CELEX: 32020M9495
Language: en
Date: 2020-09-21 00:00:00
Title: Commission Decision of 21/09/2020 declaring a concentration to be compatible with the common market (Case No COMP/M.9495 - FORTENOVA GRUPA / POSLOVNI SISTEMI MERCATOR) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                 Brussels, 21.09.2020
                                                                 C(2020) 6585 final
                                                                                  PUBLIC VERSION
                                                                  In the published version of this decision,
                                                                  some information has been omitted
                                                                  pursuant to Article 17(2) of Council
                                                                  Regulation (EC) No 139/2004 concerning
                                                                  non-disclosure of business secrets and other
                                                                  confidential information. The omissions are
                                                                  shown thus […]. Where possible the
                                                                  information omitted has been replaced by
                                                                  ranges of figures or a general description.
                                                                 To the notifying party
Subject:            Case M.9495 – FORTENOVA GRUPA / POSLOVNI SISTEMI
                    MERCATOR
                    Commission decision pursuant to Article 6(1)(b) of Council Regulation
                    No 139/20041 and Article 57 of the Agreement on the European Economic
                    Area2
Dear Sir or Madam,
(1)       On 17 August 2020, the European Commission received notification of a proposed
          concentration pursuant to Article 4 of the Merger Regulation by which Fortenova
          grupa d.d. (‘Fortenova’, Croatia) acquires within the meaning of Article 3(1)(b) of
          the Merger Regulation sole control over Poslovni Sistemi Mercator (‘Mercator’,
          Slovenia), by way of purchase of shares (the ‘Proposed Transaction’).3 Fortenova is
          referred to hereinafter as the ‘Notifying Party’ and Fortenova and Mercator are
          referred to together as ‘Parties’.
1.        THE PARTIES
(2)       Fortenova is a Croatian based entity established for the purposes of the restructuring
          of Agrokor d.d. (‘Agrokor’, Croatia). On 1st April 2019, as part of a debt-for-equity
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 280, 25.08.2020, p. 20.
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak---     restructuring, the business and all the assets of Agrokor with the exception of
    Mercator were transferred to Fortenova. At the same time, the business and assets of
    Agrokor’s subsidiaries were transferred to Fortenova’s subsidiaries.
(3) According to the Notifying Party, Mercator was not transferred to Fortenova with
    the rest of Agrokor’s business and assets on 1st April 2019 because of potential
    mandatory takeover implications that required further consideration and thus more
    time to prepare the business for transfer.4 As a result, Mercator remained with
    Agrokor.
(4) Fortenova’s core business is the production and supply of food and beverages and
    the retail supply of groceries/daily consumer goods (and related products). It
    operates through three core business segments:
    (a)     the retail and wholesale segment, which encompasses the retail supply of
            groceries/daily consumer goods;
    (b)     the food production and supply segment, which includes the production and
            supply of mineral water, ice cream, oil, margarine and mayonnaise; and
    (c)     the agriculture segment, which encompasses activities in the production of
            cereal, oils crops, cheese, fresh fruit and vegetables, as well as the operation of
            livestock farms.
(5) Mercator is headquartered in Slovenia. Together with its subsidiaries, it is primarily
    active in the retail supply of daily consumer goods to end consumers via a network
    of retail stores, notably in Slovenia.
2.  THE OPERATION AND THE CONCENTRATION
(6) The Proposed Transaction forms part of the broader restructuring of Agrokor , the
    scope and objective of which is to maintain the operational business of the Agrokor
    group by substantially reducing its debt burden to a sustainable level so as to ensure
    that the restructured group (i.e., Fortenova) has the capacity to fulfil its liabilities in
    the long term on the basis of a lasting strengthened equity capital basis.
(7) On 6th April 2017, the Croatian Parliament passed the Law on the Procedure of
    Extraordinary Administration in Companies of Systemic Importance for the
    Republic of Croatia (the “CSI Extraordinary Administration Law”). The CSI
    Extraordinary Administration Law came into force on 7th April 2017 and on the
    same day Agrokor filed a petition to commence extraordinary administration
    proceedings (the “Extraordinary Administration”).
(8) The Extraordinary Administration procedure is overseen by the Extraordinary
    Administrator in charge of restructuring Agrokor and negotiating the terms set out in
    the Settlement Plan of Agrokor Creditors (the “Settlement Plan” 5). With a view to
    implementing the Settlement Plan, the Extraordinary Administrator created several
    entities consisting of an ultimate holding company in the form of a Dutch Stichting,
    Fortenova STAK, and various subsidiaries including Fortenova.
4   Form CO, para. 9.
5   http://nagodba.agrokor.hr/en/settlement-plan-agrokor-creditors/
                                                     2
 ---pagebreak--- (9)  The Proposed Transaction is carried out in accordance with the terms of the
     Settlement Plan and a letter of intent entered into by Agrokor and Fortenova on
     15 July 2019. The Proposed Transaction will result in Fortenova exercising sole
     control over Mercator after acquiring the controlling 69.57% equity stake in
     Mercator held by Agrokor.
(10) The Proposed Transaction therefore constitutes a concentration within the meaning
     of Article 3(1)(b) of the Merger Regulation.
(11) In contrast, the operation whereby, on 1st April 2019, Agrokor’s equity holders
     exchanged their existing debt in Agrokor for shares/depositary receipts in Fortenova
     STAK and, concomitantly, the businesses and assets of Agrokor (except for
     Mercator) were transferred to Fortenova, was not notifiable under the Merger
     Regulation. In effect, as Fortenova could not be considered an undertaking when it
     acquired control over Agrokor’s assets and businesses, control over the latter was
     not acquired by “one or more undertakings” or by “one or more persons already
     controlling at least one undertaking”, within the meaning of Articles 3(1)(b) of the
     Merger Regulation.
(12) Likewise, the operation whereby Agrokor originally acquired a controlling stake in
     Mercator was not notifiable under the Merger Regulation because the relevant sale
     and purchase agreement was entered into prior to Croatia’s accession to the EU on
     1st July 2013, at a time when Agrokor’s EU turnover was below the turnover
     thresholds provided for in Articles 1(2)(b) and 1(3)(d) of the Merger Regulation.
3.   EU DIMENSION
(13) In 2019, Fortenova and Mercator achieved a combined aggregate worldwide
     turnover of more than EUR 5 000 million6 (Fortenova: EUR 3 167 million,
     Mercator: EUR 2 167 million). Each of them also achieved an EU-wide turnover in
     excess of EUR 250 million (Fortenova: EUR […] million, Mercator: EUR […]
     million), yet they do not achieve more than two-thirds of their aggregate EU-wide
     turnover within one and the same Member State.
(14) The notified operation therefore has an EU dimension within the meaning of
     Article 1(2) of the Merger Regulation.
4.   RELEVANT MARKETS
(15) Fortenova and Mercator are both active throughout the supply chain of daily
     consumer goods, namely in the production and supply, procurement, wholesale
     supply and retail supply of daily consumer goods. Within the EEA, Fortenova has a
     large presence in Croatia and some activities in Slovenia, though not at retail level.
     In contrast, Mercator has a large presence in Slovenia, notably at retail level, and
     some de minimis wholesale activities and adjacent procurement activities in Croatia.
(16) The Parties’ activities overlap horizontally to a limited extent with regard to the
     procurement and wholesale supply of daily consumer goods. In addition, vertical
     overlaps between the Parties’ activities arise primarily in Slovenia between
6    Turnover calculated in accordance with Article 5 of the Merger Regulation.
                                                      3
 ---pagebreak---         Fortenova’s activities upstream in the production and supply of daily consumer
        goods and Mercator’s activities downstream in the retail supply of daily consumer
        goods.
4.1.    Relevant product markets
4.1.1. The production and supply of daily consumer goods
(17)    The Proposed Transaction concerns the production and supply of daily consumer
        goods and agricultural products, the procurement of daily consumer goods, the
        wholesal supply of daily consumer goods and the retail sale of daily consumer
        goods.
4.1.1.1. Previous cases
(18)    The Commission has segmented the production and supply of daily consumer goods
        market based on narrow product categories, thus as those discussed in further detail
        below in Sections 4.1.1.1 (A) to (G).
(19)    In the past the Commission also indicated7, that private label and branded products
        may within each category belong to the same market as there is a tendency for the
        customers to switch from one group of the products to another; but left the question
        ultimately open.
(20)    In so far as food products are concerned, in past decisions the Commission has
        consistently distinguished between the production and supply of food products
        dedicated to the retail sector and the production and supply of food products to the
        food service sector (i.e. the supply to out-of-home eating, institutional catering and
        the quick service restaurants sectors).8
        (A)       Production and supply of frozen foods including ice cream
(21)    The Commission’s decisional practice concerning the frozen food sector
        distinguishes between ice cream products and other frozen food products.9
(22)    The Commission has previously distinguished between industrial ice cream (which
        is usually manufactured in specialised facilities and its consumption site is
        independent of the production site and comprises a broad range of sweetened frozen
        desserts consisting of a number of major components, all of which are mixed
        according to different recipes, packaged and stored before delivery to downstream
        customers) and artisanal ice cream (which is produced by street vendors or bakers
        who produce themselves their ice cream, as well as ice cream parlours and small
        companies generally with less than 10 employees, which offer their ice cream
        products at a local level).10
7       See, for instance, Case M.1740 – Heinz/United Biscuits Frozen and chilled foods (1999); Case
        M.7946 – PAI/Nestle/Froneri (2016), para. 44 et seq.; Case M.6348 – Arla Foods/Allgauland (2011),
        para. 28, Case M.6895 – 3G Special Situations Fund III/Berkshire Hathaway/H J Heinz Company
        (2013), para. 17 and Case M.8150 – Danone/The Whitewave Foods Company (2016), para. 36 et seq.
8       Case M.5975 – Lion Capital/Picard Groupe (2010), para 10.
9       Case M.7669 – Lion Capital/Aryzta/Picard Groupe (2015).
10      Case M.7946 – PAI/Nestle/Froneri (2016), para. 15.
                                                        4
 ---pagebreak--- (23) Within the market for industrial ice cream the Commission has previously11
     identified distinct product markets for each of: (i) take-home ice cream, potentially
     further segmented by branded vs. private label (although the results of market
     investigations have been inconclusive regarding such a further segmentation); (ii)
     impulse ice-cream; (iii) catering ice cream (i.e. ice cream sold to restaurants, hotels
     etc., and which is mainly sold and delivered in bulk to be consumed at the catering
     location). The Commission has not previously considered it appropriate to further
     segment the market for artisanal ice cream.12
     (B)       Production and supply of edible oils
(24) In previous decisions, the Commission has segmented the broader edible oils sector
     into the following sub-segments: (i) crude seed oil; (ii) refined seed oil which can be
     sold in bulk (“BRSO”); and (iii) refined seed oil which is packaged for sale to end-
     users (“PRSO”).13
(25) The Commission has also considered that olive oils are distinct from seed oils, and
     treated the former as forming a distinct product market. As the Proposed Transaction
     will only potentially give rise to affected markets with respect to the production and
     supply of PRSO and olive oil, the correct market definition to adopt with respect to
     the supply of other oils has not been discussed further.
(26) In its previous decisions, the Commission did not consider it necessary to further
     segment the market for the production and supply of olive oil.
(27) As regards PRSO, the Commission previous market investigations have indicated
     that it may not be necessary to define separate markets based on different types of
     seeds.14
     (C)       Production and supply of vegetable (plant-based) fats
(28) The Commission has previously concluded that vegetable fats (namely, margarine)
     are not in the same market as packet butter, given the extent to which prices would
     need to increase before inducing customers to switch from margarine to butter.15
(29) In its previous decisions, the Commission did not consider further segmentations of
     the market for the production and supply of margarine.
     (D)       Production and supply of cheese/dairy spreads
(30) In previous decisions, the Commission has considered dividing the cheese market
     according to category of cheese, that is, spreadable, fresh, soft, semi-hard and hard
     cheese.
(31) The Commission has also considered further segmentations based on type of
     presentation (e.g. slice, fixed weight and variable weight), type of milk used and
     protected geographic status.16
11   Case M.7946 – PAI/Nestle/Froneri, para. 21 et seq.
12   Case M.7946 – PAI/Nestle/Froneri, para. 21 et seq.
13   Case M.7963 – ADM/Wilmar/Olenex JV (2016), para. 20.
14   Case M.8068 – Bunge/Walter Rau Neusser Ől Und Fett (2016), para. 15 et seq.
15   Case M.8150 – Danone/The Whitewave Foods Company (2016), para. 14.
                                                     5
 ---pagebreak--- (32) As noted above, the Commission has previously treated spreadable cheese (cream
     cheese and soft processed) as forming a distinct product market, and has undertaken
     a competitive assessment on this basis in a number of cases.17
(33) In its previous decisions, the Commission did not consider a further segmentation of
     the market for the production and supply of cheese/dairy spread.
     (E)         Production and supply of cold sauces
(34) The Commission’s past decisional practice18 has defined a separate market for cold
     sauces (which are typically used to add flavour to cooked food) from hot sauces
     (which are employed during the cooking process).
(35) As regards cold sauces, the Commission has consistently further segmented the
     market by type of cold sauce due to differences in characteristics and use of the
     products. As such, the Commission has defined separate markets for the supply of
     each of ketchup, mayonnaise, mustard, salad dressing and other cold sauces.19
     (F)         Supply of meat products
(36) In its previous cases, the Commission has drawn a distinction between the supply of
     fresh meat (i.e. fresh, frozen or minced meat that has not undergone any further
     processing, that is, no other ingredients or spices have been added, nor has the meat
     been cooked, smoked or dried) and processed meat (i.e. meat products containing
     external ingredients such as salt, spices, being raw, dried smoked or cooked).20
(37) The Commission has previously concluded that the supply of fresh meat for further
     processing and the supply of fresh meat for direct human consumption constitute two
     separate markets. The Commission has also segmented this market based on type of
     fresh meat.21
(38) The Commission’s decisional practice with respect to processed meat has been to
     segment the market by narrow product categories. Whilst leaving the precise market
     definition open, the Commission has grouped processed meat products into the
     following categories:22
          Raw cured products – that is, products that will be cooked by the consumer prior
           to eating. Some of the products may have already received some heat treatment
           (i.e. by smoking) but will still be viewed by consumers as being raw. This group
           consists of bacon, larger pieces of ham and loin cured or smoked.
16   Case M.6348 – Arla Foods/Allgauland (2011), para. 29.
17   Case M.6348 – Arla Foods/Allgauland (2011) and Case M.2011 – Delta Selections/Arla Foods Hellas
     (2000).
18   Case M.1990 – Unilever /Bestfoods (2000), para. 8 et seq; Case M.6895 – 3g Special Situations Fund
     Iii/ Berkshire Hathaway/ H J Heinz Company (2013), para. 13.
19   Case M.6895 – 3G Special Situations Fund III/Berkshire Hathaway/H J Heinz Company (2013),
     para. 18.
20   Case M.7565 – Danish Crown/Tican (2015), para. 17 and para. 21.
21   Case M.7930 – ABP Group/Fane Valley Group/Slaney Foods (2016).
22   Case M.7565 – Danish Crown/Tican, para. 22 and Case M.2662 – Danish Crown/Steff-Houlberg
     (2002), para 74.
                                                    6
 ---pagebreak---           Processed meat for cold consumption (cold cuts or charcuterie) – that is,
           products that will not be cooked by the consumer before eating, but will be
           consumed as is (typically in slices or dices). This category includes dried ham,
           cooked ham and salami for sandwiches, which can also be used in salads and
           cold starters.
          Canned meat – that is, fully preserved meats in selected metal cans or glasses,
           which have a prolonged shelf life at ambient temperatures. This product group
           includes canned ham, luncheon meat, cocktail sausages and semi-prepared
           meats with gravy and other ingredients.
          Cooked sausages – that is, sausages which are cooked and consumed directly as
           sausages, typically after heating in water, frying or grilling (including sausages
           for hotdog stands).
          Pates and pies – that is, pies, which are commuted and heat-treated products
           (baked or boiled) often including ingredients such as liver.
          Ready prepared dishes and components (convenience products) – that is, those
           products which typically requires a higher degree of preparation for
           consumption, either being the complete meal itself or being a significant
           component of this (e.g. meatballs, burgers etc.). Such products are often sold in
           frozen state but can also be sold as chilled products.
(39) The Commission has also left open further sub-segmentations within the above
     categories (e.g. by type of raw product, such as, raw sausages, bacon etc.) and
     whether such product types should be further sub-divided according to the meat type
     (i.e. pork, beef etc.). 23
     (G)        Production and supply of non-alcoholic beverages
(40) The Commission has consistently defined a separate market for the supply of
     alcoholic and non-alcoholic beverages (“NABs”). As regards the latter, the
     Commission has further distinguished between the supply of carbonated soft drinks
     (“CSDs”) and non-carbonated soft drinks (“NCSDs”).
(41) As regards NCSDs, the Commission indicated in past cases24 that it may be
     appropriate to further segment NCSDs into mineral waters, fruit juices, iced/ready-
     to-drink (“RTD”) teas and energy and sports drinks, although it ultimately left the
     question on such segmentation open, apart from distinguishing bottled water
     (comprising different types of still and carbonated waters, such as mineral water,
     spring water and treated water) from other NABs25, and from RTD teas.26
23   Case M.3401 – Danish Crown/Flagship Foods (2004).
24   Case M.2276 - The Coca-Cola Company/Nestle/JV, para. 17; Case M.6924 - Refresco Group/ Pride
     Foods, para. 16. and Case M.8244 – The Coca-Cola Company/Coca_Cola HBC/Neptuno Vandenys
     (2016), para. 18 et seq.
25   Case M.190 - Nestlé/Perrier, para. 8 et. Seq (1992).
26   Case M.6924 – Refresco Group/Pride Foods, para. 23.
                                                       7
 ---pagebreak--- (42)    The Commission has to date left open the question whether bottled water should be
        further segmented (including into still and carbonated water).27
4.1.1.2. The Notifying Party’s view
(43)    The Parties consider that most of the food products they produce and supply
        (including edible oils, margarine, cold sauces, cheese, meats and NABs) are
        relatively homogeneous. Therefore, customers will focus more on price and volume
        than on the brand itself when purchasing such food products.28 More specifically, the
        Notifying Party considers that in particular the following food products are
        characterised by homogeneity: take-home ice cream and fresh meat. 29
(44)    In addition, the Notifying Party also considers that the edible oil and margarine
        markets display a certain level of homogeneity, but that increasingly at least a certain
        segment of customer (i.e. those that place a premium on perceived health benefits)
        are placing a greater emphasis on product characteristics (e.g. margarine with added
        omega-3 fatty acids due to the perceived cardiovascular benefits).30
(45)    However, Fortenova also points out that there are other food products - most notably
        impulse ice cream, iced tea, bottled water, carbonated soft drinks and cold sauces
        (mayonnaise and ketchup) – in relation to which customers place great importance
        on the brand. According to the Notifying Party these food products are typically
        (although not always) associated with lower private label penetration.31
(46)    The Notifying Party did not take a view on other aspects of the product market
        definition in relation to the production and supply of daily consumer goods.
4.1.1.3. The Commission’s assessment
(47)    In the Commission’s market investigation, a clear majority of market participants
        who took a view agreed that the production and supply of food products dedicated to
        the retail distribution sector, on the one hand, and the production and supply of food
        products dedicated to the food service sector (i.e. the supply to out-of-home eating,
        institutional catering and the quick service restaurants sectors), on the other hand,
        constitute separate product markets with different supply-demand dynamics.32
(48)    In light of the above, in line with previous cases and for the purposes of this decision
        the Commission considers that the production and supply of food products dedicated
        to the retail distribution sector and the production and supply of food products
        dedicated to the food service sector constitute separate product markets.
27      Case M.8244 – The Coca-Cola Company/Coca_Cola HBC/Neptuno Vandenys (2016), para. 21 et
        seq.
28      See Form CO, paragraph 384.
29      See Form CO, paragraph 387.
30      See Form CO, paragraph 387.
31      See Form CO, paragraph 388.
32      Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 11;
        replies to questionnaire to wholesalers of daily consumer goods (Q2), question 12; replies to
        questionnaire to retailers of daily consumer goods (Q3), question 12; replies to questionnaire to
        certain producers and suppliers of daily consumer goods (Q4), question 11.
                                                         8
 ---pagebreak---      (A)        Production and supply of frozen foods including ice cream
(49) In the Commission’s market investigation, a majority of market participants who
     took a position agreed with the finding in previous cases that the production and
     supply of ice cream products, on the one hand, and other frozen food products, on
     the other hand, constitute different product markets with different supply-demand
     dynamics.33
(50) Further, a majority of market participants who took a view agreed in the market
     investigation that the production and supply of industrial ice cream, on the one hand,
     and, on the other hand, the production and supply of artisanal ice cream constitute
     different product markets with different supply demand dynamics.34
(51) Moreover, a majority of market participants who took a view in the market
     investigation agreed that the production and supply of (i) take-home ice cream, (ii)
     impulse ice cream, and (iii) catering ice cream constitute different product markets
     with different supply demand dynamics.35 One market participant commented in this
     regard: “Yes the packaging is completely different, the basic composition of the
     products is different and also the expiration dates themselves.”36
(52) In light of the above and for the purposes of this decision the Commission considers
     that the production and supply of ice creams constitutes a separate product market
     from the production and supply of other frozen food. The Commission further
     considers that the production and supply of industrial ice cream constitute a separate
     market from artisanal ice cream. Further, there are strong indications that the
     production and supply of (i) take-home ice cream; (ii) impulse ice cream and (iii)
     catering ice cream constitute separate product markets. The exact market definition
     can, however, be left open. The Proposed Transaction does not raise serious doubts
     as to its compatibility with the internal market irrespective of this market definition.
     (B)        Production and supply of edible oils
(53) In the Commission’s market investigation, a clear majority of market participants
     who took a view agreed with the finding in previous cases that the production and
     supply of (i) crude seed oil; (ii) BRSO; and (iii) PRSO constitute separate product
     markets with different supply-demand dynamics. Similarly, a clear majority of
     market participants who took a position in the market investigation agreed that olive
     oils, on the one hand, and seed oils, on the other hand, constitute separate product
     markets with different supply-demand dynamics.37
33   Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 13;
     replies to questionnaire to wholesalers of daily consumer goods (Q2), question 14; replies to
     questionnaire to retailers of daily consumer goods (Q3), question 14.
34   Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 14;
     replies to questionnaire to wholesalers of daily consumer goods (Q2), question 15; replies to
     questionnaire to retailers of daily consumer goods (Q3), question 15.
35   Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 15;
     replies to questionnaire to wholesalers of daily consumer goods (Q2), question 16; replies to
     questionnaire to retailers of daily consumer goods (Q3), question 16.
36   Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 15.1.
37   Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 16;
     replies to questionnaire to wholesalers of daily consumer goods (Q2), question 17; replies to
     questionnaire to retailers of daily consumer goods (Q3), question 17; replies to questionnaire to
     certain producers and suppliers of daily consumer goods (Q4), question 16.
                                                       9
 ---pagebreak--- (54) As regards a potential further segmentation by seed type within the production and
     supply of PRSO, the market investigation is inconclusive. A slight majority of
     market participants who took a view in the market investigation agreed that a further
     segmentation by different seed type within the production and supply of PRSO is not
     necessary.38 One producer/supplier explained in this regard that demand-side
     substitutability was high. However, another producer/supplier brought forward that
     supply-side substitutability was limited “(…) due to different sources of purchase,
     prices and availability of seeds to obtain PRSO.”39
(55) In light of the above, in line with previous cases and for the purposes of this decision
     the Commission considers cases that the production and supply of (i) crude seed oil;
     (ii) BRSO; and (iii) PRSO constitute separate product markets. Similarly, the
     Commission considers that the production and supply of seed oil is separate from the
     production and supply of olive oil. A further segmentation of the three identified
     markets for the production and supply of seed oil by seed type cannot be excluded.
     The exact market definition can, however, be left open. The Proposed Transaction
     does not raise serious doubts as to its compatibility with the internal market
     irrespective of this market definition.
     (C)       Production and supply of vegetable (plant-based) fats
(56) In the Commission’s market investigation, a majority of market participants who
     took a view agreed with the previous Commission finding that the production and
     supply of margarine constitutes a separate product market with its own supply-
     demand dynamics.40 Further, all market participants who expressed a view further
     explained that they did not consider a further market segmentation with respect to
     the production and supply of margarine as appropriate.41
(57) In light of the above and for the purposes of this decision the Commission finds that
     the production and supply of margarine constitutes a separate product market.
     (D)       Production and supply of cheese/dairy spreads
(58) In the Commission’s market investigation, a clear majority of market participants
     who took a clear position agreed that the production and supply of (i) spreadable, (ii)
     fresh, (iii) soft, (iv) semi-hard and (iv) hard cheese each constitute separate product
     markets with different supply-demand dynamics.42 One producer and supplier
     explained in this regard, that the preservation production and marketing policies
     were different.43
38   Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), question
     16.2.
39   Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), question
     16.2.1.
40   Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), question
     15.
41   Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), questions
     15.2 and 15.3.
42   Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), question
     13.
43   Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), question
     13.1.
                                                     10
 ---pagebreak--- (59) As regards a potential further segmentation based, for instance on type of
     presentation (e.g. slice, fixed weight and variable weight), type of milk used and
     protected geographic status, responses from market participants were inconclusive.
     Some said they agreed with a further segmentation, while some said that they
     disagreed with a further segmentation.44
(60) In relation to the production and supply of spreadable cheese, all of the market
     participants who took a view in the market investigation agreed with the finding in
     previous cases, that the production and supply of spreadable cheese constitutes a
     distinct product market with different supply-demand dynamics from other dairy
     products and that no further segmentation is appropriate.45
(61) In light of the above and for the purposes of this decision the Commission considers
     that the production and supply of (i) spreadable, (ii) fresh, (iii) soft, (iv) semi-hard
     and (iv) hard cheese each constitute separate product markets. A further
     segmentation by type of presentation, type of milk used and/or protected geographic
     market can be excluded, with the exception of spreadable cheese, where the market
     investigation suggests that no further segmentation is appropriate.
     (E)        Production and supply of cold sauces
(62) A vast majority of market participants who took a view in the market investigation
     agreed with previous Commission findings (see Section 4.1.1.1 (E)) that ketchup46
     and mayonnaise47 each constitute distinct product markets with specific supply-
     demand dynamics. One wholesale supplier stated in this regard: “„Ketchup“ has a
     special status within the other cold sauces. The production lines are normally
     separated from other products (e.g. from the production of natural cold sauces) also
     the production quantities are normally much higher.”48
(63) The Commission therefore finds that, as in previous cases, for the purposes of this
     decision, the production and supply of ketchup and the production and supply of
     mayonnaise each form distinct product markets.
     (F)        Supply of meat products
(64) In the Commission’s market investigation, all of the market participants who
     expressed a view agreed with the finding in previous cases that the supply of fresh
     meat and the supply of processed meat constitute distinct product markets with
     different supply-demand dynamics.49 Similarly, all of the market participants who
     took a clear position responded that the supply of fresh meat for further processing
44   Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), question
     13.2.
45   Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), questions
     13.3 and 14.
46   Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 17;
     replies to questionnaire to wholesalers of daily consumer goods (Q2), question 18; replies to
     questionnaire to retailers of daily consumer goods (Q3), question 18; replies to questionnaire to
     certain producers and suppliers of daily consumer goods (Q4), question 17.
47   Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), question
     17.
48   Replies to questionnaire to wholesalers of daily consumer goods (Q2), question 18.1.
49   Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), question
     19.
                                                       11
 ---pagebreak---      and the supply of fresh meat for direct human consumption constitute two separate
     markets.
(65) In light of the above and for the purposes of this decision the Commission considers
     that the supply of fresh meat for human consumption is a separate market from the
     production and supply of processed meat for human consumption. Further
     segmentations cannot be excluded. However, irrespective of a further segmentation,
     the Proposed Transaction does not raise serious doubts as regards its compatibility
     with the internal market.
     (G)        Production and supply of non-alcoholic beverages
(66) In the Commission’s market investigation, a majority of market participants who
     took a view responded that the production and supply of carbonated water, still water
     and flavoured water each constitute distinct product markets with different supply-
     demand dynamics, with one supplier and producer expressly mentioning different
     consumer habits, pricing and packaging strategies, as well as different growth
     rates.50
(67) In light of its past decisions and for the purposes of this case, the Commission
     considers that within the broader market for the production and supply of non-
     alcoholic drinks, there are separate product markets each for the production and
     supply of CSDs and for the production and supply of NCSDs. The Commission
     further considers in line with precedents that bottled water constitutes a separate
     product market. While the market investigation indicates that the production and
     supply of carbonated water, still water and flavoured watermight constitute separate
     product markets, in absence of serious doubts as to the compatibility of the
     transaction with the internal market under any alternative market definition, the
     precise product market definition can be left open in the present case.
     (H)        Branded vs private label products.
(68) With regard to a possible distinction between the production and supply of branded
     products and the production and supply of private label products, like in previous
     market investigations (see Section 4.1.1.1 above), there are strong indications that
     the production and supply of branded and the production and supply of private-label
     products are part of the same product markets.
(69) A clear majority of suppliers and producers do consider that both production and
     supply categories belong to the same product markets across the above mentioned
     plausible product markets for daily consumer goods.51 Some producers/suppliers
     explained that, on the supply-side, the same manufacturing plants were producing
     the same branded and non-branded products, while on the demand-side consumers
     were less and less distinguishing between the two categories.52 One
     producer/supplier noted: “In particular, there is a strong competitive relationship
50   Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), questions
     18 and 18.1.
51   Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), questions 18 and
     18.2; replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4),
     questions 21 and 21.2.
52   Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 18.1;
     replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), questions
     21.1 and 21.2.1.
                                                      12
 ---pagebreak---         between branded and non-branded/private label products, with the latter exerting
        significant competitive pressure on the former. It is increasingly difficult for
        consumers to distinguish whether products were manufactured by a manufacturer of
        branded goods or whether they are being sold as a private label product, (…).”53
(70)    However, the Commission notes that a clear majority of both wholesale suppliers
        and retail suppliers responded that the two categories belong to different product
        markets,54 with one retail supplier explaining that private label products usually
        target customers with lower income and another retail supplier referring to the
        supply-side stating that production facilities could be specialised and separated for
        private label products.55
(71)    In light of the above and for the purposes of this decision, the Commission notes that
        although there are strong indications that branded and private label products belong
        to the same production and supply markets across product categories, the results of
        the market investigation are mixed. However, the exact market definition can be left
        open. The Proposed Transaction does not raise serious doubts as to its compatibility
        with the internal market irrespective of this product market definition.
4.1.2. The procurement of daily consumer goods
4.1.2.1. Previous cases
(72)    In previous decisions, the Commission has considered a distinct market for the
        procurement of daily consumer goods, comprising the purchase of daily consumer
        goods by customers such as wholesalers, retailers and other firms from upstream
        producers and suppliers.56
(73)    In its decisional practice57, the Commission, considered a segmentation of that
        market into 19 relevant product markets corresponding to different types of goods,
        namely: (i) meat and sausages; (ii) poultry and eggs; (iii) bread and pastries; (iv)
        dairy products; (v) fresh fruits and vegetables; (vi) beer; (vii) wine and spirits; (viii)
        non-alcoholic beverages; (ix) hot beverages; (x) confectionery; (xi) basic food
        products (xii) preserved food; (xiii) frozen foods; (xiv) baby foods; (xv) pet foods;
        (xvi) body care articles (e.g. creams, lotions) and cosmetics (make-up and
        perfumes); (xvii) detergents, polishes and cleaning products; (xviii) other drugstore
        products; and (xix) other non-food products usually found in supermarkets (e.g.
        newspapers, magazines, entertainment).58 In one precedent59, the Commission also
        considered a different segmentation of the procurement market for daily consumer
        goods into 2360 product categories. However, this precedent, which related to
53      Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 18.1.
54      Replies to questionnaire to wholesalers of daily consumer goods (Q2), question 19; replies to
        questionnaire to retailers of daily consumer goods (Q3), question 19.
55      Replies to questionnaire to retailers of daily consumer goods (Q3), question 19.1.
56      Case M.8468 – Norgesgruppen/Axfood/Eurocash (2017), para. 22. Case M.7920 – Netto/J
        Sainsbury/Dansk Supermarked/New Edlington/Hedon/Roundhay Road, para. 19, Case M.7224 –
        Koninklijke Ahold/Spar CZ, para. 10; M.1221 – Rewe/Meinl, para. 81.
57      Case M.1221 – Rewe/Meinl (1999), para. 81.
58      Case M.7920 – Netto/J Sainsbury/Dansk Supermarked/New Edlington/Hedon/Roundhay Road
        (2016), para. 20.
59      M.7933 – Carrefour/Billa Romania and Billa Invest Construct, para. 17.
60      (1) Liquids (including soft drinks, beer and cider, water, still wine, sparkling wine and spirits); (2)
        hardware store products (including cleaning products, sponges, toilet paper and kitchen rolls,
                                                           13
 ---pagebreak---         Romania, included products typically sold in hypermarkets but not in supermarkets
        (e.g., large domestic electrical appliances, hifi/ audio, TV/video). According to the
        Form CO, Fortenova and Mercator operate supermarkets and discounters. Thus, the
        sub-segmentation into 19 product categories is more appropriate for the purposes of
        this decision.
(74)    The Commission also previously considered, but ultimately left open, whether a
        further distinction should be made between different sales channels, such as food-
        retailing, specialised trade, delicatessen, cash and carry stores and other wholesalers,
        drugstores and export trade.61
4.1.2.2. The Notifying Party’s view
(75)    The Notifying Party took no view on the product market definition as regards the
        procurement of daily consumer goods.
4.1.2.3. The Commission’s assessment
(76)    The Commission’s market investigation showed that the findings of past cases in
        relation to the procurement of daily consumer goods are still appropriate.
(77)    A vast majority of market participants who expressed a view responded that there is
        a specific market for the procurement of daily consumer goods including food
        products to customers such as wholesalers, retailers and other firms from upstream
        producers and suppliers.62
(78)    Likewise, the market investigation showed that an overwhelming number of market
        participants agree with the segmentation into 19 different procurement markets
        according to different product groups with different supply-demand dynamics found
        in previous cases, namely: (i) meat and sausages; (ii) poultry and eggs; (iii) bread
        and pastries; (iv) dairy products; (v) fresh fruits and vegetables; (vi) beer; (vii) wine
        and spirits; (viii) non-alcoholic beverages; (ix) hot beverages; (x) confectionery; (xi)
        basic food products (xii) preserved food; (xiii) frozen foods; (xiv) baby foods; (xv)
        pet foods; (xvi) body care articles (e.g. creams, lotions) and cosmetics (make-up and
        perfumes); (xvii) detergents, polishes and cleaning products; (xviii) other drugstore
        deodorants, insecticides, household soaps, washing products, water softeners, washing-up liquids,
        dishwasher products, all-purpose cleaning products/detergents); (3) perfumes/hygiene products (paper
        or cotton hygiene/sanitary products, perfumes, health-care products); (4) dry groceries (including
        breakfast products, sweet biscuits, cakes, confectionery, desserts, cake-making ingredients, baby
        foods, soups, pasta, starch-containing foodstuffs, preserves and prepared foods, condiments and
        seasonings, aperitif products, pet foods); (5) parapharmaceutical products; (6) perishable goods sold
        on a selfservice basis (dairy products and eggs, poultry, frozen foods, ice cream, factory-made
        pastries and bread); (7) delicatessen (prepared meat products and seafood); (8) fish; (9) fruit and
        vegetables; (10) fresh bread and cakes; (11) meat; (12) do-it-yourself; (13) home decorating; (14)
        culture; (15) toys/leisure/relaxation; (16) gardening; (17) motor car accessories; (18) large domestic
        electrical appliances; (19) small domestic electrical; (20) photography/movie-making; (21) hi-
        fi/audio; (22) TV/video; and (23) textiles.
61      See Case M.7920 – Netto/J Sansbury/Danks Supermarked/New Edlington/Hedon/Roundhay Road,
        para. 19; Case M.7933 – Carrefour/Billa Romania and Billa Invest Construct, para. 16; Case M.1221
        – REWE/Meinl, para. 81.
62      Replies to questionnaire to Producers and suppliers of daily consumer goods (Q1), question 19;
        replies to questionnaire to wholesalers of daily consumer goods (Q2), question 20; replies to
        questionnaire to retailers of daily consumer goods (Q3), question 20; replies to questionnaire to
        certain producers and suppliers of daily consumer goods (Q4), question 22.
                                                          14
 ---pagebreak---         products; and (xix) other non-food products usually found in supermarkets (e.g.
        newspapers, magazines, entertainment).63
(79)    Further, a clear majority of market participants who took a view expressed that
        different sales channels such as food-retailing, specialised trade, delicatessen, cash
        and carry stores and other wholesalers, drugstores and export trade constituted
        distinct procurement markets with different supply-demand dynamics.64 One
        producer/supplier explained that on the demand side, the customers were different
        for each sales channels, and they bought different quantities, different assortments of
        products and required different customer service i.e. the way the order is placed, the
        way it is made up and the way that delivery is made.65
(80)    In light of the above and for the purposes of this case, the Commission considers that
        there are strong indications for a segmentation of the procurement markets by the
        nineteen product categories mentioned above. Similarly, there are strong indications
        for a segmentation by sales channel. The exact market definition can, however, be
        left open. The Proposed Transaction does not raise serious doubts as to its
        compatibility with the internal market irrespective of this market definition.
4.1.3. The wholesale supply of daily consumer goods
4.1.3.1. Previous cases
(81)    Within the wholesale supply of daily consumer goods market a number of further
        potential segmentations have previously been considered by the Commission (but
        ultimately left open), that is: (i) segmentation into food and related non-food
        products; (ii) segmentation by mode of supply (e.g. delivered wholesale, contract
        distribution and cash & carry); (iii) segmentation by temperature range (i.e. frozen,
        chilled/fresh and ambient); (iv) segmentation by geographic scope of customer (i.e.
        national or independent); (v) segmentation by end-customer type (i.e. quick service,
        full service, pubs/coffee shops, hotels/accommodation, business & industry, other
        commercial, health, education, other institutional); and (vi) segmentation by product
        category (e.g. fruit & vegetables, poultry, savoury bakery, sweet bakery, dairy, fish,
        confectionary, desserts, meat, all other).66 However, for reasons of full supply-side
        substitutability, the Commission concluded in Sysco/Brakes that further
        segmentation by temperature range and end-customer type is not appropriate (at least
        in the context of that transaction).67
4.1.3.2. The Notifying Party’s view
(82)    The Notifying Party took no view on the product market definition as regards the
        wholesale supply of daily consumer goods.
63      Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 20;
        replies to questionnaire to wholesalers of daily consumer goods (Q2), question 21; replies to
        questionnaire to retailers of daily consumer goods (Q3), question 21; replies to questionnaire to
        certain producers and suppliers of daily consumer goods (Q4), question 23.
64      Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 21;
        replies to questionnaire to wholesalers of daily consumer goods (Q2), question 22; replies to
        questionnaire to retailers of daily consumer goods (Q3), question 22; replies to questionnaire to
        certain producers and suppliers of daily consumer goods (Q4), question 24.
65      Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 21.1.
66      Case M.7986 – Sysco/Brakes, para 11.
67      Case M.7986 – Sysco/Brakes, para 13.
                                                         15
 ---pagebreak--- 4.1.3.3. The Commission’s assessment
(83)    A clear majority of market participants who expressed a view68 confirmed the
        finding of previous Commission decisions, that the market or markets for the
        wholesale supply of non-food products and the market or markets for the wholesale
        supply of food products are each distinct markets with their on supply-demand
        dynamics.
(84)    A clear majority of market participants who took a clear position69 further responded
        that they considered a segmentation by product category (e.g. fruit & vegetables,
        poultry, savoury bakery, sweet bakery, dairy, fish, confectionary, desserts, meat, all
        other) as appropriate. A market participant explained in this regard: “Purchasing is
        influenced by the specifics of each category (different logistics routes, other sales
        channels, other methods storage, hygiene requirements, temperature regimes).”70
(85)    The market investigation is not wholly conclusive as to a further segmentation by
        mode of supply (e.g. delivered wholesale, contract distribution and cash&carry).
        There are some indications that this distinction might be appropriate. A majority of
        market participants who took a view said that they considered the different modes of
        supply to be distinct markets with different supply-demand dynamics. However, a
        notable number of respondents also said they did not agree with this distinction. 71
(86)    In light of the above and in line with previous Commission decisions, the
        Commission considers for the purposes of this decision, that there are indications
        that there are separate product markets for different product categories of wholesale
        supply of daily consumer goods (e.g. fruit & vegetables, poultry, savoury bakery,
        sweet bakery, dairy, fish, confectionary, desserts, meat, all other). A segmentation by
        mode of supply cannot also not be excluded. The exact market definition can,
        however, be left open since the Transaction would not give rise to serious doubts as
        to its compatibility with the internal market under the narrowest possible product
        market definition.
4.1.4. The retail supply of daily consumer goods
4.1.4.1. Previous cases
(87)    In its previous decisional practice the Commission has consistently held that within
        the retail segment a separate product market exists for the sale of daily consumer
        goods mainly carried out by retail outlets such as hypermarkets, supermarkets and
        discount chains (so called “modern distribution channels”).72 These retail outlets
68      Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 22;
        replies to questionnaire to wholesalers of daily consumer goods (Q2), question 23; replies to
        questionnaire to retailers of daily consumer goods (Q3), question 23; replies to questionnaire to
        certain producers and suppliers of daily consumer goods (Q4), question 25.
69      Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 22;
        replies to questionnaire to wholesalers of daily consumer goods (Q2), question 23; replies to
        questionnaire to retailers of daily consumer goods (Q3), question 23; replies to questionnaire to
        certain producers and suppliers of daily consumer goods (Q4), question 25.
70      Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 22.1.
71      Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 22;
        replies to questionnaire to wholesalers of daily consumer goods (Q2), question 23; replies to
        questionnaire to retailers of daily consumer goods (Q3), question 23; replies to questionnaire to
        certain producers and suppliers of daily consumer goods (Q4), question 25.
72      Case M.7224 – Koninklijke Ahold/Spar CZ (2014), para. 9.
                                                         16
 ---pagebreak---         offer consumers a basket of fresh and dry foodstuffs and non-food household
        consumables sold in a supermarket environment.
(88)    In addition, in past decisions the Commission has also considered that modern
        distribution channel outlets belong to a different product market to other retailers,
        such as specialised outlets (e.g. butchers, bakers, etc.) and service stations. These
        other retailers fulfil a specialist or convenience function and the variety and range of
        products in these more traditional store types would be narrower than in
        hypermarkets and supermarkets, which means that they belong to a different product
        market.73
4.1.4.2. The Notifying Party’s view
(89)    The Notifying Party took no view on the product market definition as regards the
        procurement of daily consumer goods.
4.1.4.3. The Commission’s assessment
(90)    A clear majority of market participants who expressed a view in the market
        investigation responded that within retail supply a separate product market exists for
        the sale of daily consumer goods mainly by retail outlets such as hypermarkets,
        supermarkets and discount chains (so-called “modern distribution channels”) distinct
        from other specialised retailers74.
(91)    In light of this and in line with previous Commission decisions, the Commission
        finds for the purposes of this decision that the market for the retail supply of daily
        consumer goods through hypermarkets, supermarkets and discount chains constitutes
        a separate product market.
4.2.    Relevant geographic markets
(92)    Within the EEA, Fortenova is mainly active in Croatia, where it has significant
        activities in the retail supply of daily consumer goods (via Konzum) and in the
        production and supply of food products (via Ledo, Jamnica, Zvijezda, Belje and PIK
        Vrbovec).
(93)    Mercator in contrast has a limited presence in Croatia (total revenue in the financial
        year 2018: EUR […] and in the financial year 2019 of EUR […]) in the wholesale of
        raw and intermediate daily consumer goods, procurement of daily consumer goods
        and the production and supply of food products. Mercator, however, has a strong
        presence in Slovenia where Fortenova is not active in the retail supply of daily
        consumer goods but has some activities upstream in the production and supply of
        daily consumer goods. Outside of Croatia and Slovenia, the Parties’ activities in the
        EU are limited.
73      Case M.8374 – UAB Rimi Lietuva/UAB Palink (2017), para. 13 et seq.
74      Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 23;
        replies to questionnaire to wholesalers of daily consumer goods (Q2), question 24; replies to
        questionnaire to retailers of daily consumer goods (Q3), question 24; replies to questionnaire to
        certain producers and suppliers of daily consumer goods (Q4), question 26.
                                                        17
 ---pagebreak--- 4.2.1. The production and supply of daily consumer goods
4.2.1.1. Previous cases
        (A)        Production and supply of ice cream
(94)    From a geographic perspective, the Commission has consistently considered that the
        relevant geographic markets for all ice cream products are national in scope due to
        legislative differences, national and sub-national trends in sales and distribution, and
        differences in consumers’ habits, products recipes and packaging.75
        (B)        Production and supply of edible oils
(95)    As noted above (See Section 4.1.1.1(B) above), the Commission has segmented the
        edible oils sector into the three sub-segments, namely crude seed oil, BRSO and
        PRSO. In addition, the Commission has also considered that olive oils are distinct
        from seed oils and treated the former as forming a distinct product market.
(96)    The Commission in previous decisions left open the precise definition of the
        geographic scope of the PRSO markets.76 However, the market investigation in
        previous cases revealed elements indicating that supply of PRSO to the retail
        channel can be regarded as national in scope with possible cross-border effects,
        encompass neighbouring regions, as well as other areas likely to supply without
        significant cost differences.77
        (C)        Production and supply of vegetable (plant-based) fats
(97)    The Commission has not assessed the geographic market definition for the supply of
        margarine in its previous decisions.
        (D)        Production and supply of cheese/dairy spreads
(98)    The Commission has defined, in its previous decisions, the market for the production
        and supply of cheese as being national in scope.78
        (E)        Production and supply of cold sauces
(99)    In previous decisions, the Commission has defined the relevant cold sauces markets
        as being national in scope, due to significant differences in sales channels, retailers,
        logistics, brands, and eating habits between the various EEA countries.79
        (F)        Supply of meat products
(100) As noted above (See Section 4.1.1.1(F) above), in its decisional practice the
        Commission has drawn a distinction between the supply of fresh meat and processed
        meat.
75      Case M.7946 – PAI/Nestle/Froneri, para. 55.
76      Case M.8068 – Bunge/Walter Rau Neusser Ől Und Fett (2016), para. 24
77      For instance, the competitive assessment carried out in Case IV/M.1227 – Cargill/Vandemoortele –
        JV, para. 24.
78      Case M.6242 – Lactalis/Parmalat (2011), para. 55.
79      Case M.6753 – Orkla/Rieber & Son (2013), para. 38.
                                                        18
 ---pagebreak--- (101) From a geographic perspective, the Commission has in past cases indicated that
        fresh meat for direct human consumption is likely to be national in scope, whereas
        the supply of fresh meat for further processing is national or wider than national,
        although this was ultimately left open.80
(102) As regards processed meat, the Commission has previously concluded that the
        market for processed meat is national in scope. Such delimitation would be justified
        on the basis that suppliers are able to price discriminate between different Member
        States. 81 The national scope of the market is also supported by the fact that the
        markets are still to a large extent characterised by national consumer preferences and
        recipes for national “specialties” (e.g. “Kasseler” in Germany, “Chorizo” in Spain
        etc.),82 as well as due to differences in terms of consumption habits and preferred
        national brands.83 However, the possibility that the market may be broader than
        national in scope for individual product groups of processed meat under specific
        circumstances has not been excluded.84
        (G)        Production and supply of non-alcoholic beverages
(103) From a geographic perspective, the Commission has consistently defined the
        geographic market for NABs as being national in scope, particularly in light of
        differentiated consumer preference between countries, the importance of national
        brands, significance of marketing and advertising expenses, and the significance of
        transport costs in relative terms to the final value of the product.85
4.2.1.2. The Notifying Party’s view
(104) The Notifying Party took no view on the definition of the geographic market as
        regards the production and supply of daily consumer goods.
4.2.1.3. The Commission’s assessment
        (A)        Production and supply of frozen foods
(105) As regards the geographic scope of the market for the production and supply of all
        ice cream, a majority of market participants who took a position indicated that the
        market(s) are national in scope.86 One producer/supplier of ice cream explained that
        there were differences in consumer habits and preferences between countries.87
80      See Case M.7565 – Danish Crown/Tican, para. 32.
81      Case M.4257 – Smithfield/Oaktree/Sara Lee Foods Europe (2006), para 38.
82      Case M.4257 – Smithfield/Oaktree/Sara Lee Foods Europe (2006), para 38.
83      Case M.7565 – Danish Crown/Tican, para. 39.
84      Case M.4257 – Smithfield/Oaktree/Sara Lee Foods Europe, para. 39.
85      Case M.7057 – Suntory/GlaxoSmithKline (Ribena & Lucozade Soft Drinks Business) (2013),
        para. 28 et seq.
86      Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 24;
        replies to questionnaire to wholesalers of daily consumer goods (Q2), question 25; replies to
        questionnaire to retailers of daily consumer goods (Q3), question 25. However, the Commission notes
        that some market participants consider the market or markets for all ice cream or at least for take-
        home ice cream and impulse ice cream as broader than national or even EEA-wide in scope.
87      Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 24.1.
                                                         19
 ---pagebreak--- (106) Consequently, and in line with its findings in previous decisions, the Commission
      concludes that for the purposes of this decision the geographic market or markets for
      the production and supply of all ice cream is/are national in scope.
      (B)        Production and supply of edible oils
(107) As regards the geographic scope of the market for the production and supply of
      edible oils, responses from market participants were not wholly conclusive. There
      are indications that the market or markets for the production and supply of edible
      oils might be wider than national. While a notable number of market participants
      said that the markets were national in scope, a majority of market participants did not
      agree that each country constitutes a separate market for the production and supply
      of edible oils with different supply-demand dynamics, with several explaining that
      the market was broader than national, EEA-wide or even global. 88
(108) Furthermore, the market investigation was not conclusive as to whether the
      production and supply of PRSO is national in scope or wider than that. Half of the
      respondents who expressed a view said it was national while the other half said that
      the geographic market was wider than national.89
(109) For the purposes of this decision, the Commission leaves open whether the market or
      markets for the production and supply of edible oils are national or wider than
      national. Irrespective of the geographic market definition for the market or markets
      for the production and supply of edible oils, the Proposed Transaction does not raise
      serious doubts as to its compatibility with the internal market.
      (C)        Production and supply of margarine
(110) With regard to the geographic scope of the market for the production and supply of
      margarine, responses from market participants were not fully conclusive. All market
      participants who expressed a view indicated that the market or markets for the
      production and supply of margarine are at least national in scope. Market
      participants, however, did not take a clear view on whether the geographic scope of
      the market for production and supply of margarine is national or wider than national.
      There are indications that the market or markets might be wider than national as a
      slight majority of a limited number of responses considered the market or markets
      for the production and supply of margarine to be wider than national.90
(111) For the purposes of this decision, Commission concludes that the market or markets
      for the production and supply of margarine are at least national in scope. As,
      irrespective of this geographic market definition, the Proposed Transaction does not
      raise serious doubts as to its compatibility with the internal market, the Commission
      leaves open whether the market or markets for the production and supply of
      margarine might be wider than national in scope.
88    Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), questions 25 and
      25.1; replies to questionnaire to wholesalers of daily consumer goods (Q2), questions 26 and 26.1;
      replies to questionnaire to retailers of daily consumer goods (Q3), questions 26 and 26.1; replies to
      questionnaire to certain producers and suppliers of daily consumer goods (Q4), questions 30 and 30.1.
89    Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), questions
      30.2. and 30.2.1.
90    Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), questions
      28 and 28.1
                                                        20
 ---pagebreak---       (D)        Production and supply of cheese/dairy spreads
(112) As regards the geographic scope of the market for the production and supply of
      cheese, responses from market participants were inconclusive. While half of the
      market participants who expressed a view said that each country constituted a
      separate market for the production and supply of cheese due to different supply-
      demand dynamics, the other half of market participants who took a clear position
      disagreed, with one stating they were at least regional and two others stating they
      were EEA-wide.91
(113) As, irrespective of this geographic market definition, the Proposed Transaction does
      not raise serious doubts as to its compatibility with the internal market, the
      Commission leaves open the geographic market definition for the markets for the
      production and supply of cheese.
      (E)        Production and supply of cold sauces
(114) As regards the geographic scope of the market for the production and supply of cold
      sauces, responses from market participants were not wholly conclusive. A slight
      majority of respondents who took a clear position did not agree that each country
      constitutes a separate geographic market for cold sauces, with several of them
      indicating, that the markets might be wider than national.92
(115) In light of the above, the Commission concludes that for the purposes of this
      decision, the markets for cold sauces are at least national in scope. The Commission
      leaves open whether the markets might be wider than national, as the Proposed
      Transaction does not raise serious doubts as to its compatibility with the internal
      market irrespective of this market definition.
      (F)        Supply of meat products
(116) With regard to the markets for the supply of meat for human consumption, the
      market investigation confirms that the markets for the supply of fresh meat for
      human consumption are national in scope. All of the market participants who
      expressed a view agreed with this.93
(117) As regards the supply of processed meat for human consumption, the market
      investigation is not wholly conclusive. A majority of respondents agreed in response
      to one question that the markets for the supply of processed meat are wider than
      national. 94 One producer/supplier explained the difference was due to the different
      expiry dates. Because of this, processed meat could be distributed more broadly.95
91    Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), question
      27.
92    Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 26;
      replies to questionnaire to wholesalers of daily consumer goods (Q2), question 27; replies to
      questionnaire to retailers of daily consumer goods (Q3), question 27; replies to questionnaire to
      certain producers and suppliers of daily consumer goods (Q4), question 33.
93    Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), question
      31.
94    Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), question
      31.
95    Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), question
      31.1.
                                                      21
 ---pagebreak---         However, in a response to another question with a limited response rate, market
        participants agreed with a national scope.96
(118) In light of the above, the Commission concludes for the purposes of this decision,
        that the markets for the supply of fresh meat for human consumption are national in
        scope and the markets for the production and supply of processed meat for human
        consumption are at least national in scope. The Commission leaves open whether the
        markets for the production and supply of processed meat might be wider than
        national as the Proposed Transaction does not raise serious doubts as to its
        compatibility with the internal market irrespective of this market definition.
        (G)        Production and supply of non-alcoholic beverages
(119) With regard to the geographic scope of the market for the production and supply of
        bottled water, all of the market participants who expressed a view said that the
        market or markets for the production and supply of bottled water are national in
        scope.97
(120) In light of the clear outcome of the market investigation and in line with its previous
        decisions, the Commission concludes that the market or markets for the production
        and supply of bottled water are national in scope.
4.2.2. The procurement of daily consumer goods
4.2.2.1. Previous cases
(121) In previous decisions, the Commission has consistently defined the procurement
        market as being national in scope. The main reasons underlying this approach have
        been that consumer preferences relate to national products and suppliers generally
        negotiate on a national level.98
4.2.2.2. The Notifying Party’s view
(122) The Notifying Party took no view on the definition of the geographic market as
        regards the procurement of daily consumer goods.
4.2.2.3. The Commission’s assessment
(123) In the Commission’s market investigation, a clear majority of market participants
        who took a clear position said that each country constitutes a separate market for the
        procurement of daily consumer goods with different supply-demand dynamics99,
96      Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), question 31
        and question 32.
97      Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), question
        29.
98      Case M.7920 – Netto/J Sainsbury/Dansk Supermarked/New Edlington/Hedon/Roundhay Road,
        para. 21.
99      Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 27;
        replies to questionnaire to wholesalers of daily consumer goods (Q2), question 28; replies to
        questionnaire to retailers of daily consumer goods (Q3), question 28; replies to questionnaire to
        certain producers and suppliers of daily consumer goods (Q4), question 34..
                                                         22
 ---pagebreak---         with some providing reasons such as different consumer preferences as well as the
        prominence of local brands.100
(124) The Commission notes that, despite the clear general agreement with a national
        scope of the procurement markets for daily consumer goods, explanations of several
        market participants indicate that at least some of the markets are increasingly
        becoming wider than national.101
(125) In light of the above, the Commission concludes that for the purposes of this
        decision it finds that the markets for the procurement of daily consumer goods are at
        least national in scope. However, a wider market definition cannot be fully excluded.
        The Commission ultimately leaves open whether the market is wider than national,
        as the Proposed Transaction does not raise serious doubts as to its compatibility with
        the internal market irrespective of the market definition.
4.2.3. The wholesale supply of daily consumer goods
4.2.3.1. Previous cases
(126) From a geographic perspective, the Commission has previously considered the
        market for the wholesale supply of daily consumer goods to be national in scope.102
        The one potential exception is the cash & carry mode of supply, where the
        Commission has previously considered the market to be smaller than national
        (i.e. local) in scope.103
4.2.3.2. The Notifying Party’s view
(127) The Notifying Party took no view on the definition of the geographic market as
        regards the wholesale supply of daily consumer goods.
4.2.3.3. The Commission’s assessment
(128) As regards the market or markets for the wholesale of daily consumer goods, the
        market investigation confirms that these markets are national in scope. A clear
        majority of market participants who expressed a view said that each country
        constitutes a separate product market for the wholesale of daily consumer goods.104
(129) As regards a possible exception for the cash & carry mode of supply, which the
        Commission previously considered to be smaller than national in scope, a majority
100     Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 27.1;
        replies to questionnaire to wholesalers of daily consumer goods (Q2), question 28.1; replies to
        questionnaire to retailers of daily consumer goods (Q3), question 28.1; replies to questionnaire to
        certain producers and suppliers of daily consumer goods (Q4), question 34.1.
101     Replies to questionnaire to wholesalers of daily consumer goods (Q2), question 28.
102     Case M.2891 – CD&R Fund VI Limited/Brake Bros plc (2002), para. 9.
103     Case M.784 – Kesko/Tuko (1996), para. 32.
104     Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 28;
        replies to questionnaire to wholesalers of daily consumer goods (Q2), question 29; replies to
        questionnaire to retailers of daily consumer goods (Q3), question 29; replies to questionnaire to
        certain producers and suppliers of daily consumer goods (Q4), question 35.
                                                          23
 ---pagebreak---         of market participants who responded to the market investigation said it is likewise
        national in scope. 105
(130) In light of the above and in line with previous decisions, the Commission finds that,
        for the purposes of this decision, the markets for the wholesale supply of daily
        consumer goods (with the possible exception of the cash & carry mode of supply)
        are national in scope. In light of the feedback from Slovenian market participants,
        the Commission further considers that the plausible Slovenian wholesale market(s)
        for the cash & carry mode of supply is(are) national in scope. However, for the
        purposes of this decision, the Commission leaves open whether the markets for the
        wholesale of daily consumer goods through the cash & carry mode of supply outside
        Slovenia may be smaller than national in scope. Irrespective of this market
        definition, the Proposed Transaction does not raise serious doubts as to its
        compatibility with the internal market.
4.2.4. The retail supply of daily consumer goods
4.2.4.1. Previous cases
(131) The geographic market for the retail supply of daily consumer goods has generally
        been considered by the Commission to be local in scope, as delineated by the
        boundaries of a territory where the outlets can be reached easily by consumers
        (typically based on radii of approximately 20 to 30 minutes driving time).106
4.2.4.2. The Notifying Party’s view
(132) The Notifying Party took no view on the definition of the geographic market as
        regards the retail supply of daily consumer goods.
4.2.4.3. The Commission’s assessment
(133) As regards the geographic scope of the markets for the retail supply of daily
        consumer goods in Slovenia, the Commission’s market investigation showed that the
        markets are most likely local in scope as delineated by the boundaries of a territory
        where the outlets can be reached easily by consumers (typically based on radii of
        approximately 20 to 30 minutes’ driving time). A majority of market participants
        who expressed a view said that the Slovenian retail supply markets for daily
        consumer goods should be defined as local.107 A retail supplier notes in this regard:
        “Slovene customers are less likely to travel a long distance to buy the daily
        consumer goods. The density of retail stores in Slovenia is amongst highest in
        EU”.108
105     Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 28;
        replies to questionnaire to wholesalers of daily consumer goods (Q2), question 29; replies to
        questionnaire to retailers of daily consumer goods (Q3), question 29; replies to questionnaire to
        certain producers and suppliers of daily consumer goods (Q4), question 35..
106     Case M.8374 – UAB Rimi Lietuva/UAB Palink (2017), para. 15.
107     Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 29;
        replies to questionnaire to wholesalers of daily consumer goods (Q2), question 30; replies to
        questionnaire to retailers of daily consumer goods (Q3), question 30; replies to questionnaire to
        certain producers and suppliers of daily consumer goods (Q4), question 36.
108     Replies to questionnaire to retailers of daily consumer goods (Q3), question 30.1.
                                                           24
 ---pagebreak--- (134) However, the Commission notes that a meaningful number of respondents consider
      the Slovenian markets for the retail supply of daily consumer goods to be national.
(135) In light of the above, for the purposes of this decision, the Commission considers
      that the Slovenian markets for the retail supply of daily consumer goods are likely
      local in scope. However, a national scope of the Slovenian retail supply markets for
      daily consumer goods cannot be excluded. It can ultimately be left open whether the
      markets are local or national in scope as the Proposed Transaction does not raise
      serious doubts as to its compatibility with the internal market irrespective of this
      market definition.
5.    COMPETITIVE ASSESSMENT
(136) In Croatia, due to some very limited wholesale activities of Mercator, the Proposed
      Transaction gives rise to plausible horizontally affected markets as regards the
      production and supply of bottled water dedicated to the food service sector, as
      regards the production and supply of ice cream dedicated to the food service sector,
      as regards the procurement of daily consumer goods and as regards the wholesale of
      daily consumer goods. Similarly, the Proposed Transaction gives rise to vertical
      overlaps in Croatia between Mercator’s wholesale activities vis-à-vis Fortenova’s
      production and supply activities upstream and vis-à-vis Fortenova’s retail supply
      activities in five plausible local markets downstream.
(137) However, due to the very limited size of Mercator’s activities in Croatia, the
      horizontal overlaps and the increments are de minimis with regard to all plausible
      affected markets.109 The HHI deltas are all below the 250 threshold, and almost all
      below 150, and are therefore unlikely to raise competition concerns according to
      Paragraphs 20 and 21 of the Horizontal Merger Guidelines. There are two overlaps
      as regards the wholesale supply of daily consumer goods in Croatia, where the pre-
      merger market share of Fortenova would be above 50%, namely bottled water (with
      […]%) and iced tea (with […]%), thereby falling outside the scope of Paragraphs 20
      and 21 of the Horizontal Merger Guidelines in spite of an HHI delta below 150.
      However, the Commission notes that these market shares provided by the Parties
      relate to food product categories that are relatively narrow compared to the broader
      markets the Commission previously found with regard to the wholesale supply of
      daily consumer goods. The available market shares, therefore, are likely to
      overestimate the market shares on the likely broader relevant markets. Second, the
      wholesale supply activities of Mercator as regards both bottled water and iced tea
      account for less than one percent market share both on a volume and value basis (de
      minimis).110 As such, substantive competition concerns can be excluded due to a lack
      of closeness of competition and the de minimis increments that would result from the
      Transaction.
(138) Similarly, regarding the possible vertical overlaps in Croatia, the activities of
      Mercator all account for less than one percent market share (de minimis). In this
      respect, the Commission notes that Fortenova’s brands/products have a substantial
      share in Croatia in a number of product categories principally in respect of impulse
      ice cream ([…]%), margarine ([…]%), mayonnaise ([…]%) and bottled
109   See Form CO, paragraph 275 et seq. and the cover-letter of the Notifying Party’s response to the
      request for information No. 12 on 18.9.2020.
110   See Form CO, paragraph 276.
                                                   25
 ---pagebreak---       water ([…]%).111 However, even if Fortenova were to be deemed to possess market
      power in one or more of the upstream markets, input foreclosure would not be a
      credible strategy for Fortenova post-Transaction. Fundamentally, the Commission
      considers that the addition of Mercator is too small to change the ability and/or
      incentives of Fortenova in supplying downstream competitors, and that therefore the
      risk of input foreclosure is extremely limited. Mercator’s limited downstream
      increment in Croatia (<1% on both a volume and value basis) means that customer
      foreclosure concerns can be dismissed given that post-Transaction there will clearly
      remain sufficient economic alternatives in the downstream market for the upstream
      rivals to sell their competing daily consumer goods and agricultural products to.
(139) Similar considerations apply to incentives regarding input and customer foreclosure
      in relation to the overlap with Fortenova’s retail activities downstream. Input
      foreclosure concerns can be excluded on the basis that the addition of Mercator’s de
      minimis (<1%, on both a volume and value basis) upstream share would not alter the
      ability and/or the incentive of the merged entity to engage in an input foreclosure
      strategy at the wholesale level. As regards customer foreclosure, whilst there are five
      plausible local Croatian markets (counties) in which Fortenova’s retail share exceeds
      30% (their shares range from […]% to […]%)112, the fact that retailers typically
      procure goods on a national basis (particularly those large downstream retailers that
      compete with Fortenova in Croatia – e.g. Lidl, Kaufland, Tommy and Spar) means
      that customer foreclosure strategy could not be effectively limited to these plausible
      local markets. Furthermore, Mercator’s transit wholesale business in Croatia
      typically focuses on supply of a limited range of products to food processors and
      downstream retailers are in any event not an important source of demand for this
      business.113 Finally, one of the key features of running a successful downstream
      retail business is to ensure that customers are provided with a wide-range of products
      and brands (so as to meet the diverse needs and preferences of consumers), as such,
      it is highly unlikely that Fortenova would cease to procure products from competing
      upstream wholesalers.
(140) Therefore, in conclusion, the Commission finds that the Proposed Transaction does
      not raise serious doubts as to its compatibility with the internal market in relation to
      Croatia.114 Therefore, the Croatian markets are not assessed further in this decision.
(141) In Slovenia, the Proposed Transaction gives rise to horizontally affected markets
      with respect to the markets for the procurement of food products/daily consumer
      goods and plausible sub-markets thereof, as well as plausible sub-markets for the
      wholesale supply of daily consumer goods. Furthermore, the Proposed Transaction
      gives rise to a number of vertically affected markets in Slovenia because of
      Fortenova’s upstream activities in the production and supply of daily consumer
      goods (in particular impulse ice cream) and Mercator’s downstream wholesale
      supply and retail supply activities.
111   See Form CO, paragraph 285.
112   There are five counties in Croatia (out of a total of 21) where Fortenova’s retail share will reach or
      exceed 30%, that is: Lika-Senj ([40-50]%), Dubrovnik-Neretva ([30-40]%), City of Zagreb ([30-
      40]%), Zagreb County ([30-40]%) and Sibenik-Knin ([30-40]%), see Form CO paragraph 290.
113   See Form CO, paragraph 290.
114   This would be the case even if the market(s) for the retail sale of daily consumer goods in Croatia
      were to be defined as local in scope.
                                                       26
 ---pagebreak--- (142) At the outset, though, as explained in Section 2 above, the target Mercator was
        already part of the same corporate group together with the Agrokor assets currently
        controlled by acquirer Fortenova, from 2014 until 1 April 2019 when Mercator was
        excluded from the Agrokor assets initially transferred to Fortenova as part of the
        Agrokor debt-for-equity restructuring. The Notifying Party argues that the
        Transaction essentially re-establishes the status quo prior to 1 April 2019 and that,
        by construction, the Proposed Transaction cannot significantly affect competition as
        compared to the previously existing situation. In its view, the Proposed Transaction
        would merely restore the competitive conditions/status quo that existed until
        immediately befor 1st April 2019.115 In this respect, the Commission notes that the
        Commission’s market investigation confirmed that Mercator is indeed integrated
        already with the other Fortenova assets to a high degree. This prompted many
        respondents to expect “no change” in the competitive conditions on the relevant
        markets as a result of the Proposed Transaction. Moreover, as one retailer
        commented “Mercator is a selfstanding company” and its management has always
        been “sovereign at taking business decisions and according to our knowledge so
        shall remain also after its reintegration of the corporate group previously known as
        Agrokor and now controlled by Fortenova”.116
(143) In light of this, the Commission notes that the outcome of the market investigation
        tends to support the Notifying Party’s view that merger-specific effects arising from
        the Proposed Transaction are likely to be limited. However, for the purposes of this
        decision, the question of the appropriate counterfactual and the materiality of effects
        can be left open because the Proposed Transaction does not raise serious doubts as to
        its compatibility with the internal market in any event.
5.1.    Horizontal overlaps
(144) In Slovenia, the Proposed Transaction gives rise to horizontally affected markets
        with respect to the procurement of food products/daily consumer goods and
        plausible sub-markets thereof and plausible sub-markets for the wholesale supply of
        daily consumer goods.
5.1.1. Procurement of daily consumer goods
(145) Horizontal overlaps arise in Slovenia in the plausible overall market as well as in
        several plausible sub-markets for the procurement of daily consumer goods, given
        that both Parties procure items from upstream daily consumer goods manufacturers
        in Slovenia for sale in their downstream businesses.
5.1.1.1. Notifying Party’s view
(146) The Parties have based most of their market shares on data contained in reports by
        Nielsen, an information & measurement company providing market research. These
        reports discuss Fortenova’s share (and those of competitors) in the affected markets
        in Croatia and Slovenia for 2016, 2017, 2018 and 2019.117
115     See Form CO, paragraph 329.
116     Reply to questionnaire to retailers of daily consumer goods (Q3), question 4.1.
117     See Form CO, paragraph 138 and Suppporting Documents 4 to 7 and 41.
                                                          27
 ---pagebreak--- (147) Regarding a plausible segmentation by 19 product categories (see above Section
        4.1.2.1 and 4.1.2.3) 118, the Parties were not able to provide market share estimates
        as they do not possess a reliable third party source of data that would allow them to
        provide share estimates on this basis. They have provided internal revenue data as
        the best available data.
(148) The Notifying Party argues that the fact that the Proposed Transaction would only
        result in a limited increment of less than [0-5]% (on both a volume and value basis),
        means that substantive competition concerns should not arise.
(149) If the procurement markets were instead to be segmented by sales channel and the
        sector for the procurement of daily consumer goods to be sold via cash and carry
        stores (or via other traditional wholesalers) were to be analysed separately, then the
        Parties’ combined share of approximately [5-10] % in Slovenia would not lead to
        affected procurement markets for daily consumer goods in Slovenia. Even a further
        segmentation would not give rise to any horizontally affected markets in light of the
        again limited increment.119
(150) In relation to narrower markets by product category, the Notifying Party notes that
        substantive competition concerns could be excluded even putting aside the lack of
        merger-specific effect stemming from the Transaction on the basis that the likely
        limited/de minimis increment in each category accounted for by Fortenova would
        mean that post-Transaction, Mercator’s purchasing position would not be
        significantly strengthened.120
5.1.1.2. The Commission’s assessment
(151) The Commission considers the Nielsen data credible.
(152) In the plausible overall market for the procurement of daily consumer goods, the
        combined market share of the Parties would, based on the data provided by the
        Parties, amount to [20-30] % with a very low increment of [0-5]%.121
(153) A plausible segmentation by sales channels would not lead to any affected markets
        based on the market share information provided by the Parties.
(154) The internal revenue data of the Parties for the individual products seem to generally
        support their claim that the increments would be limited/de minimis as the value of
        the Fortenova procurement activities is low in absolute numbers and compared to
        Mercator’s activities, see the Table 1 below.
118     I.e.: (i) meat and sausages; (ii) poultry and eggs; (iii) bread and pastries; (iv) dairy products; (v) fresh
        fruits and vegetables; (vi) beer; (vii) wine and spirits; (viii) non-alcoholic beverages; (ix) hot
        beverages; (x) confectionery; (xi) basic food products (xii) preserved food; (xiii) frozen foods; (xiv)
        baby foods; (xv) pet foods; (xvi) body care articles (e.g. creams, lotions) and cosmetics (make-up and
        perfumes); (xvii) detergents, polishes and cleaning products; (xviii) other drugstore products; and
        (xix) other non-food products usually found in supermarkets (e.g. newspapers, magazines,
        entertainment)
119     See Form CO, paragraph 301.
120     See Form CO, paragraph 300.
121     See Form CO, paragraph 299.
                                                            28
 ---pagebreak---  ---pagebreak--- (156) Second, the combined market share of the Parties of [20-30] % remains modest. In
        particular, the combined market share is just slightly above the threshold of 25%,
        which would indicate a presumption of compatibility with the internal market
        according to Paragraph 18 of the Horizontal Merger Guidelines.
(157) Third, in the market investigation market participants did not express concerns in
        relation to an increased bargaining power of the Parties resulting from the horizontal
        overlap in procurement activities. On the contrary, asked for the impact of the
        Proposed Transaction on the market or markets for the procurement of food products
        to customers such as wholesalers, retailers and other firms in Slovenia, the clear
        majority of market participants who expressed an opinion responded that there
        would be no change in relation to price, quality, choice and innovation.123
(158) In conclusion, the Commission finds that the horizontal overlaps in plausible
        Slovenian markets for the procurement of daily consumer goods do not raise serious
        doubts in relation to their compatibility with the internal market.124
5.1.2. Wholesale of daily consumer goods
(159) Horizontal overlaps arise in Slovenia in several plausible sub-markets for the
        wholesale supply of daily consumer goods. This horizontal overlap arises due to:
        (i) the activities of Fortenova in the direct supply of food products manufactured by
        upstream Fortenova entities to downstream retailers and wholesalers in Slovenia;
        and (ii) Mercator’s traditional wholesaling activities (i.e. via its warehousing, cash
        and carry, franchise and transit distribution channels), via which it distributes
        Mercator private label products (primarily to franchisees) and other branded
        products. Fortenova does not have a competing traditional wholesaling business in
        Slovenia.125
(160) The overall market for the wholesale supply of daily consumer goods in Slovenia is
        not affected, as the combined market share of the Parties is below 10%.
5.1.2.1. Notifying Party’s view
(161) In addition to the lack of merger-specific impact on competition stemming from the
        Proposed Transaction, the Notifying Party argues that, in any event, the merged
        entity would continue to be constrained by a number of producers/manufacturers, as
        well as suppliers of private label.126
(162) Secondly, the differing nature of the Parties’ activities in the Slovenian wholesale
        market means that they were unlikely to be viewed by downstream customers as
        being close competitors. This is because traditional grocery wholesale services, such
        as those offered by Mercator, are typically used by smaller grocery retailers and
        small wholesale customers (e.g. small businesses and tradesmen), whereas larger
        grocery retailers (who typically purchase greater volumes and have more
123     Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 8; replies
        to questionnaire to wholesalers of daily consumer goods (Q2), question 9; replies to questionnaire to
        retailers of daily consumer goods (Q3), question 9; replies to questionnaire to certain producers and
        suppliers of daily consumer goods (Q4), question 8.
124     If the market(s) for the procurement of daily consumer goods were found to be broader than national
        in scope, they would not raise serious doubts as the relevant market shares would be lower.
125     See Form CO, paragraph 302.
126     See Form CO, paragraph 307.
                                                          30
 ---pagebreak---  ---pagebreak---  ---pagebreak---              Bio Today, as well as a long tail of private label and smaller manufacturers
             who collectively account for in excess of c. [40-50]% of the category (on both
             a volume and value basis).131
      (c)    In relation to all industrial ice cream and impulse ice cream, Ljubljanske
             mlekarne will continue to pose a strong competitive constraint on the Parties
             post-Transaction (e.g. by value it has an approximate [20-30]% share of the
             total industrial ice cream category and an approximate [20-30]% share of the
             impulse ice cream category). Other significant players include Incom, Pro
             Organika, Mars, Unilever and Nestle who combined account for in excess of c.
             [10-20]% of both of these categories by value and by volume, approximately
             [10-20]% of the impulse ice cream category and approximately [5-10]% of the
             all industrial ice cream category).132
      (d)    In relation to the wholesale supply of ketchup in Slovenia, the merged entity
             will continue to face strong competition from number of well-established
             competitors, including: Felix ([20-30]% volume share and [30-40]% value
             share), ETA ([5-10]% volume share and [5-10]% value share), Heinz ([0-5]%
             volume share and [5-10]% value share) and Mutti Fratelli ([0-5]% volume
             share and ([0-5]% value share).133
      (e)    As regards the wholesale supply of mayonnaise in Slovenia, the market is
             dominated by Nestle (via its Thomy brand) with a share of approximately [50-
             60]% (by value) and approximately [40-50]% (by volume). Other significant
             competitors include Unilever ([5-10]% volume share and ([5-10]% value
             share) and GEA ([0-5]% share by both volume and value).134
      (f)    Looking at the wholesale supply of dairy/cheese spread in Slovenia, where the
             Parties would have a combined market share of [20-30]% post-transaction, the
             key competitors include Ljubljanske (via the MU brand), which in 2018 had a
             share of [10-20]% (by volume) and [20-30]% (by value), and Mlekarna Celeia
             (via the Zelene Doline brand), which in 2018 had a share of [5-10]% (by
             volume) and [10-20]% by value. Private label suppliers accounted for a
             significant portion of the category, [10-20]% by volume and [10-20]% by
             value in 2018.135
(168) Fourthly, responses of market participants to the market investigation who said that
      the geographic markets are wider than national suggest that there is a certain degree
      of constraints from imports in particular in relation to edible oils, but also in relation
      to cold sauces like mayonnaise and ketchup, as well as with regard to margarine and
      impulse and take-home ice cream.136
(169) Fifthly, in the market investigation market participants did not express concerns in
      relation to the horizontal overlap in the wholesale activities. On the contrary, asked
      for the impact of the Proposed Transaction on the market or markets for the
      wholesale supply of food products in Slovenia, the clear majority of market
131   See Form CO, paragraph 307.
132   See Form CO, paragraph 307.
133   See Form CO, paragraph 307.
134   See Form CO, paragraph 307.
135   See Form CO, paragraph 307.
136   See above Section 4.2.3.3 above.
                                                  33
 ---pagebreak---        participants who expressed an opinion responded that there would be no change in
       relation to price, quality, choice and innovation.137 Moreover, none of the market
       participants who took a view expects a price increase in relation to each of: all
       industrial ice cream, impulse ice cream, edible oils, mayonnaise, margarine, ketchup
       and dairy/cheese.138
(170) Sixthly, the difference in the Parties’ activities suggests they are not close
       competitiors. Mercator’s traditional grocery wholesale supply services are typically
       used by smaller businesses whereas larger grocery retailers are more likely to
       purchase groceries directly from producers. As such, given that Fortenova’s
       wholesale activities in Slovenia are limited to the direct supply channel and Mercator
       has very limited activities in this space (solely via Mercator-Emba), the Parties do
       not seem to compete closely.139
(171) In conclusion, the Commission finds that the potential horizontal overlaps in
       plausible Slovenian markets for the wholesale of daily consumer goods do not raise
       serious doubts in relation to their compatibility with the internal market.
5.1.3. Conclusion on horizontal overlaps
(172) In light of the above, the Commission finds that the Proposed Transaction does not
       raise serious doubts as to its compatibility with the internal market in relation to
       horizontal overlaps in Slovenia or on any alternative geographic market definition.
5.2.   Vertical overlaps
(173) The Proposed Transaction gives rise to vertically affected markets in relation to:
       (a)     Fortenova’s upstream production and supply of impulse ice cream overall,
               branded impulse ice cream, branded take-home ice cream, branded all
               industrial ice cream, private label ketchup,branded edible oils, margarine
               overall, mayonnaise overall, water overall, PRSO and iced tea vis-à-vis
               Mercator’s wholesale (delivered, cash & carry and franchisee supply) and
               retail activities downstream in Slovenia; and
       (b)     Mercator’s downstream retail supply of daily consumer goods, bottled water,
               fresh and processed meat, take-home ice cream, dairy/cheese products,
               mayonnaise,dairy/cheese spread, ice cream overall, ketchup, edible oils,
               impulse ice cream, fresh fruit and vegetables, and PRSO vis-à-vis Fortenova’s
               upstream production and supply activities in Slovenia.
137    Replies to questionnaire to producers and suppliers of daily consumer goods (Q1), question 9; replies
       to questionnaire to wholesalers of daily consumer goods (Q2), question 10; replies to questionnaire to
       retailers of daily consumer goods (Q3), question 10; replies to questionnaire to certain producers and
       suppliers of daily consumer goods (Q4), question 9.
138    Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), question
       9.2..
139    See to a similar effect the results of the market investigation in Case M.7986 in relation to broadline
       vs specialist suppliers, para. 19 et seq.
                                                          34
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---       products, and that there is no reason to believe that Mercator coming back under the
      control of Fortenova will have any meaningful impact on this strategy.144
      (A.i)      Ability
(183) According to the Parties:
      (a)    It is extremely unlikely that the merged entity would be able to engage in input
             foreclosure as Fortenova has low market shares in Slovenia with the exception
             of the impulse ice cream market ([30-40]%).
      (b)    It is highly unlikely that Slovenian retailers would view Fortenova products as
             being important input, or as “must-have” products.
      (c)    A number of large upstream competitors exist with strong brands in each
             product market in which Fortenova is active in Slovenia (in particular
             Ljubljanske Mlekarne in ice cream and Tovarna Olja in oils). In each upstream
             product category in which Fortenova is active, post-Transaction competing
             retailers would still have a number of strong alternative suppliers to choose
             from. 145
      (A.ii)     Incentive
(184) According to the Parties:
      (a)    The merged entity would also lack the incentive to engage in an input
             foreclosure strategy. Mercator has a number of important retail competitors in
             Slovenia (including Spar, Lidl, Hofer and Tus) and Fortenova makes a
             significant value of sales to these downstream competitors (e.g. in 2018 these
             sales totalled approximately EUR […] million). Therefore, deciding to refuse to
             supply Mercator’s downstream competitors in Slovenia would involve a
             significant opportunity cost to Fortenova. This is particularly so because there
             are multiple other credible suppliers active in the upstream product markets in
             question which would be available to Mercator’s downstream competitors as an
             alternative source of supply.146
      (b)    Furthermore, many of the products that are supplied by Fortenova (e.g.
             margarine and PRSOs) are homogeneous products where the focus is on price
             and volume, rather than on brand. In these product areas, private label products
             exercise a particularly strong constraint. Therefore, downstream competitors
             would be able to easily replace Fortenova with private label supply in this
             regard.147
      (c)    The merged entity was not engaging in any input foreclosure strategies prior to
             1st April 2019.148
144   See Form CO, paragraph 338.
145   See Form CO, paragraph 335.
146   See Form CO, paragraph 336.
147   See Form CO, paragraph 336.
148   See Form CO, paragraph 335.
                                                 39
 ---pagebreak---       (A.iii)    Effect
(185) According to the Parties:
      (a)     It appears implausible that Mercator’s downstream competitors would be
              substantially disadvantaged by not having access to (or paying higher prices
              for) Fortenova products.149
      (b)     Given that Fortenova would not be expected to have the incentive or the ability
              to engage in input foreclosure, the likelihood of the Transaction resulting in
              price increases at the retail level to the detriment of consumers is extremely
              limited.150
      (B)        The Commission’s assessment
(186) The risk of input foreclosure through the notified concentration appears limited. It
      seems unlikely that, post-merger, Fortenova would restrict access to its products by
      other retailers competing against Mercator in Slovenia.
(187) The results of the market investigation showed that customers have few concerns
      about possible input foreclosure in general. The responses to the market
      investigation included hardly any references to specific segments of daily consumer
      goods. Even when asked to add the specific segments to which their comments
      applied, respondents typically did not mention particular markets but merely cited
      general terms such as food products.
(188) On the question regarding the effect of the 2014 integration of Mercator into
      Agrokor, when asked to select the relevant markets, a majority of retailers
      expressing an opinion indicated that the integration had not affected Agrokor’s
      supply activities in Slovenia to their business or other Slovenian retailers with regard
      to food products in general.151
(189) The Commission therefore considers that the feedback from the market investigation
      relevant to input foreclosure may be taken to apply across the whole range of food
      products sold to retailers in Slovenia, including in each of the plausible affected
      markets.
      (B.i)      Ability
(190) The prerequisite for input foreclosure concerns to arise is that the merged entity must
      have a significant degree of market power in the upstream market (i.e. the production
      and supply of daily consumer goods in Slovenia).
(191) The Commission notes that Fortenova’s market positions in the upstream supply of
      daily consumer goods in Slovenia are moderate, only exceeding 40% with regard to
      branded impulse ice cream.
      (a)       With regard to the production and supply of impulse ice cream, Ljubljanske
                mlekarne will offer customers an important alternative source of supply post-
                Transaction (e.g. by value it has a [20-30]% share of the production and
149   See Form CO, paragraph 335.
150   See Form CO, paragraph 337.
151   Replies to questionnaire to retailers of daily consumer goods (Q3), question 32.
                                                         40
 ---pagebreak---                supply of impulse ice cream in Slovenia). Other significant players include
               Incom, Pro Organika, Mars, Unilever and Nestle who together account for
               approximately [10-20]% of the impulse ice cream category.152
      (b)      With regard to the production and supply of edible oils153 in Slovenia,
               competitor GEA will continue to offer a strong alternative, with a market
               share of [20-30]% by value and [20-30]% by volume. Other established
               manufacturers active in this sector include: Bunge Creol, CJS, Narajan Doo,
               Oljarna Fram, Baton and Bio Today, as well as a large number of private
               label and smaller manufacturers who collectively make up more than 40% of
               the category (on both a volume and value basis).154
      (c)      In relation to the production and supply of ketchup in Slovenia, customers
               will continue to have a choice among a number of well-established
               competitors, including Felix ([20-30]% volume share and [30-40]% value
               share), ETA ([5-10]% volume share and [5-10]% value share), Heinz ([0-5]%
               volume share and [5-10]% value share) and Mutti Fratelli ([0-5]% volume
               share and [0-5]% value share).155
(192) The outcome of the market investigation confirmed the availability of sufficient
      alternatives for Mercator’s downstream rivals to source their products. The market
      investigation shows that there are alternative suppliers from which they could
      purchase daily consumer goods if Fortenova stopped supplying them or supplied
      them at more disadvantageous conditions. Asked whether they would have
      alternative suppliers if Fortenova would stop selling to them, or would sell at more
      disadvantageous conditions, a retailer replied: “[…] we are buying products from
      Jamnica [Fortenova subsidiary producing bottled water] and Ledo [Fortenova
      subsidiary producing frozen food and ice cream] and these products could be
      replaced with other suppliers”.156 Asked about the impact of the reintegration of
      Mercator into Fortenova on the markets in Slovenia, a retailer commented: “Increase
      of choices to be expected on the segment of distribution (Velpro and Mercator
      Logistika) and also choice of producers of the food products.”157 Retailers in
      Slovenia therefore seem to view Fortenova’s upstream activities as bringing more
      choice and lower prices to the Slovenian market for the production and supply of
      daily consumer goods rather than potentially limiting access to inputs for retailers.
      (B.ii)     Incentive
(193) If Fortenova were to stop its sales to other retailers and sell exclusively through
      Mercator post-merger, this would lead to reduced sales of its products as it seems
      unlikely that Mercator could take over all or a large part of the retail sales of its
      competitors. Mercator has a national share of about [30-40]% in the retail supply of
      daily consumer goods and shares not exceeding [30-40]% in sub-segments of daily
152   See Form CO, paragraph 307.
153   As regards the subsegment PRSOs, where Fortenova has a market share between 30% and 50% on a
      regional basis, these are typically homogeneous products for which private label suppliers offer
      downstream competitors an effective alternative to Fortenova.
154   See Form CO, paragraph 307.
155   See Form CO, paragraph 307.
156   Replies to questionnaire to retailers of daily consumer goods (Q3), question 31.2.1.
157   Replies to questionnaire to retailers of daily consumer goods (Q3), question 8.1.
                                                         41
 ---pagebreak---       consumer goods in Slovenia. It seems unlikely that Fortenova’s lost upstream sales
      could be recouped through increased downstream revenues.
(194) On the downstream market for the wholesale of daily consumer goods in Slovenia,
      Mercator holds an even smaller market share of [5-10]%, and is subject to fierce
      competition from a wide range of other wholesalers. This limits even further the risk
      of input foreclosure because Fortenova has no interest in worsening supply
      conditions to third party wholesalers representing a more significant part of demand
      while it would be unlikely to recoup lost profits upstream through increased profits
      downstream.
(195) A majority of retailers expressing an opinion stated that the 2014 integration of
      Mercator into Agrokor did not affect Agrokor’s supply activities in Slovenia to their
      business or to other Slovenian retailers with regard to food products, including
      industrial ice cream, take-home ice cream, impulse ice cream, edible oils and
      ketchup.158
      (B.iii)    Effect
(196) A clear majority of retailers expressing an opinion in the market investigation stated
      that the reintegration of Mercator into the corporate group previously known as
      Agrokor and now controlled by Fortenova, would not lead to any changes on the
      market or markets for the retail supply of food products in Slovenia in terms of
      prices, quality, choice, or innovation, while some suggested that choice may increase
      and prices may decrease as a result of the Proposed Transaction. Asked about the
      impact of the reintegration of Mercator into Fortenova on markets in Slovenia, a
      retailer stated: “With the re - inclusion of Mercator in the group of companies, in our
      opinion, the range of products of companies from groups and there will be a larger
                                                                                                 159
      selection of products on both the Slovenian and Croatian markets”.                                A
      wholesaler/retailer commented: “Price decreases are expected to be seen on agro-
                                                                                                    160
      food market (cheaper production on markets outside Slovenia”. A
      producer/supplier stated: “Mercator would lose competitive edge if trying to increase
      prices.”161 Another producer anticipates that “Competition will force retailers to
      provide more innovations and choice for consumers”.162
(197) With regard to the wholesale markets for daily consumer goods, a majority of
      wholesalers expressing an opinion in the market investigation did not expect any
      changes in terms of prices and quality, while a majority of those expressing an
      opinion stated that they expect an increase in choice and innovation as a result of the
      Transaction.163
(198) Therefore, in light of the results of the market investigation and the evidence
      available to it, the Commission considers that it is not likely that the merged entity
158   Replies to questionnaire to retailers of daily consumer goods (Q3), question 32.
159   Replies to questionnaire to retailers of daily consumer goods (Q3), question 11.1.
160   Replies to questionnaire to wholesalers of daily consumer goods (Q2), question 8.1; replies to
      questionnaire to retailers of daily consumer goods (Q3), question 8.1.
161   Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), question
      9.2.1.
162   Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), question
      9.1.
163   Replies to questionnaire to wholesalers of daily consumer goods (Q2), question 10.
                                                         42
 ---pagebreak---         would have the ability and/or incentive to engage in an input foreclosure strategy
        post-Transaction. Thus, the Commission concludes that the Transaction does not
        give rise to serious doubts of input foreclosure as regards any of the plausible
        markets in Slovenia.
5.2.2.2. Customer foreclosure
        (A)       The Notifying Party’s arguments
(199) The Parties submit that, since Fortenova does not currently engage in a customer
        foreclosure strategy, and the Transaction does not materially change its incentive to
        exclude its rivals, the risk of customer foreclosure concerns arising is low. They claim
        that this is further evidenced by the fact that Fortenova (or Agrokor as it then was) did
        not pursue such a strategy following its original acquisition of control over Mercator
        in 2014 (given that, as is the case now, it lacked both the ability and incentive to do
        so).164
        (A.i)     Ability
(200) According to the Parties:
        (a)     The merged entity is unlikely to have the ability to engage in customer
                foreclosure. On a national basis, Mercator only accounts for approximately
                [30-40]% of the total retail market. Therefore, any decision by Mercator to
                refuse to stock products from suppliers competing with Fortenova would
                nevertheless leave those rival producers with sufficient alternative routes to
                market (and by lowering prices and increasing sales in competitor retail
                outlets, would be able to mitigate the effect of any attempted customer
                foreclosure strategy pursued by the merged entity).165
        (A.ii)    Incentive
(201) According to the Parties:
        (a)     Even if the merged entity were to have the ability to foreclosure rival
                suppliers of consumer goods, it would not have the incentive to engage in a
                customer foreclosure strategy. This is due in a significant part to the fact that
                end retail/wholesale customers value being able to select from a wide-range
                of competing brands so, by reducing the range stocked, customers would
                likely switch away from Mercator to competing retailers (particularly due to
                the strength/importance in Slovenia of certain competing brands that would
                no longer be available in Mercator stores).166
        (b)     Therefore, should the merged entity engage in such a strategy it would be
                expected to lead to substantial customer switching away from Mercator, with
                the customers that switch likely to divert their purchases for a broader basket
                of goods (and not simply with respect to those categories in which Fortenova
                is active and Mercator has ceased to stock competing products).167
164     See Form CO, paragraph 343.
165     See Form CO, paragraph 340.
166     See Form CO, paragraph 341.
167     See Form CO, paragraph 341.
                                                    43
 ---pagebreak---       (A.iii)   Effect
(202) According to the Parties:
      (a)     Consumer harm is unlikely given that it is implausible that a large number of
              Fortenova’s competitors would be negatively affected by the Transaction to
              such an extent that their ability to compete would be irreparably damaged,
              particularly since competitors, even if negatively affected, would have
              available to them a range of options for improving their competitive offering
              (e.g. through cost reductions or innovation).168
      (b)     The potential for an increase in the prices for daily consumer goods is further
              mitigated by the constraint exercised by potential entry and expansion by
              importers or producers of consumer goods that currently have a limited
              supply presence in Slovenia.169
      (B)       The Commission’s assessment
(203) The risk of customer foreclosure through the notified concentration appears limited.
      It seems unlikely that, post-merger, the merged entity may decide not to stock
      products produced by Fortenova’s upstream competitors in Mercator stores in
      Slovenia.
(204) The Commission has assessed the risk of customer foreclosure on a general basis,
      looking at food products overall, for the following reasons.
(205) The responses to the market investigation included hardly any references to specific
      segments or categories of daily consumer goods. Even when asked to add the
      specific segments to which their comments applied, respondents typically did not
      mention particular markets but merely cited general terms such as food products.
(206) On the question regarding the effect of the 2014 integration of Mercator into
      Agrokor, when asked to select the relevant markets, a majority of producers
      expressing an opinion indicated that the integration had not affected Mercator’s
      procurement activities in Slovenia from their business or other Slovenian producers
      with regard to food products in general.170
(207) The Commission therefore considers that the feedback from the market investigation
      relevant to customer foreclosure may be taken to apply across the whole range of
      food products sold to retailers in Slovenia, including in each of the plausible affected
      markets.
(208) Moreover, Mercator’s market shares in each of the narrower retail product categories
      are very close to its overall share of [30-40]%. This indicates that there are no
      categories where the merged entity’s ability and incentive to engage in customer
      foreclosure would be materially different from any other.
(209) The Commission considers that the general lack of references to particular products
      in the market investigation and the homogeneous nature of Mercator’s market shares
168   See Form CO, paragraph 342.
169   See Form CO, paragraph 342.
170   Replies to questionnaire to producers of daily consumer goods (Q1), question 31; replies to
      questionnaire to certain producers and suppliers of daily consumer goods (Q4), question 38.
                                                        44
 ---pagebreak---       in the various retail product categories warrants taking a general approach to the
      customer foreclosure assessment, the conclusions of which apply to each of the
      affected markets.
      (B.i)       Ability
(210) The Commission notes that Mercator’s national market position in the downstream
      retail supply of daily consumer goods in Slovenia is moderate, at just above 30%,
      with shares in certain sub-segments of daily consumer goods not exceeding [30-
      40]%. A producer/supplier stated: “Mercator does not have a strong position and
      there is very strong competition from other retailers (especially discounters) which
      in fact are driving prices down.” 171
(211) As regards the local retail markets in Slovenia where Mercator’s market share may
      exceed 30%, Mercator and its large downstream competitors, e.g. Lidl, Spar, Hofer,
      Tus, typically procure goods on a national basis. Therefore, the national market share
      seems to be a more representative basis to assess Mercator’s ability and incentive to
      foreclose customers. In any case, sufficient sources of retail demand would remain
      outside of these local markets for competing upstream suppliers.
(212) Some international suppliers, which fear that by (re-)integrating with the Agrokor
      assets Mercator will (continue to) internalise the procurement of certain products or
      favour regional brands to the benefit of Fortenova-controlled Croatian suppliers, as it
      apparently did in the past already, thus taking advantage of its vertical integration. A
      supplier stated: “If Mercator ceased to purchase, some lost volume would be
      replaced through other channels, but some would not. It is extremely difficult to
      know exactly how much volume would be lost, but it would be material”.172
(213) Some respondents to the market investigation voiced concerns relating to customer
      foreclosure in relation to local Slovenian producers (e.g., of unbranded products such
      as meat). A wholesaler/retailer explained: “In the past we have already noticed
      complaints from Slovene (local) food suppliers that they shall be better represented
      in the product portfolio of Mercator, especially after Mercator become a part of
      Agrokor Group within which are also big food production and supply factories from
      Croatia”.173 A producer stated that “20-30% of annual sales could not be replaced
      by other customers”.174
(214) However, the outcome of the market investigation confirmed the availability of
      sufficient alternatives for Fortenova’s upstream rivals to sell their output. The
      majority of respondents expressing an opinion in the market investigation on this
      point indicated that sufficient economic alternatives for placing their output exist.175
      Asked whether they would have alternative customers if Fortenova would stop
      sourcing from them, or would source at more disadvantageous conditions, aproducer
171   Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), question
      9.2.1
172   Replies to questionnaire to producers of daily consumer goods (Q1), question 30.2.1.
173   Replies to questionnaire to wholesalers of daily consumer goods (Q2), question 6.1.
174   Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), question
      37.2.1
175   Replies to questionnaire to producers of daily consumer goods (Q1), question 30.2; replies to
      questionnaire to certain producers and suppliers of daily consumer goods (Q4), question 37.2.
                                                        45
 ---pagebreak---       replied: “We would look for alternative customers and new markets”.176, while
      another producer explained: “We would look for other ways to make additional sales
      to other retailers”.177
(215) Moreover, the concerns voiced seem to stem primarily from the prospect of
      competitive constraint and pressure on prices being exerted by Croatian suppliers
      competing on the merits, rather than the expectation of the merged entity engaging in
      exclusionary conduct by limiting market access for suppliers. For example, asked
      about the impact of the reintegration of Mercator into Fortenova on the markets for
      the production and supply of food products in Slovenia, a producer of daily
      consumer goods stated: “Possible pressure on lower prices, possible pressure on
      local producers”178 Another producer commented: “Increased competition and thus
      pressure on the purchase price of existing suppliers.”179
      (B.ii)      Incentive
(216) The outcome of the market investigation also indicated that the Parties would not
      have an incentive to foreclose suppliers or customers due to the already existing
      integration of both entities. In this regard, one wholesaler indicated: “According to
      our assessment, the companies have already been fairly integrated and no major
      changes are to be expected.”180.
(217) Other respondents suggested that Mercator is likely to remain relatively autonomous
      within Fortenova, as it was already in the past within Agrokor. A wholesaler/retailer
      indicated that “Mercator is a self standing company with its headquarter in Slovenia
      (Ljubljana). Their management was always sovereign at taking business decisions
      and according to our knowledge so shall remain also after its reintegration of the
      corporate group previously known as Agrokor and now controlled by Fortenova. In
      their current strategy is explicitly outlined that they act first and foremost locally
      and only than regionally (since they operate their activities under Mercator brand
                                                     181
      also on other markets than Slovene).”
(218) In this respect, the Commission notes that the treatment of Slovenian suppliers by
      Mercator after its acquisition by Agrokor/Fortenova has been a sensitive and
      prominent “national” political issue but that lately the Slovenian press has reported
      efforts by Mercator to accommodate these concerns by engaging directly with local
      suppliers and committing to support the local value chain.182
176   Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), question
      37.2.
177   Replies to questionnaire to producers of daily consumer goods (Q1), question 30.2.1.
178   Replies to questionnaire to producers of daily consumer goods (Q1), question 6.
179   Replies to questionnaire to certain producers and suppliers of daily consumer goods (Q4), question
      7.1.
180   Replies to questionnaire to producers of daily consumer goods (Q1), question 6; replies to
      questionnaire to wholesalers of daily consumer goods (Q2), question 5.1; replies to questionnaire to
      retailers of daily consumer goods (Q3), questions 5.1 and 6.
181   Replies to questionnaire to wholesalers of daily consumer goods (Q2), question 4.1; replies to
      questionnaire to retailers of daily consumer goods (Q3), question 4.1.
182   See, e.g., “Fortenova v kratkem računa na ustvarjene pogoje za prenos delnic Mercatorja”, 9 June
      2020 (https://www.24ur.com/novice/gospodarstvo/fortenova-v-kratkem-racuna-na-ustvarjene-pogoje-
      za-prenos-delnic-mercatorja html); « Fortenova želi čimprejšnji prenos delnic Mercatorja », 9 June
      2020                      (https://www.rtvslo.si/gospodarstvo/fortenova-zeli-cimprejsnji-prenos-delnic-
      mercatorja/526625).
                                                         46
 ---pagebreak--- (219) A majority of producers expressing an opinion in the market investigation stated that
       the 2014 integration of Mercator into Agrokor did not lead to the reduction or
       discontinuation of Mercator’s purchases from their business or other Slovenian
       producers/suppliers with regard to food products in general and take-home ice cream
       in particular.183
       (B.iii)    Effect
(220) A clear majority of producers of daily consumer goods considered that the
       reintegration of Mercator into the corporate group, previously known as Agrokor and
       now controlled by Fortenova, would have no impact on the market or markets for the
       production and supply of food products in Slovenia in terms of price, quality, choice
       or innovation.184
(221) Therefore, in light of the results of the market investigation and the evidence
       available to it, the Commission considers that that it is not likely that the merged
       entity would have the ability and/or incentive to engage in a customer foreclosure
       strategy post-Transaction. Thus, the Commission concludes that the Transaction
       does not give rise to serious doubts in relation to customer foreclosure as regards any
       of the plausible markets in Slovenia.
5.2.3. Conclusion on vertical effects
(222) In light of the considerations in Section 5.2, the Commission concludes that the
       proposed Transaction does not give rise to serious doubts about its compatibility
       with the internal market or the EEA Agreement due to input or customer foreclosure
       as regards the markets for the retail supply of daily consumer goods, including
       bottled water, fresh and processed meat, take-home ice cream, dairy/cheese products,
       mayonnaise and dairy/cheese spread, ice cream overall, ketchup, edible oils, impulse
       ice cream, fresh fruit and vegetables, and PRSO and as regards the markets for the
       production and supply of impulse ice cream overall, branded impulse ice cream,
       branded take-home ice cream, branded all industrial ice cream, private label
       ketchup,branded edible oils, margarine overall, mayonnaise overall, water overall,
       PRSO and iced tea in Slovenia.
183    Replies to questionnaire to producers of daily consumer goods (Q1), question 31; replies to
       questionnaire to certain producers and suppliers of daily consumer goods (Q4), question 38.
184    Replies to questionnaire to producers of daily consumer goods (Q1), question 9.
                                                         47
 ---pagebreak--- 6.    CONCLUSION
(223) For the above reasons, the European Commission has decided not to oppose the
      notified operation and to declare it compatible with the internal market and with the
      EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the
      Merger Regulation and Article 57 of the EEA Agreement.
                                                    For the Commission
                                                    (Signed)
                                                    Margrethe VESTAGER
                                                    Executive Vice-President
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