CELEX: 32016M7799
Language: en
Date: 2016-02-04 00:00:00
Title: Commission Decision of 04/02/2016 declaring a concentration to be compatible with the common market (Case No COMP/M.7799 - SCHLUMBERGER / CAMERON) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 4.2.2016
C(2016) 778 final

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|To the notifying party:                                                |                                                                       |

Dear Sir/Madam,

Subject:    Case M.7799 - SCHLUMBERGER / CAMERON
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1] and Article 57 of the Agreement  on  the  European  Economic
Area[2]

 1) On 23.12.2015, the European Commission received notification of a proposed concentration pursuant to Article 4 of the Merger  Regulation  by
    which the undertaking Rain Merger Sub LLC (of the United States of America), controlled by Schlumberger Holdings Corporation of  the  United
    States of America ("Schlumberger") enters into a full merger within the meaning of Article 3(1)(b) of the  Merger  Regulation  with  Cameron
    International Corporation of the United States of America ("Cameron") by way  of  purchase  of  shares[3].  (Schlumberger  and  Cameron  are
    thereafter referred to as "the Parties".)

THE PARTIES

 2) Schlumberger provides services to the Oil and Gas industry and particularly provides oilfield products and  services  supplying  technology,
    information solutions, and integrated project management for oil and gas customers. Schlumberger is currently organised into three Groups:

a. Reservoir Characterization Group: This business group provides the  principal  technologies  involved  in  finding  and  defining  hydrocarbon
   resources.

b. Drilling Group: This business group provides the services and technologies involved in the drilling and positioning of oil and gas wells.

c. Production Group: This group provides the services and technologies involved in the production of oil and gas reservoirs.

 3) Cameron provides drilling and production systems, valves and measurement, and topside  process  systems  used  to  carry  out  a  number  of
    functions on the platform above sea level by the oil, gas and process industries. Cameron is organised into four main business units:

a. Subsea: delivers solutions, products, systems and services to the subsea oil and gas market, including integrated  subsea  production  systems
   involving wellheads, subsea trees, manifolds and flowline connectors, subsea processing systems for the  enhanced  recovery  of  hydrocarbons,
   control systems, connectors and services designed to maximize reservoir recovery and extend the life of each field.

b. Surface: provides onshore and offshore platform wellhead systems and processing solutions,  including  valves,  chokes,  actuators,  christmas
   trees and services to oil and gas operators. Rental equipment and artificial lift  are  also  provided,  as  well  as  products  and  services
   involving shale gas production.

c. Drilling: provides drilling equipment and services to shipyards, drilling contractors, exploration and production operators  and  rental  tool
   companies. The products of the Drilling segment fall into two broad categories: (i) pressure  control  equipment;  and  (ii)  rotary  drilling
   equipment. They are designed for either onshore or offshore  applications.  Such  products  include  drilling  equipment  packages,  blow  out
   preventers (BOPs), BOP control systems, connectors, riser systems, valve and choke manifold  systems,  topdrives,  mud  pumps,  pipe  handling
   equipment, rig designs and rig kits.

d. Valves and Measurement ("V&M"): The V&M segment businesses serve portions of the upstream, midstream and downstream markets. These  businesses
   provide valves and measurement systems that are primarily used to control, direct and measure the flow of oil and gas as they are  moved  from
   wellheads through flow lines, gathering lines and transmission  systems  to  refineries,  petrochemical  plants  and  industrial  centres  for
   processing. Products include various types of valves as well as measurement equipment  products  such  as  totalizers,  turbine  meters,  flow
   computers, chart recorders, ultrasonic flow meters and sampling systems.

 4) In 2013, Schlumberger and Cameron were granted unconditional approval by the European Commission to form the joint venture OneSubsea, active
    in the manufacture, development and supply of products, systems and services for subsea oil and gas production.[4] OneSubsea is 60% owned by
    Cameron and 40% by Schlumberger. After the Proposed Transaction Schlumberger will also acquire full control over OneSubsea.

THE CONCENTRATION

 5) Under the terms of the Merger Agreement, Schlumberger will acquire Cameron in a transaction in which Rain Merger Sub  LLC,  a  wholly  owned
    subsidiary of Schlumberger, will merge with and into Cameron, with Cameron as the surviving entity. As a result, Schlumberger  will  acquire
    all of the outstanding and issued voting securities of Cameron (the "Proposed Transaction”).[5]

 6) Following the Proposed Transaction Schlumberger will acquire sole  control  over  Cameron  and  therefore  it  constitutes  a  concentration
    according to Article 3(1)(b) of the Merger Regulation.

EU DIMENSION

 7) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million[6]. Each  of  them  has  an  EU-wide
    turnover in excess of EUR 250 million, 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.

MARKET DEFINITION

 8) The Proposed Transaction gives rise to (i) a number of horizontal and vertical overlaps between Schlumberger and Cameron  as  well  as  (ii)
    several vertical relationships between either of the Parties and OneSubsea, a joint venture currently jointly controlled by the Parties.

 9) Regarding the overlaps between the Parties, only the Parties' activities in the areas of Produced Water Treatment ("PWT")  and  Chokes  give
    rise to three horizontally potentially affected markets, namely produced water de-oiling, produced sand management and drilling chokes.

10) Regarding vertical relationships between the Parties and OneSubsea, the Proposed Transaction gives rise to four vertically affected  markets
    in relation to subsea CIVs as well as Subsea chokes (upstream) and Subsea christmas trees and subsea manifolds (downstream).

11) In neither of the affected markets the Proposed Transaction will give rise to competition concerns.

1 Product market definition

1 Produced Water Treatment

12) The extraction of oil and gas from underground reservoirs is accompanied by water or brine (which is referred to as  “produced  water”)  and
    sand. The efficient production of oil and gas requires the separation of water and solids from the oil.

13) PWT equipment is designed to remove oil, gas, and sand from produced water and to clean produced sand so that the produced water may be  re-
    injected or disposed of and the produced sand may be disposed of. Produced water and sand management  equipment  may  be  used  onshore  and
    offshore.

14) The Notifying Party claims that equipment for Produced Water de-oiling and Produced Sand management constitute two distinct product markets.
    Produced Water De-oiling equipment is designed and employed to separate oil from produced water,  whereas  Produced  Water  Sand  Management
    equipment is employed to remove sand from produced water, then to clean and transport it. They thus perform distinct functions and end uses,
    and because Produced Water De-oiling technologies are not substitutable with Produced Water Sand Management  technologies,  they  should  be
    viewed as separate relevant product markets.

15) The market investigation carried out by the Commission gave strong indications that de-oiling and  sand  management  products  are  part  of
    separate markets. All the customers and competitors contacted in fact indicated that  de-oiling  equipment  and  sand  management  equipment
    differ substantially.[7]

16) The market investigation also indicated that, notwithstanding the fact that  for  some  of  the  products  used  in  both  applications  the
    underlying physical principle is the same (centrifugal force), equipment used for de-oiling applications cannot be adapted for use  in  sand
    management applications.[8]

17) The Commission also found some indications that, albeit the larger suppliers are able to manufacture  both  de-oiling  and  sand  management
    products, some of the Parties' smaller competitors specialise in one of the two product lines.[9]

18) As regards Produced Water De-oiling, the Notifying Party submits that the relevant product market for Produced Water De-oiling does not need
    to be further segmented according to the technology and equipment used to deliver such services.

19) The Commission found some indications that all the technologies employed in de-oiling fulfil the same purposes and customers  can  use  them
    interchangeably.[10] The market investigation also indicated that some customers or group of customers may  have  different  preferences  as
    regards the technology to be employed; however this is not due to the fact  that  some  of  the  technologies  cannot  fulfil  the  required
    applications.

20) In some circumstances, removal of oil from the produced water requires more than one stage; this depends on the characteristics of each well
    and of the extracted hydrocarbon. The market investigation indicated that the different  stages  generally  are  carried  out  by  employing
    different technologies and not by replicating the same technology multiple times.[11]  The  Commission  takes  the  view  that  this  is  an
    indication that technologies used in de-oiling are substitutable from a demand side.

21) As regards Produced Water Sand Management, the Notifying Party submits that distinct markets  could  be  defined  for  De-sanding  and  Sand
    transportation equipment. However, all the market participants contacted during the market investigation stated that sand transportation and
    disposal is carried out by the same suppliers in charge of sand management operations.[12] Nevertheless, the question can be left open as no
    competition concern arises in any plausible scenario.

22) Finally the Notifying Party submits that for both, Produced Water De-oiling and Produced Water  Sand  Management  distinct  product  markets
    should be defined for onshore and offshore equipment as onshore equipment is not suitable for offshore operations due to a larger  footprint
    and different technologies used.

23) The market investigation indicated that, as regards de-oiling equipment, it may be appropriate to segment  between  off-shore  and  on-shore
    equipment. This is because all respondents to the market investigation  stated  that  customers  have  stricter  requirement  for  off-shore
    equipment, mainly due to the environment where it must operate.[13] In off-shore installation, in fact, limiting  space  and  weight  is  of
    paramount importance; therefore equipment for off-shore installation is designed to have a significantly more limited  footprint.  According
    to the respondents to the market investigation, as a result of the need for equipment to be more compact, offshore equipment  is  also  more
    technologically more advanced. As a direct consequence of this technology gap, equipment for off-shore installation  is  usually  also  more
    expensive. Furthermore, the market investigation indicated that equipment used for  on-shore  applications  cannot  be  used  for  off-shore
    applications, specifically due to the different conditions it is designed to operate in[14], and that manufacturers  of  on-shore  equipment
    may not have the sufficient know-how to readily start producing off-shore equipment.[15]

24) In light of the above, the Commission considers that (i) de-oiling and de-sanding equipment form parts of separate product markets that  can
    be possibly further segmented by technology and (ii) these product markets can be further segmented  into  onshore  and  offshore.  However,
    ultimately the exact product market can be left open as the Proposed Transaction does not raise competition  concerns  under  any  plausible
    product market definition.

2 Chokes

25) Chokes are a type of valve that acts as a restriction in drilling and production systems, and which is used to  control  the  flow  rate  of
    fluids and gas, and to manage the pressure reduction as the fluid leaves the wellbore. Multiple chokes are used on a well (as part of larger
    assemblies, such as manifolds), to control pressure and flow rates.  Chokes  are  available  in  several  configurations  and  technologies:
    Different choke technologies can be used to restrict fluid flow, and the technology  deployed  depends  on  whether  the  use  is  only  for
    open/close functions or also partially open. Chokes can be turned manually or mechanically by using hydraulic or electric actuators.

26) Chokes can be sold on a stand-alone basis or can be incorporated in a "manifold". Schlumberger sells chokes on a stand-alone  basis  whereas
    Cameron does not, and incorporates them in the manifolds it sells; however Cameron did  sell  some  chokes  on  a  stand-alone  basis  as  a
    replacement part to some of its manifolds customers. In addition, Cameron also sold chokes on a stand-alone basis to non-manifold  customers
    on [limited occasions, outside the EEA].

27) There are two main types of chokes used in the O&G industry: (i) drilling chokes and (ii)  production  (or  well-control)  chokes.  Drilling
    chokes used during drilling to maintain a suitable back pressure in the well bore, and to control the unloading of gas that may be entrained
    in the drilling mud. Production chokes are used during production to maintain a suitable back pressure, manage start-up  of  the  well,  and
    control the production rate. The Parties' activity overlap only in respect to drilling chokes and therefore production chokes  will  not  be
    discussed further.

28) There are two main types of drilling chokes that are currently produced by the Parties: (i) disc-style chokes and  (ii)  gate  &  seat-style
    chokes. According to the Parties each style of choke can be used for the same end-use applications, but customers may have a preference  for
    a specific type of choke. However, the Parties submit that the two types of chokes are substitutable as they perform the same  function  and
    are used for the same applications. Only for some specialty applications, accruing for less than 10% of the total demand of chokes, the  two
    types may not be interchangeable.

29) The Commission did not assess at the market for chokes in the past, however in the decision authorising the creation of the OneSubsea  joint
    venture between Schlumberger and Cameron (the "2013 Decision"), the Commission defined the market for subsea chokes  as  being  separate  to
    subsea manifolds. By analogy, Schlumberger considers that topside  chokes  constitute  a  separate  relevant  product  market  from  topside
    manifolds.

30) With regards to a possible segmentation between drilling chokes and production chokes, the Parties claim that these two types of chokes  are
    not substitutable from a demand side perspective as they have a fundamentally different design and do not perform the same functions.  Also,
    from a supply side perspective, a producer of drilling chokes would not be able to very promptly  and  profitably  switch  to  manufacturing
    production chokes. In light of the above, the Parties claim that drilling chokes and production chokes each form separate product markets.

31) Further to this, the parties claim that a further segmentation according to the style of choke is inappropriate  as  disc-style  chokes  and
    gate & seat-style chokes are interchangeable (see paragraph 28 above).

32) There is no overlap in the supply of production chokes between the Parties given that Schlumberger only supplies drilling chokes. Therefore,
    the delineation between both types of chokes can be left open as  the  competitive  assessment  will  be  unchanged  regardless  of  whether
    production chokes and drilling chokes belong to the same product market.

33) Further, among drilling chokes, the question whether disc style chokes and gate & seat style chokes belong to the same product market can be
    left open as the Proposed Transaction does not raise competition concerns under any plausible product market definition.

34) In light of the above, the Commission considers ultimately it can be left open, whether separate markets for drilling chokes and  production
    chokes are to be defined or whether these markets are to be segmented even further as the Proposed Transaction does  not  raise  competition
    concerns under any plausible product market definition.

2 Geographic market definition

1 Produced water treatment

35) The Notifying Party submits that, irrespective of how the relevant product markets are defined for Produced  Water  De-oiling  and  Produced
    Sand Management, the relevant geographic markets are global but at least EEA-wide in scope. They argue that first the Parties  and  most  of
    their competitors supply their technology worldwide, second there are no differences regarding technology used between different  geographic
    areas and third local requirements regarding the materials used for the manufacturing of the equipment are met by most competitors.

36) The Commission has not dealt with produced water and sand management equipment in  previous  cases.  However,  in  some  areas  of  oilfield
    products and services the Commission found some indications that  providers  need  to  establish  a  local  presence  in  order  to  compete
    effectively. The geographic reach of such a local presence may vary depending on whether the respective product or service is  provided  on-
    or offshore. In any case suppliers lacking a local presence may only  provide  a  limited  competitive  constraint  on  providers  that  are
    physically present with facilities and/or personnel in a given geographic area. Significant differences in the distribution of market shares
    (e.g. worldwide vs EEA-wide) also suggest that the competitive conditions may not be homogenous across all geographic  areas  and  that  the
    relative strength of suppliers may vary from one area  to  another.  Moreover,  the  Notifying  Party  acknowledges  that  often  regulatory
    requirements are set by National or Regional Regulatory Agencies which have to be addressed by the suppliers.

37) The market investigation in the present case gave some indication that for produced water treatment the market can be EEA-wide  rather  than
    national in scope. The majority of respondents to the market investigation stated in many countries national environmental regulation is  in
    place as regards the amount of oil in the water that is about to be discharged.[16] However, even though regulation is  national  in  scope,
    the legislative requirements within the  EEA  do  not  differ  substantially  and  suppliers'  equipment  either  is  compliant  with  these
    requirements[17] or can easily be adapted to meet these requirements[18]. Furthermore, the majority of respondents explained  that  a  local
    presence of a supplier is usually not required by the customer. However, in some instances smaller local suppliers can  have  a  competitive
    advantage over large international suppliers given their knowledge of the local market.[19] Moreover, in some cases a local presence in  the
    country of installation can be requested by the host country.[20] Finally, large customers responding to  the  market  investigation  stated
    that they procure PWT equipment on a worldwide basis and consider that suppliers are able to meet the different legal and customer  specific
    requirement throughout the world.[21]

38) Based on the above the Commission considers that in the present case it can be left open whether the geographic markets are  to  be  defined
    EEA-wide or narrower in scope as the Proposed Transaction does  not  raise  competition  concerns  under  any  plausible  geographic  market
    definition.

2 Chokes

39) The Notifying Party submits that, irrespective of the precise scope of the product market, its geographic scope is likely  to  be  worldwide
    and in any event not narrower than EEA-wide.

40) According to the Notifying Party, in fact, all major competitors are active on a  global  scale  and  the  main  technical  requirement  for
    drilling chokes is compliance with API 16C, which is an international standard.

41) The Commission has not dealt with the market for chokes as a whole in the past, however in the 2013 Decision the markets for  subsea  chokes
    and related products could be worldwide in scope.

42) The Commission considers that in the present case it can be left open whether the geographic market is to be defined EEA-wide or narrower in
    scope as the Proposed Transaction does not raise competition concerns under any plausible geographic market definition.

COMPETITIVE ASSESSMENT

1 Horizontal overlaps

1 Produced water treatment

43) As regards Produced Water De-oiling and Produced Sand Management the Notifying Party submits that it is not in a  position  to  the  provide
    market shares either worldwide or EEA-wide. The principal reason, as they argue, is that the Parties do not have  visibility  into  anywhere
    near all the tenders or bidding opportunities to come to a reliable base to estimate the market volume and thus market shares.

44) However, regardless of their exact market shares of the Parties, the Notifying Party submits that (1) they are hardly competing against each
    other in tenders, (2) a large number of competitors are active in the supply of equipment for Produced Water  De-oiling  and  Produced  Sand
    Management, many of whom have made sales to major customers inside and outside the EEA; (3) a variety of different technologies can be  used
    for Produced Water Treatment processes and the Parties' activities overlap only in a few of them and (4) customers set specific requirements
    for each tendered project.

45) The competitive conditions on the markets for Produced Water De-oiling and Produced Sand  Management  are  similar.[22]  Therefore,  in  the
    following they will be assessed in one and the same section.

46) First, as regards market shares, the market investigation gave indications that the Parties combined market share is low under any plausible
    market definition. According to a responding competitor, none of the currently existing suppliers on the markets has  a  market  share  that
    exceeds 5%[23] and the Parties' combined market share would be below 10%.

47) Second, based on the data provided by the Parties, as regards Produced Water De-oiling [… and] Produced Sand Management  projects,  […]  the
    Parties are not close competitors on any of the markets.

48) Third, according to the Notifying Party's submission, as regards Produced Water De-oiling equipment, the Parties compete with  at  least  18
    other suppliers, including large conglomerate companies such as Siemens, Sulzer, Veolia. Most of the suppliers offer a broad  range  of  de-
    oiling equipment. As regards Produced Sand Management equipment, the Parties compete with at least 17 other suppliers, most of which, again,
    offer a variety of different equipment and solutions, including Siemens, Sulzer and Veolia. Most respondents  to  the  market  investigation
    confirmed that these companies are major suppliers on the markets, competing with Schlumberger and Cameron.[24] Moreover, all respondents to
    the market investigation stated that the markets are competitive[25] and a sufficient number of alternative suppliers  to  the  Parties  are
    present[26].

49) Fourth, according to data provided by the Notifying Party, while a number of different technologies are used for  both  Produced  Water  De-
    oiling and Produced Sand Management, the Parties' activities overlap only in seven of 15 different  technologies  listed  by  the  Notifying
    Party (namely de-oiling hydrocyclones, compact flotation units, horizontal degassing vessels, wellhead de-sanding cyclones,  production  de-
    sanding cyclones, sand cleaning and sand transportation). This indicates that the Parties cannot be regarded as close competitors.

50) In respect to the competitive dynamics if the product market was to be segmented by  technology,  the  Commission  notes  that  on  all  the
    technologies where the Parties overlap they face competition from a significant number of market participants, always in excess of 10.

51) In light of the above and based on the results of the market investigation the Proposed Transaction does not raise competition  concerns  in
    relation to the markets for Produced Water De-oiling and Produced Sand Management and their possible segmentations.

2 Chokes

52) In relation to chokes, the Proposed Transaction only leads to a minimal market share increment mainly due to the  sale  of  spare  parts  by
    Cameron to its manifolds customers.

53) In fact, whereas Schlumberger markets and sells drilling chokes  as  a  stand-alone  product,  Cameron  only  provides  drilling  chokes  as
    components in its manifolds. Cameron does not advertise or market drilling chokes to customers as a standalone product separately  from  its
    manifolds. On limited occasions, Cameron has sold drilling chokes to its existing  manifolds  customers  as  spare  parts  to  the  drilling
    manifolds that it has previously supplied to them. Only on […] occasions, Cameron has in the past sold stand-alone drilling chokes  to  non-
    manifold customers, [all of them outside the EEA] and on the request of these customers.

54) On a market encompassing all drilling chokes, Schlumberger had a worldwide market share of [40-50]% for each of the last  3  years,  whereas
    Cameron's share was of [0-5]% in 2012, [0-5]% in 2013 and [0-5]% in 2014. On an EEA wide basis, the Proposed Transaction would not  generate
    an overlap […].

55) In addition, Cameron's chokes can hardly be used on manifolds from other suppliers since those manifolds  would  need  to  be  modified  and
    adjusted to make them compatible with Cameron's chokes[27]. Therefore, Cameron's chokes cannot be considered  to  be  fully  interchangeable
    with other chokes and could not be marketed on a stand-alone basis. As a result, the Commission considers that  Cameron  does  not  exert  a
    significant competitive constraint on Schlumberger on the market for stand-alone drilling chokes.

56) The Notifying Party is unable to provide market share estimates for a plausible segmentation according to  the  style  of  drilling  chokes,
    however Schlumberger estimates that at a worldwide level its share on the market for the sale of disc style chokes  would  be  approximately
    [50-60]% and on the market for the sale of gate & seat style chokes would be approximately [0-5]%. Cameron's market  share  would  be  below
    marginal on a worldwide basis. […] the Proposed Transaction would not generate any overlap.

57) Even if Cameron was to be considered a competitor on the market for the sale of stand-alone chokes, the Proposed Transaction will not  raise
    competition concerns as (i) Cameron does not pose a significant competitive constraint to the marker and (ii) post  transaction  the  merged
    entity would face competitive constraint from players such as Expro and CorTec, both having an estimated market share of around [20-30]%.

58) In light of the above the Proposed Transaction is unlikely to raise competition concerns in relation to the markets for chokes.

2 Vertical overlaps

59) In its 2013 Decision the Commission analysed several vertical relationships between Cameron and /  or  Schlumberger  on  the  one  hand  and
    OneSubsea on the other hand. Specifically, the Commission assessed vertical relationships between the markets provided in  the  table  below
    (market shares are based on estimates provided by the Notifying Party for EEA-wide markets (averages for the years 2013 to 2015)).[28]

|No.          |Upstream market[29]                               |Downstream market[30]                                  |
|(1)          |Subsea gate & ball valves;                        |Subsea christmas trees                                 |
|             |Cameron: [5-10]%                                  |OneSubsea: [30-40]% [31]                               |
|(2)          |Subsea chemical injector valves ("CIV");          |Subsea christmas trees                                 |
|             |Cameron: [30-40]%                                 |OneSubsea: [30-40]%                                    |
|(3)          |Subsea chokes;                                    |Subsea christmas trees                                 |
|             |Cameron: [50-60]%                                 |OneSubsea: [30-40]%                                    |
|(4)          |Subsea chokes;                                    |Subsea manifolds;                                      |
|             |Cameron: [50-60]%                                 |OneSubsea: [5-10]%                                     |

60) While these vertical links in the 2013 Decision gave – and for the purpose of the Proposed Transaction give – rise to affected markets,  the
    Commission concluded that OneSubsea and its parent companies will not have the ability and  incentive  to  foreclose  competitors  from  the
    market. The Commission argued that the vertical link was pre-existent (Subsea christmas trees were contributed to OneSubsea by Cameron), and
    the change from sole control (by Cameron) to joint control (by the Parties) would not change the ability and incentives to foreclose.

61) The Notifying Party claims that market conditions in 2013 and 2015 are basically the same so that the Commission's conclusion holds true for
    the assessment of the Proposed Transaction. Furthermore they argue that Cameron and OneSubsea are already vertically  integrated  –  Cameron
    jointly controls OneSubsea with Schlumberger – and a shift from joint to sole control would not  change  the  merged  entity's  ability  and
    incentive to foreclose.

62) The Commission agrees with these arguments and considers that the fact that, following the Proposed Transaction, Cameron will solely control
    OneSubsea would not change the assessment made in the 2013 Decision.

63) In any event, for the sake of completeness, the Commission has examined the vertical overlaps between Cameron and  OneSubsea  and  considers
    that following the Proposed Transaction the merged entities will not have the ability and the incentives to  engage  in  input  or  customer
    foreclosure.

64) Cameron is a supplier of subsea gate & ball valves, subsea chemical injector valves ("CIV") and subsea chokes  (upstream  markets),  all  of
    which can be considered as inputs for subsea christmas trees (downstream market)  which  –  amongst  others  –  are  produced  by  OneSubsea
    (vertical links No. (1) to (3)). Furthermore, Cameron's subsea chokes (upstream market)  are  an  input  for  subsea  manifolds,  which  are
    produced by OneSubsea (downstream market; vertical link No. (4)).

    Input foreclosure

65) As regards input foreclosure, the Commission considers that despite Cameron's substantial market shares on the upstream markets  for  subsea
    CIV ([30-40]%) and subsea chokes ([50-60]%), the merged entity will not have the ability to foreclose downstream competitors in  the  supply
    of subsea christmas trees and subsea manifolds of these input products.

66) First, on the upstream markets the merged entity competes with a number of suppliers from which downstream competitors can  source.  In  the
    supply of subsea CIV, the Cameron's strongest competitors under any plausible market definition are  SkoFlo  ([30-40]%),  Oceaneering  ([20-
    30]%) and Hunting ([5-10]%). SkoFlo in 2013 even had a higher market share than Cameron. In the  supply  of  subsea  chokes,  the  Cameron's
    strongest competitors are Masterflo ([20-30]%), GE ([10-20]%) and FMC ([5-10]%).

67) Second, on the downstream market the merged entity faces competition from a number of suppliers of both, subsea christmas trees  and  subsea
    manifolds, some of which have significantly higher market shares  than  the  merged  entity.  For  subsea  christmas  trees,  the  strongest
    competitors under any plausible market definition are FMC ([20-30]%), Dril-Quip ([10-20]%), Aker Solutions ([10-20]%) and GE ([5-10]%).  For
    subsea manifolds, the strongest competitors are FMC ([70-80]%) and Aker Solutions ([10-20]%). Given the strong market position of downstream
    competitors it is unlikely that the merged entity can foreclose them from access to an input product.

68) In light of the above the Commission considers tor Proposed Transaction will not raise competition concerns in relation input foreclosure on
    the markets for subsea chokes and subsea CIV (upstream) and subsea christmas trees and subsea manifolds (downstream).

    Customer foreclosure

69) As regards customer foreclosure, the Commission considers that despite the merged entity's market share in the supply  of  subsea  christmas
    trees above 30%, it will not have the ability to foreclose upstream competitors from access to an important downstream customer.

70) First, as indicated above (paragraph 69), downstream the merged entity competes with several suppliers that have a significant market share,
    among other FMC ([20-30]%), Dril-Quip ([10-20]%), Aker Solutions ([10-20]%) and GE ([5-10]%). Moreover, the merged entity sourced subsea CIV
    and subsea chokes from upstream competitors only to a limited extent. It sources equipment [merged entity’s sources of supply for subsea CIV
    and subsea chokes].[32] Thus, the merged entity is not an important customer to upstream competitors and therefore  cannot  foreclose  these
    competitors to access to an important customer.

71) Second, on the upstream markets for subsea CIV and subsea chokes the merged entity competes with a number of suppliers, two of which  –  FMC
    and GE – are vertically integrated and active on the downstream market for subsea christmas trees. Given  that  these  competitors  are  not
    insignificant and two of them even vertically integrated and OneSubsea sourced subsea CIV and subsea chokes from these competitors only to a
    limited extent, it is unlikely that these competitors can be foreclosed from access to in important customer.

72) In light of the above, the Commission considers that the Proposed Transaction will not raise competition concerns in  relation  to  customer
    foreclosure on the markets for subsea christmas trees and subsea manifolds (downstream markets)  and  subsea  gate  &  ball  valves,  subsea
    chemical injection valves and subsea chokes (upstream markets).

CONCLUSION

73) For the above reasons, the European Commission has decided not to oppose the notified operation  and  to  declare  it  compatible  with  the
    internal market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger Regulation and  Article
    57 of the EEA Agreement.

For the Commission

(Signed)
Margrethe VESTAGER
Member of the Commission

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[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 006, 09.01.2016, p. 3.
[4]   COMP/M.6854 – Cameron / Schlumberger / OneSubsea, decision of 15 April 2013.
[5]   As a consequence, Schlumberger also acquires Cameron's stake  in  and  thereby  sole  control  over  OneSubsea,  a  joint  venture  jointly
    controlled by Cameron and Schlumberger.
[6]   Turnover calculated in accordance with Article 5 of the Merger Regulation.
[7]   Non-confidential minutes of calls with competitors and customers on 11, 12, 13, 14 and 15 January 2016.
[8]   Non-confidential minutes of a call with competitors on 11, 12, 13 and 15 January 2016.
[9]   Non-confidential minutes of a call with a competitor on 11 January 2016 and a customer on 12 January 2016.
[10]  Non-confidential minutes of a call with a competitor on 11 January 2016.
[11]  Non-confidential minutes of calls with competitors on 12 January 2016, 15 January 2016 and customers on 12  January  2016  and  14  January
2016.
[12]  Non-confidential minutes of calls with competitors and customers on 11and 12 January 2016.
[13]  Non-confidential minutes of calls with competitors and customers on 11, 12, 13, 14 and 15 January 2016.
[14]  Non-confidential minutes of calls with a customer on 12 January 2016 and a competitor on 15 January 2016.
[15]  Non-confidential minutes of a call with a competitor on 12 January 2016.
[16]  Non-confidential minutes of calls with competitors on 11 January 2016 and 15 January 2016 and with a customer on 12 January 2016.
[17]  Non-confidential minutes of calls with competitors on 11 January 2016 as well as a customer on 12 January 2016.
[18]  Non-confidential minutes of a call with a competitor on 15 January 2016.
[19]  Non-confidential minutes of a call with a competitor on 12 January 2016.
[20]  Non-confidential minutes of a call with a customer on 12 January 2016.
[21]  Non-confidential minutes of calls with customers on 12 January 2016 and 14 January 2016.
[22]  Form CO, para. 500.
[23]  Non-confidential minutes of a call with a competitor on 11 January 2016.
[24]  Non-confidential minutes of calls with competitors 11 January 2016, 12 January 2016 and a customer on 12 January 2016.
[25]  Non-confidential minutes of calls with competitors and customers on 11, 12, 13, 14 and 15 January 2016.
[26]  Non-confidential minutes of a call with a competitor on 11 January 2016.
[27]  Reply to question 3 of Questionnaire 4 – Parties.
[28]  In addition in the 2013 Decision the Commission analysed vertical relations between a) subsea electrical connectors  and  subsea  christmas
trees, b) subsea booster pumps and SPS and c) subsea MPFWs and SPS. All of these products were post-merger  supplied  by  OneSubsea  so  that  no
vertical relationships arise from the Proposed Transaction.
[29]  See COMP/M.6854 for the exact product and geographic market definitions.
[30]  See COMP/M.6854 for the exact product and geographic market definitions.
[31]  Estimated market share for 2015 is [30-40]% and thus exceeds the level of 30%.
[32]  Notifying Party's response to question 2 of RFI 04 of 21 January 2016.

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 In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC)  No  139/2004
 concerning non-disclosure of business secrets and other confidential information.  The  omissions  are  shown  thus  […].  Where  possible  the
 information omitted has been replaced by ranges of figures or a general description.

                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE