CELEX: 32014M7138
Language: en
Date: 2014-02-12 00:00:00
Title: Commission Decision of 12/02/2014 declaring a concentration to be compatible with the common market (Case No COMP/M.7138 - THYSSENKRUPP / ACCIAI SPECIALI TERNI / OUTOKUMPU VDM) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |
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Brussels, 12.2.2014
C(2014) 1008 final

|In the published version of this decision, some information |           |Public version                                                 |
|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|omitted has been replaced by ranges of figures or a general |           |                                                               |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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|                                                            |           |MERGER PROCEDURE                                               |
|                                                            |           |ARTICLE 6(1)(b) DECISION                                       |

|                                                                       |To the notifying party                                                 |

Dear Sir/Madam,

Subject:    Case No. COMP/M.7138 - THYSSENKRUPP/ ACCIAI SPECIALI TERNI/ OUTOKUMPU VDM
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1]

 1) On 8 January 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 undertaking ThyssenKrupp AG ("TK", Germany) intends to acquire, within the meaning of  Article  3(1)(b)  of
    the Merger Regulation, control of Acciai Speciali Terni ("AST") and its affiliates as well as Outokumpu VDM ("VDM", and together "AST/VDM"),
    by way of the acquisition of shares (the "Transaction"). TK is also hereinafter referred to as the Notifying Party, whereas TK, AST and  its
    affiliates, as well as VDM, are collectively referred to as "Parties".[3]

THE PARTIES

 2) TK is active in the production and distribution of steel and other materials, as well as in elevators,  plant  technology,  engineering  and
    construction services, and components for the car, construction and engineering industry.

 3) AST/VDM is active in (i) stainless steel production and (ii) distribution, as well as in (iii) the production of  high  performance  alloys.
    AST/VDM comprises the divestment business from the Outokumpu/Inoxum transaction.[4] It also includes the  VDM  business  and  steel  service
    centres ("SSCs") in Barcelona (Spain) and Gebze (Turkey), as well as AST's tube-making business Tubificio di Terni.

THE TRANSACTION AND CONCENTRATION

 4) The Transaction would entail the acquisition of sole control by TK over AST/VDM by way of purchase  of  shares.  The  Transaction  therefore
    constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

EU DIMENSION

 5) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million (TK: EUR 38,559 million and AST/VDM:
    EUR […] million). The aggregate Union-wide turnover of each of both of the undertakings concerned is more than EUR 250 million (TK: EUR  […]
    million and AST/VDM: EUR […] million). Finally, none of the undertakings concerned achieves more than two-thirds of its aggregate Union-wide
    turnover within one and the same Member State. The proposed transaction therefore has an EU dimension pursuant to Article 1(2) of the Merger
    Regulation.

COMPETITIVE ASSESSMENT

 6) The Transaction gives rise to horizontally affected markets in the distribution of stainless steel products.[5] The Parties'  activities  in
    the distribution of stainless steel also give rise to vertically affected markets with respect to the production  and  supply  of  stainless
    steel flat products.[6]

1 Product market definition

1 Production and supply of stainless steel products

 7) The Commission has consistently distinguished four broad categories of steel products: (i) carbon steel, (ii) stainless steel, (iii)  highly
    alloyed steel, and (iv) electrical steel.[7] The Commission has also consistently found in past  cases  that  flat  steel  products  form  a
    separate product market from long steel products.[8] In addition,  two  separate  markets  for  flat  stainless  steel  products  have  been
    identified: (i) hot rolled stainless steel products ("HR"), and (ii) cold rolled stainless steel products ("CR").

 8) As regards HR, a potential segmentation between hot black band ("HBB") and hot white band ("HWB")  has  been  considered,  but  the  precise
    market definition was ultimately left open.[9]

 9) As regards CR, the Commission concluded in Outokumpu/Inoxum that the relevant product market was the overall market for the  production  and
    supply of CR flat products, excluding precision strip.[10]

2 Distribution of stainless steel products

10) In previous cases, the Commission concluded that the distribution of stainless steel products should be considered a  separate  market  from
    the production and direct (ex-mill) sales of stainless steel products.[11] The Notifying Party agrees with this distinction.

11) The Commission observes that this view is in line with the result of the market investigation. According to most customers  and  competitors
    of the Parties, the production and the distribution of stainless steel products are different businesses  with  different  prices,  business
    processes and models.[12]

12) The Commission has in its Outokumpu/Inoxum decision investigated three different distribution channels: (i) stainless steel services centres
    which distribute flat and long products, (ii) stockholding centres/stockists which distribute flat and long products and quarto plate  (QP),
    (iii) oxycutting centres, which only distribute QP. Ultimately, the Commission left open the question of whether or  not  each  distribution
    channel constituted a separate market.[13]

13) The Notifying Party is of the view that there is an overall market for the distribution  of  stainless  steel  products,  which  is  however
    separate from the distribution of QP products.

14) The Commission notes that, on the basis of the results of the market investigation, it was not  possible  to  conclude  as  to  whether  the
    distribution of stainless steel products through SSCs constitutes a separate market. Most  customers  and  competitors  of  the  Parties  in
    distribution markets agreed with the distinction outlined in paragraph (12) above, on the basis that SSCs  provide  additional  services  to
    their customers[14] and therefore require additional equipment compared to stockholding centres, and that the prices and delivery times also
    differ depending on the distribution channel.[15] However, most customers and competitors also considered that SSCs and stockholding centres
    compete with each other as they partly serve the same demand, especially with respect to spot purchases of standard products.[16]

15) In any event, the product market definition for distribution markets may be left open as no  competition  concerns  would  arise  under  any
    plausible market definition.

2 Geographic market definition

16) In Outokumpu/Inoxum, the Commission concluded that the market for the production and supply of hot-rolled stainless steel flat  products  is
    at least EEA-wide.[17] Regarding the market for the production and supply of cold-rolled  stainless  steel  flat  products,  the  Commission
    concluded in Outokumpu/Inoxum that the geographic scope of the market is EEA-wide.[18]

17) Regarding the distribution of stainless steel products, in line with the Commission’s conclusion in Outokumpu/Inoxum,  the  Notifying  Party
    submits that the geographic scope of the distribution markets  for  stainless  steel  flat  products  is  either  national  or  cross-border
    regional.[19]

18) Most customers and competitors of the Parties considered that the geographic scope of  such  markets  is  either  national  or  cross-border
    regional in scope.[20] In particular, most customers of the Parties at distribution level indicated that they source stainless steel  either
    in the country where their facilities are located or in neighbouring countries, and that local knowledge is necessary in order to carry  out
    stainless steel distribution activities.[21]

19) However, the precise geographic market definition for distribution markets may be left open as no competition concerns would arise under any
    plausible market definition.

3 Assessment

1 Distribution of Stainless Steel products

20) TK's and AST/VDM's activities overlap in the distribution of stainless steel products. The Transaction  thus  gives  rise  to  a  number  of
    potentially affected markets at national and regional level, as summarized in the tables below.

Table 1: Distribution of all stainless steel products (market shares in volume, 2012)

|                                     |TK                  |AST SSCs             |Combined                |
|Austria                              |[20-30]%            |[0-5]%               |[20-30]%                |
|France                               |[10-20]%            |[10-20]%             |[20-30]%                |
|Germany                              |[20-30]%            |[5-10]%              |[30-40]%                |
|Netherlands                          |[10-20]%            |[5-10]%              |[20-30]%                |
|Benelux                              |[10-20]%            |[5-10]%              |[20-30]%                |

Table 2: Distribution of flat stainless steel products (market shares in volume, 2012)

|                                     |TK                  |AST SSCs              |Combined                |
|Austria                              |[10-20]%            |[0-5]%                |[20-30]%                |
|France                               |[5-10]%             |[10-20]%              |[20-30]%                |
|Germany                              |[20-30]%            |[5-10]%               |[30-40]%                |

   Table 3: Distribution of flat stainless steel products through SSCs (market shares in volume, 2012)

|                                    |TK                   |AST SSCs              |Combined                |
|Czech Republic                      |[10-20]%             |[5-10]%               |[20-30]%                |
|France                              |[0-5]%               |[20-30]%              |[20-30]%                |
|Germany                             |[20-30]%             |[10-20]%              |[40-50]%                |
|Netherlands                         |[5-10]%              |[10-20]%              |[20-30]%                |

21) Apart from Germany, the Parties' combined market shares remain at or below [20-30]% regardless of  the  market  definition.  In  all  Member
    States, the Parties will continue to face competition from the other three vertically integrated stainless steel producers Outokumpu, Aperam
    and Acerinox, as well as from a number of national or regional independent distributors.[22]

22) Regarding the German stainless steel distribution markets, the Parties' activities  overlap  only  in  distribution  through  SSCs.  In  the
    narrowest possible market definition – i.e. the distribution of flat stainless steel products through SSCs – the  main  competitors  of  the
    Parties are Outokumpu ([10-20]%), Aperam ([10-20]%), Acerinox ([10-20]%) and Norder Bandstahl ([5-10]%).

23) The Commission notes as a preliminary point that SSCs make up only one of the distribution channels for stainless steel  flat  products,[23]
    and that some customers have expressed some willingness to substitute purchases from SSCs with purchases from  stockholding  centres,  while
    other customers source part of their requirements directly from stainless steel mills.[24]

24) Most customers of the Parties indicated that they do not consider TK's distribution business and the  AST  SSCs  as  close  competitors,  in
    particular as regards Germany where Outokumpu and Aperam SSCs were considered closer competitors to AST than TK.[25]

25) On the basis of the market investigation, the Commission has noticed that barriers to entry and to expansion are  overall  moderate  in  the
    stainless steel distribution markets,[26] in particular as regards Germany due to its central location in Europe.[27]

26) Furthermore, most German customers have confirmed that it is possible for them to switch easily between different distributors of  stainless
    steel flat products within a short period of time.[28]

27) Overall, it appears that the Parties will, also after the Transaction, face sufficient competition from a number of established  players  in
    all potentially affected markets for the distribution of stainless  steel  products.  No  substantiated  concerns  were  raised  during  the
    Commission's market investigation as regards stainless steel distribution markets.

28) Therefore, the Commission concludes that the Transaction does not raise serious doubts as to its compatibility with the internal  market  in
    relation to the markets for the distribution of stainless steel.

2 Vertical relationship between stainless steel production and stainless steel distribution

29) The Transaction will also give rise to a vertical relationship between AST's stainless steel  production  activities  and  the  distribution
    activities of the Parties in Germany only.

1 Potential input foreclosure

30) According to the Parties, AST/VDM will be the smallest of the four integrated  suppliers  of  CR  (respectively  HR)  stainless  steel  flat
    products in the EEA, with a market share estimated at approx. [10-20]% (respectively [5-10]%) in 2012. It thus  appears  unlikely  that  AST
    would have any market power in the upstream markets for the production and supply of stainless steel flat products in the EEA.

31) Furthermore, the other three European stainless steel suppliers, as well as a number of non-EEA competitors,[29] control their  own  network
    of distributors and SSCs in the EEA. These competitors therefore have the ability to self-supply stainless steel flat products.

32) The Commission also found in the Outokumpu/Inoxum case that distributors who are not vertically  integrated  upstream  have  access  to  and
    purchase both from AST/VDM’s EEA-based rivals and from third-country producers.[30] Thus, independent distributors have alternative  sources
    of supply for HR and CR products other than AST/VDM.

33) During the market investigation, most other stainless steel distributors were of the view that the Parties would not have  the  ability  and
    incentive to stop supplying competing distributors, or to increase prices for these distributors.[31]

34) In light of the above, the Commission concludes that input foreclosure is unlikely as a result of the Transaction.

2 Potential customer foreclosure

35) For customer foreclosure to be a concern, TK would need to have the ability and incentive to foreclose upstream HR and  CR  stainless  steel
    producers by restricting access to an important source of demand for their products.

36) First, as noted in paragraph (28) above, it appears that the combined entity will not acquire any significant market power  in  any  of  the
    potential German markets for the distribution of stainless steel products.

37) Second, the other EEA stainless steel suppliers are vertically integrated into distribution across the EEA and would be able  to  distribute
    their production through their own distribution network. In Germany, as noted in paragraph (22) above, Outokumpu, Aperam  and  Acerinox  all
    enjoy substantial market presence, in particular through SSCs.

38) Third, as noted above, it appears that barriers to entry and to expansion are moderate in EEA distribution markets, and a number of  non-EEA
    stainless steel suppliers have opened new distribution facilities in the last three years, such as Posco.[32] As  noted  in  paragraph  (25)
    above, barriers to entry and to expansion in the potential German distribution markets appear to be further  limited  by  Germany's  central
    geographic position in Europe.

39) Finally, no substantiated concerns were raised by customers or competitors of the Parties during the Commission's  market  investigation  as
    regards the vertical link between the markets for the production and direct sale of stainless steel flat products and German markets for the
    distribution of stainless steel products.

40) The merger is therefore unlikely to give TK the ability to foreclose upstream rival stainless steel suppliers.

3 Conclusion

41) In light of the above, the Commission concludes that the Transaction does not raise serious doubts as to its compatibility with the internal
    market with respect to the vertical link between the markets for the production and direct sale of stainless steel flat products and  German
    markets for the distribution of stainless steel products.

CONCLUSION

42) 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. 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]   Publication in the Official Journal of the European Union No C 10, 14.01.2014, p.6.

[4]   See Commitments attached to the Commission decision in case COMP/M.6471 Outokumpu/Inoxum.

[5]   AST will be TK's only stainless steel production plant, and TK is currently not active in the production of high-performance alloys.  There
are therefore no horizontally affected markets in the production and supply of steel products.

[6]   For the sake of completeness, TK's distribution business also  purchases  minimal  quantities  of  high-performance  alloys  ([…]  tons  in
2012/2013, compared to a market size of more than 100 thousand tons), and that TK's  elevator  business  also  purchases  minimal  quantities  of
stainless steel ([…] ktons in 2013, compared to a market size  of  more  than  3  million  tons).  These  links  do  not  constitute  a  vertical
relationship (see Commission Notice on a simplified procedure for treatment of certain concentrations under Council Regulation (EC) No  139/2004,
OJ C 366, 14.12.2013, p. 5, footnote 10) and will therefore not be discussed further in this decision.

[7]   See case COMP/M.4137 – Mittal/Arcelor, para. 9; case COMP/M.6471  –  Outokumpu/Inoxum,  para.  116.  There  is  no  overlap  between  AST's
production activities and the production activities of TK in carbon and electrical steel. These products, therefore, will not  be  discussed  any
further in this Decision.

[8]   See cases COMP/M.6471 – Outokumpu / Inoxum, paragraph 128, and COMP/M.4137 – Mittal / Arcelor, paragraph 17.

[9]   See case COMP/M.6471 – Outokumpu/Inoxum, para. 136.

[10]  See case COMP/M.6471 – Outokumpu/Inoxum, para. 209.

[11]  See case COMP/M.6471 – Outokumpu/Inoxum, para. 214; case COMP/M.5211 – Outokumpu/Sogepar, para. 14.

[12]  See replies to question 5 of the Commission’s requests for information pursuant to Article 11 of the Merger  Regulation  to  customers  and
competitors, sent on 9 January 2014.

[13]  See case COMP/M.6471 – Outokumpu/Inoxum, para. 215 to 231.

[14]  SSCs typically cut stainless steel flat products to the customers' desired length and width.

[15]  See replies to question 6 of the Commission’s requests for information pursuant to Article 11 of the Merger Regulation  to  customers  sent
on 9 January 2014, and replies to questions 6 and 7 of the Commission’s requests for information pursuant to Article 11 of the Merger  Regulation
to competitors sent on 9 January 2014.

[16]  See replies to question 7 of the Commission’s requests for information pursuant to Article 11 of the Merger Regulation  to  customers  sent
on 9 January 2014, and replies to question 8 of the Commission’s requests for information pursuant to Article 11  of  the  Merger  Regulation  to
competitors sent on 9 January 2014.

[17]  See case COMP/M.6471 – Outokumpu/Inoxum, para. 238, 239 and 243. See also case COMP/M.5211 – Outokumpu/SoGePar of 25 June 2008.

[18]  See case COMP/M.6471 – Outokumpu/Inoxum, para. 246 and 260.

[19]  The potential regional geographic markets identified by the Commission were the Nordic countries, i.e.  Denmark+Norway+Sweden+Finland,  the
Benelux countries and UK plus Ireland. The Commission however ultimately left the exact geographic market definition open. See  case  COMP/M.6471
– Outokumpu/Inoxum, para. 277.

[20]  See replies to question 13 of the Commission’s requests for information pursuant to Article 11 of the Merger Regulation to  customers  sent
on 9 January 2014, and replies to question 14 of the Commission’s requests for information pursuant to Article 11 of  the  Merger  Regulation  to
competitors sent on 9 January 2014.

[21]  See replies to questions 9 and 11 of the Commission’s requests for  information  pursuant  to  Article  11  of  the  Merger  Regulation  to
customers, sent on 9 January 2014.

[22]  According to the Notifying Party, Outokumpu would enjoy a [10-20]% market share,  Acerinox  [10-20%]  market  shares  and  Aperam  [10-20%]
market shares in potential affected markets in Austria; Outokumpu would enjoy [10-20%] market shares,  Acerinox  [[10-20]  –  [20-30]  %]  market
shares and Aperam [[20-30] – [20-30]%] market shares in potential affected markets in France; Outokumpu would enjoy [[10-20] –  [30-40]%]  market
shares, MCB [[10-20] – [30-40]%], Roba [[5-10] – [10-20]%] and Aperam [[10-20] – [10-20]%] in potential affected markets in the  Netherlands;  in
the Czech Republic, Outokumpu would enjoy a [20-30]% market share, Acerinox [5-10]% and Aperam [30-40]% in  a  potentially  affected  market  for
SSCs. Finally, in a potential market for stainless steel distribution in the Benelux, Outokumpu would enjoy a [10-20]% market share, Aperam  [10-
20]%, MCB [20-30]%, Sadel [5-10]% and Roba [5-10]%.

[23]  As regards Germany, the Notifying Party estimates that the distribution of stainless steel flat products through  SSCs  accounts  for  [50-
60]% of the total distribution of stainless steel flat products, and [40-50]% of the total distribution of stainless steel products.

[24]  See replies to questions 5, 7, 14 and 15 of the Commission’s requests for information pursuant to Article 11 of the  Merger  Regulation  to
customers, sent on 9 January 2014.

[25]  See replies to question 20 of the Commission’s requests for information pursuant to Article 11 of the Merger Regulation to customers,  sent
on 9 January 2014. This was also confirmed by a majority of German customers.

[26]  See replies to question 27 of the Commission’s requests for information pursuant to Article 11 of the Merger Regulation to customers,  sent
on 9 January 2014. The Parties submit that the opening of a new steel service centre in a different geographic area  in  the  EEA  would  require
around […] and a EUR […] investment.

[27]  The Notifying Party submits in this respect that Asian distributors are mainly present  in  Austria,  Germany,  France,  Italy,  Spain  and
Poland.

[28]  See replies to question 25 of the Commission’s requests for information pursuant to Article 11 of the Merger Regulation to customers,  sent
on 9 January 2014.

[29]  E.g. Jindal Stainless, Baosteel and Posco.

[30]  The Commission concluded that "Approximately [90-100]% of imports in the EEA [which account for approx. 20% of the EEA CR market] are  sold
to independent distributors, who in turn sell to other distributors or final customers." See case COMP/M.6471 – Outokumpu/Inoxum, para. 528.

[31]  See replies to question 23 of the Commission’s requests for information pursuant to Article 11 of the Merger Regulation to customers,  sent
on 9 January 2014.

[32]  The Parties submit in this respect that the number of Asian distribution centers has nearly doubled in the five year  period  between  2005
and 2010.