COMMISSION DECISION of 30/09/1999 declaring a concentration to be compatible with the common market (Case No IV/JV.22 - * / *** FUJITSU / SIEMENS) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

Brussels, 30 September 1999

To the Notifying Parties

Dear Sirs,

Subject: Case No IV/JV.22 Fujitsu/Siemens Notification of 27 August 1999 pursuant to Article 4 of Council Regulation No 4064/89

1. On 27 August 1999, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EEC) No 4064/89 [1] by which Fujitsu Limited ("Fujitsu") and Siemens AG ("Siemens") intend to create a joint venture company ("JVC"). The JVC is to be engaged in the development, manufacture and sale of general-purpose computer hardware and related products, including desktop PCs, laptops, workstations, servers, storage systems and certain server operating systems.

[1] OJ L 395, 30.12.89, p.1; corrected version OJ L 257 of 21.9.1990, p13; as last amended by Regulation (EC) No 1310/97, OJ L 180, 9.7.1997, p.1, corrigendum in OJ L140, 13.2.1998, p.17

2. After examination of the notification, the Commission has concluded that the notified operation falls within the scope of Council (EEC) Regulation No 4064/89, and does not raise serious doubts as to its compatibility with the Common Market and the EEA agreement.

I. THE PARTIES

3. Fujitsu is a Japanese-based provider of information technology and network solutions. The Fujitsu group comprises over 500 subsidiaries world-wide, including ICL, Amdahl and the DMR consulting group. Fujitsus principal subsidiaries in the European Union are located in the United Kingdom, Germany, Spain and Finland. Fujitsu is active in the manufacture and sale of a wide range of computer, semiconductor, and telecommunications products and the provision of related services. [2]

[2] See Case No IV/M.977 - Fujitsu/Amdahl.

4. Siemens is a German-based provider of electronic engineering and electronics products and services. Siemens sells products and services in the fields of energy industry, transportation, healthcare lighting, information and communication, and household appliances. Siemens has subsidiaries in most Member States.

II. THE OPERATION

5. The proposed concentration will be established by a Joint Venture Agreement ("JVA") between Fujitsu and Siemens, dated 11 August 1999. According to the JVA, the parties will create a new joint venture company ("JVC") combining the entire activities of Fujitsu Computers (Europe) Ltd. ("FCEL"), a subsidiary of Fujitsu, with the European activities of the Computer Systems Division ("CSD") of Siemens Information and Communications Product Group. According to the parties, CSD comprises the entire computer hardware business of Siemens in Europe. The activities of the JVC will be the development, manufacture, distribution, marketing and sale of desktop computers, servers, storage systems, workstations and other computer hardware and related products (such as high-end server operating systems). It will be active in the CIS, the Middle East, Africa, Western and Eastern Europe (together, the "European Zone"). The JVC will rely on the parents for servicing and after sales maintenance of these computers and operating systems.

III. THE CONCENTRATION

a) Joint control

6. According to the JVA, each party will own 50% of the shares in the JVC. The JVC Board will consist of [...] directors. Each party will have the right to designate [...] directors, [...].

7. Votes of the JVC Board will be taken by simple majority. Each director will have one vote, but at each meeting the votes exercisable by each partys directors will be equal in number. [...].

8. In respect of, inter alia, the budget, the business plan, and the appointment and dismissal of senior management, the JVCs Board decisions have to be taken by a vote in favour of at least [...] directors including at least [...] directors from Fujitsu and [...] from Siemens.

9. It follows that decisions regarding key commercial matters need the approval of both parties and that they therefore exercise decisive influence over the joint venture. Fujitsu and Siemens therefore jointly control the joint venture.

b) Full-function joint-venture

10. The parties will contribute to the JVC all the assets and activities of FCEL and all the assets and activities of CSD in the European Zone. Both FCEL and CSD currently operate as independent business entities.

11. The JVC will have its own management dedicated to day-to-day operations. It will take over FCEL and CSDs existing offices and personnel (more than 9000 employees in total). It will own FCEL and CSDs existing intellectual property rights and will thus carry out all the functions normally carried out by a company in the field of computer hardware products.

12. The parties intend the JVC to be permanent. It is installed for an initial period of [...] years and will operate indefinitely thereafter. [...]

13. The joint venture will therefore perform on a long-lasting basis all the functions of an autonomous economic entity. The proposed operation, therefore, constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

IV. COMMUNITY DIMENSION

14. The combined aggregate world-wide turnover of Fujitsu (EUR 35,800 million) and Siemens (EUR 59,000 million) exceeds the EUR 5,000 million threshold. The aggregate Community-wide turnover of each of these companies is more than EUR 250 million (Fujitsu EUR[...] and Siemens EUR [...]). Neither Fujitsu nor Siemens achieve more than two-thirds of its aggregate Community-wide turnover within a single Member State. The notified operation therefore has a Community dimension. It does not constitute a co-operation case under the EEA agreement, pursuant to Article 57 of that agreement.

V. COMPETITIVE ASSESSMENT

A. Relevant Product Markets

a) Laptops, desktop computers and workstations

15. The notifying parties identify a number of product markets for computers and computer related products. These include personal computers, where the parties, based on certain functional characteristics and price, differentiate between laptops, desktop computers and workstations. [3] According to the parties, laptops are compact computers with an integrated keyboard and a flat screen, a large storage hard disk and a battery. Laptops are designed for mobile users and, as such, are highly transportable. The use of desktop computers is usually restricted to a fixed place. Due to different component features, the price of a laptop is usually higher than the price of a desktop computer. The parties define a workstation as an intermediate computer between a powerful desktop computer and a midrange computer. [4] Typically, a workstation would be a high-speed desktop computer used for intensive processing tasks such as Computer-Aided Design ("CAD"), engineering and the creation of computer graphics.

[3] In previous decisions the Commission has considered whether the personal computer market should be subdivided into several markets without it being necessary to define these markets, see decisions in Cases IV/M.920 - Samsung/AST at para. 7; IV/M.050 - AT&T/NCR at para. 6. However, the Commission identified workstations as a separate relevant product market, see decisions in Cases IV/M.129 - Digital/Philips at para. 9 and 17; IV/M.057 - Digital/Kienzle at para. 10, 11 and 19.

[4] This differentiation is in line with the Commission decisions in Digital/Philips and Digital/Kienzle, cited above.

16. A number of third parties which replied to the Commission's request for information, have stated that desktop computers, laptops and, to some extent, even workstations are based on the same technology, have similar capabilities, run with the same operating system and software applications and can be used for the same or similar purposes. Therefore, a distinction between the different categories of personal computers is not justified. It is, however, for the purpose of this case not necessary to delineate further the relevant product market since there is no creation or strengthening of a dominant position irrespective of the market definition chosen.

b) Servers

17. The suggested relevant product markets furthermore include servers, which the parties define as computers providing services to other computers or terminals connected to a network. With regard to servers, the parties differentiate between three relevant server categories according to price bands: entry servers costing less than US$ 100,000; midrange servers costing between US$ 100,000 and US$ 1 million; and high-end servers costing over US$ 1 million. This is in line with previous Commission decisions concerning servers. [5]

[5] In previous decisions the Commission has considered dividing servers according to price bands without actually considering it necessary to define these markets, see the decisions in Cases IV/M.1120 - Compaq/Digital at para. 7; IV/M.977 - Fujitsu/Amdahl at para. 6; and IV/M.963 - Compaq/Tandem at para. 9.

18. The notifying parties suggest that a differentiation could also be made according to the operating systems, which run on them. [6] The parties submit that a division by reference to operating systems would largely, although not entirely, coincide with the division according to price bands mentioned above. The parties identify a high-end server segment that consists of supercomputers and mainframe computers. Mainframe computers are used in commercial environments for business transactions such as order processing, booking and payment systems. Supercomputers work on scientific tasks. All products identified in the high-end server segment have proprietary operating systems running on them. The investigation has revealed that servers in the midrange and entry categories can run either on open or proprietary operating systems.

[6] In Case IV/M.1120 - Compaq/Digital the Commission has considered dividing the product markets according to the operating system running on the hardware platform without, in the end, having to define the relevant market.

19. Third parties which replied to the Commission's request for information, have confirmed that only proprietary operating systems are able to run on high-end servers. According to several of the responses received, this distinguishes high-end servers from entry level and midrange servers. As the parties overlap is limited to entry servers and no competition problems would arise on this market as a result of the proposed operation, it is not necessary to define precisely the relevant product market, since, even on narrower definitions considered, the proposed operation would not create or strengthen a dominant position irrespective of the market definition chosen.

c) High-end operating systems

20. Concerning server operating systems, the parties argue that all high-end servers run on proprietary operating systems (mostly IBM OS/390), while the entry level and midrange server operating systems are increasingly platform-independent. Platform independence for entry level and midrange servers but not for high-end servers is a finding in line with a previous decision. [7]

[7] Case IV/M.1120 - Compaq/Digital at para. 8.

d) Storage systems for desktop computers and servers

21. The suggested relevant product markets furthermore include storage systems. The parties state that a storage system is a peripheral device, which provides the external memory of the computer system. The parties distinguish between various types of storage devices, such as "floppy disk drives", "tape drives" and "CD-ROM drives", typically used with desktop computers, and "direct access storage devices" or "DASDs", the main type of external storage device used with servers. A DASD is capable of storing many thousand times the data contained on a "floppy disk".

22. However, it is not necessary to further delineate the relevant product markets for storage systems, since with all alternative product market definitions considered, the concentration would not create or strengthen a dominant position as a result of which effective competition would be significantly impeded in the EEA or in any substantial part thereof.

B. Relevant Geographic Markets

23. The parties state that the relevant geographic scope for all relevant product markets is world-wide, or at least EU-wide. The Commission has indicated in previous decisions [8] that, given the small transport costs relative to price, the similarity of consumer preferences, product specifications and patterns of sales of major manufacturers throughout the EEA countries, the relevant geographic markets for personal computers, servers, workstations and disk storage systems appear to be at least EEA-wide.

[8] See the Commission decisions in Cases IV/M.1120 - Compaq/Digital at para. 11; IV/M.963 - Compaq/Tandem at para. 11; the question was left open in IV/M.977 - Fujitsu/Amdahl.

24. Some third parties, however, expressed the view that products vary from region to region. They also state that, for certain hardware computer products, there might be different market structures and national preferences. Finally, these differences are reflected in different regional strengths and weaknesses of certain suppliers. In light of these comments, the investigation assessed competitive conditions on the EEA levels and the national levels.

25. However, since the investigation revealed that the concentration would not create or strengthen a dominant position as a result of which effective competition would be significantly impeded in the EEA or in any substantial part of that area, the question of whether markets were national or EEA-wide could be left open.

C. Assessment

26. There is no overlap with respect to midrange servers and high-end servers and high-end server operating systems, as Fujitsu is not active in these areas.

27. The notifying parties activities overlap with respect to desktop computers, laptop computers, entry servers, storage systems, and workstations.

28. According to available data, [9] the notifying parties' aggregated share of sales in 1998 in each of the markets in which there activities overlap, i.e. laptops, desktop computers, workstations, low-end servers and storage systems does not exceed 15% in the EEA.

[9] Source: Dataquest.

29. On a national level, the parties aggregated share of sales in 1998 also do not exceed 15% in any Member State, except for desktop computers and entry servers in Germany and Austria. The tables below indicate the parties position in desktop computers and entry servers in the EEA, Germany and Austria:

30. Concerning desktop computers, the parties face significant competitors throughout the EEA and in particular in Germany and Austria. Vobis Computers, in 1998 accounted for a German share of sales of [15-25]%, Compaq accounted for [10-20]%of the German market and IBM for approximately [0-10]%. In Austria Compaq accounted for [10-20]% of the 1998 desktop computer market, IBM for [10-20]% and Vobis for [0-10]%. Both Compaq and IBM are strong and resourceful competitors commanding EEA-wide share of sales of [15-25]% and [5-15]% respectively. Thus, in the EEA both Compaq and IBM have shares of sales, which exceed or are comparable to those of the JVC ([0-15]%). Their competitive potential is much stronger than their German market shares in 1998 suggest. Furthermore, the overall volume of desktop computers has significantly increased over the last three years (+40% in value terms for the EEA, +30% for Germany and +57% for Austria).

31. Thus, although the parties would, after the merger, have a leading position in Germany and would share the leading position in Austria with Compaq, their aggregated market share is still relatively small with no dominant position. The investigation has shown that desktop computers is a growing market. In addition, the parties will face significant competitive constraint from a number of important suppliers of desktop computers in these countries as well as in the EEA.

32. Concerning entry servers, Compaq accounts for [20-30]% of EEA sales, for [20-30]% in Germany and for [20-30]% in Austria. Other important suppliers of entry servers in the EEA, Germany and Austria are IBM ([20-30]% EEA-wide, [15-25]% in Germany and [20-30]% in Austria), HP ([10-20]% EEA-wide, [10-20]% in Germany and [0-10]% in Austria. The parties would therefore face strong competitors as at least three major suppliers have significant activities in entry server products.

33. Therefore, the notified operation will not have a significant impact on competition either in Germany and Austria or within the EEA. Finally, the investigation revealed that at least IBM, Compaq and HP offer a range and variety of computer hardware products, which is comparable in scope to that of the JVC.

34. It can be concluded from the above, that the proposed concentration would not create or strengthen a dominant position as a result of which effective competition would be significantly impeded in the EEA or any substantial part of that area.

D. Co-ordination of competitive behaviour

35. Pursuant to Article 2(4) of the Merger Regulation, to the extent that the creation of a joint venture has as its object or effect the co-ordination of the competitive behaviour of (at least two) undertakings that remain independent, such co-ordination shall be appraised in accordance with the criteria of Article 81(1) and (3) of the EC Treaty. In order to establish a restriction of competition in the sense of Article 81(1) of the EC Treaty, it is necessary that the co-ordination of the parent companies competitive behaviour is likely and appreciable and that it results from the creation of the joint venture, be it as its object or its effect.

a) Definition of the candidate markets for co-ordination

36. According to Article 2(4)(2) of the Merger Regulation, the Commission shall, when making the said appraisal, take into account in particular whether two or more parent companies retain to a significant extent activities in the same market as the joint venture or in a market that is upstream or downstream from that of the joint venture or in a neighbouring market closely related to this market. Therefore, candidate markets for co-ordination are those on which the joint venture and at least two parent companies remain active, or closely related neighbouring markets where at least two parent companies are active or markets upstream or downstream from the joint venture, in which at least two parent companies are active.

1) Relevant product markets

37. As mentioned above, the JVC will be active in the development, manufacture and sale of laptops, desktop computers, workstations, storage systems and servers. None of these markets are candidate markets for co-ordination, as Fujitsu will be the only parent company to remain active in the product categories covered by the JVC.

38. Both parent companies will remain active in a number of upstream or downstream information technology ("IT") markets, such as the production of semiconductor chips, DRAM semiconductor chips, and financial and retail workstations. Both parent companies will also remain active in neighbouring markets such as hardware maintenance services, IT services (among others, advice on information systems, outsourcing, systems management), global account IT services (IT services to global customers, as defined below) and IT software.

39. For the reasons set out in the assessment below, apart from DRAM semiconductor chips, financial and retail workstations, hardware maintenance services and global account IT services, the definition of further candidate markets for co-ordination can, however, be left open.

i) DRAM semiconductor chips

40. Both Fujitsu and Siemens will remain active in the manufacture of dynamic random access memory ("DRAM") semiconductor chips. DRAMs are semiconductors for storage of binary data used mainly in computer hardware. Semiconductors are part of the electronic components sector. The parties further distinguish between commodity DRAMs, used as components for personal computers, and high-speed DRAMs, used in high-performance servers and workstations. The parties state that Siemens (Infineon) is active mainly in commodity DRAM production, [...].

41. For the reasons set out in the assessment below, the precise product market delimitation, and, in particular, the question whether commodity and high-speed DRAMs form two separate relevant product markets, can be left open.

ii) Financial and Retail Workstations

42. Both Siemens and Fujitsu will remain active in the financial and retail workstation markets. [10] Financial workstations are utilised in the banking sector. They consist of Automatic Teller Machines ("ATM") and Cash Dispensers, which connect to a central computer. These central verification points link with computerised bank accounts. [11] Retail workstations are configurations of cash register and/or automatic credit/debit facilities, which connect to central verification points in the same way as ATMs and Cash Dispensers. Retail workstations are utilised in the retail hotel and restaurant businesses. Competitors and customers alike saw a steady and ongoing trend toward convergence between personal computers, workstations and financial and retail workstations.

[10] This has been held a market vertically related to the manufacture of personal computers in the Commissions decision in Case IV/M.050 - AT&T/NCR at para. 11.

[11] See Commission decision in Case IV/M.050 - AT&T/NCR at para. 12.

iii) Hardware Maintenance Services

43. The JVC will not have its own service organisation, but will rely on the service organisations of both parent companies as preferred partners. Thus, both parents remain active in hardware maintenance services. Fujitsu will provide hardware maintenance services through its subsidiaries Amdahl, ICL and FIESA. Siemens will provide hardware maintenance services through its subsidiary ITS. Hardware maintenance services are therefore a candidate market for co-ordination.

44. Hardware maintenance consists of preventive and remedial services that physically repair or optimise hardware. They comprise basic installation, contract maintenance, per-incident repair, technical troubleshooting by telephone and assistance for set-up. Hardware maintenance services are this mostly after-sales services. The parties state that such services are provided either by the manufacturers themselves (by in-house maintenance departments) or by third party maintenance providers. The notifying parties further submit that computer vendors typically have business units that maintain a variety of systems. Third-party maintenance companies usually specialise in maintaining more than one type of system. The notifying parties emphasise the importance of a service organisation in the midrange and high-end server business. This is because the breakdown of these servers can lead to significant losses for the customer concerned.

iv) Global Account IT services

45. Both parties will remain active as independent providers of global account IT services and projects. Fujitsu will remain in this market through its subsidiaries Amdahl and ICL, and Siemens through its subsidiaries ITS and SBS. Global account IT services therefore is a candidate market for co-ordination.

46. Global account IT services comprise the maintenance and upgrading of information technology infrastructures, the design of customised IT solutions, the development of internet and intranet sites, systems integration for international infrastructure projects and related consulting services for global customers. According to the parties, customers for global account IT services are "global" companies, i.e. companies who have subsidiaries in more than one region (continent) of the world. The parties define a region as Asia/Pacific, the Americas or the European Zone. Global customers require a complete range of computer and information technology products and solutions. The parties identify major airlines, insurance companies or automotive companies as "global" customers. A global account IT project is a request from a global customer for the implementation of a project in several countries in more than one region.

2) Relevant geographic markets

47. There are several factors in favour of an EEA-wide market for the manufacture and sales of semiconductor chips. Low transportation costs, the absence of import tariffs and the world-wide distribution systems for semiconductors are indicators that the market is at least EEA-wide. However, for the purposes of this case, it is not necessary to further delineate the relevant geographic market, because, the analysis would be identical for all alternative geographic markets considered. [12]

[12] The Commission has previously not found it necessary to define the geographic scope of the semiconductor markets, see decision in Case IV/M.1492 Hyundai Electronics/LG Semicon at para.10.

48. In a previous decision, the Commission has found the relevant geographic market for financial and retail workstations to be Community-wide in scope. [13] The Commission based this assessment on the following facts: customers do not limit their choice to national manufacturers, all major suppliers were present in all national markets, there is substantial cross-border trade and national buying preferences are absent.

[13] See Commission decision in Case IV/M.050 - AT&T/NCR at para. 13.

49. With respect to hardware maintenance services, the Commission, in previous cases, [14] has taken into account the importance of being able to communicate in the customers own language and the importance of a local presence. These arguments play in favour of national markets. Nevertheless, the precise definition of the geographical market has always been left open.

[14] The Commission has analysed the geographic scope of service markets in previous cases without finding it necessary to take a position on the issue, see the decisions in Cases IV/M.50 - AT&T/NCR; IV/M.668 - Philips/Origin; IV/M.705 - Deutsche Telekom/SAP-S; IV/M.798 - General Electric/CompuNet; and IV/M.1580 - CAI/Platinum.

50. The provision of global IT services usually requires a world-wide service network corresponding to the global customers own network and might thus be world-wide in scope. However, a number of third parties which replied to the Commission's request for information, indicated that customers of global IT services do not always purchase on a global basis, even if the customer operates globally. In light of this comment, an assessment of the parties position was accordingly made at both the national levels and the EEA level. However, the question whether the markets were national or EEA-wide could be left open, as no competitive concerns arise on either definition.

3) Assessment under Article 2(4)

51. There is no evidence to support the conclusion that the JVC has the object of co-ordinating the competitive behaviour of Fujitsu and Siemens in the candidate markets for co-ordination. However, it might be the effect of the operation to give way to co-ordination of competitive behaviour of Fujitsu and Siemens in all these markets.

52. In making the assessment whether co-operation between the parent companies in the joint venture might have the effect to give rise to co-ordination in the candidate markets, the structure of the candidate markets, the parties shares of sales in the candidate market, the structure of the candidate market and the structural change resulting from the creation of the joint venture are relevant.

i) Semiconductor chips (DRAMs)

53. The three biggest producers in the production of DRAMs, taken as a whole, account for a combined world-wide share of sales exceeding [45-75]% (Samsung: [20-30]%; Hyundai/LG Semicon: [15-25]%; Micron/Texas Instruments: [10-20]%). It appears that the competitive situation on an EEA-wide level reflects the situation prevailing on a world-wide level.

54. Siemens, in March 1999, has spun-off its semiconductor chip manufacturing business into a separate company, Infineon Technologies AG ("Infineon"). Siemens at present still holds 100% of the shares in Infineon. [...] Thus, the five biggest producers of DRAMs, among themselves, account for a combined world-wide share slightly exceeding [60-70]% ([...]). The production of DRAMs therefore can be considered as being concentrated.

55. Fujitsu also is a manufacturer of memory chips and, in particular DRAMs, accounting for approximately [0-10]% of DRAM sales world-wide. [...].

56. Nevertheless, only a relationship of interdependence between the five major producers in the DRAM market would allow the conclusion that co-ordination of the competitive behaviour between Siemens and Fujitsu was sufficiently likely. Therefore, the question whether the characteristics prevalent on the DRAM market are conducive to a relationship of interdependence between the major suppliers becomes relevant.

57. The Commissions investigation of the DRAM market revealed that this market does not display the characteristics which usually militate in favour of assuming a relationship of interdependence between the major producers: First, the prices for DRAMs are not transparent. Indeed, prices are normally the result of negotiations between producers and customers. Second, most customers are major original equipment manufacturers, which command significant countervailing bargaining power. Third, overall price trends in DRAMs have been unpredictable. Demand forecasts beyond three months have consistently proven unreliable. Fourth, the cycles between shortage and oversupply are very short. This leads to constant fluctuations in price and the necessity to react immediately to changing conditions of the market. Fifth, supply and demand inter-react almost immediately. Sixth, DRAMs are products undergoing rapid technological evolution and there is strong competition with respect to innovation. These findings are in line with the views expressed by third parties which replied to the Commissions request for information.

58. It results from the above market characteristics that the four biggest producers of DRAMs are not in a position to realistically anticipate one anothers behaviour. Furthermore, it is not realistic to assume that competitive action on the part of one competitor will immediately provoke identical action by the others, thus neutralising the benefit of any competitive measure.

59. Given the characteristics of the DRAM market and the absence of a relationship of interdependence between the four major DRAM producers, there is no incentive for Fujitsu and Siemens to co-ordinate their competitive behaviour in this market.

ii) Retail Workstations

60. IBM is the largest EEA-wide supplier for retail workstations and in 1998 accounted for a [10-20]% share of sales in the EEA. Siemens is the second biggest supplier of retail workstations and accounted for [0-15]% of EEA-wide sales. Fujitsu accounted for [0-15]% of the EEA retail workstations market. Other suppliers active in retail workstations in the EEA include Omron/ADS Anker ([0-15]%), Casio ([0-15]%), Sharp ([0-15]%), and NCR ([0-15]%).

61. As the parties combined sales in the retail workstation market do not exceed 15% and due to the relatively large amount of competitors on this market, the structure of the retail workstations market is not conducive to co-ordination.

iii) Financial Workstations

62. NCR is the biggest supplier of financial workstations on a world-wide as well as an EEA-wide scale. NCRs EEA-wide share of sales for 1998 is estimated at [30-40]%. Siemens EEA-wide share of sales for 1998 is estimated at [20-30]%, while Fujitsu accounts for approximately [0-10]% of all EEA sales. Thus, after creation of the JVC, Siemens and Fujitsu would jointly account for around [20-40]% of all sales in the EEA. This would make the parties the second biggest EEA-wide supplier of financial and retail workstations after NCR. In addition, the positions of the major suppliers of financial workstations have been fairly stable over the last three years, while Siemens share of sales has increased from [15-25]% in 1997 to [20-30]% in 1998. Other operators in the EEA include Diebold ([0-15]%), Bull ([0-15]%) and Olivetti ([0-15]%).

63. For the reasons set forth below, the financial workstations market displays several structural characteristics, which make co-ordination between the parents in financial workstations likely. First, the market is highly concentrated with NCR, Siemens and Fujitsu accounting for a share of sales of approximately 70%. Second, NCR and Siemens together with Fujitsu have roughly symmetrical market shares. Third, the remaining competitors all have market shares, which do not exceed 10%. Fourth, the technology for financial workstations is relatively mature, as the technology needed to operate financial workstations tends to be standard personal computer-based technology.

64. Any co-ordination between the parent companies would furthermore be appreciable. Both parties will jointly hold a share of sales of [20-40]% and will be the second biggest competitor next to NCR, which accounts for [30-40]% of the financial workstations market. In light of the almost symmetrical market shares of the two major groups in the financial workstations market and the resulting relationship of interdependence existing between NCR and Siemens/Fujitsu, taken as a group, any co-ordination between the parties appears likely to cause the elimination of competition in respect of a substantial part of the financial workstations market.

65. Co-ordination between the parent companies will also have an effect on trade between Member States. Both Siemens and Fujitsu are EEA-wide operators in financial workstations with activities covering all the major Member States of the EEA. Any alteration of their competitive behaviour would have an effect on intra-Community trade in financial workstations.

66. When these concerns were communicated to the parties, Siemens offered a remedy in order to remove the competitive concerns raised by the operation with regard to the EEA-wide financial workstations market.

67. In two letters dated 15 and 23 September 1999, respectively, Siemens undertakes the following:

"(i) Siemens announced, in November 1998 its intention to sell off its retail and banking systems business. This will be done through the sale of all its shares in Siemens Nixdorf Retail and Banking Systems GmbH (based in Paderborn) and the sales of all respective business activities abroad to be carved out of regional legal entities (the "Retail and Banking System Business"); [...]

Siemens commits itself to selling the Retail and Banking Systems Business [...]"

68. [...]

69. The undertaking given by Siemens removes the Commissions concern that the creation of the JVC has as its effect the co-ordination of the competitive behaviour of Siemens and Fujitsu in the financial workstations market. The undertaking to divest Siemens Retail and Banking Systems Business within [...], removes the incentive to co-ordinate its behaviour with that of Fujitsu [...]. After divestment [...], the financial workstation market will no longer be a candidate market for co-ordination within the meaning of Article 2(4) of the Merger Regulation.

iv) Hardware Maintenance Services

70. Hardware maintenance services are offered by a large number of IT manufacturers and independent third-party service providers. The parties maintenance service activities do not overlap to a noticeable degree in any of the national markets concerned. Fujitsus maintenance service activities are concentrated on the United Kingdom (national share of sales: [10-20]%), Portugal (national share of sales: [10-20]%) and Finland (national share of sales: [20-30]%). Siemens maintenance activities are focused on Germany (national share of sales: [10-20]%), Austria (national share of sales: [10-20]%) and Ireland (national share of sales: [10-20]%). Neither party has share of sales in the other parties territory of primary focus exceeding [0-10]%. The geographic scope of their maintenance service activities is thus complementary. The absence of geographic overlap makes it unlikely that the creation of the JVC would lead to co-ordination between the parent companies in the different hardware maintenance markets.

71. In any event, even if the parties were to co-ordinate their behaviour, such co-ordination would not be appreciable in very competitive markets for hardware maintenance services. As mentioned above, the national hardware maintenance markets are characterised by the presence of several large IT manufacturers and third-party service providers.

v) Global Account IT Services

72. This decision is limited to assessing whether the co-operation between the parties in the JVC might have the effect of giving rise to co-ordination in the global account IT services market. Agreements between the parent companies to co-operate in the global account IT services market are a co-operative element that is not directly related and necessary to the implementation of the JVC. Therefore, this decision will not examine these agreements under Article 2(4) of the Merger Regulation.

73. In assessing the likelihood of co-ordination between the parent companies behaviour, the structure of the global account IT services and solutions market, the parties combined shares of sales and the purchasing power of global customers are relevant.

74. The parties combined world-wide and Community-wide shares of sales in global account IT services and solutions does not exceed [0-15]%. In addition, global customers which replied to the Commissions request for information, have indicated several large companies such as IBM, EDS, Cap Gemini, Dell, Compaq and Andersen Consulting as strong competitors in the provision of IT services and solutions to global customers. Any co-ordination between the parties on an EEA-wide scale in global account IT services would therefore not have an appreciable effect.

75. On a national level, their combined shares of sales only exceed [0-15]% in Germany, where the parties achieve a combined share of sales of [0-15]%. However, no co-ordination is likely in Germany, because the parties activities in Germany do not overlap to a noticeable degree. Siemens accounts for [0-15]% of the parties combined German share of sales and Fujitsu for [0-15]%.

76. Furthermore, the decision to co-operate, on a project-by-project basis, in the servicing of global accounts stem from a separate agreement to do so (Annex 10(2)(4) of the JVA). This agreement between the parent companies is co-operative element that is not directly related and necessary to the implementation of the JVC. Therefore, this decision will not examine this agreement under Article 2(4) of the Merger Regulation.

77. This separate agreement on servicing global accounts on a project-by-project basis cannot be considered as directly related and necessary to the establishment of the JVC. Consequently, it has to be established separately whether the agreement to co-operate on a project-by-project basis would be compatible with Article 81 of the EC Treaty.

vi) Other services and products

78. As regards the other services and products mentioned above, the competitive structure of the sectors concerned and the parties rather low shares of sales (never exceeding 5%) in these sectors make co-ordination of their competitive behaviour either unlikely or not appreciable.

VI. ANCILLARY RESTRAINTS

a) The notified restrictions

79. The notifying parties have identified six restrictions in the JVA which they consider to be directly related and necessary to the implementation of the concentration:

(a) According to Section 16.1.1 of the JVA, Fujitsu will treat the JVC Group as the main sales channel in the European Zone [...];

(b) According to Section 16.2.1 of the JVA, Siemens undertakes not to develop, design or manufacture general purpose volume products in the class of Computer Products in competition with the JVC;

(c) According to Section 16.4 of the JVA, in the event of termination of the JVA, the shareholder exiting the joint venture will not compete with the JVC in relation to computer hardware products in the European Zone for a period of [...] following the effective date of termination;

(d) According to Section 16.1.1(a) of the JVA, the JVC shall satisfy its requirements for computer hardware products which it does not produce itself exclusively from Fujitsu. [...] ;

(e) Hardware maintenance services for the Siemens BS 2000 mainframe operating system will be performed exclusively by its service subsidiary ITS. The JVC will thus not have a choice to select the hardware maintenance provider for BS 2000. According to the parties, this exclusivity is justified by two considerations: First, Siemens would not transfer the intellectual property rights with regard to the maintenance of BS 2000 to the JVC if ITS were not granted exclusivity for the maintenance of BS 2000. Second, Siemens considers BS 2000 customers as essential customers with whom the existing level of maintenance has to be upheld. According to Siemens, inferior service quality for BS 2000 would put Siemens reputation with these customers at stake;

(f) Pursuant to Section 22 of the JVA, the parties agree not to disclose confidential information relating to the JVC Group or disclosed in the context of the establishment of the operation of the JVC, including the terms of the JVA and related documents.

b) Assessment of the notified restrictions

80. (a) The Sales Channel Arrangement: An unlimited sales channel arrangement between the JVC and Fujitsu is not directly related and necessary to the implementation of the concentration. Only an arrangement whereby the JVC would serve as Fujitsus sales outlet for a transitional period of three years after Fujitsu has transferred its existing distribution network to the JVC can be ancillary to the concentration. [15] [...]

[15] See Commission notice regarding restrictions ancillary to concentrations (OJ C 203, 14.8.1990, p.5), at C.4.

81. (b) and (c) The Siemens Non-Compete Provisions: The non-compete provision (Section 16.2.1 of the JVA) is directly related and necessary to the implementation of the concentration, as long as Siemens retains its shareholding in the JVC. For this time period, it expresses the reality of the lasting withdrawal of Siemens from the market assigned to the JVC and prevents Siemens from free-riding on the JVCs efforts. Any extension of the non-compete clause beyond the European Zone, where the JVC might in the future decide to become active, is not ancillary to the concentration. [16] The post-termination non-compete obligation contained in Section 16.4 of the JVA is not ancillary to the transaction.

[16] See Commission notice regarding restrictions ancillary to concentrations, at A.3.

82. (d) JVC Exclusive Purchase Provision: The exclusive purchase provision (Section 16 of the JVA) is not directly related and necessary to the implementation of the JVC. Save in exceptional circumstances, exclusivity in the joint ventures purchasing policy is not objectively necessary to permit the implementation of a concentration. [17] [...]

[17] See Commission notice regarding restrictions ancillary to concentrations, at C.3.

83. (e) Exclusive Maintenance for Siemens BS 2000: The exclusive maintenance provision is not directly related and necessary to the implementation of the JVC. It restricts the JVCs freedom to exploit fully the rights transferred to it by one of the parent companies. As the exclusive maintenance clause limits the JVCS freedom in favour of one of the parent companies, it cannot be related directly to the implementation of the JVC. Furthermore, the exclusivity in favour of one of the parent companies, Siemens, is not necessary in order to protect Siemens reputation. An agreement whereby the JVC is obliged to meet certain quality standards in the provision of maintenance services for BS 2000 would appear sufficient to ensure that the existing level of maintenance is upheld.

84. (f) Confidentiality Provisions: The confidentiality clause contained in Section 22 of the JVA is directly related and necessary to the implementation of the concentration.

VII. CONCLUSION

85. The notified operation between Fujitsu and Siemens should be declared compatible with the common market and the functioning of the EEA Agreement, subject to the condition of compliance with the undertaking given by Siemens to the Commission as set out in this decision.

86. The Commission therefore decides not to oppose the notified operation and to declare it compatible with the common market and with the functioning of the EEA Agreement, subject to the condition of full compliance with the undertaking given by Siemens as set out in this decision. This decision is adopted in application of Article 6(1)(b) of Council Regulation (EEC) No 4064/89.

For the Commission,

ANNEX

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