CELEX: 32020M9383
Language: en
Date: 2020-01-23 00:00:00
Title: Commission Decision of 23/01/2020 declaring a concentration to be compatible with the common market (Case No COMP/M.9383 - ZF / WABCO) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                 Brussels, 23.1.2020
                                                                 C(2020) 467 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                                                                  information omitted has been replaced by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.9383 – ZF / WABCO
                     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 9 December 2019, the European Commission received a notification of a
                proposed concentration pursuant to Article 4 of Council Regulation (EC)
                No 139/2004 by which ZF Friedrichshafen AG (Germany, hereinafter “ZF” or
                the “Notifying Party”) intends to acquire sole control over WABCO Holdings
                Inc. (USA, hereinafter “Wabco”) (the “Transaction”).3 In this Decision, ZF and
                Wabco 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 424, 17.12.2019, p. 18.
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, THE OPERATION AND THE CONCENTRATION
     (2)       ZF is a global technology company that develops, manufactures and distributes
               products and systems for passenger cars, commercial vehicles and industrial
               technology.
     (3)       Wabco is a global supplier of braking control systems, technologies and
               services that improve safety, efficiency and connectivity of commercial
               vehicles including trucks, buses and trailers.
     (4)       On 28 March 2019, ZF, Wabco and Verona Merger Sub Corp., an indirect
               wholly-owned subsidiary of ZF, signed an Agreement and Plan of Merger,
               according to which Verona Merger Sub Corp. shall merge with and into
               Wabco, with Wabco surviving the merger and Verona Merger Sub Corp.
               ceasing to exist, pursuant to the General Corporation Law of the State of
               Delaware (USA). The proposed Transaction is structured as a so-called
               “reverse triangular merger” with, upon closing, ZF indirectly owning 100% of
               the shares in and sole of control of Wabco (including the former Verona
               Merger Sub Corp.) within the meaning of Article 3(1)(b) of the Merger
               Regulation.
2.       UNION DIMENSION
     (5)       The undertakings concerned have a combined aggregate worldwide turnover of
               more than EUR 5,000 million4 in 2018 (ZF: EUR 36,929 million,
               Wabco: EUR 3,287 million). Each of them has an EU-wide turnover in excess
               of EUR 250 million (ZF: EUR [amount], Wabco: EUR [amount]), but they do
               not achieve more than two-thirds of their aggregate EU-wide turnover within
               one and the same Member State. The notified operation therefore has an EU
               dimension.
3.       INTRODUCTION TO THE PARTIES’ ACTIVITIES
3.1.     The Parties’ activities in relation to medium and heavy commercial vehicles
     (6)       The proposed Transaction concerns various markets for components and
               services for medium and heavy commercial vehicles (“MHCV”).5 Both ZF and
               Wabco act mainly as tier-1 and tier-2 suppliers,6 respectively, to MHCV
               original equipment manufacturers (“OEMs”) such as […]* or Volvo and as
               service providers on the aftermarket.7 The role of the Parties varies depending
4   Turnover calculated in accordance with Article 5 of the Merger Regulation.
5   MHCV are commercial vehicles with a weight above 6 -7.5 tons, such as trucks, busses and trailers.
6   The supply chain in the MHCV industry mainly comprises two types of suppliers: tier-1 and tier-2 (and
    tier-3 as the case may be). Tier-1 suppliers generally have integration capabilities and provide whole
    systems and equipment. Tier-2 suppliers tend to be active at an upstream stage, supplying components
    and sub-components, which are later integrated into the systems/equipment by either the MHCV OEMs
    or the tier-1 supplier (or third-parties system integrators).
*   Should read: “Daimler”.
7   Wabco supplies CV aftermarket distributors and service partners as well as fleet operators with
    replacement parts, fleet management solutions, diagnostic tools, training and other expert services
                                                            2
 ---pagebreak---               on the specific product/component, with ZF providing input as tier-2 supplier
              to, for example, Wabco as tier-1 supplier, and vice versa.
     (7)      ZF has its focus in the passenger vehicles (“PV”) or light commercial vehicles
              (“LCV”) area.8 Its MHCV activities are essentially limited to steering, chassis9
              and driveline products, including automated, manual and power shift
              transmissions as well as drive components such as clutches and electric drives,
              and advanced driver assistance systems (“ADAS”) technology such as
              automated, camera and radar-based comfort and safety functions for trucks and
              buses. In contrast to this, Wabco is a supplier of mainly braking and active
              safety technologies10 for MHCV and its activities in the PV and LCV areas are
              limited11 to only few products.12
     (8)      The MHCV market, including its aftermarket, is highly concentrated at both
              supply and demand level. There are strong cooperation links between tier-1
              and tier-2 suppliers, as well as OEMs and tier-1 suppliers, including R&D and
              product development. Commercial relationships between two or more market
              players, including the Parties, where one market player is the input provider for
              one component, but a customer for another component, are common.
3.2.     General market divisions for automotive components
3.2.1. Components for PV and LCVs versus components for MHCV
     (9)      In previous cases concerning automotive components, the Commission drew a
              distinction between components for PV and LCV on the one hand, and
              components for MHCV on the other hand.13
    (Form CO, paragraph 27). Apart from supplying spare parts to the aftermarket, ZF is partner to the joint
    venture Alltrucks, which is a full-service workshop concept for servicing MHCV (Form CO,
    paragraph 742).
8   ZF’s activity in the PV and LCV segment covers the products areas of steering, chassis, braking,
    driveline, active and passive safety.
9   The portfolio also comprises complete chassis systems, chassis components and steering systems for
    vehicles of all renowned commercial vehicle manufacturers worldwide.
10  Active safety systems in vehicles take action. For example, Automatic Emergency Braking systems
    (“AEB”) identify an imminent collision and brake without any driver intervention. Other examples of
    active functions are Adaptive Cruise Control (“ACC”), Lane Keeping Assist (“LKA”), Lane Centering
    (“LC”), and Traffic Jam Assist (“TJA”). ACC automatically adjusts the host vehicle speed from its pre-
    set value (as in standard cruise control) in case of a slower vehicle in its path. LKA and LC
    automatically steer the vehicle to stay within the lane boundaries. TJA is a combination of both ACC
    and LC under traffic jam conditions (Form CO, paragraph 340).
11  According to the Parties, there is no actual or potential overlap or vertical link between Wabco and ZF in
    the PV and LCV area.
12  Form CO, paragraph 89: Wabco manufactures air supply units and control systems (“ASU”) for
    electronic air suspension systems (“ECAS”) and vacuum pumps in the LCV segement.
13  The distinction is made between components for passenger cars and LCVs below 6 or 7.5 tons, on the
    one hand, and components for MHCV above 6-7.5 tons, on the other hand. See Case No IV/M.337 –
    Knorr-Bremse/Allied Signal, paragraphs 11 and 18, decision of September 14, 1993; Case No
    COMP/M.1342 – Knorr-Bremse/Robert Bosch, paragraph 21, decision of December 14, 1998; Case No
    COMP/M.8198 – Alliance Automotive Group/FPS Distribution; Case No COMP/M.7400 – Federal-
    Mogul Corporation/TRW Engine Components; Case No COMP/M.7420 – ZF/TRW paragraph 10,
    decision of March 12, 2015; Case No COMP/M.4456 – Mahle/Dana EPG, paragraph 13; Case No
                                                           3
 ---pagebreak---      (10)     The Notifying Party agrees with the market definition retained in the
              Commission’s previous decisional practice.14 The Notifying Party further
              explains that ZF mainly focuses on components for PVs for its overall
              business, while Wabco largely focuses on components for MHCV.
     (11)     Respondents to the market investigation confirmed the segmentation between
              components for (i) PV and LCV and (ii) MHCV. Due to differentiations in
              their characteristics (price, power, size or architecture, etc.), respondents to the
              market investigation generally considered that the components (i) for PV and
              LCVs on the one hand and (ii) for MHCVs on the other, were not considered
              as interchangeable.15
     (12)     The overlap between the Parties’ activities occur only with respect to
              components for MHCVs.
     (13)     For the purpose of the present Decision, the Commission will therefore focus
              its analysis on components for MHCVs.
3.2.2. Components for different vehicle types: trucks, buses and trailers
     (14)     In previous cases, the Commission notes the similarities between components
              for trucks and buses, pointing out that the components at hand are substantially
              the same, but eventually left open whether components manufactured for
              trucks, buses and trailers should be distinguished.16
     (15)     The Notifying Party notes that the Parties manufacture components for both
              buses and trucks, also pointing to a substitutability of components for the two
              segments but maintains that it can be left open whether components for trucks
              and busses form one product market or belong to separate markets as the
              Transaction will not give rise to serious doubts as to its compatibility with the
              internal market under either definition.17
     (16)     The MHCV discussed in Section 3.2.1, and therefore the components
              manufactured for MHCV, can be further sub-segmented between (components
              for) trucks, buses and trailers.18 Since the Parties’ activities generally do not
              overlap in trailers, the narrowest market segment will be buses and trucks,
              therefore, the trailer segment will not be further discussed.19
     (17)     The market investigation indicates that from a supply-side perspective,
              manufacturers are largely confident that they can supply components, e.g.
    COMP/M.5799 – Faurecia/Plastal, paragraph 7, Case No COMP/M.6714 – U-Shin/Valeo CAM,
    paragraphs 7, 9.
14  Form CO, paragraph 83.
15  Replies to questions 3 and 3.1 of Questionnaire to Customers and replies to questions 3 and 3.1 of
    Questionnaire to Competitors.
16  Case No IV/M.337 – Knorr-Bremse/Allied Signal, paragraph 20.
17  Form CO, paragraph 83.
18  Form CO, paragraph 84.
19  For instance, trailers do not have transmission systems.
                                                          4
 ---pagebreak---               AMT systems for both trucks and buses as their products can easily be
              adapted.20
     (18)     From a demand-side perspective, the market investigation indicates that
              demand structure may partly differ, mostly due to the fact that some customers
              are only active in the truck or in the bus segment.21
     (19)     For the purposes of the present Decision, in light of responses to the market
              investigation concerning the high degree of supply-side substitutability, the
              Commission considers that the components for trucks and buses, belong to the
              same market. Since the Parties’ activities generally do not overlap in trailers,22
              the narrowest relevant market segment would be buses and trucks. Therefore,
              the trailer segment will not be further discussed in this Decision. For this
              reason, whenever reference is made to “MHCV” in this Decision without any
              further specification, the reference comprises trucks and buses or, as the case
              may be, components for trucks and buses respectively.
3.3.    Overview of vertical links, horizontal overlaps, conglomerate links and other
        competition-related aspects under the proposed Transaction
     (20)     In view of ZF’s and Wabco’s activities as well as the general market divisions
              for automotive components described in Sections 3.1 and 3.2, the Transaction
              brings about the following horizontal overlaps, verticals links and other
              competition-relevant aspects.
3.3.1. Horizontal overlaps
     (21)     The Parties’ activities lead to potential horizontal overlaps in a number of
              markets.
        (a)       The Parties’ activities overlap in the manufacturing and sales of clutch
                  actuation for automated manual transmission (“AMT”). ZF manufactures a
                  Concentric Pneumatic Clutch Actuator (“CPCA”). Currently, Wabco does
                  not manufacture and sell CPCAs, but is in the process of starting pre-serial
                  production of a new CPCA in [strategic information]. The market launch of
                  Wabco’s CPCA leads to an affected market.23
        (b)       ZF is partner to the joint venture “Alltrucks” together with Knorr-Bremse
                  and Bosch. Alltrucks offers workshop services on the aftermarket for
                  commercial vehicles (“CV”).24 For the aftermarket of CV, Wabco certifies
                  independent third-party workshops as qualified to repair Wabco products in
                  the framework of its “WABCO Service Partner Network”.25 26
20  Replies to questions 7 and 7.1 of Questionnaire to Competitors.
21  Respondents’ answers to question 1 of Questionnaire to Customers.
22  For instance, trailers do not have transmission systems.
23  Section 5 of this Decision.
24  Form CO, paragraph 579.
25  Form CO, paragraph 584.
26  Section 6 of this Decision.
                                                          5
 ---pagebreak---         (c)      Both ZF and Wabco sell ZF’s cabin dampers in the independent
                 aftermarket. Wabco acts as ZF’s reseller alongside ZF.
    (22)      Furthermore, both Parties are active in the following product areas, which,
              however, do not lead to affected markets:
        (a)      In the segment of telematics and fleet management solutions27 (“FMS”) for
                 MHCV, ZF offers its product “Openmatics” as a fleet management solution,
                 [strategic information].28 Moreover, as an addition to Openmatics, ZF offers
                 a “Driver Feedback Device” to monitor engine over-reviving.29 Wabco
                 provides FMS solutions for MHCV including mainly its products
                 Transics202, Traxee203, TX-Trailerguard204 and DIS-Transics205
                 comprising software, hosting and hardware.30 The combined market shares
                 are below 20% under any plausible product and geographic market
                 definition.31
        (b)      In the segment of diagnostic solutions32 for MHCV to independent
                 aftermarket (“IAM”) customers,33 one can distinguish between multi-brand
                 and brand-dedicated diagnostic and testing equipment/devices (“DTEs”),
                 DTEs are needed by workshops to connect to the vehicle’s on-board
                 diagnostic (“OBD”) system, which is a computer-based self-diagnostic,
                 monitoring, and reporting system that monitors the performance of the
                 various engine components and emission system components.34 Brand-
                 dedicated DTEs can be used only for products of one particular brand,
                 whereas multi-brand DTEs can be used for several different brands.
                 However, in general, multi-brand DTEs typically offer a more limited level
                 and depth of functionalities compared to brand-dedicated DTEs.35 Whilst
                 multi-brand DTEs of one manufacturer compete with multi-brand DTEs of
                 other manufacturers, the competition between multi-brand DTEs and brand-
                 dedicated DTEs is limited due to different functionalities but also the higher
27 Traffic telematics is intended to exploit data exchange between a service provider and vehicles in order
   to enhance traffic information and communications and improve traffic management processes. By
   gathering and providing information relating to transportation quality, such as driving time, vehicle
   speed and position, vehicle location, tire pressure, engine idle time etc., fleet management solutions
   (“FMS”) can help drivers and transportation companies improve safety and reliability as well as result in
   increased efficiencies and cost optimization (Form CO, paragraphs 510 and 511).
28 Form CO, paragraph 516.
29 Form CO, paragraph 517.
30 Form CO, paragraphs 520 and 524.
31 Notifying Party’s reply to question 2 of RFI 12 post-notification of 6 January 2020. For the potential
   relevant product market, this takes into account a segmentation by (i) the sales channels OEM/OES on
   the one hand and IAM on the other hand; (ii) vehicle types PV/LCV on the one hand and MHCV on the
   other hand; (iii) telematics for transport and logistics undertakings on the one hand and for private
   customers on the other hand; (iv) the sales channels “OE-fit” (FMS solution integrated into a OEM’s
   vehicle) on the one hand and “fleet-fit” (FMS sold to individual fleets) on the other hand; (v) products
   for trucks on the one hand and trailers on the other hand; as well as (vi) any other plausible segmentation
   criterion identified by the Parties not covered by the criteria above.
32 Form CO, paragraph 545: this is equipment designed for analysing and testing the condition of a vehicle.
33 Mainly OEMs and fleet owners/operators (Form CO, paragraph 515).
34 Form CO, paragraph 546: OBD systems communicate with Electronic Control Units (“ECU”) to inform
   the driver of errors and store a permanent fault message, which can later be retrieved by a workshop.
35 Form CO, paragraph 548.
                                                          6
 ---pagebreak---                   price of multi-brand DTEs.36 Finally, brand-dedicated DTEs do not compete
                  with each other, as a brand-dedicated DTE cannot be used for products of
                  another brand.
                  ZF offers its brand-dedicated DTE “Testman”. ZF does not offer a multi-
                  brand DTE. ZF does, however, provide the ZF-Testman to […], which in
                  turn incorporates ZF Testman into Alltrucks’ multi-brand DTE “KTS Truck
                  Alltrucks DTE”.37 […] sells KTS Truck Alltrucks DTE to Alltrucks’
                  franchisees and ZF receives royalties for these sales.38 Apart from its brand-
                  dedicated DTE, Wabco offers a multi-brand DTE through the joint venture
                  WABCOWÜRTH.39
                  Even if the KTS Truck Alltrucks DTE product were to be attributed to ZF,
                  the Parties’ combined market share in the EEA for multi-brand DTEs or any
                  sub-function of it, such as “Electronic Control Unit diagnosis/scan tools”
                  would not exceed 20%.40 The Commission considers that also on the
                  national level, there are no affected markets in multi-brand DTEs.41
        (c)       Both ZF and Wabco manufacture and sell air disc brake components (discs,
                  calipers, pads)42 for MHCV,43 or purchase certain air disc components and
                  re-sell them, for the IAM.44 The combined market shares of the Parties do
                  not exceed [5-10]% under any plausible market definition45 for discs, pads
                  and calipers on an EEA-wide market,46 or, as the case may be, national
                  markets.47
36 Form CO, paragraph 548.
37 Form CO, paragraph 552.
38 Annex RFI 1 to Form CO, response to question 25(d).
39 Form CO, paragraph 555.
40 Notifying Party’s reply to question 3 of RFI 12 post-notification of 6 January 2020.
41 In Germany, where WABCOWÜRTH has the largest market share of approximately [10-20]% based on
   the Notifying Party’s conservative estimates and under the assumption that all sales of KTS Truck
   Alltrucks DTE by […] would be made in Germany, the combined market share would be at the
   maximum [20-30]% (Notifying Party’s reply to question 2 of RFI 17 post-notification of
   14 January 2020). However, as all Alltrucks Partners have to purchase the KTS Truck Alltrucks
   (Notifying Party’s reply to question 25(c) of RFI 1 of 8 July 2020) and not all Alltrucks Partners are in
   Germany, this cannot be the case.
42 Discs, calipers and pads are commoditized parts and input for air disc brakes.
43 The Parties’ activities do not overlap in sales of air disc brake systems to the IAM as such, as ZF is not
   selling air disc brake systems to the IAM (Form CO, paragraph 674).
44 Form CO, paragraphs 595 et seq.
45 Notifying Party’s reply to question 7 of RFI 19 post-notification of 15 January 2020: “The Notifying
   Party submits that it does not see any basis for further sub-segmenting the product markets for the
   various braking components. In particular, components such as discs, calipers, and carriers are
   commoditized parts made of forged metal, and are therefore interchangeable both from a supply and
   demand perspective. With respect to pads, the Notifying Party understands that all manufacturers
   supply metallic pads, with differing levels of copper (for cooling), and their own blend of friction
   material. According to the Notifying Party, these pads are interchangeable from a supply and demand
   perspective. As far as the Notifying Party is aware, there are no ceramic pads used in MHCV
   applications. Nevertheless, the Notifying Party estimates that the Parties’ market shares in any putative
   sub-segments would not materially differ from the market shares provided for discs, pads and calipers.”
46 Form CO, paragraph 674.
47 Notifying Party’s reply to question 3 of RFI 17 post-notification of 14 January 2020: “The Notifying
   Party submits that its best knowledge and to its best estimates, the Parties’ combined shares do not
                                                           7
 ---pagebreak---         (d)      The Parties’ activities horizontally overlap in steering systems for MHCV.
                 This overlap relates predominantly to the US market and hence outside of
                 the EEA. However, the Parties intend to divest Wabco’s steering business
                 RH Sheppard Inc., which, according to the Parties, comprises the quasi
                 entirety of Wabco’s global activities in steering.48 This planned divestiture
                 is a condition imposed by the Department of Justice in the USA but does
                 not directly affect the EEA. The Commission notes that regardless of the
                 divestment of Wabco’s steering business, Wabco’s sales in the EEA
                 amounted to USD [turnover] in 2018 for the sales of steering gear to one
                 customer based in the […], and sales of pitman arms to the same customer
                 for an amount of EUR [amount] in 2018. No sales were achieved with this
                 customer in 2019 until notification of the Transaction.49 ZF’s sales of
                 MHCV hydraulic power steering components in the EEA amounted to EUR
                 [amount] in 2018.50
    (23)     In light of recital (32) of the Merger Regulation, it may be presumed that the
             proposed Transaction is not liable to impede effective competition in the
             internal market with respect of the products described in paragraph (22) above.
             Therefore, these products are not discussed further in this Decision.
    (24)     Finally, the Parties are active in manufacturing and sale of electronic control
             units (“ECU”). Except for ECUs integrated in ADAS sensors,51 which Wabco
             does not manufacture, ZF manufactures and sells ECUs only for passenger
             vehicles (“PV”) whereas Wabco manufactures and sells ECUs exclusively on
             the market for MHCV.52 ZF’s ECUs integrated in ADAS sensors and Wabco’s
             (other) ECUs for MHCVs are not substitutable.53
    (25)     The Commission notes that its decisional practice distinguishes between
             different types of ECUs for the purposes of defining the relevant product
             market. For example, in one decision the Commission assumed separate
             markets for different ECUs along the different areas of application such as
             transmission controls, airbag control units, body electronics, central body
             control units, engine management in diesel engines for heavy commercial
             vehicles, engine management in diesel engines for passenger cars, engine
             management in petrol engines for passenger cars, for chassis control, for
   materially differ from the EEA-wide IAM shares The Notifying Party further submits that his does not
   exclude that IAM shares in hypothetical national markets may vary to some extent. The Notifying Party,
   however, holds the view that the relevant geographic market is EEA-wide.”
48 Form CO, paragraphs 678 and 679. The remaining part of Wabco’s activity in MHCV steering are the
   sales by Wabco’s subsidiary WIN in India of steering gear designed for the Indian market to […] Indian
   customer, Form CO, paragraph 679.
49 Form CO, footnote 259.
50 Form CO, paragraph 710. This includes steering gears, steering pumps and steering columns.
51 Form CO, paragraph 723; Notifying Party’s reply to question 2 of RFI 18 post-notification of
   14 January 2020.
52 Form CO, paragraph 724.
53 Notifying Party’s reply to question 1(c) of RFI 18 post-notification of 14 January 2020: According to the
   Notifying Party, the lack of substitutability results from the different way of design and technical
   components of the ECUs. ECUs, which are integrated in ADAS sensors (“smart sensors”), are chips and
   boards, which are directly integrated into the sensors. They do not have a housing, connector or power
   supply, but rather work as a highly integrated part of the sensor. If one would want to use them for other
   products than ADAS sensors, redesign, additional components and validation would be necessary.
                                                         8
 ---pagebreak---               electronic braking systems and for electronic parking brakes.54 The
              Commission confirmed this approach in more recent decisions.55
     (26)     In light of its decisional practice as well as the generally applicable distinction
              between OEM/OES markets on the one hand and IAM on the other hand
              (Section 7.1.1.3), the Commission considers that the ZF’s and Wabco’s
              activities in ECUs do not overlap on any relevant product market. Therefore,
              the Parties’ activity in ECUs will not be discussed further in this Decision.
3.3.2. Vertical links
     (27)     There are seven (potential) vertical links between ZF and Wabco, which lead
              to affected markets:
        (a)       Wabco supplies transmission actuation controllers (“AMT controllers”) as
                  upstream input for ZF’s downstream product of AMT systems (mainly
                  consisting of gearboxes);56
        (b)       ZF supplies sensors (e.g. cameras and radars) for ADAS for commercial
                  vehicles as upstream input for Wabco’s ADAS subsystems;57
        (c)       ZF supplies clutches as upstream input into Wabco’s air compressors
                  downstream;58
        (d)       Wabco sells certain valves as upstream input for specific MHCV cabin
                  dampers manufactured by ZF;59
        (e)       Wabco supplies clutch servos to ZF for ZF’s manual transmission (“MT”)
                  system;60
        (f)       Wabco would be a potential supplier of its newly developed CPCA product
                  to ZF’s [strategic information] from […] onwards;61
        (g)       Wabco is a potential supplier of its Pneumatic Clutch Actuator (“PCA”)
                  product into ZF’s older AMT “AS Tronic”.62
     (28)     There are further (potential) vertical links between ZF and Wabco, which do
              not give rise to affected markets:
        (a)       ZF sources from Wabco revolution per minute (“RPM”) counters as input
                  for its steering axles for MHCV. The purchasing volume is approximatively
                  EUR [amount] worldwide and approximatively EUR [amount] in the
54  Case No COMP/M.4878 – Continental/Siemens VDO Business, paragraph 12.
55  See, for example, Case No COMP/M.9330 – Denso/Hirose, paragraph 15 with further references.
56  Section 7 of this Decision.
57  Section 8 of this Decision.
58  Section 9 of this Decision.
59  Section 10 of this Decision.
60  Section 11 of this Decision.
61  Section 12 of this Decision.
62  Section 13 of this Decision.
                                                     9
 ---pagebreak---                   EEA.63 RPM counters are commodity parts representing less than 1% of the
                  overall cost of a MHCV steering / drive axel.64 The Notifying Party submits
                  that Wabco’s market share in RPMs upstream is below 30%65 and that ZF’s
                  market share for steering axles for MHCVs is below [5-10]% on both a
                  potential global and a potential EEA-wide market.66 In light of the relatively
                  low purchasing volume of RPM counters and its commoditized character as
                  well as the low market share on of ZF’s steering axles on the downstream
                  market, the Commission concludes that the risk of any input or customer
                  foreclosure is minimal. Therefore, these products are not discussed further
                  in this Decision.
         (b)      Wabco supplies various small parts to ZF and ZF supplies various small
                  parts to Wabco.67 Wabco’s sales volumes to ZF of each of such parts was
                  below EUR [amount], and mostly below EUR [amount] in 2018 and ZF’s
                  sales volumes to Wabco of each of such parts was below EUR [amount] and
                  mostly below EUR [amount] in 2018.68 These parts were mainly purchased
                  for aftermarket sales outside the EEA and therefore not used as inputs for
                  ZF’s products.69
                  Therefore, these products are not discussed further in this Decision.
3.3.3. Other competition-relevant aspects
     (29)     Moreover, until 19 September 2019, ZF held a minority shareholding in
              Haldex, a competitor of Wabco in the market for truck and trailer brakes. ZF
              has divested its entire stake in Haldex and confirms that it will not undertake to
              (re-) acquire any voting or non-voting shares in Haldex or any of its affiliates
              for a period of [strategic information] years following the closing of this
              Transaction.70 Therefore, ZF’s previous minority shareholding in Haldex and
63  Form CO, paragraph 100.
64  Form CO, paragraph 100.
65  According to the Notifying Party, Wabco’s share in the narrowest hypothetical market, which comprises
    RPM counters (ABS sensors) for commercial vehicles (including trailers), is below 30% both EEA-wide
    and globally. This applies also to hypothetical sub-segments by customer type (OEM, OES, IAM) EEA-
    wide and globally. In all other plausible markets – which would be broader – Wabco’s shares would be
    lower or significantly lower (Notifying Party’s reply to question 1 of RFI 23 post-notification of 16
    January 2020).
66  Notifying Party’s reply to question 5 of RFI 16 post-notification of 14 January 2020.
67  Form CO, paragraphs 100 and 101.
68  Notifying Party’s reply to question 18 of RFI 16 post-notification of 14 January 2020. In 2018, the five
    value-based largest supplies are as follows: Wabco sold to ZF pipes for EUR [amount], brake cylinders
    for EUR [amount], pressure supplies for EUR [amount], assembly parts for EUR [amount] and pressure
    valves for EUR [amount]. ZF sold to Wabco in 2018 shifter links for EUR [amount], customized snap
    switches for EUR [amount], control arms for EUR [amount], dampers for [amount] and duoplan two
    speed gearboxes for Machine Tools for EUR [amount].
69  Notifying Party’s reply to RFI 32. To the best of their knowledge, the Parties confirm that their
    respective market shares are estimated at below 30% for any input products within the "various small
    parts" as described in the Form CO. The Parties note that the vast majority of these supplies between the
    Parties pertain to highly commoditized parts and components, sold in very limited numbers (often below
    EUR [amount] on a global basis i.e., well below [0-5]% of the Parties’ respective total sales) through
    aftermarket channels, outside the EEA, as replacement parts or repair kits, and which are not used as
    inputs to each other’s downstream products.
70  Form CO, paragraph 648.
                                                         10
 ---pagebreak---               the related potential competition-relevant aspects will not be discussed in this
              Decision.
4.      ANALYTICAL FRAMEWORK
4.1.    Introduction
     (30)     Under Article 2(2) and (3) of the Merger Regulation and Annex XIV to the
              EEA Agreement, the Commission is required to examine whether notified
              concentrations are compatible with the internal market and the functioning of
              the EEA Agreement, by assessing whether they would significantly impede
              effective competition in the internal market or in a substantial part of it, in
              particular through the creation or strengthening of a dominant position.
     (31)     In addition, Article 57(1) of the EEA Agreement requires the Commission to
              examine whether notified concentrations are compatible with the functioning
              of the EEA Agreement, by assessing whether they would create or strengthen a
              dominant position as a result of which effective competition would be
              significantly impeded within the EEA territory or a substantial part of it.
     (32)     In this respect, a proposed concentration may entail horizontal and/or non-
              horizontal effects.
4.2.    Analytical framework of the horizontal effects
     (33)     In addition to creating or strengthening a dominant position, the Commission
              Guidelines on the assessment of horizontal mergers under the Council
              Regulation on the control of concentrations between undertakings (the
              “Horizontal Merger Guidelines”) distinguish between two other main ways in
              which mergers between actual or potential competitors on the same relevant
              market may significantly impede effective competition, namely non-
              coordinated and coordinated effects.71 72
     (34)     Non-coordinated effects may significantly impede competition by eliminating
              important competitive constraints on one or more firms, which consequently
              would have increased market power, without resorting to coordinated
              behaviour. In that regard, the Horizontal Merger Guidelines consider not only
              the direct loss of competition between the undertakings involved in the
              horizontal merger, but also the reduction in competitive pressure on
              undertakings not involved in the horizontal merger in the same market that
              could be brought about by the horizontal merger.73
     (35)     The Horizontal Merger Guidelines list a number of factors which may
              influence whether significant non-coordinated effects are likely to result from a
              horizontal merger, such as the large market shares of the undertakings involved
              in the horizontal merger, the fact that the undertakings involved in the
71  Horizontal Merger Guidelines, paragraph 22 (b).
72  As there is no indication that the Transaction will give rise to co-ordinated effects, the present Decision
    focusses exclusively on non-coordinated effects.
73  Horizontal Merger Guidelines, paragraph 24.
                                                          11
 ---pagebreak---              horizontal merger are close competitors, the limited possibilities for customers
             to switch suppliers, or the fact that a horizontal merger would eliminate an
             important competitive force.74 That list of factors applies equally if a
             horizontal merger would create or strengthen a dominant position, or would
             otherwise significantly impede effective competition due to non-coordinated
             effects.
4.3.    Analytical framework of the vertical effects
     (36)    As regards non-horizontal effects, the Commission Guidelines on the
             assessment of non-horizontal mergers,75 (“Non-Horizontal Merger
             Guidelines”) distinguish between two broad types of concentrations that
             concern undertakings which are active on different relevant markets (“non-
             horizontal mergers”), namely vertical mergers and conglomerate mergers.76
     (37)    A vertical merger may result in anti-competitive effects due to foreclosure.
             Foreclosure concerns a situation where actual or potential rivals’ access to
             supplies or markets is hampered or eliminated as a result of the vertical
             merger, thereby reducing these companies’ ability and/or incentive to
             compete.77
     (38)    Two forms of foreclosure can be distinguished in a vertical relationship: input
             and customer foreclosure.78
     (39)    Input foreclosure arises where, post-Transaction, the new entity would be
             likely to restrict access to the products or services that it would have otherwise
             supplied absent the vertical merger, thereby raising its downstream rivals’
             costs by making it harder for them to obtain supplies of the input under similar
             prices and conditions as absent the vertical merger.79
     (40)    Customer foreclosure may occur when a supplier integrates with an important
             customer in the downstream market. Because of this downstream presence, the
             merged entity may foreclose access to a sufficient customer base to its actual
             or potential rivals in the upstream market (the input market) and reduce their
             ability or incentive to compete. In turn, this may raise downstream rivals’ costs
             by making it harder for them to obtain supplies of the input under similar
             prices and conditions as absent the vertical merger.80
     (41)    For an input or customer foreclosure scenario to raise competition concerns,
             three cumulative factors need to be taken into account: (i) the ability of the
             merged entity to engage in foreclosure; (ii) the incentives of the merged entity
74  Horizontal Merger Guidelines, paragraphs 27-38.
75  OJ C 265, 18.10.2008, p. 6.
76  Non-Horizontal Merger Guidelines, paragraph 3.
77  Non-Horizontal Merger Guidelines, paragraph 18.
78  Non-Horizontal Merger Guidelines, paragraph 30.
79  Non-Horizontal Merger Guidelines, paragraph 31.
80  Non-Horizontal Merger Guidelines, paragraph 58.
                                                    12
 ---pagebreak---            to do so; and (iii) whether a foreclosure strategy would have a significant
           detrimental effect on competition in the downstream market.81
   (42)    Pursuant to the Non-Horizontal Merger Guidelines, in most circumstances,
           conglomerate mergers do not lead to any competition problems.82 However,
           foreclosure effects may arise in conglomerate mergers 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.83
   (43)    The Non-Horizontal Merger Guidelines distinguish between bundling, which
           usually refers to the way products are offered and priced by the merged entity84
           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).85
   (44)    Within bundling practices, a 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.86 Tying can take place on a technical or contractual basis. For
           instance, technical tying occurs when the tying product is designed in such a
           way that it only works with the tied product (and not with the alternatives
           offered by competitors).87
   (45)    While tying and bundling have often no anticompetitive consequences, in
           certain circumstances such practices may lead to a reduction in actual or
           potential competitors’ ability or incentive to compete. This may reduce the
           competitive pressure on the Merged Entity allowing it to increase prices or
           deteriorate supply conditions in other ways.88 In this particular case regarding
           the combination of engines and avionics, the complainant has raised concerns
           of mixed bundling and technical tying.
   (46)    In assessing the likelihood of such a scenario of conglomerate effects, the
           Commission examines, first, whether the merged firm would have the ability
           to foreclose its rivals, second, whether it would have the economic incentive to
           do so and, third, whether a foreclosure strategy would have a significant
           detrimental effect on competition, thus causing harm to consumers. In practice,
           these factors are often examined together as they are closely intertwined.89
81 Non-Horizontal Merger Guidelines, paragraph 32.
82 Non-Horizontal Merger Guidelines, paragraph 92.
83 Non-Horizontal Merger Guidelines, paragraph 93.
84 Non-Horizontal Merger Guidelines, paragraph 96.
85 Non-Horizontal Merger Guidelines, paragraph 97.
86 Non-Horizontal Merger Guidelines, paragraph 96.
87 Non-Horizontal Merger Guidelines, paragraph 97.
88 Non-Horizontal Merger Guidelines, paragraph 93.
89 Non-Horizontal Merger Guidelines, paragraph 94.
                                                   13
 ---pagebreak--- 5.       MARKET DEFINITION AND COMPETITIVE                        ASSESSMENT        CONCERNING         THE
         PARTIES’ ACTIVITIES IN CLUTCH ACTUATION
5.1.     Introduction
     (47)      Both ZF and Wabco manufacture clutch actuators for AMT systems. Clutch
               actuators are part of the transmission system of a vehicle and a component of
               an AMT gearbox. Within the transmission system, the actuators are modules
               used to engage and disengage the clutch in order to change gear.90
     (48)      There are three different types of clutch actuator technologies for MHCV
               AMT systems: CPCA, PCA, and electric or electro-hydraulic clutch actuators
               (“ECA”).91 According to the Notifying Party, PCAs are the older technology
               when compared to CPCAs.92
     (49)      ZF manufactures and sells only CPCAs.93 Wabco mainly manufactures and
               sells PCAs. However, Wabco is developing a CPCA product and [strategic
               information].94 [strategic information, customer name]95 [strategic
               information].96 As such, the Parties are both active in the manufacture and sale
               of CPCAs.
5.2.     Market definition
5.2.1. Relevant product markets
     (50)      There are no relevant Commission decisional practice, which specifically
               concern clutch actuators for MHCV.97
     (51)      The Notifying Party submits that in a first step, the relevant product markets
               should be segmented along the lines of different transmission systems, as
               clutch actuation using CPCAs, PCAs and ECAs is relevant only for AMT but
               not for manual transmission (“MT”), automatic transmission (“AT”) or electric
               transmissions.98 Furthermore, the Notifying Party contends that, whereas the
90  Form CO, paragraph 601.
91  Form CO, paragraph 602.
92  Form CO, paragraph 605.
93  Form CO, paragraph 604; Notifying Party’s reply to question 6 of RFI 12 post-notification of
    6 January 2020.
94  Form CO, paragraph 608.
95  Form CO, paragraph 601.
96  Wabco has competed in the [strategic information] tender within the EEA as well as in the [strategic
    informaion] and [strategic information] tenders outside the EEA. It is currently competing in three
    tenders outside of the EEA, namely in the CPCA tenders of [strategic information], [strategic
    information], and [strategic information]. Notifying Party’s reply to question 2 of RFI 14 post-
    notification of 9 January 2020.
97  The Notifying Party points to Case No COMP/M.8102 – Valeo/FTE Group, which dealt with clutch
    actuation for light vehicles and the Cases No COMP/M.4878 – Continental/Siemens VDO and
    COMP/M.5294 – Schaeffier/Continental, in which the Commission considered transmission control
    units for light vehicles. However, the Notifying Party itself dismisses the relevance of this decisional
    practice for the purposes of defining the relevant product markets in this case (Form CO,
    paragraph 615).
98  Form CO, paragraph 615. The Notifying Party submits that it might technically be possible to adapt
    PCA and CPCA to MT, but that it would not make any sense from an economic perspective.
                                                       14
 ---pagebreak---               same functionality of different clutch actuators speaks in favour of a product
              market comprising all three kinds of clutch actuators, it is more appropriate to
              further sub-segment the relevant product market by differentiating between
              CPCAs, PCAs and ECAs.99 The Notifying Party substantiates its view by
              pointing to the technical differences and price differences between CPCAs,
              PCAs and ECAs.100 Furthermore, according to the Notifying Party, CPCAs
              and PCA are not interchangeable for use in the same type of AMT.101 With
              regard to the differentiation between OEM/OES markets on the one hand and
              IAM markets on the other hand, the Notifying Party explains that the
              OEM/OES sales channel accounts for the vast majority of the sales. Since
              clutch actuators are not wear and tear parts (in other words, they do not need
              regular replacement but should last for the lifetime of the MHCV), if,
              exceptionally, a CPCA requires replacement, it is typically replaced by a
              product of the original CPCA supplier.102 There are typically no third party
              products that could be used instead of the original parts.
     (52)     The Commission takes note of the fact that PCAs are the older technology
              compared to CPCAs and that PCA-technology is being phased-out from the
              market. This is supported by the Notifying Party’s submission of information
              with respect to EEA-wide and worldwide tenders for clutch actuators,
              according to which all but one next generation transmission systems of the
              relevant OEMs will utilise CPCA technology (or ECA technology, as the case
              may be), which replaces the currently commonly utilised PCA technology.103
     (53)     Given the differences between the three technologies and the fact that tenders
              specifically request a PCA, a CPCA, or an ECA, none of the technologies
              appears directly substitutable for another.104 For the purposes of this Decision,
              the Commission considers that the market for clutch actuators can therefore be
              further subdivided into three separate product markets: (i) CPCAs for AMTs;
              (ii) PCAs for AMTs; and (iii) ECAs for AMTs.
     (54)     Given that the Parties’ activities in clutch actuators do not overlap in respect of
              PCAs or ECAs, the only relevant horizontal overlap relates to CPCAs.
99  Form CO, paragraph 616. As the Parties have no activities in ECAs, the Notifying Party claims that
    ECAs do not need to be considered.
100 Form CO, paragraph 618. See also paragraph 605: “CPCA have technical advantages compared to PCA
    and are therefore used in the latest generations of AMT. The advantages of the CPCA as compared to
    the PCA are: (i) a reduced number of components and system weight, (ii) the small number of friction
    contacts and elimination of unnecessary play improves the controllability; (iii) the axleparallel
    actuation direction reduces release bearing loads; (iv) simplified transmission assembly thanks to the
    push-type clutch and high integration level of components; and (v) environmentally sound, no hydraulic
    liquid required.”
101 Form CO, paragraph 617.
102 Notifying Party’s reply to question 11 of RFI 12 post-notification of 6 January 2020. According to the
    Notifying Party, in any case, assuming separate OES and IAM markets, and under the assumption that
    the failure rate of all clutch actuators is similar, the market shares in the aftermarket approximately
    mirror the market shares on the OEM/OES market.
103 Form CO, paragraphs 609 and 610.
104 The Commission also notes that there are price differences between the products. According to the
    Notifying Party, the average price of CPCAs is EUR […] higher than the average price of PCAs.
                                                          15
 ---pagebreak---      (55)     As regards the question as to whether a separate IAM market exists for
              CPCAs, the Commission considers that due to the fact that CPCAs are not
              regular replacement products and the fact that if exceptionally a replacement is
              needed, this tends to be provided by the original CPCA manufacturer, it is not
              necessary to identify a separate IAM for CPCAs but rather, any (likely very
              limited) IAM sales should be considered part of the same market as OEM/OES
              sales.
5.2.2. Relevant geographic market
     (56)     The Notifying Party submits that the relevant geographic market is at least
              EEA-wide, if not global.105 It contends that in the OEM/OES market, all
              customers for CPCA are active at least on an EEA-wide basis and that there
              are no legal barriers within the EEA. Transportation costs are low, given the
              compact size of CPCA.106
     (57)     For AMT gearboxes and AMT controllers, the vast majority of the respondents
              which expressed an opinion, considered that the relevant geographic market is
              either EEA-wide or global.107 As CPCAs are a component designed
              exclusively for AMT gearboxes, the same market dynamics appear to apply to
              CPCAs. In any event, nothing in the Commission’s market investigation
              suggests otherwise.
     (58)     For the purpose of this Decision, it can be left open whether the geographic
              market for CPCAs is EEA-wide or global, as the outcome of the competitive
              assessment would be the same under either geographic market definition.
5.3.     Competitive assessment
5.3.1. Global CPCA market
5.3.1.1. Market shares
     (59)     On a global basis, and taking into account that Wabco’s CPCA product is still
              under development, [strategic information], the Notifying Party provides
              estimates of market shares both in 2018 and projected for the future until 2024
              as follows.108
105 Form CO, paragraph 619.
106 Form CO, paragraph 620.
107 Replies to questions 10 and 11 of each Questionnaire to Customers and Questionnaire to Competitors.
108 The market shares provided in this section are based on unit volumes. The Notifying Party confirmed
    that the value-based market shares would not differ, Notifying Party’s reply to question 2 of RFI 20
    post-notification of 15 January 2020.
                                                        16
 ---pagebreak---    Table 1: CPCA for AMT MHCV, worldwide, OEM/OES market
                                   2018          2019        2020       2021        2022      2023     2024
ZF ConAct (CPCA) including
                                [90-100]% [90-100]% [90-100] [90-100]%           [70-80]% [60-70]% [60-70]%
   merchant sales
Wabco CPCA                        [0-5]%        [0-5]%      [0-5]%     [0-5]%      [0-5]% [5-10]% [5-10]%
ZF-Wabco combined               [90-100]% [90-100]% [90-100]% [90-100]%          [80-90]% [60-70]% [60-70]%
Knorr-Bremse CPCA                 [0-5]%        [0-5]%      [0-5]%     [0-5]%    [10-20]% [20-30]% [20-30]%
Others/New business
                                  [0-5]%        [0-5]%      [0-5]%     [0-5]%      [0-5]%   [5-10]% [5-10]%
   opportunities
Total                              100%          100%        100%       100%        100%     100%      100%
   Source: Notifying Party’s reply to question 8 of RFI 14, annex Q8.
   Notes: The market shares are based on unit volumes.
        (60)     ZF uses a certain amount of its CPCA production in-house for its TraXon
                 gearbox. The current and projected split of ZF’s CPCAs into in-house use and
                 sales on the market is as follows.
   Table 2: Split between ZF’s CPCAs used in-house and sold on the market (units)
                           2018          2019         2020        2021        2022        2023       2024
ZF ConAct (CPCA) in- [amount]          [amount]     [amount] [amount]       [amount] [amount] [amount]
   house production     ([20-30]%) ([20-30]%) ([20-30]%) ([30-40]%)       ([40-50]%) ([50-60]%) ([50-60]%)
   for ZF’s TraXon
ZF ConAct (CPCA)         [amount]      [amount]     [amount] [amount]       [amount] [amount] [amount]
   merchant sales to    ([70-80]%) ([70-80]%) ([70-80]%) ([60-70]%)       ([60-70]%) ([40-50]%) ([40-50]%)
   […] and […]
   Source: Notifying Party’s reply to question 8 of RFI 14, annex Q8.
        (61)     Therefore, the market shares on the OEM/OES market for CPCAs on a global
                 basis without taking into account ZF’s CPCAs used in-house would be as
                 follows.
   Table 3: CPCA for AMT MHCV, worldwide, OEM/OES market, without ZF’s in-
   house sales
                           2018          2019         2020        2021       2022       2023       2024
ZF ConAct (CPCA)
   merchant market to [90-100]% [90-100]% [90-100]% [90-100]%             [70-80]% [40-50]%      [40-50]%
   […] and […]
Wabco CPCA                [0-5]%        [0-5]%       [0-5]%      [0-5]%    [5-10]% [5-10]% [10-20]%
ZF-Wabco combined       [90-100]% [90-100]% [90-100]% [90-100]%           [70-80]% [50-60]% [50-60]%
Knorr-Bremse CPCA         [0-5]%        [0-5]%       [0-5]%      [0-5]%   [20-30]% [30-40]% [30-40]%
Others/New business
                          [0-5]%        [0-5]%       [0-5]%      [0-5]%    [5-10]%    [10-20]%   [10-20]%
   opportunities
Total                      100%          100%         100%        100%       100%       100%       100%
   Source: Notifying Party’s reply to question 8 of RFI 14, annex Q8.
   Notes: The market shares are based on unit volumes.
   5.3.1.2. The Notifying Party’s view
        (62)     With respect to the competitive assessment on the market for CPCAs on a
                 global basis, the Notifying Party submits that there is no existing competition
                 between the Parties and an extremely low likelihood of any future
                 competition.109 Even if some competition were to take place between Wabco
   109 Form CO, paragraph 642.
                                                            17
 ---pagebreak---               and ZF in other parts of the world absent the merger, the Notifying Party is of
              the opinion that there would be no elimination of competition in respect of
              customers located in the EEA in the foreseeable future given that there will be
              no demand for CPCAs within the next […], as all recent tenders have already
              been awarded by accessible customers in the EEA.110 As such, Wabco’s CPCA
              product has no prospective customers in the EEA.
     (63)     Furthermore, the Notifying Party contends that post-Transaction, the merged
              entity would face a sufficient number of strong competitors that have sufficient
              development competences, such as Knorr-Bremse, Kongsberg and LuK ([…]*
              Group). In particular, the Notifying Party points out that it has recently lost
              some of its CPCA business with one of its two current EEA-based customers:
              [customer] will source CPCAs from Knorr-Bremse for its new generation of
              AMT from [strategic information] onwards instead of from ZF.111 Moreover,
              ZF will incur further volume losses of CPCAs in the EEA when it loses it
              AMT gearbox business with [customer] as of [strategic information]
              onwards.112
     (64)     In view of the projections submitted until 2024, the Notifying Party concludes
              that its market share will decrease [strategic information] in the near future.113
     (65)     Finally, the Notifying Party emphasises that a market share assessment is not
              appropriate for the analysis of the market situation for clutch actuators as there
              is a very limited number of customers and tenders. For future competition, the
              current market shares are not decisive but rather the ability of CPCA
              manufacturers to compete for future tenders.114
5.3.1.3. Commission’s assessment
     (66)     The Commission considers that although the merged entity’s market share is
              high in respect of CPCAs, for the following reasons the Transaction does not
              result in serious doubts as to its compatibility with the internal market and the
              functioning of the EEA Agreement with respect of CPCAs.
     (67)     First, the combined share is projected to decrease significantly, as production
              resulting from recent tenders comes online. If one includes ZF’s in-house
              sales, the combined market share is projected to reduce from [90-100]% to
              [60-70]% by 2024.115 Moreover, if one does not take into account the CPCA
110 Form CO, paragraph 609.
*   Should read: “Schaeffler”.
111 Notifying Party’s reply to question 1 of RFI 14 post-notification of 9 January 2020.
112 Notifying Party’s reply to question 8 of RFI 12 post-notification of 6 January 2020. The Notifying Party
    explains that ZF is currently selling its TraXon AMT (which incorporates ZF’s CPCA) to [customer].
    From [strategic information] on, [customer] will source the HCV-AMT entirely from [third-party] (i.e.
    [third-party]). Consequently, ZF will also lose its clutch actuator-volumes at [customer].
113 Notifying Party’s reply to question 8 of RFI 12 post-notification of 6 January 2020.
114 Form CO, paragraph 639.
115 ZF is projected to increase its TraXon gearbox sales by [sales volume] units by [strategic information].
    These estimates of volume reductions in CPCAs take into account the increased projected TraXon sales.
                                                           18
 ---pagebreak---                volumes used by ZF for its TraXon gearbox,116 the market shares decrease
               even more rapidly between 2020 and 2024 from [90-100]% to [50-60]%.
     (68)      Second, the market for CPCAs is characterised by large, lumpy orders117
               where the loss or win of one customer may have a significant impact on the
               future market share of a competitor. The movement in market shares as set out
               in Table 1, Table 2, and Table 3 above, shows how quickly market positions
               can change depending whether or not one wins or loses a tender. The market
               for CPCAs is a bidding market with a limited amount of tenders (see paragraph
               (70)).118
     (69)      Third, once a tender is won, the market share corresponding to that tender
               tends to remain with the winner of that tender. This is because CPCAs are
               bespoke products designed to fit into a specific AMT system. In principle,
               CPCAs have to be developed specifically for a specific (new generation of)
               AMT system. This enhances the chances of potential suppliers, which are not
               incumbent suppliers, to win orders. It is for this reason that what is important
               in terms of competition in the market is development capabilities.
     (70)      Fourth, the decreasing trend of ZF’s market share is due to competitive
               constraints from competitors such as Knorr-Bremse, which won [third party]
               tender for CPCA volumes as of [strategic information] onwards (this tender
               not only affects the EEA but also North America),119 as well as from OEMs
               themselves, which are capable of insourcing the production of CPCAs, such as
               [third party], which will use the […] including the CPCA as of [strategic
               information].120 Moreover, whilst market shares will not change immediately
               due to the fact that a CPCA/AMT combination tends to be for life of the
               product, the fact that Knorr-Bremse won the […] contract from ZF in […]
               shows that it is already now exercising competitive constraint on ZF.
     (71)      Fifth, the Commission’s market investigation has shown that there are a
               number of companies currently developing CPCAs. Amongst those are
               Kongsberg and LuK, which presented their prototypes at the Automechnica
               exhibition in Frankfurt in 2018.121 In particular, Kongsberg is actively
116 There are indication that ZF’s volumes used in-house for its TraXon gearbox are not part of the
    merchant market. ZF has not issued a typical tender for the supply with CPCA for its TraXon product
    but merely carried out a concept development study and requested a so-called A-sample from [supplier
    name] and its in-house department for the supply of CPCAs. Other potential suppliers were eventually
    not approached to provide an A-sample. Finally, ZF decided not to request a so-called B-sample from
    [supplier name]; Notifying Party’s reply to question 2(b) of RFI 14 post-notification of 9 January 2020;
    Notifying Party’s reply to questions 1 and 2 of RFI 16 post-notification of 14 January 2020; Annex Q1
    to Notifying Party’s reply to RFI 16 post-notification of 14 January 2020.
117 See also Horizontal Merger Guidelines, paragraph 15.
118 Form CO, paragraph 610: On a global level, there are currently only four ongoing tenders where the
    supplier is not yet determined.
119 This corresponds to roughly [sales volume] units, Notifying Party’s reply to question 8 of RFI 12 post-
    notification of 6 January 2020.
120 This loss of volume starting [strategic information] corresponds to roughly [sales volume]-[sales
    volume] units, Notifying Party’s reply to question 6 of RFI 14 post-notification of 9 January 2020.
121 Notifying Party’s reply to question 9 of RFI 12 post-notification of 6 January 2020; Notifying Party’s
    reply to question 5 of RFI 14 post-notification of 9 January 2020. LuK has a high number of
    patents/patent applications for CPCA.
                                                          19
 ---pagebreak---               promoting its CPCA, which is demonstrated by Kongsberg submitting to
              [strategic information].122
     (72)     Sixth, even when assuming a global market for CPCAs, the impact of the
              Transaction on the internal market would be significantly delayed, if any. The
              data provided by the Notifying Party show that […] options to bid on the EEA
              market are limited by the number of potential customers. Post-merger, for
              CPCAs, potential customers are only [third party interest] and [third party
              interest]. In addition, [third party interest] will in all likelihood use ZF’s
              CPCAs after [strategic information].123 Finally, [third party interest] has
              awarded the supply contract for CPCAs for its next generation AMT system to
              Knorr-Bremse and this contract is designed to be in place until […].124 In
              short, there is no possibility for ZF and Wabco to compete for the supply of
              CPCAs vis-à-vis customers located in the EEA in the short- to medium-term.
              This also allows Kongsberg and LuK further time to develop their CPCA
              products and prepare for future tenders.
     (73)     Outside the EEA, the Commission notes that ZF did not compete for the
              [strategic information]. However, both ZF and Wabco are participating in
              ongoing tenders and thus competing against each other (ongoing tenders for
              [strategic information]). These tenders are to be awarded in [strategic
              information], with start of production envisaged in [strategic information].
              After these CPCA tenders, it is unclear what tenders are coming up globally.
              As for the EEA, the Parties main competitor is Knorr-Bremse. Additionally,
              customer may in future turn to the potential new entrants Kongsberg and LuK.
              As such, whilst some competition will be eliminated outside of the EEA going
              forward, the Commission considers that options for customers remain such that
              the reduction of competition between ZF and Wabco caused by the
              Transaction outside of the EEA is not such as to give rise to serious doubts as
              to the Transaction’s compatibility with the internal market and the functioning
              of the EEA Agreement with respect to CPCAs for AMTs.
     (74)     Finally, whilst one market participant highlighted the fact that “[t]his
              transaction will allow ZF/Wabco to increase its position as leader for Clutch
              actuators products (CPCA = Concentric Pneumatic Clutch Actuator),”125 the
              Commission considers that in light of the foregoing, in the specific
              circumstances of the present case, this factor alone is not sufficient to give rise
              to serious doubts as to the Transaction’s compatibility with the internal market
              and the functioning of the EEA Agreement with respect to CPCAs for AMTs.
     (75)     Overall therefore, the Commission considers that the merged entity will face
              competitive constraints not only from other tier-1 or tier-2 suppliers such as
              Knorr-Bremse or Kongsberg, but also from MHCV OEMs, which are capable
              of “making” the clutch actuations for the AMT in-house. Finally, the
122 Annex Q1 to Notifying Party’s reply to RFI 16 post-notification of 14 January 2020. [strategic
    information].
123 Notifying Party’s reply to question 1 of RFI 14 post-notification of 9 January 2020: [third party] is not
    expected to change its currently running AMT generation within the [strategic information]; [third party]
    will revise its AMT in [strategic information], however without changing the CPCA.
124 Form CO, paragraph 609.
125 Reply to question 111.1 of Questionnaire to Competitors.
                                                         20
 ---pagebreak---               information available to the Commission either through the Notifying Party’s
              submissions or the market investigation show that there are potential
              competitors to the merged entity (such as Kongsberg and LuK), which have
              undertaken concrete steps to develop own CPCA capabilities in order to
              compete in future tenders.
     (76)     In light of the considerations of this Section, and in absence of any
              substantiated concerns voiced during the market investigation, the Commission
              concludes that, on balance, the Transaction does not raise serious doubts as to
              its compatibility with the internal market and the functioning of the EEA
              Agreement with respect CPCAs sold to OEM/OES customers on a global
              market.
5.3.2. The EEA-wide CPCA market
     (77)     As regards a potential EEA-wide market for CPCAs sold to OEM/OES
              customers, the Commission considers that the arguments as to why no
              competition concerns arise are the same as those that are applicable to the
              global market.
     (78)     The Commission in particular notes that as regards the EEA, there is no
              potential competition opportunities foreseen between the Parties’ in respect of
              CPCA for the foreseeable future. […] contract with Knorr-Bremse is
              understood to last until […]. Whether or not […] will issue a tender for a new
              CPCA prior to that is unclear given that this is likely to depend on […] plans
              regarding next generation AMTs.126 Although the Parties competed for the
              […] tender (and both lost to […]), it seems unlikely that future competitive
              interactions in the EEA will take place in the short-to-medium term.
     (79)     Finally, there is no competition for contracts currently being supplied by a
              CPCA supplier. CPCAs are bespoke products. A CPCA has to be adapted to
              each specific AMT. Even if a supplier already has a CPCA available, the effort
              to adapt the CPCA to the specific AMT is considerable. Switching from one
              existing CPCA supplier to another therefore generally makes no economic
              sense. In short, once the CPCA customer has chosen its supplier for a
              particular AMT system, it normally stays with that supplier for that particular
              AMT system.
     (80)     In light of the considerations in this Section, the Commission concludes that
              the Transaction does not raise serious doubts as to its compatibility with the
              internal market and the functioning of the EEA Agreement with respect to
              CPCAs sold to OEM/OES customers on an EEA-wide market.
5.3.3. Conclusion
     (81)     In light of the considerations in this Section 5.3, the Commission concludes
              that the Transaction does not raise serious doubts as to its compatibility with
126 Annex Q7 to the Notifying Party’s reply to question 8 of RFI 14 post-notification of 9 January 2020.
    Whilst Wabco did compete against ZF in the tender for […], there are no further tenders envisaged in
    the near future.
                                                      21
 ---pagebreak---              the internal market and the functioning of the EEA Agreement with respect to
             CPCAs sold to OEM/OES customers on a EEA-wide or on a global market.
6.      MARKET        DEFINITION AND COMPETITIVE ASSESSMENT CONCERNING THE
        PARTIES’     ACTIVITIES AND POTENTIAL HORIZONTAL OVERLAP IN WORKSHOP
        CONCEPTS
6.1.    Introduction
     (82)    A workshop concept is a contractually fixed form of cooperation between a
             provider of a workshop concept and a workshop.127 Through a workshop
             concept, workshops, which service fleet owners in the aftermarket can benefit
             from a common brand and thus form a stronger antithesis to the OEM’s own
             aftermarket workshops and authorised workshops.128 Ultimately all workshops,
             whether OEM owned or independent compete to provide maintenance and
             repair services to fleet owners in the aftermarket.
     (83)    ZF, through a cooperative non full-function joint venture with Bosch and
             Knorr-Bremse, provides an IAM concept for CV workshops called
             Alltrucks.129 The workshops, which join Alltrucks, are referred to as “Alltrucks
             Partners”. Alltrucks is a full-service concept meaning that Alltrucks workshops
             services all OEM brands in the CV sector and covers almost all vehicle related
             maintenance and repair work.130 Alltrucks provides it Partners with
             comprehensive support in commercial and technical questions, such as
             technical trainings, a technical hotline, a workshop portal with technical
             information, quality assurance through process consulting and auditing of
             partner workshops, as well as marketing, design assistance and a common
             brand. This also includes the Alltrucks diagnostics system, comprising
             hardware and software from the joint venture partners Bosch, ZF and Knorr-
             Bremse.
     (84)    Alltrucks is a franchise concept. As such, Alltrucks charges its franchisees
             different types of franchise fees, dependent on the service purchased by the
             individual Alltrucks Partner.131 Clause 6(1) of the Alltrucks standard
             contract132 […].133 […].134
     (85)    Alltrucks does not distribute any spare parts that are needed by the Alltrucks
             Partners for the maintenance and repair of CV. Spare parts are sourced directly
             by the workshops from spare part manufacturers. Whilst the Alltrucks
             franchisee contract foresees that […], the Alltrucks Partners are free to also
127 Form CO, paragraph 576.
128 Form CO, paragraph 576.
129 The Alltrucks cooperation agreement was approved by the German Bundeskartellamt, the Austrian
    competition authority and the Polish competition authority in 2013.
130 Form CO, paragraph 579.
131 Form CO, Annex 6.4-(4)_Contract Alltrucks. The price list with the franchise fees is attached to the
    standard Alltrucks contract submitted in this Annex 6.4-(4)_Contract Alltrucks.
132 Form CO, Annex 6.4-(4)_Contract Alltrucks.
133 Form CO, Annex 6.4-(4)_Contract Alltrucks, Clause 6.1, which reads (in German): “[…].”
134 Form CO, Annex 6.4-(4)_Contract Alltrucks, Clause 6.1, which reads (in German): “[…].”
                                                        22
 ---pagebreak---              source from other sources. In addition, the Alltrucks joint venture itself does
             not own any workshops and thus does not offer maintenance and repair of
             commercial vehicles itself.135 At the end of 2018, there were […] Alltrucks
             Partners in Germany, Austria, Switzerland, Italy and Poland.136
     (86)    Wabco, on the other hand, certifies independent third-party workshops as
             qualified to repair Wabco’s products (by training workshop mechanics in the
             Wabco Academy and equipping them with Wabco diagnostics tools for the
             repair of Wabco systems. Such certified workshops form the “Wabco Service
             Partner Network” and operate independently from Wabco. The Notifying Party
             submits that as such, Wabco does not consider itself as active in the supply of
             full-service workshop concepts. Wabco does not derive any direct revenues
             from the certification process, i.e. no fee is due for the certification.137 Instead,
             the business rationale of the Wabco Service Partner Network is that thus
             Wabco is better able to ensure that its customers can easily identify workshops
             that provide reliable, high quality services and offer Wabco original
             replacement parts. The objective is, among others, to foster that the
             replacement parts purchased are Wabco original parts (whether sourced
             directly from Wabco or other Wabco parts distributors).138 There are
             approximately […] Wabco Service Partners,139 out of which […] are in the
             EEA.140
6.2.    Market definition
     (87)    The Commission’s previous decisional practice has never considered
             workshop concepts for the aftermarket for providing MHCV maintenance and
             repair services.
     (88)    The Notifying Party submits that the relevant product market comprises
             comprehensive full-service workshop concepts for CV, which does not target
             only specific services.141 It argues that the provision of single, specific services
             does not cover the needs of a workshop in its entirety and is not an alternative
             to a full-service workshop concept. Furthermore, workshops, which are part of
             a (full-service) workshop concept, often also participate in "detail concepts"
             such as the Wabco Service Partner Network concept, to obtain the linked
             certification. Detail concepts are not exclusive of other detail or full-service
             workshop concepts, whereas full-service workshop concepts are exclusive of
             other (competing) full-service workshop concepts.
     (89)    In the Notifying Party’s view, workshop concepts are primarily to be
             understood as comprehensive full-service concepts. These concepts distinguish
             themselves from individual product or product group-related support services
             to which the Notifying Party refers as "detail workshop services" or "detail
             concepts", which are usually initiated by the parts manufacturers along their
135 Form CO, paragraph 583.
136 Form CO, paragraph 580.
137 Form CO, Annex 6.4-(5)_Contract WABCO Service.
138 Notifying Party’s reply to question 11 of RFI 16 of 14 January 2020.
139 Form CO, 585.
140 Notifying Party’s reply to question 8 of RFI 16 of 14 January 2020.
141 Form CO, paragraph 589.
                                                         23
 ---pagebreak---              limited product competence and provided with limited technical information.
             Full-service concepts claim to be able to cover almost all vehicle-related
             work.142
     (90)    Finally, the Notifying Party contends that workshop concepts for CV and PVs
             form separate markets, as the workshops themselves are normally either
             operating repair and maintenance services for CV s or for PVs.143
     (91)    With respect to the relevant geographic market, the Notifying Party submits
             that assuming a potential relevant product market for full-service workshop
             concepts, the geographic market is EEA-wide. Most full-service workshop
             concept networks are active all across Europe or at least in multiple Member
             States. Likewise, most customers are large transport companies and fleet
             operators, which operate across the EEA. Further, the service provided to these
             customers is largely standardised across the EEA.144 If, however, the product
             market were to include detail concepts, these function more on a national basis
             and as such, a national market approach should be adopted.145
     (92)    The Commission finds that, for the purposes of this Decision, the exact market
             definition with respect to the provision of aftermarket services through
             workshop concepts can be left open as the outcome of the competitive
             assessment would be the same irrespective of whether one defines a separate
             market for the provision of such services through full-concept workshops or an
             overall market comprising full-service workshops, detail concept workshops
             and independent workshops and irrespective of whether the scope of the
             geographic market is national or EEA-wide.
6.3.    Competitive assessment
6.3.1. Market shares
     (93)    For the market of full-service workshop concept on the EEA level, the
             Notifying Party submitted market shares as follows.
142 Form CO, paragraph 578.
143 From CO, paragraph 589.
144 Notifying Party’s reply to question 4 of RFI 16 of 14 January 2020.
145 Notifying Party’s reply to question 4 of RFI 16 of 14 January 2020.
                                                         24
 ---pagebreak--- Table 4: Full-service workshop concepts (including OEM workshops and other full
service workshops), EEA-wide146
                                           Workshops          Workshops
Customer
                                              (units)             (%)
Truck Station (Iveco, Fiat Group)         ~ [amount]          ~ [20-30]%
Truckworks (Daimler)                      ~ [amount]          ~ [20-30]%
MAN Service Complete (MAN)                ~ [amount]          ~ [10-20]%
Truckfit                                  ~ [amount]          ~ [10-20]%
Alltrucks                                 ~ [amount]          ~ [10-20]%
TOP TRUCK Service                         ~ [amount]           ~ [0-5]%
AD Truckdrive                             ~ [amount]           ~ [0-5]%
Total                                     ~ [amount]             100 %
Source: Notifying Party’s reply to question 4(d) of RFI 12 post-notification of 6 January 2020.
      (94)     For a product market comprising all different kinds of workshop concepts
               (i.e. full-service concepts, detail concepts and independent workshops),
               Notifying Party estimates the combined market share to be [10-20]-[10-20]%
               (Alltrucks [0-5]-[0-5]% and Wabco Service partner Network [10-20]%) on an
               EEA-wide basis.147
      (95)     According to the Parties’ best estimates, their combined market shares at
               national level would be between [10-20]-[10-20]% in all Member States except
               Germany where they estimate their combined market share to be [10-20]%.148
6.3.2. The Notifying Party’s arguments
      (96)     The Notifying Party submits that Alltrucks does not compete with Wabco as
               only Alltrucks is active in full-service workshop concepts, whereas Wabco is
               not.149
      (97)     Furthermore, the Transaction would not lead to any increase in market
               presence of Alltrucks. The Transaction would have no impact on Wabco’s
               Service Partner Network either. As the Wabco Service Partner Network
               satisfies demands different from those of Alltrucks there are no horizontal
               effects.150
      (98)     Finally, the Notifying Party argues that there are no vertical relations between
               Wabco and Alltrucks. Alltrucks is a workshop concept only and does not sell
               ZF’s, Bosch’s, or Knorr-Bremse’s spare parts to workshops. The workshops,
               which are franchisees of Alltrucks, are free to purchase spare parts from third
146  The Notifying Party submits that the most plausible basis for determining the market shares in the
     product market for full-service workshop concepts for MHCVs is the number of workshops. The
     number of workshops and the size of the network are the most important factors from a customer
     perspective and therefore, can be seen as indicative of market position. In contrast, the aggregated
     turnover of the participating workshops, however, is not suitable to serve as a basis for determining the
     market shares as the individual workshop concepts are independent and also generate turnover with
     services and/or sales of products unrelated to the workshop concepts; Notifying Party’s reply to question
     5 of RFI 16 of 14 January 2020.
147  Notifying Party’s reply to question 8 of RFI 16 post-notification of 14 January 2020.
148  The Parties do not track market share data or the number of all workshops at national level. As such, the
     Parties have done their best to estimate the total number of workshops.
149  Form CO, paragraph 591.
150  Form CO, paragraph 593.
                                                           25
 ---pagebreak---               parties. Likewise, Wabco’s Service Partners are free to purchase spare parts
              from third parties.151
6.3.3. Commission’s assessment
     (99)     At the outset, the Commission notes that during the market investigation,
              certain third parties raise concerns relating to the Alltrucks concept. The
              concerns raised revolve around (i) an alleged increased strength of the
              combined entity in several segments of the IAM, based in particular on the
              strong positions of Knorr-Bremse (a party to Alltrucks) and Wabco in braking
              components and air compressors, on the increased cross-selling opportunities,
              economies of scale and scope; (ii) possible foreclosure strategies whereby
              OEMs would not be able to source components for the IAM under the same
              conditions as pre-merger or that Alltrucks would have less incentive to source
              competitors’ products;152 and (iii) concerns that confidential information
              provided by Knorr-Bremse in the framework of Alltrucks may be disclosed to
              its main braking competitor Wabco (and vice-versa).153
     (100) However, the Commission considers that the Transaction does not give rise to
              serious doubts as to its compatibility with the internal market and the
              functioning of the EEA Agreement in relation to workshop concepts for the
              reasons explained in the next sections.
6.3.3.1. No horizontal effects
     (101) The Commission considers that if full-service workshop concepts form a
              separate product market (whether EEA-wide or national), no horizontal
              overlap exists. The same applies if one were to consider a separate market for
              detail concept and independent workshops.
     (102) If, on the other hand, the market comprises both full-service workshops, detail
              concepts and independent workshops, the Commission considers that no
              competition concerns arise for the following reasons.
     (103) First, the combined market share of the merged entity at EEA-wide level
              would be less than [10-20]%. It should also be highlighted that in this wider
              market, Alltrucks represents a very small proportion of workshop concepts
              ([0-5]-[0-5]%). At a national level the combined market shares also remain
              below [10-20]%, the highest estimated combined market share being [10-20]%
              in Germany.154
     (104) Second, the workshop concepts offered are very different and do not to
              compete closely.
151 Form CO, paragraph 594.
152 Replies to questions 108.1 of Questionnaire to Customers and replies to question 128.1 of Questionnaire
    to Competitors.
153 Reply to questions 108.1 of Questionnaire to Customers.
154 Overlaps arise in respect of Austria, Belgium, France, Germany, Italy, the Netherlands, Norway, Poland,
    Portugal and Spain. These are the countries in which Alltrucks is present.
                                                        26
 ---pagebreak---      (105) In the first place, given the way the two business concepts work (Alltrucks
              generates its revenue through franchise fees paid by workshops, which joined
              their workshop concepts whilst Wabco received no remuneration certifying
              workshops as Wabco Service Partner),155 these concepts attract different
              independent workshops. Those who wish to provide full services and those
              who may wish to specialise, or add a particular competence to other
              competences. This in turn translates to the type of service the workshop offers
              to fleet owners. Those fleet owners who wish to have a full-service will turn to
              Alltrucks or equivalent. For these customers non full-service workshops may
              not be an option. Ultimately, substitutability of the two services depends on the
              needs and wishes of the service customer.
     (106) In the second place, as regards the actual situation, out of the currently […]
              Alltrucks Partners, […] are also Wabco Service Partners.156 This demonstrates
              that both concepts could be considered rather supplementary than competing
              (otherwise the exclusive nature of the Alltrucks concept would prevent
              Alltrucks Partners from being also part of the Wabco Service Network).157 The
              Commission also notes that Knorr-Bremse, one of the current Alltrucks parent
              companies, also has its own parallel workshop concept.158
     (107) In the third place, Alltrucks’ workshops are already pre-merger in a position to
              service and supply Wabco manufactured components irrespective of whether
              they are part of the Wabco Service Network.159 This would not change through
              the combination of Alltrucks (through ZF) and Wabco’s Service Partner
              Network.
     (108) Third, the majority of the respondents to the Commission’s market
              investigation is not concerned about the impact on the provision of
              maintenance and repair services for commercial vehicles. Roughly two-thirds
              of the respondents, which expressed their view, are of the opinion that the
              impact of the Transaction will be neutral and in the view of one respondent
              even positive.160 One respondent stated that “[d]ue to the wide and developed
              spare parts offer in IAM we believe the impact of this transaction is neutral”
              and another commented that “[l]ong established supply chains will outlast the
              transaction.”161 Another voice from the market pointed to the existing business
              relations in the IAM: “I don’t think the transaction will have an immediate
              impact on maintenance and repair. On a long term this might change but will
              be subject to the parties existing agreements with third-party workshops.”162
     (109) Fourth, the Commission does not share the concerns voiced by a few third
              parties as to the increased strength of the merged entity in the IAM (combining
155 Notifying Party’s reply to question 11 of RFI 16 of 14 January 2020. Wabco’s network is in fact a
    marketing tool for its component sales on the OEM/OES market as well as the IAM.
156 Notifying Party’s reply to question 9 of RFI 16 of 14 January 2020.
157 Notifying Party’s reply to question 10(a) of RFI 16 of 14 January 2020.
158 Minutes of a call with Knorr-Bremse of 1 October 2019.
159 Notifying Party’s reply to question 6 of RFI 26.
160 Replies to questions 108 of Questionnaire to Customers and replies to question 128 of Questionnaire to
    Competitors: Two thirds of the respondents, which expressed their opinion.
161 Both quotes are replies to questions 108.1 of Questionnaire to Customers.
162 Reply to question 108.1 of Questionnaire to Competitor.
                                                         27
 ---pagebreak---            Wabco and Knorr-Bremse, cross-selling, economies of scope and scale). In the
           first place, it is wrong to conclude that the Transaction results in a merger of
           Knorr-Bremse’s and Wabco’s IAM activities. Alltrucks is a cooperation
           agreement. Any extension of the agreement to Wabco would also need to be
           agreed with Bosch and Knorr-Bremse, the other Alltrucks parent companies. In
           the second place, Alltrucks’ market share in the EEA is relatively low
           ([10-20]% if considering full-service concepts only and [0-5]-[0-5]% if
           considering all workshop concepts). The Parties’ combined position on a wider
           market comprising all workshop concepts (whether EEA-wide or national) also
           remains below [10-20]%. As such, even if the merged entity were to engage in
           increased cross-selling or benefit from economies of scale and scope, this is
           unlikely to lead to a significant impediment to effective competition in respect
           of the provision of maintenance and repair services by all workshop concepts.
6.3.3.2. No vertical effects
     (110) The Transaction also does not give rise to competition concerns because of
           (potential) vertical links.
     (111) The Commission considers that it is questionable whether there is indeed a
           direct vertical link between Wabco’s spare parts and Alltrucks. First, Alltrucks
           does not supply any spare parts itself. Second, Alltrucks Partners are free to
           source from third parties and not only the Alltrucks parent companies.
           Moreover, nearly […]% of Alltrucks Partners are also already Wabco Service
           Partners. There is no evidence provided that these workshops which belong to
           both the Alltrucks and Wabco networks have stopped purchasing spare parts
           from third party competitors. Moreover, even if post-Transaction Alltrucks
           were to somehow limit its Partners’ ability to source spare parts from third
           parties, multiple other avenues to reach the market would remain, including the
           OEMs workshop concepts. The Commission therefore considers that customer
           foreclosure is unlikely.
     (112) Finally, the Commission does not agree with the concern raised by one market
           participant that OEMs may find it more difficult to source certain spare parts
           as a result of the Transaction for the OEMs’ workshop concepts. First, if
           OEMs can no longer provide full services for their own trucks and busses
           because of restricted access to certain of Wabco’s spare parts it seems logical
           that the OEMs would re-consider buying Wabco components going forward.
           Second, even if additional Alltrucks Partners were to purchase Wabco spare
           parts post-Transaction, there would be no incentive to concentrate the
           distribution of all Wabco spare parts to Alltrucks Partners given Alltrucks’
           relatively minor market position (see paragraph (106) above). Finally, nothing
           in the market investigation has provided any evidence that the current
           Alltrucks owners (ZF, Bosch and Knorr-Bremse) have restricted access to
           spare parts to OEMs as a result of the Alltrucks joint venture.
6.3.3.3. No concerns related to disclosure of confidential information
     (113) Finally, the Transaction does not give rise to competition concerns because of
           ZF potentially disclosing Knorr-Bremse’s confidential information obtained in
           the course of the operation of Alltrucks to Wabco (or vice versa).
                                                28
 ---pagebreak---      (114) The Notifying Party argues that confidential information is only exchanged (if
               at all) on a need-to-basis for the operation of the Alltrucks joint venture within
               the administrative bodies of the joint venture. For these administrative bodies
               the parties of the joint venture have agreed on antitrust compliance rules.163
     (115) Furthermore, the Notifying Party submits that, for its own best interest, it
               ensures that there will be no flow of sensitive information of Knorr-Bremse via
               Alltrucks to Wabco.164
     (116) The Commission notes that any exchange of commercially sensitive
               information between Knorr-Bremse and Wabco through Alltrucks would be a
               breach of Article 101 TFEU. In that context and in view of the agreed
               compliance rules for Alltrucks and ZF’s statement that there will be no flow of
               Knorr-Bremse’s confidential information to Wabco through Alltrucks,165 the
               Commission considers it unlikely that the Transaction would cause ZF to
               disclose Knorr-Bremse’s confidential information obtained in the course of the
               operation of Alltrucks to Wabco (or vice versa).
6.3.4. Conclusion
     (117) In light of the considerations in this Section 6.3, the Commission concludes
               that the Transaction does not raise serious doubts as to its compatibility with
               the internal market and the functioning of the EEA Agreement with respect to
               the market for maintenance and repair services through workshop concepts.
7.       MARKET DEFINITION AND COMPETITIVE ASSESSMENT CONCERNING THE
         PARTIES’ ACTIVITIES IN (UPSTREAM) AMT CONTROLLERS AND (DOWNSTREAM)
         AMT GEARBOXES
7.1.     Market definition
7.1.1. Product market definition
7.1.1.1. AMT systems (gearboxes)
         (A)        The Commission’s decisional practice
     (118) In previous cases, in which the Commission defined the relevant product
               market for transmission systems,166 the Commission distinguished between
163 Notifying Party’s reply to question 12 of RFI 16 post-notification of 14 January 2020.
164 Notifying Party’s reply to question 13 of RFI 16 post-notification of 14 January 2020.
165 According to ZF, the information that is usually shared in the meetings of the supervisory board
    (Beiratssitzungen), i.e. the only body in which employees of the parent companies have access to
    information of Alltrucks, relates typically to Alltrucks sales generated from the service fee, number of
    acquired/lost workshops, roll out to new countries, cooperations, personnel/staff, etc. Accordingly,
    Alltrucks does not receive competitively sensitive data from Knorr-Bremse that could be passed on to
    Wabco via ZF’s staff in the corporate bodies of Alltrucks ZF also notes that its subsidiary TRW partly
    competes with Bosch and Knorr-Bremse in steering technology. As a result, there are already strict
    antitrust compliance rules in place in the Alltrucks joint venture.
166 Case No COMP/M.5518 – Fiat/Chrysler; Case No COMP/M.2066 – Dana/Getrag; and Case No
    IV/M.1368 – Ford/ZF.
                                                           29
 ---pagebreak---                automatic and manual transmissions and, within each market, between
               transmissions for LCV/PV and for MHCV.
     (119) The Commission left open whether a further sub-segmentation between types
               of transmission systems beyond manual and automatic transmission systems
               would be warranted.167
         (B)         The Notifying Party’s view
     (120) The Notifying Party agrees with the market definition retained in the
               Commission’s decisional practice with regard to a distinction between
               automatic and manual transmission systems.168 The Notifying Party further
               argues that four main types of transmission systems (or gearboxes) should be
               distinguished:169 (i) manual transmission, (ii) automated manual transmission
               (previously defined as AMT systems), (iii) automatic transmission, and
               (iv) electric transmission. Moreover, the Notifying Party notes that, in the
               EEA, AMT is the predominant technology (with a 75% saturation). AMT
               systems combine the advantages of manual transmissions (high efficiency and
               low weight) with a more comfortable gear shifting from the perspective of the
               driver.170
         (C)         The Commission’s assessment
     (121) With regard to the distinction between automatic and manual transmission, the
               majority of both competitors and customers consider that automatic and
               manual transmissions should not be considered interchangeable.171 The
               distinctive characteristics mentioned were the differences between powertrain
               architecture, the components required for one technology or the other, the
               differences in prices or market customs traditions, etc. which indicate that the
               different types of transmission systems are not substitutable for another.172
     (122) With regard to a further sub-segmentation of this market, between (i) manual
               transmission (“MT systems”), (ii) automated manual transmission (“AMT
               systems”), (iii) automatic transmission, and (iv) electric transmission, the
               majority of customers and competitors considers these technologies to be
               distinct.173 One customer explains that the “markets of manual transmission,
               automated manual transmission, automatic transmission and electric
               transmission are different. Manual transmission is an old product, used in
               developing markets considering the cost and simplicity. Automated manual
               transmission is [a] separate product, relative simply operation (two pedal
               operation). Simply to drive. Automatic transmission is power shift
167 Case No COMP/M.5518 – Fiat/Chrysler, paragraph 18.
168 Form CO, paragraph 140.
169 Transmission systems (or gearboxes) are used to provide the speed and torque conversions required to
    change the ratio between engine revolutions per minute and a vehicle’s wheel revolution per minute.
170 Form CO, Annex 6.1-(2), ECA Report AMT controller, page 10.
171 Replies to questions 8 and 8.1 of Questionnaire to Customers and Questionnaire to Competitors.
172 Replies to question 8.1 of Questionnaire to Customers and Questionnaire to Competitors.
173 Replies to questions 9 and 9.1 of Questionnaire to Customers and Questionnaire to Competitors. For the
    purposes of this Decision, references to “transmission systems” or “gearboxes” refer collectively to
    (i) manual transmission, (ii) automated manual transmission, (iii) automatic transmission, and
    (iv) electric transmission.
                                                        30
 ---pagebreak---               transmission, used in specific high duty cycle operation. Mainly used in refuse
              trucks and buses. Electric transmission is new product and market is still
              under developing.” A competitor adds that the “[t]ransmission for electric
              powertrains will have a complete new structure (e.g., strong integration with
              e-machine, less gears, different speed/torque”. These statements show that
              from a supply side perspective these technologies differ sufficiently from each
              other to an extent that they cannot be considered as part of the same market.
     (123) With regard to demand side substitutability, Knorr-Bremse explained that there
              is “no meaningful demand-side substitutability between AMT, on the one hand,
              and manual or […] automatic transmission technology, on the other hand.
              Manual transmissions are significantly less expensive than AMT [systems].
              However, AMT [systems] are more fuel efficient and, more generally, have
              lower total cost of ownership. […] automatic transmissions, on the other hand,
              are significantly more expensive than AMT [systems], and only used in niche
              applications such as in very heavy duty vehicles which drive at low speed and
              accelerate very slowly (e.g., pushback tractors for airplanes).”174
     (124) On the basis of the above distinctions, the only relevant vertical link is between
              the AMT controller (of Wabco) and the AMT systems (of ZF) as other
              technologies (manual, automatic and electric vehicles) do not require an AMT
              controller for their transmission systems. This is due to the fact that the AMT
              controller is an addition to the AMT systems, whereas it is not required for the
              other technologies.
     (125) To conclude, for the purposes of this Decision, the Commission considers that
              the relevant downstream market is the market for AMT systems for trucks and
              buses (as there is no transmission system in a trailer, the Parties activities do
              not overlap in that segment) encompassing OEM/OES sales.
7.1.1.2. AMT controllers
     (126) Transmission actuation controllers or “AMT controllers” automate the
              transmission and therefore constitutes an input to AMT systems, as opposed to
              other transmission systems such as manual, automatic or electric that do not
              require an AMT controller.
        (A)        The Commission’s decisional practice
     (127) In previous decisions, the Commission considered a market for transmission
              control units and left open a potential further distinction according to the type
              of transmission.175
        (B)        The Notifying Party’s view
     (128) The Notifying Party considers that AMT controllers constitute one relevant
              product market, independent of the type of controller system.176 AMT
174 Replies to question 8.1 of Questionnaire to Competitors.
175 Case No COMP/M.4878 – Continental/Siemens VDO, paragraph 13; Case No COMP/M.5294 –
    Schaeffler/Continental, paragraphs 32 et seq.
176 Form CO, paragraphs 126-135.
                                                        31
 ---pagebreak---               controllers are customised products for AMT systems. Broadly speaking, the
              AMT controller system automates the transmission.177
     (129) In a first submission, the Parties suggested a sub-segmentation between
              integrated AMT controllers (“I-AMT”) and modular-AMTs (“M-AMT”). The
              Notifying Party amended this suggested sub-segmentation afterwards into
              three possible types of AMT controllers: (i) modular add-on (ii) modular and
              (iii) non-modular.
        (a)       Modular add-on AMT controllers are added on AMT systems and are
                  produced as manual transmissions but turned into an AMT systems by
                  adding the modular add-on controller system.
        (b)       Modular AMT controllers are designed to be integrated with the
                  transmission, which is built as an AMT system.178
        (c)       Non-modular AMT controllers are designed to be integrated with the
                  transmission, which is built as an AMT system. Contrary to the modular
                  AMT controllers, they are built as one piece.179
     (130) The Notifying Party explains that in the EEA, modular and non-modular
              controllers are predominant compared to modular add-on controllers. The
              former are custom-made developments for a specific transmission, they all
              have similar technical characteristics and are used for the same purpose.180
     (131) Regarding the price levels of AMT controllers, the Parties submit that price
              levels as such are not informative because the specifications that determine the
              costs of the AMT controllers differ between the OEMs. This is mainly due to
              the bespoke nature of AMT controllers and the diversity of ways one OEM to
              the next decides to source or manufacture AMT controllers.
        (C)         The Commission’s assessment
     (132) The Commission takes note that AMT controllers are highly customised to fit
              specific AMT systems. The choice for one type of controller (modular, non-
              modular or add-on) or its supplier is mainly driven by the customer’s needs
              and specifications.181 AMT controllers are adapted to the specific transmission
              system the customer has developed (or sourced).
     (133) From a supply-side perspective, manufacturers are able to supply different
              types of technologies. For instance, Wabco supplies […] with a non-modular
177 Form CO, Annex 6.1-(2), ECA Report AMT controller, page 10.
178 For ZF’s TraXon AMT systems, ZF sources […] out of […] modules of the AMT controller system
    from Knorr-Bremse. This corresponds to the integrated AMT controllers (or I-AMT).
179 ZF sourced a non-modular AMT controller system from [supply source] for its AS Tronic AM-
    Transmission, the predecessor to the TraXon. This corresponds to the integrated AMT controllers (or I-
    AMT).
180 Nevertheless, the Notifying Party provided market shares for every plausible segment.
181 For instance, Ford Otosan procured its AMT controllers system in 2016 in a tender where at least […],
    […] and Wabco competed. Wabco won the tender and developed an integrated AMT controller system.
    This shows that the exact solution of the type of AMT controller or how it will be developed with the
    customers’ technology, is not so rigid.
                                                       32
 ---pagebreak---               AMT controller and […] with an add-on AMT controller. The supplier will
              focus on the type of technology that the customer is requesting in the tender.
     (134) In the EEA, the different types of controller technologies can be found
              depending on the customer’s choice. [Third party interest] and [third party
              interest] use a modular add-on AMT controller to fit their in-house
              transmission system, while [third party interest] uses a non-modular integrated
              AMT controller. ZF, which buys AMT controllers to be integrated in its AMT
              systems has been sourcing different types of AMT controller systems
              depending on its gearbox generation. Ultimately, as described by Knorr-
              Bremse: “[b]oth Wabco and Knorr-Bremse would be able to develop all types
              of AMT controllers. However, it is the customer, who determines what type of
              AMT controller he wants to use for his transmission system.”182
     (135) Once a tender is awarded, the supply is rarely split between two suppliers and
              the controller supplier will remain the same until the end of the lifetime of that
              generation of gearbox (switching is difficult once the gearbox and controller
              have been designed). As such, a change of type of AMT controller system, as
              well as its supplier will occur only through tenders, in the course of the next
              transmission system generation.
     (136) Overall, the market investigation results do not point to a further sub-
              segmentation of the AMT controller technologies. Respondents explained that
              there is supply-side substitutability between the technologies insofar as
              manufacturers adjust and customise their product to the customer’s
              transmission system. The proposed sub-segmentation was also not known to
              all respondents, which sometimes classify these technologies differently,
              without there being a type of segmentation that emerged as an alternative.183
     (137) Considering the strong supply-side substitutability for this product, the
              Commission considers the different types of technologies should not be
              analysed separately of each other.
     (138) For the purposes of this Decision, therefore, the Commission considers that the
              relevant product market is that of AMT controllers regardless of the precise
              technology used.
7.1.1.3. OEM/OES and IAM
     (139) In previous cases, the Commission considered that there are separate product
              markets for components (i) supplied to OEM and original equipment suppliers
              (“OES”) on the one hand and (ii) those sold on the independent aftermarket
              (“IAM”).184
182 Replies to questions 4 and 4.1 of Questionnaire to Competitors.
183 Replies to questions 4 and 4.1 of Questionnaire to Competitors and Customers.
184 Case No IV/M.337 – Knorr-Bremse/Allied Signal; Case No IV/M.1342 – Knorr-Bremse/Robert Bosch,
    paragraph 12; Case No COMP/M.7420 – ZF/TRW, paragraph 10; Case No COMP/M.4456 –
    Mahle/Dana EPG, paragraph 10; Case No COMP/M.5799 – Faurecia/Plastal, paragraph 7; Case No
    COMP/M.6714 – U-Shin/Valeo CAM, paragraph 7.
                                                        33
 ---pagebreak---      (140) The Notifying Party agrees with the market definition retained in the
             Commission’s previous decisional practice in general.185 However, in relation
             to AMT controllers, the Notifying Party considers that no distinction should be
             made between OEM/OES and IAM sales since there are no separate sales to
             the IAM channel.186 This is mainly because an AMT controller rarely needs to
             be replaced in its entirety if it fails. It can generally be fixed using repair
             kits/repair components. Therefore, a volume figures for the IAM for AMT
             controllers is not relevant.187
     (141) The Notifying Party’s view was supported by the results of the market
             investigation, in which, the vast majority of respondents to this market
             investigation considered that in respect of AMT systems and AMT controllers,
             no separate IAM market should be defined. Some respondents to the market
             investigation explained that, in their view, there is no aftermarket for
             transmission systems. OEMs may sell a few add-on parts for AMT gearboxes,
             but overall adding an IAM segment to the OEM/OES segment does not seem
             relevant.188
     (142) In light of the market investigation, the Commission therefore concludes that
             no distinction should be made between OEM/OES and IAM in respect of
             AMT systems and AMT controllers.
7.1.2. Geographic market definition
7.1.2.1. AMT systems
        (A)        The Commission’s decisional practice
     (143) In previous cases, the Commission defined the relevant product market for
             transmission systems as at least EEA-wide, if not global.189 This is in line with
             the constant position taken by the Commission concerning automotive systems
             and components, as players have worldwide operations but customers’
             production sites are mainly located in the EEA.190
        (B)        The Notifying Party’s view
     (144) The Notifying Party agrees with the market definition retained in the
             Commission’s previous decisional practice.191
185 Form CO, paragraph 85.
186 Form CO, footnotes 47 and 48.
187 Reply to RFI 19, paragraph 5.
188 Replies to questions 6 and 6.1 of Questionnaire to Customers and replies to questions 6 and 6.1 of
    Questionnaire to Competitors.
189 Case No COMP/M.5518 – Fiat/Chrysler; Case No COMP/M.2603 – ZF Friedrichshafen/Mannesmann
    Sachs; Case No COMP/M.2066 – Dana/Getrag; and Case No IV/M.1368 – Ford/ZF.
190 Case No COMP/M.7420 – ZF/TRW, paragraphs 47-50; Case No IV/M.1368 – Ford/ZF, paragraph 13;
    Case No COMP/M.2603 – ZF Friedrichshafen/Mannesmann Sachs, paragraph 20.
191 Form CO, paragraph 140.
                                                      34
 ---pagebreak---         (C)         The Commission’s assessment
     (145) Both the majority of customers and competitors that responded to the market
              investigation consider the AMT systems market to be worldwide in scope.192
              Respondents also consider that AMT systems purchased outside the EEA can
              be sold and integrated in the EEA.193 A competitor replied “Global market
              penetration – OEMs source globally and most gearbox suppliers have a global
              footprint”. Certification, regulatory requirements and the types of technologies
              were considered homogeneous both on an EEA-level and globally.194
     (146) The Commission agrees that AMT controllers can be shipped over long-
              distances. Wabco’s AMT controller for […] and […] in North America are
              produced in the EEA and shipped either as AMT controllers or as part of the
              AMT systems. Likewise, the Knorr-Bremse/Bosch Japan AMT controllers are
              sold to Fuso in Japan, who implements it in their AMT systems and then ships
              it to Daimler in Europe. […].195
     (147) Customers nevertheless report some slight differences in the competitive
              landscape and prices between the EEA and the rest of the world.196 For
              instance, a customer considers the geographic market for AMT systems to be
              wider than the EEA but not completely global as it defines the market as
              “mainly in Europe, NA, SA, and Japan”. Another explains that there are “[f]ew
              players on the global markets but flexible to adapt/customise their off-the-shelf
              solutions for specific markets/customers.”197 The fact that certain market
              players that "focus" on a certain regions reinforces the view that while this
              market appears wider than the EEA, it does not appear to be fully global. For a
              complete overview of which supplier focuses on which region, reference is
              made to Section 7.2.1.
     (148) For instance, Eaton (an AMT systems supplier that will be further introduced
              in Section 7.2.1.2(B)) has a stronger presence in North America, while ZF has
              a stronger presence in the EEA. The Commission’s view is that this should not
              necessarily be analysed as amounting to barriers to entry between regions or as
              reflecting different market characteristics. Suppliers consider that they can
              supply more than one region.198 This appears to be mostly due to strategic
              choices from AMT systems manufacturers that focus mainly on certain
              markets and that could enter other regions rather easily (see Section 7.2.1 for a
              more detailed analysis on each supplier and their general focus).
     (149) For the purposes of this Decision, the Commission considers that the question
              of the exact geographic market definition can be left open between worldwide
              and at least EEA-wide, as the Transaction does not give rise to serious doubts
192 Replies to questions 11 and 11.1 of Questionnaire to Customers and Questionnaire to Competitors.
193 Replies to questions 14 and 14.1 of Questionnaire to Customers and Questionnaire to Competitors.
194 Replies to questions 20 and 20.1 of Questionnaire to Customers.
195 Form CO, Annex 6.1-(2), ECA Report AMT controller, page 22.
196 Replies to questions 20 and 20.1 of Questionnaire to Customers.
197 Replies to question 20.1 of Questionnaire to Customers.
198 Replies to question 11.1 of Questionnaire to Competitors; see also, Non-confidential minutes of a
    conference call with Eaton: “Eaton itself is already active also outside North America, throughout the
    world.”
                                                        35
 ---pagebreak---               as to its compatibility with the internal market and the functioning of the EEA
              Agreement under either geographic market definition.
7.1.2.2. AMT controllers
         (A)       The Commission’s decisional practice
     (150) In previous cases, the Commission defined the relevant product market for
              components of transmission systems as at least EEA-wide, if not global.199
         (B)       The Notifying Party’s view
     (151) The Notifying Party agrees with the market definition retained in the
              Commission’s previous decisional practice.200 The Notifying Party emphasises
              the global footprint of this market. AMT controller systems can be shipped
              over long-distances.201
         (C)       The Commission’s assessment
     (152) Similarly, to the AMT systems market, the AMT controller market is generally
              considered by respondents to the market investigation (both customers and
              competitors) as being global in scope.202
     (153) Customers nevertheless report some slight differences in the certification /
              regulatory requirements and types of technology used in the EEA compared to
              the rest of the world.203 Competitors also observe some differences in the
              competitive landscape in the EEA.204
     (154) To conclude, for the purposes of this Decision, the Commission considers that
              the question of the exact geographic market definition can be left open
              between worldwide and at least EEA-wide, as the Transaction does not give
              rise to serious doubts as to its compatibility with the internal market and the
              functioning of the EEA Agreement under either geographic market definition.
7.2.     Competitive assessment
     (155) The AMT business in the EEA is characterised by a small number of suppliers
              of AMT controllers (Wabco, Knorr-Bremse, Kongsberg) that compete for the
              award of tenders issued by a handful of customers (Volvo, Daimler and ZF, i.e.
              the three AMT system manufacturers in the EEA which currently do not
              produce AMT controllers in-house).
199 Case No COMP/M.5294 – Schaeffler/Continental, paragraph 39.
200 Form CO, paragraph 136-138.
201 Form CO, paragraphs 136-138: “WABCO’s AMT controller systems for […] and […] in North America
    are produced in the EEA and shipped either as AMT controllers systems or integrated into the AM-
    Transmission by OEMs. Likewise, the KB (formerly Bosch) Japan AMT controller system is sold to Fuso
    in Japan, who implement it into their AM-Transmission, and the AM-Transmission is then shipped to
    Daimler in Europe for LCV (< 7.5 tons; Fuso Canter Duonic). […]. Finally, Kongsberg, which is
    currently producing its AMT controller systems in Mexico, is considered to ship its AMT controller
    systems from Mexico to the EEA if it wins an upcoming tender in the EEA.”
202 Replies to questions 10 and 10.1 of Questionnaire to Customers and Questionnaire to Competitors.
203 Replies to questions 19 and 19.1 of Questionnaire to Customers.
204 Replies to questions 16 and 16.1 of Questionnaire to Competitors.
                                                        36
 ---pagebreak---      (156) Supply contracts last as long as 10 to 15 years (in some cases 20 years). Once
              an AMT controller contract is awarded to a supplier, the customer will almost
              never change the supplier of the AMT controller for the particular gearbox for
              which it was designed. Competition for that customer will again take place at
              the time when the customer decides to design the next gearbox generation and
              requires an AMT controller for that. As such, in the AMT systems and
              controllers space, competition takes place for the market rather than in the
              market.
     (157) The demand in the EEA for AMT controllers amounted to roughly [500,000-
              600,000] units in 2018 (the exact figure changes depending on the each party’s
              best estimates of its competitors activities).205 Given the relatively low volume
              of sales, it is not surprising that only a handful of suppliers are active in the
              market. Moreover, demand in the EEA is not expected to grow significantly in
              the near future.
     (158) However, demand for AMT controllers (and AMT systems in general), is
              expected to grow significantly in other parts of the world, in particular in Asia.
              In general, volumes of transmission systems sold in the EEA are much smaller
              than in Asia or the Americas. This in turn is a direct consequence of the
              number of trucks sold, i.e. the size of the MHCV market.
     (159) AMT systems and thus AMT controllers are the most prevalent technology
              used in the EEA (around [70-80]% of MHCVs use AMT systems versus
              [30-40]% in North America and [0-5]% in China).206 However, other parts of
              the world such as Asia and the Americas are now starting to move from
              manual transmission to AMT systems. There are significant growth prospects
              for AMT controllers in the Asian market which is expected to be worth upward
              of EUR [400-500] million and shares of AMT systems in MHCV in China are
              expected to increase from [0-5]% in 2018 to [10-20]% in 2023.207
     (160) In total, the number of transmission systems sold in the EEA in 2018 was
              [500,000-600,000] units (including internal production). Roughly [300,000-
              400,000] of these were AMT systems needing AMT controllers. Globally, the
              number of transmission systems sold was around [3-4] million of which only
              around [700,000-800,000] were AMT systems (representing approximatively
              [20-30]%). Growth potential in other parts of the world for AMT systems and
              thus AMT controllers is therefore significant. In terms of AMT controller
              sales, according to the Parties, roughly [600,000-700,000] units were sold
              globally in 2018. Of this, approximatively [500,000-600,000] were sold in the
205 Form CO, tables 38 table 75: This figure fluctuates between approximatively [400,000-500,000] and
    [500,000-600,000] deepening on the source used by the Parties and based on their best estimates;
    Notifying Party’s reply to question 3, RFI 23.
206 Form CO, Annex 6.1-(2), ECA Report AMT controller, page 11.
207 Form CO, Annex 6.1-(2), ECA Report AMT controller, page 12. These estimations are based on the
    trend towards driver comfort (important due to driver shortage), expected emissions regulations,
    efficiency gains and in the future also autonomous driving (higher levels require AMT or automatic
    transmission).
                                                      37
 ---pagebreak---             EEA. This shows that in the past, demand for AMT controllers and AMT
            systems was largely EEA focused.208
     (161) Furthermore, competition must be assessed in the context where OEMs who
            manufacture their own AMT systems but currently purchase AMT controllers
            (Volvo, Daimler), may always move to in-house production of also the
            controllers if more economical. This is indeed what Scania has done in the past
            – it designed an in-house AMT system including the AMT controller. Its […]
            will move to […] AMT system as of […], thereby reducing the addressable
            market for AMT system providers such as ZF or AMT controller providers
            such as Wabco, Knorr-Bremse or Kongsberg further in the EEA. Going
            forward this shows that future demand for third party manufacturers of AMT
            systems and controllers might further decrease.
     (162) Section 7.2.1 will further introduce the different market players, while
            Section 7.2.2 will describe how the market characteristics interplay with the
            competitive assessment. Sections 7.2.3 and 7.2.4 will assess any risks of input
            and customer foreclosure.
7.2.1. Market players
     (163) The suppliers or customers of AMT systems and controllers have different
            ways of sourcing AMT systems and components: (i) some manufacturers
            provide AMT controllers only (Knorr-Bremse, Wabco and Kongsberg),
            (ii) they sell these AMT controllers either to OEMs with in-house production
            of AMT systems (Daimler and Volvo) or (iii) to AMT systems manufacturers
            (ZF, Eaton, FAST) that integrate and sell the entire product to OEMs that do
            not have in-house AMT system production (Paccar, Iveco, etc.). Finally,
            (iv) some OEMs have opted for in-house production of also the AMT
            controller (Scania).
7.2.1.1. Manufacturers of AMT controllers
        (A)       Wabco
     (164) Wabco develops tailored AMT controllers to effectively transform a given
            gearbox into an automated manual transmission. Wabco produces all types of
            AMT controller systems.209
     (165) Wabco’s total sales of AMT controller systems were approximately EUR
            [amount] in 2018, nearly all of which (approximately EUR [amount]) were in
            the EEA. Wabco’s customers include ZF and two OEMs: [customer] (EUR
            [amount] sales in 2018) and [customer] (EUR [amount] sales in 2018). Sales to
            Daimler and Volvo are limited to the EEA, but [customer] and [customer] then
            re-ship some AMT controller systems (assembled already on the AMT gearbox
            or not) to their facilities in other parts of the world.
208 Form CO, Annex 6.1-(2), ECA Report AMT controller.
209 Form CO, paragraphs 120-121.
                                                    38
 ---pagebreak---          (B)        Knorr-Bremse
     (166) Knorr-Bremse develops tailored AMT controllers to effectively transform a
              given AMT system into an automated manual transmission. [Strategic
              information].
     (167) In the rest of the world, Knorr-Bremse has used the successful development of
              the [strategic information] to expand in this segment in Asia notably. Knorr-
              Bremse took over the AMT controller activities of Bosch in Japan (2016) and
              has set up a JV with Dongfeng (2018/19) for the Asian market. Since the
              acquisition of the Bosch unit in 2016, Knorr-Bremse also entered into strategic
              alliances with two of the largest truck manufacturers in China, Dongfeng and
              FAW, in order to jointly develop and produce pneumatic AMT controllers.
     (168) [Amount, sales volume, strategic information].210
     (169) Outside of its relationship with […] or its activities in Asia, Knorr-Bremse
              competed against Wabco in previous tenders but was not successful.211
     (170) [Strategic information].
         (C)        Kongsberg
     (171) Kongsberg is a European manufacturer of various MHCV components,
              including AMT controllers. Kongsberg is a relatively new entrant in the AMT
              controller market. It currently supplies Eaton with integrated AMT controllers
              for Eatons’ AMT systems sold in the U.S.212 Respondents to the market
              investigation have mentioned Kongsberg as a credible alternative to Wabco.213
     (172) […]. ZF understands that Kongsberg has developed the “ATrAct” AMT-
              system with an integrated clutch actuator for Eaton as AMT systems
              manufacturer.214
     (173) Kongsberg has, however also participated in request for quotes processes in the
              EEA. […].215
     (174) Kongsberg explained that it “competes both with Wabco and Knorr-Bremse in
              Asia, Europe and the USA. In general, the relevant market players are aware
              of Kongsberg’s abilities and know-how and thus Kongsberg assumes that it
              would be shortlisted in all future tenders for AMT controllers.”216
     (175) Therefore, Kongsberg is considered a credible player both in the EEA and
              worldwide.
210 Form CO, tables 41 and 89.
211 Form CO, Annex 6.1-(2), ECA Report AMT controller, page 19.
212 Non-confidential minutes of a conference call with Kongsberg, paragraph 13.
213 Replies to questions 21.2 and 22 of Questionnaire to Customers.
214 [Strategic information]
215 Notifying Party’s reply to RFI 10 and “Additional input following the technical meeting”, submitted by
    the Parties on 14 January 2020: [strategic information and supply source].
216 Non-confidential minutes of a conference call with Kongsberg, paragraph 6.
                                                         39
 ---pagebreak---         (D)        Others
     (176) The respondents to the market investigation provided names of additional
             suppliers for AMT controllers, such as MSM, EFI, Bosh or ETO.
     (177) While it cannot be excluded that such market players provide AMT controllers
             in the longer term, it should be noted that these companies focus mostly on
             certain modules or components of the AMT controller rather than being a
             source for a full controller.217
7.2.1.2. Customers of AMT controllers: tier-1 customers
        (A)        ZF
     (178) ZF produces AMT systems for MHCV above 6 tons. It sources various sub-
             components, including the AMT controller. ZF is the only tier-1 manufacturer
             of AMT systems in the EEA. It sells AMT systems mainly to [customers].
     (179) In the EEA, ZF offers two AMT systems: its current generation TraXon AMT,
             and its legacy AMT system AS Tronic. For buses, ZF additionally offers a
             manual transmission system, Ecoshift as well as an automatic transmission
             system, Ecolite.
     (180) ZF sources its AMT controllers for AS Tronic from Wabco and for TraXon
             from […]. AS Tronic is being phased out, any future sales will effectively be
             legacy sales.218 TraXon volumes on the other hand are increasing.
     (181) [Strategic information].
        (B)        Eaton
     (182) Eaton manufactures AMT systems, using Kongsberg’s AMT controllers. Eaton
             has traditionally focused on the U.S. market for this business activity. Eaton
             notably supplies PACCAR in the U.S. but is also active outside of North
             America.219
     (183) It should be noted that before selecting Kongsberg as its controller supplier,
             “Eaton compared several potential suppliers, including WABCO.” However,
             and this is also why Eaton has “a neutral view of the Transaction” is that “it
             believes the market will still evolve and that Wabco’s products will not be for
             long a leading product in the transmission system market.”220
     (184) Eaton is well placed to supply customers such as DAF or Iveco in the EEA
             with AMT systems (in competition with ZF). DAF is a subsidiary of PACCAR
217 Annex 6.1-(2), ECA Report AMT controller, page 12.
218 Form CO, paragraph 115: ZF currently still produces the predecessors of the TraXon and the
    PowerLine, the AM-Transmissions of the AS Tronic Series, AS Tronic lite, AS Tronic mid and AS
    Tronic. These are not offered for new projects as they are being currently phased out with end of
    production in the EEA [strategic information] for the AS Tronic mid and AS Tronic light, and [strategic
    information] for the AS Tronic.
219 Non-confidential minutes of a conference call with Eaton, paragraph 2.
220 Non-confidential minutes of a conference call with Eaton, paragraphs 3, 6 and 11.
                                                        40
 ---pagebreak---               (Eaton being the main supplier to PACCAR). As regards Iveco, Eaton used to
              supply Iveco with a transmission system.221
     (185) Furthermore, in 2019, Eaton participated in a tender issued by Traton for
              MHCV AMT systems worldwide (other participants being ZF and Allison). ZF
              won this tender for Europe with its Powerline AMT transmission, and Eaton
              won parts of the tender for manual transmissions and AMT in South
              America.222 As for the EEA, Eaton explained it “believes the next tenders it
              could participate in in Europe will take place around 2025-2026.”223
              Moreover, Eaton has publicly recognised its interest to enter the EEA
              market.224
     (186) Customers which responded to the market investigation consider Eaton a
              credible competitor of ZF both in the EEA and worldwide. They expect Eaton
              to become an active supplier in the EEA in the foreseeable future.225
         (C)       FAST
     (187) Shanxii Fast Gear (“FAST”) is a producer of AMT systems in China. FAST is
              not yet active in the EEA. Moreover, FAST provides mechanical parts and
              application software for AMT systems.
     (188) [Strategic information].226 [Strategic information].227
     (189) According to the Parties, [strategic information] there has not been direct
              competition between ZF and FAST with respect to AMT systems in the last
              three years within or outside the EEA.228 However, in future, it cannot be
              excluded that ZF’s AMT system and FAST’s AMT system compete against
              each other, at least in China.
         (D)       Allison
     (190) Some respondents to the market investigation229 also mentioned Allison as a
              potential supplier of AMT systems/a customer of AMT controllers. For
              instance, one customer mentioned that if “ZF were to disappear, Allison could
              be an alternative supplier but it is not a big player in Europe.” The customer
              estimated that 5-6 years would be necessary to do the integration of Allison’s
221 Form CO, paragraph 153.
222 Form CO, paragraph 153.
223 Non-confidential minutes of a conference call with Eaton, paragraph 9.
224 See website accessed on 21.01.2020 at 18:25: http://transportoperator.co.uk/2018/10/04/latest-
    transmission-technology-launched-iaa/: “For decades, European truck manufacturers have been faced
    with a choice of using ZF transmissions or developing their own gearboxes for heavy trucks. But now
    Eaton, one-time maker of the legendary Twin-Splitter, has launched itself back into Europe’s heavy
    truck market." and "Eaton claims that on a like-for-like basis, Endurant is 47 kg lighter than the rival
    ZF TraXon currently used by DAF and MAN in Europe, and says that Scania and MAN parent company
    Traton is expressing interest in it for the European market.”
225 Replies to questions 14.1, 21.1, 21.2, 28.1, 28.2 and 31.1 of Questionnaire to Customers.
226 Notifying Party’s reply to RFI 15, paragraph 5: “[strategic information]”.
227 Replies to question 1 of Questionnaire to Customers.
228 Notifying Party’s reply to question 1 of RFI 15 of 10 January 2020.
229 Replies to questions 21.2 and 28 of Questionnaire to Customers.
                                                          41
 ---pagebreak---               product in theirs.230 Allison has already won certain tenders outside of the
              EEA, but for automatic transmission systems and not AMT systems. In 2019,
              it participated in a tender issued by Traton for MHCV AMT systems
              worldwide against ZF and Eaton.231
7.2.1.3. Customers of AMT controllers: OEM customers
         (A)       Daimler
     (191) Daimler is one of the largest truck OEMs worldwide. Daimler has internalised
              the manufacturing of transmission systems. However, to date, it has not
              manufactured the AMT controller in-house but sources it from [strategic
              information]. The supply agreement between Daimler and [strategic
              information] runs until [strategic information]. Daimler may, if it moves to a
              new generation of gearboxes, organise a tender to source AMT controllers
              around that time.232
         (B)       Volvo
     (192) Similarly, Volvo (including Renault Truck) has internalised the manufacturing
              of transmission systems but has not, to date, manufactured the AMT controller
              in-house. Volvo sources the AMT controllers from Wabco. Its contract with
              [strategic information] for its current gearbox generation comes to an end in
              [strategic information].
         (C)       OEM customers in other parts of the world
     (193) Whilst Volvo and Daimler are the only OEM customers in the EEA purchasing
              AMT controllers, other OEMs in other parts of the world are equally potential
              customers.
     (194) Other companies mainly active in Russia, Turkey and Central / Eastern Europe
              are Kamaz, GAZ, MAZ, Tata, Ford Otosan, Sisu and Ginaf. With the
              exception of Ford Otosan, all the others have links in one form or other to one
              of the five Western Europe-based truck builders in the form of technology
              transfer agreements, component supplies or joint ventures.233
230 Non-confidential minutes of a conference call with Iveco (CNHI), paragraph 16.
231 Form CO, paragraph 153.
232 Form CO, paragraph 43: “Daimler always benchmarks outside sourcing options against in-house
    production”; supplemented by the “Additional input following the technical meeting”, submitted by the
    Parties on 14 January 2020.
233 Form CO, paragraph 69.
                                                        42
 ---pagebreak--- 7.2.1.4. Customers of AMT controllers: OEMs with in-house capabilities also for AMT
         controllers
        (A)       Scania
     (195) Scania is part of the Traton SE group (formerly called “Volkswagen Truck &
             Bus”) and produces LVCs and MHCVs. Scania has developed in-house
             capabilities for AMT systems, including AMT controllers.234
     (196) While certain OEMs, such as Daimler or Volvo have internalised the
             manufacturing of AMT systems, Scania went further by producing in-house
             the controller as well.
     (197) Traton explains that “[t]he decision to ‘make’ a component instead of ‘buying’
             is a strategic decision, even more for AMT systems, which are the most
             important and expensive component of a truck. The underlying elements
             informing such a decision include (i) cost savings due to synergies and scale
             effects in the sourcing of materials, which would reflect in the overall price of
             trucks, (ii) the fact that in-house manufacturing secures employment of the
             current employees, and (iii) higher predictability and reliability when sourcing
             is made in-house instead of external suppliers.”235
        (B)       MAN
     (198) MAN, Scania’s sister company within the Traton group, was, until recently, a
             customer for AMT systems ([…]). However, MAN is moving supply by
             Scania. [Strategic information].236
7.2.2. Market shares
7.2.2.1. Competition for the market
     (199) One of the main characteristics of the AMT controller market is the fact that
             tenders occur rarely. Contracts are long-term (up to 20 years) and the number
             of customers issuing tenders is limited, with three main customers (Daimler,
             Volvo and ZF) that could issue new tenders in the EEA. Globally, the
             customer base is slightly larger with Eaton and FAST (see Section 7.2.1.2).
     (200) Given the bespoke nature of the AMT controllers, customers do not generally
             multi-source. As explained by Knorr-Bremse during the market investigation,
             “AMT controllers are always developed for specific customer applications”
             and “[c]onsidering a new AMT controller technology makes only sense when
             an OEM rolls out a new MHCV platform with a new transmission”.237 Since
             the controller is specifically designed (or at least adapted) for a specific
             transmission system, changing the supplier of the controller for an existing
             transmission system is a lengthy and costly process. AMT system
             manufacturers generally look for new controller suppliers only at the time
             when they are launching the design of a new transmission system generation.
234 Form CO, paragraph 148.
235 Non-confidential minutes of a conference call with a competitor on 13 January 2020.
236 Form CO, paragraph 148.
237 Questions 3 and 4 of Questionnaire to Competitors.
                                                        43
 ---pagebreak---               Responses to the market investigation confirmed that this is the way the market
              works.238
     (201) With regard to future tenders, competitors of AMT controllers are not aware of
              any future tenders for AMT controllers in the EEA (either on-going or in the
              next 10 years)239 and, as regards customers, only Volvo explained that it has
              concrete plans to issue a tender for AMT controllers in the EEA in the next
              10 years, while keeping the exact date confidential.240
     (202) Overall, the market investigation showed that there would be a very limited
              number of tenders in the next 10 years in the EEA.
     (203) Therefore, the market for controllers is characterised by competition for the
              market. Competition occurs rarely, only at the time of a new tender.
7.2.2.2. Merchant markets versus internal sales
     (204) The Notifying Party argues that only taking into account the merchant market
              without captive sales of OEMs does not reflect the actual market situation, in
              particular in respect of AMT systems.
     (205) Many OEMs (Daimler, Volvo and Traton) produce AMT systems in-house.
              They account for the largest part of the AMT systems activity. Daimler, Volvo
              and Traton together, represent [60-70]% of the demand. Moreover, once MAN
              has fully switched its sourcing from its sister company Scania, the customer
              base ZF actually represent will further shrink.241 Moreover, OEMs have been
              internalising production as a response to market changes but sometimes
              continue issuing requests for quotes on the market, if only to increase pressure
              on their own internal line of production. For instance, [strategic
              information].242
     (206) The Commission considers that indeed merchant suppliers such as ZF are
              competitively constrained by OEM captive production for AMT systems. This
              is illustrated by […].243
7.2.2.3. Relevant markets under which the competitive assessment will be conducted
     (207) With regard to the potential product markets discussed in Section 7.1 that
              could be defined either at EEA level or at worldwide level, the Commission
              takes the view that the analysis of each geographic market contains similar
              elements.
     (208) The analysis will be conducted at the EEA level as, due to the smaller number
              of market players, an alternative source of suppliers or customer base would be
              harder to find in case of foreclosure attempt. The analysis will also focus on a
238 Replies to questions 4, 5, 20 and 20.1 of Questionnaire to Competitors.
239 Replies to questions 20 and 20.1 of Questionnaire to Competitors.
240 Replies to questions 24 and 24.1 of Questionnaire to Customers.
241 Form CO, table 75 and paragraphs (187)-(190).
242 “Additional input following the technical meeting”, submitted on 14 January 2020 and [strategic
    information].
243 Form CO, paragraph 132.
                                                         44
 ---pagebreak---               worldwide definition of the market. However, insofar as the additional market
              players at worldwide level are also potential entrants in the EEA market, the
              Commission takes the view that the two analysis can be conducted together.
     (209) To analyse differences that may occur, e.g. lower share at worldwide level but
              higher number of market players that could be foreclosed, the analysis will
              cover the two scenario (worldwide and EEA-wide).
     (210) This is further reinforced by the fact that respondents to the market
              investigation did not consider to be high barriers to entry in the EEA. Indeed, if
              AMT controllers or AMT systems are manufactured outside the EEA, they can
              nevertheless be sold in the EEA.244 Reference is made to Section 7.1.2.
7.2.2.4. Market shares in the context of competition for the market
     (211) The Notifying Party argues that market shares in the area of AMT systems are
              not an appropriate indicator for market power, as they do not reflect the current
              or future competitive situation that is relevant for the assessment of market
              power.
     (212) According to the Notifying Party, its high level of market share in the
              merchant market for AMT systems must be read in the context of (i) the fact
              that it won past tenders with [customers] for AMT systems, which led to long-
              term contracts, and (ii) the fact that the large OEMs have decided to build
              AMT systems in-house.
     (213) The Commission considers that this is true both for the market for AMT
              systems and for AMT controllers. These markets are characterised by
              competition for the market rather than competition in the market. The
              infrequent tenders, followed by long-term supply contracts mean that upon
              winning one or two contracts, the market shares of a supplier can change
              dramatically. Current market shares are a useful indicator but must be read in
              light of the market characteristics.245
7.2.2.5. Market share tables
        (A)        Market shares at worldwide level
     (214) The market shares at worldwide level, for AMT controllers for MHCV are
              reproduced below.
244 Replies to question 13 of Questionnaire to Competitors and Customers.
245 Form CO, paragraph 179.
                                                       45
 ---pagebreak--- Table 5: AMT Controllers, worldwide, 2018246
                                             Turnover        Turnover          Volume            Volume
                                          (EUR million)           (%)           (units)             (%)
ZF                                          [amount]            [0-5]%         [amount]           [0-5]%
Wabco                                       [amount]          [60-70]%         [amount]         [60-70]%
ZF-Wabco combined                          [amount]           [60-70]%         [amount]         [60-70]%
Knorr-Bremse                                [amount]          [10-20]%         [amount]         [10-20]%
Kongsberg                                   [amount]            [0-5]%         [amount]           [0-5]%
Scania (in-house)                           [amount]          [10-20]%         [amount]         [10-20]%
Others                                      [amount]           [5-10]%         [amount]          [5-10]%
Total                                       [amount]             100%          [amount]            100%
Source: Form CO, table 14.
      (215) The market shares at worldwide level, for AMT systems for MHCV are
               reproduced below.
Table 6: Automated Manual Transmissions (AMT systems), worldwide, 2018
                                             Turnover        Turnover          Volume            Volume
                                          (EUR million)           (%)           (units)             (%)
ZF                                          [amount]          [20-30]%         [amount]         [20-30]%
Wabco                                       [amount]            [0-5]%         [amount]           [0-5]%
ZF-Wabco combined                          [amount]           [20-30]%         [amount]         [20-30]%
Daimler (in-house)                          [amount]          [20-30]%         [amount]         [20-30]%
Volvo (in-house)                            [amount]          [20-30]%         [amount]         [20-30]%
VW (in-house)                               [amount]          [10-20]%         [amount]         [10-20]%
Others (in-house)                           [amount]            [0-5]%         [amount]           [0-5]%
Eaton                                       [amount]           [5-10]%         [amount]          [5-10]%
Shaanxi Fast Gear Works                     [amount]            [0-5]%         [amount]           [0-5]%
Qijiang Gear Transmission                   [amount]            [0-5]%         [amount]           [0-5]%
Lvkong Chuandong                            [amount]            [0-5]%         [amount]           [0-5]%
Others                                      [amount]            [0-5]%         [amount]           [0-5]%
Total                                       [amount]             100%          [amount]            100%
Source: Form CO, table 41.
          (B)       Market shares at EEA-wide level
      (216) The market shares at EEA-wide level, for AMT controllers for MHCV are
               reproduced below.
Table 7: AMT Controllers, EEA, 2018247
                                             Turnover        Turnover          Volume            Volume
                                          (EUR million)           (%)           (units)             (%)
ZF                                          [amount]            [0-5]%         [amount]           [0-5]%
Wabco                                       [amount]          [70-80]%         [amount]         [70-80]%
ZF-Wabco combined                          [amount]           [70-80]%         [amount]         [70-80]%
Knorr-Bremse                                [amount]          [10-20]%         [amount]         [10-20]%
Kongsberg                                   [amount]            [0-5]%         [amount]           [0-5]%
Scania (in-house)                           [amount]          [10-20]%         [amount]         [10-20]%
Others                                      [amount]            [0-5]%         [amount]           [0-5]%
Total                                       [amount]             100%          [amount]            100%
Source: Form CO, table 67.
246  Form CO, Tables 14, 15 and 16. Over the past three years, the market shares of the Parties remained
     stable and therefore, only the most recent market shares have been reproduced in the Decision.
247  Form CO, Tables 67, 68 and 69. Over the past three years, the market shares of the Parties remained
     stable and therefore, only the most recent market shares have been reproduced in the Decision.
                                                          46
 ---pagebreak---       (217) The market shares at EEA-wide level, for AMT systems for MHCV are
             reproduced below.
Table 8: Automated Manual Transmissions (AMT systems), EEA, 2018
                                          Turnover          Turnover         Volume    Volume
                                       (EUR million)            (%)           (units)    (%)
ZF                                       [amount]            [30-40]%        [amount] [30-40]%
Wabco                                    [amount]             [0-5]%         [amount]  [0-5]%
ZF-Wabco combined                        [amount]            [30-40]%        [amount] [30-40]%
Volvo (in-house)                         [amount]            [20-30]%        [amount] [20-30]%
VW (in-house)                            [amount]            [20-30]%        [amount] [20-30]%
Daimler (in-house)                       [amount]            [20-30]%        [amount] [20-30]%
Others                                   [amount]             [0-5]%         [amount]  [0-5]%
Total                                    [amount]              100%          [amount]   100%
Source: Form CO, table 75.
7.2.3. No input foreclosure
      (218) The Commission considers that, post-Transaction, it is unlikely that the
             merged entity would have the ability or incentive to engage in input
             foreclosure.
7.2.3.1. Ability
      (219) The only customers that the merged entity could potentially have the ability to
             foreclose access to Wabco’s AMT controllers post-Transaction are [customer],
             [customer] in the EEA, and [customer] or [customer] at global level. As
             [customer] and [customer] could be considered potential entrants in the EEA,
             they will be analysed together in the following developments.
      (220) The Commission considers that it is unlikely the merged entity would have the
             ability to foreclose these customers.
      (221) First, with regard to [customer] and [customer] current supply contracts, the
             Notifying Party argues that a unilateral increase of prices by the merged entity
             could not occur. Wabco is locked into supply contracts with [customer] and
             [customer] for the next […]. […].248 […].249 […].
      (222) Second, the Commission takes the view that, even if […], any ability to
             attempt unilateral price increases is not merger specific. Indeed, in a
             contractual relationship where a customer only sources its product from one
             supplier over an almost 20 year period and where switching in the course of
             the life of this contract does not in practice happen, such customer is already
             locked in a situation where the supplier could increase prices without
             constraint.
      (223) Therefore, the ability to increase prices for the existing contracts either does
             not exist or should not be regarded as merger specific.
248 According to the Notifying Party (reply to question 1 of RFI 33), “[…].”
249 Form CO, paragraphs 173-176. For completeness, […].
                                                         47
 ---pagebreak---      (224) Third, with regard to the ability to deny supply or increase prices of Wabco’s
              AMT controllers post-Transaction in respect of any future tenders, the
              Commission considers this is unlikely to happen since any such attempts
              would be defeated by Wabco’s competitors constituting an alternative source
              of supply.
        (a)      First, [customer] considers the impact of the Transaction to be neutral. It
                 considers Knorr-Bremse and Kongsberg to be credible alternatives to
                 Wabco for the supply of AMT controllers for any future tenders.
                 [Customer] also indicated that, compared to the demand, there are enough
                 suppliers in the EEA to meet such demand. [Customer] further elaborated
                 that AMT controllers are a “[c]omplex product but nevertheless with a
                 green field approach sufficient suppliers could be identified.” Moreover,
                 [customer] does not believe that, post-Transaction, the merged entity would
                 reduce its supply to AMT controllers.250
        (b)      Second, [customer] also considers Knorr-Bremse and Kongsberg as credible
                 alternatives to Wabco for the supply of AMT controllers for any future
                 tenders. [Customer] also indicated that, compared to the demand, there are
                 enough suppliers in the EEA to meet such demand as “[i]t is enough
                 because there are 3 suppliers in the market”.
        (c)      Third, other respondents to the market investigation emphasised that
                 Kongsberg and Knorr-Bremse are credible alternatives to Wabco’s AMT
                 controllers. Therefore, any attempt to foreclose input to downstream rivals
                 would be defeated by recourse to Kongsberg and Knorr-Bremse. This is
                 further illustrated by the fact that, during the last round of tenders, both
                 [customer] and [customer] had invited Wabco’s competitors to tender.
     (225) Fourth, as described in Section 7.2.1.2(B), Eaton is active in the supply of
              AMT systems in the U.S., using Kongsberg’s AMT controllers. If the market
              were to be defined as worldwide or Eaton considered a potential entrant in the
              EEA market, the merged entity would also not have the ability to successfully
              foreclose access to AMT controllers to Eaton as it has a readily available
              alternative. Going forward, and as already explained in Section 7.2.1.2(B),
              Eaton will not rely on Wabco for AMT controllers in the future as “it believes
              the market will still evolve and that Wabco’s products will not be for long a
              leading product in the transmission system market.”251 Therefore, inputs will
              be available for Eaton through Kongsberg, and denying access to Wabco will
              not result in input foreclosure.
     (226) Fifth, as described in Section 7.2.1.2(C), FAST has a [strategic information]
              supply contract with […] until […]. In any case, for any new
              generation/different type of transmission system, FAST can collaborate with
              […]. […], FAST can even collaborate with other third parties for a directly
              competing transmission system. Therefore, FAST’s ability to compete for
              potential future tenders is preserved.
250 Replies to questions 17, 18, 21.2 and 110 of Questionnaire to Competitors.
251 Non-confidential minutes of a conference call with Eaton, paragraphs 3, 6 and 11.
                                                        48
 ---pagebreak---      (227) Sixth, the next tenders in the EEA will not take place earlier than in at least
             5 years. This is sufficient time to select a new AMT controller supplier should
             the merged entity engage in anti-competitive behaviour.
     (228) Seventh, […].
     (229) Therefore, due to the specific set of facts described in Section 7.2.3.1, the
             Commission considers that the merged entity will not have the ability to
             engage in input foreclosure post-Transaction. The only possible exception
             would be FAST and will be addressed thereafter.
7.2.3.2. Incentives
     (230) The Notifying Party argues that, post-Transaction, the merged entity will in
             any case not have any incentives to foreclose access to inputs for future
             contracts.252
     (231) First, as regards OEMs, the Commission considers that ZF has no incentive to
             engage in total or partial foreclosure (stop supply/raise prices) of AMT
             controllers to […] and […] in order to try to force […] and […] to buy ZF’s
             AMT system.
     (232) Indeed, the Commission considers that […] and […] are very unlikely to agree
             to stop manufacturing AMT systems in-house. As such, any attempt at supply
             restrictions or price rises would antagonize these two large customers and ZF
             would take the risk of harming its overall relationship with […] and […].
     (233) The Commission notes that both ZF and Wabco have significant business with
             […] in other product areas.253 On the one hand, ZF’s overall business with […]
             amounted to EUR [amount] in 2018. With […], it amounted to [amount] in
             2018. On the other hand, Wabco’s overall business with [customer] (including
             AMT controllers) amounted to EUR [amount] in 2018. The AMT controller
             business of Wabco with [customer] amounted to EUR [amount] in 2018.
             Compared to the overall business of the combined entity with [customer]
             (i.e. EUR [amount]), the proportion of the AMT controller business would
             represent approximately […]%. Wabco’s overall business with [customer]
             (including AMT controllers) amounted to EUR [amount] in 2018. The AMT
             controller business of Wabco with [customer] amounted to EUR [amount] in
             2018. Compared to the overall business of the combined entity with [customer]
             (i.e. [amount]), the proportion of the AMT controller business would represent
             approximately […]%.254 Therefore, the Commission considers it is very
             unlikely the merged entity would take the risk to antagonise two of its major
             customers.
     (234) Moreover, […] and […] are currently not active on the open market for AMT
             systems (and are unlikely to become active on this market in the coming years,
             if at all). […] and […] are also unlikely to switch to buying ZF’s AMT
             systems instead of producing those in-house. A foreclosure strategy would thus
252 Form CO, Annex 6.1-(2), ECA Report AMT controller, page 34.
253 Form CO, Annex 6.1-(2), ECA Report AMT controller, page 34.
254 Notifying Party’s reply to question 9 of RFI 22.
                                                     49
 ---pagebreak---              likely not result in any increased downstream sales of AMT systems for ZF.
             Therefore, the incentive of the merged entity in future bids is unlikely to
             change given that a foreclosure strategy would not lead to increased market
             share downstream.
     (235) Second, as regards FAST, which is a direct competitor of ZF in particular in
             Asia, given that [strategic information].
     (236) However, FAST is part of the WeiChai Group. The WeiChai Group owns
             several heavy duty vehicle manufacturers, including Shaanxi Heavy Duty
             Automobile Co. ZF does not currently supply to [strategic information]. There
             are at least two reasons for this:
        (a)     First, TraXon serves the upper end of the market and Shaanxi Heavy Duty
                Automobile Co the lower end. Moreover, Shaanxi Heavy Duty Automobile
                Co has access to its own in-house supply of transmissions by FAST. As a
                result, [strategic information].
        (b)     Second, the business relationship with the WeiChai Group is extremely
                valuable to Wabco, and the merged entity alike, as the WeiChai Group is an
                important customer to Wabco. The WeiChai Group accounts for
                approximately USD [amount] business for Wabco. Wabco currently
                supplies [customer data] to the WeiChai Group. [Strategic information].255
                Therefore, the merged entity would have no incentive to jeopardize this
                important business relationship or to loose WeiChai Group as a customer.
     (237) Therefore, the Commission considers that the merged entity will not have the
             incentives to engage in input foreclosure post-Transaction.
7.2.3.3. Effects on competition
     (238) In any case, even a successful input foreclosure strategy would have no effect
             on the merchant market for AMT systems since the OEMs do not sell their
             AMT systems on the market. Even if one were to consider that OEM in-house
             production competes with tier-1 AMT suppliers OEM’s would have alternative
             suppliers such as Eaton.
     (239) Therefore, there is no ability or incentive to attempt input foreclosure by the
             merged entity.
7.2.4. No customer foreclosure
     (240) The Commission considers that, post-Transaction, it is unlikely that the
             merged entity could foreclose competing AMT controller suppliers from
             access to a sufficient customer base.
255 Notifying Party’s reply to question 9 of RFI 22.
                                                     50
 ---pagebreak--- 7.2.4.1. Ability
     (241) Post-Transaction, the only rivals that the merged entity could potentially have
              the ability to foreclose access to ZF as a customer for AMT controllers are
              Knorr-Bremse or Kongsberg.
         (A)       [Strategic information]
     (242) [Strategic information].
     (243) [Strategic information].256
     (244) [Strategic information].
     (245) [Strategic information].
     (246) [Strategic information].
     (247) [Strategic information].257
[Strategic information]
Source: Notifying Party’s reply to RFI 8, Confidential Annex 29, slide 8.
     (248) [Strategic information],258 [strategic information],259 [strategic information].260
              [Strategic information]261 [strategic information].262 [Strategic information].263
     (249) [Strategic information]:
         (a)     [Strategic information].264
         (b)     [Strategic information].265
     (250) [Strategic information].266
[Strategic information]
Source: M.9383_RFI 8_Confidential Annex 31_2, submitted with RFI 8, page 4.
     (251) [Strategic information].267
256 Form CO, Annex 6.1-(2), ECA Report AMT controller, page 30.
257 Notifying Party’s reply to RFI 8, Confidential Annex 29, slide 8.
258 Form CO, paragraph 204: [strategic information].
259 Form CO, paragraph 208.
260 Form CO, paragraph 206.
261 Form CO, paragraph 205.
262 Notifying Party’s reply to RFI 8, Confidential Annex 30 (2012), Confidential Annex 31_2 (2018).
263 Notifying Party’s reply to RFI 8, Confidential Annex 29, slide 5 and 8, Confidential Annex 28 (2015),
    slide 31; Confidential Annex 31_2 (2018), slide 4.
264 Notifying Party’s reply to question 3 of RFI 10 - Annex Q3-(1).
265 Notifying Party’s reply to question 2 of RFI 10 of 20 December 2019 and RFI 8 annex 2.
266 Confidential email response by ZF of 8 January 2020, in addition to the response to RFI 10.
                                                         51
 ---pagebreak---      (252) [Strategic information].
     (253) [Strategic information].268
     (254) [Strategic information].
         (B)        [Strategic information]
     (255) [Strategic information].
     (256) [Strategic information].269
         (B.i)      [Strategic information]
     (257) [Strategic information].270 [Strategic information].271 [Strategic information].
     (258) [Strategic          information].272         [Strategic     information].273       [Strategic
               information]. 275
                              274
     (259) [Strategic information] exploring all options for an extraordinary termination
               even before [strategic information]. [Strategic information].276
     (260) [Strategic information].
         (B.ii)     [Strategic information]
     (261) [Strategic information].277
     (262) [Strategic information].
     (263) [Strategic information]:
         (a)      [Strategic information].
         (b)      [Strategic information].278 [Strategic information].
     (264) [Strategic information].279 [Strategic information].
267 Notifying Party’s reply to question 3 of RFI 10, Confidential Annex Q3-(06). Internal ZF email dated
    [strategic information]
268 Notifying Party’s reply to question 2 of RFI 10 of 20 December 2019.
269 Notifying Party’s reply to RFI 8, Confidential Annex 21_7: “[strategic information]”; Confidential
    Annex 21_9: [strategic information].
270 Form CO, paragraph 189. [Strategic information].
271 [Strategic information].
272 [Strategic information].
273 [Strategic information].
274 [Strategic information].
275 [Strategic information].
276 Notifying Party’s reply to RFI 8, Confidential Annex 21_7.
277 ZF’s presentation, Machatonics TraXon, 11 September 2018.
278 Notifying Party’s reply to RFI 10.
279 Form CO, paragraph 182: the Notifying Party provides a list of upcoming (already announced) tenders
    in China where for various reasons KB is well placed to participate/win the tender (as the incumbent
                                                         52
 ---pagebreak---           (C)        Kongsberg specifically has access to a sufficient customer base
     (265) As developed in Sections 7.2.1.1(C) and 7.2.1.2(B) Kongsberg currently
                supplies Eaton with integrated AMT controllers for Eatons’ AMT systems sold
                in the U.S.280 Eaton’s interest to enter the EEA is in line with Kongsberg own
                plans, as illustrated by its participation in requests for quotes processes in the
                EEA.
     (266) Through Eaton, Kongsberg has access to ZF’s customer base such as
                [customer] and [customer].
     (267) Through other tenders from OEMs that (as described in Section 7.2.4.1(D)
                below) acquire AMT controllers on a standalone basis, such as […], […], etc.,
                Kongsberg could have its own customer base.
     (268) Therefore, the Commission considers that Kongsberg will have access to a
                sufficient customer base so that not having access to ZF, in a worst-case
                scenario, would not successfully foreclose its access.
          (D)        There are sufficient number of alternative customers for Knorr-Bremse
                     and Kongsberg
     (269) There are sufficient alternatives in the downstream market for AMT systems to
                whom AMT controller competitors, like Knorr-Bremse, could sell their
                products. It should be noted that ZF represents roughly [30-40]% of the AMT
                systems market in the EEA given its supply contracts with [customer] and
                [customer].
     (270) Competitors of Wabco can compete for the tenders for next generation AMT
                controllers for […] and […] if and when those OEMs decide to issue a tender.
                […] and […] represent together roughly [40-50]%, almost half of the AMT
                systems market. Moreover, other OEMs such as […] and […] could soon issue
                tenders for AMT systems.281
     (271) Moreover, especially after losing some volumes from […], the merged entity’s
                purchasing volume for integrated AMT controllers only constitutes a small
                percentage of the total demand.
    supplier: (1) [Strategic information]: KB is the incumbent supplier of the AMT controller system to
    FAW and it has development engineering and production capabilities in Asia. It is expected to be a
    strong bidder in the next tender, together with Wabco and potentially local Chinese bidders. Those local
    Chinese bidders include at least [strategic information] and [strategic information]. Both companies are
    rapidly growing their sales in recent years, mainly for electric drives for New Energy Vehicles
    (i.e. electric vehicles) in China ([strategic information]). Both suppliers have pneumatic AMT controller
    system solutions available for hybrid applications. They are capable to compete in next tenders for both
    hybrid and pneumatic solutions. (2) [Strategic information]: KB, Wabco and local Chinese bidders are
    expected to compete. (3) [Strategic information]: KB, Wabco and local Chinese bidders are expected to
    compete.
280 Non-confidential minutes of a conference call with Kongsberg, paragraph 13.
281 Form CO, paragraph 181.
                                                            53
 ---pagebreak---      (272) Respondents to the market investigation have also noted that there are other
              alternatives to ZF, such as Eaton, Daimler, Volvo, Allison or FAST.282
     (273) Therefore, due to the specific set of facts developed in Section 7.2.3.1, notably
              that (i) [strategic information], (ii) [strategic information]; and (iii) other AMT
              controller suppliers have alternative customer base, the Commission considers
              the merged entity will not have the ability to engage in customer foreclosure
              post-Transaction.
7.2.4.2. Incentives
     (274) The merged entity will not have the incentive to foreclose access to customers
              either for its […] TraXon […]. AMT controllers are bespoke products
              designed for a specific AMT system. Knorr-Bremse’s EL40 is specifically
              designed for the TraXon system. Switching to Wabco would be costly as
              Wabco would need to develop a controller that fits the TraXon system (its
              controller for the AS Tronic is not suitable for the TraXon system). Therefore,
              ZF had tried to find a solution with Knorr-Bremse […].
     (275) [Strategic information].
7.2.4.3. Effects on competition
     (276) Since the next tender is unlikely to take place prior to at least 5 years, suppliers
              have time to find a solution to this issue, if any, and therefore competition in
              unlikely to be affected.
     (277) As such, it is difficult to see any significant negative effect on competition
              whether in the market for AMT systems or AMT controllers.
7.2.5. Conclusion
     (278) In light of the considerations in this Section 7.2, the Commission concludes
              that the Transaction does not raise serious doubts as to its compatibility with
              the internal market and the functioning of the EEA agreement with respect to
              the markets for AMT systems or AMT controllers.
8.      MARKET DEFINITION AND COMPETITIVE ASSESSMENT CONCERNING THE
        PARTIES’ ACTIVITIES IN ADAS COMPONENTS AND ADAS SYSTEM INTEGRATION
8.1.    Introduction
     (279) ADAS encompass a broad range of features technically enabling vehicles to
              assist their drivers. The level of assistance can vary from mere warning
              systems to systems that automatically and actively intervene in the driving
              process (e.g. by emergency braking). It is expected that ADAS technologies
              will develop towards Autonomous Driving (“AD”).
282 Replies to question 22.1 of Questionnaire to Competitors.
                                                       54
 ---pagebreak---      (280) The Society of Automotive Engineers (“SAE”) distinguishes between different
               stages or levels of truck automation (applicable to all MHCV),283 as illustrated
               below.284
Source: Form CO, paragraph 352.
     (281) Wabco’s and ZF’s activities in the ADAS sphere do not result in any
               horizontal overlap. ZF and Wabco are present at different levels of the supply
               chain in the overall ADAS space, with ZF present upstream through its supply
               of ADAS components (mainly sensors),285 and Wabco present downstream as
               an integrator of sensors sourced from third parties with its mechanical
               components on MHCVs, such as braking systems (ADAS system integration).
               Wabco does not provide such integration services on a standalone basis, but
               only to OEMs which purchase its braking systems. That is, Wabco provides its
               customers with a final integrated ADAS solution encompassing: ADAS system
               integration services, together with all necessary ADAS components (that
               Wabco sources from third parties) and Wabco’s braking system.
     (282) ADAS components are technical components integrated into MHCVs to
               enable ADAS functions. In ZF’s terminology, ADAS consists of three parts:
               (i) “see”; (ii) “think” and (iii) “act”. ADAS components can be categorised
283 The Notifying party confirms that these different levels of automation apply to all three categories of
    MHCV.
284 At level 1, specific functions are taken over by assistance systems providing truck drivers with warning
    information under narrowly predefined situations such as Lane Departure Warning Systems (“LDWS”).
    At level 2, the vehicle system is capable of actively intervening the driving process with respect to single
    functions under predefined conditions such as in the event of unintentional lane departure (LDWS that
    actuates steering).
    Level 3 is of a more transitionary character and can be assigned to ADAS as well as to AD to some
    extent as a vehicle can perform all driving tasks, but the vehicle still requires a driver’s attention and
    his/her ability to quickly take back control, at any time.
    At Levels 4 and 5, a driver’s action is required only in complicated traffic situations or, respectively, not
    at all. With regard to Level 4, the vehicle can handle certain easier-to-navigate environments like less
    crowded highway stretches without any driver’s action. Level 5 systems can deal with any traffic
    situation (even difficult ones).
285 ADAS sensors include cameras, radars, Light Detection and Ranging (“LiDAR”) and ultrasonic.
                                                            55
 ---pagebreak---                into ADAS sensors (i.e. “see” components including cameras, radars, Light
               Detection and Ranging (“LiDAR”) and ultrasonic), and ADAS controlling
               units (i.e. “think” components including specific ADAS controlling Electronic
               Control Units (“ADAS ECUs”)286 and software). In-vehicle driving
               components (i.e., “act” components) like steering and braking are not pure
               ADAS components because these components are technically required in all
               MHCVs, independently of whether or not they are ADAS-enabled.
     (283) ADAS system integration consists of one or more ADAS components that are
               adapted to specific MHCV models and provide a set of ADAS functions in
               combination with MHCV actuation, such as steering or braking.
         (a)      ADAS system integration describes the development and engineering
                  services that are required to integrate ADAS components into specific
                  MHCV models. These services also include the support of vehicle
                  homologation. OEMs can either self-integrate ADAS components into their
                  MHCV models or source such services from external suppliers. External
                  suppliers may either offer the service standalone and separately priced e.g.,
                  as provided stand-alone by engineering integrator firms, or in a package
                  with actuation components (i.e, an integrated ADAS solution, which consist
                  of components and integration services) e.g. as provided by Wabco. Wabco
                  offers ADAS system integration services only to OEMs which buy Wabco’s
                  braking systems, never on a standalone basis.
         (b)      ADAS functions include (i) passive systems that support the driver, such as
                  Lane Departure Warning Systems (“LDWS”, where a visual or audible
                  warning alerts the driver of a lane drift), or Forward Collision Warning
                  system (“FCW”, where a visual or audible warning alerts the driver of an
                  upcoming (frontal) obstacle), and (ii) active systems, such as Automatic
                  Emergency Braking systems (“AEBS”), Adaptive Cruise Control (“ACC”),
                  or Lane Keeping Assist (“LKA”).
     (284) ZF’s and Wabco’s product portfolio is specified below:
         (a)      ZF’s ADAS component offer for MHCV includes only ADAS sensors and,
                  within sensors, only radars and cameras. ZF does not yet manufacture other
                  types of ADAS sensors such as ultrasonic or LiDAR.287 ZF does not yet sell
                  ADAS ECUs.288 To date, ZF develops software (“think”) only integrated
286 ADAS controlling ECUs should not be confused with central vehicle ECUs, which are used in most
    MHCVs today and control vehicle functions like door locking systems or air conditioning. ADAS ECUs
    are the interface between the sensors and the actuators on a vehicle. ADAS ECUs also function as a
    "brain" that monitors the surroundings and fuses data from cameras, radars and sensors to interpret the
    situation and trigger ADAS features such as emergency braking or automatic lane changes.
287 Form CO, paragraph 454. ZF is developing a [strategic information]. Should ZF decide to develop a
    [strategic information]. As a rough estimate, ZF expects that the total market volume in the EEA will be
    around [amount]. According to the Notifying Party, even in a best-case scenario, the combined entity’s
    market share will be less than [5-10]% in 2026 in the EEA (and all the more worldwide). (Reply to
    question 5 of RFI 19.)
288 ZF has [strategic information]. According to ZF, these products will belong to [strategic information]
    and no other comparable product is already on the market, possibly with the exception of one OEM with
    in-house production. Major competitors in this area are expected to be Bosch, Continental and Autoliv,
    among others. See Form CO, paragraphs 366 to 371.
                                                        56
 ---pagebreak---                   within its ADAS components (“see”, i.e. camera or radar) and not on a
                  standalone basis.289 ZF also manufactures steering systems.
         (b)      Wabco offers fully integrated ADAS systems for MHCV including ADAS
                  sensors (sourced by Wabco from third party suppliers), and braking
                  components as well as ADAS integration services.290 Wabco’s integrated
                  ADAS solutions enable the following ADAS functions: LDWS, AEBS,
                  ACC and FCW. LDWS and AEBS are legally required in Europe.291
                  Wabco’s sales of AEBS, ACC and FCW are always made together292 and
                  only to OEMs that purchase Wabco’s MHCV braking systems.293 Wabco’s
                  LKA is in the final stages of testing and validation in the USA only and no
                  sales have been generated in the EEA.294 Wabco also notes that it does not
                  supply ADAS components (including ADAS sensors or ADAS ECUs)
                  stand-alone to any OEM customer.295
8.2.     Market definition
8.2.1. Product market definition
     (285) The definition of the relevant product markets for ADAS as such has not been
              dealt with in previous Commission decisions. In Case No COMP/M.8306 –
              Qualcomm/NXP Semiconductors,296 the Commission dealt with the market of
              semiconductors for ADAS and defined ADAS as: “[…] a broad range of
              features that enable a vehicle to “see,” “sense” and “react” to the objects
              that surround it […]. Over time, ADAS systems are expected to evolve into
              more sophisticated systems and eventually autonomous driving system. […]”.
              According to the Commission’s market investigation in that case, the majority
              of respondents considered that the automotive ADAS chips in the following
              function blocks: (i) Ultrasonic; (ii) LiDAR; (iii) radar; (iv) camera;
              (v) Vehicle-to-Everything (“V2X”) communication are complementary rather
              than alternatives to each other since they are different technologies used for
              different purposes and functions. Ultimately, the market definition for chips for
              the safety function for automotive application was left open.
     (286) As indicated in paragraph (278), in-vehicle driving components (i.e., “act”
              components) such as steering and braking are not pure ADAS components
              because these components are technically required in all MHCVs,
289 Form CO, paragraph 361.
290 Form CO, paragraph 417.
291 Form CO, paragraph 415.
292 Reply to question 10(d) of RFI 10: “WABCO has chosen to integrate the AEBS (including FCW)
    functions and the ACC function in a single product (i.e., OnGuard). Therefore WABCO’s AEBS
    (including FCW) functions and the ACC function are always sold together. This is because these
    functions rely on the same underlying sensor (in this case the radar). However, customers can choose to
    have the ACC function enabled or disabled at their choice (e.g., if they have their own ACC […]) or on
    the type of vehicle and/or transmission (e.g., ACC is disabled for manual transmissions). It is possible to
    use several suppliers for these functions, and integration work can be done by the OEM, a third party
    engineering company, or one of the suppliers.”
293 Form CO, paragraph 415.
294 Wabco expects that its LKA will be launched in the EEA in around 2023 and globally in 2022.
295 Form CO, paragraph 417.
296 Case No COMP/M.8306 – Qualcomm/NXP Semiconductors, paragraphs 32 and 41.
                                                         57
 ---pagebreak---              independently of whether or not they are ADAS-enabled. However, given the
             interactions between steering and braking (manufactured by ZF and Wabco)
             and ADAS components, this Decision addresses also these components.
         (a)     With regard to braking systems, in a previous decision,297 the Commission
                 distinguished between pneumatic and hydraulic brakes, emphasising that in
                 MHCVs beyond a total weight of 6-7.5 tons, only pneumatic brakes are
                 used in the EEA. Below this weight limit, hydraulic brakes are used for
                 LCVs and passenger vehicles. Thus, due to the essential technical and
                 commercial differences, the Commission considered that hydraulic braking
                 systems for lighter vehicles and commercial vehicle brakes for heavy
                 vehicles are two separate markets. For pneumatic braking systems, the
                 Commission distinguished between: (a) air supply/actuation systems, and
                 therein further between (i) air compressors, (ii) air dryers and (iii) other
                 parts of actuation systems; (b) foundation brakes, and therein further
                 (i) drum brakes and (ii) disc brakes; and (c) brake and chassis control and
                 therein further between (i) ABS, (ii) ASR and (iii) EBS. The Commission
                 also distinguished between different distribution channels: OEM/OES on
                 the one hand and IAM on the other hand.
         (b)     With regard to steering components, in the MHCV area, ZF and
                 Wabco/Sheppard298 offer only hydraulically powered steering (“HPS)
                 system.299 HPS systems work with hydraulic pumps driven by the vehicle’s
                 engine. Major components, aside from the rack and pinion, include valve
                 assembly, rack tube housing, yoke plug, flexible bellows and pressure lines.
                 The following MHCV steering components are sold individually:
                 (i) Steering gears, (ii) Steering columns, (iii) Steering pumps,
                 (iv) Intermediate steering shafts, and (v) Column drives.300 In Case No
                 COMP/M.5500 – General Motors/Delphi Steering Business, the
                 Commission left open whether a further sub-segmentation based on the type
                 of vehicle would be pertinent. The Commission stated in Case No
                 IV/M.1291 – Bosch/ZF Friedrichshafen that its investigation had revealed
                 that components for steering systems were increasingly sold as a package,
                 suggesting that these various components could belong to one product
                 market.
8.2.1.1. The Notifying Party’s view
     (287) First, the Notifying Party submits301 that the market of ADAS for PC/LCVs is
             separate from the ADAS market for MHCVs because of the difficulty in
297 Case No IV/M.1342 – Knorr-Bremse/Bosch.
298 As indicated in paragraph (22)(d) the Parties intend to divest Wabco’s steering business RH Sheppard
    Inc.
299 According to the Notifying Party, the following types of steering systems use hydraulic pressure to
    provide steering assistance: (i) Hydraulically Powered Steering (“HPS”) systems, which work with
    hydraulic pumps driven by the vehicle’s engine; and (ii) Electro-Hydraulic Power Steering (“EHPS”)
    systems, which is a hydraulic power steering unit controlled by an electric motor. (Form CO, paragraph
    690.)
300 Form CO, paragraph 683.
301 Form CO, paragraphs 406-407.
                                                        58
 ---pagebreak---               transferring ADAS systems across these segments, a view that would be
              supported by a number of past Commission decisions.302
     (288) Second, the Notifying Party submits303 that a categorisation from the demand-
              side perspective does not lead to a definitive conclusion for market definition.
              Nevertheless, if one were to try to categorise ADAS products for MHCV
              according to customer demand, the following segmentations / categories may
              apply: (i) OEMs that develop and integrate ADAS systems in-house and
              purchase individual ADAS components and subsystems; (ii) OEMs which
              purchase individual ADAS components but do not have the capabilities or
              engineering workforce to do the integration themselves and use third party
              system integrators and (iii) OEMs which do not have the capabilities or
              engineering workforce to do the integration and purchase fully integrated
              solutions (sensors, steering, braking). According to the Notifying Party,
              category 1 customers represent approximately 80% of the current MHCV
              market volume in the EEA.304
     (289) Third, the Notifying Party submits that:
         (a)      ADAS for MHCV may constitute an overall market for fully integrated
                  ADAS solutions consisting of different components, functionalities and
                  subsystems. However, if one were to further sub-segment the overall ADAS
                  system market, a segmentation between ADAS components/subsystems
                  (e.g. ADAS camera and ADAS radar) and third party integration services is
                  possible.305
         (b)      Concerning cameras and radars, a further sub-segmentation is not
                  appropriate according to their characteristics, price and intended use.306
         (c)      “Fusion and functions” (“sensor fusion” being the combination and
                  seamless interplay between different sensor technologies)307 do not belong
                  to a separate product market from ADAS components308 because ADAS
302 In Case No COMP/M.4381 – JC/Fiamm the Commission, referencing to various preceding decisions,
    stated that “it may be appropriate to define the relevant product market by reference to the type of
    vehicles for which a particular product or component is supplied” and that “[a] split has usually been
    made between products supplied for passenger cars, light commercial vehicles and heavy commercial
    vehicle”.
303 Form CO, paragraph 408.
304 Form CO, paragraph 409.
305 Form CO, paragraphs 412 and 419.
306 Form CO, paragraph 421.
307 According to the Notifying party, “[w]hen taken individually, current sensor technologies have different
    strengths and weaknesses that preclude any one technology being suitable for the transition to L4/L5
    autonomy. In order to overcome the shortcomings of individual sensors, "sensor fusion", i.e., the
    combination and seamless interplay between various sensor technologies, is a prerequisite for a
    successful AD platform.” (Form CO, paragraph 357.)
308 Form CO, paragraph 383. “Sensor fusion” is the combination and seamless interplay between different
    sensor technologies. Some ADAS functions require the combination of several ADAS components, such
    as the fusion of information from different kinds of sensors, and the interaction with related MHCV
    components such as braking systems (Form CO, paragraph 381). Among the functions offered by ZF are
    braking gradient for Automatic Emergency Braking Systems (“AEBS”), selected object for Adaptive
    Cruise Control (“ACC”), defined object for Forward Collision Warning Systems (“FCW”), lean
                                                       59
 ---pagebreak---                   components provide ADAS functions such as Emergency Braking systems
                  (AEBS), hence ADAS functions are inherently connected to ADAS
                  components and cannot be traded separately.
     (290) Fourth, concerning braking systems, the Notifying Party agrees with the
              definition provided in Case No IV/M.1342 – Knorr-Bremse/Bosch with the
              following precisions: Whilst technological penetration of certain products has
              increased, the Notifying Party’s understanding of the different segments for
              pneumatic braking remains the same. According to the Notifying Party,
              Wabco’s own braking business is structured along similar lines. The key
              changes have been the move towards ADAS and the move towards electric
              vehicles. However, this has not yet altered the dynamics of pneumatic braking
              systems. The segmentation by MHCV and LCV is still accurate and the
              Notifying Party agrees that the market is at least EEA-wide, if not global. The
              segmentation by air supply / foundation brakes / ABS and EBS is also still
              accurate. However, the Notifying Party notes that in foundation brakes the
              trend in the EEA (and globally) is towards the use of disc brakes. Likewise, the
              penetration of ABS and EBS is higher than it was 20 years ago. In relation to
              system suppliers, the Notifying Party notes that ABS can be provided by one
              system supplier or by multiple suppliers of components. EBS still requires just
              one system supplier.309
     (291) Fifth, concerning steering systems, the Notifying Party considers that310
              (i) there is a distinction between steering systems for MHCV and PV/LCV;
              (ii) it is possible to envisage an overall market for MHCV steering with no
              further sub-segmentation; (iii) it would be possible to distinguish between
              different types of MHCV steering systems, i.e. HPS systems, and Electro-
              Hydraulic Power Steering (“EHPS”) systems, which are hydraulic power
              steering units controlled by an electric motor; with the market being currently
              in transition from HPS (still the predominant technology) to EHPS and is
              expected to move into Electric Power Steering (“EPS”); (iv) the overall market
              for MHCV steering can be sub-segmented according to the type of the
              components including steering gears, steering columns, steering pumps,
              intermediate steering shafts and column drives, while it is customary for
              conventional CV steering technologies to be segmented in terms of at least
              steering gears, steering pumps and steering columns since these technologies
              form the foundation of the steering system; (v) a further distinction according
              to vehicle types is not necessary; and (vi) because ZF’s market share in the
              IAM is below [5-10]% regarding the overall CV steering market, it does not
              have a comprehensive information for that market segment.
8.2.1.2. The Commission’s assessment
     (292) There is a separate market for ADAS components and systems for MHCV
              encompassing buses, trucks and trailers.
    information and lean crossing for Lane Keep Assist (“LKA”) (Form CO, paragraph 381). However, ZF
    does not trade ADAS fusions and functions on a stand-alone basis.
309 Form CO, paragraph 659.
310 Form CO, paragraphs 684 to702.
                                                       60
 ---pagebreak---      (293) From a demand-side perspective, the ADAS market can be further split
              between the supply of ADAS components (mainly cameras, radars, LIDAR,
              ultrasonic, ADAS ECUs, and ADAS software) and the supply of fully
              integrated ADAS solutions and of ADAS integration services. Whether
              integrated ADAS solutions and ADAS integration services should be
              considered as part of the same product market can be left open for the purposes
              of this Decision as no competition concerns arise whether these are considered
              as part of the same or separate markets. As regards ADAS components, the
              Commission considers that each of (i) radars, (ii) cameras, (iii) LiDARs,
              (iv) ultrasonics, (v) ADAS ECUs and (vi) ADAS software belong separate
              product markets, but a further sub-segmentation between different radars or
              different cameras (the two ADAS components currently manufactured by
              ZF)311 is not necessary. Finally, the Commission considers that fusion and
              functions do not belong to a separate product market from ADAS components.
              The reasons for the Commission’s findings are set out below.
        (A)         There is a separate market for ADAS components and systems for MHCV.
     (294) The Commission considers that ADAS components and systems for MHCV do
              not belong to the same product market as ADAS components and systems for
              PC/LCVs, in line with the Notifying Party’s submission, for the following
              reasons.
     (295) First, this is in line with the Commission’s previous decisional practice for
              other MHCV components, which have consistently been found to belong to
              separate product markets from components for PC/LCVs.312
     (296) Second, a majority of respondents to the Commission’s market investigation
              who expressed an opinion agreed with the Notifying Party that there is one
              overall market for ADAS systems for MHCV313 and that ADAS for PC/LCV
              is not interchangeable with ADAS for MHCV.314 According to one of the
              respondents, “[t]his is due to the specific requirements of MHCV and in
              particular (i) higher lifetime requirements, (ii) vehicle dimensions and mission,
              (iii) legal requirements.”315 According to another respondent, “[f]irst, there are
              different use-cases for PC and MHCV […]. Second, there are significant price
              differences due to volumes, estimation 10-25%. Third, automated driving
              know-how, technology, IP and/or expertise for PC/LCV can only to a limited
              extent be used to developed automated driving functions for MHCV or vice
              versa. For instance, while some base algorithms for environment detection can
              be used, different algorithms are needed due to different mounting positions
311 ZF does not manufacture ultrasonics (Form CO, paragraph 454). ZF is currently in the stage of
    developing [strategic information]. ZF does not sell software for MHCV on a standalone basis, only
    incorporated to its ADAS components (Form CO, paragraph 361).
312 Commission decision of 14 September 1993 in Case No COMP/IV/M.337 – Knorr-Bremse/Allied
    Signal, paragraphs 11 and 18, Commission decision of 14 December 1998 in Case No COMP/M.1342 –
    Knorr-Bremse/Robert Bosch, paragraph 21; Commission decision of 12 March 2015 in Case No
    COMP/M.7420 – ZF/TRW, paragraph 10.
313 Reply to question 40 of Questionnaire to Customers, Reply to question 31 of Questionnaire to
    Competitors.
314 Reply to question 35.1 of Questionnaire to Customers, Reply to question 26.1 of Questionnaire to
    Competitors.
315 Reply to question 35.1.1 of Questionnaire to Customers.
                                                       61
 ---pagebreak---               MHCV vs. PV/LCV.”316 According to another respondent, MHCV “[…] are
              expected to have higher durability and longer lifetime then most of the PVs or
              LCVs. Additionally, MHCV’s vehicle size is bigger, weight is heavier, and they
              use different braking system.”317 A fourth respondent stated that “[… d]ifferent
              vehicle dimensions, mounting positions (e.g. camera perspective),
              lifetime/robustness and legislative functional requirements (e.g. warning
              cascade for AEBS) required more or less costly adaptations. Basically, there
              are no barriers but significant developments and application efforts.
              Challenge is to balance the engineering efforts needed to spend while the
              volumes are much lower compared to PV, the cost sensitivity is higher and the
              budgets of the OEM are limited.”318
     (297) Finally, the majority of respondents to the Commission’s market investigation
              who expressed an opinion also agreed that ADAS components and systems for
              buses, trucks and trailers are interchangeable.319 According to one of the
              respondents, “[t]here are no significant barriers. Mechanically, an ADAS for
              trucks and buses is basically the same. Further, transferring ADAS across
              buses and trucks requires rather minor modifications with regard to the
              software. Customers do not source ADAS components/systems for buses and
              trucks separately. Suppliers provide solutions for both applications. […]”.320
        (B)         Separate markets for ADAS components and integrated ADAS
                    solutions/integration services
     (298) The Commission’s investigation321 has shown that, from a demand-side
              perspective, a clear distinction needs to be made between the provision of
              ADAS components and the provision of integrated ADAS
              solutions/integration services. This product market distinction stems from the
              current ultimate OEM customer base and their current capabilities in the
              ADAS field: (i) first, there are OEMs which currently have the capability to
              integrate ADAS systems in-house and therefore buy different ADAS
              components directly from tier-1 suppliers such as ZF, Bosch, Continental, etc.
              (Category 1 customers); (ii) second, there are smaller OEMs which may
              currently lack the capability to self-integrate and therefore either rely on the
              services of third-party ADAS system integrators such as AVL or Bertrandt
              (Category 2 customers)322 and buy the components directly from tier-1
              suppliers such as ZF, Bosch, Continental, etc. or (iii) third, buy integrated
              ADAS solutions from tier-1 suppliers such as Wabco (Category 3 customers).
              One respondent stated that “independent ADAS system integrators can
316 Reply to question 35.1.1 of Questionnaire to Customers.
317 Reply to question 35.1.1 of Questionnaire to Customers.
318 Reply to question 26.1.1 of Questionnaire to Competitors.
319 Reply to question 35.2 of Questionnaire to Customers, Reply to question 26.2 of Questionnaire to
    Competitors.
320 Reply to question 35.2.1 of Questionnaire to Customers.
321 Reply to question 36.1 of Questionnaire to Customers, Reply to question 27.1 of Questionnaire to
    Competitors.
322 For example, the Notifying Party assumes that […] is working with AVL (reply to question 5 of
    RFI 21). In the replies to the market investigation, AVL confirmed that it provides ADAS integrated
    systems for trucks. Valeo confirmed also that it provides ADAS integrated systems (automatic parking
    with fusion) although not for buses or trucks. See replies to question 45 of Questionnaire to Competitors.
                                                          62
 ---pagebreak---               compete with ADAS solution providers as Wabco, as they can create an
              ecosystem with partners to propose integrated ADAS solutions” and another
              one that “[g]iven the magnitude of the development costs, OEMs may decide to
              subcontract the integration. It can also be an opportunity to buy sensors from
              different sources / competitors.”323 Third-party system integrators cited by the
              respondents to the Commission’s market investigation include AVL,
              Bertrandt, FEV, Harman, Luxoff, Magna, Nvidia, Ricardo.
     (299) However, other respondents considered that, “[…] a customer could,
              theoretically, opt to purchase components and engage an independent
              engineering firm as third-party integrator such as EDAG or AVL. However,
              this is rather uncommon.”324 Another respondent stated that “[…] we have the
              same perspective on the three customer clusters […], but we are realizing that
              OEM of class ii) and iii) typically have high difficulties or no chance to use
              third party integrators or suppliers other than WABCO and Knorr-Bremse,
              when ADAS functions need to access the brake system interface. Reason for
              that is, that the interface standard is extended by proprietary locking
              mechanisms (known only by the respective brake supplier), not allowing third
              parties to make use of the brake system interface. Since class ii) and iii) OEM
              are typically small manufactures with low volumes they are not in the position
              to encourage the brake supplier to open the interface. Therefore, emergency
              braking systems are typically sold together with the complete brake system to
              those OEM.”325 A third respondent stated that “[i]n addition to the available
              engineering resources the OEM distinguish mainly on the access to the brakes
              as the brake suppliers shield their Software to smaller OEM. In consequence,
              (ii) [i.e. category 2 OEM customers] does not exist in the market as the only
              possible non-OEM integrators are brake suppliers (i.e. Wabco and Knorr
              Bremse). These players are providing at least components or integrated ADAS
              systems already and are thus no pure system integrators.”326
     (300) In short, despite this general categorisation of customers into three groups,
              some doubts remain as to how prevalent the middle category will be going
              forward, i.e. to what extend OEMs can use third party integrators. It is
              therefore not clear whether ADAS integration services are fully
              interchangeable with integrated ADAS solutions. Given that the ADAS sector
              is still nascent and the way in which it will develop is uncertain, for the
              purposes of this Decision, the Commission will leave it open whether
              integrated ADAS solutions a separate product market from that of integration
              services. In any event, neither Wabco nor ZF provide ADAS integration
              services on a standalone basis. Moreover, as far as the Commission
              understands, currently Wabco is the only company providing integrated ADAS
              systems in the EEA.
     (301) It is clear, however, that for those customers, which wish to self-integrate, the
              integrated ADAS system/ADAS integration services are not an
              interchangeable option.
323 Replies to question 30.1 of Questionnaire to Competitors.
324 Reply to question 36.1.1 of Questionnaire to Customers.
325 Reply to question 27.1.1 of Questionnaire to Competitors.
326 Reply to question 27.1.1 of Questionnaire to Competitors.
                                                       63
 ---pagebreak---         (C)        ADAS components: cameras, radars, LIDAR, ultrasonic, ADAS ECUs
                   and software belong to separate product markets
     (302) The Commission considers that different ADAS components (cameras, radars,
             LIDAR, ultrasonic, ADAS ECUs and software) belong to separate product
             markets. In particular, within ADAS sensors (the only ADAS components
             currently sold by ZF for MHCVs), cameras, radars, LIDAR and ultrasonic
             belong to separate product markets. ZF currently only manufactures and sells
             cameras and radars. Contrary to the Notifying Party’s arguments,327 and based
             on the results of its market investigation, the Commission considers that radars
             and cameras belong to separate product markets for the following reason.
     (303) The majority of respondents to the Commission’s market investigation who
             expressed an opinion considered that different ADAS cameras and radars are
             not interchangeable and belong to separate product markets.328 This is because
             each of radars and cameras have certain functions (advantages/disadvantages)
             that the other does not. For example, LDWS is only currently possible with the
             use of a camera.329 As one respondent put it, “[…] single radars / cameras
             could be interchanged – but an overall system will always require both
             technologies (i.e. certain functionalities can only be provided by either a
             camera or a radar) and both technologies complement each other.”330 That
             being said, one respondent also outlined that a distinction “[…] is not relevant.
             Front Cameras, Radars, and Lidar are part of the Active Safety needed
             sensors. They may be sourced separately but at the end are part of the global
             system.”331
     (304) Whilst it may indeed be that in future the functions provided by radars on the
             one hand and cameras on the other hand become very similar and for some
             functions radars may be substituted by cameras and vice-versa, given today’s
             technology, for the purposes of this Decision, the Commission considers radars
             and cameras to belong to separate product markets.
     (305) As regards a potential further sub-segmentation within each of radars and
             cameras by e.g. the exact functionality of the radar or camera, the majority of
             respondents to the Commission’s market investigation who expressed an
             opinion also considered that a further sub-segmentation within cameras and
             radars is not pertinent. Whilst each type of radar has a different purpose, e.g. a
             short-range radar or long-range radar, these can be considered as part of the
             same differentiated product market for radars. The same applies for cameras.
             As one respondent explained, “[t]here are some technical differences between
             radars and cameras available on the market. In particular, there are products
             better suited for the short-range and products better suited for the far-range
             use case. However, it is difficult to draw a clear line between these products.
327 Form CO, paragraph 421.
328 Reply to question 41 of Questionnaire to Customers, Reply to question 32 of Questionnaire to
    Competitors.
329 Reply to question 32 of Questionnaire to Competitors.
330 Reply to question 32 of Questionnaire to Competitors.
331 Reply to question 33 of Questionnaire to Competitors.
                                                       64
 ---pagebreak---               In addition, with innovation still on-going, existing technical differences may
              abate in the future.”332
        (D)        ADAS fusion and functions will not be considered separately for the
                   purposes of this Decision
     (306) Finally, some respondents considered that ADAS fusion and functions do not
              belong to a separate product market from ADAS components because they are
              inherently connected to ADAS components and cannot be traded separately.
              According to one respondent “[i]ndeed, data fusion collected to be analyzed
              for better customized services, and driver assistance functions are deeply
              connected to ADAS components, which role is to detect, prevent, inform about
              the other cars, the environment, or the infrastructure”,333 another respondent
              also indicated that “[s]afety related items, for best performance should be
              developed and traded together”.334
     (307) However, other respondents considered that “fusion and functions” could,
              eventually, be traded separately, for example: “[i]t is conceivable to source
              fusion and functions separately from the component (extended workbench).
              However, due to the time and effort for programming this is not common. Also,
              the customer would need to coordinate a close cooperation between the
              component supplier on the one hand and the provider of fusion and functions
              on the other hand”,335 according to another respondent “[w]hile optimized
              “fusion and functions”, particularly in the case the technology is implemented
              as SW module, is connected with specific ADAS components, Core
              technologies for “fusion and functions” can be an independent components.
              To support this view, there are many start-ups/IT companies specialized to
              develop “fusion and functions” SW [software] package”, and according to
              another one “‘[f]usion and Functions’ are not useful if not inserted into an
              ADAS together with other ADAS components. Nevertheless, depending on
              OEM preferences, they can be sourced in an integrated way or separately. The
              definition of the market depends therefore on the OEM preferences about the
              sourcing of ADAS”.336
     (308) The responses reflect the fact that the development of ADAS is at its early
              stages and that it is still unclear the choices that OEMs will make concerning
              the mechanisms to build ADAS functions. Separate trading of fusion and
              functions appears to require a standardised interface. In any event, neither ZF
              nor Wabco trade ADAS fusions and functions on a stand-alone basis.
              Therefore, for the purposes of this Decision, ADAS “fusions and functions”
              will not be considered.
        (E)        Acting components: braking and steering
     (309) For the purposes of this Decision, concerning steering and braking systems,
              there is no reason to depart from the market definition provided by the
332 Reply to question 42 of Questionnaire to Customers.
333 Reply to question 36.1 of Questionnaire to Competitors.
334 Reply to question 44.1 of Questionnaire to Customers.
335 Replies to question 36.1 of Questionnaire to Competitors.
336 Replies to question 36.1 of Questionnaire to Competitors.
                                                        65
 ---pagebreak---              Notifying Party. Concerning braking systems, the Commission will therefore
             retain the markets for ABS and EBS. Regarding steering systems, the
             Commission will retain the markets for EHPS and EPS.
     (310) In this context the Commission takes note of the Notifying Party maintaining
             that ADAS components interact with the following braking and steering
             components:
        (a)     ABS and EBS braking systems,337 and
        (b)     EHPS or EPS systems.338
     (311) ZF so far only offers HPS, which cannot interact with ADAS. [Strategic
             information].
8.2.1.3. Conclusion on product market definitions
     (312) In view of the above, for the purposes of this Decision, the ADAS market for
             MHCV will be segmented between (a) the provision of ADAS components
             and, within that market, the provision of (i) radars, (ii) cameras, (iii) LiDARs,
             (iv) ultrasonics, (v) ADAS ECUs and (vi) ADAS software; (b) the provision of
             integrated ADAS solutions, and (c) the provision of ADAS system integration
             services.
     (313) Concerning braking systems, for the purposes of this Decision, the
             Commission will retain the markets for ABS and EBS braking systems.
             Concerning steering systems, for the purposes of this Decision, the
             Commission will retain the markets for electrically assisted steering ("EHPS")
             and electric power steering ("EPS").
8.2.2. Geographic market definition
     (314) ADAS for MHCV as such has not been dealt with in previous Commission
             decisions.
8.2.2.1. The Notifying Party’s view
     (315) The Notifying Party considers the geographic market definition within ADAS
             for MHCV to be global or at least EEA-wide.339 According to the Notifying
             Party, OEMs source automotive parts centrally and frequently on a worldwide
             basis, although ZF and Wabco mainly supply ADAS products to OEMs in the
             EEA. OEMs active in the EEA produce for the EEA and also for the global
             market. Legal standards for ADAS technologies are uniform in the EEA and
             development capabilities can easily be transferred across continents.
8.2.2.2. The Commission’s assessment
     (316) The Commission considers that the geographic market for all ADAS
             components, ADAS system integration and integrated ADAS solutions is at
337 Reply to question 1(b) of RFI 28.
338 Reply to question 1 of RFI 35.
339 Form CO, paragraphs 426-430.
                                                 66
 ---pagebreak---               least EEA-wide, if not worldwide. Arguments in favour of an EEA-market
              include the advantage of having development teams close to the customers’
              development sites (e.g. in the EEA) and different regulatory ADAS
              requirements across continents, explaining differences in the ADAS system
              integration services. Arguments in favour of worldwide markets include the
              international footprint and global sourcing activities of many OEMs.
     (317) The majority of respondents to the Commission’s market investigation who
              expressed an opinion consider the market for ADAS components and
              integrated ADAS solutions to be global. As put by one of the respondents,
              “[m]ain customers are globally active with largely centralized sourcing
              decisions. Due to limited volumes in CV market basic solutions will be similar
              across regions (i.e. globally). Homologation & SW might differentiate across
              markets – especially due to differing legislations.”340 Another respondent
              explained that “[d]ue to efficiency reasons, suppliers of components attempt to
              design their products to be suitable worldwide. This is sometimes not possible
              for some components that have different regulatory constraints in different
              countries. For example, radars have different frequency ranges but, despite
              that, in North America, in the European Union and in most of Asia, there are
              limited differences, which are handled by software adaptation, while the
              hardware components are the same. For example, modifications are required
              due to different enviroments (e.g., road conditions, traffic signs, etc.). On the
              other hand, the development of ADAS requires a close cooperation between
              the customer and the system supplier, which is why a "local" provider is often
              the preferable option. […].”341
8.2.2.3. Conclusion on geographic market definition
     (318) For the purposes of this Decision, the exact geographic market definition can
              be left open as the Transaction does not raise competition concerns with
              respect to ADAS components, ADAS system integration or integrated ADAS
              solutions irrespective of the exact geographic market definition.
8.3.     Competitive assessment
8.3.1. ADAS market characteristics and ZF’s and Wabco’s positions in it
     (319) The ADAS market (which will ultimately develop into the Autonomous
              Driving “AD” market)342 is only at its early stages of development. The
              competitive strength of players will depend much on their development
              capabilities. Such development capabilities are dynamic (many products and
              functions are at development stages and not marketed yet), distributed across
              the different layers of the production chain (ADAS component manufacturers,
340 Reply to question 37.1 of Questionnaire to Competitors.
341 Reply to question 37.1 of Questionnaire to Competitors.
342 Over time, ADAS will develop by incrementally achieving higher levels of automated sophistication
    until eventually achieving full-fledged automation (AD). A major difference between ADAS and AD is
    that in ADAS-enabled vehicles the human driver is still responsible for driving the vehicle and liable for
    any potential incidents, while this is not the case anymore for AD. Automation Levels 1 and 2
    encompass current and next generation ADAS, whereas Levels 4 and 5 are considered Automated/AD
    rather than ADAS. (Form CO, paragraphs 343 and 350).
                                                        67
 ---pagebreak---               ADAS system integrators and OEMs) and subject to different potential
              combinations across the vertical chain (self-integration by OEMs, reliance on a
              third-party system integrator, or with support of an ADAS component
              manufacturer).343
     (320) From a demand-side perspective, as explained in paragraph (296) above,
              OEMs can either self-integrate ADAS components into their MHCV models or
              source such services from external suppliers (whether via buying components
              and then the services of an integrator or by buying an integrated solution from
              a supplier). Once a contract is awarded to a supplier for the supply of an
              ADAS component, the customer will almost never change the supplier of an
              ADAS component for the particular ADAS system in which it is integrated.
              Competition for that customer will again take place at the time when the
              customer decides to design the next generation of ADAS system and requires
              ADAS components for that. As such, in the ADAS systems and components
              space, competition takes place for the market rather than in the market.
     (321) From a supply-side perspective, there are different players present at different
              levels of the ADAS supply chain:
         (a)      ZF is active upstream through the supply of ADAS sensors (cameras and
                  radars) to (i) OEMs, which then integrate these themselves in their trucks
                  (such as Volvo and Daimler) and to (ii) ADAS system integrators like
                  Wabco or Knorr-Bremse.344 Together with ZF, the main players providing
                  ADAS sensors include Aptive, Bosch, Continental.
         (b)      Wabco is present downstream as a provider of integrated ADAS solutions.
                  Wabco purchases ADAS components (in particular sensors) and integrates
                  them into ADAS solutions that it then offers to OEMs such as Iveco and
                  DAF, i.e. truck manufacturers which do not currently have their own
                  capabilities to integrate. The other main provider of integrated ADAS
                  solutions is Knorr-Bremse, which offer ADAS integration services in a
                  package with their actuation components (brakes). In addition, external
                  suppliers (such as engineering integrator firms) may offer the integration
                  service on a standalone, separately priced basis. Wabco currently provides
                  its integrated ADAS solutions only to customers using the Wabco braking
                  system. It does not provide ADAS integration services on a standalone
                  basis.
     (322) ZF and Wabco have a different customer base. ZF’s main customers are large
              OEMs with internal capability to integrate ADAS components to obtain ADAS
              functionalities, whereas Wabco’s customer base is made of smaller OEMs
              which currently lack such capabilities.
343 Reply to RFI 6, Annex Q53.
344 Currently, ZF does not supply components to Wabco. [Strategic information: the business relationship
    between ZF and Wabco as regards ADAS is limited. There is no actual supply relationship but only
    limited activities and agreements indicating that ZF is a potential partner for supply relationships and co-
    operations in the field of ADAS products] (Form CO, paragraph 815).
                                                          68
 ---pagebreak--- Source: Form CO, paragraph 433.
      (323) According to the Notifying Party’s estimates, OEMs served by ZF and its
              competitors (Category 1 customers buying components, see paragraph (296))
              account for […]% of the total market volume for MHCV in the EEA.
Table 9: MHCV production, volume, EEA, 2018345
OEM                                      Category 1     Category 2     Total
[Customer]                               [amount]              -      [amount]
[Customer]                               [amount]              -      [amount]
[Customer]                               [amount]              -      [amount]
[Customer]                               [amount]              -      [amount]
[Customer]                                              [amount]      [amount]
[Customer]                                              [amount]      [amount]
“Other” truck and bus                                   [amount]      [amount]
Total                                    [amount]       [amount]      [amount]
Split (%)                               [70-80]%       [20-30]%     [90-100]%
Source: Reply to question 52 of RFI 10.
      (324) ZF does not currently supply ADAS components to Wabco. ZF’s main
              customers for MHCV ADAS sensors are [customer information] in the EEA.
Table 10: ZF’s top five MHCV ADAS sensor customers, 2018
                                            EEA         Worldwide
Customer
                                       (EUR million)  (EUR million)
[Customer]                               [amount]        [amount]
[Customer]                               [amount]        [amount]
[Customer]                               [amount]        [amount]
Other                                    [amount]        [amount]
Total                                    [amount]        [amount]
Source: Form CO, paragraph 443.
      (325) Wabco’s main customers for integrated ADAS solutions are [customer
              information] and [customer information] in the EEA and [customer
              information] in the US.
345  Reply to RFI 10, question 11.
                                                     69
 ---pagebreak--- Table 11: Wabco’s top five MHCV ADAS customers, 2018
                                             EEA            Worldwide
Customer
                                        (EUR million)     (EUR million)
[Customer]                                [amount]           [amount]
[Customer]                                                   [amount]
[Customer]                                [amount]           [amount]
[Customer]                                                   [amount]
[Customer]                                                   [amount]
[Customer]                                [amount]
[Customer]                                [amount]
[Customer]                                [amount]
Other                                     [amount]           [amount]
Total                                     [amount]           [amount]
Source: Form CO, paragraph 435.
      (326) Wabco’s main suppliers of ADAS sensors are [supplier name] (radars),
               [supplier name] (cameras) and [supplier name] (cameras, however Wabco’s
               contract with [supplier name] was […] until 2018).
Table 12: Wabco’s top five MHCV ADAS sensor suppliers, 2018
                                             EEA            Worldwide
Customer
                                        (EUR million)     (EUR million)
[Customer]                                [amount]           [amount]
[Customer]                                [amount]           [amount]
[Customer]                                [amount]           [amount]
Total                                     [amount]           [amount]
Source: Form CO, paragraph 446.
      (327) ZF does not manufacture the whole range of cameras and radars purchased by
               Wabco from ZF’s competitors.346
8.3.2. Market shares
8.3.2.1. ADAS cameras and radars
      (328) Upstream, ZF has a relatively low market share in the sale of cameras and
               radars, remaining below 30% both on an EEA-wide and worldwide basis:
               [20-30]% for cameras and [5-10]% for radars in the EEA in 2018 in terms of
               value, and [20-30]% for cameras and [10-20]% for radars worldwide in 2018
               in terms of value. There are several strong competitors in both radars and
               cameras, such as Aptiv, Bosch and Continental, with market shares similar or
               higher than ZF.
346 When providing integrated ADAS systems, Wabco makes use of front-looking cameras, short-range
    radars, mid-range radars and long-range radars. Of these types, ZF only sold mid-range radars and front-
    looking cameras in the past. Notifying Party’s reply to question 15 of RFI 16 post-notification of 14
    January 2020. According to ZF’s best estimates, its sales of front cameras represented roughly [20-30]%
    of all front camera sales in the EEA and [5-10]-[5-10]% of all sales of mid-range radars in the EEA.
                                                         70
 ---pagebreak--- Table 13: ADAS camera, EEA, 2018
                                   Turnover      Turnover    Volume          Volume
                                (EUR million)        (%)      (units)          (%)
ZF                                [amount]       [20-30]%     [amount]      [20-30]%
Wabco                             [amount]         [0-5]%     [amount]       [0-5]%
ZF-Wabco combined                [amount]        [20-30]%    [amount]       [20-30]%
Continental                       [amount]       [20-30]%     [amount]      [20-30]%
Bosch                             [amount]       [20-30]%     [amount]      [20-30]%
Aptiv                             [amount]       [20-30]%     [amount]      [20-30]%
Others                            [amount]         [0-5]%     [amount]       [0-5]%
Total                             [amount]          100%      [amount]        100%
Source: Form CO, paragraph 454.
Table 14: ADAS radar, EEA, 2018
                                   Turnover      Turnover    Volume          Volume
                                (EUR million)        (%)      (units)          (%)
ZF                                [amount]        [5-10]%     [amount]      [10-20]%
Wabco                             [amount]         [0-5]%     [amount]       [0-5]%
ZF-Wabco combined                [amount]         [5-10]%    [amount]       [10-20]%
Continental                       [amount]       [40-50]%     [amount]      [20-30]%
Aptiv                             [amount]       [40-50]%     [amount]      [60-70]%
Others                            [amount]         [0-5]%     [amount]       [0-5]%
Total                             [amount]          100%      [amount]        100%
Source: Form CO, paragraph 454.
Table 15: ADAS camera, worldwide, 2018
                                   Turnover      Turnover    Volume          Volume
                                (EUR million)        (%)      (units)          (%)
ZF                                [amount]       [20-30]%     [amount]      [20-30]%
Wabco                             [amount]         [0-5]%     [amount]       [0-5]%
ZF-Wabco combined                [amount]        [20-30]%    [amount]       [20-30]%
Continental                       [amount]       [10-20]%     [amount]      [10-20]%
Bosch                             [amount]       [20-30]%     [amount]      [20-30]%
Aptiv                             [amount]       [20-30]%     [amount]      [20-30]%
Others                            [amount]       [20-30]%     [amount]      [10-20]%
Total                             [amount]          100%      [amount]        100%
Source: Form CO, paragraph 454.
Table 16: ADAS radar, worldwide, 2018
                                   Turnover      Turnover    Volume          Volume
                                (EUR million)        (%)      (units)          (%)
ZF                                [amount]       [10-20]%     [amount]      [10-20]%
Wabco                             [amount]         [0-5]%     [amount]       [0-5]%
ZF-Wabco combined                [amount]        [10-20]%    [amount]       [10-20]%
Continental                       [amount]       [20-30]%     [amount]      [10-20]%
Aptiv                             [amount]       [40-50]%     [amount]      [50-60]%
Others                            [amount]       [10-20]%     [amount]      [10-20]%
Total                             [amount]          100%      [amount]        100%
Source: Form CO, paragraph 454.
8.3.2.2. ADAS system integration and integrated ADAS solutions
      (329) Downstream, Wabco provides integrated ADAS solutions to customers which
            buy Wabco’s braking systems and have not developed the internal capacity to
            integrate ADAS components themselves. In this context, the Commission
                                              71
 ---pagebreak---               recalls that, in the EEA, these customers essentially consist of smaller OEMs
              such as Iveco and DAF, and bus companies like Van Hools etc. These
              customers represent around [20-30]% of the total MHCV customer base (see
              paragraph (321)). In this customer segment, winning a few customer contracts
              for the provision of integrated ADAS solutions may result in high shares.347 In
              a market for ADAS system integration, Wabco would have a [70-80]% market
              share in the EEA and a [50-60]% market share worldwide in 2018 in terms of
              value. In a market for the provision of integrated ADAS solutions excluding
              third-party system integrators, Wabco’s market share would be [90-100]% in
              the EEA and [60-70]% worldwide in 2018 in terms of value.
      (330) It should be noted that, since Wabco only provides integrated ADAS solutions
              to purchasers of its braking systems which do not self-integrate ADAS, its
              market share in the provision of integrated ADAS solutions/integration
              services is tied very much to the sale of its braking systems.
Table 17: ADAS system integration, EEA, 2018
                                             Turnover      Turnover
                                         (EUR million)          (%)
ZF                                          [amount]          [0-5]%
Wabco                                       [amount]        [70-80]%
ZF-Wabco combined                          [amount]         [70-80]%
AVL                                         [amount]         [5-10]%
Bertrand                                    [amount]         [5-10]%
Others                                      [amount]         [5-10]%
Total                                       [amount]           100%
Source: Form CO, paragraph 439.
Table 18: ADAS system integration, worldwide, 2018
                                             Turnover      Turnover
                                         (EUR million)          (%)
ZF                                          [amount]          [0-5]%
Wabco                                       [amount]        [50-60]%
ZF-Wabco combined                          [amount]         [50-60]%
Knorr-Bremse/Bendix                         [amount]        [30-40]%
AVL                                         [amount]          [0-5]%
Bertrand                                    [amount]          [0-5]%
Others                                      [amount]         [5-10]%
Total                                       [amount]           100%
Source: Form CO, paragraph 439.
Table […]*: Integrated ADAS system solutions, EEA, 2018
                                             Turnover      Turnover
                                         (EUR million)          (%)
ZF                                          [amount]          [0-5]%
Wabco                                       [amount]       [90-100]%
ZF-Wabco combined                          [amount]        [90-100]%
Knorr-Bremse/Bendix                         [amount]          [0-5]%
Total                                       [amount]           100%
Source: Reply to question 1 (Annex Q1) of RFI 22.
347 In the case of Wabco, the contracts with […] OEMs ([customer name] and [customer name]) in the EEA
    account for [80-90]% of all its sales to ADAS customers in the EEA (see Table 11 above).
*   Should read: “19”.
                                                        72
 ---pagebreak--- Table […]*: Integrated ADAS solutions, worldwide, 2018
                                            Turnover        Turnover
                                        (EUR million)          (%)
ZF                                         [amount]          [0-5]%
Wabco                                      [amount]         [60-70]%
ZF-Wabco combined                          [amount]         [60-70]%
Knorr-Bremse/Bendix                        [amount]         [30-40]%
Total                                      [amount]           100%
Source: Reply to question 1 (Annex Q1) of RFI 22.
      (331) Wabco’s main competitor in the market for integrated ADAS solutions/ADAS
               integration services both in the EEA and at worldwide level is Knorr-Bremse.
               However, as pointed out by the Notifying Party,348 the Commission notes that
               Knorr-Bremse was unsuccessful in the awarding of supply contracts for OEMs
               for the current generation of fully integrated ADAS solutions in the EEA.
               However, there is no indication that Knorr-Bremse would not continue to
               compete for future supply contracts coming up for tender in the EEA (and
               worldwide).349 Indeed, Knorr-Bremse has already partnered up with
               Continental to become a leading player in the supply of ADAS for commercial
               vehicles. As stated in Knorr-Bremse’s press release at the time of establishing
               the cooperation, “Knorr-Bremse and Continental have entered into a
               partnership to develop a complete system solution for highly automated
               driving (HAD) in commercial vehicles. This means that in the future the
               partners will be able to offer HAD solutions for truck series production of any
               size”.350 As also put by a third party OEM: “[…] Continental has entered into
               a collaboration agreement with Knorr-Bremse on the acting market; ZF would
               therefore need to acquire WABCO to compete on an equal footing. […] The
               main impact of this Transaction is that it will create a full service supplier (for
               the three parts of the market). Currently, only Continental (with Knorr-Bremse
               for the acting part) is a full service supplier, and Bosch has the capacity to
               become one in the future, especially if it develops in the braking market.”351
8.3.2.3. Braking and steering
      (332) Knorr-Bremse is Wabco’s main rival in the sale of ABS and EBS braking
               systems required for ADAS interaction, where Wabco has an estimated share
               of approximatively [50-60]%, followed by Knorr-Bremse with
               approximatively [40-50]% in the EEA in terms of volume. On a global basis,
               Wabco has an estimated share of approximatively [40-50]%, with Knorr-
               Bremse at approximatively [30-40]%, and others at approximatively [10-20]%,
*   Should read: “20”.
348 Form CO, paragraph 416.
349 According to the Notifying Party (reply to question 3 of RFI 18), future tenders for ADAS include:
    (i) Iveco: tender open as of […]; (ii) DAF: open as of […]; and (iii) smaller tenders for other truck and
    bus manufacturers from […].
350 See Knorr-Bremse’s press release dated 19 September 2018 at: https://www knorr-
    bremse.com/en/media/press-releases/knorr-bremse-and-continental-announce-a-partnership-for-high-ly-
    automated-driving-in-commercial-vehicles.json.
351 Minutes of the interview with Traton of 18 July 2019.
                                                        73
 ---pagebreak---              in terms of volume.352 There is no horizontal overlap between Wabco and ZF
             in ABS and EBS braking systems.
     (333) As explained in paragraph (307), ZF so far only offers hydraulically powered
             steering (“HPS”) which cannot interact with ADAS. Whilst ZF is in the
             process of developing EPHS (to be launched in the US [strategic information])
             and EPS, there is no overlap of ZF’s and Wabco’s activities in this segment.
8.3.3. No input foreclosure
     (334) In view of the information provided by the Notifying Party and the results of
             the market investigation, the Commission is of the view that an input
             foreclosure strategy by the merged entity involving ZF’s supply of ADAS
             components to downstream customers (such as OEMs who self-integrate or
             tier-1 suppliers such as Knorr-Bremse) is unlikely to succeed.
8.3.3.1. No ability to foreclose access to inputs
     (335) According to the Notifying Party,353 the merged entity would not be able to
             pursue an input foreclosure strategy in view of ZF’s modest share in the supply
             of ADAS sensors and the numerous alternatives available in the market,
             making any strategy to increase prices unsuccessful. Furthermore, ZF is legally
             bound to continue supplying current customers for a certain period under the
             agreed terms and conditions.
     (336) Paragraph 34 of the Non-horizontal Merger Guidelines354 states that input
             foreclosure may raise competition problems if it concerns an important input.
             Paragraph 35 of same guidelines states that, for input foreclosure to be a
             concern, the merged entity must have a significant degree of market power in
             the upstream market. Paragraph 37 of the Non-horizontal Merger Guidelines355
             also states that, when determining the extent to which input foreclosure may
             occur, it must be taken into account that the decision of the merged entity to
             rely on its upstream division’s supply of inputs may also free up capacity on
             the remaining input suppliers from which the downstream division used to
             purchase before.
     (337) The Commission considers that, for the following reasons, the merged entity
             will not have the ability to engage in input foreclosure of ADAS sensors: ZF
             has a relatively low market share in the provision of ADAS sensors and faces
             important competitors, and ZF has ongoing contractual arrangements with
             third parties.
     (338) First, ZF does not have a significant degree of market power upstream in
             respect of ADAS sensors (whether cameras or radars).
     (339) Firstly, as set out in Section 8.3.2.1 above, ZF’s market share for the sale of
             cameras and radars is below 30% both worldwide and at the EEA ([20-30]%
352 Reply to question 4 of RFI 18 and reply to question 1 of RFI 28.
353 Form CO, paragraphs 452-459.
354 OJ C 265, 18.10.2008, p. 6.
355 OJ C 265, 18.10.2008, p. 6.
                                                        74
 ---pagebreak---              and [20-30]% for cameras in the EEA and worldwide respectively, and [5-
             10]% and [10-20]% for radars in the EEA and worldwide respectively, in
             terms of value of sales).
     (340) Secondly, ZF faces competition for the supply of ADAS cameras and radars
             from strong players such as Continental, Bosch and Aptiv, with market shares
             similar or higher than ZF. Furthermore, ZF does not manufacture all sensor
             ranges needed for ADAS, as indicated in paragraph (325).
     (341) In addition to Continental, Bosch and Aptiv, there are many additional smaller
             players. The fast-growing landscape of ADAS is illustrated below.
Source: Form CO, paragraph 456.
     (342) Second, by its contractual commitments, ZF is legally bound to continue
             supplying current customers ([content of internal documents]) until […].356
     (343) Finally, if ZF starts supplying ADAS sensors to Wabco, this would likely free
             up capacity of current suppliers of Wabco, which would then be able to supply
             other customers and a realignment of purchase patterns would occur. This is
             likely in view of the limited market share of ZF in the upstream market and the
             strong position of competitors.
     (344) In conclusion, the Commission considers that ZF will not, as a result of the
             merger, have the ability to foreclose access to ADAS sensors (whether by
             stopping supply or raising prices) given it’s moderate market shares for both
             radars and cameras, the fact that it does not even provide a full range of radars
             and cameras, the existence of strong competitors such as Continental, Bosch
             and Aptiv and the existence of long-term supply agreements.
356 Reply to question 6 of RFI 19. The Commission notes that [content of intenal documents].
                                                      75
 ---pagebreak--- 8.3.3.2. No incentives to foreclose access to inputs
     (345) According to the Notifying Party,357 ZF’s main customers are large OEMs
            which do not compete with Wabco. Furthermore, ZF will stop supplying
            sensors to [customer data] [strategic information] ([customer data] took this
            decision prior to the announcement of the Transaction).358 Therefore, post-
            Transaction ZF will have incentives to continue selling to those OEMs.
     (346) Paragraph 40 of the Non-horizontal Merger Guidelines359 states that the
            incentive to foreclose depends on the degree to which foreclosure will be
            profitable. Paragraph 43 of the same guidelines states that, the greater the
            market shares of the merged entity downstream, the greater base of sales on
            which to enjoy increased margins.
     (347) As explained in paragraph (321), OEMs served by ZF and its competitors
            account for [70-80]% of the total market volume for MHCV. Since Wabco
            only sells integrated ADAS solutions, its potential customer base represents
            [20-30]% of the MHCV market. Therefore, despite Wabco’s high market
            shares in the provision of integrated ADAS solutions, Wabco’s customer sales
            base represents only a third of the overall customer base for ADAS sensors.
            According to the figures provided by the Notifying Party, in 2018 the total
            market value for ADAS sensors accounted for EUR [amount] in the EEA and
            EUR [amount] worldwide, while Wabco’s purchases of ADAS sensors account
            for EUR [amount] in the EEA and EUR [amount] worldwide. According to
            this, in 2018, Wabco accounted for [20-30]% of the purchases of ADAS
            sensors in the EEA and [10-20]% of purchases worldwide.
     (348) Foreclosing inputs to large OEMs would not increase the sale of integrated
            ADAS solutions since the large OEMs will not buy these products but wish to
            self-integrate. Foreclosing input to Wabco’s competitor Knorr-Bremse or to
            third party integration service providers is also unlikely to increase Wabco’s
            sales of integrated ADAs solutions given that Knorr-Bremse is collaborating
            with Continental in the ADAS sphere (Continental providing similar sensors as
            Wabco’s) and third party integration service providers are hired by the OEMs
            which will purchase the sensors.
     (349) In conclusion, the Commission considers that the merged entity will not, as a
            result of the merger, have the incentives to foreclose access to ADAS radars
            and cameras).
8.3.3.3. Overall likely impact on effective competition
     (350) The Non-horizontal Merger Guidelines360 state that a merger will raise
            competition concerns because of input foreclosure when it would lead to
            increased prices in the downstream market thereby significantly impeding
            competition. To assess this, one should consider (i) whether the foreclosed
            firms play an important role in the competitive process in the downstream
357 Form CO, paragraphs 460-461.
358 Form CO, paragraph 461.
359 OJ C 265, 18.10.2008, p. 6.
360 OJ C 265, 18.10.2008, p. 6, paragraphs 47-51.
                                                  76
 ---pagebreak---            market (the higher the proportion of rivals which could be foreclosed, the more
           likely the merger can result in an increase of prices); (ii) whether the merger
           raises barriers to entry to potential competitors. If downstream rivals are
           vertically integrated or capable of switching to other input suppliers,
           competition from those firms may be a sufficient competitive constraint to
           prevent the merged entity to raise prices. Customers buyer power and the
           likelihood of entry in the upstream market would also reduce the likelihood of
           a negative impact on competition and prices.
     (351) Because of the reasons already stated in Sections 8.3.3.1 and 8.3.3.2, it is
           unlikely that the merger will have a negative impact on competition in terms of
           increased prices in the downstream market: (i) there is a significant number of
           competitors in the upstream market which can supply OEMs or tier-1 suppliers
           such as Knorr-Bremse (see Section 8.3.2.1 on market shares); (ii) Knorr-
           Bremse has already started a cooperation agreement with Continental (a main
           competitor in the provision of ADAS cameras and radars); (iii) OEM
           customers of ADAS cameras and radars are big companies with important
           buyer power which could source from alternative suppliers if ZF refused to
           supply to them; and (iv) foreclosing inputs to large OEMs would not increase
           the sale of Wabco’s integrated ADAS solutions since the large OEMs will not
           buy these products but wish to self-integrate.
     (352) In conclusion, the Commission considers that, overall, the merged entity would
           not have the ability nor the incentives to foreclose access to ADAS sensors.
8.3.4. No customer foreclosure
     (353) In view of the information provided by the Notifying Party and the results of
           the market investigation, an input foreclosure strategy by the merged entity is
           unlikely to succeed. The merged entity will lack the ability and the incentives
           to foreclose access to customers mainly because (i) Wabco is not an important
           customer for ADAS sensors and is tied to contracts with [supplier name] and
           [supplier name], and (ii) ZF does not produce the whole range of ADAS
           sensors required by Wabco or its competitors.
8.3.4.1. No ability to foreclose access to customers
     (354) According to the Notifying Party,361 Wabco is not an important customer for
           ADAS sensors, its purchasing volume of ADAS sensors constitutes a small
           percentage of total sales, and approximately [70-80]% of ADAS sensors sales
           are made to OEMs directly. Also, according to the Notifying Party, the average
           duration of ADAS sensor contracts between sensor suppliers and ADAS
           system integrators is of about five to six years and, post-Transaction, the
           merged entity will be bound by those and current suppliers will continue
           selling their radars for a certain period of time in the agreed terms and
           conditions.
361 Form CO, paragraphs 463 and 464.
                                                77
 ---pagebreak---      (355) Paragraph 61 of the Non-horizontal Merger Guidelines362 states that the
              Commission will examine if there are sufficient economic alternatives in the
              downstream market for the upstream rivals to sell their output.
     (356) As described in Section 8.3.1, competition for ADAS cameras and radars
              occurs for the market rather than in the market. Therefore, the assessment of
              ability distinguishes between contracts already concluded and future contracts.
     (357) As regards contracts already concluded, according to the figures provided by
              the Notifying Party, in 2018, the total market value for ADAS sensors
              accounts for EUR [amount] in the EEA and EUR [amount] worldwide, while
              Wabco’s purchases of ADAS sensors account for EUR [amount] in the EEA
              and EUR [amount] worldwide. According to this, in 2018, Wabco accounted
              for [20-30]% of the purchases of ADAS sensors in the EEA and [10-20]% of
              the purchases worldwide. Thus, Wabco is not a customer with significant
              degree of market power, and there are sufficient alternatives in the downstream
              market for upstream rivals to sell their input.
     (358) In addition, the results of the market investigation indicate that switching
              suppliers of ADAS sensors is costly and takes time. Therefore, any input
              foreclosure strategy would not be able to succeed immediately: “[it is
              e]xtensively hard and costly to change. Project time +36 months and x times
              10 M eur in development including V&V” and “[s]witching the sensor supplier
              requires quite an effort regarding time, resources (manpower) and money. The
              base software with its interfaces needs to be adapted by the supplier, function
              software needs to be adapted to the new environment, brackets holding the
              sensors need to be modified resulting in new tools, documentation needs to be
              updated, and application teams need to be trained. One of the largest efforts is
              the testing and release of the new sensors with the integrated functions. Per
              sensor, suppliers ask for up to 3-4 mEUR of non-recurring expenses for
              adaption of the base software. Timewise, switching a sensor supplier can take
              from supplier selection to customer SOP 3 to 4 years” and “[w]e think that it
              will take approx 2-3 years. The costs are depending by the actual solution
              chosen and technology”.363
     (359) Wabco also has ongoing contracts with two ADAS sensor suppliers: with
              [supplier name] for radars until [strategic information] and with [supplier
              name] for cameras until [strategic information].364 Furthermore, Wabco is
              currently in discussions with [supplier name] and [supplier name] to explore
              the development of next generation of ADAS sensors. In view of this, any
              possible change of supplier would not take place before [strategic
              information]365 and a customer foreclosure strategy would not be implemented
              immediately. In this sense, [supplier name] confirmed that “[…] it is not
              feasible to switch radars/sensors’ supplier in a short-term period, since
              customers need a transition to integrate this complex product”366 and that,
              although it assumed that Wabco would source components from ZF (only)
362 OJ C 265, 18.10.2008, p. 6.
363 Replies to question 69 of Questionnaire to Customers.
364 Form CO, paragraph 448.
365 Form CO, paragraph 460.
366 Minutes of the interview with [supplier name] of 30 July 2019.
                                                        78
 ---pagebreak---              after ZF had bought Wabco, “WABCO has not yet given any indications (to
             Continental) that the merger/transaction would lead to changes in their
             sourcing strategies”.367
     (360) In conclusion, the Commission considers that the merged entity would not
             have the ability to foreclose access to an important customer base for the
             contracts already concluded.
     (361) As regards future contacts, competitors in the ADAS sensors market would
             still be able to supply more than [70-80]% of the market in the EEA and more
             than [80-90]% worldwide (see paragraph (355)). Hence, although Wabco has
             [90-100]% of the EEA market for the supply of integrated ADAS solutions, it
             does not reflect its buyer power in the downstream market as a purchaser of
             ADAS sensors.
     (362) In conclusion, the Commission considers that the merged entity would not
             have the ability to foreclose access to an important customer base for ADAS
             sensors.
8.3.4.2. No incentive to foreclose access to customers
     (363) According to the Notifying party,368 the merged entity will have no incentive
             to foreclose access to customers. This is mainly because ZF does not produce
             all sensors required for ADAS for MHCV, such as Short Range Radars
             (“SRR”) and Long Range/Full Range Radar (“LRR/FRR”, also called
             imagining radar) although it has the capability to do so.369 Also, ADAS sensor
             manufacturers also sell different types of sensors to customers in other
             downstream product markets. As such, the customer base for sensor
             manufacturers is very broad and includes many customers using sensors in
             different fields of application.
     (364) According to the Non-horizontal Merger Guidelines,370 the incentive to engage
             in customer foreclosure depends on the degree to which it is profitable in terms
             of the difference between the costs and the gains from not procuring products
             from upstream rivals. The Guidelines state that the costs associated with
             reducing purchases from upstream rivals increases if the upstream division of
             the merged entity is less efficient. In this sense, it is worth mentioning that ZF
             does not currently supply the whole range of ADAS sensors required by
             Wabco ([strategic information])371 and that Continental seems to be the market
             leader. Given that ADAS is not a mature market but a nascent market in which
             new players are coming with new solutions, it is likely that the merged entity
             will continue to have incentives to purchase from third parties.
     (365) According to the Non-horizontal Merger Guidelines,372 the incentive to engage
             in customer foreclosure becomes higher the greater the market shares of the
367 Minutes of the interview with [supplier name] of 30 July 2019.
368 Form CO, paragraphs 465-473.
369 For example [strategic information] (Form CO, paragraph 469).
370 OJ C 265, 18.10.2008, p. 6.
371 Form CO, paragraph 466.
372 OJ C 265, 18.10.2008, p. 6, paragraph 70.
                                                        79
 ---pagebreak---             merged entity’s downstream operations. However, as explained in previous
            paragraphs, Wabco accounts only for [20-30]% of the purchases of ADAS
            sensors in the EEA and [10-20]% of purchases Worldwide, making a customer
            foreclosure strategy by the merged entity unlikely to succeed in terms of
            financial gain, and therefore reducing the merged entity’s incentives to engage
            in such a strategy.
     (366) In conclusion, the Commission considers that the merged entity would not
            have the incentive to foreclose access to an important customer base.
8.3.4.3. Overall likely impact on effective competition
     (367) According to the Non-horizontal Merger Guidelines,373 foreclosing rivals in
            the upstream market by denying competitive access to a significant customer
            base may reduce those rival’s ability to compete. As a result, rivals
            downstream would be put at a competitive disadvantage which, in turn, may
            allow the merged entity to profitably increase prices or reduce the overall
            output in the downstream market. It is only when a sufficiently large fraction
            of upstream output is affected by the revenue decreases resulting from the
            vertical merger that the merger may significantly impede effective competition
            in the upstream market. When the reduction of competition upstream affects a
            significant fraction of output downstream, the merger is likely, as with input
            foreclosure, to result in a significant increase of the price level in the
            downstream market and, therefore, to significantly impede competition.
            Effective competition on the upstream market may also be significantly
            impeded by raising barriers to entry to potential competitors. In any event, the
            effect on competition must be assessed in light of countervailing factors such
            as the presence of countervailing buyer power.
     (368) As explained in previous paragraphs, the merger does not affect a significant
            fraction of output upstream; ZF’s market share for the sale of cameras and
            radars is below 30% both worldwide and in the EEA ([20-30]% and [20-30]%
            for cameras in the EEA and worldwide respectively, and [5-10]% and [10-
            20]% for radars in the EEA and worldwide respectively, in terms of value of
            sales). Therefore, there will remain a sufficient number of competitors
            upstream (such as Continental, Bosch, Aptiv) to prevent prices from increasing
            in the upstream market and, consequently, in the downstream market.374
     (369) Moreover, as also explained in previous paragraphs, the reduction of
            competition upstream does not affect a significant fraction of output
            downstream: Wabco accounts only for [20-30]% of the purchases of ADAS
            sensors in the EEA and [10-20]% of purchases worldwide. Therefore,
            upstream rivals will have a sufficient customer base to offer their products and
            remain competitive.
     (370) Furthermore, OEMs are sophisticated customers with strong buyer power.
            Knorr-Bremse, the only tier-1 supplier of integrated ADAS systems, has
            entered into a cooperation agreement with Continental, a main competitor in
            the supply of ADAS cameras and radars and will be able to compete in equal
373 OJ C 265, 18.10.2008, p. 6, paragraphs 72 to 77.
374 Non-Horizontal Merger Guidelines, OJ C 265, 18.10.2008, p. 6, paragraph 74.
                                                     80
 ---pagebreak---                footing with the merged entity for future contracts375 with OEMs in the EEA
               and worldwide.
     (371) In conclusion, the Commission considers that the merged entity will not
               negatively impact effective competition as there will be sufficient competitors
               upstream and customers downstream to compete effectively against the
               merged entity.
8.3.5. No conglomerate effects
     (372) The Notifying Party submits that376 the merged entity would have no market
               power to leverage via bundling or tying strategies; that rivals can offer similar
               packages of MCHV components / systems (e.g. Knorr-Bremse and
               Continental) such that they would not be affected by anti-competitive bundling
               or tying; and that the merged entity would have no incentive to engage in
               strategies with a view to foreclosing rivals. The Notifying Party states that, on
               the contrary, the Transaction will have pro-competitive effects because the
               combination of the product portfolios of ZF and Wabco will allow the merged
               entity to offer better and more cost-efficient ADAS components and integrated
               systems than either one would be able to do on its own.
     (373) According to the Non-horizontal Merger Guidelines,377 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 by
               means of tying, bundling, or other exclusionary practices, thereby causing
               harm to consumers. Tying and bundling are common practices that often do
               not have anticompetitive effects and allow companies to provide better
               products or offerings in cost-effective ways. However, in certain
               circumstances, these practices may reduce actual or potential rivals’ ability or
               incentive to compete. The merged entity’s ability to foreclose is dependent on
               the merged entity enjoying a significant degree of market power in one or
               more major products (i.e. anchor products). The merged entity’s incentive to
               foreclose is largely dependent on the profitability of an exclusionary practice,
               for which the relative value of the different products must be taken into
               consideration. Finally, it is only when a sufficiently large fraction of market
               output is affected by the foreclosure that the merger may significantly impede
               competition. The effect on competition must be assessed in light of
               countervailing factors such as the presence of countervailing market power.
8.3.5.1. Possible foreclosure strategies
     (374) ADAS components (supplied by ZF) interact with acting components such as
               braking (supplied by Wabco) and steering (supplied by ZF). Because Wabco is
               active in the brakes market and ZF in the steering market, the merged entity
               could engage in tying/bundling practices of their acting components and
               ADAS components. For example, the merged entity could follow a
375 According to the Notifying Party (reply to question 3 of RFI 18), future tenders for ADAS include:
    (i) Iveco: tender open as of […]; (ii) DAF: open as of […]; and (iii) smaller tenders for other truck and
    bus manufacturers from […].
376 Form CO, paragraph 499.
377 OJ C 265, 18.10.2008, p. 6, paragraphs 91-118.
                                                        81
 ---pagebreak---                tying/bundling strategy to supply fully integrated ADAS systems in
               combination with braking systems to MHCV OEMs. For the reasons explained
               below, the Commission considers that this is unlikely.
8.3.5.2. No ability to foreclose
     (375) According to the Non-horizontal Merger Guidelines,378 the merged entity’s
               ability to foreclose is dependent on the merged entity enjoying a significant
               degree of market power in one of the markets concerned (i.e. anchor product).
               The specific characteristics of the products may also be relevant, for instance,
               pure bundling is unlikely if products are not bought simultaneously or by the
               same customers.
     (376) As indicated in Section 8.3.2, ZF does not have a strong position in the market
               for ADAS cameras and radars ([20-30]% and [20-30]% for cameras in the
               EEA and worldwide, respectively, and [5-10]% and [10-20]% for radars in the
               EEA and worldwide, respectively, in terms of value of sales). In the Steering
               systems market, ZF faces strong competition from Bosch, which is the main
               player, with a market share of approximately [60-70]% in the EEA, and more
               advanced product development.379 In fact, ZF so far only offers hydraulically
               powered steering (“HPS”) which cannot interact with ADAS.380 The only
               possible anchor product is therefore Wabco’s braking system, where Wabco
               competes with Knorr-Bremse.
     (377) In the sale of braking systems (ABS and EBS), when looking at all customer
               categories, Wabco has an estimated share of approximatively [50-60]%, in the
               EEA, followed by with Knorr-Bremse with approximatively [40-50]% in the
               EEA.381 On a global basis, Wabco has an estimated share of approximatively
               [40-50]%, with Knorr-Bremse at approximatively [30-40]%, and others at
               approximatively [10-20]%, in terms of volume.382 Hence, two players with
               similar market coverage are active in the braking systems market.
     (378) While Wabco enjoys a [90-100]% market share in the provision of integrated
               ADAS solutions, such integrated solutions are already a bundled product (at
               the request of OEMs which do not have the capacities to self-integrate)
               including ADAS components and braking. Moreover, Wabco only provides
               integrated ADAS solutions together with Wabco brakes. Hence, the
               Transaction does not change anything in that regard. Furthermore, Wabco’s
               main competitor in this market, Knorr-Bremse, has teamed up with Continental
               to provide integrated ADAS systems and will be able to compete with the
               merged entity for future tenders in the ADAS sphere.383
378 OJ C 265, 18.10.2008, p. 6, paragraphs 95-104.
379 Form CO, paragraph 485.
380 ZF is only in the process of [strategic information]. Reply to question 1 of RFI 35.
381 Replies to question 4 of RFI 18 and question 1 of RFI 28.
382 Reply to question 4 of RFI 18.
383 According to the Notifying Party (reply to question 3 of RFI 18), future tenders for ADAS include:
    (i) Iveco: tender open as of […]; (ii) DAF: open as of […]; and (iii) smaller tenders for other truck and
    bus manufacturers from […].
                                                           82
 ---pagebreak---      (379) Concerning the specific characteristics of the products, ADAS components
              interact with acting components such as braking in order to supply ADAS
              functions. However, while some OEMs buy the bundled product (i.e.
              integrated ADAS solutions from tier-1 suppliers such as Wabco and Knorr-
              Bremse), the majority buys ADAS components separately from acting
              components (such as brake systems).
     (380) The demand for MHCV components is characterised by the presence of large
              and sophisticated OEMs with significant buyer power and technical abilities to
              develop products internally or, alternatively, sponsor new entrants.
     (381) Already today, Wabco does not engage in any tying or bundling strategy. The
              vast majority of OEMs source ADAS components separately from the braking
              hardware, whereas Wabco only sells the bundled integrated ADAS system to
              those OEMs which require so given their lack of internal capabilities to self-
              integrate (OEMs which represent less than 30% of the MHCV market).
     (382) The merger does not change anything vis-à-vis OEMs which already buy
              integrated ADAS systems from Wabco. One respondent to the Commission’s
              market investigation raised concerns that the merger could make it more
              difficult for smaller OEMs to request the merged entity to disclose steering and
              braking interfaces to do the system integration by themselves. However,
              according to the Commission’s market investigation, buying an integrated
              ADAS solution is rather a choice of smaller OEMs (which lack integrating
              capacities), than an imposition on the part of providers of integrated ADAS
              solutions.384 Furthermore, OEMs did not complain about difficulties in
              obtaining disclosure of the necessary interfaces.
     (383) On the other hand, the merger between ZF and Wabco is unlikely to have an
              impact in the merged entity’s ability to impose fully integrated ADAS
              solutions to those OEMs, which currently purchase ADAS components
              separately and do the integration in-house. OEMs, which self-integrate ADAS
              solutions represent roughly 80% of the MHVC market. These OEMs have
              strong countervailing buyer power as well as the ability to self-supply, self-
              integrate, and sponsor entry for other suppliers. These OEMs source different
              components separately via highly competitive tenders that are subject to strict
              and detailed requests for quotes (“RFQs”) or requests for information
              (“RFIs”). OEMs, when sourcing a braking system, will specify that it must be
              an “open” system allowing to accept external brake request signals from any
384 As one respondent to the Commission’s investigation explains, there are advantages and disadvantages
    to using a third-party system integrator: “[…] the business models of suppliers of fully integrated ADAS
    and third-party integrators are somewhat different. […], suppliers of fully integrated systems amortize
    development cost over multiple customers. Compared to that, engaging third-party integrators is more
    costly. On the other hand, however, when engaging a third-party integrator, the OEM would typically
    also acquire the IP rights in connection with the development work carried out by the third-party
    integrator”. Another respondent, in the same line: “[t]he development needs should depend on specific
    vehicle development requirements as well as existing in-house expertise and own IPs. If an OEM is okay
    a solution from a system solution provider they would do so. Or If an OEM may want to apply their
    own/existing IPs, they would work with a system integrator”. (Replies to question 30.1 of the
    Questionnaire to Competitors).
                                                         83
 ---pagebreak---               ADAS.385 This way, the OEMs are free to integrate their ADAS (or an ADAS
              sourced from a third party) with a Wabco braking system without
              interoperability issues. This applies equally to third-party integrators which
              will have full access to the product specifications and settings of the
              components they have been tasked to integrate. This has been the case, for
              example, with Daimler and Traton, which have already sourced the next
              generation of Wabco’s braking system without Wabco’s ADOPT386 Software
              for ADAS. For the aforementioned reasons, these OEMs can integrate
              Wabco’s braking system with a non-Wabco ADAS. This inherent
              interoperability will not change post-merger as it is stipulated in the product
              specifications that are at the sole discretion of the OEMs.387
     (384) Wabco is under the contractual obligation to supply braking systems to most
              OEMs until [strategic information] and this will not be affected by the
              merger.388 Furthermore, ZF does not manufacture all ADAS sensor ranges,
              making a tying or bundling strategy not feasible, at least in the short run.
     (385) Finally, ADAS is a nascent market where new players are coming in with
              various and innovative solutions. The future market evolutions in the area of
              automated driving are uncertain and the position / strength that the merged
              entity will have in the future ADAS / AD market is also uncertain. In this
              context, it does not seem that the merged entity will “in all likelihood” hold a
              dominant position in the near future.
     (386) Given Knorr-Bremse’s similar position to that of Wabco and given customers’
              buyer power, Wabco’s high market share is unlikely to confer upon it the
              ability to foreclose rivals through tying or bundling strategies.
8.3.5.3. The merged entity lacks incentives to engage in foreclosing practices
     (387) According to the Non-horizontal Merger Guidelines,389 the incentive to
              foreclose rivals through bundling or tying depends on the degree to which this
              strategy is profitable. In this context, it is relevant to assess the relative value
              of the different products, for example, it is unlikely that the merged entity
              would forego sales on one highly profitable market in order to gain market
              shares on another market where turnover is relatively small and profits are
              modest. The Commission will also consider whether there are effective and
              timely counter-strategies that the rival firms may deploy.
385 Respondents to the Commission’s market investigation stated that “[w]e are currently working on open
    platforms”, and “[a]s to our knowledge, OEMs can apply a supplier’s ADAS system on other supplier’s
    hardware” and “[name of OEM] has positive experience within advanced technology projects”, Replies
    to question 61.1 of the Questionnaire to Customers.
386 Wabco’s “Autonomous Driving Open Platform Technology” (ADOPT™) includes applications that will
    connect to and be interoperable with Wabco’s braking, steering, stability control, driveline and
    suspension control systems. ADOPT platform consists of software and interfaces between the various
    actuators in a MHCV (such as steering and braking) and ADAS software that provides ADAS/AD
    functions. (Form CO, paragraphs 370, 393, 496).
387 Reply to question 1 of RFI 17.
388 Form CO, paragraph 492.
389 OJ C 265, 18.10.2008, p. 6, paragraphs 105-110.
                                                        84
 ---pagebreak---      (388) Knorr-Bremse (Wabco’s main competitor in the provision of integrated ADAS
              systems) is Wabco’s main rival in the sale of braking systems, where Wabco
              has an estimated share of approximatively [50-60]%, followed by Knorr-
              Bremse with approximatively [40-50]% in the EEA.390 On a global basis,
              Wabco has an estimated share of approximatively [40-50]%, with Knorr-
              Bremse at approximatively [30-40]%, and others at approximatively [10-20]%,
              in terms of volume.391 Knorr-Bremse recently acquired Hitachi’s steering
              business and technology392 and, in September 2018, teamed-up with
              Continental to provide ADAS solutions for MHCV.393 Therefore, the merged
              entity risks losing the market against Knorr-Bremse, if it uses a tying strategy
              which OEMs could refuse, reducing the merged entity’s incentives to engage
              in such a strategy.
8.3.5.4. Overall likely impact on effective competition
     (389) According to the Non-horizontal Merger Guidelines,394 it is only when a
              sufficiently large fraction of market output is affected by foreclosure resulting
              from the merger that the merger may significantly impede effective
              competition. If there remain effective single-product players in either market,
              competition is unlikely to deteriorate following a conglomerate merger. The
              same holds when few single-product rivals remain, but these have the ability
              and incentive to expand output.
     (390) As explained in previous sections, ZF has a relatively low market share in the
              upstream market of ADAS components, with [20-30]% and [20-30]% for
              cameras in the EEA and worldwide respectively, and [5-10]% and [10-20]%
              for radars in the EEA and worldwide respectively, in terms of value of sales).
     (391) Wabco has a strong market position for the provision of integrated ADAS
              solutions ([90-100]% in the EEA and [60-70]% worldwide in the narrowest
              possible market for OEMs which do not carry out self-integration activities).
              When considering competition from third-party system integrators, Wabco’s
              market share is lower ([70-80]% in the EEA and [50-60]% worldwide).
              However, (i) Wabco’s offer of ADAS products covers only a fraction of the
              market, i.e. OEMs which do not self-integrate, representing less than 30% of
              the MHCV market, and requesting the bundled product by their own motion in
              view of their lack of capacity to self-integrate (the merger does not change
              anything in this regard); (ii) in the brakes system market, Wabco faces strong
              competition from Knorr-Bremse; and (iii) in the provision of integrated ADAS
              systems and ADAS integration services, Wabco faces competition from third-
              party system integrators as well as Knorr-Bremse, which has teamed up with
              Continental.
390 Reply to question 4 of RFI 18.
391 Reply to question 4 of RFI 18.
392 See https://www.knorr-bremse.com/en/media/press-releases/knorr-bremse-completes-acquisition-of-the-
    commercial-vehicle-steering-business-of-hitachi-automotive-systems-ltd-in-japan.json.
393 See https://www knorr-bremse.com/en/media/press-releases/knorr-bremse-and-continental-announce-a-
    partnership-for-high-ly-automated-driving-in-commercial-vehicles.json.
394 OJ C 265, 18.10.2008, p. 6, paragraphs 111-118
                                                       85
 ---pagebreak---      (392) Therefore, there remains sufficient competition both upstream and downstream
               and the Commission concludes that the merger will not have a negative impact
               on effective competition.
8.3.6. Conclusion
     (393) In light of the considerations in this Section 8.3, the Commission concludes
               that the Transaction does not raise serious doubts as to its compatibility with
               the internal market and the functioning of the EEA Agreement with respect to
               ADAS components and ADAS system integration.
9.       MARKET DEFINITION AND COMPETITIVE ASSESSMENT CONCERNING THE
         PARTIES’ ACTIVITIES IN (UPSTREAM) CLUTCHES AND (DOWNSTREAM) MHCV AIR
         COMPRESSORS
9.1.     Introduction
     (394) ZF offers clutches for pneumatic auxiliary drives such as air compressors. ZF
               does not produce clutches for other types of auxiliary drives than MHCV air
               compressors.395
     (395) Pneumatic auxiliary drives equipped with a clutch are disconnected from the
               drivetrain as soon and as long as the pneumatic auxiliary drive is not needed.
               Clutches for pneumatic auxiliary drives open when the cut-out pressure is
               reached and the auxiliary drive, e.g. a compressor, is completely separated
               from the engine. Then the abrasion and energy consumption stop.396
     (396) Wabco produces MHCV air compressors. Air compressors are one
               (pneumatic) type of auxiliary drives. Compressed air is the main source of
               energy for all pneumatic braking systems, air suspensions and clutches in CV.
               The main component of the air management system is the compressor itself. It
               is typically driven by the vehicle’s engine and produces the compressed air for
               the entire air system.397
9.2.     Market definitions
9.2.1. Clutches for pneumatic auxiliary drives
     (397) As regards clutches for auxiliary drives, there is no decisional practice of the
               Commission.
     (398) With respect to the relevant product market, the Notifying Party submits that
               clutches for air compressors constitute a separate product market as they are an
               optional, separate component for air compressors. The Notifying Party further
               contends that hydraulic and pneumatic systems differ as they are based on
395 Form CO, paragraph 218.
396 Form CO, paragraph 221. Contrary to this, conventional pneumatic auxiliary drives in CV, such as
    conventional air compressors, are continuously in operation from start to stoppage of the vehicle’s
    engine. As soon as the compressed-air reservoir tanks are filled, conventional compressors continue to
    run (at a reduced pressure level) and continue to abrade and consume energy.
397 Form CO, paragraph 226.
                                                          86
 ---pagebreak---              specific technical designs and developments and cannot easily be combined or
             replaced by each other, which seems to indicate separate markets.398 For the
             reason that clutches for air compressors are offered separately and independent
             of other components, the Notifying Party finally considers that the clutches do
             not belong to a broader, overall market for air management systems in
             MHCV.399
     (399) With respect to the relevant geographic market, the Notifying Party holds the
             view that this should be at least EEA-wide but may develop into a global
             market in the future.400 According to the Notifying Party, the product is almost
             exclusively sold in the EEA at the time being. However, the expected potential
             future expansion of the technology may render a global market definition more
             appropriate.401
     (400) During the market investigation, the majority of respondents that expressed an
             opinion, were of the view that hydraulic systems on the one hand and
             pneumatic clutches/auxiliary drives systems on the other, are part of separate
             product markets.402 As one market participant responded, “[a]ctuation medium
             (air or oil) differ significantly in regard to product design. In regards to power
             density, the size /envelope of hydraulic brake is much smaller vs. air brake.
             Under the hydraulic concept pressure is applied to actuate the brake or
             clutches, while under a pneumatic system it is usually used to release the brake
             (exception service brake). […] Additionally, systems with hydraulic and
             pneumatics usually have different applications, respectively LCVs and
             MHCVs. LCVs trucks are mainly operated with hydraulic brakes (no
             pneumatic system). Pneumatic operated truck applications are used on
             MHCVs which are heavier than 7 tons.”403
     (401) Furthermore, the market investigation results indicate (with the majority of
             respondents that expressed an opinion) that clutches for air compressors
             constitute a separate product market.404 As one of the respondents held
             “[c]lutches for air compressors have special technical requirements which
             differ significantly from clutch applications for example on gearboxes. These
             differing technical requirements relate for example to […] speed of actuation,
             […] different oils used, […] envelope.405
     (402) As for the geographic market, the market investigation results broadly
             confirmed that the geographic scope of selling and purchasing clutches for air
398 Form CO, paragraphs 231 and 232.
399 Form CO, paragraph 233.
400 Form CO, paragraph 234.
401 Form CO, paragraph 234.
402 Replies to question 80 of the Questionnaire to Competitors and question 94 of the Questionnaire to
    Customers.
403 Reply of a market participant to question 94.1 of the Questionnaire to Customers.
404 Replies to question 81 of the Questionnaire to Competitors and question 95 of the Questionnaire to
    Customers.
405 Reply of a market participant to question 95.1 of the Questionnaire to Customers.
                                                          87
 ---pagebreak---               compressors is likely to be EEA-wide but has neither confirmed nor rejected a
              global scope of the geographic market.406
     (403) Based on market investigation results, the Commission finds that the relevant
              product market comprises clutches for air compressors in MHCV. In line with
              the distinction between the OEM/OES distribution channels on the one hand
              and IAM distribution channel on the other407, there are two separate markets
              along the line of these distribution channels. With regard to the relevant
              geographic market, it can ultimately be left open whether the relevant
              geographic market is global or EEA-wide, since the Transaction does not give
              rise to serious doubts about its compatibility with the internal market and the
              functioning of the EEA Agreement under either of these plausible geographic
              market definitions.
9.2.2. Air compressors for MHCV
     (404) In previous decisions, the Commission considered that air compressors for
              MHCV constitute a separate product market.408 In relation to OEM/OES
              markets, the geographic scope was considered to be at least EEA-wide.409
              However, the Commission has not concluded on the geographic market
              definition in relation to IAMs.410
     (405) The Notifying Party endorses the Commission’s findings in its prior decisional
              practice.411 As regards the relevant product market, the Notifying Party
              specifies that it considers air compressors with clutches and without clutches to
              form part of the same relevant product market as these two alternatives exist
              among multiple options for OEMs when the OEMs design a new MHCV.412
              As regards the geographic market definition, the Notifying Party points out
              that the market for air compressors for MHCV may develop into a global
              market in the future.413
     (406) The majority of respondents, having expressed their opinion, are of the view
              that air compressors for conventional MHCVs form a separate product market
              as opposed to air compressors for electrified and hybrid MHCV.414 However,
              contrary to the Notifying Party’s view, the market investigation results suggest
              that air compressors with clutches and without clutches belong to separate
              product markets. As one of the respondents stated “[t]he air compressor with
              clutch is another variant / version offering additional features (fuel
              consumption reduction).” Another respondent explained that “[t]echnically, air
              compressors with a clutch could be viewed as a variant of air compressors
406 Replies to questions 86 and 87 of the Questionnaire to Competitors and questions 100 and 101 of the
    Questionnaire to Customers.
407 Section 7.1.1.3 of this Decision.
408 For example in Case No COMP/M.1342 – Knorr-Bremse/Robert Bosch, paragraph 22.
409 Case No COMP/M.1342 – Knorr-Bremse/Robert Bosch, paragraph 22.
410 Case No COMP/M.1342 – Knorr-Bremse/Robert Bosch, paragraph 23.
411 Form CO, paragraph 236.
412 Form CO, paragraph 238.
413 Form CO, paragraph 239.
414 Replies to question 83 of the Questionnaire to Competitors and question 97 of the Questionnaire to
    Customers.
                                                      88
 ---pagebreak---               with[out] a clutch, namely a variant which offers additional features. However,
              air compressors with a clutch offer more a fuel-efficient solution to supply
              compressed air, although usually at a higher price, than air compressors
              without a clutch.”415
     (407) With respect to the relevant geographic market, the market investigation points
              towards an EEA-wide market for air compressors and remains inconclusive
              concerning a potential global market.416
     (408) The Commission considers that, for the purposes of this Decision, the exact
              product market definition and geographic market definition with respect to air
              compressors can be left open, as the outcome of the competitive assessment
              would be the same under any plausible alternative market definition. The
              plausible product markets are the markets for (i) air compressors with and
              without clutches; and for (ii) air compressors with clutches, which should each
              be subdivided according to distribution channel (OEM/OES on the one hand
              and IAM on the other).417 These potential product markets are either (i) EEA-
              wide or (ii) global in scope.
9.3.    Competitive assessment
9.3.1. Market shares
     (409) As regards ZF’s market shares upstream, the Notifying Party submits that ZF’s
              market share upstream in the supply of clutches for auxiliary drives for MHCV
              air compressors on a global and EEA-wide level418 is roughly [50-60]%, both
              on the OEM/OES markets as well as on the IAM markets.419
     (410) Wabco’s market shares of MHCV air compressors (i) with clutches as a
              separate market on an EEA-wide or global basis or (ii) air compressors with
              and without clutches combined on an EEA-wide or global basis, both on the
              OEM/OES market as well as on the IAM market are as follows.420
415 Replies to question 85 of the Questionnaire to Competitors and questions 99 and 99.1 of the
    Questionnaire to Customers.
416 Replies to question 88 of the Questionnaire to Competitors and question 102 of the Questionnaire to
    Customers.
417 Section 7.1.1.3 of this Decision.
418 The Notifying Party notes that air compressors with clutches are sold [strategic information] (Form CO,
    paragraph 234).
419 Notifying Party’s reply to question 1 of RFI 21 post-notification of 15 January 2020.
420 The potential market for air compressors without clutches is not relevant for this Transaction as there are
    no vertical links or horizontal overlaps.
                                                         89
 ---pagebreak--- Table 19*: Wabco’s air compressors, worldwide, with and without clutches,
OEM/OES, 2018421
                                           Turnover        Turnover          Volume     Volume
                                       (EUR million)            (%)           (units)      (%)
ZF                                        [amount]            [0-5]%          [amount]   [0-5]%
Wabco                                     [amount]          [40-50]%          [amount] [40-50]%
ZF-Wabco combined                         [amount]          [40-50]%         [amount]  [40-50]%
Knorr-Bremse                              [amount]          [20-30]%          [amount] [20-30]%
Voith                                     [amount]            [0-5]%          [amount]   [0-5]%
SORL / Asimco                             [amount]           [5-10]%          [amount]  [5-10]%
Others                                    [amount]          [10-20]%          [amount] [10-20]%
Total                                     [amount]             100%           [amount]    100%
Table […]**: Wabco’s air compressors, worldwide, with and without clutches, IAM,
2018422
                                           Turnover        Turnover          Volume     Volume
                                       (EUR million)            (%)           (units)      (%)
ZF                                        [amount]            [0-5]%          [amount]   [0-5]%
Wabco                                     [amount]          [40-50]%          [amount] [40-50]%
ZF-Wabco combined                         [amount]          [40-50]%         [amount]  [40-50]%
Knorr-Bremse                              [amount]          [20-30]%          [amount] [20-30]%
Voith                                     [amount]           [5-10]%          [amount]   [0-5]%
SORL / Asimco                             [amount]          [10-20]%          [amount]   [0-5]%
Vaden                                     [amount]          [10-20]%          [amount] [10-20]%
Yumak                                     [amount]           [5-10]%          [amount]  [5-10]%
Others                                    [amount]           [5-10]%          [amount]  [5-10]%
Total                                     [amount]             100%           [amount]    100%
Table […]***: Wabco’s air compressors, worldwide, with clutches, OEM/OES, 2018
                                           Turnover        Turnover          Volume     Volume
                                       (EUR million)            (%)           (units)      (%)
ZF                                        [amount]            [0-5]%          [amount]   [0-5]%
Wabco                                     [amount]          [50-60]%          [amount] [50-60]%
ZF-Wabco combined                         [amount]          [50-60]%         [amount]  [50-60]%
Knorr-Bremse                              [amount]          [40-50]%          [amount] [40-50]%
Voith                                     [amount]            [0-5]%          [amount]   [0-5]%
SORL / Asimco                             [amount]            [0-5]%          [amount]   [0-5]%
Others                                    [amount]            [0-5]%          [amount]   [0-5]%
Total                                     [amount]             100%           [amount]    100%
*   Should read: “21”.
421 The market shares are, by and large, the same across 2016, 2017 and 2018.
** Should read: “22”.
422 The market shares are, by and large, the same across 2016, 2017 and 2018.
*** Should read: “23”.
                                                        90
 ---pagebreak--- Table […]*: Wabco’s air compressors, worldwide, with clutches, IAM, 2018
                                           Turnover        Turnover          Volume     Volume
                                       (EUR million)            (%)           (units)      (%)
ZF                                        [amount]            [0-5]%          [amount]   [0-5]%
Wabco                                     [amount]          [50-60]%          [amount] [50-60]%
ZF-Wabco combined                         [amount]          [50-60]%         [amount]  [50-60]%
Knorr-Bremse                              [amount]          [40-50]%          [amount] [40-50]%
Voith                                     [amount]            [0-5]%          [amount]   [0-5]%
SORL / Asimco                             [amount]            [0-5]%          [amount]   [0-5]%
Vaden                                     [amount]            [0-5]%          [amount]   [0-5]%
Yumak                                     [amount]            [0-5]%          [amount]   [0-5]%
Others                                    [amount]           [5-10]%          [amount]   [0-5]%
Total                                     [amount]             100%           [amount]    100%
Table […]**: Wabco’s air compressors, EEA, with and without clutches, OEM/OES,
2018423
                                           Turnover        Turnover          Volume     Volume
                                       (EUR million)            (%)           (units)      (%)
ZF                                        [amount]            [0-5]%          [amount]   [0-5]%
Wabco                                     [amount]          [50-60]%          [amount] [50-60]%
ZF-Wabco combined                         [amount]          [50-60]%         [amount]  [50-60]%
Knorr-Bremse                              [amount]          [50-60]%          [amount] [50-60]%
Voith                                     [amount]          [30-40]%          [amount] [40-50]%
SORL / Asimco                             [amount]           [5-10]%          [amount]  [5-10]%
Others                                    [amount]            [0-5]%          [amount]   [0-5]%
Total                                     [amount]             100%           [amount]    100%
Table […]***: Wabco’s air compressors, EEA, with and without clutches, IAM,
2018424
                                           Turnover        Turnover          Volume     Volume
                                       (EUR million)            (%)           (units)      (%)
ZF                                        [amount]            [0-5]%          [amount]   [0-5]%
Wabco                                     [amount]          [50-60]%          [amount] [40-50]%
ZF-Wabco combined                         [amount]          [50-60]%         [amount]  [40-50]%
Knorr-Bremse                              [amount]          [30-40]%          [amount] [30-40]%
Voith                                     [amount]           [5-10]%          [amount]  [5-10]%
Vaden                                     [amount]           [5-10]%          [amount]  [5-10]%
Others                                    [amount]           [5-10]%          [amount]  [5-10]%
Total                                     [amount]             100%           [amount]    100%
* Should read: “24”.
** Should read: “25”.
423 The market shares are, by and large, the same across 2016, 2017 and 2018.
*** Should read: “26”.
424 The market shares are, by and large, the same across 2016, 2017 and 2018.
                                                        91
 ---pagebreak--- Table […]*: Wabco’s air compressors, EEA, with clutches, OEM/OES, 2018
                                        Turnover      Turnover      Volume        Volume
                                     (EUR million)       (%)         (units)        (%)
ZF                                     [amount]        [0-5]%        [amount]     [0-5]%
Wabco                                  [amount]       [50-60]%       [amount]    [50-60]%
ZF-Wabco combined                     [amount]        [50-60]%      [amount]     [50-60]%
Knorr-Bremse                           [amount]       [40-50]%       [amount]    [40-50]%
Voith                                  [amount]        [0-5]%        [amount]     [0-5]%
Others                                 [amount]        [0-5]%        [amount]     [0-5]%
Total                                  [amount]         100%         [amount]      100%
Table […]**: Wabco’s air compressors, EEA, with clutches, IAM, 2018
                                        Turnover      Turnover      Volume        Volume
                                     (EUR million)       (%)         (units)        (%)
ZF                                     [amount]        [0-5]%        [amount]     [0-5]%
Wabco                                  [amount]       [50-60]%       [amount]    [50-60]%
ZF-Wabco combined                     [amount]        [50-60]%      [amount]     [50-60]%
Knorr-Bremse                           [amount]       [40-50]%       [amount]    [40-50]%
Voith                                  [amount]        [0-5]%        [amount]     [0-5]%
Vaden                                  [amount]        [0-5]%        [amount]     [0-5]%
Others                                 [amount]        [0-5]%        [amount]     [0-5]%
Total                                  [amount]         100%         [amount]      100%
9.3.2. The Notifying Party’s view
      (411) The Notifying Party contends that ZF supplies clutches for air compressors
            [supplier data] to Wabco and Wabco sources clutches for air compressors
            [supplier data] from ZF.425 The Notifying Party hence holds the view that the
            competitive dynamic on the market(s) would not change as a result of the
            Transaction.426 In addition, the Notifying Party maintains that there is neither
            an ability nor an incentive for input foreclosure or for customer foreclosure,427
            as, on the one hand, there is a sufficient number of alternative suppliers in the
            market and the merged entity would strive for generating efficiencies instead
            of ceasing to supply clutches to other manufacturers,428 and, on the other hand,
            Wabco is already exclusively supplied by ZF and would rather identify
            potentials for cost saving than to foreclose access to customers.429
9.3.3. The Commission’s assessment
      (412) The Commission first notes that the Transaction is unlikely to change anything
            in the IAM markets with respect to clutches for air compressors as well as air
            compressors. There is no horizontal overlap in the IAM sales of these
            components. Moreover, the vertical link between clutches for air compressors
* Should read: “27”.
** Should read: “28”.
425 Form CO, paragraph 240.
426 Form CO, paragraph 240.
427 Form CO, paragraphs 247 et seq.
428 Form CO, paragraphs 247 and 248.
429 Form CO, paragraphs 250 and 252.
                                                   92
 ---pagebreak---               and air compressors is between air compressor suppliers and clutch suppliers
              and is not related to IAM sales of components. Therefore, the IAM markets
              will not be discussed further.
     (413) During the market investigation, no purchaser of clutches submitted that it
              would purchase clutches for air compressors from ZF.430 Several respondents,
              however, took the view that their access to ZF’s clutches would deteriorate
              post-Transaction.431 Two respondents also indicated that their possibilities to
              sell clutches to Wabco post-Transaction would deteriorate.432 Two respondents
              indicated that, for market participants sourcing air compressors for MHCV
              from Wabco, it would not be possible to switch to another supplier of air
              compressors without incurring significant costs and efforts should the merged
              entity increase the prices for air compressors post-Transaction.433 However,
              with respect to the likely effect of the Transaction, only one respondent out of
              nine considered that there would be negative effects on the competitive
              situation in the market for clutches for pneumatic auxiliary drives (including
              air compressors);434 and none of the respondents expected a negative effect of
              the Transaction on its own company in respect of clutches for pneumatic
              auxiliary drives (including air compressors) for MHCV.435 Most of the market
              participants expressing an opinion also indicated that such clutches are
              bespoke products.436
     (414)     Despite the high market shares (as set out in Section 9.3.1 above, the
              Commission considers that the Transaction does not raise serious doubts as to
              its compatibility with the internal market and the functioning of the EEA
              Agreement for the following reasons.
     (415) First, ZF’s entire production of clutches for air compressors is sourced
              [supplier data] and Wabco satisfies its entire demand for these clutches by
              purchasing from [supplier data]. This means that no current supplier of Wabco
              or current customer of ZF in relation to clutches for air compressors can be
              excluded as a result of the Transaction.437
     (416) Second, as regards potential input foreclosure (i.e. deterioration of access to
              ZF’s clutches), the Commission notes that ZF has in the past tried to gain
              business with other customers than [customer data] but unsuccessfully. For
              example, ZF explained that initially, [customer data] was the target lead
              customer for ZF’s air compressor clutch (in 2008/2009). Ultimately, the
              project was industrialised with [customer data] in 2012 instead of [customer
430 Replies to questions 89 to 91 of the Questionnaire to Competitors and questions 103 to 109 of the
    Questionnaire to Customers.
431 Replies to question 90 of the Questionnaire to Competitors and questions 105 of the Questionnaire to
    Customers.
432 Replies to question 91 of the Questionnaire to Competitors. A third respondent indicated this response,
    but the Commission does not consider its response to be credible given that it does not manufacture or
    distribute clutches for air compressors.
433 Replies to questions 107 of the Questionnaire to Customers.
434 Replies to questions 108 of the Questionnaire to Customers.
435 Replies to questions 109 of the Questionnaire to Customers.
436 Replies to question 82 of the Questionnaire to Competitors and question 96 of the Questionnaire to
    Customers.
437 [Strategic information].
                                                        93
 ---pagebreak---              data] was not driving the project forward. ZF approached [customer data]
             again in 2019 but [customer data] has shown no interest to purchase ZF’s
             product. ZF is also actively trying to gain business with [customer data].438
             The fact that ZF has not succeeded in gaining other customers than [customer
             data] demonstrates that customers have other credible choices. In line with the
             conditions applicable to the ability to foreclose access to input439 the
             Commission notes that ZF’s clutches for air compressors do not appear to be
             an important input for the downstream market. Likewise, considering ZF’s
             unsuccessful attempts to win further supply contracts for its clutches, ZF
             obviously cannot negatively affect the overall availability of this input for the
             downstream market.440 Finally, even though the supply relationship is factually
             exclusive, this is not the case legally, as ZF’s attempts to win further business
             show.441 Alternative suppliers of clutches include Tremec/Horbiger which
             currently supplies Knorr-Bremse and has a clutch design very similar to that of
             ZF; YooSung which has a clutch concept different to that of ZF but with the
             same functionality (YooSung currently supplies Navistar in the US); as well as
             Kendrion and Licos which also both offer clutch actuators for air
             compressors.442 As such, input foreclosure is unlikely.443
     (417) Third, in relation to potential customer foreclosure (i.e. deterioration of
             possibilities to sell clutches to Wabco), whilst Wabco represents half of both
             EEA and global demand, the Commission notes that alternative clutch supplier
             are present in the market despite not having supplied Wabco for years (see
             paragraph (411) above). Hence, Wabco appears not to be an important
             customer in the downstream market444 and due to its singular sourcing from
             ZF, it is highly unlikely that the Transaction will increase ZF’s competitors
             costs by, for example, restricting access to Wabco.445
     (418) Finally, comments relating to difficulties to switch from Wabco’s air
             compressors to those of its competitors without incurring significant costs and
             efforts should the merged entity increase the prices for air compressors post-
             Transaction are not merger specific. Unless the Transaction were to lead to
             input foreclosure and thus exit of competing air compressor suppliers (which is
             unlikely, see paragraph (411) above), the fact that switching may be costly is a
             characteristic of the market that is unrelated to the Transaction.
438 Notifying Party’s reply to RFI 22.
439 Non-Horizontal Merger Guidelines, paragraphs 33 et seq.
440 Non-Horizontal Merger Guidelines, paragraph 36.
441 Non-Horizontal Merger Guidelines, paragraph 36.
442 [Customer name and strategic information].
443 Demand for clutches is also affected by the development of the air compressor products. For example,
    Voith supplies Daimler with conventional air compressors but has recently introduced air compressors
    equipped with a self-actuating effective idling system which serves a similar function to an air
    compressor with a clutch. Sanwa Seiki is developing and already offering a clutch-equipped air
    compressor on its website.
444 Non-Horizontal Merger Guidelines, paragraph 58.
445 Non-Horizontal Merger Guidelines, paragraph 60.
                                                       94
 ---pagebreak--- 9.3.4. Conclusion
     (419) In light of the arguments set out above in this Section 9.3, the Commission
               concludes that the Transaction does not raise serious doubts as to its
               compatibility with the internal market and the functioning of the EEA
               Agreement with respect to the markets for (i) clutches for air compressors and
               for (ii) air compressors whether on an EEA-wide or global basis.
10.      MARKET DEFINITION AND COMPETITIVE ASSESSMENT CONCERNING                                         THE
         PARTIES’ ACTIVITIES IN VALVES AND CABIN DAMPERS FOR MHCV
10.1. Introduction
     (420) MCHV cabin suspension is primarily achieved by the use of cabin dampers
               (along with other components). Cabin dampers (also called shock absorbers)
               absorb vibrations or more precisely, vibrational energy, and provide greater
               safety, comfort and stability in the vehicle cabin.446 Vehicle cabins differ in
               size, equipment, and weight. Each different cabin design requires an individual
               spring/damper solution (in this Decision, cabin damper refers to a combination
               of a damper unit and a spring unit).
     (421) According to the Notifying Party, in general, cabin dampers can be classified
               as follows: steel spring module,447 air spring module,448 cabin air levelling
               module (“CALM”)449 and CDC (“continuous damping control”) damping
               system.450
     (422) When OEMs design a cabin suspension system, they have the choice basically
               between451
         (a)      Cabin suspension without a height levelling function, and
         (b)      Cabin suspension with a height levelling function.
     (423) More specifically, if OEMs choose a cabin suspension without a height
               levelling function, they have the choice between
         (a)      Steel spring modules (consisting of a damper unit and a spring unit), or
446 Form CO, paragraph 255.
447 Steel spring modules are used primarily in construction and delivery vehicles as well as tractors ad
    special vehicles, where robustness is important. Steel springs are a mechanical solution and are not part
    of pneumatic or air damping solutions. Form CO, paragraph 257.
448 Air spring modules are used for driver cabs with high comfort requirements and for trucks, tractors,
    construction vehicles and special vehicles. The advantage of air spring modules is that they allow ride
    height control with different cabin equipment/loading, they provide constant, comfortable characteristic
    frequency as well as increased ride comfort. Air spring modules consist of a damping unit and an air
    spring unit and work alongside bellows and cabin levelling valves. Form CO, paragraph 257.
449 Cabin air levelling module is an integrated system providing the same functions as the combination of
    an air spring module and a cabin levelling valve. Form CO, paragraph 257.
450 With CDC, also a ZF innovation, most of the vibration can be isolated and thus ergonomics are
    improved. This is a sophisticated cabin damper that provides stability even in critical driving situations
    and safe handling during dynamic driving manoeuvres. Further advantages are more comfort for the
    driver, reduced vehicle wear, reduction in road damage and an increase in cost-effectiveness.
451 Form CO, paragraph 259.
                                                         95
 ---pagebreak---         (b)       Air spring modules (consisting of a damper unit and a spring unit)
     (424) Should OEMs choose a cabin suspension with a height levelling function, they
              can either
        (a)       Purchase a damper unit, an air spring and cabin levelling valves (“CLV”) as
                  separate components and self-integrate, or
        (b)       Purchase an air spring module (consisting of a damper unit and a spring
                  unit) and a CLV and self-integrate, or
        (c)       Purchase an integrated solution (which integrates a damper unit, a spring
                  unit and a CLV (for example, ZF’s CALM).452
     (425) The OEM’s choice is based on price, space and weight. Integrated solutions
              are lighter, require less space and less assembly effort, but are more costly.
     (426) As regards cabin dampers, ZF manufacturers and sells (i) steel modules; (ii) air
              spring modules; (iii) CALM and (iv) CDC damping system. Only air spring
              modules and CALM are relevant products for the current assessment since
              Wabco’s CLVs and bellow servo valve (“BSV”)453 can only be used in
              conjunction with these two products.
     (427) Wabco manufactures and sells many types of valves (mainly mechanical). The
              majority of the valves Wabco manufactures fall into the category of brake and
              chassis control valves. Amongst these are valves related to the air suspension
              system such as CLVs, BSVs and chassis levelling valves.
     (428) ZF buys various types of valves. However, it does not buy most types of
              valves manufactured by Wabco.454 The key exception is a specific BSV, which
              ZF then incorporates in its integrated cabin damper CALM.455 456 Wabco
              provides this BSV only to ZF and to no other customer (it is a patented,
              bespoke product, designed for ZF’s CALM).
     (429) As regards CLVs and chassis levelling valves, Wabco sells these directly to
              OEMs and OEMs then integrate these into their air suspension systems. ZF
              does not buy CLVs or chassis levelling valves whether from Wabco or any
              other manufacturer.
     (430) ZF also sells its CALM cabin dampers together with air spring modules on the
              IAM. ZF also sells the CALM cabin dampers together with air spring modules
452 Form CO, paragraph 259.
453 The BSV is integrated into the damper unit of the air spring module and controls air flow as well as
    height levelling by pressurising and venting the cabin air bellows. Form CO, paragraph 257.
454 According to ZF, it sources certain commoditised valves from Wabco: [strategic information] worth
    EUR [amount], [strategic information] worth EUR [amount] and [strategic information] worth EUR
    [amount]. These were purchased solely for the aftermarket. In other words, ZF sourced these for
    replacement parts and not as input parts to its own products. All these products were resold outside the
    EEA.
455 ZF manufactures internally certain valves which are used in the cabin damper. Wabco does not
    manufacture these types of valves (nor does it buy them).
456 Form CO, paragraph 254.
                                                         96
 ---pagebreak---                to Wabco and Wabco acts as a reseller to its IAM customers. CALM and air
               spring modules are always supplied by ZF as a bundle given that CALM is
               always combined with air spring modules (e.g. 2x CALM and 2x air spring
               modules or 3x CALM, 1x air spring module).457
10.2. Market definition
10.2.1. Valves for cabin dampers
10.2.1.1. Previous Commission decisions
     (431) Valves are devices that control the passage of a fluid, gas or other material
               through a pipe or duct.458 The Commission has not previously considered
               valves for cabin dampers. It has considered valves in a more general context
               and came to the conclusion that valves can be segmented into “control valves”
               and “isolation valves”.459 This conclusion was drawn on the basis that from the
               demand-side perspective, there is no or only little substitutability within each
               of “control valves” and “isolation valves”, but from a supply-side perspective
               the substitution is by far greater.460 Although not all control valve
               manufacturers produce all types of control valves and not all isolation valve
               manufacturers produce all types of isolation valves, in general, all manufacture
               a large variety of valves and every type of valve has a variety of suppliers.461
               Therefore, the Commission assessed the Case No COMP/M.8207 –
               Emerson/Pentair (valves and controls business) based on a distinction between
               control valves and isolation valves.462 As regards the geographic market, the
               Commission found for the purposes of its decision that the geographic market
               for valves was EEA-wide in scope.463
10.2.1.2. The Notifying Party’s view
     (432) CLVs and BSVs are effectively air suspension valves. According to the
               Notifying Party, there are four types of air suspension valves: CLVs, chassis
               levelling valves, BSVs and valves with comparable height levelling and air
               flow functionalities.
457 Form CO, paragraphs 260 and 333 et seq.
458 Form CO, paragraph 266: Valves come in several forms and types. Typically, industry reports
    differentiate valves according to their shape (e.g. gate valves, ball valves, plug valves, butterfly valves,
    check valves, diaphragm valves and others), their function (on/off valves, safety valves, control valves,
    pressure reducing valves), their size or the mode of operation (for emergency shut down, manual or
    actuated) and also consider their end use in various industries.
459 Case No COMP/M.8207 – Emerson/Pentair (Valves and controls business), paragraphs 7 et seq. Control
    valves are valves used to control conditions such as flow, pressure, temperature and liquid level by fully
    or partially opening or closing in response to signals received from controllers that compare a “set point”
    to a “process variable” whose value is provided by sensors that monitor changes in such conditions. .
    Isolation valves are also referred to as “on-off” valves. They stop or start the flow of a medium but, in
    contrast to control valves, are not able to control flow by partially opening or closing.
460 Case No COMP/M.8207 – Emerson/Pentair (Valves and controls business), paragraphs 16 and 17.
461 Case No COMP/M.8207 – Emerson/Pentair (Valves and controls business), paragraph 17.
462 Case No COMP/M.8207 – Emerson/Pentair (Valves and controls business), paragraph 18.
463 Case No COMP/M.8207 – Emerson/Pentair (Valves and controls business), paragraph 36.
                                                            97
 ---pagebreak---      (433) The Notifying Party submits that the relevant product market is the one of
            “brake and chassis control valves (conventional valves)”.464 It contends that all
            air suspension levelling valves used for MHCV belong to the market for brake
            and chassis control valves for MHCV. Moreover, there is no need to
            distinguish between different types of air suspension valves.
     (434) Whilst the Notifying Party concedes that the different types of valves used for
            air suspension are not interchangeable with other types of valves from the
            demand-side perspective,465 it argues a market for brake and chassis control
            valves is justified based on supply-side substitutability.466 More specifically,
            according to the Notifying Party, (i) all brake and chassis control valves,
            including valves used for MHCV air suspension are mechanically controlled
            valves that regulate, direct or control the flow of gasses or liquids by opening,
            closing or partially obstructing various passageways;467 (ii) valves used for
            MHCV cabin air suspension are technically and functionally comparable to
            valves used for MHCV chassis air suspension;468 (iii) a manufacturer of brake
            and chassis control valves will be able to switch production to any kind of
            valve for MHCV cabin dampers and MHCV air suspension, respectively, as
            these valves are relatively simple, low cost and commoditised items;469 (iv) no
            patents are required to produce valves that provide airflow and height levelling
            functions; and (iv) conventional valves such as brake and chassis control
            valves are often based on a standard valve type or design which is frequently
            configured to order for the customer. Finally, the Notifying Party argues that
            even manufacturers of industrial pneumatic valves could easily switch
            production to MHCV mechanically controlled valves. The product market
            might therefore be considered even wider than brake and chassis control
            valves.470
     (435) As for a possible segmentation by sales channel, i.e. an OEM/OES market on
            the one hand and an IAM market on the other hand, the Notifying Party
            contends that this would not be appropriate because valves are generally
            integrated components of cabin, chassis and seat dampers, which are generally
            designed to last for the lifetime of an MHCV. If dampers of MHCVs break,
            they must be replaced as a whole. Only cabin levelling valves (“CLV”) can be
            replaced separately as they come alongside cabin dampers.471
     (436) As for the geographic market, the Notifying Party considers the market to be
            global, or at least EEA-wide since472 (i) as valves are small, transport costs are
            low, (ii) customers source around the world and (iii) no national sales
            structures are necessary.
464 Form CO, paragraph 268.
465 Form CO, paragraph 270.
466 Form CO, paragraph 270.
467 Annex RFI 5 to Form CO, response to question 1.
468 Annex RFI 5 to Form CO, response to question 1.
469 Annex RFI 5 to Form CO, response to question 1.
470 Annex RFI 5 to Form CO, response to question 1.
471 Annex RFI 5 to Form CO, response to question 1.
472 Form CO, paragraph 275.
                                                    98
 ---pagebreak--- 10.2.1.3. Commission’s assessment
     (437) The Commission first notes that the previous decision relating to valves as set
              out in section 10.2.1.1 is not directly relevant since it did not relate to brake
              and chassis control valves used for MHCVs.473 However, the Notifying Party
              has used it for inspiration in determining that control valves from one product
              market without a need for any further sub-division.
     (438) The Commission takes as a starting point the Notifying Party’s market
              definition, i.e. that of brake and chassis control valves for MHCV. Due to the
              specific function of control valves (as opposed to other types of valves with no
              control function) and no evidence to the contrary, the Commission considers
              that a wider market definition than brake and chassis control valves is not
              appropriate (i.e. to include valves used in brakes and chassis but not exercising
              a control function).
     (439) For the reasons explained below, the Commission considers that brake and
              chassis control valves for MHCV may be sub-divided further. First, the
              Commission notes that, within brake and chassis control valves, there exist
              certain control valves which relate to air suspension (whether cabin air
              suspension or chassis air suspension). Second, within air suspension related
              control valves, there exist different types of control valves: CLVs, chassis
              levelling valves, BSVs and valves with comparable height levelling and
              airflow functionalities.
     (440) First, responses to the market investigation are mixed in term’s of demand-side
              substitutability between different types of brake and chassis control valves and
              in particular between valves for air suspension and other control valves. Those
              respondents that expressed an opinion consider that some valves maybe
              interchangeable whilst others are not. The majority of the respondents, which
              expressed an opinion, held that with respect to different types of valves used
              for MHCV air suspension only some can be used interchangeably.474 One
              market participant explained that “[e]ven though technical principle is similar
              or same, there is no interchangeability given because of completely different
              boundary conditions and requirements. Airflow characteristics, airflow
              volumes and air pressure are significantly different between the different
              applications (e.g. cabin levelling valves vs. chassis levelling valves).”475
              Another stated that “[i]n general you have to distinguish between an integrated
              version of the levelling valve in the cabin damper and a separate version
              where cabin damper and levelling valve are two single components. While
              these are technically and commercially comparable, in general the integrated
              version is more attractive for customers. There are several market players who
              supply valves for the separate version. These are interchangeable.”476
473 The Emerson/Pentair case did not relate to the automotive sector but rather to other industries. In that
    case, the Commission did not distinguish by specific end use but rather focused on the division between
    control and isolation valves.
474 Replies to question 92.1of Questionnaire to Competitors and replies to question 110.1 of Questionnaire
    to Customers.
475 Reply to question 92.1.1of Questionnaire to Competitors.
476 Reply to question 92.1.1of Questionnaire to Competitors.
                                                        99
 ---pagebreak---      (441) Responses to the market investigation in respect of supply-side substitutability
               between different types of brake and chassis control valves and in particular
               between valves for air suspension and other control were also mixed. For
               example, there is no clear view as to whether air suspension (including cabin
               damper) valves are simple, low cost and commoditised products.477 Moreover,
               whilst some replies indicate that supply-side substitutability should be
               possible,478 others consider that valve technology is quite complex, barriers to
               entry exist and lead times long so question supply-side substitutability.479
     (442) Given the lack of direct relevance of the Emerson/Pentair decision and the
               inconclusive market investigation on the substitutability of different valves
               within brake and chassis control valves, the Commission considers that it is
               prudent to also assess the effects of the Transaction on the basis of narrower
               markets. In this case, the narrow market with any relevance to cabin dampers
               would be the markets for CLVs and BSVs. Ultimately, it can however be left
               open for the purposes of this Decision whether CLVs and BSVs belong to an
               overall all brake and chassis control valve market or whether each of CLVs
               and BSVs belong to distinct product markets as no competition concerns arise
               under either definition.
     (443) Furthermore, the Commission considers that segmentation by the sales channel
               – OEM/OES market on the one hand and IAM on the other hand – is not
               necessary for BSVs for the purposes of this Decision since the BSV Wabco
               manufacturers is not sold on the IAM. As regards CLVs, these are sold on the
               IAM market. However, since ZF neither buys nor sells CLVs, the Transaction
               has no effect on the IAM sales of CLVs. As such, the IAM of CLVs is not
               discussed further in this Decision. The relevant potential product markets
               therefore are (i) brake and chassis control valves to OEM/OES; (ii) CLVs to
               OEM/OES; and (iii) BSV. For the purposes of this Decision, it can however be
               left open whether there is an overall market for brake and chassis control
               valves or whether distinct markets for each of CLVs and BSV exist.
     (444) With regard to the geographic market, a large majority of competitors
               considered the market to have a global character.480 In this context, the market
               participants stated, for example, that “[a]ll key relevant suppliers have a global
               manufacturing footprint”,481 “[p]roducts are shipped globally” and “[t]he
477 Reply to question 97 of Questionnaire to Competitors.
478 Replies to questions 92.1.1 and 92.2.1 of Questionnaire to Competitors. For example, one market
    participant explained that it “understand[s] that customers tend to purchase different valves for different
    purposes, and so in that sense, they are complementary rather than substitutable. However, each of the
    different valves described above is, we believe, similar in price. We expect that all key valve
    manufacturers are capable of manufacturing all types of valves. As these are "designed in" products: all
    suppliers should be capable of designing a valve to suit the OEM’s technical requirements.” Another
    voice from the market stated that “[f]rom a technical perspective, these valves are a purely mechanical
    product. They are afforded only a low degree of IP protection. Knowledge of the manufacturer about
    pneumatic/mechanic is necessary, which is specific to the truck industry. […] From an investment
    perspective, the barriers are quite low for existing valve manufacturers (e.g. for those who have an
    existing production line). For a completely new market entrant, the investments would be very high.”
479 Replies to question 92 of Questionnaire to Competitors.
480 Replies to question 92.2.1of Questionnaire to Competitors; Replies to question 118 of Questionnaire to
    Customers.
481 Reply to question 118.1 of Questionnaire to Customers.
                                                         100
 ---pagebreak---               market can be considered global because the valves are not so much impacted
              by the logistic costs, so the competition could be considered as global.”482
     (445) The Commission considers that for the purposes of this Decision, it can be left
              open whether the geographic market with respect to brake and chassis control
              valves or each of CLVs or BSVs is EEA-wide or global, as the outcome of the
              competitive assessment would be the same under any of these plausible
              alternative geographic market definitions.
10.2.2. Cabin dampers
10.2.2.1. Previous Commission decisions
     (446) As regards cabin dampers, according to one previous Commission decision, air
              spring suspension systems are to be distinguished from other suspension
              systems such as leaf and coil springs.483 A further segmentation exists along
              the distinction between OEM/OES markets on the one hand and IAM on the
              other hand.484
     (447) In that previous decision, the Commission found that the relevant geographic
              market is “European”.485
10.2.2.2. The Notifying Party’s view
     (448) The Notifying Party submits that the relevant market is the market for air
              suspension for MHCV (i.e. suspension systems using air spring dampers).486
              According to the Notifying Party, in line with the previous Commission
              decision mentioned above, air suspension should be distinct from other types
              of suspension (for example steel spring suspension).487 The Notifying Party
              argues that no distinction should be made between air suspension systems for
              the chassis, the cabin and the driver seat as there are no relevant technical
              differences between the components used for the chassis, cabin and driver seat
              air suspension.488 All air suspension systems consist of a damping unit and an
              air spring unit.
     (449) If one were to consider only cabin air suspension, no further sub-segmentation
              should be made between conventional cabin suspension and cabin suspension
              with a height levelling function. From a demand-side perspective, an OEM that
              wants a cabin suspension with a height levelling function can either purchase a
              conventional damper and combine it with a CLV, or purchase a cabin damper
482 Both replies to question 103.1of Questionnaire to Competitors.
483 Case No COMP/M.3436 – Continental/Phoenix, paragraphs 10 et seq. This decision dealt with air
    springs overall.
484 Case No COMP/M.3436 – Continental/Phoenix, paragraphs 14 and 15.
485 Case No COMP/M.3436 – Continental/Phoenix, paragraphs 18 to 42.
486 Form CO, paragraph 281.
487 Form CO, paragraph 281.
488 Form CO, paragraph 285. The Notifying Party further explains that air suspension for MHCV is
    consequently in a sense broader than MHCV cabin dampers. The former also comprises chassis air
    suspension and driver seat air suspension. In a different sense, it is narrower, as cabin dampers can also
    be steel spring dampers (Form CO, paragraph 284).
                                                         101
 ---pagebreak---               with an integrated levelling function.489 From a supply-side perspective, there
              exists significant substitutability: as all air suspension systems consist of air
              spring modules, there are no relevant technical differences. This is supported
              by the fact that all manufacturers of air suspension for MHCV produce air
              spring modules.490
     (450) Finally, the Notifying Party contends that whereas a sub-segmentation into
              OEM/OES markets and IAM is conceivable, this does not apply to a potential
              sub-segmentation along the different kinds of vehicles, as cabin dampers are
              only used in trucks.491
     (451) In the Notifying Party’s view, the geographic market is global or at least EEA-
              wide.492 Customers are OEMs, which purchase on a global or at least EEA-
              wide basis, no national sales structures are needed and transport costs are low.
10.2.2.3. Commission’s assessment
     (452) Given that Wabco produces two types of valves that are used either in an
              integrated cabin damper (CALM) or provided alongside cabin dampers, the
              Commission’s investigation focused on cabin dampers.
     (453) First, the Commission investigated whether, as contended by the Notifying
              Party all air suspension systems belong to the same market. However, contrary
              to the Notifying Party’s view, a clear majority of respondents which expressed
              their opinion held that air spring dampers for cabins (and as such air
              suspension for cabins) are not substitutable with air spring dampers for chassis
              or driver seats.493 According to one competitor, “[t]hese are different products,
              with different functionality and different end-use application.”494
     (454) Second, the Commission investigated whether a distinction should be made
              between the different types of cabin damper (air spring, steel spring (which can
              be coil or leaf springs). In this respect, the market investigation provided
              mixed feedback. On the one hand, respondents stressed the lack of
              substitutability because of “[…] different characteristics. The systems
              architecture requires different solutions/vehicle-infrastructure (e.g. coils are
              passive and don´t use levelling control with valves). Other interchangeable
              solutions we do not know.” but on the other hand highlighted that they all serve
              the “[…] same purpose. Air springs are generally regarded as the more
              technically advanced product, offering more comfort to the driver (and as a
              result, typically commanding a higher price), but they effectively fulfil the
              same purpose as coil springs, namely as the “cushion” portion of the
489 Form CO, paragraph 287.
490 Form CO, paragraph 288.
491 Form CO, paragraphs 289 and 290. Trailers do not have cabins and the cabin of busses is not separate
    from the rest of the vehicle chassis.
492 Form CO, paragraph 292.
493 Replies to question 101 of Questionnaire to Competitors and replies to question 116 of Questionnaire to
    Customers.
494 Reply to question 101.1of Questionnaire to Competitors.
                                                      102
 ---pagebreak---               suspension system. A customer can choose to purchase air or coil springs
              alone for a particular vehicle, or a combination of the two.”495
     (455) Third, the Commission investigated a further, possible sub-segmentation,
              namely conventional cabin dampers without a levelling function and cabin
              dampers with a levelling function, the majority of the market participants,
              which expressed their opinion, viewed that these types of cabin dampers are
              interchangeable.496 As one respondent stated, “[b]asically, they [i.e. cabin
              dampers with and without a levelling function] are interchangeable but the
              dynamic behaviour and therefore the comfort level will change.”497 The same
              respondents stresses that the difference between these two types is mainly the
              driver’s comfort: “[f]rom the perspective of customers / users, the balance of
              the cabin is an important feature. Cabin balance is directly noticeable or
              feelable by the driver. Accordingly, the cabin levelling function is a relevant
              comfort characteristic for a truck to which customers pay attention.”498
              Another voice from the market confirmed that “[f]rom a customer perspective,
              conventional cabin dampers without a levelling function and cabin dampers
              with a levelling function are interchangeable.”499 As a reason, this market
              participant submits that “[w]ith respect to the former (i.e., cabin dampers
              without a levelling function), the customer merely needs to source that
              additional component (the valve) from a third party, and integrate into the
              system There are efficiencies for the customer in purchasing a single
              integrated unit (such as from ZF), but from a price perspective, both options
              are comparable and actively compete with each other regularly.”500
     (456) The Commission considers that in light of its market investigation, the relevant
              product market for the purposes of this Decision is that of cabin dampers for
              MHCV with or without a levelling function given that the levelling function
              can be added by purchasing a CLV (or alternatively buying an integrated cabin
              damper). This effectively means that steel and air spring modules also belong
              to the same product market. The Commission notes in particular that it does
              not consider that a separate market exists for integrated cabin damper modules
              (CALM or equivalent). As explained in Section 10.1, OEM customers can
              choose between three options when opting for a solution with a height
              levelling function. The Commission considers that these three options are
              interchangeable at the time that the OEM is making its system design choice.
     (457) Finally, in line with the general segmentation in the MHCV industry as regards
              components and systems, there are distinct markets for cabin dampers for
              MHCV on the OEM/OES market and the IAM.
     (458) With respect to the relevant geographic market, most of the respondents which
              expressed an opinion submitted that the market for cabin dampers is global.501
495 Both quotes from replies to question 100.1of Questionnaire to Competitors.
496 Replies to question 102 of Questionnaire to Competitors.
497 Reply to question 102.1 of Questionnaire to Competitors.
498 Reply to question 102.1 of Questionnaire to Competitors.
499 Reply to question 102.1 of Questionnaire to Competitors.
500 Reply to question 102.1 of Questionnaire to Competitors.
501 Replies to question 104 of Questionnaire to Competitors.
                                                       103
 ---pagebreak---               As one market participant stated, the “[g]eographic market is at least EEA
              wide, if not global in scope. Products are shipped globally.”502
      (459) Regarding the relevant geographic market, the market investigation points
              towards a global market for cabin dampers. The investigation has not provided
              any indications that the conditions for competition in cabin dampers would not
              be sufficiently homogenous on the global scale. However, the Commission
              considers that for the purposes of this Decision, it can be left open whether the
              geographic market with respect to cabin dampers for MHCV is EEA-wide or
              global, as the outcome of the competitive assessment would be the same under
              either alternative geographic market definition.
10.3. Competitive assessment
10.3.1. Market shares brake and chassis control valves (upstream)
      (460) Wabco’s market shares upstream in the market for brake and chassis control
              valves are as follows.503
Table […]*: Sales and market shares of brake and chassis control valves (MHCV) to
OEM/OES worldwide in 2018
                                          Sales        Market share
Company
                                      (EUR million)           (%)
ZF                                     [amount]             [0-5]%
Wabco                                  [amount]           [30-40]%
ZF-Wabco combined                      [amount]           [30-40]%
Knorr-Bremse                           [amount]           [20-30]%
Haldex                                 [amount]           [10-20]%
SORL                                   [amount]            [5-10]%
Barksdale                              [amount]             [0-5]%
Others                                 [amount]           [10-20]%
Total                                  [amount]              100%
Source: Form CO, table 120.
Table […]**: Sales and market shares of brake and chassis control valves (MHCV)
to OEM/OES in the EEA in 2018
                                          Sales        Market share
Company
                                      (EUR million)           (%)
ZF                                     [amount]             [0-5]%
Wabco                                  [amount]           [60-70]%
ZF-Wabco combined                      [amount]           [60-70]%
Knorr-Bremse                           [amount]           [10-20]%
Haldex                                 [amount]           [10-20]%
Barksdale                              [amount]             [0-5]%
Others                                 [amount]             [0-5]%
Total                                  [amount]              100%
Source: Form CO, table 121.
502 Replies to question 104.1 of Questionnaire to Competitors.
503 The Notifying Party submits that Wabco is not capable of estimating their exact sales volumes and
    market shares (Form CO, paragraph 300). Therefore, the market shares have been provided only based
    on value.
* Should read: “29”.
** Should read: “30”.
                                                      104
 ---pagebreak--- Table […]*: Market shares of CLV sales to OEM/OES in the EEA and globally, in
2018
                                        Market share
Company
                                             (%)
Wabco (EEA-wide)                           [70-80]%
Wabco (global)                             [30-40]%
Source: Form CO, paragraphs 308 and 309.
      (461) As regards BSVs, the Commission notes that Wabco has a [90-100]% market
              share for the type of BSV it provides to ZF. It is a patented bespoke product
              specifically designed for CALM. It cannot be supplied to anyone but ZF and is
              not interchangeable with any other BSV.
10.3.2. Market shares cabin dampers (downstream)
      (462) The Notifying Party submitted the following market shares for cabin dampers
              for the OEM/OEM market as well as the IAM, both on an EEA-wide and
              global level.504
Table […]**: OEM/OES sales of MHCV cabin dampers in the EEA, in 2018505
                                             Sales             Sales
Company
                                        (EUR million)           (%)
ZF                                       [amount]            [60-70]%
Wabco                                    [amount]             [0-5]%
ZF-Wabco combined                        [amount]            [60-70]%
Tenneco                                  [amount]            [30-40]%
Maysan Mando                             [amount]             [0-5]%
Others                                   [amount]             [0-5]%
Total                                    [amount]              100%
Source: Form CO, table 126.
*   Should read: “31”.
504 Even though the Commission considers the market to comprise all cabin dampers, for sake of
    completeness, the Commission notes that if one were to only consider air spring cabin dampers and
    exclude steel cabin dampers, ZF’s market share for OEM/OES sales of air spring cabin dampers would
    be [50-60]% in the EEA, followed by Tenneco with [40-50]%, and Maysan Mando with [0-5]%. As
    such, these shares do not differ from the overall cabin damper market.
** Should read: “32”.
505 The market shares were largely the same in 2016 and 2017 (Form CO, tables 127 and 128).
                                                          105
 ---pagebreak--- Table […]*: OEM/OES sales of MHCV cabin dampers worldwide, in 2018506
                                          Sales             Sales
Company
                                      (EUR million)          (%)
ZF                                     [amount]          [40-50]%
Wabco                                  [amount]            [0-5]%
ZF-Wabco combined                      [amount]          [40-50]%
Shanchuan/Xichuan                      [amount]          [10-20] %
Tenneco                                [amount]          [10-20]%
Gabriel India                          [amount]           [5-10]%
Cofap                                  [amount]            [0-5]%
Maysan Mando                           [amount]            [0-5]%
Others                                 [amount]          [10-20]%
Total                                  [amount]             100%
Source: Form CO, table 126.
Table […]**: IAM sales of MHCV cabin dampers in the EEA, in 2018
                                          Sales             Sales
Company
                                      (EUR million)          (%)
ZF                                     [amount]          [20-30]%
Wabco                                  [amount]            [0-5]%
ZF-Wabco combined                      [amount]          [30-40]%
Tenneco                                [amount]          [20-30]%
Others                                 [amount]          [40-50]%
Total                                  [amount]             100%
Source: Form CO, table 129.
Table […]***: IAM sales of MHCV cabin dampers worldwide, in 2018
                                          Sales             Sales
Company
                                      (EUR million)          (%)
ZF                                     [amount]          [10-20]%
Wabco                                  [amount]            [0-5]%
ZF-Wabco combined                      [amount]          [10-20]%
Tenneco                                [amount]          [30-40]%
Others                                 [amount]          [40-50]%
Total                                  [amount]             100%
Source: Form CO, table 129.
10.3.3. Input and customer foreclosure
      (463) The Commission notes that there exist no horizontal overlap between the
              Parties in respect of cabin dampers or brake and chassis control valves.
10.3.3.1. The Notifying Party’s arguments
      (464) The Notifying Party contends that the vertical relationship between ZF and
              Wabco with respect to valves for MHCV cabin dampers does not result in a
              significant impediment to effective competition within the meaning of Article
              2 Merger Regulation.507
*   Should read: “33”.
506 The market shares were largely the same in 2016 and 2017 (Form CO, tables 127 and 128).
** Should read: “34”.
*** Should read: “35”.
                                                      106
 ---pagebreak---      (465) The Notifying Party holds the opinion that competitive dynamics will not
              change post-Transaction. It explains that the vertical link only relates to
              Wabco’s BSVs for integration into CALM but not for other ZF cabin dampers,
              as Wabco’s BSVs are specifically designed for CALM. The design for
              Wabco’s specific BSV is patented, and Wabco’s BSV is designed based on
              ZF’s specifications. ZF would not be able to source it from other suppliers
              currently. Likewise, Wabco cannot supply the BSV developed for ZF to other
              downstream players.508
     (466) With respect to the ability of the merged entity to foreclose any other
              manufacturers of cabin dampers from supplies of valves, the Notifying Party
              argues that there are a sufficient number of alternative suppliers in the market.
              The Notifying Party names inter alia Freudenberg/Vibracoustic (Germany),
              Haldex (Sweden) and KB (Germany). In the Notifying Party’s opinion, these
              alternative valves suppliers have established supply relationships with other
              suppliers of MHCV cabin dampers509 Furthermore, other manufacturers of
              (brake and chassis) control valves could be regarded as potential competitors.
              In particular, any competitor may develop a “new” BSV with a different
              technical solution that buy-passes Wabco’s patent.510 In fact, since ZF’s
              competitors for cabin dampers do not source any brake and chassis control
              valves from Wabco, the Transaction will have no impact on the competitive
              position of these market participants.
     (467) According to the Notifying Party, the merged entity would also have no
              incentive to foreclose other cabin damper manufacturers by not supplying
              valves. On the contrary, the merged entity would rather be interested in
              generating efficiencies. Not only does the Notifying Party consider valves as
              commoditised items that cost approximately EUR [amount] to [amount] per
              piece, but also argues that the revenue generated with valves represents less
              than 1 % of Wabco’s total revenues and will also represent an insignificant
              part of the revenues of the combined entity post-merger.511
10.3.3.2. Commission’s assessment
     (468) As a starting point, the Commission notes that ZF does not buy brake and
              chassis control valves produced by Wabco apart from one specific valve: the
507 Form CO, paragraph 322.
508 Form CO, paragraphs 262 and 263.
509 The Notifying Party names Freudenberg/Vibracoustic (Germany), Tenneco (USA), Shanchuan/Xichuan
    (China), Gabriel (lndia), Magneti Marelli Cofap (Fiat Chrysler Automotive Group, Italy/USA/Brazil),
    Maysan Mando (Turkey) and Koni (Netherlands), Form CO, paragraph 324.
510 According to the Notifying Party, the technical specification of the BSV mainly lies in the geometric
    requirement to fit into ZF’s CALM and not in the material used or technical know-how required to
    produce BSVs. Whilst the technical design of the BSV is state-of-the-art, it is not difficult for mature
    competitors like KB, Norgren, Kongsberg or anyone eise to develop and produce such a valve. The only
    hurdle is the investment needed for the development and tooling, as well as the R&D to come up with a
    technical alternative. However, if another company sought to develop a solution similar to CALM or
    Vibracoustic’s product then this would provide sufficient incentive to develop such a valve (Form CO,
    paragraph 328).
511 Form CO, paragraphs 325 to 327.
                                                      107
 ---pagebreak---               BSV which ZF integrates into its CALM.512 ZF does not buy BSVs for cabin
              dampers from anyone else. The Notifying Party has also confirmed that there
              is no potential relationship between ZF and Wabco for additional valves. In
              this respect, the concern raised by some market participants that ZF will no
              longer purchase valves from third party suppliers but rather source solely from
              Wabco cannot arise.513 As such, no customer foreclosure can take place as a
              result of the Transaction in respect of any brake and chassis control valve.
     (469) As regards input foreclosure, given that Wabco only sells the BSV to ZF and
              not to anyone else in the market, no input foreclosure can arise in this respect.
     (470) The only potential foreclosure theory that could arise relates to CLVs. Wabco
              manufacturers CLVs and sells these to OEMs, which buy separate cabin
              dampers from cabin damper manufacturers such as ZF and then self-integrate
              the CLV and the cabin damper. ZF [strategic information]. Post-Transaction,
              one could potentially argue that the merged entity could restrict the supply of
              CLVs (or supply at worse conditions) to OEMs in order to push its integrated
              CALM solution or its own cabin dampers (by tying or bundling the sale of
              CLVs with its cabin dampers). This in turn would reduce competing cabin
              damper competitors’ sales. This concern was raised by one competitor.514
     (471) However, the Commission considers that this type of foreclosure is unlikely
              for the following reasons. First, the majority of the respondents to the
              Commission’s market investigation have not raised any concerns.515 In
              particular, no OEM customer has raised any concerns. Second, despite
              Wabco’s current strong market position in respect of CLVs in the EEA, if ZF
              attempted to restrict supply of Wabco’s CLVs (whether in an attempt to sell
              more CALM units or through tying or bundling sell more non integrated cabin
              damper units), OEMs have sufficient alternative suppliers such as Vibracoustic
              (which also provides an integrated solution), Haldex and Knorr-Bremse. As
              stated by one larger customer, “we have a long list of suppliers used in every
              tender”. Another one stated that “we know that there are many suppliers that
              can supply and develop the valves for cabin dampers”.516 On a global level,
              Wabco’s market position is weaker, with further competitors present. Third,
              the customers are OEMs which have a certain amount of buyer power.
     (472) Finally, the Commission notes that one competitor argued that the Transaction
              would create a monopoly in regard to integrated cabin dampers as the merged
              entity will be able to combine their competencies with respect to both bellow
512 According to ZF, it sources certain commoditised valves from Wabco: [strategic information] worth
    EUR [amount], [strategic information] worth EUR [amount] and [strategic information] worth EUR
    [amount].
513 Reply to questions 106.1 of Questionnaire to Competitors.
514 Reply to questions 106.1 of Questionnaire to Competitors. There is also one concern of unsubstantiated
    character from a respondent who says it is not active in the market for cabin dampers of CLVs,
    according to which “[t]he competition in this market will be negative impacted in terms of
    diversification, sources, quality, production capacity, technical evolution, prices” (reply to
    questions 105.1 of Questionnaire to Competitors).
515 For example, Vibracoustics, who has a competing integrated cabin damper system to ZF’s CALM
    considers that the Transaction will have no impact on the supply of cabin dampers. See reply to
    question 107 of Questionnaire to Competitors.
516 Replies to question 113.1 of Questionnaire to Customers.
                                                       108
 ---pagebreak---              design and valve design in one company, increasing entry barriers for other
             players.517 In this respect, the Commission first notes that it does not consider
             that there exists a separate market for integrated cabin dampers (see Section
             10.2.2.3). Second, the Commission notes that Vibracoustics will start
             supplying MAN in 2020 with a comparable integrated solution and, as such,
             there is already one competitor who appears to have all the competences to
             provide an integrated solution. Moreover, combining competencies may foster
             innovation and lead to better quality or new products to the benefit of
             customers.
     (473) For the reasons set out above, the Commission therefore considers that the
             Transaction will not give rise to serious doubts in respect of cabin dampers and
             brake and chassis control valves sold to OEM/OES overall or specifically in
             relation to CLVs sold to OEM/OES or BSV whether on an EEA or global
             level.
10.3.4. IAM sales of cabin dampers
     (474) ZF sells its CALM cabin dampers and air spring modules on the IAM. ZF also
             sells the CALM cabin dampers and air spring modules to Wabco, which, in
             turn, sells them to its IAM customers.518
     (475) ZF treats sales to Wabco as sales to OEMs. Wabco adds a mark-up and resells
             these products to the IAM when replacements for ZF’s CALM are needed.
             Wabco’s market position in the supply of cabin dampers to the IAM market is
             negligible and as said, limited to the resale of ZF’s CALM (Wabco does not
             sell any other cabin dampers). Wabco’s IAM sales of CALM represent [0-5]%
             of all cabin damper IAM sales in the EEA and [0-5]% globally. The merged
             entity’s combined share of cabin damper sales in the IAM would be [30-40]%
             in the EEA and [20-30]% globally. Wabco’s current activity in respect of
             MHCV cabin dampers on the IAM is limited to the resale of ZF’s CALM.
     (476) Given that Wabco’s activity in respect of cabin dampers is limited exclusively
             to reselling ZF’s cabin dampers to IAM customers, the Transaction will not
             substantively change the competitive situation on the market because: (i) pre-
             Transaction, Wabco’s IAM customers were (already) sourcing (indirectly) ZF
             cabin dampers; and (ii) the Parties’ combined market share is, in any event
             moderate with a relatively small increment. Indeed, the Transaction could
             potentially be beneficial for customers seeking to purchase IAM cabin dampers
             from Wabco if the Transaction removes the double mark-up.
10.3.5. Conclusion
     (477) In light of the considerations in this Section 10.3, the Commission considers
             that the Transaction does not lead to serious doubts in respect of its
             compatibility with the internal market and the EEA Agreement with regard to
             IAM sales of cabin dampers.
517 Reply to questions 106.1 of Questionnaire to Competitors.
518 Form CO, paragraphs 333 et seq.
                                                      109
 ---pagebreak--- 11.     MARKET DEFINITION AND COMPETITIVE ASSESSMENT CONCERNING THE
        PARTIES’ ACTIVITIES IN (UPSTREAM) CLUTCH SERVOS AND (DOWNSTREAM) MT
11.1. Market definition
     (478) Wabco supplies clutch servos for MT systems. ZF buys clutch servos for its
              MT systems.
     (479) As regards the relevant product markets in relation to clutch servos, the
              Notifying Party submits that clutch servos is a sub-segment of clutch actuators
              that operate clutches for manual transmission. Therefore, in the Notifying
              Party’s view, clutch servos constitute the narrowest possible market.519 With
              respect to the geographic market of clutch servos, the Notifying Party is of the
              view that the market is EEA-wide. It contends that the conditions of
              competition and the demand characteristics are not sufficiently homogeneous
              on a global basis to assume a global market.520
     (480) MT systems for MHCV form a distinct market from other transmission
              systems for MHCV.521 With respect to the geographic market of the manual
              transmission, the Notifying Party is of the view that, in line with the
              geographic market of clutch servos, also the geographic market of manual
              transmission system is EEA-wide. The Notifying Party further argues that the
              current patterns of purchases of customers differ significantly between the
              EEA (low volumes, projects that are being phased out) and other regions of the
              world (still large-scale projects).522
     (481) The Commission notes that according to the Notifying Party’s explanations,
              “clutch actuator” is a generic (technical) term for several very different
              products based on a similar technical principle (engaging and disengaging of
              the clutch within the transmission). Therefore, a “clutch actuator” as such is in
              the Notifying Party’s opinion not a product market as the specific products are
              very different depending on the transmission type and technology. A clutch
              servo is only used in manual transmissions. It is a power assistance for the
              human driver who operates the clutch manually (i.e. by pushing the pedal with
              the power of his/her foot and leg). Without the clutch servo, the driver would
              need to invest much more power into the clutch operation. The Notifying Party
              further maintains that clutch servos must not be confused with PCA and CPCA
              as these relate to AMT (and not MT) technology. For both PCA and CPCA the
              clutch operation is done automatically by means of an electronic signal
              releasing the pneumatic support for the transmission (i.e. without the human
              factor). In clutch actuators for AMT (either PCA or CPCA) a clutch servo is
              not needed. The clutch servos for MT systems cannot be used in AMT
              systems. Therefore, such clutch servos are no sub-segment of clutch actuators
              for AMT systems, such as CPCA and PCA, which is a different technology.523
519 Notifying Party’s reply to question 8 of RFI 19 post-notification of 15 January 2020.
520 Notifying Party’s reply to question 3 of RFI 28 post-notification of 20 January 2020.
521 Section 7.1.1.1(C) of this Decision.
522 Notifying Party’s reply to question 3 of RFI 28 post-notification of 20 January 2020.
523 Notifying Party’s submission on clutch servos of 22 January 2020.
                                                        110
 ---pagebreak---      (482) In the absence of views from the market investigation,, the Commission will,
              for the purposes of its assessment of potential input or customer foreclosure in
              this Decision, consider the narrowest possible market which is clutch servos
              for MT in MHCV. As regards the geographic market, whilst the Commission
              acknowledges the Notifying Party’s arguments advocating an EEA-wide
              market, it considers, in line with other MHCV components, that it can be left
              open whether the market is EEA-wide or global.
11.2. Competitive assessment
     (483) The Notifying Party submits that Wabco’s market shares in clutch servos are
              approximately [50-60]% EEA-wide and approximately [40-50]% on the global
              level.524
     (484) As regards ZF’s market shares downstream in MT systems, the Notifying
              Party submits that on the EEA-wide basis, ZF’s market share is [30-40]% and
              on the global basis [5-10]%.525
     (485) The Notifying Party argues that (i) clutch servos are used only in MTs, which
              is an outdated technology that is virtually no longer used in MHCVs in the
              EEA, at least for new MHCVs (75% of current MHCVs in the EEA are fitted
              with AMT systems). As an example, it refers to Volvo, which has shut down
              all MT activity in the EEA; (ii) a clutch servo is not a high technology
              product;526 (iii) the clutch servos that Wabco supplies to ZF are all used for
              [strategic information]; (iv) the total OE demand for clutch servos is only
              approximately USD […] million in the EEA. The Notifying Party assumes that
              going forward, the already insignificant demand for clutch servos for new
              MHCVs in the EEA will decrease even further. The overwhelming majority of
              clutch servos that Wabco supplies to its OEM customers in the EEA are in fact
              used in trucks outside the EEA ([strategic information]).527
     (486) Furthermore, the Notifying Party maintains that its share of demand for clutch
              servos is below [0-5]% on a worldwide basis and its purchasing volume for
              clutch servos from Wabco was approximately [amount] pieces corresponding
              to approximately EUR [amount] million worldwide in 2018.
     (487) The Notifying Party is therefore of the opinion that the limited vertical
              relationship between the Parties in clutch servos does not affect the
              competitive assessment in the EEA.
     (488) The Commission notes that in the EEA, the share of MT systems as opposed to
              AMT or AT is approximately 21%528 and that there is a trend towards using
              more AMT or AT systems in the EEA.
524 Notifying Party’s reply to question 9 of RFI 19 post-notification of 15 January 2020.
525 Form CO, paragraphs 168 and 169.
526 Notifying Party’s reply to question 9 of RFI 19 post-notification of 15 January 2020.
527 Notifying Party’s reply to question 9 of RFI 19 post-notification of 15 January 2020.
528 This is based on the figures provided in Form CO, paragraph 169: In 2018, overall [500,000-600,000]
    transmission units were used in the EEA. Thereof [350,000-450,000] were AMT, [100,000-200,000]
    MT and [0-100,000] AT.
                                                        111
 ---pagebreak---      (489) In particular, in light of the gradual phasing out of the MT technology in the
              EEA, ZF’s moderate market share in MT in the EEA (and small market share
              globally) and thus limited market share of clutch servo demand, customer
              foreclosure appears unlikely.
     (490) As regards input foreclosure, the Commission notes that (i) other clutch servo
              suppliers exist in the market place, namely Kongsberg529 and Knorr-Bremse;530
              and (ii) if ZF tried to limit Wabco’s clutch servo sales it would be unlikely to
              be able to recoup lost sales in increased MT sales given the declining trend of
              MT demand (in particular in the EEA). On this basis, the Commission
              considers that the Transaction is unlikely to give rise to input foreclosure in
              respect of clutch servos.
     (491) In light of the considerations in this Section 11.2, the Commission concludes
              that the Transaction does not raise serious doubts as to its compatibility with
              the internal market and the functioning of the EEA Agreement due to input or
              customer foreclosure as regards clutch servos for MT for MHCVs.
12.      MARKET DEFINITION AND COMPETITIVE ASSESSMENT CONCERNING THE
         PARTIES’ POTENTIAL ACTIVITIES IN (UPSTREAM) CPCAS AND (DOWNSTREAM)
         AMT SYSTEMS
12.1. Introduction
     (492) ZF is active in the manufacture and sale of both AMT systems and CPCAs for
              AMT systems. For its own AMT system (TraXon), ZF manufactures CPCAs
              in-house.531 [Strategic information].532 Therefore, there is a potential vertical
              link between the Parties as Wabco is a potential supplier of CPCAs for AMT
              systems.
12.2. Market definition
     (493) With regard to the relevant product markets, CPCAs for AMT systems for
              MCHV form a distinct product market from other clutch actuators such as
              PCAs or ECAs.533 Also, AMT systems belong to a different product market to
              other transmission systems.534
     (494) With respect to the geographic markets, the market for CPCAs is either EEA-
              wide or global.535 The same applies to the geographic market of AMT
              systems.536
529 Kongsberg has been manufacturing clutch servos since 1975 according to its website
    https://www kongsbergautomotive.com/products-services/on-highway/cabin/clutch-actuation-
    systems/clutch-servo/.
530 Notifying Party’s reply to question 2 of RFI 28 post-notification of 20 January 2020.
531 Section 5.3.1.1 of this Decision.
532 Section 5.1 of this Decision.
533 Section 5.2.1 of this Decision.
534 Section 7.1.1.1 of this Decision.
535 Section 5.2.2 of this Decision.
536 Section 7.1.2.1 of this Decision.
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 ---pagebreak--- 12.3. Competitive assessment
     (495) The Commission considers that the proposed Transaction does not give rise to
              input or customer foreclosure in respect of CPCAs.
     (496) The combined market share of the merged entity in respect of CPCAs does not
              change in respect of the EEA as a result of the Transaction. On a global level,
              the increment remains small. As set out in Section 5.3.1.1 above, Wabco’s
              market share is estimated to be [0-5]% in 2020, [0-5]% in 2021 and [0-5]% in
              2024 on the global market and [0-5]% on the EEA-wide market.537
     (497) At the AMT systems level, ZF is currently the only tier-1 supplier in the EEA.
              It competes globally with other AMT system tier-1 suppliers (see
              Section 7.2.1.2).
     (498) First, as regards customer foreclosure, ZF already sources CPCAs internally
              for its TraXon AMT system. As such, ZF does not source from any third party,
              who would otherwise be foreclosed by the Transaction. Moreover, there is no
              evidence to suggest that if and when ZF develop its [strategic information], it
              would not continue to manufacturer the CPCA internally.
     (499) Second, as regards input foreclosure as explained in Section 5.3.1.3, CPCAs
              are bespoke products, designed for specific AMT systems. The key is therefore
              once again competition for the market rather than in the market, as explained
              in this Section below.
     (500) With respect to OEM customers, the Commission considers it unlikely that the
              Transaction would result in input foreclosure. First, as explained in Section 5
              above, there are very few customers, which buy CPCAs and could be
              foreclosed ([customer name] and [customer name] in the EEA). Second,
              alternative suppliers exist as evidenced by [strategic information].
     (501) With respect to competing tier-1 AMT system manufacturers (i.e. customers
              purchasing CPCAs for integration in their AMT systems to be sold to OEMs),
              the Transaction does not change the pre-existing situation in the EEA since ZF
              is currently the only tier-1 AMT system supplier. As regards other parts of the
              world, in respect of new contracts, given Wabco having only a nascent position
              in this market and the existence of other competitors or potential competitors
              such as Knorr-Bremse, Kongsberg or LuK, ZF’s acquisition of Wabco’s
              CPCA business is unlikely to result in input foreclosure. In the first place,
              Wabco is estimated to hold only a [0-5]% market share on the global scale in
              [strategic information]. Wabco’s objective would thus be rather to gain
              additional business and become established on the market rather than restrict
              the input it could provide on the market. In the second place, both Kongsberg
              and LuK have made investments into CPCA prototypes and presented them in
              2018.538 Apart from the actual competitor Knorr-Bremse, there is, therefore,
              high likelihood that there will be future competitors striving to launch their
              CPCA product on the market and providing an alternative to Wabco’s CPCA.
537 Section 5.3.1.1 of this Decision.
538 Notifying Party’s reply to question 5 of RFI 14 post-notification of 9 January 2020.
                                                        113
 ---pagebreak---      (502) [Strategic information], the ability to raise prices does not change as a result of
              the Transaction since once a customer has chosen the CPCA supplier, the
              customer tends to be locked in. As with AMT controllers, one could argue that
              the incentives of the merged entity may no longer be the same in supplying to
              competing AMT system manufacturers. However, of [strategic information],
              only one customer, [customer], is an AMT system supplier. [customer] is a
              Chinese tier-1 supplier that is launching its AMT system, [strategic
              information]. The arguments set out in paragraph (225) above (Section 7.2.3)
              in respect of incentives regarding vertical input foreclosure towards [customer]
              in respect of AMT controllers apply equally to CPCAs.
     (503) In light of the considerations in this Section 12.3, the Commission considers
              that the Transaction does not raise serious doubts as regards its compatibility
              with the internal market and the functioning of the EEA Agreement due to
              input or customer foreclosure as regards CPCAs and AMT systems.
13.     MARKET DEFINITION AND COMPETITIVE ASSESSMENT CONCERNING THE
        PARTIES’ POTENTIAL ACTIVITIES IN (UPSTREAM) PCAS AND (DOWNSTREAM)
        AMT SYSTEMS
13.1. Introduction
     (504) Wabco currently sells PCAs to [customer data].539 ZF currently sources PCAs
              for its AMT system “AS Tronic” from Knorr-Bremse. There is a potential
              vertical link between the Parties as, post-Transaction, Wabco could potentially
              replace Knorr-Bremse as supplier of PCAs to ZF.
13.2. Market definition
     (505) With regard to the relevant product markets, PCAs for AMT systems for
              MHCV form a distinct product market from other clutch actuators such as
              CPCAs or ECAs.540 Also, AMT systems belong to a different product market
              from other transmission systems.541
     (506) In line with the potential relevant geographic markets of CPCAs, it can be
              assumed that the geographic market for PCAs is either EEA-wide or global.542
              The same applies to the geographic market of AMT systems.543
13.3. Competitive assessment
     (507) The Commission considers that the proposed Transaction does not give rise to
              input or customer foreclosure in respect of PCAs for the reasons set out below.
     (508) As regards PCAs, Wabco’s market shares is approximately [50-60]% in the
              EEA and [30-40]% on a global basis.544 ZF’s market share in AMT systems
539 Form CO, paragraph 607: Wabco currently sells its PCA system together with modular add-on AMT
    controller system, advertised as OptiDrive.
540 Section 5.2.1 of this Decision.
541 Section 7.1.1.1 of this Decision.
542 Section 5.2.2 of this Decision for the geographic market for CPCAs.
543 Section 7.1.2.1 of this Decision.
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 ---pagebreak---               (Section 7.2.2.5) corresponds to ZF’s sales of both the TraXon AMT system
              which uses a CPCA and the AS Tronic AMT system which uses the PCA.
              Therefore, only a proportion of ZF’s downstream market share is in fact
              relevant for PCAs. According to the Notifying Party, [strategic information].
     (509) First, in relation to customer foreclosure, it is highly unlikely that Wabco
              would start supplying PCAs to ZF for ZF’s AS Tronic product. In the same
              manner as CPCAs, PCAs are bespoke products and their development needs to
              be aligned with the specific AMT system.545 This means that as for any other
              potential supplier of PCAs, Wabco (and ZF) would need to re-develop
              Wabco’s product to fit into ZF’s AS Tronic AMT. Given that [strategic
              information], it makes no commercial sense to invest in R&D to develop and
              change the PCA in the AS Tronic system. Customer foreclosure is therefore
              unlikely. Moreover, the contract with [supplier data] product is valid until […].
              Switching from [supplier data] to Wabco’s PCA would also in all likelihood
              imply that ZF would be in breach of its supply contract. Such non-compliance
              bears legal and hence commercial risks.
     (510) As regards input foreclosure, the Commission first notes that the data provided
              by the Notifying Party shows that the PCA technology is slowly being phased
              out from the overall market for clutch actuators.546 The Notifying Party expects
              this to take place within the next five years.547 Against this background, given
              that current tenders for next generation transmission systems are nearly all for
              CPCAs, there appear to be limited customers that could be foreclosed. For
              these customers, alternative suppliers of PCAs remain on the market such as
              Kongsberg and Knorr-Bremse, who are currently supplying PCA to their
              customers.
     (511) In light of the considerations in this Sections 13.3, the Commission concludes
              that the Transaction does not raise serious doubts as to its compatibility with
              the internal market and the functioning of the EEA Agreement due to input or
              customer foreclosure as regards the markets of PCAs and AMT systems.
544 Notifying Party’s reply to question 1 of RFI 20 post-notification of 20 January 2020.
545 Notifying Party’s reply to question 4(b) of RFI 14 post-notification of 9 January 2020.
546 Form CO, paragraphs 609 and 610: Except for one next generation transmission system, all purchaser of
    clutch actuators switch to CPCA, where they have sourced PCAs for the current transmission system.
    Four tenders not awarded yet at the date of this Decision are all tenders for CPCAs.
547 Notifying Party’s reply to question 1 of RFI 20 post-notification of 20 January 2020.
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 ---pagebreak--- 14.    CONCLUSION
    (512) 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
                                                     Executive Vice-President
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