CELEX: 32017M8207
Language: en
Date: 2017-02-07 00:00:00
Title: Commission Decision of 07/02/2017 declaring a concentration to be compatible with the common market (Case No COMP/M.8207 - EMERSON ELECTRIC / PENTAIR (VALVES AND CONTROLS BUSINESS)) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

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                                        Brussels, 7.2.2017
                                        C(2017) 811 final

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|To the notifying party:                                                                                                                   |

Subject:    Case M.8207 - Emerson / Pentair (Valves and controls business)
            Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1] and Article 57 of the Agreement on the European
            Economic Area[2]

Dear Sir or Madam,

    1) On 3 January 2017, the European Commission received notification of a proposed concentration ('The Transaction') pursuant to Article 4  of
       the Merger Regulation by which the undertaking Emerson Electric Company ("Emerson", USA) acquires within the meaning of Article 3(1)(b) of
       the Merger Regulation sole control of the valves and controls business of Pentair plc ("Pentair", UK) by way  of  purchase  of  shares.[3]
       (Emerson and Pentair are designated hereinafter as the "Parties" and Emerson as the "Notifying Party".)

The parties

   1) Emerson is a global technology and engineering company supplying products for Process Management,  Industrial  Automation,  Network  Power,
      Climate Technologies and Commercial & Residential solutions businesses. Emerson is a manufacturer of valves, controls  and  instrumentation
      and automation products in a broad range of industrial sectors.

   2) Pentair designs, manufactures, distributes and services valves, actuators and instrumentation and automation  products  in  industrial  and
      energy projects worldwide.

The concentration

   3) Pursuant to an agreement entered into between Emerson and Pentair on 18 August 2016, the concentration consists of the acquisition of  sole
      control by Emerson of the valves and controls business of Pentair.

   4) Therefore, the Transaction is a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

EU dimension

   5) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million[4]  (Emerson:  EUR 19 426  million,
      Pentair: EUR 1 658 million). Each of them has an EU-wide turnover in excess of EUR 250 million (Emerson: EUR […] million, Pentair: EUR  […]
      million), but they do not achieve more than two-thirds of their aggregate EU-wide turnover within  one  and  the  same  Member  State.  The
      notified operation therefore has an EU dimension.

Competitive assessment

   6) The Parties' activities horizontally overlap in the manufacture, sale and servicing of valves, actuators  and  valve  instrumentation.  The
      Commission has never assessed in detail the markets for valves, actuators and valves instrumentation as it focused  in  previous  cases  on
      industrial control process equipment, which included valves  but  also  central  control  units,  process  control  field  and  measurement
      instruments.

1 Product markets

1 Valves

   7) Valves are devices that control the passage of a fluid, gas or other material through a pipe or duct.

   8) Valves come in several forms and types. Typically, industry reports differentiate valves according to their shape (e.g. gate  valves,  ball
      valves, plug valves, butterfly valves, check valves, diaphragm valves and others), their function (on/off valves,  safety  valves,  control
      valves, pressure reducing valves, control valves), their size or the mode of operation (for emergency shut- down, manual or  actuated)  and
      also consider their end use in various industries. Valves are widely used in the oil and gas sector, from exploration, distribution, to oil
      refining, in the chemical processing industries, power generation, water processing and in many settings in general industries.

   9) The Notifying Party suggests classifying valves into isolation valves and control valves as  they  argue  that  there  is  no  demand  side
      substitutability between isolation and control valves.

  10) Control valves are valves used to control conditions such as flow, pressure, temperature and liquid level by fully or partially opening  or
      closing in response to signals received from controllers that compare a “set point” to a “process variable”  whose  value  is  provided  by
      sensors that monitor changes in such conditions. For example, control valves in a gas pipeline are typically used to regulate pressure  and
      keep it within a predetermined range. Control valves are provided as a single branded package, incorporating valve, actuators  (see  below)
      and controls. Control valves are often based on a standard valve type or design which is frequently configured to order for the customer.

  11) Isolation valves are also referred to as “on-off” valves. They stop or start the flow of a medium but, in contrast to control  valves,  are
      not able to control flow by partially opening or closing. Isolation valves can be standard, configured or extensively engineered  to  order
      for a specific application. They require a device to turn the valve from an open to a closed position.

  12) The Notifying Party considers that no further segmentation of control valves or isolation valves would be justified; the different types of
      control valves are largely substitutable, as are the various types of isolation valves. A triple offset valve for instance  –  which  is  a
      type of control or isolation valve – can be replaced by a ball valve or gate valve to perform the same function.

  13) According to the Notifying Party, a segmentation according to end use or industries is not relevant either as the same types are frequently
      used across sectors; the type of industry being less of a factor than the requirements of  the  specific  project.  This  being  said,  the
      Notifying Party acknowledges that there are certain exceptions, where highly specific valves are  employed  for  particular  purposes.  For
      example turbine bypass valves which are a highly engineered type  of  specialised  control  valve  used  in  severe  conditions  cannot  be
      substituted with other types of control valves due to size, material, customisation and performance expectation. None of the Parties supply
      turbine bypass valves in the EEA.

  14) Therefore, the Notifying Party suggests identifying a relevant product market for all isolation valves and a relevant  product  market  for
      all control valves, irrespective of end use given the potential for demand-side substitution.

  15) Customers and competitors in the market investigation clearly confirmed that isolation valves and control valves constituted  two  separate
      product groups[5], as their functionality and design were different. It was noted that in theory certain designs  in  control  valves  were
      suitable to be deployed as isolation valves, however, this was not common practice. Most isolation valves (ball valves, plug  valves,  gate
      valves and strop check valves) were simply impossible to be replaced by any type of control valve. Similarly, the physical design  of  most
      isolation valves makes them unsuitable to replace control valves.

  16) However, the market investigation did not confirm the Parties' assertion that there was a wide substitutability between the different types
      of valves within the broader categories of control and isolation valves respectively.[6] Respondents were  of  the  view  that  each  valve
      design had its specificity, making it suitable for a certain purpose or application, while it was acknowledged that some  types  were  more
      substitutable than others. The overwhelming majority of respondents ultimately  agreed  that  the  valves  needed  to  be  adapted  to  the
      application, according to the specifications of the project.

  17) From a supply side perspective, however, the substitution is by far greater. Although not all valve  manufacturers  produce  all  types  of
      valves, in general, all do manufacture a large variety of valves and every type  of  valve  has  a  variety  of  suppliers.[7]  The  market
      investigation has shown that there are a significant number of suppliers able to provide different designs of valves suitable  for  various
      applications.[8]

  18) In the light of the above, the competitive assessment will be carried out on  the  basis  of  a  distinction  between  control  valves  and
      isolation valves.

2 Actuators

  19) Actuators are devices used to move and control a valve in response to a control signal. The control signal may  be  supplied  by  a  simple
      electronic system, a more sophisticated software-based operating system or manually. An actuator requires a control signal and a source  of
      energy which generate motion which then moves the valve. While control valves are always sold with actuation,  isolation  valves  are  sold
      with or without actuator and the actuators for the isolation valves can be purchased separately. The Notifying Party  estimates  that  only
      30%-35% of isolation valves require an actuator and argues that actuators are designed to work with all  isolation  valves,  regardless  of
      manufacturer.

  20) Actuators can be further differentiated according to their operations: (i) electric actuators  use  electricity  as  the  power  source  to
      provide a stem force output for a variety of process applications; (ii) pneumatic actuators are usually air operated and provide high  stem
      force output for demanding service conditions; and (iii)  hydraulic  actuators  use  hydraulic  fluid  pressure  to  facilitate  mechanical
      operation. Hydraulic cylinders provide more torque in less physical space when compared with pneumatic actuators, but they are also 1.5  to
      4 times more expensive than pneumatic actuators, which latter are typically  also  larger.  Determining  whether  to  use  a  hydraulic  or
      pneumatic actuator therefore involves balancing cost against space restrictions.

  21) The Notifying Party considers that hydraulic and pneumatic actuators are substitutable as they  use  a  similar  mechanism  with  the  only
      difference that the motion generator is either air or fluid. By contrast electric actuators are operated using a motor, they have a  slower
      function and are in general twice as expensive as pneumatic actuators. The Notifying Party has therefore provided shares with a distinction
      between electric actuators on the one hand, pneumatic/hydraulic actuators on the other hand.

  22) As regards the Notifying Party’s assertion that all actuators could work with all valves, most of the respondents to  the  investigation[9]
      agreed that technically this was feasible. Customers, either end customers or EPC contractors [10], tend to  purchase  the  actuated  valve
      from the valve manufacturer, which undertakes the integration with its own actuator or a purchased one from different brands.

  23) The Notifying Party argues that there is a high level of substitutability  between  actuators  and  similarly  to  valves,  a  segmentation
      according to end use or industries is not relevant either as the same types are frequently used across sectors. In response to  a  specific
      request from the Commission, following feedback from the market  investigation,  Emerson  however  provided  market  shares  for  pneumatic
      actuators in the oil and gas and the chemicals industries.[11]

  24) It is however not necessary to conclude on the exact scope of the product market as regards actuators as the  Transaction  does  not  raise
      serious doubts under any alternative market definition.

3 Valve instrumentation

  25) Valve instrumentation includes devices mounted on the valve actuator used to signal the actuator to operate or to monitor the  position  of
      the valve or other parameters (e.g. temperature, pressure). They are generally designed to support  all  types  of  valves  and  actuators,
      regardless of manufacturer.

  26) Valve instrumentation products include: (i) Positioners are used to move valves to the specific desired intermediate position in  order  to
      control a parameter of the process; (ii) Digital valve controllers (“DVCs”), a substitute for positioners, use microprocessors rather  than
      conventional and electro-pneumatic technology commonly associated with positioners; (iii) Field instrumentation are devices that  are  used
      to provide monitoring and control for valves; transducers, controllers, volume boosters, solenoids and switches (including switchboxes) are
      all types of field instrumentation that are used to monitor and control flow, temperature, pressure and  level  variables  in  the  process
      industry; (iv) Tank Protection Products, including emergency vents and flamer arresters, protect storage tanks from flames from  low-flash-
      point liquids and flammable gases. The target’s product portfolio includes conservation vents, flame arresters  and  pilot-operated  relief
      valves.

  27) Despite this variety of products, the Notifying Party considers that it is  not  appropriate  to  further  segment  the  market  for  valve
      instruments as the different categories of instruments provide the same end-function (allowing a valve to be controlled and monitored).

  28) The market investigation pointed out that within field instrumentation most products were not substitutable from a  demand  side  point  of
      view as such. However, from a supply side perspective, instrumentation manufacturers supplied a wide range of devices  and  instrumentation
      was widely used by customers to describe the same wide range of products. The narrowest potential product markets that could be considered,
      where both Parties are active as was pointed out in the market investigation, are solenoids and switchboxes.[12]

  29) It is however not necessary to conclude on the exact scope of the product market(s) as regards valve  instrumentation  as  the  Transaction
      does not raise serious doubts under any alternative market definition.

2 Geographic market

  30) The Notifying Party submits that the market for valves, actuators and instrumentation is global but at  least  EEA-wide.  The  Parties  and
      their competitors have manufacturing locations and sales worldwide. Basic functionality, design, technical skills,  marketing  content  and
      competitors' presence do not vary by world regions according to the Notifying Party.

  31) In a previous case[13] dealing with process control instruments, which includes also valves  and  controls,  the  geographic  markets  were
      considered Europe-wide as the market investigation concluded that national boundaries within Europe did  not  influence  either  supply  or
      purchasing activities.

  32) In the present case, the Commission considers that the markets for valves, actuators and valves instrumentation are EEA-wide in scope.  The
      following elements are relevant in that regard.

  33) First, in Europe, valves, actuators and valves instrumentation have to comply with the specific  requirements  of  the  Pressure  Equipment
      Directive 2014/68/EU which sets standards for the design  and  development  of  pressure  equipment,  including  safety  valves  and  other
      components subject to pressure loading. As explained  by  one  large  customer  "Even  though  suppliers  may  be  the  same  globally  the
      certifications that each must meet may vary depending  on  a  particular  region".[14]  Another  customer  mentioned  that  "EEA  companies
      specifications and norms are different from the ones on other parts of the worlds. There are a few companies  that  supply  worldwide,  but
      there are lots of smaller companies living thanks to these specific demands". Yet another customer preferred purchasing product originating
      in the EEA for the reason "We do not want to have the responsibility of the conformity check with EEA norms."

  34) Second, although customers active globally reported that they purchased valves, actuators and instrumentation from vendors located globally
      and that their AMLs (Authorized Manufacturer List) were in general global,[15] respondents located only in the EEA preferred purchasing  in
      the EEA. The main reason would be the need for local presence of the vendor close to the site in case of emergency,  need  for  maintenance
      and quick access to spare parts. Also global companies noted that their preference was a global supplier that has a local presence  at  the
      highest number of service locations. Even for those customers which do not specifically require proximity of service support, local service
      organization is an appreciated advantage.

  35) Finally, even if major manufacturers offered their products globally, respondents  noted  that  there  were  also  many  that  were  active
      regionally only and competed with the international ones. Customers also pointed out that even the  global  competitors  were  not  equally
      present in all parts of the world.[16] For example, a European valve supplier named Samson is not yet active in North America.

  36) Therefore, for the purposes of the present decision the geographic market for valves, actuators and instrumentation are  considered  to  be
      EEA-wide in scope.

3 Competitive assessment

1 Valves

  37) The Notifying Party submits that the Parties' activities are complementary as concerns isolation and control valves. Emerson is present  in
      control valves ([5-10]% in the EEA)[17] but the increment brought by Pentair is negligible (less than [0-5]%). In isolation valves, Pentair
      is more present ([5-10]% EEA market share) but the increment brought by Emerson is also negligible ([0-5]%).

  38) For isolation valves, the Parties note the presence of Cameron[18], Flowserve, Crane and Valvitalia, all between [5-10] and [10-20]% market
      shares globally and in the EEA. Control valves are manufactured by competitors GE, Flowserve, Samson and IMI  (with  [5-10]-[20-30]%  share
      globally in the EEA.).

  39) The Notifying Party submits in addition that the valves and controls markets are highly fragmented, consisting of a large number of  local,
      regional and global competitors, for nearly […]% of the market the competitors cannot be identified.

  40) The market investigation also confirmed the fragmented structure of the market and the presence of a large number of global,  regional  and
      also local players.[19]

  41) In light of the above the Transaction does not raise serious doubts as regards the horizontal overlap of the  Parties'  activities  in  the
      sale of isolation and control valves in the EEA.

2 Actuators

  42) The Notifying Party submits that combined market shares in actuators would remain below [20-30]%, even if actuators are further broken down
      to differentiate between electric and pneumatic and hydraulic types.

  43) The Notifying Party submits that their position in electric actuators is minimal  ([0-5]%  combined  share).  In  pneumatic  and  hydraulic
      actuators, the Parties would have a share of [10-20]% at EEA level next to competitors such as  Rotork  ([10-20]%),  Cameron  ([0-5]%)  and
      Flowserve ([0-5]%).

  44) Considering a sub-segmentation of actuators per sector, the oil and gas sector  in  particular,  where  market  participants  attributed  a
      stronger role to the Parties, the Parties claim that their combined market shares amount to [20-30]% in the EEA. For chemical applications,
      another alleged stronghold of the Parties, they estimate their EEA shares to be below [20-30]%.

  45) Furthermore, the Notifying Party adds that customers for valves and controls, such as EPC contractors, OEMs, oils  and  gas  companies  and
      distributors, are large and exercise their buying power through competitive bidding procedures conducted project  by  project.  Their  AMLs
      contain a number of alternative suppliers for each component, which they evaluate on a yearly basis.

  46) The market investigation revealed that the Parties' brands have been established and acknowledged brands on the markets for several decades
      and the merger combines two historically very strong product lines in actuation, Bettis (Emerson) and Biffi and Morin (Pentair valves).

  47) The overwhelming majority of respondents to the market investigation did not raise concerns as  regards  actuators.  However,  some  market
      participants, who were all customers and competitors of the Parties at the same time,  indicated  that  the  strong  brand  image  and  the
      perceived reliability of the Parties' products make them almost the exclusive choices for some  safety  critical  or  high-end  heavy  duty
      applications. They explain that the Parties are clear market leaders  in  actuators,  especially  in  the  specific  type  of  scotch  yoke
      actuators[20] for oil and gas applications, where the number of competitors is more  limited,  estimating  the   Parties'  combined  market
      shares at 50-75% globally[21].

  48) Despite these claims, the results of the market investigation confirmed  the  presence  of  a  number  of  alternative  suppliers  for  all
      categories of pneumatic and hydraulic actuators, especially so in the EEA, such as Samson, IMI,  ATC–actuators,  Airtorque,  Paladon,  DVG,
      ABB, Petras, Pepperl+Fuchs, Camtorc and Eckart, which are all EEA- or Swiss-based suppliers. In general customers did not establish a clear
      ranking but noted these alternative suppliers among the four largest competitors of either Emerson or Pentair or both.  While  Emerson  and
      Pentair were noted among each other's largest competitors, Rotork and Flowserve appeared with at least the same frequency.

  49) As concerns scotch yoke actuators in particular, some respondents noted in the market investigation  that  this  was  an  area  of  overlap
      between the Parties where both had significant presence.[22] However, the market investigation did not confirm the elevated  market  shares
      in the EEA as alleged by the customers who raised some concerns on a global market. Among the four largest competitors of the  Parties  for
      scotch yoke actuators, respondents identified a smaller number of but still several alternative suppliers were, such as Rotork,  Flowserve,
      Airtorque, and Paladon, also capable of delivering actuators for heavy duty applications, acting as competitive constraint to the Parties.

  50) In light of the above, the Transaction does not raise serious doubts as regards the horizontal overlap of the Parties'  activities  in  the
      sale of actuators in the EEA.

3 Instrumentation

  51) As concerns a potential instrumentation market encompassing all instrumentation products, the Notifying Party estimates that their combined
      market shares would be [10-20]% at EEA level, Rotork ([20-30]%) and Samson ([10-20]%) being stronger than the Parties in the EEA.

  52) Narrowing down the market to switchboxes, the Parties combine two strong product lines, TopWorx (Emerson) and Westlock (Pentair).  Internal
      documents of Emerson estimate that these two products combined have a [40-50]% share of  the  instrumentation  market  in  Europe.[23]  The
      Notifying Party argues that this internal document significantly overstates the market presence  of  Pentair’s  Westlock  brand,  as  these
      estimates were made before the due diligence and the total market size was  lower  than  the  actual.  Nevertheless,  some  of  the  market
      participants held that the combined shares would be rather between 50% and 75% globally[24].

  53) Ultimately, the Notifying Party acknowledges that on the narrower product market, encompassing switchboxes for oil  and  gas  applications,
      their combined market share would be [50-60]% globally and somewhat less, [40-50]% in the EEA, while stressing that  the  relevant  product
      market should be considered to include all instrumentation products.

  54) Respondents to the market investigation did not only mention the Parties as strongest competitors in switchboxes but confirmed the presence
      of numerous suppliers among the Parties' four strongest competitors such as Siemens, Flowserve, Stonel, IFM,Crouse Hinds,  ABB,  Armstrong,
      Rotork, Pepperl&Fuchs, Moniteur, ,Dieckers Prometheus, Paladon and others. The vast majority of customers  of  switchboxes  did  not  raise
      concerns about the impact of the Transaction in the light of the presence of those alternative suppliers.

  55) Narrowing down the market to solenoid valves, some customers indicated that the Parties may  have  an  especially  strong  position  as  in
      switchboxes. ASCO, an Emerson company is the original inventor of these valves.  However, respondents to the market investigation  did  not
      mention the Parties in the first place as strongest competitors but a large number of alternatives, which they considered to compete in the
      top four. These were Norgren, Versa, Parker Lucifer/Hannifin, Siemens, Flowserve, ABB, Paladon Pepperl&Fuchs, Samson, Festo, and more.

  56) In light of the above, the Transaction does not raise serious doubts as regards the horizontal overlap of the Parties'  activities  in  the
      sale of instrumentation products in the EEA.

4 Input foreclosure

  57) Some valve competitors expressed concerns about potential input foreclosure  by  the  Parties  as  regards  actuation  and  instrumentation
      products. Some of the customers do not manufacture actuation and instrumentation products and therefore rely completely on purchasing  them
      on the market. Some do manufacture such products, but explained that the final customer sometimes specifies the actuator or instrumentation
      brand it requests and often it is the Parties' products. In the latter  case,  the  Parties'  products  form  an  essential  input  of  the
      downstream product which represents a non-negligible portion[25] of the total cost of an actuated valve.

  58) In order to provide the actuated valve package, some valve manufacturers thus need to purchase actuation and instrumentation products  from
      the Parties, while potentially competing with the Parties on the final  product  for  the  same  customer  at  the  same  time.  After  the
      Transaction, where Emerson will integrate the isolation valve business of Pentair (mainly the  popular  butterfly  valves)  and  where  the
      merged entity will allegedly have high combined market shares in actuators and instrumentation products, a small number of  customers  fear
      that the Parties may have the ability and the incentive to restrict access or deteriorate the conditions of access to  their  actuator  and
      instrumentation products in order to gain competitive advantage on the final product, the actuated valve  package,  bidding  for  the  same
      projects. They add that the foreclosure is facilitated by the Parties requiring  the  valve  manufacturer  to  disclose  the  identity  and
      location of the final customer beforehand.

  59) The Commission has analysed these claims and found that the Transaction is unlikely to lead to any input foreclosure  effect,  neither  for
      actuators nor for switchboxes.

  60) First, combined market shares for actuators in the EEA, even if narrowed down to the oil and gas and chemical industries, appear to be  far
      lower in the EEA than the shares alleged by the complainants and do not allow the Parties to exercise a significant degree of market  power
      on the actuator market. As regards switchboxes in the EEA, although these  shares,  as  also  acknowledged  by  the  Parties,  are  higher,
      especially for the oil and gas and the chemicals industries, as explained in recital 53, a large number of competitors have been identified
      as credible alternatives.

  61) Second, Emerson's actuators sales are made to […]% with distributors and not valve OEMs or final customers. This figure for switchboxes  is
      […]%. When sales are made to distributors, the Parties do not know with which third party valves their components will be combined.

  62) Third, the Parties have carried out an analysis of the AMLs from […] Emerson and […] Pentair customers, which were filtered for the oil and
      gas and chemical sectors and for actuators and switchboxes. The filtering resulted in […] AMLs for actuators in the oil  and  gas  industry
      and […] AMLs for actuators in the chemicals industry. According to the Parties, it results from the analysis of customers’  AMLs  that  the
      Parties are hardly ever the sole accepted suppliers for actuators and most AMLs contain many alternative manufacturers, both for  actuators
      and switchboxes.

        a) For pneumatic actuators in the oil and gas industry, […]% of the global customers have 3 or more suppliers and […]% have  5  or  more
           suppliers on their AMLs. In the chemical industry […]% of the global customers have 3  or  more  and  […]%  have  over  5  suppliers.
           Narrowing down the scope to EEA projects only, […] alternative pneumatic actuator suppliers figure on the collected AMLs in total for
           the oil and gas industry and […] for the chemical industry. […] of the AMLs for EEA projects have less than 3 suppliers  and  […]  of
           the AMLs where both Parties are listed contain only the Parties' names.

        b) As regards switchboxes, the analysis was carried out on […] AMLs of global customers for switchboxes for the oil and gas industry and
           […] AMLs for switchboxes for the chemicals industry. The AMLs for switchboxes show less competition than for actuators: […]% of  AMLs
           contain less than 3 suppliers for switchboxes. In the oil and gas industry, […]% of the AMLs list only Emerson and  Pentair.  At  the
           same time, in […]% of the AMLs in the oil and gas industry and […]% of the AMLs in the chemical industry only one of the  Parties  or
           none of them figured. Overall, […] and […] different suppliers figured on the AMLs in total in the oil and gas and  in  the  chemical
           industry respectively. In the EEA, although the total number of listed competitors is less, […] and […] only in the oil and  gas  and
           in the chemical industry respectively, only […] of the AMLs include the Parties only.

  63) In light of the above, the Transaction does not raise serious doubts as regards the vertical overlap of the Parties' activities in the sale
      of valves, actuators and instrumentation in the EEA.

5 Single vendor packages

  64) The Parties' internal documents and customer feedback suggest furthermore that there is a  growing  demand  for  complete  automated  valve
      packages from a single vendor in order to enhance interoperability, servicing  and  availability  of  spare  parts  and  accountability  as
      concerns the safety and integrated functioning of the various components.[26] From this perspective the number of competitors that are able
      to provide such a service would be more limited and the merger would eliminate one of these alternatives.[27] This view is  also  supported
      by some of the Parties' internal  documents  which  analyse  the  competitive  landscape  by  segmenting  competitors  according  to  their
      capabilities into pure valve and actuators companies, multicomponent providers,  aftermarket  service  providers,  solution  providers  and
      automation providers.

  65) The Notifying Party argues that such automated valve packages are also offered on the market by a variety of alternative firms,  which  are
      not manufacturing but only integrating the necessary components themselves as  the  automated  valve  package  does  not  need  to  contain
      components of the same brand. Such firms can be third party distributors or service centres (e.g. MRC Global, Sunbelt,  ERIKS,  Valve  Team
      Europe, Distribution NOW, Score or TEAM). Furthermore, these firms can be the EPC contractors (Technip, Aker, Fluor,  Wheeler,  Bechtel  or
      Foster) and other valve or actuator manufacturers that purchase third party instruments for integration. The Notifying Party considers that
      these firms should all be considered as the Parties' competitors in engineering automated valve packages.

  66) As concerns a further level of integration where the valves are integrated into  a  software  controlled  process  management  system,  the
      Notifying Party submits that only Emerson is active on this market and numerous large competitors develop  such  core  automation  systems,
      such as Honeywell, General Electric, ABB, Schneider, Yokogawa, Cameron or Metso.

  67) Respondents to the market investigation clearly identified both Emerson and Pentair as major competitors for automated valve  packages.[28]
      According to these customers, they are close competitors on this market and were mentioned on first rank. However, other suppliers, such as
      Metso, SRI, Flowserve, Samson, Petrovalves, Somas, Valvitalia, Masoneilan, Sunbelt, MRC, Darko and  Argus  were  also  listed  as  credible
      competitors on this potential market.

  68) In addition, customers were split as to their purchasing strategies, whether they preferred the integrated packages or the  procurement  of
      separate components, and noted various advantages and disadvantages for both, from  which  it  can  be  concluded  that  sourcing  separate
      components separately clearly constitutes an alternative to integrated packages.

  69) The vast majority of respondents to the market investigation did not raise any concerns related to the potential impact of the  Transaction
      as regards the provision of single vendor packages.

  70) In light of the above, the Transaction does not raise serious doubts as regards the provision of single vendor packages in the EEA.

Conclusion

  71) 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
                                        Member of the Commission

                                        -----------------------
  [1]       OJ L 24, 29.1.2004, p. 1 (the 'Merger Regulation'). With effect from 1 December 2009, the Treaty on the Functioning of the European
    Union ('TFEU') has introduced certain changes, such as the replacement of 'Community' by 'Union' and 'common market' by 'internal market'.
    The terminology of the TFEU will be used throughout this decision.
  [2]       OJ L 1, 3.1.1994, p. 3 (the 'EEA Agreement').
  [3]       Publication in the Official Journal of the European Union No C 9, 12.1.2017, p.41
  [4]       Turnover calculated in accordance with Article 5 of the Merger Regulation.

  [5]       See replies to question 5 of Q2 Questionnaire to customers and replies to question 6 to Q1 Questionnaire to competitors.

  [6]       See replies to questions 6 and 7 of Q2 Questionnaire to customers  and  replies  to  questions  9  and  10  to  Q1  Questionnaire  to
    competitors.

  [7]       See replies to question 7 of Q2 Questionnaire to customers and replies to question 11 to Q1 Questionnaire to competitors.

    [8]     See replies to questions 21 and 22 of Q2 Questionnaire to customers.

  [9]       See replies to question 11 of Q2 Questionnaire to customers.

  [10]      Engineering, Procurement and Construction (“EPC”) contractors manage procurement, engineering, project execution, integration, start-
    up and commissioning for large projects.

    [11]   Response to European Commission questions of 21 January 2017.

    [12]   See replies to question 24 of Q2 Questionnaire to customers.

  [13]      See e.g. Case IV/M.1380, Siebe/BTR.

  [14]      See replies to question 17 of Q2 - Questionnaire to customers.

  [15]      See replies to questions 14 and 15 of Q2 - Questionnaire to customers.

  [16]      See replies to question 16 of Q2 - Questionnaire to customers.

  [17]      For the estimation of the market shares, the Notifying Party relied on its own intelligence and on  the  Report  European  Industrial
    Forecasting Ltd, ‘The World Valve & Actuator Market 2015-2020’, which contains the total market sizes per country per  product  type.  There
    are no publicly available reports that analyse the market participants' positions and market shares.

  [18]      Since April 2016, Cameron is part of the Schlumberger Group, which achieved USD 35.5 billion in revenues in 2015 and  is  specialised
    on providing technology, integrated project management and information solutions to customers in the oil and gas industry worldwide.

  [19]      See replies to questions 16 and 33 of Q2 - Questionnaire to customers.

  [20]      Scotch yoke actuators are a specific design of pneumatic or hydraulic actuators, predominantly used in the oil and gas industries.
    Both Parties offer them on the market.

  [21]      No EEA shares were submitted.

  [22]      See replies to question 24 of Q2 - Questionnaire to customers.

  [23]      Internal document of Emerson: TopWorx site visit, 25 August, 2016, slide 38.

  [24]      No EEA shares were submitted.

  [25]      […]% in oil and gas while up to […]% in chemical.

  [26]      See replies to question 8 of Q2 - Questionnaire to customers.

  [27]      See replies to question 27 of Q2 - Questionnaire to customers.

  [28]      See replies to questions 21 and 22 of Q2 - Questionnaire to customers.

-----------------------
 In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC)  No  139/2004
 concerning non-disclosure of business secrets and other confidential information.  The  omissions  are  shown  thus  […].  Where  possible  the
 information omitted has been replaced by ranges of figures or a general description.

                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE