2006/899/EC: Commission Decision of 13 July 2005 declaring a concentration compatible with the common market and the EEA Agreement (Case No COMP/M.3653 — Siemens/VA Tech) (notified under document number C(2005) 2676)   (Text with EEA relevance)
Date: 2005-07-13
Institutions: European Commission
Subjects: building industry, economic concentration, electric machinery, electrical energy, electrical equipment, merger control, metallurgical industry, power plant, rail transport

13.12.2006

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Official Journal of the European Union

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COMMISSION DECISION

of 13 July 2005

declaring a concentration compatible with the common market and the EEA Agreement

(Case No COMP/M.3653 — Siemens/VA Tech)

(notified under document number C(2005) 2676)

(Only the German text is authentic)

(Text with EEA relevance)

(2006//EC)

On 13 July 2005 the Commission adopted a Decision in a merger case under Council Regulation (EC) No 139/2004 of
20 January 2004 on the control of concentrations between undertakings, and in particular Article 8(2) of that
Regulation. A non-confidential version of the full Decision can be found in the authentic language of the case and in the
working languages of the Commission on the website of the Directorate-General for Competition, at the following address:
http://ec.europa.eu/comm/competition/index_en.html.

I.

EXECUTIVE SUMMARY

(1) This case concerns the takeover by Siemens of the Austrian

engineering group VA Tech.

(2)

Siemens is a diversified engineering group active in the
information and commu-
following core business areas:
nications, automation and control, power
technology,
transportation, street lighting and medical equipment.

(3) VA Tech, headquartered in Linz,

is Austria's

largest
industrial group with a EUR4,3 billion annual turnover
and some 17 000 employees. Its four main business areas
cover power generation, power transmission and distribu-
tion, metallurgy and electrical plant building and infra-
structure.

(4) On 10 December 2004, Siemens launched a public bid for
VA Tech aimed at raising its current 16,45 % shareholding
to at
[…] (*). The only
outstanding condition for the bid to become effective at
this point is the Commission's regulatory approval.

least 50 % plus one share.

(5) The proposed acquisition, whereby Siemens acquires sole
control over VA Tech, constitutes a concentration within
the meaning of Article 3(1)(b) of the Merger Regulation.

(6) The undertakings concerned have a combined aggregate
worldwide turnover of more than EUR5 billion (Siemens:
EUR74 billion for the year ending 30 September 2003; and
VA Tech: EUR3,9 billion in 2003). Siemens and VA Tech
each have an aggregate Community-wide turnover in excess
of EUR250 million […] (*). Neither of
the companies
achieves more than two thirds of its aggregate Community-
wide turnover within one and the same Member State. The
notified transaction therefore has a Community dimension.

(*) 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.

(7) The Commission's market investigation confirmed that the
proposal leads to numerous horizontal and vertical over-
laps in the fields of power generation (see Section A), power
transmission and distribution (B), rail transport technology
frequency inverters (D), metallurgical and electrical
(C),
plant building (E),
low-voltage switchgear (F), building
technology (G), infrastructure and ropeways (H) and other
IT services (I).

(8) The Commission came to the conclusion in its Decision
that, having regard to the commitments given by the parties
in the areas of (i) hydroelectric power equipment and (ii)
mechanical metallurgical plant building, the notified merger
did not significantly impede effective competition in any of
these areas either in the common market or in a substantial
part thereof.

II.

DETAILED SUMMARY

A.

POWER GENERATION

A1.

EQUIPMENT FOR HYDROELECTRIC POWER PLANTS

Relevant markets

(9)

Equipment for hydroelectric power plants comprises a large
number of separate components, notably hydroelectric
turbines, generators and various other mechanical and
(electrical)
electrical parts
the mechanical
(known as
balance of plant). Customers often tender
these
for
components separately, especially in Europe, where most
demand is for replacement or modernisation of existing
hydroelectric power plants. The different components are

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not substitutable from the demand side. Following a series
of mergers between manufacturers of mechanical and
electrical hydroelectric power equipment, Siemens/VA Tech
and their main competitors can supply the full range of
components. Supply-side factors lead the Commission to
there exists a single relevant
agree with Siemens that
product market for hydroelectric power plant equipment,
although the products
included in this market are
significantly differentiated.

that

(10) As to the relevant geographic market, the Decision explains
that different sets of competitors compete in the different
world regions, but
the leading European players
(Siemens, VA Tech, Alstom and GE Hydro) operate
worldwide. Particularly in China and the rest of Asia, there
are a number of Chinese, Indian and Japanese companies
that European customers do not recognise as credible
bidders. Customers in the EEA either do not know these
manufacturers or they rate them significantly lower than
the suppliers active in Europe. They have so far neither won
any contracts in the EEA, nor have they submitted bids
(although Siemens has pointed to two successful Chinese
projects in Albania in the 1960s and ’70s).

(11) […] (*) The Decision concludes that conditions of supply
and demand differ significantly between the EEA and other
world regions
relevant
geographic market is the EEA.

consequently,

and that,

the

Competition assessment

(12) For the period from 2000 to 2004 Siemens estimates its
combined EEA market share together with VA Tech at [40-
50] (*) % (Voith Siemens [20-30] (*) % (1), VA Tech [20-
30] (*) %). VA Tech's estimate is [40-50] (*) %, whereas
Alstom puts Siemens/VA Tech's combined market share at
61 %. Customers’ market share estimates are generally in
the same range, although one smaller competitor (Andino)
believes that Siemens/VA Tech has 70 % of the EEA market.
Based on the turnover figures submitted by the main
competitors for the same five-year period, the following
market shares arise (accepting Siemens’s estimate of ‘others'’
sales):

EEA 2000-2004

EUR (millions)

Market share %

Siemens

VA Tech

Combined

Alstom

GE Hydro

318

[10-20] (*) %

[30-40] (*) %

50 %

[20-30] (*) %

[0-10] (*) %

(1) Voith Siemens is the joint venture through which Siemens is active in

hydroelectric power.

EEA 2000-2004

EUR (millions)

Market share %

Ansaldo

Andritz

Others

Total

[<1] (*) %

[<1] (*) %

473

[20-30] (*) %

100 %

Source: Commission's market investigation

(13) Although Siemens argues that this is a bidding market and
that market shares fluctuate greatly from year to year
[…] (*), a number of factors indicate that market shares
nevertheless contain significant information about market
power in this market. In particular, bids are frequent and
often small
in volume (only […] (*) of […] (*) tenders
submitted by Siemens are larger than EUR[…] (*) in size),
and products are highly customised and significantly
differentiated. In addition, for larger contracts, there is ex-
ante uncertainty about the actual value (i.e. profitability) of
a project for the winning bidder. The expected value of the
price offered by the lowest bidder is therefore bound to
increase as the number of credible bidders decreases. Hence,
Siemens/VA Tech's high combined market
the
relatively small size of the remaining competitors and the
elimination of an important bidder increase the possibility
that a dominant position will be created as a result of the
merger.

share,

(14) From the replies to the market investigation […] (*), a
group of
four leading competitors (Siemens, VA Tech,
Alstom and GE Hydro) can be identified. These companies
are recognised by customers as credible bidders for large
hydroelectric power equipment. All other competitors are
rated significantly lower or do not produce comparable
equipment, even if they are eligible for smaller contracts.
The Decision presents a quantitative aggregation of
customer ratings for the various hydroelectric equipment
suppliers to corroborate this finding […] (*).

(15) Bidding lists

[…] (*)

submitted by Siemens,

indicate,
furthermore, that Siemens meets VA Tech more frequently
in tenders (in […] (*) % of tenders above EUR[…] (*) in
value) […] (*) than it meets Alstom […] (*) or GE […] (*). In
[…] (*) of tenders, Siemens and VA Tech were the only
companies among the Big 4 to submit a bid. The frequency
of interaction is partly explained by the fact that GE Hydro
rarely bids outside the Nordic region and the UK (GE Hydro
originates from GE’s takeover of Kvaerner’s hydroelectric
power unit.) Alstom participates more frequently across the
different parts of Europe, although it has been somewhat
more active in the Iberian peninsula than elsewhere. It also
bids more frequently for larger projects than for smaller
ones.

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(16) A large number of customers and competitors complained
in their Article 11 replies that the transaction will lead to
price increases, as two close competitors in an already
concentrated market would be combined.

(17) Siemens appears to agree with the Commission’s finding
that Siemens and VA Tech, along with Alstom, are at
present the leading competitors for hydroelectric power
equipment in the EEA.
It consequently invokes mainly
dynamic arguments in its defence.

and the boiler manufacturer Foster & Wheeler). VA Tech’s
EEA-market share for turnkey contracts is below 15 %
[…] (*). The notified transaction will thus deprive GE of one
sales channel for its turbines and a supplier of generators
designed to work with its turbines. However, given the
strategic role of gas turbines in combined-cycle plants and
GE’s market-leading position in that area, the Decision
concludes that GE will be able to replace VA Tech as a
distribution channel for its turbines. GE has its own in-
house generator manufacturing capacity. It has itself not
raised any concerns about the transaction. The Decision,
therefore, concludes that no competition concerns arise in
this area.

(18) According to Siemens, Chinese and small European
suppliers would readily be able to supply competitive
equipment if Siemens/VA Tech attempted to raise prices
after the merger. Siemens argues that
long-established
supplier relationships have so far prevented new bidders
from emerging and that, with some effort, customers could
develop new supply sources. However, Siemens provides no
evidence of any attempts or plans by suppliers not yet
active in Europe to participate in tenders in the EEA. Apart
from Chinese manufacturers, Siemens lists a number of
small European manufacturers of
small hydroelectric
equipment and suppliers of small components that can,
among other applications, also be used in hydroelectric
power plants. However, all of these companies have market
shares below 1 % and do not supply products comparable
to those of Siemens and VA Tech.

(19) The Decision concludes that Siemens’s arguments are
speculative and amount essentially to a general contention
that every monopoly will
in the long run attract new
entrants. Siemens/VA Tech’s high combined market share,
the reduction in the number of credible bidders from four
to three, bidding data indicating that Siemens/VA Tech
supply close (or even the closest) substitutes and the large
number of customer complaints lead the Commission to
conclude that the transaction will
lead to a significant
impediment to effective competition (‘SIEC’), through the
creation of a dominant position,
for
hydroelectric power equipment.

in the market

A2.

FOSSIL POWER PLANT EQUIPMENT

B.

TRANSMISSION AND DISTRIBUTION (T&D)

EQUIPMENT

(21) Like power generation equipment,

the T&D market
comprises a wide range of different components that are
supplied to customers (mainly national grid operators and
local/regional electricity distributors) at a certain level of
aggregation. Based on Siemens/VA Tech's horizontal over-
lap, Siemens proposes to define relevant markets at the
level of the product groups listed under a.-e. below.

a.

HIGH-VOLTAGE PRODUCTS (FOR TRANSMISSION NET-
WORKS OPERATING AT VOLTAGES BETWEEN 52 KV
AND 800 KV)

(i)

air-insulated switchgear

(ii)

gas-insulated switchgear

(iii)

circuit breakers

(iv) disconnectors

(v)

instrument transformers

(vi)

coils

b.

TRANSFORMERS

(i)

power transformers

(ii)

distribution transformers

(20) In fossil power plant equipment, VA Tech supplies
combined-cycle power plants as a turnkey integrator using
mainly components supplied by third parties, notably gas
turbines made by GE, together with turbo generators from
its own in-house production. In the turnkey contracting
market, several competitors remain after the transaction
(mainly the turbine manufacturers Siemens, GE, Alstom
and Mitsubishi, but also general contractors such as Bechtel

c.

ENERGY AUTOMATION AND INFORMATION SYSTEMS

(i)

power system management

(ii)

protective relays

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d.

TURNKEY PROJECTS

(i)

high-voltage projects

(ii) medium-voltage projects

e.

T&D SERVICES

(i)

asset services

(ii)

network planning.

(22) On product markets, the market investigation provided
some indications that, contrary to Siemens's view, at least
some of the components identified under (i), (ii), … in each
section may by themselves constitute separate relevant
product markets. However,
the exact product market
definition can be left open for purposes of this Decision
as no SIEC will arise under any possible market definition.

(23) On geographic market definition, the Decision concludes
that the T&D markets are EEA-wide. Technical standards no
longer pose an obstacle for grid operators to source
products
from abroad, especially in the high-voltage
markets, where products are significantly customised. The
main suppliers participate successfully in tenders for T&D
equipment throughout the EEA.

(24) The following market share estimates provided by Siemens
in the notification as well as the identity of the competitors
in each market were largely confirmed by the market
investigation. The exception is the market for high-voltage
turnkey projects, where no other market participant
estimated Siemens’s market share as high as [50-60] (*) %.
However, the turnkey market comprises a range of products
and components and allocating sales to turnkey services, as
opposed to underlying components, may be handled
differently by respondents to the market investigation.

Product

Siemens

VA Tech

Combined

Main competitors

a.

High-voltage products

[10-20] (*)

[0-10] (*)

[20-30] (*)

Areva 18, ABB 15

(i)

air-insulated switchgear

[0-10] (*)

[0-10] (*)

[10-20] (*)

Areva 12; ABB 9, Cegelec 6,
EFACEC 6

(ii)

gas-insulated switchgear

[30-40] (*)

[10-20] (*)

[40-50] (*)

ABB 33, Areva 23

(iii)

circuit breakers

[30-40] (*)

[0-10] (*)

[40-50] (*)

Areva 30, ABB 28

(iv)

disconnectors

[30-40] (*)

[20-30] (*)

[30-40] (*)

Areva 21, HAPAM 14

(v)

instrument transformers

10-20] (*)

[0-10] (*)

[10-20] (*)

(vi)

coils

[20-30] (*)

[10-20] (*)

[40-50] (*)

b.

Transformers

[10-20] (*)

[0-10] (*)

[20-30] (*)

(i)

power transformers

[10-20] (*)

[10-20] (*)

[20-30] (*)

(ii)

distribution transformers

[10-20] (*)

[0-10] (*)

[10-20] (*)

Areva 20-25, ABB 10-15, Ritz
10-15, Arteche 10-15, Pfiffner
3-8

Areva 22-27, ABB 17-22, Tra-
fomec 5-10

ABB 18-23, Areva 13-18, RWE
Solutions 8-13, Schneider 4-7,
Pauwels 4-7, others

ABB 20-25, Areva 15-20, RWE
Solutions 7-14, Pauwels 2-5,
EFACEC 2-5, others

ABB 12-17, Schneider 10-15,
RWE Solutions 8-13, Areva 7-
12, Pauwels 5-10, others

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Product

Siemens

VA Tech

Combined

Main competitors

c.

Energy Automation and Informa-
tion Systems

(i)

power system management

[10-20] (*)

[10-20] (*)

[20-30] (*)

(ii)

protective relays

[20-30] (*)

[0-10] (*)

[20-30] (*)

ABB 8-12, Areva 6-10, others
(including various software
companies)

Areva 23-27, ABB 13-17,
Schneider 4-8

d.

Turnkey projects

[20-30] (*)

[0-10] (*)

[30-40] (*)

ABB 18, Areva 14, Cegelec 9

(i)

high-voltage projects

[50-60] (*)

[10-20] (*)

[70-80] (*)

ABB 21, Areva 9

(ii) medium-voltage projects

[10-20] (*)

[0-10] (*)

[10-20] (*)

ABB 17, Areva 16, Cegelec 12

e.

T&D services

No affected markets on an EEA or national basis

(*) 40 % non-controlling shareholding; 60 % sold in 2004 to Southern States LLC (United States)

(25) Siemens, VA Tech, Areva and ABB supply a wide range of
T&D components, whereas several smaller competitors,
including Cegelec, EFACEC, Ansaldo, HAPAM, Pauwels and
others cover only smaller product segments.

(26) The transaction leads to high market shares in excess of
[30-40] (*) % in several tentative T&D markets, namely gas-
insulated switchgear (GIS), circuit breakers and high-voltage
turnkey projects. It would also reduce from four to three
the number of credible competitors in these product
markets (Siemens/VA Tech, Areva and ABB). The three
markets are vertically related as a large proportion of HV-
turnkey projects include GIS as the main underlying
component. Circuit breakers,
in turn, are used as a
component in GIS. Siemens, VA Tech, Areva and ABB are
all active at all three of these vertical levels.

(27) In the remaining (tentative) T&D markets, Siemens/VA
Tech’s combined market shares are lower, and additional
competitors exist. No competition concerns arise here.

(28) Replies by customers and competitors to the Commission's
market investigation have overall been less negative than in
hydroelectric power. Negative remarks tended to be more
general, pointing to the fact that a competitor is eliminated
in an already concentrated market. The Commission's
investigation therefore focused on the potential effect

resulting from the reduction in the number of credible
bidders from four to three in some tentative markets.

(29) In the HV-turnkey market, the main competitive overlap
between Siemens and VA Tech is in GIS-based turnkey
substations. Market power in the HV-turnkey market is thus
linked to the suppliers’ market position in the underlying
GIS components. The turnkey market is heavily project-
driven and market shares have fluctuated widely. During
the five-year period from 1999 to 2003, Siemens’s share
varied from [5-10] (*) % (2000) to [50-60] (*) % (2003). VA
Tech’s market share ranged from [0-5] (*) % (1999) to [15-
20] (*) % (2002). ABB and Areva captured the remaining
projects in each year. A single large project can have a
strong impact on a supplier’s market share in a given year.
Similarly, its strong market position in 2003 ([50-60] (*) %)
resulted from […] projects in excess of EUR[…] million and
[…] +EUR[…] million contracts. The Decision thus
concludes that the HV-turnkey market is indeed a bidding
market where competition is ‘for the market’ (rather than
‘in the market’) and where market shares reveal little about
a competitor’s ability to win future projects.

(30) In GIS, the same competitors as in HV turnkey are active in
the EEA: Siemens, VA Tech, ABB and Areva. Siemens/VA
Tech’s combined share in 2003, according to Siemens, was
[40-50] (*) % (Siemens
[30-40] (*) %, VA Tech [10-
15] (*) %). The combined market shares fluctuated between
[40-50] (*) % and [60-70] (*) % in the period 1999 to
Individual market shares fluctuated more widely
2003.
(Siemens
[10-
15] (*) %-[40-50] (*) %). As in the turnkey market, ABB
and Areva accounted for the remaining EEA market share.

[10-15] (*) %-[40-50] (*) %, VA Tech

(31) Although the safety-critical nature of HV products limits
the number of eligible suppliers to European electricity
operators, there appears to be little product differentiation
between the equipment supplied by the four market leaders

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for a given tender specification. Based on these character-
istics (bidding market, little product differentiation among
the majors), the GIS/HV-turnkey markets could in principle
produce competitive outcomes, even with only three
credible competitors.

C.

RAIL TECHNOLOGY

C1. RAIL ROLLING STOCK

(32) The market investigation examined bidding lists for HV-
turnkey projects, GIS and circuit breakers supplied by
Siemens and data from competitors covering the periods
from 1999 to date. The data show that ABB was Siemens's
most frequent competitor in tenders, followed by Areva. VA
Tech participated less frequently in GIS tenders and rarely
bid in competition with Siemens. One explanation for the
rare encounter of Siemens and VA Tech may be that VA
Tech's European GIS business originates from its takeover
of Schneider's HV activities in Grenoble. VA Tech's installed
base is therefore concentrated in France, whereas Siemens's
traditional geographic strength has been elsewhere in
Europe.

(33) Ganz-Transelektro of Hungary has submitted several bids in
the EEA since the country became an EU member. It has
recently won a GIS contract
in the Netherlands (with
the Japanese GIS manufacturers
Corus). By contrast,
Toshiba-Mitsubishi (TM) and JAEPS have in the EEA limited
their activities to tenders in the island states of Iceland and
Cyprus.

(34) The Commission also compared bids from […] (*) tenders,
where all four firms submitted bids,
in order to verify
whether any one firm frequently submitted the lowest or
second-lowest bid. This was not the case.

(35) As outlined in the Decision,

the GIS market could
potentially produce competitive outcomes even with three
credible bidders, provided the merger does not involve the
lowest and second-lowest-cost bidder or competitors who
are particularly close substitutes by another dimension. The
bidding data provided no indications to this effect.

(36) The Decision also examines the possibility that the notified
transaction may lead to coordinated effects. However,
it
appears from the structure of the GIS, HV-turnkey and
circuit-breaker markets (three close competitors, inhomo-
large customers) and the observed
geneous products,
bidding pattern (all competitors participate successfully in
tenders throughout Europe) that any effective coordination
mechanism in the GIS market would have to be highly
elaborate and would be difficult to implement.

(37) The Decision concludes that no significant impediment to
effective competition arises in the T&D market under any
possible product market definition.

(38) The takeover of VA Tech leads to the disappearance of VA
Tech Elin EBG Traction (ETR) as an independent supplier of
electrical traction for trams, metros and regional trains. ETR
is also a supplier to integrated manufacturers of rolling
stock, forming consortia for particular types of trams and
trains with among others Bombardier and Siemens.

(39) Following past cases the present Decision analyses the
impact of the proposed transaction on the basis of an EEA
traction and national markets for
market for electrical
rolling stock, separate for the various types of rolling stock,
i.e. trams, metros, regional trains and locomotives in this
case. The overlap in the market for electrical traction is
rather limited and does not
lead to any competition
concerns. However, owing to ETR's and Siemens's position
in some Member States there are vertically affected markets.

(40) The market

investigation showed that

in the markets
affected by the proposed transaction, i.e. trams in Spain,
Poland, Austria and the Czech Republic, metros in Belgium
and regional trains in Germany and Austria, sufficient
competition will remain after the transaction. In order to
sever the links between ETR and Bombardier created by
Commission Decision COMP/M.2139 Bombardier/Adtranz
of 3 April 2001, it is proposed to adopt in parallel an
Article 8(2) decision cancelling one of the commitments
given by Bombardier in that case should Siemens acquire
sole control of VA Tech. That commitment obliges
Bombardier to offer its CityRunner tram of the ‘Linz’ type
only with traction by ETR.

(41) The non-integrated companies will not be foreclosed for the
following reasons. First, at least one independent supplier of
electrical traction for trams (Kiepe) and metros (Mitsubishi)
will remain available. Secondly, there is the possibility for
the non-integrated manufacturers to integrate within two to
three years, as has been demonstrated by Stadler for trams
and regional trains. Thirdly, the integrated suppliers have, in
the past, often teamed up with the non-integrated, and this
option will remain as well. Lastly, even if the non-integrated
suppliers had to leave the market for electrically driven
rolling stock, sufficient competition would remain in the
market for rolling stock. The Decision concludes that no
significant impediment to effective competition arises in

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both the market
metros, regional trains and locomotives.

for electrical

traction and for trams,

C2. CATENARY WIRES

(42) The Decision concludes that the question whether there is
an overall market for all types of catenary wires or whether
smaller product markets such as catenary wires for long-
distance traffic exist can be left open. The concentration
leads to one affected national market. In Germany, Siemens
and VA Tech would have a combined market share of
around [30-40] (*) % in the overall market, followed by
Balfour Beatty with a similar
share and five small
competitors. On the basis of the market investigation the
Commission concludes that there is no significant impedi-
ment to effective competition after the concentration. The
same applies to the smaller possible product market of
catenary wires for long-distance traffic since there is only
for the
one customer,
product for which there is an overlap, and at least four
credible competitors. Moreover, it turned out that Siemens
and VA Tech were rarely competing against each other.
Lastly, tacit coordination between the merged entity and
Balfour Beatty seems very unlikely since the market is
declining year by year, and VA Tech cannot be described as
the maverick which would be taken over and, therefore,
make coordination easier. The Decision concludes that no
significant impediment to effective competition arises in the
market for catenary wires.

the incumbent Deutsche Bahn,

C3. TRACTION POWER SUPPLY

for substations and a market

(43) Traction power supply concerns the supply of electricity
into the catenary system of the railway operator through
substations. The Decision identified two product markets,
one overall market
for
components. In addition, there is an overlap in the market
for the servicing of traction power generation stations in
Germany. The concentration leads to two affected national
markets for traction power supply. Siemens and VA Tech
would have a combined market share of [40-50] (*) % in
the overall market in Austria. In addition to Siemens/VA
Tech, there are four internationally active credible suppliers,
ABB, Areva, Balfour Beatty and SAG (RWE), which have
market shares between 5 and 25 %, and some fringe
players. The demand side is highly concentrated:
the
national railway company ÖBB and Wiener Linien account
for more than 90 % of demand in that rather small market,
and use tenders. As a consequence, market shares in this
bidding market vary a lot.

(44) In Germany, Siemens and VA Tech would have a similarly
high market share as in Austria. Competitors are ABB,
Balfour Beatty, Elpro and Spitzke. VA Tech is almost
exclusively active in the long-distance segment where there

it has been brought

is one customer, Deutsche Bahn. Given that this market is a
bidding market with one powerful customer in the segment
where the overlap is, there is no competition issue for entire
substations for traction power supply. With regard to
substation components
to the
the merged entity would
Commission's attention that
become a monopolist for certain components with the
potential to foreclose competitors. However, the market
investigation showed that Siemens does not have any of the
three components in question, there are other competitors
the one
these components and that,
for
component where indeed VA Tech is the only supplier, the
customer Deutsche Bahn played a very active part in getting
it tested and ultimately approved by the regulator. The
to
Decision concludes that no significant
effective competition arises in the market
for traction
power supply. The same is true for the servicing of traction
power generation stations where VA Tech only supplied one
of approximately 20 stations for which it is best placed to
do also the servicing and since there are several credible
alternatives to Siemens and VA Tech.

impediment

two of

for

C4.

LEVEL CROSSINGS

(45) Both Siemens and VA Tech are suppliers of level crossings.
While VA Tech is active only in Austria, Siemens is not, but
can be seen as a potential entrant. A customer raised the
issue that after the merger Siemens might withdraw the VA
Tech product and replace it with its own. However, the
market investigation showed that VA Tech's product is
owned by a German firm which has all the legal means to
transfer the distribution rights to someone else if necessary.
Therefore, the number of suppliers in the Austrian market
does not change.

D.

FREQUENCY INVERTERS

(46) Both Siemens and VA Tech are suppliers of

frequency
inverters. The market investigation confirmed Siemens's
view that the relevant geographic market for frequency
inverters is the EEA. In line with previous decisions the
is divided into two with the
relevant product market
dividing line at 100 kW. Whether in the market
for
inverters above 100 kW a further segmentation for liquid-
cooled and fourquadrant inverters is needed is left open
since the competition assessment would not change.

(47) The combined market share of Siemens and VA Tech in the
market for inverters below 100 kW is less than [15-
20] (*) %. Since in 2004 VA Tech entered into a joint
venture with Schneider and Toshiba (‘STI’) the market share
of STI has to be added. However, even then the combined
market share is below [30-40] (*) %. Important competitors
are ABB and Danfoss with 10-20 %, and Lenze, SEW

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Eurodrive, Vacon and Yaskawa/Omron with 5-10 % each.
There are numerous smaller companies which are strong at
the local level. For inverters above 100 kW the combined
market share including the STI JV is less than [20-30] (*) %.
For liquid-cooled and fourquadrant inverters the combined
the
market
Commission came to the conclusion that competition
concerns are unlikely to arise under any plausible product
market definition.

is below [20-30] (*) %. Therefore,

share

E.

METALLURGICAL AND OTHER INDUSTRIAL PLANT

BUILDING

1.

RELEVANT PRODUCT MARKETS

a.

Fundamental distinctions

(48) In the area of industrial plant building a distinction can be
drawn firstly according to sectors (such as metallurgy,
chemicals, paper, cement, etc.). This case relates primarily to
metallurgical plant building. In this respect, a distinction
can be drawn between mechanical plant building, electrical
plant building and plant maintenance and services.

(49) Mechanical industrial plant building involves planning the
use of machines in the industrial production process in
question, procuring those machines and installing them in
the production plant. VA Tech is a supplier in this area via
its subsidiary VAI. Siemens is not itself active in this area as
a supplier but, in the metallurgical sector, has a […] (*)
holding in SMS Demag, one of the VA Tech’s two closest
rivals.

(50) Electrical plant building primarily covers general plant
electrification, the configuration and assembly of traction
solutions and the area of actual automation, which
essentially consists of electrical monitoring and control
systems and process automation. Both Siemens and VA
Tech are suppliers in this area, the latter via its subsidiaries
VAI (in the metallurgical sector) and Elin EBG (in various
sectors).

(51) Plant maintenance and services include ongoing main-
tenance work and service provision, but exclude the
redesign of parts of the plant. Siemens and VA Tech are
both active in plant maintenance and services in the field of
metallurgy.

b. Mechanical metallurgical plant building

(52) Siemens considers the mechanical part of industrial plants
to be sector-specific and therefore assumes a separate
product market for mechanical metallurgical plant building.
However, Siemens does not apply the further subdivision
by process stage adopted by the Commission in its SMS/
Mannesman Demag decision (1) but takes the view that these
are only segments of a larger market
for mechanical
metallurgical plant building.

(53) The Commission concludes from the results of the market
investigation that
the subdivision by process stage in
mechanical industrial plant building applied in the SMS/
Mannesmann Demag case in the iron and steel sector can
also be adopted for the purposes of this Decision. This
involves making a distinction between product markets for
pig iron making, steelmaking, continuous casting plants,
hot rolling mills, cold rolling mills, strip plants, section
rolling mills and hot pressing and forging. A distinction
should also be made between metallurgical plant building
for iron and steel on the one hand and for non-ferrous
metals, in particular aluminium and copper, on the other.

(54) However, the precise definition of the product market can
be left open in the area of mechanical metallurgical plant
building.

c.

Electrical metallurgical plant building

(55) Electrical metallurgical plant building covers so-called ‘level
0’ automation (electricity supply and traction), actual
automation (levels 1 and 2) and the more recent area of
IT solutions for drive logistics/MES (level 3).

No uniform market

(56) Siemens does not consider electrical

industrial plant
building for the metallurgical sector to be a separate
market, but takes the view that electrical industrial plant
building as a whole is independent of any sector.

(57) In the context of the market investigation carried out by the
Commission, however, most market participants expressed
the view that special know-how is necessary for building
In their
in the metallurgical
electrical plants
statements, competitors particularly stressed the specialisa-
tion of their engineers. The importance of reference lists in
the
the market
investigation leads to the conclusion that most customers
demand relevant experience from suppliers in the area of
metallurgy. […] (*). A further indication of an increasing
branch-related specialisation is the advance of the former
mechanical metallurgical plant building specialists, Danieli,

received in the

context of

replies

sector.

(1)

IV/M. 1450 — SMS/Mannesmann Demag.

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SMS Demag and VAI, in the area of electrical metallurgical
plant building.

aluminium can also be left open for the purposes of this
Decision.

(58) Although level-0 products (electrical, drives) are metal-
lurgy-specific to a relatively minor extent, this is not true
for level-1 and level-2 products (automation proper). This is
because levels 1 and 2 require branch-specific solutions
(software modules) in order to be applicable. Siemens and
its competitors are developing such solutions in branch-
specific product families in the area of electrical industrial
plant building.

(59) For the said reasons, the existence of a specific market for
electrical plant building should be assumed for
the
purposes of defining the product market here, at least for
the metallurgical sector. Such an overall market can be
defined either as an overall market for electrical metallurgi-
cal plant building,
including all possible submarkets, or
more narrowly as a possible overall market for electrical
metallurgical plant building at automation levels 0 to 2 in
the area of iron and steel.

Possible separate submarkets for individual process
areas or steps

(60) Market participants also take the view that the market for
electrical plant building can be subdivided even further
according to the various process steps of metallurgical
production. There was some evidence of this in the market
investigation, although it can ultimately remain open
whether separate electrical product markets exist according
to the three main process stages of electrical metallurgical
plant building (liquid phase, hot phase, cold phase) and the
special area of long product rolling. The question whether
there should be a further subdivision by process step can
also be left open for the purposes of this Decision.

Separate
automation?

submarkets

for

level-1

and

level-2

(61)

It can also be left open for the purposes of this Decision
whether separate product markets should be assumed for
levels 1 and 2 combined or for submarkets thereof.

Separate markets for the iron and steel sector and the
aluminium sector, in particular for aluminium hot and
cold rolling

Possible market for IT solutions for plant logistics/
MES/level 3

(63) The Commission's market

investigation also revealed
indications of a separate, possibly emerging metals-specific
product market for IT solutions for plant logistics/MES/level
3. However, the question whether this is a specific branch
and whether it should be included in or separated from the
market
for electrical metallurgical plant building can
ultimately be left open for the purposes of this Decision.

d. Maintenance and services

(64) Siemens takes the view that there is a specific market for the
provision of services to metallurgy plants. The Commis-
sion's market investigation tends to confirm this view.
However, a precise market definition can be left open in this
area.

e.

Electrical
sectors

industrial plant building in non-metal

(65) For the purposes of this Decision the question of the
branch-specific market definition of non-metallurgical
electrical industrial plant building can be left open since
the proposed merger does not give rise to any competition
concerns whatever the definition of product market (i.e.
covering several branches or in terms of a separate market
for each branch).

f.

Conclusion concerning the definition of product
market in the areas of metallurgical plant building
and industrial plant building in other branches

(66) For the purposes of this Decision, therefore, the product
markets are deemed to be the following in the area of
mechanical metallurgical plant building:

(62) The question whether or not there should be a separation
of product markets for the rolling markets in iron/steel and

— an overall market for mechanical metallurgical plant
building (either limited to ferrous metals or covering
both ferrous and non-ferrous metals);

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13.12.2006

— possible submarkets for the various process steps of

b.

Electrical metallurgical plant building

mechanical metallurgical plant building.

(67) For the purposes of this Decision, the product markets are
deemed to be the following in the area of electrical
metallurgical plant building:

— the overall market for electrical metallurgical plant
the following possible

building including all of
submarkets:

(72) Siemens also assumes the existence of a world market in the

area of electrical metallurgical plant building.

(73) According to the findings of the market investigation, the
relevant geographic market should at least be EEA-wide for
the purposes of this Decision, but consideration should also
be given to the possibility of a larger market than the EEA.

— the possible (more narrowly defined) overall market
for electrical metallurgical plant building at automa-
tion levels 0 to 2 in the area of iron/steel;

(74) This is true for all possible submarkets and markets for
electrical metallurgical plant building,
including the
possible market for IT solutions for plant logistics/MES/
level 3.

— the possible submarkets for electrical metallurgical
plant building at the liquid phase, hot phase and cold
phase and for long product rolling (process-stage
markets) in the area of iron/steel and the possible
process-step markets (or further subdivision, e.g. by
levels of automation), and possible level-1 and level-2
submarkets;

— the markets for aluminium hot rolling and aluminium

cold rolling.

— the possible market for IT solutions for plant logistics/

MES/level 3.

the Commission is prepared to consider

(75) Siemens can agree with the Commission's definition of the
geographic market for electrical metallurgical plant building
the
only if
possibility of a larger market than the EEA, but opposes
the view that certain Asian regions cannot be included in
the relevant market. The corresponding submarkets are
entirely accessible to foreign suppliers.

(76) However, the Commission continues to take the view that
different competitive conditions exist in certain regions of
the world which cannot be attributed purely to historical
factors, and that, consequently, a larger market than the
EEA but not a global market can be assumed.

(68) For the purposes of this Decision, at least one separate
product market for metallurgical plant maintenance and
services may also be assumed.

c. Maintenance and services

(69) The definition of product market in electrical

industrial
plant building in other branches can remain open for the
purposes of this Decision.

2.

RELEVANT GEOGRAPHIC MARKETS

a. Mechanical metallurgical plant building

(70) Siemens takes the view that the market for mechanical
metallurgical plant building is a world market or at least an
EEA-wide market with a strong tendency towards a
worldwide market.

(77) In Siemens's view, this market should be defined as EEA-
wide, but it is perceived as being narrower by the majority
of market participants, as geographical proximity to the
supplier and, to a certain extent, the sharing of a common
language are cited as being particularly relevant in this area.
A number of customers would not select a supplier from a
Member State other than the one in which their production
site is located even if the prices for services from their
current suppliers were to rise by 5-10 %. This applies to
both the mechanical and the electrical areas.

(78) For

the purpose of

this Decision, a precise market
definition can ultimately be left open. In any case, the
relevant geographic market is not smaller than national and
not larger than EEA-wide.

(71) However, it is not necessary to determine the geographic
market for the purposes of this Decision since the merger
gives rise to competition concerns in the area of mechanical
metallurgical plant building whichever definition of
geographical market (EEA-wide or larger) is applied.

d.

Electrical industrial plant building in other areas

(79) VA Tech's internal organisation, according to which VAI is
active worldwide in the area of metallurgical plant building

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and Elin EBG, which generally covers electrical plant
in Austria and is
building, concentrates its activities
otherwise highly active in the area of
industrial plant
building in Central Europe, suggests that the market or
markets in other areas of electrical industrial plant building
should be defined more narrowly in geographical terms
than that of the specialised field of electrical metallurgical
plant building. This view was confirmed by the Commis-
sion's market investigation, with many of the responding
industrial companies indicating that they tended to consider
some
there to be national or
specialised processing industries
(such as paper and
chemicals) a larger geographic market may, if necessary,
be considered. However, the Commission's market inves-
tigation gave no indication of the existence of a geographic
market which should be defined as larger than the area
covered by the EEA.

regional markets. For

(80) The question of

the precise definition of

the relevant
geographic market can ultimately be left open for the
purposes of this Decision. The relevant market or markets
are, in any case, not smaller than national and not larger
than EEA-wide.

3.

COMPETITION ASSESSMENT

a. Mechanical metallurgical plant building

(81) The merger substantially weakens competition between
Siemens/VAI and its main competitor, SMS, in the EEA or
world market for mechanical metallurgical plant building or
in the submarkets for mechanical plant building for
steelmaking and for continuous casting. This will pose a
significant impediment to effective competition, in particu-
lar by creating a dominant position for Siemens/VAI in the
submarkets mentioned above.

(1) Market conditions

(85) SMS sees VAI as its main competitor in most of its business
areas. It gives its own market shares and those of VAI in
mechanical metallurgical plant building overall as 24 % and
20 %. In the process step markets the combined market
shares of the two leading firms are significantly higher. In
one process step market, steel production, VAI is level with
SMS (33 % each), while in the process step market of
continuous casting VAI is well ahead of SMS (SMS: 23 %;
VAI: 62 %). VAI has confirmed its leading position in
continuous casting, with high market shares,
in public
statements.

(2) Overall market for mechanical metallurgical plant
building in the area of iron and steel or overall
market for mechanical metallurgical plant build-
ing including non-ferrous metals:
significant
impediment to effective competition

(86) The Commission's market investigation shows that the
merger will lead to a substantial weakening of the current
competition between VAI and SMS owing to Siemens's
minority stake in SMS. Because of VAI’s market strength in
this highly concentrated market and the very close
competition between VAI and SMS, and in particular
because other competitors are not able to restrict Siemens/
VAI’s competitive room for manoeuvre sufficiently if the
competitive pressure exerted on Siemens/VAI by SMS is
weakened, the merger will in any event pose a significant
impediment to effective competition through uncoordi-
nated behaviour and possibly also by creating a dominant
position for Siemens/VAI.

(87) VAI and SMS are the closest competitors in the relevant
market. Because of this close competition between VAI and
SMS, a customer who decides against VA Tech in a
particular metallurgical project would very probably regard
SMS as the next best alternative. This is shown by the
ratings given by the competitors and customers questioned
during the Commission's market investigation.

(82) Only VA Tech is active in this area, not Siemens. Siemens
in all

estimates VA Tech’s market share at
possible submarkets.

[10-15] (*)

(83) By contrast, market participants argued for considerably
higher market shares for VA Tech in possible product
markets in mechanical plant building. The worldwide and
EEA market shares of VA Tech in the metallurgical plant
building market were seen as being close to those of the
previous sole market leader SMS-Demag (hereinafter called
‘SMS’),
line
supplier active in the EEA, Danieli. In individual possible
mechanical engineering submarkets VA Tech is seen as the
clear market leader.

followed by the third and only other full

(88) Danieli is usually regarded as the third strongest competitor,
but on average well behind SMS and VAI. Its strength lies
mainly in long product rolling, where it is the market
leader. Because of its market position and customer rating,
Danieli is unlikely to be able either to prevent a decline of
competition in the market for mechanical metallurgical
plant building as a whole or to threaten the dominant
position that VAI might gain as a result of Siemens/VAI's
information advantage. Moreover, customers need at least
three competitive bids in order to negotiate successfully in
the field of metallurgical plant building.

(84) Statements by market participants also suggest that the
market or markets for mechanical metallurgical plant
building are to be regarded as highly concentrated.

(89) There is no significant competitive pressure from other
competitors. The major suppliers mentioned by Siemens

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besides the three market leaders are rarely or never active in
Europe and so do not represent a proper alternative for
European customers. Smaller suppliers are very unlikely to
be able to bid successfully for major contracts. Apart from
the three market leaders, competition is very fragmented
and is not sufficiently capable of curbing the market power
of the three leading suppliers.

building for steelmaking and for continuous casting. In
the other possible submarkets in mechanical metallurgical
plant building, however,
is impossible to state with
sufficient certainty that the merger would constitute a
significant impediment to effective competition.

it

(90) A large supplier of mechanical metallurgical plant building
has a large number of customers accounting for the bulk of
the firm's orders and is not therefore highly dependent on
individual customers.

(91) The merger would substantially weaken the competitive
pressure exerted by SMS on Siemens/VAI. It would give
Siemens control of VA Tech in addition to its existing 28 %
holding in SMS. In view of the special circumstances of the
case (see following paragraph: prior exercise of the put
option; it is common ground that the value of the share is
to be determined as of 31 December 2004), it cannot be
assumed with sufficient certainty that Siemens's 28 % share
interest in SMS (and the financial participation in SMS's
business success that this would normally entail) will induce
Siemens/VA Tech to compete less strongly with SMS.
[…] (*)

(97) In the possible market in mechanical plant building for
is the firm rated highest overall by
steelmaking, VAI
competitors and customers in the Commission's market
investigation. In second place, just behind, is SMS. VAI and
SMS have high EEA and world market shares in a
concentrated market. VAI and SMS each have estimated
world market shares of around 30–40 %; their EEA market
shares are, with a high likelihood, even higher. These high
market shares suggest that the market is already highly
concentrated, which makes a significant negative impact on
customers more likely. This is especially true given the close
competition between the two strongest players, which
would diminish as a result of the merger in favour of the
leading firm. VAI and SMS are the closest competitors.
Danieli lies well behind in third place and is not in such
close competition. The remaining competition is fragmen-
ted. Smaller suppliers cannot compete with the big players
in major projects or rely on cooperation with the big
suppliers or specialise in specific market niches.

(92) Siemens has exercised a put option to sell its share in SMS
to the majority shareholder. However,
is
contentious as regards the value of Siemens's share and
potentially lengthy litigation is pending before the German
courts. Until this litigation has been settled and the sale of
Siemens's 28 % share is therefore completed […] (*).

the matter

(98) In the possible market for mechanical plant building for
continuous casting, VAI is clearly rated by customers and
competitors alike as the market leader both in the EEA and
worldwide. VAI very probably has market shares of over
50 % in the EEA and worldwide. SMS ranks second and is
VAI's closest competitor. Danieli
is well behind in third
place. Competition is fragmented and is not sufficiently
capable of curbing VAI's market power.

(93) […] (*).

(94) […] (*).

(95) […] (*). Given Siemens's continuing 28 % share in SMS, the
merger would thus
substantially weaken competition
between Siemens/VAI and SMS. Whether the information
advantage over its strongest competitor SMS and its lead
over Danieli in terms of market power would give Siemens/
VAI a dominant position can be left open. In any event the
merger would have a serious harmful impact on competi-
tion as a result of uncoordinated behaviour by firms. For
these reasons there would be a significant impediment to
effective competition in the overall market for mechanical
metallurgical plant building.

(99) Under

in a
these circumstances […] (*) would result
dominant position of Siemens in the possible markets for
mechanical plant building for steelmaking and mechanical
plant building for continuous casting, constituting a
significant impediment to effective competition.

b.

Electrical metallurgical plant building

Market for electrical metallurgical plant building (level
0-2, iron/steel), possible process area and process step
markets

Market structure and market shares

(3) Submarkets of mechanical metallurgical plant

building: Creation of a dominant position

(96) The above conclusions apply even more forcefully to the
possible process step submarkets in mechanical plant

(100) The Commission's market investigation has shown that
Siemens is seen by many market participants as the most
important supplier of electrical metallurgical plant building
in the iron/steel sector in the EEA and worldwide. This is
true for the possible overall market and in most of the

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submarkets, except in the possible long rolling submarket,
where Danieli is seen as the leader. In all these areas VAI is
regarded as a strong competitor, usually in second place in
the market; and in the field of continuous casting it is even
regarded as roughly on a par with Siemens. It is, however,
significant that besides them, around four other competi-
tors are held to be strong and credible suppliers. The main
firms in question are ABB, Alstom, SMS and Danieli, in
some areas, especially worldwide, Toshiba (or TMEIC-GE)
as well, and in some areas also Sundwig-Andritz,
Ingelectric or ASI Robicon.

Market shares

as

(101) Market shares are rather difficult to quantify objectively in
this very varied and differentiated product or service area.
The Commission has several estimates from Siemens, some
produced for the purpose of the proceedings and others
produced well before they started. The Commission also
has estimates drawn up by VA Tech before the proceedings
began as well
estimates drawn up during the
proceedings at the Commission's request. Finally, estimates
drawn up by SMS for the purposes of the proceedings were
also submitted to the Commission. The estimates give quite
figures for market shares. Siemens's
a wide range of
estimates generally assume combined market shares of less
than 20 %, whereas VAI's estimates are considerably
higher, somewhere in the region of 40–50 %. The highest
figures, for some process step markets, appear in SMS's
estimates.

and process step, and they can be expected to exert
sufficient competitive pressure on the merged firms.

Tender analysis

(105) The relevant market/markets are bidding markets, where
market shares are only indicative. The decisive factor is the
strength of the competitive pressure exerted by firms on
one another in the bidding process, although long-term
market shares are an important indicator of such strength.

(106) The tender analysis of data from Siemens and VAI showed
that, at the most, Siemens and VAI can be regarded as close
competitors in a few possible submarkets (continuous
casting, liquid phase). But even in those few submarkets
they are not the closest competitors.

Effect of Siemens's shareholding in SMS

(107) The commitments

that were required from Siemens
in SMS in order to
regarding its shareholding […] (*)
eliminate the competition concerns
in the field of
mechanical metallurgical plant building also rule out a
significant impediment to competition solely as a result of
this holding […] (*), at any rate in electrical metallurgical
plant building.
(This also applies to all other electrical
metallurgical plant building markets.)

Possible level 1 and 2 automation markets

(102) In the view of the Commission (and of some of the
competitors mentioned) none of these estimates can be
regarded as very reliable.

(108) The market investigation has confirmed that competitors’
level 1 and 2 software solutions are considered relevant
indicators of market strength.

(103) The Commission carried out an analysis of the strength of
the major competitors in the main part of the markets
referred to above, i.e. for orders of more than EUR1 mil-
lion, for the years 2002-04. It asked competitors about all
the orders they had won during the relevant period and
aggregated the figures. The results of the inquiry reflect the
relative size of the firms questioned. At a late stage in the
proceedings, Siemens provided further details about other
competitors (in the liquid phase). The Commission checked
the information and took it into account where it was
confirmed in time by the customers and/or competitors in
In the Commission's view this calculation
question.
represents a reasonable approximation of
the actual
market shares. However, the percentages indicated must
be regarded as the upper limit and the actual market shares
are very probably somewhat lower.

(104) The figures show that the merger will probably not lead to
market shares of more than 35–40 %. At least four strong
suppliers will remain in the market in each process area

(109) […] (*). However,

in these possible markets also, a
sufficient number of strong competitors remain: SMS,
Danieli, ABB, Alstom and TMEIC-GE. In addition, there are
a number of other competitors who are active above all in
the area of level 1, where entry barriers are lower than in
level 2, or in niche solutions in competition with the
parties to the merger. This is confirmed by an analysis
carried out by the Commission of market strengths in the
case of level 1 and 2 software modules in a few process
stages. Data from individual major competitors were
lacking, but it was possible to carry out an analysis of a
worst-case scenario which confirms the continued exis-
tence of strong competitors in the possible markets.

Electrical metallurgical plant building for aluminium
hot rolling and aluminium cold rolling

(110) The possible markets for aluminium rolling mill building
are, in comparison with steel rolling, very small. For this
reason alone,
in the case of joint steel and aluminium
rolling markets the above analysis of steel rolling markets
could not be substantially affected.

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(111) The overwhelming majority of customers regard the
impact of the merger in the area of electrical plant building
for aluminium hot and cold rolling mills as unproblematic.
It is true that both parties are often named prominently as
being among the leading bidders. However, a number of
other companies have won tenders. Mention was made of
ABB, TMEIC, Alstom, ASI Robicon and IAS.

(112) Entry barriers in the aluminium field are appreciably lower
for suppliers of mechanical aluminium mills and for
companies which already offer level 1 and 2 automation in
the steel
field. A certain degree of buyer power can
definitely be ascribed to the highly concentrated demand
side and this may promote the entry of new suppliers from
these groups. Mention can be made above all of SMS in
this connection.

IT solutions for plant logistics/MES/level 3

(113) In this relatively young and relatively strongly growing
market,
the transaction does not give rise to any
competition concerns. The area is small and therefore
does not make a substantial difference when it comes to
examining a possible overall market for electrical metal-
lurgical plant building.

(116) The merger would therefore not lead in this market to the
creation or strengthening of a dominant position or to any
other significant impediment to effective competition.

d.

Electrical industrial plant building in other sectors

(117) The planned merger is unobjectionable from a competition
point of view in the electrical, non-metallurgical industrial
plant building sector however
is
defined.

the product market

e.

Conclusions on the electrical metallurgical plant
building markets and on the market/s for electrical
industrial plant building in non-metallurgical sec-
tors

(118) For the reasons given above, the notified transaction would
not lead in any of the relevant electrical metallurgical plant
building markets or in the market/s for industrial plant
building in non-metallurgical sectors to the creation or
strengthening of a dominant position or to any other
significant impediment to effective competition.

Conclusion on a possible overall market for electrical
metallurgical plant building including all the above
submarkets and on all possible submarkets

F.

LV SWITCHGEAR AND COMPONENTS

(114) Since no competition problems arise in any of the possible
submarkets of an overall market for electrical metallurgical
the same necessarily holds true for a
plant building,
possible overall market. In no possible market for electrical
metallurgical plant building is there any question of the
creation or strengthening of a dominant position or of any
other significant impediment to effective competition. Nor
are any anticompetitive effects for electrical metallurgical
plant building apparent from the supplementary examina-
tion of possible non-horizontal effects.

(119) The relevant product market for low-voltage switchgear
(‘LV switchgear’) can be segmented into three submarkets
according to the built-in circuit breaker which can be an
ACB, MCB or MCCB. In addition there is a separate market
for busways, another component. Further components are
programmable logic controllers and contactors. The
markets for both the components and the assembled
switchgear were, in line with previous decisions, analysed
on a Member State basis, but since the proposed merger
does not raise competition concerns at EEA level the
question can ultimately be left open.

c. Metallurgical plant maintenance and servicing

(115) The activities of Siemens and VA Tech overlap in this
market also. The Commission's market
investigation
revealed, however, no signs of any competition problems
in the market for metallurgical plant maintenance and
in this market are
servicing. The entry thresholds
substantially lower than in the markets for electrical and
mechanical plant building. A sufficient number of local
competitors are active in the area of the maintenance and
servicing of metallurgical plant. The
customers of
metallurgical plant manufacturers are, moreover, them-
selves capable of carrying out such work.

(120) On that basis the markets for LV switchgear and some
components in Austria and for other components in the
EEA and in some Member States would be markets
horizontally and/or vertically affected by the proposed
transaction. VA Tech is a panel builder and sources all
components it needs to assemble an LV switchboard from
third parties. Siemens is both a panel builder and a supplier
of all components needed. However, regardless of the
market definition chosen the combined market share is in
no horizontally affected market higher than [30-40] (*) %,
and there are strong competitors in all affected markets
which either produce their own components or have their
own, independent source of components so that it will be
impossible for Siemens to foreclose these competitors.
Therefore, the Commission came to the conclusion that

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competition concerns are unlikely to arise.

G2. Facility management

G.

BUILDING TECHNOLOGY AND FACILITY

MANAGEMENT

1.

RELEVANT PRODUCT MARKETS

G1. Building technology

(121) Siemens and VA Tech are active in the field of building
technology, which in Siemens's view must be segmented
into three levels: the component level, the system level and
the installation level. Siemens states that, although there
are markets for facility management
(see G.2), other
services should be allocated to the respective primary
market. The component and system levels should be
divided according to area of application. At the component
level, a distinction should be made above all between the
areas of electrical installation technology, safety technol-
ogy, control and instrumentation technology and HVAC
(heating, ventilating and air-conditioning), and at
the
system level between safety technology and control and
instrumentation technology. Lastly, at the installation level,
it
is necessary to distinguish between electrical and
mechanical contracting. On the basis of the results of the
Commission's market investigation, a distinction ought to
be made in the case of safety technology at least between
the areas of (i) fire protection and (ii) access control/
intruder detection. The question of any further subdivi-
sions can remain open for the purposes of this Decision.

(122) At the installation level, a distinction can be made between
electrical contracting and mechanical contracting. The
market investigation showed that there may be a separate,
overlapping market for the construction of electrical and
mechanical building installations (1) by a technical general
contractor bearing overall responsibility. The exact defini-
tion of the market can, however, ultimately be left open.

