Summary of Commission Decision of 26 July 2012 declaring a concentration compatible with the internal market and the functioning of the EEA Agreement (Case M.6410 — UTC/Goodrich) (notified under document C(2012) 5161) (Text with EEA relevance)
Date: 2012-07-26
Institutions: European Commission
Subjects: advanced technology industry, aeronautical industry, building industry, economic concentration, electronics industry, merger control








C_2015388EN.01000701.xml










21.11.2015   


EN


Official Journal of the European Union


C 388/7





Summary of Commission Decision
of 26 July 2012
declaring a concentration compatible with the internal market and the functioning of the EEA Agreement
(Case M.6410 — UTC/Goodrich)
(notified under document C(2012) 5161)
(Only the English version is authentic)
(Text with EEA relevance)
(2015/C 388/05)

On 26 July 2012 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
 (1)
, and in particular Article 8(2) of that Regulation. A non-confidential version of the full Decision can be found in English on the website of the Directorate-General for Competition, at the following address: http://ec.europa.eu/comm/competition/index_en.html

I.   THE PARTIES









(1)


United Technologies Corporation (‘UTC’) is active in the production of a broad range of high-technology products and support services for the building systems and aerospace industries worldwide. The UTC group comprises a number of major business units such as: Carrier heating and air conditioning; Otis elevators; UTC Fire & Security systems and UTC Power fuel cells. In addition there are three businesses that are particular relevant for the proposed transaction: (i) Hamilton Sundstrand aerospace systems and industrial products; (ii) Pratt & Whitney aircraft engines; and (iii) Sikorsky helicopters.












(2)


Goodrich Corporation (‘Goodrich’) is active in the production and sale of systems and services to the aerospace, defence and security industries on a worldwide basis. Goodrich has activities in three main business areas: (i) actuation and landing systems; (ii) nacelles and interior systems; and (iii) electronic systems.




II.   THE OPERATION









(3)


On 20 February 2012, the European Commission received a formal notification pursuant to Article 4 of Regulation (EC) No 139/2004 (the ‘Merger Regulation’), by which UTC acquires, within the meaning of Article 3(1)(b) of that Regulation, control of the whole of Goodrich by way of purchase of shares. UTC and Goodrich are designated hereinafter as ‘the Parties’. UTC is also referred as ‘the Notifying Party’.












(4)


The operation had an EU dimension in accordance with Article 1(2) of the Merger Regulation.




III.   THE PROCEDURE









(5)


Based on its first phase investigation, the Commission raised serious doubts as to the compatibility of the proposed transaction with the internal market and adopted a Decision to initiate proceedings pursuant to Article 6(1)(c) of the Merger Regulation on 26 March 2012.












(6)


The Notifying Party submitted its written comments on the Article 6(1)(c) decision on 4 April 2012.












(7)


On 15 May 2012, the time limit for taking a final decision in this case was extended by an additional 15 working days pursuant to the second subparagraph of Article 10(3) of the Merger Regulation.












(8)


The Notifying Party submitted commitments on 11 June 2012 pursuant to Article 8(2) of the Merger Regulation. Following the results of the market test of these commitments, the Notifying Party presented a revised version of the commitments on 29 June 2012 and a final version of the commitments on 12 July 2012 (‘the Commitments’).












(9)


The Advisory Committee discussed the draft of this Decision on 12 July 2012 and issued a favourable opinion.




IV.   EXPLANATORY MEMORANDUM









(10)


The proposed transaction concerns a substantial number of aviation equipment markets, as well as the downstream aircraft engine and helicopter markets.












(11)


The Commission considers that the proposed transaction would lead to a significant impediment of effective competition regarding the horizontally affected market for AC power generators, as well as the vertically affected markets for (i) engine controls and small aircraft engines, and (ii) fuel nozzles and large commercial aircraft engines.












(12)


The Commission has not raised objections as regards the remaining affected markets. Therefore these other markets will not be discussed in this summary (2).




A.   The relevant markets

1.   AC power generators









(13)


A power generator is used to generate electrical power for the various systems and devices deployed on the aircraft. As with generators in general, aircraft generators convert mechanical energy into electrical energy by a process of electromagnetic induction.












(14)


An aircraft will typically have two principal types of generators: (1) a power (engine) generator; and (2) an Auxiliary Power Unit (‘APU’) generator. Main power generators produce electricity driven by the engines of the aircraft. They are the principal electrical power source for the aircraft during normal flight conditions. APU generators are driven by the APU of the aircraft and provide electric power for the aircraft’s systems and devices while it is on the ground. The aircraft also carries an emergency power unit (‘EPU’), a device which generates electric power in case of failure of the primary systems.












(15)


The Commission has analysed in the past a number of aerospace component markets and has generally concluded that each aerospace component is a market in itself. In this context, the market investigation broadly confirmed that the power generator, the APU and the EPU constitute separate product markets.












(16)


The Notifying Party considers that a distinction should be made between alternating current (‘AC’) and direct current (‘DC’) technology in aircraft electrical systems on the basis that demand-side substitutability is limited for technical reasons. Each technology tends to be favoured in particular end-use applications, with DC systems being typically used in smaller aircraft and corporate jet with lower power need and AC systems typically used in larger regional and commercial aircraft with greater power needs and where the power will be distributed on longer lines, such as large commercial aircraft. The market investigation has broadly confirmed that electrical systems based on AC and DC technology constitute separate product markets.












(17)


The Notifying Party submits that AC power generators constitute a single product market without the need for a further segmentation according to the type of generator. However, the market investigation broadly confirmed that AC generation systems based on constant and variable frequency constitute distinct product markets. Since an engine rotates at variable speeds during flight, the generator would normally also produce electricity of variable frequency. However, if the generator is equipped with a constant speed drive, it can produce constant frequency. While constant frequency AC generators are utilized in most large commercial aircraft flying today, they represent legacy technology and virtually all newer platforms are being designed and built as variable frequency AC platforms. From a demand side perspective, there is limited substitutability since they differ significantly from each other in terms of design, specifications and performance. Moreover, the specification of the electrical system architecture is already defined in the terms of the tender. From a supply-side perspective, the number of suppliers differs significantly.












(18)


The question whether generators for different aircraft platform sizes should be defined as a distinct product market can be left open for the purpose of this Decision as it does not alter the conclusions of the competitive assessment.












(19)


In addition, for the purpose of this Decision, the relevance of further segmenting the market for power generation according to commercial and military applications can be left open as it will not materially affect the assessment of the proposed transaction.












(20)


With respect to the geographic scope, previous Commission decisions have found that components such as power generation for commercial applications are worldwide in scope, and this has been broadly confirmed by the market investigation. Furthermore, the Notifying Party considers that the geographic scope of components for military applications is worldwide, whereas the Commission in previous decisions left open the question whether the markets are national or EEA-wide in scope.












(21)


For the purpose of this Decision, the exact geographic definition of aircraft AC power generators for military applications can be left open as it will not materially affect the assessment of the proposed transaction.




2.   Aircraft engines









(22)


Aircraft engines are deployed to power and propel aircraft. Jet engines are the propulsion system of jet aircraft. Within the broad category of jet engines, a distinction can be made between turbofan engines, turboprop and turboshaft engines. Turbofan engines are those in which a fan driven by a turbine provides extra air to the burner and gives extra thrust. In turboprop engines thrust is provided by an external propeller rather than an internal fan. The turboprop provides the benefits of high-thrust and low-fuel consumption for aircraft designed for short distances. Turboshaft engines produce shaft power, rather than jet thrust. Turboshaft engines are mainly deployed on helicopters.












(23)


Previously, the Commission has segmented the aircraft turbofan jet engine market into groups based on the ‘mission profile’ (that is to say, the purpose for which the aircraft is purchased, determined by reference to the aircraft’s seating capacity, flying range, and price and operational cost) of the aircraft on which the engine is deployed: (i) jet engines for large commercial aircraft (> 100 passengers, range of 2 000 to 8 000 nautical miles), which include narrow-body/single-aisle aircraft and wide-body/double-aisle aircraft (‘LCA’); (ii) jet engines for large regional aircraft (> 70 passengers, range up to 2 000 nautical miles) (‘LRA’); (iii) jet engines for small regional aircraft (30-50 passengers, range up to 2 000 nautical miles) (‘SRA’); and (iv) jet engines for corporate aircraft. Turboprop and turboshaft engines have not been considered previously in Commission decisions.












(24)


The market investigation has not been conclusive as to whether there are any thresholds which split the engine supply market.












(25)


For the purpose of this Decision, the question whether the market should be narrowly defined on the basis of the mission profiles, or whether it should be considered a unique market including both turbofan and turboprop engines, can be left open as the assessment of the vertical effects of the transaction in relation to engines does not depend on the precise scope of the engine market




3.   Engine controls









(26)


The primary function of engine controls is to convert the pilot’s commands into changes in the amount of fuel that is fed into the aircraft engine, thereby controlling the amount of thrust produced by the engines and ultimately the speed of the aircraft. The Parties’ activities overlap in the provision of electronic engine controls (‘EECs’), main fuel pumps, and fuel metering units (‘FMUs’). These three components are mainly sold to engine manufacturers.












(27)


The market investigation has confirmed that each of the above mentioned components is a market in itself. The potential for demand-side substitution for these components is very limited since each of them performs a distinct and vital function in the operation of the aircraft types they are used for. The Notifying Party has not provided arguments that call the absence of demand-substitutability into question.












(28)


Furthermore, the Notifying Party considers that a segmentation based on aircraft or engine size is not warranted based on a high degree of supply-side substitutability. It also submits that it is not relevant to make a distinction between engine control product markets for civil and military applications (i.e. according to purpose) since: both have the same basic functionality, in many cases essentially the same engine (including engine controls) is used for both applications, and there would be a similar number of alternative suppliers under either market definition.












(29)


The Commission’s investigation has shown that the competitive conditions for engine controls differ across segments identified by engine size and aircraft purpose, in view of differences regarding product requirements and performance. The investigation has confirmed that engine controls on the different aircraft platform segments constitute distinct markets, primarily because of an evident lack of demand-side substitutability. Even though supply-substitutability is a feature of a certain importance, the barriers to entry in order to move to adjacent platforms are significant due to the sophistication of engine controls, the high associated R & D requirements, the cost of obtaining product certification and the need to have a strong technology capability as well as a worldwide product support network. Furthermore, any potential market entry of an alternative engine controls supplier is offset by the high switching costs for users. In sum, each of the above mentioned engine controls forms a market in itself for each of the aircraft platforms they are used for.












(30)


The Notifying Party considers that the geographic scope of engine control markets is worldwide. In previous decisions the Commission has considered that the geographic scope of the engine control markets for civil aerospace applications is worldwide. The market investigation supports this view. For military applications and defence markets, considered national in scope where there is a national supplier, and otherwise the EEA or worldwide.












(31)


For the purpose of this Decision, the assessment will be carried out on the basis of a worldwide market. Since the analysis of the vertical relationship between Goodrich and Pratt & Whitney leads to the conclusion that the concentration as notified would significantly impede effective competition for civil applications, and since the proposed divestiture, in combination with Rolls-Royce’s buyout of UTC in Aero Engine Controls (‘AEC’), will remove the entire horizontal overlap between Goodrich and UTC in engine controls, it is not necessary to investigate potentially narrower geographical markets for military applications.




4.   Fuel nozzles









(32)


Fuel nozzles are turbomachinery components for aerospace engines whose function is to deliver fuel into the engine’s combustion chambers. Fuel nozzles are made by attaching various machined detail parts (spray tip, fuel fittings and strainer) to a forged or cast base support. Fuel nozzles are sold directly to the engine manufacturers or to the end-user as a spare part in the aftermarket. The market for fuel nozzles is characterized by infrequent and large contract awards.












(33)


The Commission has previously identified a distinct market for machined parts used in aircraft engines. However, the question whether each type of machined part should constitute a distinct product market and/or whether a distinction should be made according to the type of aircraft/engine was left open.












(34)


For the purpose of this Decision, the exact product market definition can be left open as the assessment of the vertical effects of the proposed transaction in relation to engines does not depend on the precise scope of the upstream market of nozzles.












(35)


The Notifying Party submits that the geographic market definition for fuel nozzles is worldwide. The market investigation confirmed that most of the fuel nozzles suppliers serve their clients regardless of their location, and so do customers when choosing their suppliers. The Commission therefore considers that the relevant geographic market for the supply of fuel nozzles to civil applications is worldwide.




B.   Competitive assessment

1.   Horizontal effects

1.1.   AC power generators









(36)


UTC is currently the leader in aircraft AC power generation through its subsidiary Hamilton Sundstrand. The market investigation has confirmed that the proposed transaction would strengthen this position. When one considers AC generation as a whole, the Parties’ combined market share in 2010 was [80-90] % (Goodrich’s increment was [10-20] %). If AC generation were to be further split into military and commercial applications, or according to the size of the aircraft, the proposed transaction would also result in very high combined market shares.












(37)


The market investigation has revealed three main trends impacting the current development of aircraft electrical systems: (i) the shift from electrical systems designed around constant frequency to systems designed on variable frequency; (ii) the industry trend towards a more electric aircraft; and (iii) the increasing demand for system integration capacities.












(38)


The large market share of Hamilton Sundstrand in AC generation is predominantly derived from the platforms using constant frequency AC generation systems. However, since Hamilton Sundstrand lost out on the variable frequency contract for the A380 in 2001 has developed a strong position in variable frequency AC generation for large commercial aircraft.












(39)


As to Goodrich’s specific presence in the AC power generation market, Goodrich, through the Aerolec joint venture, won the tender for the Airbus A380 in 2001 and for the Airbus military transport turboprop A400M in 2003. It is also present on a standalone basis in variable frequency AC generation in a number of smaller platforms. Although Goodrich exited the constant frequency AC main generation original equipment business more than 15 years ago, it still has in service constant frequency generators on various platforms.












(40)


The in-depth investigation revealed that market operators perceive that UTC has a very strong capacity in AC power generation for large, regional and corporate commercial aircraft, whereas Goodrich on a standalone basis or through its Aerolec Joint Venture has a strong capacity in AC power generation, in particular as regards regional and corporate aircraft.












(41)


A case by case analysis of recent bids revealed that the Parties are in fact close competitors and that Goodrich exerts a strong competitive constraint on Hamilton Sundstrand’s in variable frequency AC generation.












(42)


Regarding competitors, as of today none has on a stand-alone basis a variable frequency AC generator in service on a large commercial aircraft. Competitors to Hamilton Sundstrand and Goodrich therefore all lack a proven technology which would allow them to become credible competitors in the market for power generation in the near future. The in-depth market investigation revealed that Honeywell is viewed as having a weak position in AC power generation in all the platforms except helicopters and in particular a very weak position in large commercial aircraft. GE on the other hand is believed to have today a weak position in all of the segments. As to Thales it is regarded as having a weak position in relation to large and regional aircraft but a strong capacity for corporate jets and helicopters.












(43)


Furthermore, the market investigation revealed that UTC’s merger with Goodrich will contribute to reinforce the merging parties’ capacity in electrical systems integration.












(44)


Barriers to entry and repositioning in power generation are relatively high, in particular in AC power generation which is used in most large commercial aircraft. Incumbent suppliers have an advantage against new entrants due to the relevance that reputational effects, accumulated flying hours and in-service experience play in this market. Moreover, accumulated R & D expenditures significantly play to the advantage of incumbents in this largely technology-driven industry.












(45)


A large number of competitors and customers expressed concerns about the negative impact of the proposed transaction on competition and the impact it might have by reducing innovation incentives in AC power generation.












(46)


It appears that Goodrich’s expertise and proven technology in variable frequency AC power generation is considered important to the industry. Concerns were expressed that post transaction there would be no credible alternative partner to team up with that would allow rivals to offer an alternative to Hamilton Sundstrand in AC power generation. It appears that the investments required to ensure standalone presence in AC generation for large commercial aircraft would be so substantial that teaming up with another industrial partner is essential to reduce development risks.












(47)


In view of the above, the in depth investigation has confirmed the serious doubts as to the concentration compatibility with the internal market as expressed in the Article 6(1)(c) decision relation to the market for AC power generators (or alternatively on its possible submarkets).




2.   Vertical effects

2.1.   Aircraft engines









(48)


UTC is active in the market for aircraft engines through its subsidiary Pratt & Whitney, as well as two joint ventures, International Aero Engines (‘IAE’) and Engine Alliance (a 50/50 joint venture between Pratt & Whitney and GE). According to the Notifying Party, the main competitors on the market are GE, Safran/Snecma, CFMI (a 50/50 joint venture between GE and Safran), Rolls-Royce, Honeywell and Williams.












(49)


In the large commercial aircraft turbofan engine segment, Engine Alliance has a [0-5] % market share and Pratt & Whitney has a [0-5] % market share at the worldwide level. On the other hand, UTC has no market share on the large regional aircraft turbofan engine segment, whereas the Parties have not submitted market shares for small regional aircraft turbofan engines since they argue that there are none currently in production. In the corporate aircraft turbofan engines segment, Pratt & Whitney has a [20-30] % market share, while it is the leader in the turboprop/turboshaft engine segment with a [40-50] % market share.




2.2.   Engine controls for small aircraft engines









(50)


The proposed transaction gives rise to a vertical link between the upstream supply of EECs, main fuel pumps and FMUs (together ‘engine controls’), where both Goodrich and UTC are active, and the downstream supply of aircraft engines, where UTC is active through Pratt & Whitney.












(51)


UTC is active in the production of engine controls through Hamilton Sundstrand. Goodrich is active in engine controls through AEC and Goodrich Pump & Engine Control Systems (‘GPECS’). GPECS produces engine controls for all engine sizes, with a particular focus on engines under 4 000 lbs thrust. GPECS has among its customers some of Pratt & Whitney’s main competitors in the small engine segment, such as Honeywell and Williams.












(52)


Regarding EECs, the merged entity would have a [40-50] % market share at the worldwide level based on 2010 figures. In narrower segments, the Parties’ highest combined market share is in corporate jets ([70-80] %). In main fuel pumps the Parties’ combined market share at the worldwide level is [30-40] %. The Parties’ highest combined worldwide market share in narrower segments is [50-60] %, for military applications. As regards FMUs, the merged entity would reach a market share of [20-30] % at the worldwide level. The highest worldwide market share in a narrower segmentation would be [40-50] % in smaller engines.












(53)


During the market investigation, both Honeywell and Williams raised concerns regarding a potential input foreclosure by the merged entity with respect to the supply of engine controls for Honeywell’s and William’s engines. Post transaction Goodrich’s incentives regarding its supply relationships with Williams and Honeywell would change since Goodrich would become part of the same group as Pratt & Whitney, which competes on the engine market with Williams for the corporate aircraft segment and with Honeywell for the corporate, regional and helicopter segments.












(54)


Although the in-depth investigation indicated that there would remain alternative suppliers to Goodrich, the investigation also showed that the merged entity would have the ability to stop, disturb or otherwise restrict the supply of engine controls to Honeywell and Williams. Switching to another supplier would entail high costs and it would take at least three years to develop alternative engine control systems. This would therefore affect the current supply relationships between Honeywell, Williams and their respective OEM aircraft customers.












(55)


Furthermore, the in-depth investigation indicated that the merged entity would have the incentive to stop, disturb or otherwise restrict the supply of engine controls to Honeywell and Williams. On the one hand, the market investigation showed that there are no aircraft platforms dual sourcing the engine from Williams or Honeywell and Pratt & Whitney, and it did not point to near-term opportunities whereby Williams or Honeywell would be competing with Pratt & Witney for the engine selection on new corporate aircraft platforms.












(56)


However, on the other hand, the investigation confirmed that there are a number of aircraft platforms which deploy Pratt & Whitney engines and which compete with aircraft deploying Williams’s and Honeywell’s engines that use Goodrich’s engine controls. The Commission compared the expected losses and gains of the merged entity resulting from a possible input foreclosure strategy. An input foreclosure strategy would have a significant impact on Williams’s business since potential damage would not be limited to lost sales, but also entail potential damage payments and loss of reputation. This scenario would benefit the merged entity because it would divert Williams’s time and resources from investing in new products to managing these issues.












(57)


As regards the impact on effective competition, the market investigation indicated that an input foreclosure strategy would have detrimental effect on competition and hence customers. Honeywell and Williams combined cover [20-30] % of the market for corporate aircraft turbofan engines and Pratt & Whitney holds [20-30] % market share. However, since different engines within the market have different specifications, each engine competition is likely to be between a relatively limited number of particular specific engines.












(58)


If Honeywell and Williams were not able to respond to engine orders placed under their existing engine supply contracts, their customers (i.e. airframers) might not be able to deliver aircraft to the final customers (such as airlines). As a consequence, final customers might opt for buying a competing aircraft deploying a Pratt & Whitney engine. Therefore, the choice of aircraft for final customers could be significantly reduced. Furthermore, if Honeywell or Williams were not able to participate in tenders for the supply of new engines, the airframers’ choice of engine suppliers for their new platforms could be significantly reduced. This reduction of choice might in turn lead to an increase in price level and a reduction in quality.












(59)


In view of the above, in the absence of supply agreements between the merged entity and its customers Honeywell and Williams, the Commission concludes that the in depth investigation has confirmed the serious doubts as to the concentration’s compatibility with the internal market as expressed in the Article 6(1)(c) decision with respect to the vertical relationship between, on the one hand, EECs, main fuel pumps and FMUs, and on the other hand, small engines.




2.3.   Fuel nozzles for engines









(60)


The proposed transaction gives rise to a vertical link between the supply of aircraft engines, where UTC is active through its subsidiary Pratt & Whitney, and the manufacture of fuel nozzles, where Goodrich is active. In particular, Goodrich has engaged in a R & D cooperation with Rolls-Royce, one of the main large commercial engine manufacturers competing with Pratt & Whitney, to develop a new generation of fuel nozzles that will reduce large engines emissions.












(61)


Contrary to more generic components, fuel nozzles are interlocked with engine production as each nozzle is designed specifically to meet the performance requirements associated to a particular engine. Switching fuel nozzle supplier is not straight forward. In fact, since the IPRs associated to the fuel nozzle component are normally held by the supplier, before introducing a new supplier and replace the incumbent, the engine OEM should account for the time required by the new supplier to design and develop from scratch the new nozzle component. In addition, as for other engine components, the replacement of a fuel nozzle on an existing certified engine platform requires in any case the testing and certification of the new component. The market investigation confirmed that switching is highly costly and time consuming.












(62)


During the in-depth investigation, concerns arose in relation to Goodrich’s current cooperation with Rolls-Royce on the development of a new lean burn fuel nozzle technology, which will improve the emission performance of engines and is expected to be a stringent requirement for participating in future competitions for large commercial engines. The investigation shows that the merged entity will have the ability and incentive to implement an input foreclosure strategy in relation to the new lean burn fuel nozzles and in particular in relation to the upcoming tender for the Boeing B777X platform, for which both Rolls-Royce and Pratt & Whitney are competing.












(63)


If Rolls-Royce is not able to participate in the B777X tender, Boeing in the first place will suffer from a choice reduction as it will have less engine suppliers competing for the contract. This reduction of choice might in turn lead to price increase and quality reduction. In addition, the likely negative impact will be felt by customers through the duration of the B777X platform. Furthermore, if Rolls-Royce ability to compete on this new type of emission-efficient engines is hindered, the choice of engine suppliers for other airframers might be significantly reduced in the future.












(64)


The Commission therefore concludes that the concentration as notified would significantly impede effective competition with respect to the vertical relationship between fuel nozzles and engines.




C.   Commitments









(65)


The Notifying Party submitted commitments to remove the identified concerns.




1.   AC power generators









(66)


UTC proposed to divest Goodrich’s entire electrical power systems business (the ‘Electrical Power Systems Divestment Business’). This comprises Goodrich’s activities in the design, production and supply of AC and low-voltage DC power generation systems, along with its activities in the design, production and supply of electric distribution systems. In addition, it includes Goodrich’s interests in the Aerolec joint venture between Goodrich and Thales.












(67)


The Commitments address the concerns identified regarding AC power generation as they remove entirely the overlap between UTC and Goodrich in this market.




2.   Engine controls for small aircraft engines









(68)


UTC proposed to divest (i) Goodrich’s engine control business situated at West Hartford, Connecticut, United States; as well as (ii) the assets and intellectual property used for engine controls activities in Montreal, Canada (the ‘Montreal Assets’), that are currently being transferred to the West Hartford facility (together, the ‘Engine Controls Divestment Business’). The Engine Controls Divestment Business comprises only the assets owned by GPECS that are relevant for engine controls for small engines.












(69)


The divestiture offered addresses all the concerns identified with respect to engine controls. Through the divestiture, Pratt & Whitney Canada’s competitors in the supply of small engines may be supplied with engine controls by a third party independent from the merged entity.




3.   Fuel nozzles for engines









(70)


UTC submitted a commitment to grant Rolls-Royce the option to acquire the Lean Burn R & D Project pursuant to the terms of a Memorandum of Understanding between UTC and Rolls-Royce of 7 June 2012.












(71)


In addition, UTC committed to a number of related obligations, including the obligation to ensure continued cooperation to support Rolls-Royce bid for the 777X program for the time period necessary to support Entry into Service of the lean burn engine.












(72)


The Commitments address all the concerns identified in relation to fuel nozzles. Rolls-Royce will have the option to acquire the Lean Burn R & D Project so as to make sure to have access to this component critical for the new emission-efficient engines, which will be more and more required by airframers. The safeguarding of Rolls-Royce’s ability to develop a new fuel efficient engine is ensured by the existence of the option and does not depend on its exercise as such. In particular, the Commitments address the concern that the merged entity will prevent Rolls-Royce from competing for the B777X program, since Goodrich will continue the cooperation with Rolls-Royce for the time necessary to support the Entry into Service of the new engine.




V.   CONCLUSION









(73)


For the reasons mentioned above, the concentration would therefore not significantly impede effective competition in the internal market or in a substantial part of it.




Consequently the concentration should be declared compatible with the internal market and the functioning of the EEA Agreement, pursuant to Article 8(2) of the Merger Regulation and Article 57 of the EEA Agreement, subject to compliance with the Commitments.


(1)  OJ L 24, 29.1.2004, p. 1.

(2)  See Section 6 of the Decision.