CELEX: 32014M7182
Language: en
Date: 2014-05-16 00:00:00
Title: Commission Decision of 16/05/2014 declaring a concentration to be compatible with the common market (Case No COMP/M.7182 - VISTEON CORPORATION / AUTOMOTIVE ELECTRONICS BUSINESS OF JOHNSON CONTROLS) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 16.5.2014
C(2014) 3393 final

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                                        To the notifying party

Dear Sir/Madam,

Subject:    Case No COMP/M.7182 – VISTEON CORPORATION / AUTOMOTIVE ELECTRONICS BUSINESS OF JOHNSON CONTROLS
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1]

    1) On 04.04.2014 the European Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC)
       No 139/2004[2] by which the US-based company Visteon Corporation ("Visteon") acquires within the meaning of Article 3(1)(b) of the  Merger
       Regulation sole control of the whole of the Automotive Electronics Business (the "Target") which  is  currently  held  and  controlled  by
       Johnson Controls, Inc. ("JCI", USA), by way of purchase of assets and stocks.

    2) Visteon, JCI and the Target are hereinafter referred to as the "Parties".

1.    THE PARTIES

    3) Visteon is a global supplier of climate, electronics and interiors systems,  modules  and  components  to  automotive  original  equipment
       manufacturers (“OEMs”), active in North America, the EU and Asia. Visteon’s electronics portfolio includes driver  information  components
       and systems (instrument clusters, information displays, infotainment and connectivity) and body electronics (electronic climate  controls,
       body controllers, access control systems, and automotive lighting).

    4) JCI is a global diversified technology and industrial company that operates in three major  areas:  (i)  building  efficiency:  supply  of
       integrated heating, ventilating and air conditioning systems, building management systems, controls, security  and  mechanical  equipment,
       and provision of technical services, energy management consulting and  operations  of  real  estate  portfolios  for  the  non-residential
       buildings market; (ii) automotive experience: supply of automotive seating, overhead systems, door and instrument panels, floor  consoles,
       and interior electronics; and (iii) power solutions: supply of lead-acid automotive  batteries  and  advanced  batteries  for  hybrid  and
       electric vehicles.

    5) The Target, currently part of  JCI,  provides  automotive  OEMs  with  driver  information  (instrument  clusters,  information  displays,
       connectivity systems and specialty products) and body electronics products.  It  comprises  subsidiaries,  manufacturing  facilities,  R&D
       centres, application and technical centres, related tangible and intangible assets, employees, etc. in a number  of  countries,  including
       France, Germany, Slovakia, Brazil, China, Macedonia, Mexico, Tunisia, and the United States.

2.    THE OPERATION

    6) Pursuant to a Purchase Agreement dated from 12 January 2014 between Visteon and JCI, Visteon will acquire 100% of the assets  and  stocks,
       all rights, titles and interests in the Target.

    7) The proposed transaction therefore constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

3.    EU DIMENSION

    8) The undertakings concerned have a combined aggregate worldwide turnover of more than EUR 5 000 million (Visteon: 5,337.0  million  EUR  in
       2012; Target: […] million EUR in 2013). Each of them has an EU-wide turnover in excess of EUR 250 million (Visteon:  […]  million  EUR  in
       2012; Target: […] million EUR in 2013). Neither company achieves more than two-thirds of its aggregate EU-wide turnover  within  the  same
       Member State.

    9) The notified operation therefore has an EU dimension within the meaning of Article 1(2) of the Merger Regulation.

4.    PRODUCT AND GEOGRAPHIC MARKET DEFINITIONS

   10) Automotive electronics are electrically-generated systems used in vehicles and can be classified in the following main product categories:
       (i) driver information electronics; (ii) body electronics; (iii) safety electronics; (iv) powertrain control electronics; and (v)  chassis
       electronics.

   11) The Parties manufacture and supply driver information and body electronics to automotive OEMs for  light  vehicles.  In  particular,  both
       Parties are active in driver information, including instrument clusters, information displays and connectivity systems, as well as in body
       electronics for light vehicles, including body controllers and access control systems.

4.1.  Product market definition

   12) In its previous decisions, the Commission concluded that the sale electronic components to Original  Equipment  Manufacturers  (OEMs)  and
       their authorized dealers (Original Equipment Services - "OES") constitutes a  market  separate  from  the  supply  of  components  to  the
       independent aftermarket.[3] The Commission also concluded that the supply of automotive parts for light vehicles  constitutes  a  separate
       product category from the supply of the same product to heavy vehicle manufacturers.[4]

   13) The Parties do not dispute such findings. As such, the supply of automotive parts to OEMs of light vehicles will be considered a  separate
       market in the present decision.

   14) In past decisions, the Commission has also considered, but has ultimately left the question open,  whether   there   may   be   a   widely
       defined  market  comprising  automotive  components modules and systems, or separate markets for “modules”[5]  and  “systems”.[6]

   15) In their submission, the Parties claim that there is no need to distinguish between components, modules and systems.  From  a  supply-side
       perspective, most components' manufacturers are vertically integrated and therefore able to produce and supply individual  components,  as
       well as modules and systems of such components tailored to their customer OEMs needs and product designs.  From a demand-side perspective,
       OEMs not only source modules but also source individual components separately.

   16) The results of the market investigation were inconclusive on this point. The majority of respondents to the market investigation from  the
       demand side have stated that components and modules constitute different product markets.[7] However, respondents  from  the  supply  side
       confirmed the Parties' claims that components and modules for automotive electronics are part of the same product market.[8]

   17) In any case, the exact definition of the product market can be left open in this case as the  proposed  transaction  does  not  raise  any
       competitive concern under any plausible market definition. In previous decisions in the area of automotive electronics, the Commission has
       also determined the  scope  of  the  product  markets  for  electronic control units ("ECUs")  according  to  their  respective  areas  of
       application:  e.g.  transmission controls,  airbag control  units,  body  electronics,   central  body  control  units,  ECUs  for  engine
       management, ECUs for chassis control, ECUs for electronic braking systems and ECUs for electronic parking brakes, etc.

   18) Since the Parties manufacture and supply driver information and body electronics, the analysis below will focus  on  these  two  types  of
       product categories and their possible sub-segments.

4.1.1. Driver information systems

   19) Within driver information systems, the Parties provide instrument clusters, information displays, infotainment  systems  and  connectivity
       systems.

       Instrument clusters

   20) Regarding instrument clusters, the Commission has not previously assessed specifically these products. However,  in  early  decisions  the
       Commission examined the market for instrument panels, and considered that these would constitute a  separate  product  market,  ultimately
       leaving the question open.[9]

   21) In their submission, the Parties claim that instrument clusters include dashboard-mounted analogue clocks, where  both  Parties  are  also
       active. In particular, the Parties claim that dashboard-mounted analogue clocks are a niche product  usually  used  in  high-end  vehicles
       accounts for a de minimis fraction of the overall driver information electronics segment, with total global market sales of  approximately
       € […] in 2013.

   22) The market investigation yielded mixed results regarding the question whether instrument clusters constitute  a  separate  product  market
       within the broader market for driver information systems. While the replies  of  the  market  investigation  from  the  demand  side  were
       inconclusive[10] a large majority of respondents from the supply side[11] stated that instrument clusters constitute  a  separate  product
       market due to the differences in terms of product characteristics, functions, reliability and safety standards  vis-à-vis  other  products
       within driver information systems. However, some competitors also considered that the different products within driver information systems
       might start converging in the future.[12]

   23) In addition, the market investigation results indicated that digital clocks for integration in instrument clusters and analogue clocks for
       integration in instrument clusters constitute different product markets. The majority of competitors and customers stated that  these  two
       products constitute different product markets based on differences in the prices[13] and characteristics of the products.[14]

   24) However, the precise scope of the market for instrument clusters can be left open in this case as the proposed transaction does not  raise
       any competitive concern under any plausible market definition.

       Information displays

   25) As to information displays, the Commission has in its previous decisional practice concluded that information  displays[15]  constitute  a
       separate relevant product market.[16]

   26) In their submission, the Parties claim that information displays are a separate product market. They  also  consider  that  multi-function
       displays (MFDs)[17] should not be considered as part of the information displays segment.

   27) The market investigation however yielded inconclusive results with regard to the existence and scope of a market for information  displays
       within the broader market for driver information systems.

   28) On the one hand, the majority of customers considered that information displays are not a separate product market.[18]

   29) On the other hand, respondents to the market investigation both from supply and demand side indicated that MFDs  could  constitute  market
       separate from that of  "dumb"  information  displays.  This  was  due  to  these  two  products  being  neither  comparable  in  terms  of
       characteristics,[19] nor in terms of price ,[20] and are not used to meet the same needs.[21]

   30) However, the precise scope of the market for information displays can be left open in this case as the proposed transaction does not raise
       any competitive concern under any plausible market definition.

       Infotainment systems

   31) While in the past the Commission reflected whether the market for infotainment systems should be distinguished from the  markets  for  the
       individual components or peripherals that may be included  in  these  systems,[22]  in  its  decisional  practice  it  considered  whether
       infotainment systems would constitute a separate market, ultimately leaving this question open.

   32) The Parties submit that there is no need to distinguish between infotainment systems and the individual  components  or  peripherals  that
       form these systems. The number and type of peripherals that are included depends on the level of functionality that a given OEM  wants  to
       offer. Dividing OEM infotainment systems by the functionalities they provide or the devices they use to provide such functionalities would
       artificially create a myriad of product markets that would not capture the competition among OEM infotainment system providers to meet the
       demands of OEMs and consumers for integrated solutions. In any case, the Parties claim that there is no need to define the  precise  scope
       of the relevant market for infotainment systems.

   33) The market investigation both from the supply and demand side largely confirmed that infotainment systems constitute  a  separate  product
       market.[23] However, the majority of competitors also considered that the different products such  as  infotainment  systems,  information
       displays etc. within driver information systems are starting to converge and might be part of the same product market  definition  in  the
       future.[24]

   34) The precise scope of the market for infotainment systems can be left open in this case as the proposed  transaction  does  not  raise  any
       competitive concern under any plausible market definition.

