CELEX: 32015M7616
Language: en
Date: 2015-06-23 00:00:00
Title: Commission Decision of 23/06/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7616 - DCC / DLG DANISH ENERGY BUSINESS) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

                                        Brussels, 23.6.2015
                                        C(2015) 4420 final

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

Subject:    Case M.7616 – DCC/ DLG DANISH ENERGY BUSINESS
         Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1] and Article 57 of the Agreement on the European
         Economic Area[2]

    1) On 21 May 2015, the European Commission received a notification of a proposed concentration pursuant to Article 4  of  Council  Regulation
       (EC) No 139/2004 by which the undertaking DCC Holding A/S ("DCC Energy", Denmark)  controlled  by  DCC  Plc  ("DCC",  Ireland)  indirectly
       acquires within the meaning of Article 3(1)(b) of the Merger Regulation sole control of the Danish energy business of the undertaking  DLG
       Service A/S (the "DLG Danish Energy Business", Denmark) controlled by DLG Group ("DLG", Denmark)[3]. DCC Energy is designated  hereinafter
       as 'Notifying Party' and together with the DLG Danish energy business as the 'parties to the proposed transaction' or the 'Parties'.

       THE PARTIES

    2) DCC entered the Danish energy market in 2009 through the acquisition of the majority of Shell's Danish  commercial  fuels  activities.  In
       connection with the 2009 acquisition, DCC Energy was appointed as A/S Dansk Shell’s sole distributor of Shell-branded commercial fuels  to
       Danish customers – save for certain named customers reserved to A/S Dansk Shell itself and for customers in the agricultural segment which
       are reserved to the DLG Danish Energy Business (see next paragraph). Although the majority of DCC Energy's business is  accounted  for  by
       sales of fuel products purchased from A/S Dansk Shell, it is also active in the unrelated sale of bio-fuels (wood pellets) and lubricants.

    3) The DLG Danish Energy Business is the currently wholly-owned Danish energy business of the DLG Group. Since 1 January 2010, the DLG Danish
       Energy Business has been appointed as A/S Dansk Shell’s sole distributor of Shell-branded commercial fuels  to  Danish  customers  in  the
       agricultural segment which constitutes its core customer base for energy products.

    4) DCC Energy and the DLG Danish Energy Business are both active in the sales of gasoline, diesel, heating  oil  and  fuel  oil  in  Denmark,
       primarily at the non-retail level. Moreover, both Parties are active in the sales of bio-fuels (wood pellets) and lubricants.  DCC  Energy
       is furthermore active in the sales of marine gas oil and natural gas whereas DLG Service is not active  in  the  sales  of  any  of  these
       products. Conversely, the DLG Danish Energy Business has sales of coal and electricity whereas DCC does not sell these products.

    5) The Parties indicate that their respective contractual relationships with A/S Dansk Shell will not be affected by the proposed transaction
       and that they will continue to act as exclusive resellers of Shell-branded fuel products in Denmark – save  for  certain  named  customers
       which A/S Dansk Shell has reserved to itself.

       THE OPERATION

    6) The proposed transaction involves the acquisition of sole control of the existing Danish energy business of the DLG Group by DCC, via  its
       subsidiary DCC Energy. The strategic and economic rationale for the Transaction is to create synergies  by  combining  the  Danish  energy
       businesses of the Parties in a joint venture company (the "Combined Entity"). In return for a [less  than  50]  per  cent  non-controlling
       shareholding, the DLG Group will contribute its entire Danish energy business to the Combined Entity which will be controlled and  managed
       by DCC.

       THE CONCENTRATION

    7) By means of the proposed transaction, DCC will indirectly acquire the majority ([more than 50] per cent) of the shares and  voting  rights
       in the Combined Entity and, thereby, in the DLG Danish Energy Business. Pursuant to the shareholders agreement entered  into  between  the
       Parties in relation to the Combined Entity (the "SHA"), DCC will moreover have the right to appoint three out of five members of the board
       of directors thereof. Given that simple majority voting applies both at the level of the general meeting as well as at the  level  of  the
       board of directors of the Combined Entity, while the presence of the DLG Group is not required for reaching a quorum at either level,  DCC
       will have the power to unilaterally decide on the strategic commercial behaviour thereof. Finally, DCC will be  responsible  for  managing
       the Combined Entity on a day-to-day basis.[4]

    8) At the same time, the veto rights that the DLG Group will hold as a result of its retained [less than 50] per  cent  shareholding  in  the
       Combined Entity do not go beyond what is normally accorded to minority shareholders in order  to  protect  their  financial  interests  as
       investors in joint ventures.[5]  Pursuant to the SHA, the only veto right that the DLG Group will namely hold  over  any  strategic  issue
       relates to the existing high-level business plan of the Combined Entity and is limited  to  […].  Given  that  the  Combined  Entity  will
       continue the activities of two already existing wholesale businesses that operate in a relatively low-technology sector not  characterized
       by significant, regular investments, the veto right over significant changes to the high-level  business  plan  cannot  be  considered  to
       confer joint control over the Combined Entity upon the DLG Group.

    9) In light of the foregoing, the Commission considers that DCC acquires sole control over the DLG Danish Energy Business post-completion  of
       the proposed transaction within the meaning of Article 3(1)(b) of the Merger Regulation.

       EU DIMENSION

   10) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million[6]  [DCC: EUR 13 321 million;  DLG
       Danish Energy Business: EUR […] million].  Each of them has an EU-wide turnover in excess of EUR 250 million [DCC: EUR  […]  million;  DLG
       Danish Energy Business: EUR […] million], but they do not achieve more than two-thirds of their aggregate EU-wide turnover within one  and
       the same Member State. The notified operation therefore has an EU dimension within the meaning of Article 1(2) of the Merger Regulation.

       MARKET DEFINITION

   11) The Parties' activities overlap in relation to the non-retail sale in Denmark of (i) gasoline, (ii) diesel, (iii) heating  oil,  and  (iv)
       fuel oil (HFO). The Parties are also active in Denmark in (v) the retail sale of heating oil, (vi) the sale of wood pellets, and (vii) the
       sale of lubricants.

   12) Regarding the supply of refined oil products the Commission has previously considered three levels of the market: ex-refinery sales,  non-
       retail sales and retail sales.[7] The Parties are not active at the ex-refinery level of the market and only to a very limited  extent  at
       the retail level.[8]

1 Non retail sale of refined fuel products

   13) At the non-retail level, the Commission has previously concluded that each refined fuel product constitutes a  distinct  relevant  product
       market.[9]  In the case at hand, the Commission similarly considers four distinct product markets at the non-retail level, i.e. the  sales
       of (i) gasoline, (ii) diesel, (iii) heating oil, and (iv) fuel oil (HFO). The Notifying Party however submits that the  market  should  be
       defined as one single product market without a further distinction either by non-retail/retail sales or by the type of fuel product.

   14) In the case of diesel sold at this level, the Commission has previously considered a potential sub-segmentation of the  non-retail  market
       between on-road and off-road diesel – without finally concluding on the issue.[10]  The Notifying Party considers that the relevant market
       for the assessment of the Combined Entity's diesel sales activities is the Danish market for the non-retail sale  of  diesel  encompassing
       all types of diesel products, and that no distinction should be made between on-road and off-road diesel. Notwithstanding,  the  Notifying
       Party notes that three different diesel products are currently sold at the non-retail level in Denmark at different price levels  and  for
       different end-uses: (i) B7 diesel, which contains seven per cent biodiesel and is therefore suited for on-road use  (i.e.  transportation)
       under Danish law; (ii) uncoloured B0 diesel, which does not contain any biodiesel and is therefore only suited for non-road use (i.e. as a
       motor fuel for non-road machinery), and; (iii) coloured B0 diesel, which is subject to a special tax regime in Denmark – an exemption from
       energy levies – pursuant to which it can only be used for forestry and agricultural purposes.

   15) As regards the geographic scope of these markets, the most recent Commission decisions pointed towards markets that are likely  to  be  at
       least national in scope, and possibly even Scandinavia-wide in scope in the case of Denmark. The exact delineation of the geographic scope
       of these markets was however left open.[11]

   16) In the case at hand, the exact delineation of the relevant product and geographic markets can however be left open as the transaction does
       not give rise to serious doubts as to its compatibility with the internal market under any plausible market definition.

2 Retail sale of heating oil

   17) The Commission has previously distinguished between non-retail sales of heating oil and retail sales of heating oil.[12] However,  in  the
       case of heating oil sold in Denmark, the distinction between retail and non-retail and the exact boundary between the two segments is  not
       straightforward. Contrary to gasoline and diesel, the 'retail' sales of heating oil are not carried out through service stations. Both non-
       retail and retail sales of  heating  oil  are  done  by  truck  delivery  directly  at  end-customers'  premises,  regardless  of  whether
       industrial/commercial customers or domestic consumers are concerned. The complex structure of the market for the sale of  heating  oil  is
       illustrated by the fact that a company like A/S Dansk Shell sells heating oil both to large resellers  (DCC  Energy  and  the  DLG  Danish
       Energy Business) as well as to large business customers, whereas DCC and  the  DLG  Danish  Energy  Business  sell  heating  oil  both  to
       commercial and domestic customers – with the customers of the DLG Danish Energy Business either being qualified as business  customers  or
       domestic customers, depending on the volume they off-take, as the latter's reporting systems do  not  provide  insight  into  whether  the
       heating oil in question is used for private or commercial purposes.

   18) In any event, the Commission considers that for the purpose of assessing the proposed transaction, the question of whether non-retail  and
       retail sales of heating oil constitute separate product markets can be left open, as the  proposed  transaction  does  not  give  rise  to
       serious doubts as to its compatibility with the internal market under any plausible market definition.

   19) Regarding the geographic scope of this market, the Commission has previously considered it to be at least national in scope. However,  the
       exact geographic scope can be left open, as the transaction does not give rise to serious doubts as to its compatibility with the internal
       market under any plausible market definition.

3 Sales of bio-fuels (wood pellets)

   20) The Parties are both active in the sales of wood pellets that are used as a bio-fuel.

   21) The Commission has previously considered distinguishing separate relevant product markets involving the sale of wood pellets based on  (i)
       the type of customer/retail channel (large, medium and small), (ii) the type of wood pellet sold (premium versus non-premium) as  well  as
       on (ii) the size of the burner used by the relevant customer (distinguishing capacities below 25 kW, between 25 kW and 2 MW  and  above  2
       MW). The Commission however ultimately considered that the distinction based on the type of wood pellets and based  on  the  size  of  the
       customers' burners are the relevant ones to take into account.

   22) The Notifying Party takes the view that the market for the sale of wood pellets should not be further segmented based on the size  of  the
       burner nor on the basis of the type of wood pellets because irrespective of their quality or size, they fulfil the same function –  energy
       production in wood pellet burners.

   23) As regards the geographic scope of the market for the  sale  of  wood  pellets,  the  Commission  previously  considered  that  there  are
       indications for the existence of a market that is at least national, and possibly wider, in scope.[13] The precise delineation  (regional,
       national or local) was, however, left open.[14]

   24) Given that the proposed transaction does not give rise to serious doubts as to its  compatibility  with  the  internal  market  under  any
       plausible alternative market definition, the precise product and geographic market definitions can however be left open.

       COMPETITIVE ASSESSMENT

   25) As can be seen from the table, the proposed transaction gives rise to affected markets in relation to the non-retail and  retail  sale  of
       heating oil, and certain possible sub-segments of the respective markets for the non-retail sale of diesel and the sale of wood pellets.

       Table 1 – market shares of the Parties in the various plausible affected markets, 2014 (volume)[15]

|                                                      |Denmark                                    |
|                                                      |DCC          |DLG          |Combined        |
|Non-retail diesel                                     |[0-5]%       |[5-10]%      |[10-20]%        |
|Non-retail coloured B0 diesel                         |[0-5]%       |[30-40]%     |[30-40]%        |
|Non-retail uncoloured B0 diesel                       |[20-30]%     |[0-5]%       |[20-30]%        |
|Non-retail B7 diesel                                  |[0-5]%       |[0-5]%       |[0-5]%          |
|Non-retail uncoloured B0 & B7 diesel                  | [0-5]%      |[0-5]%       |[5-10]%         |
|Non-retail and retail heating oil                     |[10-20]%     |[5-10]%      |[20-30]%        |
|Non-retail heating oil                                |[10-20]%     |[5-10]%      |[20-30]%        |
|Retail heating oil                                    |[20-30]%     |[0-5]%       |[20-30]%        |
|Wood pellets                                          |[0-5]%       |[5-10]%      |[5-10]%         |
|Premium wood pellets                                  |[0-5]%       |[10-20]%     |[10-20]%        |
|Non-premium wood pellets                              |[0-5]%       |[0-5]%       |[0-5]%          |
|Wood pellets –  burner <25 kW                         |[0-5]%       |[10-20]%     |[20-30]%        |
|Wood pellets – burner 25 kW-2 MW                      |[0-5]%       |[10-20]%     |[10-20]%        |
|Wood pellets – burner >2 MW                           |[0-5]%       |[0-5]%       |[0-5]%          |

1 Sale of refined oil products

   26) The Commission considers at the outset that the proposed transaction is unlikely to reduce the intensity of  competition  in  any  of  the
       markets in which the Parties' activities overlap, as they target very different customer groups.  Indeed,  pursuant  to  their  respective
       supply and distribution agreements with A/S Dansk Shell which cover the bulk of their respective businesses  (i.e.  heating  oil,  diesel,
       fuel oil and gasoline), the Parties are subject to customary active sales restrictions in relation to the  respective  exclusive  customer
       groups of A/S Dansk Shell, the DLG Danish Energy Business and DCC Energy.[16] Accordingly, the DLG Danish Energy Business has focused  its
       efforts on building and maintaining a strong customer base among the agricultural customers which the DLG Group as a farmer-owned purchase
       and supply organisation focuses on. DCC Energy, in turn, cannot actively market its Shell-branded fuel products to agricultural  customers
       and accordingly has limited sales of commercial fuels to this customer group. Instead, DCC Energy focuses its  marketing  effort  on,  and
       sells fuel products to, other types of industrial and commercial customers, as well as service stations and independent resellers (in  the
       case of gasoline and diesel) and domestic consumers (in the case of heating oil). The DLG Danish Energy Business does not  have  sales  to
       service stations or independent small resellers and has only very limited sales of heating oil to domestic consumers.

   27) The Parties' fundamentally different focus becomes apparent when assessing their positions on the respective plausible markets for the non-
       retail sale of coloured B0 diesel and for the non-retail sale of uncoloured B0 diesel. As ninety-five per cent of total sales of  coloured
       B0 diesel are made to agricultural customers, which are reserved to the DLG Danish Energy Business under its  supply  agreement  with  A/S
       Dansk Shell, the former has a relatively strong position in this market. Oppositely, in relation to sales of uncoloured B0  diesel,  which
       are primarily made to industrial companies (construction), DCC Energy is a much  more  significant  player  than  the  DLG  Danish  Energy
       Business.

   28) In addition, as can be seen from the market share table below, the proposed transaction involves limited increments in the Parties' market
       shares in all affected markets and it is accordingly unlikely to result in a significant loss of competition, also taking into account the
       aforementioned difference in the respective customer groups targeted by the Parties.

   29) In those cases where the proposed transaction, notwithstanding the limited increment involved, gives  rise  to  an  affected  market,  the
       Parties will, according to information  provided  by  them,  furthermore  continue  to  face  competitive  pressure  from  several  strong
       competitors.

   30) In relation to both the non-retail and retail sale of heating oil, the Parties will continue to face at least four strong competitors with
       a nation-wide presence, each having a share of the market that significantly exceeds that of the target, the DLG Danish  Energy  Business:
       Statoil – [20-30]%; OK – [20-30]%; Q8: [10-20[%; Uno-X: [10-20]% (the same shares apply to both sales channels). Furthermore, one  of  the
       parties' main competitors indicated during the Commission's market investigation that, in addition, Shell  constitutes  one  of  the  main
       players (alongside OK and Statoil) on the market involving the sale of heating oil to business end-customers, for commercial use.[17]

   31) In relation to the sale of coloured B0 diesel, the Parties will continue to face at least five strong competitors, each having  a  nation-
       wide presence as well as a market share exceeding that of DCC: Danish Agro: [20-30]%; OK: [10-20]%; Q8: [10-20]%; Uno-X: [5-10]%;  Statoil
       Fuel & Retail: [5-10]%. This assessment applies equally to the sale of uncoloured B0 diesel: Statoil Fuel & Retail: [20-30]%; Uno-X:  [20-
       30]%; OK: [10-20]%; Q8: [10-20]%; Danish Agro: [0-5]%.

   32) What is more, in relation to the various markets involving the non-retail sale of refined fuel products, it is noted that the existence of
       significant cross-border trade has previously led the Commission  to  consider  that  Denmark  forms  part  of  a  wider  Scandinavia-wide
       market.[18] Given that the DLG Danish Energy Business is exclusively active  within  Denmark,  its  shares  of  possible  Scandinavia-wide
       markets for the non-retail sale of refined fuel products would be significantly smaller. The potential import  of  refined  fuel  products
       from Denmark's neighbouring countries therefore constitutes an additional competitive constraint that the Parties will  continue  to  face
       post implementation of the proposed transaction.

   33) Finally, during the market investigation in relation to the markets for the non-retail and retail sale of heating oil where  the  proposed
       transaction would bring about the most significant – but still limited – increment in the Parties'  shares,  the  Parties'  customers  and
       competitors that were contacted did not raise any concern in relation to the proposed transaction.

2 Sales of bio-fuels (wood pellets)

   34) As mentioned above, the fundamentally different customer focus of the Parties means that the proposed transaction is  unlikely  to  reduce
       the intensity of competition, including in the market for the sale of wood pellets to customers having a burner size below 25 kW.

   35) What is more, the incremental change in the Parties' share of this market that is brought about by  the  proposed  transaction  is  highly
       limited, amounting to, at most, only [0-5]%.

   36) Finally, the Parties will similarly continue to face at least four strong competitors in relation to the sale of wood pellets: Neova: [10-
       20]%; Danish Agro: [10-20]%; Verdo: [5-10]%; and SydJysk Stoker: [5-10]%.

3 Conclusion on competitive assessment

   37) In light of all of the foregoing, the Commission considers that the proposed transaction does not give rise to serious doubts  as  to  its
       compatibility with the internal market as a result of non-coordinated horizontal effects arising in any of the affected markets  involving
       the sale of refined fuel products and the sale of wood pellets in Denmark.

       CONCLUSION

   38) For the above reasons, the European Commission has decided not to oppose the notified operation and to  declare  it  compatible  with  the
       internal market and with the EEA Agreement. This decision is adopted in application of  Article  6(1)(b)  of  the  Merger  Regulation  and
       Article 57 of the EEA Agreement.

                                        For the Commission
                                        (Signed),
                                        Margrethe VESTAGER
                                        Member of the Commission

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[1]   OJ L 24, 29.1.2004, p. 1 ('the Merger Regulation'). With effect from 1 December 2009, the Treaty on the Functioning of the  European  Union
      ('TFEU') has introduced certain changes, such as the replacement of 'Community' by 'Union' and 'common market' by  'internal  market'.  The
      terminology of the TFEU will be used throughout this decision.
[2]   OJ L 1, 3.1.1994, p.3 ("the EEA Agreement").
[3]   Publication in the Official Journal of the European Union No C 177, 30.05.2015, p. 17.
[4]   Form CO, annex 5.4(A), p. 6.
[5]   These veto rights include: […].
[6]   Turnover calculated in accordance with Article 5 of the Merger Regulation and the Commission Consolidated Jurisdictional Notice (OJ  C  95,
    16.4.2008, p. 1).
[7]         COMP/M.6801 Rosneft / TNK-BP, of 8 March 2013; COMP/M.6463 Marquard & Bahls, of 19 March 2012; COMP/M.6261 North Sea / Argos Group  /
      JV, of 27 September 2011; COMP/M.6151 Petrochina / Ineos / JV, of 13 May 2011; COMP/M4348 PKN/Mazeikiu, of 7 November 2006, para 7.
[8]         DLG is present on the market for retail sales of motor fuels with one single petrol station in Northern Jutland. DCC is  not  present
      on this market.
[9]         See COMP/M.3291 Preem/Skandinaviska Raffinaderi (2003); COMP/M.3375 Statoil / SDS (2004); COMP/M.3543 PKN Orlen /  Unipetrol  (2005);
      COMP/M.3516 Repsol / Shell Portugal; COMP/M.4208 Petroplus / European Petroleum  Holdings  (2006);  COMP/M.4545  Statoil  /  Hydro  (2007);
      COMP/M.5005 Galp Energia / Exxonmobil Iberia (2008); COMP/M.5169 Galp Energia Espana / Agip Espana (2008).
[10]  See COMP/M.6935 – Argos / Sopetral
[11]        COMP/M.3291 Preem/Skandinaviska Raffinaderi (2003); COMP/M.3375 Statoil / SDS (2004);  COMP/M.3543  PKN  Orlen  /  Unipetrol  (2005);
      COMP/M.3516 Repsol / Shell Portugal; COMP/M.4208 Petroplus / European Petroleum  Holdings  (2006);  COMP/M.4545  Statoil  /  Hydro  (2007);
      COMP/M.5005 Galp Energia / ExxonMobil Iberia (2008); COMP/M.5846 Shell / Cosan / JV (2011).
[12]        COMP/M.6167 RWA / OMV Warme (2011); COMP/M.5637 Motor Oil (Hellas) Corinth Refineries / Shell Overseas Holdings  (2010);  COMP/M.5796
      Eni / Mobil Oil Austria (2010).
[13]  COMP/M.7185 - Agroenergi / Neova Pellets / JV.

[14]        The Parties confirm that their individual and combined shares at a local level in Denmark,  although  they  consider  such  a  market
       unlikely to exist given the very small size of the country, would not be materially different from  their  shares  at  national  level  in
       Denmark.

[15]        The Parties note that all market share data for refined fuel products have been provided on the basis of  EOF  data,  which  excludes
       any imports of these products into Denmark by non-EOF members. (EOF stands for Energi og Olieforum – the Danish Oil Industry Association).
       The Parties accordingly estimate that the total market is five to ten per cent larger than referenced here, which would  mean  that  their
       respective market share could be overstated.
[16]        Cf. Form CO, annexes 6.3(A) and 6.3(B) – DCC and DLG commercial fuels branded distributor agreements with Shell,  respective  clauses
       2.4 (DCC) and 2.4 of annex 2 (DLG).
[17]  Minutes of a conference call between the Commission's services and a competitor of 29 May 2015.
[18]  M.3291Preem/Skandinaviska Raffinaderi (2003).

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 In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC)  No  139/2004
 concerning non-disclosure of business secrets and other confidential information.  The  omissions  are  shown  thus  […].  Where  possible  the
 information omitted has been replaced by ranges of figures or a general description.

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