|EUROPEAN COMMISSION |

Brussels, 12.4.2013

C(2013) 2162 final

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 Where possible the information omitted has been replaced by ranges of figures or a general description. | |Public version |

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| |MERGER PROCEDURE ARTICLE 6(1)(b) DECISION |

|To the notifying party |

Dear Sir/Madam,

Subject: Case No COMP/M.6722 – FrieslandCampina/ Zijerveld & Veldhuyzen and Den Hollander Commission decision pursuant to Article 6(1)(b) in conjunction with Article 6(2) of Council Regulation No 139/2004 [1]

1. On 19 February 2013, the European Commission received notification of a proposed concentration pursuant to Article 4 of the Merger Regulation by which the undertaking FrieslandCampina Nederland Holding B.V. ("FrieslandCampina", the Netherlands) acquires within the meaning of Article 3(1)(b) of the Merger Regulation, sole control of the undertakings Zijerveld & Veldhuyzen B.V. ("Z&V", the Netherlands) and Den Hollander Food B.V. ("Den Hollander", the Netherlands) by way of purchase of shares. [2] FrieslandCampina is designated hereinafter as "the Notifying Party". Zijerveld & Veldhuyzen and Den Hollander are designated hereinafter as "the Target". FrieslandCampina and the Target are designated hereinafter as "the Parties".

I. THE PARTIES

2. FrieslandCampina develops, produces and sells dairy products (primarily milk, yoghurt, cream, cheese, butter and desserts) for consumers across Europe, Asia, Africa, the Middle East and Australia. The company also produces non-dairy products, predominantly fruit beverages as well as ingredients for professional and industrial customers worldwide. [3]

3. Z&V is a specialised cheese wholesaler providing value-added services such as category consultancy in both the retail segment and in other sales channels, storing and maturing, distribution to different downstream channels and other tailor-made packaging services. Z&V's main focus is in the Netherlands but it also has some activities abroad, mainly in Germany, Belgium and North-European countries.

4. Den Hollander is active at the wholesale level providing services such as the cutting, slicing, grating and packaging of cheese. [4]

II. THE OPERATION

5. On 7 January 2013, the Parties signed a share purchase agreement by which FrieslandCampina intends to acquire all the shares of the Target, provided that certain shareholdings of the Target in other undertakings will not be affected by the proposed concentration. [5]

III. CONCENTRATION

6. In view of the above, the proposed transaction constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

IV. EU DIMENSION

7. The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million [6] (FrieslandCampina: EUR 9 626 million; Target: EUR […]). Each of them has an EU-wide turnover in excess of EUR 250 million (FrieslandCampina: EUR […]; Target: EUR […]). Only the Target achieves more than two-thirds of its aggregate EU-wide turnover in one Member State.

8. The notified operation therefore has an EU dimension within the meaning of Article 1(2) of the Merger Regulation.

V. COMPETITIVE ASSESSMENT

9. The proposed concentration concerns the dairy product sector and it gives rise to both horizontal overlaps and vertical relationships. The Parties overlap in the sale of a number of types of cheese to various downstream channels, primarily in the Netherlands and to a lesser extent in Belgium and Germany.

10. Furthermore, the Parties’ activities in cheese are vertically related since FrieslandCampina is a cheese producer and the Target is active downstream as a wholesaler and in the packaging market. In addition, the Parties overlap in the supply of other dairy products (value-added yoghurt/quark, portion pack dairy desserts, and packet butter with additives) to the downstream channels, again primarily in the Netherlands.

A. Relevant market definitions

(i) Dutch-type cheese

1. Introduction

11. The proposed transaction gives rise to horizontal overlaps and vertical relationships as regards the market for the sale of Dutch-type cheese in the Netherlands and other Member States.

12. The Commission dealt specifically with Dutch-type cheese in the case Friesland Foods/Campina. [7] In its decision in that case, the Commission referred to Dutch-type cheese as a category comprising Gouda, Maasdam and Edam cheeses. Gouda, Maasdam and Edam are made of cow's milk and have a fat content of 48%, 45% and 40% respectively. [8]

13. Dutch-type cheese can be produced as nature or rindless cheese. Nature cheese has a rind and is capable of maturing for up to one year and longer. Rindless cheese is wrapped in plastic foil when it is young and does not mature any further. [9]

14. Despite such differences, the beginning of the production process for both nature and rindless cheese is very similar: raw milk is pre-treated (standardised or pasteurised) and the water in the milk is partly removed to increase the proportion of dry matter in the milk. The milk is thickened with the help of rennet, and a starter culture is added to help shape the flavour of the milk. The process produces curds and a mass of solid cheese lumps with whey as by-product. After processing, the cheese is put into a brine bath. [10]

15. After the cheese is removed from the brine bath, however, the production processes of nature and rindless cheese differ considerably. [11]

16. The last stage of production of nature cheese entails coating of the rind, where it is dipped in paraffin to ripen it after it has left the brine bath. [12] Nature cheese can be moved from the production location at the earliest 15 days after production. [13] It is then normally matured by cheese producers or wholesalers in special maturing facilities where temperature and handling are carefully monitored and the cheese needs to be turned regularly and recoated. [14]

17. In contrast, at the last stage of production rindless cheese is packed in plastic bags (foil) immediately after it has left the brine bath and it is stored in a temperature regular controlled environment (4-6 degrees Celsius) for about 4 weeks. It is normally made available to the consumers at 28 days maturity. [15]

18. All Dutch-type nature cheese produced in the Netherlands is matured for at least four weeks before it is ready for consumption; often, it is matured for significantly longer periods. A significant proportion of Dutch-type cheese purchased by Dutch consumers is matured nature cheese of different ages. [16]

19. While all Dutch-type nature cheeses have their own traditional shapes (Gouda: round wheel shape, Maasdam: round bold shape and Edam: ball shape), they can also be produced as rectangular blocks (also referred to as "Euro shape cheese"). These blocks are easier to handle in the supply chain and are better suited for cutting/slicing and pre-packing equipment. Rindless cheese in the Netherlands is always produced in the form of rectangular blocks. [17]

2. Relevant product market

20. In previous decisions, [18] the Commission considered segmenting the cheese market according to cheese categories: (i) spreadable cheese; (ii) fresh cheese; (iii) soft cheese; (iv) semi-hard cheese; and (v) hard cheese. The Commission also considered segmenting the cheese market according to certain narrower cheese types (e.g. mozzarella), the type of presentation (slice, fixed weight, variable weight), type of milk used (e.g. mozzarella using different milks) and protected geographical status (e.g. “appellations d’origine controlée”).

21. As far as Dutch-type cheese is concerned, in Friesland Foods/Campina the Commission concluded that:

a) Dutch-type cheese forms part of a separate market from other hard/semi-hard cheeses;

b) The main varieties of Dutch-type cheese (namely Gouda, Maasdam and Edam) are likely to constitute separate markets, though ultimately the relevant product market definition was left open;

c) Nature and rindless cheeses are likely to constitute separate markets, though ultimately this point was also left open;

d) Branded and private label/unbranded cheeses belong to the same relevant product market;

e) There is a separate market for the supply to specialised cheese wholesalers;

f) There is a possible distinction between the supply to specialised cheese wholesalers of 15-day-old nature cheese and other nature cheese, although also this question was left open;

g) The supply to retail needs to be distinguished from the supply to out-of-home ("OOH") wholesalers and industrial customers. In addition, the supply to retail has to be segmented between modern types of retail (supermarkets) on the one hand and specialised cheese shops, open markets and other small retail outlets ("classic retail") on the other.

22. Each of these possible segmentations will be discussed below.

a) Dutch-type cheese vs. other hard/semi-hard cheeses

23. In Friesland Foods/Campina, the Commission concluded that Dutch-type cheese forms part of a separate market from other hard/semi-hard cheeses. [19] On the demand side, the Commission found that Dutch-type cheese is not in competition with other hard/semi-hard cheeses in the Netherlands in particular due to consumer preferences for Dutch-type cheeses and strong differences in taste and price. This was also evidenced by the fact that the consumption of other hard/semi-hard cheeses such as Emmenthal and Cheddar in the Netherlands is very low. On the supply side, the Commission found that a switch from the production of Dutch-type cheese to non-Dutch-type cheese would not have been sufficiently immediate and effective.

24. The Notifying Party does not explicitly object to the existence of a separate market for Dutch-type cheese.

25. As far as the Netherlands are concerned, the Commission considers in light of the market investigation that a separate market for Dutch-type cheese exists. In particular, a large majority of respondents stated that Dutch-type cheese would not be substitutable with non-Dutch type cheese from the Dutch consumers’ point of view. [20] In addition, a clear majority of customers stated that Dutch consumers do not consider Dutch-type cheese produced outside the Netherlands as competing with Dutch-type cheese produced in the Netherlands. [21] In addition, it appears that at present only one customer in the modern retail segment purchases significant volumes of Dutch-type cheese from non-Dutch suppliers. [22] Dutch customers' preference for Dutch-type cheese produced in the Netherlands could even become more significant given the increased popularity of protected designations of origins such as Gouda Holland (GH) or Noord-Hollandse Gouda (NHG) in the Netherlands. [23]

26. As regards supply-side substitutability, almost the entire output of Dutch cheese producers consists of Dutch-type cheese. [24] As a result, any possible switch in the production of non-Dutch type cheese in the Netherlands to Dutch-type cheese would be unlikely to have any effect, even without concluding on the technical feasibility of such switch and on the economic incentives to switch production.

27. As regards other geographic areas, the market investigation has been inconclusive as to whether the preferences of German and Belgian customers would lead to the existence of a separate market for Dutch-type cheese. [25]

28. In view of the above, the Commission concludes that there is a separate market for the supply of Dutch-type cheese in the Netherlands. As regards other Member States, the market definition can be left open, given that serious doubts would not arise even under the narrowest market definition.

b) Gouda vs. Maasdam vs. Edam

29. In Friesland Foods/Campina, the Commission found that consumers would not switch easily between Gouda, Maasdam and Edam due to differences in taste and consumption patterns. In addition, the Commission found that that supply-side substitution between Gouda, Maasdam and Edam in the Netherlands would be unlikely to be sufficiently immediate and effective. Nevertheless, the Commission left open the precise market definition as it did not have any material impact on the competitive assessment. [26]

30. The Notifying Party argues that there is only one single market for Dutch-type cheese in the Netherlands and that no further segmentation between Gouda, Maasdam and Edam is warranted. On the one hand, the Notifying Party contends that the argument that consumers would not switch between Gouda, Maasdam and Edam in the Friesland Foods/Campina decision was not substantiated. On the other hand, the Notifying Party submits that significant supply side substitutability between these types of cheese exists, mainly because the same production lines can be used to produce all the varieties of Dutch-type cheese.

31. The market investigation has been inconclusive as regards the existence of possible markets for Gouda, Maasdam and Edam cheeses. On the one hand, most respondents to the Commission's requests for information confirmed that customers do not see Gouda, Maasdam and Edam as substitutes. [27] On the other hand, however, most of the respondents stated that change in the price of one of these cheese varieties would have an impact on the others though it was also acknowledged that this could be due to the commonality of costs as all varieties are produced from the same primary raw material (cow milk). [28] As regards supply-side substitutability, half of the producers stated that they use the same lines to produce the three varieties of Dutch-type cheese.

32. In any event, the question as to whether separate markets exist for Gouda, Maasdam and Edam can be left open as no serious doubts would arise even under the narrowest market definition.

c) Nature vs. Rindless

33. In Friesland Foods/Campina, the Commission found that a clear majority of specialised cheese wholesalers in the Netherlands considers rindless cheese to be of a lower quality than nature cheese, due to differences in taste, structure and colour. In addition, the Commission considered it unlikely that a possible supply-side substitution effect in the Netherlands would be sufficiently immediate and effective. [29]

34. The Notifying Party submits that nature and rindless cheese form part of the same market for Dutch-type cheese. It considers that any alleged difference in the perceived quality of the two varieties is more one of perception that is not justified by market trends. In this respect, it notes that increasing volumes of cheese are sold to final consumers in the Netherlands as pre-packed cheese, whereby customers often do not even notice whether the cheese they are buying is nature or rindless. In addition, FrieslandCampina and many of its large competitors are able to switch production between nature and rindless without incurring any additional cost.

35. A clear majority of the replies to the Commission’s requests for information confirmed that nature and rindless cheese have different characteristics in terms of taste, quality and price. [30] From a supply-side perspective, however, approximately one third of the Dutch-type cheese producers responding to the Commission’s requests for information stated that they produce nature and rindless cheese on the same production lines. Another producer which currently uses different equipment stated that it would not be particularly expensive to switch from the production of nature to rindless and vice-versa. [31]

36. In any event, the question as to whether separate markets exist for nature and rindless Dutch-type cheese can be left open as no serious doubts would arise even under the narrowest market definition.

d) Branded vs. private label/unbranded

37. In Friesland Foods/Campina, the Commission found that only a small part of all sales of Dutch-type cheeses at retail level are producer-branded or wholesaler-branded while producers and specialised cheese wholesalers often focus both on the branded and on the private label/unbranded segment. Many of the same players offer both branded and private label/unbranded products. In addition, most companies active in modern types of retail in the Netherlands participating in the market investigation agreed that branded products and private label products compete on the shelves. Although differences at procurement level indicate different competition conditions for branded products and private label products as the latter are typically procured following a call for tenders, supermarket chains in the Netherlands also procure private label/unbranded cheese on the basis of bilateral negotiations. On these grounds, the Commission concluded that branded, private label and unbranded Dutch-type cheese belong to the same product market. [32]

38. The Notifying Party submits that producer brands play a very limited role in the market for Dutch-type cheese as more than 80% of the cheese is sold under private label or unbranded. For this reason marketing, promotion and brand related costs only play a very limited role in the cheese business and are hence not relevant to the assessment of supply-side substitutability. As such, the Notifying Party submits that branded and private label/unbranded Dutch-type cheese form part of the same market.

39. The market investigation revealed that a number of suppliers are active only or predominantly in the branded or private label/unbranded segments. In addition, a majority of customers responded that customers do not see branded and private label/unbranded Dutch-type cheese as substitutable because of brand loyalty or differences in taste and quality. [33]

40. In any event, the question as to whether separate markets exist for branded Dutch-type cheese and private label/unbranded Dutch-type cheese can be left open as no serious doubts would arise even under the narrowest market definition.

e) Specialised cheese wholesalers

41. In Friesland Foods/Campina, the Commission noted that specialised cheese wholesalers form an intermediate level between the production and downstream levels. Specialised cheese wholesalers do not sell cheese directly to the final consumer level. This clearly distinguishes them from the players active at the downstream level (retailers, OOH wholesalers, industrial users). In addition, specialised cheese wholesalers often buy 15-day-old nature cheese, a semi-finished product which is not yet ready for consumption but is further ripened by them for periods up to one year or longer. Accordingly, in view of this intermediary position of specialised cheese wholesalers between the production level and the downstream level, the Commission found it appropriate to define a separate market for the sale of Dutch-type cheese to specialised cheese wholesalers. [34]

42. The Notifying Party submits that the sales and sourcing market to and by wholesalers should comprise all hard/semi-hard cheese varieties. This is because wholesalers typically offer a whole assortment of cheeses or alternatively may specialise in certain types of cheeses.

43. The Commission considers in light of the market investigation that unlike downstream customers, many specialised wholesalers purchase 15-day-old nature Dutch-type cheese from producers. [35] In addition, based on the market investigation, the Commission considers that specialised wholesalers in the Netherlands play an important role. These wholesalers purchase from producers and sell to final customers, often adding value to the final product by means of services such as packaging, ripening, cutting and slicing.

44. In view of the above, the Commission concludes that a separate market exists for sales of Dutch-type cheese to specialised cheese wholesalers.

f) 15-day-old nature Dutch-type cheese vs. other nature Dutch-type cheese

45. In Friesland Foods/Campina, the Commission noted that 15-day-old nature Dutchtype cheese is a semi-finished product whose maturing is a fundamental part of the commercial activity of specialised cheese wholesalers and does therefore not satisfy the same demand as matured cheese. Furthermore, Dutch producers would need sufficient ripening capacities to significantly increase their production of 15dayold cheese. [36]

46. According to the Notifying Party, the difference between 15-day-old nature Dutchtype cheese and other nature Dutch-type cheese consists merely of the fact that the latter has matured in (the producer's or subcontracted) ripening facilities for a longer period of time. Questions of supply-side substitutability are not applicable since 15day-old nature Dutch-type cheese and other nature Dutch-type cheese are in essence one and the same product. If one were to consider supply-side substitutability, it would in this case amount to 100%. Accordingly, the Notifying Party maintains there is no separate market for sales of 15-day-old nature Dutch-type cheese.

47. A clear majority of the specialised wholesalers responding to the Commission's requests for information stated that they cannot switch their purchases between 15day-old and older than 15 days nature cheese. This is mainly because specialised wholesalers appear to focus on purchasing and ripening 15-day-old nature cheese, while customers not operating ripening facilities cannot purchase this type of cheese. [37]

48. In any event, the question as to whether separate markets exist for 15-day-old nature Dutch-type cheese and other nature Dutch-type cheese can be left open as no serious doubts would arise even under the narrowest market definition.

g) Modern retail vs. classic retail vs. OOH vs. industry

49. In Friesland Foods/Campina, the Commission found that the sale of Dutch-type cheese at the retail level on the one hand and the sale of Dutch-type cheese at the OOH and industry levels on the other hand fall within different product markets. This is because of differences in packaging, prices and business models. [38]

50. In addition, in Friesland Foods/Campina the Commission found important differences in offerings, supply structures, know-how and logistics between modern retail on the one hand and other types of retail outlets (such as specialised cheese shops, open markets, ambulant stands) on the other hand. Accordingly, the Commission found it appropriate to define a separate market for the sale of Dutch-type cheese to modern types of retail. [39]

51. The Notifying Party considers that all the segments above are served by specialised wholesalers whose core business is to accommodate demand from customers in all segments. On the other hand, the Notifying Party acknowledges that there are differences in the distribution of the cheese between the various segments mainly linked to the procurement strategies of downstream customers.

52. The Commission concludes in light of the market investigation that customers in retail, OOH and industry are different and that the suppliers are often active only in one or two segments. [40] In addition, entry does not appear to be straightforward, given that many customers pointed at large investments (up to EUR 10 million) and significant time (up to 8 years) required to move from one segment to the other, and particularly to enter the modern retail segment, where the barriers appear to be particularly high, inter alia for the presence of branded products and the need to supply very large volumes of cheese. [41]

53. In addition, as regards the modern retail private label segment, which constitutes the largest part of the sales in the channel, it appears that it is particularly important for customers to have access to a number of additional services, such as packaging, slicing, cutting, ripening, etc. Suppliers active in this segment therefore need to have captive capacity for these services or procure these services from third parties. [42] Retailers have no visibility as regards the price of these associated services given that suppliers charge one single price for the final offer. As such, packaging and related services (e.g. slicing and cutting) used exclusively for captive purposes do not appear to constitute separate markets but rather be an important part of the activities of cheese suppliers to the modern retail channel.

54. In view of the above, the Commission concludes that a separate market exists for sales of Dutch-type cheese to modern retail. In addition, for the purposes of this decision the Commission will also look at possible markets for classic retail, OOH and industry, although the market definition in this respect can be left open, given that no serious doubts would arise even under the narrowest market definition.

3. Relevant geographic market

3.1. Introduction

55. In Friesland Foods/Campina the Commission's assessment focused on the supply of Dutch-type cheese to specialised cheese wholesalers and modern retailers in the Netherlands. In addition to these segments considered in Friesland Foods/Campina, the proposed transaction leads to horizontally affected markets regarding the supply to the OOH and industry segments in the Netherlands, as well as in the supply to customers based outside the Netherlands (in particularly in Germany and Belgium).

3.2. Supply to specialised cheese wholesalers and modern retailers in the Netherlands

56. In Friesland Foods/Campina the Commission concluded that the markets for the sale of Dutch-type cheese (comprising both nature and rindless cheese) and the markets for the sale of nature Dutch-type cheese to specialised cheese wholesalers and modern types of retail were national in scope. The Commission based its conclusion on the importance of ingredients originating from the Netherlands, consumer preferences, consumption patterns, the absence of significant imports and the presence of specialised cheese wholesalers in the Netherlands. [43]

57. On the other hand, the Commission concluded that the markets for the sale of rindless Dutch-type cheese to specialised cheese wholesalers and modern types of retail were wider than national and included at least the Netherlands and Germany. In this regard, the Commission found that quality, taste and consumer preferences played a less important role, modern types of retail sourced almost 50% of their rindless cheese from abroad and many wholesalers indicated that they could source rindless cheese from abroad, in particular from Germany.

58. Despite the conclusion that a separate market for rindless Dutch-type cheese would be wider than national in scope, the Commission also concluded in Friesland Foods/Campina that the markets for the sale of Dutch-type cheese (comprising both nature and rindless cheese) were national in scope given the predominance of nature cheese over rindless cheese, [44] the existence of differences in quality and taste between rindless cheese produced in the Netherlands and abroad (albeit lower than in the case of nature cheese), the insignificant level of imports when considering rindless and nature cheese together and the limited competitive pressure exerted by rindless cheese upon nature cheese.

59. Furthermore, the Commission reached the same conclusions regarding potential narrower definitions of these markets only comprising Gouda, Maasdam or 15-day-old cheese.

60. The Notifying Party submits that the geographic markets for the sale of all Dutch-type cheese to specialised cheese wholesalers are at least EEA-wide in scope, while the markets for the sale to retailers comprise at least the Netherlands, Germany and Belgium.

61. The Notifying Party argues that rindless cheese of for instance German origin is in direct competition with Dutch-type nature cheese produced in the Netherlands. In addition, the Notifying Party submits that there are no specific consumer preferences regarding the origin of Dutch-type cheese particularly as the origin of Dutch-type cheese is often unknown to the consumer. With respect to the specific taste and quality of Dutch-type cheese, the Notifying Party notes that such finding would be inconsistent with concluding that the geographic scope of nature Dutch-type cheese is national while the geographic scope of rindless Dutch-type cheese is wider than national given that the quality of the raw milk and the production processes used in both types of cheese are the same.

62. Furthermore, the Notifying Party argues that since imports of Dutch-type nature cheese (mainly by specialised cheese wholesalers and predominantly from Germany) have grown considerably since 2007, [45] the Commission's statement in Friesland Foods/Campina that imports would be "virtually non-existent" and that wholesalers would barely be able to source nature Dutch-type cheese from abroad is no longer sustainable. In addition, transport costs are not an obstacle. Therefore, the Notifying Party submits that wholesalers would switch away to producers abroad should Dutch producers increase their prices by 5-10%.

63. The Commission considers based on the results of the market investigation that the findings of the Commission in Friesland Foods/Campina with respect to the supply of Dutch-type cheese (and potential narrower product segments) to specialised cheese wholesalers and modern retailers remain valid. In particular, a strong majority of the respondents indicated that Dutch consumers have specific preferences regarding the Dutch origin of Dutch-type cheese, Dutch-type cheese produced in the Netherland has a specific taste and higher quality, and consumption habits in the Netherlands are also different. [46] Furthermore, the replies to the market investigation from modern retail customers indicate that imports are still very low, with the exception of one retailer. [47] To the extent that some Dutch-type cheese is imported into the Netherlands, it seems that this is not directly sold to retailers but it is transformed first by Dutch wholesalers (through maturing, packaging etc.) into the final product. In addition, many respondents indicated that the creation of protected designations of origin ("PDOs") and protected geographical indications ("PGIs") and the investment on these geographic designations made by suppliers have reinforced the importance of the Dutch origin of the cheese. [48]

64. On the basis of the above, the Commission concludes that, as regards the supply of Dutch-type cheese to customers based in the Netherlands, the markets for the sale of Dutch-type cheese (comprising both nature and rindless cheese) and the markets for the sale of nature Dutch-type cheese to specialised cheese wholesalers and modern types of retail are national in scope. On the other hand, the markets for the sale of rindless Dutch-type cheese to specialised cheese wholesalers and modern types of retail are wider than national and include at least suppliers based in the Netherlands and Germany, and most likely Belgium, although the market definition in this respect can be left open, given that no serious doubts would arise even under the narrowest market definition. The same conclusions apply regarding potential narrower definitions of these markets only comprising Gouda, Maasdam, Edam or 15-day-old cheese.

3.3. Supply to the OOH and industry channels in the Netherlands

65. As regards the OOH and industry channels, which were not assessed in detail in Friesland Foods/Campina given that the merging parties stated that they were not active in those channels, [49] the Notifying Party submits that the geographic markets for the sale of all Dutch-type cheese to the industry channel are at least EEA-wide in scope, while the markets for the sale of all Dutch-type cheese to the OOH channel at least comprise the Netherlands, Germany and Belgium. In particular, the Notifying Party argues that transport costs are not an issue and that industrial customers often have only one or a few production sites to serve the entire European market and typically source their ingredients at a European level.

66. The market investigation has been inconclusive as regards the exact geographic scope of the markets for the supply of Dutch-type cheese (and potential narrower product segments) to the OOH and industry channels. In any event, the question as to whether the markets for the supply of Dutch-type cheese (and potential narrower product segments) to the OOH and industry channels are national in scope or wider can be left open as no serious doubts would arise even under the narrowest market definition.

3.4. Supply to customers based in Germany and Belgium

67. Regarding the supply to customers based in Germany and Belgium, which was not dealt with in Friesland Foods/Campina, the Notifying Party submits that there is not a distinct relevant market for the supply of Dutch-type cheese in any possible geographic market outside the Netherlands.

68. The market investigation indicated that the origin of the Dutch-type cheese (and potential narrower product segments), in particular whether it is produced in the Netherlands, is not important for German and Belgian consumers. Most of the Dutch-type cheese sold by the majority of the German and Belgian customers which responded to the market investigation is not sourced from the Netherlands, but from Germany (for Belgian and German customers) and from Belgium (for Belgian customers). [50] Furthermore, almost all German and Belgian customers have confirmed that Dutch-type cheese produced in the Netherlands and Dutch-type cheese produced outside the Netherlands compete on the shelves. [51]

69. In light of the above, the Commission concludes that the relevant geographic market for the supply of Dutch-type cheese (and potential narrower product segments) to Belgian and German customers includes volumes sold in these countries by at least German, Belgian and Dutch producers. In any event, the relevant geographic scope of the markets for the supply of Dutch-type cheese (and potential narrower segments) can be left open as no serious doubts would arise even under the narrowest market definition.

(ii) Semi-hard goat cheese

1. Relevant product market

1.1. Semi-hard goat cheese vs Dutch-type cheese

70. The Commission has not dealt explicitly with semi-hard goat cheese in previous decisions, though the Commission has considered splitting the relevant product markets for cheese according to the different types of milk used. [52]

71. According to the Notifying Party, semi-hard goat cheese is made from raw goat milk and can be distinguished from soft goat cheese mainly due to differences in consumption patterns, texture, taste and maturing process. In addition, the Notifying Party submits that semi-hard goat cheese is part of the overall Dutch-type cheese product market since it is consumed for the same purposes and often positioned on supermarket shelves alongside other Dutch-type cheeses. The Notifying Party also argues that it would be very easy to switch from producing cow milk cheese to goat milk cheese and vice-versa as both varieties are produced on the same production lines and the production method is known and easily accessible.

72. The Commission considers that, in light of the market investigation in the present case, contrary to Parties' view semi-hard goat cheese does not form part of the wider Dutch-type cheese market.

73. From the demand-side, all respondents to the market investigation indicated that semihard goat cheese is perceived by consumers as a different product. First, goat milk is totally different from cow milk. Second, there are differences in taste, colour and consumer preference between goat cheese and Dutch-type cheese. Whilst Dutch-type cheeses are a product for every day and mainly for mass consumption, goat cheese is a product for special occasions and thus consumers view goat cheese as a specialty cheese. Third, the price of semi-hard goat cheese is typically higher than that of Dutch-type cheese. [53] These factors indicate that from the demand-side perspective semi-hard goat cheese does not form part of the broader market of Dutch-type cheese.

74. According to the Commission notice on the definition of relevant market for the purposes of Community competition law, supply side substitutability may also be taken into account for the purpose of defining relevant markets in those situations in which its effects are equivalent to those of demand substitution in terms of effectiveness and immediacy. [54] That is, if “suppliers are able to switch their production to the relevant products and market them in the short term without incurring significant additional costs or risks in response to small and permanent price changes”, the resulting “disciplinary impact on the competitive behaviour of the companies involved” is regarded as equivalent to the restraining effects of demand substitutability. In these specific situations only supply side substitutability can constitute a basis for delineating the relevant product market.

75. From the supply-side, although it appears that the current producers of semi-hard goat cheese can produce semi-hard goat cheese and Dutch-type cheese using the same lines and production process, different storage tanks seems to be needed for the different origin of the milk. [55] The Commission considers in light of the market investigation that producers of Dutch-type cheese who are not currently active in semi-hard goat cheese would require a reliable flow of goat milk, a separate production line and milk tanks and new recipes to start to produce semi-hard goat cheese. Moreover, based on the market investigation the Commission found that these producers would not be interested in starting to produce semi-hard goat cheese due to the small scale of this market and the requirements needed. [56]

76. In light of the above, the Commission concludes that semi-hard goat cheese is not part of the market for Dutch-type cheese but constitutes a distinct product market in its own right.

1.2. Possible further segmentation

77. In light of the market investigation the Commission found that like most of the markets for cheese, also the semi-hard goat cheese market can be segmented according to different types of distributions channels. This is in line with the submission of the Notifying Party, which assuming that the market for semi-hard goat cheese formed part of a wider market for Dutch-type cheese has implicitly confirmed that the same distinction by sales channels apply.

78. Therefore, for the purposes of this decision, different markets for the sale of semi-hard goat cheese to wholesalers, [57] modern retail, classic retail, OOH and industry will be considered.

2. Relevant geographic market

79. The Notifying Party argues that the geographic market for the sale of semi-hard goat cheese is the same as that for Dutch-type cheese, that is to say (i) at least EEA-wide for the sale to specialised cheese wholesalers and industry and (ii) comprising at least the Netherlands, Germany and Belgium for the sale to retailers and OOH.

80. The market investigation has not confirmed the geographic market definition proposed by the Notifying Party.

81. Based on the market investigation the Commission found that there are no or very limited imports into the Netherlands of semi-hard goat cheese. Most of the customers of semi-hard goat cheese indicated that they source all their semi-hard goat cheese from the Netherlands and many customers are not aware of suppliers of semi-hard goat cheese located elsewhere. [58] Moreover, most of the customers indicated that they would not switch to purchasing semi-hard goat cheese from non-Dutch producers if a definitive price increase of 5-10% was imposed by Dutch producers. [59]

82. In addition, the vast majority of wholesalers in the market investigation indicated that Dutch customers show a clear preference for cheese produced from Dutch milk and produced in the Netherlands. [60]

83. In light of the above, the Commission concludes that the market for semi-hard goat cheese is no wider than the Netherlands.

(iii) Cheese packaging [61]

1. Relevant product market

84. While there are no Commission precedents specifically dealing with cheese packaging, in Alcan / Pechiney (II) the Commission concluded that the market for the production of flexible packaging could be segmented on the basis of the end-use application, and as such defined flexible packaging markets for products ranging from food to pharmaceuticals. [62] The Commission ultimately left the market definition open. Moreover, in Amcor / Alcan the Commission considered "cheese and dairy" as one of the possible segments of the food packaging activities on the basis of a third party report submitted by the parties to that transaction. [63]

85. The Notifying Party distinguishes different types of packaging such as fresh-packs, flow-packs and hard-packs. Fresh-pack (or "klappack") displays a great impression of freshness by making use of a special kind of "klappack" foil. Hard-packs (or "pre-packs") use thermoformed trays with rigid bottoms which are formed by moulding foil into a pre-defined dish or tray, using a heating and vacuum technique. A sealing unit extracts the oxygen and adds a protective gas before sealing the packaging. Flowpacks use flexible foil which is sealed in the same way as hardpacks.

86. The Notifying Party argues that packaging services for cheese could constitute a separate relevant product market. However, it submits that a further segmentation according to the different packaging methods should not be necessary since consumers usually do not perceive the differences and competitors would be able to apply all packaging methods.

87. The market investigation confirmed that cheese packaging is carried out by wholesalers and independent packers. The market investigation also pointed to a possible segmentation for each of the three main types of packaging (hard-pack, flowpack and fresh-pack). The respondents' replies suggest that customers do not see the different types of packaging as substitutes. In addition, there does not appear to be any substitutability from the supply side as the various packaging types require different production lines. In particular, hard packaging is mainly used for branded and private label cheese sold on the self-service shelves of supermarkets. By contrast, fresh packaging is mainly used to give a fresh impression to the cheese sold in the over-the-counter segment. The latter appears to be a relatively sophisticated activity and requires dedicated equipment that is currently not wide-spread among producers. [64]

88. For the purposes of the competitive assessment of the notified operation, however, the precise market definition can be left open as no serious doubts would arise even under the narrowest definition.

2. Relevant geographic market

89. In previous cases, the Commission found that the market for flexible packaging was EEA-wide in scope. [65] Customers indeed sourced at EEA-level and imports played a limited role.

90. The Notifying Party submits that the market for cheese packaging should similarly be considered as being EEA-wide. Companies providing this type of service in different Member States are in direct competition with each other. In addition, cheese is not a perishable good and can be transported easily over great distances without incurring prohibitive transportation costs.

91. The majority of respondents to the market investigation stated that packaging customers normally procure these services only or mostly at national level. This is mainly because of the higher transport cost for the packaged cheese compared to unpackaged cheese, as well as because of possible differences in packaging between Member States, for instance in relation to fresh-pack, which appears to be wide-spread only in the Netherlands and Belgium. [66]

92. For the purpose this decision, and given the peculiarities of packaging services relating to Dutch-type cheese, the packaging market will be assessed at the national level.

(iv) Value-added yoghurt and quark

1. Relevant product market

93. In Friesland Foods/Campina, the Commission left open the question whether value - added yoghurt and quark form a single relevant product market. [67] The Commission concluded that the retail and OOH distribution channels constituted separate products markets and left open the question whether the market should be further segmented into (i) health and non-health related segments; and (ii) private label and branded segments. [68]

94. The Notifying Party submits that it is not necessary to reach a view on the precise scope of the product market definition since the type of yoghurt sold by the Target (Greek yoghurt) appears to be a product somewhere between conventional yoghurt and quark, in terms of texture and taste.

95. The results of the market investigation suggested separation between markets of value-added yoghurt and quark. The vast majority of the producers responding to the Commission's requests for information pointed to the different tastes, prices and consuming moments between value-added yoghurt and quark from a consumer point of view. [69] In addition, most of the producers responding to the market investigation stated that they do not produce value-added-yoghurt and quark on the same production line. [70]

96. The majority of the respondents agreed with the previous findings of the Commission distinguishing the market for value-added yoghurt and quark according to distribution channels, pointing to differences in customers, consuming moments, formats and packaging. [71] Moreover, the vast majority of the respondents considered that branded products and private label products constitute different markets as the price for branded products is considerably higher than the price for private label products. [72]

97. However, the question as to whether the market for value-added yoghurt and quark should be further segmented can be left open, as it does not significantly affect the competitive assessment of the proposed concentration.

2. Relevant geographic market

98. In Friesland Foods/Campina, the Commission concluded that the relevant geographic market is national for the upstream market of value-added yoghurt and quark to OOH wholesalers and wider than national for the upstream market of value-added yoghurt and quark to retailers. [73]

99. Although the Notifying Party considers that the relevant geographic market might be wider than the findings in Friesland Foods/Campina, it provides market share estimates for the Netherlands only as the Target only sells Greek yoghurt to customers in the Netherlands.

100. As the transaction does not raise serious doubts as to its compatibility with the internal market under any alternative definition, the geographic scope of the market for value-added yoghurt and quark can be left open.

(v) Portion pack dairy desserts

1. Relevant product market

101. In Friesland Foods/Campina, the Commission concluded that portion pack dairy desserts (e.g. mousse, puddings and luxury desserts such as crème brûlée or tiramisu) constituted a relevant product market separate from the markets for fresh custard in gable top and porridge. [74] However, the Commission did not draw further conclusions as to the relevant product market for portion pack dairy desserts given the lack of a horizontal overlap between the activities of the merging parties in that case.

102. The Notifying Party in the present case, whilst not taking a clear position on the relevant product market, acknowledges that the type of desserts sold by the Target might be considered to be part of a wider market for portion pack dairy desserts where FrieslandCampina is also active.

103. The majority of the respondents to the Commission's request for information agreed with the previous Commission's definition of a separate market for (i) portion pack dairy desserts and (ii) fresh custard in gable tops and porridge as they believe consumers, prices, format and packaging are different. [75]

104. The respondents to the Commission's request for information similarly agreed with the Commission's proposed segmentation between distribution channels in OOH and retail relevant for portion pack dairy desserts, as customers and consuming moments as well as packages are often different in each of these channels. [76] The majority of the respondents do not consider a further segmentation between "basic" products and "luxury" desserts to be relevant and none of the respondents proposed another further segmentation. [77] All of the respondents reported that private label products are cheaper than brander products. [78]

105. However, the question as to whether the market for portion pack dairy desserts should be further segmented can be left open, as it will not significantly affect the competitive assessment of the proposed concentration.

2. Relevant geographic market

106. In Friesland Foods/Campina, the Commission concluded that the relevant geographic markets for custard in gable tops and porridge were national in scope [79] while it did not need to reach a conclusion on portion pack dairy desserts given the absence of any overlaps between the merging parties' activities in that case.

107. The market investigation in the present case has provided some indication that the market for portion pack dairy desserts is wider than national. All of the respondents to the market investigation indicated that Dutch consumers do not show a preference for portion desserts originating in the Netherlands. [80]

108. However, as the transaction does not raise serious doubts as to its compatibility with the internal market even on the basis of a geographic market that is no broader in scope than the Netherlands, the exact geographic scope of the market for portion pack dairy desserts can be left open.

(vi) Packet butter with additives

1. Relevant product market

109. According to previous Commission decisions, the butter market can be split into bulk and packet butter segments. [81] Within packet butter, the Commission concluded that the retail and OOH channels constitute separate product markets and left open the question whether the market should be further segmented into branded and private labels. [82] However, the Commission has not previously considered specifically herb packet butter or more broadly packet butter with additives.

110. The Notifying Party argues that herb packet butter is a part of a broader segment for butter with additives (e.g. herbs, garlic and salt), which would in turn be part of the relevant product market for packet butter given the existence of supply- and demand-side substitutability. According to the Notifying Party, packet butter with additives only differs from plain packet butter in respect of the additives that are added to the butter. Producers of packet butter with additives procure bulk butter and use the same blending machine to mix all additives. As far as demand-side considerations are concerned, the Notifying Party indicated that these products are all in the same range since consumers can choose between plain butter, salted butter, butter with sea salt or butter with more special additives such as herbs or garlic.

111. The results of the market investigation did not confirm the Notifying Party's submission that packet butter with additives is perceived by consumers as forming part of the packet butter market because the use and the moments of consuming are completely different. [83] At the same time, however, respondents to the Commission's requests for information did not consider that a further distinction between the various types of butter with additives (for example herbs or garlic) was appropriate since the moment of consuming are the same and customers can substitute herb butter and garlic butter. [84] From the supply side, it appears that, with the exception of FrieslandCampina, other producers of herb/additive butter in the Netherlands do not produce plain butter. [85]

112. On the basis of these elements, it appears that plain packet butter and packet butter with additives might constitute two separate markets. However, for the purpose of the present case, the exact definition of the relevant product market can be left open as this would not significantly affect the assessment of the proposed concentration.

2. Relevant geographic market

113. In Friesland Foods/Campina the Commission concluded that the relevant market for packet butter included at least Belgium, Germany and the Netherlands. The question whether the relevant geographic scope of the packet butter market is EEA-wide was left open. [86]

114. In line with the Commission precedents, the Notifying Party considers that the same approach applies to a market for packet butter with additives, noting that both Dutch and foreign producers of packet butter with additives compete in tenders organised by Dutch modern retail chains.

115. The market investigation has indicated that in the market for packet butter with additives the country of origin is of minor importance. Moreover, the majority of the respondents to the Commission's request for information indicated that Dutch consumers do not show a clear preference for herb butter originating in the Netherlands [87] and the Dutch origin of the product is not displayed in any special way on the packaging.

116. However, as the transaction does not raise serious doubts as to its compatibility with the internal market under any alternative definition, the geographic scope of the market can be left open.

B. Competitive assessment

(i) Dutch-type cheese

117. FrieslandCampina and the Target are both active in the supply of Dutch-type cheese. However, only FrieslandCampina is active in the production of Dutch-type cheese. As such, the overlaps between the Parties only arise at the level of sales to downstream customers.

Horizontally affected markets

1. Supply to modern retailers in the Netherlands

1.1. Introduction

118. The modern retail channel accounts for 53% of the overall Dutch-type cheese sales in the Netherlands. [88] It is therefore by far the single most important sales channel for Dutch-type cheese in the Netherlands.

119. According to the Notifying Party, the Parties' combined shares of sales in this market would amount to [40-50]%, with an increment of [10-20]% due to the Target. [89] The Parties' shares in the individual varieties of Dutch-type cheese would be [40-50]% for Gouda (with an increment of [10-20]% due to the Target), [80-90]% for Edam (with an increment of [0-5]% due to the Target) and [10-20]% for Maasdam (with an increment of [0-5]% due to FrieslandCampina). [90]

120. The Notifying Party submits that the merged entity will continue to face competitive pressure from a large number of rivals such as A-ware Food Group ("A-ware") (market share: [10-20]%), De Graafstroom ([5-10]%), Vergeer ([5-10]%), Cheesepartners ([5-10]%), Westland ([0-5]%) and CONO ([0-5]%).

121. From the demand side, the Notifying Party submits that the modern retail market in Netherlands is characterised by the presence of five large customers which account for approximately 99% of total demand: Albert Heijn, Bijeen, Superunie, [91] Aldi and Lidl. According to the Notifying Party, these customers exercise significant buyer power which would be sufficient to offset any potential anticompetitive effect resulting from the proposed transaction.

1.2. Concerns raised in the market investigation by certain players

122. During the course of the market investigation, a number of concerns have been raised by third parties regarding the position that would be acquired by the merged entity. In particular, two of these third parties have submitted formal complaints to the Commission. The main concerns identified by third parties as regards the impact of the proposed transaction on the Dutch-type cheese market are briefly outlined below.

123. First, some respondents to the market investigation submit that the largest alternative supplier listed by the Parties, A-ware, is not active at all in the supply of Dutch-type cheese to the modern retail channel. On the contrary, A-ware only provides logistics and accessory services (e.g. packaging and slicing) to the retailer Albert Heijn under an exclusivity agreement. As such, A-ware does not constitute an alternative to the merged entity for retailers.

124. Second, according to some respondents, Cheesepartners and Vergeer, which are both important players in the wholesale market, would not represent independent alternatives because of the corporate links between them, namely the packaging joint venture (Kraats Kaas) between Vergeer and the cheese producer DOC which owns Cheesepartners.

125. Third, certain respondents submitted that the Parties are particularly close competitors as regards the sale of private label/unbranded Dutch-type cheese to modern retail and the provision of associated services such as packaging.

126. Fourth, it has also been brought to the Commission's attention that access to cheese supply associated services such as cheese cutting, packaging and slicing is not readily available to all suppliers. As such, only a few suppliers are able to provide a comprehensive service to end customers.

127. In view of the elements above, certain market players submit that post-merger the sourcing alternatives for some large retailers may be significantly reduced. According to these market players, the merged entity would achieve a very important position in the market for the supply of Dutch-type cheese to the modern retail in the Netherlands, and this would lead to a significant impediment to effective competition in that market.

1.3. Commission’s assessment

128. In order to assess the proposed transaction also in light of the concerns submitted by certain market players, the Commission has carried out a thorough assessment of the impact of the proposed transaction on the market for the supply of Dutch-type cheese to the modern retail in the Netherlands.

129. The Commission’s assessment is based on information gathered in the context of its investigation by means of written requests for information, conference calls and meetings with the Parties as well as interested third parties.

130. On the basis of the result of this investigation, the Commission concludes that the proposed transaction does not raise serious doubts as to its compatibility with the internal market as regards the market for the supply of Dutch-type cheese to the modern retail in the Netherlands. [92]

1.3.a. The Parties' competitors

131. According to the Notifying Party, the merged entity will continue to face intense competition from a number of players. The most important of these players would be A-ware, De Graafstrom, [93] Vergeer and Cheesepartners (DOC).

132. In order to appreciate the competitive pressure that will continue to constrain the merged entity, the Commission has carefully assessed the position of each of the main competitors of the Parties.

133. First, A-ware is active in the market as the main supplier of cheese associated services to the retailer Albert Heijn for cheese purchased from third parties. Albert Heijn is the largest retailer in the Netherlands. A-ware does not supply any cheese or provide any associated service to any other retailer in the Netherlands. Retailers' replies to the market investigation confirm that they do not list A-ware amongst cheese suppliers. As such, it appears that A-ware does not constitute a suitable direct alternative for most of the retailers in the Netherlands.

134. It is however worth noting that A-ware is an important supplier of cheese and associated services such as packaging and ripening to other suppliers. For instance, Aware provides ripening services to the Target, as well as packaging to the producer De Graafstroom.

135. The Commission therefore considers that A-ware should not be included in the calculation of the market shares in the market for sales of Dutch-type cheese to modern retailers. However, the substantial sales attributed by the Parties to A-ware are reflected in either the sales of other wholesalers (who are the ones who actually sell to retailers and outsource services from A-ware) or in the amount of imported cheese (which is subsequently transformed by A-ware).

136. In view of these factors, the exclusion of A-ware from the market represents in fact a conservative approach, likely to downplay the indirect competitive constraint constituted by the presence of a large player such as A-ware.

137. Second, the Commission concludes in light of the market investigation that the producer De Graafstroom is an active competitive force in the market for Dutch-type cheese and supplies its products to some retailers in the Netherlands.

138. Third, the Commission has not found any clear evidence that Vergeer and Cheesepartners would not be actively competing for customers. On the contrary, Vergeer and Cheesepartners have participated in tenders for the same customers, clearly competing against each other. In addition, each of the two companies stated that they see the other as a competitor. [94]

139. In view of the above, it appears that at least De Graafstroom, Vergeer and Cheesepartners will continue to exercise competitive pressure on the merged entity. In addition, the Commission considers in light of the market investigation that a number of smaller players such as Uniekaas, Vandersterre and Westland will remain active on the market. The Commission also considers, based on the market investigation, that a number of other large players such as Westland, CONO and Bel Leerdammer will also remain active on the market.

1.3.b. Market reconstruction

140. On the basis of the findings above and the other information gathered in the course of the market investigation, the Commission has reconstructed the position of the competitors in the market for the supply of Dutch-type cheese to modern retailers in the Netherlands.

141. Table 1 below outlines the results of this market reconstruction exercise. [95]

Table 1: Supply of Dutch-type cheese to modern retailers in the Netherlands (2011)

Supplier |Dutch-type cheese (Tons) |Dutch-type cheese (%) |

FrieslandCampina |[…] |[20-30]% |

Target |[…] |[10-20]% |

Combined |[…] |[40-50]% |

Vergeer |[…] |[10-20%] |

Imports Even if imported Dutch-type cheese is not currently purchased by most of the Dutch retailers, imports still appear to represent an alternative for at least one of them (Albert Heijn). As such, the inclusion of imports in the market shares reconstruction would seem to be justified. In any event, even if imports were to be excluded, the Parties' market share would not be significantly different and amount to approximately [40-50]%. Even if imported Dutch-type cheese is not currently purchased by most of the Dutch retailers, imports still appear to represent an alternative for at least one of them (Albert Heijn). As such, the inclusion of imports in the market shares reconstruction would seem to be justified. In any event, even if imports were to be excluded, the Parties' market share would not be significantly different and amount to approximately [40-50]%. |[…] |[5-10%] |

Cheesepartners |[…] |[5-10%] |

De Graafstroom |[…] |[5-10%] |

Westland |[…] |[0-5%] |

Vandersterre |[…] |[0-5%] |

Vepo |[…] |[0-5%] |

Others |[…] |[10-20%] |

Total |143.142 |100% |

142. The Commission agrees with the market size presented by the Notifying Party based on Nielsen data [97] and hence with the Parties' market shares computed based on their sales. On the basis of the market reconstruction above, it appears that the merged entity would continue to face competition from a number of big established players such as Vergeer, Cheesepartners and De Graafstroom as well as from numerous other smaller competitors.

1.3.c. Complementarity between the Parties’ activities

143. The proposed transaction would remove the competitive constraint constituted by each Party on the other. In order to appreciate the magnitude of this competitive constraint, the Commission has assessed whether the Parties could be considered as closest competitors.

144. First, the core activities of the Parties appear to be different.

145. FrieslandCampina is mainly engaged in high volume production and deliveries of Dutch-type cheese. FrieslandCampina focuses on bulk products and cost leadership in production rather than on high quality services on the distribution level.

146. By contrast, the Target offers a comprehensive solution to its customers by combining a complete Dutch and foreign cheese portfolio to all downstream distribution channels, both fresh-pack cheese and pre-packaged cheese with all kinds of high quality services. The Target operates a sophisticated distribution network and provides category consultancy services to individual retailers amongst others with the help of a special tool called "Kaaskompas" (Cheese compass), with which it can develop a tailor-made portfolio proposal for individual retailers based on amongst others the demographic environment in the area the retailer is located. [98]

147. Second, while both FrieslandCampina and the Target supply private label/unbranded Dutch-type cheese, only FrieslandCampina is active to any appreciable extent in the supply of branded Dutch-type cheese. [99]

148. Third, as far as packaging is concerned, both FrieslandCampina and the Target are active in the supply of hard-packed Dutch-type cheese for the self-service shelves. However, only the Target is active in the supply of fresh-packed cheese to modern retailers. This type of cheese is mainly sold as over the counter (OTC) cheese in supermarkets to give customers the impression of fresher and more “natural” cheese.

149. It follows from the above that within the modern retail channel the only appreciable area of overlap between the Parties is with regard to the supply of private label hard-packed cheese for self-service shelves. [100]

1.3.d. Impact of the proposed transaction on the private label hard-packed cheese segment

150. According to data gathered by the Commission in its market investigation, [101] the private label hard-packed cheese segment represents less than 50% of the overall market for sales of Dutch-type cheese to the modern retail (i.e. less than 70 000 tons). The Parties' sales in this segment amount to less than […] tonnes ([…] tons Friesland Campina and […] tons for the Target). These sales would represent a combined share of the segment of approximately [40-50]%.

151. A number of credible competitors (for instance, Vergeer, Cheesepartners and De Graafstroom) are all offering substantial volumes of private label hard-packed cheese and are competing against each other in the tenders organised by the retailers. Bidding data collected from retailers shows that all these competitors are normally invited to participate in tenders. The bidding data also shows that all the retailers have sourced from two or more other players independent from the Parties in the past three years.

152. Furthermore, the market investigation has revealed that the private label hard-packed cheese segment is a highly competitive market. The product supplied appears to be more commoditized and less sophisticated than other products in the cheese market (such as branded or fresh-packed cheeses). It seems that price is the only factor, or at least a very significant one, which determines the choice of suppliers in the tenders organised by retailers.

153. The findings above are confirmed by the Parties’ margins in the sales of private label hard-packed cheese to modern retailers submitted at the request of the Commission. In most years and for the vast majority of the sales, both FrieslandCampina and the Target realised […]. In this case, low pre-merger margins would seem to be compatible with the existence of strong competition in the segment pre-merger.

154. In markets (or segments) where competition pre-merger is particularly intense, only a significant change in the market structure and dynamics can normally lead to anticompetitive effects. In this case, the increment in the shares brought by the Target to FrieslandCampina does not appear to be particularly large ([5-10]%). Therefore, the proposed transaction would be unlikely to result in anticompetitive effects.

155. In addition, even within the private label hard-packed cheese segment, the Parties’ activities appear to remain largely complementary. On the one hand, FrieslandCampina is a large producer of wedges, which are not supplied by the Target. On the other hand, the Target is an important supplier of grated cheese, which is not manufactured and supplied by FrieslandCampina.

156. The only area of overlap between the Parties in the private label hard-packed cheese segment arises with regard to sliced cheese.

157. This sub-segment represents less than 20% of the overall market for Dutch-type cheese sold to retailers and the Parties’ combined sales of sliced cheese would amount to approximately [30-40] of the sub-segment. The sub-segment for sales of sliced cheese is unlikely to constitute a separate market because of possible demand-side substitutability between slices on the one hand and other shapes such as wedges on the other, [102] as well as prompt availability of slicing capacity which makes entry in the market easy for a company which is already active in the wholesale of other types of cheese. [103]

158. The Parties are not the only suppliers of sliced cheese. Competitors in this sub-segment indeed include Vergeer, Cheesepartners and De Graafstroom. In addition, other players like A-ware or Kraats have sufficient slicing capacity to offer to other wholesalers, who could promptly enter the market in case of a price increase.

159. In view of the above, it appears that the Parties are not the closest competitors even in the narrow segment for sales of private label hard-packed cheese. A number of competitors would remain active in the segment and continue to constrain the behaviour of the merged entity.

1.3.e. Competitors’ expansion

160. The Commission has also assessed whether possible expansion from the Parties’ rivals would be constrained by a bottleneck at any point of the supply chain.

161. First, as regards expansion at production level, the volume of Dutch-type cheese produced in the Netherlands is significant in relation to the overall size of the national retail market. The total production of Dutch-type cheese in the Netherlands amounts to 756 500 tons, while the size of the overall market for sales of Dutch-type cheese to modern retailers amounts to only 143 142. [104]

162. FrieslandCampina is one of the two main producers of Dutch-type cheese, the other one being DOC. The third main supplier of base cheese for private labels is De Graafstroom. [105] In addition, a number of existing suppliers such as CONO, DOC and Bel Leerdammer are currently planning to expand their production capacity. [106] The large wholesaler A-ware is also currently building in cooperation with Fonterra a cheese production factory that will enter in operation as of 2014 with a total production capacity of 60-80 000 tons. [107]

163. Second, there appears to be sufficient captive and non-captive packaging capacity available in the market. The Notifying Party estimates capacity utilisation at packaging level at less than 60%. Furthermore, packaging in the only segment where the Parties’ activities’ overlap (i.e. hard-pack) appears to be relatively common and does not require significant technology or know-how.

164. Based on the market investigation the Commission considers that, apart from the Parties, there are at least three important wholesalers who have significant packaging capacity (Vergeer: 30-45 000 tons, Kraats Kaas: 20 000 tonnes and and A-ware: 105 000 tons). [108] These three wholesalers alone represent a packaging capacity which is approximately equivalent to the total size of the market of Dutch-type cheese in the Netherlands.

165. Lastly, there appears to be sufficient slicing capacity in the market to allow the remaining competitors to expand also in this narrow segment. According to the Notifying Party's estimates, the total slicing capacity in the Netherlands would amount to 213 500 tons per year and the slicing capacity utilisation to 59%. Competitors which are currently operating large slicing facilities include A-ware (85 000 tons/year), Vergeer (10 000 tons/year) and Uniekaas (4 000 tons/year). [109]

166. In view of the above, the Commission concludes that the merged entity’s rivals will not face any significant obstacle to expansion, should they wish to expand output as a reaction to a price increase from the merged entity.

1.3.f. Buyer power

167. In the course of the market investigation, the Notifying Party has not been able to substantiate sufficiently its argument that large retailers exercise buyer power such as to prevent any possible price increase.

168. Nevertheless, in light of the market investigation the Commission considers that large retailers are able to put in place strategies which would appear to be adequate to contribute to offsetting a possible price increase, taken in conjunction with the elements mentioned above.

169. First, Albert Heijn, the largest retailer in the Netherlands, has successfully implemented a procurement strategy that allows the company to source directly from producers, thereby bypassing wholesalers. As discussed above, this strategy is based on a co-operation with A-ware, which provides cheese associated services to Albert Heijn. Also as a result of this strategy, the volumes that Albert Heijn purchases from FrieslandCampina in the past years have been progressively reduced to a significant extent.

170. Second, in light of the market investigation the Commission considers that retailers would try to sponsor entry as a reaction to a price increase and that similar strategies already took place after the 2008 merger between Friesland Foods and Campina. [110] Given the lack of bottlenecks at the levels of production, packaging and slicing level, it appears that such attempt could be successful even for a player which would source from third parties all of these services, with a view to providing the final product to the retailer.

171. In absence of more convincing evidence of buyer power from the Notifying Party, the elements above do not appear in themselves to be sufficient to fully remove the risk of a price increase caused by the proposed transaction. However, if taken jointly with the other factors discussed above, they further decrease the likelihood for anticompetitive effects to arise.

1.3.g. Conclusion

172. In view of the above, the Commission concludes that the proposed transaction does not raise serious doubts as to its compatibility with the internal market with regard to the sale of Dutch-type cheese to the modern retail in the Netherlands.

2. Supply to classic retailers in the Netherlands

173. The table below provides the Notifying Party's market share estimates for the supply of Dutch-type cheese and Gouda nature cheese to classic retailers in the Netherlands.

Table 2: Supply of Dutch-type cheese to classic retailers in the Netherlands (2011)

Supplier |Dutch-type cheese (%) |

FrieslandCampina |[5-10]% |

Target |[5-10]% |

COMBINED |[10-20]% |

Vandersterre |[20-30]% |

Cheesepartners |[5-10]% |

Westland |[5-10]% |

A-ware |[5-10]% |

CONO |[5-10]% |

Vergeer |[0-5]% |

Uniekaas |[0-5]% |

Others |[20-30]% |

Total market size |28 257 tons |

174. According to the Notifying Party's estimates, post-transaction the merged entity would have relatively low market shares in the supply of Dutch-type cheese ([10-20]%) to classic retailers in the Netherlands. [111]

175. The Notifying Party submits that Vandersterre is the Target’s closest competitor in the supply to classic retailers and Vandersterre remains even post-transaction the largest supplier of cheese to the classic retail. It also argues that typically in this segment the market is very fragmented with numerous smaller suppliers.

176. The market investigation indicated that there will remain a sufficient number of alternative suppliers to the merged entity for Dutch-type cheese, Gouda nature cheese and Maasdam nature cheese. [112] In addition to the suppliers listed by the Notifying Party, the responses from suppliers indicated that for example Bel Leerdammer and CONO are active in the supply of Dutch-type cheese. [113] Moreover, none of the respondents to the Commission's requests for information raised any substantiated concerns with respect to the Parties' overlap in the supply to classic retailers. [114]

177. In light of the above, the Commission concludes that the proposed transaction does not raise serious doubts as to its compatibility with the internal market with regard to the supply of Dutch-type cheese, Gouda nature cheese and Maasdam nature cheese to classic retailers in the Netherlands.

3. Supply to the industry segment in the Netherlands

178. The table below provides the Notifying Party's market share estimates for the supply of Dutch-type cheese to the industry segment in the Netherlands.

Table 3: Supply of Dutch-type cheese to the industry segment in the Netherlands (2011)

Supplier |Dutch-type cheese (%) |

FrieslandCampina |[10-20]% |

Target |[0-5]% |

COMBINED |[10-20]% |

A-ware |[20-30]% |

Poll Food/Vepo |[10-20]% |

Cheesepartners |[5-10]% |

Imports |[0-5]% |

Others |[20-30]% |

Total market size |70 150 tons |

179. According to the Notifying Party's estimates, post-transaction the merged entity would have a relatively low market share ([10-20]%) in the supply of Dutch-type cheese to the industry in the Netherlands. [115]

180. The Notifying Party submits that the increment ([0-5]%) is very limited and therefore the proposed transaction would not lead to a significant impediment to effective competition.

181. The market investigation confirmed that there will remain a sufficient number of alternative Dutch-type cheese suppliers to the merged entity for the industry segment. [116] The replies to the market investigation indicated that CONO, Rouveen, Uniekaas, Vandersterre and Vergeer are also present in the market. Furthermore, none of the respondents to the market investigation raised any substantiated concerns with respect to the Parties' overlap in this segment. [117]

182. In light of the above, the Commission concludes that the proposed transaction does not raise serious doubts as to its compatibility with the internal market with regard to the supply of Dutch-type cheese to the industry segment in the Netherlands.

4. Supply of Dutch-type cheese to modern retailers in Germany [118]

183. The table below provides the Notifying Party's market share estimates for the supply of Dutch-type cheese to modern retailers in Germany. [119]

Table 4: Supply of Dutch-type cheese to modern retailers in Germany (2011) [120]

Supplier |Dutch-type cheese (%) |

FrieslandCampina |[20-30]% |

Target |[0-5]% |

Combined |[20-30]% |

Total market size |286 479 tons |

184. According to the Notifying Party's estimates, post transaction the merged entity would have a market share of [20-30]% (FrieslandCampina: [20-30]%, Target: [0-5]%) in the supply of Dutch-type cheese to modern retailers in Germany. [121]

185. The Notifying Party submits that Dutch-type cheese (and potential narrower segments) is not a distinct relevant product market in any possible geographic market outside the Netherlands. Furthermore, it argues that there are sufficient alternative suppliers, such as DMK, Müller, DOC/Cheesepartners, Vergeer and Baackes&Heimes.

186. The Commission considers in light of the market investigation that alternative suppliers exist and that customers are generally not concerned. [122] While a minority of the customers raised concerns regarding the reduction of available suppliers, these customers did not substantiate these concerns and indicated that there are still a number of current or potential available suppliers, such as Ammerland, DOC, Heinrichstaller or Sachsenmilch. Furthermore, other customers also indicated other current or potential suppliers, such as A-ware, Belgomilk, DMK, Kraats Kaas, PG Kaas, Rücker or Vergeer.

187. The Commission concludes, in light of the above and the other evidence available, that the proposed transaction does not raise serious doubts as to its compatibility with the internal market with regard to the supply of Dutch-type cheese (and potential narrower product segments) in Germany.

Vertically affected markets

1. Production and wholesale of cheese

188. The proposed transaction would lead to vertically affected markets as regards the production and wholesaling of Dutch-type cheese, including a market segment concerning 15-day-old nature cheese. The table below provides the Notifying Party's estimates for (i) FrieslandCampina’s and its competitors’ market shares in the supply of Dutch-type cheese to specialised cheese wholesalers in the Netherlands; and (ii) the Target’s and its competitors’ market shares in the sourcing of Dutch-type cheese by specialised cheese wholesalers in the Netherlands. [123]

Table 5: Supply of Dutch-type cheese to specialised cheese wholesalers in the Netherlands (2011)

Supplier |Dutch-type cheese (%) |

FrieslandCampina |[30-40]% |

DOC |[20-30]% |

Graafstroom |[5-10]% |

CONO |[0-5]% |

Bel Leerdammer |[0-5]% |

Rouveen |[0-5]% |

Other producers |[5-10]% |

Import |[10-20]% |

Total market size |340 350 tons |

Table 6: Sourcing of Dutch-type cheese by specialised cheese wholesalers in the Netherlands (2011)

Wholesaler |Dutch-type cheese (%) |

Target |[10-20]% |

A-ware |[20-30]% |

Cheesepartners |[10-20]% |

Uniekaas |[10-20]% |

Poll Food / Vepo |[5-10]% |

Westland |[5-10]% |

Vergeer |[0-5]% |

VanderSterre |[0-5]% |

Other wholesalers |[10-20]% |

Total market size |340 350 tons |

189. In the overall market for the supply of Dutch-type cheese to specialised cheese wholesalers in the Netherlands, FrieslandCampina has a market share of [30-40]%, while the Target's market share in the overall market for the sourcing of Dutch-type cheese is [10-20]%.

190. The Notifying Party submits that FrieslandCampina's estimated market share strongly decreased since 2009 (from [40-50]% to [30-40]%). Furthermore, the Notifying Party argued that that the market share estimate for DOC, FrieslandCampina's main competitor, was considered to be conservative, as the Notifying Party estimated DOC's total production capacity at 115 000 - 120 000 tons.

191. Based on the market investigation the Commission found that the estimate of DOC's share of the supply to specialised cheese wholesalers was conservative, as their supply volume to specialised cheese wholesalers in 2011 was 118 500 tons, which increases their market share to [30-40]%, decreasing FrieslandCampina's market share to a similar figure ([30-40]%).

192. Furthermore, as regards a potential input foreclosure scenario, while a number of specialised cheese wholesalers that responded to the Commission's requests for information have raised concerns relating to an alleged lack of alternative suppliers to FrieslandCampina, some of these concerns are not substantiated and others are not merger specific. [124] In addition, the Commission considers in light of the market investigation that there are alternative suppliers to FrieslandCampina and that wholesalers can easily switch suppliers.

193. In addition, it appears unlikely that FrieslandCampina would be able to channel its current volume supplied to specialised cheese wholesalers only or to a large extent through the Target, as this would mean an increase of […] kt to […] kt. Likewise, it appears unlikely that FrieslandCampina would have the incentive to forego the profits that it makes in the supply of the […] kt supplied to other specialised cheese wholesalers as it would be difficult to compensate for the sales losses with sales downstream.

194. Moreover, the increment in the market shares at wholesale level brought about by the proposed transaction is relatively low. It follows that the change in incentives for FrieslandCampina to engage in an input foreclosure strategy after the proposed transaction would not change to any significant extent.

195. Regarding a potential customer foreclosure, such a scenario would be highly unlikely since the Target already sources [60-70]% of its volume from FrieslandCampina and the remaining volume ([…] tons) corresponds to only [5-10]% of the total volume supplied to specialised cheese wholesalers. The Target’s current suppliers would therefore have the ability to find alternative customers in the event that the merged entity would internalise this volume.

196. The same assessment concerning potential input and customer foreclosure scenarios applies to the supply of 15-day-old nature Gouda cheese, which is the only 15-day-old Dutch-type cheese sourced by the Target.

197. Regarding input foreclosure, such scenario would be highly unlikely for various reasons. First, none of the specialised cheese wholesalers raised concerns specific to 15-day-old cheese. Second, it appears unlikely that FrieslandCampina would be able to channel its current volume of 15-day-old nature Gouda cheese supplied to specialised cheese wholesalers only or to a large extent through the Target, as this would mean an increase of […] kt to […] kt. Third, even if FrieslandCampina would channel its entire current volume of 15-day-old nature Gouda cheese through the Target, other specialised cheese wholesalers would still have access alternative suppliers. These alternative suppliers represent around [60-70]% of the total volume of 15day-old nature Gouda cheese and, as mentioned in recital 162, there are expansion plans. Fourth, it appears unlikely that FrieslandCampina would have the incentive to forego the profits that it makes in the supply of the […] kt supplied to other specialised cheese wholesalers as it would be difficult to compensate for the sales losses with sales downstream.

198. As regards a potential customer foreclosure of 15-day-old nature Gouda cheese of the other cheese producers, such a scenario would also be highly unlikely since the Target already sources around [70-80]% of its volume from FrieslandCampina and the remaining volume ([…] tons) corresponds to only [5-10]% of the total volume supplied to specialised cheese wholesalers. The Target’s current suppliers would therefore have the ability to find alternative customers in the event that the merged entity would internalise this volume.

199. The table below shows the volumes of Dutch-type cheese and 15-day-old nature Gouda cheese sourced by the Target from each of its suppliers.

Table 7: Sourcing of Dutch-type cheese and 15-day-old nature Gouda cheese by the Target (2011)

Supplier |Dutch-type cheese (tons) |Percentage of total sourcing represented by supplier |15-day-old Gouda nature cheese (tons) |Percentage of total sourcing represented by supplier |

FrieslandCampina |[…] |[60-70]% |[…] |[70-80]% |

DOC |[…] |[20-30]% |[…] |[20-30]% |

De Graafstroom |[…] |[0-5]% |[…] |[5-10]% |

A-ware |[…] |[0-5]% |[…] |[0-5]% |

Rouveen |[…] |[0-5]% |[…] |[0-5]% |

Others |[…] |[0-5]% |[…] |[0-5]% |

Total |46 546 |100% |32 523 |100% |

200. One producer raised concerns relating to the Target’s activities as a wholesaler for the classic retail segment and a potential foreclosure to the producer's access downstream. However, as already discussed, these concerns do not appear to be substantiated as there are other wholesalers which are active in the supply to this segment.

201. In light of the above, the Commission concludes that the proposed transaction does not raise serious doubts as to its compatibility with the internal market with regard to the vertical relationship between FrieslandCampina as a supplier of Dutch-type cheese (and other potential narrower product segments such as 15-day-old nature Gouda cheese) to specialised cheese wholesalers in the Netherlands and the Target as a specialised cheese wholesaler in the Netherlands.

2. Supply of Dutch-type cheese to specialised cheese wholesalers and downstream markets in the Netherlands and provision of packaging services for third parties

202. There is no overlap between the Parties’ activities with regard to the supply of packaging of Dutch-type cheese to third parties in the Netherlands, given that FrieslandCampina is not active at all in this market. [125]

203. However, the Target provides non-captive packaging services (i.e. without supplying the cheese together with the packaging) to […].

204. In particular, the Target (through Den Hollander) has packaging lines dedicated exclusively to packaging and cutting services for […], including slicing for hardpacks, flowpacks (for the OOH segment) and freshpacks. […].

205. Furthermore, post-transaction the merged entity would compete with […] in the supply of Dutch-type cheese in the Netherlands, in particular in the supply to specialised cheese wholesalers (Gouda and Maasdam) and modern retailers (Maasdam). In addition, as already mentioned, the merged entity would have market shares above 25% in these markets.

206. In light of the fact that […] and the merged entity would be competitors, […] has indicated that innovations to be developed with Den Hollander would be stopped and, in case new investments would be required, […] and Den Hollander would need to enter into new mutual commitments.

207. It appears unlikely however that the merged entity will have the ability to foreclose access to the downstream market by interrupting packaging services to […]. First, the packaging services concerned only represent a limited proportion of […] total requirements. Second, […] has indicated that there are alternative providers of these packaging services to which it could switch if necessary within a relatively short period.

208. In any event, the merged entity does not appear to have the incentive to foreclose […]. This [reference to internal documents]. [126]

209. In light of the above, the Commission concludes that the proposed transaction does not raise serious doubts as to its compatibility with the internal market with regard to the vertical relationship between the Target as a provider of packaging services to third parties and FrieslandCampina as a supplier of Dutch-type cheese to specialised cheese wholesalers and downstream markets in the Netherlands.

3. Other vertical issues [127]

210. A number of third parties have raised concerns with respect to the potential increase of cost transparency resulting from the combination of two companies which are essentially active at different levels of the supply chain, given FrieslandCampina’s position in the production of Dutch-type cheese in the Netherlands and the Target’s presence in cheese wholesaling, packaging and cutting.

211. However, as discussed there exist alternative suppliers of the products and services provided by each party to the proposed transaction. Therefore, any buyer concerned by an increase in its exposure to the merged entity would be able to decrease such exposure by switching at least part of the services or products sourced from the merged entity to another supplier.

212. In addition, FrieslandCampina is already active both at production and wholesale level and Zijerveld is already an important customer of FrieslandCampina. Therefore, FrieslandCampina could already access potentially sensitive information gathered through its activities at all levels of the supply chain. The additional transparency that would be generated by the proposed transaction, if any, is unlikely to create any merger-specific anticompetitive effects.

(ii) Semi-hard goat cheese

213. The Parties' activities overlap in the production and sale of semi-hard goat cheese to downstream markets mainly in the Netherlands. [128]

1. Production of semi-hard goat cheese

214. The total production of semi-hard goat cheese in the Netherlands was approximately 12 500 tons in 2011. [129]

215. FrieslandCampina produces semi-hard goat cheese at its production plant in Gerkesklooster (the Netherlands), which also produces cheese from cow milk. In 2011, FrieslandCampina produced approximately […] tons of semi-hard goat cheese at this facility. In addition, FrieslandCampina also sources semi-hard goat cheese from Amalthea Van Dijk B.V ("Amalthea") under a toll manufacturing agreement. FrieslandCampina does not have any goat farmer members in its cooperative and therefore has to procure the raw goat milk from third parties. FrieslandCampina procures most of its goat milk requirements from Coöperatie Belangenvereniging Melkgeitenhouderij Midden Nederland U.A. ("CBM"), a cooperative of goat farmers with which it has a long-term contract.

216. Z&V has an exclusive supply agreement with Amalthea. Amalthea is a joint venture between the Cooperative Amalthea, a Dutch co-operative of Dutch and Belgian goat farmers, and Zuidelijke Land- en Tuinbouw Organisatie (ZLTO). [130] The co-operative's member farmers annually supply approximately […] kg of raw goat milk. This milk is processed in Amalthea's production plant in Rijen into semi-hard goat cheese. The production facility currently has a production capacity of […] tons of (brinedried) semi-hard goat cheese per year. [131]

217. According to the terms of their Cooperation Agreement (Samenwerkingsovereenkomst tussen Zijerveld en Veldhuyzen B.V en Amalthea Van Dijk B.V en Ontwikkelingsbureau Intensieve Veehouderij B.V.), […]. In 2011, Amalthea supplied approximately […] tons of semi-hard goat cheese to Z&V under the terms of the Cooperation Agreement.

218. In addition, as mentioned in recital 215 above, Amalthea's production capacity is also available for the production of semi-hard goat cheese for third parties using goat milk supplied by such third parties. On this basis, Amalthea produced […] tons of semi-hard goat cheese for FrieslandCampina in 2011.

219. The proposed transaction will bring together the production of the two most important producers of semi-hard goat cheese in the Netherlands. The proposed transaction will indeed combine on the one hand FrieslandCampina’s own production capacity and Amalthea’s production capacity that is currently dedicated to FrieslandCampina, and on the other hand the production capacity that Amalthea uses to supply Z&V under the terms of the Cooperation Agreement.

220. The Cooperation Agreement constitutes a structural link between Z&V and Amalthea’s activities, given its exclusive nature and the fact that it will last at least until […]. In addition, the potential yearly renewal of the contract implies that the Cooperation Agreement may last well beyond its currently foreseen expiry date.

221. In view of the above, even if the Parties’ own production activities do not overlap directly at the production level, the effect of the proposed transaction will be equivalent to that of a merger with horizontal overlaps at production level.

2. Sales of semi-hard goat cheese to downstream markets

222. As mentioned above, specialised wholesalers purchase cheese from producers and other wholesalers to resell to final customers and thus the Parties' activities overlap in the sale of semi-hard goat cheese to wholesalers. In 2011, FrieslandCampina sold […] tons of semi-hard goat cheese to wholesalers whilst the Target sold […] tons.

223. Furthermore, the Parties' activities also overlap in the sale of semi-hard goat cheese to the classic retail and industry.

3. Assessment

224. Most of the respondents to the market investigation indicated that post-transaction the Parties will acquire a dominant position on the production of semi-hard goat cheese due to the combination of FrieslandCampina’s production capacity with the exclusivity agreement between Z&V and Amalthea. Moreover, respondents to the market investigation submitted that the consolidation at the production level leading to a dominant supplier on the market will give rise to increased prices for semi-hard goat cheese. The Commission also considers that in light of the results of the market investigation the consolidation at the production level could eliminate other suppliers of semi-hard goat cheese to the downstream markets. [132]

225. According to the Notifying Party, the proposed transaction would not give rise to a significant impediment to effective competition in the market for semi-hard goat cheese. The Notifying Party submits that current producers of semi-hard goat cheese (namely Rouveen and Henry Willig) or potential producers, such as DOC, would readily be able to procure sufficient raw goat milk in case the Parties' customers would want to switch volumes to third parties as there are sufficient quantities of raw goat milk traded domestically in the Netherlands and beyond. In addition, the merged entity will have neither the ability nor the incentive to foreclose other wholesalers since there are enough alternative production sources available for wholesalers and their total sourcing is many times larger than the total domestic demand in the Netherlands given that the majority of semi-hard goat cheese sourced by wholesalers in the Netherlands is exported. Finally, as FrieslandCampina's sales of semi-hard goat cheese to classical retail and industry are de minimis ([…] tons and […] tons respectively), the proposed transaction would not have any significant impact on competition in these markets.

226. In light of the market investigation the Commission considers that the merged entity will achieve a key position both in the production and sale of semi-hard goat cheese in the Netherlands and will face limited competition from existing suppliers.

3.1. Horizontal overlaps

227. The combination of FrieslandCampina’s and Amalthea’s activities at production level will entail serious consequences on the market structure at horizontal level.

228. Post-transaction, FrieslandCampina and the Target (via Amalthea) would reach a combined market shares of [60-70]% in the production of semi-hard goat cheese. The only remaining producers of semi-hard goat cheese in the Netherlands are Rouveen ([20-30]%) and Henry Willig ([10-20]%).

229. With regard to the market for sales of semi-hard goat cheese to wholesalers, the Parties' combined market share would amount to approximately [60-70]% (FrieslandCampina: [40-50]% and the Target: [10-20]%). The only other suppliers of semi-hard goat cheese to wholesalers would be Rouveen ([10-20]%) and Henri Willig ([10-20]%). [133]

230. The Parties’ activities overlap in the sale of semi-hard goat cheese to classic retail and industry. In particular, the Parties' combined market shares amounts to [30-40]% (FrieslandCampina: [5-10]% and the Target: [30-40]%) at the classic retail level and [90-100]% (FrieslandCampina: [70-80]% and the Target: [20-30]%) at the industry level. However, as submitted by the Notifying Party, the volumes in these segments are very limited and therefore the additional anticompetitive harm brought by these overlap is likely to be small.

3.2. Vertical relationships

231. The Parties' activities do not overlap in the sales of semi-hard goat cheese to modern retail in the Netherlands, which constitutes by far the largest segment among the different downstream channels for the sale of semi-hard goat cheese. While the Target has a very impo