G2. Facility management

(123) The market investigation shows that the market may be
segmented into technical facility management, commercial
facility management and general facility management. The
question of the precise product market definition can,
however, be left open.

2.

RELEVANT GEOGRAPHIC MARKETS

G1. Building technology

(124) In Siemens's view, all the markets referred to above in part
G (apart from that for installation technology components)
are at least EEA-wide. According to the findings of the
market investigation, there are many indications that the
markets are national. The question of
the geographic
market definition can, however, be left open.

(1) The parties’ activities in this area relate as a rule to non-industrial
building installations (residential and office buildings and such
structures as concert halls, museums, hospitals and tunnels).

(125) The same holds true for the market or markets in the area

of facility management.

3.

COMPETITION ASSESSMENT

G1. Building technology

(126) At the component level, it is only in a vertical respect that
there can be any relevant markets inasmuch as VA Tech is
not itself active in these markets.

(127) The market investigation provided insufficient indications
that Siemens would as a result of the merger be in a
position to foreclose the said component markets in
Austria to its competitors on the component level. There is
sufficient competition in the markets for downstream
systems and installations. At the immediately downstream
systems level, the addition of market shares due to the
In the said
merger would, moreover, be very small.
component markets themselves, Siemens faces competi-
internationally established companies
tion from large,
(including ABB and Möller or Honeywell,
Johnson
Controls and Sauter).

(128) According to the company itself, VA Tech is not at all
active at the systems level. VA Tech attributes all of its
turnover in this area to contracting (installation level). The
horizontal effects of the merger in the area of individual
works outside Austria are marginal. Likewise within
Austria there are no relevant markets with a market share
addition of more than 10 %. A sufficient number of
alternative system suppliers and integrators are available.
Also from a vertical standpoint the merger would not lead
to any significant impediment to competition.

(129) At the installation level, it is only in Austria that there are
any overlaps worth mentioning between VA Tech and
Siemens. Most pronounced are the direct competitive
position and the respective market strengths of Siemens
and VA Tech in the possible submarket for technical
general contractors. Although the merger would result in a
reduction in the number of suppliers in Austria, RWE
Solutions, MCE, the Dutch Imtech group (through its
German subsidiary) and M+W Zander (Germany) would
still remain as technical general contractors in Austria.
Medium-sized electrical contractors such as, for example,
Klenk & Meder, Landsteiner and Bostelmann operate in the
market through consortia. If, as might happen especially in
the case of major projects, there were not enough suppliers
available to carry out the technical general contract, then
customers have indicated that they see no problem in
reacting by breaking up tenders into smaller parts (for
individual systems/works instead of the overall technical
general contract). Customers would then either take care of

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Official Journal of the European Union

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the planning and integration themselves or entrust it to an
engineering consultancy. There would therefore not be any
significant impediment to competition. The same holds
true for the areas of electrical and mechanical contracting.

G2. Facility management

(130) Most of Siemens's and VA Tech's customers indicated in
the market survey that the respective other party was not
the most promising competitor in the context of
the
tendering or negotiated procedure. In Austria, the only
possible relevant market, there are a number of other
suppliers whose services in the area of technical facility
management are from a customer standpoint basically
equivalent to those of VA Tech and Siemens. Even smaller
companies, especially at regional level, exert competitive
pressure on the above-mentioned larger competitors. The
merger would therefore not
lead to any significant
impediment to effective competition in this area.

H.

INFRASTRUCTURE INSTALLATIONS AND ELECTRICAL

EQUIPMENT FOR ROPEWAYS

H1. TRAFFIC INFRASTRUCTURE INSTALLATIONS

(131) With respect to traffic infrastructure installations, only in
Austria would there be a few small overlaps between
Siemens and VA Tech in the case of street lighting, traffic
signalling equipment, parking space control installations
and traffic control installations. The question of product
markets and geographic markets can be left open in these
areas. Customers have sufficient alternatives available. The
merger would therefore not
lead to any significant
impediment to effective competition.

H2. WATER TREATMENT INSTALLATIONS

(132) The same holds true for water treatment installations.

H3. ELECTRICAL EQUIPMENT FOR ROPEWAYS

(133) The same holds true for electrical equipment for ropeways.

I.

OTHER IT SERVICES

(134) The same holds true for electrical equipment for other IT

services.

CONCLUSIONS

(135) The Decision therefore

concludes

the notified
concentration would lead to a SIEC, in particular through
the creation of a dominant position, in the markets for (i)
and (ii) mechanical
equipment
hydroelectric power
metallurgical plant building.

that

J.

COMMITMENTS

(136) In order

to address the aforementioned competition
concerns in the markets for
(i) hydroelectric power
equipment and (ii) mechanical metallurgical plant building,
the parties have submitted the commitments described
below.

(137) In hydroelectric power equipment, the parties commit to
divest VA Tech Hydro, a subsidiary of VA Tech containing
the company's activities in hydroelectric power equipment
as well as in combined-cycle power generation equipment.
No competition concerns were raised in the latter area, but
most of
this business is heavily integrated with the
hydroelectric operations, both physically and financially.
The market test confirmed that divestiture of VA Tech
Hydro (which removes entirely the competitive overlap in
hydroelectric power) would solve the competition pro-
blems in this market.

to sell

(138) In mechanical metallurgical plant building, divestiture of
Siemens's 28 % shareholding in VA Tech's most important
competitor, SMS Demag, would be necessary to prevent a
significant impediment to effective competition. Siemens
has already exercised a put option (effective 31 December
2004)
its stake to SMS Demag's controlling
shareholder. However, implementation of the divestiture
is delayed for an uncertain period owing to litigation with
SMS about valuation of the shares. Siemens has, therefore,
submitted a commitment that will remove any competitive
effect of the continued shareholding […] (*) in SMS and
the economic interest in its future competitor. Under the
commitment, a trustee will replace Siemens's representa-
tives in SMS's shareholder committee and supervisory
board. No sensitive strategic information concerning SMS's
future business activities will be passed on to Siemens. The
trustee will provide Siemens with information only as far
as strictly required for Siemens's defence in the court
proceedings and for producing its annual accounts. The
former information will relate only to information before
31 December 2004, while the latter information will not
rely on the shareholders’ agreement, but on normal legal
rights of minority shareholders.
In addition, a non-
buyback commitment and clarification by Siemens that
the shareholding will be valued as of 31 December 2004,
as well as the fact that Siemens cannot count on dividends,
eliminates any concern that Siemens can expect
to
continue to participate in SMS Demag's future profits.
Hence the commitment replicates, as closely as feasible, a
full divestiture of the SMS Demag stake while litigation
continues. The market test of the proposed commitment in
mechanical metallurgical plant building was positive.

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(139) In its Decision, the Commission has, therefore, reached the
conclusion that, on the basis of
the commitments
submitted by the parties, the notified concentration will
the parties in (i)
not lead to a dominant position of
hydroelectric power
and (ii) mechanical
metallurgical plant building.

equipment

K.

CONCLUSION

(140) The Decision concludes that, subject to full compliance
with the commitments given by the parties, the proposed
concentration will not impede effective competition in the
common market or
it. The
Commission has therefore decided to declare the concen-
tration compatible with the common market and the EEA
Agreement in accordance with Articles 2(2) and 8(2) of the
Merger Regulation and Article 57 of the EEA Agreement.

in a substantial part of

III.

ADVISORY COMMITTEE

(141) At its 133rd meeting on 29 June 2005 the Advisory
Committee on Concentrations gave its unanimous support
to the Commission's draft decision to clear the concentra-
tion subject to conditions and obligations based on the
commitments given by the parties.

(142) Pursuant to Article 19(7) of the Merger Regulation, the
Commission is making public the opinion of the Advisory
Committee together with the Decision, having regard to
the legitimate interest of the undertakings in the protection
of their business secrets. In the present case the Advisory
Committee's opinion does not contain any business
secrets.