CELEX: 32014M7400
Language: en
Date: 2014-12-15 00:00:00
Title: Commission Decision of 15/12/2014 declaring a concentration to be compatible with the common market (Case No COMP/M.7400 - FEDERAL-MOGUL CORPORATION / TRW ENGINE COMPONENTS) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

                                        Brussels, 15.12.2014
                                        C(2014)9873 final

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                                        To the notifying party

Dear Sir/Madam,

Subject:    Case M.7400 - Federal-Mogul Corporation / TRW Engine Components
         Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1] and Article 57 of the Agreement on the European
         Economic Area[2]

1) On 10.11.2014, the European Commission received notification of a proposed concentration pursuant to Article 4 of  the  Merger  Regulation  by
   which Federal-Mogul Corporation ("FDML", USA) acquires within the meaning of Article 3(1)(b) of the Merger Regulation sole  control  over  the
   engine valve components business of TRW Automotive Inc. ("TEC", USA), by way of purchase of shares and  assets[3]  (Federal-Mogul  Corporation
   and TRW Automotive Inc. are designated hereinafter as the "Parties" or "parties to the proposed transaction".)

       THE PARTIES

2) FDML is an international company which develops, manufactures and sells engine,  transmission  and  driveline  components  as  well  as  brake
   friction material, chassis, sealing and wiper products for automotive, rail and other applications. FDML also distributes, markets  and  sells
   brake fluids and hardware (e.g. discs), chassis, sealing and engine components as well as ancillary equipment.

3) TEC is active at worldwide level in the engine components business relating to the designing, developing, simulation,  testing,  manufacturing
   and selling of engine valves, valve train components, valve rotators, retainers, tappets and rocker arm  assemblies,  in  each  case  for  the
   automotive industry or heavy duty engine applications.

       THE CONCENTRATION

4) The proposed concentration concerns the acquisition by FDML of sole control over the engine valve components business of  TRW,  consisting  of
   certain TRW companies and joint venture interests as well as certain TRW assets collectively referred to as TEC.

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

       EU DIMENSION

6) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 2 500 million[4]  (FDML: EUR […] million;  TEC:  EUR
   […] million). Each of them has an EU-wide turnover in excess of EUR 100 million (FDML: EUR […] million; TEC: EUR […] million), but they do not
   achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State. Furthermore, the  aggregate  Community-
   wide turnover of each of the undertakings concerned is more than EUR 100 million. In addition, in at least three Member States, being Germany,
   Spain and Austria, the combined aggregate turnover of all the undertakings concerned is more than EUR 100 million and in each of  these  three
   Member States, the aggregate turnover of FDML as well as of TEC is more than EUR 25 million.

7) The notified operation therefore has an EU dimension according to Article 1(3) of the Merger Regulation.

       COMPETITIVE ASSESSMENT

8) The Parties' activities mainly overlap with respect to engine valves. There are no vertical relationships between the Parties' activities.

1 Market definition

9) The valve train is an essential part within the combustion engine. Its main function is to allow the gas exchange in the  combustion  chamber.
   The valve train mainly consists of engine valves, valve cotters, valve rotators,  retainers,  tappets,  and  rocker  arm  assemblies.  In  the
   specific case of engine valves, a general distinction can be made between monometallic and bimetallic valves.

10) In the past, the Commission has not specifically addressed the market of valves and valve train components for internal  combustion  engines,
   except for valve train actuation products (valve lifters)[5]. However, the Commission has previously analysed the markets of other  automotive
   components[6]. The approach taken in these cases has been applied to the case at hand and has been confirmed during the market investigation.

1 Product market definition

11) In the past decisional practice regarding automotive components, the  Commission  considered  that  each  individual  component  may  form  a
   separate product market, at least from a demand-side perspective. Each component would perform a highly specific function within a system  and
   these components would not be substitutable among each other[7].

12) In addition, in the past the Commission has further  distinguished  automotive  components  by  different  applications.  For  instance,  the
   Commission considered it appropriate to segment the relevant market for diesel engines by end-use application[8], in  most  of  the  cases  as
   follows[9]: industrial, on-highway trucks, power generators and marine applications. A distinction has also been made between  components  for
   light vehicles ("LVs"), namely passenger cars and light commercial vehicles weighing up  to  6  tonnes,  and  for  heavy  commercial  vehicles
   ("HCVs"), which includes medium and heavy-duty commercial vehicles such as trucks, buses and trailers[10].

13) Moreover, the Commission has previously established that the market for each component (possibly distinguished by  end-use  application)  can
   be further segmented by supply channel: the supply of components to automotive manufacturers for installation on new  vehicles,  the  Original
   Equipment Manufacturer ("OEM") and the replacement of components to OEMs and their authorised dealers, the Original Equipment Service ("OES"),
   constitutes a different market from the supply of replacement  products  to  independent  customers,  this  is,  the  independent  aftermarket
   ("IAM")[11].

14) The Parties generally share the Commission's approach. With particular regard to  the  distinction  by  component,  the  Parties  argue  that
   defining different product markets for each valve train component, as done in the past by the Commission, would indeed be  appropriate,  given
   the absence of any demand for pre-assembled groups of valve train components. The Parties even suggest a possible sub-segmentation  for  mono-
   metallic valves and bi-metallic valves since significant differences exist between these two types of valve in terms of costs, materials  used
   and application.

15) The Parties however consider that for the present case the exact product market definition can be  left  open  as  the  proposed  transaction
   would not lead to any competitive concern.

16) The market investigation indicates that with regard to the IAM the relevant product market could be further segmented into mono-metallic  and
   bi-metallic markets while it has not been conclusive on a possible segmentation of engine valves by end-use application.

17) The Commission considers for the purpose of this decision that the exact product delineation of the  relevant  market  involving  the  engine
   valve supply to OEM/OES and IAM can be left open as the proposed concentration does not give rise  to  competition  concerns  even  under  the
   narrowest plausible product market.

2 Geographic market definition

18) In the past the Commission indicated that the geographic scope for the sale of automotive components to the OEM/OES market is, at least, EEA-
   wide[12]. With respect to the IAM, the Commission has considered these markets at least national in scope[13], with a possible  trend  towards
   an EEA-wide market. In most of the cases, the Commission did not conclude on the exact geographic market definition.

19) The Parties agree on the geographic scope of the OEM/OES market previously adopted by the Commission.

20) With respect to the IAM, the Parties submit that the scope of the market should be defined as  EEA-wide.  Indeed,  they  state  that  from  a
   demand side perspective, customers are organized as international wholesalers or pan-European buying groups, sourcing at  EEA  level.  On  the
   other side, they also submit that from a supply perspective, production plants, serving the entire  EEA,  would  only  be  located  in  a  few
   countries.

21) The Commission considers for the purpose of this decision that the exact geographic scope  of  the  relevant  markets  involving  the  engine
   valve supply to OEM/OES and IAM can be left open as the proposed concentration does not give rise  to  competition  concerns  even  under  the
   narrowest plausible geographic market.

2 Competitive Assessment

22) Based on the Parties' activities, the proposed transaction involves a number of horizontal overlaps in the sector of engine  valves,  leading
   to the following horizontally affected markets:

        a. the EEA OEM/OES market for monometallic engine valves for marine/stationary

        b. the German IAM for monometallic engine valves for light vehicles

        c. the German IAM for monometallic engine valves for commercial vehicles

        d. the German IAM for bimetallic engine valves for marine/stationary

1 EEA OEM/OES market for monometallic engine valves for marine/stationary

23) On the EEA OEM/OES market for monometallic engine valves for marine/stationary the Parties' combined market share would be [10-20]% by  value
   and [20-30]% by volume based on 2013 data. TEC has market shares of [10-20]% by value and [10-20]% by volume. FDML has only a limited share of
   the market by value ([0-5]% by value and [10-20]% by volume) with [identity of customer].

24) The Commission considers that the market is characterized by several competitors, such as MWH (Germany) with [5-10]% by value and [5-10]%  by
   volume, Zanzi (Italy) with [5-10]% by value and [5-10]% by volume, Mahle (Germany) with [5-10]% by value and  [10-20]%  by  volume  and  Eaton
   (USA) with [10-20]% by value and [0-5]% by volume.

25) In addition, the Commission has no indications that FDML and TEC are close competitors.  [Information on FDML's manufacturing]  According  to
   the Parties, this is illustrated by the average price per unit which was approximately EUR [40-60] per TEC valve and approximately EUR  [0-10]
   per FDML valve in 2013. Thus, the Commission  considers  that  with  its  offering,  FDML  does  not  compete  for  a  large  portion  of  the
   Marine/Stationary segment offered by TEC.

26) On the basis of the above and all available evidence the Commission considers that the concentration does not raise serious doubts as to  its
   compatibility with the internal market with regard to EEA OEM/OES market for monometallic engine valves for marine/stationary.

2 German IAM for monometallic engine valves for light vehicles

27) On the German IAM for monometallic engine valves for light vehicles the Parties' combined market share would be [20-30]% by  value  and  [10-
   20]% by volume based in 2013. FDML has a share of the market of [5-10]% by volume and [10-20]% by value. TEC's position on the  German  market
   for valves light vehicles is only slightly stronger with market shares of [10-20]% by volume and  [10-20]%  by  value.  However,  the  Parties
   underline that TEC's market share is overestimated, [information on TEC's distribution system].

28) The Commission considers that the combined entity will continue to face strong competition by undertakings  with  similar  or  higher  market
   shares such as, inter alia, Mahle ([10-20]% by both value and volume), Eaton ([10-20]% by both value and volume) and Osvat  (Italy)  ([20-30]%
   by both value and volume).

29) On the basis of the above and all available evidence the Commission considers that the concentration does not raise serious doubts as to  its
   compatibility with the internal market with regard to the German IAM for monometallic engine valves for light vehicles.

3 German IAM for monometallic engine valves for commercial vehicles

30) On the German IAM for monometallic engine valves for commercial vehicles the Parties' combined market shares would be [20-30]% by  value  and
   [10-20]% by volume based on 2013 data. TEC's position on the German market for valves for commercial vehicles  is  [10-20]%  market  share  by
   volume and [5-10]% by value. FDML has a limited share of the market of [0-5]% by volume and [0-5]% by value.

31) The Commission considers that the merged entity faces significant competition from competitors which have post-merger similar  market  shares
   such as Mahle ([10-20] by both value and volume), Eaton ([10-20]% by both value and volume) and Osvat ([20-30]% by both value and volume).

32) On the basis of the above and all available evidence the Commission considers that the concentration does not raise serious doubts as to  its
   compatibility with the internal market with regard to the German IAM for monometallic engine valves for commercial vehicles.

4 German IAM for bimetallic engine valves for marine/stationary

33) On the German IAM for bimetallic engine valves for marine/stationary the Parties' combined market share would be [10-20]% by value  and  [20-
   30]% by volume based on 2013 data. TEC's market share on the German market for valves for marine/stationary is [10-20]% by volume and [10-20]%
   by value. FDML holds a more limited share of the market of [10-20]% by volume and [0-5]% by value.

34) The Commission considers that FDML and TEC are not close competitors as [different  supply  foci].  Therefore,  the  market  shares  provided
   overstate the market position the combined entity has vis-à-vis its competitors, namely MWH ([10-20]% by value, [5-10]% by volume), Eaton ([5-
   10]% by value, [0-5]% by volume) and Mahle ([5-10]% by value, [10-20]% by volume).

35) On the basis of the above and all available evidence the Commission considers that the concentration does not raise serious doubts as to  its
   compatibility with the internal market with regard to German IAM for bimetallic engine valves for marine/stationary.

5 Conclusion

36) The market investigation confirmed that the proposed concentration is unlikely to raise competition concerns mainly because none of  FDML  or
   TEC is considered as an indispensable supplier, customers would be able to switch in case of a permanent price increase and no effect  on  the
   availability and on the price of the engine valves is expected as a result of the proposed concentration.

37) Based on the above and all available evidence, the Commission considers that the proposed concentration does not raise serious doubts  as  to
   its compatibility with the internal market.

       CONCLUSION

38) For the above reasons, the European Commission has decided not to oppose the notified  operation  and  to  declare  it  compatible  with  the
   internal market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger Regulation and Article 57
   of the EEA Agreement.

                                        For the Commission

                                        (Signed)
                                        Margrethe VESTAGER
                                        Member of the Commission

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[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 407, 15.11.2014, p. 16.

[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]   COMP/M.1789 – INA / Luk, para. 11.
[6]   Among others, IV/M.1189 – Teksid / Norsk Hydro Produksjon /  Meridian;  COMP/M.1587  –  Dana  /  GKN,  COMP/M.4456  –  Mahle  /  Dana  EPG;
      COMP/M.4524 – Nemak / Hydro Castings; COMP/M.5500 –  General  Motors  /  Delphi  Steering  Business;  COMP/M.5799  –  Faurecia  /  Plastal;
      COMP/M.6083 – FIAT / GM / VM Motori JV; COMP/M.6714 – U-Shin / Valeo CAM;
[7]   COMP/M.4524 – Nemak / Hydro Castings, para. 13, 15; COMP/M.6714 – U-Shin / Valeo CAM, para.6
[8]   IV/M.768 – Lucas / Varity, para. 9.
[9]   IV/M.1094 – Caterpillar / Perkin Engines, para. 10, 12; COMP/M.2127 – DaimlerChrysler/Detroit Diesel Corporation, para. 20;  COMP/M.5157  –
      Volkswagen / Scania, para. 23; COMP/M.6083 – FIAT / GM / VM Motori JV, para. 12
[10]  COMP/M.1587 – Dana / GKN, para. 11, 12; COMP/M.4456 – Mahle / Dana EPG, para. 13; COMP/M.5799 – Faurecia / Plastal, para. 7, COMP/M.6714  –
      U-Shin / Valeo CAM, paras.7, 9.
[11]  COMP/M.4456 – Mahle / Dana EPG, para. 10; COMP/M.5799 – Faurecia / Plastal, para. 7; COMP/M.6714 – U-Shin / Valeo CAM, para. 7
[12]  COMP/M.1587 – Dana / GKN, para. 16 (despite no direct reference to OEM); COMP/M.1959 – Meritor / Arvin, para.  11;  COMP/M.3789  –  Johnson
      Controls / Robert Bosch / Delphi SLI, para. 10; M.5500 – General Motors / Delphi Steering Business, para. 23 (despite no  direct  reference
      to OEM); COMP/M.5799 – Faurecia / Plastal, para. 15; COMP/M.6714 – U-Shin / Valeo CAM, para. 32
[13]  COMP/M.1959 – Meritor / Arvin, para. 11; COMP/M.3789 – Johnson Controls / Robert Bosch / Delphi SLI, para. 12. COMP/M.2939 – JCI / Bosch  /
      VB Autobatterien JV, p. 6 infra. "Regarding the IAM market, the market conditions, including (…) low transport costs, lead us  to  conclude
      that the IAM market is EEA-wide"

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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