CELEX: 32021M10216
Language: en
Date: 2021-09-06 00:00:00
Title: Commission Decision of 06/09/2021 declaring a concentration to be compatible with the common market (Case No COMP/M.10216 - DFDS / HSF LOGISTICS GROUP) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                 Brussels, 6.9.2021
                                                                 C(2021) 6639 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                                                                  information omitted has been replaced by
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                                                                 DFDS A/S
                                                                 Sundkrogsgade 11
                                                                 2100 – Copenhagen
                                                                 Denmark
Subject:             Case M.10216 – DFDS / HSF LOGISTICS GROUP
                     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 2 August 2021, the European Commission received notification of a proposed
          concentration pursuant to Article 4 of the Merger Regulation by which DFDS A/S
          (“DFDS”, Denmark) acquires within the meaning of Article 3(1)(b) of the Merger
          Regulation indirect sole control of the following entities: (i) HSF Distri
          Holding B.V., (ii) HSF Expeditie Holding B.V. and (iii) Frekrenij B.V. (together
           with their respective subsidiaries “HSF” or the “Target”, the Netherlands) by way
           of purchase of shares (the “Transaction”).3 DFDS is designated as the “Notifying
          Party” and, together with HSF, as the “Parties” to the 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 321, 10.8.2021, p. 5.
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)      DFDS is a limited liability company incorporated under the laws of Denmark that
         is listed on NASDAQ OMX Copenhagen A/S and ultimately controlled by
         Lauritzen Fonden.4 It operates a sea transport network around Europe and provides
         ferry shipping services as well as transport and logistics solutions. DFDS’ business
         is split into two divisions: (i) the Ferry Division, which operates a network of ferry
         routes in and around Europe, providing port terminal services, freight and
         passenger transport services and (ii) the Logistics Division, which provides full-
         load and part-load freight transport services together with warehousing and
         logistics solutions, active in continental Europe and the United Kingdom (“UK”).
(3)      HSF is a cold chain logistics company operating across North West Europe. Its
         principal activities include refrigerated transport (fresh and frozen food), cold
         storage and cross-docking, re-usable packaging and packaging contract cleaning. It
         operates from a number of sites located primarily in the Netherlands, Denmark,
         Norway, Sweden, Germany, Poland and the UK. HSF transports truck loads for
         various clients with a focus on continental Europe and the UK.
2.       THE OPERATION
(4)      On 25 January 2021, DFDS, through its wholly owned subsidiary DFDS NewCo
         B.V., entered into an agreement (the “Signing Protocol”) and a related Share
         Purchase Agreement (“SPA”) to acquire the entire issued and outstanding share
         capital of the entities that together form HSF. As a result of the Transaction, DFDS
         will acquire the entire issued and outstanding share capital of the entities that
         together form HSF, together with all voting rights in these entities. DFDS will thus
         acquire sole control over HSF within the meaning of Article 3(1)(b) of the Merger
         Regulation.
(5)      As part of the Transaction, the Sellers5 will acquire a preference share in HSF
         through a dedicated entity (the “Preference Shareholder”) in accordance with a
         shareholders’ agreement (“SHA”) attached to the SPA. This preference share,
         however, will not confer joint control because (i) [information related to the
         Seller’s rights under the Shareholder’s agreement].6
(6)      The Preference Shareholder will have certain consent rights, but these correspond
         to customary minority shareholder rights within the meaning of paragraph 66 of the
4   Lauritzen Fonden also controls (through a 100% shareholding) (i) the shipping company J. Lauritzen
    A/S and (ii) the investment company LF Investment ApS. However, DFDS explained that in the absence
    of any horizontal overlaps and vertical links with HSF’s activities, the activities of these companies are
    not relevant to the Transaction. Form CO, para. 58.
5   Fam. PTML Bonnichsen Holding A/S, FCKH B.V., Frederiks Holding B.V., MGG Holding ApS, and
    Weideman Beheer B.V. (the “Sellers”) currently hold all issued and outstanding depositary receipts
    corresponding to all issued and outstanding shares in the capital of HSF Distri Holding B.V., HSF
    Expeditie Holding B.V. and Frekrenij B.V.
6   The Preference Shareholder will appoint […] members of DFDS NewCo B.V.’s supervisory board. The
    other board members will be appointed by DFDS. […] members will have to attend in order for the
    supervisory board to adopt resolutions and the supervisory board will adopt resolutions […].
                                                      2
 ---pagebreak---          Commission Consolidated Jurisdictional Notice7 (“CJN”) and do not relate to
        HSF’s strategic commercial decisions. 8
3.      UNION DIMENSION
(7)     The Transaction does not meet the turnover thresholds of Article 1(2) of the
        Merger Regulation as the combined aggregate worldwide turnover of the
        undertakings concerned is less than EUR 5 000 million (DFDS: EUR 2 710
        million; HSF: EUR […] million). 9
(8)      However, the proposed transaction fulfils the alternative turnover thresholds of
         Article 1(3) of the Merger Regulation as the combined worldwide turnover of the
         undertakings concerned exceeds EUR 2 500 million, in each of at least three
         Member States, the combined aggregate turnover of all the undertakings concerned
         is more than EUR 100 million, and in each of these Member States the aggregate
         turnover of at least two of the undertakings concerned is more than
         EUR 25 million. 10 Finally, the aggregate EU-wide turnover of at least two of the
        undertakings concerned is more than EUR 100 million (DFDS: EUR […] million;
        HSF: EUR […] million) and none of the undertakings concerned achieves more
        than two thirds of its aggregate EU-wide turnover within one and the same Member
        State.
4.       MARKET DEFINITION
(9)     The Parties’ activities overlap in the provision of freight forwarding services. Both
         DFDS (through its Logistics Division) and HSF provide freight forwarding
         services, primarily by land (via road), in the EEA. DFDS is active in freight
         forwarding by land mostly via road (>[…]), with a small proportion of business
         carried by rail (<[…]) primarily between Trieste in Italy and Northern Europe.11
        HSF’s core business in freight forwarding relates to freight forwarding by land.
        When goods need to be carried by sea, it procures short-sea shipping services from
        third parties.12
7   Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the
    control of concentrations between undertakings, OJ C 95, 16.4.2008, p. 1-48.
8   These consent rights cover in particular decisions over [information related to the Seller’s rights under
    the Shareholder’s agreement] (see: Form CO, para. 71).
9   Turnover calculated in accordance with Article 5 of the Merger Regulation. The Parties provided
    turnover figures for 2019 as only 2019 audited financial accounts were available at the time of the
    execution of the Signing Protocol. The Parties confirmed that the 2020 turnover will not affect the
    Commission’s jurisdiction to review the Transaction (see: Form CO, footnotes 51 and 52).
10  Denmark (DFDS: EUR [...] million; HSF: EUR […] million); Germany (DFDS: EUR […] million;
    HSF: EUR […] million); Netherlands (DFDS: EUR […] million; HSF: EUR […] million) ; Sweden
    (DFDS: EUR […] million; HSF: EUR […] million).
11  Form CO, para. 121.
12  Form CO, para. 111. A small part of the Target’s business also relates to transportation by air via N&K
    Air Solutions. The total turnover attributable to this business is minimal (around EUR […]) and N&K
    Air Solutions is mainly active in transporting products (such as Norwegian salmon) to countries outside
    the EU (Form CO, para. 112).
                                                       3
 ---pagebreak--- (10)      In addition, the Transaction gives rise to vertical relationships between: (i) DFDS’
          short-sea shipping services (provided by its Ferry Division) upstream and (ii) the
          Parties’ freight forwarding activities downstream.
4.1.      Freight forwarding services
4.1.1. Product market
(11)      Freight forwarding refers to the organisation of transportation of items (possibly
          including activities such as customs clearance, warehousing, ground services, etc.)
          on behalf of customers according to their needs.13 Air and sea freight forwarding
          services include land transportation to/from the port/airport when required by
          customers. The freight forwarder often does not own the assets (ship, aeroplanes or
          other) necessary for the transportation (nor does it perform the actual
          transportation) but, generally, hires transportation capacity from third parties.14
(12)      In its previous decisions, the Commission has considered the possibility of sub-
          segmenting this market into domestic 15 and cross-border freight forwarding, 16 and
          into freight forwarding by air, land (road and rail17) and sea.18 In CMA
          CGM/OPDR, however, the Commission defined a market for door-to-door
          transport services,19 in which providers compete for the same customers
          irrespective of the specific mode of transportation.20 In that decision, the
          Commission noted that in the intra-European market, customers who would
          consider maritime transportation could often also opt for transport by truck,
          whereas sea transport could often be an option for customers of truck transportation
          services (depending on their needs in terms of frequency and flexibility). 21
(13)      In addition, the Commission previously considered a further segmentation by type
          of transported cargo (e.g. perishable goods, valuables, etc.).22 In Deutsche Post/Air
          Express International, the market investigation suggested that such a segmentation
          was not relevant because freight forwarders are generally able to serve all types of
13   See, for instance: M.9319 – DP World/P&O Group, para. 32; M. 9221 - CMA CGM/CEVA, para. 10;
     M.8594 – Cosco Shipping/OOIL, para. 23; M.8330 – Maersk Line/HSDG, para. 38; M.8120 – Hapag-
     Lloyd/United Arab Shipping Company, para. 26; M.7268 – CSAV/HGV/Kühne Maritime/Hapag-Lloyd,
     para. 37; M.6059 – Norbert Dentressangle/Laxey Logistics, para. 17; M.1794 – Deutsche Post/Air
     Express International, para. 8.
14   M.7630 – Fedex/TNT Express, para. 23; M.6570 – UPS/TNT Express, para. 26; M.1794 – Deutsche
     Post/Air Express International, para. 8.
15   Domestic freight forwarding means the provision of services within one country.
16   Cross-border freight forwarding means the provision of freight forwarding services from one country to
     any other country in the world.
17   M.5579 – TLP/ERMEWA, para. 42.
18   See, for instance, Commission decision in cases: M.9319 – DP World/P&O Group, para. 33; M.9221 –
     CMA CGM/CEVA, para. 11; M.8594 – Cosco Shipping/OOIL, para. 23; M.8120 – Hapag-Lloyd/United
     Arab Shipping Company, para. 26; M.6059 – Norbert Dentressangle/Laxey Logistics, para. 18; M.6570
     – UPS/TNT Express, para. 27; M.5756 – DFDS / Norfolk, para. 30; M.5579 – TLP/ERMEWA, para. 38;
     M.1794 – Deutsche Post/Air Express International, paras. 9-11.
19   Door-to-door transport services consist in taking up cargo at an agreed point and delivering it to another
     agreed point. Customers decide where the point of loading and point of delivery are situated and
     transport services providers adapt to this. See M.7523 – CMA CGM/OPDR, para. 24 and M.9319 – DP
     World / P&O Group, para. 11.
20   M.7523 – CMA CGM/OPDR, paras. 31 and 37.
21   M.7523 – CMA CGM/OPDR, para. 26.
22   M.5579 – TLP/ERMEWA, paras. 43 – 44 ; M.1794 – Deutsche Post/Air Express International, para. 11.
                                                       4
 ---pagebreak---          customers without distinguishing them according to the types of goods
         transported.23 More recently, however, the market investigation in TLP/ERMEWA
         showed that a segmentation according to the type of products concerned could be
         relevant for the transport of products requiring a specific expertise or a specific
         logistical set-up. 24
4.1.1.1. The Notifying Party’s view
(14)     DFDS submits that the relevant freight forwarding product market definition
         should include door-to-door multimodal transportation services without
         segmentation by mode of transport or type of transported cargo.25
(15)     DFDS submits that both Parties offer door-to-door transportation services, that in-
         land and sea transport modes are fully substitutable 26 from a customer’s
         perspective, and that sea vessel operators, truck, rail and barge companies all
         ultimately compete in the provision of multimodal transport services.27 DFDS
         further submits that HSF and DFDS’ ferry customers would use other means of
         transport and competing ferry routes (e.g. indirect ferry routes28) or container
         services, and that a number of cold cargo freight forwarders will not use DFDS
         ferry routes at all but still offer cold cargo freight forwarding for the country pairs
         of concern through alternative means of transport.29
(16)     As for the potential sub-segmentation by type of transported cargo, DFDS submits
         that a potential segmentation by type of transported cargo into cold
         (i.e. temperature-controlled) cargo and ambient (i.e. dry) cargo is not relevant in the
         case at hand. According to DFDS, segmentation by type of transported cargo has
         only been considered appropriate for specific types of cargo and in markets where
         freight forwarders act as the “gatekeeper” to the transportation of that particular
         product.30
(17)     DFDS considers that any freight forwarder has the option at modest cost and
         relative ease to carry cold cargo since in DFDS’ view cold cargo freight forwarding
23  M.1794 – Deutsche Post/Air Express International, para. 11.
24  M.5579 – TLP/ERMEWA, paras. 43 -44.
25  Even though DFDS does not object to the segmentation between domestic and cross-border freight
    forwarding discussed in the prior precedents of the Commission, it, nevertheless, explained that only one
    of the Target’s business units, namely Skive, focusses on domestic freight forwarding and generates a
    […] turnover. All other of the Target’s business units focus on international trade. Form CO, para. 203.
26  In particular because containerised cargo can be transported easily by truck. Form CO, para. 180
    referring to M.7523 – CMA CGM/OPDR, para. 26.
27  Form CO, para. 180 referring to Case M.7523 – CMA CGM/OPDR, para. 31.
28  According to DFDS, a “direct route” involves a direct ferry service between countries that form a
    country pair, while an “indirect route” involves road only, or road plus a ferry service from a country
    that is not part of the country pair. On that basis, DFDS submits that indirect routes are good alternatives
    for direct routes and that there is no basis for a market that involves only direct routes, see the Notifying
    Party’s reply to RFI 10, question 1. For instance, DFDS explained it may be more cost effective for HSF
    to carry volumes via routes that do not use DFDS’ Denmark-UK ferry. As explained by DFDS, when
    HSF won freight forwarding business related to [customer]’s cold cargo from [competitor] in 2013, it
    moved such volumes away from DFDS’ Denmark-UK ferry (i.e. EBJ-IMM ferry) and transported these
    via alternative routes. See Notifying Party’s reply to RFI 8, question 15. Also, according to DFDS, such
    a strategy would also be consistent with HSF’s current business model: […]. RBB Economics
    submission on input foreclosure assessment of 20 August 2021, page 2.
29  Notifying Party’s reply to RFI 2, question 2.
30  Form CO, para. 183.
                                                         5
 ---pagebreak---          is not a niche or specialist service for which specialised expertise and equipment is
         required.31 Accordingly, DFDS submits that the relevant market segmentation by
         type of transported cargo into freight forwarding of cold cargo and freight
         forwarding of ambient cargo is not appropriate.32
(18)     DFDS also submits that it is not appropriate to further segment the potential market
         for cold cargo freight forwarding into fresh33 and frozen goods. As explained by
         DFDS, almost all HSF trailers are “multi-temp trailers” meaning that they can
         transport both fresh and frozen products at the same time in the same trailer by
         making use of compartments. 34
4.1.1.2. The Commission’s view
(19)     In the case at hand, the replies received in the course of the market investigation
         provided indications that a distinction in terms of type of transported cargo
         between ambient and cold cargo35 could be relevant. However, on balance, the
         replies were too inconclusive in order for the Commission to reach a definite
         conclusion on the existence of separate product markets.36
(20)     From a demand-side perspective, several customers (i.e., shippers) replied that in
         their view ambient and cold cargo freight forwarding would appear to be difficult
         to substitute. These customers explained that when the goods need to be chilled to
         prevent their deterioration during transport, there is no alternative to cold cargo
         freight forwarding. 37 There are also time restrictions on how long certain cold
         cargo such as, for example, fresh fish can be in transit as it has a limited shelf life
         and has to be consumed in a relatively short time. 38
(21)     By way of illustration, one customer explained that “in order to be able to
         transport cold or frozen cargo, special equipment and knowledge is required. This
         includes specific trailers with cooling facilities, and access to cool terminals”. The
         same customer noted that it would not be possible to “use a provider of only
         ambient cargo transport services for the transportation of any of its products”.39
31  Form CO, para. 184. See also Notifying Party’s reply to RFI 2, introduction.
32  Form CO, para. 185.
33  “Fresh” goods can also be referred to as “chilled” goods, meaning that fresh products require warmer
    refrigerated conditions (e.g. around 0 to 5 degrees Celsius), whereas frozen goods are typically
    transported at minus 18 to minus 20 degrees Celsius. See non-confidential replies to Questionnaire for
    shippers, question 10.1.1.
34  Multi-temp trailer units offer dual temperature zones within the same trailer. There are usually multiple
    entry points with doors to each zone and they are separated by a bulkhead to create the different
    compartments. See Notifying Party’s reply to RFI 2, question 13. See also Form CO, paras. 184-193.
35  Including both fresh and frozen cargo.
36  The results of the market investigation also appeared inconclusive in relation to a potential segmentation
    between domestic and cross-border freight forwarding, however, many of the market participants
    responding to the market investigation explained that they are active in both domestic and cross-border
    freight forwarding and that from a demand side perspective, some customers purchase freight
    forwarding services at EU level. See non-confidential replies to Questionnaire for freight forwarders,
    questions 1, 3.3, 9 and 10.
37  Non-confidential replies to Questionnaire to shippers, question 10.
38  Non-confidential replies to Questionnaire to shippers, question 7. See also non-confidential minutes of a
    call with a market participant of 7 July 2021, para. 12; non-confidential minutes of a call with a market
    participant of 8 July 2021, para. 4.
39  Non-confidential replies to Questionnaire to shippers, question 10.
                                                      6
 ---pagebreak--- (22)     However, some customers noted that cold and ambient cargo freight forwarding
         could be performed by the same company. Indeed, certain customers explained that
         they buy cold cargo freight forwarding services from freight forwarders that
         provide both cold and ambient cargo freight forwarding services.40
(23)     From a supply-side perspective, the market investigation has confirmed that most
         freight forwarders that are active in cold cargo freight forwarding are also active in
         ambient cargo freight forwarding. 41 Some freight forwarders also indicated that for
         the return journey they could use cold cargo trailers for cargo that does not require
         temperature control.42
(24)     However, the market investigation also indicated that ambient cargo freight
         forwarders may not be able to easily switch to cold cargo freight forwarding in the
         short term without incurring additional costs or risks. This is mainly because: (i)
         cold cargo transport requires special equipment and infrastructure, and might
         require a different logistical approach due to time constraints of the cold cargo’s
         shelf life or the need to have a plug on the ferry, (ii) cold cargo transport mostly
         pertains to foodstuffs, so special regulations may apply and specific licenses may
         be required, (iii) different requirements relating to sanitation, smell, temperature
         and packaging mean that different types of fresh cold cargo (e.g., meat, fish, fruit
         and vegetables) have to be transported separately, which would indicate that such
         product transportation might be more complex.43
(25)     The results of the market investigation also indicate that a smaller group of freight
         forwarders specialise in cold cargo freight forwarding (as opposed to ambient
         cargo) and the prices for cold cargo freight forwarding appear to be higher than for
         freight forwarding of ambient cargo.44
(26)     As to the possible sub-segmentation within cold cargo freight forwarding between
         fresh and frozen cargo, the results of the market investigation suggest that even
         though there are some differences in terms of expertise and infrastructure required
         for transportation of frozen and fresh cargo,45 it does not appear that this further
         distinction of the cold cargo freight forwarding segment is warranted on the basis
40  Non-confidential minutes of a call with a market participant of 7 July 2021, para. 14; non-confidential
    replies to Questionnaire to shippers, questions 7 and 9.
41  Non-confidential replies to Questionnaire for freight forwarders, questions 5 and 6. See also Non-
    confidential minutes of a call with a market participant of 1 June 2021, para. 3.
42  Non-confidential minutes of a call with a market participant of 1 June 2021, para. 5.
43  See Non-confidential replies to Questionnaire for freight forwarders, questions 11, 13, 13.1, and 15;
    non-confidential minutes of a call with a market participant of 30 June 2021, para. 10. According to one
    of the freight forwarders, for instance: “Cold (or temperature-controlled) transport […] is a somewhat
    different activity than ambient (or non-controlled temperature) transport, especially with respect to
    fresh cargo. Fresh cargo is very sensitive and requires special and modern equipment, educated and
    specifically trained personnel and compliance with regulations, and certification applying to transport
    […]. Transporting fresh products is very complex. Fish, for example, are very temperature sensitive and
    can have a very strong [smell] so they cannot be transported with other fresh cargo. After transporting
    fish, the trailer must be thoroughly cleaned before other type of cargo can be loaded to it. Usually fresh
    fruit and vegetables cannot be transported with fresh meat, unless both are finished packed for retail
    sales to consumers because of the risk of coli bacteria that may be found in them” (Non-confidential
    minutes of a call with a market participant of 4 June 2021, paras. 3-4).
44  A large majority of freight forwarders confirmed that prices are higher for cold cargo freight forwarding
    than for ambient cargo freight forwarding. See Non-confidential replies to Questionnaire for freight
    forwarders, question 14.
45  Non-confidential replies to Questionnaire for shippers, question 10.1.
                                                       7
 ---pagebreak---         of the results of the market investigation. This is so in particular because the
        majority of freight forwarders confirmed that it would be easy for a freight
        forwarder transporting frozen cargo to start providing freight forwarding services
        of fresh cargo. 46 In the same vein, one shipper explained that “it is possible to
        transport both frozen and fresh goods together in the same shipment”.47 This is in
        line with DFDS’ submission that that HSF can transport both fresh and frozen
        products at the same time in the same trailer by making use of compartments.48 For
        the above-mentioned reason, the Commission considers that there is no need to
        further distinguish cold cargo freight forwarding into fresh and frozen cargo.
(27)    Lastly, as for DFDS’ argument that the relevant product market should include
        different means of transportation and that available indirect routes should be
        considered as alternatives to direct routes, the Commission considers that for the
        country pairs relevant for the assessment of this Transaction, it is warranted to
        include available modes of transport via indirect routes into the relevant product
        market in this case. Such a view is supported by the replies received in the course
        of the market investigation which suggest that despite certain freight forwarders’
        preference to use one specific route that requires certain modes of transport (e.g.
        ferry in conjunction with trucks),49 other freight forwarders choose less direct
        routes and rely on different modes of transport (e.g. only trucks without using a
        ferry).50 Some customers submitted that they might cooperate or discuss with a
        freight forwarder the optimal route or mode of transport which would meet their
        needs, while others explained that the choice of mode of transport or specific route
        is entirely in the hands of a freight forwarder. 51
(28)    In light of the above, the Commission considers that the exact product market
        definition can be left open since the Transaction does not raise serious doubts as to
        its compatibility with the internal market under any plausible product market
        definition.
(29)    Nevertheless, given the fact that HSF is specialised in cold cargo freight
        forwarding and that cold cargo freight forwarding appears to present certain
        constraints in terms of transportation timing and required equipment, the
        Commission considers that under the most conservative approach the Transaction
        should be assessed on the basis of the potential segment for cold cargo freight
        forwarding including available direct and indirect routes.
4.1.2. Geographic market
(30)    In its prior decisional practice, the Commission has left open whether the freight
        forwarding market or subdivisions thereof should be considered national in scope,
46  Non-confidential replies to Questionnaire for freight forwarders, question 16.
47  Non-confidential replies to Questionnaire for shippers, question 10.1.1.
48  Notifying Party’s reply to RFI 2, question 13. See also Form CO, paras. 184-193.
49  Non-confidential minutes of a call with a market participant of 1 June 2021, paras. 8-9.
50  Non-confidential minutes of a call with a market participant of 30 June 2021, para. 4. See also non-
    confidential replies of a market participant to follow-up request of information of 25 August 2021,
    question 1a.
51  For instance, one customer noted that it “do[es] not decide the routing but do[es] in general decide what
    type of mode to be used. Espercially (sic) in relation to intermodal solutions (combinations of
    truck/sea/rail).” Non-confidential replies to Questionnaire for shippers, question 11.
                                                       8
 ---pagebreak---         due to language and regulatory barriers, or larger in view of a trend by major
        competitors to create transnational or even EEA-wide networks.52
(31)    The Commission has also considered a possible trade-lane based market, but it left
        the precise geographic definition open.53 In DFDS / Norfolk, the Commission
        assessed the transaction on freight forwarding markets on specific country pairs
        (e.g., between Denmark and the UK and between Sweden and the UK). 54
4.1.2.1. The Notifying Party’s view
(32)    With respect to domestic freight forwarding, DFDS submits that the relevant
        market is at least national in scope and provided the relevant market shares on a
        national basis. 55
(33)    As for international freight forwarding, DFDS considers that the relevant market is
        that of freight forwarding to any destination in the EEA outside of the national
        market of reference.56 Accordingly, for the relevant Member States where the
        Parties are active in international freight forwarding, DFDS provided market share
        estimates between said country (e.g. Denmark) and the rest of EEA.57
(34)    DFDS argues that even if the Commission were to consider a putative market
        segment for cold cargo, it regards the market for freight forwarding to be at least
        national (or wider than national, extending to the EEA).58 In DFDS’ view, the
        freight forwarding market should not be defined on a country-country basis,
        nevertheless, it has provided the relevant market shares in cold cargo freight
        forwarding on the specific country pairs. 59
4.1.2.2. The Commission’s view
(35)    The market investigation provided mixed results as to the definition of the relevant
        geographic market for freight forwarding. Some freight forwarders explained that
        customers procure freight forwarding services at national level, whereas others
        explained that customers procure freight forwarding services at regional level (i.e.
        for a group of countries), at EU level or even globally. 60
(36)    Conversely, when asked about their main points of origin and points of destination,
        a vast majority of freight forwarders mentioned corridors corresponding to country
52  See, for instance: M.9319 – DP World/P&O Group, para. 36; M.9221 – CMA CGM/CEVA, para. 14;
    M.8594 – Cosco Shipping/OOIL, para. 24; M.8330 – Maersk Line/HSDG, para. 39; M.8120 – Hapag-
    Lloyd/United Arab Shipping Company, para. 26; M.7268 – CSAV/HGV/Kühne Maritime/Hapag-Lloyd,
    para. 39; M.6059 – Norbert Dentressangle/Laxey Logistics, paras. 20 and 22; M.5579 – TLP/ERMEWA,
    para. 52.
53  M.4786 – Deutsche Bahn/Transfesa, para. 43 (where most respondents to the market investigation
    considered a separate market for rail freight forwarding from and to Spain due to the specificities of the
    Spanish railways).
54  M.5756 – DFDS / Norfolk, para. 70.
55  Form CO, paras. 194, 198, and Annex 10. See also Notifying Party’s reply to RFI 2, introduction.
56  Form CO, paras. 198-199.
57  Form CO, para. 196 and Annex 10.
58  Notifying Party’s reply to RFI 2, introduction.
59  Notifying Party’s reply to RFI 2, introduction and questions 1-2.
60  Non-confidential replies to Questionnaire for freight forwarders, questions 10 and 10.1.
                                                       9
 ---pagebreak---           pairs (e.g., from Denmark to the UK or Sweden to the UK).61 Besides, some of the
          market participants identified possible input foreclosure issues, which could
          possibly occur on the routes connecting specific country pairs. 62 In light of this, the
          Commission adopted a conservative approach and, similarly to the approach
          adopted in DFDS / Norfolk, assessed the Transaction under the narrowest plausible
          market definition for international freight forwarding, taking into account country
          pairs. However, the exact geographic market definition can be left open, as the
          Transaction does not raise serious doubts under any plausible market definition.
4.2.      Short-sea shipping services
4.2.1. Product market
(37)      Short-sea shipping involves the provision of regular, scheduled, intracontinental
          (usually, costal trade) services for the carriage of cargo by shipping companies. 63
(38)      In previous decisions, the Commission left open whether short-sea shipping
          services should be part of a broader door-to-door multimodal transport services
          market, encompassing all modes of transport by sea, rail and road. 64 However, in
          CMA CGM/OPDR, the majority of respondents to the market investigation
          indicated that short-sea container shipping should be distinguished from other
          modes of transport as a separate market.65
(39)      The Commission has also distinguished short-sea container shipping from long-sea
          container shipping (i.e., deep-sea shipping) 66 and has considered that non-liner
          shipping services (i.e., charter, tramp or specialised transport services) are not part
          of the short-sea container shipping market.67
(40)      In addition, the Commission has considered that short-sea container shipping could
          be distinguished from roll-on/roll-off (“RoRo”) shipping, on the one hand, and bulk
          shipping (i.e., non-containerised shipping), on the other hand.68
(41)      RoRo vessels usually transport wheeled cargo (trucks, trailers, cargo or containers
          on trailers) and have built-in ramps for the “rolling-on” and “rolling-off” of the
61   Non-confidential replies to Questionnaire for freight forwarders, question 2.
62   Non-confidential replies to Questionnaire for freight forwarders, questions 43-45.
63   See, for instance: M.9093 – DP World Investments/Unifeeder, para. 30. With respect to short sea
     container shipping services see also: M.9319 – DP World/P&O Group, para. 19.
64   See, for instance: M.9319 – DP World/P&O Group, para. 20; M.9093 – DP World
     Investments/Unifeeder, para. 31; M.8330 – Maersk Line/HSDG, para. 19; M.7523 – CMA CGM/OPDR,
     para. 48.
65   M.7523 – CMA CGM/OPDR, para. 41.
66   See, for instance, Commission decision in cases: M.8330 – Maersk Line/HSDG, para. 19; M.7523 –
     CMA CGM/OPDR, paras. 49 and 51.
67   See, for instance, Commission decision in cases: M.8330 – Maersk Line/HSDG, para. 19; M.8120 –
     Hapag-Lloyd/United Arab Shipping Company, para. 10; M.7523 – CMA CGM/OPDR, para. 49. Non-
     liner shipping distinguishes itself from liner shipping because of the regularity and frequency of the
     service.
68   M.7523 – CMA CGM/OPDR, para. 39; M.3829 – Maersk/ PONL, para. 7; M.3973 – CMA
     CGM/Delmas, para. 6; M.5398 – Hutchison/Evergreen, para. 12; M.5756 – DFDS/Norfolk, paras. 11
     and following; M.6305 – DFDS/ C.RO Ports/Älvsborg, para. 19; M.7268 – CSAV/ HGV/ Kühne
     Maritime/ Hapag-Llyod AG, paras. 15 and following.
                                                       10
 ---pagebreak---         cargo.69 They can be distinguished from (i) RoPax70 vessels that transport cargo
        and passengers (so cargo drivers can accompany their trucks) and (ii) lift-on/lift-off
        (“LoLo”) vessels that are primarily used for the transport of containers.71
(42)    In DFDS/Norfolk, the market investigation confirmed that the freight transport on
        RoRo and RoPax vessels are substitutes for most products72 as they can transport
        all types of unitized freight (i.e., containers but also other types of freight stored in
        standardized modes such as driver accompanied vehicles and unaccompanied
        vehicles). 73 In contrast, LoLo vessels are not substitutable because they aim at
        different cargo flows, they require terminals with container cranes and they take
        more time to load and unload. 74 Accordingly, the Commission defined a market for
        short-sea unitised freight services, encompassing containers and other freight stored
        in standardized modes transported on Ro-Ro and Ro-Pax vessels (i.e., driver
        accompanied vehicles and unaccompanied vehicles).75
(43)    The Commission has also considered potential distinctions: (i) between reefer
        (i.e., refrigerated or temperature-controlled) and dry (or non-reefer) services76, and
        (ii) between feeder services (i.e. transport of cargo between hub ports and (smaller)
        outports) and non-feeder services.77 However, the Commission has ultimately left
        the exact market definition open.
4.2.1.1. The Notifying Party’s view
(44)    According to DFDS, the relevant product market for the assessment of the
        Transaction is the market for the provision of short-sea shipping services for
        unitised cargo. 78
(45)    DFDS carries all categories of cargo, including ambient and temperature-controlled
        cargo, in both trailers and containers. If the cargo arrives in a RoRo trailer, it can be
        driven onto the ship. If it is in a container, it can be lifted onto a rolling unit and
        then driven onto the ship. 79 Accordingly, DFDS submits that the relevant product
        market for the assessment of the Transaction is that of short-sea shipping services
        for unitised cargo, without further distinction between trucks and containers.80
69  M.5756 – DFDS / Norfolk, para. 11.
70  Roll-on/roll-off passengers (“RoPax”).
71  M.5756 – DFDS / Norfolk, para. 11. In contrast with Ro-Ro shipping, in Lo-Lo shipping, dock mounted
    cranes lift and stack containers on vessels.
72  With the exception of the hazardous products, which cannot be transported on RoPax vessels.
73  M.5756 – DFDS / Norfolk, para. 11.
74  M.5756 – DFDS / Norfolk, paras. 13-14.
75  M.5756 – DFDS / Norfolk, para. 37.
76  M.9319 – DP World/P&O Group, para. 22; M.9093 – DP World Investments/Unifeeder, para. 35;
    M.7523 – CMA CGM/OPDR, para. 50; M.6305 – DFDS/C.RO Ports/Älvsborg, paras. 19-21.
77  See, for instance, cases: M.9319 – DP World/P&O Group, para. 27; M.9093 – DP World
    Investments/Unifeeder, para. 35.
78  Form CO, para. 244.
79  Form CO, para. 239.
80  Form CO, paras. 239 and 242. In this respect, DFDS explains that only […] customers of HSF use
    container transport and that HSF does not organise LoLo transportation to these customers. As a result,
    there is no vertical relationship between the Target and DFDS with respect to LoLo shipping (Form CO,
    para. 122, footnote 54).
                                                      11
 ---pagebreak--- (46)     As for feeder services, DFDS submits that they should be considered as a separate
         market81 and with regards to a possible distinction between reefer and non-reefer
         services, DFDS explains that such segmentation would not be relevant82 as the
         frequency and duration of services are the same for both types of services.83 In this
         respect, DFDS further submits that short-sea shipping operators are equally able to
         transport either type of unit since reefer capacity can be adjusted easily in
         accordance with the customers’ needs.84
4.2.1.2. The Commission’s view
(47)     The Commission investigated whether other modes of transportation are
         substitutable to short-sea shipping services. In this respect, the market investigation
         elicited mixed results showing that the competitive pressure exerted by alternative
         modes of transportation (road transportation in particular) is stronger for certain
         routes than for others.
(48)     By way of illustration, respondents to the market investigation indicated that other
         modes of transportation may constitute viable alternatives to direct ferry lines
         between (i) Northern Europe (i.e., France, Belgium, the Netherlands and Germany)
         and the British Isles (via the Channel Tunnel), 85 as well as (ii) Scandinavia and the
         Baltic region. 86
(49)     In light of the results of the market investigation, the Commission concludes with
         respect to the routes between (i) Northern Europe and the British Isles (via the
         Channel Tunnel) and (ii) Scandinavia and the Baltic region that the relevant
         product market includes both road transportation and short-sea shipping services.
         For the other routes, because the market investigation elicited mixed results, the
         Commission will assess the Transaction under the narrowest plausible product
         market definition (i.e., short-sea shipping services, to the exclusion of alternative
         modes of transportation).
(50)     The Commission also investigated whether RoRo, RoPax and LoLo services
         belong to the same market. In this regard, the market investigation has confirmed
         the relevance of a distinction between RoRo and RoPax, on the one hand, and
81  Form CO, para. 3, footnote 3. In this respect, DFDS notes however that these services are generally
    provided in the context of deep-sea shipping and DFDS does not provide feeder services.
82  Form CO, para. 241.
83  Form CO, para. 241.
84  Form CO, para. 242. Plugs for refrigerated transport can be turned on and off, and additional plugs may
    be added bringing on-board a power generator. This means that reefer capacity can be adjusted easily in
    accordance with customer needs.
85  Non-confidential replies to Questionnaire for ferry operators, questions 19.6, 19.6.1 and 25; Non-
    confidential replies to Questionnaire for freight forwarders, question 26.2. Likewise, the Parties
    explained for instance that HSF [information on HSF’s current business strategy] and that the alternative
    routes it uses include the Eurotunnel (see Notifying Party’s reply to RFI 11, question 2). The fact that
    there was no direct ferry line between France and the Republic of Ireland before 2021 also shows the
    possibility to use alternative modes of transportation on this country-pair (Notifying Party’s reply to
    RFI 11, question 2).
86  Several freight forwarders active on this route explained that they significantly rely on modes of
    transportation other than direct ferry lines (See non-confidential replies to Questionnaire for freight
    forwarders, question 26.2; non-confidential replies to Questionnaire for ferry operators, questions 19.3
    and 19.3.1). Likewise, the Parties confirmed for instance that HSF [information on HSF’s current
    business strategy]. (see Notifying Party’s reply to RFI 11, question 2).
                                                       12
 ---pagebreak---          LoLo services, on the other hand. All freight forwarders use RoRo vessels, alone or
         together with LoLo vessels, whereas certain freight forwarders do not use LoLo
         vessels. 87 In addition, several market participants stressed that LoLo vessels take
         longer to load and unload so they do not constitute a credible alternative to
         transport fresh cargo.88
(51)     The market investigation also suggested that a market for unitised cargo (including
         containers and trailers) would be relevant. Although freight forwarders mostly use
         wheeled transport vehicles (i.e., trailers)89, the Commission notes that DFDS
         carries cargo in both trailers and containers, which contain all categories of cargo. 90
         This was also confirmed by other ferry operators.91
(52)     Concerning the potential distinction between reefer and non-reefer services, freight
         forwarders explained that the transport of cold cargo requires special equipment on
         the ferries (i.e., electricity plug-ins), power for coolers and temperature checks
         during the trip. 92 As a result, prices tend to be higher for the transport of cold cargo
         than for ambient cargo.93 This would suggest that a further segmentation between
         cold cargo and ambient cargo is relevant. However, the vast majority of ferry
         operators confirmed that they could transport both cold and ambient cargo.94 For
         instance, one ferry operator explained that “all ferry/roro services offer plus
         facilities for reefer units”.95
(53)     For the purpose of the assessment, in connection with the routes between
         (i) Northern Europe - British Isles, and (ii) Scandinavia - the Baltic region, the
         Commission will analyse the effect of the Transaction on a product market
         including both road transportation and short-sea shipping for the transport of
         unitised freight cargo on RoRo and RoPax vessels (i.e., excluding LoLo shipping
         and bulk shipping). As for the other routes, the Commission will analyse the effect
         of the Transaction on a product market limited to short-sea shipping services for
         the transport of unitised freight cargo on RoRo and RoPax.96
4.2.2. Geographic market
(54)     In previous decisions, the Commission defined the geographic market for short-sea
         shipping services by reference to corridors, i.e. ranges of ports at each side of each
87  Non-confidential replies to Questionnaire for freight forwarders, question 32: 56% of the respondents
    use only RoRo and RoPax vessels, whereas 44% of them use both RoRo and LoLo vessels.
88  Non-confidential replies to Questionnaire for freight forwarders, question 32.1: “[We use] only ro/ro
    vessel due to speed and fast transit as well as availability of departues throughout the week”. Non-
    confidential replies to Questionnaire for freight forwarders, question 32.1: “Ro/Ro is the only alternative
    [w]hen[?] going to UK with fresh products with short lead time”.
89  Non-confidential replies to Questionnaire for freight forwarders, question 32.1.
90  Form CO, para. 239.
91  Non-confidential replies to Questionnaire for ferry operators, question 1.1.
92  Non-confidential replies to Questionnaire for freight forwarders, question 30.1.
93  Non-confidential replies to Questionnaire for freight forwarders, question 30.
94  Non-confidential replies to Questionnaire for ferry operators, question 5.
95  Non-confidential replies to Questionnaire for ferry operators, question 19.1.1.
96  The Commission will not assess the effects of the Transaction on a broader market encompassing door-
    to-door intermodal transport services, since the market shares of DFDS on this broader market will be
    diluted as DFDS only provides short-sea shipping services.
                                                       13
 ---pagebreak---          trade route.97 While leaving the question open, the Commission adopted the same
         approach with respect to short-sea unitised freight services with a potential sub-
         segmentation by country-pair.98
(55)     By way of illustration, in DFDS/Norfolk, a majority of respondents to the market
         investigation pointed at separate markets for unitised freight services by sea
         between: (i) the UK and the Benelux, (ii) the UK and Norway, (iii) the UK and
         Sweden, and (iv) the UK and Denmark. 99
(56)     The Commission also considered a further delineation between the different legs of
         trade. A leg of trade is defined as one of the two directions of a trade (e.g., on the
         trade connecting Scandinavia to the UK and back, Scandinavia-UK is the first leg
         and UK-Scandinavia is the second leg). 100
4.2.2.1. The Notifying Party’s view
(57)     DFDS considers that the market for short-sea shipping should be segmented on the
         basis of single trades101 with a further distinction between each leg of trade, given
         that the conditions of demand differ in each direction of trade.102
(58)     However, DFDS considers that a definition of each trade by country pairs or on a
         port-port basis is not relevant103. In the case at hand, DFDS considers that trade
         legs should be defined by reference to the following ranges of ports104: (i) the
         British Isles (i.e. the UK and Republic of Ireland) 105; (ii) Scandinavia
         (i.e., Denmark, Finland, Norway and Sweden)106; (iii) Baltic region (i.e., Estonia,
         Poland, Latvia and Lithuania)107 and (iv) Northern Europe (i.e., the Netherlands,
         Belgium, Germany and Northern France).
4.2.2.2. The Commission’s view
(59)     The market investigation confirmed that the broadest plausible market definition
         for short-sea shipping services corresponds to trade routes (i.e., corridors) with a
         possible further segmentation by country-pairs on some routes.
97  See, for instance: M.8330 – Maersk Line/HSDG, para. 20; M.6305 - DFDS/C.RO PORTS/ ÄLVSBORG,
    paras. 24-28; M.5756 - DFDS/ Norfolk, paras.18-20; M.2838 - P&O STENA LINE (HOLDING)
    LIMITED, paras.15-16; Case IV/36.253- P&O Stena Line, para. 38.
98  M.5756 - DFDS/ Norfolk, paras. 18-20.
99  M.5756 - DFDS/ Norfolk, para. 19.
100 M.7523 – CMA CGM/OPDR, paras. 54 and 60 ; M.9093 – DP World Investments/Unifeeder, para. 36;
    M.8330 – Maersk Line/HSDG, para. 20.
101 Form CO, paras. 245-246.
102 Form CO, para. 246.
103 Form CO, para. 247.
104 Form CO, para. 251.
105 In this respect, DFDS refers to the Commission’s precedents in cases M.7523 – CMA CGM/OPDR,
    paras. 56 and 58; M.9016 – CMA CGM/Container Finance, para. 42 (Form CO, para. 251,
    footnote 119).
106 M.9016 – CMA CGM/Container Finance, para. 42 (Form CO, para. 251, footnote 120).
107 In this respect, DFDS refers to the Commission’s precedents in cases M.9016 – CMA CGM/Container
    Finance, para. 42, in which the Commission endorsed a definition of the Baltic region as including
    Estonia, Latvia and Lithuania (Form CO, para. 251, footnote 121). In addition, DFDS explains that it
    considers Poland substitutable from a demand-side perspective with routes to and from Estonia, Latvia
    and Lithuania (Form CO, footnote 121).
                                                   14
 ---pagebreak--- (60)     In the case at hand, the Transaction may give rise to vertically affected markets, at
         corridor and/or country-pair level108, on the following routes: (i) Scandinavia –
         British Isles, (ii) Northern Europe – Baltic region, (iii) Northern Europe – British
         Isles 109, (iv) Scandinavia – Baltic region. 110
         (A)         Scandinavia – British Isles
(61)     The Commission investigated whether the relevant geographic market corresponds
         to a trade corridor including all Scandinavian ports, on one end, and all ports from
         the British Isles (i.e., the UK and the Republic of Ireland), on the other end.
(62)     The results from the market investigation elicited mixed results, which, on balance,
         did not confirm the Parties’ submission that Scandinavia and the British Isles
         constitute relevant ends of trade.
(63)     Concerning Scandinavia, several freight forwarders confirmed that Norwegian
         ports are substitutable with the port of Gothenburg (Sweden). Likewise, several
         freight forwarders explained that Swedish ports are substitutable with the port of
         Esbjerg (Denmark).111 However, a significant freight forwarder explained that
         Swedish ports, Norwegian ports and Danish ports are not substitutable.112
         Concerning British Isles, all the responses received in this respect explained that
         there is no port substitutable with UK ports. 113
108 The Parties were not able to provide volume and value market shares for every route. For the purpose of
    the assessment and for the sake of consistency, the Commission relied on capacity market shares to list
    affected trade routes (Form CO, Annex 21).
109 On a country-pair basis, the country pairs that could be potentially affected on this route would be
    between the Netherlands and the UK, the Republic of Ireland and France, Germany and the UK. On
    these country-pairs DFDS confirmed that its market share would be below 30% if road transportation
    via the Channel Tunnel is taken into account (response to RFI 12, question 4). In this respect, as
    explained above, the market investigation confirmed the Parties’ submission that road transportation (via
    the Channel Tunnel) is a viable alternative to direct ferry lines between France, Belgium, the
    Netherlands and Germany, on the one hand, and the UK, on the other hand. In any event, none of the
    market participants expressed concern in connection with this country pair (see non-confidential replies
    to Questionnaire for freight forwarders, question 3; non-confidential replies to Questionnaire for
    shippers, question 19). Therefore, this trade route will not be further examined.
110 On a country-pair basis, the country pairs that could be potentially affected on this route would be
    between Sweden and Lithuania, Denmark and Lithuania, Sweden and Estonia. On these country-pairs
    DFDS confirmed that its market share would be below 30% if road transportation is taken into account.
    In this respect, as explained above, the market investigation confirmed the Parties’ submission that road
    transportation is a viable alternative to direct ferry lines between Scandinavia (i.e., Denmark, Sweden,
    Norway, Finland) on the one hand, and the Baltic region (i.e., Lithuania, Latvia, Estonia as well as
    Poland) on the other hand. In any event, none of the market participants expressed concern in connection
    with this country pair (see non-confidential replies to Questionnaire for freight forwarders, question 3;
    non-confidential replies to Questionnaire for shippers, question 19). Therefore, this trade route will not
    be further examined.
111 Non-confidential replies to Questionnaire for freight forwarders, question 37. The responses were the
    same for ambient and cold cargo.
112 Non-confidential reply to Questionnaire for freight forwarders, question 37. The response concerned
    only cold cargo.
113 Non-confidential replies to Questionnaire for freight forwarders, question 37. The responses were the
    same for ambient and cold cargo.
                                                        15
 ---pagebreak--- (64)    Accordingly, the Commission will analyse the Transaction under the narrowest
        plausible market definition, that is the country pairs between Scandinavia and the
        UK (i.e., Denmark – UK, Sweden – UK, Norway – UK). 114
(65)    In addition, the Commission examined whether indirect routes via Dutch, Belgian
        and French ports as well as the Channel Tunnel could constitute credible
        alternatives to direct ferry lines between Scandinavian countries (especially
        Denmark, Sweden and Norway) and the British Isles, more specifically the UK. In
        this respect, the market investigation elicited mixed results.
(66)    On the one hand, the market investigation pointed towards several elements
        suggesting that there would be no perfect alternative to direct ferry lines between
        the country-pairs of Scandinavia and the UK. In this regard, because HSF is
        specialised in cold cargo freight forwarding, the Commission adopted a
        conservative approach and focused on the substitutability of alternative routes from
        the point of view of cold cargo freight, which is the most time sensitive.
(67)    First, from a demand-side perspective, according to several market participants,
        driving to Dutch, Belgian or French ports would not be a perfect substitute. For
        instance, several freight forwarders active between Scandinavia and the UK
        explained that going by road and then crossing by ferry from the Netherlands or
        Belgium or via the Channel Tunnel would not be a competitive alternative for cold
        cargo freight forwarding, 115 especially for routes between Sweden and Norway to
         the UK. 116
(68)    Likewise, several freight forwarders active between Scandinavia and the UK
        explained that going by road from Scandinavia and then crossing the Channel via
        the Eurotunnel would not be a competitive alternative.117
(69)    Second, cold cargo freight forwarders using DFDS’ ferries between Scandinavia
        and the UK actually ship most of their cold cargo (around 90%) from Scandinavia
        to the UK by direct ferry. Alternative routes represent only around 10% of their
        cold cargo from Scandinavia to the UK. For these freight forwarders, the direct
        ferry lines between Scandinavia and the UK seem to be more attractive.
(70)    Third, according to the Parties’ data, shipping cold cargo from Scandinavia to the
        UK other than via direct ferry lines would be at least 20% more expensive.118 This
         confirms that alternative routes would be less attractive for freight forwarders.
114 As for Finland, DFDS does not operate any direct ferry line between Finland and the UK.
115 Non-confidential replies to Questionnaire for freight forwarders, questions 38 and 39. One freight
    forwarder, for instance, explained that “The price difference is too high – this would not be a cost
    competitive solution for most ports, particularly in the Nordics, Baltics and some North European
    markets. Such other routing would also add more transportation time which would easily render the
    alternative less viable for most types of cargo” (non-confidential reply of a market participant to
    Questionnaire for freight forwarders, question 38.2).
116 According to a freight forwarder: “it is easier to go by road from Denmark to the UK than from Sweden
    or Norway” (non-confidential minutes of the call with a market participant on 26 August 2021).
117 According to one freight forwarder: “It is absolutely not possible [to go by road and then cross the
    Channel via the Eurotunnel] due to economic, operational and time factors. Gothenburg is the main
    corridor and going to other ports like in Benelux or even the Channel is both very expensive due to
    distance and the complication of getting another setup to return trailers” (non-confidential replies to
    questionnaire for freight forwarders, question 38.2).
                                                       16
 ---pagebreak--- (71)     On the other hand, several elements suggested that cold cargo freight forwarders
         actually use alternative routes.
(72)     First, the market investigation showed that a number of cold cargo freight
         forwarders active between Scandinavia and the UK frequently use routes other than
         direct ferry lines. These market participants include significant players in the cold
         cargo freight forwarding segment.119
(73)     Second, several freight forwarders relying on direct ferry lines to transport cold
         cargo between Scandinavia and the UK have confirmed that they could use
         alternative routes if required when there are capacity constraints on the ferries or
         when the sailing schedules of ferries are not convenient.120
(74)     One cold cargo freight forwarder specialised in the transport of Norwegian salmon
         to the UK explained for instance that it prefers to use the ferry line between
         Sweden and the UK instead of the ferry line between Norway and the UK because
         the sailing schedules of the latter ferry line are not convenient for the product flows
         of this market participant.121 The same cold cargo freight forwarder further
         explained that it uses alternative routes “from time to time, but only if DFDS has no
         capacity on [Gothenburg-Immingham], because we can’t wait for the next ferry, so
         in that case we are forced to go via Benelux”.122
(75)     Third, several shippers also confirmed that they can use alternative routes.123 From
         2013 to 2018, for instance, [customer] used HSF to transport cold cargo (including
         full truckloads) from Denmark to the UK via the Netherlands.124 Today, to some
         extent [customer] continues to transport cold cargo to the UK via the Netherlands,
         Belgium and even the Channel Tunnel. 125
(76)     For the purpose of this decision, however, the exact geographic market definition
         for short-sea shipping between Scandinavia and the UK can be left open, as the
         Transaction does not raise serious doubts as to its compatibility with the internal
         market under any plausible market definition. Accordingly, the Commission will
         assess the effects of the Transaction below on a market for short-sea shipping
118 Non-confidential replies to Questionnaire for freight forwarders, question 39.1.
119 “[our company] is not using DFDS services to the UK because the schedule of its ferries is not
    convenient for [our company]. [Our company] transports fresh salmon from Norway to the UK mostly
    by road (with a lead tome between 2-3 days)”, non-confidential minutes of a call with a market
    participant of 30 June 2021, para. 4. See also non-confidential replies of a market participant to follow-
    up request of information of 25 August 2021, question 1a.
120 Non-confidential replies to Questionnaire for freight forwarders, question 39; non-confidential replies of
    a market participant to follow-up questions of 25 August 2021.
121 Non-confidential minutes of a call with a market participant of 27 August 2021.
122 Non-confidential replies to Questionnaire for freight forwarders, question 39.
123 According to one shipper for instance: “It is always possible to drive “around” and avoid all feries, but
    this will cost extra in addition to longer transit. Usually a bad solution. When the weather does not
    allow it, we have to send trucks by road all the way” (non-confidential replies to questionnaire to
    shippers, question 16.2,).
124 Notifying Party’s reply to RFI 8, question 15, non-confidential minutes of a call with a market
    participant of 26 August 2021, para. 3.
125 Non-confidential minutes of a call with a market participant of 26 August 2021, para. 4.
                                                      17
 ---pagebreak---          services for unitised cargo between Scandinavia and the British Isles, 126 with a
         further segmentation by country-pair and to the exclusion of indirect routes.
         (B)       Northern Europe – Baltic region
(77)     The Commission investigated whether the relevant geographic market corresponds
         to a trade corridor including all Northern European ports (i.e., Northern France,
         Netherlands, Belgium, Germany) at one end of the leg, and all ports from the Baltic
         region (i.e., Lithuania, Latvia, Estonia as well as Poland) on the other end of the
         leg.
(78)     Several market participants confirmed that ports in Northern Europe (i.e., Northern
         France, Netherlands, Belgium, and Germany) are substitutable with one another.127
         However, the responses of certain market participants suggest that German ports
         would not be substitutable to other ports in France, Netherlands and Belgium. 128
(79)     Regarding the Baltic region, on the other hand, several market respondents
         confirmed that the ports in the Baltics (i.e., Latvia, Lithuania and Estonia) are
         substitutable with one another.129 According to another market participant for
         ambient cargo, the port of Gdynia in Poland would also be substitutable with
         Lithuanian ports.130
(80)     For the purpose of the assessment, however, the Commission will analyse the
         Transaction under the narrowest plausible market definition, that is the country
         pairs between Northern Europe and the Baltic region (i.e., Germany - Lithuania).
(81)     The Commission also examined whether indirect routes could constitute credible
         alternatives to direct ferry lines between Northern Europe and the Baltic region for
         freight forwarders. In this respect again, the market investigation elicited mixed
         results.
(82)     On the one hand, several market participants explained that direct ferry lines are
         more attractive than alternative routes, including alternative means of
         transportation. One freight forwarder transporting both ambient and cold cargo
         explained that “it would not be a competitive solution for most ports, particularly
         in the Nordics, Baltics and some North European markets. Also getting capacity in
         place for trucking, rest period for drivers would unfavourably impact the set-up
         significantly – as well as getting the trailer equipment into the right flows.
         Congestion on road side would also make this alternative less attractive – not
         forgetting environmental impact, which is having higher concern from our
         customers than earlier”.131
(83)     Another freight forwarder transporting ambient and cold cargo explained in the
         same vein that “Road is not a viable alternative due to the extra costs due to
126 In a conservative approach, the Commission focuses on the ferry lines between Scandinavia and the UK
    (because DFDS does not operate any ferry line between Scandinavia and Ireland). On such a broader
    market, DFDS’ market share would be diluted.
127 Non-confidential replies to Questionnaire for freight forwarders, question 39.
128 Non-confidential replies to Questionnaire for freight forwarders, question 39.
129 Non-confidential replies to Questionnaire for freight forwarders, question 39.
130 Non-confidential replies to Questionnaire for freight forwarders, question 39.
131 Non-confidential replies to Questionnaire for freight forwarders, question 40.
                                                      18
 ---pagebreak---         additional required equipment, additional required personnel and, especially when
        it comes to the road mode, it would result in additional CO2 emission. When it
        comes to rail mode, the issue of imbalanced cargo flows plays important role and
        very important factor to mention is foreseen provisions of the mobility package
        which would require return of the truck to the country of registration, therefore rail
        mode would become the least acceptable option leaving only ferry and road as
        relatively acceptable”.132
(84)    A third freight forwarder also mentioned “additional factors like limited
        permissions crossing the Polish border that might limit our possibilities to use the
        road as an alternative. The rail alternative do not have well-developed service to
        use it as an option”.133
(85)    On the other hand, several respondents confirmed that they actually use alternative
        routes to transport cargo from Northern Europe to the Baltics. A freight forwarder
        transporting both ambient and cold cargo explained, for instance, that it uses
        various routes to/from the Baltic region, via Northern German ports, over land via
        east-coast Sweden or direct line out of Fredericia port in Denmark into Klaipeda in
        Lithuania.134
(86)    Likewise, another freight forwarder explained that the “Baltic sea is better covered
        by alternatives” and that it can use trucks to transport products between Northern
        Europe to the Baltics via Poland.135
(87)    For the purpose of this decision, however, the exact geographic market definition
        for short-sea shipping between Northern Europe and the Baltic region can be left
        open, as the Transaction does not raise serious doubts as to its compatibility with
        the internal market under any plausible market definition. Accordingly, the
        Commission will assess the effects of the Transaction below on a market for short-
        sea shipping services for unitised cargo between Northern Europe and the Baltic
        region with a further segmentation by country-pair and to the exclusion of indirect
        routes.136
        (C)        Northern Europe – British Isles
(88)    The Commission investigated whether the relevant geographic market corresponds
        to a trade corridor including all Northern European ports (i.e., Northern France,
        Netherlands, Belgium, Germany) at one end of the leg, and all ports from the
        British Isles (i.e., the UK and the Republic of Ireland) on the other end of the leg.
(89)    As previously explained, several market participants confirmed that ports in
        Northern Europe (i.e., Northern France, Netherlands, Belgium, and Germany) are
        substitutable with one another.137 However, the responses of certain market
        participants suggest that German ports would not be substitutable with other ports
132 Non-confidential replies to Questionnaire for freight forwarders, question 40.
133 Non-confidential replies to Questionnaire for freight forwarders, question 40.
134 Non-confidential minutes of a call with a market participant of 4 June 2021, para. 14.
135 Non-confidential replies to Questionnaire for freight forwarders, question 40.
136 As explained in further detail below, at the level of country pairs, the only vertically affected market is
    the route between Germany and Lithuania where DFDS’ market share for direct short-sea shipping
    services upstream is above 30%. The Commission thus focused its assessment on this country-pair.
137 Non-confidential replies to Questionnaire for freight forwarders, question 39.
                                                      19
 ---pagebreak---          in France, Netherlands and Belgium. 138 Regarding the British Isles, only one
         respondent expressed the view that UK ports were not substitutable to other ports.
(90)     However, the exact market definition can be left open, as the Transaction does not
         give rise to serious doubts as to its compatibility with the internal market under any
         plausible market definition. For the purpose of the assessment, the Commission
         will analyse the Transaction on a country-pair basis, to the exclusion of indirect
         routes.
         (D)       Scandinavia – Baltic region
(91)     The Commission investigated whether the relevant geographic market corresponds
         to a trade corridor including all Scandinavian ports (i.e., Denmark, Sweden,
         Norway) at one end of the leg, and all ports from the Baltic region (i.e., Lithuania,
         Latvia, Estonia as well as Poland) on the other end of the leg.
(92)     As explained above, several freight forwarders confirmed that Norwegian ports are
         substitutable with the port of Gothenburg (Sweden). Likewise, several freight
         forwarders explained that Swedish ports are substitutable with the port of Esbjerg
         (Denmark).139 However, a significant freight forwarder explained that Swedish
         ports, Norwegian ports and Danish ports are not substitutable. 140
(93)     As for the Baltics, several market respondents confirmed that the ports in the
         Baltics (i.e., Latvia, Lithuania and Estonia) are substitutable with one another.141 In
         addition, one market participant for ambient cargo explained that the port of
         Gdynia in Poland would also be substitutable to Lithuanian ports.142
(94)     However, the exact market definition can be left open, as the Transaction does not
         give rise to serious doubts as to its compatibility with the internal market under any
         plausible market definition. Accordingly, the Commission will analyse the
         Transaction under the narrowest plausible market definition, that is the country
         pairs between Scandinavia and the Baltic region, to the exclusion of indirect routes.
5.       COMPETITIVE ASSESSMENT
(95)     The Parties’ activities overlap in the provision of freight forwarding services. HSF
         is specialised in cold cargo freight forwarding, especially for fresh products,
         whereas DFDS is primarily active in ambient cargo freight forwarding, with
         limited activities in cold cargo freight forwarding. 143 As a result, the Parties’
138 Non-confidential replies to Questionnaire for freight forwarders, question 39.
139 Non-confidential replies to Questionnaire for freight forwarders, question 37. The responses were the
    same for ambient and cold cargo.
140 Non-confidential replies to Questionnaire for freight forwarders, question 37.
141 Non-confidential replies to Questionnaire for freight forwarders, question 39.
142 Non-confidential replies to Questionnaire for freight forwarders, question 39.
143 DFDS’ current business in cold cargo freight forwarding is limited to the UK and Ireland (Form CO,
    para. 153). DFDS’ activities to-date in cold cargo freight forwarding have largely been the result of
    historical acquisitions. For example, through its acquisition of Norfolkline in 2010, DFDS assumed
    Norfolkline’s freight forwarding activities (including cold chain transportation in the UK) and opted to
    continue operating this business but not extend it to other countries (Form CO, para. 153, footnote 72).
    However, DFDS submitted that it has an ambition to grow the cold chain part of its logistics business
    (Form CO, para. 37).
                                                      20
 ---pagebreak---          activities in freight forwarding are relatively complementary and primarily overlap
         on cold cargo freight forwarding. Accordingly, the Commission will focus its
        assessment on the overlap for cold cargo freight forwarding.
(96)    DFDS also provides short-sea shipping services (i.e. ferry services) which are an
        input to the provision of freight forwarding services; freight forwarders are thus
        customers of ferry companies. As a consequence, the Transaction gives rise to
        vertical relationships between (i) DFDS’ activities upstream on the markets for
        short-sea shipping services and (ii) the Parties’ activities downstream on the
        markets for freight forwarding.
(97)    The horizontal and vertical relationships arising as the result of the Transaction will
        be further assessed below.
5.1. Horizontal effects
(98)    While the Parties’ activities overlap horizontally in the provision of freight
        forwarding services, the Transaction only gives rise to horizontally affected
        markets in the market for the provision of cold cargo freight forwarding services
        for the country pair Denmark-UK 144 (when taking into account indirect
         transportation modes).145 Indeed, if indirect transportation modes via Northern
         European routes such as the Netherlands and the Eurotunnel are taken into account,
         HSF estimates its market share to be around [20-30]% for the Denmark - UK
        country pair (and less than [10-20]% for the Scandinavia – UK corridor). 146
(99)    The Commission notes however that DFDS’ individual market share in cold cargo
        freight forwarding between Denmark and the UK is negligible and estimated to be
        less than [0-5]%. 147 The resulting market share is therefore almost entirely
         attributable to the Target’s business in Denmark and the increment brought about
         by the Transaction is insignificant.
(100) The Parties do not appear to be close competitors since: (i) HSF is specialised in
         cold cargo freight forwarding whereas the presence of DFDS on this segment is
         currently very limited, (ii) DFDS does not [information on DFDS’s current
         business strategy], whilst the Target uses both the direct ferry route and indirect
         routes via the Netherlands and the Eurotunnel, (iii) the vast majority of the Target’s
         volumes between Denmark and the UK are transported via the Netherlands. In
         addition, there are several other freight forwarders active in this market which is
         very fragmented.148 For instance, DSV is one of the Parties’ main competitors
        active in this market, with an estimated market share well above [10-20]%. Other
144 See Notifying Party’s reply to RFI 11, question 1.
145 DFDS provided different market share estimates for freight forwarding depending on the relevant
    delineation of the product market. See below under Section 5.2.2 information on the Parties’
    downstream market shares, which remain below 20%.
146 See Notifying Party’s reply to RFI 6, question 6. The Parties confirmed that no other market would be
    horizontally affected when taking into account indirect transportation modes (see Notifying Party’s reply
    to RFI 11, question 1).
147 See Table 2 below.
148 For instance, DFDS estimates that there are at least 12 other freight forwarders offering cold-freight
    forwarding services between Denmark and the UK. DFDS also notes that on the basis of a report
    “Europe Refrigerated Transport Vehicles Market: 2015-2026” by IMARC market research, the total
    EEA fleet of refrigerated transport vehicles is approximately 1.2 million units and the Parties’ combined
    share of this total is less than [0-5]%. See Notifying Party’s reply to RFI 9, question 2 c.
                                                        21
 ---pagebreak---          freight forwarders, such as Girteka, Bring and Nagel are also competing with the
         Parties on this market with a combined estimated market share of up to
         [30-40]%.149
(101) Finally, the majority of market participants responding to the Commission’s market
         investigation did not raise any horizontal competition concerns with respect to
         freight forwarding.
(102) Based on the above, the Transaction does not give rise to serious doubts as to its
         compatibility with the internal market with respect to horizontal overlaps in freight
         forwarding, including on any putative horizontally affected market for cold cargo
         freight forwarding between Denmark and the UK.
5.2.Vertical effects
5.2.1. Legal framework
(103) A merger can entail non-horizontal effects when it involves companies operating at
         different levels of the same supply chain or in closely related markets. Pursuant to
         the Non-Horizontal Merger Guidelines, 150 non-horizontal mergers do not entail the
         loss of direct competition between merging firms in the same relevant market and
         provide scope for efficiencies. However, there are circumstances in which non-
         horizontal mergers may significantly impede effective competition. This is in
         particular the case if they give rise to foreclosure.151
(104) In assessing potential vertical effects of a merger, the Commission analyses
         whether a merger results in foreclosure so that actual or potential rivals' access to
         supplies or markets is hampered or eliminated as a result of the merger, thereby
         reducing those companies' ability and/or incentive to compete.152 Such foreclosure
         may discourage entry or expansion of rivals or encourage their exit. Foreclosure
         thus can be found even if the foreclosed rivals are not forced to exit the market. It is
         sufficient that the rivals are disadvantaged and consequently led to compete less
         effectively. Such foreclosure is regarded as anti-competitive where the merging
         companies — and, possibly, some of their competitors as well — are as a result
         able to profitably increase the price charged to consumers.
(105) The Non-Horizontal Merger Guidelines distinguish between two forms of
         foreclosure: (i) input foreclosure, when access of downstream rivals to supplies is
         hampered;153 and (ii) customer foreclosure, when access of upstream rivals to a
         sufficient customer base is hampered.154
(106) In assessing both types of foreclosure, the Commission assesses whether the
         merged entity (i) would have the ability to engage in foreclosure, (ii) whether it
         would have the incentive to do so, and (iii) what would be the overall impact on
         effective competition in the affected markets.
149 See Notifying Party’s reply to RFI 7, question 12.
150 Commission Guidelines on the assessment of non-horizontal mergers under the Council Regulation on
    the control of concentrations between undertakings. OJ C 265, 18.10.2008, p. 6.
151 Non-Horizontal Merger Guidelines, para. 18.
152 Non-Horizontal Merger Guidelines, paras. 20-29.
153 Non-Horizontal Merger Guidelines, para. 31.
154 Non-Horizontal Merger Guidelines, para. 58.
                                                     22
 ---pagebreak--- 5.2.2. Overview of the vertically affected markets
(107) In the case at hand, as explained above,155 the Transaction gives rise to vertically
         affected markets, at corridor and/or country-pair level,156 on the following routes
         (i) Scandinavia – British Isles, (ii) Northern Europe – Baltic region. In these
         affected trade corridors, HSF uses only DFDS on the Esbjerg-Immingham ferry
         connecting Denmark and the UK in the British Isles-Scandinavia trade corridor,
         and on the Kiel-Klaipeda ferry connecting Germany and Lithuania in the Northern
         Europe-Baltics trade corridor. HSF does not use any provider of short-sea shipping
         services on any other routes within the affected markets.157
(108) The following table shows DFDS' market shares on the affected market segments
         for short-sea shipping services.
Table 1. DFDS’ market share on the market for short-sea shipping services on the
basis of capacity (upstream)
                 Corridor (same share                 for    both      Market Share of
                 directions of trade)                                                DFDS
                 Scandinavia/British Isles                                       [70-80]%
                                                   Denmark/UK                         100%
                                                     Sweden/UK                        100%
                                                 Norway/UK158                    [50-60]%
                 Northern Europe-Baltics                                         [30-40]%
                                           Germany/Lithuania                     [80-90]%
         Source: Form CO, Annex 21.
(109) As for the downstream markets, DFDS provided different market share estimates
         depending on the relevant delineation of the product market. For instance, DFDS
         submitted that the Parties’ combined market shares by volume are below [5-10]%
         in the EEA and in any individual Member State when the overall (cold and
         ambient) freight forwarding services by land and sea159 are considered in
         international (i.e. cross-border) freight forwarding. 160 Similarly, when outbound
         volumes of only ambient cargo161 freight forwarding from one Member State to
155 See footnotes 111 and 112 above.
156 The Parties were not able to provide volume and value market shares for every route. For the purpose of
    the assessment and for the sake of consistency, the Commission relied on capacity market shares to list
    affected trade routes (Form CO, Annex 21).
157 Form CO, para. 207.
158 The cargo transported between Norway and the UK include but are not limited to agricultural and
    fishery products that fall outside the scope of the EEA agreement. Although the exact nature of the
    products stored in the trailers and cargo cannot be determined precisely, these products also include
    ambient and cold products falling within the scope of the EEA agreement, which would thus be part of
    the relevant market. Accordingly, the Commission will assess the merger in relation to Norway with
    regard to all products falling within the scope of the EEA-agreement, in accordance with the principles
    and the approach set out in its communication on the definition of the relevant market.
159 DFDS refers to it as “road transport” and explains that the total market sizes are based on Eurostat data
    in volume (tonnes) and include road and sea freight on the relevant routes. The sea freight volumes are
    included in the totals, as all sea freight includes a road leg, which is not reflected in the road freight
    volumes in the Eurostat data. Form CO, Annex 10.
160 Form CO, para. 200 and Annex 10.
161 DFDS refers to it as “non-temperature-controlled freight forwarding”. Form CO, Annex 10.
                                                       23
 ---pagebreak---           other EU countries by land and sea162 are considered, DFDS submitted that the
          Parties’ combined market shares by volume are below [5-10]%.163
(110) When outbound volumes of cold cargo freight forwarding from one Member State
          to other EU countries by land and sea164 are considered, the highest market shares
          of the Parties are in Denmark to other EU countries (HSF: [10-20]%;
          DFDS: [0-5]%), the Netherlands to other EU countries (HSF: [5-10]%;
          DFDS: [0-5]%), the UK to the EU (HSF: [0-5]%; DFDS: [0-5]%) and Germany to
          other EU countries (HSF [0-5]%; DFDS: [0-5]%). 165 In all other markets from one
          Member State to the other EU countries, the Parties’ combined market shares by
          land and sea for cold cargo freight forwarding are below [10-20]%. 166
(111) Given the fact that HSF is specialised in cold cargo freight forwarding and that
          cold cargo freight forwarding appears to present certain constraints in terms of
          transportation timing and required equipment and that DFDS operates the only
          direct short-sea shipping service between Denmark-UK and Sweden-UK, and faces
          limited competition on short-sea shipping services between Norway-UK and
          Germany-Lithuania,167 (see Section 4 above), the Commission considers that under
          the most conservative approach the Transaction should be assessed on the basis of
          the potential segment for cold cargo freight forwarding. For this reason, DFDS
          provided market share estimates on the narrowest plausible market, i.e. the market
          for cold cargo freight forwarding on the relevant country pairs, including direct and
          indirect routes.168
(112) The table below shows DFDS' and HSF’s market shares on such a potential market
          segment.
162 As explained above, DFDS refers to it as “road transport” and explains that the total market sizes are
    based on Eurostat data in volume (tonnes) and include road and sea freight on the relevant routes.
    Form CO, Annex 10.
163 Form CO, para. 200 and Annex 10.
164 As explained above, DFDS refers to it as “road transport” and explains that the total market sizes are
    based on Eurostat data in volume (tonnes) and include road and sea freight on the relevant routes.
    Form CO, Annex 10. With respect to domestic vs. international freight forwarding, the Target estimates
    – given its focus on international freight forwarding – that the domestic cold cargo freight forwarding
    market shares will be lower than its international cold cargo freight forwarding market shares. With
    respect to the split between fresh and frozen, the Target was unable to provide a meaningful market
    share estimate. Form CO, paras. 203-204.
165 Form CO, para. 196 and Annex 10.
166 Form CO, Annex 10.
167 See Table 1 above.
168 I.e., the market shares provided by DFDS take into account the volumes that HSF transports via indirect
    routes (e.g. volumes transported by HSF from Denmark to the UK via the Netherlands or the
    Eurotunnel). As explained in Section 4 above, the Commission agrees with this view because the market
    investigation has shown that several of the Parties’ cold cargo freight forwarding competitors are active
    on the relevant markets by way of alternative routes without using DFDS’ short-sea shipping input.
                                                      24
 ---pagebreak--- Table 2. The Parties’ market share by volume on the potential market segment for
cold cargo freight forwarding on the relevant trade corridors/country pairs
(downstream)
      Corridor                                             Market Share of          Market Share of
                                                                         HSF                       DFDS
      Scandinavia/UK                                              <[10-20]%                     <[0-5]%
                                    Denmark/UK                   [20-30]%169                    <[0-5]%
                                     Sweden/UK                       <[0-5]%                    <[0-5]%
                                     Norway/UK                       <[0-5]%                    <[0-5]%
      UK/Scandinavia                                                 <[0-5]%                    <[0-5]%
                                    UK/Denmark                       <[0-5]%                    <[0-5]%
                                     UK/Sweden                       <[0-5]%                    <[0-5]%
                                     UK/Norway                       <[0-5]%                    <[0-5]%
      Northern Europe-Baltics                                        <[0-5]%                      [0-5]%
                             Germany/Lithuania                       <[0-5]%                    <[0-5]%
      Baltics-Northern Europe                                        <[0-5]%                      [0-5]%
                             Lithuania/Germany                         [0-5]%                   <[0-5]%
          Source: Notifying Party’s reply to RFI 2, question 2; Notifying Party’s reply to
          RFI 8, questions 9, 10 and 11; Notifying Party’s reply to RFI 9, question 2; and
          Notifying Party’s reply to RFI 10, question 3.
          Notes: The provided market shares take into account the volumes that HSF
          transports via direct and indirect routes.
5.2.3. Input foreclosure
(113) During the market investigation, the Commission has examined whether the
          merged entity would have the ability to substantially foreclose access to input,
          whether it would have the incentive to do so and whether any foreclosure strategy
          would have a significant detrimental effect on competition on the freight
          forwarding services on the narrowest plausible markets within the affected trades,
169 Including the volumes of [customer]. It should be noted that [customer] (end customer) has a direct
    contract for short-sea shipping services between Denmark and the UK with DFDS, whereas haulage
    services for transporting cold cargo from [customer]’s facilities to the short-sea shipping terminal in
    Denmark and from the short-sea terminal in the UK to its destination are provided by HSF. DFDS
    argues that [customer] volumes should not be included in the market share estimate of HSF because
    (i) [customer] decides on the shipping line of its cargo on its own and HSF is not involved in negotiating
    the ferry rate; (ii) [customer] will continue to determine its choice of shipping line and negotiate with it;
    (iii) the Transaction does not weaken [customer]’s negotiation strength, which remains as it was prior to
    the Transaction. (See Form CO, para. 140, Notifying Party’s reply to RFI 2, question 2, Notifying
    Party’s reply to RFI 7, question 1, and Notifying Party’s reply to RFI 9, question 1). However, the
    Commission considers that [customer]’s volumes should be included in calculating the market share of
    HSF as they represent HSF business. Moreover, post-Transaction, both contracts for haulage services
    and for short-sea shipping services will be serviced by the merged entity (at least until the expiry of such
    contracts). Consequently, post-Transaction, [customer] will be a customer of the merged entity and not
    of other cold cargo freight forwarder(s). According to DFDS, if [customer]’s volumes were not
    attributed to HSF, HSF’s market share on Denmark-UK would be <[0-5]%. (See Notifying Party’s reply
    to RFI 9, question 1).
                                                        25
 ---pagebreak---          namely between Scandinavia (i.e. Denmark, Sweden and Norway) and the British
         Isles (i.e. the UK) and between Northern Europe (i.e. Germany) and the Baltic
         region (i.e. Lithuania). 170
5.2.3.1. The Notifying Party’s view
(114) According to DFDS, it would have neither the ability nor the incentive to engage in
         an input foreclosure strategy post-Transaction. In this respect, DFDS submits that
         even if HSF were to divert volumes to DFDS post-Transaction, these volumes
         would not materially affect DFDS’ market shares in the affected markets. In
         addition, it notes that the Target already uses DFDS’ short-sea shipping services for
         the limited volumes it carries within these regions. 171 DFDS also notes that
         multiple options exist for freight forwarders and other logistics providers to procure
         shipping services and that customers can and do use alternative routes in a given
         region.
(115) DFDS also submits that it has no incentive to raise prices, restrict access or degrade
         the terms or quality of service offered to existing and potential customers given the
         small revenue represented by HSF, the likelihood of customer switching and its
         desire to maximise capacity utilisation in order to minimise its ferry unit costs.172
(116) In relation to the Denmark-UK route specifically, DFDS submits that it lacks the
         ability to engage in an input foreclosure strategy because its service is not an
         important input and that there are several substitutable routes that could be used
         and are indeed currently used by the Target and other cold cargo freight
         forwarders.173 DFDS submits that its upstream margins are more than […] larger
         than HSF’s downstream margins on this route and therefore it is unlikely to have
         an incentive to foreclose other freight forwarders since a blanket price increase on
         cold cargo shipping would cause substantial volumes to be switched which in
         return would cause profits to be lost upstream. DFDS also argues that the Target
         would have limited scope to recapture business downstream because, it is only one
         of many freight forwarders on this route and that it is multiple times smaller than
         DFDS’ main cold cargo freight forwarding customer on this route. 174
(117) In the same vein, DFDS argues that the merged entity will not have the ability and
         incentive to engage in input foreclosure on the Sweden-UK, Norway-UK and
         Germany-Lithuania routes, because (i) DFDS’ ferry service is not an important
         input to offering freight forwarding services; (ii) an attempted foreclosure strategy
         would trigger substantial switching to alternative routes; (iii) as both DFDS and the
         Target have only small market shares on the downstream market on these routes,175
         there is no reason to expect that the merger would cause a material change in
170 DFDS is not active on Finland-UK. Form CO, Tables 24 and 25.
171 Form CO, para. 124.
172 Form CO, para. 124.
173 According to DFDS, [information on HSF’s current business strategy]. RBB Economics submission on
    input foreclosure assessment of 20 August 2021, page 2.
174 Ibid and see, for instance, Notifying Party’s reply to RFI 8, question 15.
175 When looking at the market shares of direct and indirect means of transport. If a narrow (direct route
    only) market were considered, the Transaction would not give rise to vertically affected markets on the
    Sweden-UK and Norway-UK routes because [information on HSF’s current business strategy]. See
    Notifying Party’s reply to RFI 10, question 1.
                                                       26
 ---pagebreak---          DFDS’ incentives; and (iv) input foreclosure would likely be unprofitable.176
         Consequently, DFDS submits that it would lack the ability or incentive to favor
         HSF post-Transaction by raising prices to its other freight forwarder customers or
         refusing to provide services to those other customers on the routes of concern
         where DFDS has a high market share and HSF is active as a customer.177
5.2.3.2. Commission’s view
         (A)       Ability to foreclose
(118) The Non-Horizontal Merger Guidelines point to three conditions, which are
         necessary for the merged entity to have the ability to foreclose its downstream
         competitors, namely (i) the existence of a significant degree of market power,
         (ii) the importance of the input and (iii) the absence of timely and effective counter-
         strategies. 178
         (A.i)     Scandinavia-British Isles
(119) The Commission’s market investigation has shown that ferry services are an
         important input for the freight forwarding services on the Denmark-UK, Sweden-
         UK and Norway-UK country pairs, representing approximately […]% of the total
         costs of the freight forwarding service.179
(120) As explained above, DFDS is the only short-sea shipping operator on the Denmark-
         UK (market share of 100%) and Sweden-UK (market share of 100%) country pairs
         and has a considerable presence on the Norway-UK country pair (market share of
         [50-60]%).
(121) Despite these large market shares and the ferry component being an important
         input, the market investigation has indicated the existence of certain elements,
         which could constrain DFDS’ market power to some extent post-Transaction.
(122) First, while a large number of respondents to the Commission’s market
         investigation indicated that DFDS' short-sea shipping services are a critical input
         for their cold and ambient cargo freight forwarding activities and that the
         competitive pressure exercised on DFDS by other short-sea shipping operators
         active on the other routes would be limited,180 some of the largest freight
176 Notifying Party’s reply to RFI 10, question 1.
177 Form CO, para. 145.
178 Non-Horizontal Merger Guidelines, para. 35.
179 Notifying Party’s reply to RFI 2, question 8 and RBB Economics submission on input foreclosure
    assessment of 20 August 2021. Furthermore, on the basis of the information submitted by DFDS, it
    appears that the ferry component on various alternative routings (e.g. via the Netherlands, North of
    France or the Eurotunnel) is available at a roughly similar total cost. DFDS also noted that that the sea
    leg of the journey falls to […]% on the Dunkirk-Dover ferry route or […]% with the Eurotunnel. See
    Notifying Party’s reply to RFI 2, question 8 and Form CO, Annex 26(a) and (b).
180 Non-confidential replies to Questionnaire for freight forwarders, questions 27, 27.3, 46, 46.2, non-
    confidential replies to Questionnaire to ferry operators, questions 22; 25 and 25.1, non-confidential
    minutes of a call with a market participant of 1 June 2021, paras. 8-10, non-confidential minutes of a
    call with a market participant of 27 August 2021, paras. 3-5. Some end customers also noted that the
    merged entity might have the ability to foreclose by explaining that “DFDS will have the ferry set up,
    the transportation set up, the set up in relation to some types of reusable (sic) packaging materiel (sic) -
    meaning that a bigger part of the total chain of value will be in their "hand" [.] Can be difficult for other
                                                        27
 ---pagebreak---          forwarders active on the routes of concern (and in the region in general) noted that
         they either do not use the ferry services on the Denmark-UK, Sweden-UK and
         Norway-UK country pairs, or that they believe that there are competitive services
         provided by other means of transport or other routes, such as for example, going
         through the Netherlands, Belgium, North of France or the Channel Tunnel.181
(123) At the same time, it should be noted that some market respondents explained that
         the substitutability of DFDS’ Denmark-UK short-sea shipping ferry line with the
         other routes depends on the origin and destination points. 182 While these
         submissions are good indications that some alternatives to DFDS’ direct ferry are
         available, however, the results of the market investigation did not allow to
         determine whether these alternatives would be similarly attractive or available for
         all cold cargo freight forwarders.
(124) Second, one of DFDS’ largest short-sea shipping customers of cold cargo,
         [customer], in the past has also transported its cold cargo between Denmark and the
         UK going through the Netherlands in the south and to a lesser extent by way of a
         DFDS’ ferry. 183 In the Commission’s view, this could suggest that even though the
         direct short-sea shipping services provided by DFDS on the Esbjerg-Immingham
         ferry are a preferred option for some of the cold cargo freight forwarding
         companies active in the region, the existence of certain alternatives would exert a
         certain degree of competitive constraints on DFDS’ position in the upstream
         market.
(125) Third, the market investigation did not confirm entry or expansion plans of other
         ferry operators.184 However, some cold cargo freight forwarding customers of
         DFDS explained that if DFDS were to engage in input foreclosure, there would
    transport companies / forwarders to be seen as an alternative in the market”. See non-confidential
    replies to Questionnaire to shippers, questions 17 and 17.1.
181 For instance, one large freight forwarder active in both cold and ambient cargo explained that it
    transports fresh salmon from Norway to the UK mostly by road (with a lead time of 2-3 days). It added
    that “The journey starts in Oslo – Sweden (sometimes [the company] will use a ferry from Sweden
    directly to Germany) – Denmark – Germany – the Netherlands (sometime [the company] will use a
    ferry from Denmark directly to the UK) – Belgium – France – Euro tunnel – UK.” The same market
    participant further explained that “It would also be possible to travel by road to the Netherlands and
    cross over by ferry from Rotterdam to Immingham in the UK”. See non-confidential minutes of a call
    with a market participant of 30 June 2021, para. 4. Another large cold cargo freight forwarder explained
    that its “trucks are routed via mainland Europe and the Calais - Dover (France – UK) or Hook of
    Holland – Harwich (Netherlands – UK) port pairing.” Non-confidential replies of a market participant to
    follow-up request of information of 25 August 2021, question 1a. See also non-confidential minutes of a
    call with a market participant of 26 August 2021, para. 6.
182 For instance, one market participant submitted that “the further South one goes, the more competitive the
    Southern routes become via the Channel Tunnel, Belgium, the Netherlands or Northern France.
    Likewise, the origin matters: it is easier to go by road from Denmark to the UK than from Sweden or
    Norway.” It further noted that it is “important to consider whether a freight forwarder has customers to
    transport cargo on the return trip Eastbound [i.e. from the UK]. If so, taking the Channel Tunnel as
    opposed to the ferry might become more cost competitive.” Non-confidential minutes of a call with a
    market participant of 26 August 2021, paras. 6-7. Another market participant noted that “The choice of
    one route instead of another is a complex one, which should take into account a number of commercial
    factors, such as types of goods, location of the customer, possibility of a freight forwarder to fill in the
    trailers on for the return trip, regulatory requirements and other”. Non-confidential minutes of a call
    with a market participant of 26 August 2021, para. 2.
183 Notifying Party’s reply to RFI 8, questions 2 and 3. Non-confidential minutes of a call with a market
    participant of 26 August 2021, paras. 3-4.
184 Non-confidential replies to Questionnaire to ferry operators, questions 30.1 and 30.1.1.
                                                      28
 ---pagebreak---         exist a possibility to retaliate by, for instance, (i) switching cold cargo volumes
        from the merged entity to other (indirect) routes or modes of transport;
        (ii) encouraging entry of a new ferry operator; or (iii) switching away from DFDS
        on other routes.185 For instance, one of the largest cold cargo customers of DFDS
        explained that post-Transaction it will try to negotiate advantageous conditions
        with the merged entity and did not exclude the possibility that the other cold cargo
        freight forwarders might also bid for its business. 186 It further noted that if post-
        Transaction the merged entity attempted to impose higher prices or exert other less
        favorable conditions, then it might look for possibilities to switch to alternative
        routes such as taking the ferry from Belgium or contract with alternative cold cargo
        freight forwarders. 187
(126) Fourth, DFDS explained that the ferry business model is focused on the utilisation
        of capacity, meaning that in order to operate profitably it has to fill the available
        capacity on its ferry.188 Based on the data submitted by DFDS, the largest part of
        DFDS’ business on these country pairs relates to ambient cargo (as opposed to cold
        cargo).189 Moreover, some of the largest DFDS’ freight forwarding customers that
        transport cold cargo also use the same DFDS ferry for their ambient cargo
        volumes. Therefore, in response to an attempted input foreclosure such customers
        might also switch their ambient cargo volumes from DFDS. 190
(127) For instance, the split of total volumes of cargo transported by [customer], DFDS’
        largest customer that accounts for the largest part of DFDS’ total ferry capacity on
        Denmark-UK, shows that it transports […]% of cold and […]% of ambient
        cargo.191 With the exception of [customer] and [customer], the remainder of the
        top 10 of DFDS’ customers on this route carry ambient cargo only. 192 The potential
        loss of more significant volumes of ambient cargo on the short-sea shipping route
        between Denmark and the UK could potentially minimize the merged entity’s
        ability to engage in input foreclosure.
(128) The results of the market investigation did not allow to conclude how timely or
        effective such retaliation measures would be, nevertheless, the Commission
185 For instance, one large cold cargo freight customer noted that “if DFDS were to engage in input
    foreclosure, [freight forwarder] would have the possibility to divert all or some of its DFDS volumes on
    other routes.” Non-confidential minutes of a call with a market participant of 26 August 2021,
    paras. 21-22. Another market respondent explained that has other trade relationships with DFDS
    therefore it “could leverage this trade relationship to ensure that it is not treated disadvantageously by
    the merged entity.” Non-confidential minutes of a call with a market participant of 26 August 2021,
    para. 10.
186 Non-confidential minutes of a call with a market participant of 26 August 2021, paras. 6-7.
187 Non-confidential minutes of a call with a market participant of 26 August 2021, para. 9.
188 Form CO, para. 216.
189 For instance, in 2020 on Denmark-UK ferry DFDS shipped […] lanemetres of ambient cargo and […]
    lanemetres of cold cargo; on Sweden-UK ferry DFDS shipped […] lanemetres of ambient cargo and
    only […] lanemetres of cold cargo; on Norway-UK ferry DFDS shipped […] lanemetres of ambient
    cargo and only […] lanemetres of cold cargo. See Notifying Party’s reply to RFI 5, Annex 1.
190 See, for instance, an explanation by one market participant that transports cold and ambient cargo with
    DFDS on the Denmark-UK route: “In addition to cold freight forwarding cargo, [our company]
    transports significant ambient cargo volumes using DFDS, this gives a stronger leverage for [our
    company], which DFDS knows.” Non-confidential minutes of a call with a market participant of
    26 August 2021, para. 21.
191 Notifying Party’s reply to RFI 2, Annex 2.
192 Form CO, para. 128.
                                                      29
 ---pagebreak---          considers that the possibility for such counter-strategies may potentially have an
         impact at least to some degree.193
(129) In light of the above, the Commission considers that on balance DFDS may not
         have the ability to foreclose cold cargo freight forwarders active between
         Scandinavia (i.e. Denmark, Sweden and Norway), on the one hand, and the British
         Isles (i.e. the UK), on the other hand.
         (A.ii)     Northern Europe-Baltics
(130) Between Northern Europe and the Baltics, the only affected country-pair is that of
         Germany-Lithuania. On this country-pair, as explained above, DFDS has a market
         share of [80-90]% on the upstream market for short-sea shipping services between
         Germany and Lithuania (in both directions).
(131) In the course of the market investigation, one cold cargo freight forwarder active on
         the route between Germany and Lithuania explained that “DFDS is practically the
         sole shipping operator between Lithuania and Germany” and expressed concerns
         that the new entity could “attract end customers by providing lower overall prices
         while charging higher prices to other freight forwarders […] This would increase
         other freight forwarders’ overall costs and make them less competitive compared
         to the combined entity”.194
(132) Other market participants, however, were of the view that DFDS was unlikely to
         have the ability to foreclose freight forwarders between Germany and Lithuania
         post-Transaction.
(133) First, the market power of DFDS on the upstream market is limited by the presence
         of an alternative operator (TT Line), which is active on the route between
         Trelleborg (Sweden) and Klaipeda (Lithuania). On this route, the alternative ferry
         operator has a market share of [10-20]% and a frequency similar to that of DFDS’
         ferries (i.e., 5 departures per week compared to 4.5 for DFDS).
(134) Several cold cargo freight forwarders mentioned TT Line as a credible competitor
         of DFDS. 195 By way of illustration, one cold cargo freight forwarder, which uses
         DFDS’ ferries between Germany and Lithuania, listed TT Line as a credible
         alternative to DFDS’ ferry line and explained that it has no concern because “there
         are alternative options to DFDS”.196 In the same vein, another cold cargo freight
         forwarder explained that the “Baltic Sea is better covered by alternatives”.197
         Another cold cargo freight forwarder also explained that “Other operators in the
         Baltic Sea are Stena and Finnlines. Although the choice of ferries in the Baltic
         Region is limited, DFDS does not have a monopoly in that region like it has on
193 It should be also noted that in the past one of the current DFDS’ cold cargo freight customers moved
    away from its ferry on Denmark-UK to an alternative route for at least some of its cold cargo volumes.
    See Notifying Party’s reply to RFI 8, question 15. See also Non-confidential minutes of a call with a
    market participant of 26 August 2021, paras 3-4.
194 Non-confidential minutes of the call held with a market participant in pre-notification on 4 June 2021.
195 Non-confidential replies to Questionnaire for freight forwarders, question 42.
196 Non-confidential minutes of a call with a market participant of 10 June 2021.
197 Non-confidential replies to Questionnaire for freight forwarders, question 46.3.
                                                      30
 ---pagebreak---         Sweden and Denmark – UK and there are alternative routes for [confidential] for
        all types of cargo”.198
(135) Likewise, the market investigation has shown that alternative means of
       transportation constitute credible alternatives for cold cargo freight forwarders
       between Germany and Lithuania. According to one freight forwarder for example,
       the road route via Poland is a credible alternative to transporting cold cargo
       between Germany and Lithuania.199 Another freight forwarder transporting both
        ambient and cold cargo explained that it uses various routes to/from the Baltic
        region, via Northern German ports, over land via east-coast Sweden or direct line
        out of Fredericia port in Denmark into Klaipeda in Lithuania.200
(136) In light of these elements, the Commission is of the view that even if these
       alternative routes were excluded from the market, they would constitute credible
       alternatives, which despite relatively higher transit time, may offer more flexibility
       and thus exert a constraint on DFDS, thereby limiting DFDS’ market power on the
       market for short-sea shipping services between Germany and Lithuania.
(137) Second, the data submitted by the Parties show that ferry services do not account
       for a large part of the total costs borne by freight forwarders downstream to
       transport cargo from Germany to Lithuania (i.e. between […]% and […]%).201 This
        in turn suggests that ferry services do not constitute an important input for freight
        forwarding between Germany and Lithuania.
(138) In light of the above, the Commission considers that on balance, DFDS may not
        have the ability to foreclose freight forwarders on the Northern Europe – Baltics
        corridor, and more specifically between Germany and Lithuania post-Transaction.
        (B)       Incentive to foreclose
(139) The incentive to foreclose depends on the degree to which foreclosure would be
        profitable. The vertically integrated firm will take into account how its supplies of
        inputs to competitors downstream will affect not only the profits of its upstream
        activities, but also of its downstream activities. Essentially, the merged entity faces
        a trade-off between the profit lost in the upstream market due to a reduction of
        input sales to (actual or potential) rivals and the profit gain, in the short or longer
        term, from expanding sales downstream or, as the case may be, being able to raise
        prices to consumers. 202
        (B.i)     Scandinavia-British Isles
(140) The results of the market investigation suggest that even if the merged entity had
        the ability to engage in input foreclosure post-Transaction, it is questionable
        whether it would have the incentive to do so as any such attempts would not appear
        to be sufficiently profitable.
198 Non-confidential minutes of a call with a market participant of 26 August 2021.
199 Non-confidential replies to Questionnaire for freight forwarders, question 27.4.
200 Non-confidential minutes of a call with a market participant of 26 August 2021.
201 Response to RFI 2, question 8.
202 Non-Horizontal Merger Guidelines, para. 40.
                                                      31
 ---pagebreak--- (141) In relation to the short-sea shipping operations between Denmark and the UK,
         DFDS’ upstream profit margins amount to […]%. 203 The following elements
         suggest that the merged entity would not recuperate the loss of DFDS’ profits on
         the upstream level by foreclosing potential competitors downstream.
(142) First, as submitted by DFDS, the downstream gross margin earned by HSF on a
         round trip between Denmark and the UK is […]%, which is more than […] lower
         than the margin that DFDS earns upstream. 204 Given the difference in margins, the
         diversion ratio on the downstream market would need to be particularly important
         for a foreclosure strategy to be profitable, which appears rather unlikely given that
         the main cold cargo freight forwarding customers on the Denmark-UK route seem
         to enjoy some retaliation power.
(143) The higher margins on the upstream market incentivize DFDS to maximize the
         utilization rate of its ships. If the merged entity were to engage in input foreclosure,
         it would have no guarantee to win all the volumes lost to competing cold cargo
         freight forwarders downstream. As a result, an input foreclosure strategy would
         arguably result in a loss of some volumes for DFDS on the upstream market and
         these losses upstream may not be recouped downstream because of the
         significantly lower margins of cold cargo freight forwarding.
(144) On the basis of DFDS’ estimates, HSF currently holds a market share of [20-30]%
         on the market for cold cargo freight forwarding between Denmark and the UK,
         when including indirect modes of transportation (i.e. alternative routes through the
         Netherlands or the Eurotunnel).205 This means that the base of sales on which the
         merged entity could potentially enjoy increased margins as a result of an input
         foreclosure strategy are currently not particularly large.
(145) HSF has only used DFDS for short-sea shipping for a relatively small proportion of
         HSF’s entire business. Indeed, as explained by the Parties, in 2019, HSF shipped
         approximately […] tonnes of cargo with DFDS which amounted to only […]% of
         its total demand for short-short sea shipping services.206 In 2020, this volume was
         lower (approximately […] tonnes) and amounted to […]% of the total short-sea
         shipping demand of HSF. 207 HSF’s market share on DFDS’ ferry between
         Denmark and the UK is limited and on the basis of volume amounts only to
         […]%.208
(146) While the results of the market investigation show that DFDS has plans to expand
         its activities in the market for cold cargo freight forwarding, 209 the likelihood that
203 RBB Economics submission on input foreclosure assessment of 20 August 2021; Notifying Party’s reply
    to RFI 8, question 15.
204 See Notifying Party’s reply to RFI 8, question 15. According to DFDS, for the period from January to
    June in 2021, the gross margin for the transport of cold cargo from Denmark to the UK when using
    DFDS’ ferry route on average was approx. […]%. See Notifying Party’s reply to RFI 8, question 8. In
    its earlier submissions, DFDS noted that the downstream gross margin earned by HSF was […]%.RBB
    Economics submission on input foreclosure assessment of 20 August 2021, p. 8.
205 See Table 2 above.
206 Form CO, para. 206 and the following table.
207 Form CO, para. 206 and the following table.
208 Notifying Party’s reply to RFI 8, question 9.
209 See, for example, Form CO, paras. 17-18; 37; 97 and 153. Also, Commission’s analysis of the Parties’
    internal documents shows that DFDS [DFDS’s current business strategy]. See Form CO, annex 30,
    Slide 16.
                                                    32
 ---pagebreak---          the merged entity would be able to attract a sufficient amount of new business to
         replace the profit loss upstream was not confirmed by the market investigation.
(147) First, as already explained, the results of the market investigation indicate that
         alternative means of transportation could constitute an alternative for cold cargo
         freight forwarders between Denmark and the UK to some extent. Indeed, some of
         the freight forwarders responding to the market investigation indicated that they are
         active on this country pair with no or limited use of the DFDS ferry. 210 Therefore,
         given the availability of competing suppliers, in case of a foreclosure strategy,
         freight forwarders would be unlikely to divert all their demand to DFDS’ ferry, as
         some of the volumes would likely be diverted to alternative routes.
(148)    Second, the results of the market investigation also show that due to the presence of
         well-established players on the downstream market, some retaliation possibilities
         may exist post-Transaction. Indeed, as confirmed by the market investigation, the
         two largest freight forwarding customers on the Denmark-UK route represent
         […]% of DFDS’ cold cargo freight forwarding volumes shipped on this country
         pair in 2020. 211 These freight forwarding customers confirmed that they would
         have possible retaliation measures available. 212 The possibility that two of its
         largest cold cargo freight forwarding customers would switch to other means of
         service, in the Commission’s view, limit DFDS’ incentive to engage in foreclosure.
(149) Third, DFDS is currently vertically integrated with respect to ambient cargo freight
         forwarding on the Denmark-UK country-pair and the market investigation has not
         revealed concrete evidence of prior attempts to foreclose downstream competitors
         on this market.213
(150) In light of the above, while potential loss of customers on the upstream market can
         presumably be compensated by attracting customers downstream, the profit
         expected from any foreclosure on the Denmark-UK country-pair would be
         relatively modest in view of the low downstream margins.
(151) In relation to the short-sea shipping operations between Sweden and the UK,
         DFDS’ upstream profit margin amounts to approximately […]%, whereas on the
         Norway-UK route, its upstream profit margin is approximately […]%.214 These
210 Non-confidential minutes of a call with a market participant of 30 June 2021, para. 4. See also non-
    confidential replies of a market participant to follow-up request of information of 25 August 2021,
    question 1a.
211 Notifying Party’s reply to RFI 2, Annex 1. Even when looking at DFDS’10 largest customers on the
    route for both ambient and cold cargo, these two customers are among the largest. See Form CO, table
    “Denmark-UK” on p. 43.
212 Non-confidential minutes of a call with a market participant of 26 August 2021, paras. 20-21; non-
    confidential minutes of a call with a market participant of 26 August 2021, paras. 9-10. See also
    explanation in Section 5.2.3.2. (A.i) above.
213 Even though DFDS submits that it is vertically integrated not only with respect to ambient cargo but
    also cold cargo freight forwarding (see Notifying Party’s reply to RFI 8, question 1), the Commission
    considers that this is not the case with respect to the Denmark-UK country pair. As explained in the
    Form CO, DFDS’ current business in cold cargo freight forwarding is limited to the UK and Ireland. In
    the UK, DFDS’ activities in cold cargo freight forwarding relate only to the domestic market (as
    opposed to cross-border), whereas its presence in Ireland is [information on DFDS’ current business
    strategy]. See Form CO, paras. 153-154 and footnote 72.
214 Notifying Party’s reply to RFI 10, question 1.
                                                     33
 ---pagebreak---          margins are significantly higher than HSF’s margins downstream for cold cargo
         freight forwarding on these country pairs which are approximately […]%.215
(152) As explained above, the higher margin on the upstream market gives DFDS an
         incentive to maximize the utilization rate of its ships. If the merged entity were to
         engage in input foreclosure, it would have no guarantee to win sufficient volumes
         that were lost by competing freight forwarders downstream.216 As a result, an input
         foreclosure strategy would likely result in a loss of some volumes for DFDS on the
         upstream market and these losses upstream may not be recouped downstream
         because of the significantly lower margins for cold cargo freight forwarding.
(153) Second, HSF’s presence on the market for cold cargo freight forwarding between
         Sweden and the UK, and Norway and the UK respectively, is extremely limited:
         the cold cargo transported by HSF on these country pairs amount to […] tonnes on
         the Sweden-UK and […] tonnes on the Norway-UK country pairs, 217 which
         represents a market share of less than [0-5]%.218
(154) This means that the base of sales on which the merged entity could potentially
         enjoy increased margins as a result of an input foreclosure strategy would be
         currently limited, which reduces the incentive of the merged entity to engage in
         such a strategy.
(155) Third, as already explained, DFDS is currently vertically integrated with respect to
         ambient cargo freight forwarding and the market investigation has not revealed
         concrete evidence of prior attempts to foreclose downstream competitors on the
         market for ambient cargo freight forwarding. 219
(156) In light of the above, the Commission considers that the merged entity will likely
         not have an incentive to engage in an input foreclosure strategy post-Transaction on
         the routes between Scandinavia (i.e. Denmark, Sweden and Norway), on the one
         hand, and the British Isles (i.e. the UK), on the other hand.
         (B.ii)     Northern Europe-Baltics
(157) By the same token, even if DFDS had the ability to foreclose competing cold cargo
         freight forwarders active between Germany and Lithuania, it is unlikely that DFDS
         would have the incentive to do so post-Transaction.
215 Notifying Party’s reply to RFI 10, question 1.
216 For instance, some of these volumes could be diverted to alternative routes (e.g., through the
    Netherlands or the Eurotunnel). Besides, in relation to Norway-UK, some of these volumes could
    potentially be also diverted to the other ferry operator (i.e., SeaCargo).
217 Notifying Party’s reply to RFI 10, question 1. DFDS explained that the Target [information on HSF’s
    current business strategy].
218 See Table 2 above and Notifying Party’s reply to RFI 10, question 1.
219 Even though DFDS submits that it is vertically integrated not only with respect to ambient cargo but
    also cold cargo freight forwarding (see Notifying Party’s reply to RFI 8, question 1 and RFI 10, question
    1), the Commission considers that this is not the case with respect to the Sweden-UK and Norway-UK
    country pairs. As explained in the Form CO, DFDS’ current business in cold cargo freight forwarding is
    limited to the UK and Ireland. In the UK, DFDS’ activities in cold cargo freight forwarding relate only
    to the domestic market (as opposed to cross-border), whereas its presence in Ireland is [information on
    DFDS’ current business strategy]. See Form CO, paras. 153-154 and footnote 72.
                                                        34
 ---pagebreak--- (158) First, according to the Parties’ data, the margins upstream for short-sea shipping
         services between Germany and Lithuania (approx. […]%220) are higher than the
         margins downstream for cold cargo freight forwarding on this country pair (approx.
         […]%221).
(159) As explained above, the higher margin on the upstream market gives to DFDS an
         incentive to maximize the utilization rate of its ships. If the merged entity were to
         engage in input foreclosure, it would have no guarantee to win sufficient volumes
         lost by competing freight forwarders downstream, given the existence of a number
         of serious competitors active on the downstream market.222 As a result, an input
         foreclosure strategy would likely result in lost volumes for DFDS on the upstream
         market and these losses upstream would unlikely be recouped downstream because
         of the significantly lower margins for cold cargo freight forwarding.
(160) Second, HSF’s presence on the market for cold cargo freight forwarding between
         Germany and Lithuania is extremely limited: the cold cargo transported by HSF on
         this country pair, from Germany to Lithuania in 2020 corresponds to […] tonne,223
         which represents a market share of less than [0-5]%.224 When including indirect
         modes of transportation, the Parties confirmed that HSF’s market share would
         remain lower than [0-5]%.225
(161) This is consistent with the response received in the course of the market
         investigation. In this respect, one cold cargo freight forwarder explained for
         instance that it does not consider “HSF as an important competitor in the Baltic
         region today”.226
(162) This means that the base of sales on which the merged entity could potentially
         enjoy increased margins as a result of an input foreclosure strategy would be
         limited, which reduces the incentive of the merged entity to engage in such a
         strategy.
(163) Third, DFDS is currently vertically integrated with respect to ambient cargo freight
         forwarding227 and the market investigation has not revealed concrete evidence of
         prior attempts to foreclose downstream competitors on the market for ambient
         cargo freight forwarding. 228
220 Notifying Party’s reply to RFI 10, question 1.
221 Notifying Party’s reply to RFI 10, question 1.
222 Some of these volumes could be diverted to alternative ferry operators (e.g., TT Line), alternative routes
    (e.g., land transportation via Poland) or to alternative freight forwarders with countervailing buyer
    power vis-à-vis DFDS.
223 Response to RFI 3, question 3. In this respect, DFDS explained that given this limited volume, a
    subcontractor was engaged by HSF to actually transport these cold cargo.
224 HSF has [information on HSF’s volumes in a selected route]. (see response to RFI 3, question 3).
225 Notifying Party’s reply to RFI 9, question 2(a).
226 Non-confidential minutes of a call with a market participant of 4 June 2021, para. 14.
227 Form CO, p. 46.
228 Even though DFDS submits that it is vertically integrated not only with respect to ambient cargo but
    also cold cargo freight forwarding (see Notifying Party’s reply to RFI 10, question 1), the Commission
    considers that this is not the case with respect to Germany-Lithuania country pair. As explained in the
    Form CO, DFDS’ current business in cold cargo freight forwarding is limited to the UK and Ireland. In
    the UK, DFDS’ activities in cold freight forwarding relate only to the domestic market (as opposed to
                                                       35
 ---pagebreak--- (164) In light of the above, the Commission considers that the merged entity will likely
        not have an incentive to engage in an input foreclosure strategy post-Transaction on
        the route between Germany and Lithuania.
        (C)        Impact
(165) For trade corridors between both Scandinavia (i.e., Denmark, Sweden and Norway)
        and the UK, on the one hand, and Northern Europe (Germany) and the Baltics
        (Lithuania), on the other hand, any input foreclosure is unlikely to lead to increased
        prices.229
(166) As explained above, HSF’s relatively low market shares on downstream markets,
        together with the retaliation possibilities available to customers and the existence of
        alternative routes for freight forwarders make it unlikely that any input foreclosure
        strategy would lead to increased prices for freight forwarders, shippers and
        ultimately end customers. As a result, any such strategy would be unlikely to
        significantly impede effective competition.
        (D)        Conclusion on input foreclosure
(167) Based on the above considerations and all evidence available to it, the Commission
        concludes that an input foreclosure strategy post-Transaction by the merged entity
        in order to exclude HSF’s competitors purchasing short-sea freight shipping
        services in any of the affected legs of trade is unlikely.
5.2.4. Customer foreclosure
(168) For customer foreclosure to be a concern, it must be the case that the vertical
        merger involves a company which is an important customer with a significant
        degree of market power in the downstream market. If, on the contrary, there is a
        sufficiently large customer base, at present or in the future, that is likely to turn to
        independent suppliers, the Commission is unlikely to raise competition concerns on
        that ground.230
(169) In the case at hand, as explained above, the Parties’ combined market share on each
        of the vertically affected downstream markets for cold cargo freight forwarding are
        always below 30% under any plausible market definition. On the vast majority of
        markets, the Parties’ combined market share is below [10-20]%. The only
        exception is for the country pair Denmark-UK where the Parties’ combined market
        share downstream is [20-30]%.
(170) On the Denmark-UK route, however, HSF’s market share estimate is limited to
        cold cargo only and includes cargo transported by HSF via indirect routes.231
(171) Yet, the cargo transported by HSF via indirect routes (i.e., via ferry from the
        Netherlands or France to the UK, or via road) are not transported on direct ferries
        between Denmark and the UK. When taking into account only volumes transported
    cross-border), whereas its presence in Ireland is [information on DFDS’ current business strategy]. See
    Form CO, paras. 153-154 and footnote 72.
229 Non-Horizontal Merger Guidelines, para. 47.
230 Non-Horizontal Merger Guidelines, para. 61.
231 See para 98.
                                                      36
 ---pagebreak---         by HSF on the downstream market via direct ferries between Denmark and the UK,
        HSF’s market share is equal to [0-5]%.232 According to the information submitted
        by DFDS, in 2020 HSF’s spend on short-sea shipping services in the affected
        market of British Isles/Scandinavia represented less than […]% of DFDS’ short-sea
        shipping revenues in that market.233
(172) In addition, the market investigation has confirmed that the vast majority of ferry
        operators can transport both cold and ambient cargo.234 Therefore, when assessing
        whether the new entity will have the ability to foreclose competitors on the
        upstream market for short-sea shipping services, it is relevant to look at HSF’s
        market on a broader market including both cold and ambient cargo. On such market
        share, HSF’s market share is equal to [0-5]%.235
(173) In light of the above, the Commission considers that the merged entity will lack the
        ability to engage in a customer foreclosure post-Transaction so there is no need to
        examine the incentive of the new entity to engage in a customer foreclosure
        strategy and the impact that such strategy would have on the market.
5.2.5. Access to customer confidential information
(174) According to the Non-Horizontal Merger Guidelines, 236 a vertical merger may give
        the combined entity access to commercially sensitive information regarding the
        activity of downstream rivals. For instance, by becoming a supplier to its
        downstream competitors the combined entity may obtain sensitive information,
        which could allow it to target the customers of competing freight forwarders and
        thereby weaken their position on the market, and make entry and expansion less
        attractive.
(175) During the market investigation, some market participants indicated that, especially
        when transporting cargo to or from the UK, freight forwarders have to provide
        ferry operators with consignment documents that contain sensitive commercial
        information such as the type of cargo they transport, its origin, the name of the
        shipper, 237 its destination, volume and the name of the consignee.238 According to
        these participants, such information could allow the merged entity to identify and
        potentially target the end customers of competing freight forwarders. 239
5.2.5.1. The Notifying Party’s view
(176) DFDS argues that its ferry division receives only limited information from its
        customers, that it cannot and does not track their information, that it always treated
232 Notifying Party’s reply to RFI 8, question 9.
233 Form CO, para. 124.
234 Non-confidential replies to Questionnaire for ferry operators, question 5.
235 See RFI 2, annex 2 (excluding cargo transported via indirect routes).
236 Non-Horizontal Merger Guidelines, para. 78.
237 The shipper is the party that prepares the cargo for transport, typically the seller of the goods. The
    consignee is the party that receives the cargo, typically the buyer. Depending on the arrangements
    between the shipper and consignee, either of them can be the customer of the freight forwarders that
    handles the transport.
238 Non-confidential minutes of a call with a market participant of 4 June 2021, para.12; non-confidential
    minutes of a call with a market participant of 4 June 2021, para. 14.
239 Non-confidential minutes of a call with a market participant of 4 June 2021, paras 13 and 14.
                                                       37
 ---pagebreak---          DFDS’ freight forwarding division at arm’s length and that even from a
         technological perspective, the two divisions cannot share information.
(177) DFDS also notes that it does not carry out customs clearance for customers unless
         they specifically make an agreement with DFDS to do so. There is a number of
         neutral customs clearing agents who can carry out this procedure if they cannot do
         it themselves. 240
(178) Moreover, DFDS submits that the situation will not be affected by the
         Transaction i.e., the concerns are not merger-specific since DFDS is already
         vertically integrated in freight forwarding.
5.2.5.2. The Commission’s view
(179) Market participants confirmed that freight forwarders typically provide ferry
         operators with information on their cargo, including CMR 241 consignment notes,
         etc. for customs purposes. 242 The market investigation also showed that the
         information that has to be communicated is less detailed for cargo transported on
         EU routes that for cargo transported to or from the UK.243
(180) In this respect, the Commission notes that DFDS already has access to this
         information concerning both ambient and cold cargo transported by freight
         forwarders with whom it competes. Therefore, the Transaction will not provide
         DFDS with significant additional competitively strategic information concerning
         HSF’s downstream business (beyond what is already available to DFDS at
         present).
(181) Even if additional volume information might be available post-Transaction, this is
         unlikely to be of great value in determining the price or scope of the activities of
         HSF’s competitors as prices between freight forwarders and end customers are
         individually negotiated and customer specific discounts remain confidential.
(182) In addition, the market investigation also showed that freight forwarders have
         alternatives for the custom clearance of their cargo. For instance, a freight
         forwarder using DFDS’ ferries confirmed that it does not entrust DFDS with the
         custom clearance of its cargo.244 This market participant sub-contracts the custom
         clearance of its cargo to a third party but it confirmed that it could also do it in-
         house.
(183) During the course of the merger investigation, DFDS also confirmed that it will not
         be technically able to share sensitive information between its freight forwarding
         arm (including both DFDS Logistics and HSF) and its short-sea shipping arm. 245
(184) Finally, the market investigation confirmed that DFDS would have a strong
         incentive to maintain confidentiality of the information that its ferry division
240 See DFDS’ submission “Note on customs handling for freight forwarders using DFDS DK/UK/DK ro-
    ro ferry services” of 29 August 2021, p. 1.
241 Carriage of Merchandise by Road.
242 Questionnaire for freight forwarders, question 36, non-confidential responses.
243 Non-confidential minutes of a call with a market participant of 26 August 2021.
244 Non-confidential minutes of a call with a market participant of 26 August 2021.
245 Notifying Party’s reply to RFI 10, question 6.
                                                      38
 ---pagebreak---        receives in order to remain a credible supplier. As the Parties explained, if DFDS
       were to monitor the content of trailers, this would trigger a concern with
       customers.246 This is in turn could be harmful for DFDS because the market
       investigation confirmed that reputation is one of the main parameters when
       competing on the freight forwarding market.247 Likewise, the market investigation
       confirmed the Parties’ claim that significant freight forwarders would have the
       possibility to retaliate if DFDS were to use sensitive information on their activities
       to favour its logistics division. 248 This is also consistent with the results of the
       market investigation which has not elicited any element suggesting that DFDS
       would have used this kind of information in the past to favour its logistics division
       or target the customers of competing freight forwarders.
(185) On balance, the Commission concludes that the confidentiality issues post-
       Transaction do not lead to serious doubts as to the compatibility of the Transaction
       with the internal market.
6.     CONCLUSION
(186) 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
                                                               Executive Vice-President
246 Form CO, para. 217.
247 Non-confidential replies to Questionnaire for freight forwarders, question 22.
248 Non-confidential minutes of a call with a market participant on 26 August 2021.
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