CELEX: 32019M9501
Language: en
Date: 2019-10-18 00:00:00
Title: Commission Decision of 18/10/2019 declaring a concentration to be compatible with the common market (Case No COMP/M.9501 - I SQUARED CAPITAL ADVISORS / PEMA) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                               Brussels, 18.10.2019
                                                               C(2019) 7619 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                                                                information omitted has been replaced by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.9501 – I Squared Capital Advisors/PEMA
                    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 13 September 2019, the European Commission received notification of a
          proposed concentration pursuant to Article 4 of the Merger Regulation by which I
          Squared Capital Advisors, LLC (“I Squared”) (USA), through its controlled TIP
          Group entities (“TIP”)3 (Germany), intends to acquire within the meaning of Article
          3(1)(b) of the Merger Regulation sole control over the whole of PEMA GmbH and
          its subsidiaries (“PEMA”) (Germany), currently owned by Société Générale S.A
          (France), by way of purchase of shares (the “Transaction”). I Squared is referred to
          hereinafter as the “Notifying Party”. I Squared and PEMA collectively are referred
          to as the “Parties”.
1    OJ L 24, 29.1.2004, p. 1 (the “Merger Regulation”). With effect from 1 December 2009, the Treaty on the
     Functioning of the European Union (“TFEU”) has introduced certain changes, such as the replacement of
     “Community” by “Union” and “common market” by “internal market”. The terminology of the TFEU will
     be used throughout this decision.
2    OJ L 1, 3.1.1994, p. 3 (the “EEA Agreement”).
3    Namely TIP Trailer Services Germany GmbH and Global TIP Holdings Two B.V.
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak--- 1. THE PARTIES
(2)     I Squared, headquartered in the USA, is an independent global infrastructure
        investment manager focusing on energy, utilities, telecom and transport in the
        Americas, Europe and Asia. I Squared, through funds it manages, controls a number
        of investments, in the energy, oil and transport sectors. Of these investments, only
        TIP is active in the same relevant market as PEMA.
(3)     TIP is mainly active in operating leasing of heavy trailers (16 to 44 tons fully
        loaded) in Europe and Canada. TIP owns a fleet of approx. 68 000 heavy trailers.
        TIP also offers affiliated services such as maintenance and repair (“M&R”) and
        damage protection.
(4)     PEMA GmbH, the parent entity of PEMA, is registered in Germany and is an
        indirect wholly-owned subsidiary of GEFA Bank GmbH (“GEFA”) which, in turn,
        is an indirectly wholly-owned subsidiary of Société Générale S.A. PEMA's main
        activity is operating leasing of heavy trucks and trailers, including integrated
        services. PEMA owns a fleet of approx. 18 000 vehicles. PEMA focuses its activities
        on Germany, where PEMA generates almost […]% of its EEA-wide revenue.
2. THE OPERATION
(5)     On 25 July 2019, the Parties concluded a Share Purchase Agreement ("SPA")
        pursuant to which I Squared, through TIP, will acquire 100% of the shares in PEMA.
(6)     At closing, PEMA will become a wholly-owned subsidiary of TIP and therefore an
        indirectly wholly-owned and solely controlled portfolio company of funds managed
        by I Squared. Following the Transaction, neither GEFA nor Société Générale will
        hold any interest or rights in PEMA.
(7)     In light of the above, and in line with paragraph 91 of the Commission's
        Consolidated Jurisdictional Notice (the “Jurisdictional Notice”),4 the Transaction
        will result in I Squared’s acquisition of sole control over PEMA within the meaning
        of Article 3(1)(b) of the EU Merger Regulation.
3. EU DIMENSION
(8)     The undertakings concerned have a combined aggregate world-wide turnover of
        more than EUR […] million5 in 2018 (I Squared: EUR […] million, PEMA: EUR
        […] million). The EU-wide turnover of each of the undertakings concerned is more
        than EUR […] million (I Squared: EUR […] million, PEMA: EUR […] million).
        Not each of the Parties achieves more than two-thirds of their aggregate EU-wide
        turnover within one and the same Member State.6 The notified operation therefore
        has an EU dimension pursuant to Article 1(2) of the Merger Regulation.
4   OJ C 95, 16.4.2008, p. 1
5   Turnover calculated in accordance with Article 5 of the Merger Regulation and the Jurisdictional Notice.
6   Only PEMA achieved more than two thirds of its EU-wide turnover in Germany.
 ---pagebreak--- 4. MARKET DEFINITION
4.1    Introduction
(9)      In the EEA, the Parties’ activities overlap with respect to (i) the operating leasing of
         heavy trailers, (ii) the operating leasing of heavy trucks,7 (iii) the operating leasing of
         rigids.8 There is also an insignificant overlap in the sale of used trailers and trucks.9
         The only product overlap which results in affected markets (at EEA level and
         national level) concerns operating leasing of heavy trailers.
(10)     Since TIP and PEMA are both active in the operating leasing of trucks, which are
         complementary products to trailers (in the sense that a truck is required to tow a
         trailer which itself is not motorized), the Transaction potentially also gives rise to
         conglomerate effects. The Transaction will not result in any potential vertical or
         conglomerate relationships between I Squared’s portfolio companies, other than TIP,
         and PEMA.
4.2    Operating leasing of heavy trailers or trucks
4.2.1 Product market definition
4.2.1.1 Distinction between operating leasing and financial leasing
(11)     Operating leasing refers to a type of lease where the risks of ownership are retained
         by the lessor while the lease duration does not cover any major part of the asset’s
         life. Ownership is not transferred to the lessee at the end of the lease term and the
         lease contract does not contain a bargain purchase option. Similarly, the costs of
         other related services (such as maintenance and repair services), which form an
         integrated part of the operating leasing services, are included in the (monthly) lease
         payments.10
(12)     By contrast, financial leasing primarily functions as a loan by the lessor to enable the
         lessee to purchase a given asset. The risks associated with the investment are usually
         borne by the lessee and the legal as well as the commercial ownership is left with the
         financing lessor. After the lease, the lessee usually has the option to acquire
         ownership of the asset for the consideration of the residual value.
(13)     In addition, the Commission has previously considered a market for “short-term
         rental” separate from operating leasing and financial leasing. It has defined the
         market for short-term rental as the provision of cars for an individually agreed
         duration. Such cars could be taken over by the user at certain locations (e.g. airports,
         railway stations).11 The Parties are active in the provision of short-term and long-
         term operating leasing, to the exclusion of rental services.
7   The Parties' activities do not overlap at national level.
8   The Parties' activities do not overlap at national level.
9   The Parties’ combined market share on this market is less than 5% in the EEA and well below 20% in any
    EEA member state (as well as on a separate market for sales of used trailers and a separate market for
    sales of used trucks). Therefore, the Transaction does not give rise to affected markets in this respect and
    is consequently not further assessed in this Decision.
10 Commission decision of 6 August 2008 in case M.5217 – GEFA/PEMA, paragraph 8.
11 See Commission decision of 23 September 2011 in case M.6333 – BMW/ING Car Lease, paragraph 17;
    Commission decision of 26 July 2017 in case M.8309 –Volvo/Car Corporation/First Rent A Car,
    paragraph 41; Commission decision of 19 August 2009 in case M.5568 – Volkswagen/Fleet
 ---pagebreak--- Notifying Party’s views
(14)   While the Notifying Party agrees that there are certain structural differences between
       operating and financial leasing, it argues that the distinction has become increasingly
       blurred due to recent industry trends. According to the Notifying Party, this is due to,
       inter alia, a change in the international accounting standards IFRS 16. IFRS 16
       entered into force on 1 January 2019 and effectively abolished the accounting
       differences between financial and operating leases adopting the current financial
       leasing methodologies for all leases. In addition, the Notifying Party submits that, in
       particular in times of low interest rates, outright purchasing solutions through
       instalments or regular loans exert a material competitive constraint on the (operating)
       leasing industry.12
(15)   However, the Parties consider that the exact market definition can be left open as the
       Transaction does not result in a significant impediment of effective competition even
       if a separate market for operating leasing (of trailers) is defined.13
Commission’s assessment
(16)   The Commission has considered in previous decisions that operating leasing and
       financial leasing constitute separate product markets.14 Operating leasing and
       financial leasing can be distinguished on the basis of their respective business
       models and offerings to costumers, particularly in relation to the ownership status of
       the good and the risks associated with the leasing.
(17)   The majority of competitors responding to the Commission’s market investigation
       confirmed that a product distinction by type of leasing, i.e. between operating leasing
       and financial leasing, is appropriate.15 From a supply side perspective, the majority
       of competitors indicated that they do not provide both types of leasing services. In
       addition, one competitor explained that “it may get costly” for a provider of
       operating leasing services to start providing financial leasing services, since “the
       focus is shifting from ensuring the rental asset to compliance with procedural and
       regulatory requirements” and, in this context, “system adjustments for processes,
       implementation of adjustments in accounting regulations, terms and conditions,
       adjusted sales preposition need to be made.” Furthermore, another competitor
       indicated that “the difference between the 2 products being the offering of
       operational services, as well as taking up the operational and residual value risk of
       the assets, it is very difficult for financial leasing providers to add this dimension to
       their portfolio.”16
(18)   The responses from the customers in this regard were mixed.17 While some
       customers responding to the market investigation considered the services to be
       interchangeable and “make decisions based upon business benefit”, others however
       explained that “customers have a clear preference for either one of the leasing
   Investments/Leaseplan Corporation JV, paragraph 20; Commission decision of 12 June 2006 in case
   M.4199 – Volkswagen/Offset/Crescent/Lease/Plan/JV, paragraph 14.
12 Form CO, paragraphs 104-106.
13 Form CO, paragraph 108.
14 See, e.g. Commission decision of 6 August 2008 in case M.5217 – GEFA/PEMA, paragraphs 7 et seq.;
   Commission decision of 15 July 1992 in case M.234 – GECC/Avis Lease, paragraphs 6 et seq.
15 Replies to eQ2 – Questionnaire to Competitors, questions 3 and 4.
16 Replies to eQ2 – Questionnaire to Competitors, question 4.1.
17 Replies to eQ1 – Questionnaire to Customers, question 3.
 ---pagebreak---         options” and multiple customers referred to operating and financial leasing as
        “different” or even “very different” products and services. In this respect, they made
        reference to the differences in the property rights transferred after the lease (i.e.
        ownership or not), and in aspects of accounting law and risk.18
(19)    In any event, I Squared and PEMA provide operating leasing services only. The
        Transaction would not give rise to an affected market if operating and financial
        leasing services were considered as belonging to the same product market.19 For the
        purposes of this Decision, the Commission will further assess the competitive effects
        of the Transaction on operating leasing services only.
Conclusion
(20)    For the purposes of this Decision, it is not necessary to decide whether the provision
        of operating and financial leasing services constitute separate markets or not, since
        no serious doubts would arise as to the Transaction's compatibility with the internal
        market under either product market definition.
4.2.1.2 Distinction between short-term and long-term (operating) leasing
Notifying Party’s views
(21)    The Notifying Party submits that it can be left open whether short-term and long-
        term leasing constitute separate product markets, because the Transaction would not
        raise competition concerns under any relevant market definition. It considers that,
        while the exact delineation between short-term and long-term leasing contracts may
        be difficult in certain circumstances, e.g. because contracts are consecutively
        renewed with the same customer, the short-term versus long-term ratio should be
        very similar for all operating leasing providers.20
Commission’s assessment
(22)    In its prior decisions, the Commission left open the question whether the operating
        leasing segment should be further sub-segmented into short-term (1 to 365 days) and
        long-term (12 to 48 months) rentals.21
(23)    The results of the Commission’s market investigation indicate that a product market
        for operating leasing comprising both short-term and long-term operating leasing is
        appropriate. The majority of respondents to the market investigation (both customers
        and competitors) indicated that they acquire or provide both short-term and long-
        term leasing services. In addition, the majority of competitors responding to the
        market investigation indicated that it would be easy for a provider of short-term
        operating leasing services to start providing long-term operating leasing services and
        vice versa. One competitor explained that “the main differences in the processes of
18  Replies to eQ1 – Questionnaire to Customers, question 3.1.
19  Form CO, paragraph 108 and Reply of I Squared to RFI 2 of 9 October 2019.
20 Form CO, paragraph 118.
21 Commission decision of 6 August 2008 in case M.5217 – GEFA/PEMA, paragraph 9 ; Commission
    decision of 15 July 1992 in case M.234 – GECC/Avis Lease, paragraphs 6 et seq.; Commission decision
    of 3 December 1999 in case M.1739 – Iveco/Fraikin paragraph 8; Commission decision of 18 February
    2000 in case M.1810 – VW/Europcar, paragraph 8; Commission decision of 4 September 2001 in case
    M.2540 – Fidis/SEI/JV, paragraph 10; Commission decision of 24 November 2005 in case M.3987 – Fidis
    Renting/Leasys, paragraphs 8 and seq.; Commission decision of 5 December 2006 in case M.4420 –
    Credit Agricole/Fiat Auto/FAFS, paragraph 22.
 ---pagebreak---         these products is the amount of in and out-checks as well as the pricing. Due to this,
        a change should not be difficult.”22
(24)    On that basis, there seems to be a single market for operating leasing, independent of
        the duration. In any case, the results of the Commission market investigation did not
        provide any indication that the outcome of the competitive assessment would differ
        materially if short-term and long-term operating leasing services were considered as
        distinct markets.
Conclusion
(25)    In light of the above, considering that customers demand and providers provide both
        short-term and long-term operating leasing services, the Commission concludes that,
        for the purposes of this Decision, the market for the provision of operating leasing
        services includes both short-term and long-term leasing.
4.2.1.3 Distinction between operating leasing of trailers and operating leasing of trucks
(26)    Both Parties provide operating leasing services for both trailers and trucks. A trailer
        (or "semi-trailer", because of the missing front axle) is a non-motorized vehicle for
        the road transportation of goods. A truck (or "tractor") is a motorized vehicle that is
        required to haul the trailer.
Notifying Party’s views
(27)    The Notifying Party considers that, even if there are differences from a demand-side
        perspective between trailers and trucks, there is a supply-side substitutability
        between the operating leasing of trucks and trailers. It submits, however, that the
        definition of the relevant market can be left open in this respect, as the Transaction
        will not result in any competitive concerns regardless of whether the relevant
        product market is defined as operating leasing for all heavy road transportation
        equipment comprising both trucks and trailers, or operating leasing of trucks and
        trailers separately.23
22  Replies to eQ1 – Questionnaire to Customers, question 6; Replies to eQ2 – Questionnaire to Competitors,
    questions 9 and 10.
23 Form CO, paragraph 112.
 ---pagebreak--- Commission’s assessment
(28)    In GEFA/PEMA, in the context of both financial leasing and operating leasing, the
        Commission considered a relevant product market for "heavy road transportation
        equipment (trucks and trailers)" or "heavy commercial vehicle[s]"24, i.e., the
        Commission defined a relevant leasing market comprising both trailers and trucks.
        On that basis, the Transaction would not give rise to affected markets.
(29)    However, the results of the Commission’s market investigation indicate that a
        distinction between the operating leasing of trucks and trailers could be
        appropriate.25 In this regard, the majority of customers indicated that they lease
        trucks and trailers separately. In addition, all competitors responding to the market
        investigation indicated that they provide operating leasing services for trailers only,
        or trucks and trailers separately. One competitor explained that “the operational
        needs (maintenance, service, tyres, regulator MoT, etc) are much higher on engine
        vehicles (trucks) then on trailers, their associated risks, as well as the residual value
        risk are much higher. Hence, this will require a higher frequency of transactions, a
        higher complexity and cost per transaction for trucks than for trailers with the
        associated suppliers.” Another competitor submitted that “the technology of a truck
        is much more demanding than a trailer, e.g. emission standards, registration
        regulations, wear & tear etc.”26
(30)    There are therefore indications that the markets for operating leasing of trucks and
        operating leasing of trailers could be considered as separate. While the Transaction
        would not lead to any affected markets (i) for operating leasing of heavy commercial
        vehicles (comprising both trucks and trailers) and (ii) for operating leasing of trucks
        only,27 it only leads to affected markets for the operating leasing of trailers only.
Conclusion
(31)    In any event, for the purposes of this Decision, it is not necessary to conclude
        whether operating leasing services for trucks and for trailers constitute separate
        product markets, since no serious doubts would arise as to the Transaction's
        compatibility with the internal market under either product market definition.
4.2.1.4 Distinction between operating leasing of heavy vs. light trucks or trailers
Notifying Party’s views
(32)    The Notifying Party submits that a segmentation of the market for operating leasing
        of trailers on the basis of the weight of the trailers is appropriate. In GEFA/PEMA,
        the Commission defined heavy equipment as vehicles above 12 tons.28 However,
        while the 12 tons limit may be appropriate for trucks, the accepted range in the
        industry to define heavy trailers, according to the Notifying Party, is a load capacity
        between 16 and 44 tons fully loaded.
Commission’s assessment
24  Commission decision of 6 August 2008 in case M.5217 – GEFA/PEMA, paragraphs 16 and 18.
25  Replies to eQ2 – Questionnaire to Competitors, questions 5 and 6; eQ1 – Questionnaire to Customers,
    question 4.
26 Replies to eQ2 – Questionnaire to Competitors, question 6.1.
27 Form CO, paragraph 112 and reply of I Squared to RFI 2 of 9 October 2019.
28 Commission decision of 6 August 2008 in case M.5217 – GEFA/PEMA, paragraph 18.
 ---pagebreak--- (33)    In its prior decisions, the Commission considered a separate market for "heavy", i.e.
        above 12 tons, “road transportation equipment”/ “commercial vehicles”.29
(34)    The Commission’s market investigation did not provide any objections or remarks
        with respect to the use of the abovementioned industry standard (of 16 tons fully
        loaded) for the definition of heavy vs. light trailers.
(35)    With regard to trailers, almost all customers responding to the market investigation
        indicated that heavy trailers cannot be substituted by light trailers.30 In addition,
        while some competitors responded that they provide operating leasing services for
        both heavy and light trailers, , the majority of competitors responding to the market
        investigation indicated that they lease only heavy trailers. In this regard, one
        competitor indicated that “with increasing size of the trailer, the administrative
        burden and the maintenance and repair costs also increase. In addition, appropriate
        experts are required for the respective segment,” while another referred to “two
        different segments of customers.”31
4.2.1.4.1 Operating leasing of heavy trailers
(36)    In light of the above, considering the lack of demand-side substitutability and the
        fact that the Parties (as well as the majority of their competitors having responded to
        the Commission’s market investigation) provide operating leasing services for heavy
        trailers only, and in line with its approach in previous cases, the Commission
        concludes that, for the purposes of this Decision, the market for the provision of
        operating leasing services of heavy trailers (above 16 tons) is distinct from the
        market for the provision of operating leasing services of light trailers (less than 16
        tons fully loaded).
(37)    Considering that the Parties only provide operating leasing services of heavy trailers,
        the competitive assessment below takes account of the Parties’ activities on the
        narrowest plausible relevant product market on which the Parties’ activities would
        overlap, i.e. on the market for operating leasing services of heavy trailers.
4.2.1.4.2 Operating leasing of heavy trucks
(38)    The Commission considers that, for the purposes of this Decision, it can be left open
        whether the market for the provision of operating leasing services of heavy trucks
        (above 12 tons) is distinct from the market for the provision of operating leasing
        services of light trucks (less than 12 tons) or not, since the Transaction would not
        raise serious doubts as to its compatibility with the internal market under either
        product market definition.
(39)    Considering that the Parties only provide operating leasing services of heavy trucks,
        the Commission will further assess the competitive effects of the Transaction on the
        market for operating leasing services of heavy trucks. The Parties’ activities would
        not give rise to a horizontally affected market for operating leasing services of heavy
        trucks; however the Transaction would give rise to conglomerate effects on this
        market. With regard to the Commission’s conglomerate assessment below, the
29  Commission decision of 6 August 2008 in case M.5217 – GEFA/PEMA, paragraph 16 et seq.
30  Replies to eQ1 – Questionnaire to Customers, question 5.
31 Replies to eQ2 – Questionnaire to Competitors, questions 7, 8 and 8.1.
 ---pagebreak---         Parties' market shares would be diluted on the market for operating leasing services
        comprising both heavy and light trucks.
4.2.1.5 Distinction of operating leasing services of trailers by trailer type
(40)    Trailers come in many varieties. The most common types of trailers are curtainsiders
        (flexible sides or curtains, suitable for almost all transportation) and vans (solid
        sides, suitable for almost all transportation); followed by tankers (carry liquids,
        powder or aggregate products), reefers or temperature controlled trailers, bulkers
        (used in construction and agriculture), flats (open trailers without sidewalls, suitable
        for special transport of wide and long goods), swapbodies (an interchangeable
        freight container that can easily be separated from the carrier) and chassis trailers
        (trailer frames that can carry containers). All trailers available for leasing in the
        industry throughout Europe are homogenous, standardized vehicles available from
        OEM trailer manufacturers.32
Notifying Party’s views
(41)    The Notifying Party submits that no distinction should be made between the
        different types of trailers within the market for operating leasing of trailers, since
        from a demand-side perspective, most trailer types are suitable for most
        transportations, while there are only some goods that require a specific type of
        trailer, e.g. fuel, which can only be transported in a tanker. In its view, the
        differences between trailer-types are irrelevant for the operating leasing of trailers.33
Commission’s assessment
(42)    In its prior decisional practice, the Commission did not distinguish between the
        different types of trailers, such as curtainsider, bulker, temperature controlled or
        tanker, but, as explained above, considered a relevant market comprising all (heavy)
        trailers (or even all "heavy road transportation equipment").34
(43)    The majority of the customers and competitors responding to the Commission’s
        market investigation indicated that they lease multiple types of heavy trailers. In
        addition, a relative majority of the customers responding to the market investigation
        indicated that they lease different types of trailers from the same provider. 35 One
        customer explained that “as the case may be, different types of trailers are leased
        from different providers or from the same provider”. Another customer noted that
        they “lease from every of [their] suppliers, different types like Box and
        Curtainsiders.” Customers indicated that they “compare different providers” and it
        depends on factors such as price, availability and delivery time.36
Conclusion
(44)    In light of the above, considering that most customers and suppliers lease multiple
        types of heavy trailers, and in line with its approach in previous cases, the
32  Form CO, paragraphs 113-114
33  Form CO, paragraph 113.
34 Commission decision of 6 August 2008 in case M.5217 – GEFA/PEMA, paragraphs 16 and 18.
35 Replies to eQ1 – Questionnaire to Customers, questions 7 and 8; eQ2 – Questionnaire to Competitors,
    question 11.
36 Replies to eQ1 – Questionnaire to Customers, questions 7.1 and 8.1.
 ---pagebreak---          Commission concludes that, for the purposes of this Decision, the market for
         operating leasing of heavy trailers includes all the different types of heavy trailers.
4.2.1.6 Operating leasing services of rigids
(45)     A rigid is a vehicle that is motorized but, unlike a truck or a tractor, does not pull a
         separate trailer unit, but the trailer and the motor unit are combined. The
         Commission has not yet addressed the market delineation with respect to rigids.
Notifying Party’s views
(46)     The Notifying Party considers that the precise market definition for operating leasing
         of rigids can be left open, as the Parties' market position in the operating leasing of
         rigids is negligible.37
Commission’s assessment
(47)     Considering that the Transaction would not give rise to an affected market under any
         plausible geographic market definition (EEA-wide or national) if operating leasing
         of rigids was considered as a separate market,38 and that the Parties’ market shares
         would be diluted in a market for operating leasing of trailers including rigids,39 for
         the purposes of this Decision, the Commission can leave open the exact market
         definition and will further assess the competitive effects of the Transaction on the
         market for operating leasing of heavy trailers (excluding rigids).
Conclusion
(48)     For the purposes of this Decision, it is not necessary to conclude on the exact
         product market definition for operating leasing of rigids, since no serious doubts
         would arise as to the Transaction's compatibility with the internal market under any
         plausible product market definition.
4.2.2 Geographic market definition
Notifying Party’s views
(49)     The Notifying Party considers that the relevant markets for operating leasing of
         heavy trailers and for operating leasing of heavy trucks could be defined as national,
         although it disagrees that there are meaningful national preferences as to brands or
         difficulties relating to cross-border transactions. The brands of the trailers are
         typically the same for all trailers and across Europe and, while it is correct that cross-
         border transactions are rare, geographic expansion in this industry is easy.40
Commission’s assessment
(50)     According to previous Commission practice, the market for operating leasing is
         national in scope, due to "differentiated consumer practices and national preferences
         as to e.g. brands, existing language barriers and difficulties concerning cross-
37  Form CO, paragraph 176.
38  There is no overlap between the Parties’ rigid leasing activities at national level. On an EEA-wide basis,
    the Parties’ combined share in the operating leasing of rigids is below 5%. See Form CO, paragraph 179.
39 Form CO, paragraphs 179 and 180.
40 Form CO, paragraph 132.
 ---pagebreak---         border transactions."41 Indeed, in a number of Commission’s precedents concerning
        contract truck hire and rental of motor vehicles markets, the Commission considered
        the relevant market to be national in scope.42
(51)    The results of the Commission’s market investigation in this respect were mixed.43
        Most customers and competitors responding to the market investigation indicated
        that they lease heavy trailers and/or trucks either on a national or on an EEA-wide
        basis. A relative majority of these customers and competitors indicated that they
        lease heavy trailers and/or trucks at national level and that there are national barriers
        that prevent or make it more difficult to lease heavy trailers and/or trucks in another
        country. The national barriers mentioned by the respondents include, among others
        national tax and registration rules, insurance requirements, registration requirements,
        licence plates, laws regarding the ownership of the asset, regulations regarding the
        characteristics of vehicles, who may drive the vehicle. One competitor mentioned
        that “the risk varies widely across countries, red tape in general and varying
        technical regulations are the most important problems.”44
(52)    In sum, it appears that, while a substantial number of in particular large fleet
        operators source on an EEA-wide basis, the majority still does so at a national level.
Conclusion
(53)    In any case, for the purposes of this Decision, it can be left open whether the relevant
        geographic markets for operating leasing of heavy trailers and for operating leasing
        of heavy trucks are national or EEA-wide, since no serious doubts would arise as to
        the Transaction's compatibility with the internal market under either definition.
4.2.3 Conclusion on the market definition
(54)    In light of the above, it is not necessary to conclude on the exact geographic market
        definition of the markets for operating leasing of heavy trailers and for operating
        leasing of heavy trucks. For the reasons explained above, the Commission will, for
        the purposes of this Decision, assess the effects of the Transaction on national
        markets as well as on an EEA-wide market for the provision of operating leasing
        services of heavy trailers and for the provision of operating leasing services of heavy
        trucks.
41  Commission decision of 6 August 2008 in case M.5217 – GEFA/PEMA, paragraph 12.
42  Commission decision of 3 December 1999 in case M.1739 Iveco Fraikin, paragraph 9; Commission
    decision of 18 February 2000 in case M.1810 –VW/Europcar, paragraphs 13 and 14; Commission
    decision of 4 September 2001 in case M.2540 – Fidis/SEI/JV, paragraph 13; Commission decision of 24
    November 2005 in case M.3987 – Fidis Renting/Leasys, paragraph 12; Commission decision of 5
    December 2006 in case M.4420 – Credit Agricole/Fiat, paragraph 23.
43 Replies to eQ1 – Questionnaire to Customers, questions 15-17; eQ2 – Questionnaire to Competitors,
    questions 18-20.
44 Replies to eQ1 – Questionnaire to Customers, question 16; eQ2 – Questionnaire to Competitors, question
    19.
 ---pagebreak--- 5. COMPETITIVE ASSESSMENT
5.1     Horizontal effects
5.1.1 Market shares
(55)     The Transaction gives rise to several horizontal overlaps in the markets for operating
         leasing of heavy trailers and the sale of used trucks and trailers. However, on the
         basis of the Notifying Party’s submission, the Transaction will result in only five
         affected markets for operating leasing of heavy trailers: in Czechia, Denmark,
         Germany and Sweden, and at EEA-level.
(56)     As indicated in Table 1 below, the Parties’ combined market share for operating
         leasing of heavy trailers post-Transaction would be as follows.
         Table 1. The Parties’ market shares in operating leasing of heavy trailers,
         201845
               Country                TIP’s market             PEMA’s market           Combined market
                                            share                      share                    shares
                Czechia                   [5-10]%                   [20-30]%                 [30-40]%
               Denmark                   [20-30]%                   [10-20]%                 [30-40]%
               Germany                   [10-20]%                   [10-20]%                 [20-30]%
                Sweden                   [30-40]%                    [5-10]%                 [30-40]%
                  EEA                    [10-20]%                     [0-5]%                 [20-30]%
5.1.2 Notifying Party’s views
(57)     The Notifying Party submits that the Parties' combined market shares at EEA-level
         and on the national markets for operating leasing of heavy trailers in Czechia,
         Denmark, Germany and Sweden are not indicative of any market power and that
         they will continue to face significant competitive constraints post-Transaction due to
         the following reasons.
(58)     First, the combined entity will continue to face competition from a number of
         operating leasing players, including pan-European vertically integrated players such
         as EURO-Leasing46 and Krone.47
(59)     Second, at national level, in each of Czechia, Denmark, Germany and Sweden, there
         is a number of independent operating leasing providers. In addition, according to the
         Notifying Party, there are no material barriers to entry or expansion from both the
45  All market share estimates provided in this Decision are based on the size of the fleet (i.e. the number of
    heavy trailer units) and are based on the Parties’ estimates provided in the Form CO and Annex 6.1 to the
    Form CO. These market shares are largely confirmed by the information collected by the Commission in
    its market investigation.
46 Active, among others, in all five affected markets.
47 Active, among others, in Denmark, Sweden and Germany.
 ---pagebreak---         product and geographic perspectives as there is perfect supply-side substitutability
        between different types of trailers. An operating leasing company active in one
        Member State can easily enter or expand in another Member State.
(60)    Moreover, the Notifying Party submits that the vehicles leased to customers by TIP,
        PEMA and competing providers are homogenous and standardized products. All
        leasing companies offer more or less the same trailer brands from leading OEM
        manufacturers, such as Schmitz Cargobull, Krone,48 Kögel or Schwarzmüller.
(61)    Third, customers such as large retail chains and transport and logistics operators,
        including DHL, DB Schenker, Kuehne & Nagel, trans-o-flex, DSV, have significant
        buyer power.
(62)    Last, post-Transaction, the Parties will continue to face significant competitive
        constraints from financial institutions that offer financial leasing (e.g. instalment
        purchases, regular loans) as well as operating leasing solutions by teaming up with
        OEM manufacturers and independent services providers. In addition, the Parties’
        will remain constrained by general leasing companies, various importers, distributors
        and traders.
5.1.3 The Commission’s assessment
5.1.3.1 Czechia
(63)    The Commission has assessed the horizontal overlap between the Parties’ activities
        in operating leasing of heavy trailers in Czechia and considers that the Transaction
        will not lead to a significant impediment to effective competition for the following
        reasons.
(64)    First, while the combined entity will have a market share of [30-40]% in operating
        leasing of heavy trailers post-Transaction, there will remain a number of
        competitors, including pan-European operating leasing providers such as Fraikin
        ([20-30]% market share)49 and EURO-Leasing ([5-10]% market share)50 that will
        continue to constrain the merged entity's ability to profitably raise prices or lower the
        quality of its services in Czechia. Local or smaller players such as EWT ([5-10]%
        market share),51 Schwarzmüller ([0-5]% market share), and ABTIR/TIR Centrum ([0-
        5]% market share) will also remain active on the Czech market.52 This is also supported
        by the Commission’s market investigation, given that none of the responding
        competitors believed that the Transaction could have a negative impact in term of
        higher prices or lower quality of services in Czechia.53
(65)    Second, as demonstrated by the Commission’s market investigation, several
        customers in Czechia do not view TIP and PEMA as closest competitors due to the
48  Fahrzeugwerk Bernard Krone GmbH & Co. KG ("Krone").
49  Following the Commission’s market investigation, it appears that this market share is slightly overstated.
    Nevertheless, in the Commission’s view, Fraikin is an important competitor to the Parties.
50  Annex 6.1 to the Form CO.
51  EWT is the general agent of Schmitz Cargobull in Czechia.
52  Annex 6.1 to the Form CO.
53  Replies to eQ2 – Questionnaire to Competitors, question 27.
 ---pagebreak---         “differences in quality of services and price”54 and note that “there are no huge
        obstacles to switch to another provider”.55
(66)    Third, the majority of customers responding to the Commission’s market
        investigation noted that they do not expect significant changes following the
        Transaction.56 Given this, on balance, the Commission is of the view that the
        majority of customers do not see any issues with the Transaction.
(67)    Last, based on the Notifying Party’s submission, it appears that the total size of the
        operating leasing market in Czechia is just under 2 500 units of heavy trailers as
        opposed to markets such as Denmark and Belgium with total market sizes of
        approximately 16 000 units and 14 000 units of heavy trailers respectively.57 This
        shows that operating leasing does not seem to present an important mean of
        contracting for heavy trailers, as opposed to buying directly, including by means of a
        financial lease. Indeed, the Parties’ competitors in Czechia indicate that the markets
        in the “CEE countries are less developed, and have less concentration”.58 The same
        competitor considers that there is “lower penetration” of the operating leasing
        model,59 whereas another competitor notes that customers are “smaller fleet
        operators [that] have a preference for owning the trailers”.60 This, in the
        Commission’s view, suggests that overall operating leasing is not a preferred means
        for customers seeking to contract for heavy trailers in Czechia.
(68)    In view of the above, the Commission therefore considers that it is unlikely that the
        Transaction would give rise to serious doubts as to its compatibility with the internal
        market in operating leasing of heavy trailers in Czechia.
5.1.3.2 Denmark
(69)    The Commission considers that the Transaction will not lead to a significant
        impediment to effective competition in Denmark for the following reasons.
(70)    First, the Danish market for operating leasing of heavy trailers is considered
        competitive with a number of large fleet providers active on this market. Indeed, TIP
        and PEMA are currently number two and three operating leasing of heavy trailers
        providers in Denmark with a market share of [20-30]% and [10-20]% respectively.61
        Krone is currently the market leader with a market share of [20-30]%, whereas other
        players on the Danish market include multinational providers such as Schmitz
        Cargobull ([5-10]% market share) and EURO-Leasing ([5-10]% market share), as
        well as Nordic players such as PNO ([5-10]% market share)62 and HFR ([5-10]%
        market share).63
54  Customer’s reply to eQ1 – Questionnaire to Customers, question 18.1.
55  Customer’s reply to eQ1 – Questionnaire to Customers, question 19.1.
56  Replies to eQ1 – Questionnaire to Customers, questions 20 and 21.
57  Annex 6.1 to the Form CO.
58  Competitor’s reply to eQ2 – Questionnaire to Competitors, question 22.1.
59  Competitor’s reply to eQ2 – Questionnaire to Competitors, question 22.1.
60  Non-confidential version of the minutes of the call with a Competitor, dated 4 October 2019, paragraph
    14.
61  Annex 6.1 to the Form CO.
62  PNO is headquartered in Denmark and operates through the EEA. It describes itself as “the Nordic
    region’s leader in trailer rental”. See PNO’s website at https://sharing.pnorental.com/about.
63  Annex 6.1 to the Form CO.
 ---pagebreak--- (71)    In the Commission’s view, while the merged entity will become the largest player on
        the market for operating leasing of heavy trailers in Denmark with a combined
        market share of [30-40]% post-Transaction, it will continue to face competition from
        the remaining players, in particular from the second largest provider Krone for which
        Denmark is the largest market.64
(72)    Second, the Commission’s market investigation showed that Danish customers will
        continue to have sufficient choice following the Transaction. As noted by several
        customers, “there will […] be alternatives to TIP and PEMA”.65 Indeed, a large
        number of customers responding to the Commission’s market investigation
        expressed their view that the Transaction will have no impact in Denmark.66 Similar
        view was also shared by the majority of the Parties’ competitors in Denmark who
        provided responses to the Commission’s market investigation.67 Some customers
        also noted that they expect the Transaction to have a positive impact in terms of
        “better services”68 and “better quality”.69
(73)    Only one competitor expressed its view that the Transaction might negatively impact
        competition in Denmark.70 However, the Commission notes that this competitor is
        not active in Denmark and that during the call with the case team in the context of
        the Commission’s market investigation, this competitor did not further explain why
        the Transaction could have a negative impact in Denmark. 71 The Commission also
        notes that none of the current players in Denmark expressed similar concerns. On
        balance, the Commission is of the view that the strong presence of competing
        operating leasing providers in Denmark will be sufficient to constrain the merged
        entity’s ability to negatively affect market prices and conditions.
(74)    Moreover, a large number of customers responding to the Commission’s market
        investigation indicated that it is possible to contract for operating leasing services
        across borders.72 For example, as noted by one of the customers, typically if an
        operating leasing provider “is able to obtain local registration and insurance (and
        has regional presence), it should not raise major issues [for an operating leasing
        provider in one country to contract with customers in another country].”73 A
        competitor explained that there is “strong overall competition in the market between
        many regional players (ICTS, Krone Fleet, ATL)”.74 This shows that operating
        leasing providers of heavy trailers active in neighbouring Member States are also
        capable to exert some competitive pressure.
64 Non-confidential version of the minutes of the call with a Competitor, dated 4 October 2019, paragraph 3.
65 Replies to eQ1 – Questionnaire to Customers, question 19.1.
66 Replies to eQ1 – Questionnaire to Customers, question 21.
67 Replies to eQ2 – Questionnaire to Competitors, question 27, and Non-confidential version of the minutes
   of the call with a Competitor, dated 4 October 2019, paragraph 3.
68 Replies to eQ1 – Questionnaire to Customers, question 21.1.
69 Replies to eQ1 – Questionnaire to Customers, question 21.1.
70 Replies to eQ2 – Questionnaire to Competitors, questions 22.1, 27 and 27.1; Non-confidential version of
   the minutes of the call with a Competitor, dated 3 October 2019.
71 Non-confidential version of the minutes of the call with a Competitor, dated 3 October 2019. See also
   Competitor’s reply to eQ2 – Questionnaire to Competitors, question 22.1 where this competitor stated that
   “Denmark & Sweden are countries where we are not present, hence it is difficult to elaborate”.
72 Replies to eQ2 – Questionnaire to Competitors, question 20; Replies to eQ1 – Questionnaire to
   Customers, question 17.
73 Customer’s reply to eQ1 – Questionnaire to Customers, question 16.1.
74 Competitor’s reply to eQ2 – Questionnaire to Competitors, question 23.1.
 ---pagebreak--- (75)    Last, the responses to the Commission’s market investigation indicate that while
        various countries exhibit different regulatory requirements in terms of registration
        and insurance,75 the national markets for operating leasing of heavy trailers, on
        balance, do not exhibit particularly high barriers to entry and expansion across
        various Member States.
(76)    In view of the above, the Commission therefore considers that it is unlikely that the
        Transaction would give rise to serious doubts as to its compatibility with the internal
        market in operating leasing of heavy trailers in Denmark.
5.1.3.3 Germany
(77)    The Commission considers that the Transaction will not lead to a significant
        impediment to effective competition in Germany for the following reasons.
(78)    First, the German market for operating leasing of heavy trailers has one of the largest
        number of operating leasing providers in Europe. Indeed, a number of vertically
        integrated pan-European players such as Krone, Schmitz Cargobull and EURO-
        Leasing are active on this market in Germany and offer their large heavy trailer
        fleets to the German customers. Other experienced competitors include Seaco ([10-
        20]% market share), Axis Intermodal ([5-10]% market share), Aves ([5-10]% market
        share), and Confern ([5-10]% market share). Moreover, as noted by a competitor of
        the Parties, the German market also features strong local operating leasing providers,
        including Mezger (Stuttgart area), which have a very close relationship with their
        customers.76
(79)    Second, following the Transaction, the Parties’ combined market share in Germany
        will result to [20-30]%, i.e. just slightly above the threshold for an affected market.
        Krone (with a market share of [10-20]%) and Seaco (with a market share of [10-
        20]%) will be the second and third largest competitors respectively. 77 Given the
        moderate combined market share of the Parties, the Commission is of the view that
        the large number of the remaining players, including the strong vertically integrated
        competitor Krone, will be able to exert significant competitive pressure on the
        merged entity post-Transaction.
(80)    Third, the Parties’ competitors responding to the Commission’s market investigation
        generally support the Commission’s findings.78 Only one competitor expressed its
        view that the Transaction might have a negative impact on the German market in
        terms of higher prices and lower quality, whereas the majority of responding German
        competitors believe that the Transaction will have no impact.79 For example, as
        noted by one competitor, the Transaction “is not problematic, since [post-
75  Replies to eQ2 – Questionnaire to Competitors, question 23. In addition, such requirements are not
    specific to heavy trailers and apply to vehicles in general throughout Member States.
76  Non-confidential version of the minutes of the call with a Competitor, dated 4 October 2019, paragraph
    12.
77  Annex 6.1 to the Form CO.
78  Replies to eQ2 – Questionnaire to Competitors, question 27.
79  Replies to eQ2 – Questionnaire to Competitors, question 27. The same competitor expressed its view that
    the combined market share of the Parties post-Transaction will be above 50% in Germany leading to a
    “dominant position, especially on the trailer segment”, however, based on the information collected
    during the Commission’s investigation, it appears that such estimation is not substantiated. See
    Competitor’s reply to eQ2 – Questionnaire to Competitors, questions 22.1, 26, 26.1, 27, and 27.1; Non-
    confidential version of the minutes of the call with a Competitor, dated 4 October 2019 and Non-
    confidential version of the minutes of the call with a Competitor, dated 3 October 2019.
 ---pagebreak---          Transaction] the merged entity will still have to compete with manufacturers
         (OEMs)”.80 Another competitor explained that “most of the truck and trailer
         producers have their own leasing offers, and the independent providers are well
         served by large international and smaller regional providers.”81
(81)     On the demand side, the Commission’s market investigation showed that a majority
         of customers viewed the Transaction as having a positive or no impact.82 One
         customer noted that in its view, the Transaction could be “a benefit for maintenance
         network in Germany”83; whereas another customer noted that “we are not concerned
         here […]. In terms of pricing, our purchasing department will make sure that prices
         will not change to our disadvantage”.84
(82)     Last, as mentioned in section 5.1.3.2 above, operating leasing providers in other
         Member States also exert some competitive pressure,85 and the national markets for
         operating leasing of heavy trailers, on balance, do not exhibit particularly high
         barriers to entry and expansion across various Member States.
(83)     In view of the above, the Commission therefore considers that it is unlikely that the
         Transaction would give rise to serious doubts as to its compatibility with the internal
         market in operating leasing of heavy trailers in Germany.
5.1.3.4 Sweden
(84)     The Commission considers that the Transaction will not lead to a significant
         impediment to effective competition in Sweden for the following reasons.
(85)     First, even though the merged entity will have a combined market share of [30-40]%
         following the Transaction, a number of competitors will continue to exert significant
         competitive pressure on the merged entity, including PNO, who, with a market share
         of [30-40]% is roughly the same size as the merged entity. 86 Other competitors in
         Sweden include Schmitz Cargobull ([5-10]% market share), EURO-Leasing ([5-
         10]% market share), AG Trailer ([5-10]% market share), and Krone ([0-5]% market
         share).87
(86)     Second, based on the Notifying Party’s submission, it appears that the Parties are not
         each other’s closest competitors in Sweden, as [TIP and PEMA target different
         customer groups].88 The responses to the Commission’s market investigation in this
         respect were mixed and therefore inconclusive.89
80  Non-confidential version of the minutes of the call with a Competitor, dated 4 October 2019, paragraph
    17.
81  Competitor’s reply to eQ2 – Questionnaire to Competitors, question 23.1.
82  Replies to eQ1 – Questionnaire to Customers, question 21.
83  A Customer’s reply to eQ2 – Questionnaire to Customers, question 21.1.
84  Convenience translation from German. See Customer’s reply to eQ1 – Questionnaire to Customers,
    question 21.1.
85  Customer’s reply to eQ1 – Questionnaire to Customers, question 16.1.
86  As mentioned above, PNO is headquartered in Denmark and operates through the EEA; it describes itself
    as “the Nordic region’s leader in trailer rental”. See PNO website at https://sharing.pnorental.com/about.
87  Annex 6.1 to the Form CO.
88  As explained by the Notifying Party, as an exception in Europe, the market is not fully standardized.
    Therefore, trailers leased to domestic customers are typically local domestic equipment whereas trailers
    leased by European customers are typically European standard equipment. See Form, CO, paragraph 147.
89  Replies to eQ2 – Questionnaire to Competitors, questions 21-22.
 ---pagebreak--- (87)    Third, none of the Parties’ competitors responding to the Commission’s market
        investigation expressed their view that the Transaction could have a negative impact
        in term of higher prices or lower quality of services in Sweden. 90 Similarly, on the
        demand side, the majority of customers, which had knowledge on the Swedish
        market, indicated that the Transaction will have no impact on the market for
        operating leasing of heavy trailers in Sweden.91
(88)    Last, as mentioned in section 5.1.3.2 above, operating leasing providers in other
        Member States also exert some competitive pressure,92 and the national markets for
        operating leasing of heavy trailers, on balance, do not exhibit particularly high
        barriers to entry and expansion across various Member States.
(89)    In view of the above, the Commission therefore considers that it is unlikely that the
        Transaction would give rise to serious doubts as to its compatibility with the internal
        market in operating leasing of heavy trailers in Sweden.
5.1.3.5 EEA
(90)    If the market for operating leasing of heavy trailers was considered to be EEA-wide,
        the Transaction would give rise to an affected market. At EEA-level, the Parties’
        combined market share in operating leasing of heavy trailers is approximately [20-
        30]%, just slightly above the threshold of an affected market.93
(91)    The merged entity will continue to face significant competitive constraints post-
        Transaction from a number of large competitors, including the leasing businesses of
        OEM trailer manufacturers, such as Krone ([5-10]% market share) and Schmitz
        Cargobull ([0-5]% market share), and from general leasing companies, including
        PNO, Ryder, and Fraikin. The merged entity will also continue to face intense
        competition from regional and local players, as well as importers, distributors and
        traders of trailers.94 In addition, the merged entity will also face competition from
        international (non-European) players, such as CIMC, a Chinese company which has
        acquired the UK market leader SDC and is planning to open a plant in Poland.95
(92)    This was confirmed by the market investigation, where a majority of the customers
        and competitors responding to the market investigation indicated that the
        Transaction would have either no impact or even a positive impact on the overall
        market for operating leasing of heavy trailers in the EEA.96 Indeed, as indicated by
        one of the competitors active in several Member States, there is “strong overall
        competition in the market between many regional players (ICTS, Krone Fleet,
        ATL)”.97
90  Replies to eQ2 – Questionnaire to Competitors, question 27.
91  Replies to eQ1 – Questionnaire to Customers, question 21.
92  Customer’s reply to eQ1 – Questionnaire to Customers, question 16.1.
93  Annex 6.1 to the Form CO.
94  Form CO, paragraphs 7-10; Non-confidential version of the minutes of the call with a Competitor, dated 4
    October 2019.
95  Annex 6.2.1 to the Form CO, page 39.
96  Replies to eQ1 – Questionnaire to Customers, question 21; and to eQ2 – Questionnaire to Competitors,
    question 27.
97  Competitor’s reply to eQ2 – Questionnaire to Competitors, question 23.1.
 ---pagebreak--- (93)     In view of the above, the Commission therefore considers that it is unlikely that the
         Transaction would give rise to serious doubts as to its compatibility with the internal
         market in operating leasing of heavy trailers at EEA-level.
5.2    Conglomerate effects
(94)     The Transaction will give rise to conglomerate effects in four national markets,
         namely Czechia, Denmark, Sweden, and the Netherlands.
(95)     TIP and PEMA are active in the operating leasing of heavy trailers and trucks.
         Trailers and trucks are complementary products in the sense that a truck is required
         to tow a trailer, which itself is not motorized.
5.2.1 Market shares
(96)     With respect to the conglomerate relationship between the Parties’ activities, the
         Transaction would give rise to affected national markets, if the operating leasing of
         heavy trailers and trucks are defined as separate relevant product markets. As shown
         in Table 2 below, the Parties' combined market share in operating leasing of heavy
         trailers exceeds [30-40]% in Czechia (combined market share of [30-40]%),
         Denmark (combined market share of [30-40]%), Sweden (combined market share of
         [30-40]%). In the Netherlands TIP’s market share alone is [40-50]%,98 however
         PEMA does not lease heavy trailers to customers that are located in the
         Netherlands.99
(97)     TIP’s presence in the operating leasing of heavy trucks is marginal with only […]
         trucks units across the EEA.100 Moreover, TIP is not active in the operating leasing
         of heavy trucks in Denmark, Sweden, Czechia and the Netherlands, and estimates
         that its and PEMA’s combined market share is below [5-10]% at EEA level.101
         PEMA estimates that its market share in the operating leasing of heavy trucks in
         Sweden is approximately [0-5]-[5-10]%, in each Denmark and Czechia below [5-
         10]%, and in the Netherlands below [0-5]%.102
          Table 2. The Parties’ market shares in conglomerate affected markets103
         Country104                   Operating leasing Operating leasing of heavy trucks
                                      of heavy trailers
98  Form CO, paragraph 172.
99  As explained by the Notifying Party, PEMA does not lease trailers to customers that are located in the
    Netherlands. Nevertheless, in exception, a non-Dutch customer may ask PEMA to register a trailer, which
    is required to be registered in one country, in the Netherlands (from PEMA's offices in Belgium or
    Germany), however, such registrations are not considered as relevant market activity in the Netherlands.
    See Form CO, footnote 34.
100 Form CO, paragraph 172.
101 Form CO, paragraph 172, Reply of I Squared to RFI of 10 October 2019, paragraphs 3-5.
102 Form CO, paragraph 172, Reply of I Squared to RFI of 10 October 2019, paragraphs 3-5.
103 Form CO, paragraph 172, Reply of I Squared to RFI of 10 October 2019, paragraphs 3-5.
104 At EEA-wide level, the conglomerate relationship between the Parties’ activities will not give rise to an
    affected market, since the Parties have a combined market share of [20-30]% on the market for operating
    leasing of heavy trailers and a combined market share below [5-10]% for the operating leasing of heavy
    trucks.
 ---pagebreak---                                     Merged entity               PEMA          TIP
        Czechia                     [30-40]%                    <[5-10]%      [0-5]%
        Denmark                     [30-40]%                    <[5-10]%      [0-5]%
        Sweden                      [30-40]%                    [0-5]-[5-10]% [0-5]%
        The Netherlands             [40-50]%           (only <[0-5]%          [0-5]%
                                    TIP’s market share)
5.2.2 Notifying Party’s views
(98)    The Parties submit that the Transaction will not result in any competitive
        (conglomerate) concerns in relation to the potential commercial building of a
        combined trailer and truck offering, as the merged entity will not have the ability and
        incentive to foreclose competitors post-Transaction.
5.2.3 Commission’s assessment
(99)    The Commission considers that the Parties will not have the ability to foreclose
        rivals by engaging in bundling strategies.
(100) First, PEMA is already active in the operating leasing of both heavy trucks and
        heavy trailers and could have already engaged in such practices.
(101) Second, as explained in the section on horizontal assessment, the merged entity will
        not have a significant degree of market power in the operating leasing of heavy
        trailers. As such, it will not to be able to foreclose competitors in the operating
        leasing of heavy trucks. Moreover, as indicated in Table 2, PEMA’s market shares in
        operating leasing of heavy trucks are very low. The merged entity will thus lack the
        sufficient degree of market power to leverage its market position in operating leasing
        of heavy trucks to be able to foreclose competitors in the operating leasing of heavy
        trailers.
(102) Third, customers can and do mix and match heavy trucks and trailers from different
        leasing providers (“multi-sourcing”). Indeed, the majority of customers responding
        to the Commission’s market investigation confirmed that they lease their heavy
        trailers from different operating leasing providers.105 One customer indicated that
        they “utilise a limited pool of industry recognised suppliers to fulfil [their] trailer
        requirements and always after undertaking a review of the respective quotations”;
        another indicated that this constitutes a “decision based upon operational and
        financial considerations” and a third one noted that “it is a strategic purchasing
        decision […] to have different suppliers”.106
(103) Fourth, post-Transaction, there will remain a large number of operating leasing
        providers in the relevant national markets that are able to offer both truck and trailer
        operating leasing contracts.
105 Replies to eQ1 – Questionnaire to Customers, question 9.
106 Replies to eQ1 – Questionnaire to Customers, questions 9.1 and 8.1.
 ---pagebreak--- (104) In view of the above, and considering all the evidence available to the Commission,
      the Commission concludes that the Transaction does not raise serious doubts as to its
      compatibility with the internal market due to conglomerate effects.
5.3  Conclusion on the competitive assessment
(105) In light of the outcome of the market investigation and the evidence submitted by the
      Notifying Party, the Commission concludes that the Transaction does not raise
      serious doubts about its compatibility with the internal market or the functioning of
      the EEA Agreement as regards its impact on competition for operating leasing of
      heavy trailers in Czechia, Denmark, Germany, Sweden, the Netherlands or at EEA-
      level, including with respect to conglomerate effects.
 ---pagebreak--- 6. CONCLUSION
(106) For the above reasons, the European Commission has decided not to oppose the
      notified operation and to declare it compatible with the internal market and with the
      EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the
      Merger Regulation and Article 57 of the EEA Agreement.
                                                    For the Commission
                                                    (Signed)
                                                    Margrethe VESTAGER
                                                    Member of the Commission