CELEX: 32019M9332
Language: en
Date: 2019-08-20 00:00:00
Title: Commission Decision of 20/08/2019 declaring a concentration to be compatible with the common market (Case No COMP/M.9332 - ERICSSON / KATHREIN ANTENNA AND FILTER ASSETS) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 20.08.2019
                                                                C(2019) 6196 final
                                                                                         PUBLIC VERSION
                                                                 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                                                                 information omitted has been replaced by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.
                                                                To the notifying party
Subject:            Case M.9332 - ERICSSON / KATHREIN ANTENNA AND FILTER
                    ASSETS
                    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 15 July 2019, the European Commission received notification of a proposed
          concentration pursuant to Article 4 and following a referral pursuant to Article 4(5)
          of the Merger Regulation by which Telefonaktiebolaget LM Ericsson (publ)
          (“Ericsson” or “Notifying Party”, Sweden) acquires within the meaning of Article
          3(1)(b) of the Merger Regulation sole control of parts of Kathrein SE (“Kathrein
          Group”, Germany) (the “Transaction”) by way of purchase of assets. The
          Transaction only concerns Kathrein Group’s business in passive antennas and filters
          as components for mobile network equipment (“Kathrein” or “Target Business”).3
          Ericsson and Kathrein Group are collectively referred to as the “Parties”.
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 245, 22.07.2019, p. 7.
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--- 1.       THE PARTIES
(2)      Ericsson is a public company headquartered in Stockholm, Sweden. It is a global
         provider of network equipment and software, as well as services for network and
         business operations. Ericsson’s business is divided into four segments: “Network
         solutions”, “Digital Services”, “Managed Services”, and “Other”.
(3)      Kathrein Group, headquartered in Rosenheim, Germany, is a provider of
         communication technologies solutions. Kathrein divides its activities in: ”Business
         Solutions in communication technology”, “Mobile Communication”, ”Satellite
         Reception”, “Special Communication”, and “Broadcast”.
2.       THE TRANSACTION
(4)      Under an Umbrella Asset Purchase Agreement entered into on 25 February 2019,
         Ericsson will acquire Kathrein Group’s antenna and filter assets as components in
         mobile network equipment, belonging to Kathrein Group’s wider “Mobile
         Communication” business segment.4 The Transaction will be carried out through the
         acquisition of various assets (e.g. tangible fixed assets, all inventory, all intangible
         assets and intangible fixed assets) and the client base representing Kathrein Group’s
         antenna and filter products business. Therefore, the Transaction consists of the
         acquisition of sole control by Ericsson over part of Kathrein Group within the
         meaning of Article 3(1)(b) of the Merger Regulation.
3.       EU DIMENSION
(5)      The Transaction does not have a Union dimension within the meaning of Article
         1(2) or Article 1(3) of the Merger Regulation.
(6)      Nonetheless, the Transaction fulfils the two conditions set out in Article 4(5) of the
         Merger Regulation since it is a concentration within the meaning of Article 3 of the
         Merger Regulation and it is capable of being reviewed under the national
         competition laws of at least three Member States, namely Cyprus, Estonia, Germany,
         the Netherlands and, potentially, Austria.
(7)      On 19 March 2019, the Notifying Party informed the Commission by means of a
         reasoned submission that the Transaction should be examined by the Commission
         pursuant to Article 4(5) of the Merger Regulation. A copy of that submission was
         transmitted to the Member States on 19 March 2019.
(8)      As none of the Member States competent to review the Transaction expressed its
         disagreement within 15 working days as regards the request to refer the case to the
         Commission, the Transaction is deemed to have a Union dimension pursuant to
         Article 4(5) of the Merger Regulation.
4   Kathrein Group’s product portfolio of antennas for special purpose deployments, e.g. for in-door use cases
    in trains and busses and for special communications, is not part of the Transaction. The “Train & Bus”
    portfolio has already been sold to Huber + Suhner AG and the “Special Communications” portfolio is in
    the process of being sold to a third party. See Notifying Party’s Reply to RFI 9 of 6 August 2019, question
    8 and Notifying Party’s Reply to RFI 11 of 15 August, question 1.
                                                            2
 ---pagebreak--- (9)      Therefore, on 10 April 2019, the Commission informed the Parties and Member
         States that the Transaction was deemed to have a Union dimension and would have
         to be notified to the Commission.
4.       RELEVANT MARKETS
4.1.     Introduction
(10)     Ericsson supplies mobile network equipment, one part of which is Radio Access
         Network (“RAN”) equipment. RAN equipment establishes a connection between
         individual mobile devices and the core network through radio connections. Notable
         components of the RAN equipment are antennas, filters, radio units5, baseband6, and
         cabling. Ericsson manufactures baseband and radio units which are the key
         components of the RAN equipment that it supplies to mobile network operators
         (“MNOs”).
(11)     Kathrein manufactures antennas and filters and supplies them directly to MNOs or to
         RAN equipment suppliers, such as Ericsson, which resell them to MNOs as
         complementary components of the RAN equipment.
4.2.     RAN equipment
4.2.1. Product market definition
4.2.1.1. Commission precedents
(12)     In Nokia/Alcatel-Lucent7, Ericsson/Nortel Group8, and Nokia Siemens
         Networks/Motorola Network Business9, the Commission distinguished between (i)
         RAN equipment, (ii) Core Network Systems (“CNS”)10 and (iii) network-related
         services.
(13)     With regard to RAN equipment, in Nokia/Alcatel-Lucent, the Commission examined
         whether a potential market for RAN equipment could be sub-segmented as follows:
         (i) by technology standards (2G/3G/4G)11, (ii) between macro-cells12 and small
5   The radio unit contains the analogue to digital conversation logic and functionality, amplifiers etc. The
    radio unit transforms the digital signals received into analogue and transmits or receives them to/from the
    antenna via a cable (feeder).
6   The baseband (or digital unit) contains the RAN functionality and connects the RAN with the Core/IP
    network.
7   Commission decision of 24 July 2015 in case M.7632 - Nokia/Alcatel-Lucent, paragraphs 19-24.
8   Commission decision of 2 March 2011 in case M.6095 - Ericsson/Nortel Group (MSS & Global Services),
    paragraph 27.
9   Commission decision of 18 January 2011 in case M.6007 - Nokia Siemens Networks/Motorola Network
    Business, paragraph 10.
10 Core Network System solutions include the following main elements: (i) wireless packet core equipment,
    (ii) carrier IP telephony solutions, and (iii) operation and business support software. RAN establishes a
    connection between the individual mobile devices and the core network through radio connections. See
    Nokia/Alcatel-Lucent, paragraphs 160-196.
11 RAN equipment can be grouped into the standard generations 2G/2.5G (GSM), 3G (WDCMA), 4G (LTE)
    and 5G (NR).
12 Individual geographic areas covered with mobile radio equipment are known as "cells" or "macro cells",
    as the coverage they provide can have a radius range of few tens of kilometres.
                                                            3
 ---pagebreak---         cells13 and (iii) Single RAN ("SRAN") equipment14 as a potential separate market
        segment. Ultimately, the Commission left the precise market definition open.
4.2.1.2. Notifying Party’s views
(14)    The Notifying Party refers to the Commission precedents listed at paragraphs (12)-
        (13).
(15)    With regard to the possible sub-segmentation of the market for RAN equipment by
        technology standards, the Notifying Party submits that current RAN equipment
        supports multiple technology standards and further segmentation is not justified.15
        More generally, with regard to technology standards, the Notifying Party explains
        that the share of 2G and 3G has been steadily declining in the past few years while
        4G is increasing and 5G has been slowly emerging since 2018.16 The Notifying Party
        explains that, at the present date, 5G has not yet been commercially launched.
        Nevertheless, the Notifying Party considers that, since 2017 and 2018, 5G mobile
        network technology is no longer in a pure development phase.17
(16)    With regard to the possible sub-segmentation between small cells and macro cells,
        the Notifying Party considers that such distinction is not justified. In the Notifying
        Party’s view, the main difference between macro cell RAN equipment and small cell
        RAN equipment lies in the output power. While small cell RAN equipment can
        provide output for a smaller radius (normally between 10 m to 100 m), the radius of
        macro cell RAN equipment is significantly larger (normally up to 20 km or more).
        The Notifying Party explains that small cells are generally used if the macro cells’
        capacity is insufficient and needs to be complemented to deploy a mobile network,
        for instance during time slots with heavy data traffic. Small cells thus can provide
        hot spots for users such that users receive a better signal in certain areas.18
(17)    With regard to the potential separate segment for SRAN equipment, the Notifying
        Party submits that such segmentation would no longer be relevant, as currently all
        RAN equipment supports multiple technology standards (see paragraph (15)).19
        Therefore, in the Notifying Party's view, SRAN equipment forms part of the overall
        market for RAN equipment.
(18)    With regard to new solutions emerging in the industry, such as virtualised RAN
        solutions20, the Notifying Party submits that there are virtually no (or very few)
13  Small cells are technology, deployed mainly in densely populated areas to provide data traffic offloading.
    Small cells have a radius of between 10 meters to 1 or 2 km. They can be used to provide in-building and
    outdoor wireless service.
14  SRAN technology allows mobile operators to run and operate multiple mobile telecommunications
    standards (2G/3G/4G) on a single network (See Nokia/Alcatel-Lucent, paragraph 16).
15  Notifying Party's Reply to RFI 11 of 15 August, question 3.
16  The Notifying Party considers that companies no longer invest in 2G network technology and that 4G will
    replace 3G in Europe by 2020.
17  Form CO, paragraph 55.
18  Form CO, paragraph 140.
19  Form CO, paragraph 143 Notifying Party's Reply to RFI 11 of 15 August, question 8.
20  According to the Notifying Party, virtualised RAN (vRAN) was formerly referred to as Cloud RAN.
    Virtualisation involves decoupling software from hardware. The software systems that handle the network
    user traffic, is moved from hardware on the sites to a cloud. This means that the processing functions are
    not site hardware dependent anymore. The radio processing intelligence is also moved higher up in the
                                                          4
 ---pagebreak---          current commercial deployments in which the full RAN equipment is virtualised.
         Therefore, according to the Notifying Party virtualised RAN equipment does not
         have any relevance to assess the Transaction.21
(19)     In the Notifying Party’s view, the Commission does not have to conclude on the
         exact product market definition with regard to RAN equipment as the Transaction
         does not give rise to competitive concerns under any plausible market definition.22
4.2.1.3. Commission’s assessment
(20)     The market investigation provides mixed results as to whether segmenting the RAN
         equipment market is appropriate.23
(21)     Several respondents explain that RAN equipment suppliers are generally active
         across all possible segments. With regard to a possible segmentation by technology
         standards, respondents explain that the same equipment can be used across different
         technologies, although several respondents expect 5G technology to require
         equipment different from legacy technologies. Respondents did not express any firm
         views as regards as possible segment for SRAN, which the Commission understands
         may no longer be relevant given that RAN equipment supports multiple technology
         standards. A number of market participants consider that the segmentation between
         small cells and macro cells is still relevant.
(22)     As regards virtualised RAN solutions, the results of the market investigation strongly
         suggest that they belong to the same product market as traditional RAN solutions.24
         Respondents explain that while virtualised RAN solutions use very different
         technologies from traditional RAN solutions, they perform the same functions as
         traditional RAN solutions. Moreover, respondents confirm that virtualised RAN
         solutions are a new trend in the market which may gain more relevance in the future.
(23)     Moreover, as explained in more detail in Section 4.3 and 4.4 below, the results of the
         market investigation indicate that passive antennas, antenna modules and filters
         should be considered to belong to markets distinct from the market for other RAN
         equipment components and that the same finding may potentially apply to active
         antennas. Accordingly, the notion of 'RAN equipment' used in this section and in the
         remainder of this decision, unless specified otherwise, excludes passive antennas,
         active antennas, antenna modules (see Section 4.3.1), and filters (see Section 4.4.1).
(24)     With the exception of the segmentation mentioned in the previous paragraph, for the
         purpose of this decision, the exact product market definition for RAN equipment can
         be left open, as the Transaction does not raise serious doubts as to its compatibility
         with the internal market under any plausible product market definition.
    network architecture and provides additional flexibility for scaling the network in order to increase
    capacity. It reduces the need for expensive proprietary hardware and enables to use cheaper option “off
    the shelf” hardware.
21  Response to RFI 3 of 10 July 2019.
22  Form CO, paragraph 71.
23  Q1 – Questionnaire to Antenna and Filter Manufacturers (“Q1”), replies to question 21; Q2 –
    Questionnaire to RAN Equipment Suppliers (“Q2”), replies to question 19; Q3 – Questionnaire to Mobile
    Network Operators (“Q3”), replies to question 20.
24  Q1, replies to question 22; Q2, replies to question 20; Q3, replies to question 21.
                                                            5
 ---pagebreak--- 4.2.2. Geographic market definition
4.2.2.1. Commission precedents
(25)    In Nokia/Alcatel-Lucent,25 the Commission considered that the relevant geographic
        market for RAN equipment is at least EEA-wide, if not global. The Commission
        ultimately left the exact geographic market definition open.
4.2.2.2. Notifying Party’s views
(26)    The Notifying Party submits that the relevant geographic market is at least EEA-
        wide if not worldwide. In the Notifying Party’s view, this is because (i) mobile
        network equipment is based on international standards, (ii) there are no regulatory
        barriers, (iii) transportation costs are low, and consequently (iv) suppliers and
        customers generally supply and source RAN equipment on a worldwide basis.26
4.2.2.3. Commission’s assessment
(27)    A majority of respondents to the market investigation indicate that they supply
        and/or procure RAN equipment on a global basis, with the main RAN equipment
        suppliers based in Europe, USA and Asia.27
(28)    In any event, for the purpose of this decision, the exact geographic market definition
        for the supply of filters can be left open, as the Transaction does not raise serious
        doubts as to its compatibility with the internal market regardless of whether the
        market is EEA-wide or global.
4.3.    Antennas
(29)    Antennas function as a converter between two kinds of electromagnetic waves, cable
        bounded waves and free space waves. They link the users’ equipment and the base
        transceiver station in the RAN. An antenna covers a specific area which depends on
        the antenna's capacity.
(30)    There are different types of antennas, depending on the number of ports and on
        whether the antenna is “passive”, “active” or hybrid.
(31)    The number of ports of an antenna determines the number of signals that can be
        received and transmitted by the antenna, i.e. the number of frequency bands that can
        be used. A single-band antenna is a 2-port antenna which supports the usage of one
        frequency band. Multi-band antennas combine various bands and functions in one
        antenna (e.g. a 4-port antenna supports two frequency bands, a 6-port antenna
        supports three frequency bands etc.).28
(32)    Passive antennas are connected to other components of the RAN equipment (e.g.,
        radio, baseband) via a high frequency coax cable (a “feeder”) which transports the
        analogue signal. The use of a feeder with passive antennas entails some signal loss
25  Commission decision of 24 July 2015 in case M.7632 - Nokia/Alcatel-Lucent, paragraphs 25-35.
26  Form CO, paragraph 100.
27 Q1, replies to questions 25; Q2, replies to questions 24; Q3, replies to question 25.
28 Form CO, paragraph 94.
                                                           6
 ---pagebreak---         from the radio unit to the passive antenna due to the characteristics of radio waves
        and the transmission of analogue signals.29
(33)    Active antennas integrate an antenna module and a radio component in the same
        physical unit. Antenna modules are a specific kind of passive antenna exclusively
        designed to be used in an active antenna as they have provisions for mechanical
        mounting and for an electrical connection of a radio module in order to create an
        active antenna product.30 In an active antenna, the antenna module and the radio
        component are thus mechanically and electrically integrated to avoid signal loss. The
        Notifying Party explains that signal loss is also prevented in active antennas due to
        the existence of a digital connection between the radio and baseband, irrespective of
        the distance between them. However, the housing for active antennas is larger and
        heavier than for passive antennas and therefore its installation is more complex.31
(34)    According to the Notifying Party, capacity requirements have changed due to the
        development from 2G/3G over 4G to 5G mobile networks. While passive antennas
        will still be used in 5G networks, the Notifying Party expects an increasing demand
        by MNOs for active antennas in order to increase capacity and improve the
        performance of 5G networks.32
(35)    There are two types of active antennas: (i) semi-active antennas and (ii) advanced
        antenna systems ("AAS"), also called massive multiple-in multiple-out (“massive
        MIMO” or “mMIMO”). In a semi-active antenna, conventional radio units are built
        into an antenna housing. In an AAS antenna, the radio unit is physically integrated
        with the antenna. The Notifying Party explains that this is necessary due to the large
        number of antenna branches (16 up to hundreds) used to provide the ability to
        concentrate a narrow radio beam to individual or multiple users and the requirement
        of their synchronisation. The Notifying Party submits that AAS active antennas still
        represent a small proportion of sales but their importance is expected to rapidly
        increase with the evolution of 5G networks. 33
(36)    In addition, there are hybrid antennas that can be described as a mounting solution
        where the antenna manufacturer has devised a way of mounting an AAS active
        antenna on top of one of its passive antennas, behind a shroud that has the same
        profile and looks as the passive antenna.34
(37)    In light of the foregoing, three possible segmentations of the antenna market can be
        considered: (i) single-band and various types of multi-band antennas (e.g. 4-port, 6-
        port etc. antennas), (ii) passive antennas and antenna modules for active antennas,
        and (iii) passive antennas and active antennas. Active antennas (and antenna
        modules integrated therein) may also be segmented between semi-active antennas
        and AAS (or mMIMO) antennas.
29 Form CO, paragraph 57.
30 Form CO, paragraph 58.
31 Form CO, paragraph 57.
32 Form CO, paragraph 87.
33 The share of semi-active antennas in the total size of the antenna market at the worldwide level (based on
   sales) is expected to decline in the coming years (from around […] in 2019 to […] in 2022). AAS are
   expected to account for […] of the total antenna market in 2022 as compared to […] in 2019. See Form
   CO, paragraphs 57 and 79.
34 Form CO, paragraph 311.
                                                          7
 ---pagebreak--- 4.3.1. Product market definition
4.3.1.1. Notifying Party’s views
(38)    In the Notifying Party’s view, antennas belong to a separate product market, distinct
        from other RAN equipment components.35
(39)    As regards the possible distinction between single- and multiband antennas, the
        Notifying Party explains that, irrespective of the number of ports, passive antennas
        fulfil the same function and are thus substitutable.36 In the Notifying Party’s view,
        MNOs can achieve the same functionality by using two or more antennas with a low
        number of ports instead of one antenna with a high number of ports. However, as
        MNOs require compact antennas, the global trend is clearly towards multiband
        antennas with an increasing number of bands.37 The Notifying Party considers that
        there is supply-side substitutability as antenna manufacturers generally offer both
        single-band and different types of multi-band antennas.38
(40)    The Notifying Party did not express any firm views as to other possible sub-
        segmentations of the antenna product market.39 However, the Notifying Party
        considers that technical and commercial differences between antenna modules,
        passive and active antennas may indicate that they belong to separate product
        markets.
(41)    First, according to the Notifying Party, an antenna module is specifically designed to
        be included in a RAN equipment supplier’s final product (i.e. the active antenna) and
        is supplied to one specific RAN equipment supplier only. In contrast, passive
        antennas are more standardised products designed to fulfil the needs of multiple
        MNOs.
(42)    Second, in the Notifying Party’s view, while passive and active antennas fulfil the
        same general technical function, they have different use cases. The demand for
        active antennas is driven by the need for more capacity, such as in densely populated
        areas or in the context of the roll-out of 5G networks. Moreover, the price level for
        an active antenna is significantly higher compared to a passive antenna due to the
        costs of the additional radio component.
(43)    Third, while antenna modules and passive antennas are produced by antenna
        manufacturers, RAN equipment suppliers are best suited to manufacture active
        antennas which requires radio capabilities.
35  Form CO, paragraph 93.
36  The distinction between single-band and multi-band antennas is primarily relevant with regard to passive
    antennas as semi-active antennas currently available on the market generally support a limited number of
    frequency bands. AAS active antennas with multiple frequency bands are being released by other
    suppliers during 2019. [product release]. See Notifying Party's Reply to RFI 11 of 15 August 2019,
    question 3.
37 Notifying Party’s Reply to RFI 9 of 6 August 2019, question 2.
38 Form CO, paragraph 94-98.
39 Notifying Party’s reply to RFI 7 of 25 July 2019, question 14.
                                                         8
 ---pagebreak--- (44)    With regard to hybrid antennas, the Notifying Party submits that these consists of
        two separate antenna products, the passive antenna and the active antenna, which are
        mechanically connected.40
(45)    The Notifying Party submits that the Commission does not have to conclude on the
        exact product market definition as the Transaction does not raise any competition
        concerns under any plausible product market definition.41
4.3.1.2. Commission’s assessment
(46)    The Commission has not previously examined the relevant market for antennas as
        components for mobile network equipment.42
RAN equipment and passive antennas
(47)    The results of the market investigation suggest that passive antennas, as well as
        antenna modules, belong to a product market distinct from the market for RAN
        equipment components.
(48)    First, a majority of the respondents consider that passive antennas are distinct from
        other components of the RAN equipment and therefore belong to a separate product
        market.43
(49)    Second, the results of the market investigation confirm that passive antennas have a
        distinct function in the RAN and are not substitutable with other RAN equipment
        components. Moreover, MNOs can mix-and-match, purchasing passive antennas on
        a stand-alone basis, separately from other components of the RAN equipment, or as
        part of a bundle consisting of a passive antenna and other RAN equipment
        components (“turnkey solution”).
(50)    Third, from the supply side, respondents indicate that passive antennas and other
        RAN equipment components are generally manufactured by a different set of
        suppliers, with the exception of Huawei which produces both passive antennas (as
        well as antenna modules) and other RAN equipment components.44
(51)    Therefore, the Commission concludes that passive antennas and antenna modules
        belong to a product market distinct from other RAN equipment components.
RAN equipment and active antennas
(52)    With regard to active antennas, several respondents point to the closer integration of
        antennas and radio units in active antenna systems. In these, antennas are an integral
40  Form CO, paragraph 312.
41  Form CO, paragraph 99.
42 Previous Commission decisions do not examine or specify whether antennas are part of the RAN
    equipment market or constitute a separate product market (see Commission decision of 24 July 2015 in
    case M.7632 - Nokia/Alcatel-Lucent; Commission decision of 22 June 2015 in case M.7563 -
    CommScope/TE BNS; Commission decision of 2 March 2011 in case M.6095 - Ericsson/Nortel Group
    (MSS & Global Services); Commission decision of 18 January 2011 in case M.6007 - Nokia Siemens
    Networks/Motorola Network Business).
43 Q1, replies to question 3; Q2, replies to question 3; Q3, replies to question 3.
44 Q1, replies to question 3.1; Q2, replies to question 3.1; Q3, replies to question 3.1.
                                                           9
 ---pagebreak---        part of the RAN equipment and cannot be procured separately from other RAN
       equipment components.45 Therefore, active antennas may not constitute a separate
       product market distinct from other RAN equipment components.
(53)   The Commission considers that, for the purpose of the present decision, the exact
       product market definition can be left open as the Transaction does not raise serious
       doubts as to its compatibility with the internal market, irrespective of whether active
       antennas constitute a separate product market distinct from other RAN equipment
       components.
Single-band and multi-band passive antennas
(54)   The results of the market investigation indicate that there is no demand-side
       substitutability between single- and multi-band antennas, although there may be
       substitutability from the supply side.
(55)   From the demand-side, respondents to the market investigation explain that while the
       basic function of all antennas is the same, single-band and multi-band antennas are
       generally used for different purposes and the decision to deploy single- or multi-
       band antennas is primarily driven by these deployment considerations. Multi-band
       antennas are designed to support multiple bands of frequencies. They are used to
       reduce the number of antennas installed on a site given that the same coverage can
       be achieved with one multi-band antenna as with several single-band antennas.
       Single-band antennas, on the other hand, are mainly used for special purposes.46
(56)   A majority of respondents to the market investigation express the view that multi-
       band antennas present characteristics (e.g., in terms of functionalities, performance,
       overall size/weight, price) that cannot be replicated by using single-band antennas,
       and vice versa.47 In particular, in most cases, multi-band antennas cannot be replaced
       with several single-band antennas due to size, weight or volume restrictions and
       visual impact limitations.
(57)   Accordingly, demand for single-band and multi-band antennas is not responsive to
       price changes as confirmed by the results of the market investigation. A majority of
       respondents, most notably MNOs, responded that they would not switch from
       procuring multi-band antennas to single-band antennas (or vice versa) in case of a
       price increase of 5-10%.48
(58)   From the supply side, the vast majority of respondents consider that single- and
       multi-band antennas are fully substitutable.49 While it is easier to design and
       manufacture single-band antennas, (nearly) all antenna manufacturers have
       developed and offer both types of antennas without any relevant specialisations.
(59)   The Commission considers that, for the purpose of the present decision, the exact
       product market definition can be left open as the Transaction does not raise serious
       doubts as to its compatibility with the internal market, irrespective of whether the
45 Q2, replies to question 3.1; Q3, replies to question 3.1.
46 Q1, replies to question 5; Q3, replies to question 5.
47 Q1, replies to question 6; Q2, replies to question 5; Q3, replies to question 6.
48 Q1, replies to questions 7 and 8; Q2, replies to questions 6 and 7; Q3, replies to question 7 and 8.
49 Q1, replies to question 9; Q2, replies to question 8; Q3, replies to question 9.
                                                           10
 ---pagebreak---        relevant product market is further segmented between single-band and multi-band
       antennas.
Passive antennas and antenna modules
(60)   There are mixed views as to whether a segmentation between passive antennas and
       antenna modules is appropriate.50 Overall, the results of the market investigation
       suggest that passive antennas and antenna modules may be substitutes from the
       supply side, but there does not appear to be any demand-side substitutability.
(61)   Respondents to the market investigation explain that antenna modules are
       specifically developed and supplied to RAN equipment suppliers for the production
       of active antennas and therefore constitute a separate business for antenna
       manufacturers in the upstream market.51
(62)   In contrast, antenna manufacturers emphasize the fact that antenna modules are built
       from the same components as passive antennas. Antenna manufacturers confirm that
       the main difference lies in the procurement process: passive antennas can be sold on
       a stand-alone basis to end customers, while antenna modules are produced for
       original equipment manufacturers, i.e., RAN equipment suppliers, which integrate
       them directly into the RAN equipment and sell them to end customers.52
       Importantly, passive antennas are standardised products while antenna modules are
       customer specific, i.e., manufactured in accordance with customer specifications.
       Antenna modules for active antennas are developed on the basis of partnership
       agreements between antenna manufacturers and RAN equipment suppliers.53
(63)   From the supply-side, a majority of respondents indicate that it is common for
       antenna manufacturers to produce both passive antennas and antenna modules.54
(64)   Respondents did not express any views as regards a possible distinction between
       antenna modules for semi-active and AAS antennas.
(65)   The Commission considers that, for the purpose of the present decision, it can be left
       open whether there is a separate product market for antenna modules, distinct from
       passive antennas, and whether such a market would have to be further segmented
       depending on the type of active antenna for which antenna modules are used, i.e.
       semi-active and AAS active antennas. The Transaction does not raise serious doubts
       as to its compatibility with the internal market under any plausible market definition.
Passive antennas and active antennas
(66)   The results of the market investigation suggest that a segmentation between passive
       and active antennas is appropriate given the limited degree of demand-side
       substitutability and the lack of supply-side between passive and active antennas.55
50 Q1, replies to question 11; Q2, replies to question 9.
51 Q2, replies to question 9.1.
52 Q1, replies to question 11.1.
53 Q1, replies to question 28.2; Q2, replies to question 28.1.
54 Q1, replies to question 12; Q2, replies to question 10.
55 Q1, replies to question 13; Q2, replies to question 11; Q3, replies to question 11.
                                                           11
 ---pagebreak--- (67)    First, from the demand-side, the results of the market investigation confirm that
        passive and active antennas have the same basic function, i.e., providing coverage
        for mobile communication services. However, there are important differences
        between passive and active antennas in terms of their technical and commercial
        characteristics as well as use cases.
(68)    The results of the market investigation confirm that active antennas have a better
        performance than passive antennas stemming from lower signal loss and higher
        capacity. Therefore, they are used in highly densely populated areas while passive
        antennas are used for standard sites. Active antennas are needed in the context of the
        5G network roll out as they support massive MIMO applications much more
        efficiently and have better beamforming56 capabilities.57 Respondents to the market
        investigation also confirm that AAS active antennas are technically more advanced
        than semi-active antennas and will be more relevant in the long run in the context of
        the 5G roll-out.58
(69)    At the same time, the results of the market investigation also point to some
        disadvantages that active antennas have in comparison to passive antennas: (i) they
        are heavier due to integration of the radio unit, (ii) they only support a limited
        number of frequency bands, (iii) they are less scalable and more maintenance-
        intensive, and (iv) they contain RAN vendor-proprietary components and interfaces
        increasing MNOs’ dependence on a specific RAN equipment supplier. By contrast,
        passive antennas are interoperable with RAN equipment of any RAN vendor due to
        established standardised physical interfaces.59
(70)    Second, in respect of price, respondents indicate that active antennas are more
        expensive than passive antennas but also explain that the choice for active antennas
        seems to be driven by their improved performance and not by their price.60
        Accordingly, demand for passive and active antennas is not responsive to price
        changes, as confirmed by the results of the market investigation. A majority of
        respondents, most notably MNOs, responded that they would not switch from
        procuring passive antennas to active antennas (or vice versa) in case of a price
        increase of 5-10%.61
(71)    Third, MNOs responding to the market investigation explain that passive and active
        antennas are complementary and they typically would need to use a mix of active
        and passive antennas in their networks.62 Currently, the share of active antennas
        installed in mobile networks is very small and according to some respondents, active
        antennas are only “used for pilots and still in development”.63 Several MNOs
        indicate that they already deploy a mix of passive and active antennas. Several
56 Beamforming is a technology which can change electronically the direction and shape of an antenna
   pattern of a directional antenna. Beamforming is the basic technique used by AAS active antennas to
   increase capacity in a RAN. This is enabled by the higher number of antenna branches in an AAS. See
   Notifying Party's Reply to RFI 10 of 8 August 2019, question 2.
57 Q1, replies to question 14-16; Q2, replies to questions 12-14.
58 Q3, replies to question 11.1 and 17.1.
59 Q1, replies to question 14-16; Q2, replies to question 12-14; Q3, replies to question 11.1 and 12.1.
60 Q1, replies to question 15.1.
61 Q1, replies to questions 15 and 16; Q2, replies to questions 14 and 15; Q3, replies to questions 14 and 15.
62 Q3, replies to question 12.2.
63 Q3, replies to question 12.2.
                                                          12
 ---pagebreak---        MNOs explained that AAS active antennas are necessary for the deployment of 5G
       network, especially to efficiently employ the 3.5GHz band. As a result, the
       proportion of active antennas in mobile networks is expected to grow significantly.64
(72)   Fourth, a majority of respondents to the market investigation do not consider that
       there is supply-side substitution between passive and active antennas.65 Passive
       antennas are produced by dedicated antenna manufacturers and supplied to MNOs
       on a standalone basis or as part of a turnkey solution. The only exception is Huawei
       which has end-to-end in-house capabilities. By contrast, active antennas are
       manufactured by RAN equipment suppliers and antenna manufacturers only supply
       the antenna module as they generally lack radio capabilities. MNOs procure active
       antennas as integrated solutions only from RAN equipment suppliers.66
(73)   Respondents did not express any views as regards a possible distinction between
       different types of active antennas, i.e. semi-active and AAS antennas.
(74)   Therefore, the Commission concludes that passive antennas and active antennas
       belong to separate product markets.67 For the purpose of the present decision, it can
       be left open whether the market for active antennas has to be further segmented
       between semi-active and AAS active antennas as the Transaction does not raise
       serious doubts as to its compatibility with the internal market under any plausible
       market definition.
Conclusion
(75)   In light of the foregoing, for the purpose of this decision, the Commission concludes
       that passive antennas belong to a separate product market distinct from other RAN
       equipment components. In addition, the Commission concludes that passive and
       active antennas belong to separate product markets.
(76)   The question whether passive antennas and antenna modules as well as single-band
       and multi-band antennas belong to distinct product markets can be left open.
       Likewise, the question whether the potential product market for active antennas
       would have to be segmented between semi-active and AAS active antennas and
       whether antenna modules used for semi-active antennas and AAS antennas belong to
       distinct product markets can be left open. With respect to these questions, the
       Commission considers that the Transaction does not raise serious doubts as to its
       compatibility with the internal market under any plausible product market definition.
64 Q3, replies to question 12.2.
65 Q3, replies to question 15.
66 Q3, replies to questions 11.1 and 15.1.
67 As regards hybrid antennas, the results of the market investigation confirm that these are merely a
   combination of a passive and an active antenna. To build a hybrid antenna, RAN equipment suppliers rely
   on antenna manufacturers to deliver the passive antenna, the antenna module for the active antenna system
   and finally to mechanically connect the two different antennas. Therefore, hybrid antennas simply consist
   of two separate antenna products which are mechanically connected. Market participants have not
   expressed any concerns with regard to the competitive effects of the Transaction in relation to hybrid
   antennas. As hybrid antennas are a combination of a passive and an active antenna, the Commission does
   not carry out a separate analysis in this regard. In any event, similar considerations would apply in the
   context of an assessment of hybrid antennas as those set out in in Section 5.2.3 for passive antennas and
   Section 5.3.3. for active antennas.
                                                         13
 ---pagebreak--- 4.3.2. Geographic market definition
4.3.2.1. Notifying Party’s views
(77)    The Notifying Party refers to the Commission decision in Nokia/Alcatel Lucent68
        according to which the relevant geographic market for RAN equipment is at least
        EEA-wide, if not global (as discussed in paragraph (25)). The Notifying Party
        submits that the same market dynamics apply to antennas, which are RAN
        equipment components.
(78)    The Notifying Party submits that the Commission does not have to conclude on the
        exact geographic market definition as the Transaction does not raise any competition
        concerns under any plausible geographic market definition.
4.3.2.2. Commission’s assessment
(79)    A majority of respondents to the market investigation indicate that they supply
        and/or procure (all types of) antennas on a global basis, with the main suppliers
        being based in Europe, USA and Asia.69
(80)    In any event, for the purpose of this decision, the exact geographic market definition
        for the supply of antennas can be left open, as the Transaction does not raise serious
        doubts as to its compatibility with the internal market regardless of whether the
        market is considered to be EEA-wide or global.
4.4.    Filters
(81)    Filters perform mainly two functions: they amplify the signal from the transceiver
        for transmission through the antenna, and connect different passive antennas into one
        common feeder to minimize both signal loss on the feeder as such as well as to
        minimize the need for individual feeders to be installed in the mast up to the antenna.
4.4.1. Product market definition
4.4.1.1. Notifying Party’s views
(82)    In the Notifying Party’s view, RAN equipment and filters belong to separate product
        markets.70
(83)    According to the Notifying Party, filters are commodity-type products with no
        significant distinguishing characteristics and no further segmentation of the market
        for filters is necessary.71
(84)    The Notifying Party submits that the Commission does not have to conclude on the
        exact product market definition as the Transaction does not raise any competition
        concerns under any plausible product market definition.72
68  Commission decision of 24 July 2015 in case M.7632 - Nokia/Alcatel-Lucent, paragraphs 19-24.
69  Q1, replies to questions 23; Q2, replies to questions 21; Q3, replies to questions 22.
70 Form CO, paragraph 93.
71 Form CO, paragraph 204.
72 Form CO, paragraph 99.
                                                           14
 ---pagebreak--- 4.4.1.2. Commission’s assessment
(85)    The Commission has not previously examined the relevant market for filters as
        components for mobile network equipment.73
(86)    The results of the market investigation suggest that filters constitute a separate
        product market, distinct from other RAN equipment components.74 A majority of the
        respondents consider that filters are distinct from other components of the RAN
        equipment and therefore belong to a separate product market.75
(87)    Moreover, the market investigation confirms that no further sub-segmentation of the
        possible market for filters is necessary. 76
(88)    Therefore, the Commission concludes that filters constitute a separate product
        market distinct from other RAN equipment components.
4.4.2. Geographic market definition
4.4.2.1. Notifying Party’s views
(89)    The Notifying Party refers to the Commission decision in Nokia/Alcatel Lucent77
        according to which the relevant geographic market for RAN equipment is at least
        EEA-wide, if not global (as discussed in paragraph (25)). The Notifying Party
        submits that the same market dynamics apply to filters, which are RAN equipment
        components.
(90)    The Notifying Party submits that the Commission does not have to conclude on the
        exact geographic market definition as the Transaction does not raise any competition
        concerns under any plausible market definition.
4.4.2.2. Commission’s assessment
(91)    A majority of respondents to the market investigation indicate that they supply
        and/or procure filters on a global basis, with the main suppliers being based in
        Europe, USA and Asia.78
(92)    In any event, for the purpose of this decision, the exact geographic market definition
        for the supply of filters can be left open, as the Transaction does not raise serious
        doubts as to its compatibility with the internal market regardless of whether the
        market is EEA-wide or global.
73  Previous Commission decisions do not examine or specify whether filters are a part of the RAN
    equipment market or constitute a separate product market (see Commission decision of 24 July 2015 in
    case M.7632 - Nokia/Alcatel-Lucent; Commission decision of 22 June 2015 in case M.7563 -
    CommScope/TE BNS; Commission decision of 2 March 2011 in case M.6095 - Ericsson/Nortel Group
    (MSS & Global Services); Commission decision of 18 January 2011 in case M.6007 - Nokia Siemens
    Networks/Motorola Network Business).
74
    Q1, replies to questions 19 and 20; Q2, replies to questions 17 and 18; Q3, replies to questions 18 and 19.
75  Q2, replies to question 17; Q3, replies to question 18.
76  Q1, replies to questions 19 and 20; Q2, replies to questions 17 and 18; Q3, replies to questions 18 and 19.
77  Commission decision of 24 July 2015 in case M.7632 - Nokia/Alcatel-Lucent, paragraphs 19-24.
78  Q1, replies to questions 24; Q2, replies to questions 23; Q3, replies to questions 23.
                                                            15
 ---pagebreak--- 5.       COMPETITIVE ASSESSMENT
(93)     Ericsson and Kathrein’s activities do not lead to any horizontal overlap. The
         Transaction creates a number of non-horizontal, i.e. conglomerate and vertical
         relationships. These relationships are examined in Sections 5.2 and 5.3 below, after a
         presentation of Ericsson and Kathrein’s market shares in Section 5.1.
5.1.     Market shares
(94)     According to the Non-Horizontal Merger Guidelines, market shares and
         concentration levels provide useful first indications of the market structure and of the
         competitive importance of both the merging parties and their competitors.79
5.1.1. Market shares methodology
(95)     With regard to RAN equipment, the Notifying Party provided value-based market
         share estimates based on information from Dell’Oro Group80. According to the
         Notifying Party, these estimates are based on reported and estimated RAN
         equipment manufacturers’ revenues.81
(96)     With regard to passive antennas and filters, the Notifying Party estimates the size of
         the respective markets on the basis of MNOs’ purchasing volumes. The Notifying
         Party thus estimated the market size by using indicators, including capex forecasts
         by the top MNOs, publications by operators on expansion plans, information on
         spectrum auctions, analyst data on sold radio units and antenna market forecasts
         (especially EJL Wireless Report82).
(97)     The Notifying Party estimated market shares by value for passive antennas and
         filters on the basis of the price paid by MNOs for the respective products. Market
         share estimates correspond to merchant sales, i.e., exclude internal sales within the
         different branches of integrated companies which have both antenna and radio
         manufacturing capabilities.
(98)     Market share estimates presented in Sections 5.1.3. and 5.1.4. below thus take into
         account all possible sales channels for passive antennas and filters, namely (i) direct
         sales to MNOs, (ii) sales to RAN equipment suppliers which then resell these
         antennas/filters, possibly as part of a turnkey solution, and (iii) sales to other sales
         partners, such as distributors.83
(99)     With regard to antenna modules and active antennas, the Notifying Party submits
         that there are no publicly available market reports which would allow the estimation
79  Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of
    concentrations between undertakings ("Non-Horizontal Merger Guidelines"), OJ C 265, 18.10.2008,
    paragraph 24.
80  Form CO, Annexes 6.D.III.1-6.D.III.5, Market data Dell’Oro Group.
81  Market shares for RAN equipment do not include sales of passive antennas, filters and other on-site
    equipment which is merely re-sold by RAN equipment suppliers. According to the Notifying Party, even
    if such sales were to be considered, this would not materially change the reported market shares due to the
    marginal value of passive antennas and filters as compared to RAN equipment. See Notifying Party’s
    Reply to RFI 7 of 25 July 2019, question 16.
82  Form CO, Annex 6.D.II.1, Market data EJL Wireless.
83  Notifying Party’s Reply to RFI 7 of 25 July 2019, question 15.
                                                          16
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak--- 5.2.    Conglomerate assessment
5.2.1. Analytical framework
(137) According to the Non-Horizontal Merger Guidelines, in most circumstances,
         conglomerate mergers do not lead to competition problems.99
(138) However, foreclosure effects may arise when the combination of products in related
         markets may confer on the merged entity the ability and incentive to leverage a
         strong market position from one market to another closely related market by means
         of tying or bundling or other exclusionary practices. The Non-Horizontal Merger
         Guidelines distinguish between bundling, which usually refers to the way products
         are offered and priced by the merged entity100 and tying, usually referring to
         situations where customers that purchase one good (the tying good) are required to
         also purchase another good from the producer (the tied good).
(139) Tying and bundling as such are common practices that often have no anticompetitive
        consequences. Nevertheless, in certain circumstances, these practices may lead to a
        reduction in actual or potential rivals’ ability or incentive to compete. Foreclosure
        may also take more subtle forms, such as the degradation of the quality of the
        standalone product.101 This may reduce the competitive pressure on the merged
        entity allowing it to increase prices.102
(140) In assessing the likelihood of such a scenario, the Commission examines, first,
         whether the merged firm would have the ability to foreclose its rivals,103 second,
         whether it would have the economic incentive to do so104 and, third, whether a
         foreclosure strategy would have a significant detrimental effect on competition, thus
         causing harm to consumers.105 In practice, these factors are often examined together
         as they are closely intertwined.
(141) In order to be able to foreclose competitors, the merged entity must have a
        significant degree of market power, which does not necessarily amount to
        dominance, in one of the markets concerned. The effects of bundling or tying can
        only be expected to be substantial when at least one of the merging parties’ products
        is viewed by many customers as particularly important and there are few relevant
        alternatives for that product.106 Further, for foreclosure to be a potential concern, it
        must be the case that there is a large common pool of customers, which is more
        likely to be the case when the products are complementary. 107 Finally, bundling is
99  Non-Horizontal Merger Guidelines, paragraph 92.
100 Within bundling practices, the distinction is also made between pure bundling and mixed bundling. In the
    case of pure bundling the products are only sold jointly in fixed proportions. With mixed bundling the
    products are also available separately, but the sum of the stand-alone prices is higher than the bundled
    price.
101 Non-Horizontal Merger Guidelines, paragraph 33.
102 Non-Horizontal Merger Guidelines, paragraph 93.
103 Non-Horizontal Merger Guidelines, paragraphs 95 to 104.
104 Non-Horizontal Merger Guidelines, paragraphs 105 to 110.
105 Non-Horizontal Merger Guidelines, paragraphs 111 to 118.
106 Non-Horizontal Merger Guidelines, paragraph 99.
107 Non-Horizontal Merger Guidelines, paragraph 100.
                                                          24
 ---pagebreak---         less likely to lead to foreclosure if rival firms are able to deploy effective and timely
        counter-strategies, such as single-product companies combining their offers.108
(142) The incentive to foreclose rivals through bundling or tying depends on the degree to
        which this strategy is profitable.109 Bundling and tying may entail losses or foregone
        revenues for the merged entity.110 However, they may also allow the merged entity
        to increase profits by gaining market power in the tied goods market, protecting
        market power in the tying good market, or a combination of the two.111
(143) It is only when a sufficiently large fraction of market output is affected by
        foreclosure resulting from the concentration that the concentration may significantly
        impede effective competition. If there remain effective single-product players in
        either market, competition is unlikely to deteriorate following a conglomerate
        concentration.112 The effect on competition needs to be assessed in light of
        countervailing factors such as the presence of countervailing buyer power or the
        likelihood that entry would maintain effective competition in the upstream or
        downstream markets.113
5.2.2. Affected markets
(144) The Transaction may have a significant impact within the meaning of Section 6.4 of
        the Form CO in relation to the supply of RAN equipment and the supply of both
        passive antennas (Section 5.2.3) and filters (Section 5.2.4), the latter products being
        required by MNOs in addition to RAN equipment in order to deploy mobile
        networks. 114
5.2.3. Passive antennas and RAN equipment
(145) Kathrein's passive antennas are complementary to the RAN equipment supplied by
        Ericsson, these products consisting in different components necessary to build
        mobile networks. The Transaction thus creates a conglomerate relationship between
        the activities of Ericsson and Kathrein.
(146) Passive antennas are procured by MNOs either (i) directly from antenna
        manufacturers, or (ii) indirectly, via a bundle sold by RAN equipment suppliers
        consisting of passive antennas and other RAN equipment components. This bundle
        constitutes what is designated in the industry as a "turnkey solution".
108 Non-Horizontal Merger Guidelines, paragraph 103.
109 Non-Horizontal Merger Guidelines, paragraph 105.
110 Non-Horizontal Merger Guidelines, paragraph 106.
111 Non-Horizontal Merger Guidelines, paragraph 108.
112 Non-Horizontal Merger Guidelines, paragraph 113.
113 Non-Horizontal Merger Guidelines, paragraph 114.
114 In the Form CO, the Notifying Party also provides an analysis on why the relationship between the
    markets for the supply of passive antennas and RAN equipment does not lead to anticompetitive vertical
    effects (see Form CO, paragraphs 165 to 178). The Commission notes that passive antennas and other
    RAN equipment components are complementary products and are not vertically related, in the sense that
    they are not situated at different levels of the supply chain. Therefore, the Commission does not carry out
    a separate analysis of potential vertical effects arising from the Transaction in this regard. In any event,
    similar considerations would apply in the context of an assessment of vertical effects as those set out in in
    Sections 5.2.3 and 5.2.4 below.
                                                            25
 ---pagebreak--- (147) The Commission examined whether the Transaction could give rise to conglomerate
        non-coordinated effects consisting of the potential foreclosure of suppliers of passive
        antennas that compete with Kathrein, and/or the potential foreclosure of suppliers of
        RAN equipment that compete with Ericsson as a result of the implementation of a
        conglomerate strategy by the merged entity.
(148) A possible practice that could potentially lead to conglomerate effects is mixed
        bundling.115 Post-Transaction, the merged entity could attempt to reduce its
        competitors’ ability to compete by offering its bundled sales of passive antennas and
        RAN equipment to MNOs at a price lower than the sum of the standalone prices for
        these products.116 In doing so, or even independently thereof, the merged entity may
        reduce its passive antenna sales to competing non-integrated RAN equipment
        suppliers. Such practices could potentially lead to the anticompetitive
        marginalization of rivals selling standalone components (i.e., non-integrated
        competitors) and to consumer harm, if the bundled offer was not replicable and the
        bundling strategy diverted sufficient demand from non-integrated rivals so as to
        make them unable to compete effectively.
5.2.3.1. Notifying Party’s view
(149) The Notifying Party considers that conglomerate effects are unlikely for the
        following reasons.
(150) First, the Notifying Party submits that the merged entity would not have the
        technical ability to increase its bundled sales. According to the Notifying Party, the
        choice between purchasing passive antennas on a standalone basis from antenna
        suppliers or as part of a (bundled) turnkey solution is made by MNOs, which specify
        in their tenders whether they prefer being offered bundles (generally for commercial
        reasons) or standalone components. Suppliers thus offer their products in a bundled
        or standalone manner depending on the specific requirements set out by MNO
        customers. MNOs thus have a strong countervailing buyer power and are unlikely to
        be influenced in their procurement decision in this regard.117
(151) Second, the Notifying Party points out that neither Ericsson nor the Target Business
        have a significant competitive position in any plausible relevant market. In 2018,
        Kathrein’s estimated market shares for passive antennas are below 20% on any
        plausible market segment (down from over [40-50]% in the EEA in 2015) and
        Ericsson’s estimated market share in RAN equipment is about [30-40]% both on a
        worldwide basis and in the EEA. Ericsson’s market share is only higher, albeit
        below [40-50]%, for 2G and 3G technology. According to the Notifying Party,
        neither Ericsson’s RAN equipment nor Kathrein’s passive antennas are viewed as
115 Other possible practices, which could potentially have anticompetitive effects, are pure bundling or tying
    as well as a degradation of interoperability. However, these practices are not plausible in the context of
    passive antennas, as explained in the assessment in paragraphs (181) and (171) respectively. Therefore,
    Section 5.2.3. mainly focusses on mixed bundling.
116 Pre-Transaction, while Ericsson offers bundles of passive antennas and RAN equipment, [terms and
    conditions].
117 Form CO, paragraph 184 and 199.
                                                         26
 ---pagebreak---         particularly important and several credible alternative suppliers with a comparable
        product offering will remain on the market.118
(152) Third, the Notifying Party explains that competing RAN equipment suppliers and
        antenna manufacturers will continue to effectively compete with the merged entity
        even in the event that it sold passive antennas as a bundle together with RAN
        equipment. RAN equipment suppliers will be able to replicate turnkey solutions
        offered by the merged entity: (i) Huawei and Nokia already have in-house passive
        antenna capabilities and (ii) other RAN equipment suppliers, such as Samsung and
        ZTE, already source passive antennas from third parties in order to offer turnkey
        solutions.119 According to the Notifying Party, there will remain a sufficient number
        of alternative antenna suppliers after the Transaction. Standalone antenna suppliers
        will thus continue to sell passive antennas to competing RAN equipment suppliers
        and directly to MNOs and will therefore continue to have a large enough pool of
        customers.120
(153) Fourth, the Notifying Party submits that MNOs can easily switch suppliers of RAN
        equipment and passive antennas and multi-source from various manufacturers.121
(154) The Notifying Party submits that the merged entity will in any case not have the
        incentive to push for an increase in its bundled sales or to tie its sales of RAN
        equipment and passive antennas. It submits that passive antennas have a low value
        compared to other RAN equipment components, in particular the baseband and the
        radio. Therefore, a bundling strategy risking losing MNO customers would not be
        profitable.122
(155) Overall, the Notifying Party submits that the Transaction will not result in any
        significant reduction of sales by competitors that offer products on a stand-alone
        basis. In the first place, MNOs will continue to determine their own procurement
        strategy. In the Notifying Party's view, MNOs could not be forced by a bundling
        strategy to purchase a turnkey solution that they would not believe optimal for their
        needs. In the second place, passive antenna manufacturers will continue to supply
        both MNOs and RAN equipment suppliers which will enable the latter to also offer
        turnkey solution to MNOs.123
5.2.3.2. Commission’s assessment
(156) The Commission considers that the merged entity will not have the ability and
        incentive to foreclose non-integrated competitors by bundling its sales of passive
        antennas and other RAN equipment components. Even if the merged entity engaged
        in a strategy to foreclose rivals though bundling or tying, such strategy would not
        have a significant detrimental effect on competition.
118 Form CO, paragraphs 193 to 194.
119 Form CO, paragraph 185 to 189.
120 Form CO, paragraph 190.
121 Form CO, paragraph 192.
122 Form CO, paragraphs 195 to 197.
123 Form CO, paragraph 198 to 200.
                                                  27
 ---pagebreak---         As regards ability
(157) First, the Commission considers that the merged entity does not have a sufficient
        degree of market power to leverage its position in the supply of passive antennas or
        in the supply of RAN equipment to foreclose non-integrated competitors active in
        these markets.
(158) With regard to RAN equipment, the market shares presented in Section 5.1.2. do not
        suggest that Ericsson has significant market power. In an overall market for the
        supply of RAN equipment, Ericsson's market share is about [30-40]% both on a
        worldwide level and at EEA level in 2018. If the market for RAN equipment is
        further segmented by technology standards, Ericsson's market share is about [40-
        50]% in 2018 in 2G and 3G technology both on a worldwide level and in the EEA.
        Its market share for the more recent 4G technology remains below 30%. If the
        market for RAN equipment is further segmented between macro and small cells,
        Ericsson’s market share is [30-40]% in the possible segment for macro-cell RAN
        equipment in 2018 and [30-40]% in the possible segment for small cells for 5G
        technology in 2018; however, more recently its market share decreased to [20-30]%
        in the latter segment. For all other segments and years, Ericsson’s market share
        remains below 30%. In addition, Ericsson’s market position has remained stable
        over the period 2015 to 2018.
(159) Irrespective of the precise segmentation of the market for RAN equipment, in 2018
        Ericsson is the [market position] RAN equipment supplier (except for legacy
        technologies 2G and 3G in the EEA, [market position]). Ericsson’s main competitors
        are Huawei (the market leader) and Nokia. Samsung and ZTE are also significant
        competitors. Ericsson also faces smaller competitors, namely Airspan, Cisco, Fujitsu
        and NEC.
(160) The results of the market investigation confirm that Ericsson is unlikely to have a
        significant degree of market power. The majority of antenna manufacturers, RAN
        equipment suppliers and MNOs that responded to the market investigation consider
        that Ericsson’s RAN equipment product portfolio is comparable to the products of
        other RAN equipment suppliers in terms of quality, performance and price.124 This
        result supports the notion that Ericsson faces significant competitors that present
        credible alternatives to MNOs.
(161) With regard to passive antennas, similarly, market shares presented in Section 5.1.3.
        do not suggest that Kathrein has market power.125 In 2018, Kathrein is the [market
        position] supplier of passive antennas both on a worldwide basis and in the EEA
        with a market share of [5-10]% and [10-20]%, respectively. Notably, Kathrein’s
        market position has [market position] over the period 2015 to 2018, as explained in
        Section 5.1.3. Kathrein thus faces significant competitive constraints from suppliers
        with material market shares like Commscope, Huawei or Comba.
(162) The results of the market investigation confirm that Kathrein is not a particularly
        important competitor in the supply of passive antennas and that there are several
124 Q1, replies to question 31; Q2, replies to question 31; Q3, replies to question 29.
125 As explained in paragraphs (245) to (249), Kathrein does also not have significant market power with
    regard to antenna modules. Therefore, Kathrein would equally not have significant market power in a
    potential broader market encompassing passive antennas and antenna modules.
                                                           28
 ---pagebreak---          credible alternative suppliers. The majority of antenna manufacturers, RAN
         equipment suppliers and MNOs that responded to the market investigation consider
         that Kathrein’s passive antenna offering is comparable with the products of other
         antenna manufacturers in terms of quality, performance and price.126
(163) MNOs confirm that they procure passive antennas from several different suppliers.
         Besides Kathrein, MNOs generally list Huawei, Commscope, Comba and Amphenol
         as their top passive antenna suppliers.127 According to the Notifying Party, Comba
         was able to improve the quality of its products significantly in the past few years,
         [supplier information].128 Other antenna manufacturers frequently mentioned by
         market participants as credible alternatives are CellMax, Mobi, RFS, Rosenberger,
         Tongyu and Wi-com.129 One MNO summarizes the supply situation as follows:
         "There are more than 10 main passive antenna manufacturers, and an uncertain
         number of small manufacturers over the world."130
(164) In the course of the market investigation, only one MNO submitted a different view
         and considered that Kathrein offers unique products in terms of quality, price and
         innovation.131,132 This respondent indicated that, even if Huawei's passive antennas
         are comparable to Kathrein’s products, however, Huawei is not an independent
         antenna supplier.
(165) However, this view is at odds with Kathrein's current market position and [market
         position] over the past few years. Moreover, these comments are inconsistent with
         the majority view expressed by other MNOs and respondents to the market
         investigation. With respect to Huawei, although the company appears to
         predominately sell passive antennas to MNOs (on a standalone basis or as part of
         turnkey solutions), the Commission notes that Huawei also generated sales to RAN
         equipment suppliers, albeit in more limited volumes. [business relationship].133
(166) Respondents to the market investigation also explain why, in their view, Kathrein
         has [market position] market shares over the last few years. According to several
         respondents, the quality of Kathrein's product is on par with that of the other main
         suppliers, but its prices are generally higher, making Kathrein less competitive.134
         [internal documents]. On a quarterly basis, Kathrein receives written feedback from
         Ericsson on its performance as a supplier. In a 2018 report, Ericsson thus described
         Kathrein's commercial position as "[supplier information] ".135
126 Q1, replies to question 30; Q2, replies to question 30; Q3, replies to question 28.
127 Q3, replies to question 26.1.
128 Form CO, paragraph 123.
129 Q2, replies to question 25.1.
130 Q3, reply of Telefónica to question 36.1.
131 Q3, reply of Deutsche Telekom to question 28.1.
132 Notably, this MNO also underlined Kathrein’s unique offer for indoor solutions and industrial applications
    (e.g. for trains and tunnels). However, as explained by the Notifying Party, Kathrein Group’s product
    portfolio of antennas for special purpose deployments is not part of the Transaction. See paragraph (4);
    Notifying Party’s Reply to RFI 9 of 6 August 2019, question 8.
133 Notifying Party’s Reply to RFI 7 of 25 July 2019, question 1 and Notifying Party's Reply to RFI 9 of 6
    August 2019, question 3; Notifying Party’s Reply to RFI 11 of 15 August, question 1.
134 Q2, replies to question 30.1 and 37.1.
135 Notifying Party's Reply to RFI 9 of 6 August 2019, question 5.
                                                           29
 ---pagebreak--- (167) Second, the Commission notes that the merged entity is unlikely to be able to
        significantly increase its (bundled) sales of passive antennas and RAN equipment
        post-Transaction in light of MNOs’ demand patterns.
(168) In the first place, the results of the market investigation confirm that MNOs procure
        passive antennas both directly from antenna manufacturers and from RAN
        equipment suppliers. Based on the responses to the market investigation, the
        proportion of passive antennas purchased on a standalone basis is estimated to be at
        least 50% market-wide, however with significant variation across MNOs.136
(169) According to MNOs, the advantages of purchasing turnkey solutions are: (i) bundle
        discounts, (ii) one-stop-shopping and reduced coordination efforts from an
        operational perspective, and (iii) RAN equipment suppliers taking the responsibility
        for the installation and integration of the passive antenna into the RAN equipment
        and ensuring the compatibility and interoperability of all components used across the
        mobile network. However, MNOs also indicate that purchasing turnkey solutions
        entails several disadvantages, namely: (i) higher and/or hidden costs (e.g. service
        fees), (ii) less freedom and control in the selection of the best components and their
        network integration, and (iii) increased dependency on a single RAN equipment
        supplier.137 Overall, it appears that the more price-sensitive MNOs tend to negotiate
        with antenna manufacturers directly when procuring passive antennas on a
        standalone basis.138 For other MNOs, the main reason for procuring passive antennas
        on a standalone basis is to keep a better control of the design and deployment of their
        mobile networks, including by testing and integrating passive antennas
        themselves.139
(170) The results indicate that MNOs assess the costs and benefits of both options, i.e. to
        opt for a standalone or turnkey solution, on a case-by-case basis.140 An MNO
        explains that it is pro-actively increasing its share of standalone passive antenna
        purchases after an integrated RAN equipment supplier had increased its share of
        bundled sales by granting vouchers for passive antennas.141 This MNO thus
        developed a counter-strategy in order to effectively avoid being dependent on an
        integrated supplier.
(171) The results of the market investigation also confirm that mixing-and-matching
        passive antennas and RAN equipment from different vendors presents no
        interoperability issues to MNOs. This is because the integration of passive antennas
        in RAN equipment is governed by established, market-wide interoperability
        standards (i.e., the 3rd Generation Partnership Project ("3GPP") standard).142,143 The
136 Q3, replies to question 27.
137 Q2, replies to question 32; Q3, replies to question 30.
138 Minutes of the call of 29 May 2019 with Comba, paragraph 5.
139 Minutes of the call of 5 June 2019 with Commscope, paragraph 9.
140 Q3, replies to question 30.
141 Q3, reply of Deutsche Telekom to question 27.1.
142 Q3, replies to question 30.2.
143 Given the existence of established, market-wide interoperability standards governing the integration of
    passive antennas and other RAN equipment components, the Commission notes that the merged entity
    would not be able to degrade interoperability, for instance, by selectively improving the interoperability
    between Ericsson and Kathrein products, while degrading the interoperability of the merged entity’s
    products with third party products. The Commission has not received any indication from market players
                                                            30
 ---pagebreak---          combination of passive antennas and RAN equipment takes place by connecting the
         antenna with a standardized connector via a high frequency coax cable, which
         transports the analogue signal to the passive antenna. In each case, the standards for
         the control and monitoring interface between a base station and a variety of tower-
         top equipment are observed.144
(172) Accordingly, although MNOs recognize that any infrastructure exchange causes
         some switching costs, for instance in terms of the testing of new components,
         switching between different passive antenna suppliers is technically and
         commercially possible.145 MNOs confirm that switching between suppliers is easy as
         passive antennas are commoditised products that are interoperable with any RAN
         vendor’s equipment.146
(173) In the second place, MNOs that responded to the market investigation confirm that
         they multi-source passive antennas and generally work with more than two different
         suppliers at the same time.147
(174) Besides the advantage of being less dependent on a single supplier, multi-sourcing is
         required as antenna specifications differ across mobile network sites. Therefore,
         even an integrated RAN equipment supplier would be unlikely to hold an antenna
         portfolio covering all types of passive antennas and would need to procure certain
         types from third-party suppliers.148 Thus, an antenna manufacturer explained in the
         course of the market investigation that it continues to sell passive antennas to
         integrated RAN equipment suppliers, such as Nokia or Huawei.149
(175) In the third place, while respondents to the market investigation consider that the
         merged entity may have the technical ability to respond to a RFQ for a standalone
         RAN equipment solution with a bundled offer (to the extent that such an offer would
         be permissible under the relevant tender rules), there are mixed views as to whether
         the merged entity would be successful in increasing its bundled sales after the
         Transaction.150 MNOs indicate that they will remain in control of their procurement
         strategy. For instance, one MNO explains that, when selecting passive antennas and
         RAN equipment, “it considers all relevant factors such as quality/performance,
         price and maintaining a balance between different vendors on the market”.151
(176) In contrast to MNOs, most antenna manufacturers and RAN equipment suppliers
         believe that the merged entity will be able to increase its bundled sales and divert
         demand away from standalone suppliers.152 However, only few respondents believe
    that such a strategy would be likely; rather, market players unanimously confirm the relevance of the
    existing interoperability standards with regard to passive antennas.
144 Form CO, paragraph 27.1.
145 Q3, replies to question 31.
146 Q3, replies to question 31.1.
147 Q2, replies to question 26.1 and 36.1.
148 Minutes of the call of 29 May 2019 with Comba, paragraph 5.
149 Minutes of the call of 29 May 2019 with Comba, paragraph 4.
150 Q1, replies to question 35; Q2, replies to question 35; Q3, replies to question 32.
151 Q3, reply of Deutsche Telekom to question 32.1.
152 Q1, replies to question 37; Q2, replies to question 37.
                                                            31
 ---pagebreak---         that such an increase would have a negative impact on competition and make it more
        difficult for stand-alone players to compete.153
(177) Third, the Commission notes that non-integrated competitors have effective and
        timely counter-strategies available in order to be able to effectively compete with the
        merged entity in the event of a potential foreclosure strategy by the merged entity.
(178) The majority of antenna manufacturers, RAN equipment suppliers and MNOs that
        responded to the market investigation consider that standalone antenna
        manufacturers and RAN equipment suppliers will have the ability to replicate
        turnkey solutions offered by the merged entity.154 Several antenna manufacturers
        explain that standalone competitors already team up, for instance against the
        integrated player Huawei, and that RAN equipment suppliers can purchase passive
        antennas from several sources for their turnkey solutions.155 Overall, the results
        indicate that the partnership model is how the majority of RAN equipment suppliers
        currently operates. All RAN equipment suppliers seem to collaborate with antenna
        manufacturers and offer bundles or could enter into such partnerships.156
(179) Only a few respondents are concerned that while the Parties' competitors may have
        the technical ability to replicate the merged entity’s turnkey solution through
        partnerships, non-integrated players would not be as competitive as the merged
        entity. In particular, they submit that non-integrated players will not be able to
        replicate the merged entity's bundle discount. Moreover, they are concerned that
        standalone antenna manufacturers may become less competitive due to the reduced
        demand post-Transaction.157 However, these concerns are not consistent with the
        fact that non-integrated players are already competing effectively with integrated
        players pre-Transaction.
(180) Moreover, MNOs consider that post-Transaction there will remain a sufficient
        number of alternative antenna manufacturers and RAN equipment suppliers such
        that MNOs can continue purchasing these components on a standalone basis, even if
        the merged entity were to tie its passive antenna and RAN equipment sales.158 With
        regard to RAN equipment suppliers, the results of the market investigation confirm
        that the Transaction would leave the number of suppliers unaffected and that
        customers currently purchasing RAN equipment on a standalone basis expect to be
        able to do so post-Transaction.159
        As regards incentives
(181) In light of the foregoing, the merged entity is unlikely to have an incentive to engage
        in a pure bundling or tying strategy. As explained in paragraph (168), a significant
        share of MNOs is not interested in buying turnkey solutions, but instead prefers to
        buy passive antennas and RAN equipment on a standalone basis. If the merged entity
        were to pursue a pure bundling or tying strategy, it would risk losing the sales from
153 Q1, replies to question 37.1 and 38.1; Q2, replies to question 37.1.
154 Q1, replies to question 40; Q2, replies to question 40; Q3, replies to question 35.
155 Q1, replies to question 40.1.
156 Q2, replies to question 40.1; Q3, replies to questions 32.1 and 32.2.
157 Q1, replies to question 40.1.; Q2, replies to question 40.1; Q3, replies to question 35.1.
158 Q3, replies to question 36 and 37.
159 Q3, replies to question 37.1.
                                                            32
 ---pagebreak---         customers who prefer to mix-and-match and purchase only passive antennas or only
        RAN equipment from the merged entity together with the standalone product of
        another supplier. A share of these customers may decide to cease purchasing these
        products from the merged entity.
(182) In this context, it is also relevant to mention that the value of passive antennas is
        significantly lower than the value of the other RAN equipment components.160 The
        Notifying Party estimates that passive antennas represent around [5-10]% of the
        RAN equipment value.161 Respondents to the market investigation unanimously
        confirm that passive antennas represent only a small portion of the overall value of
        the RAN equipment, even in case of a complex multi-band antenna. Therefore, it is
        very unlikely that Ericsson would be willing to forego sales of RAN equipment in
        order to gain market shares on the market for the supply of passive antennas where
        turnover and profits are more modest. Vice versa, it is very unlikely that Ericsson
        would be able to convince MNO customers to buy a bundle consisting of passive
        antennas and RAN equipment, if such customers were looking to buy passive
        antennas on a standalone basis.
(183) It also appears unlikely that the merged entity will have the incentive to foreclose
        rivals though a mixed bundling strategy and/or through the reduction of passive
        antenna sales to non-integrated competitors.
(184) First, the majority of antenna manufacturers and RAN equipment suppliers that
        responded to the market investigation considers that the merged entity will have an
        incentive to increase its bundled sales.162 Respondents indicate that Ericsson will
        have the option of either selling passive antennas and RAN equipment at market
        rates, thus gaining the antenna margin as part of the company's profit, or offering a
        bundle at a reduced price to increase its sales and gain market share. Nevertheless,
        MNOs cast doubt that the merged entity will have an incentive to expand bundled
        sales by pointing to the fact that Ericsson already has an agreement with Kathrein to
        distribute antennas and could already today offer commercial advantages to
        customers purchasing a turnkey solution as opposed to purchasing components in a
        standalone form.163
(185) Second, in its assessment of the likely incentives of the merged firm, the
        Commission may take into account factors such as, inter alia, the type of strategies
        adopted on the market in the past or the content of internal documents.164
(186) With respect to past strategies adopted on the market, respondents to the market
        investigation indicate that Huawei, which is already integrated, employs a mixed
        bundling strategy offering bundles at a reduced price. 165 Therefore, a number of
        respondents are concerned that, assuming that the merged entity would increase
        bundled sales to MNOs as a result of the Transaction, it may at the same time have
        an incentive to decrease its passive antenna sales to competing RAN equipment
        suppliers (for commercial or technical reasons, such as capacity constraints). This
160 Q1, replies to question 36.2; Q2, replies to question 36.2.
161 Form CO, paragraph 173.
162 Q1, replies to question 36; Q2, replies to question 36.
163 Q3, replies to question 33.1.
164 Non-Horizontal Merger Guidelines, paragraph 109.
165 Q1, replies to question 37.1; Q2, replies to question 38.1; Q3, replies to question 33.1.
                                                            33
 ---pagebreak---          would be in line with Huawei’s strategy to only have limited passive antenna sales to
         competing RAN equipment suppliers.166
(187) [reference to internal documents on post-Transaction business strategy]167
(188) It follows that, on balance, the merged entity is unlikely to have the incentive to
         foreclose rivals through bundling, tying or other exclusionary strategies.
         As regards effects
(189) Even if the merged entity engaged in a mixed bundling strategy or other
         exclusionary strategy, for all the reasons set out in paragraphs (157)-(180), such
         strategy would be unlikely to result in a significant reduction of sales prospects by
         standalone rivals in the market leading to a reduction in rivals’ ability or incentive to
         compete.
(190) The implementation of a mixed bundling strategy may potentially lead to (i) a
         reduction of Ericsson's procurement of passive antennas from third parties and (ii) a
         reduction of Kathrein's passive antenna sales to third parties.
(191) With regard to the first effect, the Commission notes that, before the Transaction,
         Ericsson’s position as customer for other standalone antenna manufacturers is
         limited. According to the results of the market investigation, Ericsson represents less
         than 10% of most antenna manufacturers’ sales of passive antennas. Ericsson
         represents between 10% and 30% of passive antenna sales of only two antenna
         manufacturers.168 Moreover, several passive antenna suppliers indicate that they
         would be able to start selling or increase their sales to customers other than
         Ericsson.169
(192) In any event, as explained in paragraph (174), an integrated RAN equipment supplier
         is likely to continue to procure passive antennas from a range of different suppliers.
         [business strategy].170 [business strategy]. According to Ericsson, this is due to the
         need to fulfil specific requests from customers who prefer to multi-source and
         procure passive antennas from a number of different suppliers. [business strategy].171
         [business strategy].172
(193) With regard to the second effect, the Commission notes that Kathrein’s position as
         supplier to standalone RAN equipment manufacturers is fairly limited pre-
         Transaction. According to the results of the market investigation, Kathrein represents
         less than 10% of other RAN equipment suppliers’ passive antenna purchases (in
         order for them to offer turnkey solutions to MNOs).173 Moreover, several RAN
         equipment suppliers indicate that they would be able to start sourcing or increase
166 Notifying Party’s reply to RFI 9 of 6 August 2019, question 3.
167 [internal documents].
168 Q1, replies to question 27.
169 Q1, replies to question 27.2.
170 Notifying Party’s reply to RFI 9 of 6 August 2019, question 7.
171 Form CO, paragraph 123.
172 Notifying Party’s reply to RFI 9 of 6 August 2019, question 7.
173 Q2, replies to question 37; Q3, replies to question 34.1.
                                                           34
 ---pagebreak---         their purchases from antenna manufacturers other than Kathrein.174 Consequently,
        even in the unlikely scenario that Ericsson would reduce its sales of passive antennas
        to competing RAN equipment suppliers, this would not affect their ability to source
        passive antennas and, thus, they would continue to compete effectively as suppliers
        of both stand-alone and turnkey solutions to MNOs.
(194) Moreover, for the reasons set out in paragraphs (167) to (176), the Commission does
        not expect that the Transaction will divert significant demand from standalone
        products to bundled sales. In any case, the Parties’ non-integrated competitors are
        able to replicate the merged entity’s bundled offer as there remains a sufficient
        number of standalone players in both markets.
5.2.3.3. Conclusion
(195) In light of the above considerations and based on the results of the market
        investigation, the Commission considers that the Transaction does not raise serious
        doubts as to its compatibility with respect to the relationship between the market for
        the supply of passive antennas and the market for the supply of RAN equipment.
5.2.4. Filters and RAN equipment
(196) Kathrein's filters are complementary to the RAN equipment supplied by Ericsson, all
        these products consisting in components necessary to build mobile networks. The
        Transaction thus creates a conglomerate relationship between Ericsson and Kathrein.
(197) Like passive antennas, filters are procured by MNOs either (i) directly from filter
        manufacturers, or (ii) indirectly, via a bundle sold by RAN equipment suppliers
        consisting of filters and other RAN equipment components as part of a turnkey
        solution.
(198) The Commission examined whether the Transaction could give rise to conglomerate
        effects consisting of the potential foreclosure of suppliers of filters that compete with
        Kathrein, and/or the foreclosure of suppliers of RAN equipment that compete with
        Ericsson.
5.2.4.1. Notifying Party’s view
(199) The Notifying Party considers that conglomerate effects are unlikely for the
        following reasons.
(200) First, the Notifying Party submits that the merged entity would not have the
        technical ability to increase its bundled sales because, as described in relation to
        passive antennas, suppliers offer their products in a bundled or standalone manner
        depending on the specific requirements set out by their MNO customers. MNOs thus
        have a strong countervailing buyer power and are unlikely to be influenced in their
        procurement decision in this regard.175
(201) Second, the Notifying Party points out that neither Ericsson nor the Target Business
        have a significant competitive position in any conceivable relevant market. In 2018,
174 Q1, replies to question 27.2.
175 Form CO, paragraph 209.
                                                   35
 ---pagebreak---         Kathrein’s estimated market share for filters remains below 20% (down from over
        [30-40]% in the EEA in 2016) and Ericsson’s estimated market share in RAN
        equipment is about [30-40]% both on a worldwide basis and in the EEA.
(202) Third, the Notifying Party explains that other RAN equipment suppliers and filter
        manufacturers will continue to effectively compete with the merged entity even in
        the event that it sold filters as a bundle together with RAN equipment. As for passive
        antennas, RAN equipment suppliers will be able to replicate turnkey solutions
        offered by the merged entity, either relying on in-house filters capacities or
        procuring filters from alternative suppliers.176 Standalone filter manufacturers will
        thus continue to sell filters to competing RAN equipment suppliers and to MNOs
        directly and will therefore continue to have a large enough pool of customers.
(203) Fourth, the Notifying Party submits that MNOs can easily switch suppliers of RAN
        equipment and filters and multi-source from various manufacturers.177
(204) The Notifying Party submits that the merged entity will in any case not have the
        incentive to push for an increase in its bundled sales or to tie its sales of RAN
        equipment and filters. It submits that filters have a low value compared to other
        RAN equipment components. Therefore, a bundling strategy risking losing MNO
        customers would not be profitable.178
5.2.4.2. Commission’s assessment
(205) The Commission considers that the merged entity will not have the ability to
        foreclose non-integrated competitors by bundling its sales of filters and other RAN
        equipment components. Even if the merged entity engaged in a strategy to foreclose
        rivals though bundling or tying, such strategy would not have a significant
        detrimental effect on competition.
        As regards ability
(206) First, the Commission considers that the merged entity does not have a sufficient
        degree of market power to leverage its position in the supply of filters or in the
        supply of RAN equipment to foreclose non-integrated competitors active in these
        markets.
(207) With regard to RAN equipment, the Commission refers to paragraphs (157)-(160)
        above which set out why Ericsson is unlikely to have a significant degree of market
        power.
(208) With regard to filters, market shares presented in Section 5.1.4. do not suggest that
        Kathrein has market power. In 2018, Kathrein is the fifth largest supplier of filters on
        a worldwide basis with a [5-10]% market share and the third largest supplier in the
        EEA with a [10-20]% market share. Notably, as explained in detail in Section 5.1.4,
        Kathrein’s market position has [market position] over the period 2015 to 2018.
        Kathrein thus faces significant competition from the main market players, namely
        Commscope, Huawei, Comba, Mobi, Kaelus and Radio Design.
176 Form CO, paragraph 210.
177 Form CO, paragraph 211.
178 Form CO, paragraph 214.
                                                     36
 ---pagebreak--- (209) The results of the market investigation confirm that Kathrein is not a particularly
        important competitor in the supply of filters and that there are many credible
        alternative suppliers. A majority of filter manufacturers, RAN equipment suppliers
        and MNOs that responded to the market investigation consider that Kathrein’s filter
        offering is comparable with the products of other filter manufacturers in terms of
        quality, performance and price.179
(210) MNOs confirm that they rely on several different filter suppliers. Besides Kathrein,
        MNOs generally list Huawei, Commscope and Radio Design as their top suppliers of
        filters.180 MNOs do not identify any relevant differences across filter manufacturers.
        A respondent thus explains that “most suppliers have a broad range of filters in their
        portfolios, i.e. there are no types of filters produced by Kathrein which are not also
        offered by competitors”.181 One filter manufacturer explains that the filter market is
        characterized by a high level of customization; however, this is not consistent with
        the majority view of other respondents to the market investigation.182
(211) Second, the Commission notes that the merged entity is unlikely to be able to
        significantly increase its (bundled) sales of filters and RAN equipment post-
        Transaction in light of MNOs’ demand patterns, as set out for passive antennas in
        paragraphs (167)-(174). Compared to passive antennas, the results of the market
        investigation suggest that MNOs are even less likely to purchase bundles consisting
        of filters and other RAN equipment components because filters are generally
        procured separately and represent a limited portion of the cost of the RAN
        equipment.183 A respondent thus explained that “[t]he filter market has a huge
        diversity and usually is not involved in the RAN process. Cost is residual comparing
        with the RAN.”184 Therefore, the filter and RAN equipment markets seem to be less
        closely related than the passive antenna and RAN equipment markets.
(212) Third, the Commission notes that non-integrated competitors have effective and
        timely counter-strategies available in order to be able to effectively compete with the
        merged entity in the event of a potential foreclosure strategy by the merged entity. A
        majority of respondents consider that standalone filter manufacturers will have the
        ability to compete with the merged entity, even in the event that it sold filters as a
        bundle together with RAN equipment.185 As explained in detail for passive antennas
        in paragraphs (177)-(180), standalone competitors can and do to some extent
        collaborate already pre-Transaction in order to offer bundled products and compete
        against integrated players.
        As regards incentives
(213) In light of the foregoing, the merged entity is unlikely to have an incentive to engage
        in a pure bundling or tying strategy. If the merged entity were to pursue a pure
        bundling or tying strategy, it would risk losing the sales from customers who prefer
179 Q1, replies to question 43; Q2, replies to question 43; Q3, replies to question 38.
180 Q3, replies to question 26.1.
181 Q3, reply of Vodafone to question 38.1.
182 Q1, reply of Commscope to question 45.1.
183 Q3, replies to questions 39, 40.
184 Q3, reply of Telefonica to question 40.1.
185 Q1, replies to question 45; Q2, replies to question 45; Q3, replies to question 40.
                                                           37
 ---pagebreak---         to mix-and-match filters and RAN equipment from different suppliers. A share of
        these customers may decide to no longer purchase from the merged entity at all.
(214) In this context, it is also relevant to mention that the value of filters is significantly
        lower than the value of the other RAN equipment components. The Notifying Party
        estimates that filters represent around [0-5]% of the RAN equipment value.186
        Therefore, it is very unlikely that Ericsson would be willing to forego RAN
        equipment sales in order to gain market shares in filters where turnover and profits
        are more modest. Vice versa, it is very unlikely that Ericsson would be able to
        convince MNO customers to buy a bundle consisting of filters and RAN equipment,
        if such customers were looking to buy filters on a standalone basis.
(215) With respect to mixed bundling, several market participants indicate that, in their
        view, the merged entity will pursue a similar bundling strategy as for passive
        antennas and/or combine its bundling strategy by offering bundles consisting of
        passive antennas, filters and other RAN equipment components.187
(216) As noted in paragraphs (181)-(188) with regard to passive antennas, it appears
        unlikely that the merged entity will have the incentive to foreclose rivals though a
        mixed bundling strategy and/or through the reduction of filter sales to non-integrated
        competitors. [reference to internal documents on post-Transaction business strategy].
(217) It follows that, on balance, the merged entity is unlikely to have the incentive to
        foreclose rivals through bundling or tying or other exclusionary practices.
        As regards effects
(218) Even if the merged entity engaged in a mixed bundling strategy, for all the reasons
        set out in paragraphs (206)-(212), the Commission notes that such strategy is
        unlikely to result in a significant reduction of sales prospects by standalone rivals in
        the market leading to a reduction in rivals’ ability or incentive to compete.
5.2.4.3. Conclusion
(219) In light of the above considerations and based on the results of the market
        investigation, the Commission considers that the Transaction does not raise serious
        doubts as to its compatibility with respect to the relationship between the market for
        the supply of filters and the market for the supply of RAN equipment.
5.3.    Vertical assessment
5.3.1. Analytical framework
(220) According to the Non-Horizontal Merger Guidelines, a vertical merger may
        significantly impede effective competition as a result of non-coordinated effects if
        such merger gives rise to foreclosure.
(221) The Non-Horizontal Merger Guidelines distinguish between two forms of
        foreclosure. Input foreclosure occurs where the merger is likely to raise the costs of
186 Form CO, paragraph 173.
187 Q1, replies to question 44.1.
                                                   38
 ---pagebreak---        downstream competitors by restricting their access to an important input. Customer
       foreclosure occurs where the merger is likely to foreclose upstream competitors by
       restricting their access to a sufficient customer base.
(222) In assessing the likelihood of an anticompetitive foreclosure scenario, the
       Commission examines, first, whether the merged entity would have, post-merger,
       the ability to substantially foreclose access to inputs or customers, second, whether it
       would have the incentive to do so, and third, whether a foreclosure strategy would
       have a significant detrimental effect on competition.188
(223) As regards ability to foreclose, under the Non-Horizontal Merger Guidelines, input
       foreclosure may lead to competition problems if the upstream input is important for
       the downstream product.189 For input foreclosure to be a concern, a vertically
       integrated merged entity must have a significant degree of market power in the
       upstream market. It is only in those circumstances that the merged entity can be
       expected to have significant influence on the conditions of competition in the
       upstream market and thus, possibly, on prices and supply conditions in the
       downstream market.190
(224) With respect to incentives to foreclose, paragraph 40 of the Non-Horizontal Merger
       Guidelines states that the incentive of the merged entity to foreclose depends on the
       degree to which foreclosure would be profitable. The vertically integrated firm will
       take into account how its supplies of inputs to competitors downstream will affect
       not only the profits of its upstream division, but also of its downstream division.
       Essentially, the merged entity faces a trade-off between the profit lost in the
       upstream market due to a reduction of input sales to (actual or potential) rivals and
       the profit gain, in the short or longer term, from expanding sales downstream or, as
       the case may be, being able to raise prices to consumers.191 Additionally, paragraph
       42 of the Non-Horizontal Merger Guidelines indicates that “[t]he incentive for the
       integrated firm to raise rivals' costs further depends on the extent to which
       downstream demand is likely to be diverted away from foreclosed rivals and the
       share of that diverted demand that the downstream division of the integrated firm
       can capture”.
(225) As regards the effects of input foreclosure, the Non-Horizontal Merger Guidelines
       explain that such conduct raises competition concerns when it leads to increased
       prices on the downstream market. First, anticompetitive foreclosure may occur when
       a vertical merger allows the merging parties to increase the costs of downstream
       rivals in the market thereby leading to an upward pressure on their sales prices.
       Second, effective competition may be significantly impeded by raising barriers to
       entry to potential competitors.192 The Non-Horizontal Merger Guidelines further
       state that if there remain sufficient credible downstream competitors whose costs are
       not likely to be raised, for example because they are themselves vertically integrated
       or they are capable of switching to adequate alternative inputs, competition from
188 Non-Horizontal Merger Guidelines, paragraph 32.
189 Non-Horizontal Merger Guidelines, paragraph 34.
190 Non-Horizontal Merger Guidelines, paragraph 35.
191 Non-Horizontal Merger Guidelines, paragraph 40.
192 Non-Horizontal Merger Guidelines, paragraphs 47-49.
                                                      39
 ---pagebreak---          those firms may constitute a sufficient constraint on the merged entity and therefore
         prevent output prices from rising above pre-merger levels.193
(226) For customer foreclosure to be a concern, a vertical merger must involve a company
        which is an important customer with a significant degree of market power in the
        downstream market. If, on the contrary, there is a sufficiently large customer base, at
        present or in the future, that is likely to turn to independent suppliers, the
        Commission is unlikely to raise competition concerns on that ground.194
5.3.2. Affected markets
(227) The Transaction gives rise to a vertical relationship insofar as Kathrein supplies
        antenna modules, which are used as an input by RAN equipment suppliers such as
        Ericsson to manufacture active antennas. In light of the market shares set out in
        Sections 5.1.5 and 5.1.6 above, the Transaction gives rise to a number of vertically
        affected markets, namely the upstream market for antenna modules (and potential
        sub-markets for antenna modules used for semi-active and AAS antennas) and the
        downstream market for active antennas (and potential sub-markets for semi-active
        and AAS antennas).195
5.3.3. Antenna modules and active antennas
5.3.3.1. Introduction
        Technical characteristics of active antennas
(228) The development of an active antenna requires the mechanical and electrical
        integration of an antenna module and a radio unit (which is a RAN equipment
        component) in the same physical housing.196
(229) The Notifying Party explains that antenna modules are customer-specific products
        based on specification requirements197 defined by the RAN equipment supplier.
        RAN equipment suppliers select antenna modules to be integrated in their active
        antennas via calls for tenders.198 Once the antenna module manufacturer has been
        selected for a specific project, it closely collaborates with the RAN equipment
        supplier in the development of the active antenna.199 The Notifying Party thus
193 Non-Horizontal Merger Guidelines, paragraph 50.
194 Non-Horizontal Merger Guidelines, para 61.
195 In the Form CO, the Notifying Party also provides an analysis on why the relationship between the
    markets for the supply of antenna modules and active antennas does not lead to anticompetitive
    conglomerate effects (see Notifying Party’s Reply to RFI7 of 25 July 2019, question 18). The
    Commission notes that such an analysis does not appear relevant in the assessment of the Transaction, as
    antenna modules constitute an input for the development of active antennas rather than a complementary
    product which can be purchased also on a standalone basis by the end customers. Therefore, the
    Commission does not address any potential conglomerate effects arising from the Transaction in this
    regard.
196 Form CO, paragraph 57.
197 The RAN equipment supplier conceptually designs the complete active antenna product resulting in a
    specification of the antenna module. This specification includes the electrical and radiating properties and
    performance as well as mechanical mounting interface. Form CO, paragraph 131.
198 Form CO, paragraph 119.
199 The Notifying Party explains that after the award has been concluded, a phase is entered in which the
    RAN equipment supplier and the selected antenna module manufacturers adjust or finalize the complete
                                                          40
 ---pagebreak---          explains that the development of active antennas requires RAN capabilities and
         therefore standalone antenna manufacturers cannot produce active antennas.200
(230) There are no standard interfaces for the integration of the radio and the antenna
         module into an active antenna, i.e., each active antenna has a specifically designed
         antenna module and interface to the radio module. MNOs thus cannot procure the
         integral components of an active antenna separately and instead purchase integrated
         active antennas from RAN equipment suppliers.201
(231) The Commission notes that, as explained in paragraphs (69) and (171), passive
         antennas are interoperable with the RAN equipment of any RAN vendor due to
         established standardised physical interfaces. In contrast, the interface between active
         antennas and other RAN equipment components in a mobile network is vendor-
         specific and proprietary.202 Therefore, MNOs must purchase active antennas and
         other RAN equipment components from the same RAN equipment supplier.
(232) The O-RAN Alliance203, which was founded by several industry players in 2018,
         serves as a forum for discussing an open interface for RAN solutions.204 Ericsson is
         a member of the O-RAN Alliance, while Kathrein is not. Open interfaces, if widely
         adopted in the industry, would allow MNOs to procure active antennas and other
         RAN equipment components from different vendors and increase the interoperability
         of all components in the mobile network.205 However, the Commission notes that
         specifications for fully open baseband interfaces are not mature as no products have
         been brought to market at this point in time. Therefore, any future potential impact
         of the O-RAN Alliance on competition in the active antenna market cannot be taken
         into account to assess the Transaction’s effects and will not be further discussed in
         this decision.
         Ericsson's and Kathrein's activities
(233) Ericsson produces semi-active and AAS antennas. In the period 2016-2018, Ericsson
         has sourced antenna modules for its active antenna offerings from [supplier
         information] and Kathrein. For active antennas under development and not yet
    product design together. During this process the purchaser's and the supplier's know-how is combined to
    reach the best possible result from the view of all parties involved. See Form CO, paragraphs 131 and 297.
200 Form CO, paragraph 305.
201 Form CO, paragraph 280.
202 The Notifying Party explains that the interface between the baseband and the radio is currently to a very
    large extent an interface based on the Common Public Radio Interface ("CPRI") standard. This is a
    baseband interface which is only standardised up to a general point, on top of which, each RAN
    equipment manufacturer has added its specific dialect of the interface to support certain features of its own
    radios and baseband software. See Form CO, paragraph 54.
203 The O-RAN Alliance was founded in August 2018 by a number of industry players (AT&T, China
    Mobile, Deutsche Telekom, NTT, and Orange). O-RAN is an initiative aiming to develop an open
    interface for RAN equipment and a wide ecosystem based on ensuring interoperability of RAN equipment
    components (radio and baseband) from different RAN equipment suppliers.
204 Based on the Notifying Party’s submission, for active antennas, such an open interface concerns the
    connection between the radio and the baseband interface and not the connection between the antenna
    module and the radio within the active antenna, which in any event is defined by the RAN equipment
    supplier and will remain vendor specific and proprietary. See Form CO, paragraph 143
205 Minutes of call with Telefonica of 11 June 2019, paragraph 6.
                                                            41
 ---pagebreak---          released, Ericsson also procured antenna modules from [supplier information].
         [supplier information] .206
(234) Currently, Kathrein [business relationship] for the development and supply of semi-
         active antennas. Kathrein's business relationship with Ericsson regarding semi-active
         antennas is long-standing, having started in 2012. It concerns semi-active antennas
         called AIR products. The Target Business also started delivering antenna modules
         for AAS active antennas [business relationship].207
(235) The Notifying Party explains that Kathrein [tender information]. [tender
         information].208
(236) The Commission examined whether the Transaction could give rise to a possible risk
         of input foreclosure for the supply of antenna modules, as a result of exclusive
         supplies of Kathrein’s antenna modules to Ericsson, to the detriment of other RAN
         equipment suppliers. In addition, the Commission assessed the risk of a possible
         customer foreclosure for Kathrein’s competitors should the merged entity stop
         acquiring antenna modules from other antenna manufacturers and exclusively rely
         on the antenna modules provided by Kathrein.
5.3.3.2. Notifying Party’s view
(237) According to the Notifying Party, the Transaction is not likely to lead to input or
         customer foreclosure with regard to active antennas for the reasons set out at
         paragraphs (238)-(243) below.
(238) First, with regard to possible input foreclosure, the Notifying Party submits that
         Kathrein does not have any market power in the possible segment for antenna
         modules. Kathrein’s market share is higher only in a potential segment for antenna
         modules for semi-active antennas, around [30-40]% at worldwide level (and [5-10]%
         in the EEA). However, regarding antenna modules for AAS, which will gain in
         importance in the future, Kathrein’s market share is around [0-5]% at the worldwide
         level, and Kathrein currently does not have any activities in the EEA. The Notifying
         Party explains that semi-active antennas are considered as a “bridge technology”209
         which is rapidly declining.210 In addition, antenna modules are produced and
206 [tender information]. See Notifying Party’s Reply to RFI 7 of 25 July 2019, question 7.
207 Form CO, paragraph 62.
208 The Notifying Party submits that [tender information]. See Notifying Party’s Reply to RFI 7, question 3.
209 The Notifying Party explains that semi-active antennas allow for a faster deployment than passive
    antennas and therewith performance improvements for MNOs. As the passive and active components are
    already adjusted to each other, the installation process on site is faster. Regarding performance, the benefit
    is that the high level of integration of passive and active components in the same physical unit allows for
    shorter signal paths compared to passive antennas on masts with a long cable connecting them to the base
    station. According to the Notifying Party, AAS encompass the same advantages mentioned above (i.e.
    faster deployment and better performance in comparison to passive antennas) and in addition are a further
    development of the semi-active antenna. The Notifying Party expects that replacement of semi-active
    antennas by AAS will increase in the future. See Notifying Party’s Reply to RFI 7, questions 11 and 12.
210 The share of semi-active antennas in the total size of the antenna market at the worldwide level (based on
    sales) is expected to decline in the coming years (from around […] in 2019 to […] in 2022). AAS are
    expected to account for […] of the total antenna market in 2022 as compared to […] in 2019. See Form
    CO, paragraph 79.
                                                            42
 ---pagebreak---         supplied via bidding procedures which ensure fierce competition between antenna
        module suppliers.211
(239) Second, in the Notifying Party’s view, RAN equipment suppliers are not dependent
        on Kathrein's antenna modules for their active antenna offerings. Currently Kathrein
        does not deliver antenna modules for active antennas to any customer other than
        Ericsson. The Notifying Party argues that, as antenna modules are (i) based on
        specification requirement determined by RAN equipment manufacturers and (ii)
        sourced on the basis of bidding procedures, other antenna suppliers will be able to
        produce such products for Ericsson’s competitors. Post-Transaction, there will be
        various suppliers from which Ericsson's competitors can source antenna modules,
        e.g., Huawei, Commscope, Comba, Tongyu, Mobi, RFS, Rosenberger and
        Amphenol as well as numerous smaller and regional active and specialised antenna
        suppliers.
(240) Third, the Notifying Party submits that the merged entity will not have the incentive
        to foreclose access to antenna modules. In the Notifying Party's view, antenna
        modules and active antennas represent a minimal value of the total costs for RAN
        equipment. For antenna modules, RAN equipment manufacturers send RFQs to
        numerous suppliers and will be able to continue to rely on many alternative suppliers
        after the Transaction. According to the Notifying Party, this is all the more true as no
        other RAN equipment manufacturer is currently procuring antenna modules from the
        Target Business.212
(241) Fourth, with regard to possible customer foreclosure, the Notifying Party argues that
        Ericsson's market position as a customer of antenna modules is modest. In the
        Notifying Party's view, suppliers of antenna modules will have a sufficiently large
        customer base available after the Transaction. It can be expected that antenna
        manufacturers’ sales of antenna modules with various RAN equipment
        manufacturers will further increase as demand for active antennas and antenna
        modules, respectively, will increase in the coming years with the roll-out of 5G
        networks.213
(242) Fifth, the Notifying party submits that Ericsson will not have an incentive to stop
        sourcing antenna modules from third parties (such as [supplier information]). The
        Notifying Party submits that Ericsson will continue to source antenna modules from
        [supplier information].214 [business strategy].
(243) Finally, according to the Notifying Party, as Ericsson’s competitors do not currently
        source antenna modules from Kathrein, the Transaction will not have any effect on
        the possible market for active antennas. Furthermore, the Notifying Party argues that
        the main RAN equipment manufacturers will be able to replicate the merged entity’s
        active antenna offering post-Transaction by relying at least partly on in-house
211 Notifying Party's Reply to RFI 7 of 25 July 2019, question 18.
212 Notifying Party's Reply to RFI 7 of 25 July 2019, question 18.
213 Notifying Party's Reply to RFI 7 of 25 July 2019, question 18.
214 Form CO, paragraph 166.
                                                         43
 ---pagebreak---          antenna modules capabilities (Huawei, Nokia) or on third party antenna module
         suppliers (Samsung, ZTE).215
5.3.3.3. Commission’s assessment
(244) The Commission considers that the merged entity will not have the ability and
         incentive to foreclose non-integrated competitors by engaging in input or customer
         foreclosure. Furthermore, even if the merged entity would engage in input or
         customer foreclosure (quod non), such strategy would not have a significant
         detrimental effect on competition.
         (A)        Input foreclosure
         As regards ability
(245) First, the merged entity will not have a significant degree of market power in the
         upstream market for the supply of antenna modules. As set out in Table 10, in 2018,
         Kathrein’s market share in the potential market for the supply of antenna modules is
         limited (especially at EEA level) and has been [market position] compared to 2017.
         Kathrein’s market share is currently higher than 30% only in the potential market for
         antenna modules used in semi-active antennas at the worldwide level ([30-40]%) but
         is not as such indicative of market power, in particular taking into account the factors
         considered below.216
(246) Second, RAN equipment suppliers are not dependent on Kathrein's antenna modules
         for developing active antennas.
(247) The results of the market investigation confirm that Kathrein’s antenna modules are,
         on balance, comparable to those of other suppliers in terms of quality and
         performance.217 Some respondents point out that the price of Kathrein’s antenna
         modules is higher than other suppliers, making it difficult for Kathrein to be
         competitive.
(248) [business relation]. Based on the Notifying Party’s submission, Kathrein [tender
         information].218
(249) Furthermore, with regard to antenna modules for AAS antennas, over the period
         2016-2018, Kathrein [tender information].219,220 Ericsson's internal documents
         indicate that [supplier information].221
(250) Third, the Commission notes that the merged entity would not have the ability to
         foreclose rival RAN equipment suppliers through input foreclosure by degrading the
215 The Notifying Party refers to an example of a successful partnership between Nokia and CommScope for
    the development of active antennas. See Form CO, paragraph 188.
216 As explained in paragraph (161), Kathrein does also not have significant market power with regard to
    passive antennas. Therefore, Kathrein would equally not have significant market power in a potential
    broader market encompassing passive antennas and antenna modules.
217 Q3, replies to questions 41 and 41.1; Q1, replies to question 46; Q2, replies to question 46.
218 Notifying Party’s Reply to RFI 7, question 6.
219 Notifying Party’s Reply to RFI 7, question 3.
220 [business relationship]. [market information on a third party supplier]. See Q2, replies to question 27.1.
221 Notifying Party’s Reply to RFI 9, question 5, Annex 1 and Annex 2.
                                                           44
 ---pagebreak---          terms and conditions by which it will supply antenna modules to RAN equipment
         suppliers.
(251) The market investigation results indicate that RAN equipment suppliers are not
         dependant on Kathrein’s antenna modules for their active antennas and that there
         will remain a sufficient number of alternative suppliers of antenna modules after the
         Transaction.222 For example, an antenna module manufacturer expressed the view
         that “there is and will continue to be competition between antenna module providers
         and that the real negotiating power will lie with the RAN vendors that are active
         antenna suppliers” such that the merged entity will not have the ability to degrade
         terms and conditions for the supply of antenna modules. 223
(252) [business relationship]. Therefore, the Transaction is unlikely to affect any possible
         ability of the merged entity to foreclose competitors by degrading terms and
         conditions by which it will supply antenna modules to them. As a result, the
         Transaction is unlikely to bring about material merger-specific changes in the
         upstream market for the supply of antenna modules that would affect downstream
         competitors.
(253) Fourth, non-integrated competitors have effective and timely counter-strategies
         available in order to be able to effectively compete with the merged entity in the
         event of an input foreclosure strategy by the merged entity.
(254) Antenna modules are customer-specific products, which are developed on the basis
         of specifications defined by RAN equipment suppliers. Furthermore, antenna
         modules are manufactured and supplied on the basis of calls for tenders and
         collaboration between antenna module manufacturers and active antenna suppliers.
(255) There will remain a sufficient number of credible alternative antenna module
         suppliers after the Transaction to allow non-integrated RAN equipment suppliers to
         manufacture and supply active antennas, as confirmed by the market investigation
         results.224 Such antenna manufacturers include, e.g. Commscope, Comba, Tongyu,
         Mobi, RFS, Rosenberger, Amphenol and other smaller antenna manufacturers. The
         vast majority of respondents to the market investigation confirmed that post-
         Transaction there will be “enough competition” and that globally there are “many
         alternative vendors”.225
(256) The results of the market investigation thus show that market players which are not
         vertically integrated will have the ability to effectively compete with the merged
         entity post-Transaction.226 Respondents to the market investigation point out that
         various active antennas are already produced through partnerships between vendors
         of RAN equipment and antenna module manufacturers.227 Standalone antenna
         module manufacturers and RAN equipment suppliers will thus have the ability to
         replicate the merged entity’s active antenna offering by entering into partnerships.
222 Q1, replies to question 55; Q3, replies to question 44.1.
223 Q1, reply of Commscope to question 51.1.
224 Q1, replies to question 55; Q2, replies to question 55; Q3, replies to question 47.
225 Q1, replies to questions 51.1; Q2, replies to question 55.1.
226 Q1, replies to question 57; Q2, replies to question 57; Q3, replies to question 48.
227 Q3, replies to question 48.
                                                           45
 ---pagebreak---          As regards incentives
(257) The Commission considers that, on balance, the merged entity is unlikely to have an
         incentive to engage in an input foreclosure strategy.
(258) The value of antenna modules is significantly lower than the value of active
         antennas.228 As the Notifying Party explains, the value of antenna modules in semi-
         active antennas is around [30-40]% of its total value, and [0-5]% in AAS active
         antennas.229 Furthermore, a number of antenna manufacturers that responded to the
         market investigation consider that the merged entity may have the incentive to stop
         supplying antenna modules to competing active antenna manufacturers.230
(259) [business relationship]. Therefore, there are no indications that, by engaging in an
         input foreclosure strategy, the merged entity would divert any demand away from
         rivals in the downstream market for active antennas, although it would likely forego
         any potential sales of antenna modules to third parties. This factor therefore limits
         any possible incentive the merged entity might have to engage in foreclosure in
         relation antenna modules.
(260) Similarly, the merged entity is unlikely to have an incentive to engage in input
         foreclosure by degrading the terms and conditions for the supply of antenna
         modules. [market position]. By degrading terms and conditions for the supply of
         antenna modules, the merged entity would risk further losing potential sales of
         antenna modules without any conceivable gain in the downstream market for active
         antennas.
(261) [reference to internal documents on post-Transaction business strategy].231
(262) It follows that, on balance, the merged entity is unlikely to have the incentive to seek
         to foreclose rivals by engaging in an input foreclosure strategy.
         As regards effects
(263) Even if the merged entity pursued an input foreclosure strategy, for the reasons set
         out in paragraphs (245)-(262), such a strategy is unlikely to result in a reduction in
         rivals’ ability or incentive to compete with the merged entity and lead to increased
         prices in the downstream market for active antennas.
(264) First, Kathrein's role in the potential market for antenna modules is limited. [business
         relation]. [market position].232
(265) Second, for the reasons set out in paragraphs (253)-(256) above, post-Transaction,
         there will remain a sufficient number of credible alternative antenna module
         suppliers such that non-integrated players will be able to enter into partnerships and
         replicate the merged entity’s active antenna offering. Therefore, post-Transaction
228 Q2, replies to question 50.2.
229 Form CO, paragraph 78.
230 Q1, replies to questions 49 and 49.1; Q2, replies to questions 50 and 50.1.
231 [internal documents].
232 Notifying Party’s Reply to RFI 7 of 25 July 2019, question 3.
                                                           46
 ---pagebreak---         RAN equipment suppliers will be able to continue to effectively compete with the
        merged entity in the downstream market for active antennas.
        Conclusion
(266) In light of the above considerations and based on the results of the market
        investigation, the Commission considers the Transaction does not give rise to serious
        doubts as to its compatibility with the internal market as a result of any input
        foreclosure strategy by the merged entity with regard to antenna modules.
        (B)         Customer foreclosure
        As regards ability
(267) First, the merged entity will not have a significant degree of market power in the
        downstream market for the manufacturing and supply of active antennas. As set out
        at paragraph (132), irrespective of the precise market definition, Ericsson’s market
        share in the potential market for active antennas [market position] from its market
        share in the market for RAN equipment, where Ericsson does not have a significant
        degree of market power (see paragraphs (157)-(160) above).
(268) In addition, the market investigation confirms that Ericsson’s active antenna
        portfolio is comparable to those of other active antenna suppliers in terms of quality,
        performance, price and other characteristics.233 Moreover, the results of the market
        investigation strongly suggest that the market for active antennas, in particular AAS,
        is nascent and in the early stages of its development.234
(269) Second, the Commission considers that Ericsson does not constitute an important
        route to market for antenna module manufacturers. None of the antenna suppliers
        that responded to the market investigation sold any antenna modules to Ericsson in
        the past 3 years (Ericsson only purchased antenna modules from Kathrein and
        [supplier information], see paragraph (233)).
(270) A majority of antenna manufacturers indicated that they supply antenna modules and
        cooperate with other RAN equipment suppliers for the development of active
        antennas.235 RAN equipment suppliers that responded to the market investigation
        confirm that they source antenna modules and cooperate with several antenna
        manufacturers for the development of active antennas.236
(271) Third, the merged entity is unlikely to have the ability to exclusively rely on in-
        house production to source its internal requirements of antenna modules, to the
        exclusion of other antenna module suppliers.
(272) Several respondents to the market investigation confirm that active antenna designs
        and requirements vary widely among vendors and different vendors have unique
        selling points such as cost, performance, compactness, modularity, beam steering
233 Q1, replies to question 47; Q2, replies to questions 47 and 47.1; Q3, replies to questions 42 and 42.1.
234 Q2, replies to question 47.2.
235 Q1, replies to questions 29 and 29.1.
236 Q2, replies to question 27.1
                                                           47
 ---pagebreak---          capability etc.237 On that basis, the merged entity will be unlikely to be able to meet
         all requirements by solely relying on its in-house antenna module capacity.238
(273) Furthermore, Ericsson plans to purchase antenna modules from a number of third
         party suppliers such as [supplier information].239 The Commission notes that,
         [business strategy], Ericsson will most likely need to continue sourcing different
         antenna modules from several suppliers. The Commission thus considers that the
         merged entity will most likely not have the ability to stop sourcing antenna modules
         from alternative antenna manufacturers post-Transaction.
(274) Fourth, the Commission notes that non-integrated competitors have effective and
         timely counter-strategies available in order to compete with the merged entity in the
         event of a customer foreclosure strategy.
(275) The majority of antenna manufacturers and RAN equipment suppliers that responded
         to the market investigation indicate that Ericsson’s competitors in the downstream
         market for active antennas that will continue to procure antenna modules for their
         active antenna offerings include Nokia, Samsung, ZTE, and new entrants such as
         Mavenir and Altiostar.240 Therefore, there will remain sufficient demand for antenna
         modules from alternative RAN equipment suppliers after the Transaction.
         As regards incentives
(276) The Commission considers that, on balance, the merged entity is unlikely to have an
         incentive to engage in a customer foreclosure strategy.
(277) First, it would not appear profitable for the merged entity to exclusively rely on
         Kathrein's antenna modules due to potentially higher costs associated with reduced
         purchases from alternative antenna module suppliers. The quality of Kathrein’s
         antenna modules is on par with that of other suppliers, but its prices are higher, as
         confirmed by the market investigation (see paragraph (247)). [reference to internal
         documents on post-Transaction business strategy].241 Some respondents to the
         market investigation also point out that given the high price of Kathrein’s antenna
         modules, the merged entity will most likely deploy alternative solutions such as sub-
         contracting to third party antenna module manufacturers. 242
(278) Second, due to product differentiation, Ericsson is likely to continue sourcing
         antenna modules from third parties in order to develop and expand its active antenna
         portfolio. Antenna modules are customer-specific products, whereby the
         development of each antenna module requires a team of developers for a period of 9-
         12 months.243 As the market for AAS antennas is projected to grow, [business
         strategy].244 [business strategy].
237 Q1, replies to questions 48 and 48.1; Q2, replies to questions 48 and 48.1.
238 Q2, replies to question 48.1 and 49.1.
239 Notifying Party’s Reply to RFI 7 of 25 July 2019, Annex 2.
240 Q1, replies to questions 56 and 56.1; Q2, replies to question 56.
241 [internal documents]
242 Q1, replies to question 49.1; Q2, replies to question 49.1.
243 Form CO, paragraph 307.
244 [internal documents].
                                                           48
 ---pagebreak---        As regards effects
(279) The Commission considers that even if the merged entity attempted to engage in a
       customer foreclosure strategy, the Transaction would not adversely affect upstream
       rivals’ ability to compete in such a way as to lead to detrimental effects on
       competition in the downstream market for the supply of active antennas.245
(280) The Commission notes that, as explained in paragraph (132) above, Ericsson’s
       position in the downstream market for active antennas is relatively limited. Before
       the Transaction, Ericsson sources antenna modules primarily from Kathrein and
       [supplier information] and accounted for less than 10% of antenna module suppliers’
       sales (other than Kathrein) in the last 3 years.
(281) Moreover, for the reasons set out in paragraphs (133) and (275), post-Transaction
       antenna module suppliers will be able to sell their product to a number of alternative
       active antenna manufacturers such as Nokia, Samsung, ZTE, Mavenir and Altiostar.
       Therefore, the Commission considers that any potential customer foreclosure
       strategy of the merged entity will not deprive antenna module suppliers in the
       upstream market of access to a sufficient customer base in the downstream market
       for active antennas and will thus not reduce their ability to compete in the
       foreseeable future. As a result, the Transaction would also not lead to detrimental
       effects in the downstream market for active antennas.
       Conclusion
(282) In light of the above considerations and the results of the market investigation, the
       Commission considers that the Transaction does not raise serious doubts as to its
       compatibility with the internal market in relation to a possible customer foreclosure
       strategy by the merged entity with regard to active antennas.
6.     CONCLUSION
(283) 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
245 Non-Horizontal Merger Guidelines, paragraph 72.
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