CELEX: 32012M6606
Language: en
Date: 2012-06-29 00:00:00
Title: Commission Decision of 29/06/2012 declaring a concentration to be compatible with the common market (Case No COMP/M.6606 - TOSHIBA / IBM'S RETAIL STORES SOLUTIONS BUSINESS) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

Important legal notice

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32012M6606

Commission Decision of 29/06/2012 declaring a concentration to be compatible with the common market (Case No COMP/M.6606 - TOSHIBA / IBM'S RETAIL STORES SOLUTIONS BUSINESS) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)  

          |EUROPEAN COMMISSION     |
             Brussels, 29.06.2012
              In the published version of this decision, some i n formation has been omitted pursuant to Article 17(2) of Council Regulation (EC) No  139/2004  concer n ing non-disclosure of business secrets and other co n fidential information. The omissions are shown thus […]. Where possible the information omitted has been replaced by ranges of figures or a general d e scription. C(2012) 4632
             PUBLIC VERSION
             MERGER PROCEDURE ARTICLE 6(1)(b) DECISION
               |          To the notifying parties:   |
              
             Dear Sir/Madam,
             Subject: Case No COMP/M.6606 – TOSHIBA/ IBM'S RETAIL STORES SOLUTIONS BUSINESS 
             Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004 [1]  
            1.  On 24 May 2012, the European Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 (the “Merger Regulation”), according to which Toshiba Tec Corporation (“Tec”, Japan) controlled by Toshiba Corporation ("Toshiba", Japan), together the Notifying Parties,  intends to acquire within the meaning of Article 3(1)(b) of the Merger Regulation control of International Business Machines Corporation's ("IBM", United States of America) Retail Store Solutions business (“RSS”) by way of purchase of assets (the "Transaction").
            I.  THE PARTIES
            2.  Toshiba is a diversified manufacturer, providing a wide range of products and services on a global basis in four business domains: Digital Products, Electronic Devices, Social Infrastructure and Home Appliances. 
            3.  Tec is a majority owned subsidiary of Toshiba that falls within Toshiba’s Digital Products business domain. Tec manufactures and markets products and business solutions in four core areas: (i) retail solutions, (ii) office solutions, (iii) supply chain solutions and (iv) inkjet heads.
            4.  IBM is a U.S. public company active worldwide in the development, production, and marketing of a wide variety of information technology solutions. IBM's RSS business is active within IBM's system and technology business segment and is involved in the development and distribution of retail solutions, including point-of-sale (“POS”) systems, self-service-systems, and related maintenance and technical support services ("MTS").
            II.  THE CONCENTRATION
            5.  Pursuant to a Master Asset Purchase Agreement dated 17 April 2012 (the “MAPA”), Tec agreed to acquire sole control of assets relating to RSS. As part of the Transaction, Tec will also acquire sole control of two IBM subsidiaries in Turkey and Italy that are dedicated to the RSS business. 
            6.  The Transaction constitutes a concentration within the meaning of Article 3(1)(b) of the EU Merger Regulation.
            III.  EU DIMENSION
            7.  The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million [2]   (Toshiba: EUR 56 533 million, IBM RSS: EUR […]) in the last financial year and each achieve more than EUR 100 million EU-wide (Toshiba: […], RSS: EUR […]). There are no Member States in which more than two-thirds of their aggregate EU-wide turnover is achieved. The combined aggregate turnover of all undertakings concerned exceeds EUR 100 million in Finland, France, Germany, Hungary, Italy, Netherlands, Poland, Portugal, Spain and the United Kingdom. In [three of those EU Members States], both undertakings achieve revenues of more than EUR 25 million each. The Transaction therefore has an EU dimension within the meaning of Article 1(3) of the Merger Regulation.
            IV.  RELEVANT MARKETS
            A.  Introduction
            8.  Retail solutions are integrated systems of hardware and software solutions that are used for processing sales transactions by retail store customers. Retails Solutions are typically capable of connecting and interoperating with a retailer’s other IT and software systems. Therefore, they are often distinguished from electronic cash registers that tend to operate independently or with more limited connectivity to other computing systems. 
            B.  Product markets
              All retails solutions vs. product segments
            9.  All retail solutions are generally referred to as POS systems and they can generally contain either a touch screen or keyboard interface. Industry analysts [3]   report sales of (i) traditional, cashier-operated POS Systems separately from sales of (ii) PC-On-Cash-Drawer (“PCCD") systems, which is a category of lower cost retail solutions offered in particular by some PC manufacturers and (iii) self-service-systems. Self-service-systems consist of the sub-segments self-service-kiosks ("SSK") and self-service-check-out ("SSC") systems.  (iv) Peripheral devices such as POS receipt printers constitute further product segments. According to the Notifying Parties, customers typically purchase receipt printers together with the underlying retail solution or as replacement parts but can also purchase these from non-integrated suppliers (such as Epson). 
            10.  The Notifying Parties submit that the relevant product market is properly defined as the sale of all retail solutions irrespective of the particular type of solution. Retail solutions are designed to enable retailers to perform the same basic functions – that is, to process sales transactions with their customers quickly and efficiently, maintain records and data related to such sales, interoperate with the retailer’s other IT systems and enterprise applications, and enhance the ability of retailers to expand sales through increased customer satisfaction and loyalty programs. Likewise, touch screen and keyboard-based systems perform the same functionality. From a supply side perspective, most suppliers of retail solutions offer a similar variety of systems to satisfy customers across multiple industries or customers with slightly different preferences (such as touch screen POS system vs. keyboard POS system). Thus, customers have a similar selection of suppliers regardless of their specific preferences for certain types of retail solutions.
            11.  In previous Commission decisions, all retail solutions were considered as a relevant market but the Commission ultimately left open the precise definition of the product market. 
            12.  The market investigation was inconclusive as to whether the relevant product market is properly defined as the sale of all retail solutions, irrespective of the particular type of retail solution. Neither customers nor competitors responding to the market investigation expressed a sufficiently unified view in this respect. 
              Customer segments
            13.  Industry analysts and market participants segment the sale of retail solutions based on the customer’s industry vertical such as (i) food retailers and supermarkets, (ii) drug stores, (iii) superstores, warehouses and hypermarkets, (iv) department stores, (v) mass merchandisers, (vi) convenience stores and petroleum outlets, (vii) speciality stores, and hospitality providers (restaurants, hotels/ lodging).
            14.  The Notifying Parties submit that customer segments do not constitute separate markets. Retail solution suppliers offer the same solutions to customers across multiple industry verticals and many suppliers also achieve sales across all or multiple customer groups. 
            15.  The market investigation was inconclusive as to whether the different customer segments do constitute separate markets. Even if the majority of the competitors is of the opinion that retail solutions for specific customer groups do not constitute different product markets, most of the competitors indicated that the systems would be significantly customised to the specific needs of each customer segment. One third of the customers active in various customer segments responded that the systems they purchase for different segments would be significantly customised.   
              Maintenance and technical support services
            16.  Tec and RSS derive a significant part of their revenue from Maintenance and Technical Support ("MTS") services in connection with the installation, repair and support (including software upgrades) of their retail solutions.  The Notifying Parties submit that both, from a demand-side and supply-side perspective, MTS services relating to retail solutions do not constitute separate markets. The demand for MTS services is strongly linked to the customers’ demand for the POS or self-service-systems requiring MTS services and all major retail solution suppliers offer these services. MTS services are typically purchased together and usually from the same supplier of the underlying retail solution system. Tec and other retail solution suppliers provide MTS Services for products of other vendors, these services are typically for complementary products/ peripheral devices offered by other vendors, such as payment terminals or authorization systems (e.g., PIN or signature pads), receipt printers, or retail scanners, as customers may want a single maintenance contract for all of its stores’ hardware systems.  Customers may also decide to purchase MTS services from a vendor other than their retail solutions supplier (usually only after the initial warranty period expires). These services are often provided to customers by authorized distribution partners of retail solutions suppliers and independent service providers. System integrators and independent software vendors that market their own POS software solutions also offer their own MTS Services to support their customers. [A minority] of Tec’s sales within the EEA are made through distribution partners, and the Notifying Parties estimate that [the vast majority] of these customers are also purchasing MTS Services from a Tec business partner or an independent service provider. After expiration of the initial warranty period, many retail solutions customers choose to provide their own maintenance support. 
            17.  The market investigation confirmed the Notifying Parties' view that MTS services relating to retail solutions do not constitute separate markets. A vast majority of the respondents to the market investigation is of the opinion that MTS services are related to retail solutions.
             Conclusion on the relevant product market
            18.  For the purpose of evaluating this Transaction, the precise definition of the relevant product market(s) can be left open as the Transaction will have no adverse effect on any conceivable relevant market.
            C.  Geographic market
            19.  The Notifying Parties submit that the relevant geographic market is at least EEA-wide. In support of its views, it maintains that transportation costs for retail solutions are low, producers can supply products from a single global or regional facility, and average prices for the various types of retail solutions are nearly similar worldwide. Tec produces all of its retail solutions in Asia and distributes them globally, and RSS also currently sources some of its POS and SSC Systems from a single global production facility to support sales throughout the world. Furthermore, the retail solutions sold throughout the world and within the EEA typically have the same features, and customers do not have strong preferences for particular brands or products manufactured by local or regional suppliers. While the software systems must be adapted for the language and currency used at the retail store location, RSS and many suppliers offer retail solutions that can be configured to function in multiple languages and currencies and therefore can compete globally. 
            20.  In a previous decision [4]  , the relevant geographic market for retail solutions was found to be EEA-wide but in more recent decisions [5]  , the Commission left open the precise geographic market definition. 
            21.  The market investigation confirmed that the relevant geographic market for retail solutions is at least EEA-wide. A vast majority of the participants replied that the geographic cope is EEA-wide or world-wide. 
             Conclusion on the relevant geographic market
            22.  For the purpose of evaluating this Transaction, the precise definition of the relevant geographic market(s), that is EEA-wide or worldwide, can be left open as the Transaction will have no adverse effect on any conceivable relevant market.
            V.  COMPETITIVE ASSESSMENT
            A.  Competitors and market shares
            23.  The below table 1 shows that if all retail solutions are considered to be a relevant market, the Parties’ combined market share in 2011 in the EEA is approximately [10-20]%. The incremental share gain resulting from the Transaction would be only [0-5]% due to Tec’s limited sales in the EEA. The parties combined worldwide market share would be [10-20]%.
             Table 1: Estimated market shares (in %) retail solutions [6]   
            Product market /Geographic scope |EEA |Worldwide |
             |IBM |TEC |Combined |IBM |TEC |Combined |
            Retail solutions (POS System including  PCCD & self-service-systems) |[10-20] |[0-5] |[10-20] |[10-20] |[0-5] |[10-20] |
            POS system (excluding PCCD & self-service-systems) |[10-20] |[0-5] |[20-30] |[10-20] |[5-10] |[20-30] |
            Self-service-check-out systems (SSC) |[5-10] |[0-5] |[5-10] |[10-20] |[0-5] |[10-20] |
            Self-service-kiosks (SSK) |[10-20] |[0-5] |[10-20] |[5-10] |[0-5] |[5-10] |
              
            24.  If the specific product segments of retail solutions (such as POS Systems, PCCD, self-service systems with its sub-segments SSC and SSK systems) are considered to be relevant product markets, the only affected market would be the traditional, cashier-operated POS Systems (excluding PCCD & self-service-systems) with a combined 2010 share in the EEA of [20-30]% and worldwide of [20-30]%. 
            25.  If each customer segment is considered to be a separate relevant market, table 2 below shows that the following segments would be affected: Food/Supermarket, Drug stores, Department stores, Convenience/Gas stores, Hospitality. However, the Parties’ combined share of shipments in all of these retail customer segments is less than [10-20] %within the EEA in 2011 except for the Convenience and Gas store and Hospitality segments. In these segments, RSS accounts for [30-40]% and [30-40]% of sales in the EEA while Tec accounts for approximately [0-5]% of sales in each segment. 
             Table 2: Estimated 2011 market shares (in %) retail solutions in the EEA per customer group [7]  
            Customer Segment |IBM |Tec |Combined |
            Food retailer/ Supermarket |[10-20]% |[0-5]% |[10-20]% |
            Drug stores |[10-20]% |[0-5]% |[10-20]% |
            Superstore/Warehouse/ Hypermarket |[5-10]% |[0-5]% |[10-20]% |
            Department stores |[10-20]% |[0-5]% |[10-20]% |
            Mass merchandiser |[10-20]% |[0-5]% |[10-20]% |
            Convenience/Gas store |[30-40]% |[0-5]% |[40-50]% |
            Specialty Store |[5-10]% |[0-5]% |[5-10]% |
            Hospitality (hotels, restaurants, etc.) |[30-40]% |[0-5]% |[30-40]% |
            26.  The market for MTS Services is more fragmented than the retail solutions market because these services are sometimes provided to customers by distribution partners and independent service providers rather than their retail solutions provider. The Parties’ combined share in any MTS Service market therefore would not exceed its share of the installed base of retail solution customers. The Parties’ combined share of the installed base of retail solution customers in the EEA is less than [20-30]% (IBM: [10-20]%; Tec: [0-5]%).
            B.  Non-coordinated effects
             Horizontal overlaps
            27.  The Notifying Parties submit that the combined business will continue to face significant competition from at least five competitors with a share greater than 5% in each segment, including NCR/Radiant, HP, Gilbarco Veeder-Root, Wincor Nixdorf, Micros, Par, Epson, and Dell, as well as many others. This is also true if a market according to customer segments were to be defined. In addition in the Convenience and Gas store segment NCR and HP have a market share of [10-20]% and [5-10]% respectively. In the Hospitality segment Micros and HP have a market share of [10-20]% and [10-20]% respectively. Moreover, HP is currently the world’s largest global supplier of all retail solutions with a share of [10-20]%. The Parties’ combined share in 2011 was [10-20]%.
            28.  Furthermore, the notifying Parties submit that customers can easily deter any attempt by the combined firm to raise prices unilaterally by choosing retail solutions from these alternative suppliers. Finally, it maintains that within the EEA, RSS competes more frequently against HP, NCR, Wincor Nixdorf, and Fujitsu than Tec. 
            29.  The market investigation confirmed that switching suppliers is a real option for the customers. A vast majority of responding customers indicated that they could and would switch to alternative suppliers in case of a 10% price increase. 
            30.  All respondents to the market investigation said that a sufficiently large number of competitors will continue to compete in the retail solutions business with the merged company. The results of the market investigation further showed that RSS and Toshiba Tec are not the closest competitors. The market investigation confirmed that RSS's closest competitors are NCR and Wincor Nixdorf. No customer or competitor raised concerns as to the impact of the Transaction on the competition in the retail solutions market in the EEA or worldwide. 
            31.  In view of the above, the Transaction does not raise serious doubts as to its compatibility with the internal market with respect to the market for retail solutions or any of its possible sub-segments.
             Vertical overlaps
            32.  The Target Business does not currently supply retail solutions vendors with key input or component used in retail solutions. While Toshiba sells hard disk drives and semiconductors used in retail solutions, it does not account for more than 25% of the global market for these products. Therefore, the Transaction will not give rise to vertically affected markets and competing retail solution suppliers will continue to be able to purchase these components from multiple vendors.
            C.  Coordinated effects
            33.  Given the large number of suppliers and the differentiated nature of Retail Solutions, the Transaction does not give rise to serious doubts as to the compatibility with the internal market in relation to coordinated effects.
            VI.  CONCLUSION
            34.  For the above reasons, the Commission has decided not to oppose the notified Transaction 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)  Neelie KROES  Vice-President
            [1]  OJ L 24, 29.1.2004, p. 1 ("the Merger Regulation"). With effect from 1 December 2009, the Treaty on the Functioning of the European Union ("TFEU") has introduced certain changes, such as the replacement of "Community" by "Union" and "common market" by "internal market". The terminology of the TFEU will be used throughout this decision.
            [2]  Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission Consolidated Jurisdictional Notice (OJ C95, 16.04.2008, p. 1).
            [3]  Par example VDC Research
            [4]  See Commission decision of 18 January 1991 in Case No IV/M.050 – AT&T/NCR, recital 13.
            [5]  See Commission decision of 15 June 2004 in Case No COMP/M.3437 KKR/Vendex, recital 14; Commission decision of 17 December 1999 in Case No COMP/M.1765 – KKR Associates/Siemens Nixdorf Retail and Banking Systems, recital 9.
            [6]  All retail solutions share data (POS Systems including PCCD & self-service-systems) is based on 2011 shipment estimates from IHL Consulting (EMEA and worldwide).  Estimates for POS Systems, SSC Systems and SSKs are based on 2010 shipment estimates from VDC Research (EMEA and worldwide). VDC’s estimated shares of the EMEA market are a reasonably close proxy for the Parties’ share of sales in the EEA, as approximately 90% of VDC’s estimated total POS System sales for all vendors are derived from countries within Europe (rather than the Middle East or Africa).  Similarly, although IHL only publishes country specific market size data for select countries, more than 80% of its reported EMEA sales are derived from countries within the EEA.
            [7]  All retail solutions share data (POS Systems including PCCD & self-service-systems) is based on 2011 shipment estimates from IHL Consulting.  IHL's estimated shares of the EMEA market are a reasonably close proxy for the Parties’ share of sales in the EEA, IHL only publishes country specific market size data for select countries, more than 80% of its reported EMEA sales are derived from countries within the EEA.