CELEX: 32018M9121
Language: en
Date: 2018-12-10 00:00:00
Title: Commission Decision of 10/12/2018 declaring a concentration to be compatible with the common market (Case No COMP/M.9121 - Michelin / Camso) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                              Brussels, 10.12.2018
                                                              C(2018) 8749 final
  In the published version of this decision, some information
  has been omitted pursuant to Article 17(2) of Council                 PUBLIC VERSION
  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  information omitted has been replaced by ranges of figures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.
                                                              To the notifying party
Subject:             Case M.9121 - MICHELIN / CAMSO
                     Commission decision pursuant to Article 6(1)(b) of Council
                     Regulation No 139/20041 and Article 57 of the Agreement on the
                     European Economic Area2
Dear Sir or Madam,
(1)         On 5 November 2018, the European Commission received notification of a
            proposed concentration pursuant to Article 4 of the Merger Regulation by which
            the undertaking Canada Inc., a special purpose vehicle that has been
            incorporated in Canada and ultimately controlled by Compagnie Générale des
            Etablissements Michelin, together with its subsidiaries ("Michelin") acquires,
            within the meaning of Article 3(1)(b) of the Merger Regulation, sole control
            over Camso Inc. ("Camso") by way of a purchase of shares ("the Transaction").3
            Hereafter Michelin is referred to as "the Notifying Party". Michelin and Camso
            are collectively referred to as the "Parties".
1.        THE PARTIES
(2)       Michelin is a manufacturer and distributor of tyres for cars, vans, trucks, buses,
          two-wheel non-motorised vehicles, two-wheel motorised vehicles, aircraft,
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 410, 13.11.2018, p. 6.
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak---            subway trains and tramways, as well as tyres for industrial and agricultural
           vehicles. Michelin group is also active on the conveyor market.
(3)        Camso is a Canadian manufacturer and distributor of pneumatic, airless and solid
           tyres, tracks, conversion track systems and OEM undercarriages, serving the
           industrial, agricultural and power-sport sectors. Camso operates on a global basis.
2.         THE OPERATION AND THE CONCENTRATION
(4)        The Parties signed a Share Purchase Agreement on 12 July 2018, pursuant to
           which the current shareholders of Camso agree to sell all of the issued and
           outstanding equity of Camso to Michelin. Therefore, Camso will be solely
           controlled by Michelin pursuant to Article 3(1)(b) of the Merger Regulation.
3.         EU DIMENSION
(5)        The undertakings concerned have a combined aggregate world-wide turnover of
           more than EUR 2 500 million (Michelin: EUR 21 960 million; Camso:
           EUR 830 million).4 In each of at least three Member States, the undertakings have
           a combined aggregate turnover of more than EUR 100 million ([…]) and in each
           of at least three of these Member States, each of the undertakings has an
           aggregate turnover of more than EUR 25 million ([…]). Finally, each of the
           undertakings has an EU-wide turnover in excess of EUR 100 million (Michelin:
           EUR […]; Camso: EUR […]). The notified operation therefore has a Union
           dimension within the meaning of Article 1(3) of the Merger Regulation
4.         MARKET DEFINITION
(6)        Michelin's and Camso's activities horizontally overlap in the manufacture and
           supply of tyres for industrial vehicles (hereafter "industrial tyres").5
(7)        There is also a vertical link between the Parties' activities in the manufacture and
           supply of industrial tyres (upstream market) and Michelin's presence in the
           distribution of tyres, through its own integrated distributor, Euromaster
           (downstream market).
4.1.       Product market definition
4.1.1. Supply of industrial tyres
(8)        In its previous decisional practice, the Commission has considered that the
           industrial tyre market can be segmented along several dimensions.
(9)        First, the Commission has typically distinguished between: (i) the sale of tyres to
           Original Equipment Manufacturers ("OEM") and (ii) the sale of replacement tyres
           ("RT").6
4   Turnover calculated in accordance with Article 5 of the Merger Regulation and the Commission Consolidated
    Jurisdictional Notice (OJ C 95, 16.4.2008, p. 1).
5   Camso also produces tracks but Michelin does not manufacture tracks. On the other hand, Michelin manufactures
    tyres for agricultural vehicles as well as retreaded tyres but Camso is not active in these areas.
                                                                   2
 ---pagebreak--- (10)     Second, the Commission has also considered7 a possible segmentation on the
         basis of the composition and the construction technology. Considering the tyres'
         composition, a distinction can be made between solid and pneumatic tyres.
         Pneumatic tyres can be further distinguished between bias and radial tyres,
         according to the construction technology. In bias tyres, the cord plies overlap each
         other diagonally whereas radial tyres are tyres for which the cord plies run like
         strings through the layers of rubber to give the rubber stability, and are aligned
         such that they run at 90 degrees to the direction of travel.
(11)     Finally, the Commission has considered whether it would be appropriate to
         separate markets on the basis of the industrial vehicle on which the tyres are
         fitted, in particular, whether a distinction between forklifts and earthmoving
         vehicles and, within earthmoving vehicles, between loaders, graders, articulated
         dump trucks, rigid dump trucks and cranes is warranted.8 However, the market
         definition was ultimately left open.
(12)     The Notifying Party submits that, in addition to tyres for forklifts and
         earthmoving vehicles, the Parties manufacture a range of tyres that can be fitted
         on compact equipment ("CE") vehicles9, and that these tyres are specifically
         designed for CE vehicles. Tyres for CE vehicles tend to differ in technology, size
         and weight from tyres designed for use in other types of vehicles and therefore
         would not fit under either of the categories previously considered by the
         Commission (forklifts or earthmoving vehicles).
(13)     The Commission's investigation supports the view that, in general, tyres designed
         for different vehicle categories (forklifts, earthmoving and CE vehicles) are not
         interchangeable due to different requirements in terms of size, durability, cut and
         heat resistance, traction, load index, etc.10 However, the extent to which tyres
         designed for a given vehicle category can be interchangeably used for all vehicles
         falling under the category is less clear. Some customers indicated that tyres
         designed for a category can be fitted on all vehicles belonging to that category
         while others noted that even within categories, vehicles may have different tyre
         requirements and this limits the substitutability between tyres designed for
         different vehicles.11
(14)     The Commission considers that the product market definition can be left open as
         the Transaction would not raise competition concerns under any plausible market
         segmentation.
6  Case COMP/M.7864 – Trelleborg / CGS Holding (2016), paragraph 10; Case COMP/M.7911 – CNCE / KM
   Group (2016), paragraph 25; Case COMP/M.7643 – CNRC / Pirelli (2015), paragraph 23; Case COMP/M.3081 –
   Michelin / Viborg (2003), paragraphs 8-9.
7  Case COMP/M.7864 – Trelleborg / CGS Holding (2016), paragraphs 24-28.
8  Case COMP/M.7864 – Trelleborg / CGS Holding (2016), paragraphs 19-23.
9  This vehicle category includes: backhoe, telehandler, skidsteer, wheeled excavator, mini dumper, compact wheel
   loader, rough terrain lift truck and mixer.
10 Customers' questionnaire, Q3 and Competitors' questionnaire, Q3.
11 Customers' questionnaire, Q4 and Competitors' questionnaire, Q4.
                                                             3
 ---pagebreak--- 4.1.2. Distribution of industrial replacement tyres
(15)      In previous cases,12 the Commission has considered that a separate market for the
          distribution/wholesale supply of replacement tyres exists. However, the
          Commission has also noted that tyre manufacturers often supply the repair and
          maintenance service providers directly, in competition with the
          wholesalers/distributors, and that therefore a single market including both
          wholesalers and direct supplies by manufacturers may be defined. The exact
          scope of the relevant market was ultimately left open.
(16)      The market definition can be left open also for the purpose of this case as the
          Transaction does not raise competition concerns under either of the two possible
          market segmentations.
4.2.      Geographic market definition
(17)      In past decisions, the Commission has considered that the market for OEM tyres
          is at least EEA-wide13 whilst the market for RT tyres supplied by manufacturers
          is generally national.14
(18)      In its decisional practice, the Commission has considered the market for the
          distribution of replacement tyres by wholesalers to be national in scope.15
(19)      The Notifying Party does not contest the geographic market definitions adopted
          by the Commission in previous cases and therefore these definitions are retained
          for the purpose of this investigation.
5.        COMPETITIVE ASSESSMENT
5.1.      Horizontal overlap
(20)      The Parties' activities overlap in the following markets:
          (a)        Radial industrial tyres (and within this category, they only overlap in the
                     supply of tyres for earthmoving vehicles) for both OEM and RT
                     customers;16
          (b)        Bias industrial tyres (and within this category, they only overlap in the
                     supply of tyres to CE vehicles) for both OEM and RT customers.17
12 Case COMP/M.6063 – Itochu / Speedy (2011), paragraph 11; Case COMP/M.3081 – Michelin / Viborg (2003),
   paragraphs 8-12.
13 Case COMP/M.7643 – CNRC / Pirelli (2015), paragraphs 31-32; Case COMP/M.7864 – Trelleborg / CGS Holding
   (2016), paragraphs 29-30.
14 Case COMP/M.7643 – CNRC / Pirelli (2015), paragraph 34-36; Case COMP/M.7864 – Trelleborg / CGS Holding
   (2016), paragraphs 32-37.
15 Case COMP/M.6063 – Itochu / Speedy (2011), paragraphs 19-20; Case COMP/M.3081 – Michelin / Viborg (2003),
   paragraph 14.
16 Should the earthmoving market be further segmented based on the specific type of vehicle on which the tyres are
   fitted, the Parties' activities would only overlap in the supply of tyres for 'loaders'.
17 Should the CE market be further segmented based on the specific type of vehicle on which the tyres are fitted, the
   Parties' activities would overlap in the supply of tyres for 'backhoe', 'wheeled excavator', 'telehandler' and 'compact
   wheel loader'.
                                                                  4
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---        premium supplier (Tier 1) while Camso is largely seen more as a non-premium /
       low-price supplier (Tier 2 or Tier 3).24 One customer indicated that as a result of
       their different brand positioning "Michelin and Camso target different markets
       and different customer groups".25 When asked about the next best alternative to
       each of the Parties, the majority of the customers indicated that if they were to
       switch away from Michelin, they would most likely buy tyres from players other
       than Camso. Likewise, the majority of the customers indicated that if they were to
       switch away from Camso, they would most likely buy tyres from players other
       than Michelin.
(33)   Second, like customers, competitors do not consider the Parties as close
       competitors. For bias tyres, Bridgestone and Continental are typically seen as
       Michelin's closest competitors whilst BKT, Alliance and Mitas are often
       mentioned as Camso' closest competitors. Similar to customers, competitors
       consider that the Parties have a different product offering and market positioning.
       For example, one competitor noted that "Michelin products are perceived as
       premium, Tier 1 in the market offer: higher quality with better performance than
       Camso products. Michelin also offers additional services like field engineering,
       field support at end-users or dealers, service solutions (repair, tire management
       software, TPMS (Tire Pressure Monitoring System), etc.) and other digital
       solutions. Camso does not offer such services or at least not to the same extent."26
       Similarly, another competitor explained that there is a difference between the
       Parties in terms of "price & quality…and also Brand name & market perception
       and Positioning".27
(34)   Third, further support to the argument that the Parties do not closely compete
       comes from a price comparison analysis (submitted by the Parties) which shows
       that, for a number of bias tyres that can be fitted on CE vehicles, Michelin's prices
       are […]% higher than Camso's.
(35)   Fourth, the Commission notes that the Parties' have only two customers buying
       bias tyres in common. Neither of them expressed concerns about the competitive
       impact of the Transaction. One of them noted that while the Parties are important
       suppliers of bias tyres (especially for backhoe loaders) they "differ in their market
       positioning". The other customer said that it never switched from Michelin to
       Camso, nor vice versa, for any type of tyre and that it considers that the merger
       "will not have a material impact on competition" as the Parties have a
       complementary portfolio.
(36)   Finally, the Parties' internal documents suggest that they typically monitor
       different sets of competitors. Camso mostly monitors […], but not Michelin.
       Michelin, instead, looks mostly at […], but not Camso.
(37)   When considering bias tyres for CE vehicles for RT customers, the Transaction
       would give rise to 8 affected (national) markets. Table 4 below shows the Parties'
       market share in each of the affected markets.
24 Competitors' questionnaire, Q5.1.
25 Competitors' questionnaire, Q5.
26 Competitors' questionnaire, Q7.3.
27 Competitors' questionnaire, Q7.3.
                                                 8
 ---pagebreak---  ---pagebreak--- 5.2. Vertical effects
(40) To the extent that the distribution/wholesale supply of replacement tyres is
     considered a separate market from the direct supplies by manufacturers, the
     Transaction leads to a vertical relationship between the Parties as Michelin is
     active in the distribution of tyres, through its own integrated distributor
     (Euromaster).
(41) The vertical link is pre-existent. In some markets, the Transaction increases the
     Parties' market share upstream (see Section 5.1) but it does not materially alter the
     Parties' upstream market power and therefore its ability to (input) foreclose
     downstream competitors. This is because the Transaction either only marginally
     increases the Parties' market share in the upstream market (in the supply of radial
     tyres, see Section 5.1.1) or does not strengthen their negotiating position as their
     products are not seen as close alternatives by customers (in the supply of bias
     tyres, see Section 5.1.2).
(42) Nor is the Transaction likely to materially increase the risk of customer
     foreclosure effects as Euromaster's position in the distribution of industrial tyres
     is limited (it is active in 11 Member States and its market share remains well
     below 20% in each of them) and its position is not strengthened by the
     Transaction as Camso does not operate as a distributor of industrial tyres.
(43) In light of the above, the Commission considers that the Transaction does not give
     rise to vertical foreclosure concerns.
5.3. Conglomerate effects
(44) The Commission has considered whether the Parties, by combining their portfolio
     of industrial tyres, would have the ability and incentives to leverage a strong
     market position from one market to another by means of, for example, tying or
     bundling.
(45) First, neither of the Parties alone or the two combined appear to have a significant
     degree of market power in any of the industrial tyre markets where they are
     active. The Parties' largest combined market share is in the supply of bias tyres
     for CE vehicles ([40-50]%). However, even in this market, the merger does not
     significantly strengthen the Parties' market power as they do not compete closely
     (see paragraphs (30) and (33)).
(46) Second, a number of strong competitors such as, for example, BKT, Alliance,
     Trelleborg and Goodyear, are active across the entire range of industrial tyres
     (including radial and bias) and have a portfolio of products comparable to that of
     the merged entity post-Transaction. Some of these competitors (e.g. Trelleborg
     and BKT) also supply solid tyres as does Camso.
(47) Finally, while some customers buy a wide range of tyres encompassing both
     radial and bias tyres for various vehicles categories, others are more specialised in
     some types of vehicles and only purchase a limited range of tyres. The demand of
     the latter would not be affected by bundling or tying strategies.
(48) In view of the above, the Commission considers that the Transaction does not
     give rise to conglomerate effects.
                                                10
 ---pagebreak--- 6.   CONCLUSION
(49) 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
                                            11