Summary of Commission Decision of 29 June 2015 declaring a concentration compatible with the internal market and the functioning of the EEA Agreement (Case M.7429 — Siemens/Dresser-Rand) (notified under document C(2015) 4355) (Text with EEA relevance)
Date: 2015-06-29
Institutions: European Commission
Subjects: economic concentration, machinery, merger control, oil technology, petroleum exploration








C_2016281EN.01000701.xml










3.8.2016   


EN


Official Journal of the European Union


C 281/7





Summary of Commission Decision
of 29 June 2015
declaring a concentration compatible with the internal market and the functioning of the EEA Agreement
(Case M.7429 — Siemens/Dresser-Rand)
(notified under document C(2015) 4355)
(Only the English version is authentic)
(Text with EEA relevance)
(2016/C 281/09)

On 29 June 2015 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)
(hereinafter ‘the Merger Regulation’), and in particular Article 8(1) 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)


Siemens is a German stock corporation headquartered in Munich, Germany. Siemens offers a wide range of products and services to customers including energy management, power and gas, power generation services, process industries and drives, wind power and renewables.












(2)


DR is a US company headquartered in Houston, Texas. DR focuses on servicing customers in the oil and gas (‘O&G’) industry with products (mostly compressors gas turbines and steam turbines) designed for applications along the O&G value chain: upstream exploration and production, midstream transportation, LNG and storage and downstream processing, and distribution of O&G and related by-products.












(3)


Siemens will buy all the outstanding shares of DR and will acquire sole control over DR. It follows that the transaction is a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.




II.   THE OPERATION









(4)


On 9 January 2015 the Commission received a notification of a proposed concentration pursuant to Article 4 of the Merger Regulation by which Siemens AG (‘Siemens’ or ‘the Notifying Party’) will acquire sole control over Dresser Rand Group, Inc. (‘DR’). The proposed transaction entails the acquisition by Siemens of all the issued shares of DR (the ‘Transaction’). As a result, Siemens will acquire sole control over DR.




III.   THE PROCEDURE









(5)


The Transaction was notified on 9 January 2015. On 13 February 2015 the Commission raised serious doubts as to the compatibility of the Transaction with the internal market and adopted a decision to initiate proceedings pursuant to Article 6(1)(c) of the Merger Regulation. The Notifying Party submitted its written comments to the Article 6(1)(c) decision on 27 February 2015.












(6)


On 23 March 2015, the Commission adopted two decisions pursuant to Article 11(3) of Regulation (EC) No 139/2004 whereby it required Siemens and Dresser-Rand to supply information that they had previously been requested to provide by 18 March 2015. The Commission received the complete and correct information required by the decisions on 27 March 2015. Consequently, pursuant to Article 10(4) of Regulation (EC) No 139/2004 and Article 9 of Commission Regulation (EC) No 802/2004 (2) (‘the Implementing Regulation (EC) No 802/2004’), the time limits referred to in Article 10 of Regulation (EC) No 139/2004 were suspended from 19 March 2015 until 27 March 2015 inclusive.




IV.   EXPLANATORY MEMORANDUM

A.   THE RELEVANT PRODUCT MARKETS








(7)


The Parties activities give rise to the following horizontal overlaps:






(a)


the supply of ADGT driven and light IGT driven turbo compressor trains. Particularly the overlap would be for upstream offshore applications and midstream pipeline applications;










(b)


the supply of ADGT driven and light IGT driven generator sets;










(c)


the supply of mechanical drive small steam turbines; and










(d)


the supply of steam turbines for generator drive applications.
















(8)


The Parties activities will give rise to vertical overlaps for the following downstream markets for supply of (1) turbo compressor trains; and (2) fluid catalytic cracking (FCC) trains.




I.   Market for ADGT driven and light IGT driven turbo compressor trains with a power requirement above 23 MW

(i)   Introduction









(9)


Customers in the oil and gas industry (‘O&G’) usually purchase a so-called turbo compressor train to perform the compression jobs required by the processes they run.












(10)


A compressor train comprises a compressor, which is the part actually performing the specific compression job, and a driver, which is the part providing power to the compressor. These two main parts are linked by auxiliary equipment such as gear boxes, piping and instrumentation and control devices. Compressor, driver and all auxiliary equipment are installed on a base frame.












(11)


There are different types of compressors. In previous cases, the Commission has distinguished between air and gas compressors. Gas compressors have been segmented into standard and process compressors and the latter between positive displacement compressors and dynamic/turbo compressors (3). However, the exact market definition was ultimately left open.












(12)


In theory compressors can be driven by any type of driver, which are gas turbines, electric motors and steam turbines. With reference to gas turbines, three different technologies can be identified: heavy-duty industrial gas turbines (‘heavy-duty IGT’), which are the traditional gas turbines; aero-derivative gas turbines (‘ADGT’) which are gas turbines derived from engines mounted on commercial and passenger jets, and light industrial gas turbines (‘light IGT’), which are a hybrid between the two others.












(13)


When an end-customer needs to purchase a turbo compressor train, a number of considerations come into play in order to determine the exact technical specifications of the solution to be purchased regarding the driver as well as the turbo compressor. The decisive element is the exact compression job to be performed, which will determine the choice of the compressor. This, in turn, will define the power input required to actually fulfil the task. However, other elements come into play, such as the geographic location of the project, the environmental conditions at site, the availability of fuel. All these elements will shape the technical specifications that the turbo compressor train will have to comply with. These elements, in fact, will define which compressor and which driver can be employed for any specific project.




(ii)   Market definition









(14)


Since the Parties’ activities overlap with respect to ADGT driven turbo compressor trains in the O&G industry, the Commission analysed whether:






(a)


all types of turbo compressors can be used in all applications or not;










(b)


there are turbo compressors regarded as substitutes to the ones employed in the application where there is an overlap;










(c)


other types of drivers are substitutes to ADGTs;










(d)


applications for ADGT driven turbo compressor trains may constitute a distinct product market.
















(15)


That analysis indicates that:






(a)


there is no demand-side and only very limited supply-side substitution regarding the compressor used in turbo compressor trains; and










(b)


there is limited demand- and no supply-side substitution regarding the driver used for turbo compressor trains and power ranges as only light IGTs are substitutable with ADGTs for some applications.
















(16)


Finally, with reference to specific O&G applications, that analysis, also comforted by the analysis of the bidding data collected from the Parties and third parties, indicated that there is no substitution regarding the turbo compressor trains used in different applications. The analysis of the turbo compressor trains bidding data, in fact, enables the Commission to identify homogenous sets of tenders encompassing the different O&G applications. The Parties’ activities overlap in upstream offshore and midstream pipeline applications.












(17)


With reference to compressors, the Commission found that different types of turbo compressors exist. Of these only a limited subset can be employed in upstream offshore and midstream pipeline applications. First, turbo compressors can be divided in integrally geared turbo compressors and single shaft turbo compressors. The Commission takes the view that only the latter are suitable for those applications. Second, single shaft turbo compressors can be either horizontally split or vertically split (so called ‘barrel type’). For technical reasons only the latter can be employed in the relevant applications. Within barrel type compressors, manufacturers offer different ‘base designs’, which are designed to serve in specific applications. There is no demand-side substitutability for base deigns of compressors across applications. Also, supply-side substitution proved to be very limited.












(18)


On the driver side of the turbo compressor trains, the Commission found that ADGTs and light IGTs are substitutable whereas this is not the case for electric motors and heavy-duty IGTs. Also, the Commission found that ADGT employed in the production of electricity cannot be used as drivers to compressors. Finally, the Commission found that the competitive situation for the supply of ADGTs and light IGTs above and below 23 MW are different. Therefore, the Commission is of the opinion that the market can be segmented at this power level.












(19)


Finally, also on the basis of the observation of limited substitution between base designs of compressor, the Commission found that turbo compressor trains used in different applications can constitute separate product markets.












(20)


Therefore, the Commission concluded that ADGT and light IGT driven turbo compressor trains with a power requirement above 23 MW for upstream offshore and midstream pipeline applications could constitute a separate product market. However, the exact market definition can be left open as the Transaction would not lead to a significant impediment of effective competition in the internal market under any plausible product market definition.












(21)


The Notifying Party take the view that there is no such market as ADGT-driven compressor trains. In the view of the Notifying Party this merely lumps together a number individual bidding opportunities across distinct applications in which customers end up choosing a technical solution that favours an ADGT to drive the compressor over industrial gas turbines (IGTs) or other drivers. Also, the Notifying Party submits that ADGTs are sometimes preferred for high power requirements because they are often more efficient, smaller, and lighter than equivalent industrial gas turbines. However, industrial gas turbines are increasingly competing with ADGTs in that respect, as new industrial gas turbine models launched are lighter, more compact and more efficient. Thus the Notifying Party claims that the relevant product market is the market for turbo compressor trains.




II.   Market for ADGT driven and light IGT driven generator sets









(22)


The Notifying Party considers ADGT driven generator sets do not constitute a distinct product market. The Notifying Party claims that ADGT for mechanical drive applications do not differ from ADGT for generator drive application and the same models could be used interchangeably for both applications.












(23)


The Commission takes the view generator sets constitute a distinct product market from compressor trains. The Commission also concluded that ADGT driven and light IGT driven generator sets are likely substitutable, but ADGT driven and light IGT driven generator sets constitute a distinct product market from heavy-duty IGT driven generator sets. Finally, the Commission concluded that it may be appropriate to distinguish between generator sets driven by ADGT or a light IGT above and below 23 MW.












(24)


However, the exact market definition can be left open as the Transaction does not lead to a significant impediment of effective competition under any conceivable market definition.




III.   Differentiation between mechanical drive steam turbines and generator drive steam turbines









(25)


The Notifying Party claims that steam turbines could be segmented into mechanical drive (‘MD’) and generator drive (‘GD’) steam turbines, especially the ones at a higher output level.












(26)


In its previous decisions the Commission did not define a separate market for MD steam turbines.












(27)


The market investigation provided the following results:






(a)


First, MD steam turbines usually have to comply with additional technical requirements, such as API standards and other special requirements defined by the customers (4). By contrast, customers generally do not require GD steam turbines to comply with API standards.










(b)


Second, customers of GD steam turbines have high requirements for efficiency whereas customers of MD steam turbines do not (5).










(c)


Third, customers generally buy GD steam turbines packaged with generators (‘gen-sets’), therefore there is a demand for the whole package and not solely for GD steam turbines (6).










(d)


Fourth, MD steam turbines and GD steam turbines target different customer groups. MD steam turbines customers are active in various industries such as O&G, metals, pulp and paper, steel, etc. GD steam turbines customers are usually involved in power generation (7).
















(28)


As the Transaction will not significantly impede effective competition on the basis of any plausible market, the Commission left open the question of the exact product market for mechanical drive steam turbine markets concerned.




IV.   Market for mechanical drive steam turbines









(29)


The Notifying Party claims that there is a separate market for MD steam turbines. As regards, power output, the Notifying Party submits that it is not meaningful to define separate markets according to the power output.












(30)


The Commission has considered whether the market for MD steam turbines could potentially be further segmented into different markets according to their power output and end applications.












(31)


With reference to a possible segmentation according to the power output, the market investigation was inconclusive as to the appropriate dividing point. Some competitors indicated that it is appropriate to distinguish MD steam turbines with a power output comprised between 0 MW to 10 MW, some other respondent pointed out that suppliers generally manufacture MD steam turbines with a power output up to 20 MW, and that therefore no segmentation below this threshold is appropriate.












(32)


Regarding a possible segmentation according to the end application, the respondents to the market investigation pointed to a possible distinction between on the one hand MD steam turbines that are used in the O&G industry (mainly petrochemicals and chemicals) and on the other hand MD steam turbines that are used in other industries, such as metals, pulp and paper, steel, food processing and others.












(33)


As the Transaction will not significantly impede effective competition on the basis of any plausible segmentation, the Commission considers that the question of the exact product market for mechanical drive steam turbines can be left open.




V.   Market for steam turbines for generator drive applications









(34)


The Notifying Party argues that there is a separate market for GD steam turbines packaged together with generators. For the purpose of the competitive assessment of this Transaction, the Commission considered a separate market for GD steam turbines packaged together with generators as customers buy a final combined product.












(35)


As the Transaction will not significantly impede effective competition under any plausible market definition, the exact product market definition can, however, be left open.




VI.   Market for fluid catalytic cracking (FCC) trains









(36)


Fluid catalytic cracking is a widely used refinery process to convert hydrocarbon fractions of petroleum crude oil to more refined gasoline, olefinic gases and other products. During the process an expander captures energy from the high-temperature flue gas (that is normally wasted). This energy is then applied to drive a generator or the main air compressor. This allows the refinery to reduce energy expense and to improve its overall energy index rating. The equipment performing this activity can either be arranged in one train (an FCC one-train-solution) or in two separate trains (an FCC-two-train solution).












(37)


An FCC one-train solution consists of an expander, an air compressor (the main blower), a steam turbine and a generator. All components are included into a single train.












(38)


An FCC two-train solution consists of two separate trains. In that case, one train consists of an air compressor driven by a steam turbine (‘FCC compressor train’). The other train comprises an expander and a generator (‘FCC expander train’).












(39)


Customers of FCC trains are refineries. They generally purchase the FCC train as a whole rather than its components separately. The customers are also assisted by EPC companies.












(40)


The Notifying Party considers that the relevant product market is the market for FCC trains, including both FCC one-train and FCC two-train solutions (8). The Commission previously did not define a product market for FCC trains.












(41)


In the case at hand, the Commission considers that the question whether or not FCC one-train solutions and FCC two-train solutions are distinct product markets can be left open, as irrespective of the exact boundaries of the relevant product market(s), the Transaction will not significantly impede effective competition in relation to FCC trains. The Commission also considered the possible existence of markets that are upstream to (i) the market for FCC one-train; and (ii) the market for two-train solutions in order to assess any possible vertical effects.




(iii)   Geographic market definition









(42)


The geographic market for all the above markets is at least EEA and probably worldwide.




B.   COMPETITIVE ASSESSMENT
I.   ADGT and light IGT driven turbo compressors trains with a power output above 23 MW for upstream offshore and midstream pipeline applications — horizontal assessment

(i)   Framework of analysis









(43)


While the competitive conditions prior to the merger are generally a reliable proxy for the conditions that would have prevailed without the merger, in the case at hand, the competitive conditions existing at the time of the merger do not necessarily constitute the relevant comparison. This is because the data used to assess the Transaction stems from the time period prior to the completion of a preceding transaction — the Siemens/RR transaction (9), which occurred in December 2014 — by which Siemens acquired Rolls Royce’s (‘RR’) ADGTs. This past data may therefore not fully reflect the future competitive position of the combined entity Siemens/RR absent the notified merger.












(44)


The integration of RR’s ADGT business may have changed Siemens’ market position and the constraints it exerts on its competitors to a certain extent. Also, Siemens intends to […] the newly acquired RR product line. Absent the Transaction, the competitive constraints that DR and Siemens/RR would exert on each other will be anywhere between the current situation and the situation in which Siemens manages to […] the RR products.












(45)


The Commission considers that ultimately it can be left open which of the two alternative scenarios of analysis is more likely as under both scenarios, the Transaction will not lead to a significant impediment of effective competition.












(46)


Furthermore, given that the vast majority of sales are made following a tender process and that turbo compressor trains are highly differentiated and engineered products, the assessment of potential non-coordinated effects of the Transaction needs to be carried out in a ‘bidding market’ framework with differentiated products. However, given the lack of transparency in most tender processes, the Commission’s assessment did not only focus on tendered projects in which the Parties were winner and runner-up but considered all projects in which the Parties were competing.




(ii)   Assessment









(47)


The Commission concluded that the Transaction will not eliminate a significant competitive force on the market. This is for the following reasons.






(a)


the combined market shares of the Parties are moderate, and in all market segments they will face competition from GE which has a comparable or higher market share;










(b)


Siemens/RR and DR are not close competitors, as their portfolio of turbo compressors trains is focused on different applications. This is also confirmed by the fact that Siemens and DR competed against each other only in a limited number of projects. The number of projects where one of them won and the other one also submitted a firm bid is even more limited;










(c)


the elimination of competition between the merging firms is unlikely to lead to a significant reduction of the competitive constraint they exert on GE;










(d)


the integration of RR’s ADGT business is unlikely to increase significantly the competitive constraint that Siemens would exert on DR absent the merger; and,










(e)


the possible disappearance of the mixed GE-DR offer from the market will not reduce significantly the competitive constraints that the Parties exert on GE.
















(48)


The Commission also found that the Transaction will not eliminate a significant competitive force from the market for turbo compressor trains driven by ADGT or light IGT with power output below 23 MW. This is because the combined market shares of the parties are moderate and the increment brought about by the Transaction is small under any possible framework of analysis.




II.   ADGT and light IGT driven turbo compressors trains — non-horizontal assessment









(49)


The Commission analysed possible non-horizontal effects of the transaction. Under this framework of analysis, the hypothetical market for ADGTs and the market for turbo compressors would be upstream of the market for turbo compressor trains used for O&G applications. In fact, both ADGTs and compressors are essential inputs for the production of compressor trains, for which both elements are needed.












(50)


As Siemens/RR and GE are the only suppliers of ADGTs to third parties, while there are a number of compressor manufacturers, Siemens/RR’s ability and incentive to restrict access to its products can only relate to the ADGT but not to its compressors. Therefore, the Commission only assessed whether the merged entity would have the ability and the incentive to restrict access of third parties to its ADGTs, and the effects that such strategy would have on competition.












(51)


The Commission takes the view that, albeit having the ability to foreclose access to ADGTs, the merged entity will not have the incentive to do so. This is because it would not be profitable for Siemens/Rolls-Royce to withhold the supply of ADGTs because it would lose substantially more from refusing to sell ADGTs on a stand-alone basis than it might gain from selling additional compressors as part of all-Siemens compressor trains. Also, sales of ADGT generate a long-term stream of revenues deriving from the servicing thereof.












(52)


In any event, a hypothetical foreclosure strategy would have no significant impact on effective competition, as non-vertically integrated compressor manufacturers very rarely participate in tenders, and even less so manage to win.




III.   ADGT driven and light IGT driven generator sets — horizontal assessment









(53)


Despite the significant combined market share of the Parties in the market for ADGT driven and light IGT driven generator sets above 23 MW for O&G applications, the Commission considered that the Transaction will not significantly impede effective competition as it will not eliminate a significant competitive force from the market.












(54)


This is for the following reasons:






(a)


the Parties are not close competitors, as they are focusing on different O&G application segments;










(b)


DR is not a strong competitive force on the market, as it relies to a significant extent on GE with regard to its ADGT and on third party generator suppliers;










(c)


as shown by an analysis of the bids of market participants, Siemens/RR and DR do not exert strong competitive constraints on each other;










(d)


even if following the Transaction, DR generator sets equipped with a GE ADGT are no longer available, the Parties would still be able to exert (at least) the same competitive constraint on GE by offering generator sets equipped with RR ADGT; and,










(e)


it is likely that the synergies between Mitsubishi Heavy Industries (‘MHI’) and PW Power Systems (‘PWPS’) will allow the latter to increase the competitive constraint it currently exerts on the Parties and GE.








IV.   Market for mechanical drive steam turbines









(55)


The Commission concludes that the Transaction is unlikely to significantly impede effective competition in relation to MD steam turbines with a power range up to 45 MW or on the power range segment up to 5 MW.












(56)


On the market for MD steam turbines with a power output between 5 MW and 45 MW, the combined market share (10) of the Parties does not exceed (0-5 %) both at the EEA and at the worldwide level. This is also what the market investigation indicated: in fact, the majority of customers stated that the Transaction will not have impact on competition in this market segment (11).












(57)


As regards MD steam turbines with a power range up to 5 MW, at the worldwide level the combined market share of the Parties is (20-30 %) with Siemens’ increment being only (0-5 %). Other major players active are Elliott Ebara (USA), Shin Nippon (Japan), TGM Kanis/Turbinas (Brazil), NG Metallurgica (Brazil) and others (12).












(58)


At the EEA level the combined market share of the Parties will be (40-50 %). Elliott will remain the number two MD steam turbines supplier and the largest competitor. Other smaller competitors would hold market shares of less than 5 %. Notwithstanding the strong position of the Parties and Elliott, there will be also number of smaller EEA-based competitors, such as MAN Diesel and Turbo (Germany), Fincantieri (Italy), M+M (Germany); as well as players from outside the EEA, namely TGM Kanis/Turbinas, NG Metallurgica and Shin Nippon.












(59)


Despite the Parties’ combined market shares and the concentrated nature of the market, the Commission considers that the Transaction is unlikely to significantly impede effective competition in relation to up to 5 MW MD steam turbines as (1) Siemens and DR are not close competitors; and (2) barriers to entry and expansion are low.












(60)


In relation to closeness of competition, Siemens’ business focus is on power generation. Dresser-Rand’s focus, on the other hand, is MD steam turbines for O&G applications. This is confirmed by the Parties’ sales information for the period 2009-2014. More than (80-90 %) of DR’s sales within that market segment are for O&G applications, whereas Siemens’ sales to the O&G industries represent only about (20-30 %) of Siemens’ total sales of MD steam turbines below 5 MW.












(61)


In relation to entry barriers, the market investigation indicated that (1) a number of competitors which are already active in MD steam turbines below 5 MW could easily expand their production in reaction to an increased demand; and (2) companies currently active in the GD steam turbines market could easily start supplying MD steam turbines as long as they are able to comply with addition standards required by the industry, which they claim are in themselves not difficult to fulfil.




V.   Market for steam turbines for generator drive applications









(62)


The Commission considers that the Transaction is unlikely to significantly impede effective competition for gen-sets below 45 MW, irrespective of whether the Commission considers an EEA market or a worldwide market. This is for the following reasons:






(a)


First, the combined market share of the Parties will not exceed (20-30 %) whether at the EEA level or at the worldwide level.










(b)


Second, the increment brought about by the Transaction is small whether at the worldwide level or at the EEA level. Whereas Siemens has a market share of (20-30 %), DR is a minor competitor on the gen-sets market, with only (0-5 %) market share. As such, DR cannot be considered a significant competitive constraint on this market.










(c)


Third, customers and competitors of gen-sets with a power output up to 45 MW indicated that Siemens is well known and is an established supplier of gen-sets. They did however not identify DR as a strong and established player in that market (13).








VI.   Market for FCC trains









(63)


For the reasons set out below, the Commission considers that the Transaction will not significantly impede effective competition in relation to FCC trains, irrespective of the exact boundaries of the relevant product market(s). In particular, the Commission carried out its competitive assessment of both horizontal and vertical effects under three plausible downstream markets: (1) FCC trains in a one-train solution; (2) FCC trains in a two-train solution: FCC expander trains and FCC compressor trains; and (3) FCC trains including both one-train solutions and two-train solutions; and came to the conclusion that the Transaction will not significantly impede effective competition in relation to any of these plausible markets.




1.   
FCC one-train solution


(i)   No horizontal effects









(64)


Neither of the Parties is active on the market for FCC one-train solutions, therefore any horizontal effect can be excluded.












(65)


On this market, if regarded as worldwide in scope, MAN (with DR expander) has a market share of (60-70 %) and Elliott Ebara (30-40 %) (14). On the EEA level neither of the companies sold FCC one-train solutions.




(ii)   No vertical effects









(66)


FCC train suppliers either rely on expanders that they produced themselves or source expanders from third party manufacturers which then are packaged together with the other components. MAN, a compressor and steam turbine manufacturer, won […] projects as a prime contractor for the FCC trains, sourcing the expanders from DR. Elliott, on the other hand, won one project relying on its own expander and compressor line. Therefore there is possibly an upstream market for the sales of expanders used in FCC trains.












(67)


On this upstream market for expanders DR has worldwide market share of (40-50 %), Elliott Ebara (30-40 %) and GE (20-30 %). At the EEA level only one train was sold by Elliott Ebara (15).












(68)


FCC one-train solution segment, DR sold very few expanders as part of FCC trains offered by MAN ([…] projects) and Elliott only one as part of an FCC train offered by Elliott itself.












(69)


The Commission considers that the Transaction is unlikely to lead to any anti-competitive input foreclosure. In particular, in line the with the non-horizontal merger guidelines (16), the Commission analysed and concluded that: (1) the combined entity would not have the ability to foreclose as suppliers relying on DR input could turn to GE or Elliott; (2) the question as to whether the combined entity would have an incentive to foreclose could be left open; and finally the Commission concluded that (3) even if the merged entity had the ability and incentive to substantially foreclose access to expanders, this would not have a significant detrimental effect on competition at the FCC one-train solution level. The reason is that currently only Elliott and MAN (with a DR expander) compete at that level. As a result, if the Parties were to stop supplying MAN with DR’s expanders and instead exclusively combine them with Siemens’ compressors, post transaction there would still be two active suppliers, the only difference being that the DR-MAN solution would be replaced by a DR-Siemens solution.




2.   
FCC two-train solution










(70)


FCC trains in two-train solutions consist of two separate trains: (1) FCC expander trains; and (2) FCC compressor trains. Customers usually organise separate tenders for each train. Therefore, the supplier of the expander train is not necessarily the supplier of the compressor train. As a matter of fact, DR supplied […] expander trains as part of FCC trains in two-train solutions since 2004, whereas it has […] compressor train as part of this type of FCC trains (17). The Commission conducted the competitive assessment for the FCC expander train and the FCC compressor train separately and came to the conclusion that the Transaction is unlikely to impede effective competition in any of these putative markets.




2.1.   FCC expander trains









(71)


In the downstream market for the worldwide market of FCC expander train DR has a market share of (30-40 %); Elliott Ebara has a market share of (30-40 %); and GE (20-30 %). On the EEA level only Elliott Ebara has sold FCC expander trains. On this market, Siemens is not active and therefore any horizontal effect can be excluded.












(72)


In this market the expander manufacturer usually acts as prime contractor, generally sourcing the generator from a third party. In such a potential upstream putative market for generators Siemens’ share of supply is below [10-20] % in the EEA and worldwide. DR manufactures only a niche product (NovaGen 400) and has minimal market shares both at the EEA and the worldwide levels. That niche product is not used in combination with FCC expanders.












(73)


With respect to input foreclosure, the Commission considers that the merged entity will have neither the ability nor the incentive to foreclose third party expander OEMs from having access to generators. This is because, Siemens has less than (10-20 %) market share in this putative market and DR’s market share is minimal; and in any event DR’s generators are not used in combination with FCC expanders. Therefore, the suppliers of FCC expander trains will post-merger still have access to generators from Siemens’ competitors, many of which are not integrated (18).












(74)


With respect to possible customer foreclosure, the Parties would not have the ability to foreclose access to a sufficient customer base to Siemens’ competitors in the market for generators, as generators are used in many other applications, such as generator sets used in O&G applications. Therefore, even if the Parties were to only source generators internally from Siemens to combine them with DR’s expanders into FCC expander trains, Siemens’ competitors in the market for generators would still have access to a sufficient customer base in other applications.




2.2.   FCC compressor trains









(75)


Neither DR nor Siemens supply FCC compressor trains. On the upstream market for steam turbines, the combined market share of the Parties is (0-5 %) (19). Therefore, the Commission considers that the Transaction does not raise any horizontal nor vertical concerns in relation to FCC compressor trains.




3.   
FCC trains including both one-train solutions and two-train solutions










(76)


The Commission concluded in the two previous sections that the Transaction is unlikely to impede effective competition on both the putative market for FCC one-train solutions and the putative market for FCC two-train solutions. If both products were part of the same relevant market, this would only reinforce the Commission’s conclusion. This is because in case of a hypothetical price increase in one of the two segments customers and/or suppliers could substitute one solution with the other.




V.   CONCLUSION









(77)


For the reasons mentioned above, the decision concludes that the proposed concentration will not significantly impede effective competition in the Internal Market or in a substantial part of it and therefore that the acquisition of Dresser Rand by Siemens in compatible with the internal market and the functioning of the EEA agreement.






(1)  OJ L 24, 29.1.2004, p. 1.

(2)  Commission Regulation (EC) No 802/2004 of 21 April 2004 implementing Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings (OJ L 133, 30.4.2004, p. 1).

(3)  Case M.6222 GE Energy/Converteam (2011), Case M.2834 Alchemy/Compare (2002), Case M.1775 Ingersoll Rand/Dresser Rand/Ingersoll Dresser Pump (1999), Case M.479 Ingersoll Rand/MAN (1994).

(4)  See ID 2295 Minutes of the call with a competitor and ID 161-Ql Questionnaire to competitors, replies to question 37.

(5)  ID 161-Ql Questionnaire to competitors, replies to question 37.

(6)  ID 265 Minutes of the call with a competitor, 8.12.2015.

(7)  ID 2295 Minutes of the call with a competitor 6.3.2015 and ID 177 Minutes of the call with a customer 10.12.2014.

(8)  ID 2746 Notifying Party’s reply to the Commission RFI of 7 May 2015, paragraph 8.

(9)  Case M.7284 — Siemens/John Wood/Rolls-Royce Combined ADGT Business/RWG, 4.8.2014

(10)  ID 113 Form CO, paragraph 527.

(11)  ID 195 Q2 — Questionnaire to customers, replies to question 80.16.

(12)  ID 113 Form CO, paragraph 530.

(13)  ID 177 Minutes of the call with a customer 10.12.2014; ID 2295 Minutes of the call with a competitor 6.3.2015.

(14)  Market shares are calculated for the period 2004-2015.

(15)  The market share calculation period is for the years 2004-2015

(16)  Guidelines on the assessment of the non-horizontal mergers under the Council Regulation on the control of concentrations between the undertakings (OJ C 265, 18.10.2008, p. 7).

(17)  ID 2745 Annex to the Notifying Party’s reply to the Commissions RFI of 7 May 2015.

(18)  ID 2746 Notifying Party’s reply to the Commissions RFI of 7 May 2015, paragraph 43-44.

(19)  ID 2746 Notifying Party’s reply to the Commissions RFI of 7 May 2015, paragraph 13.