Commission Decision of 14 March 2000 declaring a concentration to be incompatible with the common market and the functioning of the EEA Agreement (Case No COMP/M.1672 Volvo/Scania) (Text with EEA relevance.)(notified under document number C(2000) 681)
Date: 2000-03-14
Institutions: European Commission
Subjects: European Economic Area, agreement (EU), dominant position, economic concentration, merger control, motor vehicle industry

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COMMISSION DECISION

of 14 March 2000

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

(Case No COMP/M.1672 Volvo/Scania)

(notified under document number C(2000) 681)

(Only the English text is authentic)

(Text with EEA relevance)

(2001/403/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Com-
munity,

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

Having regard to Council Regulation (EEC) No 4064/89 of
21 December 1989 on the control of concentrations between
undertakings (1),
(EC)
No 1310/97 (2), and in particular Article 8(3) thereof,

Regulation

amended

by

as

Having regard to the Commission Decision of 25 October
1999 to initiative proceedings in this case,

Having given the undertakings concerned the opportunity to
make known their views on the objections raised by the
Commission,

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

Whereas:

(1) On 22 September 1999,

the Commission received
notification of a proposed concentration pursuant to
Article 4 of Council Regulation (EEC) No 4064/89
(‘Merger Regulation’) by which AB Volvo (‘Volvo’) pro-
poses to acquire control of the whole of Scania AB
(‘Scania’) by way of purchase of shares, within the
meaning of Article 3(1)(b) of the Merger Regulation.

(2)

After examining the notification, the Commission con-
cluded that the notified operation falls within the scope
of the Merger Regulation and raises serious doubts as to
its compatibility with the common market, because it
could create or strengthen a dominant position as a
result of which effective competition would be signifi-
cantly impeded in the common market or in a substantial

(1) OJ L 395, 30.12.1989, p. 1; corrected version: OJ L 257,

21.9.1990, p. 13.

(2) OJ L 180, 9.7.1997, p. 1.
(3) OJ C 154, 29.5.2001.

part of it and in the territory covered by the EEA
Agreement. Therefore, on 25 October 1999, the Com-
mission decided to initiate proceedings pursuant to
Article 6(1)(c) of the Merger Regulation.

to Article 11(5) of

(3) On 9 December 1999,
the Commission adopted
decisions pursuant
the Merger
regulation, because Volvo and Scania had failed to reply
within the period fixed to a request for information
relating to their competitive position on the markets for
heavy trucks and buses. They had been asked to supply
that information by 7 December 1999. The parties
supplied the requested information on 20 December
1999. Therefore, pursuant to Article 9 of Commission
Regulation (EC) No 447/98 of 1 March 1998 on the
notifications, time limits and hearings provided for in
Council Regulation (EEC) No 4064/89 on the control
of concentrations between undertakings (4), the time
periods referred to in Article 10(1) and (3) of the Merger
Regulation were suspended for a total of 13 days.

I. THE PARTIES

(4)

Volvo is registered in Sweden. Through its shareholdings
in companies in the Volvo group, Volvo is primarily
active in the manufacture and sale of trucks, buses
construction equipment, marine and industrial engines,
as well as aerospace components. Volvo’s principal
business units include (a) trucks (manufacture of heavy
trucks weighing more than 16 tonnes as well as medium-
heavy trucks, between 7 and 16 tonnes, and a range of
related services and financing); (b) buses (manufacture of

(4) OJ L 61, 2.3.1998, p. 1.

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buses and bus chassis for city,
intercity and tourist
purposes); (c) marine and industrial engines (through
Volvo Penta corporation, a wholly-owned subsidiary,
Volvo develops, manufactures, and markets drive sys-
tems for marine and industrial applications); (d) con-
struction equipment (manufacture and sale of a variety
of construction equipment); (e) aero (development, pro-
duction and maintenance of military aircraft, primarily
for the Swedish Air Force, as well as production of
components).

(9)

(5)

Scania is a Swedish company that, through its sharehold-
ings in companies in the Scania group, is mainly active
in the manufacture and sale of heavy trucks, buses, and
marine and industrial engines. Scania also holds 50 % of
Svenska Volkswagen AB, which imports, markets, and
distributes passenger cars and light commercial vehicles
in Sweden. Scania also owns the Swedish passenger car
dealer Din Bil, which accounts for 40 % of Svenska
Volkswagen’s deliveries.

(6) On 1 March 1999, Ford Motor Co. signed an agreement
to acquire Volvo’s automobile business, which ac-
counted for about 52 % of Volvo’s total 1997 turnover.
Volvo’s decision to sell the automobile division reflects
Volvo’s determination to concentrate on its trucks,
buses and engines businesses. According to Volvo,
the proposed acquisition is particularly important for
Volvo’s efforts to compete in large, emerging markets
for heavy trucks and buses in Asia, central Europe, the
former Soviet Republics, and in South America. As a
result of the sale of its automobile business, Volvo’s
truck business represents 57 % of Volvo’s turnover, the
bus business approximately 13 % and the marine and
industrial engines sector approximately 4 %. For Scania,
trucks represent 60 % of its 1998 total sales revenues,
buses 8 %, industrial and marine engines 1 %.

(7)

Volvo has explained that the rationale for the proposed
concentration is to support Volvo’s efforts to compete
in large, emerging markets for heavy trucks and buses in
Asia, central Europe, the former Soviet Republics, and
in South America. According to Volvo, substantial
investments will be required to take advantage of
opportunities in these regions. Volvo’s ability to expand
in those emerging markets is stated to be a critical
requirement if it is to operate efficiently and remain
competitive with the world’s leading truck and bus
manufacturers, and, particularly, with DaimlerChrysler
and the large North American engine producers.

II. THE OPERATION AND THE CONCENTRATION

(8)

The proposed concentration involves the acquisition by
Volvo of a controlling stake in Scania. On 6 August
1999, Volvo reached an agreement to acquire all of

Investor AB’s shares in Scania. Concurrently, the Volvo
board of directors decided to make a public offer for all
remaining shares in Scania.

The agreement between Volvo and Investor AB provides
that the latter will receive payment solely in cash or a
combination of cash and newly issued Volvo shares.
Investor AB currently owns 54 061 380 series A shares
and 1 508 693 series B shares in Scania. Investor AB
will receive a cash payment of SEK 315 per share for 60
% of its holding. For the remaining 40 %, Investor AB
will receive, at its discretion, either SEK 315 in cash per
share or newly issued shares in Volvo in the proportion
of six Volvo shares for each five Scania shares. If Investor
AB chooses to receive solely a cash payment, it has
stated its intention to acquire Volvo shares on the
market for an amount corresponding to 40 % of the
payment
owns
25 290 660 series A shares and 60 993 759 series B
shares in Scania. After the acquisition of Investor AB’s
shares in Scania, Volvo will own 79 352 040 series A
shares and 62 502 452 series B shares in Scania, which
corresponds to 77,8 % of the voting rights and 70,9 %
of the share capital.

Currently,

received.

Volvo

(10) On the basis of the foregoing, the Commission concludes
that the proposed acquisition, whereby Volvo would
acquire sole control over Scania, constitutes a concen-
tration within the meaning of Article 3(1)(b) of the
Merger Regulation.

III. COMMUNITY DIMENSION

(11) Volvo and Scania had a combined aggregate worldwide
turnover in excess of EUR 5 000 million in 1998 (Volvo,
EUR 12,9 billion and Scania, EUR 5,1 billion). Each of
them had a Community-wide turnover in excess of
EUR 250 million in 1998 (Volvo, EUR 6,4 billion and
Scania, EUR 3,1 billion), but they do not achieve more
than two thirds of their aggregate Community-wide
turnover within one and the same Member State. The
operation constitutes a cooperation case with the EFTA
Surveillance Authority under Article 57 of the EEA
Agreement in conjunction with Article 2(1)(c) of Proto-
col 24 to that Agreement.

IV. COMPATIBILITY WITH THE COMMON MARKET

(12) The proposed operation would affect two main areas:
trucks (heavy trucks in particular) and buses (city buses,
intercity buses and touring coaches). The investigation
has confirmed that the proposed concentration would
not lead to the creation or strengthening of a dominant
position in the field of diesel engines (industrial and
marine). Consequently, the markets for diesel engines
will not be further discussed in this decision.

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(i) TRUCKS

Heavy-duty trucks (above 16 tonnes)

A. RELEVANT PRODUCT MARKET

(13) The proposed concentration would create Europe’s
largest producer of heavy trucks (over 16 tonnes).

(14) The notifying party relies on a previous Commission
Decision (Case No IV/M.004 — Renault/Volvo)
to
identify three market segments according to the truck’s
gross vehicle weight: the light-duty segment (below
5 tonnes), the medium-duty segment (5 to 16 tonnes),
and the heavy-duty segment (above 16 tonnes).

Heavy-duty trucks versus medium-duty and light-duty
trucks

(15) The market investigation carried out by the Commission
in this respect broadly confirms the submission of the
notifying party. Indeed, both competitors and customers
have indicated that the distinction in paragraph 14 is
correct and corresponds to the industry standard. In
addition, a number of elements suggest that that distinc-
tion is appropriate.

(16) The technical configuration of trucks of tonnage lower
than 16 tonnes and trucks above 16 tonnes (the upper
range) is very different as regards the key components
such as the type of engine and the number of axles in
particular. The technical aspects of the upper range
are more sophisticated because the requirements of
durability (length of life) and operating costs are greater
than for the other ranges. Trucks above 16 tonnes are
vehicles, which are used in transport of considerable
weight. The type of transport can be regional or long
distance.

(17)

(18)

In addition, the marketing of trucks is influenced by
these technical differences which are of great importance
for the buyer. Therefore, the technical boundary between
the two products groups corresponds to a commercial
distinction, which makes it possible to differentiate
between two groups of customers. Upper range trucks
are not normally considered by customers to be inter-
changeable with or substitutable for trucks belonging to
the intermediate and lower range. The three categories
of
trucks thus constitute separate relevant product
markets.

Furthermore, this distinction appears to reflect the fact
that different production lines are used to produce
trucks belonging to the different categories and that
manufacturers can concentrate their production on one
range with no presence or with a relatively weaker
presence in another range. (For example, as far as Volvo
and Scania are concerned, Volvo has a presence in the
segment for trucks between 7 and 16 tonnes, while
Scania has no production of trucks falling within this
segment. Neither party produces trucks below 7 tonnes.
Both parties are active in respect of
trucks over
16 tonnes).

Information provided by Volvo in the notification

(19) As the proposed transaction more specifically concerns
the market segment of trucks above 16 tonnes, or heavy
trucks, the present assessment will, in particular, focus
on this segment of the market.

(20)

In the notification, Volvo indicated that
there are
generally two model categories for heavy trucks: long-
haul and regional/local. However, Volvo indicates that
chassis for trucks over 16 tonnes are essentially the same
for all models. Differentiation only occurs in respect of
the cab and the body or configuration for specific
applications (for example, cement-mixing, city delivery,
long haul transport).

(21)

In addition to these categories, Volvo notes that in
Sweden and in Finland, longer trucks (25,25 metres)
with higher maximum load capacities (60 tonnes) are
truck is not
type of
commonly used. This special
normally allowed in other Member States.

(22) The notifying party claims that any major truck manu-
facturer would be in a position to easily modify one of
its standard models for a specific application (as, for
example, the longer trucks used in Sweden and Finland).

(23) On the basis of the foregoing, Volvo therefore concludes
that trucks above 16 tonnes belong to the same relevant
product market.

The results of the market investigation

(24) The extensive market investigation carried out in this
case has shown that the reality, from the customer’s
point of view, is quite complex. In particular, the market
investigation has revealed that, from the customer’s
point of view, there are a number of criteria, which are
relevant for the choice of a given type of heavy truck
over another.

(25) A main distinction in the overall category of ‘heavy-duty
trucks’ can be drawn between ‘rigid trucks’ on the one
hand and ‘tractor heavy trucks’ on the other. Rigid trucks
are integrated trucks, in the sense that they constitute a
single body, from which no semi-trailer can be detached.
‘Tractor heavy trucks’, on the other hand, are ‘detach-
able’, in the sense that a semi-trailer is added to the top
back of the cabin. On the basis of their transportation
needs and personal preferences,
the customers will
choose a tractor or a rigid truck. As a matter of fact,
the geographic location of the customer will strongly
influence its choice for a tractor type or a rigid type of
truck. As will be indicated in recital 52, customers in the

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northern part of Europe typically purchase rigid heavy
trucks. There are some indications that from the point
of view of demand, rigids and tractors may not be fully
substitutable. However, this question can be left open,
as it does not materially eaffect the assessment of the
notified concentration.

(30) On the basis of the foregoing, it is therefore concluded
that the category of heavy trucks (more than 16 tonnes)
can be considered to be a single relevant product market,
for the purposes of this assessment.

(26) Besides this basic distinction, the market investigation
has revealed that there are three main criteria according
to which customers will choose to purchase a certain
heavy truck (applicable to both rigids and tractors). The
first criterion relates to the engine, and in particular, to
its power (hp). The power of the engine is important in
view of the weight to be transported and the topography
in the geographic area of intended use. The second
criterion is the number of axles of which the truck is
composed: according to the investigation, there is a
standard combination of axles (4 × 2), which is the most
common combination in Europe. Other combinations,
consisting of a higher number of axles (as for example
6 × 2 and 6 × 4) are more customised to meet specific
customer preferences, which are, in turn, at least partially
linked to topography and weather considerations. The
third criterion relates to the cabin of the truck, which
can be low, high or very high depending on the level of
comfort required.

(27) A rather substantial number of options can and will
then be chosen by the customer in relation to its specific
needs and the type of transport is in involved in.
However, in general, all heavy truck manufacturers will
be able to offer a truck including any of the key elements
which are decisive from the customer’s point of view, as
well as from the manufacturer’s point of view (for
example, when deciding whether to offer a price for a
truck comparable to that offered by a competing
manufacturer).

(28)

(29)

Furthermore, in view of specific customers’ requirements
and the specific national regulations applicable, the
customer will be in a position, in Sweden and in Finland,
to purchase longer trucks (25,25 metres) with higher
maximum load capacities (60 tonnes).

From the point of view of supply, it would appear that
any major European truck manufacturer is in a position
to offer a complete range of different types of heavy
trucks. To offer specific trucks for certain European
areas would certainly represent a supplementary cost for
such manufacturers. The cost would then have to be
compared to the attractiveness of the market under
consideration. However, with specific reference to the
question of product market definition, it is considered
that the costs related to switching form the production
of one type of heavy truck to another would not, per se,
be considered substantial. Therefore, it is considered that
the different types of heavy trucks do not constitute
separate product markets.

B. RELEVANT GEOGRAPHIC MARKET

(31)

In a previous case (5) the Commission indicated that ‘it is
not necessary to determine whether or not the geo-
graphic market for trucks is a Community market or is
still composed of several national markets’, as the
question was not essential for the purposes of that
specific case. The investigation in this case has focused
on northern Europe, in particular four Nordic countries,
Denmark, Finland, Norway and Sweden, and Ireland.
Since, even on a national market definition, the oper-
ation does not lead to a dominant position in other parts
of the Community, it is still not necessary to determine
the exact scope of the geographic market outside the
Nordic countries and Ireland.

(32) The investigation has, however, shown that for these
five countries the relevant geographic markets for heavy
trucks are still national
in scope. The reasons for
reaching this conclusion will be explained below; the
starting point will be the arguments put forward by
Volvo in the notification.

Arguments put forward by the notifying party

(33)

In the notification, Volvo relied on the Commission’s
findings in the Renault/Iveco case (6). In that Decision,
the Commission concluded that the relevant market for
touring buses was the European Economic Area (EEA),
basically because of the high levels of imports and
exports. The Commission also recognised that pur-
chasers of touring buses are private operators who are
price sensitive and have little regard for considerations
of brand loyalty to national manufacturers (7).

(34)

In the notification, Volvo submitted that the analysis
that applies to touring coaches is equally applicable to
heavy trucks.
the parties refer to the
following elements, which they claim to be conclusive
in the determination of the relevant geographic market:

In addition,

(5) See Case No IV/M.004 — Renault/Volvo, Decision of 7 November

1990.

(6) See Case No IV/M.1202 — Renault/Iveco, Decision of 22 October

1998.

(7) The relevance of this finding for the affected bus markets will be

discussed in the section concerning buses and coaches.

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(a)

price levels: according to Volvo, ‘... price differences
between Member States are not substantial.
In
particular, with the exception of France, Member
State price level variations for Volvo’s heavy trucks,
for example, are within a ± 10 % range’ (see page 39
of the notification);

(b) manufacturers are already active EEA-wide and
imports within the EEA are increasing: according
to Volvo, ‘... the seven largest heavy truck manufac-
turers (DaimlerChrysler, Volvo, Scania, MAN, RVI,
Iveco and DAF-Paccar), which account for approxi-
mately 97 % of the European market, are present
in almost all Member States and all make substantial
export sales. For Volvo and Scania, sales outside
Sweden accounted for 90 % and 80 % of their total
turnover in 1998 respectively. Imports represented
about 30 % of sales of heavy trucks in the Nordic
countries. While some manufacturers continue to
maintain relatively large market shares in their
home countries,
largely an historical
is
phenomenon. Imports are continuing to increase’
(see pages 39 and 40 of the notification);

this

(c)

(d)

(e)

the emergence of large, private, trans-border pur-
chasers: according to Volvo, deregulation in the
truck industry has led to a ‘significant change
In
in customer profile and purchasing habits.
particular, it has resulted in the emergence of large,
multinational fleet operators such as GPE Lyonnaise
and Geodis/B Montreuil in France and the Nether-
lands with fleets that number between 5 000 and
10 000 trucks. Whereas in the past, most of
Volvo’s customers were small or medium-sized
fleet owners, the majority of Volvo’s customers are
now large owners having fleets of at least 20 to
25 trucks. These large operators are present in
several Member States and many of them either use
competitive bids or tenders to purchase trucks
from a central location or take advantage of their
knowledge of prices and competitive conditions
in other Member States when negotiating with
distributors’ (see page 46 of the notification);

emergence of dual-sourcing: Volvo argues that the
trend towards large and multinational customers
has also contributed to increasing dual (or multiple)
sourcing. ‘To ensure independence from any single
fleet
manufacturer when negotiating purchases,
owners with more than 20 to 25 trucks typically
carry at least two different makes in their fleets’ (see
page 47 of the notification);

product standardisation: according to Volvo, ‘while
in the past, weight and length restrictions presented
barriers to the development of EC-wide truck
models, the process of harmonisation that began
in 1985 with Council Directive 85/3/EEC and most
recently included Council Directive 96/53/EC has

led to a situation whereby the same basic truck in
terms of weight and dimensions can be sold and
the
used throughout Europe’
notification);

(see page 47 of

(f)

absence of entry barriers for non-domestic pro-
ducers: according to Volvo, ‘while in the past the
need to establish dealer and aftersales networks
may have been considered a barrier to entry, it no
longer prevents non-domestic truck manufacturers
(see
from competing in a given Member State’
page 48 of the notification).

(35)

In its reply to the Commission’s Statement of Objections
pursuant to Article 18 of the Merger Regulation (herein-
after: ‘the reply’), Volvo submits that the Commission
should not base its assessment of the relevant geographic
market on non-price factors which were set out in
Volvo’s notification, as these are not relevant to the
definition of the relevant geographic market. Instead,
Volvo submits that the decisive factor for defining the
relevant geographic market is whether suppliers actually
price discriminate across markets. Volvo has submitted
two reports (the Lexecon and Neven reports), which, in
its view, show that prices for comparable heavy trucks
are within a 5 % to 15 % band throughout
the
Community, with the exception of Sweden, and that
there are therefore no significant price differences
between the other Member States.

(36)

In its reply, Volvo also submits some new evidence
relating to parallel trade in heavy trucks and factors
related to the deregulation of the downstream transport
industry which, in Volvo’s view, provide further support
for its contention of an EEA (minus Sweden) market for
heavy trucks. All of these arguments will be assessed
below.

The Commission’s assessment of the relevant geo-
graphic market

(37)

In its reply, Volvo submits a number of new arguments
in support of its contention as to the scope of the
relevant geographic market. Although the reply seems
to indicate that the company no longer considers the
non-price factors indicated in its notification to be useful
for the definition of
these
factors are nonetheless assessed, as they constitute useful
elements in the overall market definition assessment.
The main change of approach is that Volvo now believes
that the primary focus of the assessment should be on
suppliers’ ability to price discriminate across markets.

the geographic market,

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Contrary to the assertion in the reply, the evidence
available to the Commission shows that Volvo and the
other suppliers of heavy trucks have applied significantly
different prices and margins for comparable products in
different Member States. This, as well as the relevant
non-price evidence, which shows that conditions of
competition in the heavy truck market differ from one
Member State to the other, is considered in the following
paragraphs.

Price levels differ significantly across Member States

(38) Purchasing of heavy trucks is still largely done on a
national level, for a number of reasons. This is reflected
by the fact
that significant price variations can be
observed even between neighbouring countries. As
indicated above, Volvo has argued both in its notification
and in its reply that price differences between Member
States are not substantial and concludes that there exists
an EEA market for heavy trucks.

(39)

In the notification, Volvo considered that the insignifi-
cance of price differences was shown by information (on
page 122) according to which, with the exception of
France, Member State price level variations for Volvo’s
heavy trucks would be within a ± 10 % range. This
information (relating to [a commonly sold Volvo mod-
el] (*)), however, showed the existence of national price
variations as high as 20 %. According to the notification,
Volvo’s price for that model is approximately [10 % to
20 %] higher in Finland than in Denmark, approximately
[10 % to 20 %] higher in Sweden than in France, [0 % to
10 % higher in Germany than in the Netherlands, [0 %
to 10 %] higher in Germany than in Denmark and [0 %
to 10 %] higher in the United Kingdom than in France.
If the comparison is made with reference to (the [a more
commonly sold model in the Nordic countries]), Volvo’s
price is approximately [10 % to 20 %] lower in Denmark
than in Sweden, [10 % to 20 %] lower in Denmark than
in Germany and [20 % to 30 %] lower in Denmark than
in Finland. The notification did not provide price
indications for Norway and Ireland. In the course of the
proceedings the Commission also collected list prices
for the most commonly sold models of heavy trucks for
each manufacturer in each Member State. These data
largely confirm the price variations indicated above.
Furthermore, they show that Volvo’s prices are signifi-
cantly lower in Ireland than in the neighbouring United
Kingdom. The indicated prices in 1998 for the most
commonly sold rigid and tractor trucks ([...]) were thus
more than 40 % higher in the United Kingdom than in
Ireland. Whilst transaction prices may differ from list
prices, such differences do not support Volvo’s conten-
tion that these markets are not national. The mere fact
that price lists differ significantly from country to
country is indeed an indication that the conditions of
competition differ and will have the effect of making
price comparisons more difficult
for purchasers of
heavy trucks. In general, pricing figures provided by

competitors confirm that there are substantial national
price differences going in the same direction as those
indicated for Volvo. For example, none of the competi-
tors indicate a higher price in Denmark than in Germany.
On the contrary, it appears that the indicated prices are
normally at least 5 % to 10 % higher in Germany.
This is consistent with a table contained in Volvo’s
notification, which was prepared for internal purposes
prior to the transaction and gives actual dealer net prices
adjusted for specifications. The indicated average price
is 8 % lower in Denmark than in Germany.

(40) Volvo has argued that a price comparison based on the
figures provided in the notification is not meaningful for
the definition of geographical markets in this case. The
reason for this is that the indicated price differences are,
in Volvo’s view, due to variations in the equipment
supplied with the heavy truck and/or the customer
structure (and therefore the purchasing power) in differ-
ent countries. In its reply Volvo therefore stated that
price discrimination should be defined as earning differ-
ent margins on the sale of the same goods to different
consumers.

(41)

In its reply, Volvo submits, in support of its arguments,
reports by Lexecon and Neven, which suggest that with
the exception of Sweden, price divergences between
Member States are limited. The methodology used in
these studies is to compare the sales of two of Volvo’s
heavy truck models (the [a commonly sold model]
tractor and the [a commonly sold model] rigid) across
12 EU countries and Norway (8). The starting point for
the comparison was the average net prices charged to
dealers in each country. In the reports, these average net
prices are then adjusted for specification. Following
these adjustments, the reports conclude that Volvo’s
prices for the tractor model fall within a ± 5 % band in
all countries, except Sweden ([+ 0 % to 10 %]), France
([– 0 % to 10 %]) and Norway ([– 0 % to 10 %]). For the
rigid model, the reports conclude that the adjusted prices
fall within a ± 6 % band in all countries, except Sweden
([+ 10 % to 20 %)] and Denmark ([– 0 % to 20 %]). The
reports furthermore attempt to adjust for customer mix
which, it is claimed, would lead to a further reduction in
the spread in the order of 2 % to 4,2 %.

(*) Parts of this text have been edited to ensure that confidential
information is not disclosed; those parts are enclosed in square
brackets.

(8) In the studies, Greece was omitted owing to the low number of
vehicles sold, Luxembourg is included in Belgium and Ireland is
included in the United Kingdom.

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(42) On closer examination, the Commission cannot agree
that the Lexecon and Neven reports constitute a reliable
source of evidence to support the existence of an EEA-
wide market for heavy trucks. The reports rely on
average net prices charged to dealers. Volvo has through-
out the investigation questioned the validity of using
this type of data. Furthermore, the adjustments use data
from one year only (1998). It is therefore questionable
how much weight can be given to the proposed
conclusions of these reports, especially when several
other factors point to national market definitions.

stated that ‘analysis on samples in the United Kingdom
shows that the average price for a specific truck type is
down [10 % to 20 %] for large customers (fleets owning
more than 30 trucks) compared to small fleets (less than
five trucks). The corresponding figures for new truck
sales for Germany and France are [10 % to 20 %] and
[10 % to 20 %] lower’. The Commission is therefore of
the view that the correction for customer mix applied in
the reports has several shortcomings. Furthermore, it
would in any case only offer insights for a limited
number of countries. For instance, Norway, Ireland and
the United Kingdom are not included.

(43) The Commission has examined the data used in the
reports and some data, which were not used in the
reports. Based on these data provided by Volvo the
Commission has made its own calculations for some of
the truck types that are not analysed in the Lexecon and
Neven reports. Instead of taking averages over different
engine types, as is done in the reports, the Commission
made direct comparisons between the prices for the
exact same engine type in various countries while using
the methodology of
the reports for correcting for
differences in specifications. These comparisons are
given below for the [a commonly sold model], which,
of the models for which data are provided, is the most
frequently sold engine in several countries (Belgium,
Finland, France, the Netherlands, Portugal, Sweden and
the United Kingdom). The (adjusted) price is then [10 %
to 20 %] higher in the United Kingdom than in France
and [10 % to 20 %] higher in Belgium than in France.
The (adjusted) price in Sweden is [10 % to 20 %] higher
than in Denmark, [10 % to 20 %] higher than in Norway
and [0 % to 10 %] higher than in Finland. The (adjusted)
price in Finland is [10 % to 20 %] higher than in Norway
and [0 % to 10 %] higher than in Denmark. These large
differences in adjusted prices — using the methodology
suggested by the reports — clearly do not support the
finding of an EEA-wide geographic market or a regional
geographic market in the Nordic region.

(44) The Commission has furthermore examined the correc-
tions for customer mix made in the reports. It notes
that the calculations are based on very limited data,
particularly outside France, and that some of
the
countries where Volvo claims that large fleets are present
but prices are still relatively high (for instance, the
Netherlands) are not included in the calculation. This
could bias the results towards finding a narrower spread.
The reports also seem to favour the hypothesis that
fleet discounts are particularly high in France. This is
contradicted by a report
from [a reputable market
research company] to Volvo dated January 1999 which

(45) As to the conclusions of the Lexecon and Neven reports,
the Commission cannot accept that the existence of
price differences within a ± 5 % (or ± 6 %) band (9)
should be disregarded for the purposes of market
definition, as this would suggest that a hypothetical
monopolist in one area could impose a price increase in
some cases as large as 10 % (or 12 %) without being
restricted form doing so by conditions of competition
in neighbouring areas.

(46) Secondly, and even more importantly, the proposed
conclusion of these reports is incompatible with other
available sources of
information. This includes not
only the price comparison submitted by Volvo in the
notification, but also the pricing information sub-
sequently submitted during the Commission’s investi-
gation (which includes national price lists and trans-
action prices for the same truck model) and show that
price variations are as important as those contained in
the notification), and pricing comparisons contained in
internal Volvo documents provided at the Commission’s
request (for example a table called ‘transaction price
comparisons, Q1 1999’, which indicates prices for one
to three truck deals regarding specific truck models, for
Volvo, Scania and DaimlerChrysler). It is clear from
Volvo’s internal data that the price comparison was
made taking detailed specifications into account. For
Volvo, this table included the [a commonly sold model]
tractor, and it shows that this model was sold at a price,
which was [...] higher in the United Kingdom than in
France. The largest price difference indicated for this
Volvo model is a [20 % to 30 %] higher price in Belgium
than in France. The table shows that
the selected,
comparable Scania and DaimlerChrysler trucks follow
the same price pattern in the countries indicated as the
latter
Volvo model. Consequently, both of

the

(9) It should also be recalled that the reports, for the purposes of
narrowing the difference between the adjusted prices, had to
exclude Sweden, France and Norway for tractors, and Sweden and
Denmark from rigids.

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types of evidence indicate national price differences of
the same order as those indicated in the notification.
Therefore, in order to accept the findings of the Lexecon
and Neven reports it would be necessary not only to
overlook the shortcomings identified above but also to
conclude that both the price comparisons provided by
Volvo to the Commission and the price comparisons
used internally by Volvo are equally flawed.

(49)

Indeed, if the markets were wider than national, it would
be reasonable to assume that buyers of heavy trucks
would take advantage of the existing price differences
and buy their vehicles in a neighbouring country and/or
that arbitrageurs would take advantage of the oppor-
tunities created by these differences and buy vehicles
from Volvo in the countries where its margins are the
lowest and sell them to customers in the countries where
the margins are high. Some of the reasons for the
absence of such customer behaviour and arbitrage will
be indicated in the following paragraphs. This will be
done in the context of the non-price evidence that was
included in the notification, despite Volvo’s statement in
its reply that this material is not useful for the definition
of relevant markets.

(47) Volvo suggests, in its reply, that the definition of relevant
geographic markets should be based on whether there is
price discrimination, defined as the heavy truck pro-
ducers earning different margins on the sale of the same
goods to consumers in different countries. It is therefore
interesting to note that the figures on margin develop-
ments submitted by Volvo in the course of the proceed-
ings clearly indicate that such price discrimination has
taken place (10). As examples, Volvo’s net profit margin
in 1998 for its [a commonly sold model] rigid was
[10 % to 20 %] in Sweden versus (0 % to 10 %] in
Denmark (measured at the level of gross profit margin it
was [20 % to 30 %] in Sweden and [10 % to 20 %] in
Denmark). For the [a commonly sold model] rigid the
margin was [10 % to 20 %] in Finland versus [– 0 % to
10 %] in Norway (measured at the level of gross profit
margin it was [20 % to 30 %] in Finland and [10 % to
20 %] in Norway). The information provided by Volvo
also indicates similar differences in the margins between
other countries, such as between Denmark, Ireland and
Belgium for the [a commonly sold model] tractor.

(48)

In conclusion, Volvo suggests in its reply that the main
question for the definition of the relevant geographic
market should be whether price or margin discrimi-
nation is possible between different areas. Volvo has
provided numerous examples indicating that
it has
indeed been able not only to uphold substantial price
differences between neighbouring countries, but also to
apply significantly different margins (11).
It therefore
must be concluded that the available evidence on prices
and margins is incompatible with Volvo’s contention
that the Nordic countries (Sweden, Denmark, Finland
and Norway), the United Kingdom and Ireland should
not each be regarded as separate geographic markets.

Customer preferences

(50)

It is clear from the market investigation that, although
truck manufacturers are in a position to supply a range
of different models of heavy trucks (although the
adaptation for specific regulations existing in certain
Member States does certainly represent a supplementary
cost constituting a disincentive to penetrate certain
markets), customer requirements are such that
the
models and technical configurations of heavy trucks
sold in different Member States present considerable
variations.

(51) This conclusion is substantiated having regard to the
most commonly sold truck models of major truck
manufacturers in different Member States. While it is
observed that major differences may exist even in the
basic characteristics of the heavy trucks sold in the
different Member States (even when the models of the
same manufacturer are compared), these differences are
significantly less marked if one compares the most
commonly sold models for the different truck manufac-
turers within a single Member State.

(10) The information provided by Volvo indicates the margins for the
three most popular models in a number of countries. However,
as the most popular model varies between countries and since
Volvo has not provided this data for all countries, no complete
comparison can be made.

(11) It should be recalled that even the Lexecon and Neven reports,
which went into considerable efforts to adjust the existing price
data, despite omitting a number of countries where larger price
differences were found, concluded that prices vary by 12 %.

(52) As a point of reference, the table below summarises the
details of Volvo’s three best selling models in each
country along with the percentage of the total sales
volume represented by these three models. The picture
would be largely the same with regard to the other truck
manufacturers.

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29.5.2001

Austria

Belgium

Denmark

Finland

France

Germany

United Kingdom

Greece

Italy

Netherlands

Norway

Portugal

Spain

Sweden

Tractor/rigid

Engine (litres)

HP

Axles (wheel-
s/traction)

Cabin com-
fort level

% of total
sales

T

T

T

R

T

T

T

12-16

420-520

4×2

12

12

380-420

4×2

380-420

4×2

12-16

420-520

6×2-6×4

12

12

380-420

4×2

380-420

4×2

2-3

2-3

2-3

1-2

1-2

2-3

10-12

360-380

4×2-6×2

1

T-R

12-16

420-520

4×2-6×2

T

T

R

T

T

T-R

12

12

12

12

12

12

380-420

4×2

380-420

4×2

420-520

6×2

380-420

4×2

380-420

4×2

380-420

4×2-6×2

1-3

1-2

2-3

1-2

1-2

1-3

1-2

[... (*)]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

(*) [The national figures range from 19 % to 60 %, with an average of 43 %].

(53)

As it can be seen form the table in recital 52, the types
of basic characteristics, considered as key elements, of
heavy duty trucks tend to change according to the
Member State where the trucks are sold. Customers in
Finland, Greece, Norway and Sweden have a stronger
preference for rigid trucks than customers in other
the same time customers in Austria,
countries. At
Finland, Greece and Norway require larger and more
powerful engines, whereas customers in the United
Kingdom tend to require smaller engines. There are
similar differences in the preferences for the axle con-
figuration. Finally, the cabin comfort level tends to be of
lesser
the United
Kingdom, Italy, Norway, Portugal and Sweden. Further-
more, with particular reference to the Nordic countries,
it is evident that the basic specifications required vary
substantially, not only if compared to those required in
other Member States, but even among the Nordic

importance in Finland, France,

countries, with Danish customers preferring tractor-type
vehicles, whereas customers in the other three countries
generally prefer rigid trucks and have lower requirements
for cabin comfort. Moreover, customers in Norway, and
in particular Finland, appear to require engines with
higher horsepower than those in Sweden and Denmark.

(54)

In addition to the differences in the basic characteristics,
it appears that customers’ requirements may vary for a
number of options, which can be applied to heavy truck
models (for example, the gearbox and the number of
cylinders in the engine).

(55)

It appears that customers in three of the Nordic countries
(Norway, Finland and Sweden) generally purchase heavy

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L 143/83

trucks of the rigid type (integrated) having an engine of
higher power than engines sold in other Member States
and with a higher number of axles. These purchasing
habits are linked to the topography and the climatic
conditions prevailing in all these countries, as well as to
the specific regulations applicable in terms of allowed
tonnage. Given these conditions, truck operators will
need to use trucks, which are actually able to provide
the service required.

are in fact sold elsewhere in high quantities. The costs of
passing the test outweighs the revenues that would be
derived from the additional sales through the current
network’. At the oral hearing, Volvo admitted that the
cab crash test constitutes a barrier to entry for non-
Swedish producers of heavy trucks. Volvo estimated
that DaimlerChrysler in Germany ask an additional
DM 7 850 from customers who want a Swedish safety
cab.

Technical requirements vary between Member States

Purchasing is done on a national basis

(56) The market investigation has revealed that, despite a
certain degree of harmonisation achieved at the Euro-
(in particular Council Directive 85/3/EEC
pean level
which harmonised weight requirements and dimensions
for international traffic within the Union), there are still
a number of technical requirements for heavy trucks
which vary from country to country. This conclusion is
particularly valid for the United Kingdom, Ireland and
some of the Nordic countries. As far as the United
Kingdom and Ireland are concerned, the fact that all
vehicles must be adapted for right-hand drive severely
restricts the possibility of importing vehicles intended
for continental Europe. Furthermore, the Commission’s
attention has been drawn to the fact that the specification
of the vehicles of the same model would be different in
Ireland from that in the United Kingdom. Indeed, Scania,
Volvo and Iveco all operate a heavier specification (in
terms of running gear, driveline, suspension, tyres and
springs) on the Irish market owing to the adverse road
conditions in this country. For some of the Nordic
countries, it is noted that whole vehicle type approval
(i.e. complete harmonisation of technical regulations) in
the heavy truck sector is not expected to take place
within the next two to three years. Different regulations
still apply for example in Sweden and Finland as concerns
transported tonnage and maximum
permitted total
length of the trucks. Higher tonnage and longer trucks
are allowed in these two countries (60 tonnes and
25,25 metres) than in the rest of Europe. This gives, in
general, Volvo and Scania an advantage since their trucks
are traditionally produced to meet the requirements (e.g.
engine and axle configuration) of longer and heavier
vehicles.

(57)

In Sweden, there is also a specific regulatory barrier to
entry. Under Swedish law, a specific homologation
known as the ‘cab crash test’ is required. A competitor
described the effect of this test to the Commission in the
following way. ‘A technical barrier to enter the Swedish
market is, already mentioned, the Swedish cab test.
This has amongst others effectively stopped (name of
competitor) from selling its top of the range (name of
models) and important models in its light line range.
These models are homologated for sale in Europe and

(58)

(59)

investigation that

In view of the above described specificity of the truck
market
technical
relating to customer preferences,
requirements and price differences, and the need for
it is not surprising that the market
dealer support,
investigation has shown that purchasers of heavy trucks
very rarely turn to dealers established outside their
country of operation. Even when the purchaser is a
‘fleet customer’ with international transport activity and
operations located in various countries, it appears from
the market
trucks are bought
nationally and buying decisions are taken on the basis
of dealer support and pricing in that particular country.
This is a fortiori true when the customer is a small to
medium-sized transport company. As a matter of fact,
the majority of heavy truck purchasers in the Nordic
countries are small and medium-sized companies who
buy nationally and do not consider taking advantage of
price differences in view of the need for after sales and
service support, the risk of a reduced secondhand value
of privately imported trucks and the different types of
technical characteristics prevailing in other Member
States.

Furthermore, it has been brought to the Commission’s
attention that dealers see the sale of a new truck as a
source of future income from service and spare parts
sales, on which the dealer typically has significantly
higher margins than on the sale of the new truck. Data
submitted by Volvo confirm that the major part of a
dealer’s revenue comes from service and the sale of spare
parts. Therefore, a dealer who knows that the sale of a
truck to a specific customer will not generate after sale
income will be less inclined to offer an attractive price
to this customer. Hence, customers trying to import
trucks privately from other Member States (for instance,
Danish truck customers wishing to buy in Germany)
may well find that they will have to pay higher prices
than locally based customers. It has also been brought
to the Commission’s attention that the various problems
(service, guarantees, etc.) involved in importing privately
from a neighbouring country would mean that a price
difference of up to 10 % would be necessary before
buying trucks in that neighbouring country would
become profitable, and even then only for customers
buying a certain number of trucks.

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(60) Another issue that influences whether a truck customer
fins it attractive to import trucks privately or buy from
a parallel importer is the possibility of being partly or
fully reimbursed for problems with a truck after the
warranty period has expired. The decision to give such a
reimbursement
typically made by the
importer which of course would have little incentive to
give such a reimbursement for a truck not imported via
the official importer.

is, however,

Distribution and service network

(61) The market investigation has revealed another point,
which needs to be taken into account when determining
the geographic dimension of
the relevant market.
Although some market operators refer to the heavy
truck market as a ‘European market’, they invariably
indicate that a key factor in the decision relating to the
purchase of trucks is the after sales network (mainten-
ance, ordinary and extraordinary, as well as supply of
spare parts) which can be offered by a given truck
manufacturer. Replies from truck customers invariably
indicate that an effective and well spread after sales and
maintenance service is essential for a truck operator. As
a matter of fact, the market investigation has made clear
that the decision of a truck operator to purchase a
certain type of truck will depend on a number of
variables, each being essential
the purchasing
decision: the most important elements are price, after
sales services, secondhand value and warranty conditions
(all these elements being reflected in a brand name, as it
will be seen later). It therefore follows that the choice of
a truck operator relating to the purchase of a certain
brand of truck will heavily depend on the possibility for
this specific truck manufacturer to offer effective after
sales assistance. This connection between the desirability
of a heavy truck supplier and its available after sales
service network could explain why most customers
(despite being in Volvo’s terms ‘professional buyers’) do
not take advantage of the existing price differences. For
the same reason, it is likely that arbitrageurs would find
it difficult to convince truck customers in a certain
country to buy parallel imported vehicles(12). It should
be noted that, although warranties offered by manufac-
turers typically are valid throughout Europe, these cover
Normal
only

manufacturing

defects.

for

maintenance and servicing of the vehicle is not covered
by the warranty but will typically be done locally, often
on the basis of a service contract with the dealer which
sold the vehicle.

(62) As will be further indicated in the assessment, especially
the situation is such that
in all Nordic countries,
the other European truck companies have significantly
smaller and less well spread after sales networks, and
that
the existing alternative networks primarily are
intended to cater partly for the needs of international
heavy truck companies (requiring emergency repair
service across Europe), and partly to the servicing of cars
and vans. The market investigation has indicated that an
adaptation of the competitors’ networks to the level of
the
those of Volvo and Scania,
requirements of customers with widespread operations
in the Nordic countries, would require substantial invest-
ments (which, of course, would have to be compared to
the economic attractiveness of the market.

in order to meet

(63)

In the course of the market investigation, competitors
have indicated that the decision relating to the establish-
ment or the development of a service network is linked
to a ‘critical mass’ of vehicles sold in any particular
country. It has been suggested that this may be in the
order of 10 %, depending on a number of factors linked
to the costs and opportunities offered by the market in
question. For the Nordic countries, with their relatively
small market sizes and the additional costs relating to
technical requirements, it has been stated that a market
share of 10 % to 15 % would be the minimum necessary
to justify the decision to incur these supplementary
costs. It has also been brought to the Commission’s
attention that the relatively small size of the Nordic
countries may not provide a sufficient incentive to
penetrate the markets, even in the case of a price increase
of 5 % to 10 %.

(64)

For the purposes of definition of the relevant geographic
market it is sufficent to note that the importance of
distribution and service networks is likely to be one of
the main elements restricting customers from buying
outside their country of establishment and also in
limiting the ability of arbitrageurs to take advantage of
existing price discrimination between Member States.

Market share variations

(12) In its reply, Volvo refers to the existence of trade in secondhand
heavy trucks as evidence that national markets are interrelated.
In this context it should be noted, first that the buyer of a
secondhand vehicle is typically not buying a package of a truck,
a maintenance contract and possibly financing, as is the case for
new trucks. Secondly, in its notification Volvo did not indicate
that secondhand trucks were on the same market as new trucks
(indeed, it provided no information about the sales of secondhand
vehicles). Thirdly, Volvo has not provided information to show
that parallel trade of new trucks is at the same level as trade in
secondhand vehicles.

(65)

Furthermore, Volvo’s contention as to an EEA-wide
market for heavy trucks is not supported by the facts
concerning its sales across that area, as indicated in the
notification. It has been indicated that Volvo has a
market share of 15,2 % in the EEA. However, its market
share is significantly higher in a number of individual
Member States (45 % in Sweden, 34 % in Finland, 29 %
in Denmark, 38 % in Norway, between 22 % and 25 %
the Netherlands, Portugal and
in Ireland. Belgium,

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L 143/85

Greece). At the same time, its market shares in a number
of countries are significantly below this EEA average
(12 % in Austria, 8 % in Germany, 13 % in Spain, 12 %
in Italy and 11 % in Luxembourg). As indicated in the
following table, similar national deviations from the
average EEA market share can be observed for Scania
and all other heavy truck manufacturers. Even between
neighbouring Member States with somewhat similar

topography such as Denmark and Germany there are
large variations in the market shares of
the main
manufacturers. Apart form vague references to historical
reasons, Volvo has not provided any explanation as to
how,
in its view, such differences in market shares
between Member States could be compatible with its
contention that the heavy truck market is EEA-wide.

Volvo

Scania

Daimler

MAN

RVI

EEA average

15,2

15,6

20,5

12,6

11,9

Iveco

10,6

DAF

10,5

Sweden

Finland

Denmark

United Kingdom

Ireland

Germany

Austria

France

Belgium

Luxembourg

Netherlands

Italy

Spain

Portugal

Greece

Norway

45

34

29

18

22

8

12

14

23

11

16

12

13

25

24

38

46

31

30

19

27

9

16

9

17

15

23

12

16

19

17

32

6

10

18

9

9

42

18

16

18

28

12

16

19

12

36

9

Source: Notification (based on official registration figures).

0

3

10

7

6

26

34

5

11

14

9

6

8

6

12

12

1

18

3

6

3

2

4

38

8

10

3

9

19

17

3

1

0

4

7

9

8

6

6

8

6

8

3

41

20

7

2

2

2

0

4

18

13

5

9

8

17

15

33

4

9

14

3

4

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Conclusion on relevant geographic markets for
heavy trucks

Sweden

(66) The Commission considers that Sweden constitutes a
separate relevant geographic market for heavy trucks.
First, the market investigation has shown that purchasing
of heavy trucks is done on a national basis and that the
distribution and service networks constitute a barrier to
import penetration to manufacturers who do not have a
well-developed local network. This applies in particular
to MAN and Iveco, which have no market share for
heavy trucks in Sweden. The national purchasing pattern
was confirmed by the investigation conducted by the
Swedish competition authority showing that truck cus-
tomers overwhelmingly tend to purchase heavy trucks
on a national level, perhaps even locally. Secondly, as
described above, prices in Sweden are different from
those in its neighbouring countries. For instance, the
(adjusted) price in Sweden for [a commonly sold model]
is [10 % to 20 %] higher than in Denmark, [10 % to
20 %] higher than in Norway and [0 % to 10 %] higher
than in Finland. Thirdly, Volvo’s profit margins in
Sweden are different from those in the other Nordic
countries. For example, Volvo’s net profit margin in
1998 for its [a commonly sold model] was [... (*)] in
Sweden versus [...] in Denmark, [...] in Finland and [...]
in Norway. Fourthly, technical specifications are different
in Sweden from the rest of Europe as higher tonnage
and longer trucks are allowed in Sweden. Moreover, the
Swedish cab crash test has been identified as a specific
regulatory barrier to entry, which has meant that some
truck models are not presently for sale in Sweden.
Finally, RVI only has 1 % market share in Sweden while
in neighbouring Finland the ‘national’ brand RVI/Sisu
has 18 %. For the above reasons, the conditions of
competition in the market for heavy trucks in Sweden
are different from those of its neighbouring countries
and Sweden thus constitute a separate relevant geo-
graphic market.

Denmark

(67) The Commission considers that there are strong indi-
cations that Denmark constitutes a separate relevant
geographic market for heavy trucks. First, the market
investigation has shown that purchasing of heavy trucks
is done on a national basis and that the distribution
and service networks constitute a barrier to import
penetration to manufacturers who do not have a well-
developed local network. Secondly, as described above,
from those in its
prices in Denmark are different
neighbouring countries. For instance, the (adjusted) price
for the [a commonly sold model] is [10 % to 20 %]
higher in Sweden than in Denmark. Furthermore, the
dealer net prices adjusted for specifications for the
[a commonly sold model], which are given in the
notification, indicate an average price, which is [0 % to
10 %] lower in Denmark than in Germany. Thirdly,

(*) [Figure is highest in Sweden, followed by Finland, Denmark and

Norway, in that order].

Volvo’s profit margins in Denmark are different from
those in the other neighbouring countries. For example,
Volvo’s net profit margin in 1998 for its [a commonly
sold model] was [...] in Denmark versus [...] in Sweden
[...] in Finland and [...] in Norway. Fourthly, the three
most sold Volvo heavy truck models in Denmark have
different specifications from the preferred models in the
other Nordic countries. Finally, the fact that Volvo has a
market share of 29 % in Denmark but only 8 % in
Germany, Scania 30 % in Denmark but only 9 % in
Germany, DaimlerChrysler 42 % in Germany but only
18 % in Denmark, and MAN 26 % in Germany but only
10 % in Denmark tends to confirm that Denmark and
Germany do not belong to the same relevant geographic
market. The above reasons constitute strong indications
that the conditions of competition in the market for
heavy trucks in Denmark are different from those of its
neighbouring countries and Denmark therefore consti-
tutes a separate relevant geographic market. As shown
below, if Denmark were to be considered as a separate
geographical market the operation would lead to the
creation of a dominant position on this market. How-
ever, given the fact that, as explained below, the notified
transaction would in any event, be incompatible with
the common market even if it would not create a
dominant position on the Danish heavy truck market,
this question does not have to be settled in the context
of the present proceedings.

Norway

(68) The Commission considers that Norway constitutes a
separate relevant geographic market for heavy trucks.
First, the market investigation has shown that purchasing
of heavy trucks is done on a national basis and that the
distribution and service networks constitute a barrier to
import penetration to manufacturers who do not have a
well-developed local network. Secondly, as described
above, prices in Norway are different from those in its
neighbouring countries. For instance, the (adjusted) price
for the [a commonly sold model] is [10 % to 20 %]
higher in Sweden than in Norway and [10 % to 20 %]
higher in Finland than in Norway. Thirdly, Volvo’s profit
margins in Norway are different from those in the other
Nordic countries. For example, Volvo’s net profit margin
in 1998 for its [a commonly sold model] was [...] in
Norway versus [...] in Sweden, [...] in Denmark and [...]
in Finland. Fourthly, the three most sold Volvo heavy
truck models in Norway have different specifications
from the most preferred models in Denmark. Finally,

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market shares differ between Norway and Sweden in
that MAN has 12 % in Norway and none in Sweden,
while Volvo and Scania have 38 % and 32 % respectively,
in Norway, and 45 % and 46 % in Sweden. Furthermore,
RVI only has 1 % market share in Norway while in
Finland the ‘national’ brand RVI/Sisu has 18 %;
in
Denmark DaimlerChrysler has 18 % and only 9 % in
the conditions of
Norway. For the above reasons,
competition in the market for heavy trucks in Norway
are different from those of its neighbouring countries
and Norway thus constitutes a separate relevant geo-
graphic market.

Finland

(69) The Commission considers that Finland constitutes a
separate relevant geographic market for heavy trucks.
First, the market investigation has shown that purchasing
of heavy trucks is done on a national basis and that the
distribution and service networks constitute a barrier to
import penetration to manufacturers who do not have a
well-developed local network. Secondly, as described
above, prices in Finland are different from those in its
neighbouring countries. For example, the (adjusted) price
for the [a commonly sold model] is [10 % to 20 %]
higher in Finland than in Norway and [0 % to 10 %]
higher in Sweden than in Finland. Thirdly, Volvo’s profit
margins in Finland are different from those in the other
Nordic countries. For example, Volvo’s net profit margin
in 1998 for its [a commonly sold model] was [...] in
Finland versus [...] in Sweden, [...] in Denmark and [...]
in Norway. Fourthly, higher tonnage and longer trucks
are allowed in Finland than in the rest of Europe except
for Sweden. Finally, the ‘national’ brand RVI/Sisu has a
market share of 18 % in Finland while it only has a share
of 1 % in Sweden and Norway and 3 % in Denmark. For
the above reasons, the conditions of competition in the
market for heavy trucks in Finland are different from
those of its neighbouring countries and Finland thus
constitutes a separate relevant geographic market.

Ireland

(70) The Commission considers that Ireland constitutes a
separate relevant geographic market for heavy trucks.
First, the market investigation has shown that purchasing
of heavy trucks is done on a national basis and that the
distribution and service networks constitute a barrier to
import penetration to manufacturers who do not have a
well-developed local network. Secondly, list price data
provided by Volvo for the most sold rigid and tractor
trucks are considerably lower ([40 % to 50 %]) in the
technical
United Kingdom than in Ireland. Thirdly,
requirements in Ireland are different from other Member
States. The right-hand drive severely restricts the possi-
bility of imports of vehicles intended for continental
Europe. Furthermore, the specification of the vehicles of
the same model is heavier in Ireland than in the United
Kingdom due to the adverse road conditions in Ireland.

Finally, the market shares of the main manufacturers in
Ireland differ significantly from those in most of the
rest of Europe. Although the difference to the United
Kingdom is less pronounced, the combined market share
of Volvo and Scania is 49 % in Ireland but only 37 % in
the United Kingdom. For the above reasons, the con-
ditions of competition in the market for heavy trucks in
Ireland are different form those of its neighbouring
countries and Ireland thus constitutes a separate relevant
geographic market.

C. ASSESSMENT

(71) Article 2 of the Merger Regulation requires an assess-
ment of proposed concentrations with a view to estab-
lishing whether or not they are compatible with the
common market. The key question in making this
assessment is whether the proposed operation will lead
to the creation or the strengthening of a dominant
position. One of the key parameters involved in this
assessment relates to the market position of the under-
takings concerned and their economic and financial
power. From an economic viewpoint the effects of a
merger on market conditions may be measured in a
number of different ways. Traditionally, the market
power of merging parties has been measured by way of
proxy, using criteria such as the market shares of the
merging parties on the relevant markets and those of
the remaining competitors. This analysis is normally
supplemented with an assessment of the possible pur-
chasing power of the customers, the likelihood of new
entry, etc. The Commission has conducted this type of
analysis in this case, and has come to the conclusion
that the proposed concentration would be incompatible
with the common market.

(72) The Commission has also requested an econometric
study from Professors Ivaldi and Verboven in order to
attempt to measure directly what the effects of the
merger could be on the prices charged by heavy truck
producers in the various national markets. The results of
such econometric studies can be a valuable supplement
to the way the Commission has traditionally measured
market power. This can, in particular, be the case when
the customer base for a product is very fragmented so
that reaching a satisfying segment of customers through
survey-based methods is difficult. As there are many
thousands of truck owners in each country, many having
only one truck, a study was seen to be useful in this case.

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(73) The study is based on a ‘nested logit model’ where
certain parameters relating to the pricing decisions of
firms and to the buying decisions of customers are
estimated from prices, market shares and other variables.
In this case, the model was applied using data for two
years for two types of truck for each of the seven major
truck manufacturers in each of the Member States and
Norway. The results from this estimation were then used
to simulate the effects of the merger on the prices
of both the combined entity (‘New Volvo’) and its
competitors.

(74) The results of the study point to serious competition
problems,
in particular in the Nordic countries and
Ireland, where the present Decision finds that the merger
will lead to the creation of a dominant position.

(75) The Commission recognises that using this type of study
is a relatively new development in European merger
control. Furthermore, in its reply Volvo contested the
validity of the study, claiming that the analysis was
seriously flawed and that the results cannot be relied on.
Although Professors Ivaldi and Verboven have provided
answers to these criticisms, Volvo still contests some of
the fundamental elements of the study. Given the novelty
of the approach and the level of disagreement, the
Commission will not base its assessment on the results
of the study.

have EEA-level market shares between 10,4 % and
12,6 % (13).

(77) Therefore, before the implementation of the proposed
operation, the European heavy truck market was charac-
terised by the presence of seven producers. The strongest
producers in Europe, also in view of their worldwide
market presence, are respectively DaimlerChrysler,
Volvo and Scania.

(78)

In addition, when having regard to the respective market
position in the EEA of each of these manufacturers, it
appears that it is only DaimlerChrysler, Volvo and Scania
that have a significant presence throughout the whole of
Europe. The other manufacturers tend to be more
geographically specialised. Although even Daimler-
Chrysler, Volvo and Scania are stronger in their ‘home’
or ‘natural’ markets only these three companies are
well represented throughout Europe. DaimlerChrysler’s
market share ranges between 6,2 % and 17,7 % in
northern Europe (Nordic countries and Ireland), form
12 % to 42 % in the rest of Europe. Volvo’s and Scania’s
profile is very similar, since their position is very strong
in the whole of northern Europe (Nordic countries and
Ireland) and rather equally distributed through the rest
of Europe, with market shares ranging form 8 % to 9 %
in Germany to 16 % to 23 % in the Netherlands.

(79) The other European truck manufacturers have a rela-
tively strong position in their ‘home’ or ‘natural’ market
(RVI 38 % in France, Iveco 41 % in Italy, DAF-Paccar
33 % in the Netherlands and MAN 26 % in Germany
and 34 % in Austria), but they are quite weak or virtually
not present in some areas of Europe.

Current structure of the European heavy truck market

(80)

(76) According to tables reporting European ranking for
producers of heavy duty trucks in 1998 provided
by Volvo in the notification, DaimlerChrysler is the
European leader with 20,6 % of the EEA market, Scania
ranks second with 15,6 %, Volvo third with 15,2 % and
then four producers (MAN, DAF-Paccar, RVI and Iveco)

Furthermore, before the proposed transaction, Volvo
and Scania appeared to be each other’s closest competi-
tors pursuing similar market strategies. Both Volvo and
Scania are Swedish makes and are generally perceived as
the expression of quality products, offering globally a
reliable service. An examination of Volvo’s and Scania’s
respective market shares clearly shows their essentially
parallel positions throughout the whole of Europe (1998
figures).

Market

Sweden

Finland

Denmark

United Kingdom

Volvo

44,7

34,3

28,7

18,3

Scania

46,1

30,8

30,2

18,6

(13) Volvo’s market share figures are based on registration volumes
for all heavy trucks. The data submitted largely correspond to
the sales figures collected by the Commission in the course of
the investigation (including those broken down between rigid
and tractor heavy trucks).

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Market

Ireland

Germany

Austria

France

Belgium

Luxembourg

Netherlands

Italy

Spain

Portugal

Greece

Norway

Volvo

22,0

7,7

12,3

14,5

23,4

11,1

15,9

12,0

13,0

25,1

24,1

38,0

Scania

27,1

8,9

16,5

9,4

17,4

14,7

22,8

12,0

16,0

19,1

16,6

32,2

(81) These figures relate to 1998 only. However, even
considering the existing variations in market shares that
can be observed with respect to previous years, the
overall impression is that there is, to a significant extent,
symmetry between the market position of the two
companies. This is consistent with the observations by
third parties, that Scania has been Volvo’s most direct
competitor.

(82)

In addition, when examining the situation in the Nordic
countries, it is clear that over a long period of time
(1989 to 1998) the average market position of Volvo
and Scania has not only remained relatively stable, but
that in addition most variations in the market share of
one of the two companies (say, Volvo) correspond to a
variation (in the opposite direction) of the other one
(Scania).

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Sweden

Volvo
Scania

Mercedes
DAF

60

50

40

30

20

1 0

0

40

35

30

25

20

15

10

5

0

8 9

90

9 1

9 2

93

9 4

95

9 6

9 7

98

Denmark

Volvo
Scania

Mercedes
MAN

89

90

91

92

93

94

95

96

97

98

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Finland

Volvo
Scania

Mercedes
Sisu/Toyota

4 0

3 5

3 0

2 5

2 0

15

10

5

0

50

40

30

20

10

0

89

9 0

9 1

9 2

9 3

94

9 5

9 6

97

9 8

Norway

Volvo
Scania
Mercedes
MAN

89

90

91

92

93

94

95

96

97

98

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These graphs show not only that Volvo and Scania have
similar market positions, but are also indicative of the
fact that they are each other’s closest substitutes.

(83)

In addition to sales, the presence of a truck producer in
a certain area can also be measured by the number of
sales and service points that it has in that area. According
to figures provided by Volvo, about [70 % to 80 %] of a
heavy truck dealer’s total turnover is from service and
sales of spare parts, whereas the remaining [20 % to
30 %] is from sales of new vehicles. The table below
indicates the total number of sales/service points in the
relevant markets, as indicated by the main heavy truck
suppliers. It should be noted that a dealer can have one
or several sales points. The table below is intended to
give an idea of the capillarity of each manufacturer’s
network, and consequently indicates the total number

of sales points. The table is indicative of the merged
entity’s advantage over competing suppliers in the
relevant markets, in particular as all of the Volvo and
Scania sales and service points are largely dedicated to
heavy trucks, whereas several of the competitors’ sales
and service points are used for medium and light trucks,
cars and vans and not for heavy trucks. Whilst some
service points intended for servicing medium trucks may
also be able to service heavy trucks, it should be noted
that the investigation has indicated that medium trucks
are largely used only in urban areas (14). Competitors
have, however, indicated that heavy trucks need service
points throughout any given country and that pur-
chasers of heavy trucks will not be persuaded to buy the
trucks of competitors who only have a presence in the
main cities. For the heavy truck market the table below
therefore tends to overstate the extent and the quality of
the networks of New Volvo’s competitors.

Volvo

Scania

Volvo
+ Scania

Daimler

MAN

RVI

Iveco

DAF (*)

Sweden

71/116

67/105

138/221

34/38

0/9

4/20

13/34

Na/60

Finland

22/31

23/34

45/65

37/37

0/25

16/45

3/26

Na/2

Denmark

16/30

15/28

31/58

35/42

7/19

5/10

19/40

Na/20

Ireland

5/5

8/8

13/13

8/8

0/0

1/1

7/7

Na/11

Norway

42/65

45/50

87/115

24/24

6/23

13/13

16/23

Na/33

(*) Figures supplied by Volvo.

Structure of the market at Member State level —
current structure and effects of the proposed operation

Customer concerns

(84)

In its reply, Volvo makes two general comments con-
cerning the analysis of the competitive effects of the
merger in individual Member States. First, it argues that
customers do not display an undue level of concern
about the proposed concentration. Secondly, it argues
that price discrimination between large and small cus-
tomers is not possible in the heavy truck markets.
The Commission has considered these general remarks
carefully and come to the conclusion that neither is
conclusively supported by the available facts. Prior to
analysing the results in the individual Member States,
the reasons for this conclusion will be set out below.

(85) When assessing Volvo’s argument that customers are
not concerned, it is necessary to keep in mind that the
truck industry has an extremely fragmented customer
structure. To give an illustration, there are, according to
Volvo’s figures, more than 23 000 owners of heavy
trucks in Sweden alone. Less than 5 % of these operate a
fleet of more than 10 trucks. The situation is largely
similar in other Member States (and also for the bus
markets, in particular for tourist coaches).

(14) It has been brought to the Commission’s attention that the costs
of extending the capability of a light/medium truck network to
cover also heavy trucks are 50 % of the costs of an entirely new
heavy truck network (see, for example, recital 141).

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(86)

In a market with such a fragmented demand structure, it
would be unreasonable to expect that the majority of
such customers would be in a position to provide a
sophisticated legal analysis of the proposed merger. This
means that it is not possible, as Volvo suggests, to
consider that customers who, for unknown reasons,
have not participated actively in the proceedings are all
unconcerned. Instead, the responsibility of the compe-
tition authority to look carefully at the effects of a
merger in such a market is particularly strong.

agree with Volvo’s contention that the GfK surveys
demonstrate the absence of concerns. The reasons for
this are twofold. First, form a methodological viewpoint,
there are a number of questions regarding the way in
which the questions were formulated (for example, the
respondents ware not asked how they would react if
both Volvo and Scania were to raise their prices
after the merger). Such methodological question marks
inevitably reduce the evidential value that can be attri-
buted to the GfK survey.

(87) Thus, the Commission cannot accept Volvo’s view that
the question of whether significant concerns exist in a
certain market can be answered by reference to the
responses from a limited sample, such as the 20 largest
buyers in a country. This approach would certainly raise
a question as to how representative the views of these
buyers are of the effects of the merger on smaller
customers. There is evidence form Volvo’s own docu-
mentation that price discrimination takes place in these
markets.

(88) However, even on the basis of a limited sample, the
Commission finds that there is strong cause for concern
in the countries indicated below. In this context it must
be stressed that the relevant question is not, as claimed
by Volvo, the number of ‘complaints’ that have been
submitted. Instead, a qualitative analysis must be made
of the answers provided. In this context it is clear that a
competition authority has strong grounds to be con-
cerned when, as in this case, a not insignificant pro-
portion of the largest customers indicates, inter alia, that
the parties will become dominant, that Scania is the only
alternative to Volvo, that other brands are unable to
fulfil their technical requirements or have insufficient
service networks, and that they would have to accept a
price increase of 5 % to 10 % (15). Even while admitting
that a number of customers have not expressed concerns
about the proposed concentration, the Commission is
therefore unable to accept Volvo’s argument that no
concerns exist.

(89) The same argument also applies to the 12 surveys
conducted by GfK on behalf of Volvo for its reply
(hereinafter referred to as ‘the GfK surveys’). These
surveys were conducted by telephone with a sample of
‘large’ customers in each of the four Nordic countries,
the United Kingdom, Ireland, Belgium and Portugal. In
each of the Nordic countries an additional survey was
made for ‘small’ customers. The Commission cannot

(15) As explained above,

the Commission does not consider it
meaningful to provide statistics based on an unrepresentative
sample. However, it is worth noting that, although the number
of respondents expressing concerns varies from country to
country, in all of them some made one or more of the comments
indicated in recital 88.

(90) Secondly, even assuming that the methodological ques-
tion marks could be answered satisfactorily, it is difficult
to follow Volvo’s argument that the GfK surveys demon-
strate that the proposed merger would not lead to
competition concerns. One of the questions asked in the
surveys was whether the respondent would switch
supplier in response to a 5 % price increase by Volvo or
Scania. While the indicated result of each survey shows
that some respondents would switch (less than half of
the respondents to each survey), it is unlikely that New
Volvo would adopt a strategy to impose an across-the-
board price increase. Indeed, information provided by
Volvo shows that it applies a strategy of individual
pricing for each transaction and that large price differ-
ences are applied to different customers. There is also
strong evidence that Volvo is able to price discriminate
between small and large customers. It is also worthy of
note that the surveys show that the respondents’ most
common answer as to the company to which they
would switch is actually Volvo and Scania. It therefore
appears that, when stating their likelihood to switch in
response to a 5 % price increase, respondents have been
allowed to assume that their pre-merger ability to switch
from Volvo to Scania (or vice versa) will be unchanged
after the implementation of the proposed merger. It
would therefore seem likely that the already low pro-
portion of customers who indicated that they would
switch in response to a 5 % price increase would have
been even lower if they had been instructed to assume
that their post-merger ability to switch form Volvo to
Scania (or vice versa) will be decided by Volvo’s market-
ing strategy for the two brands.

Price discrimination

(91)

In its reply, Volvo argues that it would be extremely
difficult to engage in successful price discrimination in
the heavy truck market and that the risks associated with
losing sales to customers who are not prepared to pay a
higher price would outweigh the potential gains form
such behaviour. In addition, at the oral hearing, Volvo
presented the results of an analysis of its sales to Swedish
and Danish customers in 1998. After having made
various adjustments for specification of the vehicle and

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(92)

fleet size the analysis concludes that the price differential
is small, [0 % to 10 %] lower prices to large customers
(defined as those buying at least 30 trucks) — and does
not constitute significant price discrimination. It should,
however, be noted that this analysis of Volvo’s sales to
Swedish and Danish customers in 1998 does not contain
any reference to its margins on the sales to the different
customer groups. As will be recalled from the section
on relevant geographic markets, Volvo have submitted
that price discrimination should be defined as earning
different margins on the sale of the same product to
different consumers.

Furthermore, it should be noted that Volvo’s contention
as to the absence of price discrimination is in sharp
contrast with its own internal documents supplied to
the Commission in the course of the proceedings. At the
Commission’s request Volvo has submitted information
indicating its prices, profits and margins on sales to
small, medium and large buyers of the [a commonly
sold model] truck with three different engine sizes (16).
For the most commonly sold engine size ([...]), this
information shows that a small customer will pay a price
that is [20 % to 30 %] higher than a large customer or
[0 % to 10 %] higher than a medium-sized customer.
Even more significantly, it is apparent that Volvo’s profit
margin on sales of this model to the small customer is
[10 % to 20 %] whereas the profit margin on sales to
large and medium-sized customers is [0 % to 10 %] and
[10 % to 20 %] respectively. Thus, it follows that a
relatively modest price difference such as the [0 % to
10 %] difference between a small and a medium-sized
customer translates into a difference of [30 % to 40 %]
in the profit margin achieved. At the same time the
profit margin achieved from the small customer is [0 %
to 10 %] times as high as that achieved from large
customers (the margin on sales to medium-sized cus-
tomers are more than [0 % to 10 %] times that achieved
from large customers).

(93)

In view of the foregoing, it must be concluded that
this pre-existing internal Volvo document constitutes a
strong indication that the company has actually been
able to price discriminate between sales to different
this evidence must
customer group, and that
take
precedence over
abovementioned arguments
developed for the purposes of the reply and the oral
hearing

the

Sweden

Current structure of the market

Market shares

(95) The current structure of the Swedish market for heavy
trucks is represented and summarised by the following
table:

Company

Market share in 1998

Volvo

Scania

DaimlerChrysler

MAN

RVI

Iveco

DAF-Paccar

44,7 %

46,1 %

6,2 %

—

0,8 %

0,2 %

1,9 %

(96) The table in recital 95 shows that currently Volvo and
Scania are the only significant competitors in the
Swedish market. Both Volvo and Scania have a market
position, which is seven times higher than that of the
next competitor, DaimlerChrysler. All other manufac-
turers are either not present in the Swedish market or
have a totally insignificant presence.

(97)

In addition, as it is further substantiated by the graphs
shown in recital 82, Volvo and Scania are in direct
competition with each other. That is shown by the fact
that any market share variation of one of the two
companies is closely correlated to an opposite market
share variation of the other one.

Assessment at Member State level

Brand

(94) The prominent market positions of Volvo and Scania in
the Nordic countries and Ireland will now be assessed
separately.

(16) Volvo supplied this information relating to its sales in France,
stating that it was not able to provide such a breakdown for
other countries.

(98) Both Volvo and Scania are Swedish high-value brands.
The strength of
the respective brands lies in their
perception as high-quality products having effective and
very well spread after sales networks. According to the
supporting documentation submitted by Volvo, both
parties present the second hand value of their vehicles
as part of their brand image. All these elements make
in the whole of the
these two brands ‘the brands’
Nordic countries and Sweden in particular. The market
investigation indicates that demand in the heavy truck

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market is quite inelastic, in the sense that the purchase
price is only one of the elements, which determine the
choice of a certain type of heavy truck. The reason for
this is that purchasers of heavy trucks typically have
regard to the whole life cost of the vehicle, which means
they will have regard to initial purchase price, financing,
after sales network, warranties, and secondhand value
(including ‘trade-in’ of used trucks). As is clearly demon-
strated by the market shares, only Volvo and Scania
have up to now been able to offer a sufficiently good
package, including a good balance of all these elements.

(99) This is further confirmed by the fact that price infor-
mation in the possession of the Commission shows that
the parties’ pricing for heavy trucks in Sweden is
invariably higher, for comparable models, than pricing
applied by other potential competitors. This is proof
that a typical truck purchaser in Sweden will not have
regard only to the initial price paid for the purchase of
the heavy truck, but will consider a number of elements,
namely the quality of the product, the after sales network
and the secondhand value, which will offset the higher
price paid for the initial purchase.

(100) In view of this, Volvo and Scania have over time built
up loyalty in the whole of the Nordic countries, and in
Sweden in particular, vis-à-vis their own respective
brands. In this market, brand loyalty means that market
participants consider that Volvo and Scania over a long
period have provided high-quality products, good service
to customers and high secondhand value and that this
reputation makes customers inclined to continue to buy
these brands. This loyalty is expressed at least at two
levels: at the level of the final purchaser, the truck
operator, and at the level of the dealer.

Brand loyalty: service network

(101) The market investigation has provided indications that
in the heavy truck market a well-spread and effective
after sales network is crucial for any truck manufacturer
to penetrate a market. Both Volvo and Scania have an
extensive dealer and after sales network in Sweden, most
of which are exclusive. The strength of a network is
represented by its density, by the technical capability of
a given dealer/service point to serve the truck operator,
and by the contacts existing between the dealer/service
points and the truck operator. This last element trans-
lates itself, after a number of years, into relationships of
trust between the dealer/service point and the truck
operator. This relationship of
the
reputation of the brand, and its accumulated value is
significant (which is reflected in the fact that a substantial
proportion of the price that Volvo has offered to pay for
Scania relates to goodwill).

is part of

trust

(102) The investigation has shown that dealers/service points
in Sweden tend to be loyal to Volvo and Scania, and will
therefore show resistance in changing supplier. Owing,
in particular, to the large installed base of Volvo and
Scania vehicles, these companies are in a position to
ensure a better and more secure return on investment to
the dealer/service point.

Brand loyalty: final customer

(103) The market investigation has also provided indications
that final purchasers of heavy trucks tend to be loyal to
the national brands, Volvo and Scania. This is the case
essentially for the reasons mentioned above; these two
manufacturers are in a position to offer customers the
best package in terms of whole life cost. In addition, as
far as northern Europe and the Nordic countries in
particular are concerned, Volvo and Scania are perceived
to be the best placed to provide a product that satisfies
In this context,
customers’ specific transport needs.
factors such as the suitability for climatic and road
conditions and satisfying all technical requirements,
including national legislation, have been mentioned. It
should be underlined, and this factor will be further
elaborated below, that the vast majority of Swedish
truck purchasers are not, as claimed by Volvo, fleet
customers with a large number of trucks, but rather
operators with one or two trucks. This type of customer
will typically be more sensitive to brand loyalty consider-
ations than customers with a large number of trucks in
their fleets.

(104) In the reply, Volvo disputes the conclusion that road
and climatic conditions in the Nordic countries amount
to a substantial barrier to entry. To support its view,
Volvo refers to a specialised truck magazine in the
United Kingdom that chose a MAN truck as the best
vehicle (ahead of both Volvo and Scania) in a test of
trucks of various manufacturers in arctic conditions. It
is noticeable that this test was organised by Scandinavian
magazines and that Volvo has not submitted the assess-
ment made by the other magazines that participated in
the test. Furthermore, it must be noted that customers’
purchasing behaviour and preferences may be based on
the perceived quality of a product.

Effects of the proposed operation on the Swedish heavy
truck market

Market shares — market structure

(105) The proposed acquisition of Scania by Volvo would
result in a New Volvo whose combined market share in
Sweden would be equal to 90,8 % of the market,
according to 1998 figures. The next competitor to the
New Volvo would be DaimerChrysler with a market
share of 6,2 %. The other European truck manufacturers
are virtually absent from the market (DAF-Paccar: 1,9 %,
RVI: 0,8 %, Iveco: 0,2 %, MAN: no sales).

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(106) Therefore, the proposed operation results in a significant
overlap between the parties’ activities. Moreover, the
proposed concentration would significantly increase the
gap between the market share held by New Volvo and
that of its closest competitor in each of the Nordic
countries, and in Sweden in particular. Prior to the
concentration the closest remaining competitor in Swed-
en (DaimlerChrysler) had a market share that was about
7,5 times smaller than that of
leader.
Following the implementation of the concentration this
competitor would have a market share 14,5 times
smaller than that of the new entity.

the market

(107) Furthermore, the information provided by Volvo (further
corroborated by the graphs in recital 82) as well as the
Commission’s investigation, clearly supports a finding
that, prior to the proposed concentration, Volvo and
Scania have been each other’s main competitors. As a
result of the proposed concentration, this competition
would be lost, and the advantage that New Volvo would
hold over the remaining competitors would increase
significantly.

(108) The situation is further aggravated by the fact that the
very strong market position of each of the parties to the
concentration is not a recent phenomenon or the result
of strong market share variations. It is therefore not
likely that other truck manufacturers will exercise a
significant competitive pressure on the parties. Indeed,
an evaluation of the respective market shares of the
parties in Sweden, illustrated by the graphs in recital 82,
shows that the respective market positions of Volvo and
Scania have remained relatively stable over a very long
period of time (10 years). Furthermore, the market
investigation has corroborated this view.

Dealer and customer loyalty

(109) New Volvo will be in a position to act on a market, the
heavy truck market in Sweden, where it will have the
benefit of specific strengths. In the first place, it will
benefit from a traditional dealer and customer loyalty.
In the course of the market investigation, it has been
explained that competitors of Volvo and Scania face
significant difficulties in finding efficient and reliable
dealers/service points in this area. This is essentially
because dealers/service points are traditionally linked to
their national suppliers, who can offer the highest
volume of business and therefore a better return on the
dealer’s investment.

Customer structure

(110) Furthermore, given the customer structure of heavy
truck purchasers in Sweden, the new entity will be in a
position to profit from their loyalty and therefore be in
a position to raise prices. In addition, Volvo’s five major
customers of heavy trucks in Sweden represent only
[0 % to 10 %] of Volvo’s total sales in that country. The
situation is similar for Scania. The proportion of sales to

the five largest customers of the merged entity would be
even lower.

(111) This is further corroborated by Volvo’s own estimates
(see page 5 of the submission dated 25 November 1999)
concerning its sales of a specific model of heavy truck
([...]), which is a commonly sold model in Sweden. This
information shows that [80 % to 90 %] of these trucks
sold in Sweden are sold as single unit sales. Volvo has
indicated that this is a useful proxy for fleet size.

(112) In addition, according to a table provided by Volvo in a
fax of 13 December 1999, out of a total Swedish fleet
population of more than 61 000 heavy trucks, [20 % to
30 %] are owned by a person or company owning just
that one truck. Moreover, [40 % to 50 %] of the total
Swedish heavy truck fleet are owned by persons or
companies that have between 2 and 10 trucks in their
fleet. This means that a large majority ([60 % to 70 %])
of the Swedish heavy truck population is owned by very
small operators. According to the same source, out of a
total of more than 23 000 Swedish heavy truck owners,
only [10 % to 20 %] have fleets consisting of more than
100 trucks, and only [50 % to 60 %] have between 51
and 100 trucks.

Customer structure and dual-sourcing

(113) Volvo has argued that many of their truck customers in
the Nordic countries (and elsewhere) are sophisticated
professional buyers with a policy of dual-sourcing.
According to Volvo, these customers currently pursue a
policy of double-sourcing or multi-sourcing, in order
not to be dependent on a single truck manufacturer.

(114) According to information provided by Volvo in the table
mentioned in recital 12, there are [>30 000] trucks in
mixed fleets in Sweden of which [>14 000] are Volvo
trucks. This means that 50 % of all Swedish heavy trucks
are in mixed fleets and that just under half of those are
It should, however, be noted that Volvo’s
Volvos.
definition of a mixed fleet includes any proportion of
mix, for example a fleet of 50 Volvos and one Scania is
a mixed fleet according to this definition. Moreover, it
is doubtful whether, based on this definition, and
considering that heavy trucks are durable goods, the
prevalence of mixed fleets provides any significant
insight into the future devolpment of the market, or the
reaction of customers with a policy of on-going dual-
sourcing. On the other hand, there is a total of more
than 23 000 owners of heavy trucks in Sweden. Only
[<5 000], that is less than 18 % of them have a mixed
fleet. This means that more than 80 % of all Swedish
heavy truck owners do not have more than one brand
in their fleet. Under these circumstances, the value of the
arguments relating to dual-sourcing should not be
overstated.

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(115) In addition, the market investigation has revealed that,
especially as concerns smaller truck operators, there is a
strong economic interest in concentrating the fleet to
one brand. This is due to the possibilities that this type
of strategy can offer,
in terms of reducing costs for
maintenance and training of personnel (primarily, the
drivers).

Customer structure and shrinkage effect

(116) In mergers with horizontal overlaps in industrial markets
where there is some dual-sourcing, merging parties often
present calculations of a certain loss of market share
resulting from customers switching supplier. These
calculations are motivated in part by the fact
that
the management wants to be cautious vis-à-vis its
shareholders. The calculations are therefore often more
like worst-case scenarios than actual predictions. The
Commission therefore has to evaluate carefully the
assumptions behind the calculations and the likelihood
that the losses will actually materialise. Only if this
evaluation results in a finding that a certain merger can
be safely predicted to lead to market share losses that
will significantly change the competitive situation, will
these losses be taken into account in the competitive
assessment. In this particular case Volvo has not, for
the reasons set out below, been able to sufficiently
substantiate its claims that
the merged entity will
suffer such losses of sales as to support changing the
competitive situation in the relevant markets.

(117) According to Volvo, the proposed operation will inevi-
tably result in a shrinkage effect, i.e. in current Volvo
and Scania heavy truck customers switching to other
makes. To support this view, Volvo has provided the
Commission with the final results of a study carried out
by JP Morgan on behalf of Volvo. According to these
results, the proposed operation would result in a loss of
customers corresponding, in percentage of market share,
to [10 % to 20 %] in Sweden and Finland and [10 % to
20 %] in Denmark and Norway. As to this contention
the following is noted.

(118) According to Volvo, the best source for evaluating the
likelihood of a post-merger reduction in market shares
should be the above-indicated financial reports prepared
by stock market analysts for the purpose of assessing
the proposed concentration. It may, however, be necess-
ary to approach these reports with a certain degree of
caution. First, it is obvious that these reports have not
been produced to evaluate the proposed concentration’s
effects on competition. Instead, the aim of such reports
is to evaluate the value of the shares in the companies
involved, should the concentration be approved. The
fact that analysts may be overly cautious or optimistic
in their presentation, in order to fit the long or short-
term recommandation they wish to make can therefore

not be excluded. Indeed, in a submission of 21 October
1999 Volvo stated that ‘if the valuation of the acquisition
was overly optimistic because total gains were exagger-
ated or losses underestimated, then Volvo could suffer
serous negative consequences in the form of the capital
markets selling Volvo shares and reducing the total
capital value of the company’. Secondly, the way in
which analysts present their recommendations do not
have to follow any specific systematic approach, such as
that imposed by the Merger Regulation, where each
relevant market has to be assessed separately. Thirdly,
Volvo has made known that the financial reports, to
which it has referred, have been based only on infor-
mation provided by Volvo itself.

(119) Volvo has indicated that a number of analysts other than
JP Morgan have expressed their views on combined
market share loss, and a number of them have confirmed
the views of JP Morgan. It is however noted that these
predictions were all made around the moment of the
announcement of the operation and in any event before
the date of notification to the Commission. It cannot be
excluded that most of these early reports were based on
the same material as that provided to JP Morgan by
Volvo. Furthermore, the market share losses mentioned
in these reports are often not estimates in the proper
sense of the word, but rather scenarios used for quan-
tifying the downside risk of the share price of New Volvo
after the acquisition.

(120) In its reply Volvo relies on some of these estimates of
market shares losses. Several of them are so high that
they clearly cannot refer to what Volvo has described as
a shrinkage effect. For instance, Volvo reports that
Handelsbanken Markets has projected a long-term Vol-
vo/Scania market share of 46 % in Sweden. This implies
a market share loss of 45 %, equivalent to the entire
market share addition. According to Volvo, both Den
Danske Bank (8 August 1999) and Enskilda Securities
(9 August 1999) estimate a long-term market share loss
of 31,5 %. Again, this figure is so high that it clearly
cannot refer to what Volvo calls the shrinkage effect.

(121) It is, however, useful to consider the two most recent
predictions of possible shrinkage effects, made by two
other analysts (Salomon Smith Barney, London, 4 Octo-
ber 1999, and Alfred Berg ABN Amro, 6 October
1999). The latter, in particular, is clearly made having
considered the predictions of all the early reports. These
later reports are much more conservative about the loss
of market share than those expressed earlier by other
analysts.

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(122) For example, Alfred Berg Research of ABN Amro, in its
report of 6 October 1999, indicates: ‘Short term, doubts
on EU clearance of the Scania deal and synergies, could
hold back the stock, but we are convinced that Volvo
has a good chance of delivering on synergies and
defending market share’. And: ‘Based on our research
and talking to customers, we believe that the overall
market share risk in western Europe could be more
limited than many seem to fear’. Alfred Berg’s scenarios
of market share loss in western Europe are of a global
loss between 0 % and 3 %.

that

(123) In view of these weaknesses, and in order to assess
the likelihood of the proposed ‘shrinkage-effect’, the
Commission has contacted a number of
important
the proposed
customers to assess the impact
concentration is likely to have on their future purchasing
decisions. In addition the Swedish competition authority
has, on the Commission’s behalf, made a similar enquiry
It follows from
with smaller customers in Sweden.
these investigations that Volvo, which has consistently
announced in its market communications that it intends
to keep the Volvo and Scania organisations and brand
separate, may have been relatively successful
in this
strategy. An important number of heavy truck customers
have referred to the fact that the two units will remain
separate, and that the proposed concentration will not
necessarily have an important impact on their future
purchasing decisions.

(124) In order to evaluate the impact of Volvo’s decision to
keep brands and marketing organisations separate, the
Alfred Berg report also provides comparisons with
previous mergers in which a similar decision was taken.
Two operations are considered: 1. Iveco-Pegaso; and 2.
Freightliner-Ford (Sterling). It is appropriate to cite these
past cases because Volvo also relies on the experience in
the Freightliner case in order to assess the likelihood of
loss of market share.

Iveco-Pegaso

(125) When Iveco acquired Pegaso in 1990, the combined
market share was 14 %, which had fallen to 10 % last
year. According to the report,
‘A key difference, we
believe, (with the present operation) is the strength of
those brands compared to Volvo and Scania. Merging
two weak brands such as Pegaso and Iveco does not
necessarily create a strong player’. This comparison
therefore appears to be inappropriate.

Freightliner-Ford (Sterling)

(126) The Alfred Berg report indicates:

‘When Freightliner
announced its acquisition of Ford’s heavy truck oper-
ations in January 1997, Ford’s market shares had been

on a declining trend for many years. As the Ford name
and products were dropped and the new Sterling
products were not introduced until a year later, market
shares fell, but have started to recover less than a year
after the Sterling products reached the market. We
believe this ahs a very limited comparability with
Volvo/Scania, as the Volvo and Scania names are strong
and no brands will be dropped’.

in the light of

(127) Finally, it is worth mentioning that the Commission’s
conclusions, reached,
the
inter alia,
market investigation amongst customers, are further
substantiated by research carried out in the context of the
econometric study. Alfred Berg indicates: ‘The decisive
factor as to whether a parallel branding strategy will be
successful is clearly what the customers say. We have
interviewed a number of the largest European hauliers
to get their initial thoughts on the proposed merger.
Judging from interviews with purchasing managers at
small, medium and large fleet hauliers, there seems little
to suggest that market shares should drop drastically in
the short to medium term, given that the organisations
maintain separate channels and management is kept
intact’. The main factors relevant for this conclusion are
the following: (a) separate distribution channels are a
credible offer (‘Most hauliers seem to be of the opinion
that, as long as dealer networks are separate, they will
continue to view both Volvo and Scania as separate
offers in any truck tender’); (b) service networks reduce
short-term risk (‘The importance of the service networks
reduces the risk of a massive fall in combined market
shares in the short term, as competitors’ networks,
particularly in the Nordic countries, are relatively weak’;
(c) no significant push from competitors (‘Competitors
naturally aim at moving their positions forward at the
expense of Volvo and Scania. Amongst the hauliers we
have talked to, none had, up to this point, noticed any
increased marketing activity from any of the competi-
tors’).

(128) In the reply Volvo claims that the results of the GfK
surveys support Volvo’s analysis of the shrinkage effect.
For instance, the reply states that in Sweden 15 % of the
top 20 customers of Volvo and Scania indicate that they
will switch to a competitor as response to a merger ‘in
any event’. The corresponding figure in the small
customer survey is 9 %. However, there is no reason to
believe that these customers would eliminate Volvo and
Scania completely from their fleets. Hence, even if 15 %
of the large customers would introduce a new supplier
this would not correspond to a 15 % market share
loss among the large customers. If, for instance, the
customers switch to competitors to substitute half of the
Volvo and Scania trucks previously in the fleet, the

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market share loss among the large customers would
only be 7,5 %. Similarly, among the small customers the
market share loss would be 4,5 %. This clearly illustrates
that the GfK surveys indicate that a shrinkage effect of
15 % in Sweden is not realistic, especially when taking
into consideration the relative number of small and large
customers. Similar calculations can be made for the
other Nordic countries and the United Kingdom where
the same type of survey has been made. Hence, the
conclusion must be that the GfK survey does not support
Volvo’s claim of shrinkage effects of [10 % to 20 %] in
Sweden and Norway and [10 % to 20 %] In Denmark
and Finland.

(129) Volvo also claims that the evidence from the Mercedes-
Benz/Kässbohrer (17) merger supports Volvo’s calcu-
lation of a large shrinkage effect in the Nordic countries.
After the oral hearing Volvo presented data that show a
shrinkage effect over four years after the Mercedes-
Benz/Kässbohrer merger of 3 % in inter city buses and 5
% in touring coaches. First, such figures do not in
themselves support Volvo’s claims about the magnitude
of possible shrinkage effects in the heavy truck markets
in the Nordic countries. Secondly, it is doubtful that
effects which only materialise after four years cna be
defined as ‘immediate’, which is what Volvo contends in
this case. Furthermore,it is evident that possible shrink-
age effects have to be analysed in light of the specific
circumstances of the markets in question, and in this
context
the Mercedes-
Benz/Kässbohrer merger concerned the German mar-
kets, which are significantly larger and therefore poten-
tially more attractive to new entrants than any of the
Nordic markets, and that even after the Mercedes-
Benz/Kässbohrer merger, there remained two indepen-
dent German bus and coach suppliers (namely MAN and
Neoplan), whereas this would not be the case in the
Nordic countries.

it may be noted

that

(130) Finally, Volvo presents in its reply a figure called ‘Effect
of merger activities, Daf & Leyland, UK — impact on
heavy duty market shares in home markets’ and claims
that it shows post-merger shrinkage after DAF’s acqui-
sition of Leyland in 1985. It is, however, not clear how
the evolution of market shares over such a long period
of time should be interpreted in relation to the shrinkage
effect. In particular, the details of the market situation at
including the level of dual-
the time of the merger,
sourcing, the previous evolution of market shares, etc.,
would need to be analyses before any conclusions could
be drawn. Volvo has not provided any such information
in its reply. Finally, it is surprising that Volvo has chosen
not to provide details of the evolution of its own market

shars in the United Kingdom and Irish bus markets after
it acquired Leyland buses (around the same time as DAF’s
acquisition of the Leyland truck division). Presumably,
detailed information about any relevant shrinkage effect
resulting from this operation is available to Volvo.

(131) In conclusion, Volvo, has not been able to substantiate
its claims of a large market share loss as an immediate
effect of this merger. Although there might be a certain
shrinkage effect, the Commission considers that is may
be of a much smaller size than that claimed by Volvo,
and that in any event, Volvo has not shown that its
effects will be such as to change the competitive
assessment.

Barriers to entry and absence of potential competition

(132) As is apparent from the foregoing, in Sweden there is
virtually no competitor to Volvo and Scania, with the
exception of DaimlerChrysler, which has a very weak
position corresponding to approximately 6 % of the
market. This market structure has been broadly similar
for a very large number of years. For the following
reasons the Commission considers that other truck
manufacturers will not exert a competitive pressure on
New Volvo in Sweden.

(133) In particular, based on the assumption that, following
the operation New Volvo would increase its prices by a
small but significant amount, this price increase would
not be sufficient for companies not present or having a
very limited presence in Sweden to significantly pen-
etrate the market or expand their presence in the market,
given the following considerations.

(134) The results of the market investigation indicate that the
cab crash test (described in the section on geographic
market) constitutes a significant barrier to entry into the
Swedish market for heavy trucks. Moreover, it strongly
indicates that a strong presence on the service network
level is essential for any truck manufacturer to become
truly competitive and that Volvo and Scania have an
additional advantage based on their well-spread service
network in Sweden. The notion that such a network is
available is essential to transport companies when they
consider which truck brand to purchase. In the course
of the market investigation, the difficulties in establishing
a geographically, well-spread after sales network has
been described as one of the main reasons for the
very limited market entry by non-domestic producers.
Especially for small and medium-sized truck operators,
there is a high risk that a breakdown, which cannot be
repaired immediately, will result in a direct loss of
revenue (as such an operator may not have a replacement
vehicle at its disposal).

(17) See Case No IV/M.477 — Mercedes-Benz/Kässbohrer, Decision

of 14 February 1995 (OJ L 211, 6.9.1995, p. 1).

(135) In addition, it appears from the market investigation
that it is only when the number of trucks of the new

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entrant will exceed a certain number, that the costs
associated with the establishment/adaptation of a service
network will be financially rewarding. During the initial
period of establishment, until a sufficient installed base
has been achieved, a new entrant may therefore have to
run the service network at a loss. The establishment of a
sufficient installed base is therefore a significant entry
cost. For these reasons, an essential parameter for a new
entrant will be the absolute attractiveness of the market,
i.e. the number of trucks that it can expect to sell within
a reasonable period in a given country.

(136) According to information in the possession of the
Commission, in terms of time, a new entrant on the
market would need at least five years to establish a
sufficiently large network. The costs for the establish-
ment of such a network in Sweden have been stated to
be approximately EUR 20 million. This calculation is
based on the hypothesis of a total network, in Sweden
of five dealers, 14 branches and 92 service points, which
would appear to constitute the very minimum target for
Sweden (18).

(137) Other costs would have to be incurred by the new
entrant to effectively penetrate the market, when refer-
ring to the establishment of a service network (and
bearing in mind the need to achieve a minimum market
share, which would appear to be at least 10 % in the
Nordic countries). The most
investments
would include training for salesmen and workshop
technicians (EUR 1 500 000), demonstration (demo)
vehicles and demo drivers (EUR 1 500 000),
‘seed
customers
vehicles’ given for
(EUR
advertising
1 000 000),
(EUR 1 000 000).

trial by important

important

local

and

(138) Although in absolute terms the above costs may not
seem extremely high, competitors have stated that they
are not willing to make them unless they can be properly
amortised. Seen in the context of the economic size of
the market in question, it is submitted that it is highly
unlikely that any truck manufacturer will decide to
penetrate the Nordic heavy truck market, and the
in a way that would
Swedish market in particular,
seriously challenge the position of New Volvo.

(139) Volvo has argued that a potential source of competition
would come from DaimlerChrysler, since this company,
although virtually absent from the heavy truck market,
is well-placed in the medium-duty truck market in
Sweden in particular, where it has approximately 31 %
market share. According to Volvo, DaimlerChrysler
would be in a position to easily adapt its network
currently dedicated to medium-duty trucks in order to
service heavy-duty trucks.

(18) As Scania and Volvo have, respectively 106 and 103 service
points in Sweden, these figures appear plausible for a company
that would want to put itself in a position to be equally attractive
to Swedish truck operators as Volvo and Scania (before the
proposed concentration). However, the indicated number of
dealerships is significantly lower than those of Volvo and Scania
(each about 30).

(140) As to this argument the following is noted. In the first
place, the fact that DaimlerChrysler has not been in a
position to gain a significant market share over a very
long period of time is in itself a strong indication that
market penetration is not easily achievable, even for a
company enjoying a relatively strong position in
medium-duty trucks. This consideration is
further
enhanced having regard to the high margins achieved by
Volvo on its sales of heavy trucks in Sweden.

(141) In addition, the market investigation has revealed that,
although market penetration in the heavy truck market
by a truck manufacturer with a certain presence in the
medium-duty segment may be easier, this penetration in
any event involves costs which are such as to constitute
a sufficient deterrent for market expansion. According
to information collected on the market, to extend the
capability of a light/medium truck network would
require at least two years. In addition, the company in
question would have to bear costs equal to 50 % of the
least
costs
EUR 2 500 000 .

indicated above,

to say at

that

is

(142) These costs have to be compared to the total size of the
market, which is relatively small for all Nordic countries.
Therefore, in view of the time and costs associated with
the need to establish a comprehensive dealer and service
network in each of the Nordic countries, it is unlikely
that any of the smaller competitors in those countries
would,
to medium term, be able to
match the current establishments of Scania, and thereby
compensate for the loss of actual competition resulting
from the proposed concentration.

in the short

(143) The conclusion that significant barriers to entry and/or
expansion exist in the Nordic markets for heavy trucks
is further strengthened by the fact that these countries
are large but sparsely populated areas. Therefore, the
Nordic market may not be the prime targets for future
investments by DaimlerChrysler and the other suppliers
that so far have only made limited inroads into the
Nordic market, concentrating mainly on the most
densely populated areas. Indeed, it would appear more
likely that these competitors will focus their investments
on eastern Europe and other markets where the growth
prospects are better (as, indeed, Volvo itself intends to
do). Consequently, it cannot be presumed that even the
more sophisticated customers, who may want
to
increase purchases
from alternative suppliers, will
necessarily be able to find an alternative supplier who is
able to provide the type of service that Scania has
provided in competition with Volvo prior to the concen-
tration.

Conclusion

(144) On the basis of the foregoing it is concluded that it will
be highly unlikely that actual or potential competition

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or purchasing power among customers will be sufficient
to restrict New Volvo from exercising its increased
market power resulting from the acquisition of its only
significant competitor and the resulting market share of
over 90 %. In addition, Volvo’s margins in Sweden, as
indicated by Volvo itself for three chosen vehicle models,
are high both in absolute terms and in relative terms
when compared to margins obtained in some other
Member States, especially outside the Nordic area.

(145) It is therefore considered that the proposed operation
would result in the creation of a dominant position in
Sweden.

Denmark

Current structure of the market

Market shares

(146) The current structure of the Danish market for heavy
trucks is represented and summarised in the following
table:

Company

Market share in 1998

Volvo

Scania

DaimlerChrysler

MAN

RVI

Iveco

DAF-Paccar

28,7 %

30,2 %

17,7 %

9,7 %

3,3 %

6,8 %

3,8 %

(147) The table in recital 146 shows that currently only
Volvo and Scania enjoy prominent market positions in
Denmark. Although other truck manufacturers are better
represented in Denmark than in the other Nordic
countries,
their presence remains relatively limited.
Furthermore an analysis of the market shares of the
different truck manufacturers over the years shows that
the respective market presence of all relevant truck
manufacturers has largely remained stable over time.

(148) Furthermore, as already noted for Sweden (and, in fact,
the same is true for all Nordic countries), graphs
provided by Volvo relating to the evolution of market
shares of Volvo and Scania over a long-term period

(10 years) show a direct correlation between the respect-
ive market position of the two companies. This is a
strong indication that Volvo and Scania are currently
each other’s closest competitors, and have been for a
very long time.

(149) Most of the factual elements relating to the importance
of
the brand and brand loyalty, which have been
analysed with regard to Sweden, also apply to Denmark.

(150) A distinguishing feature of the Danish market is the
similarities it shares with other continental countries; its
geographic location, customer preference for tractor-
type heavy trucks, the somewhat higher proportion of
fleet customers (which to a certain extent is a conse-
quence of the first element, as Denmark appears to have
a relatively higher proportion of international traffic
than the other Nordic countries). Nevertheless, Volvo’s
own price data shows that the price in Denmark is
significantly lower
than in neighbouring Germany
(about [0 % to 10 %]). This means that the potential for
Danish customers to resort to imports from Germany
would be limited if there was a price increase after the
implementation of the proposed concentration. It is,
however, stressed that the number of fleet customers in
Denmark is still relatively limited when compared to
that of other Member States, such as in particular, the
Netherlands, France and, to a lesser extent, the United
the market
is, however, stressed that
Kingdom.
investigation has revealed that this type of customer also
appears to be sensitive to Volvo’s announcement of its
intention to keep brands and marketing organisations
separate, thereby implying that even for a relatively
larger customer of heavy trucks, especially in the Nordic
countries, Volvo and Scania brands are ‘the brands’, and
are the closest competitors. Many of these customers
believe that a decision not to keep brands separate
would be detrimental to competition.

It

(151) It is furthermore noted that some of these Danish fleet
customers are in fact not truck operators themselves,
but rather rental companies, whose activity is to rent
single trucks or a number of trucks to, generally, small
truck operators. This type of customer will in fact be
dependent, as far as the demand for heavy trucks is
concerned, on the requirements of the final customers,
that are generally very small operators, and often
sensitive to brand considerations. During the market
investigation it has been thus submitted that the market-
ing of Mercedes trucks even at a rebated price (5 % to
15 %) has proved difficult.

(152) Furthermore, Volvo has provided information relating
to the percentage of a certain type of truck model ([a
commonly sold model]) sold as a single-unit sales in
different Member States. This information shows that
more than half of
these sales ([50 % to 60 %])
were made as single-unit sales, which indicates that a
significant proportion of the Danish market is represent-
ed by sales to small operators.

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Effects of the proposed operation on the Danish heavy
truck market

Market shares — market structure

(153) The proposed acquisition of Scania by Volvo would
result in a New Volvo with a combined market share of
approximately 60 % (28,7 % plus 30,2 %) in the Danish
heavy truck market. The next competitor would be
DaimlerChrysler, with a market share of 17,7 %, fol-
lowed by MAN (9,7 %), RVI (4,2 %), Iveco (6,8 %) and
DAF-Paccar (3,8 %).

(154) Following the implementation of the proposed oper-
ation, the gap to the largest remaining competitor would
increase from a ratio of 2:1 to more than 3:1. The
proposed operation would result
in the two main
competitors on the Danish market joining forces. Fur-
the proposed
thermore, as in relation to Sweden,
operation would result in the elimination of Volvo’s
closest competitor on the Danish heavy truck market.

entity’s behaviour should not be exaggerated. In addition,
there are indications that even for this category of
customers (which includes rental companies), New Vol-
vo may be in a position to raise prices, without being
restricted from doing so by other truck manufacturers,
given the strength of New Volvo, in terms of, inter alia,
product suitability, secondhand value and aftersales
services. As already stated, Volvo’s decision to retain a
dual-brand policy appears to have had the intended
effect on customers.

(157) However, even assuming that New Volvo would not be
in a position to raise prices vis-à-vis the largest cus-
tomers, there is evidence that it would be able to price
discriminate smaller customers against larger customers,
that is raise prices to smaller customers, who are less
likely to switch to other truck manufacturers, and apply
more favourable conditions to larger customers. As a
matter of
investigation has made
clear that the range of discounts granted by the truck
to customers can vary enormously
manufacturer
depending, specifically, on the size of the customer and
of the order at stake.

the market

fact,

Brand loyalty

Barriers to entry and potential competition

(155) Also in Denmark both Volvo and Scania enjoy the
reputation of very strong brands, ensuring for truck
customers the best package in terms of whole life cost,
and for dealers large installed bases, on which the dealer
has a better chance of making a good return on its
investment. All
forward in this
the arguments put
Decision as to the effects of the proposed operation in
Sweden are largely applicable in Denmark. As in Sweden,
in Denmark New Volvo will have specific strengths
relating to the reputation of the brands, suitability of
the trucks, secondhand value, and service network.
Furthermore, the same arguments as to the alleged
shrinkage effect that would result from the implemen-
tation of the proposed operation, apply for the Danish
market.

Price discrimination

(156) As already been mentioned, the vast majority of the
Swedish demand for heavy trucks is composed of small
to very small truck operators. Volvo has suggested that
a comparatively larger part of the Danish market is
composed of ‘fleet customers’, and that these customers
are less sensitive to considerations linked solely to
brand loyalty, and are in a better position to negotiate
favourable conditions vis-à-vis a number of
trucks
manufacturers. However, it appears from the notification
that Volvo’s five major customers of heavy trucks in
Denmark do not represent more than [0 % to 10 %] of
Volvo’s total sales of heavy trucks in that country. The
importance of these largest buyers, as a proportion of
the merged entity’s sales, would decrease even further.
Consequently, very few Danish truck customers will be
in a strong position vis-à-vis New Volvo, and the
impact of the fleet owners on the merged
potential

(158) The arguments already set out as to barriers to entry and
unlikely entry/expansion on the market by other trucks
manufacturers are also true for Denmark, which,
although being a bigger market than each of the other
Nordic countries, remains,
in absolute terms, a very
small market when compared to the larger Member
States.

(159) As regards the specific costs to be incurred by a
truck manufacturer to penetrate the market, the market
investigation has revealed that these costs would amount
to EUR 21 million for the establishment of the network
plus EUR 1 500 000 for the connected expenses (train-
ing, demo vehicles, ‘seed vehicles’, local advertising). The
adaptation of an existing network could require up to
50 % of this sum. Although in absolute terms the above
costs may not seem extremely high, competitors have
stated that they are not willing to make them unless they
can be properly amortised. The costs must be seen in
the light of the economic size of the market in question.

Conclusion

(160) On the basis of the foregoing it is concluded that it is
highly unlikely that actual or potential competition or
purchasing power among customers will be sufficient to
restrict New Volvo from exercising its increased market
power resulting from the acquisition of its only signifi-
cant competitor and the resulting market shares of 60 %.
It is therefore considered that, if the Danish heavy truck
market were to be considered as constituting a separate
geographical market, the proposed operation would
result in the creation of a dominant position in Denmark.

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Norway

Effects of the proposed operation on the Norwegian
heavy truck market

Current structure of the market

Market shares — market structure

Market shares

(161) The current structure of the Norwegian market for heavy
trucks is represented and summarised in the following
table:

Company

Market share in 1998

Volvo

Scania

DaimlerChrysler

MAN

RVI

Iveco

DAF-Paccar

38,0 %

32,2 %

9,3 %

12,5 %

0,8 %

2,0 %

4,1 %

(162) The table in recital 161 shows that currently only Volvo
and Scania enjoy very strong market positions in
Norway. The next competitor to Volvo and Scania in
Norway is MAN with a market share of about one third
of that enjoyed individually by both Volvo and Scania.
Besides MAN, all other trucks manufacturers have
market shares well below 10 % and, in most cases, below
5 %. Furthermore an analysis of the market shares of the
different trucks manufacturers over the years shows that
the respective market presence of all relevant truck
manufacturers has largely remained stable over time.

(163) Furthermore, as already noted for Sweden and Denmark
(and the same is, in fact, true of all Nordic countries)
graphs provided by Volvo relating to the evolution of
market shares over a long-term period (10 years) show
a direct correlation between the respective market
position of the two companies. This is a strong indication
that Volvo and Scania are currently each other’s closest
competitors, and have been for a very long time.

(164) Most of the factual elements relating to the extreme
importance of the brand and brand loyalty, which have
been analysed with regard to Sweden and Denmark, also
apply to Norway.

(165) The proposed acquisition of Scania by Volvo would
result in a New Volvo with a combined market share of
approximately 70 % (Volvo: 38 % and Scania: 32,2 %) in
the Norwegian heavy truck market. The next competitor
would be MAN, with a market share of 12,5 %, followed
by DaimlerChrysler (9,3 %), RVI (0,8 %), Iveco (2 %),
DAF-Paccar (4,1 %).

(166) Following implementation of the proposed operation,
the gap to the largest remaining competitor would
increase from a ratio of 3:1 to more than 5:1. The
proposed operation would result
in the two main
competitors on the Norwegian market joining forces.
With the exception of MAN, all other competitors would
have a market share of less than 10 % and most of them
of less than 5 %. Furthermore, as noted for Sweden and
Denmark, the proposed operation would result in the
elimination of
the two closest competitors on the
Norwegian heavy truck market.

Brand loyalty

(167) Also in Norway, both Volvo and Scania enjoy the
reputation of very strong brands, ensuring for truck
customers the best package in terms of whole life cost,
and for dealers large installed bases, on which the dealer
has a better chance of making a good return on its
investment. All
forward in this
the arguments put
Decision as to the effects of the proposed operation in
Sweden are equally applicable in Norway. As is the case
in Sweden, in Norway New Volvo will have specific
strengths when compared to all other truck manufac-
turers, especially having regard to reputation of the
brand, suitability of the trucks, secondhand value and
service network. Furthermore, the same arguments as to
the alleged shrinkage effect
that would result from
the implementation of
the proposed apply for the
Norwegian market.

(168) It has been brought to the Commission’s attention that
trucks sold in Norway have to meet specific technical
requirements, given specific conditions due to, inter alia,
temperature, ice, snow and topography. In this context,
it is important to note that Volvo and Scania have the
best experience and reputation for selling trucks which
can, in a reliable manner, satisfy the final customer’s
needs in these conditions.

(169) Finally, according to the notification, prices for Volvo’s
most commonly sold models in Norway are substantially
higher than in other countries (indeed, according to
these figures, the company has even managed to price
its products in Norway at a higher level than that applied
in Sweden and Denmark).

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Price discrimination

Finland

(170) Volvo has also suggested that a comparatively larger
part of the Norwegian market is composed of fleet
customers. The proportion of such customers in Norway
is, however, even lower than in Denmark. The potential
impact of the behaviour of such large customers in
Norway must therefore be regarded as relatively insignifi-
cant. However, even assuming that New Volvo would
not be in a position to raise prices for the limited
number of Norwegian fleet customers, it is likely to be
able to price discriminate between smaller customers
and larger customers, that is raise prices to smaller
customers, who, will not switch to other truck manufac-
turers, and apply more favourable conditions to larger
customers. As a matter of fact, the market investigation
has made clear that the range of discounts granted
by the truck manufacturer to customers can vary
enormously depending, specifically, on the size of the
customer and of the order at stake.

Barriers to entry and potential competition

(171) The arguments set out already as to barriers to entry and
unlikely entry/expansion on the market by other truck
manufacturers are also true for Norway, which is an
even smaller market than Sweden, and a very small
market when compared to the larger Member States.

(172) As regards the specific costs to be incurred by a
truck manufacturer to penetrate the market, the market
investigation has revealed that these costs would amount
to EUR 15,5 million for the establishment of the network
plus EUR 1 200 000 for the connected expenses (train-
ing, demo vehicles, ‘seed vehicles’, local advertising). The
adaptation of an existing network could require up to
50 % of this sum. Although in absolute terms the above
costs may not seem extremely high, competitors have
stated that they are not willing to make them unless they
can be properly amortised. The costs must be seen in
the light of the economic size of the market in question.

Conclusion

(173) On the basis of the foregoing, the Commission concludes
that it is highly unlikely that actual or potential compe-
tition or purchasing power among customers will be
sufficient to restrict New Volvo from exercising its
increased market power resulting from the acquisition
of
its only significant competitor and the resulting
market share of 70 %. The Commission therefore
considers that the proposed operation would result in
the creation of a dominant position in Norway.

Current structure of the market

Market shares

(174) The current structure of the Finnish market for heavy
trucks is represented and summarised in the following
table:

Company

Market share in 1998

Volvo

Scania

Renault/Sisu

DaimlerChrysler

Iveco

MAN

DAF/Paccard

34 %

31 %

18 %

10 %

4 %

3 %

< 1 %

(175) The table in recital 174 shows that at present Volvo and
Scania are by far the leading competitors on the Finnish
market for heavy trucks. Both Volvo and Scania have a
market share, which is approximately twice that of the
closest competitor Renault, which has an extensive
cooperation with the Finnish company Sisu (it appears
that Sisu trucks, which are only sold in Finland, are
assembled using mainly components produced by
Renault). For this reason, it appears appropriate for this
assessment to combine the activities of Renault and Sisu.
DaimlerChrysler, the clear market leader in the market
for heavy trucks in the EEA, has less than one third of
the market share of either Volvo or Scania in Finland.
Iveco, MAN and DAF/Paccard are present on the Finnish
market for heavy trucks only to a limited extent.

(176) As was shown by the graphs in recital 82, Volvo and
Scania have both retained high and relatively stable
market shares over the last 10-year period. The graph
also indicates that they are in direct competition with
one another. This is true, in particular, for the last five
years of the period, as the graph shows a strong negative
correlation between the two makes in the sense that an
increase in market share by one of the two companies
corresponds to a loss of market share for the other. It
should be noted that there has been a more distinctively
negative correlation between Volvo and Scania in this
period, when, as will be indicated below, Sisu has lost
singnificant market shares.

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Brand

(177) Both Volvo and Scania are perceived as high-value
brands particularly well-adapted to the Nordic weather
and road conditions. The strength of the respective
brands is based on the high quality of the trucks
manufactured, their effective and very well-spread after-
sales network in Finland and the high secondhand value
of the vehicles. All these elements make these two
brands the most-favoured brands in Finland.

(178) The market investigation has confirmed the inelasticity
of demand in the heavy truck market. Purchasers of
heavy trucks typically have regard for the whole life cost
of
the vehicle including the initial purchase price,
aftersales network, warranties and secondhand value.
Price is thus only one of the elements, determining the
choice for a heavy truck. In Finland, only Volvo and
Scania and to some extent Renault/Sisu have been able
to offer a package including a good balance of all these
elements. However, in the reply Volvo indicated that
Sisu, as late as 1993, had a market share of 30 %, of
which close to half was lost in the following five years.

(179) Price information in the possession of the Commission
further shows that the parties’ pricing for heavy trucks
in Finland is consistently higher, for comparable models,
than pricing applied by other potential competitors. It
can therefore be concluded that not only the initial price
paid for the purchase of the heavy truck but also the
presence of a number of elements, namely the aftersales
network and the secondhand value, which offset the
higher price paid for the initial purchase, play an
important role in a purchase decision.

(180) Volvo and Scania have been able to build up over time a
loyalty vis-à-vis their own respective brands in Finland.
As already explained, the loyalty is expressed at least at
two levels: at the level of the dealer and at the level of
the final purchaser, the truck operator.

Brand loyalty — service network

(182) The market investigation indicates that a certain level of
truck population is necessary in order to ensure the
dealer/service point an adequate return on investment.
On the basis of their installed base of vehicles in Finland,
Volvo and Scania are clearly in the best position to
attract dealers and service points. This, in turn, gives
them an advantage in terms of having a well-spread and
effective aftersales network in Finland. After a number
of years good contacts between the dealer/service points
and the truck operator turn into relationships of trust
between the dealer/service point and the truck operator.
This relationship of trust is part of the reputation of the
brand.

Brand loyalty — final customer

(183) The market investigation has also provided indications
that in Finland final purchasers of heavy trucks also tend
to be loyal to the Volvo and Scania brands. Volvo and
Scania are the only manufacturers (possibly with the
addition of Renault/Sisu, which has a significantly
smaller and decreasing market share), which are in a
position to offer customers in Finland the best package
in terms of whole life cost of a truck. According to truck
customers contracted, Volvo and Scania are generally
regarded as the best placed manufacturers to provide
truck purchasers with trucks suitable to the climatic
conditions in Finland and satisfying the technical require-
ments, including national legislation.

(184) According to the information obtained from the Finnish
Truck Association (19) about its members in 1999, the
repartition of the number of trucks owned by truck
companies was as follow:

Number of trucks/Company

Percentage of such companies
of all truck companies

1

2

3-4

5-10

11-15

16-20

21-

66 %

18 %

10 %

5 %

0,5 %

0,1 %

0,2 %

(181) The market investigation has provided indications that
in the heavy truck market a well-spread and effective
aftersales network is crucial for any truck manufacturer
to penetrate a market. Both Volvo and Scania have an
extensive aftersales network in Finland. The strength of
a service network is represented by its density, by the
technical capability of a given dealer/service point to
serve the truck operator, and by the contacts existing
between the dealer/service points and the truck operator.

(185) The figures in recital 184 include the light, medium-
heavy and heavy trucks. The figures indicate that the
vast majority, over 80 %, of Finnish truck companies
operate one to two trucks. In comparing the data with

(19) Source: ‘Kuorma-autoliikenne Suomessa 1999’, by Suomen Kuor-
(‘Truck-transport in Finland 1999’, The

ma-autoliitto p. 16,
Finnish Truck Association), p. 16.

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the results of the market investigation, there is nothing
to suggest that the repartition of heavy trucks would be
considerably different. In general, small customers will
be more sensitive to the brand loyalty considerations
discussed above than customers with a large number of
trucks in their fleets.

manufacturers will maintain considerable competitive
pressure on the parties. An evaluation of the respective
market shares of the parties in Finland, illustrated by the
graphs in recital 82, indicates that the respective market
position of Volvo and Scania has remained relatively
stable over a long period of
time. This is further
confirmed by the market investigation.

Effects of the proposed operation on the Finnish heavy
truck market

Dealer and customer loyalty

Market shares

(186) The proposed acquisition by Volvo and Scania would
result in a New Volvo whose combined market share in
Finland would be equal to 65 % of the market according
to 1998 figures. The next competitor to the new entity
is Renault/Sisu with a current market share of 18 %. It
should be noted that Renault’s involvement with Sisu
does not appear to have had any significant impact on
the company’s market position (indeed, according to
Volvo’s own figures, Sisu has lost a significant part of its
sales since 1993). The next competitor is Daimler-
Chrysler with a market share of 10 %. The other
European truck manufacturers would continue to have
a considerably smaller share of the market: Iveco 4 %,
MAN 3 %, DAF/Paccar < 1 %.

(187) Therefore, the proposed operation results first in a
significant overlap between the parties’ activities in
Finland. The proposed concentration would also signifi-
cantly increase the market share gap between New Volvo
and its closest competitors. Prior to the concentration
the closest remaining competitor Renault/Sisu had a
market share that was approximately half that of the
market leader. Following the implementation of the
concentration Renault/Sisu would have a market share
that is almost four times smaller than that of the new
entity. Similarly, prior to the concentration Daimler-
Chrysler, the European market leader in heavy trucks,
holds a market share of one third of that of the market
leader in Finland. Following the proposed acquisition it
would have a market share more than six times smaller
than that of New Volvo.

(188) Secondly, the information provided by Volvo (further
corroborated by the graphs in recital 82), as well as the
Commission’s investigation, clearly supports a finding
that, prior to the proposed concentration, Volvo and
Scania have been each other’s main competitors. The
proposed concentration would result in the loss of this
competition and the advantage that New Volvo would
have over the remaining competitors would also increase
significantly in Finland.

(189) Finally, the situation is further aggravated by the fact
that, as in Sweden, the very strong market position of
both Volvo and Scania in Finland is not a recent
phenomenon or the result of strong variations in market
truck
shares.

likely that other

is therefore not

It

(190) New Volvo will be in a position to operate on the heavy
truck market in Finland on the basis of Volvo’s and
Scania’s combined specific strengths. It will continue to
benefit from a traditional dealer and customer loyalty
for both brands. The market investigation has shown
that competitors of Volvo and Scania may face signifi-
cant difficulties in establishing a sufficiently dense net-
work of dealers/service points in Finland, compared to
that of Volvo and Scania. This is essentially because such
a network must necessarily rely on a sufficient return on
investment based on a sufficiently large population of
trucks in circulation in Finland.

Customer structure

(191) Given the market structure on the demand side, namely
the large number of small truck companies in Finland,
the new entity will be in a position to profit from the
customer loyalty of both brands and therefore also be in
a position to raise prices. On the basis of the information
provided by Volvo in the notification, it appears that
none of Volvo’s largest EEA customers by fleet size have
activities in Finland. In addition, Volvo’s five major
customers for heavy trucks in Finland represent only
[0 % to 10 %]; of Volvo’s total sales in that country and
Scania’s sales to its five major customers [0 % to 10 %]
of its total sales in Finland.

(192) According to supplementary information provided by
Volvo at the request of the Commission, this conclusion
is further corroborated by the following elements.
According to Volvo’s own estimates (see page 5 of
submission dated 25 November 1999), its sales of a
specific model of heavy truck ([...]), which is a commonly
sold model in Finland (20), show that [70 % to 80 %] of
the total number of these trucks sold in Finland are sold
as single unit sales and [20 % to 30 %] as multi-unit
sales.

Customer structure and dual-sourcing

(193) Volvo maintains also that many of their truck customers
in the Nordic countries are sophisticated professional
buyers with a policy of dual-sourcing. According to
Volvo, these customers currently pursue a policy of
double-sourcing or multi-sourcing, in order not to be
dependent on a single truck manufacturer. Whereas
some Finnish truck customers submit that they keep

(20) According to Volvo [...] is the highest or second highest volume
model in all of the Nordic countries and in 1998 accounted for
[20 % to 30 %] of all Volvo heavy trucks sales in the Nordic
region.

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two brands (most often Volvo and Scania) in their truck
fleet in order to exert competitive pressure on the other
brand, the smaller truck operators in particular, which,
as indicated in recital 184, represent the vast majority of
Finnish truck companies, have a strong interest
in
limiting the fleet to one make. The advantages related to
such a strategy (lower costs for maintenance and training
of personnel) that have already been described in relation
to Sweden are equally applicable in Finland.

Customer structure and shrinkage effect in Finland

(194) According to Volvo, the proposed operation will inevi-
tably result in a shrinkage effect, i.e. in current Volvo
and Scania heavy truck customers switching to other
makes. The proposed operation would, in Volvo’s view,
result in a loss of customers, in percentage of market
share, corresponding to 15 % in Finland. The Com-
mission’s reasons for not placing as much faith as Volvo
in this theory have been presented in the section
concerning Sweden.

Barriers to entry and absence of potential competition

(195) As can be concluded from the foregoing, Volvo and
Scania are the two main competitors on the Finnish
heavy trucks market, where Renault/Sisu and Daimler-
Chrysler have a much weaker position corresponding to
approximately 18 % and 10 % of the market respectively.
The market structure has remained relatively constant in
this respect for at least a decade. It is the view of the
Commission that other truck manufacturers will not be
able to exert a significant competitive pressure on New
Volvo in Finland. This conclusion is based on the
following reasons.

(196) In particular, based on the assumption that following
the operation, New Volvo would increase its prices for
heavy trucks by a small but significant amount, this price
increase would not be sufficient to enable companies not
present or having a very limited presence in Finland
to sufficiently penetrate the market, or expand their
presence.

(198) The results of the market investigation clearly indicate
that a strong presence at the service network level is
essential for any truck manufacturer to become truly
competitive. Volvo and Scania have both been able to
establish a well-spread service network in Finland. The
extent of the service network is an essential factor for
truck companies when considering which truck brand
to purchase. According to the market investigation, the
difficulty for, for instance DaimlerChrysler,
in estab-
lishing a comparable geographically well-spread after-
sales network to Volvo or Scania for heavy trucks in
Finland,
is indicative of the so far relatively limited
presence of DaimlerChrysler or of other European truck
manufacturers in Finland. The manufacturers’ inability
to repair a truck immediately may, especially for small
operators, result in a direct loss of revenue.

(199) With regard to the limited size of the Finnish market,
time and costs associated with the need to establish a
comprehensive dealer and service network and the
already much weaker position of competitors of Volvo
and Scania in Finland, it appears unlikely that following
the proposed concentration, any of these manufacturers,
including DaimlerChrysler, would be in a position to
significantly extend its service network or, with regard
to a new entrant, efficiently penetrate the heavy truck
market in Finland. Therefore, it is unlikely that any of
the smaller competitors will, in the short to medium
term, be able to match the current position of Scania on
the Finnish market, and thereby compensate for the loss
of actual competition resulting from the proposed
concentration. Such a loss of actual competition has also
been considered among customers as resulting in a
significant deterioration of competition on the heavy
trucks market in Finland.

(197) As already stated, the market investigation indicates that
the costs associated with the establishment/adaptation
of a service network will only be financially rewarding
when the number of trucks of the new entrant exceeds
a certain level. Establishing such a network will take
several years and require considerable investment from
the manufacturer. In carrying out the calculation, an
essential parameter for the new entrant will be the
absolute attractiveness of the market, i.e. the number of
trucks that can be sold in a given country. Adaptation
of a service network also comprises training for salesmen
and workshop technicians, demo vehicles, demo drivers,
‘seed vehicles’ and local advertising.

(200) As already discussed in the section concerning the
Swedish heavy trucks market, Nordic markets including
Finland may not be the prime targets for future invest-
ments by DaimlerChrysler and the other European
manufacturers that have less presence in Finland, given
the already significant barriers to entry and the relatively
small size of the market. Markets in eastern Europe
are more likely to offer better growth prospects for
manufacturers like DaimlerChrysler. Consequently, even
the more sophisticated customers may face difficulties
in finding an alternative supplier able to provide the
type of vehicles and services that Volvo and Scania have
provided prior to the concentration in Finland.

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Conclusion

Effects of the proposed operation on the Irish heavy truck
market

(201) On the basis of the foregoing, the Commission concludes
that it is highly unlikely that actual or potential compe-
tition or purchasing power among customers will be
sufficient to restrict New Volvo from exercising its
increased market power resulting from the acquisition
its only significant competitor and the resulting
of
market share of 65 %.

(202) For all these reasons, the Commission therefore con-
siders that the proposed operation would result in the
creation of a dominant position in Finland.

Ireland

Current structure of the market

Market shares

(203) The current structure of the Irish market for heavy
trucks is represented and summarised in the following
table:

Company

Market share in 1998

Volvo

Scania

DaimlerChrysler

MAN

RVI

Iveco

DAF/Paccar

22,0 %

27,1 %

8,6 %

6,2 %

2,7 %

8,0 %

13,2 %

Market shares — market structure

(206) The proposed acquisition of Scania by Volvo would
result in a New Volvo with a combined market share of
approximately 50 % in the Irish heavy truck market. The
next competitor would be DAF/Paccar, with a market
share of 13,2 %, followed by DaimlerChrysler (8,6 %),
Iveco (8,0 %), MAN (6,2 %) and RVI (2,7 %).

(207) Following implementation of the proposed operation,
New Volvo would obtain a market share of nearly 50 %
in Ireland, which leads to the presumption of
the
existence of a dominant position.

(208) This is compounded by the fact that both parties have
enjoyed high and relatively stable market shares in
Ireland over the last three years. According to the
notification, Volvo’s market share in 1996 was 23 %
and its market share in 1997 was 27 %. Scania had 29 %
in 1996 and 27 % in 1997. Over the same period,
DAF/Paccar, Daimler-Chrysler and MAN have increased
their market shares somewhat, but remain below 10 %,
with the exception of DAF/Paccar. RVI and, in particular,
Iveco have lost market shares over the last three years. It
appears that the gains by DAF/Paccar DaimlerChrysler
and MAN correspond to the loss of market share by RVI
and Iveco.

(209) The proposed operation would result in the combination
of the two leading suppliers on the market. Moreover,
the next largest competitor would be far smaller, with a
market share of only 13 %, or about one quarter of
that of New Volvo. Furthermore, the market share
development over the last three years indicates that the
high and relatively stable combined market share of
Volvo and Scania is relatively unaffected by market share
variations within the group of smaller competitors.

(204) The table in recital 203 shows that Scania is the market
leader in Ireland with 27 % market share, and the closest
substantial competitor is Volvo with 22 % market share.
All other truck manufacturers enjoy much weaker
market positions, and, with the exception of DAF-Paccar
which has a market share of approximately 13 %, all
other truck manufacturers are quite weak with market
shares below (or well below) 10 %.

(205) On the basis of the figures in recital 203 it therefore
follows that before the proposed operation Volvo and
Scania together represent nearly 50 % of the Irish heavy
truck market, and that they are the main competitors in
that country.

Brand loyalty

(210) Again, the existing evidence indicates that the proposed
concentration would mean that the two strongest brands
would combine their forces. Both Volvo and Scania have
developed a loyalty in Ireland over the years, through
offering competitive packages to truck operators, includ-
ing not only the price for the truck, but also excellent
terms of warranty and aftersales service. Their respective
market positions would now be consolidated. The
market shares of Volvo and Scania taken together have
not been subject to significant fluctuation over the last
three years.

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Barriers to entry and potential competition

(211) The arguments set out already as to barriers to entry and
unlikely entry/expansion on the market by other truck
manufacturers for the Nordic countries also apply in
relation to Ireland. Ireland has many similar features to
the Nordic markets, a dispersed customer structure
(where, for example, the five largest Volvo customers
only account for [10 % to 20 %] of total Volvo sales and
the five largest Scania customers account for [0 % to
10 %] of Scania sales), a small market size and the
market is relatively unattractive for investments. In fact,
the Irish market for heavy trucks is extremely small. Its
annual volume is, for example, approximately half of
that of the Danish heavy truck market. It is therefore
unlikely, even in the event of a price increase, that other
heavy truck manufacturers would find it an attractive
target for expansion and/or entry.

Conclusion

(212) For these reasons the Commission concludes that the
proposed operation will result in the creation of a
dominant position in Ireland.

Overall conclusion on the market for heavy trucks

(213) On the basis of the foregoing, it can be concluded that
the proposed concentration would create a dominant
position on the markets for heavy trucks in Sweden,
Norway, Finland and Ireland. There are strong indi-
cations that this would also be the case in Denmark.
However, this question does not have to be settled in the
context of the current proceedings.

(ii) BUSES AND COACHES

A. RELEVANT PRODUCT MARKET

(214) The proposed operation will also produce a major
impact on the bus market. The operation will create
the second largest European bus manufacturer after
DaimlerChrysler.

(215) The Commission has already examined the bus and
coach markets on several occasions (21). In the most
recent decisions, the Commission has concluded that
although the boundaries between the main different
segments of buses and coaches are not rigid, there are
three categories of bus, each corresponding to a separate
product market. The categories are city buses, intercity
buses and touring coaches.

(21) See Case No IV/M.477 — Mercedes-Benz/Kässbohrer, Decision
of 14 February 1995 (OJ L 211, 6.9.1995, p. 1), and Case
No IV/M.1202 — Renault/Iveco, Decision of 22 October 1998.

(216) In general, buses are typically designed for a specific
type of travel service. City buses are,
for example,
designed for a type of travel where people typically
spend a few minutes or, at any rate, only a short time
on the bus and where easy entry and exit is important.
Touring coaches, on the other hand, are designed for
transporting people over long distances, where people
spend hours or even days in the vehicle. The design of
touring coaches emphasises comfort and storage space
rather than ease of entry and exit.

(217) The different requirements of different types of transport
service mean that buses are heterogeneous products.
Broadly speaking, the market can be described as having,
at one extreme, low-floor city buses with more and/or
wider doors for public transport services in urban areas
and at
luxurious double-decker
touring coaches for long-distance tourist travel. A large
number of different types of bus exists in between.
Furthermore, the various types of bus are available in
different sizes. Demand is therefore very diverse, since
the bus operator will demand a bus designed specifically
for the transport services it expects to provide.

the other extreme,

(218) In the notification, the relevant market is defined as the
overall bus market. In particular, Volvo notes that: (i) the
supply-side factors that would lead to the assessment of
these three segments as a single product market would
be particularly applicable in the case of both Volvo and
Scania, as, according to the most recently submitted
figures, they achieve [50 % to 60 %] and [20 % to 30 %]
of their respective EEA sales by selling chassis only, and
since the same chassis is used for different types of bus;
(ii) the major European bus producers are present in all
segments and largely occupy the same relative position
in terms of sales share; (iii) the development of an EEA-
wide market for city and intercity buses significantly
diminishes one of the earlier distinctions between city
and intercity buses, on the one hand, and coaches, on
the other; (iv) the boundaries between city and intercity
buses, on the one hand, and intercity buses and touring
coaches, on the other, are fluid. In the notification, the
notifying party concludes that this would be particularly
true in the Nordic countries where there are very few
large cities with exclusively urban traffic.

(219) At the oral hearing, Volvo maintained this position and
repeated that there is no distinct boundary between the
three segments of city and intercity buses and touring
coaches. According to Volvo, low-floor city buses are
being used for intercity operations, whilst low-floor or
standard floor-height intercity buses are used for city
operations. Likewise, coaches are used for intercity
operations and intercity buses for coach operations. The
notifying party further contends that, particularly in
Finland and the United Kingdom, ‘midi buses’, which are
smaller in size and weight, are used for the same type of

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travel service as large buses. Also, concerning the chassis
components, for example the engine and gearbox, Volvo
maintains that there is a great overlap between the three
bus segments. As will be shown in the following section,
despite the fact that boundaries between these three
segments are fluid to some extent, this cannot be taken
as the decisive element establishing the existence of one
single product market.

Europe. Consequently, the Commission’s market investi-
gation in the present case is particularly focused on the
Nordic area of Europe (namely, Denmark, Finland,
Norway and Sweden) as well as the United Kingdom and
Ireland.

Buses are heterogeneous products with low demand-
side substitutability

(220) The line of reasoning put forward by Volvo, both in the
notification and at the oral hearing, that there exists a
single relevant market for all buses, cannot be accepted.
Clearly, there is no demand-side substitutability between
a low-floor city bus with room for a large number of
standing passengers and a double-decker touring coach
with toilet, video and kitchen. There exists between these
two extremes a range of different types of bus, which,
on the basis of their design and equipment, are suited
for a large number of different purposes. In general, it
may be said that requirements in terms of technical
specifications and equipment, which determine the ride
and travelling comfort for passengers, increase with the
distance for which the bus is primarily intended. Thus,
such requirements increase in proportion to the extent
to which a given type of bus is intended more for touring
than for scheduled services. Nevertheless, contrary to
the view taken by the notifying party in the notification
and at the oral hearing, it cannot be deduced from this
gradual transition to greater comfort and more luxurious
equipment, and from the resulting heterogeneity of
buses, that the market for buses consists of a single
relevant market. The difficulty in determining a precise
demarcation of the market within a broad and highly
differentiated product range cannot be accepted as the
basis for dispensing with a market definition altogether
despite the obvious lack of substitutability between
particular products.

(221) In 1990 and 1991, the Commission took the view in
two Decisions (22) concerning the French market that
two markets — buses operating in public transport and
touring coaches — would have to be distinguished. In
1995, the Commission adopted a Decision concerning
the German market (23) and in 1998 a Decision relating
to the Italian, French and Spanish markets (24). Whilst
both Volvo and Scania are active across the EEA, their
market position is significantly stronger in northern

(22) See Case No IV/M.004 — Renault/Volvo, Decision of 7 Novem-
ber 1990, point 15; Case No IV/M.092 — Renault/Heuliez,
Decision of 3 June 1991, point 5.

(23) See Case No IV/M.477 — Mercedes-Benz/Kässbohrer, Decision

of 14 February 1995 (OJ L 211, 6.9.1995, p. 1).

(24) See Case No IV/M.1202 — Renault/Iveco, Decision of 22 October

1998.

Differences in technical characteristics

(222) The Commission’s market investigation in this case
shows that there is a clear distinction between,
in
particular, city/intercity buses on the one hand and
touring coaches on the other hand. This applies both to
the supply- and demand-side of the market.

(223) The supply-side data submitted by Volvo and Scania as
well as data obtained from other suppliers confirm that
there are important differences in terms of chassis
characteristics between the various types of bus. Thus,
the parties’ best-selling chassis model of a city bus is in
most countries a low-floor or low-entry, two-axle bus
with a relatively low horsepower engine (typically
around 250 hp). The parties’ best-selling coach chassis,
on the other hand, is a high-floor bus with an engine of
around 400 hp. Furthermore,
in some countries the
best-selling coach is a three-axle vehicle. A typical
intercity bus will generally have a high floor, but a
relatively weaker engine than a touring coach. Intercity
buses may also be longer than city buses and coaches.
Articulated buses are used primarily for intercity services.

(224) Form a demand-side point of view, these differences in
technical characteristics do not only necessitate a
decision as to the primary intended use of the vehicle,
but also result in important price differences between
(chassis for) city buses, intercity buses and coaches.

(225) As a reminder, the main features of the three types of

bus may be summarised as follows.

(a) City buses

City buses are designed for public transport in urban
areas. They tend to have a low floor (or low entry)
without any steps, as well as more and wider doors than
other types of bus. Only city buses will be designed to
have room for standing passengers. The main feature of
city buses is that they are constructed primarily with a
view to facilitate frequent entry and exit. The main
customers are municipal and local authorities and, in
countries where public transport has been privatised,
private operators which have won tenders to provide
bus transport services on behalf of such municipal and
local authorities.

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(b)

Intercity buses

Intercity buses are designed for public transport in rural
districts and public intercity travel. In common with city
buses, these buses do not normally have particularly
luxurious equipment. From a technical point of view,
they are, for the most part, not low-floor buses and
generally have more powerful engines than city buses
(but less so than touring coaches). Due to the nature of
the service, features that facilitate entry and exit are less
important
than in city buses. The main customers
are regional public bus operators, as well as private
companies operating scheduled services. Buyers of
intercity buses are often also customers for city buses.

(c)

Touring coaches

Touring coaches are primarily intended to serve the
leisure market, mainly for long-distance tourist travel.
As with intercity buses, features that facilitate frequent
entry and exit are not prioritised in touring coaches. A
touring coach will normally be equipped with a manual
gearbox, whereas the two other types of bus will have
automatic gearboxes. Touring coaches tend to be higher
than intercity buses and are equipped in a comparatively
luxurious manner. They are often equipped with more
luggage space, air conditioning, toilets and television
screens, which make such buses more suitable for long
trips. The main customers are private operators of leisure
or charter trips. The market investigation has show that
certain operators, during off-season periods, may use
their touring coaches for other purposes, for example
intercity services. The fact that a touring coach can have
a secondary field of application does not, however,
imply that there would be any significant substitutability
between these products and, for example, intercity buses.

(226) The Commission also notes that this division of the
overall bus market into three segments is generally
reflected in the sales literature of all the suppliers, and is
widely accepted by suppliers and customers in the
market.

longer apply to the purchasing of the vehicles as such,
as these purchases will no longer be made by the public
authorities. Sales of touring coaches, on the other hand,
are normally not influenced by public authorities, as
touring coaches are bought by private operators and
used for leisure transport. Therefore, whilst it can be an
important competitive parameter for a leisure travel
operator to offer a luxuriously equipped touring coach,
this is often not the case for companies operating public
city and intercity transport, as, for these services, the
specifications for the vehicle will normally be set by the
public authority organising the service and the tendering
procedure.

(228) The market

investigation has

revealed a second
important distinction on the customer side. Prior to
privatisation and liberalisation of
the bus transport
sector, most bus companies were only active on a local
or regional basis. However, over the last decade, the
liberalisation of public scheduled city and intercity bus
services has led to the creation of a number of large
national, and in some cases even international, bus fleet
operators. Also the notifying party has emphasised
throughout the procedure the rapid pace of the consoli-
dation process that has taken place on the part of bus
operators in the past decade, whereby the bus customers’
fleet sizes have increased considerably and thus also
their buying power vis-à-vis bus manufacturers. Never-
theless, the market investigation has shown that bus
manufacturers can, and do discriminate between the
price and other conditions granted to small and large
customers, and that purchasing preferences between
these groups can vary significantly. It will therefore be
appropriate to consider in the assessment below, that
bus manufacturers are able to price discriminate between
small and large customers.

Distinct buyer groups

Supply-side substitutability is not effective

(227) A further distinction has to be drawn on the basis of the
type of customer. City and intercity buses are normally
bought by public or private operators in charge of
scheduled public transport services. In this respect, it has
been brought to the Commission’s attention that public
authorities in charge of public transport continue to
influence demand conditions even in countries where
privatisation of such services has taken place,
for
example, by specifying detailed requirements as to the
vehicle specifications in the request for competitive
tenders for the operation of scheduled bus services.
In this respect,
following
privatisation, the tender procedure will normally no

it should be noted that,

(229) As regards supply-side substitutability, the market inves-
tigation has confirmed Volvo’s contention that all major
bus manufacturers in Europe are present in all three
segments. However, contrary to Volvo’s contention, the
relative positions of these manufacturers, in terms of
sales, differ substantially when comparing, on the one
hand, their sales of the three types of bus, and, on the
other hand, each supplier’s market share in each Member
State or group of Member States, and in Europe as a
whole. This element will be further examined when
considering the geographic dimension of the markets.

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Conclusion on relevant product markets

(230) As already stated,

there are significant differences
between a typical city bus, intercity bus and touring
coach. Given that the buyer of a bus, in any purchasing
situation, will have a definite idea as to the type of
service for which the vehicle is primarily intended, the
substitutability between the various types of bus will
necessarily be low. It is therefore likely that the merged
entity would be able to take advantage of this in the
future, if it were to achieve increased market power in
one or more of the three vehicle types as a result of the
notified transaction. For these reasons, the Commission
considers it appropriate to assess the competitive impact
of the notified transaction on the basis of separate
intercity buses and touring
markets for city buses,
coaches.

B. RELEVANT GEOGRAPHIC MARKETS

(231) In the notification, Volvo submits that the relevant
geographic market for touring coaches, city buses, and
intercity buses is at least the EEA, and claims that this
conclusion is supported by evidence relating to price
levels, which have been stated as generally being, with a
few exceptions, within a ± 10 % range throughout the
EEA. Furthermore, Volvo considers that there are no
national barriers to entry, which is confirmed by pres-
ence of all the leading producers throughout the EEA.

(232) In its reply and at the oral hearing, Volvo maintained
that price discrimination and import penetration should
the
in general constitute the appropriate focus of
geographic market definition instead of non-price fac-
tors, such as customer preferences, technical require-
ments, purchasing habits and market shares. With
reference to the Commission’s decision in the Mercedes-
Benz/Kässbohrer case, Volvo claims that price compari-
sons for buses and coaches are rendered difficult by
differences in the type of bus,
in equipment and in
determining transaction prices. Therefore, in its reply it
did not submit any further elements supporting its
contentions as to the price levels remaining within a
± 10 % range throughout the EEA. It has, however,
submitted evidence relating to market penetration rates
for city buses,
intercity buses and touring coaches.
Consequently, the notifying party bases its definition of
the relevant geographic market on the approach adopted
by the Commission in its decision in the Renault/Iveco
case, and on the non-price factors.

Member States. Other elements such as customer prefer-
ences, technical requirements, purchasing habits, market
for the
shares and import penetration are relevant
definition of relevant markets to the extent that they
give indications about the ability of manufacturers to
price discriminate. The Commission’s investigation has
shown that
the finding of
national geographic markets in the northern European
areas where the impact of the concentration would be
the strongest.

these elements support

(234) The notifying party has in particular pointed out in its
notification and reply that the decision in the Renaul/
Iveco case focused on the existing levels of import
penetration when it defined the relevant geographic
market for touring coaches as EEA-wide in scope. In
that case, which the Commission approved without
opening a second-phase investigation, the Commission
considered that the level of import penetration of non-
national manufacturers of touring coaches in France and
Italy was relatively high on the market for touring
coaches (between 65 % and 70 %). However, according
to information submitted by Volvo, the level of import
penetration in the United Kingdom (40 %) and Finland
(10 %), which are the relevant Member States in the
present case, is significantly lower. Taking into account
the other elements analysed in more detail
in the
following recitals, these figures cannot be taken as a
strong indication of an EEA-wide market.

(235) For the reasons set out in detail below, it follows from
the market investigation that, as far as the Nordic region
(Sweden, Finland, Norway and Denmark) and the United
Kingdom and Ireland are concerned, Volvo’s contention
as regards the geographic market for city buses, intercity
buses and touring coaches cannot be accepted. Instead,
the market investigation has provided indications that
the markets in question are still essentially national in
scope. As regards the Finnish market, and in particular
in view of some linguistic, cultural and historical factors,
this was also the view presented by the Finnish Bus and
Coach Association at the oral hearing.

(233) The Commission agrees that the ability of manufacturers
to price discriminate between different geographic areas
is a central element of defining the relevant geographic
market. There are indications that Volvo has been able
in various
to charge substantially different prices

(236) For the remaining Member States, the geographic scope
of the market can be left open, as regardless of the
definition adopted, the proposed concentration would
not lead to the creation or strengthening of a dominant
position. This will be further elaborated in the section
dealing with the competitive analysis.

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Touring coaches

Market shares vary significantly between Member
States

(237) Volvo’s contention as to the existence of an EEA-wide
market for touring coaches is not supported by the facts
concerning its sales across that area, as indicated in the
notification. It has been indicated that Volvo has a
market share of [10 % to 20 %] in the EEA. Its market
share is significantly higher in the Nordic countries, the
its
United Kingdom and Ireland. At the same time,

market shares in a number of countries is significantly
below this EEA average ([0 % to 10 %] in Austria, [0 %
to 10 %] in Belgium, [0 % to 10 %] in France, [0 % to
10 %] in Germany and [0 % to 10 %] in Spain). Similar
national deviations from the average EEA market share
can be observed for Scania and all other touring coach
manufacturers. Apart from vague references to historical
reasons, Volvo has not provided any explanation as to
how,
in its view, such differences in market shares
between Member States could be compatible with its
contention that the touring coach market is EEA-wide.

(238) The combined market share of Volvo and Scania for

1998 is set out in the table below.

Sweden

Finland

Norway

City buses

Intercity buses

Touring coaches

[80 % to 90 %]

[80 % to 90 %]

[20 % to 30 %]

[90 % to 100 %]

[80 % to 90 %]

[80 % to 90 %]

[60 % to 70 %]

[80 % to 90 %]

[40 % to 50 %]

Denmark

[80 % to 90 %]

[70 % to 80 %]

[30 % to 40 %]

United Kingdom

[60 % to 70 %]

Ireland

[90 % to 100 %]

[50 % to 60 %]

[60 % to 70 %] (1)

(1) As explained below, the market investigation has shown that this figure is considerably lower than that submitted by Volvo.

Purchasing habits are not similar across Member
States

only, whereas in the United Kingdom approximately
[80 % to 90 %] of all sales comprised chassis only.

(239) Furthermore, there are significant variations between
Member States as concerns the purchasing behaviour of
touring coach customers. The final user has two main
possibilities of purchasing a touring coach. It can either
buy a complete touring coach, or it can buy a chassis
from, for example, Volvo and a touring coach body, that
is to say, the complete passenger compartment, from a
‘body-builder’. The latter case may, or may not, involve
a contractual arrangement between Volvo and the body-
builder. Measured at the EEA-level, Volvo achieves [40 %
to 50 %] of its total sales from selling complete vehicles.
The corresponding figure is [70 % to 80 %] for Scania.
However, these figures vary significantly for individual
Member States. For example, all of Volvo’s touring coach
sales in Sweden, Norway and Finland in 1998 were
complete vehicles, as were a majority of Scania’s sales.
This is largely explained by the fact that both Volvo and
Scania are vertically integrated with the main body-
builders in the Nordic region. On the other hand, in
Ireland and Greece all sales were limited to chassis

(240) In addition, as stated in the notification, a particular
feature of the demand structure in the United Kingdom
and Ireland, when compared to all other Member States,
is that there are no sales of intercity buses.

Purchasing is done on a national basis

(241) The national characteristics described above are con-
sistent with the Commission’s findings that buyers of
touring coaches very rarely turn to dealers established
outside their country. For this reason, a German manu-
facturer, for example, needs to have an established sales
and distribution system in each of the Nordic countries
and in the United Kingdom and Ireland, if it wants to
achieve significant sales in the country in question.
Consequently, as touring coaches are mainly imported
into these countries by the respective manufacturer’s
national organisations, the competitive conditions, even
in neighbouring countries, appear to have little or no
impact on the selling conditions in any given country.

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(242) One reason indicated by touring coach customers for
their preference for making their purchases within their
country of establishment is that this will provide them
with more reliable access to servicing of the vehicle to
the extent such service cannot be done in-house by the
touring coach company. In that respect it must be
emphasised that a significant proportion of the touring
coach customers are small and medium-sized com-
panies. For these customers, even the existence of
significant price differences would not necessarily justify
having to transport the vehicle to a foreign dealer for
the necessary servicing and repairs. Another reason
stated by customers against buying vehicles outside their
country is the time, effort and cost involved in changing
the registration of the vehicle. In addition, there is a risk
that the secondhand value of a ‘privately’
imported
vehicle is lower and/or that it may be more difficult to
use as a ‘trade-in’ in future transactions with dealers in
their own country. Contrary to what Volvo stated in its
reply and at the oral hearing, a number of customers
have also referred to the perceived quality of the vehicle
and the availability of spare parts and servicing as
essential criteria for a purchase decision. These criteria
are strongly associated with the Volvo and Scania brands
in the Member States assessed below.

requirements
Technical
between Member States

and preferences vary

the vehicle is 12 metres in France,

(243) In addition, the market investigation has revealed that,
despite a certain degree of harmonisation achieved at
the European level, a number of technical requirements
and preferences that are pertinent to touring coaches
and other bus types still vary across Member States (25).
One such example is that the maximum permitted
length of
the
Netherlands, Italy and Austria. Denmark has a maximum
length limit of 13,7 metres, whereas Finland applies a
14,5 metre limit. Finally, Belgium, Sweden, Norway and
Germany allow lengths up to 15 metres. Moreover, as
concerns the United Kingdom and Ireland, the fact that
all vehicles must be adapted for right-hand drive and
that all doors need to be on the left-hand side of the
vehicle, severely restricts the possibility of importing
vehicles intended for Continental Europe. In 1998, the
Office of Fair Trading concluded for similar reasons that

(25) Volvo in its reply refers to current discussion about further
harmonisation concerning the length and width of buses and
coaches used in international traffic. Volvo estimates that this
further harmonisation will be in effect from 2002. Volvo has,
however, not provided any evidence about the market impact of
these new rules, should they be adopted according to the time
schedule envisaged by Volvo.

the United Kingdom constituted a relevant geographic
market, separate from that of the rest of Europe (26).

(244) Finally, as concerns primarily Sweden, Finland and
Norway, a number of customers have indicated that
specific adaptations are needed for the vehicle to be
suitable for the climate and road conditions, as well
as to meet specific collision protection requirements
concerning the front of the bus. Therefore, a number of
customers have indicated that
the models used in
Continental Europe are less well-suited for use in the
the notifying party
In the reply,
Nordic countries.
disputes the conclusion that road and climatic conditions
in Finland amount to a substantial barrier to entry. To
support
its view, Volvo refers to a specialised bus
magazine that ranked Mercedes and Setra brands of
DaimlerChrysler ahead of both Volvo and Scania in a test
of buses of various manufacturers in arctic conditions. It
should be noted that this article was published in a
German magazine in 1993. Volvo has not submitted
any evidence as to the authority of this particular article,
nor has it even suggested that it is the only article in
which such a test has been made over the last seven
years. Consequently, the Commission can attach no
value to this information.

(245) The notifying party contests, in its reply, the view of
the Commission that the technical requirements vary
between Member States to a significant extent and
maintains that manufacturers are currently in a position
to adapt their production to such differences. Leaving
aside the technical capability of manufacturers to adapt
their production processes, the costs related to such
adaptation which, according to an estimation brought
to the Commission’s attention can amount to at least
EUR 5 million, would have to be balanced against the
attractiveness and size of the market in question.

Price levels differ significantly between Member
States

(246) The fact that purchasing of touring coaches is done at a
national level is furthermore reflected in the fact that
significant price variations (excluding taxes) can be
observed even between neighbouring countries. For
example, according to the information contained in the
notification, Volvo’s price for the same touring coach
model (a commonly sold model) is [10 % to 20 %]
higher in Norway than in Denmark, [10 % to 20 %]
higher in Finland than in Sweden and [20 % to 30 %]
higher in the United Kingdom than in the Netherlands.
Similar differences can be found in pricing information
submitted by Scania and other touring coach manufac-
turers in the course of the market investigation. Volvo
has acknowledged that,
in general, a manufacturer’s
ability to price discriminate between customers in
different Member States is an essential indication for a
finding that the market is national in scope.

(26) In the context of the examination of a merger between Henlys

Group plc and Dennis Group plc.

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(247) Price differences between neighbouring countries, such
as those indicated above, are generally incompatible with
Volvo’s contention that the Nordic countries (Sweden,
Finland, Norway and Denmark), the United Kingdom
and Ireland should not each be regarded as separate
geographic markets. If the markets were indeed wider
than national, it would be reasonable to assume that
buyers of touring coaches would take advantage of the
existing price differences and buy their vehicles in a
neighbouring country.

Conclusion on relevant geographic market for tour-
ing coaches

(248) In view of the foregoing, the Commission considers it
appropriate to assess the competitive impact of the
notified transaction on the market for touring coaches
separately in Finland and the United Kingdom. For the
other Member States the precise delineation of the
relevant geographic markets can be left open, as the
operation would not lead to the creation or strength-
ening of a dominant position.

City buses and intercity buses

(249) The market investigation has shown that in the Nordic
countries (Sweden, Finland, Norway and Denmark), and
the United Kingdom and Ireland most of the elements
described in relation to touring coaches also apply to
city buses and intercity buses.

Market shares differ significantly between Member
States

(250) As in the case of touring coaches, Volvo’s contention as
to an EEA-wide market for city and intercity buses is not
supported by the facts concerning its sales across that
area, as stated in the notification. It has been indicated
that Volvo’s market share for city buses is [20 % to
30 %] in the EEA, whereas its EEA market share for
intercity buses is stated to be [10 % to 20 %]. However,
Volvo’s market share is significantly higher in the Nordic
countries (city and intercity buses), as well as in the
United Kingdom and Ireland (city buses). At the same
time,
its market share in a number of countries is
significantly below these EEA averages. For city buses,
Volvo has a market share of between [0 % to 10 %] in
Austria, Belgium, Germany, Italy and Luxembourg. For
intercity buses, the company’s market share is [0 %
to 10 %] in Germany, Greece, Luxembourg and the
Netherlands. This means, for instance, that Volvo’s share
of the city bus market in Denmark is [50 % to 60 %]
while less than [0 % to 10 %] in Germany and [30 % to
40 %] in Sweden. In Ireland, Volvo has [60 % to 70 %]
of the city bus market while Scania has [30 % to 40 %].
The equivalent figures for the United Kingdom are [50 %
to 60 %] and [10 % to 20 %]. Similar, or even greater,
national deviations from the average EEA market share

can be observed for Scania and all other manufacturers.
Again, Volvo has not provided sufficient explanation as
to how, in its view, such variations in market shares
between Member States could be compatible with its
contention that the city and intercity bus markets are
EEA-wide.

Purchasing is done nationally and purchasing habits
differ between Member States

(251) Similar variations in the demand structure between
Member States as those described for touring coaches
also exist for city and intercity buses, in the sense that
customers in certain countries prefer to buy a complete
vehicle, whereas customers in other countries have a
preference for buying the chassis and body separately.

(252) Furthermore, the fact that buyers of touring coaches
rarely turn to dealers established outside their country
also applies to city and intercity buses. However, in this
respect it is relevant to consider one significant difference
between, on the one hand, the market for touring
coaches and on the other, the markets for city and
intercity buses. Whilst touring coaches are often sold
through the manufacturer’s dealers in each country, city
and intercity buses are, to a significant extent, sold
directly to the final customer by the manufacturer’s
national importer.

(253) This means that, in theory, it should be comparatively
less important for a ‘foreign’ supplier of city and intercity
buses to have a well-established national network of
dealers. Consequently, it would be reasonable to expect
a higher penetration of ‘foreign’ suppliers of city and
intercity buses. However, as indicated in the table in
recital 237, ‘foreign’ manufacturers have been compara-
tively less successful in penetrating the Nordic countries,
the United Kingdom and Ireland with their city and
intercity buses (the combined market share of Volvo and
Scania in these countries is [60 % to 70 %] to [90 % to
100 %]. It follows from this that there is no indication
that this theoretical ability of ‘foreign’ manufacturers to
sell city and intercity buses directly to the final customer
of such vehicles has had any significant impact on the
competitive situation in these countries.

(254) The market investigation carried out by the Commission
provides some indication of the reasons for this. First,
public authorities play a comparatively greater role in
the markets for city and intercity buses, as buyers and/or
as the body responsible for issuing calls for tenders. The
market
these sales
continue to be subject to detailed technical specifications
that often go beyond the national legal requirements. In
addition to intangible explanations, such as national

investigation also indicates that

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brand loyalty and language difficulties, purely economic
reasons may also play a role. Among such economic
reasons is the fact that transaction costs may be higher
if contacts are to be established with suppliers in other
countries. Some customers have pointed out that these
vehicles are generally sold with certain warranties and/or
service contracts. Customers have expressed concerns
that they would not necessarily be provided with the
same level of aftersales service in their country of
incorporation, even if they had bought the vehicle from
the same manufacturer, but
In
addition, to the extent that the buyer operates its own
service and repair shop (for routine servicing and
repairs), the costs related to keeping a stock of spare
parts and brand-specific tools will, to a certain extent,
act as a disincentive to take on additional brands. Finally,
for the same reasons as indicated for touring coaches,
the purchase of city and intercity buses in another
country is likely to increase the risk and cost associated
with changing the registration of the vehicle and securing
its secondhand value.

in another country.

Technical requirements vary between Member
States

(255) The same variation in length restrictions as has been
described for touring coaches also applies to city and
intercity buses. The same is true for the specifications
relating to right-hand drive in the United Kingdom and
Ireland (27). In addition, it is recalled that there is no
market for intercity buses in these two countries. In the
course of the market investigation, third parties have
submitted that, for the Nordic markets, low entry, rather
than low floor, is generally demanded for city buses, and
that there is also a specific Nordic demand for ethanol-
powered buses. Manufacturers, which have not trad-
itionally focused on sales in the Nordic region, face
therefore additional costs in the same way as previously
described for touring coaches.

(256) As already indicated, these vehicles are normally bought
by public or private operators in charge of public
transport services. It has been brought to the Com-
mission’s attention that public authorities in charge of
public transport continue to influence demand con-
ditions, even where privatisation of such services has
taken place, by specifying detailed requirements as to
the vehicle specifications in the request for competitive
tenders. One such example is the request for ethanol-
such additional non-
powered buses. Therefore,

regulatory technical requirements will be of significant
importance to any bus service operator that wishes to
participate in a tendering procedure.

Price levels differ significantly across Member States

(257) As in the case of touring coaches, the fact that purchasing
of city and intercity buses is done on a national level is
reflected in significant price variations (excluding taxes),
including between neighbouring countries. For example,
according to information submitted by Volvo, its prices
for a similar city and intercity bus model are respectively
[10 % to 20 %] and [10 % to 20 %] higher in Sweden
than in Norway. At the same time, the prices in Finland
are respectively [0 % to 10 %] and [20 % to 30 %]
higher, than the corresponding prices in Denmark. Its
price for a city bus in the United Kingdom is [20 % to
30 %] higher than in Norway. Again, similar price
differences can be found in information submitted by
Scania and other city and intercity bus manufacturers.
Finally, internal documents of Volvo submitted to the
Commission also indicate price differences between
other neighbouring Member States. According to this
information, the market price for a two-axle low-floor
city bus is [20 % to 30 %] higher in the Netherlands
than in Belgium and the price for an articulated low-
floor city bus, [10 % to 20 %] higher in Italy than in
Austria in 1999.

(258) Price differences between neighbouring countries, such
as those indicated above, are generally incompatible with
Volvo’s contention that the Nordic countries (Sweden,
Finland, Norway and Denmark) and the United Kingdom
and Ireland should not each be regarded as separate
geographic markets. If the markets were indeed wider
than national, it would be reasonable to assume that
buyers of city and intercity buses would take advantage
of the existing price differences and buy their vehicles in
a neighbouring country.

Conclusion on relevant geographic market for city
and intercity buses

(259) For these reasons, the Commission considers it appropri-
ate to assess the competitive impact of the notified
transaction on the markets for city and intercity buses
separately in each of the Nordic countries (Sweden,
Finland, Norway and Denmark) and Ireland.

C. ASSESSMENT

(27) In 1998, the Office of Fair Trading concluded in the context of
the examination of a merger between Henlys Group plc and
Dennis Group plc that the United Kingdom constituted a relevant
geographic market, separate from that of the rest of Europe,
including Ireland.

(260) Prior to assessing the individual market for city and
intercity buses and touring coaches in the above-
mentioned Member States, two specific issues raised by
Volvo in its reply and at the oral hearing need to be
addressed, namely the results of
the Commission’s
market investigation and the issue of shrinkage.

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Customer response

(261) As to the results of the Commission’s market investi-
gation on the markets for buses and coaches, Volvo has
argued in its reply and at the oral hearing that customers
do not display an undue level of concern about the
proposed concentration. The Commission has con-
sidered this remark carefully and has come to the
conclusion that it is not supported by the facts available.
As previously stated for the market in heavy trucks,
when assessing Volvo’s argument that customers are not
concerned, it is first necessary to keep in mind that,
despite a certain degree of consolidation that has
occurred in the past decade, as also submitted by the
notifying party in its notification and reply, that the bus
industry also has a fragmented customer structure, in
particular as concerns touring coaches.

‘complaints’

the number of

(262) Moreover, for the same reasons as stated in relation to
heavy trucks, the relevant question is not, as implied by
Volvo,
that have been
submitted. Instead, a qualitative analysis must be made
of all the available information, including the comments
provided by third parties. When, as in this case, the
proposed concentration would lead to extremely high
market shares for the combined entity, the fact that even
some of the largest customers indicate, inter alia, that
the parties will become dominant, must be seen as
significant. The Commission is therefore unable to
accept Volvo’s argument that no concerns exist.

(263) As regards the GfK survey conducted on behalf of Volvo
for its reply, it must be noted that the survey was carried
out by telephone with a sample of Volvo’s and Scania’s
bus and coach customers in each of the four Nordic
countries, the United Kingdom and Ireland. The cus-
tomer list was provided by Volvo. Even if the survey
could give some indications of the characteristics and
reactions of the customers, it fails to identify which are
the coach, intercity and city bus customers. Therefore, it
is not possible to draw the necessary detailed conclusions
as regards the behaviour of each of these customer
groups.

Shrinkage effect

(264) Volvo has put forward the shrinkage effect, which is
related to customers’
‘multiple sourcing’ policy. How-
ever, as regards the markets for city and intercity buses
and touring coaches, Volvo has not been able to establish
that there will be market share losses, which would
significantly change the competitive situation on these
markets. Volvo has not provided any data to support its
claims of a significant shrinkage effect in these markets.
Instead it refers to the Commission’s decision in the
Mercedes-Benz/Kässbohrer case, which mainly con-
cerned the German markets for city buses,
intercity
buses and touring coaches.

(265) In that case the Commission considered the markets to
be national in scope. In its assessment it took account
of structural elements which were likely to alter the
conditions of competition and which would justify a
more dynamic interpretation of the significance of the
market share of the merged parties. It was concluded
that such structural factors could, for example, include
the ability of actual competitors to constrain the actions
of the new entity, the expectation of a significant increase
in potential competition from powerful competitors, the
possibility of a quick market entry or the buying power
of important customers. In particular, the Commission
considered the issue of expected substantial actual
and potential competition and the effect of public
procurement procedures. The Commission noted in that
case, that the small number of imports into the German
market in the past was due not only to intangible
barriers to market entry, including customer-supplier
relationships and brand loyalty, but also to the fact that
foreign suppliers’ products were not properly tailored to
the German market. The Commission concluded that
the potential competition together with the already
existing competition was sufficient to limit the merged
entity’s freedom of manoeuvre on the German market,
because the tangible entry barriers could be overcome
and the intangible barriers were expected to lose signifi-
cance.

(266) The Commission notes, however, that there are signifi-
cant differences between the circumstances in these two
cases meaning that direct parallels cannot be drawn.
First, in terms of market size, Germany is by far the most
important bus market in Europe and bus manufacturers
have a strategic interest in entering that market. Sec-
ondly, following the concentration, two further signifi-
cant domestic bus and coach manufacturers, namely
MAN and Neoplan, remained on the market in addition
to foreign manufacturers,
like Bova. This is not the
situation in the present case.

(267) However, even if one were to accept the possibility of a
certain shrinkage effect after the planned merger of
Volvo and Scania, the evidence from the Mercedes/
Kässbohrer merger shows that the market share loss
over four years was actually only 3 % to 5 %, according
to Volvo’s own submission, and that the market share
loss took longer to materialise than was expected at the
time of the merger.

(268) In its reply, Volvo asserts that the experience of the
Swedish coach market, where its market share dropped
drastically in 1998, should be taken as evidence that all
bus markets are contestable and therefore Volvo’s and
Scania’s combined high market shares should not be a
cause for concern. However, Volvo has not been able to
explain the exact reason why its market share decreased

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in the Swedish coach market. Nor has it explained the
reason why this experience should be expected to be
transposed to other relevant coach markets. Therefore,
while recognising that these markets are not entirely
sealed off from competition, and therefore could be
subject to change, the Commission does not consider
that the available evidence allows it to disregard the
extremely high and stable market shares in other relevant
markets. In particular, the Commission considers that
the loss of market share on the Swedish coach market
may be due to specific factors, such as the change of
ownership of some of the main Swedish players on this
market. Indeed, some of the main players in the Swedish
touring coach market have recently been taken over
by companies, such as Vivendi, which given their

international presence are more likely to buy foreign
brands.

Touring coaches

(269) Both Volvo and Scania have a significant presence across
in Austria, Belgium,
most Member States. However,
France, Germany and Luxembourg their combined mar-
ket shares were less than 15 % in 1998. Consequently, it
is not necessary to consider these markets for the
purposes of the assessment of the notified operation.
The market shares of Volvo and Scania in the remaining
Member States (and Norway) are set out in the table
below.

Volvo

Scania

Largest competitor

Denmark

[10 % to 20 %]

[10 % to 20 %]

Finland

Greece

Ireland

Italy

[60 % to 70 %]

[20 % to 30 %]

[20 % to 30 %]

[60 % to 70 %]

[30 % to 30 %]

[30 % to 40 %]

[10 % to 20 %]

[0 % to 10 %]

The Netherlands

[10 % to 20 %]

[10 % to 20 %]

Norway

Portugal

Spain

Sweden

[20 % to 30 %]

[10 % to 20 %]

[10 % to 20 %]

[10 % to 20 %]

[0 % to 10 %]

[30 % to 40 %]

[0 % to 10 %]

[20 % to 30 %]

The United Kingdom

[40 % to 50 %]

[10 % to 20 %]

Total EEA

[10 % to 20 %]

[10 % to 20 %]

> 25 %

< 10 %

[...]

[...]

> 40 %

< 30 %

> 30 %

> 25 %

> 25 %

> 30 %

> 10 %

> 30 %

(270) As can be seen from the table in recital 269, the merged
entity would remain subject to competition from at least
one other supplier with similar or greater market
share in Italy,
the Netherlands, Spain and Sweden.
Consequently, there is no risk that the proposed concen-
tration will create or strengthen a dominant position in
those markets. In Denmark, Norway and Portugal, the
parties’ combined market share is between [30 % to
40 %]. However, in each of those countries the combined

entity would remain subject to competition from, at
least, one supplier with a market share exceeding 25 %.
Furthermore, the parties’ combined market shares in
these three countries have been subject to significant
fluctuations over the last
that
background, the information available to the Com-
mission does not indicate that the proposed concen-
tration could lead to the creation or strengthening of a
dominant position in Denmark, Norway or Portugal.

three years. Against

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(271) According to the figures provided by Volvo, the parties
would achieve very large market shares in Greece and
Ireland. It is, however, to be noted that the market for
touring coaches in both of these countries is very limited
in size (a total of 16 and 15 registrations in 1998
respectively). This means that the market share calcu-
lation for these countries is particularly sensitive to the
general difficulty that official registrations in most
Member States (28) do not differentiate between city
buses, intercity buses and coaches. In the course of the
Commission’s investigation,
information provided by
third parties made it necessary to revise the market share
information for Greece and Ireland submitted by Volvo.
When taking this third-party information into consider-
ation,
it follows that the combined market share of
Volvo and Scania is significantly lower than indicated in
the table in recital 269, and, in fact, that in both Member
States the combined sales of Volvo and Scania in 1998
were lower than those of at least one other manufacturer.
It follows from this that the information available to
the Commission does not support a finding that the
proposed concentration could lead to the creation or
strengthening of a dominant position in Greece or
Ireland.

(272) There are, however, two countries where the proposed
concentration would have a serious impact on compe-
tition; Finland and the United Kingdom. Each of these
two markets will be analysed in detail.

A dominant position would be created on the
Finnish market for touring coaches

Market size and market shares

(273) The Finnish coach market is relatively small in volume,
with annual sales of between 80 and 100 units. As
indicated in the table above, the parties’ combined share
of that market was [80 % to 90 %] in 1998. Their
combined share has been very stable at that high level
[80 % to 90 %] in 1996, [80 % to 90 %] in 1997. Even
if measured over a 10-year period (1989 to 1998) the
combined share is [80 % to 90 %]. Although the market
share distribution between Volvo and Scania has also
been relatively stable over this period, with Volvo
generally having [50 % to 60 %] of the market and
Scania having [30 % to 40 %], there was a change in this
trend in 1998. In that year, Volvo increased its market
share to [60 % to 70 %], whereas Scania’s market share
fell to [20 % to 30 %]. The development of the parties’
market shares shows that gains by Scania have resulted
in losses for Volvo and vice versa. These figures therefore
confirm the statements by third parties to the effect that
Scania has competed with Volvo for the same customers.

(28) According to the notification, the United Kingdom is the only
Member State to differentiate registrations into two classes: city
buses and touring coaches.

(274) There are no other suppliers that have had any significant
sales of touring coaches in Finland over the last 10 years.
In the notification, Volvo nevertheless submitted that
DaimlerChrysler is a serious challenger. Volvo’s conten-
tion cannot, however, be accepted, given that the sales
of DaimlerChrysler have remained stable at a level
representing less than 5 % of the market. The same is
true for all other manufacturers.

Demand characteristics

(275) It is a feature of the Finnish market (touring coaches and
other buses) that customers have, historically, often
bought the vehicle chassis and body separately. In that
respect, third parties have submitted that the purchasing
of chassis and body separately can have two main
advantages. First, body-builders are traditionally active
on a national basis and, as such, are well-placed to
produce a body that will satisfy local requirements,
which tend to relate more to the body than the
chassis. Secondly,
this type of separate purchasing
has traditionally been a way to reduce the chassis
manufacturer’s leverage in negotiations. In this respect,
third parties have stated that Volvo’s market position
was strengthened by its acquisition,
in 1998, of the
largest Finnish body-builder, Carrus. Also, the Finnish
Bus and Coach Association, acting as a third party at the
oral hearing, stated that Volvo has a 75 % share of the
body-building production in terms of volume through
the Volvo-owned Carrus factories in Finland. This would
be consistent with the observation that Volvo’s market
share increased significantly from 1997 to 1998. This
ability to significantly strengthen its market position,
demonstrated following the acquisition of Carrus, also
significantly reduces the credibility of Volvo’s argument
that, despite an important structural change in the
market, Finnish touring coach customers will ‘support’ a
second manufacturer in order to maintain the possibility
of dual-sourcing. In fact, Volvo’s increase in market
share suggests that these customers will favour the
manufacturer with the strategically strongest market
position.

(276) On the customer side, it is to be noted that 83 % of all
Finnish bus companies have 20 vehicles or less (with
37 % having a fleet of 1 to 5 buses, 28 % a fleet of 6 to
10 buses and 18 % a fleet of 11 to 20 buses). The
number of small customers is particularly high among
the touring coach customers. The market investigation
has confirmed that, for this type of small bus company,
there are significant advantages in concentrating pur-
chases in one single supplier, as this reduces the cost
and complexity of maintaining multiple contacts with
suppliers, spare parts logistics and stockholding, training
of drivers and mechanics, etc. The market investigation
has also confirmed that these customers are only to a
limited extent in a position to buy touring coaches from
suppliers located outside Finland. This was also the view
presented by the Finnish Bus and Coach Association at
the oral hearing. As already indicated, this has enabled
Volvo and Scania to maintain significantly higher prices
in Finland than, for example, in neighbouring Sweden.

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Barriers to entry and potential competition

high wages, large areas, small total vehicle population
and the existing position of Volvo and Scania.

(277) As there is a certain degree of commonality between the
service network used for touring coaches and other
types of bus and heavy trucks, it is important to note
that Volvo and Scania also have similarly high market
shares for city and intercity buses (see recital 291) and
heavy trucks in Finland. The fact that most touring
coach customers are small private companies means
that they may rely on their supplier for more complex
repairs and maintenance of their vehicles. This explains
why customers of touring coaches in Finland would
generally find it more difficult to source their touring
coaches from DaimlerChrysler or any of the other
manufacturers that do not have a service network
comparable to that of the parties. A number of cus-
tomers have also indicated that other manufacturers’
prices for service and spare parts can be substantially
higher than Volvo’s and Scania’s, and that other manu-
facturers have less well developed logistic systems, which
lead to longer delivery times for spare parts. These views
the importance of a well-established service
reflect
network also in respect of touring coaches.

(278) Volvo and Scania currently have 31 and 34 service
points respectively in Finland, all of which, according to
Volvo, are suitable for servicing both heavy trucks and
all types of bus. In its reply, the notifying party submitted
further information on the number of competitors’
service points. According to this information, the num-
ber of service points of the competitors would be
the merged entity.
significantly lower than that of
Renault has 45 service points, DaimlerChrysler 34 and
MAN 25. It can therefore be concluded that the merged
entity’s competitors would have less dense service net-
works in Finland.
In its reply, Volvo contests the
importance of a dense service network for city, intercity
bus and coach customers by reference to the high
proportion of in-house servicing done by bus and coach
customers; as an example it mentions Göteborg City bus
company. Volvo also claims that customers can use the
service networks of competitors as well as independent
service points as a source of service and repair. Whilst it
is true that a number of customers are able to service
and repair their vehicles in-house,
the
relatively small size of touring coach companies and the
need for more complex repairs, the value of effective
aftersales service should not be underestimated,
in
particular in relation to small companies. As already
mentioned, service offered by the manufacturer is also
an element perceived by customers as closely related to
brand image. However, apart from the amount of the
investment required for a dense service network, it has
been reported to the Commission that the establishment
of a competitive service network in Finland (and the
other Nordic countries) is relatively more expensive than
in other parts of the EEA, owing to the combination of

in view of

(279) It follows from the foregoing that, prior to the concen-
tration, Scania has been the only real source of competi-
tive pressure that Volvo has had to face on the Finnish
market. This source of competition would be removed
by the proposed concentration. The market investigation
indicates that Volvo, following implementation of the
concentration, would be able to raise its prices signifi-
cantly, and that the small bus companies, which are the
main group of buyers of touring coaches, would not be
able to restrain the merged entity’s behaviour on the
market. The notified transaction would thus create a
dominant position on the Finnish market for touring
coaches.

(280) Volvo has suggested that there are no barriers to entry,
and that, consequently, it would be subject to effective
potential competition form all other European manufac-
turers, which would obtain improved opportunities to
increase their presence on the market following the
concentration. However, as already noted, there are a
number of technical characteristics that make touring
coaches intended for Continental Europe less suitable
for the Finnish market and adaptations for climate and
road conditions, length of vehicle, etc. are thus necessary.
Third parties have submitted that the cost involved in
adapting their existing coach models to the Finnish
market would be significant. Furthermore, in order to
become a significant competitive force in the market,
the other manufacturers would need to invest in the
reinforcement or establishment of a service network,
comparable to that of Volvo and Scania. The market
investigation has also shown that other suppliers regard
the limited size of the Finnish market as a barrier to
effective entry, in the sense that it may be difficult to
recoup the necessary investments within a reasonable
time-frame. Consequently, it has to be concluded that
Volvo has not sufficiently shown that, following the
implementation of the proposed concentration, it would
be subject to such potential competition as to signifi-
cantly restrain it from exercising the increased market
power gained through the acquisition of Scania.

Conclusion on the Finnish market for touring coaches

(281) For all of these reasons the notified transaction would
create a dominant position on the Finnish market for
touring coaches.

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A dominant position would be created on the
United Kingdom market for touring coaches

Market size and market shares

(282) In terms of volume, the coach market in the United
Kingdom is the second largest in Europe (after Germany).
In 1998, 1 320 touring coaches were sold in the United
Kingdom. The parties’ combined share of that market
was 52 % in 1998, with Volvo having 42 % and Scania
10 %. The combined market share of the parties was
57 % in 1996 and 59 % in 1997. Also, when measured
over a 10-year period (1989 to 1998), the combined
share was 57 %. As in the case of Finland, Volvo has,
throughout this period, been the competitor with the
stronger position with a market share of between
42 % and 50 %, whereas Scania has been stable at
approximately 10 %. It appears that one of the main
reasons for Volvo’s consistently strong position in the
United Kingdom is its acquisition of the United Kingdom
company Leyland Buses. However, the market investi-
gation indicates that, despite its lower market share,
Scania has been one of the main sources of competition
for Volvo,
the two companies have generally
competed for the same customers, and that Scania’s
vehicles are considered by many customers to be their
preferred substitute for Volvo’s touring coaches. Internal
Volvo data confirm that Volvo and Scania are considered
by their United Kingdom coach customers to be close
substitutes in terms of quality, safety and environmental
impact.

that

(283) Apart from Volvo and Scania, the supply-side of the
touring coach market is very fragmented in the United
(Daimler-
Kingdom, with all other manufacturers
Chrysler, MAN, DAF Bus, Van Hool and Dennis) having
market shares of around 10 %.

Demand characteristics

(284) As in the case of the Finnish market, touring coach
customers in the United Kingdom often buy the vehicle
chassis and body separately (80 % of Volvo’s sales have
been stated to involve chassis only). In that respect, third
parties have submitted that Volvo’s market position is
strengthened by its indirect ownership of one of the
most important body-builders in the United Kingdom,
Plaxton. Furthermore, third parties have projected that
this type of vertical integration will gain more import-
ance over the coming years and submitted that Scania,
which only sells complete touring coaches in the United
Kingdom, is an example of this trend.

(285) On the customer side, Volvo has cited the United
Kingdom as an example of a completely privatised
market with sophisticated and powerful private bus
operators. It has submitted that the five largest bus
operators account for about [60 % to 70 %] of demand.
The degree of customer dispersion is, however, higher
on the coach market than on the city bus market. This
is consistent with the fact that the economies of scale
that can be found in operating a significant number of
scheduled public bus services are less evident in the

excursion and tourism sector, which is the main field of
use for touring coaches. Thus, the number of small
customers is higher among the users of touring coaches,
and for this type of small bus company, the same
advantages apply in concentrating purchases in one
single supplier, as already described for Finland (reducing
the cost and complexity of maintaining multiple contacts
with supplier, spare parts logistics and stockholding,
training of drivers and mechanics, etc.). Again, the
market investigation has confirmed that these customers
are not in a realistic position to buy touring coaches
from suppliers located outside the United Kingdom. This
has enabled Volvo and Scania to maintain significantly
higher prices in the United Kingdom than, for example,
in the neighbouring Netherlands.

Actual and potential competition

(286) Volvo and Scania also have high market shares for city
buses (see recital 291) and would become the market
leader in heavy trucks in the United Kingdom. As
explained above in relation to Finland, the existing
commonality between the service network for all these
vehicles and the fact that many touring coach customers
are dependent on their supplier for repairs and mainten-
ance creates a lock-in effect. This is consistent with a
finding that touring coach customers generally display a
high degree of brand loyalty. Volvo has 94 service points
and Scania 80 in the United Kingdom. At present, the
main competitors have a similar network of service
points.
Iveco has 119 service points and Daimler-
Chrysler 82.

(287) Following the proposed concentration, Volvo would be
in a considerably stronger position to take advantage of
this brand loyalty. For example, if, it had attempted to
raise its prices in the pre-merger situation, it would have
had to balance the potential gains from this against the
risk that a number of its customers would switch to
other manufacturers. Given the market perception that
Scania is a close substitute for Volvo, it would, in that
exercise, have had to consider there to be a high risk
that customers would switch to Scania. Following the
implementation of the proposed concentration, such a
customer response would, from a revenue viewpoint,
become neutral to Volvo. Consequently, the proposed
operation would, as a direct result, reduce the risk to
Volvo of exercising its market power.

(288) In addition to the effect of neutralising potential cus-
tomer response (as far as Scania is concerned) to a price
increase, the concentration would also have the effect of
strengthening Volvo’s market leadership. Given that the
proposed transaction would increase Volvo’s share of
the United Kingdom touring coach market to over 50 %,
it would also be likely to result in other suppliers (none
of whom have a market share above 10 %) becoming
increasingly likely to accept Volvo’s price leadership.
Consequently, the transaction would also reduce the risk
of an aggressive response from the smaller suppliers, if
Volvo were, for example, to increase its touring coach
prices.

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(289) It follows from the foregoing that, prior to the concen-
tration, Scania has been a main source of competitive
pressure for Volvo on the United Kingdom market.
This source of competition would be removed by
the proposed concentration,
in a way that would
significantly strengthen Volvo’s ability to exercise its
market power. Moreover, it is unlikely that the small bus
touring
companies, which are the main buyers of
coaches, would be able to restrain the merged entity’s
behaviour on the market.

Conclusion on the United Kingdom market for touring coaches

(290) For all of these reasons, it is concluded that the notified
transaction would create a dominant position on the
United Kingdom market for touring coaches.

City and intercity buses

(291) Both Volvo and Scania have significant activities in these
markets across most Member States. However, for city
buses, their combined market shares in Austria, Belgium,
France, Germany, Italy, Luxembourg and Spain were less
than [10 % to 20 %] in 1998. For intercity buses, the
parties had less than [10 % to 20 %] market share in all
of these Member States, as well as in the Netherlands.
is not necessary to consider these
Consequently,
markets for the purposes of the assessment of the
notified operation. The market shares of Volvo and
Scania in the remaining Member States (and Norway)
are set out in the table below.

it

City buses

Intercity buses

Volvo

Scania

Largest
competitor

Volvo

Scania

Largest
competitor

Denmark

[50 % to 60 %]

[20 % to 30 %]

< 20 %

[50 % to 60 %]

[20 % to 30 %]

< 20 %

Finland

[70 % to 80 %]

[20 % to 30 %]

< 10 %

[60 % to 70 %]

[20 % to 30 %]

< 10 %

Greece

[10 % to 20 %]

[30 % to 40 %]

< 30 %

[0 % to 10 %]

[40 % to 50 %]

< 30 %

Ireland

[60 % to 70 %]

[30 % to 40 %]

< 10 %

NA

NA

Netherlands

[10 % to 20 %]

[0 % to 10 %]

< 30 %

[0 % to 10 %]

[0 % to 10 %]

< 30 %

Norway

[40 % to 50 %]

[10 % to 20 %]

< 20 %

[60 % to 70 %]

[10 % to 20 %]

< 20 %

Portugal

[10 % to 20 %]

[0 % to 10 %]

< 30 %

[10 % to 20 %]

[10 % to 20 %]

< 20 %

Sweden

[30 % to 40 %]

[40 % to 50 %]

< 10 %

[50 % to 60 %]

[20 % to 30 %]

< 10 %

United Kingdom [50 % to 60 %]

[10 % to 20 %]

< 20 %

NA

NA

Total EEA

[20 % to 30 %]

[0 % to 10 %]

[10 % to 20 %]

[0 % to 10 %]

(292) As can be seen from the table in recital 291, the merged
entity would, on both product markets, remain subject
to competition from at least one other supplier with
similar or greater market share in the Netherlands
and Portugal. Consequently, there is no risk that the
proposed concentration wold create or strengthen a
dominant position in those markets.

significant combined market shares. Volvo has sub-
mitted that the parties’ combined market share for city
buses in the United Kingdom decreased dramatically in
1999, with Volvo’s market share dropping to 18 %. It
follows that the information available to the Com-
mission does not support a finding that the proposed
concentration could lead to the creation or strengthening
of a dominant position in the United Kingdom.

(293) The situation is also particular in relation to the United
Kingdom and Greece, in both of which, according to the
figures provided by Volvo, the parties would achieve

(294) The situation in Greece also requires specific attention.
The total size of the Greek markets for city and intercity

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buses is very small (respectively approximately 100 and
20 vehicles in 1998). The public transport operators in
Athens and Thessaloniki are the main buyers of such
vehicles in Greece. Both of these operators purchase city
and intercity buses through public tenders. This has the
effect that market shares in Greece are extremely volatile.
In the period between 1996 and 1998, Volvo’s market
share for city buses in Greece was [20 % to 30 %], [60 %
to 70 %] and [10 % to 20 %], whereas Scania’s market
share for the same years was [10 % to 20 %], [30 % to
40 %] and [30 % to 40 %]. The market share of the
largest competitor, DaimlerChrysler, was [60 % to 70 %],
[0 % to 10 %] and [40 % to 50 %] over the same period.
Under such circumstances, the Commission is of the
opinion that the proposed concentration would not lead
to the creation or strengthening of a dominant position
in the Greek markets for city and intercity buses.

(295) There are, however, five countries where the proposed
concentration would have a serious impact on compe-
tition: Sweden, Finland, Norway, Denmark and Ireland.
As the markets for city and intercity buses in the
first four countries have a number of similarities, the
assessment will provide a detailed description of the
markets in one of these countries (Sweden). Following
this, the assessment of the other three Nordic countries
will be made largely by reference to the first assessment
and focus on existing national differences. Finally, the
Irish market will be assessed.

(296) A common feature of all four Nordic countries is that
both Volvo and Scania are the traditional suppliers in
the whole area and have traditionally enjoyed very
strong market positions for both city and intercity buses.
The market investigation also strongly supports a finding
that Volvo and Scania have been each other’s main
competitor in each of the Nordic countries for a number
of years. Therefore, the proposed operation would lead
to the elimination of Volvo’s main competitor in these
markets.

market share was [70 % to 80 %] in 1997 and [60 % to
70 %] in 1996 (the corresponding figures for Scania
were [20 % to 30 %] in 1997 and [30 % to 40 %] in
1996). Thus, although there has been some variation in
the parties’ market shares over the last three years, the
figures provided by Volvo clearly indicate that this
fluctuation of market share has mainly been between
the two parties. Also when measured over a 10-year
period (1989 to 1998) the combined share is [80 % to
90 %] (city buses) and [90 % to 100 %] (intercity buses).
Thus, the available evidence indicates that both Volvo
and Scania have been able to maintain consistently high
market shares, and that they have been each other’s
main source of competition in both markets. The market
investigation also indicates that customers in Sweden
generally consider Volvo and Scania to be the closest
substitutes in the markets for city and intercity buses.
This is further confirmed by internal data submitted by
Volvo.

(298) It follows from the very high combined market shares
of Volvo and Scania, that all other suppliers (Daimler-
Chrysler, Neoplan and Bova) have weak market pos-
itions, ranging from 2 % to 10 %. Consequently, the
merged entity would have a market share about eight
times higher than that of its closest competitor. This is a
significant difference to the pre-merger situation, where
Volvo faced competition from a company, Scania, that
had a comparable market share for city buses, as well as
significant sales of intercity buses. In addition, whereas
Sweden has been a core market for Scania, there is no
evidence that is the case for any of the other manufac-
turers. This is important, as customers tend to attribute
significant importance to the track-record and commit-
ment of the manufacturer to ‘their’ market. It follows
that the merged entity would clearly become the market
leader in Sweden. As such, it would be in a significantly
better position to spread the costs related to specific
national measures (such as development of service
networks, maintaining contacts with customers and
public authorities and other promotional campaigns,
etc.) than any of is remaining, weaker competitors.

Dominant positions would be created on the
Swedish markets for city and intercity buses

Market size and market shares

Demand characteristics

(297) In 1998,

the volume of

the Swedish markets was
289 city buses and 411 intercity buses. For city buses,
the parties’ combined market share was [80 % to 90 %]
in 1998, with Volvo having [30 % to 40 %] and Scania
[40 % to 50 %]. The corresponding figure for intercity
buses was [80 % to 90 %] (combined), with Volvo
contributing [60 % to 70 %] and Scania [20 % to 30 %].
For city buses, Volvo’s market share was [40 % to 50 %]
in 1997 and [40 % to 50 %] in 1996 (the corresponding
figures for Scania were [30 % to 40 %] in 1997 and
[30 % to 40 %] in 1996). For intercity buses, Volvo’s

(299) The Swedish city and intercity bus operators have been
almost completely privatised. Volvo has submitted that
three operators, Swebus, Linjebuss and Busslink account
for [60 % to 70 %] of the total Swedish demand for city
and intercity buses, and that these companies exercise
significant buying power. Volvo has also given a number
of examples of what it considers to be ‘significant
contract losses’ over the last three years to these larger
buyers. The Commission recognises that privatisation
and consolidation among Swedish bus operators are
likely to have provided these larger entities with a
comparatively better bargaining position than that pre-

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viously held by the smaller and mainly publicly owned
local operators. This, however, does not constitute
evidence that, despite the significant overlaps created,
the proposed concentration would not increase Volvo’s
market power. Instead, the relevant question is whether
Swedish customers would have the ability to significantly
restrain the combined entity’s future market behaviour.
A common characteristic for all New Volvo’s bus
customers is that they buy a very high proportion of
their total requirements form Volvo and Scania (up to
100 %). Each customer would therefore be significantly
more dependent on New Volvo than vice versa. There-
fore, based on their purchases, there is insufficient
evidence that the Swedish customers will have sufficient
buying power to restrain New Volvo’s market behaviour.

(300) It should also be noted that most of the Swedish city
and intercity bus operators have already been privatised
for a considerable period of time (up to 10 years).
However, as can be seen from the above market shares,
Volvo and Scania have in fact been able to retain very
high and relatively stable market shares over the last
years. Against this background, it must be concluded that
the modest market share increases by DaimlerChrysler,
Neoplan and Bova over the period since liberalisation of
the Swedish bus markets cannot be taken as support
for Volvo’s contention relating to ‘significant contract
it has already been shown that
losses’. Furthermore,
fluctuations in market shares have primarily been
between the parties. It therefore appears that even large
Swedish buyers of city and intercity buses have a strong
preference for the Volvo and Scania products. The
market investigation indicates that most customers are
not very price sensitive. This is consistent with a
customer survey for city buses conducted by Volvo in
1996/97, which concluded that the purchase price was
less important than factors such as local service network,
reliability and lifetime costs. Volvo’s contention as to the
likelihood of New Volvo’s customers reducing their
purchases from New Volvo in response to the merger
has already been analysed in relation to the shrinkage
effect.

(302) In conclusion, Volvo has not been able to demonstrate
that the existing level of buying power of the city and
intercity bus operators in Sweden would be sufficient to
negate the merged entity’s ability to take advantage of
the increased market power that it would gain from the
proposed concentration.

Barriers to entry and potential competition

(303) In Sweden, Volvo and Scania also have high market
shares for heavy trucks and, to a lesser extent, touring
coaches (see table in recital 269). Therefore, to the extent
that city and intercity bus customers require aftersales
services from the manufacturer, the existing common-
ality between the service network for all vehicles creates
a lock-in effect among existing customers, who conse-
quently can be expected to display a significant degree
of brand loyalty. The widespread nature of the Volvo
and Scania service network in Sweden will therefore act
as an additional barrier to entry for other manufacturers
of city and intercity buses. For the reasons indicated in
relation to the Finnish market for touring coaches, the
market investigation also indicates that the compara-
tively high costs of establishment,
in particular as
concerns the sales and aftersales organisation, combined
with the limited size, and therefore attractiveness, of
the Swedish markets is another important barrier to
significant entry.

(304) Volvo and Scania currently have 116 and 105 service
point respectively in Sweden. All competitors have
significantly fewer service points in Sweden, with the
largest competing service network having less than one
third as many points of presence as that of the merged
entity. Consequently, the merged entity’s competitors
would be at an additional disadvantage,
in terms of
being able to offer a comprehensive service network.
Finally, the same cost-related restraints to increase the
capillarity of the service network as described for Finland
also apply in Sweden.

(301) Secondly, it should be noted that even if the Swedish
bus operator market is relatively concentrated, there are
still a significant number of small-sized bus operators.
These smaller customers are in a number of aspects in a
similar position to that of the touring coach customers,
which means that they will normally have a preference
for concentrating their purchases in one single supplier
(for reasons such as reducing the cost and complexity of
maintaining multiple contacts with suppliers, spare
parts logistics and stockholding, training of drivers and
mechanics, etc.). In addition, smaller city and intercity
bus customers are normally more dependent on their
supplier for aftersales services. For these reasons, these
smaller customers will have little or no ability to
withstand attempts by the merged entity to use its
increased market power after the concentration.

(305) Volvo has submitted that its customers generally have a
dual-sourcing policy, and that customers who have so
far bought from Volvo and Scania are likely to look for
alternative suppliers following the concentration. In its
view, this is likely to lead to a reduction of the merged
entity’s market share in Sweden, to the benefit of other
manufacturers. Volvo has also suggested that it would
be at a competitive disadvantage compared to other
manufacturers, which, according to Volvo, are more
advanced in providing [certain types of] buses. This
argument has not been confirmed by the market investi-
gation, and must therefore be disregarded. As to Volvo’s
argument relating to ‘shrinkage’, this has already been
it is to be noted that the board
analysed. However,
documents and other reports relied on by Volvo to
demonstrate this ‘shrinkage’ effect are largely focused on

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heavy trucks, and that most of these documents contain
no specific analysis of the development of the city and
in addition to the
intercity bus markets. Therefore,
Commission’s arguments set out in relation to heavy
trucks, it must be concluded that Volvo’s contention as
to the likelihood of significant ‘shrinkage’ in the sales of
city and intercity buses is only an estimation without
any firm foundation and as such cannot be given such
value as to remove the concerns following from the
combination of the two main competitors in the market.

(306) On the contrary,

it must be concluded that Volvo,
following the proposed concentration, would be in a
considerably stronger position to utilise its market
power. For example, if, in the pre-merger situation, it
had attempted to raise its prices, it would have had to
balance the potential gains from this against the risk that
a number of
its customers would switch to other
manufacturers. Given the established position of Scania,
combined with the market perception that Scania is the
closest substitute to Volvo, as confirmed by internal
Volvo data, it would, in so doing, have had to consider
the particularly high risk that customers would switch
to Scania. Following the implementation of the proposed
concentration, such a customer response would, from a
revenue viewpoint, become neutral to Volvo. Conse-
quently, the proposed operation would, as a direct result,
reduce Volvo’s risk in exercising its market power.

(307) In addition to the effect of neutralising potential cus-
tomer reaction (as far as Scania is concerned) to a price
increase, the concentration would also have the effect of
creating a strong position of market leadership for
Volvo. Given that
the proposed transaction would
increase Volvo’s share of the Swedish city bus market
from around [40 % to 50 %] to approximately [80 % to
90 %], it would also be likely to have the effect that
other suppliers (all of which have a market share below
10 %) would become increasingly likely to accept Volvo’s
price leadership. The same applies for the intercity bus
market, where Volvo’s market share would increase
from [50 % to 60 %] to [80 % to 90 %], and where
the only significant competitor would be removed.
Consequently, the transaction would also reduce the risk
of an aggressive response from the smaller suppliers, if
Volvo were, for example, to increase its prices.

(308) It follows from the foregoing that, prior to the concen-
tration, Scania has been the only significant source of
competitive pressure faced by Volvo on the Swedish
market. This source of competition would be removed
as a result of the proposed concentration, in a way that
would significantly strengthen Volvo’s ability to exercise
its market power. The market investigation does not
support a finding that the buying power of the merged
entity’s customers would be such as to significantly
restrain its behaviour on the market.

Conclusion on the Swedish markets for city and intercity buses

(309) For all of these reasons, the notified transaction would
create a dominant position on the Swedish markets for
city and intercity buses.

Dominant positions would be created on the
Finnish, Norwegian and Danish markets for city and
intercity buses

(310) The structure of the Finnish, Norwegian and Danish
markets for city and intercity buses are all to a significant
extent similar to that described in relation to Sweden.
This section will therefore focus on the existing differ-
ences, whilst making references to the previous section
where appropriate.

Market size and market shares

(311) According to the notification, in 1998, [< 140] city
buses were registered in Finland, [< 180] in Norway and
[< 250] in Denmark. The corresponding figures for
intercity buses were [< 130], [< 180] and [< 270].

(312) For city buses, the parties’ combined market share was
[90 % to 100 %] in Finland (Volvo having [70 % to
80 %] and Scania [20 % to 30 %]), in Norway it was
[60 % to 70 %] (Volvo [40 % to 50 %] and Scania [10 %
to 20 %]) and in Denmark, the parties’ combined share
was [80 % to 90 %] (Volvo [50 % to 60 %] and Scania
[30 % to 40 %]).

(313) For intercity buses, the parties’ combined market share
was [80 % to 90 %] in Finland (Volvo [60 % to 70 %]
and Scania [20 % to 30 %]), [80 % to 90 %] in Norway
(Volvo [60 % to 70 %] and Scania [10 % to 20 %]) and
[70 % to 80 %] in Denmark (Volvo [50 % to 60 %] and
Scania [20 % to 30 %]).

(314) As can be seen from these market share figures, the
same relationship that exists in Sweden, where Volvo
has consistently been the stronger of the two parties,
also applies in Finland, Norway and Denmark. The main
reason for Scania’s relatively higher proportion of the
combined market share in Denmark appears to be
related to its recent acquisition of DAB,
the most
significant body-builder in that country.

(315) According to the information submitted by Volvo, the
market share of the largest competitor in each of these
markets ranges from approximately 5 % to just below
20 % (29). It therefore follows that the merged entity, in
a similar way as described for Sweden, would have the
benefit of a market position several times stronger than

(29) Volvo had submitted that DaimlerChrysler would have a market
share around 30 % for city buses in Norway. This, however, has
not been confirmed by the investigation.

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that of its closest competitor in each of the relevant
markets. The market investigation also supports a find-
ing that Volvo and Scania have been each other’s main
competitors in Finland, Norway and Denmark, and
that customers generally consider them as the closest
substitutes for one another.

Consequently, it can be concluded, also for Norway and
Denmark, that the merged entity’s competitors would
be at an additional disadvantage in terms of being able
to offer customers a comprehensive service network.
Finally, the same cost-related restraints to increase the
capillarity of the service network as has already been
described applies also in these countries.

(316) It may be noted that,

if market shares were to be
calculated at the Nordic level, the combined city bus
sales of Volvo and Scania would be [80 % to 90 %]
(Volvo [50 % to 60 %] and Scania [30 % to 40 %]). For
intercity buses the corresponding Nordic figures would
also be [80 % to 90 %] (Volvo [50 % to 60 %] and Scania
[20 % to 30 %]). Consequently, all conclusions stated for
the four individual countries would remain valid, even if
the market were to be assessed at the Nordic level.

Conclusion on the Finnish, Norwegian and Danish markets
for city and intercity buses

(320) For all of these reasons the notified transaction would
create a dominant position on the Finnish, Norwegian
and Danish markets for city and intercity buses.

Demand characteristics

A dominant position would be created on the Irish
market for city buses

(317) The Finnish, Norwegian and Danish market have not yet
reached the same degree of privatisation as the Swedish
market and demand is generally less concentrated than
in Sweden. Consequently,
for the same reasons as
indicated in relation to Sweden, it must be concluded
that Volvo has not been able to demonstrate that the
existing level of buying power of the city and intercity
bus operators in Finland, Norway and Denmark will be
sufficient to negate the merged entity’s ability to take
advantage of the increased market power that it would
gain from the proposed concentration.

Barriers to entry and potential competition

(318) The barriers to entry relating to aftersales services and
limited attractiveness of the market described in relation
to Sweden are equally applicable to Finland, Norway
and Denmark. Moreover,
for the same reasons as
described in relation to Sweden, Volvo’s arguments on
‘shrinkage’ cannot be accepted for the other Nordic
countries. Instead, it has to be concluded that, again for
the same reasons as indicated for Sweden, the proposed
concentration would remove Scania as the only effective
these
source of competitive pressure from each of
markets, and that this would significantly strengthen
Volvo’s ability to exercise its market power.

(319) The merged entity’s competitive advantage in Finland,
relating to its significantly larger service network, has
been described in the section on touring coaches. The
situation is similar in Norway, where Volvo has 65
service points and Scania has 50, as well as in Denmark,
where Volvo and Scania have 31 and 29 service points
respectively. Again, all competitors have significantly
fewer service points in each of these countries (about a
third as many in Norway for the largest competing
service network, and,
the
the combined Volvo/Scania network).
coverage of

for Denmark, about half

Market size and market shares

(321) In 1998, the total volume of the Irish market was
110 city buses. The parties’ combined market share in
1998 was extremely high, amounting to 92 %, with
Volvo having 60 % and Scania 32 %. Volvo’s market
share has been consistently very high in Ireland over the
last three years, with shares of 88 % in 1997 and 79 %
in 1996. Volvo’s traditionally strong position in Ireland
stems from its acquisition of British Leyland in the late
1980s.

(322) With the exception of DAF and Dennis, both of which
had a market share of 11 % in 1996, but have
subsequently gone down to less than 5 %, no other
supplier (i.e. DaimlerChrysler and MAN) has managed
to reach a market share exceeding 10 % in the period
between 1996 and 1998. In fact, Scania had no sales in
the Irish city bus market in 1996 and 1997, but, as
indicated above, managed to obtain a 32 % market share
in 1998 (30).

(323) Scania’s ability to penetrate the Irish market on a
significant scale, where no other producer has managed
to do so over the last three years, provides another
strong indication that customers generally consider
Volvo and Scania as the closest substitutes for city buses.
The proposed concentration would therefore remove
this newly introduced element of competition from the
Irish market.

(30) In its reply, Volvo claims that this market share is not related to
sales but registrations since Scania’s market share is based on city
buses leased by Bus E´ ireann from Scania Bus and Coach in the
United Kingdom. However, Volvo has not proposed that the
relevant market should exclude leased vehicles and has not
provided figures based on sales only.

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(324) It follows from the very high combined market shares
of Volvo and Scania,
that all other suppliers have
extremely weak market positions (below 5 %). Conse-
quently, the merged entity would have a market share
almost 20 times higher than that of its closest com-
petitor.

Demand characteristics

(325) In Ireland, city bus services are still largely operated by
important of which is
public authorities, the most
Dublin Bus. Consequently, most purchases of city buses
in Ireland will be subject to a public tendering procedure.
However, as can be seen from the table in recital 291,
Volvo has (apart from the loss of market share to Scania
in 1998) been able to retain very high and relatively
stable market shares over the last three years. Against
this background, it must be concluded that there is no
evidence to permit
the public
procurement procedure would enable other city bus
suppliers to provide the same degree of competition to
the merged entity, as Scania has recently demonstrated
its ability to do.

the conclusion that

(326) In conclusion, Volvo has not been able to demonstrate
that the existing level of buying power of the city bus
operators in Ireland will be sufficient to negate the
merged entity’s ability to take advantage of the increased
market power that it would gain from the proposed
concentration.

Barriers to entry and potential competition

(327) Volvo’s strong position in Ireland is linked to its
acquisition of British Leyland’s bus division and the
perception that it has provided the best combination of
price and aftersales services. Its ability to consistently
maintain very high market shares, despite the fact
that the market is mainly driven by public tendering
procedures, indicates that other suppliers find it difficult
to enter the market on a significant scale. For the reasons
indicated in relation to the Nordic markets, the limited
size, and therefore attractiveness, of the Irish market
appears to be another important barrier to significant
entry.

(328) Given that Scania, over the last three years, has been the
only other supplier able to significantly challenge Volvo
for sales of city buses in Ireland, it must be concluded
that the proposed concentration would improve Volvo’s
ability to use its market power. For example, in the
absence of the concentration, Volvo would, if it con-
sidered raising its prices by a small but significant
amount, have had to balance the potential gains from
this against the risk that a number of its customers
would switch to Scania, which in 1998 demonstrated its
ability to make significant inroads into the market.
Following the implementation of the proposed concen-
tration, such a customer reaction would, from a revenue
viewpoint, become neutral to Volvo. Consequently, as

no other supplier has demonstrated the same ability to
take market share, the proposed operation would, as a
direct result, reduce Volvo’s risk in exercising its market
power.

(329) It follows from the foregoing that, prior to the concen-
tration, Scania has been the only significant source of
competitive pressure faced by Volvo on the Irish market.
This source of competition would be removed through
the proposed concentration,
in a way that would
significantly strengthen Volvo’s ability to exercise its
market power. The market investigation does not sup-
port a finding that the buying power of the merged
entity’s customers would be such as to significantly
restrain its behaviour on the market. It is therefore
concluded that the notified transaction would create a
dominant position on the Irish market for city buses.

Conclusion on the Irish market for city buses

(330) For all of these reasons the notified transaction would
create a dominant position on the Irish market for city
buses.

Conclusion on the bus markets

(331) The proposed concentration would create a dominant
position on the markets for touring coaches in Finland
and the United Kingdom, as well as on the markets for
city and intercity buses in Sweden, Finland, Norway and
Denmark as well as on the Irish city bus market.

V. UNDERTAKINGS PROPOSED BY VOLVO

(332) In order to ensure the adoption of a decision pursuant
to Article 8(2) of the Merger Regulation, on 21 February
2000, Volvo submitted the following undertakings that
would take effect on the date of adoption of such a
decision.

A. HEAVY TRUCKS

1. Opening up of Volvo and Scania’s dealer and
service networks in Sweden, Finland, Denmark and
Norway, as well as the Volvo network in Ireland.

2. Divestiture of Volvo’s 37 % stake in Bilia AB (a

distributor in the Nordic countries).

3.

Best efforts to ensure abolition of Swedish cab
crash test.

4. A two-year temporary suspension of the Scania
brand name in Sweden, Finland and Norway.

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B. COACHES, CITY AND INTERCITY BUSES

1.

Same opening of sales and service network and
suspension of Scania brand as for heavy trucks (1
and 4 above).

2. Divestiture of three bus and coach body-building

plants (two in Denmark, one in Sweden).

3. Access to body-building capacity in Finland.

(333) Volvo has contacted the Swedish Government and
requested that it eliminate the specific Swedish technical
safety standard applicable to cabs used on heavy duty
trucks (the ‘cab crash test’) as soon as practically possible
and in any event no later than six months following
the adoption of the Commission’s Decision. After the
adoption of the Commission’s Decision, Volvo under-
takes to use its best efforts to ensure abolition of the cab
crash test in Sweden and to keep the Commission
informed of progress in this regard on a basis to be
determined by the Commission.

(334) Volvo has proposed to open up its and Scania’s sales
and service networks by informing all authorised dealers
and service centres in relevant countries that they are
free to establish contractual relations with Volvo’s
competitors,
including their foreign and/or Swedish
subsidiaries, for the sale and leasing of those competitors’
heavy trucks, city buses, intercity buses and performance
of maintenance, servicing and repair related thereto or
to provide the same on an ad hoc basis without the need
to establish a separate company or to carry out such
activities at separate premises. Moreover, according to
the proposal, dealers and service stations may terminate,
at their option, with effect two months after providing
written notice to Volvo, any existing dealership agree-
ments or service centre agreements. Volvo further
commits itself not to discriminate against any actual or
prospective dealer or service centre on the basis that
they deal with any of Volvo’s competitors. In the event
that the combined share of Volvo and Scania heavy
trucks falls below 40 % of total heavy truck sales in the
relevant countries in a given year, Volvo shall, according
to its proposal, be free to enter into exclusive arrange-
ments with new or existing dealers or service centres
and shall no longer be bound by the commitment,
except as such rights may be provided in the dealership
or service centre agreements.

(335) Volvo proposes to divest its stake in Bilia AB and the
three bus and coach body-building plants (Volvo’s plant
in Silkeborg,
in Aabenraa, Denmark, Scania’s plant

Denmark and Scania’s plant in Katrineholm, Sweden)
within six months of the Commission’s Decision, with
the possibility of an extension of another six months.
The proposal also contains provisions for supervision
and possible sale by a trustee.

(336) The undertaking to provide third parties access to
Volvo’s bus and coach body-building capacity relates to
Volvo’s subsidiary, Carrus Oy (‘Carrus’), situated in
Finland. According to Volvo, Carrus currently has a
practice of supplying bus and coach bodies to unrelated
bus, coach and chassis suppliers on commercial terms.
Volvo would commit to oblige Carrus to supply bus and
coach bodies to Volvo’s competing European bus and
coach suppliers for their sales of buses and coaches in
Finland on terms that are non-discriminatory as com-
pared with the supply of Carrus bus and coach bodies to
Volvo for sale in Finland.

(337) Finally, the proposal not to use the Scania trade mark
for new heavy trucks, city/intercity buses and coaches
sold in Sweden, Finland an Norway for a period of two
years would commence on the date of the closing of the
transaction or as soon as contractually possible. The
proposal is subject to provisions, which means that the
Scania vehicles would continue to be sold during the
two-year period, but under another trade mark to be
decided solely by Volvo. The proposal is also subject to
the fulfilment of existing contracts and orders, as well as
to the sale of products in existence prior to the closing.

VI. ASSESSMENT OF THE PROPOSED UNDERTAKINGS

(338) Even though the undertakings proposed by Volvo could,
if properly implemented, have some beneficial effect on
the competitive situation in the relevant markets, the
Commission has, following contacts with market partici-
pants, come to the conclusion that the proposed under-
takings are insufficient to resolve the competitive con-
cerns resulting from the elimination of Volvo’s main
competitor, Scania.

A. HEAVY TRUCKS

(339) The market test has confirmed that Volvo’s proposals
relating to the Swedish cab crash test and the suspension
of the Scania brand in Sweden, Norway and Finland
would have little or no impact on the competitive
situation. The cab crash test can only be abolished by
the Swedish Government, which has not indicated that
the test would be removed within the six-month period
referred to by Volvo. Despite Volvo’s undertaking to use
its best efforts to seek its abolition, it is therefore not
possible to conclude for the purposes of this assessment

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that the test would be abolished. Equally, the proposed
suspension of the Scania brand is of limited significance.
First, it relates to a two-year period (and does not extend
to Ireland). Moreover, it would not imply the withdrawal
of the Scania product line which, according to the
proposal, would continue to be sold under another
brand of Volvo’s choice. Nor would the suspension
apply to existing contracts, binding orders or products
in stock. In conclusion, these proposals would appear
very limited in substance and consequently unlikely to
have any competitive impact.

(342) First, a number of respondents have questioned the
effectiveness of the proposal as regards Scania’s dealer
and service network which includes wholly owned
dealers in all Nordic countries. In Sweden [30 % to 40 %]
of Scania’s sales are made through wholly owned dealers.
The corresponding figures for Norway and Finland are
even higher ([90 % to 100 %]) and [90 % to 100 %],
respectively). In fact, the proposed opening up of the
Scania network would only relate to three independent
dealers in Norway and to one independent dealer in
Finland. For these reasons some respondents have
suggested that divestiture of these wholly owned net-
works would have a greater market impact.

(340) The market test has also revealed scepticism about the
proposed divestiture of Volvo’s 37 % stake in Bilia AB (a
truck, bus and car distributor in the Nordic countries),
even though this would remove this vertical
link.
According to the market test, event if this link were to
be removed, Bilia would, in the same way as all other
Volvo dealers, continue to be economically dependent
on Volvo,
in the sense that a large majority of its
business activities relate to the sale and service of Volvo
vehicles. Moreover, it has been suggested that the most
likely buyer is Ford, which owns the Volvo car division,
and uses Bilia for its distribution of cars in the Nordic
countries. Ford is not active on the market for heavy
trucks and buses and would therefore not necessarily
provide any new competition on the market. In addition
to that, Volvo has indicated that it may terminate its
contract with Bilia AB if this latter company is acquired
by a competing manufacturer and thereby takes on a
competing brand.

(341) As to the measures proposed for the opening up of
Volvo’s and Scania’s dealer and service networks, the
market test has confirmed that they are unlikely to
provide the existing dealers with the necessary strong
incentive to take on an additional brand or to switch
completely to a new brand. The proposal would basically
leave the existing structure of the Volvo and Scania
organisations intact (that is to say, there would be no
divestiture, active termination of contracts, etc.). This in
itself leads to significant doubts as to the effectiveness of
the proposal. Therefore, in order to conclude that the
proposal would have a significant impact on the market
structure in the foreseeable future, it would be necessary
to demonstrate that, despite its lack of structural features,
it is highly likely to provide the existing dealers with a
strong incentive to change their behaviour in a way that
would have a structural impact on the market. There
are, however, both formal and economic arguments
against such a conclusion. Most respondents believe that
the proposal is unlikely to have any significant effect on
reducing New Volvo’s market share in the next two to
three years. Both formal and economic arguments have
been given against the effectiveness of the proposal.

(343) Secondly, all Volvo and Scania dealers are, according to
the block exemption for motor vehicle distribution (31),
already able to take on a competing brand. The only
requirement is that they do so on separate business
premises. The fact that Volvo and Scania dealers have
not, in the past, used the possibility of taking on another
brand has been mentioned as an indication of the limited
attractiveness of dual-branding distribution (both from
the viewpoint of the supplier and the distributor). In
addition to that, Volvo has, in relation to the proposed
Bilia divestiture, reserved its right
to terminate its
distribution agreement with Bilia should it be acquired
by a competitor. Third parties have indicated this as
Volvo’s indirect acknowledgment of the unattractiveness
of dual-brand distribution.

(344) Thirdly, for the service stations, the market test has
confirmed that the Volvo and Scania networks have
already, in the past accepted, de facto, to do work for
competing brands. Therefore, the proposal is unlikely to
lead to any substantial change.

(345) Fourthly, a number of reasons have been indicated for
concluding that the proposal would not provide existing
Volvo and Scania dealers and service stations with a
sufficiently strong economic incentive to take on another
brand. From a purely economic viewpoint it has been
stressed that these dealers will continue to be econom-
ically dependent on revenues derived from sales and
servicing of Volvo and Scania vehicles for a long period
(up to 15 years has been mentioned). The reason for this
continued dependency is that trucks and buses are
durable goods, and that, consequently, the main part of
the ‘rolling stock’ of such vehicles will continue to be
Volvos and Scanias for the foreseeable future. In this
context it should be recalled that a dealer achieves about

(31) Commission Regulation (EC) No 1475/95 of 28 June 1995 on
the application of Article 85(3) of the Treaty to certain categories
of motor vehicle distribution and servicing agreeements (OJ
L 145, 29.6.1995, p. 25).

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[70 % to 80 %] of its revenue from service and sales of
spare parts (and [20 % to 30 %] from sales of new
vehicles). Other disincentives for dealers to take on new
brands have been indicated to be the risk that New
Volvo could decide to adopt a new policy of more direct
sales from the head office (stated to represent 40 % of
all Volvo’s sales in Finland today), and the fact that there
is a widespread belief that New Volvo will reduce the
size of its combined dealer network in the future, and
that ‘disloyal dealers’ would run a higher risk of being
excluded at that stage.

will continue to sell Volvo and Scania, and which, for
significant periods of
time, have been telling their
customers that the best option is a Volvo (or Scania)
vehicle.

(349) In conclusion, the proposed undertaking to open up the
dealer and service networks is not structural in character,
and is unlikely to provide a strong incentive for the
existing dealers to change their behaviour in a way that
would have a structural impact on the market.

(346) Fifthly, Volvo’s proposed undertaking not to discrimi-
nate against dealers which take on a new brand has been
criticised as being too vague and impossible to monitor
effectively. Similarly, the provision that the undertaking
should no longer have effect if the combined Volvo and
Scania market share were to fall below 40 % has been
criticised as making it impossible for both dealers and
other suppliers to take on the necessary long-term
investments related to building up a sufficient installed
base of a new brand.

(347) Sixthly, the market test has also confirmed that the
proposal is unlikely to enable other suppliers to create
a sufficiently capillary network to provide effective
competition with New Volvo (in particular, owing to the
limited incentives for dealers as set out above). Most
respondents believe that only a very limited number of
Volvo and Scania dealers would, within a two to there
year period, significantly reduce their dependency on
New Volvo by taking up other brands. For this reason
the proposal would, at most, provide each of the other
suppliers with access to a limited number of dealers.

(348) Seventhly, competitors believe that the risks involved in
entering or expanding their market presence through
the existing Volvo and/or Scania networks would be
high. In this context, it has been explained that the sunk
costs involved would still be significant. The investments
would include, inter alia, employing a full network of
specialised mechanics and dedicated sales personnel,
training, investment in specialised tools, stock of spare
parts and computer and administrative systems.
In
addition, there would be significant commercial costs in
terms of selling the products at prices which are, at least,
10 % to 20 % below those of Volvo and Scania, as well
as offering the dealers a significantly higher margin to
compensate for the lower volumes until a sufficient
these costs,
installed base is reached. Given all of
competitors have expressed strong reservations about
entrusting the marketing of their vehicles to dealers that

B. COACHES, CITY AND INTERCITY BUSES

(350) As stated above, Volvo’s proposal includes the same
opening up of the dealer and service network as for
heavy trucks. This means, first, that the proposal does
not include any measure directed at the coach market in
the United Kingdom, where New Volvo would have a
combined market share of 52 %. Secondly, as indicated
by Volvo itself, the dealer and service network is of more
limited interest for, in particular, the city and intercity
bus markets than for heavy trucks (as these vehicles are
normally sold directly from the manufacturer’s head
office and since servicing is more often carried out in-
house by the customers). This means that the lack of
incentive for dealers and service stations to take up new
brands would apply to an even greater extent than for
heavy trucks. This proposal can therefore not be ex-
pected to have a significant impact on the competitive
situation in the relevant bus and coach markets.

(351) Moreover, for the same reasons as indicated in relation
to heavy trucks, the proposal for a limited suspension of
the Scania brand name is unlikely to have any significant
impact on the relevant markets for coaches, city buses
and intercity buses.

(352) The market test has also confirmed that the proposal
to allow competitors access to Volvo’s body-building
capacity in Finland (Carrus Oy), would provide little or
no change from the existing situation. Some respondents
have indicated that they have been, and would continue
to be, unwilling to contract with Carrus, as it is a wholly
including Volvo
owned subsidiary of Volvo. Others,
itself, have confirmed that Carrus has already, in the
past, had a practice of supplying bus and coach bodies
to unrelated bus and coach suppliers on commercial
terms. The addition of a behavioural non-discrimination
undertaking is also unlikely to increase the attractiveness
of the proposal (and would from a logical viewpoint
only have an effect if Carrus has been discriminating
against third parties in the past). For these reasons, the
proposed undertaking relating to Carrus is unlikely to
have any significant impact on the relevant markets for
coaches, city buses and intercity buses.

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(353) Volvo’s proposal to divest three bus and coach body-
building plants (Volvo’s plant in Aabenraa, Denmark,
Scania’s plant in Silkeborg, Denmark and Scania’s plant
in Katrineholm, Sweden) has also been criticised as not
improving market access for competitors to the relevant
market and, more generally, as being insufficient to
remove the identified competition concerns.

(354) First, a number of respondents have indicated that this
proposal is in effect limited to a proposal to divest the
resulting overcapacity of New Volvo. It has been pointed
out that both Volvo and Scania have recently invested
in modern body-building capacity in Poland, and that
the most efficient Nordic plants will be retained (Carrus
in Finland, and Säffle in Sweden). None of the contacted
third parties have expressed any interest in acquiring the
three proposed plants.

(355) It has also been submitted that the divestiture of the
three proposed plants would not significantly facilitate
access to the Nordic markets for competitors, in particu-
lar as there is a strong belief that these plants, for
technical compatibility reasons, will continue to be
dependent on chassis supplies by New Volvo for the
foreseeable future. This dependency will also mean that
after sales service on the completed vehicles will have to
continue to be performed by New Volvo.

(356) Finally, according to Volvo, the Aabenraa plant produced
[230 to 240] city and intercity bodies in 1999. Out of
these, [190 to 200] were delivered to Denmark, [20 to
30] to Sweden, and [10 to 20] to Norway. The Scania
plant in Katrineholm delivered only city bus bodies,
[90 % to 100 %] of which went to the Swedish market
(part of the remaining [0 % to 10 %] went to Finland
and Iceland). Scania’s Silkeborg plant manufactures both
city and intercity buses. it produces bodies under the
DAB trade mark. Apart from [10 to 20] units registered
in northern Sweden, all of its production is destined for
the Danish market. Therefore, although the undertakings
proposed by Volvo for the coach, city and intercity bus
in character,
markets are, at
the market
they would not
significantly facilitate access to the relevant market for
competitors and that, even under the most favourable
interpretation, they are of insufficient scope to eliminate
the competition concerns in each of the relevant mar-
kets.

test has indicated that

least partly, structural

(357) In conclusion, the undertakings proposed by Volvo for
the coach , city and intercity bus markets are, even under
the most favourable interpretation, of insufficient reach
to remove the competitive concerns in each of the
relevant markets.

New proposal by Volvo

(358) At a very late stage in the procedure, on 7 March
2000, Volvo proposed a new and substantially modified
undertaking. The new proposal differs from the above
described undertakings, submitted on 21 February 2000
in the following respects:

— the proposal to divest Volvo’s 37 % shareholding

in Bilia AB is withdrawn,

— the proposal to suspend the use of the Scania brand

name for a two-year period is withdrawn,

— a new proposal has been introduced, [concerns

distribution networks],

— a provision has been added to the proposal to
divest the Scania body-building plants [concerns
sales of city and intercity bus chassis].

(359) Article 18(2) of Regulation (EC) No 447/98 provides
that commitments intended by the parties to form
the basis of a decision of compatibility pursuant to
Article 8(2) of the Merger Regulation are to be submitted
to the Commission within three months of the decision
to open proceedings, although the Commission may, in
exceptional circumstances, extend that period. Volvo did
not put forward any reasons, which could be regarded
as constituting such exceptional circumstances. The last
day for submitting proposed commitments in this case
was 21 February 2000 and Volvo’s new proposal was
submitted on 7 March 2000. In the Commission’s view,
there was nothing in the new proposal which Volvo
could not have included in an undertaking submitted
within the three-month time limit. The present Decision
therefore will not take this proposal into account.

(360) It may be added that the implementation of the new
proposals would be complex from a procedural view-
point, in particular as regards the proposal to terminate
the contracts with dealers and/or divest sales points. The
procedure according to which interested third parties
would be able to take over part of the Volvo and Scania
distribution capacity is also complex and would require
detailed examination. Such procedural complexities
inherently, and in particular when submitted at a late
stage in the procedure, increase the difficulty in assessing
the proposal’s potential effects from a substantive view-
point.

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(361) It is not possible to conclude that the new proposal in
an obvious and clear-cut way would remove all the
identified competition concerns. The complexity of the
new proposals would have made it impossible, in the
short time remaining before the expiry of the deadline
under Article 10(3) of
for
the Commission to evaluate them effectively. Further
investigation would have been called for, and it would
also have been necessary to seek the views of interested
third parties pursuant to the relevant provisions of the
Merger Regulation.

the Merger Regulation,

pliance with the proposed undertakings, it would create
dominant positions in the markets for heavy trucks in
touring
Sweden, Norway, Finland and Ireland,
coaches in Finland and the United Kingdom, for intercity
buses in Sweden, Finland, Norway and Denmark, and
for city buses in Sweden, Finland, Norway, Denmark
and Ireland, each of which would result in effective
competition being significantly impeded in the common
market within the meaning of Article 2(3) of the Merger
Regulation and Article 57 of the EEA Agreement,

for

HAS ADOPTED THIS DECISION:

Conclusion on the proposed undertakings

Article 1

(362) For the reasons indicated above, the Commission has
come to the conclusion that the undertakings proposed
by Volvo on 21 February 2000 are insufficient to
remove the competitive concerns resulting from the
proposed acquisition of Scania. As concerns the new
proposal of 7 March 2000, it is firstly concluded that
Volvo has not been able to justify its submission several
weeks after the expiry of the deadline for submission of
undertakings. In any event the new proposal does not in
an obvious and clear-cut way remove all the identified
competition concerns.

The concentration notified to the Commission by AB Volvo
on 22 September 1999, whereby AB Volvo would acquire sole
control over Scania AB is hereby declared incompatible
with the common market and the functioning of the EEA
Agreement.

Article 2

This Decision is addressed to:

AB VOLVO
40508 Göteborg
Sweden.

VII. OVERALL CONCLUSION

Done at Brussels, 14 March 2000.

(363) In view of the above, the Commission has come to the
conclusion that the notified concentration is incompat-
ible with the common market and the functioning of
the EEA Agreement, since, even assuming full com-

For the Commission

Mario MONTI

Member of the Commission