CELEX: 32019M9584
Language: en
Date: 2019-12-20 00:00:00
Title: Commission Decision of 20/12/2019 declaring a concentration to be compatible with the common market (Case No COMP/M.9584 - HUTCHINSON / PFW AEROSPACE) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                 Brussels, 20.12.2019
                                                                 C(2019) 9496 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                                                                  information omitted has been replaced by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.9584 – Hutchinson / PFW Aerospace
                    Commission decision pursuant to Article 6(1)(b) of Council Regulation
                    No 139/20041 and Article 57 of the Agreement on the European Economic
                    Area2
Dear Sir or Madam,
(1)       On 15 November 2019, the European Commission received notification of a
          proposed concentration pursuant to Article 4 of the Merger Regulation by which
          Hutchinson Holding GmbH (‘Hutchinson’, Germany), controlled by TOTAL S.A.
          (France) intends to acquire by way of purchase of shares sole control over PFW
          Aerospace GmbH (‘PFW’, Germany), within the meaning of Article 3(1)(b) of the
          Merger Regulation (hereinafter, the ‘Transaction’).3 Hutchinson is hereinafter referred
          to as the ‘Notifying Party’ and together with PFW 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 398, 25.11.2019, p. 5.
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak--- 1.  THE PARTIES
(2) Hutchinson is active in the worldwide supply of premium elastomer products,
    including sealing solutions, vibration, acoustic and thermal insulation and fluid
    transfer systems for the aerospace industry.
(3) PFW is active in the worldwide supply of tubes and ducts for the aerospace industry,
    as well as aero-structure components. It is currently majority owned by Airbus.
2.  THE CONCENTRATION
(4) Pursuant to a share purchase agreement dated 13 September 2019, Hutchinson will
    acquire 100% of the shares in PFW. The completion of the proposed Transaction
    will therefore result in Hutchinson acquiring sole control over PFW within the
    meaning of Article 3(1)(b) of the Merger Regulation.
(5) The proposed Transaction therefore constitutes a concentration pursuant to Article
    3(1)(b) of the Merger Regulation.
3.  UNION DIMENSION
(6) The undertakings concerned have a combined aggregate worldwide turnover of more
    than EUR 5 000 million4 (TOTAL S.A., including Hutchinson: EUR [200 000-300
    000] million, PFW: EUR [400-450] million). Each of them has a Union-wide
    turnover in excess of EUR 250 million (TOTAL S.A., including Hutchinson: EUR
    [100 000 – 150 000] million, PFW: EUR [300 -350] million), but they do not
    achieve more than two-thirds of their aggregate Union-wide turnover within one and
    the same Member State.
(7) The notified operation therefore has a Union dimension pursuant to Article 1(2) of
    the Merger Regulation.
4.  COMPETITIVE ASSESSMENT
(8) The Parties are both active in the production and supply of tubes and ducts for air
    and fluid conveyance systems in the aerospace industry. The Parties also supply
    hoses to the aerospace industry, though PFW only resells limited volumes procured
    from third parties.5 Likewise, the Parties supply a limited range of other – and
    different – connectors.6
(9) Tubes and ducts are typically used in the aerospace industry for either high-pressure
    applications (e.g. hot air and air conditioning systems, mufflers and bleed air
    routings) or low-pressure applications (e.g. transportation of air, water and fuel).
4   Turnover calculated in accordance with Article 5 of the Merger Regulation and the Commission
    Consolidated Jurisdictional Notice (OJ C 95, 16.4.2008, p. 1).
5   In 2018, Hutchinson produced and supplied hoses accounting for sales below EUR [0-10] millions,
    and PFW resold hoses for less than EUR [0-10] million.
6   Hutchinson supplies clamps and brackets, whereas PFW only supplies connectors for the Airbus
    A350 wing fuel system.
                                                     2
 ---pagebreak---        Likewise, they can be manufactured by using either metallic or non-metallic
       (composite/thermoplastic) materials. The overlap between the Parties’ activities
       relates in essence to non-metallic/composite tubes, which are used primarily for low-
       pressure applications.
(10)   In addition, Hutchinson and PFW manufacture and supply other aircraft components.
       According to the Parties, however, these components are distinct and independent
       from each other. In particular, the Notifying Party submits that the aero-structures
       supplied by PFW are not linked to any of the components supplied by Hutchinson,
       and that they are not part of common sub-systems.7
(11)   The Notifying Party therefore submits that there is no overlap between the Parties’
       product portfolios in relation to other aircraft components, as apparent from Figure
       1.
             Figure 1 – Other aerospace components supplied by the Parties
                                 Source: Form CO, paragraph 105.
(12)   The Commission’s market investigation did not reveal horizontal or vertical overlaps
       between the Parties with respect to any of the products listed in Figure 1. In contrast,
       the market investigation revealed the existence of a vertical relation between
       Hutchinson’s production of aerospace seals and PFW’s activities, as discussed
       further below in Sections 4.1.1.6 and 4.2.2.2.
(13)   As a result, the competitive assessment of the Transaction will address the horizontal
       overlap between the Parties’ activities in the supply of aerospace tubes and ducts, as
       well as the vertical link with regard to of aerospace seals since Hutchinson is a
       manufacturer and supplier of elastomer-based seals, including for the aerospace
       industry, while PFW is a customer of seals’ providers.
4.1.   Market definition
4.1.1. Product markets
(14)   The Notifying Party submits that the relevant product market for the purpose of
       assessing the horizontal overlap between the Parties’ activities, which pertains
       essentially to the supply of non-metallic tubes, is that of aerospace tubes and ducts
       combined, including hoses and other components necessary for the connection of the
7      Form CO, paragraphs 104-106.
                                                   3
 ---pagebreak---         tubes and ducts to a system. However, the Notifying Party also suggested a number
        of alternative segmentations, which will be discussed throughout this section. The
        various segmentations discussed below are therefore merely alternative inasmuch as
        they aim to frame in different ways the assessment of the horizontal overlap brought
        about by the Transaction in relation to non-metallic tubes.
4.1.1.1. Tubes and ducts
(15)    In previous decisions, the Commission has considered that each aerospace
        component is a market in itself essentially on the basis that each component
        performs a distinct and vital function in the operation of the aircraft type it is used
        for, and is airframe-specific (that is to say, engineered for a specific aircraft
        platform).8
(16)    The Notifying Party submits that the relevant product market in the present case is
        that of aerospace tubes and ducts combined, including hoses and other components
        (e.g. connectors) necessary for the connection of the tubes and ducts to a system.9
(17)    Alternatively, the Notifying Party submits that aerospace tubes (including hoses) on
        the one hand, and ducts (and other connectors) on the other hand, could constitute
        separate relevant product markets.10 In any event, the Notifying Party is of the view
        that the exact product market definition can be left open, as no competition concerns
        arise under any alternative product market definition.11
(18)    In its investigation, the Commission inquired into a possible segmentation between
        the supply of aerospace tubes, on the one hand, and aerospace ducts, on the other
        hand.
(19)    The majority of respondents to the Commission’s market investigation that
        expressed an opinion on this point indicated that tubes and ducts for air and fluid
        conveyance in the aerospace industry constitute separate product markets, and are
        sourced separately.12
(20)    In any event, for the purpose of this decision, the exact product market definition
        with respect to tubes and ducts can be left open, as the outcome of the competitive
        assessment would be the same under any plausible alternative product market
        definition, i.e., irrespective of whether tubes and ducts are considered to belong to
        one or separate markets.
4.1.1.2. Tubes and hoses
(21)    In the past, the Commission has considered that aerospace tubes and hoses constitute
        a single relevant product market because: (i) they convey the same function and are
        manufactured using the same technology irrespective of the system or the type of
        aircraft for which they are designed; and (ii) they are commonly manufactured to
8       For example, Commission decision of 1 July 2013 in Case M.6844 – GE/Avio, paragraph 17 (and
        references provided there).
9       Form CO, paragraph 79.
10      Form CO, paragraphs 84 et seq.
11      Form CO, paragraph 80.
12      Questionnaire to customers and competitors, replies to questions 4 and 4(2).
                                                         4
 ---pagebreak---         standard specifications approved by the OEM manufacturers for a range of pressure
        applications.13
(22)    In its investigation, the Commission inquired into a possible segmentation between
        the supply of tubes, on the one hand, and the supply of hoses, on the other hand, all
        for air and fluid conveyance in the aerospace industry.
(23)    The majority of respondents who expressed an opinion on this point also considered
        tubes and hoses for air and fluid conveyance in the aerospace industry to belong to
        the same product market, although these components tend to be procured separately.
        However, certain respondents argued that tubes and hoses belonged to different
        product markets because of the materials used, or different product characteristics.14
(24)    In any event, for the purpose of this decision, the exact product market definition
        with respect to tubes and hoses can be left open as the outcome of the competitive
        assessment would be the same under any plausible alternative product market
        definition, i.e., irrespective of whether tubes and hoses are considered to belong to
        one or separate markets.
4.1.1.3. Ducts and connectors
(25)    In previous decisions, the Commission has considered that each aerospace
        component is a market in itself, essentially on the basis that each component
        performs a distinct and vital function in the operation of the aircraft type it is used
        for, and is airframe specific.15
(26)    The Notifying Party submits that ducts and other connectors constitute a single
        relevant product market.16
(27)    In its investigation, the Commission inquired into a possible segmentation between
        the supply of ducts, on the one hand, and the supply of connectors, (e.g., flanges,
        clamps, end fittings or ferrules), on the other hand, all for air and fluid conveyance in
        the aerospace industry.
(28)    The feedback received from the market investigation was mixed on this point. While
        a majority of respondents that expressed an opinion indicated that ducts and
        connectors belong to the same product market, a number of respondents indicated
        that these components have different product applications and characteristics.17
        Further, the majority of respondents who expressed an opinion indicated that the
        procurement for ducts and connectors can be carried out either separately or in
        combination.18
(29)    In any event, for the purpose of this decision, the exact product market definition
        with respect to ducts and connectors can be left open as the outcome of the
13      Commission decision of 21 December 2017 in Case M.8425 – Safran / Zodiac Aerospace, para. 211.
14      Questionnaire to customers and competitors, replies to questions 5 and 5(2).
15      See, e.g., Commission decision of 1 July 2013 in Case M.6844 – GE / Avio, para. 17 (and references
        provided there).
16      Form CO, paragraphs 84 et seq.
17      Questionnaire to customers and competitors, reply to question 6.
18      Questionnaire to customers and competitors, reply to question 6(2),
                                                         5
 ---pagebreak---         competitive assessment would be the same under any plausible alternative product
        market definition, i.e., irrespective of whether ducts and connectors are considered
        part of the same or separate markets.
4.1.1.4. High-pressure vs low-pressure tubes and ducts
(30)    In previous decisions, the Commission has considered that high-pressure and low-
        pressure components could constitute different markets, as there is limited demand-
        side substitutability between them.19
(31)    The Notifying Party submits that, alternatively, high-pressure tubes, low-pressure
        tubes, high-pressure ducts, and low-pressure ducts could constitute separate relevant
        product markets.20
(32)    The Notifying Party submits that there is no industry standard to differentiate
        between high- and low-pressure tubes, and high- and low-pressure ducts, although
        the intended application could be a reasonable criterion for differentiation (i.e. high-
        pressure applications include hot air and air conditioning systems, mufflers and
        bleed air routings, whereas low-pressure applications include transportation of air,
        water and fuel).21
(33)    In its investigation, the Commission inquired into a possible segmentation of the
        supply of tubes and ducts for air and fluid conveyance in the aerospace industry
        between high-pressure and low-pressure applications.
(34)    Regarding tubes, the majority of respondents who expressed an opinion on this point
        considered high-pressure tubes and low-pressure tubes to constitute separate product
        markets, in view of their different characteristics. As one respondent pointed out:
        “High pressure and low pressure tubes are complementary products with distinctly
        different and separate technical and procurement drivers”. Another respondent
        indicated that: “High and low pressure tubes can be defined as separate markets
        because diameter, fluid type and material construction are frequently different
        between high and low pressure tubes”.22
(35)    Regarding ducts, the vast majority of respondents who expressed an opinion on this
        point considered high-pressure ducts and low-pressure ducts to constitute separate
        product markets, in view of their limited substitutability in terms of technical
        characteristics (e.g., resistance), design and manufacturing process.23
(36)    However, for the purpose of this decision, the exact product market definition with
        respect to high-pressure vs low-pressure tubes and ducts can be left open as the
        outcome of the competitive assessment would be the same under any plausible
        alternative product market definition, i.e., irrespective of whether high-pressure and
19      See, e.g., Commission decision of 19 April 2017 in Case M.8242 – Rolls-Royce / ITP, paragraphs 42
        and 44, although it ultimately left the question open (paragraph 47).
20      Form CO, paragraphs 87 et seq. and response to RFI 2, submitted on 9 December 2019, paragraphs
        20 et seq.
21      Response to RFI 2, submitted on 9 December 2019, paragraph 20.
22      Questionnaire to customers and competitors, reply to question 7.
23      Questionnaire to customers and competitors, reply to question 8.
                                                           6
 ---pagebreak---         low-pressure tubes and ducts are considered as part of the same or distinct product
        markets.
4.1.1.5. Metallic vs non-metallic (composite/thermoplastic) tubes and ducts
(37)    In past decisions, the Commission has considered that supply-side substitutability is
        limited across different materials, e.g. metals vs. composite, due to the respective
        equipment and know-how involved.24 As regards demand-side substitutability, the
        Commission also considered that substitutability across different materials is limited,
        since components need to be optimised around the different characteristics of the
        chosen material.25
(38)    The Notifying Party suggests that an additional segmentation between metal vs
        composite tubes and ducts is not industry standard but would largely (though not
        exactly) coincide with a segmentation between high-pressure (90% metal, 10%
        composite) vs low-pressure applications (30% metal, 70% composite).26
(39)    In its investigation, the Commission inquired into a possible segmentation of the
        supply of tubes and ducts for air and fluid conveyance in the aerospace industry by
        materials, in particular between metallic and non-metallic (composite/thermoplastic)
        materials.
(40)    The outcome of the market investigation largely confirmed the Notifying Party’s
        view. Thus, the vast majority of respondents that expressed an opinion on this point
        confirmed that metallic tubes and ducts are mainly designed for high-pressure
        applications whereas non-metallic tubes and ducts are largely designed for low-
        pressure applications.27
(41)    In any event, for the purpose of this decision, the exact product market definition
        with respect to metallic vs non-metallic tubes and ducts can be left open as the
        outcome of the competitive assessment would be the same under any plausible
        alternative product market definition, i.e., irrespective of whether metallic and non-
        metallic tubes and ducts are part of the same or distinct markets.
4.1.1.6. Aerospace seals
(42)    In past decisions, the Commission has considered that several small sub-
        components, such as seals, coupling, check valves or caps might belong to the same
        product market.28 The Commission considered that seals are a commodity product
        for which many applications exist.29
24      See, e.g., Commission decision of 3 August 2012 in Case M.6581 – GKN / AERO, paragraph 24;
        Commission decision of 21 December 2017 in Case M.8425 – Safran / Zodiac Aerospace,
        paragraphs 92 and 203.
25      Idem.
26      Form CO, paragraphs 93, 96 and 97.
27      Questionnaire to customers and competitors, replies to questions 9 and 10.
28      See, e.g., Commission decision of 21 December 2017 in Case M.8425 – Safran / Zodiac Aerospace,
        paragraphs 219-221.
29      Idem, paragraph 636.
                                                         7
 ---pagebreak--- (43)   For the purpose of this decision, the exact product market definition with respect to
       seals can be left open as the outcome of the competitive assessment would be the
       same under any plausible alternative product market definition, i.e., irrespective of
       whether seals are part of the same market as other small subcomponents (such as
       coupling, check valves or caps) or of a distinct market whether such distinct market
       be limited to aerospace applications or encompass other possible applications.
4.1.2. Geographic market
(44)   In previous decisions, the Commission has considered that the relevant geographic
       market for the supply of aerospace components (including tubes and ducts, and
       aerospace seals) was global in scope due to global sourcing, significant trade flows
       across countries, and worldwide purchasing policies of aircraft manufacturers.30
(45)   The Notifying Party submits that any possible relevant market(s) in the present case
       would be worldwide in scope.
(46)   The market investigation sought to verify the appropriateness of a worldwide
       geographic market definition in the present case. The majority of the respondents to
       the market investigation that expressed a view on this point confirmed that the
       relevant geographic market for the supply of aerospace components, including tubes
       and ducts, is global.31
(47)   Therefore, for the purpose of this decision, and in line with Commission precedents
       and the feedback from the market investigation, the relevant geographic market with
       respect to the supply of aerospace tubes and ducts and possible sub-segments, as
       well as for aerospace seals, is global in scope.
4.2.   Competitive assessment
4.2.1. The Notifying Party’s arguments
(48)   The Notifying Party submits that the Transaction will not lead to a significant
       impediment of effective competition in any plausible relevant market.
(49)   In particular, according to the Notifying Party, the relevant market is a single
       worldwide market for aerospace tubes and ducts, which also includes hoses or other
       components (e.g. connectors) necessary for the connection of the tubes and ducts to a
       system.32 According to the Notifying Party, the Parties’ combined 2018 market share
       in this market amounts to [10-20]%.33 Therefore, the Transaction would not lead to a
       horizontally affected market.
(50)   According to the Notifying Party, the Transaction would only result in horizontally
       affected markets defined at the level of aerospace tubes and sub-segments thereof,34
       namely composite tubes, tubes for high-pressure applications and tubes for low-
30     See, e.g., Commission decision of 21 December 2017 in Case M.8425 – Safran / Zodiac Aerospace,
       paragraphs 297-298.
31     Questionnaire to customers and competitors, reply to question 11.
32     Form CO, paragraphs 79 and 111.
33     Form CO, paragraph 120.
34     Form CO, paragraph 124.
                                                        8
 ---pagebreak---      pressure applications. However, the Notifying Party submits that its activities in
     aerospace tubes are very limited and amounted in 2018 to approximately EUR [0-10]
     million only, [Hutchinson’s sales strategy].35
(51) Moreover, the Notifying Party submits that it will continue to compete with a
     number of established competitors on the market for tubes for the aerospace
     industry. These competitors include tube manufacturers such as Eaton (market share
     of 10-20% in aerospace tubes), Leggett & Platt (market share in aerospace tubes of
     5-10%), Senior Aerospace (market share in aerospace tubes of 5-10%), Parker
     Aerospace (market share in aerospace tubes of 5-10%) and FMH Aerospace (market
     share in aerospace tubes of 0-5%). In addition, Boeing’s internal tubes
     manufacturing capabilities would be equivalent to an estimated market share of
     20-30%.36
(52) While the Notifying Party submits that hoses are part of the overall market for tubes
     and ducts, for completeness it has also provided more specific information with
     respect to the manufacture and supply of hoses. In relation to the manufacture and
     supply of hoses, in particular, the Notifying Party submits that PFW does not
     produce hoses and only supplies hoses to its customers in very few occasions (which
     it sources from third party suppliers). In 2018, PFW sourced hoses for an amount of
     only EUR [500 000 -1 000 000].37 Hutchinson produces some flexible hoses for the
     aerospace industry but its sales only amounted to EUR [0-10] million in 2018. The
     Notifying Party estimates the market size for hoses to amount to at least EUR [390-
     410] million. This corresponds to a market share for Hutchinson of approximately
     [0-5]%.38 Moreover, the Notifying Party submits that Eaton and Parker are the two
     key players in the market for the production and supply of hoses.39
(53) Therefore, the Notifying Party submits that even if hoses were to be defined as a
     separate product market, the Transaction would not raise any competitive concerns.40
(54) In relation to the manufacture and supply of connectors for the aerospace industry,
     the Notifying Party submits that there is no overlap between the Parties’ activities.
     The Parties’ activities in these segments are in any case limited.41
(55) Finally, Hutchinson is a manufacturer and supplier of elastomer-based seals,
     including for the aerospace industry, while PFW is a customer of seals’ providers.
     Thus the Transaction will create a vertical link between the Parties with respect to
     seals.
(56) However, the Notifying Party submits that the market for aerospace seals is very
     large since seals are required in almost all parts of aircraft platforms. Moreover, seals
     can be produced in many different materials. Hutchinson’s share of the worldwide
35   Form CO, paragraph 147.
36   Form CO, paragraph 158.
37   Notifying Party’s response to RFI 2, question 1.
38   Notifying Party’s response to RFI 2, question 1.
39   Notifying Party’s response to RFI 2, question 1.
40   Notifying Party’s response to RFI 2, question 1.
41   Notifying Party’s response to RFI 2, question 2.
                                                      9
 ---pagebreak---  ---pagebreak---  ---pagebreak---      (c)     Worldwide market for the production and supply of tubes used in low
             pressure applications;
     (d)     Worldwide market for the production and supply of tubes used in high
             pressure applications.
(61) However, while based on the Parties’ market shares there may be four potentially
     affected markets, the overlap between the Parties’ activities relates only to non-
     metallic/composite tubes. Given that composite tubes are a sub-segment of the
     broader market for tubes, the overlap is then also reflected in the overall market for
     aerospace tubes and in the sub-segments based on the applications (low-pressure
     applications, in particular).
(62) In turn, as can be seen from Table 2, the combined markets share of the Parties in
     composite tubes would remain moderate at [20-30]%.
(63) Alternatively, in a potential worldwide market for tubes, while the Parties would
     have a combined market share of [20-30]%, the increment brought about by the
     Transaction is estimated at only [0-5]%. This is because Hutchinson is not present in
     the manufacturing of metallic tubes and the increment comes only from
     Hutchinson’s activities in the production of composite tubes. Given the small size of
     the market for composite tubes (EUR [20-25] million), the increment brought about
     by the Transaction in the market for tubes (size of EUR [480-500] million) is de
     minimis.
(64) Furthermore, the increment brought about by the Transaction is also very low in the
     sub-segments of tubes for high-pressure and low-pressure applications, with the
     delta amounting to only [0-5]% and [0-5]% respectively, as shown in Table 2.
(65) Therefore, the competitive interaction between the Parties is essentially limited to
     composite tubes used in low pressure applications. In line with the Horizontal
     Merger Guidelines, the relatively low level of concentration brought about by the
     proposed Transaction in these potential markets is prima facie unlikely to
     significantly impede effective competition.49
(66) Generally, the competitive interaction between the Parties appears to be limited
     overall. This is apparent from a list of all projects in which each of the Parties
     participated over the 2014-2018 period, which was submitted by the Notifying Party.
     It appears from that list that the Parties have virtually never competed for the same
     business opportunity in recent years (but for one possible occasion).50
(67) This is also apparent from the outcome of the market investigation. With respect to
     the supply of tubes and/or ducts for air and fluid conveyance in the aerospace
     industry, only a small minority of the respondents to the market investigation
     considers that Hutchinson and PFW compete with each other. Conversely, a majority
     of respondents expressing a view states that ‘it depends’.51 In effect, the Parties
49   Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of
     concentrations between undertakings, OJ C 31, 5.2.2004, page 5, paragraph 20.
50   Notifying Party’s response to RFI 1, question 21.
51   Questionnaire to customers and competitors, reply to question 12
                                                       12
 ---pagebreak---      appear to have complementary capabilities and to compete only in the supply of non-
     metallic tubes and ducts, to a limited extent.
(68) Thus, one competitor explains that ‘Hutchinson and PFW manufacture the same
     product made out of different material. Hutchinson provides composite ducts and
     PFW aluminium ducts. In low pressure and low temperature systems the parts can
     be replaced by each other. From a total OEM point of view the products are
     complementary’.52 Another competitor indicates that it has ‘competed [with]
     Hutchinson and PFW as potential suppliers’ with respect to ‘the procurement of
     non-metallic tubes and ducts’.53 Similarly, other competitors observe that ‘PFW is
     primarily a metallic Tube and Duct Supplier, [while] Hutchinson only supplies
     plastic and Composite Products’,54 and that ‘PFW provides hydraulic tubes and
     bleed air ducting, while Hutchinson mainly provides low pressure ducts’.55A major
     customer concurs and points out that ‘Hutchinson and PFW are essentially offering
     different types of tubes and ducts since Hutchinson is focusing on non-metallic tubes
     and ducts for low-pressure applications, whereas PFW is focussing on metallic tubes
     and ducts for high-pressure applications’.56 Hence, as another customer puts it, the
     Parties compete ‘[p]erhaps in some small cross-section of products but generally
     no’.57
(69) Furthermore, while half of the respondents to the market investigation consider PFW
     to be among the top five suppliers of tubes for air and fluid conveyance in the
     aerospace industry, only one respondent mentions Hutchinson among the top five
     suppliers.58 This is in line with Hutchinson’s very small market share in the overall
     tubes segment ([0-5]%).
(70) Likewise, with respect to ducts, only a minority of respondents mentions PFW as
     one of the top five suppliers and only one respondent mentions Hutchinson. This
     appears to be in line with the Parties’ limited individual market shares in the ducts
     segment, i.e., [5-10]% for Hutchinson and [5-10]% for PFW.
(71) In addition, when asked to identify the main competitors of Hutchinson for the
     supply of tubes and ducts, only a minority of respondents mentioned PFW.59 When
     asked to identify the main competitors of PFW for the supply of tubes and ducts,
     only one respondent mentioned Hutchinson.60
(72) The results of the market investigation therefore reveal that PFW and in particular
     Hutchinson are not considered to be particularly strong or important suppliers of
     tubes and ducts for the aerospace industry. They further confirm that Hutchinson and
     PFW can largely be considered to be active in different tube and duct segments,
     namely PFW mainly in metal tubes, where Hutchinson is not present, and
     Hutchinson in composite tubes, where PFW is present but which is a narrow
52   Questionnaire to customers and competitors, reply to question 12.1
53   Questionnaire to customers and competitors, reply to question 12.1
54   Questionnaire to customers and competitors, reply to question 12.1
55   Questionnaire to customers and competitors, reply to question 12.1
56   Questionnaire to customers and competitors, reply to question 12.1
57   Questionnaire to customers and competitors, reply to question 12.1
58   Questionnaire to customers and competitors, replies to question 13
59   Questionnaire to customers and competitors, replies to question 14
60   Questionnaire to customers and competitors, replies to question 15
                                                     13
 ---pagebreak---         segment. Consequently, PFW and Hutchinson do not compete closely in the supply
        of tubes and ducts. Specifically PFW and Hutchinson also do not compete closely in
        the supply of tubes, as only one respondent to the market investigation mentioned
        Hutchinson as an important competitor to PFW in that segment.61
(73)    Conversely, respondents to the market investigation have listed a significant number
        of other companies among the top suppliers for the supply of tubes and ducts,62
        confirming the Notifying Party’s argument that a number of strong competitors to
        the merged entity will remain post-Transaction.63 In particular, with respect to
        aerospace tubes, respondents to the market investigation named companies such as
        Eaton, Senior Aerospace, Leggett and Platt, Parker Aerospace and a number of
        others as top suppliers. Even more specifically, as regards composite tubes, these
        suppliers are also mentioned as main competitors of Hutchinson (which in the tubes
        segment is only active in the supply of composite tubes). Therefore, respondents to
        the market investigation consider that a number of competitors will remain active in
        the supply of composite tubes after the transaction.
(74)    Finally, a majority of respondents to the market investigation expressing an opinion
        do not expect the Transaction to have an impact on their business or generally on the
        supply, price, quality or innovation of either tubes or ducts for air and fluid
        conveyance in the aerospace industry .64 With respect to a potential impact on price,
        a competitor explains that it ‘would not expect any change given that there are other
        competitive suppliers’.65 Another competitor concurs by stating that ‘[t]here are
        many suppliers of tubes and ducts’.66
(75)    Other comments suggest that the Transaction may in fact strengthen competition. In
        particular, one of the two respondents that indicated that the Transaction would have
        a negative effect on their business explains that the Transaction ‘unleashes PFW
        from the burden of ownership of Airbus which made it very difficult for PFW to act
        and be seen on the market as independent and competitive’ and further that ‘[t]he
        change of ownership to Hutchinson brings big amounts of fresh capital to PFW
        Aerospace to make overdue changes in organisation and technology’.67
(76)    In view of the above, and, in particular, in light of the combined market shares and
        the limited increase brought about by the Transaction as well as the limited
        competitive interactions between the Parties in the supply of tubes and ducts,
        including in relation to composite tubes, the Commission considers that the
        horizontal overlap brought about by Transaction is not such as to raise serious
        doubts as to its compatibility with the internal market.
4.2.2.2. Vertical overlap
(77)    One respondent to the market investigation raised the issue of the Transaction giving
        PFW access to Hutchinson’s production of aerospace seals. Thus, for that
61      Questionnaire to customers and competitors, replies to question 15
62      Questionnaire to customers and competitors, replies to question 13
63      e.g. Form CO, paragraph 158.
64      Questionnaire to customers and competitors, replies to question 16
65      Questionnaire to customers and competitors, replies to question 18.1
66      Questionnaire to customers and competitors, replies to question 18.1
67      Questionnaire to customers and competitors, replies to question 16.1
                                                        14
 ---pagebreak---        competitor, post-Transaction ‘PFW could (in)-source the seals that they currently
       purchase from [the competitor] from Hutchinson instead’.68 However, this concern
       was not echoed by any other market participant.
(78)   Moreover, in response to a request for information on that point,69 the Notifying
       Party submitted that the Transaction would not raise an issue for the reasons
       described in paragraph (55).
(79)   Therefore, in particular due to the ubiquity of seals in aircraft platforms and PFW
       modest procurement volumes and Hutchinson’s moderate market share, the
       Transaction does not raise serious doubts as to its compatibility with the internal
       market in relation to the supply of aerospace seals.
4.2.3. Conclusion
(80)   For the reasons set out in this Section 4.2, the Commission concludes that the
       Transaction does not raise serious doubts as to its compatibility with the internal
       market with respect to the supply of tubes and ducts for the aerospace industry, or
       with respect to the supply of aerospace seals, including in all plausible sub-segments.
5.     CONCLUSION
(81)   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
68     Questionnaire to customers and competitors, replies to question 16.1
69     Notifying Party’s response to RFI 2, question 4.
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