CELEX: 32014M7353
Language: en
Date: 2014-11-26 00:00:00
Title: Commission Decision of 26/11/2014 declaring a concentration to be compatible with the common market (Case No COMP/M.7353 - AIRBUS / SAFRAN / JV) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 26.11.2014
C(2014) 9165 final

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|                                                                   |To the notifying parties:                                          |
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Dear Madam(s) and/or Sir(s),

Subject:    Case M.7353 – Airbus/ Safran/ JV
Commission decision pursuant to Article 6(1)(b) in conjunction with Article 6(2) of Council Regulation  No 139/2004[1]  and  Article  57  of  the
Agreement on the European Economic Area[2]

 1) On 8 October 2014, the European Commission received notification of a proposed concentration pursuant to Article 4 of the Merger  Regulation
    by which the undertaking Airbus Group N.V. ("Airbus") and the undertaking Safran S.A. ("Safran") create within the meaning of  Article  3(4)
    of the Merger Regulation a joint venture  performing  on  a  lasting  basis  all  the  functions  of  an  autonomous  economic  entity  (the
    "Transaction"). Airbus and Safran hereinafter are referred to as the "Parties" and the joint venture established by the Transaction  as  the
    "Joint Venture".

   The Parties

 2) Airbus is a Dutch-based company active in aeronautics, space and defence. Through its division Defence and Space, in particular its business
    line Space systems, Airbus designs, manufactures and sells worldwide civil space launchers, launcher subsystems and  equipment,  satellites,
    satellite subsystems and equipment. Airbus is also active in the field of strategic and tactical missiles.

 3) Safran is a French-based company active in aerospace propulsion, aircraft equipment, defence and security. Through its Aerospace  propulsion
    business, Safran produces liquid rocket and solid rocket motors propulsion systems for launchers as well as electric  propulsion  subsystems
    for satellites. Safran is also active in the field of strategic and tactical propulsion for missiles.

   The OperatIon AND Concentration

 4) The Transaction consists of the creation of a 50/50-owned joint venture,  to  which  the  Parties  intend  to  contribute  their  respective
    activities in space launchers, satellite systems and subsystems and missile propulsion.

 5) According to the Memorandum of Understanding of 10 June 2014 and the Term Sheet of 30 July 2014 ("Term Sheet"), the Parties will  contribute
    to the Joint Venture the following activities: (i) Airbus' activities as prime contractor for the development and manufacturing of  European
    civil space launchers, as well as a supplier of related subsystems and equipment;  (ii)  Airbus'  and  Safran's  stakes  in  Arianespace  of
    respectively 28.5 % and 10.6 %;[3] (iii) Safran's activities as a supplier of civil space launcher propulsion systems and related subsystems
    and equipment; (iv) Airbus' and Safran's activities in satellite propulsion (electric and chemical)  and  other  satellite  subsystems;  (v)
    Airbus' and Safran's activities related to strategic missiles; and (vi) Safran's tactical propulsion activities.  Airbus'  activities  as  a
    prime satellite contractor will not be contributed to the Joint Venture.

 6) According to the Parties, the Transaction would rationalise the industrial organisation of the launcher industry in order  to  significantly
    reduce costs and improve competitiveness of the European launcher business.

 7) The Transaction will be implemented in two phases. In the first phase, […]. In the second phase, […].

 8) Upon completion of the Transaction, the Joint Venture will have sufficient financial resources and assets, as well as  dedicated  management
    and staff, to conduct on a lasting basis the functions of an autonomous economic entity. According to the Term Sheet "[…]". Besides, as also
    indicated in the Term Sheet: "[…]".

 9) Consequently, the Transaction constitutes the creation of a joint venture performing on a lasting basis all the functions of  an  autonomous
    entity within the meaning of Article 3(4) of the Merger Regulation and, therefore, a concentration within the meaning of Article 3(1)(b)  of
    the Merger Regulation.

   JURISDICTION

10) The Joint Venture will have 39 % of the capital of Arianespace with the remaining participations of the Parties (less than 5 %) kept outside
    the Joint Venture. The French Space Agency ("CNES") will be the second largest shareholder in Arianespace with a 35 % stake, followed by  MT
    Aerospace (Germany) with 8 %, RUAG (Switzerland and Sweden), Avio (Italy) and SABCA (Belgium) with participations of around 3 % each.

11) During the Commission's investigation, some concerns were raised as  regards  the  increase  of  the  Parties'  influence  in  Arianespace's
    activities.[4] Some respondents to the Commission's investigation mentioned that the combination of the Parties' stakes in  Arianespace  may
    result in a transfer of control of Arianespace to the Joint Venture. However, the Commission considers that the Transaction would not result
    in a change of control of Arianespace for the following reasons.

    No acquisition of sole control over Arianespace

12) The Commission considers that subsequent to the Transaction the Parties will not be able to exercise any voting rights or other forms of  de
    jure or de facto sole control over Arianespace.

13) The Commission's investigation confirmed that in Arianespace the strategic decisions are taken by simple majority of the  Board  members.[5]
    Additionally, the Board members are appointed by the ordinary  shareholder's  meeting  by  simple  majority  and  the  attendance  rates  at
    shareholder meetings are systematically very high.

14) Currently, Airbus appoints three administrators and Safran only one out of 12 and post-Transaction the total contribution  of  the  Parties'
    participations in Arianespace to the Joint Venture will be 39 %. Therefore, the Joint Venture would not be in a  position  to  exercise  any
    sole control over Arianespace.

15) In addition, pursuant to the Launchers Exploitation Arrangement ("LEA")[6] between the European Space Agency ("ESA") and Arianespace,  which
    entrusts the commercial exploitation of ESA's launchers to Arianespace,  ESA  has  the  power  to  request  any  information  regarding  the
    activities of Arianespace and has a role of censor in Arianespace.

16) […].[7]

17) […]. The censor role in Arianespace thus gives ESA and its Member States considerable influence on Arianespace’s main strategic decisions.

18) According to Arianespace, the combination of the Parties' shareholdings will neither change anything in terms of governance of  Arianespace,
    nor in terms of access to information about Arianespace's operations between the different participants  (shareholders  and  customers).  In
    fact, both ESA and CNES' roles ensure the neutrality of Arianespace.[8]

    No acquisition of joint control over Arianespace

19) The Commission considers that the Transaction will not lead to an acquisition of joint control  over  Arianespace  by  CNES  and  the  Joint
    Venture.

20) First, as set out in paragraphs (12) to (18), the Joint Venture's representation on the Board of Arianespace does not give the Joint Venture
    the possibility to block strategic decisions by exercising any veto right.

21) Second, CNES' role is to (i) ensure the neutrality of Arianespace, (ii) ensure the transparency of Arianespace's processes and (iii) prevent
    discriminatory behaviour. Under the French Space Operation Act, CNES  is  commissioned  by  the  French  government  to  monitor  the  space
    operator’s compliance with the French Space Act and its associated technical regulations. Thus, CNES' interests are not aligned  with  those
    of the Joint Venture. Consequently, the Joint Venture will not have de facto joint control together with CNES subsequent to the Transaction.

22) CNES also confirmed that the Joint Venture will not have any privileged access to information about the operations of Arianespace.

23) Finally, the strong control of ESA Member States over Arianespace (as explained in paragraphs (16) and (17)), makes any joint control  on  a
    de facto basis even more unlikely to arise.

    Future acquisition of CNES' stake in Arianespace a separate transaction

24) The Parties confirmed their intention of acquiring the CNES' stake in  Arianespace.  However,  the  Parties  submit  that  although  initial
    meetings were held with the French authorities, the negotiations to acquire CNES' stake have not been concluded at this stage.

25) CNES confirmed that […]. On […].[9]

26) The Parties also confirmed that the Transaction and the acquisition of CNES' stake in Arianespace are not linked by condition. Moreover, the
    Parties confirmed that should the acquisition of CNES' stake not materialise in the future, the Joint Venture would remain viable […].[10]

27) Finally, Arianespace confirmed as well that that the acquisition of the CNES' participation by  the  Joint  Venture  would  be  a  potential
    transaction that is separate from rather than a prerequisite for the creation of the Joint Venture.[11]

28) The Commission thus considers that the acquisition of CNES' stake in Arianespace by the Joint  Venture  would  be  a  separate  transaction.
    Consequently, the competitive impact of a possible acquisition of CNES's stake in Arianespace by the Joint Venture is not assessed  in  this
    decision.

   EU DIMENSION

29) The undertakings concerned have a combined aggregate worldwide turnover of more than EUR 5 000 million[12]  [Airbus:  EUR  59  256  million,
    Safran: EUR 14 695 million]. Each of them has an EU-wide turnover in excess of EUR 250 million [Airbus: EUR […], Safran: EUR […]], but  they
    do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State.

30) The Transaction therefore has an EU dimension within the meaning of Article 1(2) of the EU Merger Regulation.

   Introduction to the space industry

31) The Transaction involves the space industry which can be subdivided into the following main sectors: launch services, launchers  and  ground
    systems, satellites and space infrastructure.[13] Moreover, the Transaction involves the missile activities. The present  decision  analyses
    below the competitive impact of the Transaction in those areas.[14]

Figure 1: Relationship between main actors in space industry

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1. Space launchers

32) Space launchers are vehicles based on rocket engines and used to deliver space systems (satellite and space  infrastructure  elements)  into
    orbit. Depending on their class, launchers can deliver satellites of up to 10 tons to orbits varying from 160 km high (low  earth  orbit  or
    "LEO") to 36 000 km (geostationary transfer orbits or "GTO"). Launchers can usually reach a rather wide range of orbits  but  are  optimised
    for a specific orbit. In particular, launchers can be categorised between (i) launchers with GTO capacity and (ii) launchers with  only  LEO
    capacity.

33) The Parties are essentially active in the development and manufacture of launchers with GTO capacity, in particular the Ariane programme.

1. Institutional framework for the development of launchers in Europe

34) In Europe, space launchers are ordered and developed by ESA, an intergovernmental organisation with 20 Member States (18 EU  Member  States,
    Switzerland and Norway) dedicated to the exploration of space. It co-operates closely with the European Union  through  various  cooperation
    agreements.

35) ESA has a Member State funded budget of EUR 4.3 billion through which it funds various research  and  development  programmes  conducted  by
    European space industry participants including the Parties. In particular, this budget is used to fund civil space launchers  and  satellite
    programs.

36) After the initial R&D and feasibility studies,  the  programmes  essentially  consist  of  (i)  a  development  phase  including  subsequent
    production; and (ii) an exploitation phase where Ariane rockets based on the qualified design provide launch services.

37) The fleet of launchers developed by ESA today  comprises  the  Ariane  5,  the  Soyuz  and  the  Vega  rockets.  The  configuration  of  and
    specifications for the launchers are decided by the so-called "design authority", which is traditionally a national space  agency.  CNES  is
    the design authority for Ariane 5, and ELV, a joint venture between Avio and the Italian Space Agency, assumes this task for Vega.

38) The manufacturing of the launcher is entrusted to European industry participants such as the Parties. ESA selects one main  contractor,  the
    "prime contractor", which will be responsible for building the launcher, and  several  subcontractors,  which  will  produce  the  different
    launcher subsystems and equipment.

39) For a large part of those contracts ESA does not conduct open tenders, but  designates  its  industrial  partners  on  the  basis  of  those
    partners' known expertise and the so-called geographical "juste retour" principle. According  to  this  principle,  the  share  of  business
    awarded to manufacturers in a given Member State needs to be closely related to the share of financial contribution from that  Member  State
    to the respective programme.

40) This process does not always lead to the selection of the most price-competitive operators, which will be reflected in the  final  price  of
    the launcher, thus negatively impacting prices on the downstream market for the provision of launch services to satellite operators. This is
    considered a major drawback for Arianespace, the private company to which ESA has entrusted the exploitation of its launchers, which in  the
    past few years has had difficulties in competing with new, aggressive entrants on the market for launch services for commercial satellites.

2. Exploitation of launchers in Europe

41) Arianespace is a company incorporated under French law. It offers, through the fleet  of  launchers  developed  by  ESA,  commercial  launch
    services to private and institutional satellite operators on the basis of the 2008 LEA  signed  with  ESA.  For  that  purpose,  Arianespace
    procures from European suppliers the launchers which they have developed for ESA.

42) The current main launcher being exploited by Arianespace is Ariane 5 which captured 30 % of the launch of commercial satellites in 2013 (six
    out of 19 satellites launched). However, this launcher currently suffers from the relative imbalance between  commercial  and  institutional
    launch demand in Europe (non-European launch systems rely much more significantly on institutional launches). This implies that  Arianespace
    can rely only to a limited extent on institutional launches to ensure sustainability (only one institutional  satellite  was  launched  with
    Ariane 5 in 2013, out of 67 worldwide). This in turn requires that Arianespace captures a significant presence with  respect  to  commercial
    launches in order to sustain its business model.

43) Currently, Arianespace faces competition by several providers of launch services for commercial satellites.

44) Traditionally, the main competitor of Arianespace on the market for launch services for commercial satellites has been the US-based  company
    International Launch Services ("ILS"), which commercialises the Russian launch vehicle Proton M. However, competition  on  this  market  has
    increased in the past years with the entry of US companies such as SpaceX and Orbital Science Corporation, which  respectively  develop  and
    commercialise the Falcon 9 and Antares launchers, and which have adopted a very aggressive pricing policy.

45) SpaceX (Falcon 9) and ILS (Proton M) are able to  offer  low  prices  for  commercial  launches  due  to  (i)  their  access  to  guaranteed
    institutional launches and (ii) their integrated manufacturing chain.

46) It is in the context of this highly competitive environment that ESA is currently reflecting on the development of a new framework  for  its
    Ariane programme. In fact, in order for Arianespace to be competitive, there is a need for decreasing  the  price  of  a  launch  from  $[…]
    million per ton to $[…] million with a new launcher project.

3. The future of the Ariane programme

47) During a Ministerial Council held in Naples in November 2012, ESA Member States discussed potential ways to improve the  competitiveness  of
    European launchers by decreasing the price per ton in orbit of its launchers.[15] The objective would be to achieve a cost reduction of  20-
    30 %. On this occasion, it was decided to launch two complementary programmes to reach this objective.

48) The first one, Ariane 5ME, is a launcher similar to Ariane 5 with certain improvements. In particular, the upper-stage[16] of  the  launcher
    was changed to incorporate a cryogenic engine, Vinci, which will allow the launcher to re-ignite. This programme is already at  an  advanced
    phase of its development and the qualification flight is expected to take place in 2017 or 2018.

49) The second one, Ariane 6, is an entirely new launcher. The initial configuration proposed by ESA  entailed  a  solid  propulsion  first  and
    central stage, and a cryogenic upper-stage (the "PPH version").

50) ESA subsequently asked Airbus to submit an offer for Ariane 6. In June 2014 the Parties submitted a counter-proposal where the  first  stage
    would remain as initially designed, the central stage would use a cryogenic engine, and the upper-stage would be designed in  two  versions:
    Ariane 6.1, with a Vinci engine, and Ariane 6.2, with an Aestus engine, to allow for more flexibility ("the PHH version").

51) This revised proposal was discussed at the ESA Ministerial Meeting of 23 September 2014, which finally agreed on a hybrid  solution  between
    the PPH and PHH versions, such as depicted in Figure 2.

Figure 2: Ariane 6 industrial scenario

[pic]

    Source: Form CO.

52) The next ESA Ministerial Meeting will be held on 2 December 2014, on which occasion the ESA Member States will discuss whether  to  continue
    both programmes, or discontinue the Ariane 5ME programme and proceed directly with Ariane 6.[17]

53) Following discussions within the ESA/industry governance working group, the governance scheme of the new project will be based on  a  Public
    Private Partnership between ESA, CNES and the industry, to be defined and implemented by  2016,  where  the  industry  will  be  given  more
    responsibility but would in return have to bear more costs and risks associated with the programme.

54) The design authority for the Ariane 6 programme will then be transferred to Airbus/the Joint Venture pursuant to an agreement with  ESA.[18]
    Consequently, the Joint Venture will be responsible for designing the configuration of the Ariane 6 launcher.

4. Selection of prime contractors and subcontractors for Ariane 6

55) The launcher system prime contractor and the integrators for the main subsystems for Ariane 6 have already  been  selected  by  ESA  through
    direct negotiations, with respect to the development of the Ariane 6 PPH versions. In these negotiations Airbus was selected to be the prime
    contractor and Safran (through its subsidiary Snecma) to be the integrator of the cryogenic upper stage.

56) In 2013, ESA also issued a first tender for six consolidated launcher equipment ("CLEs"), for which certain manufacturers  were  preselected
    as subcontractors:

      i) CLE 1: Upper Parts, the fairing of the launcher;

     ii) CLE 2: Aerostructures, various metallic structures intended for the different stages of the launcher;

    iii) CLE 3: Insulated Motor Case, the booster composite motor case;

     iv) CLE 4: Equipped Insulated Tank, for the upper cryogenic stage;

      v) CLE 5: Thrust Vector Control; and

     vi) CLE 6: Avionics Main Systems.

57) Given that the proposed design for Ariane 6 was modified in September 2014, Airbus issued a new request for  quotation  to  the  preselected
    candidates. The final subcontractors for these CLES have not yet been decided on. So far no tender has been launched for the remaining CLEs.

2. Satellites

58) Satellites are space systems orbiting or revolving around celestial objects. Satellites are delivered into orbit by space launchers.

59) There are different types of satellites depending of their missions and the different customers (satellites operators):

      i) Commercial satellites are purchased by private satellite operators, and are used in the field of telecommunications (for example,  fixed
         telephony, mobile telephony and internet) and for television broadcasting. The main operators in Europe are SES, Intelsat, Eutelsat, and
         Hispasat.

     ii) Institutional satellites are purchased by national or supra-national space agencies  to  carry  out  specific  missions  such  as  earth
         observation, scientific missions, navigation or telecommunication.

    iii) Military satellites are purchased by ministries of defence or multinational defence organisations  such  as  NATO.  They  are  used  for
         telecommunications, and for radar and optical observation.

1. Prime contractors and subcontractors

60) Satellite operators order satellites from satellite prime contractors, which design,  develop,  manufacture  and  commercialise  satellites.
    There are three satellite prime contractors active in the EU: Airbus, OHB and  Thales  Alenia  Space  ("TAS").  Outside  the  EU,  the  main
    satellite prime contractors are Boeing and Lockheed Martin.

61) Prime contractors for commercial and institutional satellites are typically chosen through a tender organised  by  the  satellite  operator.
    They may have the capacity to manufacture in-house some of the material integrated into a satellite, but will usually need to source certain
    subsystems and/or equipment externally. For instance, many satellite prime contractors have  to  procure  propulsion  subsystems  for  their
    satellites from external suppliers. As a result, two categories of players are  active  in  the  supply  chain  for  satellites:  the  prime
    contractor and the subcontractor(s).

62) When the final customer is a private satellite operator, prime contractors are usually free to choose  their  business  partners.  When  the
    final customer is a space agency, prime contractors may be restricted in their selection of subcontractors. This is  particularly  the  case
    when ESA is funding the project, in which case the prime contractor may be subject to the juste  retour  principle  described  in  paragraph
    (39).

2. Neosat programme

63) TAS and Airbus are currently participating in a programme of ESA, led in cooperation with CNES, for the development of a new  generation  of
    satellite platforms, called Neosat. Neosat is part of ESA’s Advanced Research in Telecommunications Systems programme (ARTES-14), which aims
    at developing, qualifying and validating in orbit next-generation satellite platforms for commercial satellites.

64) The main purpose of the Neosat platform is to strengthen the European suppliers base to address the needs  of  telecommunications  satellite
    operators. It will develop several building blocks. According to ESA,[19] in the Neosat programme, items can be:

      i) unified items: TAS' and Airbus' platforms would use the same item, that is the same design and the same supplier;

     ii) interchangeable items for which TAS and Airbus would have agreed on the performances requirements and interfaces; and

    iii) core items for the strategic prime activities, specific to proprietary prime systems.

65) ESA expects the prime contractors to finalise their agreement on the common specifications for  all  items  (including  propulsion)  in  the
    upcoming months, and ESA will be checking these specifications in order to make  sure  that  the  design  will  be  useful  for  both  prime
    contractors and suppliers.

66) In the Neosat programme, the electric propulsion engine is planned to be  an  interchangeable  item.  According  to  ESA,  there  are  three
    potential suppliers for the electric thruster which could be used in this platform:

      i) Safran (Snecma) with the PPS 5000;

     ii) European Space Propulsion ("ESP", UK), with the European version of Aerojet Rocketdyne's ("Aerojet") XR 5E thruster; and

    iii) EDB Fakel ("Fakel", Russia), with the SPT 140.

   Launcher prime contracting and LAUNCHER components

3. Relevant product markets

1. Prime contracting for ESA space launchers

67) A prime contractor is responsible for the design, R&D, engineering, manufacturing and assembly of  the  launcher  in  cooperation  with  ESA
    during the development phase. Once the development is over, the prime contractor is responsible for the manufacture and sale of launchers to
    launch service providers.

68) The Commission has previously considered that the space industry could be split into (i) satellites, (ii) space infrastructure (mainly space
    stations), (iii) launch services, (iv) launchers and (v) ground systems. In all these sectors, a further distinction has to be made  between
    the prime contracting level and the equipment level.[20] However, the Commission has never analysed the prime contracting market  for  space
    launchers in the past.

69) The Parties argue that there is no open market for launcher prime contracting for the following reasons.

70) First, the Parties submit that ESA is the only customer with regards to the prime contracting of launchers development in Europe. Given  the
    unique competences required and juste retour constraints, there has never been a tender process to  select  the  prime  contractor  for  ESA
    launchers. This role has always been attributed by ESA through bilateral negotiations to the industry of the main contributing Member  State
    based on the juste retour principle. In fact, since 2003, based on its technical expertise and know-how required to act as prime  contractor
    and on the contributions of ESA Member States, Airbus has been appointed as the prime contractor of all Ariane programmes (Ariane 5,  Ariane
    5ME and Ariane 6) without any competitive tender.

71) Second, the Parties submit that Airbus has already been selected as a prime contractor in the context of the initial  PPH  configuration  of
    Ariane 6. Moreover, there are no other foreseeable launcher programmes for which a prime contractor would need to be selected in Europe.

72) Third, the Parties submit that it is not possible to change the prime contractor once it has been selected and  the  development  phase  has
    started, and even less during the exploitation phase.

73) Finally, the Parties argue that even if the Commission concluded that there existed an open market, Airbus  would  be  the  only  industrial
    player with the demonstrated capacity to be prime contractor for launchers with heavy GTO capacity.

74) In view of the fact the Transaction does not raise serious doubts as to its compatibility with the internal  market  in  relation  to  prime
    contracting for ESA space launchers, the existence of relevant market, as well as its exact scope, can be left open for the purposes of  the
    competitive assessment of the Transaction.

2. Propulsion systems for ESA space launchers

75) Propulsion systems generate the thrust that propels space launchers forward. There are two types of  propulsion  systems:  solid  propulsion
    systems, also called solid rocket motors ("SRM"), and liquid propulsion systems.

76) In its previous decisions, the Commission has considered that each system and subsystem likely constitutes a relevant  market.[21]  However,
    in some decisions the possibility of whether key systems, such as the propulsion system, should be considered as an open market or  not  was
    also discussed, based on the fact that suppliers are selected on the basis of expertise, know-how, capabilities, and in  the  light  of  the
    juste retour principle.[22] As regards in particular propulsion systems, the Commission identified SRM for launchers as a  relevant  product
    market, distinct from liquid propulsion systems.[23]

77) The Parties consider that there is no open market for propulsion systems in Europe for the following reasons.

78) First, the Parties submit that propulsion system suppliers are not selected by the prime contractor. In fact,  propulsion  system  suppliers
    are chosen by ESA on a bilateral basis based on their unique competences and in accordance with the juste retour principle. Since propulsion
    systems represent up to [50-60]% of the launcher value, propulsion systems are supplied by the  relevant  industrial  partner  of  the  main
    contributing Member State in the programme.

79) Second, the Parties submit that suppliers of propulsion systems have already been chosen through bilateral negotiations  with  ESA  for  all
    Ariane programmes (Ariane 5, Ariane 5 ME and Ariane 6 PPH). Even if the industrial solution for Ariane 6 is not definitely fixed yet, Safran
    (through its subsidiary Herakles) and Avio have already been granted direct responsibility for  the  whole  solid  propulsion  systems,  and
    Safran (Snecma) has been selected by ESA as the supplier of the cryogenic systems in the context of Ariane 6 PPH. This would not  change  in
    the new configuration proposed by the Parties.

80) Third, the Parties submit that any switch of supplier, assuming such were technically possible, would result in a costly, complex and  time-
    consuming qualification process that is incompatible with the ESA budget and timing constraints.

81) The Parties also argue that if the Commission concluded that there was an open market for the supply of propulsion systems for launchers  in
    Europe, this market should be further segmented between SRMs and liquid propulsion systems; and within liquid propulsion, between  cryogenic
    and hypergolic propulsion systems. This is based on the absence of supply side substitutability and limited demand side substitutability.

82) In view of the fact that the Transaction does not raise serious doubts as to its compatibility with  the  internal  market  in  relation  to
    propulsion systems for ESA Developed Launchers, the existence of relevant market, as well as its exact scope,  can  be  left  open  for  the
    purposes of the competitive assessment of the Transaction.

3. Other Systems, Subsystems and Equipment for launchers

83) Space launchers are made up of systems, subsystems and equipment. Systems are composed of subsystems. According to the  Parties,  subsystems
    are complex parts of the launcher, such as the fairing, whereas equipment consists  of  components  used  in  systems  and  subsystems  (for
    example, pyrotechnic devices, valves).

84) In its previous decisions, the Commission considered that each system and subsystem likely constitutes a relevant  market.[24]  However,  in
    some decisions the possibility of whether key subsystems should be considered as an open market or not was also discussed, based on the fact
    suppliers are selected on the basis of expertise, know-how, capabilities, and in the light of the juste retour principle.[25]

85) The Parties state that each subsystem and equipment is designed  specifically  for  a  given  launcher  programme,  and  that  there  is  no
    interchangeability. The Parties state that in the past 10 years there have been tender procedures carried out by ESA for Ariane 5  ME,  VEGA
    and Ariane 6, and each tender constitutes a separate product market.

86) For Ariane 6 PPH, the Parties submit that ESA decided to distinguish between two categories of subsystems and equipment.

87) The first category covered the main subsystems and equipment which was grouped into six CLEs open to tender as described in paragraph  (56).
    These CLEs have each been attributed through an open tender to a specific supplier and therefore have been treated  as  a  relevant  product
    market.

88) The second category covers the remaining tenders for subsystems and smaller equipment, which will take place at a later stage. These  tender
    procedures will be managed by the industry players already directly designated or selected following a tender by  ESA  as  suppliers  for  a
    system or subsystem. If each subsystems and equipment should be considered as a separate market,  the  Parties  submit  that  the  following
    smaller equipment will be relevant for the future Ariane 6 programme: (i) pyrotechnic equipment; and (ii) valves equipment.

89) Pyrotechnic equipment consists of products performing various functions and using the energy provided by exothermic chemical reactions.

90) The Parties, in line with previous decisions taken by the Commission, submit that the market for  pyrotechnic  equipment  can  be  segmented
    according to the field of application and that equipment used for one application generally cannot be used for  other  applications  due  to
    technical reasons. Moreover, the Parties submit that the supply of pyrotechnic subsystems and equipment should  be  distinguished  from  the
    supply of pyrotechnic systems, which require in-depth knowledge of the launcher specifications as well as design and integration expertise.

91) Valves equipment includes valves, plates, and pressurisation systems that regulate the  passage  of  fluid  in  liquid  propulsion  launcher
    engines and stages.

92) The Parties submit that valves equipment for launchers must be distinguished from valves equipment for other  fields  of  application  since
    equipment for one application generally cannot be used for the other applications due to technical reasons.  Moreover,  the  Parties  submit
    that in the area of Ariane launchers, valves may be distinguished between cryogenic valves[26] and non-cryogenic valves[27], both  of  which
    have different and specific product characteristics.

93) In view of the fact that the current Transaction does not raise serious doubts as to its compatibility with the internal market in  relation
    to launcher components for ESA, the exact scope of the relevant product markets can be  left  open  for  the  purposes  of  the  competitive
    assessment of the Transaction.

4. Relevant geographic markets

94) The Commission considered in previous decisions that competition for systems, subsystems and equipment for Ariane launchers takes  place  at
    European level. This is due to the fact that the selection of suppliers of those products usually takes place during the  development  phase
    and is governed by the juste retour principles.[28]

95) The Parties submit that, due to the juste retour principle enshrined in the ESA Convention, the relevant market for  prime  contracting  for
    ESA space launchers and launchers' subsystems or equipment should be considered as EEA-wide in scope.

96) The responses obtained by the Commission in the course of its market investigation confirmed that the procurement of systems, subsystems and
    equipment for all ESA launcher programmes takes place at European level.[29]

97) In any event, the scope of the relevant markets can be left open for the purposes of the competitive assessment of  the  Transaction  as  no
    serious doubts arise as to its compatibility with the internal market in relation to any launcher components irrespective of the  geographic
    market definition applied.

5. Competitive assessment

1. Parties' activities

98) Airbus is currently the prime contractor on all Ariane programmes, including Ariane 5, Ariane 5 ME and Ariane 6. Safran is not active  as  a
    prime contractor for launchers. Therefore, there are no horizontal overlaps between the Parties’ activities at this level.

99) The Parties are mainly active in the supply of systems, subsystems and equipment for heavy launchers (Ariane programme). For small launchers
    as VEGA, the Parties are only marginally active.[30]

100) Safran is active in propulsion systems for launchers through (i) Europropulsion and Regulus (two joint ventures with Avio) and Herakles  for
    solid propulsion systems, and (ii) Snecma for liquid cryogenic propulsion.[31] Outside the Joint Venture, neither Airbus nor Safran  operate
    as a supplier of propulsion system for other non-ESA launchers, whether for solid or liquid propulsion.

101) As regards Ariane 6, the Parties were in competition for CLE 3 (Insulated Motor Case) and CLE 6 (Avionics Main Systems). Safran […]. In  the
    other Ariane programmes, the Parties' activities overlap in the supply of pyrotechnic separation systems as well as valves equipment.

102) In addition, the Transaction would lead to vertically related affected markets since Safran supplies propulsion  systems  and  equipment  to
    Airbus for integration into launchers. The Parties also have some vertical relationships at the level of smaller subsystems and equipment.

2. Assessment of potential horizontal effects

1. Parties' arguments

103) According to the Parties, the Transaction would lead to a horizontal  overlap  between  the  Parties'  activities  regarding  Avionics  Main
    Systems. As regards the Insulated Motor Case, Airbus and Safran have complementary capabilities. Moreover, the Transaction will also lead to
    a horizontal overlap in the supply of small equipment: (i) pyrotechnic equipment and (ii)  valves  equipment,  although  not  all  of  these
    activities will be contributed to the Joint Venture.

    Avionics Main Systems

104) The Parties are currently active in the launcher avionics sector as follows: (i) avionics system designers for launchers and  (ii)  avionics
    component manufacturers for launchers. However, the Parties submit that there is no affected market as regards avionics main systems.

105) First, the Parties submit that there will only be an indirect horizontal overlap since only  Airbus’  competence  as  systems  designer  for
    launcher avionics will be contributed to the Joint Venture.

106) Second, the Parties submit that since Airbus has already been selected by ESA for the Ariane 6  programme  (PPH),  there  will  be  no  open
    market for launcher avionics in the foreseeable future. In fact, it is very unlikely that ESA will decide to reopen this CLE in the  context
    of the new Ariane 6 configuration proposed by the Parties since (i) the avionics should not significantly differ from the initial  Ariane  6
    configuration and (ii) the overall key objective for Ariane 6 consists in reducing development and exploitation costs, which itself requires
    to avoid any redevelopment which is not absolutely necessary.

107) Third, the Parties argue that even if ESA decided to reopen competition for avionics, the setup of the Joint Venture  would  not  negatively
    affect competition in the launcher avionics sector for the following reasons:

      i) Safran would have no incentive to reduce competition and favour a 50%-owned entity to  the  detriment  of  a  100%-owned  entity,  Sagem
         Défense Sécurité. Conversely, Airbus would have no incentive whatsoever in reducing the competitive pressure exerted  on  Sagem  Défense
         Sécurité by the Joint Venture.

     ii) The new tender would be organised under ESA’s Procurement Rules.[32] As a sophisticated buyer, ESA would have the power to  prevent  any
         possible negative impact of the Transaction on price.

    iii) Several other suppliers would be available.

    Insulated Motor Case

108) In the context of the Ariane 6 programme (PPH version), ESA organised a competitive tender bid for the Insulated Motor Case.  There  was  no
    direct competition between Airbus and Safran for this CLE, […]. Avio ultimately won the CLE.

109) The Parties argue that the Insulated Motor Case CLE in the context of the Ariane 6 programme is not an affected market.

110) First, the Parties submit that they are not direct competitors for Insulated Motor Cases for Ariane launchers but  only  have  complementary
    capabilities. On the one hand, […]. On the other hand, […].

111) Second, the Parties submit that since Avio has already been selected by ESA for the Ariane 6 programme (PPH), there will be no  open  market
    for Insulated Motor Cases in the foreseeable future. In fact, the new configuration of Ariane 6 proposed by the Parties would not require to
    organise a new tender for this CLE, since the technical requirements for the solid propulsion stage would not significantly  differ  between
    the PHH and the PPH configurations.

112) Third, the Parties argue that if a new tender were organized by ESA for the composite Insulated  Motor  Case  in  the  context  of  the  new
    configuration of Ariane 6 (PHH), Avio would still remain a strong competitor of the Joint Venture, and the Joint Venture would not have  the
    capacity to foreclose the participation of Avio in such possible new tender for the Insulated Motor Case for the following reasons:

      i) The organisation of a new tender would fall within the exclusive purview of  the  ESA's  decision-making  powers  with  respect  to  the
         selection of suppliers for the development phase, and would follow ESA’s Procurement rules.

     ii) Avio could bid against the newly-formed Joint Venture entirely on its own, […], since Avio has the capability to manufacture  all  parts
         of an Insulated Motor Case in-house.

    iii) Even if Avio wanted to continue […] in a competing bid against the Joint Venture, ESA is a very sophisticated buyer that would be  in  a
         position to check precisely the commercial conditions applied […].

113) Fourth, the Parties submit that two other competitors manufacture composite booster cases for launchers, and were consulted by  ESA  in  the
    Insulated Motor Case CLE tender organised for the initial Ariane 6 configuration:[…].

    Pyrotechnic equipment

114) Airbus will contribute to the Joint Venture its activity in pyrotechnic systems for the Ariane programmes. Airbus  will  not  contribute  to
    the Joint Venture any pyrotechnic subsystem and equipment manufacturing capabilities.[33] Safran will contribute  its  launcher  pyrotechnic
    activities at the subsystem and equipment level.[34]

115) The Parties argue that the Transaction will not have a significant negative impact on competition in the pyrotechnic sector.

116) First, the Parties submit that their activities do not overlap with respect to pyrotechnic systems, as only Airbus is active at  the  system
    level.

117) Second, the Parties submit that Airbus is only marginally active in launcher pyrotechnics at the subsystem  level.  The  only  overlap  with
    Safran’s activities concerns hard point separation subsystems. However, since Airbus CASA will not be contributed to the Joint  Venture  the
    Transaction would only result in an indirect overlap.

118) Third, the Parties argue that despite their market position,[35] the Transaction will not have a negative  impact  on  competition  for  the
    following reasons:

      i) Market shares do not accurately reflect market power in such a bidding market with a very limited number of bids.

     ii) […].

    iii) In Europe, RUAG, a competitor, supplies both dispensers and hard point separation subsystems. RUAG has  been  selected  to  provide  the
         dispenser for the Galileo constellation.

     iv) There are numerous other competitors worldwide for the manufacture and supply of hard point separation subsystems.

      v) There are separation technologies available other than hard point separation subsystems.

    Valves equipment

119) Both Parties are active in the supply of valves equipment for  space  launchers.  However,  only  Airbus  will  contribute  launcher  valves
    equipment activities to the Joint Venture.[36] The Transaction will thus only result in an indirect horizontal overlap in  valves  equipment
    for launchers.

120) The Parties argue that the Transaction will not lead to any significant competition concerns, even if a narrow segmentation  of  the  market
    were applied, for the following reasons.

121) First, the Parties argue that there will be no open market for cryogenic valves equipment in the foreseeable future.  The  valves  equipment
    suppliers for Ariane 5 and Ariane 5 ME have already been selected under ESA's Procurement  Rules,  and  therefore  there  will  not  be  any
    competition for the supply of valves equipment in that respect.

122) Second, the Parties argue that the Ariane 6 launcher,  irrespective  of  the  final  configuration  retained  will  not  give  rise  to  new
    developments for the cryogenic stage(s), and therefore no new competition for valves is anticipated.

123) Third, the Parties argue that even if there were a tender, the Transaction would not have any significant  impact  on  competition  for  the
    following reasons:

      i) Safran would have no incentive to reduce competition and favour a 50%-owned entity to the detriment of a majority-owned entity (that  is
         Techspace Aero). Conversely, Airbus would have no incentive whatsoever in reducing the competitive pressure exerted  on  Safran  by  the
         Joint Venture.

     ii) The Joint Venture and Safran will have complementary activities in the cryogenic valves equipment sector.

    iii) Valves and other flow control equipment represent less than [0-5]  %  of  the  total  launcher  value,  and  thus  coordination  of  the
         competitive behaviour of the Joint Venture and Safran is unlikely.

     iv) It is ESA policy to reuse as much as possible already developed equipment and maximise commonalities of Ariane 5 and Ariane 6, including
         valves equipment. Any development of new valves equipment would be subject to a strict “test of necessity” at ESA level and in any  case
         subject to ESA's Procurement Rules. ESA can also sponsor the entry of a new competitor.

124) As regards non-cryogenic valves, the Parties argue that the impact of the Transaction will  be  negligible  since  (i)  there  are  numerous
    competitors supplying or able to supply non-cryogenic valves for European launchers; and (ii) valves represent only [0-5]  %  of  the  total
    launcher value, and non-cryogenic valves only account [50-60]% of the valves’ total value.

2. The Commission's assessment

125) During the Commission's investigation no concerns were raised regarding those horizontal relationships.

126) As regards Avionics Main Systems, ESA confirmed that the tender organised in 2013 will not  be  affected  since  this  component  is  rather
    independent of the configuration of Ariane 6.[37]

127) As regards the Insulated Motor Case, there may be a change in the number of boosters (from four to two),  and  therefore  the  CLE  will  be
    affected by the new configuration. However, ESA will ensure that the results of the CLEs will be used as most as  possible,  as  this  gives
    credibility and stability to the process.[38] Moreover, the Parties are not direct competitors for this CLE […].

128) Additionally, ESA confirmed that there is competition for all of those components and for none  of  them  the  Parties  were  the  only  two
    possible suppliers. In fact, ESA received between three to five replies for each of the CLEs tendered.[39]

129) The Commission's investigation also confirmed that all suppliers will be selected according  to  ESA's  Best  Practices.[40]  Moreover,  the
    geographic juste retour principle will be followed in full when selecting subcontractors.[41] Both these factors will be discussed  in  more
    detail below in paragraphs (148) to (177).

130) In light of the above and the evidence available to it, the Commission considers that the Transaction does not raise serious  doubts  as  to
    its compatibility with the internal market due to horizontal overlaps in the markets for launcher components.

3. Assessment of potential non-horizontal effects

131) There are several vertical relationships between the Parties' activities in relation to (i) Ariane 5, (ii) Ariane 5 ME, and (iii) Ariane 6.

132) Ariane 5 is composed of three stages: (i) a solid propulsion stage, (ii) a main cryogenic stage and (iii) an upper cryogenic stage.[42]  For
    each of these stages, the Transaction would lead to non-horizontal relationships between the Parties' activities. In  the  solid  propulsion
    stage, Safran (Europropulsion), is the integrator of the solid propulsion systems while Airbus supplies systems and  equipment.  As  regards
    the main cryogenic stage, Safran (Snecma) is the integrator for the liquid  propulsion  system  and  supplies  as  well  other  systems  and
    subsystems while Airbus provides the electrical equipment for the main stage and other subsystems. As regards  the  upper  cryogenic  stage,
    Safran is the integrator of the cryogenic propulsion system for Ariane 5 ECA[43] and Airbus is the integrator of the  hypergolic  propulsion
    system for Ariane 5 ES[44]. Moreover, both Parties supply equipment and subsystems in the last stage.

133) As regards Ariane 5 ME, Safran (Snecma) is the integrator of the cryogenic propulsion system and Airbus supplies the trust  chamber  of  the
    engine as well as other systems and subsystems.

134) As regards Ariane 6, Safran is the integrator for the liquid propulsion system and the subcontractor for  internal  thermal  protections  in
    the CLE 3 in which Avio is the integrator of the solid propulsion systems.

135) In addition to the vertical relationships described, it should be noted that Airbus  is  currently  the  prime  contractor  for  all  Ariane
    programmes.

1. Parties' arguments

136) According to the Parties, the Transaction does not give rise to any risk of foreclosure as regards the development and production  of  civil
    launchers because of ESA’s buying power and ESA's Procurement Rules.

137) First, the Parties submit that ESA, as the sole final buyer of launchers, has strong buyer power vis-à-vis its suppliers. ESA’s high  degree
    of sophistication enables it to closely scrutinise the cost structure of companies and to detect potential uncompetitive  pricing  from  its
    suppliers.

138) Second, the Parties submit that for a large part of ESA's contracts there is no open tender. Instead, industrial partners are designated  on
    the basis of their known expertise and the geographical juste retour principle. For instance, prime contracting accounts  for  approximately
    [30-40] % of the launcher value and propulsion for [40-50]%, so that those work shares may only be attributed to undertakings that (i)  have
    the necessary competencies, and (ii) belong to the programme’s main contributing  Member  States.  In  the  case  of  Ariane  6,  they  were
    attributed respectively to Airbus and Safran.

139) Third, the Parties submit that the selection of suppliers has been definitely made for Ariane 5, Ariane 5 ME and the largest part of  Ariane
    6 main systems and subsystems.

140) Fourth, the Parties submit that all the remaining selection processes will be conducted in accordance with ESA’s Procurement Rules and  Best
    Practices and that the contemplated evolution of the governance scheme for the Ariane 6 programme, namely the fact that  the  Joint  Venture
    will assume the role of design authority, will not have any impact in that respect.

141) Finally, the Parties submit that the vertical integration of their activities will also have  pro-competitive  effects  as  the  Transaction
    will generate significant synergies indispensable to allow the Ariane launcher family to remain competitive vis-à-vis other launchers.

2. Concerns expressed by competitors

142) Market participants stated that ESA's role will diminish with the attribution of the design authority to Airbus/the Joint Venture, and  fear
    that ESA's Procurement Rules and Best Practices will not be sufficient to prevent the adoption  of  a  foreclosure  strategy  by  the  Joint
    Venture.[45]

143) A launcher subsystem supplier stated that the "integration of Airbus and Safran may prove particularly  problematic  for  (…),  which  is  a
    competitor of Safran's subsidiary. Indeed, if (…) were to have bidden against (…) for Ariane 6, there may be a risk that Airbus would favour
    JV’s bids".[46] For the case of pyrotechnic subsystems, this supplier was concerned that Safran would be favoured since no supplier has been
    officially selected for the moment.[47]

144) Another launcher subsystem supplier also stated that there is "the risk that JV would opt for manufacturing the equipment  in-house  instead
    of opening the selection process to competition (…)  the  JV  may  place  politics  and  internal  industrial  policy  considerations  above
    competition".[48] At the same time this supplier stated that the "JV will however strive to  make  a  cost  efficient  rocket.  The  current
    functioning in Europe cannot continue, in view of the competition of SpaceX".[49]

145) Similar concerns were mentioned by another launcher subsystem supplier: "The JV could have an incentive to manufacture  launcher  parts  in-
    house instead of opening the selection process to competition. (…) Indeed, (…) submits from past experience that  when  a  prime  contractor
    acts in the same field as sub-contractors, there is a conflict of interest (…). In these cases, there is  a  need  for  a  counter-balancing
    power".[50] At the same time this supplier stated that the "JV may actually have positive effects on the market, provided that ESA  were  to
    continue to exercise its mitigating and leveraging power. In particular, a positive impact of the JV would be  to  decrease  the  number  of
    complicated interfaces that currently exist for the manufacture of Ariane launchers".[51]

146) Moreover, another launcher subsystem supplier stated that "the JV may have the ability and incentive to bring all production of  liquid  and
    solid propulsion within itself and keep (…) away from the process. In order to work alone on the whole booster for Ariane 6,  the  JV  would
    have to invest large amounts in time and facilities, but such strategy could be rewarding in that it would lead to a  consolidation  of  its
    position in the EU to the detriment of other technology suppliers, and thus lead to higher returns for the JV from these activities".[52]

147) In relation to the CLEs, one supplier of launcher subsystems expressed concerns as regards  the  fact  that  suppliers  have  received  from
    Airbus requests for quotations that are not subject to ESA's Procurement Rules, for  only  parts  of  some  subsystems.  According  to  this
    supplier, "those new requests for quotations were different from the previous public tenders in two main ways: (i) the scope of the  request
    has changed, and (ii) there will be no ESA tender for the turnkey product".[53] However, this same launcher subsystems  supplier  recognised
    that these concerns were more related with the transfer of the design authority to Airbus, and not to the merger itself.

3. The Commission's assessment

148) First, satellite operators mentioned that the Transaction will influence the industrial organisation  of  Ariane  launchers,  improving  the
    internal effectiveness. Other satellites operators mentioned that as a result of  the  Transaction  European  launchers  would  become  more
    competitive and thus more satellites would be launched.[54]

149) Second, the Commission's investigation showed that the attribution of the role of design  authority  to  Airbus  is  not  dependent  on  the
    Transaction. This implies that any eventual incentive of the Joint Venture to favour an Airbus subsidiary would not be merger specific. Only
    if the Transaction itself created an eventual incentive for Airbus to favour Safran or its subsidiaries,  the  resulting  effects  would  be
    merger specific.

150) Third, the Commission's investigation confirmed that ESA has the powers to avoid any competitor  foreclosure  by  the  Joint  Venture,  both
    during the development phase and the exploitation phase of launchers. In fact, the new Ariane 6 subcontractors will be selected according to
    ESA's Best Practices even tough Airbus/the Joint Venture will be the design authority.

151) According to Article 10 of ESA's Procurement Rules, procurement rules for launcher components shall always be interpreted so as to ensure:

     i) "transparency and fair and equitable treatment of all economic operators;

     ii) that the participation of a Tendering Body does not cause any distortion of competition in relation to private economic operators;

    iii) the most economic and effective employment of the Agency’s resources;

     iv) the implementation of the defined industrial policy and to guarantee a distribution, of work among Member States provided in Article VII
         and Annex V of the Convention."

152) Pursuant to Article 13(1) of ESA's Procurement Rules, "open competitive tender shall be the normal procedure for the placing  of  contracts,
    unless, in specific circumstances, ESA waives this right and directly appoints the  supplier  of  its  choice".  In  the  specific  case  of
    pyrotechnic equipment, in relation to which concerns were raised during the Commission's investigation, ESA imposes it to be selected  under
    a competition process.[55]

153) Moreover, pursuant to Article 17 of ESA's Procurement Rules, ESA has  the  right  to  contractually  impose  on  the  prime  contractor  and
    integrators of key subsystems the tendering requirements that they have to follow in the selection of  their  subcontractors,  in  order  to
    ensure that the principle of transparency and fair and equitable  treatment  of  all  economic  operators  are  implemented  throughout  its
    procurements.

154) ESA also applies ESA's Best Practices whose underlying objective is "to ensure that Prime Contractors together  with  their  Sub-contractors
    when required to perform the selection of sub-contractors in the framework of an Agency Program, conduct their procurement in line with  the
    principles of fairness and equity".

155) The Commission's investigation showed that under ESA's  Best  Practices,  ESA  effectively  exercises  control  of  the  selection  process,
    validates and approves key elements of the tender documentation, and retains important veto rights  with  respect  to  the  final  selection
    decision.

156) ESA's Best Practices stipulate that a prime contractor should prepare and submit to ESA the Industrial Procurement Plan  (“IPP”)  describing
    the procurement approach to be followed for each development phase in order to achieve the requirements set out by ESA. For  each  component
    to be procured, the IPP contains, inter alia, (i) the procurement  method  and  if  relevant  its  justification,  (ii)  list  of  potential
    tenderers, and (iii) indicative or target budget, which are all subject to ESA’s approval. The IPP is then used by ESA for  identifying  and
    assessing activities in order to determine if they should be produced directly through the prime contractor (make) or  from  source  outside
    (buy). ESA must approve the IPP.

157) According to ESA's Best Practices, for each request for quotation,  a  tender  evaluation  board  is  generally  established  by  the  prime
    contractor. Even in such case, the prime contractor’s discretion in the  composition  of  the  board  is  limited,  including  the  required
    participation of ESA. This rule is specifically designed to ensure the fairness of the selection process and removes potential  concerns  of
    conflict of interest in the choice of subcontractors. Indeed, it ensures that the prime contractor does not have the ability (that  is,  the
    decision-making power) to select its internal subsidiary or otherwise preferred company as its subcontractor.

158) For instance, in situations of conflict of interests, notably when the prime contractor (or any of its affiliates) wishes to participate  in
    the bidding for any element for which such prime contractor will carry out the competitive tendering procedure, ESA shall in the interest of
    impartiality exclude the prime contractor from the evaluation of tenders submitted.

159) Moreover, and still according to ESA, if a company considers its offer on a specific part as the most competitive  and  has  doubts  on  the
    fairness of the attribution of this part, it will have the possibility to go to the ESA Ombudsman, then appeal to the  Head  of  Procurement
    and then to the Procurement Board.[56]

160) During the exploitation phase, ESA will remain the most important customer  and  will  maintain  certain  key  facilities  operational  (for
    example, launch pads). According to ESA, their role will then guarantee that there will  be  no  discrimination  or  abuse  from  the  Joint
    Venture.[57]

161) The Commission's investigation revealed that the exploitation phase of launchers is divided into two stages. The first stage corresponds  to
    an initial quantity of launchers determined by ESA in such a way as to ensure that the cumulative turnover of the industry  of  each  Member
    State having contributed to the Ariane 6 activities during the development phase will be equivalent to its contribution to those activities.

162) During this first production quantity of launchers, subcontractors may only be modified in case of:

      i) material breach of the contract concluded between a subcontractor and its direct customer;

     ii) subcontractor’s failure to meet the technical requirements of the subcontract to such an extent as to jeopardise the  execution  of  the
         subcontract; or

    iii) subcontractor's insolvency or discontinuation of the development or manufacturing of the products under its responsibility.

163) In case one of the above mentioned conditions is fulfilled, the prime contractor may initiate  a  procedure  to  change  the  subcontractor,
    which shall follow ESA's Best Practices.

164) As from the second production quantity of Ariane 6 launchers, a change of subcontractors is only possible if the subcontractor:

      i) has failed technically;

     ii) increases substantially the prices for its production activities compared to the prices for the first production quantity;

    iii) refuses to decrease its prices to its direct customer for the relevant manufacturing activity in the same proportion  as  the  reduction
         made by the prime contractor towards the launch provider; or

     iv) becomes insolvent or decides not to continue the development or manufacturing of the products under its responsibility.

165) In case one of the above mentioned conditions is fulfilled, the prime contractor may initiate a procedure to change the subcontractor.  This
    procurement procedure shall also follow a competitive procurement procedure inspired by  ESA's  Best  Practices.  In  case  of  conflict,  a
    concerned party may request the involvement of the ESA Ombudsman as mediator.

166) According to the contractual principles defined by ESA […], ESA's Best Practices will be applied.[58] In this context, the design  authority
    must:

      i) list suppliers and subcontractors foreseen for the execution of the contract;

     ii) make available to ESA the contracts with its subcontractors and its suppliers; and

    iii) provide full visibility to ESA over the subcontractors and main suppliers technical and financial implementation of the contract.

167) The Commission's investigation showed that the power of Airbus/the Joint Venture to manufacture  in-house  will  be  limited  by  the  juste
    retour principle. In fact, ESA stated that the geographic juste retour principle will be followed in full in the development phase of Ariane
    6. ESA has already provided Airbus with a list of potential contributions discussed by the Member States, which will have to be  taken  into
    account when selecting subcontractors. In the exploitation phase, the geographic juste retour principle  will  be  followed  for  the  first
    quantity of launchers.[59]

168) This is also confirmed by ESA’s Request for Submission in the context of the attribution of the  role  of  design  authority  to  Airbus/the
    Joint Venture where it is stated that "the request for submission of a Committing Ariane 6 Programme File shall match the following  targets
    for geo return".[60]

169) Fourth, Commission's investigation showed that it is very costly to switch the supplier of a component from the  development  stage  to  the
    exploitation stage.[61] Thus, those suppliers that are selected in the development stage will  most  probably  remain  in  the  exploitation
    stage.

170) Fifth, and as regards the request for quotation sent by Airbus to the subcontractors selected in the previous  tenders  for  Ariane  6,  ESA
    stated that it would make sense for Airbus to send them in order to confirm the prices initially  quoted.  However,  ESA  will  ensure  that
    Airbus will use the results of the CLEs as much as possible, as this gives credibility and stability to the process.[62]

171) In fact, an ESA's document shows that its objective is for the Ariane 6 industrial scenario to be  mainly  based  on  heritage  coming  from
    previous competition organised for Ariane 6 PPH, for which a consolidated industrial proposal exists and has been evaluated.[63]

172) Sixth, the Commission's investigation showed that in assessing Airbus/the Joint Venture's global offer, ESA will have  all  the  information
    contained in the procurement plan and will thus have enough material to control and monitor whether prices are offered at, or above, market-
    price since it also knows the existing suppliers in the market. This should  ensure  that  Airbus/the  Joint  Venture  will  not  choose  to
    manufacture in-house when purchasing from an external supplier would be less costly.

173) Even for equipment where Airbus/the Joint Venture will decide not to issue a tender, if ESA learns that the selection has not  been  carried
    out at market price, ESA will have the power to make Airbus/the Joint Venture open a competition for the particular equipment.

174) Seventh, the Commission's investigation also confirmed that the creation of  the  Joint  Venture  is  aimed  at  creating  efficiencies  and
    rationalising costs at the level of the new Ariane 6 programme.

175) ESA confirmed that the main rationale behind the Ariane 6 programme is to create efficiencies which will result in a decrease of  the  price
    and cost of launch services. Many of these efficiencies will come also from the integration of Airbus and Safran. One key efficiency will be
    the elimination of transaction costs between the two companies. Indeed, each time Airbus purchases hardware from Safran, a series  of  tests
    has to be done in order to transfer responsibility, which has an impact on costs. This will no longer be the case after the creation of  the
    Joint Venture.[64]

176) On the other hand, the Joint Venture would also have a strong interest to develop a launcher at the  lowest  cost  possible  since  the  new
    Ariane 6 will have to compete with other launchers, like SpaceX.

177) In conclusion, the Commission considers, on the basis of the above and the evidence available to it, that the  Transaction  does  not  raise
    serious doubts as to its compatibility with the internal market due to vertical  relationships  between  the  Parties  in  the  markets  for
    launcher components.

6. Conclusion

178) In conclusion, the Commission considers, on the basis of the above and the evidence available to it, that the  Transaction  does  not  raise
    serious doubts as to its compatibility with the internal market in relation to the markets for launcher components.

   Satellite prime contracting and satellite components

7. Relevant product markets

179) The Commission has previously considered the satellites markets. In particular, as regards  satellites  equipment,  the  Commission  further
    distinguished between the platform and the payload of the satellite, and indicated that there might be  separate  product  markets  for  the
    different subsystems and components assembled on a satellite.[65]

1. Satellite prime contracting

180) The Commission has previously distinguished between satellites used for military applications and those used for civil applications. In  the
    civil sector, a further distinction can be made between the institutional segment and the commercial segment.[66]

181) The Parties submit that, given the absence of any significant impact on competition, the precise definition of the relevant product  markets
    may be left open.

182) The results of the market investigation are  in  line  with  the  Commission's  previous  decisions.  All  satellite  prime  contractors[67]
    responding to the Commission's market investigation have confirmed the relevance of those distinctions. Therefore, for the purpose  of  this
    decision it is considered that prime contracting for (i) military satellites, (ii) institutional satellites, and (iii) commercial satellites
    constitute different product markets.

2. Satellite Propulsion Subsystems

183) A satellite propulsion subsystem is made of several parts and is used to raise the satellite in orbit once it is separated from  the  launch
    vehicle (orbit-raising) as well as to ensure that the satellite keeps its assigned orbit (station keeping).

184) Satellites can use the following types of subsystems: (i) chemical: both  orbit-raising  and  station  keeping  are  provided  by  the  same
    chemical liquid propellant thrusters; (ii) electric: both orbit-raising and station keeping are provided by the same electric thrusters;  or
    (iii) hybrid: orbit-raising is done by chemical thrusters while station keeping is provided by different, electric thrusters.

185) Electric satellite propulsion subsystems include (i) ion gridded thrusters, and (ii) plasma thrusters (also called  Hall-effect  thrusters).
    In ion gridded thrusters, ions (commonly xenon gas) are accelerated by electrostatic forces. The Hall-effect technology generates thrust  by
    ejecting ions at a very high speed.[68]

186) The Commission has not previously analysed in detail the market  for  satellite  propulsion  subsystems.  However,  in  past  decisions  the
    Commission has found that each satellite subsystems and equipment might constitute a distinct product  market  according  to  the  functions
    performed by it, due to the lack of demand side substitutability. In addition, the level of supply side substitutability was also  found  to
    be limited due to the very high level of reliability and expertise required.[69]

187) The Parties submit that satellite propulsion subsystems constitute a distinct product market to  the  extent  that  they  serve  a  specific
    function, which is to provide thrust for the satellite to move in space, which cannot be  achieved  by  any  other  satellite  subsystem  or
    equipment. Propulsion subsystems are the only equipment that can raise the satellite into orbit. As regards station keeping, although  other
    equipment such as mechanical and magnetic wheels can also help maintain the satellite in orbit, satellite propulsion subsystems are based on
    very different technologies and know-how, are tendered separately and are usually not produced by the same manufacturers.[70]

188) In addition, the Parties submit that satellite propulsion subsystems should be further segmented  according  to  the  propulsion  technology
    between (i) chemical, and (ii) electric.

189) Although chemical and electric propulsion can be used alternatively or in combination to perform both  orbit-raising  and  station  keeping,
    these technologies’ characteristics vary significantly, notably in terms of weight, life span, and time to orbit.  In  particular,  chemical
    propulsion works with liquid propellant, which allows reaching the orbit faster than electric propulsion (one week  as  opposed  to  several
    months) and which is much heavier than the latter as tanks and fuel need to be loaded on  to  the  platform.  Electric  propulsion  uses  an
    electric reaction to provide thrust. It allows for a 40 % launch mass gain or a 30 % payload  mass  gain  compared  to  chemical  propulsion
    (supposing similar propulsion force and orbit destination) and has a longer life span.

190) In terms of procurement, the Parties submit that separate tenders are typically  organised  for  chemical  engines  on  the  one  hand,  and
    electric thrusters on the other hand. This would also apply in the case of hybrid propulsion, where satellite  prime  contractors  typically
    launch a competition for a chemical subsystem and one for an electric subsystem separately.

191) From the supply side, satellite propulsion subsystem manufacturers are usually specialised in one technology only  (electric  propulsion  or
    chemical propulsion). Out of the main suppliers of chemical satellite propulsion  subsystems,  only  Aerojet  (US)  is  active  in  electric
    propulsion as well, and the main suppliers of electric thrusters, Fakel (Russia) and L3Com  (US),  do  not  manufacture  chemical  satellite
    propulsion subsystems at all.

192) The Parties further submit that satellite operators choose the satellite prime contractor depending, inter alia, on the type  of  propulsion
    offered by the latter’s platforms, given that normally it is not possible to request a chemical or electrical satellite propulsion subsystem
    different from the one that has been qualified by the satellite prime contractor.

193) Within electric propulsion, the Parties submit that a  further  segmentation  between  (i)  Hall-effect  thrusters,  and  (ii)  ion  gridded
    thrusters should be considered.

194) According to the Parties, a distinction can be made between those two  technologies  from  a  demand-side  perspective,  in  view  of  their
    different performances. Ion gridded thrusters allow for maximum weight gain but provide only limited thrust (time-to-orbit ranging from  six
    months to a year). On the other hand, Hall-effect thrusters are slightly heavier but provide more thrust  (three  to  six  months  to  reach
    orbit). As a consequence, those technologies are typically used for different types of missions. Ion gridded thrusters are mostly  used  for
    institutional satellites. In particular deep space missions, for which the satellite needs to embark a heavy payload but  does  not  require
    much thrust, whereas Hall-effect thrusters are increasingly used on hybrid  commercial  satellite  platforms  where  orbit-raising  time  is
    usually of the essence. From a supply-side perspective, the Parties submit that suppliers of  electric  propulsion  for  satellites  usually
    specialise in one technology in particular.

195) The Parties consider, however, that it is not necessary to define whether those two technologies belong to different product  markets  since
    the Transaction will not, in any event, give rise to any competition concerns.

196) Respondents to the Commission's market investigation  indicated  that  (i)  chemical  satellite  propulsion  subsystems  and  (ii)  electric
    satellite propulsion subsystems are not part of the same relevant  market.  All  of  the  satellite  prime  contractors  responding  to  the
    Commission's investigation considered that the two types of satellite propulsion subsystems are not substitutable from  a  demand  point  of
    view.[71] In particular,  a  satellite  prime  contractor  stated  that  in  most  instances,  chemical  and  electric  subsystems  are  not
    interchangeable: "Chemical systems typically provide low cost and high thrust/fast orbit transfer. Electrical  systems  typically  use  less
    propellant and therefore enable more capable payloads given the same launch vehicle capability, but their low thrust results in longer orbit
    transfer times. They are also more expensive (approximately 3-5 times) than chemical systems".

197) Moreover, all of the respondents considered that it would  not  be  possible  for  satellite  prime  contractors  using  chemical  satellite
    propulsion subsystem to switch to electric satellite propulsion subsystem in a short time and without incurring significant costs.[72]

198) The majority of  satellite  operators,  satellite  prime  contractors  and  subsystems  producers  responding  to  the  Commission's  market
    investigation indicated that those two technologies are not comparable in terms of (i) technical characteristics, (ii) customers' needs, and
    (iii) price.[73] Satellite propulsion subsystems' providers explained that "electric propulsion provides much  better  fuel-efficiency  than
    chemical propulsion" while "chemical propulsion is more power-efficient  than  electrical  propulsion".  They  also  stated  that  "electric
    propulsion offers significant competitive improvements for certain spacecraft (GEO comsats, navsats) if the customer is prepared to accept a
    longer manoeuvre time to operational orbit  (…)  Time  to  orbit  is  drastically  lower  for  chemical  propulsion  (…)  For  constellation
    replacements, this is not seen as an issue, for one-off satellites it most certainly can  be".  In  terms  of  price,  "electric  propulsion
    systems are more expensive to implement" however according to a satellite operator "the launch services tend to be less expensive since  the
    electric satellite is much lighter". The same satellite operator explained that "the choice of the propulsion system  is  made  based  on  a
    variety of factors, be they commercial, financial or technical. Each propulsion system has its advantages and drawbacks. Electric propulsion
    is more efficient than chemical propulsion. As a result, it allows to sharply reduce the mass of the satellite for a given  mission,  or  to
    sharply increase the size of the mission for a given mass. In other words, it can help reduce the cost per MHz or per Mbps of  the  mission.
    On the other hand, orbit raising takes longer in electric propulsion because electric propulsion is less powerful than chemical  propulsion.
    For satellites that are urgently needed, chemical propulsion is a better choice."

199) As to the potential further segmentation between (i) electric Hall-effect thrusters and (ii) electric ion gridded  thrusters,  the  majority
    of satellite operators, satellite prime contractors and subsystems producers responding to the Commission's market  investigation  indicated
    that those two technologies are not comparable in terms of (i) technical characteristics, (ii) customers' needs, and (iii) price.[74]

200) In terms of technical characteristics, satellite propulsion subsystem providers expressed that "Hall-effect  has  higher  power  efficiency;
    ion gridded has higher fuel efficiency. For an all-electric satellite, Hall effect offers  the  best  combined  performance",  "gridded  Ion
    thruster systems weigh more (dry mass), are more fuel efficient (less wet mass), but produce lower thrust" and "Hall-effect  thrusters  have
    higher thrust, lower specific impulse or "Isp" (a relative measure of fuel economy), and lower cost.". A satellite prime  contractor  stated
    that "for most GEO missions, Hall-effect thrusters' time to orbit is shorter. However, gridded ion thrusters can deliver  a  higher  payload
    mass with a longer time-to-orbit". Satellite prime contractors also stated that "ion gridded have a higher fuel efficiency" and "Hall-effect
    thrusters have a higher thrust-to-power ratio".

201) Regarding customer's needs, satellite propulsion subsystem providers explained that "gridded ion is better suited to science  missions  with
    high demands on fuel efficiency. For commercial applications, Hall-effect better meets customers' needs (cost, ease of implementation, orbit
    raise duration)", "(…) ion thrusters will allow higher payload mass for same launch mass. Time to orbit will be higher for ion thrusters". A
    satellite prime contractor stated that "for most GEO missions, Hall-effect thrusters'  time  to  orbit  is  shorter.  However,  gridded  ion
    thrusters can deliver a higher payload mass with a longer time-to-orbit".

202) On the basis of the above considerations, it is likely that there are separate product markets for (i) chemical and (ii) electric  satellite
    propulsion subsystems. It is also likely that within electric satellite propulsion subsystems a further segmentation between (i) Hall-effect
    thrusters and (ii) ion gridded thrusters should be considered. However, the precise product market definition can be left  open,  since  the
    commitments proposed by the Parties would eliminate any serious doubts as to the compatibility of the Transaction with the  internal  market
    under any plausible market definition.

3. Other Satellite Subsystems and Equipment

203) In past decisions the Commission defined relevant product  markets  according  to  the  functions  performed  by  satellite  subsystems  and
    equipment.[75]

1. Valves for satellite propulsion subsystems

204) The Parties submit that satellite valves should be distinguished from launcher valves for the following reasons. First,  the  valves  differ
    in terms of design: valves for satellites have a much lower mass flow rate and use different media than launcher valves. Second, unlike  the
    technology used for launchers’ engine valves, satellite valves technology is relatively old and well-established.  Third,  from  the  supply
    side, the Parties consider that a valve supplier for launchers cannot enter the valve market for  satellites  within  a  short  time  period
    because the technology has to satisfy different requirements, for example in terms of number of  actuations,  life  cycle  and  environment.
    Therefore, the Parties submit that a segmentation of the market of valves equipment according to their  application  (satellite,  launchers)
    may be relevant.

205) The Parties further submit that a sub-segmentation according to the valves’ location on the satellite (satellite propulsion  subsystems  and
    elsewhere) may also be relevant due to the technology constraints linked to the satellite propulsion subsystems.

206) Within the segment of valves for satellite propulsion subsystems, the Parties submit that further segmentation according to  the  propulsion
    media (electric or chemical) may be envisaged. First, electric satellite propulsion subsystems require  a  smaller  number  of  valves  than
    chemical satellite propulsion subsystems. Second, valves characteristics have to be adjusted to the propellant state.  As  mentioned  above,
    chemical propulsion uses liquid monopropellant or bipropellant while electric propulsion  uses  an  electric  reaction.  Third,  valves  for
    chemical propulsion and valves for electric propulsion significantly differ in terms of technology.

207) The Parties submit that the exact product market definition may be left open since the Transaction will not have any significant  impact  on
    competition in relation to valves for satellites propulsion subsystems.

208) During the Commission's market investigation, a supplier of satellite equipment stated  that  many  different  types  of  valves  exist  for
    satellites and "all can be different for the different fluids and temperature  of  the  fluids".[76]  Moreover  "the  valves  are  generally
    uniquely designed to the application".[77] As to the possibility of substitution between different types of valves from a  demand  point  of
    view, the supplier explains that "although one can possibly use a particular valve type for the different function, it would  not  generally
    be recommended, nor would they all be qualify-able for the new application".[78]

209) Given that the Transaction does not raise serious doubts as to its compatibility with the internal market in relation  to  satellite  valves
    irrespective of the market definition applied, the exact scope of the market can be left open for the purposes of the competitive assessment
    of the Transaction.

2. Pyrotechnic subsystems for satellites and pyrotechnic equipment

210) Pyrotechnic equipment consists of products performing various functions and using the energy provided by exothermic chemical  reactions.  In
    a previous decision[79], the Commission considered that the market for pyrotechnic equipment can be segmented  according  to  the  field  of
    application (defence; space; aeronautical and other industrial applications)  leaving  open  whether  those  segments  need  to  be  further
    segmented according to the type of pyrotechnic equipment.

211) The Parties consider that a distinction between pyrotechnic equipment for (i) space launchers, (ii) satellites and  (iii)  missiles  appears
    relevant, since pyrotechnic equipment used in those sectors have different customers and different ultimate objectives. Moreover, each field
    of application requires specific expertise and qualification processes, and equipment for one application cannot  generally  technically  be
    used for the other applications. Pyrotechnic equipment for satellites allows for example the in-orbit deployment of solar  screens,  antenna
    masts and reflectors.

212) The Parties also submit that the market should be segmented between (i) pyrotechnic systems and (ii) pyrotechnic subsystems  and  equipment.
    Subsystems and equipment include complete pyrotechnic chains, pyrotechnic nuts or separation devices. Subsystems  are  composed  of  various
    types of equipment, such as hold-and-release mechanisms (“HRM”).

213) The Parties submit that the exact product market definition may be left open since the Transaction will not have any significant  impact  on
    competition in relation to pyrotechnic subsystems and equipment.

214) Given that the Transaction does not raise serious doubts as to its compatibility  with  the  internal  market  in  relation  to  pyrotechnic
    subsystems and pyrotechnic equipment for satellites, the exact scope of the market can be left open for  the  purposes  of  the  competitive
    assessment of the Transaction.

3. Sensors for satellites

215) A sensor is a device that detects or measures a physical property and records, indicates, or otherwise responds  to  it.  Satellite  sensors
    are satellite equipment which is used to measure numerous data (heat, pressure, altitude, surface roughness).

216) The Commission has previously concluded that each engine control component comprises a separate  market.[80]  In  addition,  the  Commission
    recognised that sensors (including pressure, temperature, fire and vibration sensors, as well as ignition  systems)  constitute  a  distinct
    product market.[81] In another decision, the Commission considered the market for pressure transducers and potential  further  segmentations
    but ultimately left the market definition open.[82] The Commission also considered a potential  market  definition  for  satellite  attitude
    sensors, and a potential further segmentation into earth, star and sun sensors for satellites.[83] However, the  precise  market  definition
    was ultimately left open.

217) Safran (Herakles) produces Standard Accuracy Pressure Transducers ('SAPT') which are pressure sensors  equipped  with  a  temperature  bulb,
    whose function is to measure pressure of fluids in tanks (high pressure) as well as in other parts of the  satellite  propulsion  subsystems
    before injection (low pressure). Pressure measure accuracy is of great importance as the propellant pressure allows  predicting  the  expiry
    date of the satellite. A satellite prime contractor stated that SAPT cannot be replaced by any other technology.[84]

218) The Parties submit that the exact product market definition may be left open since the Transaction will not have any significant  impact  on
    competition in relation to sensors for satellites.

219) On the basis of the above considerations, it is likely that there is a separate product market for  satellite  SAPT.  However,  the  precise
    product market definition can be left open, since the commitments proposed by the Parties would eliminate  any  serious  doubts  as  to  the
    compatibility of the Transaction with the internal market in relation to sensors for satellites under any plausible market definition.

4. Thermostructural composite materials

220) "Composite materials" is a generic term for materials resulting from the combination of two or more materials, a matrix and a  reinforcement
    or fibre, which are combined because of the specific properties their combination produces.

221) In a previous decision, the Commission considered that (i) cold composite materials, (ii) thermostructural  composite  materials  and  (iii)
    other composite materials constitute separate product markets leaving open whether those markets  need  to  be  further  segmented.[85]  The
    differentiation between those products is based on the temperature range that they can withstand: cold  composite  materials  can  withstand
    operating temperatures of up to about 230°C, thermostructural composite materials can withstand operating temperatures of up to  3000°C  and
    other composite materials resist to temperatures from 200 to 400°C.

222) The Parties submit that thermostructural composite materials have been adopted for numerous applications in  aeronautics,  space  launchers,
    satellites, defence and other industries, and they are not specific to  the  various  fields  of  application.  According  to  the  Parties,
    thermostructural composite materials are used in the satellite sector for their geometrical characteristics, mainly the controlled  and  low
    dilation. Thermostructural composite materials in the satellites sector may be used for instance in satellite propulsion subsystems but also
    on optical equipment.

223) The Parties submit that the exact product market definition may be left open since the Transaction will not have any significant  impact  on
    competition in relation to thermostructural composite materials for satellites.

224) There are indications in the Commission's market investigation that point towards  a  potential  further  segmentation  of  thermostructural
    composite materials into (i) carbon-carbon, which  is  made  of  carbon  fibre  and  plastic  and  (ii)  ceramics.[86]  Safran  manufactures
    cylinders[87] made of carbon-carbon materials that are used in optical EO satellites to mount space telescopes.  The  manufacture  of  those
    cylinders requires very specific design and know-how capabilities. According to one satellite prime contractor, there is no other technology
    that can substitute carbon-carbon materials given their specific physical properties.[88]

225) On the basis of the above considerations, it is likely that there is a separate product market for  carbon-carbon  materials.  However,  the
    precise product market definition can be left open, since the commitments proposed by the Parties would eliminate any serious doubts  as  to
    the compatibility of the Transaction with the internal market in relation to thermostructural composite materials under any plausible market
    definition.

5. MMH Propellant

226) Chemical satellite propulsion subsystems can be based on either a monopropellant or bipropellant technology. Monopropellant  engines  use  a
    single combustible propellant while bipropellant liquid fuel propulsion subsystems use a separate  fuel  and  oxidizer.  The  fuel  and  the
    oxidizer are stored in separate tanks and brought together only in the combustion chamber. The fuel-oxidizer combination  normally  used  is
    MMH (mono-methyl hydrazine) and MON-3 (mixed oxides of nitrogen).

227) In a previous decision, the Commission has considered the market for MMH, however left open the precise product market definition of  inputs
    for propellant charges.[89]

228) The Parties submit that propellant for satellite monopropellant engines and propellant for bi-propellant engines likely belong to  different
    product markets since those products are different and not substitutable. However, the Parties submit that the  precise  definition  of  the
    relevant product markets may be left open.

229) Given that the Transaction does not raise serious doubts as to its compatibility with the internal market in relation to MMH propellant  for
    satellites irrespective of the market definition applied, the exact scope of the market can be left open for the purposes of the competitive
    assessment of the Transaction.

8. Geographic market

1. Prime contracting for satellites

230) In previous decisions, the Commission found that the geographic dimension of the satellite prime contracting markets depends on  the  nature
    of the customers.[90]

231) The market for military satellites prime contracting must be considered as either national or worldwide  in  scope  depending  on  both  the
    procurement policies of each national military authority involved and the existence of national satellite prime contracting capabilities.

232) The market for institutional satellites prime contracting based on European/ESA programmes has been  considered  EEA-wide  in  scope,  inter
    alia due to the specific procurement policy of ESA, and the application of juste retour principle.

233) The market for commercial satellites prime contracting is considered to have a worldwide geographic dimension as sourcing takes place  on  a
    worldwide basis. It should however be noted that the U.S. Export Administration Regulations ("EAR") and U.S. International Traffic  in  Arms
    Regulations ("ITAR") exclude US satellite prime contractors from prime competitions  to  supply  satellites  to  operators  in  black-listed
    countries. The EAR are intended to regulate dual-use technologies and make the export of certain U.S. subsystems and equipment subject to  a
    licence. The ITAR make the export of certain US subsystems and equipment subject to a licence or forbid the export of certain subsystems and
    equipment depending on the end-use country.

234) The Parties submit that, given the absence of any significant impact on competition, the  precise  definition  of  the  relevant  geographic
    markets may be left open.

235) The results of the market investigation are in line with the Commission's past decisions. All satellite prime contractors responding to  the
    Commission's market investigation have confirmed the relevance of those distinctions.[91] A satellite prime contractor explained that  "when
    procuring satellites, commercial customers typically  consider  suppliers  from  around  the  world  during  the  acquisition  process.  For
    institutional or military customers, however, the tendency is for the acquisition process to be limited to suppliers located within  in  the
    customer’s country". Another satellite prime contractor explained that "commercial customers tend to favour flight heritage and  reliability
    of the supplier while institutional and military customers have strong geographical preferences for  regional  or  national  suppliers".  In
    addition, commercial satellite operators tend to confirm that they operate in a worldwide market.[92]  For  example,  a  satellite  operator
    explained that it chooses its providers "based on reliability, design compliance, credibility, and price criteria; country  of  origin  does
    not play a role" and another stated that "the key aspects are cost, schedule assurance  and  reliability.  If  those  are  met,  I  have  no
    preference".

236) The Commission's investigation showed that ITAR plays a role in the procurement  and  sale  of  satellites.  A  satellite  prime  contractor
    explained that "one single ITAR component on a satellite prevents its sale to an ITAR banned country" and another satellite prime contractor
    stated that "ITAR places restrictions on the information that can be shared with foreign  suppliers  and  customers"  According  to  another
    satellite prime contractor "in general, ITAR regulations introduced administrative delays and uncertainties in the execution of the programs
    (civil as defense)".[93]

237) On the demand side, all satellite operators responding to the Commission's market  investigation  stated  that  they  are  subject  to  ITAR
    restrictions in their procurement of satellites. However, this does not seem to affect their choice between  suppliers.[94]  In  a  previous
    decision, the Commission found that the impact of the ITAR export restrictions should not be overestimated, as it appears possible to obtain
    an export licence, exceptions to and exemptions from the ITAR are possible, and the list of black-listed countries evolves over time.[95]

238) Therefore, for the purpose of this decision, it is considered that the markets  for  prime  contracting  for  (i)  military  satellites  are
    national or worldwide in scope, (ii) European/EEA institutional satellites are European  in  scope,  and  (iii)  commercial  satellites  are
    worldwide in scope.

2. Satellite Propulsion Subsystems

239) In past decisions, the Commission considered that the geographic markets for satellite subsystems and equipment  follow  the  definition  of
    geographic markets at the satellite prime contracting level, that is they are EEA-wide for European based institutional programmes, national
    for military programmes where national suppliers exist, and worldwide for commercial satellites.[96]

240) The Parties submit that the geographic market definitions for satellite propulsion subsystems can be left open as the Transaction  will  not
    have any significant impact on competition irrespective of the geographic market definition applied.

241) The Commission's market investigation is in line with the Commission's past decisions[97] and respondents  have  also  indicated  that  ITAR
    plays a role in the procurement of satellite propulsion subsystems. However, the precise geographic market  definition  can  be  left  open,
    since the commitments proposed by the Parties would eliminate any serious doubts as to the compatibility of the Transaction in  relation  to
    satellite propulsion subsystems under any plausible geographic market definition.

3. Other Satellite Subsystems and Equipment

1. Valves for satellite propulsion subsystems

242) In previous decisions, the Commission has considered that  the  geographic  markets  for  satellite  subsystems  and  equipment  follow  the
    geographic market definition at the satellite prime  contracting  level,  that  is  they  are  EEA-wide  for  European  based  institutional
    programmes, national for military programmes where national suppliers exist, and worldwide for commercial satellites.[98]

243) According to the Parties, the supply of valves occurs on a worldwide basis, even for ESA programmes. The Parties add that ESA's  Procurement
    Rules do not apply strictly to those small components. For small components, providers of systems and subsystems  may  select  any  supplier
    (including non-EU suppliers), regardless of ESA juste retour and ESA's Procurement Rules, subject to ESA’s approval. In practice,  ESA  does
    not refuse the use of non-EU components when they are cheaper than the EU alternative. As a result, regardless of the type of  satellite  at
    stake, valves can be procured on a worldwide basis.

244) Respondents to the Commission's market investigation[99] have indicated that ITAR plays a role in the procurement of  valves  for  satellite
    propulsion subsystems. However, given that the Transaction does not raise serious doubts as to its compatibility with the internal market in
    relation to valves for satellites, the exact scope of the geographic market can be left open for the purposes of the competitive  assessment
    of the Transaction.

2. Pyrotechnic subsystems for satellites and pyrotechnic equipment

245) In a previous decision, the Commission found that the markets for pyrotechnic equipment are EEA-wide in  scope.[100]  This  decision  mainly
    concerned launchers, strategic missiles and tactical missiles and, therefore, the market of pyrotechnic equipment  for  satellites  was  not
    assessed.

246) The Parties consider the competition on that market as worldwide but submit that in any event, the geographic market definition may be  left
    open as the Transaction will not have a significant impact on competition in this sector.

247) Respondents to the Commission's investigation have indicated that ITAR plays a  role  in  the  procurement  of  pyrotechnic  subsystems  and
    equipment. However, given that the current Transaction does not raise serious doubts as to its compatibility with  the  internal  market  in
    relation to pyrotechnic subsystems and pyrotechnic equipment for satellites, the exact scope of the geographic market can be left  open  for
    the purposes of the competitive assessment of the Transaction.

3. Sensors for satellites

248) According to the Parties, the supply of sensors occurs on a worldwide basis, even for ESA programmes, for the same reasons as  described  in
    paragraph (243).

249) Respondents to the Commission's investigation have indicated that ITAR plays a role  in  the  procurement  of  sensors  for  satellites,  in
    particular of SAPT. However, the precise geographic market definition can be left open, since the commitments proposed by the Parties  would
    eliminate any serious doubts as to the compatibility of the Transaction with the internal market in relation to sensors for satellites under
    any plausible geographic market definition.

4. Thermostructural composite materials

250) In a previous decision, the Commission left the exact geographic market definition for composite materials open.[101]

251) The Parties consider the market for thermostructural composite materials as worldwide, but submit that the  exact  definition  may  be  left
    open in the present case since the Transaction does not affect negatively that market.

252) Respondents to the Commission's market investigation have indicated that ITAR plays a role in the procurement of thermostructural  composite
    materials. However, the precise geographic market definition can be left open, since the commitments proposed by the Parties would eliminate
    any serious doubts as to the compatibility of the Transaction with the internal market in relation to thermostructural  composite  materials
    under any plausible geographic market definition.

5. MMH

253) In a previous decision, the Commission left open the exact geographic market definition  for  Ammonium  Perchlorate  and  other  inputs  for
    propellant charges.[102]

254) According to the Parties, the supply of MMH occurs on a worldwide basis, even for ESA programmes, for  the  same  reasons  as  described  in
    paragraph (243).

255) Respondents to the Commission's market investigation have indicated that ITAR plays a role in the procurement of MMH.  However,  given  that
    the Transaction does not raise serious doubts as to its compatibility with the internal market  in  relation  to  MMH  irrespective  of  the
    geographic market definition applied, the exact scope of the geographic market can  be  left  open  for  the  purposes  of  the  competitive
    assessment of the Transaction.

9. Competitive assessment

1. Assessment of potential horizontal effects

256) The activities contributed to the Joint Venture would create a horizontal overlap in (i)  electric  satellite  propulsion  subsystems,  (ii)
    valves for satellite propulsion subsystems, and (iii) pyrotechnic subsystems.

1. Electric satellite propulsion subsystems

257) The Parties will contribute to the Joint Venture their activities related  to  electric  satellite  propulsion  subsystems.  In  particular,
    Airbus will transfer its ion gridded satellite propulsion activities  while  Safran  will  transfer  its  Hall-effect  satellite  propulsion
    activities.

258) Safran is currently supplying and/or developing Hall-effect thrusters for (i) TAS on the new version of  its  Spacebus  platform[103],  (ii)
    Airbus and TAS as co-prime contractors of the  Alphabus[104]  and  […],  and  (iii)  Airbus  for  the  new  version  of  its  Eurostar  3000
    platform[105]. Airbus […].

259) The Parties submit that the Transaction will not lead  to  any  anti-competitive  horizontal  effects  in  relation  to  electric  satellite
    propulsion subsystems.

260) First, the Parties argue that the market for electric satellite propulsion subsystem remains an emerging market. According to  the  Parties,
    satellites with electric satellite propulsion subsystems would account for less than [5-10]% of all satellites in both 2014  and  2020,  and
    satellites with hybrid satellite propulsion subsystems would account for [5-10]% in 2014 and [20-30]% in 2020, the rest of satellites  being
    based on chemical satellite propulsion subsystems.

261) Second, the Parties argue that […].

262) Third, the Parties submit that the market for satellite thrusters (chemical  and  electric)  is  worldwide  since  the  platforms  currently
    available and developed by EU satellite prime contractors are not ITAR-free, and thus no restriction to the use of additional US  components
    would exist. Therefore, the Parties consider that there are a significant number of strong competitors.

263) As regards ion gridded thrusters, the Parties submit that the European player Qinetiq (UK) holds a  100  %  market  share  in  the  European
    institutional segment, while L3COM (US) holds a 100 % market share in the worldwide commercial segment.

264) As regards Hall-effect thrusters, the Parties submit that the thrusters developed by Fakel (Russian) and Aerojet (US) through  its  European
    subsidiary ESP (UK) will be fully interchangeable and, therefore, the cost for switching suppliers for the thrusters would be marginal.

265) During the Commission's market investigation no concerns were raised as regards  horizontal  effects  of  the  Transaction  in  relation  to
    satellite propulsion subsystems. However, some concerns were raised as regards the  vertical  relationship  between  Airbus'  activities  as
    satellite prime contractor and Safran's activities as supplier of Hall-effect thrusters, which will be discussed in section 7.3.2.1.

266) In the overall segment of satellite propulsion subsystems  (chemical  and  electric),  both  Parties  offer  electric  satellite  propulsion
    subsystems and Airbus also supplies chemical satellite propulsion subsystems. However, currently there is no horizontal overlap  since  […].
    Airbus' market share was [10-20]% at worldwide level and [40-50]% at European level in 2013.

267) The Commission's investigation showed, however, that chemical and electric thrusters are much differentiated since  those  technologies  are
    different in terms of technical characteristics, prices and customers' need, and thus may not belong to the same  relevant  product  market.
    Moreover, even if they were to belong to the same relevant market, several alternative suppliers would be available both at  European  level
    for example Qinetiq, and at non-European level, for example Aerojet (US), L3COM (US), Fakel (Russia) and MOOG (US).[106]

268) As regards electric satellite propulsion subsystems (ion gridded thrusters and Hall-effect thrusters), although both Parties are  active  in
    that field , […] there was no horizontal overlap between their activities […]. The Commission's market investigation  indicated  that  there
    are alternative suppliers of electric satellite propulsion subsystems such as QinetQ (UK), Fakel (Russia),  L3COM  (US)  and  Aerojet  (US).
    Additionally, the Commission's market investigation indicated that ion  gridded  thrusters  and  Hall-effect  thrusters  are  differentiated
    technologies and may thus belong to two different relevant product markets.

269) In the hypothetical market for Hall-effect thrusters, the Parties' activities do not overlap since only Safran is active in that field.

270) In conclusion, in light of the above and the available evidence, the Transaction does not raise serious doubts as to its compatibility  with
    the internal market in relation to horizontal effects concerning electric satellite propulsion subsystems.

2. Valves for satellite propulsion subsystems

271) Airbus produces and supplies two types of valves for chemical satellite propulsion subsystems  (fill-drain  valves  and  pyro-valves)  while
    Safran is only marginally active in flow control valves for chemical satellite propulsion subsystems.[107]

272) The Transaction will result only in an indirect horizontal overlap for valves  for  chemical  satellite  propulsion  subsystems  since  only
    Airbus will contribute its satellite valves activities to the Joint Venture.

273) The Parties submit that given their low combined market shares the Transaction will not lead to any anticompetitive  horizontal  effects  in
    relation to valves for satellite propulsion subsystems regardless of the market definition applied.

274) During the Commission's market investigation no concerns were raised regarding valves for satellite propulsion subsystems.

275) First, the Parties' combined market shares in 2013 remained below [20-30]% under any possible market definition. For  flow  control  valves,
    the only types of vales for satellite propulsion subsystems where the Parties'  activities  overlap,  Airbus  […]  and  Safran  only  has  a
    negligible market presence (less than [0-5]% market share).

276) Second, as one market participant stated there are several other alternative suppliers of valves to  the  Parties,[108]  namely  MOOG  (UK),
    ValveTech (US), Vacco (US) and Cobham (US).

277)  In conclusion, on the basis of the above and the available evidence, the Transaction does not raise serious doubts as to its  compatibility
    with the internal market in relation to the supply of valves for satellite propulsion subsystems.

3. Pyrotechnic subsystems for satellites

278) Both Parties are active in the supply of pyrotechnic subsystems for satellites, namely in HRM.

279) The Transaction will only result in an indirect horizontal overlap of  the  Parties'  activities  since  only  Safran  will  contribute  its
    pyrotechnic subsystems activities to the Joint Venture.

280) The Parties submit that given their limited presence in this market the  Transaction  will  not  lead  to  any  anti-competitive  horizontal
    effects in relation to pyrotechnic subsystems for satellites.

281) The Parties' combined market shares for HRM for satellites amounted to less than [10-20]% at worldwide level and [30-40]% at European  level
    in 2013. Moreover, the Parties will continue to face a strong competition from both European  suppliers  (for  example,  Lacroix,  RUAG  and
    Dassault) and US suppliers (for example, Hi-Shear and Ensign Bickford).

282) During the Commission's market investigation no concerns were raised regarding pyrotechnic subsystems.

283) In conclusion, on the basis of the above and the available evidence, the Transaction does not raise serious doubts as to  its  compatibility
    with the internal market in relation to the supply of pyrotechnic subsystems for satellites.

2. Assessment of potential non-horizontal effects

284) The creation of the Joint Venture will lead to a vertical relationship between some of the Parties’ activities.

285) The Commission's market investigation showed that satellites operators considered that the Transaction would have positive impact  on  their
    companies and the industry in general.[109] However, during the Commission's market investigation some concerns were raised in  relation  to
    specific products, which will be analysed below.

1. Vertical relationship between satellite prime contracting and electric satellite propulsion subsystems

286) Airbus is currently active in (i) the  worldwide  market  for  commercial  satellites  prime  contracting,  (ii)  the  European  market  for
    institutional satellites prime contracting, and (iii) the national markets of EU Member States for military  satellites  prime  contracting.
    Airbus will not contribute its activities as satellite prime contractor to the Joint Venture.

287) As regards the worldwide market for commercial satellites prime contracting, Airbus had a market share  of  [20-30]%  in  2013,  […]  Boeing
    which had a market share of [20-30]%.

Table 1: Market shares in the worldwide market for commercial satellites prime contracting

|              |Boeing         |Airbus        |SS/L           |TAS            |
|2013          |[40-50]%       |[40-50]%      |[10-20]%       |[0-5]%         |
|2012          |[20-30]%       |[10-20]%      |[40-50]%       |[5-10]%        |
|2011          |[40-50]%       |[40-50]%      |[5-10]%        |[5-10]%        |

                               Source: Form CO (market shares calculated based on the number of contracts awarded)

288) As regards the German market for military satellites prime contracting, Airbus had a market share of [30-40]% in  2013.  OHB  was  the  only
    other satellite prime contractor which was also awarded military contracts in Germany in 2013.

Table 3: Market shares in the German market for military satellites prime contracting

|              |Airbus         |TAS            |OHB           |
|2013          |[30-40]%       |[0-5]%         |[60-70]%      |

                               Source: Form CO (market shares calculated based on the number of contracts awarded)

289) The Parties argue that the creation of the Joint Venture will not have an impact on competition at either worldwide or European level.

290) First, the Parties argue that the market for electric satellite propulsion subsystems remains an  emerging  market  and  that[…].  Moreover,
    there are numerous competitors both inside and outside Europe offering  electric  satellite  propulsion  subsystems  (including  Hall-effect
    thrusters).

291) Second, the Parties argue that development contracts for the future platforms of  European  satellite  prime  contractors  are  awarded  and
    managed under ESA and/or CNES financing and contracts, which therefore imply at least a clear visibility and monitoring  rights  over  their
    supply conditions.

292) Third, the Parties argue that the new Hall-effect thrusters currently developed  by  Fakel  (Russia),  ESP  (UK)  and  Safran  (Snecma)  are
    designed to be fully interchangeable without any significant switching cost or delay. According to the Parties, ESA itself  is  funding  the
    development of ESP’s XR-5E thruster to ensure that it will be totally compatible with both Airbus’ and TAS’ new platforms.

293) Fourth, the Parties argue that Airbus is already vertically integrated and supplies chemical satellite propulsion subsystems to  several  of
    its competitors, including […]. According to the Parties, Airbus has never  discriminated  against  other  satellite  prime  contractors  in
    relation to the provision of chemical satellite propulsion subsystems  and  the  Joint  Venture  will  thus  not  create  any  new  risk  of
    foreclosure. On the contrary, the fact that Airbus will contribute its satellite propulsion subsystems activities to the Joint Venture while
    retaining its satellite prime contracting activities outside the Joint  Venture  will  further  reduce  Airbus’  ability  and  incentive  to
    foreclose competitors.

294) Finally, the Parties argue that TAS is currently the only company in Europe  manufacturing  power  processing  units  (“PPU”)  for  electric
    satellite propulsion subsystems. According to the Parties, since the PPUs are the most expensive part of the electric  satellite  propulsion
    subsystems (two to four times as expensive as the thrusters), TAS would have the possibility to immediately retaliate against any attempt of
    foreclosure by the Joint Venture.

    Input foreclosure

295) During the Commission's market investigation several respondents raised concerns as regards the possibility of the Joint  Venture  to  adopt
    an input foreclosure strategy with a detrimental effect on Airbus' competitors in the downstream markets for satellite prime contracting.

296) According to the Commission's Non-Horizontal Merger Guidelines[110], input foreclosure arises where, post-merger, the  Joint  Venture  would
    be likely to restrict access to the products that it would have otherwise supplied absent the merger, thereby raising its downstream rivals'
    costs by making it harder for them to access the input under similar prices and conditions as absent the merger. For  input  foreclosure  to
    lead to harm to competition, it is not necessary that rivals are forced to exit the market. The  relevant  benchmark  is  whether  the  less
    favourable supply conditions for the input would lead to higher prices for consumers of the downstream market.

297) In this particular case, an input foreclose strategy regarding Hall-effect thrusters may not be limited  to  price  discrimination  but  may
    mainly consist of non-price discrimination strategies like:[111]

      i) requirements for Airbus' rivals to pay for qualifications of Hall-effect thrusters: the baseline for the product developed by the  Joint
         Venture could be the Airbus satellite platform, thus imposing costs for use in other platforms;

     ii) discrimination in the delivery schedule of Hall-effect thrusters in favour of Airbus; and

    iii) imposition of early orders on Airbus' rivals.

298) In the context of those concerns, the Commission examined (i) whether the Joint Venture would have, post-merger, the  ability  to  foreclose
    competing satellite prime contractors from access to Hall-effect thrusters, (ii) whether the Joint Venture would have the  incentive  to  do
    so, and (iii) whether such a foreclosure strategy would have an overall likely negative effect on competition.

299) For the reasons set out below, the Commission concluded that the Parties are likely to have the ability and  incentive  to  adopt  an  input
    foreclosure strategy as regards Hall-effect thrusters, and that such  a  strategy  would  have  an  overall  negative  impact  on  effective
    competition in the markets for the prime contracting of satellites.

    Ability to foreclose satellite prime contractors from access to Hall-effect thrusters

300) For the reasons set out below, the Commission takes the view that the Joint Venture would have the  ability  to  foreclose  satellite  prime
    contractors from access to Hall-effect thrusters.

301) As regards the Joint Venture's ability to adopt an input foreclosure strategy, the Commission's investigation  revealed  that  (i)  a  Hall-
    effect thruster is a critical component for a satellite prime contractor, (ii) there are no equivalent alternatives to Safran for the supply
    of Hall-effect thrusters to European satellite prime contractors, and (iii) switching costs and entry barriers are significant.

302) The Commission's market investigation showed that a propulsion thruster is a critical input for the success  of  a  satellite,  although  it
    represents less than [0-5]% of its total cost. If there is any failure of the propulsion thruster, the satellite  operator  loses  both  the
    value of the satellite and its launch (that is EUR 200 million). Moreover, a new satellite could only be launched  2-3  years  later,  which
    would impose additional costs for a satellite operator.

303) In the specific case of Hall-effects thrusters, the Commission's market  investigation  indicated  that,  although  they  are  currently  an
    emerging market, there is an expectation by market participants that they will become the most relevant technology in the next five years.

304) Satellite prime contractors stated that "with the competitive pressure to reduce launch costs, there will likely be an increase  in  use  of
    electric propulsion to reduce launch mass. Although the use of both gridded ion and Hall-effect thrusters will likely  increase,  the  Hall-
    effect technology will increase at a faster rate due to the number of satellite primes that have already adopted this technology".[112]

305) Satellite propulsion subsystem suppliers also mentioned that "there has been a major shift in the satellite propulsion market from  chemical
    to electric propulsion. Indeed, while only a few years ago, 100% of the engines were using chemical propulsion, the new electric  technology
    has been gaining in importance. This shift has happened quite rapidly (…) the  trend  from  chemical  to  electric  propulsion  should  only
    accentuate in the next 5 years. The expectation is that in 5 years 50% of the propulsion systems will  be  electric".[113]  Other  satellite
    propulsion subsystem suppliers mentioned that the future trend will be "decreased chemical propulsion, no  ion  gridded  and  a  significant
    increase in Hall Effect on commercial satellites"[114] and that "in the next 5 years, electric propulsion,  and  in  particular  Hall-effect
    technology, may overweight chemical propulsion. Ion-gridded propulsion will have its share of the market depending on the  specificities  of
    certain missions, but Hall- effect technology will have the greater impact".[115]

306) According to ESA, electric satellite propulsion has been gaining prominence in telecommunication satellites, and this  trend  will  probably
    increase so that electric satellite propulsion may outweigh chemical propulsion in the future.[116] An ESA report also states that "The  use
    of EP [electric propulsion] in the telecommunication space market is today a key issue to improve the position of the European space sector"
    and "All the major Satcom manufacturers (i.e. Boeing, TAS, Space Systems Loral and EADS  ASTRIUM)  have  already  implemented  EP  [electric
    propulsion] systems". It is also mentioned that "there is a long term need for electric propulsion systems: (i) For exploration (…) (ii) For
    Telecommunication (…), (iii) For LEO applications for Earth science and observation".[117]

307) Airbus' internal documents also confirm this trend. One document mentions that […].[118]Additionally, it is stated that  there  is  an  […].
    Another internal document states that there is a […][119]

308) As regards potential alternative suppliers of Hall-effect thrusters, the Commission's investigation showed  that  there  are  no  equivalent
    alternatives to Safran (Snecma)'s thrusters for European satellite prime contractors.

309) First, the Commission’s investigation showed that although Safran still has a low market share in the market for the supply  of  Hall-effect
    thrusters, […][120], it is likely to assume a leader role in Europe, in particular with the PPS 5000, whose  qualification  is  planned  for
    2016.

310) According to one satellite propulsion subsystem supplier  "Snecma  has  recently  become  a  very  aggressive  competitor  on  the  European
    market".[121] ESA also states that most of the future European Geostationary Telecommunication Platforms using electric satellite propulsion
    subsystems (for example, Spacebus, Alphabus, Alphabus extension and the future Neosat) will  have  a  Safran’s  thruster.[122]  An  internal
    document from Safran estimates that Safran […] on the worldwide market for the supply of Hall-effect thrusters, with a market share of  […].
    Fakel (Russia) and Aerojet (US) are foreseen to obtain a market share of […].[123]

311) The main alternative to Safran's  Hall-effect  thrusters  could  be  Fakel  (Russia).  This  satellite  propulsion  subsystem  provider  has
    traditionally been the leading supplier of Hall-effect thrusters, accounting for the sale of [80-90]% of the worldwide supply of Hall-effect
    thrusters used in commercial satellites in the last three years and [90-100]% of the  European  supply  of  Hall-effect  thrusters  used  in
    commercial satellites.

312) Fakel's most important Hall-effect thruster currently available on the market is the  SPT  100,[124]  which  is  already  qualified  and  is
    similar in terms of thrust and power to Safran’s PPS 1350. Fakel's SPT 140 is currently undergoing qualification  […],  and  is  similar  to
    Safran’s PPS 5000.

313) However, the Commission's market investigation has revealed that currently Fakel (Russia)  is  not  seen  as  a  good  option  for  European
    satellites given the recent embargo imposed on Russia. In fact, although Fakel (Russia) stated that it "has not, in the past,  been  subject
    to restrictions on the supply of its thrusters to European customers, and does not expect the current geopolitical situation to  impact  its
    ability to supply in Europe"[125], most market participants have the expectation that  the  significance  of  this  supplier  is  likely  to
    decrease substantially in the near future.

314) According to ESA "Given the current political situation, this Russian supplier is  not  the  preferred  option.  Fakel's  role  in  electric
    propulsion will likely decrease in the future" although for now "ESA has not seen any impact  of  the  current  geopolitical  conflict  with
    Russia on the procurement of Fakel's technology (…) even at the worst of the Ukrainian crisis, the  industry  has  managed  the  issue  with
    Russian suppliers".[126]

315) A satellite prime contractor also mentioned that "Fakel technology, initially considered to be used on its version of  the  Neosat  platform
    pending the availability of Safran’s PPS 5000, is  potentially  subject  to  certain  Russian  restrictions".[127]  A  satellite  propulsion
    subsystem supplier also mentioned that "Fakel is a Russian company, and it might be complex to  work  with  them  due  to  the  geopolitical
    situation".[128] Another satellite propulsion subsystem supplier stated that "Fakel is fully eligible  for  all  activities  which  are  not
    subject to "juste retour" constraints, but (…) submits that given the recent geopolitical conflict with Russia, satellite customers may have
    increased concern regarding their selection".[129] Finally, a satellite operator also stated  that  "Obviously  the  uncertain  geopolitical
    context with Russia is a source of concern, and could go in any direction, including serious blockage of hardware and services".[130]

316) Market participants also mentioned some recent evidence of geopolitical risks associated with Russia. A satellite  prime  contractor  stated
    that "recently, as a consequence of the embargo imposed on Russia in relation to the Ukrainian/Crimea crisis, the Russian industrials had to
    suspend the delivery of thrusters used by the Americans Air Force and United Launch Alliance on the heavy launcher Atlas when they are  used
    for military purposes".[131] Another satellite prime contractor added that "Russia threatened to  stop  supplying  the  International  Space
    Station, which, although the threat was not carried out, shows that space industry is not entirely impervious to  problems  arising  in  the
    political sphere. In US there were already some problems in the supply of Russian thruster engines for US rockets, so US  companies  decided
    to develop an American solution. There is therefore the risk that Fakel may decide not to sell its thrusters anymore outside Russia or  make
    the qualification very difficult. For this reason, it is not possible to rely solely on Fakel".[132]

317) The Commission's market investigation also showed that Fakel's thruster may suffer from some quality disadvantage. According to a  satellite
    propulsion subsystem supplier "some quality control issues have been reported regarding  Fakel".[133]  A  satellite  prime  contractor  also
    mentioned that "Russian suppliers present a very uncertain level of quality. For instance, it is of common knowledge in the  space  industry
    that Russian satellites have a shorter life in orbit than their Western equivalent. Because of the lack of consistent investment to maintain
    and upgrade the production infrastructure, and manage obsolescence, we have a low level of confidence in the fact that Fakel will be able to
    supply Hall-effect thrusters without discontinuation in the coming 20 years".[134]

318) Additionally, market participants also stated that access to Fakel's thrusters is not easy as a result of an agreement between this  company
    and Airbus. A satellite prime contractor stated that Airbus "has made it very difficult for other satellite manufacturers to get  access  to
    Fakel’s technology, and to the information regarding its qualification of Fakel's products. Indeed, when  a  prime  wants  to  work  with  a
    supplier, it needs either to qualify their product or to obtain the qualification data of another prime. This  current  situation,  combined
    with the future consolidation of Airbus and Safran's activities, could give  rise  to  concerns  regarding  access  to  electric  propulsion
    equipment currently independently supplied by Safran".[135] According to another satellite prime contractor "There has not been an  explicit
    refusal to supply from Fakel. However, in order to select a supplier for thrusters, […] requires certain technical  and  qualification  data
    about the relevant product, and Fakel has never been responsive to […] requests on those topics. (…) Fakel who has suggested that  […]  goes
    through Airbus for the qualification of the thruster".[136] An internal document from Airbus […]".[137]

319) Finally, the fact that Fakel (Russia) is from a country which is not a member of  ESA  may  also  create  some  disadvantages  for  European
    institutional satellites. According to this supplier, it "has met with both TAS and  Airbus  regarding  the  Neosat  program  regarding  its
    potential involvement as a supplier for this platform, (…) it has not had any recent update. Thus, currently Fakel is not actively  involved
    in the project (…). Fakel  does  not  know  to  which  extent  the  fact  that  this  project  is  funded  by  ESA  would  prevent  it  from
    participating".[138]

320) Another potential supplier of Hall-effect thrusters is Aerojet (US). In particular Aerojet (US)  supplies  the  XR-5  Hall-effect  thruster,
    which is, however, subject to several export restrictions, namely those related to ITAR restrictions.

321) During the Commission's market investigation, market participants mentioned  that  for  institutional  satellites  they  need  to  buy  from
    European suppliers. According to one satellite prime contractor "for institutional programs, with focus on  European  procurement,  it  will
    suffer from a de facto monopoly in Europe".[139] ESA also stated that "where cost conditions allow for  it,  ESA  prefers  to  use  European
    technology".[140] On one report by ESA is stated that "Europe needs to keep the independence on this technology which is strategic  for  the
    future commercial telecommunication market, especially considering the ITAR restrictions of American products".[141]

322) Moreover, the Commission's market investigation also showed that some commercial customers have a preference for European  solutions,  given
    that ITAR restrictions do not allow the export to some countries. A satellite prime contractor mentioned that "US thrusters are  subject  to
    ITAR regulations. If ITAR products can be sold easily in Europe, this is not the case for other countries, for instance in the  Arab  world.
    An ITAR satellite cannot be launched from a Chinese rocket. Moreover, ITAR could also change in the future, leading to a component  becoming
    unavailable".[142] According to another satellite prime contractor countries subject to  US  export  restrictions  represent  25  %  of  the
    commercial tenders.[143]

323) The Commission's market investigation also showed that US thrusters  are  not  compatible  with  Safran's  and  Fakel's  thrusters.  As  one
    satellite prime contractor mentioned,  "US  electric  thrusters  use  different  technologies,  which  have  different  characteristics  and
    performances. Even if […] were to buy from US suppliers using Hall-effect thrusters, such as Aerojet, it  would  have  to  adapt  the  other
    components of its propulsion systems".[144]

324) A third alternative to Safran's Hall-effect thrusters could be ESP (UK). This subsidiary of Aerojet (US) is  currently  developing  a  Hall-
    effect thruster based on the XR-5 Aerojet design with the objective of making it a European thruster.

325) The project would be 50% funded by ESA and 50% by Aerojet (US). However, so far no final  agreement  between  ESA  and  ESP  (UK)  has  been
    concluded, also because of the use of non-European components in the development of this thruster. There  is  thus  still  some  uncertainty
    about when ESP (UK) will be able to make available an European Hall-effect thruster compatible with the  thrusters  from  Safran  and  Fakel
    (Russia). According to ESA, "The thruster could then be used for Neosat, although ESA has not yet seen such proposal".[145]

326) The Commission's market investigation showed that ESP's thruster would still be  subject  to  ITAR  restrictions  and  export  restrictions.
    Satellite prime contractors mentioned that "ESP's thrusters would be subject to ITAR".[146] ESP (UK) mentioned that "It is very difficult to
    build entirely ITAR-free thrusters. The XR-5E, for instance, will not be ITAR-free, although it will include as little  ITAR  technology  as
    possible".[147]

327) The Commission's investigation also showed that the use of this thruster would involve additional costs. According to  one  satellite  prime
    contractor "if […] were to buy ESP's thrusters such requalification would be costly, and would negatively impact […]  price-competitiveness,
    in particular for the  commercial  market".[148]  Another  satellite  prime  contractor  added  that  the  Aerojet  original  thrusters  are
    significantly more expensive "both in terms of recurring and non-recurring costs".[149] One of the steps of the investment in Europe is thus
    "to, little by little, replace elements that can be improved in order to reduce costs".[150]

328) As regards multi-sourcing, the Commission's investigation showed that it is relevant for both satellite  primes  contractors  and  satellite
    operators to have more than one alternative, in particular if there are some potential restrictions associated with one of the suppliers.

329) One satellite prime contractor mentioned "that is important to have two suppliers of propulsion system, in particular  if  one  of  them  is
    located in Russia, where the access could be limited by political factors, and the other one in the US, where ITAR regulations  apply".[151]
    Satellite operators also stated that (i) "if there is uncertainty, […] would require the satellite manufacturer to provide a  viable  backup
    plan", (ii) "currently we would not decide against a particular manufacturer offer because of the presence of Fakel in the supply chain.  It
    is however a plus for any company to have access to alternative electrical  propulsion  solutions  in  case  these  thrusters  would  become
    unavailable" and (iii) "as a general rule, satellite manufactures and satellite operators try to avoid single  sourcing".[152]  An  internal
    document from Airbus confirms that […].[153]

330) The Commission’s investigation also showed that some suppliers of Hall-effect thrusters may be close to full capacity.  An  Airbus  internal
    document mentions that […].[154] A satellite prime contractor also stated that "Airbus is such an important  client  that  it  uses  Fakel’s
    entire capacity, thus making access to Fakel's thrusters very difficult".[155]

331) Those two factors imply that it is important for satellite prime contractors to have at least two alternative suppliers in  order  to  avoid
    any risk of delivery failure resulting from the lack of capacity or export restrictions.

332) As regards switching costs, the large majority of market participants  stated  that  they  are  significant.[156]  As  one  satellite  prime
    contractor mentioned "switching from one supplier to another could lead to significant non-recurring costs and a significant schedule impact
    at both the supplier and prime contractor level".[157] Another satellite prime contractor stated that "switching supplier for its propulsion
    system would entail a cost of around EUR 10 million. Switching only the thruster supplier would cost about EUR 4 million just to qualify the
    new supplier (such as Fakel). Moreover, if the propulsion system does not have a record it needs  to  offer  a  discount  to  the  satellite
    operator that incorporates the need of validation".[158]

333) However, the Commission’s investigation also showed that in the context of the future Neosat platform funded by ESA there is  an  effort  to
    make this platform compatible with different suppliers, thus significantly reducing switching costs. According to ESA, the "Neosat  platform
    has been defined with interchangeable components precisely to allow for second sourcing. In theory, for the interchangeable items, the  cost
    of switching from a manufacturer to a different one should be minimal".[159]

334) Although the Hall-effect thrusters by Safran, Fakel (Russia) and, possibly, ESP (UK) will  be  compatible  in  the  context  of  the  Neosat
    platform, there are non-recurring costs associated with switching suppliers. According to one satellite prime contractor "the  non-recurring
    costs of switching of supplier would in such case consist in: (i)  the  acquisition  of  the  complete  thruster  qualification  file,  (ii)
    possibly, delta qualification (…), (iii) system tests (coupled tests with PPU, multi-firing tests) if not already completed, and (iv) system
    impacts of new thrusters implementation on the spacecraft (e.g. with regard to thruster module, ADCS, thermal aspects)".[160]

335) As regards the qualification costs, ESA mentioned that “To propose on the market a new satellite solution embedding electric  propulsion,  a
    prime has to demonstrate that its overall system is correct, and in that respect  the  knowledge  from  the  behaviour  and  performance  of
    electrical thruster -through a complete thruster qualification file-, is a must. A European prime, which would  not  have  itself  performed
    these qualifications, would have to acquire the qualification files of the thrusters that it  is  going  to  use”.  As  regards  the  fourth
    component mentioned by the satellite prime contractor, ESA explained that "if the mechanical interfaces  of  the  thrusters  are  different,
    starting from a certain “thruster module” design, based on a certain thruster, then to switch to another thruster, there is  a  need  for  a
    modification".[161]

336) In addition, the interchangeability of Hall-effect thrusters is so far  limited  to  the  Neosat  platform  developed  by  TAS  and  Airbus.
    Therefore, other satellite prime contractors would not benefit from such interchangeability.

337) The Commission’s investigation also showed that barriers to entry pertaining to the supply of Hall-effect thruster are high.[162] Thus,  any
    counter-strategy by satellite prime contractors to promote a new supplier of Hall-effect thrusters would be unlikely.

338) Finally, the Commission’s investigation showed that despite the relatively low value of satellite propulsion thrusters as  compared  to  the
    total value of a satellite, the Joint Venture could still have the ability to significantly affect the competitiveness of Airbus' rivals. As
    one satellite prime contractor explained, in addition to a price increase, discrimination by the Joint Venture against Airbus' rivals  could
    take several forms that would affect significantly their competitiveness, namely:

      i) "necessity to pay for qualifications: in case the baseline of  electric  propulsion  engines  becomes  Airbus’  platform  (in  terms  of
         qualification, functioning points, etc), (…) would have to support

          a) the extra-cost represented by the adaptation/delta qualification of the product on (…) platform which would be fixed by  Safran/the
             JV; (…) anticipates it would represent approx. 4 millions euros. This qualification cost has to be supported whenever there  is  an
             evolution on the thruster (i.e. every 4 to  5  years).  The  qualification  cost  is  therefore  incurred  on  all  the  satellites
             manufactured by (…) in the meantime (3 to 4 satellites per year, i.e. a total of 12 to 20 satellites); and

          b) the extra-cost represented by the loss of flight heritage: a limited flight heritage can be compensated by a  discount  applied  on
             the price of the satellite (around 3-4% of the price of the satellite);

     ii) necessity to support the cost of early bookings and delays in delivery:

          a)  early bookings that could either be imposed by the JV or be the result of the necessity to  obtain  a  qualification,  generate  a
             financing cost; and

          c) delays in deliveries result in the payment of very high liquidated damages".[163]

339) The discrimination against Airbus' rivals could also assume more qualitative forms, namely "(i) Not reacting in time  to  (…)  requests  for
    price quotations and technical information would allow the JV to seriously hinder (…) ability to compete efficiently in the context  of  the
    tenders organized by satellite operators” and “(ii) repetitive delay deliveries  of  the  satellites.  It  would  harm  (…)  reputation  and
    disadvantage it for future tenders".[164]

340) On the basis of the above and the available evidence, the Commission concludes that the Joint Venture would have the  ability  to  foreclose
    satellite prime contractors from access to Hall-effect thrusters.

    Incentives to foreclose satellite prime contractors from access to Hall-effect thrusters

341) The Commission’s investigation also showed that, for the reasons set out below, the Joint  Venture  may  have  the  incentive  to  foreclose
    satellite prime contractors from access to Hall-effect thrusters.

342) In Europe there are only two competitors in the downstream market of satellite prime contacting. One of those companies, TAS, has a  similar
    size and product range as Airbus and seems to compete with Airbus for several contracts. The other company, OHB, is an aggressive competitor
    which has been expanding in the last years. In case of discrimination against those two satellite prime contractors,  their  competitiveness
    would be affected. Thus, for customers which only buy from European satellite prime contractors Airbus would appear  as  the  only  credible
    alternative.

343) Airbus' internal documents show that TAS and OHB are its two main competitors. […].[165]

344) The benefits of a potential input foreclosure strategy by the Parties would consist in an increase in  the  number  of  satellites  sold  by
    Airbus as well as in an eventual increase in Airbus' margins per satellite.  This  is  particularly  the  case  for  European  institutional
    programmes for which only Airbus, TAS and OHB are the potential suppliers, and for which Airbus has a market share above [40-50]%. It  would
    also be the case for commercial satellites from countries subject to US restrictions, where the main competitors  are  Airbus  and  TAS.  As
    regards other satellite operators, in particular for those that also have US  suppliers  as  alternatives,  the  benefits  for  the  Parties
    deriving from such an input foreclosure strategy would be lower given their possibility to switch to a US satellite prime contractor instead
    of to Airbus.

345) Given the higher absolute margins of the satellite prime contracting activity (around EUR […]) compared  with  the  margins  of  Hall-effect
    thrusters (whose total cost is less than EUR […] per satellite), the gains for Airbus of adopting an input foreclosure strategy  as  regards
    Hall-effect thrusters could potentially be higher than the eventual cost of losing some sales in the upstream markets.[166]

346) The incentives for the Parties to adopt an input foreclosure strategy are  however  reduced  by  the  fact  that  Airbus'  activities  as  a
    satellite prime contractor are not contributed to the Joint Venture. Consequently, the shareholder Safran might not  have  an  incentive  to
    allow the Joint Venture to favour Airbus' activities, thereby risking losing sales. However, it is also possible that  Safran  would  accept
    discrimination in favour of Airbus in exchange of some sort of compensation within the Joint Venture. Additionally, it is possible that  the
    Joint Venture would not suffer any loses in case Airbus were to capture all the sales lost by its rivals. This is more likely to happen  for
    European institutional customers and commercial customers with European preferences.

347) The Commission also considers that the Joint Venture would have the incentive to discriminate against Airbus' downstream rivals, because  it
    would not be able to extract all the available profits in the downstream markets by simply raising the price of the Hall-effect thrusters as
    this component only accounts for less than [0-5]% of downstream profits.[167] In fact, for that to be a credible strategy, the price of  the
    Hall-effect thrusters would need to be increased very significantly, which would be an easily detectable strategy. This  is  also  why  non-
    price discrimination strategies would be the more effective in order to shift downstream rents to Airbus.

348) The possibility of retaliation by one of Airbus' satellite prime contracting competitors  could  also  discourage  the  Joint  Venture  from
    discriminating against those companies. However, the Commission’s investigation has shown that the Joint Venture does not seem to be  highly
    dependent on its two main European competitors.

349) According to the Parties, for equipment purchased by Airbus and Safran, there is no alternative to TAS for  either  the  PPU  or  electronic
    tubes, while for all the other subsystems there are alternative suppliers. In the case of PPU, […]. In the case of electronic tubes, TAS  is
    subject to the remedies committed in the context  of  two  Commission  decisions  that  aimed  reducing  the  likelihood  of  discriminatory
    behaviour.[168]

350) As regards OHB, […].

351) On the basis of the above and the available evidence, the Commission concludes that the Joint Venture would have the incentive to  foreclose
    satellite prime contractors from access to Hall-effect thrusters.

    Overall likely impact on effective competition

352) For the reasons set out below, the Commission takes the view that an input foreclosure strategy by the Joint Venture in  relation  to  Hall-
    effect thrusters would have an overall negative impact on effective competition.

353) The Airbus rivals that would be most affected by being  foreclosed  from  access  to  Hall-effect  thrusters,  that  is  TAS  and  OHB,  are
    significant satellite prime contractors, in particular in the European institutional and  national  military  market  segments.  TAS  has  a
    position similar to Airbus in Europe (around [40-50]% of the European market segment for institutional satellites) and OHB has been  growing
    and plans to expand to commercial satellites in the near future.

354) The negative effects of an input foreclosure strategy by the Joint Venture on effective competition would probably  be  most  pronounced  on
    the European market for institutional satellites prime contracting and the national markets of EU Member States  military  satellites  prime
    contracting and could extend to the market for prime contracting for commercial satellites in so far as commercial customers are subject  to
    US regulatory restrictions. That latter group represents around 25 % of  the  worldwide  demand  for  commercial  satellites.  Although  the
    majority of those satellites still use other propulsion technologies (for example, chemical satellite propulsion  subsystems),  the  growing
    importance of the Hall-effect thruster implies that the proportion of satellites affected by an input foreclosure strategy  in  relation  to
    Hall-effect thrusters would become increasingly relevant. According to ESA "electric propulsion has been identified by European actors as  a
    Strategic Technology for improving the European competitiveness in different space areas".[169]

    Conclusion

355) On the basis of the above and the available evidence, the Commission concludes  that  the  Parties  are  likely  to  have  the  ability  and
    incentive to adopt an input foreclosure strategy as regards Hall-effect thrusters, and that such a strategy  would  be  likely  to  have  an
    overall negative impact on effective competition in the markets for the prime contracting of satellites.

    Customer foreclosure

356) During the Commission’s investigation market participants also expressed concerns about the possibility of customer foreclosure  by  Airbus,
    as a satellite prime contractor, against Safran's rivals in the supply of Hall-effect thrusters.

357) According to the Commission's Non-Horizontal Merger Guidelines[170], customer foreclosure may occur  when  a  supplier  integrates  with  an
    important customer in the downstream market. In the present case, because of Airbus' presence in the downstream  markets  (that  is  in  the
    markets for the prime contracting of satellites), Airbus may foreclose competing  suppliers  of  Hall-effect  thrusters  from  access  to  a
    sufficient customer base and reduce those suppliers' ability or incentive to compete with the Joint Venture.

358) In assessing the likelihood of a customer foreclosure strategy, the Commission examined, first, whether Airbus would  have  the  ability  to
    foreclose access to the markets for the prime contracting of satellites by  reducing  purchases  from  competing  suppliers  of  Hall-effect
    thrusters; second, whether Airbus would have the incentive to do so; and third, whether such a customer foreclosure strategy would  have  an
    overall negative impact on effective competition in the markets for the prime contracting of satellites.

359) For the reasons set out below, the Commission concluded that Airbus may have the ability and  incentive  to  adopt  a  customer  foreclosure
    strategy as regards Hall-effect thrusters, and that such a strategy would have an overall negative impact on effective  competition  in  the
    markets for the prime contracting of satellites.

    Ability to foreclose suppliers of Hall-effect thrusters from access to the markets for prime contracting of satellites

360) As regards the Airbus' ability to foreclose competing suppliers of Hall-effect thrusters from access to the markets  for  prime  contracting
    of satellites, one supplier of satellite propulsion subsystems mentioned in the course of the Commission's market investigation that "Airbus
    has approximately 60 % of the market for satellites in Europe (commercial, institutional and military all together), and is as such  a  much
    more important player than TAS or OHB".[171] Although this percentage may overstate the position of Airbus as  a  European  satellite  prime
    contractor, Airbus still represents around 40-50 % of the market. This significant market position may allow Airbus to  engage  in  customer
    foreclosure, thereby impacting competing satellite prime contractors' profitability.

361) Moreover, for European suppliers of Hall-effect thrusters having Airbus as a customer is  particularly  relevant  since  lost  sales  cannot
    easily be recouped from US satellite prime contractors: "US strongly promotes "Buy American" therefore this market is  difficult  to  access
    for a non-US company".[172]

362) Consequently, the Commission takes the view that Airbus would have the ability to foreclose competing  suppliers  of  Hall-effect  thrusters
    from access to the markets for prime contracting of satellites.

    Incentives to foreclose suppliers of Hall-effect thrusters from access to the markets for prime contracting of satellites

363) As regards the incentive to adopt a customer foreclosure strategy, one of Safran's competitors  for  the  supply  of  Hall-effect  thrusters
    mentioned that "it is concerned that Airbus will tend to purchase  Safran's  thrusters".[173]  Another  competitor  mentioned  that  it  "is
    concerned that, for political reasons within the company, Airbus might start procuring solely  from  the  JV".  [174]  Another  supplier  of
    satellite propulsion subsystems also stated "it is likely that Airbus will source from itself in the future".[175]

364) The Commission’s investigation also showed that if Airbus were to buy all of its Hall-effect thrusters needs from the  Joint  Venture,  this
    would create difficulties for competing suppliers of Hall-effect thrusters, which would have problems in achieving economies  of  scale.  As
    ESA explains "the loss of sales would prevent [a supplier] from benefiting from important economies of scale".[176]

365) Moreover, the Commission's investigation showed that a customer foreclosure strategy would have a significant impact on a supplier of  Hall-
    effect thrusters that it is about to enter the European market, and which has not  yet  an  established  customer  base.  According  to  one
    Safran’s competitor, "the #1 target opportunity for (…) is the high-power plasmic propulsion on the European GEO Comsat platforms, of  which
    Airbus is the market leader in Europe. (…) is therefore concerned about the potential impact of the JV on (…), since this JV could eliminate
    the #1 target opportunity and greatly reduce the business case for continuing forward with (…). The integration of Airbus  and  Safran  will
    lead Airbus/the JV to procure exclusively in-house. (…) If the access to Airbus' platform were to be foreclosed, (…) would  lose  access  to
    the largest manufacturer of GEO satellites in Europe, which could have a very important impact on (…) business plan".[177]

366) As a result of these two factors, Safran's main competitors in the supply of Hall-effect thrusters would have higher costs  or,  eventually,
    would leave the European market for the supply of Hall-effect thrusters. In turn, this may  raise  the  Hall-effect  thrusters'  procurement
    costs of Airbus's competitors in satellite prime contracting. This would  allow  Airbus  to  profitably  establish  higher  prices  for  its
    satellite prime contracting activities.

367) Consequently, the Commission takes the view that Airbus would have the incentive to foreclose competing suppliers of  Hall-effect  thrusters
    from access to the markets for prime contracting of satellites.

    Overall likely impact on competition

368) For the reasons set out below, the Commission takes the view that a customer foreclosure strategy by Airbus in relation  to  the  access  to
    the markets for prime contracting of satellites by suppliers of Hall-effect thrusters would have an overall  negative  impact  on  effective
    competition.

369) The adoption of a customer foreclosure strategy by Airbus would likely result in an alternative supplier of Hall-effect thrusters in  Europe
    leaving the market or at least preventing it from entering that market successfully, thereby reducing innovation. One  satellite  propulsion
    subsystem supplier also mentions that the "transaction will lead to less innovation on the market"  since  it  "will  lead  other  potential
    suppliers to either exit market or curtail development programmes or new product creation. This  will  impact  overall  competitiveness  and
    innovation in Europe".[178]

370) Moreover, Safran's main competitors in the supply of Hall-effect thrusters would have higher costs. Therefore,  the  prices  of  Hall-effect
    thrusters would increase with a consequent negative impact on the price of the downstream market for satellite prime contracting.

    Conclusion

371) On the basis of the above and the available evidence, the Commission concludes  that  the  Transaction  raises  serious  doubts  as  to  its
    compatibility with the internal market as regards the access to the market of satellite  prime  contracting  for  suppliers  of  Hall-effect
    thrusters.

    Conclusion

372) The Commission considers that there may be a relationship between input and customer foreclosure. For instance, the  adoption  of  an  input
    foreclosure strategy by the Joint Venture may render customer foreclosure less problematic, by inducing Airbus' rivals on  the  markets  for
    the prime contracting of satellites to procure Hall-effect  thrusters  from  other  European  suppliers.  On  the  other  hand,  a  customer
    foreclosure strategy by Airbus may render an input foreclosure strategy more effective, by inducing a supplier not to enter the  market  for
    the supply of Hall-effect thrusters in Europe. However, the Commission at this stage has serious doubts about  either  type  of  foreclosure
    taking place (possibly only one or the other, in isolation) post-Transaction.

373) On the basis of the above and the available evidence, the Commission concludes  that  the  Transaction  raises  serious  doubts  as  to  its
    compatibility with the internal market as regards to the vertical relationship between the Parties'  activities  in  relation  to  satellite
    prime contracting and the supply of Hall-effect thrusters.

2. Vertical relationship between satellite prime contracting and thermostructural composite materials

374) The Parties argue that the creation of the Joint Venture will not have any competition impact as regards the vertical  relationship  between
    the Parties' activities in relation to satellite prime contracting and the supply of thermostructural composite materials.

375) First, the Parties argue that Safran (Herakles) does not supply thermostructural composite materials  directly  to  Airbus  as  a  satellite
    prime contractor but to […] as the supplier of optic equipment. According to the Parties there is therefore no direct vertical  relationship
    between Airbus and Safran.

376) Second, the Parties argue that there are several suppliers  of  thermostructural  composite  materials  for  satellites,  including  General
    Electric, Goodrich, ATK and COI-C in the US,  and  Boostec  (France)  in  Europe.  Moreover,  new  technologies  are  under  development  by
    competitors.

    Input foreclosure

377) During the Commission's investigation, concerns were raised by  a  satellite  prime  contractor  as  regards  the  supply  of  carbon-carbon
    materials (in the shape of a cylinder) to be used in observation satellites, namely about the possibility of the Joint Venture  adopting  an
    input foreclosure strategy against Airbus’ satellite prime contractor rivals.[179]

378) According to this satellite prime contractor, the Joint Venture would be likely to restrict access to carbon-carbon materials by  (i)  price
    discriminating in favour of Airbus and/or (ii) delaying the delivery schedule in favour of Airbus.

379) In the context of those concerns, the Commission examined (i) whether the Joint Venture would have, post-merger, the  ability  to  foreclose
    competing satellite prime contractors from access to carbon-carbon materials, (ii) whether the Joint Venture would have the incentive to  do
    so, and (iii) whether such a foreclosure strategy would have an overall negative impact on effective competition.

380) For the reasons set out below, the Commission concluded that the Parties are likely to have the ability and  incentive  to  adopt  an  input
    foreclosure strategy as regards carbon-carbon materials, and that such a strategy  would  have  an  overall  negative  impact  on  effective
    competition in the markets for the prime contracting of satellites.

    Ability to foreclose satellite prime contractors from access to carbon-carbon materials

381) For the reasons set out below, the Commission takes the view that the Joint Venture would have the  ability  to  foreclose  satellite  prime
    contractors from access to carbon-carbon materials.

382) First, a satellite prime contractor argued in the course of the Commission's market investigation that the ability of the Joint  Venture  to
    adopt such input foreclosure strategies would result from the monopoly position of Safran (Herakles) in the supply  carbon-carbon  materials
    to observation satellite projects in Europe.

383) According to the Commission's investigation, carbon-carbon materials have specific characteristics suited  for  its  specific  needs.  As  a
    consequence, there may not be any credible alternative supplier  to  Safran  for  carbon-carbon  materials  for  space  optical  observation
    satellites.

384) The two potential alternatives in Europe do not seem to be credible alternatives. Mersen's (France) materials are designed to be  stable  at
    temperatures higher than the carbon-carbon cylinders' specifications. As regards MTA (Germany), it has no heritage on  ultra-stable  carbon-
    carbon materials (that is, its product has not yet been tested in satellites).

385) The Commission's investigation also confirmed that, although ITAR restrictions are not a  significant  restriction  in  the  procurement  of
    carbon-carbon materials in the context of institutional programmes, ESA's approach is to favour European sources, and to  only  source  from
    outside Europe if there is no European source available.[180] The use of carbon-carbon materials in the context of  military  programmes  is
    also subject to European preferences. Thus US companies are not viable alternatives for the supply of carbon-carbon materials.

386) Second, the satellite prime contractor also stated that the involvement of ESA in the projects where carbon-carbon materials  are  required,
    does not guarantee access to those materials. The Commission's investigation confirmed that ESA is not responsible for  the  procurement  of
    carbon-carbon materials used in those projects.[181]

387) Third, the satellite prime contractor argued that the development by a new supplier of carbon-carbon materials, and in particular a  carbon-
    carbon cylinder, would take three to five years and cost around EUR 10 million. This would make it  prohibitively  costly  for  a  satellite
    prime contractor to promote a new supplier.

388) The Commission's investigation confirmed that although there are several producers of carbon-carbon materials, in  particular  for  the  car
    industry, satellite products require specific knowledge and  have  to  undergo  a  strict  qualification  process  since  customers  require
    traceability of the products, and a high level of quality.[182]

389) Fourth, the satellite prime contractor argued that carbon-carbon materials are very important for observation  satellites  since  they  have
    the specific function of stabilising a telescope in order to get a clear image. It requires specific design and know-how  capabilities.  The
    cost of carbon-carbon materials per satellite corresponds to EUR […] out of a total cost of EUR […].

390) On the basis of the above and the available evidence, the Commission concludes that the Joint Venture would have the  ability  to  foreclose
    satellite prime contractors from access to carbon-carbon materials.

    Incentive to foreclose access to carbon-carbon materials

391) For the reasons set out below, the Commission takes the view that the Joint Venture would have the incentive to  foreclose  satellite  prime
    contractors from access to carbon-carbon materials.

392) As regards the incentive for the Joint Venture to adopt an input foreclosure strategy,  the  arguments  presented  by  the  satellite  prime
    contractor are similar to the ones discussed in paragraphs (342) to (353) regarding  the  incentives  of  the  Joint  Venture  to  foreclose
    competing satellite prime contractors' access to Hall-effect thrusters.

393) The Commission’s investigation confirmed that Airbus has a strong incentive to challenge TAS' position in the area of prime contracting  for
    Earth observation satellites where carbon-carbon materials are used. According to one internal document from Airbus, this company has as  an
    objective to “[…]”.[183]

394) Moreover, given the higher absolute margins of the satellite prime contracting activity (EUR […])  compared  with  the  margins  of  carbon-
    carbon materials (whose price is around EUR […]), the gains for Airbus from adopting an input foreclosure strategy as regards  carbon-carbon
    materials could potentially be higher than the eventual cost of losing some sales in the upstream markets.

395) On the basis of the above and the available evidence, the Commission concludes that the Joint Venture would have the incentive to  foreclose
    satellite prime contractors from access to carbon-carbon materials.

    Overall likely impact on competition

396) The overall likely impact on effective competition of an input foreclosure strategy on carbon-carbon materials would be negative.  It  would
    mostly affect TAS, the most important player in prime contracting for Earth observation satellites in Europe, although it could also  affect
    future players in this field. Consequently, given that it would weaken Airbus' competitors, the input foreclosure strategy would potentially
    lead to an increase in the price for satellite prime contracting.

    Conclusion

397) On the basis of the above and the available evidence, the Commission concludes  that  the  Transaction  raises  serious  doubts  as  to  its
    compatibility with the internal market as regards the access to carbon-carbon materials by satellite prime contractors.

    Customer foreclosure

398) As regards customer foreclosure, no concerns were raised. In the particular case of carbon-carbon materials, the only supplier would be  the
    Joint Venture. In the case of the broader market for the supply of thermostructural composite materials it is  unlikely  that  Airbus  would
    have the ability and incentive to adopt such a strategy given the specificity of the different thermostructural composite materials sold  by
    each company, with no direct substitute produced by the Joint Venture.

    Conclusion

399) On the basis of the above and the available evidence, the Commission concludes  that  the  Transaction  raises  serious  doubts  as  to  its
    compatibility with the internal market as regards the vertical relationship between the Parties' activities in relation to  satellite  prime
    contracting and the supply of carbon-carbon materials, in particular in the shape of cylinders.

3. Vertical relationship between satellite prime contracting and/or the supply of  chemical  satellite  propulsion  subsystems  and  sensors  for
   satellites

400) According to the Parties, the Transaction would bring about a vertical relationship between the activities of the Joint Venture  and  Airbus
    (as a satellite prime contractor and/or a chemical satellite propulsion subsystem supplier), since Safran (Herakles)  supplies  sensors  for
    Airbus' activities in chemical satellite propulsion subsystems.

401) The Parties argue that the creation of the Joint Venture will not have any competition impact as regards this vertical relationship.

402) First, the Parties argue that Safran supplies sensors on platforms originally designed for commercial  satellites,  where  Airbus  worldwide
    market share is below [30-40]% both at the satellite prime contractor level ([20-30]% in 2013) and  at  the  chemical  satellite  propulsion
    subsystem level ([20-30]% in 2013).

403) Second, the Parties argue that Safran's market share is under [10-20]% in the worldwide market for satellite sensors,  and  that  there  are
    numerous competitors that manufacture sensors, both in Europe and worldwide, including MOOG-Bradford (the Netherlands), Meggitt (UK), Trafag
    (Switzerland), Ametek (US), Taber (US), Kulite (US), Druck (US), Rosemount (US) and Kistler (US). In particular, the  Parties  mention  that
    Safran faces strong competition from MOOG-Bradford (the Netherlands) and Ametek (US).

404) Third, the Parties argue that suppliers of sensors will still have access to other prime satellite contractors, including  TAS  and  OHB  in
    Europe and to other suppliers of chemical satellite propulsion subsystems, including MOOG (US) and Aerojet (US).

    Input foreclosure

405) During the Commission's investigation concerns were raised by a satellite prime contractor as regards the supply of SAPT to satellite  prime
    contractors, namely concerning the possibility of the Joint  Venture  to  adopt  an  input  foreclosure  strategy  against  satellite  prime
    contractors competing with Airbus.[184]

406) According to the Commission's investigation, the Joint Venture would likely restrict access to SAPT by (i) price  discriminating  in  favour
    of Airbus and/or (ii) delaying the delivery schedule in favour of Airbus.

407) In the context of those concerns, the Commission examined (i) whether the Joint Venture would have, post-merger, the  ability  to  foreclose
    competing satellite prime contractors from access to SAPT, (ii) whether the Joint Venture would have the  incentive  to  do  so,  and  (iii)
    whether such a foreclosure strategy would have an overall negative impact on effective competition.

408) For the reasons set out below, the Commission concluded that the Parties are likely to have the ability and  incentive  to  adopt  an  input
    foreclosure strategy as regards SAPT, and that such a strategy would be likely to have an overall negative impact on  effective  competition
    in the markets for the prime contracting of satellites.

    Ability to foreclose satellite prime contractors from access to SAPT

409) For the reasons set out below, the Commission takes the view that the Joint Venture would have the  ability  to  foreclose  satellite  prime
    contractors from access to SAPT.

410) First, a satellite prime contractor argued in the course of the Commission's market investigation that the Joint Venture's ability to  adopt
    such strategies would result from (i) the lack of alternatives to Safran's SAPT and (ii) the existing regulatory constraints.

411) According to the Commission’s investigation the only potential alternatives for the supply of SAPT would be MOOG-Bradford (the  Netherlands)
    and Paine (US). In the worldwide market for the supply of SAPT, Safran has a market share of [40-50]%. The European market in  evenly  split
    between Safran and MOOG-Bradford (the Netherlands).

412) Moreover, the Commission’s investigation showed that European satellite prime contractors are encouraged to select European  suppliers  over
    suppliers from the US. This would restrict the use of SAPT from Paine (US) and, possibly, from MOOG-Bradford (the Netherlands),  since  that
    company was acquired by an American company (MOOG) in 2011. In fact, the equipment from Paine is subject to ITAR restrictions, which prevent
    their use in satellites to be sold to several countries. According to the Commission's investigation, after being  acquired  by  MOOG  (US),
    also MOOG-Bradford (the Netherlands) started to be subject to Restricted Commerce limitations with some countries.

413) According to ESA, MOOG-Bradford's SAPT are an equal alternative to Safran's.[185] However, the satellite prime contractor argued  that  they
    are less accurate than Safran's SAPT, and although they can be an acceptable alternative for monopropellant satellite propulsion subsystems,
    their use in bi-propellant satellite propulsion subsystems and electric  satellite  propulsion  subsystems  would  require  an  upgrade  and
    requalification.[186]

414) Second, the satellite prime contractor also argued that the cost of switching suppliers of SAPT is significant since  there  is  a  need  to
    qualify the equipment of the new supplier. Moreover, despite their low costs (EUR […] per satellite), SAPT are a very important product  for
    satellite prime contractors that cannot be substituted by any other technology.

415) On the basis of the above and the available evidence, the Commission concludes that the Joint Venture would have the  ability  to  foreclose
    satellite prime contractors from access to SAPT.

    Incentive to foreclose satellite prime contractors from access to SAPT

416) For the reasons set out below, the Commission takes the view that the Joint Venture would have the incentive to  foreclose  satellite  prime
    contractors from access to SAPT.

417) As regards the incentive for the Joint Venture to adopt an input foreclosure strategy vis-à-vis satellite prime contractors,  the  arguments
    presented by the satellite prime contractor to the Commission are similar to the ones presented  as  regards  the  incentive  of  the  Joint
    Venture to foreclose the satellite prime contractors from access to Hall-effect thrusters. The Commission’s investigation  showed  that  the
    Joint Venture would have similar incentives to the ones discussed in (342) to (353).

418) Airbus competes closely with the other two European competitors in the downstream market of satellite prime  contacting,  that  is  TAS  and
    OHB. Moreover, given the higher absolute margins of the satellite prime contracting activity (EUR […]) compared with  the  margins  of  SAPT
    (whose price is around EUR […] per satellite), the gains for Airbus of  adopting  an  input  foreclosure  strategy  as  regards  SAPT  could
    potentially be higher than the eventual cost of losing some sales in the upstream markets for SAPT.

419) On the basis of the above and the available evidence, the Commission concludes that the Joint Venture would have the incentive to  foreclose
    satellite prime contractors from access to SAPT.

    Overall likely impact on competition

420) The overall impact on effective competition of an input foreclosure strategy on SAPT would be negative. Airbus' rivals in  the  markets  for
    satellite prime contracting that would be most affected, TAS and OHB, are important players in those markets. Consequently,  given  that  it
    would weaken Airbus' competitors, the input foreclosure strategy would potentially lead to an increase in  the  price  for  satellite  prime
    contracting. The effects would be most pronounced on the European market for institutional satellites prime  contracting  and  the  national
    markets of EU Member States for military satellites prime contracting and could extend to the market for prime  contracting  for  commercial
    satellites in so far as commercial customers are subject to US regulatory restrictions. However, contrary  to  Hall-effect  thrusters,  this
    impact would reflect on all satellites, independently of the satellite propulsion subsystem used.

    Conclusion

421) On the basis of the above and the available evidence, the Commission concludes  that  the  Transaction  raises  serious  doubts  as  to  its
    compatibility with the internal market as regards the access to SAPT by satellite prime contractors.

    Customer foreclosure

422) No concerns were raised by market participants as regards customer foreclosure. In  the  particular  as  regards  SAPT,  MOOG-Bradford  (the
    Netherlands) would be the only possible alternative supplier affected. However, that company has a strong position in the  worldwide  market
    (market share of [30-40]%) and could still find sufficient economic alternatives in the downstream market to which it could sell its output.
    In the case of the broader market for the supply of sensors for satellites it is unlikely that Airbus would  have  the  ability  and/or  the
    incentive to adopt a customer foreclosure strategy given (i) the existence of sufficient economic alternatives in the downstream  market  to
    which competing suppliers of sensors for satellites could sell their output and (ii) the specificity of some of the sensors produced by some
    suppliers, which would make them not substitutable with Safran’s product.

423) Consequently, it is unlikely that the Transaction would give Airbus the ability and incentive to adopt a customer foreclosure strategy  with
    regard to sensors for satellites, in particular SAPT.

    Conclusion

424) On the basis of the above and the available evidence, the Commission concludes  that  the  Transaction  raises  serious  doubts  as  to  its
    compatibility with the internal market as regards the vertical relationship between the Parties' activities in relation to  satellite  prime
    contracting and the supply of SAPT.

4. Vertical relationship between pyrotechnic systems and subsystems for satellite and pyrotechnic equipment

425) According to the Parties, the Transaction will create a vertical relationship between the activities of Airbus CASA  (whose  activities  are
    not contributed to the Joint  Venture),  as  a  provider  of  pyrotechnic  systems  and  subsystems,  and  Safran  (through  its  subsidiary
    Pyroalliance), as a supplier of pyrotechnic equipment.

426) The Parties argue that the creation of the Joint Venture will not have any competitive impact as regards this vertical relationship.

427) First, the Parties argue that Safran is already vertically integrated, as  it  provides  both  pyrotechnic  subsystems  and  equipment,  and
    nevertheless supplies pyrotechnic equipment to competing providers of pyrotechnic subsystems. According to the Parties, the Transaction will
    therefore not increase the Parties’ incentive to foreclose competing suppliers of pyrotechnic systems and subsystems, in particular  because
    Airbus CASA’s activities will not be integrated in the Joint Venture by Airbus.

428) Second, the Parties argue that competing suppliers of pyrotechnic equipment will not be foreclosed, since there are several other buyers  of
    pyrotechnic equipment for satellite in Europe, including TAS and OHB.

429) Finally, the Parties argue that there are several other providers of pyrotechnic equipment both in Europe (RUAG, Lacroix and  Dassault)  and
    in the US (for example, Hi-Shear).

430) During the Commission's investigation no concerns were raised as regards this vertical relationship.

431) As regards the eventual adoption of an input foreclosure strategy by Safran it is unlikely that  it  could  negatively  affect  the  overall
    availability of pyrotechnic equipment for suppliers of pyrotechnic systems and  subsystems  given  the  existence  of  credible  alternative
    suppliers and the low market shares of Safran (below [10-20]% in the worldwide market for the supply of pyrotechnic equipment  in  2013)  As
    one market participant stated, there are several alternative suppliers of pyrotechnic equipment to Safran.[187]

432) As regards customer foreclosure, given that Safran and  Airbus  CASA  together  represent  around  [10-20]%  of  the  worldwide  pyrotechnic
    subsystems sales in 2013, it is unlikely that a rival supplier of pyrotechnic equipment would not find sufficient economic  alternatives  in
    the downstream market to sell its output, even if Airbus CASA bought all its needs from the Joint Venture.

433) On the basis of the above and the available evidence, the Commission concludes that the Transaction does not raise serious doubts as to  its
    compatibility with the internal market as regards the vertical relationship between the Parties' activities in relation to the  markets  for
    pyrotechnic systems and subsystems for satellites and for the supply of pyrotechnic equipment for satellites.

5. Vertical relationship between chemical satellite propulsion subsystem and MMH propellant

434) According to the Parties, the Transaction will create a vertical relationship between Airbus as a provider of chemical satellite  propulsion
    subsystems for satellites and Safran (Herakles) as a supplier of MMH propellant.

435) The Parties argue that the creation of the Joint Venture will not have any competition impact as regards this vertical relationship.

436) First, the Parties argue that in the worldwide market for satellite chemical satellite propulsion  subsystems  for  satellites,  (i)  Airbus
    held only a [10-20]% market share in 2013 and (ii) there are several competitors, including Aerojet (US), MOOG (US), and Rafael (Israel). In
    particular, the Parties estimate that in the accessible  worldwide  market  for  satellite  chemical  satellite  propulsion  subsystems  for
    satellites (that is excluding China or India and satellite prime contractors that procure all their needs internally such as  TAS),  Aerojet
    (US) holds a market share of [70-80]% and MOOG (US) a market share of [10-20]%.

437) Second, the Parties argue that in a worldwide market for MMH for chemical satellite propulsion subsystems, the market share  of  Safran  was
    around [30-40]% in 2013. According to the Parties, Safran faces competition mainly from the Finechem (Japan) - directly or through  Sumitomo
    (Germany) - and Arch Chemicals (US), both of which have market shares of [30-40]% each.

438) As a consequence, the Parties claim that (i) competing suppliers of MMH propellant can still sell their product  to  numerous  providers  of
    chemical satellite propulsion subsystems for satellites, making a customer foreclosure strategy not viable, and (ii) competitors  of  Airbus
    in the market for chemical satellite propulsion subsystems can  still  buy  MMH  propellant  from  Safran's  competitors  such  as  Sumitomo
    (Germany), Finechem (Japan) or Arch Chemicals (US).

439) Moreover, the Parties argue that since no MMH propellant supplier faces capacity constraints, even if Airbus decided to procure all its  MMH
    propellant from Safran, other manufacturers of chemical satellite propulsion subsystems for satellites would still be able  to  procure  MMH
    propellant from Safran's competitors.

440) During the Commission's investigation concerns were raised as regards the possibility of Airbus adopting a customer foreclosure strategy  by
    buying all its needs of MMH propellant from Safran.[188] Currently Airbus buys [90-100]% of its MMH propellant needs from […] and only  [10-
    20]% from […]. If Airbus stopped buying MMH propellant from […] this could create a disadvantage for this company.

441) The Commission's investigation revealed however that Airbus represents only around 5-10 % of the total procurement of MMH propellant,  which
    includes not only suppliers of chemical satellite propulsion  subsystems  for  satellites  but  also  other  companies  active  in  launcher
    propulsion systems. Consequently, since there are sufficient economic alternatives in the downstream market to which competing suppliers  of
    MMH propellant can sell their output, Airbus would not have the ability to adopt a customer foreclosure strategy.

442) As regards the eventual adoption of an input foreclosure strategy by Safran it is unlikely that such a strategy could negatively affect  the
    overall availability of MMH propellant for suppliers of chemical satellite propulsion subsystems since there are still two strong  suppliers
    of MMH propellant, in addition to several other small suppliers from China and Japan.[189]

443) On the basis of the above and the available evidence, the Commission concludes that the Transaction does not raise serious doubts as to  its
    compatibility with the internal market as regards the vertical  relationship  between  the  Parties'  activities  in  relation  to  chemical
    satellite propulsion subsystems and the supply of MMH propellant for satellites.

6. Vertical relationship between satellite propulsion subsystems and valves for satellite propulsion subsystems

444) According to the Parties, Techspace Aero, a Safran subsidiary which will not be contributed to the Joint Venture, is  marginally  active  in
    valves for satellite propulsion subsystems. Therefore, the Transaction will create a vertical relationship between Airbus as a  provider  of
    satellite propulsion subsystems and Safran as a supplier of valves for satellite propulsion subsystems.[190]

445) The Parties argue that the creation of the Joint Venture will not have any competitive impact as regards this vertical relationship.

446) First, the Parties argue that Safran has only a marginal market share for satellite valves  (less  than  [0-5]%  in  the  worldwide  market)
    compared to the two market leaders MOOG (UK) and ValveTech (US).

447) Second, the Parties argue that regarding chemical satellite propulsion subsystems, (i) Airbus has a market share of  only  [10-20]%  on  the
    overall worldwide market and (ii) Safran only manufactures flow control valves, which Airbus already procures […] today.

448) During the Commission's investigation no concerns were raised regarding this vertical relationship.

449) As regards the potential adoption of an input foreclosure strategy by Safran it is unlikely that such a  strategy  could  negatively  affect
    the overall availability of valves to suppliers of chemical satellite propulsion subsystem. The Joint Venture and Safran only sold less than
    [10-20]% of the valves used worldwide in chemical satellite propulsion subsystems in 2013. There are several other alternative suppliers  of
    valves for satellite propulsion subsystems than the Parties.[191]

450) As regards customer foreclosure, given that Airbus only represents [10-20]% of the potential procurement of valves  for  chemical  satellite
    propulsion subsystem for satellites, it is unlikely that a rival supplier of valves would not find sufficient economic alternatives  in  the
    downstream market to which it could sell its output, even if the Joint Venture bought all its needs internally.

451) On the basis of the above and the available evidence, the Commission concludes that the Transaction does not raise serious doubts as to  its
    compatibility with the internal market as regards the vertical  relationship  between  the  Parties'  activities  in  relation  to  chemical
    satellite propulsion subsystems and valves for chemical satellite propulsion subsystems.

3. Transmission of confidential information

452)  During the Commission's investigation, some concerns were raised as regards the  risk  of  the  transmission  of  confidential  information
    received by Safran and/or the Joint Venture to Airbus' satellite prime contracting activities and vice-versa.

453) The Parties submit that no such risk exists since Airbus’ satellite prime contracting activities will remain with Airbus whereas  the  Joint
    Venture will be jointly controlled by Safran and Airbus. As a result, the Joint Venture and Airbus as satellite prime contractor will remain
    distinct legal entities, which will reduce the risk  of  transmission  of  information.  In  particular,  as  regards  satellite  propulsion
    subsystems, the Parties submit that contracts signed by Safran (Snecma) contain provisions to protect the confidentiality of the information
    exchanged between Safran and its existing or potential clients in the context of these agreements.[192]

454) However, a satelliteprime contractor expressed concerns about access by Airbus to confidential information regarding satellites  components,
    especially in relation with technologies developed by Safran in the Neosat platform, which  could  be  used  by  Airbus  strategically.[193]
    Another satellite prime contractor also mentioned that "Airbus will benefit from technologies developed and protected under our  procurement
    agreement with  the  joint  venture"  and  expressed  the  need  for  firewalls  and  their  enforcement  to  prevent  the  transmission  of
    information/intellectual property from the Joint Venture to unauthorised uses/applications within the Airbus satellite business.[194]

455) A supplier of electric satellite propulsion subsystems stated similar concerns, in particular that Airbus  might  obtain  information  about
    its main satellite prime contracting competitors through Safran acting as a supplier to them.[195]

456) In addition, some suppliers of electric satellite propulsion subsystems were also concerned that Airbus might transfer  information  to  the
    Joint Venture about those suppliers' activities. One supplier of electric satellite propulsion subsystems stated that it "is more  concerned
    about exchange of information between Airbus and Safran through the JV. Indeed, (…) has provided Airbus with technical  and  financial  data
    about its products, and is concerned this data may be shared with Safran. This would create problems to (…) since one competitor would  have
    access to its data".[196] Another supplier mentioned that "(…) has exchanged some information with Airbus regarding the supply of  (…),  and
    is concerned that this information will be made available to Safran after the creation of the joint venture. Information provided  is  of  a
    nature to support technical specification and performance of the thruster, while in principle this is covered by NDA’s between both  parties
    the barriers that would have existed in two separate companies will be eroded and opportunity for information to transition increased".[197]

457) The Commission considers that although Airbus will retain its prime satellite activities outside the Joint Venture, this  may  not  mitigate
    the risk of transmission of confidential information to Airbus brought about by the Transaction.

458) First, Safran activities through which Airbus could obtain information about competitors' satellite prime  contracting  activities  will  be
    contributed to the Joint Venture. This is in contrast with a previous Commission  decision  in  case  M.4403  -  Thales/Finmeccanica/Alcatel
    Alenia Space & Telespazio where the subsidiary receiving the relevant information was outside the Joint Venture.

459) Second, the Joint Venture and Airbus will have activities in markets that are vertically related. Therefore, there  is  the  possibility  of
    Airbus, as a parent company of the Joint Venture, to gain a competitive advantage by having access to information  collected  by  the  Joint
    Venture about Airbus' competitors.

460) Third, the information that Airbus could access via the Joint  Venture  could  be  relevant  for  Airbus  in  determining  its  pricing  and
    commercial strategy, especially regarding the information on  electric  satellite  propulsion  subsystems  which  is  closely  related  with
    satellite prime contracting activities.

461) Finally, Airbus' satellite prime contracting competitors will need to maintain commercial relationships with the Joint Venture  since  there
    are not many credible options for the supply of certain components, namely Hall-effect thrusters. Consequently, the effective possibility of
    switching to suppliers other than the Joint Venture is remote.

462) On the basis of the above and the available evidence, the Commission concludes  that  the  Transaction  raises  serious  doubts  as  to  its
    compatibility with the internal market as regards the transmission of confidential information between Airbus  and  the  Joint  Venture,  in
    particular in the context of the supply of Hall-effect thrusters.

   Space transportation prime contracting and space transportation Components

10. Relevant product markets

1. Space transportation prime contracting

463) The Commission has in previous decisions analysed the segment for space transportation  and  infrastructure[198]  to  which  space  vehicles
    belong. Following a similar reasoning as for satellites and launchers, the markets for space  transportation  prime  contracting  should  be
    distinct from the markets for the supply of components for space transportation.

464) In Europe, atmospheric re-entry programmes only exist in the civil institutional domain. None of the Parties is currently  active  as  prime
    contractors for space transportation requiring re-entry heat shields.

465) The main reference programme for space vehicles in Europe is the Intermediate eXperimental Vehicle (“IXV”) programme, developed  within  the
    Future Launchers Preparatory Programme (“FLPP”) and funded by ESA .The IXV is an experimental re-entry vehicle intended to validate European
    reusable launchers which could be evaluated in the frame of the FLPP programme, aiming at developing a  demonstration  vehicle  to  increase
    know-how in the field of advanced atmospheric re-entry technologies.[199]

2. Thermostructural composite heat shields for space transportation

466) A heat shield is a thermal protection consisting of a protective layer of special materials to dissipate the heat  generated  when  a  space
    vehicle re-enters the atmosphere.

467) According to the Parties, heat shields for space transportation can be made either of (i) ablative materials[200] or  (ii)  thermostructural
    composites[201]. Ablative materials are a different and older technology.  Both  products  offer  protection  from  heat,  however  ablative
    materials can only bear limited mechanical loads as opposed to thermostructural materials. Moreover, thermostructural  composites  materials
    allow for a number of re-entries, unlike ablative materials which deteriorate more quickly when confronted  to  the  thermal  flows  endured
    during atmospheric re-entry. Within thermostructural composites materials, Safran (Herakles) produces  thermal  protection  system  made  of
    silicon carbide for ESA's IXV programme.

468) The Commission's investigation showed that although these two technologies  are  aimed  at  the  same  applications,  they  offer  different
    characteristics and performances and are thus not substitutable. In particular, "for re-entry vehicles such as IXV, the required  technology
    for the Nose and Windwards Assembly is  Herakles’  ceramics  heat  shields,  to  which  Avio’s  and  Airbus’  products  cannot  be  seen  as
    alternatives".[202]

469) For the purpose of this decision, it is therefore considered that thermostructural composite heat shields constitute a  relevant  market.  A
    narrower relevant market could be potentially defined for thermostructural composite heat shields made  of  silicon  carbide  but,  for  the
    purpose of this decision, such a market definition would not change the competitive assessment of the Transaction since Safran (Herakles) is
    currently the only European supplier of thermostructural composite heat shields. Therefore, the commitments proposed by  the  Parties  would
    eliminate any serious doubts as to the compatibility of the Transaction with the internal market in relation to  thermostructural  composite
    heat shields under any plausible product market definition.

11. Relevant geographic markets

470) Currently only the ESA programme IXV requires thermostructural heat shields for atmospheric re-entry. Therefore,  the  geographic  scope  of
    the market can be considered EEA-wide inter alia due to the specific procurement policy of ESA, and the  application  of  the  juste  retour
    principle.

471) However, the precise geographic market definition can be left open, since the commitments  proposed  by  the  Parties  would  eliminate  any
    serious doubts as to the compatibility of the Transaction with the internal market in relation to thermostructural  composite  heat  shields
    for space transportation under any plausible geographic market definition.

12. Competitive assessment

1. Parties' activities

472) Airbus is currently not active as prime contractor for space transportation requiring re-entry  heat  shields.  According  to  the  Parties,
    currently there are only two European space programmes requiring heat shields for space transportation (i) the EXOMARS  programme  and  (ii)
    the IXV programme. The EXOMARS programme only uses ablative heat shields, which are supplied by Airbus. The IXV programme uses both types of
    heat shields, thermostructural composite heat shields and ablative heat shields. However, Airbus is active as  prime  contractor  for  other
    types of space transportation, such as Automated Transfer Vehicle, and is involved in another programme for an orbital transfer vehicle  for
    removal of space debris.

473) The Parties' activities do not horizontally overlap in relation to heat shields since their  technologies  are  different.  Airbus  is  only
    active in ablative heat shields and Safran is active in thermostructural composite heat shields.  Thermostructural  composite  heat  shields
    constitute a distinct product market from other types of heat shields as referred to in paragraph (470).

2. Assessment of potential non-horizontal effects

474) As regards non-horizontal effects, the Transaction creates  one  potential  vertical  relationship  between  Airbus  as  a  potential  prime
    contractor for space transportation requiring re-entry heat shields and Safran as a supplier of thermostructural composite heat shields  for
    space transportation. Although Airbus is currently not active as prime contractor for space transportation requiring re-entry heat  shields,
    it is active in other types of space transportation.

475) The Parties argue that the creation of the Joint Venture will not have any competitive impact as regards this  vertical  relationship  since
    there are alternative suppliers of thermostructural  composite  heat  shields  in  Europe,  in  particular  MTA  (Germany)  which  developed
    thermostructural composite heat shields for previous ESA's programmes.

476) Moreover, according to the Parties, […]. The Parties added that ESA is developing a new project for a space vehicle  system,  the  successor
    of IXV, but currently with no contribution of France, which could imply that there would be no French just retour for Safran.

    Input foreclosure

477) During the Commission's investigation  concerns  were  raised  by  a  space  transportation  prime  contractor  as  regards  the  supply  of
    thermostructural composite heat shields for space transportation, and in particular thermal protection system made of silicon carbide. These
    concerns regard the possibility of the Joint Venture adopting an input foreclosure strategy against Airbus' rivals.

478) According to the Commission's investigation, the Joint Venture would be  likely  to  restrict  access  to  thermostructural  composite  heat
    shields for  space  transportation  via  a  refusal  to  supply  or  more  subtle  forms  of  foreclosure  like  delivery  delays  or  price
    discrimination.[203]

479) In the context of those concerns, the Commission examined (i) whether the Joint Venture would have, post-merger, the  ability  to  foreclose
    competing space transportation prime contractors from access to thermostructural composite heat shields,  (ii)  whether  the  Joint  Venture
    would have the incentive to do so, and (iii) whether such a foreclosure  strategy  would  have  an  overall  negative  impact  on  effective
    competition.

480) For the reasons set out below, the Commission concluded that the Parties are likely to have the ability and  incentive  to  adopt  an  input
    foreclosure strategy as regards thermostructural composite heat shields, and that such a strategy would be likely to have a negative  impact
    on effective competition in the markets for the prime contracting of space transportation.

    Ability to foreclose space transportation prime contractors from access to thermostructural composite heat shields

481) For the reasons set out below, the  Commission  takes  the  view  that  the  Joint  Venture  would  have  the  ability  to  foreclose  space
    transportation prime contractors from access to thermostructural composite heat shields.

482) First, a space transportation prime contractor argued in the context of the Commission's  market  investigation  that  the  Joint  Venture's
    ability to adopt such input foreclosure strategies would result from the monopoly position of  Safran  in  the  supply  of  thermostructural
    composite heat shields in Europe. Moreover, and given the absence of  alternatives  to  Safran,  ESA's  Procurement  Rules  and  ESA's  Best
    Practices would not restrict such strategies.

483) Second, that space transportation prime contractor argued that thermostructural composite heat shields are critical for its  activity  as  a
    space transportation prime contractor, and represent around 10 % of the overall cost of a space vehicle.[204]

484) Third, the space transportation prime contractor stated that the IXV programme will continue in the coming  five  years  with  ESA  support,
    which will surely require the procurement of these types of materials. The IXV flight  experience  will  thus  be  a  strong  heritage,  and
    therefore a considerable head-start for Safran (Herakles).[205]

485) The Commission's investigation confirmed that only Safran produces thermostructural composite heat shields in Europe. Avio and  Airbus  also
    produce heat shields but made of ablative materials.[206] Moreover, the Commission’s investigation showed that  although  the  juste  retour
    principle is a target which ESA tries to satisfy to the largest possible extent, it remains subject to the number  of  operators  which  are
    actually able to manufacture the relevant technology.

486) On the basis of the above and the available evidence, the Commission concludes that the Joint Venture would have the  ability  to  foreclose
    space transportation prime contractors from access to thermostructural composite heat shields.

    Incentive to foreclose space transportation prime contractors from access to thermostructural composite heat shields

487) For the reasons set out below, the Commission takes  the  view  that  the  Joint  Venture  would  have  the  incentive  to  foreclose  space
    transportation prime contractors from access to thermostructural composite heat shields.

488) As regards the incentives for the Joint Venture to adopt an input foreclosure strategy, the space transportation  prime  contractor  raising
    concerns with the Commission presented similar arguments to the ones described in paragraphs (342) to (353) regarding the incentive  of  the
    Joint Venture to foreclose satellite prime contractors from access to Hall-effect thrusters.

489) Although Airbus is currently not active as prime contractor for space transportation  requiring  re-entry  heat  shields,  the  Commission's
    investigation indicated that TAS and Airbus are close substitutes for space transportation prime contracting.[207] Therefore, by obtaining a
    preferable access to the thermostructural composite heat shields produced by the Joint Venture, Airbus would increase its chances  of  being
    nominated the prime contractor in future IXV or similar programmes.

490) Moreover, given the  higher  value  of  the  space  transportation  prime  contracting  activity  (EUR  […])  compared  with  the  value  of
    thermostructural composite  heat  shields  (EUR  […]),  the  gains  for  Airbus  of  adopting  an  input  foreclosure  strategy  as  regards
    thermostructural composite heat shields could potentially be higher than the eventual cost of losing some sales in the upstream markets  for
    thermostructural composite heat shields.

491) On the basis of the above and the available evidence, the Commission concludes that the Joint Venture would have the incentive to  foreclose
    space transportation prime contractors from access to thermostructural composite heat shields.

    Overall likely impact on effective competition

492) A strategy by the Joint Venture to foreclose competing space transportation prime contractors  from  access  to  thermostructural  composite
    heat shields would result in an overall negative impact on the market for space transportation prime contracting. Given the  limited  number
    of market participants, an input foreclosure strategy by the Joint Venture in favour of Airbus would  significantly  reduce  competition  in
    that market as it would impede the possibility of competitors to expand in that market and/or raise barriers for new entrants.

    Conclusion

493) On the basis of the above and the available evidence,, the Commission considers that  the  Transaction  raises  serious  doubts  as  to  its
    compatibility with the internal market as regards potential vertical relationship between the  Parties'  activities  in  relation  to  space
    transportation prime contracting and the supply of thermostructural composite heat shields  for  space  transportation,  and  in  particular
    thermal protection systems made of silicon carbide for civil re-entry bodies.

   Missiles

494) Missiles are guided weapons carrying either a high explosive (tactical missiles) or  a  nuclear  (strategic  missiles)  warhead,  which  are
    dedicated to State defence applications. They are composed of a number of subsystems and equipment.

13. Tactical missiles

1. Relevant product markets

495) In previous decisions, the Commission considered that competition for guided weapons ("GW") and guided weapon systems  ("GWS")  takes  place
    both at prime contracting level and for subsystems and equipment at subcontracting level.[208] Accordingly,  the  relevant  product  markets
    should be defined by differentiating between prime contracting markets and equipment markets.

1. Prime contracting for tactical missiles

496) A prime contractor is responsible for delivering an entire system in accordance with specified performance and reliability standards.

497) In previous decisions, the Commission considered that GW and GWS can be classified according to product characteristics such as their  point
    of origin and destination, their range, their use, and the type of warhead carried.[209] As to the exact product market definition,  various
    considerations of supply-side substitutability and procurement policies of customers, namely the ministry of defence, should be  taken  into
    account.[210]

498) However, in the view of the fact that the current Transaction does not raise serious doubts  as  to  its  compatibility  with  the  internal
    market in relation to prime contracting for tactical missiles, the exact scope of the product market can be left open.

2. Subsystems and equipment for tactical missiles

499) GW and GW are composed of subsystems and equipment including propulsion systems, insulation, pyrotechnic devices and valves.

500) As regards tactical missile propulsion, the Commission previously determined that is divided into three types  of  technologies:  SRMs[211],
    ramjets (liquid and solid), and turbojets engines.[212] In particular, SRMs and ramjets are not substitutable from a technical  or  economic
    point of view, as ramjets are more expensive than SRMs and provide a longer range and higher velocity.[213] The Parties  confirm  that  this
    analysis is still valid today.

501) SRMs are made with various components, which the Commission  considered  that  each  could  constitute  a  separate  market,[214]  with  the
    exception of three components: (i) pyrotechnic equipment, (ii) thermostructural composites; and (iii) inputs for propellant charges.

502) In the present case, the Transaction will not raise serious doubts as to its compatibility with the internal market even  if  the  narrowest
    of the potential market definitions were applied. For this reason, the exact product market definition  for  subsystems  and  equipment  for
    tactical missiles can be left open.

2. Relevant Geographic markets

1. Prime contracting for tactical missiles

503) In previous decisions, the Commission considered that the markets for prime contracting for tactical missiles are national when  a  national
    supplier exists, due to national preferences of the monopsonistic buyers (that is, the  ministries  of  defence)  and  other  administrative
    barriers. On the other hand, where there is no  domestic  supplier,  competition  takes  place  worldwide  amongst  suppliers  of  different
    countries, subject to barriers such as export restrictions or barriers connected with national security.[215]

504) The Parties submit that the 2009 Directive on Defence and Security Procurement [216] constitutes a clear impulse towards an  opening  up  of
    national defence procurement contracts to European based competition. Moreover, the Parties argue that tenders allowing the participation of
    worldwide competitors also develop in Europe.

505) For the purposes of this decision, however, the exact geographic market definition can be left open, since the Transaction  will  not  raise
    serious doubts as to its compatibility with the internal market in relation to prime contracting for tactical missiles irrespective  of  the
    geographic market definition applied.

2. Subsystems and equipment for tactical missiles

506) As regards the geographic market for SRMs, the Commission previously found that markets are national where a domestic supplier  exists,[217]
    and at least EEA-wide where no domestic supplier exists.[218]

507) The Parties submit that, within the EEA, the evolution of SRM markets towards a European or  even  wider  dimension  has  intensified,  even
    where a domestic supplier exists. The reasons submitted by the Parties are the following: (i) the development  of  multinational  programmes
    may have led to increased competition between EU subcontractors; (ii) the 2009 Directive on Defence and Security Procurement reinforces  the
    Member States' obligations to open SRM procurement to competition within Europe; and (iii) ITAR export restrictions, which may  in  practice
    prevent European missile manufacturers from selecting American suppliers, should not be overestimated, as they contain many exceptions.

508) For the purposes of this decision, however, the exact geographic market definition can be left open, since the Transaction  will  not  raise
    serious doubts as to its compatibility with the internal market in relation to subsystems and equipment for tactical  missiles  irrespective
    of the geographic market definition applied.

3. Competitive assessment

1. Parties' activities

509) Only Airbus is active as a prime contractor for tactical missiles, through its joint-controlling stake in  MBDA,  a  joint  venture  between
    Airbus (37.5 %), BAE (37.5 %) and Finmeccanica (25 %). Airbus’ participation in MBDA will not be contributed to the Joint Venture.

510) As regards subsystems and equipment for tactical missiles, Safran will contribute to the  Joint  Venture  all  its  activities  relating  to
    tactical propulsion systems and other equipment.[219]Airbus is active in tactical  propulsion  systems  through  MBDA,  which  will  not  be
    contributed to the Joint Venture.[220]

2. Parties' arguments

511) The Parties submit that the Transaction will not create any horizontal overlaps between their activities on the markets for  subsystems  and
    equipment for tactical missiles. In fact, although Safran will contribute its 50 % shareholding in Roxel to  the  Joint  Venture,  Roxel  is
    already jointly controlled by MBDA (which owns the remaining 50 %), and hence ultimately by Airbus together with BAE and Finmeccanica.[221]

512) The Parties also argue that the Transaction will not result in the creation of additional vertical links between the Parties' activities  in
    prime contracting of tactical missiles and SRMs, since […].

513) Additional vertical relationships will however arise from the Transaction with regard to (i) SRMs,and pyrotechnic equipment  and  (ii)  SRMs
    and thermostructural composites. MBDA and Bayern-Chemie  (MBDA's  wholly-owned  subsidiary)[222]  will  gain  indirect  access  to  Safran's
    pyrotechnic equipment and thermostructural composites. The Parties submit that there is no risk of  vertical  foreclosure  in  the  tactical
    missile sector as they have neither the ability nor incentive to foreclose customers or competitors of SRM.

3. Commission's assessment

514) During its investigation the Commission could confirm the Parties' arguments and no concerns were expressed about the potential  effects  of
    the Transaction in the markets for tactical missiles.[223]

515) On the basis of the above and the available evidence, the Commission considers that the Transaction will not raise serious doubts as to  its
    compatibility with the internal market in relation to the markets for tactical missiles.

14. Strategic missiles

1. Relevant product markets

516) Strategic missiles are dedicated to critical State defence applications. They have a long range and great destruction  capabilities  relying
    on nuclear warheads. In a previous decision the Commission considered that strategic  missiles  differ  from  tactical  missiles  since  the
    decision to make use of strategic missiles is made at the highest levels of commandments as opposed to the use of tactical  missiles,  which
    is decided by field commandments.[224] Among strategic missiles, ballistic missiles raise above the atmosphere before going  down  again  on
    their target.

517) In previous decisions the Commission also determined that there is a relevant product market for propulsion systems for  strategic  missiles
    that is distinct from the propulsion systems for tactical weapons.[225]

518) In any case, the exact product market definitions can be left open since the outcome of competitive assessment of the Transaction would  not
    change irrespective of the product market definitions applied.

2. Relevant geographic markets

519) The Commission has previously considered that each State controls the manufacturing of deterrence strategic missiles  and  no  international
    market exists.[226] […].

520) In any case, the exact geographic market definitions can be left open since the outcome of competitive assessment of the  Transaction  would
    not change irrespective of the geographic market definitions applied.

3. Competitive assessment

1. Parties' activities

521) Both Parties have activities regarding the […], and will transfer to the Joint Venture all their activities in that sector.  Airbus  is  the
    prime contractor […]. Airbus is also responsible for […]. Airbus' […].[227]

522) Safran is the prime contractor for the […]. Herakles designs and produces […]. PyroAlliance and Roxel […].

2. Parties' arguments

523) The Parties submit that the Transaction will not negatively affect the structure of the French  strategic  ballistic  missile  sector  since
    there is no horizontal overlap between the Parties' activities contributed to the Joint Venture. […]. In addition, the Transaction will  not
    create any new vertical links between the Parties' activities […].

3. Commission's assessment

524) During the Commission's investigation no concerns were expressed regarding the markets for strategic missiles.[228] Moreover, […].

525) On the basis of the above and the available evidence, the Commission considers that the Transaction will not raise serious doubts as to  its
    compatibility with the internal market in relation to the markets for strategic missiles.

   Commitments submitted by the notifying parties

526) In order to render the Transaction compatible with the internal  market,  the  Parties  have  modified  the  Transaction  by  entering  into
    commitments in relation to: (i) electric satellite propulsion subsystems, (ii) carbon-carbon cylinders, for optical  instruments  for  space
    applications, (iii) thermal protection systems made of silicon carbide for civil re-entry bodies, (iv) SAPT  and  (v)  the  transmission  of
    confidential information.

527) The Parties submitted three successive sets of commitments on 5 November, 18  November  and  21  November  2014  in  order  to  address  the
    competition concerns raised by the Commission. The Final Commitments (that is, the commitments submitted on 21 November 2014) are annexed to
    this decision and form an integral part thereof.

15. Framework for the Commission's assessment of commitments

528) Where a concentration raises serious doubts as to its compatibility with the internal market,  the  Parties  may  undertake  to  modify  the
    concentration so as to remove the grounds for the serious doubts identified by the Commission with a view to having the Transaction approved
    in phase I of the merger review procedure. In this respect, the Commission has the power to accept commitments provided that they are deemed
    capable of rendering the concentration compatible with the internal market.

529) As set out in the Commission Notice on Remedies,[229] the commitments have to eliminate the competition concerns entirely  and  have  to  be
    comprehensive and effective from all points of view and must be capable of being implemented effectively within a short period  of  time  as
    the conditions of competition on the market will not be maintained until the commitments have been fulfilled.[230]

530) In assessing whether or not commitments will restore effective competition, the Commission considers  the  type,  scale  and  scope  of  the
    commitments by reference to the structure and the particular characteristics of the market in which the competition concerns arise.[231]  In
    the present case, and in particular taking into account the  specificities  of  the  space  industry,  commitments  other  than  divestiture
    commitments also appear suited to address some of the concerns raised.

16. Initial Commitments

1. Description of the Initial Commitments proposal

531) The Parties submitted on 5 November 2014 a first set of commitments. After some small modifications to that version, the  Parties  submitted
    on 10 November 2014 amended commitments ("Initial Commitments proposal") which were market tested.

532) In the Initial Commitments proposal, the Parties proposed:

  • A "Non-Contribution Commitment", that is:

 i. not to contribute to the Joint Venture the electric satellite propulsion activities of Safran (Snecma) as regards the development,  testing,
    manufacturing and sale of Hall-effect thrusters for satellites, as well as the design and production  of  electric  propulsion  modules  and
    assembly (altogether "the Excluded Business"). The Excluded Business includes all the assets and staff necessary to ensure the viability and
    competitiveness of the Excluded Business, in particular: (i) all tangible and intangible assets (including  intellectual  property  rights),
    with the exception of the production means concerned by the Utilisation Agreement[232], (ii) all licences, permits and authorisations issued
    by any governmental organisation for the benefit of the Excluded Business; (iii) all contracts, leases, commitments and customer  orders  of
    the Excluded Business; and (iv) the personnel;

ii. for a period of five years after the Commission's clearance decision in the present merger control proceeding (i) not  to  transfer  to  the
    Joint Venture the possibility of exercising influence on the Excluded Business and (ii) to include in the Excluded Business  an  Utilisation
    Agreement to be signed between the Excluded Business and the Joint Venture allowing the Excluded Business to use some production means to be
    contributed to the Joint Venture by Safran.

iii. to ensure that this Utilisation Agreement would not allow for the transfer of any competitively  sensitive  information  from  the  Excluded
    Business to the Joint Venture.

iv. to appoint a trustee to monitor the implementation of the previously described measures.

  • A "Supply Assurance Commitment", that is:

 i. to guarantee, for a period of five years after the Commission's clearance decision in the present merger control proceeding, that the  Joint
    Venture would bid for, whenever  invited,  and  supply,  if  selected,  (i)  carbon-carbon  cylinders  for  optical  instruments  for  space
    applications, (ii) thermal protection systems made of silicon carbide for civil re-entry bodies, (iii) SAPT (the  "Commitments  Equipment"),
    for civil use to any third party prime contractor. To this end, the Joint Venture would propose supply agreements on contractual terms which
    are non-discriminatory, on a standard commercial basis.

ii. to include confidentiality clauses in any agreement entered into between the Joint Ventures and a third party prime contractor.

iii. to create a fast-track dispute resolution mechanism that would be overseen and arbitrated by ESA.

2. Assessment of the Initial Commitments proposal

533) The Commission assessed the appropriateness of the Initial Commitments proposal in the light of the principles  underlying  its  commitments
    policy and carried out a first market test.

534) In light of the results of the market test, the Initial Commitments proposal was  considered  a  potential  starting  point  to  remove  the
    competitive concerns identified by the Commission with regard  to  (i)  electric  satellite  propulsion  subsystems,  (ii)  the  Commitments
    Equipment and (iii) the transmission of confidential information between Airbus and  the  Joint  Venture.  However,  as  indicated  by  some
    respondents to the market test the Initial Commitments proposal could not fully remove the concerns for the following reasons.

535) As mentioned by a number of respondents to the Commission's market test the five year time period  limitation  foreseen  both  in  the  Non-
    Contribution Commitment and the Supply Assurance Commitment does not appear to be sufficient to ensure  the  lasting  effectiveness  of  the
    Initial Commitments, in view of the manufacturing and life cycle of the products concerned and the considerable time needed for  alternative
    suppliers to enter the market with the required track record and certifications.

536) As regards the Non-Contribution Commitment, one respondent mentioned that "a period of 10 years would ensure  true  competition  would  have
    time to develop and broaden the advancement of this technology for the benefit of all stakeholders".[233]  Another  respondent  stated  that
    "the commitments remain unclear as to the timeframe in which the Excluded Business will provide technical support  (…)  the  last  thrusters
    sold by Snecma just prior to the JV transfer, support which could continue to be needed 15 to 17 years after the  last  thruster  system  is
    delivered".[234]

537) As regards the Supply Assurance Commitment, one respondent mentioned that "the limitation of the Supply Assurance to a period of five  years
    is insufficient. Such obligation should at  least  be  undertaken  for  ten  years  (…)  based  on  a  ten-year  rotation  period  for  each
    technology".[235]

538) A number of respondents to the Commission's market  test  considered  that  the  role  of  the  trustees  for  both  commitments  should  be
    strengthened in terms of compliance monitoring and reporting to ensure the effectiveness of the Initial Commitments.

539) As regards the Non-Contribution Commitment, some respondents to the Commission's market test indicated the need for the trustee to  annually
    monitor the effective separation of the Excluded Business. One respondent mentioned that "the effectiveness of this Commitment, i.e not only
    the separation between the Excluded Business and the JV, but maintaining the Excluded business as a standalone activity needs to be  closely
    monitored."[236]

540) As regards the Supply Assurance Commitment, respondents stated that "the Supply trustee should be maintained for ten years  and  Arbitration
    procedure should be maintained indefinitely" and "the length of the monitoring period should be determined based  on  the  duration  of  the
    remedy, i.e. at least 10 years".[237]

541) Moreover, some respondents to the market test stated that the Initial Commitments  proposal  was  not  sufficient  to  remove  all  concerns
    regarding the transmission of confidential information.

542) Some particular concerns were also raised by respondents to the Commission's market test. In particular, one respondent was  concerned  that
    the Joint Venture would develop its own electric propulsion activity, notably using as a starting point the production assets contributed to
    the Joint Venture and for which the Joint Venture would allow the Excluded Business to operate these assets. If the Joint  Venture  were  to
    succeed in developing its own electric propulsion activity the commitments would effectively be circumvented.[238]

543) As regards the Supply Assurance Commitment, one respondent mentioned that more  details  about  the  conditions  under  which  it  would  be
    applicable were needed. In particular, the respondent indicated that the text should include (i) detailed information as regards  conditions
    in terms of price and deliveries, (ii) a provision that the Joint Venture would be restricted from applying more  favourable  conditions  to
    Airbus, and (iii) a provision that the Joint Venture would supply the Commitments Equipment to any third party.[239] Moreover, a  respondent
    mentioned the need of a bilateral contract between the Joint Venture and potential customers.[240]

544) The Commission concluded that the Initial Commitments proposal could not fully remove the serious doubts identified by it and  informed  the
    Parties accordingly.

17. Second Commitments proposal

1. Description of the Second Commitments proposal

545) The Parties submitted a Second Commitments proposal on 18 November 2014 aimed at addressing the shortcomings identified with regard  to  the
    Initial Commitments proposal.

546) The Second Commitments Proposal introduced the following improvements:

 i. an extension of the time period limitation from five to 10  years  for  both  the  Non-Contribution  Commitment  and  the  Supply  Assurance
    Commitment;

ii. strengthening of monitoring powers of the trustees;

iii. a commitment not to transfer the key assets of the Excluded Business to the Joint Venture within 10  years  of  the  Commission's  clearance
    decision in the present merger control proceeding;

iv. a commitment to use best efforts to conclude a framework agreement with Safran's current main customer for  the  Commitments  Equipment  for
    civil use;

 v. establishing of a benchmark based on previous contracts for the conditions of the Supply Assurance Commitment; and

vi. the inclusion of confidentiality clauses also in existing agreements between Safran and any third party prime contractor.

2. Assessment of the Second Commitments proposal

547) The Commission carried out a limited second market test, on the basis of which  it  could  confirm  the  significant  progress  achieved  in
    comparison with the Initial Commitments proposal.

548) However, as indicated by one respondent to the market investigation, some concerns still  remained,  namely  regarding  (i)  the  risk  that
    Safran would stop developing the Excluded Business; (ii) the risk of the transmission of confidential information to Airbus in  the  context
    of the supply of the Commitments Equipment; (iii) the restricted scope of the use of the Commitments  Equipment  (that  is  only  for  civil
    missions); and (iv) the definition of the evolution of the next generation of the Commitments Equipment.[241]

549) The Commission concluded that the Second Commitments proposal could not fully remove the serious doubts identified by it  and  informed  the
    Parties accordingly.

18. Final Commitments

1. Description of the Final Commitments

550)  The Parties submitted the Final Commitments on 21 November 2014.

551) In the Final Commitments, the Parties commit as follows:

     • Non-Contribution Commitment, pursuant to which the Parties will:

        i) not contribute to the Joint Venture the Excluded Business for a period of 10 years following the date of the  Commission's  clearance
           decision in the present merger control proceeding;

       ii) not transfer to the Joint Venture the possibility of exercising influence over the Excluded  Business  and  the  key  assets  of  the
           Excluded Business for a period of 10 years following the date of the Commission's clearance decision in the  present  merger  control
           proceeding;

      iii) sign an Utilisation Agreement between the Excluded Business and the  Joint  Venture  which  allows  the  Excluded  Business  and  its
           personnel to use some production means transferred to the Joint Venture by Safran, for a transitional period of up to 10 years  after
           the date of the Commission's clearance decision in the present merger control proceeding, and on a standard commercial basis;

       iv) implement all necessary measures to ensure that the Joint Venture does not  obtain  any  confidential  information  relating  to  the
           Excluded Business and that any such confidential information obtained by activities/personnel to be transferred to the Joint  Venture
           will be eliminated and not be used by the Joint Venture;[242] and

        v) appoint a Trustee, to be approved by the Commission, to supervise the implementation of the Non-Contribution Commitment  and  provide
           an annual report to the Commission about the Utilisation Agreement and the transmission of confidential information.

  • Supply Assurance Commitment, pursuant to which the Parties will:

        i) use their best efforts to conclude a framework supply agreement with Safran’s current main customer, […], regarding  the  Commitments
           Equipment[243] within […] months following the date of the Commission's clearance decision in the present merger  control  proceeding
           renewable once for another period of […] months. The framework supply agreement should be in line with the principles agreed  between
           the Parties and […] in a Memorandum of Agreement, monitored by ESA and approved by the Commission;

       ii) bid for, and supply, if selected, the Commitments Equipment at the demand of any third party prime contractor, using  the  conditions
           of the framework supply agreement with […] as a benchmark, for a period of 10 years following the date of the Commission's  clearance
           decision in the present merger control proceeding. Should the Parties not reach a framework supply agreement with […], they commit to
           give ESA all the information contained in past agreements to serve as a benchmark for the supply of the Commitments Equipment to  any
           third party prime contractor;

iii) include in, any such agreement (or already existing agreements for the supply of the Commitments  Equipment)  a  confidentiality  clause  to
    protect information disclosed by the prime contractor to the Joint Venture; and

iv) appoint ESA to monitor the implementation of this commitment, and arbitrate any dispute between the Joint Venture and a  third  party  prime
    contractor arising from the claim that the Joint Venture is failing to comply with the Supply Assurance Commitment, and in  the  failure  of
    the complainant and the Joint Venture to first reach an amicable settlement.

2. Assessment of the Final Commitments

   Non-Contribution Commitment

552) The Non-Contribution Commitment will remove the ability of the Joint Venture to adopt an input foreclosure strategy and  the  incentives  of
    Airbus to adopt a customer foreclosure strategy regarding electric satellite propulsion subsystems as well as the risk of  the  transmission
    of confidential information between the Joint Venture and Airbus for the following reasons.

553) First, the Non-Contribution Commitment, by eliminating any influence of Airbus on Safran's Hall-effect thruster activities, will remove  the
    Joint Venture's potential incentive to adopt an input foreclosure strategy as regards this product.

554) The vertical relationship between Airbus, as a satellite prime contractor, and Safran,  as  a  supplier  of  electric  satellite  propulsion
    subsystems, will be entirely outside the Joint Venture given that both activities will not be contributed to the Joint Venture. Thus, Safran
    as the sole owner of the Excluded Business will not have an interest in selling its Hall-effect thrusters under more  favourable  conditions
    to Airbus.

555) As regards the consideration that Airbus could eventually try to compensate Safran  within  the  Joint  Venture  to  obtain  a  preferential
    treatment, as explained above in paragraph (347), such risk is also not significant post-implementation of  the  Final  Commitments.  Indeed
    Airbus will not be in a position to monitor any potential deviation by the Excluded Business regarding a preferential treatment since Airbus
    will not have access to any information about the Excluded Business' sales. Moreover, and contrary  to  the  case  where  Safran's  electric
    satellite propulsion subsystem activities would be contributed to the Joint Venture (and in which case Safran would retain an interest of 50
    % in those activities), Safran would be sacrificing not only half but the totality of  any  losses  associated  with  an  input  foreclosure
    strategy. Thus any such hypothetical compensation would imply too high sacrifices to be borne by Airbus.

556) Second, the Non-Contribution Commitment will remove any incentives for the adoption of a customer  foreclosure  strategy  by  Airbus.  Since
    Airbus will not have any financial interest in the sale of Safran's electric satellite propulsion subsystems, it will not have an  incentive
    to give preference to buying such subsystems from the Excluded Business in case there are equivalent, or better, options  available  in  the
    market.

557) The Commission notes that the customer foreclosure concern would not have been removed if  only  a  Supply  Assurance  Commitment  had  been
    proposed by the Parties. In that case, Airbus would still keep its financial interest in the sales of Safran's  Hall-effect  thrusters,  and
    would therefore have reduced incentives to procure this product from other suppliers.

558) Third, the Non-Contribution Commitment will remove any risk of transmission  of  confidential  information  between  Airbus  and  the  Joint
    Venture since neither the satellite prime contracting activities nor  the  electric  satellite  propulsion  subsystems  activities  will  be
    contributed to the Joint Venture. In fact, Airbus will not have access to any information received by Safran in the context of the supply of
    electric satellite propulsion subsystems to other satellite prime contractors. Likewise, Safran will not be able to obtain  any  information
    received by Airbus in the context of its procurement of satellite propulsion subsystems from other suppliers.

559) The presence of a trustee monitoring the independence between Safran's activities in electric satellite propulsion  systems  and  the  Joint
    Venture will also guarantee the absence of any influence by Airbus on the Excluded Business and the transmission of confidential information
    regarding third parties.

560) Finally, the Commission considers that the application of the Non-Contribution Commitment extension of the commitment for  a  period  of  10
    years is sufficient to guarantee that the Excluded Business will be viable on a long-lasting basis.

561) The large majority of market participants also stated that the Non-Contribution Commitment removes the competition concerns  raised  by  the
    Transaction.[244]

562) Only one satellite prime contractor mentioned that there was a risk that Safran would stop developing its Hall-effect  satellite  propulsion
    subsystems in case the Joint Venture were to develop its own electric satellite propulsion activity. However, such strategy  does  not  seem
    likely since the Final Commitments include anti-circumvention measures, pursuant to which:

 i. Safran will not be able to transfer the key assets of its electric satellite propulsion activities,  including  the  necessary  intellectual
    property rights and licences to the Joint Venture for a period of 10 years, which  implies  that  the  Joint  Venture  would  have  to  make
    significant and time intensive investments to become active in Hall-effect propulsion; and

ii. even if the Joint Venture were to start its own electric satellite propulsion activities, Safran would be sacrificing the  totality  of  its
    profits for Hall-effect propulsion activities in order to obtain only 50 % of the potential Joint Venture's profits with electric  satellite
    propulsion subsystems.

563) Overall, the Commission considers that those elements will allow for an effective enforcement of and ensure an effective  implementation  of
    the Non-Contribution Commitment.

   Supply Assurance Commitment

564) The Supply Assurance Commitment will remove the ability of the Joint Venture to adopt an input foreclosure strategy as regards  (i)  carbon-
    carbon cylinders for optical instruments for space applications, (ii) thermal protection system made of silicon carbide for  civil  re-entry
    bodies and (iii) SAPT. This is because the Supply Assurance Commitment guarantees to Safran's current main customer and to any  third  party
    prime contractor access to those products on a non-discriminatory basis.

565) First, the Parties enter into a commitment to conclude a framework supply  agreement  with  […]  within  […]  months.  That  period  can  be
    prolonged once by […] months at the request of both […] and the Parties.

566) Second, the Parties enter into a commitment to benchmark the conditions in that future framework  supply  agreement  on  the  basis  of  the
    conditions agreed in past agreements between […] and the Parties. The Parties need to objectively justify deviations  from  those  benchmark
    conditions on the basis of substantiated changes of proven costs, technologies and customer requirements.

567) Third, the Parties enter into a commitment to supply the  Commitments  Equipment  to  third  party  prime  contractors.  The  basis  of  the
    applicable supply conditions is equally to be determined on the basis of the conditions agreed in past agreements, whereby the Parties  need
    to objectively justify deviations from those benchmark conditions.

568) Fourth, a strong role is given to ESA for the monitoring of the  negotiation  of  the  framework  supply  agreement  with  […]  and  in  the
    monitoring and arbitration of disputes regarding the supply of the Commitments Equipment to third party prime contractors.

569) […], the Commission considers that the Supply Assurance Commitment  is  sufficient  to  ensure  access  to  those  products  at  competitive
    conditions and may thus eliminate the competition concerns.[245] Moreover, and since it cannot be excluded that in  future  other  customers
    may also require access to these products, the commitments also foresee that the Commitments Equipment will also be available to them.

570) A divesture of the Commitments Equipment's activities is not feasible since  those  activities  are  incorporated  in  business  units  that
    produce several other products and whose production resources are not segmented (for example, there is no personnel dedicated solely to  the
    production of the Commitments Equipment).[246]

571) The Commission considers that a benchmark based on past contracts, with any eventual deviations being subject to  objective  justifications,
    is objective and sufficient to ensure the effectiveness of the Supply Assurance Commitment. This is because  a  supply  assurance,  and  not
    necessarily price, is the most important variable for customers of the Commitments Equipment.

572) The Commission notes that the Supply Assurance Commitment will need to be implemented, through  agreements,  the  terms  and  conditions  of
    which do not form an integral part of the Final Commitments but which are the means by which they will be  implemented  in  practice.  Those
    agreements and their terms and conditions will need to be consistent with the Final Commitments to ensure  their  effectiveness  and  cannot
    include terms and conditions endangering their effective implementation.

573) The Supply Assurance Commitment will also remove the risk of transmission of confidential information between Airbus and the  Joint  Venture
    given the obligation for the Parties to include a confidentiality clause in each agreement that aims to protect information disclosed by the
    prime contractors to the Joint Venture. The confidentiality clauses are also to be included in existing contracts in order  to  ensure  that
    current exchange of information will be protected by the Final Commitments.

574) Overall, the Commission considers that those elements will allow for an effective enforcement and ensure an effective implementation of  the
    Supply Assurance Commitment.

3. Conclusion on the Final Commitments

575) For the reasons outlined above, the Final Commitments submitted by the Parties are sufficient to eliminate the  serious  doubts  as  to  the
    compatibility of the Transaction with the internal market and with the functioning of the EEA Agreement.

   Conditions and obligations

576) Under the first sentence of the second subparagraph of Article 6(2) of the Merger Regulation, the Commission  may  attach  to  its  decision
    conditions and obligations intended to ensure that the undertakings concerned comply with the Commitments they have entered  into  vis-à-vis
    the Commission with a view to rendering the concentration compatible with the internal market.

577) The achievement of the measure that gives rise to the change of the market  is  a  condition,  whereas  the  implementing  steps  which  are
    necessary to achieve this result are generally obligations on the parties. Where a condition is not  fulfilled,  the  Commission’s  decision
    declaring the concentration compatible with the internal market no longer stands. Where the undertakings concerned commit  a  breach  of  an
    obligation, the Commission may revoke the clearance decision in accordance with Article 8(6)(b) of the Merger Regulation.  The  undertakings
    concerned may also be subject to fines and periodic penalty payments under Articles 14(2) and 15(1) of the Merger Regulation.

578) In accordance with the basic distinction between conditions and obligations, the decision in this case is  conditional  on  full  compliance
    with the requirements set out in section B and D of the Final  Commitments  (conditions),  whereas  the  remaining  sections  of  the  Final
    Commitments constitute obligations on the Parties.

   CONCLUSION

579) For the above reasons, the Commission has decided not to oppose the Transaction as modified by the  Final  Commitments  and  to  declare  it
    compatible with the internal market and with the functioning of the EEA Agreement,  subject  to  full  compliance  with  the  conditions  in
    sections B and D of the Final Commitments annexed to the present decision and with the obligations contained in the other  sections  of  the
    Final Commitments. This decision is adopted in application of Article 6(1)(b) in conjunction with Article 6(2) of the Merger Regulation  and
    Article 57 of the EEA Agreement.

For the Commission
(Signed)
Margrethe VESTAGER
Member of the Commission
Case M.7353 – Airbus/Safran/JV
                                                      COMMITMENTS TO THE EUROPEAN COMMISSION

In accordance with Article 6(2) of Council Regulation (EC) No 139/2004 (the  “Merger  Regulation”),  Airbus  Group  and  Safran  (“the  Notifying
Parties”), acting for themselves and on behalf of the new joint-controlled entity to be created pursuant to the present merger case  (the  “Joint
Venture”, altogether “the Parties”), hereby enter into the following commitments (“Commitments”) with a view to enable  the  European  Commission
(the “Commission”) to declare the creation of the Joint Venture between the Parties notified in  Case  M.7353  (the  “Concentration”)  compatible
with the internal market and the functioning of the EEA Agreement by dispelling  the  Commission's  concerns  as  set  out  in  the  Commission’s
preliminary assessment provided during the State of Play Meeting dated 29 October 2014 in the context of its investigation in the present case.

This text shall be interpreted in light of the Commission’s decision pursuant to  Article  6(1)(b)  of  the  Merger  Regulation  to  declare  the
Concentration compatible with the internal market and the functioning of the  EEA  Agreement  (the  “Decision”),  in  the  general  framework  of
European Union law, in particular in light of the Merger Regulation, and by reference to the  Commission  Notice  on  remedies  acceptable  under
Council Regulation (EC) No 139/2004 and under Commission Regulation (EC) No 802/2004 (the “Remedies Notice”).

Section A.  Definitions

For the purpose of the Commitments, the following terms shall have the following meaning:

Affiliated Undertakings: undertakings controlled by the Parties and/or by the ultimate parents of  the  Parties,  including  the  joint  venture,
whereby the notion of control shall be interpreted pursuant to Article 3 of the Merger Regulation and in light  of  the  Commission  Consolidated
Jurisdictional Notice under Council Regulation (EC) No 139/2004  on  the  control  of  concentrations  between  undertakings  (the  "Consolidated
Jurisdictional Notice").

Assets: the assets that contribute to the current operation or are necessary  to  ensure  the  viability  and  competitiveness  of  the  Excluded
Business as indicated in Section B, paragraphs 5 and 6 and described in more detail in Confidential Schedule 1.

Commitments Equipment: Carbon/Carbon cylinder for optical instruments for space applications, Thermal Protection System made of  Silicon  carbide
(SiC) for civil re-entry bodies, and Standard Accuracy Pressure Transducer for satellites currently manufactured by Safran (Herakles).

Commitments Equipment Activity:  the activity of the Joint Venture relating to the Commitments Equipment.

Confidential Information: any business secrets, know-how, commercial information, or any other information of a proprietary nature  that  is  not
in the public domain.

Conflict of Interest: any conflict of interest that impairs the Non Contribution  Trustee's  objectivity  and  independence  in  discharging  its
duties under the Commitments.

Deputy Supply Trustee and Arbitrator: a natural person designated as provided in paragraph 36 hereunder who is approved  by  the  Commission  and
who is in charge of replacing the Arbitrator in the event of absence or incapacity of the Arbitrator.

Dispute: any dispute between the Joint Venture and a Third Party Prime Contractor relating to the Commitment set out in Section D.

Effective Date: the date of adoption of the Decision.

Excluded Business: the business or businesses as defined in Section B and in Confidential Schedule 1 which the Notifying Parties  commit  not  to
contribute to the Joint Venture. […].

Key Personnel: all personnel necessary to maintain the viability and  competitiveness  of  the  Excluded  Business,  as  listed  in  Confidential
Schedule 1.

Non Contribution Trustee: a person appointed in accordance with Section C.

Personnel: all staff currently employed by the Excluded Business, including staff seconded to the Excluded Business, shared personnel as well  as
the additional personnel listed in Confidential Schedule 1, which cover all the functions involved in the Excluded Business ([…]).

Phase 1 Closing: […].

Phase 2 Closing: […].

Supply Trustee and Arbitrator: a natural person designated as provided in paragraph 35 hereunder who is in  charge  of  the  enforcement  of  the
Supply Monitoring and Arbitration Commitment.

Third Party Prime Contractors: prime contractors for satellites and for civil re-entry space vehicle systems, other than Airbus.

Third Party Prime Contractor Information: competitively sensitive information relating to  Third  Party  Prime  Contractors  including,  but  not
limited to, information relating to any and all proposals and offers, technology, costs,  suppliers,  designs,  sketches,  preliminary  drawings,
plans, test results, specifications, pricing, technical interface information or data.

Section B.  The Commitment not to contribute the Excluded Business

Commitment not to contribute

   1. The Notifying Parties commit not to contribute the Excluded Business to the Joint Venture either at Phase 1 or Phase 2 Closing.

   2. The Notifying Parties commit in particular that Phase 2 Closing shall not take place until the Excluded Business has  been  separated  from
      other activities to be contributed to the Joint Venture.

   3. The Notifying Parties shall be deemed to have complied with this Commitment if:

       (a)  the Assets and Personnel attached to the Excluded Business – as described in Confidential Schedule 1 – are  kept  within  the  Safran
           Group and not transferred to the Joint Venture at Phase 1 Closing, […]; and

       (b)  at Phase 2 Closing, the Excluded Business has been maintained as a standalone business within a legal  entity  of  the  Safran  Group
           distinct from the Joint Venture.

   4. In order to maintain the structural effect of the Commitments, the Notifying Parties shall, for a period of ten (10) years after  Effective
      Date, not transfer to the Joint Venture, whether directly or indirectly, the possibility of exercising influence (as defined  in  paragraph
      43 of the Remedies Notice, footnote 3) over the whole or part of the Excluded Business, nor shall the Notifying Parties  transfer  directly
      or indirectly the key assets of the Excluded Business to the Joint Venture unless, following the submission of a reasoned request from  the
      Notifying Parties showing good cause and accompanied by a report from the Non Contribution Trustee, the Commission finds that the structure
      of the market has changed to such an extent that the absence of influence over the Excluded Business is no longer necessary to  render  the
      proposed concentration compatible with the internal market.

Structure and definition of the Excluded Business

   5. The Excluded Business consists of the electric satellite propulsion activities carried out by Snecma, a fully-owned  subsidiary  of  Safran
      […]. The structure of the Excluded Business as operated to date is described in Confidential Schedule 1. The Excluded  Business,  described
      in more detail in Confidential Schedule 1, includes all assets and staff that contribute to the  current  operation  or  are  necessary  to
      ensure the viability and competitiveness of the Excluded Business, in particular:

      (a)   all tangible and intangible assets (including intellectual property rights), to the exception of the production  means  concerned  by
           the utilisation agreement mentioned in paragraph 6 hereunder;
      (b)   all licences, permits and authorisations issued by any governmental organisation for the benefit of the Excluded Business;
      (c)   all contracts, leases, commitments and customer orders of the Excluded Business; and
      (d)   the Personnel.

   6. In addition, the Excluded Business will include a utilisation agreement to be signed between the Excluded Business and  the  Joint  Venture
      allowing the Excluded Business and its Personnel to use some production means transferred to the Joint Venture by Safran,  as  detailed  in
      Confidential Schedule 1, for a transitional period of up to ten (10) years after Effective Date and on a  standard  commercial  basis.  The
      Parties commit to ensure that this utilisation agreement will not allow for the transfer of any competitively sensitive information related
      to, or arising from the Excluded Business to be shared with personnel of the Joint Venture.

Ring-fencing

   7. Safran shall implement, or procure to implement, all necessary measures to ensure that the Joint Venture  does  not,  after  the  Effective
      Date, obtain any Confidential Information relating to the Excluded  Business  and  that  any  such  Confidential  Information  obtained  by
      activities/personnel to be transferred to the Joint Venture before Effective Date will be eliminated and not be used by the Joint  Venture.
      This Commitment does not cover, however, information that Airbus has and will have access to through  its  normal  commercial  relationship
      with the Excluded Business.

Section C.  Non Contribution Trustee

Appointment Procedure

   8. The Notifying Parties shall appoint one Non Contribution Trustee to carry out the functions specified in paragraph 16 hereunder.

   9. The Non Contribution Trustee shall:

      (i)   at the time of appointment, be independent of the Parties and their Affiliated Undertakings;

      (ii)  possess the necessary qualifications to carry out its mandate, for example have  sufficient  relevant  experience  as  an  investment
         banker or consultant or auditor; and

      (iii)       neither have nor become exposed to a Conflict of Interest.

  10. The Non Contribution Trustee shall be remunerated by the Notifying Parties in a way that does not  impede  the  independent  and  effective
      fulfillment of its mandate.

      Proposal by the Parties

  11. No later than two weeks after the Effective Date, the Notifying Parties shall submit the name or names of one  or  more  natural  or  legal
      persons whom the Notifying Parties propose to appoint as the Non Contribution Trustee to the Commission for approval.  The  proposal  shall
      contain sufficient information for the Commission to verify that the proposed Trustee fulfills the requirements  set  out  in  paragraph  9
      above and shall include the full terms of the proposed mandate, including all provisions necessary to enable the  Trustee  to  fulfill  its
      duties under these Commitments and the outline of a work plan which describes how the Non Contribution Trustee intends  to  carry  out  its
      assigned tasks.

      Approval or rejection by the Commission

  12. The Commission shall have the discretion to approve or reject the proposed Non Contribution Trustee and to  approve  the  proposed  mandate
      subject to any modifications it deems necessary for the Non Contribution Trustee to fulfil its obligations. If only one name  is  approved,
      the Notifying Parties shall appoint or cause to be appointed the person or persons concerned as Non  Contribution  Trustee,  in  accordance
      with the mandate approved by the Commission. If more than one name is approved, the Notifying Parties shall  be  free  to  choose  the  Non
      Contribution Trustee to be appointed from among the names approved. The Non Contribution Trustee shall be appointed within one week of  the
      Commission’s approval, in accordance with the mandate approved by the Commission.

      New proposal by the Parties

  13. If all the proposed Trustees are rejected, the Notifying Parties shall submit the names of at least  two  more  natural  or  legal  persons
      within one week of being informed of the rejection, in accordance with paragraphs 11 and 12 of these Commitments.

      Non Contribution Trustee nominated by the Commission

  14. If all further proposed Non Contribution Trustees are rejected by the Commission,  the  Commission  shall  nominate  a  Trustee,  whom  the
      Notifying Parties shall appoint, or cause to be appointed, in accordance with a trustee mandate approved by the Commission.

Mission of the Non Contribution Trustee

  15. The Non Contribution Trustee shall assume its specified duties and obligations in order to ensure compliance with the Commitment  described
      in Section B above. The Commission may, on its own initiative or at the request of the Non Contribution Trustee or the  Notifying  Parties,
      give any orders or instructions to the Trustee in order to ensure compliance with the Commitment described in Section B above.

      Duties and obligations of the Non Contribution Trustee

  16. The Non Contribution Trustee shall supervise the implementation of the Commitment described in Section B above and in particular shall :

     i) monitor the keeping separate of the Excluded Business retained by Safran from the business to be contributed  by  Safran  to  the  Joint
        Venture at Phase 1 and Phase 2 Closings, in particular monitor the splitting of assets and  the  allocation  of  personnel  between  the
        Excluded Business and the Joint Venture or its Affiliated Undertakings;

    ii) with respect to Confidential Information:

               – determine all necessary measures to ensure that the Joint Venture does not after the Effective  Date  obtain  any  Confidential
                 Information relating to the Excluded Business,

               – make sure that any Confidential  Information  relating  to  the  Excluded  Business  obtained  before  the  Effective  Date  by
                 activities/personnel to be transferred to the Joint Venture is eliminated and will not be used by the Joint Venture; and

               – decide whether such information may be disclosed to or kept by the Joint Venture as the disclosure is required by law;

   iii) propose to the Notifying Parties such measures as the Non Contribution Trustee considers necessary  to  ensure  the  Notifying  Parties’
        compliance with the Commitment described in Section B above;

    iv) promptly report in writing to the Commission, sending the Notifying Parties non-confidential copies at the same time, if it concludes on
        reasonable grounds that the Notifying Parties are failing to comply with the Commitment described in Section B above;

     v) provide to the Commission, sending the Notifying Parties non-confidential copies at the same time, a written report at least  one  month
        before Phase 2 Closing that shall cover the splitting of assets and the allocation of personnel between the Excluded  Business  and  the
        Joint Venture or its Affiliated Undertakings, as well as the measures taken to ensure the ring-fencing of the Confidential  Information,
        so that the Commission can assess whether the Excluded Business is separated in a manner consistent with  the  Commitment  described  in
        Section B above;

    vi) following Phase 2 Closing, provide to the Commission, sending the Notifying Parties non-confidential copies at the same time, an  annual
        report regarding the implementation of paragraphs 4 and 7 of these Commitments.

  17. The Non Contribution Trustee shall provide a detailed work plan to the Commission within one (1) month of its appointment, sending  a  copy
      to the Notifying Parties at the same time, describing how it intends to carry out its mandate.

Duties and obligations of the Notifying Parties

  18. The Notifying Parties shall provide and shall cause its advisors to provide the  Non  Contribution  Trustee  with  all  such  co-operation,
      assistance and information as the Non Contribution Trustee may reasonably require to perform its tasks. Safran and  the  Excluded  Business
      shall provide the Non Contribution Trustee upon request with copies of any document, and shall  be  available  for  meetings  in  order  to
      provide the Non Contribution Trustee with all information, reasonably necessary for the performance of its tasks.

  19. The Notifying Parties shall indemnify the Non Contribution Trustee and its employees and agents (each an “Indemnified Party”) and hold each
      Indemnified Party harmless against, and hereby agrees that an Indemnified Party shall have no liability to the Notifying Parties  for,  any
      liabilities arising out of the performance of the Non Contribution Trustee’s duties under the Commitments, except to the extent  that  such
      liabilities result from the wilful default, recklessness, gross negligence or bad faith of the Trustee, its employees or agents.

  20. Safran agrees that the Commission may share Confidential Information proprietary to Safran with  the  Non  Contribution  Trustee.  The  Non
      Contribution Trustee shall not disclose such information and the principles contained in Article 17 (1) and (2) of  the  Merger  Regulation
      apply mutatis mutandis.

  21. For a period of ten (10) years from the Effective Date, the Commission may request all information from  the  Parties  that  is  reasonably
      necessary to monitor the effective implementation of the Commitment described in Section B.

Replacement, discharge and reappointment of the Non Contribution Trustee

  22. If the Non Contribution Trustee ceases to perform its functions under the Commitments or for any other good cause, including  the  exposure
      of the Non Contribution Trustee to a Conflict of Interest:

      (a)   the Commission may, after hearing the Non Contribution Trustee and the Notifying Parties, require the Notifying  Parties  to  replace
           the Non Contribution Trustee; or

      (b)   the Notifying Parties may, with the prior approval of the Commission, replace the Non Contribution Trustee.

  23. If the Non Contribution Trustee is removed according to paragraph 22 of these Commitments, the Trustee may be required to continue  in  its
      function until a new Non Contribution Trustee is in place to whom the Non Contribution Trustee  has  effected  a  full  hand  over  of  all
      relevant information. The new Non Contribution Trustee shall be appointed in accordance with the procedure referred to in paragraphs  11-14
      of these Commitments.

  24. Unless removed according to paragraph 22 of these Commitments, the Non Contribution Trustee shall cease to act as Trustee  only  after  the
      Commission has discharged it from its duties after the Commitment  described  in  Section  B  above  has  been  implemented.  However,  the
      Commission may at any time require the reappointment of the Non Contribution Trustee if it subsequently appears that the relevant  remedies
      might not have been fully and properly implemented.

Section D.  Supply Assurances

  25. The Notifying Parties undertake that for a period of ten (10) years after Effective Date, the Joint Venture will bid for, whenever invited,
      and supply, if selected, the Commitments Equipment to any Third Party Prime Contractor who so requests. For the avoidance  of  any  doubts,
      the present Section also applies to new generation products to be developed by the Joint Venture derived from or replacing the  Commitments
      Equipment, based on the need to replace obsolete components or  derived  from  the  introduction  of  new  technologies  and/or  presenting
      equivalent or better specifications to the Existing Products, namely: (i) evolutions of Standard Accuracy Pressure Transducers  (SAPT)  for
      Satellites; (ii) development of carbon/carbon stable structures  of  any  shape  for  optical  or  scientific  space  missions;  and  (iii)
      development of Thermal Protection System made from Silicon carbide (SiC) material for civil re-entry bodies (heat shield) deriving from the
      Intermediate eXperimental Vehicle (IXV) programme.

  26. To this end, the Notifying Parties commit to use their best efforts to conclude a framework supply agreement  with  Safran’s  current  main
      customer for the Commitments Equipment,  […], within a […] period of the Effective Date which can be renewed once for  another  […]  period
      upon formal agreement of both the Notifying Parties and […] (the “Framework Supply Agreement”). The Framework Supply Agreement shall be  in
      line with the principles agreed between the Notifying Parties and […] in the Memorandum of Agreement attached as Confidential Schedule 2.

  27. The negotiations of the Framework Supply Agreement will be conducted under the monitoring of the European  Space  Agency  (“ESA”)  and  the
      supervision of the Commission. The final Framework Supply Agreement will be approved by the Commission based on the recommendation of  ESA.
      A copy of the signed Framework Supply Agreement shall be forwarded by the Notifying Parties to the Commission without delay.

  28. The Notifying Parties shall be relieved from their obligations under paragraphs 26 and 27 above if, following the submission of a  reasoned
      request from the Notifying Parties showing good cause and accompanied by a report from ESA, the Commission finds that the Notifying Parties
      are facing unreasonable demands from […] that would make the conclusion of the Framework Supply Agreement unfair to the Notifying  Parties.
      The reasoned request from the Notifying Parties shall be submitted to the Commission prior to the expiration of the […] or, as the case may
      be, […] period referred to in paragraph 26.

  29. In addition, the Notifying Parties undertake that the Joint Venture will  supply  the  Commitments  Equipment  to  any  Third  Party  Prime
      Contractor on a transparent and non-discriminatory basis, based on the conditions of the Framework Supply Agreement serving as a  benchmark
      and under the monitoring of ESA’s Industrial Ombudsman. Should the Notifying Parties have been relieved of their obligation to  enter  into
      the Framework Supply Agreement pursuant to paragraph 28 above, the Notifying Parties commit to give ESA’s Industrial  Ombudsman  access  to
      all relevant price, discounts, delivery schedules and conditions, quality standards and ordinary shipping conditions contained in all  past
      agreements entered into by Safran for the supply of Commitments Equipment, to serve as benchmark for the supply of Commitments Equipment to
      any Third Party Prime Contractor.  Deviations from the conditions of the benchmark contracts shall be acceptable only to  the  extent  that
      they can be objectively justified on the basis of substantiated evolutions of proven costs,  technologies  and  customer  requirements,  it
      being understood that the Joint Venture should be able to reach a reasonable profit in line with industry standards above proven costs.

  30. The Notifying Parties commit that any agreement entered into between the Joint Venture and a Third Party Prime Contractor with  regards  to
      Commitments Equipment shall include the following confidentiality clauses, and that, where requested by a Third Party Prime Contractor, the
      existing agreements between Safran and any Third Party Prime Contractor regarding the Commitments Equipment will also be amended to include
      the following clauses:

      Confidentiality

      X. For the duration of this Agreement and for a period of ten (10) years from the end or termination of this Agreement, in respect  of  any
      [Third Party Prime Contractor Information] received by the [Joint Venture] from the [Third Party Prime  Contractor],  the  [Joint  Venture]
      undertakes that such information shall:

      (a)   be protected and kept in strict confidence by the Joint Venture, which must use at least the same degree of precaution and safeguards
           as it uses to protect its own proprietary information of like importance, but in no case less than reasonable care;
      (b)   be only disclosed to and used by those persons within the [Joint Venture’s] organisation who have a need to know and solely  for  the
           performance of this Agreement;
      (c)   not be used in whole or part for any purpose other than the performance of this Agreement;
      (d)   neither be disclosed or caused to be disclosed whether directly or indirectly to any third party, including the parent  companies  of
           the [Joint Venture], or persons other than those mentioned in sub-paragraph (b) above or as otherwise permitted herein;
      (e)   neither be copied, nor otherwise reproduced nor duplicated in whole or in part where such copying, reproduction  or  duplication  has
           not been specifically authorised in writing by the [Third Party Prime Contractor].

      Any [Third Party Prime Contractor Information] shall remain the property of the [Third Party Prime Contractor] and  shall  be  returned  by
      [the Joint Venture] forthwith upon request.

      [The Joint Venture] shall have no obligation or restriction under this  Agreement  with  respect  to  any  [Third  Party  Prime  Contractor
      Information] which the [Joint Venture] can prove:

      (a)   has come into the public domain prior to, or after the disclosure thereof and in such case through no  wrongful  act  of  [the  Joint
           Venture]; or
      (b)   has been lawfully received from a third party without restrictions or breach of this Agreement; or
      (c)   has been or is published without violation of this Agreement; or
      (d)   is independently developed in good faith by employees of the [Joint Venture] who did  not  have  access  to  the  Third  Party  Prime
           Contractor Information; or
      (e)   is approved for the release or use in question by written authorisation of the [Third Party Prime Contractor]; or
      (f)   is not designated or confirmed as [Third Party Prime Contractor Information] within the meaning of this Agreement.

      Y. In case of any breach by [the Joint Venture] of Article X. above, the [Joint Venture] shall pay to the [Third Party Prime Contractor]  a
      penalty of [•%] of the Price defined by the present Agreement.

      Notwithstanding the above, the [Joint Venture] agrees to indemnify and hold the [Third Party Prime Contractor] harmless  from  any  damage,
      loss, cost or liability (including legal fees and costs of enforcing or seeking remedies for the breach of Article X.) arising  out  of  or
      resulting from any unauthorised use or disclosure by it of any [Third Party Prime Contractor Information].

  31. All agreements entered into by the Joint Venture for the supply of Commitments Equipment to Third Party Prime Contractors will be forwarded
      by the Notifying Parties to the Commission and to the Supply Trustee and Arbitrator in writing and without delay. The  Supply  Trustee  and
      Arbitrator shall be entitled in its sole initiative or upon request of a Third Party Prime Contractor to review offers made  by  the  Joint
      Venture to Third Party Prime Contractors regarding the Commitments Equipment to  ensure  the  absence  of  discrimination  between  several
      offers.

  32. The monitoring of the application of the present Section and any Dispute arising in relation therewith  shall  be  subject  to  the  supply
      monitoring and fast-track dispute resolution mechanism described in Section E below.

Section E.  Supply Monitoring and Fast-Track Dispute Resolution Mechanism

  33. In the event that a Third Party Prime Contractor, showing a sufficient legitimate interest, claims that the Joint  Venture  is  failing  to
      comply with the Commitment described in Section D above, such Third Party Prime Contractor may refer its claim to the  Supply  Trustee  and
      Arbitrator according to the mechanisms described in this Section.

Appointment of the Supply Trustee and Arbitrator

  34. The Notifying Parties propose that the monitoring of the Supply Assurance and any Dispute arising thereof be submitted  to  a  sole  Supply
      Trustee and Arbitrator, with the required experience, competence and independence.

  35. The Notifying Parties propose that ESA, through its Industrial Ombudsman, be designated as Supply Trustee and Arbitrator.

  36. In addition, the Notifying Parties shall propose that ESA appoint as Deputy Supply Trustee and Arbitrator the  second  ESA  Ombudsman,  who
      fulfills the same conditions of impartiality as the incumbent and who will be able to act in the event of the absence or incapacity of  the
      incumbent Supply Trustee and Arbitrator.

Amicable Settlement of Dispute

  37. Should a Third Party Prime Contractor consider that the Joint Venture is in breach of the Commitment set out in Section  D  above,  it  may
      activate the present Amicable Settlement Mechanism by notifying to the Joint Venture the subject matter of the Dispute by letter sent  with
      acknowledgment of receipt either by fax, e-mail or registered post (the “Notice”). The Joint Venture shall inform without delay the  Supply
      Trustee and Arbitrator by forwarding to it a copy of the above Notice.

  38. The Joint Venture and the Third Party Prime Contractor have a duty to cooperate and use every reasonable effort to settle the  Dispute  and
      reach an agreement satisfactory for both of them, within a reasonable period of time not exceeding fifteen  (15)  calendar  days  from  the
      receipt of the Notice. The Supply Trustee and Arbitrator shall be informed of this agreement in  writing  and  without  delay.  The  Supply
      Trustee and Arbitrator may also suggest to the Joint Venture and the Third Party Prime Contractor measures  that  could  help  solving  the
      Dispute.

  39. The Supply Trustee and Arbitrator will keep the Commission informed of the Dispute and of its resolution in writing and without delay.

Arbitration Procedure

  40. Should the Joint Venture and the Third Party Prime Contractor not reach an agreement according to  the  procedure  of  Amicable  Settlement
      described above, the Parties commit to refer the Dispute to the Supply Trustee and Arbitrator.

  41. To initiate the Arbitration Procedure, the Third Party Prime Contractor shall, by registered letter with acknowledgement of  receipt,  give
      written notice to the Supply Trustee and Arbitrator and state the specific nature of the claim, the factual basis of its position  and  the
      relief requested (the “Referral”). The Supply Trustee and Arbitrator will forward  any  such  letter  to  the  Joint  Venture  and  to  the
      Commission without delay.

  42. The Supply Trustee and Arbitrator will act in accordance with French law, as provided for in Articles  1442  and  following  of  the  Civil
      Procedure Code and may take any interim measures. The Arbitration Procedure shall be conducted in Paris, France.

  43. The Supply Trustee and Arbitrator shall, as soon as practical, hold an organisational conference to discuss any procedural issues with  the
      Joint Venture and the Third Party Prime Contractor in relation to the Arbitration Procedure.

  44. The Supply Trustee and Arbitrator shall have access to any Confidential Information, be able to conduct inquiries and appoint experts,  and
      order any other measures, including interim measures, to the extent necessary for the performance of its duties.  The  Supply  Trustee  and
      Arbitrator shall agree in writing to keep any Confidential Information and business secrets disclosed to it in confidence.

  45. Upon request of the Third Party Prime Contractor, the Supply Trustee and Arbitrator may make a  preliminary  ruling  on  the  dispute.  The
      preliminary ruling shall be rendered within fifteen (15) calendar days following receipt of the Referral, be applicable  immediately,  and,
      as a rule, remain in force until a final decision is rendered.

  46. The Supply Trustee and Arbitrator shall render its final award within a maximum of two (2) months following receipt  of  the  Referral.   A
      copy of the final decision shall be forwarded to the Commission in writing and without delay.

  47. The final arbitration award shall, in addition to deciding the merits of the claims, determine the Supply Trustee and Arbitrator’s fees and
      the arbitration costs. Such fees and costs shall in principle be borne by the Parties, except in cases of unsubstantiated demands.

  48. The Parties undertake to take the relevant compliance measures by the deadline set by the Arbitrator and to report their implementation  to
      the Arbitrator within the shortest timeframe possible.

  49. The French Ministry of Defense shall be informed of any Dispute by the Joint Venture and, where the Dispute involves  matters  or  products
      that are related to matters of national security interests, shall have a right to raise the issue with the Commission and take any  measure
      necessary to the protection of French State national security interests, in line with the Treaties.

  50. The possibility of such arbitration proceedings shall be mentioned in any agreement entered into between the  Joint  Venture  and  a  Third
      Party Prime Contractor with regards to Commitments Equipment.

  51. This Supply Monitoring and Fast-Track Dispute Resolution Mechanism shall remain in force for a period of ten (10) years from the  Effective
      Date, provided that the Joint Venture continues to carry out  its  Commitments  Equipment  Activity  and  to  manufacture  the  Commitments
      Equipment.

Annual Report and Contacts with Commission

  52. During this ten (10) year period, the Supply Trustee and Arbitrator will present in an annual report all questions raised relating  to  the
      implementation of the Commitment set out in Section D above and the compliance measures taken by the Joint Venture either on its own motion
      through cooperation and consultation with Third Party Prime Contractors or upon its own proposal. The Supply Trustee  and  Arbitrator  will
      submit the annual report to the Commission.

  53. Should any further questions arise for the Commission with regards to the implementation of  this  Commitment  during  the  ten  (10)  year
      period, the Commission may address a request for clarification in writing to the Supply Trustee and Arbitrator.   The  Supply  Trustee  and
      Arbitrator will answer to the request within thirty (30) calendar days.

Section F.  Entry into force – Effective Period

  54. The Commitments shall take effect as of Effective Date.

  55. The Commitment set out in Section B above shall apply for a period of ten (10) years from Effective Date. The Commitment set out in Section
      D above shall also apply for a period of ten (10) years from Effective Date, as long as  the  Joint  Venture  continues  to  carry  on  its
      Commitments Equipment Activity and to manufacture the Commitments Equipment.

Section G.  The review clause

  56. The Commission may, in response to a reasoned request from the Notifying Parties showing good cause and accompanied by a report from either
      the Non Contribution Trustee for the Commitment set out in Section B above or the Supply Trustee and Arbitrator for the Commitment set  out
      in Section D above, waive, modify or substitute, in exceptional circumstances, one or more of the undertakings in  these  Commitments.  The
      request shall not have the effect of suspending the application of the undertaking and, in particular, of suspending the expiry of any time
      period in which the undertaking has to be complied with.

20 November 2014

Name: […]

Function: […]

duly authorised for and on behalf of Airbus Group N.V.

Name: […]

Function: […]

duly authorised for and on behalf of Safran
                                                                    SCHEDULE 1
                                                       Description of the Excluded Business

                                                                       […]
                                                                    SCHEDULE 2

                                                                       […]

|                                                               |                                                              |

-----------------------
[1]   OJ L 24, 29.1.2004, p. 1 ('the Merger Regulation'). With effect from 1 December 2009, the Treaty on the Functioning of the  European  Union
   ('TFEU') has introduced certain changes, such as the replacement of 'Community' by 'Union' and 'common  market'  by  'internal  market'.  The
   terminology of the TFEU will be used throughout this decision.

[2]   OJ L 1, 3.1.1994, p.3 ("the EEA Agreement").

[3]   Arianespace is the European space launcher provider. The Parties  will  contribute  to  the  Joint  Venture  their  stakes  in  Arianespace
   Participation SA, respectively 28.5 % and 10.6 %, and in Arianespace SA. […].

[4]   Replies to question 49 of Questionnaire Q2 - Satellites primes and question 11 of Questionnaire Q4  -  Launcher  subsystems  and  equipment
   producers.

[5]   Articles 17 and 18 of the Arianespace’s by-laws.

[6]   The LEA provides for a mandate from ESA Member States to Arianespace to exploit the  European  launchers  developed  by  ESA  in  order  to
   guarantee the European access to space and strictly limit Arianespace’s choices in terms of industrial organisation.  Annex  3.1.2.c  of  the
   Form CO.

[7]   Article 5.3 of the LEA.

[8]   Minutes of a call with Arianespace on 17 October 2014.

[9]   CNES' reply to question 3 of the Commission's request for information, 23 October 2014.

[10]  Parties' reply to question 10 of the Commission's request for information, 20 October 2014.

[11]  Minutes of a call with Arianespace on 17 October 2014.

[12]  Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the  Commission  Consolidated  Jurisdictional  Notice  (OJ
   C95, 16.04.2008, p1).

[13]  Commission's decision of 5 June 2001 in case COMP/M.2437 - NEC/Toshiba.

[14]  The Parties are not active in launch services and in ground systems, and therefore these areas will  not  be  analysed  in  detail  in  the
   competitive assessment in the present decision.

[15]  Minutes of a call with ESA on 20 October 2014.

[16]  A satellite is constituted by three stages: the first stage is at the bottom (denominated propulsion  stage),  the  second  and  subsequent
   upper stages are above it, usually decreasing in size.

[17]  Minutes of a call with ESA on 20 October 2014.

[18]  Annex 6.1.8 of the Form CO.

[19]  Minutes of a call with ESA on 20 October 2014.

[20]  Commission's decision of 5 June 2001 in case COMP/M.2437 - Nec/Toshiba (2001), paragraph.12.

[21]  Commission's decision of 21 March 2000 in case COMP/M.1636 - MMS/DASA/Astrium, paragraph 122; Commission's decision of 11 May 2000 in  case
   COMP/M.1745 - EADS, paragraph 76 and Commission's decision of 10 March 2009 in case COMP/M.5426 - Dassault Aviation/TSA/Thalès, paragraph 13.

[22]  Commission's decision of 21 March 2000 in case COMP/M.1636 - MMS/DASA/Astrium, paragraphs. 121-122; and Commission's decision of  30  March
   2011 in case COMP/M.6104 - Safran/SNPE Matériaux énergétiques/Regulus, paragraphs 22-23.

[23]  Commission's decision of 30 March 2011 in case COMP/M.6104 - Safran/SNPE Matériaux énergétiques/Regulus, paragraph 26.

[24]  Commission's decision of 21 March 2000 in case COMP/M.1636 - MMS/DASA/Astrium, paragraph. 122; Commission's decision  of  11  May  2000  in
   case COMP/M.1745 - EADS, paragraph 76 and Commission's decision of  10  March  2009  in  case  COMP/M.5426  -  Dassault  Aviation/TSA/Thalès,
   paragraph 13.

[25]  Commission's decision of 21 March 2000 in case COMP/M.1636 - MMS/DASA/Astrium, paragraph 121-122; and Commission's  decision  of  30  March
   2011 in case COMP/M.6104 - Safran/SNPE Matériaux énergétiques/Regulus, paragraphs 22-23.

[26]  Cryogenic valves are used in connection with very low temperature oxygen and hydrogen in cryogenic propulsion subsystems.

[27]  Non-Cryogenic valves are used in non-cryogenic propulsion  systems  and  in  connection  with  non-oxygen/hydrogen  related  function  (for
   example, in connection with helium – in cryogenic propulsion systems).

[28]  Commission's decision of 10 March 2009 in case COMP/M.5426 - Dassault Aviation/TSA/Thalès, paragraph 11.

[29]  Replies to question 6 of Questionnaire Q4 – Launcher subsystems and equipment producers.

[30]        Airbus provides limited equipment such as non-cryogenic valves while Safran provides equipment for the SRMs. The Parties submit  that
   […] and there are no vertical relationships between the Parties' activities.

[31]  […].

[32]  ESA's Procurement Rules consist of the rules governing ESA procurements. They are laid down in  the  ESA  Convention  and  are  implemented
through the ESA Procurement Regulations and the General Clauses and Conditions for ESA Contracts. Annex 6.1.3 and 6.1.4 of the Form CO.

[33]  Airbus CASA, which will not be contributed to the Joint Venture, is also active in the  launcher  pyrotechnic  sector  at  the  system  and
   subsystem level.

[34]  Safran is not active at the system level.

[35]  In the last five years, the Parties supplied hard point separation subsystems for all the constellations launched worldwide.  However,  for
   the next constellation scheduled for launch an American supplier has been selected for the hard point separation subsystem.

[36]  Safran will not contribute its subsidiary Techspace Aero which is active in valves equipment.

[37]  Minutes of a call with ESA on 28 October 2014.

[38]  Minutes of a call with ESA on 28 October 2014.

[39]  Minutes of a call with ESA on 20 October 2014.

[40]  Best Practices for the Selection of Subcontractors by Prime Contractors in the frame of ESA's Major Procurements ("ESA's  Best  Practices")
   have been laid down by ESA for the selection of sub-contractors by Prime Contractors in the frame of ESA’s major procurements. Annex 6.1.5 of
   Form CO.

[41]  Minutes of a call with ESA on 20 October 2014.

[42]  See Figure 2.

[43]  Ariane 5 ECA is the "heavy-lift workhorse" for missions to GTO.

[44]  Ariane 5 ES is tailored for LEO orbit missions with the automated transfer vehicle.

[45]  Replies to questions 9 and 10 of Questionnaire Q4 – Launcher subsystems and equipment producers.

[46]  Minutes of a call with a launcher subsystem supplier on 27 October 2014.

[47]  Reply to question 8.1 of Questionnaire Q4 - Launcher subsystems and equipment producers.

[48]  Minutes of a call with a launcher subsystem supplier on 27 October 2014.

[49]  Minutes of a call with a launcher subsystem supplier on 27 October 2014.

[50]  Minutes of a call with a launcher subsystem supplier on 28 October 2014.

[51]  Minutes of a call with a launcher subsystem supplier on 28 October 2014.

[52]  Minutes of a call with a launcher subsystem supplier on 15 October 2014.

[53]  Minutes of a call with a launcher subsystem supplier on 22 October 2014.

[54]  Replies to questions 25, 26 and 27 of Questionnaire Q1 – Satellite operators.

[55]        Annex 6.8.1of Form CO: "ESA’s Request for Submission".

[56]  Minutes of a call with ESA on 28 October 2014.

[57]  Minutes of a call with ESA on 28 October 2014.

[58]  Annex 6.1.8. of Form CO "ESA’s Request for Submission".

[59]  Minutes of a call with ESA on 28 October 2014.

[60]  Annex 6.1.8. of Form CO "ESA’s Request for Submission".

[61]  Replies to question 12 of Questionnaire Q4 – Launcher subsystems and equipment producers.

[62]  Minutes of a call with ESA on 28 October 2014.

[63]  ESA's document "Progress report on the Implementation of decisions taken at C/M 12 on Launchers", 23 September 2014.

[64]  ESA stated that the efficiencies behind the creation of the Joint Venture would not be specific for Ariane 6, but  would  also  have  cost-
   cutting effects in the context of the Ariane 5ME project.

[65]  Commission's decision of 5 June 2001 in case COMP/M.2437 - NEC/Toshiba, paragraph 12.

[66]        Commission's decision of 17 December 2008 in case COMP/M.5168 - EADS/SSTL, paragraphs 8-17; Commission's decision of 4 April 2007  in
   case COMP/M.4403 - Thales/Finmeccanica/Alcatel Alenia Space & Telespazio, paragraphs 38-41; and Commission's decision of  28  April  2005  in
   case COMP/M.3680- Alcatel/Finmeccanica/Alcatel Alenia Space & Telespazio, paragraphs 14-23.

[67]  Replies to question 4 of Questionnaire Q2 – Satellite primes.

[68]  Hall-effect thrusters operate on a variety of gas, the most common being xenon. Other possible options  include  krypton,  argon,  bismuth,
   iodine, magnesium, and zinc.

[69]  Commission's decision of 17 December 2008 in case COMP/M.5168 - EADS/SSTL, paragraph 25.

[70]  Commission's decision of 21 March 2000 in case COMP/M.1636 - MMS/DASA/Astrium, paragraph 28.

[71]  Replies to question 8 of Questionnaire Q2 - Satellite primes.

[72]  Replies to question 8.2 of Questionnaire Q2 - Satellite primes.

[73]  Replies to question 7 of Questionnaire Q1 - Satellite operators, question 9 of Questionnaire Q2 -  Satellite  primes  and  question  10  of
   Questionnaire Q3 - Satellite systems, subsystems and equipment producers.

[74]  Replies to question 11 of Questionnaire Q1 - Satellite operators, question 14 of Questionnaire Q2 - Satellite primes  and  question  13  of
   Questionnaire Q3 - Satellite systems, subsystems and equipment producers.

[75]        Commission's decision of 17 December 2008 in case COMP/M.5168 - EADS/SSTL, paragraph 25; Commission's decision of  4  April  2007  in
   case COMP/M.4403 - Thales/Finmeccanica/Alcatel Alenia Space & Telespazio, paragraph 45;  Commission's  decision  of  4  April  2007  in  case
   COMP/M.3680 - Alcatel/Finmeccanica/Alcatel Alenia Space & Telespazio, paragraphs 26-27; and Commission's decision of 22 December 2004 in case
   COMP/M.3621 - SAGEM/SNECMA, paragraph 8.

[76]  Reply to question 19 of Questionnaire Q3 - Satellite systems, subsystems and equipment producers.

[77]  Reply to question 19.1 of Questionnaire Q3 - Satellite systems, subsystems and equipment producers.

[78]  Reply to question 19.2 of Questionnaire Q3 - Satellite systems, subsystems and equipment producers.

[79]  Commission's decision of 30 March 2011 in case COMP/M.6104 - Safarn/SNPE Matériaux énergétiques/Regulus, paragraph 57.

[80]  Commission's decision of 23 August 2002 in case COMP/M.2892 - Goodrich/TRW, paragraph 7.

[81]  Commission's decision of 3 July 2001 in case COMP/M.2220 - General Electric/Honeywell, paragraph 332.

[82]  Commission's decision of 26 July 2012 in case COMP/M.6410 - UTC/Goodrich, paragraphs 125-127.

[83]  Commission's decision of 5 June 2001 in case COMP/M.2437 - NEC/Toshiba, paragraphs 13-14.

[84]  Reply to question 53 of Questionnaire Q2 – Satellite primes.

[85]  Commission's decision of 30 March 2011 in case COMP/M.6104 - Safran/SNPE Matériaux énergétiques/Regulus, paragraph 64.

[86]  Minutes of a call with a satellite subsystem supplier on 4 November 2014.

[87]  Currently, the cylinder is the only shape of carbon-carbon structure produced for space missions.

[88]  Reply to question 53.1 of Questionnaire Q2 – Satellite primes.

[89]  Commission's decision of 30 March 2011 in case COMP/M.6104 - Safran/SNPE Matériaux énergétiques/Regulus , paragraphs 87-88.

[90]  Commission's decision of 17 December 2008 in case COMP/M.5168, EADS/SSTL, paragraphs 18-23; Commission's decision of 4 April 2007  in  case
   COMP/M.4403, Thales/Finmeccanica/Alcatel Alenia Space & Telespazio, paragraphs 93-100; and Commission's decision of  4  April  2007  in  case
   COMP/M.3680, Alcatel/Finmeccanica/Alcatel Alenia Space & Telespazio, paragraphs 51-56.

[91]  Replies to question 21 of Questionnaire Q2 – Satellite primes.

[92]  Replies to question 15 of Questionnaire Q1 – Satellite operators.

[93]  Replies to question 25 of Questionnaire Q2 – Satellite primes.

[94]  Replies to question 17 of Questionnaire Q1 – Satellite operators.

[95]  Commission's decision of 17 December 2008 in case COMP/M.5168 - EADS/SSTL, paragraph 21.

[96]  Commission's decision of 17 December 2008 in case COMP/M.5168, EADS/SSTL, paragraph 27; Commission's decision  of  4  April  2007  in  case
   COMP/M.4403, Thales/Finmeccanica/Alcatel Alenia Space & Telespazio, paragraphs 104-105; and Commission's decision of 4  April  2007  in  case
   COMP/M.3680 Alcatel/Finmeccanica/Alcatel Alenia Space & Telespazio, paragraphs 59-62;

[97]  Replies to question 20 of Questionnaire Q3 - Satellite systems, subsystems and equipment producers.

[98]  Commission's decision of 17 December 2008 in case COMP/M.5168, EADS/SSTL, paragraph 27; Commission's decision  of  4  April  2007  in  case
   COMP/M.4403, Thales/Finmeccanica/Alcatel Alenia Space & Telespazio, paragraphs 104-105; and Commission's decision of 4  April  2007  in  case
   COMP/M.3680 Alcatel/Finmeccanica/Alcatel Alenia Space & Telespazio, paragraphs 59-62.

[99]  Replies to questions 22 and 23 of Questionnaire Q3 - Satellite systems, subsystems and equipment producers

[100]       Commission's decision of 30 March 2011 in case COMP/M.6104 - Safran/SNPE Matériaux énergétiques/Regulus, paragraph 59.

[101]       Commission's decision of 30 March 2011 in case COMP/M.6104 - Safran/SNPE Matériaux énergétiques/Regulus ,  paragraph 68.

[102]       Commission's decision of 30 March 2011 in case COMP/M.6104 - Safran/SNPE Matériaux énergétiques/Regulus, paragrah 90.

[103]       Spacebus is a telecom platform.

[104]       Alphabus is a platform designed for the largest mission that is commercialised by TAS and Airbus expiring on […].

[105]       Eurostar 3000 is a telecom platform.

[106]       MOOG is a US-based company with activities in different countries in Europe.

[107]       Airbus also is active in the production of flow control valves for chemical satellite propulsion subsystems and valve regulators  for
   electric satellite propulsion subsystems […].

[108]       Reply to question 37 of Questionnaire Q3 - Satellite systems, subsystems and equipment producers.

[109]       Replies to questions 25, 26 and 27 of Questionnaire Q1 – Satellite operators.

[110]       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 ("Non-Horizontal Merger Guidelines"), paragraph 31.

[111]       According to paragraph 33 of the Non-Horizontal Merger Guidelines, input foreclosure can  take  several  forms,  including  non-price
   forms, namely if it affects other conditions of supply.

[112]       Reply to question 13 of Questionnaire Q2 - Satellite primes.

[113]       Minutes of a call with a satellite subsystem supplier on 9 October 2014.

[114]       Reply to question 15 of Questionnaire Q3 - Satellite systems, subsystems and equipment producers.

[115]       Minutes of a call with a satellite subsystem supplier on 29 October 2014.

[116]       Minutes of a call with ESA on 20 October 2014.

[117] ESA report "European Space Technology harmonisation technical dossier: electric propulsion technologies", 23 May 2014.

[118]       Airbus' internal document[…].

[119]       Airbus' internal document […].

[120]       […].

[121]       Minutes of a call with a satellite subsystem supplier on 29 October 2014.

[122] ESA report "European Space Technology harmonisation technical dossier: electric propulsion technologies", 23 May 2014.

[123]       Safran’s internal document […].

[124]       This thruster although manufactured by Fackel, was commercialized in Europe  by  Safran  until  2013,  the  same  year  where  Safran
   obtained the flight heritage for its PPS 1350.

[125]       Minutes of a call with a satellite subsystem supplier on 29 October 2014.

[126]       Minutes of call with ESA on 20 and 28 October 2014.

[127]       Minutes of a meeting with a satellite prime contractor on 7 October 2014.

[128]       Minutes of a call with a satellite subsystem supplier on 6 October 2014.

[129]       Minutes of a call with a satellite subsystem supplier on 23 October 2014.

[130]       Satellite operator's rely to Commission's request for information, 4 November 2014.

[131]       Satellite prime contractor's reply to question 16b of the Commission's request for information, 16 October 2014.

[132]       Minutes of a call with a satellite prime contractor on 3 November 2014.

[133]       Minutes of a call with a satellite subsystem supplier on 6 October 2014.

[134]       Satellite prime contractor's reply to question 16b of the Commission's request for information, 16 October 2014

[135]       Minutes of a call with a satellite prime contractor on 14 October 2014.

[136]       Minutes of a call with a satellite prime contractor on 6 November 2014.

[137]       Airbus' internal document […].

[138]       Minutes of a call with a satellite subsystem supplier on 29 October 2014.

[139]       Minutes of a call with a satellite prime contractor on 14 October 2014.

[140]       Minutes of a call with ESA on 28 October 2014.

[141] ESA report "European Space Technology harmonisation technical dossier: electric propulsion technologies", 23 May 2014.

[142]       Minutes of a call with a satellite prime contractor on 3 November 2014.

[143]       Satellite prime contractor's reply to question 11 of the Commission's request for information, 30 October 2014

[144]       Minutes of a call with a satellite prime contractor on 3 November 2014.

[145]       Minutes of a call with ESA on 28 October 2014.

[146]       Minutes of a call with a satellite prime contractor on 6 November 2014.

[147]       Minutes of a call with a satellite subsystem supplier on 9 October 2014.

[148]       Minutes of a call with a satellite prime contractor on 3 November 2014.

[149]       Satellite prime contractor's reply to question 16 of the Commission's request for information, 16 October 2014.

[150]       Minutes of a call with ESA on 28 October 2014.

[151]       Minutes of a call with a satellite prime contractor on 14 October 2014.

[152]       Satellite operators' replies to the Commission request for information, 4 November 2014.

[153]       Airbus' internal document […].

[154]       Airbus' internal document […].

[155]       Minutes of a call with a satellite prime contractor on 3 November 2014.

[156]       Replies to question 36 of Questionnaire Q2 – Satellite primes and question 28 of Q3 - Satellite  systems,  subsystems  and  equipment
   producers.

[157]       Reply to question 36 of Questionnaire Q2 – Satellite primes.

[158]       Minutes of a meeting with a satellite prime contractor on 7 October 2014.

[159]       Minutes of a call with ESA on 20 October 2014.

[160]       Satellite prime contractor's reply to question 22 of the Commission's request for information, 16 October 2014.

[161]       Minutes of a call with ESA on 28 October 2014.

[162]       Replies to question 37 of Questionnaire Q2 – Satellite primes and question 30 of Q3 - Satellite  systems,  subsystems  and  equipment
   producers.

[163]       Satellite prime contractor's reply to question 23 of the Commission's request for information, 16 October 2014.

[164]       Satellite prime contractor's reply to question 23 of the Commission's request for information, 16 October 2014.

[165]       Airbus' internal document […].

[166]       Satellite prime contractor's presentation submitted to the Commission on 7 October 2014.

[167]       According to the paragraph 44 of the Non-Horizontal Merger Guidelines an upstream monopolist that is already able  to  fully  extract
   all available profits in vertically related markets may not have any incentive to foreclose rivals following a vertical merger.

[168]       In the context of the Commission's decision of 4 June 1998 in  case  COMP/M.1185-  Alcatel  /  Thomson  /  CSF-SCS  and  Commission's
   decision of 4 April 2007 in case COMP/M.4403 - Thales / Finmeccanica / Alcatel Alena Space & Telespazio, TAS committed to supply without  any
   restriction travelling wave tubes to SCS (the new satellite company) and to third parties at similar  conditions,  with  respect  to  prices,
   quality, specifications, delivery period and other terms and conditions.

[169] ESA report "European Space Technology harmonisation technical dossier: electric propulsion technologies", 23 May 2014.

[170]       Non-Horizontal Merger Guidelines, paragraph 58.

[171]       Minutes of a call with a satellite subsystem supplier on 9 October 2014.

[172]       Reply to question 21.1 of Questionnaire Q3 - Satellite systems, subsystems and equipment producers.

[173]       Minutes of a call with a satellite subsystem supplier on 9 October 2014.

[174]       Minutes of a call with a satellite subsystem supplier on 29 October 2014.

[175]       Minutes of a call with a satellite subsystem supplier on 6 October 2014.

[176]       Minutes of a call with ESA on 20 October 2014.

[177]       Minutes of a call with a satellite subsystem supplier on 23 October 2014.

[178]       Minutes of a call with a satellite subsystem supplier on 9 October 2014.

[179]       Reply to question 53.1 of Questionnaire Q2 – Satellite primes.

[180]       Minutes of a call with ESA on 28 October 2014.

[181]       Minutes of a call with ESA on 28 October 2014.

[182]       Minutes of a call with a satellite subsystem supplier on 4 November 2014.

[183]       Airbus' internal document […].

[184]       Reply to question 53.1 of Questionnaire Q2 – Satellite primes.

[185]       Minutes of a call with ESA on 28 October 2014.

[186]       Satellite prime contractor's reply to question 36 of the Commission's request for information, 16 October 2014.

[187]       Reply to question 34 of Questionnaire Q3 - Satellite systems, subsystems and equipment producers.

[188]       Reply to question 55 of Questionnaire Q3 - Satellite systems, subsystems and equipment producers.

[189]       Minutes of a call with ESA on 28 October 2014.

[190]       Airbus only manufactures valves for chemical satellite propulsion subsystems, while Safran is only active in  the  electric  thruster
   segment. As a result, there is no vertical relationship regarding Airbus’ satellite valves  business  and  Safran's  activities  in  electric
   propulsion.

[191]       Reply to question 37 of Questionnaire Q3 - Satellite systems, subsystems and equipment producers.

[192]       Parties' reply to question 1 of the Commission's request for information, 9 October 2014.

[193]       Minutes of a call with a satellite prime contractor on 7 October 2014.

[194]       Reply to questions 46 and 47 of Questionnaire Q2 – Satellite primes.

[195]       Minutes of a call with a satellite subsystem supplier on 6 October 2014.

[196]       Minutes of a call with a satellite subsystem supplier on 29 October 2014.

[197]       Minutes of a call with a satellite subsystem supplier on 9 October 2014.

[198]       Commission's decision of 4 April 2007 in case COMP/M.4403 - Thales/Finmeccanica/Alcatel Alenia Space & Telespazio.

[199]       Satellite prime contractor's reply to question 42 of the Commission's request for information, 24 October 2014.

[200]       Ablative materials are much simpler materials than thermostructural composites made of layers of foam, silicon  or  cork  with  hydra
   alumina. The outer surface of the ablative material is heated to a gas which carries away the heat by convection.

[201]       Thermostructural composite materials are made of carbon or ceramic fibres and matrix from carbon  or  ceramic  materials,  which  are
   then processed in various ways.

[202]       Satellite prime contractor's replies to questions 15 and 16 of the Commission's request for information, 30 October 2014.

[203]       Reply to question 54 of Questionnaire Q2 – Satellite primes.

[204]       Satellite prime contractor's reply to question 42 of the Commission's request for information, 16 October 2014.

[205]       Satellite prime contractor's reply to question 47 of the Commission's request for information, 16 October 2014.

[206]       Parties' reply to question 6 of the Commission's request for information, 31 October 2014.

[207]       Satellite prime contractor's presentation submitted to the Commission on 7 October 2014.

[208]       Commission's decision of 11 May 2000 in case COMP/M.1745 - EADS, paragraph 121.

[209]       Commission's decision of 27 January 1998 in case COMP/M.945 - Matra BAe Dynamics SAS / DASA / LFK, paragraphs 19-20.

[210]       Commission's decision of 3 July 1998 in case COMP/M.1198 - BAE / SAAB, paragraph 18.

[211]       See paragraph (75).

[212]       Commission's decision of 21 April 2008 in case COMP/M.5032 - Roxel / Protac; paragraph15; and Commission's decision of 30 March  2011
   in case COMP/M.6104 - Safran / SNPE Materiaux Energetiques / Regulus, paragraph 32.

[213]       Commission's decision of 30 March 2011 in case COMP/M.6104 - Safran / SNPE Materiaux Energetiques / Regulus, paragraph 35.

[214]       Commission's decision of 30 March 2011 in case COMP/M.6104 - Safran / SNPE Materiaux Energetiques / Regulus, paragraph 37.

[215]       Commission's decision of 3 July 1998 in case COMP/M.1198, BAE / SAAB, paragraph 22.

[216]       OJ L 216, 20.8.2009, p. 76–136.

[217]            Commission's decision of 31 July 2007 in case COMP/M.4653 - MBDA/Bayern-Chemie, paragraphs 21 and 23.

[218]            Commission's decision of 30 March 2011 in case COMP/M.6104 - Safran / SNPE Materiaux Energetiques / Regulus, paragraph 42.

[219]            Safran will contribute its 50 % shareholding in Roxel, Herakles's activities in solid propulsion, and PyroAlliance's  activities
   in the tactical missile sector.

[220]       Airbus also holds a 26.8 % non-controlling minority interest in the Finnish provider of defence Patria, which holds 50  %  of  Nammo-
   Raufoss, a company active in SRMs for tactical missiles.

[221]  Commission's decision of 21 April 2008 in case COMP/M.5032- ROXEL / PROTAC.

[222]  Commission's decision of 31 July 2007 in case COMP/M.4653 - MBDA/ BAYERN-CHEMIE.

[223]       Ministries of defence's replies to the Commission's request for information, 4 November 2014.

[224]   Commission's decision of 21 April 2008 in case COMP/M.5032- ROXEL / PROTAC, footnote 5.

[225]       Commission's decision of 21 April 2008 in case COMP/M.5032- ROXEL / PROTAC, paragraph 14 and  Commission's  decision  of  30  October
   2002 in case COMP/M.2938 - SNPE/MBDA/JV, paragraph 10.

[226]       Commission's decision of 30 March 2011 in case COMP/M.6104 - Safran / SNPE Materiaux Energetiques / Regulus, paragraph 28.

[227]       […].

[228]       Ministries of defences' replies to the Commission's request for information, 4 November 2014.

[229]       Commission Notice on remedies acceptable under Council Regulation (EEC) No 139/2004 and under Commission Regulation (EC) No  802/2004
   (OJ C 267, 22.10.2008, p. 1-27).

[230]       Commission Notice on remedies, paragraph 9.

[231]       Commission Notice on remedies, paragraph 12.

[232]       The Utilisation Agreements will be concluded between the Excluded Business and the Joint Venture allowing the  Excluded  Business  to
   use some production means ([…]) to guarantee the production of Hall-effect thrusters. Those production means shall be  operated  […]  without
   involvement on the Joint Venture.

[233]       Replies to question 2 of Questionnaire Q1 - Remedies market test.

[234]       Replies to questions 2 and 6 of Questionnaire Q1 - Remedies market test.

[235]       Replies to question 14 of Questionnaire Q2 - Remedies market test.

[236]       Replies to question 4 of Questionnaire Q1 - Remedies market test.

[237]       Replies to question 14 of Questionnaire Q2 - Remedies market test.

[238]       Replies to question 7 of Questionnaire Q 2- Remedies market test.

[239]       Replies to question 11 of Questionnaire Q2 - Remedies market test.

[240]       Replies to question 10 of Questionnaire Q2 - Remedies market test.

[241]       Replies to Questionnaire 2nd Remedies market test.

[242]       This does not cover information that Airbus has and will have access to through its normal commercial relationship with the  Excluded
   Business.

[243] The Supply Assurance Commitments will also apply to new generation of products to be  developed  by  the  Joint  Venture  derived  from  or
   replacing the Commitments Equipment already supplied by Safran based on  the  need  to  replace  obsolete  components  or  derived  from  the
   introduction of new technologies and/or presenting equivalent or better specifications to the existing products, namely:  (i)  evolutions  of
   SAPT for satellites; (ii) development or carbon/carbon stable structures of any shape for optical or scientific  space  missions;  and  (iii)
   development of thermal protection system made from silicon carbide material for civil re-entry bodies (heat shield)  deriving  from  the  IXV
   programme.

[244]       Replies to question 1 of Questionnaire Q1 – Remedies market test.

[245]       Commission's decision of 2 September 2003 in case COMP/M.3083 - GE/Instrumentarium, and Commission's decision of  30  April  2003  in
   case COMP/M.2861 - Siemens/Draegerwerk.

[246]       Parties' reply to question 4 of the Commission's request for information, 16 October 2014.

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

                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE
                                                              ARTICLE 6(2) DECISION