EUROPEAN COMMISSION

DG Competition

Only the English text is available and authentic.

REGULATION (EC) No 139/2004 MERGER PROCEDURE

Article 4(4) Date: 21/10/2021

EUROPEAN COMMISSION

Brussels, 21.10.2021 C(2021) 7697 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 Where possible the information omitted has been replaced by ranges of figures or a general description.

Compagnie Générale des Établissements Michelin 23, place des Carmes Déchaux 63000 Clermont-Ferrand France

Autorité de la Concurrence 11, rue de l'Échelle 75001 Paris France

Date of filing: 16.09.2021 Legal deadline for response of Member States: 07.10.2021 Legal deadline for the Commission decision under Article 4(4): 21.10.2021

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 (‘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 REGIST RY, 1049 Bruxelles, BELGIQUE Europese Commissie, DG COMP MERGER REGIST RY, 1049 Brussel, BELGIË

Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.

Dear Sir or Madam,

1. INTRODUCTION

(1) On 16 September 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 transaction cited above. Compagnie Générale des Établissements Michelin (hereinafter ‘Michelin’ or the ‘Notifying Party’) requests the operation to be examined in its entirety by the competent authorities of France.

(2) According to Article 4(4) of the Merger Regulation, before a formal notification has been made to the Commission, the parties responsible for notifying the transaction may request with a Reasoned Submission 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.

(3) A copy of this Reasoned Submission was transmitted to all Member States on 16 September 2021.

(4) By way of a letter dated 8 October 2021, the Autorité de la Concurrence as the competent authority of France informed the Commission that France agrees with the proposed referral.

2. THE PARTIES

(5) Michelin is a French group manufacturing tyres for cars, vans, trucks, buses, two-wheel non-motorised vehicles, two-wheel motorised vehicles, aircraft, subway trains and tramways, as well as tyres for industrial and agricultural vehicles. It is also active in the tyre distribution sector, through retail stores and online networks. Following the 2018 acquisitions of Camso and Fenner, Michelin group is also active on the markets for tracks and conveyor belts.

(6) Allopneus SAS (‘Allopneus’) is a French company mainly active in the retail sale and installation of tyres, with a particular focus on online sales. The share capital and voting rights of Allopneus are currently for 60% held by Hévéa SA (‘Hévéa’), with the remaining being held indirectly by Michelin. Allopneus is currently jointly controlled by Hévéa and Michelin as Michelin has a veto over certain strategic decisions at Allopneus, namely the annual budget and the three-year strategic plan. However, the Notifying Party submits that Michelin ‘cannot intervene directly in the operational decisions of Allopneus, such as the determination of sales prices, which is decided by Hévéa’.

3. THE TRANSACTION

(7) The proposed transaction concerns the acquisition of sole control of Allopneus by Michelin (the ‘Transaction’).

3Reasoned Submission, paragraph 70.

(8) The Transaction consists in the acquisition by Michelin of Hévéa’s 60% share in the capital and voting rights of Allopneus, as a result of which Allopneus would be fully-owned and solely controlled by Michelin.

(9) It follows that the Transaction would result in a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

4. EU DIMENSION

(10) The combined aggregate worldwide turnover of all the undertakings concerned is more than EUR 5 billion (EUR 20.5 billion for Michelin and EUR […] million for Allopneus) and both Michelin and Allopneus have an EU-wide turnover in excess of EUR 250 million (EUR […] million for Michelin and EUR […] million for Allopneus). Moreover, Michelin and Allopneus do not achieve two-thirds of their EU-wide turnover within one and the same Member State.

(11) Therefore, the concentration has a Union dimension within the meaning of Articles 1(2) of the Merger Regulation.

5. ASSESSMENT

5.1. Horizontally affected markets

(12) The Transaction gives rise to several horizontal overlaps. Both Michelin and Allopneus are active in the retail distribution of new replacement tyres and, in particular, in the retail distribution of (i) tyres for cars and vans, (ii) tyres for trucks and buses, (iii) tyres for earth-moving vehicles, (iv) tyres for agricultural use and (v) tyres for two-wheel motorised vehicles.

5.1.1. Product market

(13) The market for the retail distribution of tyres brings together tyre retailers (the suppliers) and vehicle end-users (the customers). In its decisional practice, the Commission has considered a distinction according to the type of vehicle concerned: (i) car and van tyres, (ii) truck and bus tyres, (iii) agricultural tyres, (iv) earth-moving vehicle tyres and (v) motorised and (vi) non-motorised two-wheel vehicle tyres.

(14) In the retail market, new replacement tyres are sold through different distribution channels (namely specialised tyre dealers, concessionaires, independent workshops, tyre dealers or online aftermarket suppliers). In its decisional practice, the Commission has not defined separate segments for the different distribution channels. However, the Autorité de la Concurrence has considered that the different distribution channels belong to the same product market.

(15) Moreover, the Autorité de la Concurrence has considered the existence of a separate segment for the online sale of new replacement tyres during its review of the acquisition of joint control of Allopneus by Hévéa and Michelin, but has ultimately left the definition of the product market open.

5.1.2. Geographic market

(16) In its previous decisional practice, the Commission has considered that the markets for the retail distribution of new replacement tyres are national in scope.

(17) The Autorité de la Concurrence, while leaving the definition of the geographic market open, has considered that the markets for the retail distribution of new replacement tyres may be national or possibly local in scope.

5.1.3. Affected Markets

(18) The Notifying Party estimates that Michelin’s and Allopneus’ combined market share would be in excess of 20% in four potentially relevant national markets for which the Transaction gives rise to a horizontal overlap in France:

(a) the retail distribution of new replacement tyres for cars and vans (online segment only) ([30-40]%);

(b) the retail distribution of new replacement tyres for trucks and buses (all sales channels) ([20-30]%);

(c) the retail distribution of new replacement tyres for agricultural use (all sales channels) ([20-30]%);

(d) the retail distribution of new replacement tyres for earth-moving vehicles (all sales channels) ([30-40]%).

5.2. Vertically affected markets

(19) The Transaction also gives rise to a vertical link between Michelin’s and Allopneus’ activities, because Michelin is active upstream in the manufacture and wholesale supply of tyres, while Allopneus is active downstream in the wholesale supply and retail distribution of tyres.

5.2.1. Product market

(20) Upstream, the market for the manufacture and supply of tyres has been segmented in the Commission’s decisional practice according to (i) the type of customers targeted and (ii) the types of the vehicles on which tyres have to be fitted.

(21) In relation to the first point, in its decisional practice the Commission has segmented the market for the manufacture and supply of tyres into two markets according to the type of customer targeted: (i) the sale of new tyres to original equipment manufacturers (‘OEM’) and (ii) the sale of new replacement tyres to wholesalers and retailers.

(22) In relation to the second point, in its decisional practice the Commission concluded that, within each of the OEM and new replacement tyres categories, it is possible to distinguish six product segments according to the specific characteristics and dimensions of the vehicles on which tyres have to be fitted: (i) tyres for cars and vans; (ii) tyres for trucks and buses; (iii) tyres for earth-moving vehicles (industrial tyres); (iv) tyres for agricultural and forestry vehicles (agricultural tyres); (v) tyres for two-wheel motorised vehicles; and (vi) tyres for two-wheel non-motorised vehicles.

(23) Downstream from the manufacturing, tyre manufacturers and wholesalers distribute new replacement tyres to retail suppliers (such as car concessionaires, independent workshops, tyre dealers or online aftermarket suppliers) which in turn sell tyres to end-customers, which fit their replacement tyres on their vehicles. The Commission also found indications that the market for wholesale supply of replacement tyres may include both wholesalers and direct supplies by OEMs, as tyre manufacturers do not restrict their activities to only distributing their own tyres but also distribute tyres of other manufacturers. However, the exact scope of the market was ultimately left open.

(24) The Autorité de la Concurrence considered in its decisional practice, while leaving the question open, whether a separate intermediate wholesale distribution market exists – distinct from the manufacturing markets upstream and the retail distribution markets downstream. It also considered that the market should be segmented by type of vehicle.

5.2.2. Geographic market

(25) In past cases regarding the manufacture and supply of new replacement tyres, the Commission analysed relevant markets at national level but ultimately left the geographic market definition open.

(26) While leaving the precise scope of the market open, the Autorité de la Concurrence’s precedents appear to have considered that it is likely national in scope.

(27) As for the wholesale supply of new replacement tyres, the Commission has found that the market is national in scope, as conditions of competition are homogeneous within Member States but they vary from one country to the other, despite a trend towards broader geographic markets.

9Cases M.7864 Trelleborg / CGS Holding of 4 May 2016, M.7911 CNCE / KM Group of 15 March 2016, M.7643, CNRC / Pirelli of 1 July 2015, and M.3081 Michelin / Viborg of 7 March 2003.

10Cases M.7864 Trelleborg / CGS Holding of 4 May 2016, M.7911 CNCE / KM Group of 15 March 2016, M.7643, CNRC / Pirelli of 1 July 2015, and M.3081 Michelin / Viborg of 7 March 2003.

11Cases M.3081 Michelin / Viborg of 7 March 2003, M.6063 Itochu / Speedy of 12 May 2011, M.7643 CNRC / Pirelli of 1 July 2015, M.9000 Bain Capital / Reifen Krieg Group of 3 August 2018.

12Decision n° 15-DCC-76 of 30 June 2015.

13M.7643, CNRC / Pirelli of 1 July 2015 and M. 9000 Bain Capital / Reifer Krieg Group.

14Decision n° 15-DCC-76 of 30 June 2015.

15M.7643, CNRC / Pirelli of 1 July 2015.

(28) While leaving the geographic market definition open, the Autorité de la Concurrence appears to have considered that this market is national or local in scope.

5.2.3. Affected markets

(29) The Notifying Party estimates that their combined market share would be in excess of 30% in two potentially relevant national markets for which the Transaction gives rise to a vertical link in France:

(a) the manufacture and supply of tyres for two-wheel motorized vehicles ([40-50]%), which is vertically linked to the potentially relevant downstream markets for:

– the wholesale of tyres for two-wheel motorized vehicles; and/or

– the retail distribution of tyres for two-wheel motorized vehicles.

(b) the manufacture and supply of tyres for trucks and buses ([30-40]%), which is vertically linked to the potentially relevant downstream markets for:

– the wholesale of tyres for trucks and buses; and/or

– the retail distribution of tyres for trucks and buses.

6. ASSESSMENT OF THE REFERRAL REQUEST

6.1. Legal requirements

(30) According to the Commission Notice on Case Referrals (the ‘Notice’), 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.

(31) With regard to the first requirement, and in light of the information submitted by the Parties in the Reasoned Submission, the Transaction may significantly affect competition in the potentially relevant markets for the wholesale supply and for the retail distribution of new replacement tyres, always in relation to the French retail market.

(32) Specifically, the Notifying Party submits that, at national level, there are possibly:

(a) four horizontally affected markets (with combined market shares ranging from [20-30]% to [30-40]%), namely the markets for the retail distribution of new replacement tyres for (i) cars and vans (online only); (ii) trucks and buses (all sales channels); (iii) agricultural use (all sales channels); and (iv) earth-moving vehicles (all sales channels); and

(b) two vertically affected markets (with an upstream market share around or above [40-50]%), namely the wholesale supply (upstream) and retail distribution (downstream) of tyres for (i) two-wheel motorized vehicles and (ii) trucks and buses.

(33) In light of the substantial market shares of the merged entity in France, there are indications that the concentration may significantly affect competition in a number of potentially relevant markets.

(34) Therefore, the first legal requirement set forth by Article 4(4) of the Merger Regulation is met.

(35) With regard to the second requirement, and in line with the precedents discussed above in paragraphs (13)-(17)(13) and (20)-(28), the Commission considers that the relevant markets for the wholesale supply and for the retail distribution of new replacement tyres are most likely national or, in the case of the retail distribution, possibly local in scope. The Transaction thus does not appear to lead to any affected markets that could be wider than France, or to any affected markets outside France. Furthermore, the markets in question present all the characteristics of distinct markets because the conditions of competition on these markets are clearly distinguishable from those in other markets, especially with respect to markets for the manufacture and markets for the retail distribution of new replacement tyres in other EEA countries.

(36) Therefore, the second legal requirement set forth in Article 4(4) of the Merger Regulation is met.

6.2. Additional factors

(37) In addition to the verification of the legal requirements, point 19 of the Notice 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”.

(38) In addition, point 23 of the Notice 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.”

(39) First, the effects of the Transaction are likely to be confined to France and, in light of the information submitted in the Reasoned Submission, will have its main economic impact in France. The plausible potentially affected markets are not wider than national, and are all located in France. Therefore, the Autorité de la Concurrence is well placed to examine the case.

(40) Second, the Autorité de la Concurrence has reviewed the acquisition of joint control of Allopneus by Hévéa and Michelin and, as a result, has substantial experience and expertise in examining not only the markets in question, but also a merger with a direct link to the Transaction. Therefore, the Autorité de la Concurrence is well equipped to assess the impact of the Transaction on competition in the markets in question.

(41) Third, the requested referral would preserve the ‘one-stop shop’ principle as this case would be referred in its entirety to a single competition authority.

6.3. Conclusion on referral

(42) 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 one or more markets within a Member State which presents all the characteristics of a distinct market.

(43) Moreover, the requested referral would be consistent with points 19-23 of the Notice, in particular because the Autorité de la Concurrence appears to be the most appropriate authority to examine the Transaction.

7. CONCLUSION

(44) For the above reasons, and given that France has expressed its agreement, the Commission has decided to refer the transaction in its entirety to be examined by France. 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

20Decision n° 15-DCC-76 of 30 June 2015.

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