CELEX: 32015M7655
Language: en
Date: 2015-07-22 00:00:00
Title: Commission Decision of 22/07/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7655 - BERKSHIRE HATHAWAY / THE DURACELL BUSINESS) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 22.07.2015
C(2015) 5171 final

                                        [pic]

|To the notifying party:                                                |                                                                       |

Dear Sir/Madam,

Subject:    Case M.7655 - BERKSHIRE HATHAWAY/ THE DURACELL BUSINESS
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1] and Article 57 of the Agreement  on  the  European  Economic
Area[2]

On 23 June 2015, the European Commission received notification of a proposed concentration pursuant to Article 4  of  the  Merger  Regulation  by
which Berkshire Hathaway Inc. ("Berkshire Hathaway", USA) acquires within the meaning of Article 3(1)(b) of the Merger  Regulation  sole  control
of […]* (the "Duracell Business") from The Procter & Gamble Company (the "P&G", USA) by way of  purchase  of  shares[3].  Berkshire  Hathaway  is
designated hereinafter as the "Notifying Party" and together with the Duracell Business as the "Parties".

THE PARTIES AND THE OPERATION

Berkshire Hathaway is a holding company owning subsidiaries that engage in a number of  diverse  business  activities,  including  insurance  and
reinsurance, freight rail transportation, utilities and energy finance, manufacturing, services and retailing.

P&G is a multinational company active in the manufacturing, distribution and marketing of fabric  and  household  care,  beauty  care,  grooming,
healthcare, baby, feminine and family care worldwide. The Duracell Business constitutes one of several businesses within P&G.

The Duracell Business manufactures and supplies portable batteries, including alkaline and lithium  batteries,  and  to  a  very  limited  extent
battery chargers. The Duracell Business does not  currently  include  stand-alone  distribution  assets  or  capabilities;  however  distribution
capabilities are being put in place and these will be transferred on closing of the proposed transaction.

Pursuant to a transaction agreement signed on 13 June 2014, P&G will carry out an internal reorganisation whereby it will transfer  the  Duracell
Business to a newly incorporated Delaware corporation, The Duracell Company, which has been established as a wholly-owned subsidiary  of  P&G.[4]
Certain of Berkshire Hathaway’s subsidiaries[5] will acquire the entire capital stock of The Duracell Company in exchange  for  shares  that  the
Berkshire Hathaway Subsidiaries hold in P&G.[6] As such, Berkshire Hathaway will indirectly acquire 100 % of  the  capital  stock  and  therefore
sole control of the Duracell Business.

The proposed transaction therefore constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

EU DIMENSION

The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000  million[7]  [Berkshire  Hathaway:  EUR  135  215
million; The Duracell Business: EUR […]].  Each of them has an EU-wide turnover in excess of EUR 250 million [Berkshire Hathaway:  EUR  […];  The
Duracell Business: EUR […]], but they do not achieve more than two-thirds of their aggregate EU-wide turnover within  one  and  the  same  Member
State. The notified operation therefore has an EU dimension.

COMPETITIVE ASSESSMENT

The assessment focuses on two relevant product markets, namely (i) the manufacture and the supply of batteries,  and  (ii)  the  distribution  of
portable batteries.

The transaction gives rise to a vertical relationship between Duracell Businesses' activities in the upstream market for portable  batteries  and
the downstream activities of one of Berkshire Hathaway's subsidiaries, […], active in the distribution of electronic components, with  only  very
limited sales of batteries in the EEA.

1 Relevant markets

1 Upstream market: manufacture and supply of portable batteries

Batteries are devices that produce electrical energy by means of a chemical interaction between a negative electrode  (“anode”)  and  a  positive
electrode (“cathode”) through a conductive material (“electrolyte”).[8]

The Commission has considered segmenting the market for batteries into three separate product markets: (a) portable batteries[9]; (b)  heavy-duty
industrial batteries[10]; and (c) automotive batteries[11], and possible distinction between primary batteries (i.e.  disposable  batteries)  and
secondary batteries (i.e. rechargeable batteries).[12]

The Commission also found that the market for primary and secondary portable batteries can be distinguished  according  to  the  chemistry.  More
specifically, the primary portable batteries can be further segmented into chemistries such as (a) zinc carbon, (b) alkaline,  and  (c)  lithium.
Similarly, secondary portable batteries can be further segmented into chemistries such as (a) nickel-cadmium  (NiCd);  (b)  nickel-metal  hydride
(NiMH); (c) lithium-ion (Liion); and (d) lithium.[13]

Lithium batteries can be produced in cylindrical and coin shapes.  The  Commission  has  therefore  considered  further  segmenting  the  lithium
cylindrical batteries based on sub-chemistries as  follows:  (a)  Lithium  manganese  dioxide  "LiMnO2",  (b)  Lithium  poly-carbon  monofluoride
"Li(CF)n", (c) Lithium thionyl chloride "LiSOCl", and (d) Lithium-Iron Disulfide "LiFeS".[14]

Coin-shaped batteries are manufactured both in primary (disposable) and secondary (rechargeable) variants. Primary coin-shaped batteries make  up
the majority of sales of coin-shaped batteries and are usually used in watches, calculators, hearing aids,  cameras  and  utility  meters.  Coin-
shaped batteries exist based on alkaline, silver oxide and zinc air chemistries and when using lithium as their anode, a distinction can be  made
between LiMnO2 coin batteries and Li(CF)n coin batteries.[15]

In its previous decisional practice, the Commission has also considered putative industrial/consumer market segmentations rather than  segmenting
the market on the basis of the physical characteristics of the battery. However, the Commission has left open whether the battery  market  should
be segmented according to sales channel or the physical characteristics of the battery.[16]

As for the geographic scope, in Panasonic/Sanyo, the results  of  the  market  investigation  indicated  that  the  geographic  markets  for  the
manufacture and supply of primary and secondary portable battery markets are at least EEA-wide and possibly worldwide in  scope.  In  particular,
the following elements in the market investigation pointed towards a worldwide market: (a) LiMnO2 and Li(CF)n   batteries  are  produced  outside
the EEA, mainly in Asia (ii) there are no major differences in customers' requirements between the EEA, USA and Asia (iii) producers  would  have
a global pricing strategy and (iv) many customers source globally. However, indications for significant price differences  between  the  EEA  and
the rest of the world, pointed to an EEA-wide market also. The exact geographic market definition was left ultimately left open.[17]

For the purpose of this decision, it is not necessary to conclude on  the  exact  product  and  geographic  market  definition  as  the  proposed
transaction does not give rise to serious doubts as to its compatibility with the internal market under any  alternative  product  or  geographic
market definition.

2 Downstream market: distribution of portable batteries

The Commission has not previously examined a separate market for the distribution of portable batteries. It has only considered separate  markets
for the wholesale distribution of electronic components and the direct sale of electronic  components  by  manufacturers.[18]  In  Avnet  EMG/MSC
Investoren, the Commission did not consider necessary to further segment  the market for the wholesale distribution of electronic  components  by
product category, notably by reference to semiconductors, passive  components,  electromechanical  components  (which  includes  batteries),  and
embedded products.[19]

The Commission has previously considered that the relevant  geographic  market  for  the  wholesale  distribution  of  electronic  components  is
national, although it was observed that there was a trend towards the widening of the geographic market.[20]

The Notifying Party is of the view that the relevant geographic market should be considered to be EEA-wide  as  (i)  most  suppliers  are  active
across a range of countries; (ii) transport costs make up only a small part of the total price  of  the  products;  and  (iii)  there  is  little
variation in terms of products, pricing and transport costs between Member States.[21]

For the purpose of this decision, it is not necessary to conclude on  the  exact  product  and  geographic  market  definition  as  the  proposed
transaction does not give rise to serious doubts as to its compatibility with the internal market under any  alternative  product  or  geographic
market definition.

2 Vertical effects

The Notifying Party is of the view that narrowing the market to the distribution of portable batteries is no necessary as portable batteries  can
be (and are) distributed by companies that also distribute other products. Furthermore, the Commission  has  not  previously  analysed  a  narrow
market for the distribution of portable batteries. In any event, for the sake of completeness, the Notifying Party submitted information even  on
this narrow approach.

The Notifying Party submitted market share information, according to which the EEA market share of the Duracell Business  for  portable  alkaline
batteries would be of [30-40]% in value and [10-20]% in volume (and between [0-5]% and [10-20]% by volume  and  between  [0-5]  and  [20-30]%  by
value in respect of other types of batteries).

On the other hand, the Notifying Party submits that in 2014 [a subsidiary of Berkshire Hathaway] sold approximately […] of portable batteries  in
the EEA and that portable batteries represent [0-5]% of [that subsidiary's] total sales of electronic components.

Moreover, the Notifying Party submitted market share data showing that in the area of primary portable alkaline batteries, the Duracell  Business
has a strong competitor with a value based market share of [10-20]% and a volume based share of [10-20]%, namely Energizer. While  the  remainder
of the market for branded products appears to be fragmented, a [30-40]% value based market share  and  [50-60]%  volume  based  market  share  is
attributed to private label producers. It is apparent that the vertical link in question is highly unlikely to lead to  any  foreclosure  effects
in the EEA market given that Berkshire Hathaway's subsidiary distributes only very small amounts of batteries in the EEA  ([…]  in  2014),  while
The Duracell Business and its main competitors supply very significant amounts of portable primary alkaline batteries on the EEA  market.  It  is
apparent that Berkshire Hathaway lacks the ability and incentive to engage in any foreclosure strategy.

Even when considering a further sub-segmentation of the market on the basis of sub-chemistries and form of the batteries (lithium  coin,  lithium
cylindrical, manganese dioxide coin, zinc air coin, NiMH) no further affected market would arise.

Against this background, the proposed transaction does not raise serious doubts as to its compatibility with the internal market with respect  to
the market for portable batteries.

CONCLUSION

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").

*     Should read the worldwide Duracell battery business.

[3]   Publication in the Official Journal of the European Union No C 214, 30.6.2015, p. 13.

[4]   The Duracell Company has, or will have on closing of  the  Proposed  Transaction,  subsidiaries  incorporated  in  several  Member  States,
including France, Germany, Italy, Portugal, Spain and the UK.

[5]   […].

[6]   The transferred P&G Shares that are currently held by the Berkshire Hathaway Subsidiaries do not confer control of P&G, amounting  to  only
1.93 % of P&G’s shares.

[7]   Turnover calculated in accordance with Article 5 of the Merger Regulation and the Commission Consolidated Jurisdictional Notice (OJ  C  95,
16.4.2008, p. 1).

[8]   COMP/M.5421 – Panasonic/Sanyo (29 September 2009).

[9]   The term “portable" battery denotes sealed power cells that can be hand-carried and are meant for use  in  relatively  small  devices  like
mobile telephones, laptop computers, power tools, toys, and the like.

[10]  Stationary power supplies that are used in businesses, factories and the like.

[11]  Batteries which are used in cars, trucks, and other wheeled vehicles.

[12]  COMP/M.5421 – Panasonic/Sanyo (29 September 2009).

[13]  COMP/M.5421 – Panasonic/Sanyo (29 September 2009), paragraph 14.

[14]  COMP/M.5421 – Panasonic/Sanyo (29 September 2009), paragraphs 16-18.

[15]  COMP/M.5421 – Panasonic/Sanyo (29 September 2009), paragraphs 49-51.

[16]  COMP/M.5421 – Panasonic/Sanyo (29 September 2009), paragraph 35.

[17]  COMP/M.5421 – Panasonic/Sanyo (29 September 2009), paragraph 38.

[18]  COMP/M.5099 - Arrow Electronics/Logix (19 May 2008); COMP M.5385 - Avnet/Abacus (19 January 2009); COMP/M.6863 – Avnet EMG/ MSC  Investoren
(4 September 2013).

[19]  COMP/M.6863 – Avnet EMG/MSC Investoren (4 September 2013), paragraphs 29; COMP M.5385 - Avnet/Abacus (19 January 2009), paragraphs 13-16.

[20]  COMP M.5385 - Avnet/Abacus (19 January 2009),  paragraph 27; COMP/M.6863 – Avnet EMG/ MSC Investoren  (4  September  2013),  paragraph  39;
COMP/M.3820 - Avnet / Memec ( 24 June 2005), paragraph 25.

[21]  COMP/M.6863 – Avnet EMG/MSC Investoren (4 September 2013), paragraph 40.

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

                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE