Competition merger brief. Issue 1/2019 - July.
Date: 2019-10-08
Institutions: Directorate-General for Competition
Subjects: competition policy, merger, merger control, serial publication

Competition merger brief  

Issue 1/2019 - July 

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Competition merger briefs are 
written by the staff of the 
Competition Directorate-
General and provide 
background to policy 
discussions. They represent the 
authors’ view on the matter 
and do not bind the 
Commission in any way. 

© European Union, 2019  
Reproduction is authorised 
provided the source is 
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KD-AL-19-001-EN-N 
doi 10.2763/363418 
ISBN 978-92-76-08727-4 
ISSN 2363-2534 

In this issue: 

Page 1: M.8788   

Apple/Shazam 

Apple/Shazam constitutes the most recent case where the 
Commission has performed a comprehensive assessment of 
data-related issues in the field of merger control. 

Page 5: M.8480   

Praxair/Linde 

Following an in-depth investigation, the Commission cleared the 
merger between Praxair and Linde, two of the four largest gas 
suppliers worldwide. The clearance was subject to the divestiture 
of an extensive remedy package. 

Page 10: M.8451  

 Tronox/Cristal 

Following an in-depth investigation, the Commission conditionally 
cleared the acquisition of Cristal by Tronox, both major suppliers 
of titanium dioxide pigment. In order to remedy the concerns 
raised by this acquisition, the Parties undertook to divest 
Tronox’s grade of pigment sold on this market. 

Page 13: M.8744 

Daimler/BMW/Car Sharing JV 

The European Commission assesses the (free-floating) car 
sharing and the access to integrator apps markets for the first 
time and clears Daimler/BMW/Car Sharing JV subject to 
conditions. 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Competition Merger Brief 1/2019 – Article 1 

Competition merger brief

Apple/Shazam: A remix of your 
favourite tunes of data issues in 
merger control  

Salvatore De Vita, Eleonora Ocello 

Introduction 

On  6  September  2018,  following  an  in-depth  investigation,  the 
Commission  approved  the  acquisition  of  Shazam  by  Apple. 1 
Shazam  is  the  leading  provider  of  music  recognition  services 
through  its  “Shazam”  mobile  application  (“app”),  while  Apple 
designs,  manufactures  and  sells  personal  computers,  mobile 
communication and media devices, including its flagship product, 
the  “iPhone”.  Apple  also  develops  operating  systems,  which  are 
installed  on  the  hardware  of  the  devices  it  sells,  and  other 
software solutions and mobile apps. Apple also sells and delivers 
digital  content  online  and  offers  a  music  and  video  streaming 
service through the ''Apple Music'' app. 

Apple/Shazam is the most recent case where the Commission has 
performed a comprehensive assessment of data-related issues in 
the analysis of a merger. 

Over  the  past  ten  years  the  Commission  has  adopted  a  dozen 
merger decisions involving data-related issues.2 In several cases 
the Commission has also looked at “big data” issues, that is the 
aggregation  under  common  ownership  of  large  datasets  that 
were  previously  independent.  In  the  Commission’s  practice,  data 
has  been  relevant  in  different  ways,  notably:  (i) as  a  product 
which the parties to the transaction offer on a market, and which 
constitutes the focus of a classic horizontal effects case; (ii) as an 
asset which may constitute a competitive advantage (even if it is 
kept captive and not traded on a market) to the extent that it can 

1   The  Commission  did  not  have  originally  jurisdiction  over  the  case.  It 
was  referred  to  the  Commission  by  the  Member  States  pursuant  to 
Article 22 of the Merger Regulation. 

- 

(2008);  M.5727 

2   M.4726  -  Thomson/Reuters  (2008);  M.4731  -  Google/Doubleclick 
- 
TomTom/Tele  Atlas 
(2008);  M.4854 
(2010);  M.6314  -  Telefonica 
Microsoft/Yahoo!  Search  Business 
- 
UK/Vodafone  UK/Everything  Everywhere/JV 
Publicis/Omnicom  (2014);  M.7337  -  IMS  Health/Cegedim  (2014); 
M.7217  -  Facebook/WhatsApp  (2014);  M.78913  Sanofi/Google/DMI/JV 
(2016);  M.8124  –  Microsoft/LinkedIn  (2016);  M.8180  -  Verizon/Yahoo! 
(2016).  More  recently,  see  also  M.8994  –  Microsoft/GitHub  (2018), 
which  builds  up  on  the  framework  of  assessment  formalised  by  the 
Commission in Microsoft/LinkedIn. 

(2012);  M.7023 

The content of this article does not necessarily reflect the 
official position of the European Commission. Responsibility 
for the information and views expressed lies entirely with 
the authors. 

be  a  source  of  market  power, 
efficiencies  or  commercially 
sensitive information on rivals; 
(iii) as  an  input;  and,  finally, 
(iv)  the  protection  afforded  to 
data  has  been  found  to  be 
relevant, in certain cases, as a 
parameter of competition. 3The 
decision 
Apple/Shazam 
important 
constitutes 
development 
the 
Commission's  assessment  of 
several of these aspects in the 
digital sector.  

an 

in 

Relevance  of  data  in 
the 
digital  music 
industry 

In a nutshell 

constitutes 
Apple/Shazam 
the  most  recent  case  where 
the 
has 
Commission 
performed  a  comprehensive 
assessment  of  data-related 
issues  in  the  field  of  merger 
control. 

In  particular, 
it  provides 
further  guidance  on  how  the 
Commission  assesses 
the 
importance  of  data  as  an 
input.  Moreover,  it  offers  a 
first example of a case in the 
digital  sector  where 
the 
Commission 
assessed 
whether  gaining  access  to 
sensitive 
commercially 
information  on  competitors 
through  a  merger  could  give 
titi
i

Before  illustrating  the  novel 
aspects of the approach taken 
in  the 
by  the  Commission 
analysis 
data-related 
issues  in  the  Apple/Shazam 
decision,  it  is  important  to 
mention how data is relevant in the music industry. 

 t  

of 

After more than a decade of declining revenues, in recent years 
the  music  industry  has  experienced  a  positive  momentum4.  This 
growth has been largely driven by the development of a new way 
of  delivering  music  to  the  listeners  thanks  to  the  use  of  digital 
technologies, that is digital music streaming services. 

in 

the  Digital  Sector?  Lessons 

3   In  this  regard,  see  E.  Ocello,  C.  Sjödin  and  A.  Subočs,  What's  Up  with 
the 
Merger  Control 
Facebook/WhatsApp EU merger case, Competition Merger Brief 1/2015, 
available 
at 
http://ec.europa.eu/competition/publications/cmb/2015/cmb2015_001_
en.pdf;  E.  Ocello,  C.  Sjödin,  Microsoft/LinkedIn:  Big  data  and 
conglomerate  effects  in  tech  markets,  Competition  Merger  Brief 
1/2017, 
at 
http://ec.europa.eu/competition/publications/cmb/2017/kdal17001enn.p
df. 

available 

from 

4   See  “Global  recorded  music  industry  revenues  1999-2017  (us$ 
at: 

billions)”, 
https://www.ifpi.org/downloads/GMR2018.pdf 

available 

Report 

Global 

2018, 

Music 

 
 
  
 
 
 
 
 
 
 
 
 
       
 
 
 
                                                             
                                                             
M.8788 Apple/Shazam | Competition Merger Brief No 1/2019 

Digital  music  streaming  services  have  become  popular  for  a 
combination  of  various  factors  and  their  success  is  based  on  a 
variety  of  different  business  models.  Some  music  streaming 
providers operate so-called freemium models whereby they offer 
a  basic,  free  and  ad-supported  service  to  attract  users,  while 
additional  features  are  offered  in  a  premium  service  to  which 
users  can  subscribe  in  exchange  for  the  payment  of  a  monthly 
fee. 
leader  Spotify  offers  free 
subscriptions,  subsidised  by  advertising.  Further,  digital  music 
streaming  services  increase  accessibility  and  convenience  for 
users  and  allow  for  a  more  personalised  music  experience,  for 
example  thanks  to  music  recommendations.  Advertising  and 
other marketing services as well as music recommendations are 
services and features powered by data. 

In  particular,  the  market 

In  turn,  the  increased  consumption  of  music  via  digital  music 
streaming services has led to the creation of large datasets that 
are  used  by  players  in  the  music  industry,  from  publishers  to 
artists, in order to identify new music trends and understand the 
performance  of  their  repertoire.  Those  datasets  can  ultimately 
also  be  used  to  further  improve  functionalities  of  digital  music 
streaming services and assist the development of new innovative 
solutions. 

relevant  for 

Data  particularly 
these  purposes  are  user 
behavioural  data  (for  example,  user's  clicks  in the  app,  the  time 
users  spend  on  various  screens,  microphone  volume  level,  track 
titles, artists, time and location of when a song has been played, 
the  reason  why  a  song  stopped  playing,  social  media  activity), 
which  provides  insights  on  the  taste  and  activity  patterns  of 
customers of digital music streaming services.  

It  is  in  this  context  that  the  Commission  assessed  whether  the 
transaction, by giving Apple access to data collected by Shazam, 
could have had any anticompetitive effects. 

Data protection and competition 

An important issue assessed by the Commission in the review of 
data mergers, including in Apple/Shazam, relates to the interplay 
between competition and privacy rules. In this respect, while the 
Court  of  Justice  indicated  in  Asnef  that  “issues  relating  to  the 
sensitivity  of  personal  data  are  not,  as  such,  a  matter  for 
competition  law  [and]  may  be  resolved  on  the  basis  of  the 
relevant  provisions  governing  data  protection" 5,  this  does  not 
prevent  the  Commission,  in  its  merger  assessment,  from  giving 
due  account  to  the  increasing  importance  of  data  protection  in 
the  competitive  dynamics  of  digital  markets,  as  consumers 
become  more  aware  of  the  importance  of  privacy,  and  stronger 
regulation has entered into force at European level. 

In  this  context,  as  further  explained,  in  Apple/Shazam  the 
Commission  considered  the  relevance  of  privacy  legislation 
(GDPR,  ePrivacy  directive)  when  assessing  the  ability  of  the 

5   Case C-238/05  –  Asnef-Equifax  v Asociación  de Usuarios  de  Servicios 

Bancarios (Ausbanc), [2006] ECR  I-11125. 

merged entity to undertake an anticompetitive conduct premised 
on  the  use  of  data,  without  any  prejudice  to  the  assessment  of 
the matter by the competent data protection authorities. 

Access to commercially sensitive information 

According  to  paragraph  78  of  the  Non-Horizontal  Merger 
Guidelines,  a  merged  entity,  by  vertically  integrating,  may  gain 
access  to  commercially  sensitive  information  regarding  the 
upstream  or  downstream  activities  of  rivals.  Such  information 
may be used by the merged entity to undertake conducts which 
would  put  competitors  at  a  competitive  disadvantage.  The 
Commission has assessed concerns of this type in various cases 
in the past6, but in Apple / Shazam this theory of harm has been 
applied for the first time in the digital sector. 

More  precisely,  in  Apple  /  Shazam,  the  Commission  analysed 
whether,  through  the  acquisition  of  Shazam,  post-transaction 
Apple  could  have  gained  insights  into  users  of competing  music 
streaming apps. In particular, the Commission assessed whether, 
thanks  to  the  data  acquired  through  Shazam,  post-transaction 
Apple  could  have  improved  the  performance  of  Apple  Music’s 
customer  acquisition  channel,  by  performing  more  targeted 
advertising or marketing campaigns aimed at customers of rival 
providers  of  music  streaming  services  (in  particular  Spotify’s 
freemium  customers).  Indeed,  arguably,  customers  of  other 
digital music streaming services could have been more prone to 
switching  and  taking  an  Apple  Music  subscriptions,  compared  to 
the universe of all other potential addressees of Apple’s targeted 
advertising  or  marketing  campaigns,  who  might  have  not  been 
music enthusiasts. In turn, this could have undermined the growth 
of Apple Music’s rivals.  

To  assess  the  effects  of  this  potential  conduct,  the  Commission 
first considered whether the information that Apple could acquire 
through 
sensitive 
information”. 

“commercially 

constituted 

Shazam 

Shazam collected certain data on users of third party apps, and in 
particular  digital  music  streaming  apps,  installed  on  the  same 
smart mobile devices where the Shazam app is installed. Notably, 
Shazam  collected  data  on  whether  there  were  other  music 
streaming apps installed on the phone of their users. With respect 
to  Spotify’s  users  who  have  connected  their  account  with  the 
Shazam  app,  Shazam  could  collect  additional  pieces  of 
information, based on Spotify’s Application Programme Interfaces 
(APIs).7  The  Commission  concluded  that,  to  the  extent  the  data 

6   See  M.6800  -  PRSfM  /  STIM  /  GEMA  /  JV  (2015);  M.7194  -  Liberty 
Global  /  Corelio  /  W&W  /  De  Vijver  Media  (2015);  M.7724  -  ASL  / 
Arianespace (2016); M.8314 - Broadcom / Brocade (2017). 

7   Based  on  the  Application  Program  Interfaces  ("APIs")  published  by 
Spotify, Shazam’s app allowed those of its users who are also users of 
Spotify  to  connect  their  Shazam  account  to  their  Spotify  account 
(freemium  or  premium).  If  a  Shazam  user  had  connected  its  Shazam 
account to a Spotify account, Shazam was able to gain access to some 
additional  pieces  of  information  on  Spotify  users  in  addition  to 
information on the mere presence of the Spotify app on the device (for 
example playlist names for Spotify premium users). 

2 

 
                                                             
                                                             
M.8788 Apple/Shazam | Competition Merger Brief No 1/2019 

collected by Shazam on Android devices8 allowed Apple to derive 
lists  of  customers  of  Apple  Music’s  rivals,  such  data  constituted 
commercially sensitive information.  

The  question  was  therefore  whether  the  use  of  that  data  by 
Apple  could  have  put  Apple  Music’s  competitors  at  a  significant 
competitive disadvantage. For this purpose, the Commission has 
analysed  Apple’s  ability  and  incentive  to  use  the  data  and  the 
impact on competition of such potential conduct.  

First, the Commission found that there would be some legal and 
contractual  limits  for  Apple  to  use  the  information  about  the 
customers of its competitors. Whilst that conduct was not per se 
prevented  by  the  applicable  data  protection  rules,  such  rules 
would  have  posed  certain  legal  constraints  on  Apple’s  ability  to 
use  the  data  collected  through  Shazam.  Moreover,  contractual 
constraints were posed by the Android Developer Guidelines and 
Spotify  Developer  terms,  which  set  the  framework  of  what 
Shazam (and Apple post-transaction), as developer of an app for 
Android  devices  using  Spotify’s  APIs,  could  do  with  the  data 
acquired on the Android platform and through Spotify’s APIs. 

Second,  the  documental  evidence  gathered  by  the  Commission 
showed that Apple did not have a clear incentive to undertake the 
possible anticompetitive conduct envisaged by the Commission’s 
theory  of  harm.  Moreover,  in  response  to  a  request  by  the 
Commission,  Apple  formally  stated  that  it  planned  to  change 
Shazam’s  data  collection  practices  to  bring  them  in  line  with 
Apple’s positions on privacy and, thus, to update the Shazam app 
for operating systems other than Apple’s, such as Android, so that 
it would not be able to send to Apple the commercially sensitive 
information,  unless  the  music  streaming  service  of  that  user 
agreed to allow the information to be sent to Apple. 

the 

the 

that 

found 

Commission 

Finally, 
potentially 
anticompetitive  conduct  would  have  had  in  fact  only  a  limited 
impact  on  competition.  This  was  because,  on  Android,  any  app 
developer  could  gather  information  similar  to  that  collected  by 
Shazam. Moreover, there were several providers allowing for the 
targeting  of  “music  enthusiast”  audiences,  including,  but  not 
limited  to,  Facebook,  Google  and  Twitter,  which  Apple  could 
already rely upon pre-transaction and on which, post-transaction, 
Apple  Music's  rivals  could  also  rely.  Furthermore,  the  market 
investigation confirmed that the digital music streaming markets 
in  the  EEA  are  growing  considerably  and  that  growth  comes 
mainly  through  subscription  of  new  customers  rather  than 
winning-back of competitors' customers. 

Therefore, the Commission concluded that it was unlikely that the 
data  increment  brought  by  Shazam  could  have  provided  a 
significant competitive advantage to Apple which could have led 
to  anticompetitive  effects  by  reducing  the  ability  and  incentives 
of competing digital music streaming providers to compete. 

8   Apple is already able to determine which apps are installed by users on 

iOS. 

3 

“4  Vs”:  an  analytical  approach 
assessment of data as an input 

for 

the 

As mentioned, data is very important in the digital music industry, 
in particular as they can be used to understand the music tastes 
of  listeners  in  order  to  offer  personalised  playlists  and  provide 
music recommendations. 

In  this  respect,  the  Commission  investigated  whether  Shazam’s 
data  could  have  been  considered  as  an  important  input  to 
improve existing functionalities, or offer additional functionalities, 
on  music  streaming  apps,  and  thus  whether denial  of  access  to 
such  data  to  Apple  Music’s  competitors  in  the  supply  of  digital 
music streaming services could have had anticompetitive effects. 

In  previous  cases,  the  Commission  has  cleared  similar  concerns 
on  the  basis  that  datasets  similar  to  the  one  controlled  by  the 
merged entity would have remained available in the market.9 To 
reach this finding, the Commission mainly relied on the evidence 
and  arguments  provided  by  the  parties  to  the  transactions,  and 
by the respondents to the market investigation, which considered 
the various datasets available in the market as comparable.  

In  Apple/Shazam,  the  Commission  made  an  additional  step  in 
developing  the  methodology  to  assess  the  importance  of 
datasets  gathered  by  the  parties  to  a  transaction  and  their 
substitutability with other datasets available on the market. 

In  particular,  the  Commission  assessed  the  increment  of  data 
brought by the transaction to Apple, that is Shazam's data, using 
four  relevant  metrics:  :  the  type  of  data  composing  the  dataset 
(variety);  the  speed  at  which  the  data  is  collected  (velocity);  the 
size of the data set (volume); and the economic relevance (value). 
These  metrics,  the  so-called  “Four  Vs”10,  comprise  the  four  key 
parameters that are increasingly used to assess the commercial 
and thus competitive relevance of large datasets. 

First,  by  assessing  the  variety  of  data,  the  Commission  could 
clearly define the specific data which would be the focus of the 
investigation.  Specifically,  while  Shazam  collected  device  and 
demographic  data  that  is  similarly  available  to  or  replicable  by 
several  companies  active  in  the  digital  arena,  this  prima  facie 
was  not  the  case  in  relation  to  the  "music  tag  data"  or  “music 
discovery  data”  collected  by  Shazam.  Music  tag  data  or  music 
discovery data is the data generated by the users when using the 
Shazam app to perform music recognition activity.  

9 In  this  regard,  see  E.  Ocello,  C.  Sjödin,  Microsoft/LinkedIn:  Big  data and 

conglomerate effects in tech markets, cit. 

10 See  "Competition  Law  and  Data",  10  May  2016,  joint  report  of  the 
Bundeskartellamt  the  German  National  Competition  Autority  ("NCA") 
and  the  Autorité  de 
la  concurrence  French  NCA,  available  at 
http://www.autoritedelaconcurrence.fr/doc/reportcompetitionlawanddata
final.pdf. 
Commission 
German 
(Monopolkommission),  Special  Report  N.68:  Competition  policy:  The 
challenge 
at 
http://www.monopolkommission.de/images/PDF/SG/s68 fulltext eng.pdf.  

digital  markets", 

Monopolies 

available 

2015, 

also, 

See 

of 

 
                                                             
                                                             
M.8788 Apple/Shazam | Competition Merger Brief No 1/2019 

Finally,  in  order  to  assess  the  value  of  data,  the  Commission 
relied  on  internal  documents  submitted  by  the  parties  and  on 
third  parties’  submissions.  It  also  considered  the  revenues 
generated  by  Shazam  pre-transaction  from  the  licensing  of  its 
database. On this basis, the Commission found that Shazam data 
was  of  relatively  limited  value  for  offering  digital  music 
streaming  services  and  that,  in  fact,  in  the  music  industry,  the 
most potentially valuable data is the one related to actual music 
consumption,  as  that  is  the  most  representative  of  the  multiple 
songs a user may like. As a result, the most useful and valuable 
data  for  offering  digital  music  streaming  services  was  found  to 
be held by music streaming providers themselves.  

Therefore the Commission found that, even if the merged entity 
were  to  deny  access  to  Shazam’s  data  to  competitors  of  Apple 
Music, the impact on the ability to compete of those rivals would 
have  likely  been  negligible,  thus a  potential  foreclosure  strategy 
carried  out  by  the  merged  entity  would  have  not  led  to  a 
significant impediment to effective competition. 

Conclusion 

The  Apple/Shazam  case  demonstrates  the  increasing  attention 
given by the Commission to the importance of data issues in the 
era of digital economy.  

In  the  Apple/Shazam  decision  the  Commission  has  made  an 
additional  step  in  the  assessment  of  the  “big  data”  issue  in  the 
field  of  merger  control,  by  developing  a  methodology  to 
benchmark different databases available in the market and thus 
verify whether a merger could bring under the control of a single 
entity non-replicable assets.  

Further,  for  the  first  time,  in  the  Apple/Shazam  decision  the 
Commission had the opportunity to analyse the issue of access to 
commercially  sensitive  information  specifically  in  the  digital 
sector. 

However, the Commission found that several market players did 
have access to, or could start collecting, music discovery data on 
popularity  of  music  tracks  and  future  music  trends  through 
various market intelligence sources as well as through the launch 
of  services  or  functionalities  similar  to  the  Shazam  app. 11  
Moreover,  the  Commission  found  that  in  order  to  provide 
recommendations  and  personalised  suggestions  to  users  based 
on  their  tastes,  several  datasets  are  needed  and  used  in  the 
market  and  not  only  music  discovery  data.  In  fact,  music 
streaming services offer music recommendations based on their 
own user music consumption data (that is data on the music that 
users  stream)12  as  well  as  music  discovery  data.  Therefore,  for 
the  purpose  of  its  assessment, the  Commission  considered  both 
music  consumption  data  and  music  discovery  data  capable  of 
providing 
to  users. 
Accordingly,  since  Shazam’s  data  only  consisted  of  music 
discovery  data,  the  Commission  found  that  the  variety  of  data 
collected  by  Shazam  appears  to  be  more  limited  compared  to 
data sets collected by other industry players. 

insights  for  music 

recommendations 

Second, as regards velocity, the Commission used information on 
monthly  average  time  spent  by  users  on  the  app  as  a  proxy  to 
understand the user engagement with a certain service and thus 
the speed at which data is collected on the app. The analysis of 
this  metric  showed  that  the  velocity  of  Shazam's  data  was 
significantly  lower  compared  to  the  one  of  music  streaming 
services. 

Third,  the  Commission  estimated  the  volume  of  the  datasets  of 
Shazam and other market players by considering the number of 
monthly  active  users  multiplied  by  the  app  engagement  or  time 
spent  on  the  app.  On  this  basis,  the  Commission  concluded  that 
alternatives  and  larger  datasets  compared  to  that  of  Shazam 
would  have  remained  available  to  Apple  Music’s  competitors  in 
the market. 

11  For  example,  Deezer, another  competitor  of  Apple  Music,  had  recently 
launched  a  music  recognition  functionality  within  its  digital  music 
streaming app. 

12 For  example,  Spotify  in  its  IPO  file  indicated  that  its  ability  to  predict 
user music preferences is dependent on the large amounts of user data 
they keep. 

4 

 
                                                             
Competition Merger Brief 1/2019 – Article 2 

Competition merger brief 

paper, 

glass, 
chemical, 
electronic, 
food,  etc.)  and 
account for the largest part of 
the gas industry. 

(medical 
gases 
Medical 
oxygen,  medical 
nitrogen, 
medical  nitrous  oxide  and 
medical carbon dioxide) consist 
of the same molecules, and are 
produced  in  the  same  way,  as 
industrial  gases,  but  are 
subject  to  stricter  regulatory 
requirements,  such  as  specific 
certifications  of  the  production 
and distribution facilities. These 
gases  are 
to 
hospitals  and  (in  the  case  of 
medical  oxygen)  to  patients 
receiving homecare assistance. 

sold  both 

In a nutshell 

in-depth 
an 
Following 
investigation, the Commission 
cleared  the  merger  between 
Praxair  and  Linde,  two  of  the 
largest  gas  suppliers 
four 
worldwide. 

of 

divestiture 

The  clearance  was  subject  to 
an 
the 
extensive  remedy  package, 
which 
the 
overlaps (i) in the EEA and (ii) 
at  global  level  in  relation  to 
helium sourcing. 

removes 

fully 

The  specific  features  of  the 
gas  industry  (economies  of 
density,  portfolio  effect  and 
vertical 
integration)  called 
for a holistic approach in the 
design and delineation of the 
remedy  package,  to  preserve 
d 
it  

ti

ff

Specialty  gases  include  a 
large variety of gases with the 
common denominator of being 
high-value  products  sold  in 
small 
quantities.  Within 
specialty gases, noble gases (krypton, neon, xenon) are extracted 
from the air where they exist in very small concentrations. They 
are  used,  pure  or  in  mixtures,  by  the  lighting  and  electronics 
industries.  Other  gases  and  gas  mixtures  are  typically  not 
produced  in-house,  but  are  sourced  from  chemical  companies, 
purified, blended and distributed to end-customers. They include 
electronic  specialty  gases  (“ESGs”),  used  by  the  semiconductor 
industry;  refrigerants used  as  cooling  agents;  chemicals  used  by 
the  chemical,  biochemical  and  manufacturing  industries;  and 
calibration  and  other  gas  mixtures  used  for  the  calibration  of 
instruments and other specialty applications. 

Helium  is  a  scarce  and  high-value  product,  with  a  very  specific 
supply  chain  as  it  is  a  by-product  of  natural  gas  production, 
extracted  from  a  handful  of  locations  worldwide  (mainly  in  the 
U.S.  and  Qatar).  Helium  is  used  in  a  wide  range  of  industries 
(including, among others, aerospace, automotive and healthcare). 

Praxair/Linde  –  Economics  of  an 
effective remedy design 

Giulia Astuti, Julien Caminati, Adelaide Mozzi, Eleonora Ocello 

Introduction 

On  20  August  2018,  following  an  in-depth  investigation,  the 
Commission  cleared  the  merger  between  Praxair  and  Linde, 
subject to remedies. Praxair and Linde are two large international 
groups  active  in  the  supply  of  a  wide  range  of  gases  (industrial 
gases,  medical  gases,  specialty  gases  and  helium)  and  related 
services. 

The transaction raised horizontal non-coordinated anticompetitive 
effects in a large number of distinct product and geographic gas 
markets,  as  well  as  vertical  unilateral  anticompetitive  effects  in 
relation  to  the  supply  of  helium.  Nonetheless,  a  traditional 
market-by-market  approach  would  have  been  inadequate  to 
design suitable remedies due to the specific characteristics of the 
gas  industry.  Those  market  features  called  for  a  more  holistic 
approach  in  the  delineation  of  the  assets  and  businesses  to  be 
divested,  in  order  to  ensure  the  effectiveness  of  the  remedy 
package and, thus, the preservation of the competitiveness of the 
affected markets post-merger. 

In  the  following  sections,  the  authors  will  first  provide  a  brief 
overview  of  the  gas  industry  in  Europe.  Then,  they  will  assess 
each  of  the  specificities  of  that  industry  and  explain  their 
relevance for the theories of harm identified by the Commission 
and their implications in terms of remedy design.  

Industry overview 

The  gases  produced  and sold  by  the  parties  can  be divided  into 
four  main  categories,  depending  on  their  applications  and  mode 
of production. 

(for 

technology 

Industrial  gases are obtained from the air, mainly through the 
cryogenic  air  separation 
the  so-called 
“atmospheric  gases”:  oxygen,  nitrogen  and  argon)  or  from 
synthetic  processes  or  natural  sources  (for  the  so-called  “non-
atmospheric  gases”:  hydrogen,  acetylene,  carbon  monoxide, 
carbon dioxide and nitrous oxide). Typically, gas companies build 
the plants, produce and distribute the gases to their clients. These 
gases  are  used  by  a  wide  variety  of  industries  (metallurgy, 

The content of this article does not necessarily reflect the 
official position of the European Commission. Responsibility 
for the information and views expressed lies entirely with 
the authors. 

 
 
  
 
 
 
 
 
 
 
 
 
       
 
 
 
M.8480 Praxair/Linde | Competition Merger Brief No 1/2019 

Depending  on  the  volume  of  gas  required  by  the  customers, 
gases are supplied through different distribution modes, which 
are not substitutable one for another. 

Economies of density: thousands of markets but 
one  single  business  for  industrial  and  medical 
gases 

"Tonnage" refers to the supply of large volumes of gases in gaseous 
form  either  via  a  pipeline  connected  to  a  large  gas  plant  serving 
multiple  customers  or  through  a  dedicated  gas  plant  built  and 
operated under the supervision of the engineering division of the gas 
company at the production site of the customer (for example, a steel 
factory). Only industrial gases are supplied in this mode.  

"Bulk"  refers  to  the  supply  of  smaller  volumes  of  gas  in  liquid 
form, delivered in road or rail tankers. Gases produced at the gas 
plants  are  compressed  to  liquid  status  to  make  transportation 
cost-effective.  At  the  customer site,  the  liquefied  gas  is  brought 
back to gaseous form for its final use. Industrial gases, medical 
gases  and  helium  are  all  supplied  in bulk;  rarely  some  specialty 
gases are supplied through this distribution mode. 

"Cylinders" refers to the supply of very small volumes of gas, in 
gaseous form, in cylinders. Cylinders are filled by gas companies 
in filling centres located either where the gas is produced or at a 
point that receives bulk supplies. All categories of gases are sold 
in  cylinders.  Often,  customers  purchase  cylinders  of  different 
gases, which are delivered together in a pallet. 

With few exceptions, joint production and sale of several gases is 
highly synergetic as they are the result, in full or in part, of the 
same production processes and distribution modalities. There are 
strong  economies  of  scale,  scope  and  density.  For  example,  the 
rare  gases  neon,  krypton  and  xenon  are  produced  in  small 
quantities in the largest air separation plants, which produce very 
large  volumes  of  oxygen,  nitrogen  and  argon;  after  being 
separated  from  other  air  gases,  rare  gases  are  purified  (and 
blended  in  an  exact  mixture)  and  sold  notably  to  the  aerospace 
industry. The oxygen obtained from the same separation process 
can  be  sold  to  steel  producers  and/or  (if  the  level  of  purity  is 
suitable  and  the  production  facilities  certified)  to  hospitals  or 
patients 
respiratory  homecare  services.  Further 
synergies are obtained using the same distribution infrastructure 
to  ship  different  gas  molecules.  In  turn,  the  various  distribution 
modes  are  interlinked  by  virtue  of  economies  of  density. 
Furthermore, the economics of this industry are such that in order 
to  be  competitive  and  benefit  from  significant  synergies  a 
company has to be active in the three distribution modes. Vertical 
integration and global sourcing are other two key features of the 
gas  industry,  in  particular  in  relation  to  helium,  which  were 
decisive  in  the  Commission's  assessment  of  the  merger  and  of 
the remedy proposal submitted by the parties.  

receiving 

The theories of harm 
Pre-merger, the European Economic Area (EEA) gas industry was 
characterised by a competitive landscape featuring only four so-
called  "Tier  1"  players  (Air  Liquide,  Linde,  Praxair  and  Air 
Products).  These  players  have  comparable  offerings  and 
capabilities  (including  technical  and  financial)  and  are  able  to 
compete  throughout  the  EEA  for  the  products  and  projects  with 
higher  revenue-generation  potential.  In  this  environment,  Linde 
and Praxair were, respectively, number two and three in terms of 
revenues, the number one being Air Liquide and the number four 
Air  Products.  The  remaining  players  (the  largest  of  which  is 
Messer) have only regional, national or local presence and limited 
financial  and  technical  capabilities  compared  to  the  Tier  1 
players. This means that, whilst in the markets for the supply of 
industrial  and  medical  gases  in  bulk,  and  cylinders  (whose 
geographic  scope 
typically  national),  some  degree  of 
competition would have remained post-merger at least in certain 
countries,  this  would  not  have  been  the  case  for  the  tonnage 
markets, which have an EEA dimension. 

is 

Nonetheless,  as  mentioned,  the  various  distribution  modes  of 
industrial gases are highly interlinked and the gas industry overall 
is  characterised  by  strong  positive  externalities,  notably 
economies of density, which are a primary factor in the operation 
of  the  industrial  and  medical  gas  business.  In  this  context, 
economies of density refer to a concentration of gas plants and 
filling  centres 
in  a  certain  geography  affording  the  gas 
companies that own those plants and centres a very competitive 
cost structure, which enable them to reach the critical (financial) 
size  to  bid  for  capital-intensive  large  tonnage  projects  or 
pipelines.  Large 
installations  allow  the  expansion  of  the 
distribution  network,  which  translates  into  increased  market 
power in the bulk and cylinders markets. Such economies of scale 
are  so  strong,  that  effective  entry  or  expansion  are  rare  in  the 
industry, irrespective of the distribution mode, and typically occur 
as a result of mergers and acquisitions and not through organic 
growth.  

In  this  context,  the  Commission  found  that  the  transaction,  as 
notified, would have modified the industry landscape by reducing 
the  number  of  Tier  1  players  from  four  to  three  and  creating  a 
new leading player with significant market power in the EEA. The 
lessening  of  the  competitive  pressure  at  the  level  of  Tier  1 
players resulting from the merger would have likely reduced the 
incentives  to  compete  of  these  players  and  given  rise  to  price 
increases for industrial and medical gases, across all distribution 
modes.  

6 

 
M.8480 Praxair/Linde | Competition Merger Brief No 1/2019 

Remedies considerations 
In order to solve such competition concerns, any remedy proposal 
needed not only to remove the overlap between the parties in the 
problematic  markets,  but  also  to  preserve  the  ability  of  the 
divestment  business  to  enjoy  sufficient  economies  of  density  to 
be competitive and cost effective.  

For  this  purpose,  a  suitable  divestment  would  have  needed  to 
include  the  full  supply  chain  related  to  the  production  of  all 
gases,  from  tonnage  to  cylinders,  and  the  medical  business,  as 
well  as  the  co-products,  irrespective  of  whether  or  not  the 
transaction gave rise to problematic markets at all levels and for 
all molecules. Further, a "mix and match" solution, combining in a 
divestment  package  assets  of  both  Linde  and  Praxair  which  did 
not  form  a  coherent  business, would  not  have  been suitable,  as 
any  disruption  of  the  supply  chain  could  have  undermined  the 
viability and competitiveness of the divestment business. 

In line with these principles, to gain merger clearance, the parties 
offered  the  divestment  of  the  entire  EEA  business  of  Praxair, 
including  all  relevant  legal  entities,  assets  and  personnel  (the 
“EEA Divestment Business”).1  

Given the size of the EEA Divestment Business – around €5 billion 
in revenues – as well as the specific expertise needed to be able to 
run in an effective manner the concerned business, strict purchaser 
requirements  were  essential.  The  parties'  proposal  contained 
specific  provisions  in  that  respect,  as  well  as  an  up-front  buyer 
clause, so that the Praxair/Linde merger could close only after the 
Commission's approval of the EEA Divestment Business’ buyer. 

Portfolio  effects:  the  value  added  of  specialty 
gases 

The theories of harm 
Specialty gases encompass different types of gases (as explained 
above) which are highly interlinked, both with each other and with 
other categories of gases, notably industrial gases. 

First, certain specialty gases are produced in the same production 
process  as  other  specialty  and/or  industrial  gases  (this  is  the 
case, for example, of krypton and xenon). Second, some specialty 
gases consist of mixtures of other gases (for example, industrial 
gases  or  helium  with  higher  purity  grades,  for  the  calibration  of 
instruments).  Third,  specialty  gases  are  often  delivered  through 
the  same  distribution  networks  as  industrial  gases.  Fourth,  and 
importantly,  customers  (especially  those  of  large  size)  often 
purchase (i) different types of specialty gases (for example, noble 
gases and ESGs) and (ii) other types of gases, notably industrial 
gases  and/or  helium  (this  is  the  case,  for  example,  of  large 
chemical companies, which buy both chemical gases and oxygen). 

1   Praxair is also active in Europe through Società  Italiana  Acetilene  e  
Derivati S.p.A. ("SIAD"), a joint venture with Flow Fin S.p.A. (of Italy) The 
EEA Divestment Business excludes Praxair’s stake in  SIAD, which is to 
be divested to the joint venture partner (the “SIAD Commitments”). 

limited  geographic  presence.  While 

Overall, the competitive landscape of the specialty gas markets is 
populated  by  industrial gas  suppliers, which  are generally  active 
in  a  number  of  EEA  countries,  and  local  players,  which  have  a 
more 
industrial  gas 
companies  typically  perform  some  steps  of  the  specialty  gases 
supply  chain  in-house  (such  as purification,  transfilling,  blending 
and  distribution),  local  players  mainly  operate  on  the  markets 
concerned as traders (distribution only).  

Although  there  is  no  technical  barrier  that  prevents  customers 
from  buying  specialty  gases  from  multiple  suppliers,  they 
generally prefer, and consider it more convenient, to purchase the 
gases  they  need  from  a  limited  number  of  providers,  which  are 
able  to  offer  a  wide  variety  of  specialty  (and  non-specialty) 
gases.  This  means  that  being  able  to  offer  a  one-stop-solution 
represents  an  important  competitive  advantage  for  suppliers, 
especially in view of serving customers that purchase significant 
quantities of specialty and non-specialty gases.  

Tier  1  players  are  able  to  offer  a  wide  range  of  gases  at 
competitive  terms,  in  light  of  their  scale  and  their  degree  of 
vertical  integration,  which  makes  them  the  most  credible 
suppliers  in  the  market.  In  this  context,  the  Commission  found 
that  the  transaction,  as  notified,  would  have  had  modified  the 
industry  landscape in  the  EEA  by  reducing  the  number  of  Tier  1 
players  from  four  to  three.  The  lessening  of  the  competitive 
pressure at the level of Tier 1 players resulting from the merger 
would  have  likely  reduced  the  incentives  to  compete  of  these 
players and given rise to price increases for specialty gases. 

Remedies considerations 
As  is  the  case  for  industrial  and  medical  gases,  to  solve 
competition  concerns  identified  on  the  markets  for  specialty 
gases,  any  remedy  proposal  needed  not  only  to  remove  the 
overlap between the parties in the problematic markets, but also 
to preserve the ability of the business to offer a wide portfolio of 
gases at competitive terms.  

In  line  with  this  principle,  to  gain  merger  clearance,  the  parties 
offered  the  divestment  of  the  entire  EEA  specialty  gas  business 
of  Praxair  (as  part  of  the  EEA  Divestment  Business).  Where  the 
supply chain of specialty gases involved Praxair’s assets located 
outside  the  EEA,  the  commitments  provided  for  adequate 
transitional  supply  arrangements,  to  avoid  any  disruption  in  the 
supply chain and to allow for a smooth transfer of the business 
to the purchaser.  

Vertical integration and global sourcing: the plus 
factors in the helium business 

The theories of harm 
Helium  is  characterised  by  a  specific  supply  chain  compared  to 
other  gases.  It  is  sourced  globally  from  a  few  natural  gas 
producers worldwide, which enter into long-term supply contracts 
or  joint  ventures  with  gas  companies.  The  latter  bring  helium  to 

7 

 
                                                             
M.8480 Praxair/Linde | Competition Merger Brief No 1/2019 

the  market,  selling  it  either  to  other  distributors  (wholesale 
supply) or directly to end-customers (retail supply). 

Helium  is  a  scarce  product  regularly  subject  to  shortages.  As  a 
result,  competition  in  this  sector  is  driven  by  access  to  helium 
sources.  Suppliers  with  no  (or  limited)  direct  access  to  such 
sources must procure helium from competitors. This affects their 
competitiveness  in  terms  of  reliability  of  supply  and  pricing. 
Moreover,  the  size  and  the  diversity  of  the  helium  sourcing 
portfolio  are  crucial:  having  a  balanced  portfolio,  with  access  to 
various  sources,  enables  suppliers  to  respond  to  (or  to  mitigate) 
supply disruptions. 

The  number  of  players  competing  for  direct  access  to  helium 
sources  is  limited.  Helium  producers  typically  favour  Tier  1 
players, which can commit to purchase large quantities of helium 
under long-term take-or-pay commitments. In fact, the ability of 
a gas company to compete for direct access to helium sources is 
closely  related  to  its  sales  on  the  downstream  wholesale  and 
retail markets: as helium is perishable and difficult to store, gas 
companies must always balance their helium supply and demand. 
Therefore, small or mid-size Tier 2 players are de facto excluded 
from large tenders organised by the main helium producers.  

The  above  features  of  the  helium  markets  constitute  very  high 
barriers  to  entry/expansion,  which  limit  not  only  the  number  of 
credible  and  competitive  competitors  but  also  their  ability  to 
increase output in response to price increase or supply disruption. 

In  this  context,  the  Commission  found  that  the  transaction,  as 
notified,  would  have 
important  competitive 
removed  an 
constraint in the helium markets, with a risk of price increases. In 
particular,  the  combination  of  the  parties’  helium  businesses 
would have enabled the merged entity to control a large share of 
global helium production and to have a sourcing portfolio with no 
equivalent  on  the  market.  Moreover,  the  above  horizontal  non-
coordinated effects would have been further compounded by the 
risks of foreclosure effects. Indeed, post-transaction, the merged 
entity  would  have  had  the  ability  and  incentive  to  foreclose  a 
large number of competitors, thanks notably to the supremacy of 
its  sourcing  portfolio.  Lastly,  the  market  investigation  revealed 
that  helium  is  a  highly  strategic  and  must-have  product,  which 
drives the sales of other gases (including industrial, medical, and 
specialty  gases).  Consequently,  adverse  competition  effects  on 
the  helium  retail  markets  would  have  likely  had  an  impact  on 
other markets (portfolio effect). 

Remedies considerations 
In  order  to  solve  the  competition  concerns  identified  on  the 
helium  markets,  any  remedy  proposal  had  to  provide  for  the 
removal of the full overlap in (i) the wholesale market at global 
level; and (ii) the national retail markets in the EEA. 

For  this  purpose,  a  suitable  divestment had  to  include  sufficient 
access  to  helium  sources,  both  in  terms  of quantity and  quality. 
In particular, the scope and design of the helium divestment had 
to  ensure  not  only  the  removal  of  the  full  overlap  in  helium 

sourcing  but  also  the  balance  between  the  helium  supply  and 
demand  of  the  divestment  business.  Indeed,  the  divestment  of 
downstream  operations  insufficient  to  cover  the  costs  of  the 
helium  sourcing  obligations  included  in  the  remedy  package 
would  have  put  at  risk  the  viability  of  the  divestment  business. 
Furthermore,  the  sourcing  portfolio  to  be  divested  had  to  be 
representative  of  the  current  portfolio  of  Praxair  (in  terms  of 
diversity, reliability, competitiveness and duration).  

The design of the remedy proposal also had to take into account 
the  global  scope  of  the  helium  sourcing  divestment  and  the 
existence  of  factors  and  assets  specifically  relevant  to  regions 
outside  the  EEA,  which  other  competition  agencies  might  be 
better placed to consider. In this respect, the Commission actively 
cooperated  with  several  national  competition  authorities  in 
America  and  Asia,  including  in  particular  the  U.S.  Federal  Trade 
instrumental  to  ensure 
Commission.  This  cooperation  was 
consistency  in  the  remedy  process  and  implementation  on  an 
international level. 

In line with these principles, to gain merger clearance, the parties 
offered two sets of commitments in relation to helium.  

First,  the  parties  offered  the  divestment  of  the  entire  helium 
retail business of Praxair in the EEA business (as part of the EEA 
Divestment  Business),  together  with  helium  sourcing  contracts, 
expressly identified in the commitments, which were sufficient to 
satisfy  the  current  and  future  helium  demand  of  the  EEA 
Divestment Business. 

Second,  the  parties  offered  the  divestment  of  additional  helium 
sourcing contracts and related assets (other than those included 
in the EEA Divestment Business) to one or several buyer(s) so as 
to fully remove the global overlap in helium sourcing (the ”Helium 
Sourcing Divestment Business”). Besides a limited number of key 
assets, the sourcing contracts and related assets included in the 
Helium  Sourcing  Divestment  Business  were  not  expressly 
identified  and  had  to  be  agreed  in  cooperation  with  other 
competition  authorities  (in  particular  the  U.S.  Federal  Trade 
Commission).  The  commitments  offered  by  the  parties  also 
provided  that  the  overall  helium  sourcing  portfolio  divested 
globally,  as  a  result  of  the  combination  of  the  helium  sourcing 
contracts  included  in  the  EEA  Divestment  Business  and  in  the 
Helium  Sourcing  Divestment  Business,  had  to  be  equivalent  to 
and representative of Praxair’s existing global sourcing portfolio. 

Outcome 

In  view  of  its  scope,  effectiveness  and  comprehensiveness,  the 
Commission  concluded  that  the  remedy  package  offered  by  the 
parties was sufficient to remove the competition concerns arising 
from the transaction.  

Following  the  conditional  clearance  of  the  Praxair/Linde  merger, 
the Commission approved: (i) on 22 October 2018, Taiyo Nippon 
Sanso  Corporation,  a  Japanese  gas  company  active  across  the 
world  but  not  in  the  EEA,  as  the  buyer  of  the  EEA  Divestment 

8 

 
M.8480 Praxair/Linde | Competition Merger Brief No 1/2019 

Business2  and;  (ii)  on  19  December  2018,  Messer  Industries,  a 
newly  created  joint-venture  between  Messer,  a  German  gas 
company primarily active in Europe and Asia, and CVC, a private 
equity  company,  as  the  buyer  of  the  major  part  of  the  Helium 
Sourcing Divestment Business3.4 

Conclusions 

Remedy design is always a delicate exercise, especially when the 
specific 
involved  by  a 
businesses 
characteristics, such as in the gas industry. 

transaction 

feature 

When  assessing  commitments,  the  Commission  is  required  to 
consider all relevant factors judged by reference to the particular 
characteristics  of  the  market  in  which  competition  concerns 
arise.5 

In line with the above, and while the remedy proposal offered in 
each  case  should  be  assessed  on  its  own  merits,  the  lesson 
learned  from  Praxair/Linde  case  is  that,  when  economies  of 
density,  portfolio  effects  or  vertical  integration  play  a  very 
significant  role  in  a  market,  the  remedy  may  not  only  need  to 
address  the  market(s)  where  competition  concerns  arise,  but 
should  also  include  all  additional  assets  that  are  necessary  to 
guarantee  the  viability  and  competitiveness  of  the  divestment 
business.  

Such  market  features  may  indeed  call  for  more  comprehensive 
divestments  –  including  activities  related  to  markets  where  the 
Commission did not identify a significant impediment to effective 
competition 6  –  to  avoid  an  artificial  split  of  the  overlapping 
activities,  which  could  hamper  the  viability  of  the  divestment 
business  and  affect  its  ability  to  compete  effectively  with  the 
merged entity on a lasting basis. 

2 On  22  October  2018,  the  Commission  also  approved  the  transitional 

supply agreements related to the SIAD Commitments. 

3   The helium sourcing contracts/assets acquired by Messer Industries are 
part of a wider package comprising industrial gas assets in North and 
South America. 

4   The  Helium  Sourcing  Divestment  Business  is  split  in  two  parts,  to  be 
divested to different purchasers: (i) first, the helium sourcing contracts/ 
assets  defined  in  agreement  with  the  U.S.  Federal  Trade  Commission 
and  (ii)  second,  the  helium  sourcing  contracts/assets  defined  in  
agreement with  the  People's  Republic  of  China State  Administration  
for  Market  Regulation. The Commission has not approved the buyer of 
the helium sourcing contracts/assets divested in China yet. 

5   Commission  notice  on  remedies  acceptable  under  Council  Regulation 
(EC)  No  139/2004  and  under  Commission  Regulation  (EC)  No 
802/2004, para. 12. 

6   Commission  notice  on  remedies  acceptable  under  Council  Regulation 
(EC)  No  139/2004  and  under  Commission  Regulation  (EC)  No 
802/2004, para. 23. 

9 

 
                                                             
                                                             
Competition Merger Brief 1/2019 – Article 3 

Competition merger brief 

The “white powder” case: acquisition of 
Cristal by Tronox 

range  of  applications 
(e.g. 
including  both  coatings  and 
plastic products). 

In a nutshell 

Thomas Braun, Ligia Dorobantu, Kate Hudson, Massimo Tognoni 

Introduction 

On 4 July 2018, following an in-depth investigation, the European 
Commission  conditionally  cleared  Tronox’s  acquisition  of  Cristal, 
the  titanium  dioxide  business  of  The  National  Titanium  Dioxide 
Company Ltd.  

Tronox and Cristal (the “Parties”) are two of the five major global 
titanium dioxide pigment producers.  

investigated  horizontal  unilateral  and 
The  Commission 
coordinated  effects  concerns  in  relation  to  several  types  of 
titanium  dioxide  pigment.  Following  the  in-depth  investigation, 
the  Commission  dismissed  all  concerns  with  the  exception  of 
those  regarding  the  market  for  chloride-based  titanium  dioxide 
pigment for use in paper laminate, which were remedied through 
Tronox’s commitment to divest its activities in this area.  

Tronox’s  acquisition  of  Cristal  was  also  subject  to  review  in  the 
United  States  of  America,  where  the  Federal  Trade  Commission 
(US  FTC)  challenged  the  decision  in  federal  court  and  before  an 
Administrative  Law  Judge.  In  April  2019,  the  Parties  agreed  to 
settle  the  FTC’s  charges  by  divesting  Cristal’s  North  American 
titanium dioxide assets.1   

Titanium dioxide pigment 

Titanium  dioxide  pigment  is  an  inorganic  chemical  which  serves 
to  opacify,  brighten  and  whiten  various  industrial  and  consumer 
products.  It  is  primarily  used  in  the  production  of  coatings, 
plastics  and  paper,  but  is  also  an  input  in  food  products, 
inks.  The  Parties' 
cosmetics,  pharmaceuticals  and  printing 
activities  only  overlap  in  the  supply  of  titanium  dioxide  pigment 
for  use  in  coatings,  plastics  and  paper  laminate.  The  different 
grades  of  titanium  dioxide  pigment  are  often  developed  and 
marketed  for  specific  end-uses  within  these  broad  areas  (e.g. 
architectural  coatings,  automotive  coatings,  PVC,  engineering 
plastics,  etc.),  although  some  grades  are  suitable  for  a  broad 

1

 https://www.ftc.gov/news-events/press-releases/2019/04/ftc-requires-
divestitures-tronox-cristal-suppliers-widely-used 

The content of this article does not necessarily reflect the 
official position of the European Commission. Responsibility 
for the information and views expressed lies entirely with 
the authors. 

an 

cleared 

through 

which 
several 

in-depth 
an 
Following 
investigation, the Commission 
conditionally 
the 
acquisition  of  Cristal  by 
Tronox,  both  major  suppliers 
of titanium dioxide pigment. 

Titanium  dioxide  pigment  can 
be  produced 
two 
processes:  the  chloride-based 
process, which uses chlorine to 
treat  titanium  feedstock  and 
intermediate 
produce 
then 
compound, 
other 
undergoes 
processes  before  becoming 
raw  titanium  dioxide  pigment, 
sulphate-based 
and 
the 
process, 
reacted  with 
feedstock 
sulphuric 
the 
processes  through  which  it  is 
produced,  i.e.  the  sulphate  or 
the chloride process, and the specific proprietary techniques used 
in the subsequent steps of the manufacturing process, determine 
the  different  characteristics  the  pigment  can  have,  which 
ultimately  make  it  more  or  less  suitable  for  specific  end 
applications.  

The  case  raised  horizontal 
unilateral concerns in relation 
for 
the  EEA  market 
to 
titanium dioxide pigment used 
in 
laminate 
applications. To remedy them, 
to 
the  Parties  undertook 
divest  Tronox’s  grade  of 
pigment sold on this market.  

in 
is 
acid.  Both 

paper 

which 

the 

Worldwide,  there  are  five  global  suppliers  of  titanium  dioxide 
pigment  that  use  chloride-based  processes,  and  one  other 
established company which has recently acquired this technology. 
The  number  of  suppliers  using  sulphate-based  technology  is 
significantly higher as this process is older and easier to master, 
albeit less environmentally friendly.  

The demand (and supply) for titanium dioxide is highly cyclical. At 
the  time  of  the  notification,  the  titanium  dioxide  market  was 
“tight”, meaning prices had been increasing and there was limited 
spare capacity globally. 

Product market definition 

Product  market  definition  was  a  key  issue  in  the  assessment  of 
the 
the 
Commission.  

transaction,  and  was  carefully 

investigated  by 

The  Parties  submitted  that  titanium  dioxide  pigment  grades  for 
coatings,  plastics  and  paper  applications  belong  to  the  same 
relevant  product  market,  on  account  of  customers  in  all  three 
areas of end-use having similar requirements in terms of product 

 
 
  
 
 
 
 
 
 
 
       
 
 
 
                                                             
M.8451 Tronox/Cristal | Competition Merger Brief No 1/2019 

characteristics,  and  of  the  supply-side  substitutability  between 
various grades produced with a given technology.   

Horizontal unilateral effects 

The  Parties  also  argued  that  the  relevant  market  should  not  be 
segmented based on production technology, since chloride-based 
and  sulphate-based  grades  have  similar  characteristics,  and 
customers in all application areas use both types.  

The  in-depth  investigation  showed  that  there  was  a  certain 
degree  of  demand-side  substitutability  between  grades  for 
different  coatings  and  plastics  (also  referred  to  as  "mass 
applications”).  As  this  would  not  have  changed  the  outcome  of 
the  competitive  assessment,  the  Commission  left  open  the 
question of whether the market for titanium dioxide pigment for 
use in mass applications should be split at all, and whether such 
a  segmentation  would  be  between  coatings  and  plastics,  or 
narrower segments within each of these broad categories.   

The  same  was  not  the  case  with  respect  to  the  third  area  of 
overlap  between  the  Parties,  namely  titanium  dioxide  for  use  in 
paper  laminate.  The  market  investigation  showed  that  paper 
laminate  is  a  type  of  “speciality  application”,  which  requires 
titanium  dioxide  pigment  with  different  characteristics  than  are 
offered by the grades used in coatings and plastics applications. 
Paper  laminate  producers  explained  they  would  not  be  able  to 
use grades destined for use in other areas, especially since they 
do  not  provide  the  same  level  of  lightfastness,  i.e.  resistance  to 
change when exposed to sunlight.  

Moreover,  the  market  investigation  showed  that  chloride-based 
grades  offer  superior  lightfastness  to  grades  produced  through 
sulphate-based  processes,  which  tend  to  have  a  yellow 
undertone.  Although  paper  laminate  producers  do  also  buy 
sulphate-based  grades,  they  can  only  use  them  for  a  certain 
proportion  of  their  pigment  requirements,  and,  in  addition,  only 
chloride-based  grades  are  suitable  for  the  production  of  white 
paper laminate. As such, the market investigation showed that, in 
the  event  of  a  non-transitory  price  increase  of  5-10%,  only  a 
negligible  proportion  of  chloride-based  paper  laminate  grades 
could  be  replaced  by  sulphate-based  pigment.  This  is  in  marked 
contrast  to  the  mass  applications  area,  where  the  market 
investigation  indicated  a  much  higher  degree  of  substitutability 
between  chloride-based  and  sulphate-based  grades  for coatings 
and plastic producers in the European Economic Area (EEA).  

regards 

supply-side 

As 
substitutability  between  grades 
manufactured using chloride-based technology, it is important to 
note that suppliers could technically switch from producing other 
chloride grades to paper laminate grades in the short run only if 
they  already  have  such  a  product  in  their  portfolio.  The 
Commission  took  into  account  the  constraint  deriving  from 
certain  chloride  suppliers  diverting  their  production  from  mass 
application  grades  to  paper  laminate  ones,  but  considered  that 
defining a broader market on this basis would not be appropriate 
given  that  not  all  chloride-based  suppliers  are  active  in  paper 
laminate applications.  

The  Commission  therefore  concluded  that  there  is  a  distinct 
relevant market for the supply of chloride-based titanium dioxide 
pigment for paper laminate applications.  

The  Commission  found  that  the  transaction  would  significantly 
impede  competition  on  the  EEA  market  for  chloride-based 
titanium  dioxide  pigment  for  use  in  paper  laminate.  Tronox  and 
Cristal  are  two  of  the  four  suppliers  active  in  this  market,2  and 
together they account for [30-40] % of sales. Their merger would 
have  therefore  significantly  increased  concentration  in  the 
market3  and  would  have  left  paper  laminate  producers  with  a 
limited  choice  of  suppliers  of  chloride-based  titanium  dioxide 
pigment.  

Tronox, despite being the smallest of the four suppliers, exercises 
an important competitive constraint on Cristal and the other two 
rivals.  This  is  particularly  important  given  that  Tronox’s  and 
Cristal’s grades compete closely with one another, and that paper 
laminate  producers  find  it  necessary  to  source  titanium  dioxide 
pigment  from  several  providers.  Customers  explained  that 
sourcing  from  at  least  three  suppliers  is  important  to  avoid 
shortages  of  supply  -  a  significant  risk  in  the  industry,  in 
particular in times of tight capacity.  

The Commission therefore found that customers would not have 
sufficient buyer power to counteract the increased market power 
that  the  Parties  could  exercise  post-merger,  and  that  pressure 
from  competitors  would  have  also  been  insufficient  to  ensure 
effective competition. The ability of existing suppliers to increase 
production in response to a price increase by the merging Parties 
is  limited  by  the  low  levels  of  spare  capacity  and  competitors' 
existing commitments to other customers, which make it difficult 
to  shift  production  away  from  other  grades.  The  market 
investigation  also  showed  that  entry  from  suppliers  that  do  not 
currently produce chloride-based paper laminate is unlikely. Even 
for  chloride  producers,  developing  a  new  grade  requires 
significant  investment  in  R&D  and  cannot  be  achieved  in  the 
short  to  medium  term.  As  regards  sulphate-based  producers, 
barriers  to  entry  are  even  higher  as  chloride-technology  is 
proprietary  and  generally  not  licensed  by  other  suppliers,  and, 
even  once  the  technology  becomes  available,  it  can  be  a  long 
time  before  producers  are  capable  of  operating  it  on  a 
commercial scale. 

The  Commission  therefore  concluded  that  the  transaction  would 
result  in  a  significant  impediment  to  effective  competition,  with 
negative effects on prices and the availability of titanium dioxide 
grades for use in paper laminate.  

2   Chemours  and  Kronos  are  the  two  other  suppliers.  Venator,  the  other 
major supplier of chloride-based titanium dioxide pigment, is active in 
the  production  of  titanium  dioxide  pigment  for  mass  applications  but 
not in the production of chloride-based grades for paper laminate. 

3 The  transaction  would  have  increased  the  Herfindahl-Hirschman  Index 

by [0-500] to a level of [3000-4000].  

11 

 
                                                             
M.8451 Tronox/Cristal | Competition Merger Brief No 1/2019 

Coordinated effects 

Efficiencies 

The Commission also assessed in depth whether the transaction 
would be likely to result in coordinated effects on one or more of 
the  plausible  EEA  markets  for  titanium  dioxide  pigment.  Market 
features such as a limited number of suppliers accounting for a 
high proportion of sales; a relatively homogeneous product; and a 
high  level  of  transparency  in  the  market,  typically  make 
coordination more likely to emerge. The Commission investigated 
whether  coordination  could  take  place  in  the  various  possible 
titanium  dioxide  pigment  markets  on  the  basis  of  price  increase 
announcements.  

In  the  three  years  preceding  the  transaction,  there  had  been 
several  instances  when  the  Parties  and  their  three  main 
competitors 4 announced price increases of similar magnitude and 
at similar points in time. The evidence available did not however 
enable  the  Commission  to  conclude  that  titanium  dioxide 
suppliers  had  coordinated  on  the  basis  of  such  price  increase 
announcements  in  the  past, and  did  not  point  to  any  clear  focal 
point  around  which  the  Parties  could  have  coordinated,  or  could 
coordinate after the merger. 

The  Commission  also  considered  the  constraint  exercised  by 
other  suppliers  on  the  sustainability  of  a  potential  coordination 
scheme  between  the  big  five  suppliers.  Unlike  paper  laminate, 
where  chloride  and  sulphate-based  grades  were  found  to 
constitute  separate  markets,  such  a  distinction  could  not  be 
firmly  drawn  with  respect  to  pigment  used  for  coatings  and 
plastics. A fringe of smaller, sulphate-based suppliers of titanium 
dioxide  for  mass  applications  account  for  [10-20]  %  of  sales  in 
this segment in the EEA.  

The presence of suppliers other than the main five is one of the 
structural  differences  between  the  EEA  and  other  regional 
markets  for  titanium  dioxide  pigment,  such  as  North  America. 
Those,  and  other  structural  differences, 
lead  to  diverging 
competitive  conditions  in  the  EEA  and  in  North  America  and 
explain why the Commission and the US FTC ultimately reached 
different  conclusions  on  the  likelihood  of  coordinated  effects 
resulting from the merger in the respective markets.5 

As  part  of  its  in-depth  investigation,  the  Commission  also 
assessed  claims  submitted  by  the  Parties 
in  relation  to 
efficiencies  which  they  believed  would  be  delivered  by  the 
merger.  The  efficiencies  related  mainly  to  potential  synergies 
between  particular  assets  held  by  the  Parties  and  the  value  of 
combined expertise and experience.  

Given  the  Commission's  conclusion 
in  relation  to  market 
definition,  namely  that  a  separate  market  existed  for  chloride-
based  titanium  dioxide  for  use  in  paper  laminate,  efficiencies 
claims would have needed to pertain specifically to this market in 
order  for  the  Commission  to  be  able  to  take  them  fully  into 
account  in  its  assessment.  The  claims  made  were  instead  more 
generic in nature and not sufficiently verifiable in relation to the 
particular product market in question. 

Remedies 

In view of the competition concerns identified by the Commission 
on  the  market  for  chloride-based  titanium  dioxide  pigment  for 
use  in  paper  laminate,  the  Parties  offered  to  divest  Tronox’s 
grade  sold  on  this  market,  including  the  rights  to  proprietary 
production techniques and processes.  

As is often necessary for remedies of this type, the commitments 
made  by  the  Parties  included  arrangements  for  a  transitional 
period  during  which  the  Parties  would  manufacture  the  product 
on  behalf  of  the  purchaser  of  the  divestment  business.  The 
pricing mechanism set out in the transitional supply agreement is 
based on the incremental cost of manufacturing the product. The 
purchaser will thus have the incentive to price the divested grade 
on  a  similar  basis to  Tronox  absent  the  merger  even  during  the 
transitional period, without placing undue costs on the Parties. 

Conclusions 

Product  market  definition  proved  to  be  the  deciding  element  in 
the Commission's assessment of this case. The findings of the in-
depth  investigation  led  to  the  identification  of  one  specific 
product market, on which the level of concentration was already 
much  higher  and  the  likelihood  of  new  entrants  very  limited. 
Remedies  were  therefore  required  to  resolve  the  competition 
concerns  that  would  have  otherwise  arisen  on  this  particular 
market. On the remaining possible product markets, however, the 
presence  of  a  larger  number  of  competitors  and  a  relatively 
higher level of substitutability between types of titanium dioxide 
pigment  meant  that  the  Commission  did  not  find  equivalent 
grounds to conclude that the merger would have led to reduced 
competition on these markets in the EEA.  

4  Kronos, Chemours and Venator. 
5  The US FTC challenged the merger inter alia on the basis that it would 
increase the likelihood of coordinated conduct. The US FTC’s complaint 
was upheld by the Administrative Law Judge. 

12 

 
                                                             
Competition Merger Brief 1/2019 – Article 4 

Competition merger brief 

SHARING is CAR-ing 

Stephan Simon, Kathlynn Hinnekens, Nicolas Listl,  
and Andrea Usai

1
Introduction 

The  European  Commission  has  approved  under  the  EU  Merger 
Regulation, subject to conditions, the creation of six joint ventures 
by  Daimler  and  BMW,  both  car  manufacturers 
(“Original 
Equipment  Manufacturers”  or  “OEMs”)  based  in  Germany.2  The 
transaction  was  notified  to  the  Commission  on  17  September 
2018 and conditionally cleared on 7 November 2018.  

The  activities  of  Daimler  (via  car2go)  and  BMW  (via  DriveNow) 
overlapped  mainly  with  respect  to  (free-floating 3)  car  sharing 
services. That market has certain specific unique features, which 
the Commission took into account in its assessment:  

• 

• 

there  is  a  large  range  of  mobility  services  that  are,  to 
varying  degrees,  seen  as  substitutes  by  consumers, 
including in particular public transport,  
there  are  thus  out-of-market  competitive  constraints 
exerted by other means of transportation, and  

•  many players (including OEMs) have plans to enter the 
market,  which  is  a  new,  expanding  form  of  urban 
mobility offering commercial opportunities. 

In order to address the Commission’s concerns, the remedy that 
was accepted aimed at ensuring that the merger would not shut 
out rival integrator apps or car sharing services, and at lowering 
the barriers to entry in this fast-growing market to ensure that a 

1  The  authors  would  like  to  thank  in  alphabetic  order:  Aleko  Bogdanov, 
Peter  De  Luyck,  Julie  Eve,  Tobias  Glass,  Patrizia  Messina,  Luca 
Manigrassi,  Pablo  Serrano  and  Hans  Zenger  for  their  support  on  the 
case and/or for providing comments on this paper. 

2   The  transaction  brings  together  the  two  companies'  mobility-related 
services  in  five  business  fields:  (i)  (free-floating)  car  sharing  services, 
via DriveNow (BMW) and car2go (Daimler), (ii) ride hailing service (the 
Parties  are  not  active  in  ride-hailing  services  in  the  EEA),  (iii)  parking 
services,  (iv)  charging  services,  and  (v)  other  on-demand  mobility 
services,  i.e.  integrator  apps.  The  sixth  joint  venture  will  manage  the 
brands and license them out to the other five joint ventures 

3  Free-floating car sharing allows customers to pick up and drop off the 
car  anywhere  within  a  certain  delimited  area  in  a  given  city,  using 
authorised  parking  spaces  such  as  public  parking  spots.  The  car  can 
then be picked up by the next user at the location where the previous 
user parked it.  

The content of this article does not necessarily reflect the 
official position of the European Commission. Responsibility 
for the information and views expressed lies entirely with 
the authors. 

number 

of 
sufficient 
alternative  transport  options 
will be available to customers.  

The case in the context 
of new and e-mobility  

Among the interesting aspects 
of  this  case  is the  fact  that  it 
should  be  considered  in  the 
broader  context  of  the  future 
of  mobility.  The  case  also 
challenges 
the 
concerns 
the  global 
already  driving 
transformation 
the 
of 
automotive  sector, 
including 
electrification,  assisted  and 
autonomous 
car 
sharing and connected cars.4  

driving, 

The  Parties  stated  that  the 
rationale of the deal would be 
to  prepare  for  a  future  in 
which individual car ownership 
and  therefore  vehicle  sales 
decrease.  Mobility 
would 
would  instead  be  provided  as 
a service and, with the advent 
of  autonomous  vehicles,  the 
the 
distinction 
different  mobility  services  – 
such  as  standard  taxi,  ride 
hailing or car rental or sharing 
services – would disappear.  

between 

In a nutshell 

cleared 

Commission 
The 
conditionally 
the 
creation of six joint ventures 
in  the  field  of  new  mobility 
and,  in  particular,  in  (free-
sharing 
car 
floating) 
services, 
by 
created 
subsidiaries  of  BMW  and 
Daimler.  

The  Commission  analysed 
the  dynamic  and  evolving 
new  mobility  sector  with  its 
range  of  mobility 
large 
services  that  are,  to  varying 
degrees,  seen  as  substitutes 
by  consumers,  including  in 
particular  public  transport. 
An  access  remedy,  together 
with  evidence  for  specific 
entry  plans,  the  evolving 
nature  of  the  market,  and 
quantitative evidence for the 
constraint  imposed  by  other 
means  of  transport,  paved 
the  way  for  a  conditional 
Phase-I clearance. 

4  The transition towards automated and connected cars is also supported 
by  the  Commission  through  the  third  Mobility  Package  and  other 
initiatives. See, in particular, Communication from the Commission: On 
the  road  to  automated  mobility:  An  EU  strategy  for  mobility  of  the 
future,  COM  (2018)  283.  More  recently,  on  13  March  2019,  the 
Commission  adopted  new  rules  on  Cooperative  Intelligent  Transport 
Systems  (“C-ITS”),  i.e.  a  new  technology  that  allows  vehicles  and 
infrastructure  to  communicate  warnings  to  each  other,  which  then 
time: 
informs 
http://europa.eu/rapid/press-release_MEMO-19-1649_en.htm. 
Such 
technology will help avoid crashes, reduce traffic congestion and make 
driving more comfortable. Driverless and not-driverless vehicles will be 
able to benefit from the C-ITS rules.  

situation 

drivers 

traffic 

about 

real 

in 

 
 
  
 
 
 
 
 
 
 
       
 
 
 
                                                             
                                                             
M.8744 Daimler/BMW/CarSharing JV | Competition Merger Brief No 1/2019 

In  a  global  context  of  environmental  concerns,  there  is  also  a 
strong push towards low emission and electric mobility solutions. 
These developments are closely linked to the markets examined 
in this case, since: (i) municipalities can more easily influence the 
fuel  technology  and  emissions  of  shared  cars  than  personally 
purchased  cars5;  and  (ii)  the  corporations  operating  car  sharing 
schemes can finance the higher upfront cost for electric vehicles 
more  easily  than  private  car  owners,  due  to  later  fuel  cost  and 
refuelling (labour) cost savings.6  

Market definition 

While the Commission has previously dealt with the markets for 
all  passenger  transport  services  and  for  short-term  car  rental 
services7,  it  has  not  previously  investigated  a  market  for  car 
sharing  services.  The  UK  Competition  Commission  (now  CMA) 
defined a narrow car sharing market in its 2010 Streetcar/Zipcar 
decision,  but  acknowledged  a  high  degree  of  substitution 
between car sharing and other modes of transport. 8  

The  Parties  submitted  that  it  would  be  accurate  to  define  a 
market encompassing all means of passenger transport for short 
to medium distances, including public transport, taxis, ride-hailing 
services,  personal  cars,  short-term  car  rental  services,  scooter 
sharing  and  (electric)  bicycle  sharing.  The  Parties  further 
submitted  that,  at  the  very  least,  all  car  sharing  services  and 
short-term  car  rental  services  belong  to  the  same  product 
market.9  

When  asked  about  close  substitutes  to  free-floating  car  sharing 
in  the  market  investigation,  mobility  service  providers  and 
technology  providers  mentioned  station-based  car  sharing10  as 
the  closest  substitute,  and  OEMs  mentioned  it  as  a  close 
substitute. The Commission also took into account the findings of 
a customer survey conducted by the Parties in coordination with 
the  Commission.  This  survey  asked  users  which  service  they 
would have switched to, if the respective Party’s service had been 
unavailable for the user’s last trip. The survey showed that in this 
evolving market,  there  is  a  large  range  of  mobility  services  that 
are,  to  varying  degrees,  seen  as  substitutes  by  consumers, 
including in particular public transport. 

5   Some cities either require or have set up incentive schemes for (free-
floating)  car  sharing  providers  to  employ  a  certain  percentage  of 
electric vehicles in order for them to obtain the relevant permits. 

6   Some of the Parties’ vehicles used in their car sharing service are fully 

electric, such as the BMW i3. 

7  See  e.g.  Cases  M.8441  –  Firstgroup/MTR  Corporation/South  Western 
Rail  Franchise,  M.7146  –  Govia/Thameslink,  Southern  and  Great 
Northern  Passenger  Rail  Franchise,  M.8309  –  Volvo  Car 
Corporation/First Rent A Car, and M.6333 – BMW/ING Car Lease. 

8  UK Competition Commission, 22 December 2010.  
9  That  is,  the  “standard”  car  rental,  as  opposed  to  leases  of  several 
months or years, as well as station-based and peer-to-peer car sharing, 
also  known as  round-trip  car  sharing  since the  car  has to  be  dropped 
off at the same location where it was picked up, and free-floating car 
sharing as offered by the Parties, which allows for one-way trips. 

10 Where cars have to be picked up and dropped off at specific "stations", 

generally one and the same station. 

As  regards  supply-side  substitution,  much  of  the  hardware  and 
software  required  on  cars  used  for  (free-floating)  car  sharing 
services  is  similar  for  all  types  of  car  sharing  services.  A 
difference,  however,  is  that  station-based  car  sharing  could  in 
theory  be  operated  competitively  with  just  one  vehicle,  while  a 
free-floating  operator  needs  to  offer  a  certain  business  area 
(large enough to make driving more convenient than walking) and 
a  certain  fleet  density  within  that  area  (so  that  a  car  is  always 
nearby), giving rise to a minimum efficient scale, as confirmed by 
the market investigation. 

As  regards  the  geographic  market  definition,  the  Parties 
submitted  that  the  scope  of  the  geographic  market  can  be  left 
open but is likely to be EEA-wide or, at the very least, national in 
scope.  The  Commission  found  that  there  is  no  demand-side 
substitutability  across  cities.  While  there  is  some  degree  of 
supply-side  substitutability,  it  is  neither  immediate,  due  to  the 
need  to  obtain  parking  licences,  nor  fully  flexible  as regards  the 
new  establishment  of  a  service  (as  opposed  to  an  increase  or 
reduction  in  fleet  size),  due  to  the  minimum  efficient  scale.  The 
Commission  therefore  assessed  the  transaction  at  local  city 
level.11  

The  Commission  also  looked  into  the  market  for  access  to 
integrator  apps 12,  as  one  of  the  narrowest  plausible  –  and 
vertically  affected  –  sub-markets  of  a  broader  market  for 
smartphone applications.  

The Parties submitted that access to integrator apps could not be 
considered as a relevant product market in this case. The Parties 
argued  that  an  integrator  app  is  only  one  of  the  many  possible 
ways of offering a transportation service to end users. However, 
due  to  the  characteristics  of  the  market,  the  Commission 
considered it appropriate to carry out the vertical assessment on 
the market for access to integrator apps.  

As for the geographic scope, the Parties were of the view that it 
should have been at least EEA-wide, if not global, given that app 
developers  are 
located  all  over  the  world.  However,  the 
Commission  considered  it  appropriate,  for  the  purpose  of  this 
decision, to carry out its assessment on a national and EEA-wide 
basis. 

11 The exception being Cologne-Düsseldorf, which both Parties consider as 
just  one  business  area,  i.e.  a  car  can  be  picked  up  in  one  city  and 
returned  in the  other,  though this  is subject  to  a  surcharge.  For  those 
two cities, the Commission therefore assessed the transaction on both 
local city level and on the single business area. 

12 Integrator apps, including platforms such as moovel (Daimler), provide 
customers with access to a wide range of mobility offerings, including 
but  not  limited  to  free-floating  car  sharing,  by  enabling  in-app 
searching,  booking,  ticketing  and  payment  or  only  in-app  searching, 
redirecting the user to a third app for booking and payment. 

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M.8744 Daimler/BMW/CarSharing JV | Competition Merger Brief No 1/2019 

Horizontal effects 

Vertical effects 

The  Parties’  activities  overlap  in  Berlin,  Cologne,  Düsseldorf, 
Hamburg, Munich, Vienna and Milan. In Milan, several other large 
free-floating  car  sharing  providers  are  already  active,  so  the 
transaction  would  not  raise  any  competition  concerns,  while  for 
Berlin, Volkswagen expressed concrete large scale entry plans. 13 
In  Cologne,  Düsseldorf,  Hamburg,  Munich  and  Vienna,  the 
transaction, as originally notified, raised competition concerns.  

The  Parties’  combined  market  shares  in  these  five  cities  are 
estimated to range between approximately 50% and 80% in the 
market for all car sharing services (assessed by number of cars 
or  revenues).  On  a  separate  sub-market  for  free-floating  car 
sharing  services,  the  merged  entity  would  have  been  either  the 
only  supplier  or  would  have  faced  competition  only  from  one  or 
two fringe firms.  

Nevertheless,  the  Commission  acknowledged  that  other  mobility 
solutions  exert  a  competitive  constraint  on  the  Parties.  Overall, 
the  market  investigation  and  quantitative  evidence  from  a 
customer survey painted a consistent picture, indicating that: 

• 

• 

• 

• 

The  Parties  are  each  other’s  closest  competitors,  since 
they both offer free-floating car sharing services.  
Station-based  car  sharing  and  short-term  car  rental 
impose a competitive constraint on the Parties. 
Public  transport  imposes  a  substantial  out-of-market 
competitive constraint.  
The  other  means  of  transport,  on  aggregate,  also 
impose non-negligible out-of-market constraints on the 
Parties.  

Moreover, any concerns were partly alleviated by plans expressed 
by OEMs to enter some of the overlap cities with a free-floating 
car sharing offer, as well as by the dynamic nature of the market 
with  frequent  new  offers  for  scooter  sharing,  electric  bicycle 
sharing and ride sharing or collective taxis, which constitute out-
of-market constraints. 

Nevertheless,  smaller  independent14  mobility  service  providers 
face substantial barriers to entry due to difficulties in reaching a 
fleet  size  that  is  attractive  to  customers  as  well  as  due  to 
difficulties 
in  raising  awareness  about  their  services  and 
attracting  users  to  their  dedicated  app.  The  remedy  offered  and 
described  below  aimed  at  addressing  these  difficulties  for 
smaller  car  sharing  providers  by  lowering  the  barriers  for  their 
potential market entry.  

13  Volkswagen made a public announcement to enter Berlin in the second 
quarter  of  2019  with  a  fleet  of  1500  electrical  cars  under  its  brand 
“We Share”. 

14  An independent mobility service provider is a mobility service provider 

not controlled by an OEM. 

The  Commission  also  raised  competition  concerns  as  to  the 
transaction’s compatibility with the internal market in relation to 
the  vertically  related  markets  for  access  to  integrator  apps  and 
(free-floating) car sharing.15  

Concretely, the Parties would have the ability and incentive post-
merger  to  (i)  foreclose  their  rival  car  sharing  providers  from 
access  to  a  sufficient  customer  base,  by  restricting  their  access 
to  and  presence  within  Daimler’s  integrator  app  “moovel” 
(customer  foreclosure);  and  to  (ii)  foreclose  rival  providers  of 
integrator  apps from  access  to  an  important  input by restricting 
their  access  to  the  merged  entity’s  Application  Programming 
Interface  (“API”),  which  is  necessary  for  listing  the  Parties’  car 
sharing offering on the integrator app (input foreclosure).  

This  would  be  likely  to  have  had  an  impact  on  effective 
competition.  Given  that:  (i)  integrator  apps  are  important  for 
reaching  customers  by  acting  as  an  access  point  to  car  sharing 
services; and (ii) the Parties’ car sharing fleet is a must-have for 
competing  integrator  apps,  the  Commission  found  that  the 
transaction  as  notified  would  have  raised  vertical  competition 
concerns in relation to the five cities of horizontal concern as well 
as in Berlin.  

Remedies  

As  recalled  by  the  Commission’s  Notice  on  Remedies,  according 
to  the  EU  Courts’  case law,  the  basic  aim  of  commitments  is  to 
ensure competitive market structures.16 Therefore, commitments 
that  are  structural  in  nature,  such  as  commitments  to  sell  a 
business unit, are, as a rule, preferable, from the point of view of 
the Merger Regulation’s objective.  

Nevertheless,  the  Commission’s  remedy  assessment  took  into 
account  the  specific  characteristics  of  the  investigated  markets 
as well as the theories of harm concerned.  

The  market  for  (free-floating)  car  sharing  services  (as  well  as 
new  mobility  in  general)  is  rapidly  evolving  and  is  subject  to 
several interrelated developments as described above. Innovative 
transport  solutions  are  frequently  emerging,  which  makes  it 
difficult to establish a clear view on how competition will play out 
in  the  future, whilst  making it  all  the  more  relevant  to  facilitate 
entry. 

15 The  Commission  also  assessed  the  following  vertical 

links:  (i) 
manufacture and supply of passenger cars / (free-floating) car sharing, 
(ii) manufacture and supply of (purely electric) passenger cars / parking 
services, (iii) manufacture and supply of (purely electric) passenger cars 
/  charging  services,  (iv)  financial  and  operational  leasing  /  (free-
floating)  car  sharing,  (v)  full  fleet  leasing and  management  services  / 
(free-floating)  car  sharing,  (vi)  development  and  sale  of  smartphone 
apps  /  (free-floating)  car  sharing,  (vii)  development  and  sale  of 
integrator  apps  /  (free-floating)  car  sharing,  (viii)  charging  /  (free-
floating) car sharing. 

16 Commission’s Notice on Remedies, para 15. 

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M.8744 Daimler/BMW/CarSharing JV | Competition Merger Brief No 1/2019 

The  market  test  carried  out  by  the  Commission  was  overall 
positive  and  the  Parties’  revised  remedies  submitted  in  reaction 
to the market test addressed any outstanding concerns.  

Already  during  the  first  quarter  of  2019,  when  requests  for 
access  were  possible,  several  third  parties  submitted  access 
requests for the overlapping cities. 

Concluding remarks  

The  Commission has  assessed  the  effects  of the  transaction  on 
the  market  for  (free-floating)  car  sharing  services  taking  into 
account  its  unique  and  dynamic  features.  The  remedy  package 
offered by the Parties consisted of an access remedy that would 
lower  barriers  to  entry  for  smaller  car  sharing  service  providers. 
In 
the 
Commission’s horizontal and vertical concerns that were already 
partly  alleviated  by  the  out-of-market  constraints  from  other 
means of transport, the evolving market dynamics, and the entry 
plans of potential competitors, including OEMs.  

remedy  package  fully  eliminated 

this  way, 

the 

the  US  Federal  Trade 
The  Commission  cooperated  with 
Commission, which had issued a second request. However, due to 
the different dynamics of the US market,18 the US Federal Trade 
Commission ultimately cleared the transaction unconditionally.  

As  described  above,  the  Commission  was  concerned  that,  first, 
without  being  visible  on  the  Parties’  potentially  pre-eminent 
integrator app, a smaller player entering with only a few vehicles 
would  face  high  entry  barriers  due  to  the  problem  of:  (i)  raising 
awareness  about  its  services;  and  (ii)  attracting  users  to  its 
dedicated  app,  since  it  cannot  compete  with  the  Parties  on  the 
important  quality  criterion  of  fleet  size.  Integrator  apps  remove 
both obstacles.  

Furthermore,  the  Commission  was  also  concerned  about  the 
Parties’  car  sharing  fleet  being  perceived  as  a  must-have  by 
competing  integrator  apps,  and  about  the  merged  entity’s  own 
integrator app becoming the pre-eminent gateway to car sharing 
services.  

resulting 

While  divestiture  commitments  are  generally  the  best  way  to 
eliminate  competition  concerns 
from  horizontal 
overlaps, and may also be the best means of resolving problems 
resulting from vertical or conglomerate concerns, other structural 
commitments,  such  as  access  remedies,  may  be  suitable  to 
resolve  concerns  if  they  are  equivalent  to  divestitures  in  their 
effects.17  

The  Parties  offered an  access  remedy  consisting  of  two  legs:  (i) 
their  service  remaining,  under  certain  conditions,  visible  on  third 
parties’ integrator apps; and (ii) allowing, under certain conditions, 
competing mobility service providers to be visible on the Parties’ 
combined  integrator  app.  Both  legs  are  to  be  provided  for  free 
and on non-discriminatory terms. The overall aim of the remedy 
is  to  lower  entry  barriers  for  independent  smaller  car  sharing 
service providers by allowing them to compete effectively with a 
smaller fleet. Such market entry – in addition to the existing entry 
plans  by  OEMs  and  the  out-of-market  constraints  exerted  by 
other  means  of  transport – will  ensure  that a  sufficient  number 
of alternative transport options will be available to customers. 

17 Commission’s Notice on Remedies, para 17. 

18  In  particular,  the  Parties’  activities  overlapped  in  only  two  cities 
(Seattle,  WA  and  Portland,  OR)  and  ride-hailing  services  are  more 
popular in the USA.  

16