CELEX: 32019M9205
Language: en
Date: 2019-06-27 00:00:00
Title: Commission Decision of 27/06/2019 declaring a concentration to be compatible with the common market (Case No COMP/M.9205 - IBM / RED HAT) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 27.6.2019
                                                                C(2019)5011 final
                                                                             PUBLIC VERSION
                                                                To the notifying party
Subject:            Case M.9205 – IBM / RED HAT
                    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 20 May 2019, the European Commission received notification of a proposed
          concentration pursuant to Article 4 of the Merger Regulation by which
          International Business Machines Corporation (“IBM” or “Notifying Party”, USA)
          intends to acquire sole control of Red Hat Inc. (“Red Hat”, USA) (the
          “Transaction”)3. IBM and Red Hat are collectively referred to as "Parties".
1    OJ L 24, 29.1.2004, p. 1 (the 'Merger Regulation'). With effect from 1 December 2009, the Treaty on
     the Functioning of the European Union ('TFEU') has introduced certain changes, such as the
     replacement of 'Community' by 'Union' and 'common market' by 'internal market'. The terminology of
     the TFEU will be used throughout this decision.
2    OJ L 1, 3.1.1994, p. 3 (the 'EEA Agreement').
3    Publication in the Official Journal of the European Union No C 185, 29.05.2019, p. 21.
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak--- 1.      THE PARTIES
(2)     IBM is a public company headquartered in Armonk, New York, USA. It is active
        worldwide in the development, production, and marketing of a wide variety of
        information technology (“IT”) solutions, namely enterprise IT software and
        systems (such as servers, storage systems, cloud, and cognitive offerings) and IT
        implementation services (such as business consulting and IT infrastructure
        services).
(3)     Red Hat is a public company headquartered in Raleigh, North Carolina, USA. It
        is a global provider of open-source software and support services, using a
        community-powered approach to develop and offer a wider range of open-source
        software solutions for enterprise customers, including in hybrid cloud
        environments.
2.      THE TRANSACTION
(4)     Under an agreement and plan of merger dated 28 October 2018 (the
        “Agreement”), IBM will acquire all of Red Hat’s issued and outstanding common
        shares for a total value of approximately USD 34 billion. Therefore, the
        Transaction consists of the acquisition of sole control by IBM over Red Hat
        within the meaning of Article 3(1)(b) of the Merger Regulation.
3.      EU DIMENSION
(5)     The Parties concerned have a combined aggregate world-wide turnover of more
        than EUR 5 000 million4 (IBM: EUR 67 392 million; Red Hat: EUR 2 531
        million). Each of them has an EU-wide turnover in excess of EUR 250 million
        (IBM: EUR […]; Red Hat: EUR […]), but they do not achieve more than two-
        thirds of their aggregate EU-wide turnover within one and the same Member
        State. The notified operation therefore has an EU dimension.
4.      RELEVANT MARKETS
4.1.    Introduction – approach to market definition
(6)     Red Hat and IBM are both active in IT software for enterprise customers across
        different layers of the IT stack.
4   Turnover calculated in accordance with Article 5 of the Merger Regulation.
                                                        2
 ---pagebreak--- (7)      The Parties’ activities overlap in a number of plausible markets or market
         segments at nearly all levels of the IT software stack. The Transaction also creates
         a large number of non-horizontal relationships.
(8)      In determining the relevant markets, where possible, the Notifying Party provided
         its views on the product and geographic market definitions on the basis of
         previous Commission decisions. The Notifying Party also relies on the
         segmentation of the market intelligence companies IDC and/or Gartner,5 which
         the Notifying Party submits has been used in previous Commission decisions, in
         order to identify the narrowest possible product markets on which the Parties are
         active.
(9)      For the purpose of the present decision, the Commission carried out its
         competitive assessment on the basis of the narrowest possible product market
         segments identified by the Notifying Party in accordance with IDC and Gartner
         segmentations for which market share data is available and which were affected
         on the basis of 2018 market shares data.6
(10)     In the following Sections, the Commission carries out an assessment on the basis
         of IDC's primary markets for (i) Application Development and Deployment
         Software (Section 4.2) and (ii) System Infrastructure Software (Section 4.3).
(11)     IDC sub-segments the primary market for Application Development and
         Deployment Software into the secondary markets for (i) Application Platform
         Software,7 (ii) Integration and Orchestration,8 (iii) Application Development,9 (iv)
         Data Management.10
5   IDC and Gartner classifications are not directly comparable with each other. This decision refers to the
    segments as indicated by the Notifying Party in the Form CO.
6   In the present decision, the Commission only refers to market segments which are horizontally or non-
    horizontally affected based on 2018 market shares data. On that basis, the following possible segments
    are not discussed in this decision: (i) Storage Resource Management, (ii) ITOM Mainframe Tools, (iii)
    Performance Analysis: Artificial Intelligence for Operations, IT Infrastructure Monitoring and Other
    Monitoring Tools.
7   Within the secondary market for Application Platform Software, IDC identifies the functional markets
    for (i) Deployment-Centric Application Platforms (Section 4.2.1) and (ii) Transaction Processing
    Monitors (Section 4.2.2).
                                                          3
 ---pagebreak--- (12)     IDC sub-segments the primary market for System Infrastructure Software into the
         secondary markets for (i) Storage,11 (ii) Physical and Virtual Computing
         Software,12 (iii) Network13 and (iv) Operating Systems14.
(13)     When relevant, the Commission also relied on the Gartner segmentation.15
4.2.     Application Development and Deployment Software (Middleware)
(14)     Middleware is a large and diverse category of software that is used for building
         and operating large enterprise software applications. Some middleware is
         provided as prebuilt libraries or components that developers incorporate into
         applications and components. Middleware simplifies and accelerates development
         by reducing the need to recreate common functionality required by many
         applications. Middleware includes several products that could constitute sub-
         segments such as deployment-centric application platforms, business process
         management suites, integration software, event-driven middleware, business rules
         management systems, transaction processing monitors, managed file transfer
         software, non-relational database management systems, etc.
(15)     In Oracle/Sun Microsystems16, Oracle/BEA17, and IBM/ILOG18 the Commission
         considered whether all types of middleware belong to a single product market or
         whether it would be necessary to further sub-segment the possible market
         according to the end use of the product, but ultimately left the precise product
         market definition open in Oracle/Sun Microsystems and Oracle/BEA. In those
         decisions, the Commission also relied on IDC and Gartner segmentation in order
         to identify the possible affected markets.
8   Within the secondary market for Integration and Orchestration, IDC identifies the functional markets
    for (i) Integration Software and a sub-market for API Management (Section 4.2.4), (ii) Event-Driven
    Middleware (Section 4.2.5), and (iii) Managed File Transfer (Section 4.2.6).
9   Within the secondary market for Application Development, IDC identifies the functional market for
    Business Rules Management Systems (Section 4.2.7).
10  Within the secondary market for Data Managment, IDC identifies the functional markets for Non-
    Relational Database Management (Section 4.2.8).
11  Within the secondary market for Storage, IDC identifies the functional market for Software-Defined
    Storage Controller (Section 4.3.1).
12  Within the secondary market for Physical and Virtual Computing Software, IDC identifies the
    functional market for Software-Defined Storage Compute and the sub-market for Container
    Infrastructure Software (Section 4.3.2).
13  Within the secondary market for Network, IDC identifies the functional markets for (i) Network
    Management Software (Section 4.3.3).
14  Within the secondary market for Operating Systems, IDC identifies the functional markets for (i)
    Server Operating Systems (paid and unpaid) and (ii) Server Operating Systems (paid only) (Section
    4.3.10).
15  Gartner identifies the following macromarkets which are referred to in this decision: (i) Storage
    Management and its sub-segment Storage Management Mainframe Software (Section 4.3.4); (ii)
    Security and its sub-segments Security Information and Events Management (Section 4.3.5), Security
    Testing (Section 4.3.6), Web Access Management (Section 4.3.7); (iii) IT Operations and its sub-
    segment Other ITOM (Section 4.3.8); (iv) Application Development and its sub-segment AD
    Mainframe Tools (Section 4.3.9). These Gartner macromarkets would broadly fall within IDC’s
    primary market for System Infrastructure Software.
16  Commission decision of 30 July 2009 in case M.5529 Oracle/Sun Microsystems, recitals 763-765.
17  Commission decision of 26 March 2008 in case M.5080 Oracle/BEA, paragraphs 9-12.
18  Commission decision of 6 October 2008 in case M.5317 IBM/ILOG, paragraph 20.
                                                       4
 ---pagebreak--- (16)     In Oracle/Sun, the Commission concluded that the relevant geographic market for
         middleware is worldwide.
4.2.1. Deployment-Centric Application Platforms
(17)     Deployment-centric application platforms (“DCAPs”) host applications and
         provide them with common services that allow the application to operate
         effectively. DCAPs include application server software platforms (referred to as
         “application servers” or “app servers”) that provide a common framework for
         applications to provide services that would need to be duplicated across multiple
         applications, manage the application runtime environment consistently and at
         scale, and implement complex functions (e.g. the management of database
         connections) with high quality and resiliency.19
(18)     The Parties’ products are: (i) IBM’s WebSphere Application Server (“WAS”)20
         and (ii) Red Hat’s JBoss Enterprise Application Platform (“JBoss”), and JBoss
         Web Server. Both IBM’s WAS and Red Hat’s JBoss products are Java Enterprise
         Edition (“Java EE”) compliant products. Java EE extends Java to include a
         defined list of capabilities that have proven valuable across enterprise
         applications. These capabilities are typically called Java EE Web Profile and Java
         EE Full Profile.21
(19)     Traditional application servers are "heavyweight" and are designed to support
         large monolithic application architecture. Legacy applications are typically
         written as monoliths (i.e. all features of the application are contained within that
         application).
(20)     Applications are increasingly built on the principles of integrating many small
         and dispersed components (a microservices architecture) instead of having to
         integrate each new application into an existing, large monolithic architecture.
         These principles allow application components to evolve independently and
         rapidly, to scale when workloads are unpredictable, and to be reused in a
         predictable manner. DCAPs supporting these applications have different
         requirements compared to traditional middleware: they must be lightweight for
         rapid delivery and startup, use different mechanisms to ensure resilience, focus on
         integration of dispersed applications rather than on heavy application servers, and
         address different security risks.
(21)     To capture the distinction between architectural needs that process large amounts
         of data or perform complex processes across multiple systems, IT systems are
19  Form CO, paragraphs 314-316.
20  There are currently three main editions of WAS, with each edition providing progressively greater
    functionality: (i) WAS Liberty Core; (ii) WAS (Base), (iii) WAS ND. WAS (Base) and WAS ND are
    suited to customers with legacy, on-premises workloads. WAS Liberty Core—which includes only the
    features of Java EE required by web applications—is offered to customers with purely cloud-based
    workloads (where a minimal resource footprint is crucial) and for applications that do not require
    clustering or the same degree of functionality as those supported by traditional WAS.
21 Java EE Web Profile includes security, connections to web services, and transaction integrity, among
    other things; Java EE Full Platform includes all of Java EE Web Profile and adds features e.g. Java
    batch (for data processing), JavaMail (for sending and receiving email), and Java Message Queues (for
    enabling communication between components of a distributed application).
                                                          5
 ---pagebreak---          sometimes placed in the two following categories: (i) system of record and (ii)
         system of engagement.
                Systems of record are IT systems that focus on managing vast quantities
                 of data. These systems typically interact with databases and manage high
                 volumes of transactions. They have capabilities (also referred to as “back-
                 end capabilities”) focusing on the storing and processing of information.22
                System of engagement: systems of engagement are IT systems that focus
                 on interacting with users. Systems of engagement are typically immediate,
                 open, and accessible ad hoc—e.g. software delivered through the cloud
                 and on mobile devices. They have capabilities that focus on interfaces
                 engaging with users (also referred to as “front-end capabilities”), which
                 typically do not require the same degree of data and transactional integrity
                 as systems of record.23
(22)     On that basis, the Notifying Party has identified three use cases which DCAPs can
         support: (i) back-end workloads which require extensive capabilities (such as high
         availability and cluster management, legacy integration, performance and
         optimization, standards support), (ii) back-end workloads which do not require
         these capabilities and (iii) front-end workloads.
4.2.1.1.         Commission precedents
(23)     In Oracle/Sun24 and Oracle/BEA25, the Commission considered a possible
         relevant product market for all application servers without further segmenting
         according to programming language, operating system compatibility, or
         proprietary/open source, although it ultimately left the product market definition
         open.
(24)     In Oracle/Sun26, the Commission concluded that the relevant geographic market
         for middleware and sub-segments thereof is worldwide.
4.2.1.2.         Notifying Party’s views
(25)     The Notifying Party submits that the relevant product market for DCAPs should
         encompass all platforms (i.e. application server software platforms as well as
         deployment-orientated platforms operating in public and private clouds) that host
         applications, provide them with common services that would otherwise need to be
22  Mainframes or other larger servers, coupled with databases like Oracle or Db2, application servers like
    WebLogic, WAS, or transaction processing monitors like CICS, are typically systems of record. They
    are used, for example, to constantly and accurately process payments and reservations against
    databases with minimized risk of error or failure.
23  Social media (e.g. Facebook), online collaboration (e.g. Google Docs), and messaging applications
    (e.g. WhatsApp) are examples of systems of engagement.
24  Commission decision of 30 July 2009 in case M.5529 Oracle/Sun Microsystems, recitals 761-765.
25  Commission decision of 26 March 2008 in case M.5080 Oracle/BEA, paragraphs 9-12 and paragraph
    34
26  Commission decision of 30 July 2009 in case M.5529 Oracle/Sun Microsystems, paragraphs 776-769.
                                                        6
 ---pagebreak---         duplicated across multiple applications, and manage the application runtime
        environment consistently and at scale.27
(26)    The Notifying Party argues that DCAPs running monolithic applications and
        DCAPs running cloud-native microservices belong to the same product market.
        According to the Notifying Party, there is a continuum of DCAPs spanning from
        those suitable for heavyweight workloads requiring sophisticated back-end DCAP
        capabilities in addition to those offered by the Java EE specification to those best-
        suited for cloud-native applications and front-end workloads, depending on the
        functionalities of each DCAP. It is therefore difficult to establish clear-cut
        categories in which to fit each DCAP.28
(27)    Furthermore, in the Notifying Party’s view, DCAPs vendors have no way of
        discriminating between customers according to use case, since they have no
        visibility over how their DCAPs are ultimately used. Therefore, the Notifying
        Party submits that pursuant to the Market Definition Notice,29 there are no
        grounds on which to define a separate product market for DCAPs running
        monolithic or microservices workloads, as the overlap between these two
        (hypothetical) groups of customers is necessarily fluid.30
(28)    The Notifying Party submits that, in line with the Commission decisions listed at
        paragraphs (23) and (24), the relevant geographic market for DCAPs is global.
        Nevertheless, the Notifying Party also provided EEA-based market shares for
        completeness.31
4.2.1.3.          Commission’s assessment
(29)    The Commission considers that the possible market for DCAPs does not need to
        be further sub-segmented based on programming language, operating system
        compatibility or use cases / types of applications (e.g. monolithic applications,
        applications built as a system of microservices) for the following reasons.
(30)    First, the results of the market investigation indicated that further segmentation by
        use cases to which DCAPs can cater is not warranted. A competitor expressed the
        view that customers do not distinguish between back-end workloads and front-
        end workloads but “in general customers are looking for an application server
        platform that supports the Java EE APIs and that is generally applicable to the
        wide range of workloads found typically in a large organisation”.32 Another
        competitor explained that customers are primarily interested in the outcome based
        on their application needs and “the technical requirements can be met with many
        application server and architectural options”33. Customers responding to the
27  See Form CO, paragraph 331.
28  See Form CO, paragraph 332.
29  Commission Notice on the definition of relevant market for the purposes of Community competition
    law [1997] OJ C372/5, paragraph 43.
30  See Form CO, paragraph 332.
31  See Form CO, paragraph 337.
32  See replies to Questionnaire Q1 to competitors, question 14.1.
33  See replies to Questionnaire Q1 to competitors, question 15.1.
                                                        7
 ---pagebreak---         market investigation confirm that their DCAPs choice depends on the features
        required by the various applications and technology decisions.34
(31)    Therefore, the Commission considers that, from the demand side, customers
        employ different types of DCAPs which cover a range of use cases and
        functionalities.
(32)    From the supply side, competitors indicated that DCAPs can support a range of
        different use cases, without making a clear-cut distinction between their
        functionalities and suitability for specific use cases.35 These DCAPs include Java
        EE, other platforms/programming languages, cloud-native application platforms
        offered by CSPs, serverless programming etc. 36
(33)    Furthermore, with the emergence of new technologies such as Container
        Infrastructure Software (see Section 4.3.2), any distinction between use cases
        (back-end and front-end) becomes even more blurred. A competitor explained
        that “the more modern approach to this class of problems (“how do I run this
        application”) is to use containers, which wrap up the language together with the
        application into a container. In that world, the distinctions of front and back end,
        and compatibility with legacy apps, are very different”37.
(34)    In addition, the market investigation results did not sugest that DCAPs vendors
        can discriminate between customers using DCAPs for different use cases.38
(35)    Second, a majority of customers consider that they can switch their traditional
        (legacy and heavy-weight) application server either to other heavy-weight
        application servers or to applications built as a system of microservices.39
        Customers responding to the market investigation switched away from WAS to
        other Java EE DCAPs (e.g. JBoss, Weblogic, Tomcat, Jetty, Pivotal tc Server
        etc.), or to other platforms e.g. Springboot or .NET. A number of customers
        indicated that they switched to JBoss mainly due to cost considerations (some
        mention in addition that they moved to more light-weight options). Even if
        customers acknowledge that switching entails time, substantial costs and
        engineering efforts, a large number of customers which responded to the market
        investigation have migrated at least some existing applications. A small number
        of customers explained that switching is only likely to happen as part of a wider
        IT architecture transformations.40
(36)    In light of the above, the Commission considers that the possible market for
        DCAPs does not need to be further sub-segmented based on programming
        language, operating system compatibility or use cases / types of applications (e.g.
        monolithic applications, applications built as a system of microservices).
        However, as regards free and unsupported open source DCAPs, the Commission
        considers that demand-side substitution is most likely too limited to exercise a
34 See replies to Questionnaire Q2 to customers, question 5.
35 See replies to Questionnaire Q1 to competitors, questions 7, 8, 9, 10, 11, 12.
36 Ibid.
37 See replies to Questionnaire Q1 to competitors, question 14.1.
38 See replies to Questionnaire Q1 to competitors, question 14.
39 See replies to Questionnaire Q1 to customers, question 10.
40 See replies to Questionnaire Q1 to customers, question 10.
                                                       8
 ---pagebreak---         competitive constraint on DCAPs with commercial support or proprietary DCAPs
        for the following reasons.
(37)    First, customers responding to the market investigation consider free and
        unsupported open source DCAPs as credible alternatives to proprietary or
        supported open-source DCAPs only for low-risk use cases.41 A small number of
        customers explained that for low-risk use cases, they can self-support open-source
        software, which requires developing in-house capabilities and relying on the open
        source community for updates, bug fixes etc. According to some customers, this
        is an expensive option as compared to procuring commercial support.
(38)    Second, for mission-critical applications the majority of customers using open
        source DCAPs procure commercial support (directly from the vendor or from
        third parties specialised in providing commercial support for open source
        software).42 A number of customers explained that internal companies’ policies
        and IT startegies would not allow the use of unsupported DCAPs.43
(39)    Therefore, the Commission does not consider that free and unsupported open
        source DCAPs belong to the same product market as proprietary or commercially
        supported DCAPs.
(40)    The Commission considers that for the purpose of the present decision, the exact
        product market definition can be left open as the Transaction does not raise
        serious doubts as to its compatibility with the internal market under any plausible
        product market definition.
(41)    In line with the Commission decisions listed at paragraph (23), the Commission
        considers that the relevant geographic market for DCAPs is global. Nevertheless,
        for completeness, the Commission carried out the competitive assessment in
        Section 5.2.2 also at the EEA-wide level.
4.2.2. Transaction Processing Monitors
(42)    A Transaction Processing Monitor (“TPM”) is a control program that ensures
        transactions are completed successfully. It primarily handles resource sharing
        (also referred to as load balancing), as well as ensures optimal use of resources by
        applications.
(43)    IBM offers the following TPM products: (i) IBM CICS is IBM’s main TPM
        product44, (ii) IBM TXSeries, (iii) IBM z/OS Connect Enterprise Edition, (iv)
        IBM z/Transaction Processing Facility, (v) IMS Transaction Manager/Database
        Manager. Red Hat is not active in TPMs.
41  See replies to Questionnaire Q2 to customers, question 15.
42  See replies to Questionnaire Q2 to customers, question 16.
43 See replies to Questionnaire Q2 to customers, question 17.1.
44 It is a set of enterprise application servers with transactional performance and connectivity for
    mission-critical transactions.
                                                        9
 ---pagebreak--- 4.2.2.1.         Commission precedents
(44)    In Dell/EMC45 and Oracle/BEA46, it referred to TPMs as a possible sub-segment
        of the overall middleware market. In Oracle/Sun47, the Commission identified
        TPMs as a product within application server middleware, in accordance with
        IDC’s classification although it ultimately left the market definition open.
(45)    In Oracle/Sun48, the Commission concluded that the relevant geographic market
        for middleware and sub-segments thereof is worldwide.
4.2.2.2.         Notifying Party's views
(46)    The Notifying Party submits that, in accordance with IDC’s taxonomy, TPMs
        could be viewed as a separate relevant product market. The IDC taxonomy
        identifies a functional market TPMs, within the secondary market Application
        Platforms and the primary market Application Development and Deployment
        Software. IDC does not segment this functional market further.49
(47)    In the Notifying Party’s view, TPMs have a distinct functionality within
        enterprise middleware as they mediate and optimize the use of resources (e.g.
        databases) by applications, balance load of dynamic processes, and monitor and
        fix processes between the applications and the databases.50 According to the
        Notifying Party, the Transaction does not raise any concerns on any of the
        possible segmentations, and the precise product market definition can be left
        open.51
(48)    The Notifying Party submits that, in line with the Commission decisions listed at
        paragraphs (44)-(45), the relevant geographic market for TPMs is global.
        Nevertheless, the Notifying Party also provided EEA-based market shares for
        completeness.52
4.2.2.3.         Commission’s assessment
(49)    In line with Dell/EMC, Oracle/BEA and Oracle/Sun, a possible product market
        for TPMs can be identified. Nevertheless, the Commission considers that for the
        purpose of the present decision, the exact product market definition can be left
        open as the Transaction does not raise serious doubts as to its compatibility with
        the internal market under the narrowest possible product market definition
        identified by IDC for which market shares data is available.
(50)    In line with the Commission decisions listed at paragraphs (44)-(45), the
        Commission considers that the relevant geographic market for TPMs is global.
45  Commission decision of 25 January 2016 in case M.7861 Dell/EMC, paragraph 55.
46  Commission decision of 26 March 2008 in case M.5080 Oracle/BEA, paragraph 8.
47  Commission decision of 30 July 2009 in case M.5529 Oracle/Sun Microsystems, recital 777.
48  Commission decision of 30 July 2009 in case M.5529 Oracle/Sun Microsystems, recitals 776-769.
49  See Form CO, paragraph 730.
50  According to the Notifying Party, TPMs are typically defined by most market analysts (including IDC
    and Gartner) as mainframe-based legacy application runtime environments that focus primarily on
    supporting “pre-web” era programming languages (such as COBOL, C, C++, PL/I, and Assembler).
51  See Form CO, paragraphs 729-733.
52  See Form CO, paragraph 734.
                                                      10
 ---pagebreak---         Nevertheless, for completeness, the Commission carried out the competitive
        assessment in Section 5.3.7.3 also at the EEA-wide level.
4.2.3. Business Process Management Suites
(51)    Business process management (“BPM”) Suites provide intuitive, point-and-click
        environments for non-programmers to model business processes and develop and
        run simple, process-driven applications based on these models.
(52)    In the BPM Suite segment, IBM offers IBM Business Process Manager (“IBM
        BPM”), including three versions – i.e. BPM Express, BPM, and BPM on Cloud.
        Red Hat offers Red Hat Process Automation Manager (formerly Red Hat JBoss
        BPM Suite).
4.2.3.1.         Commission precedents
(53)    In IBM/ILOG53 and Oracle/Sun54 the Commission identified a possible relevant
        market for “process automation middleware” (which corresponds to model-driven
        application platforms today).55 The Commission adopted this segment as the
        relevant market in IBM/ILOG, but left the product market definition open in
        Oracle/Sun.
(54)    In Oracle/Sun56, the Commission concluded that the relevant geographic market
        for middleware and sub-segments thereof is worldwide.
4.2.3.2.         Notifying Party's views
(55)    The Notifying Party refers to the Commission decisions listed at paragraph (53)
        and to Gartner's segment for BMP Suites.
(56)    The Notifying Party submits that the term “process automation middleware”, as
        used in the IBM/ILOG and Oracle/Sun Microsystems decisions, refers to a former
        IDC segment that has not been included in the IDC Worldwide Software
        Taxonomy since 2013. The closest segment in IDC’s 2018 taxonomy is the
        “Model-Driven Application Platforms” (“MDAP”) functional market, which
        however includes both process-centric and data-centric platforms. As the Parties’
        products are both process-centric platforms, and as data-centric platforms
        typically offer a more limited range of functionality for the design, modelling, and
        optimization of business processes than process-centric platforms, the Notifying
        Party submits that the Gartner segment Business Process Management Suites may
        be an appropriate representation of the relevant product market on a conservative
        basis.
53  Commission decision of 6 October 2008 in case M.5317 IBM/ILOG, paragraphs 19-20.
54  Commission decision of 30 July 2009, Case M.5529 Oracle/Sun Microsystems, recitals 760-765.
55 Gartner’s taxonomy identifies a subsegment for Business Process Management Suites, which is part of
    the Application Infrastructure and Middleware macromarket. It corresponds to but is narrower than
    IDC’s functional market for Model-Driven Application Platforms within the secondary market for
    Application Platforms.
56 Commission decision of 30 July 2009 in case M.5529 Oracle/Sun Microsystems, paragraphs 776-769.
                                                    11
 ---pagebreak--- (57)    According to the Notifying Party, the Transaction does not raise any concerns on
        any of the possible segmentations, and the precise product market definition can
        be left open.57
(58)    The Notifying Party submits that, in line with the Commission decisions listed at
        paragraph (54), the relevant geographic market for BPM Suites is global.
        Nevertheless, the Notifying Party also provided EEA-based market shares for
        completeness.58
4.2.3.3.          Commission’s assessment
(59)    In line with IBM/ILOG and Oracle/Sun, the possible product market for BMP
        Suites can be identified. Nevertheless,the Commission considers that for the
        purpose of the present decision, the exact product market definition can be left
        open as the Transaction does not raise serious doubts as to its compatibility with
        the internal market under the narrowest product market definition identified by
        Gartner for which market shares data is available and which leads to the highest
        combined market shares of the Parties.
(60)    In line with the Commission decisions listed at paragraph (54), the Commission
        considers that the relevant geographic market for BMP Suites is global.
        Nevertheless, for completeness, the Commission carried out the competitive
        assessment in Section 5.2.3 also at the EEA-wide level.
4.2.4. Integration Software
(61)    Integration Software is server software used to connect two or more separate
        applications, to coordinate requests from an application’s front end and back-end
        services, and to connect applications to databases. The Parties’ activities overlap
        in Integration Software overall, as well as in two types of Integration Software:
        API management software59 and integration platforms60.
(62)    As regards API Management Software, IBM offers IBM API Connect, whereas
        Red Hat offers 3scale API Management. As regards integration platforms, IBM
        offers IBM App Connect and Red Hat offers Fuse and Fuse Online.
4.2.4.1.          Commission precedents
(63)    In Oracle/BEA61, the Commission identified application integration software as a
        possible relevant market, although it ultimately left the market definition open.
(64)    In Oracle/Sun, the Commission concluded that the relevant geographic market for
        application integration software is worldwide.62 Similarly, in Oracle/Sun, the
57  See Form CO, paragraphs 421-422.
58  See Form CO, paragraph 427.
59  APIs may be used by companies to deliver their data and services to customers. In this context,
    enterprises release public APIs that enable other applications to incorporate their services or have
    access to their data.
60  Integration platforms connect different applications, systems, and data in a single platform.
61  Commission decision of 26 March 2008 in case M.5080 Oracle/BEA, paragraph 12.
62  Commission decision of 30 July 2009 in case M.5529 Oracle/Sun Microsystems, recital 15.
                                                         12
 ---pagebreak---          Commission concluded that the relevant geographic market for middleware and
         sub-segments thereof is worldwide.63
4.2.4.2.          Notifying Party's views
(65)     The Notifying Party refers to IDC’s segment for Integration Software which is
         further sub-segmented into (i) API Management Software, (ii) Integration
         Platforms, and (iii) Connectivity Adapters And Plug-in Software. The Notifying
         Party submits that the relevant product market should encompass all Integration
         Software products without distinguishing between the three categories of
         products. In the Notifying Party’s view, all these products perform the same
         function of enabling communication and the exchange of services and data
         between applications in real time.64 Nevertheless, the Notifying Party provided
         market shares data both for Integration Software and the narrowest possible sub-
         segments as per IDC where both Parties are active, i.e. (i) API Management
         Software and (ii) Integration Platforms.65 Only the overall Integration Software
         segment and its API Management Software sub-segment are affected.
(66)     The Notifying Party submits that, in line with the Commission decisions listed at
         paragraphs (63)-(64), the relevant geographic market for Integration Software
         (and any possible sub-segment thereof) is global. Nevertheless, the Notifying
         Party also provided EEA-based market shares for completeness.66
4.2.4.3.          Commission’s assessment
(67)     In line with Oracle/BEA and IDC segmentation, the possible product market for
         Integration Software and its sub-segment for API Management Software can be
         identified. Nevertheless, the Commission considers that for the purpose of the
         present decision, the exact product market definition can be left open as the
         Transaction does not raise serious doubts as to its compatibility with the internal
         market under the narrowest possible product market definition identified by IDC
         for which market shares data is available and which leads to the highest combined
         market shares of the Parties.
(68)     In line with the Commission decisions listed at paragraphs (63)-(64), the
         Commission considers that the relevant geographic market for Integration
         Software (and any possible sub-segment thereof) is global. Nevertheless, for
         completeness, the Commission carried out the competitive assessment in Section
         5.2.4 also at the EEA-wide level.
4.2.5. Event-Driven Middleware
(69)     Event-Driven Middleware is software that enables program-to-program (or
         component-to-component) communication—i.e. it facilitates the transfer of
63  Commission decision of 30 July 2009 in case M.5529 Oracle/Sun Microsystems, recital 769.
64  According to the Notifying Party, Integration platforms typically incorporate connectivity adaptors and
    plug-in software as a feature: these serve to translate data from one protocol or format to another.
    Integration platforms may also include API management functionality, such as the ability to build
    APIs and publish APIs to internal development teams and developer communities products that
    integrate disparate applications and information systems.
65 See Form CO, paragraphs 477-482.
66 See Form CO, paragraph 483.
                                                        13
 ---pagebreak---         information between disparate applications and components across multiple
        hardware and software platforms that would not otherwise be able to
        communicate.
(70)    IBM offers the following products that fall into Event-Driven Middleware: IBM
        MQ, IBM Event Streams, and Cloud Functions. Red Hat offers Red Hat AMQ
        (including Red Hat AMQ Streams).
4.2.5.1.         Commission precedents
(71)    There is no Commission precedent with regard to Even-Driven Middleware.
(72)    In Oracle/Sun67, the Commission concluded that the relevant geographic market
        for middleware and sub-segments thereof is worldwide.
4.2.5.2.         Notifying Party's views
(73)    The Notifying Party refers to IDC’s segment for Event-Driven Middleware which
        is further sub-segmented into (i) Message-Oriented Middleware, (ii) Streaming
        Analytics Software, and (iii) Functions Software.68 IDC does not provide market
        shares for these sub-segments.
(74)    The Notifying Party submits that the relevant product market should encompass
        all Event-Driven Middleware without distinguishing between the three categories
        of products. In the Notifying Party’s view, all these products perform the same
        function: monitoring and detecting events and transmitting the events to relevant
        applications and systems to execute a response.
(75)    According to the Notifying Party, while certain software are more adapted to the
        transmission of structured messages rather than real-time events, other software
        combine both capabilities in one product. For example, Red Hat AMQ is
        equipped to handle traditional messages (including through a centralized message
        hub) and to carry out real-time event streaming based on Apache Kafka
        technology. The Notifying Party explains that while certain software may focus
        on the transmission of events rather than their processing and analysis, other
        products incorporate all these functions. For example, AWS Kinesis provides
        customers with the ability to capture continuous real-time data (such as video
        streams from security cameras), and to process and analyze these volumes of data
        (for example, to solve traffic problems, prevent crime, or dispatch emergency
        responders). 69
(76)    The Notifying Party argues that there is also significant substitution of supply, as
        the main providers of Event-Driven Middleware have all developed offerings
        suitable for transmitting traditional messages and/or real-time events and products
        with processing and analytics capabilities.
67  Commission decision of 30 July 2009 in case M.5529 Oracle/Sun Microsystems, recital 769.
68  The Notifying Party submits that the IDC segmentation should be preferred to Gartner segmentation as
    Gartner’s “Message-Oriented Middleware” corresponds to IDC’s overall “Event-Driven Middleware”,
    without accounting for streaming analytics.
69 See Form CO, paragraphs 500-503.
                                                     14
 ---pagebreak--- (77)    The Notifying Party submits that, in line with the Commission decision listed at
        paragraph (72), the relevant geographic market for Even-Driven Middleware is
        global. Nevertheless, the Notifying Party also provided EEA-based market shares
        for completeness.70
4.2.5.3.        Commission’s assessment
(78)    The Commission considers that in line with IDC’s segmentation, a possible
        product market for Event-Driven Middleware can be identified. Based on the
        Notifying Party’s submission, there are many offerings which can support and
        combine capabilities for messaging, streaming analytics and functions software.
        Therefore, the Commission does not consider that it would be justified to further
        sub-segment the possible market for Event-Driven Middleware.
(79)    Nevetheless, the Commission considers that for the purpose of the present
        decision the product market definition can be left open as the Transaction does
        not raise serious doubts as to its compatibility with the internal market regardless
        of whether there is an overall market for Event-Driven Middleware or whether
        there are separate markets for different types of Event-Driven Middleware.
(80)    In line with the Commission decisions listed at paragraph (72), the Commission
        considers that the relevant geographic market for Event-Driven Middleware is
        global. Nevertheless, for completeness, the Commission carried out the
        competitive assessment in Section 5.2.5 also at the EEA-wide level.
4.2.6. Managed File Transfer Software
(81)    Managed File Transfer Software enables enterprises to transfer files securely and
        at high speeds over a network, such as the Internet. Managed File Transfer
        software typically offers a higher-level of security and/or convenience compared
        to other file transfer options, such as e-mail or external storage devices. They may
        include additional features such as reporting (i.e. notification of successful file
        transfers), automation of file transfer-related activities and auditability.
(82)    IBM offers the following solutions: IBM Connect:Direct, IBM Aspera, IBM File
        Gateway, IBM Supply Chain Business Network File Transfer Service, and IBM
        WebSphere MQ. Each offering provides specific capabilities or deployment
        models targeting a comprehensive range of use cases. Red Hat is not active in
        Managed File Transfer Software.
4.2.6.1.        Commission precedents
(83)    There is no Commission precedent with regard to Managed File Transfer
        Software.
(84)    In Oracle/Sun71, the Commission concluded that the relevant geographic market
        for middleware and sub-segments thereof is worldwide.
70  See Form CO, paragraph 504.
71  Commission decision of 30 July 2009 in case M.5529 Oracle/Sun Microsystems, recital 769.
                                                    15
 ---pagebreak--- 4.2.6.2.         Notifying Party's views
(85)    The Notifying Party submits that Managed File Transfer Software (in line with
        IDC’s taxonomy) constitutes a separate relevant product market. 72 The IDC
        taxonomy identifies the functional market Managed File Transfer Software within
        the secondary market for Integration and Orchestration Software and the primary
        market Application Development and Deployment Software. IDC does not
        segment this functional market further.
(86)    The Notifying Party submits that, in line with the Commission decision listed at
        paragraph (84), the relevant geographic market for Managed File Transfer
        Software is global. Nevertheless, the Notifying Party also provided EEA-based
        market shares for completeness.73
4.2.6.3.         Commission’s assessment
(87)    The Commission considers that in line with IDC’s segmentation, a possible
        product market for Managed File Transfer Software can be identified.
        Nevertheless, the Commission considers that for the purpose of the present
        decision, the exact product market definition can be left open as the Transaction
        does not raise serious doubts as to its compatibility with the internal market under
        the narrowest product market definition identified by IDC for which market
        shares data is available and which leads to the highest market shares of the
        Parties.
(88)    In line with the Commission decisions listed at paragraph (84), the Commission
        considers that the relevant geographic market for Managed File Transfer Software
        is global. Nevertheless, for completeness, the Commission carried out the
        competitive assessment in Section 5.3.7.3 also at the EEA-wide level.
4.2.7. Business Rules Management Systems
(89)    Business rules management systems (“BRMS”) enable business managers to
        define business rules in a familiar language and manage them in a central
        repository. Business applications can then be programmed to draw on these rules.
        This eliminates the need to modify the source code of individual applications each
        time rules are implemented or updated.
(90)    IBM offers IBM Operational Decision Manager (“ODM”) in this market segment,
        whereas Red Hat offers Red Hat Decision Manager (formerly Red Hat JBoss
        BRMS).
4.2.7.1.         Commission precedents
(91)    In IBM/ILOG74, the Commission identified BRMS as a relevant market.
(92)    In Oracle/Sun, the Commission concluded that the relevant geographic market for
        middleware and sub-segments thereof is worldwide. Similarly, in IBM/ILOG, the
72  See Form CO, paragraphs 741-745.
73  See Form CO, paragraph 746.
74 Commission decision of 6 October 2008 in case M.5317 IBM/ILOG, paragraphs 17 and 20.
                                                   16
 ---pagebreak---         Commission concluded that the relevant geographic market for BRMS is
        worldwide.75
4.2.7.2.        Notifying Party's views
(93)    The Notifying Party submits that relevant product market should be defined as the
        market for BRMS, as per IDC’s taxonomy. In the Notifying Party's view, BRMS
        form a separate relevant product market to BPM Suites (see Section 4.2.3). The
        Notifying Party submits that BPM Suites and BRMS products are often sourced
        independently of each other, and there is robust demand for standalone BRMS
        software.76
(94)    The Notifying Party submits that, in line with the Commission decisions listed at
        paragraphs (91)-(92), the relevant geographic market for BRMS is global.
        Nevertheless, the Notifying Party also provided EEA-based market shares for
        completeness.77
4.2.7.3.        Commission’s assessment
(95)    In line with IBM/ILOG, the product market for BRMS can be identified.
        Nevertheless, the Commission considers that for the purpose of the present
        decision, the exact product market definition can be left open as the Transaction
        does not raise serious doubts as to its compatibility with the internal market under
        the narrowest possible product market definition for which market shares data is
        available and which leads to the highest combined market shares of the Parties.
(96)    In line with the Commission decisions listed at paragraphs (91)-(92), the
        Commission considers that the relevant geographic market for BRMS is global.
        Nevertheless, for completeness, the Commission carried out the competitive
        assessment in Section 5.2.6 also at the EEA-wide level.
4.2.8. Non-Relational Database Management Systems
(97)    According to the Notifying Party, most databases systems today are relational
        databases that store data in separate tables, instead of placing all data in one large
        table, and define relationships between these tables. Non-relational database
        management systems ("DBMS") refer to a residual category of database systems
        which do not use this system. Non-relational DBMS differ from relational DBMS
        in programming language and the structure used to organize the data.
(98)    IBM offers a non-relational database management system (“DBMS”), called
        Information Management System. Red Hat is not active in non-relational database
        management systems.
75  Commission decision of 6 October 2008 in case M.5317 IBM/ILOG, paragraph 23.
76  According to the Notifying Party, this is evidenced by the fact that the IDC functional market for
    BRMS, which only encompasses standalone BRMS products, has an estimated size of approximately
    USD […] for 2017. See Form CO, paragraphs 526-532.
77 Form CO, paragraph 533.
                                                     17
 ---pagebreak--- 4.2.8.1.        Commission precedents
(99)    In IBM/Informix78, the Commission considered the database market as a whole
        (without segmentation by relational and non-relational databases), and also
        considered possible segmentations by “legacy” and distributed environments,
        operative system and customer requirements, but ultimately left the product
        market definition open. In Oracle/Sun and SAP/Sybase79, the Commission
        segmented the database market between relational and non-relational databases. It
        also considered further sub-segmentation, but ultimately left the question open.80
(100) In Oracle/Sun, SAP/Sybase, and IBM/Informix, the Commission concluded that
        the relevant geographic market for databases is global.
4.2.8.2.        Notifying Party's views
(101) The Notifying Party refers to IDC’s segment for Non-Relational DBMS, which is
        sub-segmented into four sub-markets: (i) end-user, (ii) navigational, (iii) object-
        oriented, and (iv) multivalue database management systems. The Notifying Party
        submits that IDC’s segment for Non-Relational Database Management Software
        (“DBMS”) constitutes the relevant product market.81 Nevertheless, the Notifying
        Party submitted market shares data for the narrowest possible market
        segmentation including IBM’s product: the Gartner subsegment Prerelational Era
        DBMS (see Section 5.3.7.3).
(102) According to the Notifying Party, Non-relational DBMS differ from relational
        DBMS in programming language and the structure used to organize the data:
        Non-relational DBMS are not strictly based on the (standard) programming
        language SQL for data definition and access or on relational theory, i.e. an
        organization of data in different tables which are formally related to each other.
(103) In the Notifying Party’s view, a large number of competitors are active in Non-
        Relational DBMS, including Microsoft’s NoSQL on Azure, InterSystems’ Caché,
        CA Technologies’ Datacomm, and Apple’s FoundationDB, each generating at
        least USD 100 million in annual worldwide revenues from sales of Non-
        Relational DBMS. In addition, there is a large range of popular and successful
        open source offerings, including MongoDB, Redis, Apache Cassandra, HBase,
        Couchbase and many more. The Notifying Party submits that customers consider
        these Non-Relational DBMS products substitutable for each other as they all
        support a multi-value format, in-database computing, intelligent interface
        services, and emerging data types suited for cloud environment, providing
        comparable level of support and interoperability.82
(104) The Notifying Party submits that, in line with the Commission decisions listed at
        paragraphs (99)-(100), the relevant geographic market for Non-Relational DBMS
78  Commission decision of 19 June 2001 in case M.2460 IBM/Informix.
79  Commission decision of 20 July 2010 in case M.5904 SAP/Sybase, paragraph 16.
80   Commission decision of 30 July 2009 in case M.5529 Oracle/Sun Microsystems, recitals 27 and 109.
81 See Form CO, paragraphs 753-755.
82 See Form CO, paragraph 755.
                                                     18
 ---pagebreak---         is global. Nevertheless, the Notifying Party also provided EEA-based market
        shares for completeness.83
4.2.8.3.         Commission’s assessment
(105) In line with Oracle/Sun, SAP/Sybase, and IBM/Informix, the product market for
        Non-Relational DBMS can be identified. The Commission considers that, for the
        purpose of the present decision it can be left open whether Non-Relational DBMS
        constitute a relevant product market and whether it needs to be further sub-
        segmented as the competitive assessment under Section 5.3.7.3 remains
        unchanged irrespective of the exact product market definition.
(106) In line with the Commission decisions listed at paragraphs (99)-(100), the
        Commission considers that the relevant geographic market for Non-Relational
        DBMS is global. Nevertheless, for completeness, the Commission carried out the
        competitive assessment in Section 5.3.7.3 also at the EEA-wide level.
4.3.    System Infrastructure Software
4.3.1. Software-Defined Storage Controller Software
(107) Software-Defined Storage (“SDS”) refers to computer software programs that
        have been developed to optimize available storage hardware resources by creating
        a virtualized layer on top of the underlying physical storage hardware and that
        operates independently of the hardware to enable the efficient management of
        data storage and the scaling of data capacity, without being reliant on the
        hardware itself.
(108) IBM’s offering in the Software-Defined Storage Controller space includes: IBM
        Spectrum Virtualize (for block storage), IBM Spectrum Accelerate (for block
        storage), IBM Spectrum Scale (for file storage), IBM Spectrum NAS (for file
        storage), IBM Cloud Object Storage (formerly Cleversafe) (for object storage).
        Red Hat offers two basic SDS products: (i) Red Hat Ceph Storage and (ii) Red
        Hat Gluster Storage, based on open source Ceph and Gluster, respectively. These
        two products form the basis for Red Hat’s other offerings such as Red Hat
        Storage One, Red Hat Hyperconverged Infrastructure, and Red Hat OpenShift
        Container Storage.
4.3.1.1.         Commission precedents
(109) In Dell/EMC84, the Commission considered the segment of “storage and
        virtualization software” but ultimately left the precise product market definition
        open.
(110) In Symantec/Veritas85, the Commission considered whether the broader market
        for storage software was worldwide or at least EEA-wide, but ultimately left the
        exact scope of the relevant geographic market open.
83  See Form CO, paragraph 756.
84  Storage virtualization software is a type of SDS controller software. See Commission decision of 25
    January 2016 in case M.7861 Dell/EMC, paragraphs 134, 139.
85 Commission decision of 15 March 2005 in case M.3697 Symantec/Veritas.
                                                       19
 ---pagebreak--- 4.3.1.2.        Notifying Party's views
(111) The Notifying Party refers to IDC’s functional market for SDS Controller
        Software which is further sub-segmented into (i) Block-Based, (ii) File-Based,
        (iii) Object-Based, and (iv) Hyperconverged Software-Defined Storage Controller
        Software.
(112) The Notifying Party submits that the relevant product market with regard to the
        Parties’ activities in the storage level of the IT stack is storage software which
        encompasses all software that manages, stores and/or ensures the accessibility,
        availability, and performance of information stored on physical storage media. As
        the Parties’ activities do not give rise to a horizontally affected market on the
        overall market for Storage Software, the Notifying Party refers to the narrower
        possible market for SDS Controller Software.86
(113) According to the Notifying Party, under IDC’s taxonomy, SDS Controller
        Software includes and combines block, file, object, and hyperconverged software
        offerings that enable the creation of a storage system. Most SDS offerings support
        at least one of the three main types of storage methods: file, block and object
        storage.87
(114) With regard to SDS Controller Software, according to the Notifying Party, the
        various types of SDS Controller Software are substitutable from a supply
        perspective. A number of vendors are active with SDS offerings for multiple
        storage formats. For example, Dell EMC, Hitachi, NetApp, SUSE and Nexenta all
        offer SDS products for more than one type of storage.88
(115) The Notifying Party submits that, in line with the Commission decisions listed at
        paragraphs (109)-(110), the relevant geographic market for SDS Controller
        Software is global. Nevertheless, the Notifying Party also provided EEA-based
        market shares for completeness.89
4.3.1.3.        Commission’s assessment
(116) The Commission considers that in line with Dell/EMC, a possible product market
        for SDS Controller Software can be identified. Based on the Notifying Party’s
        submission, there are a number of SDS Controller Software which support
        multiple types of storage.
(117) Nevertheless, for the purpose of the present decision the exact product market
        definition can be left open as the Transaction does not raise serious doubts as to
        its compatibility with the internal market regardless of whether there is an overall
        market for SDS Controller Software or whether there are separate markets
        depending on the type of storage (Block-Based, File-Based, Object-Based, and
        Hyperconverged Software-Defined Storage Controller Software).
86  See Form CO, paragraph 563.
87  See Form CO, paragraphs 554-556.
88 See Form CO, paragraph 560.
89 See Form CO, paragraph 564.
                                                  20
 ---pagebreak--- (118) In line with the Commission decisions listed at paragraphs (109)-(110), the
        Commission considers that the relevant geographic market for SDS Storage
        Controller Software is at least EEA-wide if not global. For the purpose of the
        present decision, the exact geographic market definition can be left open as the
        Transaction does not raise serious doubts as to its compatibility with the internal
        market under any plausible geographic market definition.
4.3.2. Container Infrastructure Software
(119) Containers are small, isolated, lightweight virtual workspaces that sit on an
        operating system and are used to build, host, and deploy an application. Their
        small footprint compared to other virtual workspaces (like virtual machines)
        makes containers easily portable between different systems and well-suited to
        deployment across multiple clouds. Container Infrastructure Software (or
        “container platforms”) comprises container engines, which instantiate containers,
        and orchestration software, which facilitate the management of containers and
        automate tasks such as deployment, workload balancing between containers, and
        the movement of containers between hosts.
(120) IBM provides Container Infrastructure Software in two products: (i) IBM Cloud
        Private (“ICP”) and (ii) IBM Cloud Kubernetes Service (i.e. IBM’s public cloud
        managed Kubernetes service).
(121) ICP is a platform for developing and managing containerised applications. It is an
        integrated environment for managing containers that includes the container
        orchestrator (Kubernetes90), a private image repository, a management console,
        and monitoring frameworks. According to the Notifying Party, ICP is focused on
        […]: it consists of a private cloud that offers open source container platforms
        focused on using containers to achieve enhanced operational efficiency (targeting
        […]) and enable new […] technologies.91
(122) Red Hat offers several container infrastructure software products as part of the
        OpenShift family of products.92 Red Hat OpenShift Container Platform (formerly
        known as OpenShift Enterprise) provides a platform for deploying both new and
        existing applications on secure, scalable resources with minimal configuration
        and management overhead. Enterprises run OpenShift on a wide variety of
        infrastructure, including public cloud environments, private cloud infrastructure,
        virtualization software, as well as bare-metal servers or a combination of all or
        some of the above.
(123) Red Hat OpenShift Container Platform should be distinguished from Red Hat
        OpenShift Container Engine—both are forms of the paid-for OpenShift product
        offered by Red Hat, but Red Hat OpenShift Container Engine consists simply of
        the RHEL or Core OS operating system, a container engine, and Red Hat’s
        Kubernetes orchestrator, while Red Hat OpenShift Container Platform also
90  An open source container management system, based on Google-developed technology.
91  According to the Notifying Party, ICP can be used on customers’ servers and infrastructure of choice
    and with their hosting partner of choice. IBM currently supports ICP on bare metal servers, VMware,
    OpenStack, OpenShift, Amazon Web Services, Microsoft Azure, and IBM Cloud. IBM Cloud Private
    customers can therefore use IBM Cloud Private with a variety of third-party cloud providers.
92 Red Hat OpenShift Online, Red Hat OpenShift Dedicated, Red Hat OpenShift Application Runtimes,
    Red Hat Container Development Kit (formerly OprnShift Developer Studio).
                                                       21
 ---pagebreak---         includes advanced management capabilities and more detailed development
        functionality.
4.3.2.1.        Commission precedents
(124) In Dell/EMC93, the Commission considered container technology and virtual
        machine-based virtualization software as distinct product markets within the
        broader category of virtualization software, but ultimately left the market
        definition open.
(125) In Dell/EMC94, the Commission considered whether the market for Container
        Infrastructure Software was worldwide or at least EEA-wide, but ultimately left
        the exact scope of the relevant geographic market open.
4.3.2.2.        Notifying Party's views
(126) The Notifying Party submits that IDC defines three submarkets within the
        functional market for Software Defined Compute Software: (i) Container
        Infrastructure Software, (ii) Virtual Machine Software, and (iii) Cloud System
        Software. According to the Notifying Party, the Transaction does not raise any
        concerns on any of the possible segmentations, and the precise product market
        definition can be left open.95
(127) The Notifying Party submits that, in line with the Commission decisions listed at
        paragraphs (124)-(125), the relevant geographic market for Container
        Infrastructure Software is global. Nevertheless, the Notifying Party also provided
        EEA-based market shares for completeness.96
4.3.2.3.        Commission’s assessment
(128) In line with Dell/EMC and IDC’s segmentation, a possible market for Container
        Infrastructure Software can be identified. Nevertheless, the Commission considers
        that for the purpose of the present decision, the exact product market definition
        can be left open as the Transaction does not raise serious doubts as to its
        compatibility with the internal market under the narrowest product market
        definition identified by IDC for which market shares data is available and which
        leads to the highest combined market shares of the Parties. As only the
        subsegment for Container Infrastructure Software is affected, the Commission
        carried out the competitive assessment in Section 5.2.8 on the basis of the
        segmentation put forward by the Notifying Party in accordance with IDC’s
        segment for Container Infrastructure Software.
(129) In line with the Commission decisions listed at paragraphs (124)-(125), the
        Commission considers that the relevant geographic market for Container
        Infrastructure Software is at least EEA-wide if not global. For the purpose of the
        present decision, the exact geographic market definition can be left open as the
93  Commission decision of 25 January 2016 in case M.7861 Dell/EMC, paragraph 67.
94  Commission decision of 25 January 2016 in case M.7861 Dell/EMC, paragraph 70.
95 See Form CO, paragraphs 587-592.
96 See Form CO, paragraph 593.
                                                    22
 ---pagebreak---         Transaction does not raise serious doubts as to its compatibility with the internal
        market under any plausible geographic market definition.
4.3.3. Network Management Software
(130) Network management software is designed to reduce the burden on IT teams by
        facilitating and automating the network management process. Network
        management software monitors the devices connected to the network and collects
        reportable data on these devices. When the software detects a problem on the
        network (e.g. network faults, performance bottlenecks, or compliance issues), the
        software will either take any necessary remedial action automatically, or it will
        present the data to the relevant network administrator which allows the
        administrator quickly to identify and resolve the problem.
(131) IBM has one offering with network management features, i.e. IBM Netcool
        Network Management. Red Hat offers Red Hat Ansible Network Automation.
4.3.3.1.         Commission precedents
(132) There is no Commission precedent with regard to Network Management
        Software.
4.3.3.2.         Notifying Party's views
(133) The Notifying Party submits that the IDC segment for Network Management
        Software constitutes the relevant product market. The IDC taxonomy identifies a
        functional market for Network Management Software and does not segment this
        functional market further. According to the Notifying Party, the Transaction does
        not raise any concerns on any of the possible segmentations, and the precise
        product market definition can be left open.97
(134) The Notifying Party submits that, in line with Commission’s previous decisions
        concerning software, the relevant geographic market for Network Management
        Software is global. Nevertheless, the Notifying Party also provided EEA-based
        market shares for completeness.98
4.3.3.3.         Commission’s assessment
(135) In line with IDC taxonomy, the possible market for Network Management
        Software can be identified. Nevertheless, the Commission considers that for the
        purpose of the present decision, the exact product market definition can be left
        open as the Transaction does not raise serious doubts as to its compatibility with
        the internal market under the narrowest product market definition identified by
        IDC for which market shares data is available and which leads to the highest
        combined market shares of the Parties.
(136) The Commission considers that the relevant geographic market for Network
        Management Software is at least EEA-wide, if not global. For the purpose of the
        present decision, the exact geographic market definition can be left open as the
97  See Form CO, paragraphs 676-678.
98  See Form CO, paragraph 679.
                                                23
 ---pagebreak---         Transaction does not raise serious doubts as to its compatibility with the internal
        market under any plausible geographic market definition.
4.3.4. Storage Management Mainframe Software
(137) Storage Management Mainframe Software includes tools for storage mainframe
        implementations, including for archive, backup and recovery, core storage, data
        replication, and device resource management.
(138) IBM offers DFSMS, which comprises a suite of related data and storage
        management products for the z/OS operating system focused on managing the
        life-cycle of data and the devices and media associated with that data. Red Hat is
        not active in Storage Management Mainframe Software.
4.3.4.1.          Commission precedents
(139) In Symantec/Veritas99, the Commission considered the market definition for
        storage software more generally and considered that it was not necessary to
        distinguish the segments backup and archive software according to the OS on
        which software may run nor according to customer but category and ultimately
        left the market definition open.
(140) In Symantec/Veritas100, the Commission considered whether the market for
        Storage Software was worldwide or at least EEA-wide, but ultimately left the
        exact scope of the relevant geographic market open.
4.3.4.2.          Notifying Party's views
(141) The Notifying Party refers to Gartner’s macromarket for Storage Management
        Software, which is further divided into nine subsegments, including Storage
        Management Mainframe Software.101 The Notifying Party submits that the
        relevant product market should encompass all software that manages, stores
        and/or ensures the accessibility, availability, and performance of information
        stored on physical storage media, and Storage Management Mainframe Software
        falls within that product market.
(142) In the Notifying Party’s view, vendors of storage software (including Dell EMC,
        Veritas, NetApp, Microsoft and HPE) are all active across a wide range of storage
        software and offer products with comparable levels of support and
        interoperability. The Notifying Party submits that these vendors, together with a
        number of other vendors and unpaid open source offerings, provide credible
        alternatives to and exercise a competitive constraint on IBM’s storage software
        offering.102
(143) According to the Notifying Party, the Transaction does not raise any concerns on
        any of the possible segmentations, and the precise product market definition can
99  Commission decision of 15 March 2005 in case M.3697 Symantec/Veritas, paragraphs 15-16.
100 Commission decision of 15 March 2005 in case M.3697 Symantec/Veritas, paragraph 21.
101 The other segments are: (i) Archive, (ii) Backup and Recovery, (iii) Management Software Defined
    Storage, (iv) Data Replication, (v) Infrastructure Software-Defined Storage, (vi) File Analysis, (vii)
    Storage Resource Management, and (viii) Other Storage Management Software.
102 See Form CO, paragraph 765.
                                                        24
 ---pagebreak---         be left open. For the purpose of the present decision, the Notifying Party provides
        information needed to carry out the competitive assessment in Section 5.3.7.3 on
        the basis of Gartner’s sub-segment for Storage Management Mainframe Software,
        the only one of the nine sub-segments in which IBM is active.103
(144) The Notifying Party submits that, in line with Commission’s previous decisions
        concerning software, the relevant geographic market for Storage Management
        Mainframe Software is global. Nevertheless, the Notifying Party also provided
        EEA-based market shares for completeness.104
4.3.4.3.        Commission’s assessment
(145) In line with the Commission decision in Symantec/Veritas and Gartner’s
        segmentation, a possible product market for Storage Management Mainframe
        Software can be identified. The Commission considers that for the purpose of the
        present decision the question whether Storage Management Mainframe
        constitutes a relevant product market and whether it needs to be further sub-
        segmented into different types of storage depending on their use can be left open
        as the Transaction does not raise serious doubts as to its compatibility with the
        internal market under the narrowest possible product market definition for which
        market shares data is available. As Gartner’s segment for Storage Management
        Mainframe Software is the only one affected by the Transaction, the Commission
        carried out the competitive assessment in Section 5.3.7.3 on the basis of the
        segmentation put forward by the Notifying Party in accordance with Gartner’s
        segment for Storage Management Mainframe Software.
(146) The Commission considers that the relevant geographic market for Storage
        Management Mainframe Software is at least EEA-wide, if not global. For the
        purpose of the present decision, the exact geographic market definition can be left
        open as the Transaction does not raise serious doubts as to its compatibility with
        the internal market under any plausible geographic market definition.
4.3.5. Security Information and Event Management Software
(147) Security information and event management products provide a real-time analysis
        of the security alerts that have been generated by applications and network
        hardware. Once security threats (e.g. attacks by a hacker) have been identified,
        the product alerts the business to the attack and automates the response to such
        incident.
(148) IBM offers the QRadar family of products which provides an overview visibility
        of any organization´s security system, since they are able to detect security
        offences and report them, as well as provide insight that allow teams to respond
        quickly to reduce the impact of incidents. Red Hat is not active in security
        information and event management software.
103 See Form CO, paragraphs 763-766.
104 See Form CO, paragraph 767.
                                                25
 ---pagebreak--- 4.3.5.1.        Commission precedents
(149) In Intel/McAfee105, the Commission segmented the market for Security Software
        following IDC and identified IDC’s functional market Endpoint Security as the
        relevant product market. It also envisaged further segmentation according to the
        type of end-customers, but ultimately left the market definition open.106
(150) In Intel/McAfee, the Commission considered whether the market for Security
        Software was worldwide or at least EEA-wide, but ultimately left the exact scope
        of the relevant geographic market open.
4.3.5.2.        Notifying Party's views
(151) The Notifying Party submits that in line with the Commission decision listed at
        paragraph (149), the relevant market is the IDC segment for Security Analytics,
        Intelligence, Response, and Orchestration Software. However, as under this IDC
        segment, a non-horizontally affected market does not arise, the Notifying Party
        provides information needed to carry out the competitive assessment in Section
        5.3.7.3 on the basis of Gartner’s sub-segment for Security Information and Event
        Management Software. According to the Notifying Party, the Transaction does
        not raise any concerns on any of the possible segmentations, and the precise
        product market definition can be left open.107
(152) The Notifying Party submits that, in line with line with Commission’s previous
        decisions concerning software, the relevant geographic market for Security
        Information and Event Management Software is global. Nevertheless, the
        Notifying Party also provided EEA-based market shares for completeness.108
4.3.5.3.        Commission’s assessment
(153) In line with the Commission decision in Intel/McAfee and Gartner’s
        segmentation, a possible product market for Storage Management Mainframe
        Software can be identified. Nevertheless, the Commission considers that for the
        purpose of the present decision, the exact product market definition can be left
        open as the Transaction does not raise serious doubts as to its compatibility with
        the internal market underunder the narrowest possible product market definition
        for which market shares data is available. As no IDC segments would be affected
        by the Transaction, the Commission therefore carried out the competitive
        assessment in Section 5.3.7.3 on the basis of the segmentation put forward by the
        Notifying Party in accordance with Gartner’s narrower segment for Security
        Information and Event Management Software.
(154) The Commission considers that the relevant geographic market for Security
        Information and Event Management Software is at least EEA-wide, if not global.
        For the purpose of the present decision, the exact geographic market definition
        can be left open as the Transaction does not raise serious doubts as to its
105 Commission decision of 26 January 2011 in case M.5984 Intel/McAfee.
106 Commission decision of 26 January 2011 in case M.5984 Intel/McAfee, paragraph 50.
107 See Form CO, paragraphs 782-785.
108 See Form CO, paragraph 786.
                                                    26
 ---pagebreak---          compatibility with the internal market under any plausible geographic market
         definition.
4.3.6. Security Testing
(155) Security testing encompasses products aimed at software developers that want to
         test their web and mobile applications prior to deployment, to detect and fix any
         security issues. Security testing refers to both dynamic application security testing
         (“DAST”)109 and static application security testing (“SAST”)110.
(156) IBM offers IBM Security AppScan which is a family of web security testing and
         monitoring tools. Red Hat is not active in Security Testing Software.
4.3.6.1.          Commission precedents
(157) In Intel/McAfee111, the Commission segmented the market for security software
         following IDC and identified Endpoint Security. It also envisaged further
         segmentation according to the type of end-customers, which is an IDC functional
         market, as the relevant product market.
(158) In Intel/McAfee112, the Commission considered whether the market for Security
         Software was worldwide or at least EEA-wide, but ultimately left the exact scope
         of the relevant geographic market open.
4.3.6.2.          Notifying Party's views
(159) The Notifying Party submits that the relevant product market with regard to
         Security Testing is IDC’s functional market for Other Security Software.
         However, as under this IDC segment, a non-horizontally affected market does not
         arise, the Notifying Party provides information needed to carry out the
         competitive assessment in Section 5.3.7.3 on the basis of Gartner’s sub-segment
         for Security Testing Software (which is narrower than the IDC segment).113
(160) The Notifying Party submits that, with line with Commission’s previous decisions
         concerning software, the relevant geographic market for Security Testing
         Software is global. Nevertheless, the Notifying Party also provided EEA-based
         market shares for completeness.114
4.3.6.3.          Commission’s assessment
(161) In line with the Commission decision in Intel/McAfee and Gartner’s
         segmentation, a possible product market for Storage Management Mainframe
         Software can be identified. Nevertheless, the Commission considers that for the
109 DAST is a program that communicates with a web application through the web front-end to detect
    security vulnerabilities in the web application as well as architectural weaknesses.
110 Static application security testing is a technology aimed at analyzing the source code, byte code and
    binaries from coding and design conditions that could indicate security vulnerabilities. Red Hat is not
    active in security testing software.
111 Commission decision of 26 January 2011 in case M.5984 Intel/McAfee, paragraph 50.
112 Commission decision of 26 January 2011 in case M.5984 Intel/McAfee, paragraph 55.
113 See Form CO, paragraphs 793-796.
114 See Form CO, paragraph 797.
                                                         27
 ---pagebreak---         purpose of the present decision, the exact product market definition can be left
        open as the Transaction does not raise serious doubts as to its compatibility with
        the internal market under the narrowest possible product market definition for
        which market shares data is available. As no IDC segments would be affected by
        the Transaction, the Commission therefore carried out the competitive assessment
        in Section 5.3.7.3 on the basis of the segmentation put forward by the Notifying
        Party in accordance with Gartner’s segment for Security Testing Software.
(162) The Commission considers that the relevant geographic market for Security
        Testing Software is at least EEA-wide, if not global. For the purpose of the
        present decision, the exact geographic market definition can be left open as the
        Transaction does not raise serious doubts as to its compatibility with the internal
        market under any plausible geographic market definition.
4.3.7. Web Access Management Software
(163) Web access management software is a form of identity management that controls
        access to web resources, by providing authentication management, policy-based
        authorisations, reporting and auditing services as well as single sign-on
        convenience.
(164) IBM’s range of products115 ensures that the relevant people have access to
        business resources, by providing access controls for web, mobile, cloud and
        legacy apps, as well as desktops, VPNs, and servers. Red Hat is not active in Web
        Access Management Software.
4.3.7.1.         Commission precedents
(165) In Intel/McAfee116, the Commission segmented the market for security software
        following IDC.
(166) In Intel/McAfee117, the Commission considered whether the market for Security
        Software was worldwide or at least EEA-wide, but ultimately left the exact scope
        of the relevant geographic market open.
4.3.7.2.         Notifying Party's views
(167) The Notifying Party submits that the relevant product market with regard to its
        activities in Web Access Management Software is IDC’s segment for Identity
        And Digital Trust Software. However, as under this IDC segment, a non-
        horizontally affected market does not arise, the Notifying Party provides
        information needed to carry out the competitive assessment in Section 5.3.7.3 on
        the basis of Gartner’s sub-segment for Web Access Management Software (which
        is narrower than the IDC segment).118
115 IBM Security Access Manager, IBM Security Identity Governance and Intelligence, IBM Security
    Secret Server, IBM Cloud Identity, IBM Security Directory Suite, IBM Security Access Manager for
    Enterprise Single Sign-On, and IBM Security zSecure.
116 Commission decision of 26 January 2011 in case M.5984 Intel/McAfee.
117 Commission decision of 26 January 2011 in case M.5984 Intel/McAfee, paragraph 55.
118 See Form CO, paragraphs 804-807.
                                                     28
 ---pagebreak--- (168) The Notifying Party submits that, in line with line with Commission’s previous
         decisions concerning software, the relevant geographic market for Web Access
         Management Software is global. Nevertheless, the Notifying Party also provided
         EEA-based market shares for completeness.119
4.3.7.3.          Commission assessment
(169) In line with the Commission decision in Intel/McAfee and Gartner’s
         segmentation, a possible product market for Storage Management Mainframe
         Software can be identified. Nevertheless,the Commission considers that for the
         purpose of the present decision, the exact product market definition can be left
         open as the Transaction does not raise serious doubts as to its compatibility with
         the internal market under the narrowest possible product market definition for
         which market shares data is available. As no IDC segments would be affected by
         the Transaction, the Commission therefore carried out the competitive assessment
         in Section 5.3.7.3 on the basis of the segmentation put forward by the Notifying
         Party in accordance with Gartner’s segment for Web Access Management
         Software.
(170) The Commission considers that the relevant geographic market for Security
         Testing Software is at least EEA-wide, if not global. For the purpose of the
         present decision, the exact geographic market definition can be left open as the
         Transaction does not raise serious doubts as to its compatibility with the internal
         market under any plausible geographic market definition.
4.3.8. Other IT Operations Management
(171) Gartner identifies IT Operations Management (“ITOM”) Mainframe Tools as a
         distinct subsegment within the Gartner macromarket IT Operations Management.
         Other ITOM is a catch-all category that includes any management tools and/or
         integrated functionality not specifically covered by one of the other Gartner
         subsegments within its IT Operations Management macromarket. This includes:
         output management software used to manage hardware peripherals (such as
         printers); database administration automation and support tools that automate
         routine administration of databases; schema development and management; query
         analyzers; reorganization utilities; space tuners; and bulk data loading/unloading
         technologies.
(172) IBM's products falling within the category of Other ITOM are: IBM Netcool
         Operations Insight120 and IBM Operations Analytics121. Red Hat is not active in
         Other ITOM.
119 See Form CO, paragraph 808.
120 Netcool Operations Insight is an operations center which provides a consolidated view of the alerts and
    alarms affecting an organization’s IT system and filters out irrelevant or low-priority alerts.
121 IBM Operations Analytics analyses operational big data to create insights for quicker problem solving
    and better overall service. The product can learn and understand how applications and their
    infrastructure should normally behave and interact, establish baselines for normal behavior, and issue
    alerts on detected anomalous behavior. It helps operational teams detect trends and forecast future
    problem prioritization and determination needs, thereby reducing repair times and improving
    operational efficiency.
                                                        29
 ---pagebreak--- 4.3.8.1.         Commission precedents
(173) There is no Commission precedent with regard to ITOM tools.
4.3.8.2.         Notifying Party's views
(174) The Notifying Party submits that the relevant product market with regard to its
        activities in Other ITOM is IDC’s segment for ITOM software. However, as
        under this IDC segment, a non-horizontally affected market does not arise, the
        Notifying Party provides information needed to carry out the competitive
        assessment in Section 5.3.7.3 on the basis of Gartner’s sub-segment for Other
        ITOM Tools (which is narrower than the IDC segment). According to the
        Notifying Party, the Transaction does not raise any concerns on any of the
        possible segmentations, and the precise product market definition can be left
        open.122
(175) The Notifying Party submits that the relevant geographic market for Other ITOM
        is global. Nevertheless, the Notifying Party also provided EEA-based market
        shares for completeness.123
4.3.8.3.         Commission’s assessment
(176) In line with Gartner’s segmentation, a possible product market for Other ITOM
        can be identified. Nevertheless, the Commission considers that for the purpose of
        the present decision, the exact product market definition can be left open as the
        Transaction does not raise serious doubts as to its compatibility with the internal
        market under the narrowest possible product market definition for which market
        shares data is available. As no IDC segments would be affected by the
        Transaction, the Commission therefore carried out the competitive assessment in
        Section 5.3.7.3 on the basis of the segmentation put forward by the Notifying
        Party in accordance with Gartner’s segment for Other ITOM.
(177) The Commission considers that the relevant geographic market for Other ITOM
        is at least EEA-wide, if not global. For the purpose of the present decision, the
        exact geographic market definition can be left open as the Transaction does not
        raise serious doubts as to its compatibility with the internal market under any
        plausible geographic market definition.
4.3.9. AD Mainframe Tools
(178) Application Development (“AD”) mainframe tools are used to develop and
        maintain applications that run on IBM’s proprietary System z mainframes.124 Red
        Hat is not active in AD mainframe tools.
122 See Form CO, paragraphs 816-819.
123 See Form CO, paragraph 819.
124 IBM offers a wide range of AD Mainframe Tools: IBM Developer for System z, IBM Application
    Discovery and Delivery Intelligence, IBM Application Delivery Foundation, IBM Application
    Performance Analyzer for z/OS, IBM Fault Analyzer for z/OS, IBM File Manager for z/OS, IBM Z
    Development and Test Environment, IBM Z Open Development, IBM Debug Tool, UrbanCode
    Deploy, IBM Rational Test Workbench, IBM Rational Integration Tester, Rational Team Concert, and
    IBM InfoSphere Optim Test Data Management.
                                                  30
 ---pagebreak--- 4.3.9.1.        Commission precedents
(179) There is no Commission precedent with regard to AD Mainframe Tools but the
        Commission has considered the broader category of application development
        software in previous decisions. In these decisions, the Commission investigated
        different types of application development software constitute separate product
        markets, but ultimately left the market definition open.125
(180) In its previous decisions considering application development software, the
        Commission considered whether the market was worldwide or at least EEA-wide,
        but ultimately left the exact scope of the relevant geographic market open.
4.3.9.2.        Notifying Party's views
(181) The Notifying Party submits that the relevant product market is Gartner’s
        segment for AD Mainframe Tools, which is not segmented further. IDC does not
        identify a distinct segment for AD mainframe tools, although they are likely to
        fall within the IDC secondary market of Application Development Software.
(182) According to the Notifying Party, while application development tools generally
        include multiple sets of products that enable application discovery, management,
        development, testing, debugging, DevOps, and performance analysis for
        application developers, AD Mainframe Tools include specific capabilities to
        enhance, simplify and automate these activities for developers and operational
        engineers who are producing and maintaining applications targeting the
        mainframe.126
(183) In line with previous Commission decisions where different types of application
        development tools have tended to be considered distinct markets (discussed at
        paragraph (179) above), the Notifying Party considers AD mainframe tools as the
        relevant product market and provides shares of sales based on Gartner data for
        this segment.
(184) The Notifying Party submits that the relevant geographic market for AD
        Mainframe Tools is global. Nevertheless, the Notifying Party also provided EEA-
        based market shares for completeness.127
4.3.9.3.        Commission’s assessment
(185) In line with Gartner’s segmentation, a possible product market for AD Mainframe
        Tools can be identified. Nevertheless, the Commission considers that for the
        purpose of the present decision, the exact product market definition can be left
        open as the Transaction does not raise serious doubts as to its compatibility with
        the internal market under the narrowest possible product market definition for
        which market shares data is available. The Commission therefore carried out the
        competitive assessment in Section 5.3.7.3 on the basis of the segmentation put
125 Commission decision of 8 March 2017 in case M.8223 Micro Focus/HPE Software Business,
    paragraph 32; Commission decision of 5 March 2008 in case M.4747 IBM/Telelogic, paragraph 122;
    Commission decision of 20 February 2003 in case M.3062 IBM/Rational, paragraphs 11, 16, 20, and
    23.
126 See Form CO, paragraphs 833-836.
127 See Form CO, paragraph 837.
                                                   31
 ---pagebreak---           forward by the Notifying Party in accordance with Gartner’s segment for AD
          Mainframe Tools.
(186) The Commission considers that the relevant geographic market for AD
          Mainframe Tools is at least EEA-wide, if not global. For the purpose of the
          present decision, the exact geographic market definition can be left open as the
          Transaction does not raise serious doubts as to its compatibility with the internal
          market under any plausible geographic market definition.
4.3.10. Server Operating Systems
(187) Operating systems manage computer hardware (e.g., processing, memory, and
          storage) and all other programs in a computer. In the traditional IT stack,
          operating systems sit above hardware and below middleware and applications.
          Operating systems save application developers from tailoring their program to the
          specific hardware in each computer—instead, they write the program for an
          operating system which provides it with the necessary computer resources to run.
(188) The vast majority of servers today run Windows or Linux operating systems.
          Windows128 and Linux are estimated to account for more than [90-100]% of new
          server operating system deployments and more than [90-100]% of the installed
          base in 2017.129 The remainder of deployments are either Unix130 or other
          proprietary server operating systems, both of which have significantly declining
          sales and installed bases.131
(189) Linux refers to a range of operating systems built on the Linux kernel, a free,
          open source operating system core developed by Linus Torvalds in the early
          1990s. Because the Linux kernel is open source, it can be modified and tailored to
          suit different needs. As a result, a range of desktop, mobile, and server Linux
          distributions have emerged. Linux distributions can be maintained by the open
          source community, produced commercially—or both.132
(190) Red Hat offers Red Hat Enterprise Linux (“RHEL”) and IBM’s operating systems
          are proprietary and based on either Unix or IBM’s own code base: z/OS, zVSE,
          zTPF, AIX, and IBM i. z/OS, zVSE, and zTPF run exclusively on IBM’s z
128  Microsoft started developing proprietary operating systems for personal computers (“PC”) in the early
     1980s. Since 1993, Microsoft has also produced Windows operating systems for servers. The latest
     edition is Windows Server 2019, released in October 2018.
129 IDC, Worldwide Server Operating Environments Market Shares, 2017: Linux Fuels Market Growth
     (2018).
130 Unix is a family of operating systems that emerged from the Unix operating system developed by U.S.
     telecommunications provider AT&T in the late 1960s. AT&T originally provided the Unix source
     code for free. This led to diverse groups developing different versions of Unix, each tailored to their
     needs. Unix’s descendants ultimately coalesced into two broad groups—academic and commercial.
     companies developed their own versions of Unix. The most well-known is Oracle's (formerly Sun
     Microsystems’) Solaris. HP and IBM continue to market Unix-based systems today.
131 IDC, Worldwide Server Operating Environments Market Shares, 2017: Linux Fuels Market Growth
    (2018).
132 Canonical Ltd maintains Ubuntu and provides commercial support for Ubuntu’s Server edition
     (Ubuntu is also available unsupported for free) while SUSE sponsors free, community-based
     OpenSUSE and charges for SUSE Enterprise Linux. Oracle Corporation providesa commercially-
     supported version of Linux called Oracle Enterprise Linux. Other Linux-based operating systems
     include Amazon Linux, Debian, and Fedora.
                                                        32
 ---pagebreak---         processors, while AIX and IBM i run exclusively on IBM’s POWER processor
        architecture.
4.3.10.1.        Commission precedents
(191) In Oracle/Sun, the Commission referred to its Microsoft antitrust decision133
        where it had identified a market for work group server operating systems, distinct
        from other software.134 It did not segment server operating systems by processor
        type, or operating system family (i.e., Windows, Linux, or Unix), but ultimately
        left open the precise product market definition.
(192) In Oracle/Sun, the Commission referred to its Microsoft antitrust decision where
        it identified a worldwide geographic market for server operating systems.
4.3.10.2.        Notifying Party’s view
(193) The Notifying Party considers that the relevant product market for operating
        systems should encompass all server operating systems, i.e. Windows (server),
        Linux, Unix, including any “descendants” thereof, such as Solaris, HP-UX and
        AIX, and other proprietary operating systems, such as IBM i, z/OS, and z/VSE.
        This product market definition is consistent with the IDC submarket for Core
        Operating Systems (i.e. server operating systems). It submits that further
        segmentation of the product market for server operating systems between
        paid/unpaid or depending on the family (Linux, Windows, etc.) is not warranted.
        According to the Notifying Party, server operating systems all perform the same
        basic function, regardless of which “family” they are in.135
(194) The Notifying Party submits that, in line with the Commission decisions listed at
        paragraphs (191)-(192), the relevant geographic market is global. Nevertheless,
        the Notifying Party also provided EEA-based market shares for completeness.136
4.3.10.3.        Commission’s assessment
(195) RHEL is the most successful and widely used paid supported Linux distribution.
        The Commission therefore investigated whether the following categories of
        server operating systems can be considered part of the same relevant product
        market as paid supported Linux distributions: (1) free unsupported Linux
        distributions, (2) other free unsupported open-source operating systems, and (3)
        other paid supported operating systems from different families (e.g., Microsoft
        Windows, Unix-based operating systems such as IBM’s AIX, Oracle’s Solaris
        and HP-UX, and other proprietary operating systems).
(196) As regards free unsupported Linux distributions, the Commission considers that
        demand-side substitution is most likely too limited to constraint a hypothetical
        monopolist in paid supported Linux distribution. This is for the following reasons.
(197) First, a large majority of competitors responding to the market investigation
        considered that competition between paid Linux distributions and free
133 Commission decision of 24 April 2004 in case COMP/C-3/37.792 – Microsoft.
134 Commission decision of 30 July 2009 in case M.5529 – Oracle/Sun Microsystems, recital 945.
135 See Form CO, paragraphs 702-706.
136 See Form CO, paragraph707.
                                                    33
 ---pagebreak---         unsupported Linux distributions was either limited or very limited. Some
        competitors explained that free unsupported Linux distributions are not
        considered for mission-critical workloads. Within enterprises, free Linux
        distributions would mainly be used in testing and development efforts, but not in
        production.137 Rival Linux distributors explained that customers who choose to go
        for a paid Linux distribution do it because they need the support. The
        Commission therefore considers that customers using paid Linux operating
        systems would be unlikely to switch to unsupported Linux distributions, at least
        for mission-critical workloads.138
(198) Second, on the customers’ side, a majority of them do not consider free
        unsupported Linux distributions to be possible alternatives to paid supported
        Linux distributions.139 Customers explain that it is generally a company policy to
        opt for supported distributions, and unsupported alternatives would in any event
        not be considered.
(199) As regards other free unsupported open-source operating systems, the
        Commission considers that demand-side substitution is most likely too limited to
        constrain a hypothetical monopolist in paid supported Linux distribution, for the
        same reasons as for free unsupported Linux distributions, i.e. support is
        considered crucial for most customers. In addition, switching from a Linux
        operating system to another family of operating systems is more difficult than
        from a Linux distribution to another Linux distribution.140 This was confirmed by
        the market investigation. On the one hand, all competitors responding to the
        market investigation and expressing an opinion on the issue considered that
        competition between paid Linux distribution and other free unsupported open-
        source operating systems was either limited or very limited.141 On the other hand,
        the vast majority of customers do not consider other free unsupported open-
        source operating systems to be possible alternatives to paid supported Linux
        distributions.142
(200) As regards other paid supported operating systems from different families (e.g.,
        Microsoft Windows, Unix-based operating systems such as IBM’s AIX, Oracle’s
        Solaris and HP-UX, and other proprietary operating systems), the Commission
        also considers that demand-side substitution is most likely too limited to
        constraint a hypothetical monopolist in paid supported Linux distribution. This is
        for the following reasons.
137 For instance, Oracle explains “[w]hile unsupported Linux distribution may be used by individuals and
    hobbyists or customers with limited needs, an enterprise will almost always require some sort of Linux
    support. This reality is reflected in Red Hat’s (and Oracle’s) revenue model where Linux is typically
    available for free but customers are charged for associated Linux support. One exception (and the
    reason we mark “limited” instead of “very limited”) is the use of Linux in testing and development
    efforts. In these cases customers are likely to use free Oracle or CentOS distributions, since Red Hat
    does not provide RHEL for free for testing/development purposes.” See replies to Questionnaire Q1 to
    competitors, question 40.
138 See replies to Questionnaire Q1 to competitors, question 40.
139 See replies to Questionnaire Q2 to customers, question 39.
140 See replies to Questionnaire Q1 to competitors, question 40.
141 See replies to Questionnaire Q1 to competitors, question 40.
142 See replies to Questionnaire Q2 to customers, question 39.
                                                         34
 ---pagebreak--- (201) First, although a majority of customers replied that they consider other operating
        system families (e.g. Microsoft Windows and Unix-based operating systems) to
        be possible alternatives to paid supported Linux distributions, their explanations
        suggest that they currently use different families of operating systems as
        complementary operating systems to manage different tasks/applications.
        However, when it comes to the possibility of switching applications, middleware
        or tools running on Linux, several customers explain that while most of those
        components could in principle run on Microsoft Windows or even Unix,
        switching would require significant effort and costs. As explained by one
        customer, “[i]n theory, Microsoft Windows could be an alternative to a paid
        supported Linux distribution, however, the migration cost, the time required and
        the acquisition of skills render this an unrealistic scenario”.143
(202) Second, this view is also supported by competitors who generally explain that
        substitution is limited between Linux and other families of operating systems
        such as Windows and Unix, even when supported. According to a competitor, for
        application development, organisations tend to have most of their developers
        specialized in either the Linux environment or the Windows environment.
        Switching from one to the other is therefore unlikely. 144
(203) For third party software, although competitors generally explain that most
        software are compatible with both Linux and Windows, once they are running on
        Linux, switching to Windows would be very complex and expensive. The same is
        true for switching from Linux to Unix. For instance one customer explains that
        “[s]witching [between different families of] operating systems tends to be
        expensive and complex, requiring changes to the applications being run, as well
        as to the tools used to manage/operate the systems. Additionally, there can be
        substantial performance differences requiring re-testing and re-tuning of
        applications”. Windows, Linux, Unix and other families of operating systems
        would only be considered interchangeably for new applications/services
        deployment, which are both Windows and Linux compatible.145
(204) In light of the above, the Commission considers that paid supported Linux server
        operating systems may constitute a distinct product market from (1) free
        unsupported Linux distributions, (2) other free unsupported open-source
        operating systems, and (3) other paid supported operating systems from different
        families (e.g., Microsoft Windows, Unix-based operating systems such as IBM’s
        AIX, Oracle’s Solaris and HP-UX, and other proprietary operating systems).In
        any event, for the purpose of this decision, it can be left open whether RHEL
        belongs to a relevant product market defined as (i) paid supported Linux server
        operating systems, (ii) paid supported server operating systems (including
        different families), (iii) paid supported and unpaid unsupported Linux
        distributions or (iv) all server operating systems, as under each of these
        alternatives the Transaction does not raise serious doubts as to its compatibility
        with the internal market.
(205) As regards IBM’s operating systems which are based on either Unix (AIX) or on
        IBM’s own code base (e.g., z/OS), for the purpose of this decision, it can be left
143 See replies to Questionnaire Q2 to customers, question 39.
144 See replies to Questionnaire Q1 to competitors, question 40.
145 See replies to Questionnaire Q1 to competitors, question 40.
                                                       35
 ---pagebreak---          open whether IBM’s server operating systems belong to (i) a distinct market for
         paid Unix and other paid operating system (other than Microsoft and Linux) on
         which IBM’s market share is the highest, (ii) all paid supported operating systems
         or (iii) all server operating systems, as under each of these alternatives the
         Transaction does not raise serious doubts as to its compatibility with the internal
         market.
(206) In line with the Commission decisions listed at paragraphs (191)-(192), the
         Commission considers that the relevant geographic market for Server Operating
         Systems is worldwide. Nevertheless, for completeness, the Commission carried
         out the competitive assessment in sections 5.2.10., 5.3.3. and 5.3.7. also at the
         EEA-wide level.
4.4.     Servers
4.4.1. Commission precedents
(207) In past decisions, the Commission has focused on x86 servers and considered a
         segmentation by price band: (a) entry-level (below USD 100,000), (b) mid-range
         (USD 100,000 – USD 999,999), and (c) high-end (USD 1 million and above).146
         The Commission ultimately left the product market definition open.147
(208) The Commission found the market for servers to be at least EEA-wide if not
         worldwide.148
4.4.2. Notifying Party’s view
(209) The Notifying Party considers that the relevant product market should encompass
         all servers.149
(210) First, the Notifying Party submits that customers are increasingly opting for a
         “scale out” model, where their computing requirements are performed by
         networks of lower-priced servers, instead of one or two high capacity servers.
         This model affords customers greater flexibility to scale their server requirements
         according to predicted growth and usage, reduce idle server capacity, and manage
         overall capex for IT hardware. The capabilities of such horizontal server
         architectures (i.e., networks of servers) were previously limited by the capability
         of software to exploit network computer resources, and the complexities of
         managing multiple hardware clusters. However, advances in network technology
         and virtualization technology now enable distributed server systems to deliver
         comparable levels of security, reliability, and performance to single large-
         capacity servers. The emergence of software-defined storage products now
146  Commission decision of 29 February 2016 in case M.7861 – Dell/EMC, paragraphs 38-42;
Commission decision of 21 January 2010 in case M.5529 – Oracle/Sun Microsystems, recital 941;
Commission decision of 29 February 2016 in case M.7861 – Dell/EMC, paragraphs 19-22.
147 Ibid, paragraph 45.
148 Commission decision of 29 February 2016 in case M.7861 – Dell/EMC, paragraph 44; Commission
    decision of 21 January 2010 in case M.5529 – Oracle/Sun Microsystems, recital 950;
    Commission decision of 31 January 2002 in case M.2609 – HP/Compaq, paragraph 23.
149 See Form CO, paragraph 257.
                                                     36
 ---pagebreak---          enables enterprises to unify multiple servers, consolidating them into a single
         “virtual pool” that can be centrally managed and provisioned. 150
(211) Second, according to the Notifying Party, customers are also migrating increasing
         volumes of workload to public cloud. Public cloud vendors predominantly
         provision their data center infrastructure with lower-priced servers. They rely on
         large numbers of inexpensive servers across networks of data centers to build in
         significant redundancy, ensure high availability, and guarantee their ability to
         elastically meet customer cloud computing needs.151
(212) Finally, and in line with the above explanation, the Notifying Party submits that
         IDC and Gartner data also indicate a consistent increase in the share of revenues
         accounted for by lower-priced servers and a consistent decline in the share of
         revenues accounted for by mid-range and high-end servers year on year, which
         may suggest an increased competition from, and a general shift of workloads
         towards, lower-priced servers.152
(213) The Notifying Party submits that the relevant geographic market for servers is
         worldwide. According to the Notifying Party, suppliers of servers are global
         enterprises and are active worldwide, there are no significant transport costs
         associated with servers, and customer preferences and product specifications do
         not tend to vary by geography.
4.4.3. Commission’s assessment
(214) The Commission considers that for the purpose of this decision, it can be left
         open whether the market for servers would have to be further segmented
         according to the price band, because the Transaction does not raise serious doubts
         as to its compatibility with the internal market even in a plausible high-end server
         market where IBM’s position would the strongest.
(215) The Commission considers that for the purpose of the present decision, the exact
         geographic market definition can be left open as the Transaction does not raise
         serious doubts as to its compatibility with the internal market whether the
         geographic market is EEA-wide or worldwide.
4.5.     IT services
(216) IBM markets IT Services to enterprises under the IBM Services brand. IBM
         Services includes two operationally distinct businesses, Global Business Services
         (“GBS”) and Global Technology Services (“GTS”), each with a different focus:
         GBS mainly provides strategy and architecture consulting services, while GTS
         generally provides outsourcing services.
150 See the Notifying Party’s response to the Commission’s RFI 16.
151 See the Notifying Party’s response to the Commission’s RFI 16.
152 According to Gartner, between 2015 and 2018, the proportion of low-end servers grew from [80-90]%
    to [90-100]% of the worldwide market by value. The proportion of mid-range and high-end servers
    both declined in the same period, from [5-10]% and [5-10]% to [0-5]% and [5-10]%, respectively.
    According to IDC, between 2015 and 2018, low-end servers grew from [80-90]% to [90-100]% of the
    worldwide market by value, while the proportionof mid-range and high-end servers shrunk from [5-
    10]% and [5-10]% to [5-10]% and [0-5]%, respectively. See the Notifying Party’s response to the
    Commission’s RFI 16.
                                                      37
 ---pagebreak--- 4.5.1. Commission precedents
(217) In its most recent decisions, the Commission has considered segmenting IT
         services on the basis of (i) the functionality of the service and (ii) industry sector,
         but ultimately left the precise product market definition open.153 In these
         decisions, the Commission relied on market data and the segments published by
         Gartner.
(218) In previous decisions, the Commission, while considering that IT services are
         provided on a national basis, also pointed that the market could have a broader
         geographic scope, as major providers of IT services operate on a worldwide basis
         and customers frequently issue worldwide/EEA-wide tenders.154
4.5.2. Notifying Party’s view
(219) The Notifying Party submits that, for the purposes of the present case, the
         relevant market comprises all IT Services, and that this market should not be
         further sub-segmented because of a high degree of supply side substitutability, as
         well as the fact that many suppliers are active across various service categories,
         industries or customer groups.
(220) From a geographic standpoint, the Notifying Party considers the relevant market
         to be worldwide in scope given the worldwide activities of providers of IT
         Services as well as developers and vendors of these software products, common
         customer preferences across the globe, negligible transport costs, maintenance
         and support services (commonly provided via the Internet), and limited trade
         barriers.
4.5.3. Commission’s assessment
(221) The Commission considers that, for the purpose of this decision, it can be left
         open whether the market for IT services would have to be further segmented
         according to (i) the functionality of the service and (ii) industry sector, because
         the Transaction does not raise serious doubts as to its compatibility with the
         internal market irrespective of the exact market definition. The Commission also
         considers that, for the purpose of this decision, it can be left open whether IT
         services markets are national, EEA-wide or worldwide, because the Transaction
         does not raise serious doubts as to its compatibility with the internal market
         irrespective of the exact geographic market definition.
153 Commission decision of 15 December 2014 in case M.7458 – IBM/INF Business of Deutsche
    Lufthansa, paragraphs 16-29 and 33; Commission decision of 19 June 2013 in case M.6921 – IBM
    Italia/UBIS, paragraphs 12-24 and 25; Commission decision of 18 November 2004 in case M. 3571–
    IBM/Maerskdata/DM data, paragraphs 9-14; Commission decision of 23 September 2002 in case
    M.2946 – IBM/PWC Consulting, paragraphs 9-13.
154 Case M.6237 – Computer Sciences Corporation / iSoft Group, Commission decision of 20 June 2011,
    paragraphs. 17-18.
                                                    38
 ---pagebreak--- 5.       COMPETITIVE ASSESSMENT
5.1.     Analytical framework
(222) Article 2 of the Merger Regulation provides that: “[a] concentration which would
         significantly impede effective competition, in the common market or in a
         substantial part of it, in particular as a result of the creation or strengthening of a
         dominant position, shall be declared incompatible with the common market”.
         Under Article 2(2) and (3) of the Merger Regulation, the Commission must thus
         assess whether a proposed concentration would significantly impede effective
         competition in the internal market or in a substantial part of it, in particular
         through the creation or strengthening of a dominant position.
(223) In this respect, a concentration may entail horizontal and/or non-horizontal
         effects. Horizontal effects are those deriving from a concentration where the
         undertakings concerned are actual or potential competitors of each other in one or
         more of the relevant markets concerned. Non-horizontal effects are those deriving
         from a concentration where the undertakings concerned are active in different
         relevant markets.
(224) As regards non-horizontal concentrations, two broad types of such concentrations
         can be distinguished: vertical concentrations and conglomerate concentrations.155
         Vertical concentrations involve companies operating at different levels of the
         supply chain.156 Conglomerate concentrations are concentrations between firms
         that are in a relationship which is neither horizontal (as competitors in the same
         relevant market) nor vertical (as suppliers or customers).157
(225) A concentration may entail both horizontal and non-horizontal effects. This may
         for instance be the case when the merging firms are not only in a vertical or
         conglomerate relationship, but are also actual or potential competitors of each
         other in one or more of the relevant markets concerned. In such a case, the
         Commission will appraise horizontal, vertical and/or conglomerate effects in
         accordance with the guidance set out in the relevant notices.158
(226) The Commission appraises horizontal effects in accordance with the guidance set
         out in the relevant notice, that is to say the Horizontal Merger Guidelines.159
         Additionally, the Commission appraises non-horizontal effects in accordance with
         the guidance set out in the relevant notice, that is to say the Non-Horizontal
         Merger Guidelines. Finally, the Commission appraises innovation competition in
         accordance with the analytical framework for the assessment of horizontal non-
         coordinated effects in the Horizontal Merger Guidelines which is also largely
         applicable to innovation.
155 Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control
    of concentrations between undertakings ("Non-Horizontal Merger Guidelines"), OJ C 265, 18.10.2008,
    recital 3.
156 Non-Horizontal Merger Guidelines, recital 4.
157 Non-Horizontal Merger Guidelines, recital 5.
158 Non-Horizontal Merger Guidelines, recital 7.
159 Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of
    concentrations between undertakings ("Horizontal Merger Guidelines"), OJ C 31, 05.02.2004.
                                                     39
 ---pagebreak--- 5.1.1. Horizontal effects
(227) In addition to the creation or strengthening of a dominant position, the Horizontal
        Merger Guidelines distinguish between two other ways in which concentrations
        between actual or potential competitors on the same relevant market may
        significantly impede effective competition, namely non-coordinated and
        coordinated effects.
(228) Recital 25 of the Preamble to the Merger Regulation clarifies that "under certain
        circumstances, concentrations involving the elimination of important competitive
        constraints that the merging parties had exerted upon each other, as well as a
        reduction of competitive pressure on the remaining competitors, may, even in the
        absence of a likelihood of coordination between the members of the oligopoly,
        result in a significant impediment to effective competition".160 It further clarifies
        that the notion of significant impediment to effective competition “should be
        interpreted as extending, beyond the concept of dominance, only to the
        anticompetitive effects of a concentration resulting from the non-coordinated
        behaviour of undertakings which would not have a dominant position on the
        market concerned”.161
(229) The Horizontal Merger Guidelines list a number of factors which may influence
        whether or not significant horizontal non-coordinated effects are likely to result
        from a concentration, such as the large market shares of the merging firms, the
        fact that the merging firms are close competitors, the limited possibilities for
        customers to switch suppliers, or the fact that the merger would eliminate an
        important competitive force. That list of factors applies equally regardless of
        whether a concentration would create or strengthen a dominant position, or would
        otherwise significantly impede effective competition due to non-coordinated
        effects. Furthermore, not all of these factors need to be present to make
        significant non-coordinated effects likely and it is not an exhaustive list.162
        Finally, the Horizontal Merger Guidelines describe a number of factors, which
        could counteract the harmful effects of a merger on competition, including the
        likelihood of buyer power, entry and efficiencies.
5.1.2.    Vertical effects
(230) The Non-horizontal Merger Guidelines recognises that non-horizontal
        concentrations are generally less likely to significantly impede effective
        competition than horizontal concentrations.163
(231) Vertical non-coordinated effects may principally arise when non-horizontal
        concentrations give rise to foreclosure.164 A concentration is said to result in
        foreclosure where actual or potential rivals' access to supplies or markets is
        hampered or eliminated as a result of the merger, thereby reducing these
160 Merger Regulation, recital 25. Similar wording is also found in paragraph 25 of the Horizontal Merger
    Guidelines.
161 Merger Regulation, recital 25.
162 Horizontal Merger Guidelines, paragraph 26.
163 Non-horizontal Merger Guidelines, paragraph 11.
164 Non-horizontal Merger Guidelines, paragraph 18.
                                                        40
 ---pagebreak---         companies' ability and/or incentive to compete.165 Such foreclosure may
        discourage entry or expansion of rivals or encourage their exit. Such foreclosure
        is regarded as anti-competitive where the merged entity — and, possibly, some of
        its competitors as well — are as a result able to profitably increase the price
        charged to consumers.166
(232) Two forms of vertical foreclosure can be distinguished.167 The first is where the
        concentration is likely to raise the costs of downstream rivals by restricting their
        access to an important input (input foreclosure). The second is where the merger
        is likely to result in foreclosure of upstream rivals by restricting their access to a
        sufficiently large customer base (customer foreclosure).
5.1.3.    Conglomerate effects
(233) In the majority of circumstances, conglomerate concentrations do not lead to any
        competition problems but in certain specific cases there may be harm to
        competition.168 The main concern in the context of conglomerate effects is that of
        foreclosure.169 Conglomerate concentrations may allow the merged entity to
        combine products in related markets and this 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.170
(234) In assessing the likelihood of conglomerate effects, the Commission examines,
        first, whether the merged firm would have the ability to foreclose its rivals,
        second, whether it would have the economic incentive to do so and, third, whether
        a foreclosure strategy would have a significant detrimental effect on competition,
        thus causing harm to consumers. In practice, these factors are often examined
        together as they are closely intertwined.171
5.1.4.    Effects on innovation competition
(235) The Merger Regulation establishes a legal framework that is not limited to the
        assessment of price effects, but may also be based on the likelihood of the impact
        of other factors such as innovation, quality and choice. In that respect, the Union
        Courts have clarified that the prospective analysis consists of an examination of
        how a concentration might alter the factors which determine the state of
        competition on a given market in order to establish whether it would give rise to a
        significant impediment to effective competition.172
(236) The Commission considers that innovation is an important criterion on the basis
        of which the appraisal of a concentration should be conducted. Paragraph 8 of the
165 Non-horizontal Merger Guidelines, paragraph 29.
166 Non-horizontal Merger Guidelines, paragraph 29.
167 Non-horizontal Merger Guidelines, paragraph 30.
168 Non-horizontal Merger Guidelines, paragraph 92.
169 Non-horizontal Merger Guidelines, paragraph 93.
170 Non-horizontal Merger Guidelines, paragraph 93.
171 Non-horizontal Merger Guidelines, paragraph 94.
172 Judgment of 15 February 2005, Commission v Tetra Laval, C-12/03 P, EU:C:2005:87, paragraph 43;
    Judgment of 10 July 2008, Bertelsmann and Sony v. Impala and Commission, C-413/06 P,
    EU:C:2008:392, paragraph 47. See also Judgment of 9 March 2015, Deutsche Börse v Commission,
    T-175/12, EU:T:2015:148, in particular paragraph 177.
                                                      41
 ---pagebreak---          Horizontal Merger Guidelines clarifies that the merger control system established
         by the Merger Regulation aims at preventing mergers which would be likely to
         deprive customers of some of the benefits of effective competition, which are not
         only low prices, but also include high quality products, a wide selection of goods
         and services, and innovation (in the form of more, better and improved products).
(237) A merger may deprive consumers of these benefits through an increase of market
         power, which in the same paragraph is defined as the ability of one or more firms
         to profitably increase prices, reduce output, choice or quality of goods and
         services, diminish innovation or otherwise influence parameters of competition.173
(238) Therefore, in accordance with the Merger Regulation and the Horizontal Merger
         Guidelines, the Commission is required to prevent significant impediments to
         effective competition without limiting its assessment to either price effects or
         product and price competition between existing products. It is also part of the
         Commission’s tasks to determine whether a transaction is likely to lead to
         diminished innovation competition and innovation.
(239) Finally, The Commission considers that the framework set out in the Horizontal
         Merger Guidelines for the assessment of non-coordinated effects is not
         exclusively restricted to the appraisal of price competition between existing
         products but it is also largely applicable to innovation.174
5.2.     Horizontal non-coordinated effects175
5.2.1. Horizontally Affected Markets
(240) Based on 2018 data, the Notifying Party has identified 9 IDC or Gartner market
         segments176 in which the Parties' combined market shares exceed 20% at the
         worldwide or EEA level as demonstrated in Table 1 below. Six of these segments
         are also non-horizontally affected. They are indicated in Italics in Table 1.
173 Paragraph 8 identifies innovation as one of the benefits that mergers may deprive customers of:
    “[e]ffective competition brings benefits to consumers, such as low prices, high quality products, a wide
    selection of goods and services, and innovation”. Increased market power may consist in the ability of
    one or more firms to profitably diminish innovation. Pursuant to paragraph 25, “mergers in
    oligopolistic markets involving the elimination of important competitive constraints that the merging
    parties previously exerted upon each other together with a reduction of competitive pressure on the
    remaining competitors may, even where there is little likelihood of coordination between the members
    of the oligopoly, also result in a significant impediment to competition.”
174 See reasons as set out in case M.7932 – Dow/DuPont, paragraphs 1994 to 1999 and M.8084 –
    Bayer/Monsanto, 21 March 2018, paragraphs 68 to 74.
175 The Commission does not consider that the change brought about by the Transaction is likely to lead
    to any horizontal coordinated effects in the product markets discussed at Section 5.2. In all
    horizontally affected markets, the demand is highly fragmented and there is limited transparency. The
    Transaction does not diminish these market characteristics which make coordination difficult.
    Furthermore, the Transaction does not significantly increase symmetry in these markets. Based on the
    market share figures presented in Tables 2-16, the markets will remain relatively asymmetrical post-
    Transaction. Therefore, horizontal coordinated effects are not discussed further in the following
    Sections.
176 In some cases both the IDC and the broadly corresponding Gartner segments are affected. In these
    cases, the Commission relies on the IDC denomination.
                                                          42
 ---pagebreak---  ---pagebreak--- (242) Based on the Gartner segment Application Platform Software (which broadly
         corresponds to the IDC segment for DCAPs), the combined market share of the
         Parties at the EEA level is [40-50]%: IBM ([30-40]%), Red Hat ([5-10]%).177
5.2.2.1.           Notifying Party’s views
(243) In the Notifying Party’s view, the Transaction is unlikely to raise any unilateral
         effects concerns in the possible market for DCAPs for the reasons set out
         below.178
(244) First, the Notifying Party submits that the Parties’ revenue-based market shares
         are moderate, and the increment brought by the Transaction is very small.
         According to the Parties, in any event, their revenue-based market shares are
         overestimated as the IDC/Gartner methodology fails to capture the competitive
         strength of (i) Microsoft’s .NET framework179 and (ii) numerous free open-source
         alternatives.180 The Notifying Party argues that the most widely used application
         servers are in fact free open source products with IBM’s WAS and Red Hat’s
         JBoss constituting a small percentage of the application servers in use.
(245) Second, according to the Notifying Party, WAS and JBoss are not close
         competitors. The Notifying Party submits that both Parties’ application servers
         are Java EE-compliant but their offerings are significantly differentiated and
         target different use cases:
         (a)       WAS is heavyweight and JBoss is lightweight;181
         (b)       WAS is a “sophisticated” system of records, JBoss EAP only has basic
                   system of records capabilities;182
         (c)       WAS and JBoss have different technical characteristics;
         (d)       WAS and JBoss do not have the same closest competitors.183
177 Using the Parties’ best estimates, WAS’ market share in 2018 is [20-30]% in value and [20-30]% in
    volume, while JBoss’ market share is [5-10]% in value and [5-10]% in volume.
178 Form CO, paragraphs 345-414.
179 IDC’s share data do not accurately capture Microsoft’s application server software offered as part of
    Microsoft’s pervasive .NET framework, while Gartner does not track Microsoft’s .NET at all. This is
    because .NET is not a separate product but a framework built into Microsoft Windows.
180 Free open source alternatives are e.g. Apache Tomcat, Spring on Tomcat, GlassFish application
    servers and their derivatives. Since these offerings do not generate revenues, their competitive position
    is better reflected in volume based market shares.
181 According to the Notifying Party, WAS is a proprietary, “heavyweight” solution that is more suited to
    traditional, large on-premises workloads that require greater functionality and customisation. JBoss
    EAP is a highly-modular, open source solution that is designed for transitioning workloads to the
    cloud.
182 The Notifying Party identified 3 different use cases to which DCAPs can cater: (i) workloads which
    require extensive and sophisticated back-end capabilities (high availability and cluster management,
    legacy integration, performance and optimisation, standards support), (ii) workloads which do not
    require one or more of these four back-end capabilities, and (iii) front end workloads. In the Notifying
    Party’s view, […]. The Notifying Party considers that there is competitive interaction between WAS
    and JBoss possibly only with regard to […].
183 The Notifying Party submits that WAS’ closest competitors are […]. JBoss competes primarily
    against other open source options, such as […], as well as offers from public cloud providers (e.g.,
                                                          44
 ---pagebreak--- (246) According to the Notifying Party, this is reflected in IBM’s and Red Hat’s win-
        loss data, which shows that WAS and JBoss EAP rarely compete.184
(247) Third, in the Notifying Party's view, unpaid open source application servers pose
        a significant competitive constraint. The Notifying Party considers that customers
        of DCAPs are sophisticated companies and open source enables them to self-
        support (thus removing the need to procure commercial support). The Notifying
        Party further submits that customers also have the possibility to procure
        commercial support for free open source DCAPs from third parties.185
(248) Fourth, the Notifying Party argues that traditional application servers, and in
        particular Java EE application servers of the kind offered by IBM, are rapidly
        becoming obsolete, as the trend is away from “heavy” on-premises application
        servers toward lighter weight, open source options and, increasingly, middleware-
        as-a-service provided directly by public cloud providers (e.g. AWS, Microsoft,
        Google). In addition, the Notifying Party argues that frameworks alternative to
        Java are increasingly important (e.g., PHP-, Python-, and Ruby-based application
        servers and platforms). According to the Notifying Party, customers enjoy a
        considerable range of application server options, including alternative
        frameworks and cloud-based (Sofware as a Service (SaaS)/Platform as a Service
        (SaaS)) offerings, whereby the choice of application server and vendor is based
        on the application’s needs.
5.2.2.2.          Commission’s assessment
(249) The Commission considers that, for the reasons set out below, the Transaction
        does not raise serious doubts as to its compatibility with the internal market on the
        potential market for DCAPs as a result of horizontal non-coordinated effects.
(250) First, the increment brought by the Transaction is small. Based on IDC, the
        Transaction will result in a small global increment of [0-5]% in the possible
        worldwide market for DCAPs (and [0-5]% in the EEA). Based on Gartner, the
        increment of the Transaction is [5-10]%, while based on Parties’ own estimates of
        their market shares, the increment is [5-10]%.186
(251) Second, the market investigation provided mixed results as to whether WAS and
        JBoss compete closely for the same use cases/types of applications.
    […]), as well as offers from […], and custom options that can be created by forking open source
    middleware (including Red Hat’s free, community-based application server, WildFly.
184 According to the Notifying Party, JBoss EAP competed with WebSphere for only […]% of
    WebSphere opportunities in 2017 and […]% of the WebSphere opportunities in 2018.
185 The Notifying Party submits that a significant number of third parties provide support for open source
    application platforms. Rogue Wave, MuleSoft and Tomitribe, for example, provide support for Tomcat
    in a similar way to Red Hat and Dell EMC’s Pivotal Tomcat offerings. Many other third parties
    provide up to date distributions and assistance, without necessarily providing full patch level support.
    Those third-party providers that offer support for Do-It-Yourself software add further competitive
    pressure on Red Hat and its competitors.
186 The Commission attempted to carry out a market reconstruction in order to confirm the market shares
    in the possible market for DCAPs given the discrepancies between the market shares based on
    IDC/Gartner and the Parties' own estimates. However, the Commission did get sufficient replies to
    have meaningful results because certain third parties could not provide the data as requested.The
    reason is that certain third parties do not separately track their revenues derived from DCAPs (when
    they are sold as part of other offerings).
                                                         45
 ---pagebreak--- (252) The market results indicate that there is a wide range of functionalities and use
        cases which DCAPs can support, depending on customers’ needs and preference.
        A competitor expressed the view that customers do not distinguish between back-
        end workloads and front-end workloads but “in general customers are looking for
        an application server platform that supports the Java EE APIs and that is
        generally applicable to the wide range of workloads found typically in a large
        organisation”.187 Customers responding to the market investigation confirm that
        their DCAPs choice depends on their technology decisions and needs when
        customers define the application stack.
(253) Against that background, a number of market participants indicated that
        WebSphere and JBoss closely compete because both products are Java EE-
        compliant.188 According to customers: “Both platforms [WAS and JBoss]
        provide Java EE compliant hosting environments for both front and back-end
        applications”.189
(254) However, some respondents nevertheless point out that there are some technical
        differences between WebSphere and JBoss (and other Java EE complaint
        DCAPs). One customer explained that “[they] continue to use Websphere for
        applications […] where high availability and extremely heavy load”. 190 A
        competitor explained that “Red Hat is more suited for modern architecture (e.g.
        cloud and microservices), while WAS is more [suited for] traditional on-premise
        workloads”.191
(255) Furthermore, the win-loss data of the Parties indicates that IBM and Red Hat
        rarely compete for the same opportunities with regard to DCAPs. In 2017, JBoss
        competed with WAS for […]% of WAS opportunities and in 2018 for […]% of
        WAS opportunities.192
(256) Third, the results of the market investigation strongly indicate that there will
        remain sufficient alternative providers post-Transaction to maintain the same
        level of competition on the market for DCAPs. Even within the narrow Java EE
        space, there are a number of credible alternatives to WAS and JBoss which are
        well suited to support a range of use cases. According to competitors and
        customers, the most prominent alternatives are Weblogic (Oracle), Tomcat and
        Glassfish. Competitors and customers also mention Pivotal tc Server Jetty,
        Wilfdly, OpenLiberty and a large number of smaller alternatives (e.g. Apache
        Geronimo, Jonas, Resin, Blazix etc.).193 The majority of customers which replied
        to the market investigation already today use in parallel more than one DCAP
        (some customers have more than three or four DCAPs).194
187 See replies to Questionnaire Q1 to competitors, question 14.1.
188 See replies to Questionnaire Q2 to customers, question 6.
189 See replies to Questionnaire Q2 to customers, question 6.1.
190 See replies to Questionnaire Q1 to competitors, question 14.1.
191 See replies to Questionnaire Q1 to competitors, question 6.
192 This is in line with the Commission’s analysis of the win-loss data of the Parties, according to which in
    2018, JBoss competed with WAS for […]% of WAS’ opportunities and OpenShift (Red Hat’s
    Container Infrastructure Software) in […]% of WAS’ opportunities. In 2018, […] competed for […]%
    of WAS’ opportunities, while […] competed for […]% of the opportunities.
193 See replies to Questionnaire Q2 to customers, question 6.2.
194 See replies to Questionnaire Q2 to customers, question 4.
                                                        46
 ---pagebreak--- (257) Fifth, the market investigation generally confirms that Java EE DCAPs such as
        WAS and JBoss are facing increasing competition from alternative platforms.
        Java EE (and in particular DCAPs such as WAS and Weblogic which are more
        suited for legacy applications) are becoming less relevant as customers move to
        newer technologies or application architectures (e.g. DCAPS for applications
        built as a system of micro-services, container infrastructure software etc.). There
        are also alternative platforms which are gaining in prominence (e.g. Springboot).
        According to a competitor: “Java app server market is effectively a legacy market
        which is slowly declining. Java apps servers are rarely used for new workloads”
        195. Oracle explained that “it is a fast-moving area with many alternative
        offerings, whereby developers are often attracted to the new “flavour of the day”
        platforms such as e.g. Node.js”.196
(258) Sixth, customers consider that “this is a well populated market segment” and that
        “there will remain a rich, competitive marketplace that will include proprietary
        and open source solutions outside of IBM and Red Hat”. Furthermore, the
        majority of customers which responded to the market investigation consider that
        the impact of the Transaction on the level and intensity of competition on the
        DCAPs market is neutral.197
(259) In addition to the many remaining proprietary and supported open source DCAPs,
        it can also be noted there are a number of free and unsupported open source
        DCAPs although, as explained in paragraph (37) above, the market investigation
        indicated that such free and unsupported open source DCAPs are considered as
        credible alternatives to proprietary or supported open-source DCAPs only for
        low-risk use cases but not for mission-critical appications.198 However, based on
        the Notifying Party's submission and as confirmed by the market investigation,
        customers using open source DCAPs can and do procure commercial support
        either directly from vendors or from third parties specialised in providing
        commercial support for open source software such as Rogue Wave.199 According
        to a competitor, commercial support is available for every open source DCAP.200
(260) Therefore, the Commission considers that the merged entity will continue to face
        strong competitive constraints from alternative providers post-Transaction and
        competition on the possible market for DCAPs will not decrease as a result of the
        Transaction.
5.2.3. Business Process Management Suites
(261) The market shares of the Parties and their competitors in the Gartner segment for
        BMP Suites are presented in Tables 4-5.
195 See replies to Questionnaire Q1 to competitors, question 13.
196 Minutes of call with Oracle, 9 April 2018.
197 See replies to Questionnaire Q2 to customers, question 60.
198 See replies to Questionnaire Q2 to customers, question 15.
199 See replies to Questionnaire Q2 to customers, question 16.
200 See replies to Questionnaire Q2 to customers, question 15.1.
                                                       47
 ---pagebreak---  ---pagebreak---          lightweight, very flexible, and more technically oriented model driven
         environment.
(265) With respect to their target audience, in the Notifying Party’s view, IBM BPM is
         considered to be […], while Red Hat Process Automation Manager is considered
         to be […]. This is because Red Hat Process Automation Manager requires […].202
(266) The Notifying Party submits that in terms of feature set, IBM BPM includes a
         wider set of functionality to support business process creation and execution
         across a large organization, including: reusable templates, collaborative authoring
         up to unlimited process authors and end-users, and real-time reporting and
         analytics features to help refine business processes For these reasons, IBM BPM
         is better-positioned to cater to large-scale deployments compared to Red Hat
         Process Automation Manager.
(267) In the Notifying Party’s view, Red Hat views […] as its strongest competitors, as
         they are leading providers of business process management suites, rated highly in
         analyst reports, and their products are often together on the shortlist when
         potential customers are considering to procure these products, even though their
         functionalities may be more closely comparable to IBM BPM. Red Hat does not
         view IBM as a close competitor, due to increasing customer emphasis on […].
         IBM considers its main competitors to be […].
(268) Third, the Notifying Party submits that a wide range of competitors will remain
         post-Transaction such as Oracle ([5-10]%), OpenText ([5-10]%), Pegasystems
         ([5-10]%), Software AG ([0-5]%), and K2 ([0-5]%). According to the Notifying
         Party, recent entrants in BPM offerings include Amazon, Aurea, Axon,
         BonitaSoft, BPM'online, Ultimus as well as Whitestein. Bizagi and BonitaSoft are
         significantly expanding […].
5.2.3.2.          Commission’s assessment
(269) The Commission considers that, for the reasons set out below, the Transaction
         does not raise serious doubts as to its compatibility with the internal market on the
         potential market for BPM Suites as a result of horizontal non-coordinated effects.
(270) First, the increment brought by the Transaction is very small. As shown in Tables
         4-5 above, the Transaction results in an increment of [0-5]% at the worldwide and
         [0-5]% at the EEA-wide level.
(271) Second, a majority of customers responding to the market investigation consider
         that the Parties are not close competitiors with regard to BPM Suites and there
         will remain sufficient alternative providers post-Transaction such as Appian,
         PegaSystems, Oracle, OpenText, TIBCO and others.203 Furthermore, a majority
         of customers and competitors that responded to the market investigation
202 To deliver an application solution using Red Hat Process Automation Manager, custom Java
    development is typically required to connect the application to other systems, to create end-user
    interfaces and to perform common customizations.
203 See replies to Questionnaire Q2 to customers, questions 20, 21, 22.
                                                       49
 ---pagebreak---  ---pagebreak---  ---pagebreak--- 5.2.4.2.          Commission’s assessment
(278) The Commission considers that, for the reasons set out below, the Transaction
        does not raise serious doubts as to its compatibility with the internal market on the
        potential market for Integration Software as a result of horizontal non-coordinated
        effects.
(279) First, the increment brought by the Transaction is very small. As shown in Tables
        6-8 above, the Transaction results in an increment of [0-5]% at the worldwide and
        [0-5]% at the EEA-wide level. The increment on the possible sub-segment for
        API Management is [5-10]% at the worldwide level for 2017.
(280) Second, a majority of customers responding to the market investigation consider
        that the Parties are not close competitiors with regard to Integration Software and
        API Management Software and there will remain sufficient alternative providers
        post-Transaction such as Oracle, MuleSoft, Apigee, TIBCO, Dell Boomi, WSO2,
        CA Technologie, Software AG and others.206 According to a customer, there are
        “many vendors in this dynamic market, and plenty of alternatives”.207
(281) Furthermore, a majority of customers and competitors that responded to the
        market investigation expressed the view that the Transaction will have a neutral
        impact on competition in the possible market for Integration Software and its
        possible sub-segment for API Management Software.208
(282) Therefore, the Commission considers that the merged entity will continue to face
        strong competitive constraints from alternative providers post-Transaction and
        competition on the possible market for Integration Software will not decrease as a
        result of the Transaction.
5.2.5. Event-Driven Middleware
(283) The market shares of the Parties and their competitors in the IDC segment for
        Event-Driven Middleware are presented in Tables 9-10.
206 See replies to Questionnaire Q2 to customers, questions 23, 24, 25.
207 See replies to Questionnaire Q2 to customers, question 23.
208 See replies to Questionnaire Q2 to customers, question 60; replies to Questionnaire Q1 to competitors,
    question 67.
                                                       52
 ---pagebreak---  ---pagebreak---  ---pagebreak---         on top of Kafka. According to the Notifying Party, […]. The Notifying Party
        submits that in comparison to Red Hat AMQ, IBM MQ comprises key technical
        differentiations including encryption at rest, support for XA transactions, once
        and once only delivery of messages, and both proven scalability and high
        availability, beyond any comparison with AMQ. In addition IBM MQ is
        supported on a wider variety of platforms including as a physical appliance.
(288) The Notifying Party considers that the rapid growth in real-time use cases is a
        recent development and has the potential to be highly disruptive to the way
        customers approach and build their event-driven middleware solutions: they now
        have a wider range of technology choices from which to select the best fit for
        their requirements, depending on the relative importance of guaranteed delivery
        or real-time event streaming. This is likely to drive a shift in technology choices
        as customers review their use cases against the offerings available from different
        vendors (such as Microsoft (Event Hubs), TIBCO (Messaging Apache Kafka
        Distribution), and Stream.io, as well as the Apache Kafka open source project).
(289) Third, the Notifying Party submits that a wide range of competitors will remain
        post-Transaction such as Amazon ([20-30]%), TIBCO ([10-20]%), Openet ([0-
        5]%), and Unicom Systems ([0-5]%). In addition, in the Notifying Party’s view,
        barriers to entry are low, as evidenced by the high number of new market
        entrants, e.g. Apache Kafka Streaming, Amazon Kinesis Analytics, and eBay
        Pulsar.
5.2.5.2.          Commission’s assessment
(290) The Commission considers that, for the reasons set out below, the Transaction
        does not raise serious doubts as to its compatibility with the internal market on the
        potential market for Event-Driven Middleware as a result of horizontal non-
        coordinated effects.
(291) First, the increment brought by the Transaction is very small. As shown in Tables
        9-10 above, the Transaction results in an increment of [0-5]% at the worldwide
        and [0-5]% at the EEA-wide level. Under the Gartner segment for Message-
        Oriented Middleware, the increment brought by the Transaction is still neglible
        ([0-5]% at the worldwide and [0-5]% at the EEA level). In addition, even though
        under the Gartner segment, the Parties’ combined market shares are [50-60]% at
        the worldwide and [50-60]% at the EEA level, the market shares of IBM have
        been substantially declining over the period 2016-2018 ([60-70]% in 2016 to [50-
        60]% in 2018 in the EEA). Over the same period, the market shares of
        competitors (e.g. AWS) have been increasing substantially (from [0-5]% in 2016
        to [10-20]% in 2018 in the EEA).
(292) Second, a majority of customers responding to the market investigation consider
        that the Parties are not close competitiors with regard to Event-Driven
        Middleware and there will remain sufficient alternative providers post-
        Transaction such as Amazon Web Services (“AWS”), TIBCO, Oracle, Apache
        Kafka, Microsoft and others.210 According to a customer, “there are sufficient
        alternative credible providers which offer event driven middleware with event
210 See replies to Questionnaire Q2 to customers, questions 26, 27, 28.
                                                       55
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak--- 5.2.7.2.          Commission’s assessment
(311) The Commission considers that, for the reasons set out below, the Transaction
        does not raise serious doubts as to its compatibility with the internal market on the
        potential market for Software-Defined Storage Controller Software (and any
        possible sub-segment thereof) as a result of horizontal non-coordinated effects.
(312) First, the increment brought by the Transaction is very small. As shown in Tables
        15-16 above, the Transaction results in an increment of [0-5]% at the worldwide
        level and [0-5]% at the EEA-wide level.
(313) Second, a majority of customers responding to the market investigation consider
        that the Parties are not close competitiors with regard to Software-Defined
        Storage Controller Software. Furthermore, the Parties’ activities do not overlap
        according to Gartner’s segmentation (IBM’s products fall within the Management
        Software-Defined Storage subsegment, and Red Hat’s SDS products fall within
        the Infrastructure Software-Defined Storage subsegment).219Based on the market
        investigation results, there will remain sufficient alternative providers post-
        Transaction such as VMware, Dell/EMC, HPE, NetApp, Nutanix, SUSE, Hitachi,
        AWS, Microsoft and others.220 According to a customer, “there’s a healthy
        competition in the SDS market”.221
(314) Furthermore, a majority of customers and competitors that responded to the
        market investigation expressed the view that the Transaction will have a neutral
        impact on competition in the possible market for Software-Defined Storage
        Controller Software (and any possible sub-segment thereof).222
(315) Therefore, the Commission considers that the merged entity will continue to face
        strong competitive constraints from alternative providers post-Transaction and
        competition on the possible market for Software-Defined Storage Controller
        Software (and any possible sub-segment thereof) will not decrease as a result of
        the Transaction.
5.2.8. Container Infrastructure Software
(316) The market shares of the Parties and their competitors in the IDC segment for
        Container Infrastructure Software are presented in Table 17.
Table 17 – Container Infrastructure Software (Worldwide, 2015-2017)223
219 See Form CO, paragraph 561.
220 See replies to Questionnaire Q2 to customers, questions 32, 33, 34.
221 See replies to Questionnaire Q2 to customers, question 32.
222 See replies to Questionnaire Q2 to customers, question 60; replies to Questionnaire Q1 to competitors,
    question 67.
223 The Notifying Party explained that IDC does not systematically report submarket-level data. The
    Notifyng Party sourced worldwide shares of sales for 2015 – 2017 for the Container Infrastructure
    Software submarket from an ad-hoc IDC report, published in December 2018. The Notifying Party
    submits that a similar report containing 2018 data is not currently available. See Notifying Party’s
    response to the Commission’s RFI 22 of 18 June.
                                                       60
 ---pagebreak---  ---pagebreak---          significant rate.226 These competing offerings, as well as those of recent and new
         entrants to the market, such as Microsoft, in the Notifying Party’s view, will
         provide an increasingly strong competitive constraint on the combined entity
         post-Transaction.
(322) Fourth, according to the Notifying Party, the Parties’ offerings do not compete
         closely as they address different customer needs and use cases.227 The Notifying
         Party submits that Red Hat’s OpenShift is a robust platform for application
         development and deployment in any cloud environment and is positioned for use
         as a “run anywhere” container platform. By contrast, IBM’s Cloud Private is
         primarily focused on […].
(323) Fifth, the Notifying Party considers that the container technology and the
         Container Infrastructure Software segment are nascent, evolving areas with
         constant new entry and a large number of players across a variety of technologies.
         While Kubernetes is recognised as the industry leader for orchestration, there is
         nonetheless still competitive pressure from non-Kubernetes services such as
         Docker Swarm or Dell/EMC’s Pivotal Cloud Foundry.
(324) Sixth, given the open source nature of container management infrastructure
         software, including Kubernetes, Docker Swarm, and Apache Mesos, “DIY”
         options whereby enterprises can download and develop/manage their own
         Kubernetes based container management solutions also provide a competitive
         constraint on paid-for container management providers.
5.2.8.2.           Commission’s assessment
(325) The Commission considers that, for the reasons set out below, the Transaction
         does not raise serious doubts as to its compatibility with the internal market on the
         potential market for Container Infrastructure Software as a result of horizontal
         non-coordinated effects.
(326) First, the Commission considers that even on the basis of the market shares
         reported by IDC (see Table 17), the increment brought by the Transaction is small
         ([0-5]%). Furthermore, the Parties’ market shares have been declining over the
         past three years, while the market for Container Infrastructure Software has been
         growing expodentially as evidenced by industry reports (see paragraph (321)).
(327) The results of the market investigation also confirm that IBM’s role in the
         Container Infrastructure Software space is small. According to customers: “IBM’s
         products in this space are not credible alternatives and do not represent
226 According to the Notifying Party, In 2016, AWS’ revenues grew by […]%, Google by […]%, Docker
    by […]% and VMware by […]%. See also IDC, Worldwide Container Infrastructure Software Market
    Shares, 2017: Containers Poised for Growth.
227 The Notifying Party argues also that IBM Cloud Kubernetes Service does not directly compete against
    Red Hat OpenShift. IBM views its Kubernetes Service’s main competitors as […]. In those public
    cloud hosted services, the Kubernetes Service is usually deeply integrated with the cloud services but
    limiting the customer’s portability of applications outside of the specific cloud. Red Hat’s OpenShift
    offering, whether run by the customers or by Red Hat as a managed service, focuses on providing
    portability of the applications across the cloud providers. While both utilize the same core technology,
    the value provided to the customer is significantly differentiated. Red Hat’s largest competitors in this
    area are companies that provide that same abstraction such as […].
                                                         62
 ---pagebreak---         meaningful competition” and “IBM today is not a major / largely relevant
        Kubernetes / Container Platform provider in the broader industry”.228
(328) Second, the results of the market investigation confirm that the Parties are not
        close competitors with regard to Container Infrastructure Software and there will
        remain sufficient alternative providers post-Transaction such as Docker,
        Dell/EMC’s Pivotal/VMware, Rancher, and Canonical, SUSE, AWS, Microsoft,
        Google.229 As demonstrated at Table 17 above, these competitors entered the
        market for Container Infrastructure Software in 2016 and their market shares have
        been expondentially growing.
(329) Customers and competitors expressed the view that this is a nascent market with
        many new competing offerings. This is confirmed by the market shares data set
        out in Table 17 above. Over the period 2016-2017, a number of strong
        competitors entered the market with their own Container Infrastructure Software
        offerings such as Docker, AWS, Google, VMware and their market shares have
        been consistently increasing. Therefore, these new entrants will continue to exert
        growing competitive pressure on the merged entity post-Transaction.
(330) During the market investigation, customers expressed the views that “this market
        is very active. New products and versions are coming from different providers”;
        “[the] market is developing, new alternatives are on the horizon”. Customers
        also state that “Container orchestration is a growing segment and there are more
        options in the market. Most of these options are based in Kubernetes”. 230
        Accoridng to a customer, “[the company] has experienced this as an emerging
        and rapidly evolving market with a significant amount of competitors (with and
        without paid solutions/support)”.231
(331) With regard to Kubernetes-based Contrainer Infrastructure Software, a customer
        considers that “Red Hat OpenShift is one of the Kubernetes distributions. There
        will be a number Kubernetes distributions available in the market post-
        Transaction”. Another customer stated that “Container technology is quickly
        evolving. Multiple vendors offer specific products in this area, both on premise
        and in the public cloud. Although there is dominant technology (Kubernetes)
        there is no dominant vendor”.232 A number of respondents to the market
        investigation also consider that technologies other than Kubernetes (such as
        Docker or Cloud Foundry) play an important role in the market for Container
        Infrastructure Software.233
(332) Furthermore, a majority of customers and competitors that responded to the
        market investigation expressed the view that the Transaction will have a neutral
        impact on competition in the possible market for Container Infrastructure
228 See replies to Questionnaire Q2 to customers, question 35.
229 See replies to Questionnaire Q2 to customers, questions 35, 36, 37.
230 See replies to Questionnaire Q2 to customers, question 35.
231 See replies to Questionnaire Q2 to customers, question 35.
232 See replies to Questionnaire Q2 to customers, question 35.
233 See replies to Questionnaire Q2 to customers, questions 35, 36, 37.
                                                       63
 ---pagebreak---  ---pagebreak---  ---pagebreak--- (341) First, the increment brought by the Transaction is very small. As shown in Tables
        19-20 above, the Transaction results in an increment of [0-5]% at the EEA-wide
        level.
(342) Second, based on the Notifying Party’s submission, the Commission considers
        that the Parties are not close competitiors with regard to Network Management
        Software and there will remain sufficient alternative providers post-Transaction
        such as CA Technologies, HPE, Nokia and others.
(343) Therefore, the Commission considers that the merged entity will continue to face
        strong competitive constraints from alternative providers post-Transaction and
        competition on the possible market for Network Management Software (and any
        possible sub-segment thereof) will not decrease as a result of the Transaction.
5.2.10. Server Operating Systems
(344) Red Hat offers Red Hat Enterprise Linux (“RHEL”), a Linux distribution that
        accounts for some […]% of Red Hat’s overall revenues (in FY 2018). The RHEL
        source code is open source and therefore freely available; Red Hat instead charges
        for annual subscriptions that include technical support, updates, security, and IP
        protection. In FY 2018, Red Hat’s RHEL revenues were USD […] (EUR […]), of
        which approximately USD […] (EUR […]) were generated in the EEA.
(345) Red Hat also contributes to the CentOS community, which distributes a Linux
        distribution for developers based on RHEL and to the Fedora community which
        distributes a Linux distribution based on the latest technology from the Linux
        kernel community. Red Hat does not sell support subscriptions for CentOS or
        Fedora and derives no revenue from these activities.
(346) IBM is a minor player in server operating systems. Its operating systems are
        proprietary and based on either Unix or IBM’s own code base: z/OS, zVSE,
        zTPF, AIX, and IBM i. z/OS, zVSE, and zTPF run exclusively on IBM’s z
        processors, while AIX and IBM i run exclusively on IBM’s POWER processor
        architecture. Note however that IBM’s System z and POWER System servers are
        also capable of running a variety of Linux distributions. Canonical, SUSE, and
        Red Hat have certified their operating systems (i.e., Ubuntu, SUSE Enterprise
        Linux, and RHEL) for IBM’s servers.
(347) The market shares of the Parties and their competitors in the Gartner segment for
        All Operating Systems (paid only) are presented in Tables 20-21.237
237 There is no horizontally affected market on the basis of a possible market including both paid and
    unpaid Server Operating Systems. On such a market, the combined market shares of the Parties are
    [10-20]% for 2018 at the worldwide level (IBM: [0-5]%; Red Hat: [10-20]%).
                                                      66
 ---pagebreak---  ---pagebreak--- (350) Second, the Notifying Party also refers to Gartner which reports separate
        segments for IBM’s proprietary operating systems. According to the Notifying
        Party, this reflects the absence of overlap between the Parties’ operating systems
        products.
5.2.10.2.        Commission’s assessment
(351) The Commission considers that the Transaction does not raise serious doubts as to
        its compatibility with the internal market in the market for Server Operating
        Systems (and any sub-segment thereof) as a result of horizontal non-coordinated
        effects.
(352) The Commission considers that IBM’s proprietary OS and Red Hat’s Linux
        distribution, i.e. RHEL, address different use cases and do not compete in any
        meaningful way. Based on the Notifying Party’s submission, IBM is a de minimis
        vendor of proprietary server operating systems that run exclusively on IBM’s z
        processors and IBM’s POWER processor architecture. IBM’s proprietary servers
        are also capable of running Linux distributions, which are nevertheless deployed
        for use with different applications. Therefore, even if only considering IBM’s
        installed customer base, there does not appear to be any significant competitive
        interaction between Red Hat and IBM.
5.3.    Vertical and conglomerate non-coordinated effects
5.3.1. Affected markets
(353) Based on 2018 data, there are 18 IDC and/or Gartner market segments239 in which
        the individual and/or combined market shares of the Parties exceed 30% at the
        worldwide and/or EEA level as described in Table 22 below.240 Actually, in each
        market segment where the combined market shares exceed 30%, it is mainly due
        to a strong position of one of the Parties, which already pre-Transaction holds a
        market share above 30%. As indicated in this Table, in 15 of these segments it is
        IBM which has an individual market share in excess of 30%, and in 3 segments it
        is Red Hat.
239 In some cases both the IDC and the broadly corresponding Gartner segments are affected. In these
    cases we have kept the IDC denomination.
240 Six of these 18 segments are also horizontally affected. They are indicated in italic in Table 17. The
    horizontal overlaps between the Parties on these segments are assessed in section 5.2 above.
                                                        68
 ---pagebreak---  ---pagebreak--- (356) Given the potentially very high number of related neighbouring markets in the IT
        stack, it would be unrealistic to assess each non-horizontal link between any
        potential product market listed in Table 22 above and any neighboring market
        where one of the Parties is active.
(357) Instead, in this decision, the Commission undertakes an overall assessment, first,
        whether the merged entity would have the ability to leverage a strong position in
        any of the potential markets listed in Table 22 into any other market(s) where one
        of the Parties is active, second, whether it would have the incentive to do so, and
        third, whether such a foreclosure strategy would have a significant detrimental
        effect on competition in those latter markets, thereby significantly impeding
        effective competition.243 All three factors will be examined together as they are
        closely intertwined.244 This assessment is done in turn for each market listed in
        Table 22.
(358) Section 5.3.3 first looks at whether the merged entity would have the ability and
        incentive to leverage the potentially strong position of Red Hat Enterprise Linux
        in a market for server operating systems into neighbouring markets where IBM is
        active and thereby foreclose competitors. Section 5.3.4 carries out a similar
        assessment looking at the potentially strong position of Red Hat OpenShift in a
        market for container infrastructure.
(359) Section 5.3.5 then looks at the server markets and evaluates whether the merged
        entity would have the ability and incentive to leverage the potentially strong
        position of IBM’s Mainframe and Power servers into neighbouring markets where
        Red Hat is active. As the Commission heard concerns that IBM (through its role
        as global leader in IT services and IT consultancy) may substantially influence
        end customers’ purchasing decisions for software products in favour of Red Hat
        products and to the detriment of competing vendors’ products post-transaction,
        Section 5.3.6 assesses whether the merged entity would have the ability and
        incentive to leverage a potentially strong position of IBM in any IT services
        market into neighbouring markets where Red Hat is active. And finally, section
        5.3.7 covers all the other non-horizontally affected markets where IBM has a
        market share in excess of 30% and evaluates whether the merged entity would
        have the ability and incentive to leverage the potentially strong position of IBM
        into neighbouring markets where Red Hat is active.
(360) Before delving into the assessment for each potential market, section 5.3.2 first
        briefly describes the potential practices in the IT sector by way of which the
        Commission considered that the merged entity could potentially leverage its
        position in one market into another one.
5.3.2. Potential theories of harm
(361) The Non-horizontal Merger Guidelines recognise that the main concern in the
        context of non-horizontal concentrations is that of foreclosure. In particular, the
        combination of products in related markets may confer on the merged entity the
243 Non-horizontal Merger Guidelines, paragraph 32.
244 Non-horizontal Merger Guidelines, paragraph 32.
                                                    70
 ---pagebreak---         ability and incentive to leverage a strong market position from one market to
        another by means of tying or bundling or other exclusionary practices.245
(362) In assessing the likelihood of conglomerate effects, the Commission examines,
        first, whether the merged firm would have the ability to foreclose its rivals,
        second, whether it would have the economic incentive to do so and, third, whether
        a foreclosure strategy would have a significant detrimental effect on competition.
        In practice, these factors are often examined together as they are closely
        intertwined.246
(363) Mixed bundling refers to situations where the products are also available
        separately, but the sum of the stand-alone prices is higher than the bundled
        prices.247 Tying refers to situations where customers that purchase one good (the
        tying good) are required also to purchase another good from the producer (the tied
        good). Tying can take place on a technical or contractual basis.248 Tying and
        bundling as such are common practices that often have no anticompetitive
        consequences. Nevertheless, in certain circumstances, these practices may lead to
        a reduction in actual or potential rivals’ ability or incentive to compete.
        Foreclosure may also take more subtle forms, such as the degradation of the
        quality of the standalone product.249 This may reduce the competitive pressure on
        the merged entity allowing it to increase prices.250
(364) In order to be able to foreclose competitors, the merged entity must have a
        significant degree of market power, which does not necessarily amount to
        dominance, in one of the markets concerned. The effects of bundling or tying can
        only be expected to be substantial when at least one of the merging parties’
        products is viewed by many customers as particularly important and there are few
        relevant alternative for that product.251 Further, for foreclosure to be a potential
        concern, it must be the case that there is a large common pool of customers,
        which is more likely to be the case when the products are complementary.252
(365) The incentive to foreclose rivals through bundling or tying depends on the degree
        to which this strategy is profitable.253 Bundling and tying may entail losses or
        foregone revenues for the merged entity.254 It may also increase profits by gaining
        market power in the tied goods market, protecting market power in the tying good
        market, or a combination of the two.255
(366) It is only when a sufficiently large fraction of market output is affected by
        foreclosure resulting from the concentration that the concentration may
        significantly impede effective competition. If there remain effective single-
245 Non-horizontal Merger Guidelines, paragraph 93.
246 Non-horizontal Merger Guidelines, paragraph 94.
247 Non-horizontal Merger Guidelines, paragraph 96.
248 Non-horizontal Merger Guidelines, paragraph 97.
249 Non-horizontal Merger Guidelines, paragraph 33.
250 Non-horizontal Merger Guidelines, paragraph 93.
251 Non-horizontal Merger Guidelines, paragraph 99.
252 Non-horizontal Merger Guidelines, paragraph 100.
253 Non-horizontal Merger Guidelines, paragraph 105.
254 Non-horizontal Merger Guidelines, paragraph 106.
255 Non-horizontal Merger Guidelines, paragraph 108.
                                                     71
 ---pagebreak---         product players in either market, competition is unlikely to deteriorate following a
        conglomerate concentration.256 The effect on competition needs to be assessed in
        light of countervailing factors such as the presence of countervailing buyer power
        or the likelihood that entry would maintain effective competition in the upstream
        or downstream markets.257
(367) The Commission considered in particular two practices by way of which the
        merged entity could potentially leverage a strong market position in one market
        into another one and foreclose competitors in the latter.
(368) Anticompetitive (mixed) bundling or tying. The merged entity could for instance
        attempt to reduce its competitors’ ability to compete by offering a strong IBM or
        Red Hat product in one of the markets listed in Table 22, combined with one of
        the other Party’s products at a bundled price lower than the sum of the standalone
        prices. This could potentially lead to the anticompetitive marginalization of rivals
        selling stand-alone components (i.e., nonintegrated rivals) competing with the
        other Party’s product and to consumer harm, if the bundled offer was not
        replicable and the bundling strategy diverted sufficient demand from non-
        integrated rivals to make them unable to compete effectively.Degradation of
        interoperability. The merged entity could in theory selectively improve the
        interoperability between IBM and Red Hat products, while degrading the
        interoperability of the merged entity’s products with third party products. This
        relative degradation of interoperability could for instance take the form of a
        refusal by the merged entity to certify one of its strong products in one of the
        markets listed in Table 22 when combined with third party hardware or software,
        whereas it would be certified to run with the competing IBM/Red Hat product.
        Certification is a common practice by which a vendor certifies its ability and
        willingness to fully support its product when combined with another product.
        Non-certification does not mean that the products will not be interoperable, just
        that full support would not be guaranteed unconditionally, in particular when the
        non-certified product is suspected to be the cause of the issue. If the merged entity
        has a significant degree of market power with the product that it selectively
        refuses to certify with a third party product, if there is a large common pool of
        customers for the individual products, and if cross-certification is an important
        consideration for customers, then such selective refusal to certify may potentially
        allow the merged entity to foreclose competitors.258
5.3.3. Server Operating Systems – Leveraging the potentially strong position of Red Hat
        Enterprise Linux into neighbouring markets where IBM is active
5.3.3.1.         Potential concern
(369) The Commission has assessed a potential competition concern whereby the
        merged entity would leverage RHEL’s potentially strong position in a plausible
        market for paid Linux server operating systems, into any other market(s) where
256 Non-horizontal Merger Guidelines, paragraph 113.
257 Non-horizontal Merger Guidelines, paragraph 114.
258 During the pre-notification phase the Commission received two complaints based on such a scenario.
    However, as these complaints relate to a current refusal to certify Red Hat Enterprise Linux (“RHEL”)
    when combined with third party products competing with Red Hat, these complaints largely relate to
    ongoing commercial disputes rather than to merger specific concerns.
                                                        72
 ---pagebreak---          IBM is active and thereby foreclose competitors, by means of one of the practices
         described in section 5.3.2.
(370) In particular, some competitors have suggested that the merged entity may try to
         leverage RHEL into (1) IBM’s servers, (2) IBM’s application software and (3)
         IBM’s cloud solutions (including public and private cloud).259,260
(371) In addition, Nutanix – a cloud computing software company – put forward a
         related complaint. According to Nutanix, Red Hat is already attempting to
         leverage the strong position of RHEL, by refusing to certify competing open
         source hypervisors such as Nutanix’s AHV and by denying support to RHEL
         customers who operate non-certified hypervisors. According to Nutanix,
         Nutanix’s open-source KVM-based Acropolis Hypervisor (“AHV”) competes
         directly with Red Hat’s open source KVM-based hypervisor solution (“RHV” or
         Red Hat Virtualization).
(372) Nutanix however acknowledged that this foreclosure strategy has so far only been
         partially implemented since powerful customers have been able to compel Red
         Hat to certify Nutanix’s products to run on RHEL on an ad hoc basis.
(373) According to Nutanix, the Transaction will increase the merged entity’s ability
         and incentive to foreclose its competitors in a market for open source hypervisors.
         This is because, post-Transaction, the merged entity will not only leverage its
         control over the certification process of Nutanix’s hypervisor (in combination
         with RHEL), but will also leverage its allegedly strong position in the provision
         of IT services and hardware, to steer customers to Red Hat’s own hypervisor, and
         away from non-certified open source hypervisors.261 However, the core of
         Nutanix’s complaint is about Red Hat refusing to certify competing open source
         hypervisors such as Nutanix’s AHV and denying support to RHEL customers
         who operate non-certified hypervisors. The claim by Nutanix that the merged
         entity would also leverage its allegedly strong position in the provision of IT
         services and hardware was added by Nutanix in a second stage in an effort to
         make its complaint merger specific.262
5.3.3.2.          Notifying Party’s view
(374) The Notifying Party submits that the merged entity will not have the ability and
         incentive to leverage RHEL’s potentially strong market position to boost IBM’s
         sales and foreclose IBM’s competitors in neighbouring markets, for the following
         reasons.
259 See replies to Questionnaire Q1 to competitors, questions 41 and 42. See also further submission by
    Oracle, dated 5 June 2019, in which it claims that the Transaction will increase both the ability and
    incentive of the merged entity to leverage Red Hat’s position in the enterprise Linux market to
    strengthen the merged entity’s position in the cloud infrastructure space.
260 Only IBM has meaningful cloud service activities and its corresponding share of sales are very small
    (<[5-10]% for Infrastructure-as-a-Service (“IaaS”), <[0-5]% for Platform-as-a-Service (“PaaS”), and
    <[0-5]% for Software-as-a-Service (“SaaS”)). IaaS can comprise either a public or private cloud
    infrastructure provided as a service (on a pay-as-you-go model). See Form CO, paragraph 296.
261 See Submission of Nutanix, Inc. dated 3 April 2019 and Responses from Nutanix dated 24 April 2019
    to Commission’s questions of 9 April 2019.
262 This is also apparent from the fact that the remedy advocated by Nutanix is that the merged entity
    commits to certify Nutanix’s AHV for use with RHEL.
                                                         73
 ---pagebreak---       As regards ability
(375) The Notifying Party argues that the merged entity will not have the ability to
        foreclose rivals by leveraging Red Hat’s position in server operating systems
        because Red Hat does not have sufficient market power in the market for server
        operating system, for the following reasons.
(376) In the first place, as explained in section 4.3.10 above, the Notifying Party
        considers that the relevant product market for operating systems should
        encompass all server operating systems, i.e., Windows (server), Linux, Unix,
        including any “descendants” thereof, such as Solaris, HP-UX and AIX, and other
        proprietary operating systems, such as IBM i, z/OS, and z/VSE. This product
        market definition is consistent with the IDC submarket for Core Operating
        Systems (i.e., server operating systems) as well as the Commission’s decisional
        practice.263 In such market, RHEL only represented [10-20]% of new server OS
        deployments in 2017 (i.e. volume market shares), Windows Server [30-40]%,
        unpaid Linux [30-40]%, SUSE [5-10]%.264 Even when excluding unpaid
        deployments, Red Hat had a market share of only [30-40]% in 2017. In terms of
        revenue (and therefore excluding free unsupported operating systems), based on
        Gartner, Red Hat had a market share of [10-20]% in 2018, whereas Microsoft had
        a market share of [50-60]%, Oracle [0-5]%, HPE [0-5]%, etc.
(377) In the second place, the Notifying Party argues, that even when considering only
        paid Linux distributions, RHEL faces strong competition from SUSE, Canonical
        (Ubuntu), Oracle Linux, and Amazon Linux.265
(378) In the third place, according to the Notifying Party, credible alternatives are
        particularly numerous in case of cloud deployments, as each public cloud
        platform offers several different (free and paid) alternatives to RHEL. Amazon
        and Oracle actually offer and support their own Linux distributions. These
        alternatives are close and supported substitutes to RHEL, as they are based on
        RHEL, and are generally offered at no additional cost to customers beyond
        computing time. Existing customers would likely switch to these native offerings
        in the event of practices unduly favoring IBM products in combination with
        RHEL, thus denying IBM the ability to foreclose competitors. For example, a
        customer that currently runs RHEL on an IBM rival’s public cloud could start
        using one of the many available alternatives to RHEL if IBM were to increase the
        price of RHEL sold through that IBM rival’s public cloud to try and favor its own
        public cloud offering.
(379) In the fourth place, the Notifying Party claims that Red Hat’s market power is
        further limited by the fact that RHEL is open source and therefore can be forked,
        i.e., a company may choose to take the open source code and develop it with
        community support under a different distribution.266
263 See Form CO, paragraph 704.
264 IDC, Worldwide Server Operating Environments Market Shares, 2017: Linux Fuels Market Growth
    (2018)
265 See Form CO, paragraph 885.
266 See Form CO, paragraph 847.
                                                  74
 ---pagebreak--- As regards incentives
(380) According to the Notifying Party, the merged entity would also not have the
         incentive to degrade RHEL’s interoperability (whether by changing RHEL’s
         source code or by refusing to certify RHEL) or to raise RHEL’s relative price
         when combined with third party products competing with IBM.
(381) First, according to the Notifying Party, this is because customers value choice and
         the ability to mix and match capabilities at each level of the IT stack that best
         match the compute and functional requirements of specific workloads (which
         very much diverges from one customer to another). As, according to the
         Notifying Party, there are credible competing alternatives to RHEL to which
         customers may turn, the merged entity would be more likely to lose sales of
         RHEL than to gain additional sales of the other product. This is even more so that
         often system integrators are involved to help satisfying the heterogenous needs of
         their customers.267
(382) Second, the incentive to engage in any anticompetitive exclusionary practices
         would be further reduced because, according to the Notifying Party, such
         practices would be perceived as hostile by Red Hat’s customers, developer
         community, and ecosystem partners, and would therefore alienate them. As Red
         Hat’s success relies both on the support of developers and the ecosystem partners
         (to be able to sell in a wide ecosystem), […].268
As regards the Nutanix complaint in particular
(383) The merged entity argues that neither Red Hat nor the merged entity has or will
         have the ability or the incentive to foreclose third-party hypervisors, for the
         following reasons.269
(384) First, the Notifying Party argues that certification is not a prerequisite or
         requirement for interoperability, and as a result cannot be used to foreclose
         competitors. Certification is just an expression by a commercial vendor that it is
         willing to support its products when used in combination with certain, identified
         other products
(385) Second, the Notifying Party argues that its pre-merger choice not to certify certain
         third parties hypervisors, including Nutanix’s AHV is not motivated by an
         anticompetitive objective to foreclose competitors but is driven by legitimate
         business considerations. In particular, Red Hat has so far decided not to certify
         Nutanix because […].
267 In particular, the Notifying Party explains that it would have no incentive to degrade RHEL’s
    interoperability with, or raise the relative price of RHEL sold through its public cloud rivals, to boost
    its own public cloud offering because diversion at the cloud environment level would likely be small
    relative to diversion between operating systems within the same cloud environment. This is because
    switching between Linux distributions within the same cloud environment is easier than switching
    cloud environments. See Form CO, paragraphs 886-888.
268 See Form CO, paragraph 848.
269 See Notifying Party’s response to submission by Nutanix, Inc. to the European Commission, 3 May
    2019.
                                                           75
 ---pagebreak--- (386) Third, the Notifying Party argues that Red Hat does not have the ability to
         foreclose third-party hypervisors, as it has no market power in server operating
         systems (see above).
(387) Fourth, the Notifying Party argues that the mere fact that Red Hat’s market share
         in an overall market for virtualisation software is below [0-5]%, shows that Red
         Hat has neither the ability nor the incentive to foreclose competition in
         hypervisors.270 The Notifying Party further argues that it is not appropriate to
         further segment virtualisation software into proprietary and supported open
         source virtualisation software, as argued by Nutanix.
(388) In fact, the Notifying Party explains that Red Hat certifies all the most important
         competing hypervisors VMware ESX and ESXi, Microsoft Hyper-V, and
         Google’s and AWS’s enclosed KVM-based hypervisors, showing that it has no
         incentive to foreclose competing hypervisors. According to the Notifying Party,
         together Microsoft Hyper-V and VMware ESX and ESXi account for more than
         [90-100]% of the hypervisors used. In contrast, AHV has a very small presence
         on premises or in clouds (estimated to less than [0-5]% by Red Hat), and given
         […], Red Hat has so far decided not to certify AHV.
(389) Fifth, the Notifying Party claims that just as Red Hat lacks the ability to use
         RHEL as a lever to foreclose competitors today, IBM will lack such ability to do
         so post-Transaction, as IBM has less than [10-20]% market share in any possible
         IT services market.
5.3.3.3.           Commission’s assessment
As regards the general theory of harm
(390) The Commission considers that the merged entity will most likely not have the
         ability to foreclose competition in other markets by leveraging RHEL’s
         potentially strong position in a plausible market for paid Linux server operating
         systems, into any other market(s) where IBM is active and thereby foreclose
         competitors, by means of one of the practices described in section 5.3.2..
         Moreover the Commission considers that the merged entity will also most likely
         not have the incentive to engage in any exclusionary practice. Therefore, it is
         unnecessary to assess in more detail whether such foreclosure strategy would
         have a significant detrimental effect on competition.
As regards ability
(391) First, the Commission considers that Red Hat most likely does not have a
         sufficient degree of market power to leverage its position with RHEL to foreclose
         competitors in other markets. Although it can be left open whether the market for
         server operating system would have to be further segmented between paid
         supported and unpaid unsupported and between families, the Commission
270 See Form CO, paragraphs 269-294. The Notifying Party explained that hypervisors only refer to the
    core technology enabling virtualization, and software vendors today no longer sell hypervisors alone
    but virtualization solutions that include host OS and management functions. Therefore, the Parties
    refer to virtualization software instead of hypervisors. For market shares, see IDC Worldwide Virtual
    Machine Software Market Shares, 2017: Virtualization Still Showing Positive Growth and Gartner
    Enterprise Infrastructure Software Market Share Tracker (Worldwide 2017).
                                                         76
 ---pagebreak---  ---pagebreak---  ---pagebreak---          very large common pool of customers between Red Hat other products and RHEL
         (most likely larger in terms of proportion than between IBM products and
         RHEL), which increases the potential for mixed bundling or degradation of
         interoperability to affect the demand for individual products.
(396) According to IDC, with the exception of the plausible market for paid Linux
         server operating system, Red Hat’s market share is the highest in container
         infrastructure software. However, even in this plausible market, Red Hat only had
         a market share of [30-40]% in 2017, in decline from its 2015 level of [60-70]%.
         This is despite the fact that according to a number of competitors, Red Hat
         already attempts to leverage its position with RHEL to advantage its own
         container infrastructure software, i.e. OpenShift. For instance Oracle explains that
         Red Hat “limits support when customers do not run RHEL with OpenShift in
         order to favour its own container technology”.276 The Commission considers that
         the strongly declining market share of OpenShift and the very low market shares
         of Red Hat’s other products is indicative of Red Hat’s lack of market power in
         operating systems to influence demand in neighbouring markets in favour of its
         own products.
(397) Second, the results of the market investigation show that only very few customers
         representing a very small minority considered that the merged entity may have the
         ability to leverage RHEL’s market position into another market where IBM is
         active.277
(398) Third, as regards specifically the potential concern that the merged entity may
         want to leverage the strong position of RHEL in paid Linux distributions into
         IBM’s cloud solutions (including public and private cloud), by degrading RHEL’s
         interoperability with, or raise the relative price of RHEL sold through its cloud
         rivals, the Commission considers that the merged entity would not have the
         ability to significantly foreclose competitors in any cloud services market.
(399) In the first place, cloud customers would have the option to use alternative Linux
         distributions with their preferred cloud providers as each public cloud platform
         offers several different (free and paid) alternatives to RHEL. For instance,
         Microsoft offers eight supported Linux distributions on Azure, but customers can
         also build or upload other Linux versions;278 AWS offers seven supported Linux
         distributions;279 Google Cloud platform offers seven supported Linux
         distributions.280 This includes their own free alternatives (offered at no additional
         cost to customers beyond computing time), which are increasingly being adopted.
         Amazon and Oracle offer and support their own Linux distributions based on
         RHEL. Google is known for using a derivative of Debian Linux. Azure uses an
         Ubuntu derivative. Red Hat expects that […], and with that will come the further
         growth of the public clouds' own free Linux distributions. The Commission
         therefore considers that existing cloud customers would have sufficient
         alternatives to switch to in the event of a relative price increase of RHEL on their
         cloud platform, a refusal to certify RHEL or any other degradation of
276 See Minutes of the call with Oracle of 9 April 2019.
277 See replies to Questionnaire Q2 to customers, question 42.
278 https://docs.microsoft.com/en-us/azure/virtual-machines/linux/endorsed-distros
279 https://aws.amazon.com/fr/mp/linux/
280 https://cloud.google.com/compute/docs/images#os-details
                                                        79
 ---pagebreak---          interoperability. This would significantly limit the ability of the merged entity to
         foreclose competitors.
(400) In the second place, the Commission notes that switching between cloud
         environments can be difficult, limiting further the ability of the merged entity to
         leverage RHEL to foreclose its cloud competitors. For example, many public
         cloud providers impose large switching costs, such as by charging for data
         mobility.281
As regards incentives
(401) First, the Commission acknowledges that IBM has made firm, public
         commitments to maintain and continue Red Hat’s open source business model
         and its neutral “Switzerland” strategy in working with third parties. Virginia
         Rometty, IBM’s Chairman and Chief Executive Officer, made clear her view that
         IBM must “preserve absolutely” Red Hat’s position as a neutral Switzerland with
         respect to third party partners.282 IBM expressly included this commitment in the
         Agreement and Plan of Merger (the “Agreement”). In the Recitals of the
         Agreement, IBM agreed to operate Red Hat as a distinct business unit and that
         Red Hat would “remain an open and neutral platform, partnering broadly with
         information technology participants […] and continuing to support the open
         source community.”283 And this is actually in line with IBM’s intent as stated in
         its internal documents. As reflected in IBM’s internal documents, IBM’s business
         case for the Transaction assumes that RHEL’s sales will grow. This requires
         maintenance of Red Hat’s neutral and open status, and its existing business
         model.284
(402) Second, although the Commission acknowledges that efforts are required to
         switch from one Linux OS to another one, the Commission considers that
         switching is feasible . This view is confirmed by the results of the market
         investigation. Even if most customers consider that switching from one Linux OS
         to another would not be easy or may even be very difficult, many customers
281 See study carried out for the European Commission by IDC and Arthur’s Legal entitled “
    Switching of Cloud Services Providers” available at https://publications.europa.eu/en/publication-
    detail/-/publication/898aeca7-647e-11e8-ab9c-01aa75ed71a1. Note that as stated in its
    Communication on ICT standardisation priorities for the Digital Single Market (“DSM”, April 2016),
    it is the Commission’s intention to promote the interoperability and data portability among cloud
    providers through facilitating the use of open source and the promotion of new cloud standards.
    Furthermore, since December 2017, the Commission established the DSM cloud stakeholders platform
    in order to facilitate the discussion among cloud stakeholders on technical and policy related aspects.
    Currently, in the context of the Regulation on the free flow of non-personal data (see https://eur-
    lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32018R1807), the DSM cloud stakeholders
    working group on data porting and switching of providers (SWIPO) is developing Codes of Conduct
    on data porting, with the purpose of facilitating the switching between cloud service providers.
282 See e.g., Seeking Alpha, International Business Machines Corp. (IBM) CEO Ginni Rometty on
    Acquisition of Red Hat (Transcript), October 29, 2018, https://seekingalpha.com/article/4215572-
    international-business-machines-corp-ibm-ceo-ginni-romettyacquisition-red-hat-transcript . See also
    see also CNBC, IBM CEO Ginni Rometty insists the 63% premium the tech giant is paying for Red
    Hat is a ‘fair price’, October 29, 2018, https://www.cnbc.com/2018/10/29/ibm-ceo-ginnirometty-
    63percent-premium-for-red-hat-is-a-fair-price html
283 See the Agreement and Plan of Merger by and among International Business Machines Corporation,
    Socrates Acquisition Corp. and Red Hat, Inc. dated October 28, 2018.
284 See e.g. […]
                                                          80
 ---pagebreak---          however explain that it is feasible and some state that they would consider it on a
         case by case basis assessing costs and benefits of doing so.285
(403) As explained by the Notifying Party, “for enterprise-grade workloads, any
         change of server OS requires retesting of applications in full, and may require the
         reinstallation of applications, including potential modifications, as well as
         potential recertification. […] changing between different versions of Linux is
         simpler than changing between Windows and Linux, but some adjustments are
         required. This is also true for Oracle Linux, which is based on RHEL, but is not
         an exact clone of it.”286 However, as explained by the Notifying Party, “[w]hile
         switching existing workloads from one Linux OS to another always requires some
         level of effort in terms of application reinstallation and testing, switching does
         routinely occur”. According to the Notifying Party, examples of customers
         switching existing and new workloads from RHEL to SUSE include […].
         Similarly, several customers including […] have migrated from RHEL to a
         Canonical OpenStack environment and have decided to run OpenStack on top of
         Ubuntu. 287
(404) Actually, when asked how they would react if as a result of the Transaction the
         merged entity were to non longer certify RHEL in combination with competing
         products at the infrastructure layer of the stack, only a small minority of
         customers claimed that they would continue using RHEL, but switch to the
         IBM/Red Hat alternative that is fully supported. A larger proportion of customers
         declared that they would switch to an alternative Linux distribution. A large
         customer for instance explains that “[t]here are viable alternatives to Red Hat
         Linux, including Debian and Ubuntu, that would enable us to reduce our
         dependency on IBM/Red Hat”. Some customers even indicated that they already
         switched in the past to alternative Linux OS because Red Hat did not certify
         elements of the IT stack for which they had a strong preference. Another large
         customer for instance explains: “We have already switched our Linux OS where
         necessary to provide a fully supported stack, e.g., Oracle DB on Oracle Linux
         hosted on Oracle VM hypervisor” 288
(405) Third, in line with the Parties argument, the Commission acknowledges that the
         merged entity will at least to some extent continue to be disciplined by the open
         source community of developers and by Red Hat’s ecosystem of partners.
         Significantly reducing the neutrality of RHEL would most likely be perceived as
         hostile by Red Hat’s developer community, and ecosystem partners. As Red Hat’s
         success relies both on the support of developers and the ecosystem partners (to be
         able to sell in a wide ecosystem), such practices may undermine one of the very
         rationale of the Transaction which is to grow Red Hat’s business. Since many of
         Red Hat’s key employees have chosen to work there precisely because of Red
         Hat’s neutral open source approach, any practice that would reduce the neutrality
         of Red Hat in favour of IBM product may also risk an exodus of key leadership,
         talent, and skills. The risks of […].
285 See replies to Questionnaire Q2 to customers, questions 41 and 44.
286 See the Notifying Party’s response to the Commission’s RFI 19, question 2.
287 Ibid.
288 See replies to Questionnaire Q2 to customers, question 46
                                                       81
 ---pagebreak--- (406) This is also confirmed by some customers. Although certification of RHEL is
        acknowledged by many customers to be an important factor when considering the
        purchase of software/hardware/cloud services at other levels of the IT stack, only
        very few customers consider that the merged entity may have the incentive to
        limit certification of third party software, hardware, services and/or cloud service
        providers to perform with RHEL. According to some customers, this would
        alienate the open source community. As explained by a customer, “One of the
        major benefits that IBM can expect from this acquisition is the position of Red
        Hat in the open source community. Adopting such a behaviour would generate
        very negative reactions from the open source community, and from other
        commercial editors who develop solutions which will be deployed on RHEL”.289
        According to some others, this would reduce the attractiveness of RHEL, leading
        to customers eventually switching to alternative Linux distributions.
(407) Fourth, and more generally, the vast majority of customers that responded to the
        market investigation indicated that the merged entity would not have the incentive
        to leverage RHEL’s market position into another market where IBM is active.290
(408) Fifth, as regards specifically the potential concern that the merged entity may
        want to leverage the strong position of RHEL in paid Linux distributions into
        IBM’s cloud solutions (including public and private cloud), the Commission
        considers that the merged entity would not have the incentive to restrict RHEL’s
        availability to its own cloud, to refuse certification of third party cloud service
        providers or to disadvantage third party cloud providers commercially, for the
        following reasons.
(409) In the first place, the wide choice of Linux distributions on competing cloud
        platforms and the difficulty to switch between cloud environments (see above)
        would limit the merged entity’s incentive to disadvantage RHEL’s deployment on
        third party cloud platforms.
(410) In the second place, none of IBM’s three main competitors in public cloud
        services ([…]) raised any such concern. Only a fourth competitor, […], raised the
        concern that the Transaction will increase both the ability and incentive of the
        merged entity to leverage Red Hat’s position in the enterprise Linux market to
        strengthen the merged entity’s position in the cloud infrastructure space.291
(411) In fact, according to Microsoft, “IBM likely does not have the incentive to
        materially restrict RHEL’s availably to its own cloud, IBM Cloud. Red Hat is an
        open source company with a very strong reputation in the open source
        community. If IBM were to restrict RHEL to IBM Cloud, it would materially harm
        Red Hat’s reputation as an open source software provider, which would make
        customers less likely to use RHEL and other Red Hat products, harming the value
        of the transaction. And because RHEL is an open source solution, aggrieved open
        source community members could fork RHEL and create their own version.”292
289 See replies to Questionnaire Q2 to customers, question 43-45
290 See replies to Questionnaire Q2 to customers, question 42
291 See further submission by Oracle, dated 5 June 2019
292 Microsoft’s further information responsive to Questionnaire Q1 to competitors, submitted on 24 May
    2019.
                                                       82
 ---pagebreak--- (412) In the third place, […]. Actually, the Notifying Party explained to the
         Commission that […].293
(413) The Notifying Party further explained that the Agreement and Plan of Merger
         between IBM and Red Hat provides that IBM’s consent is needed for amendment
         of Material Contracts. […]. 294
As regards the Nutanix complaint in particular
(414) Overall, the Commission considers that the merged entity will most likely not
         have the ability and incentive to foreclose competing hypervisor or virtualisation
         software for the following reasons.295
(415) First, as regards Red Hat’s motivation for not certifying Nutanix’s AHV, the
         Commission notes that Red Hat is not the only Linux distributor which has not
         certified AHV to run their Linux operating system. For instance, Oracle explained
         that “Nutanix’s hypervisor AHV is not formally certified by Oracle to run Oracle
         Linux, though […] Oracle supports other third party open source hypervisors,
         e.g. Ubuntu”.296 This suggests that as explained by the Notifying Party, there may
         be legitimate business considerations for both Oracle and Red Hat not certifying
         AHV.
(416) The Commission also notes that Red Hat certifies the most widely used
         competing hypervisors, including VMware ESX and ESXi and Microsoft Hyper-
         V, which account for [90-100]% of hypervisors used.297 This strongly suggests
         that Red Hat is not motivated by a desire to foreclose competition, but rather by
         legitimate commercial considerations, unless proprietary hypervisors were not
         part of the same relevant market as open source hypervisors. If proprietary
         hypervisors are part of the same relevant market as Red Hat’s open-source
         hypervisor RHV, then Red Hat would anyway still continue to face competition
         from its largest competitors representing around [90-100]% of the market.
293 See Notifying Party’s response to question 1 of Commission RFI 21
294 Ibid.
295 The Commission however does not agree with the Notifying Party that a refusal to certify cannot be
    used to foreclose competitors. Although the Commission acknowledges that non-certification does not
    equate to non-interoperability, the Commission considers that, at least in certain cases where
    certification is an important factor in the choice of customers, a refusal to certify is equivalent to a
    degradation of interoperability which may potentially in certain conditions be used to foreclose
    competitors. As regards hypervisors, the market investigation shows that the vast majority of
    customers would not consider purchasing a hypervisor to run RHEL if it is not certified by Red Hat
    (See replies to Questionnaire Q2 to customers, question 52). Customers generally explain that they
    need support and that it is too risky to run uncertified hypervisors. Even Red Hat itself recommends
    not to use uncertified hypervisors, as this “introduces significant risk to customer environments”. See
    also https://access redhat.com/third-party-software-support where Red Hat states: “Using Red Hat
    products on uncertified hardware, hypervisors, or providers is unsupported. Using Red Hat software in
    an unsupported configuration introduces significant risk to customer environments and should be
    avoided […]”. Therefore, if customers were not willing to switch to alternative Linux distributions (or
    other operating systems), the Commission considers that a refusal to certify would potentially
    constitute an effective way to foreclose competing hypervisors.
296 See Minutes of the call with Oracle of 7 June 2019.
297 See Notifying Party’s response to submission by Nutanix, Inc. to the European Commission, 3 May
    2019.
                                                         83
 ---pagebreak--- (417) On this point, the results of the market investigation strongly suggest that
        proprietary and open source hypervisors are part of the same market. The vast
        majority of competitors considered that competition between proprietary
        hypervisors and open source hypervisors is either strong or very strong.298 The
        majority of customers expressing a view on the question also indicated that when
        considering the purchase of a hypervisor for running virtual machines, they
        typically consider both proprietary and open source alternatives.299 However, the
        question can ultimately be left open, as even within a market for open source
        hypervisors, the Commission considers that the Transaction does not raise serious
        doubts as to its compatibility with the internal market (for the reasons stated
        below).
(418) Second, as regards Red Hat’s potential market power in server operating systems,
        as explained above, the Commission considers that Red Hat most likely does not
        have a sufficient degree of market power to leverage its position with RHEL to
        foreclose competitors in other markets.
(419) Third, as regards IBM’s alleged ability to use its position in IT services and/or in
        hardware markets as a lever to foreclose hypervisor competitors, the Commission
        considers it very unlikely. As such, even if (quod non) the current practice of Red
        Hat had an anti-competitive motive and an anti-competitive effect, this would not
        be merger specific. The reasons are twofolds.
(420) In the first place, the Commission considers that IBM has no strong market
        position in any plausible IT services markets that it could leverage into another
        market, and this would not change post-merger, as Red Hat is not active in IT
        services.300 Considering all segmentations of IT services markets considered by
        the Commission in the past (see section 4.5), there is no plausible IT services
        market where IBM’s market share would equal or exceed 30%. Available data
        show that IBM’s shares (both at EEA- and at worldwide level) remain below [5-
        10]% in the Gartner market for all “IT Services”, as well as in IDC’s “IT
        Services” and “Business Services” overall categories. Even on the basis of a
        narrow segmentation of the IT Services market, IBM’s share does not exceed [20-
        30]% in any hypothetical market segmentations according to IDC and Gartner
        data. 301
(421) In the second place, as regards hardware, IBM’s estimated market share of sales
        only exceeds 30% in two sub-segments of the server market (which may
        potentially constitute separate relevant markets although as explained in section
        4.4 this can be left open), i.e. in mid-range (USD 100,000 – USD 999,999), and
        high-end server (USD 1 million and above). According to IDC, IBM’s revenue
        share in the high-end segment is [70-80]% at the worldwide level and [50-60]% at
        the EEA level. It is [50-60]% and [60-70]% in the mid-range segment
        respectively at the worldwide level and at the EEA level. However, IBM’s share
        in an overall market for servers is less than [0-5]% and is declining. As a result,
        the vast majority of hypervisors are not deployed on IBM servers, but in other
298 See replies to Questionnaire Q1 to competitors, question 54
299 See replies to Questionnaire Q2 to customers, question 51
300 See Form CO, paragraph 305.
301 Section 5.3.6 below assesses more in details whether the merged entity would have the ability to
    leverage its position in IT services into neighbouring markets where Red Hat is active.
                                                         84
 ---pagebreak---         environments. Any leveraging of IBM’s position in a plausible market for high-
        end and mid-range servers would not be capable of significantly affecting the
        overall demand for hypervisors, which is in its vast majority independent from
        IBM’s servers.302
5.3.4. Container Infrastructure Software - Leveraging the potentially strong position of
        Red Hat OpenShift into neighbouring markets where IBM is active
5.3.4.1.           Potential concern
(422) The second potential relevant market in which Red Hat has a market share in
        excess of 30% is the market for container infrastructure software (see section
        5.2.8), in which Red Hat offers its OpenShift product. The Commission has
        assessed a potential competition concern whereby the merged entity would
        leverage Red Hat OpenShift’s potentially strong position in a plausible market for
        container infrastructure software, into any other market(s) where IBM is active,
        by means of one of the practices described in section 5.3.2.
5.3.4.2.           Notifying Party’s view
(423) Red Hat’s OpenShift, is probably the best example of a Red Hat product that is
        compatible with the products offered by IBM’s competitors in different public
        clouds, private clouds and traditional enterprise stack environments, as
        OpenShift’s objective is to facilitate the movement of workloads between these
        three environments.
(424) The Notifying Party submits that the merged entity will not have the ability and
        incentive to leverage OpenShift’s potentially strong market position to boost
        IBM’s sales and foreclose IBM’s competitors in neighbouring markets, for the
        following reasons.
As regards ability
(425) The Notifying Party argues that the merged entity will not have the ability to
        foreclose rivals by leveraging Red Hat’s position in container infrastructure
        software because Red Hat does not have sufficient market power in the market for
        container infrastructure software, for the following reasons.
(426) First, as explained in section 5.2.8, the Notifying Party submits that the possible
        market for container infrastructure software is fragmented and highly competitive.
        This potential market is nascent and developing rapidly, while Red Hat’s market
        share is declining due to the significant competitive pressure from major public
        clouds’ Kubernetes offerings (e.g., Amazon, Microsoft, and Google), other
        commercial platforms (e.g., Docker,Dell/EMC’s Pivotal/VMware, Rancher, and
        Canonical), and DIY open source products. In 2018, Red Hat only had a market
        share of [30-40]%.
(427) Second, the Notifying Party claims that Red Hat’s market power is further limited
        by the fact that OpenShift is open source and therefore can be forked, i.e., a
302 Section 5.3.5 below assesses more in details whether the merged entity would have the ability and
    incentive to leverage its potentially strong position in servers into neighbouring markets where Red
    Hat is active.
                                                         85
 ---pagebreak---         company may choose to take the open source code and develop it with
        community support under a different distribution.303
As regards incentives
(428) According to the Notifying Party, the merged entity would also not have the
        incentive to degrade OpenShift’s interoperability (whether by changing
        OpenShift’s source code or by refusing to certify OpenShift) or to engage in an
        anticompetitive mixed bundling strategy involving OpenShift, because such
        strategies would not be profitable.
(429) This is because there are many alternatives to OpenShift and customers are
        unlikely to switch to IBM platforms as a result of any strategy which would make
        the combination of OpenShift with third party platforms less competitive.
5.3.4.3.          Commission’s assessment
(430) The Commission considers that the merged entity will not have the ability to
        foreclose rivals by leveraging Red Hat’s position in container infrastructure
        software because Red Hat does not have sufficient market power in the market for
        container infrastructure software, in particular given its relatively low market
        share ([30-40]%) and the fact that Red Hat faces many strong competitors in that
        potential market.
(431) Furthermore, as explained in section 5.2.8, and as acknowledged by the Parties’
        customers and competitors, the market for container infrastructure software is a
        nascent market with many new competing offerings. Over the period 2015-2017,
        Red Hat’s market share declined from [60-70]% to [30-40]%, while a number of
        strong competitors entered the market (AWS, Google, VMware) or expanded
        (Docker).
(432) The Commission also considers that the merged entity is unlikely to have the
        incentive to engage in any foreclosure strategy by leveraging its position with
        OpenShift. This is because OpenShift’s business proposition in the nascent hybrid
        cloud environment is to use container technology precisely in order to allow
        applications to run anywhere, in any type of environment, including different
        public clouds, private clouds and traditional enterprise systems. Any attempt by
        the Parties to alter OpenShift’s platform neutrality in favour of IBM’s cloud
        products would move IBM into the same model as its cloud competitors, which
        are much larger and more successful than IBM itself. With this Transaction, IBM
        has the opportunity to offer a differentiated and attractive hybrid cloud
        proposition. This valuable opportunity would be sacrificed at a cost if IBM
        engaged in the types of foreclosure strategies discussed above.
(433) The results of the market investigation confirm this view. The vast majority of
        customers consider that IBM will not have an incentive to alter OpenShit’s
        platform neutrality.304 They consider that Red Hat faces competition from strong
        alternatives, and that most customers would switch to these alternatives if
303 See Form CO, paragraph 847.
304 See e.g. replies to Questionnaire Q2 to customers, question 48.
                                                        86
 ---pagebreak---          OpenShift’s platform neutrality was altered.305 To the question as to what their
         reaction would be if post-Transaction the merged entity were to no longer certify
         OpenShift in combination with third party products and only with products from
         the merged IBM/Red Hat entity, the majority of customers who are currently
         using OpenShift and who expressed an opinion on the question explained that
         they would switch to an alternative container infrastructure software.306
(434) Therefore, it is unnecessary to assess in more detail whether such foreclosure
         strategy would have a significant detrimental effect on competition.
5.3.5. Server markets - Leveraging the potentially strong position of IBM into
         neighbouring markets where Red Hat is active
5.3.5.1.          Potential concern
(435) A limited number of Red Hat competitors raised the concern that the merged
         entity may leverage IBM’s market power in server markets, in particular with its
         IBM Power servers and its z System servers (also referred to as “Mainframe”) to
         promote Red Hat products and in particular RHEL and foreclose competing
         products and in particular competing Linux distributions, through various
         practices which would effectively degrade the interoperability of these competing
         products with Mainframe and Power servers or through commercial practices
         equivalent to mix bundling that would advantage Red Hat products over
         competing products.
5.3.5.2.          Notifying Party’s arguments
(436) As explained in section 4.4 above, the Notifying Party views the relevant product
         market as comprising all servers. IBM’s share in an overall market for servers is
         less than [0-5]% and is declining.307
(437) However, even if the Commission were to consider unduly narrow segments
         limited by price band (for mid-range and high-end servers), where IBM’s
         estimated share of sales may exceed 30%, the Notifying Party submits that these
         estimated shares do not give rise to any credible non-horizontal concerns for the
         following reasons.
(438) First, the Notifying Party notes that IBM is already active in both servers and the
         neighboring market of operating systems, but continues to offer its servers
         independently and to ensure their compatibility with non-IBM operating systems.
305 For instance, a large customer explains: “[t]he success of Red Hat OpenShift is largely linked to the
    ecosystem Red Hat has struggled to build over these past few years, it is also what makes them
    successful. As there are other alternative solutions to their offer, they would kill their ecosystem by
    discriminating, reducing their reach and pushing customers and partners to other solutions”. Another
    large customer further explains “The competition in this area is very aggressive. If the merged entity
    does not offer a wide compatibility, its products will be out of the market in some time”. Another large
    customer also states: “[i]t is in the interest of OpenShift development to be as open as possible”. See
    replies to Questionnaire Q2 to customers, question 48.
306 See replies to Questionnaire Q2 to customers, question 49.
307 See Form CO, paragraph 258.
                                                         87
 ---pagebreak--- (439) Second, given the significantly higher value of IBM’s servers relative to a RHEL
        subscription, it would not be profitable to pursue a strategy that would attempt to
        foreclose competing Linux distributions from IBM’s servers, because the trade-
        off between lost sales of servers and gained sales of RHEL subscriptions would
        necessarily be negative. The Parties roughly estimate that the revenues derived by
        IBM from its server business associated with non-RHEL Linux distributions is
        multiple times more valuable than the revenues derived by the vendors of non-
        RHEL Linux distributions used on IBM servers. Therefore IBM would risk losing
        significant revenues by foreclosing rivals’ Linux distributors – and in particular
        […] – for a negligible potential gain.308
(440) Third, the Notifying Party also submits that such strategy would not be profitable
        as customers are more likely to change platform than to change Linux distribution
        because it is easier to move workload running on a Linux distribution from IBM
        servers to other servers rather than to move the workload from one Linux
        distribution to another one.309
(441) Fourth, the Notifying Party submits that any action to foreclose […] on System z
        or POWER would cast doubts on IBM’s commitment to open source, and could
        have an indirect negative effect on IBM’s reputation in the open source
        community, threatening the achievement of the goals of the proposed
        Transaction.310
(442) Finally, even if the merged entity had the ability or incentive to bundle its servers
        with RHEL or to degrade the interoperability of its servers with competing Linux
        distributions, the Notifying Party submits that this is unlikely to have any actual
        foreclosure effect on rival operating systems, given the small market opportunity
        represented by IBM servers. According to IDC, IBM’s servers only represent [0-
        5]% and less than [0-5]% of all servers running Linux, by revenue and units,
        respectively. This also holds for other Red Hat products.311
5.3.5.3.         Commission’s assessment
(443) The Commission considers that IBM could only potentially have market power
        and therefore the ability to leverage that market power into neighbouring markets,
        if the relevant product market is defined narrowly. On an overall market for
        servers, IBM has a market share below [10-20]% in terms of revenue and below
        [0-5]% in terms of units both at the EEA level and at the worldwide level
        according to Gartner and IDC.312
(444) IBM’s market share exceeds however 30% in both the high-end (USD 1 million
        and above) and mid-range (USD 100,000 – USD 999,999) server segments. As
        shown in Table below, in the potential market for high-end servers, IBM has a
        market share of [70-80]% in terms of revenue at a worldwide level in 2018,
308 SUSE claims to have a share of around [80-90]% of Linux deployments on IBM System z […].
309 See Notifying Party’s response to the Commission’s RFI 21.
310 See Notifying Party’s response to the Commission’s RFI 21.
311 See Form CO, paragraph 266.
312 See Annex to Notifying Party’s response to the Commission’s RFI 9, question 4(iii)
                                                      88
 ---pagebreak---  ---pagebreak--- As regards ability
(447) The Commission considers that even if the merged entity had the incentive to
        leverage its position in servers to boost its sales of RHEL (and other Red Hat
        products) to the detriment of competing Linux distributions (and other competing
        products), it would anyway not have the ability to foreclose rival Linux
        distributions or other rival products of Red Hat, given the small market
        opportunity represented by IBM servers.
(448) A large majority of the workloads of most companies do not run on IBM servers,
        but rather on competing x86 servers or in the cloud. As such most middleware or
        system infrastructure software of third parties that are competing with Red Hat do
        not run on IBM’s servers. A large majority of the demand for these software
        would therefore be unaffected by any hypothetical exclusionary practice of the
        merged entity leveraging its position in servers.
(449) As regards competing Linux distributions in particular, according to IDC, IBM’s
        servers only represent [0-5]% and less than [0-5]% of all servers running Linux,
        by revenue and units, respectively. The Commission therefore considers that even
        if the merged entity had the incentive to foreclose competing Linux distributions
        from its server footprint, this would leave the vast majority of the demand for
        competing Linux distributions unaffected.
(450) As for other infrastructure software and middleware competing with Red Hat, the
        Commission asked the Parties to estimate, for each Red Hat product, the
        proportion of customers that installed the Red Hat software/middleware on an
        IBM server, whether newly purchased or already installed.
(451) The Parties estimated, for each Red Hat product, the overlap between Red Hat
        customers and IBM server customers in 2018 (purchases carried out in 2018). The
        Parties even estimated for each Red Hat product, the overlap between Red Hat
        customers in 2018 and the full installed base of IBM server customers
        (irrespective of when the server was purchased), by comparing the list of Red Hat
        customers in 2018 with the installed base of IBM server customers. These
        estimates shows that for most Red Hat products, there is minimal overlap between
        Red Hat’s customers and IBM’s server customer base. In fact, for most Red Hat
        products, this analysis shows that more than [90-100]% of Red Hat customers do
        not have an IBM server. There are only four products where the share of common
        customers exceeds […]%: Red Hat Data Grid ([…]%), Red Hat Ansible Network
        Automation ([…]%), Red Hat Quay ([…]%), and Red Hat Hyperconverged
        Infrastructure for Cloud (“RHHI for Cloud”) ([…]%)315. However, the Notifying
        Party confirmed that although there is a significant overlap in the customer base
        for these products, these Red Hat products are not typically used for the same use
        cases as IBM servers, or in other words even in cases where there is customer
        overlap, IBM servers and these Red Hat products are used for different purposes
        (i.e. the Red Hat product will most of the time be installed on competing servers
        rather than on the IBM servers).316
315 […].
316 See Parties’ response to Commission’s RFIs 16 and 18, including Annex RFI 18 Q.2(a).
                                                     90
 ---pagebreak--- As regards incentives
(452) The Commission has doubts whether the merged entity would have the incentive
        to anticompetitively bundle its servers only with RHEL or to degrade
        interoperability of its servers with third party Linux distributions, for the
        following reasons.
(453) First, the Commission notes that IBM competes against other server platforms
        (including x86), public cloud, and SaaS, all of which offer multi-vendor Linux
        support. This is true although some of them have their own Linux distribution (e.g
        AWS, Microsoft Azure, Google Cloud Platform). This suggests that customers
        expect to be able to run their workload on their favourite Linux distribution
        irrespective of the platform chosen.
(454) Second, the Commission notes that doing so would likely be seen as a hostile
        move by IBM going against its general commitment to open source, and could
        have an indirect negative effect on IBM’s reputation in the open source
        community.
(455) Third, the Commission takes note that the potential gains from any such
        foreclosure strategy would be rather limited as opposed to the potential risk, given
        the relative value of IBM servers compared to RHEL. However, the Commission
        has not been able to confirm the Notifying Party’s view according to which it is
        easier for a client to move workloads on a Linux distribution from an IBM server
        to another server than to move workloads from one Linux distribution to another.
        If the merged entity were to cut SUSE off from its IBM servers, it is therefore
        unclear to the Commission how customers would react, i.e. whether they would
        move their SUSE workloads to other environments running SUSE or instead
        whether they would move their workloads to RHEL to keep them on IBM servers.
        On balance, therefore, the Commission cannot take a position on whether
        engaging in such foreclosure strategy would be immediately profitable or not
        (ignoring the indirect negative effect on the merged entity’s reputation).
(456) Fourth, irrespective of whether this would be profitable or not, the Commission
        has not found […] that IBM is counting on any synergy from the Transaction that
        would involve leveraging IBM’s position in hardware to sell more RHEL or any
        other Red Hat products.
(457) In any event, the Commission notes that IBM and SUSE […].317 The Commission
        also notes that in an email to all addressees of the June edition of the “Partner for
        Growth with IBM Server Solutions” newsletter distributed by IBM’s Systems
        Middle East and Africa team, IBM makes clear that “today IBM supports multiple
        variants of Linux – including Canonical (Ubuntu), SUSE, and Red Hat – on IBM
        servers, and that will not change upon the expected closing of IBM’s acquisition
        of Red Hat. IBM will not have a default or preferred variant of the Linux
        operating system for IBM servers. IBM will continue to work with different Linux
        distributors in an effort to provide clients with the flexibility and choice they
        expect from IBM”.318
317 See […].
318 See the Notifying Party’s response to a Commission’s request for information of 21 June 2019.
                                                      91
 ---pagebreak--- (458) As regards Canonical which also has a partnership agreement with IBM, to have
        its Linux distribution “Ubuntu” supported on IBM Power and z servers, the
        Commission assumes that the merged entity would have the same incentive to
        continue its partnership agreement. In any event, […].319 As such, even if the
        merged entity were to take Ubuntu off from its servers, this would have no
        significant impact on Ubuntu’s ability to continue competing with RHEL in other
        environments. Moreover, it would also have a negligible impact on customers’
        choice and competition in the IBM servers footprint, as SUSE and RHEL together
        account for close to 100% of all Linux deployments on IBM servers.
As regards effects
(459) Finally, even if IBM had the ability or incentive to bundle its servers with RHEL
        or other Red Hat products or to degrade the interoperability of its servers with
        rival operating systems or other rival products, the Commission considers that this
        is unlikely to have any actual foreclosure effect on rival operating systems or
        other rival products and therefore any harm to consumers, given the small market
        opportunity represented by IBM servers (see paragraphs 449-451 above)
5.3.6. IT services markets – Leveraging the potentially strong position of IBM into
        neighbouring markets where Red Hat is active
5.3.6.1.          Potential concern
(460) A small number of market participants expressed concerns that through its role as
        alleged global leader in IT services and IT consultancy, IBM would be able to
        substantially influence end customers’ purchasing decisions for software products
        in favour of Red Hat products and to the detriment of competing vendors’
        products post-transaction, thereby potentially foreclosing competitors.
5.3.6.2.          Notifying Party’s view
        As regards ability
(461) The Notifying Party submits that IBM does not currently have, and will not gain
        as a result of the Transaction, the ability to influence customers’ purchasing
        decisions in favour of Red Hat products and to the detriment of competing
        vendors’ products, for the following reasons.
(462) First, IBM, through its IT Services business (Global Business Services (“GBS”)
        and Global Technology Services (“GTS”)),320 does not have market power under
        any plausible market segmentation. IBM’s shares (both at EEA- and at worldwide
        level) remain below [5-10]% in the Gartner market for all “IT Services”, as well
        as in IDC’s “IT Services” and “Business Services” overall categories. Even on the
        basis of a narrow segmentation of the IT Services market, IBM’s share does not
        exceed [20-30]% in any hypothetical market segmentations according to IDC and
319 See Notifying Party’s response to Commission’s RFI 21
320 IBM markets IT Services to enterprises under the IBM Services brand. IBM Services includes two
    operationally distinct businesses, Global Business Services (“GBS”) and Global Technology Services
    (“GTS”), each with a different focus: GBS mainly provides strategy and architecture consulting
    services, while GTS generally provides outsourcing services.
                                                       92
 ---pagebreak---           Gartner data. IBM also faces strong rivals in IT Services, including Accenture,
          McKinsey, Deloitte, E&Y, PWC, Oracle, SAP, and others, who enjoy market
          positions equivalent to IBM’s.
(463) Second, IBM’s GTS321 has to deal with customers’ existing IT architecture
          constraints and would not in any event be able to impose its own products on the
          customer.
(464) Third, both GBS’322 and GTS’ customers are usually large and sophisticated
          customers with their own IT departments who often have precise ideas about what
          solutions they need before they even involve IBM as an advisor. Therefore,
          IBM’s role essentially involves implementing the clients’ choices rather than
          influencing these choices.
          As regards incentives
(465) The Notifying Party also submits that IBM will not have the incentive to
          foreclose competitors’ solutions by leveraging IBM Services in order to push Red
          Hat software to the detriment of competing vendors’ products that are more
          suitable to meet the customers’ needs.
(466) According to the Notifying Party, doing so (i) would damage its credibility as a
          neutral advisor and result in diverting sales to the many other vendors that
          provide the same services as GBS and GTS, (ii) be at odds with IBM’s past
          practices in IT services, and (iii) not result in any significant increase of Red Hat
          products’ sales
5.3.6.3.           Commission’s assessment
(467) The Commission considers that the merged entity will not have the ability to
          significantly influence customers’ purchasing decisions in favour of Red Hat
          products and to the detriment of competing vendors’ products, let alone
          significantly foreclose access to a sufficient customer base to Red Hat’s
          competitors, for the reasons set out below. Therefore, it is unnecessary to assess
          in more detail whether the merged entity would have an incentive to engage in
          such practice and whether such foreclosure strategy would have a significant
          detrimental effect on competition.
As regards ability
(468) First, the Commission considers that IBM has no strong market position in any
          plausible IT services markets that it could leverage into another market, and this
          would not change post-merger, as Red Hat is not active in IT services.323 As
          submitted by the Notifying Party, and considering all segmentations of IT
          services markets considered by the Commission in past decisions (see section
          4.5), there is no plausible IT services market where IBM’s market share would
321 The focus of GTS is to provide implementation, outsourcing and support (maintenance) for enterprise
    IT infrastructure environments comprised of hardware, middleware software, networking, mobile
    devices, etc.
322 GBS provides three broad categories of services: (i) IT Consulting, (ii) Application Management, and
    (iii) Cognitive Process services.
323 See Form CO, paragraph 305.
                                                       93
 ---pagebreak---          equal or exceed 30%, with the exception of two narrowly defined product markets
         only when looking at data on a narrow country-level324 – i.e. the potential markets
         for Managed Services and Cloud Infrastructure Services in the wholesale trade
         sector, in Austria ([30-40]%) and Denmark ([30-40]%).325 In addition, IBM faces
         strong global rivals in all potential markets for IT services, including Accenture,
         Amazon, Atos, Capgemini (which recently announced that it will acquire Altran),
         Cisco, Cognizant, Dell-EMC, Deloitte, DXC, EY, Fujitsu, HPE, Infosys,
         Microsoft, NTT Data, Oracle, PwC, SAP, Tata, and many others. This is also true
         for the potential markets for Managed Services and Cloud Infrastructure Services
         in the wholesale trade sector in Austria and Denmark, where Capgemini,
         Accenture, DXC, Cisco and Ricoh are particularly active.326
(469) Second, customers responding to our market investigation indicated in their vast
         majority that IBM’s influence on their company’s purchasing decisions for
         hardware or software is either “limited” or “very limited”.327
(470) Third, even assuming that demand for IBM IT services is not contestable, and
         therefore that IBM could steer customers’ choice towards Red Hat products to the
         detriment of equally or more suitable competing third party products without
         risking to lose their client, the Commission considers that the merged entity
         would not have the ability to foreclose access to a sufficient customer base. The
         market investigation has shown that IBM’s GBS and GTS business units (all IT
         services included) do not constitute a sufficiently important ‘route to market’ to
324 Based on IDC data, IBM’s share is consistently below 30% in all segments, even at the national level.
    Based on Gartner data, IBM’s share is consistently below 30% both when segmenting by functionality
    and when segmenting by industry, even at the national level. Only when combining Gartner’s
    functionality and industry segments, AND looking at data on a narrow country-level, IBM’s share
    exceptionally exceeds 30% in a mere two combinations of (i) “Service 2” level functionality segments
    and (ii) industry sectors, out of 880 possible combinations in total (i.e., less than 0.3%), which both
    concern Managed Services and Cloud Infrastructure Services in the wholesale trade sector, in Austria
    ([30-40]%) and Denmark ([30-40]%). See the Notifying Party’s response to the Commission’s RFI 23.
325 Even assuming that IBM could leverage its position in these two narrowly defined markets to push for
    the adoption of Red Hat products instead of equally or more suitable competing third party products
    without the risk of losing IT services customers to competitors (quod non), the Commission considers
    that the merged entity will not have the ability to significantly foreclose access to a sufficient customer
    base to Red Hat’s competitors. This is because the middleware and system infrastructure software
    markets in which Red Hat is active are either EEA-wide or worldwide. As a result, as confirmed by the
    Notifying Party, the customers of IBM’s GBS and GTS in the potential markets for Managed Services
    and Cloud Infrastructure Services in the wholesale trade sector in Austria and Denmark only represent,
    at most, a very small proportion of Red Hat’s customer base for any of its products at the EEA and
    worldwide level.
326 In this respect, the Commission notes that recently, IBM decided to withdraw its notification in Case
    B7-50/19 – IBM/T-Systems, notified to the German Federal Cartel Office (“FCO”), following the
    opening of an in-depth investigation by the FCO. In a press release, the FCO set out its provisional
    view that mainframe services (i.e. IT outsourcing of aftermarket services for mainframe systems)
    could constitute a distinct product market and that IBM might hold a dominant position in the EEA.
    The Notifying Party strongly disagrees with this provisional view of the FCO. In particular, even if
    such market existed, the Notifying Party argues that its market share on such market would only be
    [20-30]%, taking into account both internally supplied services as well as outsourced services.
    However, even if there was a relevant market for mainframe services in the EEA and even if IBM
    were to be considered dominant on such market, the Commission considers that the merged entity
    would have no ability to use its position in mainframe services to exclude competitors of Red Hat’s
    products. This is because mainframe servers (to which mainframe services relate) represent only a tiny
    fraction of overall deployments for the software categories where Red Hat is active (see section 5.3.5).
327 See replies to Questionnaire Q2 to customers, question 56.
                                                          94
 ---pagebreak---         significantly limit access of Red Hat rivals to customers. Indeed, the vast majority
        of Red Hat’s competitors have indicated that they have less than 10% of their
        software sales for which IBM is involved as an intermediary (e.g. system
        integrator), as an IT consultant or as an other type of IT service provider.328 Even
        if for these sales they were entirely dependent on IBM (quod non), this would not
        be sufficient to foreclose access of Red Hat’s rivals to a sufficient customer base.
5.3.7. Other non-horizontally affected markets – Leveraging the potentially strong
        position of IBM into neighbouring markets where Red Hat is active
5.3.7.1.          Potential concern
(471) Sections 5.3.3 and 5.3.4 assessed whether the merged entity would have the
        ability and incentive to leverage Red Hat’s position in the two markets where Red
        Hat has an individual market share in excess of 30% at the worldwide and EEA
        level – i.e. paid operating systems (and paid Linux operating systems in
        particular) and container infrastructure software – into neighbouring markets
        where IBM is active. Section 5.3.5 assessed whether the merged entity would
        have the ability and incentive to leverage IBM’s market position in the potential
        markets for high-end and mid-range servers in which IBM has a market share in
        excess of 30% into neighbouring markets where Red Hat is active.
(472) As shown in section 5.3.1, there are 13 additional IDC and/or Gartner market
        segments where IBM has an individual market share in excess of 30% at the
        worldwide and/or EEA level. Although, no market participant raised
        conglomerate or non-horizontal concern with respect to those markets, the
        Commission assesses in this section whether the merged entity would have the
        ability and incentive to leverage IBM’s position in those potential markets to
        boost Red Hat’s sales in neighbouring markets and foreclose Red Hat’s
        competitors.
5.3.7.2.          Notififying Party’s view
(473) The Notifying Party submits that the Transaction will not enable IBM to leverage
        any of its potentially strong market positions in any of the market segments where
        it has more than 30% market into any of the segments where Red Hat is active.
        The reasons are the following.329
(474) First, IBM’s worldwide or EEA-wide share exceeds 40% only in the following
        segments: Transaction Processing Monitors (IDC and Gartner), Paid Unix and
        Other OS (Gartner), Message-Oriented Middleware (Gartner), Storage
        Management Mainframe Software (Gartner), and WEB Access Management
        (Gartner).330 The Notifying Party therefore considers that only in relation to these
        segments, could IBM potentially have sufficient market power.
(475) Second, there are no major Red Hat products that are interoperable with IBM’s
        Storage Management Mainframe Software products. This is sufficient to discard
328 See replies to Questionnaire Q1 to competitors, question 58.
329 See the Notifying Party’s response to the Commission’s RFI 16.
330 See section 5.3.7.3 below.
                                                       95
 ---pagebreak---         any risk that IBM would leverage its position on Storage Management Mainframe
        Software to push Red Hat’s products.
(476) With respect to the other four segments, the Notifying Party submits that Red Hat
        has few main products that are supported and interoperable with IBM’s offerings.
        With respect to all four of these segments, the Notifying Party submits that the
        merged entity will however not have the ability to engage in anticompetitive
        bundling or tying, or in interoperability degradation, post-Transaction for the
        following reasons.
(477) In the first place, there are many rivals with similar offerings and there is no
        bundle of functionalities that IBM/Red Hat’s products could offer in combination
        that is not already offered or could not be offered by one or more of the major
        rivals.
(478) In the second place, in the software markets where Red Hat is active, these IBM
        offerings are not critical complementary products without which competing
        software vendors could not develop or effectively sell their software on the
        market.
(479) In the third place, the Notifying Party submits that there is no large common pool
        of customers for Red Hat’s software products and IBM’s offerings in the above-
        listed segments.
(480) The Notifying Party also submits that the merged entity will not have the
        incentive to engage in anticompetitive leveraging post-Transaction. Such a
        strategy would not be profitable because customers would rather move away from
        IBM’s proprietary software than adopt Red Hat’s software offering if it is not its
        preferred solution, for at least the following reasons.
(481) In the first place, customers’ preferences across combinations of IT products are
        heterogeneous.
(482) In the second place, customers’ preferences across IT products change over time
        and technology continuously evolves, many customers prefer to mix and match
        complementary software and service offerings from different vendors and avoid
        being locked into a particular vendor.
(483) In the third place, system integrators and resellers offer customers mix-and-match
        solutions integrating products and functionality from different vendors.
5.3.7.3.         Market shares
Deployment-Centric Application Platform
(484) The Parties activities overlap in this IDC segment and their combined market
        share exceeds 20%. The market shares are therefore presented under section 5.2.2
        above.
Business Process Management Suites
(485) The Parties activities overlap in this Gartner segment and their combined market
        share exceeds 20%. The market shares are therefore presented under section 5.2.3
        above.
                                                  96
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---           between 30% and 40%, the Commission considers that there are a number of
          credible alternatives available, as there are at least three significant competitors in
          each of those market segments. This is confirmed by the results of the market
          investigation for all but one market segment, as, with the exception of the
          segment for Transaction Processing Monitors, the vast majority of customers
          consider that in each segment listed in section 5.3.7.3, there are sufficient credible
          alternatives to IBM’s products.332
(499) Second, there is only a limited overlap between Red Hat’s and IBM’s customer
          bases. The Commission asked the Parties to estimate, for each Red Hat product,
          the proportion of Red Hat customers that are also customers of one of the IBM
          products in any of the market segments in which IBM has an individual market
          share above 40% at the worldwide or EEA level in 2018 (Transaction Processing
          Monitors (IDC and Gartner), Paid Unix and Other OS (Gartner), Message-
          Oriented Middleware (Gartner), Storage Management Mainframe Software
          (Gartner), and WEB Access Management (Gartner)).333
(500) The analysis of the Parties covered IBM customers with revenues for the relevant
          software segments in 2018, and this included revenues from the purchase of new
          (perpetual or fixed term) licenses as well as annual subscription and support
                               334
          (“S&S”) revenue. Taken together, these customers materially cover the entire
          installed base for the relevant IBM software products.335
(501) The analysis of the Parties shows that there is a limited overlap between Red
          Hat’s customers and IBM’s customer base of IBM products that belong to any of
          the market segments in which IBM has an individual market share above 40% at
          the worldwide or EEA level in 2018. It shows that the vast majority of Red Hat’s
          customers overall (more than […]%) was not also a customer of IBM products in
          any one of the relevant segments. Actually, there is not a single Red Hat product
          for which more than […]% of the customers are also customers of any of the IBM
          products in any of the above-mentioned segments. As regards in particular the
          segment for Transaction Processing Monitors for which just more than half of the
          customers considered that there were not sufficient credible alternatives to IBM’s
          products, there is not a single Red Hat product for which more than […]% of the
          customers are also customers of IBM’s products belonging to the segment
          Transaction Processing Monitors.336
(502) Moreover, even where a customer overlaps between a Red Hat product and an
          IBM product, these products are often not used together for the same use cases,
          and therefore a degradation of interoperability would have at most an
          insignificant effect on demand for competing products of Red Hat. The
          Commission therefore considers that IBM will have limited ability to affect the
          demand for Red Hat’s and its competitors’ offerings through bundling/tying or
          relative degradation of interoperability.
332  See replies to Questionnaire Q2 to customers, question 53.
333  See Notifying Party’s response to Commission’s RFI 16 and RFI 18.
334 IBM Software Subscription and Support (“S&S”) entitles customers to product updates, bug fixes and
     technical     support    for    their    software.     For     more     information,   please see
     https://www.ibm.com/software/passportadvantage/software_subscription_support_ov.html.
335 […].
336 See Notifying Party’s response to question 3.b of RFI 16 and to question 2.b of RFI 18.
                                                        107
 ---pagebreak--- (503) As regards the merged entity’s potential incentive to leverage strong IBM market
         positions into Red Hat positions, the Commission notes that it has not found a
         single internal document indicating that this was one of the synergies considered
         by the Notifying Party. Moreover, not a single competitor of Red Hat expressed
         any such concern.
5.3.8. Potential input foreclosure of RHEL competitors by withholding access to
         RHEL’s source code
5.3.8.1.         Potential concern
(504) Red Hat’s business is based on open source technologies and, as a matter of
         principle, the source code of all of the software that Red Hat develops is licensed
         under terms that permit any recipient to access, use, change or share this source
         code.337 With respect specifically to RHEL’s source code, Red Hat’s practice has
         so far enabled competitors (including Oracle338) to access and use this source
         code in order to offer clones of RHEL (“RHEL clones” or replicates of RHEL).
         The main RHEL clone is Oracle Linux which was launched in 2006.339
(505) Based on feedback from the market investigation and in particular on a concern
         raised by Oracle, the Commission has assessed a potential competitive concern,
         whereby the Merged Entity would have the ability and the incentive to foreclose
         access to RHEL’s source code which is a key input in order to enable competitors
         to offer replicates of RHEL.
(506) According in particular to Oracle, such a foreclosure strategy would prevent
         RHEL’s competitors from continuing to offer alternative Linux distribution which
         are fully compatible with RHEL.340 Oracle claims that this would in turn results in
         a significant increase of the costs and efforts that customers have to incur in order
         to switch away from RHEL. In particular, Oracle explains that, while switching
         from RHEL to a RHEL clone would be “seamless”, switching from RHEL to any
         other Linux distribution would require customers to recertify, retest and reinstall
         applications in full in a process, which would also require potential application
         modifications.341 Oracle therefore claims that the competitive pressure currently
         exercised by RHEL clones and in particular by Oracle Linux would be
         undermined.342
(507) Based on the above, such a strategy aimed at foreclosing RHEL clones by
         preventing access to RHEL’s source code could potentially result in an increase
         of Red Hat’s market power on a market for paid Linux-based server operating
         systems where, as explained in more details at the above paragraph (392), Red
         Hat’s current market share exceeds 70%. Such an increased market power could
         in turn potentially result in a higher priced RHEL or in a decrease in the quality of
337 See Form CO, paragraphs 19 and 227. For example at paragraph 227, the Notifying Party states: “In
    addition, Red Hat makes the source code for its products available for download under open source
    licenses”.
338 On Oracle’s current access to RHEL’s source code see paragraph (522) below.
339 The Notifying Party also mentions the following RHEL clones: Scientific Linux, Red Hat sponsored
    CentOS project and Amazon Linux 2. See Form CO, paragraph 227.
340 See Oracle’s reply to Questionnaire Q1 to competitors, question 41.
341 See Oracle’s reply to Questionnaire Q1 to competitors, question 41.
342 See Oracle’s reply to Questionnaire Q1 to competitors, question 41.
                                                      108
 ---pagebreak---         this product. It could also potentially be leveraged in a wide range of hardware
        and software markets which interact with RHEL.
5.3.8.2.         Notifying Party’s view
(508) The Notifying Party submits that, after the Transaction, the Merged Entity will
        have the same constraints on its ability to interfere with Oracle or any other
        competitors’ access to RHEL source code, and if anything less incentive than Red
        Hat may have to do so.343 The Notifying Party’s view is based inter alia on the
        following arguments:344 345
(509) First, under the General Public Licence (“GPL”), Red Hat’s distributees,
        including its customers and developers, are free to distribute RHEL open source
        code under the GPL and could do so easily and promptly in response to any
        foreclosure attempt.
(510) Second, even if Red Hat could interfere with Oracle’s access to RHEL source
        code under the GPL, it has not done so pre-merger because of its dependency on
        the community of open source developers, which will continue post-merger.
(511) Third, the Notifying Party disagrees with Oracle’s claim that Oracle Linux is an
        exact substitute for RHEL and that switching between RHEL and Oracle Linux is
        seamless. Indeed, the Notifying Party claims that, as for any change of server
        operating systems, a switch from RHEL to Oracle Linux would require to retest
        applications in full and may require the reinstallation of applications, including
        potential modifications, as well as potential recertification.
(512) Fourth, the Notifing Party argues that migrating workloads between RHEL and
        other Linux distributions, including SUSE and Ubuntu, does not present
        significant barriers and regularly occurs in practice.
(513) Fifth, the Notifying Party argues that the Merged Entity would have little to gain
        in additional RHEL revenues from trying to divert RHEL clones’ customers to
        RHEL given that RHEL clones’ sales are extremely small.
(514) Sixth, the Notifying Party argues that IBM will not be incentivized, post-
        Transaction, to divert sales from Oracle Linux to increase IBM’s sales in other
        product areas where IBM competes with Oracle because, in particular, given
        Oracle Linux’s negligible market share, the amount of Oracle products that might
        compete with IBM offerings sold together with Oracle Linux is limited.
        Therefore, IBM would not make any material gain from trying to divert
        customers from Oracle to win customers on other types of software for which it
        competes with Oracle, such as databases and application servers.
(515) Seventh, the Notifying Party argues that RHEL clones represent only a very small
        share of server operating systems (and even of Linux server operating systems).
343 See the Notifying Party’s response to the Commission’s RFI 19.
344 A number of other arguments put forward by the Notifying Party are described in the below section
    5.3.8.3 (“Commission’s assessment”).
345 See the Notifying Party’s response to the Commission’s RFI 19, questions 1, 2 and 3.
                                                     109
 ---pagebreak---         Even if RHEL clones were to be foreclosed, customers would still have a number
        of other Linux options to which they could easily switch.
5.3.8.3.         Commission’s assessment
(516) Overall, the Commission considers that, post-Transaction, the Merged Entity will
        not have the ability and incentive to foreclose the competitive pressure exercised
        by RHEL clones, either (i) directly by restricting third party’s access to RHEL’s
        source code or (ii) indirectly by degrading access to releases of updates and
        patches for RHEL’s source code in such a way that it would effectively become
        impossible to continue marketing RHEL clones, or (iii) by implementing a
        combination of (i) and (ii), for the reasons set out below. In any event, the
        Commission considers that such foreclosure strategy would not have a significant
        detrimental effect on competition.
Oracle’s claim
(517) The vast majority of the software packages in RHEL are licensed under
        “copyleft” open source licences that require the distributor of a binary to make the
        source code of the binary available.346 Most of these copyleft packages are
        specifically licensed under the GPL, which contains a detailed requirement that
        distributors of binary versions provide the complete corresponding source code of
        the binary.
(518) Oracle does not claim that the Merged Entity would have the ability and incentive
        to infringe the terms of RHEL’s open source licences. Instead, Oracle claims that
        the GPL that governs the use of the Linux kernel and according to which any
        derivative works of the Linux kernel code has to be made available does not
        preclude the Merged Entity from effectively foreclosing Oracle’s access to the
        RHEL source code.347
(519) More specifically, Oracle explains that in order to be able to offer a RHEL clone,
        as it currently does, it is dependant on full and timely access to RHEL’s source
        code.348 In this respect, Oracle claims that the Merged Entity will have the
        technical ability to delay or degrade access to RHEL’s source code in such a way
        that it would effectively become impossible to continue marketing RHEL clones.
(520) Oracle further explains that this could be achieved without infringing the GPL by
        a combination of (i) not making available the source code to third party other than
        the direct recipients of the binary and/or (ii) degrading access to releases of
        updates and patches for RHEL’s source code, i.e, by changing the method and/or
        timing for such releases. With respect to the former, Oracle explains that the GPL
        requires the distributor to provide complete corresponding source code to all
        direct recipients of the binary, but not necessarily to the public at large. In this
        respect, Oracle claims that Red Hat’s current contract terms “restrict the
        customer’s ability to share the source code with others” and that, while so far Red
        Hat has not done so, the Merged Entity could seek to enforce these contractual
346 See the Notifying Party’s response to the Commission’s RFI 19, question 1.
347 See minutes of a call with Oracle dated 9 April 2019, paragraph 14.
348 See minutes of a call with Oracle dated 9 April 2019, paragraph 14.
                                                       110
 ---pagebreak---         terms in order to prevent Oracle from accessing RHEL’s source code. 349 With
        respect to the latter, Oracle explains that such behaviours would not infringe the
        GPL since this open source licence does not provide any specific obligations
        around the method and timing of sharing updates and patches to the source code.
As regards the Merged Entity’s ability to restrict third party’s access to RHEL’s source
code
(521) The Commission considers that it is unlikely that the Merged Entity would have
        the technical ability to completely foreclose its competitors’ access to RHEL’s
        source code through contractual restrictions without infringing the GPL. This is
        based on the following reasons.
(522) First, the Commission notes that Red Hat’s current practice is to make available
        the source code for RHEL in two ways: first, Red Hat makes source code
        available for download to all RHEL distributees (including to enterprise paid
        customers and to developers, partners and potential customers irrespective of
        whether such user has a paid subscription), and second Red Hat publishes the
        RHEL’s source code on the publically accessible CentOS project website.350
        Currently, Oracle or any other third party can therefore directly access RHEL’s
        source code on the CentOS project website.
(523) Second, even if Red Hat was to change its current practice of making RHEL’s
        source code available to the public (as it could do without infringing the GPL),
        the Commission considers that Red Hat’s current contractual terms for the
        distribution of RHEL would not give Red Hat the ability to restrict third party’s
        access to RHEL’s source code since, currently, the only condition for a third party
        to be contractually allowed to share RHEL’s source code with Oracle or any other
        third party is that all occurrence of Red Hat trademarks should be removed.351
        Oracle or any third party could therefore gain access to RHEL’s source code by
        asking one of the many Red Hat distributees352 to pass on the RHEL source code,
        as long as they strip out the Red Hat trademark. In this respect, the Notifying
        Party states that “Red Hat’s contract terms do not restrict the customer’s ability
        to share the source code with others”353 and also specifies that […].354
(524) Third, the Commission notes that another potential alternative way for Oracle or
        any other third party to gain access to RHEL’s source code in the event where it
        would not be publicly available any more, could be for Oracle or any other third
        party to indirectly become a RHEL distributee. In this respect, the Notifying Party
        explains that “Oracle or the third party itself, or any of its developers employees,
        could become a Red Hat customer or developer” in which case the GPL would
349 See minutes of a call with Oracle dated 9 April 2019, paragraph 14.
350 See the Notifying Party’s response to the Commission’s RFI 19, question 1.
351 See the Notifying Party’s response to the Commission’s RFI 19, question 1.
352 According to the Notifying Party (see the Notifying Party’s response to the Commission’s RFI 19,
    question 1), there are “millions of RHEL users, including not only thousands of enterprise customers
    worldwide who purchase a RHEL support subscription in return for a fee, but also over 1.4 milion
    developers, who are entitled to a self-supported, development-only subscription that comes with full
    access to the code”.
353 See the Notifying Party’s response to the Commission’s RFI 19, question 1.
354 See the Notifying Party’s response to the Commission’s RFI 19, question 1.
                                                       111
 ---pagebreak---         require that it be provided with the complete RHEL source code. 355 For example,
        an Oracle employee (or someone acting on behalf of Oracle although not an
        employee) could potentially become part of the community of 1.4 million
        developers, who are entitled to a self-supported, development only RHEL
        subscription that comes with full access to the code.356
(525) Fourth, the Commission notes that the Transaction does not increase Red Hat’s
        pre-existing ability to restrict third party’s access to RHEL’s source code.
(526) In any case, as explained in the below section, the Commission considers that the
        Merged Entity will not have the ability and incentive to foreclose the competitive
        pressure exercised by RHEL clones by withholding or degrading access to
        RHEL’s source code.
As regards the Merged Entity’s ability to foreclose the competitive pressure exercised by
RHEL clones by withholding or degrading access to RHEL’s source code
(527) The Commission considers that the Merged Entity will face similar constraints as
        Red Hat pre-Transaction in its ability to foreclose access to RHEL’s source
        code.357 The Commission therefore considers that, post-Transaction, the Merged
        Entity will not have the ability to foreclose RHEL clones by withholding or
        degrading acess to RHEL’s source code for the reasons set out below.358
(528) First, the Commission considers that it is unclear whether the Merged Entity will
        have the technical capacity to foreclose RHEL clones by degrading access to
        RHEL’s source code. This is in particular based on the fact that, as reported by
        several market respondents,359 Red Hat has already undertaken certain actions in
        the past in order to make access to RHEL’s source code more difficult. However,
        as confirmed by Oracle, these actions have so far not prevented it from offering a
        RHEL clone.360
(529) More specifically, according to Oracle, in 2009, Red Hat has changed the way in
        which updates to RHEL’s source code were packaged in order to make it more
        difficult to understand what had changed between subsequent versions of
        RHEL.361 However, with respect to this specific Red Hat behaviour, Oracle
355 See the Notifying Party’s response to the Commission’s RFI 19, question 1.
356 See the Notifying Party’s response to the Commission’s RFI 19, question 1.
357 The Commission notes that the analyses of the incentive and the ability to foreclose cannot be easily
    separated. The considerations discussed below at paragraphs (527) to (542) therefore do not only
    constraint the Merger Entity’s ability to foreclose but also its incentive to do so. Conversely, the
    considerations discussed at paragraphs (543) and (559) below, do not only constraint the Merged
    Entity’s incentive to foreclose but also its ability to do so.
358 The Commission considers that the same line of arguments as set out at paragraphs (531) to (559)
    would similarily apply to any potential concern relating to the foreclosure of the source code of any
    other open source products of either Red Hat or IBM. The Commission therefore considers that the
    Merged Entity is unlikely to have the ability and the incentive to significantly harm competition
    through the foreclosure of the source code of any other open source products of either Red Hat or
    IBM.
359 See for example Oracle’s email to the case team dated 11 June 2019 and replies to Questionnaire Q1 to
    competitors, question 65.
360 See Oracle’s email to the case team dated 11 June 2019.
361 See for example minutes of a call with Oracle dated 9 April 2019, paragraph 13; Oracle’s email dated
    11 June 2019 and replies to Questionnaire Q1 to competitors, question 64. More specifically, while
                                                           112
 ---pagebreak---         explains that, while this was more time consuming, it was able to “separate
        patches in a timely enough manner” without it having a negative impact on its
        customers.362 Based on this example, the Commission considers that it is unclear
        at which point Oracle would lose the technical ability to accommodate changes in
        the method and /or timing for the release of updates and patches for RHEL’s
        source code.
(530) However, since the GPL does not provide for any specific obligations with
        respect to the method and/or timing for the release of RHEL’s source code, the
        Commission also notes that the Merged Entity could in theory decide to impose
        even more drastic changes in order to effectively prevent Oracle or any other
        competitors from offering RHEL clones. In particular, Oracle notes that a delay in
        its access to updates and patches for RHEL’s source code could expose its
        customers to “catastrophic security issues”. Oracle further explains that such a
        delay would prevent it from continuing to offer its RHEL clone.363 However,
        Oracle does not provide further details (i) on the concrete actions that the Merged
        Entity could potentially carry out in order to delay access to RHEL’s source code,
        and (ii) on the reasons why Oracle would not have the technical ability to
        accommodate such actions in a way that would make it possible for Oracle to
        continue offering its RHEL clone.
(531) Second, even if the Merged Entity could deteriorate access to RHEL’s source
        code to the extent where it would become impossible to offer a RHEL clone, the
        Commission considers that the Merged Entity would not have the ability to drive
        competitors currently relying on a RHEL clone out of the market for paid Linux-
        based server operating systems since these competitors could always continue
        competing with a forked Linux distribution based on RHEL.
(532) In this respect, Oracle indicates that, in the event where it would not get full and
        timely access to RHEL’s source code any more, it would react by developing its
        own forked version of RHEL.364 Any other vendors relying on a RHEL clone
        could therefore likely also decide to no longer rely on RHEL updates, patches, and
        fixes, and develop its own technical solutions.
(533) Oracle however claims that the constraint it would be able to exercise on RHEL
        would be significantly reduced since the switching costs that customers would
        have to incur for switching from RHEL to such a forked Linux distribution would
        be significantly higher.
(534) As explained above at paragraph (402), on the issue of switching, the
        Commission acknowledges that efforts are required to switch from one Linux OS
        to another one. However, based on its market investigation (see above paragraphs
        (402) and (404)), the Commission considers that switching is feasible and that the
        threat of customers switching away from RHEL to alternative Linux distributions
        would most likely make any type of exclusionary practice leveraging RHEL not
        profitable and in any event ineffective in foreclosing rivals.
    Red Hat had previously released updates in clearly identifiable individual fixes/patches, in 2009, Red
    Hat allegedly changed this method and started to provide fixes/patches in an undifferentiated mass.
362 See Oracle’s email to the case team dated 11 June 2019.
363 See minutes of a call with Oracle dated 9 April 2019, paragraph 14.
364 See for example reply to Questionnaire Q1 to competitors, question 61.
                                                       113
 ---pagebreak--- (535) This view is shared by the Notifying Party, which explains that “even if Oracle or
        another vendor relying on a RHEL clone had to create its own forked distribution
        of RHEL (which it does not have to do), it would in no way affect customers'
        ability to switch to Oracle Linux or to another forked distribution of RHEL as a
        competitive alternative”.365 In particular, the Notifying Party argues that, contrary
        to Oracle’s allegation, while it is true that Oracle Linux is based on RHEL,
        already today Oracle Linux is not a perfect clone of RHEL and switching from
        RHEL to Oracle Linux would require some adjustements. In addition, the
        Notifying Party confirms that, while switching existing workloads from one
        Linux OS to another always requires some level of effort in terms of application
        reinstallation and testing, switching does routinely occur.366 In the same vein, the
        Notifying Party states that “entreprise customers can and do switch among Linux
        distributions without significant difficulty”367 and it identifies a number of
        examples of large companies having performed a complete switch from RHEL to
        SUSE including for existing and new workloads. These companies include
        […].368
(536) In line with the Notifying Party’s view, the Commission notes that, as explained
        above at paragraphs (402) to (404), even if most customers having responded to
        the Commission’s market investigation consider that switching from one Linux
        OS to another would not be easy or may even be very difficult, many customers
        however explain that it is feasible and some state that they would consider it on a
        case by case basis assessing costs and benefits of doing so.369 In particular, with
        respect more specifically to switching away from a RHEL clone, a large customer
        which is also a competitor of the Parties on certain markets, has indicated that,
        while it is currently using a RHEL clone for its servers (i.e., CentOS which is the
        community, free version of RHEL), if following the Transaction, this RHEL
        clone was to become unavailable, it would be able to switch to a different Linux
        distribution. This customer/competitor however indicates that such a switch
        would be costly.370
(537) Third, in any event, in addition to the potential new forked versions of RHEL,
        there are several alternative paid Linux distributions which do not depend on
        RHEL’s source code in the same extent as Oracle Linux currently does and which
        could continue being credible alternatives to RHEL even in the event where the
        Merged Entity would attempt to foreclose access to RHEL’s source code.
(538) As explained above at paragraph (392), this is in particular the case for SUSE’s
        SLES which has a [10-20]% market share on the paid Linux-based server
        operating systems market and Canonical’s Ubuntu whose market share is
        equivalent to Oracle’s market share at a level of around [5-10]%. Indeed, as also
        explained at paragraphs (402) to (404), a number of customers see these paid
        Linux distribution as credible alternatives to RHEL and there are regular
        examples of customers switching from RHEL to these alternative distributions. In
        addition, as explained by one competitor in its response to the Commission’s
365 See the Notifying Party’s response to the Commission’s RFI 19, question 3.
366 See the Notifying Party’s response to the Commission’s RFI 19, question 3.
367 See the Notifying Party’s response to the Commission’s RFI 19, question 3.
368 See the Notifying Party’s response to the Commission’s RFI 19, question 2.
369 See replies to Questionnaire Q2 to customers, questions 41 and 44.
370 See replies to Questionnaire Q1 to competitors, question 62.
                                                       114
 ---pagebreak---         market investigation, by contrast with Oracle Linux which is described as a
        “RHEL derivatives”, SUSE’s SLES and Canonical’s Ubuntu are described as
        “more independent of RHEL”.371
(539) With respect specifically to SUSE, the Commission notes that while, SUSE offers
        a service (i.e. SUSE Linux Enterprise Server with Expanded Support) based to a
        certain extent on RHEL’s source code, this service is only an ancillary service
        aimed at facilitating the migration towards SUSE’s own SLES Linux distribution.
        With respect to this specific service, the Notifying Party explains that it
        essentially consists in SUSE’s marketing updates and fixes to its customers that
        are compatible with both SUSE and RHEL so that customers can “purchase a
        one-stop-shop Linux OS support subscription and keep access to full commercial
        support for both RHEL and SUSE”.372 In this regard, the Notifying Party
        considers that SUSE’s ability to offer such a service for its customers using both
        RHEL and SLES does not depend on the availability of RHEL’s source code.
        Indeed, the Notifying Party states: “the availability of the RHEL source code is in
        no way a requirement for SUSE to provide this one-stop-shop service to
        customers”.
(540) With respect specifically to Canonical, while Canonical’s own Linux distribution
        relies to some extent on RHEL’s source code, by contrast with Oracle Linux, it
        cannot be considered as a RHEL clone since Ubuntu is largely based on
        Canonical’s own technology.373 In addition, while Canonical considers that any
        delay or deterioration in accessing RHEL’s source code would represent a
        challenge that it would need to overcome, in response to the Commission’s
        market investigation, Canonical also indicates that it expects that, as a result of
        the Transaction, certain RHEL customers may be more willing to consider
        alternative Linux distributions and that this may create additional business
        opportunities for Ubuntu.374
(541) In any event, if SUSE and Canonical’s access to RHEL’s source code was to
        become more difficult post-Transaction, the Commission considers likely that,
        similar to Oracle (see above paragraphs (531) to (536)), SUSE and Canonical
        could fork the specific component of RHEL’s source code that they currently use
        for their own Linux distribution in order to stop relying on RHEL’s input.
(542) Overall, the Commission therefore considers that, even if the Merged Entity was
        to engage in a strategy aimed at foreclosing to a certaint extent access to RHEL’s
        source code, there would still be sufficient credible alternatives for customers
        willing to switch away from RHEL since (i) even if Oracle or another vendor
        relying on a RHEL clone had to create its own forked distribution of RHEL, these
        vendors would still constitute credible alternatives for customers willing to switch
        away from RHEL (see above paragraphs (531) to (536)) and (ii) several
        alternative paid Linux distributions which do not depend on RHEL’s source code
371 See replies to Questionnaire Q1 to competitors, question 41.
372 See the Notifying Party’s response to the Commission’s RFI 19, question 3.
373 See the Notifying Party’s response to the Commission’s RFI 19, question 2. See also replies to
    Questionnaire Q1 to competitors, question 41.
374 See Canonical’s response to question 67: “However, some enterprise will be more inclined to look for
    an alternative to RHEL given the association with IBM”.
                                                       115
 ---pagebreak---          in the same extent as Oracle Linux currently does would continue being credible
         alternatives to RHEL.
As regards the Merged Entity’s incentive to foreclose the competitive pressure exercised
by RHEL clones by withholding or degrading access to RHEL’s source code
(543) The Commission considers that the Merged Entity will face similar constraints as
         Red Hat pre-Transaction in its incentive to foreclose access to RHEL’s source
         code. The Commission therefore considers that, post-Transaction, the Merged
         Entity will not have the incentive to foreclose RHEL clones by withholding or
         degrading acess to RHEL’s source code for the reasons set out below.
(544) First, the Commission considers that the current constraint exercised by the risk
         that any attempt from Red Hat to foreclose RHEL’s source code would trigger a
         negative reaction from the developer community and/or RHEL’s clients resulting
         in a significant detrimental impact on Red Hat’s business will continue to apply to
         the Merged Entity post-Transaction. This is based on the following reasons.
(545) In the first place, Oracle and other competitors have indicated in response to the
         Commission’s market investigation that, in 2009, Red Hat has already undertaken
         concrete steps in order to make access to RHEL’s source code more difficult (see
         above paragraph (529)). However, as also explained at paragraph (529), this
         strategy has not prevented RHEL’s competitors from offering RHEL clones.
         According to Oracle, the main reason why Red Hat has been unable to foreclose
         access to RHEL’s source code is that such behaviour has been “so far tempered
         by severe reactions from the open source community”.375
(546) In the second place, all competitors having expressed their view confirm that, if
         the Merged Entity were to change Red Hat’s current commitment towards open
         source this would trigger a reaction from the open source community. In
         particular a number of competitors consider that the adverse effect on the Merged
         Entity’s business would be very significant or significant.376 One of them (which
         is also a large customer), for example, states “IBM appears to be chasing the
         open-source community with this planned acquisition, and Red Hat’s business
         depends on the open-source community in order to function. Losing their support
         would be incredibly detrimental”377 while another one states “Red Hat would
         become another proprietary vendor and lose the power with the community, who
         they depend on for contributions back to the open source code. Innovation within
375 See Oracle’s replies to Questionnaire Q1 to competitors, questions 39 and 66. See also minutes of a
    call dated 9 April 2019 with Oracle, paragraph 13. See also the also the following similar statement
    from the Notifying Party: “even if Red Hat could interfere with Oracle’s access to RHEL source code
    under the GPL, it has not done so pre-merger because of its dependency on the community of open
    source developers, which will continue post-merger” (see Notifying Party’s reply to RFI 19, question
    1).
376 While certain competitors (e.g. Oracle) consider that the detrimental effect on the Merged Entity
    would be “limited”, these responses seem to be mainly based on the large scale of IBM which would
    enable to Merged Entity to better weather any negative reaction from the open source community.
    With respect to this argument, the reasoning sets out at paragraphs (557) to (559) in relation to
    Oracle’s specific claim applies mutatis mutandis.
377 See replies to Questionnaire Q1 to competitors, question 65.
                                                       116
 ---pagebreak---         the merged entity would slow and other open source vendors would gain
        marketshare.”378
(547) In addition, in line with the above competitors’ feedback, all the open source
        foundation that have responded to the Commission’s market investigation
        consider that, if the Merged Entity were to change Red Hat’s current commitment
        towards open source this would trigger a reaction from the open source
        community.379 As explained in more details below at paragraph (568), open
        source foundations host key open source projects and the Commission therefore
        considers that they are likely to have a broad insight on how the open source
        community could be expected to react.
(548) As apparent from their responses to the Commission’s market investigation, in
        line with the Notifying Party’s claim, open source foundations expect that any
        modification of Red Hat’s open source participation could significantly impair the
        value of IBM’s investment in Red Hat. In particular, one of them indicates that it
        would expect the adverse effect on the Merged Entity’s business to be very
        significant based in particular on the high risk that a large number of Red Hat’s
        key developers would leave the company, as apparent from the following
        statement: “Well, if Red Hat's developers leave en masse it would mean that the
        money spent to acquire Red Hat would have been completely wasted. I would
        assume that the most likely outcome from that scenario would be bankruptcy of
        IBM”.380
(549) Similarily, while another one considers that the adverse effect on the Merged
        Entity would be overall limited, this foundation clarifies that this is because of the
        relatively limited share that Red Hat will represent in the Merged Entity’s total
        turnover. With respect specificly to the effect on Red Hat’s business, that
        foundation confirms that the effect could be significant: “however the impact
        could well be significant for the portion of the merged entity’s overall business
        corresponding to Red Hat”.381
(550) Finally, a third one considers highly unlikely that the Merged Entity would
        become less “open” as a result of the Transaction. In this respect, it states the
        following: “having worked with both groups extensively (IBM and Red Hat) I
        consider it highly unlikely that the merged entity will do anything to lessen the
        "openness" Indeed I expect they will be at pains to ensure the resultant entity is -
        more- open than less”.382
(551) In the third place, the Notifying Party has repeatedly stressed the importance of
        the open source community’s support for Red Hat’s business and the dramatic
        impact that antigonizing such community could have on Red Hat’s business. For
        example, the Merged Entity explains that it is “vital for Red Hat (and post-
        Transaction, IBM) to maintain its good standing with the developer community”
        since “any attempt to affect the neutrality or openness of RHEL would alienate
378 See replies to Questionnaire Q1 to competitors, question 65. A number of other similar statements can
    be found in the competitors’ responses to question 64 and 65.
379 See replies to Questionnaire Q3 to open source foundations, question 6.
380 See replies to Questionnaire Q3 to open source foundations, question 7.
381 See replies to Questionnaire Q3 to open source foundations, question 7.
382 See replies to Questionnaire Q3 to open source foundations, question 6.
                                                       117
 ---pagebreak---          many of the key developers (both within Red Hat and outside) upon whom Red
         Hat relies for its commercial offerings”.383
(552) In the same vein, the Notifying Party explains that it has all the incentive to share
         the source code of its products with the “upstream” developer community in a
         timely manner since Red Hat needs the input of this community to maintain and
         further develop its products. For example, the Notifying Party explains that
         “given the small percentage of Linux code actually developed by Red Hat,
         continued developer mindshare is the single most important asset for Red Hat to
         ensure the continued success of RHEL and other Red Hat products and timely
         sharing of code is critical to this”.384
(553) Second, the claim that the Merged Entity would have an incentive to delay or
         degrade access to RHEL’s source code does not seem supported by IBM’s
         rationale for the Transaction as stated in the Recitals in the Agreement and Plan
         of Merger and […].385
(554) Indeed, as explained in more details above at paragraph (401), the Commission
         acknowledges that IBM has made firm, public commitments to maintain and
         continue Red Hat’s open source business model and its neutral “Switzerland”
         strategy in working with third parties. In addition, internal documents provided to
         the Commission show that […].
(555) Third, Oracle claims that, unlike Red Hat, post-Transaction the Merged Entity
         will have the ability and incentive to foreclose Oracle’s access to RHEL’s source
         code essentially because the Merged Entity’s more diversified business will allow
         it to “weather any temporary backlash better than Red Hat alone, which is
         dependent on RHEL support revenues”.386 With respect to this backlash, Oracle
         acknowledges that a “developer backlash” could be expected. However, it argues
         that a “customer backlash” is unlikely since “enterprise customers who pay
         support are generally indifferent to whether vendors are open source or not”.387
         In addition, Oracle argues that the merged entity will have “an extra incentive to
         undermine Oracle Linux by blocking access to RHEL’s code” since “Oracle
         Linux helps Oracle compete with IBM in servers, middleware and database
         management systems”.388
383 See the Notifying Party’s response to the Commission’s RFI 19, question 1.
384 See the Notifying Party’s response to the Commission’s RFI 19, question 1.
385 See for example the Agreement and Plan of Merger by and among International Business Machines
    Corporation, Socrates Acquisition Corp. and Red Hat, Inc. dated October 28, 2018. IBM agreed to
    operate Red Hat as a distinct business unit and that Red Hat would “remain an open and neutral
    platform, partnering broadly with information technology participants […] and continuing to support
    the open source community”.
386 See Oracle’s reply to Questionnaire Q1 to competitors, question 39 and minutes of a call with Oracle
    dated 9 April 2019, paragraph 16.
387 See minutes of a call dated 9 April 2019 with Oracle, paragraph 15.
388 See minutes of a call with Oracle dated 9 April 2019, paragraph 15. In its reponse to to Questionnaire
    Q1 to competitors, question 39, Oracle also claims that its concerns are “exacerbated” by IBM’s
    ability to influence decisions through its “massive consulting business”. With respect to this argument
    as explained at the above paragraph (467) and followings, the Commission considers that the Merged
    Entity will not have the ability to significantly influence customers’ purchasing decisions in favour of
    Red Hat products and to the detriment of competing vendors’ products, let alone significantly
    foreclose access to a sufficient customer base to Red Hat’s competitors, for the following reasons.
                                                          118
 ---pagebreak--- (556) The Commission considers that this specific claim from Oracle can be rejected
        based on the following reasons.
(557) In the first place, as explained above at paragraphs (544) to (552), based on its
        market investigation, the Commission considers that if, post-Transaction, the
        Merged Entity was to foreclose access to RHEL’s source code this would likely
        have a significant detrimental effect on Red Hat’s business. While certain
        competitors having responded to the Commission’s market investigation consider
        that customers do not attach too much importance to whether a product is open
        source or not as long as it delivers the functionalities they need and would
        therefore not necessarily switch away if RHEL was to become less open source, a
        number of other competitors consider that, if the Merged Entity was to deviate
        from Red Hat’s current commitment to open source, there would likely be
        customers switching to other open source alternatives.389 In any case, in line with
        the feedback of several market participants, the negative reaction from the open
        source community alone could already have a significant detrimental impact on
        Red Hat’s business since, as explained in more details at paragraphs (544) to
        (552), Red Hat’s business relies to a great extent on contributions from the open
        source community.390
(558) In the second place, it is unlikely that a strategy aimed at foreclosing RHEL
        clones by preventing access to RHEL’s source code could be leveraged in order
        to capture sufficient additional sales so as to offset the detrimental effect attached
        to such a foreclosure strategy (see above paragraph). In particular, it is unlikely
        that such a foreclosure strategy would enable the Merged Entity to advantage its
        hardware and software products by degrading the interoperability of competing
        products with RHEL since, as explained above at paragraphs (531) to (542),
        customers will likely still be able to use third party hardware and software
        products in combination with a number of alternative paid Linux operating
        systems. This is for example the case for Oracle’s servers, middleware and
        database management systems. If the Merged Entity was to (i) foreclose access to
        RHEL’s source code and (ii) limit the interoperability of these Oracle products
        with RHEL, customers could still use these products in combination either with
        Oracle’s forked version of RHEL or with other paid Linux operating systems such
        as SUSE’s SLES or Canonical’s Ubuntu.
(559) In the third place, while Oracle acknowledges that a strategy aimed at preventing
        Oracle Linux from using RHEL’s source code would involve a certain degree of
        “backlash” in particular on the part of developers, Oracle does not explain why it
        considers that this “backlash” would be only temporary and why, in spite of this
        “temporary backlash”, the Merged Entity would still find it profitable to engage
        in the foreclosure of RHEL’s source code. In particular, Oracle does not explain
        how the foreclosure of Oracle Linux as a RHEL clone could provide a leverage
389 See replies to Questionnaire Q1 to competitors, questions 62 and 64. For example: “customers would
    look to other open source alternatives. Other players would take leadership roles in advancing open
    source projects for the benefit of the community (as Red Hat does today)”.
390 See replies to Questionnaire Q1 to competitors, question 64. For example: “As mentioned in the
    previous response, it seems that one of the drivers of IBM’s planed acquisition of Red Hat is access to
    the large and passionate open source community. Changing the current commitment would elicit
    strong negative pushback from the community. Therefore we do not think this is likely” or “in our view,
    Red Hat’s strength is having community support since they do not create their own products”.
                                                        119
 ---pagebreak---        allowing to capture additional IBM sales of such an amount that it would overall
       give the Merged Entity the incentive to engage in the foreclosure of RHEL’s
       source code.
As regards effect
(560) The Commisison considers that, in any event, a potential foreclosure strategy
       targeting RHEL clones would have no significant effect on competition. This is
       because, as explained at paragraphs (544) to (542), even if the Merged Entity was
       to effectively prevent RHEL clones by foreclosing access to RHEL’s source code,
       customers would still have sufficient alternatives that they could switch to. In
       particular, customers could switch to alternative paid Linux distributions that are
       not RHEL clones (mainly to SUSE’s SLES or Canonical’s Ubuntu). Customers
       could also switch to Oracle’s forked version of RHEL or to any other potential
       forked version developed by other vendors relying on a RHEL clone.
(561) The Commission therefore considers that, even if RHEL clones were to be
       foreclosed, this would not result in a significant increase in RHEL’s market
       power. In line with the conclusion at the above paragraph (390), the Commission
       therefore considers that the Merged Entity will most likely not have a sufficient
       degree of market power to leverage its position with RHEL to foreclose
       competitors in other markets.
5.4.   Effects on open source innovation
5.4.1. Potential concern
(562) There are hundreds of thousands of open source projects which, to different
       degrees, may serve as input into current and future commercial products of third
       parties. Red Hat contributes to thousands of these open source projects while IBM
       contributes to approximately […] projects.
(563) Some third party commercial software products that derive from open source
       projects in which IBM and/or Red Hat are involved may compete with existing
       IBM/Red Hat products. Some other commercial software products may also at
       some point be developed on the basis of some of these projects to compete with
       the Parties. Therefore, the question arises whether the Merged Entity may have
       the ability and incentive to delay the development of some of these projects or
       otherwise redirect them to reduce the emergence of competing products or reduce
       the competitive pressure of existing products.
(564) While the Commission has not received any formal complaint with respect to this
       theory of harm, a few respondants to the Commission’s market investigation
       identified open source projects for which they consider that the influence that the
       Merged Entity will hold post-Transaction could potentially raise a concern. These
       open source projects are the followings: Cloud Foundry, Eclipse Microprofile,
       and systemd. The potential concerns related to these projects are described and
       assessed below at paragraph (582) and followings.
5.4.2. Notifying Party’s view
(565) The Notifying Party submits that the Transaction will not give raise to any
       potential anticompetitive concerns in relation to open source innovation since:
                                               120
 ---pagebreak---          (a)     IBM has publicly stated its intention to continue the independent open
                 source approach to product development that has made Red Hat so
                 successful;391
         (b)     the Transaction will not give IBM decisive “influence” or “control” over
                 the activities or the strategic direction of strategic open source projects in
                 which IBM and/or Red Hat are currently involved;392
         (c)     in any event, the open source community of developers would fork the
                 project if it were unhappy with the direction taken and if there was market
                 interest in the fork (which would presumably be the case if the fork could
                 lead to a commercial product which would divert sales away from an
                 incumbent);393
         (d)     any modification of Red Hat’s open source participation would result in
                 developers simply “voting with their feet”394 and moving to a new firm,
                 significantly impairing the value of IBM’s investment; and
         (e)     with respect to the specific open source projects identified by market
                 participants as potential concerns, the Transaction will not give the
                 Merged Entity the ability and the incentive to steer the direction of these
                 projects to advantage the Merged Entity’s commercial products.395
5.4.3. Commission assessment
5.4.3.1.          As regards the general theory of harm
(566) The Notifying Party distinguishes open source projects in which Red Hat and
         IBM are currently involved between projects that are “maintained” by either IBM
         or Red Hat and projects that are “maintained” by third parties. Open source
         projects are typically maintained by the original publisher of the project (i.e., of
         the working code base) until the stewardship is transferred to another individual
         or group. Where a project has a single “maintainer”, the maintainer can typically
         decide on the direction for the main technical aspects of the project. The
         “maintainer” will however often invite contributions and commentary from the
         community surrounding the project and third party contributors may also steer the
         direction of particular technical sub-areas.
(567) Each of Red Hat and IBM have provided a list of open source projects that they
         consider as the most relevant/strategic for their business.396 Within these lists,
         Red Hat and IBM have respectively identified […] projects which they consider
391 See Form CO, paragraphs 42-44.
392 See Form CO, paragraph 1121 and followings. See also the Notifying Party’s response to the
    Commission’s RFI 19, question 5.
393 See Form CO, paragraph 205 and followings.
394 See Form CO, paragraph 204.
395 See the Notifying Party’s response to the Commission’s RFI 19, question 5.
396 Red Hat has provided a list of […] open source projects which it considers as being significant to Red
    hat’s commercial products and where Red Hat is a material contributor to a significant code base. IBM
    has provided a list of […] projects in which IBM is actively promoting and investing as IBM believes
    that future product developments may be based on these projects (see Form CO, Annex – Pre-
    Notification RFI 3 – 4).
                                                      121
 ---pagebreak---          as “maintained” by Red Hat (out of a total of […] strategic projects) and […]
         projects which they consider as “maintained” by IBM under the IBM open source
         governance model397 (out of a total of […] strategic projects). The remaining
         projects on IBM and Red Hat’s lists are maintained by third parties.
(568) Among the projects that are maintained by third parties, a number – typically the
         larger ones – are governed by open source foundations under a formal set of rules.
         Such formal structures are implemented to provide open source projects with the
         organization needed to create an effective solution, while maintaining the benefits
         of a community project. The Linux Foundation, the Apache Software Foundation,
         and the Eclipse Foundation are examples of non-profit open source “foundations”
         that provide formal governance and support for popular community projects. One
         open source foundation can host a large number of open source projects. This is
         for example the case for the Eclipse Foundation which administers 380 open
         source projects.
(569) Overall, the Commission considers that the Merged Entity will not have the
         ability and incentive to delay the development of open source projects it is
         involved in or otherwise redirect them to reduce the emergence of competing
         products or reduce the competitive pressure of existing products. This is based on
         the following general reasons and on the specific reasons set out below at
         paragraphs (583) to (602).
(570) First, with respect to open source projects that are currently maintained by either
         Red Hat or IBM or for which either IBM or Red Hat is a large contributor, the
         current ability of each of the Parties to steer the direction of these projects will not
         increase further because of the Transaction.
(571) Second, based on the Parties’ best estimates,398 IBM and Red Hat’s contributions
         to source code only overlap for […]399 out of their […] most relevant/strategic
         projects. For […] out of these […] overlapping projects, the Notifying Party
         submits that the Merged Entity will have “no greater influence” following the
397 IBM open governance model is IBM’s effective strategy to attract developers and IT industry players
    to a single open source project with the objective of attaining momentum faster. It looks to avoid
    community fragmentation and ensures the commitment of IT industry players.
398 For the purpose of estimating their share of contributions in open source projects the Parties have used
    GitHub as primary source of data as they believe that it is the most comprehensive repository of open
    source projects to which they contribute. Red Hat’s contribution percentages have been calculated for
    the time period from January 2014 until March 28, 2019 using the following formula: Percentage of
    Red Hat Contributions = Red Hat Project Commits/All Project Commits. With respect to IBM, IBM’s
    contribution rates represent the percentage of the total committers (as opposed to the number or the
    percentage of commits) that have the ibm.com domain in their email addresses. In particular, IBM has
    a script that gathers the commit logs from GitHub repositories of the relevant project, scans the data
    for the author/committer email and examines the domain, and then summarizes contributions by top
    level domain (e.g., ibm.com). IBM examined the period beginning January 1, 2018 through Friday,
    April 19, 2019. For the Swift Storlets project, an OpenStack project listed in tab 2, IBM estimated its
    share of contribution by using the contribution data published on stackalytics.com. The Parties note
    that while they have endeavoured to provide their best estimates, the share of contribution for some of
    the projects may be underestimated as Red Hat and IBM developers do not always disclose their Red
    Hat or IBM email addresses on GitHub. In particular, Red Hat indicates that the contribution shares
    may significantly understate Red Hat’s contribution share for at least the following projects: […]. See
    Form CO, paragraphs 1115 to 1120.
399 These projects are: […].
                                                        122
 ---pagebreak---          Transaction.400 In this respect, the data provided by the Notifying Party confirms
         that the increment of contribution share represented by IBM is limited for the
         large majority of the overlapping projects since, among the […] overlapping
         projects, the incremental share of contribution represented by IBM is only above
         [5-10]% for […] projects.401 For […] out of these […] projects, the Notifying
         Party explains that despite the overlap in contribution share, the Merged Entity
         will have “no greater influence” in these projects following the Transaction since
         IBM’s contributions are only occasional and/or limited to the maintenance of
         specific IBM system offerings. There is only one project for which the Notifying
         Party acknowledges that the combination of IBM and Red Hat will result in
         increased influence, i.e., the […] open source project. However, as explained
         below at paragraph (589) and followings, the Commission considers that the
         Parties’ combined influence in this project does not raise competitive concerns.
(572) Third, several open source projects in which IBM and/or Red Hat are involved are
         under the umbrella of an open-source foundation that serves as a check against
         behaviours that might seek to concentrate influence over the project in one
         contributing entity.402 IBM and/or Red Hat are members in a number of these
         foundations and may hold certain role in the governance bodies of these
         foundations or in specific committees and groups within these foundations.
(573) In this respect, the Parties identify two major foundations in which they both
         currently hold a board seat, i.e., the Eclipse Foundation and the Cloud Native
         Computing Foundation (“CNCF”).403 While the rules addressing affiliation
         conflicts may differ from one open source foundation to the other, the bylaws of
         both the Eclipse Foundation and the CNCF preclude multiple representatives. As
         confirmed by the Notifying Party,404 the Parties will therefore have to give up one
         of their seats on the boards of both the Eclipse Foundation and the CNCF. In
         response to the Commission’s market investigation, another open source
         foundation hosting certain projects in which Red Hat and/or IBM are involved,
         also indicated that, following the Transaction, Red Hat will no longer be able to
         maintain a separate membership in its foundation.405
(574) Fourth, the Commission notes that the large majority of the competitors having
         replied to the its market investigation are generally not concerned with the
         influence that the Merged Entity will have in open source projects. Indeed, in
400 There is only one project for which the Merged Entity acknowledges that the Merged Entity will
    increase its influence following the Transaction, i.e., the […] project. A specific assessment of this
    project is set out below at paragraph 592 and followings.
401 These projects are the followings: […].
402 E.g., among the overlapping projects […] is hosted by the […] Foundation, […] is hosted by the […]
    Foundation, […] is hosted by the […] Foundation, […] is hosted by the […], […] is hosted by the […]
    Foundation, […] is hosted by the […] Foundation, etc.
403 While they do not both hold a board seat, the Parties also overlap to some extent in the Linux
    foundation and in the Apache Software Foundation. In the Linux foundation, IBM holds the highest
    (Platinium) membership level and a seat on the Linux Foundation board while Red Hat has a lower
    (Silver) membership level and does not have a board seat. As to the Apache Software Foundation,
    while a Red Hat employee serves on its board, IBM’s employees do not. The President of the Apache
    Software Foundation is an IBM executive but he does not serve on the Apache Software Foundation’s
    board.
404 See Form CO, paragraphs 1150 and 1156. Also confirmed by the Eclipse Foundation (see Eclipse
    Foundation’s reply to Questionnaire Q3 to open source foundations, question 4).
405 See replies to Questionnaire Q3 to open source foundations, question 4.
                                                        123
 ---pagebreak---          response to the Commission’s market investigation, a large majority of the
         competitors indicated that they are not involved in any open source projects for
         which either Red Hat or IBM have the ability to unilaterally adopt decisions
         having a significant impact on the direction of the relevant project(s). 406 A large
         majority of competitors also responded that they are not involved in certain open
         source projects for which, following the Transaction, the combined IBM/Red Hat
         entity will gain the ability to unilaterally adopt decisions having a significant
         impact on the direction of the relevant project(s).407
(575) Fifth, even for projects for which the Merged Entity may have some degree of
         influence allowing it to steer the direction of a given project to some extent, the
         merged entity will likely not be able to impose a direction advantaging its
         commercial offering to the detriment of third parties because of the threat of
         forking and the threat of other developers (contributors) walking away from the
         project, which would significantly damage the project at stake.
(576) Open source software is typically governed by broad copyright licenses that
         permit the software’s source code to “be freely accessed, used, changed, and
         shared (in modified or unmodified form) by anyone”.408 Because the source code
         is freely available, developers are therefore, in theory, free to “fork” any open
         source community project if they are unhappy with the direction in which a
         project is going. Similarly, IT vendors could, in theory, “fork” the code of any
         open source project to develop their own commercial offerings.
(577) In this respect, there are a number of actual examples of notable forks, a number
         of which have been in direct response to actions taken by a projects’ leadership or
         sponsor that were seen as potentially impinging on innovation or commitment to
         open source community norms.409 These examples include complex projects
         which shows that, even though, as also acknowledged by the Notifying Party, the
         easiness of forking depends on the complexity of the software product and related
         source code, forking can be a possibility even in the case of complex open source
         projects. Based in particular on these past examples and on their detrimental
         impact for the original project that have been forked, the Notifying Party claims
406 See replies to Questionnaire Q1 to competitors, question 62.1. For the large majority, these
    competitors did not provide a detailed explanation of their responses. It may therefore be that they are
    not involved in any of the projects identified by the Notifying Party as “maintained” by either Red Hat
    or IBM, or it may also be that they are involved in such projects but nonetheless consider that even if
    Red Hat and/or IBM would have the ability to steer the influence of a given open source project, Red
    Hat and/or IBM would not have the incentive to do so (e.g. because they wish to encourage third party
    contributions).
407 See replies to Questionnaire Q1 to competitors, question 62.2.
408 See https://opensource.org/faq#osd.
409 MariaDB was forked from MySQL in 2009 after Oracle acquired Sun and degraded MySQL, by
    stopping offering the cheapest subscription levels for MySQL and holding back test cases in the latest
    release of MySQL instead of feeding them back into the open source community; Jenkins was forked
    from Hudson in 2011 after Oracle applied for a trademark on Hudson and did not support the
    community’s desire to migrate hosting of Hudson from Oracle's Java net site to GitHub; LibreOffice
    was forked from OpenOffice.org in 2010 after development slowed under Oracle’s stewardship and
    Oracle antagonized the community; X.Org was forked from XFree86 in 2004 after XFree86 changed
    its licensing terms, adding a restriction that required redistributions to explicitly acknowledge
    XFree86; OpenSSH was forked from SSH in 1999 after the original creator of SSH founded a
    company to profit from SSH, and licenses for SSH became increasingly restrictive. See Form CO,
    paragraph 206.
                                                         124
 ---pagebreak---         that “The threat of forking underpins why IBM will have no ability or incentive to
        limit Red Hat's neutrality (e.g., favoring changes that support IBM products over
        those of competitors) or its commitment to work within the norms of open source
        development”.410
(578) As regards forking, the Commission’s market investigation confirms that it could
        be an option at least for certain open source projects in which Red Hat and/or
        IBM are involved.411 For example, as explained above at paragraph (532), Oracle
        indicates that, if its full and timely access to RHEL’s source code was hampered
        by the Merged Entity, it would create its own forked version of RHEL. Another
        competitor also indicate that, following the rejection of changes that it had
        proposed to an open source project in which Red Hat was one of the key
        participant, it has been able to fork the code of the relevant project into an
        alternative project.412
(579) However, competitors having provided their views on this topic also flag that
        forking can only be the last resort given the investment and the time required in
        order to fork a complex open source project.413 Competitors further explain that
        there are potentially significant barriers that need to be overcome such as finding
        developers with the required technical knowledge or building sufficient trust in
        order to become an “enterprise grade” alternative (which includes inter alia
        building a support team).414 Finally, competitors also indicate that for a large,
        complex project to be forked it would need the involvement of one or even
        several large market players.
(580) Sixth, even for projects where a fork may be unlikely to occur, the Merged Entity
        will still remain constrained to some extent by the risk to lose the support of the
        open source community. Indeed, as explained above at paragraphs (544) to (552),
        competitors and open source foundations having replied to the Commission’s
        market investigation consider that, if the Merged Entity was to disregard Red
        Hat’s legacy commitment to “open source”, this could result in key developers
        leaving the company and external contributors refraining from inputing in Red
        Hat’s key projects. Given that Red Hat’s business is entirely based on open source
        products, losing the support of the open source community could have a
        significant detrimental on the future development of Red Hat’s products. As
        explained above at paragraph (548) this could in turn significantly impair the
        value of IBM’s investiment in Red Hat.
(581) Seventh, as explained above at paragraphs (401) and (554), IBM has made firm,
        public commitments to maintain and continue Red Hat’s open source business
        model. […].415
410 See Form CO, paragraph 208.
411 See replies to Questionnaire Q1 to competitors, question 63.
412 See replies to Questionnaire Q1 to competitors, question 62.
413 See replies to Questionnaire Q1 to competitors, question 63.
414 See replies to Questionnaire Q1 to competitors, question 63.
415 There is nothing in the Commission’s case file which suggests that the Transaction’s business plan
    would be premised on IBM making Red Hat’s products less open source that they are today. By
    contrast, as apparent from the Parties’ internal documents which are listed in the above footnote (284),
    […] (see footnote (284)). By way of example, […].
                                                        125
 ---pagebreak--- 5.4.3.2.           As regards the specific concerns
(582) With respect to the specific potential concerns identified by a few competitors
         having responded to the Commission’s market investigation, the Commission
         considers that the Merged Entity will not have the ability and incentive to delay
         the development of these specific projects or otherwise redirect them to reduce
         the emergence of competing products or reduce the competitive pressure of
         existing products.416417 This is based on the general reasons set out at the above
         paragraphs (575) to (581) and on the following specific reasons.
As regards Cloud Foundry
(583) A respondent expressed the concern that IBM could use its influence within the
         Cloud Foundry community in order to change the direction of this project in a
         way that would advantage OpenShift, […].418 In particular, Post-Transaction, the
         Merged Entity would have no incentive to keep improving Cloud Foundry as an
         improved Cloud Foundry would potentially create stronger competitors for
         OpenShift.
(584) Cloud Foundry is one of the open source container orchestrator technology which
         is used by commercial vendors to offer container infrastructure software. Other
         orchestration technology include Kubernetes, Docker, Swarm, Apache Mesos.
         Among these orchestration technologies, Kubernetes is the leader and de facto
         standard.419 As explained above at paragraphs (119) to (123), both Red Hat, with
         OpenShift, and IBM offer container infrastructure software based on the
         Kubernetes orchestration technology. With respect to the commercial products
         that are based on Cloud Foundry the Notifying Party explains that “the primary
         commercial non-Kubernetes competitor to OpenShift has been […] (a different
         open source container platform technology)”.420
416 In addition, a respondent expressed the concern that, post-Transaction, IBM would have the incentive
    to use its influence on “KVM Hypervisor for the Power and Z/LinuxOne architecture” open source
    projects to delay the release of upstream contributions in order to foreclose competitors. However, the
    Commission considers that, in any event, post-Transaction, the Merged Entiy will not have the ability
    to exclude rival hypervisors by delaying the release of upstream contributions, or otherwise attempting
    to frustrate the progress of these extension projects since IBM servers represent only a tiny fraction of
    the total opportunity for hypervisors. In fact, IBM servers account for less than [0-5]% of new server
    deployments, and represent only [0-5]% and less than [0-5]% of all servers running on Linux, by
    revenue and units, respectively (see the Notifying Party’s response to the Commission’s RFI 19,
    question 5). Accordingly, any deterioration of interoperability with IBM servers would have little to no
    impact.
417 A respondent also mentioned a potential concern with respect to the Parties’ role in Open Invention
    Network (“OIN”), an independent organization created in 2005 in order to ensure a level playing field
    for Linux by safeguarding developers, distributors, and users from organizations that would leverage
    patents to hinder its growth and innovation. This respondent however did not provide convincing
    explanation on how the combination of Red Hat and IBM’s role in OIN could raise competition
    concerns. In any case, the Commission considers that the Parties will not be able to achieve an
    increased influence over OIN as a result of the Transaction, since in particular, as explained by the
    Notifying Party, the bylaws of OIN requires that either IBM or Red Hat transfer their interest in OIN
    to the other, and the “Continuying Member” will only be entitled to have one vote in total and one seat
    on OIN’s board. the Notifying Party’s response to the Commission’s RFI 18, questions 3 and 4.
418 See replies to Questionnaire Q1 to competitors, question 62.
419 See Form CO, paragraph 572.
420 See Form CO, paragraph 612.
                                                         126
 ---pagebreak--- (585) The Commission considers that, following the Transaction, the Merged Entity
         will not have the ability and the incentive to influence the direction of Cloud
         Foundry in order to reduce the competitive pressure on OpenShift. This is based
         on the following reasons.
(586) First, based on the data provided by the Notifying Party, IBM’s contributions to
         the Cloud Foundry project amount to only 5%, far behind Pivotal, which together
         with its affiliates Dell EMC and VMWare account for almost 70% of
         contributions.421 In addition, any attempt by IBM to unduly influence the
         direction of Cloud Foundry would likely be detected and hampered by a number
         of companies competing with OpenShift which are involved in the Cloud
         Foundry project, notably Pivotal but also Dell EMC, Google and Microsoft.
(587) Second, IBM is only one out of eight organizations with a representative on the
         Cloud Foundry Board of Directors, which determines the strategic direction and
         business governance of the project and makes most of its decisions by simple or
         70% majority.422 With one board member, IBM holds only 12.5% of voting rights
         and has therefore no veto on any kind of decisions. As Red Hat is not currently a
         member of the Cloud Foundry project, the Transaction would not change this.
(588) Third, the Notifying Party explains the Transaction will have no impact on IBM’s
         incentives to keep improving Cloud Foundry since IBM will still have a
         responsibility to support its clients that are currently running their applications on
         Cloud Foundry through IBM Public Cloud and IBM Cloud Private.423
As regards Microprofile
(589) A respondent expressed the concern that, post-Transaction,424 the Merged Entity
         would decide to reduce its involvement in the Eclipse Microprofile open source
         project (i.e., project aimed at developing application programming interface
         “API” to extend Enterprise Java to microservices architecture) in order to reduce
         the adoption of products competing with the Merged Entity’s middleware (in
         particular Red Hat’s JBoss EAP middleware which is already suitable to a certain
         extent for the microservice architecture).425
(590) The Eclipse MicroProfile project is a relatively young open source project which
         was announced in September 2016, with IBM, Red Hat, Tomitribe and Payara as
         founding members and the London Java Community and SouJava as supporting
         members.426 The Eclipse MicroProfile project’s founding objective is the vendor-
421 https://cloudfoundry.biterg.io/
422 The other directors are appointed, respectively, by Dell EMC, VMware, SUSE, HCL, Swisscom, SAP
    and Pivotal. See further https://www.cloudfoundry.org/governance/. As an exception to the usual “one
    organization one representative” rule, Dell EMC, VMware, and Pivotal are each represented by one
    director, due to a special dispensation in the bylaws (Section 3.3 of the Cloud Foundry bylaws
    provides: “At no time may a Member and its Affiliates have more than one Director who is an
    employee, officer, director, or consultant of that Member, except that Pivotal, EMC, and VMware,
    though Affiliates, shall each have one (1) Director on the Board)”. The Cloud Foundry bylaws are
    available at: https://www.cloudfoundry.org/wp-content/uploads/2017/01/CFF_Bylaws.pdf.)
423 See the Notifying Party’s response to the Commission’s RFI 19, question 5.
424 See replies to Questionnaire Q1 to competitors, question 62.
425 See Form CO, paragraph 327.
426 Current members include IBM, LJC, Tomitribe, Red Hat, Payara, SouJava, Hazelcast, Fujitsu,
    KumuluzEE, Hammock, Oracle, Lightbend, and Microsoft. See https://microprofile.io/.
                                                        127
 ---pagebreak---          neutral advancement and optimization of Java EE for microservices-based
         architectures, the provision of a platform portable across multiple runtimes and
         the development of an interoperable microservices architecture that allows
         communication among polyglot runtimes (not just Java).427
(591) According to the Merged Entity, the Eclipse MicroProfile is currently at the stage
         of […].428 In this respect, the community is currently in the process of actively
         recruiting participants.
(592) The Commission considers that, following the Transaction, the Merged Entity
         will not have the ability and the incentive to impede the development of the
         Eclipse MicroProfile project in order to reduce the actual and potential
         competitive pressure on its middleware offering. This is based on the following
         reasons.
(593) First, the Eclipse Microprofile project is hosted within the Eclipse Foundation,
         which serves as a check against behaviour that might seek to concentrate
         influence over the project in one contributing entity. As also explained above at
         paragraph (573), IBM and Red Hat currently only have two out of 15
         representatives on the Eclipse Foundation Board of Directors,429 which
         determines the strategic direction and business governance of the project and
         makes most of its decisions by simple or two-thirds majority. Following the
         Transaction, the Merged Entity will have to relinquish one Board seat, so the
         Merged Entity with only one board member would only hold 7% of voting rights.
         Given the foundation’s governance structure, the Merged Entity will not be able
         to unduly influence the general direction of the project.
(594) Second, the Eclipse Foundation did not express any specific concerns with respect
         to the impact of the Transaction on the development of the Eclipse Microprofile
                  430
         project.
(595) Third, while IBM and Red Hat account for a large share of current contributions
         to the Eclipse MicroProfile project (around 75% with IBM representing a 23%
                                               431
         contribution share increment ), the Notifying Party reports that the Parties’
         contribution shares are decreasing as the project has recently grown to include a
                                                                          432433
         larger number of industry sponsors and contributors.                    In addition, recent data
427 See https://projects.eclipse.org/proposals/eclipse-microprofile.
428 See Form CO, Annex Pre-Notification RFI 10 – 1.
429 The other representative on the Board of Directors are: one representative each for CA Technologies,
    Bosch, CEA List, OBEO, Fujitsu, SAP and Oracle (as Strategic Developer Members), three elected
    representatives for the two classes of Enterprise and Solution Members, and three elected members of
    the            Committee                Members            collectively.          See          further
    https://www.eclipse.org/org/foundation/directors.php.
430 See Eclipse Foundation’s reply to Questionnaire Q3 to competitors, question 5.
431 See https://projects.eclipse.org/projects/technology.microprofile/who.
432 See the Notifying Party’s response to the Commission’s RFI 19, Question 5.
433 Corporate sponsors and members of the project other than IBM and Red Hat include enterprises and
    foundations like Payara, Tomitribe, Lightbend, LJC, SouJava, Hazelcast, Fujitsu, KumuluzEE,
    Hammock, Microsoft, and Oracle (see https://microprofile.io/). Third party-affiliated and independent
    developers include developers from the corporate sponsors and other corporations, including e.g.
    Phoenix Contact, Creative Arts & Technologies, DSoft, Apinauten, and Deutsche Telekom (see
    https://microprofile.io/contributors/).
                                                         128
 ---pagebreak---         shows that the adoption of the project among Java EE developers has been rising
                                              434
        significantly in the last year.           Even if IBM and Red Hat slowed down or
        reduced their contributions, the Commission therefore considers that this would
        likely only have a relatively short term impact on the development of the project
        as other contributors would be able to increase their contributions and assume
        leadership positions.
(596) Fourth, the Notifying Party claims that it will have no incentive to reduce
        contributions in order to advantage the Merged Entity’s offering of middleware
        since, in particular, this project remains key to maintaining the relevance of
        IBM’s middleware products in the new cloud-native microservices environment.
        In this respect, as set out above at paragraph (241), IBM’s Java EE middleware
                                                                          435
        still currently constitute a significant stream of revenues.
(597) Fifth, even if the Merged Entity were to reduce its contributions in the Eclipse
        MicroProfile project in a way that would make it more difficult for competing
        Java EE middleware to be competitive in new microservices environment, there
        are already a large number of middleware offerings other than the ones offered by
                                                                                      436
        Red Hat and IBM that are suitable for microservices environment. This market
        segment would therefore in any case remain competitive.
As regards Systemd
(598) A respondent expressed the concern that, post-Transaction, the Merged Entity
        would have the incentive to leverage Red Hat’s ability to steer the direction of the
        “systemd” open source project in order to prevent the development and/or the
        extension of alternatives to RHEL.437
(599) Systemd is an open source project that provides basic building blocks for a Linux
        operating system.438 It is one of the many components of a Linux operating
        system. Systemd was initially cofounded by a Red Hat engineer and was
        introduced by Red Hat five years ago as part of RHEL 7. Systemd was originally
        developed to create an alternative to Canonical’s Upstart init system project that
        developers considered superior from a technical and governance perspective.
        Systemd has today been adopted more widely by the majority of Linux
        distributions and it is considered in the industry as a “de facto standard”.
(600) The Commission considers that the Transaction will not have any effect on Red
        Hat’s current ability to use its influence on the systemd project in order to reduce
434 A 2019 survey indicates that Eclipse Microprofile’s reported usage among Java EE developers grew
    from 13% in 2018 to 28% in 2019, and Eclipse MicroProfile is listed as one of the top three
    frameworks for building cloud native applications and top cloud native technologies, alongside
    Spring/Springboot and Kubernetes (See https://eclipse-foundation.blog/2019/05/10/results-2019-
    jakarta-ee-developer-survey/ and https://jakarta.ee/documents/insights/2019-jakarta-ee-developer-
    survey.pdf).
435 See the Notifying Party’s response to the Commission’s RFI 19, question 5.
436 These offerings include e.g. Apache Tomcat, Glassfish, Wildfly, Jetty, Pivotal tc Server, Tomtribe,
    Mulesoft Tcat Server, etc.
437 See replies to Questionnaire Q1 to competitors, question 62.
438 See the Notifying Party’s response to the Commission’s RFI 19, question 5; replies to Questionnaire
    Q1 to competitors, question 62 and replies to Questionnaire Q3 to open source foundations, questions
    1 and 5.
                                                       129
 ---pagebreak---         the competitive pressure exercised by alternative Linux distributions on RHEL.
        This is because, while the Commission’s market investigation confirms that Red
        Hat currently exercises a significant influence on the direction of systemd, based
        on the data provided by the Notifying Party, IBM today appears to be a very
        minor contributor to systemd. In fact, out of a total of 40,409 contributions on
        “github”, only 58 are associated with an “ibm.com” email address, which
        represents a contribution of less than 2%.439
(601) In addition, the Commission considers that it is unlikely that the Merged Entity
        will have the ability and the incentive to use its influence on the systemd project
        in order to foreclose RHEL’s competitors. In this respect, the reasons set out at
        paragraphs (527) to (559) with respect to the potential foreclosure of RHEL’s
        clones through withholding, delaying or degrading access to RHEL’s source code
        apply mutatis mutandis.
(602) With respect specifically to a foreclosure strategy based on Red Hat’s influence
        over systemd, while systemd has recently emerged as a de facto industry standard,
        it is only one type of “init” system for Linux and RHEL’s competitors could
        therefore migrate to other alternative existing open source init systems such as
        Upstart or System V and contribute to the further development of these alternative
        projects.440 In any case, the Merged Entity’s competitors on the paid Linux-based
        server operating systems could react by forking the source code of systemd and
        creating a new community open source project having similar functionalities.
        Indeed, systemd is one of more than 10,000 RHEL components and, while it is an
        important and increasingly complex component, it is likely that the sophisticated
        players active on the paid Linux server operating systems market (e.g., Oracle,
        SUSE, or Canonical) could team up to develop a fork of systemd. In this respect,
        the Notifying Party explains that approximately half of the top 10 systemd
        contributors do not work for Red Hat. With respect to systemd’s top contributors
        who are employed by Red Hat, the Merged Entity explains that ”they could
        conceivably leave Red Hat (or IBM) to work on system for another vendor using
        system technology”.441
439 The analysis is based on contributors’ email addresses associated with git commit records to the master
    branch of the project, as disclosed on https://github.com/systemd/systemd. For purposes of this
    analysis, a “contribution” is considered to be equivalent to one commit record in the git source code
    version control system that is merged in the master branch of the project. See Notifying Party’s reply
    to RFI 19, Question 5.
440 See the Notifying Party’s response to the Commission’s RFI 19, question 5.
441 See the Notifying Party’s response to the Commission’s RFI 19, Question 5.
                                                       130
 ---pagebreak--- 6.    CONCLUSION
(603) For the above reasons, the European Commission has decided not to oppose the
      notified operation and to declare it compatible with the internal market and with
      the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of
      the Merger Regulation and Article 57 of the EEA Agreement.
                                                   For the Commission
                                                   (Signed)
                                                   Margrethe VESTAGER
                                                   Member of the Commission
                                             131