CELEX: 32020M9316
Language: en
Date: 2020-03-26 00:00:00
Title: Commission Decision of 26/03/2020 declaring a concentration to be compatible with the common market (Case No COMP/M.9316 - PEAB / YIT'S PAVING AND MINERAL AGGREGATES BUSINESS) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                  Brussels, 26.03.2020
                                                                  C(2020) 2002 final
                                                                                    PUBLIC VERSION
                                                                    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                                                                    information omitted has been replaced by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.
                                                                  To the notifying party
Subject:             Case M.9316 – PEAB / YIT’s PAVING AND MINERAL
                     AGGREGATES BUSINESS
                     Commission decision pursuant to Article 6(1)(b) of Council
                      Regulation No 139/20041 and Article 57 of the Agreement on the
                     European Economic Area2
Dear Sir or Madam,
(1)       On 20 February 2020, the Commission received the notification of a proposed
          concentration pursuant to Article 4 of Council Regulation (EC) No 139/20043 by
          which Peab AB (“Peab” or “Notifying Party”) acquires sole control of the mineral
          aggregates business of YIT Oyj (“YIT”) in Denmark, Finland, Norway and
          Sweden (the “Transaction”, as set out in paragraph 5 below). The business
          targeted by the acquisition is referred to as the “Target”, while Peab and the
          Target are collectively referred to as the “Parties”. In a post-Transaction context,
          Peab, all the subsidiaries under its control and the Target may also be collectively
          referred to as the “merged entity”.
1
      OJ L 24, 29.1.2004, p. 1 (the “M erger 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
      OJ L 24, 29.1.2004, p. 1 (the "M erger Regulation").
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak--- 1.       THE PARTIES
(2)      Peab, the acquirer, is a construction and civil engineering company, active in
         businesses such as civil engineering; construction and renovations of buildings
         and infrastructure; paving of roads and other surfaces; as well as the production of
         mineral aggregates, concrete, asphalt and prefabricated concrete elements. Peab is
         registered in Sweden.
(3)      YIT, the seller, is a construction company active in the construction and
         renovation of buildings and infrastructure; the paving of roads and other surfaces;
         and the production of mineral aggregates and asphalt. YIT is registered in
         Finland.
(4)      The Target comprises the following YIT businesses: i) the production and sale of
         mineral aggregates in Finland, Norway and Sweden; ii) the production and sale of
         asphalt in Denmark, Finland, Norway and Sweden; iii) the paving of roads in
         Denmark, Finland, Norway and Sweden; iv) sale of bitumen in Norway, and
         v) operation of transport sea vessels. Bitumen is a marginal activity as the Target
         does not produce bitumen but rather buys them from oil companies for its own
         asphalt production needs. If asphalt production falls below the forecasted
         production, the Target sells the surplus it does not need. Transport is also a
         marginal activity as the Target has only one cargo ship and one bulk carrier ship,
         which carry, inter alia, some mineral aggregates.
2.       THE OPERATION
(5)      The Transaction is accomplished by way of a share acquisition (Finland, Norway
         and Denmark) and partly through a business asset acquisition (Sweden). Peab will
         acquire all shares of the Danish company YIT Danmark A/S, all shares of the
         Norwegian company YIT Norge AS and all shares of the Finnish company YIT
         Teollisuus Oy. In addition, Peab will acquire from the Swedish company YIT
         Sverige AB all assets related to its mineral aggregates, asphalt and paving
         businesses. The concentration will be implemented by the conclusion of an
         agreement.
3.       THE CONCENTRATION
(6)      As a result of the Transaction Peab will acquire sole control within the meaning
         of Article 3(1)(b) the Merger Regulation over the Target.
4.       UNION DIMENSION
(7)      The undertakings concerned have a combined aggregate world-wide turnover of
         more than EUR 5 000 million4 (Peab: EUR 5 471 million;
         Target: EUR 600 million). Each of them has a Union-wide turnover in excess of
         EUR 250 million (Peab: EUR 4 815 million; Target: EUR 457 million), but they
         do not achieve more than two-thirds of their aggregate Union-wide turnover
4
    Turnover calculated in accordance with Article 5 of the M erger Regulation and the Commission Consolidated
    Jurisdictional Notice (OJ C 95, 16.4.2008, p. 1).
                                                       2
 ---pagebreak---      within one and the same Member State. The notified operation therefore has
     Union dimension.
 5.  RELEVANT M ARKETS AND COMPETITIVE ASSESSMENT.
5.1. Introduction and overview of horizontal and vertical links
 (8) Mineral aggregates (“aggregates”) are different types of grained particulate
     minerals used as base materials in the construction of buildings, roads and other
     infrastructure. They are also used as raw material in the production of concrete,
     asphalt and mortar. Bitumen is a viscous liquid or semi-liquid form of petroleum
     found in natural deposits and often obtained as a result of oil refining process. It is
     primarily used as a binding agent in the production of asphalt (road bitumen), in
     the construction industry and in the production of paper (industrial bitumen).
     Asphalt is the building material of roads, bicycle lanes, car parks, sidewalks, sport
     areas and airport runways. It is a mixture of aggregates and bitumen. Ready-mix
     concrete (“RMX”) is a common construction material made of cement,
     aggregates and water. It is manufactured at a concrete plant and transported in a
     semi-wet form in specific mixer truck vehicles to the construction site. Paving,
     also referred to as contract surfacing, is the application of asphalt and other
     materials to surface roads, car parks, footpaths, airport runways and other sites.
     Construction has been defined as the on-site construction or assembly of
     buildings and other structures, including building engineering. The upstream-
     downstream relationships of these various products and services are illustrated in
     figure 1 below.
     Figure 1 Upstream - downstream links between the relevant construction materials and services
 (9) The Transaction involves a number of horizontal overlaps and                           vertical
     relationships. Horizontal overlaps include:
        i.)   the production and sales of aggregates in Finland, Sweden and Norway.
       ii.)   the production and sales of asphalt in Norway and Sweden; and
      iii.)   the supply of road paving services in Norway and Sweden.
                                              3
 ---pagebreak---  (10)    There is no horizontal overlap in asphalt or paving in Finland or Denmark as Peab
         is not active in these activities in these Member States. Neither the Target nor
         Peab is active in aggregates in Denmark. Furthermore, Peab is not active in
         bitumen, while the Target is not active in RMX and construction. As regards the
         latter, YIT’s construction business is not part of the Transaction.
 (11)    Vertical relationships between the Parties include:
            i.)   Aggregates – asphalt relationship in Norway and Sweden
           ii.)   Aggregates – RMX relationship in Finland, Norway and Sweden
          iii.)   Aggregates – construction relationship in Finland, Norway and Sweden
          iv.)    Bitumen – asphalt relationship in Norway
           v.)    Transport – aggregates relationship in Norway.
          vi.)    Asphalt – paving relationship in Norway and Sweden
         vii.)    Paving – construction in Norway and Sweden
 (12)    The aggregates – asphalt relationship stems from the fact that both Parties are
         active in aggregates and asphalt in Norway and Sweden. However, there is no
         such relationship in Finland as Peab is not active in asphalt in Finland. As Peab is
         active in RMX in Finland, Norway and Sweden and the Target is active in
         aggregates in all of these EEA Contracting Parties, there is an aggregates – RMX
         link between the parties in all these EEA Contracting Parties. Likewise, the
         Target’s aggregates activities are in a vertical relationship with Peab’s
         construction activities in Finland, Norway and Sweden. The Target’s minor
         activities in bitumen restricted to Norway, and thus the vertical links to asphalt
         only occurs in Norway. The same applies to transport as the Target operates a
         cargo ship and a bulk carrier ship only in Norway and these carry, inter alia, some
         mineral aggregates. Asphalt is the main input in paving but due to the fact that
         Peab is not active in asphalt and paving in Denmark and Finland, the asphalt-
         paving vertical link only arises in Norway and Sweden. Finally, Peab is active in
         construction, of which road construction is a particular segment, and paving could
         be regarded as an input service to road construction. This vertical link only arises
         in Norway and Sweden as Peab is only active in road construction in these EEA
         Contracting Parties.
 (13)    There are no bitumen-construction links as the Target only sells bitumen to
         asphalt producers. Lastly, there are no RMX-construction vertical links because
         the Target is not active in either activity.
5.2.     Market definition
5.2.1.   Aggregates
5.2.1.1. Product market definition
 (14)    Aggregates are used as (i) base materials in the construction of roads, buildings
         and other infrastructure, and (ii) raw materials to make products such as concrete,
                                                 4
 ---pagebreak---         asphalt and mortar. They may be quarried from land and dredged from the sea
        (together, “primary aggregates”); obtained from waste products of other mining
        or industrial services (“secondary aggregates”); or obtained from recycled sources
        such as demolition sites and construction waste (“recycled aggregates”). The two
        types of aggregates are crushed rock (“crushed rock”) on the one hand and gravel
        and sand (“gravel and sand”) on the other. Finally, “specialist aggregates” such as
        rail ballast, high polished stone value ('PSV') aggregates, and high-purity
        limestone aggregates can also be distinguished from primary and
        secondary/recycled aggregates used in the asphalt, RMX and construction
        businesses.
        (A) The Notifying Party’s view
(15)    The Notifying Party submits that the distinction between primary and
        secondary/recycled aggregates is irrelevant as (i) there is no overlap in secondary
        aggregates, and (ii) secondary/recycled aggregates make up a very small share of
        the overall market (less than 4% in Finland and Sweden and less than 1% in
        Norway).5 Furthermore, in the Notifying Party’s view, secondary aggregates can
        be substituted by primary aggregates for all purposes, whereas the opposite is not
        always true.6 Consequently, the total aggregates market essentially corresponds to
        the primary aggregates market.
(16)    The Notifying Party further submits that, within primary aggregates, no
        distinction should be made between i) gravel and sand on the one hand and
        ii) crushed rock on the other as the two types of aggregates are substitutable for
        most uses.7 Customers buying aggregates for construction purposes usually
        procure all types of aggregates.8 RMX customers traditionally used gravel and
        sand but due to the scarcity of natural gravel, it is increasingly replaced by
        crushed rock.9 Generally crushed rock is used for asphalt production and thus
        asphalt producers seek to buy crushed rock.10 The price differences between the
        two types of aggregates are minimal.11 When aggregates are purchased in public
        procurements, gravel/sand and crushed rock is usually purchased together.12
(17)    As regards the         distinction between specialist and other primary and
        secondary/recycled    aggregates, the Notifying Party submits that Peab only
        produces specialist   aggregates in Sweden, whereas the Target only does so in
        Finland. There is     no vertical link between one party’s specialist aggregates
        production and the    other party’s operations. Absent horizontal and vertical links,
        the Notifying Party   considers that the distinction between specialist aggregates on
5
    Form CO, paragraph 90.
6
    Form CO, paragraph 90.
7
    Form CO, paragraph 94.
8
    Form CO, paragraph 98.
9
    Form CO, paragraph 95.
10
    Form CO, paragraph 95.
11
    Form CO, paragraph 96.
12
    Form CO, paragraph 99.
                                               5
 ---pagebreak---          the one hand and primary and secondary/recycled aggregates on the other can be
         left open.13
(18)     Thus the Notifying Party considers that, for the purposes of the Transaction, the
         relevant product market covers all aggregates.
         (B) Commission precedents
(19)     In some past decisions the Commission considered aggregates as a single,
         separate product market without further distinctions.14
(20)     In other cases, the Commission has considered, but ultimately left open, a
         segmentation between (i) primary aggregates (crushed rock, gravel and sand) and
         (ii) secondary / recycled aggregates (such as colliery and china clay waste, slate,
         power station ash, slags and demolition/construction waste).15
(21)     Within the primary aggregates category, the Commission has also considered a
         further distinction between (i) gravel and sand and (ii) crushed rock, but
         ultimately left the definition open.16
(22)     Additionally, the Commission has also carried out a separate assessment of the
         impact of a merger as regards specialist aggregates despite ultimately leaving
         open the market definition.17
         (C) The Commission’s assessment
         (C.i) Primary vs secondary/recycled aggregates
(23)     The market investigation has not produced conclusive results on the distinction
         between primary and secondary/recycled aggregates. Some respondents consider
         that slag is interchangeable with primary aggregates18 and, in a more general
         fashion, there is a degree of substitutability between primary and
         secondary/recycled aggregates.19 Others exclude the possibility of switching
         between these types of aggregates.20
(24)     However, the Parties’ presence in secondary/recycled aggregates is minimal
         without there being any horizontal and vertical links between their respective
         operations.21 Considering these aggregates separately would therefore not lead to
13
    Form CO, paragraph 100.
14
    Cases M .2317 Lafarge/Blue Circle (II); M .1779 - Anglo American/Tarmac; M .3415 – CRH/Semapa/Secil JV,
    recital 10; M .3141 – Cementbouw/Enci/JV, recital 11.
15
    Case M .7252 – Holcim/Lafarge, paragraphs 331-333; Case M .7054 – Cemex/Holcim Assets, paragraph 302; Case
    M .1779 – Anglo American/Tarmac, paragraph 20.
16
    Case M .7252 – Holcim/Lafarge, paragraphs 331-333; Case M .7054 – Cemex/Holcim Assets, paragraph 302; Case
    M .5803 - Eurovia/Tarmac, 10 June 2010, recital 10.
17
    Case COM P/M .7252 – Holcim/Lafarge, paragraph 334.
18
    SSAB’s response to Q1 – Questionnaire to customers – aggregates, Finland, question 11.
19
    Q1 – Questionnaire to customers – aggregates, Finland, question 11; Q2 – Questionnaire to competitors –
    aggregates, Finland, question 15; Q10 – questionnaire to customers – aggregates, Sweden, question 11.
20
    Q1 – Questionnaire to customers – aggregates, Finland, question 11; Q2 – Questionnaire to competitors –
    aggregates, Finland, question 15; Q10 – questionnaire to customers – aggregates, Sweden, question 11.
21
    Form CO, paragraph 90.
                                                         6
 ---pagebreak---          competition concerns. Furthermore, the responses to the market investigation
         suggest that secondary and recycled aggregates can always be substituted with
         primary aggregates and doubts on the substitutability arise in the opposite
         direction.22 This would imply that there can be no market power separately in
         secondary/recycled aggregates because producers of primary aggregates exercise
         a constraint on producers of secondary/recycled aggregates. Thus, the separate
         investigation of secondary/recycled aggregates is not warranted.
(25)     The Commission also notes that secondary/recycled aggregates are a very small
         part of the overall aggregates market. In line with the Notifying Party’s view,
         public statistics indicate that the share of secondary/recycled aggregates is less
         than 4% of total aggregates production in Sweden and Finland and less than 1%
         of total aggregates production in Norway.23 Thus the competitive assessment of
         an overall aggregates market and a separate primary aggregates market would
         essentially be the same.
(26)     Consequently, for the purpose of the assessment of the Transaction, the
         Commission will not distinguish primary and secondary/recycled aggregates.
         (C.ii) Specialist aggregates vs. primary and secondary/recycled aggregates
(27)     Concerning the possible segmentation between specialist aggregates, on one side,
         and primary/secondary/recycled aggregates on the other, similar considerations
         apply as in the case of the potential primary aggregates – secondary/recycled
         aggregates distinction. First, the Parties’ presence is minimal in specialist
         aggregates without there being any horizontal and vertical links between their
         respective operations.24 Thus considering these aggregates separately would not
         lead to competition concerns. Second, the specialist aggregates segment is a niche
         market relative to the primary and secondary/recycled aggregates segment,
         constituting less than 0.5-5% of the two segments combined.25 Consequently, the
         competitive assessment of an overall aggregates market and a separate
         primary/secondary/recycled aggregates market would substantially be the same.
(28)     Consequently, for the purpose of the assessment of the Transaction, the
         Commission will not distinguish specialist aggregates and primary,
         secondary/recycled aggregates.
         (C.iii) Crushed rock vs. gravel and sand
(29)     The market investigation indicated that crushed rock and gravel/sand can be used
         interchangeably in construction.26
(30)     RMX producers indicated that they use both types of aggregates
         interchangeably27 or use gravel/sand only in quality products.28 However, if
22
    Q1 – Questionnaire to customers – aggregates, Finland, question 11; Q2 – Questionnaire to competitors –
    aggregates, Finland, question 15; Q10 – questionnaire to customers – aggregates, Sweden, question 11.
23
    See http://www.uepg.eu/statistics/estimates-of-production-data/data-2017.
24
    Form CO, paragraph 90.
25
    Notofying Party’s Response to the Commission’s RFI 5, questions 1-2. Data for Finland and Sweden.
26
    Q1 – Questionnaire to customers – aggregates, Finland, question 12. M inutes of phone call with [a competitor] on
    10 M arch 2020.
                                                         7
 ---pagebreak---          gravel and sand is not available nearby, it will be substituted with crushed rock.29
         Thus, while only gravel and sand has been used in RMX production, it is
         increasingly replaced by crushed rock. For example, according to a report by the
         Swedish Geological Survey, 2016 was the first year when rock material in
         Sweden surpassed gravel and sand in the manufacture of concrete. Out of the
         aggregates used for manufacture of concrete, 51 % consisted of rock material.30
         These facts suggest a significant degree of substitutability between the two types
         of aggregates for the purposes of RMX production.
(31)     The market investigation also indicated that mainly crushed rock is used for
         asphalt and that gravel and sand is not suitable for this purpose.31
(32)     Further, construction represents around 80 % of all aggregates use, with asphalt
         and RMX representing 11% and 5 % of total use respectively (disregarding
         specialist aggregates).32
(33)     Based on the above the Commission considers that gravel and sand can be
         substituted with crushed rock, even if, in the case of RMX, the substitution is not
         perfect. However, despite the lack of full substitutability in the case of RMX, it
         appears difficult to raise the price of gravel and sand as construction customers
         would readily switch to crushed rock, making such a small but not insignificant
         price increase unprofitable. Since the market investigation has not yielded any
         indications that arbitrage could be prevented by aggregate producers, the
         Commission does not consider that selectively raising the price for RMX
         customers (i.e. price discrimination) is feasible. On the contrary, there are
         indications that quarries do not even control the final destination of their
         deliveries,33 which makes it unlikely that they would be able to control secondary
         sales. Thus, despite the lack of perfect substitutability, crushed rock can be
         considered as a demand-side constraint that prevents price increases in gravel and
         sand.
(34)     As regards substitution of crushed rock with gravel and sand, the Commission
         considers that such substitution is possible in construction and in RMX
         production but not in asphalt production. However, for the same reasons as
         discussed above in relation to substitution from gravel and sand to crushed rock,
         increasing the price of crushed rock appears difficult because the switching of
         construction customers would defeat such a move and selectively raising the price
         for asphalt customers does not appear feasible due to the inability of the
         aggregates suppliers to control arbitrage. Thus, despite the lack of perfect
         substitutability, gravel and sand can be considered as a demand-side constraint
         that prevents price increases in crushed rock.
27
    Customer response to Q1 – Questionnaire to customers – aggregates, Finland, question 12.
28
    Customer reply to Q1 – Questionnaire to customers – aggregates, Finland, question 12.
29
    Customer reply to Q1 – Questionnaire to customers – aggregates, Finland, question 12.
30
    See the Geological Survey of Sweden, Grus, sand och krossberg 2016, periodiska publikationer 2017:2, p. 22.
31
    Q1 – Questionnaire to customers – aggregates, Finland, question 12. M inutes of phone call with a competitor on
    10 M arch 2020.
32
    M inutes of phone call with a competitor on 10 M arch 2020.
33
    Form CO, paragraph 817.
                                                          8
 ---pagebreak---  (35)    On this basis, the Commission considers that the degree of substitution is at such
         levels that an overall aggregates market is probable. Consistent with this, the
         Swedish Competition Authority has concluded (and was upheld by the Swedish
         Market Court on this point) that sand and gravel belong to the same product
         market with crushed rock as they are substitutable with each other to more than
         only a limited extent.34
 (36)    Thus, while the Commission also received unsubstantiated responses on this
         issue, the market investigation overall suggests that crushed rock and gravel and
         sand belong to one market. In any event, the question whether separate markets
         should be defined for crushed rock, on the one hand, and gravel and sand on the
         other, can be left open as this would not change the competitive assessment in this
         case.
 (37)    Consequently, for the purpose of the assessment of the Transaction, the
         Commission will take a single aggregates market as a basis without distinguishing
         between (i) gravel and sand and ii) crushed rock. However, it ultimately leaves
         this question open as it would not change the competitive assessment.
5.2.1.2. Geographic market definition
         (A) The Notifying Party’s view
 (38)    The Notifying Party submits that the definition of a relevant geographic market
         for aggregates is dependent on the fact that aggregates are heavy and voluminous
         products with significant transport costs. Around half of the price of aggregates is
         made up of transport costs.35 Consequently, the size of the geographic market
         depends on the distance to which it is economically reasonable to transport
         aggregates.
 (39)    In the Notifying Party’s view, this distance varies to a certain extent by country
         and by region, as it depends on the cost of producing the aggregates (if aggregates
         can be produced at a lower cost, they can be sold competitively further away from
         the production site than aggregates produced at a higher cost), and the cost of
         transport.36 The cost of producing aggregates in turn is tied to a number of
         variable components (e.g. whether the quarry is on an owned or leased property,
         the amount of landscaping works necessary for production), while the cost of
         transport depends on the location of the quarry and the road network available.37
         Further, in sparsely populated areas aggregates need to be transported to longer
         distances despite the higher costs as the place of use are often further away from
         the source of aggregates than in more densely populated areas. Thus quarries tend
         to compete in somewhat larger areas in sparsely populated areas than in
         metropolitan areas.38
 34
     Decision by the Swedish Competition Authority, Dnr 211/97, Skanska Sydöst / Bjursells i Jönköping AB och
     Bjursells Kran AB, 18 June 1997; M D 2011:11, Swerock AB mot Konkurrensverket, 12 April 2001, p. 15.
 35
     Form CO, paragraph 103.
 36
     Form CO, paragraph 104.
 37
     Form CO, paragraph 104.
 38
     Form CO, paragraph 110.
                                                        9
 ---pagebreak--- (40)     Based on the share of the Parties’ aggregates sales to different distances the
         Notifying Party considers that the most appropriate geographic market is a 50 km
         radius around the quarry and 80 km radius is the second best alternative.39 For
         example, based on internal estimates, in Sweden [50-60]% of Peab’s aggregates
         are used within a radius of 25 km of the quarry, [90-100]% is used within a radius
         50 km and [90-100]% were used within 80 km from the quarry. The
         corresponding figures of the Target are as follows: [20-30]% of aggregates are
         used within a radius of 25 km, [70-80] % of aggregates are used within a radius of
         50 km and [90-100]% are used within a radius of 80 km.40
(41)     Further, while in the countries affected by the Transaction aggregates are
         predominantly transported by road, in certain areas, most notably in northern
         Norway, they are also transported by boat. In the case of boat transport,
         aggregates can be transported to distances of 150-250 km.41
         (B) Commission precedents
(42)     In past decisions, the Commission has considered the aggregates market to be
         local/regional in scope42 and has retained a radius of 50 to 80 km depending on
         the particularities of the areas concerned.43 This approach was based on the fact
         that aggregates are heavy and voluminous products with significant transport
         costs.
(43)     Exceptionally, a national market was also defined but this concerned the
         Netherlands, which has a relatively small size, very easy geography as well as a
         dense and good quality road network.44
(44)     Most recently, in Holcim /Lafarge, the Commission retained a 50-80 km radius
         around the production site as the relevant geographic market, in line with the
         standard practice.45
         (C) The Commission’s assessment
(45)     It is clear on the basis of the precedents that the appropriate market size depends
         on how far it is reasonable to transport aggregates, which is confirmed by the fact
         that customers that the maximum distance from which customers source
         aggregates is 100 km.46
(46)     However, the maximum distance could be an exceptional outlier that does not
         reflect real competitive conditions. If the vast majority of aggregates are sold
         within a shorter radius, competition between suppliers mostly takes place within
39
    Form CO, paragraph 120.
40
    Form CO, paragraph 108.
41
    Form CO, paragraph 107.
42
    Case M .4298 – Aggregate Industries/Foster Yeoman, paragraph 13.
43
    Case M .3713 - Holcim/Aggregate Industries, paragraph 8; M .2317 – Lafarge/Blue Circle (II), paragraph 10;
    COM P/M .1827 Hanson/Pioneer.
44
    COM P/M .3141 Cementbouw/ENCI/JV, paragraph 12.
45
    M .7252 Holcim / Lafarge, paragraphs 343 and 340-342.
46
    Q1 – Questionnaire to customers – aggregates, Finland, question 14; Q2 – Questionnaire to competitors –
    aggregates, Finland, question 19; Q10 – questionnaire to customers – aggregates, Sweden, question 14.
                                                         10
 ---pagebreak---           the smaller area determined by that radius and a supplier that is located from
          100 km from the customer does not exercise competitive constraints on suppliers
          closer to the customer in a meaningful way. In this regard, the market
          investigation indicates that the vast majority of aggregates are sold within a radius
          of 50 km.47
 (47)     The Commission also notes that, in line with the Notifying Party’s view, the
          investigation confirmed that in northern Norway aggregates are also transported
          by boat.48 For example respondents included a shipping company that operates in
          Northern Norway and transports aggregates for both Parties.49 The Target also
          operates boats that transport, inter alia, aggregates.50 This is in line with the fact
          that northern Norway has a long and fractured coastline, that the population
          centres are located along the coast and that all inland destinations are relatively
          close to the coast. In the case of boat transport, aggregates can be transported to
          longer distances than by road, approximately 200 km.51
 (48)     Thus, in line with the precedents, the Commission considers that the appropriate
          geographic market is in general a radius of 50 kms in Finland, Norway and
          Sweden. However, to the extent necessary, it will also take into account regional
          variations in the competitive assessment. The most important regional variation is
          that in northern Norway boat transport is also used and this increases the area
          within which aggregates suppliers compete.
5.2.2.    Bitumen
5.2.2.1. Product market definition
 (49)     Bitumen is a viscous liquid or semi-liquid form of petroleum found in natural
          deposits and often obtained as a result of oil refining process. It is primarily used
          as a binding agent in the production of asphalt (road bitumen), in the construction
          industry and in the production of paper (industrial bitumen).
          (A) The Notifying Party’s view
 (50)     The Notifying Party considers bitumen to be one product market without further
          segmentation. However, it submits that the exact product market definition can be
          left open for the purpose of this case52 .
          (B) Commission precedents
 (51)     In previous decisions, the Commission has considered that bitumen should be
          distinguished from other refined oil products, based on its characteristics and
 47
     Q10 – questionnaire to customers – aggregates, Sweden, question 13, Q2 – Questionnaire to competitors –
     aggregates, Finland, question 17; Q1 – Questionnaire to customers – aggregates, Finland, question 13.
 48
     M inutes of phone call with a competitor on 10 M arch 2020.
 49
     Customer response to Q9 – Questionnaire to customers – aggregates, Norway, question 1.
 50
     Form CO, paragraph 56.
 51
     M inutes of phone call with a competitor on 10 M arch 2020.
 52
     Form CO, paragraph 251.
                                                          11
 ---pagebreak---           specific use53 . In addition, the Commission has considered but ultimately left
          open, a further segmentation according to the type of bitumen used for a given
          end-application, such as road/standard bitumen, modified bitumen, bitumen
          emulsions and industrial bitumen.54
          (C) The Commission’s assessment
 (52)     In line with previous decisions, the Commission considers a distinct market for
          the supply of bitumen, with a potential further segmentation, depending on the
          type of bitumen.55 In this case, the Target processes the purchased bitumen
          predominantly for its own asphalt production in Norway,56 and sells any surplus
          on an ad-hoc basis to third parties.57 Because of the Target’s minor activity, the
          competitive assessment would not change under any plausible product market
          definition. For the purpose of this case, the exact product market definition can
          therefore be left open, as regardless of the exact product market definition for
          bitumen, no competition concerns would arise as a result of the transaction.
5.2.2.2. Geographic market definition
          (A) The Notifying Party’s view
 (53)     The Notifying Party submits that, in line with precedents, the market for bitumen
          should be national. However, the Notifying Party also notes that the exact
          geographic market definition can be left open as the Transaction will not result in
          any competition issues due to the vertical relationship between bitumen and
          asphalt.58
          (B) Commission precedents
 (54)     In its past practice, the Commission has assessed national markets for the supply
          of bitumen and considered whether the geographical scope of bitumen supply
          could be narrower than national, without ever concluding on the market
          definition.59 In addition, the Commission has considered whether the geographic
          scope of bitumen markets could be radius-based, pointing to radii of 200-300 km
          and 400-500 km.60
 53
     M .6151 – Petrochina/Ineos/JV, paragraph 28; M .5005 – Galp Energia/ExxonM obil Iberia, paragraph 19; M .3543
     – PKN Orlen/Unipetrol, paragraph 20; M .3516 – Repsol Ypf/Shell Portugal, paragraph 13; M .1464 –
     Total/Petrofina, paragraph 18.
 54
     M .7849 – M OL Hungarian Oil And Gas/ENI Hungaria/ENI Slovenija, paragraph 15; M .5781 – Total Holdings
     Europe SAS/ ERG Spa/ JV, paragraph 24.
 55
     M .7849 – MOL Hungarian Oil And Gas/ENI Hungaria/ENI Slovenija, paragraph 15; M .5781 – Total Holdings
     Europe SAS/ ERG Spa/ JV, paragraph 24.
 56
     Form CO, paragraph 263.
 57
     Form CO, paragraph 271.
 58
     Form CO, paragraph 252.
 59
     M .7849 – MOL Hungarian Oil And Gas/ENI Hungaria/ENI Slovenija, paragraph 38; M .5781 – Total Holdings
     Europe SAS/ERG Spa/JV, paragraphs 40-43; M .5005 – Galp Energia/ExxonMobil Iberia, paragraphs 36-38. See
     also M .3516 – Repsol Ypf/Shell Portugal, paragraphs 13-14; M .1464 – Total/Petrofina, paragraph 19.
 60
     M .7849 – MOL Hungarian Oil And Gas/ENI Hungaria/ENI Slovenija; M .6151 – Petrochina/Ineos/JV,
     paragraph 28; M .5781 – Total Holdings Europe Sas/ERG Spa/JV, paragraphs 40-43; M .3516 – Repsol Ypf/Shell
     Portugal, paragraphs 13-14.
                                                          12
 ---pagebreak---          (C) The Commission’s assessment
 (55)    In the present case, the Target sells bitumen in Norway over a distance of up to
         600 km.61 The market investigation has not provided any indications that would
         speak against defining bitumen markets in this case in line with the Commission's
         findings in previous cases. In any event, for the purpose of this decision the exact
         scope of the geographic market can be left open, as the Transaction would not
         give rise to any competition concerns in this regard, irrespective of the exact
         market definition.
5.2.3.   Asphalt
5.2.3.1. Product market definition
 (56)    Asphalt is used for surfacing roads, car parks, footpath pavements, airport
         runways and other sites. As asphalt is produced by heating but it may also be
         produced at lower temperatures as so-called half-warm mix or cold mix asphalt,
         which is generally done by heating the asphalt mix with steam or adding
         chemicals to the asphalt mix. Regardless of the production temperature, all
         asphalt is used for generally similar paving purposes. Warm asphalt mix is more
         durable than half-warm mix, which is in turn more durable than cold mix. The
         vast majority (around 90%) of all asphalt produced and used in paving in the
         countries affected by the Transaction is warm mix.62 Asphalt is 100% recyclable
         and because of the increased focus on the circular economy, the share of recycled
         asphalt has been increasing over the recent years.63 Asphalt can be produced in a
         fixed plant or in a mobile plant, which can change location several times a year.64
         Most suppliers are vertically integrated with in-house paving operations,65 and
         asphalt is used exclusively for paving.66
         (A) The Notifying Party’s view
 (57)    The Notifying Party submits that, with a single exception, all of the Parties’ and
         their competitors’ asphalt plants produce warm asphalt in all of the horizontally
         and vertically affected markets and therefore the distinction between warm, half-
         warm and cold mix asphalt is irrelevant.67
 (58)    The Notifying Party further submits that mobile plants are usually sent to a
         particular location for specific paving projects, for which competition takes place
         before the plant is moved.68 As mobile plants produce asphalt almost exclusively
         for captive use, they do not in actuality compete with fixed plants in asphalt
         production.69
 61
     Request for Information 5, question 3.
 62
     Form CO, paragraph 297.
 63
     Form CO, paragraph 296/
 64
     Q6 – questionnaire to competitors – asphalt, Sweden, question 14.
 65
     Notifying Party’s response to the Commission’s Request for Information RFI 2
 66
     Form CO, paragraph 372.
 67
     Form CO, paragraph 299.
 68
     Form CO, paragraph 303.
 69
     Form CO, paragraph 306.
                                                         13
 ---pagebreak--- (59)    As regards the link between asphalt and paving, the Notifying Party considers that
        paving has indeed a strong vertical link to the upstream market of production and
        sale of asphalt. In the countries affected by the Transaction, there is a high degree
        of vertical integration between the production of asphalt and paving. In addition
        to the Parties, many notable players in Norway and Sweden such as NCC,
        Skanska, Svevia, Sandahls and Veidekke operate on both levels and source most
        or at least a significant amount of their asphalt internally.70 Nonetheless, the
        Parties and other notable asphalt producers also sell significant amounts of
        asphalt to external customers such as independent, including some independent
        paving contractors. As such independent paving operators exist and asphalt is sold
        to them regularly, the Notifying Party considers that asphalt and paving form two
        separate markets.71
        (B) Commission precedents
(60)    In past decisions, the Commission has consistently found that the production and
        sale of asphalt constitutes a distinct product market without further subdivision
        into warm, half-warm and cold mix asphalt.72 Likewise, past decisions have
        consistently found that asphalt constitutes a distinct product market, separate from
        paving.73
(61)    The Commission has not previously assessed the use of mobile plants, since the
        Commission’s previous cases only related to Member States in which mobile
        plants are not used.
        (C) The Commission’s assessment
(62)    Given that the asphalt produced in all but one of the horizontally and vertically
        affected markets is warm asphalt, there is no need to distinguish between warm,
        half-warm and cold mix in this case. In other words asphalt in this case means
        warm asphalt and is the sole focus of the assessment.
(63)    As regards the question whether asphalt and paving should constitute one
        combined market or, on the contrary, asphalt and paving should form separate
        markets, the market investigation confirmed that there are a number of
        independent paving operators, mostly small firms in big metropolitan areas.74 The
        majority of respondents also submitted that although the majority of the asphalt is
        produced for captive use, some asphalt is sold on the external market.75
        Furthermore, detailed catchment area data reveals that significant amounts of
70
    Form CO, paragraph 309.
71
    Form CO, paragraph 310.
72
    Case COM P/M .7252 Holcim/Lafarge, paragraph 383; Case M .5803, Eurovia/Tarmac; Case M .5158 Strabag /
    Kirchhoff.
73
    Case COM P/M .7252 – Holcim/Lafarge, paragraph 383; Case M .5803, Eurovia/Tarmac; Case M .5158 Strabag /
    Kirchhoff.
74
    Q6 – questionnaire to competitors – asphalt, Sweden, question 19. Q4 – questionnaire to competitors – asphalt,
    Norway, question 19.
75
    Q6 – questionnaire to competitors – asphalt, Sweden, question 20. Q4 – questionnaire to competitors – asphalt,
    Norway, question 20.
                                                      14
 ---pagebreak---           asphalt are sold externally.76 As asphalt is sold regularly between buyers and
          sellers, there is demand for asphalt separate from demand for paving works that
          include captive asphalt production. Separate demand means that asphalt is a
          product separate from paving and thus forms a product market distinct from the
          market for paving.77
 (64)     The Notifying Party also made the argument that mobile plants should be
          excluded from the product market definition. In this regard, the market
          investigation revealed that mobile plants are not always an alternative to fixed
          plants. Whether or not they are an alternative to customers depends on the actual
          location even within a country. Therefore the Commission will assess this
          question in the geographic market definition in Section 5.2.3.2. The Commission
          notes, however, that the Notifying Party’s argument that asphalt production in
          mobile plants is purely captive does not justify excluding asphalt produced in
          mobile plants from the product market. Captive production by a mobile plant is
          not different from captive production by a fixed plant and the Notifying Party
          does not argue that captive production should be excluded per se. On the contrary,
          the Notifying Party considers that market shares based on the combined merchant
          and captive production are a better indicator of market power than market shares
          based only on merchant sales, which is not consistent with the view that
          production by mobile plants should be excluded from the market.78
 (65)     On the basis of the above, for the purposes of the present decision, the
          Commission considers that asphalt is a market separate from paving. The
          Commission does not distinguish between warm, half-warm and cold mix asphalt
          in this case as practically the only type of asphalt that matters for the competitive
          assessment is warm asphalt. The issue of mobile plants is taken into account in
          the geographic market definition as they can only be a viable customer choice in
          certain areas.
5.2.3.2. Geographic market definition
          (A) The Notifying Party’s view
 (66)     The Notifying Party submits that asphalt is produced by heating and as a result it
          is perishable because it is best laid before it cools down and hardens. In practice
          this implies that it has to be laid within 2-3 hours of production, which limits the
          transport time to 1–2 hours.79
 (67)     Consequently, the Notifying Party considers that, in line with precedents, the
          relevant geographic market is local in scope and correspond to the catchment area
          of each asphalt plant.80
 76
     Notifying Party’s response to the Commission’s Request for Information RFI 2.
 77
     The question whether an integrated asphalt and paving supplier’s captive asphalt production constrains indirectly
     another supplier’s merchant sales indirectly will be discussed in the competitive assessment
     (Section 5.3.4.1.(A.iii.a)).
 78
     As indicated in footnote 74, the role of captive sales will be discussed in the competitive assessment.
 79
     Form CO, paragraph 297.
 80
     Form CO, paragraph 313.
                                                            15
 ---pagebreak--- (68)    Just like in the case of aggregates, the Notifying Party is of the view that the size
        of the geographic market varies to a certain extent by country and by region.81 In
        general, transport distances tend to be shorter in urban areas and longer in
        sparsely populated areas.82 In suitable regions, namely in Northern Norway,
        asphalt can also be transported by boat occasionally. Boats can transport larger
        amounts than trucks because the increased volume makes it easier to keep the
        asphalt warm, which in turn reduces its perishability. Thus, asphalt can be
        transported further by boat than by truck.83
(69)    Based on the share of the Parties’ asphalt sales to different distances the Notifying
        Party considers that the most appropriate geographic market is a 50 km radius
        around the asphalt plants but notes that a wider radius could be more appropriate
        in sparsely populated areas.84 For example, based on internal estimates, in
        Sweden [60-70]% of asphalt produced by Peab is used within a radius of 25 km
        of the asphalt plant, [80-90]% is used within a radius 50 km and [90-100]% is
        used within 80 km from the plant. The corresponding figures of the Target are as
        follows: [20-30]% of the asphalt it produced is used within a radius of 25 km,
        [70-80] % of its production is used within a radius of 50 km and [90-100]% is
        used within a radius of 80 km.85
(70)    The Notifying Party also suggests that radiuses of 40 km and 80 km can also be
        used as an alternative but considers that radiuses smaller or larger than these are
        not plausible. 86 Further, in the case of boat transport in Northern Norway, the
        transport distance can be 250 km.87
        (B) Commission precedents
(71)    In previous decisions, the radius of catchment areas that comprised the relevant
        geographic market varied between 25 km and 100 km depending on the
        circumstances.88 In line with the Notifying Party’s view, these precedents confirm
        that asphalt is a perishable product which needs to be transported in special
        heated containers to prevent it from hardening before it can be laid.
(72)    In the most recent Holcim/Lafarge case that concerned the United Kingdom, the
        Commission retained a radius of 40 km around the asphalt facility.89
        (C) The Commission’s assessment
(73)    In line with the precedents and the Notifying Parties’ view, the market
        investigation confirmed that asphalt is perishable and needs to be laid within a
81
    Form CO, paragraph 317.
82
    Form CO, paragraph 317.
83
    Form CO, paragraph 316.
84
    Form CO, paragraph 321.
85
    Form CO, paragraph 319.
86
    Form CO, paragraph 321.
87
    Form CO, paragraph 316.
88
    M .3754 Strabag/Dywidag; M .1827 Hanson/Pioneer; M .1779 Anglo American/Tarmac; M .678 M inorco/Tilcon.
89
    Case COM P/M .7252 – Holcim/Lafarge, paragraph 388.
                                                     16
 ---pagebreak---          few hours of production.90 For example, a competitor observed that “The driving
         distance combined with the driving time determines the maximum distance to
         transport the asphalt from production facility’s to paving site. Mixed asphalt has
         a minimum temperature that defines if you can pave the material or not.”91
(74)    Given the perishable nature of asphalt, the definition of the relevant geographic
        market revolves around the appropriate radius of the catchment area within which
        most of the competition takes place. In this regard customers indicated that they
        source close to 100 % of their asphalt within a radius of 50 km from their paving
        projects,92 while 5 out of 7 competitors submitted that they sell 85%-100% of
         their asphalt within this radius.93 Thus, most of the competitive interactions
         between competitors with fixed plants in Norway and Sweden take place within a
         radius of 50 km from the asphalt plant.
(75)    However, the Commission notes that two competitors indicated that they sell 25%
        and 30 % of their asphalt outside the radius of 50 km but within a radius of
        80 km.94 Furthermore, another of the Parties’ competitors submitted that there are
         few asphalt plants in the north of Norway and thus distances can be larger.95
         These facts suggest that in sparsely populated rural areas the appropriate size of
         the geographic market may be larger than a radius of 50km around the plant and
         rather correspond to a radius of 80 km around the plant.
(76)     The market investigation also confirmed that asphalt is transported by boat in
         northern Norway and therefore in that region the transport distances and the
         geographic market can be larger.96 Boats can transport larger amounts than trucks
         and the increased volume allows longer travel distances97 because it is easier to
         keep larger volumes warm.
(77)    Mobile asphalt plants are also relevant in the systematic identification of
        competitive constraints the Parties face. In this regard the market investigation
        indicates that, unless there is no alternative, municipalities prefer fixed plants
        over mobile plants due to environmental concerns. The use of mobile plants leads
        to noise, dust and other types of pollution. Furthermore, fixed plants can use a
        much higher share of recycled asphalt than mobile plants. Consequently, in
        densely populated areas, where there are enough fixed plants and where issues
        such as dust and noise weigh more, mobile plants are not used. By contrast,
        mobile plants are used in less densely populated areas since in those areas
90
    Q6 – Questionnaire to competitors – asphalt, Sweden, question 22; Q4 – Questionnaire to competitors – asphalt,
    Norway, question 22; Q5 – Questionnaire to customers – asphalt, Sweden, question 11 ; Q3 – Questionnaire to
    customers – asphalt, Norway, question 11.
91
    Competitor response to Q6 – Questionnaire to competitors – asphalt, Sweden, question 22.
92
    Q5 – Questionnaire to customers – asphalt, Sweden, question 10; Q3 – Questionnaire to customers – asphalt,
    Norway, question 10.
93
    Q6 – Questionnaire to competitors – asphalt, Sweden, question 21 ; Q4 – Questionnaire to competitors – asphalt,
    Norway, question 21.
94
    Q6 – Questionnaire to competitors – asphalt, Sweden, question 21 ; Q4 – Questionnaire to competitors – asphalt,
    Norway, question 21.
95
    Competitor response to Q4 – Questionnaire to competitors – asphalt, Norway, question 22.
96
    Q3 – Questionnaire to customers – asphalt, Norway, question 10.
97
    See the study “Boat transport and quality of hot mix asphalt” by the Norwegian Public Roads Administration,
    page 9, table 4.
                                                       17
 ---pagebreak---           environmental concerns weigh less and there is not always a fixed plant nearby.
          More specifically, responses to the market investigation indicated that mobile
          plants are considered as an alternative in northern Sweden and in the whole of
          Norway with the exception of metropolitan areas such as, for example, Oslo,
          Bergen, Stavanger and Trondheim. Within the regions where mobile plants are an
          alternative, they can be moved to any area within 10 to 30 days.98
 (78)     Although mobile plants are mainly used captively to support the asphalt
          supplier’s paving operations, there is nothing to prevent an owner of a mobile
          asphalt plant to deploy such a plant for merchant asphalt sales. Thus, if there is an
          opportunity to sell asphalt externally, mobile plants can represent additional
          constraints in these regions. Further, even when they are used captively, they may
          constrain other suppliers’ merchant sales indirectly.99
 (79)     Based on the above, the Commission will retain geographic markets with a radius
          of 50 km but will take into account regional differences in the competitive
          assessment as appropriate. These regional differences are as follows:
              i.)      in sparsely populated areas a radius of 80 km may be more appropriate;
             ii.)      in northern Norway boat transport is also an alternative that can result in
                       a larger geographic market as boat transport allows larger volumes,
                       which reduces perishability; and
            iii.)      in northern Sweden and in Norway outside the metropolitan areas,
                       mobile asphalt plants can also be competitive constraints.
5.2.4.    Paving (contract surfacing)
5.2.4.1. Product market definition
          (A) The Notifying Party’s view
 (80)     The Notifying Party submits that, in line with the Commission’s previous
          decisions, paving of roads / contract surfacing constitutes one product market.100
          (B) Commission precedents
 (81)     In previous decisions, the Commission has considered contract surfacing to be a
          relevant product market in itself, distinct from the materials used (namely
          aggregates and asphalt).101
          (C) The Commission’s assessment
 (82)     As discussed in Section 5.2.3.1., paving is distinct from asphalt. Within paving,
          the market investigation indicated that standards and working methods differ on
          the basis of the surface to be paved (e.g. highways, roads, streets, pavements,
          parking lots, airport runways etc.) such that paving works paving works to be
          performed for one type of surface are not suitable to execute paving works for
 98
     M inutes of a call with a competitor, 10 march 2020; M inutes of a call with a competitor, 10 march 2020.
 99
     As indicated in footnote 74, the role of captive sales will be discussed in the competitive assessment.
 100
     Form CO, paragraph 534.
 101
     Case M .5158 Strabag/Kirchhoff, recital 20; Case M .7252 – Holcim/Lafarge, paragraph 401.
                                                            18
 ---pagebreak---          another type of surface.102 However, respondents also considered that most
         suppliers are capable of performing all kinds of paving works and that all
         suppliers are capable of performing most of the paving works.103 Consequently,
         the Commission considers that paving is a single, distinct product market.
5.2.4.2. Geographic market definition
         (A) The Notifying Party’s view
 (83)    The Notifying Party considers that the paving market is national as all the major
         competitors on the paving market in Sweden and Norway are active on a national
         basis. The machinery and equipment used in paving can be moved around
         nationally if needed.
         (B) Commission precedents
 (84)    In Holcim Lafarge, the Commission considered that the market for contract
         surfacing, i.e. paving, is national in scope.104 This finding was based on the fact
         that equipment for paving is mobile and can be moved around to the point of
         demand, that the asphalt input is sourced from the vicinity of the paving project
         and that the biggest paving players in the United Kingdom are all active
         nationally.105
         (C) The Commission’s assessment
 (85)    A majority of both customers and competitors considered that paving players bid
         nationally and not only regionally.106 As bidding has substantial costs, it is
         unlikely that a firm would bid in a tender if it did not consider that it has a non-
         negligible chance of success. Consequently, the fact that bidding takes place
         nationally indicates that suppliers constrain each other in the entire EEA state
         concerned and not only in the region where they have equipment or employees.
         This would therefore be indicative of a national market. In the same vein,
         respondents to the market investigation were of the view that paving suppliers can
         bid competitively anywhere in the EEA state regardless of having equipment and
         employees in the area, even if they considered that local presence is an
         advantage.107 The Commission notes that having an advantage implies
         differentiation within the same market rather than separate markets.
 (86)    As regards the possibility of a market larger than national in scope, competitors
         considered that they would not be able to bid competitively in an EEA State
         where they are not present.108 Similarly, customers considered that paving
 102
     Q7 – Questionnaire to customers – paving, Sweden, question 10. Q8 – Questionnaire to competitors – paving,
     Sweden, question 9.
 103
     Q7 – Questionnaire to customers – paving, Sweden, question 11. Q8 – Questionnaire to competitors – paving,
     Sweden, question 10.
 104
     Case M .7252 – Holcim/Lafarge, paragraph 405.
 105
     Case M .7252 – Holcim/Lafarge, paragraphs 402-405.
 106
     Q8 – Questionnaire to competitors – paving, Sweden, question 15; Q7 – Questionnaire to customers – paving,
     Sweden, question 16.
 107
     Q7 – Questionnaire to customers – paving, Sweden, question 14; Q8 – Questionnaire to competitors – paving,
     Sweden, question 13.
 108
     Q8 – Questionnaire to competitors – paving, Sweden, question 16.
                                                        19
 ---pagebreak---          companies from neighbouring countries cannot bid competitively without
         presence in their own Member State, in this case Sweden.109 Barriers include
         cultural differences, language and lack of contacts.110
 (87)    On the basis of the above, the Commission considers that, in line with precedents,
         the market for paving is national.
5.2.5.   RMX
5.2.5.1. Product market definition
         (A) The Notifying Party’s view
 (88)    The Notifying Party submits that, in line with the Commission’s precedents,
         RMX constitutes a single product market.111
         (B) Commission precedents
 (89)    The Commission has consistently considered RMX to constitute a single, distinct
         product market.112
         (C) The Commission’s assessment
 (90)    RMX is homogenous and distinct from other types of building materials. Given
         the consistent past practice, which is in accordance with the Notifying Party’s
         view, the Commission considers that RMX is a single distinct product market
         without further subdivisions.
5.2.5.2. Geographic market definition
         (A) The Notifying Party’s view
 (91)    The Notifying Party submits that the definition of a relevant geographic market
         for RMX is dependent on the fact that RMX is perishable over time, and can
         therefore only be transported up to a maximum distance.113 A second limiting
         factor is the question of economic viability of transport distances.114
 (92)    In the view of the Notifying Party, exact driving distances may vary from location
         to location. Distances may be larger compared other European states given the
         size of the countries relevant to the Transaction. Transport distances may also
         vary depending on the density of population.115 In less populated areas, distances
         tend to be longer. In urban areas on the other hand, there are more competing
 109
     Q7 – Questionnaire to customers – paving, Sweden, question 17.
 110
     Q8 – Questionnaire to competitors – paving, Sweden, question 16.1.
 111
     Form CO, paragraph 534.
 112
     Cases M .3572 Cemex/RM C, recital 12; M .4719 HeidelbergCement/Hanson, recital 21; M .6153 Anglo
     American/Lafarge/JV, recital 22; Case M .7054 – Cemex/Holcim Assets, paragraph 319; Case COM P/M .7252 –
     Holcim/Lafarge, paragraph 281.
 113
     Form CO, paragraph 668.
 114
     Form CO, paragraph 664.
 115
     Form CO, paragraph 665.
                                                        20
 ---pagebreak---         plants and traffic congestion, making the costs caused by longer transport
        distances a bigger disadvantage than in less populated areas. In urban areas,
        maximum distances for RMX therefore tend to be shorter.
(93)    The Notifying Party submits that a clear majority of its RMX products are sold
        within a radius of 50 km or less. On average, its Finnish plants sell approximately
        [70-80]% of its products within an area of 25 km from the plant, but [50-60]% of
        its products outside a radius of 15 km116 . Swedish and Norwegian RMX plants
        would sell close to [90-100]% of its products within a distance of 25 km,
        and [70-80]% within a radius of 15 km around a plant117 . The Notifying Party
        estimates that maximum transportation distances for RMX are 100 km, and for
        some plants in Sweden up to 150 km.
(94)    Based on this sale shares, the Notifying Party submits that a radius of 50 km
        around each plant can be used as the relevant geographic area for RMX, with a
        radius of 25 km as an alternative.118
        (B) Commission precedents
(95)    In past decisions, the Commission has considered that a relevant geographic
        market for RMX is a catchment area of a radius of 25 km around each plant119 .
        However, the decision concerned markets located predominantly in France,
        Germany and the UK, and was partly based on the responses to the market
        investigation as well as arguments provided by the Notifying Party in the context
        of the Transaction in the respective countries.
        (C) The Commission’s assessment
(96)    The Commission considers that a plausible geographic market for RMX would be
        either 25 km or 50 km around each plant. Based on previous decisions, as well as
        information provided by the Notifying Party, a narrower catchment area would be
        the more likely alternative in urban and more densely populated areas. However,
        the Commission acknowledge the argument by the Notifying Party that in
        Finland, Norway and Sweden, transport distances depend highly on the specific
        region in question. In the northern and other rural regions, which are sparsely
        populated, a catchment area around of 25 km around each plant would likely
        underestimated the actual sales territory.
(97)    However, the ultimate market definition can be left open for the assessment of the
        case. As the Target is not active in the RMX business120 , no horizontal overlaps
        occur. Vertical relationships are considered in the context of a link with upstream
        aggregates businesses in all three countries. For the assessment of this specific
        case, applying a wider catchment area of 50 km is the more prudent approach.
(98)    With respect to possible input foreclosure, the market shares on the respective
        aggregates markets upstream are decisive. However, those would not change
116
    Form CO, paragraph 666.
117
    Form CO, paragraph 667.
118
    Form CO, paragraph 669.
119
    Case COM P/M .7252 – Holcim/Lafarge, paragraph 286.
120
    Form CO, paragraph 671.
                                                     21
 ---pagebreak---           under a narrower geographic market definition. On the other hand, the overall
          number of affected markets would decline, as fewer catchment areas would
          overlap as a radius of 25 km would be considered as catchment area for RMX.
 (99)     Downstream market shares would indeed matter for the assessment of possible
          customer foreclosure. However, customer foreclosure is not a concern in the
          context of the aggregates – RMX relation, as further explained in the competitive
          assessment section.
 (100) For the purposes of the present decision, a wider catchment area will be used as
          general assumption, as it would allow for a more prudent analysis. The ultimate
          geographical market definition can be left open between catchment areas of
          25 km and 50 km around each RMX site, as it would not change the outcome of
          the assessment.
5.2.6.    Construction
5.2.6.1. Product market definition
          (A) The Notifying Party’s view
 (101) The Notifying Party submits that the market definition can be left open as the
          number of affected markets and the Notifying Party’s market share will remain
          roughly the same under all plausible market definitions.
          (B) Commission precedents
 (102) Construction has in the past been defined as the on-site construction or assembly
          of buildings and other structures and building engineering.
 (103) In previous decisions, the Commission has considered the division of the
          construction market into three sub-segments: the construction of residential
          buildings (blocks of flats, single household buildings), the construction of non-
          residential buildings (industrial buildings, offices, shopping centres and hospitals)
          and the construction of infrastructure/civil engineering (roads, bridges, railroads,
          sewage systems).121 The Commission has, however, usually left the final market
          definition open. Within the segments of residential building, non-residential
          building and infrastructure building, a further segmentation has occasionally been
          made based on contract value.122
 (104) The Commission also considered dividing the infrastructure construction / civil
          engineering segment into the construction of roads, the construction of bridges,
          the construction of tunnels and other infrastructure construction.123 However, in
          this case too, the Commission has left the final product market definition open.
 121
     Case COM P/M .6841 – Goldman Sachs/TPG Lundy/Tullock Homes Group Limited, paragraph 17; M .6020 —
      ACS/HOCHTIEF, paragraph 6.
 122
      Case COM P/M .1157 – Skanska /Scancem, paragraph 53-54.
 123
      Case COM P/M .3864 – Fimag/Züblin, paragraph 10; Case COM P/M .5200 – Strabag/Kirchner, paragraph 12; and
      Case COM P/M .5158 – Strabag /Kirchhoff, paragraph 12.
                                                        22
 ---pagebreak---          (C) The Commission’s assessment
 (105) The Parties do not have any horizontal overlap in construction as the Target is not
         active in construction. Peab’s share in construction stays below 30 % under any
         market definition that the Commission considers plausible in all three EEA states
         involved in the Transaction.124 Thus construction markets are of interest because
         they are the downstream leg of a vertical link involving aggregates in the
         upstream market. In these vertical relationships the competitive assessment is the
         same under any market definition that the Commission considers plausible.
 (106) Consequently, for the purpose of the assessment of the Transaction, the exact
         market definition can be left open.
5.2.6.2. Geographic market definition
         (A) The Notifying Party’s view
 (107) The Notifying Party considers the market for construction to be national, and
         considers that the ultimate geographic market definition can be left open.
         (B) Commission precedents
 (108) In previous cases, the Commission has considered the market for construction
         works to be national, and potentially EEA-wide for certain types of construction
         works such as the construction of tunnels or bridges. However, geographic market
         definitions were ultimately left open.125
         (C) The Commission’s assessment
 (109) For the present case, the Commission considers the market for construction to be
         national or wider. Peab itself is active in construction in Finland, Sweden and
         Norway, which is also the case for Skanska. NCC and Veidekke have a presence
         in construction in both Norway and Sweden126 . However, companies do not
         compete in all parts of the EEA, and market investigation provided no
         information on whether presence in the respective country is a perquisite for
         successfully competing for construction projects.
 (110) For the assessment of the case, a geographic market of at least national is
         considered, as no concerns would occur under the narrower definitions.
5.2.7.   Transport
5.2.7.1. Product market definition
 (111) The Target owns a general dry cargo ship and a bulk carrier that operate in
         northern Norway127 .
 124
     For Finland, see Form CO, paragraph 814; for Norway see Form CO, paragraph 822; for Sweden see Form CO,
     paragraph 829.
 125
     M .3864 – Fimag / Züblin; M .6020 ACS / Hochtief.
 126
     Annex 5.7.
 127
     Form CO, paragraph 872.
                                                       23
 ---pagebreak---          (A) The Notifying Party’s view
 (112) The Notifying Party submits that transport business has a vertical relationship
         with its aggregations operations, as the vessels are to transport, inter alia,
         aggregates. However, the Notifying Party considers that the relevant product
         market can be left open as the relationship between aggregates and cargo shipping
         does not give rise to affected markets under any plausible market definitions or
         result in any competition issues.128
         (B) Commission precedents
 (113) In its previous decisions, the Commission defined a separate product market for
         short-sea container liner shipping, i.e. distinct from deep-sea container shipping,
         non-liner shipping and non-containerised shipping, such as bulk shipping.129
 (114) Additionally, the Commission has recognised the need to consider vessel sizes
         and contract types when defining the relevant product market for vessels.130
         (C) The Commission’s assessment
 (115) Given that the Target only has one cargo ship and one bulk carrier ship, which
         carry, inter alia, some mineral aggregates, the Commission considers that the
         market definition can be left open as there are no conceivable competition
         concerns linked to these transport vessels.
5.2.7.2. Geographic market definition
         (A) The Notifying Party’s view
 (116) The Notifying Party submits information on the basis of a national market, and
         considers that the exact geographic market definition can be left open.131
         (B) Commission precedents
 (117) In previous decisions, the Commission has considered that smaller ships tend to
         focus on coastal/short-range trade, while larger ships tend to go long-range, which
         may be worldwide.132 Ultimately, the market definition was left open.
         (C) The Commission’s assessment
 (118) The ships in question are rather small,133 the geographic market is therefore
         smaller than worldwide. For the assessment of this case, the market definition can
         be left open. Possible vertical effects would origin from the link between the
         Target’s cargo ship business in northern Norway and the aggregates production of
         Peab. Combined market shares in aggregates stay below 30% in all local markets
 128
     Form CO, paragraph 874.
 129
     Case COM P/M .9016 – CMA CGM/Container Finance, paragraph 31.
 130
     Case COM P/M .5346 – APMM/Broström, paragraph 11.
 131
     Form CO, paragraph 876.
 132
     Case Comp/M .5346 – APM M / Broström.
 133
     Form CO, paragraph 875.
                                                    24
 ---pagebreak---         in Norway.134 Markets could therefore only become affected if market shares in
        cargo shipping would exceed 30%.
(119) On a national level, market shares are negligible below 2%. If markets would be
        defined regional, no links would occur, as Peab’s two quarries are located in
        central Norway in Verrabotn135 and in Jessheim near Oslo.136 Therefore, under an
        even more narrow market definition than national, upstream and downstream
        market would no longer fall into the same geographic area.
(120) Thus the Commission considers that the exact geographic market definition can
        be left open.
5.3.    Competitive assessment
5.3.1. Market share methodology
(121) In the case of local markets defined as a catchment area around a plant or a
        quarry, obtaining reliable sales and volume data for each local competitor poses
        great challenges. Such data is not readily available and reliable data collection
        may not be possible. Thus, in previous cases,137 the Commission has relied on
        indirect estimation of market shares and proxies.
(122) Following the methodology used in previous cases, the market shares for
        catchment areas have been compiled as follows.138
         •    The size of the market (local demand) is computed as the product of
              consumption per capita in the relevant country and the population of the
              catchment area. A NASA population dataset has been used to estimate the
              size of the local market in terms of population.
         •    The Parties' combined sales attributed to each catchment area are all sales of
              the production site in the centre of the catchment area plus a share of the sales
              of each of the Parties' production sites with an overlapping catchment area,
              calculated based on the percentage of the overlap from the entire catchment
              area.
         •    The Parties’ local market share is calculated as these sales divided by the total
              estimated consumption for the relevant product in the catchment area.
         •    Unless otherwise stated, the sales market shares of competitors are estimated
              by allocating the market volume minus the Parties' volumes to each
              competitor in proportion to its production capacity shares in the area. The
              production capacity share of each competitor is calculated in relation to the
              total capacity of competitors in the area
134
    Form CO, paragraph 877.
135
    The quarry is closed.
136
    Form CO, Picture 4 / paragraph 133.
137
    M .7550, CRH / Holcim Lafarge Divestment Business, paras 174-176. Also see Case M .7252, Holcim / Lafarge,
    paras 75-77.
138
    Form CO, paragraphs 62-64.
                                                    25
 ---pagebreak--- (123) The Commission considers that this methodology is in line with precedents in this
        sector139 and provides the best available proxy given the challenges of data
        gathering. The Commission notes that because the total market size is proxied
        with per capita consumption and population data whereas the Parties’ sales are
        concrete sales figures, the market shares can sometimes exceed 100%, especially
        in more sparsely populated areas.
5.3.2. Overview of affected markets
(124) Table 1 below gives an overview of the product and country combinations in
        relation to which the Transaction gives rise to affected markets. A cell in a table
        does not necessarily correspond to a specific market as in many cases the markets
        are local. Thus one cell can refer to several markets, involving the same
        product(s) and the same EEA state.
         Table 1 - overview of affected markets
                 Finland                     Sweden                             Norway
                                   Horizontally affected markets
      aggregates                     aggregates
                                     asphalt                       asphalt
                                     paving
                                     Vertically affected markets
                                     aggregates-asphalt            aggregates-asphalt
      aggregates-RMX                 aggregates-RMX                aggregates-RMX
      aggregates – construction                                    aggregates – construction
                                     asphalt – paving              asphalt – paving
                                                                   bitumen – asphalt
(125) The Commission notes that there are no affected markets in relation to transport,
        which would only concern Norway. The relationship would be between transport
        and aggregates as the Target’s boats transport some aggregates from time to time.
        As discussed in Section 5.2.7., combined market shares in aggregates stay
        below 30% in all local markets in Norway.140 Markets could therefore only
        become affected if market shares in cargo shipping would exceed 30%. If the
        cargo shipping market is national or wider, this would be wholly implausible as
        the Target has only two boats. If the cargo shipping market is local with a very
        small radius, the market share is still unlikely to exceed 30% and, in addition, the
        Target’s boats could not serve the catchment areas of Peab’s quarries. This is
        because Peab has only two quarries in Norway, one in Jessheim in southern
        Norway and one in Verrabotn in central Norway, whereas the Target’s boats
        operate in northern Norway.141
139
    M .7550, CRH / Holcim Lafarge Divestment Business, paras 174-176. Also see Case M .7252, Holcim / Lafarge,
    paras 75-77.
140
    Form CO, paragraph 877.
141
    Form CO, paragraph 872.
                                                    26
 ---pagebreak---  5.3.3. Finland
5.3.3.1. Horizontally affected markets
         (A) Aggregates
         (A.i) List of affected markets and market shares
 (126) Overall, Peab currently has limited presence in the aggregates business in
         Finland. It operates three aggregates quarries located in the wider Forssa area in
         south-western Finland and in the wider Lahti area in the southeast.142
 (127) The Target, on the other hand, is a well-established supplier of aggregates in
         Finland. It owns approximately 200 aggregates quarries, around half of which are
         currently operative.143
 (128) Overlaps of catchment areas of the three quarries currently owned by the
         Notifying Party with a number of catchment areas around the YIT’s quarries give
         rise to 15 horizontally affected market in the Turku / Forssa / Uusimaa area. In
         addition, six market become vertically affected in the area of Lahti /
         Lappeenranta. The affected markets are listed in Tables 2 and Table 3 below.
         Table 2 - horizontally affected aggregates markets in the Turku / Forssa / Uusima area
           Catchment area                     Peab                     Target                Combined
           Forssa / Forssanporti            [5-10]%                  [30-40]%                 [40-50]%
           Forssa / Vuori                   [5-10]%                  [30-40]%                 [40-50]%
           Humppila                         [5-10]%                  [20-30]%                 [20-30]%
           Jokioinen, M yllymäki            [5-10]%                  [30-40]%                 [30-40]%
           Jokioinen, Ripunkallio           [5-10]%                  [30-40]%                 [40-50]%
           M urronmaa                        [0-5]%                  [20-30]%                 [30-40]%
           Nummensyrjä                       [0-5]%                  [20-30]%                 [30-40]%
           Salo, Hiekkanummi                 [0-5]%                  [20-30]%                 [30-40]%
           Somero, M atinmäki               [5-10]%                  [30-40]%                 [30-40]%
           Somero Sora-Heikkilä             [5-10]%                  [30-40]%                 [30-40]%
           Tammela, Penttilä                 [0-5]%                  [40-50]%                 [40-50]%
           Vahva Sora                        [0-5]%                  [20-30]%                 [20-30]%
           Tehdaspalsta                      [0-5]%                  [20-30]%                 [30-40]%
           Hämeenlinna                       [0-5]%                  [20-30]%                 [20-30]%
           Pusula                            [0-5]%                  [20-30]%                 [20-30]%
         Source: Form CO, table 1, paragraph 80.
         Table 3 - horizontally affected aggregates markets in the Lahti/Lappenrata area
           Catchment area                     Peab                     Target                Combined
           Hämeenlinna                       [0-5]%                  [20-30]%                 [20-30]%
           Hamina                            [0-5]%                  [20-30]%                 [20-30]%
           Kotka                             [0-5]%                  [20-30]%                 [20-30]%
           Lahti                             [0-5]%                  [20-30]%                 [20-30]%
           Luumäki, Heimala                  [0-5]%                  [20-30]%                 [20-30]%
           Ämmänäyräs                        [0-5]%                  [20-30]%                 [20-30]%
         Source: Form CO, table 1, paragraph 80.
 142
     Form CO, paragraph 126.
 143
     Form CO, paragraph 125.
                                                     27
 ---pagebreak--- (129) A further segmentation of aggregates into crushed rock and gravel / sand would
        not substantially change that picture. In the Turku / Forssa / Uusimaa area, three
        more markets would be horizontally affected in that case (Pori, Söörmarkku,
        Ulvia), all with moderate market shares of well under 30%. In the Lahti /
        Lappeenranta area, three additional markets would become horizontally affected
        (Pernaja, Keltti 1, 2), all three with moderate market shares of below 30%. Also
        under such distinction, as shown in Table 4 and 5, combined market shares do not
        exceed [40-50]% in any affected areas, which is also the case for the combined
        market shares for the overall aggregates market.
        Table 4 - market shares in horizontally affected aggregates markets separately for i) crushed rock
        and ii) gravel and sand
                  Catchment area                         Crushed Rock                          Gravel + S and
               Forssa / Forssanporti144                        -                                       -
                    Forssa / Vuori                         [40-50]%                                    -
                      Humppila                                 -                                  [30-40]%
                Jokioinen, M yllymäki                          -                                  [40-50]%
                Jokioinen, Ripunkallio                     [30-40]%                                    -
                      M urronmaa                               -                                  [40-50]%
                  Nummensyrjä145                               -                                       -
                 Salo, Hiekkanummi                             -                                  [30-40]%
                 Somero, M atinmäki                            -                                  [40-50]%
                Somero Sora-Heikkilä                           -                                  [40-50]%
                  Tammela, Penttilä                        [40-50]%                                    -
                      Vahva Sora                           [10-20]%                               [20-30]%
                    Tehdaspalsta                               -                                  [40-50]%
                     Hämeenlinna                           [20-30]%                                    -
                        Pulsua                                 -                                  [20-30]%
                         Pori                              [20-30]%                                    -
                     Söörmarkku                            [20-30]%                                    -
                         Ulvila                            [20-30]%                                    -
        Source: Form CO, Annex 7, Table 67.
        Table 5 - market shares in horizontally affected aggregates markets in the Lahti / Lappeenranta
        area separately for i) crushed rock and ii) gravel and sand
                  Catchment area                         Crushed Rock                          Gravel + S and
                     Hämeenlinna                           [20-30]%                                    -
                        Hamina                             [40-50]%                                [5-10]%
                        Kotka                              [40-50]%                                    -
                         Lahti                             [20-30]%                                    -
                  Luumäki, Heimala                         [30-40]%                                    -
                    Ämmänäyräs                                 -                                  [10-20]%
                        Pernaja                            [20-30]%                                    -
                  Kouvola, Keltti 1                        [20-30]%                                    -
                  Kouvola, Keltti 2                        [20-30]%                                    -
        Source: Form CO, Annex 7, Table 67.
144
    Forssa / Forssanporti does not produce new aggregates and sells only recycled / secondary aggregates.
145
    No data available
                                                        28
 ---pagebreak--- (130) Tables 4 and 5 show that in most quarries, either crushed rock or gravel / sand is
        produced. In few catchment areas, market shares in segments may be lower than
        in the overall aggregates market. This is because in Tables 2 and 3, production of
        all aggregates by both parties within the catchment area is taken into account. In
        Tables 4 and 5, only all production by the parties of the specific type of
        aggregates that is produced in the respective quarry is analysed.
        (A.ii) The Notifying Party's view
(131) The Notifying Party considers that the Transaction would have no impact on the
        aggregates markets in question. First, an increase of the Parties’ combined market
        shares would only be nominal, as the Notifying Party’s production is used fully
        captively and therefore would not put competitive pressure on the market.
        Production will remain for internal use only post Transaction.146
(132) Second, the combined market shares in the local areas would still remain
        moderate, and the Notifying Party would still meet plenty of competition in all
        markets.147
        (A.iii)     The Commission’s assessment
        (A.iii.a) Common characteristics of all markets
(133) Market shares as discussed in this section comprise both captive and non-captive
        production. As discussed under 5.3.1, also volumes that are not sold on the
        market, but used internally by companies with an integrated downstream
        business, are considered. For the purposes of the assessment, no distinction is
        therefore made between captive and non-captive sales, despite the Notifying
        Party’s argument that almost the entire production of aggregates in its three
        quarries would be used internally148 . This is because also internally used volumes
        reflect the market power of a specific company. The Notifying Party also appears
        to acknowledge that switching between internal and external sales is relatively
        easy149 , and that captively used production would reflect the capability to
        participate in the market or extent their sales.150
(134) Aggregates are a rather homogeneous product, and as evidenced by the market
        investigation, costs of switching between suppliers are generally moderate. A
        majority of customers responding to the investigation indicate that they can easily
        switch to other companies than the ones they source from151 . The only reported
        barriers to switching pertain to different price levels or lack availability, and only
        to a minor degree on product differentiation connected to respective specific
        suppliers152 . All undertakings that have responded to the market investigation
146
    Form CO, paragraph 164, 170.
147
    Form CO, paragraph 166, 172.
148
    Form CO, paragraph 127.
149
    Form CO, paragraph 68.
150
    Form CO, paragraph 69.
151
    See Q1, questionnaire to aggregates customers in Finland, question 15.
152
    See Q1, questionnaire to aggregates customers in Finland, question 17.1.
                                                         29
 ---pagebreak---          source from more than one aggregates supplier153 . Therefore, the presence of
         actual or potential alternative aggregates suppliers within a market exert
         competitive pressure on aggregates companies, as customers can switch when
         prices are raised unilaterally.
(135) Production of aggregates in Finland is generally limited due to the fact that
         sourcing aggregates requires a permit, which is not easy to obtain because of
         environmental requirements. Respondents to the market investigation consistently
         state that acquiring a permit could take several years, a factor that constrains
         capacity expansion.154 Therefore, barriers to enter the market or to expand
         production are not negligible. Even though the costs for opening a new or
         additional quarry are moderate155 , the time required to get a permit makes a
         timely entry into any market to respond to increased demand in that market
         unlikely, which may lead to capacity constraints.
(136) Responses from the market investigation indicated that, while there is not a
         general capacity problem regarding aggregates in Finland, there are regional
         differences156 . This was further developed during calls with aggregates
         competitors. One of the main competitors of YIT confirmed that there would be
         significant excess capacities in rural Finland, for example in the Forssa area,
         where lots of excess capacities exist157 . By contrast, access to aggregates would
         be more difficult in metropolitan areas, such as Helsinki.158
(137) Despite a more limited availability in metropolitan areas, as highlighted by the
         same competitor, in such areas however aggregates could not only be sourced
         from quarries, but also as by-product from construction sites, such as construction
         of roads, metro lines or tunnels. Such aggregates would add another 10% to 40%
         to the overall market of aggregates159 . As these volumes are linked to specific
         construction projects, the availability of aggregates in metropolitan areas would
         be subject to significant variations. Therefore, in some years, demand for
         aggregates would outstrip capacities, including in Helsinki and other metropolitan
         areas.160
         (A.iii.b) Turku / Forssa / Uusimaa area
(138) The Commission considers that there are two main reasons why the Transaction
         will not lead to higher prices for aggregates in the Turku / Forssa / Uusimaa area.
         First, the Transaction does not change the competitive structure of the market, as
         merged entity would not have a significantly stronger position compared to
         situation pre-transaction. Increments remain close to or below [5-10]% in all of
         the areas. This was further substantiated by replies to the market investigation. As
         an illustration, a competitor in aggregates production in Finland expressly
153
    See Q1, questionnaire to aggregates customers in Finland, question 17.
154
    See Q1, questionnaire to aggregates customers in Finland, question 25.
155
    At around EUR 100.000, see Q2, questionnaire to aggregates competitors, question 30.
156
    See Q1, questionnaire to aggregates customers in Finland, question 23.
157
    Call with a competitor, 10 M arch 2020, point 9.
158
    Call with a competitor, 10 M arch 2020, point 6, 7.
159
    Call with a competitor, 10 M arch 2020, point 4.
160
    Call with a competitor, 10 M arch 2020, point 7.
                                                         30
 ---pagebreak---          confirmed the Transaction would not have material effects on the market structure
         regarding aggregates in the Forssa / Turku / Uusimaa area161 .
(139) The point that the Transaction would not change the market structure was further
         substantiated in the market investigation. None of the respondents stated that Peab
         would currently exercise significant or even some competitive pressure on YIT,
         while customers rather stated that it would not exercise any significant pressure (a
         majority stated it would not be able to answer this question)162 . Therefore, no
         significant competitive force would leave the market due to the Transaction.
(140) Second, the merged entity would still be constrained by other players. This is
         illustrated in the first place by the fact its combined market shares remain below
         45% in all markets, and well below that figure in most of the regions. As
         switching costs for aggregates customers are generally moderate, the presence of
         alternative suppliers leave customers with the option of sourcing from other
         companies. In the second place, as Table 6 shows, the competitor base consists of
         both small players as well as larger, integrated competitors, in line with overall
         market structures within Finland generally.
(141) The fragmentation of the Finnish market for aggregates is illustrated by the fact
         that, in 2013, there were more than 6000 permits across the country for quarrying
         various kind of grounds. 4000 of these quarries were producing gravel and sand,
         1800 rock, and 200 other types of grounds163 . Overall, around one third of all
         aggregates in the wider Turku / Forssa / Uusimaa area are produced by smaller
         suppliers.
         Table 6 - estimated market shares of aggregates competitors in the Turkuu / Forssa / Uusima
         area
                              Competitor                                Estimated market shares164
                              Rudus (CRH)                                          [10-20]%
                            Hämeen Kuljetus                                         [5-10]%
                                 Destia                                             [5-10]%
                                  NCC                                               [5-10]%
                               TerraWise                                            [5-10]%
                            Palovuoren Kivi                                         [5-10]%
                               Kiertomaa                                            [5-10]%
                             Läänin Kuljetus                                        [5-10]%
                            Hämeen kuljetus                                         [5-10]%
                                 Others                                       approx. [30-40]%
         Source: Form CO, Table 16
         (A.iii.c) Lahti / Lappeenranta area
(142) Similar arguments as stated above are valid for the assessment of the Lahti /
         Lappeenranta area. First, the Transaction would not change the structure of
         competition in the area compared to the situation pre-transaction. Increments in
161
    Call with a competitor, 10 M arch 2020, point 9.
162
    Q1, questionnaire to aggregates customers in Finland, question 19.
163
    The Finnish M inistry of Employment and the Economy, Kiviaines- ja luonnonkiviteollisuuden kehitysnäkymät
    (report on aggregates), report 54/2015, page 28
164
    Form CO, Table 16; estimates for an area of 160 km around the Target`s quarries in the Turku and Forssa area,
    and therefore potential competitors under catchment areas of 80 km.
                                                         31
 ---pagebreak---           all markets are close to or below [0-5]%. Therefore, Peab would not gain a
          stronger position than YIT currently has. As the market investigation confirmed,
          Peab currently does not form a significant competitive constrain on YIT165 .
          Therefore, no significant competitor would be eliminated due to the Transaction.
 (143) Second, the merged entity would still face significant competition, as its modest
          market shares remain below 30% in the Lathi / Lappeenranta area below 30%. As
          switching costs for aggregates customers are generally moderate, the presence of
          alternative suppliers leave customers with the option of sourcing from other
          companies. As switching costs between aggregates suppliers are generally
          moderate, the merged entity will not be in a position to raise prices unilaterally.
 (144) Also in the Lahti / Lappeenranta area, the merged entity faces competition from a
          number of competitors. The competitor base consists partly of bigger, integrated
          companies such as Rudus, Destia or NCC. In addition to this, a large number of
          small suppliers with a market share below 5% account for around [40-50]% of all
          aggregates supply in the region, as Table 7 shows.
          Table 7 - estimated market shares of aggregates competitors in the Lahti / Lappeenranta area
                               Competitor                                 Estimated market shares166
                               Rudus (CRH)                                           [20-30]%
                              Savon Kuljetus                                         [10-20]%
                                  Destia                                              [5-10]%
                                   NCC                                                [5-10]%
                                Tykkimäki                                             [5-10]%
                                Turpeinen                                             [5-10]%
                                  Others                                         approx. [40-50]%
          Source: Form CO, Table 17.
          (A.iii.d) Conclusion
 (145) Based on the above the Commission considers that the Transaction will not lead
          to a significant impediment of effective competition due to unilateral effects in
          the markets for aggregates in Finland.
5.3.3.2. Vertically affected markets
          (A) Aggregates – RMX
          (A.i) List of affected markets and market shares
 (146) The Notifying party has a limited presence in the aggregates business in Finland.
          It operates three aggregates quarries located in the wider Forssa area in south-
          western Finland and in the wider Lahti area in the southeast.167 However, the
 165
     Q1, questionnaire to aggregates customers in Finland, question 19.
 166
     Form CO, Table 17; estimates for an area of 160 km around the Target`s quarries in the Lappeenranta area, and
     therefore potential competitors under catchment areas of 80 km.
 167
     Form CO, paragraph 126.
                                                          32
 ---pagebreak---         Notifying Party is well active in the production of RMX in Finland and operates
        several RMX plants in the south and the west of the country168 .
(147) The Target, on the other hand, has no RMX production169 , but is very strong in
        the aggregates business. It owns approximately 200 aggregates quarries, around
        half of which are currently operative.170
(148) Potential concerns result therefore from the fact that the merged entity would
        reach a strong presence both in upstream aggregates and downstream RMX
        markets. The Transaction gives rise to a number of vertically affected markets, as
        catchment areas around the YIT’s quarries overlap with the catchment areas of
        Peab’s RMX plants. In given local markets, combined market shares exceed 30%
        either or both upstream and / or downstream. Concerns arise therefore in the
        context of both input foreclosure and customer foreclosure.
(149) Lists with affected markets are presented in the respective sections A.iii.a (input
        foreclosure) and A.iii.b (customer foreclosure).
        (A.ii) The Notifying Party's view
(150) The Notifying Party considers that it would not have the ability to engage in input
        foreclosure, as RMX competitors would still have the opportunity to source from
        a large number of other suppliers in all areas. An obvious lack of ability would
        also eliminate any incentive to engage in such a strategy.171
(151) As for customer foreclosure, the Notifying Party submits that aggregates are a
        highly versatile product with many end-uses. As aggregates competitors would
        still be able to sell to other RMX manufacturers, as well as construction, asphalt
        or mortar companies, there would be no ability for customer foreclosure.172
        (A.iii) The Commission’s assessment
        (A.iii.a) Input foreclosure
(152) The Transaction gives rise to a number of vertically affected markets with a
        combined upstream market share of more than 30% and an overlap with the
        catchment area of one of the Notifying Party's RMX plants. All these markets,
        listed in Table 8, are broadly located in the wider Turku / Forssa / Uusimaa area.
168
    Form CO, paragraph 674.
169
    Form CO, paragraph 671.
170
    Form CO, paragraph 125.
171
    Form CO, paragraph 709, 710.
172
    Form CO, paragraph 711.
                                              33
 ---pagebreak---          Table 8 - upstream aggregates markets with combined market shares above 30%
                  Catchment area               Combined market shares in              Overlapping RMX plants173
                                                  upstream aggregates
                Forssa, Forssanportti                    [40-50]%                   Loimaa, Salo, Ylöjärvi, Tampere,
                                                                                  Naantali, Lieto, Lohja, Kirkkonummi,
                                                                                                  Espoo
                    Forssa, Vuori                        [40-50]%                Loimaa, Salo, Ylöjarvi, Lieto, Tampere,
                                                                                 Naantali, Lohja, Kirkkonummi, Espoo
                Jokioinen, M yllymäki                    [30-40]%                  Loimaa, Ylöjärvi, Tampere, Lieto,
                                                                                      Naantali, Salo, Lohja, Espoo
               Jokioinen, Ripunkallio                    [40-50]%                Loimaa, Salo, Ylöjärvi, Lieto, Naantali,
                                                                                 Tampere, Lohja, Kirkkonummi, Espoo
                 Salo, Hiekkanummi                       [30-40]%                 Lohja, Salo, Loimaa, Lieto, Naantali,
                                                                                     Kirkkonummi, Espoo, Helsinki
                 Somero, M atinmäki                      [30-40]%                 Lohja, Loimaa, Salo, Lieto, Naantali,
                                                                                     Kirkkonummi, Espoo, Helsinki
                Somero, Sora-Heikkilä                    [30-40]%                 Lohja, Loimaa, Salo, Lieto, Naantali,
                                                                                     Kirkkonummi, Espoo, Helsinki
                   Tammela, Pentt                        [40-50]%                   Loimaa, Salo, Ylöjärvi, Tampere,
                                                                                 Naantali, Lieto, Kirkkonummi, Espoo,
                                                                                                 Helsinki
         Source: Form CO, Table 169, paragraph 702.
(153) RMX can be generally produced using both types of aggregates, crushed rock or
         gravel and sand. Whereas gravel / sand is generally the preferred for the
         production of RMX174 , it is more and more replaced by crushed rock175 . The
         market investigation confirmed that it is generally possible to use both crushed
         rock and gravel / sand for RMX production176 .
(154) For the assessment of input foreclosure, the conclusion would remain the same
         even if a product segmentation between crushed rock and gravel / sand was made.
         A segmentation would indeed give rise to two additional affected markets in
         Murronmaa and Humppila. However, as Table 9 shows, also with a segmentation
         in crushed rock and gravel / sand, combined market shares of the merged entity
         would remain in similar ranges compared to overall combined markets shares and
         remain below [40-50]% in all of the markets.
         Table 9 - upstream aggregates markets with a combined market share of more than 30%
         separately for i) crushed rock and ii) gravel and sand
                  Catchment area                      Crushed Rock                           Gravel + S and
              Forssa, Forssanportti177                       -                                       -
                    Forssa, Vuori                        [40-50]%                               [30-40]%
                   Humppila, Kair                            -                                  [30-40]%
                Jokioinen, M yllymäki                        -                                  [40-50]%
               Jokioinen, Ripunkallio                    [30-40]%                                    -
173
    Downstream market shares: Loimaa [40-50]%; Salo [40-50]%; Ylöjärvi plant opened in 2019; Tampere plant
    opened in 2019; Naantali [50-60]%; Lieto [50-60]%; Lohja [10-20]%; Kirkkonummi [10-20]%; Espoo [10-20]%;
    Helsinki [10-20]%.
174
    Confirmed minutes of a call with a competitor, 10 M arch 2020, point 10.
175
    The Finnish M inistry of Employment and the Economy, Kiviaines- ja luonnonkiviteollisuuden kehitysnäkymät
    (report on aggregates), report 54/2015, page 12.
176
    Q1, questionnaire to aggregates competitors in Finland, question 12.1.1.
177
    Site do not produce new aggregates, sales only from recycled / secondary aggregates.
                                                          34
 ---pagebreak---                   Catchment area                      Crushed Rock             Gravel + S and
                   M urronmaa Iii                                                [40-50]%
                 Salo, Hiekkanummi                          -                    [30-40]%
                 Somero, M atinmäki                         -                    [40-50]%
               Somero, Sora-Heikkilä                        -                    [40-50]%
                   Tammela, Pentt                       [40-50]%                     -
         Source: Form CO, Annex 7, Table 186.
(155) Production of aggregates in Finland is limited due to the fact that sourcing
         aggregates requires a permit, which is not easy to obtain because of
         environmental requirements. Respondents to the market investigation consistently
         state that acquiring a permit could take several years, which limits the possibility
         for capacity expansion.178 Response from the market furthermore showed that
         generally there is no capacity problem regarding aggregates in Finland, even
         though there are regional differences179 . This was further developed during calls
         with aggregates competitors. As an illustration, one of the main competitors of
         YIT confirmed that there would be significant excess capacities in rural Finland,
         for example in the Forssa area180 .
(156) While some respondents indicated that access to aggregates would be more
         difficult in metropolitan areas, such as Helsinki,181 as already illustrated within
         the horizontal assessment, in such metropolitan areas, aggregates would not only
         be sourced from quarries, but also as by-product from construction sites, such as
         construction of roads, metro lines or tunnels. Such aggregates would add another
         10% to 40% to the overall market of aggregates182 . As these volumes are linked to
         specific construction projects, the availability of aggregates in metropolitan areas
         would be subject to significant variations. Therefore, in some years, demand for
         aggregates would outstrip capacities in Helsinki and other metropolitan areas.
         This may lead to longer transport distances to alternative sources farther away.
         Overall, however, there would generally be enough capacity of aggregates even in
         metropolitan areas such as Helsinki.183 Even though aggregates sourced from
         construction sites cannot be used directly as input for RMX production due to
         quality requirements,184 they still form a general capacity relaxation on the overall
         aggregates market.
(157) During the market investigation, a downstream competitor in RMX pointed
         specifically to possible shortages in aggregates following the Transaction. The
         company raised its concern regarding access to aggregates post-transaction, as it
         would currently source aggregates from YIT, which is, unlike Peab, not a
         competitor in the downstream RMX business185 . The same competitor also
         referred to the possibility that, post transaction, the merged entity and its largest
178
    See Q1, questionnaire to aggregates customers in Finland, question 25.
179
    See Q1, questionnaire to aggregates customers in Finland, question 23.
180
    Confirmed minutes of a call with a competitor, 10 M arch 2020, point 9.
181
    Confirmed minutes of a call with a competitor, 10 M arch 2020, point 6, 7.
182
    Confirmed minutes of a call with a competitor, 10 M arch 2020, point 4.
183
    Call with a competitor, 10 M arch 2020, point 7.
184
    Call with a competitor, 10 M arch 2020, point 10.
185
    Q1, questionnaire to aggregates customers, question 32.
                                                         35
 ---pagebreak---          upstream competitor Rudus (CRH) could exert market power as large integrated
         players throughout the whole value chain186 .
(158) However, for the specific markets in question, the Commission comes to the
         conclusion that it is unlikely that the merged entity could foreclose inputs for
         downstream competitors, as it would not have the ability and unlikely the
         incentive for such a strategy. In addition to this, input foreclosure would not have
         an impact, as it would not lead to an increase of downstream RMX prices.
(159) First, the merged entity would not have the ability to foreclose downstream RMX
         competitors, as these companies could still source from other suppliers.
         Combined market shares in the upstream aggregates business remain well below
         50% in all affected markets. As discussed above, switching costs for aggregates
         customers are generally moderate. Within the area in question, alternative
         suppliers are present. The competitor base consist of both small players as well as
         larger competitors with an overall presence across the region.
                    Estimated market shares of competitors in the Turku / Forssa / Uusimaa area
         Table 10 – estimated market shares of aggregates competitors in the Turku / Forssa / Uusima
         area
                               Competitor                                   Estimated market shares187
                              Rudus (CRH)                                              [10-20]%
                            Hämeen Kuljetus                                             [5-10]%
                                  Destia                                                [5-10]%
                                  NCC                                                   [5-10]%
                                TerraWise                                               [5-10]%
                             Palovuoren Kivi                                            [5-10]%
                                Kiertomaa                                               [5-10]%
                             Läänin Kuljetus                                            [5-10]%
                            Hämeen kuljetus                                             [5-10]%
                                 Others                                            approx. [30-40]%
         Source: Form CO, Table 16.
(160) With respect to capacities, the Notifying Party submits that YIT is currently not a
         significant source for RMX competitors in the areas where the merged entity
         reaches upstream market shares of more than 30% that have overlapping
         catchment areas with one of Peab’s RMX plants. In Forssa / Forssanportti, Forssa
         / Vuori, Jokioinen / Ripunkallio, Jokioinen / Myllymäki, Salo / Hiekkanummi,
         Somero / Matinmäki and Tammela Pentt, YIT reports no current sales to RMX
         manufacturers. In Somero / Sora-Heikkilä, sales to RMX companies remain
         moderate at around [10-20]%188 . YIT indeed does report significant sale shares to
         Peab’s RMX competitors for some markets where either combined upstream
         markets shares remain below 30% or that cannot serve one of Peab’s RMX plants.
         However, in areas where input foreclosure may be a concern, RMX competitors
         predominantly source from other suppliers that the Target.
(161) Second, the merged entity lacks incentive for input foreclosure, for two reasons.
         On the one hand, the merged entity does not have a large enough downstream
186
    Submission by a customer, 10 M arch 2020.
187
    Form CO, Table 16; estimates for an area of 160 km around the Target`s quarries in the Turku and Forssa area,
    and therefore potential competitors under catchment areas of 80 km.
188
    Reply to RFI1, question 1.
                                                         36
 ---pagebreak---          presence in RMX markets to recoup the margins lost through lower sales in the
         upstream aggregates market. Overall, Peab is not the largest player in four out of
         eight RMX downstream markets in question189 . In the two by far biggest markets
         in Helsinki and Espoo, it is only the fourth biggest RMX supplier. In all markets
         in question, four or more other competitors with a market share of at least 5% are
         present, and at least one with a market share exceeding 15%.190 191 This is
         compounded by limited barriers to switching for a homogeneous product such as
         aggregates, as explained in the horizontal assessment section.
(162) On the other hand, the merged entity would indeed need large gains in market
         share downstream to level potential losses in upstream aggregates sales. As stated
         above, RMX forms only a small part of the overall aggregates customer base.192
         However, as the merged entity does not have control over the secondary market,
         and cannot avoid arbitrage, it would have to sustain higher aggregate prices not
         only for RMX customers, but also for customers from the construction or asphalt
         business in the context of an input foreclosure strategy. Therefore, in the face of
         limited potential gains downstream, it would risk facing losses in other customer
         groups upstream, which makes an incentive to pursue such a strategy unlikely.
(163) Third, the Commission considers that it is unlikely that an input foreclosure
         strategy would have an overall impact on downstream RMX prices. As shown
         above, the Notifying Party meets a number of credible competitors in all local
         markets, the largest of which have access to own upstream aggregates.
(164) The Notifying Party’s main competitor Rudus (CRH) is an integrated company
         itself with own access to aggregates193 and therefore does not rely on purchases
         from the Notifying Party. Further, the Notifying Party submits it would face
         competition from four additional integrated RMX competitors in the Turku /
         Forssa area (Santalan Betoni, 10Betoni, Vammalan Betoni and Laurilan Betoni),
         and competition from five integrated players in the Uusimaa area (Rusko, Luja,
         Betonicenter, Santalan Betoni, 10Betoni)194 . As explained above, it is furthermore
         unlikely that the merged entity would have the ability to foreclose non-integrated
         competitors. Therefore, even if input foreclosure by the merged entity would
         affect single downstream competitors, it would not eliminate effective
         competition on the downstream market, and therefore not raise RMX prices.
         (A.iii.b) Customer foreclosure
(165) The Transaction gives rise to a number of vertical aggregates and RMX markets
         where customer foreclosure is a potential concern. This would be the case in the
         four downstream RMX markets where the merged entity reaches shares
         exceeding 30%, as listed in Table 11.
189
    Applying a catchment area of 50 km radius for Loimaa, Salo, Naantali, Lieto, Lohja, Kirkkonummi, Espoo,
    Helsinki; no data available for Ylöjärvi, Tampere, as plants opened in 2019.
190
    Annex 7, table 155.
191
    Under a catchment area of 25 km, the Notifying Party would face at least three competitors of more than 5%
    market share, with at least one of them with a share exceeding 10%.
192
    The Finnish M inistry of Employment and the Economy, Kiviaines- ja luonnonkiviteollisuuden kehitysnäkymät
    (report on aggregates), report 54/2015, page 11.
193
    See Q1, questionnaire to aggregates customers in Finland, question 4.
194
    See response to RFI 1, 11 M arch 2020.
                                                          37
 ---pagebreak---          Table 11 – downstream RMX markets where Peab’s market share exceeds 30%
                              Catchment area                                  Market shares195
                                    Lieto                                          [50-60]%
                                   Naantali                                        [50-60]%
                                    Salo                                           [40-50]%
                                   Loimaa                                          [40-50]%
         Source: Form CO, Table 186.
(166) All upstream aggregates markets listed                above for input foreclosure are also
         affected vertically due to market shares           exceeding 30% in Peab’s downstream
         RMX business, and put in italics in Table          12. In addition, a number of other areas
         are affected only because of the Notifingy         Party’s strong downstream position.
         Table 12 – affected upstream aggregates markets
                Catchment area             Market shares            Linked RMX catchment area
                 Humppila, Kair             [20-30] %                 Loimaa, Salo, Lieto, Naantali
                Hyvinkää, Noppo               [5-10]%                      Loimaa, Salo, Lieto
                Hämeenlinna/Hatt            [20-30] %                             Loimaa
               Kemiönsaari, Nord              [0-5] %                             Loimaa
                 Laitila, Haijanen            [5-10]%                 Loimaa, Salo, Lieto, Naantali
                Lempäälä, Aukeas              [5-10]%                             Loimaa
                   Loppi, Läyl                [5-10]%                         Loimaa, Salo
                  Loppi, Pilpala             [10-20]%                         Loimaa, Salo
              Pirkkala, Linnakorpi            [5-10]%                             Loimaa
                      Puslua                [20-30] %                    Salo, Loimaa, Naantali
                  Pöytyä, Kum                [10-20]%                      Loimaa, Salo, Lieto
                 Tampere, Sorila              [5-10]%                             Loimaa
                Tarvasjoki, Tyllilä           [5-10]%                 Lieto, Loimaa, Naantali, Salo
                      Tupuri                 [10-20]%                 Lieto, Salo, Naantali, Loimaa
                Ulvila, Pirunkynsi           [10-20]%                             Loimaa
            Valkeakoski, Patavuori           [10-20]%                         Loimaa, Salo
                  Vantaa, Kiila               [5-10]%                               Salo
                 Vantaa, Voutila              [5-10]%                               Salo
              Forssa, Forssanportti          [40-50]%                 Loimaa, Salo, Lieto, Naantali
                  Forssa, Vuori              [40-50]%                 Loimaa, Salo, Lieto, Naantali
             Jokioinen, M yllymäki           [30-40]%                 Loimaa, Salo, Lieto, Naantali
             Jokioinen, Ripunkallio          [40-50]%                 Loimaa, Salo, Lieto, Naantali
               Salo, Hiekkanummi             [30-40]%                 Loimaa, Salo, Lieto, Naantali
              Somero, M atinmäki             [30-40]%                 Loimaa, Salo, Lieto, Naantali
             Somero, Sora-Heikkilä           [30-40]%                 Loimaa, Salo, Lieto, Naantali
                 Tammela, Pentt              [40-50]%                 Loimaa, Salo, Lieto, Naantali
         Source: Form CO, Annex 5.6a.
(167) However, it is in general unlikely for RMX producers to be able to foreclose
         upstream aggregates suppliers, as RMX typically forms only a small portion of
        the overall aggregates demand. Aggregates can be used for a number of end-
        products, such as asphalt, mortar, RMX and overall construction works.
(168) In fact, RMX forms only a small part of around 10% of the overall aggregates
         customer base196 . This number was confirmed during the market investigation, as
         market participants estimated the share of total aggregates that would be used for
195
    Annex 7, table
196
    The Finnish M inistry of Employment and the Economy, Kiviaines- ja luonnonkiviteollisuuden kehitysnäkymät
    (report on aggregates), report 54/2015, page 11.
                                                         38
 ---pagebreak---          RMX production at below 10%.197 High market shares in downstream RMX
         markets alone do therefore not imply the ability for customer foreclosure, as the
         Notifying Party’s RMX business accounts in fact for significantly less than 10%
         of the total customer base of upstream competitors in the aggregates business.
(169) Therefore, with respect to a potential product segmentation into crushed rock and
         gravel / sand, the assessment would not change, as both types of aggregates are
         used for the production of RMX. Concerning the geographic market definition,
         the conclusion remains the same if a narrower catchment area of 25 km was
         applied, as even very high downstream market shares in RMX would not be
         sufficient to successfully engage in customer foreclosure.
(170) Also a possible combination of all end-uses, combining market shares of all the
         merged entity’s end-uses, would not increase the ability for customer foreclosure.
         The biggest part of overall aggregates production is used in the construction
         sector, where Peab currently has a market share of around [0-5]%198 , while YIT’s
         construction business is not part of the Transaction. Peab itself is not active in
         manufacturing of asphalt in Finland, but aquires YIT’s asphalt business.
         However, the ability for customer foreclosure for the merged entity post-
         transaction is significantly lower than it is currently for YIT.
         (A.iii.c) Conclusion
(171) Based on the above the Commission considers that the Transaction will not lead
         to a significant impediment of effective competition as a result of the aggregates-
         RMX vertical links in Finland.
         (B) Aggregates – construction
         (B.i) Affected markets
(172) The Transaction gives rise to a vertically affected market due to the aggregates-
         construction vertical link. The downstream construction market is national and
         the combined market share on this market stays well below 30% as only Peab is
         active in construction and its share is moderate. Namely, its share stays below 3%
         regardless of how construction market is defined.199
(173) Thus the only potential issue is input foreclosure due to high individual or
         combined market shares in a number of aggregates markets. The affected market
         is the national paving market.
(174) Table 13 below lists the aggregates markets where the Parties’ individual or
         combined market share exceeds 30%.
197
    See call with a competitor on 10 M arch 2020.
198
    Form CO, Table 220 / paragraph 809.
199
    Form CO Table 220, see also Form CO paragraph 814.
                                                    39
 ---pagebreak---           Table 13 – upstream aggregates markets where individual or
          combined market shares exceed 30%
                                          Target       Peab  Combined share
                 Forssa, Forssaporti     [30-40]%     [0-5]%    [40-50]%
                    Forssa, Vouri        [30-40]%    [5-10]%    [40-50]%
               Jokioininen/M yllymaki    [30-40]%     [0-5]%    [30-40]%
               Jokioininen/Ripunkallio   [30-40]%    [5-10]%    [40-50]%
                 Salo, Hiekkanummi       [20-30]%     [0-5]%    [30-40]%
                  Salo, M uronmaa        [20-30]%     [0-5]%    [30-40]%
                 Salo, Nummensyrja       [20-30]%     [0-5]%    [20-30]%
                 Salo, Tehdaspalsta      [20-30]%     [0-5]%    [30-40]%
                 Somero/M atinmaki       [20-30]%     [0-5]%    [30-40]%
                Somero/Soraheikkila      [20-30]%     [0-5]%    [30-40]%
                       Tammela           [30-40]%     [0-5]%    [40-50]%
             Lappeenranta,Viipurinportti [30-40]%     [0-5]%    [30-40]%
                   Ruokolahti 1:5        [30-40]%     [0-5]%    [30-40]%
                       Joutseno          [30-40]%     [0-5]%    [30-40]%
                       Kerimäki          [30-40]%     [0-5]%    [30-40]%
                  Oulu Vittakangas       [40-50]%     [0-5]%    [40-50]%
                       Pattijoki         [40-50]%     [0-5]%    [40-50]%
                      Savonlinna         [30-40]%     [0-5]%    [30-40]%
                       Siikajoki         [40-50]%     [0-5]%    [40-50]%
                  Taipalsaari Ahola      [30-40]%     [0-5]%    [30-40]%
                  Taipalsaari Sorala     [30-40]%     [0-5]%    [30-40]%
         Source: Form CO, Table 2018, paragraph 809.
        (B.ii) The Notifying Party’s view
(175) The Notifying Party submits that it would not have the ability to foreclose
        competing construction companies in the relevant catchment areas post-
        Transaction because the pre-Transaction Peab quarries produce aggregates
        entirely for Peab’s RMX business and the market share of the Target’s quarries
        are limited. Market shares of at most 30-40% indicate that several significant
        competitors remain in the area from whom aggregates can be sourced.200
(176) Furthermore, many of the Target's largest customers in the areas are independent
        transport companies that deliver the aggregates to their own customers. Peab
        would not be able to prevent these companies from choosing their own end-
        customers.201
(177) In addition, many of the Target's current competitors in aggregates also operate in
        infrastructure construction, which means they could counter such hypothetical
        foreclosure strategy through the use of their own aggregates production.202
(178) Any segmentation of aggregates into (i) crushed rock and (ii) sand and gravel
        would not change this assessment to a significant extent as the number of
        catchment areas with more than 30% market share and the market shares would
        not change appreciably.203
(179) The Notifying party also notes that YIT (the seller of the Target) is a much larger
        player in the Finnish construction market than Peab. Thus, as a result of the
200
    Form CO, paragraph 816.
201
    Form CO, paragraph 817.
202
    Form CO, paragraph 817.
203
    Form CO, paragraph 818.
                                                  40
 ---pagebreak---          Transaction, the combined entity's ability to attempt input foreclosure would not
         increase.204
         (B.iii)      The Commission’s assessment
         (B.iii.a) Markets with upstream increments
(180) In 11 upstream markets,205 there is an increment due to the Transaction. Given
         that the combined market share in these markets are above 30%, these markets
         were all horizontally affected. In Section 5.3.3.1. (A.ii), the Commission
         concluded that the Transaction will not lead to unilateral non-coordinated effects
         in these catchment areas. The lack of horizontal effects implies that, for the
         reasons explained in Section 5.3.3.1. (A.ii), the increment will not lead to
         significant price increases in the upstream market. This in turn implies that the
         merged entity will lack the ability to engage in input foreclosure.
(181) As regards incentives, in general the merged entity will face a trade-off when
         considering input foreclosure strategies. An increase of prices in the upstream
         market (or a refusal to sell) will reduce profits due to decreasing sales to
         downstream rivals. However, by raising downstream rivals’ input costs it may
         gain additional profits downstream by capturing additional sales or by increasing
         prices downstream.
(182) In this regard, the Transaction will decrease, rather than increase Peab’s
         incentives to engage in input foreclosure. This is because pre-Transaction the
         Target was part of YIT, the seller, which is a much larger player in the Finnish
         construction market than Peab.206 Thus, the merged entity’s downstream market
         share will be lower than YIT’s was pre-Transaction. The decreasing market share
         downstream will reduce the incentives to foreclose as downstream the merged
         entity would be able to recoup less of the lost profits upstream than YIT was able
         to pre-Transaction due to the fact that it will have a smaller sales base.
(183) On the basis of above, the Commission considers that the Transaction will not
         lead to a significant impediment of effective competition on account of input
         foreclosure in the catchment areas of the Forssa/Forssaporti, Forssa/Vouri
         Jokioininen/Myllymaki,                     Jokioininen/Ripunkallio,               Salo/Hiekkanummi,
         Salo/Muronmaa,            Salo/Nummensyrja,           Salo/Tehdaspalsta,          Somero/Matinmaki,
         Somero/Soraheikkila and Tammela quarries.
         (B.iii.b) Markets with zero upstream increments
(184) In 10 upstream markets207 the increment brought about by the Transaction is zero
         as Peab has no quarries in these catchment areas. Hence, the Transaction does not
         increase the ability of the merged entity to engage in input foreclosure.
204
    Form CO, paragraph 819.
205
    Forssa, Forssaporti; Forssa, Vouri ; Jokioininen/M yllymaki; Jokioininen/Ripunkallio; Salo, Hiekkanummi; Salo,
    M uronmaa; Salo, Nummensyrja; Salo, Tehdaspalsta; Somero/M atinmaki; Somero/Soraheikkila; Tammela.
206
    Form CO, Table 227.
207
    Lappeenranta,Viipurinportti; Ruokolahti 1:5; Joutseno; Kerimäki; Oulu/Vittakangas; Pattijoki; Savonlinna;
    Siikajoki; Taipalsaari/Ahola; Taipalsaari/Sorala.
                                                         41
 ---pagebreak---  (185) As discussed in Section 5.3.3.2 (B.iii.b) above, the Transaction decreases, rather
         than increases the incentives to engage in input foreclosure as the Peab’s
         downstream presence post-Transaction will be smaller than YIT’s pre-
         Transaction.
 (186) On the basis of above, the Commission considers that the Transaction will not
         lead to a significant impediment of effective competition on account of input
         foreclosure in the catchment areas of the Lappeenranta/Viipurinportti, Ruokolahti
         1:5, Joutseno, Kerimäki, Oulu/Vittakangas, Pattijoki, Savonlinna, Siikajoki,
         Taipalsaari/Ahola, Taipalsaari/Sorala quarries.
         (B.iii.c) Conclusion
 (187) Based on the above the Commission considers that the Transaction will not lead
         to a significant impediment of effective competition as a result of the aggregates-
         construction vertical links in Finland.
 5.3.4. Norway
5.3.4.1. Horizontally affected markets
         (A) Asphalt – unilateral effects
         (A.i) List of affected markets and market shares
 (188) The Transaction gives rise to two horizontally affected markets in Norway. The
         markets and the relevant market shares for 2018 are indicated in Table 14 below.
         The market shares are based on the 50 km radius approach and volume based.
         Both of these areas are south/southwest of Oslo, 140 km (Grenland) and 100 km
         (Tonsberg) from the capital.
         Table 14 – market shares in horizontally affected asphalt markets in Norway
           Catchment       Peab     Target    Combine      Veidekke   S kanska       NCC    Feiring Others
              area                                 d
            Tonsberg     [5-10]%   [10-20]%   [20-30]%     [30-40]%   [5-10]%     [30-40]%  [5-10]% [0-5]%
            Grenland     [5-10]%   [30-40]%   [40-50]%     [30-40]%    [0-5]%      [20-30]%  [0-5]% [0-5]%
         Source: Form CO, table 49, paragraph 393.
         (A.ii) The Notifying Party’s view
 (189) The Notifying Party submits that the Transaction will not lead to a significant
         impediment of effective competition for three general reasons.
 (190) First, the production and sale of asphalt mass to external customers is not a key
         business to the Parties. They mainly supply asphalt internally to their own paving
         operations. External sales vary considerably from year to year. As effectively all
         asphalt sold is used for paving and all major paving players produce asphalt in
         both fixed and mobile asphalt plants of their own, there are no customers that
         would be dependent on the Parties' asphalt sales. Thus raising prices vis-à-vis
         these customers would not be effective.208
 208
     Form CO, paragraph 396.
                                                     42
 ---pagebreak--- (191) Second, there are significant amounts of spare capacity available in asphalt
        production in the areas where the Parties have horizontal overlaps. Regardless of
        the combined entity's market share in any catchment area, competitors would be
        able to easily increase their production to respond to any hypothetical increase in
        the combined entity's prices. This would impose a powerful constraint for such
        behaviour.209
(192) Third, the Parties' asphalt operations are largely complementary and the merged
        entity would face strong integrated competitors such as Veidekke, Skanska and
        NCC. Any anti-competitive effects on the horizontally affected asphalt markets
        are thus unlikely.210
(193) Specifically with regard to the affected markets in Norway, the Notifying Party
        submits that in the catchment area of the Tønsberg plants, the Parties' competition
        is significant but their combined market shares are relatively modest, as NCC and
        Veidekke – both much larger players locally – are also active in the area through
        their plants in Larvik. NCC is also present through its plant in Lierskogen, from
        which there is a direct road to the area. The competitors have significant amounts
        of spare capacity available. For example, based on the notifying party's estimate
        on their production volumes, the capacity utilisation rate of both Veidekke's and
        NCC's Larvik plant and NCC's Lierskogen plant is around [20-40]%.211
(194) The Notifying Party further submits that in the Grenland catchment area, the
        combined market share is high but the Parties are not geographically close
        competitors and do not exercise major competitive pressure on each other. The
        driving distance between the Target's Grenland plant and Peab's Holmestrand
        plant is approximately 90 km, and there are two competing Veidekke plants and a
        competing NCC plant closer to the Target's Grenland plant than Peab's
        Holmestrand plant. The Holmestrand plant's operations are oriented towards Oslo,
        opposite direction from the Grenland area.212
(195) In addition, the Target’s market share has varied considerably in the Grendland
        catchment area, decreasing from [60-70]% to [40-50]% between 2017 and 2018.
        This decrease, which results from a drop in production after a 4 lane highway
        project through the Vestfold County was concluded, shows that the Target does
        not possess any real market power in the area. Such fluctuations are not
        uncommon and they are larger than the increment brought about by the
        Transaction.213
(196) The merged entity will continue to be constrained by NCC and Veidekke, who
        possess the full capability to significantly increase their production if the
        combined entity tried to increase its prices post- Transaction.214
209
    Form CO, paragraph 397.
210
    Form CO, paragraph 398.
211
    Form CO, paragraph 403.
212
    Form CO, paragraphs 401-402.
213
    Form CO, paragraph 404-405.
214
    Form CO, paragraph 409.
                                              43
 ---pagebreak---         (A.iii)     The Commission’s assessment
        (A.iii.a) Relevance of market shares and captive production.
(197) As a preliminary remark, the Commission notes that the market shares indicated
        above are appropriate to measure market power.
(198) In this regard the Commission notes that the shares are volume based, which is
        appropriate in the case of a homogenous good like asphalt according to the
        Commission’s Market definition notice.215
(199) Furthermore, they are based on the overall asphalt production, i.e. both internal
        (captive) production and external (merchant) sales, which appear more
        appropriate in this particular case for two reasons.
(200) First, overall production figures fluctuate less than merchant sales and thus
        provide a more reliable indication of market power. Indeed, the share of external
        sales can and do fluctuate widely. For example, in the years 2016-2018, the share
        of external sales can go from around 20% to 90% in some of the Parties’ asphalt
        plants.216 It is important to note in this regard that most asphalt suppliers are
        integrated and have their own paving operations,217 and that asphalt is used
        exclusively for paving.218 Consequently, external sales and purchases of asphalt
        are driven by the supplier’s success or lack thereof on the paving market (e.g. a
        supplier needs extra asphalt if it wins a lot of paving contracts) and by the
        location of the paving works (e.g. a supplier may buy extra asphalt if the
        competitor’s location is more favourable relative to the paving site than its own
        plant). As paving is a bidding market, demand is lumpy in any given asphalt
        catchment area and market shares fluctuate considerably from one year to another
        (even if these fluctuations even out on a national basis in paving). Likewise, the
        location of paving works relative to the plant is also random and this also adds to
        the fluctuating nature of external sales. These fluctuations are evened out or
        reduced considerably in the case of total production and thus the latter is a more
        reliable indicator of market power, even if the lumpy demand on the underlying
        paving market can cause even the combined shares to fluctuate somewhat. The
        Commission also notes that switching between external sales and captive
        production is very easy as it involves the same product and the same distribution
        channels.
(201) Second, a supplier’s captive production indirectly constrains another supplier’s
        external sales. As asphalt is used exclusively for paving and is one of the most
        important inputs to paving, a supplier that sells asphalt to an external paving
        supplier has to take into account its customer’s competitiveness on the paving
        market. As in in most cases the asphalt supplier is an integrated player, it is fully
        aware of the yearly fluctuation of merchant sales and the cost structure of paving
        operators. Consequently, when selling on the merchant market, it is likely to take
215
    Commission Notice on the definition of relevant market for the purposes of Community competition law,
    paragraph 55.
216
    Form CO, Annex 2 to Annex 7 (Copenhagen Economics: Catchment Areas, M arket Sizes and M arket Shares,
    18 February 2020).
217
    Notifying Party’s response to the Commission’s Request for Information RFI 2
218
    Form CO paragraph 372.
                                                       44
 ---pagebreak---         into account the constraint exercised by an integrated competitor. In summary, the
        close link between asphalt and the fact that all major players are integrated
        implies that captive production indirectly constrains merchant sales.
(202) The use of shares based on combined production does not imply that such figures
        are always appropriate in all cases where some suppliers are vertically integrated.
        However, having regard to the particular circumstances discussed above (very
        close link between the asphalt and paving markets, most players are integrated,
        fluctuating merchant sales and indirect constraints), in the case of the asphalt-
        paving markets in Norway they are a good proxy.
        (A.iii.b) Common characteristics of all Norwegian markets
(203) Before assessing the individual affected markets, the Commission will discuss
        factors that apply to all affected markets in Norway. These involve barriers to
        entry and customer buyer power.
(204) As regards entry, the Commission considers that entry barriers are not high. The
        cost of a fixed plant with medium capacity is around EUR 3-5 million.219 By
        comparison, the Target’s sales in Norway alone (combined sales of asphalt,
        paving and aggregates) amounted to roughly EUR […] million.220 Furthermore,
        setting up a plant and starting production takes 3-12 months, including the time
        necessary for obtaining the permits.221 This is consistent with the fact that
        respondents pointed to a number of entries in the different Norwegian regions by
        suppliers that have not been present in those regions, including Nord Vei &
        Anlegg in Liland, Askøy Dekkelegging in Askøy and Velde Asphalts in Mandal
        and Karmoy.222
(205) As regards buyer power, the buyers in the downstream paving market are public
        authorities who tender out paving contracts, have expertise in commissioning
        paving works and have budget constraints. All competitors noted that buyers
        exercise buyer power due to overcapacity, the number of suppliers and the focus
        of buyers on price, with the possible exception of very remote regions.223 It was
        also mentioned in this regard that asphalt has few differentiators and it is a
        volume driven (and not margin driven) business, which implies that it is difficult
        for suppliers to exercise market power in the presence of choice and
        overcapacities.
(206) Consequently, it appears that paving customers have some buyer power and that
        this has effects in the upstream asphalt market due to the strong link between the
        two markets and to the fact that most players are integrated. This is true, even if
        the responses reveal that such buyer power is not absolute and could be
        outweighed if the particular market in question capacities are tight and the
219
    Q6 – Questionnaire to competitors – asphalt, Norway, question 29; Q5 – Questionnaire to customers – asphalt,
    Norway, question 21.
220
    Annex 5.4.18 to the Form CO, Project Aniola presentation 26 October 2018, page 25.
221
    Q6 – Questionnaire to competitors – asphalt, Norway, question 29; Q5 – Questionnaire to customers – asphalt,
    Norway, question 21.
222
    Q5 – Questionnaire to customers – asphalt, Norway, question 21.
223
    Q6 – Questionnaire to competitors – asphalt, Norway, question 27.
                                                       45
 ---pagebreak---         number of competitors is low, which does not appear to be case in Norway in
        general.
        (A.iii.c) Tonsberg
(207) The combined market share in the Tonsberg area is very moderate, barely above
        the threshold for affected markets. In line with paragraph 18 of the Horizontal
        Merger Guidelines, limited combined market shares is an indication that the
        merger will not create undue market power and the price effects, if any, will be
        minor.
(208) In this catchment area, three nationally active competitors (Veidekke, Skanska,
        NCC) and one smaller competitor (Feiring) remain post-Transaction. Taking
        market share as a basis, Veidekke and NCC will be stronger than the merged
        entity, and all competitors of the merged entity except Feiring have exercised a
        stronger constraint on Peab than the Target. Thus the merged entity will face
        sufficiently strong constraints post-merger.
(209) In addition, there are considerable excess capacities in the region as the overall
        capacity utilisation in the catchment area is 63%.224 Competitors have 11 plants
        that can serve this catchment area and their capacity utilisation levels range from
        23.4% to 74.4% with 6 plants running at a capacity utilisation of less than 40%.225
        Thus, to the extent the merger could lead to increased prices, competitors will
        have the ability to prevent such increases. They will also have the incentive to do
        so as asphalt plants have high fixed costs,226 which implies that leaving capacity
        idle is costly. Consequently, if the merged entity were to raise prices, competitors
        can be expected to defeat such attempts by expanding their output and
        undercutting the merged entity’s prices.
(210) Furthermore, as discussed in Section (A.iii.b), entry barriers are not high and
        customers have some buyer power.
(211) Based on the above the Commission considers that the Transaction will not lead
        to a significant impediment to effective competition due to unilateral effects in the
        catchment area of the Tonsberg plant.
        (A.iii.d) Grenland
(212) In the Grenland area, the combined market share is very high (around [40-50]%)
        and the increment is also significant ([5-10]%). Moreover, the Transaction
        reduces the number of players from four to three, which can potentially lead to
        serious concerns. However, the Transaction is unlikely to lead to anticompetitive
        effects for the following reasons.
(213) First, capacity utilisation is very low in this market. Overall capacity utilisation is
        35%, suggesting ample spare capacities.227 Indeed Veidekke has three plants that
        could serve the catchment area with capacity utilisation levels of [30-40]%
224
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
225
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
226
    M inutes of a call with a competitor 10 M arch 2020.
227
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
                                                         46
 ---pagebreak---         (Larvik), [60-70]% (Skien) and [70-80]% (Moss).228 NCC has three plants that
        can serve this region with capacity utilisation levels of [20-30]% (Larvik),
        [20-30]% (Lierskogen) and [30-40]% (Notodden).229 Skanska has one plant in
        Halden that can serve (a small part of) the catchment area with capacity utilisation
        level of [20-30]%.230 Veidekke’s total capacity available for this catchment area is
        around […] kt, while NCC’s is […] kt, which compares to 420 kt of annual
        demand.231 Thus, given their low capacity utilisation levels, Veidekke and NCC
        have enough spare capacities to serve the entire demand in the catchment area.
        This implies that the merged entity will not have guaranteed demand and thus will
        not be able to exercise market power provided competitors have the incentive to
        use their capacities to prevent price increases by expanding output. This appears
        to be the case as asphalt plants have high fixed costs.232
(214) Second, in addition to the free capacities in fixed plants, mobile plants can
        provide further capacity and choice. As discussed in Section 5.2.3.2, mobile
        plants are not a viable choice in every region but they are used in Norway outside
        the metropolitan areas. Grendland being 140 km away from Oslo, mobile plants
        can be used in this catchment area, which was explicitly confirmed by the market
        investigation.233 These mobile plants can be moved to any area within 10 to
        30 days.234 The capacity of a mobile plant is about 150-200 kt/year,235 which
        roughly equals half of the total demand of this catchment area. One major
        competitor, Skanska, is not already present in the region with fixed plants and has
        3 mobile plants.236 In addition NCC and Veidekke could also increase their
        capacities as each of them has 3 mobile plants.237 This means, for example, that
        by bringing one mobile plant online NCC could have enough spare capacity in the
        catchment area to serve the entire demand, suggesting a very competitive post-
        merger market. Even if these catchment areas are not the only place in Norway
        where mobile plants can be used, it is likely that at least one plant from one of the
        competitors would be available for use if prices were to increase. As one single
        plant could serve half of the entire demand of this catchment area, the possibility
        of providing additional capacity and choice through mobile plants makes any
        competitive harm even less likely.
(215) Third, as discussed in Section 5.4.3.1. (A.iii.b), entry barriers (with fixed plants)
        are not high and customers have some buyer power.
(216) Based on the above the Commission considers that the Transaction will not lead
        to a significant impediment of effective competition due to unilateral effects in
        the Grenland catchment area.
228
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
229
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
230
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
231
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
232
    M inutes of a call with a competitor 10 M arch 2020.
233
    M inutes of a call with a competitor 10 M arch 2020.
234
    M inutes of a call with a competitor, 10 march 2020; M inutes of a call with a competitor, 10 march 2020.
235
    M inutes of a call with a competitior, 10 march 2020; M inutes of a call with a competitor, 10 march 2020.
236
    Notifying Party’s response to the Commission’s Request for Information RFI 4, question 1.
237
    Notifying Party’s response to the Commission’s Request for Information RFI 4, question 1.
                                                          47
 ---pagebreak---          (A.iii.e) Conclusion
 (217) Based on the above the Commission considers that the Transaction will not lead
         to a significant impediment of effective competition due to unilateral effects in
         the markets for asphalt in Norway.
5.3.4.2. Vertically affected markets
         (A) Aggregates – asphalt
         (A.i) List of affected markets and market shares
 (218) The Transaction gives rise to two vertically affected markets due to the
         aggregates – asphalt relationship. Both the upstream and downstream markets are
         local, each corresponding to a 50 km radius around the quarry and the asphalt
         plant. The Parties’ individual or combined market shares in aggregates are well
         below 30% in any catchment area and thus it is unlikely that input foreclosure
         will occur. However, since two asphalt catchment areas around Peab’s asphalt
         plants where Peab’s share exceeds 30 % can be supplied by three of the Target’s
         quarries, the Commission will examine the possibility of customer foreclosure.
 (219) Table 15 below lists the downstream markets.
         Table 15 – downstream asphalt markets with individual or combined market shares above 30% i n
         Norway, aggregates – asphalt link
           Catchment area    Market share Peab       Market share          Combined market share
                                                        Target
              Trondheim          [40-50]%               [0-5]%                     [40-50]%
                Verdal          [90-100]%               [0-5]%                    [90-100]%
         Source: Form CO, table 72.
 (220) Table 16 lists the affected upstream markets.
         Table 16 – upstream affected aggregates markets and market shares in Norway, aggregates –
         asphalt link
           Catchment area    Market share Peab       Market share          Combined market share
                                                        Target
             Skamfersætra         [0-5]%                [0-5]%                      [0-5]%
                Reitan            [0-5]%                [0-5]%                      [0-5]%
                Bjornli           [0-5]%                [0-5]%                      [0-5]%
         Source: Form CO, table 69.
         (A.ii) The Notifying Party’s view
 (221) The Notifying Party considers that it would not have the ability to foreclose
         competing aggregates suppliers. Peab's market share in asphalt would remain
         below 40% in the Trondheim catchment area. Even more importantly, as
         described above, aggregates are an extremely versatile product that has many
         fully independent end-uses. It would always be possible to sell aggregates to
         other, downstream markets such as infrastructure construction and mortar.238
 238
     Form CO, paragraph 451.
                                                  48
 ---pagebreak---          (A.iii)     The Commission’s assessment
(222) As discussed in relation to the product market definition of aggregates
         (Section 5.2.1.1. (C.iii.), construction represents around 80 % of all aggregates
         use, with asphalt and RMX representing 11% and 5 % of total use respectively
         (disregarding specialist aggregates).239 As upstream aggregates competitors will
         be able to sell aggregates to construction and RMX customers (as well as to
         Peab’s asphalt competitors) even if Peab’s asphalt plants were to stop buying
         aggregates from them, they cannot be foreclosed. As Peab’s asphalt plants
         represent a fraction of the 11% of aggregates sales in these catchment areas, they
         cannot be considered to be important customers.
(223) This applies also if the aggregates market were further divided into crushed rock,
         on one side, and gravel and sand on the other, as both can be used for
         construction,240 which makes up around 80% of all aggregates use. Moreover,
         asphalt plants usually buy crushed rock and do not buy gravel/sand,241 so in a
         divided market the potential customer foreclosure concern would apply to crushed
         rock. Crushed rock is used more widely than gravel and sand (as discussed in
         Section 5.2.1., crushed rock is used for construction, RMX and asphalt, whereas
         gravel and sand is used for construction and RMX), and thus in a separate crushed
         rock market the importance of an asphalt customer would be similar to that of a
         customer on the overall aggregates market.
(224) Based on the above the Commission considers that the Transaction will not lead
         to a significant impediment of effective competition as a result of the Parties’
         aggregates-asphalt vertical links in Norway.
         (B) Aggregates – RMX
         (B.i) List of affected markets and market shares
(225) The Notifying Party only has two aggregates quarries in Norway242 , and both are
         not relevant in a vertical aggregates RMX relation due to low market shares. Peab
         furthermore operates three RMX plants in Norway in Tromsø, Jessheim and
         Kongsberg. In the latter two catchment areas, Peab’s market shares remain below
         30% under both possible geographic market definitions of 25 km and 50 km243 .
         Affected markets are identified as market shares in Tromsø exceed 30% under
        both possible definitions, and the catchment area overlaps with those of three
        aggregates production sites currently owned by YIT, as shown in Table 17.
(226) The Target produces aggregates in 30 different locations in Norway244 , but is not
         active in RMX245 . The same markets as mentioned above are therefore also
         affected due to market shares exceeding 30% in the upstream aggregates business.
         Possible concerns therefore arise in the context of input and customer foreclosure.
239
    M inutes of phone call with a competitor on 10 M arch 2020.
240
    See Section 5.2.1.1. (C.iii.)
241
    See Section 5.2.1.1. (C.iii.)
242
    Form CO, paragraph 130.
243
    Form CO, paragraph 686.
244
    Form CO, paragraph 130.
245
    Form CO, paragraph 671.
                                                         49
 ---pagebreak---             Table 17 – upstream and downstream markets with the Parties’ combined market shares,
            aggregates – RMX link, Norway
                  Upstream            Combined             Downstream    Combined      Combined
                 aggregates         market shares        RMX catchment  market share market shares
              catchment area           upstream               area     downstream 25 downstream 50
                                                                         km radius     km radius
                   Breivika            [40-50]%              Tromsø       [60-70]%      [30-40]%
               Tyttebaervika           [50-60]%
                  Ullsfjord            [50-60]%
           Source: Form CO, Annex 5.6a; Annex 7, Table 129.
         (B.ii) The Notifying Party’s view
(227) The Notifying Party considers that the vertical aggregates – RMX relation does
         not cause any plausible competition concerns. As for input foreclosure, the
         Notifying Party submits that downstream RMX competitors do not rely on
         aggregates produced by the Target’s quarries, and can therefore not be
         foreclosed.246
(228) Concerning customer foreclosure, the Notifying Party argues that it would not
         have the ability for such a strategy, given the fact that aggregates are an input for
         a number of end products. Therefore, upstream competitors would still be able to
         sell to a high number of customers.247
         (B.iii)      The Commission’s assessment
         (B.iii.a) Input foreclosure in the Tromsø area
(229) Concerning the specific market in Tromsø, the Commission considers that the
         merged entity would not have the ability to foreclose downstream customers, and
         that it is unlikely that it would have an incentive to do so.
(230) First, existing RMX competitors currently do not purchase aggregates from YIT,
         and will therefore not rely on aggregate supply by the merged entity post
         transaction. In the downstream RMX market, Peab faces two competitors in the
         Tromsø area, Berg betong with a market share of [30-40]% and Storegga with a
         market share of [20-30]%.248 Berg betong is a vertically integrated company with
         its own aggregates production around Tromsø. Currently, the Notifying Party
         itself sources aggregates from Berg betong for its own RMX business.249 Also the
         second competitor Storegga currently does not source aggregates from YIT.
         Therefore, the merged entity will not have the ability to foreclose these two
         competitors.
(231) The market investigation provided further evidence that the merged entity will not
         have the ability for input foreclosure in the Tromsø area. On the one hand,
         capacities in the north of Norway are generally high250 . On the other hand,
         aggregates in northern Norway can be transported over longer distances to still
246
    Form CO, paragraph 722.
247
    Form CO, paragraph 725.
248
    Annex 7, table 132.
249
    Form CO, paragraph 723; response to RFI 4.
250
    Call with a competitor, 10 M arch 2020, points 14, 15.
                                                          50
 ---pagebreak---          economically reasonable terms, as they are also shipped by boat. This was
         confirmed during the market investigation by [a transport company], which stated
         to be active for companies such as Veiddeke, NCC and the Parties in northern
         Norway.251 The geographic market definition of a catchment area of 50 km
         around each plant is likely to over-estimate the actual market power of the
         merging entity with respect to the Tromsø area.252
(232) Second, the merged entity will unlikely have the incentive to engage in input
         foreclosure. Overall, RMX forms only a small portion of the overall customer
         base of aggregates suppliers. As the merged entity does not have control over the
         secondary market, and cannot avoid arbitrage, it would have to raise aggregates
         not only for RMX customers, but also for customers from the construction or
         asphalt business in the context of an input foreclosure strategy. Therefore, it
         would lose clients in all customer groups upstream. Given the fact that an input
         foreclosure strategy would likely not affect the RMX market, as YIT currently
         does not sell to RMX customers, there would be no incentive for the merged
         entity to risk decreasing sales in the upstream aggregates market.
(233) A possible segmentation of aggregates into rock and gravel / sand would not
         change the assessment of the RMX – aggregates link in the Tromsø area. First,
         market shares would still be below 50% under any possible segmentation, as
         shown in Table 18. Second, as YIT currently does not sell any type of aggregate
         to RMX competitors, the same applies under a possible segmentation. Third, as
         both types of aggregates are used for the production of RMX, but also in the
         construction business, the incentive to engage in input foreclosure would not
         increase under a further product segmentation.
           Table 18 – upstream aggregates market shares when market is divided into i) crushed ro ck a n d
           ii) gravel and sand, aggregates – RMX link, Norway
                   Catchment area                     Crushed rock                          Gravel / sand
                       Breivika                          [30-40]%                                -
                     Tyttebaervika                       [30-40]%                                -
                       Ullsfjord                         [30-40]%                            [50-60]%
           Source: See Annex 7, table 180.
         (B.iii.b) Customer foreclosure in the Tromsø area
(234) The merged entity would not have the ability to successfully foreclose upstream
         aggregates competitors. As aggregates can be used for many end-products, such
         as construction works, asphalt and mortar, a strong downstream position in RMX
         alone would not be sufficient to engage in customer foreclosure. Upstream
         competitors can deviate sales not only to other RMX competitors, but also to
         suppliers of other end uses. In fact, the market investigation showed that, among
         all end-uses for aggregates, RMX is not very important. Market participants
         estimated the share used for RMX production at less than 10%.253
251
    Q9, questionnaire to aggregates Norway, question 1, 18.
252
    In that context, it is noted that in a wider catchment area of 80 km radius, the Target would have significantly
    lower market shares in Breivika ([30-40]%), Tyttebaervika ([30-40]%) and Ullsfjord ([20-30]%). M arket shares
    for even wider areas are not available.
253
    See call with a competitor on 10 M arch 2020.
                                                        51
 ---pagebreak--- (235) This assessment would not change under a possible product segmentation. As
        both crushed rock and gravel / sand are can be used for the production of RMX,
        the share of demand linked to this specific end-product would remain small. Also
        a possibly narrower geographic market definition of RMX of a 25 km radius
        around each production facility would not change the assessment, as even very
        high market shares in RMX are not sufficient to successfully pursue a customer
        foreclosure strategy.
        (B.iii.c) Conclusion
(236) Based on the above the Commission considers that the Transaction will not lead
        to a significant impediment of effective competition as a result of the aggregates-
        RMX vertical links in Norway.
        (C) Aggregates – construction
        (C.i) List of affected markets and market shares
(237) The Notifying Party only has two aggregates quarries in Norway254 , and both are
        not relevant in a vertical aggregates RMX relation due to low market shares. Peab
        is active the construction business in Norway, with overall market shares of
        below 5%. Its market shares in construction would not rise above 20% under any
        possible product market segmentation255 . The geographic market definition for
        construction is national, as explained under 5.2.6.2.
(238) The Target produces aggregates in 30 different locations in Norway256 . Affected
        market results from market shares exceeding 30% in five upstream aggregates
        markets, listed in Table 19. The Target is not active in the construction business
        in Norway257 . The only possible concern can therefore be input foreclosure.
          Table 19 – upstream aggregates markets with combined market shares above 30%, aggrega t es-
          construction link, Norway
                                              Peab                Target            Combined share
                     Breivika                   -                [40-50]%              [40-50]%
                  Tyttebaervika                 -                [50-60]%              [50-60]%
                    Ullsfjord                   -                [50-60]%              [50-60]%
                     Bjarkoy                    -                [50-60]%              [50-60]%
                    Lodingen                    -                [60-70]%              [60-70]%
          Source: Form CO, table 221 / paragraph 809.
        (C.ii) The Notifying Party’s view
(239) On input foreclosure, the Notifying Party considers that its market shares in
        aggregates would be too low to successfully foreclose downstream construction
        competitors, as there would be several other aggregates suppliers active in the
        area.258
254
    Form CO, paragraph 130.
255
    Form CO, paragraph 822.
256
    Form CO, paragraph 130.
257
    Form CO, paragraph 791.
258
    Form CO, paragraph 821, 823.
                                                  52
 ---pagebreak--- (240) On customer foreclosure, the Notifying Party states that its market shares in the
         downstream construction market would be too low to successfully foreclose
         upstream aggregates competitors.259
         (C.iii)     The Commission’s assessment
(241) Aggregates are an input used in all kind of construction works. As market
         investigation suggested, construction is overall the main source of demand for
         aggregates.260 The aggregates produced in the five quarries in question are indeed
         almost entirely sold to construction companies.261
(242) However, the Commission considers that the merged entity will not be able to
         engage in input foreclosure post-transaction. Availability of aggregates is
         generally not a concern in northern Norway. Response from the market has
         shown that there are no capacity constraints in the area,262 and the merged entity
         would not become unavoidable in any region.
(243) This assessment concerning general availability of aggregates is plausible despite
         high market shares of the merged entity given the fact that aggregates are also
         transported by boat over longer distances in northern Norway. This was
         confirmed during the market investigation by [a transport company], which stated
         to be active for companies such as Veiddeke, NCC as well as YIT in northern
         Norway.263 As aggregates can be shipped over longer distances to economically
         reasonable terms, also suppliers outside a 50 km radius pose a competitive
         constraint, and market shares for this geographic market likely over-estimate the
         market position of the merged entity in the Tromsø area264 .
(244) Second, input foreclosure would not have a significant effect on construction
         competitors. The cost of aggregates form only a very small fraction of 1% to
         2.5% of the total costs in a construction project. For any segmentation of
         construction that the Commission considers plausible, the cost of aggregates does
         not exceed 5% of total cost. In particular, this share would only be reached in
         infrastructure construction, which includes the construction of roads. For the
         construction of buildings, for instance, aggregates account for below 1% of total
         costs for non-residential buildings, and below 0.5% of total costs for residential
         buildings.265
(245) Third, the merged entity would not have a clear incentive to engage in customer
         foreclosure, as there are no indications that it would benefit from such a strategy.
         Peab currently only has a small market share in overall construction of below 5%,
         which would remain below 20% under any product segmentation266 . In the
259
    Form COm paragraph 824.
260
    Call with a competitor, 10 M arch 2020, point 19; call with a competitor, 10 M arch 2020, point 15.
261
    See answers to RFI1.
262
    Call with a competitor, 10 M arch 2020, point 15; Q4, questionnaire to asphalt competitors in Norway,
    question 30, replies by competitors.
263
    Q9, questionnaire to aggregates Norway, question 1, 18.
264
    Under a catchment area of 160 km radius, the Target would only have a market share of 24% in aggregates in the
    Tromsø area, Form CO, table 233.
265
    See reply RFI 4, question 2.
266
    Form CO, paragraph 822.
                                                          53
 ---pagebreak---         construction of buildings and in infrastructure construction, Peab only has a
        respective market share of [0-5]%267 . However, it faces competition by large,
        integrated competitors, such as Veidekke, Skanska and NCC268 . Given this minor
        market position, it is questionable if the merged entity will be able to recoup
        losses in upstream sales with additional gains in downstream business.
(246) This assessment does not change under a possible segmentation between crushed
        rock and gravel / sand. Both types of aggregates are used in construction work,
        and market investigation suggested an overall availability of aggregates
        regardless of the segmentation. Also the impact of aggregates prices on overall
        costs of construction projects and the competition the merged entity faces in the
        construction business does not change under a product segmentation.
        (C.iii.a) Conclusion
(247) Based on the above the Commission considers that the Transaction will not lead
        to a significant impediment of effective competition as a result of the aggregates-
        construction vertical links in Norway.
        (D) Asphalt – paving
        (D.i) List of affected markets and market shares
(248) The Transaction gives rise to a vertically affected market due to the asphalt-
        paving relationship. The downstream paving market is national and the combined
        market share on this market stays below 30 %. Thus the only potential
        competition concern is input foreclosure due to high individual or combined
        market shares on a number of asphalt markets. The affected market is the national
        paving market.
(249) Table 20 below lists the asphalt markets where the Parties’ individual or
        combined market share exceeds 30%.
        Table 20 – upstream asphalt markets with a combined market share above 30%, asphalt-paving
        link Norway
          Catchment area        Market share Peab    Market share       Combined market share
                                                         Target
              Grenland                [5-10] %          [30-40]%                [40-50]%
            Ravneberget                [0-5]%           [40-50]%                [40-50]%
             Trondheim               [40-50]%            [0-5]%                 [40-50]%
               Verdal               [90-100]%            [0-5]%                [90-100]%
                Otta                   [0-5]%           [60-70]%                [60-70]%
               Eikefet                 [0-5]%           [30-40]%                [30-40]%
                Sotra                  [0-5]%           [30-40]%                [30-40]%
              Karmøy                   [0-5]%           [60-70]%                [60-70]%
              Harstad                  [0-5]%         [120-130]%              [120-130]%
           Tana Finnmark               [0-5]%           [50-60]%                [50-60]%
              Tromsø                   [0-5]%          [90-100]%               [90-100]%
                Bodø                   [0-5]%         [170-180]%              [170-180]%
               Narvik                  [0-5]%         [150-160]%              [150-160]%
        Source: Form CO, table 129
267
    Form CO, table 234 / paragraph 819.
268
    Form CO, table 234 / paragraph 819.
                                                  54
 ---pagebreak--- (250) With regard to Table 20, it should be noted that market shares above a 100% are a
        result of the market share methodology, which estimates the total market size as a
        multiple of the Norwegian per capita asphalt consumption and the population of
        the catchment area. These market shares are therefore merely a rough indicator
        for high or very high market shares rather than precise shares of supply in the
        relevant market.
(251) The Commission also notes that, having regard to its analysis in relation to
        geographic market in Section 5.2.3.2., some of these catchment areas are sparsely
        populated rural areas or fall into areas where boat transport is also possible. Both
        of these factors could modify the size of the relevant geographic market and
        hence the market shares. These points will be discussed in the individual
        assessment of the relevant catchment areas below.
(252) Tables 21-22 below lists the market shares on the downstream paving market both
        in volume and value.
        Table 21 - volume based market shares - paving, Norway
                                 Peab                        [5-10]%
                                Target                      [10-20]%
                             Combined                       [10-20]%
                              Veidekke                      [30-40]%
                                NCC                         [20-30]%
                               Skanska                       [5-10]%
                                Others                      [10-20]%
        Source: Form CO, table 127
        Table 22 - value based market shares - paving, Norway
                              Peab                       [5-10]%
                             Target                     [10-20]%
                          Combined                      [10-20]%
                           Veidekke                     [30-40]%
                             NCC                        [20-30]%
                            Skanska                      [5-10]%
                             Others                     [10-20]%
        Source: Form CO, table 127
        (D.ii) The Notifying Party’s view
        (D.ii.a) Grenland and Ravneberget
(253) With regard to the Grenland area, the Notifying Party considers that, in line with
        the horizontal assessment related to this market, the Parties' actual market power
        in the Grenland catchment area is considerably smaller than their imputed
        combined market share would suggest. The Parties are not geographically close
        competitors, and the Transaction would not have any significant impact on the
        market situation in the Grenland catchment area. The Target's market share has
        considerably decreased in this catchment area, which is not nearly offset by the
        small increase in Peab's market share.269
269
    Form CO, paragraph 573.
                                                   55
 ---pagebreak--- (254) Furthermore, the merged entity will have three competing plants in its close
        proximity, two Veidekke plants located 6 and 29 km from Grenland, and one
        NCC plant, located 26 km away from the plant. Customers therefore would have
        alternative plants from where they could purchase asphalt, affecting Peab's ability
        to foreclose any customers from access to inputs.270 Customers will also have
        alternative plants in the Ravneberget catchment area.
(255) In addition, all major paving competitors are vertically integrated and have
        mobile plants at their disposal, so an attempt to foreclose their access to asphalt in
        these catchment areas would not be successful.271
(256) Consequently, the merged entity will lack the ability to engage in input
        foreclosure in these catchment areas.
        (D.ii.b) Trondheim, Verdal and Otta (Central Norway)
(257) The Notifying Party submits that use of a broader geographical market than a
        radius of 50 km is particularly justified in this market in the fairly sparsely
        inhabited region. Thus the merged entity’s market power is smaller than what is
        suggested by its market share.272
(258) Further, in the absence of upstream increment the Transaction does not change
        the Peab’s ability or incentive to engage in input foreclosure. The increment in the
        downstream paving market will also not change the ability or incentive because
        the combined market share of the merged entity would remain moderate.273
        (D.ii.c) Eikefet, Sotra, Karmøy (Western Norway)
(259) The Notifying Party considers that in the absence of an upstream increment, the
        Transaction would not affect the combined entity's market power in asphalt in
        western Norway.274
(260) The only impact brought about by the Transaction would be the minor increase of
        approximately [5-10]% to the Target's existing market share on the paving side,
        which would have no impact on the overall competition.275
(261) Vertically integrated competitors Velde, Veidekke and NCC are all present in the
        area. As they all have their own supplies of asphalt available, a customer
        foreclosure strategy by Peab would not have any effect on the paving market.276
        (D.ii.d) Harstad, Tana Finnmark, Tromsø, Bodø, Narvik (Northern Norway)
(262) The Notifying Party submits that the use of a broader geographical market than a
        radius of 50 km is particularly justified in this market in a fairly sparsely
270
    Form CO, paragraph 574.
271
    Form CO, paragraph 574.
272
    Form CO, paragraph 579.
273
    Form CO, paragraphs 580-582.
274
    Form CO, paragraph 584.
275
    Form CO, paragraph 587.
276
    Form CO, paragraph 585.
                                              56
 ---pagebreak---         inhabited region in the north of Norway. Due to the use of boat transports along
        the western and northern coast of Norway, the relevant geographical market could
        arguably be even larger than a radius of 80 km. Thus the merged entity’s market
        power is much smaller than what is suggested by its market share.277
(263) Further in the absence of an upstream increment, the Transaction would not affect
        the combined entity's market power in asphalt in western Norway.278
(264) The only impact brought about by the Transaction would be the minor increase of
        approximately [5-10]% to the Target's existing market share on the paving side,
        which would have no impact on the overall competition.279
(265) Vertically integrated competitor Veidekke has a strong presence in the area. As
        Veidekke has its own supplies of asphalt available, an input foreclosure strategy
        by Peab would not have any effect on the paving market. Veidekke therefore has
        sufficient alternatives for selling its asphalt, and a customer foreclosure strategy
        undertaken by Peab post-Transaction would have no impact.280
        (D.iii)     The Commission’s assessment
        (D.iii.a) Grenland
(266) With regard to the Grenland cathment area, in Section 5.3.4.1. (A.iii.), the
        Commission concluded that the Transaction is unlikely to lead to price increases.
        This assessment was based on the following reasons: low capacity utilisation and
        large amounts of excess capacity in the hands of competitors; additional choice
        and capacity in the form of mobile plants; low entry barriers and buyer power.
        Lack of price effect on the upstream market implies that the merged entity will
        not have the ability to increase prices on the upstream asphalt market (or prevent
        access to asphalt) in the Grenland area.
(267) This is especially the case because the largest paving competitors (Skanska, NCC
        and Svevia) are all integrated players with asphalt plants in the area,281 which
        seriously limits the ability of the merged entity to foreclose them.
(268) As regards the incentives of the merged entity to foreclose, post-Transaction Peab
        will face a trade-off when considering input foreclosure strategies. An increase of
        prices in the upstream market (or a refusal to sell) will reduce profits due to
        decreasing sales to downstream rivals. On the other hand, by raising downstream
        rivals’ input costs it may gain additional profits downstream by capturing
        additional sales or by increasing prices downstream. In theory, the [10-20]%
        increment downstream can increase Peab’s incentives to engage in input
        foreclosure as it can recoup more profits downstream than before the merger due
        to the fact that it has a larger sales base than pre-Transaction.
277
    Form CO, paragraph 588.
278
    Form CO, paragraphs 589-590.
279
    Form CO, paragraph 591.
280
    Form O, paragraph 592.
281
    Notifying Party’s response to the Commission’s RFI 2.
                                                       57
 ---pagebreak--- (269) However, [Strategic information]282 and thus it is unlikely that asphalt sales
        would be sacrificed for gaining paving sales. At the very least [Strategic
        information] significantly reduces the incentives to engage in this strategy. Thus
        the merged entity is unlikely to have the incentives to engage in input foreclosure.
(270) Based on the above the Commission considers that the Transaction will not lead
        to a significant impediment of effective competition due to input foreclosure in
        the Grenland catchment area.
        (D.iii.b) Analytical framework and general considerations for the catchment areas
                      other than Grenland
(271) In the rest of the catchment areas, there is no merger-specific change in the
        upstream market and hence there is no merger-specific change in the ability to
        foreclose. However, there is a merger specific change in the downstream market,
        namely Peab’s downstream share on the paving market increases by [10-20]%
        points. As discussed in relation to Grenland in Section 5.4.3.2.(D.iii.a), this could,
        in principle, increase the incentives to foreclose as the merged entity can recoup
        more profits downstream than before the merger due to the fact that it has a larger
        sales base than pre-Transaction. Thus it is necessary to analyse Peab’s ability to
        do so (even if there is no merger specific change in the ability) and its incentives.
(272) As some of the catchment areas are located in sparsely populated areas, the
        application of an 80 km radius may be justified in these cases. Likewise, some of
        the catchment areas are located by the sea, which means that sea transport may be
        an option, leading to an even wider radius.
(273) In addition, a number of catchment areas are located outside metropolitan areas
        and are therefore suitable for the use of mobile plants. As discussed in
        Section 5.2.3.2, mobile plants are not a viable choice in every region but they are
        used in in Norway outside the metropolitan areas. These mobile plants can be
        moved to any area within 10 to 30 days.283 The capacity of a mobile plant is on
        average 150-200 kt/year.284 Among the competitors Veidekke, NCC and Skanska
        have mobile plants and the number of their mobile plants is 5, 3 and 3
        respectively.285 Mobile plants reduce the ability of the merged entity to cut off
        competitors’ access to asphalt or to increase the cost of this input. It is true that
        mobile plants cannot be deployed in all of the catchment areas simultaneously as
        they may be needed in other parts of the country too. However, given that neither
        the projects, nor the hypothetical foreclosure attempts are likely to occur
        simultaneously and that the plants can be moved three times a year, this option to
        mitigate foreclosure risk is available in all of the catchment areas where they can
        be used.
(274) A common consideration that applies to all catchment areas is that the merged
        entity is unlikely to have the incentive to engage in input foreclosure despite the
        fact that the downstream increment allows it to recoup more losses downstream.
282
    Notifying Party’s response to the Commission’s RFI 1, question 3.
283
    M inutes of a call with a competitor, 10 march 2020; M inutes of a call with a competitor, 10 march 2020.
284
    M inutes of a call with a competitor, 10 march 2020; M inutes of a call with a competitor, 10 march 2020.
285
    Notifying Party’s response to the Commission’s RFI 4, question 1.
                                                         58
 ---pagebreak--- (275) First, the merged entity’s downstream combined market share ([10-20]%) and the
        thus the possibility for recoupment remains moderate.
(276) Second, [Strategic information]286 and thus it is unlikely that asphalt sales would
        be sacrificed for gaining paving sales or at least further reduces the incentives to
        engage in this strategy.
        (D.iii.c) Ravneberget
(277) As the Ravneberget plant is around 100 km from Oslo and the main mode of
        transport is road, and 80 km or larger radius is not justified. Consequently, the
        standard 50 km radius applies.
(278) Despite a relatively high ([40-50]%) market share, the merged entity is unlikely to
        have the ability to raise prices or cut off competitors’ access to asphalt.
(279) First, capacity utilisation in the catchment area is low and competitors have
        significant amounts of excess capacity. Total market capacity utilisation stands at
        29%.287 Veidekke has […] kt of capacity available to serve the market and the
        capacity utilisation of its two plants is [30-40]% and [60-70]%.288 NCC has […]
        kt of capacity available to serve the market and the capacity utilisation of its three
        plants are [20-30]%, [30-40]% and [30-40]%.289 In addition, Nordic Asphalt has
        […] kt of capacity available in this market.290 The capacities of competitors
        therefore significantly exceed the total market demand of 171 kt.291 Thus, given
        their low capacity utilisation levels competitors have enough spare capacities to
        serve the entire demand in the catchment area. This implies that the merged entity
        will not have guaranteed demand and thus will not be able to exercise market
        power, provided competitors have the incentive to expand output to prevent a
        price increase or an attempt to foreclose access to asphalt. This appears to be the
        case as asphalt plants have considerable fixed costs292 and thus leaving capacity
        idle is very costly.
(280) Second, as the area is sufficiently outside the Oslo metropolitan area, mobile
        plants can also be used to bring additional capacity online and to increase choice.
        Although extra capacity is unlikely to be needed in this market, a single mobile
        plant would be able to serve the entire demand in the region, which would defeat
        any foreclosure strategy.
(281) Third, as the paving competitors present in the catchment area with an asphalt
        plant (NCC, Veidekke are large paving competitors Nordic Asphalt is smaller) are
        vertically integrated, and, as discussed above, have ample spare capacities, their
        access to asphalt cannot be cut off or made more difficult. In addition, the third
        large paving competitor, Skanska can make use of its mobile plants and also
286
    Notifying Party’s response to the Commission’s RFI 1, question 3.
287
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
288
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
289
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
290
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
291
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
292
    M inutes of a call with a competitor 10 M arch 2020.
                                                         59
 ---pagebreak---         cannot be foreclosed. The vertical integration of the main competitors severely
        restricts the ability of the merged entity to engage in input foreclosure.
        (D.iii.d) Trondheim and Verdal
(282) The Trondheim and Verdal catchment areas are located close to the Trondheim
        metropolitan area. Thus the use of 80 km radius is not justified and road transport
        remains the principal mode of transport despite the location by the sea. Further,
        mobile plants are also unlikely to be used here.
(283) Despite high market shares ([40-50]% and [90-100]%) Peab is unlikely to have
        the ability to raise prices or cut off competitors’ access to asphalt.
(284) First, capacity utilisation in the catchment area is low and competitors have a lot
        of excess capacity. Total market capacity utilisation stands at 42% in Trondheim
        and at 19% in Verdal.293 The capacities of competitors (NCC, Veidekke, Froseth)
        exceed the total market demand in both areas.294 This implies that the merged
        entity will not have guaranteed demand and thus will not be able to exercise
        market power, provided competitors have the incentive to expand output to
        prevent a price increase or an attempt to foreclose access to asphalt. This appears
        to be the case as asphalt plants have high fixed costs295 and thus leaving capacity
        idle is very costly.
(285) Second, the two large paving competitors (NCC, Veidekke) and a smaller paving
        competitor (Froseth) are present in the catchment area with asphalt plants. As
        these competitors are vertically integrated, and, as discussed above, they have
        ample spare capacities, their access to asphalt cannot be cut off or made more
        difficult.
        (D.iii.e) Otta
(286) Otta is located in a sparsely populated area in central Norway and thus the use of
        an 80 km radius is justified. Under an 80 km radius approach, the Target’s (and
        thus the Parties’ combined) market share remains below 30%, which implies that
        post-Transaction the merged entity will not have the ability to raise prices
        upstream or cut off competitors’ access to asphalt.
(287) Furthermore, mobile plants can also be used here, which would allow Veidekke,
        NCC and Skanska to bring additional capacity online. This makes it even less
        probable that Peab would have the ability to raise prices upstream or cut off
        competitors’ access to asphalt.
(288) The use of mobile plants also implies that these major competitors cannot be
        foreclosed as they have their own source of asphalt.
293
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
294
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
295
    M inutes of a call with a competitor 10 M arch 2020.
                                                         60
 ---pagebreak---         (D.iii.f) Karmoy
(289) Although Karmoy lies by the sea, in the absence of specific indications to the
        contrary in the market investigation, the Commission will apply the standard
        50 km radius. Despite a relatively high ([60-70]%) market share, the merged
        entity is unlikely to have the ability to raise prices or cut off competitors’ access
        to asphalt.
(290) First, capacity utilisation in the catchment area is low and competitors have a lot
        of excess capacity. Total market capacity utilisation stands at 27%.296 Veidekke,
        NCC, Velde and FM Asphalt have […] kt, […] kt, […] kt and […] kt of capacity
        available to serve the market respectively, which compares with a total demand of
        188 kt.297 The capacities of competitors therefore significantly exceed the total
        market demand. This implies that the merged entity will not have guaranteed
        demand and thus will not be able to exercise market power, provided competitors
        have the incentive to expand output to prevent a price increase or an attempt to
        foreclose access to asphalt. This appears to be the case as asphalt plants have high
        fixed costs298 and thus leaving capacity idle is very costly.
(291) Second, as the            area is sufficiently outside the Stavanger metropolitan area, mobile
        plants can also         be used to bring additional capacity online and to increase choice.
        Although extra          capacity is unlikely to be needed in this market, a single mobile
        plant would be          able to serve the entire demand in the region, which would defeat
        any foreclosure         strategy.
(292) Third, two large (NCC, Veidekke) the two smaller (Velde and FM Asphalt)
        paving competitors are present in the catchment area with asphalt plants. As these
        competitors are vertically integrated, and, as discussed above, have ample spare
        capacities, their access to asphalt cannot be cut off or made more difficult. In
        addition, the third large paving competitor, Skanska can make use of its mobile
        plants and also cannot be foreclosed. The vertical integration of the main
        competitors severely restricts the ability of the merged entity to engage in input
        foreclosure.
        (D.iii.g) Harstad
(293) Harstad is located in the sparsely populated northern part of Norway and thus the
        80 km radius is applicable. The Target’s market share of [120-130]% under the
        50 km approach drops to [70-80]%, which is still very high. Despite this very
        high market share the merged entity is unlikely to have the ability to raise prices
        or cut off competitors’ access to asphalt.
(294) First, capacity utilisation in the catchment area is low and competitors have a lot
        of excess capacity. Total market capacity utilisation stands at 22%.299 Veidekke
        has […] kt of capacity available, compared to the whole demand of 73 kt.300
        Thus, Veidekke can serve almost the entire demand. This implies that the merged
296
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
297
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
298
    M inutes of a call with [a competitor] 10 M arch 2020
299
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
300
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
                                                          61
 ---pagebreak---         entity will have very little guaranteed demand and thus will not be able to
        exercise market power, provided competitors have the incentive to expand output
        to prevent a price increase or an attempt to foreclose access to asphalt. This
        appears to be the case as asphalt plants have high fixed costs301 and thus leaving
        capacity idle is very costly. The Commission notes that the demand and capacity
        figures correspond to the 50 km approach. As under the applicable 80 km
        approach the Target’s market share drops, the merged entity is likely to have even
        less market power and less ability to foreclose under the 80 km radius approach.
(295) Second, mobile plants can also be used here, which would allow Veidekke, NCC
        and Skanska to bring additional capacity online. This makes it even less probable
        that Peab would have the ability to raise prices upstream or to cut off competitors’
        access to asphalt.
(296) Third, the paving competitor present in the region with an asphalt plant,
        Veidekke, is vertically integrated and has ample spare capacities. Consequently,
        its access to asphalt cannot be foreclosed. The same applies to Skanska, and NCC
        who can supply themselves with mobile plants.
        (D.iii.h) Tanna Finnmark
(297) Tanna Finnmark is located in a sparsely populated area in northern Norway and
        thus at least an 80 km radius would be justified. Furthermore, in Northern
        Norway asphalt is also transported by boat, which enlarges the geographic market
        even further. Already under an 80 km radius approach the market share remains
        below 30 %, which implies that Peab will not have the ability to raise prices
        upstream or cut off competitors’ access to asphalt. The share would even be lower
        under the 200 km approach, implying that the merged entity would have even less
        market power.
(298) Moreover, mobile plants can also be used here, which would allow Veidekke,
        NCC and Skanska to bring additional capacity online. This makes it even less
        probable that Peab would have the ability to raise prices upstream or to cut off
        competitors’ access to asphalt.
(299) In addition, the paving competitor present in the region with an asphalt plant,
        Veidekke, is vertically integrated and therefore its access to asphalt cannot be
        foreclosed. The same applies to Skanska, and NCC who can supply themselves
        with mobile plants.
        (D.iii.i) Tromso, Bodo and Narvik
(300) All three catchment areas are located in the sparsely populated northern part of
        Norway, and thus the use of the 80 km approach is justified. Under this approach
        the market shares are [70-80]%, [120-130]% and [80-90]% for Tromso, Bodo and
        Narvik respectively. These are lower than the market shares under the 50 km
        approach (Tromso [90-100]%, Bodo [170-180]% and Narvik [150-160]%), but
        still very high. As in northern Norway boat transport is also used, the market is
        even larger, the Target’s share is even lower and there are additional sources of
        supply. Nonetheless in these catchment areas the market shares remain high under
301
    M inutes of a call with [a competitor] 10 M arch 2020.
                                                           62
 ---pagebreak---         any approach. Furthermore, in these catchment areas competitors do not have
        sufficient fixed capacity available to meet local demand.
(301) However, Peab would not have the ability to engage in input foreclosure.
(302) First, overall demand in these regions is very small and only amounts to 115 kt,
        80kt and 57 kt in Tromso, Bodo and Narvik respectively. Thus, each catchment
        area’s demand can be served with a single mobile plant. A mobile plant could
        even supply all three catchment areas combined. Thus, through mobile plants,
        competitors have enough spare capacity and thus the ability to prevent upstream
        price increases by the merged entity. As asphalt plants have high fixed costs,302
        they are likely to have the incentive too
(303) Second, the use of mobile plants also implies that Veidekke, NCC and Skanska
        can rely on their own asphalt production. Given that, as discussed above, the
        capacity of this captive production is sufficient for any need in these catchment
        areas, the three largest paving competitors cannot be foreclosed.
        (D.iii.j) Eikefet and Sotra
(304) These catchment areas are located in the Bergen metropolitan area and thus the
        50 km radius applies and the principal mode of transport is by road. Furthermore,
        in these areas mobile plants are also not normally an alternative.
(305) Compared to other catchment areas in Norway, the capacity utilisation is
        relatively high ([60-70]% and [70-80]%) and competitors’ capacities are
        sufficient to serve only a little more than half of the demand. 303
(306) However, Peab’s market share will remain moderate [30-40]% in Eikefet and
        [30-40]% Sotra, which makes it unlikely that Peab would have the ability to
        increase the price of asphalt or cut competitors’ access to it.
(307) In any event, as discussed in Section 5.3.4.2.(D.iii.b), the merged entity will not
        have the incentive to engage in such foreclosure.
(308) Furthermore, the overall demand for asphalt in these two catchment areas is
        1120 kt against 7500 kt for the whole of Norway.304 As asphalt is only used for
        paving, this implies that the two catchment areas represent 15 % of overall paving
        demand in Norway. Thus, even if Peab had the ability and incentive to foreclose
        paving competitors, the overall impact on paving competition would not amount
        to a significant impediment of effective competition.
        (D.iii.k) Conclusion
(309) Based on the above the Commission considers that the Transaction will not lead
        to a significant impediment of effective competition as a result of the asphalt-
        paving vertical links in Norway.
302
    M inutes of a call with [a competitor] 10 M arch 2020.
303
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
304
    https://eapa.org/wp-content/uploads/2020/02/Asphalt-in-figures_2018.pdf
                                                           63
 ---pagebreak---         (E) Bitumen – asphalt
        (E.i) List of affected markets and market shares
(310) The Notifying Party is not active in the production or sale of bitumen305 , but has
        four asphalt plants in Norway306 .
(311) The Target imports bitumen and produces bitumen emulsion and polymer-
        modified bitumen predominantly for the purposes of its own asphalt in one
        location in Norway.307 It has twelve fixed and four mobile asphalt plants.308
(312) Bitumen is considered as a national market, on which YIT currently has a very
        small share of [0-5]% in volume and [0-5]% in value.309 310 Markets become
        affected due to two of Peabs downstream asphalt markets. The only relevant
        concern can therefore be customer foreclosure.
(313) The Transaction would potentially have an impact in three areas where
        downstream markets of Peab or combined market shares exceed 30%, listed in
        Table 23. On other areas, the Transaction would not change any ability or
        incentive of foreclosure, as no increment occurs.
          Table 23 – downstream asphalt markets with combined market share above 30%, bitumen-
          asphalt link, Norway
                           Catchment area                                  Combined market shares
                             Trondheim                                             [30-40]%
                              Grenland                                             [40-50]%
                               Verdal                                             [90-100]%
        Source: Form CO, Annex 5.6a.
        (E.ii) The Notifying Party’s view
(314) The Notifying Party considers that the Transaction would not raise concerns
        regarding the asphalt – bitumen link in Norway. The Target would only sell small
        amounts of bitumen on an ad hoc basis when surpluses occur from production for
        its own downstream asphalt business, and sales would therefore only form a
        negligible part of the overall bitumen market.
        (E.ii.a) The Commission’s assessment
(315) The merged entity would not have any ability to successfully foreclose the present
        upstream bitumen competitors such as Nynäs, Puma Energy, Exxon Mobile and
        Total311 with its own asphalt business. First, the three downstream markets are
        local and therefore form only a fraction of the total customer base for bitumen
        competitors.
305
    Form CO, paragraph 253.
306
    Form CO, paragraph 326.
307
    Form CO, paragraph 256.
308
    Form CO, paragraph 326.
309
    Annex 5.6a.
310
    No additional markets would become affected under a possible product segmentation.
311
    Form CO, paragraph 482.
                                                      64
 ---pagebreak---  (316) Second, as YIT’s upstream competitors are big oil companies, it is unlikely that a
          customer foreclosure strategy would affect these companies in a way that
          competitive pressure on the upstream market would decrease.
 (317) Third, the Target is not an integrated bitumen producer, but buys bitumen and
          process it to bitumen emulsion. Therefore, YIT, and thus post transaction the
          merged entity, relies on the upstream competitors it would foreclose as a supplier
          for input for its own bitumen sales, which does make a customer foreclosure
          implausible.
 (318) The same arguments would apply under any kind of further product segmentation
          of bitumen, and no further markets would become affected under any
          segmentation.312
          (E.ii.b)    Conclusion
 (319) Based on the above the Commission considers that the Transaction will not lead
          to a significant impediment of effective competition as a result of the bitumen-
          asphalt vertical links in Norway.
 5.3.5. Sweden
5.3.5.1. Horizontally affected markets
          (A) Aggregates – unilateral effects
          (A.i) List of affected markets and market shares
 (320) The Notifying Party has an overall strong presence in Sweden with aggregates
          quarries in over 100 locations in the country.
 (321) The Target has only very limited presence in aggregates production in Sweden. It
          operates one quarry located in Rimbo in the wider Stockholm area. The quarry
          itself is rather small, with an annual production of around […] tonnes, which
          accounts for [0-5]% market share in a catchment area of 50 km radius.
 (322) Affected markets therefore can only originate from overlapping catchment areas
          of the Target’s quarry in Rimbo and one of the Notifying Party’s sites. Applying a
          catchment area of 50 km radius, this would give rise to one affected market,
          which is shown in Table 24.
             Table 24 – horizontally affected aggregates markets, Sweden.
                   Catchment area            Market share Peab      Market share YIT Combined share
                        Harbo                    [20-30]%               [0-5]%          [20-30]%
            Source: Form CO, Table 14.
 312
     See response to RFI 3.
                                                      65
 ---pagebreak---         (A.ii) The Notifying Party's view
(323) The Notifying Party considers that the transaction would not lead to horizontal
        competition issues as the increment is very small and market shares remain
        moderate under any market definition.
        (A.iii) The Commission’s assessment
        (A.iii.a) List of affected markets and market shares
(324) The Transaction will not lead to any unilateral effects in the aggregates market
        around Harbo. First, overall market shares remain moderate. Combined market
        shares of below [20-30]% show that the Notifying Party faces sufficient
        competition in the area, not only by other larger competitors, but also due to the
        high number of small independent aggregates suppliers. Responses obtained
        during the market investigation confirmed that other market participants do not
        consider that the Transaction will have any impact on the Swedish aggregates
        market.313
           Table 25 – market shares of competitors in the wider Stockholm area
                                Competitor                                      Market share314
                                    Peab                                              [5-10]%
                                    YIT                                                [0-5]%
                                  Jehander                                             [0-5]%
                                    NCC                                               [5-10]%
                                  Skanska                                              [0-5]%
                                   Svevia                                              [0-5]%
                                Dala Frakt                                             [0-5]%
                                   Others                                            [70-80]%
           Source: Form CO, Table 18.
(325) Second, the Transaction will lead only to negligible additional market shares for
        Peab of below [0-5]%. Given this small increment, it is not likely that the
        Transaction would increase the possibility for the Notifying Party to raise
        aggregates prices unilaterally.
(326) The quarry in Rimbo produces predominantly crushed rock and some gravel /
        sand315 . Peab has a market share of [10-20]% for crushed rock in the Harbo area.
        As overlaps would decrease under a product market segmentation, a product
        segmentation would not change the assessment of the Transaction.
        (A.iii.b) Conclusion
(327) Based on the above the Commission considers that the Transaction will not lead
        to a significant impediment of effective competition due to unilateral effects in
        the markets for aggregates in Sweden.
313
    See Q10, questionnaire to aggregates customers Sweden, question 30.
314
    No reliable market shares for individual competitors in single catchment areas are available. The table reflects the
    overall competitive situation in the Stockholm area, based on a 320 km radius around the Rimbo quarry.
315
    Form CO, paragraph 134.
                                                          66
 ---pagebreak---         (B) Asphalt – unilateral effects
        (B.i) List of affected markets and market shares
(328) The Transaction gives rise to six horizontally affected markets in Sweden. The
        relevant market shares for 2018 are indicated in Table 26 below. The market
        shares are based on the 50 km radius approach and volume-based.
        Table 26 – horizontally affected asphalt markets and market shares, Sweden
          Catchment      Peab        Target   Combined     Veidekke    Skanska     NCC      Svevia   Others
             area
                                                       Stockholm area
         Rosersberg   [10-20]%      [5-10]%   [20-30]%     [5-10]%    [20-30]%   [10-20]% [10-20]%  [5-10]%
            Vidbo     [20-30]%      [5-10]%   [20-30]%     [5-10]%    [20-30]%   [10-20]% [10-20]%  [5-10]%
          Vastberga   [20-30]%       [0-5]%   [20-30]%     [5-10]%    [20-30]%   [20-30]% [10-20]% [10-20]%
          Dingtuna    [40-50]%       [0-5]%   [40-50]%         -       [0-5]%    [30-40]%  [5-10]%   [0-5]%
                                                          Lulea area
          M attsund     [0-5]%     [40-50]%   [50-60]%         -      [20-30]%   [10-20]%      -        -
           Boden        [0-5]%     [40-50]%   [40-50]%         -      [30-40]%   [10-20]%      -        -
        Source: Form CO Tables 80 and 83.
        (B.ii) The Notifying Party’s view
(329) The Notifying Party submits that the Transaction will not lead to a significant
        impediment of effective competition for three general reasons.
(330) First, the production and sale of asphalt mass to external customers is not a key
        business to the Parties. They mainly supply asphalt internally to their own paving
        operations. External sales vary considerably from year to year. As effectively all
        asphalt sold is used for paving and all major paving players produce asphalt in
        both fixed and mobile asphalt plants of their own, there are no customers that
        would be dependent on the Parties' asphalt sales. Thus raising prices vis-à-vis
        these customers would not be effective.316
(331) Second, there are significant amounts of spare capacity available in asphalt
        production in the areas where the Parties have horizontal overlaps. Regardless of
        the combined entity's market share in any catchment area, competitors would be
        able to easily increase their production to respond to any hypothetical increase in
        the combined entity's prices. This would impose a powerful constraint for such
        behaviour.317
(332) Third, the Parties' asphalt operations are largely complementary and the merged
        entity would face strong integrated competitors such as Veidekke, Skanska and
        NCC. Any anti-competitive effects on the horizontally affected asphalt markets
        are thus implausible.318
(333) Specifically with regard to the affected markets in Sweden, the Notifying Party
        submits that horizontally affected markets can be found in the Stockholm area
        (Peab plants: Vidbo, Västberga as well as Dingtuna; Target’s plants: Rosersberg)
316
    Form CO, paragraph 396.
317
    Form CO, paragraph 397.
318
    Form CO, paragraph 398.
                                                   67
 ---pagebreak---         and in the Lulea area in Northern Sweden (Peab’s plant: Boden; Target’s plant:
        Måttsund).
(334) In the Stockholm area, the merged entity would face strong, integrated
        competitors, such as Skanska, Svevia and NCC, all of which are equal in size to
        Peab.319 In addition, capacity utilisation is as low as 35% in this area and thus
        competitors can easily counter any potential price increase.320 The high market
        shares in the Dingtuna catchment area are not indicative of any harm resulting
        from the Transaction as the increment is minimal.321 In particular, the Dingtuna
        plant’s sales are transported towards the north and west from the plant, i.e. away
        from the Stockholm metropolitan area, whereas the Target’s Rosersberg plant
        serves the metropolitan area.322
(335) In the Lulea area, the Notifying Party considers that a radius larger than 50 km is
        justified to define the geographic market as this is a relatively sparsely populated
        area and asphalt is transported for longer distances. A larger market would
        decrease the Parties’ shares as it would include additional competitive
        constraints.323 Further, both the Target’s and Peab’s market share have decreased
        in the area in recent years and they face strong competition from NCC and
        Skanska in this area.324 In particular, NCC currently holds paving contracts
        awarded by the Lulea municipality, which shows that its market share in asphalt
        is set to grow at the expense of the merged entity.325 Finally, in this area Peab is a
        small player with a market share below [5-10]% and sales of less than EUR […]
        per year in recent years.326
        (B.iii)    The Commission’s assessment
        (B.iii.a) Relevance of market shares
(336) As discussed earlier in relation to the Norwegian asphalt markets in Section
        5.3.4.1.(A.iii.a), market shares based on the combined captive and merchant sales
        are an appropriate indicator of market power in this particular case in relation to
        asphalt and appear more appropriate than merchant sales.
        (B.iii.b) Common characteristics of all markets in Sweden
(337) Before assessing the individual affected markets, the Commission will discuss
        factors that apply to all affected markets in Sweden. These involve barriers to
        entry and customer buyer power.
319
    Form CO, paragraph 419.
320
    Form CO, paragraph 420.
321
    Form CO, paragraphs 421-422.
322
    Form CO, paragraph 423.
323
    Form CO, paragraph 431.
324
    Form CO, paragraph 433.
325
    Form CO, paragraph 434.
326
    Form CO, paragraph 436.
                                              68
 ---pagebreak--- (338) The Commission considers that entry barriers are not high. The cost of a fixed
        plant with medium capacity is around EUR 3-5 million.327 By comparison Peab’s
        paving sales in Sweden amount to roughly EUR […].328 Furthermore, setting up a
        plant and starting production takes 7-12 months, including the time necessary for
        obtaining the permits.329 This is consistent with the fact that respondents pointed
        to a number of entries in the different Swedish regions by suppliers that have not
        been present in those regions.330
(339) As regards buyer power, the buyers in the downstream paving market are public
        authorities who tender out paving contracts, have expertise in commissioning
        paving works and have budget constraints. All competitors noted that buyers
        exercise buyer power due to overcapacity and the focus of buyers on price.331
        Customers agreed that they are in a good negotiating position and considered that
        this is due to excess supply, the excess number of players relative to demand and
        overcapacity.332
(340) Consequently, it appears that paving customers have some buyer power and that
        this has effects in the upstream asphalt market due to the strong link between the
        two markets and to the fact that most players are integrated. This is true, even if
        the responses reveal such buyer power is not absolute and could be outweighed if
        the particular market in question capacities are tight and the number of
        competitors is low, which does not appear to be case in Sweden in general. On the
        contrary, as will be discussed in relation to the individual catchment areas, there
        are significant amounts of excess capacities in Sweden in general.
        (B.iii.c) Stockholm area
             Rosersberg, Vidbo and Vastberga
(341) In the Rosersberg, Vidbo and Vastberga catchment areas the combined market
        shares of the Parties remain moderate, namely [20-30]% [20-30]% [20-30]%.
        This suggests that the merged entity’s market power will remain moderate.
        Furthermore, the increment, while not insignificant, is also modest and remains
        below [5-10]% in all three areas, indicating that the Target is a moderately strong
        constraint.
(342) In these areas four nationally active competitors will remain (Veidekke, Skanska,
        NCC and Svevia), each of them with at least [5-10]% share, i.e. each of them
        stronger than the Target. In addition, the category “others” (in all three areas) in
        Table 26 covers three additional competitors Markona, Svenska Vag and
        Sandahls. Of these, Sandahls’s market share is close to that of the Target ([0-5]%
        in Rosersberg, [0-5]% in Vidbo and [5-10]% in Vastberga). Thus in each of these
        areas the merged entity will face five competitors that are stronger or comparably
327
    Q6 – Questionnaire to competitors – asphalt, Sweden, question 29.
328
    Annex 5.4.17 to the Form CO, Peab board presentation, page 7.
329
    Q6 – Questionnaire to competitors – asphalt, Sweden, question 29.
330
    Q6 – Questionnaire to competitors – asphalt, Sweden, question 28.
331
    Q6 – Questionnaire to competitors – asphalt, Sweden, question 27.
332
    Q5 – Questionnaire to customers – asphalt, Sweden, question 19.
                                                        69
 ---pagebreak---         strong to the Target. Therefore, the merged entity will face sufficiently strong
        constraints.
(343) In addition, the fixed costs of asphalt plants are high333 and competitors’ capacity
        utilisation is relatively low, which will incentivise competitors to expand output
        in the case of any price increase. For example, Skanska has three plants in the
        region and with capacity utilisation levels of [40-50]%, [20-30]% and
        [30-40]%.334 NCC has four plants in the region with capacity utilisation levels of
        [50-60]%, [10-20]%, [30-40]% and [30-40]%.335 Svevia has two plants in the
        region with utilisation levels of [30-40]% and [20-30]%.336 Veidekke has one
        plant with a utilisation level of [20-30]%. Sandahls has one plant in the region,
        which runs at a level of [10-20]%.337
(344) Furthermore, as discussed in Section 5.3.5.1.(B.iii.b), entry barriers are not high
        and customers have some buyer power.
(345) Based on the above the Commission considers that the Transaction will not lead
        to a significant impediment of effective competition due to unilateral effects in
        the markets of Rosersberg, Vidbo and Vastberga.
              Dingtuna
(346) The Dingtuna catchment area is slightly different from the other catchment areas
        in the Stockholm area in that the combined market share is high, namely
        [40-50]%. However, the market share increment is minimal, only [0-5] %, which
        implies that the Transaction-specific effect is marginal. Thus, despite the high
        combined market share the merger is unlikely to lead to competitive harm.
(347) Just like pre-merger, the merged entity will be constrained mainly by NCC
        ([30-40]%), and three smaller competitors, Skanska, Svevia and Sandahls, each of
        which is stronger than the Target in this region.
(348) The relevant plants of competitors and their capacity utilisation are the same as
        those in the case of the Rosersberg, Vidbo and Vastberga catchment areas.
        Consequently, in this case too competitors have the ability and incentive to
        compete strongly.
(349) Furthermore, as discussed in Section 5.3.5.1.(B.iii.b), entry barriers are not high
        and customers have some buyer power.
(350) Based on the above, the Commission considers that the Transaction will not lead
        to a significant impediment of effective competition due to unilateral effects in
        the market of Dingtuna.
333
    M inutes of a call with a competitor 10 M arch 2020.
334
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
335
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
336
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
337
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
                                                         70
 ---pagebreak---         (B.iii.d) Lulea area
(351) In the Lulea area, the combined market shares are very high, [50-60]% in
        Mattsund and [40-50]% in Boden. However, the increment is small in the case of
        Mattsund ([0-5]%) and moderate in Boden ([0-5]%), suggesting that Peab is not a
        very strong constraint in these markets and the Transaction does not have a
        pronounced effect. The markets have three strong players both before and after
        the Transaction (Target, Skanska and NCC) and the main effect of the
        Transaction is to replace the Target with Peab.
(352) In addition, capacity utilisation is very low in these markets. The overall capacity
        utilisation is below 20% in both markets, while Skanska’s and NCC's plant run
        below 50% capacity utilisation levels.338 Total market volume is estimated to be
        around 104 kt in Boden and 108 kt in Mattsund, whereas Skanska’s and NCC's
        total capacity serving these markets is above […] kt each.339 With such high
        amounts of total and free capacities, price effects, if any, are expected to be
        insignificant because competitors, taken together, can serve almost the entire
        demand and they have the incentive to fill their free capacities due to the high
        fixed costs of asphalt plants.
(353) Furthermore, mobile plants provide additional capacity and choice and could
        prevent hypothetical price increases. As discussed in Section 5.2.3.2, mobile
        plants are not a viable choice in every region but they are used in Northern
        Sweden, where these markets are located. These mobile plants can be moved to
        any area within 10 to 30 days.340 The capacity of a mobile plant is about
        150-200 kt/year,341 which roughly equals the total demand of these two
        neighbouring catchment areas. Competitors that have mobile plants and are not
        already present in the region with fixed plants (Svevia and Goodway) have
        6 mobile plants combined.342 In addition NCC and Skanksa could also increase
        their capacity as they have 4 and 3 mobile plants respectively.343 Even if these
        catchment areas are not the only place in Northern Sweden where mobile plants
        can be used, it’s unlikely that at least one plant from one of the competitors would
        not be available for use if prices were to increase. As one single plant could serve
        the entire demand in both markets the possibility of additional capacity and
        choice in the form of mobile plants makes any competitive harm even less likely.
(354) Furthermore, as discussed in Section 5.3.5.1.(B.iii.b), entry barriers (with fixed
        plants) are not high and customers have some buyer power.
(355) Based on the above, the Commission considers that the Transaction will not lead
        to a significant impediment of effective competition due to unilateral effects in
        the Lulea area (Mattsund and Boden markets).
338
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
339
    Notifying Party’s response to the Commission’s Request for Information RFI 2.
340
    M inutes of a call with a competitor, 10 march 2020; M inutes of a call with a competitor, 10 march 2020.
341
    M inutes of a call with a competitor, 10 march 2020; M inutes of a call with [a competitor], 10 march 2020.
342
    Notifying Party’s response to the Commission’s Request for Information RFI 4, question 1.
343
    Notifying Party’s response to the Commission’s Request for Information RFI 4, question 1.
                                                         71
 ---pagebreak---       (C) Paving – unilateral effects
      (C.i) List of affected markets and market shares
(356) As a result of the Transaction the market for paving in Sweden is horizontally
      affected. In tables 27-28 below, both volume and value based shares are
      presented.
      Table 27- volume based market shares - paving, Sweden
                             Peab                       [20-30]%
                            Target                       [0-5]%
                         Combined                       [20-30]%
                           Skanska                      [20-30]%
                            Svevia                      [10-20]%
                             NCC                        [10-20]%
                          Sandahls                       [0-5]%
                            Others                      [10-20]%
      Source: Form CO, Table 126.
      Table 28- value based market shares - paving, Sweden
                             Peab                       [20-30]%
                            Target                       [0-5]%
                         Combined                       [20-30]%
                           Skanska                      [20-30]%
                            Svevia                      [10-20]%
                             NCC                        [10-20]%
                          Sandahls                       [0-5]%
                            Others                      [10-20]%
      Source: Form CO, Table 126.
      (C.ii) The Notifying Party’s view
(357) The Notifying Party considers that The Parties' combined market share in the
      Swedish national market for paving would be approximately [20-30]%. Peab's
      current market share is above [20-30]%, while the Target's is around [5-10]% or
      less. Post-Transaction, Skanska, NCC and Svevia would continue to compete
      with Peab as before. All three are strong national players, and Peab would gain no
      advantage over them from the small increment that the Target would add to its
      paving operations.
      (C.iii) The Commission’s assessment
(358) The Commission notes that, although paving is a service, it is not very
      differentiated as it involves laying a homogenous product with techniques that
      have been around for decades. Thus volume based shares are also suitable to
      assess market power. In any event, it is clear on the basis of Tables 27-28 that
      both volume and value based market shares show essentially the same
      competitive picture.
(359) The Commission considers that the Transaction is unlikely to lead to competitive
      harm for the following reasons:
(360) First, the combined market share of [20-30]% remains moderate. In line with
      paragraph 18 of the Horizontal Merger Guidelines such moderate levels of
                                                72
 ---pagebreak---          combined market shares indicate the Transaction is compatible with the common
         market.
 (361) Second, the increment is small, indicating that the Transaction will not bring
         about a meaningful effect. The market structure will essentially remain
         unchanged.
 (362) Third, the merged entity will be constrained by three large competitors (Skanska,
         Svevia and NCC) and a number of smaller competitors, such as Sandahls and
         others that altogether have [10-20] % market share. These include, inter alia,
         Markona, Svenska Vag Sydbeläggningar, Asfaltgruppen, Asfaltbolaget and JLB
         Markoch Asfalt The loss of the Target as a competitive force equals to losing
         Sandahls or one of the several competitors that make up this group.
 (363) Fourth, as discussed in relation to asphalt in Section 5.3.5.1. (C.iii.b), the buyers
         of paving works have some buyer power.
 (364) Fifth, as discussed in relation to asphalt in Section 5.3.5.1. (C.iii.b), entry barriers
         are not high in asphalt market. They are even lower in the paving market as in
         principle there is no need to build out asphalt plants as asphalt can be sourced
         externally. The costs and time involved in entering the paving business was
         estimated to be around EUR 500 000 and 6 months.344 Indeed respondents noted
         that a significant number of smaller companies entered the market recently.345
         Even if a firm preferred to enter the market as an integrated asphalt-paving player,
         the entry barriers do not appear high for the reasons mentioned in in
         Section 5.3.5.1. (C.iii.b).
 (365) Based on the above the Commission considers that the Transaction will not lead
         to a significant impediment of effective competition due to unilateral effects in
         the market for paving in Sweden.
5.3.5.2. Vertically affected markets
         (A) Aggregates – asphalt
         (A.i) List of affected markets and market shares
 (366) The Notifying Party has a strong overall presence in Sweden both in the
         aggregates as well as in the asphalt business. It has quarries in over 100 locations
         in the country346 and operates 14 fixed and nine mobile plants347 .
 (367) The Target is only active to a limited extend in Sweden. Concerning aggregates, it
         operates one aggregates quarry located in Rimbo in the wider Stockholm area348 .
         With respect to asphalt, the Target operates three fixed asphalt plants located in
 344
     Q8 – Questionnaire to competitors – paving, Sweden, question 28.
 345
     Q8 – Questionnaire to competitors – paving, Sweden, question 27.
 346
     Form CO, paragraph 134.
 347
     Form CO, paragraph 333.
 348
     Form CO, paragraph 134.
                                                        73
 ---pagebreak---           Rosersberg near Stockholm, in Måttsund near Luleå and in Kvissleby near
          Sundsvall, as well as one mobile asphalt plant349 .
(368) Vertical relation stem from various overlaps from YIT’s asphalt plants in
          Måttsund and Kvissleby with Peabs aggregates quarries in the respective area,
          shown in Table 29 and 30. The only relevant concern can therefore be customer
          foreclosure.
            Table 29 – upstream and downstream markets in the aggregates – asphalt link, Lulea area,
            Sweden
                Upstream market            Market shares          Downstream market               Market shares
                     Björnberg                [20-30]%                   M åttsund                   [50-60]%
                       Heden                  [10-20]%
                       Öjebyn                 [10-20]%
                     Rasmyran                 [20-30]%
                       Rutvik                 [10-20]%
                     Nordanas                    -350
                      Storsund                     -
                      M uskus                      -
                    Brännträsk                     -
                      Ljusträk                     -
                       Heden                       -
                     Svartträsk                    -
                    Naartijärvi                    -
            Source: Form CO, Annex 5.6a.
            Table 30 - upstream and downstream markets in the aggregates – asphalt link, Sundsvall area,
            Sweden
                Upstream market            Market shares          Downstream market               Market shares
                    Bispgården                   -351                    Kvissleby                   [30-40]%
                 Hudiksvall-Sätra                  -
           Source Form CO, Annex 5.6a.
          (A.ii) The Notifying Party’s view
(369) The Notifying Party submits that the vertical link between aggregates and asphalt
          in Sweden does not raise competition concerns in the context of the Transaction.
          First, asphalt producers would only form a part of the overall customer base of
          aggregates producers, as aggregates are an input for many end-uses, such as the
          production of RMX, mortar and in construction works.352
(370) Second, in all areas in question, the Notifying Party would face competition both
          upstream and downstream by integrated competitors. This limits the ability to
          engage in any kind of foreclosure strategy.
349
    Form CO, paragraph 334.
350
    M arkets become affected due to overlapping catchment areas. No reliable market shares can be provided for these
    relations.
351
    M arkets become affected due to overlapping catchment areas. No reliable market shares can be provided for these
    relations.
352
    Form CO, paragraph 460.
                                                       74
 ---pagebreak---          (A.iii) The Commission’s assessment
         (A.iii.a) Common characteristics for all affected markets
(371) Asphalt producers form a minority of the overall customer base of aggregates
         manufacturers. In fact, aggregates can be used for a number of end-products, such
         as overall construction works, RMX or mortar. Therefore, one asphalt producer
         does likely not form a big enough share of the overall customer base of
         aggregates competitors to successfully engage in a customer foreclosure strategy.
(372) This argument would not change if a segmentation is made between crushed rock
         and gravel / sand. For the production of aggregates, only crushed rock can be
         used. Therefore, the Notifying Party would not be able to foreclose the gravel /
         sand production of upstream competitors. Crushed rock, in turn, is also used in
         the production or RMX and construction.353 Upstream aggregates competitors
         could therefore still sell to other asphalt manufacturers as well as companies
         active in the construction and RMX sector.
         (A.iii.b) Luleå area
(373) As for all aggregates – asphalt links regarding customer foreclosure, the argument
         of versatility of aggregates as input for a number of end-products such as RMX
         and construction is valid. In the catchment area around Måttsund, YIT currently
         has a market share of around [50-60]% of total asphalt production, so only half of
         the proportion asphalt customers form can be attributed to the merged entity.
(374) Second, a number of upstream aggregates competitors in the Luleå area are
         themselves integrated companies with own downstream production. Skanska and
         NCC own quarries in the area of Luleå354 , all of them are active in downstream
         activities such as asphalt and construction. The Notifying Party would therefore
         likely not have the ability to foreclose these competitors. Neither would such a
         strategy have an impact on downstream asphalt prices, as competitors would still
         be able to source aggregates from own quarries.
(375) As both arguments would be valid even under a segmentation of aggregates into
         crushed rock and gravel / sand, the exact product market definition does not
         change the assessment of the market in Luleå.
         (A.iii.c) Sundsvall area
(376) With respect to the asphalt plant in Sundvall, YIT currently has a significantly
         weaker market position than in Luleå. As market shares remain below 40%, the
         plant forms the minority of the already limited share of all asphalt producers
         among the aggregates customer base. It is therefore highly unlikely that the
         Notifying Party would have the ability for customer foreclosure post-transaction.
(377) Also in the area of Sundvall, NCC and Skanska are all present with its own
         quarries355 . As explained above, the Notifying Party would not have the ability to
         foreclose these companies, as they use their aggregates production partially
353
    See call with a competitor, 10 M arch 2020.
354
    Form CO, paragraph 478.
355
    Form CO, paragraph 470.
                                                75
 ---pagebreak---         captively. Neither would such a strategy have a likely effect on downstream
        prices, as integrated competitors would still be able to source from own quarries.
(378) As all arguments would be valid even under a segmentation of aggregates into
        crushed rock and gravel / sand, the exact product market definition does not
        change the assessment of the market in Sundvall.
        (A.iii.d) Conclusion
(379) Based on the above the Commission considers that the Transaction will not lead
        to a significant impediment of effective competition as a result of the aggregates-
        asphalt vertical links in Sweden.
        (B) Aggregates – RMX
        (B.i) List of affected markets and market shares
(380) The Notifying Party has a strong presence in Sweden both in aggregates and
        RMX. It owns quarries in over 100 locations across the country356 and operates a
        number of RMX plants located in and around the greater Stockholm area357 .
(381) The Target is barely present in the aggregates production in Sweden. It operates
        one aggregates quarry in the country that is located in Rimbo358 in the wider
        Stockholm area and is not active in RMX.359
(382) Affected markets result from the strong position in Peabs RMX business, as
        shown in Table 31. The only plausible concern can therefore be customer
        foreclosure.
          Table 31 – upstream and downstream markets in the aggregates – RMX vertical relationship
            Upstream aggregates     Combined market         Downstream RMX         Combined market
                   market                 shares                 market                  shares
                    Rimbo                [5-10]%                Norrtälje               [50-60]%
                    Rimbo                [5-10]%                Uppsala                 [30-40]%
         Source: Form CO, Annex 5.6a
        (B.ii) The Notifying Party’s view
(383) The Notifying Party submits that the link between aggregates as input for RMX
        would not raise competition concerns in Sweden. Aggregates are an input for a
        number of other end-uses, such as construction works and asphalt production. Its
        RMX business would therefore not be a substantial part of the customer base of
        upstream aggregates competitors360 .
356
    Form CO, paragraph 134.
357
    Form CO, paragraph 689.
358
    Form CO, paragraph 134.
359
    Form CO, paragraph 671.
360
    Form CO, paragraph 733.
                                                 76
 ---pagebreak---         (B.iii)      The Commission’s assessment
(384) The Commission considers that the merged entity will not have the ability to
        successfully foreclose upstream competitors due to high market shares in its
        downstream RMX business.
(385) Aggregates for use in RMX accounts only for a small portion of overall
        aggregates sales. Aggregates can be used as an input for other products such as
        asphalt, mortar or construction works. Market investigation suggests that
        aggregates for the use in RMX overall accounts only for a fraction of less than
        10% of total aggregates production.361 The Notifying Party’s RMX business does
        therefore not form a dominant part of aggregates competitors' potential customer
        base, and upstream competitors would still have a broad range of customers to
        supply in other sectors such as construction and asphalt.
(386) In addition to that, the incentive for the merged entity to engage in customer
        foreclosure would not raise due to the Transaction compared to the current
        situation. Because of the small size of YIT’s quarry in Rimbo, Peab would only
        gain an increment of additional [0-5] percentage points in the upstream
        aggregates market.
(387) The assessment of the vertical aggregates – RMX relation would not change if a
        narrower catchment area of 25 km radius around each respective RMX plant was
        applied. Furthermore, it would still be valid under a possible segmentation of
        aggregates into crushed rock and gravel / sand, as both types are an input for
        RMX production, and the ability to foreclose upstream competitors would not
        rise.
        (B.iii.a) Conclusion
(388) Based on the above the Commission considers that the Transaction will not lead
        to a significant impediment of effective competition as a result of the aggregates-
        RMX vertical links in Sweden.
        (C) Asphalt-paving
        (C.i) List of affected markets and market shares
(389) The Transaction gives rise to a vertically affected market due to the asphalt-
        paving relationship. The downstream paving market is national and the combined
        market share on this market stays below 30 %. Thus the only potential issue is
        input foreclosure due to high individual or combined market shares on a number
        of asphalt markets. The affected market is the national paving market.
(390) Table 32 below lists the asphalt markets where the Parties’ individual or
        combined market share exceeds 30%.
361
    See minutes calls with a competitor, 10 M arch 2020. .
                                                         77
 ---pagebreak---         Table 32 – asphalt markets with an individual or combined market share of more than 30%,
        asphalt-paving relationship, Sweden
          Catchment area      Market share Peab    Market share       Combined market share
                                                     Target
             Dingtuna              [40-50]%          [0-5]%                  [40-50]%
             M åttsund              [0-5]%          [40-50]%                 [50-60]%
               Boden                [0-5]%          [40-50]%                 [40-50]%
              Vålberg              [70-80]%          [0-5]%                  [70-80]%
              Örebro               [70-80]%          [0-5]%                  [70-80]%
             Kvissleby              [0-5]%          [30-40]%                 [30-40]%
              Rällsjön             [60-70]%          [0-5]%                  [60-70]%
             Bjärsgård             [40-50]%          [0-5]%                  [40-50]%
             Linköping             [40-50]%          [0-5]%                  [40-50]%
             Linneryd              [50-60]%          [0-5]%                  [50-60]%
              Fröland              [50-60]%          [0-5]%                  [50-60]%
               Savsjo              [30-40]%          [0-5]%                  [30-40]%
        Form CO, Table 132
        (C.ii) The Notifying Party’s view
(391) With regard to the Dingtuna, Boden and Mattsund catchment areas, the Notifying
        Party considers that the merged entity’s market power will be constrained by
        strong competitors’ reducing its ability to engage in input foreclosure.
        Furthermore, most competitors in these areas are vertically integrated with their
        own asphalt production, making it impossible to foreclose their access to
        asphalt.362
(392) With regard to the Vålberg, Örebro, Kvissleby, Rällsjön Bjärsgård, Linköping,
        Linneryd, Fröland and Savsjo catchment areas, catchment areas, the Notifying
        Party submits that there is no Transaction-specific change in the upstream market
        and very little change in the downstream market, which implies that the ability
        and incentive to engage in input foreclosure will be unaffected by the
        Transaction. In addition, the merged entity’s competitors are vertically integrated
        and thus impossible to foreclose.363
        (C.iii)     The Commission’s assessment
(393) As explained below with respect to the different geographic areas, the
        Commission broadly agrees with the Notifying Party.
        (C.iii.a) Catchment areas with zero upstream increment
(394) With regard to the Vålberg, Örebro, Kvissleby, Rällsjön Bjärsgård, Linköping,
        Linneryd, Fröland and Savsjo catchment areas (i.e. all catchment areas other than
        Dingtuna, Boden and Mattsund) the upstream increment is zero as either the
        Target or Peab is not present in the area. Accordingly, the Transaction does not
        change the merged entity’s ability to foreclose.
(395) As regards incentives, in general the merged entity will face a trade-off when
        considering input foreclosure strategies. An increase of prices in the upstream
        market (or a refusal to sell) will reduce profits due to decreasing sales to
        downstream rivals. On the other hand by raising downstream rivals’ input costs it
362
    Form CO, paragraphs 597-598 and 601.
363
    Form CO, paragraphs 604-607, 611-613.
                                                78
 ---pagebreak---         may gain additional profits downstream by capturing additional sales or by
        increasing prices downstream. In theory, the increment downstream can increase
        Peab’s incentives to engage in input foreclosure as it can recoup more profits
        downstream than before the merger due to the fact that it has a larger sales base
        than pre-Transaction.
(396) However, the Commission considers it unlikely that the merged entity would have
        the incentive to engage in such conduct. First, the [0-5]% increment in the
        downstream market is also minimal, which will not change appreciably the
        incentives.
(397) Second, [Strategic information]364 and thus it is unlikely that asphalt sales would
        be sacrificed for gaining paving sales or at least further reduces the incentives to
        engage in this strategy.
(398) Third, even if the Transaction increased the incentives in a meaningful way, quod
        non, the merged entity is unlikely to have the ability to engage in input
        foreclosure. This is because a number of paving competitors have asphalt plants
        in these catchment areas: Skanska and NCC have plants in all of these markets,
        while Sydbeläggningar, Asfaltgruppen, Asfaltbolaget, Svevia, Sandahls, JLB
        Markoch Asfalt have asphalt plants in one or more markets.365 As such it is
        impossible to foreclose these paving competitors in these areas if they have
        sufficient excess capacity. This appears to be the case as the capacity utilisation of
        all of these competitors’ asphalt plants in these markets are below 60 %, the vast
        majority is below 50% and their combined capacities exceed overall asphalt
        demand per catchment area.366 Furthermore, it is precisely paving competitors
        with asphalt plants in the catchment areas that are most likely to bid for paving
        contracts in these areas.
(399) On the basis of the above, the Commission considers that the Transaction will not
        lead to a significant impediment of effective competition on account of input
        foreclosure in the Vålberg, Örebro, Kvissleby, Rällsjön Bjärsgård, Linköping,
        Linneryd, Fröland and Savsjo catchment areas.
        (C.iii.b) Dingtuna
(400) In the Dingtuna catchment area, the upstream increment is not zero but the
        merger-specific change is still minimal as the upstream increment is [0-5]%,
        while the downstream increment is [0-5]%. As discussed in Section 5.3.5.2
        (C.iii.a) above, the [0-5]% downstream increment will not change appreciably the
        incentives. As the [0-5]% upstream increment will not change appreciably the
        ability to foreclose, the Transaction is unlikely to lead to input foreclosure in
        Dingtuna.
(401) Furthermore, in           Section 5.3.5.1. (C.iii), the Commission concluded that the
        Transaction will          not lead to horizontal unilateral effects in the Dingtuna
        catchment area.          The reasons included minimal increment, the presence of
        competitors with        lots of excess capacity, low entry barriers and customer buyer
364
    Notifying Party’s response to the Commission’s RFI 1, question 3.
365
    Notifying Party’s response to the Commission’s RFI 2.
366
    Notifying Party’s response to the Commission’s RFI 2.
                                                       79
 ---pagebreak---         power in the downstream market. The lack of horizontal effects implies that the
        merged entity will lack the ability to engage in input foreclosure.
(402) This is all the more the case as the largest paving competitors (Skanska, NCC and
        Svevia) all have asphalt plants in the Dingtuna catchment area367 with significant
        excess capacities. Thus it is impossible to foreclose these competitors, who
        happen to be the most likely to bid for paving contracts in the Dingtuna area on
        account of their asphalt presence.
(403) In addition, [Strategic information]368 and thus it is unlikely that asphalt sales
        would be sacrificed for gaining paving sales or at least further reduces the
        incentives to engage in this strategy.
(404) Based on the above the Commission considers that the Transaction will not lead
        to a significant impediment of effective competition due to input foreclosure in
        the Dingtuna catchment area.
        (C.iii.c) Mattsund and Boden
(405) In the Mattsund and Boden catchment areas, the combined upstream market
        shares are [50-60]% and [40-50]% while the upstream increments are [0-5]% and
        [0-5]% respectively. The downstream increment on the national paving market is
        [0-5]%.
(406) Although the increments on the upstream market are not negligible, they remain
        moderate. The increment in the downstream market is small. Taken together, they
        are unlikely to change the ability (upstream increment) and the incentive
        (downstream increment) significantly.
(407) Furthermore, in Section 5.3.5.1. (C.iii), the Commission concluded that the
        Transaction will not lead to horizontal unilateral effects in the Mattsund and
        Boden catchment areas. Reasons included the following: moderate increment;
        competitors’ substantial excess capacities and very low capacity utilisation rate
        such that competitors can serve the entire demand and have the incentives to do
        so; additional capacity that can be brought online in the form of mobile plants
        and/or additional suppliers that can compete with mobile plants; low entry
        barriers and buyer power of customers. The lack of horizontal effects implies that
        the merged entity will lack the ability to engage in input foreclosure.
(408) This is all the more the case as two of the three largest paving competitors (NCC
        and Skanska) all have asphalt plants in the Dingtuna catchment area369 with
        significant excess capacities. Thus it is impossible to foreclose these competitors,
        who happen to be the most likely to bid for paving contracts in the Dingtuna area
        on account of their asphalt presence.
367
    Notifying Party’s response to the Commission’s RFI 2.
368
    Notifying Party’s response to the Commission’s RFI 1, question 3.
369
    Notifying Party’s response to the Commission’s RFI 2.
                                                       80
 ---pagebreak--- (409) In addition, [Strategic information]370 and thus it is unlikely that asphalt sales
        would be sacrificed for gaining paving sales or at least further reduces the
        incentives to engage in this strategy.
(410) Based on the above the Commission considers that the Transaction will not lead
        to a significant impediment of effective competition due to input foreclosure in
        the Mattsund and Boden catchment areas.
        (C.iii.d) Conclusion
(411) Based on the above the Commission considers that the Transaction will not lead
        to a significant impediment of effective competition as a result of the asphalt-
        paving vertical links in Sweden. The Commission also notes that even if input
        foreclosure was possible, it would only produce effects in these areas, i.e. the
        entire downstream, national paving market may not be affected as a whole.
6.      CONCLUSION
(412) Based on Section 5.3, the Transaction will not lead to a significant impediment of
        effective competition due to horizontal non-coordinated effects
             •    in the markets for aggregates in Finland and Sweden;
             •    in the markets for asphalt in Norway and Sweden, and
             •    in the market for paving in Sweden.
(413) Based on Section 5.3, the Transaction will not lead to a significant impediment of
        effective competition due to customer or input foreclosure in the following
        vertical relationships:
             •    aggregates-asphalt link in Sweden and Norway;
             •    aggregates-RMX link in Finland, Sweden and Norway;
             •    aggregates – construction link in Finland and Norway;
             •    asphalt-paving link in Sweden and Norway, and
             •    bitumen-asphalt link in Norway.
370
    Notifying Party’s response to the Commission’s RFI 1, question 3.
                                                       81
 ---pagebreak--- (414) For the above reasons, the European Commission has decided not to oppose the
      notified operation and to declare it compatible with the internal market and with
      the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of
      the Merger Regulation and Article 57 of the EEA Agreement.
                                                   For the Commission
                                                   (Signed)
                                                   Margrethe VESTAGER
                                                   Executive Vice-President
                                          82