EUROPEAN COMMISSION C(2016) 1059 final



To the notifying party: Dear Sir/Madam, Subject:Case M.7726 - Coty/Procter & Gamble Beauty Businesses

Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004 and Article 57 of the Agreement on the European Economic Area

(1) 1.THE PARTIES 2.THE OPERATION 3.EU DIMENSION 4.MARKET DEFINITION 4.1.Introduction 4.2.Relevant product markets 4.2.1.Fragrances 4.2.2.Colour cosmetics 4.2.3.Deodorants 4.2.4.Shower gels

4.2.5.Travel retail 4.3.Relevant geographic markets 4.3.1.Fragrances and colour cosmetics 4.3.2.Deodorants 4.3.3.Shower gels 4.3.4.Travel retail 5.COMPETITIVE ASSESSMENT 5.1.Methodology for calculating market shares 5.1.1.Description of Euromonitor and scanner data 5.1.2.Assessment of market share data and adjustments 5.2.Elements common to the country/cluster assessment of fragrances and colour cosmetics 5.2.1.Description of distribution channels 5.2.2.Negotiations with retailers 5.2.3.Closeness of competition - Positioning of brands 5.2.4.Consumer brand loyalty 5.2.5.Internet sales 5.2.6.Constraint exercised by direct selling companies 5.2.7.Grey market 5.2.8.Barriers to entry or expansion – innovation 5.3.The fragrances markets

5.3.1.Introduction and affected markets 5.3.2.EEA-wide assessment 5.3.3.Country/Cluster assessment 5.4.The colour cosmetics markets 5.4.1.Introduction and affected markets 5.4.2.EEA-wide assessment 5.4.3.Country/Cluster assessment 5.5.Deodorants 5.5.1.Parties' views 5.5.2.Commission's assessment 5.5.3.Conclusion 5.6.Shower gels 5.6.1.Parties' views 5.6.2.Commission's assessment 5.6.3.Conclusion 5.7.Travel retail 5.7.1.Parties' views 5.7.2.Commission's assessment 5.7.3.Conclusion 5.8.Coordinated effects

5.8.1.Parties' views 5.8.2.Commission's assessment 5.8.3.Conclusion 5.9.Conglomerate effects 5.9.1.Parties' views 5.9.2.Commission's assessment 5.9.3.Conclusion 6.CONCLUSION

(2) (1)On 12 January 2016, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 by which the undertaking Coty Inc. (USA, "Coty") acquires within the meaning of Article 3(1)(b) of the Merger Regulation sole control of a significant part of the global hair care, colouring and styling, colour cosmetics, and fragrances businesses of The Procter & Gamble Company (USA, "the Target Businesses") by way of purchase of shares ("the Transaction"). (2)The Transaction will ultimately be effected by merging a Coty subsidiary with and into a newly formed subsidiary of The Procter and Gamble Company, which will hold the Target Businesses. (3)Coty will hereinafter be referred to as the "Notifying Party", and Coty and The Target Businesses collectively as "the Parties". 1.THE PARTIES (4)Coty is a global beauty products manufacturer. Its main products are fragrances, colour cosmetics and skin & body care products. Coty's product offerings include fragrances marketed under brands such as adidas, Calvin Klein, Chloé, Davidoff, Marc Jacobs and Playboy, and branded colour cosmetics products such as Bourjois, OPI, Rimmel and Sally Hansen. Coty is headquartered in New York and its majority shareholder is JAB Cosmetics B.V., a holding company owned by the JAB Group ("JAB"). The JAB Group is a privately held group focused on long term investments in companies with premium brands in the consumer goods sector. (5)The Procter and Gamble Company ("P&G") is a global manufacturer of consumer goods, including among others fabric and household care and beauty and health care. (6)The Target Businesses concerned by the Transaction comprise significant parts of P&G’s global beauty business unit: (a)the fragrances marketed under the brands Alexander McQueen, Bruno Banani, Escada, Gabriela Sabatini, Gucci, Hugo Boss, James Bond 007, Lacoste, Mexx and Stella McCartney; (b)the colour cosmetic business with the brands Cover Girl and Max Factor; and (c)the professional hair colouring, styling, care (shampoo, conditioner) and perming businesses as well as parts of its retail hair colouring and styling business. Brands include Wella, Clairol, SEBASTIAN, VS, Londa, NIOXIN, and […]*.

2.THE OPERATION (7)[…]. (8)As a consideration for the sale of the Target Businesses, P&G shareholders are expected to receive in total around […]% of the shares of Coty. JAB's current majority shareholding in Coty will be diluted by the transaction, but JAB will remain the single largest shareholder of Coty with expected shareholding and voting rights of approximately 36%. […] none of P&G’s shareholders or any single current minority Coty shareholder is expected to hold more than [0-5]% of the shares of Coty following the Proposed Transaction. (9)The Parties submit that following the Transaction neither JAB as the largest shareholder in Coty post-Transaction, nor the various P&G shareholders would be in a position to control Coty post-Transaction. (10)On the control situation over Coty post-Transaction, the Commission observes the following. (11)On the basis of the information provided by the Parties, it seems that JAB will not have the ability to exercise decisive influence over Coty following the Transaction. JAB will not control Coty de jure. Following the Transaction, with 36% of the shares and of the voting rights, JAB will not have a majority of the shares and votes in Coty. Furthermore, JAB will not have any special rights (through shareholder agreements or special classes of shares) to appoint directors or otherwise influence Coty’s conduct, or to veto such actions. (12)Moreover JAB would not appear to have de facto control over Coty. Given JAB’s current share of voting rights of 97%, a review of voting or attendance patterns at previous shareholders’ meetings would not be informative as to the likely impact of a 36% block of votes. Going forward, there will be a significant influx of new (P&G) shareholders, and very different relative proportions of votes between JAB and others. At this point in time, the Commission cannot predict with any degree of certainty that JAB would have a stable majority of votes at future shareholders’ meetings, as would be required for a finding of de facto control by paragraph 59 of the Commission Consolidated Jurisdictional Notice. (13)Likewise, on the basis of the Parties' submissions, it seems that Coty will not be controlled by the P&G's shareholders (individually or collectively) on a de jure or de facto basis either. (14)Firstly, it should be noted that P&G's shareholding currently is and post-Transaction will continue to be highly fragmented. Approximately 89% of P&G's shares are held by institutional investors and mutual funds, with Vanguard Group. Inc. being the largest shareholder with approximately 7% shares. Moreover, the Transaction will not affect the shareholding structure of P&G and will not give rise to any relevant structural links between competitors. (15)Following the Transaction, no single P&G shareholder will hold more than [0-5]% of Coty’s shares. Shareholdings of this level in Coty seem not to be sufficient to allow a shareholder on its own to appoint a representative to the board or a Committee. It is therefore not currently envisaged that any P&G shareholder will be represented at Coty’s board level or in any relevant committee following the Transaction. In addition, like Coty's shareholders, no shareholder of P&G will have any special rights (through shareholder agreements or special classes of shares) to appoint directors or otherwise influence Coty’s or P&G’s conduct, or to veto such actions. (16)Besides, P&G is not aware of any voting arrangement or agreements in place between P&G shareholders; [Business secrets redacted – information regarding P&G’s control]. It appears very unlikely that strong common interests currently exist and will exist post-Transaction between P&G's shareholders to control Coty. The more dispersed the shareholding is, the more remote is the likelihood that the shareholders can pool de facto their votes. (17)In light of the above and of all the available evidence, the Commission concludes that post-Transaction none of the current shareholders of Coty or of P&G will be in a position to exercise any form of decisive influence (solely or jointly) over Coty both on a de jure and on a de facto basis. (18)In light of the foregoing, the Transaction constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation. 3.EU DIMENSION (19)The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million (Coty: EUR [Business secrets redacted] million, Target Businesses: EUR [Business secrets redacted]). Each of them has a Union-wide turnover in excess of EUR 250 million (Coty: EUR [Business secrets redacted], Target Businesses: EUR [Business secrets redacted]), but they do not achieve more than two-thirds of their aggregate Union-wide turnover within one and the same Member State. (20)The Operation therefore has a Union dimension under Article 1(2) of the Merger Regulation. 4.MARKET DEFINITION 4.1.Introduction (21)As apparent from the description of the Parties, the primary overlap between Coty and the Target Businesses is in the production and sale of colour cosmetics and fragrances; the Target Businesses are also active in hair products while Coty has no presence in hair products. (22)As part of the fragrances line-up, the Target Businesses include some minor sales of deodorants, shower gel and body care products generated by the Target Businesses as ancillary products. Those products, whether sold independently or as part of gift sets lead to overlaps with Coty but do not give rise to affected markets with the exception of the male deodorants markets in Poland and the Czech Republic and Slovakia.

(23)The majority of fragrances in the EEA are produced under licence. That is the case for the Parties as well as for the rest of the industry. Fragrance licences are the result of negotiations between brand owners and fragrance manufacturers. The Parties submit that their activities in the acquisition of licences do not form part of a relevant market for competition law purposes. In any event, such a theoretical market would not be affected under EU merger control rules. 4.2.Relevant product markets 4.2.1.Fragrances 4.2.1.1.Commission's practice (24)Fragrances are liquid products used on the skin either directly or via a spray dispenser to impart a chosen scent. They are composed of an aromatic compound dissolved in a solvent, which is typically ethanol or an ethanol and water mixture. Fragrances products supplied by the Parties include perfume (parfum), eau de parfum, eau de toilette, aftershave and eau de cologne. (25)In prior Commission decisions involving fragrances, a distinction has been made between mass products and high-quality products sold under prestige brands at high prices (so-called prestige products). The Commission had found at the time that prestige beauty products typically were sold through selective distribution channels and that prices for prestige products were generally set independently from prices for mass products. Also, prestige products were sold in areas separate from mass products; customers often enjoyed extra services or special promotions. (26)A distinction between male and female fragrances has also been considered relevant in previous Commission decisions dealing with beauty/personal care products, but the Commission has left this question open. 4.2.1.2.Parties' views (27)The Parties consider that the appropriate product market definition in this case is one for all fragrances, without further subdivision by sales channel or gender. Mass/prestige (28)According to the Parties, whereas historically there was a relatively clear distinction in Europe between fragrance products sold through prestige and mass market outlets, this distinction has become increasingly blurred and no longer adequately captures the competitive interaction between fragrances brands. Female/male (29)The Parties consider that fragrance products come in variants targeted at men and women, but a distinction along gender lines is not warranted. 4.2.1.3.Commission's assessment Mass/prestige (30)In the Commission's market investigation, a majority of all respondents stated that they distinguished between mass and prestige products. (31)Moreover, the exclusive distribution channels for both prestige and mass products are still very strong despite some blurring in recent years. As to the reasons of this still strong split, one competitor argued that certain retailers distribute exclusively prestige brands because suppliers of prestige brands are not willing to sell their prestige brands to supermarkets "because in general terms they do not comply with the qualitative selection criteria that each supplier has established for the selection of their distributors". (32)Moreover, traditional prestige outlets have only to a limited extent expanded their offerings to include mass products. The same can be said of large drug stores and mass retailers which have likewise expanded their offering to include prestige products to a limited extent only. (33)As to the question of whether customers consider some mass products as alternatives to comparable products in the prestige segment, a majority of competitors was opposed. One competitor wrote: "We do not identify some mass products that could be considered as alternatives to some prestige products in the eyes of the final consumers, because the positioning of brands is fundamentally different. Media and digital campaigns in the prestige segment confer a specific image to this category of products, based on luxury, quality and scarcity. In addition, the idea of acquiring a luxury good is linked to prestige rather than consumption of a specific item. The absence of substitutability also results from the difference of distribution channels; selective distribution with specific sale staff for prestige products being very distinctive." However, for some competitors the distinction was not as clear cut and a few references were made in particular to the so-called "masstige" segment of upper mass brands in the mass distribution channels. Customers and distributors were split on the question. (34)Concerning the possibility of switching between the production of mass and prestige products, competitors said that this was relatively easy. While the production process itself does not seem to pose any problems to producers wanting to implement a switch, complications could arise from the fact that marketing and commercial strategies or processes are different (leading to different advertising processes, different distribution channels, etc.).

(35)Overall, a majority of competitors and distributors has rejected the claim that the differences between the mass and prestige markets have started to blur in recent years. A majority of customers, however, stated that there has indeed been some blurring. (36)Based on the assessment of the evidence available to it, including the results of the market investigation, the Commission considers that there are some indications that mass and prestige may still have to be considered as being distinct markets. On the one hand, producers still put high emphasis on the selective distribution channels for prestige products; moreover, marketing, price, consumer perception are all markedly different for prestige products than for mass products. On the other hand, there has been some blurring in recent years: the selective distribution model has not been watertight allowing for some mixing of mass and prestige and the "masstige" segment has progressively become more important. (37)However, for the purpose of this Decision it is not necessary to come to a conclusion on the precise definition of the product market in relation to mass and prestige products because the assessment of the Transaction would not differ under any plausible market definition. (38)In the competitive assessment, the Parties' positions will therefore be assessed on both segments as well as overall. Female/male (39)In the Commission' market investigation, the majorities of competitors and customers alike said that they distinguished between male and female fragrances. As to the reason for this differentiation, different price points, different target audience, different shelf space, different visual appearance, etc. were named. This view was not shared by distributors, a majority of which does not distinguish between male and female fragrances. (40)One competitor expressed the following opinion which seems to have been representative for a majority of competitors: "Female and male fragrances are not intended for the same consumer target (differences in formulas and marketing, among others) and are generally separated on the retailer’s shelves." By contrast, another competitor said: "Although products are consumed by different target consumers (man vs woman), they are shopped cross gender (as gifting is very important), bought one next to each other and negotiated in the same meeting with the same buyers." (41)Moreover, the majorities of competitors and customers explained that marketing campaigns are organised for male and female fragrances separately. Some competitors however argued that prestige fragrances especially evoked the same promotional "universe" for male and female fragrances of the same brand. (42)On the other hand, the majorities of all groups of respondents stated that sales of male and female fragrances with customers and distributors were handled together and not separately. There were equally majorities among all groups of respondents claiming that it was relatively easy for producers of female fragrances to switch to the production of male fragrances and vice versa. The success of a switch from male to female or female to male however highly depends on brand image and successful marketing; not all brands lend themselves for launches of both male and female variants. (43)Based on the assessment of the evidence available to it, including the results of the market investigation, the Commission considers that there are some indications that male and female fragrances should be considered separately. There are differences in target groups and marketing campaigns, presentation in shelf space and different price points. Although producers could switch easily from the production of one category to the other from a technical standpoint, these differences show that such switches may not always be feasible from a commercial standpoint. In fact, cases where this has actually happened are not common. While it is true that negotiations are held for both categories together, this may be due to the fact that many distributors and customers carry both male and female fragrances and therefore include both in their negotiations by brand. (44)However, for the purpose of this Decision it is not necessary to come to a conclusion on the precise definition of the product market in relation to female and male fragrances because the assessment of the Transaction would not differ under any plausible market definition. (45)In the competitive assessment, the Parties' positions will therefore be assessed on both segments as well as overall. 4.2.1.4.Conclusion (46)In view of the above, and considering all evidence available to the Commission, it is not necessary to decide on the exact definition of the product market for fragrances, including the potential delimitation of separate product markets for female and male, or between mass and prestige fragrances. 4.2.2.Colour cosmetics (47)The Parties define colour cosmetics as products intended to be applied to the human body for altering the appearance without affecting the body’s structure or functions, including appliance to lips (e.g. lip colour, lipstick, lip liner), face (e.g. foundations, powder make-up, blushes), eyes (e.g. mascaras, eye shadows, eye liners), nails (e.g. nail polish). 4.2.2.1.Commission's practice (48)The Commission has distinguished in its previous decisions between mass and prestige colour cosmetics. This distinction was justified by the fact that prestige cosmetics are typically sold through selective distribution channels and its products prices are generally set independently from prices for mass cosmetics. Moreover, even if some retailers belonging to the selective distribution channel do offer mass products, these are always sold in separate areas and that customers of prestige colour cosmetics often enjoy extra services or special promotions. (49)The Commission has also analysed the market for prestige colour cosmetics and has distinguished between face, lip, eye, and nail. 4.2.2.2.Parties' views

(50)According to the Parties, the appropriate product market definition in this case is one for all colour cosmetics, without further subdivision by sales channel or product type. Mass/Prestige (51)The Parties note that, just as for fragrances, the historical distinction between mass and prestige products no longer adequately captures the competitive interaction between colour cosmetics brands due to supply side substitutability, a blurring of retail channels for mass and prestige products, and low brand loyalty inducing consumers to switch between mass and prestige products. Nail, lip, face and eye products (52)The Parties consider that when looking at demand-side substitution, in relation to a potential segmentation of colour cosmetics into sub-segments such as nail, lip, face and eye products, a distinction between end consumer demand and the market level on which the Parties are active must be made. End consumers of the Parties’ or their competitors’ products will not consider nail, lip, face and eye products as interchangeable, as these serve different needs in terms of make-up usage. However, with regard to the market level on which the Parties are active, namely in the sale of colour cosmetics to retailers and distributors, the Parties consider that nail, lip, face and eye products are substitutable from a demand side perspective. The Parties assert that this view is in line with the Commission’s previous decision in L'Oreal/YSL Beauté. Distributors source the full range of make-up products per brand, and not on the basis of individual product categories. Moreover, the Parties’ direct customers expect their colour cosmetics suppliers to offer the whole range of products and negotiate with suppliers on that basis. Typically, new brands already enter the market with the full range of colour cosmetics products on offer. 4.2.2.3.Commission's assessment Mass/Prestige (53)The Commission's market investigation yielded very similar results for colour cosmetics compared to those for fragrances. Overall, it has found that most respondents in all groups queried distinguish between mass and prestige products for colour cosmetics. (54)One retailer wrote: "Similar to the fragrance market, in colour cosmetics we split the market according to mass and prestige. We are able to distinguish both mass and prestige customers and brands within the colour cosmetics market. However, customers will also buy across both mass and prestige. This means we do also look at both mass and prestige together when appropriate." (55)Furthermore, as regards the relevance of the exclusive distribution model at present, a majority of competitors said that their retailers or distributors (department stores, supermarkets, perfumeries, etc.) distribute exclusively one of the two categories, prestige products versus mass products. Among distributors, only a minority supported this statement and a majority of customers explained that they carried both, mass and prestige colour cosmetics. (56)As to the question of whether there have been some tendencies of, on the one hand, large drug stores or mass retailers to include prestige products in their portfolios and, on the other hand, prestige outlets to include mass products in their offerings, answers were equally mixed. While competitors and distributors said that this was indeed the case, customers rejected the claim. (57)Furthermore, responses by producers were split on the question of whether they could enter one of the two product categories easily if they were already producing the other category. While entering into the other product category seems relatively easy from a technical standpoint, many respondents have expressed that actual feasibility may significantly depend on branding and marketing issues as well. In fact, cases where this has actually happened would be rare. (58)Concerning the question of whether mass colour cosmetics constitute an alternative to prestige colour cosmetics and vice versa, majorities among competitors and customers said that this was indeed true while distributors were rather split on the issue. (59)Overall, majorities of competitors and distributors rejected the claim that the differences between mass and prestige colour cosmetics had become blurred in recent years. However, a majority of customers argued that there had been some blurring of boundaries. (60)Based on the evidence available to it, including the results of the market investigation, the Commission considers that there are some indications that mass and prestige colour cosmetics should be looked at separately. Despite some blurring within recent years, selective distribution still goes strong in the market, and different target groups, marketing and pricing may justify a distinction. (61)However, for the purpose of this Decision it is not necessary to come to a conclusion on the precise definition of the product market in relation to mass and prestige colour cosmetics because the assessment of the Transaction would not differ under any plausible market definition. (62)In the competitive assessment, the Parties' positions will therefore be assessed on both segments as well as overall. Nail, lip, face and eye products (63)Most competitors consider nail, lip, face and eye products separately while distributors do not. One competitor argued: "The various products of the color cosmetics category are not always subject to the same manufacturing process. For example, the manufacturing process behind a lip pencil will be different to a nail polish, in that different plants and often third party suppliers will be involved in supplying the finished or semi-finished products to the company." (64)In the same vein, the majorities among all groups of respondents stated that they analysed sales performance of colour cosmetics products, by individual category. Nevertheless, most respondents also stated that they considered in addition to the individual categories the overall product category encompassing all nail, lip, face and eye products.

(65)However, most competitors and distributors said that they did not consider these four categories separately in terms of marketing processes. A majority of customer that are selling their own retailer-branded products on the contrary do not consider these four categories separately. (66)All groups of respondents confirmed that negotiations usually take place for all four product categories together with the possible exception of the nail segment where separate negotiation may take place under certain circumstances. Indeed, there are some brands that seem to focus exclusively or predominantly on nail colour cosmetics, such as Coty's own Sally Hansen brand. (67)Moreover, the majority of respondents did not evoke the need for any further segmentation beyond the four abovementioned categories. (68)Based on the evidence available to it, including the results of the market investigation, the Commission considers that most suppliers are active in the four categories (nail, lip, face and eye) of colour cosmetics and that most customers (retailers) purchase all four categories of products, most often on the basis of the brands. Several competitors and retailers highlight in substance that one given colour cosmetics brand could not really prosper without offering the four categories. This would point to an overall market containing all product categories. Nonetheless, many market participants do consider that there is a difference between these four categories and also analyse each category on its own. (69)For the purpose of this Decision however it is not necessary to come to a conclusion on the precise definition of the product market in relation to nail, lip, face and eye products because the assessment of the Transaction would not differ under any plausible market definition. (70)In the competitive assessment, the Parties' positions will therefore be assessed in all segments as well as overall. 4.2.2.4.Conclusion (71)In view of the above, and considering all evidence available to the Commission, it is not necessary to decide on the exact definition of the product market for colour cosmetics, including the potential delimitation of separate product markets for mass and prestige products, as well as between nail, lip, face and eye products. 4.2.3.Deodorants (72)Coty and the Target Businesses both sell deodorants as ancillary products to complement their fragrances brands. 4.2.3.1.Commission's practice (73)In Unilever/Sara Lee Body Care the Commission held there to be separate markets for male and non-male deodorants, regardless of format. 4.2.3.2.Parties' views (74)The Parties believe that the markets should be defined wider than male or non-male deodorants. The Parties submit that the precise market definition can remain open for the purpose of this Form CO, since no competitive concerns arise irrespective of which possible definition of the deodorants market is assumed. 4.2.3.3.Commission's assessment (75)For the purpose of the assessment of the Transaction the exact market definition of the deodorants market can be left open because the assessment of the Transaction would not lead to any competition concerns under any plausible market definition. 4.2.3.4.Conclusion (76)In view of the above, and considering all evidence available to the Commission, it is not necessary to define the product market for deodorants. 4.2.4.Shower gels (77)Coty and the Target Businesses both sell shower gels as ancillary products to complement their fragrances and deodorants brands.

4.2.4.1.Commission's practice (78)In Unilever/Sara Lee Body Care the Commission held there to be overall product markets for bath and shower products, regardless of format. 4.2.4.2.Parties' views (79)In line with the Commission’s product market definition in Unilever / Sara Lee Body Care, the Parties believe that bath and shower products constitute a separate product market. A further distinction between bath products and shower products, and a distinction based on gender for shower products can be left open, according to the Parties, for the purpose of this case. 4.2.4.3.Commission's assessment (80)For the purpose of the assessment of the Transaction the exact market definition of the shower gels market can be left open because the assessment of the Transaction would not lead to any competition concerns under any plausible market definition. 4.2.4.4.Conclusion (81)In view of the above, and considering all evidence available to the Commission, it is not necessary to define the product market for shower gels. 4.2.5.Travel retail (82)The travel retail channel is characterised by the presence of travel retail service providers, which distribute the various and diverse products sold in the channel to retail outlets at airports, on-board aircrafts and on-board ships, amongst others. The travel retail service providers have their own stores and/or serve as distributors for third party outlets. (83)In travel retail, the Parties are mainly active in the sale of fragrances, and primarily within the prestige fragrances market. (84)Coty’s main fragrance brands in travel retail are Calvin Klein, Chloé, Davidoff, Marc Jacobs, and Roberto Cavalli. (85)The Target Businesses are mainly present in travel retail with the fragrance brands Escada, Gucci, Hugo Boss, and Lacoste. 4.2.5.1.Commission's practice (86)In its practice regarding travel retail, the Commission has assumed a separate product market for products sold in the travel retail channel. The Commission found that conditions for negotiations were different from the selective distribution channel, as well as packaging and product assortment; end consumers were found to be primarily international travellers. Many products purchased at travel retail shops are intended for gift giving, rather than for personal consumption. In another case, the Commission acknowledged the strong role of impulse purchasing behaviour, suggesting a large degree of demand side substitution between different kinds of products. 4.2.5.2.Parties' views (87)The Parties consider that the travel retail channel constitutes a separate market and beauty products belong to one market together with other products offered in travel retail, such as, e.g., alcoholic beverages. This is primarily because purchases at travel retail shops are based on impulse behaviour and are often intended for gift-giving, resulting in a large degree of demand side substitution between different product categories. Further, due to the limited floor space availability, only a limited range of products are sold in duty free and travel retail shops compared to other channels, including fragrances and cosmetics, spirits, tobacco, confectionary and high-value electrical goods. Accordingly, the Parties perceive their competitors to extend to alcohol, tobacco, and confectionary brands as competition for shelf space occurs with these product categories. 4.2.5.3.Commission's assessment (88)In the Commission's market investigation, the majorities of competitors and customers have endorsed the Commission's previous market delineation, i.e. that that fragrances sold through travel retail shops (e.g. at airports) should be distinguished from fragrances sold through other channels. Moreover, a majority of travel retailers shares the view that fragrances sold through travel retail shops should be distinguished from fragrances sold through other channels. (89)However, travel retailers are split as to whether further distinction (mass and prestige, male and female) between fragrances would be relevant. Likewise travel retailers responding to the market investigation provided mixed answers as to whether fragrances and colour cosmetics compete with other products featured in the same travel retail store (e.g. tobacco, alcoholic beverages, confectionary, etc.) for the same customers. However, a majority of competitors thought that fragrances and colour cosmetics indeed compete with such other products.

(90)The Commission considers that the market investigation has not provided conclusive results as to the exact definition of the travel retail market. (91)For the purpose of this Decision however it is not necessary to come to a conclusion on the precise definition of the travel retail market because the assessment of the Transaction would not differ under any plausible market definition. 4.2.5.4.Conclusion (92)In view of the above, and considering all evidence available to the Commission, it is not necessary to define the product market for travel retail. 4.3.Relevant geographic markets 4.3.1.Fragrances and colour cosmetics 4.3.1.1.Commission's practice (93)In prior decisions, the Commission has left open whether fragrances and colour cosmetics markets are national or EEA-wide in scope and has considered relevant to look at some country clusters (like the Baltics). 4.3.1.2.Parties' views (94)According to the Parties, the markets for colour cosmetics and fragrances could be considered to be EEA wide for the following reasons: (a)The Parties and most of their main competitors are active all across Europe. (b)The Parties’ fragrance and colour cosmetics products and those of their competitors are manufactured across the globe and distributed all over Europe. (c)The same brands are used across Europe, with minor exceptions. In addition, packaging is the same all across Europe. The language usually does not constitute a barrier to cross-border trade since most beauty products either have multi-language labels or do not require multi-language labels as their packaging or product identity is understood internationally. (d)Accordingly, on the demand side, the largest customers are multi-national retailer groups who are active across Europe. They coordinate their purchase of beauty products for all of their European activities or at least grouped by certain regions. (95)The Parties acknowledge however that the narrowest plausible geographic market definition is national. (96)Moreover, the Parties submit that the following country clusters would constitute single geographic markets: (i) Czech Republic and Slovakia, (ii) the Baltics (Estonia, Latvia, Lithuania), (iii) Scandinavia (Denmark, Sweden, Norway), and (iv) the UK and Ireland. (97)The existence of country clusters would result in particular from the following elements, which would be present at varying degrees depending on the clusters: (a)location and language (e.g. neighbouring countries, and mutually-intelligible languages), (b)spending capacity (e.g. comparable wages and living standards), (c)organisational structure and commercial strategy [Business secrets redacted],

(d)competitors (e.g. the same key competitors operate and constrain the Parties across the cluster; their brands are similar), (e)customers and product portfolio (e.g. many of the main customers are identical in both countries, and the retail structure generally is comparable across the cluster. [Business secrets redacted]. Consumer preferences and taste are also very similar), (f)pricing (e.g.[Business secrets redacted]), (g)media spill-over (e.g. there is some media spill over across the cluster). 4.3.1.3.Commission's assessment (98)The Commission's market investigation led to mixed results as to the exact geographic market sizes for fragrances and colour cosmetics. While competitors and distributors were rather split on the question of whether consumer preferences varied from one country to another, a majority of customers stated that there were country-specific differences in consumer preferences. (99)The majorities of all groups of respondents stated that wholesale prices for both colour cosmetics and fragrances were country-specific. Furthermore, retail prices for colour cosmetics and for fragrances vary significantly from one country to another according to the majority of respondents. In addition, a majority of competitors said that the structure, importance, etc. of retail or distribution channels vary significantly from a country to another in the EEA; however, distributors were split on the issue. (100)In view of the above results, the Commission considers that the organisation of distribution and purchasing along national lines (amongst other factors) suggest that these markets would be national. There are also significant variations in customers' preferences, prices and distribution channels from one country to another. (101)The Commission has also investigated whether there are country clusters as suggested by the Parties that should be considered for the assessment of the present Transaction. The Commission's market investigation does not seem to back up this claim however. (102)Majorities among all groups of respondents rejected that the following countries should be regarded as one single area (e.g. as regard marketing and promotion campaigns, customer preferences, pricing, negotiations with retailers, etc.): (i) Czech Republic and Slovakia; (ii) Estonia, Latvia and Lithuania; and (iii) Denmark, Norway and Sweden. For Ireland and the United Kingdom, results were mixed. (103)Likewise majorities among all groups of respondents stated that the conditions of competition were not sufficiently homogeneous to distinguish the following country clusters from neighbouring geographic areas: (i) Czech Republic and Slovakia; (ii) Estonia, Latvia and Lithuania; and (iii) Denmark, Norway and Sweden. For Ireland and the United Kingdom, results were again mixed. (104)Therefore, the Commission considers that the evidence available to it, including the results of the market investigation do not lend support to the conclusion that the geographic scope of the fragrance and colour cosmetics markets extends to country clusters as proposed by the Parties. As a consequence, the Transaction will be assessed on the basis of national markets. Given however that no competition concerns arise on any national markets, concerns can also be excluded on a potential country cluster level. The exact geographic market definition can therefore be left open. 4.3.1.4.Conclusion (105)In view of the above, and considering all evidence available to the Commission, the fragrance and colour cosmetics markets appear to be national. The exact geographic market delineation, including the possibility of EEA-wide markets or relevant country clusters, can be left open since no competition concerns arise on any plausible geographic market definition. 4.3.2.Deodorants 4.3.2.1.Commission's practice (106)In prior decisions, the Commission has found that there are separate national markets for male and non-male deodorants, regardless of format. 4.3.2.2.Parties' views (107)The Parties are of the view that the assessment made for colour cosmetics and fragrances is also applicable to deodorants. (108)In particular, the Parties refer the Commission to its decision in Unilever / Sara Lee Body Care, where it was held that there were separate national markets for male and non-male deodorants, regardless of formats.

4.3.2.3.Commission's assessment (109)For the purpose of the assessment of the Transaction, the exact market definition of the deodorants market can be left open because the assessment of the Transaction would not lead to any competition concerns under any plausible market definition. 4.3.2.4.Conclusion (110)In view of the above, and considering all evidence available to the Commission, it is not necessary to define the geographic market for deodorants. 4.3.3.Shower gels 4.3.3.1.Commission's practice (111)In prior decisions, the Commission has found that there are national product markets for bath and shower products, regardless of format. 4.3.3.2.Parties' views (112)The Parties are of the view that the assessment made for colour cosmetics and fragrances is also applicable to shower gels. 4.3.3.3.Commission's assessment (113)For the purpose of the assessment of the present Transaction the exact market definition of the shower gels market can be left open because the assessment of the Transaction would not lead to any competition concerns under any plausible market definition. 4.3.3.4.Conclusion (114)In view of the above, and considering all evidence available to the Commission, it is not necessary to define the geographic market for shower gels. 4.3.4.Travel retail 4.3.4.1.Commission's practice (115)In its practice regarding the travel retail market, the Commission has left open whether this market is EEA-wide or global. 4.3.4.2.Parties' views (116)The Parties’ brands available through the travel retail channel are positioned and marketed very similarly in all countries throughout the EEA, as is reflected in the internal sales organisation of Coty and the Target Businesses. Trading conditions for travel retail are largely consistent across the EEA. (117)The Parties consider the relevant geographic scope of the market should be framed as at least EEA-wide if not global. While a framework that is limited to a given airport may be appropriate for assessment of a merger between travel retailers, the Parties consider it not meaningful for a merger of businesses which operate at the same level of the supply chain as the Parties, namely as manufacturers and wholesalers. 4.3.4.3.Commission's assessment

(118)The Parties’ internal documents indicate that the Parties view the travel retail channel as at least Europe-wide in scope. Their commercial strategies, which are developed for this market, are at least Europe-wide. (119)Besides, the operational structures of the Parties’ travel retail divisions are centralised so travel retail account managers interact with travel retailers on a regional basis across Europe in relation to trading terms and conditions. The Parties have also adopted [Business secrets redacted] (120)In the Commission's market investigation, a majority of competitors held that the geographic scope of the travel retail market was worldwide; a majority of travel retail customers shared this assessment. (121)Therefore, there was clear support in the market investigation for the view that the travel retail market is at least EEA-wide in scope. 4.3.4.4.Conclusion (122)In view of the above, and considering all evidence available to the Commission, the geographic size of the travel retail market appears to be at least EEA-wide. However the exact geographic market definition (EEA-wide or worldwide) can remain open since no competition concerns arise on any plausible geographic market definition. 5.COMPETITIVE ASSESSMENT (123)The assessment of the compatibility of the Transaction with the internal market will essentially focus on non-coordinated horizontal effects in the markets for fragrances, deodorants, shower gels, and colour cosmetics where the Parties' activities overlap. (124)The Commission will first assess the Parties' proposed methodology for estimating the Parties' and their competitor's market shares (Section 5.1). (125)Then the Commission will carry out a general assessment of the unilateral horizontal effects of the Transaction that cut across the different EEA countries (Section 5.2) before undertaking a more detailed analysis on a country per country basis in the overall fragrance (Section 5.3) and colour cosmetics markets (Section 5.4), and in each of the plausible sub-segmentations thereof. The Commission will further assess the effects of the Transaction on the deodorants (Section 5.5), shower gels (Section 5.6), and travel retail (Section 5.7) markets. (126)Finally, the Commission will also assess coordinated effects (Section 5.8) as well as conglomerate effects (Section 5.9) that might be brought about by the Transaction. 5.1.Methodology for calculating market shares 5.1.1.Description of Euromonitor and scanner data (127)In prior Decisions about consumer goods, the Commission distinguished the upstream level, where retailers source their products, from a downstream level where the products are sold to the final customer. The same approach is followed in the present case for the beauty products markets and is extended to include distributors on the upstream level. (128)All fragrance and colour cosmetics manufacturers sell their products to retailers which, in turn, sell these products to final consumers. Therefore, there are two stages in the supply chain: the upstream level, where fragrance and colour cosmetics are supplied to retailers and the downstream level where retailers supply to end-consumers. Coty and the Target Businesses are only active on the production and supply upstream (to retailers). The Parties use distributors to supply to retailers in a limited number of countries where they do not deal directly via their own subsidiaries. (129)The Parties have calculated market shares on the basis of retail shares as they consider that this approach provides the best available proxy for wholesale shares, which is the actual level at which the Parties are active. The Commission has used such data in previous decisions in the sector and considers that retail-level market shares are also appropriate for the assessment of the Transaction. (130)The Parties have submitted two different sets of data to analyse market shares: Euromonitor data, which provides sales data on the basis of publicly available sources and sector experts, and retail scanner data (from Nielsen, NPD, and IRI depending on data availability in each country), which is generally based on electronic point of sales data from retailers of each purchase scanned. (131)The Commission has previously used data compiled by Nielsen, IRI, and Euromonitor when assessing transactions in the markets for fragrances and colour cosmetics. (132)The main differences between the two methodologies for gathering market shares are the following: (a)geographic coverage: Euromonitor is available for colour cosmetics and fragrances in 26 of the EEA countries, for both mass and prestige segments. Retail scanner data is available for […]* countries for mass channel colour cosmetics, 14 countries for mass channel fragrances and 5 countries for prestige channel fragrances (and […]**). The Parties argue that Euromonitor covers the broadest range of countries and is the most comprehensive data set available across the EEA in terms of its coverage of products and sales channels;

(b)channel coverage: direct sales, online sales and several retail outlets (including all own-brand stores) are not covered by retail scanner data, while they are covered by the Euromonitor; and (c)brand coverage: retail scanner data is more exact in the items that it measures but only for the retailers that it covers. This is because each purchase is scanned and is published, thus allowing the monitoring of the performance of brands and items of inventory and Stock Keeping Units ("SKUs"). It is also published in shorter intervals, if compared to Euromonitor. However, the Parties submit that its coverage of retailer brands and brands exclusively distributed by one retailer would be limited in several countries such as the UK or the Netherlands. (133)The Parties explain that they use Euromonitor data when they need an overall picture of the market, such as for their strategic planning where the inadequacies of scanner data would not allow a correct assessment of the markets and where the tracking of launches or the monitoring of the performance of a single item of inventory is not required. (134)The Parties explain that they use retail scanner data to track the sales of their individual products and brands in the different markets as this provides the most timely possibility of controlling their go-to-market strategy. As it is based on the electronic point of sales data from retailers of each purchase scanned and is published in brief intervals of one or two weeks up to two months it allows the monitoring and analysis of the performance of brands and single SKUs. (135)The Parties acknowledge that Euromonitor data may not be as exact as scanner data and can be slow to react to new trends and market movements as these may not immediately be visible to market observers on whose assessment Euromonitor bases its views. This would be true especially regarding smaller brands where Euromonitor generally may be less accurate. The Parties nevertheless consider Euromonitor data to be best suited for the purpose at hand, which is to use data for an assessment of general market shares rather than tracking of single products or SKUs. (136)Numerous competitors contacted during the market investigation questionnaire use both Euromonitor and Scanner data. They also tend to confirm that scanner data may be more accurate than Euromonitor for certain markets while Euromonitor would provide a broader picture of markets. As an example, one competitor mentions that "Euromonitor is a good source for the size evaluation of the market and global information on the different actors (weakness: they don't provide volume datas) Scanner data can give a precise information at a reference level." (137)The Commission is of the view that the assessment of market shares and market characteristics is best served by the Euromonitor data. (138)Therefore, the Commission considers that the identification and initial analysis of affected markets should be undertaken on the basis of Euromonitor data as this is the only data set which provides a homogeneous and comprehensive approach for most countries. (139)Besides, the Commission notes the following regarding scanner and Euromonitor data: (a)For prestige fragrances, scanner data is not generally available in the various countries. In the only instances when such data is available for affected markets (in Germany, Spain, and the UK), they are globally consistent with Euromonitor data (with less than four percentage points difference when taking into account the rationalisations of differences which will be described below in Section 5.1.2). (b)Regarding mass products, significant discrepancies in market shares may appear in some countries between Euromonitor data and scanner data. The Parties have tried to reconcile the market share figures. Scanner data would often be based on a limited coverage of mass product sales: in several countries, there are multiple markets where these sales would represent less than half of the sales reported by Euromonitor. (140)In light of this general description of the available data, the Commission conducted an in-depth assessment of the methodologies used by the Parties to provide market share data, as described in the following sections. 5.1.2.Assessment of market share data and adjustments 5.1.2.1.Rationalisation of differences between Euromonitor and scanner data (141)As previously described, raw Euromonitor and scanner data present certain discrepancies in a number of markets. To take into account the main differences between the two types of datasets, the Parties provided explanations that would allow several adjustments of the scanner data. These adjustments, as applied to scanner data, are essentially: (i) categorisation of prestige brands initially miscategorised as mass brands in the scanner data, (ii) inclusion of direct sales (not registered in scanner data); and (iii) inclusion of sales of certain retailers (e.g. private labels) not covered by scanner data. These adjustments were provided for both fragrances and colour cosmetics. (142)The Commission has conducted an in-depth assessment of the methodology used by the Parties for the rationalisation of the differences between Euromonitor and scanner data. In light of the differences between the two datasets as regards channel coverage, the Commission considers all three abovementioned adjustments to be appropriate. (143)The Commission considers that following these adjustments, the explanations provided lead to rationalisations of the differences between scanner data (Nielsen, IRI and NPD) and Euromonitor to a significant degree for both fragrances and colour cosmetics. In the affected markets, either market shares under Euromonitor shares are superior to the ones in scanner data, or the difference between Euromonitor and the adjusted scanner data becomes small (less than three percentage points). In both cases, using Euromonitor data for the purpose of the competitive assessment is appropriate. The only remaining markets that are affected (according to either Euromonitor or scanner data) and where the Commission is of the view that the Parties' adjustments of scanner data did not suffice to account for the difference between the datasets are: (a)Germany (mass, male, and mass male fragrances), (b)the Netherlands (mass, mass female, and mass male fragrances), and (c)the Czech Republic (mass eye and mass face colour cosmetics).

(144)In these cases, the Commission will take into account both Euromonitor and scanner data, and further details are provided in the respective country sections in the competitive assessment. 5.1.2.2.Transferred or discontinued brands (145)The Parties also submitted a list of all brands of the Parties that are covered by the Euromonitor market share data but that were or are to be discontinued. [Business secrets redacted regarding discontinuation of brand(s)]. (146)For each of the brands, Table 1 below indicates (a) if it was discontinued by the day of notification of the Transaction, and (b) if it is to be discontinued between the day of notification and the end of the current Coty's financial year. For each of the brand discontinuations, the geographic markets concerned and the date of discontinuation for these markets are also provided. Table 1: Discontinuations of the Parties' brands Coty Discontinued before notification Discontinued after notification Markets concerned Date of discontinuation Aspen X Worldwide before 2013 Balenciaga X Cyprus end of 2015 Beckham (female lines) X Worldwide 12/31/2014 [Business secrets] Chipie X Worldwide before 2013 Chopard X Europe 12/31/2015 Club Med X Worldwide before 2013 Cobalt X Worldwide before 2013 Coty X Worldwide before 2013 Gwen Stefani X Worldwide before 2013 [Business secrets] Indome X Worldwide before 2013 Isa Bella X Worldwide before 2013 Isabella Rossellini X Worldwide before 2013 Jovan X The Netherlands February 2014 Karl Lagerfeld X Worldwide before 2013 Kate Moss X Worldwide 6/30/2013 Kenneth Cole X Worldwide before 2013 Kylie Minogue X Worldwide 6/30/2014 Masumi X Worldwide before 2013 Miss Sixty X Worldwide before 2013 Miss Sporty X The Netherlands before 2013 Pierre Cardin X Worldwide 6/30/2015 Puzzle X Worldwide before 2013 Route 66 X Worldwide July 2014 Sarah Jessica Parker X Worldwide 6/30/2013 The Healing Garden X Worldwide before 2013 Tonino Lamborghini X Worldwide 11/28/2015 Vanilla X Europe before 2013 (147)The Parties propose to take the discontinuations into account and to adjust the Parties' Euromonitor market shares accordingly. (148)First, throughout this Decision, the market shares of the Parties and their competitors are presented by taking into account the brands which have been licensed to the Parties or to their competitors by the date of notification. For example, the market shares of Puma (transferred to L'Oréal in 2014) or of Naomi Campbell (transferred to Designer Parfums in 2014), are already attributed to their respective acquirers in the 2014 market shares used in the present decision. (149)The Commission's analysis of internal documents of the Parties shows that none of the discontinuations are related to the Proposed Transaction. The decisions to discontinue the listed brands have been made prior to and independently of the Transaction and most brands are discontinued because the licence is expiring and / or have shown decreasing sales figures within the last years. (150)The Commission therefore considers that such adjustments are acceptable as they account for changes in the economic reality of the undertakings concerned and reflect the brand portfolio within the scope of the Transaction at the time of notification. (151)Second, some discontinued brands (in particular by Coty which has decided not to renew licenses of these brands when they expired) are not included in the Parties' market shares, while some of these discontinued brands may have had very high market shares (e.g. in the Netherlands, Ireland, Poland, the United Kingdom, and Czech Republic). (152)The Parties consider that in each of these cases, the sales of the discontinued brands would be captured by rival brands to the Parties and that as such, the allocation of discontinued brands outside the Parties’ combined share is appropriate. First, this is because some of these brands were or are likely to be sold to competitors. Second, with respect to brands which will not be taken over by rivals, the Parties are unlikely to recapture a material proportion of their sales, as these are by and large [Business secret – description of brand(s)]. Instead, the sales of these brands are likely to be captured by rivals that will continue to supply rival [Business secret – description of brands with similar brand positioning] going forward. (153)Notwithstanding the above, the Parties have considered a scenario where the sales of the brands likely to cease supply after discontinuation would be captured by the Parties in proportion to the Parties’ combined market share in each of the relevant markets. The Commission has verified that even in such a scenario, the Parties’ combined shares would only increase marginally (by at most [0-5]% points in almost all relevant markets). Therefore, this would not materially alter the conclusion of the competitive assessment. (154)Overall, in light of the above, the Commission considers the two aforementioned adjustments to the scope of brands taken into account when calculating the market shares to be acceptable in light of the dynamic assessment it conducts. In particular, these adjustments are taken into account in order to identify the true resources being concentrated and to better reflect the economic situation of the undertakings concerned. (155)Finally, the Parties indicated that two fragrance brands will be discontinued after the day of notification. While throughout this Decision market shares of the Parties and their competitors are presented by taking into account the brands which have been licensed to the Parties or to their competitors by the date of notification only, the impact of these further discontinuations in the affected markets is very limited; indeed the change in market share would not materially affect the assessment of the Transaction. 5.1.2.3.Company-level and brand-level Euromonitor market share data (156)With regard to Euromonitor data, the Parties are using shares reported at company level for both fragrances and colour cosmetics, and they argue that this may lead to an overestimate of the Parties’ combined share in some countries. In particular, the Parties note that the shares of supply reported by Euromonitor at the company level are higher for a number of suppliers and in a number of countries than the shares of supply resulting from the aggregation of the brand level shares for those suppliers in those countries. (157)These differences seem to relate to sales that Euromonitor allocates to specific suppliers, but is not able to allocate to specific brands. (158)The Parties provide explanations that would indicate that, in the markets for fragrances in Slovakia, Slovenia, and Germany, adding P&G company level's increment to the sales of the Target Businesses would overestimate the Parties’ combined share. The Parties have not undertaken a similarly detailed investigation of this issue for other countries/markets but propose to adjust the Euromonitor company-level shares in certain markets in Slovakia, Slovenia, and Germany to account for the overestimate of the Parties' combined market share.

(159)The Commission has performed an in-depth, brand by brand analysis of the corresponding raw Euromonitor data in each relevant market and verified that the adjustments proposed by the Parties are in line with the composition of the brand portfolio which is within the scope of the Transaction at the day of notification. Further details are provided in the relevant country sections. As such, the Commission considers that the aforementioned adjustments of the Euromonitor market share data for fragrances in Germany, Slovakia, and Slovenia reflect the economic situation of the undertakings concerned and are acceptable in light of the dynamic competitive assessment the Commission conducts. 5.1.2.4.Other data sources (160)In Cyprus and Malta, the Parties have also provided other sources for estimating market shares. Indeed, in these two countries there is no data available from the usual data providers. To give an estimate of market shares, for fragrances, in both Cyprus and Malta, the Parties' distributors therefore provided sell-out data of the largest beauty retailers in the respective markets, which would account for 58% and 65% of the total retail market in Cyprus and Malta respectively. Besides sell-out data, the Parties also provided best estimates from these distributors regarding the mass fragrances markets in Cyprus and Malta. For colour cosmetics, for both Cyprus and Malta, the Parties' distributors provided their best estimates which are calculated based on sales data provided by retailers, which maintain computerised records and import statistics. (161)Moreover, no individual market share data for the mass and prestige fragrances categories is available for Malta and Cyprus. However, this would not have any bearing on the assessment of the Transaction as described in the country-specific assessment. (162)For colour cosmetics, no specific market share data by plausible colour cosmetics markets like eye, face, lip or nail is available for Slovenia, Malta, and Croatia, while only Nielsen data is available for these plausible markets in Estonia. The Parties have provided their best estimates of their market shares in these plausible-markets, e.g. in Croatia, the Parties have provided market shares for the mass eye, mass lip, mass face, mass nail sub-markets based on sell-out data received through their Croatian distributor Orbico. (163)Given the fragmented nature of all the above markets and the lack of datasets from the usual third party providers, the Commission considers these data sources to be the best available proxies to estimate the Parties' market shares for the purpose of its competitive assessment. (164) As regards deodorants and shower gels, the Parties argue that Nielsen scanner data offers better data quality at segment level. The Parties submit that certain affected markets arise from Euromonitor data only as a result of poor data quality for those particular markets, which would not be reflective of actual market conditions. Nevertheless, the Parties provide market shares for deodorants and for shower gels on the basis of both Euromonitor and Nielsen scanner data. 5.1.2.5.Conclusion (165)In view of the above, and considering all evidence available to the Commission, for both fragrances and colour cosmetics, Euromonitor data is the best available proxy to estimate market shares in most affected markets. (166)Furthermore, in the aforementioned markets where the Commission considers the Parties' adjustments of scanner data to be insufficient to account for the difference between scanner data and Euromonitor, or in markets where Euromonitor data is not available, the Commission will also consider other data sources in the competitive assessment for the relevant markets. These data sources and the respective markets are: (a)Scanner data for countries where the differences between scanner and Euromonitor data were not rationalised: Germany (mass, male, and mass male fragrances), the Netherlands (mass, mass female, and mass male fragrances) and Czech Republic (eye and face colour cosmetics); (b)Scanner data for the eye, lip, face and nail colour cosmetics markets of the colour cosmetics market and the mass colour cosmetics market for Estonia, Latvia and Lithuania, as Euromonitor data on a country basis is not available. (c)Distributor and retailer data: Croatia, Cyprus, Malta, Slovenia. (167)Finally, for deodorants and shower gels, the Commission has previously used detailed product level scanner data by Nielsen when assessing transactions in the sector. Due to the fact that sales of the Parties’ deodorants and shower gel products through selective distribution channels are minimal, the Commission considers that scanner data would be an appropriate proxy for estimating market shares of the Parties and their competitors in most markets. Nevertheless, the Commission will also consider Euromonitor data in its competitive assessment for these products. 5.2.Elements common to the country/cluster assessment of fragrances and colour cosmetics (168)The Commission has considered several elements, which are relevant for the assessment of the effects of the Transaction across countries and clusters. These elements include the distribution channels used by the Parties and their competitors (Section 5.2.1), how the Parties negotiate commercial terms with retailers (Section 5.2.2), the positioning of brands (Section 5.2.3), brand loyalty (Section 5.2.4), internet sales (Section 5.2.5), direct sales (Section 5.2.6), the grey market (Section 5.2.7), and the barriers to entry or expansion as well as the role of innovation (Section 5.2.8). 5.2.1.Description of distribution channels (169)In general, the Parties distribute their fragrance (including deodorants and bath and shower gels sold as ancillary products) and colour cosmetics products through an array of different channels, including brick-and-mortar stores such as drugstores, perfumeries and department stores and through online channels. The importance of each of these channels varies from country to country and between fragrances and colour cosmetics. (170)The following Tables provide an overview of the respective proportions of various sales channels across the EEA in most countries where affected markets arise: Table 2a: Fragrances retail sales channel split across the EEA

Fragrances In % Store based Perfumeries Drugstores Depart. stores Grocery retailers Non-store Direct selling Home shopping Internet retailing Austria 89.4 37.0 30.0 14.5 7.8 10.6 3.2 1.5 5.9 Belgium 92.6 61.6 3.1 16.7 9.1 7.4 3.4 1.0 3.0 Croatia 72.7 39.2 8.9 5.3 19.1 27.3 17.2 - 10.1 Czech Republic 23.3 14.7 4.7 1.1 2.2 76.7 31.5 0.5 44.7 Denmark 86.7 9.9 50.9 11.6 12.3 13.4 1.5 2.1 9.8 Estonia 74.6 33.0 5.9 13.8 20.3 25.4 11.2 - 14.2 Finland 80.4 26.7 - 23.2 27.2 19.6 6.6 - 13.0 Germany 91.9 53.2 23.6 5.7 8.4 8.1 3.4 0.8 3.9 Hungary 63.0 28.5 30.6 0.1 3.5 37.0 25.4 - 11.6 Ireland 92.1 29.6 6.5 30.8 7.6 7.9 4.0 - 3.9 Latvia 60.5 30.0 4.1 9.4 13.5 39.5 27.5 - 12.0 Lithuania 74.5 50.3 4.1 - 15.1 25.5 15.0 - 10.5 Netherlands 97.2 51.8 17.5 20.6 4.3 2.8 0.4 0.2 2.1 Norway 75.7 71.6 - - - 24.3 5.5 0.2 18.6 Poland 58.5 24.0 27.2 - 5.5 41.5 25.1 1.3 15.1 Portugal 89.4 49.3 2.6 13.9 20.7 10.6 9.1 0.1 1.4 Romania 61.8 19.2 0.1 - 29.4 38.2 36.1 - 2.2 Slovakia 69.3 38.4 18.3 0.5 12.1 30.7 22.4 0.5 7.8 Slovenia 91.2 30.4 57.7 1.0 2.1 8.8 6.1 - 2.7 Sweden 85.1 30.1 - 43.0 9.6 14.9 7.8 - 7.1 UK 74.5 23.1 8.1 20.1 5.1 25.5 3.4 2.7 19.5 Source: Form CO Table 2b: Colour cosmetics retail sales channel split across the EEA Colour Cosmetics In % Store based Perfumeries Drugstores Depart. stores Grocery retailers Non-store Direct selling Home shopping Internet retailers Croatia 75.8 25.0 22.9 1.2 26.7 24.2 12.9 0.2 11.1 Czech Republic 52.3 15.5 23.0 2.4 10.9 47.7 25.8 0.5 21.4 Denmark 85.7 6.9 55.8 7.2 13.5 14.3 2.8 2.0 9.5 Estonia 77.6 15.8 13.1 9.6 37.2 22.4 19.9 - 2.5 Finland 83.8 28.0 - 11.7 38.4 16.2 7.2 1.0 8.0 France 84.4 28.1 5.3 8.6 39.6 15.6 3.7 3.0 8.9 Germany 84.8 27.6 39.3 7.6 6.6 15.2 4.7 3.0 7.6 Hungary 63.4 24.5 27.5 0.1 10.0 36.6 21.8 - 14.8 Ireland 88.4 26.3 5.1 17.6 25.1 11.6 7.5 - 4.1 Italy 84.5 45.2 15.1 1.2 17.1 15.5 9.2 0.2 6.1 Lithuania 76.9 33.7 8.5 - 23.6 23.1 22.9 - 0.2 Netherlands 95.7 27.6 33.5 27.8 0.8 4.3 1.2 1.0 2.2 Norway 71.4 54.0 - - 7.8 28.6 6.0 0.2 22.5 Poland 63.2 14.7 33.4 - 9.0 36.8 23.6 0.8 12.4 Slovakia 79.1 35.6 28.6 0.3 14.5 20.9 20.3 0.1 0.4 Slovenia 79.9 57.9 20.9 0.1 - 20.1 15.8 - 4.3 Spain 87.0 49.0 0.4 17.1 12.4 13.0 6.2 - 6.8 Sweden 81.5 35.7 0.0 32.2 9.0 18.5 9.1 0.4 8.9 UK 80.4 8.4 40.8 13.3 11.5 19.6 8.3 1.8 9.5 Source: Form CO (171)Many of the Parties' competitors mainly focus on these channels, but an increasing number of competitors distribute their products directly to end consumers, either in their own stores or via direct selling (e.g. Avon, Oriflame, Mary Kay and Amway). (172)A large part of the market is characterised by the prevalence of selective distribution arrangements. Generally, all prestige fragrance and prestige colour cosmetics brands are intended to be sold through selective distribution. (173)The Parties serve directly some countries in the EEA with own country organisations whereas they use independent wholesale distributors for others. This is comparable to many competitors. (174)The Parties do not deal directly via their own subsidiaries but instead use independent distributors in the following affected countries: (a)Coty: [Confidential – list of countries in which operations are performed solely by distributors] . (b)The Target Businesses : –Fragrances: [Confidential – list of countries in which operations are performed solely by distributors] –Colour cosmetics: [Confidential – list of countries in which operations are performed solely by distributors]. 5.2.2.Negotiations with retailers (175)In this Section, the Commission assesses how negotiations between manufacturers and retailers take place and to what extent the Transaction will have an impact on the supplier-customer relationship. The Commission's analysis focuses on retailers to assess the impact on final consumers and, in particular, on the scope of negotiations, on the main drivers of commercial decisions, on the scope of rebate/bonus/discount/incentive systems, to establish whether the merged entity would acquire or strengthen a dominant position, especially given its enlarged portfolio of brands within the same product category. 5.2.2.1.Parties' views (176)According to the distribution organization in a given country, each of the Parties enters into distribution agreements with wholesale distributors or with retailers. The Parties usually have a separate contract for selective distribution for the prestige segment. With large international retailers, the Parties usually enter into framework agreements setting out the general purchase conditions, which are further negotiated and detailed at local level by national/regional agreements. [Confidential information redacted regarding structure of fragrances vs colour cosmetic contracts] The structure, content and scope of the Parties' distribution agreements can vary significantly depending on the type of customer and the level at which it operates. (177)Generally, distribution agreements entered into between the Parties and independent wholesale distributors or with retailers cover multiple brands within the same product category (e.g. all colour cosmetics brands) or within the same product-type category (e.g. all mass fragrances) or a selection thereof. They generally last from [Confidential – information redacted regarding typical term of contracts].

(178)The Parties claim that negotiations with their customers take place essentially at brand level and that the width of the brand portfolio does not play a major role in negotiations with customers. To support this claim they submit that (i) negotiations are based on brand-specific presentations, [Business secrets redacted – information regarding negotiations with customers]; (ii) negotiations with retailers for the supplier's existing brand selection, for the listing of new product launches and promotion slots allocation are essentially driven by the overall expected profitability of a given brand. [Business secrets redacted – information regarding negotiations with customers] Therefore, terms and conditions can vary significantly between the different brands. (179)[Confidential – information regarding contractual terms] However, [Confidential – information regarding contractual terms]. (180)In addition, retailers' decisions on de-listing are also linked to the performance of a given brand. This implies that a strong performance in one of the Parties' brands does not prevent the regular de-listing of the Parties' non-performing brands. (181)Besides, having a wide portfolio of brands would not per se give a supplier any significant advantage when negotiating with its customers, given that negotiations are brand-driven and retailers' major decisions (such as listing, allocation of promotional slots and de-listing) are taken on the basis of a performance of a given brand. The Transaction would not change this dynamic and would not strengthen the Parties' position vis-à-vis their retailers, and as a consequence vis-à-vis their competitors. (182)Finally, the Parties argue that in negotiations they mainly face large international retailers that have the power to constrain them. The retail sector is highly concentrated across the EEA, with the largest part of the Parties’ sales generated with a small number of retailers in each country. According to the Parties, the fragrances and colour cosmetics markets are highly fragmented and retailers can choose from a wide array of alternative products. Retailers would be thus in a position to constrain suppliers in three different ways: (i) as gatekeepers, controlling the access to shelf-space, promotional slots and setting retail prices; (ii) as customers of the Parties with power to delist; (iii) as well as competitors with their own private label brands. 5.2.2.2.Commission's assessment (183)Respondents to the market investigation indicated that negotiations and distribution agreements between suppliers and retailers comprise a wide range of arrangements, whose scope may significantly vary depending on the country, the size and geographic footprint of the customers as well as the portfolio of the supplier. (184)[Confidential – information redacted regarding dealings with customer]. (185)In addition, major commercial decisions relating to listing, de-listing and allocation of promotional slots are driven by the performance of a given brand, taking into account key performance indicators, such as the brand's sales in value and in quantity, the stock rotation and profitability. Retailers do not in general discriminate suppliers according to the mere size of their brand portfolios and stated that a large portfolio comprising brands across different product markets (beauty markets or other) would not give a supplier an advantage when negotiating with retailers. (186)This implies that a strong performance in one of the Parties' brands does not per se encourage the listing or prevent the de-listing of the Parties' less-performing brands. As a result, a strategy of leveraging the size of the Parties' range of brands within the same market or within the same product-type category (e.g. fragrances or mass fragrances) or the performance of individual brands to avoid de-listing or to encourage listing of lower performing brands would be unlikely. (187)Likewise, the key precondition for the allocation of a promotional slot is that the retailer expects the promotion of a certain brand to generate higher sales. A majority of respondents to the market investigation indicated that if more than one supplier requested a promotional slot for a similar product on the same period of the year, the retailer decides to give higher priority (for example, in terms of timing and quality of the space allocation) to the brand with the higher expected profitability. In that context, it seems that every supplier is given the opportunity to "buy" a promotional slot for the fragrance or colour cosmetics brand it wishes to promote, irrespective of its market share and the size of its total fragrances offering. (188)An important element in the negotiations between suppliers and retailers is the rebate/bonus/discount/incentive systems, which play a key role in the commercial strategy of retailers, since they may help retailers to obtain a competitive advantage over their competitors. Through these rebate/bonus/discount/incentive systems the merged entity could in theory offer e.g. better terms to retailers in exchange for foreclosing its competitors. For that reason, it is important to assess the scope and structure of the Parties' rebate/bonus/discount/incentive systems to establish whether the Transaction would lead to the creation or strengthening of a dominant position, for example because of the merged entity's enlarged portfolio of brands. (189)Suppliers use an array of rebate/bonus/discounts to incentivise retailers to list, promote and market their products. [Confidential – information redacted regarding dealings with customer]. (190)A majority of competitors indicated that rebate/bonus/discount/incentive schemes are generally based on the performance of a given brand. Some retailers mentioned that rebates and discounts may refer to all brands within the same product market or may apply across brands of a supplier. However, a majority of retailers referred also that the rebate/bonus/discount/incentive systems that they negotiate with each of the Parties is similar to that offered by other suppliers of fragrances and colour cosmetics and that in negotiations the Parties are treated similarly to their competitors. Finally, a majority of retailers do not expect any material changes in their rebate/bonus/discount/incentive schemes as a result of the Transaction. (191)In relation to the rebate/bonus/discount/incentive systems of the Parties, the Commission notes the following. (192)The [Confidential information redacted regarding contractual terms] of the Parties' rebate/bonus/discount/incentive systems are [Confidential information redacted regarding contractual terms] and in any event they are [Confidential information redacted regarding contractual terms]. (193)The rebates applying to sales across multiple brands relate essentially to savings in costs that are common to the supply of the different brands, [Confidential information redacted regarding costs taken into account], but are not contingent on portfolio size, nor are they conditional upon a multi-brand purchase. In particular, [Confidential information redacted regarding specific rebates agreed with retailers]. Such incentives represent a [Confidential] of the overall rebates and discounts offered by each of the Parties. (194)Coty's [Confidential information redacted regarding specific rebates] various brands within the same market. However, the fact that prior to the Transaction Coty already markets a large number of fragrances without bundling them seems to indicate that there would be no "portfolio effects" amongst different brands within the same market. Also, during the market investigation retailers were not concerned about the effects of the Transaction on their relationship with the merged entity. (195)Further, the change in the portfolio size of the Parties resulting from the Transaction does not appear sufficiently important to suggest that the merged entity, or the retailers would modify their commercial strategies. (196)Finally, the Parties face some strong rivals (see e.g. Section 5.2.3) which have comparable (if not larger) brand portfolios, comprising successful brands which are comparable to the highest selling brands of the Parties. Therefore, as regards the size and the composition of their portfolio of brands and their relationship with their customers, the Parties do not seem to be in a unique position compared to that of their competitors in both the fragrances and colour cosmetics markets.

(197)As regards the countervailing buyer power of retailers, respondents to the market investigation indicated that retailers have the power to decide on the allocation of shelf-space. Retailers undertake regularly category review (at least twice a year for both fragrances and colour cosmetics) and that they have the power to delist brands from their shelves. However, the market investigation has not provided clear elements as to what extent retailers have made use of de-listing as a bargaining tool to off-set any possible anti-competitive strategy of the Parties. In any event, for the purposes of this case, it is not necessary to conclude on the existence and the degree of countervailing buyer power of retailers, since, as explained in this section, the Transaction does not seem to strengthen the Parties' negotiating position vis-à-vis retailers to a significant extent. 5.2.2.3.Conclusion (198)In view of the above, and considering all evidence available to the Commission the Transaction does not have a significant impact on the way the Parties negotiate with their retailers in both fragrances and the colour cosmetics markets in the EEA. 5.2.3.Closeness of competition - Positioning of brands (199)Fragrances and colour cosmetics are differentiated products. Within a relevant market, products may be differentiated such that some products are closer substitutes than others. The higher the degree of substitutability between the merging firms' products, the more likely it is that the merging firms will raise prices significantly. For example, a merger between two producers offering products which a substantial number of customers regard as their first and second choices could generate a significant price increase. Thus, the fact that rivalry between the merging firms has been an important source of competition on the market may be a central factor in the analysis. Besides, it is less likely that a merger will significantly impede effective competition, in particular through the creation or strengthening of a dominant position, when there is a high degree of substitutability between the products of the merging firms and those supplied by rival producers. 5.2.3.1.Overview of competitors and brands (200)The competitive landscape in the fragrances markets is characterised by a high number of strong global players, which are active across the EEA and in most of the national affected markets. (201)In the colour cosmetics markets, the competitive landscape is characterised by a lower number of strong global players than in fragrances, although some of them are present in both categories with significant market positions. (202)L'Oreal is the largest beauty group in the world and is present in 130 countries, with around 30 brands. The L’Oréal Group’s product range includes hair care, skin care, sun protection, colour cosmetics, perfume and hair colour. In fragrances, it holds well-known prestige (Lancôme, Giorgio Armani, Cacharel, Diesel, Yves Saint Laurent) as well as mass brands (Puma, Vanderbilt, Daniel Hechter, The Body Shop). The L’Oréal Group’s mass colour cosmetics brands are L’Oréal Paris, Maybelline New York, and essie (specialised in nail products). L’Oréal has also recently acquired NYX. The Parties consider that L’Oréal is the strongest player across Europe in both the colour cosmetics market and the mass segment. (203)Chanel is a privately held fashion and cosmetics company headquartered in France. Its products include clothes, fragrances, eyewear, skincare, makeup, handbags and jewellery. Chanel is one of the few prestige fashion houses which commercialises fragrance products (under the Chanel brand) itself rather than licensing its brand to another company. (204)LVMH is a luxury goods conglomerate headquartered in France. Its products include wines and spirits, fashion goods, perfumes and colour cosmetics as well as watches and jewellery. It is vertically integrated through its beauty retailer chain Sephora. Its main prestige fragrances brands include Guerlain, Dior, Givenchy and Kenzo. (205)Puig is a family-managed fashion and fragrances business headquartered in Spain. The brand range for fragrances considered "prestige" currently include Prada, Valentino Parfums, Comme des Garçons, Nina Ricci and Paco Rabanne. As of 1 January 2016, Puig has taken inhouse the Jean Paul Gaultier fragrance from Shiseido. Mass brands include Antonio Banderas and David Bustamante. (206)US-based Elizabeth Arden’s fragrance brands, which have traditionally been considered "prestige" brands, include Elizabeth Arden and Juicy Couture. In addition, the company is active in the mass fragrances with celebrity brands Britney Spears or Taylor Swift. (207)Estée Lauder is a cosmetics and fragrances company also headquartered in the US. The company’s fragrances traditionally considered "prestige" include AERIN beauty, Aramis, Donna Karan Cosmetics, Estée Lauder, Michael Kors, Tom Ford and Tommy Hilfiger. (208)Avon is a manufacturer of beauty and related products and one of the world's largest direct sellers. The company’s fragrance brands include its Avon brand fragrances and Fergie Outspoken. Avon markets its mass colour cosmetics products under the Avon brand. (209)Oriflame is a manufacturer and distributor of beauty and related products, present in more than 60 countries through its direct sales distribution network (a sales force of approximately 3.6 million independent consultants, who together create annual sales exceeding EUR 1.5 billion). In some countries, the company offers over 100 different fragrance products, including brands such as Architect, Amber Elixir and Eclat. Oriflame’s mid-priced colour cosmetics are geared towards different target groups. (210)Cosnova is a fast-growing cosmetics company that reported a worldwide turnover of above EUR 300 Million in 2015. More than 90% of the Cosnova business relates to colour cosmetics, the rest being skin care and fragrance. In colour cosmetics, the company is active exclusively in the mass segment with two low-price brands essence and Catrice. The primary markets of both brands are Germany but they are also developing throughout the EEA. Cosnova sells its products through drugstores, food retailers, perfumeries, department stores and fashion retailers. (211)Kiko Milano is an Italian brand established in 1997. Kiko, whose business in mainly focused on retail sales of cosmetics, make up and, skin care, distributes exclusively through its own boutiques and online sales. KIKO’s turnover of around EUR 250 million is mainly (90%) based on retail sale on 650 monobrand stores in 14 countries, with over 1000 products. (212)Unilever is one of the world’s largest companies engaged in the production and marketing of fast-moving consumer goods in the nutrition, hygiene and personal care product categories. The company’s fragrance brands, all sold in the mass channel, include Axe, Lynx, Ego, Fabergé and Brut. (213)Mäurer & Wirtz is a manufacturer of fragrances and body care products with a main presence in Germany, the Benelux countries, Austria and Switzerland, The company’s mass fragrance brands include TNT, S’Olivern, Betty Barclay, Otto Kern and Tabac.

(214)Inter Parfums is a fragrance and beauty manufacturer, marketer and distributor, which is headquartered in New York. The European operations primarily represent the sale of prestige brand name fragrances such as Montblanc, Lanvin, Jimmy Choo, Rochas, Karl Lagerfeld and Paul Smith. (215)Revlon is a global company active in colour cosmetics, hair colour, beauty tools. Revlon’s products are distributed in over 100 countries. Revlon’s global colour cosmetics brands include Revlon, Almay, SinfulColors, and Pure Ice. In 2014, Revlon had net sales of approximately USD 2 billion. (216)Although the strength and the relevance of these brands may vary across countries, it appears that a number of these players and brands are present in the countries covered by the Commission's market investigation. (217)Moreover, some more local competitors are also strong in some affected countries (as described below, e.g. in the country-specific sections). (218)At company level, considering e.g. global, commercial and financial performance, the Parties do not appear to focus their benchmarking on each other. (219)For instance, Coty in its "industry benchmarking" assesses performance of [Business secrets – a number of large international players are named] regarding growth rates of net sales and Coty Beauty position vs competition. Regarding market shares of colour cosmetics, Coty appears to benchmark at least [Business secrets – a number of large international players are named as well as private labels]. For fragrances, Coty appears to benchmark at least [Business secrets – a number of large international players are named]. Coty's ambition appears to be to [Business secret regarding commercial strategy]. (220)Similarly, in its high level "Business strategy review" of [Confidential], relating to prestige products, P&G only mentions Coty as a possible purchaser for some assets to be divested (among a list of other possible purchasers), while benchmarking its performances against key players ([Business secrets – a number of large international players are named]. In other documents benchmarking financial performances, P&G lists [Business secrets – a number of large international players are named]. 5.2.3.2. Parties' views (221)First, the Parties note that their respective brands and products are generally subject to similar market positioning across Member States. Whilst consumer purchasing patterns and motivations may to some extent differ between relevant countries, the Parties aim to make their brands occupy a distinct but consistent position relative to competing brands in the mind of the consumers. This is undertaken through coherent marketing communication and price-points. 5.2.3.2.1.Fragrances (222)The Parties argue that competition in the fragrance market takes place at the level of brands and sub-brands. In line with general industry standards, closeness of competition in the overall fragrances market is analysed by taking into account the key drivers of competition such as brand image (which often corresponds with the image of the respective licensor), marketing and, to some extent, price. (223)Brand message and the image that consumers wish to identify with (e.g. seductive, cool, energetic, feminine, classic, etc.) are decisive factors of their purchasing decision. Fragrances suppliers create and promote a brand image and ensure that the image is kept in consumers’ minds. The price positioning of certain brands is often a part of their overall brand positioning (luxury fashion brands are generally positioned in a higher price range than an edgy sports brand targeting younger users) (224)With respect to brand image, the Parties claim that they are not particularly close competitors neither in relation to their entire product range nor in relation to their individual brands. Generally the Parties' brands are positioned at different levels within the fragrances segment in terms of overall "prestige" status and brand message, target group and pricing. (225)For example, whereas Calvin Klein and Davidoff, Coty’s [Confidential information redacted regarding brand performance] [Business secret] brands (accounting for [Confidential information redacted regarding brand performance] of Coty’s fragrances turnover) are positioned at the entry level of prestige fragrances, the Target Businesses' brands Lacoste and Hugo Boss have a clear focus on the mid- and luxury range of the segment, whereas Gucci is considered to be a more prestigious, haute couture brand. Although Coty also has some presence in the "ultra-prestige" end of the market with its brands Marc Jacobs and Chloé, these account for [Confidential information redacted regarding brand performance]. (226)Moreover, the Parties consider that there are always a number of third party products competing at least as closely as the Parties’ products compete with each other. For example, within the ultra-prestige range there are several competing third party brands. Apart from Coty's Chloé and Marc Jacobs and the Target Businesses’Gucci, Dior (LVMH), Chanel, YSL and Armani (the latter two both L’Oréal) are also present in this segment. (227)Usually in their internal documents, the Parties benchmark their own brands with other brands that have a similar or close brand image. In Table 3 below, the Parties have summarised, for their brands, the other brands that are typically used as comparisons in their internal documents. Table 3: Typical benchmarks used for the Parties’ fragrance brands ("P" is for prestige brands, "M" for mass brands) Brands Typically benchmarked against Further benchmarks Coty Adidas (M) [Business secrets – benchmarking information removed] Balenciaga (P) [Business secrets – benchmarking information removed] [Business secrets – benchmarking information removed] Bottega Veneta (P) [Business secrets – benchmarking information removed] [Business secrets – benchmarking information removed] Beyoncé (M) [Business secrets – benchmarking information removed] Calvin Klein (P) [Business secrets – benchmarking information removed] [Business secrets – benchmarking information removed] Cerruti (P) [Business secrets – benchmarking information removed] [Business secrets – benchmarking information removed] Chloé (P) [Business secrets – benchmarking information removed] [Business secrets – benchmarking information removed] Chopard (P) [Business secrets – benchmarking information removed] [Business secrets – benchmarking information removed] David Beckham (M) [Business secrets – benchmarking information removed] Davidoff (P) [Business secrets – benchmarking information removed] [Business secrets – benchmarking information removed] Guess (M) [Business secrets – benchmarking information removed] [Business secrets – benchmarking information removed] Jil Sander (P) [Business secrets – benchmarking information removed] [Business secrets – benchmarking information removed] Joop! (P) [Business secrets – benchmarking information removed] [Business secrets – benchmarking information removed] Katy Perry (M) [Business secrets – benchmarking information removed] [Business secrets – benchmarking information removed] Marc Jacobs (P) [Business secrets – benchmarking information removed] [Business secrets – benchmarking information removed] MiuMiu (P) [Business secrets – benchmarking information removed] Playboy (M) [Business secrets – benchmarking information removed] [Business secrets – benchmarking information removed] Roberto Cavalli (P) [Business secrets – benchmarking information removed] [Business secrets – benchmarking information removed] Vera Wang (P) [Business secrets – benchmarking information removed] [Business secrets – benchmarking information removed] Target Businesses Bruno Banani (M) [Business secrets – benchmarking information removed] [Business secrets – benchmarking information removed] Escada (P) [Business secrets – benchmarking information removed] [Business secrets – benchmarking information removed] Gabriela Sabatini (M) [Business secrets – benchmarking information removed] Gucci (P) [Business secrets – benchmarking information removed] [Business secrets – benchmarking information removed] Hugo Boss (P) [Business secrets – benchmarking information removed] [Business secrets – benchmarking information removed] James Bond (M) [Business secrets – benchmarking information removed] Lacoste (P) [Business secrets – benchmarking information removed] [Business secrets – benchmarking information removed] Mexx (M) [Business secrets – benchmarking information removed] Stella McCartney (P) [Business secrets – benchmarking information removed] (228)As regards pricing, pricing to end consumers and the recommended sales prices (RSP) are taken into account in relation to prestige fragrances as a reflection of the overall brand positioning and the consumer group targeted by a particular brand or line. For example, the positioning of a prestige fragrances brand in the "ultra-prestige" range within the segment often corresponds with resale prices of EUR 55 and more for a 30 ml bottle, whereas fragrances aiming at more "entry level" consumers will be sold at prices between approximately EUR 20 – EUR 40 for a 30ml bottle.

(229)The Parties argue that for the most part, their brands are not the closest to each other on the pricing spectrum, and even where some brands are closely positioned, there are plenty of other brands priced at around the same level. This can be documented in price ladders, which show the average retail pricing and segment shares of brands in national or country cluster markets. Price ladders will be assessed where relevant in Section 5.3.3. In the markets where price ladders are assessed, the Commission has verified that the coverage of the underlying scanner data in terms of number of items sold is substantial for each brand. (230)Finally, the Parties submi