CELEX: 32019M9483
Language: en
Date: 2019-09-20 00:00:00
Title: Commission Decision of 20/09/2019 declaring a concentration to be compatible with the common market (Case No COMP/M.9483 - ENGIE / POWERLINES) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                 Brussels, 20.09.2019
                                                                 C(2019) 6913 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                                                                  information omitted has been replaced by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 party
Subject:             Case M.9483 – Engie/Powerlines
                     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 16 August 2019, the European Commission received notification of a proposed
          concentration pursuant to Article 4 of the Merger Regulation by which Engie S.A.
          (“Engie”, France) acquires within the meaning of Article 3(1)(b) of the Merger
          Regulation sole control over Powerlines Group GmbH (“Powerlines”, Austria) by
          way of purchase of shares (the “Transaction”).3 Engie is designated hereinafter as the
          “Notifying Party”. Engie and Powerlines are referred to hereinafter as “the 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 285, 23.8.2019, p. 3.
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)  The acquirer Engie is an industrial company active in the fields of gas, electricity
     and energy services. In particular, through its subsidiaries Ineo and Fabricom, Engie
     is active in the installation and maintenance of railway contact lines (catenary and
     overhead lines) in France, Italy, Luxembourg and Belgium. Engie is also active in
     power supply and power transmission.
(3)  The target Powerlines is active in the areas of rail electrification and energy
     transmission. More specifically, Powerlines offers engineering, planning,
     development, assembly, installation, consulting and maintenance services for rail
     infrastructure, such as mainline, mass transit, trams, trolleybuses, and subway
     systems. In addition, the company manufactures and distributes certain catenary
     equipment. Geographically, Powerlines is active in rail electrification and overhead
     line solutions mainly in the United Kingdom, Germany and Austria, and to a lesser
     extent in Belgium, Sweden, Poland, the Netherlands, Norway, Finland, Slovakia,
     Slovenia and Switzerland. Powerlines is active in the installation of power
     transmission and distribution lines in Germany and Austria.
2.   THE OPERATION AND THE CONCENTRATION
(4)  Pursuant to a share sale and purchase agreement signed on 24 July 2019, Engie will
     acquire shares representing 100% of the total voting rights of Powerlines and will
     have sole control over Powerlines (for a purchase price of approximately […]). The
     Transaction therefore constitutes a concentration within the meaning of Article
     3(1)(b) of the Merger Regulation.
3.   EU DIMENSION
(5)  The undertakings concerned have a combined aggregate worldwide turnover of more
     than EUR 5 000 million4. Each of them has an EU-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 notified operation
     therefore has an EU dimension.
4.   COMPETITIVE ASSESSMENT
4.1. Introduction
(6)  The Parties are active in rail electrification and in power transmission but they
     operate in different geographies, with the exception of rail electrification in Belgium.
     Further, Powerlines is active in the manufacture and distribution of catenary
     equipment, an input for the installation and maintenance of railway contact lines in
     which Engie is active.
4    Turnover calculated in accordance with Article 5 of the Merger Regulation.
                                                      2
 ---pagebreak--- (7)    Specifically, the activities of the Parties overlap in the installation and maintenance
       of catenary and overhead contact lines in Belgium. The Parties’ combined position in
       Belgium also gives rise to a vertically affected relation associating the manufacture
       and distribution of catenary equipment (upstream), on the one hand, and the
       installation and maintenance of railway contact lines (downstream), on the other
       hand.
4.2.   Market definitions
4.2.1. Downstream market(s): Installation and maintenance of catenaries and overhead
       contact lines
(8)    In terms of product market definition, the Commission has identified in previous
       decisions a market for railway contact line engineering, which includes the
       installation and maintenance of catenary and overhead lines, as well as of third rail
       system.5 A segmentation of this market by system (catenary and overhead contact
       lines v. third rail) and by customer (train v. tramway) was considered, but the market
       definition was ultimately left open. The Commission has also distinguished the
       installation and the maintenance of these contact lines from the manufacture of
       catenary equipment.6
(9)    The Parties consider that there is a single market for the installation and maintenance
       of catenary and overhead contact lines, which does not warrant any segmentation.7
(10)   The Commission’s market investigation confirmed the existence of an overall
       product market for the installation and maintenance of catenaries and overhead
       contact lines, including third rail systems, which is separate from the market for the
       manufacture and distribution of catenary equipment (see para (11) to (13)).
(11)   First, the market investigation revealed that the installation and maintenance of
       catenary and overhead contact lines, on the one hand, and the installation and
       maintenance of third rail systems, on the other hand, are in the same product market.
       A majority of both customers and competitors who expressed an opinion stated that
       installers of catenary and overhead contact lines are also able to install third rail, and
       vice versa.8 While several market participants explained that the installation of
       overhead contact lines is more complex and difficult than the installation of third rail
       systems and requires special equipment, according to market participants, most of
       providers are able to do both.9
5      See cases M.5701- Vinci/CEGELEC, paras. 36 – 39, and M.3653 – Siemens/VA Tech, para. 165.
6      See case M.5701- Vinci/CEGELEC, paras. 36 - 39. The French Competition Authority has also
       considered this distinction in Eurovia/Vossloh (C2008-84).
7      Form CO, para. 44 ff.
8      Replies to eQ1 to Customers of Railway Contact Lines and Catenary Equipment, Question 4.1;
       replies to eQ2 to Competitors, Question 6.1.
9      Replies to eQ1 to Customers of Railway Contact Lines and Catenary Equipment, Question 4.1.1 and
       Replies to eQ2 to Competitors, Question 6.1.1. A competitor stated in this regard: “Both systems need
       civil work expertise. Although overhead contact lines are more complex and difficult to install than
                                                        3
 ---pagebreak--- (12) Second, the market investigation revealed that the electrification of long-distance
     railways and of metropolitan and tramways fall within the same product market. A
     clear majority of both customers and competitors who expressed an opinion
     indicated that installers of long-distance railways are able to install metropolitan and
     tramways, and vice versa.10 While several market participants explained that the
     electrification of long-distance railways is more complex and difficult than the
     electrification of metropolitan and tramways and requires special equipment, they
     also stated that the majority of providers are able to do both11.
(13) Third, the outcome of the market investigation confirmed that the distinction
     between the manufacture of catenary equipment and its components, on the one
     hand, and the installation and maintenance of catenary and overhead contact lines,
     on the other hand, remains appropriate. A clear majority of market participants who
     expressed an opinion indicated that these markets are still separate nowadays.12
     Several market participants observed that a growing number of companies are active
     in both the manufacture and the installation of catenary and overhead contact lines,
     which gives them an economical advantage because of reduced interface risks and
     synergies in management, leading to reduced unit costs for customers. Likewise,
     some market participants reported that some clients do require for certain projects
     that the contractor both delivers and installs the equipment. However, most market
     participants still consider that the overall skills, equipment and market players differ
     to such a degree that the manufacture of catenary equipment and its installation
     constitute separate markets.13
(14) In any event, the Commission considers that, for the purposes of this Decision, the
     precise scope of the relevant product market for the installation and maintenance of
     catenaries and overhead contact lines can ultimately be left open since the
     3rd rail systems because of cable routing, poles and its foundations/equipment, installers can usually
     perform the installation of both systems.”
10   Replies to eQ1 to Customers of Railway Contact Lines and Catenary Equipment, Question 4.2 and
     replies to eQ2 to Competitors, Question 6.2.
11   Replies to eQ1 to Customers of Railway Contact Lines and Catenary Equipment, Question 4.2.1 and
     Replies to eQ2 to Competitors, Question 6.2.1. A competitor noted in this regard: “The main
     difference regarding long and short distance railways is the amount of equipment to be installed. The
     technology or installation requirements/skills are rather similar. Most major installers can therefore
     install long-distance railways and metropolitan and tramways” (reply to Q2 to Competitors, Question
     6.2.1.). A customer stated: “Whilst the overall system parameters alter slightly, the base equipment
     construct at component level for long-distance railways is largely comparable with that of metro or
     tramway systems” (reply to Customers of Railway Contact Lines and Catenary Equipment, Question
     4.2.1.).
12   Replies to eQ1 to Customers of Railway Contact Lines and Catenary Equipment, Question 5 and
     replies to eQ2 to Competitors, Question 7.
13   Replies to eQ1 to Customers of Railway Contact Lines and Catenary Equipment, Question 5.1 and
     Replies to eQ2 to Competitors, Question 7.1. A competitor noted in this regard: “Manufacturing is a
     method that involves transforming raw material or material overall into a consumable product after
     being engineered whilst installation or maintenance consists of using skilled or trained people to
     install the products. Therefore, the level or type of skills between manufacturing and
     installation/maintenance are different. The competitors active on the market for manufacturing
     catenary equipment are also largely different than those active on the market for installation of such
     equipment” (reply to eQ2 to Competitors, Question 7.1).
                                                       4
 ---pagebreak---        Transaction does not give rise to serious doubts about its compatibility with the
       internal market irrespective of whether the relevant product market includes train,
       tramways and/or third rail systems.
4.2.2. Geographic market(s): Installation and maintenance of catenaries and overhead
       contact lines
(15)   In past cases, the Commission has considered the market for the installation and
       maintenance of railway contact lines to be national in scope because the regulations
       governing railway contact lines tend to be adopted at national level and because
       these regulations differ from one Member State/party to the EEA Agreement to the
       other. 14
(16)   The Parties are also of the opinion that the geographic market for the installation and
       maintenance of catenaries and overhead contact lines is national in scope.15
(17)   The market investigation revealed diverging views among market participants and
       was therefore not conclusive in this regard.16 Certain market participants consider
       that that the geographic scope of the supply of installation services is evolving and
       tends to become cross-border, potentially EEA-wide in scope. However, a number of
       elements still point in the direction of a national geographic dimension as cross-
       border activities still appear to remain very limited in practice. An overwhelming
       majority of customers who expressed an opinion replied that they had never
       commissioned or selected a supplier of installation and maintenance services for
       catenaries and overhead contact lines that did not have an established physical
       presence in the country.17 Individual replies provided by customers indicate that
       reasons for this preference for domestic suppliers are language barriers, risk
       premiums, as well as additional costs for the accommodation and travel of workers.18
       Moreover, all of the competitors who expressed an opinion consider that at least a
       consortium or partnership with a company that has a physical presence in the country
       where the relevant project takes place, is required.19
(18)   Nonetheless, the outcome of the market investigation suggests that harmonisation of
       standards and regulations within the EEA are blurring and dissolving the borders of
14     See cases M.3653 – Siemens/ VA Tech, para. 17 and M.5701- Vinci/CEGELEC, paras. 44.
15     Form CO, para. 63.
16     Asked whether the national scope found in precedents was still valid, the market investigation showed
       diverging views. While a majority of competitors who took a clear position responded affirmatively, a
       majority of customers who expressed an opinion said this definition was no longer valid (see replies
       to eQ1 to Customers of Railway Contact Lines and Catenary Equipment, Question 6 and replies to
       eQ2 to Competitors, Question 8). Similarly, while a clear majority of competitors who expressed an
       opinion indicated that national regulations, technical standards and/or certification processes for the
       installation of catenaries and overhead contact lines are very different across the EEA, a majority of
       customers said this was not the case (see replies to Q1 to Customers of Railway Contact Lines and
       Catenary Equipment, Question 7 and replies to eQ2 to Competitors, Question 9).
17     Replies to eQ1 to Customers of Railway Contact Lines and Catenary Equipment, Question 8
18     Replies to eQ1 to Customers of Railway Contact Lines and Catenary Equipment, Question 9.1.
19     Replies to eQ2 to Competitors, Question 10.
                                                         5
 ---pagebreak---         previously national geographic markets. A majority of both customers and
        competitors who expressed an opinion indicated that they were willing to consider
        cross-border installation services.20 Some competitors also indicated that they would
        consider setting up physical presences in new countries if this is economical in view
        of the size of particular projects.21
(19)    In any event, the Commission considers that, for the purposes of this Decision, the
        precise scope of the relevant geographic market for the installation and maintenance
        of catenaries and overhead contact lines can ultimately be left open since the
        Transaction does not give rise to serious doubts about its compatibility with the
        internal market irrespective of whether the relevant geographic market is defined as
        national, supra-regional or EEA-wide in scope.
4.2.3. Upstream market: Manufacture of catenaries and its components
4.2.3.1. Product market
(20)    The outcome of the market investigation confirmed that the manufacture and
        distribution of catenary equipment is separate from the installation and maintenance
        of catenaries and overhead contact lines (see above recital (13)). The Parties agree
        with that definition and consider that any further sub-segmentation is not warranted,
        for example between train and tramway equipment.22
(21)    In any event, the precise market definition, including a possible segmentation
        between train and tramway equipment, can be left open for the purposes of this
        Decision as the proposed transaction does not give rise to serious doubts as to its
        compatibility with the internal market under any alternative plausible product market
        definition for the manufacture and distribution of catenary equipment (e.g. overall
        product market or, alternatively, separate product markets for the train and tramway
        segments).
4.2.3.2. Geographic market
(22)    There is no Commission precedent regarding the geographic dimension of the
        market for the manufacture of catenary equipment. In the single case where the
        Commission concluded that this activity belonged to a separate service market from
        that of the installation of contact lines, there were no horizontal overlaps or vertical
        relations involving the manufacturing of catenary equipment and therefore there was
        no need to assess the impact of the transaction in question on this market. 23
(23)    The Parties consider the market for the manufacture and supply of catenary
        equipment to be national in scope.24
20      Replies to eQ1 to Customers of Railway Contact Lines and Catenary Equipment, Question 9 and
        replies to eQ2 to Competitors, Question 11.
21      Replies to eQ2 to Competitors, Question 11.1.
22      Form CO, para. 52.
23      See case M.5701- Vinci/CEGELEC, paras. 34 ff.
24      Form CO, para. 64.
                                                      6
 ---pagebreak--- (24) Views expressed by market participants over the course of the market investigation
     diverge and the results of the market investigation are overall inconclusive.
(25) Even more so than for the provision of installation and maintenance services for
     catenary and overhead contact lines, the results of the market investigation suggest
     that the relevant geographic market for the manufacture and supply of catenary
     equipment is widening.25 A majority of customers and half of the competitors who
     expressed an opinion indicated that national regulations, technical standards and/or
     certification processes are not very different across the EEA,26 suggesting that
     regulatory differences have declined in recent years. Overall, market participants
     indicated that the geographic market might be wider than the one for installation
     services since the shipment of equipment is not constrained by travel and
     accommodation costs for the workforce and language barriers, at least to the degree
     it still constrains installation services. Smaller equipment appears to be particularly
     easy to ship cross-border.27 Moreover, a clear majority of market participants who
     expressed an opinion indicated that no physical presence is needed in the country of
     the project for which the equipment is ordered.28
(26) However, individual replies provided by several market participants indicate that
     customers still have a preference for domestic suppliers due to, e.g., language
     barriers, costs and lasting albeit limited differences in applicable regulatory
     standards.29
(27) Ultimately, the definition of the relevant geographic market for the manufacture and
     distribution of catenary equipment may be left open for the purposes of this Decision
     since no serious doubt arises irrespective of whether the relevant geographic market
     is defined as national, supra-regional, EEA-wide or worldwide in scope.
25   Asked for the size of the geographic market for the manufacture and supply of catenary equipment,
     customers and competitors disagreed. A majority of customers who took a position consider the
     geographic scope to be EEA-wide, while competitors were split between a national and a worldwide
     market, see replies to eQ1 to Customers of Railway Contact Lines and Catenary Equipment, Question
     10 and replies to eQ2 to Competitors, Question 12.
26   Replies to eQ1 to Customers of Railway Contact Lines and Catenary Equipment, Question 11 and
     replies to eQ2 to Competitors, Question 13.
27   One customer noted in this regard: “[…] Many components are small enough to be shipped from
     other countries. Some single source components where the company owns the IPR are only
     manufactured abroad” (reply to eQ1 to Customers of Railway Contact Lines and Catenary
     Equipment, Question 12.1.) A competitor said: “Most manufacturers supply on a worldwide basis.
     While transport costs of some of the equipment such as the poles and its foundation is is moderate to
     high, other catenary equipment is normally small and easily transportable. It is therefore not required
     to have a local presence in a specific country to supply catenary equipment” (reply to eQ2 to
     Competitors, Question 14.1.).
28   Replies to eQ1 to Customers of Railway Contact Lines and Catenary Equipment, Question 12 and
     replies to Q 2 to Competitors, Question 14.
29   Replies to eQ1 to Customers of Railway Contact Lines and Catenary Equipment, Question 12.1 and
     replies to eQ2 to Competitors, Question 14.1.
                                                      7
 ---pagebreak--- 4.3.   Competitive assessment
4.3.1. Horizontal overlaps in the installation and maintenance of catenary and overhead
       contact lines
(28)   The Parties’ activities in the installation and maintenance of catenary and overhead
       contact lines overlap at EEA level but their combined EEA-wide market share
       remains modest at around [10-20]%, thus not resulting in an affected market.30
       Likewise, no affected market arises at EEA level if limited to the installation and
       maintenance of catenary and overhead contact lines for either train or tramways.
       Moreover, the Parties are not active in the installation and maintenance of third rail
       systems.
(29)   At national level, the proposed transaction would give rise to a single horizontally
       affected market for the installation and maintenance of catenary and overhead
       contact lines in Belgium, where Powerlines is only active in the tramway segment.
       In fact, the Parties activities do not overlap in any other Member State or party to the
       EEA Agreement, except Norway […].31 However, the combined market share of the
       Parties in Norway remains limited, at approximately [10-20]%.
(30)   For the sake of completeness, a slight majority of market participants who expressed
       an opinion indicated that the Parties might be potential competitors in the United
       Kingdom, France, the Netherlands, Luxembourg, and Sweden.32 However, the
       market share of the Party currently active in the United Kingdom, France and the
       Netherlands remains below 30%, irrespective of the product segmentation.33 In
       Luxemburg, the market share of Engie’s Ineo is around [40-50]% for train and
       tramways combined, and [90-100]% for tramways.34 However, the relatively limited
       size of the relevant market segments in Luxemburg means that market shares may
       vary significantly depending on the award of each particular tender. Moreover, a
       number of strong competitors active in the train segment in Luxemburg are also
       active in the tramway segment in neighbouring countries. For example, Colas Rail
       with a [40-50]% market share in the train segment in Luxemburg also has a 30-40%
       market share in the tramway segment in France and is active in that segment in
       Belgium as well.35 Similarly, TSO with a [20-30]% market share in the train
       segment in Luxemburg is a strong player in the tramway segment in France with a
       [20-30]% market share.36 Moreover, the Eqos Energie group that is based in
       Luxembourg holds a very strong market position in the tramway segment in
30     Form CO, para. 97.
31     Form CO, para. 93 ff. and reply to RFI 5, question 1 on 13 August 2019.
32     Replies to eQ1 to Customers of Railway Contact Lines and Catenary Equipment, Question 24 and 25
       and replies to eQ2 to Competitors, Question 20 and 21.
33     In France Engie through INEO has an approximately [20-30]% market share (see Form CO para. 158
       table 4). In Sweden and the UK Powerlines has a market share below 30%, (see reply to RFI N°9 of
       18 September 2019).
34     Form CO, para. 159 table 6.
35     Form CO, para 158 table 4.
36     Form CO, para. 159 table 6.
                                                        8
 ---pagebreak---         Belgium, of almost [60-70]%.37 Thus, combined with the lack of language barriers
        and the anticipated increase in cross-border supply (see above paragraphs (17) to
        (18)), effective competition from strong suppliers active in neighbouring countries
        will remain in Luxemburg irrespective of the proposed concentration. Furthermore,
        market participants did not raise specific concerns in relation to Luxembourg over
        the course of the market investigation.
4.3.1.1. Assessment of the horizontally affected market
(31)    The market investigation revealed that the sourcing of installation and maintenance
        services for catenary and overhead contact lines, including third rail system, takes
        place though tenders (i.e., these are “bidding markets”),38 and that price is the key
        driver of competition39.
(32)    In Belgium, the proposed transaction would result in a combined market share of
        [20-30]%, with an increment below [0-5]% in an overall market for the installation
        and maintenance services for catenary and overhead contact lines. In the tramway
        segment where Powerlines is active, the combined market share would be around
        [30-40]% with an increment below [0-5]%. The Parties claim that these market
        shares are overestimated inasmuch as they do not take into account third rail system
        (for the Parties themselves do not install or maintain this type of system in
        Belgium).40 These market shares were overall confirmed by market participants over
        the course of the market investigation.41
(33)    Powerlines entered the Belgium market in 2017 and has since participated in the
        same tenders as Engie. The Parties claim however that they are not close competitors
        because Powerlines does not have the capabilities to bid for large projects, whereas
        Engie does. As apparent from the results of the Commission’s investigation, market
        participants share the view that the Parties are not close competitors, including in
        Belgium.42
(34)    The Parties also claim that they are facing effective competition in Belgium from
        seven other established market players, including two with a market share close to
        the Parties (Colas and Engema/Mobix). In the tramway segment, specifically, the
        Parties face competition from at least two other competitors, including Eqos with a
        much larger market share close to [60-70]%. Generally, the results of the market
37      Form CO, para. 156 table 3.
38      Replies to eQ1 to Customers of Railway Contact Lines and Catenary Equipment, Question 13 and
        replies to eQ2 to Competitors, Question 15.
39      Replies to eQ1 to Customers of Railway Contact Lines and Catenary Equipment, Question 15.
40      Form CO, para. 80, 81, 86 and 154.
41      Replies to eQ1 to Customers of Railway Contact Lines and Catenary Equipment, Question 18 and
        replies to eQ2 to Competitors, Question 16.
42      Replies to eQ1 to Customers of Railway Contact Lines and Catenary Equipment, Question 18, 21, 22,
        23 and replies to eQ2 to Competitors, Question 16, 18.3, 18.4 and 19. One competitor stated in this
        regard: “To [our] knowledge, Engie and Powerlines have never tendered against each other. They
        could however, be close competitors as they both have railway market experience and have tendered
        for the same scope of work” (see reply to eQ2 to Competitors, Question 18.1).
                                                         9
 ---pagebreak---         investigation confirm that the supply conditions in Belgium are sufficiently
        competitive.43
(35)    Moreover, the Parties claim that they will continue facing potential competition in
        Belgium.44 The market investigation confirmed that new entries into the Belgian
        market(s) are possible even though the number of tenders is expected to be limited in
        the next three years.45 The target itself entered Belgium only in 2017 and another
        company shared its interest in entering the Belgium market(s) in response to the
        market investigation.46
4.3.1.2. Conclusion on horizontal overlaps
(36)    In view of the considerations summarised in recitals (31) to (35), the Commission
        concludes that the proposed transaction does not give rise to serious doubts about its
        compatibility with the internal market as a result of possible horizontal effects in the
        installation and maintenance of catenary and overhead contact lines.
4.3.2. Vertical relations between Powerlines’ activities in the manufacture of catenaries
        and related components
(37)    While Engie is only active in the installation and maintenance of catenary and
        overhead contact lines, Powerlines also manufactures and distributes catenaries and
        associated components and is as such active in a product market upstream of the
        electrification services.
(38)    On a single product market combining installation and maintenance for trains and
        tramways, the proposed transaction would not lead to vertically affected markets,
        irrespective of the geographic market definition.47 If one were to consider a distinct
        market for the installation and maintenance of catenary and overhead lines for
        tramways, the proposed transaction would result in a vertically affected market in
        Belgium. However, in Belgium, Powerlines’ upstream market share is limited
        (approx. [5-10]%),48 while Engie’s downstream market share in the tramways
        segment is moderate (approx. [30-40]%).49 Moreover, there are at least four other
        competitors active in the supply of catenary equipment in Belgium, including two
        with higher market shares than Powerlines (Siemens Mobility with approx. [60-
        70]% and Drugmand & Meert with approx. [10-20]%). In addition, since these are
43      Replies to eQ1 to Customers of Railway Contact Lines and Catenary Equipment, Question 18, 21, 22
        and replies to eQ2 to Competitors, Question 16, 18.3, 18.4.
44      Form CO, para. 91.
45      Replies to eQ1 to Customers of Railway Contact Lines and Catenary Equipment, Question 26 and 27
        and replies to eQ2 to Competitors, Question 23.1.
46      Replies to eQ1 to Customers of Railway Contact Lines and Catenary Equipment, Question 26 and 27
        and replies to eQ2 to Competitors, Question 22 and 23.
47      See Form CO, para 118 to 125.
48      Form CO, para. 121 and 171.
49      Form CO, para. 156.
                                                         10
 ---pagebreak---         bidding markets (see recital (31)), the Commission considers that the incentives to
        stop supplying a competitor downstream are weak as the opportunity to recover the
        loss on the downstream market is not guaranteed, whereas by supplying a competitor
        the vertically integrated company which lost the bid might still (indirectly) benefit
        from that lost bid. Hence, the likelihood that the Parties might engage in an input
        foreclosure strategy appears remote.
(39)    Similarly, engaging in a customer foreclosure strategy also appears unlikely. There
        are several other installers in Belgium and given that these are bidding markets the
        likelihood appears limited that the merged entity would benefit from higher price
        levels in the upstream market as result of their upstream rivals being foreclosed.
        Furthermore, the outcome of the market investigation has revealed that the impact of
        any foreclosure strategy on customers of Powerlines and suppliers to Engie would be
        limited in any event.50
(40)    For the sake of completeness, no vertically affected market arises in Luxembourg, as
        Powerlines has not been active in the manufacture and supply of catenary equipment
        and its components in Luxembourg over at least the last five years.51
4.3.2.1. Conclusion on vertical effects
(41)    In view of the considerations summarised in recitals (37) to (38), the Commission
        concludes that the proposed transaction does not give rise to serious doubts as to its
        compatibility with the internal market or the functioning of the EEA agreement as a
        result of the vertical relation arising between Powerlines’ activities in the
        manufacture and distribution of catenary equipment, on the one hand, and the
        Parties’ activities in the installation and maintenance of catenary and overhead
        contact lines, on the other hand, irrespective of the geographic market definition.
5.      CONCLUSION
(42)    For the above reasons, the European Commission has decided not to oppose the
        notified operation and to declare it compatible with the internal market and with the
        EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the
        Merger Regulation and Article 57 of the EEA Agreement.
                                                              For the Commission
                                                              (Signed)
                                                              Margrethe VESTAGER
                                                              Member of the Commission
50      Replies to eQ2 to Competitors, Question 24, 24.1, 24.2, 25, 25.1 and 25.2.
51      Form CO, para. 118 and 119 and the Parties’ reply to RFI 10 of 19 September 2019.
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