Case M.9474 - FAURECIA / MICHELIN / SYMBIO / JV

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EUROPEAN COMMISSION DG Competition

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REGULATION (EC) No 139/2004 MERGER PROCEDURE

Article 6(1)(b) NON-OPPOSITION Date: 12/11/2019

In electronic form on the EUR-Lex website under document number 32019M9474

EUROPEAN COMMISSION

Brussels, 12.11.2019 C(2019) 8170 final

PUBLIC VERSION

To the notifying parties

Subject: Case M.9474 – FAURECIA / MICHELIN / SYMBIO JV Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/20041 and Article 57 of the Agreement on the European Economic Area2

Dear Sir or Madam,

(1) On 7 October 2019, the European Commission received notification of a proposed concentration pursuant to Article 4 of the Merger Regulation by which Faurecia Exhaust International SAS (“Faurecia Exhaust International”, France) and Spika SAS (“Spika”, France) acquire within the meaning of Article 3(1)(b) and 3(4) of the Merger Regulation joint control of Symbio (also referred to as the “JV”, France), by way of purchase of shares (the “Transaction”).3 Faurecia Exhaust International and Spika are hereinafter collectively referred to as the “Notifying Parties”. Faurecia Exhaust International, Spika and Symbio are collectively referred to as “Parties”.

1 OJ L 24, 29.1.2004, p. 1 (the “Merger Regulation”). With effect from 1 December 2009, the Treaty on the Functioning of the European Union (“TFEU”) has introduced certain changes, such as the replacement of “Community” by “Union” and “common market” by “internal market”. The terminology of the TFEU will be used throughout this decision. 2 OJ L 1, 3.1.1994, p. 3 (the “EEA Agreement”). 3 Publication in the Official Journal of the European Union No C 350, 16.10.2019, p. 7.

Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË

Tel: +32 229-91111. Fax: +32 229-64301. E-mail: [email protected].

1. THE PARTIES

(2) Faurecia Exhaust International is fully owned by Faurecia SE (“Faurecia”, France), which is in turn solely controlled by Peugeot SA (France), the ultimate parent company of the PSA group (“PSA”). Faurecia is active globally in the manufacture and supply of automotive equipment, including (i) automotive seating, (ii) interior systems, (iii) emissions control. In particular, Faurecia supplies hydrogen storage systems (“HSS”) for the automotive sector. PSA is active globally in the manufacture and supply of passenger cars and light commercial vehicles (“LCVs”), and automotive components for motor vehicles.

(3) Spika is a fully owned subsidiary of Michelin. Michelin is a global manufacturer and supplier of tyres for automotive and other industries.

(4) Symbio assembles and supplies Fuel Cell Systems (“FCSs”) for the automotive sector. Depending on its customers’ needs, Symbio may also supply Fuel Cell Power Units (“FCPUs”).

2. THE OPERATION AND THE CONCENTRATION

(5) Pursuant to Article 2.3 of the draft Investment Protocol between Faurecia Exhaust International, Spika and Symbio (“draft Investment Protocol”), the Transaction will be implemented through (i) the completion of a share capital increase of Symbio, fully subscribed by Spika, (ii) the acquisition by Faurecia Exhaust International of 50% of the share capital of Symbio and (iii) the transfer to Symbio of certain assets held by the Michelin and PSA groups.

Joint control

(6) Pursuant to the shareholders agreements structuring the governance of Symbio, each of the Parties will hold a 50% ownership interest in the JV.4

(7) The JV will be governed by a Board of Directors (“BoD”) consisting of six members. Spika and Faurecia Exhaust International will […].

(8) The President of the JV will be appointed […] Similarly, the General Manager will be appointed […] The candidate for General Manager will […].5

(9) Decisions relating to Reserved Matters require the prior written approval of the BoD […]. Such Reserved Matters include notably (i) the approval of the annual budget, and (ii) the approval of the strategic plan and its yearly updates.6

(10) As a result, each of Faurecia Exhaust International and Spika will have the right to veto strategic decisions made by the BoD regarding the JV’s business.

4 Pursuant to Recital (F) of the draft Investment Protocoland to Recital (G) of the draft Shareholders’ Agreement between Spika and Faurecia Exhaust International in the presence of Symbio (“draft Shareholders’ Agreement”) (Schedules 1 and 2 to the Memorandum of Understanding of 26 July 2019 between Faurecia Exhaust International and Manufacture Française des Pneumatiques Michelin) […] Form CO, paragraphs 97-99, and Annex 9; Notifying Parties’ response to RFI 1, question 8. 5 Section 3 of the draft Shareholders’ Agreement. Form CO, Annex 9. 6 Schedule 3.4.3 of the draft Shareholders’ Agreement. Form CO, paragraph 107 and Annex 9; Notifying Parties’ response to RFI 2, question 8.

(11) As a result of the Transaction, Faurecia Exhaust International and Spika will jointly control Symbio within the meaning of Article 3(1)(b) of the Merger Regulation.

Full-functionality

(12) The JV will be active in the design, engineering, development, testing, production, marketing and sale of FCSs and FCPUs to be integrated in FCSs for the automotive sector. As, post-Transaction, neither PSA nor Michelin will supply FCSs or FCPUs to be integrated in FCSs for the automotive sector, the JV’s activities will go beyond the activities of any of the other entities that are part of Michelin or PSA.

(13) Moreover, there are no strong sales or purchase relations with the Parties as, although the […] the JV is intended to supply FCSs or FCPUs to third parties […].7 The Parties confirmed that the JV will deal with Michelin and PSA on an arm’s length basis.8

(14) Further, the JV will have sufficient own staff, financial resources and dedicated management for its operation and for the management of its portfolio and business interests. In particular, Michelin and Faurecia will both transfer intellectual property rights relating to fuel cell systems to the JV.9

(15) Finally, the JV is intended to operate on a lasting basis.10

(16) Therefore, the Transaction will lead to the creation of a full-function joint venture within the meaning of Article 3(4) of the Merger Regulation.

3. UNION DIMENSION

(17) The undertakings concerned have a combined aggregate worldwide turnover of more than EUR 5 000 million (PSA: EUR 74 027 million; Michelin 22 924 million; in 2018).11 Each of them has a Union-wide turnover in excess of 250 million (PSA: […]; Michelin […]), but they do not achieve more than two-thirds of their aggregate Union-wide turnover within one and the same Member State.

(18) Therefore, the Transaction has a Union dimension pursuant to Article 1(2) of the Merger Regulation.

4. RELEVANT MARKETS

4.1. Introduction (19) Hydrogen electric vehicles, also named “fuel cell electric vehicles” (“FCEVs”), use electricity to power an electric motor. In contrast to other electric vehicles, FCEVs

7 Form CO, paragraphs 107 and 168-171. 8 Form CO, paragraphs 107 and 171; Notifying Parties’ responses to RFI 2, question 8.a), and RFI 3, questions 2 and 8. 9 Schedule 5.1.3(a), 5.1.3(b) and 6.1 of the draft Investment Protocol. Form CO, Annex 9. 10 Pursuant to Article 14.3 of the draft Shareholders’ Agreement, this agreement is entered into for an initial term of 25 years, tacitly renewable for successive 5-year periods, unless terminated by written notice sent by any shareholder. Form CO, paragraph 107 and Annex 9. 11 Turnover calculated in accordance with Article 5 of the Merger Regulation.

produce electricity using a fuel cell powered by hydrogen (rather than drawing electricity from a battery). During the vehicle design process, the vehicle manufacturer defines the power of the vehicle by determining the size of the fuel cell, and the amount of energy to be stored on board by the size of the fuel tank. These types of vehicles, which are currently sold in limited volumes in comparison to conventional vehicles,12 can be seen as a response to the need to reduce vehicle emissions and fuel consumption by replacing the vehicle’s internal combustion engine with an FCEV engine.

(20) According to the Notifying Parties, a FCS is composed of two main elements (i.e., combining various components): (i) the FCPU, which is itself composed of the fuel cell stack (acting like a battery by releasing electricity in a constant flow to power the vehicle’s electric motor and auxiliary electronics), the fuel cell supply units (i.e., air loop, cooling loop and fuel loop) and the fuel cell electric and electronics (e.g., electronic control unit, sensor, wiring, connectors and DC/DC converters); and (ii) the HSS, which is composed of a hydrogen tank, valves and a balance of plant.13

(21) Once the FCS has been assembled, it is integrated into the vehicle together with the motor and the battery in order to power the vehicle.

(22) In the present case, (i) the JV is active in the supply of FCSs and possibly FCPUs to be integrated in FCSs in the automotive sector,14 (ii) PSA, through Faurecia, is active as a supplier of HSSs in the automotive sector, and (iii) PSA is active in the manufacture and supply of passenger cars and LCVs, albeit not currently manufacturing or supplying FCEVs.15,16

4.2. Supply of FCSs

4.2.1. Product market definition (23) The Notifying Parties submit that the relevant market is the market for the supply of FCSs for the automotive sector. First, they distinguish FCSs from combustion and battery electric engines because of their technical characteristics, the manufacturing process, specific customer needs, barriers to entry and price differences.17

12 In January 2019, Ballard estimated that there were approximately 10,000 FCEVs worldwide compared to 80 million cars sold each year globally, see Ballard, “Our countdown of the Top 5 Developments in the Hydrogen and Fuel Cell Industry in 2018”, https://blog.ballard.com/hydrogen-and-fuel-cell-industry, Form CO, paragraph 151. 13 Form CO, paragraph 162 and Annex 9 (Schedule 1(c) of the Memorandum of Understanding). 14 According to the Notifying Parties, the JV might, […]. Form CO, paragraphs 36, 70 and 164. However, the Notifying Parties confirmed that Michelin and PSA/Faurecia are not planning to become active in markets relating to FCSs for non-automotive purposes. Form CO, paragraph 172. Notifying Parties’ response to RFI 1, question 25. In light of the foregoing, the Commission considers that the Transaction does not give rise to an affected market in relation to the supply of FCSs and FCPUs for non-automotive sectors. It follows that the Commission will not discuss further the JV’s potential future activities in the supply of FCSs and FCPUs for non-automotive sectors. 15 Notifying Parties’ response to RFI 4, question 15.c); Notifying Parties’ response to RFI 5, question 2. 16 The JV will also manufacture membranes (which are a component of a FCS). However, the JV will not sell these membranes on a standalone basis; rather it will integrate them into its FCSs or FCPUs. […]. Form CO, paragraphs 125, 167, 244-256. For the purposes of the present case, the Commission will therefore not further discuss the JV’s activities in relation to membranes. 17 Form CO, paragraphs 182-187.

(24) In particular, the Notifying Parties consider that other types of motorisation are not substitutable to FCSs either from a demand-side perspective (in particular because of price differences) or from a supply-side perspective (given the technical specificities of FCSs).18

(25) Furthermore, the Notifying Parties submit that the JV will only sell entire FCSs but not individual components.19 Therefore, according to the Notifying Parties, it is not relevant to define separate markets for entire FCSs and for FCS components.20

(26) Finally, the Notifying Parties argue that a number of constraints that are specific to the automotive sector require to define a product market for FCSs limited to the automotive sector (e.g., costs and cycle time, design, and safety, quality and regulatory requirements).21

(27) The Commission has not yet examined the market for the supply of FCSs in prior decisions.

(28) As regards a potential distinction between the supply of entire FCSs and of FCS components, the results of the market investigation are mixed. Respondents indicated that OEMs tend to purchase components in order to assemble FCSs themselves and for R&D purposes,22 while FCS suppliers23 offer FCSs and/or components to their customers.24

(29) As regards a potential distinction according to the sector in which FCSs are used, the results of the market investigation indicate that FCSs supplied for the automotive sectors may also potentially be used for other applications and sectors (e.g., stationary applications, construction equipment, forklifts, trains, ships, etc.).25 However, the results of the market investigation were mixed as to whether suppliers of FCSs for the automotive sector may easily switch to supplying FCSs for other sectors.26

(30) In light of the above, for the purposes of the present decision, the Commission considers that it can be left open whether the market for the supply of FCSs may be further segmented according to (i) a distinction between entire systems and components or (ii) the sector in which FCSs may be used since the Transaction does not raise serious doubts as to its compatibility with the internal market or the functioning of the EEA Agreement, under any plausible product market definition.

18 Form CO, paragraphs 215-217. 19 According to the Notifying Parties, the value created by the JV lies in its know-how related to the assembly stage. Form CO, paragraphs 176-177. 20 Form CO, paragraphs 218-222. 21 Form CO, paragraphs 188-189. 22 Responses to questionnaire Q3 to car manufacturers, questions 4.1 and 4.2. 23 There is a large number of suppliers of FCSs active both worldwide and in the EEA, including for example, Ballard, Bosch / Powercell, Hyundai, Plug Power, Horizon FC and Toyota (Form CO, paragraph 240). 24 Responses to questionnaire Q2 to FCPU and FCS suppliers, question 4. 25 Responses to questionnaire Q3 to car manufacturers, questions 4.3 and 4.3.1. Responses to questionnaire Q2 to FCPU and FCS suppliers, questions 6, 6.1 and 7. 26 Responses to questionnaire Q2 to FCPU and FCS suppliers, questions 8 and 8.1 (in terms of technical difficulties and investments required).

4.2.2. Geographic market definition (31) The Notifying Parties submit that the relevant geographic market is world-wide or EEA-wide.

(32) The results of the market investigation suggest that the scope of the geographic market for the supply of FCSs is worldwide. Indeed, respondents indicated that FCS suppliers operate, and FCS customers mainly purchase, at the global level.27

(33) In light of the above, for the purposes of the present decision, the Commission considers that it can be left open whether the geographic market is global or EEA- wide, as the Transaction does not give rise to serious doubts as to its compatibility with the internal market or the functioning of the EEA Agreement, under any plausible geographic market definition.

4.3. Supply of FCPUs

4.3.1. Product market definition (34) According to the Notifying Parties, while the JV will mainly supply FCSs, it may also supply FCPUs to be integrated into FCSs, depending on its customers’ needs.28

(35) The Notifying Parties submit that the relevant market is the market for the supply of FCPUs to be integrated into FCSs for the automotive sector. The Notifying Parties refer to the same arguments as those developed in relation to FCSs (paragraphs (23) and (24)). They also consider that it is not relevant to define a separate market for entire FCPUs and for FCPU components.29 Further, the Notifying Parties submit that the market for the supply of FCPUs to be integrated into FCSs should be limited to the automotive sector for the same reasons as those described in relation to FCSs (paragraph (26)).30

(36) The Commission has not yet examined the market for the supply of FCPUs in prior decisions.

(37) The results of the market investigation are the same as those described in relation to FCSs (paragraphs (28)) and (29)).

(38) In light of the above, for the purposes of the present decision, the Commission considers that it can be left open whether the market for the supply of FCPUs may be further segmented according to (i) a distinction between entire systems and components or (ii) the sector in which FCPUs may be used since the Transaction does not raise serious doubts as to its compatibility with the internal market or the functioning of the EEA Agreement, under any plausible product market definition.

4.3.2. Geographic market definition (39) The Notifying Parties submit that the relevant geographic market is world-wide or EEA-wide.

27 Responses to questionnaire Q2 to FCPU and FCS suppliers, questions 9 and 10. 28 Form CO, paragraph 192. 29 Form CO, paragraphs 218-222. 30 Form CO, paragraphs 188-189.

(40) The results of the market investigation indicate that the geographic market for the supply of FCPUs is world-wide. Indeed, respondents indicated that FCPU suppliers operate, and FCPU customers mainly purchase, at the global level.31

(41) In light of the above, for the purposes of the present decision, the Commission considers that it can be left open whether the geographic market is global or EEA- wide, as the Transaction does not give rise to serious doubts as to its compatibility with the internal market or the functioning of the EEA Agreement, under any plausible geographic market definition.

4.4. Supply of HSSs

4.4.1. Product market definition (42) The Notifying Parties submit that the relevant market is the market for the supply of HSSs for the automotive sector. They argue that HSSs present certain characteristics (due to their specific technical features32), require specific knowledge (in particular regarding a specific design to enable incorporation in vehicles) and fulfil specific customer needs (HSSs cannot be used be for other types of storage).33

(43) Further, the Notifying Parties consider that it is not relevant to define a separate market for entire HSSs and for HSS components.34 As with FCSs and FCPUs, the JV will not sell individual HSS components and will not acquire individual components from HSS suppliers (including, but not limited to, Faurecia).

(44) The Commission has not yet examined the market for the supply of HSSs in prior decisions.

(45) As regards a potential distinction between the supply of entire HSSs and of HSS components, the results of the market investigation are inconclusive. The only respondent to the market investigation indicated that it supplies both entire HSSs and HSS components. While the majority of its customers purchase entire HSSs, components are typically sold for R&D purposes (they represent lower volumes than sales of entire HSSs). However, this respondent also explained that most of its production is dedicated to light mobility, with level of energy stored that do not fit with automotive industry requirements. As a result, the respondent sells only components to the automotive industry, which mostly uses them for R&D purposes.35

(46) As regards a potential distinction according to the sector in which HSSs are used, the respondent to the market investigation indicated that HSSs might be used in other sectors (e.g., aeronautical applications, drones and light vehicles).36

31 Responses to questionnaire Q2 to FCPU and FCS suppliers, questions 9 and 10. 32 The Notifying Parties explain that the compression method and the tank resistance are of prime importance and require a high level of technicality, notably because hydrogen is difficult to store (very low volumetric energy density). 33 Form CO, paragraphs 197-199. 34 Form CO, paragraph 202. 35 Responses to questionnaire Q1 to HSS suppliers, questions 4-7. 36 Responses to questionnaire Q1 to HSS suppliers, questions 7 and 7.1.

(47) In light of the above, for the purposes of the present decision, the Commission considers that it can be left open whether the market for the supply of HSSs may be further segmented according to (i) a distinction between entire systems and components or (ii) the sector in which HSSs may be used. In any event, the precise scope of the relevant product market can be left open, as the Transaction does not raise serious doubts as to its compatibility with the internal market or the functioning of the EEA Agreement, under any plausible product market definition.

4.4.2. Geographic market definition (48) The Notifying Parties submit that the relevant geographic market is world-wide or EEA-wide.

(49) The results of the market investigation show that, while HSS suppliers operate at a worldwide level, HSSs are mainly purchased at an EEA-wide level.37

(50) Therefore, the Commission considers that the scope of the geographic market for the supply of HSSs could be world-wide or EEA-wide.

(51) In light of the above, for the purposes of the present decision, the Commission considers that it can be left open whether the geographic market is global or EEA- wide, as the Transaction does not give rise to serious doubts as to its compatibility with the internal market or the functioning of the EEA Agreement, under any plausible geographic market definition.

4.5. Manufacture and supply of passenger cars and LCVs

4.5.1. Product market definition (52) In prior decisions, the Commission has defined separate markets for the manufacture and supply of passenger cars on the one hand, and commercial vehicles on the other hand.38 The Notifying Parties do not offer any views on such a segmentation.

(53) Within the passenger car market, the Commission has previously defined separate product markets for (i) mini cars, (ii) small cars, (iii) medium cars (iv) large cars, (v) executive cars, (vi) luxury cars (vii) sport cars, (viii) sport utility vehicles ("SUVs") and (ix) multipurpose vehicles.39

(54) In Peugeot/Opel, the Commission investigated whether electric cars constitute a separate product market and whether this possible market should be further segmented according to (i) technology (electric battery cars and hybrid cars) or (ii)

37 Responses to questionnaire Q1 to HSS suppliers, questions 9 and 10. 38 Commission decisions of 5 July 2017 in case M.8449 – Peugeot/Opel, paragraph 6; of 24 July 2009 in case M.5518 – Fiat/Chrysler, paragraph 12; of 25 September 2008 in case M.5219 – VWAG/OFH/VWGI, paragraphs 9 and 12, of 22 July 2002 in case M.2382 – General Motors/Daewoo Motors, paragraphs 13- 14; of 12 May 1999 in case M.1519 – Renault/Nissan; . 39 Commission decisions of 5 July 2017 in case M.8449 – Peugeot/Opel, paragraph 11; of 7 November 2018 in case M.8744 – Daimler/BMW/Car Sharing JV, paragraphs 77 and 81; of 19 December 2011 in case M.6403 – Volkswagen/KPI Polska/Skoda Auto Polska/VW Bank Polska VW Leasing Polska, paragraph 18; of 24 July 2009 in case M.5518 – Fiat/Chrysler, paragraphs 12-14; of 23 July 2008 in case M.5250 – Porsche/Volkswagen, paragraph 18; of 25 September 2008 in case M.5219 – VWAG/OFH/VWGI, paragraphs 8-9.

the categories defined for vehicles with combustion engines (paragraph (53)). However, the Commission ultimately left the market definition open.40

(55) The Notifying Parties do not offer any views on a potential segmentation of the market for the manufacture and supply of passenger cars. However, they submit that this transaction only concerns the supply of FCSs (or FCPUs) to OEMs for the sole purpose of equipping FCEVs that the latter may manufacture and supply. In this context, the Notifying Parties submit that FCEVs may be part of a distinct relevant market because they require specific designs, use specific technologies, require specific refuelling stations and are more expensive to manufacture (and to buy) than other vehicles.41

(56) The results of the market investigation to depart from the Commission’s previous decisions as regards a segmentation of the passenger car market by category of vehicles. In addition, with specific regard to electric vehicles, while a majority of the respondents considered that FCEVs, battery electric cars and hybrid cars may belong to the same relevant market, the results were mixed as to a potential further segmentation by technology (i.e., FCEVs, battery electric vehicles and hybrid vehicles).42

(57) Within the LCV market, the Commission has considered in previous decisions but ultimately left open whether to further segment LCVs into vehicles (i) up to 3.5 tons and (ii) between 3.5-6 tons.43 The Notifying Parties did not provide their views on this potential segmentation.

(58) The results of the market investigation did not provide any reasons that would require using another analytical framework than the one used in the Commission’s previous decisions.

(59) In light of the above, the Commission considers that it can be left open whether the market for the manufacture and supply of passenger cars and LCVs, encompassing all types of engines, could be further segmented on the basis of categories of vehicles, as the Transaction does not raise serious doubts as to its compatibility with the internal market or the functioning of the EEA Agreement under any plausible product market definition. For the same reason, the Commission considers that it can be left open whether a potential market for electric vehicles could be further segmented by (i) technology, i.e., FCEV alongside battery electric and hybrid vehicles, or (ii) categories of vehicles.

4.5.2. Geographic market definition (60) The Notifying Parties do not offer any views as to the geographic market definition.

40 Commission decision of 5 July 2017 in case M.8449 – Peugeot/Opel, paragraphs 14-16; of 7 November 2018 in case M.8744 – Daimler/BMW/Car Sharing JV, paragraph 77. 41 Form CO, paragraphs 225-226. 42 Responses to questionnaire Q3 to car manufacturers, questions 6-9. 43 Commission decision of 5 July 2017 in case M.8449 – Peugeot/Opel, paragraphs 21 and 27.

(61) In previous decisions, the Commission has ultimately left open whether the geographic scope of the market(s) for manufacturing and supply of passenger cars and LCVs (or any sub-segmentations thereof) is EEA-wide or national in scope.44

(62) The results of the market investigation indicate that suppliers of electric vehicles (including FCEVs, battery electric vehicles and hybrid vehicles) mainly operate at EEA level.45 Respondents also stressed that taxation and/or subsidies vary at national level within the EEA, such that national retail prices for FCEVs, battery electric vehicles and hybrid vehicles may also vary.46 Therefore, it cannot be excluded that the potential market for the supply of electric vehicles be national.

(63) In light of the above, the Commission considers that the market(s) for the supply of passenger cars and LCVs (or any sub-segmentations thereof) could be EEA-wide or national, but that, for the purposes of this decision, the exact geographic market definition can be left open, as the Transaction does not give rise to serious doubts as to its compatibility with the internal market or the functioning of the EEA Agreement, under any plausible geographic market definition.

5. COMPETITIVE ASSESSMENT

5.1. Affected markets (64) The Transaction does not give rise to horizontally affected markets, as there is no horizontal overlaps between the business activities of PSA and the JV on the one hand, and Michelin and the JV on the other. Indeed, neither Faurecia/PSA nor Michelin will be active in the assembly and supply of FCSs or FCPUs.

(65) PSA and the JV will be active at different levels of the fuel cell automotive sector: (i) PSA, through Faurecia is active in the supply of HSSs, (ii) the JV is active in the supply of FCSs and FCPUs, and (iii) PSA is active in the manufacture and supply of passenger cars and LCVs (albeit not currently manufacturing or supplying FCEVs).

(66) The Transaction thus gives rise to (i) a potential vertical relationship between Faurecia’s upstream activities in the supply of HSSs and the JV’s downstream activities in the supply of FCSs and FCPUs, and (ii) a vertical relationship between the JV’s upstream activities in the supply of FCSs and FCPUs and PSA’s downstream activities in the manufacture and supply of passenger cars and LCVs.47

5.1.1. Vertical relationship with regard to the supply of HSSs to suppliers of FCSs (67) On the upstream market for the supply of HSSs, the Notifying Parties submit that Faurecia’s market share was [0-5]% in 2018, and is expected to remain so until

44 Commission decision of 5 July 2017 in case M.8449 – Peugeot/Opel, paragraph 25; Commission decision of 24 July 2009 in case M.5518 – Fiat/Chrysler, paragraph 20; Commission decision of 8 April 2008 in case M.5061 – Renault/Russian Technologies/Avtovaz, paragraphs 13-14. 45 Responses to questionnaire Q3 to car manufacturers, question 12. 46 Responses to questionnaire Q3 to car manufacturers, questions 13 and 14. 47 In the following sections, the Commission will analyse the potential vertical relationship between the JV’s upstream activities and PSA’s downstream activities with regard to both FCSs and FCPUs in one section, as the competitive analysis remains the same with regard to both products.

2020. Faurecia’s market share may slightly increase in […] but should remain below 5% under any plausible geographic market definition.48

(68) With regard to the downstream markets for the supply of FCSs, Symbio supplied […] FCSs to […] in 2018, corresponding to a EUR […] revenue. In view of this low revenue figure, the Notifying Parties submit that the JV’s market share in 2018 was below 5% under any plausible geographic market definition. In addition, the Parties anticipate that between 2019 and 2021, the JV will sell FCSs or FCPUs to […] as per the existing contract between Symbio and […] regarding the delivery of […] FCSs for pre-series test vehicles.49 Therefore, its market share will remain below 5% at least […].

(69) In view of the negligible market shares of both Faurecia and the JV on their respective markets, the Transaction will not give rise to a vertically affected market within the meaning of Section 6.3 of Annex I of Commission Regulation No 802/2004.50 Therefore, for the purposes of the present decision, the Commission will not discuss further the potential vertical relationship between Faurecia and the JV with regard to the supply of HSSs to suppliers of FCSs.

5.1.2. Vertical relationship with regard to the supply of FCSs and FCPUs to car manufacturers (70) As explained above, the Transaction gives rise to a vertical relationship between the JV’s upstream activities in the supply of FCSs and FCPUs and PSA’s downstream activities in the manufacture and supply of passenger cars and LCVs.

(71) PSA does not currently manufacture and supply FCEVs. According to the Notifying Parties, in view of the expected future development of hydrogen mobility, PSA intends to develop FCEVs and has made some investments in terms of resources and facilities. […].51

(72) As explained at paragraph (68), the JV has a limited presence in the upstream market for the supply of FCSs (and FCPUs) (below 5%) both EEA-wide and worldwide in 2018.

(73) With regard to the manufacture and supply of passenger cars and LCVs (including combustion and electric engines) at both EEA and national levels, PSA's 2018 market shares (by volume) were in excess of 30% in the following plausible markets:52

48 Form CO, paragraphs 288-293. […]. Therefore, with a [0-5]% market share in 2018 and 2019, the Notifying Parties do not anticipate that Faurecia’s market power in the market for the supply of HSS would be substantial in the short term. 49 Form CO, paragraphs 268-287. 50 Commission Regulation (EC) No 802/2004 of 21 April 2004 implementing Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings, OJ L 133, 30.4.2004, p. 1. 51 Form CO, paragraphs 318-322. […]. Notifying Parties’ response to RFI 4, question 11. 52 Form CO, paragraphs 294-296 and Annex 18, Table 1-1; Notifying Parties’ response to RFI 4, question 15.a). The Notifying Parties noted that should a market for combustion engines (i.e., excluding electric vehicles) be considered, PSA’s market shares would not diverge substantially from these market shares (because of the very limited weight of electric vehicles in PSA’s total sales – in 2018, PSA only sold […] electric vehicles worldwide). Form CO, paragraphs 296 and 300.

Table 1 – PSA’s market shares (by volume) for the manufacture and supply of passenger cars and LCVs (2018)

Mini cars Netherlands [30-40]% Denmark [30-40]% Small cars France [30-40]% Larger cars Croatia [30-40]% SUVs France [30-40]% Passenger cars Estonia [40-50]% France [30-40]% Multipurpose vehicles Greece [30-40]% Latvia [30-40]% Slovakia [30-40]% Croatia [30-40]% Estonia [30-40]% France [30-40]% LCVs Portugal [30-40]% Slovakia [30-40]% Spain [30-40]% Source: HIS June 2019, Form CO, Annex 18, Table 1-1.

(74) With specific regard to the manufacture and supply of electric vehicles, PSA does not hold market shares of 30% or above in the overall market or in any possible segmentations according to (i) technology or (ii) categories of vehicles, under any plausible geographic market definition.

(75) According to the information provided by the Notifying Parties, PSA’s EEA-wide and world-wide market share for the supply of electric vehicles in 2018 was [0- 5]%.53,54 In addition, in the narrowest possible market for the manufacture and supply of FCEVs, the Notifying Parties submit that PSA’s market share is currently null, and expects that its market share will remain below 5% until at least […], under any plausible geographic market definition.55 Furthermore, the Notifying Parties confirm that PSA does not hold market shares of 30% or above any possible segmentation of the potential markets for the manufacture and supply of electric vehicles or of FCEVs (based on categories of vehicles), whatever the geographic dimension of the market (i.e., including at the national level).56

53 Corresponding to [0-5]% for the supply of battery electric vehicles and less than [0-5]% for the supply of hybrid vehicles. 54 The Notifying Parties submit that these market shares are calculated based on an EEA-wide total market and the worldwide volumes sold by PSA. Therefore, PSA’s market shares may be overestimated. Form CO, paragraph 297 and Annex 18, Table 1-2; Notifying Parties’ response to RFI 4, question 15.a). 55 Form CO, paragraphs 297-298 and Annex 18, Table 1-2; Notifying Parties’ response to RFI 4, question 15.a). 56 Form CO, Annex 18, Table 1-2; Notifying Parties’ response to RFI 4, question 15.a).

(76) Finally, the Notifying Parties submit that to the best of their knowledge, PSA does not hold market shares of 30% or above in any other types of vehicles that may potentially use FCSs (e.g., trucks or buses).57

(77) In light of the above, the Commission concludes that the possible markets for manufacture and supply of (i) mini cars in the Netherlands, (ii) small cars in Denmark and France, (iii) large cars in Croatia, (iv) SUVs in France, (v) multipurpose vehicles in Estonia, France, Greece, Latvia and Slovakia, and (vi) LCVs in Croatia, Estonia, France, Portugal, Slovakia and Spain, are vertically affected with regard to the supply of FCSs.

5.2. Customer foreclosure (78) As indicated at paragraph (77), PSA is active in the downstream markets for manufacture and supply of (i) mini cars in the Netherlands, (ii) small cars in Denmark and France, (iii) large cars in Croatia, (iv) SUVs in France, (v) multipurpose vehicles in Estonia, France, Greece, Latvia and Slovakia, and (vi) LCVs in Croatia, Estonia, France, Portugal, Slovakia and Spain (encompassing all types of engines, including FCEVs), where it has a market share above 30%. Symbio is active in the upstream markets for the supply of FCSs and FCPUs, both designed for FCEVs.

(79) The Commission has therefore assessed the risk of non-coordinated effects with regard to the vertical relationship between the JV’s activities in the upstream markets, and PSA’s activities in the vertically affected downstream markets.

(80) Vertical non-coordinated effects may principally arise when non-horizontal concentrations give rise to foreclosure.58

(81) Input foreclosure arises where, post-merger, the new entity is likely to raise the costs of downstream rivals by restricting their access to an important input.59 However, in view of the JV’s negligible market share on the upstream markets for the supply of FCSs and FCPUs, the Commission considers that the present case does not raise any input foreclosure concerns.60

(82) Customer foreclosure may occur where a supplier integrates with an important customer in the downstream market, thereby restricting upstream rivals’ access to a sufficiently large customer base.61 For customer foreclosure to be a concern, a vertical merger must involve an important customer with a significant degree of market power in the downstream market. If, on the contrary, there is a sufficiently large customer base, at present or in the future, that is likely to turn to independent suppliers, the Commission is unlikely to raise competition concerns on that ground.62

57 Form CO, paragraph 301; Notifying Parties’ response to RFI 4, questions 15.a) and b). 58 Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of concentrations between undertakings, OJ C 265, 18.10.2008 (“Non-Horizontal Merger Guidelines”), paragraph 18. 59 Non-Horizontal Merger Guidelines, paragraph 30. 60 Indeed, for input foreclosure to be a concern, the merged entity must have a significant degree of market power in the upstream market. Non-Horizontal Merger Guidelines, paragraph 5. 61 Non-Horizontal Merger Guidelines, paragraphs 30 and 58. 62 Non-Horizontal Merger Guidelines, paragraph 61.

(83) The Notifying Parties submit that the vertical relationship between the JV and PSA is very limited, notably in view of PSA’s and the JV’s current market shares on their respective markets (section 5.1.2.). Moreover, PSA is not currently manufacturing or supplying any FCEVs, and is not currently active in the hydrogen mobility sector. However, PSA intends to develop FCEVs. In this context, PSA has initiated negotiations with potential FCSs suppliers including for example the JV, Plug Power and Bosch.63

(84) The Notifying Parties also submit that the JV will in any event aim at selling its FCSs to any original equipment manufacturers (“OEMs”) (i.e., including but not limited to PSA) on a non-exclusive basis.64

(85) Finally, the Notifying Parties argue that the FCSs supplied by the JV are only suitable for FCEVs, which PSA does not currently supply.65

(86) At present, passenger cars and LCVs are mostly composed of vehicles equipped with combustion engines, with a very small minority of electric cars.66 The number of FCEVs is even more limited67 and PSA does not currently manufacture or supply any FCEVs, which is the only type of car equipped with FCSs and FCPUs. As a result, even if markets for passenger cars and LCVs encompassing all types of engines were considered, PSA could not be deemed to constitute an important customer of FCSs and FCPUs within the meaning of the Non-Horizontal Merger Guidelines with a significant degree of market power given its current lack of activity in FCEVs.

(87) In fact, a large number of alternative passenger car and LCV manufacturers are active both in the EEA and at national levels. All of these car manufacturers already compete effectively with PSA and would constitute sufficient credible alternative sources of demand for FCSs and FCPUs. In addition, the results of the market investigation did not raise any concerns with regard to the impact of the Transaction on the business of rival suppliers of FCSs and FCPUs, or the intensity of competition in the markets for the supply of FCSs and FCPUs even if PSA were to source all their FCSs and FCPUs from the JV. The results of the market investigation indicate that, in the future, the JV will be an additional credible supplier of FCSs and FCPUs whose market activity may rather have positive effects in terms of market competitiveness.68

(88) The Commission therefore considers that, despite having market shares above 30% in the possible markets listed at paragraph (77), PSA will lack the ability to engage

63 Form CO, paragraphs 317-322; Notifying Parties’ response to RFI 2, questions 5 and 6.b). 64 Form CO, paragraph 323. 65 Form CO, paragraph 324. 66 Notifying Parties’ response to RFI 4, question 15.a). Electrically-chargeable vehicles (including battery electric vehicles, extended-range electric vehicles, fuel cell electric vehicles and plug-in hybrid electric vehicles) accounted for only 2.4% and hybrid vehicles (including full and mild hybrids) for 4.9% of total new cars sales across the EU throughout 2018, see European Automobile Manufacturers Association, Economic and Market Report: EU Automotive Industry First half of 2019, 20 September 2019, https://www.acea.be/statistics/article/economic-and-market-report-state-ofthe- eu-auto-industry-full-year- 2018. 67 In January 2019, Ballard estimated that there were approximately 10,000 FCEVs worldwide, see Ballard, “Our countdown of the Top 5 Developments in the Hydrogen and Fuel Cell Industry in 2018”, https://blog.ballard.com/hydrogen-and-fuel-cell-industry, Form CO, paragraph 151. 68 Responses to questionnaire Q2 to FCPU and FCS suppliers, questions 15 and 16.

in any customer foreclosure strategies with regards to suppliers of FCSs and FCPUs competing with the JV, since it does not have a sufficient degree of market power in any of the possible downstream markets.

5.3. Conclusion (89) In light of the foregoing, the Commission concludes that the Transaction does not raise serious doubts as to its compatibility with the internal market or the functioning of the EEA Agreement in the (potential) markets for the supply of FCSs and FCPUs, in the EEA or worldwide.

6. CONCLUSION

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

For the Commission

(Signed) Margrethe VESTAGER Member of the Commission