CELEX: 32014M7259
Language: en
Date: 2014-06-25 00:00:00
Title: Commission Decision of 25/06/2014 declaring a concentration to be compatible with the common market (Case No COMP/M.7259 - CARPHONE WAREHOUSE / DIXONS) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 25/06/2014
C(2014) 4428

                                        [pic]

|To the notifying parties:                                              |                                                                       |
|                                                                       |                                                                       |

Dear Sir/Madam,

Subject:    Case M.7259 – Carphone Warehouse/ Dixons
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1]

1) On 16 May 2014, the European Commission received notification of a proposed concentration pursuant to Article 4 of the  Merger  Regulation  by
   which the undertakings Carphone Warehouse plc ("Carphone", the United Kingdom) and Dixons Retail plc ("Dixons", the United Kingdom) enter into
   a full merger within the meaning of Article 3(1)(a) of the Merger Regulation. Carphone and Dixons are designated hereinafter as the "Notifying
   Parties".

       THE PARTIES

2) Carphone is a specialist mobile telecommunications retailer, selling a range of mobile connectivity, devices and  related  services.  Carphone
   is active in the UK, France, Spain, the Netherlands, Germany, Portugal, Sweden and Ireland.

3) Dixons is a specialist electrical multi-channel retailing and services company specialising in the retail sale  of  high  technology  consumer
   electronics, personal computers, domestic appliances, photographic equipment and related services.  Dixons  is  active  in  the  UK,  Ireland,
   Greece, the Czech Republic, Denmark, Finland, Norway, Slovakia and Sweden. Dixons also operates Dixons Travel for Belgium and Italy out of the
   UK and Ireland business.

       THE OPERATION

4) The proposed transaction concerns the full merger of Dixons and Carphone.

5) The merger will be implemented by way of a scheme of arrangement (pursuant to Part 26 of the 2006 UK  Companies  Act)  whereby  Carphone  will
   issue ordinary shares to existing Dixons shareholders in consideration for the cancellation of the existing issued ordinary shares  of  Dixons
   and the issue of new ordinary shares of Dixons to Carphone. Following implementation of the scheme of arrangement, the shareholders of  Dixons
   and Carphone will each hold 50% of the shares in the merged entity.

6) Therefore, the proposed transaction constitutes a concentration within the meaning of Article 3(1)(a) of the Merger Regulation.

       EU DIMENSION

7) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million (Carphone: EUR 4 520 million;  Dixons:
   EUR 8 758 million).  Each of the two undertakings has an EU-wide turnover in excess of EUR 250 million (Carphone: EUR 4 498  million;  Dixons:
   EUR 7 459 million), but they do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State. The
   proposed transaction therefore has an EU dimension.

       INTRODUCTION TO THE COMPETITIVE ASSESSMENT

8) The Parties' activities overlap horizontally in the retail sale of mobile phones, tablets and accessories for mobile phones  and  tablets,  in
   the provision of mobile services and of services related to the provision of the above products (technical support and insurance), as well  as
   in the procurement of mobile phones and tablets. However, the proposed transaction  only  gives  rise  to  potentially  horizontally  affected
   markets in relation to the (i) retail sale of mobile phones and tablets; and (ii) procurement of mobile phones and tablets.[2]

9) The proposed transaction also gives rise to vertical relationships between Carphone's upstream activities  in  the  (i)  wholesale  supply  of
   mobile devices to third-party independent mobile phone resellers and (ii) provision of managed services in relation to mobile  retail,  mobile
   phone insurance and technology, and Dixons' (and Carphone's) downstream activities in the retail sale of mobile phones and tablets and  mobile
   services. While the proposed transaction may technically result in affected markets (depending on the geographic  market  definition  that  is
   retained in the downstream retail markets), these vertical relationships will not give rise to competition concerns.

10) First, as regards Carphone's wholesale supply of mobile devices to third-party independent  mobile  phone  resellers,  the  Parties  estimate
   Carphone's market share at the upstream level to be [5-10]% or less, both at the EEA level and at the national level. Therefore, regardless of
   the geographic dimension of this market, Carphone's limited market share would not create any risk of input foreclosure. As for the downstream
   level (retail of mobile phones and tablets), although the Parties' combined market shares may exceed 30% (when measured in terms of number  of
   shops) in certain possible local markets within the UK and Sweden (as will be explained further below), no risk of customer foreclosure  would
   arise, since wholesalers do not operate at local level, but rather sell their products to retailers at a national level or  beyond.  Moreover,
   alternative retailers such as Argos, John Lewis and the major MNOs will remain active at the downstream level.

11) Second, as regards Carphone's provision of managed services in relation to mobile  retail,  mobile  phone  insurance  and  technology,  these
   services are aimed at B2B ("business to business") customers wishing to enter the mobile retail market. The services offered  range  from  the
   provision of specific managed services to a comprehensive partnership including the provision of the store,  trained  staff,  IT  systems  and
   stock. This market could be considered EEA-wide or at least national in scope, since, even though managed  services'  contracts  relate  to  a
   single country, the choice of provider would not be constrained by geographic considerations. In all instances, the proposed transaction would
   not create any risk of input foreclosure, since the Notifying Parties estimate Carphone's market share at the upstream  level  (based  on  the
   narrowest possible product market definition) to be significantly less than 30%.[3] As for the downstream level (retail of mobile devices  and
   mobile services), where the Parties' combined market shares may exceed 30% (when measured in terms of number of  shops)  in  certain  possible
   local markets within the UK and Sweden, for the same reasons outlined above, no risk of customer foreclosure would arise.

12) In light of the above, the market definition and competitive analysis in the following sections  will  focus  on  the  horizontally  affected
   markets in relation to the: (i) retail sale of mobile phones and tablets; and (ii) procurement  of  mobile  phones  and  tablets  in  each  of
   Ireland, Sweden and the UK.

       MARKET DEFINITION

1 Product market

1 Retail sale of mobile phones and tablets

       View of the Notifying Parties

13) The Notifying Parties submit that the relevant product markets are the market for the retail of mobile phones and  the  separate  market  for
   the retail of tablets. In their view, such segmentation on the basis of the product type is justified in light  of:  (i)  differences  between
   mobile phones and tablets in terms of technical characteristics and functionalities; and (ii) differences in the manner in which these devices
   are offered to consumers[4] and in the distribution channels used.[5] According to the Notifying Parties, no further sub-segmentations  should
   be made, e.g., based on the distribution channel (between online and ‘brick-and-mortar’ retailers), or  according  to  the  category  of  end-
   customers (between corporate and private customers).

14) In particular, the Notifying Parties submit that online retailers exercise a significant competitive constraint on retailers with  a  network
   of physical stores. The Notifying Parties conclude that online and offline retailers should be considered to form part of  the  same  relevant
   market in light of the following factors: (i) the convergence of prices across online and offline channels, (ii) general customer  familiarity
   with online shopping and the fact that customers typically conduct their pre-purchase research online regardless of where the purchase is then
   finalised, (iii) the interaction between online and offline channels in the Notifying Parties' and their competitors' offerings[6] and  […].

15) Finally, in the Notifying Parties' view, drawing a distinction between different categories of retailers of mobile  devices,  such  as  those
   specialised in mobile phones and tablets or those offering a wider choice of products encompassing other electrical products  and  appliances,
   and/or online retailers would be artificial and, therefore, in their view, all categories of retailers should be considered part of  the  same
   relevant product market.

       Commission's assessment

16) In its past decisional practice[7], the Commission did not examine the retail sale of mobile phones and tablets in particular, but,  more  in
   general, the retail sale of electronic products and appliances. Within the retail sale of electronic products and appliances,  the  Commission
   considered possible sub-segmentations according to the type of product and to the distribution channel.

17) As regards the type of product, the following sub-segments were examined: (i) retail of brown goods (including audio and visual  appliances);
   (ii) retail of large domestic appliances (including washing machines, freezers, etc.); (iii) retail of small  domestic  appliances  (including
   toasters, irons, etc.); and (iv) retail  of  computers  and  communication  devices  (including  PC  hardware,  PC  software,  communications,
   accessories/peripherals, etc.).[8] The Commission also considered possible further sub-segmentations according  to  the  type  of  product[9],
   although it ultimately left the exact product market definition open.

18) As regards the distribution channel, in previous cases the Commission considered a distinction between brick-and-mortar shops (also known  as
   'offline retailing') and home shopping (which includes online shopping and shopping by catalogue).[10] However, previous  decisions  left  the
   exact product market definition open.

19) In the present case, as the overlap between the Notifying Parties' activities is  limited  to  two  types  of  products  (mobile  phones  and
   tablets) within the category of computers and communication devices, the Commission focused its analysis on possible separate sub-markets  for
   (i) the retail sale of mobile phones and (ii) the retail sale of tablets.

20) Concerning a possible segmentation between offline and online  retailing,  the  majority  of  the  respondents  to  the  Commission's  market
   investigation considered that customers view brick-and-mortar shops and online channels as substitutable for the purpose of purchasing  mobile
   phones and tablets.[11] Moreover, the large majority of respondents confirmed that customers  compare  prices  between  internet  distribution
   channels and brick-and-mortar shops before engaging in any purchasing decision.[12] However, some respondents highlighted  the  importance  of
   physical stores, since customers often seek expert advice from an in-store salesperson and/or wish to handle the product  before  engaging  in
   their purchase.[13]

21) In addition, in this case the Commission also considered  a  further  segmentation  of  the  offline  retail  market  between  the  following
   categories of retailers according to the focus of their business: (i) tied specialist retailers (retail  outlets  owned  by  MNOs  or  MVNOs),
   (ii) independent specialist retailers (retail outlet specialized in the  sale  of  mobile  telecommunications  devices  and  services),  (iii)
   generalist retailers (retail outlets selling different kinds of goods, including mobile phones and tablets, such as Tesco) and (iv) specialist
   electrical retailers (retail outlets specialized in the sale of electrical devices, such as large and small domestic appliances, audio,  video
   products, computers and communication devices).

22) Based on their respective product offerings, their business focus[14] and the location and type of their stores[15],  the  Notifying  Parties
   would appear to belong to two different categories of offline retailers. Dixons can be described as a specialist electrical retailer,  whereas
   Carphone can be described as an independent specialist retailer. However, the Commission's market investigation did not support a possible sub-
   segmentation of the offline retail market based on the type of retailer in relation to the retail distribution of mobile phones and tablets.

23) Indeed, the majority of the respondents to the market investigation confirmed that customers view all types of retailers as  substitutes  for
   the purchase of mobile phones and tablets.[16] Indeed, even if differences may exist in relation to the range of mobile connectivity  services
   offered (only pre-paid or only post-paid contracts, in bundle with a device or on a stand-alone basis, etc.) and customer accessibility  (high
   street presence as opposed to more outskirt locations), customers consider all retail channels to be substitutable given that they  all  offer
   the most popular devices.

24) In light of the above, the Commission considers that there is no need to conclude as to a possible sub-segmentation of  the  market  for  the
   retail of computers and communication devices according to the type of product (mobile phones and tablets), as the proposed  transaction  will
   not raise competitive concerns even on the narrowest product market segment. Concerning the distinction  between  online  and  offline  retail
   channels, the exact product market definition can be left open in this regard since the transaction will not  give  rise  to  any  competitive
   concerns under any possible market definition. Finally, as regards a further distinction between different categories of offline retailers  of
   mobile phones and tablets according to their business focus, the Commission concludes that, given the results of the market  investigation  in
   this case, the relevant product market likely includes all categories of offline retailers (with the possible exception  of  Sweden,  where  a
   majority of the respondents to the market investigation indicated that customers do not regard generalist retailers as  a  substitute  channel
   for the purchase of mobile phones and tablets).[17]

2 Procurement of electrical goods

       View of the Notifying Parties

25) The Notifying Parties' activities overlap in the procurement of  tablets  and  mobile  phones,  whereby  retailers  purchase  these  products
   directly from the OEMs (Original Equipment Manufacturers). However, the Notifying Parties submit that there is  no  separate  market  for  the
   procurement of mobile phones and tablets.

       Commission's assessment

26) In its past decision-making practice, the Commission considered a possible market for the procurement of electrical goods,  encompassing  all
   types of such goods.[18] In case DSGI / FR-Invest / F-Group JV, the Commission considered as well a  possible  distinction  between  different
   categories of products rather than one overall single market but ultimately left the exact product market definition open.[19]

27) The market investigation did not give any indication as to the need to depart from previous market definitions.

28) In any event, the exact product market definition can be left open since the transaction will not  give  rise  to  any  competitive  concerns
   under any possible market definition. Consequently, the narrowest possible market definition considered in this case is the procurement of (i)
   mobile phones and (ii) tablets.

2 Geographic market

1 Retail sale of mobile phones and tablets

       View of the Notifying Parties

29) The Parties submit that the relevant geographic markets are national (as opposed to local) in scope. […].

       Commission's assessment

30) In previous decisions, while ultimately leaving the exact geographic market definition open, the Commission considered the geographic  market
   for electrical retailing to be national in scope, although the possibility of a narrower scope was also taken  into  account  with  regard  to
   offline shopping (20-30 minute driving time catchment areas around each shop).[20]

31) From a supply-side point of view, the results of the market investigation gave  clear  indications  that  retailers  consider  a  nation-wide
   market when setting a price strategy for the retail of mobile phones and tablets.[21] This is further confirmed by the  fact  that  the  large
   majority of retailers set a national price for their devices.[22]

32) On the other hand, from a demand-side point of view, the results of the market investigation were mixed as to the  national  or  local  scope
   (catchment area around each outlet) of offline retailing. Furthermore, respondents that indicated a local scope of the market generally  could
   not estimate a precise radius, since this would be dependent on a number of factors (population density, characteristics of the neighbourhood,
   availability of transport, etc.).[23]

33) In any event, the Commission considers that the exact geographic market definition can be left open since the proposed transaction  will  not
   give rise to any competitive concerns under any possible market definition.

2 Procurement of electrical goods

       View of the Notifying Parties

34) The Notifying Parties do not express any view as to the geographic scope of the market for the procurement of electrical goods.

       Commission's assessment

35) In previous decisions, although acknowledging that some larger retailers procure at EEA-level, the Commission has taken  the  view  that  the
   market for the procurement of electrical goods is at least national in scope.[24]

36) The market investigation did not give any indication as to the need to depart from previous market definitions.

37) In the present case, the Commission considers that the exact geographic market definition can be left open since  the  transaction  will  not
   give rise to any competitive concerns under any possible market definition.

       COMPETITIVE ASSESSMENT

1 Retail sale of mobile phones and tablets

       View of the Notifying Parties

38) The Notifying Parties submit that the proposed transaction will not give rise to  any  competition  concerns.  First,  as  noted  above,  the
   increment in market shares brought about by the proposed transaction is limited. Second, they submit that the relevant market should encompass
   the whole range of retailers since it would not be credible to exclude other types of retailers on the basis that their product  portfolio  is
   broader than the Notifying Parties'. Therefore, post-transaction, many key retail alternatives will  be  available  to  customers  wishing  to
   purchase mobile phones and tablets. Finally, the Notifying Parties' activities would be largely complementary, since Dixons  is  a  specialist
   electrical retailer while Carphone is a specialist mobile telecommunications retailer.

      Commission's assessment

1 National level

39) Assuming the relevant markets are national in scope, and depending on the relevant product market definition, the proposed transaction  would
   give rise to several possible affected markets.

   Mobile phones (volume)[25]

|Country        |Offline                                      |Online                                |Offline + online                         |
|               |CPW                                      |DXS                                     |Combined                                 |

    |CPW |DXS |Combined |CPW |DXS |Combined |CPW |DXS |Combined | |Ireland |[0-5]% |[10-20]% |[20-30]% |[0-5]% |[10-20]% |[10-20]% |[0-5]%  |[10-
   20]% |[10-20]% | |Sweden |[0-5]% |[20-30]% |[20-30]% |[0-5]% |[10-20]% |[10-20]% |[0-5]% |[20-30]% |[20-30]% | |UK  |[5-10]%  |[10-20]%  |[20-
   30]% |[5-10]% |[5-10]% |[10-20]% |[5-10]% |[10-20]% |[20-30]% | |

40) If the relevant product market was the overall market for both offline  and  online  retail  of  tablets/mobile  phones  sold,  the  proposed
   transaction would give rise to the following affected markets:

a. the overall market for offline and online retail of mobile phones in Ireland, where the combined market shares  would  be  [20-30]%,  with  an
   increment brought by Dixons of less than [0-5]%; and

b. the overall market for offline and online retail of tablets in each of the UK and Sweden, where the combined market shares would never  exceed
   [20-30]%, with an increment brought by either Carphone or Dixons not greater than [5-10]%.

41) If two separate product markets were identified for online and offline retail, the proposed transaction would  give  rise  to  the  following
   affected markets, in terms of volume of tablets/mobile phones sold:

a. the market for online retail of mobile phones in the UK, where the combined market shares would be [20-30]%,  with  an  increment  brought  by
   Dixons of less than [0-5]%;

b. the market for offline retail of mobile phones in Ireland, where the combined market shares would be [20-30]%, with an  increment  brought  by
   Dixons of less than [0-5]%; and

c. the market for offline retail of tablets in each of the UK, Ireland and Sweden. Whilst in the UK and Ireland the combined market shares  would
   be [20-30]%, with an increment brought by Carphone not greater than [5-10]%, in Sweden the combined market shares would be [20-30]%,  with  an
   increment brought by Carphone of [0-5]%.

42) Therefore, regardless of the exact product market definition, at the national level the proposed transaction will result  in  relatively  low
   combined market shares for the Notifying Parties' activities (never exceeding [20-30]%), with a limited market share increment (not above  [5-
   10]%).

43) Moreover, a number of strong competitors will continue to compete with the  merged  entity  in  each  of  Ireland,  Sweden  and  the  UK.  In
   particular, competitors will include, among others, Vodafone, O2 and Meteor (respectively, [20-30]%, [10-20]% and [10-20]%  market  shares  in
   the overall market for offline and online retail of mobile phones in Ireland); Mediamarkt, Apple, and Siba (respectively,  [20-30]%,  [20-30]%
   and [10-20]% market shares in the overall market  for  offline  and  online  retail  of  tablets  in  Sweden);  and  Argos,  Apple  and  Tesco
   (respectively, [10-20]%, [5-10]%  and [5-10]%  market shares in the overall market for offline and online retail of tablets in the UK).

44) With specific respect to the UK, it is worth noting that Dixons' outlets host some of Phones4U's stores on the basis  of  a  "store-in-store"
   arrangement. Under such arrangement, Phones4U uses space within a Dixons store to sell mobile phone products and services under  the  Phones4U
   brand. […].

45) The Commission has considered whether, as a result of the proposed transaction, a risk of foreclosure of Phones4U could arise.  However,  the
   Commission has concluded that this risk is unlikely since  the  proposed  transaction  would  not  negatively  impact  Phones4U’s  ability  to
   effectively retail its products in the UK.

46) Indeed, the number of retail points hosted in Dixons' stores represents only a small  part  of  Phones4U's  total  business  (around  20%  of
   Phones4U's outlet portfolio). Moreover, for each Phones4U store-in-store location, there is at least one Phones4U stand-alone  store  that  is
   closer than 9.9km.

47) Finally, no respondent to the market investigation raised any concern related to the impact of the proposed transaction with respect  to  the
   markets for the retail sale of mobile phones and tablets at the national level.

48) Therefore, the Commission concludes that the proposed transaction does not raise serious doubts as to its  compatibility  with  the  internal
   market as regards the retail sale of mobile phones and tablets in Ireland, Sweden and the United Kingdom.

2 Local level

49) If the relevant markets were to be considered to be local in scope, only offline retailers were to be taken into account  and  market  shares
   were to be measured in terms of number of shops owned or controlled by the various players (no market share data in volume at the local  level
   are indeed available to the Notifying Parties), the proposed transaction would give rise to higher market shares in some local markets.[27]

50) In more detail, in Ireland the Notifying Parties' combined market shares exceed 20% in three local markets or cities but  never  exceed  25%.
   In Sweden the Notifying Parties' combined market shares exceed 20% in 22 local markets or cities. Among  these  cities,  the  combined  market
   shares exceed 25% in 12 cities, and exceed 40% in only three cities ([…], […] and […], with [50-60]%).. Finally,  in  the  UK,  the  Notifying
   Parties' combined market shares exceed 20% in 250 local markets or cities. Among these cities, the combined market shares exceed  25%  in  122
   cities. The maximum combined market shares are around [30-40]% in one city ([…]).

51) The Commission, however, considers that, even under this scenario, the proposed transaction would not give rise to serious doubts as  to  its
   compatibility with the internal market for the following reasons.

52) First, the Commission notes that the number of physical outlets is only a possible metric to measure  relative  market  positions  in  retail
   markets (the number of devices sold being a more relevant proxy for possible market power). The number of shops held by the different  players
   depends on their business model. For example, Carphone's business model is based on the operation of a  high  number  of  small  shops,  while
   Dixons' business model is based on a smaller number of bigger stores. Moreover, different shops sell different  products.  For  example,  with
   regard to the retail sale of mobile phones in the UK, Ireland and Sweden, tied specialist retailers account for around 60% of  the  market  by
   number of devices sold and are the strongest retail channel; on the contrary, as regards tablets, tied specialist retailers hold an aggregated
   market share between 10 and 20% depending on the country concerned, while other retail channels are more important. Market shares based on the
   mere number of shops do not reflect this complexity of the relevant markets.

53) Second, a number of strong competitors will continue to compete with the merged entity in each of the cities at issue  in  each  of  Ireland,
   Sweden and the UK.

54) Indeed, in Ireland, in all three cities where the Notifying Parties' activities overlap, at least seven  other  competitors  will  be  active
   through their physical retail stores. These competitors include MNOs such  as  Vodafone,  Three,  Meteor,  Telefonica,  specialist  electrical
   retailers such as Expert, Harvey Norman and D.I.D. Electrical, and generalist retailers such as Tesco.

55) In Sweden, in all the cities where the Notifying Parties' activities overlap, at least two other competitors will  be  active  through  their
   physical retail stores. Such competitors are the main MNOs such as TeliaSonera, Tele2, Tre and Telenor, and  specialist  electrical  retailers
   such as Media Markt, Euronics and Teknikmagasinet.

56) In the UK, in all the cities where the Notifying Parties' activities overlap, at least six other competitors will  be  active  through  their
   physical retail stores. Competitors of the Notifying Parties are the main MNOs  such  as  Vodafone,  Telefonica,  EE  and  Three,  independent
   specialist retailers such as Phones4U and generalist retailers such as Tesco, Argos and John Lewis.

57) Third, the Notifying Parties do not appear to be close competitors. Indeed, their business focus seems to be  different.  Carphone  has  only
   limited activities in the sale of tablets and instead focuses primarily on the sale of  mobile  phones  and  connectivity.  Other  independent
   specialist retailer and tied specialist retailers would therefore appear to be Carphone's closest competitors. On the contrary, Dixons focuses
   on the full range of electrical devices and domestic  appliances.  Other  specialist  electrical  retailers  and  generalist  retailers  would
   therefore appear to be Dixon's closest competitors.

58) These findings were confirmed by the results of the market investigation. Respondents to  the  market  investigation  indeed  indicated  that
   Carphone's closest competitors are the main MNO's outlets. When asked to identify  the  closest  competitors  of  Dixons,  respondents  rather
   pointed towards other specialised electrical retailers or generalist retailers.[28]

59) The Parties'  internal  documents  also  support  this  conclusion.  […].  Furthermore,  Carphone's  internal  documents  stress  the  highly
   complementary character of Dixons' and Carphone's businesses rather than their similarity.

60) Fourth, even if online sales of the relevant products were to be excluded from the relevant market, they would still exercise  a  significant
   competitive constraint on offline retailers. This constraint would have a disciplining effect on the merged entity's prices for mobile  phones
   and tablets irrespective of the number of physical stores existing in a given geographic market.

61) The results of the market investigation largely confirmed this finding. Indeed,  competing  retailers  of  mobile  phones  and  tablets  that
   responded to the market investigation indicated that they generally take into account online retailers  for  the  purpose  of  defining  their
   selling strategy and setting prices for mobile phones and tablets.[29] Furthermore, as stated in paragraph (17) above, the large  majority  of
   respondents confirmed that customers compare prices between internet distribution channels and brick-and-mortar shops before engaging  in  any
   purchasing decision.

62) Finally, no respondent to the market investigation raised any concern related to the impact of the proposed transaction with respect  to  the
   markets for the retail sale of mobile phones and tablets at the local level.

2 Procurement of electrical goods

       View of the Notifying Parties

63) The Notifying Parties argue that they are unable to provide market share data due to the lack of public information regarding the total  size
   of the market for the procurement of electrical goods. However, based on their market knowledge, the Notifying  Parties  consider  that  their
   share of the retail distribution market is indicative of their share of demand on a  hypothetical  procurement  market,  given  their  limited
   wholesaling activities.

64) The Notifying Parties submit that the proposed transaction is unlikely to lead to  significant  buyer  power  for  the  combined  entity,  in
   particular since their combined share of the procurement market at national level in Ireland, Sweden and the UK  is  relatively  low  and  the
   companies from which the Notifying Parties procure mobile phones and tablets are not dependent on purchases from any specific retailers.

       Commission's assessment

65) Assuming that the Notifying Parties' market shares in the retail of mobile phones and tablets could be a  relevant  proxy  for  their  market
   power in the procurement market for the corresponding products, the combined market share of the Notifying Parties would only  exceed  20%  in
   the procurement of mobile phones in Ireland ([20-30]%  in volume) and in the procurement of tablets in Sweden ([20-30]%  in volume) and in the
   UK ([20-30]%  in volume).

66) However, the Commission considers that the proposed transaction will not give rise to any competitive concern as regards the  procurement  of
   mobile phones and tablets.

67) First, the combined market share of the Notifying Parties in Ireland, Sweden and the UK is limited and not exceeding [20-30]%. Moreover,  the
   increment brought about by the proposed transaction is limited (below [5-10]%  in all three countries).

68) Second, the companies from which the Notifying Parties procure  mobile  phones  and  tablets  are,  in  general,  very  large  multi-national
   manufacturers that are active on a global scale and that are not dependent on purchases  from  any  specific  retailers.  In  addition,  these
   companies are present at the retail level with their own outlets. Furthermore, none of the OEMs interrogated during the  market  investigation
   raised any concern related to the impact of the proposed transaction with respect to the market for  the  procurement  of  mobile  phones  and
   tablets.

69) Third, other retailers will remain active, post-transaction, in each of Ireland (Harvey Norman, Tesco,  etc.),  Sweden  (Mediamarkt,  Expert,
   etc.) and the United Kingdom (Phones4U, Vodafone, etc.) and will continue to exert competitive pressure on the merged entity.

70) Therefore, the Commission concludes that the proposed transaction does not raise serious doubts as to its  compatibility  with  the  internal
   market as regards the procurement of mobile phones and tablets in Ireland, Sweden and the United Kingdom.

       CONCLUSION

71) For the above reasons, the European Commission has decided not to oppose the notified  operation  and  to  declare  it  compatible  with  the
   internal market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger Regulation.

For the Commission
(Signed)
Joaquín ALMUNIA
Vice-President

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[1]   OJ L 24, 29.1.2004, p. 1 ('the Merger Regulation'). With effect from 1 December 2009, the Treaty on the Functioning of the  European  Union
('TFEU') has introduced certain changes, such as the replacement of 'Community'  by  'Union'  and  'common  market'  by  'internal  market'.  The
terminology of the TFEU will be used throughout this decision.

[2]   The Notifying Parties' activities also overlap with respect to (i) the retail sale of accessories for mobile phones and tablets,  (ii)  the
provision of insurance services and (iii) the provision of technical support services. However, the  combined  market  shares  of  the  Notifying
Parties in each of Ireland, Sweden and the UK are well below 20% under any possible market definition.  Therefore,  these  markets  will  not  be
analysed further.

[3]   Carphone's offering of managed services represents a new activity […].

[4]   Mobile phones are often offered in a bundle together with a retail mobile services contract, while tablets are usually offered on a  stand-
alone basis.

[5]   Mobile phones are mainly sold by mobile network operators ("MNOs") and other specialist retailers, while tablets are sold by a  much  wider
group of retailers.

[6]   Examples include 'pay and collect' services (whereby customers pay online and pick  up  the  goods  in-store)  and  'reserve  and  collect'
services (whereby customers reserve a product online and collect and pay in store), and joint advertising of stores and online opportunities.

[7]   Commission decision of 23 June 2011 in case M.6226 - Media-Saturn/Redcoon, paragraph 9 and Commission decision of  29  June  2006  in  case
M.4226 – DGSI / Fotovista, paragraph 9.

[8]   Commission decision of 29 June 2006 in case M.4226 – DGSI / Fotovista, paragraphs 9-14.

[9]   E.g., a sub-segmentation within the market for the retail of  domestic  appliances  between  tumble  dryers,  fridges,  dishwashers,  etc.:
Commission decision of 4 March 2002 in case M.2703 – MERLONI / GE / GDA JV, paragraph 12.

[10]  Commission decision of 29 June 2006 in case M.4226 – DGSI / Fotovista, paragraph 14.

[11]  See replies to Commission questionnaire Q1 Competitors –  Retailers  in  the  United  Kingdom  of  19  May  2014,  question  7,  Commission
questionnaire Q2 Competitors – Retailers in Ireland of 19 May 2014, question 7 and Commission questionnaire Q3 Competitors – Retailers in  Sweden
of 19 May 2014, question 7.

[12]  See replies to Commission questionnaire Q1 Competitors –  Retailers  in  the  United  Kingdom  of  19  May  2014,  question  8,  Commission
questionnaire Q2 Competitors – Retailers in Ireland of 19 May 2014, question 8, and  Commission  questionnaire  Q3  Competitors  –  Retailers  in
Sweden of 19 May 2014, question 8.

[13]  See replies to Commission questionnaire Q1 Competitors –  Retailers  in  the  United  Kingdom  of  19  May  2014,  question  7,  Commission
questionnaire Q2 Competitors – Retailers in Ireland of 19 May 2014, question 7 and Commission questionnaire Q3 Competitors – Retailers in  Sweden
of 19 May 2014, question 7.

[14]  Dixons' offer is not limited to mobile phones and tablets, which account for a minor part of its sales, but includes a wide range of  other
electrical goods and accessories, including computers, cameras, televisions, and domestic appliances. Carphone's main focus of  activity  is  the
resale of mobile phones, tablets, accessories and retail mobile services.

[15]  Dixons predominantly operates big box, out of town stores, whilst Carphone focuses on high street stores and shopping centres.

[16]  However, with respect to the Swedish market, most of the respondents did not regard generalist retailers as substitutable with other  types
of retailers. See replies to Commission questionnaire Q1 Competitors – Retailers in the United Kingdom of 19 May  2014,  question  5,  Commission
questionnaire Q2 Competitors – Retailers in Ireland of 19 May 2014, question 5 and Commission questionnaire Q3 Competitors – Retailers in  Sweden
of 19 May 2014, question 5.

[17]  As for Sweden, as stated above, the market investigation suggested that customers do  not  regard  generalist  retailers  as  a  substitute
channel for the purchase of mobile phones and tablets. However, the Commission considers that  the  distinction  between  categories  of  offline
retailers with respect to Sweden can be left open, as this will not impact the assessment of this case. Indeed, according  to  data  provided  by
the Notifying Parties, in Sweden generalist retailers account for a negligible proportion of the total retail sales of mobile phones and  tablets
(less than [0-5]%).

[18]  Commission decision of 29 June 2006 in case M.4226 – DGSI / Fotovista, paragraph 21and Case  M.4392  –  DSGI  /  FR-Invest  /  F-Group  JV,
paragraph 14.

[19]  Commission decision of 30 November 2006 in case M.4392 – DSGI / FR-Invest / F-Group JV, paragraph 15.

[20]  Commission decision of 30 November 2006 in case M.4392 – DSGI / FR-Invest /  F-Group  JV,  paragraph  16  and  Commission  decision  of  16
February 2010 in case M.5721 – Otto / Primondo assets, paragraph 33.

[21]  See replies to Commission questionnaire Q1 Competitors –  Retailers  in  the  United  Kingdom  of  19  May  2014,  question  9,  Commission
questionnaire Q2 Competitors – Retailers in Ireland of 19 May 2014, question 9 and Commission questionnaire Q3 Competitors – Retailers in  Sweden
of 19 May 2014, question 9.

[22]  See replies to Commission questionnaire Q1 Competitors – Retailers  in  the  United  Kingdom  of  19  May  2014,  question  10,  Commission
questionnaire Q2 Competitors – Retailers in Ireland of 19 May 2014, question 10 and  Commission  questionnaire  Q3  Competitors  –  Retailers  in
Sweden of 19 May 2014, question 10.

[23]  See replies to Commission questionnaire Q1 Competitors – Retailers  in  the  United  Kingdom  of  19  May  2014,  question  11,  Commission
questionnaire Q2 Competitors – Retailers in Ireland of 19 May 2014, question 11 and  Commission  questionnaire  Q3  Competitors  –  Retailers  in
Sweden of 19 May 2014, question 11.

[24]  Commission decision of 29 June 2006 in case M.4226 – DGSI / Fotovista, paragraph 21 and Commission decision of 30  November  2006  in  case
M.4392 – DSGI / FR-Invest / F-Group JV, paragraph 21.

[25]  The Notifying Parties have not been able to identify reliable sales information by value, mainly due to  the  difficulties  encountered  in
separating bundled products (notably tablets and mobile phones with connections) and in separating the revenues  attributable  to  devices  where
these are subsidised under post-pay contracts. In any event, most of the retailers of mobile phones and tablets offer a wide variety  of  devices
ranging from high-end to low-end products. Therefore, market shares in volume or in value will not differ substantially.

[26]  Numbers may not sum due to rounding.

[27]  When discussing local markets, the overlap of catchment areas around each outlet  operated  by  the  Notifying  Parties  leads  to  markets
comprising the whole city area. Therefore, for the purpose of this decision, the analysis will be conducted on a  city  by  city  basis  (whereby
"city" refers to any city with a population of 25,000 or more, including neighbouring areas within a 25km radius – 20-30 minute driving time).

[28]  See replies to Commission questionnaire Q1 Competitors – Retailers in the United Kingdom of 19 May 2014, questions 12  and  13,  Commission
questionnaire Q2 Competitors – Retailers in Ireland of 19 May 2014, questions 12 and 13 and Commission questionnaire Q3 Competitors  –  Retailers
in Sweden of 19 May 2014, questions 12 and 13.

[29]  See replies to Commission questionnaire Q1 Competitors –  Retailers  in  the  United  Kingdom  of  19  May  2014,  question  4,  Commission
questionnaire Q2 Competitors – Retailers in Ireland of 19 May 2014, question 4 and Commission questionnaire Q3 Competitors – Retailers in  Sweden
of 19 May 2014, question 4.

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 In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC)  No  139/2004
 concerning non-disclosure of business secrets and other confidential information.  The  omissions  are  shown  thus  […].  Where  possible  the
 information omitted has been replaced by ranges of figures or a general description.

                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE