CELEX: 32018M8832
Language: en
Date: 2018-12-07 00:00:00
Title: Commission Decision of 07/12/2018 declaring a concentration to be compatible with the common market (Case No COMP/M.8832 - KNAUF / ARMSTRONG) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                               Brussels, 7.12.2018
                                                               C(2018) 8649 final
                                                                                PUBLIC VERSION
                                                                In the published version of this decision,
                                                                some information has been omitted
                                                                pursuant to Article 17(2) of Council
                                                                Regulation (EC) No 139/2004 concerning
                                                                non-disclosure of business secrets and other
                                                                confidential information. The omissions are
                                                                shown thus […]. Where possible the
                                                                information omitted has been replaced by
                                                                ranges of figures or a general description.
                                                               To the notifying party
Subject:            Case M.8832 - Knauf/Armstrong
                    Commission decision pursuant to Article 6(1)(b) in conjunction with
                    Article 6(2) of Council Regulation No 139/20041 and Article 57 of the
                    Agreement on the European Economic Area2
1       OJ L 24, 29.1.2004, p. 1 (the 'Merger Regulation'). With effect from 1 December 2009, the Treaty on
        the Functioning of the European Union ('TFEU') has introduced certain changes, such as the
        replacement of 'Community' by 'Union' and 'common market' by 'internal market'. The terminology of
        the TFEU will be used throughout this decision.
2       OJ L 1, 3.1.1994, p. 3 (the 'EEA Agreement').
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak---                                 TABLE OF CONTENTS
1. THE PARTIES ............................................................................................................ 4
2. THE OPERATION AND THE CONCENTRATION ................................................ 4
3. EU DIMENSION ........................................................................................................ 4
4. PROCEDURE ............................................................................................................. 5
5. RELEVANT MARKETS ............................................................................................ 5
   5.1. Introduction ....................................................................................................... 5
   5.2. Product market definition .................................................................................. 7
        5.2.1.   Fixed, modular and open suspended ceilings ...................................... 7
        5.2.2.   Tiles and grids for modular suspended ceilings .................................. 9
        5.2.3.   Tiles for modular suspended ceilings made of different materials .... 10
   5.3. Geographic market definition .......................................................................... 12
        5.3.1.   Parties’ view ...................................................................................... 12
        5.3.2.   The Commission’s assessment for suspended ceiling tiles ............... 13
        5.3.3.   The Commission’s assessment for grids for suspended ceilings ....... 21
6. COMPETITIVE ASSESSMENT OF THE HORIZONTAL OVERLAPS .............. 27
   6.1. Analytical framework ...................................................................................... 27
   6.2. Horizontal non-coordinated effects ................................................................. 27
   6.3. Aspects common to the assessment of all five mineral fibre tiles markets
        under review .................................................................................................... 28
   6.4. Aspects common to the assessment of all five grids markets under review ... 31
   6.5. Competitive assessment of mineral fibre tiles and grids by national
        market .............................................................................................................. 32
        6.5.1.   Austria ............................................................................................... 32
        6.5.2.   Lithuania ............................................................................................ 35
        6.5.3.   Spain .................................................................................................. 39
        6.5.4.   UK ..................................................................................................... 41
        6.5.5.   Germany ............................................................................................ 44
   6.6. Competitive assessment of the overlaps in tiles made from other
        materials (metal, gypsum, wood) .................................................................... 47
7. COMPETITIVE ASSESSMENT OF THE VERTICAL LINKS ............................. 49
   7.1. Analytical framework – Vertical unilateral effects ......................................... 49
   7.2. Competitive Assessment ................................................................................. 50
8. PROPOSED REMEDIES.......................................................................................... 50
   8.1. Legal framework ............................................................................................. 51
                                                                2
 ---pagebreak---    8.2. Initial Commitments ........................................................................................ 52
   8.3. The Commission's market test ......................................................................... 54
        8.3.1.   Geographic footprint ......................................................................... 54
        8.3.2.   Product portfolio ................................................................................ 55
        8.3.3.   R&D capabilities ............................................................................... 55
        8.3.4.   Potential purchasers ........................................................................... 55
   8.4. Final Commitments submitted by Knauf ........................................................ 56
        8.4.1.   Description of the Final Commitments ............................................. 56
        8.4.2.   Assessment of the proposed remedies ............................................... 57
9. CONCLUSION ......................................................................................................... 58
                                                          3
 ---pagebreak--- Dear Sir or Madam,
(1)    On 17 October 2018, the European Commission received notification of a proposed
       concentration pursuant to Article 4 of the Merger Regulation by which Knauf
       International GmbH ('Knauf') would acquire within the meaning of Article 3(1)(b) of
       the Merger Regulation all of the shares in (i) the subsidiaries of Armstrong World
       Industries, Inc. in Europe, the Middle East and Africa ('EMEA'), and Asia Pacific
       ('APAC'), and (ii) certain subsidiaries of Armstrong World Industries' 50/50 joint
       venture with Worthington Industries ('WAVE JV') with operations in EMEA and
       APAC (together 'Armstrong', or the 'Target') (the 'Transaction').3 Knauf and
       Armstrong are designated hereinafter as the 'Parties'. The Transaction was initially
       notified to the Commission on 20 June 2018 and subsequently withdrawn on
       24 July 2018.
(2)    The Transaction has been referred to the Commission by the Austrian
       Bundeswettbewerbsbehörde pursuant to Article 22(3) of the Merger Regulation
       (the 'Referral Request'). The Referral Request was subsequently joined by the
       national competition authorities of Germany, Lithuania, Spain, and the United
       Kingdom.
1.     THE PARTIES
(3)    Knauf is a manufacturer of insulation materials, dry-lining systems, plasters, and
       other products. Knauf has approximately 27 500 employees worldwide.
(4)    Armstrong designs and manufactures commercial and residential ceiling, wall and
       suspension system solutions. Armstrong is the ceiling business of Armstrong World
       Industries, Inc. outside of the Americas and has over 3 800 employees.
2.     THE OPERATION AND THE CONCENTRATION
(5)    The Parties entered into a binding Share Purchase Agreement ('SPA') on
       17 November 2017, amended and restated on 22 January 2018 and on 18 July 2018,
       which sets out Knauf's intention to acquire all of the shares in and, therefore, sole
       control of Armstrong.
(6)    The Transaction therefore constitutes a concentration within the meaning of
       Article 3(1)(b) of the Merger Regulation.
3.     EU DIMENSION
(7)    The undertakings concerned have a combined aggregate worldwide turnover of
       ca. EUR […] (Knauf: EUR […]; Armstrong: EUR […]), but their turnover does not
       meet any of the other thresholds set out in Article 1 of the Merger Regulation. As a
       result, the Transaction does not have an EU dimension within the meaning of Article
       1 of the Merger Regulation.
3    Publication in the Official Journal of the European Union No C 384, 24.10.2018, p. 10.
                                                         4
 ---pagebreak--- (8)    On 7 February 2018, the Commission received the Referral Request from the
       Austrian Bundeswettbewerbsbehörde on the basis of Article 22 of the Merger
       Regulation. As mentioned, the Referral Request was joined by the national
       competition authorities of Germany, Lithuania, Spain, and the United Kingdom
       within the legal deadline. On 15 March 2018, the Commission adopted five
       decisions pursuant to Article 22(3) of the Merger Regulation accepting the Referral
       Request.4 On this basis, the Commission acquired jurisdiction to examine the
       Transaction with respect to the territories of Austria, Germany, Lithuania, Spain and
       the UK.
4.     PROCEDURE
(9)    Following the referral of the Transaction, the Commission required Knauf to submit
       a notification pursuant to Article 4 of the Merger Regulation. On 20 June 2018, the
       Commission received initial notification of the Transaction. Knauf subsequently
       withdrew the notification on 24 July 2018 and then re-submitted it
       on 17 October 2018.
(10)   Following a limited number of initial phone calls with market participants before
       notification of the Transaction on 20 June 2018, the Commission initiated a market
       investigation after that date. The Commission contacted the Parties’ customers,
       distributors and competitors requesting information pursuant to Article 11 of the
       Merger Regulation through electronic questionnaires, telephone calls and written
       requests for information. The Commission also collected sales and capacity data
       from the Parties’ competitors. The Commission continued that market investigation
       after re-notification of the Transaction on 17 October 2018.
(11)   In addition, the Commission also sent several written requests for information to the
       Parties and reviewed internal documents of the Parties submitted during the phase I
       investigation.
(12)   Knauf submitted proposed remedies on 16 November 2018, formally revising them
       on 19 November 2018 and 23 November 2018. After the Commission gathered the
       views of market participants and informed Knauf of the outcome of its market test,
       Knauf submitted further revised commitments on 30 November 2018, and further
       amended those formally on 6 December 2018.
5.     RELEVANT MARKETS
5.1.   Introduction
(13)   The Transaction concerns the building materials sector and in particular suspended
       ceilings. The Transaction gives rise to horizontally affected markets in the
       production and sale of modular and open suspended ceilings.
(14)   The Transaction also gives rise to vertical links regarding certain raw materials for
       suspended ceilings (upstream) and suspended ceilings (downstream). According to
       the Parties, these vertical links, while technically giving rise to vertically affected
4    C(2018) 1687 final, addressed to Austria; C(2018) 1684 final, addressed to Germany; C(2018) 1685
     final, addressed to Lithuania; C(2018) 1686 final addressed to Spain; C(2018) 1688 final, addressed to
     the United Kingdom.
                                                        5
 ---pagebreak---         markets due to the Parties' combined market shares downstream, are very limited in
        scope and entirely ancillary to their ceilings business. These vertical links are further
        discussed in section 7 of this decision.
(15)    Suspended ceilings are systems that are fixed to a framework or "grid", which is
        attached to the main structure of a building to create a void between the actual
        ceiling (the "soffit") and the suspended ceiling. This allows for technical equipment
        such as cables and air-conditioning equipment to be placed and concealed in
        between the two layers.
(16)    There are three main types of suspended ceilings: fixed, modular and open. Modular
        and open suspended ceilings, are predominantly installed in non-residential
        buildings, such as offices, schools, retail facilities, healthcare facilities, and leisure
        facilities, whereas fixed suspended ceilings are common in both the residential and
        the non-residential segments. The main features of each type of suspended ceiling
        are described in Figure 1.
Figure 1 – Examples of fixed, modular and open suspended ceilings
 FIXED                                  Fixed ceilings are comprised of plasterboards or other types of
                                        large tiles attached to a grid system using some form of
                                        mechanical fixture (e.g. clips, screws or nails) or glue, with
                                        varying degrees of tile removability and grid visibility. Fixed
                                        suspended ceilings can provide access to the ceiling cavity by
                                        using either removable tiles (e.g. tiles fixed with screws) or via
                                        access hatches. Fixed ceilings are common in both residential
                                        and non-residential buildings.
 MODULAR                                Modular ceilings are comprised of smaller tiles laid into a grid
                                        system from above and held up by the grid system without
                                        needing any permanent mechanical fixtures, therefore providing
                                        easy access to the technical equipment in the ceiling cavity by
                                        simply pushing up the tiles. These ceilings are almost
                                        exclusively installed in non-residential buildings.
 OPEN                                   Open ceilings consist of a suspension and tiles, where the soffit
                                        and any technical equipment are only partially concealed by
                                        panels that are suspended within a grid system. These panels
                                        may have many different forms and shapes, such as canopies,
                                        baffles and clouds.
Source: Form CO, paras. 52 - 53, 59, 71
(17)    Whereas all grids for suspended ceilings are made of metal, the tiles used for open
        and modular suspended ceilings are available in a variety of materials, mainly metal,
        mineral fibre, gypsum, and wood.
                                                         6
 ---pagebreak--- (18)     The end-customer, who is a building owner, typically does not decide which type of
         ceiling to install and which material to choose. Instead, that decision is taken by a
         number of intermediate market participants who play a more or less decisive role in
         the purchasing decision. For larger projects, where a tender is typically organised, an
         architect or a "specifier" will often identify the desired supplier and product by
         naming a suspended ceiling manufacturer or even a specific product of a given
         manufacturer. The contractor, the distributor and the installer may also play a role by
         advising to purchase ceilings equivalent to those specified. For smaller projects,
         standard products are usually purchased off–the-shelf from a distributor directly by
         the contractor or the installer.
5.2.     Product market definition
(19)     In previous decisions,5 the Commission has considered a market for all ceiling
         solutions while leaving the precise product market definition open.
(20)     From a customer's perspective, distinctions can be drawn in the broader ceilings
         market between (i) fixed, modular and open suspended ceilings, (ii) tiles and grids
         for modular suspended ceilings, and (iii) tiles for modular suspended ceilings made
         of different materials. These are discussed separately in sections 5.2.1 to 5.2.3.
5.2.1. Fixed, modular and open suspended ceilings
5.2.1.1. Parties’ view
(21)     The Parties are of the view that the relevant product market comprises at least
         modular suspended ceilings, including open suspended ceilings.6 The Parties
         consider that open suspended ceilings are a type of modular suspended ceilings, that
         suppliers can easily switch production between open and modular suspended ceilings
         and that the two are highly substitutable in terms of end use for customers.
5.2.1.2. Commission’s assessment
(22)     The Commission finds that, for the reasons outlined in paragraphs (23) to (27),
         modular and open suspended ceilings do not belong to the same relevant product
         market as fixed suspended ceilings while it can be left open whether modular
         suspended ceilings and open suspended ceilings belong to the same product market.
(23)     First, from a demand side perspective, the different types of ceilings have different
         technical characteristics, performance, and price points.7 On average, and in terms of
         total costs of ownership, fixed suspended ceilings tend to be more expensive than
         modular suspended ceilings.8 As an example, Knauf estimates the price per m2 of a
         fixed suspended ceiling made of plasterboard9 to be up to twice as high as the price
         per m2 of a standard modular suspended ceiling made of mineral fibre,10 which is the
         predominantly used material for modular suspended ceilings.11 Furthermore, tiles for
5     In particular Case M.3943 – Saint-Gobain/BPB, recital 37 et seq.
6     Form CO, para. 75 et seq.
7     Replies to questions 4.1 and 6 of Questionnaire 1 – Competitors; Form CO, para. 70.
8     Form CO, footnote 11.
9     Plasterboard is the predominantly used material for fixed suspended ceilings, Form CO, para. 61.
10    Form CO, footnote 11.
11    Form CO, M.8832, RFI#1 Confidential Annex 53 (updated): In terms of volume, approx. 74% of all
      tiles for modular suspended ceilings (excluding open and fixed suspended ceilings) within the EEA
                                                          7
 ---pagebreak---        fixed suspended ceilings, which are large boards, are produced in different
       production facilities than tiles for modular suspended ceilings, they offer a lower
       degree of flexibility of access to the ceiling cavity and have good acoustic
       performance even without any treatment.12 Moreover, if an open suspended ceiling
       in a given room were to have the same acoustical performance as a modular
       suspended ceiling, it would on average be more expensive by the factor of
       approx. 2-2.5.13
(24)   Second, while there appear to be some overlaps in terms of the end use for the
       different types of ceilings; modular, fixed and open suspended ceilings are more
       complements than alternatives to one another.14 Indeed, in the same construction
       project the different types of ceilings can be used to meet different needs (e.g. in a
       hospital, the areas where patients are treated may require specific hygienic qualities,
       whereas acoustic qualities may be more important for the entrance hall). In light of
       this, one distributor explained "[t]hese ceilings do not feature on the same market
       and in general do not compete with each other".15 [Strategic considerations by
       Knauf in relation to open suspended ceilings].16
(25)   Third, from a supply-side perspective, fixed suspended ceilings are produced
       through different processes than modular (or open) suspended ceilings. Moreover,
       the Parties submit that it may be possible to switch production from modular
       suspended ceilings to open suspended ceilings. However, it is also submitted that
       open suspended ceilings have higher manufacturing costs.17
(26)   Fourth, Armstrong in its internal documents [strategic considerations by AWI in
       relation to open suspended ceilings].18 In the same document, it is also stated that
       [strategic considerations by AWI in relation to open suspended ceilings].19
(27)   Fifth, with respect to open suspended ceilings, it can be left open whether this type
       of ceiling constitutes a separate relevant product market from modular suspended
       ceilings for the following reasons. First, the open suspended ceilings segment is
       much smaller than that of modular suspended ceilings representing around [5-10]%
       of demand for modular suspended ceilings in the EEA.20 Second, its market structure
       is similar to that of modular suspended ceilings.21 Therefore, competition concerns
       arise irrespective of whether suspended modular ceilings and open suspended
       ceilings are assessed together or separately.
     in 2017 are made of mineral fibre. In terms of value, mineral fibre tiles account for approx. 55% of all
     materials.
12   Form CO, para. 61.
13   Parties’ response to RFI 2.
14   Minutes of a conference call with a customer on 22 May 2018.
15   Minutes of a conference call with a customer on 22 May 2018.
16   Knauf internal document [strategic considerations by Knauf in relation to open suspended ceilings].
17   Form CO, para. 70.
18   Form CO, M.8832, Knauf Confidential Annex 5.4.26, 26.
19   Form CO, M.8832, Knauf Confidential Annex 5.4.26, 32.
20   Form CO, M.8832, RFI#1 Confidential Annex 53 (updated): The overall value of the market for
     suspended ceilings (including tiles and grids, but excluding fixed ceilings) in the EEA in 2017 was
     EUR […]. The value attributed to open suspended ceilings was EUR […], which corresponds to
     roughly [5-10]% of the overall value.
21   Form CO, paras. 52 et seq, para. 237.
                                                        8
 ---pagebreak--- (28)    The Parties’ activities do not overlap with respect to fixed ceilings except for de
        minimis overlap in grids used in fixed ceilings for which the Target holds an
        estimated share of less than [0-5]% in the UK, Spain, Lithuania and Austria and
        Germany.22 Therefore, this overlap will not be further analysed in the present
        decision.
5.2.1.3. Conclusion
(29)    The Commission therefore considers that for the purposes of the present decision,
        fixed suspended ceilings on the one hand and modular and open suspended ceilings
        on the other hand constitute separate relevant product markets.
(30)    Further, for the purposes of the present decision, it is not necessary to conclude
        whether modular and open suspended ceilings fall into the same or separate relevant
        product markets, since the Transaction raises serious doubts under both of those
        plausible alternative market definitions.
5.2.2. Tiles and grids for modular suspended ceilings
5.2.2.1. Parties’ view
(31)    The Parties submit that within modular suspended ceilings, tiles and grids are part of
        the same relevant product market.23 From a supply-side perspective, the Parties
        submit that increased demand for sales of tiles together with grids of the same
        supplier (“system sales”) has led almost all major suppliers to develop grid and tile
        production capabilities. In addition, the Parties consider that from a demand-side
        perspective customers often source ceiling solutions comprising grids and tiles from
        one supplier.24
5.2.2.2. Commission’s assessment
(32)    The Commission finds that tiles and grids for modular suspended ceilings form two
        distinct product markets for the following reasons.
(33)    First, as explained in paragraphs (15) to (17), tiles and grids perform very different
        functions and are inherently different products. The majority of competitors that
        responded to the market investigation indicated that in a significant number of cases
        tiles and grids for modular suspended ceilings are sourced from different suppliers.
        The Commission’s market investigation also provided indications that the
        percentage of customers that seek separate quotes varies greatly depending on a
        particular supplier. For example, the response of a competitor indicated that in 70%
        to 80% of instances it supplies only grids or only tiles.25 This is also corroborated by
        the Parties’ own data. Table 1 below demonstrates that grids and tiles are often sold
        separately by the Parties themselves. Also, Table 1 shows that the share of system
        sales is very different for Knauf and Armstrong.
22    Form CO, para. 66.
23    Form CO, para. 75 et seq.
24    Form CO, paras. 77-91.
25    Replies to question 8.1.3 of Questionnaire 1 – Competitors.
                                                        9
 ---pagebreak---  ---pagebreak---         characteristics can be achieved with different materials and that price differences do
        not justify the conclusion that tiles made of different materials belong to separate
        product markets.29
5.2.3.2. Commission’s assessment
(39)    The results of the Commission’s market investigation demonstrate that tiles made
        from different materials belong to different product markets, in particular that
        mineral fibre tiles, where the overlaps between the Parties’ activities are most
        significant, constitute a separate relevant product market for the reasons set out in
        paragraphs (40) to (43).
(40)    First, there are differences between the materials in terms of technical characteristics
        (such as acoustic quality, hygiene-related qualities and fire resistance), look and
        design. While technical characteristics can overlap among tiles made of different
        materials, as claimed by the Parties, the intrinsic qualities of each material make it
        more or less suited for specific applications. A majority of customers and
        competitors that participated in the market investigation indicated that the different
        materials are not perfect substitutes to one another.30 As one competitor explained
        "the performance of different materials are different. For plasterboard it is mainly
        focused on sound insulation, the price is cheap. For mineral fiber tile it is mainly
        focused on sound absorption e.g. acoustical performance".31 Another competitor
        summarised as follows the differences among tiles made of different materials
        "Mineral fibra: good absortion. bad higiene, medium Price. short live Metal: good
        absortion, good higiene, Medium Price, long live, easy to shape Wood: good
        absortins, needs treatments to be hygienic, high Price, for small surfaces".32
(41)    Second, there are considerable price differences between tiles made from different
        materials, in particular for the two largest material segments, i.e. mineral and metal,
        with some market participants indicating that metal tiles can be (significantly) more
        expensive than mineral fibre tiles.33 Moreover, the majority of competitors that
        participated in the market investigation indicated that in case of 5-10% price increase
        of modular ceiling tiles made from mineral fibre their customers would not change
        their purchasing preferences or would change them only partly.34 A majority of
        customers that participated in the market investigation confirmed the views
        expressed by competitors.35 Customers' preference for mineral fibre tiles appears to
        be mainly driven by the fact that "acoustical performance of mineral fiber is much
29    Form CO, paras. 92-115.
30    Replies to question 12 of Questionnaire 1 – Competitors, replies to question 14 of Questionnaire 2 –
      Customers (Germany and Austria), replies to question 14 of Questionnaire 3 – Customers (Baltics),
      replies to question 14 of Questionnaire 4 – Customers (Spain), replies to question 14 of Questionnaire 5
      – Customers (UK) and replies to question 14 of Questionnaire 6 – Customers other (EEA countries).
31    Replies to question 12.1 of Questionnaire 1 – Competitors.
32    Replies to question 12.1 of Questionnaire 1 – Competitors.
33    Minutes of a conference call with a customer on 28 June 2018;
      Minutes of a conference call with a competitor on 18 May 2018.
34    Replies to question 14 of Questionnaire 1 – Competitors.
35    Replies to question 16 of Questionnaire 2 – Customers (Germany and Austria), replies to question 16 of
      Questionnaire 3 – Customers (Baltics), replies to question 16 of Questionnaire 4 – Customers (Spain),
      replies to question 16 of Questionnaire 5 – Customers (UK) and replies to question 16 of
      Questionnaire 6 – Customers other (EEA countries).
                                                        11
 ---pagebreak---         better than other materials" and "[b]ecause mineral fibre tiles are less expensive
        than the other materials".36
(42)    Third, the Parties in their internal documents [information on how Knauf tracks the
        market].37 For instance, when reporting on market developments for its ceiling
        division, [information on how Knauf tracks the market].38
(43)    Finally, the Commission's investigation showed that mineral fibre tiles produced
        with the wet-felt and the soft-felt (also referred to as dry-felt) production methods
        compete with one another but that the products are differentiated and that wet-felt
        mineral fibre tiles may compete more closely with one another than with soft-felt
        mineral fibre tiles.39 As one competitor explained "[t]he dry-felt ceiling tile is closest
        to the wet-felt ceiling tile, although they are still used for rather different
        purposes".40 The differences between the products and lack of perfect demand-side
        substitutability is also reflected in [strategic considerations by Knauf relating to wet-
        felt and soft-felt mineral fibre tiles].41 Moreover, Knauf discusses the differences
        between mineral fibre tiles produced by the wet-felt method and the soft-felt method
        in its internal documents and also points out [strategic considerations by Knauf
        relating to wet-felt and soft-felt mineral fibre tiles].42 These aspects of closeness of
        competition will be taken into account in the competitive assessment.
5.2.3.3. Conclusion
(44)    The Commission therefore considers that for the purposes of the present decision,
        tiles for modular suspended ceilings made of different materials constitute separate
        relevant product markets. There are thus separate product markets for (i) tiles for
        modular suspended ceilings made of mineral fibre (assessed in sections 6.3 and 6.5),
        (ii) tiles for modular suspended ceilings made of gypsum (assessed in section 6.6),
        tiles for modular suspended ceilings made of metal (assessed in section 6.6) and tiles
        for modular suspended ceilings made of wood (assessed in section 6.6). Within the
        product market of tiles for modular suspended ceilings made of mineral fibre, the
        differences between soft-felt and wet-felt mineral fibre tiles, albeit not forming a
        separate product market, will be taken into account in assessing the closeness of
        competition between the products of the different mineral fibre competitors.
5.3.    Geographic market definition
5.3.1. Parties’ view
(45)    The Parties consider that the markets for suspended ceiling tiles and grids are
        national in scope with the exception of two clusters of countries, which they claim
36    Replies to question 14.1 of Questionnaire 1 – Competitors.
37    Form CO, M.8832, Knauf Confidential Annex 5.4.26, p.12 (for Armstrong);
      Form CO, M.8832, Knauf Confidential Annex 5.4.16, p.1, (for Knauf).
38    Knauf internal document [strategic considerations by Knauf relating to Central and Eastern Europe].
39    Replies to question 21 of Questionnaire 1 – Competitors.
40    Minutes of a conference call with a competitor on18 May 2018.
41    Knauf internal document "Business Report 30 Juni 2014" ("Geschäftsbericht 30. Juni 2014"), page 24.
42    Form CO, M.8832, Knauf Confidential Annex 5.4.19, p.16.
      Form CO, M.8832, Knauf Confidential Annex 5.4.9, p.30.
                                                        12
 ---pagebreak---         constitute two regional markets comprising of (i) Austria and Germany, and
        (ii) Lithuania, Latvia and Estonia.43
5.3.2. The Commission’s assessment for suspended ceiling tiles
(46)    The Commission’s market investigation and other evidence available to it suggests
        that the geographic market for tiles for modular suspended ceilings, and of mineral
        fibre tiles in particular which is the main tile market assessed in the present decision,
        is limited to each of the EEA countries for which the Commission has jurisdiction
        (Austria, Germany, Lithuania, Spain and the UK) for the reasons set out in
        paragraphs (47) to (76).
(47)    As regards supply-side considerations, the supply of tiles in the EEA is characterised
        by the producers having a limited number of production plants in the EEA, from
        which they serve their customers in the EEA. For instance, Knauf produces its
        mineral fibre tiles for the EEA in [Knauf’s mineral fibre production plants in
        the EEA]. Armstrong has [AWI’s mineral fibre production plants in the EEA]. The
        Parties’ competitors have a similarly centralized production in few EEA locations.
        Therefore, there may be a degree of supply-side substitution within the EEA, which,
        however, is limited by barriers to expand the sale of tiles in the different EEA
        markets due to the significant differences in market structure from the demand side.
        Those differences from a demand-side perspective result in heterogeneous conditions
        of competition in each of the EEA countries under review, which can be
        distinguished from neighbouring EEA countries because the conditions of
        competition are appreciably different as, set out in paragraphs (48) to (53).
(48)    First, the demand structure is fragmented and national with a large number of
        customers active in each of the EEA countries that are generally not active in more
        than one or at most a few EEA countries.
(49)    Second, the average prices for tiles are generally different in different Member
        States. For example, the Parties indicate that the average price for mineral fibre tiles
        is EUR/m2 […] in Austria, EUR/m2 […] in Germany, EUR/m2 […] in Lithuania,
        EUR/m2 […] in Spain and EUR/m2 […] in the UK.44 The Commission’s market
        reconstruction indicates that the Parties appear to have underestimated those price
        differences and that they are actually larger.45 Therefore, significant price differences
        can be observed between the five EEA countries under consideration. Those
        different prices may be caused by different prices charged for similar products
        depending on the country in question or by different product mixes sold in the
        different countries. Both suggest that diverging competitive conditions exist between
        the analysed EEA countries.
43    Form CO, paras. 122-129.
44    Form CO, M.8832, RFI#2 Confidential Annex 23.1.
45    The Commission carried out a market reconstruction in order to verify the figures provided by the
      Notifying Party for the EEA countries for which the Commission has jurisdiction. In addition to
      capacity data, the Commission's market reconstruction collected sales data in volume and value from
      the Parties and their largest mineral fibre tile competitors, allowing the Commission to calculate
      average sales prices per competitor and per EEA country.
                                                        13
 ---pagebreak--- (50)   Third, a local presence and local reputation are important for a suspended ceilings
       supplier to win sales in a given EEA country.46 The reason is that different, and very
       often local, market participants decide about the manufacturer of suspended ceilings
       to be installed in a building project, mainly architects, contractors, distributors and
       the installers.47 One market participant explained its strong market position in one
       EEA country by its well-functioning sales team that sufficiently covers all regions of
       this country. For another EEA country where this market participant is less strong
       and employs only one sales representative, this market participant explained that his
       sales representative "cannot address all relevant players in the same manner as
       his/her colleagues".48
(51)   Fourth, brands play a role in the sale of tiles and grids for suspended ceilings and
       customers have different preferences for different brands across EEA countries. This
       is reflected in internal documents of Knauf, [strategic considerations by Knauf
       relating to the Armstrong brand].49,50 Another example of brand importance is
       provided by one market participant from Lithuania, who explained that in Lithuania,
       the brand "Armstrong" is used as the generic name for suspended ceilings, albeit
       other suppliers are present in the market.51
(52)   Fifth, [information on how the Parties track the market, in particular strategic
       considerations by Knauf on the markets in Germany and the UK].52,53
(53)   Sixth, customers, who expressed their opinion in the course of the Commission’s
       market investigation, would switch to alternative suppliers outside of their country
       only when the prices for mineral fibre tiles increase significantly.54
(54)   Seventh, the significant differences between            the market shares of the Parties and
       their competitors in the different EEA                  countries confirm the findings in
       paragraphs (48) to (53). The business success           of the same suppliers of mineral fibre
       tiles for modular suspended ceilings differ              considerably across EEA countries,
46   Replies to question 27 of Questionnaire 1 – Competitors, according to which the vast majority of the
     respondents (12 out of 14) consider an established presence and reputation in the customers' country as
     "very important" or "important". The customers provide a similar picture, where 25 out of
     37 respondents consider a local representative as important for a supplier to be considered reliable,
     combined replies to question 27 of Questionnaires 2, 3, 4 and 5 – Customers (GER/AT, LT, ES, UK).
     In addition, the majority of customers considered an "established presence and reputation in [their]
     country" as "important" or "very important" (replies to question 28 of Questionnaires 2, 3, 4 and 5 –
     Customers (GER/AT, LT, ES, UK): 11 out of 18 in GER/AT, 4 out of 5 in Lithuania, 6 out of 7 in
     Spain and 7 out of 7 in the UK.
47   See section 5.1.
48   Minutes of a conference call with a competitor on 6 July 2018.
49   For example in Form CO, M.8832, Knauf Confidential Annex 5.4.19, page 37.
50   For example Form CO, M.8832, Knauf Confidential Annex 5.4.27, page 23.
51   Minutes of a conference call with a customer on 24 May 2018.
52   For example: Form CO, M.8832, Knauf Confidential Annex 5.4.7, p.11 (for Armstrong), Form CO,
     M.8832, Knauf Confidential Annex 5.4.12, p.27 (for Knauf).
53   Form CO, M.8832, Knauf Confidential Annex 5.4.18, p. 6: convenience translation from German:
     [strategic considerations by Knauf on the German market] and [strategic considerations by Knauf on
     the UK market].
54   For Germany and Austria, one respondent indicated 20-30% (Replies to question 32 of Questionnaire 2
     – Customers (Germany and Austria)); for Lithuania, four respondnets indicated on average 12.5%
     (Replies to question 33 of Questionnaire 3 – Customers (Lithuania)); for Spain two respondents
     indicated on average more than 10% (Replies to question 32, of Questionnaire 4 – Customers (Spain));
     and for the UK, three respondents indicated on average 25% (Replies to question 32, of Questionnaire 5
     – Customers (UK)).
                                                       14
 ---pagebreak---         indicating diverging competitive conditions: According to the Parties’ estimates,
        Knauf's value-based market share in mineral fibre tiles in Austria is [60-70]%, in
        Spain [40-50]%, in Lithuania [30-40]%, in Germany [20-30]%, and in the
        UK [5-10]%. Armstrong's value-based market share in mineral fibre tiles in the UK
        is [40-50]%, in Spain [30-40]%, in Lithuania [20-30]%, in Austria [10-20]%, and in
        Germany [5-10]%. Such significant differences in market position between EEA
        countries persisted during the three year time period 2015-2017.
(55)    Nevertheless, the Commission will also take into account certain EEA-wide
        considerations linked to the supply side of the markets, such as production capacities
        and production output at the EEA level in particular. As explained further in
        paragraphs (107) to (108), the capacity utilization of the few EEA production plants
        influences the profitability of the businesses and therefore has a direct influence on
        the competitive behaviour and aggressiveness of the individual suppliers. Those
        EEA-wide considerations will therefore be taken into account in the competitive
        assessment.
(56)    The following sections 5.3.2.1 and 5.3.2.2 will address the Parties’ arguments
        specifically with respect to Austria and Germany on the one hand and with respect to
        the Baltic countries on the other hand.
5.3.2.1. Austria and Germany constitute two distinct geographic markets
(57)    The Commission considers that Austria and Germany constitute two distinct relevant
        geographic markets.
(58)    The Commission notes that the supply of mineral fibre tiles in Austria and Germany
        is characterised by supply from few production facilities across the EEA.55 In
        contrast, as the Commission established in paragraph (47) et seq., any supply-side
        substitution within the EEA is, however, limited by barriers to expand the sale of
        tiles in the different EEA markets due to the significant differences in market
        structure from the demand side, which result in heterogeneous conditions of
        competition. This reasoning applies equally to Austria and Germany for the reasons
        set out in paragraphs (59) to (65).
(59)    First, there are no specific trade flows between Germany and Austria that would set
        the trade between those two countries apart from the trade flows of mineral fibre
        tiles between other EEA countries. The Parties’ manufacturing network is not
        organized on the basis of an Austria-Germany region. The Parties operate a number
        of plants across the EEA and each of these plants typically supplies its products to a
        large number of countries inside and sometimes even outside of the EEA. The
        analysis of the suspended ceilings trade flows from the Parties' plants to Austria and
        Germany does not suggest that the Parties’ plants are focused specifically on
        producing for an Austria-Germany region. For example, Knauf’s plant in
        Grafenau/Germany delivers          [Knauf deliveries from its Grafenau plant].56
        Armstrong’s plant in Münster/Germany delivers [AWI deliveries from its Münster
55    See also paragraph (46).
56    Form CO, M.8832, Knauf Confidential Annex 8.12 (a).
                                                    15
 ---pagebreak---        plant].57 Furthermore, neither Austria nor Germany can be singled out in this respect
       if compared to the other EEA countries.58
(60)   Second, there are differences in the average prices charged in Austria and Germany
       as set out in paragraph (49), indicating either diverging price levels or diverging
       product mixes sold, both illustrating diverging competitive conditions.
(61)   Third, while there are some customers that purchase suspended ceilings from the
       Parties both in Germany and in Austria, the market investigation also indicated that
       there are a considerable number of customers that operate only in either Austria or
       Germany. One market participant stated that it is "a regional distributor in [country]
       with a catchment area of 100 kilometres."59 Another market participant stated,
       "[Company] is active only on [country] market and its competitors are also all
       based in [same country]."60
(62)   Fourth, the existence of separate relevant geographic markets for Austria and
       Germany is supported by the Parties’ own assessment of those markets as reflected
       in internal documents submitted by the Parties. [Information on how the Parties track
       the market in Germany and Austria].61 [Information on how the Parties track the
       market in Germany and Austria].
(63)   Fifth, the replies received from customers and competitors during the Commission’s
       market investigation support the view that the geographic markets are separate for
       Germany and Austria. A large number of respondents considered Germany and
       Austria to be separate markets.62 Respondents to the market investigation stated, for
       instance, that "The market is specific to each country with often price / marketing /
       distribution deals and legislation creating barriers for cross border trade"63 Other
       market participants explained that "[i]n Austria there is a different business culture,
       partners like [to] know each other"64, or "that the markets are national or local.
       Even though the products are largely the same, the volumes are different, the
       building materials trade is partially organized in a different way and the way to
       market is the main reason for this view").65 A customer took the stance that "[t]he
57   Form CO, M.8832, AWI Confidential Annex 8.12 (b).
58   Form CO, M.8832, RFI#2 AWI Confidential Annex 43.1 (corrected);
     Form CO,M.8832, RFI#2 Knauf Confidential Annex 43.2.
59   Convenience translation from an email of a market participant dated 23 May 2018 ("als regionaler
     Händler in [Land] mit einem Einzugsbereich von 100 km ").
60   Minutes of a conference call with a customer on 13 June 2018, convenience translation from German
     ("[UNTRNEHMEN] ist nur auf dem [LAND] Markt tätig, (…) Konkurrenten kommen ebenfalls aus
     [LAND].").
61   For example: [information on how the Parties track the market in Germany and Austria] for Knauf in
     Form CO, M.8832, Knauf Confidential Annex 5.4.18, p.7.
     For Armstrong in Form CO, M.8832, RFI#1 AWI Confidential Annex 66.1, p.11. Furthermore, in Form
     CO, M.8832, Knauf Confidential Annex 5.4.15, [information on how Knauf tracks the market in
     Germany and Austria]. In Knauf's internal document [information on how Knauf tracks the market in
     Germany and Austria].
62   Replies to question 29 of Questionnaire 1 – Competitors; Replies to question 30 of Questionnaire 2 –
     Customers (Germany and Austria).
63   Replies to question 24of Questionnaire 1 – Competitors.
64   Replies to question 33 of Questionnaire 1 – Competitors.
65   Minutes of a conference call with a customer on 25 May 2018, convenience translation from German:
     "[…] ist der Ansicht, dass die Märkte national bis lokal sind. Auch wenn die Produkte weitestgehend
     gleich sind, sind die Volumina unterschiedlich, der Baustoffhandel ist teilweise anders organisiert und
     der Marktzugang ist hier der Hauptgrund für diese Sichtweise."
                                                       16
 ---pagebreak---  ---pagebreak---  ---pagebreak--- (70)   Third, the customer base differs significantly between the Baltic countries, as the
       largest customers are not identical across the Baltic countries.
(71)   Fourth, the existence of separate relevant geographic markets for each of the Baltic
       countries is supported by the Parties’ own assessment of those markets as reflected
       in internal documents submitted by the Parties. [Information on how the Parties track
       the market in the Baltics].75,76
(72)   Fifth, the replies received from customers and competitors during the Commission’s
       market investigation support the view that the geographic markets are separate for
       each of the Baltic states. The majority of responses to the Commission's market
       investigation, which took a position, indicate that markets are national in scope.77
(73)   Sixth, the Parties' own distribution networks and customer purchasing patterns
       (including the requirement to have a local presence) point to each of the Baltic
       Member States constituting separate national markets. The majority of respondents
       to the market investigation indicated that sales representatives are required in order
       to compete efficiently.78 The importance of local sales representatives is underscored
       by the fact that they have to know local architects well in order to propose their
       ceilings in an early stage of a construction project. Also, it appears that language acts
       as a barrier to purchase abroad.79 That is also supported by the fact that product
       catalogues are translated into each language.80 Customers also explained "suspended
       modular ceilings is a technically difficult product, therefore, a consultation, training,
       project calculation are necessary to participate in this market. Without local sales
       reps that would be very difficult."81
(74)   Seventh, competition takes place at the national level. Distributors indicated that
       cross-border sales and purchases may occur in isolated cases but are not standard
       business practice.82
(75)   Eighth, a well-established presence, i.e. "good reputation", was considered as
       important.83 In Lithuania, "good reputation" typically means that a distributor can
       help to find a solution for specific spaces in a building, has not failed to deliver on
       time and has proven financial track record.84
75   For example, Form CO, M.8832, Knauf Confidential Annexes 5.4.32, 5.4.34, 5.4.35 and 5.4.36. In
     Knauf's internal document [information on how the Parties track the market in the Baltics].
76   For example, Form CO, M.8832, Knauf Confidential Annexes 5.4.15 or 5.4.26.
77   Replies to question 30 of Questionnaire 3 Customers (Baltics).
78   Replies to question 28 of Questionnaire 3 Customers (Baltics);
     Minutes of a conference call with a distributor on 24 May 2018;
     Minutes of a conference call with a customer on 28 June;
     Minutes of a conference call with a distributor on 9 July 2018;
     Minutes of a conference call with a customer on 9 July 2018.
79   Minutes of a conference call with a distributor on 9 July 2018.
80   Replies to question 37.1 of Questionnaire 3 Customers (Baltics).
81   Replies to question 27.1 of Questionnaire 3 Customers (Baltics).
82   Minutes of a conference call with a distributor on 24 May 2018;
     Minutes of a conference call with a distributor on 9 July 2018.
83   Replies to question 28.1 of Questionnaire 3 Customers (Baltics); Non-confidential minutes of a
     conference call with a distributor on 24 May 2018.
84   Non-confidential minutes of a conference call with a distributor on 9 July 2018.
                                                         19
 ---pagebreak---  ---pagebreak---  ---pagebreak--- (81)    Third, several arguments, which apply for mineral fibre tiles are valid also for grids:
        (a)     A local presence and local reputation are important for a grid supplier to win
                sales in a given EEA country.89
        (b)     Brands play a role in the sale of grids for suspended ceilings and customers
                have different preferences for different brands across EEA countries.90
        (c)     [Information on how the Parties track the market in relation to grids].91
        (d)     Customers would switch to suppliers outside of their country only when the
                prices for grids would increase significantly.92
(82)    Fourth, the significant differences between the market shares of the Parties and their
        competitors in the different EEA countries confirm the findings in paragraphs (79)
        to (81). The business success of the same suppliers of grids for modular suspended
        ceilings differ considerably across EEA countries, indicating diverging competitive
        conditions: According to the Parties’ estimates, Knauf's value-based market share in
        grids for modular suspended ceilings in Austria is [50-60]%, in Germany [20-30]%,
        in Spain [10-20]%, in the UK [10-20]% and in Lithuania [0-5]%. Armstrong's
        value-based market share in grids for modular suspended ceilings in Lithuania
        is [50-60]%, in the UK [40-50]%, in Spain [30-40]%, in Austria [10-20]% and in
        Germany [5-10]%.93
(83)    Nevertheless, the Commission will also take into account EEA-wide considerations
        linked to the supply side of the markets, such as production capacities and
        production output at the EEA level. As explained further in paragraphs (120)
        to (122), the capacity utilization of the few EEA production plants influences the
        profitability of the businesses and therefore has a direct influence on the competitive
        behaviour and aggressiveness of the individual suppliers. Those EEA-wide
        considerations will therefore be taken into account in the competitive assessment.
(84)    The following sections 5.3.3.1 and 5.3.3.2 will address the Parties’ arguments
        specifically with respect to Austria and Germany on the one hand and with respect to
        the Baltic countries on the other hand.
5.3.3.1. Austria and Germany constitute two distinct geographic markets for grids
(85)    The Commission considers that Austria and Germany constitute two distinct relevant
        geographic markets.
(86)    The Commission notes that the supply of grids in Austria and Germany is
        characterised by supply from few production facilities across the EEA. In contrast,
        as the Commission established in paragraph (78) et seq., any supply-side substitution
        within the EEA is, however, limited by barriers to expand the sale of grids in the
        different EEA markets due to the significant differences in market structure from the
        demand side, which result in heterogeneous conditions of competition. This
89    See paragraph (50) The sales representatives of one suppler sell both tiles and grids.
90    See paragraph (51).
91    See paragraph (52).
92    See paragraph (53).
93    Form CO, M.8832, RFI#2 Confidential Annex 23.1.
                                                         22
 ---pagebreak---       reasoning applies equally to Austria and Germany for the reasons set out in
      paragraphs (87) to (89).
(87)  First, there are no specific trade flows between Germany and Austria that would set
      the trade between those two countries apart from the trade flows of grids between
      other EEA countries. The Parties’ manufacturing network is not organized on the
      basis of an Austria-Germany region. The Parties operate a number of plants across
      the EEA and each of these plants typically supplies its products to a large number of
      countries inside and sometimes even outside of the EEA. The analysis of the
      suspended ceilings trade flows from the Parties' plants to Austria and Germany does
      not suggest that the Parties’ plants are focused specifically on producing for an
      Austria-Germany region. For example, [Knauf deliveries from its Viersen plant].94
      [AWI deliveries from its Valenciennes plant].95 Furthermore, neither Austria nor
      Germany can be singled out in this respect if compared to the other EEA countries.96
(88)  Second, further arguments that apply for mineral fibre tiles apply also to grids:
      (a)      The market investigation indicated that there are a considerable number of
               customers that operate only in either Austria or Germany.97
      (b)      The existence of separate relevant geographic markets for Austria and
               Germany is supported by the Parties’ own assessment of those markets as
               reflected in internal documents submitted by the Parties.98
      (c)      Customers and competitors replies during the Commission’s market
               investigation support the view that the geographic markets are separate for
               Germany and Austria.99
      (d)      Finally, a local presence in either Austria or Germany is very important to
               market participants.100
(89)  Third, the significant differences between the market shares in grids of the Parties
      and their competitors in Austria and Germany confirm the findings in
      paragraphs (87) and (88). Table 7 and Table 8 demonstrate that the business success
      and market position of the largest competitors in grids differ considerably in Austria
      and Germany. This difference is particularly pronounced for Knauf and OWA, and
      to some degree also for Rockfon. Those differences also persist over time when
      analysing the 2015-2017 period and have been largely confirmed by the
      Commission's market reconstruction.
94   Form CO, M.8832, Knauf Confidentieel Annex 8.12 (a).
95   Form CO, M.8832, AWI Confidential Annex 8.12 (b).
96   Form CO, M.8832, RFI#2 AWI Confidential Annex 43.1 (corrected);
     Form CO,M.8832, RFI#2 Knauf Confidential Annex 43.2.
97   See paragraph (61).
98   See paragraph (62).
99   See paragraph (63).
100  See paragraph (64).
                                                   23
 ---pagebreak---  ---pagebreak--- (92)   First, there are no specific trade flows between the Baltic countries that would set the
       trade between those countries apart from the trade flows of grids between other EEA
       countries. The Parties’ manufacturing network and trade flows are organised in a
       similar way across Europe and the Baltic Member States alone or as a region do not
       stand out as compared to other countries in the EEA. The Parties operate a number
       of plants across the EEA and each of these plants typically supplies its products to a
       large number of countries inside and sometimes also outside of the EEA.103
(93)   Second, further arguments that apply for mineral fibre tiles apply also to grids:
       (a)      The customer base differs significantly between the Baltic countries as the
                largest customers are not identical across the Baltic countries.104
       (b)      The existence of separate relevant geographic markets for each of the Baltic
                countries is supported by the Parties’ own assessment of those markets as
                reflected in internal documents submitted by the Parties.105
       (c)      Replies received from customers and competitors during the Commission’s
                market investigation support the view that the geographic markets are
                separate for each of the Baltic States.106
       (d)      The Parties' own distribution networks and customer purchasing patterns
                (including the requirement to have a local presence) point to each of the
                Baltic Member States constituting separate national markets.107
       (e)      Competition takes place at the national level.108
       (f)      A well-established presence, i.e. "good reputation", was considered as
                important.109
(94)   Third, the significant differences in the market shares in grids of the Parties and their
       competitors between the Baltic countries confirm the findings in paragraphs (92)
       and (93). Table 9, Table 10 and Table 11 show that the business success and market
       position of the largest competitors in grids differ considerably between the Baltic
       countries. For instance, [information on AWI's strength in the Baltic countries].
       Also, [information on AWI's strength in the Baltic countries]. These differences also
       persist over time when analysing the 2015-2017 period and have been confirmed by
       the Commission's market reconstruction.110
103  For both Parties, see paragraph (87).
104  See paragraph (70).
105  See paragraph (71).
106  See paragraph (72).
107  See paragraph (73).
108  See paragraph (74).
109  See paragraph (75).
110  The Commission market reconstruction confirms the market strengths of the Parties and their
     competitors in the Baltic countries and largely also the market shares, with deviations from time to
     time.
                                                       25
 ---pagebreak---  ---pagebreak--- 6.     COMPETITIVE ASSESSMENT OF THE HORIZONTAL OVERLAPS
6.1.   Analytical framework
(95)   Under Article 2(2) and 2(3) of the Merger Regulation, the Commission must assess
       whether a proposed concentration would significantly impede effective competition
       in the internal market or in a substantial part of it, in particular through the creation
       or strengthening of a dominant position.
(96)   In this respect, a merger 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.
(97)   As regards non-horizontal mergers, two broad types of such mergers may be
       distinguished: vertical mergers and conglomerate mergers.111 Vertical mergers
       involve companies operating at different levels of the supply chain. 112 Conglomerate
       mergers are mergers between firms that are in a relationship, which is neither
       horizontal (as competitors in the same relevant market) nor vertical (as suppliers or
       customers).113
(98)   The Commission appraises horizontal effects in accordance with the guidance set out
       in the relevant notice, that is to say the Horizontal Merger Guidelines.114
       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.115
6.2.   Horizontal non-coordinated effects
(99)   The Horizontal Merger Guidelines distinguish between two main ways in which
       mergers between actual or potential competitors on the same relevant market may
       significantly impede effective competition, namely non-coordinated and coordinated
       effects.116
(100) Under the substantive test set out in Article 2(2) and 2(3) of the Merger Regulation,
       mergers that do not lead to the creation or the strengthening of the dominant position
       of a single firm may also be incompatible with the internal market. The Merger
       Regulation provides that "under certain circumstances, concentrations involving the
111  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,
     paragraph 3.
112  Non-Horizontal Merger Guidelines, paragraph 4.
113  Non-Horizontal Merger Guidelines, paragraph 5.
114  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.
115  Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of
     concentrations between undertakings ("Non-horizontal Merger Guidelines"), OJ C 265/6, 18.10.2008.
116  In the present decision, the Commission has not found evidence that the Transaction would raise
     serious doubts as regards its compatibility with the internal market with respect to coordinated effects
     in any of the horizontally affected markets. During the market investigation, the Commission received
     no concerns about possible anti-competitive coordinated effects arising from the Transaction.
                                                        27
 ---pagebreak---       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".117
(101) 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 merger, 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 merger 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.118
(102) Finally, the Horizontal Merger Guidelines describe a number of factors, which could
      counteract the harmful effects of the merger on competition, including the buyer
      power, entry and efficiencies.
6.3.  Aspects common to the assessment of all five mineral fibre tiles markets under
      review
(103) The Transaction will create or strengthen the market leader in four of the five
      national markets under review, potentially leading to the creation or strengthening of
      a dominant position in several of those markets. As there are a number of aspects
      that are common to the assessment of each of the national markets for mineral fibre
      tiles in Austria, Germany, Lithuania, Spain and the UK, those aspects are set out in
      paragraphs (104) to (116).
(104) First, the supply of mineral fibre tiles is concentrated in all five Member States for
      which the Commission has jurisdiction. There are only five suppliers of mineral
      fibre tiles in each of those countries: the Parties, OWA, Rockwool (through its
      Rockfon branch) and Saint-Gobain (through its Ecophon and Eurocoustic branches).
      The Transaction therefore appears to be a 5-to-4 merger in mineral fibre tiles in each
      of those countries and, in fact, in the EEA as a whole, limiting the number of actual
      or potential suppliers in each of the national markets assessed in the present decision.
(105) Second, in the supply of wet-felt mineral fibre tiles, which are a sub segment of
      mineral fibre tiles albeit not forming a separate product market, there are only three
      suppliers of wet-felt mineral fibre tiles in each of the five Member States in question:
      the Parties and OWA. The Transaction therefore appears to be a 3-to-2 merger in
      wet-felt mineral fibre tiles in each of those countries and, in fact, in the EEA as a
      whole, limiting the number of actual or potential suppliers in each of the markets
      assessed in the present decision.
117  Merger Regulation, recital 25. Similar wording is also found in paragraph 25 of the Horizontal Merger
     Guidelines.
118  Horizontal Merger Guidelines, paragraph 26.
                                                       28
 ---pagebreak--- (106) Third, besides the Parties, there are only two other suspended ceiling manufacturers
       who are equally active across Europe and thus in Austria, Germany, Lithuania, Spain
       and the UK, i.e. Rockwool and Saint-Gobain. In contrast, OWA is a smaller supplier
       and is particularly focussed on Germany, where OWA is the current market leader in
       mineral fibre tiles.119 In addition, even the European-wide players focus more on
       certain regions or certain countries within the EEA as has already become apparent
       from the differences in market shares of the Parties in different EEA countries as set
       out in paragraph (54).
(107) Fourth, the Parties would become the clear EEA-wide leader in terms of production
       capacity for mineral fibre tiles after the Transaction. Knauf has an EEA-wide
       capacity share of [20-30]% and Armstrong of [30-40]% in the EEA,120 leading to a
       combined capacity share of [50-60]% in mineral fibre tiles, according to the Parties'
       estimates. The Commission market reconstruction roughly confirmed these shares.121
       That share is indicative of dominance also in the five Member States in question, in
       particular since the capacity is used in the EEA as a whole and therefore equally in
       each of the five Member States in question and the share of the next competitor
       OWA is estimated at [10-20]%, that is to say at less than a third the size of the
       merged entity.
(108) Fifth, [strategic considerations by the Parties in relation to capacity utilisation].122,123
(109) Sixth, the phase I investigation has resulted in evidence from the Parties' internal
       documents that Knauf and Armstrong were competing head-to-head in in the
       Member States under review prior to the Transaction. For instance, Armstrong
       characterised Knauf in 2016 as [strategic assessment of Knauf by AWI] and
       [strategic assessment of Knauf by AWI]124 while Knauf commented in a document
       dated 16 September 2016 on Armstrong that Armstrong is [strategic assessment of
       AWI by Knauf].125
(110) Seventh, in contrast to the close competition between the Parties, and in line with the
       fact that the market for mineral fibre tiles is differentiated, not all three remaining
       competitors appear to be competing equally head-to-head with the Parties. In
       particular, competitor Saint-Gobain's mineral fibre companies either do not compete
       closely with the Parties or have certain shortcomings.
       (a)       Saint Gobain’s Ecophon products focus on higher value products and thus
                 compete less closely with the Parties. As set out in Armstrong’s internal
119  In its phase I investigation the Commission has performed a market reconstruction. The results of this
     preliminary exercise have largely confirmed the Parties' view with respect to market structure and
     competitors active in mineral fibre tiles and grids.
120  Each of the suppliers has a limited number of production plants for mineral fibre tiles from which it
     serves the different national markets in the EEA, making it impossible to assign capacity to specific
     national markets within the EEA.
121  According to the Commission market reconstruction the combined capacity share of the Parties in
     mineral fibre tiles is above 60%.
122  Knauf internal document "Business Report 30 Juni 2016" ("Geschäftsbericht 30. Juni 2016") page 7
     (convenience translation from German): [strategic assessment of AWI by Knauf].
123  Form CO, M.8832, Knauf Confidential Annex 5.4.18, slide 47.
124  Form CO, M.8832, RFI#1 AWI Confidential Annex 66.1, p.37, see also Armstrong internal document
     [strategic assessment of Knauf by AWI].
125  Form CO, M.8832, Knauf Confidential Annex 5.4.19, p.3; see also Knauf internal document [strategic
     assessment of AWI by Knauf].
                                                          29
 ---pagebreak---                  documents, Ecophon [strategic assessment of Ecophon by AWI] and has a
                 [strategic assessment of Ecophon by AWI].126 Knauf has a similar
                 perspective on Ecophon calling them a [strategic assessment of Ecophon by
                 Knauf]127 and [strategic assessment of Ecophon by Knauf].128
       (b)       Saint Gobain’s Eurocoustic products appear to have limitations in terms of
                 product portfolio.129
(111) Eighth, on the basis of the findings of the Phase I market investigation, the
       Commission considers it unlikely that the remaining competitors would have the
       ability and incentives to react sufficiently aggressively to counter-act any negative
       effects of the transaction, for instance by expanding output, for the reasons set out in
       paragraphs (112) to (117).
(112) In the first place, the product market is not homogeneous as there are differences in
       brand appeal and in product characteristics. That is to say in particular that
       customers may view the other competitors as less good alternatives due to lesser
       brand appeal with end customers,130 due to differences in product characteristics (in
       particular for Rockfon and Saint-Gobain which sell soft-felt mineral fibre tiles)131
       and due to differences in product positioning (in particular for Saint-Gobain
       Ecophon which focuses on high quality and high price) or in product portfolio (in
       particular for Saint-Gobain Eurocoustic).
(113) In the second place, there are indications that the capacity utilization of competitors
       is higher than that of Knauf and Armstrong. This is indicated by the Commission's
       collection of capacity data from the three main competitors but also by the Parties'
       views as reflected in their internal documents: [strategic considerations in relation to
       capacity utilisation]132 and [strategic considerations in relation to capacity
       utilisation].133
(114) In the third place, the available spare capacity of competitors would not be used
       exclusively for sales in Austria, Germany, Lithuania, Spain and the UK, but all over
       the EEA and possibly also outside of the EEA.134 The Commission notes in that
       context that the Parties' combined market shares in mineral fibre tiles in other EEA
       countries than the five countries under review are very high at more than [50-60]%
       and up to [90-100]% all across substantial parts of Eastern Europe (Czech Republic,
       Slovenia, Hungary, Croatia, Slovakia, Romania, Bulgaria,) but also at more
       than [60-70]% in Ireland and Greece and around [40-50]% in Poland and Portugal.135
126  Form CO, Annex 66.1.
127  Form CO, Annex 5.4.19, slide 2.
128  Annex 5.4.27, slide 33.
129  According to an internal Knauf document, Form CO, Annex 5.4.27, slide 33.
130  The relevance of brands is acknowledged for instance in Form CO, Annex 5.4.26.
131  Some respondents consider that two distinct product markets exist for wet-felt mineral fibre products
     and soft-felt mineral fibre products, and the Transaction would, therefore, decrease the number of
     competitors with respect to wet-felt products from three to two (non-confidential minutes of a call with
     a customer on 18 May 2018).
132  Annex 66.2 to the Form CO.
133  Annex 66.1 of the Form CO.
134  Both Knauf and Armstrong export a part of their production outside of the EEA, for instance to former
     CIS states or the Middle East. This is also acknowledged in an Armstrong internal document where
     Armstrong comments in its analysis of capacity utilization of its competitors: [strategic considerations
     in relation to capacity utilisation] , Annex 66.2 of the Form CO.
135  Parties' replies to question 1 of RFI #2 dated 22 February 2018.
                                                           30
 ---pagebreak---        Therefore, if the merged entity were to increase its prices in countries where its
       market shares are high, competitors may have the same incentive to use their
       capacity for sales in those other EEA countries, limiting the spare capacity available
       for additional sales in Austria, Germany, Lithuania, Spain and the UK.
(115) In the fourth place, as regards incentives to expand output, the competitors would be
       faced with additional demand if the merged entity raised price or otherwise
       deteriorated supply conditions and customers tried to switch away after the
       Transaction. It could therefore be profitable for them to raise their prices in turn.
       This is particularly relevant against the background that the Parties [strategic
       considerations by the Parties in relation to capacity utilisation].
(116) In the fifth place, there are indications that in countries where the market structure is
       already strongly concentrated, prevailing prices may be higher, and they are not
       offset by the existence of spare capacities of competitors. This is for instance the
       situation in the United Kingdom as further detailed in paragraph (176). This may
       also be indicative of likely effects of the transactions in other markets, where the
       Transaction would bring about a significant increase in market concentration.
(117) Ninth, market entry in mineral fibre tiles in the five Member States under review that
       would constrain the merged entity after the Transaction is not likely. The majority of
       respondents in the market investigation providing a meaningful answer hold the
       view that a market entry of a suspended ceilings supplier within the next five years is
       rather unlikely or very unlikely.136 This is echoed in the internal documents of the
       Parties that do not appear to mention any significant market entry in mineral fibre
       tiles to be expected in the next five years.
6.4.   Aspects common to the assessment of all five grids markets under review
(118) The Transaction will create or strengthen the market leader in three of the five
       national markets for grids under review, potentially leading to the creation or
       strengthening of a dominant position in Austria, Spain and the UK. As there are a
       number of aspects that are common to the assessment of each of the national markets
       for grids in Austria, Germany, Lithuania, Spain and the UK, those aspects are set out
       in paragraphs (119) to (122).
(119) First, the supply of grids is concentrated. There are only five main suppliers of grids:
       the Parties, Rockwool, Saint-Gobain and OWA.137 The Transaction therefore
       appears to be a five-to-four merger of main suppliers of grids.
(120) Second, the Parties would become the EEA-wide leader in terms of production
       capacity for grids after the Transaction. Knauf has a [10-20]% capacity share and
       Armstrong has a [10-20]% capacity share, leading to a combined capacity share
       of [30-40]% in the EEA.138 They would be well ahead of the next two competitors
       Rockfon ([10-20]%) and Saint Gobain ([10-20]%). The remaining market is highly
       fragmented.
136  Replies to questions on entry in the customer questionnaire. For instance, to question 53 of
     Questionnaire 2 – Customers (Germany and Austria).
137  Considering the five national markets, OWA is not present in Spain and Lithuania.
138  RFI#2 Confidential Annex 32 (corrected). The Commission market reconstruction roughly confirms
     these figures.
                                                      31
 ---pagebreak--- (121) Third, the Parties would become the leading supplier of grids for suspended ceilings
         in the EEA with a combined sales share of around [40-50]% in grids in the EEA.139
(122) Fourth, [strategic considerations by the Parties in relation to capacity utilisation].140
         This would impact equally all five national markets for girds in the Member States
         under review.
6.5.     Competitive assessment of mineral fibre tiles and grids by national market
6.5.1. Austria
6.5.1.1. The Parties' view
(123) The Parties maintain that the relevant geographic market is wider than only Austria
         and comprises Austria and Germany. Furthermore, the Parties consider that the
         relevant product market for suspended ceilings comprises grids as well as tiles made
         from all types of materials.
(124) Based on this, the Parties claim that the combined market shares of the Parties are
         moderate ([20-30]% on a value basis and [20-30]% on a volume basis) and hence
         below any presumption of a dominant market position.141 Moreover, the Parties
         stress the exertion of strong competitive pressure in particular by OWA, Rockfon
         and Saint-Gobain, not leaving aside a "large number of smaller but highly renowned
         players present in the DA [Commission clarification: Germany-Austria] region".142
6.5.1.2. Commission's assessment
(125) Certain aspects of the competitive assessment apply across all of the national
         markets for mineral fibre tiles and grids under review as explained in sections 6.3143
         and 6.4.144 Those aspects apply fully to the Austrian markets and therefore argue in
         favour of raising serious doubts for Austria. The remainder of this section will only
         set out arguments specific to Austria that apply in addition to those cross-cutting
         aspects already set out in sections 6.3 and 6.4.
139   Form CO, M.8832, RFI#1 Confidential Annex 53 (updated):EEA-wide combined market share in value
      [40-50]% and in volume [40-50]%. The Commission market reconstruction indicates lower figures both
      in value and volume, but also according to the market reconstruction the merged entity would remain
      market leader EEA-wide.
140   Form CO, M.8832, Knauf Confidential Annex 5.4.18, slide 47.
141   Form CO, para. 154.
142   Form CO, para. 154.
143   (1) The supply of mineral fibre tiles is concentrated; (2) The supply of wet-felt mineral fibre tiles;
      which are a subsegment of mineral fibre tiles albeit not forming a separate product market, is even more
      concentrated; (3) The Parties would become the clear EEA-wide leader in terms of production capacity
      for mineral fibre tiles after the Transaction; (4) The Parties would become the leading supplier of
      mineral fibre tiles in the EEA (5) [Strategic considerations by the Parties in relation to capacity
      utilisation]; (6) Parties' internal documents show that Knauf and Armstrong were competing head-to-
      head prior to the Transaction; (7) Not all three remaining competitors appear to be competing equally
      head-to-head with the Parties, this applies in particular to Saint-Gobain; (8) The Commission considers
      it unlikely that the remaining competitors would have the ability and incentives to react sufficiently
      aggressively to counter-act any negative effects of the Transaction; (9) Market entry in mineral fibre
      tiles that would constrain the merged entity after the Transaction is not likely.
144   (1) Supply of grids in the EEA is concentrated; (2) The Parties would become the EEA-wide leader in
      terms of production capacity for grids after the Transaction; (3) The Parties would become the leading
      supplier of grids for suspended ceilings in the EEA; (4) [Strategic considerations by the Parties in
      relation to capacity utilisation].
                                                           32
 ---pagebreak---  ---pagebreak---        according to the Commission market reconstruction, the value-based market shares
       are in excess of 50% in mineral fibre tiles.
       (b)      Closeness of competition
(129) As regards mineral fibre tiles and grids, the market feedback points to existing close
       competition between Knauf and Armstrong in Austria. Respondents from Austria
       name Armstrong as an alternative to Knauf, and vice versa, even though other
       suppliers are being named as well.145 In particular, when mineral fibre is considered
       the most suitable material for certain type of characteristics (standard, sound, fire
       reaction), both Parties are very often named as potential suppliers by Austrian
       market participants.146
(130) In other regards (such as the specific manufacturing method of wet-felt tiles, high-
       end or low-end products, etc.), the majority of the respondents maintain that the
       Parties are close competitors.147 In particular as regards the differentiation between
       the production methods of mineral fibre tiles – wet-felt and soft-felt - one market
       participant explained that if a particular wet-felt product is named in the
       specifications for a project, it is practically not possible, mainly because of the price,
       to switch to soft-felt mineral fibre suppliers, that is to say to Rockfon or Saint
       Gobain.148
       (c)      Replies from the market investigation on the impact of the Transaction
(131) Most respondents are neutral as regards the impact of the transaction on their
       company. A minority expects a negative impact but no one a positive. Similarly, the
       majority of respondents assume that the prices will remain the same but a
       considerable number of market participants expect a price increase.149
(132) Considering mineral fibre tiles only, there is a slight shift towards the opinion that in
       this product area, prices may increase as consequence of the Transaction.150 For
       grids, the opinions that prices will increase or that the prices will remain the same,
       are rather balanced.151
(133) Overall, the Commission observes that whilst many respondents did not express any
       view on the impact of the transaction or remain neutral, there are more participants
       expecting a negative impact of the Transaction than those who do not, in particular
       because of increasing prices.
(134) The available market feedback thus suggests that the Transaction could reinforce
       Knauf's very strong, if not dominant, position in Austria, regarding both tiles and
       grids.
145  Replies to questions 40 and 41 of Questionnaire 2 – Customers (Germany and Austria).
146  Replies to question 44 of Questionnaire 2 – Customers (Germany and Austria).
147  Replies to question 50.1, 52.1 of Questionnaire 2 – Customers (Germany and Austria).
148  Minutes of a call with a customer on 13 June 2018.
149  Replies to questions 57 of Questionnaire 2 – Customers (Germany and Austria): Out of 14 respondents,
     4 are of the opinion that the prices will increase, 6 expressed the view that the prices will remain the
     same and 4 stated "other", most of which did not provide any further explanation.
150  Replies to questions 58 of Questionnaire 2 – Customers (Germany and Austria).
151  Replies to questions 59 of Questionnaire 2 – Customers (Germany and Austria).
                                                         34
 ---pagebreak--- 6.5.1.3. Conclusion
(135) In view of the reasons set out in paragraphs (125) to (134), the Commission finds
         that the Transactions raises serious doubts about its compatibility with the internal
         market as regards the Austrian markets for mineral fibre tiles and grids for modular
         suspending ceilings.
6.5.2. Lithuania
6.5.2.1. Parties' views
(136) The Parties consider that all Baltic Member States fall under one geographic market
         and, therefore, no competition concerns arise. Further, the Parties submit that all
         materials of modular suspended ceilings fall under single relevant product market
         definition. As a result, the Transaction would not result in the significant impediment
         of effective competition primarily because the Parties market share would be
         moderate and there would be other international competitors that would continue to
         exert sufficient competitive pressure on the Parties.
6.5.2.2. Commission's assessment
(137) Certain aspects of the competitive assessment apply across all of the national
         markets for mineral fibre tiles and grids under review as explained in sections 6.3152
         and 6.4.153 Those aspects apply fully to the Lithuanian markets and therefore argue
         in favour of raising serious doubts for Lithuania. The remainder of this section will
         only set out arguments specific to Lithuania that apply in addition to those cross-
         cutting aspects already set out in sections 6.3 and 6.4.
152   (1) The supply of mineral fibre tiles is concentrated; (2) The supply of wet-felt mineral fibre tiles;
      which are a subsegment of mineral fibre tiles albeit not forming a separate product market, is even more
      concentrated; (3) The Parties would become the clear EEA-wide leader in terms of production capacity
      for mineral fibre tiles after the Transaction; (4) The Parties would become the leading supplier of
      mineral fibre tiles in the EEA (5) [Strategic considerations by the Parties in relation to capacity
      utilisation]; (6) Parties' internal documents show that Knauf and Armstrong were competing head-to-
      head prior to the Transaction; (7) Not all three remaining competitors appear to be competing equally
      head-to-head with the Parties, this applies in particular to Saint-Gobain; (8) The Commission considers
      it unlikely that the remaining competitors would have the ability and incentives to react sufficiently
      aggressively to counter-act any negative effects of the Transaction; (9) Market entry in mineral fibre
      tiles that would constrain the merged entity after the Transaction is not likely.
153   (1) Supply of grids in the EEA is concentrated; (2) The Parties would become the EEA-wide leader in
      terms of production capacity for grids after the Transaction; (3) The Parties would become the leading
      supplier of grids for suspended ceilings in the EEA; (4) [Strategic considerations by the Parties in
      relation to capacity utilisation].
                                                           35
 ---pagebreak---  ---pagebreak--- (140) The only other credible competitor is Saint-Gobain with [30-40]% market share
      value-based and [10-20]% volume-based. However, its market position under any
      segmentation will be much smaller if compared to the Parties post-merger. The other
      major players (Rockfon and OWA) have limited market shares in Lithuania –
      Rockfon [5-10]% value-based and [0-5]% volume-based, OWA [0-5]% value-based
      and [0-5]% volume-based – and are unlikely to constrain the parties sufficiently
      post-merger.
(141) As regards grids, the Parties submit that Knauf's position is minor in Lithuania
      ([0-5]% market share by both value and volume). The Parties further submit that
      Knauf entered the Lithuanian market later, which, according to them, explains
      Knauf's limited presence in grids.155 Moreover, the parties take the view that while
      the merger would result in a strong market position of the merged entity with market
      shares above [50-60]%, over the past three years, however, the combined market
      shares decreased from above [60-70]% in 2015 to above [50-60]% in 2018. The
      Commission notes that the increment added by Knauf decreased from [10-20]%
      in 2015 to [0-5]% in 2017. The Commission market reconstruction confirms the
      market shares as well as the decrease of both the combined market shares and the
      increment. This indicates that the Transaction is unlikely to change the competitive
      landscape in grids in Lithuania.
      (b)        Closeness of competition
(142) The market investigation provided evidence that the Parties are close, if not the
      closest, competitors in Lithuania in mineral fibre tiles.
(143) First, the majority of customers and distributors responding to the Commission’s
      market investigation indicated that Armstrong is the closest alternative to Knauf and
      vice versa.156 Only one distributor considered Saint-Gobain to be a close alternative
      to the Parties' mineral fibre tiles.
(144) Second, the Parties’ mineral fibre tiles and product portfolio are very similar and
      sometimes even professionals have difficulty to tell them apart.157
(145) Third, historically, Armstrong used to be the market leader in Lithuania holding
      around 50% market share around 8-10 years ago.158 The "Armstrong" brand was
      used as a generic term for suspended ceilings irrespective of the actual manufacturer.
      However, in recent years Knauf has gained market share at the expense of
      Armstrong.159
(146) Fourth, the Parties are each other's close competitors when looking at specific price
      bands. The market investigation indicated that while Knauf is also active in the entry
      level DIY sales channel with economic (low-range) mineral ceilings in Lithuania,
155  Parties' response to question 24 RFI#4.
156  Replies to questions 41 and 42 of Questionnaire 3 – Customers (Baltics).
157  Minutes of a conference call with a distributor on 9 July 2018.
158  Minutes of a conference call with a distributor on 9 July 2018.
159  Minutes of a conference call with a distributor on 9 July 2018.
                                                         37
 ---pagebreak---        both Parties compete closely for mid- to high-segment which are meant for project
       sales.160
(147) Fifth, the head-to-head competition between Armstrong and Knauf in Lithuania is
       reflected in Knauf’s internal documents: [strategic assessment of AWI by Knauf in
       relation to Lithuania].161
(148) In contrast, the market investigation did not provide evidence that the Parties are
       close competitors in Lithuania in grids due to Knauf's limited market position in
       grids in Lithuania.
       (c)       Architect and other specifiers specification acts as a barrier for non-specified
                 manufacturers
(149) Reputation of the manufacturer/distributor is very important in Lithuania and
       architects and other specifiers are unlikely to specify manufacturers that they do not
       know or have not worked with before. In effect, this acts as a barrier for new players
       to enter the market for the following reasons.
(150) First, the majority of market participants indicated that in the vast majority of cases
       (around 75%) suspended ceiling specifications from an architect makes a reference
       to a particular manufacturer.162
(151) Second, once a particular manufacturer is specified, ceilings of such a manufacturer
       are likely to be bought.163
(152) Finally, construction companies are unlikely to buy from distributors that they have
       no experience with.164
(153) In conclusion, in contrast to competitors, the Parties' products are well known to
       architects and other specifiers. Hence, they are more likely to be referenced than
       those of competitors.
       (d)       Replies from the market investigation on the impact of the Transaction
(154) The majority of customers responding to the market investigation considered that the
       Transaction would have negative effects on competition. For example, a customer
       indicated, "Theoretically European market is open. Practically it is still segmented
       geographically per country basis. Merging of two leading suppliers of ceilings is
       probably not causing any competition problems in a big country. But such a merging
       can have crucial consequences in a small country like Lithuania, limiting
       competition almost to zero."165
160  Minutes of a conference call with a distributor on 9 July 2018;
     Response by a distributor to question 52.2 of Questionnaire 3 – Customers (Baltics).
161  Form CO, M.8832, Knauf Confidential Annex 5.4.32, p.7;
     Form CO, M.8832, Knauf Confidential Annex 5.4.34, p.7.
162  Replies to question 48 of Questionnaire 3 – Customers (Baltics). This applies equally to other
     specifiers.
163  Replies to question 48.2 of Questionnaire 3 – Customers (Baltics).
164  Minutes of a conference call with a distributor on 24 May 2018.
165  Replies to question 61 of Questionnaire 3 – Customers (Baltics).
                                                         38
 ---pagebreak--- 6.5.2.3. Conclusion
(155) In view of the reasons set out in paragraphs (137) to (154), the Commission finds
         that the transactions raises serious doubts about its compatibility with the internal
         market as regards the Lithuanian market for mineral fibre tiles.
(156) In contrast, in light of the limited increment brought about by the transaction in grids
         and the fact that Knauf's market position in grids has declined constantly over recent
         years as set out in paragraph (141), no serious doubts arise in regards of grids with
         respect to grids for modular suspended ceilings.
6.5.3. Spain
6.5.3.1. The Parties' view
(157) As regards Spain, the Parties submit that all materials of modular suspended ceilings
         fall under a single relevant product market definition. As a result, the Transaction
         would not result in the significant impediment of effective competition primarily
         because the Parties market share would be moderate and there would be other
         international and local competitors that would continue to exert sufficient
         competitive pressure on the Parties.
6.5.3.2. Commission's assessment
(158) Certain aspects of the competitive assessment apply across all of the national
         markets for mineral fibre tiles and grids under review as explained in sections 6.3166
         and 6.4.167 Those aspects apply fully to the Spanish markets and therefore argue in
         favour of raising serious doubts for Spain. The remainder of this section will only set
         out arguments specific to Spain that apply in addition to those cross-cutting aspects
         already set out in sections 6.3 and 6.4.
166   (1) The supply of mineral fibre tiles is concentrated; (2) The supply of wet-felt mineral fibre tiles;
      which are a subsegment of mineral fibre tiles albeit not forming a separate product market, is even more
      concentrated; (3) The Parties would become the clear EEA-wide leader in terms of production capacity
      for mineral fibre tiles after the Transaction; (4) The Parties would become the leading supplier of
      mineral fibre tiles in the EEA (5) [Strategic considerations by the Parties in relation to capacity
      utilisation]; (6) Parties' internal documents show that Knauf and Armstrong were competing head-to-
      head prior to the Transaction; (7) Not all three remaining competitors appear to be competing equally
      head-to-head with the Parties, this applies in particular to Saint-Gobain; (8) The Commission considers
      it unlikely that the remaining competitors would have the ability and incentives to react sufficiently
      aggressively to counter-act any negative effects of the Transaction; (9) Market entry in mineral fibre
      tiles that would constrain the merged entity after the Transaction is not likely.
167   (1) Supply of grids in the EEA is concentrated; (2) The Parties would become the EEA-wide leader in
      terms of production capacity for grids after the Transaction; (3) The Parties would become the leading
      supplier of grids for suspended ceilings in the EEA; (4) [Strategic considerations by the Parties in
      relation to capacity utilisation].
                                                           39
 ---pagebreak---  ---pagebreak---         Knauf is instead the first or the second alternative to Armstrong. 172 Finally, Knauf
        and Armstrong are practically the only two significant suppliers in the sub segment
        of mineral fibre tiles produced with the "wet" production method, as OWA has very
        limited presence in Spain with a [5-10]% market share in wet-felt mineral fibre tiles.
(162) As shown below, in its internal documents Armstrong identifies Knauf as a close
        competitor in Spain.173
Figure 2 – Closeness of competition in Spain
[Strategic considerations by AWI regarding the Spanish market and close competitor]
Source: RFI#1 AWI Confidential Annex 66.2
        (c)      Replies from the market investigation on the impact of the Transaction
(163) Finally, the majority of Spanish customers expect the Transaction to have a negative
        impact and, in particular, believe that it will lead to price increases.174
6.5.3.3. Conclusion
(164) In view of the reasons set out in paragraphs (158) to (163), the Commission finds
        that the Transaction raises serious doubts about its compatibility with the internal
        market as regards the Spanish markets for mineral fibre tiles and grids for modular
        suspending ceilings.
6.5.4. UK
6.5.4.1. Parties' view
(165) In the UK, the Parties submit that all materials of modular suspended ceilings fall
        under a single relevant product market definition. As a result, the Transaction would
        not result in a significant impediment of effective competition primarily because the
        Parties' combined market share and the increment brought by Knauf would be
        moderate. The Parties also take the view that there are other competitors that will
        continue to exert sufficient competitive pressure on the Parties.
6.5.4.2. Commission's assessment
(166) Certain aspects of the competitive assessment apply across all of the national
        markets for mineral fibre tiles and grids under review as explained in sections 6.3175
        and 6.4.176 Those aspects apply fully to the UK markets and therefore argue in
        favour of raising serious doubts for the UK. The remainder of this section will only
        set out arguments specific to the UK that apply in addition to those cross-cutting
        aspects already set out in sections 6.3 and 6.4.
172   Replies to question 39 of Questionnaire 4 – Customers (Spain).
173   See also Form CO, M.8832, Knauf Confidential Annex 5.4.7, p. 47, [strategic considerations by AWI
      regarding closeness of competition, including in Spain].
174   Replies to questions 56 and 57 of Questionnaire 4 – Customers (Spain).
175   (1) The supply of mineral fibre tiles is concentrated; (2) The supply of wet-felt mineral fibre tiles;
      which are a subsegment of mineral fibre tiles albeit not forming a separate product market, is even more
      concentrated; (3) The Parties would become the clear EEA-wide leader in terms of production capacity
      for mineral fibre tiles after the Transaction; (4) The Parties would become the leading supplier of
                                                          41
 ---pagebreak---  ---pagebreak---        shows that the Parties' actual market shares in the UK may be even higher than the
       estimates proposed by the Parties suggest.177
(169) With respect to mineral fibre tiles, the Transaction will in any case give rise to very
       high combined market shares around [50-60]%. The remaining competitors will
       remain well behind the merged entity, both in terms of value and volume: The
       strongest competitor in terms of market shares is Saint-Gobain with market shares
       around [20-30]% both value and volume based. The merged entity's position and the
       distance between it and remaining competitors would be even more significant in the
       wet mineral fibre segment, where the merged entity would have a market share in
       excess of 70%.
(170) The same applies for grids, where the merged entity's market share would be in
       excess of [50-60]% in value and in excess of [40-50]% in volume, whereas the
       remaining competitors would have a market share of ca. [10-20]% or less.
(171) Although the Target's market share has been declining both for mineral fibre tiles
       and for girds over the past 3 years, its position on the UK market is still very
       significant. In addition, because of the market share increment brought about by the
       Transaction, the merged entity's market share would be higher than was the Target's
       in 2015.
       (b)      Closeness of competition
(172) The Parties are close competitors in mineral fibre tiles in the UK.
(173) First, the Parties are two of only three wet felt tile manufacturers.
(174) Second, internal documents show that the Parties' product portfolios in the UK
       overlap to a very significant extent (up to [degree of portfolio overlap]%).178
(175) Third, independent research suggests that both Armstrong and Knauf are two of the
       five remaining mineral fibre tile manufacturers and the two main competitors in
       grids in the UK.179
       (c)      Price levels are already higher in the UK than in other EEA Member States
(176) The existing price levels in mineral fibre tiles in the UK indicate that, already before
       the Transaction, the remaining competitors did not expand aggressively to capture
       additional margins. This indicates that their reaction may be similar after the
       Transaction. The UK market could thus serve as an example of potential future
       effects of the Transaction on price levels in mineral fibre tiles. Indeed, internal
       documents indicate that price levels are higher in the UK than in other countries of
       the EEA.180 Thus, the UK could be an example of a country where price levels are
       higher than elsewhere (indicating that there is additional margin to be captured) but
       the reaction from competitors has not been aggressive enough to bring prices down.
177  The Commission market reconstruction shows combined market shares in excess of 60% both value
     and volume based.
178  Annex 5.4.18 to the Form CO, page 45.
179  Annex 29.1 to the Form CO, AMA report, Table 18.
180  See, for example, Annex 5.4.18 to the Form CO, page 5.
                                                     43
 ---pagebreak---          (d)      Replies from the market investigation on the impact of the Transaction
(177) The market participants in the UK expressed negative sentiment with respect to this
         Transaction. Reduced product choice and increased prices were cited as the main
         concerns. For instance, one contractor stated "[t]here will be less choice and more
         control from fewer parties. Historically (5 years) in this sector the fewer the
         manufacturers the higher the price points".181 Another said, "[p]rices are likely to
         rise as production capacity and product ranges are rationalised and specification
         share is high".182
(178) A majority of respondents to the Commission's market investigation expects the
         Transaction to have negative effects for customers. More specifically, half of the
         responding customers expects the Transaction to result in a price increase for both
         mineral fibre tiles183 and grids184 for modular suspended ceilings.
6.5.4.3. Conclusion
(179) In view of the reasons set out in paragraphs (166) to (178), the Commission finds
         that the Transactions raises serious doubts about its compatibility with the internal
         market as regards the UK markets for mineral fibre tiles and for grids for modular
         suspending ceilings.
6.5.5. Germany
6.5.5.1. The Parties' view
(180) The Parties are of the opinion that Germany and Austria belong to one market for
         suspended ceilings. Therefore, reference is made to the Parties' view with respect to
         Austria already set out in paragraphs (123) and (124).
6.5.5.2. Commission's assessment
(181) Certain aspects of the competitive assessment apply across all of the national
         markets for mineral fibre tiles and grids under review as explained in sections 6.3185
         and 6.4.186 Those aspects apply in principle to the German markets. However, the
         specific market structure and competitive conditions in Germany override those
181   Replies to question 56.2 of Questionnaire 5 – Customers (UK).
182   Replies to question 56.2 of Questionnaire 5 – Customers (UK).
183   Replies to question 56.1 of Questionnaire 5 – Customers (UK).
184   Replies to question 57.1 of Questionnaire 5 – Customers (UK).
185   (1) The supply of mineral fibre tiles is concentrated; (2) The supply of wet-felt mineral fibre tiles;
      which are a subsegment of mineral fibre tiles albeit not forming a separate product market, is even more
      concentrated; (3) The Parties would become the clear EEA-wide leader in terms of production capacity
      for mineral fibre tiles after the Transaction; (4) The Parties would become the leading supplier of
      mineral fibre tiles in the EEA (5) [Strategic considerations by the Parties in relation to capacity
      utilisation]; (6) Parties' internal documents show that Knauf and Armstrong were competing head-to-
      head prior to the Transaction; (7) Not all three remaining competitors appear to be competing equally
      head-to-head with the Parties, this applies in particular to Saint-Gobain; (8) The Commission considers
      it unlikely that the remaining competitors would have the ability and incentives to react sufficiently
      aggressively to counter-act any negative effects of the Transaction; (9) Market entry in mineral fibre
      tiles that would constrain the merged entity after the Transaction is not likely.
186   (1) Supply of grids in the EEA is concentrated; (2) The Parties would become the EEA-wide leader in
      terms of production capacity for grids after the Transaction; (3) The Parties would become the leading
      supplier of grids for suspended ceilings in the EEA; (4) [Strategic considerations by the Parties in
      relation to capacity utilisation].
                                                           44
 ---pagebreak---  ---pagebreak--- (183) Both the current market leader OWA and Rockfon will remain active in mineral
       fibre tiles with significant positions around 20-30%, OWA will remain market leader
       with a share even beyond 30%. Moreover, Rockfon has been growing in market
       shares during the last five years, whereas OWA's and the Parties' shares are slightly
       on the decline and Saint-Gobain remains stable. Armstrong's market shares in
       German declined continuously throughout the last years.187
(184) Regarding grids, the Commission notes that Rockfon and OWA each have sizeable
       market shares [of 20-30]% and will thus be in a position to exercise significant
       competitive constraints on the merged entity post transaction.
(185) The Commission market reconstruction broadly confirmed the parties' market share
       estimates and thus supports this analysis.
       (b)      Market strategy Knauf
(186) The Commission observes that according to the assessment of Armstrong from 2016,
       Knauf follows a strategy [assessment of Knauf strategy by AWI]188 However, so far
       Knauf's market shares 2015-2017 did not show any result of the strategy.189
       (c)      Closeness of competition
(187) As regards mineral fibre tiles, the market feedback indicates an existing competition
       between the Parties as respondents from Germany name Armstrong as an alternative
       to Knauf, and vice versa. However, the respondents name other suppliers at least as
       frequently as the Parties and overall confirm OWA's leading market position in
       Germany.190 A significant amount of the respondents from Germany are of the
       opinion that the Parties do not compete closely with each other.191
(188) When mineral fibre is considered the most suitable material for certain type of
       characteristics (standard, sound, fire reaction), both Parties are often named as
       potential suppliers. The respondents, however, name OWA regularly as the most
       preferred supplier and also Rockfon and Saint-Gobain as alternatives from time to
       time.192
(189) In other regards (such as the specific manufacturing method of wet-felt tiles, high-
       end or low-end products, etc.), the replies from market participants are overall not
       conclusive with respect of closeness of competition of the Parties.193
187  Internal document of Armstrong: M8832_2015 01 Opportunity Model Germany
     report_CONFIDENTIAL, p. 9: [development of AWI sales in Germany between 2003 and 2014].
     Minutes of a conference call with a customer in Germany on 30 May 2018: Armstrong's market shares
     declined between 2012 and 2018.
     Minutes of a condense call with a competitor on 8 June 2018: As a general statement for all markets, it
     is perceived that Armstrong has been declining in the past 10 years.
188  Form CO, M.8832, RFI#1 AWI Confidential Annex 66.1, p.37.
189  Form CO RFI#1 Confidential Annex 53 (updated): In 2015, 2016 and 2017 Knauf's market shares in
     mineral fibre tiles in Germany it at [10-20]%, which is largely confirmed by the Commission market
     reconstruction.
190  Replies to questions 40 and 41 of Questionnaire 2 – Customers (Germany and Austria).
191  Replies to question 39 of Questionnaire 2 – Customers (Germany and Austria).
192  Replies to question 44 of Questionnaire 2 – Customers (Germany and Austria).
193  Replies to question 50.1, 52.1 of Questionnaire 2 – Customers (Germany and Austria).
                                                        46
 ---pagebreak---        (d)      Impact of the transaction
(190) The majority of the respondents are neutral as regards the impact of the transaction
       on their company. A small minority expects a negative impact and none of the
       respondents a positive one.194
(191) No respondent expects the prices of tiles (across all materials) to decrease, some
       respondents expect a price increase but half of the German respondents assume that
       the prices will remain the same.195
(192) Considering mineral fibre tiles only, there is a slight shift towards the opinion that in
       this product area, prices may increase as consequence of the Transaction.196 For
       grids, the opinions that prices will increase or that the prices will remain the same,
       are rather balanced.197
(193) Overall, the Commission observes that many respondents did not express any view
       on the impact of the transaction or remain neutral. This is roughly in balance with
       those participants expecting a negative impact of the Transaction, in particular
       because of increasing prices.
       (e)      Commission's conclusion
(194) Combined market shares in mineral fibre tiles of the Parties are moderate in
       Germany compared to other countries with OWA remaining the market leader post-
       transaction capturing a market share of about [40-50]%. As regards grids, the
       merged entity would assume market leadership in regards of the market shares.
       However, OWA and Rockfon remain strong competitors with their market shares
       almost equalling the Parties' combined market shares and thus exerting competitive
       pressure. Market participants perceive the Parties from time to time as close
       competitors but do not identify any particular closeness of competition between the
       Parties as opposed to the other competitors OWA, Rockfon and Saint-Gobain. None
       of the Parties is acting particularly aggressive on the German market and
       Armstrong's market shares are on the decline considering the last 10 years.
(195) In view of the above reasons, the Commission concludes that the evidence does not
       support serious doubts about the Transaction's compatibility with the internal market
       as regards the German markets for mineral fibre tiles and grids for modular
       suspending ceilings.
6.6.   Competitive assessment of the overlaps in tiles made from other materials
       (metal, gypsum, wood)
(196) For the reasons set out in paragraphs (197) to (200), the Transaction does not raise
       serious doubts as to its compatibility with the internal market with respect to the
       national markets for tiles made from other materials than mineral fibre, namely from
194  Replies to question 55 of Questionnaire 2 – Customers (Germany and Austria).
195  Replies to question 57.2 of Questionnaire 2 – Customers (Germany and Austria): Out of 8 respondents
     3 except the prices to increase, 4 the prices remain the same, 0 the prices to decrease and 1 indicated
     "other".
196  Replies to question 58.2 of Questionnaire 2 – Customers (Germany and Austria): Out of 8 respondents
     4 except the prices to increase, 3 the prices remain the same, 0 the prices to decrease and 1 indicated
     "other".
197  Replies to questions 59, 59.1 and 59.2 of Questionnaire 2 – Customers (Germany and Austria).
                                                        47
 ---pagebreak---  ---pagebreak---       any concerns with respect to the overlap between the Parties' activities in the sale of
      wood tiles in any of Germany, Lithuania, Spain or the United Kingdom.
7.    COMPETITIVE ASSESSMENT OF THE VERTICAL LINKS
7.1.  Analytical framework – Vertical unilateral effects
(201) Vertical mergers involve companies operating at different levels of the same supply
      chain. For instance, a vertical merger occurs when a manufacturer of a certain
      product merges with one of its distributors.
(202) Pursuant to the Commission Guidelines on the assessment of non-horizontal mergers
      under the Council Regulation on the control of concentrations between undertakings
      (the “Non-Horizontal Merger Guidelines”)200, vertical mergers do not entail the loss
      of direct competition between merging firms in the same relevant market and
      provide scope for efficiencies.
(203) However, there are circumstances in which vertical mergers may significantly
      impede effective competition. This is in particular the case if they give rise to
      foreclosure.201
(204) The Non-Horizontal Merger Guidelines distinguish between two forms of
      foreclosure: input foreclosure, where the merger is likely to raise costs of
      downstream rivals by restricting their access to an important input, and customer
      foreclosure, where the merger is likely to foreclose upstream rivals by restricting
      their access to a sufficient customer base.202
(205) Pursuant to the Non-Horizontal Merger Guidelines, input foreclosure arises where,
      post-merger, the new entity would be likely to restrict access to the products or
      services that it would have otherwise supplied absent the merger, thereby raising its
      downstream rivals' costs by making it harder for them to obtain supplies of the input
      under similar prices and conditions as absent the merger.203
(206) For input foreclosure to be a concern, the Merged Entity should have a significant
      degree of market power in the upstream market. Only when the Merged Entity has
      such a significant degree of market power, can it be expected that it will significantly
      influence the conditions of competition in the upstream market and thus, possibly,
      the prices and supply conditions in the downstream market.204
(207) Pursuant to the Non-Horizontal Merger Guidelines, customer foreclosure may occur
      when a supplier integrates with an important customer in the downstream market and
      because of this downstream presence, the Merged Entity may foreclose access to a
      sufficient customer base to its actual or potential rivals in the upstream market (the
      input market) and reduce their ability or incentive to compete which in turn, may
      raise downstream rivals' costs by making it harder for them to obtain supplies of the
200  OJ C 265, 18.10.2008, p. 6.
201  Non-Horizontal Merger Guidelines, para 18.
202  Non-Horizontal Merger Guidelines, para 30.
203  Non-Horizontal Merger Guidelines, para 31.
204  Non-Horizontal Merger Guidelines, para 35.
                                                49
 ---pagebreak---       input under similar prices and conditions as absent the merger. This may allow the
      Merged Entity profitably to establish higher prices on the downstream market.205
(208) For customer foreclosure to be a concern, a vertical merger must involve a company,
      which is an important customer with a significant degree of market power in the
      downstream market. If, on the contrary, there is a sufficiently large customer base, at
      present or in the future, that is likely to turn to independent suppliers, the
      Commission is unlikely to raise competition concerns on that ground.206
7.2.  Competitive Assessment
(209) The Transaction leads to only limited vertical links as regards certain input materials
      sold by Knauf in markets that are upstream to the sale of mineral fibre tiles by Knauf
      and Armstrong in the EEA; namely secondary glass mineral fibre and secondary
      stone wool fibre, both of which are used for the production of mineral fibre tiles. In
      light of the merged entity's very limited sales to third parties and the presence of
      multiple alternative suppliers and the absence of any concerns raised in the
      Commission's market investigation, the Commission concludes that the Transaction
      does not give rise to input foreclosure concerns. Furthermore, considering that the
      upstream products are used for a number of applications other than modular
      suspended ceilings (e.g. for insulation applications) and the absence of any concerns
      raised in the Commission's market investigation, the Commission concludes that the
      Transaction does not give rise to customer foreclosure concerns either.
(210) Therefore, the Commission considers that the Transaction does not raise serious
      doubts regarding its compatibility with the internal market as regards the vertical
      link that is created between the supply of certain raw material from Knauf to
      Armstrong.
8.    PROPOSED REMEDIES
(211) In order to render the concentration compatible with the internal market, Knauf has
      modified the notified concentration by submitting commitments to the Commission.
      The legal framework applicable to the assessment of proposed commitments is set
      out below in Section 8.1.
(212) Knauf submitted two main sets of commitments. Notably, Knauf formally submitted
      commitments on 16 November 2018, which it formally revised on
      19 November 2018 and 23 November 2018 (the 'Initial Commitments'). The Initial
      Commitments are described below in Section 8.2.
(213) The Commission subsequently gathered the views of market participants on the
      Initial Commitments (the 'market test') and informed Knauf of the results thereof.
      The outcome of the market test is discussed below in Section 8.3.
(214) The Notifying Party then submitted further revised commitments on
      30 November 2018, and further amended those formally on 6 December 2018 (the
      'Final Commitments'). The Commission considers that the Final Commitments are
      sufficient to ensure that, if implemented, the Transaction no longer raises serious
205  Non-Horizontal Merger Guidelines, para 58.
206  Non-Horizontal Merger Guidelines, para 61.
                                                50
 ---pagebreak---        doubts as to its compatibility with the internal market. The Final Commitments are
       annexed to this Decision and form an integral part of the Decision. They are
       described and assessed below in Section 8.4.
8.1.   Legal framework
(215) The following principles from the Remedies Notice207 apply where parties to a
       merger choose to offer commitments in order to restore effective competition.
(216) Where a concentration raises competition concerns in the sense that it could
       significantly impede effective competition, in particular as a result of the creation or
       strengthening of a dominant position, the parties may seek to modify the
       concentration in order to resolve the competition concerns and thereby gain
       clearance of their merger.208
(217) The Commission only has power to accept commitments that are capable of
       rendering the concentration compatible with the internal market in that they will
       prevent a significant impediment to effective competition in all relevant markets
       where competition concerns were identified.209 To that end, the commitments have
       to eliminate the competition concerns entirely210 and have to be comprehensive and
       effective from all points of view.211
(218) In assessing whether proposed commitments are likely to eliminate its competition
       concerns, the Commission considers all relevant factors, including inter alia the
       type, scale and scope of the commitments, judged by reference to the structure and
       particular characteristics of the market in which those concerns arise, including the
       position of the parties and other participants on the market.212 Moreover,
       commitments must be capable of being implemented effectively within a short
       period of time.213
(219) Where a proposed concentration threatens to significantly impede effective
       competition, the most effective way to maintain effective competition, apart from
       prohibition, is to create the conditions for the emergence of a new competitive entity
       or for the strengthening of existing competitors via divestiture by the merging
       parties.214
207  Commission's Notice on Remedies acceptable under Council Regulation (EC) No 139/2004 and under
     Commission Regulation (EC) No 802/2004 ("Remedies Notice"), OJ C 267, 22.10.2008, p. 1.
208  Remedies Notice, paragraph 5.
209  Remedies Notice, paragraph 9.
210  Case C-202/06 P Cementbouw Handel & Industrie v Commission [2007] ECR 2007 I-12129,
     paragraph 54: “it is necessary, when reviewing the proportionality of conditions or obligations which
     the Commission may, by virtue of Article 8(2) of Regulation No 4064/89, impose on the parties to a
     concentration, not to determine whether the concentration still has a Community dimension after those
     conditions or obligations have been complied with, but to be satisfied that those conditions and those
     obligations are proportionate to and would entirely eliminate the competition problem that has been
     identified”.
211  Remedies Notice, paragraph 9 and 61.
212  Remedies Notice, paragraph 12.
213  Remedies Notice, paragraph 9.
214  Remedies Notice, paragraph 22.
                                                      51
 ---pagebreak--- (220) The divested activities must consist of a viable business that, if operated by a
        suitable purchaser (hereinafter referred to as 'Purchaser'), can compete effectively
        with the merged entity on a lasting basis and that is divested as a going concern. The
        business must include all the assets which contribute to its current operation or
        which are necessary to ensure its viability and competitiveness and all personnel
        which are currently employed or which are necessary to ensure the business' viability
        and competitiveness.215
(221) Normally, a viable business is a business that can operate on a stand-alone-basis,
        which means independently of the merging parties as regards the supply of input
        materials or other forms of cooperation other than during a transitory period.216
(222) Even though normally the divestiture of an existing viable stand-alone business is
        required, the Commission, taking into account the principle of proportionality, may
        also consider the divestiture of businesses which have existing strong links or are
        partially integrated with businesses retained by the parties and therefore need to be
        ‘carved out’ in those respects.217 The Commission will only be able to accept
        commitments which require the carve-out of a business if it can be certain that, at
        least at the time when the business is transferred to the purchaser, a viable business
        on a stand-alone basis will be divested and the risks for the viability and
        competitiveness caused by the carve-out will thereby be reduced to a minimum. The
        parties therefore have to ensure that the carve-out is started in the interim period,
        i.e. the period between the adoption of the Commission decision up to the
        completion of the divestiture (meaning the legal and factual transfer of the business
        to the purchaser). Consequently, at the end of this period, a viable business on a
        stand-alone basis will be divested. If this should not be possible or if the carve-out
        should be particularly difficult, parties may provide the requisite degree of certainty
        for the Commission by proposing an up-front buyer solution.218
8.2.    Initial Commitments
(223) The Initial Commitments, as revised on 19219 and 23 November 2018,220 were aimed
        at transferring Knauf’s operations in Austria, Lithuania, Spain, the United Kingdom,
        as well as in Estonia, Latvia, Portugal, Ireland, Italy and Turkey ("the Initially
        Proposed Divestment Business") and consisted of:
        (a)      Armstrong's production facility for mineral fibre tiles in Team Valley, UK.;
        (b)      Armstrong's production facility for grids in Team Valley, UK.;
215  Remedies Notice, paragraph 23-25.
216  Remedies Notice, paragraph 32.
217  Remedies Notice, paragraph 35.
218  Remedies Notice, paragraph 36.
219  The most important changes consisted of: i) including a commitment that Knauf will finance the
     upgrade of the Team Valley facilities up to a maximum budget of EUR […] for the tiles plant and
     EUR […] for the grids plant; and ii) providing that Knauf will hire necessary personnel for some
     functions and bear the one-off cost of hiring a number of additional employees for some other
     functions.
220  The most important changes consisted of: i) adding Italy, Estonia, Latvia, Ireland and Portugal to the
     list of Relevant Countries; ii) extending the scope of the IP arrangements both in terms of products
     covered and duration; iii) raising the maximum budget for the upgrades (from EUR […] to […] for the
     tiles plant and from EUR […] to […] for the grids plant); and iv) extending the duration of the possible
     transitional agreements from […] to […] years.
                                                       52
 ---pagebreak--- (c) Armstrong's sales operations, i.e. the sales teams together with the relevant
    customer bases in Austria, Lithuania, Spain, the United Kingdom, Estonia,
    Ireland, Italy, Latvia, Portugal and Turkey (the 'Relevant Countries');
(d) Certain (tangible and intangible) assets and staff that contribute to the current
    operations of the Initially Proposed Divestment Business, including all
    licences, permits and authorisations issued by any governmental organisation
    for the benefit of the Initially Proposed Divestment Business; all contracts,
    leases, commitments and customer orders of the Initially Proposed
    Divestment Business; all customer, credit and other records of the Initially
    Proposed Divestment Business;
(e) Exclusive and royalty-free licenses for the company brand Armstrong, as
    well as for the relevant product trademarks (for mineral fibre tiles and grids)
    for exclusive use in the Relevant Countries for a term of […] years after
    Closing, with the option for the Initially Proposed Divestment Business to
    terminate the license at any time, followed by a black-out period of […]
    years. The Purchaser would also be offered non-exclusive licences for a term
    of […] years for the relevant product trademarks, with the option for the
    Initially Proposed Divestment Business to terminate the license at any time,
    provided that, outside the Relevant Countries, the product trademarks may
    only be used in conjunction with a brand name; moreover, the Purchaser
    would also be offered non-exclusive licenses for all relevant production
    related IP;
(f) At the option of the Purchaser, the benefit of a supply agreement under which
    the Purchaser would be able to source certain mineral fibre tiles and grids
    currently sold by Armstrong in the Relevant Countries, but not produced at
    the Team Valley mineral fibre tile facility and the Team Valley grid facility
    for a transitional period until the production of these tiles/grids has been
    insourced by the Purchaser and – in any event – no longer than for a term of
    […] years after Closing on terms and conditions to be agreed upon between
    the Notifying Party and the Purchaser;
(g) To fund the investments necessary to enable the Team Valley mineral fibre
    facility to manufacture Armstrong's [list of products] mineral fibre tile
    products, undertaken by the Purchaser, up to a sum of EUR […];
(h) To fund the investments necessary to enable the Team Valley grid facility to
    manufacture the Armstrong's [list of products] grid products, undertaken by
    the Purchaser, up to a sum of EUR […];
(i) To the extent not already with the Initially Proposed Divestment Business
    and unless not required by the Purchaser, to hire, at Knauf's sole cost,
    adequate personnel (total of […] Full Time Equivalents ("FTE")) to carry out
    the functions of procurement, R&D, marketing, technical sales and finance,
    as reasonably necessary to ensure the viability of the Initially Proposed
    Divestment Business;
(j) To bear the one-off costs for the hiring of […] additional engineering FTEs,
    […] additional customers service FTEs, and […] additional IT FTEs, to the
    extent not already with the Initially Proposed Divestment Business and
    reasonably required by the Purchaser;
                                       53
 ---pagebreak---        (k)       To bear the costs for the acquisition of the following R&D equipment by the
                 Initially Proposed Divestment Business: [list of R&D equipment];
       (l)       At the option of the Purchaser, for a transitional period of up to […] years
                 after Closing, certain transitional services, such as IT systems and processes,
                 etc., to be provided by Knauf in order to facilitate a smooth transfer of the
                 Initially Proposed Divestment Business;
       (m)       All current arrangements under which Knauf and Armstrong or their
                 affiliated undertakings supply products or services to the Initially Proposed
                 Divestment Business, unless otherwise agreed with the Purchaser for a
                 transitional period of up to […] years after Closing and on terms and
                 conditions equivalent to those at present afforded to the Initially Proposed
                 Divestment Business.
(224) In addition, the Initial Commitments included related commitments, inter alia
       regarding the separation of the Initially Proposed Divestment Business from the
       retained businesses, the preservation of the viability, marketability and
       competitiveness of the Initially Proposed Divestment Business, including the
       appointment of a monitoring trustee and, if necessary, a divestiture trustee.
8.3.   The Commission's market test
(225) In view of assessing the appropriateness of the Initial Commitments, the
       Commission carried out a market test, which was launched on 23 November 2018.
(226) In general, the view of the market test respondents was that the Initial Commitments
       could in principle remedy the serious doubts identified by the Commission, but
       subject to modification of the Initial Commitments so as to address a number of
       specific issues described below in paragraphs (227) et seq.
8.3.1. Geographic footprint
(227) Whereas a number of respondents considered that the geographic footprint of the
       Initially Proposed Divestment Business would be sufficient, some respondents to the
       market test raised substantiated concerns in this regard, explaining why they
       considered the Initially Proposed Divestment Business' geographic footprint to be
       insufficiently homogeneous.221 In this context, some market participants argued that
       transporting the relatively lower-value product mix currently produced in the Team
       Valley plants from the UK would give rise to relatively high shipping costs,
       increasing with the distance to be crossed.222 In line with these considerations,
       several responding competitors considered that the geographic footprint envisaged in
       the Initial Commitments would put the Initially Proposed Divestment Business at a
       disadvantage compared to its competitors.223 Additional concerns expressed related
       to possible upcoming difficulties for a business producing in the UK to access
       markets in the European Union.224
221   Replies to questions 5.1 and 6 of the Questionnaire to Competitors on the Commitments offered by
      Knauf.
222   Replies to question 7.1 of the Questionnaire to Competitors on the Commitments offered by Knauf.
223   Replies to question 6 of the Questionnaire to Competitors on the Commitments offered by Knauf.
224   Replies to question 4 of the Questionnaire to Competitors on the Commitments offered by Knauf.
                                                        54
 ---pagebreak--- 8.3.2. Product portfolio
(228) The Initial Commitments included a proposed upgrade of the Team Valley plants, in
        view of enabling this plant to produce a product range comparable to the one
        currently produced and sold by Armstrong in the Relevant Countries. Several
        respondents to the market test clearly took the view that such an upgrade was indeed
        needed, stressing that the Team Valley facilities currently produce a limited range of
        relatively low-value products.225 In this context, the Commission also notes that the
        commercial terms of the transitional supply agreement for products not currently
        produced at the Team Valley facilities were, according to the Initial Commitments,
        to be negotiated between Knauf and the Purchaser, which may put the Initially
        Proposed Divestment Business at a competitive disadvantage vis-à-vis the merged
        entity and other competitors.
(229) In addition, while a number of respondents to the Commission's market test
        confirmed that carrying out the envisaged upgrade is technically possible,226 several
        respondents indicated that the envisaged industrial upgrades would be complex to
        carry out.227 More specifically, it was suggested that these upgrades would have a
        more significant cost than the Initial Commitments allowed for (i.e. a maximum
        budget of EUR […] in total for both plants).
8.3.3. R&D capabilities
(230) In their responses to the Commission's market test, respondents stressed the
        importance of sufficient product development capabilities in order for a modular
        ceilings producer to remain successful.228 In this regard, while some market
        respondents considered the R&D arrangements of the Initial Commitments to be
        sufficient, others explicitly questioned the sufficiency of the R&D capabilities
        foreseen in the Initial Commitments, both in terms of the budget made available for
        the purchasing of additional equipment and of personnel to be hired.229 In addition,
        several market respondents pointed out that it may prove challenging to hire
        adequate R&D personnel.230
8.3.4. Potential purchasers
(231) In light of the results of the market test, the Commission considers that it may prove
        challenging to find a suitable purchaser for the Initially Proposed Divestment
        Business.
(232) While most market respondents indicated that the Initial Commitments were
        sufficient to attract a suitable purchaser,231 most also stressed the need for a
        purchaser with relevant experience in the business of developing and manufacturing
225   Replies to questions 10.1 and 10.2 of the Questionnaire to Competitors on the Commitments offered by
      Knauf.
226   Replies to question 9 of the Questionnaire to Competitors on the Commitments offered by Knauf.
227   Replies to questions 9.1 and 10.1of the Questionnaire to Competitors on the Commitments offered by
      Knauf.
228   Replies to question 13 of the Questionnaire to Competitors on the Commitments offered by Knauf.
229   Replies to question 14 of the Questionnaire to Competitors on the Commitments offered by Knauf.
230   Replies to question 14.1 of the Questionnaire to Competitors on the Commitments offered by Knauf.
231   Replies to question 26 of the Questionnaire to Competitors on the Commitments offered by Knauf; and
      replies to question 10 of the Questionnaire to Customers on the Commitments offered by Knauf.
                                                          55
 ---pagebreak---         mineral fibre tiles and grids for modular suspended ceilings,232 in particular due to
        the complexities of the carve-out divestment to be achieved, the required plant
        upgrade and the need to retain Armstrong's customer relationships.
(233) However, [information on divestment process].
(234) Furthermore, according to some market respondents, an additional obstacle to
        finding an adequate Purchaser may arise in light of possible future restrictions on
        exports from the UK into the European Union following the date that the UK is
        scheduled to leave the European Union on 29 March 2019.233
8.4.    Final Commitments submitted by Knauf
8.4.1. Description of the Final Commitments
(235) In response to the Commission's feedback regarding the outcome of the market test
        and its preliminary assessment, Knauf submitted the Final Commitments on 30
        December 2018, as revised on 6 December 2018. The divested business as provided
        for in the Final Commitments is referred to as the "Divestment Business".
(236) The Final Commitments feature the following improvements and additions
        compared to the Initial Commitments, while preserving the remainder of the
        elements constituting the Initial Commitments and described above in
        paragraph (223):
        (a)       the scope of the Relevant Countries was extended to include not only Austria,
                  Lithuania, Estonia, Latvia, Spain, Portugal, the UK, Ireland, Italy and
                  Turkey, but also Germany (together the "Final Relevant Countries");
        (b)       regarding the required investments in view of the industrial upgrade of the
                   Team Valley production facilities:
                i.        the maximum budget made available for these upgrades was raised to
                          EUR […] (for the mineral fibre tiles plant) and EUR […] (for the
                          grids plant);
               ii.        the Final Commitments provide that the Hold Separate Manager will,
                          to the extent feasible and reasonable, at his own discretion, prepare
                          these investments;
        (c)       the Final Commitments provide that the possible transitional supply
                   agreements between the merged entity and the Divestment Business:
                i.        could cover not only the products whose production would be
                          insourced as a result of the plant upgrade but also the "specials" not
                          covered by the upgrade;
               ii.        would be concluded [terms of the transitional supply agreements];
232   Replies to question 28 of the Questionnaire to Competitors on the Commitments offered by Knauf; and
      to question 4 of the Questionnaire to Customers on the Commitments offered by Knauf.
.233  Replies to question 10.1 of the Questionnaire to Customers on the Commitments offered by Knauf.
                                                         56
 ---pagebreak---         (d)       in terms of additional R&D Personnel, the Final Commitments provide that:
                i.        Knauf will bear the capped one-off costs of hiring up to […]
                          additional FTEs for R&D, to the extent not already with the
                          Divestment Business and reasonably required by the Purchaser;
               ii.        Knauf will purchase the required R&D equipment for the Purchaser,
                          in coordination with the Hold Separate Manager and the Monitoring
                          Trustee;
        (e)       as for other additional Personnel, the Final Commitments provide that:
                i.        Knauf will hire […] FTEs for technical sales and […] FTEs for
                          finance will be hired, whereas the Initial Commitments provided for
                          the hiring of only […] FTEs for each of these functions;
               ii.        the number of FTEs for whose hiring Knauf will bear the one-off
                          costs (as well as the corresponding caps) are raised for customer
                          service personnel (to […] FTEs) and IT (to […] FTEs).
        (f)       the Final Commitments give the Divestment Business the possibility, under
                  certain conditions, to source from Knauf also those products currently
                  produced in the Team Valley facilities, in case of difficulties of access to the
                  single market after 30 March 2019;
        (g)       the Final Commitments provide that the Transaction shall not be
                  implemented before Knauf or the Divestiture Trustee has entered into a final
                  binding sale and purchase agreement for the sale of the Divestment Business
                  and the Commission has approved the Purchaser and the terms of sale.
8.4.2. Assessment of the proposed remedies
(237) For the reasons outlined in Sections 8.4.2.1 through 8.4.2.3 below, the Commission
        deems the Final Commitments entered into by the undertakings concerned sufficient
        to eliminate its serious doubts as to the compatibility of the Transaction with the
        internal market.
(238) As such, the commitments in section B of the Annex constitute conditions attached
        to this decision, as only through full compliance therewith can the structural changes
        in the relevant markets be achieved. The other commitments set out in the Annex
        constitute obligations, as they concern the implementing steps, which are necessary
        to achieve the modifications sought in a manner compatible with the internal market.
8.4.2.1. Removal of competition concerns
(239) The Final Commitments will remove the entire overlap between the Parties'
        activities in each of the national markets for which the Commission had concerns
        (i.e. the markets for mineral fibre tiles and for grids for modular suspended ceilings
        in Austria, Spain and the UK and the market for mineral fibre tiles for modular
        suspended ceilings in Lithuania), and with respect to the UK for the markets for
        mineral fibre tiles and for grids for modular suspended ceilings markets even more
        than the increment, since the business of the stronger of the two Parties will be
        divested. As such, the commitments will remove all competition concerns.
                                                     57
 ---pagebreak--- 8.4.2.2. Viability and competitiveness of the divested business
(240) The Commission is satisfied that the Divestment Business will be viable and
        competitive, in particular in light of the following considerations.
(241) First, the Commission takes the view that in its Final Commitments, Knauf has
        adequately addressed the concerns that had become apparent in the context of the
        market test and discussed above in paragraphs (227) through (234).
(242) Second, the Commission also assessed whether the expected sales of the Divestment
        Business would enable it to achieve a sufficient capacity utilization rate at the Team
        Valley facilities in order to develop into a viable competitor. Based on information
        provided by the Parties regarding the current output of these facilities and the sales,
        which the Divestment Business can be expected to achieve in the 11 Final Relevant
        Countries, the Commission concluded that this should indeed be the case. The sales
        in the Final Relevant Countries are likely to exceed the sales currently achieved by
        the Team Valley plants and are therefore likely to preserve at least the existing
        capacity utilization rates.
(243) Third, the Commission considers that the commitments regarding the separation of
        the Divestment Business from the retained businesses, the preservation of the
        viability, marketability and competitiveness of the divested businesses in
        combination with the transitional service and supply agreements provide for
        sufficient safeguards to protect the Divestment Business during the interim period
        and allow for a smooth transition to the Purchaser.
8.4.2.3. Purchaser criteria
(244) The Commission takes the view that the commitment taken by Knauf in paragraph 3
        of the Final Commitments adequately addresses the Commission's concerns
        regarding the finding of a suitable Purchaser, inasmuch as Knauf will effectively be
        prevented from closing the Transaction until a binding agreement is entered into for
        the sale of the Divestment Business, with both the Purchaser and the sales terms
        being subject to the Commission's approval.
9.      CONCLUSION
(245) For the above reasons, the Commission has decided not to oppose the notified
        operation as modified by the commitments and to declare it compatible with the
        internal market and with the functioning of the EEA Agreement, subject to full
        compliance with the conditions in section B of the commitments annexed to the
        present decision and with the obligations contained in the other sections of the said
        commitments. This decision is adopted in application of Article 6(1)(b) in
        conjunction with Article 6(2) of the Merger Regulation and Article 57 of the EEA
        Agreement.
                                                         For the Commission
                                                         (Signed)
                                                         Margrethe VESTAGER
                                                         Member of the Commission
                                                    58
 ---pagebreak---                                                                                 6 December 2018
                            Case M.8832 – Knauf/Armstrong
            COMMITMENTS TO THE EUROPEAN COMMISSION
Pursuant to Article 6(2) of Council Regulation (EC) No 139/2004 (the “Merger Regulation”),
Knauf International GmbH (“Knauf” and the “Notifying Party”) hereby enters into the
following Commitments (the “Commitments”) vis-à-vis the European Commission (the
“Commission”) with a view to rendering the proposed acquisition by Knauf of 100% of the
shares in (i) the subsidiaries of Armstrong World Industries, Inc. (“AWI”) in Europe, the
Middle East and Africa (“EMEA”) and Asia-Pacific (“APAC”) and (ii) designated
subsidiaries of AWI’s 50/50 joint venture with Worthington Industries (“WAVE”) with
operations in EMEA and APAC (the “Concentration”) compatible with the internal market
and the functioning of the EEA Agreement.
This text shall be interpreted in light of the Commission’s decision pursuant to Article 6(1)(b)
of the Merger Regulation to declare the Concentration compatible with the internal market
and the functioning of the EEA Agreement (the “Decision”), in the general framework of
European Union law, in particular in light of the Merger Regulation, and by reference to the
Commission Notice on remedies acceptable under Council Regulation (EC) No 139/2004 and
under Commission Regulation (EC) No 802/2004 (the “Remedies Notice”).
Section A.       Definitions
    1. For the purpose of the Commitments, the following terms shall have the following
        meaning:
    Affiliated Undertakings: undertakings controlled by the Parties and/or by the ultimate
    parents of the Parties, whereby the notion of control shall be interpreted pursuant to
    Article 3 of the Merger Regulation and in light of the Commission Consolidated
    Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of
    concentrations between undertakings (the "Consolidated Jurisdictional Notice").
    Assets: the assets that contribute to the current operation or are necessary to ensure the
    viability and competitiveness of the Divestment Business as indicated in Section B,
    paragraph 7 and described more in detail in the Schedule.
    AWI: Armstrong World Industries, incorporated under the laws of Pennsylvania, with its
    registered office at 25 Columbia Avenue, Lancaster, Pennsylvania and registered with the
    Commercial Register of Pennsylvania under number 18304.
    Closing: the transfer of the legal title to the Divestment Business to the Purchaser.
 ---pagebreak--- Closing Period: the period of […] from the approval of the Purchaser and the terms of
sale by the Commission.
Concentration: the notified transaction.
Confidential Information: any business secrets, know-how, commercial information, or
any other information of a proprietary nature that is not in the public domain.
Conflict of Interest: any conflict of interest that impairs the Trustee's objectivity and
independence in discharging its duties under the Commitments.
Divestment Business: the business as defined in Section B and in the Schedule which the
Notifying Party commits to divest.
Divestiture Trustee: one or more natural or legal person(s) who is/are approved by the
Commission and appointed by Knauf and who has/have received from Knauf the
exclusive Trustee Mandate to sell the Divestment Business to a Purchaser at no minimum
price.
Effective Date: the date of adoption of the Decision.
First Divestiture Period: the period of […] from the Effective Date.
FTE: Full Time Equivalent.
Hold Separate Manager: the person appointed by Knauf for the Divestment Business to
manage the day-to-day business under the supervision of the Monitoring Trustee.
Key Functions: Procurement, R&D, marketing, technical sales and finance.
Key Personnel: all personnel necessary to maintain the viability and competitiveness of
the Divestment Business, as listed in the Schedule, including the Hold Separate Manager.
Knauf: Knauf International GmbH, incorporated under the laws of Germany, with its
registered office at Am Bahnhof 7, 97346 Iphofen, Germany and registered with the local
court of Würzburg under number HRB 5956.
Monitoring Trustee: one or more natural or legal person(s) who is/are approved by the
Commission and appointed by Knauf, and who has/have the duty to monitor Knauf’s
compliance with the conditions and obligations attached to the Decision.
Notifying Party: Knauf.
Parties: Knauf and AWI.
                                               2
 ---pagebreak--- Personnel: all staff currently employed by the Divestment Business, including staff
seconded to the Divestment Business, shared personnel as well as the additional personnel
listed in the Schedule.
Purchaser: the entity approved by the Commission as acquirer of the Divestment
Business in accordance with the criteria set out in Section D.
Purchaser Criteria: the criteria laid down in paragraph 19 of these Commitments that the
Purchaser must fulfil in order to be approved by the Commission.
Relevant Countries: Austria, Estonia, Germany, Ireland, Italy, Latvia, Lithuania,
Portugal, Spain, Turkey and the UK (each a “Relevant Country”).
Relevant Products: Mineral fibre tiles and grids for modular suspended ceilings currently
produced by the Target for sale in the EEA and Turkey, with the exception of Specials.
Schedule: the schedule to these Commitments describing more in detail the Divestment
Business.
SPA: The Share Purchase Agreement entered into between Knauf and AWI signed on 17
November 2017, as amended and restated on 22 January 2018 and on 18 July 2018.
Specials: The small remainder products not producible in the Team Valley MF Facility
after the insourcing funded by the Notifying Party, but sold by the Divestment Business in
2017 and still in the Target’s product portfolio. See AWI Confidential Annex 14 for an
exhaustive list.
Target: AWI’s business acquired by Knauf.
Target Sales Team: The Target’s sales teams for the sale of modular suspended ceilings
in Austria, Estonia, Germany, Ireland, Italy, Latvia Lithuania, Portugal, Spain, Turkey and
the UK (each a “Target Sales Team”).
Team Valley Grid Facility: The Target’s production facility for grids in Team Valley,
UK.
Team Valley MF Facility: The Target’s production facility for mineral fibre tiles in
Team Valley, UK.
Trustee(s): the Monitoring Trustee and/or the Divestiture Trustee as the case may be.
Trustee Divestiture Period: the period of […] from the end of the First Divestiture
Period.
                                               3
 ---pagebreak--- Section B.       The commitment to divest and the Divestment Business
      Commitment to divest
    2. In order to maintain effective competition, the Notifying Party commits to divest, or
        procure the divestiture of the Divestment Business by the end of the Trustee
        Divestiture Period as a going concern to a purchaser and on terms of sale approved by
        the Commission in accordance with the procedure described in paragraph 20 of these
        Commitments. To carry out the divestiture, the Notifying Party commits to find a
        purchaser and to enter into a final binding sale and purchase agreement for the sale of
        the Divestment Business within the First Divestiture Period. If the Notifying Party has
        not entered into such an agreement at the end of the First Divestiture Period, the
        Notifying Party shall grant the Divestiture Trustee an exclusive mandate to sell the
        Divestment Business in accordance with the procedure described in paragraph 32 in
        the Trustee Divestiture Period.
    3. The proposed concentration shall not be implemented before the Notifying Party or
        the Divestiture Trustee has entered into a final binding sale and purchase agreement
        for the sale of the Divestment Business and the Commission has approved the
        purchaser and the terms of sale in accordance with paragraph 20.
    4. The Notifying Party shall be deemed to have complied with this commitment if:
       (a)      by the end of the Trustee Divestiture Period, the Notifying Party or the
                Divestiture Trustee has entered into a final binding sale and purchase
                agreement and the Commission approves the proposed purchaser and the terms
                of sale as being consistent with the Commitments in accordance with the
                procedure described in paragraph 20; and
       (b)      the Closing of the sale of the Divestment Business to the Purchaser takes place
                within the Closing Period.
    5. In order to maintain the structural effect of the Commitments, the Notifying Party
        shall, for a period of 10 years after Closing, not acquire, whether directly or indirectly,
        the possibility of exercising influence (as defined in paragraph 43 of the Remedies
        Notice, footnote 3) over the whole or part of the Divestment Business, unless,
        following the submission of a reasoned request from the Notifying Party showing
        good cause and accompanied by a report from the Monitoring Trustee (as provided in
        paragraph 46 of these Commitments), the Commission finds that the structure of the
        market has changed to such an extent that the absence of influence over the
        Divestment Business is no longer necessary to render the proposed concentration
        compatible with the internal market.
Structure and definition of the Divestment Business
    6. The Divestment Business comprises the Target’s mineral fibre tiles and grids business
        in the Relevant Countries, in particular (i) the Target’s sales operations in the Relevant
        Countries, including the Target Sales Teams together with their entire relevant
                                                    4
 ---pagebreak---       customer base; (ii) the Team Valley MF Facility, and (iii) the Team Valley Grid
      Facility.
  7. The Divestment Business, described in more detail in the Schedule, includes certain
      assets and staff that contribute to the current operation or are necessary to ensure the
      viability and competitiveness of the Divestment Business, in particular:
    (a)         all tangible and intangible assets;
    (b)         all licences, permits and authorisations issued by any governmental
                organisation for the benefit of the Divestment Business;
    (c)         all contracts, leases, commitments and customer orders of the Divestment
                Business; all customer, credit and other records of the Divestment Business;
                and
    (d)         the Personnel.
  8. In addition, the Divestment Business includes,
    (a)         exclusive and royalty-free licenses for the company brand Armstrong as well
                as for the relevant product trademarks (for mineral fibre tiles, including
                Specials, and grids) for exclusive use for the Relevant Products in the Relevant
                Countries for a term of […] years after Closing (which may be used in parallel
                to different existing brands by the Divestment Business)1, with the option for
                the Divestment Business to terminate the license at any time, followed by a
                black-out period of […] years; non-exclusive licences for a term of […] years
                for the relevant product trademarks, with the option for the Divestment
                Business to terminate the license at any time, will also be offered on an
                EEA-wide basis, provided that, outside the Relevant Countries, the product
                trademarks may only be used in conjunction with a brand name; moreover, the
                Purchaser will also be offered non-exclusive licenses for all relevant
                production related IP as set out in greater detail in the Schedule;
    (b)         at the option of the Purchaser, the benefit of a supply agreement under which
                the Purchaser will be able to source, sold by the Notifying Party [terms of the
                supply agreements], certain mineral fibre tiles and grids currently sold by the
                Target but not produced at the Team Valley MF Facility2 and the Team Valley
                Grid Facility3 for a transitional period until the production of these tiles/grids
                has been insourced by the Purchaser and – in any event – no longer than for a
                term of […] years from Closing;
1 Note that the license would not bar the Notifying Party from manufacturing products under the brand(s) and
  product trademarks in the Relevant Countries.
2 This relates to the Target’s [list of products], as well as [list of products], the Target’s [list of products].
3 This relates to the following grid products manufactured by the Target: [list of products].
                                                             5
 ---pagebreak--- (c) in case of difficulties of access to the single market after 30 March 2019, at the
    request of the Purchaser and approved by the European Commission based on a
    reasoned submission of the Monitoring Trustee, the benefit of a supply
    agreement under which the Purchaser will be able to source the Relevant
    Products and Specials from the Notifying Party (i.e., those Relevant Products
    and Specials which the Notifying Party produces in its plants) irrespective of
    the insourcing for a period of […], which may be extended on a yearly basis up
    to a total of […] years from Closing, […] that allows the Divestment Business
    to be competitive;
(d) a commitment of the Notifying Party to fund the investments necessary to
    enable the Team Valley MF Facility to manufacture the Target’s [list of
    products] mineral fibre tile products, undertaken by the Purchaser and, to the
    extent feasible and reasonable, prepared by the Hold Separate Manager at his
    own discretion, up to a sum of EUR […], whereas the question whether the
    investments are necessary, feasible and reasonable shall be established taking
    into consideration AWI Confidential Annex IV and will be subject to review
    by the Monitoring Trustee;
(e) a commitment of the Notifying Party to fund the investments necessary to
    enable the Team Valley Grid Facility to manufacture the Target’s following
    grid products: [list of products], undertaken by the Purchaser and, to the extent
    feasible and reasonable, prepared by the Hold Separate Manager at his own
    discretion, up to a sum of EUR […];
(f) to the extent not already with the Divestment Business and unless not required
    by the Purchaser, a commitment of the Notifying Party to hire, in coordination
    with the Hold Separate Manager and the Purchaser, at its sole cost, adequate
    personnel to carry out the Key Functions as reasonably necessary to ensure the
    viability of the Divestment Business – i.e. […]FTEs in procurement, […]FTE
    in R&D, […]FTEs in marketing, […]FTEs in technical sales and […]FTEs in
    finance; this personnel shall be available to the Purchaser at the day of Closing;
(g) the benefit of the Notifying Party bearing the one-off costs of up to EUR […]
    for the hiring of up to […] additional R&D FTEs, to the extent not already with
    the Divestment Business and reasonably required by the Purchaser;
(h) the benefit of the Notifying Party bearing the one-off costs of up to EUR […]
    for the hiring of […] additional engineering FTEs, to the extent not already
    with the Divestment Business and reasonably required by the Purchaser;
(i) the benefit of the Notifying Party bearing the one-off costs of up to EUR […]
    for the hiring of […] additional customer service FTEs, to the extent not
    already with the Divestment Business and reasonably required by the
    Purchaser;
(j) the benefit of the Notifying Party bearing the one-off costs of up to EUR […]
    for the hiring of […] additional IT FTEs, to the extent not already with the
    Divestment Business and reasonably required by the Purchaser;
                                          6
 ---pagebreak---       (k)       the benefit of the Notifying Party purchasing, in coordination with the Hold
                Separate Manager and the Monitoring Trustee, the following R&D equipment
                for the Divestment Business, to the extent not already with the Divestment
                Business and reasonably required by the Purchaser, to be available to the
                Divestment Business at the day of Closing: [list of R&D equipment];4
      (l)       at the option of the Purchaser, for a transitional period of up to […] years after
                Closing, the benefit of certain transitional services, such as IT systems and
                processes, etc., to be provided by the Notifying Party [terms of transitional
                services agreements] in order to facilitate a smooth transfer of the Divestment
                Business;
      (m)       all current arrangements under which the Parties or their Affiliated
                Undertakings supply products or services to the Divestment Business, as
                detailed in the Schedule, unless otherwise agreed with the Purchaser for a
                transitional period of up to […] years after Closing and on terms and
                conditions equivalent to those at present afforded to the Divestment Business.
    9. Strict firewall procedures will be adopted so as to ensure that any competitively
        sensitive information related to, or arising from such supply arrangements (for
        example, product roadmaps) will not be shared with, or passed on to, anyone outside
        the relevant operations.
 Section C.       Related commitments
      Preservation of viability, marketability and competitiveness
   10. From the Effective Date until Closing, the Notifying Party shall preserve or procure
        the preservation of the economic viability, marketability and competitiveness of the
        Divestment Business, in accordance with good business practice, and shall minimise
        as far as possible any risk of loss of competitive potential of the Divestment Business.
        In particular Knauf undertakes:
      (a)        not to carry out any action that might have a significant adverse impact on the
                 value, management or competitiveness of the Divestment Business or that
                 might alter the nature and scope of activity, or the industrial or commercial
                 strategy or the investment policy of the Divestment Business;
      (b)        to make available, or procure to make available, sufficient resources for the
                 development of the Divestment Business, on the basis and continuation of the
                 existing business plans;
      (c)        to take all reasonable steps, or procure that all reasonable steps are being taken,
                 including appropriate incentive schemes (based on industry practice), to
                 encourage all Key Personnel to remain with the Divestment Business, and not
4   Note that, already today, the Divestment Business has the following R&D equipment: [list of R&D
    equipment].
                                                      7
 ---pagebreak---             to solicit or move any Personnel to the Notifying Party’s remaining businesses.
            Where, nevertheless, individual members of the Key Personnel exceptionally
            leave the Divestment Business, the Notifying Party shall provide a reasoned
            proposal to replace the person or persons concerned to the Commission and the
            Monitoring Trustee. The Notifying Party must be able to demonstrate to the
            Commission that the replacement is well suited to carry out the functions
            exercised by those individual members of the Key Personnel. The replacement
            shall take place under the supervision of the Monitoring Trustee, who shall
            report to the Commission.
  Hold-separate obligations
11. The Notifying Party commits, from the Effective Date until Closing, to procure that
    the Divestment Business is kept separate from the business that the Notifying Party
    will be retaining and, after closing of the notified transaction to keep the Divestment
    Business separate from the business that the Notifying Party is retaining and to ensure
    that unless explicitly permitted under these Commitments: (i) management and staff of
    the businesses retained by the Notifying Party have no involvement in the Divestment
    Business; (ii) the Key Personnel and Personnel of the Divestment Business have no
    involvement in any business retained by the Notifying Party and do not report to any
    individual outside the Divestment Business.
12. Until Closing, the Notifying Party shall assist the Monitoring Trustee in ensuring that
    the Divestment Business is managed as a distinct and saleable business separate from
    the businesses which the Notifying Party is retaining. Immediately after the adoption
    of the Decision, the Notifying Party shall appoint a Hold Separate Manager. The Hold
    Separate Manager, who shall be part of the Key Personnel, shall manage the
    Divestment Business independently and in the best interest of the business with a view
    to ensuring its continued economic viability, marketability and competitiveness and its
    independence from the businesses retained by the Notifying Party. The Hold Separate
    Manager shall closely cooperate with and report to the Monitoring Trustee and, if
    applicable, the Divestiture Trustee. Any replacement of the Hold Separate Manager
    shall be subject to the procedure laid down in paragraph 10(c) of these Commitments.
    The Commission may, after having heard the Notifying Party, require the Notifying
    Party to replace the Hold Separate Manager.
13. To ensure that the Divestment Business is held and managed as a separate entity the
    Monitoring Trustee shall exercise the Notifying Party’s rights as shareholder in the
    legal entities that form part of the Divestment Business (except for its rights in respect
    of dividends that are due before Closing and except for any rights relating to carving
    out assets and relating to complying with the commitments of the Notifying Party to
    prepare for the sale of the Divestment Business), with the aim of acting in the best
    interest of the business, which shall be determined on a stand-alone basis, as an
    independent financial investor, and with a view to fulfilling the Notifying Party’s
    obligations under the Commitments. Furthermore, the Monitoring Trustee shall have
    the power to replace members of the supervisory board or non-executive directors of
    the board of directors, who have been appointed on behalf of the Notifying Party.
                                                8
 ---pagebreak---     Upon request of the Monitoring Trustee, the Notifying Party shall resign as a member
    of the boards or shall cause such members of the boards to resign.
  Ring-fencing
14. The Notifying Party shall implement, or procure to implement, all necessary measures
    to ensure that it does not, after the Effective Date, obtain any Confidential Information
    relating to the Divestment Business and that any such Confidential Information
    obtained by the Notifying Party before the Effective Date will be eliminated and not
    be used by the Notifying Party. This includes measures vis-à-vis any appointees on the
    supervisory board and/or board of directors of the Divestment Business. In particular,
    the participation of the Divestment Business in any central information technology
    network shall be severed to the extent possible, without compromising the viability of
    the Divestment Business. The Notifying Party may obtain or keep information relating
    to the Divestment Business which is reasonably necessary for the divestiture of the
    Divestment Business, the carrying out of their obligations under these Commitments
    or the disclosure of which to the Notifying Party is required by law.
  Non-solicitation clause
15. The Parties undertake, subject to customary limitations, not to solicit, and to procure
    that Affiliated Undertakings do not solicit, the Key Personnel transferred with the
    Divestment Business for a period of three years after Closing.
  Due diligence
16. In order to enable potential purchasers to carry out a reasonable due diligence of the
    Divestment Business, the Notifying Party shall, subject to customary confidentiality
    assurances and dependent on the stage of the divestiture process:
  (a)       provide to potential purchasers sufficient information as regards the
            Divestment Business;
  (b)       provide to potential purchasers sufficient information relating to the Personnel
            and allow them reasonable access to the Personnel.
  Reporting
17. The Notifying Party shall submit written reports in English on potential purchasers of
    the Divestment Business and developments in the negotiations with such potential
    purchasers to the Commission and the Monitoring Trustee no later than 10 days after
    the end of every month following the Effective Date (or otherwise at the
    Commission’s request). The Notifying Party shall submit a list of all potential
    purchasers having expressed interest in acquiring the Divestment Business to the
    Commission at each and every stage of the divestiture process, as well as a copy of all
    the offers made by potential purchasers within five days of their receipt.
18. The Notifying Party shall inform the Commission and the Monitoring Trustee on the
    preparation of the data room documentation and the due diligence procedure and shall
                                                 9
 ---pagebreak---         submit a copy of any information memorandum to the Commission and the
        Monitoring Trustee before sending the memorandum out to potential purchasers.
Section D.        The Purchaser
   19. In order to be approved by the Commission, the Purchaser must fulfil the following
        criteria:
      (a)        The Purchaser shall be independent of and unconnected to the Notifying Party
                 and its Affiliated Undertakings (this being assessed having regard to the
                 situation following the divestiture).
      (b)        The Purchaser shall have the financial resources, proven expertise and
                 incentive to maintain and develop the Divestment Business as a viable and
                 active competitive force in competition with the Parties and other competitors;
      (c)        The acquisition of the Divestment Business by the Purchaser must neither be
                 likely to create, in light of the information available to the Commission, prima
                 facie competition concerns nor give rise to a risk that the implementation of the
                 Commitments will be delayed. In particular, the Purchaser must reasonably be
                 expected to obtain all necessary approvals from the relevant regulatory
                 authorities for the acquisition of the Divestment Business.
   20. The final binding sale and purchase agreement (as well as ancillary agreements)
        relating to the divestment of the Divestment Business shall be conditional on the
        Commission’s approval. When the Notifying Party has reached an agreement with a
        purchaser, it shall submit a fully documented and reasoned proposal, including a copy
        of the final agreement(s), within one week to the Commission and the Monitoring
        Trustee. The Notifying Party must be able to demonstrate to the Commission that the
        purchaser fulfils the Purchaser Criteria and that the Divestment Business is being sold
        in a manner consistent with the Commission's Decision and the Commitments. For the
        approval, the Commission shall verify that the purchaser fulfils the Purchaser Criteria
        and that the Divestment Business is being sold in a manner consistent with the
        Commitments including their objective to bring about a lasting structural change in the
        market. The Commission may approve the sale of the Divestment Business without
        one or more Assets or parts of the Personnel, or by substituting one or more Assets or
        parts of the Personnel with one or more different assets or different personnel, if this
        does not affect the viability and competitiveness of the Divestment Business after the
        sale, taking account of the proposed purchaser.
Section E.        Trustee
      I.          Appointment procedure
   21. The Notifying Party shall appoint a Monitoring Trustee to carry out the functions
        specified in these Commitments for a Monitoring Trustee. The Notifying Party
        commits not to close the Concentration before the appointment of a Monitoring
        Trustee.
                                                      10
 ---pagebreak--- 22. If the Notifying Party has not entered into a binding sale and purchase agreement
    regarding the Divestment Business one month before the end of the First Divestiture
    Period or if the Commission has rejected a purchaser proposed by the Notifying Party
    at that time or thereafter, the Notifying Party shall appoint a Divestiture Trustee. The
    appointment of the Divestiture Trustee shall take effect upon the commencement of
    the Trustee Divestiture Period.
23. The Trustee shall:
       (i) at the time of appointment, be independent of the Notifying Party and their
       Affiliated Undertakings;
       (ii) possess the necessary qualifications to carry out its mandate, for example have
       sufficient relevant experience as an investment banker or consultant or auditor; and
       (iii) neither have nor become exposed to a Conflict of Interest.
24. The Trustee shall be remunerated by the Notifying Party in a way that does not impede
    the independent and effective fulfilment of its mandate. In particular, where the
    remuneration package of a Divestiture Trustee includes a success premium linked to
    the final sale value of the Divestment Business, such success premium may only be
    earned if the divestiture takes place within the Trustee Divestiture Period.
               Proposal by the Notifying Party
25. No later than two weeks after the Effective Date, the Notifying Party shall submit the
    name or names of one or more natural or legal persons whom the Notifying Party
    proposes to appoint as the Monitoring Trustee to the Commission for approval. No
    later than one month before the end of the First Divestiture Period or on request by the
    Commission, the Notifying Party shall submit a list of one or more persons whom the
    Notifying Party proposes to appoint as Divestiture Trustee to the Commission for
    approval. The proposal shall contain sufficient information for the Commission to
    verify that the person or persons proposed as Trustee fulfil the requirements set out in
    paragraph 23 and shall include:
  (a)         the full terms of the proposed mandate, which shall include all provisions
              necessary to enable the Trustee to fulfil its duties under these Commitments;
  (b)         the outline of a work plan which describes how the Trustee intends to carry out
              its assigned tasks;
  (c)         an indication whether the proposed Trustee is to act as both Monitoring Trustee
              and Divestiture Trustee or whether different trustees are proposed for the two
              functions.
               Approval or rejection by the Commission
26. The Commission shall have the discretion to approve or reject the proposed Trustee(s)
    and to approve the proposed mandate subject to any modifications it deems necessary
    for the Trustee to fulfil its obligations. If only one name is approved, the Notifying
    Party shall appoint or cause to be appointed the person or persons concerned as
                                                 11
 ---pagebreak---      Trustee, in accordance with the mandate approved by the Commission. If more than
     one name is approved, the Notifying Party shall be free to choose the Trustee to be
     appointed from among the names approved. The Trustee shall be appointed within one
     week of the Commission’s approval, in accordance with the mandate approved by the
     Commission.
               New proposal by the Notifying Party
27. If all the proposed Trustees are rejected, the Notifying Party shall submit the names of
     at least two more natural or legal persons within one week of being informed of the
     rejection, in accordance with paragraphs 21 and 26 of these Commitments.
               Trustee nominated by the Commission
28. If all further proposed Trustees are rejected by the Commission, the Commission shall
      nominate a Trustee, whom the Notifying Party shall appoint, or cause to be appointed,
      in accordance with a trustee mandate approved by the Commission.
    II.        Functions of the Trustee
29. The Trustee shall assume its specified duties and obligations in order to ensure
      compliance with the Commitments. The Commission may, on its own initiative or at
      the request of the Trustee or the Notifying Party, give any orders or instructions to the
      Trustee in order to ensure compliance with the conditions and obligations attached to
      the Decision.
               Duties and obligations of the Monitoring Trustee
30. The Monitoring Trustee shall:
(i)       propose in its first report to the Commission a detailed work plan describing how it
          intends to monitor compliance with the obligations and conditions attached to the
          Decision.
(ii)      oversee, in close co-operation with the Hold Separate Manager, the on-going
          management of the Divestment Business with a view to ensuring its continued
          economic viability, marketability and competitiveness and monitor compliance by
          the Parties with the conditions and obligations attached to the Decision. To that
          end the Monitoring Trustee shall:
            (a) monitor the preservation of the economic viability, marketability and
                 competitiveness of the Divestment Business, and the keeping separate of the
                 Divestment Business from the businesses retained by the Notifying Party, in
                 accordance with paragraphs 10 and 11 of these Commitments;
            (b) supervise the management of the Divestment Business as a distinct and
                 saleable entity, in accordance with paragraph 12 of these Commitments;
                                                 12
 ---pagebreak---         (c) with respect to Confidential Information:
                determine all necessary measures to ensure that the Notifying Party
                   does not after the Effective Date obtain any Confidential Information
                   relating to the Divestment Business,
                in particular strive for the severing of the Divestment Business’
                   participation in a central information technology network to the extent
                   possible, without compromising the viability of the Divestment
                   Business,
                make sure that any Confidential Information relating to the Divestment
                   Business obtained by the Notifying Party before the Effective Date is
                   eliminated and will not be used by the Notifying Party and
                decide whether such information may be disclosed to or kept by the
                   Notifying Party as the disclosure is reasonably necessary to allow the
                   Notifying Party to carry out the divestiture or their obligations under
                   these Commitments or as the disclosure is required by law.
        (d) monitor the splitting of assets and the allocation of Personnel between the
             Divestment Business and the Parties or Affiliated Undertakings;
(iii) propose to the Notifying Party such measures as the Monitoring Trustee considers
      necessary to ensure the Notifying Party’s compliance with the conditions and
      obligations attached to the Decision, in particular the maintenance of the full
      economic viability, marketability or competitiveness of the Divestment Business,
      the holding separate of the Divestment Business and the non-disclosure of
      competitively sensitive information;
(iv)  review and assess potential purchasers as well as the progress of the divestiture
      process and verify that, dependent on the stage of the divestiture process:
        (a) potential purchasers receive sufficient and correct information relating to the
             Divestment Business and the Personnel in particular by reviewing, if
             available, the data room documentation, the information memorandum and
             the due diligence process, and
        (b) potential purchasers are granted reasonable access to the Personnel;
(v)   act as a contact point for any requests by third parties, in particular potential
      purchasers, in relation to the Commitments;
(vi)  provide to the Commission, sending the Notifying Party a non-confidential copy at
      the same time, a written report within 15 days after the end of every month that
      shall cover the operation and management of the Divestment Business as well as
      the splitting of assets and the allocation of Personnel so that the Commission can
      assess whether the business is held in a manner consistent with the Commitments
      and the progress of the divestiture process as well as potential purchasers;
                                               13
 ---pagebreak--- (vii)    promptly report in writing to the Commission, sending the Notifying Party a non-
         confidential copy at the same time, if it concludes on reasonable grounds that the
         Parties are failing to comply with these Commitments;
(viii) within one week after receipt of the documented proposal referred to in paragraph
         20 of these Commitments, submit to the Commission, sending the Notifying Party
         a non-confidential copy at the same time, a reasoned opinion as to the suitability
         and independence of the proposed purchaser and the viability of the Divestment
         Business after the Sale and as to whether the Divestment Business is sold in a
         manner consistent with the conditions and obligations attached to the Decision, in
         particular, if relevant, whether the Sale of the Divestment Business without one or
         more Assets or not all of the Personnel affects the viability of the Divestment
         Business after the sale, taking account of the proposed purchaser;
(ix)     assume the other functions assigned to the Monitoring Trustee under the
         conditions and obligations attached to the Decision.
31. If the Monitoring and Divestiture Trustee are not the same legal or natural persons, the
     Monitoring Trustee and the Divestiture Trustee shall cooperate closely with each other
     during and for the purpose of the preparation of the Trustee Divestiture Period in order
     to facilitate each other's tasks.
               Duties and obligations of the Divestiture Trustee
32. Within the Trustee Divestiture Period, the Divestiture Trustee shall sell at no
     minimum price the Divestment Business to a purchaser, provided that the Commission
     has approved both the purchaser and the final binding sale and purchase agreement
     (and ancillary agreements) as in line with the Commission's Decision and the
     Commitments in accordance with paragraphs 19 and 20 of these Commitments. The
     Divestiture Trustee shall include in the sale and purchase agreement (as well as in any
     ancillary agreements) such terms and conditions as it considers appropriate for an
     expedient sale in the Trustee Divestiture Period. In particular, the Divestiture Trustee
     may include in the sale and purchase agreement such customary representations and
     warranties and indemnities as are reasonably required to effect the sale. The
     Divestiture Trustee shall protect the legitimate financial interests of the Notifying
     Party, subject to the Notifying Party’s unconditional obligation to divest at no
     minimum price in the Trustee Divestiture Period.
33. In the Trustee Divestiture Period (or otherwise at the Commission’s request), the
     Divestiture Trustee shall provide the Commission with a comprehensive monthly
     report written in English on the progress of the divestiture process. Such reports shall
     be submitted within 15 days after the end of every month with a simultaneous copy to
     the Monitoring Trustee and a non-confidential copy to the Notifying Party.
   III.        Duties and obligations of the Parties
34. The Notifying Party shall provide and shall cause its advisors to provide the Trustee
     with all such co-operation, assistance and information as the Trustee may reasonably
                                                 14
 ---pagebreak---     require to perform its tasks. The Trustee shall have full and complete access to any of
    the Notifying Party’s or the Divestment Business’ books, records, documents,
    management or other personnel, facilities, sites and technical information necessary
    for fulfilling its duties under the Commitments and the Notifying Party and the
    Divestment Business shall provide the Trustee upon request with copies of any
    document. The Notifying Party and the Divestment Business shall make available to
    the Trustee one or more offices on their premises and shall be available for meetings
    in order to provide the Trustee with all information necessary for the performance of
    its tasks.
35. The Notifying Party shall provide the Monitoring Trustee with all managerial and
    administrative support that it may reasonably request on behalf of the management of
    the Divestment Business. This shall include all administrative support functions
    relating to the Divestment Business which are currently carried out at headquarters
    level. The Notifying Party shall provide and shall cause its advisors to provide the
    Monitoring Trustee, on request, with the information submitted to potential
    purchasers, in particular give the Monitoring Trustee access to the data room
    documentation and all other information granted to potential purchasers in the due
    diligence procedure. The Notifying Party shall inform the Monitoring Trustee on
    possible purchasers, submit lists of potential purchasers at each stage of the selection
    process, including the offers made by potential purchasers at those stages, and keep
    the Monitoring Trustee informed of all developments in the divestiture process.
36. The Notifying Party shall grant or procure Affiliated Undertakings to grant
    comprehensive powers of attorney, duly executed, to the Divestiture Trustee to effect
    the sale (including ancillary agreements), the Closing and all actions and declarations
    which the Divestiture Trustee considers necessary or appropriate to achieve the sale
    and the Closing, including the appointment of advisors to assist with the sale process.
    Upon request of the Divestiture Trustee, the Notifying Party shall cause the documents
    required for effecting the sale and the Closing to be duly executed.
37. The Notifying Party shall indemnify the Trustee and its employees and agents (each an
    “Indemnified Party”) and hold each Indemnified Party harmless against, and hereby
    agrees that an Indemnified Party shall have no liability to the Notifying Party for, any
    liabilities arising out of the performance of the Trustee’s duties under the
    Commitments, except to the extent that such liabilities result from the wilful default,
    recklessness, gross negligence or bad faith of the Trustee, its employees, agents or
    advisors.
38. At the expense of the Notifying Party, the Trustee may appoint advisors (in particular
    for corporate finance or legal advice or expert advice on the work necessary, feasible
    and reasonable for the insourcing), subject to the Notifying Party’s approval (this
    approval not to be unreasonably withheld or delayed) if the Trustee considers the
    appointment of such advisors necessary or appropriate for the performance of its
    duties and obligations under the Mandate, provided that any fees and other expenses
    incurred by the Trustee are reasonable. Should the Notifying Party refuse to approve
    the advisors proposed by the Trustee the Commission may approve the appointment of
    such advisors instead, after having heard the Notifying Party. Only the Trustee shall
                                               15
 ---pagebreak---        be entitled to issue instructions to the advisors. Paragraph 37 of these Commitments
       shall apply mutatis mutandis. In the Trustee Divestiture Period, the Divestiture Trustee
       may use advisors who served the Notifying Party during the Divestiture Period if the
       Divestiture Trustee considers this in the best interest of an expedient sale.
   39. The Notifying Party agrees that the Commission may share Confidential Information
       proprietary to the Notifying Party with the Trustee. The Trustee shall not disclose such
       information and the principles contained in Article 17 (1) and (2) of the Merger
       Regulation apply mutatis mutandis.
   40. The Notifying Party agrees that the contact details of the Monitoring Trustee are
       published on the website of the Commission's Directorate-General for Competition
       and it shall inform interested third parties, in particular any potential purchasers, of the
       identity and the tasks of the Monitoring Trustee.
   41. For a period of 10 years from the Effective Date the Commission may request all
       information from the Parties that is reasonably necessary to monitor the effective
       implementation of these Commitments.
      IV.        Replacement, discharge and reappointment of the Trustee
   42. If the Trustee ceases to perform its functions under the Commitments or for any other
       good cause, including the exposure of the Trustee to a Conflict of Interest:
       (a)      the Commission may, after hearing the Trustee and the Notifying Party,
       require the Notifying Party to replace the Trustee; or
       (b)      the Notifying Party may, with the prior approval of the Commission, replace
       the Trustee.
   43. If the Trustee is removed according to paragraph 42 of these Commitments, the
       Trustee may be required to continue in its function until a new Trustee is in place to
       whom the Trustee has effected a full hand over of all relevant information. The new
       Trustee shall be appointed in accordance with the procedure referred to in paragraphs
       21-28 of these Commitments.
   44. Unless removed according to paragraph 42 of these Commitments, the Trustee shall
       cease to act as Trustee only after the Commission has discharged it from its duties
       after all the Commitments with which the Trustee has been entrusted have been
       implemented. However, the Commission may at any time require the reappointment of
       the Monitoring Trustee if it subsequently appears that the relevant remedies might not
       have been fully and properly implemented.
Section F.       The review clause
   45. The Commission may extend the time periods foreseen in the Commitments in
       response to a request from the Notifying Party or, in appropriate cases, on its own
       initiative. Where the Notifying Party requests an extension of a time period, it shall
       submit a reasoned request to the Commission no later than one month before the
                                                   16
 ---pagebreak---        expiry of that period, showing good cause. This request shall be accompanied by a
       report from the Monitoring Trustee, who shall, at the same time send a non-
       confidential copy of the report to the Notifying Party. Only in exceptional
       circumstances shall the Notifying Party be entitled to request an extension within the
       last month of any period.
   46. The Commission may further, in response to a reasoned request from the Notifying
       Party showing good cause waive, modify or substitute, in exceptional circumstances,
       one or more of the undertakings in these Commitments. This request shall be
       accompanied by a report from the Monitoring Trustee, who shall, at the same time
       send a non-confidential copy of the report to the Notifying Party. The request shall not
       have the effect of suspending the application of the undertaking and, in particular, of
       suspending the expiry of any time period in which the undertaking has to be complied
       with.
Section G.     Entry into force
   47. The Commitments shall take effect upon the date of adoption of the Decision.
       duly authorised for and on behalf of Knauf International GmbH
                                                 17
 ---pagebreak---                                                    SCHEDULE
1.     The Divestment Business comprises the Target’s mineral fibre and grids business in
       the Relevant Countries, in particular
       (a)     the Target’s sales operations in the Relevant Countries, including the Target
               Sales Teams together with their entire relevant customer base;
       (b)     the Team Valley MF Facility, and
       (c)     the Team Valley Grid Facility,
       together with all essential functions which are necessary to ensure the viability and
       competitiveness of the business, as set out below.
2.     In accordance with paragraphs 6-8 of these Commitments, the Divestment Business
       includes, but is not limited to:
       (a)     all tangible assets and production equipment/machinery of the Team Valley MF
               Facility and the Team Valley Grid Facility as well as all tangible assets
               necessary to continue the Target’s sales operations in the Relevant Countries. A
               list of all tangible assets that will form part of the Divestment Business is
               contained in AWI Confidential Annex 2;
       (b)     exclusive and royalty-free licenses for the company brand Armstrong as well as
               for the relevant product trademarks (for mineral fibre tiles, including Specials,
               and grids) for exclusive use for the Relevant Products in the Relevant Countries
               for a term of […] years (which may be used in parallel to different existing
               brands by the Divestment Business)5, with the option for the Divestment
               Business to terminate the license at any time, followed by a black-out period of
               […] years. Non-exclusive licences for a term of […] years for the relevant
               product trademarks, with the option for the Divestment Business to terminate the
               license at any time, will also be offered on an EEA-wide basis, provided that,
               outside the Relevant Countries, the product trademarks may only be used in
               conjunction with a brand name. Moreover, the Purchaser will also be offered
               non-exclusive licenses for all relevant production related IP. The terms and
               conditions of these trademark and other IP licenses are further described in AWI
               Confidential Annex 3;
       (c)     main necessary licences, permits and authorisations, a list of which is contained
               in AWI Confidential Annex 4;
       (d)     the entire customer base of the Target Sales Teams in relation to the Relevant
               Products, including – to the extent existing and still running at the time of
               Closing – all customer contacts, contracts, commitments, inventory and orders in
               relation to the sale of the Relevant Products in the Relevant Countries. A list of
               the Target’s customers in relation to the Relevant Products in the Relevant
               Countries is provided in AWI Confidential Annex 5; to the extent the transfer
               of a customer contract/order requires the customer’s consent, the Parties will use
5  Note that the license would not bar the Notifying Party from manufacturing products under the brand(s) and
   product trademarks in the Relevant Countries.
                                                         18
 ---pagebreak---     their best endeavours to procure the customer’s consent; to the extent customer
    contracts/orders also relate to other products (e.g. metal tiles), the Parties will
    use their best endeavours to procure the customer’s consent to split these
    agreements and to procure that all Relevant Products in the Relevant Countries
    are henceforth supplied by the Divestment Business.
(e) all Personnel and Key Personnel, a list of which is contained in AWI
    Confidential Annex 6;
(f) key supplier contracts, commitments and orders relating to the Divestment
    Business as set out in AWI Confidential Annex 7, to the extent still running at
    the time of Closing. To the extent the transfer of a supply contract requires the
    supplier’s consent, the Parties will use their best endeavours to procure the
    supplier’s consent. If a supplier refuses to consent, the Notifying Party commits,
    at the request of the Purchaser, to supply the relevant material to the Divestment
    Business for the remaining duration and on the terms and conditions of the
    relevant supply contract;
(g) all customer, credit and other records, as set out in AWI Confidential Annex 8;
(h) for a transitional period of up to […] years after Closing and on terms and
    conditions equivalent to those at present afforded to the Divestment Business, all
    current arrangements under which the Parties or their Affiliated Undertakings
    supply products or services to the Divestment Business, as detailed in
    Confidential Annex 9, unless otherwise agreed with the Purchaser; to the extent
    transitional supplies and services to be provided by the Notifying Party to the
    Divestment Business relate to supplies and services under the supply agreements
    and transitional service agreements foreseen in the SPA, the terms and
    conditions of these agreements shall, mutatis mutandis, also apply to the
    transitional supplies and services to be provided by the Notifying Party to the
    Divestment Business;
(i) a commitment of the Notifying Party to fund the investments necessary to enable
    the Team Valley MF Facility to manufacture the Target’s [list of products]
    mineral fibre tile products, undertaken by the Purchaser and, to the extent
    feasible and reasonable, prepared by the Hold Separate Manager at his own
    discretion, up to a sum of EUR […], whereas the question whether the
    investments are necessary, feasible and reasonable shall be established taking
    into consideration AWI Confidential Annex IV and will be subject to review by
    the Monitoring Trustee;
(j) a commitment of the Notifying Party to fund the investments necessary to enable
    the Team Valley Grid Facility to manufacture the Target’s following grid
    products: [list of products] , undertaken by the Purchaser and, to the extent
    feasible and reasonable, prepared by the Hold Separate Manager at his own
    discretion, up to a sum of EUR […];
(k) at the option of the Purchaser, for a transitional period until the production of the
    Target’s [list of products] mineral fibre tiles has been insourced by the Purchaser
    and – in any event – no longer than for a term of […] years after Closing, a
    supply agreement under which the Notifying Party will supply the Divestment
    Business with these tiles [terms of the supply agreement];
                                          19
 ---pagebreak--- (l) at the option of the Purchaser, for a transitional period of up to […] years after
    Closing, a supply agreement under which the Notifying Party will supply the
    Divestment Business with the Target’s Specials [terms of the supply agreement];
(m) at the option of the Purchaser, for a transitional period until the production of the
    Target’s [list of products] grid systems has been insourced by the Purchaser and
    – in any event – no longer than for a term of […] years after Closing, a supply
    agreement under which the Notifying Party will supply the Divestment Business
    with these grids [terms of the supply agreement];
(n) in case of difficulties of access to the single market after 30 March 2019, at the
    request of the Purchaser and approved by the European Commission based on a
    reasoned submission of the Monitoring Trustee, a supply agreement under which
    the Purchaser will be able to source the Relevant Products and Specials from the
    Notifying Party (i.e., those Relevant Products and Specials which the Notifying
    Party produces in its plants) irrespective of the insourcing for a period of […],
    which may be extended on a yearly basis up to a total of […] years from
    Closing, [terms of the supply agreement] that allows the Divestment Business to
    be competitive;
(o) to the extent not already with the Divestment Business and unless not required
    by the Purchaser, a commitment of the Notifying Party to hire, in coordination
    with the Hold Separate Manager and the Purchaser, at the Notifying Party’s sole
    cost, adequate personnel to carry out the Key Functions as reasonably necessary
    to ensure the viability of the Divestment Business – i.e. […] FTEs in
    procurement, […] FTE in R&D, […] FTEs in marketing, […] FTEs in technical
    sales, […] FTEs in finance; this personnel shall be available to the Purchaser at
    the day of Closing;
(p) the benefit of the Notifying Party bearing the one-off costs of up to EUR […] for
    the hiring of up to […] additional R&D FTEs, to the extent not already with the
    Divestment Business and reasonably required by the Purchaser;
(q) the benefit of the Notifying Party bearing the one-off costs of up to EUR […] for
    the hiring of […] additional engineering FTEs, to the extent not already with the
    Divestment Business and reasonably required by the Purchaser;
(r) the benefit of the Notifying Party bearing the one-off costs of up to EUR […] for
    the hiring of […] additional customer service FTEs, to the extent not already
    with the Divestment Business and reasonably required by the Purchaser;
(s) the benefit of the Notifying Party bearing the one-off costs of up to EUR […] for
    the hiring of […] additional IT FTEs , to the extent not already with the
    Divestment Business and reasonably required by the Purchaser;
(t) the benefit of the Notifying Party purchasing, in coordination with the Hold
    Separate Manager and the Monitoring Trustee, the following R&D equipment
    for the Divestment Business, to the extent not already with the Divestment
                                          20
 ---pagebreak---               Business and reasonably required by the Purchaser, to be available to the
              Divestment Business at the day of Closing: [list of R&D equipment];6
       (u)    at the option of the Purchaser, for a transitional period of […] years after Closing
              the benefit of certain transitional services, such as IT systems and processes,
              application engineering, etc., to be provided by the Notifying Party [terms of
              transitional services agreements] in order to facilitate a smooth transfer of the
              Divestment Business.
3.     The Divestment Business shall not include:
       (a)    any shared IT systems between the Parties and the Divestment Business as set
              out in AWI Confidential Annex 10;
       (b)    shared personnel between the Parties and the Divestment Business as set out in
              AWI Confidential Annex 11;
       (c)    parts of shared customer contracts/orders (to the extent such contracts/orders are
              in place at the time of Closing) relating to other than the Relevant Products as set
              out in AWI Confidential Annex 12;
       (d)    shared assets between the Parties and the Divestment Business as set out in AWI
              Confidential Annex 13.
     4.       If there is any asset or personnel which is not be covered by paragraph 2 of this
              Schedule but which is both used (exclusively or not) in the Divestment Business
              and necessary for the continued viability and competitiveness of the Divestment
              Business, that asset or adequate substitute will be offered to the Purchaser.
     5.       The proposed concentration shall not be implemented before the Notifying Party
              or the Divestiture Trustee has entered into a final binding sale and purchase
              agreement for the sale of the Divestment Business and the Commission has
              approved the purchaser and the terms of sale in accordance with paragraph 20 of
              the Commitments.
6  Note that, already today, the Divestment Business has the following R&D equipment: [list of R&D
   equipment].
                                                    21
 ---pagebreak---                                 ANNEXES & EXHIBITS
 AWI Confidential Annex 1: Products manufactured and/or sold by the Divestment
  Business in the Relevant Countries
 AWI Confidential Annex 2: Tangible Assets of the Divestment Business
     o AWI Confidential Exhibit 2.2.1: Fixed asset register for the Team Valley MF
         Facility
     o AWI Confidential Exhibit 2.2.2: Land register excerpts for the Team Valley
         MF Facility
     o AWI Confidential Exhibit 2.2.3: Plant layout of the Team Valley MF Facility
     o AWI Confidential Exhibit 2.3.1: Fixed asset register of the Team Valley Grid
         Facility
     o AWI Confidential Exhibit 2.2.2 (Part 1 and Part 2): Land register excerpts
         for the Team Valley Grid Facility
     o AWI Confidential Exhibit 2.3.2: Plant layout of the Team Valley Grid Facility
 AWI Confidential Annex 3: Intangible Assets of the Divestment Business
 AWI Confidential Annex 4: Main licenses, permits and authorizations of the
  Divestment Business
 AWI Confidential Annex 5: Customer contracts, commitments and orders of the
  Divestment Business
     o AWI Confidential Exhibits 5.1 - 5.25: Customer contracts
 AWI Confidential Annex 6: Personnel and Key Personnel of the Divestment Business
     o AWI Confidential Exhibit 6.1.1: Organisational chart of the Team Valley MF
         Facility
     o AWI Confidential Exhibit 6.1.2: Organisational chart of the Team Valley Grid
         Facility
     o AWI Confidential Exhibit 6.2.1: Agency agreement for the Baltics
 AWI Confidential Annex 7: Key supplier contracts, commitments and orders of the
  Divestment Business
 AWI Confidential Annex 8: Customer, credit and other records of the Divestment
  Business
 Confidential Annex 9: Supply, production, distribution, service or other contracts
  between the Parties and the Divestment Business
 AWI Confidential Annex 10: Shared IT systems or other systems not included in the
  Divestment Business
 AWI Confidential Annex 11: Shared personnel not included in the Divestment
  Business
 AWI Confidential Annex 12: Shared customers between the Target and the
  Divestment Business
                                           22
 ---pagebreak---  AWI Confidential Annex 13: Tangible assets not included in the Divestment Business
 AWI Confidential Annex 14: List of Specials
 AWI Confidential Annex IV: Summary assessing the insourcing of mineral fibre tiles
  currently not produced at Team Valley
                                         23
 ---pagebreak---  ---pagebreak---  ---pagebreak---                                                              AWI Confidential Annex 2
                                                    Tangible Assets of the Divestment Business
 I.    Target Sales Teams
    1. Movable property
    1. Other than non-material assets such as personal computers, desk-chairs or other adjuvant office supplies, the Target Sales Teams do not
       have any fixed assets.
    2. Immovable property
       The Target does not have real property which is attributed to either of the Target Sales Teams. All of the relevant sales offices are rented
       and these rental agreements will be transferred with the Divestment Business.
II.    Team Valley MF Facility
    1. Movable property
           A. List of fixed assets
               For a list of fixed assets, production machinery and equipment at the Team Valley MF Facility, please refer to the 2017 Fixed
               Asset Register submitted as AWI Confidential Exhibit 2.2.1.
           B. Raw materials, stocks, work-in-progress, semi-finished products
               Production-related movable property of the Divestment Business also includes all stocks of raw materials intended for the
               production of the Relevant Products as well as all stocks of work-in-progress, finished and semi-finished Relevant Products
               manufactured at the Team Valley MF Facility at the date of Closing.
                                                                                                                                                    3
 ---pagebreak---      2. Immovable property
           A. List of land/buildings
               The relevant real property where the production site, including plant, warehouse and distribution center are located, is leased from
               a third party, i.e. no real property will be transferred to the Purchaser. However, the relevant leasing agreements will be transferred
               to the Purchaser. These agreements are attached as AWI Confidential Exhibit 2.2.2.
           B. Plant layout
               An overview of the layout of the Team Valley MF Facility, including warehouse and distribution centre, is submitted as
               AWI Confidential Exhibit 2.2.3.
III.    Team Valley Grid Facility
     1. Movable property
           A. List of fixed assets
               For a list of fixed assets, production machinery and equipment at the Team Valley Grid Facility, please refer to the 2017 Fixed
               Asset Register submitted as AWI Confidential Exhibit 2.3.1.
           B. Raw materials, stocks, work-in-progress, semi-finished products
               Production-related movable property of the Divestment Business also includes all stocks of raw materials intended for the
               production of the Relevant Products as well as all stocks of work-in-progress, finished and semi-finished Relevant Products
               manufactured at the Team Valley Grid Facility at the date of Closing.
     2. Immovable property
           A. List of land/buildings
               The relevant real property where the production plant is located, is leased from a third party, i.e. no real property will be
               transferred to the Purchaser. However, the relevant leasing agreements will be transferred to the Purchaser. These agreements are
               attached as AWI Confidential Exhibit 2.2.2.
                                                                                                                                                       4
 ---pagebreak---  B. Plant layout
    An overview of the layout of the Team Valley Grid Facility is submitted as AWI Confidential Exhibit 2.3.2.
AWI Confidential Exhibit 2.2.1: Fixed asset register for the Team Valley MF Facility
[…]
AWI Confidential Exhibit 2.2.2: Land register excerpts for the Team Valley MF Facility
[…]
AWI Confidential Exhibit 2.2.3: Plant layout of the Team Valley MF Facility
[…]
AWI Confidential Exhibit 2.3.1: Fixed asset register of the Team Valley Grid Facility
[…]
AWI Confidential Exhibit 2.2.2 (Part 1 and Part 2): Land register excerpts for the Team Valley Grid Facility
[…]
AWI Confidential Exhibit 2.3.2: Plant layout of the Team Valley Grid Facility
[…]
                                                                                                               5
 ---pagebreak---                                                       AWI Confidential Annex 3
                                           Intangible Assets of the Divestment Business
IP in relation to the production and sale of the Relevant Products
Within the [information about the SPA] (SPA) [information about the SPA] and attached to the Form CO as Annexes 3.1.3 and
Annex 3.1.3.(a), non-exclusive licenses for the IP relating to the Relevant Products will be offered to the Purchaser by Knauf upon and
subject to the terms and conditions agreed between Knauf and AWI in the SPA and in the AWI IP Licence Agreement and WAVE IP
Licence Agreement (as defined in the SPA). As far as trademarks relating to the Relevant Products are concerned, these will be licensed
for exclusive use in the Relevant Countries for a term of […] years, after Closing, with the option for the Divestment Business to
terminate the license at any time, followed by a black-out period of […] years; non-exclusive licences for a term of […] years for product
trademarks, with the option for the Divestment Business to terminate the license at any time, will also be offered on an EEA-wide basis,
provided that, outside the Relevant Countries, the product trademarks may only be used in conjunction with a brand name.
                                                                                                                                           6
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---   3. Team Valley Grid Facility
  The following individuals are considered key personnel for the functioning of the Team Valley Grids Facility:
         […];
         […];
         […];
         […].
  4. Central Management of the Divestment Business
The envisaged management team of the Divestment Business is considered key personnel:
      […].
      […].
      […].
      […].
   AWI Confidential Exhibit 6.1.1: Organisational chart of the Team Valley MF Facility
   […]
   AWI Confidential Exhibit 6.1.2: Organisational chart of the Team Valley Grid Facility
   […]
   AWI Confidential Exhibit 6.2.1: Agency agreement for the Baltics
   […]
                                                                                                                11
 ---pagebreak---  ---pagebreak---  ---pagebreak---                                                         AWI Confidential Annex 8
                                      Customer, credit and other records of the Divestment Business
All relevant customer contacts are with the Target Sales Teams and – if and to the extent related to the Relevant Products – will be
transferred. Credit records [information on how the Target handles credit records and credit management] and will be transferred.
                                                                                                                                     14
 ---pagebreak---  ---pagebreak---                                                        AWI Confidential Annex 10
                            Shared IT systems or other systems not included in the Divestment Business
   I.    Target Sales Teams in the Relevant Countries
The Target Sales Teams in the Relevant Countries work with and are incorporated into AWI’s SAP system. There are a number of
other programs which are currently owned/licensed by AWI and used by the Target Sales Teams. Neither AWI’s SAP license nor any
other software (license) currently owned by AWI will be transferred with the Divestment Business.
The main programs for which AWI holds a license and which are also used by the Target Sales Teams in the Relevant Countries are:
[list of programs].
 II.     Team Valley MF Facility
The main programs for which AWI holds a license and which are also used at the Team Valley MF Facility are: [list of programs].
Neither AWI’s SAP license nor any other software (license) currently owned by AWI will be transferred with the Divestment
Business.
III.     Team Valley Grid Facility
The main programs for which AWI holds a license and which are also used at the Team Valley Grid Facility are: [list of programs].
Neither of the software (licenses) currently owned by AWI will be transferred with the Divestment Business.
                                                                                                                                  16
 ---pagebreak---  ---pagebreak---                                                      AWI Confidential Annex 12
                                  Shared customers between the Target and the Divestment Business
The Target does not have shared customers with the Divestment Business in a sense that a customer would be obliged to source
Relevant Products together with other Target products (e.g. metal tiles) under one agreement. However, should any such agreements
(or customer orders) be in place at the time of Closing, the Parties will use their best endeavours to procure the customer’s consent to
split these agreements and to procure that all Relevant Products are henceforth supplied by the Divestment Business. It is reiterated
that customer contracts and records are only transferred if and to the extent they relate to Relevant Products. Other products, such as
metal tiles, are not in scope of the Commitments.
                                                                                                                                         18
 ---pagebreak---                                                      AWI Confidential Annex 13
                                       Tangible assets not included in the Divestment Business
  I. Target Sales Teams
     There are no tangible assets belonging to the Target Sales Teams that will not be transferred.
 II. Team Valley MF Facility
     There are no tangible assets of the Team Valley MF Facility that will not be transferred.
III. Team Valley Grid Facility
     There are no tangible assets of the Team Valley Grid Facility that will not be transferred.
                                                                                                    19
 ---pagebreak---  ---pagebreak--- AWI Confidential Annex IV
          […]
                          21