       Connectivity systems

   35) As to connectivity systems, the Commission considered in previous decisions whether these constitute a separate product  market  and  also
       considered the possibility that connectivity systems would be part of the same product market as infotainment systems, ultimately  leaving
       this question open. [25]

   36) The Parties submit that infotainment and  connectivity  systems  perform  different  functions  within  a  vehicle.  Infotainment  systems
       coordinate and integrate in-vehicle information and entertainment functions and/or devices. Connectivity systems allow the user to connect
       external devices (e.g. smartphone devices) to the vehicle using Bluetooth or other typically wireless communication technologies.

   37) The market investigation both from the supply  and  demand  side  indicated  that  connectivity  systems  constitute  a  separate  product
       market.[26] However, some competitors also considered that the different products  within  driver  information  systems  are  starting  to
       converge and might be part of the same product market definition in the future.[27]

   38) The precise scope of the market for infotainment systems can be left open in this case as the proposed  transaction  does  not  raise  any
       competitive concern under any plausible market definition.

       Conclusion on the product market definition for driver information systems

   39) In the light of the results of the market investigation, the Commission considers that there are indications that, for the purposes of the
       present case, several products within driver information systems exist, such as infotainment systems and  connectivity  systems.  However,
       the market investigation showed indications that this segmentation may disappear in the future as these product are  already  starting  to
       converge.

   40) The Commission also considers that, for the purposes of the present case, and despite  the  results  of  the  market  investigation  being
       inconclusive, there are indications that instrument clusters constitute a separate product market. In addition, the  market  investigation
       indicated that digital clocks for integration in instrument clusters and analogue clocks for  integration  in  instrument  clusters  could
       constitute different product markets.

   41) Finally, despite the results of the market investigation being inconclusive regarding whether information displays constitute  a  separate
       product market, the market investigation showed indications that "dumb" information displays and MFDs could constitute  different  product
       markets.

   42) In any event, the exact definition of the product markets can be left open in this case as the proposed transaction  does  not  raise  any
       competitive concern under any plausible market definition.

4.1.2. Body electronics

   43) Body electronics refers generally to electronic control units responsible for monitoring and controlling various electronic accessories in
       a vehicles' body. Body electronics are usually modular and include a broad variety of applications inside the cabin.

   44) Within the segment of body electronics, the Parties offer body controllers and access (entry) control systems.

   45) The Commission has previously concluded that body controllers and entry control systems are separate product markets.[28]  The  Commission
       included in the entry control systems segment all mechanisms, which enable access to the vehicle, its operation and  its  protection  from
       infraction. Such appliances include intrusion sensing devices, alarm controllers,  central  locking  functions,  immobilizers  and  remote
       keyless entry products.

   46) The Commission considered in previous decisions that such products are to an increasing extent manufactured and sold  as  single  systems,
       which combine the different functions into one module.[29]

   47) The Parties submit that for the purposes of the transaction, a single market comprising all body electronics could be considered, based on
       supply-side substitutability considerations. From a supply-side perspective, there is a high degree of substitutability between many types
       of body electronics. Many major automotive components manufacturers operate in  more  than  one  product  group,  and  may  easily  expand
       production to other body electronics, based on OEM demand and design specifications (e.g., from production of central body controllers  to
       interior  controllers, or vice versa).  In addition, there is increasing demand for integrated body electronics systems that combine  more
       than one function.

   Conclusion on product market definitions for body electronics

   48) In the present case, the exact definition of the product market can  be  left  open  as  the  proposed  transaction  does  not  raise  any
       competitive concern under any plausible market definition.

4.2.  Geographic market definition

   49)  Regarding the geographic market definition, in prior decisions concerning automotive electronics components and systems sold to  OEM/OES,
       the Commission defined the relevant geographic market as at least EEA-wide in scope, but left open the question whether the  market  could
       be worldwide in scope.[30]

   50) The Parties submit that the geographic scope of all the relevant products markets at OEM/OES level  is  worldwide,  because:  (i)  from  a
       demand-side perspective OEMs are global companies, which increasingly source products at worldwide level, tend to set product  requirement
       standards at global level, and follow to a large extent global procurement policies; (ii) from a supply-side perspective, most  automotive
       component  manufacturers operate worldwide and tend to serve the entire global demand from a few manufacturing  facilities;  (iii)  prices
       are negotiated at a global level; (iv) transport costs  are not significant; (v) product regulation and safety standards are  set  at  the
       EEA – and often international – level; (vi) there are no regulatory barriers to cross-border supply across the EEA and even at  worldwide-
       level. The Parties further submit that in any case the precise definition of the geographic markets can  be  left  open,  given  that  the
       proposed transaction is unlikely to give rise to competition concerns.

