CELEX: 32015M7461
Language: en
Date: 2015-03-20 00:00:00
Title: Commission Decision of 20/03/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7461 - AMDS ITALIA / CLN / JV) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 20.3.2015
C(2015) 2060 final

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|                                                                       |To the notifying parties:                                              |
|                                                                       |                                                                       |

Dear Sir/Madam,

Subject:    Case M.7461 - AMDS Italia / CLN / JV
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 13 February 2015, the European Commission received notification of a  proposed  concentration  pursuant  to  Article  4  of  the  Merger
      Regulation by which ArcelorMittal Distribution Solutions Italia ("AMDS Italia", Italy) and C.L.N. – Coils  Lamiere  Nastri  S.p.A.  ("CLN",
      Italy) acquire, within the meaning of Article 3(1)(b) of the Merger Regulation,  joint  control  of  a  newly  created  company,  therefore
      creating a joint venture, ArcelorMittal CLN Distribuzione Italia S.r.l. ("the JV", Italy), by way of  purchase  of  all  its  newly  issued
      shares. AMDS Italia and CLN are collectively referred to as "Parties".[3]

THE PARTIES

   2. AMDS Italia is active in steel distribution, processing and commercialisation in Italy. It is totally held  by  ArcelorMittal,  a  globally
      active steel and mining group. ArcelorMittal is the world's largest steel manufacturer. AMDS Italia has 7 Steel Service Centres (“SSCs”) in
      Italy.

   3. CLN is active in steel distribution and processing, as well as in steel wheel production for cars, motorcycles, commercial  and  industrial
      vehicles and production of pressed components for cars and commercial vehicles. […] ArcelorMittal holds 24.56% of the  capital  of  CLN,[4]
      without control over the company. The remaining stake is held by Marubeni Itochu Group. CLN has currently sole or joint control of  several
      SSCs in Italy.

THE OPERATION

   4. On 21 October 2014, the Parties signed a Framework Agreement, for the combination of their SSCs in Italy  in  a  JV.  An  addendum  to  the
      Framework Agreement was signed on 5 March 2015.

                                                 Figure 1: Location of the Parties' SSCs in Italy

                                                                      [pic]
   Source: Form CO.

   5. The Parties state that the rationale of the transaction is to achieve synergies, notably cost savings, and provide better services to major
      customers in the Italian SSC market (including notably industrial customers and automotive customers).

   Steps in the transaction

   6. The transaction will proceed in two phases:
      a. Before the definitive closing of the agreement relating to the creation of the JV, CLN will acquire sole control  of  the  participated
         company Prorena Canessa, active in the Italian SSC market, and its subsidiary Metaltranciati, also operating in the  SSC  market,  over
         which CLN currently has joint control.[5]
      b. Then, at closing the Parties will contribute their SSCs businesses into the newly established JV.

   7. The Parties submit that the two phases are interdependent and constitute a single concentration, as the sole purpose of  CLN's  acquisition
      of sole control over its two participated companies is to contribute their and CLN's SSC activities to the JV and the  Framework  Agreement
      specifically provides that AMDS Italia’s obligation to make the closing of the main transaction is conditional upon  CLN’s  acquisition  of
      100% of Prorena Canessa and Metaltranciati.

   Joint control

   8. The Parties will contribute their SSCs activities in Italy to the JV.[6] CLN will own 51% and AMDS Italia will own 49% of equity and voting
      rights.[7] The Parties have agreed to appoint […]. AMDS will have the right to appoint […] board members, and CLN […]. […].[8] For some key
      matters, such as approval of the budget and business plan, the approval by the Board of Directors will require the favourable  vote  of  at
      least one director appointed by each Party and will not be decided by the casting vote of the Chairman.[9]

                                                                      [pic]

   Full-functionality of the JV

   9.  The JV will be an Italian limited liability company (società a responsabilità limitata). The Parties submit that the  JV's  SSCs  will  be
      full-function in nature and fact, and will not act as a mere sales agent of its co-owners.[10] The JV will operate as an  autonomous  going
      concern business with its own management dedicated to the day-to-day operations[11] and  have  access  to  sufficient  resources  including
      capital, staff, and assets for its business activities. It will hold and operate the assets, tangible and  intangible,  consisting  in  the
      Parties' SSC businesses, estimated to be approximately […]. As such, the JV will supply to third  party  customers  unaffiliated  with  the
      Parties. It will also deal with the ArcelorMittal and CLN at arm’s length on the basis of normal commercial  conditions.  Although  the  JV
      will source […] from its parents,[12] as the Parties state is consistent with industry practice, the Parties submit it will add significant
      value to these inputs. Finally, the JV is intended to be indefinite in duration for as long as is commercially feasible, […].

  10. Consequently, the proposed transaction constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

EU DIMENSION

  11. The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000  million[13]  [ArcelorMittal:  EUR  59  815
      million; CLN: EUR 1 539 million]. Each of them has an EU-wide turnover in excess of EUR 250 million [ArcelorMittal: EUR […]  million;  CLN:
      EUR […] million], but they do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State.

  12. The notified operation therefore has an EU dimension.

RELEVANT MARKETS

  13. The Parties' activities overlap in the distribution through SSCs of certain steel flat products, where JV will be active. ArcelorMittal  is
      also active upstream in steel production, while CLN is also active downstream in the manufacturing of automotive components.

Relevant product markets

Steel distribution: distribution of steel products through SSCs

  14. In addition to ex-mill sales, steel products may also be sold through various distribution channels. While steel mills tend to supply large
      orders of standard dimensions with longer lead times, distribution centres typically supply smaller lot sizes and also  have  shorter  lead
      times.

       Past decisional practice

  15. In earlier decisions,[14] the Commission has considered separate markets for distribution of steel products on the basis of  the  following
      cumulative distinctions:

      i. distribution of carbon steel products[15] vs distribution of stainless steel products[16];
     ii. distribution of flat steel products[17] vs distribution of long steel products; and
    iii. distribution through steel service centres (SSCs)[18] vs distribution through stockholding centres (SCs)[19]  vs  distribution  through
         oxy-cutting centres.[20]

  16. Steel service centres purchase strip mill products from the steel producers  and  afterwards  slit  and  cut  the  material  to  customers’
      requirements. Their customers include major consumers, such as the automobile and white goods manufacturers, stockholders and customers  of
      all sizes.[21]

      The Parties' arguments

  17. The Parties submit that it is unnecessary to analyse the possible segmentations of the market for the distribution of  steel  according  to
      distribution channels, type of steel and/or shape of the product or the possible distinctions between different kinds of SSCs and the exact
      definition of the relevant product market can be left open, as these further segmentations would not affect the competitive assessment.

       Commission's assessment

  18. The results of the investigation generally confirm that  there  is  limited  substitutability  between  the  SSCs  and  other  distribution
      channels.[22]

  19. SSCs differ from other distribution channels to a significant extent in the type  of  services  provided.  Customers  who  replied  to  the
      Commission's questionnaires explained that SSCs  offer  customized  processing  services,  including  just-in-time  slitting/cutting  steel
      products to required dimensions, whereas SCs as  well  as  ex-mill  distribution  offer  rather  standardised  products.[23]  According  to
      competitors, producers distribute a variety of different products through stocking centres (finished product) and SSCs (coils to be further
      processed), and substitutability of supply is not always feasible.[24] SCs may also have a smaller scale, limited geographic coverage,  and
      would generally sell products at a higher price compared to SSCs.[25] Accordingly respondents confirmed that SSCs mainly compete with other
      SSCs and only to a limited extent with other channels for the distribution of steel. Different  distribution  channels  therefore  seem  to
      complement each other rather than be in direct competition.

  20. To a certain extent, SSCs may specialise in certain types of products or customers, and there are only few SSCs that  offer  all  types  of
      flat steel products. A customer explained that "[s]ome of the Service Centers are specialized in Carbon  Steel,  some  other  in  Stainless
      steel."[26] The main distinction appears to be between stainless and carbon steel SSCs. Other specializations  by  sector/type  of  product
      were also mentioned.[27] However, within the segment of carbon steel flat products, where the  Parties  are  active,  no  further  specific
      subsegments have been identified. Therefore, for the purposes of the assessment of  this  transaction,  there  is  no  ground  for  further
      segmentation of SSCs distributing carbon steel flat products.

  21. In view determining whether the proposed transaction may significantly impede competition, the Commission will assess the transaction under
      the narrowest product market definition, namely the market for distribution of carbon steel flat products through SSCs.

Upstream of steel distribution: production and supply of carbon steel

       Past decisional practice

  25. In its previous decisions[28] the Commission  has  distinguished,  according  to  their  different  chemical  composition,  price  and  end
      applications, four broad categories of finished steel products: (i) carbon steel, (ii) stainless steel (iii) highly alloyed steel and  (iv)
      electrical (silicon) steel.[29]

  26. The Commission has consistently found in past cases that flat steel products form a separate product market from long  steel  products.[30]
      Within carbon steel flat products – those that the JV will distribute – the Commission  has  generally  considered  there  to  be  separate
      product markets for (1) hot rolled carbon steel flat products excluding quarto plates, (2) quarto plates, (3) cold rolled carbon steel flat
      products, (4) galvanised carbon steel flat products, (5) steel for packaging and (6) organic coated carbon steel flat products.

      The Parties' arguments

  27. Even though the Parties consider that organic coated steel products are in competition with organic coated aluminium products, they  accept
      the previous approach of the Commission in defining the upstream markets.

       Commission's assessment

  28. ArcelorMittal is active upstream of the JV, in the production of carbon steel flat products, both  organic  coated  and  galvanised.  These
      carbon steel flat products are distributed, amongst others, through SSCs. The investigation provided no grounds for deviating from previous
      decisional practice, where galvanised carbon steel flat products were analysed separately from organic coated carbon steel  flat  products.
      The Commission will accordingly maintain its established practice and consider galvanised carbon  steel  flat  products  as  separate  from
      organic coated carbon steel flat products.

Downstream of steel distribution: production of steel automotive components

       Past decisional practice

  29. In previous decisions, the Commission has considered  possible  segmentation  of  the  market  for  production  of  automotive  components,
      ultimately leaving this question open. Furthermore, according to Commission's  decisional  practice,  further  distinctions  may  be  found
      between supply of components to the original equipment manufacturers (OEMs, including original equipment suppliers,  OESs)  and  supply  of
      components to the independent aftermarkets. Within the supply of components to OEMs/OESs, the Commission has further distinguished  between
      manufacturers of light vehicles and of heavy vehicles.[31] In the Gestamp Automocion/Edscha case, the Commission considered  a  market  for
      flat steel components for the coachwork and chassis based on  (i)  supply  side  substitutability,  (ii)  similar  product  characteristics
      (structural strength of raw material and light and stable product design), (iii) joint  pricing  method  for  various  products,  based  on
      commodity prices for steel, (iv) same customer base.[32] The Commission however left the exact market definition open.

      The Parties' arguments

  30. CLN is active in the production of steel automotive components (body in white, structural components and steel wheels). The Parties further
      submit that the above mentioned distinctions between OEMs/OESs and independent aftermarkets, on one hand, and OEMs/OESs of  light  vehicles
      and of heavy vehicles is not appropriate due to the extensive supply-side sustainability which characterises the flat steel components and,
      in any case, such distinction would not affect the competitive assessment, given the low market shares of the Parties.

       Commission's assessment

  31. As the result of the assessment of the proposed transaction would not change under any plausible subsegments of the market considered,  the
      exact market definition for flat steel components for the automotive sector can be left open for the purpose of assessing  the  effects  of
      the transaction.

Relevant geographic markets

      Steel distribution

       Past decisional practice

    33. In previous decisions,[33] the Commission found that the scope of the relevant product market was national or at most  regional,  taking
        into account factors such as: value of material handled, value added by the relevant service, location of competitors, delivery time and
        relevant transportation costs.

      The Parties' arguments

    34. The Parties submit that it is not necessary to determine whether Italy forms a separate relevant geographic market  or  falls  within  a
        single cross-border regional geographic market, as the distinction would not affect the competitive assessment.

       Commission's assessment

    35. In the course of the market investigation, competitors indicated that the ability of specific SSCs to service throughout  Italy  depends
        on a number of elements, such as their location in Italy (impact of transport costs varies),  their  scale/capacity  (smaller  SSCs  not
        having the capacity to serve the entire Italian territory) and the type of  products  distributed  (low-value  products  travel  shorter
        distances).[34] However, considering these criteria, the majority of respondents[35] considered that Italian SSCs  can  serve  customers
        anywhere in Italy and possibly even abroad.

    36. As for the distance, respondents suggest that is possible to source from suppliers located, on average, in a maximum radius  of  between
        350 and 2 000 km.[36] Bigger and more sophisticated SSCs were indeed reported not only to be able to supply the whole of Italy, but also
        to export to other Member States, including France and Germany, and customers were  similarly  sourcing  in  some  instance  from  other
        European countries.[37]

    37. In the light of the above and for the purpose of assessing this transaction, the  Commission  will  assess  the  transaction  under  the
        narrowest geographic market definition, namely at national level.

Upstream of steel distribution: production and supply of carbon steel

       Past decisional practice

    38. The Commission has generally considered that the geographic scope of production and supply of carbon steel is EEA-wide, or at least EEA-
        wide.[38] In its most recent relevant decision,[39] while not concluding on the  exact  geographic  market  definition,  the  Commission
        indicated that there was at least a serious possibility that the geographic scope of carbon steel flat product markets is  in  fact  not
        wider than the Nordic countries (Finland, Sweden and Norway), at least for hot-rolled, cold-rolled and organic coated products.

      The Parties' arguments

    39. In this case, the Parties submit that the relevant geographic market is EEA-wide for the production and  supply  of  carbon  steel  flat
        product market and its further distinctions, namely hot rolled, cold rolled, galvanised and organic coated. Moreover, according  to  the
        Parties, it is not necessary to conclude on the exact geographic market definition as no competition concerns would arise if looking  at
        a hypothetical Italian market.

       Commission's assessment

    40. For the purpose of the present decision, as result of the assessment of the  proposed  transaction  would  not  change  irrespective  of
        whether the market was national or EEA in scope, the exact definition of the geographic market for the distribution  of  production  and
        supply of carbon steel flat product can be left open.

Downstream of steel distribution: production and supply of steel automotive components

    41. In previous decisions, the Commission found that the scope of the relevant product market was at least EEA-wide.[40]

    42. The Parties submit that whether the market is EEA-wide or wider may be left open, as adopting the narrowest considered geographic market
        would not affect the competitive assessment.

    43. In the light of the above and for the assessment of the current transaction, the  Commission  considers  that  the  relevant  geographic
        market for the production and supply to OEMs/OESs of flat steel components for the automotive industry is likely to  be  at  least  EEA-
        wide.

COMPETITIVE ASSESSMENT

  48. The transaction gives rise to horizontal overlaps in the Parties' activities for the distribution steel products  through  SSCs  in  Italy,
      Slovenia and Croatia. However, no horizontally affected market arises with the transaction:

        a. In Slovenia and Croatia, the Parties' combined market shares in the relevant markets for the distribution of steel products are below
           10%.[41]

        b.  In Italy, the Parties' combined market share for the distribution of flat carbon steel products through SSCs is around [10-20]%.

  49. Upstream of the JV's activities, ArcelorMittal is active in steel production. CLN is not active  upstream  of  SSCs'  activities.  Relevant
      vertically affected markets  arise  since,  upstream  of  SSC  activities,  ArcelorMittal  has  significant  shares  (just  above  the  30%
      threshold[42]) in two markets for the production of carbon steel.

  50. Downstream of the JV's activities, CLN is active in the production and supply to OEMs/OESs of flat  steel  components  for  the  automotive
      industry in the EEA, namely stamped steel components, subassemblies, modules and wheels.[43] ArcelorMittal is not active downstream of  SSC
      activities.[44] No relevant vertically affected market arises downstream, in view of CLN's limited activities. These are markets where  the
      Parties' shares at each level remain below 30%.[45]

  51. The table below indicates the Parties' market shares in the vertically affected  markets  which  do  not  fall  under  the  presumption  of
      paragraph 25 of the Guidelines on non-horizontal mergers.

                                    Table 1: Market shares in the vertically affected markets, 2014, in volume

|Upstream markets                              |EEA                   |Downstream market                    |Italy                 |
|                                              |market share          |                                     |market share          |
|Supply of galvanised carbon steel flat        |[30-40]%              |Distribution of flat carbon steel    |[10-20]%              |
|products                                      |                      |products through SSCs in Italy       |                      |
|Supply of organic coated carbon steel flat    |[30-40]%              |                                     |                      |
|products                                      |                      |                                     |                      |

   Source: Based on the information provided in the Parties' reply to the Commission's request for information of 23 February 2015.

  52. This section will therefore analyse first the Italian SSCs competitive landscape, then ArcelorMittal's position upstream, and the impact of
      the transaction.

      Competitive landscape for the distribution of flat carbon steel through SSCs in Italy

      Market shares

  53. The Parties' combined market share in the distribution of flat carbon steel through SSCs in Italy was [10-20]% in 2014, and appears to have
      remained relatively stable since 2011, as illustrated in Table 2 below.

      Table 2: Sales and market shares of the Parties in the distribution of flat carbon steel products through SSCs in Italy, 2011-2014, in
                                                                      volume

|             |Total market (th. tonnes)|AMDS Italia              |CLN                      |Combined                 |
|2014         |[5 000-10 000]           |[5-10]%                  |[10-20]%                 |[10-20]%                 |
|2013         |[5 000-10 000]           |[0-5]%                   |[10-20]%                 |[10-20]%                 |
|2012         |[5 000-10 000]           |[5-10]%                  |[5-10]%                  |[10-20]%                 |
|2011         |[5 000-10 000]           |[5-10]%                  |[10-20]%                 |[10-20]%                 |

      Source: Assofermet and Parties' estimates.

      The Parties' arguments

  54. The Parties submit that the market for the distribution of flat carbon steel through SSCs in Italy is highly fragmented, with more than 120
      players. They further state that brand and customer loyalty is low, with low switching costs and customers in  general  having  a  multiple
      sourcing policy.

  55. The Parties state that the top 10 players account for approximately [70-80]% of the market, as represented in Figure 3 below.

                                            Figure 3: Market share of the Parties and main competitors
                                                         in the SSC market in Italy, 2013

                                                                      [pic]

      Source: Form CO.

  56. The Parties also provided a map to illustrate the geographic coverage of their competitors.

                                                       Figure 4: Italy SSC distribution map

                                                                       […]

   Source: Form CO.

       The investigation

  57. Competitors of the Parties at SSC level who replied to the Commission's questionnaire confirmed that  the  Italian  SSC  market  is  highly
      fragmented. Respondents indicate, on average, that there are about 100 SSC in Italy, including several independent players. Notwithstanding
      this, respondents stated that the top players, notably Marcegaglia ([10-20]%), Gruppo Gabrielli ([10-20]%), Ilva ([10-20]%), and CLN  ([10-
      20]%), represent above 40% of the market.[46] Competitors confirmed that CLN and AMDS have respectively about [10-20]% and [5-10]%  of  the
      Italian SSC market.[47]

  58. According to competitors, there has not been any recent entry on the market.[48] However, the majority of competitors consider  that  there
      is spare capacity in the overall SSC market in Italy and that they would be able to expand capacity or output if prices were to go  up.[49]
      For instance two players point towards an estimated spare capacity of about 35-40%. The majority of competitors expect  no  impact  of  the
      transaction on the competition between SSCs in Italy.[50]

