CELEX: 32021M10173
Language: en
Date: 2021-04-30 00:00:00
Title: Commission Decision of 30/04/2021 declaring a concentration to be compatible with the common market (Case No COMP/M.10173 - LUMINUS / ESSENT BELGIUM) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 30.4.2021
                                                                C(2021) 3200 final
                                                                                 PUBLIC VERSION
                                                                 In the published version of this decision,
                                                                 some information has been omitted
                                                                 pursuant to Article 17(2) of Council
                                                                 Regulation (EC) No 139/2004 concerning
                                                                 non-disclosure of business secrets and
                                                                 other confidential information. The
                                                                 omissions are shown thus […]. Where
                                                                 possible the information omitted has been
                                                                 replaced by ranges of figures or a general
                                                                 description.
                                                               Luminus S.A.
                                                               Boulevard du Roi Albert II 7
                                                               1210 Saint-Josse-ten-Noode
                                                               Belgium
Subject:             Case M.10173 – Luminus/Essent Belgium
                     Commission decision pursuant to Article 6(1)(b) of Council Regulation
                     No 139/20041 and Article 57 of the Agreement on the European Economic
                     Area2
Dear Sir or Madam,
(1)       On 23 March 2021, the European Commission received notification of a proposed
          concentration pursuant to Article 4 of the Merger Regulation by which Luminus S.A.
          (‘Luminus’, Belgium) acquires within the meaning of Article 3(1)(b) of the Merger
          Regulation sole control of the whole of Essent Belgium NV (‘Essent Belgium’,
          Belgium)3. (Luminus and Essent Belgium are designated hereinafter as the ‘parties’
          to the proposed transaction.)
1    OJ L 24, 29.1.2004, p. 1 (the ’Merger Regulation’). With effect from 1 December 2009, the Treaty on the
     Functioning of the European Union (‘TFEU’) has introduced certain changes, such as the replacement of
     ‘Community’ by ‘Union’ and ‘common market’ by ‘internal market’. The terminology of the TFEU will
     be used throughout this decision.
2    OJ L 1, 3.1.1994, p. 3 (the ‘EEA Agreement’).
3    Publication in the Official Journal of the European Union No C 113, 31.3.2021, p. 14.
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak--- 1.      THE PARTIES
(2)     Luminus is controlled by EDF S.A. (‘EDF’, France). It is active in Belgium in the
        markets for generation and supply of electricity, gas trading on hubs, supply of gas
        to dealers as well as the retail supply of electricity and gas to large industrial and
        commercial (‘I&C’) customers, small I&C customers and household customers.
        Luminus also provides various energy-related services in Belgium for both
        household and I&C customers, including heating, ventilation, and air conditioning
        solutions, photovoltaic panels, e-mobility solutions, and energy performance
        contracts.
(3)     Essent Belgium is active in the retail supply of electricity and gas to small I&C
        customers and household customers and in the supply, installation and maintenance
        of photovoltaic panels in Belgium.
2.      THE TRANSACTION
(4)     The proposed transaction consists of the acquisition by Luminus of 100% of the
        shares of Essent Belgium. Upon completion of the Transaction, Luminus will
        exercise sole control over Essent Belgium.
3.      UNION DIMENSION
(5)     The undertakings concerned have a combined aggregate world-wide turnover of
        more than EUR 5 000 million [EDF: EUR 71,317 million; Essent Belgium: EUR
        497 million]4. Each of them has a Union-wide turnover in excess of EUR 250
        million [EDF: EUR […]; Essent Belgium: EUR […])], and they do not achieve more
        than two-thirds of their aggregate Union-wide turnover within one and the same
        Member State. The Transaction therefore has a Union dimension within the meaning
        of Article 1(2) of the Merger Regulation.
4.      COMPETITIVE ASSESSMENT
(6)     The Parties’ activities overlap horizontally as regards the retail supply of electricity
        and high-calorific gas (‘H-gas’) and low-calorific gas (‘L-gas’) to small I&C
        customers and household customers in Belgium. There are also horizontal overlaps
        in the supply, installation and maintenance of photovoltaic panels, trading of
        Guarantee of Origin certificates (‘GoOs’)5 and, marginally, in other activities in
        Belgium,6 none of which gives rise to an affected market under any plausible
        product or geographic market definition.
(7)     The Transaction also gives rise to the following vertical links: (i) between the
        generation and supply of electricity in Belgium (upstream) where Luminus is
        present, and the retail supply of electricity to small I&C customers and household
4   Turnover calculated in accordance with Article 5 of the Merger Regulation.
5   See footnote 101 of the form CO.
6   Namely, the supply and installation of smart home services, the maintenance of gas boilers for household
    customers, and the supply of electric vehicle charging stations in Belgium.
                                                          2
 ---pagebreak---          customers (downstream) in Belgium where both Luminus and Essent Belgium are
         present; and (ii) between gas trading on hubs and the supply of H-gas and L-gas to
         dealers in Belgium (upstream) where Luminus is present, and the retail supply of H-
         gas and L-gas to small I&C customers and household customers (downstream) in
         Belgium, where both Luminus and Essent Belgium are present. These overlaps do
         not give rise to any vertically affected market under any plausible product and
         geographic market definition.
(8)      The present Decision will therefore focus on the impact of the proposed transaction
         on the retail supply of electricity, H-gas and L-gas to small I&C customers and to
         household customers in Belgium.
4.1.     Markets for the retail supply of electricity to small I&C and household
         customers
4.1.1. Relevant markets
4.1.1.1. Product market definition
         (A)        Distinction by type of customers
(9)      In the past the Commission distinguished, within the retail supply of electricity in
         Belgium, three separate product markets for the supply of electricity to: (i) large I&C
         customers connected to the transmission network (at above 70 kilovolts (kV)); (ii)
         small I&C customers connected to the distribution networks (below 70 kV); and (iii)
         household customers.7 These definitions, which are not contested by the Parties and
         have been confirmed by the market investigation8, are to be retained for the purposes
         of this Decision. The Parties’ activities only overlap with respect to the latter two.
         (B)        Retail supply of “green” electricity
(10)     The Commission considered whether a separate product market for the retail supply
         of electricity energy generated from renewable sources (‘green electricity’) to small
         I&C and household customers should be defined.9
(11)     The Parties considered that there are no separate markets for the supply of green
         electricity for several reasons.10 First, green energy is supplied under very similar
         tariffs to non-green energy. In addition, the Parties stress that price remains the main
         selection criterion of consumers and that ultimately whether energy is green or not
7   In relation to Belgium, see Cases COMP/M.9587 Engie / EDP Renovaveis / EDPR Offshore Espana
    (25/02/2020), paragraphs 21-24, 27-28; COMP/M.8855 Otary / Eneco / Electrabel / JV (05/07/2018),
    paras. 26-28; COMP/M.5549 EDF/Segebel (12/11/2009), paragraphs 131-133, 138; COMP/M.4180 Gaz
    de France/Suez (14/11/2006), paragraphs. 689-695, 738-743.
8   See replies to question 3-5 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of gas
    and electricity and to question 3-5 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply
    of gas and electricity.
9   See Decision 21-DCC-18 of the French competition authority (29 January 2021) concerning Dijon
    Métropole, Storengy and Rougeot, paragraphs 66–73, where ultimately the question of whether there
    should be a new retail segmentation for the supply of green electricity in France was left open.
    (https://www.autoritedelaconcurrence fr/fr/decision-de-controle-des-concentrations/relative-la-prise-de-
    controle-conjoint-de-la-societe-dijon).
10  Paragraph 156 of the form CO.
                                                          3
 ---pagebreak---         only has a minor influence on customers’ choice. Moreover, GoOs and green gas
        certificates systems are designed in such a way that all suppliers can offer green
        energy. Furthermore, the parties underline that launching a “green tariff” is
        straightforward and only requires slight tweaks in the procurement strategy. Lastly,
        the parties emphasise that all suppliers currently offer “green energy products”.
(12)    The Commission agrees that, at the present stage, narrower markets for the retail
        supply of green electricity are not warranted in Belgium, for the following reasons.
(13)    The Belgian federal energy regulator, the Commission for Electricity and Gas
        Regulation (‘CREG’), told the Commission that it considers green energy to be an
        element of competition rather than a separate market and that it has not seen a
        particular increase in the number of green electricity contracts being offered.11
(14)    From the demand side, six of the 12 small I&C customers responding to the
        Commission’s market investigation12 replied that green electricity should be
        considered a separate segment of the market, with five of those respondents stating
        that they are ready to pay a higher price for green electricity.13 However, most of the
        competitors and customers who responded to the questionnaires confirmed that price
        is the most important factor by which customers select their electricity supplier, and
        only two of the customers ranked the type of electricity (green) amongst the two
        most important factors and none of the competitors did so.14
(15)    From the supply-side, all competitors responding to the market investigation
        indicated that the supply of green energy should not be considered a separate
        segment of the retail market, with two competitors commenting that “[g]reen energy
        is likely to be another element of competition rather than a separate market” and
        “[g]reen electricity is an additional product attribute a supplier can offer to its
        customers, but doesn’t justify to be a separate segment per se”.15 All respondents to
        the market investigation have indicated that they already supply at least some green
        electricity.16 This can be done either by producing green electricity themselves or by
        purchasing GoOs. GoOs allow for the traceability of the electricity that is purchased
        by a supplier on the wholesale market and offer the guarantee that a quantity of
        electricity equivalent to the certificate has been produced using a renewable energy
11 See paragraph 6 of the Minutes of the call between DG COMP and CREG of 24 February 2021.
12 In relation to customers of the Parties, for its market investigation the Commission engaged with some of
   their small I&C customers but not with any household customers as it was impractical to do so. It seems
   reasonable to suppose that the comments of small I&C customers would reflect similar views of
   household customers. In any case, the Commission did engage with competitors active in the supply to
   household customers and, in addition, it also engaged with CREG and the views of the regulator cover,
   among other things, the household markets.
13 See replies to questions 6 and 7 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of
   gas and electricity.
14 See replies to question 19 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of gas
   and electricity and replies to question 29 of Questionnaire Q2 – Questionnaire to Competitors in the retail
   supply of gas and electricity.
15 See replies to question 9 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas
   and electricity.
16 See replies to question 7 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas
   and electricity.
                                                            4
 ---pagebreak---         source.17 The prices of such certificates are reflected on the invoice sent to the
        customer but only represent a limited proportion of the final price of electricity. In
        Belgium, in 2020, the increase was of 0.70 EUR/MWh. By way of illustration, the
        average yearly electricity consumption of an average household is 3.5 MWh.18 Its
        impact in the final price is thus insignificant. This means, on the one hand, that
        customers that opt for “green electricity” contracts do not necessarily need to pay a
        significantly higher price than customers that choose non-green contracts, and
        second, that suppliers can start offering green electricity or expanding their current
        offer without the need to adjust any production or distribution assets, make
        additional investments (other than the cost of purchasing of GoOs) or incur in any
        time delays.
(16)    Therefore, even if for some customers green and “non-green” electricity were not
        completely substitutable, the effects of supply-side substitutability could be seen as
        equivalent to those of demand substitution in terms of effectiveness and immediacy,
        since suppliers are able to switch to the relevant products and market them in the
        short term.19
        (C)         Default customers and protected customers
(17)    In the past the Commission has considered that in Germany basic or default supply
        tariffs, i.e. those applicable to disengaged customers who remain with their historical
        incumbent, are not materially constrained by competitive tariffs and, as a result, the
        two types of contracts constitute two separate relevant product markets.20 For this
        reason, the Commission has considered whether within the retail supply market to
        household customers in Belgium a separate market should be considered for the
        supply to default customers, i.e. passive customers who did not change supplier
        since the liberalisation of the market.21
(18)    In the case of Belgium a market segmentation for the supply to default customers
        may not be warranted as in Belgium such customers are supplied under regular
        tariffs and these contracts are not specifically regulated,22 which means there is no
        indication of any substantial price difference between the prices and other conditions
        applied to default and non-default customers. Moreover, the majority of respondents
        to the market investigation did not support such a sub-segmentation.23 In any event,
17 In practice, the GoO system guarantees that, at the EU level, for every MWh of green electricity that is
   sold, one MWh of green electricity has effectively been produced. The Parties are present in the market
   for the trading of GoOs but this does not constitute an affected market for the purposes of this Decision
   (see recital (6)).
18 See paragraph 150 of the form CO.
19 See Commission Notice on the definition of relevant market for the purposes of Community competition
   law (97/C 372/03), paragraph 20-21.
20 See Case COMP/M.8870 E.ON / Innogy (17/09/2019), paragraphs 47-62.
21 The gas and electricity retail supply markets in Belgium were fully liberalised in Flanders on 1 July 2003,
   and in Brussels and Wallonia for business customers on 1 July 2004 and fully on 1 January 2007.
   Customers who had not actively entered into a new contract were assigned to the supplier selected (after a
   public tender) as default supplier for the corresponding distribution system operator (‘DSO’). No such
   customers still exist in Flanders. In 2019, such customers represented 4-7% of gas and electricity
   customers in Wallonia and 9-10% of customers in Brussels (paragraphs 218-223 of the form CO).
22 See paragraphs 218-223 of the form CO.
23 See replies to question 14 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas
   and electricity.
                                                          5
 ---pagebreak---          the question whether a separate market exists for the supply of electricity to default
         customers can be left open as the proposed transaction does not raise serious doubts
         as to its compatibility with the internal market under any plausible product market
         definition.
(19)     The Commission has also considered whether narrower product markets should be
         considered including only the supply of electricity to protected household customers
         eligible for a social tariff, which applies to around 15% of the household customers
         in Belgium.24 The Parties contend that a market segmentation for supply to protected
         customers is not warranted because there is no active competition between energy
         suppliers for protected customers, who pay the same social tariff irrespective of the
         supplier they have.25 A small majority of respondents to the market investigation
         supported such a sub-segmentation.26 In any event, the question whether a separate
         market exists for the supply of electricity to protected customers can be left open as
         the proposed transaction does not raise serious doubts as to its compatibility with the
         internal market under any plausible product market definitions.
4.1.1.2. Geographic market definition
(20)     In the past the Commission considered that the geographic scope of the electricity
         retail supply markets in Belgium was not wider than national but left open whether
         these markets should be considered national or regional (Flanders, Wallonia and
         Brussels region) in scope.27 The Parties contend that the retail markets are national in
         scope. A slight majority of the responses to the market investigation suggested that
         the market is national. In any case, the question whether the electricity retail supply
         markets in Belgium should be considered national or regional in scope can be left
         open as the proposed transaction does not raise serious doubts as to its compatibility
         with the internal market under any plausible geographic market definition.
4.1.2. Horizontal non coordinated effects
4.1.2.1. The Notifying Party’s views
(21)     The Notifying Party submits that the proposed Transaction will not give rise to
         concerns in the markets for the retail supply of electricity and gas28 to small I&C and
         household customers for the following reasons: first, the combined entity’s market
         shares will be limited; second, the share increment will be low;29 third, the energy
         markets in Belgium are very competitive with switching rates among the highest in
         Europe;30 fourth, markets are dominated by the incumbent Engie, with almost [70-
24  Customers in Belgium may be eligible for a regulated social electricity and gas tariff if they meet some
    specific conditions. The social tariff levels are determined by CREG. The social tariff levels, which are
    determined quarterly, are lower than the price level of all other supply contracts because they are based on
    the lowest price that is offered, at that moment, by suppliers.
25  Paragraphs 227 and 228 of the form CO.
26  See replies to question 15 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas
    and electricity.
27  Cases COMP/M.9587 Engie / EDP Renovaveis / EDPR Offshore Espana (2020), paragraph 28;
    COMP/M.8855 Otary / Eneco / Electrabel / JV (2018), paragraph 31; COMP/M.5549 EDF / Segebel
    (2009), paragraph 137; COMP/M.4180 Gaz de France / Suez (2006), paragraphs 739, 740, 742.
28  The Parties’ provide the same arguments in relation to the electricity and gas markets.
29  Paragraph 368 et seq. of the form CO.
30  Footnote 297 of the form CO.
                                                            6
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---         had not yet actively signed up with a supplier and were therefore still supplied by the
        default supplier was already equal to 0%. In Wallonia, the number of “passive
        customers”, i.e. those who did not chose a supplier at the time of the liberalisation, in
        2019 amounted to a 7% for household electricity customers and 6% for non-
        household customers, 4% for household gas customers, and 5% for non-household
        gas customers. In Brussels, the share of these customers at the end of 2019 was 10%
        for all electricity customers (both household and non-household) and 9% for all gas
        customers.49 In all cases, the figures provided show that the number and percentage
        of these default customers have been decreasing intensely in the last decade.50 In any
        case, according the Parties’ best estimates, their combined share among these
        customers would be below [5-10]% at national level and in the Wallonia/Brussels
        regions combined, both for household and for small I&C customers.
(32)    As regards protected customers, Luminus explains that once a customer qualifies for
        the social tariff, the customer is automatically transferred to the more favourable
        social tariff price level while remaining with the same supplier.51 Therefore,
        protected customers are automatically assigned to their current supplier and, as
        social tariffs are fixed and determined by public authorities, suppliers cannot
        compete with more attractive prices for these customers. For these reasons, Luminus
        submits that shares among protected customers generally reflect the market shares
        for the supply of electricity and gas to household customers and therefore estimates
        that the Parties’ shares at national level would be approximately [20-30]% (for
        Luminus) and [5-10]% (for Essent Belgium) both for gas and electricity.
        (C)         Other elements
(33)    On the supply-side, in addition to the moderate market share levels of the Parties, the
        Commission notes that there are more than eight other market players that supply
        electricity to small I&C and household customers and there seem to be no apparent
        obstacles for these suppliers to expand their sales in the market as a response to a
        price increase by the Parties’ post-merger. The market investigation has indeed
        confirmed this. In fact, a majority of respondents to the market investigation have
        indicated (i) that the Parties do not have any competitive advantage vis-à-vis other
        entities which already offer electricity retail supply services in Belgium,52 and (ii)
        that following the proposed transaction electricity prices would remain essentially
        unaltered since sufficient competition would remain post-merger.53 Moreover, the
49 See paragraphs 221 et seq. of the form CO. Luminus additionally notes that, according to the Walloon
   regional regulator, active and passive household customers have been charged tariffs that are on average
   significantly equivalent.
50 In Wallonia, the number of passive customers has decreased from more than 700,000 in 2007 (right after
   the liberalisation) to slightly above 100,000 in 2019 for household customers, and from around 90,000 to
   13,000 for non-households. In Brussels, passive customers have decreased from 85% of the total number
   of customers in 2007 to 10% in 2019 for all customers. The figures provided show that the decrease has
   continued, albeit at a less pronounced pace, also in the more recent years. See Luminus’ reply to question
   2 of RFI 5 of 9 April 2021.
51 Paragraphs 227 et seq. of the form CO. In 2021 there were an estimated 1.4 million customers benefitting
   from social tariffs in Belgium (870,000 PODs for electricity and 529,000 for gas).
52 See replies to question 33 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of gas
   and electricity and replies to question 22 of Questionnaire Q2 – Questionnaire to Competitors in the retail
   supply of gas and electricity.
53 See replies to question 25 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of gas
   and electricity.
                                                          11
 ---pagebreak---         responses to the market investigation do not support that the Parties could be
        considered particularly close competitors.54
(34)    Some competitors voiced some concerns in relation to the vertical integration of the
        combined entity and to the alleged duopolistic structure of the market55 (which are
        addressed in Section 4.3below) although one of them at the same time admitted that
        commodity prices in the market are currently low,56 and one referred generically to
        the size of the merged entity as a possible competitive advantage. However, of those
        competitors, only one indicated that the proposed transaction could have a negative
        impact of the retail supply markets of electricity, whereas one said – like the
        majority of competitors – that it would have no impact on the market and the third
        one was of the view that the proposed transaction would have a positive impact in
        the market. Moreover, all competitors (i.e. also those which expressed some
        concerns) considered that (i) were the merged entity to increase prices, there would
        be alternative suppliers for customers to turn to, and that (ii) the proposed transaction
        will have no impact on prices in the market. Besides the impact on prices, none of
        the Parties’ competitors identified any other possible effects that the proposed
        transaction could have in the market.
(35)    From the demand side, most small I&C customers responding to the market
        investigation explained that they organise tenders for their electricity contracts, for
        which they receive at least three offers.57 And – like competitors – most of them
        were of the view that if the merged entity were to increase prices, there would be
        alternative suppliers, in addition to Engie, to turn to.58 Some I&C customers even
        indicated that they receive offers to switch suppliers several times per month, and
        others replied that the market is open and competitive and that there are enough
        alternative suppliers.59 Finally, most I&C customers declared to have switched
        electricity supplier in the last five years and all customers considered it relatively
        easy or very easy to switch supplier,60 which would be consistent with the high
        switching rate in the Belgian market.61
54 All customers and competitors consider Engie as Luminus’ closest competitor. Competitors consider
   Essent to be Luminus’ fourth competitor (Lampiris and Eneco being second and third). By contrast,
   customers place Essent as the second closest at the same level as Eneco. Competitors and customers
   consider that Engie, Luminus and Eneco to be similarly close competitors to Essent. See replies to
   question 20 and 21 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of gas and
   electricity and replies to question 30 and 31 of Questionnaire Q2 – Questionnaire to Competitors in the
   retail supply of gas and electricity.
55 See replies to question 33 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas
   and electricity.
56 See replies to question 42 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas
   and electricity.
57 See replies to question 24 and 24.1 of Questionnaire Q1 – Questionnaire to Customers in the retail supply
   of gas and electricity.
58 See replies to question 25 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of gas
   and electricity.
59 See replies to question 25.1 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of gas
   and electricity.
60 See replies to question 33 and 34 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of
   gas and electricity.
61 See recital (21).
                                                        12
 ---pagebreak---          (D)        Conclusion
(36)     In view of the (i) moderate market shares that the combined entity would have post-
         merger; (ii) the very limited market share increase brought about by the proposed
         transaction; (iii) the distance behind the market leader (Engie); (iv) the existence of
         other competitors with market shares higher or equivalent than the market share
         increase; (v) the majority opinion by market respondents that the Parties have no
         particular competitive advantages, that there are sufficient alternatives (other than
         Engie) in the market, that it is very easy to switch suppliers, and that the proposed
         transaction will have no impact on prices or on other aspects of competition, the
         Commission takes the view that the proposed transaction does not raise serious
         doubts as to its compatibility with the internal market as regards the markets for the
         retail supply of electricity to small I&C customers and to household customers in
         Belgium.
4.2.     Markets for the retail supply of H-gas and L-gas to small I&C and household
         customers
4.2.1. Relevant markets
4.2.1.1. Product market definition
         (A)        Distinction by type of customers
(37)     In the past the Commission distinguished three separate product markets in Belgium
         for the retail supply of gas to: (i) large I&C customers; (ii) small I&C customers; and
         (iii) household customers.62 Those definitions, which are not contested by the
         Parties63 and have been confirmed by the market investigation64, are to be retained
         for the purposes of this Decision. The Parties’ activities only overlap with respect to
         the latter two.
         (B)        Distinction by type of gas
(38)     Within each of these markets, the Commission has distinguished in the past separate
         product markets for the supply of H-gas and for the supply of L-gas.65
(39)     The Parties consider that distinction is no longer warranted given that customers
         must use the type of gas of the network to which they are connected, there are no
62  Case COMP/M.4180 Gaz de France / Suez (2006), paragraphs 78-81.
63  The criteria used to delineate the border between large and small I&C customers is either (i) whether the
    customer is connected to the transmission or distribution networks or (ii) a threshold of annual
    consumption (which the Parties suggest should be 10 GWh). In this decision, the analysis is based on the
    distinction between connection to the transmission or to the distribution network, but in any case the
    information provided shows that using the consumption threshold would not have any impact on the
    assessment (paragraphs 204-210 of the form CO).
64  See replies to questions 8-10 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of gas
    and electricity and replies to question 16-18 of Questionnaire Q2 – Questionnaire to Competitors in the
    retail supply of gas and electricity.
65  For cases relating to Belgium, see COMP/M.4180 Gaz de France/Suez (2006) and COMP/M.5467
    RWE/Essent (2009).
                                                         13
 ---pagebreak---          significant price differences, and it easy for all suppliers to procure both types of
         gas.66
(40)     The responses to the market investigation were mixed, with a slight majority of
         competitors responding that the supply of L-gas and H-gas should not be considered
         as being separate markets.67 Nearly half of the small I&C customers who responded
         did not know which type of gas they are supplied.68
(41)     In any event, the question whether separate markets exists for the retail supply of H-
         gas and L-gas can be left open as the proposed transaction does not raise serious
         doubts as to its compatibility with the internal market under any plausible product
         market definitions.
         (C)         Default customers and protected customers
(42)     As done for electricity in Section 4.1.1.1(C), the Commission considered whether
         within the market for the retail supply of gas to household customers in Belgium
         separate product markets should be considered for the supply to (i) default
         customers, i.e. customers who did not change supplier since the liberalisation of the
         market, and (ii) protected household customers eligible for a social tariff. The
         analysis for gas is the same as presented above for electricity. Therefore the question
         whether separate markets exist for the retail supply of gas to default and protected
         customers can be left open as the proposed transaction does not raise serious doubts
         as to its compatibility with the internal market under any plausible product market
         definitions.
4.2.1.2. Geographic market definition
(43)     The Commission has previously held that the markets for the retail supply of gas in
         Belgium to I&C customers are national in scope, but for the retail supply to
         household customers it left open whether it should be considered national or regional
         (Flanders, Wallonia, Brussels region) in scope.69 The Parties consider that the
         markets for the retail supply of gas in Belgium should be defined as national for all
         customers. The responses to the market investigation were mixed and inconclusive.70
(44)     In any case, the question whether the gas retail supply markets in Belgium should be
         considered national or regional (Flanders, Wallonia, Brussels region) in scope can be
         left open as the proposed transaction does not raise serious doubts as to its
         compatibility with the internal market under any plausible geographic market
         definition.
66  See paragraphs 172-186 of the form CO. The Notifying Party further mentions that with Dutch L-gas
    fields rapidly depleting, and in the absence of appropriate alternative sources for L-gas imports in
    Belgium, the Belgian government is preparing to transition from L-gas to H-gas entirely by 2029.
67  See replies to question 21 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas
    and electricity.
68  See replies to question 11 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of gas
    and electricity.
69  Cases COMP/M.5549 EDF / Segebel (2009), paragraph 184; COMP/M.4180 Gaz de France / Suez
    (2006), paragraph 105.
70  See replies to questions 16-18 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of
    gas and electricity and replies to questions 26-28 of Questionnaire Q2 – Questionnaire to Competitors in
    the retail supply of gas and electricity.
                                                          14
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---         Wallonia/Brussels regions combined, both for household and for small I&C
        customers.
(63)    As regards protected customers, the Commission refers to the assessment in Section
        4.1.1.1(C). The Parties’ shares at national level for the retail supply of gas to
        protected customers would be in line with those for the general market, i.e.
        approximately [20-30]% (for Luminus) and [5-10]% (for Essent Belgium).
        (C)         Other elements
(64)    On the supply-side, in addition to the moderate market share levels of the Parties, the
        Commission notes that there are at least eight other market players that supply gas to
        small I&C and household customers and there seem to be no apparent obstacles for
        these suppliers to expand their sales in the market as a response to a price increase
        by the Parties’ post-merger. The market investigation has indeed confirmed this. In
        fact, as in the case of electricity markets, a majority of respondents to the market
        investigation have indicated (i) that the Parties do not have any competitive
        advantage vis-à-vis other entities which already offer H-gas or L-gas retail supply
        services in Belgium,90 and (ii) that following the proposed transaction H-gas and L-
        gas prices would remain essentially unaltered since sufficient competition would
        remain post-merger.91 Moreover, the responses to the market investigation do not
        support that the Parties could be considered particularly close competitors, neither in
        H-gas nor in L-gas.92 Finally, a majority of competitors considered that they could
        increase significantly the amount of H-gas or L-gas that they currently supply to
        retail customers.93
(65)    One competitor voiced some concerns in relation to the alleged duopolistic structure
        of the market94 (which are addressed in Section 4.3 below) although at the same time
        admitting that commodity prices in the market are currently low,95 and another
        referred generically to the size of the merged entity as a possible advantage.
        However, both of them also indicated that prices in the gas market would not
        increase in the short or medium term as a result of the proposed transaction In fact,
        all competitors considered that (i) were the merged entity to increase prices, there
90 See replies to questions 29 and 30 of Questionnaire Q1 – Questionnaire to Customers in the retail supply
   of gas and electricity and replies to question 38 of Questionnaire Q2 – Questionnaire to Competitors in the
   retail supply of gas and electricity. One competitor raised concerns about possible coordination effects
   between Engie and Luminus; these are addressed in Section 4.3.
91 See replies to question 39 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of gas
   and electricity.
92 All customers and competitors consider Engie as Luminus’ closest competitor. Competitors consider
   Essent to be Luminus’ third or fourth competitor (at similar levels as Lampiris and Eneco). Customers
   place Essent as the second closest at the same level as Eneco. Competitors and customers consider that
   Engie and Luminus are similarly close competitors to Essent, with Eneco and Lampiris following closely.
   Competitors do not see any differences in closeness depending in the type of gas (H-gas or L-gas). See
   replies to questions 27 and 28 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of
   gas and electricity and replies to questions 36 and 37 of Questionnaire Q2 – Questionnaire to Competitors
   in the retail supply of gas and electricity.
93 See replies to question 22 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas
   and electricity.
94 See replies to question 41.1 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas
   and electricity.
95 See replies to question 43 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas
   and electricity.
                                                          22
 ---pagebreak---         would be alternative suppliers for customers to turn to, and that (ii) the proposed
        transaction will have no impact on prices in the market. None of the Parties’
        competitors identified any other possible effects that the proposed transaction could
        have in the market.
(66)    From the demand side, most small I&C customers responding to the market
        investigation explained that they organise tenders for their gas contracts, for which
        they receive at least three offers.96 And – like competitors – most of them were of the
        view that if the merged entity were to increase prices, there would be alternative
        suppliers, in addition to Engie, to turn to.97
        (D)          Conclusion
(67)    In view of the (i) moderate market shares that the combined entity would have post-
        merger (in the case of market shares in terms of volume in the supply to small I&C
        even insufficient to give rise to affected markets); (ii) the limited market share
        increase brought about by the proposed transaction; (iii) the distance behind the
        market leader (Engie); (iv) the existence of other competitors with market shares
        higher or equivalent than the market share increase; (v) the majority opinion by
        market respondents that the Parties have no particular competitive advantages in H-
        gas or L-gas, that there are sufficient alternatives (other than Engie) in the market,
        that there is scope for competitors to expand their sales of H-gas or L-gas to retail
        customers, and that the proposed transaction will have no impact on prices or on
        other aspects of competition, the Commission takes the view that the proposed
        transaction does not raise serious doubts as to its compatibility with the internal
        market as regards the markets for the retail supply of H-gas and L-gas to small I&C
        customers and to household customers in Belgium.
4.3.    Vertical and coordinated effects
(68)    One competitor raised concerns that, due to the combined market share of Luminus
        and Engie post-merger in the electricity generation and retail markets, the market
        could evolve towards a “duopoly of vertically integrated companies” that may enable
        coordinated effects leading to less competition and possibly higher prices in the long
        term.98 Another competitor mentioned that suppliers with electricity generation
        capacity have in general a significant advantage99 although it also considered that the
        proposed transaction would not have a negative impact on the market or would lead
        to higher prices.100
(69)    As regards the Parties’ vertical integration, the Commission observes, first, that the
        proposed transaction does not lead to any vertically affected markets. Second, since
96  See replies to questions 31 and 31.1 of Questionnaire Q1 – Questionnaire to Customers in the retail supply
    of gas and electricity.
97  See replies to questions 32 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of gas
    and electricity.
98  See replies to questions 41 and 42 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply
    of gas and electricity.
99  See replies to question 33 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas
    and electricity.
100 See replies to questions 41 and 42 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply
    of gas and electricity.
                                                         23
 ---pagebreak---         Essent Belgium is not present in the electricity generation market, the proposed
        transaction does not “create” a vertical integration (Luminus’ vertical integration is
        not merger-specific) but simply adds some market share to the downstream market.
        Third, Luminus has provided data showing […],101.
(70)    In relation to any possible coordinated effects, the Commission notes, first, that the
        asymmetry between Engie and Luminous remains significant after the proposed
        transaction ([30-40]% vs [20-30]% in supply to small I&C and [40-50]% vs [20-
        30]% for household customers).102 Second, as explained in Section 4.1.2.2(A), the
        structure of supply will remain essentially unaffected by the proposed transaction
        given the very limited share of Essent Belgium in retail supply to household
        customers (barely above [5-10]%) and its negligible presence in the supply to I&C
        customers (not present in the supply to large customers and [0-5]% share to small
        customers). In fact, the delta HHI of the proposed transaction in the retail supply of
        electricity to small I&C customers in Belgium would only be 65 in electricity and 50
        in gas (H-gas and L-gas combined).103 Therefore, the proposed transaction does not
        seem to change in a significant way any incentives of Luminus and Engie to engage
        in any coordination. Third, there is consensus in the market that the proposed
        transaction will not give rise to an increase in prices.104 Fourth, the same competitor
        that raised concerns about the duopolistic structure of the market admits that
        commodity prices are currently low.105
(71)    In view of the above, the Commission considers that the Proposed Transaction does
        not raise serious doubts as to its compatibility with the internal market as a result of
        any vertical or coordinated effects.
5.      CONCLUSION
(72)    For the above reasons, the 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
                                                              Executive Vice-President
101 See paragraph 461 et seq.of the form CO. […].
102 See Commission Horizontal merger Guidelines, paragraph 48.
103 See Commission Horizontal merger Guidelines, paragraph 20. In the case of retail supply of gas to small
    I&C customers the proposed transaction would not even give rise to affected markets if markets shares in
    terms of volumes are considered.
104 See Section 4.1.2.2(C).
105 See replies to questions 42 and 43 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply
    of gas and electricity.
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