IMMC.MTF_2018_9000_FIN.ENG.xhtml.m9000.docx EUROPEAN COMMISSION Brussels, 03.08.2018 C(2018) 5397 final To the Notifying Party Subject: Case M.9000 - Bain Capital / Reifen Krieg Group Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004 1 and Article 57 of the Agreement on the European Economic Area 2 Dear Sir or Madam, (1) On 04.07.2018, the European Commission received notification of a proposed concentration pursuant to Article 4 of the Merger Regulation by which Bain Capital Investors L.L.C. ("Bain Capital", USA) acquires sole control within the meaning of Article 3(1)(b) of the Merger Regulation over Reifen Krieg GmbH, Secura Reifenservice GmbH, Reifen24 AG, MoTi Reifen GmbH, SW Reifenhandel GmbH, Komplettradlager.de GmbH, Duro Reifenservice GmbH, and MUTAVI-Solutions GmbH ("Reifen Krieg Group", Germany).
3 (Bain Capital is referred to as the "Notifying Party". Bain Capital, its controlled portfolio companies and Reifen Krieg Group are collectively referred to as "Parties"). 1. The parties (2) Bain Capital is a private equity investment firm that invests, through its family of funds, in companies on a worldwide basis across most industries, including automotive, information technology, healthcare, retail and consumer products, communications, financial and industrial/manufacturing. Two of Bain Capital's controlled portfolio companies, European finTyre Distribution ("EfTD") and Autodistribution Group, are active in the wholesale and retail supply of replacement tyres.
(3) Reifen Krieg Group is a wholesale distributor of replacement tyres, predominantly active in Germany. It supplies a full range of replacement tyres, including for passenger cars, trucks, motorbikes, as well as steel and alloy wheels (i.e. the metal rim) and Tyre Pressure Monitoring Systems ("TPMS sensors"). Reifen Krieg Group also has eleven retail stores in Germany, which supply replacement tyres to consumers. 2. The operation (4) Pursuant to an agreement of 12 June 2018, Bain Capital – through its managed funds – will acquire 100% of the shares of Reifen Krieg Group (the "Proposed Transaction").
The Proposed Transaction therefore constitutes an acquisition of sole control, within the meaning of Article 3(1)(b) of the Merger Regulation, of Reifen Krieg Group by Bain Capital. 3. EU DIMENSION (5) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million 4 [Bain Capital: EUR […], Reifen Krieg Group: […]]. Each of them has an EU-wide turnover in excess of EUR 250 million [Bain Capital: EUR […] million, Reifen Krieg Group: […] million], but they do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State.
The notified operation therefore has an EU dimension within the meaning of Article 1(2) of the Merger Regulation. 4. Competitive assessment (6) The main overlap 5 arising as a result of the Proposed Transaction relates to the wholesale supply of replacement tyres in Germany where Reifen Krieg Group's activities are predominantly focused and where EfTD also has activities. 6 The Parties supply replacement tyres in Germany for passenger cars, trucks, motorbikes and agricultural vehicles. 4.1. Relevant market definition 4.1.1. Product market definition (7) At the wholesale level, suppliers distribute 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 Notifying Party's view (8) The Notifying Party considers, in line with previous Commission decisions, that the relevant product market for the wholesale supply of replacement tyres should be defined by reference to the type of vehicle on which the tyres are designed to be fitted. (9) The Notifying Party submits that the relevant product market should not be further segmented according to sales channel into supply by wholesalers and direct supply by tyre manufacturers since both types of players compete directly for sales to all customer groups. (10) The Notifying Party submits that the precise product market definition can nevertheless be left open since the Proposed Transaction does not raise competition concerns irrespective of the market definition retained.
The Commission's assessment (11) In previous decisions, 7 the Commission found that the supply of replacement tyres belongs to a separate relevant market from the supply of tyres for new vehicles. Within the market for the distribution of replacement tyres, the Commission identified several separate product markets, consisting of car and van tyres, truck and bus tyres, agricultural tyres, earthmoving vehicle tyres and motorised and non-motorised two-wheel vehicle tyres. (12) In those previous cases, the Commission also found indications that the market for wholesale supply of replacement tyres includes both wholesalers and direct supplies by original equipment manufacturers ("OEMs") as these do not restrict their activities to only distributing their own tyres but also distribute tyres of other manufacturers, but the exact scope of the market was ultimately left open.
8 (13) The Commission's market investigation in the present case confirms the fact that wholesalers and tyre manufacturers compete for the supply to retailers. OEMs have wide distribution networks and are capable of supplying retail customers throughout Germany, are vertically integrated also down to the retail level or use franchise-systems for wholesalers as well as retailers. 9 Moreover, a number of manufacturers have set up their own wholesale organisations where they distribute not only their tyres but also those of other OEMs. The majority of customers responding to the market investigation purchase replacement tyres from both OEMs and wholesalers 10 and indicated that there are no significant differences between the two categories of suppliers in terms of conditions of supply.
11 A few respondents mentioned that a possible exception could relate to purchases of very small volumes which OEMs may not supply (at a competitive price) as their logistics networks are optimised for supplying large volumes. 12 (14) The precise definition of the relevant market can nevertheless be left open as the Transaction does not raise serious doubts irrespective of whether the market for wholesale supply of replacement tyres is taken to consist of supply by wholesalers only or direct sales by OEMs are included as well. (15) In previous cases, the Commission also found that there are separate markets for the wholesale supply of new replacement tyres and the wholesale supply of "re-tread" replacement tyres.
13 However, the Parties do not overlap in the supply of re-tread tyres, therefore the Commission's assessment in the present case relates to new replacement tyres only. 4.1.2. Geographic market definition The Notifying Party's view (16) The Notifying Party submits that the precise geographic market definition can be left open since the Proposed Transaction does not raise competition concerns irrespective of the market definition retained. The Commission's assessment (17) In previous cases involving the wholesale supply of replacement tyres, the Commission found that the market is national in scope, 14 as conditions of competition are homogeneous within Member States but they still vary across countries, despite a trend towards broader geographic markets.
15 (18) The results of the market investigation in the case at hand are consistent with a geographic market definition at national level. The vast majority of the customers responding to the market investigation purchase only to a limited extent replacement tyres from outside Germany. 16 This market definition will therefore be retained for the purpose of the competitive assessment. 4.2. Competitive assessment (19) EfTD and Reifen Krieg Group overlap on the German markets for the wholesale supply of replacement tyres for: (i) cars and vans, (ii) trucks and buses, (iii) motorised two-wheel vehicles and (iv) agricultural vehicles.
Under a narrow market definition consisting of supplies by wholesalers only, three of these segments (cars and vans, trucks and buses and motorised two-wheel vehicles) are affected by the Proposed Transaction. If supplies by OEMs are taken into account, the Parties' combined market share remains below 20% on all segments. (20) The Parties' market shares on the affected segments, both including and excluding supplies by tyre manufacturers, are depicted in Table 1 below. Table 1: Estimated market shares for the wholesale supply of replacement tyres in Germany for 2017 Total market volume (000 units) Reifen Krieg Group's market share EfTD's market share Combined market share Cars and vans (including OEMs) 48 202 [5-10]% [0-5]% [5-10]% Cars and vans (excluding OEMs) 18 319 [10-20]% [10-20]% [20-30]% Trucks and buses (including OEMs) 1 410 [5-10]% [0-5]% [5-10]% Trucks and buses (excluding OEMs) 423 [20-30]% [5-10]% [20-30]% Motorised two-wheel vehicles (including OEMs) 1 949 [0-5]% [10-20]% [10-20]% Motorised two-wheel vehicles (excluding OEMs) 975 [5-10]% [20-30]% [20-30]% Source: the Parties The Notifying Party's view (21) The Notifying Party submits that the Proposed Transaction will not give rise to any competition concerns on the market for wholesale supply of replacement tyres for the following reasons.
(22) First, the Parties face competition from a high number of replacement tyre wholesalers in Germany. According to the Notifying Party, competition in this market is intensified through independent/open online platforms such as Tyre24, Gettigo and Tyre100 which post offers from a large number of suppliers on a real time basis. The Notifying Party submits that even customers who ultimately place orders through wholesalers' sales representatives or by telephone check such platforms in order to compare prices. (23) Second, wholesalers face competition from tyre OEMs, which supply to the same customer groups.
According to the Notifying Party, large tyre OEMs like Continental, Goodyear/Dunlop, Pirelli and Michelin have warehouses and distribution networks in Germany which are similar to those of the Parties and other important wholesalers. (24) Finally, the Notifying Party submits that the Parties face competition from wholesale competitors based in other Member States who make use of online platforms to access customers in Germany and can make deliveries from neighbouring Member States. The Commission's assessment (25) The market for wholesale supply of replacement tyres in Germany is fragmented, with around 50 independent wholesalers active (i.e. excluding vertically integrated OEMs and cooperations with OEMs).
17 The main competitors to the Parties offer a wide range of replacement tyres in all vehicle segments, and they account for a significant share of total wholesaler sales of replacement tyre in Germany: Interpneu ([10-20]%, belonging to Pneuhage Partners Group), Reifen Göggel ([10-20]%), Gamma Reifen & Felgen Grosshandels AG ([5-10]%) or Reifen Gundlach/Com4Tires ([5-10]%). 18 There are also main competitors belonging to OEMs, like IHLE ([10-20]%), part of Michelin/Euromaster. (26) Other wholesalers active in Germany include for example Reifen Wolf, Reifen Specht, Reifen Burkhardt, Semex, Reifen Straub, etc.
(27) Post-Transaction, the Parties would therefore continue to face competition from a large number of other wholesalers. The customers responding to the Commission's market investigation confirmed that they can (and many of them currently do) source from a significant number of wholesalers in Germany. While several respondents to the market investigation noted that EfTD and Reifen Krieg Group are among the significant wholesalers of replacement tyres in Germany, they took the view that they will continue to face competitive constraints from other wholesale suppliers, as well as from tyre OEMs.
(28) Even if tyre OEMs were to be considered to belong to a separate market from wholesalers, the evidence available to the Commission suggests they exert a competitive constraint on the latter. The majority of customers responding to the market investigation confirmed that they source replacement tyres for all vehicle types directly from tyre OEMs, with several of them sourcing the majority of their requirements from OEMs. 19 In total, OEMs sell around 60% of all replacement tyres in the passenger car, motorbike and truck categories in Germany. 20 (29) For the reasons set out above, the Commission takes the view that the Proposed Transaction does not raise serious doubts as to its compatibility with the internal market on the market for the wholesale supply of replacement tyres in Germany, irrespective of the exact relevant market definition retained.
5. Conclusion (30) For the above reasons, the European Commission has decided not to oppose the notified operation and to declare it compatible with the internal market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger Regulation and Article 57 of the EEA Agreement. For the Commission (Signed) Margrethe VESTAGER Member of the Commission (1) OJ L 24, 29.1.2004, p. 1 (the 'Merger Regulation'). With effect from 1 December 2009, the Treaty on the Functioning of the European Union ('TFEU') has introduced certain changes, such as the replacement of 'Community' by 'Union' and 'common market' by 'internal market'.
The terminology of the TFEU will be used throughout this decision. (2) OJ L 1, 3.1.1994, p. 3 (the 'EEA Agreement'). (3) Publication in the Official Journal of the European Union No C 243, 11.7.2018, p. 9. (4) Turnover calculated in accordance with Article 5 of the Merger Regulation. (5) There are also minimal overlaps between the Parties as regards the retail supply of replacement tyres in Germany, the wholesale supply of wheel rims, fitted wheels (i.e. wheel and tyre combined) and TPMS sensors in Germany, as well as the wholesale supply of replacement tyres in other Member States. These overlaps do not give rise to affected markets within the meaning of Annex 1 to the Implementing Regulation (EC) No.
802/2004, Section 6.3. (6) Autodistribution Group, the other Bain Capital company that is active in the wholesale supply of replacement tyres, has limited activities on this market and is active exclusively in France, so there is no overlap with the activities of Reifen Krieg Group in Germany. (7) Cases M.3081 – Michelin/Viborg, M.6063 – Itochu/Speedy, M.7643 – CNRC/Pirelli. (8) Cases M.3081 – Michelin/Viborg, M.6063 – Itochu/Speedy. (9) Wholesalers themselves can also compete on the manufacturer level through own brand tyres, be vertically integrated with (or contractually linked to) retail-outlets or be active as (online) retailers selling also directly to end-customers via online platforms.
(10) Some customers that are only supplied by wholesalers and not OEMs are specific platforms set up as cooperations by wholesalers, which by their nature excludes OEMs as (direct) suppliers. (11) Customers' replies to the Commission's request for information of 12 July 2018. (12) Customers' replies to the Commission's request for information of 12 July 2018. (13) Case M.7643 – CNRC/Pirelli. (14) Cases M.3081 – Michelin/Viborg, M.6063 – Itochu/Speedy, M.7643 – CNRC/Pirelli. (15) Case M.7643 – CNRC/Pirelli. (16) Customers' replies to the Commission's request for information of 12 July 2018.
(17) German Tyre Dealers and Vulcanization Trade Association (Bundesverband Reifenhandel und Vulkaniseur-Handwerk e.V.): Marktstrukturanalyse – der Reifenfachhandel im Reifenersatzgeschäft in Deutschland, 1 February 2018. (18) Estimated market shares for wholesale supply of all replacement tyres in Germany for 2017 by value. The Parties are unable to provide individual competitors' market shares at the level of vehicle type segment. (19) Customers' replies to the Commission's request for information of 12 July 2018. (20) German Tyre Dealers and Vulcanization Trade Association (Bundesverband Reifenhandel und Vulkaniseur-Handwerk e.V.):
Marktstrukturanalyse – der Reifenfachhandel im Reifenersatzgeschäft in Deutschland, 1 February 2018.