EC, October 31, 2007, No M.4842

THE COMMISSION OF THE EUROPEAN COMMUNITIES

Dear Sir/Madam,

Subject: Case No COMP/M.4842 - Danone/Numico

Notification of 12 September 2007 pursuant to Article 4 of Council Regulation No 139-2004 (1)

1. On September 12, 2007, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139-2004 ("the Merger Regulation") by which the French company Danone SA (Danone) acquires within the meaning of Article 3(1)(b) of the Merger Regulation sole control of the Dutch company Royal Numico NV (Numico) by way of purchase of shares.

I. THE PARTIES

2. Danone is a worldwide company based in France and engaged in the production and sale of fresh dairy products, mineral water and baby food. Danone is also active in biscuits and cereals products and is in exclusive talks with Kraft foods for the sales of this business (2).

3. Numico is a company incorporated in the Netherlands specialized in the manufacture and distribution of baby food and clinical nutrition products in a large number of countries worldwide.

II. THE OPERATION

4. On July 9, 2007, Danone and Numico concluded a Merger protocol, pursuant to which Danone intends to make a recommended public offer, in cash, for all the shares of Numico. The Offer Memorandum opening the offer period was published on August 20, 2007. The proposed operation constitutes therefore a concentration within the meaning of the Merger Regulation.

III. COMMUNITY DIMENSION

5. The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million (EUR 14,073 million for Danone, EUR 2,623 million for Numico). The aggregate Community-wide turnover of Danone and Numico is more than EUR 250 million (EUR [...] million for Danone, EUR [...] million for Numico). Neither Danone nor Numico achieve more than two-thirds of their Community-wide turnover in the same Member State. The proposed transaction therefore has a Community dimension within the meaning of Article 1(2) of the EC Merger Regulation.

IV. COMPETITIVE ASSESSMENT

6. The proposed transaction concerns the production and sale of baby food (including baby milk) products. Danone is active in this segment directly and mainly through its wholly-owned subsidiary Bledina which achieves [80-90] % of its turnover in France. In 2006, baby food represented [0-10] % of Danone's EEA-wide turnover. By contrast, Numico is a more global baby food player with operations in the EEA as well as in Russia, Central and Latin America and the Asia-Pacific region. In 2006, baby food amounted to [50-60] % of Numico's EEA wide turnover. The Commission recently investigated these baby food markets in the M.4688 Nestlé-Gerber decision (3), although it did not cover baby milks.

7. On a general basis, the parties explain that the baby food markets should also include home-prepared and non-baby specific products (for example: regular food for meals, cow milk for growing-up milk) since these products are increasingly used as complements or substitutes to baby food. However, in the Nestlé/Gerber decision, the Commission stressed that it appeared difficult to consider that baby food and adult food belong to the same product market (although adult food products have to be taken into account as potential constraint on baby food producers' behaviour). From the point of view of consumers, who happen to be very sensitive to the quality of these products, regular products do not address the specific nutritional needs of their babies and baby food products are packed, priced, promoted and advertised differently from adult food. Furthermore, all retailers hold dedicated shelf-space for manufactured baby food which differentiates it clearly from similar adult food. Supply-side substitutability appears limited as well, in view of the stringent regulatory provisions that set specific requirements on raw materials and hygiene conditions at baby food production sites.

8. This distinction between baby food and regular/home made food has been confirmed by respondents to the market investigation. Accordingly and in line with its previous findings, the Commission will assess the impact of the transaction on specific product markets for baby food, which will be discussed further below. The potential competitive constraints exercised by non-baby food products, which might fluctuate according to the various baby food product markets, will be taken into account in the competitive assessment.

Relevant product markets

1. Baby milk

9. Baby milks include all milks in powder and liquid form primarily intended for feeding infants and toddlers from 0 to 36 months. The parties submit that two different categories of baby milk may be identified and constitute distinct product markets: i) Infant and Follow-on Milk (IFFO milk) and ii) Growing-Up Milk (GUM). This is in line with the findings of the UK Monopolies and Merger Commission (current Competition Commission) which has dealt with these markets before (4).

IFFO

10. IFFO milks designate nutritional milks for babies aged 0 to 12 months which are used as substitutes for human breast milk. In France, where the activities of the parties overlap for baby milk, IFFO milk is mainly sold in powder format, requiring the addition of water.

11. Besides breast milk, IFFO milk is the only milk that the medical community considers as nutritionally acceptable for infants under the age of one year (5). IFFO milks are subject to strict regulatory requirements in Europe and the Directive 2006-141-EC of 22 December 2006 regulates the marketing of IFFO milk in the Community. The directive includes mandatory requirements for the labelling (e.g. a statement related to the superiority of breast milk) and strict restrictions about advertising. The parties submit that IFFO milk is a distinct product market for the purposes of this assessment.

12. Applicable EC legislation distinguishes two main types of IFFO milk: infant milk for babies aged 0-6 months and follow-on milk for babies aged 6-12 months. Both products are distinct in terms of composition, are sold under slightly different packaging and regulatory requirements on follow-on milk are less demanding. However respondents to the market investigation indicated that the moment when parents should use follow-on milk is not clearly defined (between 4 and 6 months, depending on the circumstances) and consumers tend to remain loyal to a brand when they shift to follow-on milks. In any event, the question of distinct product markets for infant and follow-on milks can be left open as it would not substantially change the conclusions of the competitive assessment.

13. The IFFO milk market may further be segmented according to the distribution channel (retail channel or pharmacy). In France, a substantial part of the infant milk ([35-45] %) and follow-on milk ([15-25] %) is sold through pharmacies and some competitors are only active in the pharmacy channel (Lactalis-Picot, United Pharmaceuticals, and Mead Johnson). Market presence may also vary significantly from one channel to another. For instance, Nestlé has in France a market share of [35-45] % in the retail channel and [5-10] % in the pharmacy channel. There are also some differences in the products sold (therapeutic milks are only purchased in pharmacies, see below) and the purchasing pattern: parents make their own choices in retail stores whilst they usually rely on specialist's advice in the pharmacies. Nevertheless, it is not necessary to make a further distinction within IFFO milk according to the distribution channel since it would not significantly alter the competitive assessment.

14. Finally, within IFFO milks, a further distinction can be made between standard and therapeutic milks: therapeutic milks are milks intended for babies with particular digestive or health problems (milks for premature babies, anti-regurgitation milks, and milks without lactose, anti-diarrheic milks, anti-regurgitation milks or allergy treatment milks). Therapeutic milks, which are only sold in the pharmacy channel, are on average 40-50% more expensive than standard IFFO milks.

