CELEX: 32015M7610
Language: en
Date: 2015-12-02 00:00:00
Title: Commission Decision of 02/12/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7610 - DANISH CROWN / WESTFLEISCH / WESTCROWN JV) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 2.12.2015
C(2015) 8780 final

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|                                                                       |To the notifying parties:                                              |
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Dear Sirs,

Subject:    Case M.7610 – Danish Crown / Westfleisch / WestCrown JV
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1]

    0. On 27 October 2015, the European Commission received notification of a  proposed  concentration  pursuant  to  Article  4  of  the  Merger
       Regulation by which Danish Crown A/S ('Danish Crown', Denmark) together with Westfleisch SCE mbH ('Westfleisch', Germany)  acquire  within
       the meaning of Article 3(1)(b) and 3(4) of the  Merger  Regulation  joint  control  of  the  newly  created  joint  venture  WestCrown  JV
       ('WestCrown' or the 'JV', Germany) (the 'Transaction').[2]

    0. Danish Crown and Westfleisch are designated hereinafter as 'the Parties'.

THE PARTIES

    0. Danish Crown is an international food company based in Denmark with activities across the globe. Danish Crown is a cooperative owned by  a
       total of 8 278 (2013/14) member farmers that supply raw materials (pigs, sows, and cattle) to the cooperative. It  is  notably  active  in
       slaughtering activities and in the sale of fresh pig meat for further processing.

    0. Westfleisch is an international meat company based in Germany. Westfleisch is a cooperative owned by  a  total  of  4  218  (2014)  member
       farmers. It is also active, among others, in slaughtering activities and in the sale of fresh sow and pig meat for further processing.

    0. WestCrown will be a newly-created joint venture established in Germany and active in the de-boning of sows and  the  subsequent  marketing
       and sale of fresh sow meat for further processing. […].

THE OPERATION AND THE CONCENTRATION

    0. On 23 March 2015, Westfleisch and Danish Crown entered into a Joint Venture Agreement ('JVA') with the purpose of setting up WestCrown  as
       a limited liability company under German law to which Westfleisch will contribute its sow de-boning business,[3]  while  both  Westfleisch
       and Danish Crown will exclusively sell – and the JV will be obliged to purchase – all the German and Danish sows slaughtered by them or on
       their behalf to WestCrown for de-boning.[4]

    0. Westfleisch and Danish Crown will each hold 50% of the shares in WestCrown.[5]

1 Joint control

    0. WestCrown's supreme decision-making corporate body will be the Shareholders' Meeting  (Gesellschafterversammlung).[6]  Among  others,  the
       Shareholders' Meeting appoints and removes the Directors, which are the company's senior management officials, and  reviews  and  approves
       the annual company plan.[7]

    0. The Shareholders' meeting passes all decisions unanimously.[8] If the Parties cannot reach an agreement, a deadlock situation occurs which
       may trigger a deadlock resolution mechanism.[9] Therefore, the Parties have the power to block decisions determining WestCrown's strategic
       commercial behaviour and thus are able to exercise decisive influence over WestCrown.

    0. Therefore, Danish Crown and Westfleich will have joint control over WestCrown.[10]

2 Full functionality

    0. WestCrown will be full-functioning in the sense of Article 3(4) of the Merger Regulation.

    0. The fact that a joint venture does not enjoy autonomy as regards the adoption of its strategic decisions does not mean that it may not  be
       a full-function and economically autonomous entity. It is sufficient for the criterion of the full-functionality that the joint venture is
       autonomous from an operational viewpoint.[11]

    0. In this regard, first, the JVA is entered into by the Parties […].[12]

    0. Second, it will have sufficient resources to operate independently on the market. On top of receiving the  assets,  employees,  contracts,
       customer base, marketing know-how, IT system, etc. of Westfleisch's de-boning business, WestCrown will have its own Directors dedicated to
       its day-to-day business.[13] Furthermore the JVA provides for the Parties' obligation to  provide  both  start-up  financing  as  well  as
       additional financing necessary for WestCrown to meet its business objectives.[14]

    0. Third, WestCrown's activities are not limited to one specific function of the parents since it will engage not only in de-boning but  also
       in other activities such as sourcing of sow carcasses and marketing of fresh sow meat for further processing. To this end, the JV  is  not
       limited to sourcing from and producing goods for its parents but rather has its own market presence insofar as it can source sow carcasses
       from third parties and can sell fresh sow meat for further processing to third parties.

    0. Fourth, according to the Parties, the JV is likely to source [20-30]% of its raw material from third parties and WestCrown's sales to  the
       parents would likely account for no more than 10% of all WestCrown's sales of fresh sow meat for further processing.

    0. Last, by de-boning slaughtered sows WestCrown will add value to the sow meat thus bringing it to a new stage within the value chain.

    0. Consequently, WestCrown constitutes a joint venture performing on a lasting basis all the functions of an autonomous economic entity, with
       its own presence on the market.

3 Conclusion

    0. The Transaction therefore constitutes a concentration within the meaning of Articles 3(4) and 3(1)(b) of the Merger Regulation.

UNION DIMENSION

    0. The undertakings concerned have a combined aggregate world-wide turnover of more than EUR  5  000  million[15]  (Danish  Crown:  EUR 7 779
       million, Westfleisch: EUR […] ). Each of them has a Union-wide turnover in excess of EUR 250 million (Danish Crown: EUR […],  Westfleisch:
       EUR […]). Danish Crown does not achieve more than two-thirds of its aggregate Union-wide turnover within one Member  State.  The  notified
       operation has therefore a Union dimension according to Article 1(2) of the Merger Regulation.

RELEVANT MARKETS

1 Introduction

    0. WestCrown will be active in the de-boning of slaughtered sow carcasses and in the subsequent sale of (de-boned) fresh sow meat for further
       processing. The Parties are active in the slaughtering of sows, which is upstream of WestCrown’s activities. They are also active  in  the
       sale of fresh pig meat for further processing, which is part of the same broad market as WestCrown’s sale of fresh sow  meat  for  further
       processing.[16]

    0. Sows are female pigs that are used for the production of piglets, which are to be grown into slaughter pigs.  Ultimately,  the  sows  will
       also be slaughtered and may be used for meat production.

    0. For the purposes of this decision, the terms 'pig meat' and 'sow meat' are kept separate and pig meat is not  understood  to  include  sow
       meat.

    0. In its decisional practice,[17] the Commission identified several relevant product markets along the pig value chain[18] and left open the
       existence of possible separate market for pigs and sows, although the Commission has concluded in some previous decisions that  a  further
       segmentation of the market between pigs and sows exists, depending on the facts of the cases.[19]

    0. The market investigation highlighted the presence of a quality certification, namely the  Qualität  und  Sicherheit  ('QS')  certification
       provided by Qualität und Sicherheit GmbH. The QS certification is a quality assurance scheme, which applies  across  all  stages  of  food
       production (feed manufacturing, farm sides, transportation, slaughterhouses, de-boners, meat  processors,  retailers).  QS  certifies  the
       participating companies, not the products themselves. Meat products may only bear the QS certification mark if all companies  involved  in
       the production and the marketing along the supply chain are QS-certified.[20]

    0. The market investigation also indicated that de-boners were certified under other standards, which are in most  cases  national  standards
       either imposed by national law or requested by national food retailers. In particular, a majority of  German  de-boners  referred  to  the
       International Featured Standards ('IFS') scheme.[21] The IFS are quality standards  operated  by  IFS  Management,  GmbH,  established  in
       Berlin, Germany, which many food retailers in Germany demand from their suppliers. Contrary to the  QS  certification,  IFS  certification
       requires only compliance of the audited company with the IFS, not compliance of the complete supply chain. Since (i) the  supply  of  IFS-
       certified fresh meat or processed products does not require the use of ISF-certified input,[22] and (ii) the Parties  indicated  that,  to
       their best knowledge, all companies supplying German customers are IFS-certified,[23] it appears that the IFS certification has no  impact
       on the competitive assessment of the Transaction. The IFS certification is thus not considered further in this decision.

2 Supply and sourcing of sow carcasses for de-boning

1 Product market definition

    0. The Commission has previously not explicitly considered the markets for the supply  and  sourcing  of  sow  carcasses  in  its  decisional
       practice. It has acknowledged, however, that slaughterhouses may sell carcasses to third parties.[24] In other precedents, the  Commission
       has also distinguished between the slaughtering of sows and pigs without drawing explicit implications for the supply of carcasses.[25]

    0. The Commission has not previously investigated the role of the QS certification in the supply of sow carcasses for de-boning.

1 Parties' view

    0. The Parties submit that since the JV will not be active in the procurement of live sows for slaughtering or any slaughtering activity, but
       only in de-boning of sow carcasses, the relevant market is the sourcing of sow carcasses for de-boning.

2 Commission's assessment

    0. The majority of respondents to the market investigation highlighted how slaughtering and de-boning are different activities which  require
       different skill-sets and different equipment.[26]

    0. Moreover, the majority of respondents to the market investigation also highlighted that de-boning a sow carcass might be considered  as  a
       separate relevant product market from de-boning a pig carcass due to the difference in size between a sow carcass and a pig  carcass  (the
       former being much larger and heavier) but also due to different organoleptic characteristics of the sow meat[27] and lastly  also  due  to
       different end-use of sow meat, which is more suitable for processed meat products, while pig meat is often  used  also  for  direct  human
       consumption.[28]

    0. Concerning the potential sub-market for QS-certified sow  carcasses  for  de-boning,  the  majority  of  respondents  highlighted  limited
       substitutability between QS-certified and non QS-certified sow carcasses. Moreover, the respondents pointed out how the  QS  certification
       is an important factor in the choice of a carcass supplier.[29]

    0. Overall, the market investigation indicated that there is a separate relevant product market for the supply and sourcing of sow  carcasses
       for de-boning, with a potential sub-market for QS-certified sow carcasses. That relevant product market is separated from the  market  for
       pig carcasses for de-boning,

    0. In conclusion, in the light of the outcome of the market investigation, the Commission considers that, for the purpose of  this  decision,
       there is a separate relevant product market for the supply (and sourcing) of sow carcasses for de-boning. Moreover,  within  this  market,
       the Commission leaves open for the purposes of the present case, whether a separate relevant product market for QS-certified sow carcasses
       exists since the Transaction does not raise serious doubts even under the narrower definition of a market consisting in  the  supply  (and
       sourcing) of QS-certified sow carcasses for de-boning.

2 Geographic market definition

    0. The Commission has not addressed the geographic market definition of the market for sow carcasses for de-boning in its precedents.

1 Parties' view

    0. The Parties submit that the market is EEA-wide. They refer to actual trade flows within the EEA. In particular, the  Parties  submit  that
       Germany imports sow carcasses for de-boning from Denmark, the United Kingdom, Poland, Belgium, the Netherlands and Spain.

    0. The Parties submit also that sow carcasses from Denmark, the Netherlands and Belgium could likely meet the QS standard  or  an  equivalent
       one.

2 Commission's assessment

    0. The market investigation returned mixed results with regards to the substitutability of sow carcasses of German origin for de-boning  with
       sow carcasses imported from other countries,[30] the same mixed replies resulting when considering only  QS-certified  sow  carcasses.[31]
       While some of the respondents pointed at the QS certification as a German-only specificity or pointed at a less  substantiated  preference
       for German sows, others indicated that prices are similar across different countries and that they would be ready to switch the origin  of
       a considerable amount of their purchases if market condition would allow it (i.e. better prices  and  availability  of  sow  carcasses  of
       appropriate quality). [32]

    0. In conclusion, the Commission considers that there are indications that the geographic scope of the market may be national  but,  for  the
       purpose of this decision, the precise dimension of the geographic market can be left open, as  the  Transaction  does  not  give  rise  to
       serious doubts about its compatibility with the internal market under any plausible  alternative  geographic  market  definition  (whether
       national or wider than national).

3 Supply of fresh sow and pig meat for further processing

1 Product market definition

    0. After the sow carcasses have been de-boned at de-boning facilities, the  resulting  fresh  sow  meat  is  sold  to  industrial  processors
       primarily for sausage production rather than for direct human consumption. Fresh sow meat includes fresh, frozen as  well  as  minced  sow
       meat, which has not undergone further processing, i.e. no other ingredients or spices are added, nor has the meat been cooked,  smoked  or
       dried.

    0. In its decisional practice, the Commission has not explicitly assessed the possible differentiation between fresh sow meat and  fresh  pig
       meat sold for further processing. In a number of cases, the Commission has nonetheless assessed  the  sale  of  fresh  pig  and  sow  meat
       together (calling them 'pork' or 'pig meat') even if a differentiation between pigs and sows was  made  at  the  level  of  sourcing  live
       animals for slaughtering.[33]

    0. The Commission has not previously investigated the role of the QS certification in the sale of fresh meat for further processing.

1 Parties' view

    0. The Parties submit that in the supply of fresh meat for further processing, pig meat should be distinguished from sow meat since sow  meat
       is darker, more mature and firm in structure compared to pig meat. Sow meat  is  generally  well-suited  for  the  production  of  certain
       sausages, such as salamis, but not for direct human consumption.

    0. The Parties also submit that, in particular, German meat processing companies are not able to switch from fresh sow to fresh pig meat  for
       certain processed meat products.

    0. Regarding the issue and significance of QS certification, the Parties consider that the QS  scheme,  as  other  schemes  existing  on  the
       European market,[34] is not in itself sufficient to lead to the definition of a separate  relevant  product  market  for  fresh  meat  for
       further processing meeting a specific scheme.

2 Commission's assessment

    0. The majority of respondents to the market investigation confirmed the existence of a separate relevant product market for  the  supply  of
       fresh sow meat for further processing.[35] To this regard, the majority of respondents to the market investigation confirmed the different
       characteristics of fresh sow meat as compared to fresh pig meat and indicated also how fresh sow  meat  is  used  almost  exclusively  for
       further processing as opposed to direct human consumption.[36]

    0. Meat processors indicated also that fresh pig and sow meat can be substitutable only for certain processed meat products.[37]

    0. Concerning the possible relevant product market for QS-certified fresh sow meat for further processing,  the  respondents  to  the  market
       investigation gave indication that such separate market might exist and often having the QS certification is a requirement from  retailers
       but it is not clear to which extent such requirement applies to processed meat products  rather  than  to  fresh  meat  for  direct  human
       consumption.[38]

    0. In fresh meat for direct human consumption the importance of brands is quite limited and therefore a quality certification might  play  an
       important role in driving the consumers' purchasing decision, whereas in processed products the presence of  brands  with  their  inherent
       values might already per se convey an idea of quality. In this regard, while virtually all fresh pig meat  for  direct  human  consumption
       sold in Germany is marketed as QS-certified, only less than 50% of the processed meat products that contain QS-certified pig and sow  meat
       are marketed as QS-certified.[39]

    0. Overall, the market investigation indicated that there might be a relevant product market for  fresh  sow  meat  for  further  processing,
       separated from the market for fresh pig meat for further processing, with potential sub-markets for QS-certified fresh sow  and  pig  meat
       for further processing respectively. However, the Commission considers that, for the purpose of this decision,  the  exact  scope  of  the
       product market can be left open since the Transaction does not give rise to serious doubts  about  its  compatibility  with  the  internal
       market under any plausible product market definition.

2 Geographic market definition

    0. The Commission has not explicitly assessed the geographic market for the supply of fresh sow meat for further processing in its decisional
       practice.

    0. Nonetheless, in some previous decisions the Commission assessed the market for the supply of fresh pig meat  for  further  processing  and
       left the geographic scope open,[40] whereas in others the Commission found the market to be wider  than  national,[41]  depending  on  the
       facts of the cases.

1 Parties' view

    0. The Parties submit that the geographic market for the supply of fresh sow and pig  meat  for  further  processing  is  at  least  EEA-wide
       regardless of the possible differentiation between sow and pig meat for further processing.

    0. Their position is primarily based on the fact that it is possible for the  industrial  processors  to  multi-source  meat  from  different
       suppliers located in different countries. Furthermore, industrial processors are generally focused on the quality of the meat rather  than
       on its origin.

2 Commission's assessment

    0. The majority of meat processors which replied to the market investigation highlighted how fresh sow meat  of  German  origin  for  further
       processing (whether QS-certified or not) cannot be substituted with equivalent meat of non-German origin (whether  QS-certified  or  not),
       but those meat processors which see a possible substitutability with non-German meat are ready  to  switch  a  material  amount  of  their
       purchases of fresh sow meat for further processing if market condition would allow it (i.e. better prices and availability  of  fresh  sow
       meat for further processing of appropriate quality).[42]

    0. The majority of meat processors which replied to the market investigation indicated  the  absence  of  legal,  commercial  and  veterinary
       barriers to import fresh sow meat for further processing from other EU Member States into Germany but highlighted how the  origin  of  the
       meat plays an important role among retailers but also restaurants and Horeca in general.[43]  They  nevertheless  confirmed  the  Parties'
       views that multi-sourcing from slaughterhouses and de-boners established in different EU  Member  States,  including  in  non-neighbouring
       countries (for instance Spain), is customary.[44]

    0. In conclusion, the Commission considers that there are indications that the geographic scope of  the  market  is  national  but,  for  the
       purpose of this decision, the precise geographic dimension of the market can be left open, as  the  Transaction  does  not  give  rise  to
       serious doubts about its compatibility with the internal market under any alternative (whether  national  or  EU-wide)  geographic  market
       definition.

COMPETITIVE ASSESSMENT

    0. In its competitive assessment, the Commission will analyse the horizontal and vertical relationships between the Parties and WestCrown.

    0. First, horizontally affected markets would occur only if one considers the sale of fresh sow  meat  for  further  processing  –  in  which
       WestCrown will be active – and of fresh pig meat for further processing – in which the Parties are active – to belong to the same relevant
       product market, and if either of the following additional condition is met:

         i. the geographic scope of the market for fresh sow and pig meat (whether QS-certified or not) for further  processing  is  defined  as
            national (Germany); or

        ii. the product market is defined as the supply of QS-certified fresh sow and pig meat for further processing and the  geographic  scope
            of that market is defined as EU-wide.

    0. On the contrary, there would not be any horizontally affected market if the product markets for fresh sow and fresh pig meat  for  further
       processing are considered as separate or if the product market for fresh sow and pig meat for further processing  (including  QS-certified
       and non-QS-certified meat) is defined as EU-wide.[45]

    0. Second, vertical links between the Parties' upstream supply of sow carcasses and  WestCrown's  downstream  de-boning  activities  lead  to
       vertically affected markets if considering the potential upstream market for QS-certified sow carcasses in Germany. The market  would  not
       be affected under any plausible alternative  (wider  than  national)  geographic  definition  or  under  any  alternative  product  market
       definition, for instance including QS-certified and non-QS-certified meat.

1 Horizontal relationships – Supply of fresh sow and pig meat for further processing in Germany

    0. A concentration may impede effective competition by removing important competitive constraints or by creating or strengthening a  dominant
       position (non-coordinated effects) but also by allowing the Parties to coordinate with other firms on the market with the aim to  increase
       prices (coordinated effects). The Commission will assess whether significant non-coordinated or coordinated effects are likely  to  result
       from the Transaction.

1 Horizontal non-coordinated effects

    0. WestCrown will only be active in the supply of fresh  sow  meat  for  further  processing,  an  activity  in  which  only  Westfleisch  is
       meaningfully active at present in Germany but in which neither Danish Crown[46] nor Westfleisch would, after the Transaction,  be  active.
       The Transaction would therefore not give rise to horizontal overlaps if fresh sow and pig  meat  for  further  processing  are  considered
       separately.

    0. Conversely, if the supply of fresh sow and pig meat for further processing are considered in the same  relevant  product  market  and  its
       geographic scope is defined as national (Germany), a horizontally affected market emerges as Danish Crown and Westfleisch will both remain
       active on that market post-Transaction[47] and together hold a combined market share of [20-30]% including  and  excluding  captive  sales
       (Danish Crown [5-10]%, Westfleisch [10-20]%).

    0. The market would remain affected if a potential segment of QS-certified fresh sow and pig  meat  for  further  processing  in  Germany  is
       considered. In this case, the Parties reach a combined market share of [20-30]% including and excluding captive sales  (Danish  Crown  [5-
       10]% including captive sales and [5-10]% excluding captive sales, Westfleisch [10-20]% including  captive  sales  and  [10-20]%  excluding
       captive sales).[48]

    0. Finally, the market for the supply of fresh sow and pig meat for further processing would also be horizontally affected at EU level if QS-
       certified fresh sow and pig meat is considered as one and the same relevant product market, since the combined market share of the Parties
       is [20-30]% including internal sales (Danish Crown [10-20]%, Westfleisch [10-20]%) and [20-30]% excluding internal sales (Danish Crown [10-
       20]%, Westfleisch [10-20]%).[49]

1 Parties' view

    0. The Parties submit that the combined shares of the Parties on the fresh sow and pig meat markets for further processing, which  are  below
       30% regardless of the definition of the product market (i.e. including for the potential segment of QS-certified fresh meat or not) or the
       geographic scope (Germany or the EU), are not sufficient to exercise market power.

    0. In addition, the supply market remains fragmented and split between major international players such as  Tönnies  and  Vion  and  a  large
       number of small and medium sized companies (e.g. Vogler Fleisch, Müller Fleisch and Böseler Goldschmaus in Germany, Belgian Pork Group  in
       the EU), which will continue to bring significant competition in the market.

    0. Finally, the Parties argue that German meat processors, notably sausage producers, do not face any barriers to switch their  purchases  to
       alternative suppliers established in Germany, Denmark but also other EU countries, since the quality of the fresh meat prevails  over  its
       origin. The Parties put forward that actually already pre-Transaction German meat processor multi-source across the EU.

    0. The Parties consider that customers could also easily switch to other suppliers for QS-certified fresh meat only, to the extent  that  (i)
       approximately 95% of German farmers are QS-certified and can therefore be assumed to supply, following slaughtering and de-boning  through
       QS-certified processes, QS-certified fresh meat; (ii) the QS system is open to producers from other EU countries; and (iii) QS  recognises
       other national standards as equivalent (in particular in Denmark,[50] the Netherlands[51] and Belgium,[52] while preparations are on-going
       in Spain).

    0. The Parties therefore conclude that there is no reason to expect that the Transaction would significantly impede effective competition  on
       the market for the supply of fresh (sow) meat for further processing.

2 Commission's assessment

    0. The combined market shares of the Parties in Germany remain limited, as they do not exceed 30% for the supply of fresh pig  and  sow  meat
       for further processing and for the specific segment of QS-certified pig and sow meat.

    0. Furthermore, in Germany, the Parties face strong competition from other suppliers of fresh  sow  and  pig  meat  for  further  processing,
       notably integrated companies, such as Tönnies (market share in Germany of [20-30]% including and excluding internal sales) or Vion (market
       share in Germany of [10-20]% including and excluding internal sales).

    0. The same competitors are to be found on the segment of the supply of QS-certified fresh sow and pig meat for further processing,  both  at
       German level (Tönnies [20-30]% including and excluding internal sales, Vion [10-20]% including and excluding internal  sales)  and  at  EU
       level (Tönnies [10-20]% including and excluding internal sales, Vion [10-20]% including and excluding internal sales).

    0. In addition, respondents to the market investigation have not raised material concerns regarding the pig meat value chain, as  opposed  to
       the sow meat value chain. In particular, German meat processors, which use both fresh sow and pig meat as inputs, have not identified  any
       market or segment that would be impacted by the Transaction other than fresh sow meat for further processing.[53]

    0. Respondents to the market investigation have also confirmed that German meat processors usually multi-source fresh meat  from  a  pool  of
       slaughterhouses or de-boners which are not limited to the Parties and which are established in different EU  countries,  notably  Germany,
       Denmark, the Netherlands, Belgium or Spain.[54]

    0. Moreover, there is no significant barrier to the import of fresh sow or  pig  meat  for  further  processing  to  Germany  from  other  EU
       countries.[55] Respondents to the market investigation supported the view expressed by the Parties that import of QS-certified  fresh  pig
       and sow meat to Germany was also possible, since the QS scheme  is  open  to  suppliers  established  outside  Germany,  certain  national
       standards are acknowledged as equivalent to the QS standard and non-German slaughterhouses and de-boners  have  obtained  or  will  obtain
       certification under the QS scheme.[56] Respondents to the market investigation also confirmed that the penetration rate of the QS standard
       outside Germany was growing and thus de-boners outside Germany would be able to increase their exports of QS-certified fresh and pig  meat
       to Germany or enter the market. Such expansions would mean that the Transaction would be unlikely to pose any significant anti-competitive
       risk.

    0. Some respondents to the market investigation[57] nevertheless expressed reservations and  indicated  that  the  capacity  of  QS-certified
       suppliers of fresh sow and pig meat established in Denmark, Belgium or France is currently constrained by the limited production  capacity
       of QS-certified farmers, hence by the limited  availability  of  QS-certified  sows,  and  to  a  lesser  extent  QS-certified  pigs,  for
       slaughtering.

    0. In view of the above and of all the evidence available to the Commission, and in the light of the outcome of the market investigation  and
       considering in particular that (i) the combined market share of the  Parties  is  not  prima  facie  indicative  of  material  competition
       concerns, and (ii) there will remain a sufficient number of suppliers to exert competitive pressure on prices of fresh sow  and  pig  meat
       for further processing whether QS-certified or not in Germany and of QS-certified fresh sow and pig meat for further processing in the EU,
       the Commission considers that the Transaction does not raise serious doubts as to its compatibility with the internal market with  respect
       to the supply of fresh sow and pig meat for further processing, whether QS-certified or not, in Germany or with respect to the  supply  of
       QS-certified fresh sow and pig meat for further processing in the EU.

2 Horizontal coordinated effects

    0. Considering that (i) WestCrown will only supply fresh sow meat in Germany, and (ii) supply of fresh sow  meat  accounts  for  [10-20]%  in
       volume of the overall market for the supply of fresh sow and pig meat in Germany, the risk that  WestCrown's  activities  may  have  anti-
       competitive effects appears limited to the potential segment of fresh sow meat for further processing.

    0. On that segment, the Parties submit that WestCrown will hold [20-30]% of the market in Germany (in volume, including and excluding captive
       sales) following the transfer of Westfleisch's de-boning activities and the additional volumes of fresh sow meat  for  further  processing
       resulting from Danish Crown's sow carcasses currently sold to other German customers than Westfleisch.[58] WestCrown's market share  would
       reach [20-30]% (in volume, including and excluding captive  sales)  if  only  QS-certified  fresh  sow  meat  for  further  processing  is
       considered.

    0. WestCrown will thus become the second largest supplier of fresh sow meat (including QS-certified  sow  meat)  for  further  processing  in
       Germany, behind Tönnies. The two firms will hold [50-60]% of the market for the supply of fresh sow meat for further processing in Germany
       (in volume, including and excluding captive sales) and [60-70]% (in volume, including and excluding captive sales)  if  only  QS-certified
       fresh sow meat for further processing is considered.

    0. In this context, the Commission has assessed whether the Transaction would increase the likelihood that  the  two  largest  players,  i.e.
       Tönnies and WestCrown, would be able to coordinate their behaviour on the market for the supply of fresh sow meat for  further  processing
       in Germany, even without entering into an agreement or resorting to a concerted practice within the meaning of Article 101 TFEU.

    0. For that purpose, the Commission has examined whether it would be possible for WestCrown and Tönnies to reach terms  of  coordination  and
       whether such coordination would be sustainable.

1 Parties' view

    0. Regarding the possibility to reach terms of coordination, the Parties' stress that the  formation  of  WestCrown  will  not  result  in  a
       decrease in the number of companies active in the market but in a strengthened position of WestCrown, which will make it more difficult to
       obtain a common understanding on the terms of coordination.

    0. First, the Parties submit that the degree of asymmetry between the de-boning companies active in Germany will  increase  post-Transaction.
       The market structure pre-Transaction is as follows:

Table 1: Supply of fresh sow meat and QS-certified fresh sow meat for further processing in Germany, in volume, including internal sales (2014)

|                     |Tönnies             |West-fleisch          |Kurant                |Uhlen / Goertz              |
|Danish Crown         |[300 000-700 000]   |[300 000-700 000]     |[300 000-700 000]     |[300 000-700 000]           |
|Westfleisch          |[100 000-300 000]   |[0-100 000]           |[100 000-300 000]     |[0-100 000]                 |
|Combined             |[300 000-700 000]   |[300 000-700 000]     |[300 000-700 000]     |[300 000-700 000]           |
|Total market         |[2 000 000- 3 000   |[1 000 000- 2 000 000]|[1 000 000- 2 000 000]|[1 000 000- 2 000 000]      |
|                     |000]                |                      |                      |                            |

             Source: the Parties, Form CO

    0. As can be deducted from Table 2 the Parties’ individual and combined market shares in the upstream supply of sow carcasses reach 30%,  and
       therefore gives rise to a vertically affected market, only if considering non-captive supplies of QS-certified sow  carcasses.  It  should
       further be noted that the figures in Table 2 include imports into the potential German market. The Parties estimate that only  [700  000-1
       000 000] sows were actually slaughtered in Germany while [1 000 000- 2 000 000] were imported in  2014  (including  captive  imports).  It
       should further be noted that, as on the one hand Danish Crown's sow carcasses originate not from Germany but  from  Denmark  and,  on  the
       other hand, Westfleisch does not supply sow carcasses to third parties even  at  present,  the  Transaction  would  not  give  rise  to  a
       vertically affected market if imports into Germany were not taken into account.

    0. As to the potential downstream markets, the Parties' estimates of market shares are given in Table 3 and Table 4 below.

       Table 3: Supply of QS-certified fresh sow meat for further processing in Germany, excluding captive sales (2014)

|                           |Sow meat QS, CWE    |Sow meat QS, market   |
|                           |(tonnes)            |share (%)             |
|Danish Crown               |[…]                 |[0-5]%                |
|Westfleisch                |[…]                 |[10-20]%              |
|Combined                   |[…]                 |[10-20]%              |
|Tönnies                    |[…]                 |[30-40]%              |
|Uhlen/Goertz               |[…]                 |[10-20]%              |
|Kurant                     |[…]                 |[10-20]%              |
|Westphal                   |[…]                 |[5-10]%               |
|Korff                      |[…]                 |[0-5]%                |
|Others                     |[…]                 |[10-20]%              |
|Total                      |[…]                 |100%                  |

       Source: the Parties, Annex 12e to the Form CO

       Table 4 - Supply of QS-certified fresh sow and pig meat for further processing in Germany, excluding captive sales (2014)

|                           |Pig and sow meat QS,  |Pig and sow meat QS,  |
|                           |CWE (tonnes)          |market share (%)      |
|Danish Crown               |[…]                   |[5-10]%               |
|Westfleisch                |[…]                   |[10-20]%              |
|Combined                   |[…]                   |[20-30]%              |
|Tönnies                    |[…]                   |[20-30]%              |
|Vion                       |[…]                   |[10-20]%              |
|Vogler Fleisch             |[…]                   |[0-5]%                |
|Müller Fleisch             |[…]                   |[0-5]%                |
|Böseler Goldschmaus        |[…]                   |[0-5]%                |
|Others                     |[…]                   |[20-30]%              |
|Total                      |[…]                   |100%                  |

       Source: the Parties, Form CO and the Parties' submission of 20 November 2015

    0. As to the potential downstream markets for the supply of fresh sow (or fresh sow and pig) meat for further processing, the combined market
       shares remain below 30% under any plausible market definition. The Transaction thus only gives rise to vertically affected markets in case
       the supply of QS-certified (and equivalent) sow carcasses is considered separately from the supply of other sow carcasses.

3 The legal framework

    0. The Commission will examine whether the Transaction is likely to result in foreclosure.

    0. Foreclosure concerns a situation where actual or potential rivals' access to supplies or markets is hampered or eliminated as a result  of
       a merger and those companies' ability and/or incentive to compete is reduced. Such foreclosure can take  two  forms:  input  and  customer
       foreclosure.[62]

    0. Input foreclosure is a situation where, post-merger, the new entity would be likely to restrict access to products  or  services  that  it
       would otherwise supplied absent the merger, thereby raising its downstream rivals' costs by making it harder for them to  obtain  supplies
       of the input under similar process and conditions as absent the merger.[63]

    0. Customer foreclosure is a situation where the merged entity may foreclose access to sufficient customer base to its  actual  or  potential
       rivals in the upstream market and reduce their ability or incentive to compete. In turn, that may raise downstream rivals' costs by making
       it harder for them to obtain supplies of the input under similar prices and conditions as absent the merger.[64]

    0. For an input or customer foreclosure scenario to raise competition issues, three factors need to be taken into account: 1) the ability  of
       the merged entity to engage in foreclosure, 2) the incentives of the merged entity to do so and 3) whether a  foreclosure  strategy  would
       have a significant detrimental effect on competition on the downstream market.[65]

4 Input foreclosure

1 Parties' view

    0. The Parties submit that the Transaction would not give rise to any foreclosure related to the vertical link between the upstream supply of
       QS-certified sow carcasses and the downstream de-boning and supply of fresh sow and pig meat for further processing.  In  particular,  the
       Parties submit that they lack the ability to engage into input foreclosure.

    0. The Parties particularly note that competing de-boners are not limited to sourcing sow carcasses from Germany only  but  can  also  source
       from suppliers abroad, as is currently also the case for Westfleisch as well. That would apply to non  QS-certified  as  well  as  to  QS-
       certified sow carcasses since the quality schemes in Denmark, the Netherlands and Belgium have been  acknowledged  by  the  QS  scheme  as
       equivalent with it. The Parties further submit that transport costs play a minimal role in the purchase of  sow  carcasses,  which  lowers
       trade barriers and increases the pool of alternative suppliers, including those capable of supplying QS-certified carcasses to German  de-
       boners.

    0. The Parties further submit that it will not be profitable for WestCrown to pursue a foreclosure  strategy.  If  WestCrown  were  to  offer
       higher prices for QS-certified sow carcasses bought from independent farmers in the upstream market in order to foreclose access to  input
       to competing de-boners, the JV would not be able to recover these additional costs through higher prices in the downstream market for  the
       supply of QS-certified fresh sow meat for further processing. This is because WestCrown will face competition on the downstream market  by
       the other integrated de-boning companies with slaughtering activities including  Tönnies,  Uhlen/Goertz  and  Westphal  all  offering  QS-
       certified fresh sow meat and having at least part of their QS-certified carcasses supplied internally, hence not impacted  by  the  higher
       prices offered on the market by the JV.

2 Commission's assessment

    0. The Transaction would not give rise to vertically affected markets if imports of QS-certified (or equivalent) sow carcasses  into  Germany
       were not considered. Therefore the Commission will examine the effects of the transaction taking into account such imports.

    0. It should be noted that the Parties' market share in the upstream market remains modest at [30-40]%. That market  share  is  generated  by
       Danish Crown's sales of approximately [300 000-700 000] QS-certified sow carcasses to de-boners in Germany,  including  [0-100  000]  that
       already go to Westfleisch's de-boning activities. Danish Crown thus at present supplies approximately [100 000-300 000]  QS-certified  sow
       carcasses to German de-boners other than Westfleisch.

    0. The Parties have submitted that they indeed intend to redirect all of Danish Crown's sow carcasses to  WestCrown  after  the  Transaction.
       [WESTCROWN'S SOURCING STRATEGY].

    0. During the market investigation, the majority of German de-boners expressed doubts in relation to the ability of non-German  suppliers  to
       supply additional QS-certified sow carcasses to them.[66] As to slaughterhouses, only one significant operator explained that it would  be
       able to significantly increase its exports of QS-certified sow carcasses to Germany from the current levels.[67]

    0. It cannot thus be excluded that the market for the supply of QS-certified sow carcasses in Germany would decrease by the [100 000-300 000]
       carcasses that Danish Crown at present supplies to third parties without significant immediate additional supplies  being  available  from
       other suppliers.

    0. Therefore, it cannot at present be excluded that some of the German de-boners competing with WestCrown would have more limited  access  to
       QS-certified sow carcasses after the Transaction particularly if they cannot resort to their own internal captive supply as it is the case
       for integrated de-boning companies. Since their production facilities' efficiency may depend on adequate utilisation rates, it  cannot  be
       excluded that such developments could be detrimental to them and, in the worst case, result in the market exit of some de-boners.

    0. Some competing de-boners are concerned about their access to QS-certified  sow  carcasses  after  the  Transaction.  In  particular,  non-
       integrated German de-boners raised the risk of having their access to QS-certified sow carcasses hampered following the Transaction.[68]

    0. To the same regard, a non-integrated de-boner stated that it will have to shrink its size and potentially might exit the market and  would
       not be any longer in a position to exercise a competitive constraint on the  integrated  market  players.  The  reason  for  this  is  the
       difficulty to procure sufficient quantities of QS-certified sow carcasses for de-boning at  competitive  prices.  That  specific  de-boner
       further submitted that other Danish slaughterhouses were not in a position to increase their supply of sow carcasses to make  up  for  any
       lost supplies from Danish Crown.[69]

    0. German meat processors replying to the market investigation were concerned about the position of the smaller, non-integrated suppliers  in
       the market after the Transaction. The majority of German meat processors taking a position also saw that price increases on the downstream
       market for the supply of QS-certified fresh sow meat for further processing could take place. On the other  hand,  the  majority  of  meat
       processors purchasing sow meat that replied stated that they were not concerned about their access to sow meat  and  doubted  whether  the
       merged entity would have the incentive to increase its prices for fresh sow meat for further processing, including QS-certified fresh  sow
       meat for further processing.[70]

    0. Nonetheless, it should be borne in mind that if there remain sufficient credible downstream competitors whose costs are not likely  to  be
       raised, for example because they are themselves vertically integrated, competition from those firms may constitute a sufficient constraint
       on the JV and therefore prevent output prices from rising or trade conditions otherwise worsening from pre-merger levels.[71]

    0. For the reasons stated below, the Commission considers that adequate competition will remain in de-boning of sows and in  the  sub-sequent
       sale of fresh sow and pig meat for further processing and any potential input foreclosure strategy by the Parties would only have  limited
       effects on the downstream supply of fresh sow and pig meat for further processing.

    0. The most significant player on that market is already the sizeable integrated undertaking Tönnies, which will remain in that position even
       after the Transaction. As seen in Table 3, Tönnies had a market share of [30-40]% in the supply of QS-certified fresh sow meat for further
       processing in Germany in 2014, by far bigger than any other market participant. Even if the  Parties'  estimate  that  WestCrown's  market
       share on that market could rise after the Transaction to [20-30]% due to  the  redirecting  of  Danish  Crown's  sow  carcasses,  Tönnies'
       position as a clear market leader would remain.

    0. In addition to Tönnies, there are a number of other sizeable players in the potential market for QS-certified fresh sow meat  for  further
       processing. For instance, Uhlen/Goertz had a market share of [10-20]% in 2014. Uhlen/Goertz is also vertically  integrated  with  its  own
       captive sow carcass supply that is likely to be at least partially shielded from any potential input foreclosure strategy.

    0. Besides, when assessing the likelihood and extent of input foreclosure, it should be borne in mind that competing de-boners are  currently
       sourcing from a variety of slaughterhouses and can also compete  for  the  third-party  QS-certified  sow  carcasses  to  be  supplied  to
       WestCrown. Moreover, the potential exit from the market by a competitor would leave the sow carcasses  (not  delivered  by  Danish  Crown)
       until then de-boned by that market participant for the remaining de-boners.[72] The Commission therefore  considers  it  unlikely  that  a
       significant number of de-boners would exit the market due to input foreclosure.

    0. Furthermore, not all sow meat meeting the QS standard is actually marketed as such. According to the Parties, only approximately [100 000-
       300 000] CWE tonnes of the total [100 000-300 000] CWE tonnes of QS-certified fresh sow meat for  further  processing  (excluding  captive
       sales) are actually marketed as such. Westfleisch also markets a relatively small volume of its QS-certified fresh sow  meat  for  further
       processing as QS-certified (only [0-100 000] tonnes CWE excluding captive sales in 2014), and the Parties estimate that its  market  share
       was down to [5-10]% in 2014 concerning fresh sow meat that is actually marketed as QS-certified.

    0. QS-certified fresh sow meat for further processing only constitutes a small part of the  potential  downstream  market  for  combined  QS-
       certified fresh sow and pig meat for further processing. To this extent it should also be noted that for some processed pig and  sow  meat
       products, meat processors can also source fresh pig meat as a substitute of fresh sow meat.[73] Any effects on that  potential  downstream
       market would thus be even smaller than on the potential separate fresh sow meat market.

    0. In light of the above, and of all the evidence available to the Commission and in view of the outcome of  the  market  investigation,  the
       Commission considers it unlikely that the Transaction would put WestCrown in  a  position  to  significantly  increase  prices  or  impose
       detrimental conditions on the downstream markets for QS-certified fresh sow meat for further processing or combined QS-certified fresh sow
       and pig meat for further processing.

5 Customer foreclosure

    0. The Parties submit that the Transaction does not give rise to any customer foreclosure because, for instance, the merged entity would lack
       any capacity to engage in such behaviour.

    0. The Commission notes that Westfleisch's de-boning business is not at present a significant purchaser of sow carcasses from third  parties.
       In fact, it is only sourcing less than 20% of any sow carcasses  on  the  merchant  market  (whether  considering  only  QS-certified  sow
       carcasses or together with non-QS-certified ones), of which over 40% already come from Danish Crown.

    0. Moreover, slaughterhouses competing with Danish Crown will still have the possibility to supply  de-boners  competing  with  WestCrown  at
       competitive conditions, especially considering that those de-boners will have to source sow carcasses to replace those previously supplied
       to them by from Danish Crown.

    0. In light of the above and the evidence available to the Commission and in view of the outcome of  the  market  investigation,  it  appears
       unlikely that the Parties would have the ability to engage into customer foreclosure strategy after the Transaction.

6 Conclusion on non-horizontal effects

    0. The Commission concludes that the Transaction does not raise serious doubts about its compatibility with the internal market due  to  non-
       horizontal effects.

CONCLUSION

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

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

-----------------------
[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]   Publication in the Official Journal of the European Union No C 364, 04.11.2015, p. 7.

[3]   Paragraph 1.2.1. JVA (annex 3 to the Form CO).

[4]   Paragraph 1.2.4 and paragraph 5.1.a) JVA (annex 3 to the Form CO).

[5]   Section 3.4 JVA (annex 3 to the Form CO).

[6]   Paragraph 4.2.1 JVA (annex 3 to the Form CO).

[7]   Paragraphs 4.2.1.g) and j) JVA (annex 3 to the Form CO).

[8]   Paragraph 4.2.3 JVA (annex 3 to the Form CO).

[9]   Paragraph 10.3 and Section 11 of JVA (annex 3 to the Form CO).

[10]  See also the Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No  139/2004  on  the  control  of  concentrations
between undertakings, OJ C 95 of 16.04.2008, p. 1 ('Jurisdictional Notice', paragraphs 62 and 65–73).

[11]  See the Jurisdictional Notice, paragraph 93.

[12]  Paragraph 15.1 JVA (annex 3 to the Form CO).

[13]  Section 4.3 JVA (annex 3 to the Form CO).

[14]  Section 6 JVA (annex 3 to the Form CO).

[15]        Turnover calculated in accordance with Article 5 of the Merger Regulation and the Jurisdictional Notice (OJ C 95, 16.4.2008, p. 1).

[16]        The Parties have a number of other activities, including the production and sale of processed meat products in which sow meat may  be
       used. As the Transaction does not give rise to any affected markets with respect to those activities, they are not considered  further  in
       this decision.

[17]        For instance: M.1313 – Danish Crown/Vestjyske Slagterier, M.2662 – Danish Crown/Steff Houlberg and M.7565 – Danish Crown/Tican.

[18]        The main ones being: purchase of live pigs for slaughtering; sale of fresh pig meat for further processing; sale of  fresh  pig  meat
       for direct human consumption; sale of processed meat products; animal by-products.

[19]        See, for instance, M.3605 – Sovion / HMG, paragraphs 13–16, and M.3968 – Sovion / Südfleisch, paragraph 14. According to  the  German
       Bundeskartellamt (Federal Cartel Office) in its decision B2-36/11 Tönnies/Tummel, 'Der Absatz von zerlegtem Schweinefleisch und der Absatz
       von zerlegtem Sauenfleisch gehören jeweils eigenständigen sachlichen Märkten an. Schweine- und Sauenfleisch unter-scheiden sich  in  ihren
       Eigenschaften, in den Absatzkanälen, im Preis und im Exportvolumen erheblich' (paragraph 98) ('The sale of de-boned pig meat and the  sale
       of de-boned sow meat belong to separate product markets. Pig and sow meat differ significantly in  their  properties,  their  distribution
       channels, their price and the volume of their exports.'). The Bundeskartellamt thus viewed the distribution markets for sow meat  and  pig
       meat as distinct (see also paragraph 53 of its decision).

[20]        This means for instance that sausages made of sow meat qualify for QS certification if the entire production process and all  interim
       products are QS-certified (breeding of sows, slaughtering, cutting, de-boning, production of the end products) (a competitor's  submission
       of 13 November 2015, section 1.4).

[21]  See replies to Question 5.1 of Q1– Questionnaire to de-boners. This questionnaire was addressed to de-boners established in  Germany  only.
       The relevant IFS for the supply of meat for further processing is IFS Food.

[22]  As an example, Westfleisch, which is IFS-certified, also procures sow carcasses from suppliers without IFS certification.

[23]  See reply of 13 November 2015 to Question 2 of Request for information sent on 10 November 2015 (RFI 5).

[24]        M.3986 – Sovion / Südfleisch, paragraph 11.

[25]        M.3968 – Sovion / Südfleisch, paragraphs13–14; M.3605 – Sovion / HMG, paragraphs 13–16; and M.3337 –  Best  Agrifund  /  Nordfleisch,
       paragraph 8.

[26]        See replies to Questions 7 and 7.1 of Q1– Questionnaire to de-boners.

[27]        Such differences are further described in paragraphs (43) and (46).

[28]        See replies to Questions 8 and 8.1 of Q1 – Questionnaire to de-boners.

[29]        See replies to Questions 9, 14, 14.1 and 14.2 of Q1 – Questionnaire to de-boners.

[30]  See replies to Questions 15 and 15.1 of Q1 – Questionnaire to de-boners. See also the submissions from a French market  participant  of  16
       November 2015 and of 23 November 2015 according to which the de-boning market is now cross-border  and  includes  in  particular  Germany,
       Denmark, Benelux, and France. The French market participant considers that the same applies to the markets for slaughtering,  cutting  and
       processing (e.g. French producers would have delivered more than     88 000 living sows to Germany for slaughtering in 2014).

[31]  See replies to Questions 16 and 16.1 of Q1 – Questionnaire to de-boners.

[32]  See replies to Questions 15 and 16 (including sub-questions) of Q1 – Questionnaire to de-boners.

[33]  See, for instance, M.3968 – Sovion / Südfleisch, paragraphs 13–14; and M.3605 – Sovion / HMG, paragraphs 13–16.  See  also  M.3337  –  Best
       Agrifund / Nordfleisch, paragraphs 8 and 23–24, where it was nonetheless left open whether the slaughtering of pigs and sows belong to the
       same relevant market. The German Competition Authority has in the recent Tönnies/Tummel case (Beschluss B 2 –  36/11  –  Tönnies  /  Heinz
       Tummel GmbH & Co. KG and others, paragraph 98) distinguished between the supply of fresh sow meat and  fresh  pig  meat.  On  appeal,  the
       Düsseldorf Higher Regional Court did not overrule that distinction (Decision of 1 July 2015, VI-Kart 8/11, paragraph 205).

[34]  See, for instance, the Danish quality assurance system QSG (Quality and Safety Guarantee System), the Belgian Certus scheme  or  the  Dutch
       standard IKB.

[35]  See replies to Questions 12 and 12.1 of Q1 – Questionnaire to de-boners; replies to Question 8 of Q2 – Questionnaire  to  meat  processors.
       This questionnaire was addressed to meat processors established in Germany only.

[36]  See replies to Questions 8.1, 11 and 11.1 of Q1 – Questionnaire to de-boners; replies to  Question  8.1  of  Q2  –  Questionnaire  to  meat
       processors.

[37]  See replies to Questions 9 and 9.1 of Q2 – Questionnaire to meat processors.

[38]  See replies to Questions 9.2 of Q1 – Questionnaire to de-boners;  replies  to  Questions  12  and  12.1  of  Q2  –  Questionnaire  to  meat
       processors.

[39]        See agreed minutes of a call with a market participant on 18 September 2015.

[40]        See, for instance M.7565 – Danish Crown / Tican, Article 9 decision, paragraphs 47–48. See  also  M.7565  –  Danish  Crown  /  Tican,
       Article 6 decision, paragraphs 34–35. In its recent decision B2-36/11 Tönnies / Tummel, the German Bundeskartellamt found the  market  for
       the supply of fresh sow meat to be national for Germany (paragraphs 142–148). On appeal, the Düsseldorf Higher Regional  Court  left  open
       how to define the geographic market for fresh sow meat (Decision of 1 July 2015, VI-Kart 8/11, paragraph 205). See also M.3968 – Sovion  /
       Südfleisch, paragraphs 65–66; M.3522 – Danish Crown / HK / Sokolow, paragraph 15; M.3401 – Danish Crown / Flagship  Foods,  paragraph  10;
       M.3337 – Best Agrifund / Nordfleisch, paragraph 25; and M.2662 – Danish Crown / Steff-Houlberg, Article  9  decision,  paragraph  65,  and
       M.2662 – Danish Crown / Steff-Houlberg, Article 6 decision, paragraph 22.

[41]        M.3605 – Sovion / HMG, paragraph 74; and M.1313 – Danish Crown / Vestjyske Slagterier, paragraph 95.

[42]        See replies to Questions 13 and 14 (including sub-questions) of Q2 – Questionnaire to meat processors.

[43]        See replies to Questions 15, 15.1, 16 and 16.1 of Q2 – Questionnaire to meat processors.  See  also  the  submission  from  a  French
       market participant of 16 November 2015 according to which the market of fresh pig and sow meat is wider than national.

[44]  The techniques of fresh meat packing make it possible to sell fresh meat across Europe.  Besides,  according  to  the  submissions  from  a
       French market participant of 16 November 2015 and 23 November 2015, since transport costs are below the competitive advantages enjoyed  by
       German producers, they do not hinder trading of fresh meat at EU level. This market participant also points at alleged practices  of  VAT-
       related tax dumping in Germany, which would constitute State aid; it also refers to alleged social dumping measures (e.g.  massive  hiring
       of low-paid staff seconded from other Member States), Upon scrutiny, the above issues, which are qualified as undue competitive advantages
       by the market participant, would not be merger-specific. Any decision regarding a possible State aid would have no direct effects  on  the
       assessment of the Transaction under the Merger Regulation.

[45]  At EU level, Danish Crown and Westfleisch account for [10-20]% of the total volumes of fresh  sow  and  pig  meat  for  further  processing
       including captive sales (Danish Crown [10-20]%,  Westfleisch  [5-10]%)  and  [10-20]%  excluding  captive  sales  (Danish  Crown  [5-10]%,
       Westfleisch [5-10]%).

[46]        […].

[47]  Post-transaction, WestCrown will become active on that market by taking over Westfleisch's activities of  supply  of  fresh  sow  meat  for
       further processing. Since Danish Crown does not supply fresh sow meat for further processing,  it  will  not  transfer  to  WestCrown  any
       activity on the market for supply of fresh sow and pig meat for further processing. For the assessment of the impact of the Danish Crown's
       exclusive supply of sow carcasses to WestCrown, see Section 5.2.

[48]  For the activities of WestCrown on that market: see footnote 47.

[49]        For the activities of WestCrown on that market: see footnote 47.

[50]        The Danish quality assurance system QSG (Quality and Safety Guarantee System) is recognised by the QS scheme.

[51]        The Dutch IKB (Integrated Chain Control) system is recognised by the QS scheme.

[52]        The Belgian Certus system is recognised by the QS scheme.

[53]        See replies to Question 34 of Q2 – Questionnaire to meat processors.

[54]        See replies to Questions 17 and 18 of Q2 – Questionnaire to meat processors.

[55]        See replies to Questions 15 and 15.1 of Q2 – Questionnaire to meat processors.

[56]        See replies to Question 8 of Q5 - Questionnaire to EEA slaughterhouses, to Question 8 of Q4 – Questionnaire to EEA de-boners and  the
       agreed minutes of a conference call with a market participant on 18 September 2015.

[57]        See replies to Question 10 (and sub-questions) of Q4 - Questionnaire to EEA de-boners and agreed minutes of a conference call with  a
       Belgian sow and pig de-boner on 12 November 2015. For Denmark, compliance with the  QSG  standard  (equivalent  to  the  QS  standard)  is
       required by law, hence all farmers are QS-certified. The limited capacity of  production  of  QS-certified  sows  is  linked  to  farmers'
       financial difficulties which reduce their ability to expand. For Belgium, the limited capacity  of  production  of  QS-certified  sows  is
       rather linked to the low number of QS-certified farms producing sows. The same is valid for France where, according to the submission from
       a French market participant of 23 November 2015, basically no QS-certified farm is present. The situation in France would result e.g. from
       the lack of equivalence between the French quality certifications for farming and the QS certification.

[58]        According to a competitor's submission received on 30 November 2015, the market share of WestCrown in the market of  "sow  slaughters
       in Germany without Tönnies and Vion" would reach [50-60]% in 2014. This market share corresponds to the addition of the  estimated  market
       shares of Danish Crown ([20-30]%) and of Westfleisch ([30-40]%) in 2014. The submission defines the  market  of  "sow  slaughters  without
       Tönnies and Vion" as comprising slaughtering and de-boning of sows and excluding the sow carcasses which would be produced by Tönnies  and
       Vion since those are integrated companies (the sow carcasses Tönnies and  Vion  produce  are  deemed  used  for  their  own  needs,  hence
       unavailable for third parties).

            The Commission considers that the hypothetical market share of  WestCrown  in  2014  is  overestimated,  due  to  (i)  a  significant
       overestimation of the market shares of Danish Crown and Westfleisch on the possible market of sow slaughtering, probably resulting from an
       overestimated ratio between the number of pigs and sows slaughtered by Danish Crown and Westfleisch (see reply of 1 December 2015  to  the
       Request for information sent on 30 November 2015 (RFI 10)); (ii) the discrepancy in  the  treatment  of  the  sow  carcasses  produced  by
       Westfleisch compared to the treatment of sow carcasses produced by Tönnies or Vion. Westfleisch is also integrated and does not supply sow
       carcasses to third parties (all sow carcasses produced by Westfleisch are de-boned by Westfleisch); (iii) an  unclear  definition  of  the
       market on which the Parties and WestCrown are active,  which  is  extrapolated  via  data,  assumptions  and  calculations  from  the  pig
       slaughtering activity.

            Those elements lead also to a biased analysis of the closeness of the competition between Westfleisch and Danish Crown. In fact, pre-
       Transaction, Westfleisch and Danish Crown do not compete for sow-related products as they are not present  on  the  same  markets  (Danish
       Crown is only present on the upstream market of supply of sow carcasses to  third  parties  while  only  Westfleisch  is  present  on  the
       downstream market of supply of fresh sow meat for further processing). The need to separate those two markets is even acknowledged by  the
       competitor's submission (for example, the submission mentions that 'Although the markets of slaughtering and de-boning have to be  treated
       separately, it has to be stated that Westfleisch and Danish Crown are close  competitors  in  the  market  of  sow  slaughters,  which  is
       exemplified by the relatively high market shares in the market of sow slaughters').

[59]        The market investigation confirmed that the price for QS-certified sow meat is the same as the price for non QS-certified sow meat.

[60]        See Section 1.2 JVA (annex 3 to the Form CO).

[61]  It should be noted that Westfleisch does not supply sow carcasses to third parties while Danish Crown supplies […] to Germany.  Should  the
       geographic market be wider than Germany, the Parties' market shares in the supply of sow  carcasses  for  de-boning  would  thus  only  be
       diluted through the supply of sow carcasses to de-boners in neighbouring countries by third parties, if any.

[62]  See, for instance, Guidelines on the assessment of non-horizontal mergers under the Council regulation on  the  control  of  concentrations
       between undertakings, OJ C 265, 18.10.2008, p. 7 ('Non-Horizontal Guidelines'), paragraphs 29 and 30.

[63]  See, for instance, Non-Horizontal Guidelines, paragraph 31.

[64]  See, for instance, Non-Horizontal Guidelines, paragraph 58.

[65]  See, for instance, Non-Horizontal Guidelines, paragraphs 32 and 59.

[66]        See replies to Question 21 of Q1 – Questionnaire to de-boners.

[67]        See replies to Question 10 of Q5 – Questionnaire to EEA  slaughterhouses  and  the  agreed  minutes  of  a  conference  call  with  a
       slaughterhouse on 1 October 2015.

[68]  See replies to Questions 28–31 of Q1 – Questionnaire to de-boners.

[69]        Submissions of a competitor received on 13 November 2015 and on 30 November 2015.

[70]        See replies to Questions 26–31 of Q2 – Questionnaire to meat processors.

[71]        See, for instance, Non-Horizontal Guidelines, paragraph 50.

[72]        See, for instance, 'When determining the extent to which input foreclosure may  occur,  it  must  be  taken  into  account  that  the
       decision of the merged entity to rely on its upstream division's supply of inputs may also free up capacity on the part of  the  remaining
       input suppliers from which the downstream division used to purchase before.' (Non-Horizontal Guidelines, paragraph 37).

[73]        See replies to Questions 9 and 10 of Q2 – Questionnaire to meat processors.

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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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