CELEX: 32014M7401
Language: en
Date: 2014-11-26 00:00:00
Title: Commission Decision of 26/11/2014 declaring a concentration to be compatible with the common market (Case No COMP/M.7401 - BLACKSTONE / ALLIANCE BV / ALLIANCE AUTOMOTIVE GROUP) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

                                        Brussels, 26/11/2014

                                        C(2014) 9144 final

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|To the notifying party:                                                |                                                                       |
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Dear Sir/Madam,

Subject:    Case No COMP/M.7401 – Blackstone/ Alliance BV/ Alliance Automotive Group
         Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1] and Article 57 of the Agreement on the European
         Economic Area[2]

    1) On 22 October 2014, the European Commission received a notification of a proposed concentration  pursuant  to  Article  4  of  the  Merger
       Regulation by which The Blackstone Group L.P. ("Blackstone", US) and Alliance Industries B.V. ("Alliance BV", Luxembourg)  acquire  within
       the meaning of Article 3(1)(b) of the Merger Regulation joint control of Alliance Automotive Group ("AAG", France), by way of purchase  of
       shares (Blackstone and Alliance BV are designated hereinafter as the 'notifying parties' or 'parties to the proposed transaction').[3]

       THE PARTIES

    2) Blackstone is a global alternative asset manager and provider of financial advisory services which operates as  an  investment  management
       firm. It holds a number of participations in various sectors. One of its portfolio companies is  Gates  Worldwide  Limited  ("Gates",  the
       United States). Gates manufactures and supplies, among others, spare parts to the automotive sector.

    3) Alliance BV is a financial holding company. In addition to its participation in AAG, it has participations in other  companies  active  in
       the distribution of boat spare parts and various products and services for boatyards.

    4) AAG is a wholesale distributor of automotive spare parts with both trading  and  distribution  activities.  It  is  currently  exclusively
       controlled by Weinberg Capital Partners ("WCP", France), a private equity fund. AAG's trading arm is in charge  of  the  supply  of  spare
       parts through purchasing entities; its distribution activities consist of the selling of spare parts on  both  the  wholesale  and  retail
       levels.

       THE OPERATION

    5) Pre-transaction Aliance BV holds 31.9% of the shares in AAG. The latter is currently solely controlled by WCP  that  holds  54.3%  of  its
       shares. The proposed transaction consists of the acquisition by Blackstone[4] of […]% of the stakes in AAG.  Post-transaction,  Blackstone
       and Alliance BV will jointly control AAG, with respective shareholdings of […]% and […]%.

       THE CONCENTRATION

       a)   Joint control

    6) Although Blackstone will acquire a […]% stake in AAG, the notifying parties will both have a veto right at the level  of  AAG's  board  of
       directors on several issues which are essential to the latter's strategic commercial behaviour, including on the adoption and modification
       of the annual budget and business plan.[5] Accordingly, Blackstone and Alliance  BV  will,  post-merger,  exert  joint  control  over  the
       strategic commercial behaviour of AAG within the meaning of Article 3(1)(b) of the Merger Regulation.

       b)   Full-functionality

    7) AAG constitutes an existing undertaking that already performs all the functions of an autonomous economic entity within the meaning of the
       Merger Regulation. Indeed, AAG currently operates independently on the market, having its own financial resources and turnover, assets and
       staff, as well as a dedicated management overseeing its daily business. Although AAG is foreseen to continue its current operations and is
       therefore likely to, post-merger, constitute a full-function joint venture according to Article 3(4) Merger Regulation, there is  no  need
       to finally conclude on that issue as the proposed transaction involves the acquisition of joint control of a  pre-existing  business  from
       third parties.[6]

       EU DIMENSION

    8) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million[7] (Blackstone: EUR  […]  million;
       Alliance BV: EUR […]; AAG: EUR […]). Each of Blackstone and AAG has an EU-wide turnover in excess of EUR 250 million (EUR […]  and EUR […]
       respectively). Of these two undertakings, only AAG achieves more than two-thirds of its aggregate EU-wide turnover within one and the same
       Member State (namely France). The notified operation therefore has an EU dimension within Article 1(2) of the Merger Regulation.

       COMPETITIVE ASSESSMENT

    9) The activities of the notifying parties do not overlap at a horizontal level. However, there is a  vertical  relationship  between  Gates'
       activity and AAG's activity. In particular, Gates manufactures and supplies spare parts to the automotive sector,  while  AAG  acts  as  a
       wholesale distributor of automotive spare parts. AAG also  owns  four  different  central  purchasing  agencies.  Each  of  these  central
       purchasing agencies has affiliated wholesale distributors, either owned by AAG or independent of AAG. Finally,  AAG  also  has  a  limited
       retail distribution activity.

1 Market definition

1 Market for the manufacture and supply of automotive spare parts (upstream)

1 Relevant upstream product market

   10) In the automotive sector, the Commission has in the past defined the relevant product market for the manufacture and supply of spare parts
       and components on a product-by-product basis.[8]

   11) Based on that decision-making practice, the notifying parties submit that the narrowest relevant product markets that are affected by  the
       proposed concentration are the markets for the manufacture and supply of (1) ribbed belts, (2) synchronous belts, and (3) synchronous belt
       kits. In automotive applications, synchronous belts are used to synchronize the rotation of the engine crankshaft to its camshaft  due  to
       engine combustion in a valvetrain system. Ribbed belts, in turn, transfer power from the crankshaft to accessory drive components, such as
       the alternator, air conditioning compressor, power steering and water pumps. The notifying parties submit that  the  two  types  of  belts
       accordingly serve different purposes in the automotive industry and cannot be  considered  part  of  the  same  relevant  product  market.
       Finally, the notifying parties indicate that synchronous belt kits form a bundle of products that is sold separately into the  independent
       aftermarket ("IAM") and that, in line with prior decision-making practice of the Commission[9], those kits  can  therefore  be  considered
       part of a separate relevant product market.

   12) The Commission has also further segmented the various relevant markets  for  the  manufacture  and  supply  of  automotive  components  by
       reference to:

         – The vehicles for which the product is supplied: in this respect the Commission has distinguished between spare parts  for  (a)  light
           vehicles, and (b) heavy commercial vehicles.[10]

         – The distribution channel to which the product is supplied: in this regard, the Commission has distinguished between (a) products  for
           original equipment manufacturers (“OEM”), including products for the original equipment service (“OES”) businesses, and (b)  products
           sold to the IAM.[11]

   13) The notifying parties agree with this product market segmentation which was also confirmed during the Commission's  market  investigation.
       The Commission therefore retains that product market segmentation for the purpose of this decision.

2 Relevant upstream geographic market

   14) As regards the geographic scope of these markets, the Commission considered in previous decisions[12] a national scope for the IAM markets
       and an EEA-wide, if not global, scope for the OEM/OES markets.

   15) The notifying parties did not take a position on the geographic market and provided market shares at a national level for the IAM segment.

   16) In any event, for the purpose of this decision the exact delineation of the relevant geographic markets can be left open as  the  proposed
       transaction will not give rise to competition concerns even under the narrowest plausible geographic market.

2 Market for the wholesale distribution of automotive spare parts (downstream)

1 Relevant downstream product market

   17) AAG is active in the wholesale distribution of spare parts for both light vehicles and heavy commercial vehicles in the  IAM  distribution
       channel in France and in the UK.

   18) The Commission has stated in a number of decisions that the market for the wholesale  distribution  of  automotive  components  is  to  be
       divided by reference to the vehicles for which products are supplied (light vehicles vs. heavy commercial vehicles). The  Commission  also
       considered a distinction by reference to the distribution channel (OEM/OES vs. IAM), but ultimately left open the exact definition of  the
       relevant product market.[13]

   19) According to the notifying parties, the markets for the wholesale distribution of spare parts, whether for light  vehicles  or  for  heavy
       commercial vehicles, encompass both the IAM and the OES segment. The notifying parties provided AAG's market shares separately for the IAM
       segment.

   20) In any event, for the purpose of this decision the exact delineation of the relevant market involving the wholesale distribution of  spare
       parts can be left open as the proposed transaction will not give rise to competition concerns even under the narrowest  plausible  product
       market.

       2 Relevant downstream geographic market

   21) As regards the geographic scope of those wholesale spare parts markets, the Commission considered in  previous  decisions[14]  that  their
       geographic scope could be either EEA-wide, nation-wide or even regional.

   22) The notifying parties are of the view that the wholesale distribution markets in which AAG operates are at least national in scope.

   23) In any event, for the purposes of this decision, the exact delineation of the relevant geographic markets can be left open as the proposed
       transaction will not give rise to competition concerns under any alternative geographic  delineation  considered.  Indeed,  the  notifying
       parties confirmed that AAG's share of the market for the wholesale distribution of spare  parts  remains  below  30%  under  any  possible
       alternative product and geographic market definitions.

2 Competitive assessment

   24) As explained above, the activities of the notifying parties  do  not  overlap  at  a  horizontal  level.  However,  there  is  a  vertical
       relationship between Gates' activities on the upstream markets for the manufacture and supply of automotive components for light  vehicles
       into the IAM channel and AAG's activities on the downstream markets for the wholesale supply of automotive spare parts for light  vehicles
       into the IAM channel, both in the UK and in France. This vertical relationship gives rise to six vertically affected markets.

   25) On the relevant downstream markets and considering the narrowest plausible product and geographic market definitions,  AAG  has  a  market
       share of less than 30%. In particular, the notifying parties estimate that, in 2013, AAG had a market share in the wholesale  distribution
       of spare part for light vehicles in the IAM distribution channel of [20-30]% in France[15] and of [10-20]% in  the  UK.  With  regards  to
       wholesale distribution of spare parts for heavy commercial vehicles they estimate that, in 2013, AAG had a market  share  of  [20-30]%  in
       France and [20-30]% in the UK.

   26) On the relevant upstream markets in 2013, Gates only had a market share of 30% or more under the narrowest possible product and geographic
       market definitions (i.e. at a national level) in six relevant markets.

   27) The table below sets out the parties' market shares in each of the six vertically affected markets.

|Gates' market share in volume in the market for the manufacture and supply of certain automotive spare parts for light vehicles to |
|the IAM channel (upstream), 2013                                                                                                   |
|France                                                           |UK                                                               |
|Ribbed-belts         |synchronous belts    |synchronous belt kits|Ribbed-belts         |synchronous belts    |synchronous belt kits|
|[30-40]%             |[40-50]%             |[40-50]%             |[30-40]%             |[40-50]%             |[40-50]%             |
|AAG's market share in volume in the market for the wholesale distribution of spare parts for light vehicles in the IAM segment     |
|(downstream), 2013                                                                                                                 |
|France                                                           |UK                                                               |
|[20-30]%[16] [17]                                                |[10-20]%[18]                                                     |

   28) The market investigation focused on the potential impact on competition of the proposed transaction in  relation  to  the  six  vertically
       affected markets set out in this table. For each of those, the Commission assessed below two types of foreclosure risks: (i) the  risk  of
       an input foreclosure and (ii) the risk of a customer foreclosure. As the arguments are similar for each of these vertical  relations,  the
       input foreclosure and customer foreclosure analyses apply equally to all the affected markets.

1 Input foreclosure

   29) Input foreclosure “arises where, post-merger, the new entity would be likely to restrict access to the products or services that it  would
       have otherwise supplied absent the merger”.[19]

1 Ability

   30) The notifying parties submit that the merged entity will not have the ability to engage in any type of input foreclosure  in  relation  to
       ribbed belts, synchronous belts and synchronous belt kits for the following reasons:

         – With [30-40]% market share, Gates does not have a significant degree of market power in the ribbed belt markets.

         – AAG's competitors will continue to have access to numerous suppliers of ribbed belts, synchronous belts and  synchronous  belt  kits,
           to which they can turn for their purchases.

         – Gates' ribbed-belts, synchronous belts and synchronous belt kits are not important inputs for the  wholesale  distribution  of  spare
           parts. In the case of AAG, these three products represent together between [0-5]% and [0-5]% of the total value of  its  purchase  of
           automotive spare parts, in France and in the UK respectively.

   31) The Commission considers that the proposed transaction is unlikely to  confer  upon  Gates  the  ability  to  significantly  impact  AAG's
       competitors' access to ribbed belts, synchronous belts and synchronous belt kits, as several other credible suppliers of those inputs will
       remain post-merger. These competitors include Contitech (ribbed belts France:  [10-20]%;  ribbed  belts  UK  [10-20]%;  synchronous  belts
       France: [10-20]%; synchronous belts UK: [10-20]%; synchronous belt kits France: [5-10]%; synchronous belt kits UK: [5-10]%), Dayco (ribbed
       belts France: [20-30]%; ribbed belts UK [10-20]%; synchronous belts France: [20-30]%; synchronous belts  UK:  [30-40]%;  synchronous  belt
       kits France: [10-20]%; synchronous belt kits UK: [20-30]%), Hutchinson and Goodyear. Also, ribbed belts, synchronous belts and synchronous
       belt kits together represent only a very limited part of the total value  of  automotive  spare  parts  purchases  made  on  the  relevant
       downstream markets (those inputs represent [0-5]% and [0-5]% of AAG's total spare parts purchases in  France  and  the  UK  respectively).
       Finally, Gates does not hold any IP rights in relation to those products.[20]

2 Incentive

   32) The notifying parties submit that neither Gates nor Blackstone will have an incentive to engage  in  any  type  of  input  foreclosure  in
       relation to ribbed belts, synchronous belts and synchronous belt kits for the following reasons:

         – Gates would lose significant sales upstream without any certainty that AAG's competitors ability and incentive to compete  downstream
           would be impacted, since AAG's competitors have access to other suppliers of ribbed belts, synchronous  belts  and  synchronous  belt
           kits.

         – An input foreclosure strategy would endanger Gates’ customer relationships with spare parts wholesalers, and  may  eventually  result
           in AAG's competitors diverting part of their demand for other types of products from Gates to Gates' competitors. This  would  result
           in an additional loss of sales for Gates upstream.

         – Each Blackstone company is independently managed and finance. As such, there will be no formal  vertical  integration  between  Gates
           and AAG. Therefore, it will be very difficult for AAG and Gates to coordinate their commercial strategy in order  to  maximise  their
           combined profit. Instead, post-merger the most likely outcome is that both entities will continue to be run independently.

         – Blackstone will have no economic incentive to engage in an input foreclosure strategy as it would support  all  the  costs  (loss  of
           sales for AAG), while all of the benefits (if any) will be shared with Alliance BV (which will have joint control over AAG).

   33) The Commission considers that the proposed transaction is unlikely to confer upon the merged entity an incentive to engage in any type  of
       input foreclosure. In particular, the Commission considers that such strategy would likely have a significant negative  impact  on  Gates'
       profit upstream,[21] while it is much less likely that AAG could benefit from this strategy  on  the  downstream  markets,  because  AAG's
       competitors will still have access to several other credible suppliers of ribbed belts, synchronous belts and synchronous  belt  kits.  As
       such, those competitors' ability and incentive to compete downstream is unlikely to be impacted.

3 Conclusion on input foreclosure

   34) On the basis of the above and all available evidence, and given that  no  concerns  were  raised  during  its  market  investigation,  the
       Commission considers that the proposed transaction does not raise serious doubts with regard to input foreclosure.

2 Customer foreclosure

   35) Customer foreclosure arises where the merged entity forecloses "access to a sufficient customer base to its actual or potential rivals  in
       the upstream market (the input market) and reduce their ability or incentive to compete. In turn, this may raise downstream rivals'  costs
       by making it harder for them to obtain supplies of the input under similar prices and conditions as absent the merger".[22]

1 Ability

   36) The notifying parties submit that the merged entity will have no ability to engage in customer foreclosure because  there  are  sufficient
       economic alternatives for Gates' rivals in the downstream markets. In particular, AAG would only account for [10-20]% of all purchases  of
       spare parts for light vehicles in France and for [5-10]% thereof in the UK.

   37) As part of the Commission's market investigation, it was confirmed that AAG accounts for only a small part of all purchases of spare parts
       for light vehicles in France and in the UK respectively. In addition, no concerns were  raised  regarding  possible  customer  foreclosure
       during the Commission's market investigation.

   38) In light of the results of its market investigation, the Commission considers that it is very unlikely that AAG will have the  ability  to
       engage in customer foreclosure, in particular because AAG does not appear to have any form of market power on the downstream markets.

2 Conclusion on customer foreclosure

   39) Based on the above and all available evidence, the Commission considers that the proposed transaction does not raise serious  doubts  with
       regard to customer foreclosure.

       CONCLUSION

   40) 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

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[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 383, 29.10.2014, p. 18.

[4]   Its stake in AAG is foreseen to be acquired by two investment funds, the respective general partners of which will be indirectly owned  and
      controlled by Blackstone. In line with the Commission's consolidated jurisdictional notice (OJ C95, 16.04.2008, p. 1), Blackstone will,  by
      means of the proposed transaction, acquire joint control of AAG as it will control both aforementioned investment funds.

[5]   Draft shareholders' agreement, […].

[6]   In line with the Commission's consolidated jurisdictional notice, recitals 91 and 24.

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

[8]   See e.g. Cases COMP/M.4456, Mahle / Dana EPG (connecting rod bearings and pistons rings COMP/M.3972, TRW Automotive / Dalphi  Metal  Espana
      (airbags and steering wheels); COMP/M.2535, Sogefi / Filtrauto  (filters);  COMP/M.2939,  JCI  /  Bosch  /  VB  Autobatterien  JV  (starter
      batteries)

[9]   Case COMP/M.6944, Thermo Fisher Scientific / Life Technologies.

[10]  See e.g. Case COMP/M.3789, Johnson controls / Robert Bosch / Delphi SLI, para 7.

[11]  See e.g. Case COMP/M.4456, Mahle / Dana EPG, paras 9 and 10.

[12]  See e.g. Cases COMP/M.2535, Sogefi / Filtrauto, para 25; COMP/M.4456, Mahle / Dana EPG, para 24; COMP/M.6319, Triton / Europart,  paras  16
      and 17; COMP/M.5799, Faurecia / Plastal, para 7; COMP/M.3972, TRW Automotive / Dalphi Metal Espana, para 13 and footnote 5.

[13]  See especially Case COMP/M.6319, Triton / Europart, para 18.

[14]  See Cases COMP/M.5250, Porsche / Volkswagen; COMP/M.3198, VW – Audi / WW – Audi Vertriebszentren.

[15]  This [20-30]% market share is estimated on the basis of the sales of spare parts for  light  vehicles  made  by  all  of  AAG's  affiliated
      distributors, regardless of whether they are owned by AAG or independent.

[16]  This [20-30]% market share is estimated on the basis of the sales of spare parts for  light  vehicles  made  by  all  of  AAG's  affiliated
      distributors, regardless of whether they are owned by AAG or independent.

[17]  See para 135 and 138 of the Form CO, even at regional level, the notifying parties' shares do not exceed 30%.

[18]  See para 135 and 139 of the Form CO, even at regional level, the notifying parties' shares do not exceed 30%.

[19]  Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of concentrations between  undertakings,
      OJ C 265/6 from 18 October 2008 (“Non-horizontal Guidelines”), point 31.

[20]  Form CO, footnote 81.

[21]  During the market investigation, one respondent confirmed that such a strategy by Gates would indeed  have  a  negative  impact  on  Gates'
      sales, Questionnaire Q3 – AAG's IAM light vehicle competitors in France, question 14.

[22]  Non-horizontal Guidelines, point 58.

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 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.

                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE