CELEX: 32014M7075
Language: en
Date: 2014-02-18 00:00:00
Title: Commission Decision of 18/02/2014 declaring a concentration to be compatible with the common market (Case No COMP/M.7075 - CINTRA / ABERTIS / ITINERE / BIP & DRIVE JV) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 18.2.2014
C(2014) 1156 final

                                        [pic]

|To the notifying parties:                                              |                                                                       |
|                                                                       |                                                                       |

Dear Sir/Madam,

Subject:    Case No COMP/M.7075 - CINTRA / ABERTIS / ITINERE / BIP & DRIVE JV
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1]

1) On 14 January 2014, the European Commission received notification of a proposed concentration pursuant to Article 4 of the  Merger  Regulation
   by which Cintra Infraestructuras, S.A. ("Cintra", Spain ), Abertis Autopistas España, S.A. ("Abertis", Spain)  and  Itínere  Infraestructuras,
   S.A. ("Itínere", Spain) acquire within the meaning  of  Article  3(1)(b)  of  the  Merger  Regulation  joint  control  over  BIP & Drive  S.A.
   ("BIP & Drive JV" , Spain) by way of purchase of shares in a newly created company constituting a joint venture (hereinafter  referred  to  as
   “the proposed transaction").[2]

2) Cintra, Abertis and Itínere are designated hereinafter as the "Parties".

       THE PARTIES

3) Cintra is active in the construction of roads and motorways and handles toll road concessions in Europe,  in  particular  Spain,  as  well  as
   Canada and the United States. Cintra belongs to  the  Ferrovial  Group,  which  is  a  diversified  group  with  activities  in  construction,
   infrastructure concessions, telecommunications and services operating internationally.

4) Abertis belongs to the Abertis Group, which manages mobility and telecommunications infrastructures  all  over  the  world,  including  Spain,
   through three business areas: toll roads, telecommunications and airports.

5) Itínere is a company ultimately controlled by the investment fund Citi Infrastructure Partners, L.P., belonging to Citigroup. Itínere  manages
   motorway concessions in Spain. It is also active in the field of exploitation and provision of all types of  services  related  to  urban  and
   intercity transport infrastructure; design, construction, execution, exploitation, management, administration, preservation and development of
   all kinds of infrastructures and works, both public and private; management of public water supply,  sewage  and  purification  services,  and
   works and services administrative concessions, etc.

6) BIP & Drive JV is a newly created company, which will distribute electronic toll payment  devices  known  as  On-Board  Equipment  ("OBE")  in
   Spain.[3]

       THE CONCENTRATION

7) BIP & Drive JV shall be incorporated as a full-function joint venture within the meaning of the Merger Regulation  and  it  shall  be  jointly
   controlled by the Parties.

1 Joint control

8) The corporate governance structure of BIP & Drive consists of the General Shareholders Meeting, the  Board  of  Directors  composed  of  eight
   members and the Directive Management. Abertis will have 50% of the share capital and the voting rights and will designate four members of  the
   Board, whereas Cintra and Itínere will each have 25% of shares, rights and will each appoint two members of the Board.

9) The General Shareholders Meeting will normally require the quorum representing more than 50% of the share capital and voting  rights  present.
   Decisions will be taken by the favourable vote of shareholders representing more than 50% of the shares.

10) However, the adoption of a number of strategic decisions, amongst which, the appointment and the removal of the Board of Directors'  members,
   the adoption of the initial business plan and the initial budget, as well as the business plan to be developed within one year from  the  date
   of incorporation of the JV, and which will determine the business strategy of the  company  for  the  following  ten  years  shall  require  a
   reinforced majority of 76% or the votes of seven out of eight directors.

11) In addition, BIP & Drive JV will have the Directive Management in charge of the daily operations, comprising the General Director,  appointed
   by Abertis, the Financial Director by Cintra and the Technical Director by Itínere.

12) Based on the above it follows that BIP & Drive will be jointly controlled by  Cintra,  Abertis  and  Itínere  in  the  sense  of  the  Merger
   Regulation.

2 Full-functionality

13) BIP & Drive JV will have sufficient resources to operate independently on the market for distribution of OBE devices.

14) The Parties will provide the initial contribution up to EUR […] during the first five years as of the incorporation.

15) BIP & Drive JV will have its own tangible and intangible assets, namely information systems necessary for operating the business as  well  as
   its own premises located in Madrid (Spain). It will also have its own management dedicated to day-to-day business and  will  recruit  its  own
   personnel.

16) The essence of BIP & Drive JV’s income will stem from the sales of OBE devices to the final customers (registration fee), annual charges  for
   the OBE devices (maintenance fee) and from the commissions paid by the entities managing motorway concessions based on the  expenses  in  toll
   payments made by OBE users distributed by BIP & Drive JV.

17) BIP & Drive JV will conclude a supply contract with an OBE manufacturer, selected through a tender. The OBE devices will be sold […].  BIP  &
   Drive JV will have its own brand and will set up its own commercial policy. […].

18) BIP & Drive JV will compete with the entities currently distributing OBE devices in Spain, namely banks, other  non-financial  entities  such
   as oil companies (Repsol and Cepsa) as well as specialised OBE distributors such as  Pagatelia  and  undertakings  specialised  in  technology
   payment methods (such as Ingénico).

19) Lastly, BIP & Drive JV is established for an indeterminate period of time, thus it will perform on  a  lasting  basis  all  functions  of  an
   autonomous economic entity.

20) Therefore, BIP & Drive JV will be fully-functional within the meaning of the Merger Regulation.

21) In view of the above, the proposed transaction constitutes a concentration within the meaning of Article 3(4) of the Merger Regulation.

       EU DIMENSION

22) The undertakings concerned have a combined aggregate world-wide turnover of more  than  EUR  5  000  million[4]  (Cintra:  EUR  […]  million,
   Abertis: EUR […] million, Itínere: EUR […] million). Each of them has an EU-wide turnover in excess  of  EUR  250  million  (Cintra:  EUR  […]
   million, Abertis EUR […] million, Itínere EUR […] million) but they do not achieve more than two-thirds of their  aggregate  EU-wide  turnover
   within one and the same Member State.

23) Therefore, the proposed transaction has an EU dimension under the meaning of Article 1(2) of the Merger Regulation.

       MARKET DEFINITION

24) The proposed transaction is vertical and conglomerate in nature and does not give rise to any horizontal overlap in relation to BIP  &  Drive
   JV's activities and its parents. It results in a vertically affected market due to the strong position of the parent companies in  the  market
   for the exploitation of motorway concessions in Spain which is vertically related to the market for the distribution of OBE devices where  BIP
   & Drive JV will be active.

1 The upstream market for the exploitation of toll motorways

1 Product market definition

25) In its practice, the Commission has repeatedly distinguished between the activities of granting a licence for  a  particular  State-regulated
   activity (competition for the market) and the running of this  activity  (competition  in  the  market).[5]  By  analogy  the  Commission  has
   distinguished within the activities related to toll  motorways  between  (i)  the  market  for  the  granting  of  toll  motorway  concessions
   (competition for the market) and (ii) the market for the exploitation of toll motorways (competition in the market).[6] The following analysis
   aims at determining which of these two product markets is more relevant for the assessment of the vertical relationship  with  the  downstream
   market for the distribution of OBE devices.

26) In Spain, motorway concessions are granted by public authorities, via open tender procedure, to  companies  in  charge  of  the  construction
   and/or the exploitation for a period generally exceeding 20 years. Once the concession is granted to the winner of the tender procedure,  that
   company has an exclusive right to manage that concession.

27) The OBE distributors deal with the motorways managers running their concessions and have no influence on the granting of  these  concessions.
   Therefore, the upstream market concerned by the proposed transaction is the market for the exploitation of toll motorways, which  consists  of
   "the provision of speedy and secure road transport infrastructures between various geographical points".[7] This market is vertically  related
   to the market for the distribution of OBE devices.

28) In addition, in previous decisions, the Commission considered that each motorway constituted a separate market for the exploitation  of  toll
   motorways, given the limited substitutability amongst motorways from the  drivers'  perspective.[8]  However,  from  the  perspective  of  OBE
   distributors, such product delineation is irrelevant, notably due to the fact that OBE distributors face concessionaires of toll motorways  on
   a national basis regardless of the precise motorways that they exploit.

29) In any event, the question whether the exploitation of each motorway concession should be regarded as a distinct product market can  be  left
   open for the purpose of the present case, as the competitive assessment does not change irrespective of the market definition retained.

2 Geographic market definition

30) In past cases, while leaving the geographic scope of the markets open, the Commission  held  that  the  market  for  granting  toll  motorway
   concessions was probably EEA-wide in scope, whereas the geographic scope of the market for  the  exploitation  of  toll  motorways  should  be
   defined according to the "origin & destination method", i.e. assuming that each  motorway  constitutes  a  distinct  market  due  to  lack  of
   substitutability from the point of view of a driver who needs to reach a certain geographical point.[9]

31) For the purpose of the present case, from the point of view of OBE distributors, which  due  to  national  regulatory  requirements  need  to
   ensure interoperability of their OBE devices on all toll motorways in Spain, the relevant geographic market could be considered as national in
   scope. This approach would be supported by the fact that there exists an association  of  Spanish  concessionaires,  ASETA,  representing  the
   collective interest of its members.[10] Among others, ASETA checks whether any newly introduced OBE device is operable  on  all  motorways  in
   Spain.

32) In any event, the question of the precise product and geographic market definition can be left open for the purpose of the present  case,  as
   the competitive assessment does not change irrespective of the market definition retained.

2 The downstream market for the distribution of OBE devices

1 Product market definition

33) In relation to the distribution  of  OBE  devices  in  Spain  five  main  stakeholders  are  present,  notably  manufacturers,  distributors,
   concessionaires, financial institutions and end OBE users (the drivers).[11] BIP & Drive JV will operate on the last stage of the distribution
   chain, i.e. offering OBE devices to end users. The Commission has not previously analysed the market for the distribution of OBE devices as  a
   payment method on toll motorways.

34) Toll payments can be made either by credit/debit cards, in cash or via electronic toll systems by using OBE devices.

35) The Parties submit that OBE devices are not substitutable to other means of toll payment  (credit/debit  card  and  cash).  Even  though  all
   methods of toll payment will continue to exist on the motorways managed by the Parties, the toll payment by credit/debit cards and/or in  cash
   are not substitutes for OBEs from a demand-side perspective, notably due to the fact that drivers who choose OBEs as a toll payment method  do
   so in order to avoid stopping at toll stations. None of the other payment methods gives such a  possibility.  In  this  context,  the  Parties
   provide evidence that besides the fact that OBE devices are much more expensive than using credit/debit  cards  or  cash,  there  is  a  great
   discrepancy in terms of OBE prices with a price variation reaching 70% between various OBE distributors, the  market  leader  being  the  most
   expensive one. This indicates that price is not necessarily the decisive factor for end users’ decision to  purchase  an  OBE  device  and  to
   choose a certain OBE distributor, but that other factors are taken into consideration, in particular the frequent use  of  motorways  and  the
   reduction of the time spent at the toll stations.

36) The information obtained by the Commission in the course of the market investigation largely indicates that the three  different  methods  of
   toll payment do not form part of the same product market. A majority of market participants (both drivers and OBE distributors) indicated that
   once someone has started using an OBE device they would not switch to other means of toll payment, such as  cash  or  credit/debit  cards.  In
   particular, they would not be willing to switch if the current costs of OBE devices (including both purchase price and  the  maintenance  fee)
   were to increase by 5-10% on a permanent basis.[12] The majority of respondents to the market investigation indicated  that  OBE  devices  are
   used as method of toll payment mostly for comfort and security. OBE users make time and  fuel  consumption  savings  for  not  stopping  their
   vehicles at the toll stations, on the one hand, and they benefit from more secure payment transactions than using other means of toll  payment
   (cash in particular), on the other hand.[13] Moreover, the majority of respondents to the market investigation  also  stated  that  OBE  users
   would only pay the toll in cash or by credit/debit card in case the OBE device fails to work for various reasons.[14]

37) Therefore, the relevant market for the assessment of the proposed transaction is the market for the distribution of OBE devices.

2 Geographic market definition

38) Directive 2004/52/EC on the interoperability of electronic road toll systems in the Community[15]  (hereinafter  referred  to  as  “Directive
   2004/52/EC”) and Commission Decision 2009/750/EC on the definition of  the  European  Electronic  Toll  Service  ("EETS")  and  its  technical
   elements[16], (hereinafter referred to as “the Commission Decision on EETS”) aim at the improvement of the interoperability of electronic road
   toll systems in the European Economic Area. However, when analysing the progress achieved in EETS implementation, the Commission  reached  the
   conclusion that there are still different national systems due to technical barriers which have not been removed by the Member States and  the
   stakeholders. Therefore, a pan-European interoperability of electronic road toll systems has not been achieved yet.[17]

39) Directive 2004/52/EC was transposed into Spanish law by means of  Royal  Decree  94/2006,[18]  which  governs  the  interoperability  of  the
   electronic toll systems installed on Spanish motorways. It provides inter  alia  that  OBE  devices  must  be  interoperable  and  capable  of
   communicating with the electronic toll systems operating in the European Union.[19]

40) The Parties submit that a European market for the distribution of OBE devices does not exist to date,  in  particular  due  to  the  lack  of
   interoperability between different national systems. Therefore, the Parties consider that the market for the distribution of  OBE  devices  is
   national in scope.

41) The responses obtained during the market investigation are  inconclusive  with  regard  to  the  geographic  scope  of  the  market  for  the
   distribution of OBE devices. On the one hand, concessionaires and OBE users indicated that, in the majority of cases, OBE devices purchased in
   Spain are used to pay tolls on the national motorways, and only the minority of them indicated that OBE devices can be used in other EU Member
   States.[20] On the other hand, the majority of OBE manufacturers and distributors stated that the geographic coverage of the OBE devices  they
   manufacture and distribute respectively is EEA-wide, in particular due to the fact that the devices can be used in Spain as well as  in  other
   EU Member States.[21] As regards the supply side, the information gathered during the market investigation militates in  favour  of  the  view
   that OBE distributors are currently essentially active on a national level. Indeed,  the  majority  of  OBE  distributors  stated  that  their
   customer base is essentially national, even though the OBE devices they distribute are interoperable on a wider than national basis.[22]

42) In light of the above, it can be concluded that for the time being the market for the distribution of  OBE  devices  is  likely  national  in
   scope.

3 Conclusion

43) Therefore, the relevant market for the assessment of the proposed transaction is the market for the distribution of OBE devices in Spain.

       COMPETITIVE ASSESSMENT

44) The proposed transaction is vertical and conglomerate in nature and does not give rise to horizontal overlaps.

   Factual background

45) Abertis, Cintra and Itínere have a strong presence on the upstream market for the exploitation of toll motorway concessions in Spain as  they
   control 75% of Spanish toll motorways in terms of number of kilometres.

46) BIP & Drive JV is currently not present in the downstream market  for  distribution  of  OBE  devices.  There  are  more  than  50  operators
   distributing OBE devices in Spain, including large Spanish financial institutions. The three main distributors of OBE devices  are  CaixaBank,
   BBVA and Catalunya Caixa with shares amounting to [20-30]%, [5-10]% and [5-10]% respectively in terms of the total number of Spanish  vehicles
   having installed an OBE.[23] Currently OBE devices are installed in [5-10]% of vehicles in Spain.[24]

47) Following the implementation of the proposed transaction, the Parties expect that in the fifth year of activity the OBE  devices  distributed
   by BIP & Drive JV will be installed in more than [10-20]% of vehicles in Spain. Such a presence on the market  would  outperform  by  far  the
   current OBE device usage. The Parties however submit that the market for distribution of OBE devices in Spain is currently underdeveloped  and
   that assessing how much it can grow when stimulated by the implementation of an appropriate set of commercial policies  is  rather  difficult.
   The assumption that BIP & Drive JV may more vigorously advertise OBE devices and thereby increase their popularity  in  Spain  has  also  been
   shared by respondents to the market investigation: both concessionaires and OBE distributors expect that the creation of BIP & Drive  JV  will
   increase the number of OBE devices used in Spain.[25] On this basis, the Parties believe that in five years BIP & Drive JV is likely to have a
   market share similar to that of CaixaBank today (approximately [20-30]%).

1 Potential vertical foreclosure effects

48) In theory, one could imagine that Cintra, Abertis and Itínere, due to their important position on the upstream  market  for  exploitation  of
   toll motorway concessions, would have the ability and incentive to restrict the access of other OBE distributors to the motorways under  their
   concession, in order to protect BIP & Drive JV's market position on the downstream market for the OBE  distribution.  This  input  foreclosure
   strategy could theoretically be achieved in particular by worsening the terms of contracts with the OBE distributors  (competitors  of  BIP  &
   Drive JV), by bringing such contracts to an end or by limiting the technical interoperability between toll station reading equipment  and  OBE
   devices distributed by competing OBE distributors. A potential foreclosure strategy towards OBE manufacturers,  due  to  an  increasing  buyer
   power of BIP & Drive JV in the future could also be envisaged.

1 Input foreclosure strategy by contractual means or by means of limiting the technical interoperability

1 The importance of the input for the downstream market

49) The access to the reading equipment installed at the toll stations of a given motorway is a key element for the functionality of OBE  devices
   distributed in the downstream market. There is no other alternative for OBE distributors apart from having a contract with concession managers
   guaranteeing that the OBE devices will be read by the toll equipment installed at the toll stations of a given motorway.

50) In practice, OBE distributors negotiate contracts with motorway concessionaires on a mutual agreement basis.[26]  Typically  these  contracts
   are entered into for three years and thereafter may be tacitly renewed every year. The negotiated contracts would determine inter alia i)  the
   commissions that the motorway concessionaires will pay to OBE distributors based on the number of their OBE devices passing through  the  toll
   gates – depending on the contract, these commissions currently vary from 0.6% to 1.5% of the toll price[27]; ii) the number of devices  to  be
   included on the list of invalidated OBE devices that should not be let through by the concessionaire (the so-called 'blacklist'); and iii) the
   terms of payment (since OBE distributors charge their customers with a delay, while they might need to pay the concessionaires earlier).[28]

2 Ability to foreclose

51) During the market investigation, some respondents raised the concern that the creation of BIP & Drive JV could lead  to  the  marginalisation
   of other OBE distributors, notably if the Parties were to start granting lower commissions to BIP & Drive JV's  competitors.[29]       Certain
   market participants also noted that the concessionaires could have the ability to foreclose existing OBE distributors by offering unfavourable
   conditions as regards the maximum acceptable number of blacklisted OBE devices and the terms of payment. Allegedly the Parties  could,  first,
   reduce the number of registers in the blacklist, as a result of which those OBE distributors would run a higher risk of being liable  for  the
   OBE devices which do not generate toll payments. Second, the Parties could potentially request  the  OBE  distributors  to  make  payments  to
   concessionaires once or twice a week, even though the OBE distributors receive money from end users  only  at  the  end  of  the  month.  This
   situation would require a more solid financial capacity of the OBE distributors. As a result of any of these strategies (or a  combination  of
   them), the Parties could marginalise or even slowly eliminate all competitors of BIP & Drive JV.[30]

52) Finally, some OBE distributors explained that it would be technically feasible for the Parties to reject at the toll  gates  OBE  devices  of
   certain OBE distributors that compete with BIP & Drive JV.[31] For instance, the Parties could terminate (or not renew) the contracts with OBE
   distributors and through the software remove from their reading equipment those OBEs which had the PIN code of a given OBE distributor.

53) None of these scenarios, however, seems to be realistic.

54) Indeed, the Spanish legislation governing the interoperability of electronic toll systems (the Royal Decree 94/2006) sets out in its  Article
   6 a non-discrimination principle between manufacturers  and  distributors.  In  particular,  the  Spanish  legislation  obliges  the  motorway
   concessioners to use technologies which comply with open and public  rules,  available  to  all  manufacturers  and  distributors  on  a  non-
   discriminatory basis. As explained by the Parties, the fact that the rules are open and public and therefore known in advance by the  industry
   does not allow concessionaires to favour any of the distributors to the detriment of the others.

55) Therefore, the Commission concludes that the Parties do not have the ability to foreclose competing OBE  distributors  by  restricting  their
   access to the Parties' toll infrastructure by means of unfavourable contractual conditions or by limiting  the  interoperability  between  OBE
   devices distributed by BIP & Drive JV's existing and future competitors and the reading equipment installed at the Parties' toll stations.

3 Incentive to foreclose

56) The Parties claim not to have an incentive to engage in an input foreclosure strategy as the foreclosure of competing OBE  distributors  will
   most likely be unprofitable for the Parties. This is because the profit the Parties are expected to make in  their  role  as  concessionaires,
   i.e. from the exploitation of the motorways concessions, is likely to be considerably higher  than  their  likely  profits  generated  by  the
   distribution of OBE devices. In the last three years, the Parties’ revenues from collecting motorway tolls amounted  to  several  hundreds  of
   millions of Euros per year while the order of magnitude of expected profits generated through the sale of OBE devices is considerably lower.

57) Indeed, while BIP & Drive JV is expected to require EUR […] million of investment, it is supposed  to  generate  profit  […].  These  figures
   indicate that the financial amounts required and generated by the exploitation of motorways, on the one hand, and by BIP & Drive  JV,  on  the
   other hand, do not have the same magnitude. Therefore, the main interest of the concessionaires is to maximise the number of vehicles  running
   through the motorways they manage and to optimise their cost structure, for example by reducing the  number  of  manual  toll  payments.  Both
   objectives are better achieved if the toll payment is made by means of OBE devices, regardless of the identity of  the  OBE  distributor.  The
   effect on the Parties’ profitability of an increased number of cars passing smoothly through the gates at toll stations (to which the  use  of
   OBE devices contributes) is, by far, more relevant to the Parties than that the extra revenues BIP & Drive JV  might  achieve  by  foreclosing
   competitors on the market for distribution of OBEs. Thus, the Parties have no interest  in  reducing  the  number  of  companies  selling  OBE
   devices.

58) The information gathered during the market investigation confirmed the Parties' claims in this regard.[32] The majority of  OBE  distributors
   stated that such a strategy would be highly improbable and would not make sense.[33] First, as indicated by one market respondent, due to  the
   fact that: "The concessionaires have long been promoting this technology together with financial institutions  to  speed  up  queuing  at  the
   tolls, to reduce cost of 'manual payments' and increase their efficiency. I do not see any  founded  reason  why  concessionaires  would  stop
   accepting OBE devices from other distributors".[34] Second, rejecting any OBE distributor would mean facing thousands of upset  customers  who
   could not use their OBE, which would cause queues on the toll stations and could be detrimental to the general perception  of  reliability  of
   OBE devices. Finally, none of the respondents to the market investigation indicated any situation when the  Spanish  motorway  concessionaires
   would have brought their contracts with an OBE distributor to an end.

59) Based on the above, the Commission considers that the Parties will not have an incentive to foreclose existing and  future  OBE  distributors
   from the downstream market for the distribution of OBE devices, by restricting  or  limiting  their  access  to  the  toll  reading  equipment
   installed at the Parties' toll stations.

4 Conclusion

60) The Commission therefore concludes that in view of the Parties' legal obligation to refrain from  discriminating  any  OBE  distributor,  the
   means both under Spanish and EU law allowing for enforcement of  the  non-discrimination  principle  regarding  access  to  the  toll  reading
   equipment installed at the Parties' toll stations and the fact that the Parties would have no incentive to exclude other OBE distributors from
   the market, an input foreclosure strategy by contractual means or by limiting the technical interoperability seems unlikely.

2 Possibility to foreclose OBE manufacturers from the market

61) The information gathered during the market investigation confirmed that the Parties would not have the ability  and  incentive  to  foreclose
   OBE manufacturers from the market for the distribution of OBE devices. None of the  OBE  manufacturers  raised  concerns  about  the  proposed
   transaction. This is mainly because OBE manufacturers tend to be national and international multiproduct businesses, offering various products
   in different areas, thus they generate revenues from activities other than supplying the  Spanish  OBE  distributors.  In  addition,  for  the
   reasons stated above paragraph (60), it is also unlikely that BIP & Drive JV could become a dominant player on  the  Spanish  market  for  OBE
   distribution capable of exerting any pressure on OBE manufacturers.

3 Conclusion

62) The Commission therefore concludes that the proposed transaction does not raise serious doubts with  respect  to  the  vertical  relationship
   between the upstream market for exploitation of toll motorways and the downstream market for distribution of OBE devices in Spain, and this is
   irrespective of the precise product and geographic market definition retained.

2 Potential conglomerate effects

63) The markets for the distribution of OBE devices and for the exploitation of  toll  motorways  are  closely  related  as  these  products  and
   services are generally purchased by the same set of customers for the same end use, namely driving on toll motorways. Therefore, it has to  be
   assessed whether the Parties could harm effective competition on these markets by means of tying, bundling or other exclusionary practices.

1 Conglomerate effects by granting discounts at the Parties' toll stations to BIP & Drive JV's customers

64) During the market investigation, an OBE distributor expressed the concern that Cintra, Abertis and Itínere would offer special  discounts  at
   their toll stations to BIP & Drive JV's customers, which competing OBE distributors could not offer to their customers.[35] If  this  practice
   were to materialise, BIP & Drive JV could attract a large scale of customers.

65) In that respect, the Parties confirmed that the Spanish regulatory framework would indeed enable motorway concessionaires to offer  discounts
   at their toll stations. The possibility to grant discounts is governed by the Decree 215/1973 of 25 January 1973, which among others specifies
   that the entity managing a motorway concession is entitled to offer discount schemes, season tickets or other rebates at the toll fees.  These
   are however subject to prior authorisation by the relevant administration and must be of a general and objective nature. Indeed, they  usually
   apply to eco-friendly vehicles or are based on the car occupation in high-frequency toll-roads at peak times.

66) Therefore none of the Parties could offer discounts at their toll stations which target only BIP & Drive JV's customers. To the  extent  that
   they could offer discounts, they would need to be available to all OBE users, irrespective of the OBE device they use.

2 Conglomerate effects by lowering BIP & Drive JV's margins

67) The Parties may also internalise the positive effect of customers switching from payment by cash or  credit/debit  card  to  payment  by  OBE
   devices. They could then lower their margins on the market for distribution of OBE devices to increase their overall profit.[36]

68) As discussed in paragraph (16), in the long term the Parties do not intend to  fund  BIP & Drive  JV.  On  the  contrary,  according  to  its
   business plan the JV's income will stem from its own financial resources,  which  implies  that  BIP &  Drive  JV  aims  at  being  profitable
   regardless of the overall profit of the Parties.

69) In addition, even with no intention to exclude competing OBE distributors from the market, in the long term BIP & Drive JV could  nonetheless
   gain market power in the market for the distribution of OBE devices if its margins were lower than the margins of  its  competitors.  Even  in
   this hypothetical scenario, BIP & Drive JV would still face competitive constraints from potential new entrants  given  the  low  barriers  to
   entry, as will be demonstrated in Section 5.2.3 below.

70) Moreover, the majority of OBE users in Spain that have responded to the Commission's market investigation have  not  expressed  any  concerns
   regarding the Parties' plans to become active in the distribution of OBE devices by creating BIP & Drive JV.[37]

3 Barriers to entry

71) The Parties consider that there are no barriers to accessing the market for the distribution of OBE  devices  other  than  those  related  to
   technology. They submit that it takes less than one year for a new entrant to start up a new business. In  particular,  neither  strong  brand
   recognition nor a strong financial capacity is required from an OBE distributor to start up new services in the market for distribution of OBE
   devices in Spain.

72) As indicated in paragraph (46), there are more than 50 operators distributing  OBE  devices  in  Spain,  including  large  Spanish  financial
   institutions and non-financial institutions such as Solred, Ressa, Pagatelia, etc.[38] The high number of  operators  gives  already  a  prima
   facie indication of the relatively low investments necessary to enter the market for distribution of OBE devices in Spain.

73) In addition, during the market investigation, an OBE distributor stated that the distributors essentially buy  OBE  devices  that  have  been
   already certified.[39] Likewise, ASETA also indicated that: "OBE manufacturers must conduct a standard certification  process  so  that  their
   models can be distributed to ETC issuers".[40] The further steps that an OBE distributor has to carry out consist of (i) liaising  with  ASETA
   which ensures that the OBE devices comply with the technical requirements[41] and (ii) contracting with each of the  motorway  concessionaires
   (usually mediated by ASETA).[42]

74) The Commission therefore considers that any technological barriers to entry apply more to the level of OBE manufacturers than  to  the  level
   of OBE distributors. As regards the market for distribution of OBE devices, the Commission comes to the conclusion that a  new  entrant  would
   not encounter high barriers to entry.

4 Conclusion

75) The Commission therefore concludes that the proposed transaction does not raise serious doubts as to  its  compatibility  with  the  internal
   market on the basis of conglomerate effects, and this is irrespective of the precise product and geographic market definition retained.

       CONCLUSION

76) 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.

For the Commission

Signed
Joaquín ALMUNIA
Vice-President

-----------------------
[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]   Publication in the Official Journal of the European Union No C 14, 18.01.2014, p. 13.

[3]   An OBE is a device installed in the vehicle and read remotely by an antenna installed on motorway tolls for the purposes  of  allowing  the
vehicles to pass without stopping to make the toll payment.

[4]   Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the  Commission  Consolidated  Jurisdictional  Notice  (OJ
C95, 16.04.2008, p.1).

[5]   See decision of the European Commission in case IV/M.567 – Lyonnaise des Eaux/Northumbrian Water, recitals 10 and subsequent.

[6]   See decision of the European Commission  in case COMP/M.4687 – Sacyr/Eiffage, recital 26; COMP/M.4249  –  Abertis/Autostrade,  recitals  15
and subsequent; and M.4087 – Eiffage/Macquarie/APRR, recitals 9 and subsequent.

[7]   See decision of the European Commission in case COMP/M.4249 – Abertis/Autostrade, recital 18.

[8]    See  decisions  of  the  European  Commission  in  case  COMP/M.4087  -  Eiffage/Macquarie/APRR,  recital  19;  and  case  COMP/M  4687  –
Sacyr/Vallehermoso/Eiffage, recital 28.

[9]   See decisions of the European Commission in case COMP/M.4687 –  Sacyr/Eiffage,  recitals  27  and  28;  COMP/M.4249  –  Abertis/Autostrade,
recitals 18 and subsequent; and M.4087 – Eiffage/Macquarie/APRR, recitals 12 and subsequent.

[10]  The Association of Spanish Road, Tunnel,  Bridge  and  Toll  Road  Concession  Companies  (ASETA)  of  Spanish  companies,  which  controls
concessions to build, maintain and operate toll roads in Spanish territory, where tolls are directly collected from the infrastructure user.

[11]  OBE manufacturers are national and  international  multi-product  businesses  offering  various  products  in  different  areas,  so  their
activities are not limited to the manufacturing of OBEs. OBE manufacturers also provide motorway concessionaires with  the  equipment  (antennas)
to be installed at toll stations to read the OBE signal. The equipment needs to be capable of reading signals from any OBE device  allowing  thus
all OBE distributors to compete on an equal footing. Currently in Spain OBE devices are mainly distributed by financial institutions. If  an  OBE
distributor is a non-financial institution (like BIP & Drive JV), it pays a commission (a  fee)  per  invoice  to  a  financial  institution  for
charging the end users the toll fees. The end users purchasing the OBE devices provide the OBE distributor with their  bank  account  information
allowing them to charge the toll fees for using the OBE device on the motorways as payment method. End users pay a  purchase  quota  -  either  a
single payment or an initial amount corresponding to a 'registration fee' plus an annual payment during the OBE's usable life (estimated  at  six
years) corresponding to a 'maintenance fee'.

[12]  Replies to Commission questionnaire Q3 to OBE users of 15 January 2014, question 7; and replies  to  Commission  questionnaire  Q2  to  OBE
distributors of 15 January 2014, question 3.

[13]  Replies to Commission questionnaire Q2 to OBE distributors of 15 January 2014, question 4; and replies to Commission  questionnaire  Q3  to
OBE users of 15 January 2014, question 5.

[14]  Replies to Commission questionnaire Q2 to OBE distributors of 15 January 2014, question 5; and replies to Commission  questionnaire  Q3  to
OBE users of 15 January 2014, question 6.

[15]  OJ L 166, 30.04.2004, p. 124.

[16]  OJ L 268, 13.10.2009, pp. 11–29.

[17]  Communication from the Commission of 30 August 2012 on the Implementation of the EETS, COM(2012) 474 final, p. 4.

[18]  Royal Decree 94/2006 of 3 February 2006, in Boletín Oficial del Estado n° 41, Friday 17 February 2006, pp. 6339-6342.

[19]  Article 8, paragraph 3 of the Royal Decree 94/2006.

[20]  Replies to Commission questionnaire Q1 to Concessioners of 15 January 2014, question 5; and replies to Commission questionnaire Q3  to  OBE
users of 15 January 2014, question 8.

[21]  Replies to Commission questionnaire Q2 to OBE distributors of 15 January 2014, question 6; and replies to Commission  questionnaire  Q4  to
OEMs of 15 January 2014, question 9.

[22]  Replies to Commission questionnaire Q2 to OBE distributors of 15 January 2014, questions 6 and 7.

[23]  See Annex 3.1.a.4. to the Form CO.

[24]        This translates to 38% of toll payments being effected via OBEs, while 35% of toll payments were made via card and 27% cash.

[25]  Replies to Commission questionnaire Q1 to concessionaires of 15 January 2014, questions 14 and 15; and replies to Commission  questionnaire
Q2 to OBE distributors of 15 January 2014, questions 17 and 18.

[26]  See for instance the agreed non-confidential minutes of a teleconference call of 29 January 2014 with Novagalicia Banco,  paragraph  5  and
agreed non-confidential minutes of a teleconference call of 28 January 2014 with Pagatelia, paragraph 3.

[27]  See Annex 1 – "Commissions to OBE distributors" of the Parties' reply to the Commission's Request for Information dated  27  January  2014;
and agreed non-confidential minutes of a teleconference call of 29 January 2014 with Novagalicia Banco, paragraph 12.

[28]        See Annex 2 – "Model Contract" of the Parties' reply to the Commission's Request for Information dated 27 January 2014.

[29]  Replies to Commission questionnaire Q2 to OBE distributors of 15 January 2014, question 16.

[30]  Replies to Commission questionnaire Q2 to OBE distributors of 15 January 2014, question 16.

[31]  Replies to Commission questionnaire Q2 to OBE distributors of 15 January 2014, questions 15 and 17.

[32]  Replies to Commission questionnaire Q2 to OBE distributors of 15 January 2014, question 15.

[33]  Replies to Commission questionnaire Q2 to OBE distributors of 15 January 2014, question 15.

[34]  See Catalunya Banc's reply to Commission questionnaire Q2 to OBE distributors of 15 January 2014, question  15:  "Las  concesionarias  hace
muchos años que estan impulsando esta tecnologia conjuntamente con las entidades financieras para agilizar las colas en los peajes,  reducir  los
costes de los pagos manuales e incrementar la eficiencia de sus companyias. No veo ninguna razón consistente para pensar que  las  concesionarias
dejen de aceptar los OBEs comercializados por otras empresas." See also agreed non-confidential minutes of a teleconference call  of  29  January
2014 with Novagalicia Banco, paragraph 17; and agreed non-confidential minutes of a teleconference  call  of  28  January  2014  with  Pagatelia,
paragraph 6.

[35]        Replies to Commission questionnaire Q2 to OBE distributors of 15 January 2014, question 16.

[36]        This incentive is often referred to as the "Cournot effect" (see paragraph 117 of the Guidelines of the assessment of  non-horizontal
mergers under the Merger Regulation).

[37]  Replies to Commission questionnaire Q3 to OBE users of 15 January 2014, question 15.

[38]  Replies to Commission questionnaire Q1 to concessionaires of 15 January 2014, question 6.

[39]        See agreed non-confidential minutes of a teleconference call of 29 January 2014 with Novagalicia Banco, paragraph 15.

[40]  See the ASETA's reply to Commission questionnaire Q1 to concessionaires of 15 January 2014, question 11.

[41]        Such tests ensure that the signal transmitted by the OBE device is correctly read remotely by the antenna installed  on  all  Spanish
toll stations. This process takes approximately three months (see the Parties' reply  to  the  Commission's  Request  for  Information  dated  28
January 2014).

[42]  Paragraph 226 of the Form CO.

-----------------------
 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