15. One competitor indicated during the investigation that "medical milk", which is a subcategory of therapeutic milks, can be seen as a separate product market. This competitor underlines that medical milks deliver nutritional solutions for infants and babies that have specific health conditions which prevent them from using "standard therapeutic milks". These milks can only be purchased with a doctor's prescription and are typically reimbursed by the healthcare system.

16. The Commission notes that such a market definition is neither supported by any other third party submission nor by firmer evidence. First, it appears that therapeutic milks and "medical milks" both provide a therapeutic support in addition to their nutritional functions and are both intended for babies with specific therapeutic needs. As regards reimbursement, the Commission notices that some "standard therapeutic milks" (for instance Numico's product Pepti Junior, which is a partially hydrolyzed milk with a low lactose content aiming at reducing allergy symptoms) are also reimbursed by the healthcare system. As regards some very specific products manufactured by Numico (such as Neocate, an amino acid-based formula for serious allergic conditions), the Commission believes that they should rather be considered as healthcare nutrition Products (6) for infants in view of their very specific therapeutic indications (7). Therefore, the Commission does not take the view that medical milks should be considered as a distinct product market.

17. As regards a distinction between standard and therapeutic milks, the Commission notes that suppliers of IFFO milk typically offer a range of products covering the majority of therapeutic indications and that manufacturers having entered the market with therapeutic milks are now expanding into standard IFFO milk products. Hence there appears to be a certain level of supply-side substitutability between standard milks and therapeutic milks. Nevertheless, it is not necessary to make a further distinction between regular and therapeutic milks since it would not change the competitive assessment.

18. Based on the above arguments, the Commission considers that IFFO milk is a distinct product market for the analysis of the present transaction.

GUM

19. GUM milks are nutritional milks for children 1-3 years. They exist in both powder and liquid formats although the latter (bottle or tetra pack format) is prevalent in Western Europe. They are almost exclusively sold in the retail channel and average price of GUM is much lower (30-35%) than the average price of IFFO (8).

20. The parties submit that GUM competes with cow milk as well as other baby food products (sweet meals, baby cereals and baby snacks, see below) since the children's diet becomes more diversified after the age of one. According to the parties, in France and Belgium, the only two markets where the parties' activities in GUM overlap, GUM represents respectively 27% and 20% of the milk fed to children between the age of 16 and 36 months.

21. The market investigation has however highlighted that GUM is enhanced with nutrients appropriate for the developing needs of children, particularly a stronger iron content. Therefore, the majority of the parties' competitors in baby milk do not view cow milk as an adequate alternative for GUM. According to some respondents, the proportion of parents feeding cow's milk to their 1-3 year children is decreasing, due to the stronger awareness within the medical community that GUM is necessary for the child's growth and well-being.

22. Furthermore, the price of GUM is on average twice as high as the price of cow's milk. Parents who decide to feed their babies with GUM have consequently already made a choice for a product which is more expensive than cow's milk. Therefore, it is unlikely that these customers would switch to cow's milk in case of a small but significant increase of the price of GUM (in the range of 5-10%) since they are already convinced that GUM is necessary for their children despite its current higher price.

23. Based on the above, the Commission considers that GUM is a distinct product market for the purposes of this assessment.

2. Baby food

24. In line with the Commission's findings in the Nestlé/Gerber case, the parties submit that there are three segments in baby food which are not substitutable with each others and therefore should be considered as distinct product markets. These markets are baby meals, baby snacks, and baby drinks. The question whether baby cereals constitute a separate market was left open in this decision.

25. Baby meals designate prepared meals and individual ingredients for meal preparation, labelled and marketed for babies and children from 6 months up to 36 months. They include mashed purées with a combination of vegetables and meat or fish, single food purees, fruit compotes, soups and ambient dairy products. The parties submit that all baby meals form part of the same market since parents purchase different categories of meals in order to provide a balanced diet to the baby. Moreover all manufacturers offer a large range of products.

26. Within baby meals, a distinction could be made between savoury meals (vegetable, fish, poultry, meat, soup) and sweet meals (compote, yogurt, ambient dairy products) as babies' diet should balance savoury and sweet products for nutrition and taste development purposes. For the purposes of the present case, it can be left open whether distinct product market for sweet and savoury meals should be defined.

27. Baby snacks refer to all sweet and savoury snacks intended for babies and toddlers from 4 to 36 months and include biscuit, crackers, cereals bars and fruit bars.

28. The parties submit that baby cereals include cereals for feeding infants or toddlers in dry or liquid format. Baby cereals are typically composed of rice semolina, wheat flour or oats. According to the parties, it is possible to distinguish dry cereals (requiring addition of water or milk) from liquid cereals which are ready-to-drink dairy based products with cereals (typically milk with cereals).

29. Finally, baby drinks refer to all drinks other than milk-based drinks intended for babies and children, including juices, syrups and herbal teas. They are available in three product forms: ready-to drink, concentrates and dry granules, which are reconstituted with the addition of water.

30. The market investigation has globally confirmed the existence of the above-mentioned product markets. The classification of liquid cereals which are sold by Danone under the Bledilac brand is however unclear. The majority of market participants, especially customers, view Bledilac as a substitute for baby milk (primarily GUM since [60-70] % of Bledilac consumption is made by babies aged at least one year (9)) and therefore include this brand in the GUM segment. Although the parties disagree with this approach, it appears from internal documents submitted by Danone that [...] (10).

31. For the above reasons, the Commission will assess the impact of the transaction on the following product markets: i) baby meals, ii) baby dry cereals (without liquid cereals which will be included in the GUM market), iii) baby snacks and iv) baby drinks.

Branded product vs. private label products

32. In line with the Commission's previous practice (11) in consumer goods products, the Commission considers that there are separate markets for the supply of branded baby milk and baby food products to retailers (and pharmacies) and the supply of private label baby food and baby milk products to retailers (products which are marketed under retailer's brands). Accordingly, some suppliers of branded products also provide private label products to retailers and the procurement processes between branded and private labels products is different (bilateral negotiations for the former and tenders for the latter). Although it is clear that when private label products are available, branded and private label products compete at retail level (i.e. on the supermarkets' shelves), this is not the case at the wholesale level.

33. As the parties do not supply private label products, the competitive assessment will focus on the branded markets. Nevertheless, the competitive interaction at the downstream retail level (i.e. on supermarkets' shelves) between "manufacturer/branded products" and "retailer/private labels" will be taken into account in the analysis, even if private labels have so far little influence on the baby food markets.

Relevant geographic markets

34. In accordance with past Commission practice regarding the sale of food products to retail chains, and particularly the Nestlé/Gerber decision, the notifying party submits that the relevant geographic markets for each of the products described above is national in scope.

35. The parties point out that national consumption patterns for food fed to babies vary across EU countries, the distribution of baby food products is generally organized on a national basis, the relative weight of the distribution channels (in particular the breakdown of sales between pharmacies and retail chains) may differ significantly according to the countries, market presence of baby food players and brands under which these products are sold vary among Member States and finally the prices of baby food or milk show significant discrepancies from a Member State to an other (12). The market investigation has widely confirmed the existence of national features which point to the existence of national markets (e.g. procurement at national level, price differences among Member States, existence of national brands, differences between countries as regards consumption level and market growth).

36. As regards baby milk and particularly IFFO, although the caloric and nutrient needs of babies are similar across countries, consumption and sales growth depend directly of national features such as birth rate and breast feeding habits. For example in France, the birth rate is one of the highest in Europe (13 per 1000 inhabitants whereas the rate in Germany is around 8.5) but the breast feeding rate is one of the lowest (58% of French mothers breast-feed their babies, whereas this rate is more than 80% in Germany and above 90% in Scandinavian countries). IFFO formulations may also be different across Member States in order to meet national consumption habits or paediatricians' advices. The same is true for GUM which shows significant differences of saturation level and growth rates among Member States.

37. On the basis of the above considerations, the Commission takes the view that the different markets for branded baby food and baby milk products have a national geographic dimension.

Competitive assessment

38. Danone's geographic focus in baby food and baby milk is in France where its subsidiary Bledina achieves [80-90] % of its turnover. The activities of the parties overlap to a significant extent in France, Belgium, the Netherlands and Portugal. In the United Kingdom, Danone is only active in baby meals with a market share below [0-5] % (both for sweet and savoury meals). Hence the UK market will not be further discussed below.

1. France

39. The table below provides a summary of the parties' and their competitors' market shares based on value in France in 2006 in all the affected markets (13).

<emplacement tableau>

IFFO milk

40. The table shows that the transaction would create a market leader in the French market for IFFO milk with a market share of [45-55] % far from its next competitor Nestlé with [25-35] % market share. Other smaller competitors include the Spanish company Ordesa, which is active in France through its subsidiary Sodilac and markets its product under the brand Modilac both in retails outlets and in pharmacies; Mead Johnson, a division of the US pharmaceutical company Bristol-Myers Squibb that sells its products under the brand Enfamil exclusively in pharmacies ([5-10] % market share); United Pharmaceuticals, a French company which is only active in the pharmacy channel through its brand Novalac ([5-10] % market share). The market shares submitted by the parties have broadly been confirmed by the data collected from the other market players during the market investigation.

41. The market positions would not significantly change on the basis of narrower product market definitions. If a distinction was made between infant and follow-on milk, the parties would hold a market share of [45-55] % in infant milk, the next competitor being Nestlé with [25-35] % and [45-55] % in follow-on milk (Nestlé [30-40] %). Likewise, the new entity would also become market leader if separate markets where found according to the distribution channel: in the retail channel, the combined market share would be [45-55] % (Nestlé [35-45] %) and [40-50] % in the pharmacy channel, far beyond the next competitor Novalac with [15-25] %. However the new entity would have a higher combined market share on the therapeutic milk market ([50-60] %) as Nestlé is a weaker competitor in this segment ([5-10] %).

42. Respondents to the market investigation indicated that the market structure that would result from the concentration would bring about competition concerns, especially in the retail channel. Indeed, these markets are subject to strong regulatory and quality requirements, and the brand/company image among consumers as well as paediatricians/hospitals prescribing IFFO milk, plays a significant role. Thus, entry/expansion on these markets is a complex task. Respondents to the market investigation indicated that a key factor of success in the IFFO market is to establish brand awareness and credibility among healthcare professionals and prescribers of IFFO products (maternities, general practitioners, paediatricians) which require significant investment in time and money. Customers in the retail channel also unanimously confirmed that brand was a very important criterion for their purchases of IFFO milk.

43. After the transaction, the new entity would hold four of the major brands in IFFO milk in France (Bledina and Gallia from Danone; Nutricia and Milupa from Numico). With one exception, all the retailers responding in the market investigation have confirmed that Danone's IFFO milk brands are "must-have" brands in the French market and a majority of these retailers indicated that Nutricia and Milupa are must-have brands as well.

44. The market investigation highlighted that retailers usually sell a limited number of brands. In general, no more than seven brands are exposed on the retailers' shelves in France, namely Bledina and Gallia (Danone), Nidal and Guigoz (Nestlé), Milupa and Nutricia (Numico) and Ordesa's brand Modilac. Likewise for other consumers' goods products, the way IFFO milk is exposed on the shelves greatly influences consumers' choices. During the investigation, the Commission gathered information as regards the significant role of Danone and Nestlé in so-called "category management" for IFFO milk shelves in France, which allows suppliers to have a more significant weight on the placement of products on the shelves and thereby have an influence on the end consumers' purchasing decisions. Numico has fiercely competed with Danone and Nestlé to be responsible for management of the shelves. It has managed to introduce in some retailers' outlets new "plan-o-grams" on how to assort products on the shelves (all the brands on the same row) in order to enable consumers to compare prices more easily.

45. The importance of brands in the IFFO milk market is further confirmed by the fact that there is no private label IFFO competing with branded IFFO in France for two main reasons. First, as noted above, IFFO milk is a product for which access to practitioners is crucial and retailers do not promote these products towards the medical community. Second, as non specialist, retailers have to resort to third-party production and cannot control the stringent quality requirements associated with IFFO products, while still incurring the risk of quality problems with disastrous effects on the retailers' image.

46. The parties submitted that Danone and Numico are not close competitors in the French market for IFFO milk in view of the different formulations of their products and price positioning. First, the market investigation did not yield that consumers view Danone and Numico's IFFO milk as really different in terms of ingredients or formulations. Indeed, customer benefits claimed by these suppliers appear to be rather similar. Numico uses probiotic ingredients of the "FOS-GOS" (14) type, which helps to improve the child's immunity while Danone uses a fermentation process which leads to consumer benefit such as "strengthening natural defences". Second, while it is true that most of the retailers having answered to the market investigation view Nestlé's brands as close competitors of Danone's brands, they also unanimously confirmed that the best alternative for Numico IFFO milk are Danone's products (15).

47. As regards the price positioning, the market investigation revealed that Nutricia's standard baby milk offering is characterized indeed by its low price positioning. This is not the case for the Milupa brand, which is priced at the same level as the Danone's and Nestlé's milk. On average, and according to the parties' submission, Nutricia is priced [10-20] % below the average price of IFFO milk. Some customers indicated that the price gap between Nutricia and its competitors was as high as [25-35] %. Nutricia mainly competes on prices to make up for its weaker brand image compared to Danone's and Nestlé's brands.

48. A majority of customers has expressed the concerns that this low-pricing challenger strategy would not be carried out by Danone after the implementation of the transaction which would ultimately give rise to price increases on IFFO products in France. Some customers have explained that the transaction would significantly undermine their negotiation positions, as Numico is currently a credible alternative to Danone and Nestlé with a mid-priced brand (Milupa) and a low-priced brand (Nutricia). They indicated that there is a risk that given Numico's current role on the market, Danone would have a strong incentive to remove Numico's brands altogether from the market.

49. While market shares are similar in the pharmacy channel, market shares of the parties and their competitors have been less stable in the last years than in the retail channel with the entry and expansion of specific players (Ordesa, Lactalis/Picot, United Pharmaceuticals, and Mead Johnson) in this channel. In the parties' view this is due to apparently lower barriers to entry, as pharmacists can sell any equivalent to the product desired by customers. Consequently, rather than relying on their brand image, competitors in the pharmacy channel rely on the quality of their products, as well as their ability to make pharmacists achieve higher margins. However, given the current market structure, serious doubts cannot be excluded on the market for IFFO sold to pharmacists. The commitments submitted by Danone in any case cover also this channel (as discussed below).

50. Given the high market shares of the new entity, the fact that Danone/Numico would own a high number of must-have brands, the removal of a strong competitive constraint on prices and high barriers to entry in the retail channel, the Commission considers that the transaction may significantly impede effective competition on the French market for IFFO milk. Therefore, the proposed transaction raises serious doubts as to its compatibility with the common market and the EEA agreement.

GUM

51. As regards GUM, the transaction would allow Danone to strengthen its leading position in the French market with a market share of [35-45] %. Competitors include dairy products suppliers Sodiaal ([20-30] %), Lactalis ([20-30]%) and baby food suppliers like Nestlé ([15-25]%) as well as smaller players such as Novalac and Picot.

52. A majority of customers and competitors did not express concerns as regard the French GUM market. Indeed, the market investigation revealed that the GUM market shows a significant degree of competition with high promotional activities and a slight decrease in average prices in the last 12 months. Market structure is also different from IFFO to the extent that dairy products manufacturers (Lactalis, Sodiaal) are active in this market with significant market shares. This is due to the fact that contrary to IFFO products which are almost exclusively in powder format, the liquid format is widespread in the French GUM market and these companies have the know-how and industrial capabilities to develop liquid products.

53. In the light of the above, the transaction does not raise serious doubts as to its compatibility with the common market as regards the French GUM market.

Baby drinks

54. On the French baby drinks market, the proposed merger leads to a reduction of the number of suppliers from 3 to 2 and would create a new leader with a market share of [50-60]%. Apart from Nestlé which would hold a market share of [40-50] %, there is just one competitor, the German company Hipp with [0-5] % market share.

55. The parties explained that their market share is not meaningful since baby drinks is the category which is the more exposed to competition from regular products (the French baby drinks market is declining). Moreover, the parties claimed that Danone and Numico do not appear to be direct competitors since Danone only sells fruit juices and Numico sells herbal teas (dehydrated infusions derived from aromatic plants and packed in individual tea bags).

56. However, customers questioned during the market investigation view fruit juices produced by Danone and herbal teas manufactured by Numico as direct competitors in the French baby drinks market since they explained that consumers purchase one or the other product (as well as fruit juices offered by Nestlé) when they intend to buy baby drinks. Consumers make their selections between different flavours available among fruit juices and herbal teas rather than choosing a specific baby drink product.

57. As regards competition from regular drinks, the market investigation has not been conclusive as to its impact on the French baby drink market. The fact that the baby drink market has declined between 2004 and 2006 does not per se prove that customers are switching to regular drinks. Actually, baby drink is a seasonal product which is mainly purchased in summer and the level of sales of baby drinks is highly dependent on summer weather conditions. At this stage of the proceedings, the Commission is not in the position to assess whether this competitive pressure would render a price increase from the merged entity unprofitable in view of the duopolistic structure of the French baby drinks market.

58. In view of the competition concerns identified on the French market for baby drinks, the Commission has serious doubts as to the compatibility of the proposed concentration with the common market.

Baby meals, snacks and cereals

59. With regard to French baby food markets (baby meals, snacks and cereals), one competitor stressed that the transaction will impair potential entry into these markets. According to this competitor, Numico is well established baby food competitor in neighbouring countries (Belgium) and enjoys in this country a strong position with products well suited to the French market. However, Numico makes no sales of baby meals, snacks or cereals in France.

60. However, the Commission did not find evidence supporting this submission. First as regards baby cereals, Numico has tried to enter the market [...]. Numico was eventually forced to exit the market. As regards baby meals, the range of Numico's baby food products is essentially made of jars whereas in France retailers require their suppliers to provide more convenient formats such as plates and plastic bowls (which are supplied by Bledina inter alia). With regard to baby snacks, Numico has not tried to enter in view of the limited size of the segment [...].

61. Therefore, no competition concerns are identified at the French baby food markets (baby meals, snacks and cereals).

2. Belgium.

62. The market structure and size in 2006 are outlined below. Danone's Bledina products are sold through a distributor (PAB) and makes some other sales (Gervais, Lu) directly. Numico is directly active in Belgium.

<emplacement tableau>

Baby meals

63. Baby meals is the market with the most significant overlap and the merger would strengthen the position of the current leading supplier Numico ([40-50] %) with a market share of [75-85] % far beyond its nearest competitor Nestlé ([15-25] %). The parties submit that no competition concerns arise since Nestlé is a strong and growing rival, and Numico and Danone are not close competitors in view of their positioning (Danone and Numico would respectively be strong in Wallonia and Flanders) and different packaging.

64. These claims were not supported by the market investigation. Respondents indicated that Numico and Danone are the closest substitutes in this market and are engaged in face to face competition: retailers play Numico and Danone against each other to keep prices down. Furthermore, it appears that Danone and Numico compete in innovation (introduction of new products), range of products, and of course quality and prices to the benefit of consumers and are heavily advertising their products. Besides these two players, Nestlé's position, while growing, is not comparable to that of the parties, whereas a player such as Hipp has a specific positioning on organic/premium products, and is therefore not exerting a strong constraint either on the parties.

65. Nestlé, Hipp or another market player wishing to expand/enter the market would probably experience the utmost difficulties. Being active on this market requires reaching a critical size, given that a supplier has to preferably provide not only sweet and savoury meals but also products for each day of the week and all baby-age brackets (8-12 months, 12-16 months, 16-20 months). Furthermore, suppliers have to cope with the limited shelf space ascribed to baby food products and retailers do not sell products from suppliers with less than 25-30 Stock Keeping Units in order to maintain a high rotation rate. In view of this and of the importance of establishing brand awareness in these markets, expansion/entry on the baby meal markets is complex.

66. This expansion is all the more difficult, since it has been brought to the attention of the Commission that some category captainship arrangements, under which the leading market players provides recommendations on which brands to shelve, on how to display each product and with which space allocation, etc also exists in the Belgian market in a similar way to the French market for IFFO milk. These recommendations can be provided by more than one player, and, typically, on the Belgian market, category captains are Numico and Danone. This recommendation is supposed to be based on the supplier expertise on the market, and while retailers are free not to follow them, they have an incentive to do so, as they are supposed to maximize their profits. Under these circumstances, entry or expansion on those markets are difficult, as leading market players' influence on which products to shelve and how they should be displayed, often means that their products will benefit from more space and a better display than competitors' products.

67. This overall analysis is not changed if a distinction is made between savoury and sweet meals, since the market positions of the parties are similar for sweet meals (Danone: [40-50] %, Numico : [40-50] %) and savoury meals (Danone : [25-35] %, Numico : [35-45] %).

68. In the light of the above, the Commission has serious doubts that the proposed concentration would significantly impede effective competition on the Belgium market for baby meals.

GUM and baby drinks

69. For the same reasons as for baby meals, the parties contend that, despite their high market share on the GUM market ([60-70] % with an overlap of [5-15] %), the effects of the transaction on competition would remain limited. (16)

70. While it is true that fewer concerns were expressed for GUM and baby drinks than for the effects on the baby meal market, it was pointed out to the Commission that Blédilac (mix of milk and cereal) is one major product of the current Danone's range, which should be included in the GUM market since it is overwhelmingly considered by Belgian retailers as a substitute for GUM. Thus, as confirmed by the market investigation, Danone animates the market for GUM, and its removal would be detrimental to competition. The proposed concentration therefore raises competition concerns on the Belgian market for GUM products.

71. As regards baby drinks, although market shares would be very high, the parties submit that the effects of the transaction would be limited in particular in view of the high degree of substitution with regular drinks. Nevertheless, while no strong concerns were expressed about the effects of the proposed concentration on this market -perhaps due to its limited size- the first-phase investigation does not allow to decisively conclude that suppliers of baby drinks would not be able to increase prices due to regular drinks. Thus, given the new entity's very high market share, and the closeness of substitution between the products of the two parties on this market (in Belgium, Numico's portfolio of products include juices), competition concerns cannot be excluded on the Belgium markets for GUM and baby drinks. The proposed concentration therefore raises competition concerns on the Belgian market for baby drinks.

Baby snacks

72. For baby snacks, Danone is active in Belgium through three brands: Blédiscuit ([10-20] % market share), Betterfood ([40-50] %) and LU Vitabis ([25-35] %). The parties indicate that Danone is currently under exclusive discussions for the sale to Kraft Foods of its biscuit business, including LU Vitabis (17). However, for the purpose of the present case and given that the sale (presumably to Kraft as part of the Kraft-Danone transaction (M.4824)) of Betterfood and Lu Vitabis is not yet finalized, competition concerns can be identified on the market for baby snacks in Belgium. This is therefore subject to a remedy submitted by Danone by virtue of which Danone commits to sell the two brands. This would leave Danone with a [5-15] % market share, thereby removing competition concerns.

Conclusion

73. In view of the competition concerns identified on the Belgian markets for baby meals, GUM, baby drinks, and baby snacks,, the proposed concentration raises serious doubts as to its compatibility with the common market.

3. Netherlands

74. The affected markets are described in the table below. As in Belgium, Danone products are sold through its distributor PAB (18).

<emplacement tableau>

Baby meals

75. As follows from the table above, Numico dominates the Dutch baby meals market and this observation holds true if a distinction is made between sweet meals (Danone: [0-5] %, Numico: [70-80] %) and savoury meals (Danone : [0-5] %, Numico : [85-95] %).

76. While it is true that Danone is a weak actor on this market, this is also the case for Nestlé. Thus, under these market conditions, the removal of competition, how weak it may be, could be detrimental. This is all the more true as the market investigation showed that some retailers started in the past to purchase products from Danone to be less dependent on Numico.

Baby snacks

77. As regards snacks, Danone is almost exclusively active through its brand LU Liga, which should be divested to Kraft as part of the Kraft/Danone Biscuits transaction. Thus, the same question arises as for the Belgian market for baby snacks and competition concerns cannot be excluded.

Conclusion

78. In view of the competition concerns identified on the Dutch market for baby meals and snacks (19), the proposed concentration raises serious doubts as to its compatibility with the common market.

4. Portugal

79. In Portugal, the parties' activities overlap in baby meals, baby cereals and baby drinks. The affected markets are as follows:

<emplacement tableau>

80. As regards baby cereals, Nestlé is the clear market leader and the transaction does not raise competition concerns.

81. As regards baby meals (20) the market share of the new entity would remain below [45-55] % and the consolidation of the market did not raise concerns among respondents to the market investigation. Quite to the contrary, some retailers welcomed the merger on the ground that the combination of Danone and Numico product range would create a good alternative to Nestlé. Indeed, it was confirmed that Danone and Numico were not closest competitors on the market, and that they were used by retailers as an alternative to Nestlé rather than an alternative to each other. Numico is not the closest competitor to Danone since it is only active in sweet meals whereas Danone's and Nestlé's products cover the entire baby meal range. These results suggest that non-coordinated effects as a result of the merger are unlikely to arise.

82. As regards baby drinks, the combined entity would not reach as high market shares as in France and Belgium. It should also be stressed, that baby drinks are even more underdeveloped than in France and Belgium, and the market size is limited to EUR [0-5] million, which suggests that the competitive pressure stemming from regular drinks might be even stronger in Portugal. Furthermore, Danone and Numico are not closest competitors, as they are endeavouring to dispute Nestlé's position on the market. In view of these elements, non-coordinated effects as a result of the merger are unlikely.

83. Given the competitive pressure stemming from regular drinks, and the inherent difficulty to come to a common understanding on the terms of a tacit coordination on a consumer good market (range and quality of products, and introduction of new products differ across companies), coordinated effects as a result of the merger do not seem likely despite symmetry of market shares after the proposed concentration. The same is true for baby meals where suppliers need to have a broad product range in order to be successful, which renders difficult to reach adequate terms of coordination between market players. This is all the more true as innovation and the introduction of new products is a key factor of competition on this market.

84. Thus, the Commission takes the view that the proposed concentration does not impede effective competition on the Portuguese markets for baby meals, cereals, and drinks.

V. COMMITMENTS SUBMITTED BY THE NOTIFYING PARTY

(a) Procedure

85. In order to render the concentration compatible with the common market, the notifying party has offered some commitments pursuant to Article 6(2) of the EC Merger Regulation, which are annexed to this Decision. The initial commitment package was proposed by Danone on September 24, 2007, however due to limited scope of this package the Commission requested several improvements. The improved commitment package was proposed by Danone on October 10, 2007. After examination and market testing of this commitment package, a final commitment package was submitted by Danone on October 30, 2007. The final commitments were deemed suitable to remedy the competition concerns identified. These commitments are attached to this decision and form an integral part thereof.

(b) Description of the commitments

France

86. With respect to baby-milk in France, the divestment package in France would in particular comprise the following:

- the assignment of the Lemiel and Milumel and Milumel AR (therapeutic IFFO) brands;

- an exclusive 5-year license on the following brands: Nutricia and Milupa and the related sub-brands (Nutricia Confort, Nutricia Soja, Pepti Junior, Nutrilon AR, Nutricia Croissance, Nutricia Kid, HN 25, GES 45, Pregomine, Milupa Digest, Milupa Conformil, Milupa HA and Milupa prema) followed by a commitment not to reintroduce the licensed brands in France for a period of 5 years after the termination of the 5-year license agreement (black-out period). These products should be rebranded by the purchaser during the licensing period.

- A 5-year license for the use in France of all patents related to the IFFO and GUM products covered by the licensed brands.

- a 5-year exclusive license on know-how relating to recipes, formulations, manufacturing processes, and access to the R&D work that is in progress to support the new product launches planned in France within 2 years from closing (21).

- at the option of the purchaser, Numico's IFFO and GUM milk production facility in [...], or alternatively a 3-year at cost supply agreement for the production of the products covered by the licensed products, with Danone committing to reserve sufficient production capacities or making its best efforts to transfer the benefits of existing third-party arrangements with co-manufacturers.

- Numico personnel in France, in particular the sales force in charge of promoting products among paediatricians and maternities, as well as of the sales to retailers.

- All the tangible assets, contracts, customer orders, customer records and personnel in relation with Numico's IFFO and GUM milk businesses in France.

- at the option of the purchaser, the provision of manufacturing technical assistance for 12 months.

- at the option of the purchaser, a licence's to Numico's technology for the new "Eazypack" packaging for powder IFFO.

87. With respect to baby-drinks, the package would include the brand Babysoif brand and all current product recipes (formulations, etc.) with a 3-year supply agreement and at the option of the purchaser, the provision of manufacturing technical assistance for 3 years.

Belgium

88. In Belgium, the divestment package would in particular comprise the following:

1) Baby meals:

- a 5-year exclusive license on the following brands: Pots Bledina, Bledichef, Les Idées de Maman, Compotines Blédina, Pots Fruits Blédina, Pots desserts Blédina Bledisoup, Bledimilky/Petit Bledi and Repas du Soir (only the authorization to use the last product as it is not a registered trademark) - This licence would be followed by a 5-year commitment not to reintroduce the divested brands in Belgium (black-out period). Danone furthermore commits not to use the prefix "Blédi" in relation to any product sold by it in Belgium and the Netherlands during the license period and the "blackout" period defined above, except for a transitional period of up to 12 months necessary for the products not covered by the Licensed Baby Meal Brands (Les Petits Grands) to be re-branded to other (e.g., Numico) brands in Belgium

- Transfer of the existing production contract with third party/ies

- a 3-year "at cost" supply agreement for the production of the products covered by the licenses (optional)

- a 3-year - manufacturing technical assistance - a transfer of Bledina's distribution agreement in Belgium (optional)

- a license to Bledina's [...] technology for the manufacture of [...] (optional)

2) GUM

- the assignment of the brand 1-2-3 (with recipes, formulations etc.) and a 5-year license on the brand Gervais for use solely in Belgium in relation to GUM.

- Danone's contract with its current supplier of GUM 1-2-3

- a 5-year license for Bledilait and Bledilac (see schedule 4 of the attached commitments), followed by a 5-year black-out period including recipes and formulation as well as a 3-year at cost supply agreement. The same black-out period will follow the 5-year license on the Gervais brand.

3) Baby drink

- the authorization to use the Minibiberon designation in Belgium for five years, followed by a 5-year black-out period and all current product recipes, formulations, including a 3-year "at cost" supply agreement for the production of the products covered and at the option of the purchaser a 3-year manufacturing technical assistance etc.

4) Baby snack

- The assignment of the brands Betterfoodand Lu Vitabis.

Netherlands

89. In the Netherlands, the divestment package would in particular comprise the following:

1) Baby meals:

- a 5-year exclusive license on the following brands: Pots Bledina, Bledichef, Idées de Maman, Repas du Soir (22), Compotines Blédina, Pots Fruits Blédina, Pots desserts Blédina, Bledisoup, Bledimilky/Petit Bledi. This would not include the brand Les Petits Grands that would be kept by the new entity. The 5-year license would be followed by a 5-year commitment not to reintroduce the divested brands in the Netherlands (black-out period). Danone furthermore commits not to use the prefix "Blédi" in relation to any product sold by it in Belgium and the Netherlands during the license period and the "blackout" period defined above, except for a transitional period of up to 12 months necessary for the products not covered by the Licensed Baby Meal Brands (Les Petits Grands) to be re-branded to other (e.g., Numico) brands in Belgium

- the transfer of Bledina's distribution contract with its distributor PAB for the Netherlands (optional for the purchaser)

- a 3-year at cost supply agreement for the products covered by the licensed brands

- a license to Bledina's [...] technology for the manufacture of [...] (optional)

2) Baby snacks:

- the assignment of the brand Lu Liga

(c) Suitability for removing the serious doubts France

IFFO milk

90. As regards IFFO milk (including therapeutic milks) in France, the divested and licensed brands would completely remove the overlap. Indeed, Numico uses today the two brands Nutricia ([10-20]% market share in 2006) and Milupa ([0-5] % market share) to market its IFFO milk products in France. Lemiel is used as a sub-brand to Nutricia, whereas Milumel was the brand replaced recently by the brand Milupa.

91. The acquirer will be the Milupa and Nutricia licensee of the new entity for 5 years. According to the market test, and while the details of the licensing agreements between Danone and the acquirer (e.g. provisions on the change of brands, resolutions of Disputes (23), etc.) would be critical, this duration appears sufficient to allow the acquirer to re-brand the products with its own brands. It can however not be shorter -as claimed by the parties- as brands play an extremely important role on this market and rebranding implies massive education and marketing efforts. It is clear from the commitments that the acquirer of the divested business will be able to use the acquired brands to launch its re-branding. It can rely especially on Lemiel. Indeed, while the divested brand Lemiel has been used since 2006 as a sub-brand to Numico's main brand Nutricia, it appears to continue to enjoy a very strong brand awareness rooted in historical presence on the French market. It represents approximately [30-40]% of the Nutricia sales in France, and those consumers who buy Lemiel products would be more loyal to Lemiel than to Nutricia.

92. According to the information collected by the Commission, the relevance of splitting the brands between two different acquirers appears doubtful with respect to restoring effective competition. Indeed, Milupa achieves today a small market share ([0-5] %), especially among retailers, apparently due to a recent re-branding from Milumel to Milupa. Separating Milupa from Nutricia could strike a fatal blow to Milupa, as the acquirer of the Milupa brand would not achieve enough sales to retain the interest of retailers. Thus, it appears highly preferable that, to restore pre-merger competition conditions, the acquirer acquires the overall divested package in the IFFO milk.

93. The brands introduced by the acquirer will also not face the re-introduction of the Milupa and Nuticia brands after the expiration of the licenses for five years, which provides enough time to the acquirer to build brands' equity.

94. As regards production facilities, interested acquirers will have the possibility to purchase Numico's plant in [...]. Should it be the case, such acquirer would be able to manufacture the products marketed in France. As the plant has considerable capacity, the acquirer would have to supply to Danone products for the marketing of these Numico products outside of France. This solution would have the merit to enable the purchaser to control its cost structure. This is all the more important, as Numico's Nutricia is priced at a lower level than competing brands, and cost of manufacturing is therefore critical. Second, the new entity would be able to introduce innovations and new products on the market without delay. Third, the inherent difficulties of the cost monitoring of supply-agreements would be avoided.

95. Alternatively, if the buyer is of the view that no production facility is needed as it could use or expand its own capacity or find alternative sources, it could opt for a supply agreement. This supply agreement would enable the buyer to manage the transition period during which the manufacturing of Milupa and Nutricia products would be transferred from the current Numico's production lines to its own. According to the market investigation, this transition could last up to three years (and the duration of the supply agreement offered by Danone is set accordingly). Thus, given that, under this arrangement, the supply agreement could be in force during much more than a couple of months, it will have to work effectively so as to ensure that competition conditions postmerger are comparable to those conditions pre-merger. These conditions are all the more sensitive as the purchaser would be supplied by the leading market player in France.

96. According to the market test, and even if one competitor explained that such supply agreement would not be satisfactory, this arrangement would be feasible under some conditions. Indeed, among those competitors that believe such supply agreement could work in a satisfactory fashion, one of them explains that "the supply agreement to be entered between Danone and the acquirer would need to guarantee that the acquirer generates a sufficiently high gross margin to finance a high level of advertising and promotion costs. High promotion is a must if the business is to survive and generate a satisfactory return for the acquirer." (24) This is confirmed by another competitor. Another competitor points out that costs are difficult to monitor and, to ensure that competition is restored, costs other than manufacturing costs should be taken into account: "The supply agreement should make sure that the acquirer will benefit from all economies of scale including supply of raw material. Other elements (such as transport costs, packaging, general administration and marketing) play a role in the ability of the acquirer to maintain the pricing policy. Monitoring these factors is difficult due to the lack of transparency. It is necessary to bring in a third party to ensure the acquirer will benefit from economies of scale". (25) In this respect, the attached commitments provide that the monitoring trustee will have the responsibility to review such supply agreement.

97. As regards innovations not included in the current product pipeline of Numico for the next two years, confidentiality issues (innovations designed by the acquirer must not be communicated to Danone) implies that the acquirer would be able to design and produce such innovations on its own.

98. In any case, should the acquirer not wish to buy Numico's plant, it would also have access to the Numico's Eazypack packaging technology through a license and also to the FOS/GOS (oligosaccharides) formulation. These two latter points are essential to the remedy package given that the Eazypack technology is currently being introduced on French shelves. As for the FOS/GOS formulation, it was reported to the Commission that the formulation of the products based on the FOS/GOS recipe had clinically proven beneficial effects and are marketed as such to paediatricians and maternities.

99. Furthermore, the acquirer would also have access to the recent and current fruits of Numico's research and development and have access to Numico's innovation for the next two years. The personnel of Numico France dedicated to the baby-food business, and in particular the sales force in charge of marketing the products to professionals (paediatricians) and to retailers, is also part of the package. This is all the more crucial as the acquirer of the divested business will need to explain to professionals the change of brands so that the latter don't change their recommendations.

100. Given the design of the remedy package, respondents unanimously explained that the acquirer should be a company already active in the IFFO/GUM business or, at least, a dairy company. The Commission notes that such companies have expressed interest for acquiring the divested business, which suggests the good degree of viability of the package.

101. In conclusion, provided the final purchaser meets the requirements explained above, the attached commitments remedy the serious doubt expressed on the French market for IFFO milk.

Baby-drinks

102. While the baby-drink business of Numico in France is modest, a similar conclusion can be reached for the commitment made by Danone in this respect. The overlap would be removed in its entirety and, in view of the result of the market test, competition concerns would no longer exist. As regards viability, an interested purchaser expressed the view that the licensing and black out periods should be long enough to enable the rebranding, and this observation is addressed in the amended commitments offered by Danone.

Belgium

103. Danone offered a revised package to address competition concerns identified on the baby meal, baby GUM, and baby drink markets in Belgium. In addition, given that the Kraft-Danone transaction is not yet closed, a "technical" remedy with respect to baby snacks was also submitted. As described above, it consists of the divestiture of the Betterfood and Lu Liga brands.

104. This package removes the entire overlap for baby-meals (26), GUM (27), and drinks (28). The Commission in particular notes that the acquirer could be transferred the distribution agreement of Danone with its Belgian distributor, which means that it will benefit from the access to retailers and customer relationships this distributor has achieved. Upon the results of the market test, the license and black-out period are extended each to 5 years, the acquirer will have a license on the [...] technology (used for the manufacturing of some products already marketed in Belgium) as well as technical assistance for manufacturing, and all current Bledina brands will be included in the package. Similarly to the French package, the acquirer will be able to benefit from innovations introduced by Danone/Bledina for the next two years.

105. Contrary to the production of baby-milk in France, where higher volumes are at stake, a 3-year supply agreement would not raise major difficulties besides cost monitoring. First, a share of Danone's current production (fruit pouches, meal bowls, soups and purees) is outsourced and this part of the production would be transferred to the acquirer. Second, companies able to manufacture Danone's products are active on the market (but outside of Belgium) and three years will be sufficient to migrate Danone's product portfolio (29). Third, given the low volumes at stake, additional capacity is easier to find/add. Finally, the buyer will benefit from Danone's technical assistance to operate the migration of the production to its production lines. Accordingly, respondents to the market investigation did not express concerns regarding the arrangement provided in the commitments.

106. As regards baby snacks, the commitment will reduce the parties' market share to [15- 25] %, thereby removing the existence of serious doubts (30).

107. In conclusion, the attached commitments submitted by Danone remedy the serious doubts raised by the Commission on the above mentioned Belgian markets for baby meal, baby GUM, baby snacks, and baby drinks.

Netherlands

108. As explained above, Danone is active in the Netherlands through its Belgian distributor, and Danone has agreed to extend the Belgian remedy package regarding baby meals to the Netherlands. The package will therefore include, among others, 5-year licensing on brands, supply-agreement, and the transfer of Danone's distribution contract. This undertaking removes the overlap on the Dutch market for baby meals and remedies the identified competition concerns.

109. As regards snacks, Danone is almost exclusively active through its brand LU Liga ([45-55] % market share in 2006), which should be divested to Kraft as part of the Kraft/Danone transaction. A remedy has been included in the remedy package, whereby Danone commits to sell the Lu Liga brand in the Netherlands. This will remove any competition concerns.

110. Consequently, the attached commitment addresses the serious doubts raised on the Dutch markets for baby meals and baby snacks.

(d) Conclusion on the commitments

111. The Commission therefore considers the commitments suitable for remedying the serious doubts on the compatibility of the concentration with the common market and the EEA, which have been established in the previous sections of this Decision.

VI. CONDITIONS AND OBLIGATIONS

112. Under 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 common market.

113. The fulfilment 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 common market no longer stands. Where the undertakings concerned commit a breach of an obligation, the Commission may revoke the clearance decision in accordance with Article 6(3) 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.

114. In accordance with the basic distinction described above, the decision in this case is conditioned on the full compliance with Sections B to E of the Commitments submitted by the notifying party on 30/10/2007.

115. The remaining requirements set out in the other Sections of the Commitments submitted by the parties on 30/10/2007 are considered to constitute obligations.

VII. CONCLUSION

116. The Commission has concluded that the remedies submitted by the Parties are sufficient to remove the serious doubts raised by the concentration. Accordingly, subject to the full compliance with the commitments submitted by the Parties the Commission has decided not to oppose the notified operation and to declare it compatible with the common market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) and Article 6(2) of Council Regulation (EC) No 139-2004.

117. The detailed text of the commitments is annexed to this decision. The full text of the annexed commitments forms an integral part to this decision.

Notes

1 OJ L 24, 29.1.2004, p. 1.

2 See case COMP/M.4824 Kraft/Danone Biscuits.

3 Decision COMP/M.4688 Nestlé/Gerber of 27 July 2007.

4 Monopolies and Mergers Commission: "NV Verenigde Bedrijven Nutricia and enterprises belonging to Milupa AG: A report on the merger situation", August 1996

5 Cow's milk is not recommended because of its high protein and salt content, which may put a strain on infant immature's kidneys.

6 See decision Case COM/M.4540 Nestlé/Novartis (Medical nutrition business) of 29 June 2007.

7 See list of products reimbursed by the French Healthcare system available at http://www.ameli.fr/fileadmin/user_upload/documents/References_juridiques_secteur_pharmacie.pdf (page 168). The Neocate is listed an oral supplementation product.

8 Form CO, page 34.

9 Answer from the parties to the Commission's request for information dated 4 October 2007.

10 See [...].

11 See Cases COMP/M.4533 SCA/P&G, and M.4761 Bongrain/Sodiaal/JV.

12 The parties submit that for IFFO, the average Community price was approximately €13 per kg in 2006. Countries like Greece and Italy offer relatively high average prices (respectively €17 and €28) whereas the average prices in the Netherlands and Germany are respectively €9 and €10..

13 Source: Nielsen

14 Fructo Oligosaccahrides and Galacto-Oligosaccharides

15 Answer to question 18 in questionnaire sent by the Commission to customers on 20.09.2007

16 The sales include Bledilac sales in Belgium in 2006. Bledilac is a mix of milk and cereals, which sales were [...] million euros in 2006, approximately [0-10] % of the total GUM market

17 The transaction has been notified to the Commission on 12 september 2007 M. 4824 Kraft/Danone Biscuits

18 The overlaps in GUM (Danone [0-5] %) and in baby cereals (Danone [0-5] %) are minimal.

19 Baby dry cereals do not give rise to competition concerns given the marginal sales made by Danone on this market.

20 There is no overlap in savoury baby meals. In sweet baby meals, the new entity would hold a market share of [40-50] % (Nestlé: [50-60] %).

21 After the expiry of the licensing period, Danone commits to grant the purchaser a non-exclusive license for the recipes and formulations on an arm's length basis at the request of the purchaser.

22 Only the authorization to use this product as it is not a registered trademark.

23 Such disputes may arise due to the fact that Danone will continue to use the Nutricia brand for other products.

24 Response to market test sent to competitors, question 2

25 Ibidem

26 The market share of the licensed brands are the following: Pots Bledina ([5-10] %), Repas du Soir ([0-5] %), Bledichef ([15-25] %), Idees de Maman ([0-5] %), Bledisoup ([0-5] %), Compotines Bledina ([5-10] %), Pots Fruits Bledina ([0-5] %), Pots Desserts Bledina ([0-5] %), Beldimilky ([0-5] %). Les Petits Grands retained by Danone achieved only marginal sales in 2007.