|EUROPEAN COMMISSION |

Brussels, 13.5.2013

C(2013) 2883 final

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 Where possible the information omitted has been replaced by ranges of figures or a general description.

MERGER PROCEDURE ARTICLE 6(1)(b) DECISION

To the notifying parties |

Dear Sir/Madam,

Subject: Case No COMP/M.6756 - NORSK HYDRO/ ORKLA/ JV Commission decision pursuant to Article 6(1)(b) in conjunction with Article 6(2) of Council Regulation No 139/2004 [1]

1. On 18 March 2013, the European Commission received a notification of a proposed concentration pursuant to Article 4 of the Merger Regulation, by which the undertakings

Norsk Hydro ASA ("Hydro", Norway) and Orkla ASA ("Orkla", Norway) acquire within the meaning of Article 3(4) of the Merger Regulation joint control of a newly created company constituting a joint venture (JV), by way of purchase of shares. [2] Hydro and Orkla are designated hereinafter as the "Parties".

I. THE PARTIES AND THE TRANSACTION

2. Hydro is a global supplier of aluminium with activities throughout the value chain, including the production and sale of primary aluminium, soft-alloy extrusions, building systems and flat-rolled products.

3. Orkla is a Norwegian company with international operations. Its main focus is the branded consumer goods sector. In addition it operates in the aluminium, hydro power and financial investment sector.

4. On 14 October 2012, Hydro and Orkla signed a contribution agreement with a view to establishing the JV operating in the aluminium soft-alloy extrusion sector (“Contribution Agreement”). Included within the businesses to be transferred to the JV are also the Parties’ building systems activities and their precision tubing businesses.

5. The businesses being contributed by Orkla all fall under the ownership of Orkla’s wholly-owned subsidiary, Sapa Holding AB (“Sapa”).

6. Each of Hydro and Orkla will retain outside the JV their respective interests in aluminium flat-rolled products. [3]

I.1. Joint control

7. The JV will be jointly controlled by Orkla and Hydro within the meaning of the Merger Regulation. Orkla will hold 50% of the issued share capital in the JV and Hydro the remaining 50%. Pursuant to the shareholders’ agreement which is attached to the Contribution Agreement, the Parties will have parity of voting at the shareholders’ meeting and each will appoint the same number of directors to the board. No member of the board of directors will have a casting vote.

I.2. Full-functionality

8. The JV will have a management dedicated to its day-to-day operations and sufficient resources to operate independently on the market, including finance, staff and assets. It will also have direct access to customers and suppliers independent of its parents.

9. As for the lasting basis requirement, Article 19 of the shareholders' agreement attached to the Contribution Agreement provides that […]subject to a procedure set out in the Shareholders agreement.

10. The Commission considers that this provision is not sufficient to conclude that the proposed transaction is not constituted on a lasting basis. This is because the Contribution Agreement, while providing for an option to terminate the joint venture, also provides for the possible continuation of the joint venture for an indefinite period.

11. As a result, the Commission concludes that the proposed transaction consists of the creation of a full-functional joint venture which will perform all the functions of an autonomous economic entity on a lasting basis.

II. EU DIMENSION

12. The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million (Hydro: EUR 11 733 million; Orkla: EUR 7 351 million). The two of them have an EU-wide turnover in excess of EUR 250 million (Hydro: EUR […] million; Orkla: EUR […] million), but they do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State. The notified operation therefore has an EU dimension pursuant to Article 1(2) of the Merger Regulation.

III. COMPETITIVE ASSESSMENT

III.1. Introduction to the aluminium extrusion industry

13. Aluminium extrusions are produced from billets of aluminium alloys. Extrusion aluminium billets are heated in an oven and consequently pushed through a pre-shaped iron die by a large hydraulic press. The traditional analogy is that of squeezing toothpaste from a tube (see Figure 1 below).

Figure 1 – Soft alloy extrusions – production process

(...PICT...)

14. Following the extrusion process some extrusions are cooled and may be milled, drilled, tapped, bent, aged, anodized or painted. Extrusions are finally sawed in transportable lengths and packed.

15. There are two broad categories of alloys used for extrusion: hard-alloys and soft-alloys.

16. In the EEA, the principal aluminium-magnesium alloys used to manufacture soft alloy extrusions are alloy 6063 (and its alternative alloy 6060) and alloy 6082 (and its alternative alloy 6005a).

17. Plants vary as to the size of press in use. The most common press sizes are in the 7-9 inches diameter range, [4] although there are a number of larger presses in the EEA (i.e. 12 inches and above). Presses can produce extrusions that are smaller in diameter than their classification and larger presses are sometimes employed to produce smaller extrusions (although this is often not economically profitable). There are more than 500 soft-alloy presses in the EEA.

18. Dies can be changed quickly and easily, allowing a large number of different shapes to be manufactured using the same machinery (see Figure 2 below). The dies may be manufactured in integrated die-shops, or designed to the customer’s specifications at relatively little cost and in little time by independent die-shops. Most manufacturers keep a large stock of dies. Once a die is available, the time taken in switching a press from one die to another is on average only two minutes.

Figure 2 – Soft alloy extrusions – Shaping the billet through a die

(...PICT...)

19. The process of extrusion is capable of producing a variety of metal shapes. Consequently, extruded products are used in a range of applications, including construction (e.g. window frames, doorframes, and other architectural products), automotive, and industrial uses. Extrusions are produced in a huge variety of shapes, including rods, bars, tubing profiles, and forge stock, among others.

20. The same basic manufacturing process is used for all extrusion products, regardless of the end-use application. In some specific cases, however, a process involving additional steps is necessary for the production of some specialty extruded products. For instance, this is the case for multi-port extrusions ("MPEs"), which are small but important components widely used in the automotive industry for the manufacturing of condensers and evaporators.

Figure 3 – Multi-port extrusions (MPEs)

(...PICT...)

21. The proposed transaction gives rise to horizontal overlaps between the Parties' activities as regards (1) general soft-alloy extrusions; (2) MPEs; (3) a downstream market: building systems; and (4) a neighbouring product market: precision welded tubes. The Parties' activities do not overlap in precision drawn tubes. [5]

22. The proposed transaction also gives rise to vertical relationships with respect to the following: (1) Hydro's primary aluminium activities upstream and the Parties' soft-alloy extrusions activities downstream; and (2) the Parties' aluminium flat products activities upstream and the Parties' precision welded tubes activities downstream.

III.2. Relevant product market

III.2.1 Soft-alloy extrusions

23. There are two broad categories of alloys used for extrusion: hard-alloys and soft-alloys.

24. In previous decisions, the Commission has identified separate markets for hard-alloy and soft-alloy extrusions. [6] Although some companies manufacture both hard and soft-alloy extrusions, not all extrusion facilities operate with both types of alloy since different treatment processes are used in the preparation of hard-alloys.

25. In the past, the Commission has also concluded that the market for soft-alloy extrusions should not be further divided into segments relating to alloys, [7] shapes or end-uses. [8] Although from a demand-side perspective different shapes and alloys are often not substitutes to each other, there is significant supply-side substitutability, which allows many extruders to produce a wide range of products.

26. The Parties submit that, in line with Commission's precedents, the relevant product market comprises all soft-alloy extrusions.

27. Respondents to the Commission's requests for information confirmed that hard alloy extrusions constitute a separate market from soft alloy extrusions. [9] The replies received also confirmed the Commission's precedents regarding different types of alloys and shapes

28. The Commission investigated whether it would be appropriate to define a separate market for profiles for the automotive industry, since only a limited number of suppliers, which have to go through a certification process, produce extrusions for the automotive industry. The results of the investigation confirmed that automotive manufacturers should be ISO/TS 16949 certified and that almost all extruders are able to obtain such certification. In any event, the Commission considers that the question whether the segment for soft alloy extrusions for the automotive industry would constitute a separate relevant product market can, however be left open, as the concentration would not give rise to serious doubts in that potential segment.

29. In previous decisions the Commission investigated and ultimately left open the question as to whether it would be appropriate to define separate markets for larger sized (more than 14'' diameter) soft alloy extrusions, since only a limited number of supplier's operate large presses. [10] In relation to a possible segment for large extrusions, the market investigation confirmed that the size of the final product is closely related to the size of the press which is used. The issue of a separate market for large extrusions with a diameter larger than 14'' does not arise in this case given that the Parties' activities do not overlap as regards presses with more than 12'' diameter. The Commission however investigated whether a market for larger sized extrusion could be defined as including the 12'' press diameter. The Commission considers that it can be left open whether the potential segment for soft alloy extrusions produced with large extruded presses (above and including 12'') would constitute a separate relevant product market, as the concentration would not give rise to serious doubts in that potential segment.

III.2.2 Multi-port extrusions (MPEs)

30. MPEs are extruded tubes that are designed to combine small dimensions (e.g., width of 16 mm, height of 1.8 mm and a wall thickness of 0.2 mm) with a large internal surface area. These characteristics make MPEs especially suited for use in heat exchangers for automotive applications.

31. There are no Commission precedents dealing specifically with MPEs.

32. The Parties submit that from a demand-side MPEs are not substitutable with normal soft-alloy extrusions. As regards demand-side substitutability, the Parties also submit that aluminium folded tubes represent a viable alternative to MPEs for customers and that they would indeed switch to folded tubes as a reaction to a price increase.

33. As regards supply-side substitution, the Parties submit that there is a certain degree of supply-side substitutability between MPEs and normal soft-alloy extrusions given that at the core of the MPEs production there is a standard extrusion press. However, in this regard the Parties acknowledge that a standard extrusion press would have to be modified in order to accommodate for the production of MPEs.

34. For these reasons, the Parties acknowledge that it may be appropriate to define a separate market for MPEs.

35. From the demand side, respondents to the Commission's requests for information stated that MPEs cannot be substituted with normal soft-alloy extrusions and cannot be replaced easily with other products. [11]

36. As regards substitutability with aluminium folded tubes, a majority of customers replied that they would switch from MPEs to folded tubes further to a 5-10% permanent price increase. However, when questioned about the concrete possibility of such switch, the same customers expressed a number of reservations in terms of feasibility and timeliness of such switch. The market investigation showed that folded tubes cannot be used as substitutes for MPEs for all applications (in particular, not for evaporators and refrigerators). In addition, non-automotive applications, which are expected to be developed in the next years by a number of players, are mainly based on the use of MPEs. Furthermore, a number of market players still believe that MPEs constitute the leading technology and that MPEs are superior in performances to folded tubes (for further details see below, paragraphs 136-137).

37. From the supply side the market investigation indicated that although the technical production process for producing MPEs is similar to that of soft-alloy extrusions, significant investments are required to adjust the equipment to the requirements of MPEs production. For instance, the production of MPEs requires coiling lines, zinc spray and strict tolerance controls which are not necessary for the production of soft-alloy extrusions. Furthermore, market participants have indicated that MPEs are sophisticated products and specific production know-how is required.

38. In view of the above, the Commission considers that that a separate relevant product market for MPEs exists.

III.2.3 Building systems

39. The Commission has not previously considered the market for building systems.

40. According to the Parties, building systems comprise profiles made of different materials (aluminium, steel, wood or PVC) which are specifically designed to be used in the building industry. The building system suppliers add value to the basic profiles as their final product is considered a "system", which includes, apart from the profiles, other elements such as the design and conceptualisation of the system, the purpose-specific fabrication of the profiles (surface treatment of the profiles, cutting, drilling, punching, bending or the installation of a thermal brake), a variety of articles needed to install the products (all accessories and fittings) and service and logistics. The building system suppliers carry out R&D work in order to ensure that the systems meet the desired performance requirements in terms of insulation, tightness or durability. They do not offer the assembled products, such as windows frames or door frames, only the components needed to produce those.

Division between end applications

41. According to the Parties, the three main end applications of building systems are (1) windows; (2) doors; and (3) curtain walls. While doors or windows can be made from aluminium, PVC or wood (as main materials), building systems for façades use only soft alloy profiles as the basis to fabricate and install a "curtain wall". [12] Aluminium curtain walls are generally used on the exterior of buildings and might also incorporate technologies such as active double-skin façades for ventilation and heating and sun-shading or photovoltaic devices. The Parties do not consider a further segmentation of the market according to different end applications to be necessary. Nevertheless, they have provided data on this narrower segmentation.

42. The Commission notes that the replies to the market investigation in this case largely contradicted the segmentation proposed by the Parties between windows and doors. The vast majority of respondents indicated that, although the installation process and legal requirements could be different, windows and doors and other products should be considered as belonging to the same segment as there is no difference between (i) the manufacturing process, (ii) the knowhow used in the production, (iii) the complexity of their design, and (iv) the distribution channels.

43. On the contrary, the replies to the market investigation confirmed Parties' views as regards curtain walls as being a different segment different from all other products (including doors, windows or any other building system product). Competitors consider that curtain walls are different from other products due to the technical complexity of the projects. As usually curtain walls represent large projects, the technical complexity is higher than for the other products. Also, special requirements as wind loads and water resistance tests, and earthquake secure testing are specific for this segment.

Substitution between different types of materials

44. Although the Parties are active only in the production of aluminium building systems, they argue that to a certain extent, building systems made of other materials (among which the most important are PVC and wood) are substitutable and therefore the product market could be considered to be the supply of aluminium, PVC and wood building systems for the use in the construction market.

45. The Parties consider that PVC and wood are widely used as direct substitutes for aluminium, either for use as window or as door frames. Nevertheless, the Parties admit that, from the demand point of view, for some applications like large sliding doors, PVC and wood may be less suitable alternatives due to the weight that needs to be carried. As regards facades, even though from the technical point of view PVC or wood are not alternative materials, the Parties submit that, by opting for a different design concept, however, a PVC-based solution can be used as a substitute to an aluminium facade. The more complex the products are, the less PVC or wood can be regarded as a substitute for aluminium building systems.

46. From the supply-side perspective, aluminium on the one hand and other products, mainly PVC and wood, on the other hand cannot be regarded as close substitutes mainly due to the fact that the manufacturing process involved in the production of building systems from various materials are different and the machineries used differ from one material to another.

47. The Parties consider that the product market could be considered to be the supply of aluminium, PVC and wood products for use in constructions. However, they have adopted a filter focusing only on aluminium-based products and provided data on this narrower segmentation.

48. To verify the Parties' claims, the Commission analysed both supply-side and demand-side aspects of the substitution between aluminium and different other materials, mainly PVC and wood. Thus, the majority of competitors confirmed that from the supply side building systems made of aluminium are totally different from other building systems as the equipment used in their production is different (machineries and tools), operations may differ, and producing aluminium building systems seems to be more difficult than for the other materials. In addition, even though some suppliers offer besides the aluminium building systems also PVC products, the majority of them tend to specialize in the production of only one material.

49. From the demand side, the market investigation pointed also to a separate market for aluminium building systems and confirmed that customers do not consider PVC or wood as a real substitution for aluminium. Moreover, the vast majority of customers indicated that they buy only aluminium products and even if the price would increase with 5-15% they would not switch to other materials. [13] The price difference between a building system made of aluminium and other materials is also important, aluminium windows and doors being more expensive than PVC. [14]

Different distribution channels

50. For the most standardized products like windows and doors, building systems users will typically use a customer tailor made window or door. Nevertheless, these products can be also sourced from stockists, which purchase standardised profiles directly from the profile suppliers or from Building Systems suppliers. They sell the profiles together with fittings to the metal builders who in turn assemble the product and install it. Alternatively, the metal builders/installers can purchase equivalent components from the Building Systems suppliers. Finally, the metal builders/installers can purchase ready-made windows, doors or other products directly from original equipment manufacturers ("OEMs"), who assemble standardised products on an industrial scale. Nevertheless, as the products become more sophisticated or increasingly bespoke, the option of purchasing standardised profiles or pre-fabricated products from stockists and OEMs becomes less and less suitable.

51. Given the fact that a straightforward separation of the different types of competitors at different levels of production and distribution of the building systems suppliers from stockists or OEMs is difficult, the Parties have adopted a conservative approach, excluding these alternative channels of distribution.

52. The market investigation in this case indicated that although some competitors consider OEMs and stockists in direct competition with them, the majority of suppliers indicated that the products that they deliver to their customers are tailor-made and specific to each project and therefore stockists and OEMs could not be considered as alternative suppliers. From the demand side, OEMs and/or stockists are considered more often as alternative sources for their building systems' needs.

53. The Commission considers that the precise product market definition for building systems can be left open in this case, since the transaction does not raise serious doubts as to its compatibility with the internal market regardless of the exact product market definition.

III.2.4 Aluminium welded precision tubes

54. The Commission has not previously considered the market for aluminium precision welded tubes. Precision welded tubes are produced by taking a flat coil of aluminium strip, forming it into a tube and welding it together. Welded precision tubes are derived from flat rolled products (FRP) and do not involve any extrusion process. Thus, welded precision tubes can be shaped so that they are round, flat-oval or rectangular pipes.

55. Although the precision welded tubes and the extruded tubes have similar shapes and may look the same, the Parties submit that the two products are not substitutable as extruded tubes are not produced with the same welding mills as the welded precision tubes. From the demand side, the replies to the market investigation revealed that, although welded precision tubes could in principle be substituted with other products (e.g. MPEs or extruded drawn tubes), the level of substitution is low and depends on the compatibility of the products with the final application. In addition, the businesses tend to be structured so as to focus primarily on one type of tubes.

56. Also, the difference between the standard welded tubes and the high precision welded tubes is important. Switching production from welded precision tube to high precision welded tube production is not as fast as in the case of soft-alloy extrusions. On the supply side, the replies to the market investigation confirmed that, although some producers produce both the standard and the precision welded tubes, for the production of the latter products there is a need for specific knowledge and experience in the field to be able to deliver quality products.

57. In any event, for the purpose of the present case the Commission considers that the product market definition can be left open, as the transaction does not raise serious doubts irrespective of the precise product market definition.

III.3. Relevant geographic market

III.3.1 Soft-alloy extrusions

58. In past decisions, the Commission has generally found the scope of the geographic market for soft-alloy extrusions to be EEA-wide. [15] In more recent decisions, however, the Commission also considered whether a separate market for the UK existed, but ultimately left the question open. [16]

59. In particular, in Alcoa/Orkla/Soft alloy extrusion JV, [17] the Commission concluded that the scope of the geographic market for soft-alloy extrusions was likely to be EEA-wide, with the possible exception of the UK, because of (i) the significant amount of trade flows of aluminium extrusions throughout the EEA; (ii) the low transport costs, in the region of 2-4% of the final selling price; and (iii) no major price differences within the EEA.

60. The Parties submit that the relevant geographic market for soft-alloy extrusions is at least as broad as the EEA, given that there are no tariffs or regulatory barriers to trade soft-alloy extrusions within the EEA, transportation costs represent only a small proportion of the final selling price and there are significant trade flows within the EEA.

61. The Commission notes that replies to the market investigation have not been fully supportive of the Parties' views.

62. On the one hand, according to the replies to the market investigation, there are large trade flows between different Member States, which are normally an indication that markets may be wider than national. In addition, many customers have replied that they source soft-alloy extrusions from a radius of more than 500 km. [18] Lastly, many customers stated that transport costs normally represent a relatively small proportion of the final price (between 1% and 5%).

63. On the other hand, a large number of customers responding to the Commission's requests for information also stated that they find it economically profitable to source soft-alloy extrusions within a maximum radius of 500 km. Secondly, the Parties' business organisation is based on business units constituted by one or more nearby plants. Often, these business units are limited to one Member State (e.g. Italy) or to geographic regions smaller than the EEA (e.g. Benelux). […]Fourth, independent industry analysts normally report market data such as prices on a national level for the larger Member States, and not on an aggregated EEA level.

64. In view of the above, and in the light of a high number of customers expressing concerns in (1) Norway and Sweden (the "Nordic Region") and in (2) the UK, the Commission investigated more in depth whether these two regions were separate from the mainland European market.

III.3.1.A Nordic Region

65. The Commission considers that there are a number of elements pointing at a possible separate market for soft alloy extrusions in a region composed by Norway and Sweden.

66. First, there are significant and persistent price differences between the Nordic Region and the remaining Member States. The average price difference between these regions for the past 6 years amounts to [10-20]%. In addition, there is no trend showing that in recent years the price differences have been decreasing. This appears to be incompatible with functioning price arbitrage across regions.

67. Second, there are significant and persistent differences in the "extrusion premia" charged by soft alloy extrusion suppliers between the Nordic Region and the remaining Member States. The extrusion premium is the price paid by customers for the value added by extruders (i.e. full price – aluminium price – billets conversion cost). In the course of its market investigation, the Commission has found that in the aluminium soft-alloy industry, negotiations between customers and suppliers normally only concern the extrusion premium. On the contrary, the aluminium price and the billet conversion cost are generally not object of negotiations and are therefore fixed for all customers. In the presence of a similar price structure, it seems appropriate to take as relevant benchmark price the extrusion premia rather than the full price. [19] The premium difference between the Nordic Region and the remaining Member States for the past 6 years is [10-20]%, and therefore even higher than the price difference.

68. Third, a significant part of customers in the Nordic Region seems to be prevented by transport costs to source from continental Europe. In particular, some customers stated that transport costs may reach up to 20% of the final price. A significant number of customers also stated that they would not find it profitable to purchase soft-alloy extrusions beyond a radius of 500 km. It should be pointed out that other elements of the logistics system than transportation costs are equally important. Timely delivery of the products is essential for many customers due to their tight production schedules. A number of customers indicated that the transportation network was more congested for flows into the Nordic Region than out of it, making it more difficult to import into this part of the world in a sufficiently "just in time" manner than to export from it.

69. Fourth, the market structure in the Nordic Region is very different in comparison to other geographic areas. The supply-side of the market in many Member States such as Germany, Italy, Spain and the United Kingdom is fragmented and characterised by the presence of many suppliers of different size. By contrast, in the Nordic Region only three companies (Hydro, Sapa and ProfilGruppen) operate soft alloy extrusion plants.

70. Fifth, imports of soft-alloy extrusions in the Nordic Region account for approximately 20% of sales in that region, which is significantly lower than the average imports in other Member States or regions. [20] In the course of its investigation, the Commission has found that the Parties account for part of these imports (imports from Parties' Business Units are not necessarily driven by price arbitrage but could be driven e.g. by distribution needs of the merging parties). Therefore imports in the Nordic Region (excluding the Parties) would be even lower than 20%. In addition, it is not likely that the sources on which imports data is based are not reliable, insofar as they may also include products which are different from soft alloy extrusions, such as billets and windows frames. As a result, imports in the Nordic Region are likely to account for even less than 20% of sales in that region.

71. In view of the above, the Commission concludes that it is likely that a separate market for the Nordic Region exists. In any event, it is not necessary for the Commission to conclude on the matter, given that the Parties have submitted remedies that eliminate serious doubts on a possible market for soft-alloy extrusions in the Nordic Region in their entirety.

III.3.1.B UK

72. In some of its precedents on the soft alloy extrusions market, the Commission considered whether a separate market for the United Kingdom existed. [21]

73. In the present case, the results of the market investigation do not suggest that the United Kingdom constitutes a separate market for soft alloy extrusions. [22]

74. First, price differences between the UK and remaining Member States (excluding Norway and Sweden) do not appear to be significant. In particular, prices in the United Kingdom tend to be only slightly higher or lower than prices in the remaining Member States (excluding Norway and Sweden). As for the premia, these seem to be systematically lower than in the other Member States.

75. Second, imports represent a significant proportion of consumption in the United Kingdom and account for approximately 50% of demand.

76. In any event, the Commission considers that the question as to whether a separate market for soft alloy extrusions in the United Kingdom exists can be left open, given that the proposed transaction would not give rise to serious doubts even under the narrowest product market definition.

III.3.1.C Geographic markets for potential automotive and large extrusions profiles markets

77. The Commission investigated whether a potential segment for automotive profiles could be narrower than EEA in scope. The replies to the market investigation have not confirmed that there are narrower markets in the Nordic Region and in the UK. These profiles are more added-value products compared to the general soft alloy extrusions and therefore go through longer distances (relative transport costs are lower). In view of the above, the Commission has assessed the impact of the proposed transaction of the potential segment for automotive profiles in the EEA as a whole.

78. The Commission investigated also whether a potential segment for soft alloy extrusions produced with large extruded presses (above and including 12'') could be narrower than EEA in scope. This does not appear to be likely because these profiles are more added-value products compared to the general soft alloy extrusions and therefore go through longer distances (relative transport costs are lower). In the UK there is not any press above and including 12''. In any event, the Commission considers that the geographic market for the potential segment for larger profiles can be left open, given that the proposed transaction would not give rise to competition concerns even under the narrowest approach.

III.3.1.D Conclusion on the geographic market for soft alloy extrusions

79. In view of the above, the Commission has assessed the impact of the proposed transaction for soft alloy extrusions in the following possible markets: (1) in the EEA as a whole; (2) in the Nordic Region; (3) and in the United Kingdom. The Commission has also assessed the potential sub-segments for automotive in the EEA as a whole, and for large extrusions in the EEA as a whole and in the Nordic Region.

III.3.2 MPEs

80. The Parties submit that the relevant geographic market for MPEs is at least EEA-wide and could possibly be worldwide because of low transport costs, the common features of the products worldwide and the worldwide scope of the main customers’ activities.

81. The responses to the Commission's requests for information indicated that MPE customers based in Europe purchase across the whole EEA territory. [23] MPEs are comparatively high value products and therefore transport costs do not play a major role in determining the customers' purchase patterns.

82. On the other hand, imports of MPEs from outside the EEA represent only a small proportion of the EEA consumption (approximately 3%). The responses of market participants indicate that imports do not play an important role in the EEA, [24] mainly because of quality reasons as well as the obstacles constituted by the certification process that is necessary to supply automotive customers.

83. In view of the above, the Commission concludes that the market for MPEs is EEA wide.

III.3.3 Building systems

84. According to the Parties, the relevant geographic market for Building Systems should be considered as being EEA-wide for several reasons.

85. Firstly, although from a demand-side perspective there are traditional and regulatory preferences and requirements that differ between some countries, from the supply side the basic profile typically does not differ much and it is not technically complex for a building systems supplier to adapt its product in order to meet a specific demand in a given country. There is also easiness for building systems suppliers from a certain Member State to devote resources to enter on another market offering solutions meeting the local demand. Also in cases of contraction or expansion of neighbouring countries, building system suppliers are continuously optimizing their portfolio to respond to the opportunity to earn a profit in other countries. This situation is often met in the Baltics countries (comprising Lithuania, Estonia and Latvia).

86. Secondly, national patterns seem to be less obvious for big projects or more sophisticated building systems, as such buildings tend to be built according to European standards and in the same manner and style throughout Europe.

87. Thirdly, language barriers for the customers for these building systems are less important and they usually conduct supra-national tenders to achieve the best prices for the project. Therefore, these products have a European-wide scope and can be supplied throughout the entire EEA.

88. During the market investigation, the large majority of respondents have submitted that the market for the aluminium building system appears to be narrower than EEA, possibly national, due to several reasons: customers' preferences, national habits, regulatory requirements, language barriers and price difference [25] . Customers have also mentioned that a local presence of the suppliers represents an advantage for them as technical and logistic support is needed. The transport costs as indicated by the customers are also important and range from 1-4% within an area of less than 200 km up to 20% of the final price for a distance of 500-1000 km.

89. Nevertheless, the replies to the market investigation confirmed that customers in the Baltic countries tend to purchase their building systems also from suppliers located outside their country.

90. In any event, the Commission considers that the precise geographic market definition can be left open for the purpose of the present case, as the transaction is unlikely to raise serious doubts irrespective of the precise geographic market definition.

III.3.4 Aluminium welded precision tubes

91. The Parties submit that the relevant geographic market for aluminium welded precision tubes is at least EEA-wide and could possibly be worldwide for the following reasons.

92. Firstly, the vast majority of welded precision tubes are consumed by a small number of automotive heat transfer system (HTS) manufacturers. HTS manufacturers more generally operate on a worldwide basis and sell their products to car manufacturers around the world. Moreover, the products supplied to the HTS manufacturers are the same around the world. Secondly, the transport costs are not significant, and account for approximately 5% of the final sale price for products sourced worldwide. Thirdly, there are no quotas, tariffs or other barriers that would impact the imports into the EEA. In 2011, the level of imports into the EEA accounted of around 10% of all sales of welded precision tubes.

93. The market investigation indicated that transport costs account for around 3-10% of the final price for the welded precision tubes. As regards transport costs for imports from outside EEA, however, the market respondents appreciated that the transport cost can become a constraint, especially taken into account the added customs duties.

94. In any event, the Commission considers that the precise geographic market definition can be left open for the purpose of the present case, as the transaction is unlikely to raise serious doubts irrespective of the precise geographic market definition.

III.4. Competitive assessment

III.4.1 Horizontal overlaps

III.4.1.A Soft alloy extrusions

95. As already said above, the Commission has assessed the impact of the proposed transaction for soft alloy extrusions in the following possible markets: (a) in the EEA as a whole (excluding automotive and large extrusions profiles); (b) in the Nordic Region (excluding automotive and large extrusions profiles); (c) and in the United Kingdom (excluding automotive and large extrusions profiles). The Commission has also assessed the potential sub-segments (d) for automotive in the EEA as a whole, and (e) for large extrusions in the EEA as a whole and in the Nordic Region.

III.4.1.A.a EEA

96. Table 1 below shows the market shares of the Parties and their competitors.

Table 1 – 2011 Shares of soft alloy extrusion sales at EEA level

PRODUCER |KMT |% |

Hydro |[…] |[10-20%] |

Sapa |[…] |[10-20]% |

Combined |[…] |[20-30]% |

Constellium |[…] |[5-10] |

Aleris International |[…] |[0-5] |

Metra |[…] |[0-5] |

Cortizo |[…] |[0-5] |

Alumil |[…] |[0-5] |

Others |[…] |[60-70]% |

Total |[…] |100 |

Source: Form CO

97. Table 2 below shows the share of capacity of the Parties and their competitors.

Table 2 – 2011 Shares of soft alloy extrusion production capacity at EEA level

PRODUCER |KMT |% |

Hydro |[…] |[10-20]% |

Sapa |[…] |[10-20]% |

Combined |[…] |[20-30]% |

Others |[…] |[70-80]% |

Total |[…] |100 |

Source: Form CO

98. The market shares in Table 1 and 2 show that the proposed transaction will create the largest producer of soft alloy extrusions in the EEA. The Parties' combined market share for the sales of soft alloy extrusions amount to [20-30]%, but the Parties will continue to face competition from many smaller players such as Constellium, Aleris, Metra and Cortizo.

99. In the EEA (excluding the Nordic Region and the UK, which has been assessed in the following sections) only a very small minority of the respondents to the Commission's requests for information raised concerns.

100. The Parties submit that the market for soft alloy extrusions is very fragmented. In 2011, the shares of the leading suppliers (Hydro, Sapa, Constellium, Aleris International, Metra, Cortizo and Alumil) together accounted for only around 40% of 2011 EEA sales. The remaining 60% of demand was met by more than 250 independent extruders that own over 500 presses.

101. According to the Parties, entry into the production of soft alloy extrusions is relatively straightforward, as there are no technical or regulatory barriers. The Parties estimate that to set up a single press with 8 to 10 KMT annual capacity would take around 12 months. The initial investment required is around EUR 10 million. [26] Despite the downturn in demand, according to the Parties, there were new entrants in the EEA market in the last five years. [27]

102. The Parties submit as well that the soft alloy extrusion market in 2011 in the EEA was characterized by significant levels of overcapacity. Average utilization in the EEA in 2011 was around [50-60]%. The Parties' utilization was slightly higher than the average. Therefore, according to the Parties, a significant proportion of spare capacity is found with the Parties' competitors and, as such, customers have alternative sources of supply to the Parties for soft alloy extrusions.

103. The respondents to the Commission's requests for information confirmed the existence of alternative suppliers and a significant part of customers in the rest of the EEA confirmed that it is possible to switch easily between different suppliers within a short time period. [28] Almost all competitors confirmed that they have free capacity to expand production without any significant investment.

104. In view of the above, the Commission considers that the proposed transaction does not give rise to serious doubts as regards its compatibility with the internal market in relation to an EEA (as a whole) market for soft alloy extrusions.

105. If the relevant geographic market were to be considered as the EEA excluding the UK, the Commission consideres that there would be additional reasons to conclude that the transaction does not raise serious doubts because, by excluding the relatively high market shares of the Parties in the UK, the market shares in the rest of the EEA would be even lower.

106. Similarly, if the relevant geographic market were to be considered as the EEA excluding the Nordic Region (or the Nordic Region and the UK), the transaction does not raise serious doubts because, by excluding the high market shares of the Parties in the Nordic Region, the market shares in the rest of the EEA would be even lower.

III.4.1.A.b Nordic Region

107. Tables 3 and 4 below show the sales and capacity shares of the Parties and their competitors in the Nordic Region market for soft-alloy extrusions.

Table 3 – Shares of soft alloy extrusion sales in the Nordic Region in 2011

PRODUCER |KMT |% |

Hydro |[…] |[20-30]% |

Sapa |[…] |[50-60]% |

Combined |[…] |[70-80]% |

Others (including ProfilGruppen) This share of sales exclude Benteler (see footnote below) and includes imports and volumes sold by stockists. Currently there are only three extruders in the Nordic Region: Hydro, Sapa and ProfilGruppen. This share of sales exclude Benteler (see footnote below) and includes imports and volumes sold by stockists. Currently there are only three extruders in the Nordic Region: Hydro, Sapa and ProfilGruppen. |[…] |[20-30]% |

Total |[…] |100 |

Source: Market reconstruction based on internal documents

Table 4 – 2011 Shares of soft alloy extrusion production capacity in the Nordic Region in 2011 [30]

PRODUCER |KMT |% |

Hydro |[…] |[30-40]% |

Sapa |[…] |[40-50]% |

Combined |[…] |[70-80] |

ProfilGruppen |[…] |[20-30] |

Total |[…] |100 |

Source: Market reconstruction based on internal documents

108. The Parties are respectively the only producer of soft-alloy extrusions in Norway (Hydro) and the largest producer of soft-alloy extrusions in Sweden (Sapa). The only remaining competitor operating presses in the Nordic Region would be ProfilGruppen, which is already today much smaller than each of Hydro and Sapa. The proposed transaction would therefore eliminate one of the only three producers of soft alloy extrusions in the Nordic Region. The combined capacity share of the Parties would amount to [70-80]% in the Nordic Region.

109. The majority of customers replying to the Commission's requests for information expressed concerns that the proposed transaction will result in a reduction of competition and increase of prices. [31] Some respondents stated that competition in the Nordic Region is only or mainly depending on the rivalry between Hydro and Sapa, which would be eliminated as a result of the proposed transaction.

110. The Commission considers that similar conclusions can be reached on the basis of an analysis of the Parties' internal documents. […]This shows that the merging parties are close competitors and, consequently, the transaction would remove a competitive constraint in relation to the soft-alloy extrusions. ProfilGruppen (excluding the merging parties) is the only other extruder currently producing in the Nordic Region. ProfilGruppen has some spare capacity but would not have the production capacity to strongly compete with the merging parties.

111. The Parties submit that the proposed transaction would not result in anticompetitive effects. The Parties claim that (1) their competitor ProfilGruppen will strongly compete for share after the merger; (2) imports from Finnish producers and a trader will defeat the price rise; (3) large scale imports from continental Europe will defeat a possible price rise; (4) they are making losses in the Nordic Region due to high labour costs.

112. […]In addition, a customer in the Nordic Region explicitly pointed out that in the past it conducted some trials with alternative suppliers in Finland, however, the results were not satisfactory, in particular in terms of quality standards required. [32]

113. Furthermore, the Nordic Region has the lowest share of imports in all the EEA (at most approximately 20%). The reasons for this appear to be mixed and are related mainly to higher transport costs [33] than in the rest of the EEA and product mix (in the Nordic Region customers require, in relative terms, a lower amount of simple extrusions - which have on average lower transport costs).

114. In theory, barriers to entry are not particularly high and economies of scale are not significantly important. However, from the market investigation there were no indications that entry would be likely, timely and sufficient. [34] Respondents to the market investigation stated that there was no entry in recent years and that they did not expect any entry in the Nordic Region. Internal documents of the Parties do not refer to any significant entry that could take place in the close future.

115. Therefore, contrary to the Parties' submissions, the Commission's investigation indicated that customers would face limited possibilities of switching supplier post-transaction.

116. Furthermore, as regards the Parties' submission that they are […] in the Nordic Region due to […], the Commission considers that the fact that the Parties are […] does not mean that they do not today, and could in the future, enjoy significant market power, but may be linked to other issues including […].

117. In view of the above and of the other available evidence, the Commission considers that the proposed transaction raises serious doubts as regards its compatibility with the internal market in relation to soft-alloy extrusions market in the Nordic Region.

III.4.1.A.c UK

118. Tables 5 and 6 below show the sales and capacity shares of the Parties and their competitors in a possible UK market for soft-alloy extrusions.

Table 5 – Shares of soft alloy extrusion sales in the UK in 2011

PRODUCER |KMT |% |

Hydro |[…] |[10-20]% |

Sapa |[…] |[20-30]% |

Combined |[…] |[40-50]% |

Boal |[…] |[5-10] |

Smart |[…] |[5-10] |

Kayes |[…] |[0-5] |

Others |[…] |[40-50]% |

Total |[…] |100 |

Source: Form CO

Table 6 – Shares of soft alloy extrusion production capacity in the UK in 2011

PRODUCER |KMT |% |

Hydro |[…] |[20-30]% |

Sapa |[…] |[20-30]% |

Combined |[…] |[50-60]% |

Boal In the course of the State of Play meeting, the Parties reported of a clerical error in the shares of capacity of Boal. The table above has been amended in accordance with the new data. In the course of the State of Play meeting, the Parties reported of a clerical error in the shares of capacity of Boal. The table above has been amended in accordance with the new data. |[…] |[10-20] |

Smarts |[…] |[10-20] |

Kayes |[…] |[10-20] |

Others |[…] |[10-20]% |

Total |[…] |100 |

Source: Form CO

119. In a possible separate market encompassing the UK only, the Parties had a combined market share in 2011 of [40-50]%. [36] Boal would be the second largest supplier with a share of [5-10]%, followed by Smart ([5-10]%) and Kayes ([0-5]%).

120. The Parties are by far the two largest suppliers of soft-alloy extrusions in the UK. In addition, the merged entity would achieve a share of [50-60]% of the UK installed capacity.

121. Some customers answering the Commission's requests for information stated that the proposed transaction will result in a reduction of competition and increase of prices. [37]

122. According to the Parties, the proposed transaction will not result in anticompetitive effects. The Parties claim that (1) there is strong competition from stockists such as Amari which import large volumes of soft alloy extrusions into the UK; (2) the other three main extruders (i.e. Boal, Smart and Kayes) are also strong players with spare capacity which can provide the same products as the Parties; (3) imported products accounted for approximately 50% of 2011 UK sales, the largest source of imports into the UK being China, with a share of approximately 18%, followed by Germany (17%) and Belgium + Luxembourg (9%).

123. According to the replies to the market investigation, stockists have a strong position in the UK (e.g. Amari alone being around [10-20]% of sales to end users) and stockists tend to source large volumes from non-EU suppliers, in particular from Asia (therefore explaining the high levels of imports into the UK). [38] Independent stockists exercise a strong competitive constraint, supplying approximately 39% of soft-alloy extrusions in the UK.

124. In addition, the replies to the market investigation indicated that even post-transaction, there is considerable excess capacity (spare capacity estimated by the Parties to be around [30-40]%) and that the Parties will continue to face competitive pressure from the remaining extruders.

125. In view of the above and of the other available evidence, the Commission considers that the proposed transaction does not raise serious doubts as regards its compatibility with the internal market in relation to the possible soft-alloy extrusions market in the UK.

III.4.1.A.d Profiles for the automotive industry

126. Concerning the potential segment for automotive profiles, the Parties estimate the combined share of soft alloy extrusion sales to the automotive industry to amount to [10-20]% (Hydro:[5-10]%, Sapa:[5-10]%) in 2011 at EEA level. Automotive end-users often require that suppliers are certified to the ISO/TS 16949 standard. The Parties submit that many of their competitors are certified to that standard. Among them: Constellium: [10-20]%, Benteler: [10-20]%, Aleris: [5-10]%, Herbsloeh: [5-10]%, Honsel: [5-10]%, Brokelmann: [5-10]%, Hai: [5-10]%, etc.

127. Internal documents of the Parties confirm the submissions of the Parties. They show that strategic decisions on the automotive profiles are based on EEA level. Automotive profiles are more added-value than general soft alloy extrusions and travel longer distances. Competitors' replies to the market investigation confirmed the Parties' submission.

128. Therefore, the Commission concludes that the proposed transaction does not raise serious doubts in relation to the potential automotive segment.

III.4.1.A.e Large extrusions profiles

129. Concerning the potential segment for soft alloy extrusions produced with large extruded presses (above and including 12''), the Parties estimate the combined share of extrusion capacity on presses of 12'' and higher to amount to approximately to [20-30]% at EEA level. Hydro does not contribute any press of diameter larger than 12'' to the JV. For soft alloy extrusions with diameters of 12'', the Commission considers that although Hydro would contribute one 12'' press to the JV (in the Raufoss plant in Norway, described in details below), several competitors remain operating large size presses within the EEA. Furthermore, as the Parties have submitted remedies, which include the divestment of the Raufoss plant, the overlap is eliminated in relation to presses of 12'' or larger.

130. Therefore, the Commission concludes that the proposed transaction does not raise serious doubts as regards its compatibility with the internal market in relation to the potential segment for soft alloy extrusions produced with large extruded presses (above and including 12'').

III.4.1.B MPEs

131. Table 7 below shows the market shares of the Parties and their competitors.

Table 7 –Shares of MPEs sales at EEA level in 2011

PRODUCER |KMT |% |

Hydro |[…] |[50-60]% |

Sapa |[…] |[10-20]% |

Combined |[…] |[60-70]% |

Herbsloeh |[…] |[20-30]% |

Sumitomo |[…] |[10-20]% |

Imports |[…] |[0-5]% |

Total |[…] |100 |

Source: Form CO

132. The proposed transaction would eliminate one of the only four European suppliers of MPEs in the EEA. The proposed transaction would also further strengthen the already strong position of Hydro, which pre-merger accounts for more than [50-60]% of the MPEs sales in the EEA. […]This shows that the merging parties are close competitors and, consequently, the transaction would remove a competitive constraint in relation to MPEs.

133. All the customers responding to the Commission's requests for information raised concerns as to the effect of the proposed transaction with regard to the EEA market for MPEs. These customers submitted that the proposed transaction would result in the merged entity achieving or reinforcing a dominant position. As a result, prices for MPEs in the EEA would be affected.

134. The Parties submitted that the proposed transaction would not result in anticompetitive effects for three reasons. First, the competitors of the merged entity have spare capacity and would be ready to expand output further to a price increase from the merged entity. Second, customers would switch to folded tubes as a reaction to a price increase. According to the Parties, folded tubes represent a viable alternative to MPEs and can be easily produced in-house by customers. Third, the large majority of the MPEs customers are large tier-1 automotive producers who are capable to exercise sufficient buyer power to prevent a possible price increase.

135. With regard to the likely reaction of competitors, the Commission found that both competitors of the merged entity are currently operating at high utilisation rate. This means that competitors would be unlikely to have the ability to increase output to counter a possible price increase from the merged entity.

136. In addition, the Commission has not found any evidence of future entry in the EEA market for MPEs. While some customers stated that in principle they would try to sponsor entry as a reaction to a price increase, all but one customers replying to the Commission's requests for information stated that they do not expect any entry in the future.

137. As regards possible substitution of MPEs with folded tubes, a narrow majority of customers responding to the Commission's requests for information stated that they would switch to folded tubes further to a permanent increase in the price of MPEs in the range of 5-10%. However, further investigation showed the following:

(a) Folded tubes cannot be used as substitutes for MPEs for all applications (in particular, not for evaporators and refrigerators). In addition, non-automotive applications, which are expected to be developed in the next years by a number of players, are mainly based on the use of MPEs;

(b) A switch to folded tubes cannot be immediate and would probably require time. In particular, customers wishing to switch would need to invest to build captive production and request approval to final OEMs customers. The use of folded tubes in the automotive segment may also involve the use of patented processes; [39]

(c) A number of market players still believe that MPEs constitute the leading technology and that MPEs are superior in performances to folded tubes;

(d) None of the two remaining competitors of the Parties expects any major impact of the switching to folded tubes on the MPEs business; and

(e) The Parties' internal documents show that apart for a few isolated statements, no in-depth analysis on the future impact of folded tubes on the MPEs business has been carried out. In addition, there has not been any significant decrease in the volume of MPEs due to the switch to folded tubes in recent years.

138. In view of the above, the Commission considers that some degree of future substitution between MPEs and folded tubes cannot be excluded. However, such substitution would not be certain and it would be, in any event, limited. In addition, in light of the above, the Commission has doubts that it would be timely and sufficient to exclude any anticompetitive effect stemming from the proposed transaction.

139. As regards buyer power, the Parties have not submitted compelling evidence that customers enjoy sufficient countervailing buyer power to prevent a price increase. On the contrary, a number of customers have submitted that Hydro enjoys a strong if not dominant bargaining position, and makes use of that position to influence the outcome of the negotiations in its favour, for instance by adopting a "take it or leave it" approach or threatening interruptions in deliveries. [40]

140. In view of the above and of the other available evidence, the Commission considers that the proposed transaction raises serious doubts as regards its compatibility with the internal market in relation to the EEA market for MPEs.

III.4.1.C Building systems

141. According to the Parties, the proposed transaction would not significantly impede effective competition in the market for aluminium building systems in general and in any potential sub-segments for the following reasons.

142. First, the building systems suppliers operate in a market where they compete with non-integrated stockists and specialist fabricators who source profiles that they turn into complete systems. These companies offer products and services that in the case of stockists often are less, and in the case of specialist fabricators often are more sophisticated than those offered by building systems suppliers. Therefore, the competition in the building system market is very dynamic and the competitive pressure from other alternative suppliers like stockists and OEMs is stronger on the low level sophisticated products (windows or doors) and it is less for the high sophisticated level products (facades with special technical characteristics like high energy efficiency buildings).

143. Second, the Parties consider the estimated market shares as the most conservative approach. In the absence of any public available data for the building system market, the Parties have adopted a filter, focusing only on aluminum-based products and only to the extent that the building system suppliers are directly involved in that products flow, thus excluding the potential competition from the specialist fabricators (OEMs) and stockists, as well as from profiles that are based on other materials, like PVC or wood.

144. The Parties' activities overlap in the production and supply of aluminium building systems. Neither of them is active in supplying building systems based on other materials, except aluminum.

145. Should the market of aluminum building systems be considered as an overall market, the Parties combined market shares at EEA level would reach [10-20]% (in volume) and [20-30]% (in value). Their main competitors are Schueco ([10-20]% market share in volume and [10-20]% in value) and Reynaers ([0-5]% market share both in volume and in value). Other players are Metra ([0-5]% market share in volume and [0-5]% in value), Alumil ([0-5]% market share both in volume and in value), Cortizo ([0-5]% market share both in volume and in value). According to Parties' best estimates, the EEA building system market amounted to […] MT in 2011, equivalent to aproximativelly EUR […[.

146. Should the market of building systems be further segmented, the curtain walls segment would not represent an affected market at EEA level, as the combined market shares would reach only [10-20]%. Nevertheless, on the other products segment Hydro has a market share of [10-20]% and Sapa [5-10]%. Therefore, the combined market share of the Parties would reach almost [20-30]% at EEA level. Post-transaction the merged entity will face the same competitors as in the overall market for building system. Among all, Schueco has a market share equal to the merged entity. In addition, other competitors like Reynaers, Metra, Alumil, Kawneer (Alcoa) and Cortizo are also active across the EEA and will continue to compete with the Parties.

147. Thus, the Commission considers that taking into account the moderate combined market share of the Parties in the overall market for building systems and in the other products segment and the existence of the alternative suppliers mentioned above who will continue to exercise competitive pressure on the merged entity, the proposed transaction does not raise serious doubts in this market.

148. At national level, according to the Parties, the combined market share is above 15% in Austria, Belgium, Czech Republic, France, Ireland, Italy, Norway, Portugal, Spain, Sweden, the UK and the Baltics. On the basis of value market shares, Slovakia is not an affected market, but it would be considered if volume figures are taken into account. On the contrary, Denmark is an affected market based on volume figures. Except this, the Parties have confirmed that the competitive situation would not change if value figures are taken into account. Therefore, the competitive analysis based on country level is carried out on the basis of volume figures only, except for Denmark.

149. At national level by segment, there are 9 affected national markets in the curtain walls segment and another 15 affected national markets in the other products segment.

Austria

150. The Parties estimate the total supply for Building Systems in Austria to be approximately […] MT in 2011. The Parties’ combined share of supply amounts to [20-30]% in volume. Schueco will continue to be the largest competitor of the merged entity with a share of around [20-30]%. Reynaers is also present (with a share of around [0-5]%), together with a number of other suppliers including Hueck [10-20]%, Heroal [5-10]%, Alumil [0-5]%, Kawneer (Alcoa) [0-5]%, Metra [0-5] %, AluK [0-5]% and Akotherm, Gutmann/Alco, Lumon, Feal and Raico with less than [0-5]%.

151. The Commission considers that should the market for building system be further segmented, the curtain walls segment in Austria would not be an affected market. In the other products segment, the situation would be similar to the one on the overall market for building system.

152. The replies to the market investigation in this case did not reveal any competitive concern on this market. Moreover, they indicated that the market for building systems in Austria is competitive, confirming the alternative suppliers mentioned above who will continue to exercise competitive pressure on the merged entity. Therefore, in view of the above and of the other available evidence, the Commission considers that the proposed transaction does not raise serious doubts in relation to the building systems market and to any of its narrower segments in Austria.

The Baltics

153. The Parties estimate the total supply for Building Systems in the Baltics to be approximately […] MT in 2011. Of this, Hydro supplied […] MT and Sapa […] MT. The Parties’ combined share of supply amounts to [30-40]% (Hydro [20-30]%/Sapa [10-20]%). The Parties believe that Schueco is the largest supplier in the Baltics with a market share of around [30-40]%. There are numerous other competitors including Reynaers ([10-20]%), Hueck ([5-10]%), Aluprof and Javal (with market shares of less than [5-10]%). The Parties consider Cortizo as a potential new entrant on this market due to its Polish operations.

154. At segment level, the Parties would have a similar market presence in the curtain wall segment with a combined market share of [30-40]%. Their main competitor Schueco would also reach [30-40]%. Other players present in this market are Reynaers (supplying from Poland) and Hueck, each with a share of around 5-10 %. Cortizo, Heroal and Guttmann would also be active, as would Raico. The Parties also consider that Aluprof and Yawal may also be supplying curtain walls into the Baltics from Poland.

155. As regards the other products segment, the combined market shares will be smaller than in curtain walls of [20-30]%, facing competitive constraint from Schueco (with a market share of [20-30]%), Reynaers, Heroal and Aluprof, each with market share in the range of 5-10%. Metra, Alumil, Cortizo and Aliplast are also present on this market with market shares of less than [5-10]%.

156. The Parties confirmed that the competitive situation in all three of the Baltic States (i.e., Estonia Latvia and Lithuania) is similar to the overall position on the Baltics. Moreover, in all these countries Hydro does not have a local presence and therefore it exports building system products from neighbouring countries. Reynaers has the same strategy , supplying all these countries from its Polish offices.

157. The Commission considers that the replies to the market investigation in this case confirmed that customers do purchase building systems from outside their country. In the Baltics, respondents confirmed the presence of other alternative suppliers mentioned above. Moreover, respondents confirmed that the market leader is Schueco and that Sapa is among other alternative suppliers. Hydro seems indeed to have limited presence and therefore is not seen as a close competitor of Sapa. Therefore, in view of the above and of the other available evidence, the Commission considers that the proposed transaction does not raise serious doubts in relation to the building systems and to any of its narrower segments in the Baltics.

Belgium

158. The Parties estimate the total supply for Building Systems in Belgium to be approximately […] MT in 2011. Of this, Hydro supplied […] MT and Sapa […] MT. In Belgium, the Parties’ combined share of supply amounts to [20-30]% in 2011, with a small increment of [0-5]% brought by Hydro. Reynaers, a Belgian company, is by far the largest supplier in Belgium, with around [40-50]% of sales on a national basis. Schueco and Aliplast are also present, with Schueco supplying around [10-20]% of sales and Aliplast supplying [10-20]%, as well as a number of smaller local suppliers, including Van Beveren [5-10]%, Heroal, Flandria and Blyweert, each of them with around [0-5]% market share.

159. At segment level, the Parties' activities overlap only in other products segment, where the situation is similar to the one in the overall segment of building systems. The Commission considers that the replies to the market investigation in this case confirmed that due to the minimum increment in market shares and the existence of other alternative suppliers, the proposed transaction does not raise serious doubts in relation to the building systems and to any of its narrower segments in Belgium.

Czech Republic

160. The Parties estimate the total supply for Building Systems in the Czech Republic to be approximately […] MT in 2011. Of this, Hydro supplied […] MT and Sapa […] MT. In the Czech Republic, where the Parties’ combined share of supply amounts to [10-20]%, Schueco is the most important supplier and will continue to be so post-transaction, with around [40-50]% of total sales. Reynaers is also another significant supplier with around [10-20]% of sales.

161. If considering product segments, the combined market share would be just above the level of constituting a horizontally affected market in relation to Building Systems for other products ([10-20]% combined market share) and curtain walls would not represent an affected market ([10-20]% combined market share). The Parties argue that the structure of competition in the Czech Republic would not materially change after the proposed transaction.

162. Indeed, the replies to the market investigation in this case confirmed that due to the relatively small market shares of the Parties and the existence of other alternative suppliers who will continue to exercise competitive pressure on the merged entity. In the light of the above and of the other available evidence, the Commission considers that the proposed transaction does not raise serious doubts in relation to the building systems and to any of its narrower segments in the Czech Republic.

Denmark

163. The Parties estimate the total supply of Building Systems in Denmark to be approximately […] MT in 2011. Of this, Hydro supplied […] MT and Sapa […] MT. In Denmark, the Parties’ combined share of supply amounts to [10-20]% (in value) and only [10-20]% (in volume). Schueco will continue to be by far the largest competitor, with a share of around [40-50]%, with Metra ([5-10]%), Alumil and H S Hansen also being present (each of the two with market shares less than [0-5]%).

164. For the product segment, only the segment for Building Systems for curtain walls would represent a horizontally affected market. The Parties would have a combined market share of [20-30]%. Schueco would be the most significant competitor in relation to the supply of curtain walls in Denmark, representing around [30-40]% of total sales and Hueck accounting for around 5-10%. The Parties are also in direct competition with facade specialists, such as Hansen, with a share of [20-30]%, and Permasteelisa and Oskomera, which would represent between [10-20]% of sales each.

165. The Commission considers that the replies to the market investigation in this case confirmed that due to the relative moderate combined market share, the existence of other alternative suppliers, and the fact that customers indicated that they do purchase building systems also from regional suppliers located outside their country, [41] the proposed transaction does not raise serious doubts in relation to this the building systems and to any of its narrower segments in Denmark.

France

166. The Parties estimate the total supply of Building Systems in France at […] MT in 2011. Of this, Hydro supplied […] MT and Sapa […] MT. The Parties’ combined share would reach [30-40]%. Other large competitors include local suppliers Profile Systemes and Sepalumic with estimated shares of local sales of [5-10]% and [5-10]%, respectively. In addition, Schueco, Reynaers, Alcoa and Aliplast are all present, accounting for shares of [5-10]%. The remainder of the market ([30-40]% by volume) is fragmented.

167. In the curtain wall segment, Schueco has a market share of [20-30]%, with Reynaers and Alcoa each accounting for around 5-10%. The Parties also face significant direct competition from the large national facade specialists, Ouest Alu and Goyer each accounting for around [10-20]% of sales. There are also international facade specialists, like Permasteelisa accounting for between [10-20]% of the French market. Metal Yapi from Turkey is also seen as an active competitor, winning projects on this market. The Parties also sometimes encounter companies like Profiles Systemes, Sepalumic, Installux and Raico competing for curtain wall projects, but also Yuanda, a Chinese facade specialist.

168. In the other products segment, the Parties have a combined market share of [20-30]% (Hydro [20-30]% and Sapa [5-10]%). The most important competitor is again Schueco with a market share of [10-20]%. There are numerous other smaller competitors in this segment like Reynaers, Kawneer (Alcoa), Profiles Systemes, Sepalumic or Installux, each with a market share of 5-10% and also Cortizo and Heroal with market shares below [5-10]%. The Parties argue that Cortizo, a recent entry in the market decided to establish a local manufacturing facility in France and increase its sales here.

169. The Parties also argue that Hydro and Sapa are not closed competitors in the French market. Whereas Hydro has a stronger position due to historical reasons, it is addressing the higher-end customers, where Sapa presence is insignificant. Moreover, the supply of building systems in France has been industrialized to a greater extent than in other European countries. Thus, approximately 20 000MT of additional supplies in France go through OEMs who source components and assemble the systems in large factories. These products would account for windows and other products, which represent an alternative supply for the building systems customers.

170. The Commission considers that the replies to the market investigation on the French market confirmed the fact that indeed some customers do consider OEMs and/or stockists as alternative sources for aluminum building systems. [42] Customers also confirmed the existence of others as alternative suppliers as indicated by the Parties. Moreover, Cortizo indeed confirmed its plans to expand its presence in France. [43]

171. Taking into account the moderate market shares of the Parties, the existence of other alternative suppliers, some of them having the intention to expand their presence here and also considering other distribution channels as a real alternative for the customers who will continue to exercise competitive pressure on the merged entity, the proposed transaction does not raise serious doubts in relation to the building systems and to any of its narrower segments in France.

Ireland

172. The Parties estimate the total supply of Building Systems in Ireland at […] MT in 2011. Of this, Hydro supplied […] MT and Sapa […] MT. In Ireland, the Parties’ combined share of the overall building systems supply amounts to [20-30]% volume. Here, too, Schueco, Kawneer (Alcoa) and Reynaers are all active competitors with shares of [20-30]%, [10-20]% and [5-10]%, respectively. Other smaller competitors together account for [30-40]% of the Irish market.

173. The Parties have insignificant presence in the curtain walls segment. In the other products segment the combined market share reaches [20-30]% (Hydro [10-20]% and Sapa [5-10]%). Schueco and Kawneer (Alcoa) are the most important competitors with market shares of [20-30]% and [10-20]% respectivelly. Reynaers and Profiles Systemes are also active with market shares of 5-10% each. In addition, there are a number of active smaller players such as Beufort, Comar, Senior Universal and Metal Technology with market shares between 0-5%.

174. Taking into account the moderate market shares of the Parties and strong presence of Schueco and Kawneer (Alcoa) and the existence of other smaller competitors who will continue to exercise competitive pressure on the merged entity, the proposed transaction does not raise serious doubts in relation to the building systems and to any of its narrower segments in Ireland.

Italy

175. The Parties estimate the total supply of Building Systems in Italy at […] MT in 2011. Of this, Hydro supplied […] MT and Sapa […] MT. In Italy, the Parties’ combined market share of supply thus amounts to [10-20]% (Hydro: [10-20]%;Sapa: [5-10]%). Their main competitors have a volume based share of supply as follows: Metra ([10-20]%), Alumil ([5-10]%) Ponzio ([5-10]%), Schueco ([5-10]%) and Allco ([5-10]%). [30-40]% of the Italian supply is fragmented between smaller competitors.

176. In the other products segment, the situation is similar, where the combined market share of the Parties reaches [10-20]%. The main competitors in this segment are as follows: Metra ([10-20]%), Schueco, Alumil, Ponzio, Allco and Aluk(Valfidus) each with market shares of around 5-10%. Reynaers have a smaller presence on the Italian market, as well as Gold Indinvest with market shares below [5-10]%. Curtain walls would not represent an affected market.

177. Taking into account that replies to the market investigation in this case have confirmed the existence of other alternative suppliers, the moderate market shares of the Parties and the existence of s relative number of other alternative suppliers who will continue to exercise competitive pressure on the merged entity, the proposed transaction does not raise serious doubts in relation to the building systems and to any of its narrower segments in Italy.

Portugal

178. The Parties estimate the total supply of Building Systems in Portugal at […] MT in 2011. Of this, Hydro supplied […] MT and Sapa […] MT. In Portugal, the Parties’ combined share of sales therefore amounts to [30-40]% (Hydro: [10-20]%; Sapa [10-20]%) by volume. Other notable competitors include Navarra, a local supplier with a market share of [10-20]%, Anicolor ([5-10]%), Reynaers ([5-10]%), Cortizo ([0-5]%) and Schueco ([0-5]%). Due to the lack of data public sources, the Parties argue that it is difficult to accurately estimate market shares for Portugal as there is a significant portion of demand that is sourced through Portugal but exported to African countries, including Angola. For Sapa, it is estimated that such exports account for around [20-30]% of Sapa’s sales reported above. The Parties’ combined market share therefore is likely to be overestimated and would actually be less than [30-40]%.

179. In relation to curtain walls segment, the combined market share would be just over [30-40]%. The Parties’ main competitor in this segment is Cortizo, supplying both from Spain and now from within Portugal (see below), which represents between [10-20]% of total sales. Reynaers is also a significant player, accounting for around 5-10% of sales. Alcoa and Hueck are both active competitors, each with just under [5-10]% of total supply. The Parties also see Extrusal, Jobefar, Navarra and Sosoares competing in this segment as well. In addition, facade specialists also compete directly with the Parties, such as Permasteelisia and Oskomera, each accounting for around [10-20]% of this segment.

180. In the other products segment, the combined market share would also be just above [30-40]%. where Reynaers, Cortizo, Navarra and Sosoares have each a market share of 5-10%. Small other competitors such as Schueco, Kawneer (Alcoa), Anicolor, Extrusal and Jobefar are also present, having a market shares of less than [5-10]%.

181. According to the Parties, the Portuguese building system market is intensely competitive and experiences significant price pressure as a result of the significant decline in demand and overall economic climate. Under the prevailing economic conditions, the Parties consider that their customers tend to multi-source more than in other countries. As regards the closeness of competition, the Parties’ activities overlap primarily in the higher end commercial and residential developments space which represents aproximatively only [30-40]% of Hydro’s local sales and [30-40]% of Sapa’s local sales. In this segment the Parties view Schueco and Reynaers as their main competitors. For the remainder of its sales Hydro does not consider Sapa its closest competitor as Sapa’s local offering is more focused at the lower end of demand with lower prices.

182. The Commission considers that the market investigation in this country did not largely infirm or confirm the arguments of the Parties. Although some customers mentioned that they only use one single supplier, there are also customers who use two or even more than two suppliers in the same time in order to secure their purchases. [44] Also, as regards the closeness of competition between the two Parties, although some customers mentioned that Hydro and Sapa are both seen as close competitors, innovative companies with a good reputation, having competitive prices, some of them said that Hydro is perceived as offering better quality products. [45]

183. Some customers raised concerns about the combined entity's ability to increase prices post-transaction. However, all respondent customers confirmed that it is easy for them to switch suppliers, [46] indicating the existence of other alternative suppliers. They also mentioned that they multisource, some of them from more than two suppliers. [47] Therefore, it is unlikely that the combined entity could impose a significant price increase after the transaction.

184. In light of the above, the Commission considers that the proposed transaction does not raise serious doubts in relation to the building systems market and to any of its narrower segments in Portugal.

Spain

185. The Parties estimate the total supply of Building Systems in Spain to be approximately […] MT in 2011. Of this, Hydro supplied […] MT and Sapa […] MT. Thus, the combined market share after the transaction amounts to [10-20]%. The largest supplier post-transaction will be Cortizo, with a share of over [20-30]%. In addition, there are a number of other European suppliers active in Spain, including Schueco ([0-5]%), Reynaers ([0-5]%), Metales ([5-10]%) and Laminex ([5-10]%).

186. The curtain walls segment is not an affected market, as the combined market shares would be only [5-10]%. In the other products segment, the combined market share of the Parties and their competitors would be similar to the one in the overall building system.

187. The Commission considers that the market investigation in this case has confirmed the existence of other alternative suppliers, the moderate market shares of the Parties and the presence of other suppliers, especially the Spanish producer Cortizo, who will continue to exercise competitive pressure on the merged entity. Therefore, the proposed transaction does not raise serious doubts in relation to the building systems market and to any of its narrower segments in Spain.

Sweden

188. The Parties estimate the total supply of Building Systems in Sweden to be approximately […] MT in 2011. Of this, Hydro supplied […] MT and Sapa […] MT, reaching a combined share of [30-40]% in volume. The largest competitor is Schueco with an estimated share of [20-30]% followed by H S Hansen with [0-5]% and Reynaers with [0-5]% which has priced its products aggressively to gain market share. In addition, the Parties argue that close to 25% of the Swedish market is supplied through foreign metal builders who source Building Systems elsewhere (mainly from the Baltics, Poland, Hungary and, increasingly, Finland), assemble them locally and then install the Building Systems in Sweden.

189. The combined market share for the Parties in curtain walls segment is estimated to be [30-40]% with an increment of only [5-10]%. The Parties largest competitor with regard to curtain walls is Schueco, accounting for around [20-30]% of total sales in Sweden. Reynaers, Cortizo (supplying from its operations in Poland) and Hueck are also active, each with a share of just under [5-10]%. In addition, the Parties face direct competition from facade specialists, including Oskomera, which would represent around [10-20]% of total sales. Imports from Purso in Finland and from the Baltic states also represent a significant competitive constraint in relation to the supply of curtain walls.

190. In the other products segment, the combined market share would reach [30-40]%. As in curtain walls segment, Schueco remains the strongest competitor for the merged entity, with a market share of [20-30]%. The other suppliers like Reynaers, the new entrant Cortizo, Aluprof and Yawal are also present with market shares of less than [5-10]%. In addition, Purso is supplying the Swedish market, reaching a market share of 5-10%.

191. The Parties argue that in Sweden, the competitive pressure coming from OEMs is also stronger, estimating that there are approximately 60 metal builders (not including glaziers) active in Sweden accounting for almost all large projects. Specialist fabricators like Skandinaviska Glassystem, Upglaze, Fasadlas Bäcklin are all present there being regarded as three major players on the Swedish building system market.

192. The Commission considers that the market investigation in this case confirmed indeed that the Parties have important presence in this market. Nevertheless, all customers confirmed that they do not see the local presence of a supplier as necessary, even though it is considered as an advantage. Moreover, Swedish customers do think that switching suppliers is easy, providing examples of past switches. [48] Some customers also indicated that when they take a purchasing decision they take into consideration the offer of suppliers outside Sweden, especially in Denmark or the Baltic countries. [49] As regards the competitive pressure coming from OEMs, 2 out of 4 customers considered OEMs as alternative suppliers for their needs of building systems. [50]

193. Taking into account the results of the market investigation, especially the competitive constraints coming from neighbouring countries like Denmark or the Baltic countries, the fact that most of the respondent customers mentioned that it is easy for them to switch to other suppliers confirming the existence of other alternative suppliers, [51] the proposed transaction does not raise serious doubts in relation to the building systems market and to any of its narrower segments in Sweden.

United Kingdom

194. The Parties estimate the total supply of Building Systems in the UK at […] MT million in 2011. Of this, Hydro supplied […] MT and Sapa […] MT, reaching a combined market share of [20-30]% in volume. The other strong competitors are Schueco ([10-20]%) and Kawneer (Alcoa) ([10-20]%). In addition, Reynaers (with a volume-based share of [5-10]%), Aliplast and Beaufort are also present. The remainder of supply (around [40-50]%) is divided between a large number of smaller players.

195. In curtain walls segment, the Parties have a relatively low combined market share of [10-20]%, with an increment of just [0-5]%. The market leader remains Schueco, with around [20-30]% of sales. Alcoa is also a significant competitor in this segment, representing around [10-20]% of total supply. In addition, Reynaers, Hueck and Aliplast are all active, each accounting for just under [5-10]% of sales. The Parties also face direct competition from facade specialists, such as Permasteelisa and Oskomera, representing around [20-30]% and [10-20]% of the segment, respectively, and also Yuanda.

196. In the other products segment, the Parties combined market share reaches [20-30]%. Here again Schueco remains the main and stronger competitive constraint with a market share of [10-20]%, but also Kawneer (Alcoa), Aliplast, each with [10-20]% market shares and Reynaers (5-10%). Beaufort, Comar, Senior Universal and Metal Technology are also present, each with a modest market share of 0-5%.

197. The Commission considers that the the market investigation in this case revealed that the Parties are not close competitors, some indicating that their offer is not comparable from the quality point of view, either they address different geographic areas. [52] The majority of customers indicated that it is easy for them to switch suppliers, confirming the existence of various alternative suppliers. [53]

198. Taking into account the moderate combined market share with the limited increment, especially for the curtain walls segment and the existence of other alternative suppliers that will continue to exercise competitive pressure on the merged entity, the proposed transaction does not raise serious doubts in relation to the building systems market and to any of its narrower segments in United Kingdom.

Norway

199. The Parties estimate the total supply of Building Systems in Norway to be approximately […] MT in 2011. Of this, Hydro supplied […] MT and Sapa […] MT, reaching a combined share of [20-30]% in volume. Schueco is the main competitor with a market share of [30-40]%. In addition, Hueck Building Systems (market share [0-5]%) imported from Germany are sold in Norway through the wholesale company Astrup AS, re-distributing to 10 to 15 customers (this represents around €[…] of sales). HS Hansen Building Systems (market share [0-5]%) are sold in Norway through its subsidiary Hubro AS. Some specialized facade fabricators ([30-40]%) have also developed their own Building Systems: SG Bøckmann AS, Nord Norsk Aluminium AS and Bårdsen Aluminium AS. The Parties estimate that total imports of Building System products into Norway represent close to [30-40]% of total supply. Most of these imports come from Sweden, the Baltics and Poland.

200. At segment level, the combined shares are lower in the other products segment, reaching only [10-20]%. Schueco has a very strong presence in this market, accounting for [30-40] of total sales in volume. Hueck has also an important presence with a market share of [10-20]%. Numerous smaller suppliers are also present with market shares of 0-5%, i.e. Reynaers, Cortizo, Aluprof, Yawal, Aliplast, Purso and Hansen.

201. For the curtain wall segment, the Parties' combined share is around [10-20]%. By far the largest competitor is Schueco, with a share of around [40-50]%. Hueck is also a significant competitor, with a share of between [10-20]%, and Reynaers, Cortizo and Aliplast are all active each with shares of just under [5-10]%. The Parties also face direct competition from specialist facade companies, including Oskomera which the Parties estimate delivered around [10-20]% of total supply of curtain wall.

202. The Parties consider that Hydro is not a close competitor of Sapa. Hydro specialises particularly on the higher end of demand through its Wicona brand. Sapa's products are positioned at a lower price. Moreover, Hydro’s products have undergone two further design upgrades. Accordingly, Hydro does not consider Sapa as its closest competitor but focuses its competitive efforts in terms of benchmarking more on Schueco. In addition, a substantial part of Hydro’s activities in Norway [20-30] relate to the supply of customized project solutions which Sapa does not offer at all. Instead, Hydro’s main competitors here are again Schueco and specialist fabricators such as Skandinavske Glassysteme or Gartner. A particular focus of Hydro in Norway is the supply of solutions for energy-efficient buildings and so-called ‘passive houses’. Sapa’s presence in this segment is very limited.

203. Taking into account the moderate market shares of the Parties and the existence of a relative number of other alternative suppliers who will continue to exercise competitive pressure on the merged entity, the proposed transaction does not raise serious doubts in relation to the building systems market and to any of its narrower segments in Norway.

III.4.1.D Aluminium welded precision tubes

204. The Parties estimate the merchant sales of welded precision tubes to […] MT in the EEA in 2011. According to the Parties, Hydro’s share of supply amounts to [5-10]% of all sales in the EEA, while Sapa’s amounts to [20-30]%. The Parties’ combined share therefore amounts to [20-30]% in the EEA in 2011. Other competitors are Thermasys/Arup with [40-50]%, Soll [10-20]% and Lingemann with [10-20]%.

205. According to the Parties, the proposed transaction will not result in anticompetitive effects. First, large customers are able to captively produce all types of welded precision tubes. The captive manufacturing capacity in the market is estimated at [5-10] times the merchant market. Second, the buyer power of customer would in any event prevent the merging entity from any possible price increase. Customers typically spread their orders across a number of suppliers, allowing them to shift demand easily with significant investment. Third, the welded precision tubes market is characterised by high levels of overcapacity, both at the merchant level as well as at the captive level.

206. The market investigation confirmed the argument of the Parties that large customers operate in-house production facilities for welded precision tubes. In this respect, the capacity utilisation operated captively appears to be as large as several times the size of the merchant market. Any price increase would be therefore easily offset by an output increase from the customers' side. Given the magnitude of the captive capacity, an output increase by large customers will be also likely to protect the remaining small customers who do not operate captive capacity.

207. In addition, even post-transaction the Parties will continue to face competitive pressure from the remaining competitors, and notably from the market leader Thermasys/Arup (market share: 47%).

208. In view of the above, the proposed transaction does not raise serious doubts with regard to the market for aluminium welded precision tubes in the EEA.

III.4.2 Vertical relationships

III.4.2.A Primary aluminium / Soft – alloy extrusions and MPEs

209. The proposed transaction gives rise to a vertical relationship with respect to Hydro’s primary aluminium activities upstream and the Parties’ soft-alloy extrusions activities downstream.

210. Hydro’s market share for primary aluminium in the EEA amounts to [10-20]%. Sapa has no activities in the manufacture or sale of primary aluminium.

211. As stated above, the combined market share of the Parties for soft-alloy extrusions at EEA level amounts to only [20-30]%.

212. The market for soft alloy extrusions is particularly fragmented. The Parties face strong competition from a number of credible competitors. In 2011, the shares of the leading suppliers (Hydro, Sapa, Constellium, Aleris International, Metra, Cortizo and Alumil) together accounted for only around [40-50]% of 2011 EEA sales. The remaining [60-70]% of demand was supplied by more than 250 independent extruders.

213. Furthermore, none of the respondents to the market investigation raised any substantiated concerns with respect to the Parties' vertical relationship.

214. Therefore, it can be concluded that the Parties would have neither the ability nor the incentive to engage in any foreclosure strategies with regard to the supply of primary aluminium for the downstream production of soft alloy extrusions in the EEA. As regards a possible input foreclosure scenario, the Parties lack the degree of market power on the upstream market that is required for input foreclosure to be a concern. There is also no risk of customer foreclosure given that the proposed transaction will not lead to the elimination of a key portion of demand.

215. In the light of the above, it can be concluded that the proposed transaction does not raise serious doubts as to its compatibility with the internal market as regards the supply of primary aluminium for the downstream production of soft alloy extrusions in the EEA.

216. As regards possible vertical concerns in relation to the downstream markets for soft alloy extrusions in the Nordic Region and MPEs, the Commission concludes that the proposed transaction does not raise serious doubts as to its compatibility with the internal market in the light of the commitments offered by the Parties to remedy horizontal competition concerns.

III.4.2.B Aluminium flat products / welded precision tubes

217. The proposed transaction gives rise to a vertical relationship between the Parties' activities on the upstream market for aluminium flat rolled products and the downstream market for precision welded tubes. Both Parties manufacture flat rolled products which they use as an input for their downstream production of precision welded tubes.

218. The Parties' combined market shares on the upstream market for flat rolled products in the EEA are relatively low ([10-20]%). Furthermore, the Parties face strong competition from a number of credible competitors (Novelis; Constellium; Alcoa; Aleris).

219. As stated above, the Parties' combined market shares on the downstream market for precision welded tubes are not particularly large ([20-30]%). Furthermore, the Parties face strong competition from a number of credible competitors (Thermasys/Arup; Soll; Lingemann) and a particularly large captive capacity is operated by end-customers.

220. Furthermore, none of the respondents to the market investigation raised any substantiated concerns with respect to the Parties' vertical relationship.

221. Therefore, it can be concluded that the Parties have neither the ability nor the incentive to engage in any foreclosure strategies with regard to the supply of aluminium flat rolled products for the production of precision welded tubes in the EEA. As regards a possible input foreclosure scenario, the Parties lack the degree of market power on the upstream market that is required for input foreclosure to be a concern. There is also no risk of customer foreclosure given that the proposed transaction will not lead to the elimination of a key portion of demand. In conclusion the transaction does not raise serious doubts in relation to the vertical relationship between Parties' activities on the aluminium flat rolled products and the downstream market for precision welded tubes.

IV. Remedies

222. In order to render the concentration compatible with the internal market, the Parties have modified the notified concentration by entering into commitments in relation to: (i) the market for Soft Alloy Extrusions in the Nordic Region (composed of Norway and Sweden); and (ii) the EEA market for MPEs. The commitments are annexed to this Decision and form an integral part thereof.

IV.1. Pr