CELEX: 32015M7622
Language: en
Date: 2015-08-05 00:00:00
Title: Commission Decision of 05/08/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7622 - DUFRY / WORLD DUTY FREE) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 5.8.2015
C(2015) 5686 final

                                        [pic]

|To the notifying party:                                                |                                                                       |

Dear Sir/Madam,

Subject:    Case M.7622 – Dufry/ World Duty Free
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1] and Article 57 of the Agreement  on  the  European  Economic
Area[2]

1) On 1 July 2015, the European Commission received notification of a proposed concentration pursuant to Article 4 of the  Merger  Regulation  by
   which the undertaking Dufry AG ("Dufry", Switzerland) acquires within the meaning of Article 3(1)(b) of the Merger Regulation control  of  the
   whole of the undertaking World Duty Free S.p.A ("WDF", Italy) by way of purchase of shares (Dufry and WDF together the "Parties").

       THE PARTIES

2) Dufry is a global travel retail company which operates retail outlets in  airports  and  other  transport  hubs.  Dufry  is  headquartered  in
   Switzerland and it is active in North America, South America, Europe, Asia, the Middle East and Africa.

3) WDF is also a global travel retail company which operates retail outlets in airports and other transport hubs, headquartered in Italy. WDF  is
   active in North America, South America, Europe, the Middle East and parts of Asia.

       THE PROPOSED TRANSACTION

4) WDF is solely controlled by Schematrentaquattro S.p.A. ("Seller"), which owns 50.1% of  its  issued  share  capital,  and  which  is  in  turn
   indirectly controlled by the Benetton family. Currently, the two largest single shareholders of WDF hold 4.8% and 2.2%  of  the  issued  share
   capital, 42.9% are free-float. As a result, no other shareholder is able to exercise control of WDF.

5) On 28 March 2015, Dufry agreed to purchase the Seller's entire stake of 50.1% in WDF resulting in the acquisition of sole control. Apart  from
   this, the shareholder structure will remain identical to the situation pre-transaction. According to Italian law, Dufry is obliged  to  launch
   an offer to acquire the remaining shares of WDF within 20 days of completion.

6) The proposed 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[3]  (Dufry:  EUR  […],  WDF:  EUR  […]
   million).  Each of them has a EU-wide turnover in excess of EUR 250 million (Dufry: EUR […], WDF: EUR […] 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.

       the Commission's assessment

8) The competitive assessment focuses on two relevant product markets, namely (i) the market for the  provision  of  travel  retail  services  at
   airports, (ii) and the award of concessions for the provision of travel retail services at airports.

1 Travel retail services

1 Relevant product market

9) Both Parties are active globally in offering travel retail services at airports.

10) Travel retailers operate shops at different locations including airports, on-board  aircraft,  seaports,  cruise  liners  and  other  tourist
   locations, such as hotels or resort complexes. The Parties' activities focus on sales outlets at airports, where 90%  of  their  revenues  are
   achieved. Moreover, as in the EEA their activities only overlap in  the  airport  segment,  the  Commission's  analysis  is  limited  to  this
   segment[4].

11) At airports, travel retailers operate a variety of duty free and duty paid[5] retail outlets including general travel retail shops that  sell
   “typical” duty free products (such as perfumes and cosmetics, confectionery, wine and spirits and tobacco), specialised shops, brand boutiques
   and news and convenience stores.

   Previous Commission decisions

12) In previous decisions, the Commission considered the following sub-segmentations of the travel retail services at  airports,  but  ultimately
   left the market definition open:

a. by retail product category,  for  example,  perfumes  and  cosmetics,  confectionery,  wine,  spirits  and  tobacco,  watches,  jewellery  and
   accessories, fashion and leather;[6]

b. into airside sales (duty free and “travel value” only accessible to ticket holding passengers and  staff  who  have  passed  through  customs,
   immigration and security) and landside sales (duty paid, accessible to non-travellers as well as ticket holders ).[7]

Notifying Party's views

13) The Notifying Party submits that the relevant market should be defined as the overall travel retail market. In this  context,  the  Notifying
   Party contends that there is a large degree of demand-side substitutability, as most customers buy  out  of  impulse,  for  example  to  spend
   remaining local currency or simply to pass time.

   The Commission's assessment

14) In addition to the segmentations contemplated in previous decisions, the Commission also investigated whether the market could be  delineated
   according to the type of store at which travel retailers sell their goods, and considered the following types of stores in its  investigation:
   general travel retail stores, selling "classic" duty free products such as alcohol, tobacco and perfumes; brand boutiques; specialised  stores
   and news and convenience stores.

15) Conversely, based on the Notifying Party's submissions, a strong role of impulse customers could justify a finding  that  there  is  a  large
   degree of demand side substitutability between different kinds of stores and products, reducing the relevance of such a distinction.

16) In the framework of the market investigation, the majority of respondents considered that customers at  airport  retail  stores  buy  largely
   based on impulse[8]. For example, one airport operator responded that "primarily customers are using the airport to travel  [...]  During  the
   time they have available, they browse the shops and in many cases they make purchases […] however as retail isn't their focus this  is  mainly
   impulse/unplanned purchases"[9]. Another respondent stated that "the essence of airport travel retail is to generate and  manage  non-planned,
   impulse purchases"[10]; "a consequence of this is that shops offering different product categories still find themselves in  competition,  for
   the time, interest and purchasing power of travelling consumers"[11]. At the same time, there  are  indications  that  impulse  is  even  more
   prominent as a motivation to buy in some of the "classic" duty free product categories and possibly in this type of  store.[12]   Nonetheless,
   the results of the market investigation were not fully conclusive as to whether a segmentation  by  store  type  or  by  product  category  is
   warranted.

17) As regards a possible distinction between airside and landside stores, a number of respondents to the market investigation indicated that  it
   might be appropriate to make such a distinction given the different  range  of  products  available  and  the  restricted  access  to  airside
   stores.[13] However, the market investigation was not fully conclusive on this point either.

18) In any event, the definition of the relevant product market can be left open for the  purposes  of  the  present  decision  as  the  proposed
   transaction does not raise concerns under any plausible market definition.

   2 Relevant geographic market

   Previous Commission decisions

19) In its previous practice, the Commission has left open the definition of the relevant geographic market, indicating that the market could  be
   (i) limited to a given airport, (ii) EEA-wide or (iii) global[14].

   Notifying Party's views

20) The Notifying Party submits that the relevant market is worldwide in scope. They argue that customers can purchase products in  a  number  of
   airports or other travel retail locations along their journey, where a comparable range of products  is  available.  The  presence  of  online
   shopping and digital price comparison tools furthermore strengthens the possibility to compare prices.

21) The Notifying finally submits that from a supply-side perspective, the fact that most  travel  retailers  are  active  world-wide  speaks  in
   favour of a global scope of the relevant market.

   The Commission's assessment

22) The market investigation indicated that consumers tend to compare prices between airports, increasingly  by  relying  on  online-tools.  This
   behaviour seems to be of particular relevance as regards certain categories of goods such as perfumes, tobacco and alcohol[15].

23) One airport operator characterised the situation as follows: "Customers will compare prices between different airports within the EEA.  There
   is significant competition at each airport from duty free shops airside and duty paid shops on arrival  and  also  from  international  return
   airports".[16]

24) Overall, this could indicate that the relevant geographic market has to be defined as being at least EEA-wide in scope.

25) In any event, the geographic definition can be left open for  the  purposes  of  the  present  decision  as  no  competition  concerns  arise
   irrespective of the market definition.

2 Award of concessions for travel retail services

1 Relevant product market

26) Retail services at airports are provided on the basis of concession agreements between airport operators and travel retail  operators,  which
   are mostly awarded through tenders, and which can also be negotiated directly without a tender process[17]. Under these concession agreements,
   retailers typically pay the airport operator a concession fee which can for example comprise a fixed, guaranteed fee  and  a  variable  amount
   linked to the revenues generated through retail sales[18].

27) In many cases, airport operators specify in the tender documents the type of product(s) that are to be sold in the  outlet(s)  covered  by  a
   given concession.[19]

   Past Commission decisions

28) In previous decisions[20], the Commission found that a separate market for the award of such concessions  exists,  but  did  not  contemplate
   further segmentations.

   Notifying Party's views

29) The Notifying Party agrees with the approach of the Commission in previous cases, and submits that most travel retail companies can and  will
   bid for concession irrespective of the product categories covered. If the concession relates to  a  specific  product,  such  as  fashion  for
   example, then specialist retailers may bid as well.

   The Commission's assessment

30) The market investigation did not provide any indications that would warrant departing from the Commission's previous practice and to  further
   segment the market. The information assessed relating to recent tenders for concessions  at  airports  in  which  the  Parties  were  involved
   demonstrates the presence of a number of different bidders for concession of different type and duration.[21]

   2 Relevant geographic market

   Past Commission decisions

31) In its previous decisions, the Commission left open the exact scope of the geographic  market,  while  pointing  to  factors  indicating  the
   possible existence of an EEA-wide or even global market.[22]

   Notifying Party's views

32) The Notifying Party agrees with the Commission's approach, stating that tenders are generally open  to  all  bidders  irrespective  of  their
   origin. Moreover, most travel retailers are active on a global scale and airport operators aim at attracting bids from as  many  companies  as
   possible. Therefore, the Notifying Party considers the market to have a worldwide scope.

   The Commission's assessment

33) The market investigation indicates that the large majority of travel retail operators participate in tenders across the EEA and a  number  of
   these operators even participate at on a world-wide scale.[23] This suggests that the  scope  of  the  relevant  geographic  market  could  be
   regarded as at least EEA-wide, with some indications of an even broader market.

34) In any event, the geographic definition can be left open for the purposes of the present case as no competition concerns  arise  irrespective
   of the market definition.

3 COMPETITIVE ASSESSMENT

1 Travel retail services

35) On the basis of the plausible market definitions, the proposed transaction gives rise to affected markets at three geographic levels,  namely
   as regards (i) the EEA, (ii) at global level and (iii) at the level of a number of individual airports.

2 Horizontally affected markets in travel retail services in the EEA

36) The table below sets out the Parties' market shares by revenue (EUR) and by volume (number of stores) in the affected markets  on  the  basis
   of the different market sub-segmentations considered in the present decision (airside/landside, store  type,  type  of  product  sold  in  the
   store).

