CELEX: 32017M8305
Language: en
Date: 2017-04-11 00:00:00
Title: Commission Decision of 11/04/2017 declaring a concentration to be compatible with the common market (Case No COMP/M.8305 - ROCKWELL COLLINS / BE AEROSPACE) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

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Brussels, 11.4.2017
C(2017) 2474 final

To the notifying party

Subject:    Case M.8305 – ROCKWELL COLLINS / B/E AEROSPACE
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1] and Article 57 of the Agreement  on  the  European  Economic
Area[2]

Dear Sir or Madam,

    1) On 8 March 2017, the European Commission received notification of a proposed concentration pursuant to Article 4 of the Merger  Regulation
       by which Rockwell Collins, Inc. ("Rockwell Collins", USA) acquires within the meaning of Article 3(1)(b) of the Merger Regulation  control
       of the whole of B/E Aerospace, Inc. ("B/E Aerospace", USA) by way of a purchase of shares.[3]

    2) Rockwell Collins is designated hereinafter as the "Notifying Party", and Rockwell Collins and B/E Aerospace are together  referred  to  as
       the "Parties". The same concentration was already notified to the Commission under the Simplified Procedure on 2 February  2017,  but  the
       notification was subsequently withdrawn on 15 February 2017.

The parties and the operation

    3) Rockwell Collins, listed on the NYSE,[4] is a manufacturer and supplier of aviation and  integrated  solutions  for  both  commercial  and
       government applications. Its principal products include flight deck avionics, cabin electronics, mission  communications,  simulation  and
       training, and information management.

    4) B/E Aerospace, also a publically listed company,[5] is a manufacturer and supplier of aircraft cabin interior products, including aircraft
       cabin seating, lighting systems, oxygen systems, food and beverage preparation and storage equipment, galley systems, and modular lavatory
       systems.

    5) Pursuant to an agreement and plan of merger signed on 23 October 2016, a newly created direct or indirect subsidiary of Rockwell  Collins,
       Quarterback Merger Sub Corp., will merge with and into B/E Aerospace, with B/E Aerospace surviving the merger  as  a  direct  or  indirect
       subsidiary of Rockwell Collins (the "Transaction"). As a result of the Transaction, Rockwell Collins will  acquire  sole  control  of  B/E
       Aerospace.

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

EU DIMENSION

    7) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million[6] (Rockwell Collins:  EUR  4  734
       million; B/E Aerospace: EUR 2 406 million). Each of them has an EU-wide turnover in  excess  of  EUR  250  million  (Rockwell  Collins/B/E
       Aerospace: EUR [CONFIDENTIAL] million; B/E Aerospace: EUR [CONFIDENTIAL] million), but they do not achieve more than two-thirds  of  their
       aggregate EU-wide turnover within one and the same Member State. The notified operation therefore has an EU dimension.

Relevant Markets

        3.1. Introduction

    8) Rockwell Collins designs, produces and supports communications and aviation systems for commercial and  military  customers  and  provides
       information management services through voice and data communication networks and solutions. The integrated system solutions and  products
       Rockwell Collins provides are oriented  around  a  set  of  core  competencies:  communications,  navigation,  automated  flight  control,
       displays/surveillance, simulation and training, integrated electronics and information management systems. Rockwell Collins also  provides
       a range of services and support to its customers through a global network of service centres, including  equipment  repair  and  overhaul,
       service parts, field service engineering, training, technical information services and aftermarket used equipment sales.

    9) B/E Aerospace is a provider of cabin interiors products for commercial aircrafts and business jets. Its product portfolio covers:  seating
       products; food and beverage and preparation and storage equipment; oxygen delivery systems; interior structures (that is  to  say  modular
       lavatory systems, galley systems, and  vacuum  wastewater  systems),  as  well  as  engineering,  design,  integration,  installation  and
       certification services.

        3.2. Relevant product and geographic markets

               3.2.1. Aircraft seating

   10) Aircraft seating includes seats that are installed in the cabin of an aircraft. The Commission has not so far examined the  market(s)  for
       aircraft seating.

   11) The Notifying Party acknowledges that the commercial aircraft seating market may be segmented according to different  ways:  (i)  by  seat
       class (first class, business class, premium economy class and economy); (ii) by fit (line fit covering seats installed  in  new  aircrafts
       and retrofit); and (iii) by aircraft type (wide body aircraft, narrow body aircraft and regional transport  aircraft,  including  business
       jet).

   12) However, the Notifying Party submits that for each of  these  segmentations  there  is  a  high  degree  of  demand-side  and  supply-side
       substitutability between the different aircraft seating products, so that these products should all be considered part of the same product
       market.

   13) With regard to the geographic scope of the possible market(s) for aircraft seating the Notifying Party submits that  it  is  worldwide  in
       scope, notably because all major competitors supplying aircraft seating are present worldwide and sell to customers on a worldwide  basis;
       airframe original equipment manufacturers ("OEMs") and airline customers operate global sourcing strategies; and prices are  quoted  on  a
       worldwide basis.

   14) The results of the market investigation suggest that aircraft seating products are distinct from  other  non-avionics  aerospace  products
       (including components of the aircraft cabin interior). Respondents to the market investigation indicated  that  aircraft  seats  could  be
       segmented between commercial and business aircrafts due to the different size of the seat. Within commercial aircrafts  a  differentiation
       between first, business and economy class can be made because of the differences in price, in market demand in number of  seats  for  each
       class, in functionality and in comfort of seats.[7]

   15) The large majority of respondents to the market investigation support the view that the geographic scope of  the  possible  market(s)  for
       aircraft seats is worldwide as the competitive conditions for the purchase of aircraft seats do not differ between the EEA and the rest of
       the world.[8]

   16) In light of the above, for the purposes of the present decision, the exact scope of the relevant  product  and  geographic  market(s)  for
       aircraft seats can be left open, since no serious doubts as to the compatibility of the Transaction with the internal market  arise  under
       any plausible alternative product or geographic market definition.

               3.2.2. In-flight entertainment ("IFE") systems

   17) In Allied Signal/Honeywell, the Commission considered that IFE products  were  grouped  in  an  "other  non-avionics  aerospace  products"
       category. IFE products were also briefly discussed in General Electric/Honeywell, again as non-avionics products.[9]

   18) The Notifying Party submits that the technical differences between IFE hardware for single-aisle and dual-aisle large commercial  aircraft
       are limited, so that the relevant product market includes all IFE hardware, as  well  as  audio-visual  content,  for  use  on  commercial
       passenger aircrafts.

   19) The Commission has previously considered the relevant geographic market for avionics and non-avionics products for civil aircrafts  to  be
       worldwide in scope.[10]

   20) The results of the market investigation did not provide a clear picture as to whether IFE systems and  equipment  are  substitutable  with
       other non-avionics aerospace products, or whether IFE products should be segmented in any way (by  type  of  aircraft  for  example).  One
       respondent explains that for commercial aircrafts the number of seats is higher so the IFE system  is  self-contained  (i.e.  a  networked
       system with a high number of identical smart display in each seat) whereas the IFE for business jets is regarded as more customer-specific
       and integrated solution comprising functionalities of personal entertainment, connectivity and cabin control/management functions; whereas
       other market participants consider that the IFE needs of passengers flying on commercial airlines or on business jets are very similar and
       thus the IFE systems should not be segmented by type of aircraft.[11]

   21) The majority of respondents to the market investigation consider that the geographic dimension of the possible market(s) for  IFE  systems
       is worldwide as suppliers of IFE solutions compete globally.[12]

   22) In light of the above, for the purposes of the present decision, the exact scope of the relevant product and geographic market(s) for  IFE
       systems can be left open, since no serious doubts as to the compatibility of the Transaction with the  internal  market  arise  under  any
       plausible alternative product or geographic market definition.

               3.2.3. Aircraft lighting

   23) In UTC/Goodrich, the Commission investigated whether there were distinct markets for exterior and interior aircraft  lighting,  given  the
       clear demand-side differences between the two; and whether the market for interior  lighting  could  be  further  segmented  according  to
       individual types of products (such as back-light passenger signs, cockpit displays and  controls)  given  that  each  component  serves  a
       specific purpose. In that case, the Commission left the relevant product market definition open.[13]

   24) The Notifying Party submits that the aircraft lighting market can be broadly segmented into interior and  exterior  lights  as  each  have
       different purposes: exterior lights are used for identification purposes and in order to avoid collision while  interior  lights  are  for
       visibility purposes. However, because of the high degree of supply-side substitutability (aircraft lighting suppliers are able to  provide
       a full suite of cabin lights scalable to any aircraft type and the same lighting solutions are supplied for line fit  and  for  retrofit),
       the Notifying Party considers that the market for interior lights should not be further segmented in any way (by product type, by aircraft
       type or by fit).

   25) In UTC/Goodrich, the Commission's market investigation confirmed that the market for interior aircraft lighting should be  analysed  on  a
       worldwide basis, notably because (i) customers generally apply a worldwide purchasing policy and (ii) there are no significant differences
       between various regions of the world in terms of price or technical requirements of interior aircraft lighting products.[14]

   26) The results of the market investigation confirmed the relevance of segmenting  aircraft  lighting  into  exterior  lighting  products  and
       interior lighting solutions. According to the large majority of the respondents no further  segmentation  of  interior  lighting  products
       appears warranted.[15]

   27) With regard to the geographic dimension of the market for interior lighting the majority of the respondents to  the  market  investigation
       support the view that the relevant market is worldwide in scope.[16]

   28) In light of the above, for the purposes of the present decision, the exact scope  of  the  relevant  product  and  geographic  market  for
       interior aircraft lighting products and solutions can be left open, since no serious doubts as to the  compatibility  of  the  Transaction
       with the internal market arise under any plausible alternative product or geographic market definition.

               3.2.4. Cabin management systems ("CMS")

   29) CMSs generally cover utility control of various cabin environmental functions such as  temperatures,  lighting,  in-flight  entertainment,
       galley services, waste water, window shades as well as access to long-range satellite communications and internet connectivity.

   30) The Commission has not previously examined the possible market(s) for CMS.

   31) The Notifying Party does not take a view as regards the exact product or geographic delineation of the  relevant  market(s)  for  CMS  for
       business jets and submits that the exact product and geographic definition can be left open.[17]

   32) As mentioned in paragraph (19) above, the Commission has previously considered the  relevant  geographic  market  for  avionics  and  non-
       avionics products to be worldwide in scope.[18]

   33) The majority of respondents to the market investigation in the present case do not consider that CMS products should be segmented by  type
       of aircraft or in any other way. One respondent however explains that CMS for  commercial  aircrafts  is  a  more  complex  system,  which
       typically covers control of highly critical functions whereas CMS for business jets tend to be a more integrated system  to  provide  also
       connectivity for personal devices and entertainment and it has to be more adaptable and customizeable.[19]

   34) The results of the market investigation supported a worldwide scope of the possible market for CMS for business jets.[20]

   35) In light of the above, for the purposes of the present decision, the exact scope of the relevant product and geographic market(s) for  CMS
       can be left open, since no serious doubts as to the compatibility of the Transaction with the internal market arise  under  any  plausible
       alternative product or geographic market definition.

Competitive assessment

1 Industry Overview

   36) In the aviation industry there is traditionally a distinction between buyer-furnished equipment ("BFE") and  supplier-furnished  equipment
       ("SFE") for the procurement of aircraft systems (avionics and non-avionics products). BFE products are purchased by the  airlines,  whilst
       for SFE equipment, the procurement responsibility is taken on by the airframe OEMs and  usually  once  the  airframe  has  been  partially
       fabricated.

   37) BFE and SFE are purchased at different points in time: the SFE equipment (such as avionics products)[21] is  in  general  selected  up  to
       three years before the BFE interior products; whereas BFE products are selected only after  the  sale  of  the  aircraft  to  the  airline
       customer. BFE products are usually multi-sourced: while BFE suppliers need to be certified by the airframe OEM, it  is  the  airline  that
       selects the BFE equipment supplier, negotiates and buys directly from the BFE supplier. The providers of SFE equipment are selected by the
       airframe OEMs at the design and development phase of an aircraft platform on  the  basis  of  the  supplier's  technical  compliance  (the
       airframe OEM defining the technical requirements), cost, schedule and risk.

   38) Airline customers generally tender, contract and procure each BFE product separately per individual fleet type (namely by  aircraft  model
       such as A330). In particular, for cabin seats for example the airlines would tender by category: economy class, business class, and so  on
       for a specific number of aircrafts.

   39) The selection of the IFE is also conducted by a formal tender procedure with IFE decision-making  factors  covering  cabin  configuration,
       features, price, and delivery timeframe.

   40) CMS products for business jets are selected and contracted by the airframe OEM several years ahead of an aircraft's first delivery to  the
       end customer. Airframe OEMs however usually offer to the airlines and leasing company customer some level of  CMS  customization  to  meet
       their individual needs.

   41) The Notifying Party submits that these different products will continue to be supplied separately either as SFE or BFE and  consider  that
       no trend of moving towards a one-stop-shop solution in this regard is observed in the industry. Although there might have been  occasional
       instances in which airframe OEMs have attempted to shift the procurement of traditional BFE products to SFE such attempts have  proved  to
       be unsuccessful to date.

   42) In this context, Rockwell Collins is predominantly a supplier of SFE products with BFE solutions (such as  IFE)  accounting  for  only  [a
       modest part] of its revenue, whereas B/E Aerospace's activities  are  focused  on  BFE  equipment  sold  to  airlines  (airline  customers
       generating [a very substantial part] of B/E Aerospace's revenue) such as the supply of aircraft seating and of aircraft lighting.

2 Horizontal and vertical assessment

   43) The Transaction does not result in any horizontal overlaps between the Parties' activities globally and in the EEA.

   44) While both Parties manufacture and sell products for the aviation industry, they supply  largely  distinct,  unrelated  and  complementary
       products: (i) Rockwell Collins produces and supports communications and  aviation  systems  for  commercial  and  military  customers  and
       provides information management services through voice and data communication networks and solutions. Its principal products and  services
       include flight deck avionics, cabin electronics, mission communications, simulation and training, and  information  management;  (ii)  B/E
       Aerospace supplies aircraft cabin interior products, including aircraft cabin seating, lighting and  oxygen  systems,  food  and  beverage
       preparation and storage equipment, galley and modular lavatory systems for commercial airliners and business jets.

   45) The Transaction does not give rise to any vertical relationships between the Parties either.

   46) B/E Aerospace offers certain generic, standardized and commoditized electronics products, most notably  (i)  computer  cards,  (ii)  cable
       trays and assemblies, (iii) cables and connectors and (iv) power supplies.[22]  Rockwell  Collins  sources  negligible  volumes  of  these
       generic products from B/E Aerospace.[23]

   47) Most of these products that Rockwell Collins buys from B/E Aerospace are used for  Rockwell  Collins'  own  internal  test  equipment.  In
       addition, due to their commoditized nature, none of these B/E Aerospace products purchased by Rockwell Collins are essential  to  Rockwell
       Collins' products or represent an input without which the Rockwell Collins' products could not function technically.

   48) Therefore, B/E Aerospace generic electronics products do not constitute an important input  for  Rockwell  Collins'  products  within  the
       meaning of the non-horizontal Guidelines, so that the Transaction does not give rise to any vertical relationships  globally  and  in  the
       EEA.

   49) The Transaction gives rise to two potential conglomerate relationships: (i) between B/E Aerospace's aircraft seats and  Rockwell  Collins'
       in-flight entertainment ("IFE") systems on the one hand;[24] and (ii) between interior lighting products supplied  by  B/E  Aerospace  and
       cabin management systems ("CMS") for business jets of Rockwell Collins on the other hand. Each of these relationships is analysed in  turn
       below.

3 Conglomerate relationships

   50) According to paragraphs 92 and 93 of the non-horizontal Guidelines, “conglomerate mergers in the majority of circumstances will  not  lead
       to any competition problems (…) [t]he main concern in the context of conglomerate mergers is foreclosure. The combination of  products  in
       related markets may confer on the merged entity the ability and incentive to leverage a strong market position from one market to  another
       by means of tying or bundling or other exclusionary practices.”

   51) During the proceedings some third parties flagged potential anti-competitive concerns related to conglomerate relationships resulting from
       the Transaction. In particular, these market participants submitted that the Transaction will create a strong  integrated  player  with  a
       broader portfolio of interior cabin solutions with the leverage to bundle such aviation  products.  This  will  decrease  the  ability  of
       smaller, non-integrated players (that is to say single-product suppliers) to compete with the merger entity and will limit the  choice  of
       airlines and possibly aircraft makers, who will no longer be able to mix-and-match B/E Aerospace or Rockwell Collins' cabin  products  and
       equipment with independent third parties solutions.

   52) According to the Notifying Party bundling of avionics products[25] with cabin interior products is not a common practice in  the  aviation
       industry as customers do not generally source avionics and cabin interior products together or in any form of package.

   53) The market investigation confirmed that tenders for avionics products generally do not include cabin interior products.  Rockwell  Collins
       also stated that to the extent that it currently teams up with other suppliers to participate in these tenders, these teaming arrangements
       are limited to avionics products. B/E Aerospace also as a rule competes as a standalone player, and in the very few instances where it has
       teamed up with a third party it was not in relation to avionics products.[26]

   54) The merged entity is therefore unlikely to engage post-Transaction in bundling strategies in  relation  to  avionics  and  cabin  interior
       products. For this reason only the possible bundling or tying of Rockwell Collins' cabin electronics products (that is to say IFE and  CMS
       for business jets) with B/E Aerospace's cabin equipment products (in particular aircraft seats and interior lighting products) is analysed
       below.

1 Aircraft seating and IFE systems

1 Notifying Party's view

   55) B/E Aerospace manufactures aircraft seats for different classes (such as first,  business,  and  tourist)  for  commercial  aircrafts  and
       business jets. Until very recently, Rockwell Collins supplied PAVES, an IFE  system  used  in  single-aisle  large  commercial  aircrafts.
       However, on 21 February 2017, Rockwell Collins decided to stop its activities in relation to its IFE  hardware  business,  with  immediate
       effect.[27] As a result, the Notifying Party submits that the Transaction therefore does not give rise to any conglomerate effects between
       Rockwell Collins' IFE hardware and B/E Aerospace's seats.

   56) Notwithstanding the cessation of its activities in IFE systems, Rockwell Collins has considered  in  its  notification,  the  hypothetical
       conglomerate relationship between IFE hardware and B/E Aerospace's seats. The Notifying Party submits that the cabin products supplied  by
       each of the Parties are distinct and unrelated, and that for these products commercial (also referred to as "mixed") bundling is uncommon.
       Bundling these products would not be a feasible business strategy given that Rockwell Collins' products are in general sourced as  SFE  by
       airframe OEMs, whereas B/E Aerospace's products are purchased by airlines as BFE, therefore are more  likely  to  be  customized  and  are
       purchased once the aircraft has been partially fabricated.

   57) The Notifying Party further submits that the merged entity will lack the significant market power required on the  relevant  market(s)  to
       enable it to implement foreclosure strategies to the detriment of its competitors. Finally,  the  Notifying  Party  submits  that  in  all
       markets concerned, numerous competitors would be able to offer alternative competitive responses to any commercial bundling strategies  of
       the Parties.

2 Results of the market investigation and Commission's assessment

   58) The results of the market investigation indicate that both IFE systems and  aircraft  seats  are  procured  by  airlines  as  a  BFE  (one
       respondent clarifies that IFE systems suppliers need to be first certified by the airframe OEM to make sure the IFE hardware fits into the
       specific aircraft type).[28]

   59) Based on the results of the market investigation, it cannot be excluded that the merged entity could bundle IFE and  aircraft  seats  post
       transaction. However, some respondents highlighted the possible procompetitive effects of  such  a  strategy,  as  it  could  improve  the
       industrial process, the time-to-market and deliver a better integrated product with less integration issues.[29]

   60) In any event, the Commission considers that such possible bundling strategy is  unlikely  to  lead  to  anti-competitive  foreclosure  for
       several reasons.

   61) First, as implied by the level of the market shares on the relevant markets for IFE and aircraft seats, the merger entity  will  not  have
       significant degree of market power. Rockwell Collins' market share in the overall IFE system market at a worldwide level for  2016  stands
       at only [0-5]% (its market share would amount to [10-20]% in the possible narrower segment for single-aisle IFE  system)  far  behind  the
       market leader Panasonic with 51% and 54% respectively and facing another strong player, Thales. In any event, as  indicated  in  paragraph
       (55), Rockwell Collins has stopped its activities in relation to IFE in 2017.

   62) B/E Aerospace has a global market share of [30-40]% in commercial aircraft seats in 2016, which is only slightly above the  30%  threshold
       set forth by paragraph 25 of the Non-Horizontal Merger Guidelines. B/E Aerospace's market share is also above 30% only under two  possible
       narrower segmentations of the market for aircraft seats: first class commercial aircraft seats and business jet seats. In  any  event  B/E
       Aerospace faces strong competitors in the aircraft seats market in the face of Zodiac Aerospace with a market  share  of  28%  and  Recaro
       Aircraft Seating with 9% for the same period.

   63) Second, the market investigation also confirmed the presence of a number of competitors for each IFE systems and aircraft seats.  For  IFE
       solutions, market respondents pointed to Honeywell, General Electric, Esterline Technologies, Satcom  Direct,  Panasonic,  Thales,  Zodiac
       Aerospace and others. Respondents to the market investigation list, inter  alia,  Ipeco,  Zodiac  Aerospace,  Recaro,  Acro,  HAECO,  Avio
       Interiors, Stelia as competing seat suppliers.[30] The majority of the respondents to the market investigation consider that there will be
       a sufficient number of alternative suppliers of both IFE solutions and of aircraft seats post-Transaction.[31]

   64) Some of these suppliers are integrated players that is to say they are capable  of  offering  a  similar  combination  of  cabin  interior
       products as the merger entity post-Transaction: for example Zodiac Aerospace and United Technologies  ("UTC")  Aerospace  Systems,  active
       both in the supply of aircraft seats and IFE. Other players, active only in one of the markets concerned (such as Thompson  Aero  Seating,
       Recaro, Stelia Aerospace and HAECO active in aircraft seats and Custom Control Concepts, Panasonic, and Thales active in IFE)  could  team
       up and combine their offers in order to counter any possible bundling or tying strategies deployed by the merger entity.  Given  the  fact
       that the Parties did not partner either between themselves or with third parties pre-Transaction[32] the merger is unlikely to lead  to  a
       reduction in the number of possible partners for non-integrated players to team-up if necessary for commercial business opportunities.

   65) In light of the above, and in particular the very limited likelihood of successfully implementing any  hypothetical  foreclosing  strategy
       post-merger in view of the number of integrated and non-integrated players present  on  the  respective  markets,  especially  given  that
       cessation of IFE's activities claimed by Rockwell Collins, the Commission considers that the Transaction  is  unlikely  to  raise  serious
       doubts with regard to its compatibility with the internal market for  what  concerns  possible  foreclosure  effects  resulting  from  the
       combination of Rockwell Collins' IFE hardware with B/E Aerospace's aircraft seating products.

2 CMS for business jets and interior lighting products

   66) B/E Aerospace provides a range of cabin interior lighting products, as well as  emergency  and  ordinance  lighting.  These  products  can
       hypothetically be tied or bundled with Rockwell Collins' CMSs for business jets.

1 Notifying Party's view

   67) In relation to possible foreclosure concerns stemming from conglomerate relationships between these  two  products,  the  Notifying  Party
       submits similar arguments as for the conglomerate issues related to bundling or tying IFE and aircraft seats: (i)  business  jet  CMS  and
       interior lighting products are distinct and unrelated and bundling these products in uncommon as CMS is sold as a SFE and interior  lights
       are selected by the airline customers as BFE;  (ii) the Parties do not have the required market power on any of the concerned markets that
       would allow them to engage in an input foreclosure strategy; and (iii) a  sufficient  number  of  competitors  will  remain  active  post-
       Transaction in both business jet CMS and interior lights and these competitors will be able to counter any possible  foreclosure  attempts
       by the merged entity.

2 Results of the market investigation and Commission's assessment

   68) The results of the market investigation indicate that CMSs for business jets are purchased by  airframe  OEMs  through  tenders.  Interior
       lighting products, also purchased by tenders, separately from CMS, are sourced by both airframe OEMs and airlines. As one airline customer
       explains: "Interior Light can be subject to competitive tender and the airline can elect to supply this to the  aircraft  manufacturer  as
       Buyer Furnished Equipment (BFE). Alternatively, airlines can elect to have the aircraft manufacturer supply  this  as  Supplier  Furnished
       Equipment (SFE)".[33]

   69) In interior lighting solutions B/E Aerospace has a modest market share of [5-10]% globally in 2015. An important  number  of  players  are
       present on the market for interior lighting: Diehl Aerospace, Zodiac Aerospace, United Technologies Corp., Cobham.[34] The respondents  to
       the market investigation also pointed  out  to  a  number  of  alternative  suppliers  of  interior  aircraft  lighting  products:  United
       Technologies, Honeywell, Zodiac, Emteq, Sirio Panel, Astronics,  Lufthansa,  PGA  Electronics,  Madelec,  SELA,  Luminator,  Koito,  Bruce
       Industries, and others.[35]

   70) Rockwell Collins has a global market share of [40-50]% in business jet CMS. A number of alternative CMS  suppliers  with  sizeable  market
       shares are also active in the provision of CMS for business jets. Market participants that replied to the market investigation pointed  to
       a number of competitors active in the provision of CMS for business jets: Honeywell,  General  Electric,  Esterline  Technologies,  Stacom
       direct, Lufthansa Technik, Heads Up technologies and Mid Continent controls.[36]

   71) Based on the position of Rockwell Collins in CMS and the results of the market investigation, it cannot be excluded that the merged entity
       could engage in bundling interior lighting products with CMS. However, for the reasons set out below, the Commission considers  that  such
       possible bundling strategy is unlikely to lead to anti-competitive foreclosure.

   72) First, the merged entity would have strong presence only on the possible market for CMS for business jets where, as indicated in paragraph
       (70) a number of alternative suppliers will remain active post-Transaction.

   73) Second, among these competitors there are both integrated players such as Honeywell capable of offering the same combination  of  products
       as the merged entity, but also non-integrated ones such as Diehl Aerospace, Bruce Aerospace, Birk  Aerosystems  and  Schott  Lighting  and
       Imaging for interior lighting products, and Digecor, Heads Up Technologies  and  Lufthansa  Technik.  Non-integrated  players  would  have
       sufficient number of alternative partners to team up and offer the same combination of CMS and interior lighting products.

   74) Third, there is no evidence that the Parties have regularly teamed-up with each other or with any other third party in  CMS  for  business
       jets or in aircraft lighting to compete for commercial business opportunities (this has been confirmed also  by  the  respondents  in  the
       market investigation)[37].

   75) In light of the above, the Commission considers that the Transaction is unlikely to raise serious doubts with regard to its  compatibility
       with the internal market for what concerns possible foreclosure effects resulting from  the  combination  of  Rockwell  Collins'  CMS  for
       business jets with B/E Aerospace's interior aircraft lighting products.

Conclusion

   76) For the above reasons, the European Commission has decided not to oppose the notified operation and to  declare  it  compatible  with  the
       internal market and with the EEA Agreement. This decision is adopted in application of  Article  6(1)(b)  of  the  Merger  Regulation  and
       Article 57 of the EEA Agreement.

For the Commission

(Signed)

Tibor NAVRACSICS
Member of the Commission

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

[2]   OJ L 1, 3.1.1994, p. 3 (the 'EEA Agreement').

[3]   Publication in the Official Journal of the European Union No C82, 17.03.2017, p. 4.

[4]   Rockwell Collins has a highly fragmented shareholder  base,  with  the  largest  shareholder  holding  approximately  9.5%  (Capital  World
    Investors). No one shareholder exercises control over Rockwell Collins.

[5]   B/E Aerospace has a highly fragmented shareholder base, with the largest shareholder holding approximately 8.5% (BlackRock, Inc.).  No  one
    shareholder exercises control over B/E Aerospace.

[6]   Turnover calculated in accordance with Article 5 of the Merger Regulation.

[7]   See Replies to questionnaire Q1 – customers and competitors of 9 March 2017, questions 2.1. and 2.2.

[8]   See Replies to questionnaire Q1 – customers and competitors of 9 March 2017, question 2.3.

[9]   Commission decision of 1 December 1999, in Case M.1601 - Allied Signal / Honeywell, recital 56; Commission decision of 3 July 2001 in  Case
    M.2220 - General Electric / Honeywell, recital 277.

[10]  Commission decision of 3 July 2001 in Case M.2220 - General Electric / Honeywell, recital 240; Commission decision of  27  March  1996,  in
    Case IV/M.697 - Lockheed Martin/Loral Corporation, recital 17.

[11]  See Replies to questionnaire Q1 – customers and competitors of 9 March 2017, question 1.1. and 1.2.

[12]  See Replies to questionnaire Q1 – customers and competitors of 9 March 2017, question 1.3.

[13]  Commission decision of 26 July 2012, in Case M.6410 – UTC/Goodrich, recitals 130-142.

[14]  Commission decision of 26 July 2012, in Case M.6410 – UTC/Goodrich, recitals 143-144.

[15]  See Replies to questionnaire Q1 – customers and competitors of 9 March 2017, questions 3.1. and 3.2.

[16]  See Replies to questionnaire Q1 – customers and competitors of 9 March 2017, question 3.3.

[17]  Rockwell Collins sells Venue, a CMS used to control cabin  interior  environment  systems  (temperature,  shades  and  lighting  etc…)  and
    distribute entertainment content on business jet aircrafts only. Thus Rockwell Collins provides its market share for a narrower  segment  of
    CMS, namely CMS for business jets.

[18]  Commission decision of 3 July 2001 in Case M.2220 - General Electric/Honeywell, recital 240; Commission decision of 27 March 1996, in  Case
    IV/M.697 - Lockheed Martin/Loral Corporation, recital 17.

[19]  See Replies to questionnaire Q1 – customers and competitors of 9 March 2017, question 4.1.

[20]  See Replies to questionnaire Q1 – customers and competitors of 9 March 2017, question 4.2.

[21]  Avionics are typically selected by the airframe OEM prior to the  aircraft  development  and  are  consequently  certified  for  the  given
    aircraft platform. When the airline customer specifies the aircraft configuration it is offered a choice of BFE  avionics  by  the  airframe
    OEMs. Avionics and non-avionics solutions (such as cabin interior products) are not typically sourced by  the  customer  together  or  in  a
    package: avionics purchasing decisions are made by engineers of the procurement teams of airframe OEMs or airlines  whereas  cabin  interior
    decisions (such as seating for instance) are mainly done by senior business leaderships of airlines given that the aircraft interior  has  a
    greater client-facing aspect.

[22]  These generic products have generally not been discussed in prior Commission decisions. B/E Aerospace's market shares  for  each  of  these
    products were below [0-5]% at worldwide and EEA-levels.

[23]  For Rockwell Collins' financial year that ended on 30 September 2015, Rockwell  Collins'  total  worldwide  purchases  from  B/E  Aerospace
    amounted to less than [CONFIDENTIAL].

[24]  IFE systems provide audio-visual entertainment to passengers through either audio-visual on-demand entertainment consoles embedded  in  the
    backs of seats, or through overhead monitors that retract from panels.

[25]  Avionics (derived from "AVIation" and "electrONICS") is generally defined as the electromechanical and solid-state components  and  systems
    installed in the cockpit and the electronics compartments of an  airplane.  These  components  include,  for  example,  integrated  avionics
    systems, communication systems, navigation systems, and cabin electronics systems.

[26]  B/E Aerospace has teamed up with another party on two reported occasions: (i) with […] design firm for the post concept development of  B/E
    Aerospace' […] product and (ii) with […] as a Tier 1 supplier in a bid to supply a […] programme (B/E Aerospace and […]), Form CO  paragraph
    6.239.

[27]  Form CO, paragraph 6.85.

[28]  See Replies to questionnaire Q1 – customers and competitors of 9 March 2017, question 5.1.

[29]  See Replies to questionnaire Q1 – customers and competitors of 9 March 2017, question 11.1.

[30]  See Replies to questionnaire Q1 – customers and competitors of 9 March 2017, questions 7.1 and 8.1.

[31]  See Replies to questionnaire Q1 – customers and competitors of 9 March 2017, questions 12.1 and 12.2.

[32]  Those market participants that provided a reply to the market investigation were not aware of any past bids in which Rockwell  Collins  and
    B/E Aerospace have participated together (See Replies to questionnaire Q1 – customers and competitors of 9 March 2017, question 9).

[33]  See Replies to questionnaire Q1 – customers and competitors of 9 March 2017, question 5.1.

[34]  MarketsandMarkets, "Aircraft Lighting Market, Global Forecast to 2021", p. 113 submitted as Annex 6.5 to the Form CO.

[35]  See Replies to questionnaire Q1 – customers and competitors of 9 March 2017, question  8.2.  and  Unitech  technologies  Aerospace  Systems
    ("UTAS") reply submitted by email on 13 February 2017.

[36]  See Replies to questionnaire Q1 – customers and competitors of 9 March 2017, question 7.2.

[37]  See Replies to questionnaire Q1 – customers and competitors of 9 March 2017, question 9.

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

                                                                  PUBLIC VERSION