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In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and other confidential information. The omissions are shown thus […]. Where possible the information omitted has been replaced by ranges of figures or a general description.
Cordes & Graefe KG Altenwall 6 28195 Bremen Germany
Autorité Belge de la Concurrence Belgische Mededingingsautoriteit City Atrium, Vooruitgangstraat 50 1210 Brussels Belgium
Subject: Case M.9970 – CORDES & GRAEFE/FACQ Commission decision following a reasoned submission pursuant to Article 4(4) of Regulation No 139/2004 for referral of the case to Belgium and Article 57 of the Agreement on the European Economic Area.
Date of filing: 13.1.2021 Legal deadline for response of Member States: 3.2.2021 Legal deadline for the Commission decision under Article 4(4): 17.2.2021
1OJ 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 (the ‘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.
2OJ L 1, 3.1.1994, p. 3 (the ‘EEA Agreement’).
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
Dear Sir or Madam,
1.(1) On 13 January 2021, the Commission received by means of a Reasoned Submission a referral request pursuant to Article 4(4) of the Merger Regulation with respect to the acquisition by Cordes & Graefe KG of sole control over the FACQ Group. The parties request the operation to be examined in part by the competent authorities of Belgium.
2.(2) According to Article 4(4) of the Merger Regulation, before a formal notification has been made to the Commission, the parties to the transaction may request that their transaction be referred in whole or in part from the Commission to the Member State where the concentration may significantly affect competition and which present all the characteristics of a distinct market within that Member State.
3.(3) A copy of this Reasoned Submission was transmitted to all Member States on 13 January 2021.
4.(4) By letter of 25 January 2021, the Belgian Competition Authority as the competent authority of Belgium informed the Commission that Belgium agrees with the proposed partial referral.
5.(5) Cordes & Graefe KG (‘Cordes & Graefe’, Germany) is a wholesaler and retailer of sanitary, plumbing, ventilation, heating and air conditioning products, electrical equipment, roofing, excavation and industrial technologies to professional customers. To a lesser extent, it is also active in sales to non-professional customers.
6.(6) The FACQ Group (Belgium) is a retailer of sanitary, plumbing, ventilation, heating and air conditioning products to professional customers. To a lesser extent, it is also active in sales to non-professional customers. The FACQ Group includes (i) FACQ SA; (ii) Immobilière les blés d’or SA; (iii) Immobilière Weideveld SA; and (iv) Renoma SRL.
7.(7) Cordes & Graefe and the FACQ Group are jointly referred to as the ‘Parties’.
8.(8) The transaction involves the acquisition by Cordes & Graefe of […] the FACQ Group (the ‘Proposed Transaction’). Thereby, following the Proposed Transaction, Cordes & Graefe will indirectly solely control the FACQ Group.
9.(9) The Proposed Transaction therefore constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.
10.(10) The Proposed Transaction has a Union dimension within the meaning of Article 1(2) of the Merger Regulation since the undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million (Cordes & Graefe: EUR […]; the FACQ Group: EUR […]). Each of them has a Union-wide turnover in excess of EUR 250 million (Cordes & Graefe: EUR […]; the FACQ Group: EUR […]). While the FACQ Group achieves more than two-thirds of its Union-wide turnover in Belgium, Cordes & Graefe achieves more than two-thirds of its respective Union-wide turnover in a different Member State, i.e., Germany.
11.(11) The Proposed Transaction therefore has Union dimension within the meaning of Article 1(2) of the Merger Regulation.
12.(12) Cordes & Graefe is active in the wholesale and retail supply of sanitary, heating, plumbing, air conditioning/ventilation, electrical equipment, roofing technology, kitchen appliances, and excavation and industrial technology. Additionally, Cordes & Graefe sells the tools that are necessary for the installation and assembly of said building materials. Cordes & Graefe’s customers are almost exclusively professional buyers, such as craftsmen and engineers, and - to a minor extent - also resellers (retailers) and non-professional end customers.
13.(13) The FACQ Group is mainly active in the retail supply of sanitary, heating, plumbing and ventilation products, as well as electrical equipment, kitchen appliances, and the necessary tools for the assembly of said items. These products are mostly sold to professional customers via regional depots and specialised retail stores. To a very minor extent, the FACQ Group also sells directly to end customers.
14.(14) Based on the information submitted in the Reasoned Submission, the Proposed Transaction leads to horizontally affected markets in the retail supply of plumbing, installation, heating, ventilation, air conditioning and sanitary equipment (‘HEPAC’) products to professional customers in Belgium and, to a lesser extent, in Germany and Luxemburg.
15.(15) The Commission has generally considered in its previous decisions that the markets for the distribution of construction materials can be divided into the following sales channels: (i) wholesale to retailers; (ii) retail sale to professional customers; and (iii) retail sale to non-professional customers (primarily via hardware and DIY stores), but has ultimately left the exact product market definition open.
16.(16) For installation products, the Commission has in previous decisions considered a similar distinction between sales channels and further delineations according to the types of products distributed, but has left these questions ultimately open. In particular, the Commission has assessed the distribution of HEPAC separately from the distribution of other building and home improvement products.
17.(17) Within the market for the distribution of HEPAC products in particular, the Commission has also considered a further segmentation according to these three sales channels, ultimately leaving the exact product market definition open.
18.(18) Moreover, within the market for the retail supply of building materials to professional customers, the Commission has further considered separate markets for specialised retailers and generalists, without taking a final view on this aspect of the product market definition.
19.(19) The Parties submit that the distribution of HEPAC products should not be further distinguished according to sub-categories, depending on the individual product group. According to the Parties, HEPAC wholesalers and specialist retailers deal with a vast assortment of products.
20.(20) The Commission has left open in previous decisions whether downstream markets for the distribution of construction materials are to be defined on a national, sub-national (regional) or local level. In previous decisions, the Commission has taken into consideration in its assessment either a possible geographical scope of 40 to 100 km from the point of sale, or the respective administrative districts of the location as a proxy. In other decisions, the Commission has considered local markets as corresponding to the catchment area with a radius of 30 km from a store's location.
21.(21) The Commission has considered in previous decisions that some suppliers adapt their prices to local or regional market conditions and that transportation costs may be a significant factor for competitive pricing. The Commission also noted the practice of the German Federal Cartel Office of considering the delivery radius of HEPAC products to professional customers to be approximately 50 km.
22.(22) The Parties submit that a market definition at national level best reflects the economic reality of the markets for the sale of building products in general, and HEPAC products in particular. In this regard, the Parties submit that Cordes & Graefe and the FACQ Group achieve only negligible cross-border turnover in Belgium or Germany, respectively. The Parties argue that the FACQ Group almost exclusively operates in Belgium, where it achieves […] of its turnover, while Cordes & Graefe operates mainly in Germany. In Luxembourg, the FACQ Group only generates cross-border exports without operating any location there, while Cordes & Graefe, in addition to exporting HEPAC products across the border, also targets professional customers in Luxemburg via its subsidiary Holzhauer SECS, which is located in Luxemburg.
23.(23) According to the Commission Notice on Case Referral in respect of concentrations (the ‘Commission Notice on Case Referrals’), in order for a referral to be made by the Commission to one or more Member States pursuant to Article 4(4), the following two legal requirements must be fulfilled:
a) there must be indications that the concentration may significantly affect competition in a market or markets, and
b) the market(s) in question must be within a Member State and present all the characteristics of a distinct market.
24.(24) Moreover, point 20 of the Commission Notice on Case Referrals provides that concentrations with a Community dimension which are likely to affect competition in markets that have a national or narrower than national scope, and the effects of which are likely to be confined to, or have their main economic impact in, a single Member State, are the most appropriate candidate cases for referral to that Member State. This applies in particular to cases where the impact would occur on a distinct market which does not constitute a substantial part of the common market.
25.(25) Taking into account all the plausible combinations of product and geographic market definitions outlined in Sections 5.1 and 5.2 above, the Proposed Transaction would lead to several affected markets in Belgium for the retail sale of HEPAC products and its sub-categories (namely sanitary, plumbing, heating and air conditioning/ventilation equipment) to professional customers at the levels of the agglomeration of Brussels, Wallonia, the province of Liège and the German-speaking community of Belgium. Table 1 below provides an overview of the potentially affected local markets in Belgium, based on the Parties’ estimates.
14Case report to BKartA B5-63/10 Cordes & Graefe KG/Gottschall & Sohn KG, decision of 13 August 2010.
15Reasoned Submission, paragraph 52.
16OJ L 24, 29.1.2004, p. 1.
17Further developed in point 17 of the Commission Notice on Case Referrals.
18Further developed in point 18 of the Commission Notice on Case Referrals.
Transaction from being partially referred to Belgium, as the legal conditions set forth by Article 4(4) of the Merger Regulation are met.
30.(30) In addition to the verification of the legal requirements, point 19 of the Commission Notice on Case Referrals provides that it should also be considered whether referral of the case is appropriate, and in particular whether the competition authority or authorities to which they are contemplating requesting the referral of the case is the most appropriate authority for dealing with the case.
31.(31) In addition, point 23 of the Commission Notice on Case Referrals states that consideration should also, to the extent possible, be given to whether the NCA(s) to which referral of the case is contemplated may possess specific expertise concerning local markets, or be examining, or about to examine, another transaction in the sector concerned.
32.(32) First, most of the effects of the Proposed Transaction are likely to be confined to Belgium and, in light of the information submitted in the Reasoned Submission, will have their main economic impact in Belgium. Therefore, the Belgian Competition Authority is well placed to examine the case.
33.(33) Second, the Belgian Competition Authority has considerable experience assessing competition in the retail sector in its own territory and, as a result, has substantial experience and expertise in examining the markets in question. Therefore, the Belgian Competition Authority is well placed to assess the impact of the Proposed Transaction on competition in Belgium in the markets in question.
34.(34) In light of paragraphs (23) to (33) above, and on the basis of the information provided by the Parties in the Reasoned Submission, the case meets the legal requirements set out in Article 4(4) of the Merger Regulation in that the concentration may significantly affect competition in a market(s) within a Member State which presents all the characteristics of a distinct market.
35.(35) Moreover, the requested partial referral would be consistent with points 19 and 23 of the Commission Notice on Case Referrals, in particular because the Belgian Competition Authority appears to be the most appropriate authority to assess the impact of the Proposed Transaction on the affected markets in Belgium.
19Among others, see Decision of 12 February 2020 in case ABC-2020-C/C-09 – Kuwait Petroleum (Belgium) NV/Uhoda (retail sale of fuel through service station networks); Decision of 12 November 2018 in case ABC-2019-C/C-40 – Boulanger/HTM – Krëfel (retail sale of household appliances); Decision of 10 July 2018 in case BMA-2018-C/C-23 – Intergamma Holding B.V./VNG Bouwmarkten (retail sale of DIY products); Decision of 11 January 2018 in case ABC-2018-C/C-02 – D'Ieteren/Groupe Rietje (retail sale of vehicles); Decision of 20 April 2017 in case ABC-2017-CC-13 – McKesson/Belmedis et autres (retail sale of pharmaceutical products).
36.(36) For the above reasons, and given that Belgium has expressed its agreement with respect to the partial referral of the Proposed Transaction, the Commission has decided to refer the Proposed Transaction in part to Belgium, to be examined by its competent authorities in so far as the Proposed Transaction concerns Belgium.
37.(37) The European Commission will retain jurisdiction over the merger control assessment of the Proposed Transaction in relation to Germany and Luxembourg.
38.(38) This decision is adopted in application of Article 4(4) of the Merger Regulation and Article 57 of the EEA Agreement.
For the Commission
(Signed) Olivier GUERSENT Director-General
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