CELEX: 32020M9587
Language: en
Date: 2020-02-25 00:00:00
Title: Commission Decision of 25/02/2020 declaring a concentration to be compatible with the common market (Case No COMP/M.9587 - ENGIE / EDP RENOVAVEIS / EDPR OFFSHORE ESPAÑA) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 25.02.2020
                                                                C(2020) 1219 final
                                                                                 PUBLIC VERSION
                                                                 In the published version of this decision,
                                                                 some information has been omitted
                                                                 pursuant to Article 17(2) of Council
                                                                 Regulation (EC) No 139/2004 concerning
                                                                 non-disclosure of business secrets and other
                                                                 confidential information. The omissions are
                                                                 shown thus […]. Where possible the
                                                                 information omitted has been replaced by
                                                                 ranges of figures or a general description.
                                                                To the notifying parties
Subject:            Case M.9587 - ENGIE/EDP Renováveis/EDPR Offshore España
                    Commission decision pursuant to Article 6(1)(b) of Council Regulation
                    No 139/20041 and Article 57 of the Agreement on the European Economic
                    Area2
Dear Sir or Madam,
(1)       On 23 January 2020, the European Commission received notification of a
          concentration pursuant to Article 4 of the Merger Regulation which would result
          from a proposed transaction by which ENGIE S.A. (“ENGIE”, France) and EDP
          Renováveis S.A. (“EDPR”, Spain), belonging to the EDP group (Energias de
          Portugal, S.A., “EDP”, Portugal), intend to acquire joint control, within the meaning
          of Articles 3(1)(b) and 3(4) of the Merger Regulation, of EDPR Offshore España
          S.L.U. (“EDPR Offshore España” or the “JV”, Spain).3 ENGIE and EDPR are
          designated hereinafter as the “Parties” or the “Notifying Parties”.
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 031, 30.1.2020, p. 7.
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)     ENGIE, headquartered in France, is a global energy group active in the fields of gas,
        electricity and energy services.
(3)     EDPR, headquartered in Spain, is a subsidiary of EDP active in the generation of
        renewable energy by developing, building and operating wind farms and solar plants
        worldwide. EDP is active globally in the generation, distribution and supply of
        electricity.
(4)     EDPR Offshore España, headquartered in Spain, is a subsidiary of EDPR active in
        offshore windfarm activities worldwide. Post-transaction, the JV would be mainly
        active in the development, construction and operation of wind farms and the
        generation and wholesale supply of electricity.
2.      THE OPERATION
(5)     The proposed transactions consists in the acquisition of joint control by ENGIE and
        EDPR over EDPR Offshore España.
(6)     Pursuant to a Memorandum of Understanding, signed on 21 May 2019, which sets
        out the Parties’ shared intention to form a JV, the concentration is to be implemented
        by conclusion of a shareholder agreement and an investment agreement between
        ENGIE and EDPR. In addition, for each asset to be contributed to the JV, the Parties
        will enter into a Share Purchase Agreement.
(7)     The Parties intend to combine their offshore wind activities in the JV, which upon
        implementation of the proposed transaction would be the exclusive vehicle for all
        their offshore windfarm activities globally. Within the territory covering the EEA
        and the United Kingdom, the JV would be active in the generation and wholesale
        supply of electricity in Belgium, France, Poland, Portugal and the United Kingdom.
        The JV would also (to a lesser extent) be active in the development, construction and
        operation of offshore wind farms for its own use.
(8)     The JV has sufficient own staff and dedicated management (a senior management
        team dedicated to its day-to-day operations and an estimated […] employees by the
        end of 2020), as well as financial resources for its operation and for the management
        of its portfolio and business interests. Furthermore, the JV would have a market
        presence, is not expected to have significant sale or purchase relationships with its
        parents and is intended to operate on a lasting basis. Therefore, the JV would be full
        functional.
(9)     ENGIE and EDPR will each hold 50% of the JV’s shares, and they will be entitled to
        appoint an equal number of board directors ([…]). The board will be responsible for
        approving a broad catalogue of reserved matters4 and, given the required quorum and
4   Reserved Matters include approving any investment in excess of EUR […] if such investment has been
    approved in the budget and EUR […] if such investment has not been approved in the budget, approving
    any business plan and annual budgets, appointing and/or dismissal of any member of the management
    committee, and of the CEO and Chief Operating Officer, appointing directors of the boards, committee
    members, officers and executives. (Form CO, paragraph 35).
                                                       2
 ---pagebreak---          majority5 to pass board resolutions, both ENGIE and EDPR will have veto rights
         over the strategic decisions of the JV.
(10)     It follows that the proposed transaction would result in a concentration within the
         meaning of Articles 3(1)(b) and 3(4) of the Merger Regulation.
3.       UNION DIMENSION
(11)     The Parties have a combined aggregate worldwide turnover of more than EUR 5 000
         million.6 Each of them has a Union-wide turnover in excess of EUR 250 million, but
         they do not achieve more than two-thirds of their aggregate EU-wide turnover within
         one and the same Member State. The concentration has therefore a Union dimension
         within the meaning of Article 1(3) of the Merger Regulation.
4.       RELEVANT MARKETS AND COMPETITIVE ASSESSMENT
4.1.     Market Definition
(12)     Although the JV would be active in the development, construction and operation of
         offshore wind farms, it would only do so for its own use, and the market is therefore
         not affected. The only markets affected by the proposed transaction are (i) the
         markets for the generation and the wholesale supply of electricity in Belgium and
         Portugal7 and (ii) the market for the retail supply of electricity.
4.1.1. Generation and wholesale supply of electricity
4.1.1.1. Product market definition
         (A)        The Commission's past practice
(13)     In EON/INNOGY, the Commission defined the generation and wholesale supply of
         electricity as a separate product market. In that decision the Commission did not
         further segment the market for electricity generation and wholesale supply of
         electricity based on the generation sources and trading channels.8
5   Reserved Matter require the approval of at least one of the directors appointed by each shareholder. The
    quorum at a Board meeting will consist of four directors including two directors appointed by each of the
    shareholders (Form CO, paragraph 35).
6   Turnover calculated in accordance with Article 5 of the Merger Regulation.
7   The Commission received a comment related to ENGIE’s strong position in the market for green
    certificates (“GECs”) in the Flemish region. However, as the JV will not be active in this market and there
    are therefore no overlaps, this Decision will not discuss this market. In any case, the proposed transaction
    will not change ENGIE’s position with regard to GECs, since it already holds shares in the Belgian project
    that it will contribute to the JV, and EDP only has […] MW under construction, which will not be
    contributed to the JV. EDP is also not present in the market for Flemish GEC (reply to RFI of
    18 February 2020).
8   See e.g. Case COMP/M.8870 – EON/INNOGY.
                                                           3
 ---pagebreak---         (B)        The Notifying Parties' view
(14)    The Parties do not contest the market definition in EON/INNOGY.9
        (C)        The Commission’s assessment
(15)    The market investigation in the present case confirms the market definition in
        Commission’s previous decisions. None of the market respondents indicated that a
        narrower market for generation and wholesale supply of electricity through
        renewable offshore sources should be considered.10
(16)    In light of the above considerations, in this Decision the market for generation and
        wholesale supply of electricity is considered to be a single market.
4.1.1.2. Geographic market definition
        (A)        The Commission's past practice
(17)    In previous decisions, the Commission considered the market for electricity
        generation and wholesale supply of electricity to be national, but ultimately left open
        whether it could be broader in certain cases.11
        (B)        The Notifying Parties' view
(18)    The Parties do not contest this geographic delineation for Belgium but regarding
        Portugal, they argue that the geographic market for the generation and wholesale
        supply of electricity should be broader than national and also include Spain, for the
        following reasons: (i) Portugal and Spain have been integrating their wholesale
        electricity markets into a single Iberian electricity market (MIBEL); (ii) they share a
        common spot market operator, OMIE (since 2007) and (iii) a forward market
        operator, OMIP (since 2006); (iv) prices are usually similar and (v) the regulatory
        framework is increasingly harmonised.12
        (C)        The Commission’s assessment
(19)    As regards Portugal, a majority of competitors who participated in the market
        investigation indicated that “the wholesale electricity market to consider is the
        Iberian market (MIBEL)”.13 As regards Belgium, the market investigation was
        inconclusive, with some market participants buying from and selling to other
        Member States (e.g. Germany and the Netherlands) and others exclusively active in
        Belgium.14
(20)    In any case, for the purpose of this Decision, the geographic market definition can be
        left open between national and supra national, as the proposed transaction does not
9   Form CO, paragraph 139.
10  Replies to question 12 of Questionnaires to wholesale customers Belgium and Portugal. Replies to
    question 10 of Questionnaires to wholesale competitors Belgium and Portugal.
11  Case COMP/M.5979 KGHM / Tauron Wytwarzanie / JV, para. 24; Case COMP/M.4180 – GDF/Suez,
    para. 726.
12  Form CO, paragraph 142.
13  Replies to question 7 of Questionnaire to wholesale competitors in Portugal.
14  Replies to question 7 of Questionnaire to wholesale customers in Belgium.
                                                          4
 ---pagebreak---         give rise to serious doubts as to its compatibility with the internal market under any
        of these two alternative markets.15
4.1.2. Retail supply of electricity
4.1.2.1. Product market definition
        (A)        The Commission's past practice
(21)    In previous decisions, the Commission segmented the market for retail supply of
        electricity based on three categories of final customers: (i) large industrial and
        commercial customers, (ii) smaller industrial and commercial customers; and (iii)
        households.16
        (B)        The Notifying Parties' view
(22)    The Parties do not contest the previous definition and argue that the product market
        definition can be left open.17
        (C)        The Commission’s assessment
(23)    The market investigation confirms the Commission’s market definition. None of the
        market respondents indicated that a further segmentation for the retail supply of
        electricity would be appropriate.18
(24)    In light of the above considerations and of the results of the market investigation, in
        this Decision, the retail market for the supply of electricity will only be segmented
        based on different final customer groups.
4.1.2.2. Geographic market definition
        (A)        The Commission's past practice
(25)    In previous decisions, the Commission considered the market for retail supply of
        electricity to be national. For the segments of retail supply of electricity to small
        industrial and commercial customers and to households, the Commission left open
15  In case the geographic market was defined as Iberian, no affected market would arise. Therefore, this
    Decision will only discuss the potential impacts of the proposed transaction on the Portuguese market. If
    the market was broader than Belgium to cover also the Netherlands and Luxembourg, the market would
    be affected, but the combined market shares of the Parties would be significantly lower than in the case
    for the Belgian national market (ENGIE: [30-40]% generation and [30-40]% installed capacity and
    EDP: [0-5]% generation and [0-5]% installed capacity in Benelux. For comparison, the Parties’ combined
    market shares in a Belgian national market are [70-80]% in installed capacity and [60-70]% in
    generation). If the market was broader than Belgium and included France and Germany, no affected
    market would arise (Reply to RFI from 18 February 2020).
16 In relation to Belgium see Case COMP/M.5549 EDF/Segebel, para. 132, Case COMP/M.8855;
    Otary/Eneco/Electrabel/JV, paras. 27-28.
17 Form CO, paragraphs 144-146.
18 Replies to question 12 of Questionnaires to wholesale customers Belgium and Portugal. Replies to
    question 10 of Questionnaires to wholesale competitors Belgium and Portugal.
                                                          5
 ---pagebreak---         whether the market for retail supply of electricity could be regional (sub-national) in
        certain Member States, including Belgium but not Portugal.19
        (B)        The Notifying Parties' view
(26)    The Parties do not contest the previous definition by the Commission.
        (C)        The Commission’s assessment
(27)    With regard to large industrial and commercial customers, the market appears to be
        national in both Belgium and Portugal. The market investigation examined whether
        the market could be segmented between regions (Wallonia, Flanders and Brussels in
        the case of Belgium) for the retail supply of electricity to small industrial and
        commercial customers and households. The replies to the market investigation
        suggested that such a segmentation of the market was not warranted.20
(28)    For the purpose of this Decision, the Commission will leave the market definition
        open while focusing its analysis on the national level, as any difference in the market
        shares between national and regional level do not affect the competitive analysis.21
4.2.    Competitive Assessment
(29)    Under Article 2(2) and (3) of the Merger Regulation, the Commission must assess
        whether a proposed concentration would significantly impede effective competition
        in the internal market or in a substantial part of it, in particular through the creation
        or strengthening of a dominant position.
(30)    In this respect, a merger may entail horizontal and/or vertical effects.
(31)    The proposed transaction gives rise to two horizontally affected markets:
        -        The market for electricity generation and wholesale supply of electricity in
        Belgium in which ENGIE, EDP and the JV would be active.
        -        The market for electricity generation and wholesale supply of electricity in
        Portugal in which EDP, ENGIE and the JV would be active.
(32)    The proposed transaction also gives rise to six potential vertical relationships:
        -   In Belgium, the market upstream for electricity generation and wholesale supply
            of electricity in which ENGIE, EDP and the JV would be active and,
            downstream, the markets for retail supply of electricity to (i) large industrial and
            commercial customers, (ii) small industrial and commercial customers and
            (iii) households in which ENGIE is active.
19  See Case COMP/M.6984 – EPH/Stredeoslovenska Energetika, para. 18; Case COMP/M.5827 –
    Elia/IFM/50 Hertz, para. 24; Case COMP/M.5496 – Vattenfall/ Nuon Energy, para. 15; and Case
    COMP/M.5467 – RWE/Essent, paras. 283-284. In relation to Belgium, see Case COMP/M.4180 – Gaz de
    France/Suez, paras. 738-743; and Case COMP/M.5549 – EDF/Segebel, para. 138.
20 Replies to question 8 of Questionnaire to retail competitors in Portugal. Replies to question 8 of
    Questionnaire to retail competitors in Belgium.
21 In 2018, ENGIE had a market share of [60-70]% in the Brussels region, [40-50]% in Flanders and
    [40-50]% in Wallonia.
                                                     6
 ---pagebreak---         -    In Portugal, the market upstream for electricity generation and wholesale supply
             of electricity in which EDP, ENGIE and the JV would be active and,
             downstream, the markets for retail supply of electricity to (i) large industrial and
             commercial customers, (ii) small industrial and commercial customers and
             (iii) households in which EDP, parent company of EDPR, is active.
(33)    Other than the affected markets identified in Belgium and Portugal, in other Member
        States where the JV is to be active (France and Poland),22 no affected markets
        arise.23
4.2.1. Horizontal Overlaps
4.2.1.1. The market for electricity generation and wholesale supply of electricity in
          Belgium
        (A)         The Notifying Parties' view
(34)    First, the Notifying Parties submit that the proposed transaction would not materially
        alter the current market structure and the Parties’ competitive incentives. The JV’s
        only asset in Belgium would be a minority shareholding in the offshore site
        Seamade, which has an electricity generation capacity of 487.2 MW, representing
        less than 4% of the total Belgian capacity.24 ENGIE currently holds 17.5% of
        Seamade, a minority interest that would be contributed to the JV.25 In addition, EDP
        would own just […] MW of additional generation capacity in Belgium (not offshore
        and still under construction), which would not be contributed to the JV.26
(35)    Second, despite the Parties’ combined market share ([70-80]% in installed capacity
        and [60-70]% in generation), given the small increment ([0-5]% and [0-5]%) brought
        by the proposed transaction, the Notifying Parties argue that the proposed transaction
        would not raise serious doubts as to its compatibility with the internal market. There
        are also a number of credible competitors on this market, e.g. EDF
        Luminus ([10-20]% market share for installed capacity and [10-20]% for
        generation).27
(36)    Third, the Parties argue that ENGIE’s position in the Belgian electricity generation
        and wholesale market, where it is present through its subsidiary Electrabel, will
        continue to decrease in the future. The position of incumbent Electrabel has been
        declining due to new entrants following liberalisation of the electricity market. In
        addition, Electrabel faces competition from suppliers of alternative energy and its
        market share is expected to further decline after the closure of a number of nuclear
        power plants in the next ten years.28
22  In addition to the United Kingdom.
23  Form CO, paragraph 207.
24  Form CO, paragraph 195.
25  Form CO, table 3.
26  Form CO, paragraph 180.
27  Form CO, Tables 14 and 15.
28  Form CO, paragraph 189.
                                                   7
 ---pagebreak--- (37)    Finally, the Parties submit that imports of electricity, particularly from France and
        Germany, pose additional competitive constraints.29
        (B)        The Commission's assessment
(38)    The market investigation confirmed that the proposed transaction would not raise
        serious doubts as to its compatibility with the internal market and there were no
        substantiated complaints. A clear majority of participants in the market investigation
        expect the impact of the proposed transaction to be neutral,30 with prices likely to
        remain the same.31 One wholesale customer also confirmed in the market
        investigation that they receive electricity from outside32 Belgium.
(39)    Given the negligible position of the JV (with a minority stake in a single wind farm
        reflecting less than 5% of the capacity on the market), the very small increment in
        market shares (of [0-5]% reflecting the […] MW capacity of the EDP generation in
        Belgium), the other market players and the competitive constraint coming from
        imports, the Commission concludes that the proposed transaction does not raise
        serious doubts as to its compatibility with the internal market.
4.2.1.2. The market for electricity generation and wholesale supply of electricity in
          Portugal
        (A)        The Notifying Parties' view
(40)    Despite the high combined market share ([60-70]% in installed capacity and
        [50-60]% in generation), given the increment ([5-10]% and [5-10]% respectively),
        the Notifying Parties argue that the proposed transaction would not raise serious
        doubts as to its compatibility with the internal market.
(41)    Similar to the Belgian market, the incumbent EDP has continuously lost market
        share to competitors both in the generation and in the wholesale supply of
        electricity.33 Competitors on this market include Trustenergy ([5-10]% market share
        for installed capacity and [5-10]% for generation), Endesa ([0-5]% market share for
        installed capacity and [0-5]% for generation), Finenergy ([0-5]% market share for
        installed capacity) and Iberwind ([0-5]% market share for installed capacity).34
(42)    Moreover, the electricity generation capacity of the JV in Portugal is […] MW,
        which represents less than 1% of the total Portuguese capacity. This impact would be
29  Form CO, paragraph 192.
30  Replies to question 9 of Questionnaire to retail customers in Belgium.
    Replies to question 10 of Questionnaire to retail competitors in Belgium.
    Replies to question 11 of Questionnaire to wholesale customers in Belgium.
    Replies to question 9 of Questionnaire to wholesale competitors in Belgium.
31  Replies to question 8 of Questionnaire to retail customers in Belgium, question 8.
    Replies to question 9 of Questionnaire to wholesale customers in Belgium.
    Replies to question 10 of Questionnaire to wholesale customers in Belgium.
    Replies to question 8 of Questionnaire to wholesale competitors in Belgium.
32  Reply to question 7 of Questionnaire to wholesale customers in Belgium.
33  Form CO, paragraph 196.
34  Form CO, Tables 16 and 17.
                                                           8
 ---pagebreak---        even smaller in the future, in view of the increasing number of wind park projects
       under development in Portugal.35
(43)   Finally, ENGIE and EDP already jointly own the Portuguese offshore site that they
       will contribute, WFA (54.4% by EDPR and 25% by ENGIE).36
(44)   On that basis, the Notifying Parties submit that the proposed transaction would
       therefore not materially alter the current market structure and the Parties’
       competitive incentives in the market for electricity generation and wholesale supply
       of electricity in Portugal.
       (B)        The Commission's assessment
(45)   The market investigation confirmed that the proposed transaction would not raise
       serious doubts as to it compatibility with the internal market and there were no
       substantiated complaints. A clear majority of participants in the market investigation
       expect the impact of the proposed transaction to be neutral,37 with prices likely to
       remain the same.38 A number of replies also indicated that the Parties face
       competitive pressure from imports from Spain.39 A competitor described the
       wholesale electricity market in Portugal (and Spain) as “a transparent market with a
       high level of competition”.40
(46)   In the light of the results of the market investigation, the Commission concludes that
       the proposed transaction does not raise serious doubts as to its compatibility with the
       internal market for the following reasons: (i) the negligible position of the JV in the
       market (with a stake in a single wind farm reflecting less than 1% of the capacity on
       the market), (ii) the very small increment in market shares (of [5-10]% reflecting the
       position of ENGIE in generation in Portugal), (iii) the presence of other market
       players and the competitive constraint coming from imports from Spain.
35 Form CO, paragraph 201.
36 Form CO, paragraph 199.
37 Replies to question 9 of Questionnaire to retail customers in Portugal.
   Replies to question 10 of Questionnaire to retail competitors in Portugal.
   Replies to question 11 of Questionnaire to wholesale customers in Portugal.
   Replies to question 9 of Questionnaire to wholesale competitors in Portugal.
38 Replies to question 8 of Questionnaire to retail customers in Portugal.
   Replies to question 9 of Questionnaire to wholesale customers in Portugal.
   Replies to question 9 of Questionnaire to retail competitors in Portugal.
   Replies to question 8 of Questionnaire to wholesale competitors in Portugal.
39 Replies to question 7 of Questionnaire to retail customers in Portugal.
   Replies to question 8 and 9 of Questionnaire to wholesale competitors in Portugal.
40 Reply to question 8 and 9 of Questionnaire to wholesale competitors in Portugal.
                                                          9
 ---pagebreak--- 4.2.2. Vertical relationships
4.2.2.1. The generation and wholesale (upstream) and retail (downstream) sale of electricity
          in Belgium
(47)    In Belgium, three vertically affected markets arise because of the activities of
        ENGIE, EDP and the JV upstream in the market for electricity generation and
        wholesale supply of electricity, and ENGIE’s presence downstream in:
                 (a) The market for the retail supply of electricity to large industrial and
                     commercial customers,
                 (b) The market for the retail supply of electricity to small industrial and
                     commercial customers, and
                 (c) The market for the retail supply of electricity to households.
(48)    As outlined in paragraphs (34) to (35) above, at the upstream level on the market for
        electricity generation and wholesale supply of electricity in Belgium, in 2018
        ENGIE had a market share of [60-70]% (in terms of generation) and of [60-70]% (in
        terms of installed capacity), while EDP had a market share of [0-5]% (in terms of
        generation) and of [0-5]% (in terms of installed capacity). The JV would have a
        minority share in a wind farm with a market share of [0-5]% (in terms of generation)
        and of [0-5]% (in terms of installed capacity). The combined market share at the
        upstream level was therefore relatively high at [60-70]% (in terms of generation) and
        [70-80]% (in terms of installed capacity), but with the JV representing less than 5%
        ([0-5]% in terms of installed capacity and [0-5]% in terms of generation).
(49)    At the downstream level, i.e. on the market for retail supply of electricity in
        Belgium, only ENGIE is active, with a market share of approx. [40-50]% for large
        industrial and commercial customers,41 [40-50]% for small industrial and
        commercial customers,42 and [40-50]% for households in 2018.43
        (A)       No input foreclosure
(50)    The Parties submit that these markets are affected only technically, since the vertical
        link is purely potential: they confirmed that they do not foresee that the JV will sell
        to electricity retailers at all (the JV will sell either to wholesalers or to industrial and
        commercial final customers).44 In any event, basing the competitive analysis of
        vertical relationships for the affected markets on the assumption that the JV could
        sell its output to electricity retailers, the Parties submit that the proposed transaction
        does not lead to an input foreclosure risk in the Belgian market.
(51)    The Commission considers that the proposed transaction would not lead to an input
        foreclosure risk, since the Parties will neither have the ability nor the incentive to
        foreclose rival electricity retailers in Belgium.
41  Form CO, Table 19.
42  Form CO, Table 20.
43 Form CO, Table 21. See also footnote 21 above for ENGIE’s market shares on a regional level within
    Belgium.
44 Form CO, paragraphs 205-206.
                                                      10
 ---pagebreak--- (52)   First, the proposed transaction would not fundamentally alter the current market
       structure and the Parties’ competitive position and incentives. ENGIE already holds
       a minority interest in the offshore site Seamade in Belgium that it will contribute to
       the JV.45 The vertical link with respect to ENGIE downstream is therefore pre-
       existing, and is not affected by the proposed transaction.
(53)   Second, with regard to EDP (which is the new element in the vertical link), its
       market share in Belgium at the upstream level (i.e. in the national markets for
       generation and wholesale supply of electricity) is negligible, and will remain low
       after the proposed transaction.
(54)   Third, at the downstream level, i.e. on national markets for the retail supply of
       electricity, only ENGIE is currently active. EDP is not active downstream and
       therefore, regardless of its competitive position upstream, it will have no incentive to
       allow the JV to foreclose electricity retailers from the JV’s output, since that would
       imply a pure profit loss (not compensated by benefits from a hypothetical expansion
       at the downstream level, which would only benefit ENGIE). The creation of the JV
       would if anything reduce their incentives to foreclose rival retailers from electricity
       sourcing.
(55)   Fourth, the JV would hold a minority share in less than 4% of installed capacity in
       Belgium (the JV’s offshore wind farm is under construction, and therefore has no
       electricity output yet).46 The proposed transaction would not enable the Parties to
       foreclose rivals. Even if the Parties decided not to sell any of the JV’s output to third
       parties, electricity purchasers would have access to other supply sources since the JV
       accounts only for a very minor part of the electricity generated in Belgium.
(56)   Finally, the predominant view among the respondents of the market investigation
       suggests that the proposed transaction will not have any impact,47 and the
       Commission did not receive any substantiated complaint. The majority of customers
       also mentioned possible alternative retail electricity suppliers, such as EDF Luminus,
       Lampiris, RWE and Axpo.48
(57)   The Commission therefore considers that the proposed transaction does not raise
       serious doubts about its compatibility with the internal market as the Parties will
       have neither the ability nor the incentive to foreclose rival electricity retailers in
       Belgium.
       (B)        No customer foreclosure
(58)   The Parties submit that post-transaction they would neither have the ability nor the
       incentive to foreclose customers as a result of the proposed transaction. They stress
       in particular that there would remain sufficient alternative players in the market for
       the retail supply of electricity for the JV’s competitors to sell their electricity output.
       In addition, they point out that the Parties’ market shares in the retail supply of
       electricity have been decreasing at a steady rate in the last few years in view of new
45 Form CO, Table 3.
46 Form CO, paragraph 190. The Parties also expect that their market shares will decrease in the next few
   years.
47 See footnotes 30 and 31.
48 Replies to question 7 of Questionnaire to retail customers in Belgium.
                                                         11
 ---pagebreak---         entrants on these markets. ENGIE’s market share declined from [40-50]% in 2016 to
        [40-50]% in 2017.49
(59)    Moreover, the JV would have, in terms of installed capacity, market shares of less
        than 4% in Belgium. Even if ENGIE bought all the electricity produced by the JV, it
        would still need to buy significant volumes from other sources, given its downstream
        market share (hence the volume of input that it requires).
(60)    The predominant view among the respondents of the market investigation suggests
        that the proposed transaction would not have any impact on the market,50 and the
        Commission did not receive any substantiated complaint.
(61)    The Commission’s position is therefore that the proposed transaction would not lead
        to customer foreclosure risks, since the Parties would neither have the ability nor the
        incentive to foreclose rival electricity generators and wholesalers in Belgium.
4.2.2.2. The generation and wholesale (upstream) and retail (downstream) sale of electricity
          in Portugal
(62)    In Portugal, three vertically affected markets arise because of the activities of EDP,
        ENGIE and the JV upstream in the market for electricity generation and wholesale
        supply of electricity, and EDP’s presence downstream in:
                 (a) The market for the retail supply of electricity to large industrial and
                      commercial customers,
                 (b) The market for the retail supply of electricity to small industrial and
                      commercial customers, and
                 (c) The market for the retail supply of electricity to households.
(63)    At the upstream level, i.e. on the market for electricity generation and wholesale
        supply of electricity in Portugal, in 2018 EDP had a market share of [40-50]% (in
        terms of generation) and of [50-60]% (in terms of installed capacity), while ENGIE
        had a market share of [5-10]% (in terms of generation) and of [5-10]% (in terms of
        installed capacity). The JV had a market share of [0-5]% (in terms of generation) and
        of [0-5]% (in terms of installed capacity). The combined market share at the
        upstream level was therefore relatively high at [50-60]% (in terms of generation)
        and [60-70]% (in terms of installed capacity), but with the JV representing less
        than [0-5]% (in terms of installed capacity) and [0-5]% (in terms of generation).51
(64)    At the downstream level, i.e. on the market for retail supply of electricity in
        Portugal, only EDP is active, with a market share of approx. [20-30]% for large
        industrial and commercial customers, [40-50]% for small industrial and commercial
        customers, and [80-90]% for households in 2018.52
49  Form CO, paragraph 226.
50  See footnotes 30 and 31.
51 Form CO, Table 16 (installed capacity) and Table 17 (generation).
52 Form CO, Table 26.
                                                       12
 ---pagebreak---        (A)        No input foreclosure
(65)   The Parties submit that these markets are affected only technically, since the vertical
       link is purely potential: they confirmed that they do not foresee that the JV would
       sell to electricity retailers at all (the JV would sell either to wholesalers or to
       industrial and commercial final customers).53 In any event, basing the competitive
       analysis of vertical relationships for the affected markets on the assumption that the
       JV could sell its output to electricity retailers, the Parties submit that the proposed
       transaction would not lead to an input foreclosure risk in the Portuguese market.
(66)   The Commission considers that the proposed transaction will not lead to an input
       foreclosure risk, since the Parties would neither have the ability nor the incentive to
       foreclose rival electricity retailers in Portugal.
(67)   First, the proposed transaction would not fundamentally alter the current market
       structure and the Parties’ competitive position and incentives. The Portuguese
       offshore site that ENGIE and EDP will contribute to the JV, WFA, is already
       partially jointly owned by EDPR (54.4% shareholding) and ENGIE (25%
       shareholding).54 The vertical link with respect to EDP downstream is therefore pre-
       existing, and is not affected by the proposed transaction.
(68)   Second, ENGIE’s Portuguese market shares upstream are small, and will remain low
       after the proposed transaction.55
(69)   Third, ENGIE is not active downstream and therefore, regardless of its competitive
       position upstream, it will have no incentive to allow the JV to foreclose electricity
       retailers from the JV’s output, since that would imply a pure profit loss (not
       compensated by benefits from a hypothetical expansion at the downstream level,
       which would only benefit ENGIE). The creation of the JV would if anything reduce
       their incentives to foreclose rival retailers from electricity sourcing.
(70)   Fourth, the JV would hold shares representing less than 1% of the installed capacity
       in Portugal.56 The proposed transaction will not enable the Parties to foreclose rivals.
       Even if the Parties decided not to sell any of the JV’s output to third parties,
       electricity purchasers would have access to other supply sources since the JV
       accounts only for a very minor part of the electricity generated in Portugal.
(71)   Finally, the predominant view among the respondents of the market investigation
       suggests that the proposed transaction would not have any impact,57 and the
       Commission did not receive any substantiated complaint.
(72)   The Commission therefore considers that the proposed transaction does not raise
       serious doubts about its compatibility with the internal market as the Parties will
       have neither the ability nor the incentive to foreclose rival electricity retailers in
       Portugal.
53 Form CO, paragraphs 205-206.
54 Form CO, Table 3.
55 Form CO, paragraph 186.
56 Form CO, paragraph 176.
57 See footnotes 37 and 38.
                                                    13
 ---pagebreak---        (B)        No customer foreclosure
(73)   The Parties submit that they would neither have the ability nor the incentive to
       foreclose customers as a result of the proposed transaction. They stress in particular
       that there will remain sufficient alternative players in the market for the retail supply
       of electricity for the JV’s competitors to sell their electricity output. In addition, they
       point out that the parents’ market shares in the retail supply of electricity have been
       decreasing at a steady rate in the last few years in view of new entrants on these
       markets. EDP’s market share in the downstream market in Portugal dropped from
       [40-50]% in 2016 to [40-50]% in 2018.58
(74)   Moreover, the JV would have, in terms of installed capacity, market shares of less
       than 1% in Portugal. Even if EDP bought all the electricity produced by the JV, they
       would still need to buy significant volumes from other sources, given its downstream
       market shares (hence the volume of input that EDP requires).
(75)   The predominant view among the respondents of the market investigation suggests
       that the proposed transaction would not have any impact,59 and the Commission did
       not receive any substantiated complaint.
(76)   The Commission’s position is therefore that the proposed transaction will not lead to
       customer foreclosure risks, since the Parties would neither have the ability nor the
       incentive to foreclose rival electricity generators and wholesalers in Portugal.
5.     CONCLUSION
(77)   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
58 Form CO, paragraph 226.
59 See footnotes 37 and 38.
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