CELEX: 32015M7643
Language: en
Date: 2015-07-01 00:00:00
Title: Commission Decision of 01/07/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7643 - CNRC / PIRELLI) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 1.7.2015
C(2015) 4608 final

|In the published version of this decision, some information |           |Public version                                                 |
|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|omitted has been replaced by ranges of figures or a general |           |                                                               |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.                                                |           |                                                               |
|                                                            |           |                                                               |
|                                                            |           |MERGER PROCEDURE                                               |

|                                                                       |To the notifying party                                                 |

Dear Sir/Madam,

Subject:    Case M.7643 – CNRC / Pirelli
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1] and Article 57 of the Agreement  on  the  European  Economic
Area[2]

    1) On 27 May 2015, the European Commission received notification of a proposed concentration pursuant to Article 4 of the  Merger  Regulation
       by which the China National Tyre & Rubber Co. Ltd (‘CNRC’ or ‘the Notifying Party’, China), wholly owned by the  China  National  Chemical
       Corporation (‘ChemChina’), would acquire, within the meaning of Article 3(1)(b) of the  Merger Regulation, control of the whole of Pirelli
       & C S.p.A. (‘Pirelli’, Italy) by way of purchase of securities ('the Transaction').[3]  CNRC and Pirelli are hereinafter jointly  referred
       to as ‘the Parties’.

       THE PARTIES

    2) CNRC is active in the manufacture of new tyres to be fitted on new cars, commonly known as Original Equipment Manufacturer ('OEM')  tyres,
       and new replacement tyres for heavy, commercial and passenger vehicles. CNRC also operates in the market for rubber  and  tyre  production
       engineering services and in the production and distribution of equipment to produce tyres. CNRC is a wholly-owned subsidiary of ChemChina,
       a diversified company active in the production of a wide range of chemical products. ChemChina reports to the Central  State-owned  Assets
       Supervision and Administration Commission ("Central SASAC"), an agency of the central government of the People’s Republic of China.

    3) Pirelli is active in the manufacture and distribution of OEM tyres and new replacement  tyres  for  both  heavy  and  passenger  vehicles.
       Pirelli is listed on the Milan Stock Exchange and its biggest stakeholder is Camfin S.p.A. (CF), which holds 26.193% of its shares.

       THE OPERATION AND THE CONCENTRATION

    4) By the Transaction, announced on 23 March 2015, CNRC will ultimately acquire, through a series of corporate  vehicles,  the  26.193%  non-
       controlling stake in Pirelli, currently directly and indirectly[4] held by Camfin S.p.A.  (Pirelli’s  largest  shareholder),  as  well  as
       shares held by other shareholders.[5] Once it acquires these shares, CNRC will launch a mandatory tender offer for the remaining  ordinary
       share capital, and a voluntary tender offer for the saving share capital, with the objective of delisting Pirelli, subject to  a  sell-out
       procedure and exercise of squeeze-out rights.[6] Through this procedure, CNRC will ultimately acquire sole control over Pirelli.

    5) The Transaction therefore constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

       EU DIMENSION

    6) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million (CNRC/ChemChina:[7] EUR [>  6  000
       million]; Pirelli: EUR 5 940 million). Each of them has an EU-wide turnover in  excess  of  EUR  250  million  (CNRC/ChemChina:  EUR  […];
       Pirelli: EUR […]), but they do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member  State.
       The notified operation therefore has an EU dimension.

    7) For the purposes of establishing jurisdiction, there is no need to conclude on whether the  turnover  of  other  companies  owned  by  the
       Chinese State and under the supervision of the Central SASAC should be taken into account, since the turnover thresholds are  met  on  the
       basis of ChemChina's and Pirelli's turnovers alone.

       INDEPENDENCE OF CNRC / CHEMCHINA

    8) ChemChina is one of approximately 125 enterprises owned by the Chinese government[8]. In order to assess the impact on competition of  the
       Transaction, it is relevant to assess whether ChemChina it is an independent economic unit, or whether it is part of a wider economic unit
       that includes all the Chinese State-owned enterprises ("SOEs").

    9) In the past, the Commission has assessed several concentrations involving SOEs.[9] When assessing the degree of economic  independence  of
       SOEs, factors previously taken into account included "the degree of interlocking directorships or the  existence  of  adequate  safeguards
       ensuring that commercially sensitive information is not shared between such undertakings".[10]

   10) When assessing the chain of control of SOEs, the first step consists of identifying whether or not the  SOEs  have  independent  decision-
       making power. In the present case, the decision-making power might belong either to ChemChina itself or to the Chinese government (through
       the Central SASAC).

   11) The Notifying Party submits that ChemChina exercises its own decision-making powers independent from the Central SASAC. Moreover,  by  law
       the Central SASAC is required not to interfere in the business activities of ChemChina. The Central SASAC  is  merely,  according  to  the
       Notifying Party, an executor of ownership and acts exclusively as a non-managerial trustee[11].

   12) In relation to interlocking directorships, the Notifying Party submits that none of the  board  members  of  ChemChina  or  CNRC  has  any
       function or role in other SOEs. The Notifying Party also submits that any action that can undermine the independence of the  top  managers
       of SOEs is prohibited under the law of the People's Republic of  China.[12]  Moreover,  the  Central  SASAC,  while  requiring  the  SOEs,
       including ChemChina, to submit information about their financial performance, does  not  require  the  SOEs  to  submit  any  commercially
       sensitive information. ChemChina would therefore, in the Notifying Party's view, be an independent economic unit with autonomous decision-
       making power and as such it should be considered the only relevant economic unit when assessing  potential  competition  concerns  arising
       from the Transaction.

   13) In its China National Bluestar / Elkem[13] decision, the Commission analysed the absence of interlocking directorships and the  degree  of
       economic independence between ChemChina and the Central SASAC. Several SOEs had activities horizontally  overlapping  with  those  of  the
       parties to the Transaction that was under review.  However, since the market position of the companies under Central SASAC was limited  in
       the markets concerned, no final conclusion over the actual independence of the SOEs was drawn.

   14) As such, in the present case, the Commission has assessed whether the activities of the other SOEs under the control of the Central SASAC,
       were relevant for the purposes of the Commission's competitive assessment of the Transaction. In this regard, the Commission, first, found
       that there is no horizontal overlap between the activities of the SOEs and the activities of the Parties.

   15) Certain SOEs, however, do operate in markets that are  vertically  related  to  the  Parties'  activities.  The  Commission  assessed  the
       downstream position of three SOEs active in the manufacturing of various vehicles, and in particular  the  China  South  Industries  Group
       Corporation, the FAW Group and the Dongfeng Motor Corporation.[14] Even if  the  supply  of  tyres  to  these  manufacturers  were  to  be
       considered vertical links, the presence of the Parties on the OEM tyres markets as described below is marginal, and would  thus  raise  no
       competition concern.

   16) The Commission also assessed the position of four SOEs that are active in markets upstream  of  the  Parties.  In  particular,  the  China
       National and Petroleum Corporation, the China Petroleum and Chemical Corporation, the China National Offshore Oil Corporation and Sinochem
       are active, among others, in the production and sale of rubber, rubber chemicals and synthetic rubber. Both CNRC and Pirelli source rubber
       from SOEs under the control of the Central SASAC. CNRC purchases synthetic rubber from […] and synthetic  and  natural  rubber  from  […].
       Pirelli purchases natural rubber from […].

   17) Mergers regarding vertically related parties are capable of harming competition by increasing the cost at which competitors can operate on
       the downstream market (input foreclosure), or by lowering the expected revenues of the upstream competitors  (customer  foreclosure).  The
       Commission observes that these SOEs' production of rubber accounts for less than 10% of the global supply  of  rubber.[15]  Moreover,  the
       Commission observes that in the relevant downstream tyre markets the combined market shares of the Parties are in all cases below 30%.  In
       respect of volume market shares, the combined market shares of the Parties are slightly above 30% in only two occurrences,[16]  with  very
       marginal increments.

   18) Given that the SOEs only account for less than 10% of global rubber supplies and the Parties' global demand for rubber is limited (Pirelli
       [0-5]%, CNRC/ChemChina [0-5]%), even in those national markets where the Parties have a combined market share of  approximately  30%,  for
       the reasons set out below, the Commission finds that, even if the SOEs were to supply the Parties on an exclusive basis, and  the  Parties
       were to purchase their rubber requirements exclusively from the SOEs, the Transaction is unlikely  to  give  rise  to  input  or  customer
       foreclosure effects and is not such as to give rise to serious doubts as to the Transaction's compatibility with the internal market.

   19) Input foreclosure concerns arise when there is no effective competition in the  provision  of  the  input  that  the  merging  company  is
       supplying.  As noted above, the SOEs' production of the relevant input, rubber, accounts for less than 10% of the global supply of rubber.
       Therefore the Transaction would not lead to input foreclosure as competitors will always be able to purchase the relevant input from SOEs'
       rivals.

   20) Customer foreclosure is likely to arise in industries where input/product demand is significantly concentrated. When there are  sufficient
       economic alternatives in the downstream market for the upstream rivals to sell their output, customer foreclosure is highly  unlikely.  In
       the present case, the Commission observes that there are many customers that have natural rubber  sourcing  requirements  (e.g.  Michelin,
       Continental, Bridgestone, Hankook, and Goodyear). In addition, the Commission notes that Pirelli's demand for rubber only accounts for [0-
       5]% of the global market, and CNRC/ChemChina's demand only accounts for [0-5]%, therefore the Transaction would bring about no significant
       merger-specific change to the structure of global rubber demand.[17] Even if the Parties were to source all of their  rubber  requirements
       from the SOEs, sufficient demand would remain to prevent foreclosure of other upstream suppliers. Therefore,  the  Transaction  would  not
       result in foreclosure of rival upstream rubber suppliers.

   21) In light of the foregoing, given that the possible vertical links between the Parties and the SOEs is unlikely to  give  rise  to  serious
       doubts as to the Transaction's compatibility with the internal market , it is not necessary for  the  Commission  to  reach  a  definitive
       conclusion on the ultimate control of ChemChina, and in particular on the question of its independence from the Central SASAC  as  such  a
       relationship would not affect the outcome of the Commission's competition assessment in the present case.

       MARKET DEFINITION

1 Relevant product market definition

   22) The Parties are both active in the manufacture and supply of OEM and new  replacement  tyres.  The  Notifying  Party  submits  that  these
       categories of tyres are to be distinguished, in line with the Commission's previous decisional practice. The Notifying Party submits that,
       still in line with the Commission's decisional practice, within each of these two categories, a  further  segmentation  into  six  product
       markets is possible according to the type of consumer targeted by the manufacturer.

   23) The market investigation in this case supports the Commission’s view that a distinction should be made between  OEM  and  new  replacement
       tyres[18]. OEM tyres are typically sold directly by  the  tyre  manufacturer  to  the  vehicle  manufacturer  for  installation  on  newly
       manufactured vehicles without passing through an intermediary. Although manufacturers can supply major accounts  with  replacements  tyres
       directly, the vast majority of new replacement tyres are sold through a large number of specialised outlets or  tyre  dealers  who  obtain
       their supplies from the manufacturer through its wholesale operations.[19] The intermediaries in this market are usually specialised  tyre
       dealers or dealers that, together with the retailing of tyres, perform a wide range of others services connected  to  the  maintenance  of
       vehicles.

   24) The Notifying Party also noted that previous Commission decisions had defined a third category of tyres: re-treaded tyres. When OEM  tyres
       on a vehicle can no longer be used, they can be replaced by (i) a new replacement tyre or (ii) a re-treaded tyre. Re-treading is a process
       that applies a new tread to a worn tyre thus ensuring an extended life. While in previous decisions the Commission noted  that  re-treaded
       tyres may exert a degree of competitive pressure over new replacement tyres, significant quality  and  price  differences  (the  cost  per
       kilometre of use of a low-priced tyre is more expensive as that of a re-treaded tyre) have consistently led the  Commission  to  define  a
       separate market for re-treaded tyres.[20] In line with its previous decision, the Commission considers that re-treaded tyres constitute  a
       distinct product market from that of new replacement tyres. Given that the Parties are not active on the market for re-treaded tyres,  the
       market for re-treaded tyres will not be analysed further in the present decision.

   25) As noted by the Notifying Party, within each of the two categories where the Parties are active in the EEA (OEM and new replacement tyres)
       it is possible to distinguish six product markets according to the specific characteristics and dimensions of the vehicles on which  tyres
       have to be fitted. In its previous decisional practice the Commission[21] sub-divided each of the OEM and new replacement tyres categories
       into the following six different product markets:

        a. tyres for cars and vans;

        b. tyres for trucks and buses;

        c. tyres for earth moving vehicles;

        d. tyres for agricultural use;

        e. tyres for two wheels motorized vehicles; and

        f. tyres for two wheels non-motorized vehicles.

   26) The results of the market investigation indicate that the distinction between the above six separate product markets remains valid.[22]

   27) In particular, from a demand side perspective, respondents to the market investigation consistently reported that end consumers would  not
       be able to switch between tyres belonging to these distinct product markets even in the event of a small but  non-transitory  increase  in
       prices.[23] The inability  to  switch  between  tyres  belonging  to  distinct  product  markets  is  related  to  the  different  product
       characteristics (notably dimensions) and the different usage and applications of these tyres. For instance,  a  tyre  manufactured  to  be
       fitted on an earth moving vehicle will not fit on a light truck given the different dimensions of these vehicles and the  different  needs
       they have when operating. Retailers also reported that they have different needs, and degrees of knowledge about the product depending  on
       the product market in which they buy, and thus purchase tyres from one or few product markets that are related to each other.[24]

   28) On the supply side, the wide majority of tyre manufacturers are normally active on some but not all of these product markets  (on  average
       three).[25]  Moreover, tyre manufacturers are not able to switch their production from one product market to another  in  the  short-term,
       without incurring significant additional costs or risks. Specific production  facilities  and  moulds  are  needed  to  manufacture  tyres
       belonging to different product markets and high investments are necessary to become an effective competitor[26] on a specific tyre product
       market, thus making supply substitution unlikely between tyres destined for different categories of vehicles.

   29) In view of the results of the market investigation, the Commission finds that, within the categories for OEM and  new  replacement  tyres,
       six distinct product markets can be defined, in line with previous decisions: tyres for cars and vans; tyres for trucks and  buses;  tyres
       for earth moving vehicles; tyres for agricultural use; tyres for two wheels motorized vehicles; and tyres  for  two  wheels  non-motorized
       vehicles. The results of the market investigation do not challenge the existence of a separate market for re-treaded tyres.

   30) For the purposes of the competitive assessment in the market for new replacement tyres for cars and vans,  the  Notifying  Party  provided
       available market share data at a further sub-segmentation level: passenger cars, SUVs and light trucks. The Notifying Party did not submit
       that these sub-segments constitute separate product markets.  The results of the market investigation also do not suggest the existence of
       product markets at this level of sub-segmentation. Adopting a conservative approach,  for  the  purposes  of  the  present  decision,  the
       Commission has analysed these narrower sub-segments for the purposes of the competitive assessment. However, the question of  whether  the
       market for new replacement tyres for cars and vans should be further subdivided into three separate product markets  for  passenger  cars,
       SUVs and light trucks can be left open since the Transaction would not raise competition concerns even  under  any  of  these  alternative
       potential markets.

2 Relevant geographic market definition

1 Relevant geographic market for OEM tyres

   31) As regards the OEM tyres category, across all six product markets (tyres for cars and vans; tyres for trucks and buses;  tyres  for  earth
       moving vehicles; tyres for agricultural use; tyres for two wheels motorized vehicles; and tyres for two  wheels  non-motorized  vehicles),
       the Notifying Party submits that the relevant geographic markets are at least EEA-wide since vehicle manufacturers purchase tyres directly
       from producers on an EEA-wide basis, there are no impediments to trade between countries, and transportation costs are  not  relevant  for
       these products.

   32) This is in line with previous Commission decisions.[27] However, this Transaction does not give rise to affected markets  in  any  of  the
       product markets of the OEM tyres category, regardless of whether their geographical scope is defined as national or  EEA-wide.   Therefore
       the Commission finds that the exact geographic definition of the market for OEM tyres can be left open as the Transaction would not  raise
       concerns as to its compatibility with the internal market even under the narrowest geographic market definition.

2 Relevant geographic market for new replacement tyres

   33) As regards the new replacement tyres category, for all six product markets (tyres for cars and vans; tyres for trucks and buses; tyres for
       earth moving vehicles; tyres for agricultural use; tyres for two wheels  motorized  vehicles;  and  tyres  for  two  wheels  non-motorized
       vehicles), the Notifying Party submits that there is a trend under which the markets are increasingly expanding in geographical scope, and
       may be moving to become EEA-wide.

   34) In past decisions, the Commission found the relevant geographic markets for all six product markets of the new replacement tyres  category
       to be national in scope.[28] However, the more recent Commission decisions acknowledged the trend towards  EEA-wide  geographical  markets
       reported by the Notifying Party, for instance by underscoring an EEA-wide price convergence.[29]

   35) The market investigation provided some indications that would support such a trend across all six product markets of the  new  replacement
       tyres category. In particular, competitors' replies indicated that price-setting is mainly done on customers' characteristics (for example
       volume purchased and terms of the business relationship). Certain retailers also indicated that there are low barriers to trade,  that  it
       is possible to compare prices across countries and that this makes prices converge in EEA regions wider than single countries.[30]

   36) Yet, while broadly speaking, as a competitor observed, 'there are no major barriers to operate in the different  European  countries',[31]
       the market investigation also indicated that certain conditions of competition, including  prices,  are  still  reported  to  vary  across
       countries. Several customers reported that prices are determined according to country-specific supply and demand factors[32]  as  well  as
       endogenous conditions created by companies' specific investments[33]. It has also been reported that while sell-in prices (i.e. prices  to
       distributors and retailers) on certain markets tend to be more similar, sell-out prices  (i.e.  prices  to  end  customers)  may  be  more
       sensitive to local features of the market.[34]

   37) The Commission finds that the exact geographic market definition of the six product markets for new replacement tyres can be left open, as
       the Transaction does not raise serious doubts as to its  compatibility  with  the  internal  market  even  under  the  narrowest  possible
       geographic market definition (at national level).

       COMPETITIVE ASSESSMENT

   38) The Transaction would not result in any affected markets in relation to OEM tyres. As such, these markets will not be analysed further  in
       the present decision.

   39) As regards new replacement tyres, the Transaction does not result in an  affected  market  at  EEA  level  on  any  market.  However,  the
       Transaction does result in six affected national markets for new replacement tyres for trucks and buses, and two affected national markets
       the market for new replacement tyres for cars and vans.

1 National markets for new replacement tyres for trucks and buses

   40) The Transaction would result in affected markets on the markets for new replacement tyres for trucks and buses in Cyprus, Estonia, Greece,
       Malta, Netherlands and Slovakia.

   41) For the reasons set out below at paragraphs (42) to (55), the Commission finds that the Transaction is unlikely to give  rise  to  serious
       doubts as to its compatibility with the internal market in respect of the national markets for new replacement tyres for bus and trucks.

   42) First, the Transaction would not materially affect the market structure, as combined market shares on most of the affected markets do  not
       significantly exceed 20%, increments are limited or marginal and a number of competitors are already active on all affected markets.

   43) The Parties' volume and value market shares on these markets, as well as an  estimate  of  the  market  share  (by  volume)  of  the  main
       competitors of the Parties for all the affected markets where such estimates are available are provided in the below tables.

            Table I – Parties' volume and value market shares on the affected markets for new replacement tyres for trucks and buses.

|Country                                      |Trucks and Buses                                                                |
|                                             |Pirelli                   |CNRC                       |Combined                 |
|                                                                                                        |
|Manufacturer                         |Estonia                                                                         |
|                                     |Pirelli                   |CNRC                     |Combined                  |
|                                     |MS            |MS         |MS          |MS           |MS           |MS           |
|                                     |%             |%          |%           |%            |%            |%            |
|                                     |Vol.          |Val.       |Vol.        |Val.         |Vol.         |Val.         |
|Estonia                              |[0-5]         |[0-5]      |[20-30]     |[0-5]        |[20-30]      |[0-5]        |
|Ireland                              |[0-5]         |[0-5]      |[30-40]     |[20-30]      |[30-40]      |[20-30]      |

     Source: Form CO

          Table IV – Parties' and competitors' volume market shares on the affected markets for new replacement tyres for cars and vans

|Passenger Cars                 |Light Trucks                   |
|Manufacturer                                     |Estonia                        |Ireland                        |
|Pirelli                                          |[0-5]%                         |[0-5]%                         |
|CNRC                                             |[20-30]%                       |[30-40]%                       |
|Combined                                         |[20-30]%                       |[30-40]%                       |
|Michelin                                         |[0-5]%                         |[5-10]%                        |
|Continental                                      |[0-5]%                         |[10-20]%                       |
|Goodyear                                         |[5-10]%                        |[10-20]%                       |
|Bridgestone                                      |[0-5]%                         |[10-20]%                       |
|Hankook                                          |[5-10]%                        |[10-20]%                       |
|Others                                           |[50-60]%                       |[0-5]%                         |
|Total                                            |100%                           |100%                           |

     Source: Form CO

   44) In Estonia, after the Transaction, the merged entity would have a combined market share slightly above 20% in volume shares but of only [0-
       5]% in value, with marginal increments ([0-5]% in volume and [0-5] in  value),  on  a  market  which  is  fragmented  and  where  numerous
       alternative suppliers are active.

   45) In Ireland, after the Transaction, the merged entity would have a combined market share of [30-40]% in volume shares and [20-30]% in value
       with  increments of [0 5]% and [0-5] respectively. Moreover, at least five alternative competitors would still be active on  the  national
       market, with an actual share between 10% and 20%.

   46) More specifically concerning the availability of alternative competitors on these markets, the same findings as for trucks and  bus  tyres
       are applicable. The market is dynamic and fragmented. Information provided by the Notifying Party shows  that  market  shares  are  highly
       volatile. A producer may have a high market share one year and loose almost all of it the year after. In this respect, also in the  market
       for cars and vans tyres, numerous competitors will still be able to supply customers post-merger in all affected markets,  and  act  as  a
       competitive constraint on the parties.

   47) Second, the Commission's findings concerning closeness of competition on the markets for tyres for trucks and buses are equally applicable
       to the markets for tyres for cars and vans. On this market, Pirelli is said to compete  more  closely  with  other  widely  known  premium
       brands,[47] while CNRC sells new replacement tyres for cars and vans under the Aeolus brand, which respondents to the market investigation
       consider competes most closely with budget brand new replacement tyres for cars and vans.[48]

   48) Third, as regards barriers to entry, the same findings as for trucks  and  bus  tyres  are  applicable.  In  particular,  competitors  and
       customers reported that also on the market for cars and vans a number of manufacturers established outside of the EEA  and  which  do  not
       possess a local distribution network have entered the market over the past years.[49] The pressure  of  potential  entrants  will  pose  a
       competitive constraint on the Parties' ability to increase prices without incurring in additional competition.

   49) In conclusion, irrespective of the segment considered on national markets for new replacement tyres for cars  and  vans,  the  Transaction
       would not substantially affect the market structure. Several competitors are already active on all the markets and segments,  barriers  to
       entry are low, and the Parties are not each other's close competitor. Therefore, the Commission finds that the Transaction is unlikely  to
       give rise to serous doubts as to its compatibility with the internal market in respect of the national markets for new  replacement  tyres
       for cars and vans or potential segments thereof.

       CONCLUSION

   50) 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  and
       Article 57 of the EEA Agreement.

For the Commission

(signed)
Margrethe VESTAGER
Member of the Commission
-----------------------
[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]   OJ L 1, 3.1.1994, p. 3 ("the EEA Agreement").

[3]   Publication in the Official Journal of the European Union No C 183, 4.6.2015, p. 11.

[4]   Camfin owns directly 96,779,841 ordinary shares of Pirelli, representing 20.3% of Pirelli's ordinary  share  capital.  Indirectly,  through
CAM 2012 S.p.A., Camfin owns 27,831,232 ordinary shares of Pirelli. Therefore,  in  total,  Camfin  holds  directly  and  indirectly  124,611,073
ordinary shares of Pirelli, representing 26.193% of the outstanding ordinary  share  Capital  of  Pirelli.  See  CNRC’s/Pirelli's  reply  to  the
Commission's request for information, 10.06.2015, Annex 1.

[5]   The entire share capital of Pirelli will be acquired in the following way: CNRC will incorporate: two special corporate  vehicles  in  Hong
Kong (SPV HK1 and SPV HK2); one newly established company under the laws of Luxemburg (SPV Lux) to be held by  SPV  HK2;  one  newly  established
Italian joint stock company (Newco) whose share of capital will be owned by SPV Lux; and  one  newly  established  Italian  joint  stock  company
HoldCo to be fully owned by Newco. Bidco, a subsidiary of HoldCo, will acquire from CF its stakes. Simultaneously CF will reinvest in Newco  part
of the proceeds of the sale to Bidco. Under the terms of the share purchase agreement, CF is entitled to subscribe for  a  maximum  stake  up  to
49.9% of the share capital of NewCo, with a minimum investment of at least 35%. Therefore, the stake held by CNRC in NewCo will be between  50.1%
and 65%. Even if CF subscribes for a maximum stake of 49.9% of the share capital of Newco, this will not be sufficient to enable CF  to  exercise
joint control over Pirelli. Bidco will then launch a mandatory tender offer for the remaining ordinary share capital of  Pirelli  as  well  as  a
voluntary tender offer for the entire saving share capital of Pirelli in order to delist Pirelli from  the  Milan  stock  exchange.  After  these
steps and subject to the meeting of legal conditions, Bidco will carry out a mandatory sell out procedure for the acquisition  of  the  remaining
shares held by the minority shareholders of Pirelli and/or exercise its squeeze-out rights on the shares of such minority shareholders.

[6]   On 5 June 2015, a new investor, Silk Road Fund Co., Ltd. ('SRF') entered into an agreement with CNRC and ChemChina to acquire a  25%  stake
in CNRC International Holding ('HK') Limited ( 'SPV HK2'). CNRC established this new entity, SPV HK2, in Hong Kong,  as  part  of  the  corporate
structure used to carry out the Transaction. SRF is a sovereign fund established by several Chinese government  controlled  entities  whose  only
other portfolio investment is in the hydropower sector in Pakistan. This new investment does not change the fact  that  CNRC  will  be  acquiring
sole control of Pirelli, as SRF will not have rights besides those of a minority investor.

[7]   According to article 5(4) of Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings, for the purpose  of
calculating the turnover, the turnover of the parent company should be taken into account.  Therefore,  even  if  the  undertaking  concerned  is
CNRC, the turnover of its parent company, ChemChina, is taken into  consideration.  (see  Commission  Consolidated  Jurisdictional  Notice  under
Council Regulation (EC) No 139/2004 on the control of  concentrations  between  undertakings,  OJ  C  95,  16.4.2008,  p.1  ('the  Jurisdictional
Notice'), paragraph 135.

[8]   Form CO, para 44.

[9]   See for example M.5508 Soffin/Hypo Real Estate; M.5861 Republic of Austria / HYPO GROUP ALPE ADRIA; M.931 Nestle/IVO.

[10]  Case COMP/M.6082 China National Bluestar-Elkem, 31 March 2011.

[11]  Form CO, paras 43 to 52.

[12]  Law of the People's Republic of China (28 October 2008) on the State-Owned Assets of Enterprises.

[13]  Case COMP/M.6082 China National Bluestar-Elkem, 31 March 2011.

[14]  The activities of  the China South Industries Group Corporation, the FAW Group and the Dongfeng Motor Corporation are further described  in
the Form CO at paras 37-38.

[15]  The Commission in Case No. IV/M.146/91 Metallgesellschaft/Safic Alcan defined the relevant geographic market for rubber as global.

[16]  In the Netherlands in the market for new replacement tyres for trucks and buses the Parties have a combined market share by volume of  [30-
40]%. The Transaction in this case will lead to an incremental increase of [0-5]% in volume. In Ireland in the market for new  replacement  tyres
for light trucks the combined market share of the Parties by volume is [30-40]%, and the Transaction will lead to an incremental increase of  [0-
5]% in volume.

[17]  See reply to the Commission's request for information, 10.06.2015, Question 4.

[18]        See for instance agreed minutes of a call with a trade association, 21 May 2015, according to which: 'It is possible to  segment  the
market also into two others macro categories: new replacement tyres and original equipment tyres. The OEM represents 23-25% of the market,  while
the rest is the replacement market'.

[19]  Case COMP/ 36.041/PO-Michelin, 20 June 2001.

[20]  Case COMP/M.4516, Continental/Matador, 8 June 2007; Case COMP/M.4564, Bridgestone/Bandag, 29 May 2007.

[21]  Case COMP/M.3081, Michelin/Viborg, 7 March 2003.

[22]  See replies to question 4 – Q2 Questionnaire to Customers.

[23]  See replies to question 7 – Q2 Questionnaire to Customers and  replies to question 8 – Q1 Questionnaire to Competitors.

[24]        See replies to question 7 – Q2 Questionnaire to Customers

[25]  See replies to questions 6 and 7 – Q1 Questionnaire to Competitors.

[26]  See replies to question 9 – Q1 Questionnaire to Competitors.

[27]   E.g.,  Case  COMP/M.4561,  Continental/Matador,  8  June  2007,  COMP  IV/M.1470,  Goodyear/Sumitomo,  23  July  1999   and   COMP/M.3081,
Michelin/Viborg, 7 March 2003.

[28]  Case COMP/M.4564, Bridgestone/Bandag, 29 May 2007.

[29]  Case COMP/M.4516, Continental/Matador, 8 June 2006 par. 24.

[30]  See agreed minutes of a call with a competitor, 27 May 2015, according to which 'as far as retail distribution  is  concerned,  the  market
has been considered mainly national in the past but has been increasingly evolving towards a wider geographical scope, in particular due  to  the
use of internet for the distribution, which allows greater price transparency at European level'. See also  agreed  minutes  of  a  call  with  a
retailer, 18 May 2015, according to which 'the main determinant of cross-country differences in price is transportation costs.'

[31]  Agreed minutes of a call with a competitor, 21 May 2015.

[32]  See for instance agreed minutes of a call with a customer, 18 May 2015, according to which the  "maturity  of  the  market  and  number  of
competitors that are active on a specific market" have an impact on prices.

[33]  E.g. For example 'Brand awareness', see agreed minutes of a call with a customer, 20 May 2015.

[34]  See replies to question 11.3 – Questionnaire Q1 Competitors. For instance, one competitor reported that it  'publishes  a  uniform  sell-in
price list for commercial tyres valid for the EEA (…)' but 'the sell-out price of tyres is set independently by  the  relevant  distributors  and
retailers'.

[35]  See replies to question 17 - Q1 questionnaire to Competitors and replies to question 18 - Q2 questionnaire to Customers.

[36]  Mergers between close competitors are more likely to raise competition concerns. See  also  Guidelines  on  the  assessment  of  horizontal
mergers under the Council Regulation on the control of concentrations between undertakings, OJ C 372, 5.2.2004, paragraphs 28 to 30.

[37]  See replies to question 13 – Q1 questionnaire to competitors and replies to question 12 – Q2 questionnaire to customers.

[38]  See agreed minutes of a call with a large Aeolus customer, 18 May 2015, according  to  which  '[u]nlike  many  Chinese  brands,  Aeolus  is
perceived as a good brand. The company has a good reputation and many customers already appreciate the characteristics of  the  product  and  its
competitive price '  This was also confirmed by a competitor, see agreed minutes of a call, 21 May 2015, 'Aeolus is one the Chinese  brands  that
is distinguishing itself for  high quality together with other two or three brands belonging to different Chinese producers'.

[39]  See agreed minutes of a call with a competitor, 27 May 2015, according to which 'the  demand  for  T[ier]2  and  T[ier]3  brands  has  been
increasing due to the importance of costs for customers lately. […]. In this context, T1 brands are facing increasing competition from T2 and  T3
brands'. See also agreed minutes of the call with a customer, 18 May 2015, '[Aeolus tyres] are generally considered  as  the  top  quality  among
tyres imported from China. While they are still perceived to be of less quality than tyres manufactured by more  established  producers  (like  B
brands), they are coming very close and customers do switch between established brands and Aeolus tyres'.

[40]  See replies to question 14 of Q1 – Questionnaire to Competitors. For instance, one competitor  indicated  that  '[Customer]  more  tend  to
switch between brands within the same category '. See also agreed minutes of a call with a large Aeolus  customer,  18  May  2015,  according  to
which 'some customers might ask for tyres produced in the EEA that satisfy particular quality requirements.'

[41]  See replies to question 17 – Q1 questionnaire to competitors, replies to question 18 – Q2 questionnaire to customers.

[42]  See Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between  undertakings,
OJ C 372, 5.2.2004, paragraphs 28 to 30.

[43]  See for instance agreed minutes of a call with a competitor, 21 May 2015, according to which '[i]n the  truck  tyres  market  the  role  of
importers based outside the EU is still small, but constantly growing. However, these importers have been expanding their scope  the  last  three
years'.  This was also noted by a customer, see agreed minutes of a call, 19 May 2015, '[t]he tyre market had  become  very  competitive  lately.
The entry of several Chinese producers in the market intensified competition even more'.

[44]  See replies to question 22 – Questionnaire Q1 to Competitors.

[45]  Agreed minutes of a call with a trade association, 21 May 2015.

[46]  See for instance agreed minutes of a call with a competitor, 21 May 2015 'other new brands have positioned themselves in the  same  segment
where [competitor name] operates (e.g. Hankook).'

[47]  See replies to question 17 – Q1 questionnaire to competitors, and replies to question 18  –  Q2  questionnaire  to  customers.  Respondents
report Pirelli's closest competitors to be premium brands such as Continental, Michelin, Goodyear.

[48]  See replies to question 17 – Q1 questionnaire to competitors, and replies to question 18  –  Q2  questionnaire  to  customers.  Respondents
report CNRC's closest competitors to be other budget brands such as Sava and Hifly.

[49]  See replies to question 18.1 – Q1 Questionnaire to competitors. For instance,  as  regards  the  segments  specifically  assessed  in  this
section, one competitor observed that '[Passenger – Light Truck]: new Asian brands are continuously entering and leaving the EEA markets.'