CELEX: 32019M9211
Language: en
Date: 2019-03-11 00:00:00
Title: Commission Decision of 11/03/2019 declaring a concentration to be compatible with the common market (Case No COMP/M.9211 - TransDigm Group Incorporated / Esterline Technologies Corporation) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 11.03.2019
                                                                C(2019) 2041 final
 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                          PUBLIC VERSION
 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 been replaced by ranges of figures or a general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 parties:
Subject:            Case M.9211 - TRANSDIGM GROUP/ESTERLINE
                    TECHNOLOGIES
                    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 4 February 2019, the Commission received notification of a concentration
          pursuant to Article 4 of the Merger Regulation which would result from a
          proposed transaction by which TransDigm Group Incorporated (“TransDigm”),
          incorporated in the United States, intends to acquire sole control, within the
          meaning of Article 3(1)(b) of the Merger Regulation, over the whole of Esterline
          Technologies Corporation (“Esterline) incorporated in the United States (“the
          Transaction”). The concentration is to be accomplished by way of public bid
          announced on 10 October 20183. TransDigm is designated hereinafter as “the
          Notifying Party”. TransDigm and Esterline are together referred as “the Parties”.
          The undertaking that would result from the Transaction is referred to as “the
          merged entity”.
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 57, 13.02.2019, p. 27.
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)     TransDigm is active in the design, production and supply of engineered aerospace
        components, systems and subsystems. Its products are used on both commercial
        and military aircraft[…].
(3)     Esterline is active in the design, manufacture and marketing of highly engineered
        products, principally for aerospace and defence customers. Its products are also
        used in the rail, medical, gaming and other industries.
2.      THE TRANSACTION
(4)     The Transaction is to be achieved by means of a definitive merger agreement
        signed by the Parties on 9 October 2018, whereby TransDigm will purchase all of
        the issued and outstanding shares of Esterline common stock in cash, thus
        acquiring sole control over Esterline.4
(5)     The Transaction would therefore result in a concentration within the meaning of
        Article 3(1)(b) of the Merger Regulation.
3.      UNION DIMENSION
(6)     The undertakings concerned have a combined aggregate world-wide turnover of
        more than EUR 2 500 million (TransDigm: EUR 3 229.6 million and Esterline:
        EUR 1 710.1 million) and a combined aggregate turnover of more than EUR […]
        in three Member States, namely France (TransDigm: EUR […] and Esterline:
        EUR […]), Germany (TransDigm: EUR […] and Esterline: EUR […]) and the
        United Kingdom (TranDigm: EUR […] and Esterline: EUR […]). In addition, in
        each of those three Member States, the aggregate turnover of each of TransDigm
        and Esterline is more than EUR […]. Finally, each of the Parties has an aggregate
        Union-wide turnover of more than EUR […] (TransDigm: EUR […] and
        Esterline: EUR […]) and neither of them achieves more than two-thirds of its EU-
        wide turnover within one and the same Member State.
(7)     The concentration therefore has an EU dimension pursuant to Article 1(3) of the
        Merger Regulation.
4.   INTRODUCTION TO THE AIRCRAFT MANUFACTURING INDUSTRY
     4.1.     Aircraft models
(8)     The Parties are active in the manufacturing of components to be used in the
        aerospace industry. Those components are procured by aircraft manufacturers and
        assembled on a range of different aircraft[…]. Those components are used on
4   Pursuant to Article 5(2) of the EUMR, the Notifying Party also submitted information on the earlier
    acquisition of Kirkhill-TA CO., a former Esterline subsidiary, by TransDigm in 2018. The Kirkhill
    acquisition took place within two years of the present transaction, but lacked EU dimension. There
    were no horizontal overlaps or vertical links between the activities of Kirkhill and those of TransDigm.
                                                        2
 ---pagebreak---        both commercial and military aircraft[…]. The commercial aircraft category
       includes:
       (i) large commercial aircraft[…] (over 100 seats, which can cover a range of
             more than 2,000 nautical miles);
       (ii) regional aircraft[…] (between 30 and 90 seats, which can cover a range of
             less than 2,000 nautical miles); and
       (iii) business/corporate aircraft[…]/jets, designed for corporate activities.
     4.2.   Supply chain
(9)    The supply chain in the aerospace industry mainly includes different types of
       suppliers: Tier-1 and Tier-2 suppliers (sometimes Tier-3 suppliers also exist).
       Tier-1 suppliers generally have integration capabilities and provide whole
       systems and equipment. Tier-2 suppliers tend to be active at an upstream stage,
       supplying components and sub-components, which are later integrated into the
       systems/equipment by either the aircraft manufacturer or the Tier-1 supplier (or
       third-parties system integrators). Tier-3 suppliers, further upstream in the supply
       chain, are active in the supply of components to Tier-2 suppliers.
(10)   On the demand side, different types of customers purchase systems and
       equipment depending on the type of aircraft considered.
        a) For large commercial aircraft[…]: depending on the system/equipment
            considered, purchasers are either (i) aircraft manufacturers ("airframers" or
            “OEM manufacturers”) with significant integration capabilities or (ii) end
            users – inter alia airlines, lessors and national governments – which
            sometimes directly purchase certain equipment and systems from the Tier-1
            supplier;
        b) Regional aircraft[…]/corporate jets: systems and equipment are usually
            purchased by aircraft manufacturers who then resell the whole aircraft to end-
            users; and
        c) Military aircraft and helicopters: systems and equipment are usually
            purchased by aircraft and helicopter manufacturers, in some cases also the
            Ministry of Defence depending on the equipment or system considered.
            Helicopter/military aircraft manufacturers will in any case provide the
            integration of main systems and equipment.
(11)   The Parties mainly operate as Tier 2 suppliers, but also have a Tier 1 and Tier 3
       position for certain products.
     4.3.   Procurement process
(12)   In most cases, customers in the aircraft manufacturing industry source systems
       and equipment by means of competitive tender offers, often for the duration of the
       aircraft programme in question. The structure of the tender process can vary
       according to the aircraft type, customer involved or platform in question.
       Generally, the procedure involves a request for quotation (“RFQ”), the
                                                  3
 ---pagebreak---        submission of competitive offers, followed by […] one or more rounds of final
       negotiations and by the provider selection.
(13)   Aircraft manufacturers can either source products through build-to-print or build-
       to-specification ("build-to-spec") processes. The build-to-print process requires
       the supplier to manufacture equipment, systems and components to the exact
       specifications provided by the customer. The build-to-specification process, on
       the other hand, allows the supplier to use its own design (including proprietary
       design) and manufacturing skills.
(14)   In addition to providing components to OEM manufacturers, suppliers also
       provide components to the aftermarket. Aftermarket products and services
       generally include the supply of spare parts, repair services and retrofit.
(15)   The procurement process for equipment and systems for military aircraft follows
       a specific pattern. Due to the low volume of aircraft[…] and to the complexity of
       the integrated systems, the procurement process requires close cooperation
       between the airframer, the system supplier and the national procurement authority
       acting on behalf of the end-users.
5.   MARKET DEFINITION
     5.1.  Product market definition
(16)   The Parties’ activities overlap in the supply of aerospace components in two main
       areas: (i) sensors, and (ii) clamps. This section also covers relevant markets
       whose vertical links give rise to vertically affected markets, namely (i) switches
       for electric switch boxes, (ii) relays for wire harnesses and cables, and (iii) rods
       for Ram air outlet package
       Horizontal links
           5.1.1.    Sensors
(17)   Sensors are electronic components that have a given function, that is measuring a
       certain property, such as temperature, pressure, position, acceleration, and
       respond with feedback for analysis to a computer processor. In some instances
       (this is the case of both Parties), sensors are also supplied within assemblies, an
       integrated solution that combines wire harnessing (that is, wiring with a connector
       on either end) and one or more sensors.
(18)   The Commission has previously briefly analysed the market for sensors in the
       aerospace sector in Safran/Zodiac Aerospace.5 The Commission in that case did
       not ultimately decide whether the market should be further divided into different
       types of sensors as no competition issues were deemed to arise under any
       plausible alternative market definition.6 Outside of the aerospace industry, the
       Commission has previously analysed the market for sensors in the automotive
       sector and defined separate product markets for different types of of sensors based
5  Case M.8425, Safran/Zodiac Aerospace.
6  Safran/Zodiac Aerospace, para 233.
                                                 4
 ---pagebreak---        on their function (i.e. temperature sensors, pressure sensors, level sensors, speed
       sensors, accelerometers).7
(19)   The Notifying Party considers that there is no need to segment the market for
       sensors for the following reasons.
(20)   First, based on the high degree of supply-side substitutability, it considers that
       there is no need for a segmentation based on (i) the sensor’s function (i.e. the
       physical parameter measured, such as temperature, speed, pressure, etc.); (ii) the
       application for which a sensor is used (i.e. in engines, landing gear, fuel system,
       etc.); or (iii) the type of platforms on which it is deployed (i.e. different types of
       aircraft, commercial or military).
(21)   Second, it considers that there is no requirement to further segment the market on
       the basis of supply to (i) OEMs and aircraft manufacturers for original parts and
       as spares (“OEM channel”) and (ii) providers of maintenance, repair and overhaul
       services ("MROs") and airlines for repair and overhaul on the aftermarket
       (“aftermarket channel”), as similar competitive conditions apply equally in both
       scenarios.
(22)   In addition, the Notifying Party considers that harness assemblies used in
       combination with sensors in order to obtain sensor assemblies do not constitute
       separate products given that they are mostly sold as an integrated component of
       the Parties’ engine temperature sensors. The Notifying Party applies the same
       reasoning in order to conclude that thermocouples (i.e. components used with
       engine temperature sensors) do not constitute a separate product.
(23)   With respect to sensors and their classification according to the abovementioned
       criteria, the market investigation has triggered mixed replies.
(24)   As to the possible segmentation of the overall market for sensors according to the
       function or parameter measured (temperature, speed, pressure, etc.), some
       respondents argue that, from a demand side, different technologies apply and
       different performances are required from different sensors.8 Sensors, some argue,
       should be divided based on the parameter they measure (i.e. temperature,
       pressure, speed) or the environment (i.e. engine, airframe, avionics) they operate
       in.9
(25)   From a supply-side perspective, at the same time, substitutability appears to be
       possible to a certain extent and subject to certain conditions (suppliers’ size,10
       ability to invest the resources needed to carry the necessary R&D, to acquire the
       technology and the time necessary to obtain product approval by customers).11
7  Case No IV/M.1053, Mannesmann/Philips.
8  Reply by Thermocoax to question 7.1 of Q1 questionnaire to competitors of 5 February 2019.
9  Replies to question 7.1 of Q2 to customers of 5 February 2019, in particular those by MTU
   Maintenance and Leonardo.
10 Reply by Thermocoax to question 8.1 of Q1 questionnaire to competitors of 5 February 2019.
11 Replies to question 8.1 of Q2 to customers of 5 February 2019.
                                                       5
 ---pagebreak--- (26)    As to a possible segmentation of sensors depending on the application for which a
        sensor is used (i.e. in engines, landing gear, fuel system, etc.), respondents have
        submitted mixed replies.12
(27)     As to a possible segmentation between sensors supplied for installation on
        different platforms, the results of the market investigation appear to exclude a
        distinction between sensors used on the various aircraft[…] or platforms (large
        aircraft[…], regional aircraft[…] and corporate jets and commercial or military
        platforms).13
(25)    Further, several respondents indicate that a segmentation between sensors
        supplied through the OEM and the aftermarket channels is not necessary, due to
        the fact that the products and the suppliers are essentially the same across the two
        channels.14
(26)    As to the possible segmentation between sensors supplied in isolation and as a
        component of a sensor assembly including a harness, there is no indication, in the
        replies to the market investigation, that such segmentation is necessary. 15 In
        addition, customers indicate that supply-side substitutability between sensors
        supplied on a standalone basis and as components of an assembly is possible, due
        to low switching costs.16 The same applies to thermocouples.
(27)    In any event, for the purposes of this Decision, it can be left open whether the
        market for sensors should be segmented, since no serious doubts as to the
        compatibility of the notified concentration with the internal market arise under
        any plausible market definition.
            5.1.2.     Clamps
(28)    Clamps provide support and restraint to minimise or eliminate the negative effects
        of vibration and shock loads. They typically consist of a metal ring with an
        elastomer cushion. Different providers however also supply clamps in a variety of
        material types, latching mechanisms and shapes depending on the specific design
        and installation requirements.
(29)    The Commission has not previously examined the market for clamps. It has
        however, considered the market for fasteners,17 a product with similar
        characteristics and use.18 In particular, it found that aerospace fasteners should be
12 Replies to questions 9 and 9.1 of Q2 to customers of 5 February 2019.
13 Replies to questions 16.1 and 17.1 of Q2 to customers of 5 February 2019.
14 Replies to questions 15 and 15.1 of Q2 to customers of 5 February 2019.
15 Replies to questions 12, 12.1, 13, 13.1 and 13.2 to Q1 to competitors and replies to questions 12, 12.1,
   13, 13.1 and 13.2 to Q2 to customers of 5 February 2019.
16 Replies to questions 13.2 of Q2 to customers of 5 February 2019.
17 M.2928, Alcoa/Fairchild and M. 8985, Boeing/KLX.
18 Fasteners and clamps are both largely commoditised components used to attach one component to
   another within an aircraft. However, they serve quite different purposes and are not substitutable from
   a demand or supply perspective. Clamps are generally designed to “cradle” cylindrical components
   and assemblies such as wire harnesses, ducts, tubes and hosing, which by their nature require a
   fastening device through which they can be threaded. Fasteners, by contrast, are more akin to standard
   screws and bolts, and provide a means of attaching (generally non-cylindrical) parts to a structure or
   airframe.
                                                        6
 ---pagebreak---        distinguished from other mainstream fasteners for industrial applications. The
       Commission also considered further segmentations according to (i) the type of
       aircraft platforms (i.e. between large commercial aircraft, regional commercial
       aviation, etc.) and (ii) the application for which fasteners are used on each aircraft
       (e.g. airframe applications, engine applications, etc.) but, eventually, did not reach
       a conclusion on these potential segments.19
(30)   The Notifying Party considers that, similarly to fasteners, clamps for aerospace
       application constitute a distinct market. It however submits that there is no need
       to further segment the market for clamps for the following reasons. First, based in
       particular on supply-side substitutability arguments, it considers that there is no
       need for a segmentation based on (i) the type of aircraft platform; (ii) the
       application for which clamps are used on each aircraft (i.e. engine or airframe);
       and (iii) whether the clamps are “standard” clamps (i.e. clamps that are built to
       common specifications using industry-standard materials) or “specialty” clamps
       (i.e. clamps that have a proprietary design or proprietary material elements for
       specific customers needs, for instance to achieve certain higher performance
       parameters in the engine).
(31)   Second, it considers that there is no requirement to further segment the market
       based on whether clamps are supplied (i) to the OEM or aftermarket channels or
       (ii) for commercial or military applications given that competitive conditions
       remain homogeneous in all cases.
(32)   With respect to clamp classification, the market investigation has triggered mixed
       replies. A majority of respondents, particularly among customers, indicates that
       clamps for aerospace use are different from common clamps for industrial use.20
(33)   As to a possible segmentation of aerospace clamps, based on the type of
       aircraft/platform they are installed on, respondents to the market investigation
       indicate that clamps are standard components and do not vary according to the
       platform they are installed on.21
(34)   In relation to any possible alternative segmentation of clamps based on the type of
       application (e.g. airframe application, engine application, fuel applications) the
       results of the market investigation do not seem to support such distinction.22
(35)   As to the possible distinction between standard and specialty clamps, the market
       investigation led to mixed replies. The majority of respondents among
       competitors does not support the distinction,23 while a majority of respondents
       among customers indicates that, from a demand side perspective, such distinction
       exists.24 As to supply-side substitutability, competitors and customers have
       submitted mixed replies.25 Some customers indicate that suppliers of standard
19 Alcoa/Fairchild, para 11.
20 Replies to questions 19 and 19.1 of Q2 questionnaire to customers of 5 February 2019.
21 Replies to questions 20 and 20.1 of Q1 to competitors and of Q2 to customers of 5 February 2019.
22 Replies to questions 24, 24.1, 24.1.1, 24.2, 24.2.1 of Q1 to competitors and replies to questions 23,
   23.1, 23.1.1, 23.2 and 23.2.1 of Q2 to customers of 5 February 2019.
23 Replies to questions 21 and 21.1 of Q1 to competitors of 5 February 2019.
24 Replies to questions 21 and 21.1 of Q2 to customers of 5 February 2019.
25 Replies to questions 22, 22.1, 23 and 23.1 of Q1 to competitors of 5 February 2019; replies to
   questions 22 and 22.1 to Q2 to customers of 5 February 2019.
                                                        7
 ---pagebreak---        clamps may not be able to start manufacturing specialty clamps, due to
       intellectual property rights and other barriers to switching.26 As to a possible
       segmentation of clamps based on the production material, the market
       investigation triggered mixed replies27 and was thus inconclusive. One competitor
       suggests a possible distinction, within specialty clamps, between low-temperature
       and high-temperature clamps.28
(36)   Competitors provided mixed replies as to the possible segmentations between (i)
       clamps for the OEM market and the aftermarket and (ii) clamps for commercial
       platform use and defence platform use.29 Replies from customers seem to reject
       such additional segmentations.30
(37)   Based on the results of the market investigation, the Commission considers that a
       basic distinction would appear to exist between clamps for aerospace use and for
       generic industrial use. However, for the purposes of this Decision, the question
       whether the market for aerospace clamps should be further segmented can be left
       open, as the concentration does not raise serious doubts as to its compatibility
       with the internal market, regardless of the definition adopted.
       Vertical links
            5.1.3.    Switches for electric switch boxes
(38)   Switches and buttons are installed within cockpit control panels for use by pilots
       to direct various functions within an aircraft. The Commission has previously
       identified a distinct product market for cockpit components, including push-
       buttons, switches and toggles.31
(39)   On the downstream market, switches and buttons are incorporated as components
       within electric switch boxes, which are used to re-direct and re-arrange power
       cables. The Notifying party considers that electric switch boxes belong to the
       wider market for harnesses and cable assemblies, given that these are also means
       to re-direct and re-arrange power cables.32
(40)   The Commission considers that, for the purposes of this Decision, the exact
       market definition of both the market for switches and buttons and the downstream
       market for electric switch boxes can be ultimately left open, as the vertical link
       between these markets does not raise serious doubts as to its compatibility with
       the internal market, regardless of the definition adopted.
26 Replies by Pattonair and Rolls-Royce to question 22.1 of Q2 to customers of 5 February 2019.
27 Replies to questions 25, 25.1, 25.1.1, 25.2, 25.2.1 of Q1 to competitors and replies to questions 24,
   24.1, 24.1.1 and 24.2 of Q2 to customers of 5 February 2019.
28 Reply by Step’N Components to question 25.1.1 of Q1 to competitors of 5 February 2019.
29 Replies to questions 26, 26.1, 27 and 27.1 of Q1 to competitors of 5 February 2019.
30 Replies to questions 25, 25.1, 26 and 26.1 of Q2 to customers of 5 February 2019.
31 Safran/Zodiac Aerospace, paras 183(d) and 194.
32 In this respect, see the product market definition previously considered by the Commission at
   paragraph 42 below.
                                                        8
 ---pagebreak---             5.1.4.   Relays for wire harnesses and cables
(41)   Relays and relay sockets are commodity products. Relays are electro-mechanical
       devices which perform the task of switching electrical circuits, and form part of
       an aircraft’s electrical distribution system. The Commission has previously
       analysed the market for these products in Safran/Zodiac Aerospace, but its market
       investigation was not conclusive as to whether and how the market for different
       distribution components should be segmented. The Commission ultimately left
       the market definition open.33
(42)   On the downstream market, relays are incorporated in wire harness and cable
       assemblies. The Commission has previously considered a potential worldwide
       market for aerospace wiring systems (defined as “assemblies of cables, called
       harnesses, designed to transmit electrical power, data and/or signals between two
       or more termination points”) but ultimately left the definition open.34 The
       Commission also identified separate relevant product markets for the following
       wiring components: (i) cables; (ii) conduit and sleeves; (iii) backshells and
       fittings; and (iv) connectors.35
(43)   The Commission considers that, for the purposes of this Decision, the exact
       market definition of both the market for relays and relay sockets and the
       downstream market for wire harnesses and cables can be ultimately left open, as
       the vertical link between these markets does not raise serious doubts as to its
       compatibility with the internal market, regardless of the definition adopted.
            5.1.5.   Rods for ram air outlet package
(44)   Rods, made of metal or of composite materials, can be used for multiple
       applications, within the aerospace industry, including flight control, aircraft
       structure and door mechanisms.
(45)   Downstream, among various applications, rods are used into ram air outlets. The
       ram air outlet is a dual outlet channel used to enable the aircraft’s air generation
       unit to exhaust ram airflow. Ram airflow is used to transfer heat from the engine
       bleed air supply and cool it down before it enters the cabin air distribution system.
(46)   While the Commission has previously considered various other aerospace
       components to be found within flight control,36 it has not yet considered a specific
       product market for rods in the aerospace. The Commission has also not yet
       considered the market for ram air outlet systems.
(47)   The Commission considers that, for the purposes of this Decision, the exact
       market definition of both the market for rods and the downstream market for ram
       air outlet systems can be ultimately left open, as the vertical link between these
       markets does not raise serious doubts as to its compatibility with the internal
       market, regardless of the definition adopted.
33 Safran/Zodiac Aerospace, paras 66 and 67.
34 Safran/Zodiac Aerospace, para 205.
35 Safran/Zodiac Aerospace, para 207.
36 Most notably in M.8425 – Safran/Zodiac Aerospace, sections 5.8-5.10.
                                                   9
 ---pagebreak---      5.2.   Geographic market definition
(48)   In Safran/Zodiac Aerospace37 and in UTC/Rockwell Collins,38 the Commission
       found that markets for aviation components and systems are worldwide in
       scope.39 The Commission examined a possible narrower geographic scope (i.e.
       EEA-wide, or even national) for systems and components for defence and
       military applications, but ultimately left such definition open.40 The Notifying
       Party agrees with the Commission’s approach on the worldwide dimension of the
       relevant markets and argues that it is not necessary to adopt a narrower market
       definition for components for defence or military application.
(49)   In this respect, the replies to the market investigation by competitors were mixed
       (some rejected the notion of a global market, others agreed with it),41 while
       customers consistently indicated that the geographic market for sensors, clamps
       and other components addressed in this Decision (and the possible segments
       thereof) are global in scope.42
(50)   In any event, the Commission considers that the exact geographic market
       definition, for the purposes of this Decision, can be left open in relation to all
       relevant product markets, as the concentration does not raise serious doubts as to
       its compatibility with the internal market, regardless of the definition adopted,
       namely worldwide or EEA-wide.
6.     COMPETITIVE ASSESSMENT
(51)   Pursuant to Article 2(2) and 2(3) of the Merger Regulation, the Commission is
       required to examine whether notified concentrations are to be declared compatible
       or incompatible with the internal market by assessing whether they would
       significantly impede effective competition in the internal market or in a
       substantial part of it, in particular through the creation or strengthening of a
       dominant position.
(52)   In this respect, a merger may entail horizontal and/or non-horizontal effects.
       Horizontal effects are those deriving from a concentration where the undertakings
       concerned are actual or potential competitors of each other in one or more of the
       relevant markets concerned. Non-horizontal effects are those deriving from a
       concentration where the undertakings concerned are active in different relevant
       markets. As regards non-horizontal effects, two broad types of such effects may
       be distinguished: vertical effects and conglomerate effects. Vertical effects are
       those deriving from a concentration where the undertakings concerned are active
       at different levels of the supply chain. Conglomerate effects may result from
       mergers between firms that are in a relationship, which is neither horizontal ( as
       competitors in the same relevant market) nor vertical (as suppliers or costumers)
37 Safran/Zodiac Aerospace, para 298.
38 UTC/Rockwell Collins, para 207 ss.
39 Safran/Zodiac Arospace, paras 297-298.
40 Safran/Zodiac Arospace, para 300.
41 Replies to questions 30 and 30.1 of Q1 to competitors of 5 February 2019.
42 Replies to questions 29 and 29.1 of Q2 to customers of 5 February 2019.
                                                      10
 ---pagebreak--- (53)    The Commission appraises horizontal effects in accordance with the guidance set
        out in the relevant notice, that is to say the Horizontal Merger Guidelines.43
        Additionally, the Commission appraises non-horizontal effects in accordance with
        the guidance set out in the relevant notice, that is to say the Non-Horizontal
        Merger Guidelines.44
(54)    As noted above, TransDigm and Esterline are both suppliers of aerospace
        components and systems. However, the Notifying Party submits that their
        respective portfolios of products are largely complementary and that their
        activities only overlap horizontally for a limited amount of products.
(55)    The Commission’s investigation confirms that the Parties' activities are largely
        complementary. Against this background, the concentration would give rise to
        horizontally affected markets only in respect to (i) certain types of sensors
        (particularly temperature sensors) (Section 6.1.1) and (ii) aerospace clamps
        (Section 6.1.2).45
(56)    The concentration also gives rise to three vertically affected markets with regard
        to the supply of: (i) switches for electrical switch boxes; (ii) relays for wire
        harnesses and cables; and (iii) rods for ram air outlet package. These markets are
        discussed in Section 6.2.
(57)    Finally, the Commission has also considered, in Section 6.3, the question of
        whether the concentration would raise conglomerate concerns since the Parties
        are active on a number of potentially related aerospace systems and components
        markets or segments.46
43 Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of
   concentrations between undertakings ("Horizontal Merger Guidelines"), OJ C 31, 05.02.2004.
44 Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control
   of concentrations between undertakings ("Non-horizontal Merger Guidelines"), OJ C 265/6,
   18.10.2008.
45 The Parties are also both active on the markets for (i) pilot controls and (ii) Solid-state Power
   Controllers (SSPCs). However, the Parties’ combined market shares on these markets and on any
   potential sub-segments within these markets are below 20% and these markets are therefore not
   horizontally affected.
46 On day 23 of its phase 1 investigation, the Commission received a complaint from a customer of the
   Parties. This complaint does not relate to a specific type of product which is supplied by either
   TransDigm or Esterline but relates more generally to products for which Esterline is in a sole-producer
   position (i.e. the situation where a customer obtains a particular product or system exclusively from a
   single supplier). The complainant is concerned that TransDigm would impose price increases on sole-
   sourced aerospace parts that it supplies from Esterline. The complainant also notes that its ability to
   switch to other suppliers is limited without providing further details on why this is the case. In support
   of its concerns, […]. With respect to this complaint, the Commission notes that the potential barriers to
   switching in the case of products that are sole-sourced from Esterline already existed before the
   Transaction and would be the result of a customer’s commercial choice to award a given contract to
   only one single supplier. In addition, as set out in this Decision, the Commission considers that
   sufficient alternatives will remain on the market for all the products and bundles of products which are
   offered by the merged entity. The Commission therefore considers that the Transaction will not result
   in an increase of the potential barriers to switching for products that are sole-sourced from the Parties.
   Moreover, the Commission considers that the present complaint is not merger specific since the
   Transaction does not increase the merged entity’s ability and incentive to impose price increases for
   products that are sole-sourced from Esterline.
                                                         11
 ---pagebreak---  6.1. Horizontal unilateral effects
6.1.1. Sensors
(58)     The Notifying Party submits that no competition concerns arise with respect to
         sensors given that (i) the Transaction only brings about a modest share increments
         globally and in the EEA; (ii) a number of strong competitors will continue to
         exert competitive pressure on the merged entity, including for engine temperature
         sensors; (iii) based on recent and upcoming tenders, […];47 (iv) the Parties’
         customers have significant countervailing negotiation power and could, if needed,
         start the production of sensors in-house or sponsor a new entrant; (v) the Parties
         are not the closest competitors; (vi) it is not possible to exercise any portfolio
         advantage through diversified sensor range; and (vii) market entry is relatively
         easy with low barriers to entry and expansion.
(59)     First, the Commission notes that on a market including all aerospace sensors the
         Parties have a limited combined market share. The Parties’ combined market
         share in 2018 is below [10-20]% at the worldwide level and below [10-20]% at
         the EEA level with TransDigm representing an increment of less than [0-5]%
         both at the worldwide and EEA level.
(60)     Second, with respect to the potential segments and sub-segments on which the
         Parties overlap (namely, (i) temperature, (ii) speed and (iii) flow sensors48), the
         Parties’ combined market shares remain moderate. The Parties’ combined market
         shares always remain below [20-30]% except for temperature sensors for which
         the Parties’ combined market share is [20-30]% at the worldwide level ([5-10]%
         share increment) and [20-30]% at the EEA level ([0-5]% share increment). Within
         temperature sensors, the Parties’ combined market shares are below [30-40]% for
         all the potential sub-segments except for engine temperature sensors at the
         worldwide level ([30-40]% with a [10-20]% share increment) and at the EEA
         level ([30-40]% with a [0-5]% share increment). With respect to the other
         potential segmentations discussed in Section 5.1.1, the Notifying Party did not
         provide market share estimates, but it has confirmed that it does not expect
         significant differences in the level of the Parties’ combined market shares.
(61)     Third, the Commission notes that there are several large alternative competitors
         that will remain active in the aerospace sensors market and in the potential
         segments for temperature sensors and engine temperature sensors both at the
         worldwide and EEA level, including four competitors with a market share above
         10% (i.e. Ametek, Meggit, UTC and GE49). The market share of the Parties and
         their competitors on the potential market segments in which the combined market
         share of the Parties is above 25% (i.e. temperature sensors and engine temperature
47  While the affected markets which are discussed in this decision are mostly bidding markets for which
    market shares - as opposed to bidding data - may not always provide a fully accurate picture of the
    actual competitive strength of market players, the Commission considers that, for the purposes of this
    decision, the 2018 market shares provided by the Parties and the additional evidence gathered as part
    of the market investigation provide sufficient evidence in order to conclude that the Transaction does
    not raise serious doubts as to its compatibility with the internal market.
48 In addition to these segments, Esterline is active on the pressure sensors segment. […]
49 The Notifying Party also estimates that Honeywell has a market share of [10-20]% on a market
    including all aerospace sensors both at the worldwide and EEA level. However, Honeywell is not
    active in the potential temperature sensor and engine temperature sub-segments.
                                                           12
 ---pagebreak---  ---pagebreak--- (63)    Finally, the vast majority of the respondents do not expect that the Transaction
        would have any impact on the market for the supply of sensors or temperature
        sensors and none of the respondent have expressed any specific complaints with
        respect to the impact of the Transaction on the supply of sensors.55
(64)    In light of the above considerations and taking account of the results of the market
        investigation, the Commission considers that the Transaction does not raise
        serious doubts regarding the compatibility of the concentration with the internal
        market with respect to the market for the supply of sensors.
6.1.2. Clamps
(65)    The Notifying Party submits that no competition concerns arise with respect to
        clamps given that (i) the Parties are not close competitors; (ii) a number of strong
        competitors will continue to exert competitive pressure on the merged entity; (iii)
        the Parties’ customers have significant countervailing negotiation power and
        could, if needed, start the in-house production of clamps or sponsor a new entrant;
        (iv) market entry is relatively easy with low barriers to entry and expansion; in
        particular a supplier of standard clamps can easily expand into specialty design
        clamps with a limited investment.
(66)    First, the Commission notes that on a market including all aerospace clamps the
        Parties’ combined market share will be limited at the EEA level and will remain
        moderate at the worldwide level. The Parties’ combined market share in 2018 is
        [10-20]% at the EEA level with TransDigm only representing a [0-5]% share
        increment and [20-30]% at the worldwide level ([5-10]% share increment).
(67)    Second, with respect to the potential segments and sub-segments on which the
        Parties overlap (namely, (i) standard clamps; (ii) specialty clamps; and (iii)
        specialty clamps for high temperature application), the Transaction does not give
        rise to any affected market at the EEA level. At the worldwide level, the market
        for standard clamps is also not affected given that the Parties combined market
        share is below [10-20]%. As regards specialty clamps at the worldwide level, the
        Parties’ combined market shares is approximately [30-40]% with TransDigm
        representing an increment of approximately [5-10]% both on a potential market
        segment including all the specialty clamps and on a potential sub-segment for
        specialty clamps for high temperature application. With respect to the other
        potential segmentations which are discussed in section 5.1.2, the Notifying Party
        did not provide market share estimates, but it has confirmed that it does not
        expect significant differences in the level of the Parties’ combined market shares.
(68)    Third, the Commission notes that there are a number of alternative competitors
        that will remain active in the aerospace clamps market and in the potential
        segments for specialty clamps and specialty clamps for high temperature
        application at the worldwide level. The market share of the Parties and their
        competitors on the affected clamps market and potential market segments (i.e. all
        aerospace clamps and specialty clamps at the worldwide level) can be seen in
        Table 2. In addition, a number of the below listed competitors offer both standard
        and specialty clamps (i.e. UMPCO, J&M, Pacmet, Caillau).
55  See responses to questions 43, 44 and 45 of Q1 – Questionnaire to competitors and 40, 41 and 42 of
    Q2 – Questionnaire to customers.
                                                     14
 ---pagebreak---  ---pagebreak---          they purchase elastomeric material for incorporation in their clamp products from
         a number of third party suppliers including for example Santa Fe Rubber, S&H
         Rubber Inc., Goodyear Rubber Co, West Coast Gasket, Custom Fabricated
         Product, Wacker, Volker, DuPont and AGC.58
(71)     Fourth, the Parties are not close competitors for clamps. As explained above,
         unlike Esterline, TransDigm does not have manufacturing capability for the
         elastomeric material used in clamps for high temperature application. In addition,
         TransDigm’s offering is restricted to metal clamps whereas Esterline also supplies
         clamps made of other materials (e.g. plastic). Esterline also has a stronger focus
         on specialty clamps. This is largely confirmed by the results of the market
         investigation. In particular, a large majority of customers have indicated that they
         do not consider TransDigm and Esterline to be close competitors on clamps with
         one respondent stating for example “Transdigm and Esterline provide different
         types of clamps”.59
(72)     Fifth, most of the respondent to the market investigation (in particular customers)
         do not anticipate that the Transaction could have an adverse impact on the market
         for clamps.60 In this regard, one respondent has for example explained that it sees
         clamps as a “commodity”.61 A number of respondents (in particular competitors)
         have however indicated that the Transaction combines two large clamp players
         and could therefore result in price increases in particular for specialty clamps for
         high temperature application. In this regard, as explained in more details at
         paragraphs (69) to (72), the Commission considers that sufficient alternative
         suppliers would remain active in the clamps market including for the potential
         sub-segment of specialty clamps for high temperature application.
(73)     In light of the above considerations and taking account of the results of the market
         investigation, the Commission considers that the Transaction does not raise
         serious doubts regarding the compatibility of the concentration with the internal
         market with respect to the market for the supply of clamps.
 6.2. Vertical effects
(74)     Overall, the current and potential vertical relationships between the Parties are
         limited amounting to a total of less than USD […].
(75)     The Notifying Party submits that no foreclosure concerns are likely to arise given
         (i) the presence of a large number of residual suppliers on each of the vertically
         affected markets and (ii) the limited downstream presence for each of the relevant
58  Esterline also supplies elastomeric material downstream. However, this vertical relationship does not
    give rise to a risk of input foreclosure given that a number of alternative suppliers are active on the
    supply of elastomeric material (including for plybenzimidazole fiber where Custom Fabricated
    Products and AGC are two examples of alternative suppliers). In addition, none of the respondents to
    the market investigation raised specific concerns with respect to their supply of elastomeric materials.
59 See responses to question 48 of Q2 – Questionnaire to customers and Airbus reply to question 48.1 of
    Q2 – Questionnaire to customers.
60 See responses to questions 52 and 53 of Q2 – Questionnaire to customers and Questions 57 and 58 of
    Q1 – Questionnaire to competitors. In addition, the Commission has received additional feedback from
    certain market players by email.
61 See GKN Aerospace response to question 46.1 of Q2 – Questionnaire to customers.
                                                         16
 ---pagebreak---         vertical relationships which means that the rewards of an hypothetical input
        foreclosure strategy is highly unlikely to outweigh the costs.
6.2.1. Switches for electrical switch boxes
(76)    Esterline is active on the market with regard to the supply of switches and buttons
        for electrical switch boxes where, on the narrowest component basis, it has a
        worldwide market share for push-button switches of approximately [30-40]%
        (approximately [10-20]% at the EEA level). TransDigm is a customer in this
        market since it purchases various switches from Esterline.
(77)    As regards potential concerns related to input foreclosure, the merged entity
        would not have any incentive to foreclose access to Esterline’s switches and
        buttons. Esterline generated total worldwide sales in 2018 of approximately USD
        […] for push-button switches, while TransDigm’s total spend on push button
        switches in 2018 was approximately USD […].62 The rewards of foreclosing
        access to Esterline’s switches and buttons would therefore not seem to
        compensate the reduction of sales in the switches and buttons market. Moreover,
        any potential foreclosure strategy is likely to be ineffective given that TransDigm
        has a very limited presence on the downstream market for electrical switch boxes
        where its market share is less than [0-5]% at the worldwide and EEA level63 and
        several strong competitors are present on this market.
(78)    In addition, most of the respondents to the market investigation do not expect that
        the merged entity would have the ability and incentives to restrict third party
        access to push button switches or do not have a view on this question.64
(79)    As regards potential concerns related to customer foreclosure, as mentioned
        above, the merged entity only has a very limited presence on the downstream
        market for electrical switch boxes. Hence, the merged entity would have no
        ability to foreclose in the first place. In the event that post-merger TransDigm
        were to source all its switches and buttons from Esterline, it would not materially
        change the competitive dynamics on the market for electrical switch boxes.
(80)    In light of the above considerations and taking account of the results of the market
        investigation, the Commission considers that the Transaction does not raise
        serious doubts regarding the compatibility of the concentration with the internal
        market with respect to potential foreclosure strategies in relation to the supply of
        switches and buttons for electrical switch boxes.
62  TransDigm total purchases from Esterline were approximately USD […] in 2018 and approximately
    USD […] in 2017. TransDigm accounts for less than [0-5]% of Esterline’s total sales of push button
    switches at the worldwide and at the EEA level.
63 TransDigm’s activity is similarly very limited on the wider downstream market for wire harnesses and
    cable assemblies. On such a market, TransDigm’s market share remains below [0-5]% at the
    worldwide and EEA level.
64 See responses to question 57 of Q2 – Questionnaire to customers. It should however be noted that a
    significant number of respondents indicated that they are not sufficiently informed in order to take a
    view.
                                                       17
 ---pagebreak--- 6.2.2. Relays for wire harnesses and cables
(81)    Esterline is active on the market with regard to the supply of aerospace relays for
        wire harnesses and cables where, it has a worldwide market share of
        approximately [40-50]% at the worldwide level and approximately [40-50]% at
        the EEA level. TransDigm is a customer in this market since it purchases relays
        and relay sockets from Esterline.
(82)    As regards potential concerns related to input foreclosure, the merged entity
        would not have any incentive to foreclose access to Esterline’s aerospace relays.
        Esterline generated total worldwide sales in 2017 of approximately USD […] for
        relays, where its sales to TransDigm amounted to USD […] in total.65 While
        Esterline only made up approximately […] of TransDigm’s total spend on relays
        and relays sockets, TransDigm’s total spend (i.e. from Esterline and other third
        party suppliers) still constitutes […] of Esterline’s total sales of relay and relays
        sockets. The rewards of foreclosing access to Esterline’s relays and relay sockets
        would therefore not seem to compensate the reduction of sales in the relays and
        relay sockets market. Moreover, any potential foreclosure strategy is likely to be
        ineffective given that TransDigm has a very limited presence on the downstream
        market for wire harnesses and cables where its market share is less than [0-5]% at
        the worldwide and EEA level66 and several strong competitors are present on this
        market.
(83)    In addition, most of the respondents to the market investigation indicated that
        they do not expect that the merged entity would have the ability and incentives to
        restrict third party access to relays and relay sockets or do not have a view on this
        question.67
(84)    As regards potential concerns related to customer foreclosure, as mentioned
        above, the merged entity only has a very limited presence on the downstream
        market for wire harnesses and cables. Hence, the merged entity would have no
        ability to foreclose in the first place. In the event that post-merger TransDigm
        were to source all its relays and relay sockets from Esterline, it would not
        materially change the competitive dynamics on the market for wire harnesses and
        cables.
(85)    In light of the above considerations and taking account of the results of the market
        investigation, the Commission considers that the Transaction does not raise
        serious doubts regarding the compatibility of the concentration with the internal
        market with respect to potential foreclosure strategies in relation to the supply of
        relays for wire harnesses and cables.
6.2.3. Rods for ram air outlet package
(86)    TransDigm is active on the market with regard to the supply of rods for ram air
        outlet package, where it has a market share for rods for aerospace applications of
65  TransDigm accounts for less than [0-5]% of Esterline’s total sales of push button switches at the
    worldwide and less than 5% at the EEA level.
66 TransDigm’s activity is similarly very limited on the wider downstream market for wire harnesses and
    cable assemblies. On such a market, TransDigm’s market share remains below [0-5]% at the
    worldwide and EEA level.
67 See responses to question 60 of Q2 – Questionnaire to customers.
                                                       18
 ---pagebreak---         approximately [30-40]% at the worldwide level and approximately [30-40]% at
        the EEA level.68 Esterline is a customer in this market since it purchases relays
        and relay sockets from TransDigm.
(87)    As regards potential concerns related to input foreclosure, the merged entity
        would not have any incentive to foreclose access to TransDigm’s rods for
        aerospace applications. TransDigm currently generates total worldwide sales of
        rods of approximately USD […], while Esterline’s total spend on rods in 2018
        amounted to less than USD […].69 The rewards of foreclosing access to
        TransDigm’s rods would therefore not compensate the reduction of sales in the
        rods market. It is therefore highly unlikely that the merged entity would engage in
        such a strategy. Moreover, any potential foreclosure strategy is likely to be
        ineffective given that Esterline has a limited presence on the downstream market
        for ram air outlet systems where its market share is less than 5% at the worldwide
        and EEA level and several strong competitors are present on this market.
(88)    In addition, none of the respondents to the market investigation expects that the
        merged entity would have the ability and incentives to restrict third party access
        to rods for aerospace applications.70
(89)    As regards potential concerns related to customer foreclosure, as mentioned
        above, the merged entity only has a limited presence on the downstream market
        for ram air outlet systems. Hence, the merged entity would have no ability to
        foreclose in the first place. In the event that post-merger Esterline were to source
        all its rods from TransDigm, it would not materially change the competitive
        dynamics on the market for wire harnesses and cables.
(90)    In light of the above considerations and taking account of the results of the market
        investigation, the Commission considers that the Transaction does not raise
        serious doubts regarding the compatibility of the concentration with the internal
        market with respect to potential foreclosure strategies in relation to the supply of
        rods for ram air outlet package.
 6.3. Conglomerate effects
(91)    Pursuant to the Non-Horizontal Merger Guidelines, in most circumstances,
        conglomerate mergers do not lead to any competition problems. However,
        foreclosure effects may arise in conglomerate mergers when the combination of
        products in related markets may confer on the merged entity the ability and
        incentive to leverage a strong market position from one market to another closely
        related market by means of tying or bundling or other exclusionary practices.
(92)    The Transaction could potentially lead to conglomerate effects since (i) it will
        allow the merged entity to broaden its portfolio of aerospace systems and
        components; and (ii) the merged entity will hold market shares above 30% on a
68  TransDigm’ market share is similar on potential narrower markets segmented according to the material
    used. In addition, Esterline uses these rods […].
69 […].
70 See responses to question 62 of Q2 – Questionnaire to customers.
                                                       19
 ---pagebreak---         number of potentially related aerospace systems and components markets or
        segments.71
(93)    The Commission has very recently considered and rejected conglomerate effects
        with respect to the supply of aerospace systems and components in the case
        UTC/Rockwell Collins. In particular, the Commission investigated whether that
        merged entity would be able to use the breadth of its portfolio to shut out
        competitors, through practices such as bundling or tying, and concluded that it
        would have neither the ability nor the incentive to engage in such strategies and
        harm competition.
(94)    The Notifying Party submits that the same reasoning and conclusion should apply
        in the present case given that (i) the Parties’ products only account for a very
        small proportion of components within the major aircraft programs where they
        are both presents; (ii) there is nothing unique about the Parties’ products as the
        Parties’ customers will continue to have a range of alternatives to choose from
        post-Transaction; (iii) the structure of procurement in tenders for separate
        components and/or “packages” significantly limits the scope for pursuing any
        bundling strategies; (iv) the Parties’ key customers are large powerful companies
        which are able to exercise significant negotiating leverage and employ a
        combination of strategies to discipline components suppliers; and (v) the Parties’
        competitors are large diversified aerospace companies which could easily
        replicate any hypothetical bundling strategies adopted by the Parties.
(95)    In this respect, the Commission firstly notes that, taking a broad perspective on
        the importance of the merged entity, while TransDigm and Esterline are both
        present to varying degrees on each of the ten major existing large commercial
        aircraft platforms72 and regional and business jets platforms,73 their products
        account for only a very small proportion of components within any of those
        aircraft programmes. By way of example, a Boeing 737 family aircraft or an
        Airbus A320 family aircraft costs in the region of USD 100 million. On either of
        those platforms, the cost of TransDigm’s components would represent well below
        [0-5]%.74 This would also generally be the case for Esterline’s products, which
        estimates that the value of its components on each of the programmes above
        would not exceed [0-5]% of the cost of each aircraft.
(96)    Second, while the market investigation has showed that there is a certain room for
        commercial bundling,75 it has also confirmed that customers, some of which may
71 In addition to the horizontally and vertically affected markets that are discussed in this decision, these
   include the worldwide market for (i) aerospace knobs where Esterline has a [30-40]-[30-40]% market
   share, (ii) rotary switches where, on the narrowest component basis, Esterline has a [30-40]-[40-50]%
   market share, and (iii) for cockpit components such as push buttons, switches and knobs where
   Esterline has a market share of approximately [30-40]%.
72 The Parties consider that the following ten programmes represent the vast majority of large
   commercial aircraft in operation at present: (i) Boeing: 737NG, 737MAX, 767, 777, 787; and (ii)
   Airbus: A320, A320Neo, A330, A50, A380.
73 The Notifying Party considers the following ten programmes to be the most significant regional and
   business jet platforms, based on current build rates (i.e. the number of aircraft currently in production):
   (i) Embraer: 170/175, 190/195, Phenom 300; (ii) Airbus: A220; (iii) Bombardier: CRJ 900, Global
   5000; (iv) Cessna: Citation, Latitude; (v) Hawker: Kingair; and (vi) Gulfstream: G650.
74 This would also be true of larger aircraft platforms like the Boeing 787 and Airbus A250, and smaller
   regional and business jet platforms.
75 See responses to question 66 of Q2 – Questionnaire to customers.
                                                         20
 ---pagebreak---        hold a significant buyer power due to the concentrated structure of the market, are
       generally in the driving seat to formulate the scope of the tenders. For example,
       with respect to potential bundles including several type of aerospace sensors, one
       customer stated “some sensors may deliberately be split into packages”76 and
       another one “depending on programme procurement policy, sensors may be
       procured in global work packages or individually”.77
(97)   Third, only a fraction of respondents to the market investigation identified
       products of the merged entity, which they considered to be unique or a ‘must-
       have’ and which could therefore potentially help rendering a tying or commercial
       bundling scenario successful. These products however mostly concerned sensors
       and clamps for which, as explained above in sections 6.1.1 and 6.1.2, there will
       still be sufficient alternatives on the market following the Transaction. One
       respondent also specifically commented that there are no alternatives to the
       Parties for push button switches without however providing further explanation
       on how bundling and tying could materialize and how this could lead to harming
       competition. The Commission however considers that sufficient alternatives will
       remain on the market for push button switches. These include in particular Zodiac
       Aerospace (with a worldwide market share of approximately [30-40]%), Eaton
       (approximately [10-20]%), Applied Avionics (approximately [5-10]%),
       Ducommun (approximately [0-5]%) and Staco (approximately [5-10]%).
(98)   Fourth, following the Transaction, the merged entity will compete with a number
       of large diversified aerospace companies, which also offer a wide variety of
       products. These companies include for example UTC, Meggit and Honeywell.
       These companies’ product portfolios overlap with that of the merged entity for a
       significant number of products. As such, these companies would be able to adopt
       a number of counter strategies to nullify any attempt of the merger entity to
       foreclose them through bundling or discounting bundled products. For example,
       they could offer similar or different bundles and discounts of their own.
(99)   Finally, most of the respondents to the market investigation indicated that they do
       not expect that the merged entity would have the ability and incentives to bundle
       certain products for which they have a market share above 30%78 with any other
       products.79 While a number of respondents still mentioned certain possible
       bundles that the merged entity could potentially offer (e.g. between relays and
       SSPC or between sensors and ignition systems), most of these respondents also
       expressly commented that they would not be harmed by such bundles including
       because they would have the “strength to break the bundle if required”.80 As
       regards potential tying strategies, the vast majority of the respondents to the
       market investigation indicated that they do not expect that the merged entity
       would have the ability and incentives to tie certain product for which they have a
76 See Rolls Royce’s response to question 39.1 of Q2 – Questionnaire to customers.
77 See Airbus response to question 39.1 of Q2 – Questionnaire to customers.
78 These include temperature sensors, clamps, push button switches, relays and relay sockets and rods for
   aerospace applications.
79 See responses to question 67 of Q2 – Questionnaire to customers and 65 of Q1 – Questionnaire to
   competitors.
80 See Rolls Royce’s response to question 67.6 of Q2 – Questionnaire to customers.
                                                     21
 ---pagebreak---        market share above 30% with any other products.81 Overall none of the
       respondents have voiced a specific concern explaining how tying or bundling
       could materialize and how this could lead to harming competition.
(100) In light of the above considerations and taking account of the results of the market
       investigation, the Commission considers that the Transaction does not raise
       serious doubts as to its compatibility with the internal market with respect to
       conglomerate effects as the merged entity would have neither the ability, nor it is
       likely to have the incentive, to foreclose rivals through a bundling/tying strategy.
7.     CONCLUSION
(101) For the above reasons, the Commission has decided not to oppose the notified
       concentration 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
81 See responses to question 68 of Q2 – Questionnaire to customers and 66 of Q1 – Questionnaire to
   competitors.
                                                  22