CELEX: 32015M7737
Language: en
Date: 2015-12-21 00:00:00
Title: Commission Decision of 21/12/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7737 - HONEYWELL / ELSTER) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 21.12.2015
C(2015) 9785 final

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To the notifying party:

Dear Madam(s) and/or Sir(s),

Subject:    Case M.7737 - Honeywell/Elster
Commission decision pursuant to Article 6(1)(b) in conjunction with Article 6(2) of Council Regulation  No 139/2004[1]  and  Article  57  of  the
Agreement on the European Economic Area[2]

 1) On 04.11.2015, the European Commission ("Commission") received notification of a proposed concentration pursuant to Article 4 of the  Merger
    Regulation by which Honeywell International Inc. ("HON", USA) will acquire sole control of Teaford GmbH ("Teaford",  Germany),  the  holding
    company of the Elster division of Melrose PLC ("Elster", Germany) via purchase of shares ("Transaction").[3] HON,  Teaford  and  Elster  are
    collectively referred to as the "Parties" and HON as the "Notifying Party".

 2) The same Transaction was already notified to the Commission on 09.10.2015, but subsequently withdrawn on 03.11.2015.

       The Parties

 3) HON is a diversified technology and manufacturing company active worldwide. It is active in a wide  array  of  fields  including  aerospace,
    turbochargers, control, sensing and security technologies for buildings, homes  and  industry,  specialty  chemicals  and  electronics.  HON
    manages its business operations through three businesses that are reported as operating segments: (i) Aerospace, (ii) Automation and Control
    Solutions (ACS), and (iii) Performance Materials and Technologies (PMT). The HON business concerned by this Transaction is the ACS segment.

 4) Teaford is the holding company of Elster, a division of Melrose PLC ("Melrose").

 5) Elster manufactures gas, electricity and water meters and related communications, networking and software solutions, which are  designed  to
    measure and improve the flow of natural gas, electricity and water. Elster supplies its products to industrial customers around the world.

 6) Melrose is a wholly-owned subsidiary of Melrose Industries PLC (“Melrose”), and is the ultimate parent company of Elster.

       The Concentration

 7) The Transaction consists in the acquisition by HON of the entire share capital of Teaford. Therefore, the proposed transaction  consists  in
    the acquisition by HON of sole control over Teaford and therefore over Elster.

 8) In light of the above, the Transaction constitutes a concentration according to Article 3(1)(b) of the Merger Regulation.

       EU DIMENSION

 9) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million[4] (HON EUR 30 300  million,  Elster
    EUR 1 300 million). Each of them has an EU-wide turnover in excess of EUR 250 million (HON EUR […], Elster EUR […]), but  does  not  achieve
    more than two-thirds of its 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.

       MARKET DEFINITION

10) The Transaction concerns three business sectors: 1) residential heating products, 2) industrial burners and 3) gas up/mid-stream.

1 Residential Heating Products

1 Gas valves

11) In boilers for residential heating systems, gas valves moderate the combustion of the gas-fired boiler by controlling the flow  of  gas  and
    the gas/air ration in the boiler.

1 Relevant product market definition

     The Notifying Party's view

12) The Notifying Party submits that gas valves for gas-fired residential boiler systems are part of a distinct product  market.  As  regards  a
    possible distinction between gas valves that are used in high efficiency ("HE") and in standard efficiency ("SE") residential  boilers,  the
    Notifying Party takes the view that both types of gas valves form part of the same product market. While there are some differences  related
    to design, materials used and price, the Notifying Party submits that these differences are minor. Moreover, they  argue  that  there  is  a
    sufficient degree of supply-side substitutability. Finally the Notifying Party takes the view that pneumatically controlled gas  valves  and
    electronically controlled gas valves are substitutable as they principally perform the same function. According to the Notifying Party, they
    therefore form part of the same product market.

     Results of the market investigation and Commission's assessment

13) The market investigation results support the view that gas valves for residential boiler systems are part of a distinct product market.  The
    majority of respondents to the market investigation stated that the tasks performed by gas valves for residential boiler systems  cannot  be
    performed by any other piece of equipment (for instance by gas valves for other purposes).[5]

14) Regarding the possible distinction between HE and SE gas valves for residential boiler systems, the market  investigation  indicate  that  –
    contrary to the Notifying Party's view – there is limited demand-side substitutability between HE and SE gas valves. While the  majority  of
    responding customers stated that both types of gas valves are generally comparable in  terms  of  their  technical  characteristics,[6]  the
    majority of responding customers also stated that HE and SE gas valves  are  not  comparable  in  terms  of  price[7]  and  cannot  be  used
    interchangeably in their residential boiler systems.[8] Moreover, the majority of responding customers explained that they would not  switch
    from one type of gas valves to the other in case of a permanent price increase by 5-10%.[9]

15) With regard to supply-side substitutability, the results of the market investigation are inconclusive regarding the  timeframe  in  which  a
    switch of production could be implemented. While all responding competitors consider switching production from SE to HE  gas  valves  to  be
    profitable in case of a permanent price increase for HE by 5-10%, half of the responding competitors stated that switching  production  from
    SE to HE gas valves is easy, quick and economically profitable while the other half stated that switching is technically  more  complex  and
    requires some time.[10]

16) Regarding the possible distinction between pneumatically controlled  gas  valves  and  electronically  controlled  gas  valves,  the  market
    investigation results indicate that  there  is  limited  demand-side  substitutability  between  pneumatically  controlled  gas  valves  and
    electronically controlled gas valves. The majority of responding customers considers pneumatically and electronically controlled gas  valves
    not to be comparable in terms of product characteristics[11] and price.[12] Furthermore, the majority of responding customers does  not  use
    pneumatically and electronically controlled gas valves interchangeably in their residential boiler systems.[13]

17) With regard to supply-side substitutability, the results of the market investigation are inconclusive regarding the  timeframe  in  which  a
    switch of production from pneumatically controlled valves to electronically controlled gas valves could be implemented. While all responding
    competitors consider switching production from pneumatically controlled valves  to  electronically  controlled  gas  valves  in  case  of  a
    permanent price increase for pneumatically controlled gas valves by  5-10%,  half  of  the  responding  competitors  stated  that  switching
    production from pneumatically controlled valves to electronically controlled gas valves is easy, quick and economically profitable while the
    other half stated that switching is technically more complex and needs some time.[14]

18) In view of the results of the market investigation, the Commission finds that  gas  valves  for  residential  boiler  systems  constitute  a
    separate relevant product market. For the purpose of the assessment of the Transaction it can be left open  whether  the  market  is  to  be
    further segmented by SE and HE gas valves and pneumatically and electronically controlled gas valves  as  the  Transaction  does  not  raise
    serious doubts as to its compatibility with the internal market under any plausible product market definition.

2 Relevant geographic market definition

      The Notifying Party's view

19) The Notifying Party submits that the relevant market is at least EEA-wide in scope as most customers source gas valves on an EEA-wide scale,
    products are homogenous across various EEA countries, there are no local preferences and most suppliers sell their products EEA-wide.

      Results of the market investigation and Commission's assessment

20) The market investigation results suggest that the market is EEA-wide in scope. The majority of responding customers stated that they  source
    gas valves within the EEA[15] and that prices for gas valves are different inside and outside the EEA.[16]
    On the other hand, all responding competitors stated that they supply gas valves on a worldwide basis from their facilities in the  EEA.[17]
    Half of the responding customers indicated that gas valves for the use in the EEA are technically different from gas valves used outside the
    EEA. In the EEA, mainly HE gas valves are used, whilst in the rest of the world  mostly  SE  gas  valves  are  used  in  residential  boiler
    systems.[18] Moreover, half of the responding competitors indicated that the prices for gas valves in the EEA are around 30% higher than the
    prices outside the EEA[19] and that products have different technical characteristics according to the different  regulatory  standards[20].
    Nevertheless, all of the responding competitors stated that transportation costs do not limit their ability to sell gas  valves  from  their
    production facilities inside the EEA to customers outside the EEA.[21]

21) In the light of the results of the market investigation, the Commission finds that the scope of the geographic market(s) for gas valves  for
    residential boiler systems is at least EEA-wide. For the purpose of the assessment of the Transaction  it  can  be  left  open  whether  the
    market(s) could also be wider than the EEA given that the Transaction does not raise  serious  doubts  as  to  its  compatibility  with  the
    internal market under any plausible geographic market definition, the narrowest being EEA-wide.

2 Electronic boards

22) Electronic boards are small circuit boards that control certain  functions  of  a  boiler  system  such  as  ignition,  timing  of  heating,
    temperature levels. Electronic boards are usually tailored to the boiler requirements of the Original Equipment Manufacturer (OEM).

1 Relevant product market definition

     The Notifying Party's view

23) The Notifying Party submits that the relevant product market is the market for electronic boards and does not need to be further  segmented.
    It considers that from a demand side perspective there could be limited substitutability between electronic boards  for  HE  and  SE  boiler
    systems as HE boiler systems have certain functions that SE boiler systems do not have, while from a supply side perspective  there  appears
    to be substitutability since all manufacturers offer both types of electronic boards.

     Results of the market investigation and Commission's assessment

24) Electronic boards cannot be substituted with any other component.[22] The market investigation results gave some indication  that  there  is
    limited demand-side substitutability regarding electronic boards for HE and SE residential boiler systems. The majority  of  customers  that
    have responded to the market investigation stated that electronic boards for HE and SE residential boiler  systems  are  not  comparable  in
    terms of product characteristics[23] and price[24] and are not used interchangeably.[25] However, all responding  customers  also  explained
    that switching production from electronic boards for SE residential boiler systems to electronic boards for HE  residential  boiler  systems
    and vice versa is easy, quick and economically profitable in case of a permanent price increase of 5-10%.[26]

25) In the light of the above, the Commission considers that electronic boards for residential boiler  systems  constitute  a  distinct  product
    market that can possibly be further segmented into electronic boards for SE and HE boiler systems. For the purpose of the assessment of  the
    Transaction, it can be left open whether a further distinction exists between electronic boards for HE boiler systems and electronic  boards
    for SE residential boiler systems as the Transaction does not raise serious doubts as to its compatibility with the  internal  market  under
    any plausible product market definition.

2 Relevant geographic market definition

      The Notifying Party's view

26) The Notifying Party submits that the scope of the market(s) for electronic boards is at least EEA-wide.

     Results of the market investigation and Commission's assessment

27) The market investigation results suggest that the market is at least EEA-wide if not larger in scope. The majority of  responding  customers
    in the EEA stated that while transportation costs do not limit their ability to source from customers outside the EEA[27], they nevertheless
    source electronic boards within the EEA[28] and that there are price differences[29] and differences in product characteristics[30]  between
    electronic boards inside and outside the EEA – such as design,  reliability  and  quality.  Furthermore,  according  to  a  customer  a  key
    differentiator for products used in the EEA is the required compliance with the European gas safety  regulation.[31]  While  all  responding
    competitors stated that they sell electronic boards on a worldwide basis[32] and transportation costs are not a factor limiting sales to the
    EEA[33], half of the responding customers indicated that price differences[34]  and  different  product  characteristics[35]  exist  between
    electronic boards sold inside and outside the EEA.

28) In the light of the results of the market investigation, the Commission considers that the market  for  electronic  boards  for  residential
    boiler systems is at least EEA-wide in scope. For the purpose of the assessment of the Transaction it can be left open  whether  the  market
    could also be wider than EEA-wide as the Transaction does not raise serious doubts as to its compatibility with the  internal  market  under
    any plausible geographic market definition, the narrowest being EEA-wide.

3 Gas control systems

29) Instead of purchasing gas valves and electronic boards as separate components and integrating them  into  a  residential  boiler  system,  a
    boiler OEM can purchase a gas control system. A gas control system is a combination of a  gas  valve  and  an  electronic  board  which  are
    specifically configured and calibrated.

1 Relevant product market definition

      The Notifying Party's view

30) The Notifying Party submits that the relevant product market is the market for gas control systems without a further  segmentation  into  SE
    and HE gas control systems. They submit that such a further segmentation would not be meaningful for the reasons given with respect  to  the
    two components – gas valve and electronic board.

      Results of the market investigation and Commission's assessment

31) Gas control systems cannot be substituted with any other component – unless a residential boiler manufacturer decides to assemble it  itself
    based on the two components gas valve and electronic board.[36]

32) The market investigation results gave no clear indication that, within the market for gas control systems, a further distinction  should  be
    made between SE and HE gas control systems. The responding competitors stated that switching from producing SE to HE gas control systems  is
    economically profitable and a real option in case of a permanent price increase of 5-10%. However, only half  of  the  responding  customers
    indicated that switching would be quick and easy.

33) In view of the results of the market investigation, the Commission finds that gas control systems for residential boiler systems  constitute
    a distinct product market that could possibly be further segmented into gas control systems for SE and HE residential  boiler  systems.  For
    the purpose of the assessment of the Transaction, it can be left open whether a further distinction exists between SE  and  HE  gas  control
    systems as the Transaction does not raise serious doubts as to its compatibility with the internal market under any plausible product market
    definition.

2 Relevant geographic market definition

      The Notifying Party's view

34) As regards the geographic market definition, the Notifying Party claims that the market is at least EEA-wide in scope.

      Results of the market investigation and Commission's assessment

35) The market investigation results supported the view that the relevant market is at least EEA-wide. In fact, while  half  of  the  responding
    competitors state that gas control systems are supplied EEA-wide, the other half consider them to be supplied worldwide.[37] Similarly, half
    of the responding competitors consider there to be price differences[38] and technical differences[39] between inside and outside  the  EEA,
    while the other half does not observe such differences.

36) Based on the above, the Commission considers that the market for gas control systems for residential boiler systems is at least EEA-wide  in
    scope. For the purpose of the assessment of the Transaction it can be left open whether the market could also be wider than EEA-wide as  the
    Transaction does not give raise to competition concerns under any plausible geographic market definition considered, the narrowest being the
    EEA.

2 Industrial heating products

37) In the industrial heating products segment the Parties overlap in production of 1)  industrial  burners,  2)  valves,  3)  electronic  board
    controls and 4) industrial burner systems.[40]

1 Industrial burners

1 Relevant product market definition

    The Notifying Party's view

38) According to the Notifying Party, industrial burners could be segmented according to several criteria – by temperature, by technology and by
    application.

39) In relation to the segmentation by temperature, there are three types of burners that could be differentiated according to  the  temperature
    level. Low-temperature burners are burners that can generate heat below 300 C. Medium-temperature burners are burners that can generate heat
    between 300 C and 900 C. High-temperature burners are burners that can generate heat above 900 C.[41] The Notifying Party claims  that  such
    distinction is not justified as suppliers usually are able to configure a burner system that can be used in a  broad  range  of  temperature
    applications.[42]

40) The Notifying Party submits that a distinction by technology is not justified either as industrial burners of different  technologies  could
    be used by the same industries. Moreover, sometimes it is very difficult to distinguish between different burner technologies.[43]

41) The Notifying Party further submits that a distinction by application is not justified as burners of a similar  technology  and  temperature
    level could be used in various industries.[44]

    Results of the market investigation and Commission's assessment

42) The market investigation results suggest that customers do not see different temperature burners  as  substitutable  with  each  other.  The
    majority of customers responding to the market investigation indicated that they would not be able to interchangeably use  low,  medium  and
    high temperature burners.[45] However, the market investigation results indicated that  in  case  of  increase  in  demand  for  a  specific
    temperature burner (low, medium or high), the suppliers would be able to switch their production to  that  temperature  burner.  The  market
    investigation results in addition indicated that the ability to switch to a different temperature burner also depends on the  supplier.  For
    example, it would be easier to switch for suppliers that already produce industrial burners for all temperature levels, whereas it would  be
    more difficult to switch for other suppliers.[46]

43) Industrial burners can also be segmented by technology. These different technologies have been developed over time  to  address  a  specific
    application, for example, in the most efficient or the most eco-friendly manner. The four most common technologies are (i) direct heat; (ii)
    indirect air-to-air; (iii) steam-based; and (iv) radiant heat.

44) The market investigation results indicated that suppliers use different  types  of  industrial  burner  technology  in  their  manufacturing
    facility.[47] In addition, customers stated that suppliers from whom they source industrial burners are able to  offer  burners  of  various
    types of industrial technology.[48]

45) Another possible way of segmenting the market for industrial burners is by end-use application. As described above, industrial  burners  are
    used in a variety of applications, including in metallurgy, food, oil and gas, chemical, textile, automotive and waste industries.

46) The market investigation results did not indicate that there is a specific industry that requires a particular  type  of  industrial  burner
    that is only used for that industry. Suppliers that responded to the market investigation indicated that they are able to produce industrial
    burners for several industries – metallurgy, food, oil and gas, chemicals, textile, automotive and  waste.[49]  However,  several  customers
    indicated that the manufacturing of industrial burners for chemicals might require special know-how.[50]

47) As the Transaction does not raise doubts as to its compatibility with the internal market under any plausible product market definition, the
    exact product market definition in relation to industrial burners can be left open.

2 Relevant geographic market definition

    The Notifying Party's view

48) According to the Notifying Party the geographic scope for the sale of all types of industrial burners is at least EEA-wide and possibly even
    global.[51] Concerning the demand side, the Notifying Party claims that some large OEM source industrial burners worldwide. In addition,  as
    industrial burners are homogenous products, customers can source burners from any EEA country. Concerning the supply side, many of the  main
    industrial burner suppliers compete worldwide and there is nothing that prevents  suppliers  from  competing  in  a  particular  region.  In
    addition, transportation costs are limited.[52]

    Results of the market investigation and Commission's assessment

49) The market investigation results indicate that the majority of suppliers sell their industrial burners worldwide.[53] Half of the  customers
    responding to the market investigation stated that they source their burners worldwide and half of the customers  indicated  that  they  buy
    their burners at the EEA level.[54]

50) In the light of the results of the market investigation, the Commission finds that the scope of  the  geographic  market(s)  for  industrial
    burners is at least EEA-wide. For the purpose of the assessment of the Transaction it can be left open whether the market(s) could  also  be
    wider than the EEA given that the Transaction does not raise serious doubts as to its compatibility  with  the  internal  market  under  any
    plausible geographic market definition, the narrowest being EEA-wide.

2 Industrial combustion components and integrated burners

1 Relevant product market definition

51) In addition to industrial burners, the Parties sell industrial combustion components: industrial combustion valves (valves)  and  electronic
    control boards (controls). These components are sold on a standalone basis or as integrated industrial burner systems  (burner,  valves  and
    controls). Based on this the market could be segmented into – a) valves, b) electronic control boards and c) integrated burner systems.

    a) Valves

    The Notifying Party's view

52) According to the Notifying Party, industrial combustion valves are components that direct or channel the flow of fuel and heat  by  opening,
    closing, or partially obstructing the piping within a fuel control line. Valves  could  be  differentiated  further  in  relation  to  their
    technology (valve could be opened or shut electro-mechanically or electro-pneumatically), the type of fuel they are using (oil valves or gas
    valves), the fuel inlet pressure (low gas pressure or high pressure) or the function of the valves  (safety  shut  valves  or  flow  control
    valves).

53) The Notifying Party submits that the relevant product market should be a market for all types of valves for industrial burners.[55]

    The Commission's assessment

54) As the Transaction does not raise serious doubts as to its compatibility with the  internal  market  under  any  product  market  definition
    considered the exact product market definition in relation to valves can be left open.

    b) Electronic control boards

    The Notifying Party's view

55) According to the Notifying Party, electronic control boards are devices to safely start, stop, control, regulate, direct  and  moderate  the
    flow of fuel and in some cases air, within the burner. The electronic control boards could be differentiated based  on  different  safeguard
    devices they are designed for. There are board controls for leak detection, for pilot start-up, for continuous  or  intermittent  operation,
    for flame sensing. In relation to flame sensing, control boards could be UV-scanner or flamerod.[56]

56) The Notifying Party submits that the market should comprise the sale/supply of all types of electronic control  boards  used  in  industrial
    burners and it should not be further segmented.[57]

    The results of the market investigation and the Commission's assessment

57) During the market investigation the Commission identified a specific  electronic  control  board,  namely  the  Burner  Control  Unit  (BCU)
    manufactured by Elster. Customers and competitors responding to the market investigation indicated that the BCU produced by  Elster  is  not
    substitutable with other conventional electronic control boards. In comparison with a conventional electronic control board the  application
    of a BCU is equipped with the Profibus system which enables a  significant  reduction  of  the  installation  cost  of  the  burner  system.
    Additionally, Elster’s BCU performs flame control and provides switchover to an external temperature monitoring system in the case  of  very
    high furnace wall temperatures (high-temperature bypass of the flame signal at furnace temperatures above 750°C).  These  singular  features
    are neither separately nor combined available on any other burner control device for high-temperature burners.[58]

58) 90% of BCUs are sold for integration with high temperature industrial burners. HON does not manufacture and sell electronic  control  boards
    that are comparable with Elster's BCU.

59) As the Transaction does not raise serious doubts as to its compatibility with  the  internal  market  under  any  plausible  product  market
    definition, the exact product market definition in relation to electronic control boards can be left open.

    c) Integrated burner systems

    The Notifying Party's view

60) The Parties sell valves and controls assembled into burners as integrated burner systems (burner, valves and controls) to OEM  customers  in
    the auto, food, textile, printing or paper industries and to end-user manufacturing companies. Due to an existing demand from the customers'
    side the Notifying Party consider that industrial burner systems should constitute a separate product market.[59]

    The Commission's assessment

61) As the Transaction does not raise serious doubts as to its compatibility with the  internal  market  under  any  product  market  definition
    considered, the exact product market definition for integrated burner systems with or without segmentation by end-application  can  be  left
    open.

2 Relevant geographic market definition

    The Notifying Party's view

62) The Notifying Party claims that the geographic scope of the markets for industrial combustion products and integrated burner systems  is  at
    least EEA-wide or possibly even global. The main combustion components suppliers are global players and compete across the globe.  Transport
    is a minor cost for the above mentioned products. Therefore customers tend to source  their  productions  in  the  whole  EEA  and  probably
    wider.[60]

    The Commission's assessment

63) In the light of the results of the market investigation, the Commission  finds  that  the  scope  of  the  geographic  markets  for  valves,
    electronic control boards and integrated burner systems is at least EEA-wide. For the purpose of the assessment of the Transaction it can be
    left open whether the markets could also be wider than the EEA given  that  the  Transaction  does  not  raise  serious  doubts  as  to  its
    compatibility with the internal market under any plausible geographic market definition, the narrowest being EEA-wide.

3 Gas up/mid-stream products

64) In the gas up/mid-stream the Transaction gives rise to a number of horizontally affected markets with regard to 1) gas meters, 2)  gas  flow
    computers, 3) electronic volume correctors, 4) gas chromatographs and 5) gas stations.

1 Relevant product market definition

1 Gas meters

65) Gas meters are used to measure the volume and flow of gas as it is pumped through the pipelines. Gas meters determine how much gas is  being
    generated and/or transferred in different stages of the gas distribution chain. Each gas meter used in the  up/mid-stream  gas  industry  is
    designed to measure the mass or volumetric flow rate of gas. Gas meters measure a defined volume regardless of the pressurized  quantity  or
    quality of the gas flowing through the meter.

66) Gas meters can be used for  two  categories  of  applications:  fiscal  applications  (also  commonly  referred  to  as  “custody  transfer”
    applications); and non-fiscal applications. "Fiscal" or "custody transfer" refers to the measurement of the volume and flow of gas as it  is
    pumped through pipes and transferred from one owner to another. The figures recorded by fiscal meters are used for billing purposes and thus
    require a high level of accuracy concerning the volume of gas transferred. "Non-fiscal" is negatively defined and refers to meters that  are
    not certified for fiscal applications; therefore non-fiscal meters cannot be used for accounting/billing purposes.

67) Furthermore, even though all gas meters have the same function, which is to measure/report the volume of gas, they  may  rely  on  different
    technologies to do so. There are many available technologies for metering purposes (such as rotary gas meters, Coriolis gas meters,  orifice
    meters) but the Parties' activities overlap only with regard to turbine gas meters and ultrasonic gas meters.

1 Segmentation by application

    The Notifying Party's view

68) The Notifying Party claims that the product market can be segmented in markets by application and that it is  appropriate  to  consider  gas
    meters for fiscal application and gas meters for non-fiscal applications as part of separate relevant product markets.

69) The Notifying Party claims that this is the case because a non-fiscal meter is not certified for fiscal applications and therefore cannot be
    sold for such applications unless the manufacturer obtains the required certification.[61]

    The results of the market investigation and the Commission's competitive assessment

70) The Commission considers that it is appropriate to segment the product market by application and that gas meters for fiscal applications and
    gas meters for non-fiscal application are part of separate product markets.

71) First, gas meters for fiscal applications need to be certified by independent public bodies, which is not the case for gas meters  for  non-
    fiscal applications. The main certification requirement is for the meter to comply with the Measuring Instruments Directive[62] (“MID”). The
    certification process generally takes between 6 and 12 months and its cost varies depending on whether the certification is  sought  for  an
    existing product line or for a new product line. Obtaining certification for a new generation of an established product line generally costs
    below EUR 100 000. Obtaining a certification for a completely new product generally costs approximately EUR 500 000 to EUR 1 000 000.

72) Second, the market investigation results indicated that gas meters for fiscal applications are not substitutable  by  gas  meters  for  non-
    fiscal applications. The vast majority of customers responding to the market investigation results indicated that gas meters for  non-fiscal
    applications cannot be used in fiscal applications.[63]

73) Third, the vast majority of customers responding to the market investigation indicated that gas  meters  for  fiscal  applications  and  gas
    meters for non-fiscal applications are not comparable in terms of price and in terms of reliability.[64] The  market  investigation  results
    indicated that gas meters for non-fiscal applications are on average 20% cheaper than gas meters for fiscal applications.[65]

74) Finally, the market investigation results indicated that, notwithstanding the fact that turbine meters for fiscal  application  and  turbine
    meters for non-fiscal applications are broadly comparable in terms of general product characteristics,[66]  the  lack  of  certification  of
    turbine meters for non-fiscal applications is a clear differentiating factor between the two products.[67]

75) For the reasons above, the Commission concludes that separate relevant product markets exist for gas meters according to  application,  that
    is for fiscal and non-fiscal applications.

2 Segmentation by technology

    The Notifying Party's view

76) The Notifying Party states that it is inappropriate to further segment the product market by technology. According to  the  Notifying  Party
    this is because whilst some gas metering types/technologies may be better suited for certain applications or  functions,  there  is  a  high
    degree of substitutability at the demand level between the various gas metering technologies.

77) With particular reference to turbine meters and ultrasonic meters, the Notifying Party claims that both technologies can  be,  and  in  fact
    frequently are, used for the same higher flow rate / higher pressure applications and both are used for fiscal applications given their high
    accuracy. Both technologies can also be used for non-fiscal applications.[68]

    The results of the market investigation and the Commission's assessment

78) Contrary to the Notifying Party's claims, the Commission considers that a segmentation of the product market by technology is justified  and
    that turbine gas meters and ultrasonic gas meters (the only technologies where there is an overlap between the activities  of  the  Parties)
    are part of two distinct relevant product markets.[69] This is because of both technical and economic considerations.

79) As to the technical substitutability, the majority of customers responding to the market investigation results indicated  that  turbine  gas
    meters and ultrasonic gas meters cannot be used interchangeably in the same applications.[70] This is because each of the  two  technologies
    is better suited to serve applications for which the other technology has a distinct disadvantage. While ultrasonic gas meters are generally
    used in the upstream segment with higher pressure, higher capacity and bigger pipeline diameters, turbine gas meters  are  rather  used  for
    lower pressure and lower capacity.[71] Moreover, the very nature of the ultrasonic gas meters renders it not suitable to be installed  close
    to a pressure regulator as the frequencies emitted by the regulator can interfere with the ultrasonic gas meter.[72]

80) The lack of technical substitutability between turbine gas meters and ultrasonic gas meters further follows from  the  fact  that  customers
    typically replace an existing turbine meter with a new turbine meter rather than with an ultrasonic gas meters. A customer responding to the
    market investigation indicated that when replacing a gas meter they usually stick to the same technology.[73]

81) The fact that customers tend to replace turbine meters with a new turbine meter can be explained by technical reasons. Ultrasonic gas meters
    need access to a power supply and therefore when replacing an existing turbine with an ultrasonic gas meter some electrical adaptations must
    be performed. Replacing a turbine meter with an ultrasonic gas meter may require additional engineering work on the whole  installation,  as
    stated by one customer.[74]

82) In addition to the above, competitors to the Parties indicated that in any event replacing a turbine meter  with  an  ultrasonic  gas  meter
    requires some significant adaptations of the metering station. In fact, "turbine meters have shorter inlet  pipes  (4dn  typically)  whereas
    ultrasonic meters have longer inlet pipes (10dn)" and to accommodate this difference the piping and the layout of the gas station  generally
    need to be rearranged.[75]

83) Therefore, the replacement of turbine gas meter with an ultrasonic gas meter generally does not occur and in the limited number of occasions
    it is generally done by larger customers active in gas transportation with large metering stations.[76]

84) In light of the above, the Commission takes the view that from a demand side perspective are turbine gas meters and  ultrasonic  gas  meters
    hardly substitutable.

85) As to the economic substitutability between turbine meters and ultrasonic gas  meters,  the  market  investigation  results  indicated  that
    purchase price and cost of ownership of a turbine meter and of an ultrasonic gas meter  are  not  comparable.  According  to  the  Notifying
    Party's submission, an ultrasonic gas meter is significantly more expensive than a turbine gas meter both in terms of purchase price and  in
    terms of total cost of ownership, as shown in the table below.

|Technology                              |Purchase price (in EURO)                       |Estimated ownership cost (10y)   |
|                                        |                                               |(in EURO)                        |
|Turbine                                 |[…]                                            |[…]                              |
|Ultrasonic                              |[…]                                            |[…]                              |

            Table 1: Source: Notifying Party's submission and Commission's market investigation.

86) The vast majority of customers responding to the market investigation results also indicated that ultrasonic gas  meters  are  significantly
    more expensive than turbine gas meters (in terms of purchase price) and indicated the  average  price  difference  to  be  between  20%  and
    40%.[77] As to the total cost of ownership, a competitor responding to the market investigation indicated  the  price  difference  might  be
    smaller but still significant.[78] According to the same competitor responding to the market investigation, aside  from  the  difference  in
    purchase price, this difference in total cost of ownership is mainly due to the fact that ultrasonic  gas  meters  need  recalibration  more
    frequently.[79]

87) Finally, the tender documents submitted by the Parties for both  HON  and  Elster  also  suggest  that  there  is  a  lack  of  demand  side
    substitutability. The tender documents show that customers always specify the metering technology and that for some projects turbine  meters
    and ultrasonic gas meters are sourced together. A competitor explained that using the two technologies in the same installation  allows  the
    end customer to profit from the specificity of each of them to get a more precise measurement. This tender practice supports the  view  that
    turbine meters and ultrasonic gas meters are perceived as complementary rather than substitutable products.

88) From a supply side perspective, the market investigation results also gave indications that turbine meters and ultrasonic gas meters are not
    substitutable. The vast majority of competitors responding to  the  market  investigation  indicated  that  switching  production  from  one
    technology to the other is technically complex, disruptive to the business and requires a significant time.[80]

89) On the basis of the results of the market investigation, the Commission concludes that the product market for gas meters should be segmented
    according to the metering technology, and that turbine and ultrasonic technology form part of separate relevant product markets.

3 Conclusion

90) In view of the above, the Commission considers that the product market for gas meters should be segmented by application  (fiscal  and  non-
    fiscal) and by metering technology (turbine and ultrasonic).

2 Gas flow Computers

91) Gas flow computers are electronic computers which implement algorithms using signals received from flow meters,  temperature,  pressure  and
    density transmitters to which they are connected. Gas flow computers are used for custody or fiscal transfer, and they  also  audit  changes
    that have been made to any of the measurement parameters.

    The Notifying Party's view

92) The Notifying Party claims that gas flow computers constitute a distinct  product  market  and  that  this  market  should  not  be  further
    segmented. At the demand level, customers can easily switch from one gas flow computer  to  another  given  the  standards  present  in  the
    industry. As gas flow computers need to be connected with various metering tools (e.g., gas chromatograph, gas meters, etc.), standards have
    been imposed so as to allow the tools to be compatible with gas flow computers.

    The results of the market investigation and the Commission's assessment

93) The market investigation results indicated that gas flow computers perform a specific task that is not  performed  by  any  other  piece  of
    equipment.[81] Therefore, the Commission considers that gas flow computers constitute a separate product market.

94) Gas flow computers communicate with other electronic devices used by customers using a "communication protocol" which is the "language" used
    by the device. Some of these communication protocols, such as Modbus, IEC1107, DLMS COSEM, FTP, or IEC 60870-5-104, are commonly used in the
    industry whereas others have a more limited sphere of application as they are requested only by customers or customers in certain geographic
    areas. One of these communication protocols is the "DSFG" (Digitale Schnittstelle für Gasmessgeräte) communication  protocol  which  is  the
    industry standard data exchange for metering equipment only in German speaking countries.

95) The market investigation results indicated that in the German speaking part of the  EEA  and  in  particular  in  Germany  and  Austria  all
    customers ask for gas flow computers (and other devices as will be discussed below) to implement the DSFG communication protocol and, albeit
    this not being a legal requirement, do not accept gas flow computers not implementing such protocol.

96) The Notifying Party claims that it is not appropriate to consider DFSG compliant gas flow computers as a separate product  market.  Contrary
    to the Notifying Party's submission, the Commission considers that DFSG gas flow computers constitute a separate  product  market.  This  is
    mainly because of a lack of demand side substitutability. All customers requiring DSFG  products  responding  to  the  market  investigation
    results indicated that, for their applications requiring DSFG compliant gas flow computers, they only accept DSFG  compliant  equipment  and
    are not prepared and willing to waive this requirement.[82]

97) From a supply side perspective, competitors replying to the market investigation indicated that  implementing  the  DSFG  protocol  into  an
    existing gas flow computer does not entail only a firmware change (from the  existing  communication  protocol  to  DSFG)  but  rather  also
    requires hardware modification.[83] Also, producers of DSFG compliant gas flow computers as well as other DSFG compliant equipment indicated
    that developing the software itself is a difficult task and entails significant cost and time (up to 9 months).[84]

98) For the above reasons, the Commission finds that DSFG compliant gas flow computers constitute a separate relevant  product  market  that  is
    distinct from any product market for gas flow computers operating on other protocol.

3 Gas chromatographs

99) Gas chromatographs are analytical instruments that measure the content of various components in a sample. The sample solution injected  into
    the instrument enters a gas stream which transports the sample into a separation tube known as the ‘column’.[85] The various components  are
    separated inside the column. The detector measures the quantity of the components that exit the column. To measure a sample with an  unknown
    concentration, a standard sample with known concentration is  injected  into  the  instrument.  The  standard  sample  peak  retention  time
    (appearance time) and area are compared to the test sample to calculate the concentration. Gas chromatographs perform a versatile analytical
    technique that separates a sample gas stream into its individual components for measurement purposes.

    The Notifying Party's view

100) The Notifying Party claims that gas chromatographs constitute a distinct  product  market  and  that  this  market  should  not  be  further
    segmented as the products used throughout the industry perform the same functions and are technologically similar. Moreover,  suppliers  can
    easily supply the various gas chromatographs that customers may require. Further, the Notifying Party claims that it is not  appropriate  to
    consider DFSG compliant gas chromatographs as a separate product market as it is easily replicable by any supplier that does not  yet  offer
    DSFG compliant gas chromatographs.

    The results of the market investigation and the Commission's assessment

101) The market investigation results support the view that gas chromatographs constitute  a  separate  product  market.[86]  As  for  all  other
    electronic equipment in the metering sector, gas chromatographs need a communication protocol to communicate with other  equipment  and  the
    Commission finds that DSFG compliant gas chromatographs constitute a separate product market. This distinction is  justified  for  the  same
    demand and supply side considerations explained above for DSFG compliant gas flow computers.

4 Electronic Volume Correctors

102) Electronic volume correctors ("EVC") are devices used for the calculation of the quantity  of  gas  via  the  measurement  of  pressure  and
    temperature or density. They take this input from flow meters, pressure and temperature transmitters to calculate the standard  volume  for,
    inter alia, custody transfer applications.

    The Notifying Party's view

103) The Notifying Party claims that EVC constitute a distinct product market and that this market should  not  be  further  segmented.  This  is
    because all available electronic volume correctors perform the same function. There is not one type  of  electronic  volume  corrector  that
    performs a specific function or relies on a specific technology in such a way that it would form on its own a separate product market.

    The results of the market investigation and the Commission's assessment

104) The market investigation results indicated that it is plausible to consider that EVC constitute a  distinct  relevant  product  market.  The
    majority of customers responding to the market investigation in fact indicated that the tasks carried out by EVC cannot be  carried  out  by
    another piece of equipment.[87] For example, a customer indicated that "Volume correctors are drafted for the special  application.  Only  a
    volume corrector can do that" and another customer indicated that "there is no other equipment to replace electronic volume correctors".[88]

105) The market investigation results also indicated that likely there are no technical differences between the  volume  correctors  which  could
    justify a segmentation of that product market according to specific applications served. According to one respondent "The main  function  of
    volume correctors is the calculation of corrected volume and energy based on uncorrected  volume  from  meter,  gas  quality,  pressure  and
    temperature. Most of the volume converters fulfil this function".[89]

106) As explained above for gas flow computers, also EVCs need a communication protocol to communicate  with  other  devices.  As  for  gas  flow
    computers, as well as for all electronic devices used in the metering space, EVC can rely on  different  communication  protocols.  However,
    customers in the German speaking area request that the EVC they procure operates by the DSFG protocol.

107) Contrary to the Notifying Party claims, the  market  investigation  results  suggest  that  DSFG  compliant  EVC  should  be  considered  as
    constituting a separate product market. As explained above in relation to DSFG compliant gas flow computer, there  is  neither  demand  side
    substitutability nor supply side substitutability.[90]

108) For the reasons above, the Commission takes the view that it is plausible that DSFG compliant EVC is  a  separate  product  market  that  is
    distinct from any market for EVC on any other protocol. However, the exact product market definition with regard to EVC can be left open  as
    the Transaction does not raise serious doubts as to its compatibility with the internal market even under  the  narrowest  plausible  market
    definition (DSFG compliant EVC).

5 Gas Stations

109) Gas stations are control stations for regulating the delivery and transportation of compressed natural gas, fuels and  biogas.  As  pressure
    regulating stations with safety features they ensure reliable gas control and supply in domestic and industrial environments.

110) A gas station essentially consists of metal pipes put together with a number of tools integrated in them. Those tools include  flow  meters,
    regulators, gas flow computers, etc. The gas goes through the pipelines and the metering tools measure  the  flow/pressure  and  report  the
    data. Gas stations can either be assembled by the end-customers themselves, by so-called station builders or by companies like  the  Parties
    who oversee the assembling process and outsource the services that they cannot provide themselves (e.g., the assembly of pipelines).

    The Notifying Party's view

111) The Notifying Party claims that gas stations constitute a separate product market and that this market  should  not  be  further  segmented.
    According to the Notifying Party this is for both supply and demand side considerations: from a supply-side perspective, the Notifying Party
    claims that there is a high degree of substitutability given the great variety of manufacturers who can assemble these gas stations.  As  to
    the demand side substitutability, the Notifying Party claims that while each station is designed  in  a  way  that  meets  the  end-customer
    requirements, each gas station operates in the same way, relies on the same underlying principle, and fulfils the same function.

    The results of the market investigation and the Commission's assessment

112) The market investigation results indicated that it is plausible to consider that gas stations constitute  a  distinct  product  market.  All
    customers responding to the market investigation in fact confirmed that the tasks performed by gas stations cannot be performed by any other
    piece of equipment.[91]

113) The market investigation results also suggest that the product market should not be further segmented. The vast majority of  respondents  to
    the market investigation indicated that gas stations are generally suitable for all type of applications and that they are highly customised
    products made to comply with specific customer requirements.[92]

114) For the above reasons, the Commission takes the view that gas stations constitute a separate relevant product market.

2 Relevant geographic market definitions

    The Notifying Party's view

115) For all product markets discussed above – gas meters, gas flow computers, gas chromatographs, electronic volume correctors and gas  stations
    –, the Notifying Party claims that they should be regarded as being at least EEA wide in scope. According to the Notifying Party,  customers
    tend to source at an EEA level. There are no barriers that prevent metering products[93] manufacturers from supplying across the various EEA
    countries. Moreover, the customers are large, sophisticated players that can source at least EEA-wide. Furthermore,  metering  products  all
    need to be approved under the European Measuring Instrument Directive (2004/22/EC; "MID"), which confirms the harmonization on  an  EEA-wide
    level. This means that all metering products which receive an MID approval may be used in all countries across the EEA.

    The results of the market investigation and the Commission's assessment

116) The market investigation results support the view that the geographic scope of the market  is  EEA-wide.  The  vast  majority  of  customers
    responding to the marker investigation indicated that they currently source metering products used in the EEA inside the EEA.[94] Also,  the
    vast majority of customers indicated that they would not look for suppliers in different  geographic  areas  in  response  to  a  small  but
    significant and non-transitory increase in price.[95]

117) Some customers have also indicated that the quality of these products significantly changes in geographic areas  other  than  the  EEA.  For
    instance, a customer responding to the market investigation results indicated that "We source our  gas  meters  within  the  European  union
    because the quality of meters elsewhere cannot be accepted by our customers."[96] Therefore, the conditions of competition are  unlikely  to
    be homogenous at a worldwide level.

118) In addition to the above, all metering products sold in the EEA have to comply with the MID which imposes  compliance  to  strict  technical
    standards. All metering products certified to be MID compliant can be sold in all Member States. In terms of  design,  compliance  with  MID
    entails that some metering products are specifically designed for the EEA market.

119) In view of the results of the market investigation, the Commission finds that all relevant  plausible  markets  for  gas  meters,  gas  flow
    computers, gas chromatographs, EVC and gas stations are EEA wide in scope.

       Competitive assessment

1 Introduction

120) Under Articles 2(2) and (3) of the Merger Regulation, the Commission must  assess  whether  a  proposed  concentration  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.

121) As regards the assessment of horizontal overlaps, the Commission guidelines on the  assessment  of  horizontal  mergers  under  the  Council
    Regulation on the control of concentrations between undertakings (the “Horizontal Merger Guidelines”) distinguish between two main  ways  in
    which mergers between actual or potential competitors on the same relevant market may significantly impede effective competition, namely non-
    coordinated and coordinated effects. Non-coordinated effects  may  significantly  impede  effective  competition  by  eliminating  important
    competitive constraints on one or more firms, which consequently would  have  increased  market  power,  without  resorting  to  coordinated
    behaviour. In that regard, the Horizontal Merger Guidelines consider not only the direct loss of competition between the merging firms,  but
    also the reduction in competitive pressure on non-merging firms in the same market that could be brought about by the merger.

122) The Horizontal Merger Guidelines list a number of factors which may influence whether or not significant non-coordinated effects are  likely
    to result from a merger, such as the large market shares of the merging firms, the fact that the merging firms are  close  competitors,  the
    limited possibilities for customers to switch suppliers, or the fact that the merger would eliminate an important competitive force. Not all
    of these factors indicated in the Horizontal Merger Guidelines as relevant to the analysis of non-coordinated effects need to be present  to
    make significant non-coordinated effects likely. Also, the list of factors is not exhaustive.

123) As regards the assessment of vertical relationships, the Commission guidelines  on  the  assessment  of  non-horizontal  mergers  under  the
    Council Regulation on the control of concentrations between undertakings (the “Non-Horizontal Merger Guidelines”)  distinguish  between  two
    main ways in which mergers between actual or potential competitors on the a vertically related  relevant  market  may  significantly  impede
    effective competition, namely through input or customer foreclosure.

2 Residential heating products

1 Horizontal overlaps

124) The competitive conditions on the markets for gas valves, electronic boards and gas control  systems  are  similar.[97]  Therefore,  in  the
    following they will be assessed in one and the same section.

    Market shares

125) On the market for gas valves and its possible segmentations the Parties' and their main competitors' market shares are provided in  table  2
    below. The Parties' combined market share is [40-50]% in the overall market for gas valves and [40-50]% in the market for HE gas valves. The
    Parties' main competitor SIT has a market share of around [40-50]% in the overall market for gas valves and [40-50]% in the  market  for  HE
    gas valves. If the geographic scope of the possible markets were to be worldwide in scope, the Parties' market  shares  would  be  lower  as
    their activities focus mainly on the EEA.[98] Regarding SE gas valves and electronically controlled gas valves, the Parties'  activities  do
    not overlap as Elster does not produce SE gas valves and HON does not produce electronically controlled gas valves.

|EEA                       |Gas valves              |HE gas valves           |
|HON                       |[30-40]%                |[30-40]%                |
|Elster                    |[5-10]%                 |[10-20]%                |
|Combined                  |[40-50]%                |[40-50]%                |
|SIT                       |[40-50]%                |[40-50]%                |
|B&P                       |[5-10]%                 |[0-5]%                  |
|Siemens                   |[0-5]%                  |[5-10]%                 |
|Others                    |[5-10]%                 |[0-5]%                  |

                 Table 2: Source: Form CO and Commission's market investigation.

126) On the market for electronic boards and its possible segmentations, the Parties' combined market share is [30-40]%  in  the  overall  market
    for electronic boards and [30-40]% in the plausible market for electronic boards for HE boiler  systems.  As  Elster  does  not  manufacture
    electronic boards for SE boiler systems, the Parties' activities do not overlap in this possible market. The Parties' main  competitors  are
    B&P, SIT and Siemens. Moreover, the Parties claim to compete  with  their  customers'  captive  production  of  electronic  boards.  If  the
    geographic scope of the market were to be worldwide, the Parties' market shares would be lower as  their  activities  focus  mainly  on  the
    EEA.[99]

|EEA                       |Electronic boards       |HE electronic boards    |
|HON                       |[10-20]%                |[10-20]%                |
|Elster                    |[10-20]%                |[20-30]%                |
|Combined                  |[30-40]%                |[30-40]%                |
|B&P                       |[10-20]%                |[10-20]%                |
|SIT                       |[5-10]%                 |[10-20]%                |
|Siemens                   |[5-10]%                 |[5-10]%                 |
|Others                    |[30-40]%                |[30-40]%                |

                 Table 3: Source: Form CO and Commission's market investigation

127) On the market for gas control systems, the Parties' combined market share is [30-40]% in the overall market for  gas  control  systems  (HON
    [10-20]%; Elster [20-30]%). Their main competitors are B&P ([20-30]%) and Siemens ([5-10]%). The Parties' activities do not overlap  on  the
    plausible narrower markets for SE gas control systems and HE gas control systems as HON only produces SE gas control systems and Elster only
    HE gas control systems. If the geographic scope of the possible market(s) for gas control systems were to be worldwide, the Parties'  market
    shares would be lower as their activities focus mainly on the EEA.[100]

|EEA                       |Gas control system      |
|HON                       |[10-20]%                |
|Elster                    |[20-30]%                |
|Combined                  |[30-40]%                |
|B&P                       |[20-30]%                |
|Siemens                   |[5-10]%                 |
|Others                    |[20-30]%                |

                 Table 4: Source: Form CO and Commission's market investigation

128) While in all three markets – gas valves, electronic boards and gas control systems – or its putative segments post-Transaction  the  Parties
    will become the market leader with combined market shares in  the  range  of  [30-40]%  to  [40-50]%,  the  Commission  considers  that  the
    Transaction does not raise serious doubts as to its compatibility with the internal market with respect to each of these markets.

129) First, with regard to gas control systems the market investigation supported the strong presence  of  other  suppliers  such  as  B&P,  SIT,
    Siemens, EBM Papst and Bertelli that were considered as alternative suppliers by the responding customers and that would exert a competitive
    constraint on the merged entity.[101] Furthermore, two responding customers confirmed that they  have  or  had  an  in-house  production  of
    electronic boards and thereby a supply alternative.[102] The reason why some customers prefer developing and producing electronic components
    of a boiler system in-house is that the electronic components define the "user experience" of a boiler  system.  Thus  boiler  manufacturers
    consider the electronic components as a means to differentiate  their  products  from  those  of  competitors.[103]  Finally,  none  of  the
    responding competitors ranked Elster as one of their top four competitors for electronic boards and gas control systems.[104]

130) With regard to electronic boards and gas control systems the market investigation supported the strong presence of other suppliers  such  as
    B&P, SIT, Siemens, EBM Papst and Bertelli that were considered as alternative suppliers by the responding customers.[105]  Furthermore,  two
    customers confirmed that they have or had an in-house production of electronic boards and thereby a supply alternative.[106] The reason  why
    some customers prefer developing and producing electronic components of a boiler system in-house is that the electronic components are  seen
    as the interface to the customer and define the user experience of boiler system. Thus residential boiler system manufacturers consider  the
    electronic components as a means to differentiate their products from those of competitors.[107] Finally, none of the responding competitors
    ranked Elster as one of their top four competitors for electronic boards and gas control systems.[108]

131) Second, the market investigation results indicated that HON and Elster are not close competitors for gas valves, electronic  boards  or  gas
    control systems. Regarding gas valves, a customer indicated that HON is an important supplier while Elster is only  a  "niche"  player.[109]
    Another customer indicated that EBM Papst and SIT  are  the  closest  competitors  to  HON  while  Elster  was  not  mentioned  as  a  close
    competitor.[110] Another customer explained that, while it receives supplies from HON, it delisted Elster as a supplier because it failed to
    comply with the customer's quality standards.[111] Furthermore, the majority of customers that have responded to  the  market  investigation
    ranked HON as a top supplier of gas valves, electronic boards and gas control systems, while  Elster  was  ranked  several  positions  below
    HON.[112]

132) Third, the market investigation results indicated that even though some of the competitors have only a limited market presence  with  market
    shares below 10%, they are able to immediately supply additional quantities and serve switching customers. All responding competitors  state
    that they have a level of spare capacity of 10-20%[113] which they consider sufficient to accommodate additional orders  from  large  boiler
    manufacturers for all three products on short notice.[114] Similarly,  the  majority  of  responding  customers  considered  that  the  main
    suppliers on the market – including the Parties, SIT, Bertelli, EBM Papst and Siemens  –  have  sufficient  spare  capacity  to  accommodate
    additional orders.[115]

133) Fourth, it is likely that the possibility of entry would maintain effective competition in the relevant markets.  The  market  investigation
    results confirmed that EBM Papst entered the market in 2011 and is now an established competitor to  the  Parties.  More  specifically,  the
    market investigation results indicated that EBM Papst entered the markets for gas valves and electronic components through  the  acquisition
    of Karl Dungs GmbH & Co. KG of Germany. Most responding customers and competitors named EBM Papst as a viable supplier / competitor that  is
    ranked at a similar level as HON or Elster.[116] One of the competitors[117] considered EBM Papst even as one of  its  main  rivals  whereas
    several customers of the Parties considered EBM Papst as an alternative supplier for each of the three products.[118]

134) Fifth, the market investigation results indicated that the demand side – i.e. boiler manufacturing –  is  concentrated  and  that  customers
    have some degree of buyer power. The four leading boiler manufacturers in the EEA account for more than […]% of the total  demand.[119]  HON
    achieves about […]% of its turnover with residential heating products with just one customer and HON's top four customers account for almost
    […]% of HON's total turnover with residential heating products. Similarly, Elster's top  four  customers  account  for  more  than  […]%  of
    Elster's total turnover with residential heating products. Thus, the loss of any of these main customers would result in a significant  loss
    of sales that could not easily replaced by sales to another customer and therefore to a loss for HON and Elster.

135) Furthermore, as outlined above (see paragraph 131), the market investigation results indicated that customers can and  do  switch  suppliers
    and customers have a number of alternative suppliers to which they can turn (see paragraphs 128 and 129). This gives customers  the  ability
    in negotiations with suppliers to threaten changing suppliers should certain supply conditions not be met. In fact, the market investigation
    results indicated that customers make use of such countervailing power. All responding competitors reported situations  in  which  customers
    threatened to switch and did so following failed negotiations.[120] As one competitor explained, in  most  cases  customers  do  not  switch
    because they were able to obtain better commercial conditions from their suppliers.[121]

136) In addition, customers can credibly threaten to vertically integrate and start producing components in-house. As  the  market  investigation
    results indicated, some residential boiler system manufacturers already have  their  own  in-house  production  of  electronic  boards.[122]
    Furthermore, the market investigation results indicated that large customers usually have a sufficient boiler output to make the development
    and production of electronic boards profitable.[123] Thus, regarding electronic boards large customers  can  already  credibly  threaten  to
    start in-house production and therefore are in a strong negotiation position. While the market investigation results suggest  that  starting
    in-house production of gas valves – and thereby having the basis for also producing gas control systems – could be more complex and requires
    more resources, customers require and suppliers usually offer gas valves as  well  as  electronic  boards.  Nevertheless,  having  a  strong
    negotiation position with respect to electronic boards vis-à-vis a supplier, improves a customer's negotiation position vis-à-vis that  same
    supplier also with respect to gas valves.[124]

137) For the reasons above, the Commission considers that the Transaction does not  raise  serious  doubts  as  to  its  compatibility  with  the
    internal market in relation to gas valves, electronic boards and gas  control  systems  for  residential  boiler  systems  as  a  result  of
    horizontal effects.

2 Vertical relationships

138) As described above in section IV.2.2.1, gas valves and electronic boards are an input product for gas control  systems.  Thus,  there  is  a
    vertical link between gas valves and electronic boards (upstream) and gas control systems (downstream). However,  the  Commission  considers
    that this vertical link does not give rise to any input or customer foreclosure concerns.

    Risk of input foreclosure

139) The merged entity would not have the ability or incentive to  engage  in  input  foreclosure  and  input  foreclosure  would  not  have  any
    significant detrimental effect on competition.

140) First, while the merged entity would have a relatively high combined market share of [40-50]% for gas valves  and  [30-40]%  for  electronic
    boards, any competing manufacturer of gas control systems would have a sufficient number of alternative supply sources if the merged  entity
    were to decide to stop supplying. SIT, the Parties' largest competitor in gas valves  ([40-50]%)  and  the  second  largest  competitors  in
    electronic boards ([5-10]%) is not vertically integrated and would  be  available  as  an  alternative  supplier  regardless  of  any  input
    foreclosure strategy of the merged entity.

141) Second, all major suppliers of electronic boards are themselves vertically integrated and have their own in-house production of  gas  valves
    and electronic boards and are a supplier of these components to third parties.  Some  of  those  suppliers  do  not  source  gas  valves  or
    electronic boards from the Parties.[125]

142) Third, the Commission considers on the basis of the market investigation results that boiler manufacturers are in a position  to  counter  a
    foreclosure strategy. Most of them already produce gas control systems in-house by combining gas valve  and  electronic  board  into  a  gas
    control system. It is therefore unlikely that an input foreclosure related to manufacturers would have any significant detrimental effect on
    competition.

    Risk of customer foreclosure

143) The merged entity would not have the ability and the incentive to engage in customer foreclosure. The major  manufacturers  of  gas  control
    systems have their own are active suppliers of gas valves and electronic boards and therefore have in-house production of gas valves and gas
    control systems and do not source these components from the Parties. Moreover, the largest part of gas valves and electronic boards are sold
    as stand-alone products to boiler manufacturers that themselves integrate the two components into  their  residential  boiler  systems.[126]
    Thus, manufacturers of gas control systems cannot be considered important customers for suppliers of gas valves  and  electronic  boards  so
    that these would not be foreclosed from access to important customers.

144) For the reasons above, the Commission considers that the Transaction does not  raise  serious  doubts  as  to  its  compatibility  with  the
    internal market in relation to the vertical link between gas valves and electronic boards on the one hand and gas  control  systems  on  the
    other hand.

3 Industrial heating products

1 Horizontal overlaps

1 Industrial burners

145) The Parties' market shares according to the segmentation based on different temperatures are provided in Table 5 (2014) below:

|Market (EEA)                                     |HON                 |Elster          |Combined          |
|All temperature burners                          |[10-20]%            |[5-10]%         |[10-20]%          |
|Low temperature burner                           |[20-30]%            |[10-20]%        |[30-40]%          |
|Mid/high temperature burner                      |[5-10]%             |[0-5]%          |[10-20]%          |
|Mid-temperature burner                           |[10-20]%            |-               |[10-20]%          |
|High-temperature burner                          |[0-5]%              |[5-10]%         |[10-20]%          |

      Table 5: Source: Form CO, para 305, and Commission's market investigation.

146) The EEA-wide markets for industrial burners, the markets for industrial burners for all temperature  levels,  mid/high  temperature  burners
    and high-temperature burners would not constitute affected markets. With regard to mid-temperature burners the activities of the Parties  do
    not overlap.

147) On the market for low temperature burners, the combined market share of the Parties (HON [20-30]%, Elster [10-20]%)  would  amount  to  [30-
    40]%.

148) The Commission considers that a number of other competitors are and remain active on that market. This includes Dungs with  a  market  share
    of [5-10]%, Comthern [0-5]% as well as IBS, Loesche and Saacke which would each have [0-5]% market share.

149) If the market were to be segmented by different types of technology the Parties'  activities  overlap  only  for  direct  and  radiant  heat
    technology industrial burners. The market structure and market shares of the Parties in the EEA are provided in Table 6 below.

|Company name                   |Direct heat                    |Radiant heat                   |
|HO                             |[10-20]%                       |[10-20]%                       |
|Elster                         |[5-10]%                        |[5-10]%                        |
|Combined                       |[20-30]%                       |[10-20]%                       |
|Bloom                          |[5-10]%                        |[0-5]%                         |
|John Zink Hamworthy            |[5-10]%                        |[0-5]%                         |
|Loesche                        |[5-10]%                        |[0-5]%                         |
|IBS                            |[0-5]%                         |[0-5]%                         |
|SBM                            |[0-5]%                         |[20-30]%                       |
|Pyronics (Selas)               |[0-5]%                         |[10-20]%                       |
|Red-Ray (Selas)                |[0-5]%                         |[10-20]%                       |
|Others                         |[50-60]%                       |[20-30]%                       |
|Total                          |100 %                          |100 %                          |

    Table 6: Source: Notifying Party's Reply to RFI of 25.9.2015, and Commission's market investigation.

150) On a market for industrial burners with direct heat the combined market share of the Parties is [20-30]%. There is  one  competitor  with  a
    higher market share than Elster's (John Zink Hamworthy) that therefore is likely to exert a stronger  competitive  constraint  that  Elster.
    Moreover, a number of other competitors are active on this market.

151) On the possible market for industrial burners with radiant heat the combined share of the  Parties  would  be  only  [10-20]%.  Pursuant  to
    paragraph 18 of the Horizontal Merger Guidelines a market share that does not exceed 25% is an indication that a concentration is not liable
    to impede effective competition.

152) If the market were to be segmented by end-application, the Parties' activities  would  overlap  for  industries  of  textile,  paper,  food,
    automotive and printing. The Notifying Party notes that it is not possible to provide precise estimates of its and the Parties' competitors'
    market shares, but it states that the market  structure  with  regard  to  end-applications  and  any  combination  of  end-application  and
    temperature differentiation would be broadly similar compared to the market structure based on temperature range or technology type.[127]

153) With regard to textile the Parties face competition from Ecoflam, Brox, Pyronics, Oxilon and ACE. With regard to  paper,  the  Parties  face
    competition from IBS, Pyronics, Hamworthy and L.Lair. With regard to food the Parties face  competition  from  IBS,  Tecflam,  Pyronics  and
    L.Lair. With regard to automotive the Parties face competition from Atec Combustion, Comtherm, L.Lair, Mader and Nordluft.  With  regard  to
    printing the Parties face competition from IBS, Tecflam, L.Lair and Pyronics.

154) The Commission concludes that the barriers to entry and expansion are low.  The  Commission  services  visited  the  HON  industrial  burner
    manufacturing facility in Vilvoorde, Belgium, on 15 October 2015. During the site visit it was  confirmed  that  setting  up  an  industrial
    burner manufacturing facility does not require significant investment. It was explained  that  not  all  the  industrial  burner  parts  are
    manufactured at the site, but instead they are being purchased from different suppliers based on customers' demands. Therefore a large  part
    of industrial burner manufacturing is assembly work which requires rather limited investment.

155) Furthermore, the majority of customers responding to the market investigation indicated that there are a  number  of  alternative  suppliers
    and that it would be easy to switch to them.[128]

156) Moreover, the market investigation results support the view that the customers have strong buyer power. Industrial burners,  including  low-
    temperature burners, are sourced by industrial OEM customers in the metallurgy, auto, food, textile, printing and  paper  industries.  These
    customers include large global and regional companies such as Andritz, Windmoeller & Hoelscher, and Brueckner.[129]

157) For the reasons above, the Commission considers that the Transaction does not  raise  serious  doubts  as  to  its  compatibility  with  the
    internal market in relation to industrial burners.

2 Industrial combustion components – valves and electronic control boards

158) On the EEA-wide market for industrial burner valves Elster has a  [30-40]%  market  share.  The  Commission  considers  that  the  increment
    resulting from the Transaction would be limited as HON has only a market share of [0-5]%. The combined entity would face competition from  a
    number of other competitors including Dungs with a market share of [20-30]%, Uni Geräte [10-20]% as well as Madas and Siemens each with  [5-
    10]%. There are therefore four other competitors on this market which have a market share that is larger than the increment  resulting  from
    the Transaction. If the market for industrial valves were to be defined more narrowly, the Parties' market share and  competitive  landscape
    would not differ significantly.[130] The Parties have stated that competitors including Dungs, Siemens, Uni Geräte, Madas and Brahma  supply
    all types of valves.

|Market (EEA)                                     |HON                 |Elster          |Combined          |
|Industrial components - valves                   |[0-5]%              |[30-40]%        |[30-40]%          |
|Industrial components – control boards           |[5-10]%             |[20-30]%        |[20-30]%          |

      Table 7: Source: Form CO, para 305, and Commission's market investigation.

159) On the EEA-wide market for industrial burner control boards Elster has a [20-30]% market share. The Commission considers that the  increment
    resulting from the Transaction would be limited as HON has only a market share of [5-10]%. The combined entity would face  competition  from
    Siemens which has a market share that is twice as large as that of HON ([10-20]%). Furthermore, also Dungs is active  on  this  market  ([0-
    5]%). If the market were to defined more narrowly, the Parties' market share and competitive landscape would not differ  significantly.  The
    Parties have stated that competitors including Dungs, Siemens, and Brahma supply all types of control boards. Moreover, in relation  to  BCU
    there is no overlap between the Parties as HON does not produce BCU products.

160) For the reasons above, the Transaction does not raise serious doubts as to its  compatibility  with  the  internal  market  in  relation  to
    industrial burner components markets (valves and control boards).

3 Integrated burner systems

161) On the EEA-wide market for integrated burner systems, the combined market share of the Parties would be only [20-30]% (HON  [5-10]%;  Elster
    [10-20]%). The market is fragmented with a large number of competitors including Dungs ([5-10]%), Saacke  ([0-5]%),  Siemens  ([0-5]%),  Uni
    Geräte ([0-5]%) and other companies including Comtherm, IBS and Loesche. Pursuant to paragraph 18 of  the  Horizontal  Merger  Guidelines  a
    market share that does not exceed 25% is an indication that a concentration is not liable to impede effective competition.

162) Regarding a segmentation by end application, the Parties were not able to provide precise market share information. However, given the  fact
    that industrial burner systems mainly consist of an industrial burner and auxiliary equipment (such as valves and  controls),  there  is  no
    indication that the competitive conditions for the different end-applications are significantly  different  from  the  ones  for  industrial
    burner.[131]

163) For these reasons above, the Transaction does not raise serious doubts as to its compatibility with  the  internal  market  in  relation  to
    integrated burner systems.

2 Vertical relationships

164) During the market investigation one customer raised a concern in relation to BCUs manufactured  by  Elster.  The  complainant  claimed  that
    after the Transaction Elster would stop supplying BCU to the customers that integrate this product into their industrial burner  system.  In
    that respect the BCU is an input into a burner control system.[132]

165) The Commission considers that even if Elster was the only supplier of BCU and therefore had the ability to  foreclose  competing  industrial
    burner manufacturers from access to the BCU as an input product, the combined entity would not have an incentive to stop supplying  BCUs  to
    competing manufacturers of industrial burners.

166) Elster's profit margin on BCU is […]% and amounts to […] EUR. The Parties' profit margin on high-temperature industrial burners is […]%  and
    on average amounts to […] EUR. Therefore, the upstream margin in BCU is higher than the downstream margin for industrial burner  systems  in
    relative as well as in absolute terms. This means that, if Elster stopped supplying a BCU to an industrial burner  competitor  to  foreclose
    him from supplying a downstream customer it would incur a loss of profit that it would not be able to  compensate  even  if  it  gained  the
    downstream customer. Therefore, Elster does not have an incentive to stop supplying BCU to competing industrial burner  manufacturers.  This
    conclusion is reinforced by the fact that on the market for high temperature burners on which there is significant demand for BCUs, HON is a
    rather small player (market share of [0-5]%). It would therefore be difficult for the combined entity to recoup the profit loss upstream.

167) For the reasons above, the Commission considers that it is unlikely  that  the  Transaction  would  lead  to  a  foreclosure  strategy.  The
    Commission therefore concludes that the Transaction does not raise serious doubts as to its compatibility  with  the  internal  market  with
    regard to the vertical relationship between the supply of BCU and the supply of industrial burners.

4 Gas up- / mid-stream products

1 Horizontal assessment

1 Turbine gas meters for fiscal applications

    The Notifying Party's view

168) The Notifying Party claims that the Transaction will not raise any competitive concern on the market for gas meters and any  plausible  sub-
    segment thereof because: (i) the Parties face, and the merged entity will continue to face, competition from a  number  of  strong  players;
    (ii) customers can easily switch suppliers; (iii) there are no capacity constraints in the industry; (iv) customers are generally large  and
    very sophisticated and have significant buyer power; and, finally (v) the market has witnessed entry in the past and entry of new players is
    expected in the future.

169) With regards to the EEA wide market for turbine gas meters for fiscal applications, the Notifying Party claims that  the  structure  of  the
    market is the following:

|Parties and competitors           |Market share                              |
|HON                               |[5-10]%                                   |
|Elster                            |[20-30]%                                  |
|Combined                          |[30-40]%                                  |
|Itron                             |[20-30]%                                  |
|Emerson                           |1-5%                                      |
|GE                                |1-5%                                      |
|Arzamas                           |1-5%                                      |
|Sensus                            |1-5%                                      |
|Omega FMA                         |1-5%                                      |
|Metreg                            |1-5%                                      |
|Vemmtec                           |1-5%                                      |
|Common                            |1-5%                                      |
|FERP-Italy                        |1-5%                                      |
|Stream Measurement                |1-5%                                      |
|Raychem                           |1-5%                                      |
|TOTAL                             |100%                                      |

                 Table 8: Source: Form CO and Commission's market investigation

170) The market reconstruction exercise carried out by the Commission in the course of the market investigation did  not  support  the  Notifying
    Party's claim about the market structure. The presence of a number of players indicated by the Notifying Party  was  not  confirmed  by  the
    market investigation. As a consequence, the Commission considers that the market for turbine gas meters for fiscal applications in  the  EEA
    is significantly more concentrated than depicted by the Notifying Party. The estimated combined market share of the Parties is  also  higher
    than estimated by the Parties. The Commission' market reconstruction indicated the following market structure:

|Parties and competitors         |Market share[133]                      |
|HON                             |[5-10]%                                |
|Elster                          |[30-40]%                               |
|Combined                        |[40-50]%                               |
|Itron                           |[40-50]%                               |
|Vemmtec                         |[0-5]%                                 |
|FMG                             |[0-5]%                                 |
|Common                          |[0-5]%                                 |
|GE                              |[0-5]%                                 |
|TOTAL                           |100.0%                                 |

                 Table 9: Source: Commission's market investigation.

    Removal of an important competitive constraint

171) The Commission considers that the Transaction removes an important competitive constraint on the EEA-wide market for turbine gas meters  for
    fiscal applications.

172) Pre-Transaction only three main competitors are active on this market: HON, Elster and Itron, whereas the other competitors are  smaller  in
    size and do not achieve significant sales in the EEA.

173) The Parties have a high combined market share which exceeds [40-50]%. Apart from the merged entity, there will be only Itron with a  similar
    market share and as such, the Transaction will lead to a duopoly which has about 80-90% of the market.

174) The increment brought about by the Transaction is significant. HON is pre-Transaction the third largest competitor  on  the  market  with  a
    market share of [5-10]%. This market position is almost double in size compared to the remaining competitors on the market.

175) The Commission finds that the smaller players would not be able to impose a significant competitive constraint on the Parties  (and  Itron).
    This finding is supported by the analysis of the win-loss data submitted by the Parties in the course of the investigation. The analysis  of
    this data suggests that the Parties, to the extent that they are able to identify their competitors for a given project, meet Itron and each
    other significantly more often than any other player (in 7 instances out of 9 where competitors were identified)[134].  Also,  the  win-loss
    data provided by the Parties identified competitors other than Itron only in three instances and all in  tenders  which  took  place  before
    2012. In the last three years Elster was able to identify only RMG and Itron as competitors.

176) The market investigation results also indicated that, contrary to  the  Parties'  claim,  customers  have  only  a  limited  possibility  of
    switching suppliers. The majority of customers responding to the market investigation consistently indicated that they  consider  as  viable
    suppliers only Itron and the Parties.[135] Hence, their ability of switching would for a large proportion of respondents be limited to these
    undertakings. In addition, the smaller competitors responding to the market investigation indicated that they face significant  barriers  to
    expansion due to the lack of calibration facilities. This means that for larger tenders they are not able to effectively  compete  with  the
    Parties and Itron, further reducing the customers' ability to switch suppliers.

177) Finally, as explained above,[136] customers have a limited possibility to switch to alternative  suppliers  active  on  the  ultrasonic  gas
    meter market due to the technical and economic difficulties which they would have to incur to do so.

    Closeness of competition

178) The Commission considers that HON and Elster  are  close  competitors  with  regard  to  their  geographic  activity  and  their  production
    facilities.

179) HON and Elster both have manufacturing facilities for turbine gas meters in Germany and they have a  European  wide  presence.  Furthermore,
    the smaller competitors identified in the course of the market investigation results indicated that their geographic reach is limited  to  a
    number of Member States and that they do not compete across the EEA. Also, only few of them target Germany which is an important market  for
    HON as its activity on these markets derives from the past acquisition of RMG, a German company active in the metering sector.

180) Another element of closeness of competition is that both HON and Elster have in-house calibration facilities for their gas meters which  the
    smaller competitors do not have (explained in more detail below).

181) This consideration on closeness is also supported by the market investigation results: the vast majority  of  customers  responding  to  the
    market investigation in fact indicated as suppliers of turbine gas meters for fiscal applications only the Parties and Itron, whereas only a
    marginal number of them indicated other players as possible suppliers.[137]

    Barriers to expansion

182) The Commission considers that there are significant barriers to expansion on the market for turbine gas meters for fiscal applications.

183) The market investigation results indicated that having in-house calibration capabilities is very important for a competitor to  be  able  to
    expand. In this respect the Commission notes that the Parties unlike their  smaller  competitors  own  high  pressure  in-house  calibration
    facilities. As also indicated by the Notifying Party, calibration is a necessary step in the production process of fiscal turbine gas meters
    that must be completed before a meter can be supplied.[138]

184) Calibration means verifying the accuracy of the gas meter which is done by adjusting the accuracy of the meter by comparing the  meter  with
    a reference meter. As far as fiscal applications are concerned, calibration is required for the product in order to be MID-certified. As the
    calibration is a pre-requirement of the MID approval process, calibration has to be performed for each turbine gas meter before  it  can  be
    shipped to the customer.[139]

185) In order to calibrate the meters produced, manufacturers either  have  an  in-house  calibration  facility  or  they  need  to  turn  to  an
    independent provider of calibration services (so called "calibration house"). A calibration facility consists of a  test  rig  with  several
    reference meters (depending on flow range to cover) which is installed in a temperature-controlled environment. There are different types of
    calibration processes depending on whether air (compressed or at atmospheric pressure) or gas is used and on what pressure range  the  meter
    needs to be tested. Depending on these variables, the assets used in these calibration processes differ.

186) The calibration activity can be broadly divided according to the pressure rating achieved. The Notifying Party explained that:

        a. Usage up to 4 bar. A calibration with air at atmospheric pressure is sufficient for these low pressure gas meter;

        b. Usage between 4 and 24 bar. Gas meters can be calibrated with compressed air or gas.

        c. Usage above 24 bar. At pressures above 24 bar, calibration needs to be done with gas.

187) The market investigation results indicated that developing an in-house calibration facility requires a high investment and  time.  According
    to one competitor, developing a calibration facility would cost around EUR 3 to 4  million  for  the  smaller,  lower  pressure  calibration
    facilities and up to EUR 10 million for the high pressure gas calibration facilities. This is also stated by other competitors, for  example
    one competitor indicated that "building and planning high pressure facility is a high investment in high pressure air about 1.5 mil[l]ion  €
    investment. For NG a multiple of that (all depending on size and pressure) time to built 1-2years".[140]

188) As regards the possibility of having the gas meters calibrated by calibration houses, the market investigation results indicated  that  this
    is unpractical and in any event a viable solution only for a limited number of meters. According to a competitors responding to  the  market
    investigation, calibration houses can deal with only a limited number of meters per day and the cost of calibrating each  meter  can  be  as
    high as EUR 1 000 per meter.[141] Also, calibration houses have long lead times, estimated by competitors at around 3 months.[142]

189) The market investigation results indicated that  not  having  in  house  calibration  capabilities,  especially  high  pressure  calibration
    capabilities (that is a pressure rating above 4 bars), is a significant disadvantage  and  that  players  who  do  not  have  such  in-house
    capabilities cannot significantly expand production. One respondent indicated that "Not having a high pressure  facility  in  the  next  few
    years is a complication".[143]

190) Finally, the market investigation results indicated that some smaller competitors have only limited spare capacity and cannot  significantly
    expand production in the coming years.[144]

191) In light of the above, the Commission takes the view that existing smaller players face significant barriers  to  expansion  and  that  they
    will not be able to significantly increase their presence on the market in the coming years.

    Barriers to entry

192) As to entry into this market, the market investigation results indicated that this is unlikely and that therefore  the  merged  will  likely
    not have to face any new and significant competitive force in the future.[145]

193) First, the publically available information regarding the metering sector indicate that the demand of turbine gas is  expected  to  grow  by
    about 3.8% in the period from 2014 to 2019 whereas the expected growth in demand is significantly higher for  other  technologies,  such  as
    ultrasonic gas meters (expected 7.9%).

194) Second, the vast majority of customers responding to the market investigation results indicated that no significant  entry  was  experienced
    in the past 3 years.[146] Competitors responding to the market investigation indicated this  as  well.[147]  In  this  respect  it  must  be
    observed that a company, Metreg, just entered the market having obtained the MID certification for its products in the course  of  2015  but
    had only very limited sales. The Commission however considers that even if Metreg were to significantly expand, it would  not  become  of  a
    size comparable to that of HON and Elster.

195) Third, customers responding to the market investigation also indicated that they do not expect new entry into the market in the  foreseeable
    future.[148] The same was indicated by competitors responding to the market investigation.[149]

196) In light of the above, the Commission takes the view that entry of new players in the market is unlikely, and in any event it would  not  be
    timely and of a sufficient magnitude to defeat the anti-competitive effects of the Transaction.

    Absence of countervailing buyer power

197) Contrary to the Parties' claim, the market investigation results indicated that customers have  only  a  limited  degree  of  countervailing
    buyer power.

198) First, as explained above (see paragraph 176), customers have a limited possibility to switch suppliers: only  Itron  can  be  considered  a
    viable alternative for the customers as the other smaller competitors have limited sales and limited capacity to expand in the future. Also,
    the market investigation results indicated that these players  do  not  have  an  EEA-wide  reach  but,  rather  focus  on  specific  Member
    States.[150]

199) Second, the vast majority of customers responding to the market investigation results indicated that they would not sponsor new  entry  into
    the market to increase their bargaining power. The customers responding to the market investigation  also  indicated  that  they  could  not
    threaten suppliers to stop purchasing other related products from the Parties and thereby leverage their negotiating position.[151]

200) Finally, the market is already very concentrated and will be even more concentrated with only  two  significant  competitors  including  the
    Parties post-Transaction, which limits any buyer power of the customers.

201) Therefore, the Commission takes the view that customers do not have sufficient buyer power to counteract  the  likely  negative  competitive
    effects of the Transaction.

      Conclusion on market for turbine gas meters for fiscal applications

202) For the above reasons, the Commission considers that the Transaction raises serious doubts as to its compatibility with the internal  market
    with regard to the market for turbine gas meters for fiscal applications in EEA as a result of non-coordinated horizontal effects.

2 Turbine gas meters for non-fiscal applications

203) On the EEA-wide market for turbine meters for non-fiscal applications the merged entity will have a combined market share of only  [20-30]%.
    On this market HON has a very limited market share which the Parties estimate at around [0-5]%. The increment resulting from the Transaction
    is therefore rather limited.

204) In addition, customers responding to the market investigation indicated that  they  perceive  that  on  this  market  there  are  sufficient
    alternative suppliers to HON and Elster and that this market is highly fragmented.[152]

205) The market investigation results also indicated that on this market HON and Elster are not particularly close  competitors,[153]  which  can
    also be inferred from the sales figures. Elster is about seven times larger than HON in this market.

206) Finally, the market investigation results indicated that, albeit no significant entry was recorded in the past years, entry on  this  market
    is more likely compared to entry on the market for turbine gas meters for fiscal applications.[154] The Commission considers that  this  may
    also be attributable to the less stringent regulatory requirements applicable to turbine gas meters for non-fiscal applications.

207) For the reasons mentioned above, the Commission considers that the Transaction does not raise serious doubts as to  its  compatibility  with
    the internal market in relation to the market for turbine gas meters for non-fiscal applications. In any event the commitments  proposed  by
    the Notifying Party include the total activity of HON in the turbine gas meter sector and  therefore  also  eliminate  any  overlap  of  the
    Parties' activities on the market for turbine gas meters for non-fiscal applications in the EEA.

3 Ultrasonic gas meters for fiscal applications

208) The market for ultrasonic gas meters for fiscal applications[155] is characterised by a larger number of players compared to the market  for
    turbine gas meters for fiscal applications, as shown in table 10 below. According to the Notifying Party, the structure of this market is as
    follows:
|Parties and competitors         |Market share                    |
|HON                             |[20-30]%                        |
|Elster                          |[10-20]%                        |
|Combined                        |[30-40]%                        |
|Sick                            |[20-30]%                        |
|Emerson Daniel                  |[10-20]%                        |
|FMC Technologies                |[5-10]%                         |
|GE                              |[5-10]%                         |
|Sensus                          |[5-10]%                         |
|Krohne                          |[0-5]%                          |
|Omega FMA                       |[0-5]%                          |
|Others                          |[5-10]%                         |

                 Table 10: Source: Form CO and Commission's market investigation.

209) The Commission notes that the Parties would become, with a combined share of [30-40]%, the largest competitor on this  market.  The  Parties
    face, and the merged entity will continue to face, competition from important players such as Emerson Daniel Sick, GE and Sensus.

210) The Commission also takes into account that customers responding to the market  investigation  indicated  that  on  this  market  there  are
    sufficient alternative suppliers to HON and Elster and that this market is fragmented.[156]

211) The market investigation also indicated that on this market  HON  and  Elster  are  not  particularly  close  competitors:  according  to  a
    significant proportion of the customers responding to the market investigation, the Parties are not each other’s  closest  alternative.[157]
    Also, the majority of customers responding to the market investigation indicated Sick as the closest competitor to HON.[158]

212) Finally, the market investigation results indicated that entry has occurred in the past, albeit no significant entry  was  recorded  in  the
    past years, and that customers on this market expect further entry in the foreseeable future.[159] This may also be triggered by the  higher
    expected growth of the demand of ultrasonic gas meters in the next years.[160]

4 Gas flow computers

    The Notifying Party's view

213) The Notifying Party claims that the EEA market  for  all  gas  flow  computers  (irrespective  of  the  communication  protocol)  is  highly
    competitive and very fragmented and that the Parties have been facing,  and  the  merged  entity  will  continue  to  face,  several  strong
    competitors in this market. The Notifying Party submits that the main competitors on this market are players such as ABB, Emerson and  OMNI.
    According to the Notifying Party, aside from these main players the Parties face competition from other players such as  Krohne,  Fiorentini
    and Thermo Scientific.[161]

    The Commission's assessment

214) On the EEA-wide market for gas flow computers, the Parties do not have a significant market share and face competition  from  at  least  two
    competitors of comparable size as well as a number of other competitors, as shown in the following table:
|Parties and competitors         |Market share                           |
|HON                             |[10-20]%                               |
|Elster                          |[5-10]%                                |
|Combined                        |[20-30]%                               |
|Emerson                         |[20-30]%                               |
|OMNI                            |[20-30]%                               |
|ABB                             |[5-10]%                                |
|Fiorentini                      |[5-10]%                                |
|Krohne                          |[0-5]%                                 |
|Thermo Scientific               |[0-5]%                                 |
|Others                          |[10-20]%                               |
|TOTAL                           |100.0%                                 |

           Table 11: Source: Form CO and Commission's market investigation.

215) The Commission takes the view that on an EEA wide market for all gas flow computers (irrespective of the communication protocol)  sufficient
    competition would remain post Transaction.

216) However, on the market for DSFG compliant gas flow computers the competitive conditions are significantly different as only HON, Elster  and
    Krohne are active on that market.

    Removal of an important competitive constraint

217) The market investigation results indicated that on the market for DFSG compliant gas flow computers the market is already very  concentrated
    with only three companies which are active: HON, Elster and Krohne. All other players indicated that they do not produce gas flow  computers
    incorporating the DSFG communication protocol.[162] The Transaction would reduce the number of competitors from three  to  two  and  thereby
    lead to a further concentration of an already very concentrated market. Post-Transaction there would be only two available suppliers of DSFG
    compliant gas flow computers in the EEA.

218) The Commission considers that the Transaction leads to the removal of an important competitive constraint. Both HON  and  Elster  have  been
    active on the market for several years with well-established brands. The only other competitor Krohne launched its DSFG compatible gas  flow
    computer only in 2015. It therefore still does not have an established track record comparable to the one  of  the  Parties  who  have  been
    active on this market for a significantly longer time.

    Barriers to entry

219) The Commission considers that the barriers to entry are high on the market for DSFG compliant gas flow computers. The  market  investigation
    results indicated that developing a DSFG compliant gas flow computer, and the same is true also for gas chromatographs and EVCs, requires  a
    significant investment in both time and resources. As the market investigation results indicated and  the  Notifying  Party  explained,  the
    development of a DSFG compliant products requires the development of both a specific hardware and of the firmware (i.e. the software)  which
    implements the DSFG protocol.[163]

220) The market investigation indicates that this process requires an  estimated  investment  in  excess  of  EUR  250 000  to  300 000  and  one
    competitor indicated that the investment may be in excess of EUR 500 000.[164] The  required  time  to  develop  a  DSFG  compliant  product
    requires one year for both development and testing of the new product.[165] All these figures refer to the development of a  DSFG  compliant
    product on the basis of an existing non-DSFG compliant gas flow computer. Developing a green field solution of a  DSFG  compliant  gas  flow
    computer would require significantly more investment and  time.  Finally,  the  newly  developed  product  would  have  to  obtain  the  MID
    certification.

221) The Commission takes the view that the required cost and time constitutes a significant barrier to entry. This is  because  the  market  for
    DSFG compliant gas flow computers is small, with HON achieving a turnover of only EUR […] (2014) and Elster less than EUR  […]  (2014).[166]
    In this respect, the investment required to develop a product which can serve this market is in relative terms quite significant  and  there
    is a high likelihood that this will be a major disincentive for suppliers of non DSFG-compliant gas flow computers to enter this market.

222) Finally, the market for DSFG compliant equipment is limited mainly to German and  Austrian  customers,  who  historically  implemented  this
    protocol. Customers from most other Member States do not use this protocol and there is no indication that they will  implement  it  in  the
    future.[167] Therefore, the Commission takes the view that the conditions and size of this market  will  not  change  significantly  in  the
    future.

223) In light of the above, the Commission considers that, also given the size of the market  for  DSFG  compliant  gas  flow  computers,  it  is
    unlikely that new players will enter this market.

    Use of DSFG Gateways

224) The Notifying Party claims that the requirement for a DSFG compliant gas flow computer (and all other gas metering electronic  devices)  can
    be easily overcome by using a so called DSFG Gateway. According to the Parties, a DSFG gateway is a  rather  inexpensive  and  uncomplicated
    piece of equipment which can be externally attached to the gas flow computer which then "translates" the communication protocol used by  the
    gas flow computer into DSFG.

225) According to the Parties, DSFG gateways are widely available on the market as stand-alone  products  and  are  advertised  specifically  for
    converting DSFG communications in gas stations. The Parties also claim that both price, estimated in  EUR  […],  and  the  production  cost,
    estimated in EUR […] per unit, of these devices is limited. According to the Parties, the price of a DSFG gateway is so limited that –  even
    adding it without raising the cost of the gas flow computer to the end customer – still allows manufacturers to extract a significant profit
    margin from each gas flow computer sold. Finally, the Parties claim that DSFG gateways are widely  available  on  the  market  and  indicate
    players such as Tritschler, NZR, Froeschl, ClickWare and Marquis as suppliers.[168]

226) For the reasons set out below, the Commission finds that DSFG Gateways cannot be considered as a viable solution to  overcome  the  lack  of
    DSFG compliance of a gas flow computer.

227) First, the Commission during its market investigation did not identify any supplier of DSFG gateways,  except  for  Elster.  The  Commission
    contacted all alleged suppliers indicated by the Parties. None of the alleged suppliers confirmed that they supply DSFG gateways. Also,  all
    the customers contacted to investigate the issues relating to DSFG[169] indicated  that  they  are  not  aware  of  the  existence  of  such
    solution.[170] The Commission therefore takes the view that, contrary to the Parties' claim, DSFG gateways are not a  widely  available  and
    commonly used solution on the market place.

228) Second, the only manufacturer of DSFG gateways that the Commission was able to identify ceased to manufacture these  products  as  this  was
    not a commercially viable business.[171]

229) Third, customers responding to the market investigation indicated that, even if available, they would likely not accept the use  of  a  DSFG
    gateway for use in those applications requiring a DSFG compliant gas flow computer (or other gas metering electronic equipment).

230) It is also unlikely that the solution of using a DSFG gateway will become more attractive, widely spread and accepted by  customers  in  the
    future. This conclusion is supported by the fact that customers  in  the  oil  and  gas  industry  are  generally  regarded  as  being  very
    conservative.[172] Hence, customers are very cautious when faced with technical solution they are not familiar  with  and  that  potentially
    adds a further layer of complexity (and risk of failure) to the products they intend to purchase.

    The absence of countervailing buyer power

231) First, the vast majority of customers responding to the market investigation results indicated that they would not sponsor  new  entry  into
    the market to increase their bargaining power. The customers responding to the market investigation  also  indicated  that  they  could  not
    threaten suppliers to stop purchasing other related products from the Parties and thereby leverage their negotiating position.[173]

232) Second, the market is already very concentrated and will be even more concentrated with  only  two  significant  competitors  including  the
    Parties post-Transaction, which limits any buyer power of the customers.

233) Therefore, the Commission takes the view that customers do not have sufficient buyer power to counteract  the  likely  negative  competitive
    effects of the Transaction.

    Conclusion on DSFG compliant gas flow computers

234) For the reasons above, the Commission concludes that the Transaction raises serious doubts as to its compatibility with the internal  market
    on the EEA wide market for DSFG compliant gas flow computers.

5 Gas chromatographs

235) On an EEA wide market for gas chromatographs (regardless of the communication protocol), the Transaction would not raise serious  doubts  as
    to its compatibility with the internal market. On that market the Parties have an estimated combined market share of less than 20% and it is
    therefore not considered an affected market.[174]

236) The Commission considers that the competitive  situation  is  significantly  different  on  the  EEA-wide  market  for  DSFG  compliant  gas
    chromatographs.

237) First, the market investigation results indicated that on the market for DFSG compliant gas flow computers only three companies are  active:
    HON, Elster and Marquis. All other companies indicated that they do not produce gas  chromatographs  incorporating  the  DSFG  communication
    protocol.[175] The Transaction would reduce the number of competitors from three to two and thereby lead to a further  concentration  of  an
    already very concentrated market. Post-Transaction there would be only two available suppliers of DSFG compliant gas flow computers  in  the
    EEA. Based on the estimates of a market participant the HON and Elster will have a combined market share of [70-80]%  while  Marquis  has  a
    market share of [20-30]% on that market.[176]

238) Second, as mentioned above for gas flow computers, the  market  investigation  results  indicated  that  developing  a  DSFG  compliant  gas
    chromatograph requires a significant investment in both time and resources. The  development  of  a  DSFG  compliant  product  requires  the
    development of both a specific hardware and a firmware (i.e. the software) which implements the DSFG protocol.[177]

239) The Commission takes the view that the time and cost required to develop a DSFG gas  chromatograph  constitutes  a  significant  barrier  to
    entry. This is because of the limited size of this market for DSFG compliant gas chromatographs. HON achieved turnover of  EUR  […]  in  gas
    chromatographs (regardless of the communication protocol), and only a proportion of that  is  of  DSFG  compliant  gas  chromatographs.[178]
    Elster achieved sales of EUR […] in 2014 and of EUR […] in 2015.[179]

240) This conclusion is also supported by the fact that a supplier of gas chromatographs developed a DSFG  compliant  gas  chromatograph  in  the
    past but had to exit this market because of its very limited size which did not allow it to recoup the cost incurred. In  this  context,  it
    should be noted that the DSFG protocol is constantly being further developed and improved by  the  DVGW  and  therefore  suppliers  of  DSFG
    compliant equipment need to constantly keep their firmware up to date. This entails significant additional and continuous development  costs
    which further decreases the profitability – and therefore attractiveness – of entry into this market.[180]

241) Finally, as explained above (see section V.4.1.4), the market for DSFG compliant equipment is limited in terms of  customers  to  those  who
    historically implemented this protocol, and is particularly limited to German and Austrian customers. Customers from other Member States  do
    not use this protocol and will not implement it in the future. Therefore, the Commission takes the view that the conditions and size of this
    market will not change in the future.

242) In light of the above, the Commission takes the view that it is unlikely that new players will enter this market.

243) For the reasons expressed above, the Commission concludes that the Transaction raises serious  doubts  as  to  its  compatibility  with  the
    internal market on the EEA wide market for DSFG compliant gas chromatographs.

6 Electronic volume correctors

244) On an EEA wide market for EVC (regardless of the communication protocol), the combined market share of the Parties would be  [20-30]%,  with
    a minimal increment of [0-5]% brought about by HON.

245) On this market a number of competitors are active, such as Elgas (estimated market share  [20-30]%),  Logika  (estimated  market  share  [5-
    10]%), Fiorentini (estimated market share [5-10]%), GE (estimated market share [5-10]%), Itron (estimated market share [5-10]%), as well  as
    other smaller competitors.

246) The Commission takes the view that, given the limited sales achieved by HON on this market, the Transaction would not  significantly  change
    its structure.

247) For the reasons above, the Commission considers that the Transaction does not  raise  serious  doubts  as  to  its  compatibility  with  the
    internal market in relation to the EEA wide market for electronic volume correctors.

248) Furthermore, on the plausible EEA wide market for DSFG compliant EVC, the Parties activities do not overlap as Elster is not active on  this
    market.[181]

7 Gas Stations

249) On an EEA wide market for gas stations, the combined market share of the Parties would be of [20-30]%, with a minimal  increment  of  [0-5]%
    brought about by HON.

250) On this market a number of competitors are active, such as Emerson (estimated market share [10-20]%),  Sick  (estimated  market  share  [10-
    20]%), Fiorentini (estimated market share [5-10]%), Krohne (estimated market share [5-10]%), Itron (estimated market share [5-10]%), as well
    as other local system integrators.

251) In addition, customers responding to the market investigation  indicated  that  post-Transaction  there  will  be  a  sufficient  number  of
    alternative suppliers to the merged entity[182], that the Parties are not close competitors[183] and  that  HON  is  a  relatively  marginal
    player on this market.

252) Also, albeit indicating that no significant entry has occurred in the past, customers responding to the market investigation indicated  that
    they do not exclude the entry of new players on this market.[184]

253) Given the limited sales achieved by HON, the Transaction would not significantly change the  structure  of  the  EEA  wide  market  for  gas
    stations.

254) For the reasons mentioned above, the Commission considers that the Transaction does not raise serious doubts as to  its  compatibility  with
    the internal market in relation to the EEA wide market for gas stations.

2 Vertical relationships

255) The Transaction gives rise to vertical relationships since gas meters (both turbine and ultrasonic), gas flow computers, gas  chromatographs
    and EVC are input components for gas stations.

    The Notifying Party's view

256) The Parties claim that the Transaction will not lead to any foreclosure concerns. As to input foreclosure, the Notifying Party  claims  that
    on each of the components market they face a number of competitors and do not have any market power, and hence  gas  station  builders  (and
    ultimately the end-customers themselves) will have a significant number of suppliers.

    The Commission's assessment

257) The Commission considers that the merged entity may have the ability to foreclose access to inputs to competing gas stations builder.

258) First, the metering products including turbine gas meters for fiscal applications, DSFG compliant gas flow computers and DSFG compliant  gas
    chromatographs, represent an essential input for the gas stations as they are the very core of  each  gas  station  without  which  the  gas
    station cannot function.

259) Second, as described above in section V.4.1.1 above, the merged entity would have significant  market  power  with  regard  to  turbine  gas
    meters for fiscal applications, DSFG compliant gas flow computers and DSFG compliant gas chromatographs.  This  would  likely  allow  it  to
    significantly affect prices and supply conditions in the downstream market.

260) However, the Commission considers that it can be left open whether the Transaction would lead to the  ability  and  incentive  to  foreclose
    competitors as the proposed commitments (see section V.) will eliminate any overlap with regard to the activities  of  the  Parties  on  the
    upstream markets, i.e the markets for turbine gas meters for fiscal applications, DSFG compliant gas flow computers and DSFG  compliant  gas
    chromatographs.

3 Conclusion on up/mid stream sector

261) The Transaction raises serious doubts as to its compatibility with the internal market with regard to the EEA-wide markets for  turbine  gas
    meters for fiscal applications, DSFG compliant gas flow computers and DSFG complaint gas  chromatographs  as  a  result  of  non-coordinated
    horizontal effects.

       PROPOSED REMEDIES

262) In order to render the  concentration  compatible  with  the  internal  market,  the  undertakings  concerned  have  modified  the  notified
    concentration by entering into the following commitments, which are annexed to this decision and form an integral part thereof.

1 Proposed commitments

1 Description of the initially proposed commitments

263) The Parties submitted as a remedy  ("Initial  Commitments")  to  divest  HON's  subsidiary  RMG  Meßtechnik  GmbH  in  Germany  ("Divestment
    Business"). The Divestment Business consists essentially of a plant in Butzbach (Germany) which includes all  of  HON's  activities  in  the
    fields of:

       a) Turbine gas meters for both fiscal and non-fiscal applications;

       b) Gas flow computers (both DSFG compliant and non-DSFG compliant);

       c) Gas chromatographs (both DSFG compliant and non-DSFG compliant).

       d) Ultrasonic gas meters for both fiscal and non-fiscal applications;

       e) Electronic volume correctors (both DSFG compliant and non-DSFG compliant).

264) Even though no competition concerns were raised with regard to ultrasonic gas  meters  and  electronic  volume  correctors,  both  types  of
    product are produced at the Butzbach plant and will be included in the Divested Business. However, for one specific ultrasonic meter  model,
    the "USM GT400 model", the purchaser has to grant a non-exclusive license back for the intellectual property to HON.

265) Furthermore, HON has committed to divest all the:

       a) intangible assets (including IP rights, blue prints and Standard Operating Procedures),

       b) "RMG" brand in the form of a license for all present and future metering products (turbine gas meters, ultrasonic gas meters, gas flow
          computers, electronic volume correctors and gas chromatographs),

       c) tangible assets (including all production facilities),

       d) marketing material,

       e) customers and competitors list,

       f) personnel (including manufacturing and key personnel),

       g) licences, permits and authorizations

    relating to the Divestment Business.

2 The results of the market test of the initially proposed commitments

266) The Commission launched a market test of the Initial Commitments on 1 December 2015. Overall, the market test was positive as to  the  scope
    and general suitability of the Initial Commitments to remedy the serious doubts identified by the Commission as to the compatibility of  the
    Transaction with the internal market. However, the  market  test  identified  a  specific  element  of  the  Initial  Commitments  that  was
    subsequently improved by the second and final version of the Commitments ("Final Commitments") submitted on 14 December 2015.

267) The responding competitors and customers generally considered that the Divestment Business includes all necessary assets and would  be  able
    to compete effectively with the merged entity, with the exception of the fact that the "RMG" will not be owned and exclusively used  by  the
    Divestment Business but HON will continue to use the "RMG" brand for its gas  regulator  business.[185]  Several  responding  customers  and
    competitors explained that a brand name is an important competitive parameter and the use of the same brand name for different  products  by
    different suppliers could create confusion in the market.[186] The market test indicated that the products of the  Divestment  Business  and
    HON's regulating product are often sold by the same customers, the same  procurement  personnel  and  occasionally  even  through  the  same
    tender.[187] As the merged entity will remain a competitor of the Divestment Business, customers could become confused as to  which  company
    supplies which products under the brand "RMG". Furthermore, responding customers indicated that using the same brand for different  products
    that are installed in the same  installation  could  create  confusion  as  regards  the  service,  maintenance  and  warranty  issues.[188]
    Furthermore, competitors indicated that the brand licence agreement could create uncertainty as regards litigation which  could  reduce  the
    incentives to invest into or to protect the brand due to spillover effects.[189] Finally, according to  market  participants  there  are  no
    prior examples in the industry that the same brand is used by different suppliers for different products.[190]

3 Final Commitments

268) The Notifying Party took note of the issues expressed during the market test and on 14 December 2015 submitted Final Commitments  addressing
    these issues in the following way:

269) The Divestment Business will include the full transfer of HON's "RMG" brand, As HON currently uses  the  "RMG"  brand  also  to  market  its
    regulator products (e.g. gas regulators and gas trains, the latter being gas regulators combined with a  valve)),  the  Divestment  Business
    will grant a temporary, exclusive, world-wide, royalty-free and non-revocable licence back to HON to  use  the  RMG  brand  exclusively  for
    regulators and gas trains for re-branding purposes. The licence will be limited  to  […]  following  the  completion  of  the  sale  of  the
    Divestment Business and can be extended by another […] by the Commission upon a reasoned request by HON and subject to a positive opinion by
    the Monitoring Trustee. This transition period will be followed by a black-out period during which neither HON nor the  Divestment  Business
    will be allowed to use the "RMG" brand for the marketing of regulator products. This black-out period will last for  […]  for  any  products
    that are not currently produced for the regulator market (i.e. de novo entry only) and […] for a regulator product that is already  supplied
    in the market (be it by the Purchaser or another company).

2 Assessment of the proposed remedies

1 Framework for the assessment of Commitments

270) Where a notified concentration raises serious doubts as to its compatibility with the internal market, the Parties may modify  the  notified
    concentration so as to remove the grounds for the serious doubts identified by the Commission with a view to having it  declared  compatible
    with the internal market pursuant to Article 6(1)(b) in conjunction with Article 6(2) of the Merger Regulation.

271) As set out in the Commission Notice on Remedies,[191] commitments have to eliminate the Commission's serious doubts entirely, they  have  to
    be comprehensive and effective from all points of view and they must be capable of being implemented effectively within a  short  period  of
    time, as the conditions of competition on the market will not be maintained until the commitments have been fulfilled.[192]

272) In assessing whether or not commitments will restore effective competition,  the  Commission  considers  their  type,  scale  and  scope  by
    reference to the structure and the particular characteristics of the market in which the Commission has identified serious doubts as to  the
    compatibility of the notified concentration with the internal market.[193]

273) Divestiture commitments are the best  way  to  eliminate  serious  doubts  resulting  from  horizontal  overlaps  of  the  merging  parties'
    activities.[194] The divested activities must consist of a  viable  business  that,  if  operated  by  a  suitable  purchaser,  can  compete
    effectively with the merged entity on a lasting basis and that is divested as a going concern.[195]

274) The business to be divested must include all the assets which contribute to its current operation or  which  are  necessary  to  ensure  its
    viability and competitiveness and all personnel which are currently employed or which are necessary to ensure the  business'  viability  and
    competitiveness. Personnel and assets which are currently shared between the business to be divested and other businesses  of  the  Parties,
    but which contribute to the operation of the business or which are necessary to ensure its  viability  and  competitiveness,  must  also  be
    included. Otherwise, the viability and competitiveness of the business to be divested would be endangered. Therefore,  the  business  to  be
    divested must contain the personnel providing essential functions for the business, at least in a sufficient proportion to meet the on-going
    needs of the business to be divested.[196]

275) Furthermore, the intended effect of the divestiture will only be achieved if and once the business is transferred to  a  suitable  purchaser
    with proven relevant expertise and ability to maintain and develop  the  business  to  be  divested  as  a  viable  and  active  competitive
    undertaking.

2 The Commission's market test and assessment of the Commitments

    Suitability of the Final Commitments to remove the serious doubts

276) The Final Commitments, consisting in the divestiture of the Butzbach production facility and  associated  assets,  constitute  a  structural
    measure. The sale of the Divestment Business to an independent and suitable purchaser will dissipate the serious doubts  identified  by  the
    Commission as to the compatibility of the Transaction with the internal market and will not require medium or long-term monitoring measures.
    The new commercial structure resulting from the implementation of the Final Commitments will be sufficiently workable and lasting to  ensure
    that a significant impediment to effective competition will not materialise.[197]

277) The proposed divestment will eliminate the Parties' overlap in the markets for turbine gas meters for fiscal  applications,  DSFG  compliant
    gas flow computers and DSFG compliant gas chromatographs and is therefore considered suitable  to  remove  any  serious  doubts  as  to  the
    compatibility of the concentration with the internal market.

    Viability of the Divestment Business

278) The Butzbach plant and all related assets are profitable. In fiscal years 2014 and 2015 the Divestment Business achieved  significant  gross
    profit profits. In 2014 it generated revenues of EUR […] and gross profits of EUR […]; in 2015 revenues and gross profit are  forecasted  to
    grow to EUR […] and EUR […]. While in 2014 the year ended with a slightly negative operating income  of  EUR  […]  due  to  significant  R&D
    expenses (without the ultrasonic meters the operating profit would have been positive), in 2015 the operating income is  forecasted  at  EUR
    […]. Operating profit for 2016 is forecasted to grow further.

279) The Divestment Business includes all the products currently sold by the Divestment Business and is not subject to any carve out.

280) In the market test, some market participants explained that the provision regarding the licencing of the IP rights on the  USM  GT400  model
    may affect the viability of the Divestment Business. Several respondents considered that the USM GT400 is one of the most valuable  products
    and technologies of the divestment business.[198] Licencing the intellectual property would give  a  competitive  advantage  to  the  merged
    entity in the ultrasonic metering business and would therefore significantly reduce the value of the divestment business.[199]

281) The Commission considers that the back-licence of the GT400 to HON does not  endanger  the  viability  of  the  Divestment  Business.  [This
    relates to future product development and commercial strategy.  It also contains product-specific turnover data.]

282) In the light of the above, the Commission considers that the Divestment Business is a viable business.

    Purchaser criteria and potential buyers

283) The market test revealed that the Divestment Business is perceived as an attractive offer for a purchaser.

284) The market test revealed two interested buyers and two other possibly interested buyers subject to an improvement of the provisions  in  the
    Commitment. These improvements are reflected in the second and final version of the Commitments. The  Commission  therefore  considers  that
    there are at least four interested buyers. All of these interested companies are competitors to the Divestment Business.

285) […][200][…]

286) A competitor indicated that the Divestment Business product offering needs to be complemented with a wider product portfolio to  enable  the
    purchaser to replicate the competitive constraint currently imposed on the market.[201] The Commission does not  consider  a  wider  product
    portfolio necessary. First, the products included in the Divestment Business include not only the products for which the  Commission  raised
    serious doubts (turbine meters for fiscal application, DSFG compliant gas flow  computers,  DSFG  compliant  gas  chromatographs),  but  the
    complete metering business of HON, which includes also ultrasonic meters and electronic volume correctors. Second, other competitors on  the
    markets have a product portfolio comparable to that of the Divestment Business.

3 Conclusion on the Final Commitments

287) On the basis of the above, the Commission concludes that the Final Commitments are suitable and sufficient  to  remedy  the  serious  doubts
    raised by the Transaction in the potential markets for turbine gas meters for fiscal applications, DSFG compliant  gas  flow  computers  and
    DSFG compliant gas chromatographs. Moreover, the Final Commitments are comprehensive and effective from all points of view, and are  capable
    of being implemented effectively within a short period of time.

       Conditions and Obligations

288) Pursuant to the first sentence of the second subparagraph of Article 6(2) of the  Merger  Regulation,  the  Commission  may  attach  to  its
    decision conditions and obligations intended to ensure that the undertakings concerned comply with the commitments they  have  entered  into
    vis-à-vis the Commission with a view to rendering the concentration compatible with the internal market.

289) The achievement of the measure that gives rise to the structural change of the market is a condition, whereas the implementing  steps  which
    are necessary to achieve this result are generally obligations on the Parties. Where a condition is not fulfilled, the Commission's decision
    declaring the concentration compatible with the internal market and the EEA Agreement no longer stands.  Where  the  undertakings  concerned
    commit a breach of an obligation, the Commission may revoke the clearance  decision  in  accordance  with  Article  8(6)(b)  of  the  Merger
    Regulation. The undertakings concerned may also be subject to fines and periodic penalty payments under Articles  14(2)  and  15(1)  of  the
    Merger Regulation.

290) In accordance with the basic distinction between conditions and obligations, the decision in this case is  conditional  on  full  compliance
    with the requirements set out in Section B of the Final Commitments, which constitute conditions. The remaining requirements set out in  the
    other Sections of the said commitments are considered to constitute obligations.

291) The full text of the Final Commitments is annexed to this Decision as Annex I and forms an integral part thereof.

       CONCLUSION

292) For the above reasons, the Commission has decided not to oppose the notified operation as modified by the Final Commitments and  to  declare
    it compatible with the internal market and with the functioning of the EEA Agreement, subject to full  compliance  with  the  conditions  in
    section B (as well as the associated Schedule) of the Final Commitments annexed to the present decision and with the  obligations  contained
    in the other sections of the said commitments. This decision is adopted in application of Article 6(1)(b) in conjunction with  Article  6(2)
    of the Merger Regulation and Article 57 of the EEA Agreement.

For the Commission

(Signed)
Margrethe VESTAGER
Member of the Commission

                                                                                                                                 14 December 2015

                                                      CASE COMP/M.7737 – HONEYWELL / ELSTER

                                                      COMMITMENTS TO THE EUROPEAN COMMISSION

Pursuant to Article 6(2) of Council Regulation (EC) No  139/2004  (the  “Merger  Regulation”),  Honeywell  International  Inc.  (the  “Notifying
Party/Honeywell”) hereby enters into the following Commitments (the “Commitments”) vis-à-vis the European Commission (the “Commission”)  with  a
view to rendering the proposed acquisition of sole control of Teaford GmbH, the holding company of the Elster Division of Melrose PLC (“Elster”)
(the “Concentration”) compatible with the internal market and the functioning of the EEA Agreement.

This text shall be interpreted in light of the Commission’s decision pursuant to  Article  6(1)(b)  of  the  Merger  Regulation  to  declare  the
Concentration compatible with the internal market and the functioning of the  EEA  Agreement  (the  “Decision”),  in  the  general  framework  of
European Union law, in particular in light of the Merger Regulation, and by reference to the  Commission  Notice  on  remedies  acceptable  under
Council Regulation (EC) No 139/2004 and under Commission Regulation (EC) No 802/2004 (the “Remedies Notice”).

Section A.  Definitions

1. For the purpose of the Commitments, the following terms shall have the following meaning:

   Affiliated Undertakings: undertakings controlled by the Parties and/or by the ultimate parents of the Parties, whereby the notion  of  control
   shall be interpreted pursuant to Article 3 of the Merger Regulation and in light of the Commission Consolidated  Jurisdictional  Notice  under
   Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings (the "Consolidated Jurisdictional Notice").

   Assets: the assets that contribute to the current operation or are necessary to ensure the viability and  competitiveness  of  the  Divestment
   Business as indicated in Section B, paragraph 6 (a), (b) and (c) and described more in detail in the Schedule.

   Closing: the transfer of the legal title to the Divestment Business to the Purchaser.

   Closing Period: the period of […] from the approval of the Purchaser and the terms of sale by the Commission.

   Confidential Information: any business secrets, know-how, commercial information, or any other information of a proprietary nature that is not
   in the public domain.

   Conflict of Interest: any conflict of interest that impairs the Trustee's objectivity and independence in discharging  its  duties  under  the
   Commitments.

   Divestment Business: the business or businesses as defined in Section B and in the Schedule which the Notifying Party commits to divest.

   Divestiture Trustee: one or more natural or legal person(s) who is/are approved by the Commission and appointed by Honeywell and who  has/have
   received from Honeywell the exclusive Trustee Mandate to sell the Divestment Business to a Purchaser at no minimum price.

   Effective Date: the date of adoption of the Decision.

   First Divestiture Period: the period of […] from the Effective Date.

   Hold Separate Manager: the person appointed by Honeywell for the Divestment Business to manage the day-to-day business under  the  supervision
   of the Monitoring Trustee.

   Honeywell: Honeywell International Inc., a company incorporated under the laws of the State of Delaware with its seat in  Morris  Plains,  New
   Jersey, having its business address at 115 Tabor Road, Morris Plains, NJ, 07950 United States of America.

   Key Personnel: all personnel necessary to maintain the viability and competitiveness of the Divestment Business, as listed  in  the  Schedule,
   including the Hold Separate Manager.

   Monitoring Trustee: one or more natural or legal person(s) who is/are approved by the Commission and appointed by Honeywell, and who  has/have
   the duty to monitor Honeywell’s compliance with the conditions and obligations attached to the Decision.

   Parties: the Notifying Party and the undertaking that is the target of the concentration.

   Personnel: all staff currently employed by the Divestment Business, including staff seconded to the Divestment Business, shared  personnel  as
   well as the additional personnel listed in the Schedule.

   Purchaser: the entity approved by the Commission as acquirer of the Divestment Business in accordance with the criteria set out in Section D.

   Purchaser Criteria: the criteria laid down in paragraph 16 of these Commitments that the Purchaser must fulfil in order to be approved by  the
   Commission.

   Schedule: the schedule to these Commitments describing more in detail the Divestment Business.

   Trustee(s): the Monitoring Trustee and/or the Divestiture Trustee as the case may be.

   Trustee Divestiture Period: the period of […] from the end of the First Divestiture Period.

Section B.  The commitment to divest and the Divestment Business

      Commitment to divest

2. In order to maintain effective competition, Honeywell commits to divest, or procure the divestiture of the Divestment Business by the  end  of
   the Trustee Divestiture Period as a going concern to a purchaser and on terms of sale approved  by  the  Commission  in  accordance  with  the
   procedure described in paragraph 17 of these Commitments. To carry out the divestiture, Honeywell commits to find a  purchaser  and  to  enter
   into a final binding sale and purchase agreement for the sale of the Divestment Business within the First Divestiture Period. If Honeywell has
   not entered into such an agreement at the end of the First Divestiture Period, Honeywell shall grant  the  Divestiture  Trustee  an  exclusive
   mandate to sell the Divestment Business in accordance with the procedure described in paragraph 29 in the Trustee Divestiture Period.

3. Honeywell shall be deemed to have complied with this commitment if:

      (a)   by the end of the Trustee Divestiture Period, Honeywell or the Divestiture Trustee has entered into a final binding sale and purchase
           agreement and the Commission approves the proposed purchaser and the terms of sale  as  being  consistent  with  the  Commitments  in
           accordance with the procedure described in paragraph 17; and

      (b)   the Closing of the sale of the Divestment Business to the Purchaser takes place within the Closing Period.

4. In order to maintain the structural effect of the Commitments, the Notifying Party shall,  for  a  period  of  10  years  after  Closing,  not
   acquire, whether directly or indirectly, the possibility of exercising influence (as defined in paragraph 43 of the Remedies Notice,  footnote
   3) over the whole or part of the Divestment Business, unless, following the submission of a reasoned request from the Notifying Party  showing
   good cause and accompanied by a report from the Monitoring Trustee (as provided in paragraph 43 of these Commitments),  the  Commission  finds
   that the structure of the market has changed to such an extent that the absence of  influence  over  the  Divestment  Business  is  no  longer
   necessary to render the proposed concentration compatible with the internal market.

      Structure and definition of the Divestment Business

5. The Divestment Business consists of Honeywell’s subsidiary, RMG Meßtechnik GmbH, Otto-Hahn-Str. 5, 35510 Butzbach,  Germany,  which  currently
   operates Honeywell’s entire business concerning the design, development, manufacturing and sale in the EEA of turbine and  ultrasonic  meters,
   gas chromatographs, and flow computers, and electronic volume correctors. The legal and functional structure of  the  Divestment  Business  as
   operated to date is described in the Schedule. The Divestment Business, described in more detail in the  Schedule,  includes  all  assets  and
   staff that contribute to the current operation or are necessary to ensure the viability and competitiveness of  the  Divestment  Business,  in
   particular:

      (a)   all tangible and intangible assets (including intellectual property rights);

      (b)   all licences, permits and authorisations issued by any governmental organisation for the benefit of the Divestment Business;

      (c)   all contracts, leases, commitments and customer orders of the Divestment Business; all customer, credit  and  other  records  of  the
           Divestment Business; and

      (d)   the Personnel.

6. Even though the Divestment Business currently operates as a largely stand-alone business,  certain  corporate  functions  such  as  IT,  book-
   keeping, procurement and order management, HR and similar back-office functions are handled centrally  by  Affiliated  Undertakings  with  the
   Honeywell group. Therefore, in order to facilitate the seamless transition of  the  Divestment  Business  to  the  Purchaser,  the  Divestment
   Business includes also the benefit, for a transitional period of up to 12 months after Closing and on terms and conditions equivalent to those
   at present afforded to the Divestment Business, of all current arrangements under  which  Honeywell  or  its  Affiliated  Undertakings  supply
   products or services to the Divestment Business, as detailed in the Schedule, unless otherwise agreed  with  the  Purchaser.  Strict  firewall
   procedures will be adopted so as to ensure that any competitively sensitive information related to, or arising from such  supply  arrangements
   (for example, product roadmaps) will not be shared with, or passed on to, anyone outside the Honeywell companies or businesses, providing  the
   relevant back-office functions.

 Section C.  Related commitments

      Preservation of viability, marketability and competitiveness

7. From the Effective Date until  Closing,  the  Notifying  Party  shall  preserve  or  procure  the  preservation  of  the  economic  viability,
   marketability and competitiveness of the Divestment Business, in accordance with good business practice, and shall minimise as far as possible
   any risk of loss of competitive potential of the Divestment Business. In particular Honeywell undertakes:

    (a)    not to carry out any action that might have a significant  adverse  impact  on  the  value,  management  or  competitiveness  of  the
           Divestment Business or that might alter the nature and scope of activity, or the industrial or commercial strategy or the  investment
           policy of the Divestment Business;

    (b)    to make available, or procure to make available, sufficient resources for the development of the Divestment Business,  on  the  basis
           and continuation of the existing business plans;

    (c)    to take all reasonable steps, or procure that all reasonable steps are being taken, including appropriate incentive schemes (based on
           industry practice), to encourage all Key Personnel to remain with the Divestment Business, and not to solicit or move  any  Personnel
           to Honeywell’s remaining business. Where, nevertheless, individual members of the Key Personnel exceptionally  leave  the  Divestment
           Business, Honeywell shall provide a reasoned proposal to replace the person or persons concerned to the Commission and the Monitoring
           Trustee. Honeywell must be able to demonstrate to the Commission that the replacement is well  suited  to  carry  out  the  functions
           exercised by those individual members of the Key Personnel. The replacement shall take place under the supervision of the  Monitoring
           Trustee, who shall report to the Commission.

      Hold-separate obligations

8. The Notifying Party commits, from the Effective Date until Closing, to keep the  Divestment  Business  separate  from  the  businesses  it  is
   retaining and to ensure that unless explicitly permitted under these Commitments: (i)  management and staff  of  the  businesses  retained  by
   Honeywell have no involvement in the Divestment Business; (ii) the Key Personnel and Personnel of the Divestment Business have no  involvement
   in any business retained by Honeywell and do not report to any individual outside the Divestment Business.

9. Until Closing, Honeywell shall assist the Monitoring Trustee in ensuring that the Divestment Business is managed as a  distinct  and  saleable
   entity separate from the businesses which Honeywell is retaining. Immediately after the adoption of the Decision, Honeywell  shall  appoint  a
   Hold Separate Manager. The Hold Separate Manager, who shall be part of the Key Personnel, shall manage the Divestment  Business  independently
   and in the best interest of the business with a view to ensuring its continued economic viability, marketability and competitiveness  and  its
   independence from the businesses retained by Honeywell. The Hold Separate Manager shall closely cooperate with and report  to  the  Monitoring
   Trustee and, if applicable, the Divestiture Trustee. Any replacement of the Hold Separate Manager shall be subject to the procedure laid  down
   in paragraph 8(c) of these Commitments. The Commission may, after having heard Honeywell, require  Honeywell  to  replace  the  Hold  Separate
   Manager.

10. To ensure that the Divestment Business is held and managed as a separate entity the Monitoring Trustee shall exercise Honeywell’s  rights  as
   shareholder in the legal entity that constitutes the Divestment Business (except for its rights in respect of dividends that  are  due  before
   Closing), with the aim of acting in the best interest of the business, which shall be determined on a stand-alone  basis,  as  an  independent
   financial investor, and with a view to fulfilling Honeywell’s obligations under the Commitments. Furthermore,  the  Monitoring  Trustee  shall
   have the power to replace members of the supervisory board or non-executive directors of the board of directors, who have  been  appointed  on
   behalf of Honeywell. Upon request of the Monitoring Trustee, Honeywell shall resign as a member of the boards or shall cause such  members  of
   the boards to resign.

      Ring-fencing

11. Honeywell shall implement, or procure to implement, all necessary measures to ensure that it does not, after the Effective Date,  obtain  any
   Confidential Information relating to the Divestment Business and that any such Confidential  Information  obtained  by  Honeywell  before  the
   Effective Date will be eliminated and not be used by Honeywell. This includes measures vis-à-vis Honeywell’s  appointees  on  the  supervisory
   board and/or board of directors of the Divestment Business. In particular, the  participation  of  the  Divestment  Business  in  any  central
   information technology network shall be severed to the extent possible,  without  compromising  the  viability  of  the  Divestment  Business.
   Honeywell may obtain or keep information relating to the Divestment Business  which  is  reasonably  necessary  for  the  divestiture  of  the
   Divestment Business or the disclosure of which to Honeywell is required by law.

      Non-solicitation clause

12. The Parties undertake, subject to customary limitations, not to solicit, and to procure that Affiliated Undertakings do not solicit, the  Key
   Personnel transferred with the Divestment Business for a period of […] after Closing.

      Due diligence

13. In order to enable potential purchasers to carry out a reasonable due diligence of the  Divestment  Business,  Honeywell  shall,  subject  to
   customary confidentiality assurances and dependent on the stage of the divestiture process:
    (a)    provide to potential purchasers sufficient information as regards the Divestment Business;
    (b)    provide to potential purchasers sufficient information relating to the Personnel and allow them reasonable access to the Personnel.

      Reporting

14. Honeywell shall submit written reports in English on potential purchasers of the Divestment Business and  developments  in  the  negotiations
   with such potential purchasers to the Commission and the Monitoring Trustee no later than 10 days after the end of every month  following  the
   Effective Date (or otherwise at the Commission’s request). Honeywell shall submit a list of all potential purchasers having expressed interest
   in acquiring the Divestment Business to the Commission at each and every stage of the divestiture process, as well as a copy of all the offers
   made by potential purchasers within five days of their receipt.

15. Honeywell shall inform the Commission and the Monitoring Trustee on the preparation of the data room  documentation  and  the  due  diligence
   procedure and shall submit a copy of any information memorandum to the Commission and the Monitoring Trustee before sending the memorandum out
   to potential purchasers.

Section D.  The Purchaser

16. In order to be approved by the Commission, the Purchaser must fulfil the following criteria:
    […]

17. The final binding sale and purchase agreement (as well as ancillary agreements) relating to the divestment of the Divestment  Business  shall
   be conditional on the Commission’s approval. When Honeywell has reached an agreement with a purchaser, it shall submit a fully documented  and
   reasoned proposal, including a copy of the final agreement(s), within one week to the Commission and the Monitoring Trustee. Honeywell must be
   able to demonstrate to the Commission that the purchaser fulfils the Purchaser Criteria and that the Divestment Business is being  sold  in  a
   manner consistent with the Commission's Decision and the Commitments. For the approval, the Commission shall verify that the purchaser fulfils
   the Purchaser Criteria and that the Divestment Business is being sold in a manner consistent with the Commitments including their objective to
   bring about a lasting structural change in the market. The Commission may approve the sale of the Divestment  Business  without  one  or  more
   Assets or parts of the Personnel, or by substituting one or more Assets or parts of the  Personnel  with  one  or  more  different  assets  or
   different personnel, if this does not affect the viability and competitiveness of the Divestment Business after the sale,  taking  account  of
   the proposed purchaser.

Section E.  Trustee

      I.    Appointment procedure

18. Honeywell shall appoint a Monitoring Trustee to carry out the functions  specified  in  these  Commitments  for  a  Monitoring  Trustee.  The
   Notifying Party commits not to close the Concentration before the appointment of a Monitoring Trustee.

19. If Honeywell has not entered into a binding sale and purchase agreement regarding the Divestment Business one month before  the  end  of  the
   First Divestiture Period or if the Commission has rejected a purchaser proposed by Honeywell at  that  time  or  thereafter,  Honeywell  shall
   appoint a Divestiture Trustee. The appointment of the Divestiture Trustee shall take effect upon the commencement of the  Trustee  Divestiture
   Period.

20. The Trustee shall:
    (i) at the time of appointment, be independent of the Notifying Party and its Affiliated Undertakings;
    (ii) possess the necessary qualifications to carry out its mandate, for example have sufficient relevant experience as an investment  banker
    or consultant or auditor; and
    (iii) neither have nor become exposed to a Conflict of Interest.

21. The Trustee shall be remunerated by the Notifying Party in a way that does not  impede  the  independent  and  effective  fulfilment  of  its
   mandate. In particular, where the remuneration package of a Divestiture Trustee includes a success premium linked to the final sale  value  of
   the Divestment Business, such success premium may only be earned if the divestiture takes place within the Trustee Divestiture Period.

            Proposal by Honeywell

22. No later than two weeks after the Effective Date, Honeywell shall submit the names of three or more natural or legal persons  whom  Honeywell
   proposes to appoint as the Monitoring Trustee to the Commission for approval. No later than one month before the end of the First  Divestiture
   Period or on request by the Commission, Honeywell shall submit a list of one or more persons whom Honeywell proposes to appoint as Divestiture
   Trustee to the Commission for approval. The proposal shall contain sufficient information for the Commission to  verify  that  the  person  or
   persons proposed as Trustee fulfil the requirements set out in paragraph 20 and shall include:

    (a)    the full terms of the proposed mandate, which shall include all provisions necessary to enable the Trustee to fulfil its duties under
           these Commitments;

    (b)    the outline of a work plan which describes how the Trustee intends to carry out its assigned tasks;

    (c)    an indication whether the proposed Trustee is to act as both Monitoring Trustee and Divestiture Trustee or whether different trustees
           are proposed for the two functions.

            Approval or rejection by the Commission

23. The Commission shall have the discretion to approve or reject the proposed Trustee(s) and to approve the  proposed  mandate  subject  to  any
   modifications it deems necessary for the Trustee to fulfil its obligations. If only one name is approved, Honeywell shall appoint or cause  to
   be appointed the person or persons concerned as Trustee, in accordance with the mandate approved by the Commission. If more than one  name  is
   approved, Honeywell shall be free to choose the Trustee to be appointed from among the names approved. The Trustee shall be  appointed  within
   one week of the Commission’s approval, in accordance with the mandate approved by the Commission.

            New proposal by Honeywell

24. If all the proposed Trustees are rejected, Honeywell shall submit the names of at least two more natural or legal persons within one week  of
   being informed of the rejection, in accordance with paragraphs 18 and 23 of these Commitments.

            Trustee nominated by the Commission

25. If all further proposed Trustees are rejected by the Commission, the Commission shall nominate a Trustee, whom Honeywell  shall  appoint,  or
   cause to be appointed, in accordance with a trustee mandate approved by the Commission.

      II.   Functions of the Trustee

26. The Trustee shall assume its specified duties and obligations in order to ensure compliance with the Commitments. The Commission may, on  its
   own initiative or at the request of the Trustee or Honeywell, give any orders or instructions to the Trustee in  order  to  ensure  compliance
   with the conditions and obligations attached to the Decision.

            Duties and obligations of the Monitoring Trustee

27. The Monitoring Trustee shall:

     i)          propose in its first report to the Commission a detailed work plan describing how it intends to  monitor  compliance  with  the
        obligations and conditions attached to the Decision.

    ii) oversee, in close co-operation with the Hold Separate Manager, the on-going management  of  the  Divestment  Business  with  a  view  to
        ensuring its continued economic viability, marketability and competitiveness and monitor compliance by Honeywell with the conditions and
        obligations attached to the Decision. To that end the Monitoring Trustee shall:

            (a)   monitor the preservation of the economic viability, marketability and competitiveness  of  the  Divestment  Business,  and  the
             keeping separate of the Divestment Business from the business retained by the Parties, in accordance with paragraphs  7  and  8  of
             these Commitments;

            (b)   supervise the management of the Divestment Business as a distinct and saleable entity, in accordance with paragraph 9 of  these
             Commitments;

            (c)   with respect to Confidential Information:

               – determine all necessary measures to  ensure  that  Honeywell  does  not  after  the  Effective  Date  obtain  any  Confidential
                 Information relating to the Divestment Business,
               – in particular strive for the severing of the Divestment Business’ participation in a central information technology network  to
                 the extent possible, without compromising the viability of the Divestment Business,
               – make sure that any Confidential Information relating to the Divestment Business obtained  by  Honeywell  before  the  Effective
                 Date is eliminated and will not be used by Honeywell and
               – decide whether such information may be disclosed to or kept by Honeywell as the disclosure is  reasonably  necessary  to  allow
                 Honeywell to carry out the divestiture or as the disclosure is required by law;

            (d)   monitor the splitting of assets and the allocation of Personnel between the Divestment Business  and  Honeywell  or  Affiliated
             Undertakings;

   iii) propose to Honeywell such measures as the Monitoring Trustee considers necessary to ensure Honeywell’s compliance  with  the  conditions
        and obligations attached to the Decision, in particular the maintenance of the full economic viability, marketability or competitiveness
        of the Divestment Business, the holding  separate  of  the  Divestment  Business  and  the  non-disclosure  of  competitively  sensitive
        information;

    iv) review and assess potential purchasers as well as the progress of the divestiture process and verify that, dependent on the stage of the
        divestiture process:

            (a)   potential purchasers receive sufficient and correct information relating to  the  Divestment  Business  and  the  Personnel  in
             particular by reviewing, if available, the data room documentation, the information memorandum and the due diligence process, and

            (b)   potential purchasers are granted reasonable access to the Personnel;

     v) act as a contact point for any requests by third parties, in particular potential purchasers, in relation to the Commitments;

    vi) provide to the Commission, sending Honeywell a non-confidential copy at the same time, a written report within 15 days after the end  of
        every month that shall cover the operation and management of the Divestment Business  as  well  as  the  splitting  of  assets  and  the
        allocation of Personnel so that the Commission can assess whether the business is held in a manner consistent with the  Commitments  and
        the progress of the divestiture process as well as potential purchasers;

   vii) promptly report in writing to the Commission, sending Honeywell a non-confidential copy at the same time, if it concludes on  reasonable
        grounds that Honeywell is failing to comply with these Commitments;

  viii) within one week after receipt of the documented proposal referred to in paragraph 17 of these Commitments,  submit  to  the  Commission,
        sending Honeywell a non-confidential copy at the same time, a reasoned opinion as to the suitability and independence  of  the  proposed
        purchaser and the viability of the Divestment Business after the Sale and as to whether the Divestment Business  is  sold  in  a  manner
        consistent with the conditions and obligations attached to the Decision, in particular, if relevant, whether the Sale of the  Divestment
        Business without one or more Assets or not all of the Personnel affects the viability of the Divestment Business after the sale,  taking
        account of the proposed purchaser;

    ix) assume the other functions assigned to the Monitoring Trustee under the conditions and obligations attached to the Decision.

28. If the Monitoring and Divestiture Trustee are not the same legal or natural persons, the  Monitoring  Trustee  and  the  Divestiture  Trustee
   shall cooperate closely with each other during and for the purpose of the preparation of the Trustee Divestiture Period in order to facilitate
   each other's tasks.

            Duties and obligations of the Divestiture Trustee

29. Within the Trustee Divestiture Period, the Divestiture Trustee shall sell at no  minimum  price  the  Divestment  Business  to  a  purchaser,
   provided that the Commission has approved both the purchaser and the final binding sale and purchase agreement (and ancillary  agreements)  as
   in line with the Commission's Decision and the Commitments in accordance with paragraphs 16 and  17  of  these  Commitments.  The  Divestiture
   Trustee shall include in the sale and purchase agreement (as well as in any ancillary agreements) such terms and conditions  as  it  considers
   appropriate for an expedient sale in the Trustee Divestiture Period. In particular, the Divestiture  Trustee  may  include  in  the  sale  and
   purchase agreement such customary representations and warranties  and  indemnities  as  are  reasonably  required  to  effect  the  sale.  The
   Divestiture Trustee shall protect the legitimate financial interests of Honeywell, subject to the Notifying Party’s  unconditional  obligation
   to divest at no minimum price in the Trustee Divestiture Period.

30. In the Trustee Divestiture Period (or otherwise at the Commission’s request), the Divestiture Trustee shall provide  the  Commission  with  a
   comprehensive monthly report written in English on the progress of the divestiture process. Such reports shall be  submitted  within  15  days
   after the end of every month with a simultaneous copy to the Monitoring Trustee and a non-confidential copy to the Notifying Party.

      III.  Duties and obligations of the Parties

31. Honeywell shall provide and shall cause its advisors to provide the Trustee with all such co-operation, assistance  and  information  as  the
   Trustee may reasonably require to perform its tasks. The Trustee shall have full and complete access to any of Honeywell’s or  the  Divestment
   Business’ books, records, documents, management or other personnel, facilities, sites and technical information necessary for  fulfilling  its
   duties under the Commitments and Honeywell and the Divestment Business shall provide the Trustee upon request with  copies  of  any  document.
   Honeywell and the Divestment Business shall make available to the Trustee one or more offices on their premises and  shall  be  available  for
   meetings in order to provide the Trustee with all information necessary for the performance of its tasks.

32. Honeywell shall provide the Monitoring Trustee with all managerial and administrative support that it may reasonably  request  on  behalf  of
   the management of the Divestment Business. This shall include all administrative support functions relating to the Divestment  Business  which
   are currently carried out at headquarters level. Honeywell shall provide and shall cause its advisors to provide the  Monitoring  Trustee,  on
   request, with the information submitted to potential  purchasers,  in  particular  give  the  Monitoring  Trustee  access  to  the  data  room
   documentation and all other information granted to potential purchasers in the due diligence procedure. Honeywell shall inform the  Monitoring
   Trustee on possible purchasers, submit lists of potential purchasers at each stage of the selection process,  including  the  offers  made  by
   potential purchasers at those stages, and keep the Monitoring Trustee informed of all developments in the divestiture process.

33. Honeywell shall grant or procure Affiliated Undertakings to grant comprehensive  powers  of  attorney,  duly  executed,  to  the  Divestiture
   Trustee to effect the sale (including ancillary agreements), the Closing and all  actions  and  declarations  which  the  Divestiture  Trustee
   considers necessary or appropriate to achieve the sale and the Closing, including the appointment of advisors to assist with the sale process.
   Upon request of the Divestiture Trustee, Honeywell shall cause the documents required for effecting the  sale  and  the  Closing  to  be  duly
   executed.

34. Honeywell shall indemnify the Trustee and its employees and agents (each an “Indemnified Party”) and hold  each  Indemnified  Party  harmless
   against, and hereby agrees that an Indemnified Party shall have no liability to Honeywell for, any liabilities arising out of the  performance
   of the Trustee’s duties under the Commitments, except to the extent that such liabilities result from the wilful default, recklessness,  gross
   negligence or bad faith of the Trustee, its employees, agents or advisors.

35. At the expense of Honeywell, the Trustee may appoint advisors (in particular for corporate finance or legal advice), subject  to  Honeywell’s
   approval (this approval not to be unreasonably withheld or delayed) if the Trustee considers the appointment of  such  advisors  necessary  or
   appropriate for the performance of its duties and obligations under the Mandate, provided that any fees and other  expenses  incurred  by  the
   Trustee are reasonable. Should Honeywell refuse to approve the advisors proposed by the Trustee the Commission may approve the appointment  of
   such advisors instead, after having heard Honeywell. Only the Trustee shall be entitled to issue instructions to the advisors. Paragraph 34 of
   these Commitments shall apply mutatis mutandis. In the Trustee Divestiture Period,  the  Divestiture  Trustee  may  use  advisors  who  served
   Honeywell during the Divestiture Period if the Divestiture Trustee considers this in the best interest of an expedient sale.

36. Honeywell agrees that the Commission may share Confidential Information proprietary to Honeywell with the  Trustee.  The  Trustee  shall  not
   disclose such information and the principles contained in Article 17 (1) and (2) of the Merger Regulation apply mutatis mutandis.

37. The Notifying Party agrees that the contact details of the Monitoring Trustee are published on the website of the  Commission's  Directorate-
   General for Competition and they shall inform interested third parties, in particular any potential purchasers, of the identity and the  tasks
   of the Monitoring Trustee.

38. For a period of 10 years from the Effective Date the Commission may request all information from the Parties that is reasonably necessary  to
   monitor the effective implementation of these Commitments.

      IV.   Replacement, discharge and reappointment of the Trustee

39. If the Trustee ceases to perform its functions under the Commitments or for any other good cause, including the exposure of the Trustee to  a
   Conflict of Interest:

   (a)      the Commission may, after hearing the Trustee and Honeywell, require Honeywell to replace the Trustee; or

   (b)      Honeywell may, with the prior approval of the Commission, replace the Trustee.

40. If the Trustee is removed according to paragraph 39 of these Commitments, the Trustee may be required to continue in  its  function  until  a
   new Trustee is in place to whom the Trustee has effected a full hand over of all relevant information. The new Trustee shall be  appointed  in
   accordance with the procedure referred to in paragraphs 18-25 of these Commitments.

41. Unless removed according to paragraph 39 of these Commitments, the Trustee shall cease to act  as  Trustee  only  after  the  Commission  has
   discharged it from its duties after all the Commitments with which the  Trustee  has  been  entrusted  have  been  implemented.  However,  the
   Commission may at any time require the reappointment of the Monitoring Trustee if it subsequently appears that the relevant remedies might not
   have been fully and properly implemented.

Section F.  The review clause

42. The Commission may extend the time periods foreseen in the Commitments in response to a request from Honeywell or, in appropriate  cases,  on
   its own initiative. Where Honeywell requests an extension of a time period, it shall submit a reasoned request to the Commission no later than
   one month before the expiry of that period, showing good cause. This request shall be accompanied by a report from the Monitoring Trustee, who
   shall, at the same time send a non-confidential copy of the report to the Notifying Party. Only in exceptional circumstances  shall  Honeywell
   be entitled to request an extension within the last month of any period.

43. The Commission may further, in response to a reasoned request from the Notifying Party  showing good cause waive, modify  or  substitute,  in
   exceptional circumstances, one or more of the undertakings in these Commitments. This request shall  be  accompanied  by  a  report  from  the
   Monitoring Trustee, who shall, at the same time send a non-confidential copy of the report to the Notifying Party. The request shall not  have
   the effect of suspending the application of the undertaking and, in particular, of suspending the expiry of  any  time  period  in  which  the
   undertaking has to be complied with.

Section G.  Entry into force

44. The Commitments shall take effect upon the date of adoption of the Decision.

      (Signed)
      […]
      duly authorised for and on behalf of
      Honeywell International Inc.
                                                                     SCHEDULE

      1.    The Divestment Business as operated to date has the following legal and functional structure.

           RMG Meßtechnik GmbH, Otto-Hahn-Str. 5, 35510 Butzbach, Germany is a 100% subsidiary of Honeywell. It currently  operates  Honeywell’s
           entire business concerning the design, development, manufacturing and sale in the EEA  of  turbine  meters,  ultrasonic  meters,  gas
           chromatographs, flow computers, electronic volume correctors and certain other ancillary components for gas stations.

           In addition to the site owned in Butzbach  where  amongst  others  turbine   and  ultrasonic  meters  (fiscal  and  non-fiscal),  gas
           chromatographs and flow computers are manufactured, the Divestment Business also operates two satellite sites: a site owned in nearby
           Beindersheim (Germany) where it manufactures the electronic boards incorporated in the  products  manufactured  in  Butzbach;  and  a
           leased office in Zorneding (Germany) which handles software development for those products.

      2.    In accordance with paragraph 5 of these Commitments, the Divestment Business includes, but is not limited to:
      (a)   the following main tangible assets:

           The manufacturing equipment relating to the products of the Divestment Business, including:

           Multi-functional calibrators
           Meter test stands
           Test cabins
           Testing machines
           High and low temperature testing chamber
           High pressure test stand
           Analyser
           Ceiling crane
           Component cleaner
           Dangerous goods container
           Die casting equipment
           Digital manometer
           Electronic balancers
           Emulator
           Faro measuring arm
           Folding machine
           High pressure compressors
           IT security cell
           Laser marking tool
           Low pressure test stand
           Moulding cutter and drilling machine
           Oscilloscope
           Paint mixing system
           Pick-and-place machine
           Soldering machine
           Turning centre
           Wave soldering machine

           A list of all key tangible assets of the Divestment Business is included in Annex Assets.

      (b)   the following main intangible assets:
           All intangible assets such as the blueprints, Standard Operating Procedures and pipeline products (if any) of the Divestment Business
           are included in the transfer. The blueprints are currently in the custody of the Divestment Business  and  stored  at  the  sites  in
           Butzbach, Beindersheim and Zorneding and include all blueprints related to the products included  in  the  Divestment  Business.  The
           Standard Operating Procedures set out the detailed steps from start to end of producing each of  the  products  manufactured  by  the
           Honeywell Divestment Business. They are also stored at the sites in Butzbach, Beindersheim and Zorneding.

           The Divestment Business will receive a royalty-free, non-revocable and perpetual  license  to  any  required  IP  that  is  not  used
           exclusively by the Divestment Business but ownership of such IP does not transfer;

           The purchaser will provide back to Honeywell a non-exclusive, world-wide, royalty-free, fee free, non-revocable and perpetual license
           to all IP related to the ultrasonic meter type USM GT400.

           Finally, the Divestment Business will include ownership of the RMG trademark.

      (c)   the following main licences, permits and authorisations:
           All licences, permits and authorisations currently used by the Divestment  Business  regarding  the  products  and  processes  to  be
           divested, will be transferred. By way of illustration, the most important licenses, permits and authorisations are MID, BAZ,  MessEG,
           and ATEX as well as ISO 9001:2008, CSA, certificate under Pressure Equipment Directive 97/23/EC Module D, or  Betriebserlaubnis  fuer
           die Zaehlerpruefeinrichtung.

           For the avoidance of doubt, it should be noted that since the legal entity  that  holds  these  certifications  is  transferred,  the
           Divestment Business will not need to recertify products;

      (d)   the following main contracts, agreements, leases, commitments and understandings
           The lease agreement for the site in Zorneding as well as the lease agreement for the one forklift. Concerning  the  small  number  of
           vans and cars currently used by the Divestment Business, those are leased by affiliated Honeywell companies. These  leases  will  not
           transfer with the Divestment Business so that the Divestment Business will need to take up leases for a small number of cars and vans
           following the transaction. However, if required by the purchaser, Honeywell will provide the Honeywell Divestment Business  with  the
           right to use the cars and vans currently used by the Honeywell Divestment Business for a transitional period of up to  3  months  and
           use reasonable best efforts to assist the Purchaser in finding a suitable solution to ensure that the  Divestment  Business  has  all
           necessary rolling stock available;

      (e)   the following customer, credit and other records:
           A list of all customers served by the Divestment Business over the course  of  2012  to  2015  (YTD)  including  the  total  turnover
           generated by the Divestment Business with each of them, is provided as Annex  Revenue  by  Customer  2012  to  2015.  Honeywell  will
           transfer existing advertising and communication materials relating to the Divestment Business;

      (f)   the following Personnel:
           The following table shows the total number of personnel currently operating at the Divestment Business as well as an overview of  the
           number of people transferring to the purchaser.

           |Personnel Category                                        |Number of Personnel   |Number of Personnel   |
|                                                          |currently at the DB   |transferring with the |
|                                                          |                      |DB                    |
|Projects                                                  |[…]                   |[…]                   |
|Customer / Product Support                                |[…]                   |[…]                   |
|Engineering / R&D                                         |[…]                   |[…]                   |
|Finance                                                   |[…]                   |[…]                   |
|Integrated Supply Chain                                   |[…]                   |[…]                   |
|Marketing                                                 |[…]                   |[…]                   |
|Procurement                                               |[…]                   |[…]                   |
|Sales & Sales Support                                     |[…]                   |[…]                   |
|HR                                                        |[…]                   |[…]                   |
|TOTAL                                                     |[…]                   |[…]                   |

           A full list of the Divestment Business’ personnel is provided as Annex Personnel;

      (g)   the following Key Personnel:
           See Annex Organigram. Amongst the listed people, Michael Grexa will serve as the  Hold  Separate  Manager.  Michael  Grexa  has  been
           identified as Key Personnel and will not be retained by Honeywell; and

      (h)   the arrangements for the supply with the following products or services by Honeywell or Affiliated Undertakings  for  a  transitional
           period of up to 12 months after Closing:

           (i)   Human resources and finance support, such  as  recruiting,  payroll,  or  accounting  (for  a  period  of  up  to  twelve  (12)
              months)[202],

           (ii)  IT support, such as operational, and software licences (up to twelve (12) months),

           (iii) Procurement and order management (up to twelve (12) months),

           (iv) Export compliance and tax and payroll tax reporting (up to twelve (12) months).

           These transitional services comprise all of the services currently provided either exclusively or partly centrally  by  Honeywell  to
           the Divestment Business, or other services which the Divestment Business may require to commence its independent  operation.  To  the
           extent possible, these transitional services will be “walled off”  from  Honeywell’s  other  operations  in  these  and  neighbouring
           markets.

      3.    The Divestment Business shall not include:

           Books and records required to be retained by Honeywell pursuant to any statute, rule, regulation  or  ordinance,  provided  that  the
           purchaser shall, to the extent needed, receive a copy of the same and shall be permitted to access to the original of such books  and
           records upon reasonable request during normal business hours;

           Because the Divestment Business will be sold on a cash-free basis, cash, any future insurance proceeds, tax refunds and similar  will
           be retained by Honeywell as is customary in cash-free transactions.

      4.    If there is any asset or personnel which is not be covered by paragraph 2 of this Schedule but which is  both  used  (exclusively  or
           not) in the Divestment Business and necessary for the continued viability and competitiveness of the Divestment Business, that  asset
           or adequate substitute will be offered to potential purchasers.

           Not applicable. The Divestment Business includes all assets, tangible and intangible,  necessary  for  the  continued  viability  and
           competitiveness of the Divestment Business.

           The Divestment Business will include the full transfer of Honeywell’s “RMG” trademark and related logos[203] under which it currently
           markets the Divestment Business’ metering products. As Honeywell currently uses this RMG brand also to market its regulator  products
           (i.e., regulators and gas trains (i.e., gas regulators combined with a valve)), the  Divestment  Business  will  grant  a  temporary,
           exclusive, world-wide, royalty-free, fee free, and non-revocable license back to Honeywell to  use  the  RMG  brand  exclusively  for
           regulators and gas trains.

           As these products are not part of the metering product category (i.e., products that measure the flow of gas) to which  the  products
           of the Divestment Business belong but to a neighbouring product category of regulating products (i.e., products that do  not  measure
           but regulate the gas flow), Honeywell’s usage of the brand for regulators will not conflict with the Divestment Business’ use of  the
           RMG brand for metering products.

           This temporary license will be limited to […] following the completion of the sale of the Divestment Business. This period will allow
           Honeywell to rebrand its regulator products and to complete the re-certification processes that such rebranding will make  necessary.
           By reasoned request (which should set out the reason that an extension is required and demonstrate that Honeywell has  been  diligent
           in the timely execution of the rebranding exercise), and upon an opinion of the Monitoring Trustee, the  Commission  may  extend  the
           temporary license period with an additional 6 months. Such reasoned request to be made no later than 2 months prior to the expiry  of
           the temporary license.

           The temporary licence will be followed by a black-out period during which neither Honeywell  nor  the  Divestment  Business  will  be
           allowed to use the RMG trademark for the marketing of regulator products. This black-out period will last for […]  for  any  products
           that are not currently in the regulator market (i.e. de novo entry only). It will apply for […]  for  a  regulator  product  that  is
           already supplied in the market (be it by the Purchaser or another company).

           After the expiry of the applicable black-out period, the Divestment Business will have the full exclusive right to use the RMG  brand
           for all types of products, including metering and regulator products.

           If the Purchaser and Honeywell can demonstrate to the Commission that the Purchaser does not need the RMG brand  because  it  already
           owns an existing, viable brand in the sector, the Commission may grant a waiver from the requirement to include ownership of the  RMG
           trademark with the Divestment Business as part of the process of approving the Purchaser.

                                                                   Annex Assets

[…]
                                                               Annex Customers […]

[…]

                                                                 Annex Organigram

[…]

                                                                 Annex Personnel

[…]

-----------------------
[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 374, 11.11.2015, p. 4.
[4]   Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the  Commission  Consolidated  Jurisdictional  Notice  (OJ
C95, 16.04.2008, p1).
[5]   Q2 – Questionnaire to customers, replies to question 14; Q1 – Questionnaire to competitors, replies to question 8.
[6]   Q2 – Questionnaire to customers, replies to question 6.
[7]   Q2 – Questionnaire to customers, replies to question 7.
[8]   Q2 – Questionnaire to customers, replies to question 8.
[9]   Q2 – Questionnaire to customers, replies to question 9.
[10]  Q1 – Questionnaire to competitors, replies to question 6.
[11]  Q2 – Questionnaire to customers, replies to question 10.
[12]  Q2 – Questionnaire to customers, replies to question 11.
[13]  Q2 – Questionnaire to customers, replies to question 12.
[14]  Q1 – Questionnaire to competitors, replies to question 6.
[15]  Q2 – Questionnaire to customers, replies to question 19.
[16]  Q2 – Questionnaire to customers, replies to question 20.
[17]  Q1 – Questionnaire to competitors, replies to question 12.
[18]  Q1 – Questionnaire to competitors, replies to question 12.
[19]  Q1 – Questionnaire to competitors, replies to question 13.
[20]  Q1 – Questionnaire to competitors, replies to question 14.
[21]  Q1 – Questionnaire to competitors, replies to question 15.
[22]  Form CO, para. 83.
[23]  Q2 – Questionnaire to customers, replies to question 16.
[24]  Q2 – Questionnaire to customers, replies to question 17.
[25]  Q2 – Questionnaire to customers, replies to question 18.
[26]  Q1 – Questionnaire to competitors, replies to question 10.
[27]  Q2 – Questionnaire to customers, replies to question 26.
[28]  Q2 – Questionnaire to customers, replies to question 23.
[29]  Q2 – Questionnaire to customers, replies to question 24.
[30]  Q2 – Questionnaire to customers, replies to question 25.
[31]  Q1 – Questionnaire to competitors, reply of a competitor to question 25.
[32]  Q1 – Questionnaire to competitors, replies to question 16.
[33]  Q1 – Questionnaire to competitors, replies to question 19.
[34]  Q1 – Questionnaire to competitors, replies to question 17.
[35]  Q1 – Questionnaire to competitors, replies to question 18.
[36]  Form CO, para. 85.
[37]  Q1 – Questionnaire to competitors, replies to question 20.
[38]  Q1 – Questionnaire to competitors, replies to question 21.
[39]  Q1 – Questionnaire to competitors, replies to question 22.
[40]  Industrial burner systems are assemblies of industrial burners, valves and electronic board controls.
[41]  Form CO, para 111.
[42]  Form CO, paras 112-124.
[43]  Form CO, paras. 125-131.
[44]  Form CO, paras 132-137.
[45]  Q4 – Questionnaire to customers, replies to question 4.
[46]  Q3 – Questionnaire to competitors, replies to question 5-7.
[47]  Q3 – Questionnaire to competitors, replies to question 8.
[48]  Q4 – Questionnaire to customers, replies to question 8.
[49]  Q4 – Questionnaire to customers, replies to question 9.
[50]  Q4 – Questionnaire to customers, replies to question 9.1.
[51]  Form CO, para. 165.

[52]  Form CO, paras 141-144.
[53]  Q3 – Questionnaire to customers, replies to question 11.
[54]  Q4 – Questionnaire to customers, replies to question 10.
[55]  Form CO, paras 151.
[56]  The Notifying Party's reply to the RFI of 16 October 2015.
[57]  Form CO, paras 153-154.
[58]  Agreed minutes of the call with a competitor, 23 October 2015.
[59]  Form CO, paras 146-149.
[60]  Form CO, paras 165-168.
[61]  Form CO, para 174.
[62]  Directive 2004/22/EC of the European Parliament and of the Council of 31 March 2004 on measuring instruments, OJ L 135, 30.4.2004, p. 1.
[63]  Q6 – Questionnaire to customers, replies to question 5.
[64]  Q6 – Questionnaire to customers, replies to question 9.
[65]  Q6 – Questionnaire to customers, replies to question 7.
[66]  Q6 – Questionnaire to customers, replies to question 8.
[67]  Q6 – Questionnaire to customers, replies to question 9.4.
[68]  Form CO, para 182.
[69]  The market investigation results did not provide indications that other technologies (rotary  gas  meters,  Coriolis  gas  meters,  orifice
meters) are substitutable with turbine and ultrasonic meters respectively.
[70]  Q6 – Questionnaire to customers, replies to question 10.
[71]  Agreed minutes of the conference calls held with competitors, 13 November 2015; 11 November 2015; 28 October 2015.
[72]  Agreed minutes of the call held with a competitor, 11 November 2015.
[73]  Replies to RFI "Follow up questions on gas meters" dated 13 November 2015 and 18 November 2015.
[74]  Reply to RFI "Follow up questions on gas meters" dated 13 November 2015.
[75]  Agreed minutes of the call held with a competitor, 23 November 2015.
[76]  Agreed minutes of the call held with a competitor, 23 November 2015.
[77]  Q6 – Questionnaire to customers, replies to question 11 and 12.
[78]  Agreed minutes of the call held with a competitor, 23 November 2015.
[79]  Agreed minutes of the call held with a competitor, 23 November 2015.
[80]  Q5 – Questionnaire to competitors, replies to question 6.
[81]  Q6 – Questionnaire to customers, replies to question 15.
[82]  Replies to RFI – Follow up questions.
[83]  Agreed minutes of the call held with a competitor, 13 November 2015;     agreed minutes of the call held with  a  competitor,  11  November
2015.
[84]  See for example the agreed minutes of the call held with a competitor, 11 November 2015.
[85]  Helium or nitrogen is used as the so-called carrier gas.

[86]  Q6 – Questionnaire to customers, replies to question 15.

[87]  Q6 – Questionnaire to customers, replies to question 18.
[88]  Ibid.
[89]  Q6 – Questionnaire to customers, replies to question 19.
[90]  The market investigation indicated that firmware and hardware adaptions required to make electronic devices used  in  the  metering  sector
DSFG compliant are very similar. Therefore, the analysis for gas flow computers applies mutatis mutandis to EVCs.

[91]  Q6 – Questionnaire to customers, replies to question 21.
[92]  Q6 – Questionnaire to customers, replies to question 22.
[93]  Metering products is a broad category encompassing gas meters, gas flow computers, EVCs and gas chromatographs.
[94]  Q6 – Questionnaire to customers, replies to questions 24, 26, 27 and 28.
[95]  Q6 – Questionnaire to customers, replies to questions 25 and 29.
[96]  Q6 – Questionnaire to customers, replies to question 26.

[97]  Form CO, para. 245.

[98]  Form CO, para. 240.
[99]  Form CO, para. 240.
[100]       Form CO, para. 240.
[101]       Agreed minutes of the calls with two customers, 05 and 16 October 2015.
[102]       Agreed minutes of the calls with two customers, 05 and 07 October 2015.
[103]       Agreed minutes of the call with a customer, 05 October 2015. As the customer explained that is a general trend in the industry.
[104]       Q1 – Questionnaire to competitors, replies to questions 26 and 27.
[105]       Minutes of the calls with two customers, 05 and 16 October 2015.
[106]       Minutes of the calls with two customers, 05 and 07 October 2015.
[107]       Minutes of the call with a customer, 05 October 2015. As the customer explained that is a general trend in the industry.
[108]       Q1 – Questionnaire to competitors, replies to questions 26 and 27.
[109]       Agreed minutes of the call with a customer, 05 October 2015.
[110]       Agreed minutes of the call with a customer, 07 October 2015.
[111]       Agreed minutes of the call with a customer, 07 October 2015.
[112]       Q2 – Questionnaire to customers, replies to question 31 to 33.
[113]       Q1 – Questionnaire to competitors, replies to question 30.
[114]       Q1 – Questionnaire to competitors, replies to question 31.
[115]       Q2 – Questionnaire to customers, replies to question 34.
[116]       Q2 – Questionnaire to customers, replies to question 32; Q1 – Questionnaire to competitors, replies to question 25.
[117]       Agreed minutes of the call with a competitor, 06 October 2015.
[118]       Agreed minutes of the call with two customer, 07 and 16 October 2015.
[119]       Form CO, para. 272.
[120]       Q1 – Questionnaire to competitors, replies to question 40.
[121]       Q1 – Questionnaire to competitors, reply of a competitor to question 40.
[122]       Agreed minutes of a call with a competitor, 16 Octiber 2015.
[123]       Q1 – Questionnaire to competitors, replies to question 40.
[124]       Q2 – Questionnaire to customers, replies to question 40.
[125]       Agreed minutes of a call with a competitor, 06 October 2015.
[126]       Form CO, para. 342 to 346.

[127]       The Notifying Party's reply to the RFI of 8 December 2015.
[128]       Q4 – Questionnaire to customers, replies to question 25.2.
[129]       Q4 – Questionnaire to customers, replies to question 25.
[130]       Form CO, para. 323.

[131]       See section V.3.1.1 and V.3.1.2 above.

[132]       Agreed minutes of the call with a competitor, 23 October 2015. See definition of BCU in para. 56 above.
[133]       Market share of third parties are indicated in ranges for confidentiality reasons.
[134]       This data refer only to the win-loss analysis of Elster for the past 5 years. HON did not identify any  competitor  in  the  win-loss
database provided.
[135]       Q6 – Questionnaire to customers, replies to questions 30 and 31.
[136]       See section IV.3.1.1.b.
[137]       Q6 – Questionnaire to customers, replies to question 30.
[138]       Reply to RFI of 17 November 2015.
[139]       Ibid.
[140]       Reply to RFI Case M.7737 - Honeywell/Elster - Additional questions of 19 November 2015.
[141]       Agreed minutes of the conference call held with a competitor, 17 November 2015.
[142]       Reply to RFI Case M.7737 - Honeywell/Elster - Additional questions of 19 November 2015.
[143]       Ibid.
[144]       Replies to RFI - Additional questions of 19 November 2015.
[145]       Q6 – Questionnaire to customers, replies to question 43 and Q7 – Questionnaire to competitors, replies to question 32.
[146]       Q6 – Questionnaire to customers, replies to question 42.1.
[147]       Q5 – Questionnaire to competitors, replies to question 31.1.
[148]       Q6 – Questionnaire to customers, replies to question 43.1.
[149]       Q5 – Questionnaire to competitors, replies to question 32.1.
[150]       Agreed minutes of calls with competitors, 28 October 2015, 11 November 2015 and 12 November 2015.
[151]       Q6 – Questionnaire to customers, replies to question 46.
[152]       Q6 – Questionnaire to customers, replies to question 38.2 and 39.
[153]       Q6 – Questionnaire to customers, replies to question 45.
[154]       Q6 – Questionnaire to customers, replies to question 43.
[155]       HON does not sell ultrasonic gas meters for non-fiscal applications and Elster has an estimated market share  of  less  than  [0-5]%,
Form CO, para. 330.
[156]       Questionnaire to customers, replies to question 38.3 and 39.
[157]       Questionnaire to customers, replies to question 45.3.
[158]       Questionnaire to customers, replies to question 32.
[159]       Questionnaire to customers, replies to question 42.3 and 43.3.
[160]       See Annex 3b to the Form CO: report "GAS SENSORS AND GAS METERING: APPLICATIONS AND MARKETS" of August 2014 by BCC Research.
[161]       Form CO, paras 393 to 396.
[162]       Replies to RFI "M.7737 - Honeywell/Elster: Request for Information" of 9 November 2015.
[163]       Agreed minutes of the call held with a competitor, 13 November 2015.
[164]       Agreed minutes of the call held with a competitor, 11 November 2015.
[165]       Agreed minutes of the call held with a competitor, 11 November 2015.
[166]       Krohne, the only other existing players launched its DSFG compliant gas flow computer only in 2015 and therefore did not achieve  any
sale in 2014 (and previous years).
[167]       Form CO, para. 404.
[168]       "M.7737 HONEYWELL / ELSTER Additional Thoughts on DSFG" of 6 November 2015.
[169]       DSFG is a communication protocol used mainly in Germany and Austria, therefore the customer contacted  to  investigate  these  issues
are a sub-set of all the customers contacted in the course of the market investigation.
[170]       Replies to RFI "Follow up questions to customers", agreed minutes of the call held with a customer, 29 October 2015.
[171]       Agreed minutes of the call held with a competitor, 11 November 2015.
[172]       Agreed minutes of a conference call with a competitor, 9 December 2015.
[173]       Q6 – Questionnaire to customers, replies to question 46.
[174]       Form CO, para. 330.
[175]       Replies to RFI "M.7737 - Honeywell/Elster: Request for Information" of 09 November 2015.
[176]       Agreed minutes of a conference call with a competitor, 12 November 2015.
[177]       See section IV.3.3.5 above.
[178]       Additional submission on sections 6 to 8 relating to gas chromatographs.
[179]       Note submitted by the Parties on 23 November 2015.
[180]       Agreed minutes of the call held with a competitor, 11 November 2015.
[181]       According to the Parties Elster did not achieve any turnover on this market in 2014 .
[182]       Questionnaire to customers, replies to question 38.7.
[183]       Questionnaire to customers, replies to question 45.7.
[184]       Questionnaire to customers, replies to question 43.7.
[185]       Q7 – Questionnaire to competitors, replies to question 7; Q8 – Questionnaire to competitors, replies to question 4.
[186]       Q7 – Questionnaire to competitors, replies to question 7; Q8 – Questionnaire to competitors, replies to question 4.
[187]       Agreed minutes of a conference call with a competitor, 09 December 2015.
[188]       Q7 – Questionnaire to competitors, replies to question 7; Q8 – Questionnaire to competitors, replies to question  4;  agreed  minutes
of a conference call with a competitor, 09 December 2015.
[189]       Agreed minutes of a conference call with a competitor on 9 December 2015.
[190]       Agreed minutes of conference calls with two competitor on 9 and 10 December 2015.
[191] Commission Notice on remedies acceptable under Council Regulation (EC) No  139/2004  and  under  Commission  Regulation  (EC)  No  802/2004
(2008/C 267/01), (the "Commission Notice on Remedies").
[192] Commission Notice on Remedies, paragraph 9.
[193] Commission Notice on Remedies, paragraph 12.
[194] Commission Notice on Remedies, paragraph 17.
[195] Commission Notice on Remedies, paragraph 23.
[196] Commission Notice on Remedies, paragraphs 25 and 26.
[197]       See also Commission Notice on Remedies, paragraphs 10 and 15.
[198]       Agreed minutes of a conference call with a competitor on 9 December 2015.
[199]       Agreed minutes of conference calls with two competitor on 9 and 10 December 2015.
[200]       Q7 – Questionnaire to competitors, replies to question 12; Q8 – Questionnaire to competitors, replies to question 10.
[201]       Q7 – Questionnaire to competitors, reply of a respondent to question 2.
[202] Honeywell notes that the licensing conditions of SAP only allow for a 120 day grace  period  following  which  the  Purchaser  must  either
transfer the data to their own ERP or acquire a license from SAP. Honeywell believes that this is  common  and  industry  practice  for  SAP.  As
regards the transfer of Oracle licenses Oracle permits eight (8) months use by a new user which means that a purchaser would have to acquire  his
own license after that period.

[203] For the avoidance of doubt, the Divestment Business will not acquire the right to use the “RMG by Honeywell” brand.

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 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