Commission, March 21, 2011, No M.6059

Dear Sir/Madam,

Subject:  Case No COMP/M.6059 - Norbert Dentressangle/ Laxey Logistics Notification of 14/02/2011 pursuant to Article 4 of Council Regulation No 139/20041

1.  On 3 January 2011, the European Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 by which the undertaking Norbert Dentressangle S.A. ('Norbert Dentressangle', France) controlled by Financière Norbert Dentressangle ('FND', France) acquires within the meaning of Article 3(1)(b) of the Merger Regulation control of the whole of Laxey Logistics Limited (United Kingdom), the holding company of the undertaking TDG Limited ('TDG', United Kingdom), by way of purchase of shares.

2.  This notification was declared incomplete in the sense of Article 5(2) of Commission Regulation (EC) No 803/2004 on 28 January 2011. The notifying party provided the information required and the notification became complete, within the meaning of Article 10(1) of the Merger Regulation, on 14 February 2011.

I. THE PARTIES AND THE CONCENTRATION

3.   Norbert Dentressangle is a logistics and transport services provider operating across Europe.

4.   Laxey Logistics is a holding company whose only shareholding consists of TDG Limited ('TDG', United Kingdom). TDG is a provider of outsourced logistics services with operations in the UK, Belgium, the Netherlands, Ireland, Hungary, Germany and Spain.

5. With the completion of the Sale and Purchase Agreement of 27 November 2010,  Norbert Dentressangle will acquire sole control of Laxey Logistics through the acquisition of the entire share capital.

6. The notified transaction therefore constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

II. EU DIMENSION

7.  The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 2,500 million2 (EUR 2,722 million for FND and EUR 743 million for Laxey Logistics). In each of at least three Member States their combined aggregate turnover exceeds EUR 100 million (EUR […] million and EUR […] million in Spain, EUR […] million and EUR […] million in the Netherlands and EUR […] million and EUR […] million in the United Kingdom for FND and for Laxey Logistics, respectively).

8. In each of the three aforementioned Member States the aggregate turnover of each of FND and Laxey Logistics is more than EUR 25 million. The aggregate Union-wide turnover of each of the undertakings concerned is more than EUR 100 million (EUR […] million for FND and […] for Laxey Logistics) and neither of them achieves more than two-thirds of its aggregate EU-wide turnover within one and the same Member State. The notified operation therefore has an EU dimension.

III. RELEVANT MARKETS

III.1.   Contract logistics

III.1.1.       Relevant product market

9.  The Commission has previously considered general contract logistics services as a distinct market but the exact product market definition was left open. Contract logistics services can be defined as "the part of the supply chain process that plans, implements and controls the efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption in order to meet customers' requirements".3 The market investigation confirmed that the focal point of contract logistics is the management of the flow of goods for customers either across the total supply chain or an element of it.

10.  The Commission has considered different possible segmentations of this market, such as (i)   cross border and domestic logistics services, (ii) by reference to the type of goods handled or the industry serviced (e.g. food retail, consumer, pharmaceuticals and high tech) or (iii) by type of providers into lead logistics providers (LLPs) and traditional contract logistics services providers (3LPs). In the end, however, the Commission left open whether such a distinction was warranted.4

11.  The notifying party submits that there is a single product market for all contract logistics services and that it would not be appropriate to distinguish between different sector- specific segments.

12.  The market investigation has shown that a majority of customers and competitors considers that the market for contract logistics services for dangerous/hazardous products could be distinct from the market for contract logistics in general, because suppliers of contract logistics cannot easily switch to contract logistics for dangerous/hazardous goods (due to differences in legislation, need for specialised infrastructure including storage facilities and tankers, investment in staff training and equipment, specialised knowledge and experience). Some competitors also consider contract logistics for (temperature controlled) food to be a separate market.

13.  A majority of competitors considers that a distinction should be made between contract logistics for the distribution of bulk goods and contract logistics for the distribution of non-bulk goods. This distinction appears to be relevant in particular for the market segment covering contact logistics for chemicals/hazardous goods. On the other hand, some competitors consider that even though the equipment may vary, the processes of contract logistics of bulk and non-bulk goods are similar.

14.  However, for the purpose of the present decision, the exact product market definition  can be left open as the proposed transaction would not give rise to competition concerns irrespective of the market definition.

III.1.2.       Relevant geographic market

15.  The notifying party submits that whilst in previous cases the Commission has generally held that the market for contract logistics is national in scope, more recent cases indicated a trend towards internationalisation, and hence the market may be EEA-wide  in scope.5

16.  The market investigation did not give a clear result concerning the geographic  dimension of the market. However, for the purpose of the present decision, the exact geographic market definition can be left open as the proposed transaction would not  give rise to competition concerns irrespective of the geographic market definition.

III.2.   Freight forwarding

III.2.1.       Relevant product market

17.  In its practice, the Commission has defined freight forwarding as "the organisation of transportation of items (possibly including activities such as customs clearance, warehousing, ground services etc.) on behalf of customers according to their needs"6.

18.  The Commission has considered a further sub-segmentation of freight forwarding services according to the type of operations into (i) domestic and international freight forwarding, as well as according to the type of freight forwarding means into (ii) freight forwarding by air, land7 and sea. The notifying party agrees with these possible segmentations of the freight forwarding market.

19.  The results of the market investigation are not conclusive concerning the potential subdivision of the freight forwarding market. However, for the purpose of the present decision, the exact product market definition can be left open as the proposed  transaction would not give rise to competition concerns irrespective of the market definition.

III.2.2.       Relevant geographic market

20.  In its previous decisions, the Commission has so far left open whether the freight forwarding market or subsections thereof are to be considered as national due to language and regulatory barriers, or as larger in view of a trend by major competitors to create networks which are trans-national or even EEA-wide.8

21.  The notifying party submits that past market investigations of the Commission have found indications that these markets were increasingly broader and likely to be EEA- wide.

22.  Nevertheless, the market investigation conducted in the present case did not indicate clearly that the geographic dimension of the market was broader than national.  However, for the purpose of the present decision, the exact geographic market definition can be left open as the proposed transaction would not give rise to competition concerns irrespective of the geographic market definition.

III.3.   Road freight transport

III.3.1.       Relevant product market

23.  A distinction between different modes of freight transport is commonly made with the freight  transport  market  being  segmented  into  markets  for  air,  maritime  and    land transport. Furthermore, with respect to land freight transport, the Commission  considered further possible segmentations such as transport by rail, road and inland waterways, indicating that further segmentations should be made on a case-by-case basis.9 The notifying party does not contest the Commission's market definitions.

24.  The market investigation furthermore indicated that the market for road freight transport of dangerous/hazardous goods could constitute a market which is distinct from the market for road freight transport in general. Indeed, specific equipments are required, and specific rules and regulations10 apply to this type of transport. Furthermore, the  skills required are different and drivers have to follow a specific training. While several respondents considered that it was not easy for "generalist" road freight transport companies to carry dangerous/hazardous products as well, some respondents underlined that the same type of trucks could be used for the transport of both hazardous and non- hazardous goods, and that any transport firm could enter the market for the road freight transport of hazardous goods with some limited investment in training and equipment.

25.  Finally, some respondents also pointed to the fact that the transport of bulk and non-bulk hazardous goods (in majority palletised goods) constituted distinct markets, and that the handling of palletized hazardous goods could eventually be considered as a separate product market. Indeed, bulk and non-bulk transport frequently involve different types of vehicles, while palletized goods have to be handled using certain specific equipments.

26.  However, for the purpose of the present decision, the exact product market definition  can be left open as the proposed transaction would not give rise to competition concerns irrespective of the market definition.

III.3.2.       Relevant geographic market

27.  In previous decisions, the Commission has considered that the market for land freight transport may be national given the cost differences between the Member States  resulting from national labour law and fuel prices, leaving however the geographic market definition open.11 The notifying party agrees with this approach.

28.  The market investigation broadly confirms that the geographic market dimension is national. However, for the purpose of the present decision, the exact geographic market definition can be left open as the proposed transaction would not give rise to  competition concerns irrespective of the geographic market definition.

IV. COMPETITIVE ASSESSMENT

IV.1.    Contract logistics

29.   The parties' contract logistics activities overlap in five Member States within the EU: the United Kingdom, Ireland, Spain, Belgium and the Netherlands. According to the  best estimates provided by the notifying party, these overlaps are minor, as both at an EEA level and at a national level the parties' combined market shares remain below [10- 20]%.

Table A: Market shares of the parties in the market for contract logistics in 2009 (%)

30.  According to the notifying party, the contract logistics market is highly fragmented both at the EEA and national levels. The estimated market shares of each of the three main competitors are in all cases higher than the combined market shares of the parties. The notifying party submits that, whilst facing competition from larger players such as CEVA, Kuehne+Nagel, Wincanton, DHL Exel, DSV and others, the parties have a combined market share of less than [10-20]% under any possible contract logistics market definition.

31.  With respect to narrower segments of the contract logistics market such as (i) food (temperature controlled), (ii) dangerous/hazardous goods, (iii) consumer contract logistics (non-food retail) and (iv) non-specialised contract logistics, the notifying party submits, based on its best estimates12, that the parties' combined market share would not exceed [10-20]% either at an EEA-level or in any of the five Member States concerned (with [5-10]% being the highest combined market share estimated for non-specialised contract logistics in the UK).

32.  The market investigation focused on the UK market as this was the only Member State  in which prima facie competition concerns could not be excluded and concerning which the Commission had also received a complaint. The results of the market investigation show that a number of larger players are active in the UK market for contract logistics with DHL/Exel being the market leader. The combined market share of Norbert Dentressangle and TDG appears to remain below [10-20]%, at least for the UK  contract logistics market as a whole. Therefore, no competition issues appear to arise on the UK road transport market as a whole.

33.  As regards possible market segmentations in the UK, the Commission notes that according to the market investigation a possible narrower market for contract logistics   of dangerous/hazardous goods comes into consideration. In this possible narrower market TDG appears to be a major player particularly in regard to non-bulk palletised goods13. DHL Excel is also a major player in this possible market, while other important players mentioned in the replies to the market investigation include DSV, Kuehne+Nagel, CEVA. The notifying party submits that Norbert Dentressangle is not active in this possible market.14 The Commission's analysis of tender data submitted by the notifying party showed that Norbert Dentressangle has participated in a limited number of tenders for the supply of contract logistics services for hazardous goods and that it has not won any of these tenders over the past five years. Because of the weak position of Norbert Dentressangle in this possible market the proposed transaction has a limited effect only. Also, the combination of Norbert Dentressangle's transport assets and TDG's network will not give the merged entity a market position that cannot be replicated by other players. Already today other players such as DHL Excel, DSV, Kuehne+Nagel and CEVA operate a similar network. The market investigation therefore confirms that there will remain viable alternative suppliers also on a possible market for contract logistics of dangerous/hazardous goods, including the narrower segment for non-bulk.

34.  The market investigation also suggests that in a possible market for contract logistics of (temperature controlled) food and drinks the proposed acquisition would combine the strengths of TDG in warehousing with the strengths of Norbert Dentressangle in transport. However, in this market the merged entity will continue to face competition from competitors with a stronger or comparable market position such as DHL Exel, Wincanton, Kuehne+Nagel and CEVA.

35.  In the light of the presence of important competitors in the different possible markets for contract logistics, including the segments/sub-markets of contract logistics of dangerous/hazardous goods and (temperature controlled) food, it is concluded that the transaction is unlikely to result in any significant impediment to effective competition in the EEA and national markets for contract logistics, including possible narrower sub- markets.

IV.2. Freight forwarding

36.  The parties submit that their freight forwarding activities are rather marginal and account for a minimal market share. As Norbert Dentressangle only entered the sector in 2010, the only overlaps between the parties arose last year in two countries: the UK and Spain.

37.  According to the best estimates provided by the notifying party, the parties' combined turnover in the freight forwarding market will not exceed [0-5]% at an EEA level. The notifying party submits that there are no accurate external value data on the size of the UK and Spanish freight forwarding markets. In any event, according to the notifying party, the parties' market shares would not exceed [0-5]% under any alternative freight forwarding market definition and their main competitors (e.g. DHL, Kuehne+Nagel, DB Schenker, Panalpina) would have individual market shares higher than those of the parties both at an EEA and at a national level.

Table B: Market shares of the parties and in the market for freight forwarding in 2009/2010

38.  The market investigation has confirmed that the market for freight forwarding in the EEA and in the UK is highly fragmented and that there will be no competition concern post merger in this market. Strong competition from companies like DHL, Kuehne+Nagel, DB Schenker and others will continue to exist in the freight forwarding market in the EEA as well as in Spain and the UK.

39.  In these circumstances, it can be concluded that the transaction is unlikely to result in any significant impediment to effective competition in the market for freight forwarding in the EEA, Spain or the UK.

IV.3.    Road freight transport

40.     The road freight transport activities of the parties overlap in two Member States (UK  and Spain) where the parties would reach a combined market share of less than [0-5]% according to the notifying party. Moreover, the overlaps only occur with respect to domestic freight transport.

Table C: Market shares of the parties in the market for road freight transport (2009)

41.     The notifying party submits that, based on its own best estimates, post-transaction the combined market share would in any event remain below [0-5]% in the EEA, the UK and Spain. In addition, according to the notifying party, the parties' main competitors (e.g. DHL Exel, Wincanton and Stobart Group in the UK and DHL Iberia, Azkar and Rhenus in Spain) have individual market shares in excess of the parties' combined market share. Therefore, according to the notifying party the transaction does not give rise to any competition concerns in the market for road freight transport.

42.     With respect to narrower segments of the road freight transport market such as (i) dangerous/hazardous goods (ADR bulk), (ii) dangerous/hazardous goods (ADR non bulk), and (iii) non-specialised goods (covering mainly industrial goods) road freight transport, the notifying party submits that the parties' combined market share would not exceed [10-20]% in either Spain or the UK (with [5-10]% being the highest combined market share estimated for ADR bulk in the UK). As in the case of contract logistics, market shares for the different possible sub-markets of the road freight transport market are based on the notifying party's best estimates.

43.     The market investigation focused on the UK market as this was the only Member State  in which prima facie competition concerns could not be excluded and concerning which the Commission had also received a complaint. It confirmed that a large number of players (including companies such as DHL Exel, Wincanton, Stobart, Kuehne+Nagel, CEVA, Norbert Dentressangle and TDG as well as specialised network operators such as Pall-Ex, Palletline and Palletways) are present on the UK market for road freight transport. According to data submitted by the notifying party, the combined market share of Norbert Dentressangle and TDG appears to remain below [10-20]%, at least for the UK road freight transport market as a whole.

44.     Most respondents to the market investigation perceive TDG and Norbert Dentressangle as strong in the supply of road freight transport of hazardous goods, especially for palletised hazardous substances requiring specialised tanks and/or drivers.15 In addition, a few respondents referred to the relative strength of the parties in the market for the transport of certain bulk hazardous products. The market investigation also provides some indications that the UK nationwide distribution network of the parties might be improved due to the complementarities between Norbert Dentressangle's vehicle fleet and TDG's warehouse network.

45.     On the one hand, some competitors expect increased competitive pressures from the merged entity post-transaction, resulting in a decrease in prices. On the other hand,  some customers expressed concerns about the limited number of remaining suppliers of road freight transport of hazardous goods. However, despite the fact that the combined entity will be a stronger player in the possible narrower markets for road freight  transport of palletised hazardous goods and certain bulk hazardous products, the market investigation has shown that there will remain several viable alternative suppliers in these markets (including DHL Exel, the Potter Group, Rhys Davies, Clarks, FreightRoute, Wincanton and the Hazchem network). The market investigation shows that several competitors of a similar size operate in this segment and that at least two of them have their own nationwide warehouse network, whereas the others already have access to such networks operated by TDG's competitors.

46.     Moreover, there are indications from the market investigation that operators like the Hazchem network, DHL Exel, Wincanton, Suttons, Potter and Clarks are able to expand their activities in the supply of road freight transport of hazardous goods (be it pallets or in liquid bulk) if such an opportunity arises.

47.     In light of the continued presence of viable alternative suppliers in the market for road freight transport of hazardous goods and the possibility for these companies to expand their activities, it can be concluded that the transaction is unlikely to result in any significant impediment to effective competition in the UK. More generally, the proposed transaction does not give rise to competition concerns in the EEA and national markets for road freight transport or any sub-markets/segments thereof.

VI.  CONCLUSION

48.     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.

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        Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission Consolidated Jurisdictional Notice (OJ C95, 16.04.2008, p1).

3        COMP/M.2411 – Autologic/TNT/Wallenius/CAT JV, par. 15.

4        COMP/M.4232 – Scottish&Newcastle/Kuehne+Nagel JV, par 14.

5        Referring to COMP/M.3971 – Deutsche Post/Exel, par. 29.

6        COMP/M.1794 – Deutsche Post/Air Express International, par. 8.

7        In the Commission's practice, the further segmentation of land freight forwarding has been left open, with the exception of the freight forwarding of certain very specific products. For example, in COMP/M.5579 TLP/Ermewa, par. 51, the Commission defined a specific market for freight forwarding of cereals.

8       See Case COMP/M.5877 Geodis/Giraud, COMP/M.5096 RCA/MÁV Cargo para.21, COMP/M.4045 DB/BAX Global, Case COMP/M.3971 Deutsche Post/Exel, Case COMP/M.4786 Deutsche Bahn/Transfesa and Case COMP/M.1794 Deutsche Post/Air Express International.

9        COMP/M.5096 – RCA/MÁV Cargo, par. 27; and COMP/M.5579 – TLP/Ermewa, par. 47-49.

10     The European Agreement concerning the International Carriage of Dangerous Goods by Road, commonly known as ADR (Accord européen relatif au transport international des marchandises Dangereuses par Route), covers the regulations on the international transport of hazardous goods by road in the EU. These regulations specify the classifications of what is a hazardous product covering a range of materials from a wide variety of industry sectors.

11  COMP/M.1649 Gefco/KN Elan, para 14, M.5877 Geodis/Giraud, para 15

12         The notifying party stressed on several occasions in the Form CO and in its replies to the Commission's questions that it was very difficult to estimate the market size of national markets for transport services, notably due to the absence of accurate external value data on the relevant market segment sizes for the UK. As a result, the notifying party submits that it does not have any reliable third party industry data that would allow a verification of its own best estimate of the market size used for the estimation of the   parties' market shares. The market investigation has allowed the Commission to make a more precise assessment of the impact of the proposed transaction on the relevant market segments.

13     The notifying party submits that the large majority of non-bulk goods are transported on pallets. Other non-bulk goods are transported in drums or other containers.

14     According to some respondents, Norbert Dentressangle appears actually to be active in this possible market but only as a small player.

15  Some respondents estimated that the combined market share of the parties would exceed [10-20]% in this particular segment.