  59. The majority of customers who replied to the Commission's questionnaire multisource from at least 2 SSCs and the vast majority of customers
      multisource from at least 5 SSCs.[51] Customers confirmed that CLN and AMDS have respectively about [10-20]% and [5-10]% of the Italian SSC
      market.[52] A customer noted that there is a trend of consolidation in the market of steel distribution in Italy.[53] However,  the  market
      investigation showed that the majority of customers consider that the competition in the region where they operate is adequate[54] and that
      the transaction will have no impact on prices.[55] In case of a price increase, the majority of customers state they  could  easily  switch
      their flat steel purchases from one SSC to another SSC.[56]

  60. Internal documents of the Parties also confirm the view that the Italian SSCs market is highly fragmented ("[…]"[57]).

Competitive landscape for the upstream markets

  63. ArcelorMittal is active worldwide in the following markets for the production of carbon  steel:  hot  rolled  carbon  steel  flat  products
      excluding quarto plates, quarto plates, cold rolled carbon steel flat products, galvanised carbon steel flat products, and  organic  coated
      carbon steel flat products.

      Market shares

  64. The Parties submit that ArcelorMittal's market shares at EEA-level is just over 30% for two  affected  markets:  (i)  the  market  for  the
      production and supply of galvanised carbon steel flat products, and (ii) the market for the production and supply of organic coated  carbon
      steel flat products. The Parties further submit that, if the geographic market was limited to Italy, the combined market  shares  would  be
      lower than on the EEA level, and would not exceed 30% on any of the plausible upstream markets.[58]

  65. The EEA and Italian estimated sales and market share of the Parties in the two affected markets are shown in Tables 3 and 4 below.

   Table 3: Market size and shares of ArcelorMittal in the supply of galvanised and organic coated carbon steel flat products in the EEA, 2011-
                                                                 2014, in volume

|            |                        |Galvanized carbon steel flat products in |Organic coated carbon steel flat products in |
|            |                        |the EEA                                  |the EEA                                      |
|2014        |Total market            |[20 000-25 000]                          |[4 000-5 000]                                |
|            |(th. tonnes)            |                                         |                                             |
|            |ArcelorMittal's share   |[30-40]%                                 |[30-40]%                                     |
|2013        |Total market            |[20 000-25 000]                          |[4 000-5 000]                                |
|            |(th. tonnes)            |                                         |                                             |
|            |ArcelorMittal's share   |[30-40]%                                 |[30-40]%                                     |
|2012        |Total market            |[20 000-25 000]                          |[4 000-5 000]                                |
|            |(th. tonnes)            |                                         |                                             |
|            |ArcelorMittal's share   |[30-40]%                                 |[20-30]%                                     |
|2011        |Total market            |[25 000-30 000]                          |[5 000-6 000]                                |
|            |(th. tonnes)            |                                         |                                             |
|            |ArcelorMittal's share   |[30-40]%                                 |[20-30]%                                     |

      Source: Eurofer and Parties' estimates.

   Table 4: Market size and market shares of ArcelorMittal in the supply of galvanised and organic coated carbon steel flat products in Italy,
                                                               2011-2014, in volume

|            |                        |Galvanized carbon steel flat products in   |Organic coated carbon steel flat products  |
|            |                        |Italy                                      |in Italy                                   |
|2014        |Total market (th.       |[2 000-3 000]                              |[500-600]                                  |
|            |tonnes)                 |                                           |                                           |
|            |ArcelorMittal's share   |[10-20]%                                   |[30-40]%                                   |
|2013        |Total market (th.       |[2 000-3 000]                              |[500-600]                                  |
|            |tonnes)                 |                                           |                                           |
|            |ArcelorMittal's share   |[10-20]%                                   |[20-30]%                                   |
|2012        |Total market (th.       |[2 000-3 000]                              |[500-600]                                  |
|            |tonnes)                 |                                           |                                           |
|            |ArcelorMittal's share   |[10-20]%                                   |[20-30]%                                   |
|2011        |Total market (th.       |[2 000-3 000]                              |[700-800]                                  |
|            |tonnes)                 |                                           |                                           |
|            |ArcelorMittal's share   |[10-20]%                                   |[10-20]%                                   |

   Source: Eurofer and Parties' estimates.

  66. The Parties submitted their estimates of market shares of competitors at EEA level, as presented in Tables 5 and 6 below.

     Table 5: Market shares of ArcelorMittal and competitors in the supply of galvanised carbon steel flat products the EEA, 2013, in volume

|ArcelorMittal                   |[30-40]%                |
|TKS                             |[10-20]%                |
|Tata Steel                      |[5-10]%                 |
|Voest Alpine                    |[5-10]%                 |
|Ilva (Riva Group)               |[5-10]%                 |
|Others European competitors     |[10-20]%                |
|Imports                         |[5-10]%                 |

   Source: Parties' estimates.

   Table 6: Market shares of ArcelorMittal and competitors in the production of organic coated carbon steel flat products in the EEA, 2013, in
                                                                      volume

|ArcelorMittal                   |[30-40]%                |
|Tata Steel                      |[10-20]%                |
|TKS                             |[5-10]%                 |
|Marcegaglia                     |[5-10]%                 |
|Voest Alpine                    |[5-10]%                 |
|Other European competitors      |[10-20]%                |
|Imports                         |[10-20]%                |

   Source: Parties' estimates.

      The Parties' arguments

  67. The Parties submit that ArcelorMittal faces significant competition on  all  the  steel  production  markets  from  major  EEA  competitors
      including TKS, Tata Steel, and Voest Alpine. In terms of sales to SSCs in particular, many of the SSCs competing with the Parties in  Italy
      are vertically integrated. The Parties submit that, even where SSCs have vertical relationships, SSC supplies are mainly governed by  short
      term contracts (less than one year) and involve sourcing from multiple suppliers to achieve the best  available  market  conditions.  Steel
      products are generally commodity products, and customers can switch with relative ease.

  68. The Parties refer to the 2011 ArcelorMittal/ATIC Services decision, where the Commission looked at whether ArcelorMittal had  market  power
      with respect to galvanised and organic coated carbon steel flat products sufficient to foreclose vertically-related markets (in that  case,
      seaport terminal services for raw materials upstream). In that decision, the Commission stated that “It follows  that  while  ArcelorMittal
      enjoys a leading position on each of these segments its nearest rivals have substantial market shares so that it does not enjoy significant
      market power in any of these segments.”[59]

  69. The Parties also argue that ArcelorMittal would have, on top of no ability, no incentive for input foreclosure, in view of the JV's limited
      market share in a highly-competitive market. Furthermore, the Parties state that the supply relationships  between  ArcelorMittal  and  the
      Parties’ contributed SSC activities are not an effect of the operation, as they will not change as a result of  the  proposed  transaction.
      The […] Supply Agreement between ArcelorMittal and CLN provided that CLN would guarantee and reserve to ArcelorMittal […] of its purchasing
      needs. Likewise, through the Parties’ Memorandum of Understanding of March 2014, CLN has already committed to sourcing […]  purchases  from
      ArcelorMittal.

       The investigation

  70. Market participants perceive ArcelorMittal in Italy as a very strong player in steel, whose role may be further  strengthened  due  to  the
      difficulties of the Italian player Ilva. However, Ilva has remained active in flat steel products,  while  being  under  management  of  an
      Extraordinary Commissioner appointed by the Italian Government.[60]

  71. Two competitors in the upstream market replied that, through the transaction, ArcelorMittal will gain market presence all over Italy whilst
      now it seems to be limited to the North of Italy, and could have a better access to end users, especially in the auto motive markets.[61]

  72. As for customers, the majority state that ArcelorMittal will not gain any particular advantage for  the  distribution  of  its  flat  steel
      products.[62] Several customers specified that a partnership between CLN and ArcelorMittal is already in place.[63]

Commission's assessment

      Input foreclosure

  73. According to the Commission’s Guidelines on non-horizontal mergers, a merger may result in foreclosure where actual  or  potential  rivals’
      access to supplies or markets is hampered or eliminated as a result of the merger, thereby reducing these companies’ ability and  incentive
      to compete. Such foreclosure is regarded as anticompetitive where, as a result of the merger, the merging companies, and possibly also some
      of its competitors, are able to profitably increase the price charged to consumers.

  74. When assessing the likelihood of such an anticompetitive input foreclosure scenario, the Commission  examines  whether  the  merged  entity
      would have the ability post-merger to foreclose access to inputs, whether it would have the incentive to do so,  and  moreover,  whether  a
      foreclosure strategy would have a significant detrimental effect in the downstream market.

  75. In relation to the proposed transaction, first, the market shares of ArcelorMittal at upstream level and of the  JV  at  SSC  level  remain
      limited.

  76. Second, strong steel competitors exist, included integrated companies with links to SSCs in Italy. The majority of SSC  competitors  expect
      no impact of the transaction on the competition between SSCs in Italy.[64]

  77. Third, as pointed out also in the Market investigation, the Parties plan that the JV will source from  ArcelorMittal  an  amount  of  steel
      inputs representing […] of the JV’s needs […]. […]. Agreements were already in place between CLN and ArcelorMittal  in  relation  to  these
      supplies. In that respect, the transaction does not change the structure of the market in a significant way.

  78. Based on the above, the Commission finds that the merged entity is unlikely to have the ability to foreclose access to inputs following the
      proposed transaction.

  79. Therefore the Commission concludes that no input foreclosure concerns arise from the proposed transaction.

      Customer foreclosure

  80. First, the market shares of ArcelorMittal at upstream level and of the JV at SSC level remain limited.

  81. Second they are other strong players at upstream level. In the course of the market  investigation,  competitors  in  the  upstream  market
      stated that they have sufficient access to SSCs in Italy.[65] They overall indicated that the transaction will  have  no  impact  on  their
      business and the supply of steel to and through SCCs in Italy.[66] Some steel competitors  further  confirmed  that  they  hold  shares  or
      control over Italian SSCs, therefore being vertically integrated.[67] A steel producer commented  that  "[i]n  the  highly  fragmented  SSC
      market in Italy we see the positive aspect of some consolidation."[68]

  82. The Commission's investigation has shown that the merged entity would have neither the ability nor the incentive to  implement  a  customer
      foreclosure strategy.

      Conclusion

  83. In the light of the above, the Commission considers that the proposed transaction does not raise serious doubts  as  to  its  compatibility
      with the internal market.

CONCLUSION

  84. 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)

Christos STYLIANIDES
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 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 062, 20.02.2015, p. 6.
[4]   Before August 2013, ArcelorMittal held a 35% stake.
[5]   CLN has currently joint control of Prorena Canessa S.r.l., holding 50.98% of the shares,  and  indirect  joint  control  of  Metaltranciati
S.r.l., which is fully owned by Prorena Canessa S.r.l. The Parties submit that the two companies account for approximately [0-5] % of SSC  market
in Italy.
[6]   With the exception of AMDS Italia's site of Flero, which is active in the processing of the  beams  (long  products).  The  Collegno  steel
service centre site (owned by the company Nuova Sabel, in bankruptcy) currently  managed  by  CLN  under  a  business  lease  agreement  will  be
contributed to the JV subject to the approval of the Bankrupcy Court of Torino.
[7]   The closing is subject to the clearance of the Competition Authorities of the European Union, […].
[8]   See […].
[9]   See […].
[10]  See ECSC.1351, Usinor/Arbed/Aceralia (2001) and M.578 – Hoogovens / Klöckner & co (1995).
[11]  See […].
[12]  ArcelorMittal Group will provide […] the JV’s mother coil needs […].
[13]  Turnover calculated in accordance with Article 5 of the Merger Regulation and the Commission Consolidated Jurisdictional  Notice  (OJ  C95,
16.04.2008, p1).
[14]  See for instance M.7155 - SSAB/Rautaruukki (2014), M.4137 - Mittal/Arcelor (2006), M.6471 - Outokumpu/Inoxum (2004).
[15]  Carbon steel is carbon-based steel containing no or little amounts of alloying elements. Carbon steel is used  in  a  very  wide  range  of
applications including car bodies, beverage cans, beams, and reinforcing materials for the construction industry.
[16]  Stainless steel contains significant proportions of chrome and nickel and other elements. It is therefore much more expensive  than  carbon
steel, and is primarily used in applications which require resistance to corrosion and/or resistance to high temperatures.
[17]  Flat products (hot-rolled wide strips, hot-rolled narrow steel,  quarto  plates  and  sheets)  can  be  distinguished  from  long  products
(sections and steel beams, permanent way material, merchant bars and wide rods). See ECSC.1351, Usinor/Arbed/Aceralia (2001).
[18]  SSCs purchase from steel manufacturers strip mill products, which they then slit and cut to customers’ requirements.
[19]  Stockholding centres are active as wholesalers in the steel  industry,  purchasing  steel  products  in  bulk  and  re-selling  in  smaller
quantities.
[20]  Oxycutting centres purchase quarto plate from steel manufacturers, which they then cut to  particular  sizes  and  shapes  as  required  by
customers using oxyhydrogen blowtorches.
[21]  IV/M.971 - Klöckner/Comercial de Laminados, ECSC.1351 - Usinor/Arbed/Aceralia.
[22]  Replies to questions 4 and 5 - Questionnaire to customers (Q2) and replies to questions 5 to 8 - Questionnaire  to  competitors  (Q1).  For
instance, a customer pointed out that SSC products are the non-commodity ones for which "grades/dimensions/finishes  […]  are  different  to  the
basic product from the mill" and which "are not directly available from the mill". Another customer specified that  steel  mills  and  SSCs  have
different delivery times which require different planning and another pointed out that the two channels can supply different volumes of product.
[23]  Replies to questions 4 and 5 - Questionnaire to  customers  (Q2).  In  particular,  several  customers  replied  that  switching  to  other
distributors than SSCs for certain products is not possible.
[24]  Replies to questions 5 and 6 - Questionnaire to competitors (Q1).
[25]  Replies to question 6 - Questionnaire to competitors (Q1).
[26]  Replies to question 8 - Questionnaire to customers (Q2).
[27]  Replies to question 9 - Questionnaire to competitors (Q1).
[28]  IV /ECSC.1351 - Usinor/Arbed/Aceralia (2001); M.4137 - Mittal/Arcelor (2006).
[29]  Electrical (silicon) steel sheets are characterised by specific electromagnetic properties, and it is used mainly for the  construction  of
large transformers,  electric  motors,  power  supply  and  switching  units,  and  power  plant  generators.  See  for  instance  IV  /ECSC.1351
Usinor/Arbed/Aceralia (2001).
[30]  M.7155 - SSAB/Rautaruukki (2014), M.7138 - Thyssenkrupp/Acciai Speciali Terni/Outukumpu VDM (2014); M.6471 -  Outokumpu  /  Inoxum  (2004);
M.4137 - Mittal / Arcelor (2006).
[31]  M.6714 - U-Shin/Valeo “CAM” (2006).
[32]  M.5733 – Gestamp autmocion/ Edscha Hinge & Control Systems (2010).
[33]  IV /ECSC.1351 - Usinor/Arbed/Aceralia (2001), M.4137 - Mittal/Arcelor (2006).
[34]  Replies to questions 10 to 13 - Questionnaire to competitors (Q1).
[35]  Replies to question 11 - Questionnaire to competitors (Q1) and replies to question 9 - Questionnaire to customers (Q2).
[36]  Replies to question 10 - Questionnaire to customers (Q2).
[37]  Replies to question 9 - Questionnaire to customers (Q2). See also minutes of calls with customers of 26 and 27 February 2015.
[38]  M.4137 – Mittal/Arcelor (2006).
[39]  M.7155 - SSAB/Rautaruukki (2014).
[40]  M.6714 - U-Shin/Valeo “CAM” (2006).
[41]  The JV's SSCs will distribute only flat carbon steel products (hot rolled, cold rolled, metallic coated – excluding tinplates, and  organic
coated products). Both Parties are not active in Italy in the distribution of steel long products  through  stockholding  centres  and  in  steel
distribution through oxy-cutting centres. ArcelorMittal is active in the distribution of long carbon steel through SSCs in  Italy  in  its  Flero
site (with an estimated market share of [5-10]% in 2014). The Flero site will not be contributed to the JV. The steel service  centre  activities
of AMDS Italia also include the processing of approximately [...] per year of electrical (silicon) steel. CLN does not process this product.  The
Parties submit there is no overlap and the activity is negligible, accounting for a very small share ([0-5]%) of the 2013  SSCs’  Italian  market
for electrical steel (estimated in […]).
[42]  See paragraph 25 of the Guidelines on non-horizontal mergers. Guidelines on the assessment of  non-horizontal  mergers  under  the  Council
      Regulation on the control of concentrations between undertakings, adopted on 28 November 2007, OJ C265/6 of 18.10.2008, p.6.
[43]  The Parties estimate that CLN's sales in the concerned market amount to an estimated market share of [0-5]%  in  2013.  They  submit  CLN's
share can be estimated at [5-10]% for passenger cars and light commercial vehicles, and at [0-5]% for medium/heavy commercial vehicles.
[44]  ArcelorMittal is active in the production of Tailor Welded Blanks ("TWB"), which is downstream of steel production, but sources  the  steel
directly from the mills, rather than through SSCs.
[45]  See paragraph 25 of the Guidelines on non-horizontal mergers.
[46]  Replies to questions 14 and 15 - Questionnaire to competitors (Q1).
[47]  Replies to questions 14 and 15 - Questionnaire to competitors (Q1).
[48]  Replies to question 19 - Questionnaire to competitors (Q1).
[49]  Replies to questions 16 to 20 - Questionnaire to competitors (Q1).
[50]  Replies to question 29 - Questionnaire to competitors (Q1).
[51]  Replies to question 11 - Questionnaire to customers (Q2). See also minutes of calls with customers of 19 and 26 February 2015.
[52]  Minutes of calls with customers of 19 February 2014.
[53]  Minutes of a call with a customer of 26 February 2014.
[54]  Replies to question 12 - Questionnaire to customers (Q2).
[55]  Replies to question 17 - Questionnaire to customers (Q2).
[56]  Replies to question 6 - Questionnaire to customers (Q2).
[57]  Internal document of ArcelorMittal, Annex 5.4.C to the Form CO, […].
[58]  However, ArcelorMittal's share in organic coated carbon steel flat products in Italy reached [30-40]% in 2014, up from market shares  below
30% in 2011-2013.
[59]  M.6376 - ArcelorMittal/ATIC Services, para. 19 (2011).
[60]  Internal documents of ArcelorMittal indicate that ArcelorMittal has expressed interest  in  acquiring  Ilva.  The  Parties  state  that  in
November 2014 ArcelorMittal and Marcegaglia have filed a non-binding offer with the Italian Government for the acquisition of Ilva assets.[…].
[61]  Replies to question 7 - Questionnaire to steel competitors (Q3).
[62]  Replies to question 15 - Questionnaire to customers (Q2). See also minutes of a call with a customer of 26 February 2015.
[63]  Replies to question 14 - Questionnaire to customers (Q2). See also minutes of a call with a customer of 27 February 2015.
[64]  Replies to question 29 - Questionnaire to competitors (Q1).
[65]  Replies to question 6 - Questionnaire to steel competitors (Q3).
[66]  Replies to questions 8 and 9 - Questionnaire to steel competitors (Q3).
[67]  Replies to question 4 - Questionnaire to steel competitors (Q3).
[68]  Replies to question 8 – Questionnaire to competitors (steel) (Q3).

-----------------------
 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
                                                              ARTICLE 6(2) DECISION