CELEX: 32010M5902
Language: en
Date: 2010-10-26 00:00:00
Title: Commission Decision of 26/10/2010 declaring a concentration to be compatible with the common market (Case No COMP/M.5902 - LWM / RWI / F&F) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

[pic] |EUROPEAN COMMISSION

 | |Brussels, 26/10/2010

                                        C(2010) 7567

                                        To the notifying parties

Dear Sir/Madam,

Subject: Case No COMP/M.5902 – LWM/ RWI/ F&F
Notification of 21 September 2010 pursuant to Article 4 of Council Regulation No 139/2004[1]

1. On  21/09/2010, the Commission received a notification of  a  proposed  concentration  pursuant  to  Article  4  of  Council  Regulation  (EC)
   139/2004[2] ("the Merger Regulation")  by which Lamb-Weston/Meijer V.O.F. ("LWM", the Netherlands) and Raiffeisen Ware  Austria  International
   Holding GmbH ("RWI", Austria), controlled by RWA Raiffeisen Ware Austria AG ("RWA", Austria)[3], acquire within the meaning of Article 3(1)(b)
   of the Merger Regulation joint control over Frisch & Frost Nahrungsmittel-Gesellschaft m.b.H. ("F&F", Austria), by way of purchase of  shares.
   F&F is currently controlled by RWA.

    I.      THE PARTIES AND THE OPERATION

2. LWM focuses on the production and distribution of deep-frozen potato products and appetizers and is mainly active in the Netherlands,  France,
   Germany, the United Kingdom, Spain and Italy.  LWM's customers are retailers, distributors and companies in the food services sector, such  as
   caterers.

3. RWI is a holding company with no business activity of its own, ultimately  jointly  controlled  by  BayWa/RWA  group.  BayWa/RWA  group,  that
   currently controls F&F through RWI, is an international trading and  services  organization  active  in  the  wholesale  and  retail  sale  of
   agricultural products and commodities as well as consumer products mainly in Austria, Hungary,  Germany,  Slovakia,  Slovenia  and  the  Czech
   Republic.

4. F&F is active in the manufacture and trade of deep-frozen potato and dough products, in particular fries, potato croquettes and  hash  browns.
   F&F supplies retailers, distributors as well as the food service sector in Austria and also has a limited presence in some  Member  States  in
   Central and South-Eastern Europe.

5. The proposed operation concerns the acquisition by LWM of approximately [70-80%] of the share capital in F&F. LWM, RWI  and  F&F  shall  enter
   into a Shareholders Agreement relating to F&F with a view of governing the terms of the investment and their future co-operation  in  relation
   to F&F. Upon completion of the transaction, LWM will hold [70-80%] of the shares and RWI will  hold  the  remaining  [20-30%].  The  corporate
   governance rules of the joint-venture will confer joint control by both parents over F&F. In particular, decisions regarding […][4].

6. The proposed transaction therefore constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

    II.     UNION DIMENSION

7. The undertakings concerned have a combined aggregate world-wide turnover for 2009 of more than EUR 5 000 million[5] (LWM: EUR 9  646  million,
   RWI: EUR 7 203 million, F&F EUR 68 million). Each of at least two of them has EU-wide turnover for 2009 in excess of EUR 250 million (LWM: EUR
   […] million, RWI: EUR […] million) without achieving more than two-thirds of their EU-wide turnover within one and the same Member State.

8. The concentration therefore has an EU dimension within the meaning of Article 1(2) of the Merger Regulation.

    III.    COMPETITIVE ASSESSMENT

9. The proposed concentration concerns the production and distribution of frozen and chilled potato products, frozen vegetable products  as  well
   as sweet and savoury dough products for the food sector, fast food chains and the retail sector.

10. The activities of LWM and F&F overlap in the area of production and sale of deep-frozen potato products dedicated to both the  retail  sector
   and the food service sector. [6]

11. The chart below illustrates the potential segmentations of the market for the supply of deep-frozen potato products.

                 Deep-frozen potato products

[pic]

12. In the retail channel, the proposed transaction leads to horizontally affected markets in Austria only.  In  the  food  service  sector,  the
   proposed transaction gives rise to affected markets both at the EEA and national levels with significant combined market shares in Austria and
   in Italy.

   A. Relevant product market

13. The activities of LWM and F&F overlap in the area of deep-frozen potato products. The category of deep-frozen  potato  products  comprises  a
   number of different products and product varieties which could be divided broadly into French fries  and  specialities.  Specialities  usually
   have different shapes (e.g. cubes or twisters), special coatings and/or structures and include, inter alia, wedges, croquettes,  hash  browns,
   cubes, potato slices and roast potatoes.

14. In past decisions in the food sector, the Commission distinguished the production and sale of food products dedicated to  the  retail  sector
   from the production and sale of food products dedicated to the food service sector.[7]  The  notifying  parties  (hereinafter  "the  Parties")
   submit that the Commission should not depart from its past decisional  practice  given  that  the  food  service  distribution  channels  have
   important features which distinguish them from the retail distribution channels.

15. The market investigation unanimously confirmed the parties' view and the previous Commission  market  delineation.  The  main  arguments  put
   forward by respondents to distinguish the production and sales to the retail sector from the production and sales to the food  service  sector
   are the different customers and their needs (retailers for the retail sector and wholesalers or end users for the  food  service  sector),  as
   well as different packaging (including size), the quality, and the prices of the products. Suppliers have usually a separate sales  force  and
   different brands for the retail and the food service sector.

16. In the Orkla/Chips decision[8], the Commission concluded that the category of frozen potato  products  included  all  side  dishes  based  on
   potatoes without further segmentation. However, the Commission stressed the fact that its conclusions were only relevant for the  purposes  of
   the case as the consumption habits for frozen potato products appeared to vary between Member States. In the following  paragraphs,  potential
   markets are discussed separately for retail and food service sectors.

     1. The retail sector

17. The Parties submit that in the retail channel the relevant market for deep-frozen potato products should include both French  fries  and  the
   different specialities. The Parties explain that from the demand side, retailers  usually  stock  a  range  of  deep-frozen  potato  products,
   including not only French fries but also specialities, which compete for the same shelf space. From the point of view of end-consumers, French
   fries would basically fulfil the same function as other deep-frozen potato products, i.e. being a side dish. As regards the supply  side,  the
   majority of companies producing deep-frozen potato products would offer a wide range of  these  products  including  French  fries  and  other
   specialities. The Parties also state that French fries and other deep-frozen potato products involve an almost identical or at the very  least
   very similar production process, which implies that producers of French fries can easily switch to the production of other deep-frozen  potato
   products and vice versa.

18. The arguments put forward by the Parties were not clearly supported by the market investigation. The vast  majority  of  retailers  indicated
   that French fries and specialities are not substitutable products in particular  due  to  price  difference  (specialities  tend  to  be  more
   expensive due  to  the  coating  applied  to  the  product)  and  customers'  preferences.  Despite  confirming  some  degree  of  supply-side
   substitutability, the majority of respondents did not confirm the existence of an overall market for  deep-frozen  potato  products  including
   French fries and specialities.

19. In past decisions, the Commission also considered whether frozen and chilled foods belong to the same product market[9] and either  left  the
   product market definition open or indicated that, though not being part of the same market, chilled foods exercise some competitive constraint
   on frozen food and vice versa[10]. In the present case, the Parties submit that it is not appropriate to include deep-frozen  potato  products
   in the same product market, although there may be a certain degree of competitive constraint exercised  by  chilled  products.  Moreover  they
   explain that there is no overlap between the Parties as LWM does not sell chilled potato products. Therefore for the purpose  of  the  present
   case, the competitive assessment will be based on the narrowest market definition proposed by the Parties (i.e. supply of  deep-frozen  potato
   products).

20. In line with the Commission's past decisional practice[11], the Parties further explain that private label and  branded  products  should  be
   included in the same market. In the Orkla/Chips decision[12], the Commission concluded that frozen potato  products  are  close  to  commodity
   products for which price is a more important competitive factor than brand.

21. According to the Parties, the level of product differentiation is comparatively low. The Parties also argue that all  major  retailers  offer
   private label deep-frozen potato products and there would be no significant differences as regards the quality of own label and branded  deep-
   frozen potato products. Though the price range for private label products is typically somewhat  lower  than  for  branded  products[13],  the
   Parties note that private label products effectively restrict the price at which branded products can be sold. This is due to  the  fact  that
   there is a ceiling on how much more customers are willing to pay for a branded product  compared  to  private  label.  This  effect  would  be
   particularly strong for a commodity product such as deep-frozen potato product. Private label products would account for a  significant  share
   of sales of deep-frozen potato products to the retail  sector.  The  Parties  argue  that  end-consumers  increasingly  switch  to  own  label
   products[14].

22. The vast majority of the retailers responding to the market investigation  considered  private-label  and  branded  deep-frozen  potatoes  as
   similar products in terms of quality and packaging. In the event of a small and permanent price increase, these respondents almost unanimously
   indicated that end-customers would switch from producer branded products to private label. According to these respondents,  demand is   mainly
   driven by price as there are no specific differences between private label and branded products.

Conclusion

23. For the purpose of the present transaction, the question whether (i) deep-frozen potato products for the retail sector  should  include  both
   French fries and the different specialities and (ii) private label and branded products should be included in the same product market  can  be
   left open as under any alternative market definition the proposed transaction does not give rise to any competition concerns.

     2. The food service sector

24. In previous decisions, the Commission concluded that the food service sector  comprises  the  supply  to  out-of-home  eating  (e.g.  hotels,
   restaurants, fast-foods and pizzeria outlets, sandwich shops) and institutional catering (factory  and  office  canteens,  hospitals,  schools
   etc.)[15]. The Parties propose to distinguish between the supply of fast food chains and the supply of the food service sector in general.  In
   this respect, the Parties supply two groups of customers in the food service sector: (i) fast food chains and  (ii)  wholesalers  and  Cash  &
   Carry operators. With the exception of the supply to  fast  food  chains,  the  Parties  do  not  sell  directly  to  out-of-home  eating  and
   institutional catering outlets. Rather, the out-of-home eating  and  institutional  catering  sectors  are  supplied  by  means  of  sales  to
   wholesalers and Cash & Carry operators which in turn sell the products to out-of-home and institutional facilities.

25. According to the Parties, the supply of deep-frozen potato products to fast food chains would have important features  which  distinguish  it
   from the supply of other out-of-home and institutional catering outlets. In particular, products for fast food chains would need to meet  very
   high and strict quality requirements as regards their preparation and size. For example, French fries supplied to fast  food  chains  need  to
   have a certain length and to be fried in certain oils. Moreover, some fast food chains also require their  French  fries  to  have  a  special
   coating. These requirements would be satisfied by a limited number of producers.

26. The market investigation broadly confirmed the definition adopted  by  the  Commission  in  previous  decisions  (i.e.  food  service  sector
   differentiated into the supply to out-of-home eating and institutional catering). However, several respondents  to  the  market  investigation
   agree with the argument put forward by the Parties that deep-frozen potato products in the food  service  sector  are  supplied  to  different
   groups of customers such as (i) fast food chains and (ii) wholesalers and Cash & Carry operators.  In  particular,  they  confirmed  that  the
   supply of fast food chains differs from the supply of other out-of-home eating and  institutional  catering  outlet  due  to  the  higher  and
   stricter quality requirements as regards the preparation (different color and material as well as consistency) and size  notably  targeted  at
   facilitating the high speed of operation in the restaurants.

27. While in the retail sector the Parties consider that a further segmentation of the product category of deep-frozen potato  products  may  not
   be considered appropriate due to demand-side and supply-side substitutability, they submit that this may not be the case in the  food  service
   sector. The Parties indeed argue that the substitutability between French fries and other frozen potato products from the demand side is  more
   limited in the food-service sector. This would apply in particular to fast food chains.

28. According to the Parties, for fast food chains, French fries would be a "must have" product as they generate a substantial  amount  of  their
   turnover with the sale of French fries. While fast food chains may also offer other potato products, these  rather  supplement  their  product
   range and are not considered as a necessity. Most fast food chains sell other deep-frozen potato products only  as  limited  time  offers.  As
   regards other food service customers, the degree of demand side substitutability would be higher than with fast food chains. As in the  retail
   sector, wholesalers and Cash & Carry operators usually stock a range of deep-frozen potato products. Thus, they do  not  limit  themselves  to
   French fries but also offer different specialities in their portfolio. However, French fries would still remain a must stock item as a  number
   of dishes would be traditionally served with French fries in restaurants and canteens.

29. The market investigation provided indications that French fries should be considered a separate market; however it is not conclusive on  this
   point. The majority of the respondents indicated that French fries (in particular for fast-food chains) are a distinct market  on  the  ground
   that it requires a higher quality potato and more careful processing. Some respondents indicated that there  are  significant  differences  in
   price between French fries and specialities as specialities require more manufacturing processes. Nevertheless, several respondents  suggested
   French-fries to be part of an overall deep-frozen potato market.

30. For the purpose of the assessment of  the  present  transaction,  the  question  whether  (i)  the  supply  to  fast-food  chains  should  be
   distinguished from the supply to other out-of-home and institutional catering outlets and (ii) French fries should be  considered  a  separate
   market in the food sector can be left open, given that the proposed transaction does not raise any competition concerns under any  alternative
   market definition.

   B. Relevant geographic market

     1. The retail sector

31. In past decisions, the Commission considered the relevant geographic market definition  for  food  products  to  be  national  based  on  the
   following considerations: differences as regards the tastes of consumers and their consumption pattern, national sales channels,  negotiations
   of supply contracts on national level, pricing on a national level, national distribution and logistics, different brands in different  Member
   States and a considerable degree of divergence in the shares of the relevant suppliers in the different Member States.[16]

32. The Parties submit however that the market is wider than national, possibly EEA-wide,  and  should  at  least  be  considered  as  comprising
   neighbouring Member States, e.g Austria and Germany or the Benelux countries and France.

33. The Parties point out that over the past few years there would have been a significant trend towards  harmonization  and  Europeanization  as
   regard the supply of deep-frozen potato products to the retail sector: large retailers have broadened the range of  their  activities  from  a
   national to a pan-European scope and have centralized sourcing departments; there is a process of harmonization as regards the standards  that
   apply to the composition, production and labelling of consumer foods at EU-level; there are no or only very limited  differences  in  consumer
   tastes and suppliers sell the same products, i.e. without a change in the recipe, in a number of Member States; a number of suppliers of deep-
   frozen potato products are established on a pan-European basis[17] and  sell  under  the  same  brand  name  in  several  European  countries;
   eventually products are sold from a limited number of production facilities throughout the whole EEA or at least in a number of Member States.

     2. The food service sector

34. As regards the food service sector, the Parties submit that the relevant geographic market is wider  than  national,  possibly  EEA-wide  and
   should at least comprise neighbouring Member States such as Austria and Germany.  The  Parties  argue  the  following:  the  most  significant
   customers (wholesalers and Cash & Carry operators) are active in several Member States  and  large  international  fast  food  chains  have  a
   centralised sourcing strategy; there are no significant differences in tastes as regards deep-frozen potato products in the  different  Member
   States and the products supplied are therefore the same. A number of suppliers, including LWM, are active  on  a  pan-European  basis  and  an
   increasing number of suppliers have a centralised sales force.

35. Though the Commission has confirmed in the Unilever/Bestfoods decision tendencies towards a  widening  in  the  scope  of  the  food  service
   markets in the EEA, it concluded in several occasions that both from a demand side and s supply-side perspective food service  markets  remain
   predominantly national.[18] This assessment was mainly based on differences as regards the tastes of consumers and their consumption patterns,
   national sales channels, negotiations of supply contracts on national level, national distribution  and  logistics  and  different  brands  in
   different Member States.

     3. Conclusion

36. The market investigation confirmed a growing trend towards harmonization and Europeanization as  regard  the  supply  of  deep-frozen  potato
   products in the retail sector and the food service sector.  However,  the  majority  of  customers  and  competitors  pointed  to  significant
   differences among Member States, notably as regards pricing, consumers' consumption habits, brands, organisation of sales and  shares  of  the
   relevant suppliers.

37. For the purpose of the assessment of the present transaction, the exact definition of the relevant geographic market  for  food  products  in
   the retail sector and in the food service sector can be left open, given that the proposed transaction does not raise any competition concerns
   under any alternative market definition.

   C. Assessment

38. When considering all possible sub-segmentations of the overall market for the  production  and  sale  of  deep-frozen  potato  products,  the
   proposed transaction would result in several affected markets both at the EEA and national level, especially with  regard  to  the  supply  of
   French fries to fast-food chains. These are considered separately below. It can however already be noted that the market investigation carried
   out by the Commission has however showed that the proposed transaction would not raise competition concerns  on  any  market  for  deep-frozen
   potato products or any alternative sub-segmentation thereof. The vast majority of respondents to the market  investigation,  both  competitors
   and customers, have not expressed any concerns as regards the competitive effects of the proposed transaction; on the contrary some  customers
   indicated that they see this transaction as a positive event as the Parties will be  able  to  offer  post-merger  an  enlarged  portfolio  of
   products.[19]

     1. The retail sector

39. At the EEA level, the combined market shares of LWM and F&F do not give rise  to  any  affected  markets  on  any  of  the  potential  retail
   market.[20]

40. At the national level[21], the potential market for the supply of deep-frozen potato products to the retail sector in  Austria[22]  would  be
   affected, with combined market shares of at most [20-30%]% in value and [30-40%] in volume with limited increments brought by LWM  (below  [0-
   5%]% and [5-10%] in value and volume respectively). There is no overlap in a potential segment of deep-frozen  French  fries  for  the  retail
   sector in Austria as LWM has no sales of French fries to the retail sector in that Member State.

41. Considering separate product markets for branded and private labels in Austria, the combined share of the Parties as regards  the  supply  of
   private label deep-frozen potato products and specialities to the retail sector would be at most [50-60%]  in value  and  [40-50%]  in  volume
   although the increments brought by LWM remain rather low (below [0-5%] in value  and  volume  respectively).  In  the  categories  of  branded
   products only, there would be no affected market in Austria.[23]

|Product Market in Austria    |Market share in value (2009)             |Market share in volume (2009)           |
|                                                                                                                |
|deep-frozen potato products  |[0-5%]     |[10-20%]   |[20-30%]         |[0-5%]     |[30-40%]   |[30-40%]        |
|deep-frozen potato           |[0-5%]     |[10-20%]   |[10-20%]         |[0-5%]     |[20-30%]   |[20-30%]        |
|specialities                 |           |           |                 |           |           |                |
|Private labels                                                                                                  |
|deep-frozen potato products  |[0-5%]     |[40-50%]   |[40-50%]         |[0-5%]     |[40-50%]   |[40-50%]        |
|deep-frozen potato           |[0-5%]     |[50-60%]   |[50-60%]         |[0-5%]     |[40-50%]   |[40-50%]        |
|specialities                 |           |           |                 |           |           |                |

42. The transaction does not significantly change the market structure in the retail channel in Austria as the market share of LWM in  the  deep-
   frozen potato products, or any potential sub-segments, is low (in any case below [0-5%]). No retail customer active in Austria  has  expressed
   any concerns as regards the competitive effects of the proposed transaction and a significant number have attributed the absence of impact  in
   Austria to the low presence of LWM in the country.

43. Furthermore, the respondents to the market investigation confirmed that LWM and F&F will  not  be  able  to  exercise  market  power  in  the
   Austrian market for the following  reasons: (i) the presence of a number of  well-established  pan-European  competitors,  such  as  Iglo  and
   McCain, which have higher market shares than the Parties (in the supply of deep-frozen potato products Iglo has a  [30-40%]  market  share  in
   value and McCain [20-30%] in value; in the supply of deep-frozen potato specialities Iglo has a [30-40%] market share in value and McCain [20-
   30%] in value) and more generally the important number of alternative suppliers on the market[24] and (ii) the low level  of  switching  costs
   for customers.

44. As regards specifically private label products, LWM has only very limited sales in Austria and the market share of F&F in 2009 accounted  for
   […][25].

45. The market investigation confirmed that the retailers selling private  labels  do  not  consider  that  the  transaction  will  create  anti-
   competitive effects. Besides, several of respondents, whether retailers or competitors, have indicated that an important number  of  suppliers
   are active on the market, notably 11er, AVIKO, Agrafrost and Wernsing.

     2. The food service sector

46. In the food service sector, the transaction would lead to a number of affected markets both at the EEA level and at the  national  level.  As
   an introductory remark to the assessment of the impact of the transaction in the food service sector, it has to be underlined that no customer
   active in the food service sector has expressed any concerns as regards as regards the competitive effects of the proposed transaction.

a) Affected markets at the EEA level

47. Considering an EEA wide market, and considering the narrowest possible product market  definitions,  8  markets  would  be  affected  by  the
   transaction in the supply of deep-frozen potato products to the food service sector with combined market shares ranging between  [20-30%]  and
   [30-40%] in value. Increments brought by the transaction in these markets would be rather small (at most [5-10%] in value).

48. Contrary to LWM that is active as regards the supply of deep-frozen potato specialities to fast food chains in the EEA, F&F  does  not  offer
   specialities to fast food chains on a regular  basis  and  only  occasionally  supplies  deep-frozen  potato  specialities  for  campaigns  or
   promotions. In 2009, F&F did not have any sales of deep-frozen specialities to fast-foods in the EEA.

|Product Market in the EEA            |Market share in value (2009)               |Market share in volume (2009)             |
|                                                                                                                             |
|deep-frozen potato products          |[20-30%]    |[0-5%]      |[20-30%]          |[20-30%]    |[0-5%]     |[20-30%]          |
|deep-frozen French fries             |[20-30%]    |[0-5%]      |[20-30%]          |[20-30%]    |[0-5%]     |[20-30%]          |
|deep-frozen potato specialities      |[30-40%]    |[0-5%]      |[30-40%]          |[30-40%]    |[0-5%]     |[30-40%]          |
|Supply to fast-food chains[26]                                                                                               |
|deep-frozen potato products          |[20-30%]    |[5-10%]     |[30-40%]          |[20-30%]    |[5-10%]    |[30-40%]          |
|deep-frozen French fries             |[20-30%]    |[5-10%]     |[20-30%]          |[20-30%]    |[5-10%]    |[20-30%]          |
|Supply to the food service sector (excluding fast-food chains)                                                               |
|deep-frozen potato products          |[20-30%]    |[0-5%]      |[20-30%]          |[20-30%]    |[0-5%]     |[20-30%]          |
|deep-frozen French fries             |[20-30%]    |[0-5%]      |[20-30%]          |[20-30%]    |[0-5%]     |[20-30%]          |
|deep-frozen potato specialities      |[20-30%]    |[0-5%]      |[20-30%]          |[10-20%]    |[0-5%]     |[20-30%]          |

49. The market investigation confirmed that post-transaction it is unlikely that LWM and F&F will be able to exercise market power on the  supply
   of deep-frozen potato products or any sub-segmented markets at the EEA level for a number of reasons that apply both for the supply  to  fast-
   food chains and the supply to the food service sector (excluding fast-food chains).

50. First, there are several well-established competitors active in the supply  of  deep-frozen  potato  products  to  the  food-sector,  notably
   McCain, AVIKO, Farm Frites, PinguinLutosa, and Agrafrost. McCain is the strongest supplier with a market share of [30-40%]  in  value  on  the
   market for the supply of deep-frozen potato products for the food service sector as a whole in the EEA. Post-merger McCain will remain  market
   leader in all the potential markets described in the table above except in the market for the supply of deep-frozen French fries to  the  food
   service sector (excluding fast food) where LWM is already market leader (and F&F has only a [0-5%] market share in value). McCain  is  notably
   by far the strongest supplier of potato products to fast-food chains in the EEA with a [40-50%] market share in value.

51. Secondly, the vast majority of competitors have confirmed the Parties' submission that barriers to entry are  limited  by  indicating  either
   that there are no barriers to entry or that they mainly consist in the establishment of long-term relationships with customers.

52. Thirdly, the vast majority of competitors have indicated that they have lost and/or won customers in the food service sector over the last 2-
   3 years which shows that the market is dynamic.

53. As regards specifically the supply to fast-food chains  and  in  particular  the  supply  of  French  fries  (as  there  is  no  overlap  for
   specialities), the number of customers is limited and in particular [...] customers [...] account for the vast majority of sales.  [...].  The
   market investigation [...] has confirmed that fast-food chains pursue a multi-sourcing strategy and are able to switch their  suppliers.  This
   is illustrated by the fact that [...].[27]

54. Finally, as regards the markets for the supply to the food service sector excluding fast-foods, the increments brought by F&F are  negligible
   under all possible market definitions ([0-5%] at most in value). As a result, the proposed  transaction  will  not  significantly  change  the
   market structure.

b) Affected markets at national level

55. Considering national-wide markets and the narrowest possible product market definitions, the proposed transaction would result  in  a  number
   of affected markets with in some cases significant combined market shares in Austria and in Italy. This is the case notably for the supply  of
   deep-frozen potato products to the food service channel and possible narrower markets based on 2009 figures. In addition, a number of  markets
   for the supply of deep-frozen potato products to the food service would be affected in Bulgaria, Germany, Hungary and  Romania,  with  however
   relatively low markets shares and/or small increments.[28]

Austria

56. In Austria, the combined market shares of the Parties based on 2009 figures would be significant in a number  of  markets  (between  [20-30%]
   and [80-90%] in value), in particular in the supply to fast-food chains, with the two highest combined markets shares being in the  supply  of
   deep-frozen potato products for fast-food chains ([80-90%] in value, increment of [30-40%] in value) and  the  supply  of  deep-frozen  French
   fries for fast-food chains ([80-90%] in value, increment of approximately [10-20%] in value).

|Product Market in AUSTRIA            |Market share in value (2009)               |Market share in volume (2009)             |
|                                                                                                                             |
|deep-frozen potato products          |[10-20%]    |[30-40%]    |[50-60%]          |[10-20%]    |[30-40%]    |[50-60%]         |
|deep-frozen French fries             |[10-20%]    |[40-50%]    |[50-60%]          |[10-20%]    |[40-50%]    |[50-60%]         |
|deep-frozen potato specialities      |[20-30%]    |[20-30%]    |[50-60%]          |[30-40%]    |[10-20%]    |[50-60%]         |
|Supply to fast-food chains[29]                                                                                               |
|deep-frozen potato products          |[30-40%]    |[50-60%]    |[80-90%]          |[20-30%]    |[50-60%]    |[80-90%]         |
|deep-frozen French fries             |[10-20%]    |[60-70%]    |[80-90%]          |[10-20%]    |[60-70%]    |[80-90%]         |
|Supply to the food service sector (excluding fast-food chains)                                                               |
|deep-frozen potato products          |[0-5%]      |[20-30%]    |[30-40%]          |[5-10%]     |[20-30%]    |[20-30%]         |
|deep-frozen French fries             |[0-5%]      |[20-30%]    |[20-30%]          |[0-5%]      |[20-30%]    |[20-30%]         |
|deep-frozen potato specialities      |[0-5%]      |[30-40%]    |[30-40%]          |[5-10%]     |[20-30%]    |[30-40%]         |

57. As regards the supply to the food sector as whole, the Parties combined market share in value in 2009  is  [50-60%]  for  deep-frozen  potato
   products, [50-60%] for deep-frozen French fries and [50-60%] for deep-frozen potato  specialties.  Post-merger,  alternative  well-established
   competitors will remain active in all three sub-segmented markets such as 11er ([10-20%] in deep-frozen potato  products,  [10-20%]  in  deep-
   frozen French fries and [10-20%] in deep-frozen potato specialties, Farm Frites ([5-10%] in deep-frozen  potato  products,  [5-10%]  in  deep-
   frozen French fries and [5-10%] in deep-frozen potato specialities) and McCain ([5-10%] in deep-frozen products, [0-5%] in deep-frozen  French
   fries and [10-20%] in deep-frozen potato specialities).

58. As regards the supply to fast-food chains, the Parties combined market share in value in 2009 is [80-90%]  for  deep-frozen  potato  products
   and [80-90%] for deep-frozen French fries.

59.  The high market shares of the Parties in 2009 in Austria (and in Italy as indicated below) result from the sales  of  the  Parties  to  […],
   namely […], which account for a large share of total demand of deep-frozen potato products for fast-food chains in Austria (as well  in  Italy
   and all other Member States). [30]

60. However, the market shares of suppliers as regards sales to fast-food chains may vary significantly depending on  their  ability  to  win  or
   renew contracts with customers and the duration of these contracts. The volatility of market shares as regards the supply to fast-food  chains
   can be illustrated by the fact that […][31].

61. The limited duration of contracts with fast-food chains (from one up to three years) also clearly indicates that customers do  not  encounter
   difficulties in switching suppliers. […]

62. As regards the supply to the food service sector (excluding fast-food chains), the Parties combined market share in value  in  2009  is  [30-
   40%] for deep-frozen potato products, [20-30%] for deep-frozen French fries and [30-40%]  for  deep-frozen  potato  specialties.  Post-merger,
   several well-established competitors will remain active in the market such as 11er ([20-30%] in deep-frozen potato products, [20-30%] in deep-
   frozen French fries and [20-30%] in deep-frozen potato specialties), Farm Frites ([10-20%] in deep-frozen potato products, [10-20%]  in  deep-
   frozen French fries and [10-20%] in deep-frozen potato specialities) and McCain ([10-20%] in  deep-frozen  products,  [5-10%]  in  deep-frozen
   French fries and [10-20%] in deep-frozen potato specialities).  Further, LWM's market shares are limited in all the potential markets  ([0-5%]
   in deep-frozen potato products, [0-5%] in deep-frozen French fries  and  [0-5%]  in  deep-frozen  specialities)  and  therefore  the  proposed
   transaction will not significantly affect the market structure.

63.  The market investigation has confirmed that the customers in the  food  service  sector  in  Austria  (whether  fast-food  chains  or  other
   customers) consider that there is a sufficient number of alternative suppliers active on the market as indicated above. With regard the supply
   to fast-food chains, one customer even underlined that "there is a lot of capacity in Europe". Furthermore, the vast majority  of  competitors
   active in both supply to fast-food chains and other customers have confirmed the Parties' submission that barriers to  entry  are  limited  by
   indicating either that there are no barriers to entry or that they mainly  consist  in  the  establishment  of  long-term  relationships  with
   customers.

Italy

64. In Italy, the merged entity would post-transaction hold market shares between [10-20%] and [50-60%] in value. In particular in the supply  to
   fast-food chains, the highest market share is in the supply of deep-frozen French fries for fast-food chains ([50-60%] in value, increment  of
   [0-5%] in value).

|Product Market in ITALY              |Market share in value (2009)               |Market share in volume (2009)             |
|                                                                                                                             |
|deep-frozen potato products          |[10-20%]    |[10-20%]    |[20-30%]          |[10-20%]    |[5-10%]     |[20-30%]         |
|deep-frozen French fries             |[10-20%]    |[10-20%]    |[30-40%]          |[10-20%]    |[10-20%]    |[20-30%]         |
|deep-frozen potato specialities      |[10-20%]    |[0-5%]      |[10-20%]          |[10-20%]    |[0-5%]      |[10-20%]         |
|Supply to fast-food chains[32]                                                                                               |
|deep-frozen potato products          |[10-20%]    |[30-40%]    |[40-50%]          |[10-20%]    |[30-40%]    |[40-50%]         |
|deep-frozen French fries             |[0-5%]      |[50-60%]    |[50-60%]          |[0-5%]      |[50-60%]    |[50-60%]         |
|Supply to the food service sector (excluding fast-food chains)                                                               |
|deep-frozen potato products          |[10-20%]    |[0-5%]      |[10-20%]          |[10-20%]    |[0-5%]      |[10-20%]         |
|deep-frozen French fries             |[10-20%]    |[0-5%]      |[10-20%]          |[10-20%]    |[0-5%]      |[10-20%]         |

65. As regards the supply to the food service as whole, the Parties combined market share in value in 2009 is  [20-30%]  for  deep-frozen  potato
   products, [30-40%] for deep-frozen French fries and [10-20%] for deep-frozen potato  specialties.  Post-merger,  alternative  well-established
   competitors will remain active in all three segmented markets such as McCain ([30-40%] in deep-frozen potato products, [30-40%] in deep-frozen
   French fries and [30-40%] in deep-frozen potato specialties), Aviko ([5-10%] in deep-frozen potato products, [10-20%]  in  deep-frozen  French
   fries and [0-5%] in deep-frozen potato specialities) and Farm Frites ([0-5%] in deep-frozen products, [0-5%] in deep-frozen French  fries  and
   [0-5%] in deep-frozen potato specialities).

66. As regards the supply to fast-food chains, the Parties combined market share in value in 2009 is [40-50%] for  deep-frozen  potato  products,
   [50-60%] for deep-frozen French fries. […][33]

67. However, the Parties will still face competitive pressure of significant competitors, notably McCain which has approximately [20-30%]  market
   share in value in the supply of deep-frozen potatoes to fast-food chains and in the potential market for deep-frozen French fries to fast-food
   chains.

68. In addition, the increment brought by LWM is de minimis ([0-5%] in value) while there is no overlap between the Parties in any case  for  the
   supply of specialities to fast-food chains.

69. As regards the supply to the food service sector (excluding fast-food), the Parties combined market share in value in 2009  is  [10-20%]  for
   deep-frozen potato products, and [10-20%] for deep-frozen French fries. F&F's market shares are negligible in  both  sub-segments  ([0-5%]  in
   value) and therefore the proposed transaction will not significantly affect the market structure. Mc Cain will  continue  to  be  by  far  the
   market leader with approximately [30-40%] market share in value in the supply of deep-frozen potatoes and a [40-50%] market share in value  in
   the supply of deep-frozen French fries.

70. The market investigation has confirmed that the customers in the food service sector in Italy (whether fast-food chains or  other  customers)
   consider that there is a sufficient number of alternative suppliers  active  on  the  market  as  indicated  above.  Furthermore,  as  regards
   specifically Italy the vast majority of competitors have confirmed the Parties' submission that barriers to entry are  limited  by  indicating
   either that there are no barriers to entry or that they mainly consist in the establishment of long-term relationships with customers.

Hungary, Bulgaria, Romania, Germany and the Czech Republic

71. A number of other national markets for the supply of deep-frozen potato products to the  food  service  would  be  affected  in  addition  to
   Austria and Italy: Bulgaria, Germany, Hungary, Romania and the Czech Republic, with however relatively low  markets  shares  and/or  small  or
   minimal increments.

|Product Market                   |Market share in value (2009)                 |Market share in volume (2009)                |
|                                                                                                                             |
|deep-frozen potato specialities  |[5-10%]       |[0-5%]        |[10-20%]        |[10-20%]    |[0-5%]        |[10-20%]         |
|for the food sector excluding    |              |              |                |            |              |                 |
|fast-food-chains                 |              |              |                |            |              |                 |
|Bulgaria                                                                                                                     |
|deep-frozen potato products for  |[5-10%]       |[10-20%]      |[10-20%]        |[5-10%]     |[5-10%]       |[10-20%]         |
|the food service sector as a     |              |              |                |            |              |                 |
|whole                            |              |              |                |            |              |                 |
|deep-frozen French fries to      |[0-5%]        |[30-40%]      |[30-40%]        |[0-5%]      |[30-40%]      |[30-40%]         |
|fast-food chains                 |              |              |                |            |              |                 |
|Romania                                                                                                                      |
|deep-frozen potato products for  |[0-5%]        |[20-30%]      |[20-30%]        |[0-5%]      |[10-20%]      |[20-30%]         |
|the food service sector as a     |              |              |                |            |              |                 |
|whole                            |              |              |                |            |              |                 |
|deep-frozen French fries to      |[0-5%][34]    |[40-50%]      |[40-50%]        |[0-5%][35]  |[40-50%]      |[40-50%]         |
|fast-food chains                 |              |              |                |            |              |                 |
|Germany                                                                                                                      |
|deep-frozen potato products for  |[10-20%]      |[0-5%]        |[10-20%]        |[10-20%]    |[0-5%]        |[10-20%]         |
|the food service sector as a     |              |              |                |            |              |                 |
|whole                            |              |              |                |            |              |                 |
|deep-frozen potato specialities  |[10-20%]      |[0-5%]        |[10-20%]        |[10-20%]    |[0-5%]        |[10-20%]         |
|for the food sector excluding    |              |              |                |            |              |                 |
|fast-food-chains                 |              |              |                |            |              |                 |
|Czech republic                                                                                                               |
|deep-frozen potato specialities  |[10-20%]      |[0-5%]        |[10-20%]        |[10-20%]    |[0-5%]        |[10-20%]         |
|for the food sector excluding    |              |              |                |            |              |                 |
|fast-food-chains                 |              |              |                |            |              |                 |

72. Based on the market structure above, the Commission has concluded that the proposed transaction does not raise competition  concerns  on  any
   market for the supply of deep-frozen potato products or any alternative sub-segmentation thereof.

VII.  Conclusion

73. 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.

                                        For the European Commission,
                                        (signed)
                                        Joaquín ALMUNIA
                                        Vice-President of the European Commission

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

[3]   RWA is ultimately jointly controlled by BayWa AG (Germany) and RWA Raiffeisen Ware Austria Handel und  Vermögensverwaltung  eGen  (Austria)
   (the companies controlling RWI are hereinafter referred to as "BayWa/RWA group").

[4]   […].

[5]   Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the  Commission  Consolidated  Jurisdictional  Notice  (OJ
   C95, 16.04.2008, p.1).

[6]   Neither LWM nor F&F have any significant upstream (eg potato breeding) or downstream activities.

[7]   Commission decision of 3 March 2005, Case No COMP/M.3658 – Orkla/Chips; Commission decision of 23 February  2001,  Case  No  COMP/M.2302  –
  Heinz/CSM; Commission decision of 28 September 2000, Case No COMP/M.1990 – Unilever/Bestfoods.

[8]   Commission decision of 3 March 2005, Case No COMP/M.3658 – Orkla/Chips.

[9]   Commission decision of 6 March 1999, Case No COMP/M. 1740 – Heinz/United Biscuits Frozen and chilled foods.

[10]  Commission decision of 3 March 2005, Case No COMP/M.3658 – Orkla/Chips.

[11]  Commission decision of 6 March 1999, Case No COMP/M. 1740 - Heinz/United Biscuits Frozen and chilled foods.

[12]  Commission decision of 3 March 2005, Case No COMP/M.3658 – Orkla/Chips.

[13]  According to the Parties, prices for private label deep-frozen potato products range between EUR […] and EUR […] per kg  depending  on  the
   type of product and its quality. Prices for branded deep-frozen potato products range from EUR […] to EUR […] per kg depending on the type  of
   product and its quality.

[14]  According to estimates of the notifying Parties, private label products currently account for a share of approximately  [40-50%]  of  total
   sales of deep-frozen potato products by retailers in the EEA (on an average basis).

[15]  Commission decision of 28 September 2000, Case No COMP/M. 1990 – Unilever/Bestfoods.

[16]  Commission decision of 17 December 2008, Case No COMP/M.5046 – Friesland Foods / Campina; Commission decision of 9 November 2007,  Case  No
   COMP/M. 4824 – Kraft/Danone Biscuits; Commission decision of 3 March 2005, Case No  COMP/M.3658  –  Orkla/Chips;  Commission  decision  of  28
   September 2000, Case No COMP/M. 1990 – Unilever/Bestfoods.

[17]        LWM, McCain, AVIKO, Farm Frites and PinguinLutosa.

[18]  Commission decision of 17 December 2008, Case No COMP/M.5046 – Friesland Foods / Campina; Commission decision of 28  September  2000,  Case
   No COMP/M. 1990 – Unilever/Bestfoods; Commission decision of 3 March 2005, Case No COMP/M.3658 – Orkla/Chips.

[19]  Several respondents have underlined that F&F offers high quality typical Austrian products that LWM does not supply and that LWM  is  well-
   know for its innovative products.

[20] At the EEA level, the combined market shares of the Parties for deep-frozen potato products, French fries and specialities are  respectively
   of [0-5%], [0-5%] and [5-10%] (with increments brought by F&F of respectively [0-5%], [0-5%] and [0-5%]). For private label products only, the
   combined market shares of the Parties for deep-frozen potato products, French fries and specialities are respectively of [0-5%], [0-5%]and [5-
   10%] (with increments brought by F&F of respectively [0-5%], [0-5%]and [0-5%]). For branded products only, the combined market shares  of  the
   Parties for deep-frozen potato products, French fries and specialities are respectively of [0-5%], [0-5%]and [0-5%] (with  increments  brought
   by F&F of [0-5%] in all markets).

[21]  The market shares of F&F in the retail sector are higher in volume than in value. This is due to the fact that […].

[22]  In addition to Austria, the notifying Parties have overlapping activities as regards the supply  of  deep-frozen  potato  products  to  the
   retail sector in Bulgaria, Germany and Romania. The notifying Parties’ combined market shares as regards  the  supply  of  deep-frozen  potato
   products to the retail sector in all the above mentioned Member States are however clearly below 15% whatever the market definition retained.

[23]  For branded products only, in Austria the combined market shares of the Parties  for  deep-frozen  potato  products  and  specialities  are
   respectively of [10-20%] (with increments brought by LWM of [0-5%]) and [5-10%] (with increment brought by F&F of [0-5%]).

[24]  The market investigation underlined that the competitors considered as suitable alternatives are in the supply  to  the  retail  sector  in
   Austria are notably McCain, 11er, Iglo, Agristo, Agrafrost, Aviko, Elfer, Schne-frost, Wernsing and Clareabout.

[25]  Pursuant to an annual tender procedure which is the standard practice in the industry for private label products.

[26]  As mentioned above F&F in any case does not supply specialities to fast-foods in the EEA.

[27]  See Annex 6.C.II.a […].

[28]  The Parties' activities also overlap in the supply of deep-frozen potato products,  or  possible  sub-segmented  markets  also  overlap  in
   Slovakia and in Slovenia. The combined market shares of the Parties in these markets remain however below 15%.

[29]  As mentioned above F&F in any case does not supply specialities to fast-foods in the EEA.

[30]  […].

[31]  See paragraph 15 of the "Guidelines on the assessment of horizontal mergers under the Council Regulation on the control  of  concentrations
   between undertakings" (2004/C 31/03) stating that current market shares may be adjusted to reflect  reasonably  certain  future  changes,  for
   instance in the light of exit, entry or expansion.

[32]  As mentioned above F&F in any case does not supply specialities to fast-foods in the EEA.

[33]  […].

[34]  The increment brought by LWM approaches zero (with sales for LWM of […]).

[35]  The increment brought by LWM approaches zero (with sales for LWM of […]).

-----------------------
                                                                 MERGER PROCEDURE
                                                             ARTICLE 6(1)(b) DECISION

Private label     / branded products

Retail

Deep-frozen potato products

Food service

Fast-food chains

Other food service customers

French fries

Specialities

French fries

Specialities

French fries

Specialities

Private label     / branded products

                                                                  PUBLIC VERSION

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