CELEX: 32014M7134
Language: en
Date: 2014-04-24 00:00:00
Title: Commission Decision of 24/04/2014 declaring a concentration to be compatible with the common market (Case No COMP/M.7134 - VOLVO CONSTRUCTION EQUIPMENT / TEREX EQUIPMENT) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

                                        Brussels, 24/04/2014
                                        C(2014) 2874 final

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|To the Notifying Party:                                                |                                                                       |
|                                                                       |                                                                       |

Dear Sir/Madam,

Subject:    Case M.7134 - Volvo Construction Equipment AB/ Terex Equipment Limited
         Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1]

1) On 18.03.2014, the European Commission received the notification of a proposed concentration pursuant to Article 4 of  the  Merger  Regulation
   by which Volvo Construction Equipment Aktiebolag ("VCE"), Volvo Group UK Limited and Volvo  Construction  Equipment  NA  LLC,  all  ultimately
   controlled by AB Volvo, will acquire sole control, within the meaning of Article 3(1)(b)  of  the  Merger  Regulation,  over  Terex  Equipment
   Limited ("Terex") as well as certain assets related to the business activity of Terex Equipment  Limited  (the  assets  together  with  Terex,
   jointly referred to as the "Target"). (VCE and Terex are designated hereinafter as the "Parties" or "parties to the proposed transaction").

       THE PARTIES

2) VCE is a wholly owned subsidiary of AB Volvo, a Swedish multinational manufacturing company headquartered in Gothenburg, Sweden, the  ultimate
   mother company of the Volvo Group. The Volvo Group is globally active in the manufacture and sale of trucks, buses, construction equipment and
   marine and industrial engines.

3) VCE is the Volvo Group company active in the manufacture and sale of equipment for construction and related industries. VCE  manufactures  and
   sells a wide range of equipment including wheeled and  crawler  excavators,  articulated  haulers,  wheel  loaders,  pipe  layers,  demolition
   equipment, waste handlers, motor graders, pavers, compactors, milling equipment, and a range of compact equipment (such as mini loaders,  mini
   excavators, backhoe loaders and skid steer loaders).

4) Volvo Group UK is a company organised under the laws of England and Wales and fully owned by AB Volvo.

5) Volvo Construction Equipment NA LLC is a company organised under the laws of Delaware and ultimately controlled by AB Volvo.

6) VCE, Volvo Group UK and Volvo Construction Equipment NA are all part of the construction equipment division of the Volvo Group.

7) The Target is a business unit of Terex Corporation, an American multinational manufacturing company headquartered  in  Westport,  Connecticut,
   United States of America. Terex Corporation manufactures specialised machinery products for a wide range of commercial applications, including
   in the following sectors: construction, infrastructure, quarrying, mining, shipping, transportation, refining, energy and manufacturing.

8) The Target consists of the following:

a. Terex, which owns and operates the Target's sole off-highway dump truck production facility located in Motherwell, Scotland, United Kingdom;

        b. certain assets and employees related to the distribution of off-highway dump trucks in the United States of America, Europe and other
           regions; and,

c. the Terex off-highway dump truck product lines.

9) The Target is the business unit of Terex Corporation active in the  manufacture  and  sale  of  off-highway  dump  trucks,  used  for  mining,
   quarrying and heavy construction purposes. More specifically, the Target currently manufactures five different rigid frame dump truck  ("RDT")
   models (payload capacity 32 - 91 tonnes) and three different articulated frame dump truck ("ADT") models (payload capacity 25 - 38 tonnes).

       THE OPERATION

10) By means of the proposed transaction VCE will acquire sole control over the Target as it will purchase the entire  issued  share  capital  of
   Terex and all the assets included in the Target's perimeter.

11) The proposed transaction will be implemented in a single transaction where all assets and shares constituting the Target will be  transferred
   by the seller to the buyer. Volvo Group UK limited, a Volvo group company, will acquire the entire issued share capital of Terex and VCE  will
   acquire all the assets included in the Target's perimeter.

       THE CONCENTRATION

12) The proposed transaction consists of the acquisition of sole control by  VCE  of  Terex  by  way  of  purchase  of  assets  and  shares.  The
   transaction therefore constitutes a concentration within the meaning of Article 3(1) of the Merger Regulation.

       EU DIMENSION

13) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million[2] [EUR 33  866  million  for  Volvo,
   EUR […] million for Terex]. However, Terex has a turnover of only EUR […] million in the EU. Neither the requirements of Article 1(2)  nor  of
   Article 1 (3) of the Merger Regulation are therefore fulfilled.

14) Following a referral request the transaction has an EU dimension pursuant to Article 4(5) of the Merger Regulation.

       COMPETITIVE ASSESSMENT

15) The proposed transaction concerns the manufacture and sale of construction equipment in general and the  manufacture  and  sale  of  ADTs  in
   particular.

16) Within the broader category of construction equipment, heavy construction equipment, such as earthmoving machines, road making  machines  and
   material handling machines (including heavy excavators, heavy loaders, heavy levelling machines (including  dozers  and  graders))  and  light
   construction equipment such as light excavators, skid steer loaders, mini wheel loaders and backhoe loaders, can be  identified  as  different
   categories.

17) One of the types of equipment falling within the heavy construction equipment category are off-highway dump trucks of which two types  exist:
   "Articulated frame dump trucks" (ADTs)[3] and "Rigid frame dump trucks" (RDTs).

18) Both the parties to the proposed transaction are active in the broader construction equipment. With respect to the  off-highway  dump  trucks
   segment, both VCE and Terex manufacture and sell ADTs whilst only Terex is active in the RDT segment.

1 Relevant product market

1 Off-highway dump trucks with a payload capacity below 100 tonnes

19) The Parties submit that the relevant product market is the market for all construction equipment,  encompassing  earthmoving  machines,  road
   making machines and material handling machines, including heavy excavators, heavy loaders, heavy  levelling  machines  (including  dozers  and
   graders) and light construction equipment (including light excavators, skid steer loaders, mini wheel loaders and backhoe loaders).

20) Notwithstanding the above, the Parties acknowledge that an alternative market definition according to the type of product may be  considered.
   On this basis off-highway dump trucks could constitute a separate product market which could be further segmented into ADTs and RDTs.

21) The Commission has previously considered that heavy and compact construction equipment and light construction equipment  belong  to  separate
   product markets.[4] In the same case, the possibility of further sub-segmenting the market based on individual product types,  such  as  heavy
   excavators, heavy loaders, heavy levelling machines and light construction equipment has been considered.[5]

22) In case COMP/M.4887 Doosan/Bobcat the Commission considered broader market definitions such as  (i)  the  market  for  the  all  construction
   equipment including both heavy and compact equipment, (ii) the market for all compact construction equipment and (iii) the market for  compact
   equipment by application (excavating and loading). This approach was considered due to the substitutability of different individual  equipment
   types, which was also supported by customers and competitors in that case.[6] The Commission did not reach  a  definitive  conclusion  on  the
   product market definition.

23) In the present case, the Commission notes that, in light of  the  market  investigation,  albeit  customers  and  competitors  recognize  the
   existence of a great degree of substitutability between the various products falling within the broader category of "construction  equipment",
   a market segmentation according to product type should be considered.

24) The Commission also notes that the majority of the respondents took the view that off-highway dump trucks are not  substitutable  with  other
   construction equipment mainly because of their product characteristics and application in practice.

25) With reference to a possible further segmentation of the market according  to  maximum  payload  capacity,  the  Commission  notes  that  the
   majority of the respondents took the view that off-highway dump trucks with a payload capacity above 100 tons are not substitutable with  off-
   highway dump trucks with a payload capacity below 100 tons due to different characteristics and application in practice. Often is not possible
   to use off-highway dump trucks with a payload capacity of more than 100 tons due both to  the  conditions  of  the  worksite  and  to  various
   economic reasons. Respondents confirmed that in order to use off-highway dump trucks with a payload capacity of  more  than  100  tons  bigger
   loading equipment and bigger hauling road are required which requires larger investments.

26) The Commission considers that, on the basis of the market investigation,  the off-highway dump trucks with a payload capacity below 100  tons
   ADTs and RDTs may not be part of the same product market. The Commission also remarks that the majority of respondents perceive ADTs and  RDTs
   as not being comparable in terms of price. ADTs are 10 to 50% more expensive than RDTs. Furthermore, there are technical  differences  between
   the two products. ADTs are more suitable when hauling roads are soft and slippery while RDTs can be used with lower maintenance costs in  hard
   hauling road conditions.

27) For the purposes of the present transaction the Commission considers that the exact product market definition can be  left  open  considering
   that no competition problem is likely to arise even under the narrowest product market definition i.e. the market  for  ADTs  with  a  payload
   capacity below 100 tons.

2 Sales of spare parts and after sales services

28) The Parties submit that the sale of spare parts and aftersales services cannot be separated from the sale of the construction  equipment  and
   hence do form part of the same market. The Parties submit that the service costs of construction equipment are a very important factor in  the
   decision making process of the client and the overall costs are assessed in advance.

29) For the purpose of the present transaction, the Commission considers that the exact  product  market  definition  can  be  left  open  as  no
   competition problem is likely to arise even under the narrowest product market definition, i.e. considering the sales of spare parts and after
   sales services as a separate market.

2 Relevant geographic market

30) The Parties submit that, irrespective of how the product market is defined, its geographic scope is global and  in  any  event  not  narrower
   than EEA wide.

31) The Parties' allegation is consistent with the Commission’s past decisional practice.

32) The Commission observes that this view was also confirmed by the market investigation. The supply of construction equipment, irrespective  of
   the type, is made on global or at least EEA-wide basis and the  competitive  conditions  in  the  EEA  are  homogenous  with  no  major  price
   differences and the quality of the products being the same throughout the EEA.

33) However, the Commission considers that the exact geographic market definition can be left open in the present  case  as  the  transaction  is
   unlikely to raise competition concerns under the narrowest geographic market definition considered, that is an EEA-wide market.

3 Assessment

1 All construction equipment

34) On an EEA wide market for all construction equipment, the transaction would not lead to an affected market. The combined market share of  the
   Parties is [10-20] % and the increment brought about by the concentration is minimal (around [0-5] %) due to the small size  of  Terex.  Other
   competitors with significant market shares like Caterpillar ([10-20] %), JCB ([10-20] %), Doosan ([5-10] %), Hitachi CM ([5-10] %) and Komatsu
   ([5-10]%) are active on this market.

35) In the light of the above and of all the other available evidence, the Commission considers that on an EEA wide market for  all  construction
   equipment the transaction is therefore unlikely to raise serious doubts as to its compatibility with the internal market.

2 ADTs.

36) On the narrowest plausible market for ADTs with a payload capacity under 100 tons in the EEA the transaction  would  lead  to  the  following
   market structure:

|EEA-Wide                             |ADT market segment                                                                         |
|                                     |volume based market shares                                                                 |
|                                     |2012                          |2011                          |2010                          |
|VCE                                  |([30-40] %)                   |([30-40] %)                   |([40-50]%)                    |
|Target                               |([0-5] %)                     |([0-5] %)                     |([0-5] %)                     |
|VCE + Target                         |([30-40] %)                   |([30-40] %)                   |([40-50]%)                    |
|Caterpillar                          |([10-20] %)                   |([20-30] %)                   |([20-30]%)                    |
|Bell                                 |([10-20] %)                   |([10-20] %)                   |([10-20])                     |
|Hydrema                              |([10-20] %)                   |([10-20] %)                   |([0-5] %)                     |
|Komatsu                              |([0-5] %)                     |([0-5] %)                     |([0-5] %)                     |

37) VCE is the strongest player with an estimated market share by volume of [30-40]% in 2012. Terex on the contrary is  a  small  player  on  the
   market with an estimated [0-5]% market share by volume in 2012. The proposed transaction will therefore lead to a combined market share of the
   Parties of [30-40] %. However, the addition of market shares is very limited with only [0-5] %.

38) The combined entity would face competition from other market players with significant market shares between  10%  and  20%  like  Caterpillar
   ([10-20] %), Bell ([10-20] %) and Hydrema ([10-20] %).

39) The Commission notes, in light of the replies to the market investigation, that the Parties are not close competitors on  the  potential  ADT
   market as Terex is acting as a budget supplier competing mainly on price whilst VCE is a premium supplier competing mainly on quality.

40) The Commission notes that, in light of replies to the market investigation, the majority of the  respondents  do  not  perceive  Terex  as  a
   particularly aggressive or important competitor. Respondents to the market investigation state that Terex offers prices lower to VCE and other
   premium suppliers but is lacking in product development and after sales services.

41) The Parties also submit that a number of players recently entered the ADT market such as Bell (2004, at  present  with  an  estimated  market
   share of [10-20] %), Sany Group (2014), Doosan Corporation (2010), John Deere Group (2012). The Parties claim that new  players,  particularly
   those already active on the Asian market but not at EEA level, are expected to enter the market in the near future.  This  has  been  to  some
   extent confirmed by the market investigation with a minority of respondents expecting new competitors, especially  from  Asia,  to  enter  the
   market in the near future.

42) The Commission notes that, in light of the replies to the market investigation, the proposed transaction  is  unlikely  to  have  a  negative
   impact on the level of competition and prices.

43) Finally the Commission notes that no third parties raised  specific  competition  concerns  with  respect  to  the  impact  of  the  proposed
   transaction on the market for ADTs both for ADTs and for off-highway dump trucks with a payload capacity below 100 tons in general.  Moreover,
   the Commission observes that the majority of the respondents are of the opinion that price levels will likely remain the same or decrease  and
   that the level of competition post-transaction will increase or at least remain the same.

44) On the basis of the above and of all the other available evidence, the Commission considers that the proposed transaction does not give  rise
   to serious doubts as to its compatibility with the internal market in relation to ADTs under 100 tonnes on an EEA wide basis.

3 Sales of spare parts and after sales services.

45) The Parties submit that on a potential market for the sale of spare parts and supply of after sales services  for  ADTs,  their  position  is
   weaker compared to the market for ADTs as additional competitors are present on this market. The Parties claim that, aside from  the  Original
   Equipment Manufacturers present on the market for ADTs (Caterpillar, Bell, Hydrema, Komatsu and  others),  they  face  competition  also  from
   independent spare parts suppliers, independent spare parts traders, independent repairers, authorised workshops, authorised workshops of other
   repairers and in-house workshops (this is the case for large customers).

46) Following the first warranty period, VCE’s network does not retain […] of clients for after sales services.  On  the  contrary  it  estimates
   that in year 2 after the purchase of the equipment […] of the customers resort to other competitors for the provision of spare parts and after
   sales service and in year 4 approximately […] of the clients receive services from competitors.

47) The Commission notes, in light of the replies to the market investigation, that serious doubts  are  unlikely  to  arise  on  a  hypothetical
   market for the sale of spare parts and the provision of after sale services. Most respondents  are  of  the  opinion  that  the  intensity  of
   competition post-transaction will increase or at least remain the same.

48) In the light of the above and of all the other available evidence, the Commission considers that the proposed transaction does not give  rise
   to serious doubts as to its compatibility with the internal market in relation to sale of spare parts and the provision of after sale services
   for ADTs.

       CONCLUSION

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

                                        For the Commission
                                        (signed)
                                        Joaquín ALMUNIA
                                        Vice-President

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[1]   OJ L 24, 29.1.2004, p. 1 ("the Merger Regulation"). With effect from 1 December 2009, the Treaty on the Functioning of the  European  Union
      ("TFEU") has introduced certain changes, such as the replacement of "Community" by "Union" and "common market" by  "internal  market".  The
      terminology of the TFEU will be used throughout this decision.
[2]   Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the  Commission  Consolidated  Jurisdictional  Notice  (OJ
      C95, 16.04.2008, p1).

[3]   ADTs are off-highway dump trucks with a hinge between the cab and the dump box.
[4]   See COMP/M.1571 New Holland/Case (1999) and COMP/M.2369 CNF/FHE (2001).
[5]   COMP/M.2369 CNF/FHE (2001).
[6]   COMP/M.4887 Doosan/Bobcat (2007).

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                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE

 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.