   51) Regarding instrument clusters, the respondents to the market investigation both from the supply and demand  side  largely  confirmed  that
       instrument clusters are supplied and purchased at worldwide level[31] and that their quality and technical characteristics are homogeneous
       at worldwide level.[32] However the majority of respondents from  the  supply  and  demand  side  also  indicated  that  there  are  price
       differences between the EEA and the rest of the world.[33] Regarding transport costs and entry barriers, the  respondents  from  both  the
       supply and the demand side largely confirmed that the market may be limited to the EEA given the transport costs[34]  and  entry  barriers
       such as import duties.[35]

   52) As to information displays, the respondents to the market investigation both from the demand and supply side largely confirmed that  these
       products are supplied and purchased at worldwide level;[36] and that their  quality  and  technical  characteristics  are  homogeneous  at
       worldwide level.[37] The investigation was inconclusive as to the extent to which transport costs and entry barriers such as import duties
       limit the ability to purchase information displays outside the EEA for use into the EEA.[38]

   53) In the light of the results of the market investigation, the Commission considers that there are indications that, for the purposes of the
       present case, the geographic market definition for both instrument clusters and information displays is at  least  EEA-wide,  and  may  be
       worldwide in scope.[39]

   54) In any event, the exact definition of the geographic market can be left open in this case as the proposed transaction does not  raise  any
       competitive concern under any plausible market definition.

5.    COMPETITIVE ASSESSMENT

5.1   Horizontal relationships

   55) The Parties' activities overlap horizontally on the potential relevant product markets for (i) driver information systems,  including  the
       sub segments of instrument clusters; information displays (including and excluding MFDs); connectivity systems; and  infotainment  systems
       (including and excluding MFDs) as well as for (ii) body electronics, including the segments of body controllers and access (entry) control
       systems, as it can be seen from the table below:

                                                            Table 1 – Horizontal links

|Market/sub-segment                       |Geographic market            |Visteon       |Target        |Combined (2013)   |Affected market |
|Driver information                                                                                                                      |
|Instrument clusters                      |EEA                          |[10-20]%      |[10-20]%      |[20-30]%          |YES             |
|Instrument clusters                      |Worldwide                    |[10-20]%      |[10-20]%      |[20-30]%          |YES             |
|Analogue clocks only[40]                 |EEA                          |[0-5]%        |[70-80]%      |[70-80]%          |YES             |
|Analogue clocks only                     |Worldwide                    |[0-5]%        |[40-50]%      |[40-50]%          |YES             |
|Information Displays (including  MFDs)   |EEA                          |[10-20]%      |[20-30]%      |[30-40]%          |YES             |
|Information Displays (including  MFDs)   |Worldwide                    |[10-20]%      |[10-20]%      |[20-30]%          |YES             |
|Information Displays (excluding MFDs)    |Worldwide                    |[5-10]%       |[10-20]%      |[10-20]%          |                |
|Information Displays (excluding MFDs)    |EEA                          |--            |[20-30]%      |[20-30]%          |                |
|Infotainment Systems                     |Worldwide                    |[0-5]%        |--            |[0-5]%            |                |
|Infotainment Systems                     |EEA                          |[5-10]%       |--            |[5-10]%           |                |
|Connectivity systems                     |Worldwide                    |[5-10]%       |[10-20]%      |[1020]%           |                |
|Connectivity systems                     |EEA                          |[0-5]%        |[0-5]%        |[5-10]%           |                |
|Body electronics                                                                                                                        |
|Body controllers                         |Worldwide[41]                |[0-5]%        |[0-5]%        |[0-5]%            |                |
|Access (entry) control systems           |Worldwide[42]                |[0-5]%        |[0-5]%        |[0-5]%            |                |

   56) From the above, the Parties activities lead to three horizontally affected plausible markets: (i) instrument clusters at EEA and worldwide
       levels; (ii) information displays (including MFDs) at EEA and worldwide level and (iii)  the  potential  sub-segment  comprising  analogue
       clocks at EEA and worldwide levels. Even though the results of the market investigation were inconclusive, the above-mentioned potentially
       affected markets will be analysed as alternatives below.

5.1.1 Parties' view

   57) The Parties submit that no competitive concerns will arise for the reasons set out below, which apply to all affected markets.

   58) First, the automotive components industry is fragmented and highly competitive (while some automotive OEMs maintain  in-house  productions
       or sometimes source directly from electronic companies).

   59) Second, the Parties claim that demand is driven by demand for automotive vehicles and therefore market shares do not reflect the component
       suppliers' competitive position.

   60) Third, the Parties submit that the business is characterised by bidding competition where the winning bid relates primarily to the ability
       of providing products that meet the OEM's specifications at the lowest price. OEMs evaluate the suppliers based  on  financial  viability,
       product quality, price competitiveness, technical expertise, development capability, product innovation,  reliability  and  timeliness  of
       delivery, etc. In addition, components are generally customized to OEM's specifications and therefore product differentiation is essential
       in this business.

   61) Fourth, the Parties claim that OEMs multi-source from different suppliers and that switching is easy, in particular  taking  into  account
       that OEMs hold a substantial part of the IP related to design and functionalities of the tendered products.

   62) Finally, the Parties claim that they face significant countervailing buyer power from automotive OEMs  such  as  BMW,  Chrysler,  Daimler,
       Ford, General Motors, Honda, Kia, etc. which are global players with large orders that generally dictate the  prices  to  suppliers.  They
       also have significant leverage over the suppliers given the competitiveness of the  automotive  component  supply  industry,  the  limited
       number of customers for such industry and the excess capacity of such industry.  According  to  the  Parties,  automotive  OEMs  are  also
       protected by contractual provisions such as pricing  step-downs,  no  minimum  volume  requirements,  and  the  option  to  terminate  for
       convenience. It is also common practice in the industry that OEMs instruct their suppliers to procure components from electronic suppliers
       at directly negotiated prices. Therefore, the proposed transaction will not affect the contractual protections that are in place with  the
       agreements with the OEMs.

   63) Regarding the affected markets in particular, the Parties submit that no competitive concerns will arise, as set out below.

   64) In the segment of instrument clusters, where combined shares are [20-30]% and EEA level, with an increment of [10-20]%, Parties claim that
       they will continue to face strong competition at EEA level from Continental ([30-40]%); Magneti Marelli ([10-20]%),  Bosch  ([5-10]%)  and
       Yazaki ([0-5]%), amongst others.[43] Also, while Visteon's market shares have remained constant, the Target's market shares have  declined
       in the past 3 years.[44]

   65) Regarding analogue clocks, the Parties submit that they are a niche product representing a very small fraction of total sales  within  the
       overall driver information electronics segment, and, more specifically, instrument clusters. The Parties submit that they are an optional,
       decorative feature chosen in such vehicles that could easily be replaced with digital clocks. More importantly, despite the Target’s  high
       shares in this specific product ([40-50]% globally, [70-80]% in the EEA), Visteon’s sales are limited (global sales were € […] million  in
       2013, which amount to less than [0-5]% market share of the € […] million global market for analogue clocks[45]). Therefore,  Visteon  will
       add only a negligible increment to the Target’s position. In addition, the Target faces competition from a number companies such as  Unick
       ([20-30]% globally), Denso ([10-20]% globally), Sphere Design ([5-10]% globally, [20-30]% in the EEA), Paragon ([0-5]% globally,  [10-20]%
       in the EEA), and Delco ([0-5]% globally).

   66) Regarding information displays, the Parties submit that, if MFDs were excluded, the market would not be affected. Even in a larger  market
       that would include MFDs, the Parties submit that: (i) there is little direct  competition  between  the  parties  given  that  Visteon  is
       primarily a supplier of MFDs and the Target of dumb displays only; and (ii) the Parties will continue facing  competition  from  a  number
       companies such as Continental ([10-20]% globally, [20-30]% in the EEA), Denso ([10-20]% globally, [5-10]% in the EEA), Alpine ([10-20]% in
       the EEA), Matsuhita ([5-10]% globally), Nippon Seiki ([5-10]% globally), and a number of smaller players (together [30-40]% globally, [30-
       40]% in the EEA).

5.1.2 Results of the market investigation

       Competitive landscape

   67) First, sales data submitted by competitors tend to indicate that the Parties may have overestimated their market shares on both the market
       for instrument clusters and information displays, at both EEA and worldwide levels.

   68) Second, respondents from the market investigation broadly confirmed the Parties' view that the affected markets are fragmented and  highly
       competitive.

   69) In the market for instrument clusters, the majority of respondents from the demand side considered  neither  Visteon  nor  the  Target  as
       inevitable suppliers in the EEA.[46] Furthermore, the great majority of respondents did not identify the Parties as close competitors.[47]

   70) In the market for information displays, the great majority of respondents from the demand side considered neither Visteon nor  the  Target
       as inevitable suppliers in the  EEA.[48]  Furthermore,  the  great  majority  of  respondents  did  not  identify  the  Parties  as  close
       competitors.[49]

       Purchasing patterns

   71) The great majority of respondents to the market investigation confirmed that, on all affected markets, sales are made exclusively  through
       bidding processes or tenders.[50] For the remainder of respondents, these bidding processes or tenders are only  marginally  completed  by
       bilateral agreements.

   72) Regarding the ease for automotive OEMs to switch suppliers, all respondents from the demand side stated that switching suppliers for  both
       instrument clusters[51] and information displays[52] is difficult. However, the majority of them also confirm  that  they  have  sometimes
       switched suppliers in the past.[53]

   73) Furthermore, respondents from both the demand and the supply side claim to multisource across their vehicle models. [54]

   74) The market investigation also confirmed that, even when equity links exist between certain suppliers and OEMs, these do not translate into
       captive demand. Although it appears that OEMs tend to supply a stable share of their components from manufacturers in which they  hold  an
       equity stake,[55] a vast majority of respondents believe that OEMs would switch these supplies to a competitor if quality  standards  were
       not met or prices offered by this manufacturer were to permanently increase by 5-10%.[56]

   75) The majority of respondents from the demand side typically retain a substantial part of the IP related to design  and  functionalities  of
       the tendered products,[57] a statement confirmed by respondents from the supply side.[58]

       Buyer power

   76) Respondents from the market investigation confirmed the Parties' claim that component manufacturers face significant countervailing  buyer
       power from automotive OEMs.

   77) Respondents from the supply side confirm they have a limited number of customers. Regarding instrument clusters, the  top  five  customers
       account for more than 70% of sales for the majority of respondents. Regarding information displays, the majority of respondents have  five
       global customers or less, which are almost exclusively the global automotive OEMs mentioned by the Parties.[59]

   78) Such countervailing buyer power from automotive OEMs  is  further  reinforced  by  contractual  provisions,  which  for  the  majority  of
       respondents from the supply side include pricing step-downs[60], no minimum volume requirements[61], and sometimes option to terminate  at
       the OEM's convenience[62].

       Impact of the transaction

   79) No respondents from the supply or demand side have expressed any concerns about the merger. Also, respondents from the demand side largely
       confirmed that intensity of competition and price levels for instruments clusters will remain the same post-transaction[63] and  that  for
       information displays the intensity of competition and price levels will remain the same post-transaction.[64]

5.1.3 Commission's assessment

   80) The Commission considers that the proposed transaction does not result in competition concerns on any of the potential affected markets of
       instrument clusters, information displays and analogue clocks.[65]

   81) The Commission notes that with regard to a possible segmentation between components and  modules,  the  competitive  landscape  would  not
       materially differ as all large competitors produce both components and modules.  If  anything,  taking  into  account  a  narrower  market
       segmentation by components would generally result in lower Parties' market shares  due  to  the  existence  of  manufacturers  focused  on
       components only, where the Parties typically produce modules and systems. Therefore, the Commission's competitive  assessment  below  will
       focus on the relevant potential affected markets within driver information systems.

   82) First, the Parties' combined market shares remains below [30-40]% for all possible market segments[66], with the exception of the possible
       segments of information displays at EEA level and analogue clocks. In any case, the  market  investigation  indicated  that  the  Parties'
       market shares are below what they have estimated.

   83) Second, regarding the possible segment for analogue clocks, where the Parties' combined market share is [70-80]%,  the  increment  brought
       about by the transaction in this possible sub-segment is insignificant and in any case below [0-5]%. In any case, analogue  clocks  are  a
       niche product with sales amounting to only € […] in the EEA in 2013. In addition, the merged-entity will continue facing competition  from
       several significant players, including Unick and Denso globally and Sphere Design in the EEA.

   84) Third, regarding the possible market for information displays (including MFDs), where Parties' combined market share amounts  to  [30-40]%
       under the narrowest geographic market definition (EEA-wide) the merged-entity will continue to face strong competitive pressure in the EEA
       from Continental ([20-30]% market share), Denso ([10-20]%) and small players such as Matsushita ([5-10]%).

   85) Fourth, the Commission notes that no respondent to the market investigation raised any concern related  to  the  impact  of  the  proposed
       transaction with respect to any of the three affected markets, namely instrument clusters, information displays and analogue clocks.

   86) Fifth, all the potentially affected markets are fragmented  and  highly  competitive;  Parties  are  not  inevitable  suppliers  or  close
       competitors; and the sourcing of these products is characterised  by  bidding  or  tenders  competition,  and  customers  multisource.  In
       addition, switching suppliers of components is easy as it has occurred in the  past  and  also  taking  into  account  that  OEMs  hold  a
       substantial part of the IP related to design and functionalities of the products.

   87) Finally, the market investigation has confirmed the Parties' claims that they face significant countervailing buyer power from  automotive
       OEMs in the relevant affected markets.

   88) In light of the above, Commission concludes that the proposed transaction does not raise serious doubts as to its compatibility  with  the
       internal market on the markets for instrument clusters, infotainment systems and analogue clocks in the EEA and worldwide.

5.2   Coordinated effects

5.2.1 Parties' view

   89) The Parties submit that, despite the Commission's past and ongoing antitrust investigations regarding automotive components (in particular
       with regard to possible bid-rigging and price collusion practices), no coordinated effects derive from the transaction. In particular, the
       Parties claim that the investigations have not involved any of the Parties nor the products covered by the Proposed Transaction.

   90) In addition, the Parties submit that the conditions for coordination are not present in this market, as better explained below.

   91) First, the Parties claim that the market lacks the transparency and the stability of economic environment necessary for  coordination  as:
       (i) electronic components and systems are complex differentiated products,  customized  to  OEMs  specifications;  (ii)  the  industry  is
       volatile as automotive sales and production are cyclical; (iii) there is a large number of components suppliers and OEMs  tend  to  pursue
       global procurement policies; (iv) entry is easy; (v) customers, that use competitive bid procedures, do not normally disclose the identity
       of participants of a tender or the terms offered.

   92) Second, monitoring deviations is difficult as: (i) there is a significant number of active participants in the market, some of  which  are
       not traditional automotive component suppliers; (ii) the economic environment is unstable and the demand highly volatile; and (iii)  there
       is little transparency in the market.

   93) Third, it is difficult to establish a sufficiently severe deterrent mechanism as:  (i)  bidding  competitions  are  conducted  before  the
       launching of a new OEM program and the business is awarded for the entire life of a program which typically lasts a number of years;  (ii)
       automotive component suppliers lack negotiation power vis-à-vis OEMs.

   94) Finally, the Parties submit that automotive OEMs have strong countervailing power, and are protected by several contractual provisions and
       face low switching costs.

5.2.2 Results of the market investigation

   95) The market investigation confirmed that all affected markets lack transparency. During  bids,  although  competitors  sometimes  know  the
       identity of the other bidders, they more rarely know the features of the winning bid and almost never  know  the  features  of  all  other
       bids.[67]

   96) Furthermore, as previously stated above, the merged-entity will continue to face significant countervailing buyer  power  from  automotive
       OEMs.

5.2.3 Commission's assessment

   97) In view of the above, and considering in particular the lack of transparency during tenders and the existence of significant buyer  power,
       the Commission is of the view that the operation entails limited risks of coordinated effects in the contemplated markets.

6.    CONCLUSION

   98) 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.

For the Commission
(Signed)
Joaquín ALMUNIA
Vice-President

-----------------------
[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 24, 29.1.2004, p. 1 (the "Merger Regulation").

[3]   Case No COMP/M.6538 – Robert Bosch/ SPX’ Service Solutions Business, paras. 17 and 21; Case No COMP/M.5799 – Faurecia/  Plastal,  paras.  7
and 12; Case COMP/M.3789, Johnson Controls/Robert Bosch/Delphi SLI, para. 8, Case COMP/M.6714, U-Shin/ Valeo CAM, para.7.

[4]   Case No COMP/M.5799 – Faurecia/ Plastal, para. 7; Case COMP/M.4456, Mahle/Dana EPG, paras. 11-13,  Case  COMP/M.6714,  U-Shin/  Valeo  CAM,
para. 9.

[5]   The term modules refers to a number of pre-assembled individual components  that  fulfil  a  certain  function  in  the  vehicle,  and  are
delivered to the OEMs as a single unit.

[6]   Case No COMP/M.5799 – Faurecia/ Plastal, para. 8.

[7]   See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 5.

[8]   See replies to Commission questionnaire Q1 Competitors of 08 April 2014, question 5.

[9]   An instrument panel is the part of the interior of a vehicle extended from door to door and located directly in front of the driver,  which
contains the primary gauges and controls for operating the vehicle, including  instrument  clusters.   Instrument  panels  are  usually  made  of
injection-moulded thermoplastics. See e.g. Case No COMP/M.5799 – Faurecia/ Plastal, paras. 11-12.

[10]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 6.

11    See replies to Commission questionnaire Q1 Competitors of 08 April 2014, question 6.

[11]  See replies to Commission questionnaire Q1 Competitors of 08 April 2014, question 6.

[12]  See replies to Commission questionnaire Q1 Competitors of 08 April 2014, question 7.

[13]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 7.

[14]  Electronic devices employed to provide information to the driver either in the form  of  a  primary  (such  as  temperature  or  speed)  or
secondary (such as time or radio station) display.

[15]  Case No. IV/M1462 - TRW/LucasVarity, paras. 11 and 18.

[16]  MFDs are “smart” displays; they differ from typical monitor (or “dumb”)  displays  in  that  they  integrate  a  human-machine  interaction
interface, “smart” functions and other advanced features. MFDs combine  some  of  the  functionalities  of  a  typical  monitor  display  and  an
infotainment system. While from a consumer’s point of view, there is no difference between a dumb display and an MFD, the two types  of  displays
differ significantly in terms of the software, microprocessor and supporting circuitry they incorporate.

[17]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 6.

[18]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 9. See replies to Commission questionnaire  Q1  Competitors
of 08 April 2014, question 9.

[19]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 11. See replies to Commission questionnaire Q1  Competitors
of 08 April 2014, question 11.

[20]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 10.

[21]  Case No COMP/M.4696 - KKR/Harman, paras. 12-14. See also Continental/Siemens VDO, in which it was  argued  that  the  components  for  such
systems are procured and sold separately, resulting in competition at the component level and not at the level of the infotainment systems.

[22]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 6. See replies to Commission questionnaire  Q1  Competitors
of 08 April 2014, question 6.

[23]  See replies to Commission questionnaire Q1 Competitors of 08 April 2014, question 6.

[24]  Case No. COMP/M.4878 - Continental/Siemens VDO, paras. 45-49.

[25]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 6. See replies to Commission questionnaire  Q1  Competitors
of 08 April 2014, question 6.

[26]  See replies to Commission questionnaire Q1 Competitors of 08 April 2014, question 6.

[27]  Case IV/M.1462 - TWR/Lucas Varity, para. 18. Also, in Continental/Siemens  VDO,  the  Commission’s  investigation  indicated  that  it  was
appropriate to consider a separate market at least for central body control units. The Commission, however, left open the precise  scope  of  the
product market. See Case No. COMP/M.4878 - Continental/Siemens VDO, paras. 16-17.

[28]  Case IV/M.1462 - TWR/Lucas Varity, para.6, the Commission considered these products as a single, distinct product market.

[29]  See e.g., Case No IV/M. 1462 - TRW/LucasVarity, paras. 22-24; Case No COMP/M.4696 - KKR/Harman, para.15-17 (infotainment systems); Case  No
COMP/M.4878 - Continental/Siemens VDO, para. 50 (connectivity and infotainment systems); Case No  COMP/M.5799  –  Faurecia/  Plastal  (instrument
panels) para.15; Case No. IV/M.1245 – Valeo/ITT Industries; Case IV/M.1196 – Johnson Controls/Becker para. 13; and Case IV/M.1368 -Ford/ZF.

[30]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 15. See replies to Commission questionnaire Q1  Competitors
of 08 April 2014, question 16.

[31]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 16. See replies to Commission questionnaire Q1  Competitors
of 08 April 2014, question 17.

[32]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 19. See replies to Commission questionnaire Q1  Competitors
of 08 April 2014, question 20.

[33]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 17. See replies to Commission questionnaire Q1  Competitors
of 08 April 2014, question 18.

[34]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 18. See replies to Commission questionnaire Q1  Competitors
of 08 April 2014, question 19.

[35]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 20. See replies to Commission questionnaire Q1  Competitors
of 08 April 2014, question 22.

[36]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 21. See replies to Commission questionnaire Q1  Competitors
of 08 April 2014, question 23.

[37]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 22, 23, 24. See  replies  to  Commission  questionnaire  Q1
Competitors of 08 April 2014, question 19, 24, 26, 27.

[38]  The geographic market definition for infotainment systems and connectivity systems was not tested during the market investigation,  due  to
the Parties' combined market shares being below [20-30]% even under the  possible  narrowest  geographic  market  definition  considered  by  the
Commission in the past.

[39]  The analogue clock segment was never considered by Commission's precedents. In any case such segment has a very small overall size (only  ¬
30]% even under the possible narrowest geographic market definition considered by the Commission in the past.

[40]  The analogue clock segment was never considered by Commission's precedents. In any case such segment has a very small overall size (only  €
[…] globally and € […] in the EEA in 2013).

[41]  Visteon is not active at EEA level; while the Target has [5-10]% market share.

[42]  Visteon is not active at EEA level; while the Target has [0-5]% market share.

[43]  At global level Parties competitors are Continental ([20-30]%); Denso ([10-20]%); Nippon Seiki ([5-10]%); Magneti Marelli ([5-10]%), etc.

[44]  The Target’s share has declined from [10-20]% in 2011 to [10-20]% in 2012 and [5-10]% in 2013 on a global basis. The decline in the EEA  is
more significant: from [20-30]% in 2011 to [20-30]% in 2012 and [10-20]% in 2013. Target’s declining share is due to the loss  of  […]  platforms
over that time period. JCI believes the Target lost the […] instrument cluster business to […], and the […] digital instrument  cluster  business
to […].

[45]  The situation is similar in the EEA, where Visteon's sales for analogue clocks amounted to €[…] million in 2013, which amount to less  than
[0-5]% market share of the €[…] million EEA market.

[46]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 49 and 51.

[47]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 50 and 52.

[48]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 53 and 55.

[49]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 54 and 56.

[50]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 34. See replies to Commission questionnaire Q1  Competitors
of 08 April 2014, question 41.

[51]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 44.

[52]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 46.

[53]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, questions 45 and 47.

[54]  See replies to Commission questionnaire Q1 Competitors of 08 April 2014, question 46. See replies to Commission questionnaire Q2  Customers
of 08 April 2014, question 38.

[55]  See replies to Commission questionnaire Q1 Competitors of 08 April 2014, question 35.

[56]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 29. See replies to Commission questionnaire Q1  Competitors
of 08 April 2014, question 38.

[57]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 37.

[58]  See replies to Commission questionnaire Q1 Competitors of 08 April 2014, question 44.

[59]  See replies to Commission questionnaire Q1 Competitors of 08 April 2014, question 45.

[60]  It is always the case for the majority of respondents from the supply side. See replies to Commission questionnaire Q1  Competitors  of  08
April 2014, question 50.

[61]  For almost all respondents, it is always or sometimes the case. See replies to Commission questionnaire Q1 Competitors of  08  April  2014,
question 50.

[62]  The great majority of respondents confirmed it is sometimes the case. See replies to Commission questionnaire Q1 Competitors  of  08  April
2014, question 50.

[63]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, questions 58 and 59.

[64]  See replies to Commission questionnaire Q2 Customers of 08 April 2014, question 60.

[65]  Given that the results of the markets were inconclusive and the market definition is left open in the  present  case,  the  Commission  has
analysed the broader potential product market of instrument clusters

[66]  In addition, in the market for instrument clusters, the merged-entity will continue to face strong competitive pressure  in  the  EEA  from
Continental ([30-40]% market share), Magneti Marelli ([10-20]% market share) and small players such as Bosch ([5-10]%) or Yazaki ([0-5]%).

[67]  See replies to Commission questionnaire Q1 Competitors of 08 April 2014, question 43.

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

                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE