CELEX: 32020M9455
Language: en
Date: 2020-01-28 00:00:00
Title: Commission Decision of 28/01/2020 declaring a concentration to be compatible with the common market (Case No COMP/M.9455 - COMPASS / FAZER FOOD SERVICES) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                               Brussels, 28.1.2020
                                                               C(2020) 580 final
                                                                                 PUBLIC VERSION
                                                                In the published version of this decision,
                                                                some information has been omitted pursu-
                                                                ant 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 infor-
                                                                mation omitted has been replaced by ranges
                                                                of figures or a general description.
                                                               Compass Group PLC
                                                               2, Guildford Street,
                                                               KT16 9BQ – Chertsey
                                                               United Kingdom
Subject:            Case M.9455 – Compass/Fazer Food Services
                    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 12 December 2019, the European Commission received notification of a pro-
          posed concentration pursuant to Article 4 of the Merger Regulation by which Com-
          pass Group PLC (“Compass”) acquires within the meaning of Article 3(1)(b) of the
          Merger Regulation control of the whole of “Fazer FS”, which is comprised of the
          target companies Fazer Food Services AB, Fazer Food Services OY, Fazer Food
          Services AS, Fazer Food Services A/S and Fazer Food OÜ, by way of purchase of
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”).
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---         shares (the “Transaction”).3 Compass is designated hereinafter as the “Notifying Par-
        ty”, whereas Compass and Fazer FS are collectively referred to as the “Parties”. The
        undertaking that would result from the Transaction is referred to as “the merged enti-
        ty”.
1.      THE PARTIES
(2)     Compass, incorporated in the United Kingdom (the UK), provides outsourced food-
        services to customers in the business & industry, healthcare and seniors, education,
        and defence, offshore and remote sectors. It also provides certain support services
        such as facility management and cleaning services, in addition to foodservices and
        concession foodservices in the sports and leisure sector. Compass is active in around
        45 jurisdictions across the world, in particular in the United States and Europe,
        which account for approximately 55% and 25% of Compass’ total revenue respec-
        tively. Compass operates the following brands in the Nordics: Eurest, ESS Support
        Services Worldwide, Chartwells, Medirest, Medirest Signature and Levy.
(3)     Fazer FS is the target business comprised of the following subsidiaries of Fazer
        Food AB, namely Fazer Food Services AB (incorporated in Sweden), Fazer Food
        Services OY (incorporated in Finland), Fazer Food Services AS (incorporated in
        Norway), Fazer Food Services A/S (incorporated in Denmark) and Fazer Food OÜ
        (incorporated in Estonia). Fazer Food AB (“Fazer Food”) is a subsidiary of the Finn-
        ish family-owned company Oy Karl Fazer Ab.
(4)     Fazer FS provides catering, restaurant and foodservices in Finland, Sweden, Den-
        mark, Norway, and Estonia. Fazer FS operates the following primary brands and
        product names: Fazer Food & Co, Amica, Tastory, Bistro A, Ateriapalvelut, Hav a
        Java, Wicked Rabbit, and Försvarsrestauranger.
(5)     Fazer Food owns the target business Fazer FS. Fazer Food currently operates more
        than 1 000 restaurants and employs approximately 7 000 people across the countries
        it operates in.
2.      THE CONCENTRATION
(6)     On 10 June 2019, Compass and Fazer Food concluded a sale and purchase agree-
        ment pursuant to which Compass, through its subsidiaries,4 agreed to acquire all of
        the shares of each of the target companies within Fazer FS.
(7)     At closing, the target companies comprising Fazer FS will become wholly-owned
        subsidiaries of Compass. The Transaction will also include certain IP rights that are
        currently owned by Oy Karl Fazer Ab and Fazer Food.
(8)     In light of the above, the Transaction will result in Compass’ acquisition of sole con-
        trol over Fazer FS within the meaning of Article 3(1)(b) of the EU Merger Regula-
        tion.
3   Publication in the Official Journal of the European Union No C 431, 23.12.2019, p. 18.
4   Compass Group International B.V., Compass Group Sweden AB, Compass Group Danmark AS and
    Compass Holding Norge AS.
                                                          2
 ---pagebreak--- 3.       EU DIMENSION
(9)      The Parties have a combined aggregate world-wide turnover of more than EUR 5
         000 million5 [Compass: EUR 26 264.7 million, Fazer FS: EUR 593.2 million]. Each
         of them has an EU-wide turnover in excess of EUR 250 million [Compass: EUR
         6 142.9 million, Fazer FS: […] million]. Neither of the Parties achieves more than
         two-thirds of their aggregate EU-wide turnover within one and the same Member
         State. The notified Transaction therefore has an EU dimension within the meaning of
         Article 1(2) of the Merger Regulation.
4.       OVERVIEW OF THE CONTRACT FOODSERVICES INDUSTRY
(10)     Contract foodservices activities include the supply of services consisting in the prep-
         aration and/or serving of meals at the premises of business customers. This involves
         purchasing, preparing, cooking and serving food and drink to private and public
         business customers operating in various fields, for whom that service is not the pri-
         mary reason for the customer’s presence on the premises (companies, education in-
         stitutions, hospitals, municipalities, etc.).6
(11)     Contract foodservices are typically provided on the customer’s premises, using the
         customer’s equipment, along with existing staff.7 Canteen staff are typically trans-
         ferred to new foodservices suppliers under EU labour rules, more specifically Di-
         rective 2001/23/EC, which regulates the issue of the protection of workers’ rights
         when a workplace is transferred from one employer to another.8 Suppliers typically
         have training and development programmes in place in order to ensure that new and
         existing canteen staff, including managers, chefs and servicing staff, are continually
         trained to a high standard.9
(12)     In order to provide contract foodservices, the supplier must purchase food products
         as well as other related non-food products such as tableware, cookware, cleaning
         supplies, uniforms, etc.10 The on-site kitchen facility services are, however, generally
         provided by the customer on their premises, which the new contract foodservices
         supplier takes over from the previous contract foodservices supplier.11
(13)     The supplier typically presents a menu to the customer, which is often done by
         employing a small central culinary team at national level, which typically consists of
         trained chefs, nutritionists and other food professionals to assist in the developing of
         recipes that can be made available to chefs operating in the individual units. These
5   Turnover calculated in accordance with Article 5 of the Merger Regulation.
6   Form CO, para. 116.
7   Form CO, para. 1054.
8   Form CO, para. 1070; Council Directive 2001/23/EC of 12 March 2001 on the approximation of the laws
    of the Member States relating to the safeguarding of employees’ rights in the event of transfers of under-
    takings, businesses or parts of undertakings or businesses, OJ L 82, 22.3.2001, p.16-20. The United King-
    dom has implemented the European Union Transfer of Undertakings Directive 2001/23/EC in UK law
    through The Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246), col-
    loquially known as “TUPE”.
9   Form CO, para. 929.
10 Form CO, para. 904.
11 Form CO, para. 1054.
                                                           3
 ---pagebreak---        staff members are then responsible for the development of menus and recipes, food
       concepts and also the training of staff at the premises.12
(14)   In the foodservices business, foodservices are sometimes provided together with
       other facilities maintenance services, such as cleaning, reception and maintenance
       services, facility management and other support services, in a multi-service contract.
       Such multi-service providers enable the customer to engage with one sole supplier,
       which can prove to be more convenient. Furthermore, the customer can “mix and
       match” the services to cater their specific needs.13 The Notifying Party argues that
       customers are increasingly focusing on and demanding for high-quality foodservices
       over multi-service propositions, and choosing smaller providers whose focus is ex-
       clusively on the provision of foodservices.14 As such, this enables local competitors
       who are often recognised for their high-quality foodservices to differentiate them-
       selves from the multinational and multi-service providing companies, thereby win-
       ning bids as the preferred provider of foodservices. Indeed, the results of the Com-
       mission’s market investigation show a tendency towards customers prioritising high-
       quality, local and/or organic food over low-cost food offering as well as over multi-
       service solutions, where food is provided together with other services such as clean-
       ing.15
(15)   Most of the contract foodservices are procured through calls for tender, both by pub-
       lic bodies and private companies. The market for contract foodservices is a bidding
       marketplace, where competitors are invited to bid for tenders in order to win a con-
       tract with a customer.16 The majority of customers procure contract foodservices
       through tenders either as a food-only contract or as part of a multi-service contract.17
       Tenders are structured according to the wishes and requirements of the customer
       tendering.18 While some contract renewals are done on a bilateral basis, the customer
       would almost always have the possibility to open a foodservices contract for re-
       tendering if unsatisfied with the terms offered by the existing supplier.19
(16)   Contract foodservices contracts in all segments in Sweden, Finland, Norway and
       Denmark typically have an average term of three to five years. 20 Some contracts in-
       clude specific provisions for the possibility of extension for an additional period by
       agreement.21 Public tender contracts for contract foodservices are subject to a maxi-
       mum term under the EU public procurement rules.
(17)   The contract foodservices market is characterised by the presence of a large number
       of multi-national, national and local rival suppliers and the market is thus featured by
12 Form CO, para. 909.
13 Form CO, para. 1036.
14 Form CO, para. 121.
15 Replies to Q1 – Questionnaire to Competitors in Sweden, questions 22, 27, 32, 37 and 40; Replies to Q2 –
   Questionnaire to Competitors in Finland, question 20; Replies to Q3 – Questionnaire to Competitors in
   Norway, question 20; Replies to Q4 – Questionnaire to Competitors in Denmark, questions 21, 26 and 31.
16 Form CO, para. 283.
17 Form CO, para. 949.
18 Form CO, para. 950.
19 Form CO, para. 949.
20 Form CO, para. 281; Notifying Party’s reply to RFI 17 of 24 January 2020.
21 Form CO, para. 919.
                                                        4
 ---pagebreak---        both small and large players.22 The contract foodservices business in Sweden, Den-
       mark, Norway and Finland is highly diverse and includes over 35 competitors with a
       variety of different supply models and customer segments.23
5.     THE PARTIES’ BUSINESS MODEL
5.1.   Compass
(18)   Compass is a multinational, global company with strong food and support service
       credentials. Compass offers services in the Nordic countries, its largest market being
       Norway, followed by Denmark.24
(19)   Compass is a multi-services provider. In addition to foodservices, Compass also of-
       fers services, such as cleaning, facility management and other support services ca-
       tered to the individual customer’s needs. This includes, for example, cleaning in
       hospitals, reception and maintenance services at corporate headquarters and manag-
       ing remote camps, grounds and facilities services in schools and universities.25 Such
       services are complementary to contract foodservices, in the sense that some custom-
       ers tender out their needs for contract foodservices together with other services.
(20)   According to the Notifying Party, [Notifying Party’s internal business strategy], con-
       trary to Fazer FS.26 Therefore, Compass submits that the Transaction will enable it to
       enhance its Nordic business and profile in the region, which is less well-established
       than in other European countries.27 Compass also explained that it expects that the
       Transaction will enable it to strengthen its core foodservices offering and [Notifying
       Party’s internal business strategy].28 The Notifying Party believes that the combina-
       tion of Compass and Fazer FS will enable them to offer customers in the Nordic re-
       gion a wider and more innovative choice of products and services at attractive pric-
       es.29
5.2.   Fazer FS
(21)   Fazer FS started in 1891 as a restaurant business in Helsinki and built its name in the
       confectionary business, producing some of the most well-known sweets and choco-
       lates from Finland. In the contract foodservices market, Fazer FS has a reputation for
       “its focus on food excellence”.30 Fazer FS’ largest market is Finland, followed by
       Sweden.31
(22)   Contrary to Compass, Fazer FS is not a multi-service provider and typically does not
       provide additional services, such as cleaning or facility management. Fazer FS only
22  Form CO, para. 35.
23  Form CO, para. 33.
24  Form CO, section 4.
25  Form CO, para. 1036.
26  Form CO, para. 9.
27  Form CO, para. 7.
28  Form CO, para. 11.
29  Form CO, para. 9.
30  Form CO, para. 1039.
31  Form CO, section 4.
                                                  5
 ---pagebreak---          occasionally competes for multi-service contracts with a partner, as its focus is on
         the provision of foodservices.32
6.       MARKET DEFINITION
6.1.     Introduction
(23)     Both Compass and Fazer FS provide contract foodservices to customers in Sweden,
         Finland, Norway and Denmark.33
(24)     As shown in Table 1, the Parties’ activities overlap in the provision of (i) contract
         foodservices to customers active in the business & industry, education, healthcare &
         welfare, and defence sectors in Sweden; (ii) contract foodservices only to customers
         active in the business & industry sector in Finland and Norway; (iii) contract food-
         services to customers active in the business & industry and education sectors in
         Denmark.
             Table 1. The Parties’ activities per segment in each relevant country
                                                                Segment
              Country          Business & in-      Education           Healthcare &          Defence
                                   dustry                                  welfare
               Sweden               ✓                  ✓                     ✓                   ✓
               Finland              ✓              no overlap            no overlap         no overlap
                                                 (only Fazer FS       (only Fazer FS      (only Fazer FS
                                                     active)               active)            active)
             Norway34               ✓              no overlap            no overlap         no overlap
                                                 (only Compass        (only Compass       (only Compass
                                                     active)               active)            active)
              Denmark               ✓                  ✓             none of the Par-       no overlap
                                                                       ties are active
                                                                                          (only Compass
                                                                                              active)
         Source: Form CO and the Parties’ submission “Introduction to Contract Foodservices” of 19 No-
         vember 2019, slide 19.
6.2.     Relevant market: contract foodservices
(25)     In this Section, and for the purpose of this Decision, the relevant markets for contract
         foodservices are defined.
32  Form CO, para. 520.
33  Fazer FS comprises also Fazer Food OÜ, incorporated in Estonia. The Parties do not have overlapping
    activities in Estonia.
34 For completeness, Fazer FS has only de minimis activities in Norwegian healthcare & welfare, and educa-
     tion.
                                                       6
 ---pagebreak--- 6.2.1. Product market definition
6.2.1.1. Distinction between contract foodservices and concession foodservices
(26)     The Parties are both active in the foodservices industry. In addition to contract food-
         services supplied to customers that are active in various sectors, both of the Parties
         are also active, to a more limited extent, in concession foodservices for various re-
         tail-related locations and sports venues.35
The Commission’s past practice
(27)     In its prior decisional practice, the Commission has defined a separate market for
         contract foodservices, which consists of the provision of foodservices outside the
         home performed by third parties, typically on the premises of public or private sector
         customers and involving the supply of food and drink to customers for whom that
         service is not the primary reason for their presence on the premises.36 This is in con-
         trast to concession foodservices, which concern the provision of foodservices to the
         public in travel locations such as airports, railway stations, ferries, roadsides as well
         as retail related locations such as department stores, sports stadia and leisure ven-
         ues.37
The Notifying Party’s view
(28)     The Notifying Party does not dispute the market definitions provided in the Com-
         mission’s precedents and considers that the precise market definitions for contract
         foodservices and concession foodservices can be left open.38
The Commission’s assessment
(29)     The market investigation has not produced evidence indicating that the Commission
         should depart from its prior decisional practice defining separate markets for contract
         foodservices and concession foodservices.
Conclusion
(30)     In line with the Commission’s precedents and in light of the results of the market
         investigation, the Commission concludes that, for the purpose of this Decision, con-
         tract foodservices and concession foodservices should be defined as separate product
         markets.
(31)     Considering that the Parties’ activities in the market for concession foodservices do
         not give rise to any affected markets, this market will not be discussed any further in
         this Decision.39
35  Form CO, paras. 227-230.
36  Case M.2977 – Compass/Onama SpA, paras. 13-15; Case M.2373 – Compass/Selecta, para. 12. See also
    Case M.4202 – Charterhouse/Elior, para. 9.
37 Case M.2977 – Compass/Onama SpA, para. 12; Case M.4202 – Charterhouse/Elior, para. 10.
38 Form CO, paras. 117, 139 and 227.
39 Based on the Notifying Party’s submission, the Parties’ activities in concession foodservices only overlap
    in Sweden with a combined share of [0-5]% in terms of numbers of sites and [0-5]% in terms of annual
    visitors. See Form CO, para. 226 et seq.
                                                        7
 ---pagebreak--- 6.2.1.2. Segmentation by customer industry
(32)    Contract foodservices are typically provided to customers that are active in a variety
        of sectors, such as in general business industry (e.g. office or factory canteens),
        healthcare (e.g. patient meals), education (canteens at schools, universities and other
        tertiary education institutions), defence (e.g. canteens for military establishments)
        and other sectors.
The Notifying Party’s view
(33)    In the view of the Notifying Party, any segmentation of the market for contract food-
        services by customer’s industry is not appropriate for the following reasons. First,
        there would be a high level of supply-side substitutability between the supply of con-
        tract foodservices to customers in all types of sectors, including business & industry,
        education, healthcare & welfare, and defence. Second, customers in different indus-
        tries would predominantly share the same demand requirements, that is to say an op-
        erator to cook and serve meals in their canteens.40 Third, there would be no signifi-
        cant contractual characteristics that differ depending on the characteristics of cus-
        tomers (that is to say whether it is a customer active in the business & industry sector
        or the education sector) and no particular contractual form which is specific to a type
        of customer.41
(34)    The Notifying Party however concedes that there exist certain “differentiating fac-
        tors” between those segments, which are reflected in each of the Parties’ decision to
        be present in some segments, but not in others.42
(35)    Even though the Notifying Party considers that it is not necessary for the Commis-
        sion to reach a conclusion on the precise relevant product market definition in this
        case, as the Transaction will not raise serious doubts as to its compatibility with the
        internal market under any plausible segmentation,43 it, nonetheless, provided the
        Commission with the necessary information to assess the effects of the Transaction
        on the basis of customer’s sector.
The Commission’s past practice
(36)    In previous decisions, the Commission considered whether the market for contract
        foodservices should be further segmented according to the sectors in which the cus-
        tomers of contract foodservices are active, namely into (i) business & industry (staff
        canteens in both public and private sectors), (ii) healthcare (hospitals, nursing
        homes), and (iii) education (schools, universities), and (iv) defence and other.44
(37)    More particularly, in Granada/Compass, the Commission noted that certain demand-
        side differences existed between the relevant sectors in terms of the margins earned,
        growth projections and penetration rates.45 In Avenance Italy/Gemeaz Cusin, the
40  From CO, paras. 145-146 and 153.
41  From CO, paras. 146 and 150.
42  Form CO, paras. 155 et seq. and 179.
43  Form CO, paras. 117 and 139.
44  Case M.7232 – Charterhouse/Nuova Castelli, para. 17; Case M.6513 – Avenance Italy/Gemeaz Cusin,
    paras. 9-11; Case M.1972 – Granada/Compass, paras. 9-10.
45  Case M.1972 – Granada/Compass, para. 10.
                                                      8
 ---pagebreak---         Commission’s market investigation showed that segmentation on the basis of the
        customer’s activities could be relevant since each type of customer had its own spec-
        ificities, meaning that foodservices provided in a nursing home are not the same as
        those provided to the military.46
(38)    However, the Commission has not reached in the past a definite conclusion on the
        possibility to segment the contract foodservices on the basis of customer’s sector and
        ultimately left the question open.47
The Commission’s assessment
(39)    The market investigation in the present case delivered mixed results. In some in-
        stances, it was confirmed that segmentation on the basis of customer’s activities
        might be relevant. For example, some of the competitors having responded to the
        market investigation explained that supply of contract foodservices to customers in
        one sector cannot always be “easily replicated for customers in another sector”48
        and gave examples of customers in the healthcare and education sectors which re-
        quire “a different menu including nutrition-value calculations” that typically are not
        required by customers active in the business & industry segment.49 Moreover, some
        of the competitors also noted that “commercial models differ a lot from segment to
        segment”,50 including “different levels of profitability”.51 For example, business &
        industry contracts would be dominated by ‘cost-plus’ model52 and to a lesser degree
        ‘fixed-cost’ model,53 whereas other sectors would often operate “on dramatically dif-
        ferent terms.”54 For this reason, contract foodservices suppliers wishing to enter a
        new product segment might face entry barriers in relation to different regulatory re-
        quirements, production resources, need for differently trained personnel and other
        know-how and competences.55
(40)    Some of the customers also expressed their view that due to the particular needs of
        dietary restrictions of the end customers, “a high knowledge of dietary recommenda-
        tions is required (sic)” for customers active in the healthcare sector. 56 Another cus-
        tomer active in the education sector explained that “it requires a lot of expertise to
46 Case M.6513 – Avenance Italy/Gemeaz Cusin, para. 10.
47 Case M.7232 – Charterhouse/Nuova Castelli, para. 20; Case M.6513 – Avenance Italy/Gemeaz Cusin,
   para. 12; Case M.1972 – Granada/Compass, para. 11.
48 Replies to Q4 – Questionnaire to Competitors in Denmark, question 8.1.
49 Replies to Q1 – Questionnaire to Competitors in Sweden, questions 8.1 and 9.
50 Replies to Q4 – Questionnaire to Competitors in Denmark, question 8.1.
51 Replies to Q2 – Questionnaire to Competitors in Finland, question 8.1.
52 In a cost-plus contract, the supplier provides an estimated budget and operates the service according to it.
   The customer pays any excess and benefits from any savings. The supplier is remunerated on a fee basis
   (i.e. on top of the input costs the customer pays). The customer typically specifies the type of pricing
   model in the tender process. See the Notifying Party’s explanation provided in Form CO, para. 916.
53 In a fixed-cost (also known as ‘fixed-price’) contract, the supplier prepares an annual budget including all
   known variables, from which a fixed weekly or monthly subsidy is derived. The supplier is responsible for
   any excess and as a result the margin is higher to reflect the additional risk the supplier undertakes. The
   customer typically specifies the type of pricing model in the tender process. See the Notifying Party’s ex-
   planation provided in Form CO, para. 916.
54 Replies to Q4 – Questionnaire to Competitors in Denmark, question 8.1.
55 Replies to Q3 – Questionnaire to Competitors in Norway, questions 8.1 and 9; Replies to Q2 – Question-
   naire to Competitors in Finland, question 8.1.
56 Replies to Q5 – Questionnaire to Customers in Sweden, question 9.1.
                                                          9
 ---pagebreak---         handle foodservices at a university with all the different services required and the
        different segment of customers, meetings and events”.57
(41)    On the other hand, a large number of customers and, to a smaller extent, competitors,
        noted that the provision of contract foodservices requires “pretty much the same
        types of resources and delivery regardless of [the] sector. The same standards and
        HSE58 requirements within all sectors”.59 Indeed, the majority of customers were of
        the view that the supply of contract foodservices to customers in different sectors in
        terms of price, quality and services does not differ materially. 60 Certain competitors
        also responded that, in their view, the supply of contract foodservices to customers
        active in different sectors is interchangeable.61
Conclusion
(42)    In line with the Commission’s precedents and considering that the results of the
        Commission’s market investigation were mixed, the Commission concludes that, for
        the purpose of this Decision, the question whether the market for contract foodser-
        vices should be segmented on the basis of customer’s sector can in principle be left
        open.
(43)    However, considering that the Parties only overlap in specific sectors, in the compet-
        itive assessment in Section 7 the Commission will assess the likely effects of the
        Transaction on the narrowest plausible relevant product market segments, that is to
        say on each identifiable relevant sector, namely the sectors in which customers oper-
        ate, including (i) business & industry (staff canteens in both private and public sec-
        tors), (ii) education, (iii) healthcare & welfare, and (iv) defence.
6.2.1.3. Distinction between contract foodservices and other food-related services
(44)    Depending on the nature of the customer’s business, the provision of contract food-
        services on customer premises in many instances includes not only food served at
        the canteen (for example, breakfast and/or lunch), but also other food-related ser-
        vices such as, for example, catering for business meetings, kiosk and café services,
        snacks, fruit baskets, etc.
The Notifying Party’s view
(45)    The Notifying Party submits that, based on its experience, kiosks, cafés and catering
        for business meetings/hospitality in almost all relevant product market segments as
        defined above are typically tendered together with the primary foodservices contract
        and that the provision of such services typically does not require different expertise,
57  Replies to Q8 – Questionnaire to Customers in Denmark, question 9.1.
58  HSE refers to health/hygiene and safety requirements.
59 Replies to Q3 – Questionnaire to Competitors in Norway, question 9. See also Replies to Q1 – Question-
    naire to Competitors in Sweden, question 8.1 noting that “processes are very similar” and that in essence
    food is “manufactured from the same materials” and Replies to Q4 – Questionnaire to Competitors in
    Denmark, question 9, explaining that “there [is] no particular variety of needs from sector to sector”.
60 Replies to Q5 – Questionnaire to Customers in Sweden, question 9; Replies to Q6 – Questionnaire to
    Customers in Finland, question 8; Replies to Q7 – Questionnaire to Customers in Norway, question 8;
    Replies to Q8 – Questionnaire to Customers in Denmark, question 9.
61 Replies to Q3 – Questionnaire to Competitors in Norway, question 8; Replies to Q1 – Questionnaire to
    Competitors in Sweden, question 8; Replies to Q2 – Questionnaire to Competitors in Finland, question 8.
                                                         10
 ---pagebreak---         staff or facilities.62 According to the Notifying Party, with some exceptions,63 cus-
        tomers would overwhelmingly choose to tender their contract foodservices and busi-
        ness meeting catering together and suppliers of such services would mainly be the
        same companies that also offer contract foodservices.64
(46)    The Notifying Party further submits that the Parties do not account for business
        meeting catering separately in terms of restaurant/unit profitability. 65 The same is
        true for the Parties’ revenues from kiosk and café services.66 Therefore, the Commis-
        sion should assess the putative market for contract foodservices, which comprises
        canteen services and the related food services, including catering for business meet-
        ings, kiosk and café services.67
The Commission’s past practice
(47)    In previous decisions, the Commission did not specifically address the question of
        what type of food-related services should be included in the scope of the contract
        foodservices.68
The Commission’s assessment
(48)    The results of the market investigation, to a large extent, confirmed the submission
        of the Notifying Party. The majority of customers having responded to the market
        investigation confirmed that they demand catering for business meetings, and kiosk
        and café services in combination with contract foodservices (i.e. canteens) as op-
        posed to stand alone or separate service.69 One customer stated that it“[m]akes
        commercially sense to include [business meeting catering and café/kiosk services] in
        the same agreement”70, and another explained that the combination of services al-
        lows for an easier administration of the contract.71 However, the Commission’s mar-
        ket investigation also suggests that on the demand side, the final decision on whether
        the contract is entered for all food service-related needs or only for canteen services
        depends on negotiations and how favourable is the price offered by the contract
        foodservices supplier.72
62 Form CO, paras. 177, 191, 193 and 195-204. For completeness, the Notifying Party submits that the Par-
   ties are aware of customers that do not tender food-related services with contract foodservices, however,
   these are exceptions to this general rule. See Form CO, para. 191.
63 See, for example, Form CO, para. 192.
64 Form CO, para. 177. See also Form CO, footnote 143.
   Form CO, paras. 177, 184 and 192-193.
65 Form CO, paras. 177 and 207.
66 Form CO, paras. 207-209. In addition, according to the Notifying Party, both Parties focus on contracts
   where kiosk and café services form part of a broader foodservices offering. See Form CO, para. 204.
67 Form CO, paras. 179 and 207.
68 See, for example, Case M.6513 – Avenance Italy/Gemeaz Cusin, para. 9; Case M.2373 – Com-
   pass/Selecta, para. 10. These decisions only mention that as part of contract foodservices, the food is often
   sold to end customers at subsidised prices.
69 Replies to Q8 – Questionnaire to Customers in Denmark, questions 7, 7.1 and 7.3; Replies to Q5 – Ques-
   tionnaire to Customers in Sweden, questions 7.1, 7.3, 8 and 8.1.
70 Replies to Q8 – Questionnaire to Competitors in Denmark, questions 7.1.1 and 7.3.1.
71 Replies to Q8 – Questionnaire to Competitors in Denmark, questions 7.1.1 and 7.3.1.
72 Replies to Q8 – Questionnaire to Competitors in Denmark, questions 7.1.1 and 7.3.1.
                                                         11
 ---pagebreak--- (49)     A majority of competitors having responded to the market investigation indicated
         that they do not offer kiosk and café services as a separate, stand-alone service (i.e.
         without a contract foodservices contract).73 The same is true in the case of catering
         for business meetings, as most of competitors indicated that they typically provide
         hospitality/catering for meetings as part of a wider contract foodservices offering.74
Conclusion
(50)     For the reasons set out in this Section, including in light of the results of the market
         investigation and of all the evidence available to it, the Commission concludes that,
         for the purpose of this Decision, the relevant market is the market for contract food-
         services including catering for business meetings as well as kiosk and café services.
6.2.1.4. Distinction between contract foodservices and vending services
(51)     Vending services are the sale of products and services at an unattended point of sale
         using some form of payment system. Vending machines can be used to provide a
         large range of products, such as drinks, food, snacks and other.
The Notifying Party’s view
(52)     The Notifying Party submits that the Parties offer only limited vending services in
         the countries in which they are both active and that vending services are almost ex-
         clusively provided as part of the Parties’ foodservices offering rather than as a sepa-
         rate stand-alone service.75 Moreover, in practice, the Parties often sub-contract vend-
         ing services as part of their contract foodservices offering to third parties rather than
         carry out such services themselves. The Notifying Party further submits that in some
         instances, the Parties book any vending-related revenue as contract foodservices or
         catering revenue.76
(53)     In the view of the Notifying Party, vending services do not constitute a separate
         product market.77 The Notifying Party considers that it is not necessary for the
         Commission to reach a conclusion on the precise relevant product market defini-
         tion.78 However, according to the Notifying Party, if the provision of vending ser-
         vices were to be assessed as a separate product market, the Transaction would not
         give rise to an affected market as the combined market share of the Parties would be
         well below the 20% threshold in each of Sweden, Finland, Norway and Denmark.79
73  Replies to Q4 – Questionnaire to Competitors in Denmark, question 6.3; Replies to Q2 – Questionnaire to
    Competitors in Finland, question 6.3; Replies to Q1 – Questionnaire to Competitors in Sweden, question
    6.3.
74  Replies to Q4 – Questionnaire to Competitors in Denmark, question 6.1; Replies to Q2 – Questionnaire to
    Competitors in Finland, question 6.1; Replies to Q3 – Questionnaire to Competitors in Norway, question
    6.1.
75  For completeness, Compass and Fazer FS provide stand-alone vending services in Finland and Sweden,
    respectively. However, the provision of any stand-alone vending services are negligible, with less than
    [0-5]% market share for Compass in Finland, and less than [5-10]% for Fazer FS in Sweden. See Form
    CO, paras. 238 and 241-242.
76  Form CO, paras. 238 and 242.
77  Notifying Party’s reply to RFI 3 of 18 December 2019, question 1.
78  Form CO, paras. 117 and 139.
79  Form CO, paras. 244 and 247.
                                                        12
 ---pagebreak--- The Commission’s past practice
(54)    In a previous case, the Commission held that vending services and contract foodser-
        vices constituted separate markets.80 In other decisions, the Commission considered
        whether vending services offered by companies that specialise in such services and
        vending services that are offered by foodservices providers as an extension of their
        core services constitute one product market. However, in that case the Commission
        eventually left the question open.81
The Commission’s assessment
(55)    The results of the market investigation in the present case show that the majority of
        competitors and customers support the view that vending services are mostly ac-
        quired and/or provided as an integrated part of the foodservices contract.82 As indi-
        cated by some customers, it is “the most convenient way” and “makes more sense for
        business, and administration” to have a supplier as a “one-stop-shop”.83 Other cus-
        tomers explained that vending services are provided “always together with other
        services”.84 In a similar vein, the responses received from the Parties’ competitors
        point to the similar direction. For example, some competitors explained that “vend-
        ing machine services are always connected with some other service”,85 and that they
        “do not offer vending machines as a stand-alone service”.86 Furthermore, one com-
        petitor stated that “offering vending machines as a separate standalone service is not
        in line with [the company’s] global strategy”.87
(56)    This is supported by some of the responses received from contract foodservices bro-
        kers.88 For example, a broker noted that “vending machines are often a very small
        and almost non-significant part of the contract.”89
(57)    Given this, on balance, the Commission is of the view that vending services are, in
        the majority of cases, provided as part of a package offered in connection with con-
        tract foodservices.
Conclusion
(58)    In light of the above, the Commission concludes that, for the purpose of this Deci-
        sion, the market for contract foodservices includes the supply of vending services,
80 Case M.2373 – Compass/Selecta, para. 23.
81 Case M.4202 – Charterhouse/Elior, para. 16; Case M.8454 – KKR/Pelican Rouge, para. 16.
82 Replies to Q1 – Questionnaire to Competitors in Sweden, question 6.2.1; Replies to Q2 – Questionnaire to
   Competitors in Finland, question 6.2.1; Replies to Q3 – Questionnaire to Competitors in Norway, question
   6.2.1; Replies to Q4 – Questionnaire to Competitors in Denmark, question 6.2.1; Replies to Questionnaire
   Q5 – Questionnaire to Customers in Sweden, question 7.2.1; Replies to Q6 – Questionnaire to Customers
   in Finland, question 6.2.1; Replies to Q8 – Questionnaire to Customers in Denmark, question 7.2.1.
83 Replies to Q6 – Questionnaire to Customers in Finland, question 6.2.1; Replies to Q8 – Questionnaire to
   Customers in Denmark, question 7.2.1.
84 Replies to Q8 – Questionnaire to Customers in Denmark, question 7.2.1.
85 Replies to Q2 – Questionnaire to Competitors in Finland, question 6.2.1.
86 Replies to Q3 – Questionnaire to Competitors in Norway, question 6.2.1.
87 Replies to Q4 – Questionnaire to Competitors in Denmark, question 6.2.1.
88 Brokers typically are independent third party/business consultants that assist customers of contract food-
   services during all stages of their contract foodservices tender process. See Replies to Q9 – Questionnaire
   to Brokers, question 1.
89 Replies to Q9 – Questionnaire to Brokers, question 9.
                                                          13
 ---pagebreak---         because the latter are typically acquired/provided as part of the contract for contract
        foodservices and accordingly do not constitute a separate product market.
6.2.1.5. Distinction between contract foodservices and non-food related other services
(59)    In certain instances, customers that outsource contract foodservices also require oth-
        er support services, or “soft services”, that are directly used by employees and can
        make the workplace more secure or pleasant, such as cleaning, reception, plant
        maintenance, handyman, pest control and other.
The Notifying Party’s view
(60)    The Notifying Party submits that Fazer FS concentrates solely on foodservices and
        accompanying expertise, while Compass provides foodservices both by themselves
        and in conjunction with other support services.90 Consequently, the only overlaps be-
        tween the Parties are in the provision of foodservices and not in the multi-service
        agreements (i.e. food and soft service). For this reason, the Notifying Party’s sub-
        mission on the competitive effects of the Transaction covers solely the Parties’ activ-
        ities in the provision of contract foodservices.91
(61)    According to the Notifying Party, the Transaction would not give rise to an affected
        market in a potential market for support services (or any potential segment thereof,
        such as cleaning, reception, etc.) as the market share of each Party would be far be-
        low 10% in each of Sweden, Finland, Norway and Denmark.
The Commission’s past practice
(62)    In previous decisions, the Commission did not specifically address the question of
        whether non-food related services (i.e. other support services, such as cleaning, re-
        ception and facility management) should be assessed as a separate product market or
        included in the market for contract foodservices.
The Commission’s assessment
(63)    The results of the market investigation confirm that non-food related other services
        should not be included in the market for contract foodservices. Indeed, the Commis-
        sion’s market investigation shows that a large majority of customers typically tender
        contract foodservices separately from other services.92 As explained by one custom-
        er, their experience shows that “best food is made from suppliers only focusing on
        food.”93
(64)    In light of the results of the market investigation and of all the evidence available to
        it, the Commission considers that, even in cases where a contract foodservices sup-
90  Form CO, para. 331.
91  Form CO, para. 32 and footnote 39.
92 Replies to Q4 – Questionnaire to Customers in Sweden, question 100; Replies to Q8 – Questionnaire to
    Customers in Denmark, questions 62 and 64; Replies to Q6 – Questionnaire to Customers in Finland,
    question 34.
93 Replies to Q8 – Questionnaire to Customers in Denmark, question 62.1.
                                                     14
 ---pagebreak---          plier has the capability to supply food and other services, a larger part of their con-
         tracts are food-only contracts.94
Conclusion
(65)     In light of the above, for the purpose of this Decision, the Commission considers that
         the relevant product market includes the food-only foodservices contracts excluding
         non-food related other services (or other support services).
6.2.2. Geographic market definition
(66)     In previous decisions, the Commission found that the relevant geographic market for
         contract foodservices is national due to the differences in legislation and national
         preferences in terms of quality and pricing.95
(67)     The Notifying Party does not dispute the Commission’s prior decisional practice.96
         However, it submits that there are instances where contract foodservices suppliers
         active in one Nordic country have been able to launch a new service in another Nor-
         dic country.97
(68)     The market investigation in the present case confirms the Commission’s previous
         decisions. It appears that, despite the fact that the Parties and some of their competi-
         tors are active in all or most countries of the Nordic region, competition in the mar-
         ket for contract foodservices takes place at a national level. Indeed, the large majori-
         ty of customers and competitors responded that tenders for contract foodservices as
         well as supply arrangements for ingredients are typically entered into at national lev-
         el.98 The market investigation also confirmed that from the supply side, the competi-
         tive conditions of providing contract foodservices to customers in each of Sweden,
         Denmark, Norway and Finland differ significantly. 99 Indeed, a competitor active in
         several countries relevant for this investigation explained that there are “different
         cultures, tax, subsidy policy and legislation”.100 For example, “the Swedish custom-
         ers tend to focus more on organic products and ‘green’ offerings, where Norway is a
         bit more conservative […] [in] Denmark [there] is more focus on a more interna-
94  Replies to Q1 – Questionnaire to Competitors in Sweden, questions 90 and 96; Replies to Q2 – Question-
    naire to Competitors in Finland, question 41; Replies to Q9 – Questionnaire to Brokers, question 24. It
    should be also noted, however, that the market investigation shows that multi-service contracts are more
    typical for larger companies, whereas small and medium-sized companies tend to tender only contract
    foodservices; see Replies to Q4 – Questionnaire to Competitors in Denmark, question 62.1. One competi-
    tor explained “[l]arge international companies are clustering food with other services […] [n]ational
    companies are not doing this very frequently”, see Replies to Q2 – Questionnaire to Competitors in Fin-
    land, question 41.1. See also Replies to Q9 – Questionnaire to Brokers, question 24.1.
95  Case M. 2373 – Compass/Selecta, para. 25; Case M.1972 – Granada/Compass, para. 20.
96  Form CO, paras. 248 and 254.
97  Form CO, para. 248.
98  See, for example, Replies to Q2 – Questionnaire to Competitors in Finland, questions 13 and 14; Replies
    to Q4 – Questionnaire to Competitors in Denmark, questions 14 and 15; Replies to Q8 – Questionnaire to
    Customers in Denmark, question 13.
99  Replies to Q1 – Questionnaire to Competitors in Sweden, question 18; Replies to Q2 – Questionnaire to
    Competitors in Finland, question 16; Replies to Q3 – Questionnaire to Competitors in Norway, questions
    15 and 16; Replies to Q4 – Questionnaire to Competitors in Denmark, question 16.
100 Replies to Q4 – Questionnaire to Competitors in Denmark, question 16.1; Replies to Q1 – Questionnaire
    to Competitors in Sweden, questions 18 and 18.1.
                                                         15
 ---pagebreak---          tional food offering.”101 A majority of competitors indicated that competitive condi-
         tions are different from one country to another due to the differences in tax systems
         and subsidies that employers pay towards employees’ lunches.102 Many competitors
         also observe a “different foodculture (sic)” which requires them to adapt meals to na-
         tional preferences.103
(69)     In light of the above and in line with the Commission’s precedents, the Commission
         concludes that, for the purpose of this Decision, the geographic market for contract
         foodservices is national in scope.
7.       COMPETITIVE ASSESSMENT
(70)     In this section, the Commission assesses the likely effects of the Transaction with
         respect to the relevant markets or market segments concerned. More specifically, the
         Commission assesses the likely non-coordinated effects of the Transaction in the rel-
         evant markets or segments in which the Parties’ activities overlap as to the provision
         of food contractservices (Section 7.1), as well as the likely conglomerate effects of
         the Transaction due to Compass’ diversified activities in other support services mar-
         kets or segments where the Parties’ activities do not overlap (Section 7.2).
7.1.     Horizontal assessment
7.1.1. Legal framework for the competitive assessment
(71)     Effective competition brings benefits to consumers, such as low prices, high quality
         products, a wide selection of goods and services, and innovation. Through its control
         of mergers, the Commission prevents mergers that would be likely to deprive cus-
         tomers of those benefits by significantly increasing the market power of firms.104
(72)     Under Article 2(2) and (3) of the Merger Regulation, the Commission must assess
         whether a proposed concentration would significantly impede effective competition
         in the internal market or in a substantial part of it, in particular as a result of the crea-
         tion or strengthening of a dominant position. The notion of "significant impediment
         to effective competition" must be interpreted as extending, beyond the concept of
         dominance, to the anticompetitive effects of a concentration resulting from the non-
         coordinated behaviours of undertakings which do not have a dominant position on
         the market concerned.105
(73)     As regards its non-coordinated effects, a merger presenting horizontal overlaps may
         significantly impede effective competition in a market, even if it does not result in
101 Replies to Q1 – Questionnaire to Competitors in Sweden, questions 18 and 18.1
102 See, for example, Replies to Q2 – Questionnaire to Competitors in Finland, question 16.1 and Replies to
    Q3 – Questionnaire to Competitors in Norway, questions 16.1.
103 Replies to Q4 – Questionnaire to Competitors in Denmark, questions 19 and 19.1.
104 Commission Guidelines on the assessment of horizontal mergers under the Council Regulation on the
    control of concentrations between undertakings (the "Horizontal Merger Guidelines"), OJ C 31, 5.2.2004,
    p. 5, paragraph 8.
105 Recital 25 of the Merger Regulation.
                                                        16
 ---pagebreak---         the creation or strengthening of a dominant position, by removing important compet-
        itive constraints and influencing parameters of competition.106
(74)    The Horizontal Merger Guidelines list a number of factors which may influence
        whether or not significant non-coordinated effects are likely to result from a merger,
        such as the large market shares of the merging firms, the fact that merging firms are
        close competitors, the limited possibilities for customers to access to the services
        provided by the parties and their competitors and the fact that the merger would
        eliminate an important competitive force.
(75)    It is in light of the principles set out above that the Commission must analyse wheth-
        er and to what extent the Transaction may raise serious doubts as to its compatibility
        with the internal market due to its horizontal effects.
7.1.2. Overview of the reportable markets
(76)    Table 1 shows that the Transaction would result in several horizontal overlaps be-
        tween Compass and Fazer FS’s activities in the following countries and segments:
        (a)      Sweden: business & industry, education, healthcare & welfare, and defence.
        (b)      Denmark: business & industry, and education.
        (c)      Norway: business & industry.
        (d)      Finland: business & industry.
(77)    The Parties submit that following the Transaction, the merged entity will be con-
        strained by a large number of multi-national, regional and local players as showed in
        Figure 1.
         Figure 1. Significant competition in contract foodservices in the Nordics
Source: The Parties’ submission “Introduction to Contract Foodservices” of 19 November 2019, slide 22.
* Based on the Parties’ tender data of known competitors. These competitors are in addition to the Parties.
** Based on the Parties’ tender data.
106 Horizontal Merger Guidelines, paragraph 8.
                                                         17
 ---pagebreak--- (78)   ISS is a Danish company and is a globally active provider of facilities management
       services, also providing foodservices. In 2018, ISS had a revenue of EUR 9,566 mil-
       lion and employed almost 500 000 employees globally.107
(79)   Sodexo is a French company and is also a global provider of facilities management,
       including contract foodservices. In 2018, Sodexo had a revenue of EUR 20.4 billion
       worldwide and of EUR 659 million in the Nordics. Sodexo employed over 450 000
       employees globally and more than 11 000 employees in the Nordics.108
(80)   Coor is a Swedish company, also providing facilities management including food-
       services. In 2018, Coor generated a revenue of EUR 900 million and employed more
       than 9 000 employees. Sweden is Coor’s largest market, where it generated around
       50% of its turnover in 2018.109
(81)   In addition to these large multinational companies acting across all four Nordic
       countries, there are, in each of them, national players. Some of them serve also large
       customers. In addition, smaller regional companies are offering contract foodservices
       in each of the four Nordic countries. Markets are therefore characterised by large,
       medium-sized and many small contract foodservices providers.
(82)   In Denmark, there are for example Gruppo Camst, Jespers Torvekøkken, Forenede
       Service and Meyers Kantiner active. In Sweden, Nordrest and Sabis are active in
       providing contract foodservices. In Finland, Antell-Catering and Palmia are active,
       and in Norway, Toma Gruppen and 4Service.
7.1.3. Market data
(83)   As already explained in Section 4, both private and public customers of contract
       foodservices generally tender out their contracts. For that reason, the Parties submit
       that market shares would not be an accurate indicator of the competitive conditions
       in the contract foodservices industry, because in bidding markets static market shares
       would only reflect the outcome of the tenders and would not be very insightful about
       the competitive process itself. According to the Parties, the market shares would on-
       ly reflect previous wins of contracts, but not the Parties’ nor their competitors’ actual
       strengths or future success rate.110 The Parties therefore consider that it would be
       more important to determine whether a sufficient number of credible bidders will
       remain post-Transaction.111 In addition, the Parties explained that, due to the lack of
       any reliable third-party data source, they could not submit market shares with any
       degree of accuracy.112
(84)   The Parties have provided their best estimate of the total number of tenders in each
       segment in 2018, which is shown in Table 2. However, the Parties explain that they
107 Form CO, para. 633.
108 Form CO, para. 633.
109 Form CO, para. 633.
110 Form CO, para. 294 et seq.
111 Form CO, para. 297.
112 Form CO, para. 284 et seq.
                                                  18
 ---pagebreak---          only have knowledge of the tenders in which they participated and would not be able
         to estimate how much of the respective market they are unaware of.113
         Table 2. The Parties’ estimate of the total number of tenders in 2016-2018
    Country             Segment             2016                2017              2018
    Sweden              business & in- [50-100]                 [50-100]          [50-100]
                        dustry
                        education           [0-50]              [0-50]            [0-50]
                        healthcare      & [0-50]                [0-50]            [0-50]
                        welfare
                        defence             1 tender in 2016 (new tender in 2020)
    Denmark             business & in- [0-50]                   [0-50]            [0-50]
                        dustry
                        education           [0-50]              [0-50]            [0-50]
    Finland             business & in- [50-100]                 [50-100]          [50-100]
                        dustry
    Norway              business & in- [50-100]                 [100-150]         [100-150]
                        dustry
          Source: Form CO, para. 287.
(85)     In previous cases in which the Commission assessed transactions in the contract
         foodservices industry, the Commission considered market shares in its analysis.114
(86)     In the present case, the Commission observes that in the Swedish defence sector, the
         Swedish Ministry of Defence tendered out the contract foodservices, split in five
         lots, in 2016. Fazer FS holds four of these five lots.115 The next tender is planned for
         2020.116 The Commission considers that for the analysis of the market for contract
         foodservices to the Swedish defence sector, market shares do not fully capture the
         competitive conditions in the market. For the purpose of this Decision, the Commis-
         sion will therefore take account of the tender data provided by the Parties in Section
         7.1.4.5 below.
(87)     Concerning the other market segments, the Commission notes that the Parties’ are
         not certain of how much of the market is not captured by the information provided in
         Table 2. The Commission considers that the total number of tenders mentioned
         above might be understated and that, therefore, the total number of tenders might be
         higher than stated in the table above.
113  Form CO, para. 287.
114  See for example Case M.6513 – Avenance Italy/Gemeaz Cusin, paras. 18 et seq.
115 Form CO, para. 816.
116 Form CO, paras. 825 and 830 et seq.
                                                     19
 ---pagebreak--- (88)    In the case at hand, regarding contract foodservices to business & industry, educa-
        tion, healthcare & welfare customers, the Commission considers that, because of the
        high number of tenders per year, these contract foodservices market segments are not
        characterised by infrequent tenders and infrequent demand.
(89)    In light of the above, the Commission considers that the Parties’ combined market
        shares by calendar year constitute an appropriate starting point for the Commission’s
        analysis of the markets for contract foodservices to business & industry, education
        and healthcare & welfare customers.
(90)    The Parties provided the Commission with market shares based on the GIRA report,
        a report commissioned by Fazer FS in 2016 from GIRA Foodservices for the pur-
        pose of exploring a [information on Fazer FS’s business strategy] (“the GIRA re-
        port”). However, the Parties claim that the Commission should disregard the market
        shares in the GIRA report. It was argued that the GIRA report has methodological
        issues, in particular because of the “bottom-up” approach of the GIRA report that
        only took into account a small number of larger competitors and excluded smaller
        competitors.117
(91)    In any case, since the market shares in the GIRA report are from 2015 and upon re-
        quest of the Commission, the Parties provided an estimate of their market shares
        from 2016 to 2018. These market shares are based on the Parties’ turnover in each
        market segment. For the total market size, the Parties have built up on previous work
        by [third party consultant]. The Notifying Party had commissioned [third party con-
        sultant] to estimate the sizes of the contract foodservices markets in the countries in
        which the Notifying Party operates. In the course of the pre-notification stage, the
        Notifying Party asked [third party consultant] to focus on Sweden, Denmark, Fin-
        land and Norway.118
(92)    [Third party consultant] estimated the total size of the contract foodservices markets
        by multiplying the estimated number of sold meals with the average price of a meal
        in each market segment and country, using public sources as inputs. 119 [Third party
        consultant] estimated the total market size for 2017. The Parties then applied their
        best estimate of the growth rate for 2016 and 2018 to provide the Commission with
        the total market size in 2016 and 2018.120 Based on the [third party consultant] da-
        taset, which includes canteen services during lunch only, the Parties have provided
        market share data also for all contract foodservices, including ancillary vending.121
        In addition, the Parties sought to verify the assumptions used by [third party consult-
        ant].122 The Commission, in its following assessment, will first present the Parties’
        market shares based on a market total as estimated by [third party consultant] for
        each affected market as the first set of market share data.
(93)    In addition, upon request of the Commission, the Parties provided an estimate of
        their as well their competitors’ market shares in 2018. This market share estimate is
        based on the Parties’ turnover in each market segment and their estimate of their
117 See Notifying Party’s reply to RFI 12 of 14 January 2020, question 7 and Form CO, Annex 7A-002.
118 Form CO, para. 298.
119 Form CO, Annex 7A-008.
120 Form CO, Annex 7A-015.
121 Form CO, paras. 298 et seq.
122 Form CO, Annex 7A-007.
                                                         20
 ---pagebreak---         competitors’ turnover based on public sources, such as annual reports. The Parties
        provided these market share estimates calculated with two market totals, based on
        (1) the [third party consultant] market total and (2) the market total as determined by
        the total of the Parties’ turnover and their competitors’ turnover.123 The [third party
        consultant] market total is higher than the market total determined by the total of the
        Parties’ turnover and their known competitor turnover. In the following assessment,
        to apply a conservative approach, the Commission uses the estimates of the Parties’
        and their competitors’ market shares calculated based on the total market as deter-
        mined by the total of the Parties’ and their competitors’ turnover in each market
        segment. These market share estimates are presented as the second set of market
        share data in the analysis of each individual market segment.
(94)    The Commission has verified the reliability of the market share estimates provided
        by the Parties in the course of the market investigation. The results of that verifica-
        tion will be addressed in the assessment of each individual market segment.
7.1.4. Sweden
7.1.4.1. Overview of the contract foodservices industry in Sweden
(95)    In addition to the multi-national companies ISS, Sodexo and Coor referred to in par-
        agraph (78) and following above, several national companies are active in one or
        more market segments for the provision of contract foodservices in Sweden, for in-
        stance, the larger national suppliers Nordrest and Sabis.
(96)    Nordrest is a Swedish company founded in 2013. It provides contract foodservices in
        the business & industry, education and healthcare & welfare segments. It employs
        around 500 employees with an annual turnover of around EUR 74.5 million.124
(97)    Sabis is a Stockholm-based, family-owned company, providing contract foodser-
        vices as well as operating more than 20 restaurants and a number of cafés, hotels and
        food stores. 125
7.1.4.2. Contract foodservices to business & industry customers in Sweden
(98)    Table 3 presents the Parties’ estimate of their market shares in 2018, 2017, 2016 in
        the supply of contract foodservices to business & industry customers in Sweden
        based on the Parties’ turnover and the estimation of the total market size by [third
        party consultant] as explained above.
123 See Notifying Party’s reply to RFI 12 of 14 January 2020 and Notifying Party’s reply to RFI 13 of 20
    January 2020.
124 Form CO, paras. 633, 651, 670, 701, 716, 758, 779, 791, and 805.
125 Form CO, para. 670.
                                                        21
 ---pagebreak---     Table 3. The Parties’ market shares in supply of contract foodservices to business &
      industry customers in Sweden in 2018, 2017 and 2016 ([third party consultant])
                            2018                                2017                     2016
              Revenue               Share           Revenue         Share      Revenue      Share
              (€ millions)                          (€ millions)               (€ millions)
Compass       […]                   [5-10]%         […]             [5-10]%    […]          [5-10]%
Fazer FS      […]                   [10-20]%        […]             [10-20]%   […]          [10-20]%
Combined […]                        [10-20]%        […]             [10-20]%   […]          [20-30]%
Total         […]                   100%            […]             100%       […]          100%
market
           Source: Form CO, para. 620.
  (99)    The Parties verified the assumptions used in the [third party consultant] model and
          concluded that the average price per meal might be overstated. When using the Par-
          ties’ price data instead of the [third party consultant] estimates, the Parties’ com-
          bined market share would increase to [20-30]%.126
  (100) Table 4 presents the Parties’ estimate of their market shares in 2018 in the supply of
          contract foodservices to business & industry customers in Sweden based on (i) the
          Parties’ turnover, (ii) the Parties’ estimate of their known competitors’ turnover
          based on public sources and (iii) the total market size calculated as the total of the
          Parties’ own turnover and the estimated known competitors’ turnover.127
    Table 4. The Parties’ market shares in supply of contract foodservices to business &
            industry customers in Sweden in 2018 (estimated competitor turnover)
                                                              Market shares estimated in 2018
          Compass                                             [20-30]%
          Fazer                                               [20-30]%
          Parties combined                                    [40-50]%
          Sodexo                                              [20-30]%
          ISS                                                 [5-10]%
          Coor                                                [5-10]%
          Nordrest                                            [10-20]%
          Sabis                                               [5-10]%
          12 other competitors with an estimated [5-10]%
          market share of up to 2% each
          Source: Notifying Party’s reply to RFI 12 of 14 January 2020.
  126 Form CO, Annex 7A-007, Table 1.
  127 See Notifying Party’s reply to RFI 12 of 14 January 2020.
                                                           22
 ---pagebreak--- (101) The total market size used to estimate these market shares was around EUR […]
         million, whereas the total market size as estimated by the [third party consultant]
         model was around EUR […] million. The Commission therefore acknowledges that
         the market share estimates provided by the Parties based on competitors’ revenues
         might be overstated.
(102) In the course of the market investigation, the Commission has verified the market
         share estimates of the Parties. To do this, the Commission has contacted the majority
         of significant competitors who won tenders in which one of the Parties participated.
         The verification confirms the broader picture of the Parties’ position as the market
         leader with a clear difference over the next in line competitors.128
(103) The Notifying Party submits that following the Transaction, the merged entity will
         continue to be constrained by a number of significant competitors, including Sodexo,
         ISS, Coor, Nordrest and Sabis. Moreover, according to the Notifying Party, the
         merged entity will continue to face competition from a large number of smaller, lo-
         cal competitors.129 In addition, barriers to entry and expansion would be low and
         there would be strong constraints on the merged entity through buyer power as well
         as out-of-market constraints, such as restaurants.130
(104) Despite the somewhat high combined market shares of the Parties post-Transaction,
         and the clear lead over the next in line competitors, the Commission considers that
         the Transaction is unlikely to raise serious doubts as to its compatibility with the in-
         ternal market due to the following reasons.
(105) First, as shown by the market investigation and demonstrated in Table 4 above, the
         Swedish market for contract foodservices to business & industry customers is fea-
         tured not only by large multi-national players such as Coor, ISS, Sodexo, but also by
         national foodservices suppliers like Nordrest and Sabis Invest AB as well as a num-
         ber of smaller or local players like Heat.131 Demonstrative of this point is the fact
         that the Parties’ tender data includes over [10-20] competitors, [information on the
         Parties’ bidding data].132 The large number of smaller suppliers is also capable of
         serving larger customers. For example, in 2017 and 2018, local competitors won [in-
         formation on the Parties’ bidding results],133 [information on the Parties’ bidding re-
         sults].134 As demonstrated by the Parties’ tender data, these tenders are substantially
         based on the value of the tender. For example, the average value of a tender lost by
         the Notifying Party between 2014 and 2018 was around EUR [information on the
         Parties’ bidding results].135
128 Replies to Q1 – Questionnaire to Competitors in Sweden, question 21.
129 Form CO, paras. 666 et seq.
130 Form CO, paras. 676 et seq.
131 Heat entered the market for contract foodservices in 2008 and has recently expanded, for example, it won
    the tender by the Swedish Police Authority in 2019, see Form CO, para. 681.
132 Form CO, paras. 650 et seq.
133 Form CO, para. 674.
134 Form CO, para. 673.
135 Own calculation based on Form CO, paras. 651 et seq. The average value of a tender lost by the Notifying
    Party between 2014 and 2018 was around [information on the Parties’ bidding results] EUR if [infor-
    mation on the Parties’ bidding results], see Form CO, para.653.
                                                         23
 ---pagebreak--- (106) Furthermore, evidence collected during the market investigation shows that in select-
        ing their contract foodservices providers via tender processes, Swedish business &
        industry customers do not give preference to the historical relationship with the con-
        tract foodservices supplier. Customers give preference to quality of the food, the
        price of the food and efficient day-to-day operations.136 Contract foodservices sup-
        pliers try to differentiate from each other to win tenders on these parameters.137
        Moreover, the results of the market investigation show that both competitors and
        customers see as the most important trends in the contract foodservices in Sweden in
        the next three years the following: (i) customers prefer high-quality food over low-
        cost food offering; (ii) customers prefer high-quality food over multi-service solu-
        tions where food is provided together with other services, such as cleaning; (iii) cus-
        tomers demand healthy food with local ingredients and sustainable services; and (iv)
        customers see their canteen as a possibility to attract and retain employees.138 A
        trend towards customers favouring smaller or independent suppliers was also con-
        firmed to some extent.139 One of the brokers active in Sweden summarised as fol-
        lows: “Most clients are interested in high quality, entrepreneurial spirit and their
        own driving force. Likewise, locally produced food and a high sustainability factor.
        Many are willing to pay higher prices for better quality. Today, the client does not
        want larger meal companies but smaller companies that can strengthen their brand.
        The trend is towards smaller meal companies.”140
(107) Customers in the business & industry segment will therefore continue to benefit
        from the ability to choose from an extensive list of credible alternative bidders,
        which ranges from multi-national and national firms, to smaller local rivals. The
        Commission therefore considers that post-Transaction, the Parties will continue to
        face significant competition from the other companies active in the business & in-
        dustry segment in Sweden.
(108) Second, barriers to entry into the market for contract foodservices to business & in-
        dustry customers are low, especially for the companies already operating in the food
        sector in Sweden. A new market entry requires limited resources given that staff is
        typically transferred to the winner of the tender, whereas kitchen facilities typically
        belong to the customer. One competitor explained, for example, that the assets and
        investments needed to start offering contract foodservices in another market segment
        than the one he is currently active in are as follows “The entry barriers (sic) is low
        as it comes to monetary investment, may need to hire specialists i.e. dietists etc.
        Normally the outsourcer owns all fixed assets, i.e. kitchen equipment.”141 This is
        supported by the results of the market investigation, which show that the most im-
        portant criteria for a new market entry in Sweden are (i) the existence of manage-
        ment staff with experience in the contract foodservices industry and (ii) the
        knowledge of the contract foodservices industry and how to organise day-to-day op-
136 Replies to Q1 – Questionnaire to Competitors in Sweden, question 22; Replies to Q5 – Questionnaire to
    Customers in Sweden, question 17.
137 Replies to Q1 – Questionnaire to Competitors in Sweden, question 23; Replies to Q5 – Questionnaire to
    Customers in Sweden, question 18.
138 Replies to Q1 – Questionnaire to Competitors in Sweden, question 26; Replies to Q5 – Questionnaire to
    Customers in Sweden, question 21.
139 Replies to Q1 – Questionnaire to Competitors in Sweden, question 26; Replies to Q5 – Questionnaire to
    Customers in Sweden, question 21.
140 Replies to Q9 – Questionnaire to Brokers, question 14.
141 Replies to Q1 – Questionnaire to Competitors in Sweden, question 9.
                                                        24
 ---pagebreak---         erations.142 In addition, the majority of competitors responding to the market investi-
        gation explained that it would be easy for them to find suitable food suppliers for
        their contract foodservices operations in Sweden.143 The Commission’s findings in
        relation to low entry barriers on the supply side are also supported by the fact that a
        majority of the Swedish competitors responding to the Commission’s market inves-
        tigation believe that a company can enter the Swedish market and start offering con-
        tract foodservices with a contract for a single canteen or only one customer.144
(109) Third, on the demand-side, there are no significant barriers to switching between
        contract foodservices suppliers in the business & industry sector in Sweden. The ma-
        jority of competitors responding to the market investigation explained that the ma-
        jority of business & industry customers switches their contract foodservices supplier
        after the contract is terminated, when the contract would be re-tendered and awarded
        to another supplier.145 Nearly half of the customers responding to the market investi-
        gation confirmed that they had switched their contract foodservices supplier in the
        last five years.146 In addition, the majority of customers responding to the market in-
        vestigation confirmed that it was (somewhat) easy for them to find a suitable suppli-
        er of contract foodservices or to switch to a different supplier of contract foodser-
        vices.147 This ability to switch strengthens the competitive constraints on the Parties
        post-Transaction and contributes to the dynamic and competitive environment in the
        Swedish business & industry segment.
(110) Fourth, the market investigation indicated that customers of contract foodservices
        may sponsor new entry or expansion of other, in particular smaller, contract foodser-
        vices suppliers. This can be done by determining the contract details as well as the
        scope of the foodservices contract.
(111) The majority of respondents to the market investigation confirmed that the condi-
        tions of the foodservices contracts (i.e. quality of the food, price, termination claus-
        es) are determined by the customers in the business & industry segment in Swe-
        den.148 In general, it seems that the larger the customer, the higher the ability to ne-
        gotiate the conditions.149
(112) As explained, customers also have the possibility to structure their tender in separate
        tenders for contract foodservices for each of their canteens or sites. Furthermore,
        they have the possibility to split their tenders into smaller lots to increase competi-
        tion and promote smaller contract foodservices suppliers. The market investigation
142 Replies to Q1 – Questionnaire to Competitors in Sweden, question 83; Replies to Q5 – Questionnaire to
    Customers in Sweden, question 95.
143 Replies to Q1 – Questionnaire to Competitors in Sweden, question 84.
144 Replies to Q1 – Questionnaire to Competitors in Sweden, question 85.
145 Replies to Q1 – Questionnaire to Competitors in Sweden, question 57.
146 Replies to Q5 – Questionnaire to Customers in Sweden, question 52.
147 Replies to Q5 – Questionnaire to Customers in Sweden, question 50; Replies to Q9 – Questionnaire   to
    Brokers, question 19.
148 Replies to Q1 – Questionnaire to Competitors in Sweden, question 55; Replies to Q5 – Questionnaire to
    Customers in Sweden, question 49; Replies to Q9 – Questionnaire to Brokers, question 16.
149 Replies to Q1 – Questionnaire to Competitors in Sweden, question 55; Replies to Q5 – Questionnaire to
    Customers in Sweden, question 51; Replies to Q9 – Questionnaire to Brokers, question 18.
                                                       25
 ---pagebreak---         has shown that these possibilities are used by some customers.150 The majority of re-
        spondents to the market investigation confirmed that Swedish customers in the busi-
        ness & industry sector use one or more of the following tactics to achieve better con-
        tract terms: suggestion to take the foodservices in-house, to terminate the contract
        and re-tender and/or to split the tender in smaller lots that may be tendered to differ-
        ent suppliers.151
(113) Fifth, the Commission’s assessment of the effects of the Transaction has also taken
        into account the fact that other lunch food options are available to the staff in the
        business & industry sector compared to lunch in the on-site canteen. The majority of
        respondents to the market investigation considered that bringing lunch from home or
        eating lunch at home would be the preferred alternative lunch food option, followed
        by eating lunch at an outside restaurant.152 One competitor explained, for example,
        that “To bring a Lunchbox is by far the biggest competition.”153 The Commission
        therefore considers that these out-of-market constraints will have an effect on the
        merged entity’s continued incentive to deliver good quality and price ratio to their
        customers post-Transaction.
(114) Finally, the majority of respondents to the market investigation having expressed a
        view considered that the Transaction would have no effect on competition in the
        business & industry segment in Sweden.154 While the views of competitors as to
        whether there would be sufficient competition in all sectors, including business &
        industry, following the Transaction were mixed;155 the majority of customers in
        Sweden did not considered that the Transaction would have an impact on their com-
        pany.156
(115) Taking the above considerations into account, the Commission considers that the
        Parties will face significant competition in the business & industry segment in Swe-
        den post-Transaction and that the competitive constraints on the Parties in the supply
        of contract foodservices to business & industry customers in Sweden would be suffi-
        cient.
Conclusion
(116) In light of the results of the market investigation and considering the evidence avail-
        able to it, the Commission concludes that the Transaction does not raise serious
        doubts as to its compatibility with the internal market with respect to the market for
        the supply of contract foodservices to business & industry customers in Sweden.
150 Replies to Q1 – Questionnaire to Competitors in Sweden, question 54; Replies to Q5 – Questionnaire to
    Customers in Sweden, question 48; Replies to Q9 – Questionnaire to Brokers, question 15.
151 Replies to Q1 – Questionnaire to Competitors in Sweden, question 56; Replies to Q5 – Questionnaire to
    Customers in Sweden, question 54; Replies to Q9 – Questionnaire to Brokers, question 20.
152 Replies to Q1 – Questionnaire to Competitors in Sweden, question 25; Replies to Q5 – Questionnaire to
    Customers in Sweden, question 20.
153 Replies to Q1 – Questionnaire to Competitors in Sweden, question 25.
154 Replies to Q1 – Questionnaire to Competitors in Sweden, question 109; Replies to Q5 – Questionnaire to
    Customers in Sweden, question 111; Agreed non-confidential minutes of a conference call of 9 January
    2020 with a customer in Sweden, para. 6.
155 Replies to Q1 – Questionnaire to Competitors in Sweden, question 108; E-Mail of a competitor of 15
    January 2020.
156 Replies to Q5 – Questionnaire to Customers in Sweden, question 110; Agreed non-confidential minutes of
    a conference call of 9 January 2020 with a customer in Sweden, para. 13.
                                                         26
 ---pagebreak---  7.1.4.3. Contract foodservices to education customers in Sweden
 (117) Table 5 presents the Parties’ estimate of their market shares in 2018, 2017 and 2016
         in the supply of contract foodservices to education customers in Sweden based on
         the Parties’ turnover and the estimation of the total market size by [third party con-
         sultant] as explained above.
    Table 5. The Parties’ market shares in supply of contract foodservices to education
           customers in Sweden in 2018, 2017 and 2016 ([third party consultant])
                           2018                             2017                            2016
               Revenue          Share           Revenue          Share         Revenue           Share
               (€ millions)                     (€ millions)                   (€ millions)
Compass        […]              [5-10]%         […]              [5-10]%       […]               [0-5]%
Fazer FS       […]              [0-5]%          […]              [5-10]%       […]               [5-10]%
Combined […]                    [10-20]%        […]              [10-20]%      […]               [5-10]%
Total          […]              100%            […]              100%          […]               100%
market
          Source: Form CO, para. 621.
 (118) The Parties verified the assumptions used in the [third party consultant] model.157
 (119) Table 6 presents the Parties’ estimate of their market shares in 2018 in the supply of
         contract foodservices to education customers in Sweden based on (i) the Parties’
         turnover, (ii) the Parties’ estimate of their known competitors’ turnover based on
         public sources and (iii) the total market size calculated as the total of the Parties’
         own turnover and the estimated known competitors’ turnover.158
    Table 6. The Parties’ market shares in supply of contract foodservices to education
                customers in Sweden in 2018 (estimated competitor turnover)
                                                             Market shares estimated in 2018
         Compass                                             [10-20]%
         Fazer                                               [10-20]%
         Parties combined                                    [20-30]%
         Sodexo                                              [30-40]%
         ISS                                                 [10-20]%
         Hörs/Nordrest    159                                [10-20]%
         ACKlein                                             [5-10]%
         Skolfood i Göteborg                                 [5-10]%
         Fraiche Catering                                    [0-5]%
         5 other competitors with an estimated [5-10]%
         market share of up to 2% each
         Source: Notifying Party’s reply to RFI 13 of 20 January 2020.
 157 Form CO, Annex 7A-007, Table 1.
 158 See Notifying Party’s reply to RFI 12 of 14 January 2020 and the Notifying Party’s reply to RFI 13 of 20
     January.
 159 Nordrest acquired Hörs in 2019, see Form CO, para. 716.
                                                          27
 ---pagebreak--- (120) The total market size used to estimate these market shares was around EUR […]
         million, whereas the total market size as estimated by the [third party consultant]
         model was around EUR […] million. The Commission therefore acknowledges that
         the market share estimates provided by the Parties based on competitors’ revenues
         might be overstated. However, in the course of the market investigation, the Com-
         mission has verified the market share estimates of the Parties. To do this, the Com-
         mission has contacted the majority of significant competitors who won tenders in
         which one of the Parties participated. While the verification confirms the broader
         picture, namely the presence of sizable competitors, the Parties’ position seems to be
         stronger than the estimate provided in the table above.160
(121) The Notifying Party submits that following the Transaction, the merged entity will
         continue to be constrained by a number of significant competitors, including Sodexo,
         ISS, Nordrest, and several education foodservices specialists like AC Klein and
         Fraiche Catering.161 In addition, barriers to entry and expansion would be low and
         there would be strong constraints on the merged entity through buyer power.162
(122) The Commission considers that the Transaction is unlikely to raise serious doubts as
         to its compatibility with the internal market for the following reasons.
(123) First, this market is featured not only by the presence of large multi-national players
         such as Sodexo and ISS, but also by national foodservices suppliers like Nordrest,
         AC Klein, or Fraiche Catering. Demonstrative of this point is the fact that the Par-
         ties’ tender data includes over [0-10] competitors.163 This is also evidenced by the
         Notifying Party’s own analysis of the supply of foodservices to lower education in-
         stitutions: [Notifying Party’s internal document].164
(124) Furthermore, evidence collected during the market investigation shows that in select-
         ing their contract foodservices providers via tender processes, Swedish education
         customers do not give preference to the historical relationship. Customers give pref-
         erence to the quality of the food, local, fresh and/or organic ingredients/food, nutri-
         tional value of the food, price of the food as well as reputation and track-record of
         the supplier.165 Contract foodservices suppliers try to differentiate from each other to
         win tenders on these parameters and by offering efficient day-to-day operations.166
         Moreover, the results of the market investigation show that both competitors and
         customers see as the most important trends in the contract foodservices in Sweden in
         the next three years the following: customers prefer high-quality food over low-cost
         food offering and customers demand healthy food with local ingredients and sustain-
160  Replies to Q1 – Questionnaire to Competitors in Sweden, question 21.
161  Form CO, paras. 737 et seq.
162 Form CO, paras. 719 et seq. and 741 et seq.
163 Form CO, paras. 699 et seq. and 727 et seq.
164 See Form CO, Annex 5.4.A-126, “[…]”, see also Form CO, para. 736.
165 Replies to Q1 – Questionnaire to Competitors in Sweden, questions 27 and 32; Replies to Q5 – Question-
     naire to Customers in Sweden, questions 22 and 27.
166 Replies to Q1 – Questionnaire to Competitors in Sweden, questions 28 and 33; Replies to Q5 – Question-
     naire to Customers in Sweden, questions 23 and 28.
                                                        28
 ---pagebreak---         able services.167 A trend towards customers favouring smaller or independent suppli-
        ers was also confirmed to some extent.168
(125) Customers in the education segment will therefore continue to benefit from the abil-
        ity to choose from an extensive list of credible alternative bidders, which ranges
        from multi-national and national firms to smaller local rivals. The Commission
        therefore considers that post-Transaction, the Parties will continue to face significant
        competition from the other companies active in the education segment in Sweden.
(126) Second, barriers to entry into the market for contract foodservices to education cus-
        tomers in Sweden are low, especially for the companies already operating in the food
        sector in Sweden. A new market entry requires limited resources given that staff is
        typically transferred to the winner of the tender, whereas kitchen facilities typically
        belong to the customer. One competitor explained, for example, that the assets and
        investments needed to start offering contract foodservices in another market segment
        than the one he is currently active in are as follows “The entry barriers (sic) is low
        as it comes to monetary investment, may need to hire specialists i.e. dietists etc.
        Normally the outsourcer owns all fixed assets, i.e. kitchen equipment.”169 This is
        supported by the results of the market investigation, which show that the most im-
        portant criteria for a new market entry in Sweden are (i) the existence of manage-
        ment staff with experience in the contract foodservices industry and (ii) the
        knowledge of the contract foodservices industry and how to organise day-to-day op-
        erations.170 In addition, the majority of competitors responding to the market investi-
        gation explained that it would be easy for them to find suitable food suppliers for
        their contract foodservices operations in Sweden.171 The Commission’s findings in
        relation to low entry barriers on the supply side are also supported by the fact that a
        majority of the Swedish competitors responding to the Commission’s market inves-
        tigation believe that a company can enter the Swedish market and start offering con-
        tract foodservices with a contract for a single canteen or only one customer.172
(127) Third, on the demand-side, there are no significant barriers to switching between
        contract foodservices suppliers in the education sector in Sweden. The majority of
        competitors responding to the market investigation explained that the majority of
        Swedish customers in the education sector switches their suppliers of contract food-
        services after the contract is terminated, when it would be re-tendered and awarded
        to another supplier.173 The majority of customers responding to the market investiga-
        tion confirmed that they had switched their contract foodservices supplier in the last
        five years.174 In addition, the majority of customers responding to the market inves-
        tigation confirmed that it was (somewhat) easy for them to find a suitable supplier of
        contract foodservices or to switch to a different supplier of contract foodservices.175
167 Replies to Q1 – Questionnaire to Competitors in Sweden, questions 31 and 36; Replies to Q5 – Question-
    naire to Customers in Sweden, questions 26 and 31.
168 Replies to Q1 – Questionnaire to Competitors in Sweden, questions 31 and 36; Replies to Q5 – Question-
    naire to Customers in Sweden, questions 26 and 31.
169 Replies to Q1 – Questionnaire to Competitors in Sweden, question 9.
170 Replies to Q1 – Questionnaire to Competitors in Sweden, question 83; Replies to Q5 – Questionnaire to
    Customers in Sweden, question 95.
171 Replies to Q1 – Questionnaire to Competitors in Sweden, question 84.
172 Replies to Q1 – Questionnaire to Competitors in Sweden, question 85.
173 Replies to Q1 – Questionnaire to Competitors in Sweden, questions 62 and 67.
174 Replies to Q5 – Questionnaire to Competitors in Sweden, questions 60 and 68.
175 Replies to Q5 – Questionnaire to Customers in Sweden, questions 58 and 66.
                                                       29
 ---pagebreak---         This ability to switch strengthens the competitive constraints provided by customers
        and contributes to the dynamic and competitive environment in the Swedish educa-
        tion segment.
(128) Fourth, the market investigation provided indications that customers of contract
        foodservices may sponsor new entry or expansion of other, in particular smaller,
        contract foodservices suppliers. This can be done by determining the contract details
        as well as the scope of the foodservices contract, for example, by splitting their ten-
        ders into smaller lots.
(129) The majority of respondents to the market investigation confirmed that the condi-
        tions of the foodservices contracts (i.e. quality of the food, price, termination claus-
        es) are determined by the customers in the education segment in Sweden.176 In gen-
        eral, it seems that the larger the customer, the higher the ability to negotiate the con-
        ditions.177
(130) As explained, customers also have the possibility to structure their tender in separate
        tenders for contract foodservices for each of their canteens or sites. Furthermore,
        they have the possibility to split their tenders into smaller lots to increase competi-
        tion and promote smaller contract foodservices suppliers. The market investigation
        has shown that these possibilities are used by some customers.178 The majority of
        customers responding to the market investigation explained that they use the tactic of
        suggesting the termination of the contract to achieve better contract terms.179 While
        competitors responding to the market investigation considered that such a threat
        would not be used by customers,180 the general tactic was, however, broadly con-
        firmed by a competitor who explained that “Public sector contracts are always re-
        tendered or taken in-house following the contract period – this is general knowledge
        thus no threats are necessary. The argument is used however, in case the customer
        consider (sic) the supplier to breach contract.”181
(131) The Commission also notes that the majority of respondents to the market investiga-
        tion having expressed a view considered that the Transaction would have an effect
        on competition in the market for contract foodservices to education customers in
        Sweden.182
(132) Taking the above considerations into account, the Commission considers that the
        Parties will face significant competition in the education segment in Sweden post-
        Transaction and that the competitive constraints on the Parties in the supply of con-
        tract foodservices to education customers in Sweden would be sufficient.
176 Replies to Q1 – Questionnaire to Competitors in Sweden, questions 60 and 65; Replies to Q5 – Question-
    naire to Customers in Sweden, questions 57 and 65.
177 Replies to Q5 – Questionnaire to Customers in Sweden, questions 59 and 67.
178 Replies to Q1 – Questionnaire to Competitors in Sweden, questions 59 and 64; Replies to Q5 – Question-
    naire to Customers in Sweden, questions 56 and 64.
179 Replies to Q5 – Questionnaire to Customers in Sweden, questions 62 and 70.
180 Replies to Q1 – Questionnaire to Competitors in Sweden, questions 61 and 66.
181 Replies to Q1 – Questionnaire to Competitors in Sweden, question 66.
182 Replies to Q1 – Questionnaire to Competitors in Sweden, questions 110 and 111; Replies to Q5 – Ques-
    tionnaire to Customers in Sweden, questions 112 and 113.
                                                        30
 ---pagebreak---   Conclusion
  (133) In light of the results of the market investigation and considering the evidence avail-
          able to it, the Commission concludes that the Transaction does not raise serious
          doubts as to its compatibility with the internal market with respect to the market for
          the supply of contract foodservices to education customers in Sweden.
  7.1.4.4. Contract foodservices to healthcare & welfare customers in Sweden
  (134) Table 7 presents the Parties’ estimate of their market shares in 2018, 2017 and 2016
          in the supply of contract foodservices to healthcare & welfare customers in Sweden
          based on the Parties’ turnover and their estimation of the total market size by [third
          party consultant] as explained above.
   Table 7. The Parties’ market shares in supply of contract foodservices to healthcare &
       welfare customers in Sweden in 2018, 2017 and 2016 ([third party consultant])
                              2018                             2017                             2016
                 Revenue            Share           Revenue         Share           Revenue         Share
                 (€ millions)                       (€ millions)                    (€       mil-
                                                                                    lions)
Compass          […]                [5-10]%         […]             [5-10]%         […]             [5-10]%
Fazer FS         […]                [5-10]%         […]             [5-10]%         […]             [5-10]%
Combined         […]                [10-20]%        […]             [10-20]%        […]             [10-20]%
Total   mar- […]                    100%            […]             100%            […]             100%
ket
           Source: Form CO, para. 622.
  (135) The Parties verified the assumptions used in the [third party consultant] model.183
  (136) Table 8 presents the Parties’ estimate of their market shares in 2018 in the supply of
          contract foodservices to healthcare & welfare customers in Sweden based on (i) the
          Parties’ turnover, (ii) the Parties’ estimate of their known competitors’ turnover
          based on public sources and (iii) the total market size calculated as the total of the
          Parties’ own turnover and the estimated known competitors’ turnover.184
  183 Form CO, Annex 7A-007, Table 1.
  184 See Notifying Party’s reply to RFI 12 of 14 January 2020 and reply to RFI 13 of 20 January 2020.
                                                           31
 ---pagebreak---  Table 8. The Parties’ market shares in supply of contract foodservices to healthcare &
          welfare customers in Sweden in 2018 (estimated competitor turnover)
                                                              Market shares estimated in 2018
        Compass                                               [10-20]%
        Fazer                                                 [20-30]%
        Parties combined                                      [40-50]%
        Sodexo                                                [20-30]%
        ISS                                                   [10-20]%
        Coor                                                  [10-20]%
        Nordrest                                              [5-10]%
        Förenade Care                                         [5-10]%
        Source: Notifying Party’s reply to RFI 13 of 20 January 2020.
(137) The total market size used to estimate these market shares was around EUR […]
        million, whereas the total market size as estimated by the [third party consultant]
        model was EUR […] million. The Commission therefore acknowledges that the
        market share estimates provided by the Parties based on competitors’ revenues might
        be overstated.
(138) In the course of the market investigation, the Commission has verified the market
        share estimates of the Parties. To do this, the Commission has contacted the majority
        of significant competitors who won tenders in which one of the Parties participated.
        The verification confirms the broader picture of the Parties’ position as the market
        leader post-Transaction.185
(139) The Notifying Party submits that, following the Transaction, the merged entity will
        continue to be constrained by a number of significant competitors, including Coor,
        Sodexo, ISS and Nordrest.186 In addition, barriers to entry and expansion would be
        low and there would be strong constraints on the merged entity through buyer pow-
        er.187
(140) The Commission considers that the Transaction is unlikely to raise serious doubts as
        to its compatibility with the internal market for the following reasons.
(141) First, as shown by the market investigation and demonstrated in Table 8 above, the
        Swedish market for contract foodservices to healthcare & welfare customers is fea-
        tured not only by large multi-national players such as Coor, ISS and Sodexo, but also
        by national foodservices suppliers like Nordrest.
(142) Furthermore, evidence collected during the market investigation shows that in select-
        ing their contract foodservices providers via tender processes, Swedish healthcare &
        welfare customers do not give preference to the historical relationship with the con-
        tract foodservices supplier. Customers give preference to the quality of the food, the
        nutritional value of the food, price of the food, efficient day-to-day operations, and
185 Replies to Q1 – Questionnaire to Competitors in Sweden, question 21.
186 Form CO, paras. 779 and 805.
187 Form CO, paras. 780 et seq., 784 et seq., 807 et seq., 812 et seq.
                                                           32
 ---pagebreak---         the reputation and track-record of the supplier.188 Contract foodservices suppliers try
        to differentiate from each other to win tenders on these parameters.189 Moreover, the
        result of the market investigation shows that both competitors and customers see as
        the most important trends in the contract foodservices in Sweden in the next three
        years the following: customers prefer high-quality food over low-cost food offering;
        customers demand healthy food with local ingredients and sustainable services; and
        digital solutions.190 Especially for the elderly care, a competitor also mentioned that
        “[t]here is a trend towards pre-packed ready meals in the elderly care sector which
        is more frequently being provided from wholesaler/producer.”191 A trend towards
        customers favouring smaller or independent suppliers was also confirmed to some
        extent.192
(143) Customers in the healthcare & welfare segment will therefore continue to benefit
        from the ability to choose from an extensive list of credible alternative bidders. The
        Commission therefore considers that, post-Transaction, the Parties will continue to
        face significant competition from the other companies active in the healthcare &
        welfare segment in Sweden.
(144) Second, barriers to entry into the market for contract foodservices in Sweden in gen-
        eral are low, especially for the companies already operating in the food sector in
        Sweden. In general, a new market entry requires limited resources given that staff is
        transferred to the winner of the tender, whereas kitchen facilities typically belong to
        the customer. This is supported by the results of the market investigation, which
        show that the most important criteria for a new market entry in Sweden are (i) the
        existence of management staff with experience in the contract foodservices industry
        and (ii) knowledge of the contract foodservices industry and how to organise day-to-
        day operations.193 In addition, the majority of competitors responding to the market
        investigation explained that it would be easy for them to find suitable food suppliers
        for their contract foodservices operations in Sweden.194 The Commission’s findings
        in relation to low entry barriers on the supply side are also supported by the fact that
        a majority of the Swedish competitors responding to the market investigation believe
        that a company can enter the Swedish market and start offering contract foodservices
        with a contract for a single canteen or only one customer.195
(145) However, for the healthcare & welfare segment in Sweden, barriers to entry and ex-
        pansion appear slightly higher. As explained by the Parties, an entrant into the
        healthcare segment would need to demonstrate his ability to provide safe patient
        food, which would however be possible by taking over the staff with the relevant
188 Replies to Q1 – Questionnaire to Competitors in Sweden, questions 37 and 40; Replies to Q5 – Question-
    naire to Customers in Sweden, questions 32 and 35.
189 Replies to Q1 – Questionnaire to Competitors in Sweden, questions 38 and 41; Replies to Q5 – Question-
    naire to Customers in Sweden, questions 33 and 36.
190 Replies to Q1 – Questionnaire to Competitors in Sweden, questions 39 and 42; Replies to Q5 – Question-
    naire to Customers in Sweden, questions 34 and 37.
191 Replies to Q1 – Questionnaire to Competitors in Sweden, question 42.
192 Replies to Q1 – Questionnaire to Competitors in Sweden, questions 39 and 42; Replies to Q5 – Question-
    naire to Customers in Sweden, questions 34 and 37.
193 Replies to Q1 – Questionnaire to Competitors in Sweden, question 83; Replies to Q5 – Questionnaire to
    Customers in Sweden, question 95.
194 Replies to Q1 – Questionnaire to Competitors in Sweden, question 84.
195 Replies to Q1 – Questionnaire to Competitors in Sweden, question 85.
                                                       33
 ---pagebreak---          know-how after winning a tender.196 This was broadly confirmed by the market in-
         vestigation, where one competitor explained that to provide contract foodservices to
         healthcare customers “You would need to recruit chefs with a different skill set; in-
         vest in a nutritional calculation system to aid with menu planning and recruit a die-
         tician to manage the system and menus. […]”197
(146) In addition, some hospitals or care homes do not have a kitchen to produce food, for
         example, the hospitals in the Region Skåne.198 The Region Skåne has tendered its
         healthcare contracts in 2015 and 2018 divided in five different lots. Currently, the
         foodservices contracts in the healthcare sector in the Region Skåne are tendered out
         to Compass (3 lots) and Fazer (2 lots).199 Compass, however, does not supply its Re-
         gion Skåne contracts from a central kitchen, but [information on the Notifying Par-
         ty’s operations].200 Fazer provides contract foodservices to hospitals in the Region
         Skåne only since 2015. Fazer explained that it […] took over and rebuilt an existing
         kitchen into a hospital production kitchen before the contract started. 201 One compet-
         itor also explained that to provide contract foodservices to healthcare customers
         “[…] we would also require that the healthcare authority in question would agree to
         provide a kitchen/production facility (which they would normally would agree
         to)”.202 In the Commission’s view, this demonstrates that a production kitchen does
         not amount to any significant barrier to entry into the market for contract foodser-
         vices in the healthcare & welfare segment in Sweden. As a result, the Commission
         concludes that barriers to entry into the healthcare & welfare segment in Sweden are
         low.
(147) Third, on the demand-side, there are no significant barriers to switching between
         contract foodservices suppliers in the healthcare & welfare sector in Sweden. The
         majority of competitors responding to the market investigation explained that the
         majority of healthcare & welfare customers switches their contract foodservices sup-
         plier after the contract is terminated, when the contract would be re-tendered and
         awarded to another supplier.203
(148) Fourth, the market investigation provided indications that customers of contract
         foodservices may sponsor new entry or expansion of other, in particular smaller,
         contract foodservices suppliers. This can be done by determining the contract details
         as well as the scope of the foodservices contract, for example by splitting their ten-
         ders into smaller lots.
196 Form CO, para. 781.
197 Replies to Q1 – Questionnaire to Competitors in Sweden, question 14.6.
198 Form CO, para. 768.
199 Form CO, para. 767.
200 Form CO, para. 772.
201 Form CO, para. 768.
202 Replies to Q1 – Questionnaire to Competitors in Sweden, question 14.6.
203 Replies to Q1 – Questionnaire to Competitor in Sweden, questions 72 and 77; from the customers’ side
    the market investigation was inclusive as to whether customers in the majority have switched their con-
    tract foodservices supplier in the last five years and if it is (somewhat) easy for them to find a suitable
    supplier of contract foodservices or to switch to a different supplier of contract foodservices, see Replies
    to Q5 – Questionnaire to Customers in Sweden, question 50; Replies to Q9 – Questionnaire to Brokers,
    question 19.
                                                          34
 ---pagebreak--- (149) The majority of respondents to the market investigation confirmed that the condi-
        tions of the foodservices contracts (i.e. quality of the food, price, termination claus-
        es) are determined by the customers in the healthcare & welfare segment in Swe-
        den.204 In general, it seems that the larger the customer, the higher the ability to ne-
        gotiate the conditions.205
(150) As explained, customers also have the possibility to structure their tender in separate
        tenders for contract foodservices for each of their canteens or sites. Furthermore,
        they have the possibility to split their tenders into smaller lots to increase competi-
        tion and promote smaller contract foodservices suppliers. The market investigation
        has shown that these possibilities are used by some customers.206 The majority of
        customers responding to the market investigation confirmed that Swedish customers
        in the healthcare & welfare sector use one or more of the following tactics to achieve
        better contract terms: suggestion to take the foodservices in-house, to terminate the
        contract and re-tender and/or to split the tender in smaller lots that may be tendered
        to different suppliers.207 This was also broadly confirmed by a competitor who ex-
        plained that “Public sector contracts are always re-tendered or taken in-house fol-
        lowing the contract period – this is general knowledge thus no threats are necessary.
        The argument is used however, in case the customer consider the supplier to breach
        contract.” Another competitor explained that “[s]ince public sector and the tender
        follows a strict public tender process, threats are uncommon.”208
(151) Fazer FS also estimates in its internal documents that the margin in the Swedish pub-
        lic sectors including healthcare & welfare is expected to […] [Fazer FS internal
        document].209
(152) The Commission also notes that the market investigation gave mixed results on the
        question if the Transaction would have an effect on competition.210
(153) Taking the above considerations into account, the Commission considers that the
        Parties will face significant competition in the healthcare & welfare segment in
        Sweden post-Transaction and that the competitive constraints on the Parties in the
        supply of contract foodservices to healthcare & welfare customers in Sweden would
        be sufficient.
Conclusion
(154) In light of the results of the market investigation and considering the evidence avail-
        able to it, the Commission concludes that the Transaction does not raise serious
204 Replies to Q1 – Questionnaire to Competitors in Sweden, questions 70 and 75; Replies to Q5 – Question-
    naire to Customers in Sweden, questions 73 and 81.
205 Replies to Q1 – Questionnaire to Competitors in Sweden, questions 70 and 75; Replies to Q5 – Question-
    naire to Customers in Sweden, questions 75 and 83.
206 Replies to Q1 – Questionnaire to Competitors in Sweden, question 69 and 74; Replies to Q5 – Question-
    naire to Customers in Sweden, questions 72 and 80.
207 Replies to Q5 – Questionnaire to Customers in Sweden, questions 78 and 86.
208 Replies to Q1 – Questionnaire to Competitors in Sweden, questions 71 and 76.
209 Form CO, Annex 5.4.B-0.49, page 4; Form CO, para. 812.
210 Replies to Q1 – Questionnaire to Competitors in Sweden, questions 112 and 113; Replies to Q5 – Ques-
    tionnaire to Customers in Sweden, questions 114 and 115; E-mail of a competitor of 15 January 2020;
    Agreed non-confidential minutes of a conference call 9 January 2020 with a customer in Sweden, para.
    13.
                                                       35
 ---pagebreak---          doubts as to its compatibility with the internal market with respect to the market for
         the supply of contract foodservices to healthcare & welfare customers in Sweden.
7.1.4.5. Contract foodservices to the Swedish defence
(155) The Parties’ activities overlap in the supply of contract foodservices in the defence
         segment in Sweden.211
(156) The Försvarets Materielverk (“FMV”) is a Swedish government agency responsible
         for the procurement of materiel to the Swedish defence, including contract foodser-
         vices. The Swedish defence (and therefore FMV) is the only customer of contract
         foodservices in the defence segment in Sweden.212
(157) Fazer FS and Compass both participated in the multiservice tender process launched
         in 2016 by the FMV (the “2016 FMV Tender”). The 2016 FMV Tender was divided
         into five lots corresponding to the four military regions of Sweden (the fifth lot was
         for the Swedish defence headquarters in Stockholm).213 As a result of the tender pro-
         cess, Fazer FS was awarded four lots for the supply of contract foodservices to the
         Swedish defence. The fifth lot was awarded to Förenade Service AB.214
(158) Although Fazer FS currently holds four out of the five lots related to the supply of
         contract foodservices in the defence segment in Sweden and the results of the market
         investigation are inconclusive as to whether the Transaction would have an effect on
         competition,215 the Commission considers that the Transaction is unlikely to raise
         competition concerns for the following reasons.
(159) First, Fazer FS and Compass will continue to face significant competition in the
         market for contract foodservices in the defence segment in Sweden post-Transaction.
         In the 2016 FMV Tender, besides Fazer FS and Compass, several contract foodser-
         vices suppliers made it into the second round of each of the five lots, including Coor,
         ISS, and Sodexo.216 The Swedish defence is likely to announce the next tender for
         contract foodservices in the first trimester of 2020 (the “2020 FMV Tender”).217 All
         the participants to the 2016 FMV Tender are viable and credible bidders for the 2020
         FMV Tender.
(160) Second, the Swedish defence currently has and will continue to have post-
         Transaction significant power to constrain competitors. During the market investiga-
         tion, the Swedish defence indicated that the conditions of foodservices contracts (e.g.
         quality of the food, price and termination clauses) are determined by itself rather
211 Form CO, para. 617.
212 Form CO, para. 836.
213 Form CO, paras. 816 et seq.
214 The four lots awarded to Fazer account for approximately 95% of the total value of the 2016 FMV Tender
    (Form CO, Table 126).
215 The majority of competitors indicated that the Transaction will have an effect on competition but did not
    further substantiate their replies; Replies to Q1 – Questionnaires to Competitors in Sweden, question 114.
216 Form CO, Table 126.
217 Form CO, para. 825.
                                                           36
 ---pagebreak---         than the supplier of contract foodservices218 and that it is easy to switch from one
        supplier to another.219
(161) Third, Fazer FS and Compass are not each other’s closest competitors. During the
        market investigation, the Swedish defence stated that Compass and Fazer FS are not
        close competitors in contract foodservices for the Swedish military. 220 Fazer FS’ in-
        ternal documents show that Fazer FS considers [competitor’s name] as a close com-
        petitor in the defence segment in Sweden.221 By contrast, Fazer FS considers that the
        defence segment in Sweden is one of Compass’ [Fazer FS internal document].222
(162) Fourth, barriers to entry in the market for contract foodservices in Sweden are low,
        as explained in Section 7..1.4.4 above. More specifically, with respect to the defence
        segment in Sweden, the Swedish defence indicated that prior experience in the mar-
        ket for contract foodservices is not a determining criterion when awarding a con-
        tract.223 This is further demonstrated by the fact that the Swedish defence awarded in
        the 2016 FMV Tender a lot to Förenade Service AB, which used to provide only fa-
        cility services prior to this tender. In addition, according to the latest draft of the
        2020 FMV Tender, the revenue thresholds will not exclude any of the bidders that
        were in the second round of the 2016 FMV Tender.224
(163) Therefore, taking the above considerations into account, the Commission considers
        that the Parties will face significant competition in the defence segment in Sweden
        post-Transaction and that the competitive constraints on the Parties in the supply of
        contract foodservices to the Swedish defence would be sufficient.
Conclusion
(164) In light of the results of the market investigation and considering the evidence avail-
        able to it, the Commission concludes that the Transaction does not raise serious
        doubts as to its compatibility with the internal market with respect to the market for
        the supply of contract foodservices to the Swedish defence.
7.1.5. Denmark
7.1.5.1. Overview of the contract foodservices industry in Denmark
(165) In addition to the multi-national companies ISS, Sodexo and Coor referred to in par-
        agraph (78) and following above, a number of national companies are active in one
        or more market segments in Denmark.
(166) Moreover, due to tax-deductibility of subsidies under the Danish tax law, employers,
        regardless of size, are incentivised to provide employees with a subsidised lunch
        scheme.
218 Replies to Q5 – Questionnaire to Customers in Sweden, question 89.
219 Replies to Q5 – Questionnaire to Customers in Sweden, question 90.
220 Replies to Q5 – Questionnaire to Customers in Sweden, question 45.
221 Form CO, Annex 5.4.B-044 “Competitor Intelligence – […]”, page 4.
222 Form CO, Annex 5.4.B-042 “Competitor Intelligence – […]”, page 4.
223 Replies to Q5 – Questionnaire to Customers in Sweden, question 96.
224 Form CO, para. 831.
                                                       37
 ---pagebreak--- (167) ISS is a global player with Nordic roots. In terms of the Danish business & industry
        segment, its 2018 annual report noted, in particular, that its organic growth in North-
        ern Europe in the previous financial year was mainly supported by growth in Den-
        mark due to, for example, the expansion of the Danish Defence contract. In 2017,
        ISS hired a new director of its Danish contract foodservices business from Tholstrup
        Group (which owns a portfolio of leading restaurants and retail food and drink busi-
        nesses in Denmark).225
(168) Sodexo is one of the world’s largest global providers of facility services. In the Dan-
        ish business & industry segment, Sodexo serves approximately 12 000 employees in
        several of Denmark’s leading companies. The Notifying Party submits that Sodexo
        operates at least 23 kitchens in Denmark, including for many large and sophisticated
        business & industry customers such as IBM, Tetra Pak, MHI Vestas and Danfoss.226
(169) Coor is a leading Nordic facility management provider and provides a range of ser-
        vices across a number of sectors. It has many business & industry customers such as
        Fujitsu, Fibertex, Velux, and various sites for the Danish Police and the Danish Tax
        Authority.227
(170) Meyers Kantiner, being part of the vertically integrated Løgismose Meyers Group, is
        one of the Parties’ main competitors in the Danish business & industry segment. Its
        strong customer base in the Danish business & industry segment is also evident from
        […].228
(171) Gruppo Camst is a leading European contract foodservices company based in Italy,
        with operations in Italy, Spain, Germany and Denmark. It entered Danish contract
        foodservices in 2018 through its acquisition of controlling stakes in Cheval Blanc
        and Claus Tingstrøm.229
7.1.5.2. Contract foodservices to business & industry customers in Denmark
(172) Table 9 presents the Parties’ estimate of their market shares in 2018, 2017 and 2016
        in the supply of contract foodservices to business & industry customers in Denmark
        based on the Parties’ turnover and the estimation of the total market size by [third
        party consultant], as explained in Section 7.1.3 above.
225 From CO, para. 397.
226 From CO, para. 397.
227 From CO, para. 397.
228 From CO, para. 397.
229 Form CO, para. 397.
                                                  38
 ---pagebreak---     Table 9. The Parties’ market shares in supply of contract foodservices to business &
      industry customers in Denmark in 2018, 2017 and 2016 ([third party consultant])
                                2018                             2017                     2016
                   Revenue            Share          Revenue         Share      Revenue       Share
                   (€ millions)                      (€ millions)               (€ millions)
Compass            […]                [10-20]%       […]             [10-20]%   […]           [10-20]%
Fazer FS           […]                [10-20]%       […]             [10-20]%   […]           [10-20]%
Combined           […]                [20-30]%       […]             [20-30]%   […]           [20-30]%
Total market       […]                100%           […]             100%       […]           100%
            Source: Form CO, para. 342.
  (173) The Parties verified the assumptions used in the [third party consultant] model and
           concluded the following: if one official source on the share of customers with access
           to a canteen is used, the Parties’ combined market share would increase from [20-
           30]% to [20-30]%. If the Parties’ price data instead of the assumptions by [third par-
           ty consultant] would be used, the combined market share would increase from [20-
           30]% to [20-30]%. While alternative sources would exist on the question of canteen
           outsourcing, [third party consultant] assumption would be conservative.230
  (174) Table 10 presents the Parties’ estimate of their market shares in 2018 in the supply
           of contract foodservices to the business & industry customers in Denmark based on
           (i) the Parties’ turnover, (ii) the Parties’ estimate of their known competitors’ turno-
           ver based on public sources and (iii) the total market size calculated as the total of
           the Parties’ own turnover and the estimated known competitors’ turnover.231
   Table 10. The Parties’ market shares in supply of contract foodservices to business &
            industry customers in Denmark in 2018 (estimated competitor turnover)
                                                               Market shares estimated in 2018
           Compass                                             [10-20]%
           Fazer                                               [20-30]%
           Parties combined                                    [30-40]%
           ISS                                                 [10-20]%
           Meyers                                              [10-20]%
           Coor                                                [0-5]%
           Sodexo                                              [0-5]%
  230  Form CO, Annex 7A-007, Table 1.
  231  See Notifying Party’s reply to RFI 12 of 14 January 2020.
                                                            39
 ---pagebreak---                                                             Market shares estimated in 2018
        Able (Frokost.dk)                                   [5-10]%
        Gruppo Camst                                        [5-10]%
        Catering Danmark                                    [0-5]%
        23 other competitors with an estimated [5-10]%
        market share of up to 2% each
        Source: Notifying Party’s reply to RFI 12 of 14 January 2020.
(175) The total market size used to estimate these market shares was around EUR […]
        million, whereas the total market size as estimated by the [third party consultant]
        model was EUR […] million. The Commission therefore acknowledges that the
        market share estimates provided by the Parties based on competitors’ revenues might
        be overstated.
(176) In the course of the market investigation, the Commission has verified the market
        share estimates of the Parties. To do this, the Commission has contacted the majority
        of significant competitors who won tenders in which one of the Parties participated.
        The verification confirms the broader picture of the Parties’ position as the market
        leader post-Transaction with a clear difference over the next in line competitors.232
(177) The Notifying Party submits that, following the Transaction, the merged entity will
        continue to be constrained by a number of significant competitors, including ISS,
        Gruppo Camst, and Coor. Moreover, according to the Notifying Party, the merged
        entity will continue to face competition from a large number of smaller, local com-
        petitors.233 In addition, barriers to entry and expansion would be low and there
        would be strong constraints on the merged entity through buyer power as well as
        out-of-market constraints, such as restaurants.234
(178) The Commission considers that, despite the somewhat high combined market shares
        of the Parties following the Transaction, the Transaction is unlikely to raise serious
        doubts as to its compatibility with the internal market due to the following reasons.
(179) First, as shown by the market investigation and demonstrated in Table 10, the Dan-
        ish market for contract foodservices to business & industry customers is featured not
        only by large multinational players such as Coor, ISS, Sodexo, but also by mid-size
        players like Gruppo Camst, Jespers Torvekøkken, and Forenede Service and a num-
        ber of various sizes local suppliers such as Simply Cooking, Meyers Kantiner, Euro-
        pa 1989, Københavns Kantine Service, and other rivals.235 Demonstrative of this
        point is the fact that the Parties’ tender data includes over [20-30] different competi-
        tors.236 The market is characterised by a large number of smaller suppliers capable of
232 Replies to Q4 – Questionnaire to Competitors in Denmark, question 20.
233 Form CO, para. 330.
234 Form CO, paras. 333 et seq.
235 Among which are Madkastellet, Able (Frokost.dk), Kai Thor, Allianceplus and a number of others. See
    Notifying Party’s reply to RFI 12 of 14 January 2020, Annex RFI 12-001.
236 Form CO, Table 34.
                                                         40
 ---pagebreak---          also serving larger customers. Indeed, as indicated in Fazer FS’ internal documents,
         “the lower end of B&I (up to 0.5 M €) have had many new competitors. [Fazer FS’s
         internal document].237 The respondents to the Commission’s market investigation al-
         so noted that “[t]here are a lot of small companies that only has (sic) one local cus-
         tomers.”238 For example, the foodservices supplier Madkastellet won a very large
         contract for KLP Ejendomme A/S (a property management company) covering three
         large office buildings and up to 5 000 potential consumers which will start in Febru-
         ary 2020. Fazer FS estimates that the contract is worth EUR […].239 On the basis of
         the data submitted by the Notifying Party, it appears that of the [>100] Danish busi-
         ness & industry tenders that Compass participated in the past five years, 240 Compass
         encountered ISS in […] tenders (or [30-40]%), Meyers Kantiner in […] tenders (or
         [10-20]%), Jespers Torvekøkken in […] tenders (or [10-20]%), Gruppo Camst in
         […] tenders (or [20-30]%) and Forenede Service in […] tenders (or [10-20]%).241
(180) Furthermore, evidence collected during the market investigation shows that in select-
         ing their contract foodservices supplier via tenders, Danish business & industry cus-
         tomers do not give preference to the historical relationship with the contract foodser-
         vices supplier. Customers give preference to the quality of the food, the price of the
         food, and the nutritional value of the food.242 Indeed, on the basis of competitors’ re-
         sponses, it appears that in order to win tenders, contract foodservices suppliers try to
         differentiate their offering on the basis of similar parameters.243 Moreover, the re-
         sults of the market investigation show that both customers and competitors believe
         that the contract foodservices market in Denmark is shifting towards higher quality
         food preference over lesser quality but cheaper offering.244 As one customer ex-
         plains, “quality is of essence and with growing focus on sustainability lo-
         cal/fresh/organic produce is of growing importance”.245 A large number of respond-
         ents also confirmed that the key trend in the next three years in contract foodservices
         in Denmark will be healthy food with local ingredients and sustainable services.246 A
         trend towards customers favouring smaller or independent suppliers was also con-
         firmed to some extent.247
(181) Customers in the business & industry segment will therefore continue to benefit
         from the ability to choose from an extensive list of credible alternative bidders,
         which ranges from multi-national and national firms to smaller local rivals. The
237 Form CO, Annex 7B-001, Gold Food Services Denmark Sales Plan 2017-2018, dated June 2016, at page
    9.
238 Replies to Q4 – Questionnaire to Competitors in Denmark, question 58.1.
239 Notifying Party’s reply to RFI 12 of 14 January 2020.
240 I.e. between 2014 and 2018.
241 Form CO, para. 396.
242 Replies to Q4– Questionnaire to Competitors in Denmark, question 21; Replies to Q8 – Questionnaire to
    Customers in Denmark, question 16.
243 Replies to Q4 – Questionnaire to Competitors in Denmark, questions 21 and 22.
244 See Replies to Q4 – Questionnaire to Competitors in Denmark, question 25. Some competitors note that in
    general, the demand for high-end food quality is greater in Denmark compared to other Nordic countries.
    See Replies to Q4 – Questionnaire to Competitors in Denmark, question 16.1.
245 Replies to Q8 – Questionnaire to Customers in Denmark, question 16.1.
246 Replies to Q4 – Questionnaire to Competitors in Denmark, question 26; Replies to Q8 – Questionnaire to
    Customers in Denmark, question 25.
247 Replies to Q4 – Questionnaire to Competitors in Denmark, question 26; Replies to Q8 – Questionnaire to
    Customers in Denmark, question 25.
                                                         41
 ---pagebreak---         Commission therefore considers that post-Transaction, the Parties will continue to
        face significant competition from the other companies active in the business & in-
        dustry segment in Denmark.
(182) Second, barriers to entry into the market for contract foodservices to business & in-
        dustry customers are low, especially for the companies that have been active in the
        food sector in Denmark. Indeed, the results of the market investigation show that a
        new market entry requires only limited resources given that staff is transferred to the
        winner of the tender, whereas kitchen facilities typically belong to the customer. The
        majority of competitors indicated that “management staff with experience in the con-
        tract foodservices industry” is by far the most important criterion for a new market
        entry.248 As further explained by one of the Parties’ competitors, “it is key to have
        knowledge of the industry and know how to organise day-to-day operations. Central
        kitchens are not necessary, and often you will use the customer's kitchen equip-
        ment.”249 The Commission’s findings in relation to low entry barriers on the supply
        side are also supported by the fact that a majority of the Danish competitors respond-
        ing to the market investigation believe that a company can enter the Danish market
        and start offering contract foodservices with a contract for a single canteen or only
        one customer.250 Indeed, as already explained above, the Danish market is character-
        ised by the existence of an extensive number of smaller contract foodservices suppli-
        ers who only have one local customer. One competitor gave an example of an entry
        through an existing relationship with a customer where a chef starts her/his own
        business, “[i]t can typically be done due to relations. Eg a chef in a company makes
        his own business and starts as a contractor - often smaller companies.”251
(183) Third, on the demand side, there are no significant barriers to switching between
        contract foodservices suppliers in the business & industry sector in Denmark.
        Around half of the customers responding to the market investigation confirmed that
        it was (somewhat) easy for them to find a suitable supplier of contract foodservices
        or to switch to a different supplier of contract foodservices.252 Indeed, the Notifying
        Party’s submission includes concrete examples of recent customer switching to other
        contract foodservices providers. For instance, as explained by Compass, between
        March and July 2019, […] of its customers switched before their contractual end
        date by giving notice to terminate.253 This ability to switch strengthens the competi-
        tive constraints on the Parties post-Transaction and contributes to the dynamic and
        competitive environment in the Danish business & industry segment.
(184) Fourth, the market investigation provided indications that customers of contract
        foodservices may sponsor new entry or expansion of other, in particular smaller,
        contract foodservices suppliers. This can be done by determining the contract details
        as well as the scope of the foodservices contract, for example, by splitting their ten-
        ders into smaller lots.
248 Replies to Q4 – Questionnaire to Competitors in Denmark, question 56.
249 Replies to Q4 – Questionnaire to Competitors in Denmark, question 56.1.
250 Replies to Q4 – Questionnaire to Competitors in Denmark, question 58.
251 Replies to Q4 – Questionnaire to Competitors in Denmark, question 58.1.
252 Replies to Q8 – Questionnaire to Customers in Denmark, question 38. See also Replies to Q9 – Question-
    naire to Brokers, question 19.
253 [Confidential information regarding the Notifying Party’s customers]. See Form CO, para. 414 and foot-
    note 362.
                                                        42
 ---pagebreak--- (185) The majority of respondents to the market investigation confirmed that in Denmark,
         the conditions of the contracts for foodservices (e.g. quality of the food, price, ter-
         mination clauses) are typically determined by the business & industry customers ra-
         ther than by the contract foodservices suppliers.254 One of the local Danish competi-
         tors mentioned that “today the contract is often made by the customer”.255 In general,
         it seems that the larger the customer, the higher the ability to negotiate the condi-
         tions.
(186) As explained, customers also have the possibility to structure their tender in separate
         tenders for contract foodservices for each of their canteens or sites. Furthermore,
         they have the possibility to split their tender into smaller lots to increase competition
         and promote smaller contract foodservices suppliers. The market investigation
         showed that these possibilities had been used by some customers.256 In addition,
         some of the respondents explained that in order to facilitate the tender process, some
         Danish business & industry customers also hire brokers who typically are capable to
         advise them on how to better structure tenders to extract more favourable terms.257
(187) Fifth, the Commission’s assessment of the effects of the Transaction has also taken
         into account the fact that other lunch food options are available to the customer’s
         staff in the business & industry sector compared to lunch in the on-site canteen. The
         majority of respondents to the market investigation considered that bringing lunch
         from home or eating lunch at home would be the preferred alternative option to the
         food served at an organisation’s canteen.258 As explained by one of the Parties’ com-
         petitors, “many end customers find it too expensive to buy food in a canteen and
         therefore bring their own lunch from home”.259 Another important alternative for end
         customers is eating a snack or a sandwich that was not bought at the on-site can-
         teen.260 The Commission therefore considers that these out-of-market constraints
         will have an effect on the merged entity’s continued incentive to deliver good quality
         and price ratio to their customers post-Transaction.
(188) Finally, the majority of respondents to the market investigation having expressed
         their view considered that the Transaction would have no effect on competition in
         the business & industry segment in Denmark.261 While customers active in Denmark
         expressed mixed views, the majority of competitors were of the view that there
         would be sufficient competition in all sectors, including business & industry, follow-
254 Replies to Q8 – Questionnaire to Customers in Denmark, question 37; Replies to Q4 – Questionnaire to
    Competitors in Denmark, question 43.
255 Replies to Q4 – Questionnaire to Competitors in Denmark, question 43.1.
256 Replies to Q4 – Questionnaire to Competitors in Denmark, questions 44 and 44.1. Also, as explained by
    Fazer FS, […] of its former customers have switched from outsourced catering to in-house catering: [con-
    fidential information regarding Fazer FS’s customers]. See Form CO, para. 419. Furthermore, based on
    the submission of the Notifying Party, ISS has recently lost its Dansac (a medical equipment manufactur-
    er) contract to the in-house bidder in 2019. See Form CO, para. 419.
257 Replies to Q9 – Questionnaire to Brokers, questions 1 and 14.4.
258 Replies to Q4 – Questionnaire to Competitors in Denmark, question 24; Replies to Q8 – Questionnaire to
    Customers in Denmark, question 19.
259 Replies to Q4 – Questionnaire to Competitors in Denmark, question 24.
260 Replies to Q4 – Questionnaire to Competitors in Denmark, question 24; Replies to Q8 – Questionnaire to
    Customers in Denmark, question 19.
261 Replies to Q4 – Questionnaire to Competitors in Denmark, question 73; Replies to Q8 – Questionnaire to
    Customers in Denmark, question 69. This view was also supported by a broker active in Denmark, see
    Replies to Q9 – Questionnaire to Brokers, questions 26 and 26.1.
                                                          43
 ---pagebreak---          ing the Transaction.262 Indeed, as noted by one of the competitors, “there will still be
         adequate number of suppliers in the market”.263
(189) Taking the above considerations into account, the Commission considers that the
         Parties will face significant competition in the business & industry segment in Den-
         mark post-Transaction and that the competitive constraints on the Parties in the sup-
         ply of contract foodservices to business & industry customers in Denmark would be
         sufficient.
Conclusion
(190) In light of the results of the market investigation and considering the evidence avail-
         able to it, the Commission concludes that the Transaction does not raise serious
         doubts as to its compatibility with the internal market with respect to the market for
         the supply of contract foodservices to business & industry customers in Denmark.
7.1.5.3. Contract foodservices to education customers in Denmark
(191) In Denmark, both Compass and Fazer FS are active in the provision of contract
         foodservices to education customers, including universities, technical colleges, adult
         education colleges and other tertiary education establishments. These are predomi-
         nantly public institutions, which typically tender under the European public pro-
         curement rules. While traditionally meals have been subsidised, the Notifying Party
         submits that there has been a recent trend towards “zero-subsidy” contracts.264 The
         Parties are only active in the provision of contract foodservices to higher education
         customers and are not active in lower education.265 The Notifying Party submits that
         the lower education segment is almost non-existent in Denmark,266 therefore, there is
         no meaningful distinction between conducting the market share analysis on a whole
         Danish education basis or on a Danish higher education basis.267
(192) The results of the market investigation to some extent confirm that there is no mate-
         rial supply-side differences in serving a university canteen or a high school can-
         teen,268 therefore, given that the lower education segment is almost non-existent, the
         Commission will assess the impact of the Transaction in the supply of contract food-
         services to Danish customers in the overall education segment.
262 Replies to Q4 – Questionnaire to Competitors in Denmark, question 72.
263 Replies to Q4 – Questionnaire to Competitors in Denmark, question 72.1.
264 Under a “zero-subsidy” contract, the meals are not subsidised by the customer, and the costs of the meals
    are entirely covered by the price paid by end-consumers, like in a high street restaurant. See Form CO, pa-
    ra. 428 and footnote 369. As submitted by the Notifying Party, [information on the Notifying Party’s
    business strategy], whereas [information on Fazer FS’ business strategy]. See Form CO, para. 428 and
    footnote 369.
265 Form CO, paras. 425 and 428.
266 The Notifying Party submits that the education segment in Denmark is almost entirely comprised of high-
    er education contracts. This is due to the cultural norm that most schools do not have on-site canteens and
    pupils tend to bring their own lunches to school, and the fact that Denmark does not have a state-funded
    lunch programme. See Form CO, para. 344. This is consistent with the Parties’ internal documents. For
    example, Fazer FS notes that the lower education segment in Denmark is […]. See Form CO, Annex
    5.4.B-037, page 67.
267 Form CO, para. 344.
268 Replies to Q4 – Questionnaire to Competitors in Denmark, questions 13.5, 13.6.2 and 13.6.2.1; Replies to
    Q8 – Questionnaire to Customers in Denmark, question 12.2. See also agreed non-confidential minutes of
    a conference call of 14 January 2020 with a customer in Denmark, para. 9.
                                                           44
 ---pagebreak---   (193) Table 11 presents the Parties’ estimate of their market shares in 2018, 2017 and 2016
          in the supply of contract foodservices to education customers in Denmark based on
          the Parties’ turnover and their estimation of the total market size, as explained in
          Section 7.1.3 above.
    Table 11. The Parties’ market shares in supply of contract foodservices to education
           customers in Denmark in 2018, 2017 and 2016 ([third party consultant])
                                2018                             2017                    2016
                   Revenue            Share           Revenue        Share      Revenue     Share
                   (€ millions)                       (€ millions)              (€     mil-
                                                                                lions)
Compass            […]                [10-20]%        […]            [10-20]%   […]         [10-20]%
Fazer FS           […]                [5-10]%         […]            [0-5]%     […]         [0-5]%
Combined           […]                [10-20]%        […]            [10-20]%   […]         [10-20]%
Total market       […]                100%            […]            100%       […]         100%
           Source: Form CO, para. 343.
  (194) Table 12 presents the Parties’ estimate of their market shares in 2018, 2017 and 2016
          in the supply of contract foodservices (lunch only) to higher education customers in
          Denmark based on the Parties’ turnover and their estimate of the total market size, as
          explained in Section 7.1.3 above.
    Table 12. The Parties’ market shares in supply of contract foodservices to education
   customers (lunch only) in Denmark in 2018, 2017 and 2016 ([third party consultant])
                              2018                              2017                    2016
                  Revenue           Share           Revenue        Share      Revenue       Share
                  (€ millions)                      (€ millions)              (€ millions)
Compass           […]               [10-20]%        […]            [30-40]%   […]           [30-40]%
Fazer FS          […]               [20-30]%        […]            [10-20]%   […]           [5-10]%
Combined          […]               [40-50]%        […]            [40-50]%   […]           [30-40]%
Total market      […]               100%            […]            100%       […]           100%
           Source: Form CO, para. 353.
  (195) Table 13 presents the Parties’ estimate of their market shares in 2018 in the supply
          of contract foodservices to higher education customers in Denmark based on (i) the
          Parties’ turnover, (ii) the Parties’ estimate of their known competitors’ turnover
          based on public sources and (iii) the total market size calculated as the total of the
          Parties’ own turnover and the estimated known competitors’ turnover.269
  269 See Notifying Party’s reply to RFI 12 of 14 January 2020.
                                                           45
 ---pagebreak---  Table 13. The Parties’ market shares in supply of contract foodservices to higher edu-
          cation customers in Denmark in 2018 (estimated competitor turnover)
                                                            Market shares estimated in 2018
        Compass                                             [10-20]%
        Fazer                                               [20-30]%
        Parties combined                                    [40-50]%
        Sodexo                                              [5-10]%
        ISS                                                 [5-10]%
        Coor                                                [5-10]%
        Jespers Torvekøkken                                 [10-20]%
        Spisestuerne                                        [5-10]%
        Studenterhusfonden                                  [0-5]%
        8 other competitors with an estimated [10-20]%
        market share of up to 2% each
        Source: Notifying Party’s reply to RFI 12 of 14 January 2020.
(196) The Commission attempted to verify the robustness of the Parties’ submission in the
        course of the market investigation, however, this was inconclusive and did not deliv-
        er credible results.
(197) The Notifying Party submits that, following the Transaction, the merged entity will
        continue to be constrained by a number of significant competitors, including ISS,
        Jespers Torvekøkken, Simply Cooking, DinnerdeLuxe, Forenede Services and
        Gruppo Camst.270 In addition, barriers to entry and expansion would be low and
        there would be strong constraints on the merged entity through buyer power as well
        as out-of-market constraints, such as restaurants.271
(198) The Commission considers that the Transaction is unlikely to raise serious doubts as
        to its compatibility with the internal market for the following reasons.
(199) First, as shown by the market investigation and demonstrated in Table 13, the Dan-
        ish market for contract foodservices to education customers is featured not only by
        large multi-national players such as Coor and ISS, but also by mid-size and smaller
        local players like Jespers Torvekøkken, Meyers Kantiner, Simply Cooking, Gruppo
        Camst, DinnerdeLuxe, and others.272 Demonstrative of this point is the fact that the
        Parties’ tender data includes close to [20-30] competitors in this segment.273 In addi-
        tion, the Parties will continue to face strong and intensifying competition from stu-
        dent cooperatives that, according to the Notifying Party, enjoy particular advantages
        in the education segment. Not only do they have no profit requirement (and are
        therefore more able to compete on price), but they have also proved recently to be
270 Form CO, paras. 439-440.
271 Form CO, paras. 465 et seq.
272 Among which are Europa 1989, De Grønne Kokke, Green Kitchen Kantiner and a few other players. See
    Notifying Party’s reply to RFI 12 of 14 January 2020, Annex RFI 12-001. See also Form CO, para. 454.
273 Form CO, para. 434.
                                                         46
 ---pagebreak---         more attuned to the fast changing tastes and preferences of students, who have a
        strong voice in the contract award process. As a result, many of these student coop-
        eratives (such as Spisestuerne, Studenterlauget, Studenterhusfonden, and Association
        of Students and Faculty at the Department of Mathematical Sciences) have been ex-
        panding rapidly in recent years.274 Customers in the education segment will therefore
        continue to benefit from the ability to choose from a number of credible alternative
        bidders, which ranges from multi-national to smaller local rivals. The Commission
        therefore considers that, post-Transaction, the Parties will continue to face signifi-
        cant competition from the other companies active in the education segment in Den-
        mark.
(200) Second, barriers to entry into the market for contract foodservices to education cus-
        tomers are low, especially for the companies already operating in the food sector in
        Denmark. A new market entry requires limited resources given that staff is typically
        transferred to the winner of the tender, whereas kitchen facilities typically belong to
        the customer. This is supported by the results of the market investigation, which
        show that the most important criteria for a new market entry are (i) the existence of
        management staff with experience in the contract foodservices industry and (ii)
        knowledge of the contract foodservices industry and how to organise day-to-day op-
        erations.275 One of the Parties’ competitors explained that “it is key to have
        knowledge of the industry and know how to organise day-to-day operations. Central
        kitchens are not necessary, and often you will use the customer’s kitchen equip-
        ment.”276 In addition, the majority of competitors responding to the Commission’s
        market investigation explained that it would be easy for them to find suitable food
        suppliers for their contract foodservices operations in Denmark.277 Furthermore, the
        market investigation has shown that competitors that currently have a presence in the
        business & industry segment might also become a credible competitive force in the
        education segment in Denmark in the near future.278
(201) Third, on the demand side, there are no significant barriers to switching between
        contract foodservices suppliers in the education sector in Denmark. On the basis of
        the majority of customers’ responses, it appears to be (somewhat) easy to find a suit-
        able supplier of contract foodservices or to switch to a different supplier of contract
        foodservices in the education segment.279 The majority of education customers re-
        sponding to the market investigation confirmed that in the past five years, they have
        changed the supplier of contract foodservices.280 This ability to switch strengthens
274 On the basis of their annual reports, their 2018 income from contract foodservices in Denmark was in total
    around EUR 10 800 000, which exceeds the revenues of contract foodservices supplier Jespers
    Torvekøkken in the education segment. See Notifying Party’s reply to RFI 12 of 14 January 2020, Annex
    RFI 12-001.
275 Replies to Q8 – Questionnaire to Customers in Denmark, question 59; Replies to Q4 – Questionnaire to
    Competitors in Denmark, question 56.
276 Replies to Q4 – Questionnaire to Competitors in Denmark, question 56.1.
277 Replies to Q4 – Questionnaire to Competitors in Denmark, question 57. At the same time, competitors
    explain that the economies of scale also matter in acquiring ingredients from suppliers. See Replies to Q4
    – Questionnaire to Competitors in Denmark, question 57.1.
278 Agreed non-confidential minutes of a conference call of 14 January 2020 with a customer in Denmark,
    para. 14.
279 Replies to Q8 – Questionnaire to Customers in Denmark, question 46; Agreed non-confidential minutes of
    a conference call of 14 January 2020 with a customer in Denmark, para. 15.
280 Replies to Q8 – Questionnaire to Customers in Denmark, question 48.
                                                          47
 ---pagebreak---         the competitive constraints on the Parties post-Transaction and contributes to the dy-
        namic and competitive environment in the Danish education segment.
(202) Fourth, the market investigation provided indications that customers of contract
        foodservices may sponsor new entry or expansion of other, in particular smaller,
        contract foodservices suppliers. This can be done by determining the contract details
        as well as the scope of the foodservices contract, for example by splitting their ten-
        ders into smaller lots.
(203) The majority of respondents to the market investigation noted that in Denmark, the
        conditions of the contracts for foodservices (e.g. quality of the food, price, termina-
        tion clauses) are typically determined by the education segment customers rather
        than by the contract foodservices suppliers.281 In general, it seems that the larger the
        customer, the higher the ability to negotiate the conditions.
(204) As explained, customers also have the possibility to structure their tender in separate
        tenders for contract foodservices for each of their canteens or sites. Furthermore,
        they have the possibility to split their tenders into smaller lots to increase competi-
        tion and promote smaller contract foodservices suppliers. The market investigation
        has shown that Danish education customers typically split their tenders into smaller
        lots, e.g. by campus.282 One of the education customers explained that in such small-
        er-scale contracts, smaller contract foodservices suppliers can also compete for their
        contracts, “we consider splitting our contracts, to get bids from smaller suppli-
        ers/less mainstream canteen solutions.”283 In addition, some of the respondents ex-
        plained that in the majority of the Danish education tenders customers hire brokers
        who typically are capable to advise them on how to better structure tenders to extract
        more favourable terms.284
(205) Fifth, the Commission’s assessment of the effects of the Transaction has also taken
        into account the fact that in the higher education segment in Denmark, other lunch
        food options are available to the customers of on-site canteens. The majority of re-
        spondents to the market investigation considered that bringing lunch from home or
        eating lunch at home would be the preferred alternative lunch food option.285 A
        competitor explained, “[i]t is cheaper for the students to bring lunch from home”.286
        The Commission therefore considers that these out-of-market constraints will have
        an effect on the merged entity’s continued incentive to deliver good quality and price
        ratio to their customers post-Transaction.
281 Replies to Q8 – Questionnaire to Customers in Denmark, question 45; Replies to Q4 – Questionnaire to
    Competitors in Denmark, questions 48 and 48.1.
282 Replies to Q8 – Questionnaire to Customers in Denmark, question 44; Agreed non-confidential minutes of
    a conference call of 14 January 2020 with a customer in Denmark, paras. 2-3.
283 Replies to Q8 – Questionnaire to Customers in Denmark, question 46.1.
284 Replies to Q9 – Questionnaire to Brokers, questions 1 and 14.4; Replies to Q8 – Questionnaire to Cus-
    tomers in Denmark, questions 43 and 43.1; Replies to Q4 – Questionnaire to Competitors in Denmark,
    question 46.
285 Replies to Q8 – Questionnaire to Customers in Denmark, question 24; Replies to Q4 – Questionnaire to
    Competitors in Denmark, question 29.
286 Reply to Q4 – Questionnaire to Competitors in Denmark, question 29.1.
                                                        48
 ---pagebreak--- (206) Finally, the views of customers and competitors were mixed as to whether the
        Transaction will have an effect on competition.287 While some of the Danish cus-
        tomers identified a concern about one competitor leaving the market,288 at the same
        time, some of them confirmed that there will remain an adequate number of suppli-
        ers to maintain sufficient competition in the market post-Transaction.289 Indeed, a
        large education customer explained that “there would be sufficient suppliers to main-
        tain sufficient competition in the market post-Transaction” adding that it deemed
        that “Forenede Kantiner and ISS [will] make for satisfactory competitors post-
        Transaction.”290 Another customer noted that “[i]n this contract period we don't see
        that it will have an impact on our company. And since we consider smaller contracts
        in the future, we don't see it will have an impact for us.”291
(207) Taking the above considerations into account, the Commission considers that the
        Parties will face sufficient competition in the education segment in Denmark post-
        Transaction and that the competitive constraints on the Parties in the supply of con-
        tract foodservices to education customers in Denmark would be sufficient.
Conclusion
(208) In light of the results of the market investigation and considering the evidence avail-
        able to it, the Commission concludes that the Transaction does not raise serious
        doubts as to its compatibility with the internal market with respect to the market for
        the supply of contract foodservices to education customers in Denmark.
7.1.6. Norway
7.1.6.1. Overview of the contract foodservices industry in Norway
(209) In addition to the multi-national companies such as ISS, Sodexo and Coor referred to
        in paragraph (78) and following above, several national companies are active in the
        provision of contract foodservices in Norway. Among the larger national suppliers
        are Toma Gruppen and 4Service.
(210) Toma Gruppen is one of Norway’s largest facilities management companies, which
        entered the contract foodservices markets in 2006 through its acquisition of Alba-
        tross Kantine.292
(211) 4Service was established in 2010 and has expanded through four acquisitions of con-
        tract foodservices providers in the last years. 4Service employs around 2 700 em-
        ployees with an annual turnover of NOK 1.6 billion (EUR 163 million) in 2018.293
287 Replies to Q4 – Questionnaire to Competitors in Denmark, questions 74 and 75.
288 Replies to Q8 – Questionnaire to Customers in Denmark, question 70.1.
289 Agreed non-confidential minutes of a conference call of 14 January 2020 with a customer in Denmark,
    para. 13.
290 Agreed non-confidential minutes of a conference call of 14 January 2020 with a customer in Denmark,
    para. 13.
291 Replies to Q8 – Questionnaire to Customers in Denmark, question 68.
292 Form CO, para. 585.
293 Form CO, para. 585.
                                                       49
 ---pagebreak---    7.1.6.2. Contract foodservices to business & industry customers in Norway
   (212) Table 14 presents the Parties’ estimate of their market shares in 2018, 2017 and 2016
           in the supply of contract foodservices to business & industry customers in Norway
           based on the Parties’ turnover and the estimation of the total market size by [third
           party consultant] as explained above in paragraph (91) and following.
    Table 14. The Parties’ market shares in supply of contract foodservices to business &
       industry customers in Norway in 2018, 2017 and 2016 ([third party consultant])
                               2018                              2017                      2016
                 Revenue            Share           Revenue          Share       Revenue      Share
                 (€ millions)                       (€ millions)                 (€ millions)
Compass          […]                [10-20]%        […]              [10-20]%    […]          [10-20]%
Fazer FS         […]                [5-10]%         […]              [10-20]%    […]          [10-20]%
Combined         […]                [20-30]%        […]              [20-30]%    […]          [20-30]%
Total    mar- […]                   100%            […]              100%        […]          100%
ket
           Source: Form CO, para. 556.
   (213) The Parties verified the assumptions used in the [third party consultant] model and
           concluded that the average price per meal might be overstated. When using the Par-
           ties’ price data instead of the [third party consultant] estimates, the Parties’ com-
           bined market would increase from [20-30]% to [20-30]%.294
   (214) Table 15 presents the Parties’ estimate of their market shares in 2018 in the supply
           of contract foodservices to business & industry customers in Norway based on (i) the
           Parties’ turnover, (ii) the Parties’ estimate of their known competitors’ turnover
           based on public sources and (iii) the total market size calculated as the total of the
           Parties’ own turnover and the estimated known competitors’ turnover.295
    Table 15. The Parties’ market shares in supply of contract foodservices to business &
             industry customers in Norway in 2018 (estimated competitor turnover)
                                                               Market shares estimated in 2018
           Compass                                             [10-20]%
           Fazer                                               [10-20]%
           Parties combined                                    [20-30]%
           ISS                                                 [20-30]%
           Coor                                                [10-20]%
   294 Form CO, Annex 7A-007, Table 1.
   295 See Notifying Party’s reply to RFI 13 of 20 January 2020.
                                                            50
 ---pagebreak---                                                             Market shares estimated in 2018
        Sodexo                                              [10-20]%
        4Service (including the companies it [10-20]%
        acquired in 2019)296
        Toma Gruppen                                        [0-5]%
        11 other competitors with an estimated [5-10]%
        market share of up to 2% each
        Source: Notifying Party’s reply to RFI 13 of 20 January 2020.
(215) The total market size used to estimate these market shares was EUR […] million,
        whereas the total market size as estimated by the [third party consultant] model was
        EUR […] million. The Commission therefore acknowledges that the market share
        estimates provided by the Parties based on competitors’ revenues might be overstat-
        ed.
(216) In the course of the market investigation, the Commission has verified the market
        share estimates of the Parties. To do this, the Commission has contacted the majority
        of significant competitors who won tenders in which one of the Parties participated.
        While the verification in general confirms the broader picture, the Parties’ position
        seems to be stronger than the market share estimate provided in the table above.297
(217) The Notifying Party submits that, following the Transaction, the merged entity will
        continue to be constrained by a number of significant competitors, including ISS,
        Coor, Sodexo, Toma Gruppen and 4Service, amongst others.298 Moreover, according
        to the Notifying Party, there has been a recent trend of market consolidation in the
        Norwegian business & industry segment, where competitors are strengthening their
        competition positions in contract foodservices, and will thereby exert an even
        stronger competitive constraint on the merged entity post-Transaction.299
(218) The Commission considers that the Transaction is unlikely to raise serious doubts as
        to its compatibility with the internal market for the following reasons.
(219) First, as shown by the market investigation and demonstrated in Table 15 above, the
        Norwegian market for contract foodservices to business & industry customers is fea-
        tured not only by large multi-national players such as ISS, Sodexo and Coor, but also
        by national foodservices suppliers like 4Service and Toma Gruppen as well as a
        number of smaller or local players. Demonstrative of this point is the fact that the
        Parties’ tender data includes over [10-20] competitors, [information on the Parties’
        bidding data].300 The large number of smaller suppliers is also capable of serving
        larger customers. For example, smaller competitors won several tenders worth up to
        EUR […] each. Furthermore, one national competitor won tenders worth EUR […]
        between 2014 and 2018.301 As demonstrated by the Parties’ data, these tenders are
296 See Notifying Party’s reply to RFI of 21 January 2020.
297 Replies to Q3 – Questionnaire to Competitors in Norway, question 19.
298 Form CO, para. 585.
299 Form CO, para. 586.
300 Form CO, paras. 568 et seq.
301 Form CO, paras. 568 et seq.
                                                         51
 ---pagebreak---         substantially based on value of the tender.302 For example, the average value of a
        tender lost by the Notifying Party between 2014 and 2018 was around EUR […].303
(220) Furthermore, evidence collected during the market investigation has shown that in
        selecting their contract foodservices providers via tender processes, Norwegian busi-
        ness & industry customers do not give preference to criteria such as historical rela-
        tionship with the contract foodservices supplier. Customers give preference to the
        quality of the food, the price of the food and the nutritional value of the food, but al-
        so to reputation and track-record of the supplier and efficient day-to-day opera-
        tions.304 Contract foodservices suppliers try to differentiate themselves from each
        other to win tenders on these parameters.305 Moreover, the results of the market in-
        vestigation have shown that both competitors and customers see as the most im-
        portant trends in the contract foodservices in Norway in the next three years the fol-
        lowing: customers prefer high-quality food over low-cost food offering; customers
        prefer high-quality food over multi-service solutions where food is provided together
        with other services such as cleaning; customers demand healthy food with local in-
        gredients and sustainable services; and customers see their canteen as a possibility to
        attract and retain employees.306 A trend towards customers favouring smaller or in-
        dependent suppliers was also confirmed to some extent.307
(221) Customers in the business & industry segment will therefore continue to benefit
        from the ability to choose from an extensive number of credible alternative bidders,
        which ranges from multi-national and national firms, to smaller local rivals. The
        Commission therefore considers that post-Transaction, the Parties will continue to
        face significant competition from the other companies active in the business & in-
        dustry sector in Norway.
(222) Second, barriers to entry into the market for contract foodservices to business & in-
        dustry customers are low, especially for the companies already operating in the food
        sector in Norway. A new market entry requires limited resources given that staff is
        typically transferred to the winner of the tender, whereas kitchen facilities typically
        belong to the customer. This is supported by the results of the Commission’s market
        investigation, which show that the most important criteria for a new market entry are
        (i) the existence of management staff with experience in the contract foodservices
        industry and (ii) knowledge of the contract foodservices industry and how to organ-
        ise day-to-day operations.308 In addition, the majority of competitors responding to
        the Commission’s market investigation explained that it would be easy for them to
        find suitable food suppliers for their contract foodservices operations in Norway.309
302 Form CO, paras. 568 et seq.
303 Own calculation based on Form CO, para. 568.
304 Replies to Q3 – Questionnaire to Competitors in Norway, question 20; Replies to Q7 – Questionnaire to
    Customers in Norway, question 14.
305 Replies to Q3 – Questionnaire to Competitors in Norway, question 21; Replies to Q7 – Questionnaire to
    Customers in Norway, question 15.
306 Replies to Q3 – Questionnaire to Competitors in Norway, question 24; Replies to Q7 – Questionnaire to
    Customers in Norway, question 18.
307 Replies to Q3 – Questionnaire to Competitors in Norway, question 24; Replies to Q7 – Questionnaire to
    Customers in Norway, question 18.
308 Replies to Q3 – Questionnaire to Competitors in Norway, question 35; Replies to Q7 – Questionnaire to
    Customers in Norway, question 31.
309 Replies to Q3 – Questionnaire to Competitors in Norway, question 36.
                                                       52
 ---pagebreak---         The Commission’s findings in relation to low entry barriers on the supply side are
        also supported by the fact that all of the Norwegian competitors responding to the
        Commission’s market investigation believe that a company can enter the Norwegian
        market and start offering contract foodservices with a contract for a single canteen or
        only one customer.310
(223) Third, on the demand side, there are no significant barriers to switching between
        contract foodservices suppliers in the business & industry sector in Norway. The ma-
        jority of competitors responding to the market investigation explained that the ma-
        jority of business & industry customers switches their contract foodservices supplier
        after the contract is terminated, when the contract would be re-tendered and awarded
        to another supplier.311 While the majority of customers responding to the market in-
        vestigation explained that they had not switched their contract foodservices supplier
        in the last five years,312 it was confirmed that it was easy for them to find a suitable
        supplier of contract foodservices or to switch to a different supplier of contract food-
        services.313 This ability to switch strengthens the competitive constraints on the Par-
        ties post-Transaction and contributes to the dynamic and competitive environment in
        the Norwegian business & industry segment.
(224) Fourth, the market investigation provided indications that customers of contract
        foodservices may sponsor new entry or expansion of other, in particular smaller,
        contract foodservices suppliers. This can be done by determining the contract details
        as well as the scope of the foodservices contract, for example, by splitting their ten-
        ders into smaller lots.
(225) The majority of respondents to the market investigation confirmed that the condi-
        tions of the foodservices contracts (i.e. quality of the food, price, termination claus-
        es) are determined by the customers in the business & industry segment in Nor-
        way.314 In general, it seems that the larger the customer, the higher the ability to ne-
        gotiate the conditions.315
(226) As explained, customers also have the possibility to structure their tender in separate
        tenders for contract foodservices for each of their canteens or sites. Furthermore,
        they have the possibility to split their tenders into smaller lots to increase competi-
        tion and promote smaller contract foodservices suppliers. The market investigation
        has shown that these possibilities are used by some customers.316 The majority of re-
        spondents to the market investigation also confirmed that Norwegian customers in
        the business & industry sector use one or more of the following tactics to achieve
        better contract terms: the suggestion to take the foodservices in-house, to terminate
310 Replies to Q3 – Questionnaire to Competitors in Norway, question 37.
311 Replies to Q3 – Questionnaire to Competitors in Norway, question 34.
312 Replies to Q7 – Questionnaire to Customers in Norway, question 28.
313 Replies to Q7 – Questionnaire to Customers in Norway, question 26.
314 Replies to Q3 – Questionnaire to Competitors in Norway, question 32; Replies to Q7 – Questionnaire to
    Customers in Norway, question 25.
315 Replies to Q3 – Questionnaire to Competitors in Norway, question 32; Replies to Q7 – Questionnaire to
    Customers in Norway, question 27.
316 Replies to Q3 – Questionnaire to Competitors in Norway, question 31; Replies to Q7 – Questionnaire to
    Customers in Norway, question 24.
                                                       53
 ---pagebreak---         the contract and retender and/or to split the tender into smaller lots which may be
        tendered to different suppliers.317
(227) Fifth, the Commission’s assessment of the effects of the Transaction has also taken
        into account the fact that other lunch food options are available to the staff in the
        business & industry sector compared to lunch in the on-site canteen. The majority of
        respondents to the market investigation considered that bringing lunch from home
        would be the preferred alternative lunch food option, followed by eating lunch at an
        outside restaurant or eating a snack or sandwich that was not bought at the on-site
        canteen.318 The Commission therefore considers that these out-of-market constraints
        will have an effect on the merged entity’s continued incentive to deliver good quality
        and price ratio to their customers post-Transaction.
(228) Finally, the majority of respondents to the market investigation having expressed a
        view considered that the Transaction would have no effect on competition in the
        business & industry segment in Norway.319 The majority of competitors having ex-
        pressed a view considered that there would be sufficient competition in the Norwe-
        gian business & industry sector following the Transaction.320 This was confirmed by
        the majority of customers responding to the market investigation, who did not con-
        sider that the Transaction would have an impact on their company. One customer
        explained that “based on the last tender it held in the fall of 2019, [the company]
        sees the market as very competitive. As a result, it does not foresee any impact on
        competition as a result of the Transaction.”321
(229) Therefore, taking the above considerations into account, the Commission considers
        that the Parties will face significant competition in the business & industry segment
        in Norway post-Transaction and that the competitive constraints on the Parties in the
        supply of contract foodservices to business & industry customers in Norway would
        be sufficient.
Conclusion
(230) In light of the results of the market investigation and considering the evidence avail-
        able to it, the Commission concludes that the Transaction does not raise serious
        doubts as to its compatibility with the internal market with respect to the market for
        the supply of contract foodservices to business & industry customers in Norway.
7.1.7. Finland
7.1.7.1. Overview of the contract foodservices industry in Finland
(231) In addition to the multi-national companies ISS and Sodexo referred to in paragraph
        (78) and following above, several national companies are active in the provision of
317 Replies to Q3 – Questionnaire to Competitors in Norway, question 33; Replies to Q7 – Questionnaire to
    Customers in Norway, question 30.
318 Replies to Q3 – Questionnaire to Competitors in Norway, question 23; Replies to Q7 – Questionnaire to
    Customers in Norway, question 17.
319 Replies to Q3 – Questionnaire to Competitors in Norway, question 46; Replies to Q7 – Questionnaire to
    Customers in Norway, question 37.
320 Replies to Q3 – Questionnaire to Competitors in Norway, question 45.
321 Replies to Q7 – Questionnaire to Customers in Norway, question 36.
                                                       54
 ---pagebreak---             contract foodservices in Finland. Among the larger national suppliers are Antell-
            Catering and Palmia.
    (232) Antell-Catering was founded in Finland in 1880. According to the Notifying Party, it
            is one of most well-known family-owned food brands in Finland. In 2017, Antell-
            Catering had a group turnover of EUR 524 million.322
    (233) Palmia was founded in 2003 and is active in providing facilities management and
            contract foodservices. It has expanded in 2018 and 2019 and acquired two contract
            foodservices and facilities management providers.323
    7.1.7.2. Contract foodservices to business & industry customers in Finland
    (234) Table 16 presents the Parties’ estimate of their market shares in 2018, 2017 and 2016
            in the supply of contract foodservices to business & industry customers in Finland
            based on the Parties’ turnover and the estimation of the total market size by [third
            party consultant] as explained above.
     Table 16. The Parties’ market shares in supply of contract foodservices to business &
        industry customers in Finland in 2018, 2017 and 2016 ([third party consultant])
                               2018                             2017                   2016
                 Revenue            Share           Revenue        Share    Revenue        Share
                 (€ millions)                       (€ millions)            (€ millions)
Compass          […]                [0-5]%          […]            [5-10]%  […]            [0-5]%
Fazer FS         […]                [20-30]%        […]            [20-30]% […]            [20-30]%
Combined         […]                [30-40]%        […]            [30-40]% […]            [30-40]%
Total    mar- […]                   100%            […]            100%     […]            100%
ket
            Source: Form CO, para. 620.
    (235) The Parties verified the assumptions used in the [third party consultant] model and
            concluded that the average price per meal might be overstated. When using the Par-
            ties’ price data instead of the [third party consultant] estimates, the Parties’ com-
            bined market would increase from [30-40]% to [30-40]%.324
    (236) Table 17 presents the Parties’ estimate of their market shares in 2018 in the supply
            of contract foodservices to business & industry customers in Finland based on (i) the
            Parties’ turnover, (ii) the Parties’ estimate of their known competitors’ turnover
            based on public sources and (iii) the total market size calculated as the total of the
            Parties’ own turnover and the estimated known competitors’ turnover.325
    322 Form CO, para. 522.
    323 Form CO, para. 522.
    324 Form CO, Annex 7A-007, Table 1.
    325 See Notifying Party’s reply to RFI 12 of 14 January 2020.
                                                             55
 ---pagebreak---  Table 17. The Parties’ market shares in supply of contract foodservices to business &
          industry customers in Finland in 2018 (estimated competitor turnover)
                                                            Market shares estimated in 2018
        Compass                                             [5-10]%
        Fazer                                               [40-50]%
        Parties combined                                    [40-50]%
        Sodexo                                              [10-20]%
        Antell-Catering                                     [10-20]%
        Leijona Catering                                    [5-10]%
        ISS                                                 [5-10]%
        Palmia                                              [0-5]%
        9 other competitors with an estimated [5-10]%
        market share of up to 2% each
        Source: Notifying Party’s reply to RFI 13 of 20 January 2020.
(237) According to the Parties, Leijona Catering Oy was founded in 2012 and is 100%
        owned by the Finnish Government. Leijona Catering would hold a number of high
        profile contracts, including all catering contracts for the Finnish Armed Forces and
        the Criminal Sanctions Agency.326 Since Leijona Catering is 100% owned by the
        Finnish Government, it might be questionable if Leijona Catering is active on a con-
        tract foodservices market providing services to third parties or rather an in-house
        provider of contract foodservices. The Commission has therefore recalculated the
        market share estimates provided by the Parties by excluding the estimated turnover
        of Leijona Catering. Without Leijona Catering’s turnover, the Parties’ combined
        market share amounts to [50-60]%, the biggest competitors being Sodexo with an es-
        timated market share of [10-20]% and Antell-Catering with an estimated market
        share of [10-20]%. Considering that the market share estimates and therefore the po-
        sition of the Parties in the Finnish market for the supply of contract foodservices to
        business & industry customers does not change significantly, irrespective of whether
        Leijona Catering is included or not, the question whether or not Leijona Catering is a
        competitor of the Parties can be left open.
(238) The total market size used to estimate these market shares was around EUR [...] mil-
        lion, whereas the total market size as estimated by the [third party consultant] model
        was EUR […] million. The Commission therefore acknowledges that the market
        share estimates provided by the Parties based on competitors’ revenues might be
        overstated.
(239) In the course of the market investigation, the Commission has verified the market
        share estimates of the Parties. To do this, the Commission has contacted the majority
326 See Notifying Party’s reply to RFI of 21 January 2020.
                                                         56
 ---pagebreak---         of significant competitors who won tenders in which one of the Parties participated.
        The verification confirms the broader picture of the Parties’ position as the market
        leader with a clear difference to the next in line competitors.327
(240) The Notifying Party submits that, following the Transaction, the merged entity will
        continue to be constrained by a number of significant competitors, including Sodexo,
        ISS, Antell-Catering and Palmia. Moreover, according to the Notifying Party, the
        merged entity will continue to face competition from a large number of smaller, lo-
        cal competitors.328 In addition, barriers to entry and expansion would be low and
        there would be strong constraints on the merged entity through buyer power as well
        as out-of-market constraints, such as restaurants.329
(241) Despite the somewhat high combined market shares of the Parties post-Transaction
        and the clear lead over the next in line competitors, the Commission considers that
        the Transaction is unlikely to raise serious doubts as to its compatibility with the in-
        ternal market for the following reasons.
(242) First, the increment brought about by the Transaction is moderate. In addition, as
        shown by the market investigation and demonstrated in Table 17 above, the Finnish
        market for contract foodservices to business & industry customers is featured not on-
        ly by large multi-national players such as Sodexo and ISS, but also by national food-
        services suppliers like Antell-Catering as well as a number of smaller or local play-
        ers like Palmia, Juvenes, and Theron Group. Demonstrative of this point is the fact
        that the Parties’ tender data includes over [10-20] competitors, [information on the
        Parties’ bidding data].330 The large number of smaller suppliers is also capable of
        serving larger customers. For example, smaller competitors won several tenders
        worth more than EUR […] between 2014 and 2018.331 As demonstrated by the Par-
        ties’ tender data, these tenders are substantially based on value of the tender.332 For
        example, the average value of a tender lost by the Notifying Party between 2014 and
        2018 was around EUR […].333
(243) Furthermore, evidence collected during the market investigation shows that in select-
        ing their contract foodservices providers via tender processes, Finnish business &
        industry customers do not give preference to the historical relationship with the con-
        tract foodservices supplier. Customers give preference to the quality of the food, the
        price of the food and the nutritional value of the food, but also to reputation and
        track-record of the supplier, efficient day-to-day operations and a contract foodser-
        vices package that is adapted to the customer’s specific needs.334 Contract foodser-
        vices suppliers try to differentiate from each other to win tenders on these parame-
        ters.335 Moreover, the results of the market investigation have shown that both com-
327 Replies to Q2 – Questionnaire to Competitors in Finland, question 19.
328 Form CO, para. 522.
329 Form CO, paras. 528 et seq.
330 Form CO, paras. 502 et seq.
331 Form CO, para. 527.
332 Form CO, para. 502.
333 Own calculation based on Form CO, para. 502.
334 Replies to Q2 – Questionnaire to Competitors in Finland, question 20; Replies to Q6 – Questionnaire to
    Customers in Finland, question 14.
335 Replies to Q2 – Questionnaire to Competitors in Finland, question 21; Replies to Q5 – Questionnaire to
    Customers in Finland, question 15.
                                                         57
 ---pagebreak---         petitors and customers see as the most important trends in the contract foodservices
        in Finland in the next three years the following: (i) customers prefer high-quality
        food over low-cost food offering; (ii) customers demand healthy food with local in-
        gredients and sustainable services; and (iii) customers see their canteen as a possibil-
        ity to attract and retain employees.336 A trend towards customers favouring smaller
        or independent suppliers was also confirmed to some extent.337 One customer ex-
        plained that “[t]he importance of small local service providers is increasing and the
        importance of big once (sic) decreasing.”338
(244) Customers in the business & industry segment will therefore continue to benefit
        from the ability to choose from an extensive number of credible alternative bidders,
        which ranges from multi-national and national firms, to smaller local rivals. The
        Commission, therefore, considers that post-Transaction, the Parties will continue to
        face significant competition from the other companies active in the business & in-
        dustry segment in Finland.
(245) Second, barriers to entry into the market for contract foodservices to business & in-
        dustry customers are higher in Finland than in Denmark, Norway and Sweden. In
        Finland, contrary to Sweden, Norway and Denmark, the chefs and staff do not nec-
        essarily transfer with the contract. According to the Notifying Party, in Finland, the
        transfer of the contract does not necessarily constitute the transfer of an undertaking
        because assets (including kitchen equipment) are not transferred to the new operator.
        The Parties have, for example, explained that they remove their tills, ovens etc. in
        Finland following the termination of a contract.339 However, the barriers to entry into
        the market for contract foodservices to business & industry customers in Finland are
        still low, especially for the companies already operating in the food sector in Fin-
        land.
(246) According to the Notifying Party, the recruitment of staff would not be a barrier to
        entry or expansion because there is sufficient time to plan for recruitment between
        the tender announcement and the start of the contract, which would be at least 6 to
        20 weeks, depending on the tender. In the Parties’ experience, the usual length of
        time needed for hiring a head chef would be four to eight weeks. In addition, there
        would be a wide range of low-cost recruitment methods.340 This has been broadly
        confirmed by the Commission’s market investigation, which shows that the most
        important criteria for a new market entry in Finland are (i) the existence of manage-
        ment staff with experience in the contract foodservices industry and (ii) knowledge
        of the contract foodservices industry and how to organise day-to-day operations.341
        In addition, the majority of competitors responding to the Commission’s market in-
        vestigation explained that it would be easy for them to find suitable food suppliers
        for their contract foodservices operations in Finland.342 The Commission’s findings
        in relation to low entry barriers on the supply side are also supported by the fact that
336 Replies to Q2 – Questionnaire to Competitors in Finland, question 24; Replies to Q5 – Questionnaire to
    Customers in Finland, question 18.
337 Replies to Q2 – Questionnaire to Competitors in Finland, question 24; Replies to Q5 – Questionnaire to
    Customers in Finland, question 18.
338 Replies to Q6 – Questionnaire to Customers in Finland, question 38.
339 Form CO, para. 1075.
340 Form CO, para. 1075 et seq.
341 Replies to Q2 – Questionnaire to Competitors in Finland, question 35; Replies to Q6 – Questionnaire to
    Customers in Finland, question 31.
342 Replies to Q2 – Questionnaire to Competitors in Finland, question 36.
                                                         58
 ---pagebreak---         a majority of the Finnish competitors responding to the Commission’s market inves-
        tigation believe that a company can enter the Finnish market and start offering con-
        tract foodservices with a contract for a single canteen or only one customer.343
(247) Third, on the demand-side, there are no significant barriers to switching between
        contract foodservices suppliers in the business & industry sector in Finland. The ma-
        jority of competitors responding to the market investigation explained that the ma-
        jority of business & industry customers switches their contract foodservices supplier
        after the contract is terminated, when the contract would be re-tendered and awarded
        to another supplier.344 While the majority of customers responding to the market in-
        vestigation explained that they had not switched their contract foodservices supplier
        in the last five years,345 they confirmed that it was (somewhat) easy for them to find
        a suitable supplier of contract foodservices or to switch to a different supplier of con-
        tract foodservices.346 This ability to switch strengthens the competitive constraints
        provided by customers and contributes to the dynamic and competitive environment
        in the Finnish business & industry segment.
(248) Fourth, the market investigation provided indications that customers of contract
        foodservices may sponsor new entry or expansion of other, in particular smaller,
        contract foodservices suppliers. This can be done by determining the contract details
        as well as the scope of the foodservices contract, for example by splitting their ten-
        ders into smaller lots.
(249) The majority of respondents to the market investigation confirmed that the condi-
        tions of the foodservices contracts (i.e. quality of the food, price, termination claus-
        es) are determined by the customers in the business & industry segment in Fin-
        land.347 In general, it seems that the larger the customer, the higher the ability to ne-
        gotiate the conditions.348
(250) As explained, customers also have the possibility to structure their tender in separate
        tenders for contract foodservices for each of their canteens or sites. Furthermore,
        they have the possibility to split their tenders into smaller lots to increase competi-
        tion and promote smaller contract foodservices suppliers. The market investigation
        has shown that these possibilities are used by some customers.349 The majority of re-
        spondents to the market investigation confirmed that Finnish customers in the busi-
        ness & industry sector use the tactic of suggesting the potential termination of the
        contract, re-tendering and award of the contract to other suppliers.350 In addition,
        some of the respondents explained that in order to facilitate the tender process, Finn-
343 Replies to Q2 – Questionnaire to Competitors in Finland, question 37.
344 Replies to Q2 – Questionnaire to Competitors in Finland, question 34.
345 Replies to Q6 – Questionnaire to Customers in Finland, question 28.
346 Replies to Q6 – Questionnaire to Customers in Finland, question 26; Replies to Q9 – Questionnaire   to
    Brokers, question 19.
347 Replies to Q2 – Questionnaire to Competitors in Finland, question 32; Replies to Q6 – Questionnaire to
    Customers in Finland, question 25; Replies to Q9 – Questionnaire to Brokers, question 16.
348 Replies to Q2 – Questionnaire to Competitors in Finland, question 32; Replies to Q6 – Questionnaire to
    Customers in Finland, question 27; Replies to Q9 – Questionnaire to Brokers, question 18.
349 Replies to Q2 – Questionnaire to Competitors in Finland, question 31; Replies to Q6 – Questionnaire to
    Customers in Finland, question 24; Replies to Q9 – Questionnaire to Brokers, question 15.
350 Replies to Q2 – Questionnaire to Competitors in Finland, question 33; Replies to Q6 – Questionnaire to
    Customers in Finland, question 30; Replies to Q9 – Questionnaire to Brokers, question 20.
                                                         59
 ---pagebreak---         ish business & industry customers tend to hire brokers that are capable to advise
        them on how to better structure tenders to extract more favourable terms.351
(251) Fifth, the Commission’s assessment of the effects of the Transaction also takes into
        account the fact that other lunch food options than on-site canteens are available to
        the staff in the business & industry sector. The majority of respondents to the market
        investigation considered that bringing lunch from home would be the preferred alter-
        native lunch food option, followed by eating lunch at an outside restaurant or eating
        a snack or sandwich that was not bought at the on-site canteen.352 The Commission
        therefore considers that these out-of-market constraints will have an effect on the
        merged entity’s continued incentive to deliver good quality and price ratio to their
        customers post-Transaction.
(252) Finally, the majority of respondents to the market investigation having expressed a
        view considered that the Transaction would have no effect on competition in the
        business & industry segment in Finland.353 The majority of competitors were also of
        the view that there will be sufficient competition in the Finnish business & industry
        sector following the Transaction.354 Indeed, as noted by one of the competitors,
        “[t]he transaction does not change the competitive situation in the market signifi-
        cantly since Compass is small today.”355 This was confirmed by the majority of cus-
        tomers responding to the market investigation who considered that the Transaction
        would have no impact on their company.356 Furthermore, as noted by one respondent
        “I think in Finland there might be more possibilities for the smaller catering compa-
        nies to win more tender processes. Fazer has had a very good name and reputation
        on the market based on the Fazer heritage (mainly chocolate). Compass does not
        have such a good reputation in Finland.”357
(253) Therefore, taking the above considerations into account, the Commission considers
        that the Parties will face significant competition in the business & industry segment
        in Finland post-Transaction and that the competitive constraints on the Parties in the
        supply of contract foodservices to business & industry customers in Finland would
        be sufficient.
Conclusion
(254) In light of the results of the market investigation and considering the evidence avail-
        able to it, the Commission concludes that the Transaction does not raise serious
        doubts as to its compatibility with the internal market with respect to the market for
        the supply of contract foodservices to business & industry customers in Finland.
351 Replies to Q2 – Questionnaire to Competitors in Finland, question 30; Replies to Q6 – Questionnaire to
    Customers in Finland, question 23.
352 Replies to Q2 – Questionnaire to Competitors in Finland, question 23; Replies to Q6 – Questionnaire to
    Customers in Finland, question 17.
353 Replies to Q2 – Questionnaire to Competitors in Finland, question 46; Replies to Q6 – Questionnaire to
    Customers in Finland, question 37; Replies to Q9 – Questionnaire to Brokers, question 26.
354 Replies to Q2 – Questionnaire to Competitors in Finland, question 45.
355 Replies to Q2 – Questionnaire to Competitors in Finland, question 45.
356 Replies to Q6 – Questionnaire to Customers in Finland, question 36.
357 Replies to Q9 – Questionnaire to Brokers, question 26.
                                                         60
 ---pagebreak--- 7.1.8. The Transaction’s effects on public tenders
(255) For Sweden and Denmark, a concern regarding public tenders was expressed by
        some respondents in the market investigation. It was claimed that public tenders
        would be awarded based on lowest price. Post-Transaction, the Parties would be able
        – due to their increased size – to obtain food products at lower prices than their com-
        petitors and to offer, ultimately, lower prices to customers, making it difficult for
        competitors to compete with them on price in the public tenders. Finally, competitors
        would have to leave the market(s).358
(256) The market investigation confirmed that it is easy for the providers of contract food-
        services to find suitable food suppliers for their contract foodservices operations in
        their respective country359 and that the Parties would not have the ability and/or the
        incentive to restrict their competitors’ access to food suppliers necessary to provide
        contract foodservices post-Transaction.360
(257) The market investigation also confirmed in general that the foodservices supplier’s
        size is important when acquiring food products from suppliers in their respective
        country.361 One competitor explained the following “Volume drives price up or
        down. Volume is essential in order to obtain best price which, as emphasized above,
        is the greatest competitive edge for suppliers.” On the other hand, the size of the
        foodservices supplier is not the only decisive factor when negotiating good price
        conditions from food product suppliers. In that regard, another competitor explained
        that volumes are not the only factor to obtain good prices: “It is easier to negotiate
        good prices if you have a substantial size but it also depends on how good you are at
        negotiating ;-)”.362
(258) The Commission considers that the allegation according to which the merged entity
        would be able to force competitors out of the market because of their ability to offer
        lower prices in public tenders is unfounded for the following reasons.
(259) First, out of the Parties’ total revenue in the business & industry sectors in Sweden
        and Denmark, the Parties only achieve around […]% of their total revenue in 2018
        as well as 2017 with contracts following public tenders (public administration and
        public companies).363 It can therefore be concluded, that a very big proportion of the
        business & industry contract foodservices revenues of the Parties in Sweden and
        Denmark is made with private companies, which, even if the above-mentioned claim
        were correct, would be open to competitors.
358 Replies to Q1 – Questionnaire to Competitors in Sweden, question 88; Replies to Q4 – Questionnaire to
    Competitors in Denmark, question 61.
359 Replies to Q1 – Questionnaire to Competitors in Sweden, question 84; Replies to Q2 – Questionnaire to
    Competitors in Finland, question 36; Replies to Q3 – Questionnaire to Competitors in Norway, question
    36; Replies to Q4 – Questionnaire to Competitors in Denmark, question 57.
360 Replies to Q1 – Questionnaire to Competitors in Sweden, question 88; Replies to Q2 – Questionnaire to
    Competitors in Finland, question 40; Replies to Q3 – Questionnaire to Competitors in Norway, question
    40; Replies to Q4 – Questionnaire to Competitors in Denmark, question 61.
361 Replies to Q1 – Questionnaire to Competitors in Sweden, question 87; Replies to Q2 – Questionnaire to
    Competitors in Finland, question 39; Replies to Q3 – Questionnaire to Competitors in Norway, question
    39; Replies to Q4 – Questionnaire to Competitors in Denmark, question 60.
362 Replies to Q1 - Questionnaire to Competitors in Sweden, question 87; Replies to Q4 – Questionnaire to
    Competitors in Denmark, question 60.
363 Notifying Party’s reply to RFI 12 of 14 January 2020.
                                                         61
 ---pagebreak--- (260) Second, as explained above, in selecting their contract foodservices supplier, cus-
         tomers in general take into account several parameters, of which price is only one.364
         This is further evidenced by the general trend towards high-quality food over low-
         cost food offering and healthy food with local ingredients and sustainable services as
         confirmed in the market investigation.365
(261) Third, it is uncertain whether the merged entity will have the ability to obtain lower
         prices on food products and therefore offer lowest prices in public tenders. The
         Transaction envisages an annualised purchasing synergy of EUR […] million in the
         entire Nordic region.366 The Notifying Party explained that this was based on an as-
         sumption [Notifying Party’s internal business strategy].367 However, the cost base
         for the provision of any foodservices contract would include not only the cost of in-
         gredients, but also labour cost at the restaurant level and other restaurant level ad-
         ministrative costs (for example site-specific IT or rent). Of these costs, in most cases
         labour costs would be the highest cost. The Parties explained that many of their
         competitors would already offer prices […] in public bids.368
(262) Fourth, smaller competitors have the possibility to achieve cost savings when buying
         ingredients by joining purchasing cooperatives. For Denmark, the Parties explained
         that they are aware of the Samhandel purchasing cooperative, which could be joined
         by paying an enrolment fee of less than EUR 1 500.369 For Sweden, the Parties ex-
         plained that they are aware of three large purchasing cooperatives in Sweden that
         foodservices providers could join: Nores, Svenska Krögare and Krogdirekt. These
         purchasing cooperatives would be easy to join and had thousands of members in-
         cluding small restaurants and contract foodservices suppliers. The purchasing coop-
         erative Nores would have more than 1 000 members in Sweden, including the food-
         services provider Sodexo. Members of Nores would be expected to pay a deposit of
         around EUR 2 000 and to have certain annual purchasing volumes through the pur-
         chasing cooperative. Krogdirekt would claim that its members benefit from purchas-
         ing savings of up to 30%. To join Krogdirekt, only a small annual fee of less than
         EUR 600 would need to be paid.370
364 Replies to Q1 – Questionnaire to Competitors in Sweden, questions 22, 27, 32, 37 and 40; Replies to Q5 –
    Questionnaire to Customers in Sweden, questions 17, 22, 27, 32 and 35; Replies to Q 4 – Questionnaire to
    Competitors in Denmark, questions 21 and 26; Replies to Q8 – Questionnaire to Customers in Denmark,
    question 16 and 21. This is further confirmed by the Parties’ analysis of the judging criteria of the total
    public contracts tendered in 2018 in the business & industry segments in Sweden and Denmark and the
    education segment in Denmark as well as the analysis of the tenders won by one of the Parties in the
    healthcare & welfare segment and the education segment in Sweden. This data shows that in less than
    50% of the respective contracts in the respective segment, the award of the contract was explicitly solely
    based on price or price had the highest weighting (but even in those tenders where price had the highest
    weighting, price was not necessarily the decisive factor), see Notifying Party’s reply to RFI 12 of 14 Janu-
    ary 2020, question 2.
365 Replies to Q1 – Questionnaire to Competitors in Sweden, questions 26, 31, 36, 39 and 42; Replies to Q5 –
    Questionnaire to Customers in Sweden, questions 21, 26, 31, 37 and 34; Replies to Q4 – Questionnaire to
    Competitors in Denmark, question 25 and 30; Replies to Q8 – Questionnaire to Customers in Denmark,
    question 20 and 25.
366 See Form CO, Annex 5.4.A-002, Compass, [Notifying Party’s internal document] of 26 May 2019.
367 Notifying Party’s reply to RFI 12 of 14 January, question 3.
368 Notifying Party’s reply to RFI 12 of 14 January, question 4.
369 Notifying Party’s reply to RFI 12 of 14 January, question 5.
370 Notifying Party’s reply to RFI 12 of 14 January, question 5, based on the following public sources:
    https://www nores.se/, https://krogare.se/, https://krogdirekt.com/,https://www.samhandel.dk/forside.aspx.
                                                            62
 ---pagebreak--- 7.2.    Conglomerate effects
(263) Pursuant to the Non-Horizontal Merger Guidelines,371 in most circumstances, con-
        glomerate mergers do not lead to any competition problems. However, foreclosure
        effects may arise in conglomerate mergers when the combination of services in re-
        lated 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 or bundling or
        other exclusionary practices. Those practices are common and often have no anti-
        competitive consequences, as companies may engage in tying and bundling in order
        to provide their customers with better products or offerings in cost-effective ways.372
        However, in certain specific cases, conglomerate effects may harm competition.
(264) In the present case, as contract foodservices are sometimes tendered out together
        with non-food related services (i.e. other support services such as cleaning services),
        the Transaction may have a conglomerate dimension. Compass supplies contract
        foodservices together with other support services in Sweden, Denmark, Norway and
        Finland. However, Fazer FS does not provide multi-service contracts in Denmark,
        Sweden and Norway and Fazer FS is only marginally active in multi-service con-
        tracts in Finland.373
(265) In order to assess the likelihood of such possible anticompetitive foreclosure strate-
        gies, the Commission will examine whether the merged entity has (i) the ability to
        foreclose and (ii) the incentives to foreclose competing suppliers from providing
        contract foodservices to customers. Lastly, the Commission will assess whether such
        practices may have a significant negative impact on competition by limiting more
        cost-effective suppliers, and/or reducing choice for customers.374
7.2.1. Ability to foreclose
(266) The Commission considers that the Parties will not gain any ability, post-
        Transaction, to engage in a strategy of tying or bundling its contract foodservices
        with other support services in Denmark, Finland, Norway or Sweden. First, the
        merged entity will lack the market power on any of the markets concerned to engage
        in such a strategy. More specifically, in any of Denmark, Finland, Norway or Swe-
        den, the Parties’ combined share of supply in support services (or any potential seg-
        ment thereof, such as cleaning) is below 10%,375 and although the Parties’ combined
        share is significant in some markets for contract foodservices, customers will contin-
        ue to have the ability to choose from an extensive list of credible contract foodser-
        vices suppliers. Second, there is a small proportion of multi-service contracts in
        Sweden, Denmark, Norway and Finland. The majority of customers in Denmark,
        Finland, Norway and Sweden indicated that they tender out contract foodservices
        separately from other support services.376 By way of example, the table below shows
371 Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of
    concentrations between undertakings (‘Non-Horizontal Merger Guidelines’), OJ C 265/6, 18.10.2008.
372 Non-Horizontal Merger Guidelines, para. 93.
373 The support services provided by Fazer in Finland amounted to […] of its annual sales in Finland.
374 Non-Horizontal Merger Guidelines, para. 94.
375 See Notifying Party’s reply to RFI 9 of 18 December 2019, question 2.
376 Replies to Q8 – Questionnaire to Customers in Denmark, question 62; Replies to Q6 – Questionnaire to
    Customers in Finland, question 34; Replies to Q7 – Questionnaire to Customers in Norway, question 34;
    Replies to Q5 – Questionnaire to Customers in Sweden, questions 98, 100, 102, 104, 106 and 108.
                                                        63
 ---pagebreak---          the number of foodservice-only contracts and the number of multi-service contracts
         provided by Compass in the fiscal year 2017/2018.
    Table 18 - Compass food-only contracts and multi-service contracts in fiscal year
                                               2017/2018
                     Norway                 Sweden               Denmark              Finland
Segment       Food-      Multi-      Food-       Multi-    Food-     Multi-    Food-       Multi-
              only       service     only        service   only      service   only        service
              contracts  contracts   contracts   contracts contracts contracts contracts   contracts
Business &
              […]        […]         […]         […]       […]       […]       […]         […]
industry
Education     […]        […]         […]         […]       […]       […]       […]         […]
Healthcare
              […]        […]         […]         […]       […]       […]       […]         […]
& welfare
Defence       […]        […]         […]         […]       […]       […]       […]         […]
         Source: Form CO, Table 127.
7.2.2. Incentive to foreclose
(267) The incentive to foreclose rivals through bundling or tying depends on the degree to
         which this strategy is profitable. The Commission considers that the merged entity
         would have no incentive post-Transaction to favour any tied or bundled offer to the
         detriment of foodservices-only contracts in any of Denmark, Finland, Norway or
         Sweden. Indeed, the value of the support services part of multi-service contracts is
         small relative to the foodservices part and they are often only provided for the cus-
         tomer’s convenience rather than profitability reasons.377 The Parties have no reason
         to risk losing foodservices-only contracts by trying to link them with support ser-
         vices for such a small return. Second, the Parties have no incentive to tie or bundle
         contract foodservices with other support services, because customers have the power
         to design their tenders to achieve the best competitive outcome for them. If the
         merged entity insisted on tying or bundling support services to contract foodservices,
         in most cases, it would not fulfil the tender requirements and the customer would
         likely reject the merged entity from the tender process and choose among the large
         number of credible alternatives available.
7.2.3. Overall impact on competition
(268) The Commission considers that the Transaction is unlikely to have an overall nega-
         tive impact on competition in the markets for contract foodservices and other support
         services, as any bundling or tying strategy is unlikely to reduce the ability and incen-
377 Form CO, para. 870.
                                                        64
 ---pagebreak---        tives to compete of the significant competing providers that are active in the EEA.
       Customers will continue to have immediate access to competitive contract foodser-
       vices and other support services on a standalone basis. For example, there are more
       than 2 000 cleaning service suppliers in Sweden and 4 000 cleaning companies in
       Finland.378 Even if the customer did accept the tied or bundled products, the merged
       entity would still face competition from other firms with the same capacity to pro-
       vide multi-service contracts, such as ISS, Sodexo and Coor. Overall, the Commis-
       sion is of the view that the effects of any hypothetical tying or bundling strategy is
       unlikely to have a negative impact on prices and choice in any of Denmark, Finland,
       Norway or Sweden.
Conclusion
(269) In light of the above considerations and taking account of the results of the market
       investigation, the Commission concludes that the Transaction does not raise serious
       doubts as to its compatibility with the internal market with respect to conglomerate
       effects in Denmark, Finland, Norway and Sweden as the merged entity would have
       neither the ability, nor it is likely to have the incentive, to foreclose competitors
       through a bundling/tying strategy.
8.     CONCLUSION
(270) For the above reasons, the Commission has decided not to oppose the notified opera-
       tion and to declare it compatible with the internal market and with the EEA Agree-
       ment. This decision is adopted in application of Article 6(1)(b) of the Merger Regu-
       lation and Article 57 of the EEA Agreement.
                                                      For the Commission
                                                      (Signed)
                                                      Margrethe VESTAGER
                                                      Executive Vice-President
378 Form CO, para. 873.
                                                 65