Commission, June 6, 2013, No M.6908

Dear Sir/Madam,

Subject: Case No COMP/M.6908 - Randstad / USG Assets

Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/20041

(1)    On 29 April 2013, the European Commission received notification of a proposed concentration pursuant to Article 4 of the Merger Regulation by which Randstad Holding N.V. ("Randstad", the Netherlands) acquires within the meaning of Article 3(1)(b) of the Merger Regulation sole control of part of USG People N.V. ("USG Assets", the Netherlands) by way of purchase of shares2 (Randstad and USG Assets are designated hereinafter as the "Parties")

1.        THE PARTIES AND THE OPERATION

(2) Both Randstad and USG Assets are providers of temporary employment services, permanent placement services and human resources services.

(3)  The proposed transaction consists of the acquisition by Randstad of all the shares in USG Assets,  which  consists  of  the  general  staffing companies of USG People N.V. in Austria, Italy, Luxembourg, Poland, Spain and Switzerland, by way of a Share Purchase Agreement3. Therefore, the proposed transaction constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

2.     EU DIMENSION

(4)   The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million4 (Randstad: EUR 17 087 million; USG Assets: EUR 449 million). Each of  them  has  a   Union-wide   turnover   in   excess   of   EUR 250 million   (Randstad:  EUR […] million; USG Assets: EUR […] million), but they do not achieve more than two- thirds of their aggregate Union-wide turnover within one and the same Member State. The proposed transaction therefore has a Union dimension.

3.         RELEVANT MARKETS

(5)  The activities of Randstad and USG Assets overlap in the provision of temporary employment services ("TES") and permanent employment services ("PES").

(6)  However, Randstad and USG Assets have only limited activities on the PES market. They are both active in Italy, Luxembourg, Poland and Spain but none of the overlaps give rise to affected markets in these Member States.

(7)   The Commission will therefore only assess the effects of the transaction on the TES market.

3.1.  Relevant product market

3.1.1.   Market for flexible labour

(8) The Commission in previous cases has formed the view that TES is a different market compared to the wider market for flexible labour5 . The Parties submit that the effects of the proposed transaction should be assessed within the wider market for  "flexible  labour", which comprises not only TES but also direct hiring of employees by the user firms on short term or fixed term contracts, the use of permanent staff on a flexible basis (such as overtime, non-regular hours or on-call system), the use of labour pools, or the hiring of self-employed persons or freelancers.

(9) The results of the market investigation are mixed in this regard. Indeed, whilst a majority of customers considered that other forms of flexible labour would tend to constrain the provision of TES, competitors are equally split as regards this question. In addition, the majority of customers indicated that they would not switch to alternative forms of recruitment of flexible labour if the prices of TES suppliers were to increase by 5 to 10%. Some of the respondents also emphasised the importance of the added value brought by   the TES suppliers, which would not be possible to achieve with other forms of flexible labour.  In particular, the added value of using TES suppliers is seen in their expertise in finding suitable candidates, the flexibility offered to user firms (notably when accommodating the work performance linked to changes in the production demand or the legal requirements in a certain Member State) and the overall reduction of administrative work associated with the hiring of workers on the user firm side.

(10)  However, for the purposes of this decision, it is not necessary to reach a definitive  conclusion on the relevant market definition. The transaction does not give rise to serious doubts irrespective of whether the relevant market is the wider market for flexible labour or the market for TES only.

3.1.2.          Market for overall TES: regular, secondments and project-based temporary employment services

(11)  The Commission concluded in previous decisions that the overall TES market should  include "secondments" and "project-based" TES since these activities serve the same basic purpose as "regular" TES.6 The Parties endorsed this position arguing that the basic service of offering temporary work remains the same as "regular" TES and secondment and project- based TES are very closely related. The majority of the respondents to the market investigation confirmed this approach.

(12)   However, while there are indications that the market for TES should include "regular", "secondments" and "project-based" TES, for the purposes of this decision, it is not necessary to conclude on the precise market definition. The transaction does not give rise to serious doubts as to its compatibility with the internal market on any plausible market definition.

3.1.3.          Market for general and professional TES

(13) The Commission has also previously analysed whether TES should be segmented according to the degree of education or specialisation of the worker. The Commission considered distinguishing between "professional" TES involving higher-educated workers and specialists such as IT staff, and "general" TES involving lower-educated and lower-skilled workers7.

(14)  In relation to a possible subdivision of the market into "general" and "professional" TES, the Parties submit that no such distinction is relevant from a supply side perspective, as the  skills required to operate in one segment are essentially the same as the skills required to operate in the other segment.

(15) However, a large majority of respondents to the market investigation argued that the TES market should be further segmented into a market for general staffing and a market for professional staffing due to specific skills and appropriate education required for the recruitment of professional staff. Indeed, the recruitment processes, the approach to candidates and the price margins with respect to general and professional staffing are different.

(16)  However, for the purposes of this decision, it is not necessary to conclude whether a distinction should be made between the "general" and "professional" TES segments as the transaction does not raise serious doubts as to its compatibility with the internal market irrespective of the precise market definition.

3.1.3.1.   Market for professional staffing: sub-segmentation by specialisation

(17) The Commission has also suggested that the "professional" TES segment could be sub- segmented by reference to the worker's specialisation (e.g. IT, engineering/technical, finance/legal, medical/science, etc.)8. However, for the purpose of the proposed transaction, it is not necessary to consider any further sub-segmentation of the professional TES segment, as USG Assets is not active in this segment and, therefore, there will be no overlap on any other possible sub-segments of the "professional" TES segment.

3.1.3.2.   Market for general staffing: sub-segmentation by specialisation

(18)   Within the "general" TES segment, the Commission has further considered distinguishing between a sub-segment for "office and administration" (e.g. secretarial and clerical staff) and one for "industry" (e.g. technical and engineering staff)9.

(19) The Parties argue that no such subdivisions exist within the general TES segment, as from a supply-side perspective any firm that operates in one sub-segment can easily enter the other one.

(20)   A large majority of respondents to the market investigation considered that a further sub- segmentation of the general TES segment according to the specialised sub-segments is still relevant due to different recruitment processes and the need for a certain degree of specialisation of workers. Moreover, even though the TES suppliers are generally active in all sub-segments, it is not uncommon that some agencies specialise in specific sub-segments of the general TES segment.

(21)   However, for the purposes of this decision, it is not necessary to reach a definitive  conclusion as to whether the general TES segment should be further subdivided into specialised sub-segments of "administration and office" and "industry". The transaction does not give rise to any serious doubts as to its compatibility with the internal market on any plausible market.

3.2.        Relevant geographic market

(22)    In line with previous Commission decisions, the Parties submit that the geographic scope of the TES market is not wider than national due to factors such as language differences, personal preferences regarding relocation of workers and differing legal and regulatory regimes between Member States10. In the same vein, the Parties argue that the main conditions for establishing and operating a temporary employment agency are generally similar per country (such as national permits and legislation, administrative procedures, conditions for setting up a branch, language and culture of the temporary employees, etc.) and, additionally, there are no significant price differences or languages restrictions in the relevant Member States and the contracts are generally concluded at a national level.

(23) The majority of respondents to the market investigation confirm that the geographic scope   of the TES market (including its segments and sub-segments) is national. Whilst some of the respondents indicated that hiring of more specialised or qualified workers may go beyond national borders, a large majority of the respondents considered the market to be national in scope due to the differences between national regulations and administrative procedures, language requirements and personal preferences regarding relocation.

(24) Therefore, for the purpose of this decision, the geographic market for the provision of TES should be considered as national and limited to the following countries Italy, Luxembourg, Poland and Spain.

(25) The Commission's conclusions as regards the relevant product market and geographic markets are applicable to all affected markets in the proposed transaction.

4.      COMPETITIVE ASSESSMENT

(26)  On the market for TES, the Parties' activities overlap in four Member States: Italy, Luxembourg, Poland and Spain. As USG Assets is not active in the segment for professional TES, overlaps only occur in the segment for general TES.

(27)  The proposed transaction gives rise to horizontally affected markets only in Luxembourg, Poland and Spain on the TES market.11 On a wider market for flexible labour,  the  transaction does not give rise to affected markets as the Parties' combined market shares are below 15% in Italy, Luxembourg, Poland and Spain.

(28)  The Parties submit that their combined market shares in any of the relevant segments and sub-segments of the TES market do not give rise to competition concerns in that they are generally below 25%. The Parties submit also that, even when their combined market shares would be above 25%, the competitive characteristics of the TES market are such that the proposed transaction will not give rise to any competition concerns, in particular because of the low switching costs, the existence of competition for tenders, the lack of closeness of competition, the low barriers to entry and expansion, the expected future market growth and the constraint exercised by other types of flexible labour.

(29)   The Commission will assess the effects of the transaction in each of three affected markets  in turn.

4.1.  Luxembourg

(30)   Table 1 below shows the Parties' and their main competitors' estimated market shares in Luxembourg. These estimates are in line with the figures collected throughout the market investigation:

Table 1: Temporary employment services in Luxembourg

Source: Parties' estimates inter alia on the basis of data from Fedil

(31)  Table 1 above reflects the Parties' and their competitors' positions on all possible markets namely overall TES12 (which also reflects the market shares for regular13 and general TES14) and the two specialised sub-segments of the general TES segment: office and administration TES and industry TES.

(32)  In Luxembourg, the combined markets share of the Parties will be around [20-30]% irrespective of the precise market definition with an increment not higher than [5-10]%. Post-transaction, the Parties will face a competitive constraint by other TES suppliers such  as Adecco, Manpower, Staff Interim and DLSI Luxembourg.

(33) Respondents to the market investigation did not raise any material concern as regards the effects of the proposed transaction in terms of prices, quality or availability of the services  on the TES market in Luxembourg.

(34)  Therefore, the Commission concludes that given the limited market shares, the strong presence of other TES suppliers as well as the absence of concerns on the part of market participants, the transaction does not raise serious doubts as to its compatibility with the internal market regarding the market for TES or any of its segments and sub-segments in Luxembourg.

4.2.        Poland

(35) Table 2 below shows the Parties' and their main competitors' estimated market shares in Poland. These estimates are broadly in line with the figures collected throughout the market investigation:

Table 2: Temporary employment services in Poland

Source: Parties' estimates inter alia on the basis of data from the Polskie Forum HR

(36)  Table 2 above reflects the Parties' and their competitors' positions on all possible markets, namely overall TES15 (which also reflects the market shares on the general TES segment16), regular TES17 (which also reflects the market shares on the regular general TES segment18) and the two specialised sub-segments of the regular general TES segment: office and administration TES and industry TES.

(37)   In Poland, the Parties will have a combined market share of below [20-30]% and the increment is also not higher than [5-10]% on all plausible market segmentations. Other well- established competitors such as Work Service, Manpower, Adecco, Trenkwalder and Work Express will continue to exert a significant competitive constraint on the Parties post- transaction.

(38)   Respondents to the market investigation did not raise any material concern as regards the effects of the proposed transaction in terms of prices, quality or availability of the services  on the TES market in Poland.

(39)  Therefore, the Commission concludes that given the limited market shares, the strong presence of other TES suppliers as well as the absence of concerns on the part of market participants, the transaction does not raise serious doubts as to its compatibility with the internal market regarding the market for TES or any of its segments and sub-segments in Poland.

4.3.        Spain

(40)  Table 3 below shows the Parties' and their main competitors' estimated market shares in Spain. These estimates are broadly in line with the figures collected throughout the market investigation:

Table 3: Temporary employment services in Spain

Source: Parties' estimates inter alia on the basis of data from AGETT

(41) Table 3 above reflects the Parties' and their competitors' positions on all possible markets, namely overall TES19 (which also reflects the market shares for the general TES segment20), regular TES21 (which also reflects the market shares for the regular general TES segment22) and the two specialised sub-segments of the regular general TES segment: office and administration TES and industry TES.

(42)  In Spain, the Parties' combined market share will remain below [20-30]% with increments not higher than [5-10]% in all plausible markets with the exception of the specialised sub- segment "industry" within the regular general TES segment. On this plausible sub-segment, the Parties will have a combined market share of [20-30]% with an increment of [5-10]%. The Parties will continue to face a competitive constraint from large and well-established TES suppliers Adecco and Manpower who will have significant shares on all possible sub- segments. Other competitors such as Eulen/Flexiplan, Eurofirms, Synergie and Iman will also continue to be present on the market.

(43)   The Parties submit that switching costs for user firms are low in that they can try out a new temporary employment agency without incurring any significant costs and it is easy for  them to switch between agencies. Contracts are non-exclusive and user firms frequently use multiple suppliers. In particular, the Parties submit that virtually all their large customers multi-source, which demonstrates that switching is easy for them. Customers have confirmed during the market investigation that they generally use multiple suppliers of TES, that contracts for the provision of TES are non-exclusive and that it is relatively easy (in terms of time and costs) to switch suppliers of TES.

(44) Furthermore, the Parties also submit that larger contracts are awarded on the basis of tenders typically organised by their more sophisticated buyers, in which they play different TES providers off against each other, thus leading to a competitive market. At the end of the tender process, the customer selects its "approved" or "preferred" TES agencies. The Parties submit that there are often multiple agencies selected, which are all considered as equally preferred suppliers, so they continue to compete for actually supplying the customer with temporary workers. The Parties thus submit that being selected does not guarantee that an agency will actually realise any of the potential turnover of the tender. Moreover, they might even still compete with agencies that were not selected or even did not participate in the tender at all, in case the preferred suppliers cannot supply quickly enough or that smaller agencies approach and establish relations with local operations of customers independently of the tender process.

(45)  The majority of customers in Spain confirmed during the market investigation that they use several TES suppliers. Customers explained that the advantage for using "preferred" or "approved" suppliers is that it simplifies the process of recruitment and that it builds a long term business relationship with these TES suppliers. However, the majority of customers in Spain explained that they do not guarantee to the "approved" or "preferred" TES suppliers that they will source a certain amount of working hours from them. Therefore, even after obtaining the status of "approved" or "preferred" supplier, these TES suppliers seem to be in competition with other TES suppliers for the provision of TES services. Besides, the Parties have identified in their top 100 customers only 14 which have selected both Randstad and USG as their "preferred" or "approved" TES supplier in Spain following a tender procedure.

(46)   Moreover, respondents to the market investigation did not raise any material concern as regards the effects of the proposed transaction in terms of prices, quality or availability of  the services on the TES market in Spain.

(47)    Therefore, the Commission concludes that, given the rather limited combined market shares, the strong presence of other TES suppliers, the easiness of switching between TES suppliers for customers, the persisting competitive interaction following tenders as well as the absence of concerns on the part of market participants, the transaction does not raise serious doubts  as to its compatibility with the internal market regarding the market for TES or any of its segments or sub-segments in Spain.

5.     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             Publication in the Official Journal of the European Union No C 130, 07.05.2013, p. 14.

3             Randstad will acquire control of the following entities: USG People   Spain Services S.L. (Spain), Start People Sp.

z.o.o. (Poland), Start People H.R. Solutions S.A. (Luxembourg), Start People S.A. (Luxembourg), Start People

S.p.A. (Italy), Start People S.A. (Switzerland), Start People Médical S.A. (Switzerland), Uniman S.A. (Switzerland), USG People Austria GmbH (Austria) and their respective subsidiaries as listed in Annex 1 to the Share Purchase Agreement dated 4 April 2013.

4         Turnover calculated in accordance with Article 5 of the Merger Regulation.

5         Case COMP/M.5009 – Randstad/Vedior, 17 April 2008, recitals 8-10

6         Case COMP/M.5009 – Randstad/Vedior, 17 April 2008, recitals 14-15.

7         Cases COMP/M.5009 – Randstad/Vedior, 17 April 2008, recitals 11-13; COMP/M.5626 – Adecco/Spring, 16 October 2009,  recitals 10-11; COMP/M.5699 – Adecco/MPS Group, 17 December 2009, recital 10.

8         Cases COMP/M.5626 – Adecco/Spring, 16 October 2009, recitals 10, 13; COMP/M.1476 – Adecco/Delphi, 26 March 1999, recitals 7-8.

9         Case COMP/M.5626 – Adecco/Spring, 16 October 2009, recital 12.

10      Cases COMP/M.5009 – Randstad/Vedior, 17 April 2008, recitals 17-19; COMP/M.5626 – Adecco/Spring, 16 October 2009,  recitals 15-17; COMP/M.5699 – Adecco/MPS Group, 17 December 2009, recitals 13-1

11      On the basis of the market shares provided by the Parties, the market for TES in Italy does not qualify as an  affected market. The combined market share of the Parties for 2012 would be of [5-10]% in the "regular" TES market. Likewise, if a further sub-segmentation of the general TES market into specialised segments would be considered, the combined market share of the Parties for 2012 would be of [10-20]% in the specialised segment for "office and administration" and of [10-20]% in the specialised segment for "industry".

12      Includes regular, secondments and project-based TES.

13      According to the Parties, the market for secondments and project-based TES is practically non-existent in Luxembourg so that the overall TES market shares are also relevant for a narrower market comprising regular TES only. The Parties' activities do not overlap on secondments or on project-based TES markets in Luxembourg.

14      According to the Parties, the professional TES segment is small so that the market shares on the general TES segment would be similar to the market shares on the overall TES market.

15      Includes regular, secondments and project based TES.

16      According to the Parties, the market shares on the overall TES market are also an accurate indication of the market shares on the general TES segment, as the professional TES segment is negligible in Poland.

17      Excluding secondments and project based TES. The Parties' activities do not overlap on secondments or on project-based TES markets in Poland.

18      As explained above, the professional TES segment is negligible in Poland so that the market shares on the regular TES market are also an accurate indication of the market shares on the regular general TES segment.

19      Includes regular, secondments and project-based TES.

20      According to the Parties, TES suppliers in Spain generally do not provide professional TES so that the market shares for overall TES also reflect the position of the Parties and their competitors on the general TES segment.

21      Excluding secondments and project-based TES. The Parties' activities do not overlap on secondments market in Spain. On the project-based TES market in Spain their activities are minimal and do not lead to any affected markets.

22      According to the Parties, TES suppliers in Spain generally do not provide professional TES so that the market shares on the regular TES market also reflect the position of the Parties and their competitors on the regular general TES segment.