CELEX: 32015M7593
Language: en
Date: 2015-06-11 00:00:00
Title: Commission Decision of 11/06/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7593 - ALCOA / RTI INTERNATIONAL METALS) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 11.6.2015
C(2015) 4113 final

|In the published version of this decision, some information |           |Public version                                                 |
|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|omitted has been replaced by ranges of figures or a general |           |                                                               |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.                                                |           |                                                               |
|                                                            |           |                                                               |
|                                                            |           |MERGER PROCEDURE                                               |

|                                                                       |To the notifying party                                                 |

Dear Sir/Madam,

Subject:    Case M.7593 - ALCOA / RTI INTERNATIONAL METALS
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 4 May 2015, the European Commission (the “Commission”) received notification of a proposed concentration pursuant to Article 4  of  the
       Merger Regulation by which Alcoa Inc. ("Alcoa", U.S.) will acquire within the meaning of Article 3(1)(b) of  the  Merger  Regulation  sole
       control over RTI International Metals, Inc. ("RTI", U.S.) by way of  purchase  of  shares.[3]  Alcoa  is  designated  hereinafter  as  the
       "Notifying Party" and together with RTI as the "Parties" to the proposed transaction.

       THE PARTIES AND THE OPERATION

    2) Alcoa is a publicly listed producer active in lightweight metals  engineering  and  manufacturing.  Its  multi-material  products  include
       aluminium, titanium, and nickel and are used in aircraft, automobiles, commercial transportation, packaging,  building  and  construction,
       oil and gas, defence, consumer electronics, and industrial applications. Alcoa is also active in the production and management of  primary
       aluminium, fabricated aluminium, and alumina. Alcoa´s operations consist of four worldwide segments: (i)  Alumina,  (ii)  Primary  Metals,
       (iii) Global Rolled Products and (iv) Engineered Products and Solutions.

    3) RTI is a publicly listed producer of titanium mill and melted products, and of  extruded  and  machined  components,  for  the  aerospace,
       defence, energy, medical device, and other consumer and industrial markets. Its business  is  divided  into  two  segments:  (i) upstream:
       Titanium segment, and (ii) downstream: Engineered Products and Services (EP&S) segment.

    4) By agreement and plan of merger signed on 8 March 2015 between the Parties and Ranger Ohio Corporation, a direct wholly  owned  subsidiary
       of Alcoa ("Merger Sub"), the Parties intend that Merger Sub shall be merged with  and  into  RTI  International,  with  RTI  International
       surviving the merger as the direct wholly owned subsidiary of Alcoa.

    5) The proposed concentration, which will be effected by  way  of  purchase  of  shares  in  a  stock-for-stock  transaction,  constitutes  a
       concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

       EU DIMENSION

    6) The transaction will have a Union dimension under Article 1(3) of the Merger  Regulation.  The  undertakings  concerned  have  a  combined
       aggregate world-wide turnover of more than EUR 2 500 million[4] [Alcoa: EUR […]; RTI: EUR […]]. In each of at least  three  Member  States
       [[…]], the combined aggregate turnover of the undertakings concerned is more than EUR 100 million. In each of  these  Member  States,  the
       aggregate turnover of each of the undertakings concerned is more than EUR 25 million, but they do not  achieve  more  than  two-thirds  of
       their aggregate EU-wide turnover within one and the same Member State. The aggregate Union-wide  turnover  of  each  of  the  undertakings
       concerned is more than EUR 100 million. The notified concentration therefore has an EU dimension.

       COMPETITIVE ASSESSMENT

    7) The transaction is primarily of a vertical nature. RTI is a supplier of melted and milled titanium input products, whereas Alcoa purchases
       such titanium products as inputs for its casting and forging activities.  RTI  also  has  some  downstream  activities  in  machining  and
       extrusions, and Alcoa has limited production of melted titanium input products.

    8) Although both RTI and Alcoa are active in the production of melted titanium input products,  their  combined  market  shares  are  limited
       (around [10-20]%) under any plausible product market definition. The proposed transaction therefore does not lead to horizontally affected
       markets.

1 Market definition

    9) There are three distinct stages in the manufacturing of titanium products. The value chain  consists  of:  (i)  supply  of  raw  materials
       (upstream), which exist in the form of titanium sponge and recycled titanium scrap; (ii) production of input products (midstream),  namely
       melted and milled products; and (iii) conversion of input products into near-net shape  components  via  various  manufacturing  processes
       (downstream), including casting, forging, machined components and extrusion.

1 Upstream products

   10) Neither Party is active in the production and sale of titanium sponge and titanium scrap.[5]The Notifying Party therefore submits that  in
       the absence of overlaps between the Parties' activities, the relevant product market for  the  upstream  products  does  not  need  to  be
       defined.[6] As for the geographic scope, the Parties refer to the Commission decision in case M.6765 – Precision Castparts/Titanium Metals
       which found that the geographic market for titanium upstream products to be worldwide.[7]

   11) The Commission considers that given the absence of any horizontal overlap or vertical relationship  upstream, there is no need  to  define
       the exact scope of the product and geographic markets with regard to titanium sponge and recycled titanium scrap.

2 Midstream markets

   12) Melted products exist in three main forms: (i) ingots; (ii) electrodes; and (iii) slabs and are inputs for the production of mill products
       as well as for the downstream processes, notably casting, and to a more limited extent, forging.

   13) Mill products exist in three main forms: (i) long (billet and bar); (ii) flat (plate and sheet); and  (iii)  pipe.  They  are  inputs  for
       downstream processes that reshape the metal in solid form, notably forging, extrusion, and  machining.  Mill  products  are  not  used  in
       casting.

   14) The Commission previously considered that the product markets may need to be defined by at least the form of the product (e.g. long, flat)
       and potentially by grade/alloy (rotating vs. non-rotating), but left the precise market definition open.[8] The  Notifying  Party  submits
       that same should apply to the notified transaction.

   15) The replies from customers and competitors which the Commisison received in  the  market  investigation  indicated  that  titanium  melted
       products could be further segmented into ingots and slabs[9] from both a demand and a supply  side  perspective.[10]  Respondents  to  the
       investigation also  consider that a significant degree of differentiation between various grades of titanium or  titanium  alloys  exists.
       Generally titanium melted products can be distinguished based on (a) customer type (aerospace, industrial, medical etc.), (b) whether they
       will be used to produce mill products (wrought grades: plates, bars etc) or castings,[11] (c) whether they will be used for rotating grade
       products (such as rotating hot gas aerospace engine components),[12] (d) titanium purity and type of  alloy  (the  most  widespread  alloy
       being titanium 6-aluminum 4-vanadium alloy).[13]

   16) From the demand-side perspective, the choice for certain type of melted titanium product is based on the product  requirements  determined
       by the end application.[14] Thus, grades produced to meet certain product requirements are not easily substitutable from the point of view
       of intended use.[15] In terms of supply volumes, the main distinction appears to be between titanium for aerospace end  use  and  titanium
       for other applications (industrial, medical etc.). In particular the aerospace industry generally requires a higher titanium purity  level
       of the titanium grade compared to other industries.[16] Each aerospace OEM requires producers to undergo complex and lengthy qualification
       procedures before they are accepted as an approved source of titanium materials. According to one aerospace OEM, switching from  qualified
       to unqualified is "not easily done because aerospace / airworthiness authorities require lengthy  and  expensive  test  programmes  to  be
       carried out to confirm that un-qualified product can be qualified.".[17]

   17) Rotating grade titanium melted products constitute an important sub-category of  melted  titanium  product  for  the  aerospace  industry.
       According to a customer, "[r]otating grade titanium (often referred to as Premium Quality (PQ)) requires control and maintenance of  input
       material and process traceability. Control of inspectability and processing methods to ensure elimination of melt  related  defects  is  a
       requirement for PQ applications. Lifing analysis is strongly linked to material quality, defect probability, and inspection probability of
       detection; all of these are required features for critical rotating components."[18]

   18) From the supply-side perspective, switching production from one type of melted product (ingots, slabs) to another may be, depending on the
       type of melting furnace, rather difficult due to high investment costs involved.[19] More generally, for all forms of melted product,  the
       majority of the Parties' competitors also support the Commission’s view that for producers not yet active in the aerospace sector,  it  is
       difficult to reposition themselves towards aerospace customer, notably due to the complex, lengthy and costly qualification processes  for
       both the specific product as well as production processes and facilities.[20] A customer explained that "[i]f a producer has no  aerospace
       qualifications, it can be costly and time consuming to get qualified. In  addition,  the  qualification  process  for  non-rotating  grade
       aerospace products is less stringent than the qualification process for rotating grade aerospace products. Additionally, the OEM  must  be
       willing to qualify a new source. This holds true for both melted and mill products."[21]  The  replies  during  the  market  investigation
       suggests that the same is true for  the  suppliers'  switching  to  rotating  grade  products:  "[r]otative  grades  require  much  longer
       qualification. Stability of technology and internal quality and homogeneity of material is key issue. Prices is  slightly  higher".[22]  A
       customer explained that "all producers of rotating grades are active in the aerospace industry."[23]

   19) As the majority of the respondents confirmed that titanium melted products are intermediate  products  in  the  production  (for  example,
       rolling) of milled products such as plates, sheet, bars, billets, pipes and wire[24], substitutability considerations for titanium  melted
       products are equally applicable to titanium mill products. In addition, the results of the market investigation also showed that suppliers
       of mill products may be specialised in different type of mill products (flat, long).[25]

   20) On the whole, the Commission concludes on the basis of the replies from the market  investigation  that  the  market  for  titanium  input
       products can be segmented into melted and mill, and possibly further segmented by the form of melted product (ingots, slabs), the form  of
       milled product (long, flat, pipes) and end use. However, as the  notified  transaction  is  unlikely  to  significantly  impede  effective
       competition under any plausible market definition, the question of the exact scope of the relevant product market for input  products  can
       be left open.

   21) As for the geographic scope, the Notifying Party contends that the relevant markets for titanium melted products are world-wide in  scope.
       This is in line with the Commission decision in case M.6765 – Precision Castparts/Titanium Metals [26], and was confirmed by the responses
       received in market investigation. From a demand-side perspective, titanium melted and milled products are sourced globally while transport
       costs and trade barriers are minimal. From a supply-side perspective, the same competitors are  active  globally  and  the  conditions  of
       supply are homogeneous worldwide. However there may be some limitations due to export control and other laws that limit where supplies can
       be purchased.[27] Taking into account these factors, the Commisison considers that the markets for titanium melted and milled products  is
       worldwide in scope.

3 Downstream markets

   22) Various manufacturing techniques may be used to convert titanium input product into components: (i) casting is the  process  of  producing
       parts by re-melting the input product and pouring the liquid metal into a mould,  (ii)  forging  is  the  shaping  of  solid  metal  using
       localized compressive forces, typically via presses or hammers powered by compressed air, electricity, hydraulics or steam, (iii) machined
       components are produced by subtractive manufacture (cutting and drilling) and forming, primarily from sheet and plate, (iv) extrusions are
       formed by pushing long mill products (typically billets) through a die, which produces lengths with a specific 2D profile that may be  cut
       to size.

   23) The Notifying Party submits that in the present case, the product market definition for the downstream activities  does  not  need  to  be
       defined. As for the geographic scope, the Parties agree with the Commission's previous decisional practice which found that the geographic
       market for titanium components products to be at least EEA-wide or more likely worldwide.[28]

   24) The demand- and supply-side substitutability considerations concerning the aerospace customers, including for rotating grade products,  as
       discussed in paragraphs (16) to (18) are also relevant on the downstream markets for components.[29] Notably, to qualify as a supplier  to
       aerospace OEMs, a supplier of components must fulfil the requirements related both to the upstream titanium input  material  and  its  own
       manufacturing processes.

   25) As regards titanium based investment casting products, the Commission previously considered that separate markets could  be  defined  for:
       (i) aerospace airfoil casting; (ii) aerospace engine structural casting; and (iii) aerospace airframe structural casting.[30]

   26) As regards, titanium based forged products, the Commission considered whether additional segmentations should be  made  between  aerospace
       (which  is  subject  to  rigorous  certification  criteria[31])  and  other  uses,  and  among  specific  applications  within   aerospace
       applications.[32] In this respect, separate markets could be defined for (i) castings for medical and military end-use applications;  (ii)
       rotating engine components; (iii) non-rotating engine components; (vii) airframe structures;  (viii) aerostructures;  and  (ix)  fasteners
       [33].

   27) The results of the market investigation are inconclusive as to whether titanium based casting products, titanium  based  forged  products,
       machined components and extrusions should be further segmented based on characteristics, demand or supply-side considerations.[34] A broad
       majority of the respondents confirmed that components for aerospace applications do not compete with components for other end-uses due  to
       specific aircraft and certification requirements in the aerospace industry. Similarly, rotating grade  components  constitute  a  separate
       market from non-rotating grade components both from a supply and demand-side perspective.[35] As for fasteners, the results of the  market
       investigation indicated that no further segmentation is needed by grades or end-use.[36]

   28) On this basis, having regard to the Parties’ activities, forged titanium components could be  further  sub-divided  into  rotating  engine
       components, non-rotating engine components, airframe structures, aerostructures, and  fasteners.  Likewise,  titanium  castings  could  be
       further sub-divided into aerospace engine structural castings, aerospace airframe structural investment castings, and investment  castings
       for for defence and other applications.[37]

   29) As for the geographic scope of the markets, the Commission's finding in previous decisions was that the  geographic  market  for  titanium
       components products is likely to be at least EEA-wide or more likely worldwide.[38] The market investigation results support that finding.

   30) For the purpose of this decision, it is not necessary to conclude on the exact product and geographic market definition  as  the  proposed
       transaction does not give rise to serious doubts as to its compatibility with the internal market under any  plausible  market  definition
       set out at above.

2 Vertical effects

1 Competition effects of a vertical merger

   31) A vertical merger may potentially give rise to input foreclosure or customer foreclosure.

   32) 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, thereby raising its downstream rivals' costs by making it harder for them to obtain supplies of
       the input under similar prices and conditions as absent the merger.[39] Customer foreclosure may occur when a supplier integrates with  an
       important customer in the downstream market. Because of this downstream presence, the merged entity may foreclose 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.[40]

   33) In order for input or customer foreclosure to be a concern, three conditions need to be met post-merger: (i) the merged  entity  needs  to
       have the ability to foreclose its rivals; (ii) the merged entity needs to have the incentive  to  foreclose  its  rivals;  and  (iii)  the
       foreclosure strategy needs to have a significant detrimental effect on competition on the downstream  market  (input  foreclosure)  or  on
       consumers (customer foreclosure). In practice, these factors are often examined together since they are closely intertwined.[41]

2 Vertical relationships: titanium melted products (ingots) as input for Alcoa’s downstream forging and casting activities

   34) Both Parties are active in the production and sale of ingots. A portion of RTI’s and Alcoa's ingots is used for  downstream  manufacturing
       and the remainder is sold on the market. RTI uses the ingots for its machined components and extrusions, while Alcoa uses ingots  for  its
       forging and casting activities.

   35) The Parties estimate that the total worldwide merchant market for ingots is 90.7kt. RTI produced […]kt and Alcoa […]kt of ingots in  2014,
       and together representing a market share of [10-20]%. In the production of ingots, the Parties face competition from VSMPO ([…]kt),  Baoji
       Titanium Industry ([…]kt), PCC-Timet ([…]kt), ATI ([…]kt) and Toho Titanium ([…]kt). At the worldwide level, up to 80% of  ingot  is  pre-
       sold to OEMs, such as Boeing, UTC, and Rolls Royce under Long Term Agreements (LTAs).

   36) The majority of customers in the market investigation raised no competition concerns with respect to the ability of the merged  entity  to
       foreclose its competitors on the markets for titanium components. Altough one customer indicated that in the long-term  increasing  levels
       of vertical integration could weaken its ability to negotiate competitive prices, the proposed transaction will not have a negative impact
       in the medium term due to the LTAs currently in place which allow for a degree of protection until the forthcoming expiry  of  the  supply
       contract with one of the Parties to the transaction.[42]

   37) The Commission considers that the Parties are unlikely to have the incentive and the ability to foreclose competitors' access to  titanium
       melted products in order to strengthen their position on the downstream markets for components for the following reasons:

    a. the Parties only have a limited market share for titanium input products (overall [10-20]%). Even if the product markets were  limited  to
       specific titanium alloys, the Parties’ market shares would remain moderate. Concerning standard 6 Aluminium -  4  Vanadium  alloys,  RTI's
       sales represent […]% and Alcoa less than […]% of the total sales. For other specialty subtypes of the 6 Alluminium – 4 Vanadium alloy (ELI
       and Ru), RTI’s and Alcoa's sales represent  respectively  […]%  and  […]%  of  the  overall  sales.  Similarly,  while  RTI  accounts  for
       approximately […]% of the sales of the Beta C alloy, Alcoa’s  output is insignificant.

    b. the Parties face a number of significantly larger competitors. In the market investigation, the majority of customers indicated  that  the
       main suppliers of titanium melted products (notably ingots and slabs), whether for aerospace, non-aerospace or  rotating  grade  are  ATI,
       PCC/Timet, VSMPO and RTI. The number of qualified suppliers for titanium melted products for aerospace uses only ranges from 3 to  10  and
       switching suppliers is relatively easy provided that the alternative supplier is already qualified  for  aerospace  application.  Overall,
       customers perceive the level of  competition  in  titanium  melted  products  (either  aerospace,  non-aerospace  or  rotating  grade)  as
       moderate.[43]

    c. customers and competitors generally consider that RTI does not have any significant advantage over other titanium input suppliers  to  the
       aerospace industry. On the contrary, some consider that RTI is disadvantaged due to its smaller scale and lack of integration.[44]

    d. RTI presently only sells small quantities of input products outside the LTAs. Moreover, large aerospace OEMs put  in  place  directed  buy
       arrangements, whereby the OEM agrees with the titanium  input  supplier  the  terms  of  titanium  input  supplies  to  its  suppliers  of
       components.[45] Such arrangements can be seen as an expression of buyer power by large OEMs  and  may  defeat  the  Parties’  attempts  to
       foreclose downstream rivals.

    e. the investigation has confirmed that there is significant spare capacity in the market.[46] This is consistent with Alcoa’s forecast  that
       at the current level of production capacity, the utilisation rate would increase from the current rate of [60-80]% by 2018.[47]

   38) Customer foreclosure, whereby the Parties would use their downstream position as important buyers / components suppliers to foreclose  its
       rivals’ supplies of titanium melted products, is equally unlikely. Although  Alcoa  has  a  significant  position  in  certain  downstream
       segments, such as defence and other non-aerospace castings in the EEA (market share of [30-40]% in 2014), it does not purchase significant
       volumes of titanium melted product. Alcoa's ingot requirement for the last three years was on average […]kt  for  casting  and  […]kt  for
       forging, representing only […]% of the total demand for ingots. Therefore, the Parties do not  appear  to  represent  an  important  sales
       outlet for any of the significant upstream players.

   39) The majority of customers consider that the merged entity will not be able to use its market position on the upstream  market  for  melted
       products to foreclose its competitors for titanium components and none of the customers raised competition concerns about the  ability  of
       the merged entity to engage in a foreclosing strategy in the opposite scenario (use its downstream position in the supply of components to
       foreclose its rivals for titanium melted products).[48]

3 Vertical relationships: titanium mill products as inputs for Alcoa’s downstream forging and activities

   40) RTI is active in the production of long (billet) and flat (plate and sheet) milled products which Alcoa uses downstream  for  its  forging
       activities. RTI has limited downstream presence in forging, as well as in extrusions and machined components.

   41) In 2014, Alcoa had a relatively significant position in the sub-segments for forged non-rotating engine components (market share  of  [30-
       40]%) and fasteners (market share of [30-40]%).

   42) However, the Parties are unlikely to engage in input or customer foreclosure post-merger.

   43) The Commission considers that the Parties are unlikely to have the incentive and the ability to foreclose competitors' access to  titanium
       mill products in order to strengthen their position on the downstream markets for components for the following reasons:

    a. RTI only has a limited market share on any of the possible market segments for the relevant input products  –  [0-5]%  for  rotating  mill
       products (overall demand 18kt), less than 5% on both the segment of long non-rotating mill products (overall demand 62.7kt)  and  of  flat
       non-rotating mill products (overall demand 42.2kt);

    b. the Parties will face many strong rivals in the supply of milled titanium products, notably PCC, ATI and VSMPO;[49]

    c. none of the customers and competitors considered that RTI has any significant  advantage  over  other  titanium  input  suppliers  to  the
       aerospace industry;[50]

    d. the investigation has confirmed that there is significant spare capacity in the market;[51]

    e. Alcoa’s internal documents demonstrate that while the notified transaction was expected to improve the utilisation rate to around […]%  by
       2018, this would not be at the expense of existing outlets, even taking into account Alcoa’s requirements and the demand growth. The  open
       capacity would remain available to downstream parts, directed buy etc.[52]

   44) The majority of customers raised no competition concerns as regards the possibility that the merged entity would use its  market  position
       on the upstream market for milled products to foreclose its competitors for titanium components.[53]

   45) With respect to customer foreclosure, it is unlikely that the merged entity will foreclose its upstream rivals by restricting access to an
       important customer. Notably, there is a broad customer base for mill products, which includes aerospace OEMs either  directly  or  through
       directed buy agreements (where the subcontractors for OEMs source titanium input products under terms agreed by the OEM and  the  titanium
       supplier). The Parties represent only a small portion of the overall demand for mill products.

   46) The market investigation supports the Commission’s view that the Parties would face significant competitors in the  casting,  forging  and
       fasteners segment (aerospace), such as PCC.[54] None of the customers raised competition concerns about the ability of the  merged  entity
       to use its downstream position as a purchaser of mill input product for the production of components  to  foreclose  the  titanium  milled
       products supplies by its upstream rivals.[55]

   47) One respondent raised competition concerns regarding the existing cooperation  arrangements  between  Alcoa  and  VSMPO,  which  could  be
       extended to RTI post merger. The Commission understands these arrangements to consist […].[56] Based on the  available  information,  this
       arrangement does not lead to a merger-specific horizontal overlap or vertical relationship with RTI activities.

4 Conclusion on vertically linked markets

   48) In view of the above, it is highly unlikely that the merged entity will engage in any customer or input foreclosure in relation to any  of
       the vertically linked markets. The vertical aspects of the  notified  transaction  therefore  do  not  raise  serious  doubts  as  to  the
       transaction’s compatibility with the internal market on any of the plausible relevant markets.

3 Conglomerate effects

   49) According to the Non-Horizontal Guidelines[57], conglomerate mergers are mergers between firms that are in a relationship which is neither
       purely horizontal (as competitors in the same relevant market) nor vertical (as supplier and customer).  In  practice,  the  focus  is  on
       mergers between companies that are active in closely related markets (e.g. mergers involving suppliers of  complementary  products  or  of
       products which belong to a range of products that is generally purchased by the same set of  customers  for  the  same  end  use).  It  is
       acknowledged that conglomerate mergers in the majority of circumstances will not lead to any competition problems.

   50) The main concern in the context of conglomerate mergers is that of foreclosure. The combination of products in related markets may  confer
       on the merged entity the ability and incentive to leverage a strong market position from one market  to  another  by  means  of  tying  or
       bundling or other exclusionary practices. Tying and bundling as such are common practices that often have no anticompetitive consequences.
       Companies engage in tying and bundling in order to provide their customers with better  products  or  offerings  in  cost-effective  ways.
       Nevertheless, in certain circumstances, these practices may lead to a reduction in actual or potential rivals'  ability  or  incentive  to
       compete. This may reduce the competitive pressure on the merged entity allowing it to increase prices.

   51) In assessing the likelihood of such a scenario, the Commission examines, first, whether the  merged  entity  would  have  the  ability  to
       foreclose its rivals, second, whether it would have the economic incentive to do so and, third, whether a foreclosure strategy would  have
       a significant detrimental effect on competition, thus causing harm to consumers. In practice, these factors are often examined together as
       they are closely intertwined.

   52) Alcoa is a major supplier of aluminium ([…]), and its merger with a titanium input supplier could lead to a possible bundling and tying of
       aluminium products with titanium products.  The market investigation[58] indicated that the merged entity may have the ability  to  bundle
       its aluminium and titanium offering. The Commission considers that this ability does not, however,  raise  competition  concerns  for  the
       following reasons:

    a. the pool of customers buying both aluminium and titanium products is narrow and typically limited to  aerospace  OEMs,  which  are  highly
       sophisticated companies with significant buyer power.[59] A customer explained that  “there  are  only  few  buyers  which  could  buy  in
       significant quantities. Alcoa´s leverage would be ineffective due to the buying power of these customers”;[60]

    b. most of the current purchase relationships are structured through LTAs that run up to 10 years,  therefore  the  volumes  and  prices  are
       guaranteed for the medium term at least.

    c. Alcoa is already active, to some extent, in titanium input products and has not previously engaged in  any  bundling  strategy.  Likewise,
       there are other titanium suppliers that have product capability similar to the merged entity and do not engage in bundle offerings.

   53) Concerning the Parties’ possibility to bundle different products from its  titanium  portfolio,  the  competitors  and  customers  clearly
       supports the Commission’s view that there are other existing viable suppliers that can already match the offer resulting from the combined
       portfolios of Alcoa and RTI, namely ATI, PCC and VSMPO. Should the merged entity engage in bundling and tying  of  their  products,  these
       rivals would be able to react to the offer of the merged entity.[61] Furthermore, as already mentioned above, all major  suppliers  strive
       for economies of scope, a strategy  generally  endorsed  as  advantageous  by  customers  (due  to,  for  example,  streamlined  sourcing,
       administration, lower cost, discounts).[62]

1 Conclusion

   54) In conclusion, conglomerate effects as defined by the guidelines on the assessment of non-horizontal mergers under the Council  Regulation
       on the control of concentrations between undertakings are very unlikely.

       CONCLUSION

   55) For the above reasons, the 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)
                                        Věrá JOUROVÁ
Member of the Commission

-----------------------
[1]   OJ L 24, 29.1.2004, p. 1 ('the Merger Regulation'). With effect from 1 December 2009, the Treaty on the Functioning of the  European  Union
('TFEU')                                       has                                       introduced                                       certain
chang獥‬畳档愠⁳桴⁥敲汰捡浥湥⁴景✠潃浭湵瑩❹戠⁹唧楮湯湡⁤挧浯潭⁮慭歲瑥祢✠湩整湲污洠牡敫❴‮桔⁥整浲湩汯杯⁹景琠敨吠䕆⁕楷汬戠⁥獵摥琠牨畯桧畯⁴桴獩搠捥es,
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 OJ C 158, 13.5.2015, p. 16.

[4]   Turnover calculated in accordance with Article 5 of the Merger Regulation and the Commission Consolidated Jurisdictional Notice (OJ  C  95,
16.4.2008, p. 1).

[5]   Both Alcoa and RTI produces titanium scrap which is used internally and make no sales to third parties. Although Alcoa, as a result of  the
recent acquisition of Firth Rixon, produces […] metric tons of titanium scrap that […].

[6]   The upstream markets were analysed in the case M.6765 – Precision Castparts/Titanium Metals.

[7]   M.6765 – Precision Castparts/Titanium Metals.

[8]   M.6765 – Precision Castparts/Titanium Metals, para. 25.

[9]   Electrodes were described as intermediate product in the production of ingots or slabs.

[10]        Reply to Q2-Questionnaire to Customers, question 7 and reply to Q1-Questionnaire to Competitors, question 6.

[11]        Reply to Q2-Questionnaire to Customers, questions 7 and 8.

[12]  Reply to Q2-Questionnaire to Customers, question 12 and reply to Q1-Questionnaire to Competitors, question 13.

[13]  Reply to Q2-Questionnaire to Customers, question 11 and reply to Q1-Questionnaire to Competitors, questions 7 and 8.

[14]  An aerospace OEM customer observed: "Melt process (type and number of re-melts) and input stock are major  elements  that  define  pedigree
and applicability of ingot material. Premium Quality (PQ) melted ingots are required for aerospace applications such as  rotors.  Characteristics
that differentiate pedigrees of ingot materials include chemistry control, segregation, microstructure control and ultrasonic  inspectability  in
post ingot processing form…". Reply to Q2-Questionnaire to Customers, question 8.2.

[15]  Higher quality titanium may also be used for applications with  less  strict  product  requirements,  but  only  if  this  is  commercially
sensible.

[16]        Reply to Q2-Questionnaire to Customers, questions 7 and 8.

[17]        Reply to Q2-Questionnaire to Customers, question 11.1.

[18]  Reply to Q2-Questionnaire to Customers, question 12.

[19]  Reply to Q1-Questionnaire to Competitors, question 6 and reply to Q2-Questionnaire to Customers, question 7.

[20]  Reply to Q1-Questionnaire to Competitors, questions 11 and 12. See also COMP/M.6765 – Precision Castparts/Titanium Metals,  paragraphs  64-
66.

[21]  Reply to Q1-Questionnaire to Competitors, question 12.

[22]  Reply to Q1-Questionnaire to Competitors, question 13.

[23]  Reply to Q2-Questionnaire to Customers, question 12.3.

[24]  Reply to Q1-Questionnaire to Competitors, question 9 and reply to Q2-Questionnaire to Customers, question 10.

[25]  Reply to Q1-Questionnaire to Competitors, questions 8.1 and 10.

[26]  M.6765 – Precision Castparts/Titanium Metals, paragraph 28.

[27]  Reply to Q1-Questionnaire to Competitors, question 20 and reply to Q2-Questionnaire to Customers, question 19.

[28]        M.1919 – Alcoa/Cordant, paras. 12, 19 and 27; M.6765 – Precision Castparts/Titanium Metals, para. 47; M.7342  –  Alcoa/Firth  Rixson,
para. 32., M.4561 – GE/Smiths Aerospace, para. 23.

[29]  Replies to Q1-Questionnaire to Competitors, questions 15-17 and reply to Q2-Questionnaire to Customers, questions 15 and 16.

[30]  M.1919 – Alcoa/Cordant, related to the aluminium sector, M.6765 – Precision Castparts/Titanium Metals.

[31]  COMP/M.6765 – Precision Castparts/Titanium Metals, paras. 64 to 68.

[32]  COMP/M.7342–Alcoa/Firth Rixson, paras. 26 and 27 and COMP/M.6765–Precision Castparts/Titanium Metals, paras. 39 to 43.

[33]  M.6765 – Precision Castparts/Titanium Metals, para. 43.

[34]  Replies to Q1-Questionnaire to Competitors, question 15 and reply to Q2-Questionnaire to Customers, question 14.

[35]  Replies to Q1-Questionnaire to Competitors, questions 16 and 17 and reply to Q2-Questionnaire to Customers,  questions 15 and 16.

[36]  Replies to Q1-Questionnaire to Competitors, question 19 and reply to Q2-Questionnaire to Customers, question 18.

[37]  M.6765 – Precision Castparts/Titanium Metals, paragraph 43.

[38]  Replies to Q1-Questionnaire to Competitors, question 20 and reply to Q2-Questionnaire to Customers, question 19.

[39]  See, for instance Guidelines on the assessment of non-horizontal mergers under the Council Regulation  on  the  control  of  concentrations
between undertakings, OJ C 265, 18.10.2008, p. 6 (‘Non-Horizontal Guidelines’), paragraph 31.

[40]  See, for instance Non-Horizontal Guidelines, paragraph 58.

[41]  See, for instance Non-Horizontal Guidelines, paragraphs 32 and 59.

[42]  Replies to Q2-Questionnaire to Customers, question 51.

[43]  Replies to Q2-Questionnaire to Customers, questions 23, 24, 25 and 30 and reply to Q1-Questionnaire to Competitors, question 26.

[44]  Replies to Q2-Questionnaire to Customers, question 28.

[45]  See, for example, Response to Questions on 2nd draft Form CO dated 24 March 2015, question 4.

[46]  Replies to Q2-Questionnaire to Customers, question 21 and reply to Q1-Questionnaire to Competitors, question 22.

[47]  Annex 5.4 documents, “Sufficient capacity also exists at melt and mill products…”, p. 6.

[48]  Replies to Q2-Questionnaire to Customers, question 52.

[49]  Replies to Q1-Questionnaire to Competitors, question 32.

[50]  Replies to Q1-Questionnaire to Competitors, question 38 and Q2-Questionnaire to Customers, question 34.

[51]  Replies to Q1-Questionnaire to Competitors, question 32.

[52]  Annex 5.4 documents “While the industry is under-utilized…”, p. 7.

[53]  Replies to Q2-Questionnaire to Customers, question 51.

[54]  Replies to Q2-Questionnaire to Customers, questions 37, 39, 41

[55]  Replies to Q2-Questionnaire to Customers, question 52.

[56]  Reply to question 2 of the request for information dated 12 May 2015.

[57]  Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of concentrations between  undertakings,
OJ C 265, 18.10.2008, p. 6 (‘Non-Horizontal Guidelines’), paragraph 91-94.

[58]  Replies to Q2-Questionnaire to Customers, question 50 and Q1-Questionnaire to Competitors, question 52.

[59]  See Guidelines on the assessment of non-horizontal  mergers  under  the  Council  Regulation  on  the  control  of  concentrations  between
undertakings, OJ C 265, 18.10.2008, p. 6 (‘Non-Horizontal Guidelines’), paragraph 100.

[60]  Minutes of phone call on 29 April 2015.

[61]  Replies to Q2-Questionnaire to Customers, question 49 and Q1-Questionnaire to Competitors, question 51.

[62]  Replies to Q2-Questionnaire to Customers, question 48 and Q1-Questionnaire to Competitors, question 50.