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Décisions

Commission, April 12, 2019, No M.8947

EUROPEAN COMMISSION

Decision

NIDEC / WHIRLPOOL (EMBRACO BUSINESS)

Commission n° M.8947

12 avril 2019

COMMISSION DECISION of 12.4.2019

declaring a concentration to be compatible with the internal market and the EEA Agreement

(Case M.8947 - NIDEC / WHIRLPOOL  (EMBRACO BUSINESS))

(Text with EEA  relevance)

(Only  the  English  text  is authentic)

THE  EUROPEAN COMMISSION,

Having  regard  to the  Treaty  on the Functioning  of the  European Union,

Having regard to the Agreement on the European Economic Area, and in particular Article  57 thereof,

Having regard to Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations  between undertakings (1),  and in  particular  Article  8(2) thereof,

Having regard to the Commission's decision of 28 November 2018 to initiate proceedings in this case,

Having regard to the opinion of the Advisory Committee on Concentrations (2), Having regard to the final  report of the Hearing  Officer  in  this  case (3),

Whereas:

 

1. INTRODUCTION

(1)     On 8 October 2018, the European Commission  (the  "Commission") received a notification of a proposed concentration pursuant to Article 4 of Regulation (EC) No 139/2004 (the “Merger Regulation”) by which Nidec Corporation ("Nidec" or the "Notifying Party", Japan) intends to  acquire,  within  the  meaning  of  Article  3(1)(b)  of  the Merger Regulation, sole control of the  refrigeration  compressor  business  of Whirlpool Corporation  (USA),  Embraco ("Embraco",  Brazil) (the  "Transaction"). (4) Nidec and Embraco  are collectively  referred  to as the   "Parties".

(2)     Nidec is a  Japanese  company  active  in  the  engineering, manufacture,  and  distribution  of a range of electric motors and motor application products. Since  its  acquisition  of Secop  GmbH  ("Secop")  in  2017,  Nidec  also  manufactures  and  sells  compressors  for use in refrigeration  appliances. Nidec  manufactures  compressors  in  Austria,  Slovakia and China.

(3)     Embraco,  headquartered  in  Brazil, is  active  in  the  manufacture  and  sale   of compressors  for use   in  refrigeration  appliances.   Embraco   manufactures   compressors in Slovakia, Brazil, Mexico  and  China.  Embraco is  owned  and  controlled  by  Whirlpool,  a  US  company  that manufactures  a  full  line  of  home  appliances   and related products, including  refrigeration  appliances. Whirlpool’s  brands include Whirlpool,   KitchenAid,   Maytag,  Indesit,  Hotpoint,  Consul  and Brastemp.

 

2. THE  OPERATION   AND  THE  CONCENTRATION

(4)     On 24 April 2018, Whirlpool and  Nidec  signed  a  Share  Purchase  Agreement according to which Nidec would acquire all of the shares  in  Embraco  for  a  price  of USD 1.08 billion.

(5)     The completion of the Transaction would  thus  result  in  Nidec  obtaining  sole control  over Embraco  within   the  meaning  of Article   3(1)(b) of the  Merger Regulation.

 

3. UNION  DIMENSION

(6)     The  undertakings  concerned  have  a  combined  aggregate   world-wide   turnover   of more than EUR 5,000 million (5) (Nidec: EUR 10  223  million;  Embraco: EUR […];  Parties' combined: EUR […]). Each of them  has  an  EU-wide  turnover  in  excess  of EUR 250 million (Nidec: EUR […]; Embraco: […]), but  each does not achieve  more  than two-thirds  of  its  aggregate  Union-wide  turnover  within  one  and  the  same Member State.

(7)     Embraco's  Union-wide   turnover   in  2017 was [details  on turnover calculation].

(8)     The  Parties  [details  on geographic   allocation  of turnover].

(9)     The Parties argued that [details  on  geographic  allocation  of  turnover], and  was therefore the best available source of data  for  geographic  allocation  of  Embraco turnover for the purposes of determining whether the EU Merger Regulation’s  jurisdictional  thresholds   are met.

(10)    On the basis of the information provided by the Parties, the Commission accepted Embraco's methodology for the geographic allocation of turnover due to the fact that, [details  on  geographic  allocation  of  turnover]. Therefore, according  to  the  Parties' best knowledge,  [details  on geographic   allocation  of turnover].

 

4. THE   PROCEDURE

(11)    During the  Phase  I  market  investigation  the  Commission  reached  out  to  a  large number of market  participants  (customers of  the  Parties  and  competitors),  by requesting   information   through   e-Questionnaires,   telephone   calls   and    written requests  for  information  pursuant  to Article   11 of the  Merger Regulation.

(12)    In addition, the Commission also sent several written requests for information  to  the  Parties  and reviewed  internal  documents   of the Parties  submitted   at this  stage.

(13)    On 29 October 2018, the  Commission  informed  the  Parties  of  the  serious  doubts arising from the preliminary assessment of the Transaction during a "State of  Play" meeting.

(14)    In order to remove the serious doubts raised by the Transaction in  the  markets  for  variable  speed  household  refrigeration  compressors  and  both   fixed   and   variable speed light commercial refrigeration compressors, on 6 November 2018 the Parties  formally submitted commitments essentially proposing  to  divest  Nidec's  plant  in  Slovakia. These commitments were not market tested as they did not  address the  full  scope of the Commission’s  serious   doubts.

(15)    On 7  November  2018,  the  Parties  formally submitted   revised   commitments, consisting of the  divestment  of  Nidec's  plant  in  Slovakia,  with  the  addition  of  one  light commercial refrigeration compressors production  line  from  Embraco (the  MIDI  line), which would have been transferred from Embraco's plant in Slovakia. In the Commission's  view,  these  commitments equally   lacked   sufficient   scope  to  address the serious doubts in relation  to  light  commercial  refrigeration  compressors  in  a clear-cut manner, in addition to being a "mix-and-match"  solution  and  thus  raised concerns about  the  viability  of  such  a  combination.  Therefore, the  Commission decided  not to carry out a market  test.

(16)    On 9 November 2018, the Parties formally submitted a third set of  commitments, consisting of Nidec's plants in Slovakia and China. These commitments were then supplemented on the same day with some intellectual property licences for planned improvements to the Delta- and  Kappa-Series  light  commercial  refrigeration compressors.  These  commitments   were  market tested.

(17)    However, in view of the outcome of its Phase I  investigation  and  the  results  of  the market test,  the  Commission  considered  that the  commitments submitted  by  the  Parties did not meet the  required  standards  to  eliminate  the  Commission’s  serious  doubts  on the Transaction.

(18)    On 28 November 2018, the Commission therefore found that the Transaction  raised serious doubts as to  its  compatibility  with  the  internal  market  and  the  EEA  Agreement and adopted  a  decision  to  initiate  proceedings  pursuant  to  Article  6(1)(c) of the  Merger  Regulation  (the  "Article   6(1)(c) decision").

(19)    On 3 December 2018, the Commission provided a number of key documents to the Notifying Party. Additional key documents were provided by the Commission to the Notifying Party on 5 December 2018.  The  Notifying  Party  submitted  its  written response to the Article 6(1)(c) decision on 10 December 2018 (the “Response to the Article  6(1)(c) decision”).

(20)    On 12 December 2018, at a State of Play  meeting,  the  Commission  provided  the  Parties with the opportunity to discuss the main issues raised in their  Response  to  the Article 6(1)(c) decision, and indicated  the  matters on  which  it  planned  to  focus  its further investigative efforts during the Phase II investigation. During the Phase II investigation,   the Commission  sent  several  requests  for information  to the Parties.

(21)    The  Commission  also held  several  calls  with  market  participants,   and   sent  requests for information in the form of a questionnaire to customers  of  variable  speed  compressors for household refrigeration appliances.  In  addition,  the  Commission  also  sent a data request to customers of variable speed compressors for household refrigeration  appliances   with  a view  to conducting  a market  reconstruction  analysis.

(22)    The Parties indicated in the early days of the Phase II investigation,  and  in  particular  during  the   State  of  Play  meeting  held   on  12  December  2018,  that  they  would    be interested in obtaining feedback  from  the  market  investigation  as  soon  as  possible after the Commission had obtained results  from  the  investigation.  In  the  spirit  of providing the Parties with an opportunity to  remedy  any  preliminary  competition concerns prior to adopting a  Statement  of  Objections,  following  the  results  of  the Phase II market investigation a State of Play meeting was held on  23  January  2019. During the  meeting,   the   Commission  informed   the   Parties  of  the   preliminary  results of the Phase II market investigation and the scope of the preliminary concerns of the Commission.

(23)    On 28 January 2019, the merger review  time  period  was  extended  by  10  working  days  following  the  Parties'  request  pursuant  to  Article  10(3)  of  the  Merger Regulation.

(24)    In  order  to address  the  preliminary  competition  concerns  identified by  the Commission at the State of Play meeting held on 23 January 2019, Nidec submitted commitments on 7 February 2019. The Commission launched a market test of those commitments  on 11 February  2019.

(25)    On 11 February 2019, the merger review time  period  was  extended  by  5  working  days, and on 21 February 2019 by another 5 working days  following  the  Parties'  requests  pursuant  to Article  10(3) of the  Merger Regulation.

(26)    Nidec submitted   final  commitments  on 28 February  2019.

(27)    The meeting of the Advisory Committee took place on 29 March 2019 and issued a favourable   opinion  on the  draft  Decision  on the  same day.

(28)    The  Hearing  Officer   issued  his  final  report on 1 April 2019.

 

5. RELEVANT   MARKETS

5.1. Introduction

(29)    Nidec and Embraco overlap in the manufacture and sale of compressors for use in refrigeration  appliances. Refrigeration  compressors  are   electro-mechanical   devices used to lower  the  temperature  of an enclosed  space (such as a freezer  or refrigerator)  by compressing vaporised refrigerant to remove heat from that space and transfer it elsewhere.  Figure  1 illustrates   the  operation  of a basic  refrigeration system.

ifig1.png

(30)    Nidec entered the refrigeration  compressors  business  in  2017  when it  acquired  Secop. (6) Embraco has been active in the manufacture and sale  of  compressors  since  1974. Whirlpool  acquired  a majority  stake in  Embraco in 1997. (7)

(31)    Refrigeration compressors may be used for household applications (for example  refrigerators  and  freezers) or  for light  commercial  applications   (for   example   soft drink  coolers,  vending  machines,   display  cabinets,  or ice  cream coolers).

(32)    There are many types of refrigeration compressors (for example scroll, rotary, semi- hermetic,  hermetic  reciprocating).  Embraco and   Nidec  principally   manufacture  hermetic reciprocating compressors which can be  installed  in  refrigeration  appliances  used in household or light commercial applications. Reciprocating compressors are compressors which generate pressure through pistons which are attached to a rotary crankshaft. “Hermetic” reciprocating compressors are devices in which both the compressor and the motor which drives the compressor are contained in the same, hermetically sealed encasement. These refrigeration  compressors  all  use alternating current (“AC”).

(33)    Nidec also manufactures direct-current (“DC”) compressors  for use in  mobile  refrigeration devices in for example  lorries,  vans,  or  cars.  Embraco does  not manufacture   DC compressors  or compressors  for mobile   use.

(34)    Household  refrigeration  compressors  are  mainly   used   in   refrigerators   and   freezers for  residential  use.  A  household  refrigeration  compressor  typically  is  able  to  displace around  1.5 cm3 to   12  cm3 of  refrigerant  (referred to as the compressor’s “displacement  capacity”).

(35)    Light  commercial  refrigeration  compressors  are  mainly  used   in   beverage  coolers, glass door merchandisers, commercial refrigerators and freezers, display cabinets and supermarket merchandisers,  water  coolers,  ice-making machines  and  ice  cream cabinets for commercial  use.  The  displacement  capacity  of  light  commercial refrigeration  compressors  typically  ranges  from  around  1.5 cm3  to 28 cm3.

(36)    Refrigeration  compressors  may  either  run  at  a  fixed speed  ("fixed   speed compressors"  or  "single  speed  compressors"),  regulating  the   temperature   by  turning on and off as needed; or variable speed ("variable speed compressors"),  adjusting the speed at which they run depending on the need for cooling  in  order  to  maintain  the desired temperature. Variable speed compressors tend to  be  more energy  efficient, quieter and more expensive than fixed speed  compressors  with  the  same cooling capacity. Variable speed compressors are more common in household than in light commercial   refrigeration  appliances.

(37)    As regards regulation, there has  been  a  drive  to  introduce  more environmentally- friendly refrigerants. Hydrocarbon ("HC") refrigerants (R600 and R290) are more environmentally    friendly    than    hydrofluorocarbon    ("HFC")     refrigerants (R134/R404). (8) Indeed, according to Union regulation a  move  away  from HFCs  shall take place in  the  commercial  refrigeration  sector  from  2020. (9 ) The  Parties,  together with other competitors,  are  shifting  to  the  production  of  appliances  compatible  with HC refrigerants.

(38)    Other major refrigeration   compressor  manufacturers   include  the   following  companies:

(a)   Sichuan  Changhong  Electric  Co.,  Ltd.  (“Changhong”),   is   a   Chinese manufacturer  which  acquired the  Spanish  manufacturer  Cubigel  in   2012  and  also sells  under the  brands  Huayi  and  Jiaxipera.  Huayi  has  operations  in  Europe  through  Huayi  Compressor Barcelona, S.L  which  specialises  in  designing,   manufacturing   and   selling   hermetic   compressors   and   condensing units   for  the light   commercial  refrigeration  market.

(b)   Italia Wanbao/ACC S.r.l. (“Wanbao/ACC”), a company which was established through the acquisition in 2014 of the Italian  parts  of  ACC  by  Wanbao,  a Chinese group active  in  refrigeration  technology.  Wanbao/ACC’s  plant  in  Italy has  designed   and   manufactured   hermetic   refrigeration   compressors  for domestic  appliances  since  1968.

(c)   Huangshi  Dongbei Refrigeration  Co.,  Ltd.   (selling   compressors   under   the brand “Donper”), is a  Chinese  State-owned  manufacturer  that supplies refrigeration  compressors  and components   internationally.

(d)   Tecumseh Products Company (“Tecumseh”) is an American manufacturer of hermetically sealed compressors for residential and specialty air conditioning, household refrigerators and freezers as well  as  commercial  refrigeration applications.   Tecumseh   acquired   the   French   manufacturer   L'Unité  Hermétique in 1988. Tecumseh is currently  a  joint  venture  between  Atlas  Holdings  and Mueller   Industries,  Inc.

(e)   Samsung,  LG  and  Panasonic are  vertically   integrated   manufacturers   that produce refrigeration compressors for their  captive  use  and  to  some  extent  also for the merchant market, while at the same time being the manufacturers of refrigeration  appliances.

(f)   Other Chinese   manufacturers   include  Guangdong   Meizhi   Compressor Company (“GMCC”), Zanussi Elettromeccanica Tianjin Compressor Co., Ltd (“ZEL”)   and Hangzhou  Qianjiang  Compressor  Co. Ltd  (“Qianjiang”).

(39)    While players such as Embraco or Nidec (through the acquisition of Secop (10)) are established players with a  history  of  manufacturing refrigeration  compressors,  the industry has seen also entry and  expansion  of  new  players.  In  particular,  there  has  been a trend of  Chinese  manufacturers  expanding  into the  European  market  in  the more commoditised, high-volume fixed speed  household  refrigeration  compressors market. It seems that by now virtually all players on  the  market  are  capable  of producing fixed speed household refrigeration compressors. At the same time, brand awareness is still present in the industry  and  the  reputation  of  producers  such  as Embraco  or Nidec is  widely  considered  as excellent  and a guarantee  of  quality. (11)

(40)    Some of the Chinese manufactures have also been trying to enter other refrigeration compressor markets, for example household variable speed compressors or light commercial  (fixed  and  variable  speed),  however, as  further  explained  below,  their entry has  not  yet  been  significant  into these  markets  where more   advanced technology  and R&D  investment   is required.

5.2. Relevant product   market definition

5.2.1. The Notifying Party's arguments

(41)    The Notifying Party argued that there is one single  market  for all  refrigeration compressors, comprised of all household and light commercial compressors and in particular,  that   there   is   extensive   supply-side   substitution,   for   the   following reasons: (12)

(a)   All  refrigeration  compressors  share  the  same   basic   technology,   tools, equipment,   and components;

(b)   Producers typically manufacture a broad range of refrigeration compressors of varying  sizes,  displacement  and  cooling   capacities;

(c)   Products for a wide  range  of  end-use  applications  are  manufactured  on  the  same  production lines;

(d)   Suppliers can, and do,  switch  production  between  different  models  of refrigeration compressors on the same lines  in  a  matter of  hours  (including  between household   and light   commercial). (13)

(42)    Moreover, the Notifying Party argued that all  refrigeration  compressors  perform  the  same  basic function. (14)

(43)    From a  demand-side  perspective,  the  Notifying  Party  argued that the  same refrigeration compressors are generally suitable for installation in a range of different  end-use application  systems.  There  is  considerable   overlap   in   the   displacement ranges of household refrigeration compressors and light commercial refrigeration compressors. As a result, compressors produced on the same production line can be installed in a household refrigerator,  a  commercial  vending  machine,  a  beverage dispenser,  or an ice  cream freezer. (15)

(44)    The Notifying Party did not consider that notional product  markets  in  respect  of household  or  light  commercial   refrigeration   compressors   should   be   further segmented, including on the basis of displacement capacity or use of fixed speed  or variable   speed technology. (16)

(45)    Regarding  the  distinction  between fixed  and   variable   speed   refrigeration compressors, the  Notifying  Party  argued that these  belong to  the  same product market because: (17)

(a)   All major suppliers  of  refrigeration  compressors  produce  both  fixed and  variable   speed refrigeration  compressors;

(b)   There is  a  chain  of  substitution  as  between  refrigeration  compressors  of different   efficiency  levels  and  variable  speed refrigeration   compressors;

(c)   The majority of the Parties’  customers by  volume  purchase  both  fixed and variable   speed refrigeration  compressors;

(d)   Fixed  speed  refrigeration  compressors  compete   with   variable   speed refrigeration  compressors  because  using a  variable  speed  compressor  is  just  one way in  which  a customer  can achieve  a desired  overall  efficiency;

(e)   From a technical perspective, it is easy to convert a fixed speed refrigeration compressor into a variable  speed  refrigeration  compressor  by  adding an inverter;

(f)   The  price  difference   is small  and continuing  to go down.

(46)    In its Response to the Article 6(1)(c) decision, the Notifying Party did  not  put  into question   the   Commission’s   preliminary   findings   that,   household   and   light  commercial refrigeration compressors  constitute  separate  product  markets,  and  that fixed  speed and variable   speed compressors  constitute  separate product  markets. (18)

5.2.2. The Commission's precedents

(47)    The most recent decision in which the Commission considered the refrigeration  compressors industry dates from 2013, when it  approved  the  acquisition  of  ACC  Austria by Secop. In its decision, (19) the Commission  left  open  the  question of whether there were separate markets for hermetic  reciprocating compressors  installed  in  household     refrigeration     appliances     (“household     refrigeration     compressors”)   and those installed in  light  commercial  refrigeration  appliances (“light  commercial  refrigeration  compressors”).

(48)    While the  market  investigation  indicated  that  different  compressor  technologies  were not substitutable,   the  Commission  did not  conclude  on this  issue. (20)

(49)    As regards further segmentation of  the  compressor  market,  the  Commission  found  in  the M.6996 Secop/ACC Austria decision that compressors of all sizes used in a wide range of household refrigeration appliances formed  part  of  a  single  market. (21)  It  left open the question of  whether  there were  separate  markets  for  variable  speed  and fixed speed compressors as the variable speed compressor market was nascent and immaterial  at the time.

5.2.3. The Commission's assessment

(50)    The   Commission  conducted  its  assessment  of  the  product  market  definition  in   Phase

I. On the  basis  that the  Notifying  Party  did  not  challenge  the  Commission’s preliminary findings  in  the  Article  6(1)(c)  decision,  the  Commission  did  not  conduct  any further   investigation  of the product  market  in  Phase II.

5.2.3.1.   Types  of refrigeration  compressors  by technology

(51)    The vast majority of customers responding to the Commission’s market investigation indicated that it was either: (i) not possible to substitute different technology types of refrigeration   compressors   (linear,   rotary,   hermetic   reciprocating,    semi-hermetic etc.) (22); or (ii) that it  was  possible only  for certain  applications. (23) Responses  did  however indicate that some technology types of compressors could be substituted for certain  light  commercial  applications  only.  Only   a   very   small   minority   of respondents indicated that it was always possible to substitute different types  of compressor regardless of the  technology.  However,  these  respondents  were  active  in  the  light  commercial  market  and  it  therefore appears  likely that these  comments referred  to the  light   commercial  market. (24)

(52)    As regards light commercial refrigeration compressors, there was mixed  feedback  regarding the degree of substitutability between different types of compressors by technology. For example, one respondent said that they  were  not  able  to  replace  hermetic reciprocating compressors with rotary compressors, because "rotary compressors cannot reach the compression ratio we need for freezer appliances etc." (25)   A  few  others  referred  to  rotary  and  scroll  compressors  being  able  to replace hermetic compressors for commercial refrigeration. (26) On the other hand, another respondent said that: "for light commercial refrigeration applications, reciprocating compressor technology is the only practical technology based on performance, energy efficiency, availability and price." (27)

(53)    The Commission  therefore considers,  that the  substitution  in  light  commercial refrigeration compressors between hermetic  reciprocating and  other  types  of compressor technology appears to be  most relevant  for the  light  commercial refrigeration compressors with the higher displacement  ranges. Indeed,  the  Notifying Party itself refers to the use of scroll  and  rotary  compressors  as  a  substitute  for hermetic compressors, typically starting at  displacement  ranges above  28cm3. (28) However, only  a  minority of  the  Parties'  light  commercial  refrigeration  compressors have  displacement  ranges  of  28cm3  or  more. (29)  Consequently,  the  Commission  is  of  the view that only  a  minority of  hermetic  reciprocating compressors  for light commercial refrigeration applications are likely to  be  able  to  be  substitutable  with  other types of compressor  technologies,  such as rotary  or scroll   compressors.

5.2.3.2.   Compressors  for household   and light   commercial  refrigeration  applications

(54)    Customers that responded to the Phase I  investigation  indicated  that  there were  a  number of differences between compressors for household and light commercial refrigeration applications, such as: (i) different temperature limits, cooling power and displacement;  (ii)  physical  size,  efficiency  rates  and  types  of  refrigerant  used;  (iii)   back  pressure;  and  (iv)  durability  and   reliability,   as   light   commercial   applications have  to be more  durable  due to heavy  use. (30)

(55)    For example, one light commercial customer noted that: "Compressors for light commercial applications have different range of operation parameters. The main difference for our applications in the that [sic.] they have Medium Low Back  pressure or High Back Pressure, compared to the Low back pressure which is the standard for household applications. Another important difference is related with the typical refrigerant, which for Light commercial applications is R290 while for household applications id R600." (31)

(56)    A household customer made  similar  observations,  noting  in  particular  that  the  design  and components of household and light commercial  refrigeration  compressors  were similar, but not identical: "Household compressors  use  different  refrigerants  than  light commercial compressors: R600A for Household compressors in Europe and Asia;…..Light commercial compressors use R134A or R290 (new) mainly. Light commercial compressors tend to have a bigger cooling capacity than household compressors. The design and components are similar but not identical for household and light commercial compressors." (32)

(57)    Respondent  competitors identified similar  differences,  for example  one   competitor  noted   that   they   distinguish   between  household    and   light    commercial    refrigeration compressors on the basis of: "mainly by application, refrigerant and cooling capacity." (33)

(58)    Both  customers and  competitors that  responded  to  the  Commission’s  investigation  also confirmed that household refrigeration compressors  have  lower displacement capacities  than  light   commercial  refrigeration  compressors. (34)

(59)    As regards the  Notifying  Party's  arguments  that the  same  refrigeration  compressor model  can  be  used  for household  and  light  commercial  applications,  only  a  very small minority of customers stated that this was possible.  Rather,  the  Commission’s  market investigation  indicated  that  while  there may  be  some  limited  overlap,  namely that the largest household refrigeration compressors can also be used in some of the  smallest  light  commercial  refrigeration   applications,   the   two   types   of  compressors are not substitutable   for  all  types of household   and light   commercial  applications. (35)

(60)    For example, one customer noted that: "In general, it is  not  possible  to  use  the exactly same compressor in household and light commercial applications. Some compressor producers sometimes modify existing compressors normally used in one segment so that they can be used as well in the other application segment. However, even if the compressor family may be same, the compressors which are used in light commercial and household applications are never 100% identical." (36)

(61)    Another respondent noted that: "OEM customers….consider that household  appliances need some specific models and it is the same for light commercial appliances. But it is not impossible to find one model normally used in one type of refrigerator mounted in a refrigerator of the other type..."  (37)

(62)    All but one of  the  respondent  competitors stated  that the  same refrigeration compressor could only be sold for some, but not all, household and light commercial applications. For example, one competitor noted: "We could only use a household compressor for very small commercial applications which use the same refrigerant. Commercial applications typically are exposed to variations in application which include temperature excursions and requirements for product to reach a certain temperature that increase the loading on the internal components. This can also include large variations in electrical power and conditions where new product is added to the refrigerated case on a regular basis. An example of this could be the delivery of room temperature carbonated beverage deliveries on a daily basis." (38)

(63)    A number  of  light  commercial  customers noted  that there were  certain  light commercial  applications   for  which   specific   light   commercial   refrigeration compressors were needed (and  substitutes  of  household  compressors  could  not  be used) and this accounted for an important share of their purchases.  For  example,  one noted: "applications that require higher cooling capacities as in large horizontal cabinets (>300 litres), Vertical  and  Island  display cabinets and Scooping cabinets all require light commercial compressors for which the house hold compressors are not suitable. These constitute a fairly large proportion of our requirements." (39)

(64)    Another customer stated that: "Industrial and restaurant refrigerators operate under very different conditions than household. Consequently, specific light commercial compressors are needed. Due to the market requirements on the product itself, specific light commercial compressors represent 100% of total demand for compressors for  light  commercial  applications." (40)  Another  important  light commercial  customer stated that "around 80%"  of   their   light   commercial applications  required  specific  light   commercial  refrigeration   compressors. (41)

(65)    In addition, respondent customers generally stated that light commercial refrigeration compressors  tend to be  between 10–50%  more expensive   than   household refrigeration  compressors. (42)

(66)    The  Parties,  in  their  own  internal  strategy  documents, also consider  their  household and light commercial businesses separately, and indeed, they are also  managed  separately. (43) Figure  2  indicates  the  different  business  divisions within  Nidec's compressor business, including  household  refrigeration  compressors  (Cold  HH)  and light commercial refrigeration compressors (Cold LC). Embraco also segments  its household   and   light   commercial  refrigeration  compressor  business   in  the   same  way, i.e.  into  household   and light   commercial compressors. (44)

Figure 2 […] […]  Source: […].

(67)    Finally, as regards supply side substitution, the majority of  respondent  competitors indicated that production on the same line cannot be switched between production of refrigeration  compressors  for household   and   light   commercial   applications  immediately and without incurring significant costs. (45) For example, one  competitor producing both household and light commercial refrigeration compressors noted that: "Product is different even as concept is the same. Then big investments are required. Also household costs and big volumes with few models require more specific automatic lines and lower costs." (46) Another noted that: "The switch from the production of household refrigeration compressors to the production of brand-new light commercial refrigeration compressors for medium-large volume light commercial applications - which, as mentioned, cannot work with household refrigeration compressors - would entail material time and costs." (47)

(68)    Only  one  competitor  stated  that  it  could  change  over  its   assembly  line   quickly  (in less than  one  hour). (48)  Another  competitor  said that  their  particular  model  could  be used for both household and light commercial applications, so  this  did  not  involve  a switch  over. (49)

5.2.3.3.   Compressors  with  fixed   speed and  variable  speed technology

(69)    With  regard  to fixed speed  and  variable  speed  refrigeration  compressors,   the feedback from the market participants in  the  Commission’s  market  investigation confirmed that refrigeration compressors with variable speed  technology  are  different  from those  with  fixed speed  technology,  because  a  variable  speed  compressor requires a driver (inverter controller) to run the compressor and a specific  electrical motor.- (50)

(70)    From a demand-side perspective, the vast majority of customers that responded to the Commission’s market investigation stated that fixed and variable speed refrigeration compressors are  not  substitutable. (51) This  was  echoed  by  competitors  –  the  majority  of competitors that responded to the  Phase  I  market  investigation  noted  that  fixed speed and variable speed refrigeration compressors are not substitutable for their customers. (52)

(71)    One market participant explained: "An application  requiring  variable  speed  can reach highest energy efficiency, a fixed speed cannot achieve same. Cost for variable speed is higher but its premium." (53) A  producer  of  household  refrigeration compressors also noted that: "From a demand-side perspective, variable speed and single speed household refrigeration compressors are to a large extent not interchangeable. In particular, variable speed compressors can guarantee an efficiency level that single speed compressors usually cannot match – with a very few exceptions…In addition, and most of all, household refrigerators that are engineered to work with a variable speed compressor cannot work also with a single speed compressor, and vice-versa."  (54)

(72)    From a demand-side perspective,  customers in  general see the  main differences between  fixed and  variable  speed  refrigeration  compressors  to  be  efficiency  and price.

(73)    As regards efficiency, customers confirmed that there are  differences  between compressors, which can be grouped into low, medium and high efficiency products. Feedback from some customers that responded to the  Commission's  market investigation indicated that while  fixed speed  technology  can  be  substitutable  with variable speed technology  in  the  low-medium energy  class,  "on high  efficiency  (best in class) variable speed is the  unique  solution" . (55)  Another  customer specified  that low efficiency is achieved with fixed  speed  technology  up  to  1.4 COP CECOMAF (56); mid   efficiency  is  achieved  with  fixed  speed  technology  >  1.4  COP  CECOMAF and variable speed technology up to 1.4 COP CECOMAF; while high efficiency is only achieved  with  variable   speed technology  > 1.4 COP CECOMAF. (57)

(74)    Regarding price, the feedback from  customers and  competitors shows  that  variable speed refrigeration compressors are more expensive than fixed speed refrigeration compressors. (58) Some customers indicated that the price difference is in the range of 30–50%, others noted it is even more, between  100–150%. (59)  The  price  difference  seems to be a result of various factors, and in particular the fact that variable speed refrigeration  compressors  use additional  components,   such  as  an  inverter,  that  make it  a more  expensive technology.

(75)    Competitors also indicated similar ranges in price differences.  Some  competitors  also  noted that the prices may vary based on the order volumes too. (60) Furthermore, one customer noted that the price difference is  "due to the different  production  quantity and demand. VSD will arrive at a similar level in the next 5-7 years,"  (61) which points  to the fact that fixed speed refrigeration  compressors  are  currently  sold  at  a  cheaper price than variable speed refrigeration compressors due to the different production quantities and demand for  the  respective  products.  This  customer  also  seems  to  have an  expectation  that  variable  speed  refrigeration  compressors  will  reach  similar  levels  (it is not clear whether the customer refers to prices or production/demand  or both) as  fixed speed refrigeration compressors in the next 5–7 years. Thus, given  the  higher  demand, compressor manufacturers are likely  to  achieve  better  economies  of scale  in  the production of fixed speed refrigeration  compressors.  As  such,  the  production volumes are another factor that leads to the significant price difference  between refrigeration  compressors  with  fixed   and variable   speed technology.

(76)    Moreover, some customers indicated  that  the  market  structure  differs  between  fixed  and variable  speed  refrigeration  compressors,  with  fixed speed  refrigeration compressors being a more mature technology, the market therefore being  more  competitive while the market for variable speed refrigeration compressors  has  "very limited competition" . (62) One customer noted: "Variable speed compressors are more sophisticated in terms of technology and use. Not  all  compressors manufacturers offer reliable variable speed compressors." (63) Another customer took a similar view: "Variable speed is a more complex technology, not offered by all compressor manufacturers. There is a significant reliability gap between the best and the worst variable speed technology. Embraco is a leader in this technology." The same customer also noted that: "only a few of them [suppliers] can provide high efficiency compressors with reliable performance and quality."  (64)

(77)    Finally,  as  regards  supply side substitution,  feedback  from   competitors   that responded to  the  Commission's  market  investigation  showed  that  switching  between  the production of fixed and  variable  speed  on  the  same production  line  without  incurring significant costs may be difficult and indeed limited.  While  one  competitor indicated that such switching (that is  to  say  switching  from  fixed speed  to  variable  speed  and  vice   versa)  would   be  possible  for  both  household   and  light commercial refrigeration  compressors,  for some competitors this would  be  possible only  with regard to household refrigeration compressors, for others only for light commercial refrigeration compressors,  and  for certain  competitors  this is  not  possible  at  all. (65) Some competitors understood this question to refer to the possibility of new entry or switching production to develop variable speed refrigeration  compressors.  One  competitor replied that switching between fixed and variable speed refrigeration compressors would not be  possible  for those players that have  not yet developed their  own refrigeration  compressor  with  a variable  speed technology. (66)

5.2.4.     Conclusion

(78)    For the reasons set out in recitals (51) to (77), the Commission considers that, for the purposes  of assessing  the Transaction:

(a)   hermetic reciprocating refrigeration compressors constitute a  separate  product market  from  refrigeration  compressors  based on other technologies;

(b)   household and light commercial refrigeration  compressors  constitute  separate product  markets; and

(c)   fixed speed and variable speed refrigeration  compressors  constitute  separate product markets for each of household and light commercial refrigeration compressors.

(79)    In the rest of this Decision, the assessment is conducted in relation  to  hermetic reciprocating refrigeration  compressors,  and  not  based  on  other  technologies,  given that the Parties principally produce this type of compressors and there are no affected markets  with  regard  to other  compressor technologies.

5.3.     Relevant geographic  market definition

5.3.1.    The Commission’s framework for assessment

(80)    The  relevant  geographic  market  comprises the  area  in  which  the  undertakings concerned are involved in  the  supply  and  demand  of  products  or  services,  in  which the conditions of competition are  sufficiently  homogeneous  and  which  can  be distinguished from neighbouring areas because the conditions of competition  are appreciably  different   in  those areas. (67)

(81)    In order to identify the relevant geographic area,  the  Commission  takes  a  preliminary view of its scope based, inter alia, on  broad  indications  as  to  the  distribution  of  market  shares  between  the parties  and their competitors. (68)

(82)    This  initial  working  hypothesis  is  checked against  an  analysis  of   demand characteristics (importance of  national  or  local  preferences,  current patterns  of purchases of customers, product differentiation/brands, other) in order  to  establish whether companies in different areas do indeed constitute a real alternative source  of  supply  for consumers. (69)

(83)    From a supply perspective, the Commission further identifies possible obstacles  and  barriers isolating companies located in a given area from the competitive pressure of companies located outside that area, so as to determine the precise degree of market interpenetration at national, European or global level.  This  analysis  includes  the examination, inter alia, of tariffs limiting trade or production, technical standards, requirements   for administrative   authorisations   or packaging regulations. (70)

(84)    The Commission also assesses  actual  patterns  and  evolution  of  trade  flows  to  ascertain the importance of  each  demand or  supply  factor  and  the  extent  to  which they may or may not constitute actual  barriers  creating  different  geographic  markets.  This analysis will generally address the question of transport costs  and  the  extent  to  which these  may  hinder  trade  between  different  areas,  having regard  to  plant  location,   costs of production  and relative   price levels . (71)

5.3.2.    The Commission’s precedents

(85)    In the M.6996 Secop/ACC Austria decision,  the  Commission  considered  that  the  market for hermetic reciprocating compressors  was  at  least  EEA-wide  in  scope,  but  left open the precise geographic market definition. (72) In that case, the  notifying  party  claimed  that the  geographic  market  definition could  be:  (i)  worldwide;   (ii)   region- wide (that is to  say,  a  geographic  region  comprising  the  EEA,  Belarus,  Ukraine,  Russia,  Serbia,  Switzerland,   and Turkey);  or (iii)   EEA-wide. (73)

5.3.3.    Fixed speed household refrigeration compressors

5.3.3.1.   The  Notifying  Party’s arguments

(86)    The Notifying Party argued that the compressor market is worldwide in scope and, consequently, that Union suppliers are subject  to  competitive  pressure  from  suppliers  that are located outside the Union. (74) In this regard, the Notifying Party noted  that  in M.6996 Secop/ACC Austria (75) a majority  of  respondents  to  the  market  investigation had indicated that they sourced hermetic reciprocating refrigeration compressors on a worldwide  level  for production  plants  located  in  the  EEA. (76)

(87)    The Notifying Party argued that compressors are easy and cheap to transport, with transport costs amounting to [0-5]% of the product price. (77) The Notifying Party  also argued that there are no significant barriers to trade: tariffs on  imports  into  the  Union  would  be  low  or  non-existent  and  technical  standards  would  not  restrict global trade. (78)

5.3.3.2.   The  Commission’s  assessment

(88)    As explained in recitals (102) to  (104),  the  difference  in  levels  of  import  tariffs between countries are an indication that the conditions of competition are not homogeneous   around  the globe.

(89)    Moreover, as  explained  in  recitals  (105)  to (112),  the  different  regulatory requirements and differences in customers’ demand as regards energy efficiency of compressors across different regions in the  world  show  that the  conditions  of  competition  are not homogenous   worldwide.

(90)    However,  given that  the   Transaction  does  not  raise  competition  concerns  regardless of the exact geographic scope of the market for fixed speed household refrigeration compressors, the delineation of the geographic scope of fixed speed  household  refrigeration  compressors  was not  a  focus  of  the  Commission’s  Phase  II  investigation.

5.3.3.3.   Conclusion

(91)    For the purpose of  assessing the  present  Transaction,  the  issue  of  whether  the  relevant  geographic  market  for fixed speed  household   refrigeration   compressors should be considered as EEA-wide  or  worldwide  in  scope  can be  left  open because the  Transaction does  not  give  rise to a  significant   impediment   to  effective competition  under  either  geographic   market definition.

5.3.4.    Variable speed household refrigeration compressors

5.3.4.1.   The  Notifying  Party's arguments

(92)    The  Notifying  Party  argued that the  variable   speed   household   refrigeration compressor market is worldwide in scope and, consequently, that Union suppliers are subject to competitive   pressure  from  suppliers  that  are located  outside  the Union. (79)

(93)    The  Notifying  Party  maintained that suppliers  of  variable   speed   household refrigeration compressors  do  not  require  production  facilities  within  the  EEA  in  order to compete  effectively  for  EEA volumes. (80)

(94)    In this regard, the Notifying Party argued  that  transport  costs  are  low  or  non-existent and that, as a result, suppliers are able  to  produce  variable  speed  household  refrigeration  compressors  where costs  are  the  lowest and  ship   their   products wherever they are needed. (81) The Notifying  Party  also argued that there are  no significant barriers to trade: tariffs on imports to  the  Union  would  be  low  or  non- existent   and technical  standards  would  not  restrict  global trade. (82)

(95)    To  support  this claim, the  Notifying  Party  maintained that certain  information  on recent trade flows, import statistics and destinations of supplies would confirm that customers source household refrigeration compressors on a worldwide  level  for  production plants located  in  the  EEA. (83) The  Notifying  Party  stated  that  71%  of sales of all household refrigeration compressors in the EEA were imported and 44% of production  within  the  EEA  was exported. (84)  […]. (85)

(96)    Furthermore,  the  Notifying  Party  argued  that  a  number  of important  customers  – […]– choose  their  suppliers  and  negotiate  prices  largely  on  a  centralised  global  basis. (86)  In this regard, the Notifying Party referred to  a  quote  in  the  Article  6(1)(c)  decision  from one of these customers indicating that the compressor market is global with “no limitations in the field of household” when it comes to buying compressors from suppliers located outside the  EEA. (87)  Similarly,  the Notifying  Party  noted  that in  M.6996 Secop/ACC Austria a  majority  of  respondents  to  the  market  investigation  had indicated that they sourced hermetic reciprocating refrigeration compressors on a worldwide  level  for production  plants  located  in  the  EEA. (88)

(97)    In this case,  the  Notifying  Party  remarked  that respondents  in  the  Commission’s Phase I market investigation largely supported the conclusion that the variable speed household refrigeration compressor market is global in scope. (89) The  Notifying  Party  argued that, in the Article 6(1)(c) decision, the Commission  based  its  preliminary conclusion  in  relation  to  variable  speed  household  refrigeration  compressors  on  a single quote from just one customer. (90) In the  view  of the  Notifying  Party,  this  quote would show that EEA and Chinese standards are similar and  belong  to  the  same geographic  market.  It  would  moreover  indicate  that most suppliers  are  able   to provide products for the EEA standard, making standards irrelevant in the context of geographic  market  definition. (91)  Lastly,   the   Notifying   Party   submitted   that  refrigerators sold in  the  EEA,  which  are  compliant  with  the  efficiency  regulation,  can  be produced  outside  the EEA. (92)

5.3.4.2.   The  Commission’s  assessment

(98)    The  evidence  collected during  the  Commission’s  market  investigation  indicates  that some large international customers of household refrigeration compressors conclude procurement contracts  on  a  global level (93)  and  that transport  costs  are  low. (94) However, these elements in and of themselves do not warrant a conclusion that the geographic market for variable speed household refrigeration compressors would be worldwide  in  scope.  On  the  contrary,   the   Commission’s   market  investigation  points to  elements  suggesting  that the  conditions  of  competition  are   not   homogeneous across regions  of the  world.

a. Merchant market share variations between the EEA and worldwide level

(99)    The market reconstruction  carried  out  during  the  Phase  II  investigation  indicates  that  the Parties’ combined market share  in  the  merchant  market  for variable  speed  household refrigeration compressors was  approximately  [90-100]%  by  value at  the EEA level in 2018. This has been confirmed  by  the  Notifying  Party’s  own  figures,  which show that combined market shares amounted to [90-100]% by volume and [90-100]% by value at the EEA  level in  2018.  On the  basis of estimates provided by  the Parties, their combined market share at the worldwide  level  was  [30-40]%  by  volume   and [30-40]% by value   in 2018. (95)

(100)    In addition to the Parties, only  one  additional  supplier,  namely  Wanbao/ACC,  has  more than negligible sales of variable speed household refrigeration compressors to customers in the EEA. (96) At the same time,  there  are  a  greater  number  of  suppliers  active at the worldwide  level,  including  competitors such  as  Donper,  Jiaxipera, Panasonic and Tee, which currently  do  not  supply variable  speed  household refrigeration  compressors  to customers  in  the  EEA.

(101)    The sharp variation in market shares  between  the  EEA  and  worldwide  level  and  the  fact that many of the  worldwide  suppliers  are  currently  not  present  in  the  EEA  are  first  indications  that   the   conditions   of  competition  are  not  homogeneous   worldwide in the  market for  variable   speed household   refrigeration  compressors.

b. Differences in applicable  import tariffs

(102)    Based  on  information  provided  by  the  Notifying  Party, (97)  while  the   EEA   has relatively low import tariffs for  household  refrigeration  compressors,  namely 2.2%, (98)  China imposes import tariffs of 8%, Thailand 10%, Pakistan 11%, India 10%, South  Korea 8%, (99) Brazil 18%, Chile 6%, Egypt  30%  and  the  United  States  of  America  25% on imports  from  China. (100)

(103)    Hence, certain regions such as China, India and Brazil appear to be tariff-protected to some extent, with the result that local suppliers  appear  to  have  a  considerable competitive advantage. Some market participants have echoed this same view.  For  example, an important customer of household refrigeration compressors put this view forward  with  respect to Brazil.   (101)

(104)    The difference in levels of import tariffs are another indication that conditions of competition  are not homogeneous   around  the  world.

c. Differences in the regulatory environment

(105)    The  EEA  is  regarded  as  imposing  particularly  strict  regulatory  requirements  in  terms  of energy efficiency. The  evidence  gathered by  the  Commission  in  its  investigation shows  that, while  there is  a  global trend towards  standardisation of  various regulations relating  to  energy efficiency, there are  currently  no  uniform norms  or binding  regulations   that  would  apply  across the world

(106)    Conversely, regions (for  example  the  EU)  and  countries  (for  example  the  US  or  China) adopt  their  own  regulations,  which  might  not  come  into effect  at  the  same  time. This leads compressor manufacturers  to monitor  the  various  regulatory  requirements  and  developments,  such  as  upcoming   regulations,   separately   for  different   regions  and countries.   For instance,   […]. (102)

Figure 3 – […]

[…]

Source: […].

(107)    Contrary to the Notifying Party’s indication that  no  major  technical  standards  affect global trade, (103)  the  impact  of  certain  regulations  appears  to  directly  influence  the types of compressors sold in a given region. For example,  certain  refrigeration compressors sold in the US would no longer be compliant with the current Union regulations.   In this   context, […]. (104)

(108)    In this regard, a number  of  customers have  indicated  that  the  demand  for  variable speed household refrigeration compressors in different regions varies according to parameters such as environmental standards and energy efficiency. For example, a  customer argued that “[t]he demand of variable speed varies globally mainly due to the environmental standards such as gas refrigerant (R134a-R600a), product safety certification (VDE,UL..) and technical specification requirements mainly efficiency, voltage (230V,115V,127V)”. (105)  This  same  customer  also  emphasised  the  importance of there being different types of  refrigerants  and  voltage  differences  across  regions, further specifying that in “North America and Latin  America  the  refrigerant  is  mainly R134a and 60Hz frequency. Voltage is 115V for NA and 127V for Brazil. The demand for high    COP is moving up North America while for Brazil is still low-mid.UL certification is required  in North America”.  (106)

(109)    Another customer noted that:  “[f]or EEA  countries,  high efficient compressors will be used more because of new energy regulation in Europe. Compressors should have VDE or TUV certification to be used in EEA region. For the US, compressors should have UL approval. Since product sizes are larger in Europe [sic], we may need to  use higher cooling  capacity there. For some countries in APA    region like Pakistan,

India, compressors should be adapted for low voltage startability”. (107)

(110)    Yet another customer stated that: “many countries ha[ve] different regulations and standards. In order to comply with these standards, we can use different variable speed compressors”. (108)

(111)    Furthermore, internal  documents  from the  Parties   reflect   a   differentiation   in household refrigeration compressors needs according  to  the  particularities  of  each region.  For instance,  […].

Figure 4 – […]

[…]

Source: […]. Figure 5 – […] […]

Source: […].

(112)    In the Commission’s view, the different regulatory requirements and differences  in customers’ demand as regards energy efficiency of refrigeration compressors across different regions in the world show that the conditions  of  competition  are  not  homogenous worldwide. The Commission acknowledges  that manufacturers  based  outside the EEA are capable of producing variable speed household refrigeration compressors that satisfy regulatory requirements applicable within the EEA and  the particular demands of customers located in the EEA. However, as such  this  does  not speak  against  the  finding  that the  relevant  geographic  scope  of  the  market  for  variable speed household refrigeration compressors is EEA-wide or at least a clearly differentiated   EEA  region  in  a possible  worldwide market.

5.3.4.3.   Conclusion

(113)    The Commission considers that,  for  the  purpose  of assessing  the  present  Transaction,  the market for variable speed household refrigeration compressors is EEA-wide in geographic scope  or,  at  least  worldwide, with  strong  regional  differentiations,  where the  EEA  has to be considered  as a region  highly  differentiated   from others.

5.3.5.    Fixed and variable speed light commercial refrigeration compressors

5.3.5.1.   The  Notifying  Party's arguments

(114)    In the Form CO, the Notifying Party argued that  there are  no  material  differences between compressors manufactured in different regions, nor in the regulation of compressors. Further, it argued that the fact that 80%  of  the  light  commercial refrigeration compressors sold in the EEA are manufactured in the EEA is "simply a function of historic plant and line location". (109)

(115)    The Notifying Party also argued that a large local sales and support presence is  not  required  and that  the  cost of establishing  one, if  it were  required,  are low. (110)

(116)    Lastly,  the  Notifying  Party  argued that  the  Parties'  EEA  light   commercial  customers are testing or sourcing from Chinese competitors  and  that  the  Chinese  rivals  claim  in their  statements and  reports  that the  light  commercial  market   (including   outside  China)  is  a priority. (111)

(117)    In its Response to the Article 6(1)(c) decision, the Notifying Party did  not  put  into question the Commission’s preliminary assessment regarding the geographic market definition  of fixed  and  variable  speed light   commercial  refrigeration   compressors. (112)

5.3.5.2.   The  Commission’s  assessment

(118)    The  majority  of  customers  in  the  Commission’s  market  investigation  indicated  there  are limitations to successfully buying from non-EEA suppliers, in particular for light commercial refrigeration compressors. (113) In this regard,  one  customer  indicated  that: "For light commercial applications you need to be very flexible, this can create problems with the long supply chain from China. No limitation in the field of household." (114) Another customer noted, as regards the supply of light commercial refrigeration compressors: "The purchasing lead time required  is  less than 6 weeks.  The transport time elapse from extra EEA, added with the production lead time is too long and often uncompliant whit our need. We can accept Lead time longer than 5 week only when we have long term forecast from our customers, usually not available." (115)

(119)    Another customer indicated that:  "Delivery  costs  and  environmental  requirements  are the major factors which limit us in cooperating with suppliers outside EEA.  Many times such suppliers are not able to provide us with certifications proving the goods are following certain standards. Also delivery time is a huge disadvantage." (116)

(120)    Certain  light  commercial  customers also indicated   that  the   location  of  R&D  centres or engineers was important. For  example,  one  light  commercial  customer  noted:  "For the cooperation of the R&D it´s more convenient it [sic.] the distance is not too big." (117) Other customers mentioned knowledge sharing, technical support and (co-)developing of new products as reasons for why the location of R&D centres and engineers   was important   for them. (118)

(121)    Almost half of the customers responding to the market investigation in Phase I also  indicated that the location of a supplier's plant mattered also for reasons other  than transport costs. These reasons included factors such as:  lead  times,  import  tariffs, inventory  costs, currency,  and raw material    costs. (119)

(122)    The majority of competitors also indicated that the  production  plant  location  was important for customers. In this regard, one competitor noted: "For light commercial refrigeration it has an impact mainly because the market is made of small and medium OEM. More than the transportation cost is the logistic cost as customers want quick deliveries and small quantities. This is only possible being close to customers." (120)  Another  competitor mentioned  that   proximity   was  important   for  R&D, amongst other reasons: "Proximity with major customers is relevant for R&D, testing activities and delivery times." (121)

(123)    As regards sales personnel, just under half of the customers responding to the Phase I market investigation indicated that a  supplier  would  need  sales  personnel, or  other assets, in the EEA in order to successfully serve  their  company  in  the  EEA.  For example, one light commercial customer noted that: "Management of forecast needs, change of  mix, management of buffer stock, market trend and other request of our group require a strong relationship that can be realized only with a local sales referent quickly available. Also a knowledge of EEA legal requirement (Legal, Fiscal, Tax.) can be better managed when the supplier is located in EU and respect the same legal requirement (UE Certification, European Communitary LAW an so on)." (122)

(124)    However, a majority of competitors indicated  that  sales  personnel,  or other  assets,  in  the EEA were needed in  order to  successfully  serve  EEA  customers. (123)  For example, one competitor stated that: "You need local sales team and technical team to support customers as well as the possibility of testing compressors and appliances." (124)

(125)    Moreover, as regards specifically the market for fixed speed  light  commercial refrigeration compressors, the figures provided by the Notifying  Party  show  that the Parties held a  combined  market  share  of [70-80]% by volume  and  [70-80]% by value at the EEA level in 2018 and of [40-50]% by volume and [50-60]% by value at the worldwide level in 2018. (125)  The  sharp  variation  in  market  shares  between  the  EEA  and worldwide level are also indications that the conditions of competition are not homogeneous  worldwide  in  the  markets  for fixed and  variable   speed   light   commercial   refrigeration  compressors.

5.3.5.3.   Conclusion

(126)    Based on the above, the Commission considers that, for the purpose of assessing  the present Transaction, the markets for fixed and variable  speed  light  commercial  refrigeration compressors are EEA-wide in geographic scope  or,  at  least  worldwide,  with strong regional differentiations, where the EEA has to be  considered  as a  region highly  differentiated   from others.

5.3.6.    Overall conclusion on geographic market definition

(127)    For the reasons set out at recitals (88) - (126), the Commission considers that, for the purpose  of assessing  the present Transaction:

(a)   It can be left open whether the market for fixed speed household refrigeration compressors is EEA-wide or worldwide in  scope  because  the  Transaction  does not give rise to a significant impediment to effective competition under either geographic   market definition;

(b)   The  market  for variable  speed  household  refrigeration  compressors  is   EEA- wide in geographic scope or, at least worldwide, with  strong  regional  differentiations, where the EEA has to be considered as  a  region  highly  differentiated from others.  The  exact  geographic  market  definition  can  however  be left open because the Transaction gives rise to a significant impediment  to  effective   competition  under  both geographic   market definitions.

(c)   The markets for fixed and  variable  speed  light  commercial  refrigeration compressors are EEA-wide in geographic scope  or,  at  least  worldwide, with strong  regional  differentiations,  where the  EEA  has  to  be  considered  as  a region  highly   differentiated   from   others.   The   exact   geographic   market definition   can  however   be  left   open  because  the   Transaction  gives   rise   to  a significant impediment to effective competition under both geographic market definitions.

(128)    The competitive assessment in section 6 will be conducted at both the  EEA  and  worldwide  level.

 

6.  COMPETITIVE ASSESSMENT OF FIXED AND VARIABLE SPEED HOUSEHOLD REFRIGERATION COMPRESSORS, AND FIXED AND VARIABLE SPEED LIGHT COMMERCIAL  REFRIGERATION COMPRESSORS

6.1. Introduction  to the competitive  assessment

(129)    As set out in section 5.2, the Commission considers for the purposes of assessing the Transaction that: (i)  household  and  light  commercial   refrigeration   compressors constitute separate  product markets;  and  (ii)  fixed speed  and  variable  speed refrigeration compressors constitute separate product  markets  for  each  of  household  and light   commercial  refrigeration   compressors.

(130)    The  competitive   assessment  in  this  section  6 is structured  as follows:

(a)   An overview of the refrigeration compressors industry and market share  methodology   is  presented  in  section 6.2;

(b)   The  competitive  assessment of  fixed  speed  household refrigeration compressors  is  presented  in  section 6.3;

(c)   The  competitive  assessment of variable  speed  household refrigeration compressors  is  presented  in  section 6.4;

(d)   The competitive assessment of fixed and variable speed light  commercial  refrigeration  compressors  is  presented  in  section 6.5.

6.1.1.     Framework for the competitive assessment

(131)    Under Article 2(2) and (3) of the Merger Regulation, the  Commission  must  assess whether  a  proposed   concentration   would   significantly   impede   effective   competition in the internal  market  or  in  a  substantial  part  of  it,  in  particular  through  the  creation or strengthening  of a dominant   position.

(132)    In this respect, a merger may entail horizontal and/or non-horizontal effects.  Non- horizontal effects are those deriving from a concentration where the  undertakings concerned  are active  in  different   relevant  markets.

(133)    As regards the assessment of horizontal overlaps, the Commission guidelines on the assessment  of  horizontal  mergers  under the  Horizontal  Merger   Guidelines (126) distinguish between two main ways in which mergers between actual or potential competitors on  the  same relevant  market  may  significantly  impede  effective competition,   namely  non-coordinated  and  coordinated  effects.

(134)    According to the  Horizontal  Merger Guidelines,  generally,   a   merger   would significantly impede effective competition if  it  creates  or  strengthens  the  dominant  position   of   a   single    firm.    In   some   markets,   non-coordinated   effects   may      also significantly     impede     effective     competition     by    eliminating    important  competitive constraints   that  the  merging  parties  previously  exerted  upon each other. (127)

6.2. Overview of the refrigeration compressor industry and  market share methodology

(135)    As explained in section 5.1, the industry for household refrigeration compressors is characterised by a number of producers of fixed speed compressors, variable speed compressors, or both. There are producers with a long-standing history of producing refrigeration compressors,  such  as  Embraco and  Secop  (previously  owned  by  Danfoss, now  Nidec).  Some  other  manufacturers  have  been  more  recent  entrants, such as GMCC. In addition, some players, such as LG, Panasonic and Samsung, are vertically  integrated  players that use most of  their  production  internally for their  captive  production  of refrigeration  appliances.

(136)    In addition to the Parties, three other players have production facilities in the EEA: Changhong  (in  Spain), Tecumseh  (in  France),  and  Wanbao/ACC  (in   Italy).  Tecumseh is active  predominantly  in  the  production  of  refrigeration  compressors  for light commercial applications and only has a limited production of compressors for household  applications.

(137)    The Commission considers that  to  assess  the  potential  impact  of the  Transaction  and  the merged entity's market power post-Transaction, the most relevant metrics are  the  market shares on the merchant market. That is, market shares based on sales on the merchant  market,  excluding  the  internal  sales   of  vertically   integrated   manufactures  that produce compressors predominantly for use in their own appliances,  such  as Samsung, LG and Panasonic. Those volumes do not  impose  a  direct  competitive constraint on the  other  compressor  manufacturers  on  the  merchant  market,  as  vertically integrated suppliers sell very limited volumes on  the  merchant  market,  in particular   in  the EEA.

(138)    Besides, feedback from the  Commission’s  market  investigation  shows  the  following. First, a sizeable  part  of  the  refrigeration  compressors  produced  by  vertically  integrated  manufacturers  is  installed   on  appliances  destined  to  other  markets  outside of the EEA. (128) Second, many European customers on the merchant market would be unwilling to  purchase  compressors  from vertically  integrated   players   whom   they  meet as competitors in the downstream appliance markets (see  also  recitals  (231)-  (238)).  This  feedback,  in  turn,  suggests  that also other  forms  of   competitive constraint exerted by vertically  integrated  manufacturers  on  the  refrigeration  compressors’ merchant market are limited. Specifically, their  potential competitive constraint,  coming  from the  possibility  to  divert  internal  sales  to  the  merchant  market,  and  their  indirect  competitive  constraint,   coming   from   the   competitive pressure exercised on non-integrated appliance manufacturers – customers of the non-integrated  refrigeration  compressors   manufacturers   –   in   the   downstream appliance market, appears to be, if at all present, weak. This  further  supports  the  suitability of market shares based on merchant market sales as  the  relevant  metric  to assess the  merged  entity’s   market  power post-Transaction.

(139)    The Commission further considers it appropriate to include in  the  calculation  of  the market shares Embraco's sales  to  Whirlpool,  its  current parent  company.  This  is because those sales will become external merchant market sales post-Transaction, increasing the merchant market sales  of  the  merged  entity.  Furthermore,  it  appears  likely that the  supply of  those  volumes would  not  materially  change   post-  Transaction, this is because:  (i)  […];  (ii)  […];  and  (iii)  […]. (129)  Moreover,  these volumes will be contestable  post-Transaction  once  any  existing supply agreements expire.

(140)    Furthermore, the Commission considers that  in  order to  assess  the  potential impact  of the  Transaction,  the  value shares  are  more informative  than volume   shares.  Value shares better represent the competitive positions  of  the  merged  entity  and  its  competitors in markets with mostly differentiated  products,  where the  volume  of products sold may not be indicative of market power because of significant price differences  between products  in the  same  market.

(141)    Thus, value shares  represent  the  market  positions  of  each  player  measured  in  terms of value of the sales, rather than volume  of  the  sales.  A  sizeable  difference  between value shares and volume shares is an  indication  of  the  differentiated  nature  of  the products concerned, as  market  participants  sell their  products  at different  price  levels.  A higher price can be interpreted  as  indicating  that  a  given  manufacturer  is  able  to  offer either better quality and service,  or  more  technologically  advanced  products,  or  also that it enjoys a high reputation/brand  awareness  within  the  industry.  As  can  be  seen from the market shares presented in this Decision, the Parties' value shares are generally  higher  than  their  volume   shares.

(142)    The Notifying Party provided its own  estimates  in  relation  to  the  market  shares, (130) which form the main basis for the Commission’s assessment of the  structure  of  the  affected  markets.

(143)    The Commission also carried out a market reconstruction in Phase II focussed on  household refrigeration compressors based on procurement data from customers. The motivation for the market reconstruction based on customers’ procurement data was two-fold: (i) the  difficulty  of  the  Notifying  Party  to  provide disaggregated  market shares figures for fixed speed and variable speed  household  compressors  during  the  Phase I investigation; and (ii) the  incomplete  data  set  obtained  during  the  Phase  I  market  reconstruction  where the  Commission  requested   sales   data  from  competitors of the Parties. Moreover, the Notifying Party in its Response to the  Article  6(1)(c)  decision also encouraged the Commission to request data from customers  of variable  speed household refrigeration compressors in order  to  overcome  the  difficulty  in obtaining  data from  certain  non-EEA  based competitors. (131)

(144)    The Commission  did  not  contact  and  did  not  request  procurement  data  from customers of light  commercial  refrigeration  compressors,  as  the  data  obtained  during the Phase I investigation was deemed sufficient for the purpose of the Commission’s investigation  of  the  markets  for fixed and  variable   speed   light   commercial refrigeration compressors. In addition,  in  its  Response  to  the  Article  6(1)(c)  decision, the  Notifying  Party  did  not  challenge  the   Commission’s   assessment   establishing serious    doubts  in    both   fixed    and    variable    speed   light    commercial  refrigeration compressors, in the EEA and  globally. As  such,  further  data  on  fixed and  variable speed light   commercial  refrigeration  compressors  was not  considered  necessary.

(145)    For a given year, the data requested from customers of household  refrigeration compressors in the Phase II market reconstruction included: (i)  the  number  of  compressors purchased; (ii) their price; (iii) the type of compressors  purchased distinguishing  between  variable  speed  and  fixed speed;  (iv)  an  indication  of  their level of efficiency; and (v) an indication of whether the  compressors  were  used  as  an input  for  appliances  sold  in  or destined  to the  EEA,  the  US or the  rest of the world. (132)

(146)    The requested data covered the period from 2016 to 2020. Customers provided actual purchases  for the  period  2016–2018,  as  well   as   projected   purchases   for   the period 2019–2020.

(147)    For 2018, the market reconstruction covered purchases of approximately 13 million household compressors in the EEA (both fixed and variable speed), amounting to  an overall value of  approximately  EUR 300 million.   Worldwide,  the   market reconstruction covered purchases  of  approximately   42   million   compressors, amounting  to an overall  value   of approximately  EUR  925 million.

(148)    Based on the total market volume of household  refrigeration  compressors  sold worldwide and within the EEA as estimated by the Notifying Party, (133) the market reconstruction has a coverage of virtually  100%  of the  sales  in  the  EEA,  and  30% of the  sales worldwide.

6.3. Competitive  assessment of fixed speed household refrigeration compressors

6.3.1.The Notifying Party's arguments

(149)    The Notifying Party submitted that the Transaction does not give rise to competition concerns  in  fixed   speed household  refrigeration  compressors.

(150)    First, the Notifying Party  argued that  the  Parties’  combined  market  share  in  fixed  speed household refrigeration compressors is low at both the EEA  and the  worldwide level. In the EEA, the Parties estimated their combined 2018 share  of  fixed  speed household refrigeration compressors to be [30-40]% by volume and [30-40]%  by value. (134) At the global level, the Parties estimated their  combined  2018  share  of fixed speed household refrigeration compressors  to  be  [10-20]%  by  volume  and  [10-20]% by value. (135)

(151)    Second, the Notifying Party pointed out that imports of fixed speed  household  refrigeration  compressors  into the  EEA  exert  a  significant   competitive   constraint   on the Parties. (136) In this regard, the Notifying Party submitted trade data reflecting that [70-80]% of all household refrigeration compressors, which are sold in the EEA are imported from outside the EEA. (137) The Notifying Party  also  submitted  that  there  has  been a significant  entry  and  expansion  by  the  Chinese  manufacturers,  at  the  expense of  other   market   players,   including   the   Parties. (138)    As   a  result,   the   Notifying Party argued that the prices of fixed speed  household  refrigeration  compressors  have decreased significantly over the past  five  years  at  both the  EEA  and  worldwide  level and are expected  to continue   decreasing  in  the  coming  years. (139)

6.3.2. The Commission’s assessment

6.3.2.1. Market shares

(152)    Table 1 and Table 2 illustrate market shares of the Parties of fixed speed household refrigeration compressors in the  EEA  and  worldwide,  respectively.  The  figures are  based on the Notifying Party’s estimates. The Commission notes that  the  Transaction would not give rise  to  affected markets  at  the  worldwide  level  in  fixed speed household   refrigeration  compressors.

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(153)    Table 3 shows the market shares  stemming from the  Commission’s  market  reconstruction for fixed household  refrigeration  compressors  in  the  EEA,   which virtually covers the whole EEA market for fixed speed  household  refrigeration compressors.  These  market  shares  confirm  the  Parties’  market  share estimates.

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6.3.2.2. The  Parties  are not particularly  close  competitors

(154)    Respondents to  the  Commission’s  market  investigation  took  the  view  that  in  relation  to fixed speed  household  refrigeration  compressors  the  Parties  are  not  particularly close  competitors. (143)  For  example,  one  customer of  household   compressors  noted that: "Today all producers of compressors  are  producing  single  speed compressors."  (144)

(155)    While the Parties have an overlapping product portfolio in household refrigeration compressors, (145) customers  and  competitors  explained  that  there  is  a  range  of  EEA  and non-EEA producers of fixed speed household  refrigeration  compressors  that compete  with  the Parties  in  those products.

6.3.2.3. Competitive   constraint   from competitors

(156)    The Commission’s market investigation showed  that the  market  for fixed speed household refrigeration compressors is characterised by the presence of a number of suppliers both  in  the  EEA  and  globally. (146) There  are  currently  four  main  competitors of the Parties in  the EEA,  namely  Changhong,  Donper,  GMCC  and  Wanbao/ACC,  and eleven main competitors at  the  worldwide  level,  namely  Changhong,  Donper, GMCC, LG, Panasonic, Qianjiang, Samsung, Siberia, Tecumseh, Wanbao/ACC and Zelt. (147) Customers pointed out that fixed speed is an old technology in refrigeration compressors and virtually all compressor manufacturers produce fixed speed compressors. (148)

(157)    Feedback from  customers that  responded  to  the  Commission's  market  investigation also indicated that post-Transaction  customers would  have  a  sufficient  number  of suitable alternative options for sourcing  fixed speed  household  refrigeration compressors. (149)

(158)    Moreover, the majority of customers that responded to the Commission's market investigation observed that, due to a number of  reasons,  prices  of  fixed speed  household  refrigeration  compressors  in  the  EEA  have  been  decreasing  in  the  last  five years. (150) One of the reasons given for the price decrease has been the entry of new competitors   and the pressure  they exerted  on the  market.

(159)    While the Transaction leads to further concentration  in  the  industry  resulting  in  a reduction in a number of potential suppliers for customers of household refrigeration compressors, (151)  customers  that  responded  to  the  Commission’s  market  investigation  did not generally express concerns as regards the effects of the  Transaction  on  fixed speed household   refrigeration  compressors.

(160)    The majority of customers that expressed an  opinion  as  to  the  effects  of  the Transaction on the price of fixed speed household refrigeration compressors  did  not expect a price increase. (152) Similarly,  the  majority  of  customers that  expressed  an opinion as to the effects of the Transaction did not expect the Transaction to result in reduced  availability  or quality  of fixed   speed household   refrigeration compressors. (153)

(161)    Customers also did not expect that the Transaction would lead  to  a  decrease  in  innovation in fixed speed household refrigeration compressors. Rather, a majority of customers that expressed  an  opinion  expect  an  increase in  innovation,  while  a  number  of  OEM  appliance  manufacturers  expect  innovation  to  remain  the  same post-Transaction. (154)

(162)    With respect  to fixed speed  household  refrigeration  compressors,  one  market participant noted: "There is little room for technological innovation in single speed compressors, and price competition is getting intensified."  (155)

6.3.3. Conclusion

(163)    The Commission concludes that the Transaction does not give rise to a significant impediment to effective competition  in  the  market  for fixed speed  household refrigeration  compressors.

6.4. Competitive  assessment of variable  speed household refrigeration compressors

6.4.1. The Notifying Party's arguments

(164)    The Notifying Party submitted that the Transaction does not give rise to competition concerns in variable speed household refrigeration compressors due to a number of  reasons.

(165)    First, the Notifying Party argued that the Parties’ combined  market  share  in  variable  speed household refrigeration compressors is low at the global level. (156) The Parties estimated their combined 2018 share of variable speed  household  refrigeration compressors to be  [30-40]%  by volume  and  [30-40]% by value  at the  global level. (157) In its Response to the Article 6(1)(c) decision, the Notifying Party proposed that the Commission should carry out a market reconstruction from  a  customer  perspective,  which,   in  their   view,   would   show  whether   the   Parties’  estimates   of  their combined market share in variable speed household refrigeration compressors  worldwide  are accurate  and whether  the  market  is  worldwide  in  geographic  scope. (158)

(166)    Second, the Notifying Party submitted that the Parties are not close competitors  for variable  speed  household  refrigeration  compressors. (159)  In  particular,  it  argued that while Embraco is indeed a leader in  this market,  Nidec’s  position is  rather aspirational. (160) Moreover, the  Notifying  Party  argued that the  Commission   has wrongly interpreted an internal  document  from  Nidec (161)  to  reach  the  conclusion  that  the  company  considers  itself  a  market  leader  in  variable   speed   household refrigeration compressors. According to the Notifying Party, Nidec was merely  expressing  an aspiration  for the  future  in  that   document. (162)

(167)    Third, in its Response to  the  Article  6(1)(c)  decision,  the  Notifying  Party  argued  that the  Commission  wrongly  based  its  preliminary  conclusions  on  the  premise  that  there   is a small number of four to five credible suppliers in the variable speed household refrigeration  compressor  market. (163)  Conversely,  the   Notifying   Party  submitted   that the Parties  face  competitive  constraints  from at  least  eight competitors active  in  variable speed household refrigeration compressors at  the  worldwide  level  (LG, Panasonic, Jiaxipera,  Highly,   GMCC,   Donper,   Samsung  and   Wanbao/ACC),  many of which have entered the market in the last five  years. (164)  Those  competitors  would  import many  prototypes  of  their  variable  speed  household  refrigeration  compressors into the EEA in order to win new  customers.  According  to  the  Notifying  Party,  non- EEA suppliers may effectively compete in the EEA, without facing a competitive disadvantage due to their factory  location. (165)  […]. (166)  […]. (167)  The  Notifying  Party expects  the  competition  from  non-EEA  players  to increase  in  the future. (168)

(168)    Fourth, the Notifying Party submitted that vertically  integrated  producers  of  variable speed  household  refrigeration  compressors  –  among  others,   Panasonic,   LG,  Samsung, GMCC or TEE – make significant sales on the merchant market and thus  exercise competitive pressure on the Parties. (169)  Moreover,  the  Notifying  Party  argued that  the  vertically  integrated  players are  technology  leaders  within  variable   speed (170) and are already actively marketing their variable  speed  household  refrigeration compressors  to  third  parties  online,  at  trade  shows  and  directly  to  business. (171)   In this regard,  the  Notifying  Party  stated  that Samsung  and  Panasonic actively   promoted their variable speed compressors to the merchant market during the  Chillventa  International  Exhibition on  Refrigeration,  AC  &  Ventilation  and   Heat  Pumps   that was held  in  Nuremberg  from  16 to 18 October 2018. (172)

(169)    In addition,  the  Notifying  Party  submitted  that with  regard  to  fixed speed  and  variable speed household refrigeration compressors,  the  merged  entity  will  be  constrained by powerful and sophisticated customers that can exert  buyer  power  to secure  competitive  pricing. (173)

6.4.2.The Commission's assessment

6.4.2.1. Market shares

(170)    Table 4 and Table 5 show market shares of the Parties for variable speed household refrigeration compressors in the  EEA  and  worldwide,  respectively.  The  figures are  based on the  Notifying  Party’s  estimates.

(171)    Table 4 shows that in  the  EEA,  according to  the  Notifying  Party, the  market share of  the merged entity  would  be  approximately  [90-100]%,  that  is  to  say,  the  merged  entity would be nearly  a  monopolist.  The  remaining  competitors  would  have  only  a  very negligible   presence  in  the market.

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(172)    Table 5 shows  the  market  shares  for variable  speed  household  refrigeration compressors at  worldwide  level.  The  merged  entity  would  be  the  largest  player globally with a  value share  of  approximately  [30-40]%.  The  main  competitors  would be Changhong, with a value share of [20-30]%, and Donper, with a value share of [10-20]%.

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(173)    The comparison between Table 4 and  Table  5  shows  that there are  significant differences in the market positions of the manufacturers of variable speed household refrigeration compressors in the EEA and worldwide, as  set  out  in  recitals  (98)  to  (101). First, the value share of  the  merged  entity,  while  being  significant  both at  the  EEA level  and  worldwide,  differs  widely  depending  on  the  geographic  scope:  from an almost-monopolist position in  the  EEA  to  [30-40]%  worldwide. Second,  the number  of  competitors differs  significantly,  from virtually   none   in   the   EEA   to  several  globally. Such  differences  indicate  the  high  degree  of   geographic differentiation  present  in  the  market  at worldwide level.

(174)    This degree of geographic differentiation implies  that  the  market  shares  at  worldwide level are not representative of the market  power  of  the  merged  entity,  because  its market power is not uniform across the globe. Rather, as Table 4 shows, the merged  entity’s   market  power is  particularly  concentrated  in  the EEA.

(175)    As part of its Phase II investigation, the Commission also undertook a market reconstruction, as explained  in  recitals  (143)  to  (148).  The  market  shares  based  on the market reconstruction are shown in Table 6 and Table  7, for EEA and worldwide  levels,  respectively.

(176)    The EEA value shares presented in Table 6, which account for virtually  all  sales  of  variable    speed   household    refrigeration   compressors   in   the   EEA,    show   that    the Parties’ combined market share for 2018 is in the range of 90–100%. This broadly  confirms   the figures   provided  by the Notifying  Party. (176)

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(178)    As stated in recital (146), the  Commission’s  market  reconstruction  covers  a  period  from 2016 to 2020. Therefore, it includes  projections  of  the  customers’ future  purchases for the years 2019 and 2020. Table 8 shows  the  Parties’ value  shares in the EEA  over time  for  the full  period  covered  by the  market reconstruction. (177)

(179)    Based on the customers’ data, the Parties'  combined  value share  in  the  EEA  for  variable speed household refrigeration compressors remains  relatively  constant  in  the range 90–100% for four years over the period the period 2016–2019, and it decreases slightly to the range 70–80% in 2020. Such a decrease is due  to  the  entry  of  competitors into the  variable   speed   household   refrigeration   compressors   EEA market. Despite this entry,  the  merged  entity’s  combined  market  share  would nevertheless remain very high, and  the  merged  entity  would  still  enjoy  a  dominant market position.

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(180)    Finally, Table 9  shows  the  Parties'  combined  value share  in  the  EEA  over  time including captive sales, that is to say, including the internal sales of compressors by integrated appliance manufacturers. As explained in  recital  (137),  the  potential  and indirect constraint of captive sales appears  to  be  weak  in  the  variable  speed  household  refrigeration  compressors  market,  and   hence   the   Commission   considers the market shares based on the merchant market more representative of the merged  entity’s   market power.

(181)    Furthermore, Table 9 shows that even when  including  the  captive  sales,  the  merged entity would have  a  dominant  market  position  in  the  EEA  in  2018 and  going forward. In 2018, the merged entity would  have  a  value  share  between  80–90%  in  the  EEA  and also in the two previous years.  Going  forward,  the  merged  entity  would  have  a  value share of 70–80% in the EEA  in  2019 and  2020. The  range  for  2018 is  in  line  with the figure provided by the Notifying Party, specifically a  value share  of  [80-  90]%. (179) Worldwide value shares  including  captive sales  would  be  significantly lower, (180)  but  the  Commission  considers  those  market  shares  figures   as  not  reliable  for approximating the market power of the  merged  entity.  They  are  not  representative due to the differentiated nature of the worldwide geographic market and because  they include   the  captive  sales  of vertically  integrated players.

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(182)    In sum, the Commission  considers  that Embraco currently  holds  a  market  share indicative of dominance (181) on the market for variable speed household refrigeration compressors in the EEA or in a  clearly  differentiated  EEA  region  in  a  possible worldwide market. The combination of Embraco and Nidec would lead to a further strengthening  of this  market  position  with  a share  indicative   of dominance.

(183)    The  highly  concentrated  nature  of  the  market  for variable   speed   household refrigeration compressors was also put forward by market participants.  A  competitor active in the market submitted: "… where the merged entity would hold a quasi- monopolistic market share around [90-100]% (in value) and [90-100]% (in volume) in the post-transaction scenario. [The company] - i.e., the only other player currently active on this market - would not be able to counterweight the anti-competitive effects stemming from the transaction. This also considering the huge technological gap between Nidec and, in particular, Embraco, on the one hand, and [the company], on the other hand. Both Nidec and Embraco are important innovators on the variable speed household refrigeration compressor  market. Furthermore, they are currently launching new variable speed families: FMX for Embraco; new family based on Delta for Nidec." (182)

6.4.2.2. Variable  speed – new technology  and technology  of the   future

(184)    Unlike in fixed speed household refrigeration compressors, where the  Commission’s  market investigation showed that the market  is  characterised  by  the  presence  of  a number  of  suppliers,  the   feedback  from  the   Commission’s  investigation  with  respect to variable  speed  household  refrigeration  compressors  confirmed  that the  variable speed technology has not  yet  been  mastered  by  many  suppliers.  Respondent  customers confirmed  that there are  fewer suppliers  that offer  variable   speed technology  to the  market. (183)

(185)    Embraco developed  the  variable  speed  technology  almost  20  years   ago. (184)   Since then, a number of other compressor manufacturers have invested in R&D in order to develop their own variable speed refrigeration compressors for household appliances. However, as  noted  by  a  customer, variable  speed  refrigeration  compressors  are "more sophisticated in terms of technology and use. Not all compressor manufacturers offer reliable variable speed compressors."  (185)

(186)    Variable speed refrigeration compressors feature a number  of  characteristics,  making  them the more advanced technology for refrigeration compressors. In  particular,  the variable speed technology enables a compressor to achieve better performance in  a  number  of  parameters.  For  example,  variable  speed  refrigeration  compressors  are more  energy  efficient  and quieter.

(187)    The  energy efficiency  and  noise  of  a  household  refrigeration  compressor is  particularly important for household appliance manufacturers. The energy efficiency standards   are   regulated   across  countries. (186)    For  instance,   in   the   Union,  appliances' energy consumption is regulated by Union legislation. (187) In accordance with this EU legislation, the  energy efficiency  standards  will  increase   further   in   the   near   future. This  will  make  the  energy  efficiency  criteria  even  more  stringent.   […] (188) […].

Figure 6 – […]

[…]

Source: […].

(188)    In order for appliance manufacturers to be able to meet the upcoming more  stringent  energy efficiency regulations, the efficiency of a refrigeration compressor is likely  to  become even more important than today.  Market  participants  confirmed  that compressors of the low to medium energy efficiency  class  can be  produced  by using both variable and fixed  speed  technology.  However,  in  order  to  produce  compressors of high efficiency, i.e. best in class, variable speed is "the unique solution" . (189) As confirmed by an appliance manufacturer: "The market trend  of  high  efficient appliances push the manufacturer to use high efficient  variable  speed  compressors."  (190)

(189)    Thus, it would  seem  that the  use of  variable  speed  household  refrigeration  compressors will increase in the  coming  years.  In  fact,  competitors  that  responded  to the Commission's  market  investigation  expect the  demand for variable  speed refrigeration compressors to increase in the next  5  years. (191)  Similarly,  customers confirmed that there is a trend towards variable speed  household  refrigeration  compressors in the EEA, mainly due to the energy efficiency regulations. (192) A major customer of household refrigeration compressors  also noted  that they expect  the  demand for variable  speed  household  refrigeration  compressors  to  increase   in   the next  years and the  volume   to double. (193)

(190)    The expected increase in  demand for variable  speed  household  refrigeration compressors is  also shown  across  a  number  of  internal  documents  of  the  Parties. […].

(191)    An internal  strategy  document   […]. (194)

Figure 7 – […]

[…]

Source: Annex 10(2) to the Form CO, slide 95.

(192)    Furthermore,   Nidec expects  […]. (195)

Figure 8 – […]

[…]

Source: Annex 10(2) to the Form CO, slide 98.

(193)    Moreover,  in  the same  internal  presentation  […]. (196)  […].

Figure 9 – […]

[…]

Source: Annex 10(2) to the Form CO, slide 82.

(194)      […].

(195)      […].

Figure 10 – […]

[…]

Source: […].

6.4.2.3. The Parties are close competitors with  their  current portfolio  of  variable  speed  household   refrigeration  compressors

(196)    First, the  Commission’s  market  investigation  revealed the  strong  positions  of  the  Parties on the market  for variable  speed  household  refrigeration  compressors  as reflected in the market shares, in particular in the EEA. The results of the  market investigation support the  view  that in  variable  speed  household  refrigeration  compressors  the  Parties  are close competitors. (197)

(197)    Second, the feedback  from the  Commission’s  market  investigation  shows  that customers see the Parties as  close  competitors for household  variable  speed  refrigeration compressors with an overlapping portfolio. Moreover, some customers indicated that the Parties were the closest competitors for variable speed refrigeration compressors. Some customers also identified Jiaxipera (Changhong) as being a close competitor of the Parties, while identifying Embraco as the  market  leader  in  variable  speed  household  compressors. (198)  Some  customers that responded  to  the Commission’s  market  investigation  also identified Jiaxipera’s  (Changhong)  variable  speed household refrigeration compressor model as the closest substitute to Nidec’s  models  and some  of Embraco’s  variable  speed household   compressors  models. (199)

(198)    Third, respondent customers observed  that variable  speed  technology  is  a  more complex technology that is not offered by all household refrigeration compressor manufacturers. In the words of one customer: "There is a significant reliability gap between the best and the worst variable speed technology. Embraco is a leader in this technology."  (200) Another customer also pointed  out  that  Embraco  has  market  power in the area of variable speed refrigeration  compressors,  as  this is  a  new technology  for  some  suppliers. (201)

(199)    Fourth, with regard to quality, customers also highlighted  Embraco's  and  Nidec's excellence when it comes to technology and quality of their variable speed household refrigeration compressors. The majority of  customers that responded to the  Commission's market investigation indicated both Embraco and Nidec among the top compressor manufacturers for household applications  in  terms  of  their  technological ability and capacity to innovate. (202) One  appliance  producer  noted,  specifically  with regard to variable speed household refrigeration compressors: "Nidec (Secop as subsidiary) is currently supplying [the company]. So does Embraco. Both have an excellent technology for variable speed and compete for the same volume."  (203)

(200)    The  Parties',  and  in  particular  Embraco’s,  leadership  and  excellence   in  quality  of   their variable speed household refrigeration compressors is an important factor for customers. Customers'  feedback from the  Phase  I  investigation  indicates   that customers sourcing  household  refrigeration  compressors   consider   a   number   of criteria  when choosing  a  supplier,  including  price,  performance of  products, technology,   quality,   as well  as technical  feedback on research  and development. (204)

(201)    Fifth,  technological  gaps  among  suppliers  were  also specifically  stated  by   a competitor that is,  based  on  the  Commission’s  market  reconstruction   conducted during the Phase II investigation, currently the only other supplier of variable speed household refrigeration compressors in  the  EEA.  This  competitor  considered  that:  “in  the post-Transaction scenario, therefore, the technological gap between the products of the Merged Entity, on the one hand, and those of [the company] and the Purchaser, on the other hand, would still be material”. (205) According to  this competitor, “the merger, in fact, would concentrate the only two innovators in the EEA market for household variable speed refrigeration compressors.” (206) Such technological gaps seem to suggest that in the  EEA,  out  of  the  three currently  established suppliers, only two can compete in the same level  playing  field,  namely Embraco  and Nidec.

(202)    Sixth, the evidence  obtained during  the  Commission’s  investigation  also shows  that based on the Parties’ current portfolio of variable speed household  refrigeration compressor  models,  the  Parties  are close competitions.

(203)    More specifically, the feedback from  customers  shows  that  Embraco  is  considered  as the market leader and technological leader in variable speed household refrigeration compressors and a  Tier  1  supplier  for those  customers that distinguish between different   categories  of suppliers. (207)

(204)    Nidec’s competitive advantage, on the other hand, seems to also benefit from the long-standing reputation of the Secop brand and its strength in fixed speed household refrigeration  compressors  as  well  as  light  commercial  refrigeration  compressors.  A large majority of  market  participants  that  responded  to  the  Commission’s  market  test  in  Phase  I  agreed  that  Secop  is  an  important  brand  in  the  refrigeration   compressors industry. (208) Therefore, while  Nidec’s  current portfolio  may  not  be  technologically  at par with  Embraco’s,  customers  still  consider  them  as close competitors.

(205)    Seventh, the closeness of competition between the Parties is also demonstrated by the Parties’  internal  documents. For  instance,  Embraco’s  internal  documents  show  that  the  company  uses  its  business  intelligence   and closely  monitors   Nidec’s […].

(206)      […]. (209)

Figure 11 – […]

[…]

Source: […].

(207)    […] (210) Therefore, it seems that  following  the  acquisition  of  Secop  by  Nidec,  Nidec  has been a driver of competition. This competition would be lost as a result of the Transaction. […] (211) This close  monitoring  combined  with  such  observations further shows that Embraco considers Nidec as a close competitor in household refrigeration compressors.

(208)    Moreover, Embraco’s competitor monitoring of Nidec/Secop seems to suggest that Embraco  pays close  attention  to Nidec’s  next  moves.  […]. (212)

(209)      […]. (213)

(210)      […]. (214)

(211)    Finally, internal documents of  the  Parties  also show  that the  Parties  consider  themselves  as market  leaders in  variable  speed technology.   […].  (215)  […].

6.4.2.4.  Dynamic competition between the Parties in variable speed household refrigeration compressors  through  pipeline   products

(212)    In addition to being close competitors with their current variable speed household refrigeration   compressors   portfolio,   the   Commission’s   investigation   shows   and further confirms that the competition between Nidec and  Embraco was,  absent  the merger, likely to intensify. Nidec,  following  the  acquisition  of  Secop  in  2017,  have made a strategic decision to further grow the company’s presence in the household refrigeration  compressors  market.  […]. (216)   […]. (217)

(213)    Moreover, Nidec’s goal of re-entering the household market by  strengthening  its presence in  this market  is  largely  built on  upgrading  and  investing in  its  variable speed household   refrigeration  compressors  portfolio.

(214)    Following the acquisition of Secop and prior to winning the  bid  to  acquire  Embraco, Nidec had identified a number of projects to become an even stronger supplier of household refrigeration compressors and to upgrade its portfolio in  a  way  that  would allow it to compete for the expected increase in demand for variable speed household refrigeration   compressors.  […]. (218)  […]. (219)

(215)    Nidec’s […].

Figure 12 – […]

[…]

Source: […].

(216)    Another slide titled […], Nidec outlined […]. Thus, these projects were  not just mere  ideas, but concrete plans supported by financial investments where the R&D and engineering  works had been put in   motion.

Figure 13 – […]

[…]

Source: […].

(217)    Another  strategic   document,   […]. (220) […].

Figure 14 – […]

[…]

Source: […].

(218)    Nidec’s […].

Figure 15 – […]

[…]

Source: […].

Figure 16 – […]

[…]

Source: […].

(219)    In an even  more  recent  document, […].

Figure 17 – […]

[…]

Source: […].

(220)    In addition,  […].

Figure 18 – […]

[…]

Source: […].

(221) Also, Nidec has […]. (221) […] (222) […]. (223) […]. (224) 

Figure 19 – […]  

[…] 

Source: […]. 

(222) Furthermore, […]. (225) […].  

Figure 20 – […] 

[…] 

Source: […].  

(223) In another internal document […], (226) […]. 

Figure 21 – […] 

[…] 


Source: […]

(224) Moreover, the competitiveness of Nidec’s pipeline products is echoed in Embraco’s 
internal documents. […].  

(225) […]. (227)  


(226) […]. (228) 


Figure 22 – […] 

[…] 

Source: […]. 

 (227)    Thus, as a result  of  the  Transaction,  the  dynamic competition  between  the  Parties would be lost. [Post-Transaction consolidation  plans]. (229)  Such  consolidation  would  in fact reduce customers’ choice of product models and the elimination of head-to-head competition between the Parties would have an impact in the EEA and also in other geographical  regions.

6.4.2.5. Limited   competitive   constraints   from competitors

(228)    While it seems that there will be considerable demand for variable speed household refrigeration  compressors  in  the  future,   the   Commission’s   market   investigation  showed  that the  merged  entity  would  face   limited   constraints   from  competitors   in this  market.  A number  of different   customers  noted,  for instance:

(a)   "…variable speed compressors is a relatively new technology which at this stage has a very limited competition."

(b)   "In the high efficient segment the number of suppliers is smaller, as not every supplier is able to reach this efficiency segment. The main suppliers in this segment today are Embraco, Panasonic, Nidec and LG."

(c)   "…Only a few of them [suppliers] can provide high efficiency compressors  with reliable performance and quality."

(d)   "High efficiency level need strong resources and R&D."  (230)

(229)    Customers that responded to the  Phase  I  market  investigation  indicated  that  the  number  of   producers  of   variable   speed   refrigeration   compressors   is   limited   to 4-5 suppliers, especially  if  a  customer requires good  quality. (231) These producers include vertically  integrated  producers such  as  LG, Panasonic  and   Samsung. Moreover, a  customer that sources  variable  speed   household   refrigeration compressors noted that Jiaxipera  (Changhong  group) has  only  started  producing variable   speed refrigeration  compressors  a few  months  ago. (232)

(230)    The   assessment   of  the   competitive   constraint   from  competitors   in   this   sub-section

6.4.2.5 is structured as follows: the competitive constraint  from  vertically  integrated  players is assessed under heading 6.4.2.5.a; and the competitive constraint currently exercised  by Chinese  rivals   is assessed  under  heading  6.4.2.5.b.

a. Competitive constraint from vertically integrated players

(231)    As regards the constraint on  the  Parties  by  vertically  integrated  players,  customers  in the EEA do not seem to consider integrated players, in particular LG, Samsung and Panasonic, as an alternative source of supply. There seem to be several reasons why customers are reluctant to source variable speed  household  refrigeration  compressors  from  vertically  integrated  players and  why  these  suppliers’  competitive  constraint  on the  merged  entity  would  be limited  post-Transaction.

(232)    First, some customers do not  source  from vertically  integrated  producers  of compressors because these  producers are  the  customers' competitors in  the downstream market of refrigeration appliances. (233) In particular,  sourcing  from a competitor could  be  problematic  when   it   comes   to  sourcing   refrigeration compressors that need to be co-developed  with  the  refrigeration  compressor manufacturer.  Joint  R&D  initiatives  between  refrigeration  compressor   manufacturers and appliance  producers  take  place  in  particular  with  regard  to  the  technologically more advanced models where customers aim  at  achieving  a  competitive  edge. According to an appliance manufacturer: "The compressor is the most important component of a refrigerator… [the company's] engineers know the appliances and their potential weaknesses, e.g. pressure, noise, so they find solutions together with the compressor engineers."  (234) Therefore, it is likely that in order to find these technological solutions together, a  customer  would  need  to  share  certain  information that could  be  competitively  sensitive  to  a  competitor downstream  if  they  were  to work on such solutions   with  a vertically  integrated   compressor  manufacturer.

(233)    Second, some customers that  responded  to  the  Commission’s  market  investigation  noted   that   variable   speed  household   refrigeration   compressors   offered   by vertically integrated suppliers are more expensive. (235) For these  customers,  higher  price  is  the  reason why they would  not  source  compressors  from the  vertically  integrated suppliers.

(234)    Third,  the  production  of  refrigeration  compressors  of  vertically  integrated   OEMs,  such as LG and Samsung is mainly dedicated for in-house  (captive)  use. (236)  In  this  respect, one competitor noted: "Samsung has no significant sales on the merchant sector for household refrigeration compressors at EEA level. [The company] deems that Samsung will have no incentive to divert part of its current captive production to the merchant market in the post-transaction scenario, and the OEMs will have no incentive to purchase their requirements from Samsung. This is due to a number of factors, such as: (i) Samsung needs its internal production of household refrigeration compressors for its downstream production of refrigerators; (ii) Samsung has no commercial relationship with the OEMs - i.e., the customers - in this context; (iii) Samsung competes downstream with the OEMs, i.e., the customers; this implies that the former have no incentive to benefit the latter, and vice-versa. A similar reasoning applies with respect to LG."  (237)

(235)    Fourth, the  limited  presence  of  the  vertically  integrated  players on  the  merchant market seems to be supported also by the  quantitative  data  provided  to  the Commission by customers in the  context of  the  Phase  II  market  reconstruction exercise. In  particular,  in  the  EEA  the  three vertically  integrated  players (LG, Samsung and  Panasonic) have  very  limited  sales  to  customers on  the  merchant market. These sales represent 0–5% of the EEA market for variable speed household refrigeration  compressors.

(236)    Fifth, the limited  constraint  from vertically  integrated  players seems  to  be  also  reflected in the 2018 market shares provided by the  Parties. (238)  The  Parties’ combined EEA market share of [90-100]% in volume and [90-100]% in value stands in a sharp contrast  to  the  argument  that  vertically  integrated  players would   be  a  constraint  on the merged entity post-Transaction. In fact, based on the Parties’ data, the  only other  player with more than [0-5]% market share in the EEA in 2018 was Panasonic  with [0-5]% market  share  (volume)   and  [0-5]% market  share  (value),  as shown in  Table 4.

(237)    Finally, the Commission notes that while Embraco is part of  the  Whirlpool  group, customers do not seem to consider Embraco as a vertically integrated player such as Panasonic, Samsung and LG. This can  be  explained  by  the  fact  that  Embraco,  a Brazilian company that was founded in 1971, had been a self-standing refrigeration compressor manufacturer  for  a  long  time,  before  Whirlpool  acquired  a  majority  stake in Embraco in 1997. Therefore, customer relationships between many customers and Embraco predate  its  acquisition  by  Whirlpool.  Moreover,  Embraco  does  not  market its compressors under the Whirlpool brand. Thus, from a marketing perspective, it is acceptable for a refrigeration appliance  manufacturer  to  source  variable  speed  household  refrigeration  compressors  from Embraco,  because  the   Embraco  compressor built in that customer’s refrigeration appliance would not be labelled as “Whirlpool”  (a competing  brand in  refrigeration  appliances)   but rather   “Embraco”.

(238)    Therefore, based on the qualitative and quantitative feedback and evidence, the  Commission  considers  that  vertically   integrated   players’   competitive   constraint   on  the  merged  entity  post-Transaction  would  be very limited.

b. Competitive constraint from Chinese rivals

(239)    First, while  non-EEA rivals’  variable  speed   household   refrigeration   compressors  might be capable of achieving good performance, European customers limited  their sourcing to the top three suppliers in 2018. Based on the customers’ data (239),  a  vast majority of the volumes were  sourced  from the  Parties,  in  addition to  marginal volumes sourced  from only  one  competitor.   Competitive   constraints   therefore currently  appear to be limited.

(240)    Second, customers negotiate  orders  with  their  suppliers  of  refrigeration  compressors well in advance. While the Parties submitted that customers arrange their sourcing  by holding  tenders, (240)  the  feedback from the  market   investigation   suggests   that  customers in fact  select  their  suppliers  of  household  refrigeration  compressors  by holding bilateral negotiations,  during  which  technical  requirements,  product characteristics as well as prices are negotiated. (241) This  was  also confirmed  by  the Parties’  competitors  in  the Commission’s   market investigation. (242)

(241)    Negotiations and orders of compressors usually take place several months before the delivery date. Therefore, as part of the Commission’s Phase II market reconstruction, customers of variable speed household refrigeration compressors were requested  to provide their sourcing data for the  year  2018,  as  well  as  their  planned  orders  for  2019. Given that commercial negotiations and orders are agreed in advance, at the beginning of 2019 customers are mostly in  a  position  to  estimate  their  planned  orders for,  at least, 2019.

(242)    Third, in 2019 the picture does not  appear  that different.  Some  customers that responded to the Commission’s market investigation noted that for 2019 they had concluded contracts with, or were currently  testing  products,  from  a  very  limited  number of Chinese manufacturers.  However,  testing  a  new  potential  supplier  is  a process that may or  may  not  result  in  a  qualification  of  that  supplier  for  variable speed  household  refrigeration  compressors. (243) Customers  seem  to  have   planned orders from the Parties, which  will  continue  to  be  significant  and  providing  market shares clearly above the level indicative of dominance. In fact, while some customers indicated that they have made orders or are currently in the process of qualifying new suppliers, the orders and qualification seems to be limited to a very small  number  of Chinese  suppliers. (244)

(243)    Thus,  the  Commission’s  market  investigation  does  not  support  the  Parties’  argument as regards the diversified supplier base of variable speed household refrigeration compressors. While a number of additional companies may have a model and/or  a prototype  of  a  variable  speed  household  refrigeration  compressor  in  their  portfolio, the   evidence   obtained   by  the   Commission  in  the   course  of  its  market investigation, which is based on actual data from customers, shows  that  customers  do  not  currently buy these models. Therefore, it seems that the  competitiveness  of  such  additional suppliers  as  regards  their  variable  speed   household   refrigeration   compressors   is limited and these suppliers are not a real alternative to the Parties, in  particular  for  customers  that  sell  household   refrigeration  appliances  in the  EEA.

(244)    Based on the qualitative and quantitative feedback and evidence, the  Commission  considers that the Chinese suppliers that are currently present  on  the  market  would impose  only  a limited   competitive   constraint   on the merged  entity  post-Transaction.

6.4.2.6. Market entry  – not  a sufficient   competitive constraint

(245)    In order for market entry to be considered a sufficient competitive constraint on  the merging Parties, it must be shown  to  be  likely,  timely  and  sufficient  to  deter or defeat any potential anti-competitive  effects  of  the  merger. (245)  For  entry  to  be  likely,  it  must be sufficiently profitable taking into account  the  price  effects  of  injecting  additional  output  into  the market  and the potential  responses  of the  incumbents.

(246)    As regards the timeliness of entry, the Commission examines whether entry would be sufficiently swift and  sustained  to  deter  or  defeat  the  exercise  of market  power.  Entry is  normally  only  considered  timely  if  it  occurs  within   two years. (246)

(247)    Moreover, entry must be of sufficient scope and magnitude to deter or defeat the anti-competitive  effects  of the merger  in order to be  considered. (247)

(248)    First, regarding the likelihood of a market entry by Chinese rivals,  the  Commission’s market investigation  shows  that  some  Chinese  players  are  likely  to  enter  the  market  of variable speed household refrigeration compressors in the  future.  Indeed,  some customers have made limited orders and/or are in the process of qualifying  a  limited  number of Chinese  suppliers,  as  described  in  recital  (242).  Moreover,  a  submission  by  the  Notifying  Party  suggests  that  Chinese   manufacturers   import  many  prototypes of their variable speed  household  refrigeration  compressors  into the  EEA  in  order  to win  new  customers  and actively  approach European  customers. (248)

(249)    However, likelihood of an entry  is  only  one  of  the  three  conditions  that  need  to  be met in order for the Commission to consider market entry as a sufficient competitive constraint   on the Parties.

(250)    Second, while the Parties draw a parallel with the Chinese expansion into fixed speed household refrigeration compressors, this past occurrence does not seem to  suggest  a timely expansion on a large scale. In  fact, the  Chinese  expansion  in  the  household segment  overall (that is  to say,  largely  fixed speed  household  refrigeration compressors) took more than ten  years.  According to  the  Parties’  submission,  Chinese players’ market share in the EEA increased from 5% in 2006 to  12%  by  2008, (249) that is to say, during two years. Thus, in fixed speed household refrigeration compressors,  during  the timeframe that would  be  considered  for a  timely  market entry, the Chinese suppliers’ market share increased only to 12%.  It  was  only  over a longer   timeframe,   that  the   Chinese   players   expanded  their  market  share significantly. For example, the Chinese players (several players combined)  reached  a  30%  market share in 2013, which by 2017 increased to 54%. (250) However, ten years, or even seven years if one considers the 2013 market share of 30%, is a timeframe  that  goes  well beyond the  timeframe that could  be  considered  by  the  Commission  for a  ‘timely entry’. Furthermore, this  submission  of  the  Parties  does  not  show  the  market  shares  of the Parties for that given period that would allow  a  comparison  of the  respective market  shares  in  order to assess the  Parties’  market  power at the time.

(251)    Moreover, a timely entry has  not  been supported  by the  feedback  obtained  as part of the Commission’s investigation. Based on the customers’ feedback used for the Commission’s market reconstruction, only a very limited  number  of  Chinese  players  would gain market share in the supply of variable speed household  refrigeration compressors in the EEA in  the  next  two  years.  These  new  entrants  would  increase their market share from virtually zero to a small market  share.  At  the  same  time,  as shown at Table  8  the  merged  entity’s  market  share  in  the  EEA  in  2020  is  still forecast to remain very high, clearly  above  the  level  indicative  of  dominance ([70-80%]).

(252)    While  some competitors may  have  the  ambition  to  enter  the  market  for variable speed household refrigeration compressors, customers that responded to the  Commission’s  market  investigation  are  either  not  testing  new   suppliers   or   only  testing a limited number of new suppliers. (251) This may be due to the  fact  that  other suppliers have not yet developed  a  competitive  and  reliable  model  that  would  satisfy  the  customers’  requirements,  in  particular  in  the  EEA.

(253)    Third, as regards demand, feedback from customers that responded to the Commission’s market investigation suggests that market  entry  in  the  next  two  years  would  not  be  sufficient. Customers’  forecasts  as  regards  their  planned   procurement  of  variable  speed  household  refrigeration  compressors  show  that   while   customers may diversify their supplier base to some extent, the  diversification  and  volumes  that would be sourced from new suppliers  would  not  be  of  a  sufficient  scope  and magnitude.  The  quantitative  data  is   also   reflected   in   the   qualitative   feedback provided by customers. In terms of  qualifying  additional  or  new  suppliers,  customers that responded  to  the  Commission’s  market  investigation  either  confirmed   that  they are currently not planning to qualify new  suppliers,  or  if  they  do,  the  supplier  which  they are in the  process  of  qualifying  are  players that are  already  present  on  the market,  even  if just marginally. (252)

6.4.2.7. A reduction  of competition  and price  increases  feared  by market participants

(254)    As regards the effects of the Transaction, a number of customers of  household  refrigeration compressors reported that the Transaction would result in a further concentration of the industry. As  a  result,  the  competition  between  compressor suppliers   will   decrease. (253)    A   large   customer   noted,   in   particular with respect to variable speed household refrigeration compressors that "merger of 2 variable speed suppliers reduces the offering in the EEA market."  (254)

(255)    Some customers of household refrigeration compressors indicated  that  the  number  of  their potential suppliers will be reduced with the risk of reductions of the competitive pressure. (255)

(256)    For some customers, the Parties are the only two suppliers or two major suppliers of variable speed  compressors  at  the  moment,  in  particular  in  the  EEA,  and  therefore, for some customers, the Transaction  may  lead  to  a  dependency  on the  merged  entity for  some time. (256)

(257)    While the prices of variable speed household refrigeration compressors have been decreasing over the last five years, an  overwhelming majority  of  customers that responded to the Commission’s  market  investigation  expect  the  prices  of  variable speed household refrigeration compressors to increase or remain the same post- Transaction. (257) In particular, certain OEMs expect a price  increase.  One  customer  of both  household  and  light   commercial   refrigeration   compressors   explained:   "Nidec has invested to acquire Embraco. They will need to earn that money back. If the market is a bit constrained in supply of variable speed technology because of the increasing demand they will attempt to increase the prices at the same time as availability does not increase.", and added in general terms: "Unless of course the Asian competition is increasing volume offering."  (258)

(258)    Finally, with regard to variable speed household refrigeration compressors, a market participant submitted: "Customers would not have a viable alternative to Nidec and Embraco with respect to variable speed household refrigeration compressors in the post-transaction  scenario.  The  merged  entity  would  hold  a  market  share  around [90-100]% (in value) and [90-100]% (in volume), while [the company] of only [0-5]% (in value) and [5-10]% (in volume). In addition, there is a huge technological gap between the variable speed household refrigeration compressors  of Nidec and, in particular, Embraco, on the one hand, and [the company], on the other hand. The technical level of the variable speed household refrigeration compressors of Nidec and, in particular, Embraco is much more advanced as compared to that of [the company]. In addition, both Nidec and Embraco are important innovators on this market. Furthermore, they are currently launching new variable speed families: FMX for Embraco; new family based on Delta for Nidec. The level of substitutability between the products of the merged entity and those of [the company] would be limited in this context." (259)

6.4.3. Conclusion

(259)    The  Commission  considers  that the  Transaction would  be  likely to  significantly  impede  effective  competition  in  the  market   for   variable   speed   household  refrigeration  compressors  in  the  EEA  and  also globally, where EEA   is   a  differentiated segment, due to horizontal non-coordinated effects and/or due to  the  creation  or strengthening  of a dominant  position.

6.5.  Competitive assessment of fixed and variable  speed  light  commercial refrigeration compressors

6.5.1.The Notifying Party's arguments

(260)    In Phase I, the Notifying Party argued that the Transaction does not  give  rise  to competition  concerns  in  light  commercial  refrigeration  compressors.  The   Notifying Party argued that the  merged  entity  would  face  significant  competition  from  strong rivals,   notably   from   Chinese   players   such   as  Changhong,   Wanbao/ACC,  Donper, Quianjiang  and GMCC. (260)

(261)    Further, the merged entity would be constrained by suppliers of  other  types  of refrigeration  compressors,  namely  rotary and  scroll  compressors261,  which   are typically  used  in  applications  which  need  higher displacement   ranges,   but   are gradually  moving  into  the  space in  which  the  Parties  compete  most directly. (262)

(262)    Finally, the Notifying Party argued that  the  merged  entity  would  be  constrained  by strong,  sophisticated,  customers. (263)

(263)    However, in its Response to the Article 6(1)(c) decision, the Notifying Party did not challenge the Commission’s assessment establishing serious doubts in both  fixed and variable  speed  light  commercial  refrigeration  compressors,  in  the  EEA   and  globally. (264)

6.5.2.The Commission's assessment

6.5.2.1. Market shares

(264)    The market  for  light  commercial  refrigeration  compressors  is  very  concentrated,  both at EEA and global level, and for fixed and  variable  speed  (both  separately  and combined), as can be seen from the market share tables (Table  10Table  15), setting  out market shares at EEA and global level, for  fixed  and  variable  speed.  The  market share  figures   are based on the  Notifying  Party’s estimates.

(265)    Table 10 - Table 15 show that the global market for light commercial refrigeration compressors features a number of producers who are also active in the production of household  refrigeration  compressors,  such  as  the  Parties,   together   with   producers such as Changhong (through its company Huayi/Cubigel), Donper, Panasonic and Wanbao/ACC. Tecumseh is however mainly active in light commercial refrigeration compressors.

(266)    As regards the EEA  market,  the  market  is  even  more  concentrated.  The  Parties  are  the  largest  players, followed  by  Changhong,  Tecumseh  and,  according   to  the Notifying Party’s data, GMCC. Both Changhong and Tecumseh have manufacturing facilities  for light  commercial  refrigeration  compressors  in  the  EEA,  in  Spain  and France respectively.

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(267)    As can be seen from Table 13,  the  merged  entity  would  have  a  combined  market  share of [40-50]% (on the basis of volume) and [50-60]% (on the basis  of  value)  globally, for  fixed speed  light  commercial  refrigeration  compressors.  It  would  be  by  far the global leader in fixed speed light commercial refrigeration  compressors,  and between […] larger than the second global player, Changhong,  which  has  a  global market share of [10-20]% (on the basis of  volume)  or  [10-20]%  (on  the  basis  of value) according to the Notifying Party's estimates. (271) The other global players are significantly  smaller.   […].

(268)    At EEA level, the merged  entity  would  be  even  stronger,  with  a  combined  market share of [70-80]% for fixed speed light  commercial  refrigeration  compressors,  on the basis of volume and [70-80]% on the basis of value, as set out in  Table  12. The  only other three players identified by  the  Notifying  Party  as  being  active  in  the  EEA (namely  Tecumseh,   Changhong  and GMCC) are significantly  smaller.    […].

(269)    When looking at the Parties' market shares in  variable  speed  light  commercial  refrigeration compressors (Table 14and  Table  15),  the  merged  entity  would  become  the  monopolist,   both worldwide   and at EEA level.

6.5.2.2. The  Parties  are close competitors

(270)    The  Commission’s  market  investigation  confirmed  that, as  might  be   suggested   by  their  market  shares,  the  Parties  are  close  competitors   in   light   commercial  refrigeration compressors, in both fixed and  variable  speed,  and  in  the  EEA  and globally.

(271)    In  particular,  customers indicated   that  Nidec  and  Embraco  are  the  leading  suppliers of light commercial refrigeration compressors. (272) Further, many light commercial refrigeration  compressor customers, in  particular  in  the  EEA,   source   either exclusively,   or predominantly,  from  Nidec and Embraco. (273)

(272)    The  Commission’s  market  investigation  also showed  that   the   Parties   compete  closely, have a similar portfolio, and are the two leading producers when it comes to technology,  innovation  and  range. During the  Commission’s  market  investigation,   almost all respondent customers confirmed that the Parties  were  the  two  leading companies  in  terms  of technological  ability  and capacity  to  innovate. (274)

(273)    In  particular,  while  the  variable  speed  light   commercial  market  is   small  (accounting for only 2% of the volume of all light commercial refrigeration compressor sales  globally (275)), it can be seen in Table 14 and Table 15 that the Parties are the two main players currently  producing  variable   speed   light   commercial   refrigeration compressors. The merger  would  result  in  a  monopoly  in  this market  both  at  EEA level and  globally. The  variable  speed  light  commercial  refrigeration  compressors market  is  also  expected  to grow  significantly  over  the next  five years. (276)

(274)    For  example,  one  European  light  commercial  customer confirmed  that the   Parties were the only two able  to  supply  variable  speed  refrigeration  compressors:  "In  fact  for many applications Embraco and Nidec are the UNIQUE TWO COMPETITORS HOMOLOGATED, specially for variable speed compressor. For us to have both suppliers is strategic."  (277)

(275)    In addition, due to forthcoming bans  of HFCs  under  Union  regulation  in  this  area, (278) light commercial  compressors,  which  are  compatible  with  more environmentally-  friendly types of HC  refrigerant,  such  as  R290,  will  become  increasingly  more important. This was  one  area  highlighted  in  the  Commission’s  market  investigation, where customers indicated  that  there was  limited   competition  from  other  players   in the  light  commercial  market,  and  in  particular  for   models   which   were   compatible with  R290 refrigerant. (279)

(276)    For  example,  one  customer  highlighted  the  Parties'  leading  technology  and  the  fact  that the Parties were the only two suppliers able to supply the full range of R290 compressors: "The competition between Nidec and Embraco  is  very  important for our business. Both companies offer products of high quality and of high technical standards and they have the size to cover our requirements. Currently, Nidec and Embraco are the only two manufacturers of compressors who offer full range (all sizes) of compressors with R290 refrigerant for light commercial applications."   (280)

(277)    Respondent customers also noted that competitors were not able to  supply  light commercial   refrigeration   compressors   compatible   with   R290   refrigerant,   for example: "R290 and R600/R404 applications/Compressors: Nidec and Embraco are relatively pair in technology and performance on R290. All others need significant development. On R600/R404 the performance of all players is very similar." (281) This customer noted that there was more competition for compressors compatible with the R600/R404 refrigerants.

(278)    Market  participants  in  the  Commission’s  market  investigation  raised   concerns  regarding the impact of the  Transaction,  due  to  the  closeness  of competition  between the Parties pre-Transaction: "Nidec bought  the  compressor  manufacturer  SECOP and they have been a direct competition to Embraco. We see a huge  negative impact."  (282) Indeed, a  majority  of  customers considered  that prices  of  light commercial  refrigeration  compressors  would  rise  post-Transaction,  and  that   these  price rises would be higher for variable  speed  light  commercial  refrigeration  compressors,  where  the  Parties  would  have  a monopoly. (283)

(279)    For example, one light commercial customer noted that: "The fact this will be very critical situation, Embraco and Secop today are our two main competition for hermetic compressors, specially for variable speed. A merge will create a monopolistic market for light commercial applications, specially  in EEA."  (284)

(280)    Another light commercial customer noted that: "Nidec has invested  to  acquire  Embraco. They will need to earn that money back. If the market is a bit constrained in supply of variable speed technology because of the increasing demand a merger may give rise to increasing prices as availability does not increase. Unless of course the Asian competition is increasing  volume  offering." (285) The  Commission's  views that the prospects of market entry in variable speed light commercial refrigeration compressors  are limited,   particularly  in  the  EEA,  are set out  in  Section 6.5.2.4.

(281)    The  Parties’  own  internal  documents  also  provide  further  evidence  of  the  closeness  of competition between Nidec and Embraco. For example, Nidec  notes  in  one document that […] (286) In another document,  Nidec  notes  that  in  the  EEA,  […] (287)  […] (288)  […]. (289)

(282)    Moreover,  Nidec […].

Figure 23 – […]

[…]

Source: […].

(283)    Nidec’s  internal  documents  […] (290)

6.5.2.3. Limited   competitive   constraints   from competitors

(284)    The  Notifying  Party  argued that the  merged  entity  would  face   extensive   and  significant  competition  from competitors such  as  Chinese  and  Asian  players, US- based Tecumseh and vertically integrated Asian players such as LG, Panasonic and Samsung. The Notifying Party submitted a paper regarding the  Chillventa  Trade  Fair, which took place in Nuremberg (Germany) during the  course  of  the  Phase  I  investigation, in order to further support  their  arguments.  In  particular,  the  Notifying  Party argued that the vertically integrated players were targeting the light commercial refrigeration    compressor    market,    namely  that Hitachi had entered the light  commercial  refrigeration  compressor  market  and  that Changhong  and   Tecumseh   were also present. (291)

(285)    However,  the  Commission's  market  investigation  did  not   support  the   Notifying Party's argument that the merged entity  would  face  strong  competition  in  light  commercial  refrigeration  compressors  post-Transaction.  The  Commission   contacted  the Parties' global competitors in  order  to  see whether  these  players would  be entering,  or  significantly   expanding,   into   the   light   commercial   refrigeration  compressor  market  in  the next  3 – 5 years. (292)

(286)    In particular, as regards fixed speed light commercial refrigeration compressors, the Commission’s market investigation  confirmed  that in  the  EEA,  Changhong  and Tecumseh are the only other two meaningful players currently capable of supplying customers in fixed speed light  commercial  refrigeration  compressors. (293)  The Commission’s market investigation did not  reveal  significant  changes  to  this EEA position  in  the  next  three years.

(287)    There are however more competitors active globally. In addition to Changhong and Tecumseh,  according  to data  submitted  by  the  Notifying  Party,  Donper, Wanbao/ACC, Qianjiang, GMCC, Kulthorn  Kirby,  Siberia,  Zelt,  Panasonic  and  LG  are also active at worldwide level (with shares ranging from 1 – 7%  on the  basis  of volume and 0-8% on the basis of value).  However,  imports  of these  players  into  the EEA are very limited and are not sufficient to place any competitive  constraint  on the merged  entity.  Indeed, the  combined  sales  of  these  companies  into the   EEA (according to the data submitted by  the  Notifying  Party)  was  very  low  in  2018  (less than 4%).

(288)    The  Parties'  own  internal  documents  also  show  that  the  main  other  two  competitors in light commercial refrigeration compressors are Tecumseh and Changhong (Huayi/Cubigel),  as  these  are  the  two  competitors that are  routinely  tracked  in strategy  documents.  […].

Figure 24 – […]

[…]

Source: […].

(289)      […].

Figure 25 – […]

[…]

Source: […].

(290)    However, there are indications from the Commission’s market  investigation  that  Changhong  and  Tecumseh's  light  commercial   refrigeration   compressors   are  not   of the same quality, and do not have the same range as the Parties’ light  commercial refrigeration compressors, and that some customers do not consider their quality is adequate. (294)    For  example,   at  least  two   major  customers  considered  the   quality of Tecumseh's light commercial refrigeration compressors to be inadequate and  needing  further   development. (295)

(291)    Customers  that  responded  to  the  Commission’s  market  investigation  also  indicated   that there is a large gap between the Parties and Changhong and Tecumseh. (296) One customer did not consider  that Changhong  and  Tecumseh  would  be  able  to  significantly  improve  their  light  commercial   refrigeration   compressor  products  in  order to close  this  technological  gap  in the  next  few years. (297)

(292)      […] (298)  […].

(293)      However,  […]. (299)  […] (300)  […]. (301)

Figure 26 – […]

[…]

Source: […] .

(294)    As regards  possible alternative  suppliers,  one  market  participant  noted  that:  "As  of now compressors of Chinese suppliers are not on the same quality and technical standard as Embraco or Nidec (SECOP) compressors are."  (302)

(295)    The Notifying Party argued that Donper is due to  significantly  increase its  light  commercial refrigeration compressor offering and will therefore be  an  effective competitive constraint. However,  the  Commission  notes  that this company  is  not present in the EEA, but rather is based in China and has a limited  range  of  light  commercial refrigeration compressors, with a 3%  global market  share  based  on value and 5% global market share based on volume. The vast majority of customers in the Commission’s market investigation did  not  list Donper  as  a  potential supplier. Therefore, the Commission considers that the competitive  constraint  likely to  be  exercised on the merged entity by Donper is significantly lower than the competitive constraint   currently  exercised  by the  Parties  on each other.

(296)    As regards the  variable  speed  light  commercial  compressors  market,  the  Parties  are  the only two players present in  the  EEA  and  globally, on  the  basis  of  their  own  market share data (see Table 14 and Table 15) and this is largely supported by the Commission’s   market investigation.

6.5.2.4. Market entry

(297)    As noted at Section 6.4.2.6, in order for market entry to be considered a sufficient competitive constraint on  the  merging  Parties,  it  must  be  shown  to  be  likely,  timely  and  sufficient  to deter  or  defeat  any  potential anti-competitive  effects  of  the  merger. (303)  As  regards  the  timeliness of  entry,  the   Commission   examines   whether entry would be sufficiently swift and  sustained  to  deter  or  defeat  the  exercise  of  market   power.   Entry   is   normally   only   considered   timely   if   it   occurs   within    two years. (304) Moreover, entry must  be  of  sufficient  scope  and  magnitude to  deter  or defeat  the  anti-competitive  effects  of the merger  in  order to be considered. (305)

(298)    The majority of customers  that  responded  to  the  Commission’s  market  investigation  said  that  they  did  not  expect  the  market  situation  to  change  in  the  next  three    years.

By way of example,  one customer  noted:  "expect no big change in three  years." (306)

(299)    As  regards  possible future  purchases  of  light  commercial  refrigeration  compressors from Chinese suppliers that  did  not  have  facilities  in  the  EEA,  a  customer  explained  that “it is possible but evaluation takes time.  (307)  While  several customers did expect  the Chinese players to enter  the  light  commercial  refrigeration  compressor  market overall, the Commission was not able to verify these statements as they  were  not  supported by evidence. For example,  customers did  not  refer  to  the  successful outcome of testing of  refrigeration  compressors,  nor  named  any  particular  company,  but rather  generally   referred  to "Chinese"  players. (308)

(300)    As regards the views of competitors,  at  least one  was sceptical about future  entry into  the EEA market for light commercial refrigeration compressors, due to the combined strength of the Parties. (309) The Commission’s  market  investigation  did  not  therefore confirm the Notifying Party's arguments that the merged entity would be subject  to significant competitive constraints from existing and future new  suppliers  in  light commercial   refrigeration  compressors.

(301)    The  Commission’s  market  investigation  also confirmed  that new   entry   from competitors based outside the EEA and not currently active in the  market  was  not expected in the near future. (310) In particular, customers confirmed  that  they  have  not  tested  any  variable  speed  light  commercial  compressors  with  Chinese   competitors with production facilities outside the EEA for variable  speed  light  commercial  refrigeration  compressors. (311)

(302)    The Commission does not therefore consider that there would  be  timely,  likely or sufficient   entry  to deter or defeat  any anti-competitive  effects  of the  merger.

6.5.3. Conclusion

(303)    The  Commission  considers  that the  Transaction would  be  likely to  significantly  impede effective competition in the markets for  both  fixed  speed  and  variable  speed  light  commercial  refrigeration  compressors  in  the   EEA   and   globally,   due   to horizontal  non-coordinated  effects  and/or  due  to  the  creation  or  the  strengthening  of  a dominant  position.

 

7.  COMMITMENTS

(304)    On 23  January 2019,  the  Commission  informed  the  Notifying  Party  of  the  preliminary  concerns  arising  from the  preliminary  assessment  of   the   Transaction during  a State of Play  meeting.

(305)    In order to render the  Transaction  compatible  with  the  internal  market  in  relation  to  the  markets  for variable  speed  household  refrigeration  compressors  and   both  fixed and variable  speed  light  commercial  refrigeration  compressors,  on  7  February  2019 the Notifying Party formally submitted commitments pursuant to  Article  8(2)  of  the Merger  Regulation  (the  “First Commitments”).

(306)    The Commission market-tested  the  First Commitments  on  11  February  2019.  In order to address the issues raised in  the  market  test,  the  Notifying  Party submitted  a final  set of commitments  on 28 February 2019 (the  “Final   Commitments”).

7.1. First Commitments

7.1.1. Description  of the First Commitments

(307)    The First Commitments proposed by Nidec  consisted of  the  divestment  of  Nidec's global refrigeration compressor business (formerly known as “SECOP”),  with  the exclusion of Nidec’s battery driven (mobile) compressor business (the "Divestment Business").

(308)    The  Divestment  Business   comprised  of the following  legal   entities:

(a)   Nidec Global   Appliance   Austria   GmbH,   Fürstenfeld,   Austria   (“Nidec Austria”), including Nidec Austria’s manufacturing plant located  at  the  same address (“Nidec  Austria  Plant”);

(b)   Nidec Global Appliance Slovakia s.r.o.,  Zlaté  Moravce,  Slovak Republic,  (“Nidec  Slovakia”),  including  Nidec  Slovakia’s manufacturing   plant  located  at the  same address (“Nidec  Slovakia  Plant”);

(c)   Nidec Compressors (Tianjin) Co., Ltd., Tianjin, People’s Republic of China (“Nidec China”),  including  Nidec  China’s  manufacturing plant  located  at  the same  address (“Nidec  China Plant”);

(d)   Nidec Global  Appliance   Italy  Srl,  Moncalieri,   Italy  (“Nidec Italy”);

(e)   Nidec Global  Appliance  Germany  GmbH,  Flensburg,  Germany  and  Nidec Global Appliance Compressors GmbH, Mads-Clausen-Str. 7, 24939 Flensburg, Germany  (“Nidec  Germany”);

(f)   Nidec Global  Appliance   USA Inc., Roswell,   USA (“Nidec  USA”).

(309)    The  Divestment   Business  included:

(a)   Refrigeration compressor production lines to produce Nidec’s Delta  Series, Kappa Series, D-Series, F-Series, G-Series, N-Series, S-Series, T-Series and X- Series  refrigeration  compressors  (“Divestment  Products");

(b)   All improvement projects  regarding  the  Divestment  Products and  new refrigeration compressors  that  are  currently  in  development  by  Nidec  but  are  not yet  sold  on the market  (“Pipeline  Products”);

(c)   The  freehold  title and  the  leasehold  title to the  site  areas  on   which,  respectively, the Nidec Austria  Plant  is  located  in  Fürstenfeld,  the  Nidec  Slovakia Plant is  located  in  Zlaté  Moravce  and  the  Nidec China  Plant is  located in Tianjin;

(d)   The  leasehold  titles  to offices  for  Nidec Germany,   Nidec Italy,  and  Nidec  USA;

(e)   All of the patents and know-how owned by Nidec used  by  the  Divestment  Business  to  develop,  manufacture  and  sell  the  Divestment  Products  subject  to a nnon-exclusive license back to Nidec in relation to certain patents relevant to the battery-driven  refrigeration  compressors  for use  in  mobile   applications;

(f)   The  Secop brand and  any associated  trademarks  and product names;

(g)   To the extent legally possible, all Nidec-held data and relevant product registration/authorisations,  and  documents  related   thereto   (if   any),   for   all models of the Divestment Products,  including  those  that relate to  plant  or product upgrades,  quality  certificates  and  approvals   pertaining   to  the Divestment  Business;

(h)   All  contracts,  agreements, leases,  commitments and   understandings  relating  to  the   Divestment   Business,   including    supply   contracts,   customer   relationships, IT agreements   and licenses;

(i)   All personnel currently working in Nidec Slovakia,  Nidec  Austria,  Nidec  China with the exclusion of personnel working  on  the  battery-driven  compressors business  and motors  for  washing  machines;

(j)   […] employees  as Key Personnel  including  for the  following  functions:   […]

(k)   Transitional service agreements, for a transitional  period  of  up  to  one  year,  at cost, for the supply of IT services and for the  supply  of  support  services  pertaining to  the  patents,  know-how  and  other  intellectual  property  rights  used  to develop,  manufacture   and sell  the  Divestment Products.

(310)    If there is any asset  or  personnel which  was  not  included  in  the  Divestment  Business, but which was both used  (exclusively  or  not)  in  the  Divestment  Business  and  necessary  for the  continued  viability  and  competitiveness   of   the   Divestment   Business, Nidec committed to offer that asset or adequate substitute to potential purchasers.

(311)    The  Divestment   Business   did not include:

(a)   Nidec's business, including all related employees, relating to battery-driven refrigeration  compressors   for  use  in   mobile   applications   currently  manufactured in the Nidec China plant, including the two production lines used exclusively to produce those compressors which would  be  moved  on  a  timely  basis  to another  Nidec  plant; and

(b)   Nidec’s business,  including  all  related  employees, relating   to  motors   for washing  machines,  dryers   and   dishwashers   currently   manufactured   in   the Nidec Austria Plant  and  Nidec  Slovakia  Plant,  including  the  three  production lines used to produce those motors which would be moved on a timely basis  to another  Nidec plant.

(312)    The  Commission  decided  to test the  First  Commitments   with  market participants.

7.1.2. Results of the market test

(313)    The    Commission    launched    a    market    test    of    the     First     Commitments     on  11 February 2019.

(314)    The market test intended to assess whether the First Commitments were  suitable  to  remove  the  preliminary  concerns  raised  regarding  variable  speed   household refrigeration compressors  and  light  commercial  refrigeration  compressors,  both  fixed and variable  speed.

(315)    The Commission reviewed all  individual  responses  and  its  assessment  of  the  market  test was based on the totality of the replies, with a particular focus on the replies that expressed  a substantiated  opinion.

(316)    The majority of respondents expressing a view confirmed that the scope of the First Commitments  would  address  the  preliminary  concerns  in  both  variable  speed household refrigeration  compressors  and  both  fixed and  variable  speed  light commercial refrigeration compressors, by removing the overlaps and ensuring that an independent competitor is  maintained in  these  markets. (312) For  example,  one  competitor noted that: “To the best of our  knowledge,  the proposed  Commitments will ensure that a number of viable competitors remain active in this segment both globally and in the EEA. On that basis, it will be sufficient to address the Commission’s concerns.” (313)

(317)    However, at the same time, concerns were raised regarding the ongoing viability and competitiveness  of  the  Divestment   Business.   Respondents  noted  that  this  was  linked to the  identity  of  the  purchaser  and  its  willingness  to  invest  and  innovate,  in  particular in the variable speed household refrigeration business. For  example,  one customer noted that: “It depends on the purchaser's ability and  willingness  to  continue development and introducing competitive variable speed household Refrigeration compressors into the market.” (314)

(318)    Market  participants  also linked  the  likelihood  of  ensuring  that all  three  plants  are  kept open post-divestiture with the identity of the purchaser. They  noted  that  the purchaser would need to make a  strategic  decision  to  keep  producing both household and  light  commercial  refrigeration  compressors  and  invest  into new  products  in  order to justify  production  in  all  three plants. (315)

(319)    In addition, a majority of respondents indicated that the purchaser of the Divestment Business should be already active in the market for the manufacture and supply of compressors. (316) Consequently, a purely financial investor would not be suitable. For example, one customer noted that: "To support the business of refrigeration the Purchaser should be already in this business. Also to be able to follow the evolution of this Market that has some peculiarities. Differently than the air conditioning, the refrigeration require low volumes but high customization." (317) A competitor also highlighted that the purchaser should be in the same industry in order to benefit from synergies:  "Obviously must be active to get current synergies."  (318)

(320)    Another respondent noted that the  purchaser  should  be  active  in  the  refrigeration industry, but did not necessarily have to be already active in the manufacture of compressors: "It's not necessarily in the market for the manufacture and supply of refrigeration compressors. But it shall be in refrigeration related business."  (319)

(321)    A financial investor may not have the  necessary  incentives  to  ensure  the  continued viability  and  competitiveness  of  the  Divestment  Business,   by  continuing   to  operate and   invest    in   all   three   plants.   For   example,   one   private   equity   respondent   that expressed interest  in  the  Divestment  Business  as  a  potential  purchaser  suggested  that  it would close the Austria plant, noting that it: “It  might  make  sense  to  eliminate Austria operation in effort to find cost synergies.” (320) Another market respondent indicated that the previous  ownership  of  SECOP  by  a  private  equity  company  had been a “disaster”. (321)

(322)    As  regards  the  particular  characteristics that a  potential  purchaser  should  have   in order to ensure that the Divestment Business is run viably, a  number  of  market respondents  noted  the  importance  of  an  interest  in  innovation   and   launching innovative products and of having strong finances. (322) A knowledge of Union energy legislation, and a commitment to launching  energy-saving  products,  were  also considered important. (323) A  number  of  market  respondents  highlighted  again  the  need for the purchaser to have a refrigeration industry  background,  with  at  least  one respondent   highlighting   the   need   for   a   familiarisation   with   the   household refrigeration appliances market. For example,  respondents  noted  that  the  purchaser should be "cash strong, willing to invest loner [sic.] term, willing to innovate", (324) and "the purchaser should have an industrial background and should know the household market and its requirements." (325)

(323)    As regards Key Personnel, a number of  market  respondents  highlighted  the  fact  that Key Personnel with […] background should  also be  included  in  the  Divestment Business, as there were currently no employees with these functions included as Key Personnel. (326)    […] (327)

(324)    Finally, only a limited number of respondents expressed interest in purchasing the Divestment Business. This  consisted of  three strategic  players and  two  financial investors. As regards the strategic purchasers, only two of the three strategic players provided an explanation of  their  reasons  for wishing  to  acquire the  Divestment Business. Both of  these  interested players are  manufacturers  in  the  refrigeration industry. The third strategic player is an  appliance  manufacturer.  In  addition  to  the strategic purchasers, two financial investors replied that they might be interested in purchasing the Divestment  Business,  but  would  need  to  evaluate  the  opportunity  first. (328)

7.1.3. General principles for the assessment of commitments

(325)    The  following  principles  from the  Remedies  Notice (329)  apply  where parties  to  a merger  choose  to offer  commitments   in  order to restore  effective competition.

(326)    Where  a  concentration raises  competition  concerns  in  that it   could   significantly impede  effective  competition,  in  particular  as  a  result  of  the  creation  or  strengthening of a dominant position, the parties may seek to modify the concentration in order to  resolve  the  competition  concerns  and thereby  gain  clearance  of their  merger. (330)

(327)    The Commission only  has  power  to  accept  commitments that are  capable  of rendering the  concentration compatible  with  the  internal  market  in  that they will prevent  a  significant  impediment  to  effective  competition  in   all   relevant   markets where competition concerns were identified. (331) To that end, the commitments have to eliminate the competition concerns entirely (332) and  have  to  be  comprehensive  and effective   from  all  points  of view. (333)

(328)    In assessing whether proposed commitments are likely to eliminate its  competition concerns,  the  Commission  considers  all  relevant  factors  including,   inter  alia,   the type, scale and scope of the commitments, judged by reference to the structure and particular characteristics of the market in which those  concerns  arise,  including  the position of  the  parties  and  other  participants  on  the  market. (334)  Moreover, commitments must be  capable  of  being  implemented  effectively  within  a  short  period  of time. (335)

(329)    Where  a  proposed  concentration threatens to  significantly   impede   effective competition the most effective way to maintain effective competition, apart from  prohibition, is to  create  the  conditions  for  the  emergence  of a  new  competitive  entity  or  for the  strengthening  of  existing competitors via  divestiture  by  the  merging parties. (336)

(330)    The divested activities must consist of a viable business that, if operated by a suitable purchaser, can  compete  effectively  with  the  merged  entity  on  a  lasting  basis  and  that is divested as a going concern.  The  business  must  include all  the  assets  which  contribute to its current operation or which are necessary to ensure its viability and competitiveness and  all  personnel  which  are  currently  employed  or  which  are necessary  to ensure  the  business'  viability  and competitiveness. (337)

(331)    Normally, a viable business is  a  business  that  can  operate  on  a  stand-alone-basis, which means independently of the merging parties  as  regards  the  supply  of  input materials   or other  forms  of cooperation  other  than  during  a transitory period. (338)

7.1.4.Commission's assessment of the First Commitments

(332)    The Commission noted that the  First  Commitments  would  remove  the  full  overlap  of  the Parties’ activities in the markets for variable  speed  household  refrigeration compressors,   as  well   as  in   variable   and   fixed   speed   light   commercial refrigeration compressors. Respondents to the Commission’s market test  accordingly  deemed  the scope of the First Commitments to be sufficient to  address  the  Commission’s preliminary  concerns. (339)

(333)    However, market feedback indicated that the viability and competitiveness of the Divestment Business strongly depended on the  identity  of  the  purchaser  and  its willingness to invest and innovate, in particular in the variable  speed  household  refrigeration compressor business. For example,  one  customer  noted  that: “It  depends  on the purchaser's ability and willingness to continue development and introducing competitive variable speed household Refrigeration compressors into the market.” (340)

(334)    To assess  the  viability  and  competitiveness  of  the  Divestment  Business,  the Commission carried out a review of Nidec’s financial data. In particular, Nidec’s pro-forma P&Ls for the Austrian, Slovak and Chinese plants, from 2017 until  2021  divided by business division (that is to say, household, light  commercial  and  battery- driven  compressors  and “WET”,  motors  for  washing  machines   and dishwashers).

(335)    In this  respect,  the  Commission  found  that  while  the  Divestment  Business  as  a  whole is  profitable,  […].

(336)    [Discussion  of financial   results  of and outlook  for  the Divestment  Business].

(337)    In this context, the Commission noted that Nidec had  started  a  comprehensive programme to revamp the competitiveness of its European refrigeration compressor production sites, which comprised of  cost  reduction  plans  for  existing  product  lines, and also the development of new products. (341) The cost reductions  visible  in  the  pro- forma P&L analysis provided by Nidec appears to be attributable to the substantial CAPEX investments   […] that  Nidec is  planning  to undertake  […].

(338)    Overall,    the    Commission    found    that    Nidec’s    planned    investments    (totalling EUR […]) (342)  were  crucial  for  the  viability  and  the  competitiveness  of  the   Austrian and the  Slovak  plants  going  forward.

Table  16: […]

[…]

Source: Commission’s computations of the Notifying Party's Reply to RFI 23, Annex 6(a).

(339)    In the Commission’s view, there  was  a  real  risk  that  the  Divestment  Business  would  not be viable and competitive going forward if the investments in cost reduction  and  product development  planned  under Nidec’s  ownership  would  not  be  continued.  In light of the poor financial  performance  of  the  Austrian  plant,  there  was  an acute  risk that an acquirer who may be motivated by short-term profit considerations, without a strategic vision and  the  willingness  to  continue  Nidec’s  investment  plan,  would  close  that site. In  this context, the  Commission  noted  that  one  of  the   financial  investors who expressed a preliminary interest in the Divestment Business contemplated this option. (343)

(340)    In this context, the  Commission  also noted  that in  the  case  at  hand  it  was  not sufficient   that  the  Divestment  Business  as  a  whole  was  profitable  in  order  to   ensure its  viability  and  competitiveness.  This  is  because  production   is   not   homogenous across the different production sites, with each site dedicated to a different  mix  of products. Namely: China, light commercial refrigeration compressors; Slovakia, light commercial and  certain  variable  speed  household  refrigeration  compressors;  and Austria,  light  commercial,  fixed   speed   household   and   future   variable   speed household refrigeration compressors. Given that the Commission found competition  concerns in the  markets  for  variable  speed  household  refrigeration  compressors,  as  well as fixed and variable speed light commercial refrigeration compressors, it  was necessary that not only  as  a  whole,  but  also  the  individual  production sites  that  made up  the  Divestment  Business  were  viable  and   competitive.   Put   differently,   if   a possible purchaser  would  simply close  down  the  Austrian  production  site,   which under Nidec’s ownership was foreseen to  become  the  main  production  site  for  the  future variable speed household refrigeration compressor model (Delta VSD), the Divestment Business would fail  to  address  the  Commission’s  concerns  in  the  market  for  variable  speed household  refrigeration   compressors.

(341)    The Commission found that the exclusion of the Nidec's battery-driven refrigeration compressors business for use in  mobile  applications  (currently  manufactured  in  the Nidec  China  plant)  would  not  affect  the  viability  of  the  China  plant,  because  the China plant was already profitable even without this business. (344) A large majority of respondents to the market test also considered that the removal of the battery-driven business  from  the  China  plant  would  not  affect  the  viability  of the plant. (345)

(342)    The Commission similarly found that the  exclusion  of  Nidec’s  business,  relating  to motors for washing machines, dryers and dishwashers (currently  manufactured  in  the  Nidec Austria Plant and Nidec  Slovakia  Plant)  would  not  have  a  sizeable  impact  on  the viability  of  these  plants.  This  is  because  the  production  lines  currently  located  in the Austria and Slovakia plants  were  only  recently  located  to  the  plants  and were not yet profitable or only  marginally  profitable. (346)  In  addition,  respondents  to  the  market  test did not consider that this exclusion would affect the viability of  the  Austria  and  Slovakia  plants. (347)

(343)    Moreover, the Commission noted that several  respondents  to  the  market  test  indicated that the purchaser of the Divestment Business should  be  active  in  the  manufacture  and  supply of  refrigeration  compressors.  Other  respondents   indicated that the purchaser should have experience in  the  refrigeration  industry,  i.e.  not  necessarily  active  in  the  manufacture  and  supply  of  refrigeration  compressors,  but could  be  active  in  a  related  activity.  In  light  of  the  importance  that   market participants  placed  on  relevant   industry  experience,   the   Commission  considered  that a financial investor motivated only by short term profit considerations would not be a suitable purchaser to maintain and develop the Divestment Business  as  a  competitive  force. Two financial  investors  replied  in  the  market  test  that  they  might  be  interested  in  purchasing  the  Divestment  Business,  but  would  need  to  evaluate  the   opportunity first,  and  so  did  not  substantiate  their  interest.  Further,  the   Commission  noted  that  one of these two financial investors who expressed a  preliminary  interest  in  the Divestment   Business   contemplated   closing   the   Austria   plant   in   order  to  find  “cost synergies” (348) in the response to the market  test.  This  response  illustrates  a short-term view  and did  not indicate   a willingness   to pursue  long-term  investment  perspective.

(344)    In response to its market test, there were only two credible players (which had a refrigeration industry background), that expressed an interest  in  purchasing  the Divestment Business. As regards the  third  strategic  player,  on  the  basis  that  they  did  not  provide  any  explanation  for expressing   an  interest  in  the   Divestment   Business, the  Commission  does not consider  their  interest  to be  credible.

(345)    The Commission  noted  that,  on  the  basis  of this  limited  interest,  there  was  a  risk  that a suitable purchaser may not be found, leaving the sale of the  Divestment  Business  in doubt. The burden is on the Notifying Party to remove such uncertainties. (349) The Commission therefore considered that the Commitments should  include an  "up-front buyer" clause, so that the Notifying Party may not close the Transaction until the Commission has approved the proposed  purchaser  of  the  Divestment  Business.  The  First  Commitments   did  not contain  such a clause.

(346)    Finally, as regards Key Personnel, several respondents indicated that […] should be included as  Key Personnel (350)  as  no  Key Personnel  covering  these  functions  appeared to be included.  […]. (351)  The  Commission  noted  that  several  key  functions  appear  to  be missing  from  the  Key Personnel  in  the First  Commitments,   including […].

(347)    The  Commission  concluded that the  First Commitments  were  not  sufficient  to  eliminate the Commission's preliminary concerns as  to  the  compatibility  of  the Transaction with  the  internal  market  and  with  the  functioning  of   the   EEA  Agreement.

7.2. The  Final Commitments

7.2.1. Description  of the Final Commitments

(348)    In light of the issues described at Section 7.1.4, the Notifying Party submitted revised commitments,   the  Final  Commitments, on 28 February 2019.

(349)    The  Final  Commitments  include a  number  of  improvements  to  the   First Commitments.

(350)    First, Nidec commits to  make  available  to  the  purchaser  CAPEX  funding  of  the  amount of EUR […] for the  purpose  of  improving the  competitiveness  and development of compressors produced in the Nidec Austria Plant and  Nidec  Slovakia Plant. This amount  is  equal to  the  CAPEX  funding  that  Nidec  would  have  committed  to the  two plants  absent  the  divestment,  […].

(351)      […].

(352)      […].

(353)      […].

Table  17: […]

[…]

Source: […].

 

(354)      […].

(355)    Second,  an  additional  purchaser  criterion  has  been  inserted  in   the   Final Commitments. The purchaser: “shall either be  an  industry  participant  with  experience in the refrigeration business or an investor with a proven long-term perspective, successfully growing and developing its acquired companies, as well as having relevant expertise in the European manufacturing sector.” (352)

(356)    Third,  an additional  […] employees   have  been made  Key Personnel, […]

(357)    Fourth, the Final  Commitments  include an  "up-front buyer" clause, so  that the Notifying  Party  may  not  close  the   Transaction  until  the   Commission  has  approved the  proposed purchaser  of the Divestment  Business.

7.2.2. Commission’s assessment of the Final Commitments

(358)    The Commission notes that  the  Notifying  Party  has  committed  to  make  available  to  the purchaser CAPEX funding of the amount of EUR […]  for the  purpose  of  improving the  competitiveness  and  development  of  compressors  produced  in   the Nidec Austria Plant and Nidec Slovakia Plant. The CAPEX funding is equal to the investment   that  Nidec would  have  made absent  the divestment.

(359)    The Commission considers  that the  CAPEX funding  contained  in  the  Final Commitments ensures the  viability  and  competitiveness  of  the  Austrian  and  Slovak plants  going   forwards. […].

(360)      […].

(361)    The updated purchaser criteria contained in  the  Final  Commitments  require  the  proposed purchaser to either be an industry participant with  experience in  the  refrigeration business, or an “investor with a proven long-term  perspective, successfully growing and developing its acquired companies, as well as having relevant expertise in the European manufacturing sector.”

(362)    As regards the first part of the criterion, the Commission considers that this addresses concerns raised in the market test that the proposed purchaser should have  relevant  industry experience. The criterion does not limit the purchaser to being active in the manufacture  and  supply of   refrigeration   compressors.   The   Commission   considers that further restricting the criterion in this way was not needed,  on  the  basis  that  a  number  of  respondents  in  the  market  test indicated  that experience in   the refrigeration  industry   could  be sufficient. (353)

(363)    As regards the  second  part  of  the  criterion,  this  allows  a  financial  investor  to  qualify as a proposed purchaser, but only if it can demonstrate both a proven long term perspective having successfully grown and  developed  its  acquired companies, and relevant  expertise   in  the   European  manufacturing   sector.  The  Commission  notes  that if a financial investor can  prove  a  long  term  perspective  and  expertise in  manufacturing, it  may  be  considered  a  suitable  purchaser.  This   is  because  following the amendments to  the  First  Commitments  (as  contained  in  the  Final  Commitments),  the Commission  considers  that the  Divestment  Business  is  a  viable,  competitive  business capable of operating on a stand-alone basis.  Consequently,  the  Commission does not consider it appropriate to exclude financial investors as potential purchasers, provided  that  they are investors   that  show  a proven long-term perspective.

(364)    Further, this criterion  clearly  excludes  a  financial investor  motivated   only   by  short term profit considerations, which would not be a suitable purchaser to  maintain  and develop  the Divestment  Business   as a competitive  force.

(365)    The Commission considers that the additional  Key  Personnel  address  the  concerns raised  in  the market  test regarding  a number  of missing  functions,    […].

(366)    The  Commission  further  considers  that the  "up-front buyer"  clause  included   in  the Final  Commitments  is  important  to  guarantee  with  the   requisite   degree  of  certainty that  the  Divestment   Business   will   be effectively  divested  to a suitable purchaser.

(367)    The Commission considers that the Final Commitments are likely to create a viable Divestment Business  capable  of competing  effectively  on  a  lasting  basis  in  the relevant  markets.  The  Commission  therefore   concludes   that  the   Final  Commitments are adequate and sufficient to eliminate  the  significant  impediment  to  effective competition in relation to the markets for variable speed household refrigeration compressors  and  fixed and  variable  speed  light  commercial  refrigeration  compressors in the  EEA and  globally.

 

8.      CONDITIONS    AND OBLIGATIONS

(368)    Pursuant to the second subparagraph of Article 8(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  internal market.

(369)    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   internal market  is  no  longer  applicable.  Where  the  undertakings  concerned  commit  a  breach  of an obligation, the  Commission  may  revoke  the  clearance  decision  in  accordance with Article 8(6) 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.

(370)    In accordance with the basic distinction described  in  Recital (369)  as  regards  conditions and obligations, this Decision should be  made  conditional  on  the  full compliance by the Notifying Party with the Section  B  (including  the  Schedule)  of the Final Commitments submitted by the Notifying Party on 28.02.2019 and  all  other  Sections should be obligations within the meaning of Article 8(2)  of  the  Merger Regulation.  The  full  text of  the  commitments is  attached  as  an  Annex   to  this Decision  and forms  an integral  part thereof.

 

 

HAS ADOPTED  THIS DECISION:

Article 1

The notified operation whereby Nidec acquires sole control of Embraco within the  meaning  of Article 3(1)(b) of the Merger Regulation is hereby  declared  compatible  with  the  internal market and the  EEA Agreement.

Article 2

Article  1 is  subject to compliance  by Nidec with  the conditions  set out in  Section  B of Annex 1.

Article 3

Nidec shall comply with the obligations set  out  in  the  remaining  sections  of  Annex  1  not referred to in  Article 2.

Article 4

This  Decision  is  addressed to:

Nidec Corporation

338 Kuzetonoshiro-cho, Minami-ku, Kyoto – 601-8205

Japan

Done  at Brussels, 12.4.2019

 

 

 

 

 

Case COMP/M.8947 – NIDEC / WHIRLPOOL (EMBRACO BUSINESS)

COMMITMENTS  TO THE  EUROPEAN COMMISSION

28 February  2019

 

Pursuant to Articles 8(2) and 10(2) of Council Regulation (EC) No 139/2004 (the “Merger Regulation”), Nidec Corporation (“Nidec” or the “Notifying Party”) hereby enters  into the following Commitments (the “Commitments”) vis-à-vis the European Commission (the “Commission”) with a view to rendering the  acquisition  by  Nidec  of  the  compressor manufacturing business of Whirlpool Corporation  (the  “Concentration”)  compatible  with  the internal  market  and the  functioning  of the  EEA Agreement.

This text shall be interpreted in light of the Commission’s decision pursuant  to Article  8(2) of the Merger Regulation to declare the Concentration compatible with the internal market and  the  functioning of the EEA Agreement (the “Decision”), in the general framework  of European  Union law, in particular in light of the Merger Regulation, and by reference to the Commission Notice on remedies acceptable under Council Regulation (EC) No 139/2004 and under Commiss ion Regulation  (EC) No 802/2004 (the  “Remedies Notice”).

 

Section A -  Definitions

1.   For the purpose of the  Commitments,  the  following  terms  shall  have  the  follow ing meaning:

Affiliated Undertakings: undertakings controlled by the Parties and/or by the ultimate  parents of the Parties,  whereby the notion  of control  shall  be interpreted  pursuant  to Article 3 of the Merger Regulation and in light  of the  Commission Consolidated  Jurisdictio nal Notice under Council Regulation (EC) No 139/2004 on the control of  concentrations between undertakings  (the  “Consolidated  Jurisdictional  Notice”).

Assets: the assets that contribute to the current operation or are necessary to ensure  the viability and competitiveness of the Divestment  Business  as  indicated  in  Section  B, paragraph  6 and described  more  in  detail in  the Schedule.

Closing:  the  transfer  of the legal  title   to the Divestment   Business   to the Purchaser.

Closing Period: the period of […] from the approval of the Purchaser  and the terms  of sale by the Commission.

Confidential Information: any business secrets,  know-how,  commercial  information,  or  any other  information  of a proprietary  nature  that  is  not in  the public  domain.

Conflict of Interest: any conflict of interest that impairs the Trustee’s objectivity and independence   in  discharging  its  duties  under  the Commitments.

Divestment Business: the business or businesses as defined in Section  B  and  in  the Schedule  which  the Notifying  Party commits   to  divest.

Divestment Products: Nidec’s Delta Series, Kappa Series, D-Series, F-Series, G-Series, N-Series, S-Series, T-Series and X-Series Refrigeration Compressors, and all pipeline projects  related  to these  Refrigeration  Compressor platforms.

Divestiture Trustee: one or more natural or legal person(s) who is/are approved by the Commission and appointed by Nidec and who has/have received from Nidec the exclusive Trustee  Mandate  to sell  the Divestment  Business   to a Purchaser  at no minimum   price.

Effective Date: the date of adoption  of the  Decision.

First  Divestiture Period:  the  period  of […] from  the Effective Date.

Hold Separate Manager: the person appointed by Nidec for the Divestment Business to manage  the day-to-day business  under  the  supervision  of the  Monitoring  Trustee.

Key Personnel: all personnel necessary  to maintain  the  viability  and competitiveness  of  the  Divestment   Business,   as listed  in  the Schedule,  including  the  Hold  Separate Manager.

Monitoring Trustee: one or more natural or legal person(s) who is/are approved by the Commission and appointed by Nidec, and who has/have the duty to monitor Nidec’s compliance  with  the  conditions  and  obligations  attached to the   Decision.

Nidec: Nidec Corporation, incorporated  under  the  laws  of Japan,  with  its  registered  office at 338 Kuzetonoshiro-cho, Minami-ku, Kyoto 601-8205, Japan, central registration system number  1300-01-002387.

Nidec Austria: Nidec Global Appliance Austria GmbH, incorporated under the laws of  Austria,  with  its  registered  office  at Jahnstraße  30, 8280 Fürstenfeld,   Austria.

Nidec Austria Plant: Nidec Austria’s Refrigeration Compressor  manufacturing  plant located  at Jahnstraße  30, 8280 Fürstenfeld,  Austria.

Nidec China: Nidec Compressors (Tianjin) Co., Ltd.,  incorporated  in  the  People’s Republic of China, with its registered office  at Wuqing  Development Zone,  No. 27, Kai Yuan  Road, 301700 Tianjin,   People’s Republic   of China.

Nidec China Plant: Nidec China’s  Refrigeration  Compressor  manufacturing  plant  located at Wuqing Development Zone, No. 27, Kai Yuan Road, 301700 Tianjin, People’s Republic of China.

Nidec Germany: Nidec Global Appliance Germany GmbH and Nidec Global Appliance Compressors  GmbH,  both Mads-Clausen-Str.  7, 24939 Flensburg,  Germany.

Nidec Italy: Nidec Global Appliance Italy Srl, Piazza Vittorio Emanuele II, n°3 10024 Moncalieri,  Italy.

Nidec Slovakia: Nidec Global Appliance  Slovakia  s.r.o., incorporated  under  the  laws  of the Slovak Republic, with its registered office at Tovàrenskà 49, 953 01 Zlaté  Moravce,  Slovak Republic, with identity number 35 800 399, and registered with the Commercia l Register  of the District   Court Nitra,  section:  Sro, under  file   No. 13235/N.

Nidec Slovakia Plant: Nidec Slovakia’s Refrigeration Compressor manufacturing plant located  at Tovàrenskà  49, 953 01 Zlaté  Moravce,  Slovak Republic.

Nidec USA: Nidec Global Appliance USA Inc., 4000 Northfield Way, Suite  600 Roswell, GA 30076.

Parties: the  Notifying  Party and the  undertaking  that  is  the  target  of the concentration.

Personnel: all staff currently employed by the  Divestment Business,  including staff  seconded  to the  Divestment  Business.

Purchaser: the entity approved by the Commission  as acquirer  of the Divestment  Business in  accordance  with  the criteria   set out in  Section D.

Purchaser Criteria: the criteria laid down in paragraph 19 of these Commitments that the Purchaser  must  fulfil  in  order to be approved  by the Commission.

Refrigeration Compressors: electro-mechanical devices, for household  or  light  commercial applications, used to lower the temperature of an enclosed  space (such  as a  freezer or refrigerator) by  compressing  vaporised  refrigerant to  remove  heat  from  that space and transfer  it  elsewhere.

Schedule: the schedule to these Commitments describing more in detail the Divest ment Business.

Trustee(s): the Monitoring  Trustee  and/or  the  Divestiture   Trustee  as the  case may be.

Trustee Divestiture Period:  the period of […] from the end of the First Divestiture    Period.

 

Section B -  The commitment to divest and  the Divestment   Business

2.1  Commitment  to divest

2.   In order to maintain effective competition, Nidec commits  to  divest,  or  procure  the  divestiture of the Divestment Business by the  end  of the  Trustee  Divestiture  Period  as a going concern to a purchaser and on terms of sale approved by the  Commission in accordance with the procedure described in  paragraph  20 of these Commitments. To carry out the divestiture, Nidec commits  to find  a purchaser  and to enter  into  a final  binding  sale and purchase agreement for the sale of the Divestment Business within the First Divestit ure Period. If Nidec has not entered into such an agreement at the end of the First Divestit ure Period, Nidec shall grant the Divestiture Trustee an  exclusive  mandate to  sell the Divestment Business in accordance with the procedure described in paragraph  32 in  the  Trustee  Divestiture  Period.

3.   The proposed concentration shall not be implemented before Nidec  or  the  Divestit ure Trustee has entered into a final binding sale and purchase agreement for the sale of the Divestment Business and the Commission  has approved the purchaser  and the terms  of sale  in  accordance  with  paragraph 20.

4.   Nidec shall  be deemed to have  complied   with  this  commitment   if:

(a)    by the end of the Trustee Divestiture Period, Nidec or the Divestiture Trustee has entered into a final binding sale and purchase agreement and the  Commiss ion  approves the proposed purchaser and the terms of sale as being consistent with the Commitments  in accordance  with  the procedure  described  in  paragraph  20; and

(b)    the Closing of the sale of the Divestment Business  to  the  Purchaser  takes  place  within   the Closing  Period.

5.   In order to maintain  the structural  effect  of the Commitments,  the Notifying  Party shall,  for   a period of 10 years after Closing, not acquire,  whether  directly  or indirectly,  the possibilit y of exercising influence (as defined  in  paragraph  43 of the  Remedies  Notice,  footnote 3) over the whole or part of the Divestment Business, unless, following the submission of a reasoned request from the Notifying Party showing  good  cause  and  accompanied by  a report from the Monitoring Trustee (as provided  in  paragraph  46 of these  Commitments), the  Commission finds that  the  structure  of the  market  has  changed  to such  an extent  that the absence of influence over the Divestment Business is no longer necessary to render the proposed concentration  compatible   with  the  internal market.

2.2 Structure and definition of the Divestment Business

6.   The Commitments offered  consist  of the  divestiture  of Nidec’s  entire  Light  Commercia l and Household Compressor business units, consisting of  Refrigeration  Compressors produced in Nidec’s Austria, Slovakia and China plants and support functions in additiona l locations:

(a)    Nidec Global Appliance Austria GmbH, Jahnstraße 30, 8280 Fürstenfeld, Austria (“Nidec Austria”), including Nidec’s manufacturing plant located at the  same  address (“Nidec  Austria Plant”);

(b)    Nidec Global Appliance Slovakia s.r.o., Tovàrenskà 49, 953 01 Zlaté Moravce,  Slovak Republic, with identity number 35 800 399, and  registered with  the Commercial Register of the District Court Nitra, section: Sro,  under file  No. 13235/N) (“Nidec Slovakia”), including Nidec Slovakia’s manufacturing plant located  in  Zlaté  Moravce (“Nidec  Slovakia Plant”);

(c)    Nidec Compressors (Tianjin) Co., Ltd., Wuqing Development Zone,  No. 27, Kai Yuan Road, 301700 Tianjin, People’s Republic  of  China  (“Nidec  China”), including Nidec China’s manufacturing plant located at the same address (“Nidec China  Plant”);

(d)    Nidec Global Appliance Italy Srl, Piazza  Vittorio  Emanuele  II,  n°3  10024 Moncalieri,   Italy  (“Nidec Italy”);

(e)    Nidec Global Appliance Germany GmbH, Mads-Clausen-Str. 7, 24939 Flensburg, Germany;

(f)     Nidec Global Appliance Compressors GmbH, Mads-Clausen-Str. 7,  24939 Flensburg, Germany  (together with  Nidec  Global  Appliance  Germany  GmbH, “Nidec Germany”);

(g)    Nidec Global Appliance USA Inc., 4000 Northfield Way, Suite 600 Roswell, GA 30076 (“Nidec USA”).

7.   The legal entities identified in paragraph  6  (a)-(g),  together with  associated  assets, contracts, customer records, IP & knowhow, personnel and other interests, except the employees and businesses described in paragraph 4 of the Schedule, constitute the “Divestment Business”. The Nidec Austria Plant, the Nidec Slovakia Plant and the Nidec China Plant include the  Refrigeration  Compressor  production  lines  to  produce  Nidec’s Delta Series, Kappa Series, D-Series, F-Series, G-Series, N-Series, S-Series, T-Series and X-Series Refrigeration Compressors, and all pipeline projects related to these Refrigera t ion Compressor platforms (“Divestment Products”). Nidec Germany,  Nidec Italy  and Nidec USA do not have  manufacturing  facilities,  but  include personnel  who  perform administrative   services,  such as sales  and R&D  for the  Divestment  Business.

8.   The legal and functional structure of the Divestment Business  as  operated  to  date  is described in the Schedule. The Divestment Business, described  in  more  detail  in  the  Schedule, includes all assets and staff that contribute  to  the  current operation  or  are necessary to ensure the viability and competitiveness  of  the  Divestment Business,  in particular:

(a)    all  tangible   and intangible   assets (including  intellectual  property rights);

(b)    all  licences,  permits  and  authorisations issued  by any  governmental  organisat ion for  the benefit   of the  Divestment Business;

(c)    all contracts, leases, commitments and customer  orders of the Divestment  Business, as well  as all  customer,  credit  and other  records of the Divestment  Business;   and

(d)    the Personnel.

9.   In addition, the Divestment Business includes  the  benefit,  for  a transitional  period  of […] after Closing and on terms and conditions equivalent to those at present afforded to the Divestment Business, of all current arrangements under which Nidec or its Affiliated Undertakings supply IT services to the Divestment Business,  as detailed  in  the  Schedule, unless  otherwise  agreed  with  the  Purchaser.  Strict  firewall  procedures will  be adopted so  as to ensure that any competitively sensitive information related  to, or arising  from  such supply arrangements (for  example,  product  roadmaps)  will  not  be shared  with,  or passed on to, anyone  outside  the relevant   operations.

 

Section C -  Related commitments

3.1 Preservation of viability,  marketability  and competitiveness

10.  From the Effective Date until Closing, the Notifying Party shall preserve or procure the preservation of the  economic  viability,  marketability  and  competitiveness  of  the  Divestment Business,  in accordance with  good business  practice,  and shall  minimise  as far  as possible any risk of loss of  competitive potential of  the  Divestment Business.  In particular,   Nidec undertakes:

(a)    not to carry out any action that might have a significant adverse impact on the value, management or competitiveness of the Divestment Business or that might alter the nature and scope of activity, or the industrial or commercial strategy  or  the  investment   policy  of the Divestment  Business;

(b)    to make available, or procure to make available, sufficient resources for the development of the Divestment Business, on the basis  and  continuation  of  the existing  business  plans;

(c)    to take all reasonable steps, or procure that all reasonable steps are being taken, including appropriate incentive  schemes  (based on industry  practice),  to encourage all Key Personnel to remain with  the  Divestment Business,  and  not  to  solicit  or move any Personnel to Nidec’s  remaining business.   Where,  nevertheless, individual members of the Key Personnel exceptionally leave the Divest ment  Business, Nidec shall provide a reasoned proposal to replace the person or persons concerned to the Commission and the Monitoring Trustee. Nidec must be able to demonstrate to the Commission that the replacement is well suited to carry out the functions exercised by those individual members of the Key Personnel. The replacement shall take place under the supervision of the  Monitoring  Trustee,  who shall  report to the  Commission;

(d)    Nidec commits  to make  available  to the  Purchaser  CAPEX funding  in  the  amount of […]. To this effect, Nidec commits [to make available to the purchaser of the divestment  business  significant  funding  for  future  investments  for  a certain  period of time for the production lines in  Nidec’s  plants  in  Austria  and  Slovakia. The amount made available is equal to the capital expenditure that Nidec would have committed   to the two plants  without   the transaction].   […].

3.2 Hold-separate obligations

11.  The Notifying Party commits, from the Effective Date until Closing, to procure that the Divestment Business is kept separate from the business(es) that the Notifying Party will be retaining and, after closing of the notified transaction to keep the Divestment  Business  Separate from the business that the Notifying Party is retaining and to ensure that unless explicitly permitted under these Commitments: (i) management and staff of the  business retained by Nidec have no involvement in  the  Divestment  Business;  (ii)  the Key Personnel and  Personnel  of the  Divestment  Business  have  no  involvement in  any  business  retained by Nidec and do not  report to any  individual   outside  the Divestment  Business.

12.  Until Closing, Nidec shall assist the Monitoring Trustee in ensuring that  the  Divest ment Business is managed as a distinct  and  saleable entity  separate  from  the  business  which Nidec is retaining. Immediately after the  adoption  of the  Decision,  Nidec shall  appoint  a Hold Separate Manager. The Hold Separate Manager, who shall be part  of the  Key  Personnel, shall manage the Divestment  Business  independently  and in  the best interest  of  the business with a view to ensuring its continued economic viability, marketability and competitiveness and its independence from the businesses retained by Nidec. The  Hold Separate Manager  shall  closely  cooperate  with  and report  to  the  Monitoring  Trustee  and, if applicable, the Divestiture  Trustee. Any replacement  of the Hold Separate Manager  shall  be subject to the procedure laid down in paragraph 10(c) of these Commitments. The Commission may, after having heard Nidec, require Nidec to replace the Hold Separate Manager.

13.  To ensure that the Divestment Business is held and managed as a  separate  entity  the Monitoring Trustee shall exercise Nidec’s rights as shareholder in  the  legal  entities  that constitute  the  Divestment Business  (except  for  its  rights in  respect  of dividends  that   are due before Closing), with  the  aim  of acting  in  the best interest  of the  business,  which  shall be determined on a stand-alone basis,  as an independent  financial  investor,  and with  a view to fulfilling Nidec’s obligations under the  Commitments.  Furthermore,  the  Monitoring Trustee shall have the power to replace members of the supervisory board or non-executive directors of the board of directors, who have been appointed on behalf of Nidec. Upon request of the Monitoring Trustee, Nidec shall resign as a member  of the  boards or shall  cause  such members  of the boards to  resign.

3.3 Ring-fencing

14.  Nidec shall implement, or procure to implement,  all  necessary  measures  to ensure  that  it does not, after the Effective Date, obtain any Confidential Information relating to the Divestment Business and that any such Confidential  Information  obtained  by Nidec before  the Effective Date will be eliminated and not be used by Nidec. This  includes  measures vis-à-vis Nidec’s appointees on the supervisory board and/or board of directors of the Divestment Business. In particular,  the  participation  of the  Divestment Business  in  any central information technology network shall be severed to the extent possible, without compromising the viability of the Divestment Business. Nidec may  obtain  or  keep information relating to the Divestment Business which is reasonably necessary for  the  divestiture of the Divestment Business  or the  disclosure  of which  to Nidec is  required  by law.

3.4 Non-solicitation clause

15.  The Parties undertake, subject to customary limitations, not to solicit, and to procure that Affiliated Undertakings do not solicit, the Key Personnel transferred with the Divest ment Business   for  a period  of […] after Closing.

3.5 Due diligence

16.  In order to enable potential purchasers to carry out a reasonable due diligence of the Divestment Business, Nidec shall, subject to customary confidentiality assurances and dependent  on the stage  of the divestiture   process:

(a)    provide to potential purchasers sufficient information as regards the Divest ment Business;

(b)    provide to potential purchasers sufficient information relating to the Personnel and  allow  them  reasonable  access to the  Personnel.

3.6 Reporting

17.  Nidec shall submit written reports in English on potential purchasers of the Divest ment Business and developments in the negotiations with such potential purchasers to the  Commission and the Monitoring Trustee no later than 10 days after the end of every month following  the  Effective   Date  (or otherwise   at the  Commission’s request).

18.  Nidec shall inform the Commission and  the  Monitoring  Trustee  on the  preparation  of the data room documentation and the due diligence procedure and shall submit a copy of any information memorandum to the Commission and  the  Monitoring Trustee. Nidec  shall submit a list of all  potential  purchasers  having expressed  interest  in  acquiring the Divestment Business  to the Commission  at each and every stage  of the divestiture  process,  as well as a copy of all the offers made by potential purchasers within five days of their  receipt.

 

Section D -  The  Purchaser

19.  In order to be approved by the Commission,  the Purchaser  must  fulfil  the following  criteria:

(a)    The Purchaser  shall  be independent  of and unconnected  to the Notifying  Party and  its Affiliated Undertakings (this being assessed having regard to  the  situatio n  following  the  divestiture).

(b)    The Purchaser shall have the financial resources, proven expertise and incentive to maintain and develop the Divestment Business  as a viable  and active  competitive  force  in competition  with  the  Parties  and  other competitors.

(c)    The Purchaser shall either be an industry participant with  experience in  the refrigeration business or an investor with a proven  long-term  perspective, successfully growing and developing its acquired companies, as well as  having  relevant   expertise  in  the European  manufacturing  sector.

(d)    The acquisition  of the  Divestment  Business  by the Purchaser  must  neither  be likely to create, in light of the information available to the Commission,  prima  facie competition concerns nor give rise to a risk that the implementation of  the Commitments will be delayed. In particular, the Purchaser must reasonably  be expected to obtain all necessary  approvals  from the  relevant  regulatory  authorities  for  the acquisition  of the Divestment   Business.

20.  The final binding sale and purchase  agreement  (as well  as ancillary  agreements)  relating  to the divestment of the Divestment Business shall be conditional on  the  Commissio n’s  approval. When Nidec has reached an agreement with a purchaser, it shall submit a fully documented  and reasoned  proposal,  including  a copy of the  final  agreement(s),  within  one week to the Commission  and the  Monitoring  Trustee. Nidec  must  be able  to demonstrate to the Commission that the purchaser fulfils the Purchaser Criteria and that the Divest ment Business is being sold in a manner consistent with the Commission’s Decision and the Commitments. For the approval, the Commission shall verify that the purchaser fulfils the Purchaser Criteria and that the Divestment  Business  is  being  sold  in  a manner  consistent  with the  Commitments  including  their  objective  to bring  about  a lasting  structural  change  in the market. The Commission  may  approve the  sale of the Divestment  Business  without one or more Assets or parts of the Personnel, or by substituting one or more  Assets or parts  of the Personnel with one or more different  assets  or different  personnel, if  this  does not affect the viability and competitiveness of the Divestment Business after the sale,  taking account  of the  proposed purchaser.

 

Section E -  Trustee

5.1 Appointment  procedure

21.  Nidec shall appoint a Monitoring Trustee to carry out the functions specified in these Commitments for a Monitoring Trustee. The Notifying Party commits not to close the Concentration  before  the appointment   of a Monitoring  Trustee.

22.  If Nidec has not entered into a binding sale and  purchase  agreement  regarding  the Divestment Business one month before the end of the First Divestiture Period or if the Commission has rejected a purchaser proposed by Nidec at that time or thereafter,  Nidec  shall appoint a Divestiture Trustee. The appointment of the  Divestiture  Trustee  shall  take  effect  upon the  commencement  of the Trustee  Divestiture   Period.

23.  The  Trustee shall:

(a)    at the time of appointment, be independent of the Notifying Party and its Affiliated Undertakings;

(b)    possess the necessary qualifications to carry out its mandate, for example have sufficient   relevant  experience  as an investment  banker  or consultant  or auditor; and

(c)    neither  have  nor become  exposed to a Conflict   of Interest.

24.  The Trustee shall be remunerated by the Notifying Party in a way that does not impede the independent and effective fulfilment of its mandate. In particular, where the remunerat ion package  of a Divestiture  Trustee  includes  a success  premium  linked  to the final  sale  value of the Divestment Business, such success premium may  only  be earned  if  the  divestit ure takes place  within   the Trustee  Divestiture  Period.

5.1.1   Proposal by Nidec

25.  No later than two weeks after the Effective Date, Nidec shall submit  the  name  or names  of one or more natural or legal persons whom Nidec proposes to appoint as the Monitoring Trustee to the Commission for  approval.  No later  than  one  month  before  the  end  of the First  Divestiture  Period  or on request by the  Commission,  Nidec shall  submit   a list  of one or more persons whom Nidec proposes to appoint  as Divestiture  Trustee  to the Commiss ion for approval.  The  proposal  shall  contain sufficient information for  the  Commission to verify that the person or persons proposed as Trustee fulfil the requirements set out in paragraph  23 and shall  include:

(a)    the full terms  of the proposed mandate,  which  shall  include all provisions  necessary to enable  the  Trustee  to fulfil  its  duties  under  these Commitments;

(b)    the outline of a work plan which describes how the Trustee intends to carry out its assigned  tasks;

(c)    an indication whether the proposed Trustee is to act as both Monitoring Trustee and Divestiture  Trustee  or whether  different   trustees  are proposed for the two functio ns.

5.1.2   Approval  or rejection  by the Commission

26.  The Commission shall  have  the discretion  to approve  or reject the proposed Trustee(s)  and to approve the proposed mandate subject to any modifications it deems necessary for the Trustee to fulfil  its  obligations. If only  one name  is  approved, Nidec shall  appoint  or cause to be appointed the person or persons concerned as Trustee, in accordance with the mandate approved by the Commission. If more than one name is approved, Nidec shall be free  to choose the Trustee to be appointed from among the names approved. The Trustee shall be appointed within one week of the Commission’s approval, in accordance with the mandate approved  by the Commission.

5.1.3   New proposal by Nidec

27.  If all the proposed Trustees are rejected, Nidec shall submit the names of at least two more natural or legal persons within one week of being informed  of the  rejection,  in  accordance with  paragraphs  21 and 26 of these  Commitments.

5.1.4   Trustee  nominated   by the Commission

28.  If all further proposed Trustees are rejected by the Commission, the Commission shall nominate a Trustee, whom Nidec shall  appoint,  or cause  to  be appointed,  in  accordance with  a trustee  mandate  approved  by the Commission.

5.2 Functions  of the Trustee

29.  The Trustee shall assume its specified duties  and obligations  in  order to ensure  compliance with the Commitments. The Commission may, on its own initiative or at the request of the Trustee or Nidec, give any orders or instructions to the  Trustee in  order  to  ensure compliance  with  the  conditions  and  obligations  attached to the   Decision.

5.2.1   Duties  and obligations   of the  Monitoring  Trustee

30.  The  Monitoring  Trustee  shall:

(a)    propose in its first report to the Commission a detailed work plan describing how it intends to monitor compliance with the obligations and conditions attached to the Decision.

(b)    oversee, in close co-operation with the Hold Separate Manager, the on-going management of the Divestment Business with a view to ensuring  its  continued economic viability, marketability and competitiveness and monitor compliance  by Nidec with the conditions and obligations attached to the Decision. To that end the Monitoring  Trustee  shall:

(i)     monitor the preservation of the economic viability, marketability and competitiveness of the  Divestment Business,  and  the  keeping  separate  of the Divestment Business from the business retained by the Parties, in  accordance  with  paragraphs  10-11 of these  Commitments,   including […];

(ii)    supervise the management of the Divestment Business as  a  distinct  and saleable  entity,  in  accordance  with  paragraph  12 of these Commitments;

(iii)    with  respect  to Confidential Information:

–     determine all necessary measures to ensure  that Nidec does not after the Effective  Date obtain  any Confidential  Information relating  to  the  Divestment  Business,

–     in particular strive for the severing of the Divestment Business’ participation in a central information technology network  to  the  extent possible, without  compromising  the  viability  of  the Divestment  Business,

–     make sure that any Confidential Information relating  to  the Divestment Business obtained by Nidec before the Effective Date is eliminated   and will   not be used by Nidec and

–     decide whether such information may be disclosed to  or kept  by Nidec as the disclosure is reasonably necessary to allow  Nidec  to  carry out the  divestiture   or as the  disclosure   is required  by law;

(iv)    monitor the splitting of assets and the allocation of Personnel between the Divestment  Business   and Nidec or Affiliated   Undertakings;

(c)    propose to Nidec such measures as the Monitoring Trustee considers necessary to ensure Nidec’s compliance with the conditions and obligations  attached  to  the Decision, in particular the maintenance  of the full  economic  viability,  marketabilit y  or competitiveness of the Divestment Business, the holding  separate  of  the Divestment Business  and  the  non-disclosure  of  competitively  sensitive  information;

(d)    review and assess potential purchasers as well as the progress of the divestit ure process and verify  that,  dependent  on the  stage  of the divestiture  process:

(i)     potential purchasers  receive  sufficient and  correct  information  relating  to the Divestment Business and the Personnel in particular by reviewing, if available, the data room documentation,  the  information  memorandum  and the  due diligence   process, and

(ii)    potential  purchasers  are granted  reasonable  access to the  Personnel;

(e)    act as a contact point for any requests by third parties, in particular potential purchasers,  in  relation  to the  Commitments;

(f)     provide to the Commission, sending Nidec  a non-confidential  copy at  the  same  time, a written report within 15 days after  the  end of every  month  that  shall  cover  the operation  and management of the  Divestment  Business  as well  as the  splitting of assets and the allocation of Personnel so that the Commission can assess whether the business  is  held  in  a manner  consistent  with  the Commitments and the progress of the  divestiture   process as well  as potential purchasers;

(g)    promptly report in writing to the Commission,  sending  Nidec  a non-confident ia l copy at the same time, if it concludes on reasonable grounds that Nidec is failing to comply  with  these Commitments;

(h)    within  one  week after  receipt  of the  documented  proposal referred  to in  paragraph

20 of these Commitments, submit to the Commission, sending Nidec a non- confidential copy at the same time, a reasoned opinion as to the suitability and independence of the proposed purchaser and  the  viability  of  the  Divest ment Business after the Sale and as to whether  the  Divestment Business  is  sold  in  a  manner consistent with the conditions and obligations attached to the Decision, in particular, if relevant, whether the  Sale of the  Divestment  Business  without  one or more Assets or not all of the Personnel affects the viability  of  the  Divest ment Business   after  the  sale,  taking  account of the proposed purchaser;

(i)     assume the other functions assigned to the Monitoring Trustee under  the conditions  and obligations   attached  to the Decision.

31.  If the Monitoring and Divestiture Trustee are not the same persons, the Monitoring  Trustee  and the Divestiture Trustee shall cooperate closely with  each  other  during  and  for  the purpose of the preparation of the Trustee Divestiture Period  in  order  to  facilitate  each  other’s tasks.

5.2.2   Duties  and obligations   of the  Divestiture  Trustee

32.  Within the Trustee Divestiture Period,  the  Divestiture Trustee  shall  sell  at no  minim um  price the Divestment Business to a purchaser, provided that the  Commission  has approved  both the purchaser and the final binding sale and purchase agreement (and ancillar y  agreements) as in line  with  the  Commission’s  Decision  and  the  Commitments  in  accordance with  paragraphs  19 and  20 of these  Commitments.  The  Divestiture  Trustee  shall include in the  sale  and  purchase  agreement  (as well  as in  any ancillary  agreements) such terms and conditions as it considers appropriate for an expedient sale in the Trustee Divestiture Period. In particular, the  Divestiture  Trustee may  include in  the  sale  and purchase agreement such customary representations and warranties and indemnities as are reasonably required to effect the sale. The Divestiture Trustee shall protect the legitimate financial interests of Nidec, subject  to  the  Notifying  Party’s  unconditional  obligation to divest  at no minimum  price  in  the Trustee  Divestiture   Period.

33.  In the Trustee Divestiture Period  (or  otherwise  at  the  Commission’s  request),  the  Divestiture Trustee shall provide the Commission  with  a comprehensive  monthly  report written in English on the  progress  of  the  divestiture  process.  Such  reports  shall  be submitted within 15 days after the end of every month with a simultaneous copy to the Monitoring  Trustee  and a non-confidential  copy to the Notifying    Party.

5.3 Duties and obligations  of the Parties

34.  Nidec shall provide and shall cause its advisors to provide the Trustee with all such co- operation, assistance and information as the Trustee may reasonably require to perform its  tasks. The Trustee shall have full and complete access to any of Nidec’s or the Divest ment Business’ books, records, documents, management or other personnel, facilities, sites and technical information necessary for fulfilling its  duties  under  the Commit ments  and Nidec and the Divestment Business shall provide the Trustee upon request with copies of any document. Nidec and the Divestment  Business  shall  make  available  to the Trustee  one or more offices on their premises and shall be available for meetings  in  order to provide  the Trustee  with  all  information  necessary  for  the performance   of its tasks.

35.  Nidec shall provide the Monitoring Trustee with  all  managerial  and administrative  support that it may reasonably request on behalf of the  management  of the  Divestment  Business.  This shall include all administrative support functions relating to the Divestment  Business  which  are currently  carried  out  at headquarters  level.  Nidec shall  provide  and shall  cause  its advisors to provide  the  Monitoring  Trustee,  on request,  with  the information  submitted  to potential purchasers, in particular give the Monitoring Trustee access to the data room documentation and all other  information  granted to  potential purchasers  in  the  due diligence procedure. Nidec shall inform the Monitoring Trustee on possible  purchasers,  submit lists of potential purchasers at  each  stage  of the  selection process,  including  the offers made by potential purchasers at those stages, and  keep  the  Monitoring  Trustee informed   of all  developments   in  the  divestiture process.

36.  Nidec shall grant or procure Affiliated Undertakings to grant comprehensive powers  of attorney, duly executed, to the Divestiture Trustee to effect the sale (including ancillar y agreements), the Closing and all actions and declarations which the Divestiture  Trustee considers necessary or appropriate to achieve the sale and the Closing, including the appointment of advisors to assist with the sale process. Upon request of the  Divestit ure Trustee, Nidec shall cause the documents  required  for effecting  the sale  and the Closing  to  be duly  executed.

37.  Nidec shall indemnify the Trustee and its employees and agents (each an “Indemnified Party”) and hold each Indemnified Party harmless against, and hereby agrees that an Indemnified Party shall have no liability to Nidec for, any liabilities arising out of the performance of the Trustee’s duties under the Commitments, except to the extent that such liabilities result from the wilful default, recklessness, gross  negligence  or bad faith  of the Trustee,  its  employees,  agents  or advisors.

38.  At the expense of Nidec, the Trustee may  appoint  advisors (in  particular  for  corporate finance or legal advice), subject to Nidec’s approval (this approval not to be unreasonably withheld   or delayed)  if  the  Trustee  considers  the  appointment   of such  advisors necessary or appropriate for the performance of  its  duties  and  obligations  under the  Mandate, provided that any fees and other expenses incurred by the  Trustee  are reasonable.  Should Nidec refuse to approve the advisors proposed by the Trustee the Commission  may approve the appointment of such advisors instead,  after  having heard Nidec.  Only the Trustee  shall  be entitled to issue instructions to the advisors. Paragraph 37 of these  Commitments  shall apply mutatis mutandis. In the Trustee Divestiture Period, the Divestiture Trustee may use advisors who served  Nidec  during  the  Divestiture  Period  if  the  Divestiture  Trustee considers  this  in  the  best interest  of an expedient sale.

39.  Nidec agrees that the Commission may share Confidential Information proprietary to Nidec with the Trustee. The Trustee shall  not  disclose such  information  and  the  princip les contained  in  Article  17 (1) and (2) of the Merger  Regulation  apply mutatis    mutandis.

40.  The Notifying Party agrees that the contact  details  of the  Monitoring  Trustee  are published on the website of the Commission’s Directorate-General for Competition and they  shall inform interested third parties, in particular any potential  purchasers,  of the identity  and the tasks of the  Monitoring  Trustee.

41.  For a period of 10 years from the Effective Date the  Commission may  request  all information from the Parties that is reasonably necessary to monitor the effective implementation  of these  Commitments.

5.4 Replacement, discharge  and reappointment  of the  Trustee

42.  If the Trustee ceases to perform its functions under the Commitments or for any other good cause,  including  the  exposure  of the Trustee  to a Conflict   of Interest:

(a)    the Commission may, after hearing  the Trustee  and Nidec, require  Nidec to replace  the  Trustee; or

(b)    Nidec may,  with  the  prior  approval of the  Commission,   replace  the Trustee.

43.  If the Trustee is removed according to  paragraph  42 of these  Commitments,  the  Trustee  may be required to continue in its function until a new  Trustee  is  in  place  to  whom  the Trustee has effected a full hand over of all relevant information. The new Trustee shall be appointed in accordance with the procedure referred to in paragraphs 21-27 of these Commitments.

44.  Unless removed  according  to paragraph  42 of these  Commitments, the Trustee  shall  cease to act as Trustee only after the Commission has discharged it from its duties after all the Commitments with which the  Trustee has  been  entrusted have  been  implemented. However, the Commission may at any time require the reappointment of the Monitoring Trustee if it subsequently appears that the relevant remedies might not have been fully and properly implemented.

 

Section F -  The  review clause

45.  The  Commission  may extend  the time  periods  foreseen in  the Commitments  in  response  to a request from Nidec  or, in  appropriate  cases, on its  own initiative.    Where  Nidec requests an extension of a time period, it shall submit a reasoned request to the Commission no later  than one month  before  the  expiry  of that  period,  showing  good  cause.  This  request  shall be accompanied  by a report from the  Monitoring  Trustee,  who  shall,  at the same  time  send  a non-confidential copy of the report to the Notifying Party. Only in exceptional  circumstances shall Nidec be entitled to request an extension within the last month of any period.

46.  The Commission may further, in response to a reasoned request from the Notifying Party showing good cause waive, modify  or substitute,  in exceptional  circumstances,  one or more of the undertakings in these Commitments.  This  request  shall  be accompanied  by a report from the Monitoring Trustee,  who  shall,  at the  same  time  send a non-confidential  copy of the report to the Notifying Party. The request shall not have the effect of suspending the application of the undertaking and,  in  particular,  of suspending the  expiry  of  any  time period  in  which  the  undertaking  has  to be complied with.

 

Section G -  Entry  into force

47.  The  Commitments   shall  take effect  upon the  date of adoption  of the Decision.

 

(...)                              (...)

duly  authorised   for  and on behalf  of Nidec

 

Case  COMP/M.8947  – NIDEC / WHIRLPOOL (EMBRACO  BUSINESS)

SCHEDULE

1.   The Divestment Business consists of Nidec’s Refrigeration Compressor business, which consists  of the  following  entities:

(a)    Nidec Global Appliance Austria GmbH, Jahnstraße 30, 8280 Fürstenfeld, Austria (“Nidec Austria”), including Nidec Austria’s  manufacturing  plant  located  at the same  address (“Nidec Austria  Plant”);

(b)    Nidec Global Appliance Slovakia s.r.o., Tovàrenskà 49, 953 01 Zlaté Moravce, Slovak Republic, with identity number 35 800 399, and  registered with  the Commercial Register of the District Court  Nitra,  section: Sro  under file  No. 13235/N (“Nidec Slovakia”), including Nidec Slovakia’s manufacturing plant  located  at the same  address (“Nidec  Slovakia Plant”);

(c)    Nidec Compressors (Tianjin) Co., Ltd., Wuqing Development Zone,  No. 27, Kai Yuan Road, 301700 Tianjin, People’s Republic  of  China  (“Nidec  China”), including Nidec China’s manufacturing plant located at the same address (“Nidec China  Plant”);

(d)    Nidec Global Appliance Italy Srl, Piazza  Vittorio  Emanuele  II,  n°3  10024 Moncalieri,   Italy  (“Nidec Italy”);

(e)    Nidec Global Appliance Germany GmbH, Mads-Clausen-Str. 7, 24939 Flensburg, Germany;

(f)    Nidec Global Appliance Compressors GmbH, Mads-Clausen-Str. 7,  24939 Flensburg, Germany  (together with  Nidec  Global  Appliance  Germany  GmbH, “Nidec Germany”);

(g)    Nidec Global Appliance USA Inc., 4000 Northfield Way, Suite 600 Roswell, GA 30076 (“Nidec USA”),

together with all associated assets, contracts,  customer  records, IP & knowhow,  personnel and other interests, except the employees and businesses described in paragraph 4 below. Organisation  charts  of the  Divestment  Business   are enclosed  in  Annex 1.

2.   The Nidec Austria Plant, the Nidec Slovakia Plant and the Nidec China Plant include the Refrigeration Compressor production lines to produce Nidec’s Delta Series, Kappa Series, D-Series, F-Series, G-Series, N-Series, S-Series, T-Series and X-Series Refrigera t ion Compressors, and all pipeline projects related to these Refrigeration Compressor platforms (“Divestment Products”). For the 2018 sales volumes and values by series,  please  see Annex 2. These products constitute all of the refrigeration compressors manufactured by Nidec, excluding  battery-driven  refrigeration  compressors  for  mobile   applications.

3.   In accordance with paragraph 8 of these Commitments, the  Divestment  Business  includes,  but is  not  limited  to:

(a)   the  following  main  tangible  assets:

 

Case  COMP/M.8947  – NIDEC / WHIRLPOOL (EMBRACO  BUSINESS)

(i)    the freehold title and the leasehold title to  the  site  areas  on  which, respectively, the Nidec Austria Plant is located in Fürstenfeld, the Nidec Slovakia Plant is located in Zlaté Moravce and the Nidec  China  Plant  is located  in Tianjin;

(ii)    the properties on the site areas including the production plants and warehousing;

(iii)    the  production  lines   to produce the  Divestment  Products;

(iv)    the leasehold titles to offices for Nidec Germany,  Nidec  Italy,  and  Nidec  USA;

(v)    the production and quality control records in respect of the Divest ment Products;

(vi)    Nidec’s inventory of, and orders for, the Divestment Products at the time of closing  of the divestiture   sale  to the  Purchaser;

(vii)   the existing sales and promotional material designed for and  used  in connection  with  the Divestment   Products;

(b)    Nidec commits  to make  available  to the  Purchaser  CAPEX funding  in  the  amount of […]. To this effect, Nidec commits [to make available to the purchaser of the divestment business  significant  funding  for  future  investments for  a certain  period of time for the production lines in  Nidec’s  plants  in  Austria  and  Slovakia. The amount made available is equal to the capital expenditure that Nidec would have committed   to the two plants  without   the transaction].   […].

(c)    the  following  main  intangible  assets:

(i)    all patents owned  (a non-exhaustive  list  of which  is  provided  at  Annex  3) or registered but not yet published  by Nidec (a non-exhaustive  list  of which  is provided at Annex 4) existing as of the date of the divestment agreement which relate to the Divestment Business to  manufacture  and  sell the Divestment Products, subject to a non-exclusive license back to Nidec in relation to the patents identified in Annex 5, which are relevant to the battery-driven  refrigeration  compressors  for use  in  mobile   applications;

(ii)    subject to Nidec becoming the owner of the German utility model with registration number DE 202012013046 as a result of the Concentration, a non-exclusive, perpetual, royalty-free license under that utility model  to  operate the Divestment Business as at the date of the sale and purchase agreement   to be concluded  between Nidec  and the Purchaser;

(iii)    all of the knowhow (including designs, drawings,  plans  and the like)  that  is used to develop, manufacture and sell the Divestment Products  and  all  pipeline products and pipeline projects (including but not limited to those pipeline products and pipeline projects described in Annex 6), and any intellectual  property rights   in  such knowhow;

 

Case  COMP/M.8947  – NIDEC / WHIRLPOOL (EMBRACO  BUSINESS)

(iv)    to the extent legally possible, all Nidec-held data and relevant product registration/authorisations, and documents related thereto (if any), for all models of the Divestment Products, including those that relate to plant or product upgrades, quality certificates and approvals pertaining to the Divestment  Business;

(v)    all Nidec-held data related to the quality management system of  the  Divestment Products, including historic records on compliance  with  applicable   regulations   and corrective/preventive  actions;

(vi)    the  Secop website;

(vii)   the  Secop brand and any associated  trademarks  and product  names;

(d)    the  main  licences, permits  and authorisations   listed  in  Annex 7;

(e)    all contracts, agreements, leases, commitments and understandings  relating  to the  Divestment  Business,   including,  for  example:

(i)    supply  contracts and  relationships  described  in  Annex  8 and Annex 9;

(ii)    relationships with  all  customers  supplied  by the Divestment  Business  listed in Annex 10 and new  contracts  with  the  limited number  of  customers having written contracts for the purchase of the  Divestment Products described  in  Annex 11; and

(iii)    IT agreements and licences that apply to the Divestment Business, for which Nidec will either:  (i)  cause Nidec Austria,  Nidec Slovakia  and Nidec China  to enter into new agreements and licences  in  order to reflect  the agreements and licences  from which  they currently benefit;  or  (ii)  facilitate  the Purchaser in migrating the  Divestment Business  to  the  agreements  and licences   used by the Purchaser  in  the  rest of its business;

(f)    a list  of all  customers  of the  Divestment  Business  with  contact  details,  as well  as all other available customer specific information, including (but  not  limited to)  customer records, customer reports, transactional data and customer accreditatio ns relating  to the  Divestment  Products;

(g)    the following Personnel: all employees of the Divestment Business, subject to applicable labour laws (including employees listed  in  Annex  12),  except  as described  in  paragraph  4 below;

(h)    the following Key Personnel: […]

(i)     transitional services  agreements,  for a period of up to […] after Closing,  at cost and  in such a manner as not to compromise the  independence of  the  Divest ment Business,   to the  extent  required  by the Purchaser:

(i)    for  the supply  of IT services;  and

 

Case  COMP/M.8947  – NIDEC / WHIRLPOOL (EMBRACO  BUSINESS)

(ii)    for the supply of support services pertaining to the patents, know-how and other intellectual property rights used to develop, manufacture and sell the Divestment  Products.

4.   The  Divestment  Business   shall  not include:

(a)    Nidec’s business, including all relevant employees, as  specified  in  Annex  13,  relating to battery-driven refrigeration compressors for use in mobile applicatio ns currently manufactured in the Nidec China Plant, including the two production lines used exclusively to produce those compressors, which  will  be moved  on a timely basis  to another  Nidec  plant; and

(b)    Nidec’s business, including all relevant employees, as  specified  in  Annex  13,  relating to motors for washing machines, dryers and dishwashers currently manufactured in the Nidec Austria  Plant  and  Nidec  Slovakia  Plant,  including  the three production lines used to produce those  motors,  which  will  be moved  on  a timely  basis  to another  Nidec plant.

5.   If there is any asset or personnel which is not covered by paragraph 3 of this Schedule, but which is both used (exclusively or not) in the Divestment Business and necessary for the continued viability and competitiveness of the Divestment Business, that asset or adequate substitute   will   be offered  to potential  purchasers.

 

Case  COMP/M.8947  – NIDEC / WHIRLPOOL (EMBRACO  BUSINESS)

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Case  COMP/M.8947  – NIDEC / WHIRLPOOL (EMBRACO  BUSINESS)

 

 

Annex 1: Organization  Charts  of Divestment Business

[…]

Annex 2: 2018 turnover  from  sales of the  Divestment Products  by series

[…]

Annex 3: List of patents  to be transferred  to Purchaser

[…]

Annex 4: List of pending  patents

[…]

Annex 5: List of patents  to be licensed back to Nidec

[…]

Annex 6: Description of key pipeline  products  and pipeline   projects

[…]

Annex 7: List of key licences, permits  and authorisations  required  for Divestment Business

[…]

Annex 8: List of suppliers  of parts,  components  and materials  to Divestment Business

[…]

Annex 9: Table  of agreements with  suppliers  to Divestment Business

[…]

Annex 10: List of current  customers  of Divestment Business

[…]

Annex 11: Table  of agreements with  key customers  of Divestment Business

[…]

Annex 12: List of Personnel in Divestment  Business

[…]

Annex 13: List of excluded personnel

[…]

Annex 14: Estimated Post-Transaction / Post-DivestmentMarket Shares in Light Commercial,  Variable  Speed Light  Commercial  and Variable  Speed Household

[…]

 

 

 

 

 

 

 

1                  OJ L 24, 29.1.2004, p. 1 ("the Merger Regulation"). With effect from 1 December 2009, the Treaty on the Functioning of the European Union ("TFEU") has introduced certain changes, such as the replacement of "Community" by "Union" and "common market" by "internal market". The terminology of the TFEU will be used throughout this decision.

2                  OJ C ...,...200.  , p....

3                  OJ C ...,...200.  , p....

4                  OJ C 374,  16.10.2018,   p. 13.

5                  Turnover calculated  in  accordance  with  Article  5(1)  of the Merger Regulation  and  the Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings (OJ C95,  16.4.2008,  p. 1).

6                  Form CO, paragraphs 2 and 7.

7                  Form CO, paragraph 7.

8                  Form CO, paragraph 702.

9                  Regulation  (EU)  No  517/2014  of  the  European  Parliament  and  of the  Council of 16  April 2014 on fluorinated   greenhouse  gases  and  repealing  Regulation  (EC)  No  842/2006,   OJ  L  150,    20.5.2014, p. 195–230,  Annex III.

10                For the history of Nidec’s Global Appliances division see e,g, Nidec’s internal  document, presentation titled “Nidec GA Compressor Product Portfolio” dated 6 March 2018, slide 2, Doc Id: 1510-33968 (NID00143276.ppt x).

11                See for example  replies to Questionnaire on Commitments  offered by Nidec, q. 2.1 and q. 16.

12                Form CO, paragraph 17.

13                Form CO, paragraph 144 et seq.

14                Form CO, paragraph 17.

15                Form CO, paragraph 18.

16                Form CO, paragraph 20.

17                Notifying Party's submission titled "Compressor efficiency and speed-type" of 4 October 2018.

18                Notifying Party’s Response to the Article 6(1)(c) decision, paragraph 24.

19                Case M.6996 Secop/ACC Austria.

20                Case M.6996 Secop/ACC Austria, paragraph 20.

21                As  the  ACC Austria  plant  acquired  in  this  transaction  only  produced household compressors, the Commission  did not examine  closely light commercial compressors.

22                Linear compressors have a linear motor coupled to resonating mechanical system (piston and spring). The piston is activated by magnets and controlled by a spring mechanism. Linear compressors are energy-efficient and more compact than hermetic reciprocating refrigeration compressors, but have high manufacturing costs . Rotary compressors use a roller to compress the refrigerant inside a cylinder by a rotating action. Historically, rotary compressors were used in high -volume air-conditioning applications, and not in refrigeration, due to their lower efficiency levels, inferior reliability, and the higher levels of noise and vibration that they produce. Semi-hermetic reciprocating compressors are distinguishable from hermetic reciprocating compressors because the housing for the crankshaft and the motor is not sealed. They are large and heavy, and tend to be used in large refrigerator applications, such as supermarket islands. More information regarding the different compressors technologies is contained at Form CO,  paragraph 118.

23                Replies to Q2 – Questionnaire to customers, q. 6.

24                Replies to Q2 – Questionnaire to customers, q. 6.

25                Reply to Q2 – Questionnaire to customers, q. 6.

26                Replies to Q2 – Questionnaire to customers, q. 6.

27                Reply to Q2 – Questionnaire to customers, q. 6.

28                Form CO, paragraph 120.

29                Form CO, Tables 4 and 5, Parties' reply to RFI 12.

30                Replies to Q2 – Questionnaire to customers, q. 7 and q. 8.

31                Reply to Q2 – Questionnaire to customers, q. 7.

32                Reply to Q2 – Questionnaire to customers, q. 7.

33                Reply to Q1 – Questionnaire to competitors, q. 10, Replies  to Q1 - Questionnaire to competitors, q. 10.

34                Replies to Q2 – Questionnaire to customers, q. 8, Reply to Q1  – Questionnaire to competitors, q. 7.

35                Replies to Q2 – Questionnaire to customers, q. 9.

36                Reply to Q2 – Questionnaire to customers, q. 9.

37                Reply to Q2 – Questionnaire to customers, q. 9.

38                Reply to Q1 – Questionnaire to competitors, q. 12.

39                Reply to Q2 – Questionnaire to customers, q. 10.

40                Reply to Q2 – Questionnaire to customers, q. 10.

41                Reply to Q2 – Questionnaire to customers, q. 10.

42                Replies to Q2 – Questionnaire to customers, q. 11.

43                See for example  Form CO, Annex 10(6),  slide 2.

44                Form CO, Annex 10(3),  […],  slide 8.

45                Replies to Q1 – Questionnaire to competitors, q. 14.

46                Reply to Q1 – Questionnaire to competitors, q. 14.

47                Reply to Q1 – Questionnaire to competitors, q. 14.

48                Reply to Q1 – Questionnaire to competitors, q. 14.

49                Reply to Q1 – Questionnaire to competitors, q. 14.

50                Replies to Q1 – Questionnaire to competitors, q. 18.1 and q. 19.1.

51                Replies to Q2 – Questionnaire to customers, q. 13.

52                Replies to Q1 – Questionnaire to competitors, q. 19.

53                Reply to Q2 – Questionnaire to customers, q. 13.1.

54                Reply to Q1 – Questionnaire to competitors, q. 19.1.

55                Reply to Q2 – Questionnaire to customers, q. 16.

56                COP   stands   for   “coefficient   of   performance”;   CECOMAF   stands   for   “ Comité Européen  de Constructeurs de Matériel Frigorifique” (the European Committee of Refrigeration Manufacturers) and refers to a standard used by the industry to define the size of the refrigeration capacity of compressors under comparable evaporating and condensing temperatures. The other standard used by the industry to measure the coefficient of performance is ASHRAE, which stands for “The American Society of Heating, Refrigerating and Air-Conditioning Engineers”.

57                Reply to Q2 – Questionnaire to customers, q. 16.

58                Replies to Q2 – Questionnaire to customers, q. 14; replies to Q1 - Questionnaire to competitors, q. 20.

59                Replies to Q2 – Questionnaire to customers, q. 14.1.

60                Replies to Q1 – Questionnaire to competitors, q. 20.

61                Reply to Q2 – Questionnaire to customers, q. 14.

62                Replies to Q2 – Questionnaire to customers, q. 15.

63                Reply to Q2 – Questionnaire to customers, q. 15.

64                Reply to Q2 – Questionnaire to customers, q. 15 and q. 16.

65                Replies to Q1 – Questionnaire to competitors, q. 18.

66                Reply to Q1 – Questionnaire to competitors, q. 18.1.

67                Commission  Notice  on  the definition  of relevant  market  for the purpose of  Community competition law, OJ C 372,  9.12.1997,  p. 5–13,  paragraph 8.

68                Commission  Notice  on  the definition  of relevant  market  for the purpose of  Community competition law, OJ C 372,  9.12.1997,  p. 5–13,  paragraph 28.

69                Commission  Notice  on  the definition  of relevant  market  for the purpose of  Community competition law, OJ C 372,  9.12.1997,  p. 5–13,  paragraph 29.

70                Commission  Notice  on  the definition  of relevant  market  for the purpose of  Community competition law, OJ C 372,  9.12.1997,  p. 5–13,  paragraph 30.

71                Commission  Notice  on  the definition  of relevant  market  for the purpose of Community  competition law, OJ C 372,  9.12.1997,  p. 5–13,  paragraph 31.

72                Case M.6996 Secop/ACC Austria, paragraph 28.

73                Case M.6996 Secop/ACC Austria, paragraph 26.

74                Form CO, paragraph 217.

75                Case M.6996 Secop/ACC Austria, paragraph 27.

76                Form CO, paragraph 217.

77                Form CO, paragraph 221.

78                Form CO, paragraph 221.

79                Form CO, paragraph 217.

80                Notifying   Party’s   submission  titled   “Nidec/Embraco,  Economic   Analysis  of  the  Variable  Speed Household Segment” of 18 January 2019, page 6.

81                Notifying   Party’s   submission  titled   “Nidec/Embraco,  Economic   Analysis  of  the  Variable  Speed Household Segment” of 18 January 2019, page 6.

82                Form CO, paragraph 221.

83                Notifying Party’s Response to the Article 6(1)(c) decision, paragraph 34.

84                Notifying Party’s Response to the Article 6(1)(c) decision, paragraph 35.

85                Notifying Party’s Response to the Article 6(1)(c) decision, paragraph 37. […].

86                Notifying   Party’s   submission  titled   “Nidec/Embraco,  Economic   Analysis  of  the Variable  Speed Household Segment” of 18 January 2019, page 5.

87                Notifying Party’s Response to the Article 6(1)(c) decision, paragraph 31.

88                Case  M.6996  Secop/ACC  Austria,  paragraph  27;  Notifying  Party’s  Response  to  the Article 6(1)(c) decision, paragraph 27.

89                Notifying Party’s Response to the Article 6(1)(c) decision, paragraph 28.

90                Notifying  Party’s   Response  to  the  Article  6(1)(c)  decision,  paragraph  30.  The  quote   states  the following: “[t]he EEA standard is similar to China (same voltage, same frequency, same gas refrigerant). In the other regions the technical standards are different (R134a refrigerant, voltage 155V – 127V, 60Hz). Most of the suppliers can provide products for EEA standard…..As the legislation for efficient energy use in the EEA is much more stringent than in other regions the need for variable speed technology compressors is higher. Therefore, securing a competitive, EEA production of these products, combined with an open import regulation for the variable speed compressors, is needed to secure a competitive manufacturing of refrigerators and freezers”.

91                Notifying Party’s Response to the Article 6(1)(c) decision, paragraph 31.

92                Notifying Party’s Response to the Article 6(1)(c) decision, paragraph 31.

93                Replies to Q2 – Questionnaire to customers, q. 19.

94                Replies to Q2 – Questionnaire to customers, q. 20.

95                Reply to RFI 22, “2018 actual market  shares - Update”, rows 180  and 527.

96                In  particular, [0-5]%  in  value and [5-10]%  in  volume in  2017 (Customer reply  to  RFI    of 10.08.2018, pages 4 and 5).

97                Reply to RFI 20, q. 1.

98                0% tariffs on imports into the EEA  from Turkey and Mexico.

99                0% tariffs on imports into South Korea from China, EU,  India and Singapore.

100              These figures serve as a general rule, whilst there are occasional exceptions, such as 0% on compressors from Mercosur to Brazil.

101              Minutes of a conference call with a customer, 30.08.2018,   paragraph 23.

102              Embraco’s   internal  document,  presentation  titled  […],   not  dated,  Doc  ID   1533-24756  (EMB-EC- 00023159.pptx),  slide 17.

103              Form CO, paragraph 221.

104              See,  for  instance,  Embraco’s   internal  document,  […],   not  dated,  Doc  ID   1533-24756  (EMB-EC- 00023159.pptx),  slide 17, […].

105              Reply to Phase II questionnaire to customers, q. 2.

106              Reply to Phase II questionnaire to customers, q. 2.

107              Reply to Phase II questionnaire to customers, q. 2.

108              Reply to Phase II questionnaire to customers, q. 2.

109             Notifying Party's submission titled "Geographic scope of Light Commercial Segment" of 
4 October 2018. 

110              Notifying Party's submission titled "Geographic scope of Light Commercial Segment" of 
4 October 2018.

111              Notifying Party's submission titled "Geographic scope of Light Commercial Segment" of 
4 October 2018.

112              Notifying Party’s Response to the Article 6(1)(c) decis ion, paragraph 8.

113              Replies to Q2 – Questionnaire to customers, q. 24.

114              Reply to Q2 – Questionnaire to customers, q. 24.

115              Reply to Q2 – Questionnaire to customers, q. 24.

116              Reply to Q2 – Questionnaire to customers, q. 24.

117              Reply to Q2 – Questionnaire to customers, q. 22.

118              Replies to Q2 – Questionnaire to customers, q. 22.

119              Replies to Q2 – Questionnaire to customers, q. 21.

120              Reply to Q1 – Questionnaire to competitors, q. 28.

121              Reply to Q1 – Questionnaire to competitors, q. 28.

122              Reply to Q2 – Questionnaire to customers, q. 23.

123              Replies to Q1 – Questionnaire to competitors, q. 30.

124              Reply to Q1 – Questionnaire to competitors, q. 30.

125              Reply to RFI 22, “2018 actual market  shares - Update”, rows 194  and 555.

126              Guidelines  on  the  assessment  of horizontal mergers  under the Council Regulation  on the control of concentrations between undertakings, OJ C 31, 05.02.2004,  p. 5-18.

127              Horizontal Merger Guidelines, paragraph 25.

128              The Notifying Party estimates  that the combined internal sales  of vertically   integrated manufacturers represent only ~15% of the total sales (internal and on the merchant market) in the EEA in 2018. See Reply to RFI 22.

129              See Form CO, paragraphs 101-102.

130              Reply to RFI 22.

131              Notifying Party’s Response to the Article 6(1)(c) decision, paragraphs 16-19.

132              A  few  customers   could  not  identify  precisely  the  destination  of  the  appliances   that   used the compressors, and have provided estimates.

133              See Reply to RFI 22.

134              Parties’ reply to RFI 22.

135              Parties’ reply to RFI 22.

136              Form CO, paragraph 523.

137              Form CO, table 28.

138              Form CO, paragraph 441.

139              Form CO, paragraph 447 and figures 54 and 57.

140              According  to the Notifying Party’s estimates, the combined entity’s EEA  value market shares  for fixed speed household refrigeration compressors in  2017 was  [40-50]%. For 2016, the Notifying Party was not able to provide market share figures (see Reply to RFI 6, Annex 2).

141              According to the Notifying Party’s estimates, the combined entity’s worldwide value market shares for fixed speed household refrigeration compressors  in  2016 was [10-20]%, and in 2017 it was [10-20]%  (see Reply to RFI 6, Annex 2).

142              The  combined  entity’s  EEA  value  market  shares  of the Commission market reconstruction  for fixed speed household refrigeration compressors in 2016 was in the range 40-50% and in 2017 it was in the range 30-40%.

143              Replies to Q2 – Questionnaire to Customers, q. 28.

144              Minutes of a conference call with a customer, 26.7.2018,  paragraph 6.

145              Replies to Q2 – Questionnaire to Customers, q. 25.

146              Replies to Q2 – Questionnaire to Customers, q. 15.

147              Based on the Notifying Party’s Reply to RFI 22.

148              Replies to Q2 – Questionnaire to Customers, q. 15.

149              Replies to Q2 – Questionnaire to Customers, q. 27.

150              Replies to Q2 – Questionnaire to Customers, q. 31.1.

151              Replies to Q2 – Questionnaire to Customers, q. 37 and q. 38.

152              Replies to Q2 – Questionnaire to Customers, q. 39.

153              Replies to Q2 – Questionnaire to Customers, q. 39.

154              Replies to Q2 – Questionnaire to Customers, q. 39.

155              Reply to Q2 – Questionnaire to Customers, q. 39.1.

156              Notifying Party’s Response to the Article 6(1)(c) decision, paragraph 54.

157              Reply to RFI 22, “2018  actual market  shares - Update”, row 527.

158              Notifying Party’s Response to the Article 6(1)(c) decision, paragraphs 16-19.

159              Notifying Party’s Response to the Article 6(1)(c) decision, paragraphs 59-67.

160              Notifying  Party’s  Response  to  the  Article  6(1)(c)  decision,  paragraph  60  and  62 and  Whirlpool's internal document, Reply  to RFI 1, Annex 1, slide 12.

161              Nidec’s internal document, Annex 10(2)  to the Form CO, slide 10.

162              Notifying Party’s Response to the Article 6(1)(c) decision, paragraph 65.

163              Notifying Party’s Response to the Article 6(1)(c) decision, paragraph 68.

164              Notifying Party’s Response to the Article 6(1)(c) decision, paragraphs 46, 47 and 70.

165              Notifying   Party’s   submission  titled   “Nidec/Embraco,  Economic   Analysis  of  the Variable  Speed Household Segment” of 18 January 2019,  Section 3.

166              Notifying   Party’s   submission  titled   “Nidec/Embraco,  Economic   Analysis  of  the Variable  Speed Household Segment” of 18 January 2019,  Section 4.2.

167              Notifying   Party’s   submission  titled   “Nidec/Embraco,  Economic   Analysis  of  the  Variable  Speed

Household Segment” of 18 January 2019,  Section 4.3.

168              Notifying  Party’s   submission  titled  “Nidec/Embraco,  Economic   Analys is   of  the  Variable  Speed Household Segment” of 18 January 2019,  Section 4.4.

169              Notifying Party’s Response to the Article 6(1)(c) decision, paragraph 56.

170              Notifying   Party’s   submission  titled   “Nidec/Embraco,  Economic   Analysis  of  the Variable  Speed Household Segment” of 18 January 2019,  Section 5.1, page 17.

171              Notifying   Party’s   submission  titled   “Nidec/Embraco,  Economic   Analysis  of  the Variable  Speed Household Segment” of 18 January 2019,  Section 5.1, page 18.

172              Notifying Party’s Response to the Article 6(1)(c) decision, paragraph 52.

173              Form CO, paragraphs 535  and 543.

174              According  to  the  Notifying  Party’s  estimates,  the  combined  entity’s  EEA  value  market shares for variable speed household refrigeration compressors in 2017 was [70-80]%. For 2016,  the Notifying  Party was not able to provide market share figures (see Reply to RFI 6, Annex 2).

175              According to the Notifying Party’s estimates, the combined entity’s worldwide value market   shares for variable speed household refrigeration compressors in 2016 was [30-40]% and in  2017 was [30-40]%  (see Reply to RFI 6, Annex 2).

176              The Commission  notes, however, that there is  a discrepancy in  the identity of the competitors    in the Notifying Party’s figures (see Table 4) and the information available to the Commission. Such discrepancy would not change the Commission’s overall assessment in the EEA variable speed household compressors market. The Commission considers that the information it has available is more reliable for the assessment of the competitive landscape in the EEA market.

177              Worldwide market shares are not shown due to the coverage limitations of the market  reconstruction at worldwide level, and the consequent lack of reliability of the market shares based on it.

178              The  value  shares  exclude  for  the full period  the suppliers  who  did  not provide projections for 2019 and 2020. This decreases the coverage of the market reconstruction to 75% of sales in the EEA.

179              Reply to RFI 22.

180              The Notifying Party estimates a value share for the combined entity of [20-30]% worldwide.  See Reply to RFI 22.

181              Horizontal Merger Guidelines, paragraph 17 states: “According to well-established case law, very large market shares – 50% or more – may in themselves be evidence of the existence of a dominant market position.”

182              Reply to Q1 – Questionnaire to Competitors, q. 32.

183              Replies to Q2 – Questionnaire to Customers, q. 13.1 and q. 15.

184              Internet  article  titled  “Compressors  of variable  speed: A  reality  in  the market”  dated  25 April 2018 written by Embraco,  Doc ID 3047.

185              Reply to Q2 – Questionnaire to Customers, q. 15.

186              Embraco's  internal document, Reply to RFI 2, Annex 21(4),  slide 35.

187              Form CO, footnote 52: The Ecodesign Directive (2009/125/EC) sets out    minimum requirements for the energy efficiency of  products,  and  has  been  applied   to   refrigerators   by   Commission Regulation (EC) 643/2009 and Commission Regulation (EU) 2015/1095. Such regulations have  introduced energy efficiency standards which, by operation of their provisions, have increased in stringency at regular intervals since 2010, with the next such increase due on 1 July 2019. Such regulations are complemented by product labelling requirements, which have been applied to refrigerators by Commission Regulation (EU) 1060/2010 and  by  Commission  Delegated  Regulation (EU)  2015/1094,  under Directive 2010/30/EU  (replaced in 2017 by Regulation (EU) 2017/1369).

188              Embraco's  internal document, Reply to RFI 2, Annex 21(4),  slide 37.

189              Replies to Q2 – Questionnaire to Customers, q. 16.

190              Reply to Q2 – Questionnaire to Customers, q. 32.

191              Replies to Q1 – Questionnaire to Competitors, q. 40.

192              Replies to Q2 – Questionnaire to Customers, q. 32.

193              Minutes of a conference call with a customer, 18.12.2018,   paragraph 18.

194              Nidec's internal document titled […] dated […], submitted as Annex 10(2) to the Form CO, slide 95.

195              Nidec's internal document titled […] dated […], submitted as, Annex 10(2) to the Form CO, slide 98.

196              Annex 10(2) to the Form CO, slide 82.

197              Replies to Q2 – Questionnaire to Customers, q. 29.

198              Replies to Q2 – Questionnaire to Customers, q. 29.1 and q. 29.2.

199              Replies to Phase II Questionnaire to Customers, q. 8 and q. 9.

200              Reply to Q2 – Questionnaire to Customers, q. 15.

201              Reply to Q2 – Questionnaire to Customers, q. 29.2.

202              Replies to Q2 – Questionnaire to Customers, q. 30.

203              Reply to Q2 – Questionnaire to Customers, q. 25.

204              Replies  to  Q2  –  Questionnaire  to  Customers,  q. 26;  Minutes  of a  conference  call with a customer, 26.7.2018,  paragraph 18.

205              Reply to the Questionnaire on commitments offered by Nidec, q. 2.1.

206              Reply to the Questionnaire on commitments  offered by Nidec, q. 2.1.

207              Replies to Phase II Questionnaire to Customers, q. 11.

208              Replies to the Questionnaire on commitments offered by Nidec, q. 16 and q. 16.1.

209              Embraco’s internal document, slides 75, 76 and 78, Doc Id:1534-40501 (EMB-EC-00212440.pptx).

210              Embraco’s  internal document,  presentation  titled  […],  Doc  Id: 1532-35294 (EMB-EC-00158306), slide 27.

211              Embraco’s  internal document,  presentation  titled  […],  Doc  Id: 1532-35294 (EMB-EC-00158306), slide 31.

212              Embraco’s   internal  document,  presentation  titled  […],  Doc  Id:1534-40501 (EMB-EC-00212440.pptx),

slide 89.

213              Embraco’s   internal  document,  presentation  titled  […],  Doc Id:1534-40501 (EMB-EC-00212440.pptx), slide 90.

214              Embraco’s   internal  document,  presentation  titled  […],  Doc Id:1534-40501 (EMB-EC-00212440.pptx), slide 82.

215              For example  Embraco's  internal document, Reply to RFI 2, Annex 21(4),  slide 47.

216              Nidec’s internal document titled […] dated […],  Doc Id:1513-46508  (NID00174308.ppt x),  slide 90.

217              Nidec's internal document, Annex 10(2)  to the Form CO, slide 10.

218              […] dated […], Annex 10(2) to the Form CO.

219              Reply  to  Questionnaire on commitments  offered  by Nidec, q. 9.1;  reply  to  Phase II Questionnaire on commitments  offered by Nidec, q. 4.1.

220              […]  dated […],  Doc Id:1513-46508  (NID00174308.pptx),  slide 98.

221              […].

222              […].

223              […].

224              Nidec’s       internal        document,       presentation        titled […]          dated       […];          Doc Id:1510-29737 (NID00127066.ppt x),  slide 54.

225              Nidec’s     internal      document,      presentation      titled     […]       dated     […],       Doc     Id:                  1510-53057 (NID00224712.ppt x),  slide 37.

226              Nidec’s      internal      document,      presentation       titled      […],        not      dated,      Doc Id: 1513-035458 (NID00127281.ppt x),  slide 9.

227              Embraco’s internal document titled […],  Doc Id:1533-16805,  (EMB-EC-00016684),  slide 2.

228              Embraco’s internal document titled […], Doc Id: 1534-020262  (EMB-EC-00061990.pdf),  page 4.

229              Internal email of Nidec from […] to […]  sent on […],  Doc Id: 1512-40826 (NID00218084).

230              Replies to Q2 – Questionnaire to Customers, q. 16.

231              Replies to Q2 – Questionnaire to Customers, q. 15.

232              Minutes of a conference call with a customer, 30.8.2018,  paragraph 3.

233              Replies to Q2 – Questionnaire to Customers, q. 27; replies to Phase II questionnaire to customers, q. 6.

234              Minutes of a conference call with a customer, 30.8.2018,  paragraph 24.

235              Replies to Phase II questionnaire to customers, q. 6.

236              Minutes of a conference call with a customer, 26.7.2018,  paragraph 12.

237              Reply to Q1 – Questionnaire to competitors, q. 41.

238              Parties’ reply to RFI 22.

239              Replies to the Commission’s  Phase II market  reconstruction (2018 data).

240              Form CO, paragraph 440.

241              Replies to Q2 – Questionnaire to Customers, q. 26.

242              Replies to Q1 – Questionnaire to Competitors, q. 33.

243              Replies  to  Phase II Questionnaire to  Customers, q. 4 and replies to the Commission ’s Phase  II market reconstruction.

244              Replies  to  Phase II Questionnaire to Customers, q. 4; and replies to the Commission’s Phase   II market reconstruction.

245              Horizontal Merger Guidelines, paragraph 68.

246              Horizontal Merger Guidelines, paragraph 74.

247              Horizontal Merger Guidelines, paragraph 75.

248              The  Notifying  Party’s  submission  prepared  by RBB  Economics  titled  “Nidec/Embraco – Economic Analysis of the Variable  Speed Household Segment” dated 18 January 2019, page 10.

249              Between 2006 and 2008, the Parties’ submission refers to the region being classified as the EU.

250              The Parties’ submission prepared  by RBB Economics  titled  “Nidec/Embraco – Economic  Analysis of the Variable Speed Household Segment” dated 18 January 2019, page 17; and the Parties’ presentation titled “M.8947 Nidec/Whirlpool (Embraco Business) - Presentation to the European Commission Case Team” dated 12 September 2018,  slide 38.

251              Replies to Phase II Questionnaire to Customers, q. 4.

252              Replies  to  Phase II Questionnaire to  Customers, q. 4 and replies to the Commission’s    Phase II market reconstruction.

253              Replies to Q2 – Questionnaire to Customers, q. 38.

254              Reply to Q2 – Questionnaire to Customers, q. 37 and q. 38.

255              Replies to Q2 – Questionnaire to Customers, q. 37.

256              Replies to Q2 – Questionnaire to Customers, q. 25, q. 25.1  and q. 37.

257              Replies to Q2 – Questionnaire to Customers, q. 40.

258              Reply to Q2 – Questionnaire to Customers, q. 40.1.

259              Reply to Q1 – Questionnaire to Competitors, q. 37.1.

260              Form CO, paragraphs 39, 467–494.

261              The  Parties  refer to  competitors  such as Emerson producing scroll compressors and    Panasonic and Samsung producing rotary compressors.

262              Form CO, paragraph 124.

263              Form CO, paragraph 529.

264              Notifying Party’s Response to the Article 6(1)(c) decision, paragraph 8.

265              According to the Notifying Party’s estimates, the combined entity’s EEA  value market shares   for light commercial refrigeration compressors (aggregate across fixed and variable speed) in 2017 was [90- 100]%. For 2016, the Notifying Party was not able to provide market share figures (see Reply to RFI 6, Annex 2).

266              According to the Notifying Party’s estimates, the combined entity’s worldwide value market   shares for light commercial  refrigeration compressors (aggregate  across  fixed  and  variable  speed)  in 2016 was [50-60]%,  and in 2017  it was [60-70]%  (see Reply to RFI 6, Annex 2).

267              According to the Notifying Party’s estimates, the combined entity’s EEA  value market shares   for fixed speed light commercial refrigeration compressors in 2017 was [70-80]%. For 2016, the Notifying Party was not able to provide market share figures (see Reply to RFI 6, Annex 2).

268              According to the Notifying Party’s estimates, the combined entity’s worldwide value market   shares for fixed speed light commercial refrigeration compressors in 2016 was [50-60]%  and  in  2017  was  [50- 60]% (see Reply to RFI 6, Annex 2).

269              According  to  the  Notifying  Party’s  estimates,  the  combined  entity’s  EEA  value  market  shares for variable speed light commercial refrigeration compressors in 2017 was [90-100]%. For 2016, the Notifying Party was not able to provide market share figures (see Reply to RFI 6, Annex 2).

270              According to the Notifying Party’s estimates, the combined entity’s worldwide value market shares for variable speed light commercial  refrigeration compressors was [90-100]%  in both 2016  and 2017.

271              The  Parties  were  not able to  provide market  share data for competitors' shares  on the basis  of  fixed speed and variable speed light commercial compressors separately, but only on the basis of all light commercial compressors. The Commission's market reconstruction exercise largely  confirmed  the Parties' estimates.

272              Replies to Q2 – Questionnaire to Customers, q. 47.

273              Replies to Q2 – Questionnaire to Customers, q. 42.

 

274              Replies to Q2 – Questionnaire to Customers, q. 50.

275              See Table 11 and Table 15.

276              Replies to Q2 – Questionnaire to Customers, q. 52.

277              Reply to Q2 – Questionnaire to Customers, q. 42.

278              For  example,  the  use  of  R-134/404  will  be banned  under European  legislation  in new refrigeration cabinets from 1 January 2020. See Regulation (EU) No 517/2014 of the European Parliament and of the Council of 16 April 2014 on fluorinated greenhouse gases and repealing Regulation (EC) No 842/2006 Text  with EEA relevance.

279              Replies to Q2 – Questionnaire to Customers, q. 50.

280              Reply to Q2 – Questionnaire to Customers, q. 42.

281              Reply to Q2 – Questionnaire to Customers, q. 50.

282              Reply to Q2 – Questionnaire to Customers, q. 42.

283              Replies to Q2 – Questionnaire to Customers, q. 59.

284              Reply to Q2 – Questionnaire to Customers, q. 56.

285              Reply to Q2 – Questionnaire to Customers, q. 58.

286              Nidec’s internal document dated July 2018,  Doc Id: 1511-70364 (NID00210838).

287              Nidec’s internal document, Doc Id: 1511-075715  (NID00223276),  slide 21.

288              Embraco’s internal document, RFI 3 Annex 38(a)(6),  slide 8.

289              Embraco’s internal document, RFI 3 Annex 38(a)(6),  slide 7.

290              Nidec’s internal document, email  from […]  to […] dated […],  RFI 2 Annex 65.8.

291              Paper regarding Chillventa Trade Fair, submitted on 24 October 2018.

292              Responses  to  RFI  to competitors  – data request and Replies  to Q1 – Questionnaire    to Competitors, q. 44.

293              Replies to Q1 – Questionnaire to Competitors, Replies  to Q2 – Questionnaire to Customers.

294              Replies to Q2 – Questionnaire to Customers, q. 44.

295              Replies to Q2 – Questionnaire to Customers, q. 44.

296              Reply to Q2 – Questionnaire to Customers, q. 50.

297              Reply to Q2 – Questionnaire to Customers, q. 49.

298              Nidec’s internal document dated July 2018,  Doc ID 1511-70364 –(NID00210838).

299              Nidec’s internal document, email  from […]  to […] dated […],  RFI 2 Annex 65.8.

300              Nidec’s internal document dated June 2018,  Doc Id 1511-075715  (NID00223276),  slide 5.

301              Form CO,  paragraph  358  and  Notifying  Party’s estimates of EEA  market  shares for light  co mmercial refrigeration compressors (aggregate across fixed and variable speed) 2018, reply to RFI 22.

302              Reply to Q2 – Questionnaire to Customers, q. 45.

303              Horizontal Merger Guidelines, paragraph 68.

304              Horizontal Merger Guidelines, paragraph 74.

305              Horizontal Merger Guidelines, paragraph 75.

306              Reply to Q2 – Questionnaire to Customers, q. 45.

307              Reply to Q2 – Questionnaire to Customers, q. 45.

308              Replies to Q2 – Questionnaire to Customers. q.45

309              Reply to Q1 – Questionnaire to Competitors, q. 43.

310              Responses  to  RFI  to competitors  – data request and Replies  to Q1 – Questionnaire    to Competitors, q. 44.

311              Replies to Q2 – Questionnaire to Customers, q. 46.

312              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 2 and q. 3.

313              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 2.

314              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 4.

315              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q.6.

316              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 16.

317              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 16.

318              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 16.

319              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 16.

320              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 6.

321              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 7.

322              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 17.

323              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 17.

324              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 17.

325              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 17.

326              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 11.

327              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 11.

328              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 19.

329              Commission's  Notice on Remedies  acceptable under Council Regulation (EC) No  139/2004   and under Commission  Regulation (EC)  No 802/2004  ("Remedies  Notice"), OJ C 267, 22.10.2008,  p. 1.

330              Remedies  Notice, paragraph 5.

331              Remedies  Notice, paragraph 9.

332              Case   C-202/06   P   Cementbouw   Handel   &   Industrie   v   Commission   [2007]   ECR  2007   I-12129, paragraph 54: “it is necessary, when reviewing the proportionality of conditions or obligations which the Commission may, by virtue of Article 8(2) of Regulation No 4064/89, impose on the parties to a concentration, not to determine whether the concentration still has a Community dimension after those conditions or obligations have been complied with, but to be satisfied that those conditions and those obligations are proportionate to and would entirely eliminate the competition problem that has been identified”.

333              Remedies  Notice, paragraphs 9 and 61.

334              Remedies  Notice, paragraph 12.

335              Remedies  Notice, paragraph 9.

336              Remedies  Notice, paragraph 22.

337              Remedies  Notice, paragraphs 23-25.

338              Remedies  Notice, paragraph 32.

339              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 2 and q. 3.

340              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 4.

341              See Nidec’s response to RFI 23 dated 6 February 2019.

342              See Reply to RFI 23, Annex 6b; Reply to follow-up questions to RFI 23 of 4 February 2019,  q. 6.d.

343              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 6.

344              Reply to RFI 23, Annex 6a, and Reply to follow-up questions to RFI 23 of 4 February 2019,  Annex 6.

345              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 9.

346              Reply  to follow-up questions to RFI 23 of 14 February    2019, Annex 1 (file  name “01 - Nidec Austria and Slovakia P&Lwith WET.pdf”).

347              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 8

348              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 6.

349              Remedies  Notice, paragraph 11.

350              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 11.

351              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 11.

352              Final Commitments,  paragraph 19(c).

353              Replies to Questionnaire on Phase II Commitments  offered by Nidec, q. 16.