(.PICT.) |EUROPEAN COMMISSION |

Brussels , 11.08.2010

SG-Greffe(2010) 12358

C(2010) 5699

PUBLIC VERSION In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and other confidential information. The omissions are shown thus […]. Where possible the information omitted has been replaced by ranges of figures or a general description.

MERGER PROCEDURE ARTICLE 6(1)(b) DECISION IN CONJUNCTION WITH ARTICLE 6(2)

To the notifying party:

Dear Sir/Madam,

Subject: Case No COMP/M.5855 - DB/ Arriva Notification of 22.06.2010 pursuant to Article 4 of Council Regulation No 139/2004 [1]

1. On 22 June 2010, the European Commission received a notification of a proposed concentration pursuant to Article 4 of the EU Merger Regulation by which Deutsche Bahn AG ("DB", Germany) will acquire sole control over Arriva plc ("Arriva", United Kingdom) by public bid.

I. THE PARTIES

2. Deutsche Bahn AG ("DB") is the state-owned German holding company of a multinational mobility and logistics group. DB's core business is the operation of railway infrastructure and the provision of passenger and freight services in Germany. DB also operates bus services in Germany. Furthermore, DB operates passenger rail services in the United Kingdom ("UK"), Poland and Sweden, as well as bus services in Denmark and the Czech Republic. It also provides (through DB Schenker rail) rail freight services in many European countries and (through DB Schenker Logistics) freight forwarding services on a worldwide level.

3. Arriva Plc ("Arriva") provides transport services including bus, train, commuter coach, water bus and airport related transport services, as well as bus and coach distribution. The UK is the company's largest country of operation. Arriva provides passenger railway services in Denmark, Germany, the Netherlands, Poland and Sweden and the UK and bus services in the Czech Republic, Denmark, Germany, Hungary, Italy, the Netherlands, Portugal, Slovakia, Spain, Sweden and the UK.

II. THE OPERATION AND THE CONCENTRATION

4. The proposed concentration concerns the acquisition of sole control by DB of Arriva, through a public offer made under the UK City Code on Takeovers and Mergers.

5. On 22 April 2010, DB announced its intention to make a recommended cash offer for the entire issued and to be issued share capital of Arriva ("the offer"). The total cash consideration for the offer is approximately GBP 1 585 million (approximately EUR 1 824 million). It is intended that the offer will be implemented by way of a Scheme of Arrangement under Part 26 of the United Kingdom Companies Act 2006 ("the scheme").

6. On 18 May 2010, the scheme document, containing the offer, was sent to Arriva's shareholders. On 17 June 2010 Arriva's shareholders approved the scheme in a court meeting. Court hearings to sanction the scheme and confirm the reduction in capital will be held on 24 and 26 August 2010, respectively. Subject to approval by the court and the satisfaction or waiver of other conditions precedent, it is expected that the scheme will become effective on 27 August 2010, at which point DB will acquire all of Arriva's share capital and sole control of Arriva.

7. The notified operation therefore constitutes a concentration within the meaning of Article 3(1)(b) of the EU Merger Regulation.

IV. EU DIMENSION

8. The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million [2] (DB: EUR 29 335 million, Arriva: EUR 3 595 million). Each of them has a EU-wide turnover in excess of EUR 250 million (DB: EUR […], Arriva EUR 3 595 million). DB achieves more than two thirds ([…]%) of its turnover in Germany. Arriva does not achieve more than two-thirds of its aggregate EU-wide turnover within one Member State. The notified operation therefore has an EU dimension.

V. COMPETITIVE ASSESSMENT

9. DB and Arriva are both active in a number of Member States in the provision of passenger bus and/or passenger rail services. In addition, in Germany DB and Arriva both own and operate railway infrastructure and stations as well as freight transhipment terminals, and provide freight transportation services.

10. The notified concentration will result in the following affected markets: Denmark (bus sector), Sweden (rail sector) and UK (rail sector, but also limited overlaps between DB's rail services and Arriva's bus services in some areas), and Germany (rail and bus sector).

11. DB and Arriva also both have operations in the Czech Republic and Poland, but according to the parties this does not give rise to affected markets. DB and Arriva both operate bus services in the Czech market but DB's market presence is negligible. The market shares of DB and Arriva on the basis of revenues are estimated at below [0-5]% and [0-5]% respectively in the Czech bus market. DB and Arriva are active in the Polish regional passenger rail market at present only through Arriva PCC, a joint venture between DB Schenker Rail Polska and Arriva Polska Sp. zo.o. The market share of Arriva PCC is estimated at [0-5]% on the basis of train km in 2009.

12. The analysis below is presented by Member State due to the particularities of the different Member States that have an impact on the product and geographic market definition as well as on the competitive assessment.

A. Denmark

13. In Denmark the parties' activities overlap on the bus market. Arriva operates bus services across the country and is by far the leading bus operator. DB, since its takeover of the Danish company Pan Bus in 2007, is a smaller competitor and provides bus services only in certain regions.

14. There are no overlaps between the parties' rail activities since DB does not provide rail services in Denmark [3] . Arriva operates one route, the Midt-Vestjylland passenger rail route in central and western Jutland. This route accounts for roughly 5% [4] of the contract volume of all Danish rail contracts, about 95 % [5] of the total contract volume and of the passenger numbers is still operated by Dankse Statsbaner ("DSB").

15. As to rail/bus overlaps, there is only one point-to-point connection (or 'flow') where Arriva's rail service overlaps with DB's bus service. This concerns the connection between the towns of Viborg and Skive in Jutland.

16. However, there is, if at all, very limited competition for passengers between these rail and bus services: First, bus contracts are awarded by the regional transport authorities on a gross cost basis which means that the bus operator cannot set fares or frequencies and that the revenues earned from passengers are retained by the contracting authorities. Bus companies therefore cannot attract rail customers by charging lower fares or increase service frequencies. [6] Secondly, the rail and bus services between Viborg and Skive have very different frequencies and journey duration: whereas Arriva's train runs an hourly service, DB/Pan Bus only operates a very limited number of journeys [7] . Moreover the bus trip takes almost 50% more of the time than the rail service. In the light of these circumstances, a significant impediment of effective competition appears to be excluded and this one rail-bus overlap is, therefore, not further discussed

1. The regulatory framework for the provision of bus services

17. Danish bus service contracts are awarded by regional trafikselskaber (public transport authorities, "PTA"s) through public tendering or negotiated bidding procedures. There are very few exceptions to this rule: First, the bus services in three municipalities (Arhus, Odense and Bornholm) are directly operated by the responsible transport authority and not tendered. Secondly, very specific bus services such as school buses and transport services for handicapped passengers can be - and some are - directly awarded by municipalities [8]

18. The PTAs are responsible for the provision of public transport services in their respective territories (see figure A.1. below) and are owned by the regions and municipalities in that territory. There are 6 PTAs in Denmark, namely the

1. - Nordjyllands Trafikselskab (NT) in northern Jutland;

2. - Midttrafik in central Jutland;

3. - Sydtrafik in southern Jutland;

4. - Fynbus on the island of Fyn (Funen);

5. - Movia on the island of Zealand (including Copenhagen) and

6. - Bornholm Amt Trafikselskab – on the island of Bornholm.

Figure A.1.

Territorial responsibility of the Danish PTAs

19. Due to the principle rule of bidding procedures, almost all bus services in Denmark are operated by private companies which are granted the right to operate specific routes or services [9] for fixed periods on a "gross cost" basis. This means that the bus service provider is remunerated by the PTA with the PTA receiving all fare revenues and assuming the commercial risk. The PTAs set the fares and the frequencies of the service as well as certain quality standards, for instance, the age of the buses. The bus operator is, therefore, not in a position to change these parameters. PTAs may award bonuses, for instance, to reward an increase in the number of passengers [10] as well penalties, for instance, for non-cleaned buses, unreliability or bad behaviour of personnel.

2. The relevant product market

20. The parties submit that in view of the situation in Denmark the (bidding) market for the award of bus service contracts constitutes the relevant product market. Due to the award of gross contracts bus operators cannot compete for passengers. Competition, therefore, takes place at the level of bidding for contracts. The parties further submit that there is no reason to distinguish between local (urban), regional (interurban) or long-distance (Expressbus/X-lines) bus services [11] because the contracts are all awarded by the PTAs under the same regulatory framework.

21. In previous decisions, concerning public transport (including bus services) in other countries, the Commission identified specific markets for the award of contracts to operate public bus services [12] . Also in the present case the market investigation confirmed that the relevant product market is the one for the award of bus contracts.

22. Regarding overlapping routes of the two parties, the Commission found, on the basis of the market investigation, that the gross cost basis of Danish bus service contracts does not enable the bus operators to compete for passengers in case of overlapping routes or flows. [13] The fare revenues are retained by the PTAs that also set the fares, the frequencies/timetables and the number of bus hours to be operated. Consequently, bus operators compete for contracts, not for passengers. This has also been confirmed by the PTAs.

23. Regarding potential differences between local (urban), regional (inter-urban) and/or long-distance (Expressbus/X-lines) bus services, the Commission found only few distinct features that relate to technical specifications, for instance, of the different bus types required for long-distance or urban services. Furthermore, very small bus companies, i.e. operators with less than 20 buses, usually do not bid for all contracts in large cities because these may require higher frequencies and, therefore, more buses. However, this only concerns a small fraction of contracts. Moreover, operators with less than 20 buses account for less than 10% of the Danish bus market. [14]

24. The regulatory framework for the award of urban, inter-urban and X-lines, however, is the same and the PTAs follow the same rules and procedures for all three types of bus services. Therefore, the Commission does not consider the definition of separate urban, inter-urban and X-line markets to be appropriate for the assessment of Danish bus services. This has also been confirmed by the PTAs.

25. In three municipalities (Århus in central Jutland, Odense on the island of Fyn and the island of Bornholm) the responsible PTA – or a subsidiary or department of it - operates the bus services itself so that the respective contracts are currently not tendered. Whether or not the contracts and the operators form part of the relevant product market as defined above can, however, be left open, since the competitive assessment does not change, whether or not these operators are included.

3. The relevant geographic market

26. The parties consider that the relevant geographic market for the award of bus contracts is national in scope since the PTAs conduct their tendering procedures under the same regulatory framework.

27. The Commission in a previous decision left open the exact definition of the geographic scope of the bidding market for certain urban transport including bus - contracts in France [15] , but considered national markets with respect to other (urban and inter-urban) transport contracts.. The fact that the same regulatory framework applies to all PTAs across Denmark argues in favour of a national market. Bus operators can – and often do - apply for contracts in all PTA territories but still focus on particular regions. Thus, Arriva is particularly strong in the Movia territory of Zealand and the Fynbus territory on the island of Fyn where DB/Pan Bus is not present at all. However, the exact definition of the geographic scope can be left open for the purpose of this decision, since the transaction does not raise serious doubts under any alternative market definition.

4. Competitive assessment

28. Due to the takeover of several Danish bus companies [16] Arriva is today by far the leading bus service provider in Denmark. Arriva is active in all PTA territories with the exception of Bornholm. Since DB's takeover of Pan Bus in 2007, DB has been providing bus services in Pan Bus' traditional focus area of Jutland. DB/Pan Bus is the 6th largest bus service provider in Denmark. [17] It has been active only in northern, central and southern Jutland but not on the island of Fyn and the densely populated island of Zealand including Copenhagen.

4.1. The national market for the award of bus contracts

29. According to the statistics of Trafikstyrelsen Arriva has a market share of about [30-40]% (based on the number of buses) to [40-50]% (based on bus hours and contract volume) in a national market. The next largest competitors are City Trafic (Keolis group) with a market share of [5-10]%, Thykjaer with a share of [5-10]% and Tide achieving [5-10]%. DB/Pan Bus has a market share of [0-5]%. Of almost similar size are Netbus (which belongs to the Norwegian State railways and acquired former Partnerbus), Nobina (formerly named Concordia), Dito Bus and Fjord Bus.

30. The national market shares in terms of number of buses, bus hours and contract volume of Arriva, DB/Pan Bus and their major competitors are provided below:

Table A.1. [18]

National market shares, planning period 2009/2010

(...PICT...)

31. As explained above, there are municipalities - the city of Århus, the city of Odense and the island of Bornholm - where the bus contracts are not tendered because the services are provided by the PTA/municipality itself. An exclusion of these bus operators from the market volume would, however, hardly affect the market share analysis. If the largest of these operators, the Busselskabet Århus Sporveje, is excluded from the market volume, for instance, in bus hours, Arriva's share would go from [40-50]% to [40-50]%, DB's from [0-5]% to [0-5]%.

32. The market shares in terms of currently operated buses, bus hours or the current contract volume reflect the position of the competitors based on contract awards of the past. The Commission, however, has also analysed the very recent awards of contracts and the currently open tender procedures. This investigation shows that Arriva is not only the market leader on the basis of won contracts in the past but also with respect to the actual bidding behaviour. Thus, Arriva is not only a very active bidder (it has participated in more than [90-100]% of the tenders) [19] , but also successful as to the final award of [30-40]% of the tenders.

33. Although DB/Pan Bus is - with about € […] turnover in 2009 - rather small in terms of market shares, it nevertheless belongs to the larger operators with more than […] buses in operation ([…] in 2009 according to the parties). This means that DB/Pan Bus – in contrast to the small bus companies with less than […] or […] buses - is able to bid for larger contracts. Thus, in 2007 DB/Pan Bus got for the first time two contracts in southern Jutland (territory of the PTA Sydtrafik) including a contract for the city of Esbjerg previously run by Arriva. In the Sydtrafik area DB/Pan Bus is now considered an active bidder with a [10-20]% market share in terms of bus hours.

34. On the other hand DB/Pan Bus has lost almost all of its contracts in northern Jutland and, furthermore, according to the Commission's information, has not succeeded in any tender procedure over the last 5 years in this territory. DB/Pan Bus also confined itself to the not so densely populated Jutland and did not try to extent its activities to the islands of Fyn or Zealand. The majority of the PTAs, therefore, do not consider DB/Pan Bus to be a very active bidder. Some of the PTAs expected DB to be more active following the takeover of Pan Bus in 2007 and, for instance, to bid for more contracts in territories where they had already operations or to start bidding in new territories, but this has not happened.

35. Other competitors have been more successful in winning contracts, entering new territories or the Danish market altogether. For instance, Tide only entered the Danish bus market in 2008 by starting to bid in tender procedures in southern Jutland and on the island of Fyn, i.e. without acquiring an existing bus company. Since then it has been an active bidder and already achieved a position among the largest competitors of Arriva. Nobina also only entered in 2008 and also on its own, i.e. without acquiring an existing operator. Since then it won contracts in the densely populated area of Zealand as well as in central Jutland. City Trafic (Keolis) is already an operator established for a long time (entering 1989). Other competitors that entered the market more recently have done so by taking over existing operators such as Netbus acquiring Partnerbus in 2006.

36. According to the PTAs there is a sufficient number of alternative bidders in the market and the market is competitive. They have not raised objections to the transaction [20] and confirmed that they have normally several bidders, in particular for larger urban areas where often most of the eight large bus companies bid. This view is also shared by the Danish transport authority and the competition authority.

37. Scale and regional knowledge appear to be (among the) main entry barriers named by most of the competitors. Consequently, it is difficult for small operators to enter the market. There are hardly any barriers, however, for larger companies. The recent entry examples mentioned above demonstrate that the Danish bus market is very open due to the regulatory framework that promotes competition through tender procedures in all PTA territories.

38. […] [21] .

39. For all the reasons explained above, and despite the high market shares of Arriva, the concentration does not raise serious doubts on the Danish bus market as a whole. Pan Bus is a relatively small player and remained so following its acquisition by DB in 2007. Despite some new contracts awarded to it within the last three years, particularly in southern Jutland, DB/Pan Bus is not considered a very active bidder and the transaction has also not raised concerns with the majority of competitors submitting contributions in the context of the market investigation.

4.2. The regional markets for the award of bus contracts

40. If the analysis is carried out on the basis of regional markets, the market shares – in terms of bus hours - of the main competitors in the PTA territories are as follows:

Table A.2 [22]

(...PICT...)

Regional market shares (in terms of bus hours), planning period 2009/2010

41. As Table A.2 shows, Arriva has also a strong presence in the 5 main PTAs, where its market shares range from [10-20]% to [50-60]%. It is particularly strong on the islands of Fyn (Fynbus territory) and Zealand (Movia territory). In both regions, however, DB is not present and has never bid for a contract. The closest competitors of Arriva are Tide (Fyn and Sydtrafic) and City Trafik/Keolis ( Movia and NT).

42. DB/Pan Bus is only active in northern, central and southern Jutland where it achieves market shares between [5-20]%. The combined market shares of the parties are [30-40]% in southern Jutland (territory of Sydtrafik), [20-30]% in central Jutland (Midttrafik territory) and [40-50]% in northern Jutland (NT territory), where according to the Commission's market investigation DB/Pan Bus' market share ([0-5]%) has, however, further, diminished due to recent losses of contracts. In northern Jutland DB/Pan Bus is not considered to be an active bidder anymore, and it has not got a new contract recently. The closest competitors are Thykjær and City Trafik/Keolis. However, in northern Jutland smaller competitors such as Todbjerg, Hjørring or Tylstrup are still in a relatively strong position, and two of these smaller operators won more tenders during the last 5 years than the larger companies Thykjær and City Trafik/Keolis according to the Commission's information.

43. In southern Jutland, Thykjaer and Tide – the latter with almost the same share as the combined one of Arriva and DB Pan Bus ([30-40]%) - are the closest competitors of the parties. Southern Jutland is the region where DB/Pan Bus has recently been considered to be an active bidder. However, Thykjaer, Tide, City Trafik and a small operator are also among the most successful bidders of the last 5 years.

44. In central Jutland the parties achieve a combined share of [20-30]%. Due to the size of the city of Ǻrhus and its particular bus transport situation described already above, the Busselkabet Ǻrhus Sporveje is in second position with almost the same share, and Thykjaer in third with [10-20]%. If the PTA operator Busselkabet Ǻrhus is excluded from the market volume because these contracts are not tendered, this exclusion has only a limited effect: Arriva's share in bus hours would go from [20-30]% to [30-40]% and DB's from [5-10]% to [10-20]% with the second largest operator, Thykjaer, having about [10-20]%. As in northern Jutland, also in central Jutland the small operators have still a rather strong position. According to the Commission's information, four of these smaller operators feature among the 6 most successful bidders (in terms of won tenders) - together with Arriva and Thykjaer - over the last 5 years. DB/Pan Bus is not among these most successful bidders. It also is not among the most active bidders in that territory.

45. Due to the fact that the same regulatory framework and high degree of liberalisation is given throughout Denmark, the entry situation is the same as described above for the national market analysis. This is illustrated by some examples: Tide entered in 2008 by bidding for contracts in southern Jutland and on the island of Fyn. Nobina also entered in 2008 and has since then won several contracts in the Movia territory of Zealand.

46. Consequently, the concentration also does not significantly impede effective competition on the basis of regional bus markets.

4.3. Conclusion

47. On the basis of the above the Commission concludes that the proposed transaction does not raise serious doubts on the bus markets in Denmark.

B. Sweden

1. The relevant product market

48. The parties argue that the relevant product market should be the market for franchises for passenger rail services operated under contract to the relevant public transport authority without a distinction between regional and inter-regional services.

49. In Keolis/AB Storstockholm Lokaltraffik/Busslink, the Commission identified the existence of a specific market for public transport contracted by tender in Sweden, which could have included both regional and inter-regional bus and rail services [23] . The Commission, however, ultimately left the market definition open. In Schoyen/Goldman Sachs/Swebus the Commission has assessed railway services and bus services separately [24] .

50. For the purpose of the present decision the precise product market definition can be left open because under any alternative market definition the transaction would not raise serious doubts in Sweden.

2. The relevant geographic market

51. In Keolis/AB Storstockholm Lokaltraffik/Busslink the Commission noted that the parties' assumption of a Swedish market for public transport services is in line with previous decisions. However, it was also suggested by some competitors to the parties in that case that the market for public transport services contracted by tender could be regional or local. Eventually, this issue was left open [25] .

52. For the purpose of the present decision the precise geographic market definition can be left open because under any alternative market definition the transaction would not raise serious doubts in Sweden.

3. Competitive assessment

53. The Swedish county public transport authorities (PTAs) are responsible for the provision of public transport services (i.e. regional trains, buses, metro and ferries) in their respective areas. There are 21 PTAs, one for each county. Regional passenger rail services are generally tendered by the PTAs.

54. DB is currently not operating any rail services but is starting to operate two regional rail franchises in the course of 2010 (one in a joint venture). Arriva operates two regional rail franchises in Sweden. The franchises are operated under contract to the regional public transport authorities following competitive tendering. DB and Arriva do not operate rail franchises in the same regions. Arriva also operates local and regional bus services.

55. The parties' activities only overlap under a national market definition. The parties submitted the following data on market shares of regional rail passenger services based on train km on the national level:

Table B.1: Market shares of regional rail passenger services, 2009 – 2011

Operator |Market shares (in % of train km) |

|2009 |2010 |2011 |

Arriva |[10-20] | [10-20] |[10-20] |

DB |[0-5] |[0-5] |[5-10] |

Parties |[10-20] |[10-20] |[20-30] |

SJ |[50-60] |[50-60] |[30-40 |

DSB First |[10-20] |[10-20] |[10-20] |

DSB |[0-5] |[5-10] |[10-20] |

Tågkompaniet |10-20] |[10-20] |[10-20] |

Veolia | [5-10] |[0-5] |[5-10] |

Merresor |[5-10] |[5-10] |[0-5] |

Source: DB's own data and best estimates

56. As DB has not yet started operating rail services it did not have any market share in 2009. From the end of 2010, and taking into account new contract awards, DB and Arriva will jointly operate approximately [20-30]% of the regional train km.

57. According to the notifying party, there are at least six other significant operators of regional train services in Sweden. The highest market share in regional train km can be attributed to the national incumbent railway operator SJ. However, according to the notifying party, SJ announced in 2009 that it has essentially chosen not to further participate in procurement processes for contract rail services for lack of adequate profitability. Since then SJ's market share has decreased.

58. Other major operators are DSB, which is the Danish State Railway, and DSB First, a joint venture between DSB and the British company First Group. Tågkompaniet is a Swedish company which was acquired by the Norwegian national railway operator Norges Statsbaner (NSB) in 2007.

59. The parties also provided information on the bidding processes in regional rail transport tenders from 2005 to 2009. According to the parties there have always been at least three, and up to six, bidders for each tender (with the exception of one tender contract in 2005, […]).

60. The Commission further notes that the activities of DB and Arriva do not overlap on any routes in the passenger transport market.

61. In view of the relatively low market shares of the parties for regional rail passenger services, the number of competitors present in the Swedish regional passenger rail market and the absence of any overlap routes between the parties' activities, it can be concluded that the transaction does not give rise to serious doubts as to its compatibility with the common market as far as its effects in Sweden are concerned.

C. United Kingdom

62. DB operates passenger rail services in the UK. It operates Chiltern Railways under a rail franchise and, together with MTR Corporation, owns the 50/50 Joint Venture London Overground Rail Operations Ltd (LOROL). LOROL provides the London Overground under a concession for the Transport for London. DB also operates, through a 50/50 Joint Venture with Renaissance Trains Ltd, an open access passenger rail service (Wrexham & Shropshire) and operates the Tyne & Wear Metro, a light rail metro service, under a concession.

63. Arriva is active in passenger rail and passenger bus services. In passenger rail, Arriva operates two franchises, i.e. CrossCountry and Wales and Borders. In passenger bus, Arriva has bus operations across England, including London, and in Scotland and Wales.

1. The relevant product market

64. According to the parties, in countries where the provision of passenger rail services is tendered or franchised by the relevant state authorities, as is the case in the UK, a distinction has to be drawn between the competition to be awarded a franchise or concession (i.e. "competition for the market") and the market for the provision of such services to passengers (i.e. "competition in the market"). As regards competition for the market, the parties consider that the relevant market is the market for the award of franchises and concessions to operate passenger railway services. As regards competition in the market, the parties consider that the relevant market is that for passenger rail services but that on some flows there could be substitutability between bus and rail services.

65. In previous decisions the Commission has defined the product market as the supply of public passenger services by rail. In First/Keolis/TPE JV the Commission has also considered that in the UK, while competition in the market between passenger rail operators is limited, there is competition for the market, i.e. there may be a market for the award of railway franchises [26] .

66. The UK Office of Fair Trading (UK OFT) and the UK Competition Commission (UK CC) have analysed many mergers in the UK public passenger transport sector. The UK OFT and the UK CC have generally not considered the market for the award of franchises and concessions in their analysis of concentrations involving railway operators [27] . The focus of the UK OFT and CC analysis is on the competitive effects of the merger on individual rail and bus routes. They concentrate on the analysis of individual flows on which the parties' activities overlap and which are thus affected by the merger.

67. The market investigation also showed that the operators compete for passengers on rail/rail overlaps, i.e. routes where two or more railway franchises or concessions overlap. As regards rail/bus overlaps, according to the market investigation the question whether rail and bus operations compete depends on the specific route.

68. For the purpose of the present decision, two relevant product markets will be analysed: the market for the award of franchises and concessions and the passenger market on flows where the activities of the parties overlap.

69. However, for the purpose of present decision the precise product market definition can be left open, because under any alternative market definition the transaction would not raise serious doubts in the UK.

2. The relevant geographic market

70. The parties consider that the relevant geographic market for the award of franchises and concessions to operate passenger railway services is at least national.

71. In the Danish case DSB/First/Öresundståg it was submitted that the market for rail franchises is EEA-wide. However, the Commission did not have to conclude on the precise geographic market definition for the granting of rail franchises [28] .

72. The market investigation indicated that the market for rail franchises in the UK is rather national in scope. The great majority of the respondents to the market investigation indicated that, in general, railway operators bid for the award of rail passenger franchises and concessions throughout the whole of the UK.

73. As regards competition in the market, the parties submit that the relevant geographic market is for point-to-point journeys on which the parties' activities overlap. In the case First/Keolis/TPE JV the Commission has delineated the geographic market for competition in the market as the extent of the network comprising the railway routes, stations and depots subject to the franchise [29] .

74. However, in the case Govia/Connex South Central the Commission has held that the relevant geographic market may be defined as an individual point-to-point route, since rail travellers, especially business travellers and commuters do not regard an indirect journey between their point of departure and their intended destination as an acceptable substitute for the direct route [30] .

75. For the purpose of present decision the precise geographic market definition can be left open because, under any alternative market definition, the transaction would not raise serious doubts in the UK.

3. Competitive assessment

76. DB only operates passenger rail services in the UK while Arriva operates both bus and passenger rail services.

77. Mainline [31] passenger rail services are regulated and usually operated under a franchise or concession. Passenger rail franchises are awarded by the government following a competitive tendering process with the Department of Transport (DfT) being the awarding authority, other than in Scotland and Wales. The Government of Scotland is responsible for the ScotRail franchise, whilst the Welsh Assembly Government is, with DfT, a co-signatory of the Wales and Border franchises.

78. In addition to franchises, there are concessions which are tendered and contracted by local authorities. With respect to the parties' activities the following concessions are of relevance: the former Merseyrail Electrics franchise (now Tyne & Wear Metro) which is now awarded as a concession by the Passenger Transport Executive for Merseyside and the London Overground network which is awarded as a concession by Transport for London ("TfL").

79. Passenger rail services which are not tendered and where the operator assumes the full revenue risk, may also be provided by "open access" operators on a purely commercial basis. In addition to holding the necessary operating licenses and authorisations, open access operators require a track access agreement with Network Rail, granting access to the rail network.

80. The bus passenger transport sector is entirely deregulated, with the exception of bus passenger transport services in London where also Arriva is active.

3.1. Market for rail franchises and concessions

81. The parties operate five (DB: 3, Arriva: 2) out of 20 total rail franchises and concessions, i.e. 25% of the existing franchises and concessions that have been awarded in the UK: DB currently holds one franchise (Chiltern Railways) and two concessions (London Overground and Tyne & Wear Metro, a light rail concession). Arriva holds two franchises (CrossCountry and Wales & Borders).

82. The total revenues of DB and Arriva in rail services under franchises in the UK amounted to GBP [400-500m] (DB GBP [100-200m]; Arriva GBP [300-400m]) 2008/2009 [32] . The market shares in terms of train km of DB, Arriva and their major competitors in 2008/2009 are [33] :

Table C.1: Market shares, 2008/2009

Operator |Market shares (in % of train km) 2008/2009 |

DB |[0-5]% |

Arriva |[10-20]% |

Parties |[10-20]% |

First Group |[20-30]% |

Govia |[10-20]% |

Stagecoach |[10-20]% |

Serco Group & Abellio (JV) |[10-20]% |

National Express |[5-10]% |

Source: DB’s own data; ORR, National Rail trends Yearbook 2008-2009

83. An analysis of the bids in the tender procedures over the last five years, which is however a small dataset, shows that […] Arriva bid in […] cases while DB bid in […]. Arriva and DB each won […] in the last five years. Furthermore, the bidding market appears competitive since there is a large number of competing operators that participate in tenders.

84. A similar picture emerges from the analysis of the complete set of tenders since 1996. Arriva participated in […] out of the 19 tenders organised and DB (through its subsidiaries Laing Rail and Chiltern) participated in […]. Other very active players included First Group which participated in 11 tenders, National Express with 11 tenders, and Stagecoach with 6 tenders. Furthermore, there have been at least three competing train operators in each tender that has taken place in the last 10 years.

85. The market investigation confirms this analysis. All market participants, except one, consider that there is a sufficient number of alternative competitors in the tender market.

86. The Commission therefore comes to the conclusion that the proposed transaction does not give rise to serious doubts as to its compatibility with the common market as far as its effects in the UK market for passenger rail franchise are concerned.

3.2. Analysis of individual overlap flows

87. As pointed out above Arriva is active both in rail and bus services. DB only has rail activities in the UK and no bus operations. As regards bus services, Arriva has a national market share of approximately [10-20]% in Great Britain [34] . In London its estimated market share is approximately [20-30]%.

88. The parties submit that the activities of DB and Arriva overlap on […] individual point-to-point journeys from a specific point of origin to a specific point of destination ("point-to-point flows") taking into account both rail and bus operations of DB and Arriva. On some flows, the overlapping services are rail/rail and on others they are rail/bus (between DB's rail operations and Arriva's bus operations).

89. A flow is defined as a particular journey between start and end points. A flow may constitute an entire train or bus route, or it may be only a part of a longer route. For example, consider the following diagram for a journey from A to D via B and C.

A B C D

A to D is the route and the journeys A to B, A to C, and also A to D and all other combinations (B-C, B-D and C-D) would be flows on the route A to D.

90. The parties have submitted detailed information on the […] individual point-to-point flows, including turnover, fare structure and passenger numbers [35] .

91. The parties argue that no competition concerns will arise on any flow. According to the parties who refer to the UK CC's "Review of methodologies in transport inquiries" [36] , on many flows, DB's and Arriva's services do no impose a competitive constraint on each other. The parties' arguments are as follows: (i) one party's services have a limited frequency; or (ii) DB and Arriva are not competing in fares (in rail/rail overlaps); or (iii) one or both parties operate the relevant services under a gross cost contract and do not receive passenger fare revenues, nor set the fares nor timetables and thus have no significant commercial freedom. The parties argue that other flows to which the preceding arguments do not apply are of such limited significance that the operator has no incentive to change the fare structure or the service level and therefore competition concerns can be excluded.

92. The overlaps can be grouped into five areas. Below there is a competitive analysis for each group of overlap flows.

93. Due to the large number of overlap flows that arises in several mergers in the area of passenger transport the UK CC has applied a number of filters to the overlaps. First, the UK CC has examined flows that account for a significant proportion of total route revenue. The UK CC has excluded from the initial analysis routes for which overlaps account for less than 10% of passengers and revenue since it is considered that it is not worthwhile for the merged entity to adjust fares/reconfigure routes post merger if the overlap flow only accounts for such a small share in revenue.

94. Second, the UK CC has filtered out of the analysis flows in which the parties are not effective competitors or third parties offer effective alternatives. In the case FirstGroup/ScotRail the UK CC considered that competitor frequencies had to be at least half as frequent to be considered effective.

95. Third, CC filters out flows of relatively little importance (with turnover of less than GBP 10 000) [37] .

96. Also, the UK CC has used an indicator relating to the proportion of revenue on overlap flows from inter-available tickets (see also below) as an indication of no significant price competition pre-merger.

97. Furthermore, the UK CC considers also other constraints on the ability of the parties post-merger to raise prices. These include: i) regulation of rail fares and service levels ii) ratio between regulated and unregulated rail fares and iii) potential for entry/expansion.

98. The analysis below will also take into account these filters and assessment criteria applied by the UK CC.

a) Rail/bus overlap of DB operations for Transport for London (DB's JV LOROL which operates the London Overground) and Arriva bus services operated for Transport for London

99. All operations of DB and Arriva in this group are operated under so-called "gross cost contracts" with no possibility for the operator to set fares or timetables. The revenues earned from passengers are retained by the contracting authorities. In the case of LOROL […] remuneration is based […].

100. The parties cannot therefore compete in terms of prices and timetables. They would not retain any significant extra revenue either but it would predominately go to the contracting authority. Competition for these markets appears to take place only at the tender level. This has been confirmed in the market investigation.

b) Rail/bus overlap between DB metro operations in Tyne & Wear area and Arriva bus services

101. DB operates metro services […]Arriva’s bus services are unregulated.

102. Post transaction, the merged entity will have no incentive to increase prices or lower the frequency of its bus operations to divert passengers to the metro […].

c) Rail/rail and rail/bus overlap of DB's open access rail service Wrexham and Shropshire and Arriva rail franchises and/or Arriva bus services (between Wrexham and Wolverhampton)

103. DB operates its open access rail service four times per day in each direction. This is significantly less than Arriva's rail and bus services which run at least every hour. Given the limited and infrequent services of DB's open access rail operations these are unlikely to be an effective competitor to Arriva's rail and bus operations. This is also in line with the UK CC's practice and has been confirmed in the market investigation.

d) Rail/rail overlap of DB rail franchise (Chiltern Railways) and Arriva rail franchise (CrossCountry) (between Birmingham and Banbury) [38]

104. The parties' activities overlap in the provision of passenger rail services on the flows between Banbury, Leamington Spa and Birmingham. The overlap flows represent […]of the revenue and passengers on the entire route for each of the two franchises [39] . This is likely to make it commercially not profitable for the parties to adjust fares and/or reconfigure routes. This is also in line with the UK CC's practice which, as explained above, applies a filter of 10% of the revenues and excludes overlap flows with less than 10% of the route revenues from an in-depth analysis. Also the revenues on these flows are relatively limited for both parties (DB GPB […], Arriva GBP […]) [40] .

105. The parties argue that the overlap does not raise concern as on this overlap between […] of the fare revenue comes from inter-available tickets. For these tickets the lead operator, normally the train operator with the greatest commercial interest, sets the fares and other train operators on this flow are obliged to also accept these inter-available tickets on their trains [41] . Therefore, inter-available tickets allow passengers to use any train with the same ticket.

106. Train operators, except the lead operator, however, are free to set their own operator specific tickets in addition to the inter-available tickets. However, these operator specific tickets only account for a very limited share (between […]) of total revenues of the operators, the remaining revenue coming from inter-available tickets. The high share of inter-available tickets, according to the parties, demonstrates that there is little price competition on the flow pre-merger. Also, the UK CC considers that in flows in which a significant proportion (over 90%) of tickets comes from inter-available tickets it is likely that there was little price competition before between operators on this flow. This is not fully confirmed by the market investigation. The majority of respondents to the market investigation considered that operators compete even if inter-available tickets account for a significant share of fare revenues, since even in the presence of inter-available fares operators are free to offer operator specific fares and/or improve their service. On the other hand, in the Birmingham to Leamington Spa and Leamington Spa to Banbury flows neither franchise offers operator specific tickets.

107. The Commission also observes that in the concerned flows a significant share of the fare revenues on the inter-available tickets comes from regulated fares ([…] for Banbury to Birmingham, […] for Banbury to Leamington Spa and […] for Leamington Spa to Birmingham). These fares are regulated by the contracting authority and the franchise cannot raise the price of the regulated fares by more than RPI + 1%. [42] Operators are constrained in their ability to raise prices also for the non regulated ticket fares since regulated fares provide an alternative. This limits the ability of DB/Arriva to increase the prices post-transaction.

108. The market investigation has not provided any evidence that the transaction may lead to a significant impediment to effective competition with respect to any rail/rail operations of the parties in the UK.

109. Furthermore, London Midland (LM) provides 8 peak hour journeys a day between Birmingham and Leamington Spa and might potentially be able to increase its services.

110. Overall, given that i) the overlap flows represent […]of the revenue and passengers on the entire route for each of the two franchises, ii) a significant share of the fare revenues comes from regulated fares, iii) potential entry from LM constrains any potential price increase and iv) the result of the market investigation the Commission concludes that the transaction does not raise serious doubts in terms of a significant impediment of effective competition on the rail/rail operations of the parties in the UK.

e) Rail/bus overlap of DB rail franchise and Arriva buses (in the area of Aylesbury – High Wycombe – Beaconsfield)

111. The last group of flow overlaps relates to the activities of the parties in the county of Buckinghamshire between Aylesbury High Wycombe and Beaconsfield. Arriva operates a number of bus services in the area while DB is active through the Chiltern train service.

112. In rail/bus overlaps the theory of harm concentrates on the possible effect of the merger on bus services (as prices for rail services are generally higher and regulation restricts the train operator's ability to alter services and fares and a high proportion of rail costs are fixed costs). Therefore the main concern is that, post-merger, the combined entity could profitably: (a) increase bus fares, to encourage passengers to shift from its bus services to train services where these overlap on a given flow; and/or (b) amend bus service frequencies, routes and configurations to make the bus into a feeder service for rail services.

113. On two (groups of) flows the parties seem to compete more closely (Aylesbury – Stoke Mandeville – Wendover and Aylesbury – Princes Risborough – High Wycombe – Beaconsfield). In the first (group of) flows, the parties' activities appear to run at approximately the same frequency (twice per hour). However, Arriva's bus services usually take 2-3 times longer than DB's rail services. For the most important of the 3 flows in question in terms of revenues […] the journey time of the two operators differs very significantly (8 minutes versus 23). Furthermore, Tiger Line, a competitor, runs some services in these flows which are faster than Arriva's services (however, there are only 5 journeys per day).

114. In the second (group of) flows, for the great majority of the flows DB's activities are less frequent than Arriva's. DB operations have a frequency of one train per hour while Arriva's operations run every 20 minutes. According to the UK CC's practice, Arriva and DB would not be considered effective competitors on these flows either. The only exception is the Princes Risborough – High Wycombe flow where both parties' services run approximately every 20 minutes. However, on this flow Arriva's service takes more than double the journey time (28 minutes versus 12 minutes for DB).

115. Furthermore, Tiger Lines is currently operating a service on these flows but with only 5 services per day. It is likely that Tiger Lines or another operator might find it profitable to enter these flows if post merger the parties were to increase the price of the bus tickets.

116. Furthermore, the revenue of the parties on the two groups of flows is limited (DB GBP […], Arriva GBP […]).

117. The market investigation did not provide any evidence that the transaction may lead to a significant impediment to competition with respect to the horizontal overlaps of rail/bus operations of the parties in the UK.

118. On the basis of the above the Commission therefore comes to the conclusion that the proposed transaction does not significantly impede effective competition in the UK as regards the individual point-to-point overlap flows of the parties.

3.3. Conglomerate issues

119. One market participant expressed concerns that the merged entity could introduce multi-modal tickets in areas where the parties operate bus and rail services, thereby excluding competing bus operators. Multi-modal tickets allow passengers to use both rail and bus services with a single ticket.

120. Usually, the inter-modal tickets in place are not operator specific but part of multi-modal ticketing schemes (such as PLUSBUS, a national scheme). Transport authorities encourage the use of multi-modal tickets since they tend to offer a lower price than the combined fare of bus and train services and are convenient for travellers.

121. Arriva, which already now operates both rail and passenger bus services in some areas, does not offer its own inter-modal tickets. Arriva participates in a number of multi-modal ticketing schemes across the UK, either as a bus operator and/or rail operator. Also DB participates in a number of multi-modal ticketing schemes.

122. Bus services of competitors appear to play a complementary role to the services offered by the parties, since their role is to facilitate access to the train services for passengers from different areas. As a result, competing bus operators' services bring additional demand for the train services offered by DB and therefore, it is unlikely that the merged entity would have the incentive to introduce such schemes with an exclusionary effect.

3.4. Conclusion

123. On the basis of the above the Commission therefore comes to the conclusion that the proposed transaction does not raise serious doubts in the UK as regards the market for passenger rail and bus services.

D. Germany rail

124. The Parties are active in various segments of the German rail sector. DB is the German rail incumbent and maintains significant market shares in several rail markets. DB also controls [0-100]% of the rail infrastructure under the regulatory authority of the Bundesnetzagentur. [43] Arriva is also active in most of the German rail markets, mainly through its subsidiary, Arriva Deutschland GmbH, and its subsidiaries and joint ventures. Arriva also owns and operates 546 km of rail infrastructure in Germany including terminals [44] .

125. The Parties' activities significantly overlap in rail passenger transport i.e. (a) regional passenger rail transport and (b) long-distance passenger rail transport. In addition, the Parties' activities also lead to affected markets in rolling stock maintenance and rail freight transport.

1. The relevant product markets

1.1. Rail passenger transport

126. In Germany, there are significant regulatory differences between (a) long-distance passenger rail services and (b) regional passenger rail services.

127. Long-distance passenger rail services are operated commercially on an open access base without direct public funding or other additional economic regulation. Regional transport however is governed by the Regionalisation Act [45] which gives the German states (Bundesländer) the responsibility to ensure the provision of sufficient regional public transport, whether by rail or by bus. Depending on the law of the respective Bundesland, the Bundesland itself or a special state agency contracts the regional transport services from the (rail) operators. The contracting authority (hereafter referred to as Aufgabenträger) is responsible for awarding the contract for the provision of regional transport.

128. The Commission has not defined the markets for rail passenger transport in Germany in previous cases. According to the notifying party which refers to the different regulatory regimes, a distinction has to be made between long-distance passenger rail transport and regional passenger rail transport.

129. The German Competition Authority (Bundeskartellamt) and the German Supreme Court (Bundesgerichtshof ) have also distinguished between the market for regional public transport service and the market for long-distance transport services [46] . They base the distinction mainly on the different regulatory regimes which lead to significant differences in the economic environment in the two markets.

130. The market investigation also confirmed that regional passenger rail transport is a separate market from long-distance passenger rail transport. Respondents to the market investigation explained that the commercial operation of long-distance trains requires different business models with different skill sets, risk and success criteria compared to the subsidised regional train services that are purchased by the Aufgabenträger. In addition, long-distance transport and regional transport do not concern the same purpose of travelling. Moreover, the characteristics of the traffic are different, for example in terms of frequencies or stops.

1.1.1. Regional passenger rail transport

131. The German regulatory framework defines regional passenger transport by rail as the provision of urban, suburban and regional transport services by rail with a general travel distance for the majority of the travelling passengers of up to 50 km or a travel time of less than 60 minutes.

132. Regional rail passenger transport services are contracted in Germany by the Aufgabenträger. Generally rail operators need to have their own rolling stock, workshops and staff. They can otherwise lease it or contract out services to subcontractors. [47] According to the Parties, the Aufgabenträger contract regional passenger rail transport services with an annual value of EUR 5.2 billion and with a volume of approximately 630 million train kilometres annually. The Aufgabenträger have considerable discretion in the way they procure services. Contracts for regional transport are either tendered (Ausschreibung) or, under certain circumstances, awarded directly (Direktvergabe) to the rail operators. The contracts have typically a duration of 8 to 15 years. Regulation (EC) No 1370/2007 [48] reinforces the principle of transparency and level playing field in awarding of concession in public passenger transport services by rail. Therefore, an increasing number of public tenders are expected in the near future.

133. According to the notifying party, the relevant product market is the provision of contracted regional passenger rail transport services vis-à-vis the Aufgabenträger i.e. the market for concessions. This is in line with the practice of the Bundeskartellamt confirmed by the German courts. The Commission, with respect to the French public passenger transport markets, applied such a distinction in the SNCF-P/CDPQ/Keolis/Effia case and consequently focused its competitive analysis on the market for concessions. [49] For the German markets, the German Supreme Court [50] also confirmed this division between the concession and passenger market, and confined its competitive assessment to the market for concessions. In line with these findings, the relevant product market to be considered is the market for concessions (Aufgabenträgermarkt). This is due to the fact that regional passenger rail transport services are not operated on a commercial basis, but are contracted by the Aufgabenträger which remunerates the operators for the provision of these services. As a consequence, competition mainly occurs at the level of the concession of regional passenger transport services. In particular, lines or networks are contracted to certain operators and operators do not compete in terms of fares or other parameters of services relevant to the individual customer. The market participants almost unanimously confirmed that the concession regional rail market constitutes a separate relevant market based on the differences described above.

134. According to the notifying party, there is no single market for regional passenger services in Germany but a distinction has to be made between the markets for regional passenger transport by rail and regional passenger transport by bus, tram and metro.

135. In previous cases, the Commission has not taken a view on whether public passenger transport services by rail and by bus constitute separate markets in Germany. In the case Connex/DNVBVG/JV the product market definition was left open. [51] As regards the practice in Germany, the Bundesgerichtshof decided in case DB Regio/üstra for regional passenger transport that passenger transport by rail and by road do not form part of the same market. [52] Furthermore, separate markets for long-distance and regional passenger transport were defined by the Bundeskartellamt. [53]

136. The market investigation confirmed that public passenger transports by rail and by bus do not belong to the same market. Indeed, the functioning of these two markets requires different qualifications and operators have to comply with different regulatory regimes. In Germany, public rail transport is governed by the Allgemeines Eisenbahngesetz (AEG) whereas the bus market follows the regulatory framework defined in the Personenbeförderungsgesetz (PBefG). Both laws define different requirements to enter the rail and the bus market, respectively e.g. the PBefG prohibits basically long distance bus services [54] .

1.1.2. Long-distance passenger rail transport

137. Long-distance passenger rail transport in Germany is in general not subject to public tenders or contracted in other ways by the Aufgabenträger, but is operated commercially on an "open access" basis [55] .

138. According to the notifying party, the market for the provision of long-distance passenger transport includes long-distance passenger transport by a variety of modes of transport, e.g. rail, bus and air. However, the Commission in previous decisions did not consider that other modes of transport such as cars and buses belong to the same product market as rail services [56] . Regarding competition with air traffic, whereas the Commission pointed to a certain degree of substitution between high speed railway and air traffic, it dismissed however such a substitution with regard to at least a significant number of customers. [57]

139. A vast majority of the respondents to the market investigation in the present case showed that long-distance passenger rail transport constitutes a separate product market. From a regulatory perspective, the rules applicable to rail and street-bound services are different in Germany namely the German General Railway Act [58] for rail, and the Act for the Transportation of Passengers [59] for street bound services. Although there might be some routes where rail is competing to a certain extent with bus services, it was pointed out by market respondents that in most cases rail, bus and air services are not substitutable to each other in Germany. In particular, long-distance passenger transport by bus does barely exist in Germany due to a historic legal regime which provides that long-distance bus lines are not authorised as long as a sufficiently established rail connection is operated along the same path [60] . The market investigation did not provide clear indications as to the substitutability between rail and air traffic for passenger transport in Germany.

1.1.3. Conclusion

140. On the basis of the above, the relevant product markets considered for the purpose of the present case are (a) regional rail transport, and (b) long-distance passenger rail transport.

1.2. Freight rail transport

1.2.1. Freight transport vs. freight forwarding

141. Freight transport covers the activity of the physical transfer of objects carried out by the transport provider with equipment it owns, leases, or otherwise legally uses itself. Freight forwarding has been defined as the organisation of transportation of items (possibly including activities such as customer clearance, warehousing, ground services etc.) on behalf of customers according to their needs.

142. The notifying party submits that there is only one single market consisting of freight forwarding and freight transport. However, the Commission has found in previous decisions that freight transport services constitute an input to freight forwarding services [61] . The freight forwarding providers would offer a service to their customers which might include the freight transport; however the freight transport would be often sub-contracted to the freight transport carriers [62] .

143. The market participants broadly confirmed the findings of the Commission in previous cases and pointed towards a separate market for freight transport.

1.2.2. Different modes of freight transport

144. The notifying party argues that there is one market for freight transport irrespective of the different modes of transport. However, in previous cases, the Commission has found that not all modes of transport are substitutable to each other and generally it depends on the geographic location of the customer and the specific characteristics of the goods to be transported [63] . In this regard, the Commission, while leaving the market definition open, has previously found that there are strong indications for a distinct market for the transport of goods by rail. [64]

145. In the present case, the market investigation has also pointed to the existence of a separate market for rail freight transport, different from the other modes of transport. Each mode of freight transport has different characteristics in relation to prices and cost structures, timing and geographic availability. In addition, market respondents confirmed that only rail freight transport can fulfil certain requirements related to the type of certain goods transported, volume/quantity, weight of the goods, the geographic location or speed of transport, and constitutes for a substantial part of the customers the only alternative.

1.2.3. Domestic vs. international rail freight transport

146. The notifying party contests the previous Commission findings with regard to the existence of a separate market for freight transport in general and the segmentation of the freight transport into domestic and international freight transport, in particular. The market investigation in the present case pointed to further distinctions between domestic and international rail freight transport. Competitors indicated that in order to provide international, i.e. cross-border or transit rail freight transport, the rail operator needs to comply with the different regulatory and technical requirements of the different countries or co-operate with another company. Currently, only very few competitors besides DB are able to provide international freight transport and their market shares are considerably lower in comparison to domestic transport.

1.2.4. Possible subdivision of rail freight transport into single wagon and block trains

147. The notifying party submits that the rail freight transport market shall not be divided between block train services [65] and single wagon train services. [66] Arriva provides block train services and, in co-operation with DB, single wagon train services. DB is active in both, block and single wagon train services.

148. In previous decisions, the Commission found that such a subdivision between single wagon and block train services cannot be excluded. [67]

149. In the current market investigation a majority of customers and competitors consider that these two types of rail freight transport are not substitutable, since the choice of single wagon vs. block train services depends mainly on the quantity of goods to be transported. Respondents indicated that the provision of single wagon services requires a more complex organisational structure, a large rail network and a sufficient scale of operations which is very costly.

1.2.5. Possible subdivision in respect of the goods transported

150. In the notifying party's view, the freight transport market is not to be segmented according to the types of goods transported. The notifying party considers that, from a supply side, it does not matter which types of products are transported. DB and nearly all rail freight transport companies would be able to transport any product required by the customer.

151. The market investigation in the present case showed that such further sub-segmentation cannot be excluded. Market respondents indicated in particular that certain categories of goods (such as for example wood/timber) require very specific rolling stocks and that also the customer base is different depending on the categories of goods provided.

1.2.6. Conclusion

152. On the basis of the above, and for the purpose of the present case, the product relevant markets considered is that for the rail freight transport. Further market segmentations into (i) domestic and international, (ii) single wagon and block trains, or (iii) according to the goods transported can be left open in this case, as the commitments proposed by DB are capable of removing the competition concerns that arise on the overall market for rail freight market as well as on the potential (sub)markets for domestic block trains and wood/timber rail freight transport.

1.3. Rolling stock maintenance

153. In the notifying party’s view, there is an overall market for rolling stock maintenance, i.e. there are no distinct markets for heavy maintenance services and light maintenance services. Heavy maintenance consists of the refurbishment and overhaul and repair of components and accident damages. Light maintenance consists in the regular inspection of the rolling stock used and preventive and corrective repair and servicing. However, according to the notifying party, no clear line can be drawn between heavy and light maintenance services. The classification of a certain maintenance service as heavy or light maintenance varies between different railway undertakings.

154. The Commission has in its previous decisions distinguished between light maintenance services, heavy maintenance service and refurbishment of rail vehicles [68] .

155. In the present case, the market participants indicated that there are separate markets for light maintenance and heavy maintenance as these types of services require different equipment, skills and technology and serve different customer needs.

156. On the basis of the above, and for the purpose of the present case, the relevant product market definition can be left open as the commitments proposed by DB are, in any event, capable of removing any competition concerns that arise on the light maintenance market.

2. The relevant geographic market

2.1. Regional rail passenger transport

157. In the notifying party’s view, the market for concessions for regional passenger rail transport is national in scope. This is in line with the jurisprudence of the German courts [69] and the Bundeskartellamt . In DB’s view, there are no indications for a regional delimitation of the concession rail market. In a previous Commission decision, relating to the French public transport markets, it was considered that the relevant market for the concession of urban public passenger services was at least national in scope. [70]

158. Indeed, the market investigation in the present case indicated that competition takes place at the national level. A number of railway operators, present in regional passenger rail transport in Germany, such as Veolia, Abellio or Keolis, as well as DB and Arriva, regularly participate in tenders throughout (a substantial part of) Germany. Furthermore, from a regulatory perspective competition conditions appear homogeneous throughout Germany. Therefore, for the purpose of the present case the market is considered as national in scope.

2.2. Long-distance passenger rail transport

159. The notifying party is of the opinion that, in analogy to the Commissions decision in airline cases, an individual Origin and Destination (O&D) approach might also be appropriate in the present case. However, with reference to the French market, the Commission decided that the legal monopoly of SNCF in long-distance passenger rail transport led to the definition of a national market. [71]

160. The situation in the provision of long-distance passenger rail services in Germany seems to be to a certain extent comparable to the French market. The market investigation also showed that the market is still very much shaped by national regulation and by DB's quasi monopoly in this market. There is a uniform railway regulation in Germany which is still different from other areas in the EEA. Therefore, for the purpose of the present case the relevant geographic market is considered as national in scope.

2.3. Rail freight transport

161. According to the notifying party, the market for rail freight transport is national in scope. The Commission has previously held that in view of different technical and regulatory requirements the markets for rail freight services are rather national in scope [72] , but could become international on certain routes which are part of a corridor [73] . In certain particular situations the Commission also found that a corridor-based approach might best reflect the competitive situation. [74] In a recent decision, the Commission considered a distinct market for cross-border rail freight transport services between two neighbouring countries [75] .

162. The market investigation has broadly confirmed the view of the notifying party and the findings in previous decisions. Market participants underlined that there are still barriers to enter the German rail freight market, due to regulatory and technical requirements and sufficient availability and access to infrastructure. Therefore, for the purpose of the present case the rail freight markets discussed above shall be considered as national in scope.

2.4. Rolling stock maintenance

163. In the notifying party’s view, the geographic market for maintenance services is at least national in scope. In a previous Commission decision the markets for light maintenance, heavy maintenance and refurbishment services have been defined as national or even sub-national [76] .

164. The market investigation showed clear indications that the market for rail maintenance services is national in scope. Respondents showed that it is important that railway companies have access to maintenance facilities not far from their geographic scope of activities to be able to operate economically. Therefore, for the purpose of the present case the market is considered as national in scope.

3. Competitive Assessment

3.1. Regional rail passenger transport

165. The market for regional rail passenger transport is still very concentrated. On the national market for regional passenger services by rail, DB had a market share of approximately [70-80]% in terms of train kilometres (km) in 2009. In the same year, Arriva had a market share of [0-5]% in terms of train km. The proposed transaction therefore leads to a combined market share of [80-90]%. Arriva is behind Veolia the second largest competitor of DB. There are a number of smaller competitors in the market but their market shares are limited.

166. At a national level, the parties’ largest competitors for tenders in regional passenger transport and their respective market share in 2009 (in terms of train km) are the following: Veolia Verkehr GmbH, a subsidiary of Veolia Environnement (with a market share of [5-10]%); HLB – Hessische Landesbahn GmbH, a regional transport provider owned by the Bundesland of Hesse ([0-5]%); Keolis Deutschland, a subsidiary of SNCF: (([0-5]%); Abellio Rail, a subsidiary of Nederlandse Spoorwegen ([0-5]%); and BeNEX GmbH, a regional passenger service provider co-owned by Hamburger Hochbahn AG, which is the public transport operator owned by the Land of Hamburg (([0-5]%).

Table D.1: German regional rail passenger transport- market shares in 2009 (train km)

Rail Operators |Market share (train km) |

DB |[70-80]% |

Arriva |[0-5]% |

Combined |[80-90]% |

Veolia |[0-5]% |

HLB |[0-5]% |

Keolis |[0-5]% |

Abellio |[0-5]% |

BeNex |[0-5]% |

Source: DB’s best estimates

167. In the notifying party's opinion, the notified concentration does not result in competition concerns in the market for concessions for regional passenger rail transport for several reasons. Market shares would be of limited significance in tender markets. The notifying party argues that most of the tenders awarded on the market for concessions would not immediately be reflected in the market shares because the contracts only start one to two years after the tender. In addition DB’s market share would decrease steadily as tendered contracts are increasingly won by DB's competitors.

168. However, the market respondents were broadly very concerned about the proposed transaction in respect of the regional passenger rail transport market. In particular, the responsible Aufgabenträger indicated strongly their fear to lose one of the few active competitors of DB in the market. The proposed transaction would threaten to significantly impede the development of a competitive environment in this newly liberalised market. The Aufgabenträger also indicated that they intend to launch an important number of tenders in the coming years and that they fear that the proposed transaction will have a very significant impact on these tenders since Arriva is one of the few competitors that can compete for tenders involving larger volumes of train kilometres. Moreover, between 2012 and 2015 a significant number of DB's contracts expire, with large amounts of train kilometres to be newly awarded.

169. In addition, the market investigation respondents underlined that DB, as the incumbent operator, has an advantage of having a well functioning infrastructure (maintenance, rolling-stock, sales and ticketing) all over Germany. Although at a smaller scale, Arriva is one of the few companies that also has its own railway infrastructure and its own rolling stock maintenance and its own terminals. It was indicated by market respondents that this gives Arriva a competitive advantage in the market and underlines its potential as a competitive restraint for DB.

170. The proposed transaction therefore raises serious doubts on the German market of regional passenger rail transport mainly based on the high market shares of DB and Arriva's relatively strong position as third biggest market player, as confirmed by the concerns issued from a high number of respective Aufgabenträger.

3.2. Long-distance passenger rail transport

171. DB, as the incumbent operator, provides long-distance passenger rail transport services throughout Germany and has a market share that is close to a monopoly.

172. Arriva operates long-distance rail services on a commercial basis through its subsidiary Vogtlandbahn GmbH. The so-called Vogtland-Express runs once a day from Plauen via Zwickau, Chemnitz and Riesa to Berlin and back. On this route Arriva achieved a turnover of € […] in 2009. [77] Arriva's market share on a national market is less than ([0-5] %.

173. Besides Arriva, only two other companies are currently active in long-distance passenger rail transport. Veolia Verkehr is operating the InterConnex 1 long-distance connection between Leipzig and Warnemünde (via Berlin and Rostock) as well as the Harz-Berlin Express, the latter only partially operating on a commercial basis. Georg Verkehrsorganisation GmbH operates a night service between Malmö and Berlin. Both competitors have also a market share of less than ([0-5]%.

174. Competitors in the market investigation raised concerns with regard to the acquisition of one of the very few competitors which succeeded in entering this market where the barriers of entry are very high. They further stated that Arriva has the necessary know-how to expand in this market. Moreover respondents to the market investigation pointed to the fact that the access by DB to the information on the business model of Arriva in Germany will reinforce its capacity to preserve its strong dominant position in this market.

175. A majority of the market investigation respondents pointed to the very high barriers to entry in the long-distance passenger rail market due to:

a) The high investments needed for example for procurement of rolling stocks, setting up of a distribution system, construction of depots or hiring and training drivers and conductors. Both DB, which enjoys already financial advantages on the capital market as a state owned company, and Arriva have this financial strength.

b) Long period of time to enter the market. Respondents explained that the lack of availability of used rolling stock and the resulting need to procure new material leads to a significant burden for any new entrant, in particular, as the procurement of new rolling stock takes between 3-4 years and the operator does not know at the time of procuring the trains whether it is able to obtain the necessary train tracks.

c) DB's advantages resulting from the […]. In addition respondents pointed out that there is a […]. [78]

d) The dependency and possible discrimination of new entrants regarding services offered by DB (or DB Netz) such as rail energy or rail tracks access. With regard to rail tracks access respondents indicated that this is awarded by DB Netz on the basis of framework contracts under restrictive time constraints. According to these respondents, the time constraints of the application of rail tracks access, the confirmation of rail tracks access and the start of operations is such that it is impossible for an operator to develop the project in that time frame. This also may imply that the new operator pays rail tracks access fees while the operator is not ready to start its services.

176. In addition, despite the very low market share of Arriva on the market for long-distance passenger rail transport, the market investigation revealed that Arriva is one of the key competitors of DB since it has its own rail tracks [79] , it acquired indispensable knowledge of the long-distance market, which would allow Arriva to expand its long-distance operations in the future. Moreover, it was mentioned by market respondents that Arriva's strength in the regional rail passenger market in combination with its own well functioning infrastructure makes Arriva a very credible player to enter the market for long-distance passenger rail transport to a larger extent and to exert already today competitive pressure on the quasi monopolist DB.

177. Arriva is, in spite of its very low market share, thus currently one of the few competitors that could enter the German long-distance passenger rail market on a larger scale. Therefore, serious doubts exist as regards the German market for long-distance passenger rail transport.

3.3. Rail freight transport

178. The proposed transaction will lead to overlaps in the overall market for rail freight transport and in particular in the market for domestic block train transport services.

179. DB’s rail freight related activities are organised in its business unit DB Schenker Rail. DB Schenker Rail serves as a rail transport provider and rail freight forwarder for external customers and internally for DB Schenker Logistics. DB Schenker Rail is focused on freight transportation and freight forwarding services by rail.

180. DB Schenker Rail operates an open network system for the transport of single wagons and groups of wagons, and operates block train routes for point-to-point transport services. Moreover, DB Schenker Rail provides combined traffic services, including traction, trans-shipment, provision of rolling stock and provision of additional services.

181. Arriva is active in the German rail freight transport mainly through its subsidiary Osthannoversche Eisenbahnen AG (OHE). OHE is primarily active in the transport of goods for […]. OHE offers block train services and – in cooperation with DB – single wagon train services (on its own railway infrastructure in Niedersachsen) and in some areas further logistical services. These services are, however, ancillary to the rail freight business. OHE operates approximately […] block train services per week throughout Germany.

182. To a limited extent, Arriva operates some cross-border block train services [80] on the routes […]

Table D.2: German rail freight transport- market shares in 2009 (tonne km)

Rail Operators |2009 |

DB |[70-80]% |

Arriva |[0-5] % |

Combined |[70-80]% |

Competitors combined |[20-30]% |

SNCF (Veolia Cargo, ITL) |[5-10]% |

SBB Cargo |[0-5] % |

Häfen & Güterverkehr Köln AG (HGK) |[0-5] % |

TX Logistik |[0-5] % |

CTL |[0-5] % |

Havelländische Eisenbahn AG |[0-5] % |

Others |[5-10]% |

Source: DB’s best estimates

183. On an overall rail freight transport market, Arriva's market share is [0-5]% while the market share of DB is around [70-80]%.

184. The notifying party argues that there are a significant number of other competitors on the market. In addition, the increment of the proposed transaction would not be important and the market share of DB would have decreased over time.

185. However, the market respondents expressed concerns about the proposed transaction concerning its effects on rail freight transport. The broad majority of respondents underlined Arriva's potential as a strong competitive force in the market beyond its currently very modest market shares. This is illustrated by the fact that Arriva's transport volume in tonne km has been continuously growing in the last three years despite the economic downturn in 2008-2009 [81] .

186. In addition, market participants mentioned that the proposed transaction will strengthen the dominance of DB in rail freight transport and remove a growing competitive force in the market. Several customers indicated that they would expect a price increase in freight transport services post-transaction.

3.3.1. Block train freight transport

187. DB has a market share of [60-70] % in terms of tonne km in 2009 in a German market for block train services (comprising domestic and international services). [82] In the same year, Arriva had a market share of [0-5]% in terms of tonne km. [83] The competitors are all relatively small with Veolia and SBB as biggest competitors with around [0-5]% market share each.

Table D.3: German block train services - market shares in 2009 (tonne km)

Rail Operators |2009 |

DB |[60-70]% |

Arriva |[0-5] % |

Combined |[70-80]% |

Competitors combined |[30-40]% |

Veolia Cargo |[0-5] % |

SBB Cargo |[0-5] % |

Häfen & Güterverkehr Köln AG (HGK) |[0-5] % |

TX Logistik |[0-5] % |

ITL |[0-5] % |

CTL |[0-5] % |

Havelländische Eisenbahn AG |[0-5] % |

Mitteldeutsche Eisenbahn GmbH |[0-5] % |

Source: DB’s best estimates

188. While Arriva's position in the international block train market is rather minimal, it has been able to acquire a significant market share in the domestic block train market. The market participants underlined Arriva's further potential in this segment. It was often mentioned by market participants that Arriva's role as infrastructure provider in particular with respect to the important ports of Hamburg and Bremerhaven gives it a competitive advantage in comparison to other non integrated competitors to challenge DB's market position.

Table D.4: German domestic block train services - market shares in 2009 (tonne km)

Rail Operators |2009 |

DB |[60-70]% |

Arriva |[0-5] % |

Combined |[70-80]% |

Competitors combined |[30-40]% |

Veolia Cargo |[5-10]% |

SBB Cargo |[5-10]% |

Häfen & Güterverkehr Köln AG (HGK) |[0-5] % |

TX Logistik |[0-5] % |

CTL |[0-5] % |

Havelländische Eisenbahn AG |[0-5] % |

Mitteldeutsche Eisenbahn GmbH |[0-5] % |

Others |[5-10]% |

Source: DB’s best estimates

189. In a market for domestic block train services DB held in 2009 approximately [70-80]% of the market while Arriva held approximately [0-5]% (in tonne km). During the market investigations, the respondents, in addition to the concerns raised for the overall rail freight transport market, underlined Arriva's strength in providing block train services and in competing against DB. Customers and competitors have broadly expressed concerns regarding the effect of the transaction in particular for the area of block train services.

3.3.2. National freight transport by rail –types of goods transported

190. In light of Arriva’s freight activities, the parties’ market shares for the relevant categories of goods in 2009 were as follows: in a potential market for the rail freight transport of wood/timber, Arriva would have a market share of about [5-10]% while DB has a market share of [60-70]%. A number of customers mentioned Arriva's strength in this segment and indicated that the proposed transaction would remove the biggest competitor to DB in this market.

Table D.5: German block train services - market shares in 2009 by category of goods (tonne/ year)

Category |Rail Operators |2009 |

Wood/timber (in terms of t/ per year) |DB |[60-70]% |

|Arriva (OHE) |[5-10]% |

|Priessnitztalbahn |[5-10]% |

|CTH |[5-10]% |

|Raildocs |[5-10]% |

|LHG |[0-5]% |

|Mittelweserbahn |[0-5]% |

|Others |[5-10]% |

Source: DB’s best estimates

3.3.3. Conclusion

191. Taking all these elements into account, and even though the increment brought about by the transaction is relatively limited, the proposed transaction raises serious doubts for the overall market for rail freight transport due to the high market shares of DB, and Arriva's potential as a significant competitive force underlined by the concerns raised by a majority of the market respondents. On the basis of narrower markets, i.e. in a market of block train rail freight transport and in a market for the rail freight transport of wood/timber, the transaction raises also serious doubts as in these sub-markets Arriva's position is even stronger.

3.4. Rolling stock maintenance

192. Arriva-operated maintenance sites offer both heavy and light maintenance services for freight and passenger rolling stock. DB offers as well light and heavy maintenance services but mainly to DB’s own train operating units. In an overall market for (light and heavy) maintenance and in a market for heavy maintenance only, the parties' combined market share is below 15% and therefore would, according to the notifying party, not be affected.

193. According to the notifying party, only the merchant market for light maintenance is affected with a combined market share of around [20-30]% and an increment of [5-10]% (Arriva). Other competitors indicated by the notifying party would include Veolia with about [10-20]%, Euromaint ([5-10]%), SBB Cargo ([5-10]%), HGK (([5-10]%); additional competitors such as BeNEX, Keolis, Abellio, TX Logistik, CTL would account together for about [10-20]%. According to the notifying party, also suppliers of rolling stock, such as Siemens, Alstom, Bombardier, Knorr Bremsen, Vossloh, Voith, Talgo, and Stadler offer maintenance services and increasingly provide after-sales maintenance services.

194. However, as DB is using most of its capacity for heavy and light maintenance in-house, its market shares in the merchant market are less representative of the scale of operations that DB is undertaking in maintenance and therefore of its competitive position. For example DB has in-house more than EUR […] turnover in light maintenance whereas its revenues in the merchant market are EUR […] and the total merchant market size according to the notifying party is approximately EUR […]. Therefore, DB is currently only providing […] of its sales to third parties. Besides DB, Arriva is currently one of the main maintenance service providers in Germany. Arriva achieved a turnover of about EUR […] in the light maintenance, […] of which (EUR […]) being attained with the sales to third parties.

195. The relatively modest combined market shares submitted by the notifying party seem therefore not to reflect fully the strength of the parties and especially the importance of DB in the area of light maintenance services. This is underlined by the fact that DB has about […] maintenance sites in comparison to 141 maintenance sites of its competitors.

196. In addition, post transaction, the new entity would be the clear market leader on the merchant market, double the size of its second biggest competitor. A significant number of market respondents pointed to the importance of access to maintenance services in order to compete on the rail market(s). Concerns were raised by a number of competitors that post-transaction, DB will restrict third parties access to Arriva's maintenance sites and that would further weaken chances to increase competition in the German rail markets.

197. Therefore, based on the market investigation in the first phase, the proposed concentration raises competition concerns in the market of light rail maintenance service which are, in any event, removed by the proposed remedies.

4. Conclusion for Germany Rail

198. On the basis of the above the Commission concludes that there are serious doubts as to the compatibility of the notified concentration with the internal market regarding the German markets for (a) concessions for regional passenger rail transport, (b) long-distance passenger rail transport, and (c) rail freight transport (and possible narrower markets such as a market of block train rail freight transport, and in a market for the rail freight transport of wood/timber).

E. Germany bus

1. The regulatory framework

199. In Germany, the responsibility for ensuring the provision of public transport by bus usually lies with municipalities (i.e. cities) or administrative districts (Landkreise), which are so-called "Aufgabenträger" (responsible authorities). Some municipalities and districts have created special purpose entities or associations, which act as the Aufgabenträger for the municipalities and districts involved. [84]

200. According to the German federal law on passenger transport (Personenbeförderungsgesetz, "PBefG"), the provider of scheduled passenger bus transport must hold a concession for each line to be operated. Concessions are issued by the so-called Genehmigungsbehörde, which is the competent regulatory authority. The Genehmigungsbehörde is established on the level of the Länder. It should be noted that authorities who are responsible for the provision of public transport by bus in their area ("Aufgabenträger") are different from the authorities granting the concessions ("Genehmigungsbehörden"). Depending on the laws of the individual Land, the task of supervising bus operators and issuing concessions may therefore be carried out by different state entities. [85]

201. The concession holder is obliged to provide the licensed services [86] but is protected from competition on the route(s) in question for the duration of the concession, which is at maximum eight years. Thus, there is only competition for the concessions or for the service contracts, i.e. "competition for the market", and no competition in the market for the provision of such service to passenger. Even if routes served by operators may overlap on limited flows, there is usually no competition between operators, since tariffs are fixed by the transport associations, and revenues are shared among the operators according to a pre-negotiated allocation formula.

202. § 13 of PBefG defines the conditions for obtaining a concession. For example, the PBefG requires that a proposed service is in line with the public interest and the public transport plan. According to the PBefG, a service would be contrary to the public interest if there is already sufficient provision of transport on the route in question or if it could easily be provided by existing bus or rail operations. As a result, scheduled long-distance bus operations are currently not allowed in Germany as this transport need is fulfilled by rail transport. [87]

203. Scheduled passenger bus services are either operated on the initiative of the bus operator that applies for the necessary concession for a specific route (these are so-called "commercial services", or "eigenwirtschaftliche Verkehre"), or contracted by the Aufgabenträger under public service contracts following a tender procedure on routes where buses are not operated commercially (so-called "non-commercial services" or "gemeinwirtschaftliche Verkehre"). Regardless of whether the service is a commercial service or a non-commercial service, the service provider always needs a concession from the responsible Genehmigungsbehörde. [88]

204. However, it should be noted that the vast majority of scheduled bus services in Germany are provided as commercial services. The responses in the market investigation showed that, e.g. in 2009, out of a total of 1449 granted concessions, around 1427 concessions were granted for commercial services and 22 concessions were granted for non-commercial services. [89] The figures for 2007 and 2008 are similar. In 2006, on the basis of the submissions of the parties in the proceedings which involved inter alia DB, the Bundesgerichtshof found that 99% of all services were provided as commercial services. [90]

2. The relevant product market

205. The relevant product market is the competition for the market for the provision of scheduled bus services, including both "commercial" and "non-commercial" services. As discussed already with respect to rail passenger transport in Germany (see above paragraph 133) it is necessary to distinguish between competition for the market where the competent authorities (districts and municipalities) are the customers and the market for the provision of scheduled bus services where the passenger are the customers ("Fahrgastmarkt").

206. According to the parties, the German bus market can be subdivided into the provision of scheduled bus services (Linienverkehre) and the provision of sub-contracted services that are provided to the concession holders (Auftragsverkehre). They further propose that a market for the provision of non-scheduled bus services (Gelegenheitsverkehre) exists.

207. For the provision of scheduled bus services, the parties propose to define separate product/services markets for public passenger transport by rail and by bus [91] . They submit that in particular for regulatory reasons bus and rail constitute separate markets as different laws apply.

208. As discussed above in paragraph 135 the Commission has not taken a definite view on whether public passenger transport services in Germany by rail and by bus constitute separate markets in previous cases [92] , while the Bundesgerichtshof decided in case DB Regio/üstra for regional passenger transport that passenger transport by rail and by road do not form part of the same market. [93] and the Bundeskartellamt defined separate markets for long-distance and short-distance passenger transport depending on the distance of below/above 50 km or travel time of one hour time . [94] The market investigation confirmed that public passenger transports by rail and by bus do not belong to the same market. [95]

209. The market investigation further provided an indication that the German bus market can be subdivided into the provision of scheduled bus services under a concession (Linienverkehre) and the provision of sub-contracted services that are provided to the concession holders (Auftragsverkehre). A majority of competitors indicated that the level of commercial risk and the contractual provisions are very different between the two types of services.

210. However, as the parties are (a) only exceptionally present in the provision of sub-contracted services [96] and (b) have no significant activities in the provision of non-scheduled bus services, the market for the provision of sub-contracted services and the market for the provision of non-scheduled bus services are not further discussed in this decision.

211. Furthermore, both "commercial", i.e. directly awarded, services and "non-commercial" services that are awarded following a tender, fulfil the same purpose for the Aufgabenträger, namely the provision of bus services to the public. The Commission therefore considers that "commercial" bus services and "non-commercial", i.e. tendered, bus services form part of the same market. The relevant market is therefore the competition for the market for scheduled bus services, including both "commercial" and "non-commercial" services.

212. In addition, several respondents to the market investigation (in particular smaller bus companies) indicated that scheduled passenger services should not include services by tram and metro as the provision of these services requires different know-how, special qualifications, and substantially larger financial investments. However, as competition concerns arise under any alternative product market definition, the precise market definition can be left open in this respect.

3. The relevant geographic market

213. Regarding the geographic market definition, the parties submit that t