CELEX: 32017M8358
Language: en
Date: 2017-03-16 00:00:00
Title: Commission Decision of 16/03/2017 declaring a concentration to be compatible with the common market (Case No COMP/M.8358 - MACQUARIE / NATIONAL GRID / GAS DISTRIBUTION BUSINESS OF NATIONAL GRID) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                     
                     
                     
                     
                     
                     
                  
               
               Brussels, 16.3.2017
            
            
               C(2017) 1908 final
            
            
               
                  PUBLIC VERSION
               
            
            
                  
            
            
            
            
               To the notifying parties
            
            
            
               Subject:Case M.8358 – Macquarie / National Grid / Gas Distribution Business of National Grid 
                  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 9 February 2017, the European Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 by which National Grid plc ("National Grid", United Kingdom) and Macquarie Infrastructure and Real Assets (Europe) Limited (“MIRAEL”, United Kingdom) which is part of Macquarie Group Limited ("Macquarie"), acquire within the meaning of Article 3(1)(b) of the Merger Regulation joint control of the gas distribution business of National Grid that comprises four distribution networks ("Target", United Kingdom) by way of acquisition of shares ("the Proposed Transaction")
                  3
               . National Grid and Macquarie are designated hereinafter as the 'Notifying Parties' or the 'Parties'.
            
            
            
            
               1.The parties
            
            
               (2)MIRAEL focuses on the management of infrastructure and other real assets, including real estate, energy and agriculture. MIRAEL is part of Macquarie which is a global provider of banking, financial, advisory, investment and funds management services. Macquarie controls companies which have the following activities in the gas sector in the UK: (i) Energetics, an independent gas transporter which provides gas connections; and (ii) Corona Energy, a company supplying gas and electricity primarily to commercial, industrial and public sector clients in the UK. 
            
            
               (3)National Grid's principal operations are the ownership and operation of regulated electricity and gas infrastructure in the United Kingdom.
                  4
               
            
            
               (4)The Target comprises four regulated gas distribution networks (GDNs) across parts of the UK that encompasses the East of England, North London, the North West of England and the West Midlands. The Target is a licensed gas transporter
                  5
                under the GB Gas Act 1986 and is regulated by the Office of Gas and Electricity Markets (“OFGEM”). 
            
            
               2.The operation and the concentration
            
            
               (5)The Target is currently indirectly controlled by National Grid through its wholly owned subsidiary GasD Opco. Pursuant to the acquisition agreement signed on 8 December 2016, Macquarie, through MIRAEL, will indirectly acquire negative sole control over 61% of the issued share capital of a newly established holding company ("GasD Holdco") that will ultimately control the Target. The remaining 39% of the shares in GasD Holdco will be held by National Grid.
            
            
               Macquarie's control over TIL  
            
         
         
            
               (6)For the purpose of the Proposed Transaction Macquarie together with other investors formed a Consortium. The Consortium members entered into an agreement, whereby each Consortium member will subscribe to different proportions of the debt and share capital of Tellsid Holdings Limited ("Topco") and its wholly owned subsidiary, Tellsid Investment Limited ("TIL"). TIL will ultimately acquire shares in GasD Holdco. 
            
            
               (7)Macquarie, through MIRAEL, will be the largest shareholder in Topco (with a stake of […]%). Other shareholders include: CIC Capital ([…]%), ACP ([…]%), QIA ([…]%), Britel ([…]%), Dalmore ([…]%), INPP (Amber Infrastructure) ([…]%) and Hermes ([…]%).
            
            
               (8)TIL was created as an investment vehicle for the Consortium and as a holding company for GasD Holco. It is not intended that TIL would have any other activities. Macquarie will be able to control TIL via its parent company Topco. Macquarie, through MIRAEL, will be the only Consortium member who would be in a position to exercise negative sole control over TIL by virtue of its right to veto certain strategic decisions in Topco's Board related to the Target's business plan, financing plan and budget.
            
            
               Joint control of Macquarie and National Grid over the Target
            
            
               (9)National Grid and Macquarie will exercise decisive influence over certain strategic decisions of the Target and, consequently, they will jointly control the Target. 
            
            
               (10)In particular, National Grid and Macquarie will have veto rights on, among other things, the approval of the initial business plan for GasD Holdco. The gas distribution business is a regulated activity subject to price controls by OFGEM. The current price control framework referred to as RIIO-GD1 covers the period from 1 April 2013 to 31 March 2021. The initial business plan must be set in line with RIIO-GD1 and submitted to OFGEM for approval. Once approved by OFGEM the initial plan becomes the prevailing business plan for the price control period. With any future price control period, National Grid and Macquarie will have to agree on a new business plan before submitting it to OFGEM for approval. The initial financing plan as well as the budget must also be agreed by both National Grid and Macquarie. 
            
            
               (11)National Grid's and Macquarie's veto rights will also apply to any changes which are "materially adverse" to the prevailing business, financing or budget plans. The Parties submitted that, as they have not agreed on the exhaustive list of what changes would be considered as 'materially adverse', each of National Grid and Macquarie will have, in practice, discretion in deciding when to exercise their veto right. 
            
            
               (12)The Proposed Transaction therefore constitutes a concentration pursuant to Article 3(1)(b) of the Merger Regulation. 
            
            
               3.EU DIMENSION
            
            
               (13)The undertakings concerned had a combined aggregate world-wide turnover of more than EUR 5 000 million (Macquarie: EUR […]million; National Grid: EUR 18 203 million; Target: EUR 2 563 million).
                  6
                In addition, each of them had an EU-wide turnover in excess of EUR 250 million (Macquarie: EUR […]million; National Grid: EUR […]million; Target: EUR […]million), but they did 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 within the meaning of Article 1(2) of the Merger Regulation.
            
            
               4.Commission's assessment
            
            
               (14)The Parties' activities overlap horizontally in the provision of (i) one-off gas connections, and (ii) multiple gas connections. In addition, the Proposed Transaction would create a vertical link between the Target's gas distribution activity (the upstream market) and Macquarie's businesses downstream as (i) a provider of gas connections and (ii) as a (wholesale and retail) supplier of gas (the downstream markets).
                  7
               
            
            
               4.1.Market definition
            
            
               4.1.1.Gas distribution
            
            
               (15)The Commission has previously identified the distribution of natural gas through low- and medium-pressure pipeline networks as a relevant product market.
                  8
                The geographic market has been defined as the territory covered by each distribution grid.
                  9
                The distribution of gas constitutes a natural monopoly given that the distribution grid cannot be duplicated in any economically viable manner.  The Parties do not dispute this market delineation and it is retained by the Commission for the purpose of the present case.
            
            
               4.1.2.Supply of gas 
            
            
               (16)Natural gas in Britain arrives from various sources, including liquefied natural gas (LNG) terminals, storage sites, pipelines from other countries (such as Norway) and through interconnectors with Europe (in Belgium, Holland and Ireland),
                  10
                and it is transported through the national transmission system and the distribution networks by gas shippers. Gas shippers are wholesalers who contract with gas transporters, such as the Target, to move the gas through the grid and they pay transmission and distribution charges for the transportation service. Gas shippers then sell the gas on to suppliers who use it to supply retail gas to end-customers. 
            
            
               4.1.2.1.Wholesale supply of gas
            
            
               (17)The Commission has in the past identified a distinct product market for the wholesale supply of gas which encompasses sales by shippers or suppliers with an upstream gas supply contract (as well as those with domestic production),
                  11
                and which may also include trading on gas hubs, such as the National Balancing point (NBP) in the UK.
                  12
                On the scope of the geographic market, the Commission has in the past considered whether the wholesale supply market should comprise the territory of the UK as well as the Republic of Ireland but it ultimately left the market definition open.
                  13
                The exact delineation of the relevant (product and geographic) market can be left open in the present case as the Proposed Transaction does not raise serious doubts as to its compatibility with the internal market under any plausible market definition.
            
            
               4.1.2.2.Retail supply of gas
            
         
         
            
               (18)In previous decisions, the Commission has segmented the retail supply of gas into the following relevant markets: (i) gas-powered electricity plants; (ii) large industrial customers; (iii) small industrial and commercial customers; and (iv) households.
                  14
                The Commission generally held that the geographic scope of retail markets was national
                  15
                in scope.  The Parties agree with this market segmentation and it is retained by the Commission for the purpose of the present case.
            
            
               4.1.3.Gas connections
            
            
               (19)When a housing developer builds new homes, those homes need to be connected to the existing utility networks in order for the residents to receive utility services. There are two main types of gas connections: (i) one-off connections: when consumers require a gas connection for an individual home; and (ii) multiple housing connections: when housing developers require multiple connections, e.g. a large housing development requiring connections to several homes. Housing developers typically require multi-utility connections that may include gas, electricity, water and fibre connections.
            
            
               (20)Historically, gas connections were provided exclusively by the incumbent regional gas distributor. However, since 1995 these activities have been open to competition. Gas connections are either provided by a GDN operator or an independent gas transporter ('IGT'), such as Energetics.
            
            
               (21)The Commission has not previously investigated the market for gas connections. However, this market was analysed by the UK Office of Fair Trading ('OFT').
                  16
                Although it ultimately left the market definition open, the OFT considered that the market can be segmented (i) by type of connection (gas vs electricity connection),
                  17
                (ii) by customer group (one-off connections vs multiple housing connections) and (iii) by type of customer (domestic vs non-domestic)
                  18
               . As the transaction does not raise serious doubts as to its compatibility with the internal market under any plausible market definition, the exact delineation of the product market can be left open.
            
            
               (22)On the scope of the geographic market, the OFT considered the market to be that of the UK on the basis that competition takes place mainly at national level. The Parties agree with this market delineation and it is retained by the Commission for the purpose of the present case.  
            
            
               4.2.Competitive assessment
            
            
               4.2.1.Horizontal overlap in the supply of one-off gas connections
            
            
               (23)On the market for one-off gas connections, in 2015 the Target had a share of [30-40]% of the new domestic connections and [10-20]% of the new non-domestic connections. Energetics (controlled by Macquarie) has only a negligible presence in this market (less than [0-5]% of both new domestic and non-domestic connections in 2015).
                  19
                
            
            
               (24)The Parties argue that IGTs, such as Energetics, are not active in the market segment for one-off gas connections to any material extent. This is due to a number of factors, including geographic dispersion and regulatory obligations, which make the market for one-off gas connections unattractive for IGTs.
                  20
                
            
            
               (25)The Commission notes that more than [90-100]% of the one-off gas connections are carried out by GDN operators. Each GDN operator typically installs the vast majority of the new one-off connections to its own distribution grid. For example, on its GDNs the Target accounted for a share of [90-100]% to [90-100]% of all new one-off connections in 2015
                  21
                while Energetics provided only one connection in the East of England.
                  22
                This suggests that IGTs, including Energetics, exert a limited constraint on GDN operators in the provision of one-off gas connections.
            
            
               (26)In light of the above, the Commission considers that the proposed transaction does not raise serious doubts as to its compatibility with the internal market in relation to the market for the supply of one-off gas connections. 
            
            
               4.2.2.Horizontal overlap in the supply of multiple-housing gas connections
            
            
               (27)On the market for multiple housing connections, the Parties' position is limited, as they have a combined share below 20% of both domestic (Energetics [5-10]%, the Target [0-5]%)
                  23
                and non-domestic connections (Energetics [0-5]%, the Target [10-20]%). 
            
            
               (28)In addition to the limited combined market share, the Parties argue that Energetics and the Target tend to focus on different customer groups. Energetics almost exclusively serves multi-utility connections (including gas, electricity and water) which account for approximately [90-100]% of its business, whilst the position of GDN operators, including the Target, in the multi-utility segment is marginal.
                  24
                
            
            
               (29)GDN operators account together for only [5-10]% of the new multiple housing connections.
                  25
                This suggests that GDN operators have limited ability to constrain IGTs in the provision of multiple housing installations. Respondents to the market investigation also clearly indicated that competition in the provision of multiple housing gas connections takes place mostly between IGTs.
                  26
               
            
            
               (30)In view of the above, the Commission considers that the proposed transaction does not raise serious doubts as to its compatibility with the internal market in relation to the market for the supply of multiple-housing gas connections. 
            
            
               4.2.3.Vertical link between gas distribution and (wholesale and retail) supply of gas
            
            
               (31)Macquarie via Corona is active in the wholesale and retail supply of gas in the UK but it holds a limited position in both markets. In the market for wholesale supply of gas Corona's market share is less than 10%. In the retail markets Corona is active in the supply to large and small non-domestic customers with a share of, respectively, 13% and 6%. 
            
            
               (32)Gas (wholesale and retail) suppliers rely on GDN operators to transport and deliver gas to their customers. As each GDN operator is a de facto monopolist on its own grid (see paragraph 
               
                  (15)
               
               ), the Commission has considered whether post-merger the merged entity might have the ability and incentive to engage in input foreclosure by discriminating (in the provision of access to its GDNs) against Corona's competitors in the (wholesale and retail) supply of gas. 
            
         
         
            
               (33)In theory, there may be a number of tactics that a vertically integrated company could undertake to discriminate downstream competitors active in the (wholesale and/or retail) supply of gas. For example, the merged entity could discriminate in favour of Corona’s wholesale business by offering it more favourable terms (or distorting the capacity allocation mechanism), and/or in favour of its gas retail business by unduly interfering in the customers switching process from Corona to its retail competitors. 
            
            
               (34)The Parties argue that they would have no ability to discriminate because the existing regulatory framework would effectively constrain any attempt of GDN operators to discriminate.
                  27
                
            
            
               (35)Moreover, according to the Parties, Xoserve, an agency established by OFGEM in 2005, plays an important role in the UK in protecting gas suppliers from discriminatory conduct by the GDN. Xoserve provides, on behalf of gas suppliers and gas transporters, services on a centralised basis, including billing services, managing the booking of capacity, running the gas settlement systems and managing the change of supplier process. This way, GDNs do not directly interact with downstream gas suppliers and this further limits GDN operators' ability to discriminate between suppliers.
                  28
               
            
            
               (36)The Parties also argue that National Grid - who controls the Target jointly with Macquarie – would have no interest in pursuing a foreclosure strategy as it is not active in gas supply and therefore it would not support such a strategy.
                  29
                Further, the Parties argue that they would have no (or limited) incentive to discriminate as they could only expect to marginally increase Corona's sales in the downstream markets following any competitor foreclosure.
                  30
                
            
            
               (37)For the reasons set out below in paragraphs 
               
                  (38)
               
                to 
               
                  (40)
               
                the Commission is of the view that the Parties would have in practice no (or limited) ability to foreclose access to the Target’s GDNs.
            
            
               (38)First, the Commission agrees with the Parties that, unlike Macquarie, National Grid (as any other shareholder of the Target) is not active in the downstream market and therefore no benefit would accrue to it from discriminating against Corona's competitors. Moreover, any discriminatory conduct would require a tight control by Macquarie over the Target's activities in the ordinary course of business. This appears to be unlikely considering that Macquarie will exercise (joint) control over it mainly through negative influence on some reserved matters.
                  31
                
            
            
               (39)Second, most of Corona's competitors contacted by the Commission during the market investigation consider that the UK regulatory framework provides sufficient protection against potentially discriminatory practices (at both the wholesale and retail level).
                  32
                Suppliers pointed to the special role of Xoserve and, in particular, the fact that the retail customer switching process is administered separately by Xoserve on behalf of all network operators and this limits the ability of operators to unduly influence the process.
                  33
               
            
            
               (40)It is also noted that OFGEM has recently reviewed the governance of Xoserve
                  34
                and from 1 April 2017 a number of governance changes will be introduced which will include a revised Xoserve board made up of directors nominated by shippers, gas transporters and IGTs, inclusive governance arrangements and revised annual budget and business planning process involving all users of Xoserve's services. These changes are aimed at increasing transparency in the management of Xoserve and also to establish an appropriate separation of ownership and control.
                  35
               
            
            
               (41)In view of the above, the Commission considers that the proposed transaction does not raise serious doubts as to its compatibility with the internal market in relation to potential foreclosure by the Target of Corona's competitors in the (wholesale and retail) supply of gas. 
            
            
               4.2.4.Vertical link between gas distribution and provision of gas connections
            
            
               (42)To install a new gas connection IGTs must submit a design for the connection to the GDN operator for approval. Similarly to above, in light of its monopolistic position in the provision of access to its GDNs, the Commission has considered whether the Target might have the ability and incentive to discriminate in favour of Energetics' (Macquarie) gas connections business. Potential discriminatory conduct may include, for instance, interfering with the approval criteria of the connection, or hampering the approval turnaround times.
            
            
               (43)In addition to the arguments set out in paragraphs 
               
                  (34)
               
                and 
               
                  (36)
               
                above, the Parties submit
                  36
                that the interactions between IGTs and GDN operators are minimal as IGTs can largely complete a new connection with no cooperation from the GDN operators and, in any case, the GDN operators’ approval is only required in certain limited circumstances. 
            
            
               (44)Energetics' competitors contacted during the market investigation did not express any concerns about the proposed transaction as in general they consider the existing regulatory framework to be effective in preventing any form of discriminatory conducts. Moreover, the reasoning set out in paragraph 
               
                  (38)
               
                also applies to the assessment of the risk of vertical foreclosure against Energetics' competitors in the supply of gas connections.
            
            
               (45)In view of the above, the Commission considers that the proposed transaction does not raise serious doubts as to its compatibility with the internal market in relation to potential foreclosure by the Target of Energetics' competitors in the supply of gas connections.
            
            
               5.Conclusion
            
            
               (46)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 54, 21/02/2017, p. 7.
               
               
                  
                     (4)
                   
                        National Grid is also active in the US in the generation, transmission, distribution and sale of electricity, and the transmission, distribution and sale of natural gas.
               
               
                  
                     (5)
                   
                        A “gas transporter” is a technical term used in the Gas Act 1986 to refer to holder of a licence for either distribution or transmission of gas.
               
               
                  
                     (6)
                   
                        Turnover calculated in accordance with Article 5 of the Merger Regulation. 
               
               
                  
                     (7)
                   
                        The Target provides certain ancillary services in respect of meters owned by National Grid Metering Limited, the entity through which National Grid carries out its metering business, within the area of the Target's four regional GDNs. These services include certain workforce services (such as assisting with meter breaks, changing meters where requested by gas suppliers and ensuring the safety and accuracy of the meters, as well as maintenance services for larger meters) required to provide ancillary meter asset management ("MAM") services which typically cover the installation and ongoing maintenance of meters. This is a pre-existing vertical relationship and it is not created by the Proposed Transaction. Macquarie Group is active as a meter asset provider for electricity and gas meters through its Macquarie Energy Leasing business, but it is not active in the provision of MAM services. Therefore, there is no direct vertical relationship between the Target and Macquarie. See Form CO, paragraphs 192 – 201. 
               
               
                  
                     (8)
                   
                        COMP/M.4180 - GDF/Suez, COMP/M.3696 - E.On/MOL, COMP/M.6302 -F2i/AXA Funds/ G6 Rete Gas, COMP/M.6068 - ENI/AcegasAps/JV, COMP/M.6698 – Cheung Kong Holdings / Cheung Kong Infrastructure Holdings / Power Assets Holdings / MGN Gas Networks.
               
               
                  
                     (9)
                      See, e.g., COMP/M.3696 - E.On/MOL
               
               
                  
                     (10)
                   
                        See Ofgem, 
                  https://www.ofgem.gov.uk/gas/wholesale-market/gb-gas-wholesale-market
                  . 
               
               
                  
                     (11)
                   
                        COMP/M.7228 – Centrica/Bord Gais Energy.
               
               
                  
                     (12)
                   
                        For example, in Case M.4180 - GDF/Suez (2006), the Commission considered a separate market for the wholesale trading of gas on the Zeebrugge gas hub. In contrast, in Case M.5467 - RWE/Essent (2009) and M.7228 – Centrica/Bord Gais Energy (2014), the Commission considered a number of evidence suggesting that trading at the hub (the Title Transfer Facility (TTF) in the Case M.5467 and the National Balancing point (NBP) in the Case M.7228) was part of the wholesale market although the market definition was ultimately left open.
               
               
                  
                     (13)
                     COMP/M.7228 – Centrica/Bord Gais Energy.
               
               
                  
                     (14)
                   
                        COMP/M.5740 - Gazprom/ A2A / JV.
               
               
                  
                     (15)
                   
                        COMP/M.5740 - Gazprom / A2A / JV; COMP/M.6068 - ENI/ ACEGASAPS/ JV; COMP/M.3230 - Statoil / BP / Sonatrach / In Salah JV.
               
               
                  
                     (16)
                    
                        Completed acquisition by Brookfield Infrastructure Partners LP of Inexus Group Limited, the OFT's decision on reference under section 22 given on 25 October 2012. Anticipated acquisition by Scotia Gas Network plc of the Scotland and South of England gas distribution networks from National Grid Transco, the OFT's decision on reference under section 33(1) given on 25 April 2005.
               
               
                  
                     (17)
                   
                        As the Parties do not overlap in the supply of electricity connections, the decision only discusses the impact of the proposed transaction on the supply of gas connections. 
               
               
                  
                     (18)
                   
                        Domestic connections account for the vast majority of new gas connections. In 2015 98% of the new connections were for domestic customers.
               
               
                  
                     (19)
                    
                        Energetics is almost exclusively active in the market segment for multiple housing connections and focuses on multi-utility connections which account for approximately [90-100]% of its business.
               
               
                  
                     (20)
                    In particular, the Parties point to the following reasons: (i) GDN operators are subject to certain regulatory obligations to provide one-off connections to customers although they are low value and unattractive, (ii) GDN operators are also subject to the obligation to install the first 10 metres of a one-off gas connection free of charge if the house is within 23 metres of the relevant gas main; the cost of providing such connection is partially funded through the relevant price control; and (iii) GDN operators are obliged to provide (in the majority of cases) free connections to qualifying 'fuel poor' customers.
               
               
                  
                     (21)
                   
                        [90-100]% in the North West of England, [90-100]% in the West Midlands, [90-100]% in the East of England, and [90-100]% in the North London.
               
               
                  
                     (22)
                   
                        Out of almost 6,000 new connections installed in that region.
               
               
                  
                     (23)
                   
                        In the domestic segment (which accounts for more than [90-100]% of all multiple-housing gas connections) there are a number of suppliers with a share larger than the Parties, including: BUUK ([40-50]%), Zoom Group ([20-30]%) and SSE ([10-20]%).
               
               
                  
                     (24)
                   
                        GDN operators are licensed only to provide gas connections ('gas-only'). While housing developers can still choose to source its connection needs from multiple vendors, multi-utility connection providers benefit from significant economies of scope and can therefore offer more competitive tariffs. This appears to be consistent with the evidence that the vast majority of multiple housing connections (approx. [90-100]%) are multi-utility connections. In addition, IGTs have a competitive advantage over GDN operators as the former are able to partly fund the cost of connections by retaining ownership of them and receiving revenue from shippers using the connection to transport gas. This way, they are able to offer up-front financing, which developers find attractive. By contrast, the GDN operator's licence conditions do not permit it to enter into such financing arrangements.
               
               
                  
                     (25)
                   
                        Including multi-utility connections. See Form CO, paragraph 144.
               
               
                  
                     (26)
                   
                        See responses to the Commission's questionnaire to Energetics' competitors, Q6. 
               
               
                  
                     (27)
                   
                        Form CO, paragraphs 385 and 386. 
               
               
                  
                     (28)
                   
                        Form CO, paragraph 394.
               
               
                  
                     (29)
                   
                        Form CO, paragraph 387.
               
               
                  
                     (30)
                   
                        The Parties also argue that the high likelihood of being detected and the size of the fine, compensation payments and damage claims would largely outweigh any potential gains resulting from an improvement in Corona’s competitive position. See Form CO, paragraph 391.
               
               
                  
                     (31)
                   
                        See paragraphs 
                  
                     (10)
                  
                   and 
                  
                     (11)
                  
                  . These matters relate to the determination of the business plan, financing plan and budget, and they will mainly affect the Target's strategic business behaviour (rather than its day-to-day running).
               
               
                  
                     (32)
                   
                        It is noted that this type of vertical integration already exists in the UK, in Scotland and the South of England regions where SSE is the owner (jointly with other companies) of the GDN and it is also active as a retail supplier of gas. SSE also once owned Indigo Pipelines, an IGT, under the name SSE Pipelines. In 2014 Indigo Pipelines was transferred into the ownership of a capital fund which is one third owned by SSE. According to the retail suppliers and gas connection providers contacted by the Commission during its market investigation, there is no indication that the SSE vertical integration led to any type of discriminatory conducts.
               
               
                  
                     (33)
                   
                        The Parties also pointed out that the distribution charges set by the Target (according to the methodology approved by OFGEM) are communicated to Xoserve on a 'blind' basis (i.e. with no distinction as between different suppliers), and Xoserve produces and issues invoices using the same set of charges for all shippers. Form CO, paragraph 395.
               
               
                  
                     (34)
                   
                        Ofgem (2016), Xoserve - Decision on legal and regulatory framework to establish new governance and funding arrangements for the gas central service provider.
               
               
                  
                     (35)
                   
                        Xoserve is jointly owned by National Grid and GDN operators. 
               
               
                  
                     (36)
                   
                        Form CO, paragraphs 256 and 257.