CELEX: 32018M9019
Language: en
Date: 2018-10-29 00:00:00
Title: Commission Decision of 29/10/2018 declaring a concentration to be compatible with the common market (Case No COMP/M.9019 - Mars, Incorporated / AniCura TC AB) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 29.10.2018
                                                                C(2018) 7348 final
                                                                              PUBLIC VERSION
                                                                 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                                                                 information omitted has been replaced by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.
                                                                To the notifying party
Subject:            Case M.9019 – Mars/AniCura
                    Commission decision pursuant to Article 6(1)(b) in conjunction with
                    Article 6(2) of Council Regulation No 139/20041
Dear Sir or Madam,
(1)       On 10 September 2018, the European Commission (the "Commission") received
          notification of a proposed concentration pursuant to Article 4 of the Merger
          Regulation by which Mars, Incorporated ("Mars" or the "Notifying Party", USA)
          intends to acquire, within the meaning of Article 3(1)(b) of the Merger
          Regulation, sole control of AniCura TC AB and its subsidiaries ("AniCura",
          Sweden), (the "Transaction").2 Mars and AniCura are further collectively referred
          to as the "Parties", whist the undertaking that would result from the Transaction is
          referred to as "the merged entity".
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    Publication in the Official Journal of the European Union No C 327, 17.9.2018, p.16.
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak--- 1.      THE PARTIES
(2)     Mars is a global privately held company active in various consumer product
        sectors. Through its business division Mars Petcare, Mars is a pet food and
        veterinary care provider, active in the dietetic pet food segment via its Royal
        Canin brand, which it markets worldwide, including in the EU. Mars Petcare also
        operates veterinary health businesses in North America and in the UK and is the
        world's biggest veterinary health group.
(3)     AniCura operates a leading chain of veterinary clinics and hospitals throughout
        northern Europe, with significant operations (in order of importance in terms of
        turnover generated) in Sweden, Germany, Norway, the Netherlands and
        Denmark, and smaller operations in Austria, Italy, France and Spain.
(4)     AniCura also operates VetFamily, a veterinary franchise operation described by
        the Parties as a "partnership network for independent veterinary clinics".
        VetFamily currently has over 1 000 independent members across Sweden,
        Norway, Denmark, Germany and the Netherlands. AniCura owns 17 of those
        members, all located in Denmark. AniCura is responsible for the procurement of
        products for these franchise veterinary clinics, including the procurement of
        dietetic pet food. VetFamily also offers a number of training events to its
        members.
(5)     AniCura operates a similar veterinary franchise operation, called Sterkliniek, in
        the Netherlands which currently has 75 members (of which 27 are owned by
        AniCura).
2.      THE OPERATION AND CONCENTRATION
(6)     Pursuant to a sale purchase agreement entered into on 7 June 2018 between Mars
        (as buyer) and Nordic Capital, Fidelio Capital and other minority shareholders of
        AniCura (as sellers), Mars will acquire 100% of the issued and to be issued share
        capital in AniCura.
(7)     As a result of the Transaction, Mars will obtain sole control over AniCura.
(8)     Therefore, the Transaction constitutes a concentration within the meaning of
        Article 3(1)(b) of the Merger Regulation.
3.      UNION DIMENSION
(9)     The Parties have a combined aggregate world-wide turnover of more than EUR 5
        000 million3 (EUR: […]). Each of them has an Union-wide turnover in excess of
        EUR 250 million (Mars: EUR […]; AniCura: EUR […]), but each does not
        achieve more than two-thirds of its aggregate Union-wide turnover within one
        and the same Member State.
3   Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission
    Consolidated Jurisdictional Notice (OJ C95, 16.4.2008, p. 1).
                                                       2
 ---pagebreak--- (10)   The notified operation therefore has a Union dimension pursuant to Article 1(2)
       of the Merger Regulation.
4.     APPLICABILITY OF THE EEA AGREEMENT
(11)   Article 8 of the EEA Agreement4 provides that, unless otherwise specified, the
       provisions of the EEA Agreement shall apply only to:
       (a)       products falling within Chapters 25 to 97 of the Harmonized Commodity
                 Description and Coding System ("HS Nomenclature"), excluding the
                 products listed in Protocol 2 to the EEA Agreement5;
       (b)       products specified in Protocol 3 to the EEA Agreement6, subject to the
                 specific arrangements set out in that Protocol.
(12)   The HS Nomenclature of dog or cat food, put up for retail sale, is 2309.10 and
       2309.90 for other preparations of a kind used in animal feeding. Pet food
       therefore falls within Chapter 23, and not within Chapters 25 to 97, of the HS
       Nomenclature. Pet food is not covered in Protocol 3 to the EEA Agreement.
       Therefore, the EEA Agreement does not apply to pet food products and the
       assessment of the impact of the Transaction for pet food hence falls outside
       Article 57 of the EEA Agreement on merger control.
(13)   The Notifying Party argues7 that the Commission has exclusive jurisdiction to
       review the Transaction within the EEA, since the Transaction concerns the
       acquisition of a company active in the provision of veterinary services, which fall
       within the scope of the EEA Agreement.
(14)   The Commission notes that the relevant downstream market in this case concerns
       not the provision of veterinary services, but the retail of pet food. The fact that the
       target company is also active in the provision of veterinary services is not
       sufficient to conclude that the downstream market is the provision of such
       services and that the Commission therefore has exclusive jurisdiction in the EEA.
(15)   The assessment of the impact of the Transaction for pet food in the EFTA States
       hence falls outside the jurisdiction of the Commission. Consequently, the present
       Decision will analyse the effects of the Transaction on the EU market for pet food
       products and will not assess possible anticompetitive effects in Norway, Iceland
       and Lichtenstein.
4  Agreement on the European Economic Area, OJ No L 1, 3.1.1994, p.3.
5  EEA Agreement, Protocol 2 on products excluded from the scope of the Agreement in accordance
   with article 8(3)(A) of the Agreement.
6  EEA Agreement, Protocol 3 concerning products referred to in Article 8(3)(B) of the Agreement.
7  Paper on the European Commission's jurisdiction over the affected markets in Norway, 12 October
   2018.
                                                    3
 ---pagebreak--- 5.       RELEVANT MARKETS
5.1.     Introduction
(16)     The Transaction concerns two companies operating mostly at different levels of
         the supply chain. Mars is a manufacturer of dietetic pet food, which it supplies to
         veterinary clinics and animal hospitals. AniCura is the owner of a chain of
         veterinary clinics and animal hospitals (as well as of the VetFamily and
         Sterkliniek purchasing agreement networks of independent clinics), where dietetic
         pet food is sold to pet owners.
(17)     "Dietetic pet food" (also referred to in the industry as "therapeutic" or "veterinary
         diet" pet food) is pet food that is intended to be formulated to meet the specific
         dietary requirements of a pet that is suffering from one or more specific health or
         dietary issues, and is typically recommended by a veterinarian.8
(18)     Whilst AniCura also supplies ranges of private label dietetic pet food made
         available in its clinics in Denmark and in Sterkliniek clinics in the Netherlands,
         the horizontal overlaps with the supplies of dietetic pet food by Mars are very
         limited.9
(19)     Mars owns and operates veterinary clinics in the UK, but given that AniCura is
         not present in the UK, no horizontal overlaps in veterinary services arise as a
         result of the Transaction.
(20)     In order to assess the Transaction's impact on competition, the Commission has
         assessed the definition of the relevant upstream and downstream markets.
5.2.     The upstream market – manufacture and supply of dietetic pet food
5.2.1. Relevant product market definition
5.2.1.1. The Notifying Party's arguments
(21)     The Notifying Party claims that the relevant product market upstream concerns
         industrial (or prepared) pet food for dogs and for cats,10 which could be sub-
         segmented into (i) dry dog food, (ii) wet dog food, (iii) dry cat food, and (iv) wet
         cat food products.11 In particular, the Notifying Party does not believe that dietetic
         pet food forms a distinct product market.12
8   Form CO, paragraphs 102(a), 104. Examples of medical conditions for which dietetic pet food is
    available include gastrointestinal, dermatological, obesity/weight management, allergies, joint/mobility
    (arthritis), urinary, renal, cardiac, and diabetes.
9   Form CO, paragraphs 24 - 26
10  Form CO, paragraph 91.
11  Form CO, paragraph 14.
12  Form CO, paragraph 103; Parties' response to RFI 1, question 2.
                                                          4
 ---pagebreak--- (22)    The Notifying Party claims that there is a high level of demand-side
        substitutability between dietetic pet food and other pet food.13 For example, in the
        Notifying Party's view, substitution between dietetic and 'conventional' (or
        mainstream, non-dietetic) pet food can occur where the pet owner supplements
        conventional pet food with over-the-counter medication or dietary supplements to
        manage the pet's health condition.14
(23)    The Notifying Party also argues that there is a high level of supply-side
        substitutability between dietetic pet food and other pet food, since (i) many of
        Mars' competitors offer dietetic as well as non-dietetic pet food; (ii) the
        equipment processes required to manufacture dietetic and non-dietetic pet food
        are essentially similar and normally not regarded as a key determinant of
        differentiation (although the manufacturing processes are sometimes adjusted to
        reflect specific product requirements); and (iii) the investment into additional
        research and development, and product and brand awareness (including with
        professionals such as veterinarians), as well as specific product labelling and
        wider marketing, can be easily replicated by new entrants.15
(24)    Finally, the Notifying Party also claims that […]. At the same time, the Notifying
        Party acknowledges that dietetic products have a more complex formulae,
        including a wide range of different (higher quality) ingredients (or specifically
        excluded ingredients) and vitamin and mineral additives, which manufacturers
        tailor to support their claims of assisting pets' fight against certain medical
        conditions.16
5.2.1.2. The Commission's assessment
(25)    In its previous decisions relating to pet food, the Commission found that: (i)
        industrial dog and cat food is a distinct market, separate from home prepared pet
        food;17 (ii) dog food and cat food are not part of the same relevant product
        market;18 (iii) dry dog food, wet dog food, dry cat food, and wet cat food products
        each constitute a separate product market;19 and (iv) it cannot be excluded that
13  Form CO, paragraphs 103, 113, 116-117, 119-124, 127; Parties' supplemental submission on market
    definition and substitution, 22 October 2018.
14  Form CO, paragraph 124(a)-(e).
15  Form CO, paragraphs 145-146, 150-151.
16  Form CO, paragraphs 107, 118; Parties' response to RFI 1, question 2, paragraph 2.18.
17  Case IV/M.554 - Dalgety/The Quaker Oats Company, paragraph 12; confirmed in Case IV/M.1127 -
    Nestlé/Dalgety, paragraph 8 (this question was left open in that case, as the assessment of the
    competitive impact of the case did not change whether grocery and non-grocery stores were
    considered together or separately).
18  Case IV/M.1127 - Nestlé/Dalgety, paragraph 13; Case M.2337 – Nestlé/Ralston Purina, paragraph 10.
19  Case M.2337 – Nestlé/Ralston Purina, paragraph 12; Case M.2544 – Masterfoods/Royal Canin,
    paragraphs 9-11.
                                                       5
 ---pagebreak---        specialist (non-grocery) stores are a separate relevant product market from
       grocery stores.20
(26)   The Commission in the present case particularly assessed the potential distinction
       of dietetic pet food and other types of pet foods. Based on the evidence available
       and on the results of the market investigation, the Commission finds that dietetic
       pet food constitutes a distinct relevant product market based on the following
       reasons.
(27)   Demand-side substitutability between dietetic pet food and other pet food was
       shown to be very limited. None of the competitors and veterinarians that
       responded to the Commission's market investigation considered that non-dietetic
       pet food could be substituted for dietetic pet food from the view point of the
       consumer.21 It was noted that dietetic pet food fulfils a particular purpose, being
       formulated to address the nutritional requirements of specific health conditions in
       pets.22 For example, one market participant explained that "[f]rom a veterinary
       point of view, the use of dietetic feeds to support nutrition-related diseases […] is
       absolutely necessary and cannot be replaced by conventional feed."23 It was
       further noted that dietetic pet food was not fit for healthy animals and that feeding
       healthy animals a dietetic pet food diet over a prolonged period of time may lead
       to malnutrition or other health problems.24 Therefore, as was stressed by several
       market participants, a diagnosis and a medical indication from a veterinarian are
       required before a pet can be fed dietetic pet food.25
(28)   A very small number of responding veterinarians stated that non-dietetic pet food
       could be substituted for dietetic pet food, but only if the former is modified by
       means of prescription or over-the-counter medicine and/or nutritional
       supplements. One veterinarian noted that "[s]ubstitution with feed prepared by
       oneself in accordance with a recipe is possible, but for most customers not
       practicable".26 Another veterinarian explained that substitution is problematic for
       some specifically formulated dietetic pet food products, for example those
       designed to feed pets with allergies, or with kidney or urinary stones, given that
       those types of feed contain large reductions of certain raw materials (such as
       proteins and minerals).27
20 Case M.1127 - Nestlé/Dalgety, paragraph 8; Case M.2337 – Nestlé/Ralston Purina, paragraph 14.
21 Responses to Q1 - Questionnaire to Veterinarians, question 3; Responses RFI to Competitors, question
   5.
22 Responses to Q1 - Questionnaire to Veterinarians, question 3; Responses to RFI to Competitors,
   question 5.
23 Response to RFI to Competitors, question 5.
24 Responses to RFI to Competitors, question 5.
25 Responses to RFI to Competitors, question 5; Responses to Q1 - Questionnaire to Veterinarians,
   question 3.1.
26 Response to Q1 - Questionnaire to Veterinarians, question 3.
27 Response to Q1 - Questionnaire to Veterinarians, question 3.
                                                      6
 ---pagebreak--- (29)    There is very little evidence of switching between dietetic and non-dietetic
        (conventional) pet food once dietetic pet food has been recommended. For
        example, switching from dietetic to conventional pet food would occur only when
        the dietetic pet food product is no longer considered necessary, or if the pet does
        not find it palatable (refusing to eat it), in which case the recommended dietetic
        pet food is replaced by an alternative dietetic pet food product, or an alternative
        solution recommended by a veterinarian.28 Market participants have explained
        that if a pet (especially with a long-term health condition) is switched to
        conventional pet food, the pet owner would generally switch back to giving the
        pet the dietetic pet food product once they notice that the health issue recurs
        and/or once the veterinarian at a follow-up visit draws their attention to the need
        to follow the recommended diet.29
(30)    The results of the market investigation also show that dietetic pet food tends to be
        more expensive than non-dietetic pet food: the average prices for dietetic pet food
        products were estimated to be between 10-30% and up to 3 times higher than for
        non-dietetic pet food products.30
(31)    As regards supply-side substitutability, the Notifying Party's arguments as to the
        high degree of substitutability were similarly not supported by the results of the
        market investigation, which revealed a very limited degree of supply-side
        substitutability. Most conventional pet food manufacturers do not manufacture
        dietetic pet food,31 and specialised dietetic pet food manufacturers do not
        manufacture conventional pet food.32
(32)    The key characteristic of dietetic pet food is the very specific nutritional product
        profile,33 meaning that these products either contain or lack specific ingredients,
        substances, vitamins or minerals. Dietetic pet food therefore requires very
        different recipes from conventional pet food. One competitor explained that
        dietetic pet food is "characterised by a more rigorous attention to achieving exact
        nutrient levels – both at the design and ongoing manufacturing stages."34 Another
        competitor explained that the formulation of dietetic pet food requires specialist
        knowledge and know-how, to ensure that it can be manufactured consistently and
        in particular, that "advanced nutritional mastery is required – either an
28 The majority of competitors agree – Responses to RFI to Competitors, question 8; Responses to Q1 -
   Questionnaire to Veterinarians, question 11, question 11.1 and question 12.1.
29 Responses to RFIs to Competitors, question 8; Responses to Q1 - Questionnaire to Veterinarians,
   question 11.1.
30 Responses to RFIs to Competitors, question 6.
31 Mars (with its Royal Canin brand of dietetic pet food) and Nestle (with its Purina brand of dietetic pet
   food) are the exceptions.
32 Specialised manufacturers that manufacture pet food sold via the veterinary channel (including dietetic
   pet food) do not manufacture conventional pet food that is normally found in grocery stores include
   Hill's, Dechra, Vet Concept and Virbac.
33 Responses to RFI to Competitors, question 5.
34 Response RFI to Competitors, question 7.
                                                       7
 ---pagebreak---          experienced Animal Nutritionist well-versed in Clinical Conditions who
         understands the clinical condition, how to manage it from a nutritional standpoint
         and is well-versed in interpreting and applying PARNUTS, or a Veterinary
         Clinical Nutritionist."35 Whilst competitors agreed that a conventional pet food
         manufacturer could achieve the specific nutritional product profile with the
         requisite attention to nutrient levels required for dietetic pet food, it would have to
         invest into R&D and gain expertise before it could start manufacturing dietetic pet
         food.36
(33)     Dietetic pet food product development incurs significant research and
         development spending. All of the competitors that responded to the market
         investigation stated that the development of dietetic pet food products is more
         resource-intensive than the development of conventional pet food, since it
         requires more scientific research and takes significantly more time.37 Mars itself
         admits that dietetic pet food requires a higher level of investment than
         conventional pet food, explaining that "[i]n addition to increased spend on
         research and development for certain health conditions, a key investment involves
         brand education and development, including with professionals in the pet
         industry, particularly veterinarians and breeders. […] such investment relates to
         awareness and education of certain conditions, effective treatments, and product
         performance."38 Competitors have also referred to the need for the dietetic pet
         food manufacturer to provide a high level of clinical proof of efficacy in order to
         satisfy the high product quality standard demanded by veterinarians.39
(34)     Dietetic pet food products must comply with the requirements of EU Directive
         2008/38/EC40 on animal feed for particular nutritional purposes (the so-called
         "PARNUTs" legislation), which is deemed by competitors to be "far more
         stringent than legislation for conventional pet food"41. Directive 2008/38/EC
         prescribes the essential nutritional characteristics, the recommended length of
         time for the use of, and the specific labelling declarations that must be made with
         respect to the nutritional content of different types of, dietetic pet food.42
35 Response to RFI to Competitors, question 7.
36 Responses to RFI to Competitors, question 7.
37 Responses to RFI to Competitors, question 13; Responses to RFI to Competitors, question 7.
38 Form CO, paragraph 151.
39 Response to RFI to Competitors, question 7.
40 Commission Directive 2008/38/EC of 5 March 2008 establishing a list of intended uses of animal
   feedingstuffs for particular nutritional purposes (OJ L 202, 31.7.2008, p.48).
41 Response to RFI to Competitors, question 5.
42 The types of particular nutritional purposes for cats and dogs regulated by Directive 2008/38/EC are:
   (i) support of renal function in case of chronic renal insufficiency (ii) dissolution of struvite stones,
   (iii) reduction of struvite stone recurrence, (iv) reduction of urate stone formation, (iv) reduction of
   oxalate stones formation, (v) reduction of cysteine stones formation, (vi) reduction of ingredient and
   nutrient intolerances, (vii) reduction of acute intestinal absorptive disorders, (viii) compensation for
   maldigestion, (ix) support of heart function in the case of chronic cardiac insufficiency, (x) regulation
   of glucose supply (Diebetes mellitus), (xi) support of liver function in the case of chronic liver
                                                         8
 ---pagebreak---        Directive 2008/38/EC also requires specific wording to be indicated on the
       packaging of the dietetic pet food product: "It is recommended that a
       veterinarian's opinion be sought before use [or before extending the period of
       use]" (depending on the particular nutritional purpose in question).
(35)   Further regulatory requirements are imposed by Article 13 of Regulation
       767/2009,43 which prescribes the conditions for the appearance of claims on pet
       food packaging and labelling. Thus, claims as to the absence or presence of a
       substance, or any specific nutritional characteristic or process, must be objective,
       verifiable by competent authorities, understandable by the user of the feed and
       supported by scientific substantiation when the feed is placed on the market. This
       means that dietetic pet food that is more likely to make such claims must comply
       with more stringent regulatory requirements than conventional pet food, which is
       less likely to make such claims. Furthermore, claims that the feed will prevent,
       treat or cure a disease are not allowed, nor are claims that the feed has a particular
       nutritional purpose, unless that purpose is one listed in Directive 2008/38/EC. In
       other words, dietetic pet food may display claims that are not allowed for non-
       dietetic pet food (and in turn is subjected to a heavier regulatory burden).
(36)   Whilst the general plant and equipment used for the manufacture of dietetic pet
       food is similar or essentially the same as that used for the manufacture of
       conventional pet food,44 special manufacturing processes may be required for
       dietetic pet food. For example, it is absolutely necessary to ensure consistency of
       nutritional and ingredient profiles between production batches.45 Furthermore,
       certain types of dietetic pet food require specific quality controls or equipment
       adjustment. Mars explains that manufacturing processes are sometimes adjusted
       to reflect any specific product requirements (such as […]).46 […].47
(37)   Finally, dietetic pet food is sold almost exclusively via the veterinary channel.
       Market participants estimate that the veterinary channel accounts for over 90% of
       dietetic pet food sales, especially in certain markets, like the Nordics.48
(38)   In light of the foregoing and taking the results of the market investigation and all
       the evidence available to it into account, the Commission considers that the
   insufficiency, (xii) regulation of lipid metabolism in the case of hyperlipidaemia, (xiii) reduction of
   copper in the liver, (xiv) reduction of excessive body weight, (xv) nutritional restoration,
   convalescence, (xvi) support of skin function in the case of dermatosis and excessive loss of hair.
43 Regulation (EC) No. 767/2009 of the European Parliament and of the Council on the placing on the
   market and use of feed (OJ L 229, 1.9.2009, p.1).
44 Form CO, paragraph 146; Responses to RFI to Competitors, question 7; Minutes of a call with a
   competitor, 13 September 2018, 10.00 CET.
45 Response to RFI to Competitors, question 7.
46 Form CO, paragraph 146 and footnote 103; Parties' response to RFI 1, question 2, paragraph 2.17 and
   footnote 65; Form CO, paragraph 149.
47 Form CO, paragraph 149; Parties' response to RFI 2, question 4, paragraph 4.3.
48 Responses to RFI to Competitors, question 12.
                                                        9
 ---pagebreak---         manufacture and supply of dietetic pet food constitutes a distinct relevant product
        market, separate from the market for the manufacture and supply of non-dietetic
        pet food.
5.2.2. Relevant geographic market definition
5.2.2.1. The Notifying Party's arguments
(39)    The Notifying Party argues that the market definition can be left open but should
        not be sub-segmented below the national level,49 noting also that the markets for
        (i) dry dog food, (ii) wet dog food, (iii) dry cat food, and (iv) wet cat food
        products have previously been defined as national in scope.50
5.2.2.2. The Commission's assessment
(40)    In Nestle/Ralson Purina, the Commission considered that the relevant geographic
        market for industrial pet food is national in scope, given that the purchasing
        pattern even of internationally active retailers was predominantly national, and
        that significant price differences existed among Member States.51
(41)    The market investigation in the present case has similarly shown that the relevant
        geographic market for the manufacture and supply of dietetic pet food is national
        in geographic scope, given that: (i) suppliers tend to have dedicated local
        presence, personnel and distributors in various countries,52 (ii) the majority of
        competitors have indicated that they have different routes to market in different
        countries,53 and (iii) there is evidence of varying brand presence in national
        markets, with regional and national actors present in certain national markets but
        not others.54
5.2.3. Conclusion on the relevant market for the manufacture and supply of dietetic pet
        food
(42)    In light of the above considerations and taking the outcome of the market
        investigation and all the evidence available to it into account, the Commission
        considers that the relevant product market upstream is the manufacture and
        supply of dietetic pet food, which constitutes a distinct relevant product market,
        separate from the market for the manufacture and supply of non-dietetic pet food.
(43)    The market for the manufacture and supply of dietetic pet food is national in
        geographic scope.
49  Form CO, paragraph 162.
50  Form CO, paragraph 14.
51  Case M.2337 – Nestle/Ralston Purina, paragraph 21.
52  Responses to RFI to Competitors, question 15, question 16 and question 18.
53  Responses to RFI to Competitors, question 15, question 16 and question 17.
54  Responses to RFI to Competitors, question 3.
                                                      10
 ---pagebreak--- 5.3.    The downstream market - retail of dietetic pet food through the veterinary
        channel
5.3.1. Relevant product market definition
5.3.1.1. The Notifying Party's arguments
(44)    The Notifying Party submits that the relevant product market is the provision of
        veterinary services through veterinary practices.55 The Notifying Party considers
        that in the absence of any horizontal overlap in this sector, there is no need to
        consider potential market definitions in any detail, although it also acknowledges
        veterinary services' ancillary activity as a distribution channel for pet food.56
5.3.1.2. The Commission's assessment
(45)    The Transaction concerns the supply and sale of dietetic pet food through
        veterinary clinics, and not the provision of veterinary services.
(46)    In Nestlé/Dalgety, the Commission found that it cannot be excluded that specialist
        (non-grocery) stores are a separate relevant product market for the sale of pet
        food from grocery stores.57
(47)    The results of the market investigation in this case are firmly conclusive of the
        fact that veterinary clinics constitute a separate relevant product market for the
        sale of dietetic pet food, because: (i) dietetic pet food is sold almost exclusively
        through veterinary clinics; (ii) dietetic pet food sold through veterinary clinics
        tends to be more expensive than dietetic pet food sold via other channels (e.g.
        online) and (iii) suppliers tend to market dietetic pet food at a clinic-per-clinic
        level.58
5.3.2. Relevant geographic market definition
5.3.2.1. Notifying Party arguments
(48)    The Notifying Party submits that the market for veterinary services, to the extent
        that these are relevant in the present case in light of the vertical relationship of
        their ancillary activity as a distribution channel for pet food, have to be
        considered at national level.59
55  Form CO, paragraph 14.
56  Form CO, paragraph 14.
57  Case M.1127 - Nestlé/Dalgety, paragraph 8; Case M.2337 – Nestlé/Ralston Purina, paragraph 14.
58  Responses to RFI to Competitors, question 17; Minutes of a call with a competitor, 1 August 2018,
    14.00 CET; Responses to Q1 – Questionnaire to Veterinarians, question 13.1, question 14 and question
    14.1.
59  Form CO, paragraph 14.
                                                     11
 ---pagebreak--- 5.3.2.2. The Commission's assessment
(49)    In Nestlé/Ralston Purina the Commission concluded that, at the retail level, the
        prepared pet food markets are national in scope. The market investigation in that
        case revealed, inter alia, that the purchasing pattern even of internationally active
        retailers is still predominantly national, that significant price differences and
        market structures exist between Member States and that specialty shops purchase
        their pet food requirements almost exclusively at national level. 60 This conclusion
        was largely confirmed by the Commission's findings in Masterfoods/Royal Canin,
        where the Commission found that for the majority of respondents, purchasing
        patterns of demand were still essentially national as concerns the main grocery
        retailers, whilst they were nearly always national or even sub-national as concerns
        the specialty retailers.61
(50)    The market investigation in the present case confirms that the retail of dietetic pet
        food via the veterinary channel is local in geographic scope, given that: (i)
        veterinary clinics tend to attract customers from their vicinity, and (ii) the
        majority of respondent market participants indicated that the maximum distance
        travelled by pet owners to veterinary clinics is less than 90 km.62
5.3.3. Conclusion on the relevant market for the retail of dietetic pet food via the
        veterinary channel
(51)    The retail of dietetic pet food via the veterinary channel constitutes a distinct
        relevant product market, separate from the retail of dietetic pet food via other
        channels. This market is local in geographic scope.
(52)    Notwithstanding the above, and given the significant presence of AniCura and
        VetFamily across the territory of Denmark and Sweden, for the purposes of this
        decision, the effects of the Transaction were considered having regard to the
        entirety of the territories of the countries concerned (i.e. national).
6.      COMPETITIVE ASSESSMENT
(53)    Mars is active in the supply of dietetic pet food throughout the EU, whereas
        AniCura is currently present in Denmark, Sweden, the Netherlands, Germany,
        Austria, Italy, France and Spain.
(54)    The Transaction gives rise to vertically affected markets only where AniCura is
        also present, i.e. in Denmark, Sweden, the Netherlands, Germany, Austria, Italy,
        France and Spain.
(55)    There is a also a very limited horizontal overlap in Denmark and the Netherlands,
        due to AniCura's supply of dietetic pet food under the VetPro brand in AniCura
60  Case M.2337 – Nestlé/Ralston Purina, paragraphs 21-23
61  Case M.2544 – Masterfoods/Royal Canin, paragraph 27.
62  Responses to Q1 - Questionnaire to Veterinarians, question 5 and question 5.1.
                                                       12
 ---pagebreak---         clinics in Denmark and Sterkliniek private-label dietetic pet food in AniCura-
        owned Sterkliniek clinics in the Netherlands.63
6.1.    Legal framework for competitive assessment of vertical mergers
(56)    Vertical mergers involve companies operating at different levels of the same
        supply chain. Pursuant to the Commission Guidelines on the assessment of non-
        horizontal mergers under the Council Regulation on the control of concentrations
        between undertakings (the “Non-Horizontal Merger Guidelines”)64, vertical
        mergers do not entail the loss of direct competition between merging firms in the
        same relevant market and provide scope for efficiencies.
(57)    However, there are circumstances in which vertical mergers may significantly
        impede effective competition. This is in particular the case if they give rise to
        foreclosure65.
(58)    The Non-Horizontal Merger Guidelines distinguish between two forms of
        foreclosure: input foreclosure, where the merger is likely to raise costs of
        downstream rivals by restricting their access to an important input, and customer
        foreclosure, where the merger is likely to foreclose upstream rivals by restricting
        their access to a sufficient customer base66.
(59)    Pursuant to the Non-Horizontal Merger Guidelines, input foreclosure arises
        where, post-merger, the new entity would be likely to restrict access to its actual
        or potential rival in the downstream market to the products or services that it
        would have otherwise supplied absent the merger, thereby raising its downstream
        rivals' costs by making it harder for them to obtain supplies of the input under
        similar prices and conditions as absent the merger67.
(60)    For input foreclosure to be a concern, the merged entity should have a significant
        degree of market power in the upstream market. Only when the merged entity has
        such a significant degree of market power, can it be expected that it will
        significantly influence the conditions of competition in the upstream market and
        thus, possibly, the prices and supply conditions in the downstream market68.
(61)    Pursuant to the Non-Horizontal Merger Guidelines, customer foreclosure may
        occur when a supplier integrates with an important customer in the downstream
        market and because of this downstream presence, the merged entity may foreclose
        access to a sufficient customer base to its actual or potential rivals in the upstream
        market (the input market) and reduce their ability or incentive to compete which
63  Form CO, paragraphs 24 - 26
64  OJ C 265, 18.10.2008, p. 6.
65  Non-Horizontal Merger Guidelines, paragraph 18.
66  Non-Horizontal Merger Guidelines, paragraph 30.
67  Non-Horizontal Merger Guidelines, paragraph 31.
68  Non-Horizontal Merger Guidelines, paragraph 35.
                                                    13
 ---pagebreak---        in turn, may raise downstream rivals' costs by making it harder for them to obtain
       supplies of the input under similar prices and conditions as absent the merger.
       This may allow the merged entity profitably to establish higher prices on the
       downstream market69.
(62)   For customer foreclosure to be a concern, a vertical merger must involve a
       company which is an important customer with a significant degree of market
       power in the downstream market. If, on the contrary, there is a sufficiently large
       customer base, at present or in the future, that is likely to turn to independent
       suppliers, the Commission is unlikely to raise competition concerns on that
       ground70.
6.2.   Market shares
6.2.1. Upstream market – manufacture and supply of dietetic pet food
(63)   Mars is the market leader in the manufacture and supply of dietetic pet food in the
       EU. The second-largest supplier of dietetic pet food is Hill's.
(64)   In the upstream market, Mars' shares in the supply of dietetic pet food are
       significant. Mars provided the following estimated market shares for dietetic pet
       food sold in 2017 via the veterinary channel in those Member States where
       AniCura is also present.
       Table 1: Market shares of dietetic pet food sold through veterinary outlets
                                   Mars                     Hill's               Other competitors
        Sweden                   [50-60]%                 [40-50]%                      [5-10]%
        Denmark                  [30-40]%                 [40-50]%                     [20-30]%
        Netherlands              [30-40]%                 [20-30]%                     [30-40]%
        Germany                  [40-50]%                 [30-40]%                     [10-20]%
        Austria                  [60-70]%                 [10-20]%                     [30-40]%
        Italy                    [40-50]%                 [30-40]%                     [10-20]%
        France                   [40-50]%                 [30-40]%                     [20-30]%
        Spain                    [30-40]%                 [30-40]%                     [30-40]%
       Source: Mars estimates, based on available third party panel data and research providers.
(65)   According to Mars, this information constitutes its best estimate for the sales
       value of dietetic pet food products, taking into account its estimates of the
       proportion of non-dietetic pet food sold via the veterinary channel in each of the
       Member States concerned.
(66)   On the basis of the responses received in the course of the market investigation,
       the Commission was able to reconstruct an approximation of the market shares of
69  Non-Horizontal Merger Guidelines, paragraph 58.
70  Non-Horizontal Merger Guidelines, paragraph 61.
                                                          14
 ---pagebreak---        the other competitors active on the dietetic pet food market in Denmark and
       Sweden.
       Table 2: Market shares of dietetic pet food sold through veterinary outlets in
       Denmark and Sweden (market reconstruction)
                                              Denmark                                  Sweden
        Mars                                    35-45%                                  50-60%
        Hill's                                  40-50%                                  30-40%
        Dechra                                   5-15%                                   5-10%
        Spectrum Brands                           < 5%                                    < 1%
        Virbac                                    < 5%                                    < 1%
        Nestlé                                    <1%                                     <5%
        Other                                     < 1%                                    < 1%
       Source: Market reconstruction based on the data collected in the course of the market investigation.
6.2.2. Downstream market – retail of dietetic pet food via the veterinary channel
(67)   When calculating the shares of the Parties in the downstream markets, it is
       necessary to distinguish the shares of AniCura, which sources and resells dietetic
       pet food, from the shares of VetFamily member clinics. As explained above at
       paragraph (4), while VetFamily clinics are independent, they sign up to a
       purchasing framework controlled by AniCura through which they source a
       number of products for their practices, including dietetic pet food. The reasons
       why VetFamily shares are considered as shares controlled by the merged entity,
       in the competitive assessment, are assessed below at Section 6.3.2.4.
(68)   While the geographic market definition is local, the Notifying Party was only able
       to provide complete market shares on the basis of turnover at national level. The
       narrowest geographic market share data that the Notifying Party was able to
       provide was at regional level (i.e. broader than local). The regional market shares
       are set out in the competitive assessment at country level at Sections 6.4, 6.5 and
       6.6.
(69)   In the downstream market, AniCura's and VetFamily member clinics' market
       shares in the provision of veterinary services, which were used as a proxy in the
       absence of reliable data on the shares in the retail sale of dietetic pet food, are also
       significant. These market shares are based on the veterinary clinics' turnover. The
       Notifying Party also provided market shares based on numbers of veterinary
       clinics and on the numbers of veterinarians. The Commission considers that
       shares based on turnover are likely to be closest in terms of judging the economic
       importance of the downstream clinics and consequently of their sales of dietetic
       pet food.
(70)   As illustrated in Table 3 below, AniCura accounts for between [20-30]% and [20-
       30]% of the market in Sweden, Denmark and the Netherlands, and when
       AniCura's market shares are considered together with VetFamily's, these increase
       to [40-50]% in Sweden, [40-50]% in Denmark and [30-40]% in the Netherlands.
                                                          15
 ---pagebreak---          Table 3: Share estimates for AniCura’s and VetFamily's (projected)
         provision of veterinary services in the affected markets (2017, based on
         turnover)
                                                                   AniCura &        Other clinics (not
                                  AniCura
                                                VetFamily           VetFamily          belonging to
                                   market
                                               market share          combined           AniCura or
                                   share71
                                                                  market share         VetFamily)
               Sweden            [20-30]%        [20-30]%            [40-50]%            [50-60]%
              Denmark            [20-30]%        [20-30]%            [40-50]%            [50-60]%
          Netherlands72          [20-30]%        [10-20]%            [30-40]%            [60-70]%
              Germany              [0-5]%         [0-5]%              [5-10]%           [90-100]%
               Austria             [0-5]%         [0-5]%               [0-5]%           [90-100]%
                Italy              [0-5]%         [0-5]%               [0-5]%           [90-100]%
               France              [0-5]%         [0-5]%               [0-5]%           [90-100]%
                Spain              [0-5]%         [0-5]%               [0-5]%           [90-100]%
         Source: Parties' response to RFI 12
(71)     Finally, it must be noted that VetFamily has undergone a rapid expansion and is
         projected to continue to grow at a fast rate. Since AniCura purchased VetFamily
         in 2014, VetFamily has increased its membership from 120 clinics to over 1000
         clinics.73 By way of illustration of this rapid growth, between the date of
         notification and the date of this Decision, the number of VetFamily member
         clinics has increased by over [100-200] in total (by […]).74
6.3.     General features of the markets
6.3.1. Notifying Party arguments
(72)     The Notifying Party argues that the veterinary channel is of limited importance to
         the distribution of pet food.
(73)     First, the Notifying Party estimates that no more than [20-30]% of overall pet
         food sold is distributed via veterinary practices (comprised almost entirely of
         dietetic pet food).75 Royal Canin's internal strategy documents suggest that in
         2016, the veterinary dog and cat food channel represented less than [0-20]% of
         the global veterinary market, and that although veterinarians are highly trusted by
71  The AniCura market share column includes projected share of 'pipeline' clinics, taking into account
    any additional clinics for which an SPA or LOI has been signed (but completion has not occurred as at
    the day these data were provided by the Parties).
72  The AniCura market share in the Netherlands includes a [0-5]% market share attributed by the Parties
    to Sterkliniek, AniCura's partnership network of independent clinics that operates only in the
    Netherlands.
73  Parties' response to RFI 5, Annex 7.1.
74  Parties' responses to RFI 12, question 4, and RFI 9, question 1.
75  Form CO, paragraph 202.
                                                         16
 ---pagebreak---         pet owners on the topic of pet food, only [0-20]% of pet owners buy pet food at a
        veterinary clinic.76
(74)    Second, the Notifying Party also claims that even for those types of pet food that
        rely more heavily on veterinary distribution recommendation (i.e. dietetic pet
        food), there are ethical rules and behaviour driving the veterinary profession that
        prevent a veterinarian from pursuing commercial ends and instead ensure that the
        veterinary professional continues to recommend the best type of dietetic pet food
        for the pet in question.77
(75)    Third, according to the Notifying Party, the existence of VetFamily and
        Sterkliniek are not relevant for the assessment of the transaction because clinics
        are free to procure pet food outside of the framework agreements concluded by
        and for the benefit of these purchasing organisations.78
(76)    Fourth, the Notifying Party claims that the online channel is increasingly
        important in the distribution of pet food79 and that there will remain significant
        alternative routes to market following the Transaction.80
6.3.2. Commission assessment
(77)    The results of the market investigation in this case paint a different picture of the
        dietetic pet food market.
6.3.2.1. Veterinary channel as an essential distribution outlet for dietetic pet food
(78)    Based on the results of the market investigation, the Commission finds that the
        veterinary channel is an essential distribution outlet for dietetic pet food, as it is
        indispensable to reach customers through a prescribing veterinarian.
(79)    First, the veterinary channel is deemed by market participants to be the most
        important channel for the distribution of dietetic pet food. According to market
        participants' estimates, the veterinary channel accounts for over 90% of dietetic
        pet food sales, especially in certain markets, like the Nordics.81
(80)    Second, the veterinary channel is important not simply as a retail outlet for
        physical sale of dietetic pet food, but also as an indirect promoter of dietetic pet
        food products, since without a recommendation by a veterinarian, pet owners are
        not likely to set out to purchase a specific dietetic pet food product by
76  Form CO, paragraph 202.
77  Form CO, paragraphs 203-206.
78  Parties' Submission in relation to the VetFamily arrangements, 1 October 2018.
79  Form CO, paragraph 199.
80  Form CO, paragraphs 213-214
81  Responses to RFI to Competitors, question 12.
                                                        17
 ---pagebreak---        themselves.82 For instance, on the importance of a veterinarian’s
       recommendations for the sale of dietetic pet food, a competitor explained that:
       "[v]eterinarians are already the main influencers on the worldwide global pet
       food market and from far, the main distribution channel for “therapeutic” pet
       food."83
(81)   Third, dietetic pet food suppliers see access to veterinarians as a means of
       promoting their products to them as essential.84 They invest heavily in promoting
       their dietetic pet food products to veterinarians by attending individual clinics,
       giving training and educational seminars to veterinarians in clinics as well as at
       conferences for veterinary professionals, and providing written product
       information and promotional materials to be displayed in veterinary clinics.85 As
       one competitor explains, "[h]aving access to the staff in vet clinics is critical for
       pet food manufacturers because after attending training seminars in the clinics,
       vets are likely to have understood better the mode of action of the technology in
       question and the benefits of the products and are therefore more likely to
       recommend that specific brand for a pet who needs this type of diet."86
(82)   Fourth, veterinarians have control over what dietetic pet food they recommend,
       this recommendation being typically trusted by pet owners. "People put their trust
       in a vet",87 explained one competitor. Another competitor explained that
       "veterinarians play a key role in determining the appropriate food and their
       customers (pet owners) heavily rely on their veterinarian's recommendations
       before baking a purchase."88 […].89 The results of the market investigation reveal
       that pet owners follow the veterinarian's recommendation as to the type, as well as
       the brand of dietetic pet food: an overwhelming majority of veterinarians stated
       that pet owners typically follow their recommendations,90 with the majority also
       agreeing that pet owners tend to stay loyal to the brand originally recommended,91
82 Minutes of a call with a competitor, 1 August 2018, 14:00 CET.
83 Response to RFI to Competitors, question 21.
84 Minutes of a call with a competitor, 1 August 2018, 14.00 CET.
85 Response to RFI to Competitors, question 17, question 19; Minutes of a call with a competitor, 1
   August 2018, 14.00 CET.
86 Minutes of a call with a competitor, 1 August 2018, 14.00 CET.
87 Minutes of a call with a competitor, 13 September 2018, 10.00 CET.
88 Response to RFI to Competitors, question 4.
89 Form CO, paragraph 202.
90 Responses to Q1 - Questionnaire to Veterinarians, question 14.
91 Responses to Q1 - Questionnaire to Veterinarians, question 12.
                                                      18
 ---pagebreak---          with one veterinarian stating that " *if the need for the diet has been understood,
         [pet owners] stick to the once-prescribed product".92
(83)     As another veterinarian stated, "[m]ost pet owners follow our recommendations,
         as it is the best for their pet",93 and yet another explained that "especialy [sic] in
         cases with Food allergies, owners tend to stick with a diet that reduces the
         animal's medical problems."94 Veterinarians based in Denmark explained that
         owners "dont [sic] look for other options" if the dietetic pet food "works for their
         pet, and the pet likes it",95 with another explaining that "[o]wners tend to stick" to
         the dietetic pet food prescribed by the veterinarian "as they consider it to be part
         of the treatment plan for a specific disease or as a preventive [sic] measure
         against developement [sic] of a more specific condition".96
(84)     Fifth, similar views were expressed by the competitors, with all but one agreeing
         that pet owners typically follow vet recommendations.97 One competitor
         remarked that pet owners who are prescribed a dietetic pet food product by their
         veterinarian "are usually loyal to the brand and stay with these products",98 and
         another explained that in general, "a very high percentage […] of consumers will
         follow a recommendation of their vet which food to give their pets. An equally
         high amount of consumers will be loyal to that recommended brand throughout
         their pet's live [sic]".99
(85)     Sixth, Mars itself recognises in internal documents the key importance of
         veterinary visits and prescription as a key opportunity of driving sales of its
         products. For example, in internal documents […]100 […].101
92  Responses to Q1 - Questionnaire to Veterinarians, question 12.1, *courtesy translation from original
    German "wenn die Notwendigkeit der Diät verstanden wurde, bleiben sie bei dem einmal verordneten
    Produkt".
93  Responses to Q1 - Questionnaire to Veterinarians, question 11.1.
94  Response to Q1 - Questionnaire to Veterinarians, question 11.1.
95  Response to Q1 - Questionnaire to Veterinarians, question 12.1.
96  Response to Q1 - Questionnaire to Veterinarians, question 12.1.
97  Responses to RFI to Competitors, question 8; one competitor stated that "owners may choose not to
    follow veterinary advice and continue or revert to feeding conventional foods." See also Minutes of a
    call with a competitor, 1 August 2018, 14:00 CET.
98  Response to RFI to Competitors, question 8.
99  Response to RFI to Competitors, question 21.
100 Parties' response to RFI 1, Annex 12.4.7.
101 Parties' response to RFI 1, Annex 12.1.7.
                                                       19
 ---pagebreak--- 6.3.2.2. Veterinary prescriptions are affected by competition and commercial strategies of
         pet food manufacturers
(86)    Based on the results of the market investigation, the Commission finds that
        competition among pet food manufacturers, and their commercial strategy, affect
        the choices made by veterinarians as to the prescribed dietetic pet food.
(87)    First, given that a veterinarian's recommendation is generally required to start
        purchasing a dietetic pet food product, and that consumers tend to follow the
        veterinarian's recommendation, the choice as to the type and brand of dietetic
        product a consumer ends up buying is made by the veterinarian, and not by the
        consumer. As one veterinarian in Sweden explains: "Typically that is the
        available [dietetic pet] food at the local vet so they buy that. They do not have
        many choices. I have 85% royal canine and 15% Hills on my shelves."102 The
        results of the market investigation also show that pet owners are not very likely to
        request generic or alternative dietetic pet food products to the ones recommended
        by their veterinarians, with only a minority of veterinarians reporting the
        occurrence of such requests.103 This means that the choice of a local veterinary
        clinic to stock particular types and brand(s) of dietetic pet food is very likely to
        limit the choice that could otherwise be available to consumers.
(88)    Second, whilst veterinarians may be guided by their ethical obligations and seek
        to have on offer a range of dietetic pet food that best suits the needs of the pets
        they treat,104 the choice of brands to stock on the veterinary clinic's shelves (and
        subsequently to recommend) may be influenced by economic considerations
        (such as ease of procurement, rebates or other special pricing arrangements with a
        supplier).105
(89)    Third, many market participants consider that the Transaction may have an
        impact on the market because of the economic or commercial considerations that
        influence a veterinarian’s choice of dietetic pet food brands in veterinary clinics.
        For example, one veterinarian's view is that "allowing Mars to acquire Anicura is
        a very bad idea. Veterinary practice needs to be independent to be able to remain
        objective and advise quality instead of only the products that the boss
        wants/produces" and that "health care should be about health and not about what
        is commercially attractive."106 A competitor opined that "the free medical
        decision of the veterinarian who runs an Anicura Clinic as to which diet feed he
        recommends will be strongly influenced by the acquisition and the sales
        opportunities for us and other competitors will be severely impeded."107
102 Response to Q1 - Questionnaire to Veterinarians, question 12.
103 Response to Q1 - Questionnaire to Veterinarians, question 9 and question 9.1.
104 Responses to Q1 - Questionnaire to Veterinarians, question 8.1, question 11.1.
105 Responses to Q1 - Questionnaire to Veterinarians, question 17.1.
106 Response to Q1 - Questionnaire to Veterinarians, question 17.
107 Response to RFI to Competitors, question 4.
                                                       20
 ---pagebreak--- (90)    Fourth, the consumer's choice of veterinarian tends to be guided by factors other
        than the availability and price of dietetic pet food sold in-store. The choice of
        veterinarian is usually made on the basis of the type, quality and price of
        veterinary services, as well as the geographic location of the clinic. The sale of
        dietetic pet food is only an ancillary activity for veterinarians. This means that pet
        owners are not likely to switch veterinarians simply because their preferred brand
        of dietetic pet food is not available in-store.
(91)    Fifth, there is evidence that exclusive purchasing arrangements between a chain
        of veterinary clinics and a supplier lead to a significant reduction in the sale of
        competing brands of dietetic pet food products.108
6.3.2.3. Online sales are not an alternative channel to veterinary prescribed dietetic food
(92)    Based on the results of the market investigation, the Commission finds that online
        sales of dietetic food products are limited, and do not affect the primary
        importance of the veterinary channel in the retail of dietetic pet food.
(93)    First, the market investigation confirmed that the online channel serves as a
        replenishment channel only, with consumers turning to buying dietetic pet food
        online only after the initial recommendation for a specific type (and often brand)
        of dietetic pet food has been made and the first purchase(s) of the product have
        taken place in the veterinary clinic. Indeed, as a competitor explained, "the online
        channel is not a substitute to the vet channel to enter or expand in the market for
        [dietetic] pet food."109 This appears to be corroborated by Mars' internal
        documents.110
(94)    Second, in any event, the online market accounted for a limited proportion of
        sales of dietetic pet food. The Notifying Party estimates that [10-20]% and [10-
        20]% of sales of dietetic pet food in Sweden and Denmark respectively are made
        online.111
(95)    This is broadly in line with estimates by competitors. Competitors estimate that
        less than 10% of their sales of dietetic pet food take place online in Denmark and
        no more than 20% (and often significantly less) in Sweden.112 Whilst online sales
        are growing, they appear to be more important in countries in Europe other than
        Sweden and Denmark.113
108 Minutes of a call with a competitor, 1 August 2018, 14.00 CET.
109 Minutes of a call with a competitor, 1 August 2018, 14.00 CET.
110 Mars' internal documents […].
111 Form CO, paragraphs 255 and 309
112 Responses to RFI to Competitors, question 12.
113 Form CO, paragraphs 255 and 309; Responses to RFI to Competitors, question 12.
                                                       21
 ---pagebreak--- 6.3.2.4. VetFamily affects the procurement choices of its members.
(96)    Based on the available evidence and on the results of the market investigation, the
        Commission finds that, despite the fact that VetFamily clinics are independent,
        their membership in the programme affects their procurement choices.
(97)    First, even if there is no contractual requirement for VetFamily member clinics to
        purchase dietetic pet food under the VetFamily framework agreements (and no
        restrictions on purchasing outside those agreements), such purchases are strongly
        encouraged through contractual mechanisms.
(98)    For example, a VetFamily contract for Denmark states that […].114
(99)    Second, […].
(100) Third, internal documents show that compliance of member clinics and that
        compliance in general already tends to be very high, between […]. Furthermore,
        compliance by VetFamily member clinics is directly rewarded through rebates
        from suppliers to the central VetFamily entity for purchases made under the
        framework agreements, and which account for […] of VetFamily's revenues.115
        This in turn reinforces further compliance with the framework agreements as the
        central VetFamily entity is directly incentivised to encourage independent clinics
        to purchase through the framework contracts, while the independent VetFamily
        clinics are able to benefit from lower prices.
(101) Fourth, in light of the particular features of the dietetic pet food market outlined
        above, and in particular of the fact that (i) recommendations by veterinarians
        drive sales and (ii) the assortment of dietetic pet food stocked by veterinary
        clinics limits and to a great extent determines consumer choice, it is competition
        that takes place on the upstream market that matters the most. For these reasons,
        purchasing alliances or buying groups (of which VetFamily is the largest) 116 play
        a very important role in driving product choice, by effectively incentivising
        veterinary clinics to stock a particular range of brands. Given the limited shelf
        space in veterinary clinics, preference is therefore more likely to be given to
        products procured at centrally-negotiated rates than to products for which a
        veterinary clinic would otherwise have to negotiate independently.
(102) Fifth, VetFamily arranges meetings for members once or twice per year, in order
        to discuss topics relevant for veterinary practice and to provide practice managers
        and opportunity to share their experiences and discuss best practices.117
        VetFamily also provides veterinary and leadership training for its members118 and
        in Denmark acts as a forum where professionals from its member clinics discuss
114 Parties' response to RFI 5, question 3.
115 Parties' response to RFI 5, question 5; Parties' response to RFI 5, Annex 7.12
116 Parties' response to RFI 10, question 15.
117 Parties' response to RFI 7, to question 3(b).
118 Submission in relation to the VetFamily arrangements, page 4.
                                                          22
 ---pagebreak---         best practices and carry out training.119 These activities can influence VetFamily
        members' choice of dietetic pet food to stock in veterinary clinics and/or
        recommend to pet owners.
(103) Sixth, VetFamily provides a range of other benefits to incentivise its members.
        For example, in Denmark, VetFamily provides marketing support to its members,
        primarily by helping clinics build websites, organising social media campaigns,
        and coordinating promotional campaigns with suppliers.120 In Denmark,
        VetFamily also provides the VetPro range of own private label pet food, which
        consumers can buy from VetFamily members that choose to stock it, as well as in
        the VetFamily webshop.121 In other countries, VetFamily also occasionally
        distributes to its members marketing or campaign materials on behalf of selected
        suppliers.122 VetFamily has also developed a preventative care plan for pets,
        which is offered to customers on a subscription fee basis. VetPlan is managed
        with a specially developed IT system […].123
(104) In conclusion, VetFamily affects the procurement choices of member clinics, and
        as VetFamily is controlled by AniCura, the downstream shares will be assessed as
        accruing to the merged entity in the context of the competitive assessment of the
        transaction.
6.4.    Denmark
6.4.1. Customer foreclosure
6.4.1.1. The Notifying Party's arguments
(105) The Notifying Party argues that no competition concerns arise as a result of the
        Transaction, and in particular that there is no prospect of customer foreclosure, or
        input foreclosure, for a number of reasons. First, Mars' shares upstream and
        AniCura's shares downstream are not significant. Although Mars' shares may be
        above [30-40]% in a number of markets, significant competitors exist and
        continue to exert competitive pressure. Similarly, AniCura's shares in veterinary
        services are limited, representing less than [10-20]% of practices, less than [20-
        30]% of veterinary service revenues and less than [10-20]% of veterinarians at
        national level.
(106) Second, the Notifying Party refers to an analogous situation in the United States,
        in order to argue that no competition concerns should arise. In particular, Mars
        notes that it already owns veterinary clinics in the United States where […].
        Further, sales data indicates that […]. Mars argues that it intends to apply the
        same strategy in Europe, through its acquisition of AniCura.
119 Form CO, paragraph 297.
120 Form CO, paragraph 29; Parties' response to RFI 7, question 3(b).
121 Form CO, paragraph 300.
122 Parties' response to RFI 7, question 3(b).
123 Parties' response to RFI 7, question 3(b).
                                                       23
 ---pagebreak---  ---pagebreak---          during the course of the market investigation, the Commission notes that in
         Denmark, the main four competitors (Hill's, Dechra, Spectrum and Virbac) sold
         between one third and two thirds of their total sales in Denmark through AniCura
         and VetFamily.125
(113) When assessing the ability to foreclose, the Commission takes into account
         whether there are sufficient alternative outlets downstream for upstream
         competitors to sell their output.126
(114)     In the present case, the Commission considers that in Denmark there are limited
         alternative outlets. Together, AniCura and VetFamily represent the largest retail
         outlet in Denmark, with a combined downstream market share of veterinary
         services of almost [40-50]% (see Table 4 above). The importance of AniCura and
         VetFamily as a retail outlet is corroborated by the fact that they represent a
         significant share of Mars' competitors sales of these products in Denmark. Other
         retail outlets are much more fragmented and sales through the online channel are
         low (on average 5-10% of sales are made online). Further, as noted at paragraph
         (93) the online channel merely serves as a replenishment channel.
           (B)        Incentive to foreclose
(115) Pet food purchases by veterinary clinics account for a limited proportion of their
         total procurement spend for veterinary items. For example, VetFamily members
         spent approximately [20-30]% of their purchases on dietetic pet food; this was
         significantly outweighed by other categories of spending, such as […].127 In
         addition, the sale of pet food by veterinary clinics is ancillary to their main
         activity of providing veterinary services to sick pets. For these reasons, the
         Commission considers that, if prices of dietetic pet food rise, veterinary clinics
         are unlikely to forego the convenience of purchasing through the VetFamily
         framework agreements in order to negotiate new contracts with other dietetic pet
         food suppliers. Rather, they are likely to pass those price increases to their
         customers.
(116) In addition, as noted at Section 6.3.2, upstream competition in this market is
         particularly important, while downstream switching is low. The purchase of
         dietetic pet food by customers visiting veterinary clinics is ancillary to the main
         purpose of the visit, which is to obtain veterinary services for their sick pet.
         Consequently, the Commission is of the view that the customer visiting a
         veterinary clinic is unlikely to switch away from a vet clinic if prices of dietetic
         pet food were to rise, or if the choice of dietetic pet food was limited to Mars'
         Royal Canin brand. This is particularly the case because Royal Canin is the
         leading brand of dietetic pet food in the EU and has the most extensive range of
         dietetic pet food. It is consequently likely to be an adequate substitute for any
         other brands that the veterinarian may have been stocking previously.
125 Response to RFI to Competitors, question 12.
126 Non-Horizontal Merger Guidelines, paragraph 61.
127 Parties' responses to RFI 7, question 3.
                                                    25
 ---pagebreak--- (117) In addition, the Commission notes that Mars' incentive to foreclose is increased in
        particular for the VetFamily member clinics. This is because VetFamily members
        are independent veterinary clinics and would not become part of the merged
        entity. Consequently, a reduction of choice or an increase in prices of dietetic pet
        food may not be offset by any decrease in customers for veterinary clinics, thus
        reducing the likelihood of a loss of profits for the merged entity in the
        downstream market.
(118) Further, the Commission notes that a merged entity's incentive to pursue a
        customer foreclosure strategy is stronger, where the upstream division of the
        merged entity can benefit from possibly higher price levels resulting from
        foreclosure of upstream rivals.128 Mars' shares are significant upstream: in the
        market for manufacture and supply of dietetic pet food on the basis of its own
        estimates, Mars has a market share of [30-40]% in Denmark. However, the
        Commission considers that this may underestimate Mars' position and, as
        mentioned in paragraph (66), on the basis of the Commission's market
        reconstruction, Mars has a slightly higher market share within a range of 35-45%.
        The significant market position of Mars upstream would allow it to benefit from
        higher price levels upstream following the foreclosure strategy.
          (C)       Overall impact of customer foreclosure
(119) The Commission considers that the merged entity may foreclose access to a
        significant customer base to its actual or potential rivals in the upstream market
        and reduce their ability or incentive to compete in Denmark.129 As a result, also
        rival veterinary clinics in the downstream market are likely to be put at a
        competitive disadvantage, in particular due to raised costs of dietetic pet food.
        This in turn may allow the merged entity to profitably raise prices also in the
        downstream market.
(120) A number of market participants raised concerns that Mars could pursue a
        strategy to foreclose upstream competitors from the downstream retail channel.
        For example, one competitor noted that post-Transaction, Mars would likely give
        preferential treatment to its own brands in its downstream retail outlets (AniCura
        and VetFamily), resulting in reduced access to a key distribution channel and
        directly impacting their sales: "If this were to go ahead, Mars would have a
        dominant position in the Veterinary channel because they would own both the
        distribution channel and Food brands. They would most likely sell their own
        brands as a priority and block other brands including our own from this channel.
        This could potentially cut out a distribution channel/ key customer for our brands
        and reduce our selling potential."130
(121) Another competitor noted that Mars would, post-Transaction, sell its own
        products in the AniCura clinics, reducing the available retail outlets for its
        competitors: "With the acquisition of AniCura by Mars we expect that a number
128 Non-Horizontal Merger Guidelines, paragraph 70.
129 Non-Horizontal Merger Guidelines, paragraph 72.
130 Response to RFI to Competitors, question 4.
                                                    26
 ---pagebreak---         of clinics will take on Mars/Royal Canin’s pet food products, thereby reducing
        opportunities for [COMPETITOR] and other pet food competitors. Mars will
        most probably influence which pet foods the vet clinics in AniCura will use and/or
        sell."131 Similar concerns were raised by veterinarians contacted during the
        market investigation, for example: “It is quite clear that Mars would push their
        own food lines into “their” clinics, so competition in the market would be
        reduced.” Another one mentioned, “AniCura-member clinics may sell only Royal
        Canin products and by this strengthens the brand.”132
(122) AniCura and VetFamily's combined downstream share of veterinary services is
        high, at [40-50]%. This means that almost half of the downstream retail outlets
        for dietetic pet food would effectively controlled by Mars, post-Transaction and
        represent channels from which Mars' competitors may be foreclosed. Further, the
        Commission notes that a sufficiently large fraction of upstream output appears to
        be affected by revenue decreases, due to the high percentage of competitor sales
        that are currently sold through AniCura and VetFamily, as mentioned at
        paragraph (112).
(123) The Commission considers that by restricting access to a significant customer
        base, the merger may put competitors at a competitive disadvantage, by
        increasing their costs to access the remaining customers. These increased costs
        could have an impact on their revenue streams and their ability to recoup costs.133
(124) In particular, for the competitors of Mars in dietetic pet food, the costs of
        establishing and maintaining presence in a country are high. As noted in Section
        6.3.2 the importance of accessing the veterinary channel is crucial in order to sell
        dietetic products. Consequently, there are a number of important costs linked to
        local presence and developing relationships with veterinary clinics. The costs of
        entering a market (other than R&D spend and time it takes to develop a range of
        therapeutic diet) include distribution, marketing, brand awareness building (e.g. at
        veterinarian conferences and trade fairs), relationship building with veterinarians
        (visits and training in clinics, dedicated staff), staff training.134 These costs are
        estimated, on average, at a minimum of EUR 0.5 million up to several million
        (EUR 5 million) depending on market size, characteristics, entry strategy and
        level of market presence.135
(125) If Mars' competitors' revenue streams are reduced upstream, the Commission
        considers that the merger may reduce their ability and incentive to invest in cost
        reduction, R&D and product quality.136 This is particularly the case for the
        smaller competitors such as Dechra, Spectrum and Virbac, whose sales are
131 Response to RFI to Competitors, question 4.
132 Responses to Q1 - Questionnaire to Veterinarians, question 17.
133 Non-Horizontal Merger Guidelines, paragraph 72.
134 Response to RFI to Competitors, questions 19 and 20.
135 Response to RFI to Competitors, questions 19 and 20.
136 Non-Horizontal Merger Guidelines, paragraph 65.
                                                       27
 ---pagebreak---          significantly lower than Mars or Hill's. The Commission considers that the
         weakening of these competitors or their exit from the market may result in a loss
         of choice and of price competition in the upstream market, thereby enabling the
         merged entity to profitably raise prices in the downstream market.137
(126) Evidence that the merged entity may raise barriers to entry to potential
         competitors, making entry upstream by potential entrants unattractive by
         significantly reducing their revenue prospects138 was also provided during the
         market investigation. In particular, competitors not already active in the Nordics,
         felt that entry, which is already difficult, would become even more so as a result
         of the Transaction.139
(127) The Commission considers that as a result of any potential Mars' customer
         foreclosure strategy, there is a risk that prices for dietetic pet food sold in the
         veterinary channel could increase. This risk of increased prices for dietetic pet
         food sold through the veterinary channel was highlighted by market participants,
         for example one veterinarian noted that, “AniCura destroys the market, if they
         fuse, they will be market leader and dictate prices.”140
(128) The market investigation also highlighted concerns regarding reduction of choice.
         In particular, market participants were concerned that as a result of the merger,
         veterinary clinics owned by Mars would be obliged to sells Mars' brand of dietetic
         food (Royal Canin) and that this could lead to a reduction in choice for the
         customer. For example, one competitor noted: "We do expect the acquisition to
         impact our business. Obviously all clinics will carry the RC [Royal Canin] brand
         as preferred/recommended brand. And since RC has by far the largest number of
         SKUs141 of any therapeutic pet food company – this will effect and influence
         space management and limit competitors opportunities and restrict their number.
         Few clinics have the space and capacity to handle more than 3 brands."142
(129) In addition, a number of veterinarians expressed concerns that as a result of the
         merger, veterinary clinics belonging to Mars may no longer offer impartial
         advice, but would rather follow commercial imperatives to recommend Royal
         Canin pet food rather than being allowed to choose freely. For example, one
         veterinarian stated: "we think it could be problematic if animal hospitals are
         owned by a pet Food company. This might change the pet food market in an
         unfair manner. Furthermore, medical decisions could be influenced by economic
         interests."143 A competitor raised similar concerns, noting that: "Veterinarians are
137 Non-Horizontal Merger Guidelines, paragraph 72.
138 Non-Horizontal Merger Guidelines, paragraph 75.
139 Response to RFI to Competitors, question 3.
140 Responses to Q1 - Questionnaire to Veterinarians, question 17.
141 Stock keeping unit (SKU) refers to a distinct product for sale and has its own unique identifier or code.
142 Response to RFI to Competitors, question 11.
143  Response to Q1 - Questionnaire to Veterinarians, question 17.
                                                         28
 ---pagebreak---          already the main influencers…and… the main distribution channel for
         “therapeutic” pet food. If veterinarians were to lose their impartiality whilst
         recommending or prescribing such or such "therapeutic" pet food brand, it could
         lead to create / reinforce Mars dominant position in many countries."144 Another
         competitor added: "as a consequence Mars as a pet food producer owns at the
         same time vet clinics where the products are used and sold. This might create a
         conflict between the commercial interest and the request for transparency in the
         vet profession."145
(130) The Notifying Party refers to the market situation in the United States, where
         Mars owns veterinary clinic chains, to support its argument that Mars would not
         foreclose customers in markets such as Denmark.
(131) However, the Commission notes that during the course of the merger
         proceedings, [AniCura future plans].146 […].147
(132) The Commission considers it likely that […] significantly reduce the number of
         suppliers of dietetic pet food able to access the retail channels of AniCura and
         VetFamily. Further, the Commission considers it likely, […] that Mars, post-
         Transaction would have been selected […].
(133) The Commission also notes that as a result of the Transaction, Mars may face a
         reduction of countervailing buyer power. Mars' own internal documents note that
         […]148 Post-Transaction in Denmark, Mars would no longer be subject to the
         same competitive pressure in pricing negotiations, due to the fact that it would
         then control a significant downstream purchaser (AniCura) that also operates a
         purchasing alliance.
(134) As explained above at Section (115) to (116), in view of the limited switching
         capability of downstream end customers, upstream competition has a prominent
         role in these markets, thereby making it likely that reduced upstream competition
         will result in higher downstream prices.
6.4.2. Other non-coordinated effects: access to confidential information of competitors
(135) Market participants also raised concerns that post-Transaction, Mars, as the owner
         of a downstream veterinary clinics, would gain an insight into the pricing of its
         competitors, to the extent that AniCura would continue to purchase dietetic pet
         food from these competitors. Examples of competitively sensitive information
         include: prices, quantities, level and timing of price increases, promotional
         activity grids, special pricing conditions, information about innovation and new
         product launches.
144 Response to RFI to Competitors, question 21.
145  Response to RFI to Competitors, question 21.
146 Parties' response to RFI 8, question 1.
147 Parties' response to RFI 8, questions 1-4.
148 Parties' response to RFI 5, Annex 12.4.6.
                                                  29
 ---pagebreak--- (136) The Commission notes that post-Transaction, through its ownership of
        VetFamily, Mars would obtain knowledge about its competitors' pricing (and
        other competitively sensitive information) to VetFamily clinics i.e. Mars'
        downstream competitors. As a result, and in line with what is described above in
        relation to the customer foreclosure concerns, Mars could subsequently adapt its
        commercial strategy to undermine any attempt by competitors to sell to [40-50]%
        of the market that would be controlled by Mars post-Transaction (i.e. Anicura's
        and VetFamily clinics). This is likely to put competitors at a competitive
        disadvantage, thereby dissuading them to enter or expand in the market.149
(137) For example, one competitor noted that the acquisition "will allow Mars to have
        access to significant sensitive and confidential information regarding
        [COMPETITOR] as well as other pet food suppliers."150 Another competitor
        raised similar concerns, noting that: "As [Mars] are worldwide and European co-
        leaders in the "therapeutic" pet food business, we believe that it might impact
        negatively the relationship of the other players with those clinics (risk of leak of
        confidential information, lack of trust, partial choice of brand or even
        dereferencing of brand….)."151
(138) On the basis of the considerations in paragraphs (108) to (138) and in light of the
        results of the market investigation and of all the evidence available to it, the
        Commission concludes that the Transaction raises serious doubts as to its
        compatibility with the internal market as regards its impact on competition for the
        retail of dietetic pet food through the veterinary channel in Denmark, on the basis
        of (a) customer foreclosure resulting in increased prices for dietetic pet food sold
        through the veterinary channel, reduced choice, quality and innovation in dietetic
        pet food; and (b) the access to confidential information of competitors.
6.4.3. Input foreclosure
6.4.3.1. The Commission's assessment
(139) While the Commission notes that Mars has a strong position upstream (although it
        is the number 2 player in Denmark), and consequently may have the ability to
        restrict downstream customers from access to its dietary pet food products, the
        Commission considers that Mars would not have the incentive to foreclose. In its
        assessment, the Commission looks at whether the foreclosure would be profitable
        for the merged entity and the extent to which customers can be diverted away
        from downstream rivals. The effect is greater where the input, in this case dietetic
        pet food, represents a critical component of downstream rivals’ costs.152
(140) In this case, because the sale of dietetic pet food is not a key input to veterinary
        clinics, but is rather ancillary to the provision of veterinary services, the
        Commission considers that Mars would be unlikely to successfully divert
149 Non-Horizontal Merger Guidelines, paragraph 78.
150 Response to RFI to Competitors, question 4.
151 Response to RFI to Competitors, question 4.
152 Non-Horizontal Merger Guidelines, paragraphs 40-42.
                                                    30
 ---pagebreak---         customers away from AniCura’s downstream rivals, by restricting its supply of
        dietetic pet food to them. Rather, the Commission is of the view that Mars would
        face a greater risk of losing dietetic pet food sales, if it attempted an input
        foreclosure strategy regarding the supply of dietetic pet food. For these reasons,
        the Commission considers that Mars has the incentive to sell its dietetic pet food
        in as many retail outlets as possible.
(141) On the basis of the above, the Commission concludes that the Transaction does
        not raise serious doubts as to its compatibility with the internal market as regards
        its impact on competition for the retail of dietetic pet food through the veterinary
        channel in Denmark on the basis of input foreclosure.
6.4.4. Horizontally affected markets
(142) The Notifying Party notes that there is a minimal horizontal overlap between the
        Parties’ activities in the supply of pet food in Denmark, which gives rise to a
        horizontally affected market. This is because AniCura sells limited quantities of a
        private label dietetic pet food product, VetPro, through its clinics and the
        VetFamily network and a webshop. These sales represent [0-5]% of pet food sold
        through the veterinary channel in Denmark.153
(143) The Notifying Party argues that this overlap will not cause a significant
        impediment to effective competition on any relevant market in Denmark,
        because: (i) the share increment attributable to AniCura’s activities is negligible
        and will not affect Mars’ competitive position; (ii) there is no overlap in the
        manufacture of pet food (since VetPro is manufactured by a third-party pet food
        supplier), so the Transaction will not remove production capacity from the
        market; (iii) the overlap that exists is very limited, since it relates solely to the
        supply of branded pet food in VetFamily and AniCura clinics; and (iv) the Danish
        pet food market has many suppliers that will act as a competitive constraint to the
        merged entity.154
(144) As regards the Commission's assessment, the Commission notes that while the
        merged entity would have a significant combined share upstream, the horizontal
        market share increment arising from the merger is extremely limited ([0-5]% at
        national level). In addition, the Transaction does not give rise to any increase in
        the manufacturing of dietetic pet food, since VetPro is manufactured by a third-
        party supplier. Finally, the Commission notes that this horizontal overlap will be
        removed as a result of the Commitments offered by the Parties, as described in
        Section 7.
(145) On the basis of the above, the Commission therefore concludes that the
        Transaction does not raise serious doubts as to its compatibility with the internal
        market as regards its impact on competition for the retail of dietetic pet food
        through the veterinary channel in Denmark on the basis of horizontal overlaps.
153 Form CO, paragraphs 329-330.
154 Form CO, paragraphs 330-332.
                                                 31
 ---pagebreak--- 6.5.    Sweden
(146) The Notifying Party argues that no competition concerns arise in Sweden as a
        result of customer foreclosure or input foreclosure, for the reasons set out at
        Section 6.4.1.1.
6.5.1. Customer foreclosure
6.5.1.1. The Commission's assessment
(147) On the basis of the assessment set out below and the arguments also referred to in
        Section 6.4.1.2.A, the Commission considers that the Parties would have the
        ability to foreclose competitors in the market for the manufacture and supply of
        dietetic pet food in Sweden from downstream customers.
(148) In particular, AniCura and VetFamily are important customers in Sweden. They
        have a combined market share of [40-50]% at national level (AniCura [20-30]%
        and VetFamily [20-30]%). As regards regional shares, AniCura and VetFamily's
        combined shares are even higher, for example [50-60]% in Stockholm. Further,
        the Commission notes that this figure is likely to significantly underrepresent the
        importance of AniCura and VetFamily in the retail channel downstream, because
        it is calculated only on the basis of the number of veterinarians, rather than on the
        basis of turnover. Indeed, at national level, the AniCura and VetFamily combined
        veterinary service market share based on the number of veterinarians is
        significantly lower, at [30-40]%, than the market share based on turnover, at [40-
        50]%.
                                                  32
 ---pagebreak---  ---pagebreak--- (150) On the basis of the assessment set out below and the arguments also referred to in
         Section 6.4.1.2.B, the Commission considers that the Parties would have the
         incentive to foreclose competitors in Sweden from access to downstream
         customers.
(151) As regards Sweden, the Commission notes that, on the basis of Mars' own
         estimates, Mars' market share is [50-60]% in the manufacture and supply of
         dietetic pet food sold through the veterinary channel, which may in itself be
         evidence of Mars' dominant position.160 On the basis of the Commission's market
         reconstruction, this may slightly underestimate Mars' position in Sweden, which
         calculated the higher range of [50-60%] instead. The Commission notes that a
         merged entity's incentive to pursue a customer foreclosure strategy is stronger,
         where the upstream division of the merged entity can benefit from possibly higher
         price levels resulting from foreclosure of upstream rivals.161
(152) Such customer foreclosure strategy would raise barriers to entry to potential
         competitors, making their entry upstream unattractive by significantly reducing
         their revenue prospects.162
(153) The foreclosure of upstream competitors would translate into negative effects in
         the downstream retail market. This risk of increased prices and reduced choice for
         dietetic pet food sold through the veterinary channel was highlighted by market
         participants in Sweden, for example a Swedish veterinarian noted: "For sure it
         would impact my business. Their dog food is already overpriced and there are not
         many alternatives. I have the feeling that with this merger their dominance will
         just further increase while they have a quite good source of medical information
         and distribution channel if the merger will happen. It is a very good entrance
         strategy from Mars."163
(154) As explained above at Section (115) to (116), in view of the limited switching
         capability of downstream end customers, upstream competition has a prominent
         role in these markets, thereby making it likely that reduced upstream competition
         will result in higher downstream prices.
6.5.2. Other non-coordinated effects: access to confidential information of competitors
(155) Market participants also raised concerns that post-Transaction, Mars, as the owner
         of downstream veterinary clinics, would gain an insight into the pricing of its
         competitors, to the extent that AniCura continued to purchase dietetic pet food
         from these competitors. Examples of competitively sensitive information include:
         prices, quantities, level and timing of price increases, promotional activity grids,
         special pricing conditions, information about innovation and new product
         launches.
160 Horizontal Merger Guidelines, paragraph 17.
161 Non-Horizontal Merger Guidelines, paragraph 70.
162 Non-Horizontal Merger Guidelines, paragraph 75.
163 Responses to Q1 - Questionnaire to Veterinarians, question 17.
                                                       34
 ---pagebreak--- (156) The Commission notes that post-Transaction, through its ownership of
        VetFamily, Mars would obtain knowledge about its competitors' pricing (and
        other competitively sensitive information also) to VetFamily clinics i.e. Mars'
        downstream competitors. As a result, and in line with what is described above in
        relation to the customer foreclosure concerns, Mars could subsequently adapt its
        commercial strategy to undermine any attempt by competitors to sell to [40-50]%
        of the market that would be controlled by Mars post-Transaction (i.e. Anicura's
        and VetFamily clinics). This is likely to put competitors at a competitive
        disadvantage, thereby dissuading them to enter or expand in the market.164.
(157) On the basis of the considerations in paragraphs (147) and (156) and also the
        arguments referred to in Section 6.4.1.2.C, the Commission considers that the
        merged entity may foreclose access to a significant customer base to its actual or
        potential rivals in the upstream market and reduce their ability or incentive to
        compete in Sweden.165 The Commission therefore concludes that the Transaction
        raises serious doubts as to its compatibility with the internal market as regards its
        impact on competition for the retail of dietetic pet food through the veterinary
        channel in Sweden, on the basis of: (a) customer foreclosure resulting in
        increased prices for dietetic pet food sold through the veterinary channel, reduced
        choice, quality and innovation in dietetic pet food; and (b) the access to
        confidential information of competitors.
6.5.3. Input foreclosure
6.5.3.1. The Commission's assessment
(158) While the Commission notes that Mars may have upstream market power, and
        consequently may have the ability to restrict downstream customers from access
        to its dietary pet food products, the Commission considers that Mars would not
        have the incentive to foreclose. In its assessment, the Commission looks at
        whether the foreclosure would be profitable for the merged entity and the extent
        to which customers can be diverted away from downstream rivals. The effect is
        greater where the input, in this case dietetic pet food, represents a critical
        component of downstream rivals’ costs.166
(159) In this case, because the sale of dietetic pet food is not a key input to veterinary
        clinics, but is rather ancillary to the provision of veterinary services, the
        Commission considers that Mars would be unlikely to successfully divert
        customers away from AniCura’s downstream rivals, by restricting its supply of
        dietetic pet food to them. Rather, the Commission is of the view that Mars would
        face a greater risk of losing dietetic pet food sales, if it attempted an input
        foreclosure strategy regarding the supply of dietetic pet food. For these reasons,
        the Commission considers that Mars has the incentive to sell its dietetic pet food
        in as many retail outlets as possible.
164 Non-Horizontal Merger Guidelines, paragraph 78.
165 Non-Horizontal Merger Guidelines, paragraph 72.
166 Non-Horizontal Merger Guidelines, paragraphs 40 - 42
                                                      35
 ---pagebreak---  ---pagebreak--- (163) For similar reasons to those set out at Section 6.4.3 and Section 6.5.3, the
       Commission also considers that the merged entity would not have the incentive to
       pursue an input foreclosure strategy in the Netherlands. In particular, although
       Mars may have upstream market power, and consequently may have the ability to
       restrict downstream customers from access to its dietary pet food products, the
       Commission considers that Mars would not have the incentive to foreclose.
(164) In this case, because the sale of dietetic pet food is not a key input to veterinary
       clinics, but is rather ancillary to the provision of veterinary services, the
       Commission considers that Mars would be unlikely to successfully divert
       customers away from AniCura’s downstream rivals, by restricting its supply of
       dietetic pet food to them. Rather, the Commission is of the view that Mars would
       face a greater risk of losing dietetic pet food sales, if it attempted an input
       foreclosure strategy regarding the supply of dietetic pet food. For these reasons,
       the Commission considers that Mars has the incentive to sell its dietetic pet food
       in as many retail outlets as possible.
(165) There is also a horizontally affected market in the retail of dietetic pet food in the
       Netherlands, due to the limited quantities of the supply of private label Sterkliniek
       dietetic pet food through Sterkliniek clinics (27 of which are owned by AniCura).
       As regards the Commission's assessment, the Commission notes that while the
       merged entity would have a significant combined share upstream, the horizontal
       market share increment arising from the merger is extremely limited (less than [0-
       5]% at national level).167 In addition, the Transaction does not give rise to any
       increase in the manufacturing of dietetic pet food, since the Sterkliniek dietetic
       pet food is manufactured by a third-party supplier.
(166) On the basis of the considerations in paragraphs (161) to (165) the Commission
       therefore concludes that the Transaction does not raise serious doubts as to its
       compatibility with the internal market as regards its impact on competition for the
       retail of dietetic pet food through the veterinary channel in the Netherlands on the
       basis of vertical effects, or on the basis of horizontal overlaps.
6.7.   Other markets
(167) The transaction also gives rise to vertically-affected markets in Germany, Austria,
       Italy, France and Spain.
(168) The Commission notes that AniCura’s presence in these countries is limited. The
       combined AniCura and VetFamily shares are as follows: Germany ([5-10]%),
       Austria ([0-5]%), Italy ([0-5]%), France ([0-5]%) and Spain ([0-5]%). Due to the
       low market shares downstream, the Commission considers that the merged entity
       would not have the ability to pursue a customer foreclosure strategy. For similar
       reasons to those set out at Section 6.4.3 and Section 6.5.3,the Commission also
       considers that the merged entity would not have the incentive to pursue an input
       foreclosure strategy.
(169) On the basis of the above, the Commission therefore concludes that the
       Transaction does not raise serious doubts as to its compatibility with the internal
167 Form CO, paragraphs 433 - 435
                                                  37
 ---pagebreak---       market as regards its impact on competition for the retail of dietetic pet food
      through the veterinary channel in Germany, Austria, Italy, France and Spain on
      the basis of vertical effects.
7.    PROPOSED REMEDIES
7.1.  Framework for the assessment of the commitments
(170) Where, as in this case, a notified concentration raises serious doubts as to its
      compatibility with the internal market, the parties may modify the notified
      concentration so as to remove the grounds for the serious doubts identified by the
      Commission with a view to having it declared compatible with the internal market
      pursuant to Article 6(1)(b) in conjunction with Article 6(2) of the Merger
      Regulation.
(171) As set out in the Commission Notice on Remedies,168 commitments have to
      eliminate the Commission's serious doubts entirely, they have to be
      comprehensive and effective from all points of view. In Phase I, commitments
      offered by the parties can only be accepted where the competition problem is
      readily identifiable and can easily be remedied. The competition problem
      therefore needs to be so straightforward and the remedies so clear-cut that it is not
      necessary to enter into an in-depth investigation and that the commitments are
      sufficient to clearly rule out serious doubts within the meaning of Article 6(1)(c)
      of the Merger Regulation.
(172) In assessing whether or not the commitments proposed by the parties would
      restore effective competition, the Commission considers all relevant factors,
      including inter alia the type, scale and scope of the proposed commitments,
      judged by reference to the structure and particular characteristics of the market in
      which the Commission has identified serious doubts as to the compatibility of the
      notified concentration with the internal market, including the position of the
      Parties and other participants on the market.169
(173) In order for the commitments to comply with those principles, they must be
      capable of being implemented effectively within a short period of time. The
      Commission must determine with the requisite degree of certainty, at the time of
      its decision, that they will be fully implemented and that they are likely to
      maintain effective competition in the market.
(174) As regards the form of acceptable commitments, the Merger Regulation leaves
      discretion to the Commission as long as the commitments meet the requisite
      standard.
(175) Divestiture commitments are often the most effective way to eliminate
      competition concerns. The intended effects of a divestiture will only be achieved
      if and once the business to divest is transferred to a suitable purchaser.
168  Commission Notice on remedies acceptable under Council Regulation (EC) No 139/2004 and under
     Commission Regulation (EC) No 802/2004 (2008/C 267/01), (the "Commission Notice on
     Remedies").
169  Commission Notice on Remedies, paragraph 12.
                                                  38
 ---pagebreak--- (176) In order to ensure that the business is divested to a suitable purchaser, the
        commitments have to include criteria to define its suitability which will allow the
        Commission to conclude that the divestiture of the business to such purchaser will
        likely remove the competition concerns identified
7.2.    Commitments submitted by the Parties
(177) In order to remove the serious doubts raised by the Transaction in the markets for
        the retail of dietetic pet food through the veterinary channel in Denmark and
        Sweden, with a view to rendering the concentration compatible with the internal
        market, the Parties have modified the notified concentration by submitting
        commitments to the Commission pursuant to Article 6(2) of the Merger
        Regulation.
(178) The Parties submitted two sets of commitments. Notably, the Parties formally
        submitted a remedy proposal on 8 October 2018 (the 'Initial Commitments').
        After the Commission gathered the views of market participants on the Initial
        Commitments (the 'market test'), and informed the Parties of the remaining
        serious doubts raised by the Transaction, the Parties submitted a revised remedy
        proposal on 19 October 2018 (the 'Final Commitments').
7.2.1. The Initial Commitments
7.2.1.1. Description of the Initial Commitments
(179) The Initial Commitments proposed by Mars and AniCura consisted of the
        divestment of the entire VetFamily business, currently wholly-owned by AniCura
        and which is responsible for the negotiation of framework contracts for
        VetFamily members, including for the purchase of dietetic pet food ("Divestment
        Business"). The Divestment Business included:
        (a)     the VetFamily legal entities.
        (b)     all membership contracts with VetFamily members.
        (c)     all framework supply agreements for all products and services which have
                been entered into for the benefit of VetFamily members, which will
                continue to be operated under their existing terms with all benefits (e.g.
                rebates) accruing to VetFamily assigned to VetFamily. AniCura will also
                continue to use the shared framework supply agreements (i.e. which apply
                to both VetFamily and AniCura clinics) for a limited period.
        (d)     all dedicated VetFamily personnel (22 employees) and one additional
                AniCura Group Retail Manager in order to provide procurement expertise
                for pet food i.e. 23 employees in total.
        (e)     8 employees as Key Personnel, including the Group VetFamily Director,
                the Group VetFamily Manager, the Group Retail Manager and Country
                Managers for Denmark, Sweden, Norway, the Netherlands and Germany.
        (f)     intangible assets including all intellectual property rights needed to
                operate the VetFamily business including sales and marketing assets, all
                VetFamily trademarks and brand names including the brand VetPro, a
                                                 39
 ---pagebreak---                  fully paid up perpetual licence from AniCura to use an IT system through
                 which VetPlan is administered and a CRM system.
        (g)      tangible assets including office equipment, all business and financial
                 records held by VetFamily, including data held: on VetFamily members;
                 purchases made by VetFamily members under the framework agreements;
                 sales and customer data relating to VetPlan, data on suppliers. They do not
                 include office premises, except in Denmark, where the lease will be
                 transferred to the purchaser.
        (h)      transitional arrangements for IT support (including software licenses) and
                 in Sweden and Germany only, services relating to back-office functions
                 (accounting and payroll) to be provided by AniCura to the Divestment
                 Business for a period of up to […], at cost and at the option of the
                 purchaser.
(180) Moreover, the Parties committed not to establish, operate or enter into a joint
        purchasing group for or with any independent veterinary practices in Sweden,
        Denmark and Norway for a period of […] post-Closing. The Parties also
        committed not to acquire an ownership interest in any of the VetFamily Members,
        identified as of the date of the Commission decision, in Sweden, Denmark or
        Norway for the same […].
(181) In addition, if required by the Commission, the Parties committed to terminate the
        VetFamily membership contracts of the 17 AniCura clinics which are part of
        VetFamily in Denmark.
(182) Finally, the Parties entered into related commitments, inter alia regarding the
        separation of the divested businesses from their retained businesses, the
        preservation of the viability, marketability and competitiveness of the divested
        businesses, including the appointment of a monitoring trustee and, if necessary, a
        divestiture trustee.
7.2.1.2. Results of the market test
(183) The Commission launched a market test of the Initial Commitments on 10
        October 2018, which was addressed to upstream competitors of Mars, VetFamily
        member clinics and potential purchasers.
(184) Despite being generally positive, the view of the respondents to the market test
        was that a number of elements of the Initial Commitments needed to be modified
        in order for them to be able to remedy the serious doubts identified by the
        Commission in the markets for the sale of dietetic pet food through the veterinary
        channel in Denmark and Sweden.170.
(185) In particular, some respondents highlighted the need for the Divestment Business
        to have the ability to provide continuous education and training to VetFamily
        member clinics.171
170   Replies to Market Test Questionnaire on commitments offered by Mars and AniCura of 10 October
      2018.
171   Ibid.
                                                    40
 ---pagebreak--- (186) While the majority of respondents considered that the scope and duration of the
        transitional arrangements proposed in the Initial Commitments was sufficient to
        ensure the viability and competitiveness of the Divestment Business, a few stated
        that a longer duration of such arrangements may be necessary, in particular given
        the critical nature of some of those transitional services for the Divestment
        Business, such as IT.172
(187) In addition, the majority of respondents considered the proposed commitments of
        the Parties not to engage in joint purchasing groups and not to acquire VetFamily
        Members in Sweden, Denmark and Norway for the period of […] post-Closing
        (paragraph (180)) to be necessary and adequate to ensure the viability and
        competitiveness of the Divestment Business. Nevertheless, several respondents
        suggested that the duration should be longer than […].173
(188) In other respects, the respondents generally considered that the Divested Business
        includes all necessary assets and would be able to compete effectively with the
        Parties after the Transaction.174
(189) Finally, the majority of respondents considered that the Divestment Business was
        sufficiently interesting to attract suitable purchasers. Several respondents
        indicated that would be potentially interested in purchasing the Divestment
        Business, subject to the above-mentioned improvements and those respondents'
        closer due diligence of the Divestment Business.175
7.2.2. The Final Commitments
7.2.2.1. Description of the Final Commitments
(190) In view of the results of the market test and following the feedback provided by
        the Commission, the Parties submitted the Final Commitments on 19 October
        2018. The full text of the Final Commitments is attached as an Annex to this
        Decision. The Final Commitments address the shortcomings identified above and
        include other modifications to strengthen their effectiveness, as set out below:
        (a)     The scope of the Divestment Business was clarified to include the
                capability to provide all training and other on-boarding support services
                that are currently offered to VetFamily Members in connection with their
                membership of the VetFamily network.
        (b)     The possibility of extension of the transitional services agreements for a
                further period of […], at the request of the Purchaser, subject to the
                opinion of the Monitoring Trustee, was introduced.
        (c)     For the remaining term of the respective Shared Framework Agreements
                (or […]), all benefits accruing under those agreements (i.e. rebates,
                discounts, and other bonuses) will be fully transferred to VetFamily, with
172   Ibid.
173   Ibid.
174   Ibid.
175   Ibid.
                                                 41
 ---pagebreak---                 the only exception of benefits relating to volumes purchased by AniCura
                clinics.
        (d)     AniCura committed not to take any action on the tender for new suppliers
                of VetFamily Members prior to closing of the divestiture, except as
                deemed necessary by the Hold Separate Manager for the continued
                viability of the Divestment Business, subject to the opinion of the
                Monitoring Trustee.
        (e)     The First Divestiture Period, during which the Parties commit to find a
                purchaser and to enter into a final binding sale and purchase agreement for
                the sale of the Divestment Business, was shortened to three months, with
                the possibility of a one month extension by the Commission.
        (f)     During the […] period limiting the Parties ability to engage in joint
                purchasing groups and to acquire any of the VetFamily Members in
                Sweden, Denmark and Norway (paragraph (180)), the Parties committed
                also not to solicit veterinary practices for such purposes.
(191) The Final Commitments also clarify some language to ensure that all necessary rights
        and assets transfer to the Purchaser.
7.2.2.2. The Commission’s assessment of the Final Commitments
(192) For the reasons explained below, the Commission considers that the Final
        Commitments remove all serious doubts raised by the Transaction.
(193) The implementation of the Final Commitments will take VetFamily out of the
        control of the merged entity and will thus eliminate the influence of the merged
        entity on a significant number of veterinary clinics in Denmark and Sweden post-
        Transaction. The divestment of VetFamily will allow an independently-owned
        buying group to continue to operate in the relevant markets. The share of the
        downstream market of the merged entity at national level will be reduced from
        [40-50]% to [20-30]% in Sweden and from [40-50]% to [20-30]% in Denmark.
        The Commission considers that this structural change will ensure that the
        upstream competitors of the merged entity have access to a sufficient number of
        downstream veterinary clinics to remain viable and competitive in Sweden and
        Denmark.
(194) To maintain their structural effect, the Final Commitments contain a standard
        non-reacquisition clause preventing the merged entity from reacquiring
        VetFamily for the period of 10 years. In addition to that, the Final Commitments
        include an obligation on the merged entity not to engage in joint purchasing
        groups and not to acquire ownership in VetFamily Members in Denmark and
        Sweden for the period of […] following the sale of VetFamily. The Commission
        considers that such clause, even if it goes beyond the standard terms of a non-
        reacquisition clause as it concerns the acquisition of third parties, is necessary in
        the markets where serious doubts were identified to ensure that the Final
        Commitments are not circumvented by the merged entity acquiring influence
        downstream over the clinics through an alternative joint purchasing scheme or by
        acquiring current VetFamily Members. This is because the acquisition of
        influence over the clinics could enable the reacquisition of market power in those
        markets where that market power has been found to be problematic and is aimed
                                                  42
 ---pagebreak---        to be removed through the divestiture remedy. Since the Commission has not
       identified serious doubts in Member States other than Denmark and Sweden, it is
       not necessary to extend the anti-circumvention clause limiting the Parties' conduct
       to other Member States, in particular considering that the viability and
       competitiveness of the Divestment Business are not affected (see paragraph
       (198)).
(195) Furthermore, the post-market test extension of the above-mentioned prohibition
       on joint purchasing schemes and acquisition of VetFamily Members to cover also
       non-solicitation further strengthens the Final Commitments since it prevents the
       Parties from approaching veterinary clinics, and hence potentially influencing
       their behaviour, already during the […] period. The Commission also considers
       the duration of […] to be sufficient to allow VetFamily to develop and establish
       itself in the hands of a new owner, in particular given the nature of VetFamily’s
       business and its growth to date.
(196) Moreover, in light of the results of the market test, the Commission considers the
       scope and scale of the Divestment Business to be sufficient to ensure its
       continued viability and competitiveness. In particular, the Divestment Business
       includes all tangible and intangible assets, benefits from framework agreements,
       personnel (including Key Personnel), and transitional services agreements which
       are necessary for its viability and competitiveness.
(197) While the Final Commitments submitted by the Parties provide for the full
       divestiture of VetFamily including in the countries where the Transaction does
       not raise serious doubts (that is, other than Sweden and Denmark), the
       Commission considers that the inclusion of VetFamily's operations in those
       countries is necessary and proportionate to preserve the viability and
       competitiveness of the Divestment Business. Indeed, the number of VetFamily
       member clinics in Sweden and Denmark comprise only around [20-30]% of the
       total number of VetFamily members. Carving out and divesting VetFamily's
       activities only in Sweden and Denmark would risk undermining its operations as
       a standalone business.
(198) On the other hand, the non-application of the […] prohibition on joint purchasing
       and acquisition of VetFamily Members (paragraph (180)) to Germany and the
       Netherlands, where VetFamily is also currently active, does not affect the
       viability and competitiveness of the Divestment Business in light of its scope and
       scale. In particular, VetFamily's operations in Germany and the Netherlands are
       still in the start-up stage (launched in the last two years)176 generating EUR 0
       membership fees in 2017177 and VetFamily has functioned as a viable business
       already since 2000. In addition, personnel are of key importance for the operation
       of VetFamily. The Divestment Business includes (key) personnel for all
       VetFamily countries including also for Germany and the Netherlands.
(199) Nevertheless, the Parties have proposed that the […] prohibition on joint
       purchasing and acquisition of VetFamily Members covers also Norway, one of
176 Form RM, paragraph 47.
177 Form CO, paragraph 85.
                                               43
 ---pagebreak---         the core markets of VetFamily. The Commission considers this commitment to
        further strengthen the viability of the Divestment Business.
(200) Furthermore, the Commission believes that VetFamily will be viable in the hands
        of a suitable purchaser even without the involvement of AniCura. In particular,
        VetFamily was established in 2000 and successfully operated and grew also
        before 2014 when it was acquired by AniCura. Also, VetFamily is rapidly
        expanding, as evidenced, for example, by the increase in the number of
        VetFamily member clinics by over 200 only during the Commission merger
        proceedings (paragraph (71)).178
(201) In addition, the Commission is of the view that short divestiture periods
        contribute largely to the success of a divestiture because they limit the period of
        uncertainty.179 In the present case, the Parties reduced the First Divestiture Period
        in the Final Commitments to three months, subject to a possible extension by the
        Commission of one month. The Commission believes such a condensed time
        table for divestiture will facilitate the successful transfer of the Divestment
        Business to a new owner and will eliminate any possibility of anti-competitive
        effects arising in the meantime.
(202) Finally, the Commission notes that the Final Commitments remove serious doubts
        regarding Mars gaining access to competitively sensitive information in the
        downstream market (for example, on prices, quantities, product characteristics,
        etc.) of its upstream competitors. The Final Commitments ensure that VetFamily
        will be operated, and commercial terms will be negotiated, by an independent
        entity and hence Mars will not obtain access to the commercial terms that its
        upstream competitors offer to VetFamily clinics, Thus, Mars' upstream
        competitors will be able to offer commercial terms to non-AniCura clinics, which
        comprise around three quarters of the downstream market in each Sweden and
        Denmark, without making them known to Mars. At the same time, the terms
        offered by Mars' upstream competitors to AniCura clinics and to VetFamily
        clinics will not necessarily be the same post-Transaction, thus preserving
        uncertainty and conditions for competition.
(203) In light of the above considerations and taking into account the results of the
        market test and other information available to it, the Commission considers that
        the Final Commitments are sufficient to eliminate the serious doubts as to the
        compatibility of the Transaction with the internal market with respect to the
        markets for the retail of dietetic pet food through the veterinary channel in
        Denmark and Sweden. Moreover, the Final Commitments are comprehensive and
        effective from all points of view, and are capable of being implemented
        effectively within a short period of time.
178 Parties' responses to RFI 12, question 4; Parties' responses to RFI 9, question 1.
179 Commission Remedies Notice, paragraph 98.
                                                          44
 ---pagebreak--- 8.    CONDITIONS AND OBLIGATIONS
(204) Under the first sentence of the second subparagraph of Article 6(2) of the Merger
      Regulation, the Commission may attach to its decision conditions and obligations
      intended to ensure that the undertakings concerned comply with the commitments
      they have entered vis-à-vis the Commission with a view to rendering the
      concentration compatible with the internal market
(205) -The fulfilment of the measures that gives rise to the structural change of the
      market is a condition, whereas the implementing steps that are necessary to
      achieve this result are generally obligations on the Parties. Where a condition is
      not fulfilled, the Commission's decision declaring the concentration compatible
      with the internal market is no longer applicable. Where the undertakings
      concerned commit a breach of an obligation, the Commission may revoke the
      clearance decision in accordance with Article 6(3) of the Merger Regulation. The
      undertakings concerned may also be subject to fines and periodic penalty
      payments under Articles 14(2) and 15(1) of the Merger Regulation.
(206) In accordance with the basic distinction between conditions and obligations
      described in the preceding paragraph, the commitments in Section B as well as
      the Schedule of the Final Commitments set out in the Annex constitute conditions
      attached to this Decision, as only through their full compliance can the structural
      changes in the relevant markets be achieved. The other commitments set out in
      the Annex constitute obligations, as they concern the implementing steps that are
      necessary to achieve the modifications sought in a manner compatible with the
      internal market.
(207) The full text of the Final Commitments is attached to this Decision as the Annex
      and forms an integral part of this Decision.
9.    CONCLUSION
(208) For the above reasons, the Commission has decided not to oppose the notified
      operation as modified by the commitments and to declare it compatible with the
      internal market, subject to full compliance with the conditions in Section B as
      well as the Schedule of the Final Commitments annexed to the present decision
      and with the obligations contained in the other sections of the said commitments.
      This Decision is adopted in application of Article 6(1)(b) in conjunction with
      Article 6(2) of the Merger Regulation.
                                                    For the Commission
                                                    (Signed)
                                                    Margrethe VESTAGER
                                                    Member of the Commission
                                               45
 ---pagebreak---                                       19 October 2018
                              Case M.9019 – MARS / ANICURA
                COMMITMENTS TO THE EUROPEAN COMMISSION
Pursuant to Article 6(2) of Council Regulation (EC) No 139/2004 (the Merger Regulation),
Mars, Incorporated (Mars) hereby enters into the following Commitments (the Commitments)
vis-à-vis the European Commission (the Commission) with a view to rendering its proposed
acquisition of AniCura TC AB (AniCura) (the Concentration) compatible with the internal
market and the functioning of the EEA Agreement.
This text shall be interpreted in light of the Commission’s decision pursuant to Article
6(1)(b) of the Merger Regulation to declare the Concentration compatible with the internal
market and the functioning of the EEA Agreement (the Decision), in the general framework
of European Union law, in particular in light of the Merger Regulation, and by reference to
the Commission Notice on remedies acceptable under Council Regulation (EC) No
139/2004 and under Commission Regulation (EC) No 802/2004 (the Remedies Notice).
Section A.       Definitions
1.    For the purpose of the Commitments, the following terms shall have the following meaning:
      Affiliated Undertakings: undertakings controlled by the Parties and/or by the ultimate
      parents of the Parties, whereby the notion of control shall be interpreted pursuant to
      Article 3 of the Merger Regulation and in light of the Commission Consolidated
      Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of
      concentrations between undertakings (the Consolidated Jurisdictional Notice).
      AniCura: a privately held provider of veterinary care for companion animals.
      AniCura is held by AniCura TC AB, incorporated under the laws of Sweden and has
      its registered office at Vendevägen 89, 182 32 Danderyd, Sweden, registered under
      number 556972-6689.
      AniCura Clinics: veterinary practices in which AniCura has an ownership interest.
      AniPlan: a monthly subscription-based preventative pet care service that is offered to
      pet owners through AniCura Clinics. AniPlan and VetPlan are administered via the
      AniCura IT System.
                                                   1
 ---pagebreak--- AniPlan IT System: an in-house, […] IT system developed and owned by AniCura to
administer the AniPlan and VetPlan preventive care plans, managed by VetFamily.
[…].
Assets: the assets that contribute to the current operation or are necessary to ensure the
viability and competitiveness of the Divestment Business as indicated in Section B and
described more in detail in the Schedule.
Closing: the transfer of the legal title to the Divestment Business to the Purchaser.
Closing Period: the period of three months from the approval of the Purchaser and the
terms of sale by the Commission.
Confidential Information: any business secrets, know-how, commercial information,
or any other information of a proprietary nature that is not in the public domain.
Conflict of Interest: any conflict of interest that impairs the Monitoring Trustee's
objectivity and independence in discharging its duties under the Commitments.
Divestment Business: the business or businesses as defined in Section B and in the
Schedule which Mars commits to divest.
Divestiture Trustee: one or more natural or legal person(s) who is/are approved by
the Commission and appointed by Mars and who has/have received from Mars the
exclusive Trustee Mandate to sell the Divestment Business to a Purchaser at no
minimum price.
Effective Date: the date of adoption of the Decision.
First Divestiture Period: the period of three months from the Effective Date, with the
possibility of an extension of one additional month, such extension to be governed by the
procedure set out in paragraph 42.
Framework Agreements: framework supply agreements for a range of veterinary
supplies (e.g. pharmaceuticals, pet food, laboratory supplies) as described in the
Schedule.
Hold Separate Manager: the person appointed by Mars for the Divestment Business
to manage the day-to-day business under the supervision of the Monitoring Trustee.
Key Personnel: all personnel necessary to maintain the viability and competitiveness
of the Divestment Business, as listed in the Schedule, including the Hold Separate
Manager.
                                               22
 ---pagebreak--- Mars: Mars, Incorporated, a privately held company incorporated under the laws of
Delaware with its registered office at 6885 Elm Street, McLean, VA 22101-3883,
USA.
Membership Contract: a membership contract entered into between VetFamily and
an independent veterinary practice whereby the latter becomes a VetFamily Member.
Monitoring Trustee: one or more natural or legal person(s) who is/are approved by
the Commission and appointed by Mars, and who has/have the duty to monitor Mars
compliance with the conditions and obligations attached to the Decision.
Parties: Mars and AniCura.
Personnel: all staff currently employed by the Divestment Business, including staff
seconded to the Divestment Business, shared personnel as well as the additional
personnel listed in the Schedule.
Purchaser: the entity approved by the Commission as acquirer of the Divestment
Business in accordance with the criteria set out in Section D.
Purchaser Criteria: the criteria laid down in paragraph 16 of these Commitments that
the Purchaser must fulfil in order to be approved by the Commission.
Schedule: the schedule to these Commitments describing in more detail the
Divestment Business
Trustee(s): the Monitoring Trustee and/or the Divestiture Trustee as the case may be.
Trustee Divestiture Period: the period of three months from the end of the First
Divestiture Period.
VetFamily: a joint purchasing group owned by AniCura which enables VetFamily
Members to procure veterinary supplies (e.g. pharmaceutical products, pet food,
laboratory supplies etc.) on favourable terms under the Framework Agreements with
selected suppliers. In Denmark only, VetFamily also provides its members with
additional services, such as back-office support, website design, and the creation of
marketing campaigns with key suppliers. VetFamily is currently active in Sweden,
Denmark, Norway, the Netherlands, and Germany and is in the process of setting up
operations in […].
VetFamily Legal Entities: the legal entities through which the VetFamily business
operates, namely: VetFamily Holding AB (Sweden), VetFamily AB (Sweden),
VetFamily AS (Norway), VetFamily ApS (Denmark), VetFamily GmbH (Germany),
                                            33
 ---pagebreak---       VetFamily B.V. (Netherlands), and VetFamily GmbH (Austria), as well as any other
      VetFamily legal entities which are incorporated before Closing.
      VetFamily Members: veterinary practices that are members of VetFamily.
      VetPlan: a monthly subscription-based preventative pet care service offered by
      VetFamily to pet owners, sold through VetFamily Member clinics. VetPlan and
      AniPlan are administered via the AniCura IT System.
      VetPlan Contracts: customer contracts for VetPlan.
Section B.       The    Commitment         to   divest   and    the   Divestment       Business
       Commitment to divest
2.    In order to maintain effective competition, the Parties commit to divest, or procure the
      divestiture of the Divestment Business by the end of the Trustee Divestiture Period as
      a going concern to a purchaser and on terms of sale approved by the Commission in
      accordance with the procedure described in paragraph 17 of these Commitments. To
      carry out the divestiture, the Parties commit to find a purchaser and to enter into a final
      binding sale and purchase agreement for the sale of the Divestment Business within
      the First Divestiture Period. If Mars has not entered into such an agreement at the end
      of the First Divestiture Period, Mars shall grant the Divestiture Trustee an exclusive
      mandate to sell the Divestment Business in accordance with the procedure described in
      paragraph 29 in the Trustee Divestiture Period.
3.    The Parties shall be deemed to have complied with this commitment if:
              (a)   by the end of the Trustee Divestiture Period, Mars or the Divestiture
                    Trustee has entered into a final binding sale and purchase agreement and
                    the Commission approves the proposed purchaser and the terms of sale as
                    being consistent with the Commitments in accordance with the procedure
                    described in paragraph 17; and
              (b)   the Closing of the sale of the Divestment Business to the Purchaser takes
                    place within the Closing Period.
4.    In order to maintain the structural effect of the Commitments, Mars shall, for a period
      of ten years after Closing, not acquire, whether directly or indirectly, the possibility of
      exercising influence (as defined in paragraph 43 of the Remedies Notice, footnote 3)
      over the whole or part of the Divestment Business, unless, following the submission of
      a reasoned request from Mars showing good cause and accompanied by a report from
      the Monitoring Trustee (as provided in paragraph 43 of these Commitments), the
      Commission finds that the structure of the market has changed to such an extent that
                                                   44
 ---pagebreak---    the absence of influence over the Divestment Business is no longer necessary to render
   the proposed Concentration compatible with the internal market.
5. In addition:
         (a)    Subject to any transitional arrangements agreed with the Purchaser under
                the terms of these Commitments, the Parties commit that AniCura will
                withdraw from joint purchasing activities with the Divestiture Business for
                a period of ten years after Closing. By way of exception, this will not
                prevent the AniCura-owned veterinary practices which are currently
                VetFamily Members in Denmark from continuing to be VetFamily
                Members unless requested by the Commission.
           (b) For a period of […] after Closing, the Parties commit that neither Mars,
               AniCura nor their Affiliated Undertakings shall:
                  (i)   establish, operate, or enter into a joint procurement or purchasing
                        group for or with any independent veterinary practices in Sweden,
                        Denmark, or Norway, or solicit any such independent veterinary
                        practice to do so; or
                 (ii)   acquire an ownership interest in any veterinary practices in
                        Sweden, Denmark or Norway which are VetFamily Members as at
                        the Effective Date, or solicit any such VetFamily Member to be
                        acquired.
                For the avoidance of doubt, the obligations in this paragraph 5(b) shall not
                prevent Mars or AniCura or their Affiliated Undertakings from conducting
                any procurement or purchasing activity for the AniCura Clinics or their
                other Affiliated Undertakings.
    Structure and definition of the Divestment Business
6. The Divestment Business consists of the entire VetFamily business as at Closing, as
   carried out through the VetFamily Legal Entities and the assets comprised within
   them. The legal and functional structure of the Divestment Business as operated to
   date is described in the Schedule to these Commitments. As described in more detail
   in the Schedule, the Divestment Business includes all assets, contracts, licences, and
   personnel that contribute to the current operation or are necessary to ensure the
   viability and competitiveness of the Divestment Business (including any assets or
   resources which are not otherwise covered in the Schedule but which are both used in
   the Divestment Business for the continued viability and competitiveness of the
   Divestment Business, or an adequate substitute for any such asset or resource), in
   particular:
           (a) all tangible and intangible assets (including intellectual property rights);
                                                55
 ---pagebreak---               (b)    all contracts and licences (including but not limited to the Framework
                     Agreements, the Membership Contracts, and the VetPlan Contracts); and
              (c)    the Personnel.
7.    In addition, the Divestment Business includes the benefit, for a transitional period of
      up to […] after Closing (and at the request of the Purchaser, with a possible extension
      for a further period of […], subject to the opinion of the Monitoring Trustee) and on
      terms and conditions equivalent to those at present afforded to the Divestment
      Business, of all current arrangements under which AniCura or its Affiliated
      Undertakings supply services to the Divestment Business, as detailed in the Schedule,
      unless otherwise agreed with the Purchaser. Strict firewall procedures will be adopted
      so as to ensure that any competitively sensitive information related to, or arising from
      such supply arrangements will not be shared with, or passed on to, anyone outside
      AniCura’s operations.
Section C.       Related commitments
       Preservation of viability, marketability and competitiveness
8.    From the Effective Date until Closing, the Parties shall preserve or procure the
      preservation of the economic viability, marketability and competitiveness of the
      Divestment Business, in accordance with good business practice, and shall minimise
      as far as possible any risk of loss of competitive potential of the Divestment Business.
      In particular the Parties undertake:
              (a)    not to carry out any action that might have a significant adverse impact
                     on the value, management or competitiveness of the Divestment Business
                     or that might alter the nature and scope of activity, or the industrial or
                     commercial strategy or the investment policy of the Divestment
                     Business;
              (b)    to make available, or procure to make available, sufficient resources for
                     the development of the Divestment Business, on the basis and
                     continuation of the existing business plans;
              (c)    to take all reasonable steps, or procure that all reasonable steps are being
                     taken, including appropriate incentive schemes (based on industry
                     practice), to encourage all Key Personnel to remain with the Divestment
                     Business, and not to solicit or move any Personnel to the Parties’
                     remaining business. Where, nevertheless, individual members of the Key
                     Personnel exceptionally leave the Divestment Business, the Parties shall
                     provide a reasoned proposal to replace the person or persons concerned
                     to the Commission and the Monitoring Trustee. The Parties must be able
                                                    66
 ---pagebreak---                   to demonstrate to the Commission that the replacement is well suited to
                  carry out the functions exercised by those individual members of the Key
                  Personnel. The replacement shall take place under the supervision of the
                  Monitoring Trustee, who shall report to the Commission.
     Hold-separate obligations
9.  The Parties commit, from the Effective Date until Closing, to keep the Divestment
    Business separate from the business it is retaining and to ensure that unless explicitly
    permitted under these Commitments: (i) management and staff of the business retained
    by the Parties have no involvement in the Divestment Business; (ii) the Key Personnel
    and Personnel of the Divestment Business have no involvement in any business
    retained by the Parties and do not report to any individual outside the Divestment
    Business.
10. Until Closing, the Parties shall assist the Monitoring Trustee in ensuring that the
    Divestment Business is managed as a distinct and saleable entity separate from the
    business which Mars is retaining. Immediately after the adoption of the Decision,
    Mars shall appoint a Hold Separate Manager. The Hold Separate Manager, who shall
    be part of the Key Personnel, shall manage the Divestment Business independently
    and in the best interest of the business with a view to ensuring its continued economic
    viability, marketability and competitiveness and its independence from the businesses
    retained by Mars. The Hold Separate Manager shall closely cooperate with and report
    to the Monitoring Trustee and, if applicable, the Divestiture Trustee. Any replacement
    of the Hold Separate Manager shall be subject to the procedure laid down in paragraph
    8(c) of these Commitments. The Commission may, after having heard Mars, require
    Mars to replace the Hold Separate Manager.
     Ring-fencing
11. The Parties shall implement, or procure to implement, all necessary measures to
    ensure that it does not, after the Effective Date, obtain any Confidential Information
    relating to the Divestment Business and that any such Confidential Information
    obtained by the Parties before the Effective Date will be eliminated and not be used by
    the Parties. This includes measures vis-à-vis the Parties’ appointees on the supervisory
    board and/or board of directors of the Divestment Business. In particular, the
    participation of the Divestment Business in any central information technology
    network shall be severed to the extent possible, without compromising the viability of
    the Divestment Business. The Parties may obtain or keep information relating to the
    Divestment Business which is reasonably necessary for the divestiture of the
    Divestment Business or the disclosure of which to the Parties is required by law.
                                                77
 ---pagebreak---       Non-solicitation clause
12.   The Parties undertake, subject to customary limitations, not to solicit, and to procure
      that Affiliated Undertakings do not solicit, the Key Personnel transferred with the
      Divestment Business for a period of […] after Closing.
      Due diligence
13.   In order to enable potential purchasers to carry out a reasonable due diligence of the
      Divestment Business, the Parties shall, subject to customary confidentiality assurances
      and dependent on the stage of the divestiture process:
               (a)  provide to potential purchasers sufficient information as regards the
                    Divestment Business;
               (b)  provide to potential purchasers sufficient information relating to the
                    Personnel and allow them reasonable access to the Personnel.
      Reporting
14.   Mars shall submit written reports in English on potential purchasers of the Divestment
      Business and developments in the negotiations with such potential purchasers to the
      Commission and the Monitoring Trustee no later than 10 days after the end of every
      month following the Effective Date (or otherwise at the Commission’s request). Mars
      shall submit a list of all potential purchasers having expressed interest in acquiring the
      Divestment Business to the Commission at each and every stage of the divestiture
      process, as well as a copy of all the offers made by potential purchasers within five
      days of their receipt.
15.   Mars shall inform the Commission and the Monitoring Trustee on the preparation of
      the data room documentation and the due diligence procedure and shall submit a copy
      of any information memorandum to the Commission and the Monitoring Trustee
      before sending the memorandum out to potential purchasers.
Section D.        The Purchaser
16.   In order to be approved by the Commission, the Purchaser must fulfil the following
      criteria:
               (a)  The Purchaser shall be independent of and unconnected to Mars and its
                    Affiliated Undertakings (this being assessed having regard to the
                    situation following the divestiture).
                                                   88
 ---pagebreak---               (b)   The Purchaser shall have the financial resources, proven expertise and
                    incentive to maintain and develop the Divestment Business as a viable
                    and active competitive force in competition with the Parties and other
                    competitors;
              (c)   The acquisition of the Divestment Business by the Purchaser must
                    neither be likely to create, in light of the information available to the
                    Commission, prima facie competition concerns nor give rise to a risk that
                    the implementation of the Commitments will be delayed. In particular,
                    the Purchaser must reasonably be expected to obtain all necessary
                    approvals from the relevant regulatory authorities for the acquisition of
                    the Divestment Business.
17.   The final binding sale and purchase agreement (as well as ancillary agreements)
      relating to the divestment of the Divestment Business shall be conditional on the
      Commission’s approval. When Mars has reached an agreement with a purchaser, it
      shall submit a fully documented and reasoned proposal, including a copy of the final
      agreement(s), within one week to the Commission and the Monitoring Trustee. Mars
      must be able to demonstrate to the Commission that the purchaser fulfils the Purchaser
      Criteria and that the Divestment Business is being sold in a manner consistent with the
      Commission’s Decision and the Commitments. For the approval, the Commission
      shall verify that the purchaser fulfils the Purchaser Criteria and that the Divestment
      Business is being sold in a manner consistent with the Commitments including their
      objective to bring about a lasting structural change in the market. At Mars’ request, the
      Commission may approve the sale of the Divestment Business without one or more
      Assets or parts of the Personnel, or by substituting one or more Assets or parts of the
      Personnel with one or more different assets or different personnel, if this does not
      affect the viability and competitiveness of the Divestment Business after the sale,
      taking account of the proposed purchaser.
Section D.       Monitoring Trustee
      I.         Appointment procedure
18.   Mars shall appoint a Monitoring Trustee to carry out the functions specified in these
      Commitments for a Monitoring Trustee. Mars commits not to close the Concentration
      before appointment of a Monitoring Trustee.
19.   If Mars has not entered into a binding sale and purchase agreement regarding the
      Divestment Business two weeks before the end of the First Divestiture Period or if the
      Commission has rejected a purchaser proposed by Mars at that time or thereafter, Mars
      shall appoint a Divestiture Trustee. The appointment of the Divestiture Trustee shall
      take effect upon the commencement of the Trustee Divestiture Period.
                                                   99
 ---pagebreak--- 20. The Monitoring Trustee shall:
    (i)     at the time of appointment, be independent of Mars, AniCura and their
            Affiliated Undertakings;
    (ii)    possess the necessary qualifications to carry out its mandate, for example have
            sufficient relevant experience as an investment banker or consultant or auditor;
            and
    (iii)   neither have nor become exposed to a Conflict of Interest.
21. The Monitoring Trustee shall be remunerated by Mars in a way that does not impede
    the independent and effective fulfilment of its mandate. In particular, where the
    remuneration package of a Divestiture Trustee includes a success premium linked to
    the final sale value of the Divestment Business, such success premium may only be
    earned if the divestiture takes place within the Trustee Divestiture Period.
              Proposal by Mars
22. No later than ten working days after the Effective Date, Mars shall submit the name or
    names of one or more natural or legal persons whom Mars proposes to appoint as the
    Monitoring Trustee to the Commission for approval. No later than one month before
    the end of the First Divestiture Period or on request by the Commission, Mars shall
    submit a list of one or more persons who Mars proposes to appoint as Divestiture
    Trustee to the Commission for approval. The proposal shall contain sufficient
    information for the Commission to verify that the person or persons proposed as
    Trustee fulfil the requirements set out in paragraph 19 and shall include:
    (i)     the full terms of the proposed mandate, which shall include all provisions
            necessary to enable the Trustee to fulfil its duties under these Commitments;
    (ii)    the outline of a work plan which describes how the Trustee intends to carry out
            its assigned tasks; and
    (iii)   an indication of whether the proposed Trustee is to act as both Monitoring
            Trustee and Divestiture Trustee or whether different trustees are proposed for
            the two functions.
              Approval or rejection by the Commission
23. The Commission shall have the discretion to approve or reject the proposed Trustee(s)
    and to approve the proposed mandate subject to any modifications it deems necessary
    for the Trustee to fulfil its obligations. If only one name is approved, Mars shall
    appoint or cause to be appointed the person or persons concerned as Trustee, in
    accordance with the mandate approved by the Commission. If more than one name is
                                                10
                                                 10
 ---pagebreak---     approved, Mars shall be free to choose the Trustee to be appointed from among the
    names approved. The Trustee shall be appointed within one week of the Commission’s
    approval, in accordance with the mandate approved by the Commission (the Trustee
    Mandate).
               New proposal by Mars
24. If all the proposed Trustees are rejected, Mars shall submit the names of at least two
    more natural or legal persons within one week of being informed of the rejection, in
    accordance with paragraphs 18 and 23 of these Commitments.
                 Monitoring Trustee nominated by the Commission
25. If all further proposed Monitoring Trustees are rejected by the Commission, the
    Commission shall nominate a Monitoring Trustee, whom Mars shall appoint, or cause
    to be appointed, in accordance with a trustee mandate approved by the Commission.
    II.          Functions of the Trustee
26. The Trustee shall assume its specified duties and obligations in order to ensure
    compliance with these Commitments. The Commission may, on its own initiative or at
    the request of the Trustee or Mars, give any orders or instructions to the Trustee in
    order to ensure compliance with the conditions and obligations attached to the
    Decision.
                 Duties and obligations of the Monitoring Trustee
27. The Monitoring Trustee shall:
    (i)      propose in its first report to the Commission a detailed work plan describing
             how it intends to monitor compliance with the obligations and conditions
             attached to the Decision.
    (ii)     oversee, in close co-operation with the Hold Separate Manager, the on-going
             management of the Divestment Business with a view to ensuring its continued
             economic viability, marketability and competitiveness and monitor compliance
             by the Parties with the conditions and obligations attached to the Decision. To
             that end the Monitoring Trustee shall:
             (a)     monitor the preservation of the economic viability, marketability and
                     competitiveness of the Divestment Business, and the keeping separate
                                                 11
                                                 11
 ---pagebreak---               of the Divestment Business from the business retained by the Parties, in
              accordance with paragraphs 8 and 9 of these Commitments;
      (b)     supervise the management of the Divestment Business as a distinct and
              saleable entity, in accordance with paragraph 10 of these Commitments;
      (c)     with respect to Confidential Information:
                -   determine all necessary measures to ensure that the Parties do not
                    after the Effective Date obtain any Confidential Information
                    relating to the Divestment Business,
                -   in particular strive for the severing of the Divestment Business’
                    participation in a central information technology network to the
                    extent possible, without compromising the viability of the
                    Divestment Business,
                -   make sure that any Confidential Information relating to the
                    Divestment Business obtained by the Parties before the Effective
                    Date is eliminated and will not be used by the Parties; and
                -   decide whether such information may be disclosed to or kept by
                    the Parties as the disclosure is reasonably necessary to allow the
                    Parties to carry out the divestiture or as the disclosure is required
                    by law;
      (d)     monitor the splitting of assets and the allocation of Personnel between
              the Divestment Business and Mars or Affiliated Undertakings;
(iii) propose to the Parties such measures as the Monitoring Trustee considers
      necessary to ensure the Parties’ compliance with the conditions and obligations
      attached to the Decision, in particular the maintenance of the full economic
      viability, marketability or competitiveness of the Divestment Business, the
      holding separate of the Divestment Business and the non-disclosure of
      competitively sensitive information;
(iv)  review and assess potential purchasers as well as the progress of the divestiture
      process and verify that, dependent on the stage of the divestiture process:
      (a)   potential purchasers receive sufficient and correct information relating to
            the Divestment Business and the Personnel in particular by reviewing, if
            available, the data room documentation, the information memorandum
            and the due diligence process, and
      (b)   potential purchasers are granted reasonable access to the Personnel;
(v)   act as a contact point for any requests by third parties, in particular potential
      purchasers, in relation to the Commitments;
                                           12
                                           12
 ---pagebreak---     (vi)     provide to the Commission, sending Mars a non-confidential copy at the same
             time, a written report within 15 days after the end of every month that shall
             cover the operation and management of the Divestment Business as well as the
             splitting of assets and the allocation of Personnel so that the Commission can
             assess whether the business is held in a manner consistent with the
             Commitments and the progress of the divestiture process as well as potential
             purchasers;
    (vii)    promptly report in writing to the Commission, sending Mars a non-confidential
             copy at the same time, if it concludes on reasonable grounds that Mars is
             failing to comply with these Commitments;
    (viii)   within one week after receipt of the documented proposal referred to in
             paragraph 17 of these Commitments, submit to the Commission, sending Mars
             a non-confidential copy at the same time, a reasoned opinion as to the
             suitability and independence of the proposed purchaser and the viability of the
             Divestment Business after the Sale and as to whether the Divestment Business
             is sold in a manner consistent with the conditions and obligations attached to
             the Decision, in particular, if relevant, whether the Sale of the Divestment
             Business without one or more Assets or not all of the Personnel affects the
             viability of the Divestment Business after the sale, taking account of the
             proposed purchaser;
    (ix)     assume the other functions assigned to the Monitoring Trustee under the
             conditions and obligations attached to the Decision.
28. If the Monitoring and Divestiture Trustee are not the same legal or natural persons, the
    Monitoring Trustee and the Divestiture Trustee shall cooperate closely with each other
    during and for the purpose of the preparation of the Trustee Divestiture Period in order
    to facilitate each other's tasks.
                Duties and obligations of the Divestiture Trustee
29. Within the Trustee Divestiture Period, the Divestiture Trustee shall sell at no
    minimum price the Divestment Business to a purchaser, provided that the Commission
    has approved both the purchaser and the final binding sale and purchase agreement
    (and ancillary agreements) as in line with the Commission's Decision and the
    Commitments in accordance with paragraphs 16 and 17 of these Commitments. The
    Divestiture Trustee shall include in the sale and purchase agreement (as well as in any
    ancillary agreements) such terms and conditions as it considers appropriate for an
    expedient sale in the Trustee Divestiture Period. In particular, the Divestiture Trustee
    may include in the sale and purchase agreement such customary representations and
    warranties and indemnities as are reasonably required to effect the sale. The
    Divestiture Trustee shall protect the legitimate financial interests of Mars, subject to
                                                  13
                                                  13
 ---pagebreak---      Mars’ unconditional obligation to divest at no minimum price in the Trustee
     Divestiture Period.
30.  In the Trustee Divestiture Period (or otherwise at the Commission’s request), the
     Divestiture Trustee shall provide the Commission with a comprehensive monthly
     report written in English on the progress of the divestiture process. Such reports shall
     be submitted within 15 days after the end of every month with a simultaneous copy to
     the Monitoring Trustee and a non-confidential copy to Mars.
III. Duties and obligations of the Parties
31.  The Parties shall provide and shall cause their advisors to provide the Monitoring
     Trustee with all such co-operation, assistance and information as the Monitoring
     Trustee may reasonably require to perform its tasks. The Monitoring Trustee shall
     have full and complete access to any books, records, documents, management or other
     personnel, facilities, sites and technical information necessary for fulfilling its duties
     under the Commitments, and the Parties shall provide the Monitoring Trustee upon
     request with copies of any document. If requested by the Monitoring Trustee, Mars
     shall make available to the Monitoring Trustee one or more offices on their premises
     and shall be available for meetings in order to provide the Monitoring Trustee with all
     information necessary for the performance of its tasks.
32.  Mars shall provide the Monitoring Trustee with all managerial and administrative
     support that it may reasonably request on behalf of the management of the Divestment
     Business. This shall include all administrative support functions relating to the
     Divestment Business which are currently carried out at headquarters level. The Parties
     shall provide and shall cause their advisors to provide the Monitoring Trustee, on
     request, with the information submitted to potential purchasers, in particular give the
     Monitoring Trustee access to the data room documentation and all other information
     granted to potential purchasers in the due diligence procedure. Mars shall inform the
     Monitoring Trustee on possible purchasers, submit lists of potential purchasers at each
     stage of the selection process, including the offers made by potential purchasers at
     those stages, and keep the Monitoring Trustee informed of all developments in the
     divestiture process.
33.  Mars shall grant or procure Affiliated Undertakings to grant comprehensive powers of
     attorney, duly executed, to the Divestiture Trustee to effect the sale (including
     ancillary agreements), the Closing and all actions and declarations which the
     Divestiture Trustee considers necessary or appropriate to achieve the sale and the
     Closing, including the appointment of advisors to assist with the sale process. Upon
     request of the Divestiture Trustee, Mars shall cause the documents required for
     effecting the sale and the Closing to be duly executed.
34.  Mars shall indemnify the Trustee and its employees and agents (each an “Indemnified
     Party”) and hold each Indemnified Party harmless against, and hereby agrees that an
     Indemnified Party shall have no liability to Mars for, any liabilities arising out of the
                                                  14
                                                  14
 ---pagebreak---     performance of the Trustee’s duties under the Commitments, except to the extent that
    such liabilities result from the wilful default, recklessness, gross negligence or bad
    faith of the Trustee, its employees, agents or advisors.
35. At the expense of Mars, the Trustee may appoint advisors (in particular for corporate
    finance or legal advice), subject to Mars’ approval (this approval not to be
    unreasonably withheld or delayed) if the Trustee considers the appointment of such
    advisors necessary or appropriate for the performance of its duties and obligations
    under the Mandate, provided that any fees and other expenses incurred by the Trustee
    are reasonable. Should Mars refuse to approve the advisors proposed by the Trustee
    the Commission may approve the appointment of such advisors instead, after having
    heard Mars’ reasons for its refusal. Only the Trustee shall be entitled to issue
    instructions to the advisors. Paragraph 34 of these Commitments shall apply mutatis
    mutandis.
36. The Parties agree that the Commission may share Confidential Information proprietary
    to the Parties with the Monitoring Trustee. The Monitoring Trustee shall not disclose
    such information and the principles contained in Article 17 (1) and (2) of the Merger
    Regulation apply mutatis mutandis.
37. Mars agrees that the contact details of the Monitoring Trustee are published on the
    website of the Commission's Directorate-General for Competition and they shall
    inform interested third parties, in particular any potential purchasers, of the identity
    and the tasks of the Monitoring Trustee.
38. For a period of ten years from the Effective Date the Commission may request all
    information from Mars that is reasonably necessary to monitor the effective
    implementation of these Commitments.
    IV.        Replacement, discharge and reappointment of the Trustee
39. If the Trustee ceases to perform its functions under the Commitments or for any other
    good cause, including the exposure of the Trustee to a Conflict of Interest:
    (i)     the Commission may, after hearing the Trustee and Mars, require Mars to
            replace the Trustee; or
    (ii)    Mars may, with the prior approval of the Commission, replace the Trustee.
40. If the Trustee is removed according to paragraph 39 of these Commitments, the
    Trustee may be required to continue in its function until a new Trustee is in place to
    whom the Trustee has effected a full hand over of all relevant information. The new
    Trustee shall be appointed in accordance with the procedure referred to in Part I of this
    Section D of these Commitments.
                                                15
                                                15
 ---pagebreak--- 41.   Unless removed according to paragraph 39 of these Commitments, the Trustee shall
      cease to act as Trustee only after the Commission has discharged it from its duties
      after all the Commitments with which the Trustee has been entrusted have been
      implemented. However, the Commission may at any time require the reappointment of
      the Trustee if it subsequently appears that the relevant remedies might not have been
      fully and properly implemented.
Section G.      The review clause
42.   The Commission may extend the time periods foreseen in the Commitments in
      response to a request from Mars or, in appropriate cases, on its own initiative. Where
      Mars requests an extension of a time period, it shall submit a reasoned request to the
      Commission no later than one month before the expiry of that period (subject to the
      exception that, in relation to a request by Mars to extend the First Divestiture Period by
      one additional month, Mars may submit a reasoned request to the Commission no later
      than two weeks before the expiry of the initial three-month period), showing good cause.
      This request shall be accompanied by a report from the Monitoring Trustee, who shall,
      at the same time send a non-confidential copy of the report to Mars. Only in
      exceptional circumstances shall Mars be entitled to request an extension within the last
      month of any period.
43.   The Commission may further, in response to a reasoned request from Mars showing
      good cause waive, modify or substitute, in exceptional circumstances, one or more of
      the undertakings in these Commitments. This request shall be accompanied by a report
      from the Monitoring Trustee, who shall, at the same time send a non-confidential copy
      of the report to Mars. The request shall not have the effect of suspending the
      application of the undertaking and, in particular, of suspending the expiry of any time
      period in which the undertaking has to be complied with.
Section H.      Entry into force
44.   The Commitments shall take effect upon the date of adoption of the Decision.
      ………………………………….
      duly authorised for and on behalf of
      Mars, Incorporated
      ……………………………………
      duly authorised for and on behalf of
      AniCura TC AB
                                                  16
                                                   16
 ---pagebreak---                                           SCHEDULE
1.   The Divestment Business consists of the entire VetFamily business as at Closing,
     including all legal entities through which VetFamily operates (the VetFamily Legal
     Entities) and the assets comprised within them. Further details on what is contained
     within the Divestment Business are set out in the remainder of this Schedule.
2.   The Divestment Business includes, but is not limited to, the following:
    (i)    Legal entities
3.   The VetFamily Legal Entities are:
           a. VetFamily Holding AB (Sweden);
           b. VetFamily AB (Sweden);
           c. VetFamily AS (Norway);
           d. VetFamily ApS (Denmark);
           e. VetFamily GmbH (Germany);
           f. VetFamily B.V. (Netherlands); and
           g. VetFamily GmbH (Austria).
4.   […] is a newly formed and incorporated holding company, into which the entities
     listed at paragraph 3.b) to 3.g) will be transferred prior to Closing. […] is a dormant
     entity, as VetFamily is not active in […].
5.   VetFamily is in the process of incorporating new VetFamily entities in […]. These
     entities will be part of the Divestment Business to the extent that incorporation is
     complete at Closing, which is expected. All relevant documents, including any plans,
     records or other preparatory materials, relating to the incorporation of these entities
     will transfer to the Purchaser on Closing, including in the event that incorporation of
     these entities has not been finalised on Closing.
6.   A structure chart showing the current positions of the VetFamily Legal Entities within
     the wider AniCura group is provided in Annex 1 for reference.
   (ii)    Tangible assets
7.   The Divestment Business includes all tangible assets owned by the VetFamily Legal
     Entities, as well as tangible asset used exclusively by VetFamily, even if not owned by
     the VetFamily Legal Entities, including:
                                                 17
                                                  17
 ---pagebreak---             a. Office equipment used for the VetFamily business, e.g. laptops, mobile
                phones, and limited office furniture.
            b. All business records, books of account, and financial records to the extent
                pertaining to VetFamily, including all data and records held on (i) VetFamily
                Members (previous and current) and VetFamily Membership Contracts;
                (ii) purchases by VetFamily Members under the Framework Agreements;
                (iii) sales and customer data relating to VetPlan; and (iv) suppliers with
                whom VetFamily has Framework Agreements, including those shared with
                AniCura (Shared Framework Agreements), as well as product and pricing
                information, account histories and commercial data relating to VetFamily.
            c. Any other tangible assets not reflected in paragraph 7(a)-(b) above.
   (iii)    Intangible assets
8.    The Divestment Business includes all the intellectual property rights needed to run the
      VetFamily business (almost all of which are currently registered and owned by […] or
      other AniCura entities), including but not limited to:
            a. all sales and marketing assets, including marketing and distribution plans,
                VetFamily websites and domains, including the ‘VetFamily’, ‘VetPlan’, and
                ‘VetPro’ domain names (listed in Annex 3), as well as social media sites and
                the VetFamily webshop in Denmark, www.netdyredoktor.dk and
                www.netdyredoktor.com (which domain names are owned by VetFamily);
            b. all VetFamily trademarks and brand names, including ‘VetFamily’,
                ‘VetPlan’, and ‘VetPro’ (see full list in Annex 4);
            c. all documents relating to plans for future VetFamily Member benefits; and
            d. a licence to use the IT system through which VetPlan is administered (the
                AniPlan IT System), to be granted on a perpetual, fully paid-up basis; and
            e. ‘[…]’, a CRM system licensed to AniCura from […]. Prior to Closing,
                AniCura will take a copy of any information on the existing ‘[…]’ system
                which is needed for the ongoing operation of the AniCura Clinics.
9.    The Divestment Business includes any additional assets, contracts, or licences which
      relate to the commercialisation of VetPro products in Denmark by VetFamily,
      including VetFamily webshop in Denmark (www.netdyredoktor.dk). Should AniCura
      Clinics which are also VetFamily Members in Denmark remain VetFamily Members,
      they may continue to supply VetPro products under agreement with VetFamily.
                                                  18
                                                   18
 ---pagebreak---     (iv)    Contracts
10.   The Divestment Business comprises all contracts that contribute to the current
      operation or are necessary to ensure the viability and competitiveness of VetFamily,
      including in particular:
            a. all the membership contracts with VetFamily Members that are in place at
                Closing (the Membership Contracts).
            b. all framework supply agreements for all products and services which have
                been entered into for the benefit of VetFamily Members, whether negotiated
                by VetFamily or AniCura, listed in Annex 5 (Framework Agreements).
            c. all relevant customer contracts for VetPlan sold by VetFamily Members
                (VetPlan Contracts).
            d. the lease agreement on VetFamily’s office premises in Denmark.
11.   Shared framework agreements, which apply to both VetFamily Members and AniCura
      Clinics (Shared Framework Agreements), will continue to be operated according to
      their existing terms and conditions until the Purchaser takes control of VetFamily. The
      principles governing the handling of the Shared Framework Agreements until the
      Purchaser takes control of VetFamily are as follows:
            a. AniCura will continue pooling its purchase volumes under the relevant
                agreements with VetFamily for […] (or up to […] post-Closing where such
                contracts have no termination date or have an automatic renewal provision).
            b. AniCura will assign to VetFamily all benefits accruing under the Shared
                Framework Agreements (i.e. rebates, discounts, and other bonuses), except to
                the extent that such benefits relate to orders or purchases by AniCura Clinics
                under the relevant agreements, in which case these benefits are attributable
                and payable to AniCura as under the current arrangements.
            c. To the extent necessary to avoid the expiry of Shared Framework
                Agreements prior to Closing and to allow the Purchaser a reasonable
                opportunity to negotiate standalone agreements, AniCura will roll-over or
                extend such Shared Framework Agreements for a period of […] post-
                Closing. Negotiations with suppliers relating to the roll-over or extension of
                Shared Framework Agreements will be conducted jointly by AniCura and
                VetFamily/the Hold Separate Manager and subject to the oversight and
                agreement of the Monitoring Trustee.
            d. As regards Shared Framework Agreements that expire or are terminated after
                Closing, AniCura and the Divestment Business will each be responsible for
                negotiating and entering into separate agreements with suppliers without the
                continued pooling of purchase volumes.
                                                   19
                                                   19
 ---pagebreak---  ---pagebreak---  ---pagebreak---              a. System development for the AniPlan IT System, which is used to administer
                 VetPlan and AniPlan, and which is owned by […] but managed by
                 VetFamily; and
             b. Training and servicing support for AniCura Clinics in relation to the roll-out
                 of AniPlan.
    (vii)    Other
17.    If there is any asset, personnel or service which is not otherwise covered in this
       Schedule but which is both used (exclusively or not) in the Divestment Business and
       necessary for the continued viability and competitiveness of the Divestment Business,
       that asset, personnel or service, or an adequate substitute, will be offered to potential
       purchasers.
18.    For the avoidance of doubt, the Divestment Business includes the capability to provide
       all training and other on-boarding support services that are currently offered to
       VetFamily Members in connection with their membership of the VetFamily network,
       to the extent not otherwise covered in this Schedule.
19.    For the avoidance of doubt, the Divestment Business does not include:
             a. […];
             b. accounting and payroll support services provided by AniCura to VetFamily
                 in Sweden and Germany, which will be terminated after Closing, subject to
                 the transitional arrangements set out in paragraph 16.b) above; and
             c. Personnel employed by AniCura who perform shared group functions but are
                 not included in the Personnel listed in paragraph 12.a) above. The following
                 AniCura employees, which provide a very limited amount of support to the
                 VetFamily business amounting to less than 1% of their time, will not transfer
                 with the Divestment Business:
                      i. […]
                     ii. […]
                    iii. […]
                    iv. […]
                     v. […]
20.    If required by the Commission, AniCura will terminate the VetFamily Membership
       Contracts of the […] AniCura Clinics which are part of VetFamily in Denmark on
       Closing.
                                               ***
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                                                    22
 ---pagebreak--- ANNEX 1: PRE-ACQUISITION VETFAMILY CORPORATE STRUCTURE (SIMPLIFIED)
                                […]
                               23
 ---pagebreak--- ANNEX 2: VETFAMILY ORGANIGRAM
              […]
             24
 ---pagebreak--- ANNEX 3: VETFAMILY DOMAIN NAMES
              […]
              25
 ---pagebreak--- ANNEX 4: TRADEMARKS
         […]
        26
 ---pagebreak--- ANNEX 5: FRAMEWORK AGREEMENTS
              […]
             26