Commission Decision

of 2 September 2003

declaring a concentration to be compatible with the common market and the functioning of the EEA Agreement

(Case COMP/M.3083 - GE/Instrumentarium)

(notifed under document number C(2003) 3156)

(Only the English text is authentic)

(Text with EEA relevance)

(2004/322/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community,

Having regard to the Agreement on the European Economic Area, and in particular Article 57 thereof,

Having regard to Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings(1), as last amended by Regulation (EC) No 1310/97(2), and in particular Article 8(2) thereof,

Having regard to the Commission's decision of 3 April 2003 to initiate proceedings in this case,

Having regard to the opinion of the Advisory Committee on Concentrations(3),

Having regard to the final report of the Hearing Officer in this case(4),

Whereas:

(1) On 28 February 2003, the Commission received notification of a proposed concentration pursuant to Article 4 of Regulation (EEC) No 4064/89 (the Merger Regulation), whereby the US company General Electric Company (hereinafter referred to as GE) proposes to acquire sole control of the whole of the Finnish company Instrumentarium OYJ (hereinafter: Instrumentarium), by way of a public tender offer announced on 18 December 2002.

(2) On 3 April 2003, having examined the notification, the Commission concluded that the notified operation fell within the scope of the Merger Regulation and that it raised serious doubts as to its compatibility with the common market and the EEA Agreement. The Commission therefore initiated proceedings in accordance with Article 6(1)(c) of the Merger Regulation.

(3) On 28 April 2003, the Commission adopted a decision pursuant to Article 11(5) of the Merger Regulation, due to the fact that GE had not provided full responses to a request for information dated 7 April 2003 relating in particular to bidding and other data which was necessary to determine the competitive position of GE in the markets for patient monitors, mammography devices and C-arms. GE had been requested to supply the information by 14 April 2003. GE supplied the requested information on 15 May 2003. Accordingly, pursuant to Article 9 of Commission Regulation (EC) No 447/98 of 1 March 1998 on the notifications, time limits and hearings provided for in Council Regulation (EEC) No 4064/89(5) on the control of concentrations between undertakings, the time periods referred to in Article 10(1) and (3) of the Merger Regulation were suspended for a total of 18 days.

(4) Following an in-depth investigation of the case, the Commission takes the view that, although the notified proposal is liable in itself to lead to dominant positions as a result of which effective competition would be significantly impeded in a substantial part of the common market, the commitments given by the notifying party serve to remove the concerns as to the compatibility of the concentration.

(5) The Advisory Committee discussed the draft of this Decision on 12 August 2003.

I. THE PARTIES

(6) GE is a diversified company, active in various manufacturing, technology and service businesses, including medical systems. GE Medical Systems specialises in medical diagnostic imaging technology, including patient monitors, and related services and health care products.

(7) Instrumentarium is active in the development, manufacture and sale of medical equipment and technology related to the areas of anaesthesia and critical care, including patient monitors and anaesthesia delivery machines, in particular, under the names Datex-Ohmeda, Spacelabs Medical and Ziehm.

II. THE OPERATION AND THE CONCENTRATION

(8) The proposed operation concerns the acquisition of sole control of Instrumentarium by GE. The acquisition, according to a Combination Agreement signed on 18 December 2002 by the two parties, is performed by way of a voluntary public tender offer, made through a newly formed Finnish entity that is a wholly owned subsidiary of GE.

(9) On the basis of the foregoing, the proposed acquisition, whereby GE acquires sole control over Instrumentarium, constitutes a concentration within the meaning of Article 3(l)(b) of the Merger Regulation.

III. COMMUNITY DIMENSION

(10) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 billion (GE EUR 141,023 million and Instrumentarium EUR 1,163.8 million in 2001)(6). Each of GE and Instrumentarium have a Community-wide turnover in excess of EUR 250 million (GE EUR [...](7) million and Instrumentarium EUR [...]* million in 2001), but they do not achieve more than two-thirds of their aggregate Community-wide turnover within one and the same Member State. The notified operation therefore has a Community dimension within the meaning of Article 1(2) of the Merger Regulation.

IV. COMPETITIVE ASSESSMENT OF THE NOTIFIED CONCENTRATION

THE RELEVANT MARKETS

A. THE RELEVANT PRODUCT MARKETS

(11) The proposed concentration relates to the field of medical equipment, the main market segments affected by the notified transaction being patient monitors, mobile C-arms and mammography devices.

1. Patient Monitors

General description of the products

(12) Patient monitors are machines that take measurements of physiological parameters as a representation of a patient's well-being. These functions are performed whilst a patient is either undergoing treatment or recovering. Sensors attached to the patient detect different parameters (electrical, mechanical and chemical events) which are converted to electrical signals displayed on a screen (or printouts). The parameters are vital signs, which vary from the very basic (namely temperature) to the very advanced (such as an electroencephalograph). Patient monitors can measure a number of them simultaneously and are used together with other medical equipment, in particular ventilators, anaesthesia machines and, in some cases, with clinical information systems.

(13) Patient monitors can be sold either configured or in modules. In configured monitors the parameters to be measured are built-in during the manufacturing process and are fixed for the monitor's life. Modular monitors have a display and a central unit which contains a processor and a number of slots where modules to measure different parameters can be inserted.

Distinction between different types of monitors

(14) The notifying party has submitted that patient monitors are used in various care areas within a hospital and that, in each of the care areas, the parameters to be measured determine the characteristics needed for the monitors. In each area, the shares of the merging parties and the purchasing processes are different, there are price variations, and the building up of a reputation as a credible supplier is difficult.

(15) In this context, the notifying party suggests a segmentation whereby three markets can be distinguished: (i) Perioperative Monitors (PO), (ii) Critical Care Monitors (CC) and (iii) General Ward Monitors (GW).

(16) PO monitors are used in the perioperative area, that is,. mainly in the operating rooms (OR) as well as in the induction rooms and the recovery room (post-anaesthesia care units - PACU). This type of monitor can be connected to anaesthesia machines in operations performed under general anaesthesia, where the inhaled and exhaled gases need continuous monitoring in order to ensure a sufficient level of anaesthesia and successful recovery. PO monitors usually include specific modules to measure parameters not used in CC, such as respiratory gases (O2, CO2, N2O), anaesthetic gases (in connection with anaesthesia machines), the BIS (a parameter which measures the effects of anaesthesia on the patient) or neuromuscular transmission (to measure the patient's response to nerve stimulation and regional block). Other monitoring needs vary depending on the complexity of the operation. PO monitors, as opposed to CC monitors, are not yet frequently networked with other care areas of the hospital.

(17) CC monitors are used in areas of a hospital where a high level of patient care is required such as intensive care units (ICU), neo-natal intensive care units (NICU), coronary care units (CCU), and emergency rooms (ER). This type of monitor generally measures a large number of parameters also measured by PO monitor, such as ECG (electrocardiogram), SpO2 (haemoglobin oxygen saturation), NH3P (non-invasive blood pressure), IBP (invasive blood pressure), temperature, CO2 or cardiac output, but not the effects of anaesthesia on patients. CC monitors are often networked and linked to a central station where the data can be processed or stored and where the patient's vital signs can be observed at a remote location.

(18) GW monitors are less complex than PO and CC monitors, and only measure basic parameters such as NIBP, SpO2, temperature and ECG. This type of monitor is used for sub-acute activities such as general medical and surgical wards or obstetrics. GW monitors are configured rather than modular and can be linked to a central station or used as stand- alone units. Not all patients in the general ward area need to be monitored and consequently monitors are moved from bedside to bedside according to patient's monitoring requirements; for this they need to be physically easy to shift around the area.

(19) The market investigation has confirmed the product market segmentation submitted by the notifying party regarding patient monitors. The arguments that support this product market definition come from both the demand side and the supply side. Since the GW market is not an affected market (Instrumentarium is not active in this market), the analysis focuses only on the PO and CC markets.

(i) Demand side considerations

(20) First, their technical requirements are so different that, even if PO monitors can sometimes be used in the CC area, the substitution of PO for CC monitors is not possible in the vast majority of cases. These technical requirements refer not only to the specific types of parameters to be measured in each care area, but also to the network capabilities and physical characteristics needed(8).

(21) With regard to the substitutability of PO monitors for CC monitors or vice-versa, the investigation has shown that each type of monitor is exclusively used in its intended care area, because of the initial specifications and parameters that are required at the time of purchase(9).

(22) Furthermore, as was emphasised by the notifying party, these differences in technical requirements are confirmed by the differences in prices that can be observed between the three segments(10).

(23) The purchasing decision also differs from one segment to another. The market investigation has shown that, for PO monitors, the decision about the monitor's technical specifications is mainly taken by the anaesthesiologist, whereas for CC monitors the clinicians of the relevant departments (namely ICU, NICU or CCU) have a great influence in the final decision(11). Moreover, for the acquisition of equipment by either hospitals or the public authorities in charge of the hospitals' procurement, separate tenders are usually organised for each care area, with particular specifications for each case(12).

(24) Moreover, it is a common practice in the industry (in studies carried out by independent consultants and the manufacturers themselves), to segment the general patient monitor market according to the care area involved.

(25) There are also important differences with regard to the type of software used. The software defines the settings of the monitors (alarms, algorithm performance or report configurations), that are directly linked to the intended use of the monitor, that is, to the care area. Since patients usually spend only a few hours in the OR area while they can spent days or even weeks in the CC area, this leads to different software configurations and to different needs in the time scale for printed reports.

(ii) Supply side considerations

(26) The notifying party submits that from the manufacturing point of view, switching production from one type of monitor to another is easy and can be achieved at a low cost. Different care area monitors can be manufactured on the same production platforms. Moreover, the monitor's manufacturers are mainly assemblers and source a large proportion of their inputs from third parties, which are component manufacturers. Co-operation with third parties can therefore enhance this flexibility in production(13).

(27) However, each supplier manufactures models that can be specifically designed for the PO or the CC area. Some players, including the main suppliers, are more active only in some care areas than in others (for example, before the acquisition of Spacelabs, Instrumentarium was only marginally present in CC monitors and is not active, like Siemens, in GW monitors, whereas GE and Philips are present in the three segments)(14). This is particularly true as regards small suppliers, which tend to focus more on CC areas, where technological barriers to enter the market remain generally lower than in the perioperative area.

(28) The market investigation has also shown that the R& D efforts of monitor suppliers are focused on the specific applications of their products and differ substantially depending on whether their products are designed for the perioperative or the critical care areas. In that respect, the various suppliers have indicated that the latest innovative developments have indeed been different for perioperative and critical care monitors. Amongst the most important technological developments specific to the perioperative area, suppliers mention, inter alia, the introduction of software specifically adapted to the operating room, networked monitoring for the operating room, integrated anaesthesia record keeper and specific ergonomics. As regards parameters, the various suppliers also mention important developments, varying according to the market concerned. For instance, the latest innovations for PO monitors concern elaborate electroencephalogram and neuro-muscular measurements, in order to measure the effects of anaesthesia. For CC monitors, technological developments have focused, inter alia, on the introduction of non-invasive parameters aimed at measuring cardiac output and blood pressure. All these elements indicate that, given the costs of R& D and the time required to develop new products adapted to the care area for which they are used, there are important technological barriers to recustomizing CC monitors as PO monitors, and vice versa.

(29) The market shares of the parties and their competitors in each care area are also quite different, suggesting the same market segmentation. Were PO and CC to be considered as belonging to the same relevant product market, similar market shares for each segment would be expected, which is not the case.

(30) These facts constitute a clear indication of the difficulties in switching from one segment to the others. In this respect, the notifying party acknowledges(15): that "The costs of switching between the different care areas is foremost determined by the costs and time of developing a suitable product and, even more importantly, of building up a reputation as a reliable supplier within a certain care area." The market investigation has indeed shown that, among the various reasons both to change or not to change of supplier, reputation is a key factor in the decision(16). Consequently, a given company not present in one of the markets is unlikely to obtain a reliable reputation for the provision of these services, at least in the short term. These switching difficulties suggest that the three defined care areas are distinct product markets.

(31) In the light of the above, PO, CC and general ward monitors constitute separate relevant product markets.

2. Anaesthesia equipment

(32) Anaesthesia equipment is used to deliver anaesthetic gases to patients during operations, to supply them with oxygen during the operation, to provide artificial respiration if necessary and to monitor the patient during the entire period of narcosis.

(33) In case COMP/M.2861-Siemens/Drägerwerk/JV(17) the Commission concluded that anaesthesia equipment as a whole constitutes a relevant product market, the key arguments being the high differentiation of the product and the particular specifications that the equipment must meet. The Commission's market investigation did not reveal any new evidence indicating that this conclusion is not valid any more.

3. Clinical Information Systems (CIS)

(34) According to the notifying party, IT solutions for medical equipment are commonly divided between hospital information systems (HIS), clinical information systems (CIS) and picture archiving communication systems (PACS). CIS is used for automating patient records, patient medical readings and other clinical information. The parties' activities overlap in CIS. GE is active in the critical care and perioperative areas with its "Centricity Critical Care" and "Centricity Perioperative" products. Instrumentarium is present in the same care areas through its "Deio" and "Clinisoft" products. In addition to CIS, GE is also active in HIS and PACS. From a demand-side perspective, hospitals which require a CIS product to satisfy their needs for automated recording, for electronic exchange of data between different devices and automated patient records cannot turn to substitute products. Likewise, from a supply-side perspective, CIS has distinct characteristics which differentiate it from other types of software, notably its ability to exchange medical electronic data in real time at the point of care. Accordingly, for the purpose of this Decision and taking into account the fact that it is still an emerging market, the Commission considers that there are strong indications pointing towards a distinct CIS product market.

4. Mobile C-arms

General description of the product

(35) C-arms are mobile fluoroscopic X-ray machines used in hospitals and clinics to provide continuous viewing in real-time during diagnostic, surgical and interventional procedures. In comparison to general radiography where a static X-ray or an X-ray picture is provided, fluoroscopy offers a dynamic X-ray, or X-ray movie, used for the imaging of the flow of contrast media in a variety of body parts and organs.

(36) A C-arm consists of a piece of metal forged in the shape of letter "C" with an X-ray tube at one end of the "C" and an image intensifier attached to the other. The image intensifier enhances the picture generated by the X-ray which would otherwise not be clearly visible for the human eye(18).

(37) C-arms can be either large C-arm systems which are mounted on the ceiling ("fixed C-arm systems") and form a fixed part of a radiology and fluoroscopic room of a hospital, or mobile C-arms, which are attached to a wheeled device that allows the machine to be brought to the patient during operations and medical procedures(19). Mobile C-arms are used in the operating room as well as outside the perioperative units in the coronary care unit or the intensive care unit. According to the notifying party(20), fixed fluoroscopic systems account for more than 80 % and mobile C-arms less than 20 % of the fluoroscopic X-ray market. It is understood that the price of a fixed system can be significantly higher than that of a mobile C-arm. The notifying party takes the view that even if fixed systems are technically capable of offering an alternative to some, especially high-end, C-arms and provide to an extent a competitive constraint to mobile systems, it is not necessary to determine whether C-arms are part of a larger market for fluoroscopic X-ray devices, as no competition concern arise in a narrower defined mobile C-arms market. Both GE and Instrumentarium manufacture mobile C-arms but Instrumentarium does not manufacture fixed C-arm systems.

(38) It is also stated by the notifying party that most mobile C-arms on the market are full-size C-arms but that there are also mini C-arms. Mini C-arms also provide real-time X-ray imaging but their use is limited to basic orthopaedic procedures on extremities, namely arms and legs. The size of the mini C-arms market is significantly smaller than that of full-size C-arms. According to a report by the industry consultancy Frost & Sullivan, "US Fluoroscopy and Mobile C-arms Markets"(21), in 2001 the European market for full-size C-arms comprised 941 unit shipments and produced revenues of USD 63000000 whereas the market for mini C-arms comprised of 49 unit shipments and USD 3000000 in revenues(22). In comparison, the European mini C-arms market is about 10 % of the size of the US market(23). Whereas both GE and Instrumentarium manufacture full-size C-arms, Instrumentarium does not manufacture mini C-arms.

Possible distinction between different types of mobile C-arms

(39) The notifying party submits that even if all full-size C-arms perform the same basic function in providing real-time images of the part of the body under examination, a possible distinction may be drawn between mobile C-arms by distinguishing the medical application for which the equipment is utilised, given the various degree of complexity of the treatment, the necessary technical properties and the price of the C-arm.

(40) Consequently, the notifying party suggests a possible segmentation of the mobile C-arms market into: (i) low-end C-arms, (ii) vascular C-arms and (iii) cardiac C-arms. The notifying party takes, however, the view that regardless of the market definition adopted, namely the overall full-size mobile C-arms or the segmentation by application, the transaction would not raise competition concerns. Both parties are active in vascular and low-end C-arms but only GE is active in cardiac C-arms.

(41) Medical applications, for which all full-size C-arms, including low-end C-arms, can be utilised, include all orthopaedic examinations (extremities, hip and spine), general fluoroscopy (catheter placements, gastro-intestinal procedures, urology, lithotripsy), pain management procedures, laparoscopy (abdominal imaging), endoscopy, ear nose and throat procedures, pacemaker insertion and speech pathology. The applications of a lower tier of C-arms (low-end C-arms) therefore cover in essence orthopaedic applications and simpler surgical procedures.

(42) The middle tier of C-arms (vascular C-arms) perform additionally basic minimally invasive and diagnostic vascular procedures (procedures involving blood vessels) including phlebography, arteriography and lymphography.

(43) The high tier of C-arms (cardiac C-arms) consists of equipment which, in addition to the functions also carried out by low-end and vascular C-arms, can in most cases(24) also be used for advanced vascular procedures and vascular surgery, including coronary angiography, the placement of abdominal aortic aneurysm stents as well as neurosurgery and neurovascular examinations.

(44) The Commission's market investigation has largely confirmed the above product market segmentation(25). A number of market participants(26) consider, however, that a market definition based on a distinction of C-arms by their application is not appropriate. They suggest, for example, a distinction between high and low-end mobile C-arms or alternatively an overall market for mobile C-arms. The Commission concludes, however, that the assessment would not change significantly even if another segmentation or a wider market for mobile C-arms be applied. The arguments put forward by the notifying party for a further segmentation of the mobile C-arms market, which were largely confirmed by the market investigation, are, however, assessed in more detail below.

(i) Demand side considerations

(45) According to the notifying party, as regards the technical differences, low-end C-arms, which represents some 500 units annually sold in the EEA, typically provide for a low generator power (1,4 to 5 kW(27)), a stationary anode X-ray tube, basic imaging features, minimal image processing and image storage capacities and limited image display capacity. It is stated that low-end C-arms are limited in their use for vascular procedures by their inadequate power to provide imaging for the time required for the procedure. The price for a low-end C-arm is typically below EUR 65000(28). In this range, GE manufactures the OEC 7700 models and Instrumentarium the Ziehm Compact and the Ziehm 8000 (previously Exposcop 8000 Compact and Exposcop 8000)(29).

(46) Middle-tier vascular C-arms, which, according to the notifying party, also represent some 500 units annually sold in the EEA, also have lower generator power (1,3 to 5 kW(30)) than cardiac C-arms and typically use a stationary anode X-ray tube. This is said to limit the use of vascular C-arms to more basic vascular procedures (such as orthopaedic and gastro-intestine examinations) and provides only for a lower penetration capability. The price for a vascular C-arm varies between EUR 60000 and EUR 100000(31). GE manufactures the OEC Flexiview 8800 and Instrumentarium the Ziehm Vision, Ziehm Vista Vascular and Ziehm Vista Endo (previously Exposcop 8000 Endo)(32).

(47) The notifying party submits that high tier cardiac C-arms, which represent approximate sales of 300 units annually in the EEA, feature a rotating anode X-ray tube enhancing the capacity of the machine, high generator power (5 to 20 kW(33)), high resolution image processing and digital image storage capacity. Rotating anode allows for a continuous viewing during a cardiac procedure. The price for a cardiac C-arm is said to range between EUR 80000 and EUR 200000(34). GE manufactures the OEC 9800 models which can be upgraded for cardiac functions. [...]*(35).

(48) With regard to the substitutability between the different types of C-arms, the market investigation(36) largely showed that, from a hospital's point of view, there are differences between the various types of C-arms, although from technical and medical point of view the cut-off point is not always clear since the product lines to a certain extent provide for a continuum. The Commission also observes that the price of the equipment and the required service level from the supplier vary according to the complexity of the C-arm(37).

(49) It must also be noted that despite technical differences between the proposed segments, first, there is a possibility for one-way substitution in the utilisation of technically more advanced C-arms (cardiac and vascular C-arms) to perform procedures typically appropriate for the application of the low-end C-arms. This is, however, not perceived by the surveyed hospitals as a factor influencing the preferred choice of a mobile C-arm, owing to other related factors such as the difference in price(38). Secondly, according to a number of market participants it is possible to upgrade a low-end C-arm to a vascular C-arm or a vascular C-arm to a cardiac C-arm. Such an upgrade would include, inter alia, installing necessary software options. The additional cost for upgrading a low-end C-arm to a vascular C-arm was, in general, estimated as EUR 10000 to 20000 and the cost was estimated significantly higher for an upgrade of a vascular C-arm to a cardiac C-arm. The latter would also require improvements to other specifications of the C-arm(39).

(50) Frost & Sullivan does not further segment the market in its Reports on fluoroscopy and C-arms markets but makes a distinction between mobile full-size and mini C-arms and generally acknowledges, in respect of smaller suppliers of C-arms on the European market, that these mainly provide more general C-arms instead of C-arms used for a particular applications, like vascular surgery(40). The Commission's market investigation indicates that, in general, the smaller suppliers tend to concentrate either on the low-end C-arms or cardiac/vascular C-arms due to more limited resources available for R& D, manufacturing and marketing of a full range of mobile C-arms(41).

(ii) Supply side considerations

(51) The notifying party submits that from the suppliers point of view, there are credible rivals in the market like Philips and Siemens that have extensive product offerings and in-depth geographic coverage, in addition to other competitors that successfully compete with the large competitors in their chosen product and geographic areas. It is also stated that there are no significant barriers to expanding production, distribution or after-sales service and that any supplier of C-arms could easily respond to an increase in demand. An increase in production would entail procurement of more materials and acquiring more personnel. The notifying party takes the view that although patents are common in the C-arms business, none of the competitors possess unique technology and that they source a large proportion of their inputs from third parties which are component manufacturers.

(52) The market investigation has confirmed that, of the major players on the market (GE, Instrumentarium, Siemens and Philips), all, apart from Instrumentarium, have a strong presence in all three proposed segments of mobile C-arms(42). At the EEA level, GE is the clear market leader in cardiac C-arms, Siemens the market leader in vascular C-arms and GE again in low-end C-arms. The market shares of the parties and their competitors in each segment vary from segment to segment which is considered as an indication of the segmentation of the market. Were the C-arms for low-end, vascular and cardiac applications to belong to an overall product market, such divergence in market shares in different segments would not be expected. The divergence in market shares in different segments is indicated in the table below (year 2002).

Table 1

Market shares (in value) in the EEA in 2002

>TABLE>

Source: the notifying party.

(53) Furthermore, the Commission considers that technical differences related to the level of complexity of the medical procedures and the necessary after-service obligations, render the entry into the cardiac C-arms segment considerably difficult. [...]*

(54) Therefore, on the basis of an overall assessment of the information gathered from the market investigation it seems that the conditions of competition appear sufficiently different to indicate that these three segments of mobile C-arms constitute separate relevant product markets. However, the question of the precise product market definition can be left open, since, even if another segmentation of the C-arms market or a wider product market comprising all mobile C-arms were appropriate, as suggested by the notifying party, the notified concentration would not lead to the creation or strengthening of a dominant position as a result of which effective competition would be significantly impeded in the common market or in a substantial part of it.

5. Mammography devices

General description of the product

(55) Mammography is a specific type of X-ray imaging device exclusively used for medical examination of the female breast: X-rays produce an image of internal breast tissue with the purpose of detecting malignant growths. The device can be used both for screening, namely early detection of any malignant growth, and for diagnostic or interventional purposes. Breast screening campaigns aim at detecting any malignant growth in a large fraction of the female population at an early stage.

(56) The image of the breast made by X-ray can be recorded on a film, using an X-ray cassette, or digitally recorded and displayed through a digital receptor (plate) and the utilisation of a computer. This factor distinguishes the two types of mammography equipment: analogue mammography and digital mammography.

(57) According to a Frost & Sullivan report on World X-Ray Mammography Market(43), in 2001, the European market for analogue mammography comprised of 1277 unit shipments and produced revenues of USD 106800000 whereas the market for digital mammography amounted to 27 unit shipments and USD 10400000 in revenues.

Distinction between analogue and digital mammography

(58) Analogue technology has been available for some decades and constitutes the most established technology in the market. Digital technology has recently been introduced into the market and its growth is expected to be rapid in the years to come along with new developments in digital detectors with higher spatial resolution (smaller pixel size), contrast resolution, low-dose X-rays and 3D imaging.

(59) Both parties are active in analogue mammography devices but only GE currently manufactures digital mammography devices. Instrumentarium does not currently manufacture full-field digital mammography devices [...]*.

(60) The notifying party submits that there are factors such as the significant price difference between analogue and digital devices that suggest distinct product markets for the two categories of mammography devices. Nevertheless, they propose that the relevant product market definition be left open as the market is in transition.

(61) The market investigation has confirmed that there are substantial price differences between analogue and digital mammography devices: the average price for an analogue mammography device is around EUR 50000 whereas it is around EUR 300000 for a digital device. Currently digital devices form a small percentage of the overall sales of mammography device units in the EEA. In line with these figures, the overwhelming majority of customers responding to the Commission's market investigation(44) indicated that they would not switch from an analogue to a digital mammography device if the price of the former were to rise permanently by 5 to 10 %.

(62) Moreover, there are significant differences in technical performance (image quality and storage) between the two types of mammography devices. Digital mammography devices are expected to offer better contrast resolution and other image characteristics that will improve the capability to detect cancer at an early stage and to reduce errors in detection (so called false-positive). Improvements offered by the digital technology relate also to lower radiation doses and general functionality of digital technology, such as digital transmission and storage of imaging. Furthermore, it is expected that digital technology will enhance new applications, such as three dimension (tomosynthesis) or a combination with ultrasound(45).

(63) The notifying party states that digital mammography is more efficient than analogue in that it captures up to 20 % more of the original X-ray signal and increases productivity, namely the number of examinations per day, by approximately 40 to 50 %(46). The Commission observes, however, that there has been some uncertainty as to the sharpness of the image resolution of digital mammography devices and the size of the X-rayed area in comparison to those offered by analogue equipment. Digital mammography devices have so far not been accepted in the national breast screening programs in some EEA countries, because screening requires both a precise and efficient device in terms of patient throughput. However, it is merely a question of time before these technical limitations are overcome.

(64) Although analogue and digital mammography devices share some common characteristics and can be manufactured on the same product line, there is not a sufficient degree of supply-side substitutability between the two segments. There are substantial differences among the two kinds of devices. The development of digital mammography devices requires, on the part of the manufacturer, significant investments(47) in research and development to address specific issues related to digital devices, namely the conversion of X-ray signal into digital signal with respect to image resolution and speed. This requires innovation in the technology for full-field radiation detector as well as digital processing of the image for the visualisation of small structures inside dense breast tissues. As a result of such developments in digital mammography, GE holds more than [...]* patents(48) in this field. As a halfway solution between analogue and fully digital devices, some companies(49) have developed solutions to upgrade analogue devices to produce digital images.

(65) All these factors indicate a product market distinction between analogue mammography and digital mammography.

B. THE RELEVANT GEOGRAPHIC MARKETS

(66) The notifying party takes the view that factors such as a common legal framework for a wide range of medical devices(50), significant level of supply substitution, centrally organised production, minimal transport costs and the non-existence of insurmountable barriers to entry in terms of setting up a distribution network, suggest that the geographic markets for patient monitors, C-arms and mammography devices are increasingly becoming EEA-wide.

(67) The Commission's market investigation has shown, however, that the markets for patient monitors, C-arms and mammography devices are national in scope.

1. Patient monitors

(68) Since the GW market is not affected (only GE is active in this market) the relevant geographic analysis is focused only on the PO and CC markets.

Presence in the individual Member States

(69) The market penetration of the major monitoring manufacturers differs among the Member States, in particular as regards perioperative monitors.

(70) For example, GE has no reported sales of such products in countries such as [...]*, [...]*, and [...]*, while being present in neighbouring countries (Spain: [10 to 20 %]*; Denmark: [10 to 20 %]* and Germany [0 to 10 %]*) Similarly, Instrumentarium, although present on all markets, has higher market shares in Spain ([60 to 70 %]*) than in France ([40 to 50 %]*) or Portugal ([30 to 40 %]*). The same applies for other manufacturers: Siemens only has a [5 to 10 %]* market share in the United Kingdom, while having [20 to 25 %]* in Ireland, and [5 to 10 %]* in Spain compared to [50 to 55 %]* in Portugal. Similarly, Philips has a [20 to 25 %]* market share in France, but only [5 to 10 %]* in Spain and the United Kingdom.

(71) These different market structures, even between neighbouring countries, suggest that the conditions of competition vary significantly amongst Member States. In particular, there is no evidence that a grouping of Member States can be considered as a distinct geographic market. These discrepancies in market shares across the Member States are also present in the market for CC monitors to a similar extent.

Price differences in the Member States

(72) The notifying party submits that the differences in their list prices are due to the different discounting schemes in each country: where list prices are relatively higher in one Member State, this is offset by higher levels of discount.

(73) However, the Commission found that there are differences in transaction prices. In particular, when analysing the information provided by the notifying party(51) even the distinct discounts applied in each country do not offset these price differences. The table below, where GE's list prices and average discounts are summarised for some Member States, shows that there are countries with similar list prices but with different average discounts, which indicates that final selling prices are different. For example, list prices for DASH 2000 in [...]* are higher than in [...]*, while the average discount is lower, which leads to a higher final price. The same pattern can be found for other products and countries, supporting the conclusion that final selling prices do vary across the Member States.

Table 2

>TABLE>

Source: the notifying party. (*) Solar 8000.

(74) These final customer price differences are also confirmed by independent studies(52), where average prices are calculated for multi-parameter patient monitoring systems and for all brands in Europe. The results show substantial price differences ranging from 16 % to 32 % between countries such as for example France or Spain and the United Kingdom.

Distribution and after-sales service

(75) As stated above in the product market section, aspects such as after-sales service, maintenance and training are key factors in taking the final purchasing decision. The notifying party has also pointed out the importance of this issue stating that local distribution operations, including the provision of after-sales services, appears necessary to be an effective competitor in the country concerned. This need of services has been confirmed by the Commission market investigation, where, together with specification and quality, factors such as after-sales service, continuous maintenance, training and the capacity of providing maintenance and service over the whole life-cycle of the product are the more appreciated by the customers when taking the final purchasing decision(53).

(76) Furthermore, most small competitors in critical care monitoring are not present in all the Member States, which is a clear indication of the difficulties in obtaining a reliable after-sales service network even through third parties. By contrast, the main suppliers are present in, at least, all the large markets(54). Their distribution structure may however vary depending on the countries. For instance Instrumentarium sells direct to final customers in countries such as [...]*, while selling on a national basis through distributors in neighbouring countries. In that respect, the Commission has found no evidence that any group or cluster of Member States could form a distinct geographic market.

(77) In light of these factors, the Commission has reached the conclusion that each Member State constitutes a separate relevant geographic market.

2. Anaesthesia equipment

(78) In Case COMP/M.2861-Siemens/Drägerwerk/JV the Commission concluded that the geographic market anaesthesia equipment was national. Key arguments supporting this view were the fact that the parties had very different market shares in the individual EEA countries and that they had different competitors in them, that most competitors operated in only one or two Member States, that a local distribution and servicing structure was of crucial importance to market success and that anaesthesia equipment was distributed predominantly through invitations to tender, with customer preferences playing an important role in the final purchasing decision.

3. Clinical Information Systems (CIS)

(79) As explained above, CIS are mainly IT solutions used as accessories to medical equipment to enhance its capabilities. Indeed, CIS is a complicated IT system which requires installation by experts. Installation can take up to 18 months and is tailor-made to the hospital's needs. Training is also offered to the hospital staff by the installer of the CIS system. As such, a dedicated distribution, installation, maintenance and service network operating on a national basis is of great importance. In this context, the same arguments supporting the national market definition for PO and CC monitors suggest that the relevant geographic market for CIS is also national. In particular, it should also be noted that the sales of CIS go through the same distribution channels as the ones for patient monitors, on a national basis, and that the penetration rates differ across the various EEA member states.

4. Mobile C-arms

Presence in the individual Member States

(80) According to the information submitted by the notifying party, the parties' market position and that of competitors varies significantly in different Member States(55).

(81) For example, in low-end C-arms, on the basis of 2002 figures, Instrumentarium has a strong market position in Finland ([50 to 60 %]*), Denmark ([30 to 40 %]*), Germany ([30 to 40 %]*) and Belgium ([30 to 40 %]*), while in some other Member States the markets shares are much lower. For example, in Italy ([10 to 20 %]*), Norway ([10 to 20 %]*) and France ([0 to 10 %]*) its position is much weaker and in some Member States it did not have sales at all ([...]*) in 2002. These discrepancies in market shares are present for the main competitors in both low-end and vascular C-arms. Moreover, a number of smaller competitors are present in some Member States, in particular, Italy, Portugal, Spain and Greece.(56) The following table shows some of these differences for the parties and their main competitors.

Table 3

Low-end C-arms: market shares 2002

>TABLE>

Source: the notifying party.

Table 4

Vascular C-arms: market shares 2002

>TABLE>

Source: the notifying party.

Price differences in the Member States

(82) The investigation has shown that there are significant price differences between the Member States, suggesting national markets. The prices referred to in recital 83 have been obtained from GE and are average net prices by country of direct sales for GE's mobile C-arms for a basic model for year 2002.

(83) For instance, as regards GE's product [...]*, the price ranges from EUR [...]* in Germany to EUR [...]* in Norway (price difference of [15 to 20 %]*). When considering the basic configuration of the [...]*(57), for example in Germany, the product is priced at EUR [...]* and in comparison in Italy at EUR [...]* and in Norway at EUR [...]* (price difference up to [25 to 30 %]*). Similarly, significant differences in the price of [...]* can be established from EUR [...]* in Germany to EUR [...]* in Italy and EUR [...]* in Norway (price difference up to [40 to 45 %]*)(58).

Distribution and after-sales service

(84) The market investigation has confirmed that as regards vascular and low-end C-arms after-sales service, maintenance and training are important factors when taking a final purchasing decision. Third parties emphasise that local distribution operations, including the provision of after-sales services, is necessary for a supplier to be a credible supplier in the country concerned(59).

(85) In addition to product specifications and quality, after-sales service, continuous maintenance, training and the capacity of providing maintenance and service over the whole life-cycle of the product are considered as important when taking the final purchasing decision. As regards training of personnel, the market investigation has indicated that training is considered as an important element and the level required varies. The notifying party acknowledges that, for example, in Sweden a high level of training is required for in-house technicians(60).

(86) The results of the market investigation indicate that service is estimated to amount annually up to 10 % of the final price of the product but with appreciable variations between Member States(61). Therefore, it also constitutes a not insignificant part of the supplier's revenues. In Italy, where the cost to the customer of the servicing of GE C-arms appears the highest (up to [10 to 20 %]* per annum of the original equipment price), GE itself services [40 to 60 %]* of its C-arms. Instrumentarium's internal documents also indicate servicing constituting approximately [10 to 20 %]* of its diagnostic imaging sales in Europe and identify [...]* as focus markets for its new strategy on service contract business(62). GE distributes direct in all EEA Member States, whereas Instrumentarium uses distributors in [...]*.

(87) For the purposes of this Decision, therefore, each Member State constitutes a separate relevant geographic market.

5. Mammography devices

Presence in the individual Member States

(88) The Commission's market investigation has shown that the markets for mammography devices are national in scope, as several factors generally accepted as indicators of a national dimension of a geographic market definition are present.

(89) According to the figures submitted by the notifying party(63) and the market-shares calculation performed by the Commission, the relative market positions of GE and Instrumentarium vary significantly between different Member States. The market penetration of the other principal multinational competitors, such as Siemens, Philips, or Planmed and Hologic/Lorad, also varies according to the Member State.

(90) For example, in 2002, GE had a market share above [40 to 50 %]* in Belgium, Germany, Greece and Portugal but only [10 to 20 %]* in the Netherlands. Equally, Instrumentarium had a market share above [40 to 50 %]* in Finland and Norway, [10 to 20 %]* in Italy but only [0 to 10 %]* in Germany. Furthermore, GE did not have any sales in Denmark, Finland, Sweden and Norway, while Instrumentarium was either not present or had market shares below [0 to 10 %]* in Austria, Germany, Ireland, and Portugal.

(91) Similarly, the presence of the parties' competitors varies significantly from one Member State to another. Even though Siemens is generally represented throughout the EEA area, albeit with different levels of market presence in individual Member States, all the other competitors, such as Planmed, Hologic, Philips, Giotto and Metaltronica, operate in only a few Member States.

Price differences in individual Member States

(92) The Commission's market investigation has shown that purchases by private and public customers are made at local level and that manufacturers are able to apply different prices at national level.

(93) GE has national price lists for its products presenting substantial price differences in different Member States(64): GE's list prices are significantly higher, for instance, in [...]* than in [...]*, [...]* and [...]*. They are even lower in Spain. Instrumentarium has used EEA-wide price lists for the last years but applies differentiated discounts to its distributors depending on the country. These discounts vary from [...* %] to almost [...* %](65).

Regional or national distribution networks

(94) The distribution strategy followed by each of the parties also varies from one country to another. GE and Instrumentarium sell direct to the final customers in certain countries while they rely on distributors in others. For instance, Instrumentarium sells [90 to 100 %]* of its mammography devices through distributors(66) in [...]* but [...]* (only [20 to 30 %]* of sales effected through distributors), [...]* and [...]* ([80 to 90]* % through distributors), [...]* and [...]*. These distributors are independent companies that operate in one given Member State or in a region within a Member State. This enhances the local characteristics of the markets for mammography devices.

(95) GE used to sell through distributors only in [...]*. It ceased to sell through its [...]* distributors in 2001 and acquired its Irish distributor early in 2003. Consequently, GE currently sells its mammography devices to final customers through its own distribution network.

Distribution and after-sales service

(96) The Commission's market investigation has showed that customer/supplier relationships are formed principally on a national basis. Successful sales and the degree of each mammography producer's penetration in a given national market depend quite decisively on the distribution activity and after-sales servicing staff being available and ready to provide assistance to hospitals and to private practitioners on an immediate basis. Training and maintenance services are generally provided by the manufacturers and are usually agreed as part of the purchase of the equipment(67).

(97) When it comes to purchasing decisions in hospitals or in private organisations and decisions on tender specifications, the familiarity and reputation of each manufacturer are of primary importance to decision-makers. The purchase decision is taken in most Member States by the hospital administration's commercial department or by private organisations in coordination with the appropriate medical staff familiar with the equipment, the radiologists. Specifications defined by doctors and their needs in terms of product specificity and application priorities are decisive factors in purchase decisions. This is the reason why manufacturers present their equipment at trade fairs and medical congresses and pursue customer contacts with practitioners.

(98) The results of the investigation confirm that customers require assistance and expert knowledge on the part of the supplier's distribution and servicing staff. In fact, customers consider it very important that manufacturers should be able to provide after-sales service and continuous maintenance over the life span of the equipment. Local distribution services are particularly necessary for customers of mammography devices, given the number of private practitioners and private clinics that operate at local level being among the customers of these devices.

(99) Furthermore, GE and Instrumentarium, as well other competitors, are not present in all Member States. This indicates that there are some difficulties in obtaining a reliable after-sales service network even through third parties. For example, GE is not active in [...]*, [...]*, [...]* and [...]*, while Instrumentarium is not present in [...]* and [...]*.

Conclusion

(100) In the light of the above elements supported by the Commission's market investigation, the geographic markets for mammography devices are considered to be national in scope.

C. COMPATIBILITY OF THE CONCENTRATION WITH THE COMMON MARKET

A. Horizontal effects

1. Patient monitors

1.1 Perioperative patient monitors

General market features

(101) External studies(68) provided by the notifying party underline that the perioperative monitoring market has been experiencing several changes in the various European countries in the last few years. The market has become a stable and mature market(69) in which pricing strategy, technological innovation and consolidation have become crucial factors.

(102) Perioperative patient monitors are differentiated products. The products offered by the various suppliers present different strengths and weaknesses depending on customers' preferences. This is also the case where hospitals meet their needs for these products through calls for tenders. Their product preferences find expression via detailed technical specifications and thus restrict the range of products that come into consideration. The Commission's enquiries have established in particular that, in most countries, the anaesthesiologist, who is the primary user of this equipment, plays an important role in making the choice of a perioperative patient monitor.

(103) Although they generally want to obtain lower prices, technical specifications required from hospitals therefore play a major role in their purchasing decisions. That is why hospitals award procurement contracts on the basis of the "most economically advantageous" procedure that allows them to select products primarily on the basis of their quality and performance, rather than exclusively on the basis of a "lowest price" offer. Furthermore, the technical specifications requested by customers have become more and more complex and demanding for manufacturers. Not only multiparameter monitors have now become standard practice within the perioperative area, but manufacturers have also added new features and capabilities to their monitors as a result of a demand for sophisticated measurements from hospitals and, in particular, anaesthesiologists(70). The latest innovative developments include new parameters to measure the depth of anaesthesia and the effects of anaesthetics on the brain, which are becoming more important for the users(71). Computer technology has also become an important feature of these products with the upgrading or development of new software specifically adapted to the operating room in order to enhance the quality of the anaesthesia record.

(104) Finally, the market has been going through a strong period of consolidation. According to Frost & Sullivan (F& S), "a few market players are indeed in control of most of the market and the other players tend to divest and focus their resources on a country basis or they even tend to concentrate on other markets"(72). More generally, F& S observes that the European anaesthesia and respiratory equipment market (including the perioperative monitoring market) is a mature market, in which even a small gain in market share can be of important value(73).

Market shares

(105) According to the information provided by the notifying party in their Form CO, in the case of perioperative monitors, the concentration would result in the following market shares:

Table 5

Perioperative patient monitors

>TABLE>

Source: the notifying party.

(106) The notifying party thus estimates the merging parties' combined EEA market share in 2002 at [40 to 50 %]*, having been [40 to 50 %]* in 2000 and [40 to 50 %]* in 2001, with fringe competitors representing a substantial part of the market ([10 to 20* %], but [30 to 40 %]* and above in some national markets).

(107) The notifying party indicates(74) that, because of a lack of reliable publicly available sources, they have based these market share calculations on their own estimates, after having used two sources: their respective patient monitoring sales and the sales data provided by the European Coordination Committee of the Radiological Electromedical Industry (COCIR), a grouping of five medical equipment companies (Instrumentarium, Dräger, GE, Philips, and Siemens). The notifying party, however, considers that COCIR understates the sales of small rivals by approximately [30 to 40 %]* in the perioperative market. They explain that they have thus adjusted the data accordingly and that, in some countries, this ratio was adapted to reflect national differences.

(108) However, despite the indication by the notifying party that fringe manufacturers account for around [20 to 30 %]* of the EEA market (and for [30 to 40 %]* in some large national markets), external market studies(75) indicate substantially lower market shares for small competitors and consequently, higher market shares for the parties.

(109) In view of the discrepancies between the estimates of the parties and external market studies, the Commission has done its own market share calculations based on the sales figures of perioperative monitors given by them during the investigation and by companies quoted by the notifying party as competitors on the relevant market(76). The Commission also requested from the parties and their competitors to provide a breakdown of their sales between direct sales to final consumers and sales to distributors, as well as an estimate of the profit margins of these distributors. These figures were used to calculate the sales of perioperative monitors of each player to end-users(77).

(110) The concentration leads to significant market shares additions in some national markets. The following picture emerges for the years 2000, 2001 and 2002:

Table 6

Perioperative monitors: Commission's findings*

>TABLE>

Source: the Commission's investigation.

Table 7

>TABLE>

Source: the Commission's investigation.

Table 8

>TABLE>

Source: the Commission's investigation.

(111) The parties' market share estimates in the Form CO are thus significantly lower than the market shares estimated by the authors of external studies on the European market known to the Commission and by the Commission's market investigation itself.

(112) The merger would therefore bring together two of the four largest suppliers of perioperative patient monitors in the EEA. At the EEA-wide level, the merging parties would become the leading supplier of perioperative patient monitors with only two remaining sizeable competitors, Philips and Siemens.

(113) The notifying party argues(78) that, even on the basis of the Commission's figures, their market position does not give rise to dominance since the overlap is minimal, with GE having around [5 to 10 %]* at the EEA level in 2002, behind Philips and Siemens. Furthermore, during the course of the market investigation, Instrumentarium has contested the provisional estimate made by the Commission of the overall market size of the perioperative patient monitoring market by arguing that they did not match the estimates of the publicly available external studies. However, the Commission's estimates are consistent with F& S's forecasts(79).

(114) On the basis of the Commission's investigation, the parties' market position at a national level will indeed lead to a minimal overlap in a certain number of countries where GE had no activity or de minimis sales in 2002 ([...]*(80)).

(115) However, the parties' combined market shares would be close to or in excess of 50 % with an overlap exceeding at least 5 % in a certain number of countries. At national level, the merger would lead to significant combined shares(81) in particular, France ([...]*), Germany ([...]*), Spain ([...]*), Sweden ([...]*), and the United Kingdom ([...]*)(82).

(116) At least in countries where they exceed 50 % (France, Spain, Sweden and the United Kingdom), the combined market shares may in themselves be evidence of the existence of a dominant position, in particular in view of the fact that the merged entity would be twice the size of its two main competitors, namely Philips and Siemens. In Germany, the combined market share of the merged entity is indicative of a dominant position insofar as it would be in excess of 40 % and well above the market shares of its two main competitors, Siemens and Philips.

(117) The notifying party considers that, despite this combined share, the elimination of Instrumentarium as an independent entity would not lead to the creation of a dominant position on these markets because of the following factors(83):

(a) the market is a bidding market, characterised by intense rivalry, where GE is not a major player in the perioperative area and is not a close competitor to Instrumentarium;

(b) major rivals as well as smaller players would constrain any hypothetical attempt by the merged entity to increase prices;

(c) the competitive pressure will remain enhanced by hospitals, which are to be considered powerful buyers.

Purchasing processes

(118) Most purchases of perioperative patient monitors in France, Germany, Spain, Sweden, and the United Kingdom are made through a tendering procedure. In these countries, a high proportion of hospitals are public sector facilities(84), which, as such, are subject to public tendering rules. As is shown by bidding data provided by the notifying party and their competitors, private clinics also tend to organise tenders. Accordingly, the notifying party estimates at about 60 % to 100 % the proportion of the sales made through a tendering procedure depending on the Member State concerned(85).

(119) When deciding to launch a tender for patient monitors the decision-making process is generally described as follows by customers. Purchasing decisions typically include the clinicians working in the relevant medical department where the monitors are to be used. They also involve, to a lesser or greater degree, the hospital's biomedical engineers responsible for maintaining the equipment, and the administrative staff who have responsibility for the financial operations of the hospital. The need for new equipment triggers the purchase of new material. As regards perioperative patient monitors, the customers' survey has confirmed that this is largely done by anaesthesiologists who primarily use this equipment, in particular in the Operating room. They are therefore mainly responsible for determining the technical specifications that the monitors must meet. Depending on the countries, the purchasing decision is then triggered by the general manager(86) or by an economic committee(87) or by a commission of medical specialists(88) but in all instances after negotiations with the doctors and the medical staff needing the equipment.

(120) Because hospitals primarily value the quality and the specifications of the products when they make a choice, winning bids are not generally allocated to the lowest-price bidder, but to the supplier that best meets the individual hospital's requirements on both technical and economic grounds. As was observed in recital 103, procurement contracts are awarded on the basis of the "most economically advantageous offer", rather than by following the "lowest price" procedure.

(121) The qualitative requirements are expressed mostly by anaesthesiologists via detailed technical specifications, which thus restrict the range of the products in question according to their preferences. Suppliers respond to the official tender by submitting bids and hospitals then choose the supplier that best meets their requirements on the basis of various cumulative criteria. According to the market investigation, the following criteria are the most important when choosing a monitor with slight variations across countries(89): the quality and specifications of the product, the price, the technical service (training and after-sale maintenance over the whole life-cycle of the product), and the ability of the supplier to innovate and develop new products. Conversely, the ability of a manufacturer to offer anaesthesia machines as well plays a very limited role in the final decision(90).

Actual competition

(122) In this case, the fact that purchases mostly go through a tendering procedure in the various Member States does not fundamentally affect the value of market shares as a strong indication of the merged entity's market power. The market investigation has shown that, on average, in each of the Member States concerned, the value of each contract won on a tender is relatively low and the number of tenders for perioperative monitors annually is fairly high(91). In addition, customisation in this market is fairly restricted since the specifications of the tender already determine whether a given supplier will submit a bid or not. Finally, there are no significant variations in the size of the market for perioperative monitors in particular in France, Germany, Spain, the United Kingdom and Sweden, and in the market shares(92) of the main competitors, between 2000 and 2002.

(123) Furthermore, the market for perioperative monitors is not significantly different from a standard differentiated product market. Although products are procured through a tendering process, customers' preferences are reflected in the technical specifications of the tender which, in turn, determine the number of eligible bidders. Customers have individual preferences for specific devices and would consider switching to another model only in response to a more or less significant price rise (relative to competitors). The relative closeness of substitution between the various products, even within one and the same relevant product market, thus forms an important parameter of competition in these markets and has an important influence on suppliers' market power. Market shares thus contain important information as they reflect real purchasing decisions by customers in a given year.

(124) Consequently, the Commission does not share the view that market shares are meaningless in this particular market.

(125) In order to assess whether the market shares of the merging parties overestimate or underestimate their market power, the Commission has proceeded to an in-depth analysis of the nature of competition in this bidding market. First, given that competition in these tenders is determined by the number and identity of competitors present, the frequency of encounters of the various market players has been scrutinised. Secondly, since in a differentiated product market competition is all the more intense as competitors are close substitutes, the closeness of substitution is further analysed both on qualitative and quantitative grounds. Last, the Commission sought to determine, on the basis of the available data, the possible price impact of the proposed operation.

GE's positioning on the perioperative market

(126) The notifying party claims that GE is not a major player in the perioperative area and, as such, does not appreciably affect Instrumentarium's current position(93). According to the notifying party, GE and Instrumentarium are not, therefore, close competitors in the perioperative monitoring market(94). Market shares thus overstate - it is argued - the competitive impact of the transaction.

(127) The notifying party relies, inter alia, on the range of products offered by GE and its market positioning primarily focused on the critical care area. However, the notifying party acknowledges that GE offers several types of monitors for use in the perioperative area (the Solar 9500, the Solar 8000M and the DASH Series(95)), and that each of them present some strengths in comparison to competitors' products. GE's offerings thus include a wide range of monitors, from the low to the high-end, with parameters and functionalities specifically adapted to this market. GE is even quoted by several market participants as a leader in terms of research and development in the field of perioperative monitors(96). Therefore, the fact that GE is a stronger player in the critical care area does not disqualify it as one of the four major suppliers of perioperative monitors.

(128) The good reputation of GE's monitors in the perioperative area is further confirmed by external studies. T for G thus stresses, as regards the image perception of the parties' products, that "GE- Marquette has a rather high image in anaesthetics"(97). Frost & Sullivan also include GE in the second tier of competitors alongside Philips and Siemens, with Instrumentarium being in the first tier(98).

(129) The hospitals surveyed by the Commission's market investigation generally consider that GE, Instrumentarium, Siemens and Philips all supply perioperative patient monitors of comparable quality. In each country, GE's monitors are considered by respondents as high quality monitors in the operating room, with the highest average mark in some Member States in terms of specifications(99). On average, all four major suppliers are ranked at the same high level in the various countries concerned.

(130) These elements contradict the assumption made by the notifying party that, from a qualitative viewpoint, GE should be considered neither a major player nor a close competitor to Instrumentarium.

Statistical analysis conducted by the Commission

(131) In order to assess the intensity of competition between the merging parties, the Commission conducted a series of statistical analyses based on the bidding data provided by Instrumentarium, GE, Draeger, Philips and Siemens. The data provided by Siemens were not useable for this type of analysis. The bidders present in each tender were identified in 3355 cases throughout the EEA over the last five years. In the following analysis, the Commission considered the sample of bids won by either GE (either direct or via Draeger), Instrumentarium or Philips to be representative.

(132) The Commission first analysed how often the merging parties encountered each other within those 3355 tenders. Given that suppliers select the auctions in which they participate, so that a firm does not bid if it believes it has no chance of winning, the more frequently two firms face each other in a given country relative to other potential bidders the more likely it is that their products can be considered close substitutes - at least from the sellers' perspective. In addition, the presence of a supplier in a tender is constrained by the technical specifications required by the hospital which thus restricts the range of competitors that can potentially win the bid.

(133) At the EEA level, it appears that the merging parties encountered each other in [50 to 60 %]* of the cases. Moreover, they faced no competitor in [20 to 30 %]* of the cases and only one single competitor in [20 to 30 %]* of the cases. When looking at the identity of the parties' competitors, it turns out that in [30 to 40 %]* of the cases, irrespective of how many competitors were present, the merging parties faced neither Siemens nor Philips but only various fringe players. This would suggest that the merger may result in a reduction of the number of significant players from two to one in one tender out of three.

(134) The competitive constraint exerted by the merging parties on each other also appears in the bidding data(100) provided by Philips: the latter won [70 to 80 %]* of the tenders where neither GE nor Instrumentarium were present, [60 to 70 %]* of those where only Instrumentarium was present, [50 to 60 %]* of those where GE only was present and only [30 to 40 %]* of those were both GE and Instrumentarium were present. Therefore, Instrumentarium appears to bid lower when GE is present. In addition, when both Instrumentarium and GE are present, Philips tends to bid lower. The merging parties together thus exert a stronger competitive constraint on Philips.

(135) At the national level there are strong contrasts, depending on the country.

(136) As regards the German market, the results suggest that GE provided by far the strongest competitive constraint on Instrumentarium. Both met in [70 to 80 %]* of all 432 tenders under consideration. This figure may overestimate(101) the proportion of bids where both parties actually met in Germany, since it has not been possible to use in this analysis the bidding data provided by Siemens. Indeed, Germany is the national market where Siemens' turnover is the highest. Nevertheless, the above figure strongly contrasts with those relating to Philips or Siemens: Philips only participated in bids against Instrumentarium in [10 to 20 %]* of cases and Siemens in [20 to 30 %]* of the cases.

(137) Furthermore, the statistical analysis of the bidding data revealed that the merging parties encounter no other competitor in [40 to 50 %]* of the tenders where they meet(102), and only one single competitor in a further [30 to 40 %]* of these tenders. As a result, the merging parties face one or no competitor in [70 to 80 %]* of the tenders where they encounter each other. Moreover, it turns out that, in [80 to 90 %]* of the cases, this extra competitor is neither Siemens nor Philips, but a fringe player. These figures suggest that, given the impact of technical specifications on the presence of competitors in tenders, the merger is likely to lead to a reduction of the number of significant players from two to one in most of the tenders where the merging parties used to compete head-to-head.

(138) In Spain, the figures also suggest that GE again provides the main source of actual competition to Instrumentarium. They face each other in [60 to 70 %]* of tenders (out of a total of 542 tenders). Siemens, however, also remains a close competitor ([60 to 70 %]*) but less than GE and all three firms compete in only [40 to 50 %]* of the cases. Philips, in contrast, competes against Instrumentarium rather infrequently ([30 to 40 %]*). Besides, the merging parties face no, or only one, extra competitor in [60 to 70 %]* of the tenders where they encounter each other. Among these tenders, the merging parties face neither Siemens nor Philips in [20 to 30 %]* of the cases.

(139) As far as France is concerned, GE also appears to be by far the strongest competitive constraint on Instrumentarium: GE competed with Instrumentarium in [70 to 80 %]* of all 1122 tenders analysed. In contrast, Siemens faced Instrumentarium only in every other tender ([50 to 60 %]*), Philips only in less than 1 tender out of [...]* ([10 to 20 %]*). All four competitors meet very rarely ([0 to 10 %]*).

(140) In the remaining countries, the figures suggest that GE and Instrumentarium met more occasionally. In the United Kingdom, for instance, GE faced Instrumentarium in [20 to 30 %]* of a total of [...]* tenders, while Philips competed with Instrumentarium in almost every other tender ([40 to 50 %]*). Nevertheless, among the bids where GE and Instrumentarium met, they faced no other competitor in [60 to 70 %]* of the cases and only one extra-competitor in further [20 to 30 %]* of the tenders. This suggests that there is one or less competitor facing the merging parties in [80 to 90 %]* of the tenders where they meet.

(141) The picture is similar in Belgium (both parties competed against each other in [10 to 20 %]* of [...]* tenders) as well as in Finland (they met in [0 to 10 %]* of [...]* tenders). In other EEA countries, the number of useable tenders was too limited to draw any reliable conclusion. For instance, in Sweden, the results tend to show that GE competed against Instrumentarium slightly more often ([40 to 50 %]*) than Philips ([30 to 40 %]*) or Siemens ([30 to 40 %]*). However, the Commission only had at its disposal all the necessary information to run this analysis for 19 tenders in Sweden over the last five years. Therefore, only limited statistically significant results can be derived from these data.

Win-loss analysis provided by the notifying party

(142) Economics Ridyard, Bishop & Baker (RBB) has submitted, on behalf of the notifying party, an analysis of win-loss data to corroborate the contention that the market shares of GE and Instrumentarium do not accurately reflect, and, in fact, they overstate, the competitive impact of the notified transaction. The notifying party considers that, "to the extent that GE provides a more competitive constraint on the behaviour of Instrumentarium than other suppliers in the relevant market, one would expect to see GE as the second-placed bidder for a large number of those bids won by Instrumentarium and vice-versa"(103).

(143) The RBB win/loss study is based on [2000 to 2500]* tenders for perioperative monitors that Instrumentarium won across the EEA(104) between 1998 and 2003(105). The study identifies the "runner-up", meaning the second-placed bidder in each tender won by Instrumentarium for which the information was available to the merging parties. The runner-up is taken to be the closest competitor to Instrumentarium.

(144) Although the notifying party primarily relies on this study to argue that GE was not Instrumentarium's closest rival, these data show that between 1998 and 2003 GE was the most frequent runner-up to Instrumentarium in the perioperative monitoring in Europe. According to the data submitted by the parties, at the EEA level, bids containing GE's perioperative monitors are reported as runners-up in [30 to 40 %]* of all tenders won by Instrumentarium, either when they were sold through Draeger then acting as an exclusive distributor for GE ([700 to 800]*) or when GE directly participated in the tender ([100 to 200]*). Philips' bids are recorded as runner-up in [30 to 40 %]* of the tenders, and [10 to 20 %]* for those of Siemens. Other competitors account for [10 to 20 %]* of the runner-up bids, including Datascope with [0 to 10]* %.

(145) GE is by far the most frequent runner-up to Instrumentarium in three countries: [...]*, [...]* and [...]*(106). GE's monitors qualify as runner-up less frequently than Siemens or Philips in all other countries: Siemens is a runner-up in [...]*(107), [...]*, [...]*(108), whilst Philips is a runner-up in [...]*, [...]*, and in the [...]*.

(146) Of the [300 to 400]* tenders that occurred in France for which the parties had relevant information, GE's monitors were runners-up to Instrumentarium's in [50 to 60 %]* of the cases, either when they were sold through Draeger ([100 to 200]* tenders) or when GE directly participated in the tender ([0 to 100]*). Philips was a runner-up in [...]* tenders, or [10 to 20 %]* of cases, while Siemens and Datascope came in second place in [...]* and [...]* tenders respectively. In the [300 to 400]* tenders for Germany, GE's monitors were runners-up to Instrumentarium's in [70 to 80 %]* of cases, either when sold through Draeger ([...]*) or when GE directly participated in the tender ([...]*), before Siemens ([...]* - [10 to 20 %]* of cases), and Philips ([...]* - [10 to 20 %]*). In Spain ([400 to 500]* data points), GE is runner-up in [60 to 70]* % of cases either through Draeger ([200 to 300]*) or direct ([0 to 100]*), that is significantly more often than Philips ([20 to 30 %]*) and Siemens ([10 to 20 %]*).

(147) This would therefore suggest that, at least in France, Germany, and Spain, GE is the closest competitor to Instrumentarium. These data would strengthen the presumption that, alongside a high market share on these markets, the merged entity would have the ability to appreciably increase prices for a significant proportion of its customers without being challenged by its competitors. In such a situation, the take-over of the closest rival would lead to a considerable loss of competition since, in any new bidding round, the merged entity will have the ability to increase its price in the knowledge that the dissatisfied customer would tend to buy its alternative product line.

(148) The notifying party, however, considers that other factors indicate that GE was not, in fact, Instrumentarium's closest competitor.

(149) First(109), according to the notifying party, the absence of a systematic correlation in substitution patterns across the different countries show that there is nothing intrinsic in the features of the products supplied by the parties. The Commission notes however that, if brand preferences vary across countries, this only reflects the still different conditions of competition within each Member State. Furthermore, the fact that Draeger was not the runner-up in certain countries is also explained by the fact that it had a limited presence in the Member State concerned. Indeed, in the countries where, according to the parties' data, Draeger was not the runner-up (Belgium, Finland), it appears that Draeger had a very limited presence in the tenders.

(150) Secondly(110), the notifying party argues that the competitive constraint provided by Draeger/GE is overstated insofar as, during this period, Draeger was also actively marketing other suppliers' monitors (such as Philips's) despite its alliance with GE. The Commission however notes that there is no evidence that Draeger was actively selling other manufacturers' monitors during the period in question where it had an exclusive distribution contract with GE. In response to a Commission's question in that respect, the notifying party was only able to quote two examples of bids where it believed that Draeger had actively marketed other suppliers' monitors(111). Bidding data provided by Draeger show that its sales of competitors' monitors have in fact been extremely limited. Finally, even assuming that Draeger had been occasionally bidding third parties' products, these bids would not alter the significant trend evidenced by the parties' data, as Philips and Siemens were each considered as runners-up in only limited proportions.

The GE-Draeger alliance

(151) The notifying party also considers(112) that the relative success enjoyed by GE/Draeger during the alliance was due to Draeger's established anaesthesia products, to its strong relationship with anaesthetists and to its distribution infrastructure, but not to the strength of GE's perioperative monitoring offering.

(152) GE entered into an alliance with Draeger in March 1999, whereby Draeger distributed GE's monitors to the perioperative area on an exclusive basis in all EEA countries. The alliance then turned into a non-exclusive distribution agreement from February to May 2002, at which date Draeger announced its new joint venture agreement with Siemens.

(153) In the course of the investigation, the notifying party provided the Commission with internal documents relating specifically to its commercial relationship with Draeger during the period 1999-2002. The general message that emerges from GE's internal documents is that the rationale for this agreement was to allow GE to have access to Draeger's distribution network and its good relationship with anaesthesiologists. This is because GE had entered the market in 1998 with the purchase of Marquette and needed to have access to the perioperative market through an established distribution network. GE's internal documents state, for example, that there were two reasons for the alliance: "one was distribution; the other was to ensure a closer relationship with anaesthesiologists"(113).

(154) The Commission acknowledges that Draeger's presence in the upstream market for anaesthesia delivery machines may have had a positive effect on GE's sales of perioperative monitors.

(155) However, far from suggesting that GE had no strong product offerings in the perioperative market, internal documents also indicate that Draeger's position could clearly benefit from this alliance thanks to GE's products. An internal document of 1999(114) thus states that, amongst other things, Draeger would have [...]* and that [...]*. This therefore suggests that Draeger would equally benefit from GE's patient monitors offerings on the anaesthesia machine market when competing with Datex-Ohmeda.

(156) In the course of the investigation, the Commission has tried to assess, in those countries where GE/Draeger appeared as a runner-up to Instrumentarium, the reasons why Draeger's customers had bought perioperative monitors. The respondents only represented a very small sample and the results appear contradictory depending on the countries. In Germany, a large majority of respondents indicated that they had bought GE's monitors because of their own characteristics rather than because they were sold by their anaesthesia supplier. Conversely, in Spain, respondents tend to put more emphasis on the fact that the monitors were provided by Draeger, whilst in France the results were split.

(157) More generally, however, the customers' survey seem to contradict the suggestion by GE that its selection in bids as the most frequent runner-up in the perioperative area should only be attributed to Draeger's position in the anaesthesia equipment market. Indeed, a vast majority of customers choose a particular brand of monitors because they meet the technical specifications required. They also strongly rely on the ability of the supplier to rely on a good distribution network able to provide continuous maintenance and after-sales services. Customers further rank GE's monitors amongst the highest quality products together with those of Instrumentarium, Philips and Siemens. Conversely, the ability of a supplier to also offer anaesthesia machines does not appear as an important factor. The Commission's survey also shows that, when purchasing new perioperative monitors, customers rely mainly on the proven track record of the monitors' supplier and the technology offered, whether or not switching from one supplier to another.

(158) In light of the foregoing, there is reason to consider that GE's position in the perioperative area compared to other competitors, when bidding against Instrumentarium, should also be attributed to the quality of its monitors and the effectiveness of its distribution network through Draeger, rather than only to the fact that Draeger also had a product offering in the anaesthesia and the ventilation markets. This seems also confirmed by GE's initial submission in its notification(115), as regards its relationship with Draeger, that the success of a competitor's product in the market depends on the effectiveness of its sales force, as well as its size.

(159) The notifying party claims that GE was only the runner-up in countries where Draeger had a strong position in the anaesthesia machine market and mostly in tenders where monitors were sold together with the anaesthesia machine. Nevertheless, they provide figures which, in some countries, show no correlation between Draeger's market shares in the anaesthesia market and the number of bids where GE was runner-up to Instrumentarium. Thus, in [...]*, the notifying party submits that GE was never a runner-up to Instrumentarium despite a [20 to 30 %]* market share for Draeger in the anaesthesia machines market. Similarly, the notifying party acknowledges that GE was never a runner-up to Instrumentarium in [...]*, and only in [0 to 10 %]* of the bids in [...]*, despite Draeger's market shares amounting to [20 to 30 %]* and [30 to 40 %]* respectively in those countries.

(160) As to the argument that GE was mostly a runner-up to Instrumentarium when Draeger was not bidding for solo monitors, the study relies on [100 to 200]* bids won by Instrumentarium in France and [100 to 200]* in Spain(116). In France, the notifying party claims that, of the [0 to 100]* projects where Draeger was selected as a runner-up, [70 to 80 %]* were for packaged bids and [20 to 30 %]* for solo monitors. The Commission notes that the study relies on data that only represent a minor part of all bids in France where Instrumentarium was identified as the winner ([300 to 400]*) and GE/Draeger as the runner-up ([200 to 300]*). Furthermore, the notifying party themselves acknowledges that, even when taking into account this limited sample of bids, GE/Draeger remained the runner-up to Instrumentarium before all other competitors (GE/Draeger [...]*; Siemens, [...]*; Philips [...]*)(117). In Spain, the notifying party indicates that Draeger was only a runner-up in packaged bids, but relies on [100 to 200]* identified bids out of [400 to 500]* previously identified bids.

(161) The parties were also asked to provide figures for solo and package bids in Germany. There, the parties provided [0-100]* examples of bids where Instrumentarium won(118). Draeger was a runner-up to Instrumentarium not only in packaged bids ([...]* out of [...]*, i.e. [80-90 %]*) but also in [60-70 %]* of the solo bids won by Instrumentarium ([...]* out of [...]*).

(162) Finally, the notifying party argues that, following the termination of the Draeger alliance in February 2002, GE's market position has significantly deteriorated whilst Draeger's position in the perioperative segment has not weakened(119). The notifying party relies on the fact that GE's perioperative monitoring sales have declined in 2002 and that GE was rarely selected as a runner-up to Instrumentarium between October 2002 and March 2003.

(163) The Commission notes however that GE's relative decline in market shares in 2002 is inherent to a situation where a supplier's relationship with its distributor deteriorates, rather than to Draeger's activities as such. The notifying party acknowledges that any supplier on the perioperative monitoring market needs a dedicated distribution and sales staff(120) and that GE's relationship with Draeger had deteriorated as from February 2002. An internal document suggests that GE itself viewed this decline in market shares as a mere "transition"(121).

(164) Because of its size and its financial means, GE has indeed the ability to establish a distribution network and dedicated sales force on the perioperative market. Furthermore, given its position in the critical care monitoring market and its presence in other neighbouring markets for medical equipment such as Clinical Information Systems, GE would have a strong incentive in maintaining and growing its activities on the perioperative monitoring market in order to present customers with a full range of products. Finally, even during this transitory period where it has to re-establish a distribution network, GE was still able in 2002 to retain a sizeable market share, in particular in [...]* where it remains the number [...]*, in [...]*, [...]*, [...]*, and [...]*, and to remain present in tenders, thereby constituting a significant competitive constraint to other major bidders such as Instrumentarium. In [...]*, GE was even able to gain market shares despite not being distributed there in previous years.

(165) Therefore, the Commission considers that the temporary reduction of GE's sales cannot be assumed to reflect the competitive constraint that GE has exerted on Instrumentarium prior to the merger and would have been likely to exert in the absence of the merger. It follows in particular that the 2002 market shares only reflect partially GE's actual presence in the market. As a result, average market shares over the years 2000, 2001, 2002 better capture the likely market position of the merging parties in the five countries under consideration (France, Germany, the United Kingdom, Spain, Sweden).

Price impact due to the merger

(166) In order to better assess the impact of the transaction the Commission has conducted a series of econometric analyses and has examined econometric studies provided by a third party and the parties.

(167) The Commission has conducted its own analysis of the likely price effect of the merger, based on the set of bidding data collected from the parties and the main competitors. The objective was to identify the effect that the presence of Instrumentarium has on the price charged by GE/Draeger to its customers, and vice versa. The Commission also analysed data from Philips and Siemens to determine the price impact of the joint presence of GE and Instrumentarium on the market.

(168) The data set for this analysis consists of electronic files submitted by each party to the merger as well as competitors (Philips and Siemens), and of a series of paper invoices and bidding documents from the parties. Based on the available data, the Commission attempted to measure the likely price effects of the merger between GE and Instrumentarium using various econometric models, mainly multi-variable linear regressions.

(169) The price impact is measured via the impact on the discounts proposed by the various competitors, in order to account for the fact that individual projects vary greatly in terms of specifications, equipment packages, and accessories, so that the actual transaction prices are not immediately comparable between different tenders.

(170) A number of problems were encountered in matching the invoice data recorded in paper form with the bidding data submitted in electronic form. These problems prevented the Commission from computing the percentage discount applied to the list price for many observations. As a result, the Commission was not able to use the data for Instrumentarium.

The likely price effect in France

(171) The Commission gathered data from bids submitted by GE alone and by Draeger. Most of the useable observations were recorded in tenders organised in France.

(172) The analysis of the bidding data(122) provided by Draeger suggests that the presence of Instrumentarium in tenders does indeed impact on the Draeger's prices: the average discount offered by the latter when Instrumentarium was present in the bid is [35 to 45 %]* to be compared with [25 to 35 %]* when Instrumentarium was not present. This difference is statistically significant at 99 % level of confidence.

(173) When using linear regressions controlling for various parameters(123), the econometric analysis carried out by the Commission led to the conclusion that Draeger's discount is [5 to 10 %]* to [5 to 10 %]* higher when Instrumentarium is present than when Instrumentarium does not participate in the tender. This leads to an average impact on Draeger's discount of [5 to 10 %]* on average. These results are statistically significant at 99 % level of confidence. They provide empirical evidence that Instrumentarium impacts on he pricing behaviour of Draeger in France(124).

(174) As regards the bidding data provided by GE, an analysis of the discounts offered by GE shows that they are on average in the range of [20 to 30* %], when GE faces only Siemens, [30 to 40 %]* when facing only Philips and [40 to 50 %]* when facing only Instrumentarium. As for Draeger, the Commission also ran regressions in order to identify Instrumentarium's influence on GE's discounts, if any. Given the characteristics of GE's data set, the econometric model used by the Commission is slightly different from the one used with the Draeger discount data. The results from the estimation show that GE discounts are on average [10 to 20 %]* higher when Instrumentarium is present alone than that when Instrumentarium is not present. This result is statistically significant at 99 % level of confidence. The Commission notes, however, that these econometric results were obtained using a small number of observations(125).

(175) The results of the data analysis for France shows that the Draeger's (selling GE's monitors) and GE's discounts are larger when Instrumentarium participates in a bid than when it does not. In addition, the Commission econometric analysis appears to bring additional evidence that Instrumentarium constrains the sales of GE's monitors. It thus further supports the presumption associated with the merging parties high combined market share.

The likely price effect at the EEA level

Philips's bidding data

(176) Philips submitted an econometric analysis of its bidding data aimed at showing that the merging parties are close competitors and that the merger would lead to price increases.

(177) NERA Economic Consulting (NERA) on behalf of Philips submitted, on 10 June 2003, an econometric study in order to assess the possible impact of the merger on prices in the perioperative and critical care patient monitors markets. The study uses Philips' own data based on recorded information about the calls for tenders in which Philips participated in 1999, 2000 and 2001 in several EEA countries, namely, Belgium, Finland, France, Germany, Italy, Netherlands, Spain, the United Kingdom, Portugal and Sweden. The data set contains observations in most countries where the merging parties hold strong positions, except for Denmark, Ireland and Greece were no data were available. The database specifies for each tender, according to Philips, which suppliers were present, which one won, the value of the bid submitted by Philips and the relating discount offered by Philips on its list prices.

(178) The study considers the level of discount offered by Philips as an indicator of the level of price. NERA considers that a direct comparison between prices would not be possible because the characteristics of each product sold in the bids are different.

(179) Controlling for other relevant factors, the study attempts to show to what extent the discount offered by Philips is affected by the presence of certain competitors, and more specifically whether the combined presence of GE and Instrumentarium affects the final discount offered by Philips to win a bid. The explanatory variables include, inter alia, a set of country dummies to control for the possible difference in discount from one country to another, the total value of the auction (in logarithm) and a set of competitor dummies.

(180) The results of the econometric estimation show that Philips discounts are [5 to 10]* percentage points lower when GE is present, but not Instrumentarium, and [5 to 10]* percent lower when Instrumentarium is present, but not GE compared to situations where both merging parties are participating in the bidding round(126). These reductions of discounts correspond to price increases of [15 to 20 %]* and [5 to 10* %], respectively, given Philips' average discount(127). These results are based on tenders in which Philips participated irrespective of whether Philips won or lost the bid. These results, therefore, measure the likely impact o