EN This text is made available for information purposes only. A summary of this decision is published in all Community languages in the Official Journal of the European Union. Case No COMP/M.3653 - Siemens/VA Tech Only the German text is authentic. REGULATION (EC) No 139/2004 MERGER PROCEDURE Article 8 (2) Date: 13/07/2005 COMMISSION OF THE EUROPEAN COMMUNITIES Brussels, 13 July 2005 C (2005) 2676 final PUBLIC VERSION COMMISSION DECISION of 13 July 2005 declaring a concentration compatible with the common market and the EEA Agreement (Case No COMP/M.3653 - Siemens/VA Tech) TABLE OF CONTENTS I. THE PARTIES II. THE PROPOSAL III. CONCENTRATION IV. COMMUNITY DIMENSION V. COMPETITION ASSESSMENT A. POWER GENERATION A1. EQUIPMENT FOR HYDROELECTRIC POWER STATIONS A2. EQUIPMENT FOR GAS-AND-STEAM POWER STATIONS B. POWER TRANSMISSION AND DISTRIBUTION ("T&D") C. RAIL C1. ROLLING STOCK C2. CONTACT LINE ENGINEERING C3. TRACTION POWER SUPPLY C4. LEVEL CROSSINGS D. FREQUENCY INVERTERS E. METAL PLANT BUILDING AND OTHER INDUSTRIAL PLANT BUILDING F. LOW-VOLTAGE SWITCHBOARDS G. BUILDING SERVICES ENGINEERING AND FACILITY MANAGEMENT G1. BUILDING SERVICES ENGINEERING G2. FACILITY MANAGEMENT H. INFRASTRUCTURE INSTALLATIONS AND ELECTRICAL EQUIPMENT FOR ROPEWAYS H1. TRAFFIC INFRASTRUCTURE INSTALLATIONS H2. WATER TREATMENT INSTALLATIONS H3. ELECTRICAL EQUIPMENT FOR ROPEWAYS I. OTHER IT SERVICES VI. COMMITMENTS VII. COMPETITION ASSESSMENT OF THE PROPOSED CONCENTRATION IN THE LIGHT OF THESE COMMITMENTS A. EQUIPMENT FOR HYDROELECTRIC POWER STATIONS B. METAL PLANT BUILDING VIII. CONDITIONS AND OBLIGATIONS IX. CONCLUSION 2 Commission Decision of 13 July 2005 declaring a concentration compatible with the common market and the EEA Agreement (Case No COMP/M.3653 - Siemens/VA Tech) (Only the German text is authentic) (Text with EEA relevance) THE COMMISSION OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Community, Having regard to the Agreement on the European Economic Area, and in particular Article 57 thereof, Having regard to Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings,1 and in particular Article 8(2) thereof, Having regard to the Commission decision of 14 February 2005 to initiate proceedings in this case, Having regard to the opinion of the Advisory Committee on Concentrations,2 Whereas: 1 OJ L 24, 29.1.2004, p. 1. 2 OJ C […], […] 2003, p. […]. 3 (1) On 10 January 2005 the Commission received notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 ("the Merger Regulation").3 According to the notification, the following is proposed: the company Siemens Österreich AG ("Siemens Österreich", Austria), which is controlled by Siemens AG ("Siemens", Germany), is to gain control, within the meaning of Article 3(1)(b) of the Merger Regulation, of the company VA Tech AG ("VA Tech", Austria) by a public takeover bid made on 10 December 2004. (2) The Commission concluded that the notified concentration fell within the scope of the Merger Regulation and took the preliminary view that it raised serious doubts as to its compatibility with the common market and the European Economic Area. It therefore adopted on 14 February 2005 a decision pursuant to Article 6(1)(c) of the Merger Regulation initiating Phase II proceedings for examination of the notified proposal. (3) On 22 April 2005 the Commission sent a statement of objections to the notifying parties in which it found that, as a preliminary assessment and on the basis of the information so far available to the Commission, the notified proposal was incompatible with the common market (4) Siemens replied to the statement of objections in a written statement submitted on 6 May 2005. In a written statement submitted on 25 May 2005, Siemens offered commitments designed to remove any existing competition concerns. (5) The Commission has now come to the conclusion that, in its notified form, the proposal is liable to significantly impede effective competition in a substantial part of the common market, in particular as a result of the creation of a dominant position. However, the commitments given by the parties allow the competition concerns regarding the concentration to be dispelled. This Decision is issued pursuant to Article 8(2) of the Merger Regulation. I. THE PARTIES (6) Siemens supplies products and services worldwide in various areas of industry and electrical engineering. Its areas of activity include plants for power generation, transmission and distribution, automation and traction technology, plant engineering and construction, technical services, traffic engineering, building services engineering and information technology. (7) In the area of equipping hydroelectric power stations, Siemens is working on a joint venture ("JV") with the company J.M. Voith AG (Heidenheim, Germany), in which Siemens holds 35% of the shares and has joint control. […]* The Commission's competition assessment rests on the same basis, but it would not change fundamentally if, hypothetically, the concentration were only to lead to Siemens acquiring a majority holding in VA Tech and continuing the JV separately with 3 OJ L 24, 29.1.2004, p. 1. * Parts of this text have been edited to ensure that confidential information is not disclosed; those parts are enclosed in square brackets and marked with an asterisk. 4 Voith. Only the extent, but not the existence, of the effects to be expected from the concentration might possibly change as a result. (8) Through various subsidiaries, VA Tech is active in the areas of power generation (hydroelectric power stations and fossil fuel power stations), power transmission and distribution, metallurgy engineering, infrastructure (in particular building infrastructure), rail traffic technology and electrical plant engineering. II. THE PROPOSAL (9) The object of the notification is the proposal by Siemens, through a public bid by its subsidiary Siemens Österreich, to increase an existing holding in VA Tech from 16.45% of the voting rights to at least 50% plus one share and so to acquire sole control. […]*4 III. CONCENTRATION (10) The proposal is a concentration within the meaning of Article 3(1)(b) of the Merger Regulation. IV. COMMUNITY DIMENSION (11) The companies involved achieve a combined aggregate worldwide turnover of more than EUR 5 billion.5 (Siemens: EUR 74 billion in the financial year from 1 October 2002 to 30 September 2003; VA Tech: EUR 3.9 billion in the financial year 2003). Siemens and VA Tech each have an aggregate Community-wide turnover of more than EUR 250 million […]*. Neither of the companies achieved more than two thirds of its aggregate Community-wide turnover within one and the same Member State. The notified concentration therefore has a Community dimension within the meaning of Article 1(2) of the Merger Regulation. The proposal constitutes a case of cooperation with the EFTA Surveillance Authority under Article 57 of the EEA Agreement. V. COMPETITION ASSESSMENT (12) The proposed concentration leads to numerous horizontal overlaps and vertical links, in particular in the following areas: A. Power generation (equipping hydroelectric power stations and gas-and-steam power stations); B. Power transmission and distribution; C. Rail; D. Frequency Inverters,; E. Metallurgy and Other Industrial Plant Building; F. Low Voltage Switchgear; G. Building technology; and H.Infrastructure Facilities and Cable Ropeway Electrics, I. Other IT-Services 4 […]* 5 The turnover calculation is made on the basis of Article 5(1) of the Merger Regulation and the Commission notice on calculation of turnover (OJ C 66, 2 March 1998, p. 25). 5 A. POWER GENERATION A1. EQUIPMENT FOR HYDROELECTRIC POWER STATIONS 1. Relevant product market (13) Siemens says that the equipping of hydroelectric power stations is a product market in its own right and that further segmentation, e.g. into electrical and mechanical engineering, is not necessary. The product market proposed by Siemens accordingly comprises all the mechanical and electrical components of a power station, such as water turbines, generators, instrumentation and controls, hydraulic control systems, pump turbines, valves, etc. The construction work (e.g. the dam), on the other hand, would belong to a separate product market, in which neither Siemens nor VA Tech is active. (14) According to Siemens, the fact that, on the supplier side, most competitors can offer both mechanical and electrical engineering, as well as a trend also evident in Europe towards joint tenders for both groups of components, indicate such a broad product market definition. In this connection, the notifying party refers to several concentrations between manufacturers of mechanical equipment and electrical manufacturers in recent years, including Alstom/ABB, GE Hydro/Kvaerner and VA Tech/Sulzer as well as the joint venture between Siemens and the mechanical manufacturer J.M. Voith AG. To this extent, in Siemens' opinion, the market conditions since the Commission Decision in Voith/Siemens/JV (M.1793) have changed. (15) The Commission's market investigation confirmed that the main suppliers of hydroelectric power stations in the EEA, including Voith Siemens, VA Tech, Alstom, and GE Hydro, can supply both mechanical and electrical components, even if market presence and reputation with customers are not the same for both areas in each case. The companies' product range includes in particular water turbines and hydrogenerators as well as other mechanical and electrical components, the "mechanical balance of plant" ("MboP") and the "electrical balance of plant ("EboP"). It is not possible to confirm whether the Asian suppliers (from China, India and Japan) are also active in the various areas because, at present, they are not perceived as credible suppliers in the EEA by the customers questioned in the market investigation. Nor have they so far taken part in any tenders in the EEA (see Part VI). (16) The market investigation also shows that the scale of the product packages jointly sought in tenders for hydroelectric power stations varies enormously.