   Table: Affected markets in the EEA

   |Operator     |EEA retail market shares                                                                                                 |
|             |2014                                                                                                                     |

  |All sales |Airside |Landside |General Travel Retail Stores |Fashion & Accessories |Alcohol & Tobacco |Perfume & Cosmetics |Fine Food & Confec-
 tionary | | |by revenue |by nr of stores |by revenue |by nr of stores |by revenue |by nr of stores |by revenue |by nr of stores |by revenue |by
 nr of stores |by revenue |by nr of stores |by revenue |by nr of stores |by revenue |by nr of stores | |Dufry |[5-10]% |[5-10]% |[5-10]% |[5-10]%
 |[5-10]% |[5-10]% |[5-10]% |[5-10]% |[10-20]% |[5-10]% |[5-10]% |[5-10]% |[5-10]% |[5-10]% |[5-10]% |[5-10]% | |WDF |[10-20]% |[5-10]% |[20-30]%
                                                                 |[5-10]% |[0-5]
                                                                     % |[0-5]
                                                           % |[20-30]% |[10-20]% |[0-5]
                                                                     % |[0-5]
% |[20-30]% |[5-10]% |[30-40]% |[10-20]% |[20-30]% |[5-10]% | |Combined |[20-30]% |[10-20]% |[30-40]% |[10-20]% |[5-10]% |[5-10]% |[30-40]% |[10-
    20]% |[20-30]% |[10-20]% |[20-30]% |[10-20]% |[30-40]% |[10-20]% |[20-30]% |[10-20]% | |Heinemann |[10-20]% |[5-10]% |[10-20]% |[5-10]% |[10-
                                                                                                                                      20]% |[0-5]
                                                   % |[10-20]% |[5-10]% |[10-20]% |[5-10]% |[10-20]% |[5-10]% |[10-20]% |[5-10]% |[10-20]% |[0-5]
                         % | |Lagardère |[10-20]% |[30-40]% |[10-20]% |[30-40]% |[10-20]% |[40-50]% |[5-10]% |[20-30]% |[10-20]% |[30-40]% |[0-5]
 % |[10-20]% |[5-10]% |[20-30]% |[10-20]% |[40-50]% | |Aer Rianta |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]%
                                                                                  |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% | |Kappe |[0-5]
                                                                                                                                         % |[0-5]
                                                                                                                                         % |[0-5]
                                                                                                                                         % |[0-5]
                                                                                                                                         % |[0-5]
                                                                                                                                         % |[0-5]
                                                                                                                                         % |[0-5]
                                                                                                                                         % |[0-5]
                                                                                                                                         % |[0-5]
                                                                                                                                         % |[0-5]
                                                                                                                                         % |[0-5]
                                                                                                                                         % |[0-5]
                                                                                                                                % |[5-10]% |[0-5]
                                                                                                                                         % |[0-5]
                                                                                                                                         % |[0-5]
% | |IDF |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |
|Flemingo |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |
  |Others |[30-40]% |[40-50]% |[30-40]% |[40-50]% |[50-60]% |[40-50]% |[30-40]% |[40-50]% |[30-40]% |[40-50]% |[40-50]% |[60-70]% |[30-40]% |[40-
50]% |[30-40]% |[30-40]% | |Source: Notifying Party's best estimates, based on third party reports

37) As the table above illustrates, affected markets arise under the contemplated market segmentations as a result of the proposed transaction.

38) On a possible general product market for retail travel services at EEA airports, the Parties would have a combined overall  market  share  of
   [20-30]% by revenue (no affected market by number of stores). Likewise, if one were to distinguish between landside and  airside  stores,  the
   proposed transaction would lead to a [30-40]% market share by revenue in the airside segment (again, the market share by number of  stores  is
   much lower with [10-20]%).

39) On the basis of a segmentation by type of store, the proposed transaction would give rise in particular to a market  share  of  [30-40]%  (by
   revenue) for general retail stores. Finally, if product markets were defined on the basis of the product sold, affected markets  would  arise,
   by revenue, for fine food and confectionery ([20-30]%) alcohol and tobacco ([20-30]%),  perfume  and  cosmetics  ([30-40]%)  and  fashion  and
   accessories ([20-30]%).

40) As a result of the proposed transaction, the combined entity would be the strongest player in all of the affected markets. At the same  time,
   the market share of the combined entity does not exceed a maximum of [30-40]% (by revenue) in the perfume and cosmetics segment.

41) In addition, two significant competitors, Heinemann and Lagardère, with market shares of [10-20]%  and  [10-20]%  respectively  in  terms  of
   overall travel retail revenues are likely to constitute a competitive constraint for the combined entity. These two  companies  are  also  the
   most important competitors in the other affected markets, namely airside stores ([10-20]% and [10-20]% by revenue) and landside  stores  ([10-
   20]% and [10-20]% by revenue), general travel retail stores ([10-20]% and [5-10]% by revenue), fashion and accessories ([10-20]% and  [10-20]%
   by revenue), alcohol and tobacco ([10-20]% and [0-5]% by revenue), perfume and cosmetics ([10-20]% and [5-10]%  by  revenue),  fine  food  and
   confectionary ([10-20]% and [10-20]% by revenue).

42) Although the remainder of the market is rather fragmented (often companies with an overall market share in the respective segment below  1%),
   there are a number of strong local players such as Aer Rianta (active for example at Dublin airport), Kappe (active at Amsterdam-Schiphol) and
   IDF (active at Brussels-Zaventem), and a number of airport operators that run general travel retail stores themselves  on  an  in-house  basis
   (for example in Zagreb, Sofia, Venice and Stuttgart). All of these competitors are active in the general travel retail store segment, offering
   classic duty free products, such as alcohol and tobacco and fine food and confectionary, and focus also on airside sales.

43) As regards fashion and accessories and perfumes and cosmetics in particular, the number of actual and potential competitors is much  greater,
   given that a large number of high street retailers and brands are active independently at airports.

44) There are also clear indications that this is overall a dynamic market, which has experienced entry and will likely continue to do so in  the
   future. For example, since 2010 Flemingo, which now has a presence in 34 countries, is active in the EEA, and there  are  indications  that  a
   number of Asian travel retailers (DFS, Lotte and Shilla) are capable of and intend to enter the EEA market  in  the  near  future[24].  An  EU
   airport operator also indicated that those companies can be expected to participate in the next tender for concessions.[25]

45) In addition to the considerations relating to the market structure, the combined  entity  remains  subject  to  two  significant  constraints
   limiting its ability to increase prices post-transaction.

46) First, the majority of airport operators consulted in the market investigation indicated that consumers tend to  compare  prices  at  airport
   shops with high streets shops in their home or destination country, those of other airports, or those of  online  merchants[26].  One  airport
   operator stated that "people have an idea about high street pricing, and would only buy at airports if they believe they can get  […]  a  good
   deal pricewise"[27]. A competitor claimed that "general retail markets exercise a strong  pressure  on  the  airport  travel  retail  markets,
   because […] passengers do compare prices and their shopping is mostly subject to finding attractive deals"[28].  Moreover, the development and
   increasing spread of internet-based price comparison tools, combined with the  ever-more  widespread  installation  of  wireless  internet  in
   airports, and the growing role of pre-order possibility, where consumers order their product online and pick it up at  their  arrival  at  the
   airport, is likely to increase the significance of these competitive constraints in the future.

47) Second, there are indications that airport operators regularly impose some form of pricing policy  on  travel  retailers  as  an  element  of
   concession agreements. The market investigation indicates that travel retailers at airports can often not set their prices independently.  For
   example, 44% of competitors indicate that they are subject to price surveys or comparisons, further 33% to  maximum  selling  prices  and  the
   remaining 11% declare that they are obliged to enable "price tagging", that is to show  cost  saving  to  consumers.  Indeed,  one  competitor
   answered that "very often the airport operator expects from the retailers that their prices are in sync or lower as peer airports. Such has to
   be proven by regular price comparisons."[29]

48) Airport operators have largely confirmed the presence of these pricing policies – all respondents have indicated that they limit in some  way
   the pricing behaviour of their concessionaires. One operator pointed to a policy which would benchmark the prices at the duty  free  shops  in
   the airport twice a year with those down town.[30]

49) Finally, the market investigation indicated that there was no risk that the proposed transaction could lead to an increase in price  or  less
   choice in travel retail stores in airports. Almost 90% of airport operators expect prices to remain stable or decrease as a result of proposed
   transaction.[31]

50) It follows from the above that the proposed transaction does not raise serious doubts as to its  compatibility  with  the  common  market  in
   markets for travel retail services at airports in the EEA.

3 Horizontally affected markets in travel retail services on a global level

51) Were the markets for travel retail services defined at a global level, the proposed transaction would also give rise to a number of  affected
   markets. In particular, the combined entity would have a [20-30]% market share by revenue in the overall retail travel market, [20-30]% in the
   airside segment, [30-40]% in the general travel retail store segment, [30-40]% in news and convenience, [20-30]% in alcohol and tobacco,  [20-
   30]% in perfumes and cosmetics and [30-40]% in fine food and confectionary. If market shares were assessed by number of  stores,  no  affected
   markets would arise.

52) The proposed transaction would create the largest travel retail company in all the affected  product  markets.  However,  in  each  of  these
   markets strong competitors will be present post-merger. More precisely, in the overall travel retail market and each of  the  above  mentioned
   possible segmentations (airside, general travel retail,  news  and  convenience,  alcohol  and  tobacco,  perfumes  and  cosmetics,  food  and
   confectionary, the most important competitors will be Heinemann, Dubai Duty Free, Lagardère, Lotte and others with individual market shares of
   around [5-10]% and up to [10-20]% (Lagardère) in the news and convenience segment.

53)  Although the market would remain fragmented, there are a number of strong local players such as Aer Rianta (active  for  example  at  Dublin
   airport), Kappe (active at Amsterdam-Schiphol) and IDF (active at Brussels-Zaventem), and a number  of  airport  operators  that  run  general
   travel retail stores themselves on an in-house basis (for example in Zagreb, Sofia, Venice and Stuttgart). All of these competitors are active
   in the general travel retail store segment, offering classic duty free products, such as alcohol and tobacco and fine food and  confectionary,
   and focus also on airside sales.

54) In addition, the considerations set out above in recitals (47) and (48) as to the structure of the market  and  the  pricing  constraints  to
   which airport retailers are generally exposed applies to all the plausible product markets.

55) Therefore, the proposed transaction does not raise serious doubts as to its compatibility with  the  common  market  in  markets  for  travel
   retail services at airports at a global level.

4 Horizontally affected markets at airport level

56) If local markets at airport level were defined, the proposed transaction would give rise to affected markets in the airports  of  Düsseldorf,
   Manchester and London Heathrow, and in several Spanish airports (Madrid, Las Palmas, Malaga, and in  Fuerteventura,  Lanzarote  and  Tenerife)
   taking into account the percentage of stores operated by each party.

1 Düsseldorf

57) At the Düsseldorf airport, WDF is present with seven stores and Dufry operates three out of a total of 77.

58) On the basis of the plausible product market segmentations contemplated above in section 4.1.1, the only affected market  that  arises  as  a
   result of the transaction is the airside market segment, where the Parties would have a combined  market  share  of  [20-30]%  (by  number  of
   stores).

59) Given the consideration on pricing restraints set forth in recitals (47) and (48) above which apply also for  this  individual  airport,  the
   modest combined market share and presence of numerous competitors (e.g. Hollmann Books [10-20]%), the proposed transaction does not raise  any
   serious doubt as to its compatibility with the common market regarding the Düsseldorf airport.

2 Manchester

60) WDF is present with eight stores, whereas Dufry operates four, out of a total of 58 at Manchester airport. Dufry's stores  sell  fashion  and
   accessories articles. WDF operates 5 general travel retail stores, and a Victoria's Secret Beauty & Accessories concept store, which also sell
   a small volume of fashion and accessories.

61) On the basis of the plausible product market segmentations contemplated above in section 4.1.1, the combined entity would  have  a  share  of
   [20-30]% in Manchester airport of all travel retail stores, and of [20-30]% for airside stores.  A  further  affected  market  arises  in  the
   fashion and accessories product category, where the combined entity would have a share of [30-40]%.

62) However, as regards the affected market with respect to all travel retail  stores  and  airside  stores,  the  Parties  face  competition  in
   particular from WHSmith and ([10-20]% and [20-30]%) and, Boots ([10-20]% and [10-20]%) and Dixons ([5-10]% and [5-10]%).

63) The affected market in the fashion and accessories segment does not give rise to serious doubts as it  stems  from  the  inclusion  of  WDF's
   general duty free stores as well as its Victoria's Secret beauty & accessories concept store in  the  fashion  &  accessories  category.  This
   inclusion overstates the actual market share, given the small volumes of relevant (i.e. fashion & accessories) sales in those stores. Finally,
   the consideration on pricing restraints set forth in recitals (47) and (48) above applies also for this individual airport.

3 London Heathrow

64) WDF is present with 31 stores, whereas Dufry operates four, out of a total  of  166  at  London  Heathrow.  Dufry's  stores  are  [4  branded
   boutiques], selling fashion and accessories. WDF operates 3 branded boutiques offering cosmetics and perfumes.

65) On the basis of the product market segmentations contemplated above in section 4.1.1, the proposed  transaction  would  lead  to  a  combined
   market share of [20-30]% of all travel retail stores in Heathrow, and of [20-30]% for airside stores.

66) Given the consideration on pricing restraints set forth in recitals (47) and (48) which apply also to this airport, and  given  the  presence
   of many competitors such as WHSmith (all travel retail stores [10-20]% and airside stores [10-20]%), Dixons (all travel retail  stores  [0-5]%
   and airside stores [0-5]%), Harrods (all travel retail stores [5-10]% and airside stores [5-10]%), Boots (all travel retail stores [5-10]% and
   airside stores [5-10]%), the transaction does not raise  serious doubt as to its compatibility with the common market.

4 Madrid

67) Dufry plans to open its first store (Gap & Superdry) in Madrid airport in August, where it is  currently  not  active.  WDF  operates  33  in
   Madrid. In total, there are over 100 stores at this airport.

68) On the basis of the product market segmentations contemplated above in section 4.1.1, this new store would raise the market share of the  new
   entity to [30-40]% (of all travel retail stores at Madrid airport), and create an overlap in the fashion & accessories segment.

69) Given the consideration on pricing restraints set forth at recitals (47) and (48) above which apply also  to  this  individual  airport,  the
   small size of the increment (below [0-5]%), and the presence of many competitors that are active in the fashion & accessories business at  the
   airport including Accessorize, Adolfo Dominguez, Boss, Burberry, El Corte Ingles, Max Mara,  the  proposed  transaction  does  not  raise  any
   serious doubt as to its compatibility with the common market.

5 Malaga

70) Dufry is present in Malaga with one Hudson store. World Duty Free is present with six stores. The combined entity has therefore seven  stores
   out of a total of 26.

71) On the basis of the product market segmentations contemplated above in section 4.1.1, the proposed transaction will  give  rise  to  affected
   markets in the general travel retail store segment ([20-30]% market share) and the airside segment ([30-40]% market share).

72) Given the consideration on pricing restraints set forth at recitals (47) and (48) above which apply also to this airport, the small  size  of
   the increment (4 respectively [5-10]%), and the presence of many competitors including Lagardére (15, respectively  [10-20]%)  and  Areas  (12
   respectively [10-20]%) the proposed transaction does not raise serious doubt as to its compatibility with the common market.

6 Las Palmas

73) Dufry is present in Las Palmas with 4 Hudson stores that predominantly sell newspapers, books and magazines, but also tobacco and  some  food
   in small quantities, and it plans on opening a GAP & Superdry store selling fashion items. World Duty Free is present with 3 general duty free
   stores, and one store selling fashion. The combined entity therefore has 8 (9 as of August 2015) stores out of 21.

74) On the basis of the product market segmentations contemplated above in section 4.1.1, the proposed transaction will  give  rise  to  affected
   markets in the alcohol and tobacco segment ([70-80]%) and in the fine food and confectionery segment ([70-80]%). Moreover, the Parties have  a
   [30-40]% market share of all travel retail stores at the airport and a [30-40]% market share in airside stores. As of August 2015, there  will
   be an overlap in the fashion & accessories segment, where the transaction would lead to a market share of [20-30]%.

75) Aside from the consideration on pricing restraints set forth at recitals (47) and (48) above which apply also for  this  airport,  there  are
   seven competitors at this airport, including Leocadia Matos with a market share of [30-40]% in the general travel retail and [40-50]%  in  the
   airside segment.

76) In the fashion and accessories segment, there are three other  companies (Lenita XTG, the Mint Company and Lava)  selling  similar  products.
   For the remaining affected markets in alcohol and tobacco, and fine food and confectionery, the Parties are no close competitors.

77) Concerning alcohol and tobacco, Hudson stores do not sell alcohol but only cigarettes. In addition, the type  of  tobacco  products  sold  by
   Dufry (small packs containing 10 or 20 cigarettes) and World Duty Free (large cartons of more than 200  cigarettes)  do  not  serve  the  same
   purpose and the decision to purchase is not based on the same consumers' motivation.

78) Concerning fine food and confectionery, Hudson's sales of fine food and confectionery represents only […]% of its total sales.  In  addition,
   the Parties' offerings are very different. World Duty Free sells chocolate and other products  in  large  pack  sizes  (such  as  chocolates),
   generally intended as gifts, while Dufry sells much smaller packs usually intended for immediate consumption  in  the  airport.  Finally,  the
   combined entity would also be constrained by the numerous stores and cafés (which are not included in the market share calculations) that also
   sell fine food and confectionery.

79) Therefore, the proposed transaction does not raise any serious doubt as to its compatibility with the common market.

7 Fuerteventura

80) Dufry is present at Fuerteventura with 2 Hudson stores that predominantly sell newspapers, books and magazines, but  also  tobacco  and  some
   food in small quantities. World Duty Free is present with 3 stores, including a general travel retail store.

81) The combined entity operates 5 stores out of a total 14 of stores. On the basis of the product category segmentation  contemplated  above  in
   section 4.1.1, the proposed transaction will give rises to the following affected markets and market shares: [30-40]% of  all  airport  travel
   retail stores, [40-50]% for airside stores, [90-100]% in the alcohol and tobacco segment and [70-80]%  in  the  fine  food  and  confectionery
   segment.

82) Aside from the consideration on pricing restraints set forth at recitals (47) and (48) above which apply also to this airport,  there  are  6
   competitors at this airport, which constrain the Parties in the general travel retail segment and the airside segment.

83) As regards the affected markets in the alcohol and tobacco and fine food and  confectionery  segments,  the  Commission  considers  that  the
   proposed transaction does not raise serious doubts as to its compatibility with the common market, for the same reasons as those explained  in
   relation to the Las Palmas airport above at recital (78).  Moreover, no serious doubts exist with respect to any of the other market  segments
   assessed in relation to this airport.

8 Lanzarote

84) Dufry is present at Lanzarote with two Hudson stores that predominantly sell newspapers, books and magazines, but also tobacco and some  food
   in small quantities. World Duty Free is present with four stores comprising two general travel retail stores, a fashion and a souvenir store.

85) On the basis of the product market segmentations contemplated above in section 4.1.1, and the fact that the  combined  entity  would  operate
   six out of ten stores at the airport, the proposed transaction lead to a [60-70]% market share  of  all  travel  retail  stores,  as  well  as
   affected markets in the airside ([50-60]%), alcohol and tobacco ([90-100]%) and fine food and confectionery segments ([90-100]%).

86) It should be noted that these high market shares are in particular due to the small overall number of stores at this airport,  which  is  due
   to the relatively small size of this airport. Nonetheless, and aside from the consideration on pricing restraints set forth at  recitals  (47)
   and (48) above which apply also to this airport, there are three competitors (Devigardena, aloe Plus Lanzarote, Mas Palomas) at this  airport,
   which constrain the Parties in the general travel retail and airside market segments.

87) As for the affected markets in the alcohol and tobacco and fine food and confectionery segments, the Commission considers that  the  proposed
   transaction does not raise any serious doubt as to its compatibility with the common market, for the same reasons as mentioned in relation  to
   the Las Palmas airport above at recitals (77) and (78). Moreover, no serious doubts exist with respect to any of  the  other  market  segments
   assessed in relation to this airport.

9 Tenerife Norte

88) Dufry is present at Tenerife Norte with a Hudson store that predominantly sell newspapers, books and magazines, but  also  tobacco  and  some
   food in small quantities. It plans to open a Gap & Superdry store in August 2015. World Duty Free is present with 2 general duty free stores.

89) On the basis of the product market segmentations contemplated above in section 4.1.1, and the fact that the combined entity would  operate  3
   stores out of 6 stores at the airport (4 out of 7 as of August 2015), the proposed transaction leads to a [50-60]% market share of all  travel
   retail stores, as well as affected markets in the airside segment ([70-80]%) and in the alcohol and tobacco segment ([90-100]%).

90) It should be noted that these high market share are due in particular to the small overall number of stores at this airport, which is due  to
   the relatively small size of the airport. Nonetheless, and aside from the consideration on pricing restraints set forth at recitals  (47)  and
   (48) above which apply also to this individual airport, there are three competitors (Lagardère, Farmacia and Loro  Parque)  at  this  airport,
   which constrain the Parties in the general travel retail and airside market segments.

91) As for the affected markets in the alcohol and tobacco segment, the Commission considers that the proposed transaction  does  not  raise  any
   serious doubt as to its compatibility with the common market, for the same reasons as mentioned in relation to the for the Las Palmas  airport
   above at recital(77). Moreover, no serious doubts exist with respect to any of the other market segments assessed in relation to this airport.

   10 Tenerife Sur

92) Dufry is present at Tenerife Sur with 1 fashion store, one local specialities store and one store selling  sweets  and  candies.  World  Duty
   Free is present with four general Duty Free stores and two Fashion & accessories stores. The combined entity has therefore eight stores out of
   16 in total at this airport.

93) On the basis of the product market segmentations contemplated above in section 4.1.1, the proposed  transaction  would  lead  to  a  [50-60]%
   market share of all travel retail stores, as well as affected markets in the airside ([50-60]%), specialised stores ([30-40]%), fine food  and
   confectionery ([50-60]%) as well as fashion and accessories segments.

94) It should be noted that these high market share are due in particular to the small overall number of stores at this airport, which is due  to
   the relatively small size of the airport.. Nonetheless, and aside from the consideration on pricing restraints set forth at recitals (47)  and
   (48) above which apply also to this airport, there are 8 competitors at this airport, which constrain the Parties in the general travel retail
   and airside market segments.

95) As regards the fine food and confectionary market segment, the same reasons  as  those  enumerated  for  the  Las  Palmas  airport  above  in
   paragraphs (75) and ((78)) apply also to the airport at hand.

96) As for the overlap in specialised stores and  fashion  and  accessories,  the  presence  of  competitors  in  this  segment  in  the  airport
   (Devigardena and Maspalomas), will constrain the combined entity post-transaction.

97) Therefore, the Commission considers that the proposed transaction does not raise serious doubt  as  to  its  compatibility  with  the  common
   market.

5 Award of concessions for the provision of travel retail services at airports

98) In this context, the Commission has  analysed  information  concerning  recent  tenders  for  airport  retail  space  in  which  the  Parties
   participated in the EEA and world-wide. Moreover, the Commission has taken into account market share information based on  total  revenues  in
   the airport retail segment in the EEA and world-wide.

99) The analysis of the tendering information shows that both Parties together participated in about […]% of these tenders (EEA  and  world-wide)
   in which they were competing against a number of other players, including six general travel retailers (Lagardère, Heinemann, DFASS, Duty Free
   Americas, ATU Americas and Flemingo) and six high street brands tendering for specialist retail  concessions.  One  of  the  Parties  was  the
   winning bidder in […]% of the tender processes taken into account.

100) In terms of market shares an affected market arises at global level for sales at airport travel retail stores, with a combined market  share
   by revenue of [20-30]% (Dufry [10-20]%, WDF [5-10]%). In the EEA, an affected market arises at this level with  a  combined  market  share  by
   revenue of approximately [20-30]% (Dufry [5-10]%, WDF [10-20]%).

101) The analysis of the tender data and  the  market  share  data  explained  in  the  preceding  paragraphs  indicate  that  the  Parties  will
   significantly enhance their positions in the market by combining their respective businesses. In particular, at world-wide level, the  Parties
   will have a combined overall market share in the travel retail segment at  airports  of  [20-30]%  (by  revenue),  while  the  most  important
   competitors[32] have market shares of [0-5]% (by revenue). In the EEA, the Parties will have a combined market share of [20-30]% (by revenue),
   while Heinemann would be the next largest competitor with a share of [10-20]% (by revenue) and Lagardère with [10-20]% (by revenue)  would  be
   the third-largest. Smaller operators such as Aer Rianta, Kappe and International Duty Free would have market shares of between [0-5]%  at  EEA
   level.

102) In the framework of the market investigation, some competitors expressed the view that the combined entity could have a  better  negotiating
   position in future tenders and that it could therefore be able to achieve more favourable conditions,  although  these  comments  were  rather
   general and not substantiated.[33]

103) Despite the Parties' strengthened position in the market, there are however strong indications that the overall  market  for  the  award  of
   concessions for the provision of travel retail services at airports will remain competitive, in particular in the EEA,  as  the  Parties  will
   continue to face strong competition.

104) There are several established travel retail operators that are already active  in  the  EEA,  in  particular  Heinemann  and  Lagardère.  In
   addition, in the EEA a multitude of local actors are also bidding for those concessions, namely Aer  Rianta  (active  for  example  at  Dublin
   airport), Kappe (active at Amsterdam-Schiphol) and IDF (active at Brussels-Zaventem), and a number  of  airport  operators  that  run  general
   travel retail stores themselves on an in-house basis (for example in Zagreb, Sofia, Venice and Stuttgart).

105) Moreover, the results of the market investigation indicate that the barriers to entry are rather low, evidenced by actual recent entries  in
   the EEA market. For example, in 2010 the Dubai-based operator Flemingo entered the market and is now regularly bidding in EEA  tenders.  Other
   important non-EEA operators such as DFS, Lotte and Shilla which already have an international presence appear to be credible new  entrants[34]
   in the years to come. As one airport operator puts it: "With the growth of all forms of travel hubs we would expect to see  new  operators  at
   airports across EEA. We see significant demand from new potential entrants, for  example,  in  the  following  retail  categories:  department
   stores, duty free operators, fashion, gifts as well as catering"[35]. Another EU airport operator also expressed the opinion that  DFS,  Lotte
   and Shilla were likely to participate in the next tender for concessions.[36]

106) Further, the majority of the airport operators consulted in the framework of the market investigation were of the opinion that the  proposed
   transaction would have no tangible impact on this market, whereas others merely stated in a rather general manner that it would  decrease  the
   number of bidders without specifying any negative effects on competition. One of the airport operators consulted stated that "in the duty free
   industry there are still enough operators to achieve competition", another airport operator explained  that  "there  are  number  of  credible
   global retail operators who would participate in any concession award process"[37].

107) In addition, and as claimed by the Parties, there are indications that airport operators have some degree  of  countervailing  buyer  power,
   evidenced by the fact that concession fees have been rising over the last years.

108) Finally, the market investigation also related to the prerequisites to successfully participate in tenders for concessions for retail  space
   at airports. The results of the market investigation did not indicate the existence of any practices that would benefit the combined entity in
   a specific way, such as requirements to offer a particular brand or a particular portfolio of goods at one or more airports.[38]

109) For the reasons above, the proposed transaction does not raise serious doubts as to its compatibility with the common market in the area  of
   the award of concessions for the provision of retail services at airports.

   CONCLUSION

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

For the Commission
(Signed)
Margrethe VESTAGER
Member of the Commission

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

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

[3]   Turnover calculated in accordance with Article 5 of the Merger Regulation and the Commission Consolidated Jurisdictional Notice (OJ  C  95,
    16.4.2008, p. 1).

[4]   The Commission has in previous cases left open whether sales at airports from  a  distinct  product  market  from  that  of  travel  retail
services in general – for example, IV/M.782 Swissair/Allders International at paragraph 8;  COMP/M.3728  Autogrill/Altadis/Aldeasa  at  paragraph
9;COMP/M.4762 Autogrill/Alpha Airports Group at paragraph 9; COMP/M.5123 Autogrill/World Duty Free at  paragraph  12;  COMP/M.5389  Aéroports  de
Paris/The Nuance Group at paragraph 15; and COMP/M.6263 Aelia/Aéroports deParis/JV at paragraph 18.

[5]   Duty paid products include all taxable goods, including goods where the tax/duty is paid by  the  consumer  and  goods  where  the  tax  is
absorbed by the retailer in order to be able to offer the same or similar prices to intra-EU travellers as the prices for duty free products, so-
called “travel value” prices.

[6]   COMP/M.5114 Pernod Ricard/V&S at paragraph 41; COMP/M.6212 LVMH/Bulgari  at  paragraph  17;  COMP/M.6263  Aelia/Aéroports  de  Paris/JV  at
paragraphs 30-33.

[7]   COMP/M.3728 Autogrill/Altadis/Aldeasa at paragraph 9; COMP/M.4581 Imperial  Tobacco/Altadis  at  paragraph  20;  COMP/M.5389  Aéroports  de
Paris/The Nuance Group at paragraphs 16 and 17; and COMP/M.6263 Aelia/Aéroports de Paris/JV at paragraphs 25-29.

[8]   Replies to question 4 – Questionnaire to airport operators, and replies to question 5 – Questionnaire to competitors.

[9]   Replies to question 4 – Questionnaire to airport operators.

[10]  Replies to question 5 – Questionnaire to competitors.

[11]  Replies to question 5 – Questionnaire to competitors.

[12]  Replies to question 4 – Questionnaire to airport operators, and replies to question 5 – Questionnaire to competitors.

[13]  Replies to question 6 – Questionnaire to competitors.

[14]   IV/M.782  Swissair/Allders  International  at  paragraph  10;  COMP/M.3728  Autogrill/Altadis/Aldeasa   at   paragraph   12;   COMP/M.4762
Autogrill/Alpha Airports Group at paragraph 14; COMP/M.5123 Autogrill/World Duty Free at paragraph 18; COMP/M.5389 Aéroports de Paris/The  Nuance
Group at paragraph 22; and COMP/M.6263 Aelia/Aéroports de Paris/JV at paragraph 47.

[15]  Replies to question 6 – Questionnaire to airport operators.

[16]  Replies to question 6.1 – Questionnaire to airport operators.

[17]  Replies to question 15 – Questionnaire to competitors.

[18]  Minutes of a telephone conference with an EU airport operator dated 25 June 2015.

[19]  Minutes of a telephone conference with an EU airport operator dated 25 June 2015.

[20]  COMP/M.5123 Autogrill/World Duty Free at paragraphs 15-17; COMP/M.5389 Aéroports de Paris/The Nuance Group  at  paragraph  21;  COMP/M.6263
Aelia/Aeroports de Paris JV at paragraphs 44-46; and COMP/M.6723 Ferrovial/Qatar Holding/CDPQ/Baker Street/BAA at paragraphs 25 and 26.

[21]  Replies to question 8 – Questionnaire to airport operators; Minutes of a telephone conference with an EU airport  operator  dated  25  June
2015.

[22]  COMP/M.5123 Autogrill/World Duty Free at paragraph 23; COMP/M.5389 Aeroports de Paris/The Nuance Group at  paragraph  23;  and  COMP/M.6263
Aelia/Aéroports de Paris/JV at paragraph 34.

[23]  Replies to question 8 – Questionnaire to airport operators.

[24]  Replies to question 18 – Questionnaire to airport operators, and replies to question 18 – Questionnaire to competitors;  also  for  example
the Verdict Report “Global Airport Retailing 2015.

[25]  Minutes of a telephone conference with an EU airport operator dated 25 June 2015.

[26]  Replies to question 6 and 7 – Questionnaire to airport operators and replies to questions 10 and 11 – Questionnaire to competitors.

[27]  Replies to question 7 – Questionnaire to airport operators.

[28]  Replies to question 11 – Questionnaire to competitors.

[29]        Replies to question 11 – Questionnaire to competitors.

[30]  Replies to question 12 – Questionnaire to airport operators.

[31]  Replies to question 19 – Questionnaire to airport operators.

[32]  Including Lagardère, Lotte Duty Free, Dubai Duty Free, Heinemann, DFS, Aer Rianta.

[33]  Replies to questions 19-21 – Questionnaire to competitors.

[34]  Replies to question 18 – Questionnaire to airport operators, and replies to question 18 – Questionnaire to competitors;  also  for  example
the Verdict Report “Global Airport Retailing 2015.

[35]  Replies to question 18 – Questionnaire to airport operators.

[36]  Minutes of a telephone conference with an EU airport operator dated 25 June 2015.

[37]  Replies to question 22 – Questionnaire to airport operators. It is import to note that airport operators have an interest in maintaining  a
competitive bidding market, as they participate directly in the revenues achieved by the travel retailers through flexible – and  revenue-related
– concession fees.

[38]  Replies to question 14 – Questionnaire to airport operators.

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

                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE