CELEX: 32014M7174
Language: en
Date: 2014-06-16 00:00:00
Title: Commission Decision of 16/06/2014 declaring a concentration to be compatible with the common market (Case No COMP/M.7174 - FEDERAL-MOGUL CORPORATION / HONEYWELL FRICTION MATERIALS) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 16.6.2014
C(2014) 4126 final

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|To the notifying party:                                            |                                                                   |
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Dear Madam(s) and/or Sir(s),

Subject:    Case M. 7174 FEDERAL-MOGUL CORPORATION / HONEYWELL FRICTION MATERIALS
Commission decision pursuant to Article 6(1)(b) in conjunction with Article 6(2) of Council Regulation No 139/2004[1]

 1) On 16 April 2014, the European Commission received notification of a proposed concentration pursuant to Article 4 of the  Merger  Regulation
    by which Federal-Mogul Corporation ('FDML', of USA) ultimately controlled by Carl Icahn acquires within the meaning of  Article  3(1)(b)  of
    the Merger Regulation sole control from Honeywell International Inc. (of USA) over its  friction  materials  business  ('HFM'),  by  way  of
    purchase of shares and assets (the 'proposed concentration').[2] (FDML and HFM are designated hereinafter together as the 'Parties', FDML as
    the 'Notifying Party'.)

       The Parties

 2) FDML is an international company which develops, manufactures and sells engine, transmission and  driveline  components  as  well  as  brake
    friction materials, chassis, sealing and wiper products for automotive, rail and other applications.  FDML  also  distributes,  markets  and
    sells brake fluids and hardware (e.g. discs), chassis, sealing and engine components as well as ancillary equipment.

 3) HFM is an international company which designs, develops, manufactures, markets, repairs, overhauls and sells brake  friction  materials  and
    ancillary equipment for automotive, rail and other applications. HFM also distributes, markets and sells brake fluids,  and  brake  hardware
    (e.g. discs, drums) for automotive and rail applications.

       The OperatIon and the Concentration

 4) The proposed transaction involves the indirect acquisition of sole control by FDML through its solely  controlled  subsidiaries  Platin  and
    Saxid over the transferred businesses of Honeywell, HFM, by way of purchase of shares and assets. This comprises certain Honeywell companies
    and assets collectively referred to as HFM. The acquisition of sole control over HFM by FDML therefore constitutes  a  concentration  within
    the meaning of Article 3(1) of the Merger Regulation.

       EU DIMENSION

 5) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million[3] (FDML: […] (2012); HFM:  EUR  […]
    (2013)). Each of them has an EU-wide turnover in excess of EUR 250 million (FDML: EUR […]; HFM: EUR […], but each does not achieve more than
    two-thirds of its aggregate EU-wide turnover within one and the same Member State. The notified operation  therefore  has  an  EU  dimension
    according to Article 1(2) of the Merger Regulation.

       Markets

 6) The Parties activities mainly overlap with respect to original and replacement automotive brake friction material, both for light  passenger
    and commercial vehicles and for heavy commercial vehicles, as well as regarding rail brake friction material.

 7) Friction material is part of the brake. Brakes consist of a (hydraulic or pneumatic) actuation system, connecting the  brake  pedal  to  the
    brake, and a foundation brake, which applies the braking power to the axle. The latter consists of the brake disc and usually two brake pads
    (i.e. the friction material).

 8) In its previous decisions, the Commission has not yet taken a view on the  product  or  geographic  market  definition  for  brake  friction
    material.[4] However, the Commission has already established market definitions for brakes, which the Parties submit are also  relevant  for
    the segmentation of the friction materials markets.

1 Product Market definition

    Automotive brake friction material

 9) The Parties submit that in line with the market definitions for automotive brakes, a distinction should be made between drum and disc brakes
    and by type of vehicle into light vehicles (LV) and commercial vehicles (CV)[5] as there is no  demand-side  and  only  partial  supply-side
    substitutability for different designs of brakes and between light and commercial vehicles. Moreover, the Parties  submit  that  the  market
    should be segmented by type of sales into original equipment/original equipment services (OEM/OES) and independent aftermarket (IAM).

10) For automotive brakes, the Commission distinguished between drum and disc brakes because of the different design of these brake types.[6] It
    distinguished further by type of vehicle due to the fact that light  vehicles  are  usually  equipped  with  hydraulic  brakes,  whereas  in
    commercial vehicles, that is vehicles with a weight above 6 tons, pneumatic/air brakes are most frequent.[7] Moreover, markets were  further
    sub-segmented by type of sales into OEM/OES and IAM, as different conditions of competition were found to exist,  such  as  price  level  or
    identity of customers.[8]

11) The market investigation confirmed that friction material for disc brakes is not substitutable to friction material  for  drum  brakes.  The
    majority of the market players confirmed that these products are neither comparable in terms of price nor technical characteristics.

12) The market investigation also confirmed that a difference has to be made between friction material for light vehicles (i.e. mostly passenger
    cars and vehicles up to 6 tons) and commercial vehicles (i.e. vehicles above 6 tons). The majority of  the  market  players  confirmed  that
    these products are neither comparable in terms of price nor in terms of technical characteristics.

13) The Commission therefore considers separate markets for automotive brake friction materials by design (drum linings - disc brake pads), type
    of vehicle (light vehicle - commercial vehicle) and by sales channel (OEM/OES - IAM).

    Rail brake friction material

14) With regard to rail brake friction material, the Parties submit that – contrary to Commission precedents for the rail  brake  market  -  the
    market has to be segmented by foundation brake into disc brakes and tread (or block) brakes (comparable to the distinction  with  regard  to
    automotive brake friction material)[9] and by ingredient into organic, sintered and cast iron  (the  latter  only  exists  for  tread  brake
    blocks). In particular, they also argue that no IAM exists, as usually replacement parts are supplied  by  the  original  friction  material
    manufacturer and therefore it has the same supply structure as the OEM/OES market.[10]

15) The Commission has considered with respect to rail brake systems a distinction by actuation system into pneumatic and hydraulic and by sales
    into OEM/OES and IAM.[11]

16) The market investigation confirmed the segmentation proposed by the Parties into disc brakes and tread (or block)  brakes  and  by  material
    (organic, sintered and cast-iron). However, it also supported the Commission decision  making  practice  for  rail  brake  systems  that  is
    different markets for OEM/OES and IAM.

17) The Commission will therefore consider separate markets for rail brake friction material according to the foundation  brake  (disc  brake  -
    tread/block brake) and by ingredient (organic – sintered - cast iron), as well as into OEM/OES and IAM. However, the  exact  product  market
    definition can be left open as serious doubts do not arise under any product market definition considered  on  the  market  for  rail  brake
    friction material.

2 Geographic Market definition

    Automotive brake friction material

18) The Parties state that the EEA-wide market definition for the OEM/OES markets for automotive brakes  should  also  apply  for  the  friction
    material markets. They make reference to transport costs and tariffs for imports from outside the EEA, which increase the cost  for  imports
    by between 9.5 and 20 % as compared to friction material produced within the EEA, as  FDML  estimates  that  transport  costs  for  friction
    material into the EEA would amount to 5 – 15 % of net sales value of friction material with additional tariffs of 4.5 – 5  %.  According  to
    statistical information provided by the Parties, imports into the EEA account  for  only  3%  of  the  EEA  consumption  of  brake  friction
    material.[12]

19) The Parties submit that the IAMs are also EEA-wide, as there would be increasing  concentration,  internationalisation  and  many  suppliers
    would only operate few plants in the EEA, from which they service their entire customer base. In addition, they argue that price differences
    between EEA countries would not be significant.

20) The Commission has previously considered that the relevant markets for OEM/OES are at least EEA-wide, whereas the IAMs were seen  as  rather
    national in scope. However, in the decision in case M.134 Mannesmann /  Boge  the  Commission  considered  that  also  in  the  IAMs  strong
    competition and high shares of imports/exports with other Member States exist. The exact delineation was left open.[13]

21) With regard to the automotive brake friction material for the OEM/OES market, in the market investigation most customers  state  that  there
    are significant price differences between the EEA and the rest of the  world  for  the  OEM/OES  market,  which  can  be  explained  by  the
    aforementioned relatively high transport costs and import duties. Limited competitive pressure from production outside  the  EEA  cannot  be
    excluded.

22) With regard to the automotive brake friction material for the IAM, the market investigation was inconclusive as to  whether  the  market  is
    national or EEA-wide. Some customers see the main price differences between the EEA and the rest of the world, whereas other  customers  see
    price differences even between different EEA countries.

23) On the basis of the above and all available evidence, the Commission considers the OEM/OES markets on an EEA-wide basis and IAMs on both EEA
    and national basis. The exact geographic market definition for IAMs can be left open (national or EEA-wide) as the proposed transaction does
    not raise serious doubts on this market regardless of its geographic scope (that is EEA or national).

    Rail brake friction material

24) The Parties submit that the geographic market for all rail brake friction material is EEA-wide in scope. With respect to rail brake systems,
    the Commission has previously considered both OEM/OES and IAM markets to be EEA-wide.[14]

25) The view that the geographic scope of the markets for the rail brake friction material does not differ from the one for rail  brake  systems
    is confirmed by the market investigation, which indicates that customers mainly purchase their supplies at EEA-level.

26) The Commission therefore considers that the OEM/OES and IAMs for rail brake friction material are at least EEA-wide.

       COMPETITIVE ASSESSMENT

27) The transaction leads to affected markets for automotive brake friction material (i) in the EEA-wide OEM/OES for commercial vehicle pads and
    (ii) in the EEA-wide OEM/OES for light vehicle pads, (iii) in the EEA-wide IAM for commercial vehicle pads, (iv) in national IAMs for  light
    vehicle pads, commercial vehicle pads and commercial vehicle linings; and for rail brake friction material with respect to (v) the  EEA-wide
    OEM/OES markets for organic pads, (vi) the EEA-wide IAM for organic pads and (vii) the EEA-wide IAM for organic blocks.

1 OEM/OES for automotive brake friction material – non-coordinated horizontal effects

28) According to the applicable Commission guidelines, a merger may significantly impede effective competition in a market by removing important
    competitive constraints on one or more sellers, who consequently have increased market power. The larger the market share, the more likely a
    firm is to possess market power and the larger the addition of market share through the transaction, the more likely it  is  that  a  merger
    will lead to a significant increase in market power.[15]

      Commercial Vehicle Pads – Market Structure

29) The EEA-wide OEM/OES market for commercial vehicle pads (CVP) is affected by the proposed transaction. The below table sets out the relevant
    market shares by value according to the Parties.

|CVP OEM/OES                           |2013                               |2012                          |2011                          |
|FDML                                  |[10 – 20] %                        |[ 10 – 20] %                  |[10 – 20] %                   |
|HFM                                   |[20 – 30] %                        |[30 – 40] %                   |[30 – 40] %                   |
|Combined                              |[40 – 50] %                        |[40 – 50] %                   |[40 – 50] %                   |
|N/TDM                                 |[40 – 50] %                        |[40 – 50] %                   |[40 – 50] %                   |
|ITT/Galfer                            |[0 – 10] %                         |[0 – 10] %                    |[0 – 10] %                    |
|Bremskerl, others                     |[0 – 10] %                         |[0 – 10] %                    |[0 – 10] %                    |

Source: Form CO.

30) Volume-based market shares do not significantly differ from the figures above and are set out in the following table.

|CVP OEM/OES                           |2013                               |2012                          |2011                          |
|FDML                                  |[10 – 20] %                        |[10 – 20] %                   |[10 – 20] %                   |
|HFM                                   |[30 – 40] %                        |[30 – 40] %                   |[30 – 40] %                   |
|Combined                              |[40 – 50] %                        |[40 – 50] %                   |[40 – 50] %                   |
|N/TDM                                 |[40 – 50]-[50-60] %                |[40 – 50]-[50-60]  %          |[40 – 50]-[50-60]  %          |
|ITT/Galfer                            |[0 – 10] %                         |[0 – 10] %                    |[0 – 10] %                    |
|Bremskerl, others                     |[0 – 10] %                         |[0 – 10] %                    |[0 – 10] %                    |

Source: Form CO.

31) The tables show that on the OEM/OES market for CVP, the Parties have consistently held high market shares over the  last  three  years.  The
    combined market share by value 2013 amounts to [40 - 50] % (FDML: [10 – 20] %, HFM: [20 – 30] %, up from  [40  –  50]  %  in  2012)  with  a
    substantial increment.

32) The transaction leads to a significant increase in the concentration of an already concentrated market. The concentration level is  assessed
    by the Herfindahl-Hirschman Index (HHI).[16] The change in concentration directly brought about by a proposed transaction can be  calculated
    as the change of the HHI (known as 'HHI delta').[17] It is assumed that a merger is unlikely to lead to competition concerns  if  the  post-
    merger HHI is below 1 000 with an HHI delta below 250 or above 2 000 with an HHI delta below 150.[18] With respect to the OEM/OES CVP market
    however, the concentration level is approximately 4 034 and the HHI delta amounts  to  882,  a  value  far  above  the  relevant  threshold,
    indicating that the concentration level in this market will increase significantly.

33) On this market, only one competitor of the merged entity with comparable market shares will remain post-merger. Nisshinbo/TMD, which is also
    active to a lesser extent on the OEM/OES LVP market, has over the past years consistently held a market share of [40 –  50]-[50-60]  %.  The
    merged entity will have approximately the same share.

34) Nisshinbo is a Japanese brake friction material manufacturer previously mainly active in Asia and North America. It acquired  TMD,  a  brake
    friction material manufacturer with a focus on Europe, in 2011.[19]

35) Other market participants are few and have relatively limited market shares: ITT/Galfer, who entered this market segment 8  years  ago,  has
    held a market share of [0 – 10] % during the last four years. This  company  is  rather  active  on  the  OEM/OES  LVP  market.  Apart  from
    ITT/Galfer, only Bremskerl holds appreciable market shares (below [0 – 10] % for the last four years) and other companies  account  combined
    for [0 – 10] %. The transaction therefore leads to two equally strong players on the  OEM/OES  market  for  CVP  that  leave  the  remaining
    competition far behind.

      Commercial Vehicle Pads – Impact of the Transaction

36) The contemplated market is characterised by individual price setting through tenders. In the market investigation, all responding  customers
    from the CVP segment stated that they organise their sourcing process through tenders, combined with bilateral negotiations.

37) With regard to CVP, vehicle manufacturers usually buy the whole brake from a  brake  manufacturer,  who  is  responsible  for  sourcing  the
    friction material and the respective commercial conditions. With respect to technical conditions, on the other hand,  vehicle  manufacturers
    get involved through the process of homologation or type approval. This term relates to a vehicle manufacturer 'auditing' friction  material
    manufacturers before a certain project, testing the characteristics  of  their  friction  material  and  visiting  production  sites.  Brake
    manufacturers can then choose one of the homologated friction material manufacturers for the respective project.

38) With the proposed transaction, an important competitive constraint, in the form of the third established and sizeable competitor HFM,  would
    be removed from this market. The Commission considers that this loss of competition is significant for several reasons.

39) Firstly, almost half of the respondents have multi-sourced at least occasionally in the last 10 years. Amongst  these  are  large  companies
    that source significant amounts of friction material from both  Parties.  Therefore,  with  respect  to  these  OEM/OES  CVP  customers,  no
    competitive constraint would remain in the market post-merger, as soon as only two competitors are active, as  both  could  be  sure  to  be
    awarded a part of the tendered volumes.

40) Secondly, also for all further customers, the intensity of competition in tenders is likely to decrease post-transaction. In the presence of
    tenders, a merger most directly leads to a price increase where the Parties are respectively the preferred option and runner-up. However, if
    uncertainty exists with respect to relative positions, upwards pricing pressure can  apply  widely  across  bids.  The  Parties  argue  that
    particular tenders are not transparent and competitors only have limited information on how they are ranked compared to the competition.

41) In the market investigation, customers reported 25 recent tenders for the CVP segment. Both Parties were bidders  in  a  large  majority  of
    these tenders. In addition, combined they won the majority of the reported tenders and in almost half of these instances  they  were  winner
    and runner-up, whereas in almost all of the instances they were ranked among the top bidders. This indicates the strength of the competitive
    constraint that the Parties exert upon each other pre-merger and which would be eliminated post-merger.

42) Regarding competitors, Nisshinbo/TMD also participated in a majority of the tenders, but did not win as frequently as either of the Parties.
    On the other hand, ITT/Galfer only participated in the minority of the reported tender procedures and won even less. Only in a few instances
    were other companies mentioned as tender participants. Moreover, they won almost none of the reported tenders.

43) Thirdly, all OEM/OES CVP customers made clear in the market investigation that at least three suppliers are needed for a competitive  tender
    outcome, while half also mention four or more.

44) Finally, with respect to CVP, the majority of the responding customers state that the proposed concentration will decrease the intensity  of
    competition. The majority of responding customers forecast that prices will increase, some quantifying this at 5 -10%. One customer  states:
    "With less suppliers and decreasing competition there are not enough competitors on  the  market  who  are  able  to  deliver  the  required
    quality."

      Light Vehicle Pads – Market Structure

45) Also the EEA-wide OEM/OES market for light vehicle pads (LVP) is affected by the proposed transaction. The below table sets out the relevant
    market shares by value according to the Parties.

|LVP OEM/OES                                |2013                            |2012                         |2011                         |
|FDML                                       |[20 – 30] %                     |[20 – 30] %                  |[20 – 30] %                  |
|HFM                                        |[20 – 30] %                     |[20 – 30] %                  |[20 – 30] %                  |
|Combined                                   |[40 – 50] %                     |[40 – 50] %                  |[40 – 50] %                  |
|N/TDM                                      |[10 – 20]-[20-30] %             |[10 – 20]-[20-30] %          |[10- 20] - [20 – 30] %       |
|ITT/Galfer                                 |[20-30] – [30-40] %             |[20-30] – [30-40] %          |[20 – 30] %                  |
|Akebono,Roulunds, Raicam                   |[0 – 10] %                      |[0 – 10] %                   |[0 – 10] %                   |
|Others                                     |[0 – 10] %                      |[0 – 10] %                   |[0 – 10] %                   |

Source: Form CO.

46) Volume-based market shares on this market do differ to an extent from the figures above and are represented in the following table.

    |LVP OEM/OES                                    |2013                        |2012                         |2011                         |
|FDML                                           |[20 – 30] %                 |[10 – 20] %                  |[10 – 20] %                  |
|HFM                                            |[10 – 20] %                 |[10 – 20] %                  |[10 – 20] %                  |
|Combined                                       |[30 – 40] %                 |[30 – 40] %                  |[30 – 40] %                  |
|N/TDM                                          |[10-20] [20–30] %           |[10-20] [20–30] %            |[20 – 30] %                  |
|ITT/Galfer                                     |[30-40] – [40-50] %         |[30-40] – [40-50] %          |[30 – 40] %                  |
|Akebono, Roulunds, Raicam                      |[0 – 10] %                  |[0 – 10] %                   |[0 – 10] %                   |
|Others                                         |[0 – 10] %                  |[0 – 10] %                   |[0 – 10] %                   |

 Source: Form CO.

47) On the OEM/OES market for LVP, the Parties have held high combined market shares over the last three years. These have been  declining  from
    2010 until 2012, but the trend reversed and market shares increased again in 2013.

48) The combined market share of the merged entity by value in 2013 would amount to [40 – 50] % (FDML: [20 – 30] %, HFM: [20 – 30] %),  creating
    the market leader. The post-merger HHI is approximately 3 003 and therefore lower than in the CVP segment. However, the HHI-delta  for  this
    market is even higher and amounts to 941, again indicating a significant increase in market concentration.

49) In the OEM/OES market for LVP, two competitors other than the merged  entity  would  remain  post-merger.  Nisshinbo/TMD,  the  only  strong
    competitor in the OEM/OES CVP market, holds a share of [10 – 20] – [20-30] % in the OEM/OES LVP market in 2013, which is about half the size
    of the combined entity. ITT/Galfer would be the second strongest competitor on this market after the merged entity, holding a share of [20 –
    30] – [30-40] % in 2013.

50) Other competitors, such as Akebono, Roulunds and Raicam account for only a minor part of the market with shares remaining below [0 –  10]  %
    and probably even lower in all the years between 2011 and 2013. Other market participants account combined […] [0 – 10] % of sales.

51) By volume, the combined market share of the Parties would amount to [30 – 40] % (FDML [20 – 30] % and HFM [10  –  20]  %).  With  regard  to
    volume-based market shares in this market, HFM therefore accounts for [10 – 20] %, while ITT/Galfer would have a market share of [30 -40]  –
    [40 – 50] %. The Parties explain this by [different supply foci].

          Light Vehicle Pads – Impact of the Transaction

52) Also on this market, the Commission considers that the proposed transaction would remove an important competitive constraint, in the form of
    the fourth established and strong competitor HFM.

53) The large majority of responding customers stated in the market investigation  that  they  procure  friction  material  from  both  Parties,
    indicating that the Parties are indeed an important supply option for clients.

54) Firstly, with respect to the number of competing supply sources, even though multi-sourcing is less frequent for LVPs  than  for  CVPs  with
    about one third of customers at least occasionally multi-sourcing, the majority of customers are concerned about  the  loss  of  competition
    resulting from the transaction.

55) Customers moreover frequently mention the fact that each single supplier is important for a competitive market outcome, as a certain  number
    of competitors is necessary to organise a competitive bidding process. Also, customers are of the opinion that on average 3 to  4  suppliers
    are needed in a bidding process to achieve this. One customer for example states that "(t)he experience shows that without a  minimum  of  4
    suppliers the tendency of price level increases and market domination exist."

56) Given that not all companies participate in every bidding procedure, the number of  credible  bidders  post-transaction  seems  to  reach  a
    critical level for a competitive outcome, according to some customers. The industry is generally marked by low spare  capacity,  as  amongst
    others a full utilisation is not feasible due to technical restrictions and contractual obligations, as further detailed in  para.  (62)  et
    seq. below. Therefore, in particular with respect to contracts comprising larger volumes, it is not likely that all competitors are able  to
    participate in each tender, as some might not have the required associated capacity available.

57) Secondly, the analysis of the tender data provided by customers during the market investigation shows that tenders are held frequently, that
    is multiple times per year, with some customers organising between 10 and 30 tenders per year. Out of the 38 tenders reported  by  customers
    in the market investigation for LVP, both Parties participated in almost half and at least one of  the  Parties  participated  in  virtually
    every tender. ITT/Galfer participated in almost the same number of tenders as the Parties, whereas Nisshinbo/TMD participated in  less,  but
    still the majority of the reported tender procedures. Out of the total number of reported tenders, both Parties combined were awarded almost
    half of the contracts. ITT/Galfer shows similar strength in winning tenders, whereas TMD only received the award in a small  number  of  the
    reported cases. In the majority of the procedures, where one of the Parties won, the other Party was also placed amongst  the  top  bidders,
    indicating prima facie a considerable level of competitive interaction.

58) The Parties submitted in the course of the investigation an economic analysis[20] of the bidding data for LVP. The paper analysed the extent
    to which the Parties bid for the same contracts and the closeness of competition between them. The paper came to  the  conclusion  that  the
    Parties would rarely compete for the same tenders and would not impose a uniquely strong constraint on each other. However, the paper itself
    acknowledges that the underlying bidding data available has certain weaknesses and it is likely that it leaves out a  considerable  part  of
    the LV segment. In addition, it only analyses the final round of bidding and not participation in the whole process. For these reasons,  the
    Commission considers that no robust conclusions can be drawn from the analysis submitted.

59) Thirdly, a majority of customers voices concerns with respect to the proposed transaction and indicates that it  expects  a  price  increase
    post-merger on this market in a range between 5 and 15%.

60) One customer states: "After the takeover an immediate price increase is not to be expected due to the  contractual  agreements.  However,  a
    rather slowly increasing price level on any given technical change implementation or on any new tenders  are  to  be  expected.  A  supplier
    switch would be too costly and especially on a running product line."

61) One customer explains: "Reduced number of technically capable suppliers especially for the European market,  from  3  down  to  2.  No  free
    capacity at alternative suppliers and high entry barriers (no new suppliers in past 5 years) will lead to upward price  pressure  or  market
    pricing pressure." Another one adds: "For OEM supplies, natural competition will decrease to two actors (ITT and FDML). TMD  is  not  strong
    enough about technical requirement."

      Barriers to Expansion (Capacity)(CVP and LVP)

62) The OEM/OES markets for CVP and LVP share a number of characteristics  with  regards  to  capacity  constraints,  which  will  therefore  be
    discussed below for both markets.

63) In principle, merging firms may have an incentive to reduce  output  with  a  view  on  increasing  prices,  if  competitors  face  capacity
    constraints and the expansion of capacity is costly.[21]

64) With regard to a possible expansion, the Parties submit that in particular one competitor, namely ITT/Galfer,  has  sufficient  capacity  to
    expand its market share should the merged entity or N/TMDF start increasing their prices or reduce output. In that regard the Parties submit
    that ITT/Galfer operates three production sites in Italy, invests into a production site in China and is able to produce both CVP and LVP on
    the same production equipment.

65) However, the Commission considers it to be unlikely that competitors are able to swiftly expand their production if  the  new  entity  would
    raise its prices or reduce its output, for the following reasons:

66) Firstly, the Commission considers it unlikely that competitors will supply the OEM/OES market from outside the EEA. As indicated above,  the
    Parties themselves submit that the geographic scope of these markets is EEA-wide, since transport costs and tariffs  increase  the  cost  of
    imports between 9.5% and 20% compared to friction material produced within the EEA. This is also in line with the fact that imports into the
    EEA account for only 3% of the EEA consumption of brake friction material. In the market investigation, most customers confirmed that  there
    are significant price differences between the EEA and the rest of the world.

67) Secondly, the Parties themselves indicated that capacity utilisation in the EEA is generally high.  The  Parties  submit  that  the  average
    capacity utilisation in the EEA between 2010 and 2011 was about [80-90] % for LVP and [80 – 90] % for CVP.  In  comparison,  FDML's  average
    capacity utilisation was […] % for LVP and […] % for CVP and HFM's average capacity utilisation was […] % for LVP and […] %  for  CVP.  This
    suggests that spare capacity of the Parties' competitors is even lower than the  Parties'  own  spare  capacity.[22]  In  that  regard,  the
    Commission notes that the Parties themselves submit that friction material manufacturers need to hold a spare capacity for  tooling  change,
    shift changeover and maintenance, such that a plant running at [80 – 90] % of its nominal capacity is  de  facto  already  running  at  full
    capacity. Also, customers in the OEM/OES markets regularly require friction material manufacturers to hold a [10  –  20]  %  spare  capacity
    (above peak volume).

68) Thirdly, the creation of additional capacity in the OEM/OES market for CVP and LVP in the EEA is likely to be costly and time-intensive. The
    Parties themselves indicate that it would take an investment of EUR [at  least  4  million]  for  setting  up  a  viable  friction  material
    production site from scratch in an existing factory. The market investigation showed that competitors estimate the costs of setting up a new
    production site at EUR 10-40 million. Moreover, the homologation of a new production line is likely to be at least as time consuming as  the
    homologation of an existing production line for a new product requiring at least 2 years for the homologation process alone (not taking into
    account the planning and construction of the new production line). The market  investigation  indicated  that  the  homologation  of  a  new
    supplier takes between 2 and 3 years.

69) Moreover, it should be noted that according to internal  documents  from  2012,  FDML  intended  [description  of  initial  capacity-related
    considerations].[23] In response to a request for information dated 8 May 2014, the Parties  submitted  on  12  May  2014  that  this  early
    document does not reflect FDML's current plans with regard to the business, as then it still related to a  different  scope  of  the  target
    business, and that according to the current strategy [description of  revised  capacity-related  considerations].  However,  the  Commission
    considers that there is still a significant possibility that the merged entity will reduce its overall capacity.

70) In view of the above, the Commission considers that the merged entity will have an incentive to reduce  its  output,  especially  since  its
    competitors are unlikely to be able to react to such a capacity reduction by increasing their capacity in a timely manner.

      Barriers to Entry (CVP and LVP)

71) The OEM/OES markets for CVP and LVP share a number of characteristics with regard to barriers to entry, which will  therefore  be  discussed
    below for both markets.

72) In principle, when entering a market is sufficiently easy, a merger is unlikely to pose any significant anti-competitive effects.[24]

73) The Parties submit that new players could easily enter the OEM/OES markets for CVP and LVP, should the merged entity or a  competitor  start
    increasing their prices or reduce output post-transaction.

74) According to the Parties, entry could occur by geographic expansion or extension of the product range of other companies. The Parties  argue
    that brake pads are generally a low-technology product, which does not necessitate the acquisition of important patents or specialised know-
    how. Also, regulatory requirements (ECE R13 for OEM/OES) are allegedly strict, but easy to meet for any producer of friction material within
    a few weeks. The Parties note in particular that in recent years ITT/Galfer entered the OEM/OES CVP segment and Raicam and  Akebono  entered
    the OEM/OES LVP segment.

75) However, the Commission considers it unlikely that new competitors are able to enter the market and develop a significant  impact  within  a
    reasonably short timeframe.

76) Firstly, an entry into the OEM/OES market for CVP and LVP in the EEA is costly and time-intensive. The Parties themselves  concede  that  it
    would take an investment of EUR [at least 4 million] for setting up a viable friction material production site from scratch in  an  existing
    factory. The market investigation showed that competitors estimate the costs of setting up a new  production  site  at  EUR  10-40  million.
    Furthermore, the Parties concede that the costs of homologation are significantly higher for a new entrant (i.e. EUR 150 000 to EUR 900 000)
    than for an incumbent supplier (EUR 100 000 to EUR 300 000). Moreover, an entry into these markets is time consuming. The Parties themselves
    concede that a new entrant has to calculate approximately 2 years for the homologation process alone (not taking into account  the  planning
    and construction of the production site). The market investigation indicated that the homologation of a new supplier takes between 2  and  3
    years.

77) Secondly, with respect to both the OEM/OES market for CVP and LVP, it should  be  noted  that  customers  extensively  test  brake  friction
    material producers before accepting them as supplier (so-called "homologation"). This process involves intensive testing and may  take  more
    than 18 to 24 months from the request for quotation (i.e. up to 6 months), over the selection of the final supplier (up to 6 months), to the
    final validation for production (up to 18 months).[25] Once a contract is awarded, the supply relationship usually lasts 15 years or longer.
    The homologation of a new entrant is therefore costly and time consuming also for the customers. Customers therefore  prefer  to  grant  new
    contracts to incumbent suppliers. The market investigation confirmed that almost all customers prefer to choose incumbent suppliers for  new
    contracts for successor vehicle models. The market investigation further suggests that customers  are  very  reluctant  to  switch  existing
    contracts to new suppliers because of the additional time and cost effort required.

78) Thirdly, there has been no significant new entry in the last years. As regards ITT/Galfer, an incumbent LVP supplier  who  entered  the  CVP
    segment, the Parties themselves concede that this competitor has – over the last 8 years - only gained a market share of [0 – 10] %  in  the
    CVP segment (by value and volume). As regards Raicam,[26] a new entrant in the  LVP  segment,  the  Parties  themselves  concede  that  this
    competitor has had a market share not exceeding [0 – 10] % (by value and volume) in the last four years. As regards  Akebono,  an  incumbent
    supplier in Japan amongst whose shareholders are Bosch and Toyota, who entered the LVP segment, the Parties  themselves  concede  that  this
    competitor's market share has been below [0 – 10] % since 2010 (by value and volume). Other new entrants  into  the  LVP  segment,  such  as
    Brembo and Tiir, did not manage to obtain a significant market share (that is below [0 – 10] %). Furthermore, according to the Parties'  own
    estimates, market shares remained fairly stable for all of these smaller competitors between 2010 and 2013.

79) Moreover, the Commission notes that at least one new entrant failed to successfully enter the market in the last years. In 2006, two  former
    Nisshinbo/TMD employees founded Saxid and were awarded contracts mainly by [customer name]. However, it took the company two years to  start
    production and, in 2011, FDML purchased this competitor for [a symbolic price]. FDML subsequently closed the plant and moved  production  to
    one of its other production sites. This example suggests that an entry into the OEM/OES markets for LVP and CVP can be a time-intensive  and
    loss making endeavour despite experienced personnel and contracts with a premium customer, such as [customer name] in this case.

80) Fourthly, the market investigation confirmed that the large majority of the customers do not expect any new entry in the coming five  years.
    This is in line with the fact that customers in the OEM/OES segment in the EEA have a preference  for  their  incumbent  suppliers  and  are
    reluctant to grant contracts to new entrants without track record (see para. (77) above).

81) The Commission therefore considers it to be unlikely that new entrants are able to enter the OEM/OES markets for LVP and/or CVP in  the  EEA
    in a significant manner within a reasonably short timeframe.

      Buyer Power (CVP and LVP)

82) The OEM/OES markets for CVP and LVP share a number of characteristics with regard to buyer power, which will therefore  be  discussed  below
    for both markets.

83) In principle, even firms with very high market shares may not be in a position, post-merger, to significantly impede effective  competition,
    if customers possess countervailing buyer power.[27]

84) The Parties argue that any market power that might stem from the Parties' high combined market shares in the OEM/OES markets for CVP  and/or
    LVP is counter-balanced by a high degree of buyer power at customer level.

85) Firstly, according to the Parties, the customer side of the market is highly concentrated with vehicle and brake manufactures consisting  of
    a few large and sophisticated companies. The Parties note that the Commission has previously accepted the existence of buyer  power  in  the
    automotive sector.[28] Moreover, the Parties have submitted articles from the specialised press which comment on the buyer power of OEMs  in
    the automotive sector.[29]

86) However, in the case at hand the Commission considers it to be unlikely that vehicle and brake manufacturers  have  enough  buyer  power  to
    prevent the new entity, post-merger, to significantly impede effective competition. As  to  precedents,  the  Parties  refer  to  Commission
    decisions with regard to other automotive components, which are subject to a different market structure than the  one  at  hand.  Also,  the
    articles from the specialised press refer to the situation of small and medium sized suppliers of automotive components,  whose  market  has
    not yet been consolidated.

87) By contrast, with regard to the case at hand, the Commission notes that most suppliers are  themselves  large  and  sophisticated  companies
    which operate in a consolidated market. Moreover, the Parties themselves indicate that the supply side of the market is  significantly  more
    concentrated than the customer base, both with regard to the OEM/OES market for CVP and LVP.

88) It follows from the Parties' submission that, with regard to the market for CVP, post-merger, mainly  two  suppliers  (the  new  entity  and
    N/TMD), which account for at least [90 - 100] % of the market  by  value  and  volume,  compete  for  contracts  from  at  least  6  vehicle
    manufacturers (not taking into account brake manufacturers).

89) With regard to the market for LVP, post-merger, mainly three suppliers (the new entity, N/TMD and ITT/Galfer), which account for almost  [90
    - 100] % of the market by value and volume, compete for contracts from at least 10 vehicle manufacturers  (not  taking  into  account  brake
    manufacturers).

90) Secondly, the Parties submit that their customers can switch suppliers easily and regularly threaten to  do  so.  The  market  investigation
    indeed showed that many customers use the threat to switch suppliers in the course of their negotiations.

91) However, the Commission considers it unlikely that customers can exercise buyer power by immediately switching suppliers, in  particular  in
    view of the Parties' submission that the homologation of a new supplier usually takes approximately 2 years.

92) This was largely confirmed by the market investigation which showed that this process takes 2 to 3 years  (see  para.  (68)above).  In  that
    regard the Commission notes that, contrary to the Parties' argument that no incumbency advantage exists for  tenders  for  new  projects,  a
    clear majority of customers indeed indicates that they would more likely opt for an incumbent supplier for a  successor  vehicle  model.  It
    seems therefore that switching from an incumbent supplier to an alternative does not seem to be a frequently nor is it an important  feature
    of the OEM/OES markets for CVP and LVP.

    Moreover, in a market with only two main suppliers (the OEM/OES market for CVP) as well as in  a  market  with  three  main  suppliers  (the
    OEM/OES market for LVP) the switching of a supplier might prove to be difficult in view of the capacity constraints in these markets. It  is
    therefore unlikely that a customer would be able to switch to a different supplier within a reasonably short timeframe.

93) Thirdly, the Parties argue that their customers exercise buyer power in many other ways while negotiating new contracts. In particular,  the
    Parties submit that customers require suppliers to accept their terms and conditions. Furthermore, as a pre-requisite for entering into  new
    projects they request a pre-payment for the chance to be awarded new business. Moreover, the Parties also state that even after the award of
    a certain project, customers continuously pressure the chosen supplier to improve its production process, lower  its  production  costs  and
    consequently also its prices. In that regard the Parties submit that customers require a detailed list  of  production  costs,  which  gives
    their requests additional weight.

94) The market investigation confirmed that especially OEM/OES customers generally require suppliers  to  accept  their  terms  and  conditions.
    Moreover, the market investigation indicates that many customers do indeed require better  conditions  on  existing  supply  contracts  when
    entering into new contracts.

95) However, the fact that some customers ask for better conditions on existing contracts in exchange for granting new contracts, as well as for
    improved production processes and a lowering of prices during the course of the supply relationship, appears to  be  common  in  contractual
    negotiation and does not seem sufficient to indicate buyer power. Also, the market investigation shows that,  even  if  the  some  customers
    request information on production costs, the extent of these requests vary from  case  to  case  and  suppliers  may  reject  such  requests
    especially in view of their IP rights on the composition of their friction material.

96) Moreover, the market investigation did not confirm that customers require friction material manufacturers to pay lump-sums in  exchange  for
    new business. Furthermore, customers only rarely threaten to start procuring material in house, threaten to delay procurement or threaten to
    delay payment. Moreover, contrary to the Parties' argument that contractual arrangements between the customer and the successful  bidder  do
    not normally foresee obligations on the part of the former to buy any minimum quantity or guarantee a minimum period of supply, the majority
    of customers at least occasionally bear such a minimum quantity and period.

97) In conclusion, the market investigation did not confirm that customers have a level of buyer power vis-à-vis suppliers of friction  material
    that would be comparable to their buyer power vis-à-vis suppliers of some other automotive components that  has  been  the  object  of  "the
    previous cases to which the Parties referred". This is in line with the fact that the markets for many other automotive components are  more
    fragmented and sometimes characterised by numerous small and medium sized suppliers, while the market for the supply of friction material is
    already consolidated and dominated by few large and sophisticated suppliers.

98) On the basis of the above, the Commission considers it unlikely that these customers can  effectively  exercise  buyer  power  in  a  manner
    sufficient to overcome, post-merger, the market power of the remaining friction material suppliers.

    Preliminary Conclusion

99) In view of the above reasons and all available evidence, the Commission considers that the transaction  raises  serious  doubts  as  to  its
    compatibility with the internal market with regard to the OEM/OES market for CVP  and  LVP  in  the  EEA  as  a  result  of  non-coordinated
    horizontal effects.

2 OEM/OES for automotive brake friction material – coordinated effects

100) According to established case law[30] and the Commission guidelines on the assessment of horizontal mergers,[31] it must be  established  in
    order to assess coordinated effects that a proposed merger will make coordination more likely,  more  effective  or  more  sustainable.  The
    analysis needs to focus in particular on: (i) the ability to reach terms of coordination; (ii) the ability to monitor deviations; (iii)  the
    existence of a credible deterrent mechanism if deviation is detected; and (iv) the reactions of outsiders such as potential competitors  and
    customers.

101) The Commission has investigated the possibility that the proposed merger, besides raising serious  doubts  on  the  non-coordinated  effects
    described above, may also lead to a weakening of competitive pressure as a result of coordinated effects. These  coordinated  effects  would
    result in prices on the market rising higher than if they were dictated only by the individual, non-coordinated, profit maximising behaviour
    of each individual competitor.

102) The reduction in the number of firms from 3 to 2 in the OEM/OES CVP market and from 4 to 3 in the OEM/OES LVP market  and  the  increase  in
    symmetry among players may, in itself, be a factor that facilitates coordination and increase the likelihood of coordination. In particular,
    with respect to the above-mentioned CVP market, only two competitors of equal size with activities throughout all regions of the world would
    remain. In addition, these two companies both supply the full range of automotive friction material.

103) The internal documents provided by the Parties together with the Form CO make clear that both markets are much  more  transparent  than  the
    Parties suggest. In particular, in one of FDML's presentations with respect  to  the  commercial  vehicle  friction  materials,  a  detailed
    overview with market shares of the Parties and various competitors with brake and vehicle manufacturers, as well as  interrelations  between
    the brake and vehicle manufacturers are given.[32]

104) In addition, there are indications that brake friction material is a rather homogeneous product.

105) Several customers alleged in the market investigation that at least tacit coordination might already take  place  and  that  such  could  be
    strengthened by the proposed transaction. One customer with regard to the situation post-merger expresses: "Furthermore, there is  potential
    for suppliers to be selective in terms of their bidding in terms of which platforms they wish to gain. Given the small community it will  be
    easier to track wins and losses in the market and thereby drive market pricing up."

106) It is however to be emphasised that a significant part of sales result from competitive tendering which is generally not compatible  with  a
    finding of price transparency, the ability to monitor  deviations  to  a  tacitly  coordinated  outcome  and  the  likelihood  of  effective
    retaliation.

107) As the Notifying Party proposed Commitments which allow for a new competitor to  develop  on  both  OEM/OES  markets  for  automotive  brake
    friction material in the EEA and resolve the competition concerns, there is no need to make a definitive finding on coordinated effects.

3 IAM for automotive brake friction material

108) On the basis of an EEA-wide IAM, only the market for CVP would be affected, with a moderate combined market share (in value) of the  parties
    of [20 – 30] % with an increment of [0 – 10] % (in 2013 the Parties' market shares in value were [10 – 20] % for FDML and [0  –  10]  %  for
    HFM).

109) The Commission considers that post-transaction the Parties will continue to face competition on the IAM from competitors active  across  the
    EEA such as Nisshinbo/TMD, Knorr-Bremse, Meritor and Wabco, having EEA market share in value equal to [20 – 30] %, [10 – 20] %, [0 –  10]  %
    and [0 – 10] % respectively.

110) If the geographic scope of the IAM market were to be considered national, on the basis of the Parties' best  estimates  of  national  market
    shares[33], the proposed transaction would lead to affected markets for:

    ▪ LVP in Austria,  Czech Republic and France;

    ▪ CVP in Austria, the Czech Republic, Denmark, Estonia, Germany, Italy, Latvia, Luxembourg, Slovenia, Spain and the United Kingdom;

    ▪ CVL (Commercial Vehicle Linings) in Austria, the Czech Republic, France, Germany, Latvia and Lithuania.

111) The following table shows the Parties' market shares (in value) during the period 2011-2013.

|FDML/HMF shares on national IAM       |2013                               |2012                          |2011                          |
|markets                               |                                   |                              |                              |
|LVP                                                                                                                                    |
|Austria                               |[30 – 40] %                        |[30 – 40] %                   |[40 – 50] %                   |
|Czech Republic                        |[20 – 30] %                        |[10 – 20] %                   |[10 – 20] %                   |
|France                                |[20 – 30] %                        |[20 – 30] %                   |[20 – 30] %                   |
|CVP                                                                                                                                    |
|Austria                               |[30 – 40] %                        |[20 – 30] %                   |[30 – 40] %                   |
|Czech Republic                        |[30 – 40] %                        |[30 – 40] %                   |[30 – 40] %                   |
|Denmark                               |[20 – 30] %                        |[30 – 40] %                   |[20 – 30] %                   |
|Estonia                               |[20 – 30] %                        |[30 – 40] %                   |[20 – 30] %                   |
|Germany                               |[30 – 40] %                        |[30 – 40] %                   |[30 – 40] %                   |
|Italy                                 |[20 – 30] %                        |[20 – 30] %                   |[20 – 30] %                   |
|Latvia                                |[20 – 30] %                        |[20 – 30] %                   |[20 – 30] %                   |
|Luxembourg                            |[20 – 30] %                        |[30 – 40] %                   |[40 – 50] %                   |
|Slovenia                              |[30 – 40] %                        |[10 – 20] %                   |[10 – 20] %                   |
|Spain                                 |[30 – 40] %                        |[20 – 30] %                   |[20 – 30] %                   |
|UK                                    |[20 – 30] %                        |[20 – 30] %                   |[20 – 30] %                   |
|CVL                                                                                                                                    |
|Austria                               |[20 – 30] %                        |[30 – 40] %                   |[30 – 40] %                   |
|Czech Republic                        |[20 – 30] %                        |[20 – 30] %                   |[20 – 30] %                   |
|France                                |[20 – 30] %                        |[30 – 40] %                   |[30 – 40] %                   |
|Germany                               |[20 – 30] %                        |[20 – 30] %                   |[20 – 30] %                   |
|Latvia                                |[20 – 30] %                        |[20 – 30] %                   |[20 – 30] %                   |
|Lithuania                             |[30 – 40] %                        |[30 – 40] %                   |[40 – 50] %                   |

Source: Form CO.

112) In the following Member States, the Parties' combined market share post-transaction ranges between 20% and 30%:  Austria  (for  CVL),  Czech
    Republic (for LVP and CVL), Denmark (for CVP), Estonia (for CVP), France (for LVP and CVL), Germany (for CVL), Italy (for CVP), Latvia  (for
    CVP and CVL), Luxemburg (for CVP), Slovenia (for CVP), Spain (for CVP), and UK (for CVP). In the following  Member  States  the  transaction
    leads to a combined market share of the Parties of more than 30%: Austria ([30 – 40] % for LVP and [30 – 40] % for CVP), Czech Republic ([30
    – 40] % for CVP), Germany ([30 – 40] % for CVP) and Lithuania ([30 – 40] % for CVL). The structure of these markets is analysed  in  further
    detail below.

113) On the Austrian IAM market for LVP, the combined market share of the Parties is [30 – 40] % (FDML: [10 – 20] %; HFM: [20 – 30] %). The  main
    competitors for LVP in Austria are Nisshinbo/TMD, TRW, Bosch and ATE with market shares in 2013 of [10 – 20] %, [10 – 20] %, [0 – 10] %  and
    [0 – 10] % respectively. A number of other competitors with smaller market shares are also active on this market. On the Austrian IAM market
    for CVP the combined market share of the Parties is [30 – 40] % (FDML: [10 - 20] %; HFM: [20 – 30] %). The main competitors on  this  market
    are Nisshinbo/TMD, Knorr-Bremse, Meritor and Wabco with market shares in 2013 of [10 – 20] %, [10 – 20] %, [0  –  10]  %  and  [0  –  10]  %
    respectively. The Commission considers that post-transaction, these competitors will continue  to  act  as  competitive  constraint  on  the
    Parties in the Austrian IAM markets.

114) The Parties submit that they do not serve an Austrian market individually but the wider territory of  the  DACH  region  (Germany,  Austria,
    German speaking part of Switzerland). Both Parties serve this region with the same brands, have  one  single  sales  leader  for  all  these
    countries and serve the countries from the same warehouses. The Parties also do not prepare separate sales reports for Austria. Furthermore,
    FDML has only one CVP customer and only few LVP customers in Austria, some of which are Austrian branches of Germany-based companies, and it
    does not have a presence in Austria as sales and customers are managed out of Germany. Extending the scope of the relevant geographic market
    to include Germany and Switzerland would significantly dilute the Parties' combined share. In particular, for the DACH region  the  Parties'
    market shares would be [20 – 30] % for LVP and [20 – 30] % for CVP, with the main competitor, Nisshinbo/TMD, having [10 – 20] % on  the  LVP
    market and [10 – 20] % on the CVP market.

115) On the Czech IAM market for CVP the combined market share of the Parties is [30-40] % (FDML: [20 – 30] %; HFM: [10 -  20]  %).  The  Parties
    will face competition from a number of competitors with significant market shares such as  Nisshinbo/TMD,  Knorr-Bremse,  Meritor,  Fras-le,
    Lumag and Formar with market shares in 2013 of [10 – 20] %, [0 – 10] % , [0 – 10] % , [0 – 10] % , [0 – 10] %  and [0 – 10] % respectively.

116) On the German IAM market for CVP, the combined market share of the Parties is [30 – 40] % (FDML: [20 -  30]  %;  HFM:  [10  –  20]  %).  The
    Parties face competition from a number of competitors, such as Nisshinbo/TMD, Knorr-Bremse, Meritor and Wabco with market shares in 2013  of
    [20-30]%, [10 – 20] %, [0 – 10] %  and [0 – 10] % respectively.

117) On the Lithuanian IAM market for CVL the combined market share of the Parties is [30 – 40] % (FDML: [0 – 10] %;  HFM:  [30  –  40]  %).  The
    Parties face competition from a number of competitors such as Nisshinbo/TMD, Fras-Le, Lumag and Roulunds with market shares in 2013 of :  [0
    – 10] %, [0 – 10] %, [0 – 10] % and [0 – 10] % respectively.

118) The Commission considers that each national IAM is characterized by more suppliers than  those  who  are  active  in  the  OEM/OES  markets.
    Competitors are not only friction material manufacturers from the OEM/OES markets, but also  brake  manufacturers  and  aftermarket-focussed
    suppliers that offer "OE-quality" and/or very low prices. The products of all these suppliers are interchangeable from a technical point  of
    view and do not differ substantially in terms of their braking performance. Quality differences  mostly  affect  comfort  criteria  such  as
    durability, braking noise level and product appearance. Some suppliers specialize in the production of a certain quality level, whereas most
    players (including the Parties) offer a range of products at different quality levels.  Therefore, the  Commission  concludes  that  several
    players will be active on the different IAM national markets and able to exert sufficient competitive constraint on the merged entity.

119) Even though the demand-side on the IAM is less concentrated than in the OE/S-segment,  IAM  customers  are  typically  large,  sophisticated
    buyers of friction materials, mainly wholesalers, buying groups of retailers as well as large retail chains with centralized purchasing  for
    individual countries, regions or even the EEA as a whole. On the basis of the results of the market investigation, the Commission  considers
    that customers can easily switch suppliers, in particular as purchases are mainly made via weekly or monthly orders[34].

120) Finally, the majority of customers does not take the view that the transaction will have an impact on either of the affected markets.

121) In view of the above and all available evidence, the Commission concludes that the proposed transaction does not raise serious doubts as  to
    its compatibility with the internal market on the IAMs for LVP, CVP and CVL in the EEA or on a national basis.

4 Rail brake friction material

122) Concerning rail brake friction material, the markets affected by the proposed transaction are both the market for OEM/OES  of  organic  pads
    and IAM of organic pads and the IAM for organic blocks. In all of these markets the Parties' combined market shares by value  remain  at  or
    below [30 – 40] %, as reported in the tables below. Moreover, if market shares by volume are  contemplated,  only  the  market  for  organic
    blocks would be affected with a market share of [20 – 30] %.

|                                         |2013                            |2012                          |2011                          |
|organic pads  OEM/OES                    |                                |                              |                              |
|FDML                                     |[20 – 30] %                     |[10 – 20] %                   |[20 – 30] %                   |
|HFM                                      |[0 – 10] %                      |[0 – 10] %                    |[10 – 20] %                   |
|combined                                 |[30 – 40] %                     |[20 – 30] %                   |[30 – 40] %                   |
|Wabtec                                   |[30 – 40] %                     |[30 – 40] %                   |[30 – 40] %                   |
|Frenoplast                               |[0 – 10] %                      |[0 – 10] %                    |[0 – 10] %                    |
|Knorr-Bremse/Icer                        |[0 – 10] %                      |[0 – 10] %                    |[0 – 10] %                    |
|N/TMD                                    |[0 – 10] %                      |[0 – 10] %                    |[0 – 10] %                    |
|Others                                   |[10 – 20] %                     |[20 – 30] %                   |[0 – 10] %                    |

    Source: Form CO.

123) With respect to the OEM/OES market for organic pads, the Parties have a combined market share of [30 – 40] % with an increment below  [10  –
    20] % (FDML: [20 – 30] %, HFM [0 – 10] %). The Commission considers that other significant competitors would continue to  exert  significant
    competitive pressure on the combined entity also post-merger. These competitors are in particular Wabtec ([30 – 40] %), Frenoplast ([0 – 10]
    %), Knorr-Bremse/Icer ([0 – 10] %) and Nisshinbo/TMD ([0 – 10] %).

|                                      |2013                               |2012                          |2011                          |
|organic pads  IAM                     |                                   |                              |                              |
|FDML                                  |[10 – 20] %                        |[10 – 20] %                   |[0 – 10] %                    |
|HFM                                   |[10 – 20] %                        |[10 – 20] %                   |[10 – 20] %                   |
|combined                              |[20 – 30] %                        |[20 – 30] %                   |[20 – 30] %                   |
|Wabtec                                |[30 – 40] %                        |[30 – 40] %                   |[30 – 40] %                   |
|Bremskerl                             |[20 – 30] %                        |[20 – 30] %                   |[20 – 30] %                   |
|Frenoplast                            |[0 – 10] %                         |[0 – 10] %                    |[0 – 10] %                    |
|Knorr-Bremse/Icer                     |[0 – 10] %                         |[0 – 10] %                    |[0 – 10] %                    |
|Others                                |[0 – 10] %                         |[0 – 10] %                    |[0 – 10] %                    |

    Source: Form CO.

124) On the IAM for organic pads the Parties have a combined market share of [20-30] % with an increment of [10-20] % (FDML: [10-20] %, HFM: [10-
    20] %). On this market, the combined entity would become the third-largest competitor through the transaction. The Commission considers that
    also with respect to the IAM for organic pads, a number of sizeable competitors remain in the market, such as Wabtec ([30-40] %),  Bremskerl
    ([20-30] %), Frenoplast ([0-10] %) and Knorr-Bremse/Icer ([0-10] %).

|                                      |2013                               |2012                          |2011                          |
|organic blocks IAM                    |                                   |                              |                              |
|FDML                                  |[0 – 10] %                         |[0 – 10] %                    |[10 – 20] %                   |
|HFM                                   |[10 – 20] %                        |[10 – 20] %                   |[10 – 20] %                   |
|combined                              |[20 -30] %                         |[20 -30] %                    |[20 -30] %                    |
|Wabtec                                |[50 – 60] %                        |[50 – 60] %                   |[50 – 60] %                   |
|Knorr-Bremse/Icer                     |[0 – 10] %                         |[0 – 10] %                    |[0 – 10] %                    |
|N/TMD                                 |[0 – 10] %                         |[0 – 10] %                    |[0 – 10] %                    |
|Others                                |[0 – 10] %                         |[0 – 10] %                    |[0 – 10] %                    |

    Source: Form CO.

125) Regarding the IAM for organic blocks, the Parties have a combined market share of [20-30] % with an increment of [0 – 10] % (FDML: [0 –  10]
    %, HFM: [10 – 20] %). On this market, in particular the strongest competitor Wabtec with a market share of [50 – 60]  %  would  continue  to
    exert significant competitive pressure on the Parties post-merger. In addition, further competitors are active on the market, such as Knorr-
    Bremse/Icer ([0 – 10] %) and Nisshinbo/TMD ([0 – 10] %).

126) Therefore, in each of the affected markets, the Commission considers that at least three  competitors  will  continue  to  be  active  post-
    merger. Knorr-Bremse/Icer is vertically integrated also having activities on the markets for brake systems. Nisshinbo/TMD is also active  on
    the markets for automotive brake friction material.

127) The Notifying Party submits that barriers to entry in the market for rail brake friction material are not very high. Some low cost  friction
    material suppliers from Central and Eastern Europe, such as Ferex (Czech Republic), OZB (Poland) or Spomel (Poland), and some  manufacturers
    from Asia have already entered the EEA market. In the future, imports from Eastern Europe, Asia and India are expected to increase.

128) However, the market investigation indicates that entry was limited in the past 5 years and  is  not  forecasted  for  the  future.  It  also
    displayed some concern in the market, in particular with regard to the availability of rail brake friction material.  Customers  state  that
    the Parties are indispensable suppliers.

129) The Parties also submit that the customer-side of the market for rail friction  material  is  highly  concentrated  in  the  EEA.  The  main
    customers on the market for foundation brakes for rail applications are Knorr-Bremse, Faiveley and to a lesser extent, Hanning & Kahl, while
    the three main customers that are active on the markets for rail vehicles are the three manufacturers Siemens, Alstom and Bombardier.

130) The Commission considers that there is to a certain extent countervailing buyer power on the investigated markets for  rail  brake  friction
    material after the transaction. The market investigation shows that customers have  already  threatened  to  source  in-house.  Knorr-Bremse
    entered into a joint venture, ICER Rail, in order to reduce the dependency from its suppliers. A large majority of customers also  state  to
    already have threatened to switch suppliers. Moreover, two customers report to have actually switched supplier before the end of a contract.

131) In light of the above and all available evidence, the Commission considers that the proposed transaction does not raise  serious  doubts  as
    to its compatibility with the internal market with regard to the markets for rail brake friction material.

    V.5 Conclusion

132) In light of the above and all available evidence, the Commission therefore has serious doubts with respect to  its  compatibility  with  the
    internal market on (i) the OEM/OES market for CVP in the EEA and (ii) the OEM/OES market for LVP in the EEA.

       PROPOSED REMEDIES

1 Description of the proposed commitments

133) In order to render the concentration compatible with the internal market, the Notifying Party has modified  the  notified  concentration  by
    entering into the following commitments (the "Commitments")[35], which are annexed to this decision and form an integral part thereof.

134) Pursuant to the Commitments, FDML commits to divest production facilities for both the OEM/OES market for commercial vehicle pads  (CVP)  in
    the EEA and the OEM/OES market for light vehicle pads (LVP) in the EEA as well as associated personnel, contracts and  customer  orders  and
    development functions (the "Divestment Business") to an independent third party.

135) The Divestment Business consists of three elements, which essentially represent FDML's production and sales of OEM/OES for CVP  in  the  EEA
    and one production plant for OEM/OES LVP in the EEA, namely:

    (i) its entire CVP business relating to the OEM/OES market in the EEA, based at the manufacturing plant at Marienheide (MH plant),  Germany.
    This plant in 2013 had a product-specific output of […] million pieces and a product-specific turnover of […] million.  It  has  an  overall
    installed capacity of […] million CVP per year;

    (ii) a part of FDML’s LVP business relating to the OEM/OES market in the EEA, based at the manufacturing plant at Noyon (NOY plant), France.
    This plant in 2013 had a product-specific output of […] million pieces and a product-specific turnover of […] million.  It  has  an  overall
    installed capacity of […] million LVP per year;

      (iii) to the extent necessary and required by the Purchaser, FDML will provide certain transitional services to the purchaser in  order  to
    ensure a smooth transition of a fully operational business to the purchaser. In particular, FDML offers access to its testing centre located
    in Bad Camberg for a transitional period of up to 12 months on a cost-plus basis. After the transitional period, it is prepared to sell  the
    respective testing equipment at market price to the purchaser and offer him to hire the respective personnel.

      (iv) intangible assets: all intangible assets that are used in the  operation  of  the  Divestment  Business  and  all  other  intellectual
    property and know-how that the Divestment Business uses in its production and marketing of CVP and LVP for the OEM/OES market  in  the  EEA.
    FDML would obtain a non-exclusive, irrevocable, perpetual and royalty free license of the respective intellectual property rights.

136) In addition the Notifying Party has entered into related commitments, inter alia  regarding the separation of the Divestment  Business  from
    their retained businesses, the preservation of the viability, marketability and competitiveness of the Divestment  Business,  including  the
    appointment of a monitoring trustee and, if necessary, a divestiture trustee.

2 The Commission's assessment of the Commitments

1 Framework for the Commission's assessment of the Commitments

137) Where a notified concentration raises serious doubts as to its compatibility with the internal market, the Parties may modify  the  notified
    concentration so as to remove the grounds for the serious doubts identified by the Commission with a view to having it  declared  compatible
    with the internal market pursuant to Article 6(1)(b) in conjunction with Article 6(2) of the Merger Regulation.

138) As set out in the Commission Notice on Remedies,[36] commitments have to eliminate the Commission's serious doubts entirely,  they  have  to
    be comprehensive and effective from all points of view and they must be capable of being implemented effectively within a  short  period  of
    time, as the conditions of competition on the market will not be maintained until the commitments have been fulfilled.[37]

139) In assessing whether or not commitments will restore effective competition,  the  Commission  considers  their  type,  scale  and  scope  by
    reference to the structure and the particular characteristics of the market in which the Commission has identified serious doubts as to  the
    compatibility of the notified concentration with the internal market.[38]

140) Divestiture commitments are the best  way  to  eliminate  serious  doubts  resulting  from  horizontal  overlaps  of  the  merging  parties'
    activities.[39] The divested activities must consist of a viable business that, if operated by a suitable purchaser, can compete effectively
    with the merged entity on a lasting basis and that is divested as a going concern.[40]

141) The business to be divested 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. Personnel and assets which are currently shared between the business to be divested and other businesses  of  the  Parties,
    but which contribute to the operation of the business or which are necessary to ensure its  viability  and  competitiveness,  must  also  be
    included. Otherwise, the viability and competitiveness of the business to be divested would be endangered. Therefore,  the  business  to  be
    divested must contain the personnel providing essential functions for the business, at least in a sufficient proportion to meet the on-going
    needs of the business to be divested.[41]

142) Furthermore, the intended effect of the divestiture will only be achieved if and once the business is transferred to  a  suitable  purchaser
    with proven relevant expertise and ability to maintain and develop  the  business  to  be  divested  as  a  viable  and  active  competitive
    undertaking.

2 The Commission's market test and assessment of the Commitments

    The results of the market test

143) The Commission launched a market test of the Commitments on 22 May 2014. Overall, the market test was positive as to the scope  and  general
    suitability of the Commitments to remedy the serious doubts identified by the Commission as to the compatibility of the transaction with the
    internal market. However, the market test identified two specific elements of the Commitments that were subsequently improved by the  second
    and final version of the Commitments submitted on 5 June 2014.

144) Competitors and customers generally considered that the Divestment Business includes all necessary assets  and  would  be  able  to  compete
    effectively with the merged entity, with the exception of testing.

145) Indeed, testing is considered an integral and essential part of the business by almost all competitors and customers, with only  a  minority
    envisaging that the proposed transitional service agreement or third-party testing services could  be  a  sufficient  alternative.  It  was,
    however, also mentioned that this essentially depends on the identity of the purchaser. A company that has in-house testing  facility  might
    perceive an additional testing facility from the Divestment Business as a disadvantage to its ability to compete effectively.  This  relates
    mainly to competitors that are already active in the OEM/OES markets and have in-house testing in the EEA.

146) With regard to intellectual property rights, a provision was included in the Commitments that granted  FDML  a  non-exclusive,  irrevocable,
    perpetual and royalty free license for any and all IP-rights transferred. Many customers and competitors  evaluated  this  as  impeding  the
    purchaser from effectively competing on the markets.

147) The Notifying Party agreed to address the issues expressed during the market test and on 5 June 2014 submitted  a  revised  version  of  the
    Commitments addressing the issues in the following way:

    (i) FDML also includes as part of the Divestment Business virtually all necessary testing equipment and personnel used and  responsible  for
    the MH and NOY plants currently based at FDML's centralized testing site in Bad Camberg, Germany.

    (ii) With regard to the intellectual property rights, FDML will receive a license back of formulations with regard to (a)  other  geographic
    regions than the EEA and (b) the independent aftermarket (the Commission has not raised serious doubts for both (a) and (b)).  In  addition,
    with respect to the NOY plant, it receives a license back for certain formulations that are also used to serve OEM/OES  LVP  customers  from
    other FDML plants in the EEA.

    (iii) With regard to a certain formulation mix used for one project which is provided by another plant, namely [plant name], and one type of
    CVP which is sourced from the [plant name] plant, the Notifying Party commits to enter into a standard supply agreement with  the  purchaser
    on commercially reasonable terms for the duration of the underlying contract.

    Suitability of the Commitments to remove the serious doubts

148) The Commitments, consisting in the divestiture of two production facilities and associated  assets,  constitute  a  structural  measure.  In
    fact, the sale of the Divestment Business to an independent and suitable purchaser will dissipate  the  serious  doubts  identified  by  the
    Commission as to the compatibility of the transaction with the internal market and will not require medium or long-term monitoring measures.
    The new commercial structure resulting from the implementation of the Commitments will be sufficiently workable and lasting to ensure that a
    significant impediment to effective competition will not materialise.[42]

149) The proposed divestment will eliminate the Parties' overlap in the OEM/OES market for CVP and allows the entry of an  additional  competitor
    or expansion of a fringe competitor in the OEM/OES market for LVP with existing customer  contracts  and  a  proven  track  record,  and  is
    therefore considered suitable to remove any serious doubts as to the compatibility of the concentration with the internal market.

      (i) OEM/OES for CVP in the EEA

150) FDML commits to divest its complete OEM/OES business for CVP in the EEA, which  is  located  at  the  manufacturing  plant  at  Marienheide,
    Germany. Assuming this part of the Divestment Business would continue to produce the same amount of CVP for the OEM/OES market in the EEA as
    in the pre-merger situation, the post-remedies market shares for the supply of this product would change as follows:

|SALES 2013 – Current Market Shares                                        |
|                                      |                                   |
|FDML                                  |[10 – 20] %                        |
|HFM                                   |[20 – 30] %                        |
|Combined                              |[40 – 50] %                        |
|N/TDM                                 |[40 – 50] – [50 - 60]%             |
|ITT/Galfer                            |[0 – 10] %                         |
|Bremskerl                             |[0 – 10] %                         |

Source: Form CO.

    |SALES 2013 – Post-Remedies Market Shares                                  |
|                                      |                                   |
|FDML                                  |[0 – 10] %                         |
|HFM                                   |[20 – 30]%                         |
|Combined                              |[20 – 30] %                        |
|N/TDM                                 |[40 – 50] – [50-60] %              |
|ITT/Galfer                            |[0 – 10] %                         |
|Bremskerl                             |[0 – 10] %                         |
|Buyer                                 |[10 – 20] %                        |

Source: Form CO.

151) Therefore, the Commitments would remove the entirety of the increment that would have been added by the transaction in  the  OEM/OES  market
    for CVP in the EEA. The HHI-delta compared to the pre-merger situation would therefore be 0 with no increased concentration in  the  market.
    At the same time, the Commitments would lead to the creation of a new significant player  or  strengthening  of  a  fringe  competitor  with
    approximately [10 – 20] % (additional) market share in such a market and therefore the  pre-merger  market  structure  with  three  sizeable
    competitors would largely be maintained.

      (ii) OEM/OES for LVP in the EEA

152) Assuming the Divestment Business continues to produce the same amount of LVP for the OEM/OES market as  in  the  pre-merger  situation,  the
    post-remedies market shares for the supply of this product would change as follows:

|SALES 2013 – Current Market Shares                                          |
|                                           |                                |
|FDML                                       |[20 – 30] %                     |
|HFM                                        |[20 – 30] %                     |
|Combined                                   |[40 – 50] %                     |
|N/TDM                                      |[10 – 20] -[20-30]%             |
|ITT/Galfer                                 |[20 – 40] %                     |
|Akebono,Roulunds, Raicam                   |[0 – 10] %                      |

Source: Form CO.

    | SALES 2013 – Post-Remedies Market Shares                             |
|                                            |                         |
|FDML                                        |[10 – 20] %              |
|HFM                                         |[20 – 30] %              |
|Combined                                    |[30 – 40] %              |
|N/TDM                                       |[10 – 20]-[20-30] %      |
|ITT/Galfer                                  |[20-30]-[30–40] %        |
|Others                                      |[0 – 10] %               |
|Buyer                                       |[0 – 10] %               |

Source: Form CO.

153) The Commitments allow the entry of an additional ([0 – 10] % market share by value, HHI-delta reduced to  571)  or  expansion  of  a  fringe
    competitor ([0 – 10] % market share by value, HHI-delta of 619)[43] in the OEM/OES market for LVP. Therefore, the concentration level  would
    be reduced to approximately 2 650 with the HHI-delta ranging between 571 and 619, as  opposed  to  941  of  the  transaction  as  originally
    notified.

154) However, this would remove about [20 – 30] % of the overlap by value. By volume, because of HFM's lower market share of [10 –  20]  %,  this
    would constitute almost half of the overlap between the Parties.

155) Moreover, the OEM/OES market for LVP is marked by  bidding  procedures  organised  either  by  vehicle  manufacturers  themselves  or  brake
    manufacturers. Even though in theory in such markets the relevant positions of market participants are prone to change, as the award of  few
    large contracts can significantly and within a short time-span alter the strength of competitors, in the case at hand market shares have  in
    general remained stable during the years 2011-2013. The reason, why the purchaser of the NOY plant would in any event be a more  significant
    competitive force than the current fringe competitors, whose market shares might be considerably lower than [0 – 10] %,[44] is the fact that
    the purchaser would through the divested customer contracts already have business with  4  important  OEM/OES  customers,  namely  [customer
    names], as well as a number of brake manufacturers. It would therefore be able to quickly achieve a proven track-record for  its  production
    and experience, enabling it to effectively compete in upcoming tenders.

156) The Commission considers that this removes any serious doubts and thereby any significant impediment to effective  competition  by  allowing
    for an additional viable and trusted alternative for customers to source their light vehicle brake pads from, thus maintaining a  number  of
    four main competitors on the market.

    Testing facility

157) The two manufacturing plants do not contain an in-house testing facility for friction material, as FDML has organized  its  EEA  testing  of
    friction material in one central site in Bad Camberg, Germany. At this site, both dynamometer and vehicle testing  capacities  for  CVP  and
    dynamometer testing capacities for the production in the NOY plant are located. To still allow the Divestment Business  to  develop  into  a
    viable and strong competitor in the market FDML has offered for the Divestment Business  to  include  the  relevant  testing  equipment  and
    personnel allocated to the testing processes for the MH and NOY plants. These resources are currently located in FDML's  testing  center  in
    Bad Camberg. The only exclusion relates to one dynamometer that is only partially ([<30%]) used  for  testing  of  CVP  and  can  easily  be
    replaced with the current free capacity on the divested dynamometers.

158) In any event and as the described testing is perceived as essential for the continuation of a successful business, the provisions  contained
    in the Commitments with respect to this aspect will ensure that the Divestment Business can effectively compete on both markets.

    Viability of the Divestment Business

159) Both plants of the Divestment Business are profitable. In the years between 2012 and 2015 they have growing revenues and positive gross  and
    EBITDA margins.

160) The MH plant generated revenues from the sale of CVP for the OEM/OES of EUR […] million in 2012  and  EUR  […]  million  in  2013.  Capacity
    utilisation in these years was at […] and […] respectively. According to financial projections submitted by the Notifying Party, revenue  is
    forecasted to increase to […] million in 2015. Gross margins are stable at above […] and are forecasted to remain so until 2015.  EBITDA  is
    projected at […] in 2015.

161) The Divestment Business at the NOY plant generated revenues from the sale of LVP for the OEM/OES of EUR […] million  in  2012  and  EUR  […]
    million in 2013. Capacity utilisation in these years was at […] and […] respectively. According to financial projections  submitted  by  the
    Notifying Party, revenue is forecasted to increase to EUR […] million in 2015. Gross margins are positive and forecasted to amount to […] in
    2015. EBITDA is projected at […] in 2015.

162) The provisions with regard to a license for intellectual property rights will not impact the viability of the NOY plant, as this plant  only
    delivers limited volumes of its production outside the EEA ([0-5]%) and to the IAM ([0-5]%). With regard to a license  back  for  a  limited
    number of formulations for use in the OEM/OES market in the EEA, which are also used by  the  Parties  at  other  plants  predominantly  for
    projects different from the ones at the NOY plant, the viability will not be put at a risk.

    Purchaser criteria and potential buyers

163) The market test revealed that generally the Divestment Business is perceived as an attractive  offer  for  a  purchaser.  Several  different
    categories of potential purchasers were suggested, including: (i) companies marginally active in the production  of  CVP  and  LVP  for  the
    OEM/OES market in the EEA today; (ii) companies with activities in brake friction material within the EEA or in other geographic  areas  and
    (iii) some customers.

164) Generally, both competitors and customers stated that the potential purchaser does need experience  and  reputation  in  the  production  of
    brake friction material or in related markets, like brakes or automotive. A strong majority of customers in  particular  rejected  a  purely
    financial investor as a suitable purchaser, as such buyer would not have the necessary insight into the business, commitment  and  strategic
    orientation.

165) In particular, the MH plant makes approximately […] of its business on the IAM, reaching […] of its turnover in 2013. Despite the  relevance
    of the IAM business for the MH plant, the respective customer contracts, trademarks, brands and further elements related to IAM specifically
    are not included in the Divestment Business. A suitable buyer that is capable of maintaining the competiveness and viability of the MH plant
    will need to substitute the […] of the turnover, either by increasing output for the OEM/OES market or by securing new contracts in the  IAM
    market. Therefore, to ensure the continued and viable operation of the MH plant, the proposed purchaser will have to demonstrate that unless
    he can operate the plant successfully solely with OEM/OES business, he has the ability to effectively and swiftly contract EEA IAM  volumes,
    in particular on the basis of having a proven track record in the IAM.

166) Specifically, the market test revealed eight interested buyers, the majority  of  which  are  friction  material  manufacturers  or  current
    customers. In addition, one respondent submits interest only in acquiring the Divestment Business at the MH plant producing for the  OEM/OES
    market for CVP.

3 Conclusion on the Commitments

167) On the basis of the above, the Commission concludes that the Commitments are suitable and sufficient to remedy the serious doubts raised  by
    the transaction in the potential markets for:  (i) OEM/OES of CVP in the EEA and (ii) OEM/OES for LVP in the EEA. Moreover, the  Commitments
    are comprehensive and effective from all points of view, and are capable of being implemented effectively within a short period of time.

168) The Commitments will create an important or strengthen an existing fringe competitor in the supply of automotive brake friction material  in
    the OEM/OES markets with a particularly strong position in the CVP segment.

169) Finally, the Commitments also remove the entire increment that would have been added by the transaction in the potential market for  OEM/OES
    for CVP in the EEA through the divestment of FDML's only plant producing CVP for this market and [about 40-50%] of the increment  by  volume
    ([20-30]% by value) in the OEM/OES market for LVP in the EEA.

170) In addition, the emergence of an additional competitor in both of these markets also excludes any of the potential concerns with respect  to
    coordinated effects on the OEM/OES markets for CVP and LVP in the EEA.

       Conditions and Obligations

171) Pursuant to the first sentence of the second subparagraph of Article 6(2) of the  Merger  Regulation,  the  Commission  may  attach  to  its
    decision conditions and obligations intended to ensure that the undertakings concerned comply with the commitments they  have  entered  into
    vis-à-vis the Commission with a view to rendering the concentration compatible with the internal market.

172) The achievement of the measure that gives rise to the structural change of the market is a condition, whereas the implementing  steps  which
    are necessary to achieve this result are generally obligations on the Parties. Where a condition is not fulfilled, the Commission's decision
    declaring the concentration compatible with the internal market and the EEA Agreement no longer stands.  Where  the  undertakings  concerned
    commit a breach of an obligation, the Commission may revoke the clearance  decision  in  accordance  with  Article  8(6)(b)  of  the  Merger
    Regulation. The undertakings concerned may also be subject to fines and periodic penalty payments under Articles  14(2)  and  15(1)  of  the
    Merger Regulation.

173) In accordance with the basic distinction between conditions and obligations, the decision in this case is  conditional  on  full  compliance
    with the requirements set out in Section B of the final Commitments, which constitute conditions. The remaining requirements set out in  the
    other Sections of the said Commitments are considered to constitute obligations.

174) The full text of the final Commitments is annexed to this Decision as Annex I and forms an integral part thereof.

       CONCLUSION

175) 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.

For the Commission
(Signed),
Joaquín ALMUNIA
Vice-President

                                                                                                                                       05/06/2014

                                       Case M.7174 – Federal-Mogul Corporation/Honeywell Friction Materials

                                                      COMMITMENTS TO THE EUROPEAN COMMISSION

Pursuant to Article 6(2) of Council Regulation (EC) No 139/2004 (the “Merger Regulation”), Federal-Mogul Corporation (“FDML”  or  the  “Notifying
Party”) hereby enter into the following Commitments (the “Commitments”) vis-à-vis the European Commission  (the  “Commission”)  with  a  view  to
removing the Commission’s serious doubts as to the compatibility of FDML’s acquisition of  a  portion  of  the  friction  materials  business  of
Honeywell International Inc. (the “Concentration”) 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  preserve  the  current  status  of  the  viability  and
    competitiveness of the Divestment Business as indicated in Section B, paragraph 6 and described more in detail in the Schedules.

    Closing: the transfer of the legal title to the Divestment Business to the Purchaser.

    Closing Period: the period of […] from the approval of the Purchaser and the terms of sale by the Commission.

    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 businesses as defined in Section B and Schedules A and B which the Notifying Party commits to divest as a bundle to
    one single purchaser.

    Divestiture Trustee: one or more natural or legal person(s) who is/are approved by the Commission and appointed by  FDML  and  who  has/have
    received from FDML 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.

    Hold Separate Manager: the person appointed by FDML for the Divestment Business to manage the day-to-day business under the  supervision  of
    the Monitoring Trustee.

    Interim Period: the period between the Effective Date and Closing.

    Key Personnel: all personnel necessary to maintain the viability and competitiveness of the Divestment Business, as listed in the Schedules,
    including the Hold Separate Manager.

    Monitoring Trustee: one or more natural or legal person(s) who is/are approved by the Commission and appointed by FDML, and who has/have the
    duty to monitor FDML’s compliance with the conditions and obligations attached to the Decision.

    Parties: the Notifying Party and the undertaking that is the target of the concentration.

    Personnel: all staff currently employed by the Divestment Business, including staff seconded to the Divestment  Business,  shared  personnel
    (with the exception of shared personnel listed in Annexes A.10 and B.10) as well as the additional personnel listed in the Schedules.

    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 17 of these Commitments that the Purchaser must fulfil in order to  be  approved  by
    the Commission.

    Schedules: Schedules A and B to these Commitments describing more in detail the Divestment Business.

    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.

    Federal-Mogul Corporation (“FDML”), incorporated under the laws of Delaware, United States of America, with its registered office  at  26555
    Northwestern Highway, Southfield, Michigan 48033, United States of America.

Section B.  The commitment to divest and the Divestment Business

    Commitment to divest

 2. In order to maintain effective competition, FDML 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 18 of these Commitments. To carry out the divestiture, FDML 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  FDML  has  not
    entered into such an agreement at the end of the First Divestiture Period, FDML shall grant the Divestiture Trustee an exclusive mandate  to
    sell the Divestment Business in accordance with the procedure described in paragraph 30 in the Trustee Divestiture Period.

  The Divestment Business shall be sold in its entirety to one single purchaser.

   3. FDML shall be deemed to have complied with this commitment if:

      a) by the end of the Trustee Divestiture Period, FDML 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 18; and

      b) the Closing of the sale of the Divestment Business to the Purchaser takes place within the Closing Period.

 4. 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 44  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

 5. The Divestment Business consists of

   a) the FDML business relating to the development, production and supply of commercial vehicle brake pads (“CVP”) for  original  equipment  and
      original equipment spare part (“OE/S”) use to customers in the European Economic Area (“EEA”) and current limited  export  markets  outside
      the EEA, based at FDML’s manufacturing plant at Marienheide, Germany (“MH”), and currently operated  by  FDML’s  subsidiary,  Federal-Mogul
      Friction Products GmbH (“FMFP GmbH”) (the “MH Divestment Business”); and

   b) the FDML business relating to the development, production and supply of light vehicle brake pads (“LVP”) for OE/S use to customers  in  the
      EEA and current limited export markets outside the EEA, based at FDML’s manufacturing plant at Noyon, France,  and  currently  operated  by
      FDML’s subsidiary Federal-Mogul Friction Products SAS (the “NOY Divestment Business”).

 6. The legal and functional structure of the Divestment Business as operated to date is described in  Schedules  A  and  B  (collectively:  the
    “Schedules”). The Divestment Business, described in more detail in the Schedules, includes all assets  and  staff  that  contribute  to  the
    current operation or are necessary to preserve the current status of the viability  and  competitiveness  of  the  Divestment  Business,  in
    particular:

      a) all tangible and intangible assets (including intellectual property rights);

      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.

 7. In addition, the Divestment Business includes the benefit, for a transitional period of up to […] after Closing, and on terms and conditions
    equivalent to those at present afforded to the Divestment Business,  of  all  current  arrangements  under  which  FDML  or  its  Affiliated
    Undertakings supply products or services to the Divestment Business,  as  detailed  in  the  Schedule,  unless  otherwise  agreed  with  the
    Purchaser. 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  FDML  unit
    providing the respective transitional service.

Section C.  Related commitments

    Preservation of viability, marketability and competitiveness

 8. 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 FDML 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 to solicit or move any  Personnel  to
         FDML’s remaining business. Where, nevertheless, individual members of the Key Personnel exceptionally  leave  the  Divestment  Business,
         FDML shall provide a reasoned proposal to replace the person or persons concerned to the Commission and  the  Monitoring  Trustee.  FDML
         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

 9. To the extent possible without impeding the proper functioning of the Divestment Business and/or the  business  retained  by  the  Notifying
    Party during the Interim Period, the Notifying Party commits, from the Effective  Date  until  Closing,  to  keep  the  Divestment  Business
    separate from the business(es) it is retaining and to ensure that unless explicitly permitted under these Commitments:  (i)  management  and
    staff of the business(es) retained by FDML 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 FDML and  do  not  report  to  any  individual  outside  the  Divestment
    Business.

10. Until Closing, FDML shall assist the Monitoring Trustee in ensuring that each Divestment Business is managed  as  a  distinct  and  saleable
    entity separate from the business(es) which FDML is retaining. Immediately after the adoption of the Decision, FDML  shall  appoint  a  Hold
    Separate Manager. FDML may either appoint one single Hold Separate Manager for the entire Divestment Business or one Hold  Separate  Manager
    for the MH Divestment Business and one Hold Separate Manager for the NOY Divestment Business. Each Hold Separate Manager shall  be  part  of
    the Key Personnel and shall manage the relevant 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 FDML. Each
    Hold Separate Manager shall closely cooperate with and report to the Monitoring Trustee and, if applicable,  the  Divestiture  Trustee.  Any
    replacement of a Hold Separate Manager shall be subject to the procedure laid down in paragraph 8(c) of these  Commitments.  The  Commission
    may, after having heard FDML, require FDML to replace a Hold Separate Manager.

11. The following applies as of the Effective Date if and to the extent the Divestment Business is divested by way of share  deal,  or,  to  the
    extent the Divestment Business is transferred after the Effective Date to an FDML entity the shares of which would  be  divested,  from  the
    effective date of such transfer: to ensure that the Divestment Business is held and managed as a  separate  entity  the  Monitoring  Trustee
    shall exercise FDML’s rights as shareholder in the legal entity or entities that constitute the Divestment Business (except for  its  rights
    in respect of dividends that are due before Closing), 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  FDML’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 FDML. Upon request of the Monitoring Trustee, FDML shall resign as a member of the boards
    or shall cause such members of the boards to resign.

    Ring-fencing

12. To the extent possible without impeding the proper functioning of the Divestment Business, the business  retained  by  the  Notifying  Party
    during the Interim Period and/or FDML’s ability, as a consolidated tax  filer,  to  make  its  legally  required  tax  filings,  FDML  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 FDML before the Effective  Date  will
    be eliminated and not be used by FDML. This includes measures vis-à-vis FDML’s 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.  FDML  may  obtain  or  keep  information
    relating to the Divestment Business which is reasonably necessary for the divestiture of the Divestment Business, the disclosure of which to
    FDML is required by law, including but not limited to financial reporting obligations applicable to FDML as a publicly  traded  company,  as
    well as information that is needed by Federal-Mogul, as a consolidated tax filer, to make its legally required tax filings.  FDML  may  also
    keep Confidential Information obtained before the Effective Date to the extent reasonably necessary to allow FDML to continue to produce CVP
    and LVP in the production sites it retains and to fulfil its obligations under any development or supply contracts not forming part  of  the
    Divestiture Business (including, but not limited to, know-how related to friction materials formulations and friction materials production).

    Non-solicitation clause

13. 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 2 years after Closing.

    Due diligence

14. In order to enable potential purchasers to carry out a reasonable due diligence of the Divestment Business, FDML 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

15. FDML shall submit written reports in English  language  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). FDML 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.

16. FDML shall inform the Commission and the Monitoring Trustee on the preparation  of  the  data  room  documentation  and  the  due  diligence
    procedure and shall 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

17. 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. Unless the Purchaser can demonstrate that the
         MH plant can be operated successfully solely with OE/S-business within a reasonable period of  time  post-Closing,  the  Purchaser  must
         demonstrate the ability to effectively enter the EEA IAM on the basis of a proven track record in the aftermarket  (not  necessarily  in
         the EEA).

      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.

18. 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 FDML 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.  FDML  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

19. FDML 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.

20. If FDML 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  FDML  at  that  time  or  thereafter,  FDML  shall  appoint  a
    Divestiture Trustee. The appointment of the Divestiture Trustee shall take effect upon the commencement of the Trustee Divestiture Period.

21. The Trustee shall:

      i) at the time of appointment, be independent of the Notifying Party and its 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.

22. 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 FDML

23. No later than two weeks after the Effective Date, FDML shall submit the name or names of one or more natural  or  legal  persons  whom  FDML
    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, FDML shall submit a list of one or  more  persons  whom  FDML  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 21 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

24. 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, FDML shall appoint or cause to  be
    appointed the person or persons concerned as Trustee, in accordance with the mandate approved by the Commission. If more than  one  name  is
    approved, FDML 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 FDML

25. If all the proposed Trustees are rejected, FDML 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 19 and 24 of these Commitments.

         Trustee nominated by the Commission

26. If all further proposed Trustees are rejected by the Commission, the Commission shall nominate a Trustee, whom FDML shall appoint, or  cause
    to be appointed, in accordance with a trustee mandate approved by the Commission.

    II.    Functions of the Trustee

27. 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 FDML, 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

28. 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  FDML  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 business retained by the Parties, in accordance with paragraphs  8  and  9  of
             these Commitments;

         (b)      supervise the management of the Divestment Business as a distinct and saleable entity, in accordance with paragraph 10 of these
             Commitments;

         (c)      with respect to Confidential Information:

                ─ determine all necessary measures to ensure that FDML 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 FDML before the Effective  Date  is
                  eliminated and will not be used by FDML and
                ─ decide whether such information may be disclosed to or kept by FDML as the disclosure is reasonably necessary to allow FDML  to
                  carry out the divestiture or as the disclosure is required by law;
         (d)      monitor the splitting of assets and the allocation of  Personnel  between  the  Divestment  Business  and  FDML  or  Affiliated
             Undertakings;

    iii) propose to FDML such measures as the Monitoring Trustee considers  necessary  to  ensure  FDML’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 FDML 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;

    vii) promptly report in writing to the Commission, sending FDML a non-confidential copy at the same  time,  if  it  concludes  on  reasonable
         grounds that FDML is failing to comply with these Commitments;

   viii) within one week after receipt of the documented proposal referred to in paragraph 18 of these Commitments,  submit  to  the  Commission,
         sending FDML 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.

29. 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

30. 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 17 and 18 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 FDML, subject to the Notifying Party’s unconditional  obligation  to
    divest at no minimum price in the Trustee Divestiture Period.

31. 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 language 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

32. FDML shall provide and shall cause its advisors to provide the Trustee with all such co-operation, assistance and information as the Trustee
    may reasonably require to perform its tasks. The Trustee shall have full and complete access to any of FDML’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 FDML and the Divestment Business shall provide the Trustee upon request with copies of any document. FDML 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.

33. FDML 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. FDML 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. FDML 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.

34. FDML 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, FDML shall cause the documents required for effecting the sale and the Closing to be duly executed.

35. FDML 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 FDML 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.

36. At the expense of FDML, the Trustee may appoint advisors (in particular for corporate finance or legal advice), subject to  FDML’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 FDML refuse to approve the advisors proposed by the Trustee the Commission may  approve  the  appointment  of
    such advisors instead, after having heard FDML. Only the Trustee shall be entitled to issue instructions to the advisors.  Paragraph  35  of
    these Commitments shall apply mutatis mutandis. In the Trustee Divestiture Period, the Divestiture Trustee may use advisors who served  FDML
    during the Divestiture Period if the Divestiture Trustee considers this in the best interest of an expedient sale.

37. FDML agrees that the Commission may share Confidential Information proprietary to FDML 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.

38. 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 they shall inform interested third parties, in particular any potential purchasers,  of  the  identity  and  the
    tasks of the Monitoring Trustee.

39. 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

40. 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 FDML, require FDML to replace the Trustee; or

   b) FDML may, with the prior approval of the Commission, replace the Trustee.

41. If the Trustee is removed according to paragraph 40 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 19-26 of these Commitments.

42. Unless removed according to paragraph 40 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

43. The Commission may extend the time periods foreseen in the Commitments in response to a request from FDML or, in appropriate cases,  on  its
    own initiative. Where FDML requests an extension of a time period, it shall submit a reasoned request to the Commission no  later  than  one
    month before the 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  FDML  be
    entitled to request an extension within the last month of any period.

  44. 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. The Commission may also, in response to a reasoned request
      from the Notifying Party showing good cause, grant a derogation from the requirement in para. 2 sub-para. 2 that  the  Divestment  Business
      shall be sold in its entirety to one single purchaser. 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

45. The Commitments shall take effect upon the date of adoption of the Decision.

         ……………………………………
         duly authorised for and on behalf of Federal-Mogul Corporation

                                          Schedules, Annexes and Exhibits to the Draft Commitment Offer

Schedule A: The MH Divestment Business

        • Annex A.1 List and description of products manufactured by the MH Divestment Business

        • Annex A.2 Tangible Assets of the MH Divestment Business

           ─ Exhibit A.2.1 Fixed assets register MH (provided in a separate file)

           ─ Exhibit A.2.2 Land register excerpt MH (provided in a separate file)

       • Annex A.3 Intangible Assets of the MH Divestment Business

       • Annex A.4 Main licences, permits and authorizations of the MH Divestment Business

           ─ Exhibit A.4 List of permits and authorizations MH (provided in a separate file)

       • Annex A.5 Personnel of the MH Divestment Business

           ─ Exhibit A.5 Organizational chart MH (provided in a separate file)

       • Annex A.6 Key customer contracts, commitments and orders of the MH Divestment Business

       • Annex A.7 Key supplier contracts, commitments and orders of the MH Divestment Business

       • Annex A.8 Customer, credit and other records of the MH Divestment Business

           ─ Exhibit A.8 Credit records MH (provided in a separate file)

       • Annex A.9 Shared assets not included in the MH Divestment Business

       • Annex A.10 Shared personnel not included in the MH Divestment Business

       • Annex A.11 Shared supply contracts not included in the MH Divestment Business

Schedule B: The NOY Divestment Business

        • Annex B.1 List and description of products manufactured by the NOY Divestment Business

        • Annex B.2 Tangible Assets of the NOY Divestment Business

           ─ Exhibit B.2.1 List of fixed assets NOY (provided in a separate file)

           ─ Exhibit B.2.2 Notarial documents related to the transfer of the real estate of the NOY plant (provided in a separate file).

       • Annex B.3 Intangible Assets of the NOY Divestment Business

       • Annex B.4 Main licences, permits and authorizations of the NOY Divestment Business

           ─ Exhibit B.4 List of permits and authorizations MH (provided in a separate file)

       • Annex B.5 Personnel of the NOY Divestment Business

           ─ Exhibit B.5 Organizational Chart NOY (provided in a separate file)

       • Annex B.6 Key customer contracts, commitments and orders of the NOY Divestment Business

       • Annex B.7 Key supplier contracts, commitments and orders of the NOY Divestment Business

       • Annex B.8 Customer, credit and other records of the NOY Divestment Business

       • Annex B.9 Shared assets not included in the NOY Divestment Business

       • Annex B.10 Shared personnel not included in the NOY Divestment Business

       • Annex B.11 Shared supply contracts not included in the NOY Divestment Business

                                                                    SCHEDULE A
                                                            The mh divestment business

 1. The MH Divestment Business consists of the FDML business relating to the development, production and supply of commercial vehicle brake pads
    (“CVP”) for original equipment and original equipment spare (“OE/S”) use to customers in the European  Economic  Area  (“EEA”)  and  current
    selected export markets outside the EEA, based at FDML’s manufacturing plant  at  Marienheide,  Germany  (the  “MH  plant”),  and  currently
    operated by FDML’s wholly-owned subsidiary Federal-Mogul Friction Products GmbH (“FMFP GmbH”).

 1. The MH plant is currently owned by FMFP GmbH, and is approximately 142K sq. ft. The plant has installed capacity for […] CVP per year […]. A
    plan of the MH plant is contained in Annex A.2. The  MH  plant  has  a  well-trained  and  experienced  management  and  workforce  […].  An
    organizational chart is provided in Exhibit A.5.

1 Legal and functional structure of the MH Divestment Business

 2. The MH Divestment Business is currently owned and operated by FMFP GmbH, a  wholly-owned  subsidiary  of  FDML,  with  registered  place  of
    business and main place of operations at Klosterstraße 16, D-51709 Marienheide, Germany. It comprises the MH plant and the business operated
    from that facility for the development, production and supply of CVP to OE/S customers in the EEA, together with all essential functions for
    that business which are necessary to ensure its viability and competitiveness, as set forth below.

1 Development

 3. […]

2 Testing

 4. […]

3 Production

 5. […]

4 Distribution

 6. […]

5 Sales and marketing, customer relations

 7. […]

6 Supply chain, supplier relations

 8. […]

 9. […]

10. […]

11. […]

12. […]

7 Information technology systems

13. […]

14. […]

8 Administration (plant management, finance/accounting, human resources)

15. […]

2 Products manufactured by the MH Divestment Business

 1. A list and description of products manufactured by the MH Divestment Business, in particular their technical and other characteristics,  the
    turnover generated with each of these products, and any innovations or new products planned, is contained in Annex A.1.

3 Composition of MH Divestment Business

 2. In accordance with paragraph 6 of these Commitments, the MH Divestment Business includes, but is not limited to:

      a) the main tangible assets listed in Annex A.2;

      b) the intangible assets listed in Annex A.3 (“Intangible Assets”); provided that FDML shall be entitled  to  continue  to  use  Intangible
         Assets, and purchaser shall grant FDML a non-exclusive, irrevocable, perpetual and royalty-free license, which shall include  the  right
         to grant sub-licences to other entities of the FDML-group, to use Intangible Assets for the development of formulations, manufacture and
         sale of products for the purposes of competing for and selling to

       -    any customers (OE/S or IAM) outside the EEA;

       -    customers on the IAM(s) located within the EEA.

      c) the main licences, permits and authorisations listed in Annex A.4;

      d) all personnel as further described in Annex A.5 to the extent still employed by the Divestment Business and/or another  FDML  entity  at
         the time of Closing; to the extent an employee is entitled to object his/her transfer, FDML will use  its  best  efforts  to  avoid  the
         employee’s objection. If an employee objects and thereby prevents his/her transfer, FDML commits, at the request of  the  Purchaser,  to
         second the relevant employee to the relevant plant or the Purchaser for as long as legally permissible on the basis that  the  Purchaser
         bears all employment-related costs of FDML for that employee. In case such a secondment is not possible, FDML will use its best  efforts
         to assist the Purchaser in finding a suitable replacement employee.

      e) all customer contracts, commitments and orders listed in Annex A.6, to the extent still running at the time of Closing;  To  the  extent
         the transfer of a customer contract requires the customer’s consent, FDML will use its best efforts to procure the customers’ consent.

      f) all supply contracts, commitments and orders as listed in Annex A.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, FDML will use its best efforts to procure the supplier’s consent.  If
         a supplier refuses to consent, FDML commits, at the request of the Purchaser, to supply the relevant material to the MH  plant  for  the
         remaining duration and on the terms and conditions of the relevant supply contract.

      g) all customer, credit and other records as listed in Annex A.8;

 3. The MH Divestment Business shall not include:

      h) the shared assets listed in Annex A.9;

      i) the shared personnel listed in Annex A.10;

      j) the shared supply contracts in Annex A.11;

      k) business for the supply of CVP to the Independent Aftermarket;

      l) any of FDML’s brands or trademarks.

 4. In addition to the MH Divestment Business as described at para. III of this Schedule, FDML commits to offer  the  purchaser  supply  of  the
    materials covered by the shared supply contracts in Annex A.11, to the extent still running at  the  time  of  Closing,  for  the  remaining
    duration and on the terms and conditions of the relevant shared supply contract.

  Strict firewall procedures will be adopted in relation to those agreements, so as to  ensure  that  any  competitively  sensitive  information
    related thereto will not be shared with, or passed on to, anyone outside the FDML unit providing the respective transitional service.

 5. If there is any asset or personnel which is not covered by paragraph III of this Schedule but which is both used (exclusively or not) in the
    MH Divestment Business and necessary for the continued viability and competitiveness of the MH Divestment Business, that asset  or  adequate
    substitute will be offered to potential purchasers.

                                                                    ANNEX A.1
                                   List and description of products manufactured by the MH Divestment Business

[…]

                                                                    ANNEX A.2
                                                  Tangible Assets of the MH Divestment Business

[… ]

                                                                    ANNEX A.3
                                                 Intangible Assets of the MH Divestment Business

[…]

                                                                    ANNEX A.4
                                     Main licences, permits and authorizations of the MH Divestment Business

    […]

                                                                    ANNEX A.5
                                                     Personnel of the MH Divestment Business

[…]

                                                                    ANNEX A.6
                                   Key customer contracts, commitments and orders of the MH Divestment Business

[…]

                                                                    ANNEX A.7
                                   Key supplier contracts, commitments and orders of the MH Divestment Business

       […]

                                                                    ANNEX A.8
                                         Customer, credit and other records of the MH Divestment Business

    […]

                                                                    ANNEX A.9
                                             Shared assets not included in the MH Divestment Business

[…]

                                                                    ANNEX A.10
                                           Shared personnel not included in the MH Divestment Business

[…]

                                                                    ANNEX A.11
                                        Shared supply contracts not included in the MH Divestment Business

[…]

                                                                    SCHEDULE B
                                                           THE NOY DIVESTMENT BUSINESS

 1. The NOY Divestment Business consists of the FDML business relating to the development, production and supply of  light  vehicle  brake  pads
    (“LVP”) for original equipment and original equipment spare (“OE/S”) use to customers in the European  Economic  Area  (“EEA”)  and  current
    selected export markets outside the EEA, based at FDML’s manufacturing plant at Noyon, France (the “NOY plant”) and  currently  operated  by
    FDML’s wholly-owned subsidiary Federal-Mogul Friction Products SAS (“FMFP SAS”).

 2. The NOY plant is currently owned by FMFP SAS, and is approximately 215K sq. ft. The plant has installed  capacity  for  […]  LVP  per  year,
    utilizing […] technology (preferred by many OEM’s) and is currently […]. A plan of the NOY plant is contained in Annex B.2.  The  NOY  plant
    has a well-trained and experienced management and workforce. An organizational chart is provided in Exhibit B.5.

 3. […]

11 Legal and functional structure of the NOY Divestment Business

 4. The NOY Divestment Business is currently operated by FMFP SAS, a wholly-owned subsidiary of FDML, with registered place of business and main
    place of operations at 205 Rue de l'Europe, 60403 Noyon, France. It comprises the NOY plant and the business operated from  that  plant  for
    the development, production and supply of LVP to OE/S customers in the EEA, together with all essential functions for  that  business  which
    are necessary to ensure its viability and competitiveness, as set forth below.

1 Development

 5. [… ]

2 Testing

16. […]

3 Production

17. […]

4 Distribution

18. […]

5 Sales and marketing, customer relations

19. […]

20. […]

6 Supply chain, supplier relations

21. […]

22. […]

23. […]

24. […]

25. […]

7 Information technology systems

26. […]

27. […]

8 Administration (plant management, finance/accounting, human resources)

28. […]

12 Products manufactured by the NOY Divestment Business

29. A list and description of products manufactured by the NOY Divestment Business, in particular their technical and other characteristics, the
    turnover generated with each of these products, and any innovations or new products planned, is contained in Annex B.1.

13 Composition of NOY Divestment Business

30. In accordance with paragraph 6 of these Commitments, the NOY Divestment Business includes, but is not limited to:

      m) the main tangible assets listed in Annex B.2;

      n) the intangible assets listed in Annex B.3, Sections I.1. and I.2. (the latter however only to the extent the  relevant  production  site
         listed in Section I.2. is Noyon) (“Intangible Assets”); provided that FDML shall be entitled to continue to use Intangible  Assets,  and
         purchaser shall grant FDML a non-exclusive, irrevocable, perpetual and royalty-free license, which shall include the right to grant sub-
         licences to other entities of the FDML-group, to use Intangible Assets for the development of formulations,  manufacture,  and  sale  of
         products for the purposes of competing for and selling to

       -    any customers (OE/S or IAM) outside the EEA;

       -    customers in the IAM(s) located within the EEA; and

         -  customers in the OE/S-markets located within the EEA as far as the following formulations (including derivatives thereof)  listed  in
             Annex B.3, Section I., are concerned which are necessary for FDML to supply customers out of FDML plants in the EEA  which  do  not
             form part of the Divestment Business: […].

       For the avoidance of doubt, FDML shall be entitled to continue the ongoing development projects listed in Annex  B.3,  Section  I.2.,  for
         which the production site indicated in Annex B.3, Section I.2., is not Noyon, and/or to use know-how already obtained in the  course  of
         any of the ongoing development projects listed in Annex B.3, Section I.2., in order to innovate and develop friction materials for  OE/S
         and IAM-customers in and outside the EEA.

      o) the main licences, permits and authorisations listed in Annex B.4;

      p) all personnel as further described in Annex B.5 to the extent still employed by the Divestment Business and/or another  FDML  entity  at
         the time of Closing; to the extent an employee is entitled to object his/her transfer, FDML will use  its  best  efforts  to  avoid  the
         employee’s objection. If an employee objects and thereby prevents his/her transfer, FDML commits, at the request of  the  Purchaser,  to
         second the relevant employee to the relevant plant or the Purchaser for as long as legally permissible on the basis that  the  Purchaser
         bears all employment-related costs of FDML for that employee. In case such a secondment is not possible, FDML will use its best  efforts
         to assist the Purchaser in finding a suitable replacement employee.

      q) all customer contracts, commitments and orders, including the ones listed in Annex B.6, to the extent  still  running  at  the  time  of
         Closing; to the extent a customer contract forms part of an (“umbrella”) contract concerning the supply of products manufactured at  the
         NOY plant as well as at other FDML plants, only the portion of the contract concerning the supply of products manufactured  at  the  NOY
         plant will be transferred; to the extent the transfer of a customer contract (and  its  prior  split-up,  if  applicable)  requires  the
         customer’s consent, FDML will use its best efforts to procure the customers’ consent.

      r) all supply contracts, commitments and orders as listed in Annex B.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, FDML will use its best efforts to procure the supplier’s consent.  If
         a supplier refuses to consent, FDML commits, at the request of the Purchaser, to supply the relevant material to the NOY plant  for  the
         remaining duration and on the terms and conditions of the relevant supply contract.

      s) all customer, credit and other records as listed in Annex B.8;

31. The NOY Divestment Business shall not include:

      t) the shared assets listed in Annex B.9;

      u) the shared personnel listed in Annex B.10;

      v) the shared supply contracts in Annex B.11;

      w) business for the supply of LVP to the Independent Aftermarket;

      x) any of FDML’s brands or trademarks.

  In addition to the NOY Divestment Business as described at para. III of this Schedule, FDML commits to  offer  the  purchaser  supply  of  the
    materials covered by the shared supply contracts in Annex B.11, to the extent still running at  the  time  of  Closing,  for  the  remaining
    duration and on the terms and conditions of the relevant shared supply contract. Strict firewall procedures will be adopted in  relation  to
    those agreements, so as to ensure that any competitively sensitive information related thereto will not be shares with,  or  passed  on  to,
    anyone outside the FDML unit providing the respective transitional service.

32. To the extent the NOY Divestment Business currently sources (i) the formulation mix for the manufacture and supply of […] brake pads for the
    […] from FDML's […], and (ii) […] brake pads from FDML’s […] for the supply of the […],  FDML  commits  to  enter  into  a  standard  supply
    agreement for the relevant brake pads/formulation mix with the purchaser on commercially reasonable terms for the duration of the underlying
    customer contract."

33. If there is any asset or personnel which is not covered by paragraph III of this Schedule but which is both used (exclusively or not) in the
    NOY Divestment Business and necessary for the continued viability and competitiveness of the NOY Divestment Business, that asset or adequate
    substitute will be offered to potential purchasers.

                                                                    ANNEX B.1
                                   List and description of products manufactured by the NOY Divestment Business

[…]

                                                                    ANNEX B.2
                                                  Tangible Assets of the NOY Divestment Business

[…]

                                                                    ANNEX B.3
                                                 Intangible Assets of the NOY Divestment Business

[…]

                                                                    ANNEX B.4
                                     Main licences, permits and authorizations of the NOY Divestment Business

[…]

                                                                    ANNEX B.5
                                                     Personnel of the NOY Divestment Business

[…]

                                                                    ANNEX B.6
                                  Key customer contracts, commitments and orders of the NOY Divestment Business

[…]

                                                                    ANNEX B.7
                                  Key supplier contracts, commitments and orders of the NOY Divestment Business

[…]

                                                                    ANNEX B.8
                                        Customer, credit and other records of the NOY Divestment Business

[…]

                                                                    ANNEX B.9
                                            Shared assets not included in the NOY Divestment Business

[…]

                                                                    ANNEX B.10
                                           Shared personnel not included in the NOY Divestment Business

[…]

                                                                    ANNEX B.11
                                       Shared supply contracts not included in the NOY Divestment Business

[…]

-----------------------
[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]   Publication in the Official Journal of the European Union No C 130,  29.04.2014,  p. 5.
[3]   Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the  Commission  Consolidated  Jurisdictional  Notice  (OJ
C95, 16.04.2008, p1).
[4]   In the only relevant decision, COMP/M.2091 HSBC / BBA Friction Materials, the Commission left the market definition open,  since  HSBC  did
not have any investments in this sector.
[5]   CVs are vehicles with a weight of more than 6 tons.
[6]   With friction material for drum brakes being called linings, whereas friction material for disc brakes is called pads.
[7]   COMP/M.149 – Lucas / Eaton, COMP/M.768 - Lucas / Varity.
[8]   COMP/M.337 Knorr Bremse / Allied Signal, COMP/M.726 Bosch / Allied Signal. The Parties submitted that a possible  further  segmentation  of
the OEM/OES markets and IAMs by type of customer does not apply.
[9]   With friction material for tread brakes being called blocks, whereas friction material for disc brakes being called pads.
[10]  The information submitted in the Form CO on the markets for organic blocks and organic pads estimates the relevant IAM at more  than  twice
the size of the respective OEM/OES markets (para. 446).
[11]  COMP/M.1629 Knorr Bremse / Mannesmann.
[12]  DG Trade Market Access Database (http://madb.europa.eu/madb/statistical_form.htm). This information does not differentiate between  OEM/OES
and IAM.
[13]  COMP/M.149 Lucas / Eaton, COMP/M.768 Lucas / Varity, COMP/M.337 Knorr Bremse / Allied Signal, COMP/M.726 Bosch / Allied Signal,  COMP/M.134
Mannesmann / Boge, COMP/M.1207 Dana / Echlin.
[14]  COMP/M.818 Cardo / Thyssen, COMP/M.1629 Knorr Bremse / Mannesmann.
[15]  Guidelines for the Assessment of Horizontal Mergers, para. 24, 27 (OJ C31, 5.2.2004, p.5).
[16]  The HHI is calculated by summing the squares of the individual market shares of all the firms in the market.
[17]  While the absolute level of the HHI can give an indication of the competitive pressure in the market post-merger, the  change  in  the  HHI
(known as the HHI delta) is a proxy for the change in concentration directly brought about by the merger.
[18]  Guidelines for the Assessment of Horizontal Mergers, para. 16, 20.
[19]  Cf. http://www.nisshinbo.co.jp/english/news/pdf/754_1_en.pdf.

[20]  RBB Economics: "Honeywell / Federal Mogul: Assessment of bidding data in the LV segment", 29 April 2014.

[21]  Guidelines for the Assessment of Horizontal Mergers, para. 32-35.
[22]  HFM's modern Romanian plant runs at only […] % of its capacity. The new entity might therefore try to close old production lines in  favour
of more modern ones.
[23]  [Reference to an FDML internal document].
[24]  Guidelines for the Assessment of Horizontal Mergers, para. 68-74.

[25]  For LVP, with regard to CVP an additional 12 months of field testing are required.
[26]  Raicam was founded by former ITT/Galfer employees and is mainly active on the IAM. It has so far gained  one  contract  for  Fiat  and  one
contract for GM.
[27]  Guidelines for the Assessment of Horizontal Mergers, para. 64-67.
[28]  COMP/M.5039 Brose Fahrzeugteile/Contental Assets; COMP/M.4878 Continental/Siemens VDO; IV/M.1245 Valeo/ ITT Industries.
[29]  See e.g. http://www.kerkhoff-consulting.de/hk/references/press-reports/singel-view/archive/2011
/march/article/ueberdreht.html.

[30]  Cases T-342/99, Airtours v Commission; T-464/04, Impala v Commission.
[31]  Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between  undertakings,  OJ
C 31 of 5 February 2004, p. 5, paras. 39–57.

[32]  FDML: Global CV Braking Strategy: 2014-2018, 1 December 2013, submitted as Annex 5.4.w.
[33]  The Parties explain that market shares should take into account  cross-border  sales,  as  not  all  friction  material  sold  by  them  to
wholesalers and retailers would be sold to customers in the same country.

[34]  The only topic mentioned by the majority of IAM customers is that there is a certain 'must-have  stock'  and  therefore  friction  material
sometimes must be purchased from certain producers and brands due to several reasons, among them customer and security preferences.

[35]  The Notifying Party submitted a first set of commitments on 21 May 2014. In the light of the results of  the  market  test,  the  Notifying
Party implemented specific improvements in the second and final version of the proposed commitments, which was submitted on 5 June 2014.
[36]  Commission Notice on remedies acceptable under Council Regulation (EC) No  139/2004  and  under  Commission  Regulation  (EC)  No  802/2004
(2008/C 267/01), (the "Commission Notice on Remedies").
[37]  Commission Notice on Remedies, paragraph 9.
[38]  Commission Notice on Remedies, paragraph 12.
[39]  Commission Notice on Remedies, paragraph 17.
[40]  Commission Notice on Remedies, paragraph 23.
[41]  Commission Notice on Remedies, paragraphs 25 and 26.
[42]  See also Commission Notice on Remedies, paragraphs 10 and 15.

[43]  In case the fringe competitor had a market share of [0 – 10] % pre-transaction.
[44]  The Notifying Party submitted for example that Raicam has so far gained one contract with Fiat and  General  Motors  respectively  for  the
OEM/OES market for LVP.

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

                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE