EUROPEAN COMMISSION DG Competition

Only the English text is available and authentic.

REGULATION (EC) No 139/2004 MERGER PROCEDURE

Article 6(1)(b) NON-OPPOSITION Date: 22/10/2021

In electronic form on the EUR-Lex website under document number 32021M10247

EUROPEAN COMMISSION

Brussels, 22.10.2021 C(2021) 7708 final

PUBLIC VERSION

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 Where possible the information omitted has been replaced by ranges of figures or a general description.

CVC Capital Partners SICAV-FIS S.A. 20 Avenue Monterey L-2163 Luxembourg Luxembourg

Subject: Case M. 10247 – CVC/Cooper Commission decision pursuant to Article 6(1)(b) of Council Regulation 1 No 139/2004and Article 57 of the Agreement on the European Economic 2Area

Dear Sir or Madam,

1.(1) On 17 September 2021, the Commission received notification of a proposed concentration pursuant to Article 4 of the Merger Regulation , by which CVC Capital Partners SICAV-FIS S.A. (“CVC”, Luxembourg or the “Notifying Party”) acquires within the meaning of Article 3(1)(b) of the Merger Regulation sole control of the whole of Cooper Consumer Health S.A.S. and its subsidiaries (“Cooper”, 3France or the “Target”) (the “Transaction”), by way of purchase of securities. Together, CVC and Cooper are referred to as the “Parties”.

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 (‘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’).

3Publication in the Official Journal of the European Union No C 392, 28.09.2021, p. 5.

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.

1. THE PARTIES

2.(2) CVC and/or its subsidiaries manage investment funds and platforms. CVC controls a number of companies, including companies in the pharmaceutical sector, e.g., Recordati; Genetic; and Theramex, as well as in the private hospital and clinics (Hellenic health Care Group and Mehiläinen), nursing homes (Vitalia), provision of specialised medical equipment (Sebia), flexible packaging (AR Packaging) and packaging machinery (Syntegon) sectors.

3.(3) Cooper and its subsidiaries develop, produce, and market pharmaceuticals, which are typically sold over the counter (“OTC”).

2. THE OPERATION AND THE CONCENTRATION

4.(4) Pursuant to a Put Option Agreement, dated 10 March 2021, and a Securities Purchase Agreement, dated 5 May 2021, CVC plans to acquire control over Cooper through a special purpose vehicle. Post-Transaction, CVC will hold [60-70]% of the Target’s share capital. As a result, CVC will acquire sole control over Cooper. The Transaction constitutes a concentration under Article 3(1)(b) EUMR.

3. UNION DIMENSION

5.(5) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million. Each of them has a Union-wide turnover in excess of EUR 250 million, but they do not achieve more than two-thirds of their aggregate Union-wide turnover within one and the same Member State. The notified operation therefore has a Union dimension.

4. ASSESSMENT

4.1. Horizontal overlaps

6.(6) Both Parties are active in the development, manufacture, and commercialisation of finished dose pharmaceuticals (“FDPs”). FDPs are pharmaceutical products that have undergone all stages of production, including packaging in the final container and labelling.

4.1.1. Market Definitions

4.1.1.1. Product market definitions

(7) To define relevant product markets regarding FDPs, the Commission typically takes into account the Anatomical Therapeutic Classification (“ATC”) of the European Pharmaceutical Marketing Research Association. In the context of this classification, FDPs are grouped by therapeutic indications. The Commission

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

5ATC3 level classification is narrower than ATC1 and ATC2 level classifications. At ATC1, drugs are divided into 16 anatomical main groups. At ATC2, drugs are divided at pharmacological or therapeutic groups.

uses ATC3 as the starting point for relevant product market definition, since all products in the same ATC3 class generally have the same therapeutic indication and cannot be substituted by products from other ATC3 classes. However, the Commission also recognised that it may be appropriate to carry out analyses at the narrower classification level ATC4, or possibly at the level of molecule. ATC classification concerns prescription-bound (Rx) and OTC-sold drugs. For OTC-sold drugs, IQVIA also administers the Consumer Health Classification (“CHC”). With respect to OTC-sold drugs, the Commission typically uses CHC3 level (the equivalent of ATC3) as a starting point for relevant product market definition but narrower delineations are also considered (e.g., at CHC4 level (the equivalent of ATC4) or by molecule).

(8) For the purposes of the present Decision, it is not necessary to depart from the above approach, that is to define the markets for FDPs either at ATC3/CHC3, ATC4/CHC4 or molecule levels. The market investigation did not provide any indications that would require the Commission to depart from its previous decisional practice with respect to the product market definition for FDPs concerning the FDP categories in which the Parties overlap.

(A) Methodology for the identification and the assessment of affected markets

9.(9) To identify the affected markets that the Transaction gives rise to in relation to FDPs, the Notifying Party used IQVIA data (previously known as IMS). These are data on sales in value and volume of FDPs compiled by IQVIA, a third-party intelligence provider focusing on the healthcare sector.

(10) As will be further discussed further below in the present Decision (paragraphs (41) to (43), the Commission consistently defines relevant markets at national level.

(11) In line with Commission precedents in pharmaceutical mergers with a large number of affected markets (involving numerous product and geographic markets), the Commission has applied a system of filters aimed at determining the group of markets where concerns are most likely and on which it focuses its analysis. Based on the Commission’s decisional practice in the pharmaceutical sector, horizontally affected markets regarding FDPs can be grouped in the categories summarized in

(12) etc. for the treatment of haemorrhoids and anal fissures. Preparations used for treatment of perineal trauma are also classified here.

(16) The Commission has in the past left open the questions of either whether ATC3 class was the appropriate level to define the relevant product market for antihaemorrhoids (as opposed to the ATC4 class), or whether prescription and non prescription- products should be seen as belonging to the same market. The Commission has not assessed antihaemorrhoids in the past based on their CHC3 or CHC4 classification.

(17) As explained above, the Commission consistently defines the market for FDPs looking at both the ATC3/CHC3 level and at ATC4/CHC4 level. Also in this case, both ATC3 class C5A, CHC3 code 10A1 and CHC4 code 10A1O constitute plausible relevant product markets.

(18) In the present case, the Notifying Party considers that the precise product market definition can be left open because the Transaction does not give rise to competition concerns under any plausible product market definition (including under the narrowest plausible market definition where the Parties’ activities overlap, namely at CHC4 level – Antihaemorrhoids – Ointments / Creams).

(19) The Commission’s market investigation did not provide conclusive evidence regarding the question whether the relevant product market should be defined at ATC3/CHC3 level (including all types of antihaemorrhoids) or at ATC4/CHC4 level (including only antihaemorrhoidal ointments and creams). For the purposes of this decision, the product market definition for antihaemorrhoids can be left open, as the Transaction does not give rise to serious doubts as to its compatibility with the internal market or the functioning of the EEA agreement even in the narrowest plausible market where the Parties’ activities overlap (i.e., antihaemorrhoidal ointments and creams at CHC4 level).

(C.ii) Sore throat remedies

(20) In the past, the Commission considered a relevant market for sore throat remedies at ATC3 level (R2A) but eventually left open the issue of product market definition. The Commission has not assessed sore throat remedies in the past based on their CHC3 or CHC4 classification.

(21) In the present case, the Notifying Party considers that the precise product market definition could be left open because the Transaction does not give rise to competition concerns under any plausible product market definition (including under the narrowest plausible market definition where the Parties’ activities overlap, namely at CHC4 level – sore throat remedies in the form of aerosols and sprays).

22(22) The Commission’s market investigation did not provide conclusive evidence regarding the question whether the relevant product market should be defined at ATC3/CHC3 level (including all types of sore throat remedies) or at ATC4/CHC4 level (including only aerosols and sprays). For the purposes of this decision, the product market definition for sore throat remedies can be left open, as the Transaction does not give rise to serious doubts as to its compatibility with the internal market or the functioning of the EEA agreement even in the narrowest plausible market where the Parties’ activities overlap (i.e., sore throat remedies in form of aerosols or sprays at CHC4 level).

(C.iii) Mouth pain relief products

23(23) In the past, the Commission considered that there are two separate product markets for mouth pain relief products. Namely (i) a market for adult mouth pain relief products that covers products classified under ATC4 class A1A2 excluding mouthwashes (i.e. antiseptics and anti-infectives) and products classified under ATC4 class A1A3 (i.e. anti-inflammatories and analgesics), and (ii) a market for paediatric mouth pain relief products that covers products classified under ATC4 class A1A2 excluding mouthwashes (i.e. antiseptics and anti-infectives) and products classified under ATC4 class A1A3 (i.e. anti-inflammatories and analgesics).

24(24) The Commission has not assessed mouth pain relief products in the past based on their CHC3 or CHC4 classification.

25(25) The Notifying Party does not contest the Commission’s general approach to the product market definition for FDPs. However, it submits that in markets where the Parties’ activities overlap, the competition takes place at ATC3 level.

26(26) The Commission’s market investigation did not provide any indication on whether the relevant product market should be defined at ATC3/CHC3 level (including all types of mouth pain relief products) or at ATC4/CHC4 level (including only liquids). For the purposes of this decision, the product market definition for mouth pain relief products can be left open, as the Transaction does not give rise to serious doubts as to its compatibility with the internal market or the functioning of the EEA agreement even in the narrowest plausible market where the Parties’ activities overlap (i.e., mouth pain relief in the form of liquids at CHC4 level).

(C.iv) Ear care products

27(27) The Parties’ ear care products that give rise to affected markets belong to the CHC3 code 08A1 – Ear Care and CHC4 code 08A1Z – Ear Care in other forms. The Commission has not previously considered the markets for ear care products belonging to these categories. As explained above, the Commission consistently defines market for FDPs based on both the CHC3 level and at CHC4 level, and therefore both CHC3 code 08A1 and CHC4 code 08A1Z constitute plausible relevant product markets.

28(28) The CHC4 code 08A1Z, however, is a catch-all category that includes any products that cannot be included in other CHC4 codes within the CHC3 code 08A1, instead of combining products with similar properties. With respect to other catch-all pharmaceutical classes, the Commission has previously considered that these do not form an appropriate basis for defining the relevant product markets.

29(29) The Notifying Party does not contest the Commission’s general approach to the product market definition for FDPs. However, it submits that in markets where the Parties’ activities overlap, the competition takes place at ATC3 level. With respect to CHC4 code 08A1Z specifically, the Notifying Party notes that the category does not represent the actual market conditions given its catch-all nature.

30(30) The investigation did not provide any indication on whether CHC4 code 08A1Z – Ear Care in other forms could constitute a separate relevant product market.

31(31) For the purposes of this decision, the exact product market definition for ear care products can be left open since the Transaction does not give rise to serious doubts as to its compatibility with the internal market or the functioning of the EEA agreement even under the narrowest plausible market defined at the CHC4 code 08A1Z – Ear Care products in other forms.

(C.v) Antitussives (in combination)

32(32) ATC4 class R5D2 includes antitussives (which relieve coughs by blocking the cough reflex, and are most effective at relieving dry coughs, also known as cough suppressants) in combinations with expectorants, antihistamines, ephedrine, herbal tinctures, etc. ATC3 class R5D includes all antitussives.

33(33) The Commission has not previously considered the markets for antitussives belonging to these categories. As explained above, the Commission consistently defines market for FDPs based on both the ATC3 level and at ATC4 level, and therefore both ATC3 code R5D and ATC4 code R5D2 constitute plausible relevant product markets.

34(34) The investigation did not provide any indication on whether the relevant product market could be defined either at ATC3 class R5D or ATC4 class R5D2.

35(35) In the present case, the Notifying Party considers that the precise product market definition for antitussives could be left open because the Transaction does not give rise to competition concerns under any plausible product market definition (namely the narrowest plausible market definition where the Parties’ activities overlap, ATC4 class R5D2).

(C.vi) Intestinal anti-infective anti-diarrhoeals

36(36) Intestinal anti-infective anti-diarrhoeals are used for disinfection and stabilisation of the intestinal microflora and for treatment of acute diarrhoeal diseases. They can be based on different molecules, including nifuroxazide, colistin, fidacomicin, and rifaximin.

37(37) In Sanofi-Aventis/Zentiva, the Commission considered a relevant market for intestinal anti-infective anti-diarrhoeals at ATC3 level (A7A) but eventually left open the issue of relevant market definition. The Commission has not assessed intestinal anti-infective anti-diarrhoeals at molecule level in the past.

38(38) In the present case, the Notifying Party considers that the precise product market definition could be left open because the Transaction does not give rise to competition concerns under any plausible product market definition (including under the narrowest plausible market definition where the Parties’ activities overlap, namely at molecule level – nifuroxazide-based intestinal anti-infective anti-diarrhoeals).

39(39) The investigation did not provide any indication on whether the ATC3 class A7A could be considered a distinct product market.

40(40) For the purposes of this decision, the product market definition for intestinal anti-infective anti-diarrhoeals can be left open, as the Transaction does not give rise to serious doubts as to its compatibility with the internal market or the functioning of the EEA agreement even in the narrowest plausible market where the Parties’ activities overlap (i.e., at molecule level for nifuroxazide-based products).

4.1.1.2. Geographic market definitions

41(41) For FDPs, the Commission consistently defines relevant markets at national level.

42(42) The market investigation did not provide any indications that would require the Commission to depart from its previous decisional practice on the geographic scope of the different plausible markets for FDPs.

43(43) Therefore, for the purposes of this decision, the Commission considers the geographic scope of the different plausible markets for FDPs, including all of the Group1/1+ markets, Group 2 and Group 3 to be national in scope.

4.1.2. Legal framework

44(44) Article 2 of the Merger Regulation requires the Commission to examine whether notified concentrations are compatible with the internal market, by assessing whether they would significantly impede effective competition in the internal market or in a substantial part of it, in particular as a result of the creation or strengthening of a dominant position.

45(45) A merger giving rise to a significant impediment of effective competition may do so as a result of the creation or strengthening of a dominant position in the relevant market(s). Moreover, mergers in oligopolistic markets involving the elimination of the important competitive constraints that the parties previously exerted on each other, together with a reduction of competitive pressure on the remaining competitors, may also result in a significant impediment to effective competition, even in the absence of dominance.

46(46) The Commission Guidelines on the assessment of horizontal mergers under the Merger Regulation (the “Horizontal Merger Guidelines”) describe horizontal non-coordinated effects as follows: “A merger may significantly impede effective competition in a market by removing important competitive constraints on one or more sellers who consequently have increased market power. The most direct effect of the merger will be the loss of competition between the merging firms. For example, if prior to the merger one of the merging firms had raised its price, it would have lost some sales to the other merging firm. The merger removes this particular constraint. Non-merging firms in the same market can also benefit from the reduction of competitive pressure that results from the merger, since the merging firms’ price increase may switch some demand to the rival firms, which, in turn, may find it profitable to increase their prices. The reduction in these competitive constraints could lead to significant price increases in the relevant market.”

47(47) The Horizontal Merger Guidelines list a number of factors which may influence whether or not significant non-coordinated effects are likely to result from a merger, such as large market shares of the merging firms, the fact that the merging firms are close competitors, the limited possibilities for customers to switch suppliers, or the fact that the merger would eliminate an important competitive force. That list of factors applies equally regardless of whether a merger would create or strengthen a dominant position, or would otherwise significantly impede effective competition due to non-coordinated effects. Furthermore, not all of these factors need to be present for significant non-coordinated effects to be likely. The list of factors, each of which is not necessarily decisive in its own right, is also not an exhaustive list.

48(48) Finally, the Horizontal Merger Guidelines describe a number of factors, which could counteract the harmful effects of the merger on competition, including the likelihood of buyer power, the entry of new competitors on the market, and efficiencies.

4.1.3. Competitive assessment of group 2 and 3 markets

49(49) For all of the Group 2 and Group 3 markets, the market shares of the Parties are limited, and significant competitors that will likely sufficiently constrain the merged entity remain on the market post-Transaction and/or the Transaction brings about only a limited increment. In addition, the market investigation did not reveal any concerns in relation to any of the Group 2 and 3 markets.

OJ C 31, 5.2.2004, p. 5.

Horizontal Merger Guidelines, paragraph 24.

Horizontal Merger Guidelines, paragraphs 27 and following.

Horizontal Merger Guidelines, paragraphs 24-38.

50(50) The Commission assessed the competitive situation on these markets analysing the nature and the number of existing competitors and considered that the Transaction does not raise serious doubts as to its compatibility with the internal market or the functioning of the EEA agreement as a result of a horizontal effects in any of those markets. Consequently, in line with previous decisions Group 2 and Group 3 overlaps will not be assessed any further in the present Decision.

4.1.4. Competitive assessment of group 1 and 1+ markets

4.1.4.1. Antihaemorrhoids in Italy and in Romania

51(51) At each of the ATC3 class C5A (topical antihaemorrhoidals) and CHC3 code 10A1 (antihaemorrhoids), the Parties activities result in a Group 1/1+ affected market in Italy, while in the CHC4 code 10A1O (antihaemorrhoids - ointments and creams) the Parties activities result in a Group 1/1+ affected market in Italy and Romania.

(A) ATC3 level C5A (topical antihaemorrhoidals) in Italy

52(52) Recordati sells Proctolyn (based on fluocinolone acetonide and ketocaine), while Cooper sells Ruscoroid (based on ruscogenins and tetracaine) in Italy.

53(53) The Notifying Party submits that the Transaction does not give rise to competition concerns in topical antihaemorrhoidals in Italy, because the Parties’ products do not compete closely, given their different active ingredients and the combined entity would face vigorous competition in this market.

54(54) Tables 4 below show the market shares of the Parties and their main rivals in the market for topical antihaemorrhoidals in Italy in the last three years, in value and in volume.

See M.8974 – Procter & Gamble / Merck Consumer Health Business, para. 25.

55(55) In 2020, the combined share of the Parties in the market for topical antihaemorrhoidals in Italy was [40-50]% in value and [40-50]% in volume (with an increment of [5-10]% in value and [5-10]% in volume contributed by Cooper). There are four competitors with market shares in value and volume higher than the increment brought by the Transaction.

56(56) In this market, the Transaction is unlikely to give rise to serious doubts as to its compatibility with the internal market or the functioning of the EEA agreement for the following reasons:

(a) Post-Transaction, in the market for topical antihaemorrhoidals in Italy, the combined entity would face competitive constraints from several rivals. According to IQVIA, in 2020, there were around 12 competitors active in this market. These rivals include Bayer, Neopharmed Gentili, Glaxosmithkline and Alfasigma, each holding shares at, or above 10% (both in value and in volume) in 2020. The results of the market investigation confirm this. All respondents (competitors and customers) replied that post-Transaction a sufficient number of suppliers will continue offering topical antihaemorrhoidals in Italy.

(b) There is no evidence that the products of the Parties in this market compete closely with each other, since they are not close substitutes. Proctolyn and Ruscoroid are based on different active ingredients and Proctolyn contains corticosteroids, while Ruscoroid does not. Products with corticosteroids may lead to severe side effects, consequently, anti-haemorrhoidals with corticosteroids are preferably used to treat acute and severe haemorroids due to a strong anti-inflammatory action for a short period of no longer than seven days, while anti-haemorroidals without corticosteroids can be used for milder symptoms and possibly for a longer period as a maintenance therapy since they have a weaker anti-inflammatory action. The results of the market investigation confirmed to a certain extent that Proctolyn and Ruscoroid are not each others’ closest competitor.

(c) Finally, the market investigation did not reveal any concerns in relation to topical antihaemorrhoidals in Italy.

57(57) In light of the above considerations, the Commission concludes that the Transaction does not raise serious doubts as to its compatibility with the internal market or the functioning of the EEA agreement as a result of a horizontal effects in the market for topical antihaemorrhoidals in Italy.

(B) CHC3 code 10A1 (antihaemorrhoids) and CHC4 code 10A1O (antihaemorrhoids - ointments and creams) in Italy

58(58) Recordati sells Proctolyn in the forms of cream and suppositories, and Proctolyn Integra Plus, a food supplement sold in the form of sachets. Cooper sells Ruscoroid in the form of cream, Ruscoroid Forte, a food supplement in sachet form, Vasostar, which comes in the form of a cream and used to treat internal and external haemorrhoids and Micro H in the form of a gel or wipes, producing a calming effect that reduces haemorrhoidal problems.

59(59) While the products contain some of the same active substances, each product also contain further substances with different mechanisms of action to achieve the desired effect.

60(60) The Notifying Party submits that the Transaction does not give rise to competition concerns either in antihaemorrhoids, or in antihaemorrhoidal ointments and creams in Italy, because the Parties’ products do not compete closely, given their different active ingredients and the combined entity would face vigorous competition in this market.

61(61) Tables 6 and 7 below show the market shares of the Parties and their main rivals in the market for antihaemorrhoids in Italy in the last three years in value and in volume.

Micro H is exiting the market as a result of commercial decisions by Cooper. See Form CO, paragraph 281.

See Form CO, paragraph 289.

62(62) The results of the market investigation confirmed to a certain extent that the Parties’ products are not each others’ closest competitor.

(c) Finally, the market investigation did not reveal any concerns in relation to antihaemorrhoids and antihaemorrhoidal creams and ointments in Italy.

66(66) In light of the above considerations, the Commission concludes that the Transaction does not raise serious doubts as to its compatibility with the internal market or the functioning of the EEA agreement as a result of a horizontal effects in the markets for antihaemorrhoids and in the market for antihaemorrhoidal creams and ointments in Italy.

(C) CHC4 level 10A1O (antihaemorrhoids - ointments and creams) in Romania

67(67) Recordati sells Procto Glyvenol in the form of an ointment. Cooper has sold its Micro H (in form of a gel) in an one-off sale.

68(68) The Notifying Party submits that the Transaction does not give rise to competition concerns in antihaemorrhoidal ointments and creams in Romania, because the Parties’ products do not compete closely, given their different active ingredients and the combined entity would face vigorous competition in this market.

69(69) Tables 10 and 11 below show the market shares of the Parties and their main rivals in the market for antihaemorrhoids - ointments and creams in Romania in the last three years, in value and in volume.

At ATC3/CHC3 level (10A1), the Parties’ market shares result in a Group 3 affected market in Romania.

The Notifying Party submits that this was truly marginal in absolute terms ([…]). See Form CO, paragraph 318. Moreover, the Notifying Party recalls that Micro H is exiting the market, see footnote 43.

63(63) (with an increment of [10-20]% contributed by Cooper). In this market, the Transaction is unlikely to give rise to serious doubts as to its compatibility with the internal market or the functioning of the EEA agreement for the following reasons:

(a) Post-Transaction, in the market for sore throat remedies in the form of aerosols/sprays in France, the combined entity would face competitive constraints from several rivals. According to IQVIA, in 2020, there were more than 60 competitors active in this market. These rivals include Procter & Gamble; Urgo; and Pfizer, each holding shares above 5% in 2020. The results of the market investigation confirm this. All respondents (competitors and customers) replied that post-Transaction a sufficient number of suppliers will continue offering sore throat remedies in the form of aerosols and sprays in France.

(b) There is no evidence that the products of the Parties in this market compete closely with each other. Colludol and Hexaspray have different therapeutic effects. Hexaspray has antibacterial and antiseptic action. Colludol has antiseptic action but also includes lidocaine and thus works as an anaesthetic for the sore throat. Colludol competes more closely with Procter & Gamble’s and Urgo’s products (which contain lidocaine and have anaesthetic action) than with Hexaspray.

The results of the market investigation confirm this. None of the respondents (competitors and customers) identified Hexaspray as the closest competing product for Colludol. The vast majority of the respondents did not identify Hexaspray among the three closest competitors to Colludol nor Colludol among the three closest competitors to Hexaspray.

(c) Sore throat remedies are also available in forms other than aerosols/sprays, e.g., as lozenges or syrups. While lozenges and syrups are not part of the relevant market which is affected by the concentration (01C1A – Sore throat Remedies – Aerosols/Sprays), they could still exert competitive constraints over the combined entity post-Transaction.

The results of the market investigation confirm this. The majority of competitors stated that consumers consider substitutable (at least to some

By volume, Cooper held a share of [0-5]% and CVC held a share of [0-5]%. This discrepancy between value- and volume-based market shares exists because IQVIA does not properly convert “actual units” of competitor products to “standard units” (which it does for the Parties’ products).

Replies to Questionnaire Q1, question 12 and Questionnaire Q2, question 10.

Clariver and Hexaspray also do not compete closely. Clariver is based on natural ingredients while Hexaspray includes active pharmaceutical ingredients. In the market investigation, none of the respondents identified Clariver as a product competing closely with Hexaspray (Replies to Questionnaire Q1, question 8 and Replies to Questionnaire Q2, question 6).

Replies to Questionnaire Q1, question 8 and Questionnaire Q2, question 6.

Replies to Questionnaire Q1, question 8 and Questionnaire Q2, question 6.

Form CO, Annex 7.4-XI – Target’s Document (Part 1) on Colludol_Hexaspray, page 30.

Form CO, Annex 7.4-XI – Target’s Document (Part 1) on Colludol_Hexaspray, page 30.

Form CO, footnote 161.

extent) sore throat remedies in aerosols/sprays and sore throat remedies in other forms.

In its internal documents, Recordati […]”

(d) The market investigation did not reveal any substantiated concerns in relation to sore throat remedies in the form of aerosols/sprays in France.

77(77) In light of the above considerations, the Commission concludes that the Transaction does not raise serious doubts as to its compatibility with the internal market or the functioning of the EEA agreement as a result of a horizontal effects in the market for sore throat remedies in the form of aerosols/sprays in France.

4.1.4.3. Mouth pain relief liquids in France

78(78) The Parties’ activities in this product category in France give rise to a Group 1/1+ horizontally affected market only at CHC4 level (02D1L – Mouth Pain Relief – Liquids (Topical)).

79(79) Cooper markets products under the brand names Hyalugel and Dentobaume. Hyalugel is a mouthwash based on hyaluronic acid used to treat irritant conditions of the gums (e.g. inflammation of the gums, bleeding, receding gums) or traumatic conditions of the gums (e.g. due to cleaning, abrasion, extraction of teeth). As such, Hyalugel is recommended by dentists and practitioners as part of healing treatments. Dentobaume is a local anaesthetic indicated for the treatment of acute gingivodental pain. The product is liquid is and applied by a soaked pad directly on the painful gum or tooth. In 2020, Dentobaume represented [60-70]% of Cooper’s sales in this market.

80(80) Recordati markets Aphtavea, a mouthwash based on hyaluronic acid and aloe vera to treat mouth ulcers and mouth injury. Aphtavea provides a protective mechanical barrier over aphthous ulcers or oral lesions, isolating it from potential external influences, such as food particles or hot liquids.

81(81) The Notifying Party submits that the Transaction does not give rise to competition concerns in mouth pain relief products in the form of liquids because the Parties’ products are not close competitors, the Parties will continually consider their competitors and there is vibrant competition with recent entrants.

Replies to Questionnaire Q1, question 11.

Form CO, Annex 7.4-XV-1 – Recordati’s additional ordinary course documents prepared in 2019 and 2020, page 2.

(d) The market investigation did not reveal any concerns in relation to mouth pain relief products in the form of liquids in France.

85(85) In light of the above considerations, the Commission concludes that the Transaction does not raise serious doubts as to its compatibility with the internal market or the functioning of the EEA agreement as a result of horizontal effects in the market for mouth pain relief products in the form of liquids in France.

4.1.4.4. Ear care products in Spain

86(86) The Parties’ activities in this product category in Spain give rise to a Group 1/1+ horizontally affected market only at CHC4 level (08A1Z – Ear Care – Other Forms).

(c) Again, even if the Parties were to compete in this market, Post-Transaction, the combined entity would continue facing competitive constraints from several competitors with shares higher than that of CVC Recordati. These include Faes Farma ([20-30]% in value and [10-20]% in volume in 2020), Perrigo ([10-20]% in value and [10-20]% in volume) and M4 Pharma ([10-20]% in value and [5-10]% in volume).

(d) The market investigation did not reveal any concerns in relation to ear care products in other forms in Spain.

92(92) In light of the above considerations, the Commission concludes that the Transaction does not raise serious doubts as to its compatibility with the internal market or the functioning of the EEA agreement as a result of horizontal effects in the market for ear care products in other forms in Spain.

4.1.4.5. Antitussives (in combination) in Luxembourg

90(90) Antitussives(also known as cough suppressants), relieve coughs by blocking the cough reflex, and are most effective at relieving dry coughs. The ATC4 class R5D2, the only class where the Parties’ activities in antitussives give rise to an affected market, includes antitussives in combinations with expectorants, antihistamines, ephedrine, herbal tinctures, etc.

94(94) Coopers' Pholco Mereprine is an OTC medicine used for antitussive effect. It is a syrup intended to suppress dry coughs and irritable coughs. Recordati's Neo-Codion is a cough suppressant, i.e. used as a treatment that stops the cough reflex. It is used to treat dry coughs for adults and children. It is sold both in Rx and OTC variants.

95(95) Tables 16 and 17 below show the market shares of the Parties and their main rivals in the market for antitussives in Luxembourg in the last three years, in value and in volume.

Replies to Questionnaire Q1, questions 15-16 ; to Questionnaire Q2, questions 12-13; to Questionnaire Q3, questions 17-18 ; to Questionnaire Q4, questions 13-14 ; to Questionnaire Q5, questions 12-13.

96(96) In 2020, the combined share of the Parties in the market for antitussives in combination in Luxembourg was [90-100]% in value and [90-100]% in volume (with an increment of [0-5]% both in value and in volume contributed by Cooper).

97(97) The Notifying Party submits that these combined shares do not appear to reflect the current competitive dynamics within the market segment R5D2, because regulatory changes stemming from the Belgian legislation which are expected to be followed by Luxembourg, ban the combination syrups as of January 2020. As a result, during 2020, Pholco-Mereprine has been withdrawn from the market and is no longer marketed in the EEA. Its replacement, Pholco Mereprine Mono is not part of the ATC4 class R5D2, but of R5D1. Thus, the overlap in the ATC4 class R5D2 is only historical and will not persist in the future. Additionally, one of the largest market participants, Klosterfrau, is no longer included in the IQVIA data set in the R5D2 class for 2020, while it had market shares of more than approximately [20-30]% in the previous years. Finally, the Notifying Party notes that the overall sales in this market decreased by around [70-80]%, further proof that other players also had fewer sales.

98(98) Moreover, the Notifying Party underlines that the two do not contain the same molecules and can also be distinguished based on the different forms in which they are marketed and used. Vemedia's Pholco Mereprine is sold in the form of a syrup, while Recordati's Neo-Codion is sold either in the form of a tablet or in the form of a syrup.

99(99) The Commission takes note that the regulatory changes discussed above, make that the Parties no longer overlap in ATC4 class R5D2. Vermedia has replaced Pholco Mereprine by Pholco Mereprine Mono, based on the molecule pholcodine (which is not contained in Recordati's Neo-Codion). Therefore, there is no overlap at the molecule level.

100(100) The Commission also notes that in ATC3 class R5D (including both Neo-Codion’s R5D2 and Pholco Mereprine’s Mono R5D1), combined market shares would be below [20-30]%.

101Finally, the market investigation did not reveal any concerns in relation to antitussives, in combination in Luxembourg.

Decision of the Federal Agency for Medicines and Health Products ("FAMHP") of Belgium of January 2020.

See Form CO paragraph 340 and Annex 7.4-VII

According to the Notifying Party, Klosterfrau was active on the Luxemburg market with a combined product named "Toplexil", but this product was withdrawn on 1 Jan 2020 and has not been replaced by an alternative, see Form CO, footnote 156.

Vemedia's Pholco Mereprine has been a combined syrup based (until May 2020), on the following ingredients benzoic acid, doxylamine, pholcodine and sulfogaiacol. On the other hand, Recordati's Neo-Codion, is based on ascorbic acid, bromoform, codeine, benzoic acid, bromine, adiantum capillus veneris, drosera rotundifolia, grindelia robusta, papaver rhoeas, polygala senega, senna, sulfogaiacol and thymus serpyllum. Therefore the Parties' products are considered antitussives in combinations (R5D2) rather than plain antitussives (R5D1) have only two molecules in common (sulfogaiacol, an expectorant, and benzoic acid, a preservative). See Form CO paragraph 339.

See Form CO paragraph 341 and footnote 148.

Replies to Questionnaire Q1, questions 15-16 ; to Questionnaire Q2, questions 12-13; to Questionnaire Q3, questions 17-18 ; to Questionnaire Q4, questions 13-14 ; and to Questionnaire Q5, questions 12-13.

111The market investigation did not provide any indications that would require the Commission to depart from its previous decisional practice with respect to the product market definition for FDPs that are vertically affected.

112The precise delineation of the FDP market(s) that are vertically affected by the Transaction can be left open because no competition concerns arise under any plausible relevant market definition.

Geographic market definition

113As explained above, the Commission consistently defines the different plausible markets for FDPs as national in scope.

114The market investigation did not provide any indications that would require the Commission to depart from its previous decisional practice on the geographic scope of the different plausible markets for FDPs that are vertically affected.

115Therefore, for the purposes of this decision, the Commission considers the geographic scope of the different plausible markets for FDPs to be national in scope.

4.2.2.2. Flexible packaging for pharmaceuticals

Product market definition

Previously the Commission described the production of flexible packaging as the manufacture, supply and conversion of plastic and cellulose films, aluminium foils and papers into reels of packaging.

The Commission previously considered that flexible packaging could be segmented by distinguishing the end-use of the packaging. That is, distinct product markets exist for flexible packaging for: (i) food, (ii) medical supplies, (iii) pharmaceuticals, (iv) household products, and (v) other non-food.

With respect to flexible packaging for pharmaceuticals, the Commission has previously considered a narrower segmentation into (a) laminated sachets, (b) coldform blister bases, (c) plastic-based blister bases and (d) blister lidding, but ultimately left the product market definition open.

The Notifying Party submits that there is a high degree of supply-side substitutability within all types of flexible packaging, but does not contest the Commission’s decisional practice.

The Commission’s investigation did not provide any indications that it would be appropriate for the Commission to depart from its previous decisional practice to consider a distinct market for flexible packaging for pharmaceuticals.

Geographic market definition

The Commission has previously considered the geographic scope of markets for flexible packaging for pharmaceuticals as EEA-wide or wider.

The Notifying Party agrees with the previous Commission decisions that the geographic market for flexible packaging is EEA-wide or wider.

The Commission’s investigation did not provide any indications that would require the Commission to depart from its previous decisional practice that the geographic market for flexible packaging for pharmaceuticals is at least EEA-wide.

Therefore, for the purposes of this decision, the Commission considers the geographic scope for flexible packaging for pharmaceuticals to be at least EEA-wide.

4.2.2.3. Packaging machinery for the pharmaceutical sector

Product market definition

The Commission has not considered the market for packaging machinery in its previous Decisions.

The Notifying Party explains that there is typically competitive interaction between the different formats, types of machines and/or technologies, as customers would typically purchase a range of packaging machines and technologies that could be applied to different categories/sectors, as opposed to a single type of packaging machinery or technology for a specific type of product. However, the Notifying Party submits that, on the narrowest plausible basis, the market for packaging machinery could be defined by reference to end-use (e.g. packaging machinery for the pharmaceutical sector, medical sector etc.).

The Commission’s investigation did not provide any indications as to the appropriate level for defining the market for packaging machinery. The question of whether the relevant product market includes all packaging machinery, or packaging machinery for the pharmaceutical sector only, can be left open since the Transaction does not give rise to serious doubts as to its compatibility with the internal market or the functioning of the EEA agreement under any plausible product market definition.

Geographic market definition

The Commission has not previously considered the geographic scope of markets for packaging machinery.

The Notifying Party submits that the geographic market for packaging machinery (including for packaging machinery for the pharmaceutical sector) is EEA-wide or wider.

The Commission’s investigation did not provide any indications as to the appropriate geographic scope of the market for packaging machinery (or packaging machinery for the pharmaceutical sector).

Therefore, for the purposes of this decision, the Commission considers the geographic scope for packaging machinery for pharmaceuticals to be at least EEA-wide.

4.2.2.4. APIs

Product market definition

Active pharmaceutical ingredients (“APIs”) are the molecules (under patent or expired) that are used to manufacture FDPs.

Per the Commission’s decisional practice, in principle, each API belongs to a separate product market but substitutability between APIs, either in general, or for certain applications must also be considered.

The Notifying Party agrees with the decisional practice of the Commission regarding the product market definition in APIs.

The Commission’s investigation did not provide any indications that it would be appropriate for the Commission to depart from its previous decisional practice for APIs.

Geographic market definition

The Commission has previously considered the geographic scope for APIs is at least EEA-wide.

The Notifying Party did not depart from the decisional practice of the Commission regarding the geographic market definition in APIs.

The Commission’s investigation did not provide any indications that it would be appropriate for the Commission to depart from its previous decisional practice for APIs.

In this case, the exact geographic market definition for APIs can be left open since the Transaction does not give rise to serious doubts as to its compatibility with the internal market or the functioning of the EEA agreement under any plausible market definition.

4.2.2.5. Excipients

Product market definition

(Pharmaceutical) excipients are inert substances with which the API is combined to form an FDP.

In Ashland/International Specialty Products, the Commission considered pharmaceutical excipients belong to separate relevant markets based on the substance from which each excipient was made (e.g., lactose, starch, cellulose) and considered plausible markets for binders, coatings and plausible narrower segments. In Friesland Foods/Campina, the Commission defined even narrower markets for lactose excipients, namely separate markets for (i) wet granulation lactose and (ii) direct compression lactose.

The Notifying Party did not depart from the decisional practice of the Commission regarding product market definition in pharmaceutical excipients.

The Commission’s investigation did not provide any indications that would require the Commission to depart from its previous decisional practice to consider separate markets for excipients based on their substance ingredients and to sub-segment the market for lactose into (i) wet granulation lactose and (ii) direct compression lactose.

Geographic market definition

In Ashland/International Specialty Products and in Friesland Foods/Campina, the Commission found that the scope of the relevant markets for excipients is at least EEA-wide.

The Notifying Party did not depart from the decisional practice of the Commission regarding geographic market definition in pharmaceutical excipients.

The Commission’s investigation did not provide any indications that would require the Commission to depart from its previous decisional practice to consider at least EEA-wide markets for excipients based on their substance ingredients and to sub-segment the market for lactose into (i) wet granulation lactose and (ii) direct compression lactose.

150In the past, the Commission distinguished (i) a CDMO market for FDPs and (ii) a CDMO market for APIs. As regards the CDMO market for FDPs, further segmentation was considered based on (i) the pharmaceutical form manufactured (e.g., solids, semi-solids, injectables); (ii) the conditions of manufacture (e.g., toxicity, sterile environment); (iii) the type of API used for its production and the delivery mechanism used (e.g., swallowing, intravenous, injection, etc.). The Commission also examined whether there is a separate market for contract manufacturing organization (“CMO”) services but eventually left the question open.

151The Notifying Party submits that irrespective of the precise market definition and even based on the narrowest plausible market segment, the Transaction would not lead to competitive concerns.

152The Commission’s investigation did not provide any indications that it would be appropriate for the Commission to depart from its previous decisional practice for CDMOs.

153In this case, the exact product market definition for CDMOs can be left open since the Transaction does not give rise to serious doubts as to its compatibility with the internal market or the functioning of the EEA agreement under any plausible market definition.

Geographic market definition

154The Commission added that the geographic scope of all plausible CDMO services markets is at least EEA-wide.

155The Notifying Party did not depart from the decisional practice of the Commission regarding the geographic market definition for CDMOs.

156The Commission’s investigation did not provide any indications that it would be appropriate for the Commission to depart from its previous decisional practice for CDMOs.

157In this case, the exact geographic market definition for CDMOs can be left open since the Transaction does not give rise to serious doubts as to its compatibility with the internal market or the functioning of the EEA agreement under any plausible geographic market definition for CDMOs.

4.2.2.7.Private hospital services

Product market definition

158In CVC/Recordati, the Commission considered a relevant product market for private hospital services which would be separate from public hospital services, depending on the specificities of the case and the national market in question.

159The Notifying Party acknowledges the past decisional practice of the Commission and submits that the issue can be left open, since the Transaction would not lead to competitive concerns even if a product market for private hospital services were to be considered.

160The Commission’s investigation did not provide any indications that it would be appropriate for the Commission to depart from its previous decisional practice for private hospital services.

161In this case, the product market definition for hospital services can be left open since the Transaction does not give rise to serious doubts as to its compatibility with the internal market or the functioning of the EEA agreement even under the narrowest plausible product market definition of private hospital services.

Geographic market definition

162The Commission found that the geographic scope of this market is national or narrower.

163The Notifying Party did not depart from the decisional practice of the Commission regarding market definition in private hospital services.

164The Commission’s investigation did not provide any indications that it would be appropriate for the Commission to depart from its previous decisional practice for private hospital services.

165In this case, the exact geographic market definition for private hospital services can be left open since the Transaction does not give rise to serious doubts as to its compatibility with the internal market or the functioning of the EEA agreement under any plausible product market definition of private hospital services.

Legal framework

166A concentration can also entail vertical and/or conglomerate effects. The Commission Guidelines on the assessment of non-horizontal mergers under the Merger Regulation (the “Non-Horizontal Merger Guidelines”) distinguish between two main ways in which non-horizontal mergers may significantly impede effective competition: (a) when they give rise to input and/or customer foreclosure (non-coordinated effects); and (b) when the merger changes the nature of competition in such a way that firms that previously were not coordinating their behaviour, are now more likely to coordinate to raise prices or otherwise harm effective competition (coordinated effects). The Non-Horizontal Merger Guidelines distinguish two types of foreclosure: (a) where the merger is likely to raise the costs of downstream rivals by restricting their access to an important input (input foreclosure) and (b) where the merger is likely to foreclose upstream rivals by restricting their access to a sufficient customer base (customer foreclosure).

167In assessing the likelihood of an anticompetitive input foreclosure strategy, the Commission has to examine whether (i) the merged entity would have the ability to substantially foreclose access to inputs; (ii) whether it would have the incentive to do so; and (iii) whether a foreclosure strategy would have a significant detrimental effect on competition downstream. In assessing the likelihood of an anticompetitive customer foreclosure strategy, the Commission has to examine whether (i) the merged entity would have the ability to foreclose access to downstream markets by reducing its purchases from upstream rivals; (ii) whether it would have the incentive to do so; and (iii) whether a foreclosure strategy would have a significant detrimental effect on consumers in the downstream market. According to the Non-Horizontal Merger Guidelines, the Commission is unlikely to find concern in non-horizontal mergers, where the market share post-merger of the new entity in each of the markets concerned is below 30%.

168The Non-Horizontal Merger Guidelines define conglomerate mergers as mergers between firms that are in a relationship which is neither horizontal (as competitors in the same relevant market) nor vertical (as suppliers or customers).

4.2.4.Competitive assessment

Flexible Packaging for Pharmaceuticals – CVC (Upstream) / FDPs – Target (Downstream)

169One of the CVC portfolio companies, Syntegon, is active in the upstream market for flexible packaging for pharmaceuticals in the EEA. Flexible packaging is an input for several FDPs of the Target (downstream). The vertically linked upstream and downstream markets and the Parties’ shares are identified in Appendix 1. As shown in this Appendix, CVC Syntegon’s share in all upstream markets (that is in flexible packaging for the pharmaceutical sector and narrower plausible segments for laminated sachets, coldform blister bases, plastic-based blister bases and blister lidding) is 10% or less while Cooper’s share is 30% or more in all the downstream markets.

170The combined entity is unlikely to have the ability to engage in input foreclosure because it would not have market power in any of the upstream markets for flexible packaging for pharmaceuticals (under any plausible market delineation) in the EEA, where it is active. CVC Syntegon holds a share of 10% or less in the upstream markets for flexible packaging for pharmaceuticals (under any plausible market delineation) in the EEA and it would face competition from several players, including Amcor, Wipak, Constantia Flexibles and others. Post-Transaction, the Target’s downstream rivals could turn to any of CVC’s rivals (at least CVC’s rivals in the EEA or possibly to an even wider set of rivals if the geographic upstream market is defined as wider than the EEA) to source flexible packaging, even if the combined entity decided to discontinue supply of its upstream inputs.

171The combined entity is unlikely to have the ability to engage in customer foreclosure because it would not constitute an important customer for flexible packaging of pharmaceuticals (or any plausible market delineation) in the EEA. Rather, Cooper’s demand for any flexible packaging of pharmaceuticals in the upstream markets does not exceed 10% of the total EEA-wide demand. That is because flexible packaging used for individual FDPs of Cooper is used for a variety of other use cases, including for example other FDPs where Cooper’s market share is limited. In case the combined entity decided to source flexible packaging that CVC Syntegon offers today only in-house, CVC’s rivals (both its rivals in the EEA or in a wider market) would continue to have access to a significant customer base to sell their products.

172Given that the combined entity would not have the ability to foreclose its downstream rivals in FDPs or its upstream rivals in the provision of flexible packaging for pharmaceuticals in the EEA (or wider), it would also not have an incentive to attempt a foreclosure as it would not be able to gain anything from such a strategy. In the absence of the ability to foreclose, any foreclosure strategy by the combined entity would have no impact on the national markets for FDP and the market for flexible packaging for pharmaceuticals in the EEA (or wider). In any event, no respondent to the market investigation raised concerns regarding the impact of the proposed Transaction on these vertically linked markets.

Packaging Machinery for Pharmaceuticals – CVC (Upstream) / FDPs – Target (Downstream)

173One of the CVC portfolio companies, AR Packaging, is active in the plausible upstream market for packaging machines (for pharmaceuticals) in the EEA. Such machines are used to manufacture several FDPs of the Target (downstream). The vertically linked upstream and downstream markets and the Parties’ shares are identified in Appendix 2. As shown in this Appendix, CVC AR Packaging’s share in all plausible upstream markets (that is in packaging machinery or packaging machinery for pharmaceuticals) is 10% or less while the Target’s share is 30% or more in all the downstream markets.

174The combined entity is unlikely to have the ability to engage in input foreclosure because it would not have market power in any of the upstream markets (for packaging machinery or packaging machinery for pharmaceuticals) in the EEA, where it is active. CVC AR Packaging holds a share of 10% or less in the upstream markets for packaging machinery (under any plausible market delineation) in the EEA and it would face competition from several players, including IMA Group, Bausch & Ströbel, Optima and others. Post-Transaction, the Target’s downstream rivals could turn to any of CVC’s rivals (at least CVC’s rivals in the EEA or possibly to an even wider set of rivals if the geographic upstream market is defined as wider than the EEA) to source packaging machines, even if the combined entity decided to discontinue supply of its upstream inputs.

175The combined entity is unlikely to have the ability to engage in customer foreclosure because it would not constitute an important customer for packaging machines for pharmaceuticals (or any narrower plausible market) in the EEA. Rather, the Target’s demand for any packaging machines for pharmaceuticals in the upstream markets does not exceed 10% of the total EEA-wide demand. That is because the packaging machinery used for FDPs by Cooper is also used for a variety of other packaging purposes, and because, according to the Parties, Cooper only procures packaging machinery in case of an expansion or to replace obsolete packaging machinery. In case the combined entity decided to source packaging machine that CVC AR Packaging offers today only in-house, CVC’s rivals (both its rivals in the EEA or in a wider market) would continue to have access to a significant customer base to sell their products.

176Given that the combined entity would not have the ability to foreclose its downstream rivals in national markets for FDPs or its upstream rivals in the provision of packaging machines for pharmaceuticals in the EEA (or wider), it would also not have an incentive to attempt a foreclosure as it would not be able to gain anything from such a strategy. In the absence of the ability to foreclose, any foreclosure strategy by the combined entity would have no impact on the national markets for FDP and the market for packaging machines for pharmaceuticals in the EEA (or wider). In any event, no respondent to the market investigation raised concerns regarding the impact of the proposed Transaction on these vertically linked markets.

4.2.4.3.APIs – CVC’s Recordati (Upstream) / FDPs – Cooper (Downstream)

177CVC is active in the upstream API markets for (i) diphenhydramine hydrochloride in the EEA and (ii) dimenhydrinate in the EEA. These APIs are inputs to 15 FDPs marketed by Cooper downstream. The vertically linked upstream and downstream markets and the Parties’ shares are identified in Appendix 4.

140Cooper’s share of 30% or more are based on markets defined at ATC3/CHC3, ATC4/CHC4, or molecule level (or in case of anti-lice products on GERS data). Cooper’s high market shares in a few countries concerning a small number of FDPs (and often under narrow market delineations) do not give the combined entity sufficient market power to foreclose upstream rivals (see Case M.9995 – Permira/Neuraxpharm, para. 36; Case M.7975 – Mylan/Meda, para. 598; and Case M.5253 – Sanofi-Aventis/Zentiva, para. 533).

141Form CO, paragraph 251.

142Replies to Questionnaire Q1, questions 15-16 ; to Questionnaire Q2, questions 12-13; to Questionnaire Q3, questions 17-18 ; to Questionnaire Q4, questions 13-14 ; and to Questionnaire Q5, questions 12-13.

178In 2020, the Target sourced diphenhydramine hydrochloride from CVC worth approximately EUR […] (or [5-10]% of CVC’s total sales in the EEA for this API). The Target has not sourced dimenhydrinate since 2018 due to sufficient material in stock.

179The combined entity is unlikely to have the ability to engage in input foreclosure for either of these products. Firstly, for diphenhydramine hydrochloride, since it is a product which can be manufactured easily and which is sold by a number of companies globally and in Europe, e.g. by Caesar & Loretz GmbH, Tiefenbacher API + Ingredients, LGC Limited, Wanbury Limited and Kongo Chemical Co. Limited. All these suppliers would be able to supply Cooper’s downstream rivals. Given Cooper’s low market shares in the downstream markets (overall sales values of less than EUR 1m), Recordati would have to forego all or the vast majority of its sales for diphenhydramine hydrochloride in the EEA. Regarding dimenhydrinate the fact that for the last three years the Target has not sourced it demonstrates the low importance of the product and therefore the lack of any ability to foreclose.

180The combined entity is unlikely to have the ability to engage in customer foreclosure because it would not constitute an important customer for diphenhydramine hydrochloride or dimenhydrinate in the EEA or wider. In 2020 Cooper’s purchases of diphenhydramine hydrochloride amounted to approximately EUR […] ([5-10]% of the total of Recordati's total EEA sales for that year).

181Given that the combined entity would not have the ability to foreclose its downstream rivals in the national markets for FDPs or its upstream rivals in APIs in the EEA or wider, it would also not have an incentive to attempt a foreclosure as it would not be able to gain anything from such a strategy. In the absence of the ability to foreclose, any foreclosure strategy by the combined entity would have no impact on the national markets for FDPs and the market for APIs. In any event, no respondent to the market investigation raised concerns regarding the impact of the proposed Transaction on these vertically linked markets.

4.2.4.4.APIs – Target (Upstream) / FDPs – CVC (Downstream)

182The Target is active in different upstream markets for APIs in the EEA. These APIs can be an input for a number of FDPs of CVC’s Recordati and Genetic (downstream). The vertically linked ((at the ATC3/CHC3, ATC4/CHC4 and molecule levels)) upstream and downstream markets and the Parties’ shares are identified in Appendix 6 (under all plausible market definitions). As shown in this Appendix, Cooper’s share in all upstream markets is 10% or less while CVC’s Recordati and Genetic’s share is 30% or more in all the downstream markets.

183The combined entity is unlikely to have the ability to engage in input foreclosure because it would not have market power in any of the upstream markets for APIs in the EEA, where it is active. Under all plausible market definitions, the Target holds a share of 10% or less in the upstream markets for APIs in the EEA and it would face competition from several players, Brenntag, Univar, Helm, IMCD and others. Post-Transaction, Recordati’s and Genetic’s downstream rivals could turn to any of Cooper’s rivals (at least Cooper’s rivals in the EEA or possibly to an even wider set of rivals if the geographic upstream market is defined as wider than the EEA) to source APIs, even if the combined entity decided to discontinue supply of its upstream inputs.

147See Form CO, Annex 6.4 – Overview of vertical relationships (affected markets).

148See Form CO, footnote 117.

149Replies to Questionnaire Q1, questions 15-16 ; to Questionnaire Q2, questions 12-13; to Questionnaire Q3, questions 17-18 ; to Questionnaire Q4, questions 13-14 ; and to Questionnaire Q5, questions 12-13.

184The combined entity is unlikely to have the ability to engage in customer foreclosure because it would not constitute an important customer for APIs in the EEA or wider market. Rather, Recordati’s and Genetic’s demand for any APIs in the upstream markets does not exceed 10% of the total EEA-wide demand. In case the combined entity decided post-Transaction to source the APIs that Cooper offers today only in-house, Cooper’s rivals would continue to have access to a significant customer base to sell their products.

185Given that the combined entity would not have the ability to foreclose its downstream rivals in the national markets for FDPs or its upstream rivals in APIs, it would also not have an incentive to attempt a foreclosure as it would not be able to gain anything from such a strategy. In the absence of the ability to foreclose, any foreclosure strategy by the combined entity would have no impact on the national markets for FDPs and the market for APIs. In any event, no respondent to the market investigation raised concerns regarding the impact of the proposed Transaction on these vertically linked markets.

4.2.4.5.Excipients – Cooper (Upstream) / FDPs – CVC’s Recordati and Genetic (Downstream)

186The Target is active in different upstream markets for pharmaceutical excipients in the EEA. These excipients can be an input for several FDPs of CVC’s Recordati and Genetic (downstream). The vertically linked upstream and downstream markets and the Parties’ shares are identified in Appendix 5. As shown in this Appendix, Cooper’s share in all upstream markets (even under the narrowest plausible markets defined at the level of individual excipients) is 10% or less while CVC’s Recordati and Genetic’s share is 30% or more in all the downstream markets.

187The combined entity is unlikely to have the ability to engage in input foreclosure because it would not have market power in any of the upstream markets for excipients in the EEA, where it is active. Under all plausible market definitions, Cooper holds a share of 10% or less in the upstream markets for excipients in the EEA and it would face competition from several players, including Brenntag, Safic Alcan, Quimdis, and others. Post-Transaction, Recordati’s and Genetic’s downstream rivals could turn to any of Cooper’s rivals (at least Cooper’s rivals in the EEA or possibly to an even wider set of rivals if the geographic upstream market is defined as wider than the EEA) to source excipients, even if the combined entity decided to discontinue supply of its upstream inputs.

150See Form CO, Annex 6.4 – Overview of vertical relationships (affected markets).

188The combined entity is unlikely to have the ability to engage in customer foreclosure because it would not constitute an important customer for excipients in the EEA. Rather, Recordati’s and Genetic’s demand for any excipients in the upstream markets does not exceed 10% of the total EEA-wide demand. In case the combined entity decided to source the excipients that Cooper offers today only in-house, Cooper’s rivals (both its rivals in the EEA or in a wider market) would continue to have access to a significant customer base to sell their products.

189Given that the combined entity would not have the ability to foreclose its downstream rivals in the national markets for FDP and or its upstream rivals in excipients in the EEA (or wider), it would also not have an incentive to attempt a foreclosure as it would not be able to gain anything from such a strategy. In the absence of the ability to foreclose, any foreclosure strategy by the combined entity would have no impact on the national markets for FDPs and the market for excipients in the EEA (or wider). In any event, no respondent to the market investigation raised concerns regarding the impact of the proposed Transaction on these vertically linked markets.

4.2.4.6.Excipients (Wet granulation lactose and direct compression lactose) – CVC’s DFE Pharma (Upstream) / FDPs and CDMO services – Cooper (Downstream)

190DFE Pharma (a portfolio company controlled by CVC) is active in the upstream markets for wet granulation lactose and direct compression lactose in the EEA. These excipients are used as inputs for FDPs of Cooper in 12 downstream markets and for CDMO services that Cooper offers to third parties. The vertically linked upstream and downstream markets and the Parties’ shares are identified in Appendix 3. As shown in this Appendix, DFE Pharma’s share in the upstream markets is slightly above 30% while Cooper’s share is less than 30% in all the downstream markets.

191The combined entity is unlikely to have the ability to engage in input foreclosure because it would not have market power in the upstream markets. In 2020, DFE Pharma held shares of [30-40]% in wet granulation lactose and [30-40]% in direct compression lactose in the EEA but it faced competition from major international rivals in the EEA, e.g., Meggle ([10-20]% in wet granulation lactose and [30-40]% in direct compression lactose) and Kerry ([10-20]% in wet granulation lactose and [5-10]% in direct compression lactose). Post-Transaction, Cooper’s downstream rivals could turn to any of DFE Pharma’s competitors (at least rivals in the EEA or possibly to an even wider set of rivals if the geographic upstream market is defined as wider than the EEA) to source wet granulation lactose and direct compression lactose, even if the combined entity decided to discontinue supply of its upstream inputs. e.g., Meggle, Kerry, and Armor

192The combined entity is unlikely to have the ability to engage in customer foreclosure because it would not constitute an important customer for the upstream inputs in the EEA. In 2020, Cooper purchased wet granulation lactose worth EUR […] (which represents [0-5]% of the total demand for this product) and direct compression

151See footnote 74 above.

152Replies to Questionnaire Q1, questions 15-16 ; to Questionnaire Q2, questions 12-13; to Questionnaire Q3, questions 17-18 ; to Questionnaire Q4, questions 13-14 ; and to Questionnaire Q5, questions 12-13.

196The combined entity is unlikely to have the ability to engage in input foreclosure because it would not have market power in any of the upstream markets for CDMO services in the EEA, where it is active. Under all plausible market definitions, The Target holds a share of 10% or less in the upstream markets for CDMO services in the EEA and it would face competition from several players, including Lonza, Catalent, Pantheon, Recipharm and others. Post-Transaction, Recordati’s and Theramex’s downstream rivals could turn to any of Cooper’s rivals (at least Cooper’s rivals in the EEA or possibly to an even wider set of rivals if the geographic upstream market is defined as wider than the EEA) to source CDMO services, even if the combined entity decided to discontinue supply of its upstream inputs.

197The combined entity is unlikely to have the ability to engage in customer foreclosure because it would not constitute an important customer for CDMO services in the EEA. Rather, Recordati’s and Genetic’s demand for any CDMO services in the upstream markets does not exceed 10% of the total EEA-wide demand. In case the combined entity decided post-Transaction to source the CDMO services that Cooper offers today only in-house, Cooper’s rivals (both in the EEA or wider) would continue to have access to a significant customer base to sell their products.

4.2.4.7.CDMO Services – Target (Upstream) / FDPs – CVC (Downstream)

194The Target is active in the upstream markets for CDMO services in the EEA. These CDMO services can be an input for several FDPs of CVC (downstream). For some of these FDPs, CVC has a share >30% at national level.

198The combined entity is unlikely to have the ability to engage in customer foreclosure because it would not constitute an important customer for the upstream FDP markets in Greece. Rather, Recordati’s and Genetic’s demand for any CDMO services in the upstream markets does not exceed 10% of the total EEA-wide demand. In case the combined entity decided post-Transaction to source the CDMO services that Cooper offers today only in-house, Cooper’s rivals (both in the EEA or wider) would continue to have access to a significant customer base to sell their products.

4.2.4.8.FDPs – Target (Upstream) / Private Hospital Services – CVC (Downstream)

199CVC is active in the downstream market for private hospital services in Greece. Cooper offers FDPs in Greece that could be an upstream input for the operation of private hospitals downstream. The vertically linked (at the ATC3/CHC3 level) upstream and downstream markets and the Parties’ shares are identified in Appendix 8.

200The combined entity is unlikely to have the ability to engage in input foreclosure because it would not have market power in any of the upstream markets for FDPs in Greece. Cooper holds a share of 30% or less in all of the upstream markets for FDPs in Greece. Moreover, already now, Cooper does not supply any hospitals in Greece, which therefore do not rely on Cooper for the supply of FDPs. Post-Transaction, CVC’s downstream rivals could simply keep purchasing the FDPs from their current suppliers, even if the combined entity decided to not supply FDPs to its downstream rivals.

201The combined entity is unlikely to have the ability to engage in customer foreclosure because it would not constitute an important customer for the upstream FDP markets in Greece. In a plausible downstream market including all private hospitals in Greece, CVC’s hospitals held a share of [30-40]% in 2020. However, FDPs are used by a far wider set of customers other than hospitals, including for example wholesalers, drugstores and pharmacies. In case the combined entity decided to source FDPs that Cooper offers today only in-house, CVC’s rivals would continue to have access to a significant customer base to sell their products, including both private hospitals as well as other types of customers.

202Given that the combined entity would not have the ability to foreclose its downstream rivals in the provision of hospital services in Greece its upstream rivals in FDPs in Greece, it would also not have an incentive to attempt a foreclosure as it would not be able to gain anything from such a strategy. In the absence of the ability to foreclose, any foreclosure strategy by the combined entity would have no impact on the market for hospital services in Greece and the market for FDPs in Greece. In any event, no respondent to the market investigation raised concerns regarding the impact of the proposed Transaction on these vertically linked markets.

4.2.4.9.Overall conclusion on vertical effects

203In light of the considerations discussed in paragraphs (169) to (202), the Commission concludes that the Transaction does not raise serious doubts as to its compatibility with the internal market or the functioning of the EEA agreement in terms of its competition impact on the vertical relationships identified in paragraph (109).

5.CONCLUSION

204For the above reasons, the European Commission has decided not to oppose the notified operation and to declare it compatible with the internal market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger Regulation and Article 57 of the EEA Agreement.

For the Commission

(Signed) Margrethe VESTAGER Executive Vice-President

156Replies to Questionnaire Q1, questions 15-16 ; to Questionnaire Q2, questions 12-13; to Questionnaire Q3, questions 17-18 ; to Questionnaire Q4, questions 13-14 ; and to Questionnaire Q5, questions 12-13.

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