce, encourage or solicit for employment or hire, the 
Personnel transferred with the Divestment Business for a period of [CONFIDENTIAL] after 
Closing.  
 
 
6  
 Due diligence4 
13. In order to enable potential purcha sers to carry out a reasonable due diligence of the Divestment 
Business,  the Notifying  Party  shall,  subject  to customary  confidentiality  assurances  and dependent 
on the stage of the divestiture  process:  
 
(a) provide to potential purchasers sufficient informati on as regards the Divestment 
Business;  
 
(b) provide to potential purchasers sufficient information relating to the Personnel and 
allow them reasonable access to the  Personnel.  
 
Reporting5 
 
14. The Notifying Party shall submit written reports in English on potenti al purchasers of the 
Divestment Business and developments in the negotiations with such potential purchasers to the 
Commission and the Monitoring Trustee no later than 10 days after the end of every month 
following the Effective Date (or otherwise at the C ommission’s request). The Notifying Party 
shall  submit  a list of all potential  purchasers  having  expressed  interest  in acquiring  the Divestment 
Business to the Commission at each and every stage of the divestiture process, as well as a copy 
of all the offe rs made by potential purchasers within five days of their  receipt.  
 
15. The Notifying Party shall inform the Commission and the Monitoring Trustee on the preparation 
of the data room documentation and the due diligence procedure and shall submit a copy of any 
information memorandum to the Commission and the Monitoring Trustee before sending the 
memorandum out to potential  purchasers.  
Section D.  The Purchaser6 
 
16. In order to be approved by the Commission, the Purchaser must fulfil the following  criteria:  
 
(a) the Purc haser shall be independent of and unconnected to the Notifying Party and its 
Affiliated Undertakings (this being assessed having regard to the situation following 
the divestiture).  
 
(b) the Purchaser shall have the financial resources, proven expertise and inc entive to 
maintain  and develop  the Divestment  Business  as a viable  and active  competitive  force 
in competition with the Parties and other  competitors;  
 
(c) the acquisition of the Divestment Business by the Purchaser must neither be likely to 
create, in light o f the information available to the Commission, prima facie 
competition concerns nor give rise to a risk that the implementation of the 
Commitments  will  be  delayed.  In  particular,  the  Purchaser  must  reasonably   be 
 
4 See footnote  1. 
5 See footnote  1. 
7  
 expected to obtain all necessary approvals from the relevant regulatory authorities for 
the acquisition of the Divestment Business.  
 
17. The final binding sale and purchase agreement (as well as anc illary agreements) relating to the 
divestment  of the Divestment  Business  shall  be conditional  on the Commission’s  approval.  When 
the Notifying  Party  has reached  an agreement  with a purchaser,  it shall  submit  a fully  documented 
and reasoned proposal, includ ing a copy of the final agreement(s), within one week to the 
Commission  and the Monitoring  Trustee.  The Notifying  Party  must  be able to demonstrate  to the 
Commission that the purchaser fulfils the Purchaser Criteria and that the Divestment Business is 
being sold in a manner  consistent  with the Commission's  Decision  and the Commitments.  For the 
approval,  the Commission  shall  verify  that the purchaser  fulfils  the Purchaser  Criteria  and that the 
Divestment Business is being sold in a manner consistent with the  Commitments including their 
objective to bring about a lasting structural change in the market. The Commission may approve 
the sale of the Divestment Business without one or more Assets or parts of the Personnel, or by 
substituting one or more Assets or p arts of the Personnel with one or more different assets or 
different personnel, if this does not affect the viability and competitiveness of the Divestment 
Business after the sale, taking account of the proposed  purchaser.  
 
Section E.  Trustee  
 
I. Appointment  procedure  
 
18. The Notifying Party shall appoint a Monitoring Trustee to carry out the functions specified in 
these Commitments for a Monitoring Trustee. The Notifying Party commits not to close the 
Concentration before the appointment of a Monitoring  Trustee.  
 
19. If The Notifying Party has not entered into a binding sale and purchase agreement regarding the 
Divestment Business one month before the end of the First Divestiture Period or if the 
Commission has rejected a purchaser proposed by The Notifying Party at that time or thereafter, 
The Notifying Party shall appoint a Divestiture Trustee. The appointment of the Divestiture 
Trustee shall take effect upon the commencement of the Trustee Divestiture  Period.  
 
20. The Trustee  shall:  
 
(i) at the time of appointment, be inde pendent of the Notifying Party and its Affiliated 
Undertakings;  
 
(ii) possess the necessary qualifications to carry out its mandate, for example have sufficient 
relevant experience as an investment banker or consultant or auditor;  and 
 
(iii) neither have nor become e xposed to a Conflict of  Interest.  
 
21. The Trustee shall be remunerated by the Notifying Party in a way that does not impede the 
independent  and effective  fulfilment  of its mandate.  In particular,  where  the remuneration  package 
of a Divestiture Trustee include s a success premium linked to the final sale value of the 
Divestment Business, such success premium may only be earned if the divestiture takes place 
within the Trustee Divestiture  Period.  
8  
 Proposal by the Notifying Party  
 
22. The Notifying  Party  shall  submit  to the Commission  the name  or names  of one or more  natural  or 
legal persons whom the Notifying Party proposes to appoint as the Monitoring Trustee to the 
Commission for approval. The Notifying Party shall submit the proposal sufficiently in advance 
to enab le the Commission to approve the proposed Monitoring Trustee in conjunction with the 
Decision on the Effective Date.. The proposal shall contain sufficient information for the 
Commission to verify that the person or persons proposed as Trustee fulfil the r equirements set 
out in paragra ph 20  and shall  include:  
 
(a) the full terms of the proposed mandate, which shall include all provisions necessary 
to enable the Trustee to fulfil its duties under these Commitments;  and 
 
(b) the outline of a work plan which describes how the Trustee intends to carry out its 
assigned  tasks.  
 
(c) an indication whether the proposed Trustee is to act as both Monitoring Trustee and 
Divestiture Trustee or whether different trustees are proposed for the two  function s. 
 
Approval or rejection by the Commission  
 
23. The Commission shall have the discretion to approve or reject the proposed Trustee(s) and to 
approve the proposed mandate subject to any modifications it deems necessary for the Trustee to 
fulfil its obligations . If only one name is approved, the Notifying Party shall appoint or cause to 
be appointed the person or persons concerned as Trustee, in accordance with the mandate 
approved by the Commission. If more than one name is approved, the Notifying Party shall b e 
free to choose the Trustee to be appointed from among the names approved. The Trustee shall  be 
appointed within one week of the Commission’s approval, in accordance with the mandate 
approved by the  Commission.  
New proposal by the Notifying Party  
 
24. If all the proposed Trustees are rejected, the Notifying Party shall submit the names of at least 
two more natural or legal persons within one week of being informed of the rejection, in 
accordance with paragraphs 18 and 23 of these  Commitments.  
Trustee nominated by the Commission  
 
25. If all further proposed Trustees are rejected by the Commission, the Commission shall nominate 
a Trustee, whom the Notifying Party shall appoint, or cause to be appointed, in a ccordance with 
a trustee mandate approved by the  Commission.  
 
II. Functions of the  Trustee  
 
26. The Trustee shall assume its specified duties and obligations in order to ensure compliance with 
the Commitments. The Commission may, on its own initiative or at the re quest of the Trustee or 
the Notifying Party, give any orders or instructions to the Trustee in order to ensure  compliance  
9  
 with the conditions and obligations attached to the Decision.  
 
Duties and obligations of the Monitoring Trustee  
 
27. The Monitoring Trus tee shall:  
 
(i) propose  in its first report  to the Commission  a detailed  work  plan describing  how it intends 
to monitor compliance with the obligations and conditions attached to the  Decision.  
 
(ii) oversee,  in close  co-operation  with the Hold  Separate  Manager,  the on-going  management 
of the Divestment Business with a view to ensuring its continued economic viability, 
marketability and competitiveness and monitor compliance by the Notifying Party with 
the conditions and obligations attached to the Decision. To that end the Monitoring 
Trustee  shall:  
( a ) monitor the preservation of the economic viability, marketability and competitiveness of 
the Divestment Business, and the keeping separate of the Divestment Business from the 
business retained by the Parties, in accordance  with paragraphs 8 and 9 of these 
Commitments;  
 
( b ) supervise  the management  of the Divestment  Business  as a distinct  and saleable  entity,  in 
accordance with paragraph 10 of these  Commitments;  
 
( c ) with respect to Confidential  Information:  
 
 determine all necessary measures to ensure that the Notifying Party does not after 
the Effective Date obtain any Confidential Information relating to the Divestment 
Business,  
 
 in particular  strive for the severing of the Divestment Business’ participation in a 
central information technology network to the extent possible, without 
compromising the viability of the Divestment  Business,  
 
 make sure that any Confidential Information relating to t he Divestment Business 
obtained by the Notifying Party before the Effective Date is eliminated and will 
not be used by the Notifying Party,  and 
 
 decide whether such information may be disclosed to or kept by the Notifying 
Party  as the disclosure  is reasona bly necessary  to allow  the Notifying  Party  to carry 
out the divestiture or as the disclosure is required by  law; 
 
( d ) monitor the splitting of assets and the allocation of Personnel between the Divestment 
Business and the Notifying Party or Affiliated  Undertak ings;  
 
(iii) propose to the Notifying Party such measures as the Monitoring Trustee considers necessary 
to ensure  the Notifying  Party’s  compliance  with the conditions  and obligations  attached  to the 
Decision, in particular the maintenance of the full economic vi ability, marketability or 
competitiveness  of the Divestment  Business,  the holding  separate  of the Divestment  Business 
and the non -disclosure of competitively sensitive  information;  
10  
 (iv) review and assess potential purchasers7 as well as the progress of the div estiture process and 
verify that, dependent on the stage of the divestiture  process:  
 
( a ) potential purchasers receive sufficient and correct information relating to the Divestment 
Business and the Personnel in particular by reviewing, if available, the data r oom 
documentation, the information memorandum and the due diligence process,  and 
 
( b ) potential purchasers are granted reasonable access to the  Personnel;  
 
(v) act as a contact point for any requests by third parties, in particular potential purchasers, in 
relatio n to the  Commitments;  
 
(vi) provide to the Commission, sending the Notifying Party a non -confidential copy at the same 
time,  a written  report  within  15 days after the end of every  month  that shall  cover  the operation 
and management of the Divestment Business as  well as the splitting of assets and the 
allocation of Personnel so that the Commission can assess whether the business is held in a 
manner consistent with the Commitments and the progress of the divestiture process as well 
as potential  purchasers;  
 
(vii) prompt ly report  in writing  to the Commission,  sending  the Notifying  Party  a non- confidential 
copy  at the same  time,  if it concludes  on reasonable  grounds  that the Notifying  Party  is failing 
to comply with these  Commitments;  
 
(viii) within  one week  after receipt  of the documented  proposal  referred  to in paragra ph 17 of these 
Commitments, submit to the Commission, sending The Notifying Party a non -confidential 
copy at the same time, a reasoned opinion as to the suitability and independence o f the 
proposed purchaser and the viability of the Divestment Business after the Sale and as to 
whether the Divestment Business is sold in a manner consistent with the conditions and 
obligations attached to the Decision, in particular, if relevant, whether the Sale of the 
Divestment Business without one or more Assets or not all of the Personnel affects the 
viability of the Divestment Business after the sale, taking account of the proposed  purchaser;  
 
(ix) assume the other functions assigned to the Monitoring Tru stee under the conditions and 
obligations attached to the  Decision.  
 
28. If the Monitoring  and Divestiture  Trustee  are not the same  legal  or natural  persons,  the Monitoring 
Trustee and the Divestiture Trustee shall cooperate closely with each other during and for the 
purpose  of the preparation  of the Trustee  Divestiture  Period  in order  to facilitate  each other's  tasks.  
 
Duties and obligations of the Divestiture Trustee  
 
29. Within the Trustee Divestiture Period, the Divestiture Trustee shall sell at no minimum pric e the 
Divestment Business to a purchaser, provided that the Commission has approved both the 
purchaser  and the final binding  sale and purchase  agreement  (and ancillary  agreements)  as in line 
with the Commission's Decision and the Commitments in accordance with paragraphs 16 a nd 17 
 
 
6 See footnote  1. 
11  
 of these Commitments. The Divestiture Trustee shall include in the sale and purchase agreement 
(as well as in any ancillary agreements) such terms and  conditions as it considers appropriate for 
an expedient sale in the Trustee Divestiture Period. In particular, the Divestiture Trustee may 
include in the sale and purchase agreement such customary representations and warranties and 
indemnities  as are reasonably  required  to effect  the sale. The Divestiture  Trustee  shall  protect  the 
legitimate  financial  interests  of the Notifying  Party,  subject  to the Notifying  Party’s  unconditional 
obligation to divest at no minimum price in the Trustee Divestiture  Period.  
 
30. In the Trustee Divestiture Period (or otherwise at the Commission’s request), the Divestiture 
Trustee shall provide the Commission with a comprehensive monthly report written in English 
on the progress  of the divestiture  process.  Such  reports  shall  be submitted  within  15 days after the 
end of every month with a simultaneous copy to the Monitoring Trustee and a non -confidential 
copy to the Notifying  Party.  
 
III. Duties and obligations of the  Parties  
 
31. The Notifying  Party  shall  provide  and shall  cause  its advisors  to provide  the Trustee  with all such 
co-operation, assistance and information as the Trustee may reasonably require to perform its 
tasks. To the extent permitted by law, the Trustee shall have full and complete access to any of 
the Notifying Party’s or th e Divestment Business’ books, records, documents, management or 
other personnel, facilities, sites and technical information necessary for fulfilling its duties under 
the Commitments and the Notifying Party and the Divestment Business shall provide the  Trustee 
upon request with copies of any document. The Notifying Party and the Divestment Business 
shall make available to the Trustee one or more offices on their premises and shall be available 
for meetings in order to provide the Trustee with all informatio n necessary for the performance 
of its  tasks.  
 
32. The Notifying Party shall provide the Monitoring Trustee with all managerial and administrative 
support that it may reasonably request on behalf of the management of the Divestment Business. 
This shall include  all administrative support functions relating to the Divestment Business which 
are currently carried out at headquarters level. The Notifying Party shall provide and shall cause 
its advisors to provide the Monitoring Trustee, on request, with the informat ion submitted to 
potential purchasers, in particular give the Monitoring Trustee access to the data room 
documentation and all other information granted to potential purchasers in the due diligence 
procedure. The Notifying Party shall inform the Monitoring  Trustee on possible purchasers, 
submit lists of potential purchasers at each stage of the selection process, including the offers 
made by potential purchasers at those stages, and keep the Monitoring Trustee informed of all 
developments in the implementat ion of the divestiture  process.  
 
33. The Notifying Party shall grant or procure Affiliated Undertakings to grant comprehensive 
powers  of attorney,  duly executed,  to the Divestiture  Trustee  to effect  the sale (including  ancillary 
agreements),  the Closing  and all actions  and declarations  which  the Divestiture  Trustee  considers 
necessary or appropriate to achieve the sale and the Closing, including the appointment of 
advisors to assist with the sale process. Upon request of the Divestiture Trustee, the Notifying 
Party shall cause the documents required for effecting the sale and the Closing to be duly 
executed.  
12  
 34. The Notifying Party shall indemnify the Trustee and its employees and agents (each an 
“Indemnified Party ”) and hold each Indemnified Party harmless against , and hereby agrees that 
an Indemnified Party shall have no liability to the Notifying Party for, any liabilities arising out 
of the performance  of the Trustee’s  duties  under  the Commitments,  except  to the extent  that such 
liabilities  result  from  the willf ul default,  recklessness,  gross  negligence  or bad faith of the Trustee, 
its employees, agents or  advisors.  
 
35. At the expense of the Notifying Party, the Trustee may appoint advisors (in particular for 
corporate finance or legal advice), subject to the Notify ing Party’s approval (this approval not to 
be unreasonably withheld or delayed) if the Trustee considers the appointment of such advisors 
necessary or appropriate for the performance of its duties and obligations under the mandate, 
provided that any fees a nd other expenses incurred by the Trustee are reasonable. Should the 
Notifying Party refuse to approve the advisors proposed by the Trustee the Commission may 
approve the appointment of such advisors instead, after having heard the Notifying Party. Only 
the Trustee shall be entitled to issue instructions to the advisors. Paragraph 34 of these 
Commitments shall apply mutatis mutandis . In the Trustee Divestiture Period, the Divestiture 
Trustee may use advisors who served the Not ifying Party during the Divestiture Period if the 
Divestiture Trustee considers this in the best interest of an expedient  sale. 
 
36. The Notifying Party agrees that the Commission may share Confidential Information proprietary 
to the Notifying Party with the T rustee. The Trustee shall not disclose such information and the 
principles contained in Article 17 (1) and (2) of the Merger Regulation apply mutatis  mutandis . 
 
37. The Notifying  Party  agrees  that the contact  details  of the Monitoring  Trustee  are published  on the 
website of the Commission’s Directorate -General for Competition and they shall inform 
interested third parties, in particular any potential purchasers, of the identity and the tasks of the 
Monitoring  Trustee.  
 
38. For a period of 10 years from the Effectiv e Date the Commission may request all information 
from the Parties that is reasonably necessary to monitor the effective implementation of these 
Commitments.  
 
III. Replacement, discharge and reappointment of the  Trustee  
 
39. If the Trustee  ceases  to perform  its functions  under  the Commitments  or for any other  good  cause, 
including the exposure of the Trustee to a Conflict of  Interest:  
 
(a) the Commission may, after hearing the Trustee and the Notifying Party, require the 
Notifying Party to replace the Trustee;  or 
 
(b) the Notifying Party may, with the prior approval of the Commission, replace the 
Trustee.  
 
40. If the Trustee is removed according to paragraph 39 of these Commitments, the Trustee may be 
required  to continue  in its function  until a new Trustee  is in place  to whom  the Trustee  has effected 
a full handover of all relevant information. The new Trustee shall be appointed in accordance 
with the procedure referred to in paragraphs 18-25 of these  Commitments.  
13  
 41. Unless removed according to paragraph 39 of these Commitments, the Trustee shall cease to act 
as Trustee only after the Commission has discharged it from its duties after all the Commitments 
with which the Trustee has been entrusted have been implemented. However, the Commission 
may at any time require the reappointment of the Monitoring Trustee if it subsequently appears 
that the relevant remedies might not have been fully and properly  impleme nted.  
 
Section E.  The review clause  
 
42. The Commission may extend the time periods foreseen in the Commitments in response to a 
request from the Notifying Party or, in appropriate cases, on its own initiative. Where the 
Notifying Party requests an extension o f a time period, it shall submit a reasoned request to the 
Commission no later than one month before the expiry of that period, showing good cause. This 
request shall be accompanied by a report from the Monitoring Trustee, who shall, at the same 
time send a non -confidential copy of the report to the Notifying Party. Only in exceptional 
circumstances shall the Notifying Party be entitled to request an extension within the last month 
of any  period.  
 
43. The Commission may further, in response to a reasoned reques t from the Notifying Parties 
showing good cause waive, modify or substitute, in exceptional circumstances, one or more of 
the undertakings in these Commitments. This request shall be accompanied by a report from the 
Monitoring Trustee, who shall, at the sa me time send a non -confidential copy of the report to the 
Notifying Party. The request shall not have the effect of suspending the application of the 
undertaking and, in particular, of suspending the expiry of any time period in which the 
undertaking has t o be complied  with.  
 
Section F.  Entry into force  
 
44. The Commitments shall take effect upon the date of adoption of the  Decision.  
 
 
……………………………………  
 
duly authorised for and on behalf of Harris Corporation  

 
15 
 1. 7625, 7635 and 7645 Plantation Rd., Roanoke, VA (Bui lding 1), and known as 
Roanoke County, VA Tax Parcel ID 027.06 -05-15.00 -0000.  
 
2. 7767 Lila Drive (also known as 7667 Plantation Rd.), Roanoke, VA (Building 
2), and known as Roanoke County, VA Tax Parcel ID  027.06 -05-14.01 -0000.  
 
3. 7671 Elon Drive, Roanoke, VA (5.198890 acres of land and Former Building 3) 
and known as Roanoke County, VA Tax Parcel ID  027.10 -09-03.00 -0000.  
 
Interests in Real Property  
 
1. The following ingress and egress easements related to access of Lila  Drive:  
 
o Private Road Easement described in Notes 6 and 7 of Instrument No. 2005 - 
17978;  
o Agreement made by and between John William Jamison and Mary C. 
Jamison, and O.H. Huffman and Lila E. Huffman, dated June 10, 1958, and 
recorded June 17, 1958, in Deed Book 596, Page  439; 
o Ingress and Egress Easem ent granted to Raymond B. Huffman and  Florence  
H. Peters  disclosed  by instrument  recorded  as Instrument  Number  200605141 
on April 5, 2006;  and 
o Terms and conditions of Road Maintenance Agreement recorded August 5, 
1998 in Book 1588 Page  465. 
 
 Equipment, mac hinery, operating supplies, furniture, office equipment, data processing 
equipment, parts, computer equipment, computers and computer peripherals owned and 
primarily used in the Divestment Business. This includes PC/laptops; servers on -site; 
networking equ ipment; firewall; printers/copiers; mobile devices; voice phones and 
equipment.  
 
These tangible assets are located at 7635 Plantation Road, Roanoke, Virginia 24019, US.  
 
(b) The following main intangible  assets:  
 
 All original business records located in Roanok e, Virginia and primarily used in the 
Divestment Business, other than certain excluded business  records;  
 
 Computer software owned by the Notifying Party and used primarily in the Divestment 
Business;  
 
 The rights and benefits in and to contracts entered int o by the Notifying Party and 
primarily related to the Divestment Business, including all government contracts 
(contracts entered with a governmental body or subcontracts or other arrangements to 
provide goods or services to a prime contractor, any governme ntal body or to a higher - 
tier subcontractor) and government bids (offers, quotations, bids or proposals submitted 
to a governmental  body  or any higher -tier contractor  that, if accepted  or awarded,  would 
reasonably be expected to result in a government  contract);  
 
 All rights and benefits of the credits, prepaid expenses, and deposits relating to the 
contractual obligations to be assumed by  Purchaser;  
 
 All trade accounts and notes receivable and other miscellaneous receivables of the 
sellers, whether due fro m customers, vendors, or suppliers, that arise exclusively from 
the Divestment Business prior to the closing to the extent included in final working 
capital,  but excluding  any right  to payment  or repayment  of VAT  and excluding  any 
 
  
 
16 
 carve -out accounts or in tercompany accounts receivable;  
 
 Rights under express or implied warranties from suppliers of all the transferable assets, 
to the extent  transferable  and subject  to third  party  consents  and novations  of government 
contracts;  
 
 All rights to causes of action , guarantees, choses in action, rights of recovery, rights of 
set-off of any kind,  lawsuits,  claims,  bankruptcy  claims,  or proofs  of claims  and demands 
of any nature in each case exclusively related to the transferred assets and the assumed 
liabilities;  
 
 All copyrights owned by The Notifying Party and used primarily in the Divested 
Business;  
 
 All trademarks associated with the Divestment Business (except the Harris mark), and 
the goodwill associated with such trademarks. These are listed in Confidential Ann ex 
CM 3. 
 
 Trade  secrets  owned  by The Notifying  Party  and used primarily  in the Divested  Business;  
 Certain domain names associated with the Divestment Business. These are; 
dominatethedark.com; harrisnightvision.com; nightvision.com; own -the- 
environment.com ; owntheenvironment.com;  tacticalnvg.com  and 
https:/ /www.harris.com/wha t-we-do/night -vision;  and 
 
 All of the [CONFIDENTI AL NUMBER] active patents that are primarily used in the 
Divestment Business, among which [CONFIDENTIAL NUMBER] active patents 
protect core next -generation tubes technology. These are listed in Confidential Annex 
CM 5. 
 
 In addition, Harris will grant a non -exclusive, irrevocable, perpetual, and worldwide 
license for no additional consideration to use in the Divestment Business any other IP 
assets owned by Harris as of closing of the divestment that are not transferred or 
otherwise provided to the buyer unde r the Transitional Services Agreement but that are 
used in the Divestment  Business  in the twelve  months  prior  to closing  of the divestment.9 
 
(c) The following main licences, permits and  authorisations:  
 
All permits, to the extent transferable under applicable  law, primarily used in the 
Divestment Business or for the Roanoke facility or the ownership or current operation 
thereof.  
 
(d) The following main contracts, agreements, leases, commitments and  understandings.  
 
All main contracts, agreements, leases, commitmen ts and understandings entered into 
by the Notifying Party and primarily related to the Divestment Business.  
 
(e) The following customer, credit and other  records:  
 
All current customer and supplier contracts entered into by the Notifying Party and 
primarily  r elated  to  the  Divestment  Business,  regardless  of  their  location.         All  
 
9 This provision  intends  to cover  IP assets  not transferred,  if any, that either  are shared  or otherwise  used by the 
Divestment  Business.  
 
 
  
 
17 
 accounting,  financial  and business records  of the Divestment  Business,  other  than certain 
excluded business  records.  
 
(f) The following  personnel:  
 
All personnel currently working at or assigned to the Divestment Business who accept 
an offer of employment with the Purchaser or one of its A ffiliated Undertakings.  
 
 
(g) The following Key  Personnel:  
 
All key personnel currently working at the Divestment Business, as described below:  
 
 [CONFIDENTIAL], Vice President, General  Manager;  
 [CONFIDENTIAL], Director,  Sales;  
 [CONFIDENTIAL], Senior Manager, S trategy and  Development;  
 [CONFIDENTIAL], Director, Program  Management;  
 [CONFIDENTIAL], Senior Director,  Operations;  
 [CONFIDENTIAL], Senior Manager,  IT; 
 [CONFIDENTIAL], Director,  Engineering.  
 
The Notifying Party proposes [CONFIDENTIAL] as the Hold Separate  Manager of the 
Divestment Business.  
 
(h) In addition, the Divestment Business includes the benefit, for a transitional period of 6 
to 12 months  (depending  on the service  concerned)  after the divestment  and on terms  and 
conditions equivalent to those at presen t afforded to the Divestment Business, of 
arrangements under which the Notifying Party or its affiliated undertakings supply 
certain support services to the Divestment Business, unless otherwise agreed with the 
Purchaser. These services include general bac k-office business services (payroll, travel 
and expense administration, credit and purchasing card services, and certain ad hoc 
general back -office business services), human resources services (including access to 
data files, relocation services, benefit m anagement consulting services, employee  record 
maintenance services, and system access and maintenance services), IT services 
(enterprise applications, internet and employee productivity applications, connectivity, 
collaboration, and infrastructure service s, non -recurring applications support, non - 
recurring connectivity, collaboration, and infrastructure support), and specified 
engineering  services  (R&D  services  and the delivery  of wafer  seal intellectual  property).  
 
7. Among other things, the Divestment Busi ness shall not  include:  
 
a) Corporate -wide or division -wide systems, properties and assets not exclusively used in 
the Divestment Business and systems, properties and assets managed by the corporate - 
wide information technology group of the Notifying Party an d its Affiliated 
Undertakings, including the assets that will be used by the Notifying Party to provide 
transitional support services to the Divestment  Business;  
 
b) any trademarks other than as set forth in Confidential Annex CM  3; 
 
c) any patents other than as  set forth in Confidential Annex CM  5; 
 
 
 
 
18 
 d) any computer  software,  domain  names,  trade  secrets  and other  intellectual  property  rights 
other than as set forth above and in the Form of Trade Secrets and Know -How 
Assignment ( Confidential Annex CM  7); 
 
e) any real pr operty owned, operated, leased, subleased or licensed by, or for which a right 
to use or occupy  has been  granted  to, the Notifying  Party,  other  than as mentioned  above.  
 
19 
 8. LIST  OF ANNEXES  
 
 
 
Confidential Annex  CM 1 Asset Purchase Agreement  (“APA ”) 
 
Confident ial Annex  CM 2 Form of Copyright Assignment (Exhibit B to the  APA)  
 
Confidential Annex  CM 3 Assigned Trademarks (Schedule 2.1(j) to the  APA)  
 
Confidential Annex  CM 4 Roanoke facility tear  sheet  
 
Confidential Annex  CM 5 Assigned patents (Schedule 2.1(h) to the APA)  
 
Confidential Annex  CM 6 Form of Transition Services Agreement (Exhibit G to the  APA)  
 
Confidential Annex  CM 7 Form of Trade Secrets and Know -How Assignment (Exhibit F  to 
the APA)