2004/123/EC: Commission Decision of 12 January 2001 declaring a concentration to be compatible with the common market and the functioning of the EEA Agreement (Case COMP/M.2060 — Bosch/Rexroth) (Text with EEA relevance.) (notified under document number C(2000) 3785)
Date: 2001-01-12
Institutions: European Commission
Subjects: application of EU law, consumer goods, economic concentration, electrical equipment, hydraulic machinery, industrial enterprise, intermediate goods, merger control

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 12 January 2001

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

(Case COMP/M.2060 — Bosch/Rexroth)

(notified under document number C(2000) 3785)

(Only the German text is authentic)

(Text with EEA relevance)

(2004/123/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Whereas:

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(2)(a) thereof,

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

Having regard to the Commission Decision of 29 August 2000
to initiate proceedings in this case,

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

(1) On 13 July 2000 the Commission received a notification
of a proposed concentration pursuant to Article 4 of
Regulation (EEC) No 4064/89. Under the proposed
transaction, Robert Bosch GmbH (Bosch)
intends to
acquire control, within the meaning of Article 3(1)(b) of
the Regulation, of Mannesmann Rexroth AG (Rexroth).
Rexroth is a subsidiary of Mannesmann Atecs AG
(Atecs), a Mannesmann AG holding company.

(2)

After examination of the notification, the Commission
concluded that the notified operation fell within the
scope of Regulation (EEC) No 4064/89 and raised
serious doubts as to its compatibility with the common
market and with the functioning of the EEA Agreement.
The Commission therefore decided on 29 August 2000,
under Article 6(1)(c) of
to initiate
proceedings pursuant to Article 6(1)(c) of the Regulation
and Article 57 of the EEA Agreement.

the Regulation,

(1) OJ L 395, 30.12.1989, p. 1; corrigendum OJ L 257, 21.9.1990,

p. 13.

(2) OJ L 180, 9.7.1990, p. 1.
(3) OJ C 39, 13.2.2004.

The Advisory Committee discussed the draft of this
Decision on 4 December 2000.

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I. THE PARTIES

(3)

(4)

Bosch operates internationally in the fields of motor
vehicle technology, communications technology, con-
sumer durables (electrical tools, electrical household
appliances, etc.) and producer goods (automation tech-
nology, packaging machines).

Rexroth operates itself or through subsidiaries in the
fields of hydraulics (hydraulic drive and open and closed
loop control components, power units and systems,
pumps, motors and gear technology), and automation
(electrical control and drive components, and movement
and control technology).

II. THE OPERATION

A. BACKGROUND TO THE CONCENTRATION

(5) Mannesmann was taken over in the spring of 2000 by
Vodafone Airtouch plc (4). The purpose of the takeover
was to establish an international telecommunications
supplier. Mannesmann therefore decided subsequently
to shed its engineering and automotive activities. For the
purpose of the hive-off, the five companies Dematic,
VDO, Sachs, Demag Krauss-Maffei and Rexroth were
brought into the intermediate holding company Atecs.
The shareholders in Atecs are at present Mannesmann
(54 %) and its wholly owned subsidiary Mannesmann
Investment GmbH (Mannesmann Investment) (46 %).

(6)

(7)

(8)

Siemens intends to acquire sole control of Atecs and
hence also over the subsidiaries of Atecs. Immediately
following this transaction, Bosch will acquire sole con-
trol, within the meaning of Article 3(1)(b) of the Council
Regulation, of Rexroth. This concentration is the subject
of these proceedings.

B.

IMPLEMENTATION OF THE OPERATION

Siemens will acquire sole control of Atecs by acquiring
50 % plus two shares in the share capital. Mannesmann
— which will hold the other 50 % minus two shares in
Atecs’ share capital — will abstain from voting at the
shareholders’ general meeting.

The share acquisition is made up as follows: Mannes-
mann Investment will sell its 46 % share in Atecs to
Siemens. As a result of a capital increase, in respect of
which Mannesmann will renounce its subscription right,
Siemens will then, on the basis of the newly subscribed
shares, receive 50 % of the share capital of Atecs plus
two shares. Siemens and Mannesmann have also agreed
an irrevocable purchase or sale option with respect to

(4) See Commission Decision COMP/M.1795 of 12 April 2000.

the remaining Atecs shares held by Mannesmann, an
option which can be taken up by Siemens in the period
from 1 April 2002 to 31 December 2003 and by
Mannesmann from the day of the closing until 30 Sep-
tember 2002.

C. ACQUISITION OF SOLE CONTROL OF REXROTH BY BOSCH

(9)

Directly subsequent to the acquisition of control of
Atecs by Siemens, Bosch will acquire sole control of
Rexroth.

(10) A business leasing contract and a control contract
will be concluded between Bosch and Rexroth. These
contracts give Bosch management control over Rexroth.

(11) The business leasing contract provides that the conduct
of Rexroth’s business is in the hands of Bosch alone,
which will operate the leased undertaking in its own
name and for its own account (Article 1(2) of the
Rexroth business leasing contract). For this purpose,
Rexroth places all the undertaking’s assets at Bosch’s
disposal. The rental to be paid to Rexroth under Article 9
of the business leasing contract is a fixed amount to be
the economic
paid monthly and is irrespective of
performance of the leased undertaking.

(12) The control agreement places Rexroth under the man-
agement of the controlling company Bosch, which is
entitled to give instructions to Rexroth’s managing
board. The ‘profit share’ to be paid to Rexroth is a fixed
amount which has been determined once and for all and
is independent of business performance.

(13)

Further to these arrangements between Bosch and
Rexroth, Bosch and Siemens (as a shareholder
in
Rexroth) have, in a third addendum to the Supplemen-
tary Consortium Agreement, concluded agreements
which further secure Bosch’s control over Rexroth:

(14) Under Item III(1) of the Supplementary Consortium
Agreement, Siemens and Bosch have agreed that sole
entrepreneurial responsibility for and control of Rexroth
lies with Bosch.

(15) Under Item III(4) of the Supplementary Consortium
Agreement, Siemens undertakes to exercise its voting
right at the general meeting of Rexroth shareholders
solely in accordance with Bosch’s instructions. Siemens
will ensure that only persons appointed by Bosch are
chosen as shareholder representatives on Rexroth’s
supervisory board.

(16) Under Item IV(3) of the Supplementary Consortium
Agreement, all the opportunities and risks associated
with Rexroth’s business,
including responsibility for
financing, relate solely to Bosch.

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(17) Atecs, as a shareholder in Rexroth, and — via Atecs —
its parent company Siemens have no rights of influence
with regard to Rexroth. Their proprietor’s interest in
Rexroth too is limited to the leasing income and the flat-
rate ‘profit share’ which Rexroth receives.

III. COMMUNITY DIMENSION

(18) The undertakings concerned have an aggregate world-
wide turnover of more than EUR 5 000 million (Bosch
EUR 27 906 million, Rexroth EUR [...] (*) million) and
they each have a Community-wide turnover of more
than EUR 250 million (Bosch EUR [...]* million, Rexroth
EUR [...]* million). The undertakings concerned do not
achieve more than two thirds of their Community-wide
turnover in one and the same Member State. The
concentration therefore has a Community dimension. It
also constitutes a case of cooperation under the EEA
Agreement.

(22) On the basis of differences in design and use, a
distinction is made between industrial hydraulics and
mobile hydraulics. Although the components which are
used in industrial and mobile hydraulics are based
essentially on the same technological approaches, the
Commission considers with the parties that they belong
to separate product markets (5). The crucial factor here
is the difference in design, size, working pressure and
useful life which result from the different performance
requirements. As regards useful life and load capacity,
the demands made on industrial hydraulics component
systems are much higher, since they are designed for
continuous industrial operation. By contrast, mobile
hydraulics components must be of optimum weight and
shock resistant
for use in mobile machines. These
differences and the resulting differences in industrial use
mean that industrial hydraulics components are not in
general
interchangeable with mobile hydraulics com-
ponents.

IV. COMPATIBILITY WITH THE COMMON MARKET

Hydraulic components

(1) RELEVANT PRODUCT MARKETS

(19) Bosch and Rexroth are both involved in the production
and marketing of automation technology products,
with Bosch being active in automation technology
and Rexroth having its business divisions Rexroth
Hydraulics, Brueninghaus Hydromatik, Lohmann & Stol-
terfoht, Rexroth Indramat, Rexroth Star, Rexroth Mec-
man and Rexroth Gieβerei.

(20) The parties divide the activity areas of the undertakings
concerned into the categories ‘hydraulics’, ‘gearing for
‘electrical drive and
‘pneumatics’,
drive technology’,
control
systems’,
‘linear
systems’,
‘assembly and deburring technology’,
‘tightening and
press-fit systems’ and ‘foundry products’.

technology/linear

1. HYDRAULICS

(21) Hydraulics is, in technical terms, the transmission of
power and signals through pressurised fluids in closed
or open systems. In the technology, hydrostatics, i.e. the
transmission of power and signals through the static
pressure of a fluid, is distinguished from hydrodynamics,
where power and signal transmission is effected through
kinetic energy. Both technologies are applied in many
drive and control systems.

(23) A hydraulic power system used in industry is generally
made up of the same key components. A mechanically
driven hydraulic pump produces hydraulic energy which
can be directed by means of valves and is converted via
the hydraulic cylinder or the hydraulic motor into
mechanical energy.

(24) According to the information provided by the parties,
the individual components are not interchangeable with
one another as regards their function in a hydraulic
power system. The parties have also stated that these
components are sold by the hydraulics industry individu-
ally to machine producers. Although the Commission’s
investigations have shown that hydraulic components
are to some extent sold as systems, the market definition
provided by the parties has to a large extent been
confirmed by the investigations. The majority of cus-
tomers buy the relevant hydraulic components individu-
ally. There are no technical requirements on customers
to buy these components as systems. Furthermore, the
the individual
market
hydraulic components are in general not adapted for
specific branches of industry. Accordingly, as far as
industrial hydraulics are concerned, separate product
markets may be distinguished for hydraulic pumps,
hydraulic motors, hydraulic valves including electronics,
hydraulic accessories, and hydraulic power units, com-
ponents and hydraulic units (blocks) (see Case No IV/
M.152 — Volvo/Atlas).

investigation has shown that

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

(5) See Case No IV/M.152 — Volvo/Atlas.

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1.1.

Industrial hydraulics

(25) According to the information provided by the parties,
the industrial hydraulics market consists of various
component markets. These are the markets for hydraulic
pumps, hydraulic motors, hydraulic cylinders, hydraulic
valves, hydraulic accessories and hydraulic power units,
components and hydraulic units (blocks).

1.1.1. Hydraulic pumps

(26)

In the parties’ view, the market for hydraulic pumps
must be divided into further submarkets. Accordingly,
the individual types of hydraulic pumps form different
markets. According to the parties, the technical designs
they
and modes of operation are so different
are not interchangeable with one another. There are
therefore separate markets for axial piston pumps, radial
piston pumps, vane pumps and gear pumps.

that

(27) A gear pump is a hydraulic pump with two or more
gears working together within a housing. Volume forma-
tion takes place between the tooth flanks and the
housing walls. Gear pumps are essentially designed as
fixed-displacement pumps. Gear pumps are moderate in
price and have a wide speed range (up to 6 000 rev/min,
depending on type).

(28) Vane pumps have movable vanes which are directed
radially in a rotor and are supported on an excentric
stroke ring. This produces, during one revolution,
increasing and decreasing displacement volume. Vane
pumps can be designed either as fixed-displacement
pumps or as variable-displacement pumps.

(29) The Commission’s investigation has confirmed this
market division, in that vane pumps and gear pumps do
not belong to the market
for piston pumps (axial
and radial piston pumps). Piston pumps cannot be
substituted by gear pumps. This is particularly because a
gear pump is always a fixed-displacement pump (6),
while piston pumps are usually variable-displacement
pumps (7). Similarly, according to the customers ques-
tioned, gear pumps cannot be substituted for piston
pumps. The main reason for this is the limited working
pressure of gear pumps (max. 200 bar).

1.1.1.1.

Piston pumps

(30)

In the parties’ view, axial piston pumps and radial piston
pumps cannot be assigned to a single market
for
hydraulic piston pumps. Although the displacement
principle is the same with both types, there are a number

(6) Pumps with a fixed delivery.
(7) Pumps with variable delivery.

of differences. According to the information provided
by the parties, radial piston pumps work at speeds of up
to only 1 800 revolutions per minutes, which means
that they are unsuitable for being driven by combustion
engines, which run much faster. According to the
parties, axial piston pumps work at speeds of up to
3 000 revolutions per minute. They can therefore be
driven by combustion engines and are, according to the
parties, in contrast to radial piston pumps, particularly
suitable for use in mobile hydraulics.

(31) Another relevant difference in the parties’ view relates to
the production of working pressure. While radial piston
pumps produce working pressure of up to 350 bar, the
figure for axial piston pumps ranges up to 450 bar,
which makes it possible for them to be used in industrial
hydraulics with particular pressure requirements. Fur-
thermore, axial piston pumps achieve a maximum
volume flow rate of 1 000 cm3, whereas the volume
flow rate in the case of radial piston pumps is limited to
250 cm3. In addition, radial piston pumps are said to be
more expensive to produce and their cost price is
therefore higher. According to the parties, radial piston
pumps show less wear and tear than axial piston
pumps and have a longer maintenance-free useful life.
According to the parties, the absence of non-ferrous
metals gives radial piston pumps an advantage in the
pumping of water-based special fluids. All in all, the
parties take the view that these differences mean that
there are different markets for axial piston pumps and
radial piston pumps.

(32) The Commission’s investigations have shown that the
fact that axial piston pumps can be operated at a higher
number of revolutions per minute is not a factor in
industrial hydraulics,
since in industrial hydraulics
pumps are for the most part not driven by combustion
engines. Although this advantage is important in mobile
hydraulics, it is not significant in the industrial hydraulics
market being examined here. By contrast, the higher
potential pressure and the greater potential volume flow
rate of axial piston pumps compared with radial piston
pumps are specific advantages, since they allow more
versatile applicability. Thus,
in the great majority of
cases it is possible to replace a radial piston pump by an
axial piston pump. However, this is not possible to the
same extent
the
technical limitations of radial piston pumps in terms of
maximum pressure and volume flow rate. As far as the
higher cost price of radial piston pumps is concerned,
the Commission’s investigations have shown that the
price disadvantage is, from the customer’s point of view,
offset by the lower wear and tear and the wider
maintenance intervals, so that, if one looks at the total
useful
life of the pump, there is direct competition
between the two types. The specific advantage of radial
piston pumps regarding the use of water-based special
solutions is in the great majority of cases irrelevant to
the customer, since customers very rarely use these
pressurised fluids in hydraulic power systems.

the other way round, because of

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(33) The Commission therefore concludes that there is signifi-
cant substitutability between the two types of pump.
During the design stage of a new generation of machines,
the manufacturer is free to opt for the use of radial or
axial piston pumps. Once he has opted for a particular
type of pump, he designs the machine in which the
pump will be used in accordance with the specific
requirements of the pump type selected. This occurs, as
a rule, before a new generation of machines is designed,
because at this stage the different characteristics of the
pumps can still be taken into account. The market
investigation has shown that the purchasers of axial and
radial piston pumps also play Bosch and Rexroth off
against one another so as to foster competition in terms
of price and quality.

(34) The Commission therefore concludes for the purposes
of this Decision that axial and radial piston pumps form
part of a single market for piston pumps.

1.1.2.

Industrial hydraulic valves and electronics

(35) Valves are used in a hydraulic power system to control
the flow of hydraulic fluid by influencing the start, stop,
direction, pressure and size of the delivery. They are sold
as individual components or as part of hydraulic units
(blocks) and hydraulic power units. The notifying parties
take the view that only the valves sold as individual
components are to be assigned to this market, while the
valves sold as part of equipped blocks and hydraulic
power units should be assigned to the market
for
hydraulic power units and control blocks.

(36) Closely associated with valves are the electronic and
sensory control systems built in to hydraulic power
systems. The electronic components and sensors used
are tailored to use in hydraulic systems and are sold
together with the valves.

(37) Both Bosch and Rexroth produce hydraulic valves. The
large number of different valve types, which can perform
either a single or multiple control functions, are accord-
ing to the parties, because of their design, properties and
applications, interchangeable to only a limited extent
and can be divided into the following product groups:

1.1.2.1. Hydraulic-mechanical flow-control, pressure-con-

trol and shut-off valves

(38) Hydraulic-mechanical

flow-control, pressure-control
and shut-off valves control the size of the volume flow
and the desired system pressure and shut off the flow in
a given direction. The Commission’s investigation has
confirmed the view taken by the parties that, in terms of
their potential use, hydraulic-mechanical flow-control,
pressure-control and shut-off valves are to be dis-
tinguished from directional valves and cartridges and
from proportional and servo valves.

1.1.2.2. Directional valves and cartridges

(39) Directional valves and cartridges essentially control the
direction of
the volume flow and its starting and
stopping. The Commission’s investigation has confirmed
the view taken by the parties that, as regards their
potential use, directional valves and cartridges are to be
distinguished both from hydraulic-mechanical
flow-
control, pressure-control and shut-off valves and from
proportional and servo valves.

1.1.2.3. Continuously adjustable valves (proportional valves

and servo valves)

(40) There is no uniform concept covering continuously
adjustable valves in the hydraulics industry. In German
the usual generic term covering continuously adjustable
flow-control, pressure-control and directional valves is
Stetigventile (continuous valves);
in English the term
proportional valves is also used as the generic term.
Continuously adjustable valves, depending on their
design, can be used electrically with regard to all the
parameters required for the control of a hydraulic
system, for example the size of the volume flow, system
pressure, shut-off of a fluid flow, starting and stopping,
and the direction of the oil flow. As a result,
in a
hydraulic system, a variable input signal can be transfor-
med into a proportional hydraulic or pneumatic output
signal. Continuously adjustable valves differ technically
from the above-mentioned valve types in the mechanism
which makes it possible for the valve to have not just
two switching alternatives (on/off or left/right or 100 %/
0 %), but a variety of individual switching stages.

— hydraulic-mechanical flow-control, pressure-con-

trol and shut-off valves,

— directional valves and cartridges,

— continuously adjustable valves (proportional valves

and servo valves)

(41) Continuously adjustable valves can thus be used in a
more variable fashion than the above-mentioned valve
types and can accordingly be used in more complex
applications. Consequently, for the purposes of this
Decision, the Commission takes the view that continu-
ously adjustable valves differ from the above-mentioned
valves which are not continuously adjustable.

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(42) There are no clear criteria or mandatory standards in
industrial hydraulics to distinguish different types of
continuously adjustable valves. However, a distinction is
principally made between:

— proportional valves,

— high response valves, and

— servo valves.

(43)

(44)

In a proportional valve, a spool is moved with high
precision using magnetic forces in a valve housing in
such a way as to achieve the desired control parameter
(between 0 % and 100 % of the possible variants, hence
proportional). They exist in closed-loop and open-loop
form, with closed-loop and open-loop controlled valves
differing as regards their technological design mainly in
the extent to which electronics are applied. Open-loop
controlled valves, in contrast to closed-loop controlled
valves, have no electrical feedback in the circuit and are
therefore slower and less precise. Servo valves are used
to amplify signal impulses (low-voltage current signal
from the control system). By means of a magnet, an oil-
jet nozzle inside the valve is deflected in such a way that
a very thin oil jet is directed either left or right of a
spool, which thus can be moved with high precision to
the left or the right within the main valve.

In the parties’ view, all these continuously adjustable
valves belong to one market, since they are completely
interchangeable as regards their functionality and flexi-
bility of use. The parties state in this respect that
manufacturers market continuously adjustable valves as
standardised products (valve hardware) characterised
by standardised designs and standard functionality.
According to the information provided by the parties,
the various types of continuously adjustable valves are
known both on the demand and on the supply side for
their great flexibility of use. The functionality of a
continuously adjustable valve is accordingly determined
by its physical design. Depending on the bore in the
valve block and the controllability of the valve, guidance
or a change in volume of the hydraulic power within the
hydraulic power system is achieved by means of the
valve. The functionality is applicable in all machine types
for which this is required. According to the parties, there
is no adaptation of the valve hardware for use in a
particular machine type.

(45) However, the Commission’s investigation has shown
that the market for these valves can be divided into
further submarkets distinguishable from one another.
Although the investigation confirmed the information
provided by the parties in that there are standardised
connection designs for the various valve types, neverthe-
less their interchangeability as regards functionality and
price is limited. The market participants surveyed do
not, however, make a distinction as regards functionality
between proportional valves, high-response valves and

servo valves as such, but often decide on the basis of
characteristic values
fre-
quency) (8), hysteresis (9) and threshold problems (10).

for dynamics

(crossover

(46)

In addition, according to information provided by
market participants, proportional valves with closed and
open loop control differ with regard to function and
price. Proportional valves with closed-loop control are
faster and more precise and are therefore used in higher-
order control tasks. There are approximately one-and-a-
half to two-and-a-half times as expensive as proportional
valves with open-loop control.

(47) By contrast, open-loop control servo valves are very
rarely used, and then only for the control of small
volume flow rates (up to approximately 50 l/min).
They are on about the same price-level as closed-loop
controlled proportional valves, whereas closed-loop con-
trolled servo valves are considerably more expensive.
The latter are used for the control of large hydraulic
tasks and high-order control functions.

(48) However, the question of whether and how, within the
overall market for valves, individual submarkets are to
be defined can be left open for the purposes of this
Decision, since it is not to be expected that a dominant
position will develop or be reinforced applying any
conceivable market definition.

1.1.3. Hydraulic power units, and control blocks

(49) Hydraulic power units, and control blocks are ready-
made independent assemblies of hydraulic components
and accessories. In hydraulic power units, electric power
(from electric motors) or thermal power (from combus-
tion engines) is converted into hydraulic power. In both
cases, the rotary movement and torque of the engine are
converted through a hydraulic pump into volume flow
and pressure. A hydraulic power unit consists of an
engine, pump, valves, hydraulic units (blocks) and
various accessories.

(50) A control block is a metal block which can accommodate
several valves through incorporation or addition. The
connections required for the functioning of the control
block are fitted into the block and linked up with the
appropriate lines. Amongst the features of control blocks
are their compact design and the small number of seals
used.

(51) Hydraulic power units and control blocks are manufac-
tured and sold in complete form. They are used as
assemblies in industrial equipment such as machine
tools.

(8) Value relating to the time constant, i.e. the time required to
transform an (electrical) input signal into a hydraulic output
signal.

(9) Maximum difference in the same output signal in passing through

the full signal area (i.e. outward and return).

(10) Problems in the final control element of a control circuit below

the response threshold of a constantly adjustable valve.

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(52) However, the question of whether control blocks and
power units form a joint market or separate markets can
be left open for the purposes of this Decision, since it is
not to be anticipated that a dominant position will
develop or be reinforced applying any conceivable
market definition.

1.2. Mobile hydraulics

(53) On the basis of the breakdown into industrial and
mobile hydraulics, the Commission takes the view, for
the purposes of this Decision, that there are separate
component markets for hydraulic pumps, hydraulic
motors, mobile cylinders, hydrostatic gearboxes, mobile
valves and electronics, and hydraulic accessories.

1.2.1. Mobile valves

(54) The Commission’s investigations have in particular
confirmed the view taken by the parties that mobile
valves cannot be divided into further submarkets because
of the high integration of the function of the valves into
control blocks on the one hand and the special design
of the valves for special tasks on the other. However, the
question of whether the component markets for pumps
and motors must be further divided can be left open,
since a dominant position will not be established or
reinforced under any market definition.

2.

ELECTRIC DRIVES AND CONTROLS

(55)

In the parties’ view, electric drives and controls can, in
view of their technological designs, be assigned to the
following markets: servo drives, frequency converters
and digital controls.

2.1. Servo drives

be defined as covering the EEA. Within the common
market, there are no tariff and non-tariff trade barriers
for these components, low transport costs, significant
cross-border trade and internationally accepted norms
and standards. The Commission has already defined
these markets as being EU-wide (11). The investigations
in this case have confirmed this. For the purposes of
this Decision, the Commission defines the market as
comprising the EEA.

(3) ASSESSMENT

1. HYDRAULICS

1.1.

Industrial hydraulics

1.1.1. Pumps

1.1.1.1.

Piston pumps

(59) Rexroth is the leading manufacturer of axial piston
pumps, selling [40 to 50]* % of all axial piston pumps
in the EEA, while Bosch is the leading manufacturer of
radial piston pumps, selling [40 to 50]* % of all radial
piston pumps in the EEA. With the exception of one
model, neither of the parties manufactures pumps of the
other type (12).

(60) Of the total market for both types of piston pump,
Bosch has a share of [5 to 15]* % and Rexroth a share
of [30 to 40]* %. Their biggest competitors are Parker,
with a market share of [5 to 15]* %, Denison [5 to
15]* % and Eaton [5 to 15]* %. Smaller competitors are
Wepuco, with [< 10]* %, and Hawe, with [< 10]* %,
while other competitors have [15 to 25]* % between
them; according to the information supplied by the
parties, the EEA-wide market is worth EUR[< 200]*
million.

(56) A servo drive is a package consisting of a control device
and servo motor which, via the position or speed
control, using feedback, performs controlled drive tasks.

(61) The high combined share of the market, taken together
with the factors outlined below, raise serious doubts as
to the planned concentration’s compatibility with the
common market.

(57) However, the question of whether servo drives and other
electric drives and controls form a joint market or
separate markets can, for the purposes of this Decision,
be left open since it is not to be anticipated that a
dominant position will develop or be reinforced apply-
ing any conceivable market definition.

(2) RELEVANT GEOGRAPHIC MARKETS

(62) After the concentration the two leading manufacturers
would have a combined market share of nearly [40 to
50]* %. This would be more than [...]* times the share
of any of the biggest remaining competitors, Parker,
Denison and Eaton. The parties would be the only
suppliers offering both radial and axial piston pumps
and the other key components for industrial hydraulics.
The Commission’s enquiries have established that many
customers expect a supplier to be able to provide all the

(58) As distinct from the definition of the relevant product
market, the relevant geographic market for hydraulic
components must, in the view of the notifying parties,

(11) See Case IV/M.152 Volvo/Atlas, recitals 15 et seq.
(12) The one exception is a small fixed-displacement radial piston

pump produced by Rexroth.

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components for a machine. This is so especially because
technically sophisticated machines demand the closest
possible interplay between the components. Customers
and competitors estimate that for a new and competitive
producer to enter the market would take at least one to
three years.

(63) The Commission concludes, therefore, that the concen-
tration would create a dominant position held by Bosch
on the market in piston pumps.

1.1.1.2. Gear pumps

(64) There is no overlapping on the market in gear pumps,
as Bosch does not manufacture any such pumps.

1.1.1.3. Vane pumps

(65) On the market in vane pumps, the parties have a market
share of [15 to 25]* % (Bosch [...]* %, Rexroth [...]* %).
Their biggest competitors are Parker, with [5 to 15]* %,
Eaton, with [30 to 40]* %, Denison, with [20 to
30]* %, and Berama, with [5 to 15]* %. Even after the
concentration, therefore, both Eaton and Denison would
have higher market shares than the parties together, so
that on this market no competition concerns arise.

1.1.2.1. Hydraulic-mechanical flow control, pressure control

and shut-off valves

(68) On the market in hydraulic-mechanical flow control,
pressure control and shut-off valves, the parties have a
market share of [20 to 30]* % (Bosch [...]* %, Rexroth
[...]* %). Here too the competitors are Parker, with [0 to
20]* %, Denison, with [5 to 15]* %, Eaton, with
[< 10]* %, and Atos, with [< 10]* %. Despite their
these undertakings have the
smaller market shares,
competitive potential to constrain the parties’ competi-
tive behaviour (see recitals 66 et seq.).

1.1.2.2. Directional valves and cartridges

(69) On the market in directional valves and cartridges, the
parties have a market share of [20 to 30]* % (Bosch
[...]* %, Rexroth [...]* %). The competitors are Parker,
with [5 to 15]* %, Eaton, with [5 to 15]* %, and Atos,
with [< 10]* %. But this lead does not amount to a
dominant position, because Bosch/Rexroth’s competitive
behaviour is effectively constrained by its competitors
(see recitals 66 et seq.).

1.1.2.3. Continuously adjustable valves (proportional valves

and servo valves)

(70) On the market in continuously adjustable valves no
competition concerns arise, even when different possible
market definitions are tried. In none of the alternative
markets studied do the parties reach a market share of
over [15 to 25]* %. While this share might be basis for
market leadership, it does not amount to a dominant
position, because the parties’ competitive behaviour is
constrained by their competitors (see recitals 66 et seq.).

1.1.2. Hydraulic valves and electronics

1.1.2.3.1. M a r k e t

i n

c o n t i n u o u s l y

a d j u s t a b l e v a l v e s o f a l l k i n d s

(66) Of the total market in valves, the parties have a combined
share of [20 to 30]* % (Rexroth [...]* %, Bosch [...]* %).
Their main competitors are Parker, with [< 15]* %,
Moog, with [< 10]* %, Eaton/Vickers, with [< 10]%,
Atos, with [< 10]* %, and Denison, with [< 10]* %. Like
Bosch/Rexroth, these competitors do business through-
out the world, and also operate in the other branches of
industrial hydraulics. Thereafter the market in valves is
highly fragmented. These seven largest suppliers account
for just over [45 to 55]* % of the market, and the
remaining share of almost 45 % is divided between a
large number of small manufacturers.

(67) With the exception of Atos, which does not produce
servo valves, these undertakings manufacture the same
range of products. It can be assumed that the competing
producers would be in a position to increase their
market shares if the parties were to attempt to charge
higher prices.

(71) Taking a market in closed-loop and open-loop pro-
portional and servo valves, the parties would have a
market share of [15 to 25]* % after the concentration
(Bosch [...]* %, Rexroth [...]* %). The competitors are
Moog, with [15 to 25]* %, Parker, with [< 10]* %, Atos,
with [< 10]* %, and Eaton, with [< 10]* %. In view of
the sufficiently small market share, and the features of
the market already referred to, it is not to be expected
that dominance might arise (see recitals 66 et seq.).

1.1.2.3.2. M a r k e t i n p r o p o r t i o n a l v a l v e s

(72) Taking a market in closed-loop and open-loop pro-
portional valves, the parties would have a market share
of [15 to 25]* % after the concentration (Bosch [...]* %,
Rexroth [...]* %). The competitors are Moog, with [12 to
20]* %, Parker, with [< 10]* %, Atos, with [< 10]* %,
and Eaton, with [< 10]* %. In view of the sufficiently
small market share, and the features of the market
already referred to,
to be expected that
is not
it
dominance might arise (see recitals 66 et seq.).

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1.1.2.3.3. M a r k e t

i n

c l o s e d - l o o p

p r o -

Relationship between Bosch and Siemens

p o r t i o n a l v a l v e s

(73) Taking a market in closed-loop proportional valves, the
parties would have a market share of [15 to 25]* % after
the concentration (Bosch [...]* %, Rexroth [...]* %). The
competitors are Moog, with [34 to 40]* %, Parker, with
[< 10]* %, Atos, with [< 10]* %, and Eaton, with
[< 10]* %. In view of the sufficiently small market share,
and the features of the market already referred to, it is
not to be expected that dominance might arise (see
recitals 66 et seq.).

1.1.2.3.4. M a r k e t

i n

o p e n - l o o p

p r o -

p o r t i o n a l v a l v e s

(74) Taking a market in open-loop proportional valves, the
parties would have a market share of [15 to 25]* % after
the concentration (Bosch [...]* %, Rexroth [...]* %). The
competitors are Moog, with [5 to 15]* %, Parker, with
[< 10]* %, Atos, with [< 10]* %, and Eaton, with
[< 10]* %. In view of the sufficiently small market share,
and the features of the market already referred to, it is
not to be expected that dominance might arise (see
recitals 66 et seq.).

1.1.2.3.5. M a r k e t i n s e r v o v a l v e s

(75) Taking a market in servo valves, there would be no
overlapping, because Bosch does not produce any such
valves.

1.2. Mobile hydraulics

1.2.1. Mobile valves

(76) According to the information supplied by the parties
they have a share of [10 to 20]* % of the market in
mobile valves (Bosch [...]* %, Rexroth [...]* %), the
volume of the market being EUR 1,093 million. Accord-
ing to competitors’ estimates the total volume of the
market may be only EUR 750 000. Even if this lower
figure is accepted the parties’ market share is still only
about [15 to 25]* %. In view of the sufficiently small
market share, it is not to be expected that dominance
might arise.

2.

ELECTRIC DRIVES AND CONTROLS

2.1. Servo drives

(78) On a market in servo drives, then, Siemens would
be Bosch’s and Rexroth’s strongest competitor. The
Commission was therefore obliged to verify whether
the planned concentration might give rise to a joint
dominant position. That might be so especially if control
exercised by Siemens via Rexroth’s parent company
Atecs made it likely that competition between Siemens
and Rexroth/Bosch would be restricted.

(79) But Bosch and Siemens have no similar interests that
would justify coordination. The leasing and control
agreement
reduces Siemens’s interest as owner of
Rexroth to the rent it is to receive, which is independent
of profitability. Thus Bosch and Siemens have no joint
financial interest in Rexroth’s operative business.

(80) Nor is there any entitlement

to information under
company law which would operate via Atecs so as to
lead to an exchange of
information that might be
relevant from the point of view of competition. Siemens
is entitled to information on Rexroth only in respect of
the rent that Rexroth is to receive from Bosch. That is
separate form the operative business, so that competitive
conduct cannot be aligned through the exercise of rights
to information via Atecs.

(81)

In order to prevent any informal exchange of infor-
mation, Bosch and Siemens have undertaken to ensure
that nobody is appointed to the management or super-
visory boards of Rexroth who is an employee of Siemens
or of a company dependent on Siemens. Siemens and
Bosch will also ensure that nobody is appointed to the
management or supervisory boards of Atecs, VDO,
Dematic, Sachs or Demag Krauss Maffei, or of any
company dependent on any of them, who is at the same
time a member of the management board or of the
shareholders’ representation on a supervisory board of
Rexroth or of any company dependent on it, or of Bosch
or of a subsidiary of Bosch to which Rexroth’s business
has been leased.

(77) On the market in servo drives the parties would have a
market share of [10 to 20]* % after the concentration
(Bosch [...]* %, Rexroth [...]* %). The market leader would
be Siemens, with 18,7 %; other competitors would be
Fanuc and Baumüller, with 5,6 % each.

(82) Alongside these agreements, with their structural effects,
the parties have also given the Commission an undertak-
ing that they will not exercise any remaining rights to
information through Atecs in respect of the holding
companies, and will not supply any information asked
for.

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(83) The arrangements described in recitals 79 to 81 ensure
a structural division between the spheres of influence of
Bosch/Rexroth and Siemens. There is therefore no reason
to fear that as a result of the concentration a joint
dominant position might come to be held by Siemens
and Bosch/Rexroth.

V. COMMITMENTS OFFERED BY THE PARTIES

A. COMMITMENTS

(84)

In order to remove the Commission’s doubts regarding
the planned concentration, Bosch and Rexroth have
entered into the following commitments vis-à-vis the
Commission (13).

concentration is put into effect the sale is not yet
complete.

(88) As regards the other assets to be transferred, and the
supporting measures to be taken, this trustee will have
power to determine the interpretation of the contractual
clauses if the parties should disagree. Bosch will give the
trustee all assistance and information (recitals 6 to 8).

B. ASSESSMENT OF THE COMMITMENTS

(85) Bosch will sell its radial piston pumps business. The sale
will include the development and production divisions,
the transfer of customer relations and the relevant
supply contracts to the buyer, the other assets needed
for the continuation of the business, and the transfer of
the staff.

(89) The commitments offered will in the first place ensure
that the overlapping of Bosch’s and Rexroth’s shares of
the market in piston pumps will disappear: if Bosch
disposes of its radial piston pumps business, it will be
disposing of all of its piston pumps activities, and after
the concentration Bosch will be manufacturing and
selling only Rexroth’s axial piston pumps.

and possessing the

(86) Bosch will sell the business to a buyer which is an
undertaking independent of Bosch, viable, already in
existence, already operating on European industrial
hydraulics markets,
financial
resources and experience necessary to be able to survive
as an active competitor on the European market in
industrial hydraulics piston pumps. Bosch will safeguard
the transfer of the business by means of a series of
commitments. These include the following, all limited
in time: a clause banning Bosch from competing in
respect of radial piston pumps, a clause banning Bosch
from poaching staff, and a clause requiring Bosch to
make good any loss of profits if
it attracts away
customers. The buyer must be approved by the Com-
mission. Bosch intends to conclude a binding agreement
for the sale of the radial piston pumps business before
the Commission has taken a decision finding the concen-
tration compatible, which agreement is to be with a
buyer to be approved by the Commission under this
Decision. Bosch accepts that the concentration cannot
be put into effect until a binding agreement for the sale
of the radial piston pump business has been concluded.
Bosch will also entrust an independent and experienced
trustee with the task of ensuring the preservation of the
economic value and competitiveness of the radial piston
pump business until the sale is complete.

(87) Bosch will also transfer to the same trustee the task of
supervising the sale of the business if at the time the

(13) The full wording of the commitments is given in the annex, and

forms an integral part of this Decision.

(90) The commitment submitted on 20 October 2000
ensures that sufficient account is taken of the doubt that
the Commission expressed in the first stage of the
merger authorisation procedure as to the possibility of a
successful continuation of
the radial piston pumps
business by a future buyer. Bosch has now committed
itself to selling the business only to an existing undertak-
ing which already operates on the European hydraulics
market, which must also possess sufficient financial
resources and specific market experience; this ensures
that the buyer will have the specific capacity to compete
in the hydraulics business.

(91) The measures relating to the transfer of the business
which are set out in Article 2 of the commitments
are important supplementary measures which provide
further support for the continuation of Bosch’s radial
piston pumps business by the future buyer. Bosch here
commits itself to making good the profits forgone by
the buyer if in the first three years one or more of the
ten biggest customers replace Bosch radial piston pumps
in existing mass-produced machines with Rexroth axial
piston pumps. Taken together with Bosch’s commitment
not to compete in respect of radial piston pumps for a
certain time, this ensures that Bosch’s existing clientele
will not immediately be enticed away by the parties. A
future buyer will therefore have a running-in period in
which to establish itself successfully on the market.

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(92) Until a binding agreement is concluded for the sale,
Bosch accepts that the ban on putting the concentration
into effect which is laid down in Article 7(1) of
Regulation (EEC) No 4064/89 will continue to apply.
This means that the parties can put the concentration
into effect only once the radial piston pumps business
has been sold to a buyer approved by the Commission.
The Commission considers this commitment necessary
in order to resolve the doubts expressed in the market
study regarding the practical possibility of disposing of
the business.

(93) That the ban on putting the concentration into effect
should continue to apply in this case is a measure
proportionate to the aim of avoiding a real danger,
namely that if the concentration were to be completed
before this business was disposed of the added market
shares would in time automatically accrue to the parties.
In the particular situation, this could not be ruled out
with sufficient probability, because if no competitive
buyer is found for the radial piston pumps business, and
as a result customers can find no attractive long-term
alternative, customers may begin to turn Bosch, and to
buy Rexroth’s axial piston pumps, thus reducing the
market share of radial piston pumps. In a situation of
the kind described such a development is not improb-
able, since on the market in piston pumps relations
with customers have traditionally been intensive. The
continuation of the ban on putting the concentration
into effect which has been promised by the parties,
together with the other commitments entered into,
ensures that the present market situation will continue
until it is clear that the radial piston pumps business is
to be taken over by a competitive buyer.

(94)

If a concentration is authorised, but may not be put into
effect pending fulfilment of a commitment to dispose of
an asset, a situation may arise in which it may be to the
merging undertakings’ advantage to run down the
economic value of the asset to a point where it becomes
practically impossible to dispose of it. Such a situation
would not be wholly improbable especially if
the
merging undertakings could expect to be able to offset
the resultant losses of market share and profits by
making corresponding gains on their other products on
the same market.

in order to ensure that

(95) This possibility is ruled out in advance by Bosch’s
commitment to have its radial piston pumps division
supervised by an independent trustee up to the time of
sale,
its competitiveness is
preserved. The Commission also acknowledges that the
parties will hardly accept a long delay in putting the
concentration into effect in order to establish a special
situation on the market in radial piston pumps. In the
Commission’s view, the relatively great importance of
the other economic activities of the parties which are
affected by the concentration make it clear that it is in
Bosch’s interest to carry out a disposal approved by the
Commission as quickly as possible,

HAS ADOPTED THIS DECISION:

Article 1

The notified acquisition of sole control of Mannesmann
Rexroth AG by Robert Bosch GmbH is hereby declared
compatible with the common market and the EEA Agreement,
on condition that the commitments entered into by the
notifying parties, which are set out in the Annex to this
Decision, are fulfilled.

Article 2

This Decision is addressed to:

Robert Bosch GmbH
Zentralabteilung Recht
z.Hd. Herrn RA Dr. Dieter Berg
Robert-Bosch-Platz 1
D-70839 Gerlingen-Schillerhöhe

Mannesmann Rexroth AG
z.Hd. Herrn Dr. Albert Hieronimus
Jahnstraße 3-5
D-97816 Lohr am Main

Done at Brussels, 12 January 2001.

For the Commission

Mario MONTI

Member of the Commission

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ANNEX

The full text of the commitments referred to in Article 1 may be consulted on the following Commission website:

Internet: http://europa.eu.int/comm/competition/mergers/cases/decisions/m2060–de.pdf