case m.8741 - kss holdings / takata corporation€¦ · european commission dg competition case...
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EUROPEAN COMMISSION DG Competition
Case M.8741 - KSS
HOLDINGS / TAKATA
CORPORATION
Only the English text is available and authentic.
REGULATION (EC) No 139/2004
MERGER PROCEDURE
Article 6(1)(b) NON-OPPOSITION
Date: 21/02/2018
In electronic form on the EUR-Lex website under
document number 32018M8741
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: [email protected].
EUROPEAN COMMISSION
Brussels, 21.2.2018
C(2018) 1197 final
To the Notifying Party
Subject: Case M.8741 – KSS Holdings / Takata Corporation
Commission decision pursuant to Article 6(1)(b) of Council
Regulation No 139/20041 and Article 57 of the Agreement on the
European Economic Area2
Dear Sir or Madam,
(1) On 17 January 2018, the European Commission received a notification of a
proposed concentration pursuant to Article 4 of the Merger Regulation by which
KSS Holdings Inc. ("KSS", USA) acquires within the meaning of Article 3(1)(b)
of the Merger Regulation sole control of substantially all assets of Takata
Corporation ("Takata", Japan) (the "Transaction").3 KSS is designated hereinafter
as the "Notifying Party" and together with Takata as the "Parties".
1. THE PARTIES AND THE CONCENTRATION
(2) KSS is active in the research and development, design, manufacture, marketing
and sale of automotive safety systems, and more specifically seat belts, airbags
and steering wheels. KSS is a wholly-owned subsidiary of Ningbo Joyson
Electronic Corp., a Chinese automotive supplier.
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 033, 30 January 2018, p. 18.
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.
PUBLIC VERSION
2
(3) Takata is an automotive safety systems company that supplies automotive
manufacturers with a product range that includes seat belts, airbag systems and
steering wheels. In particular, Takata engages in research and development on the
design, manufacture, marketing and sale of steering wheels, airbags and seat
belts.
(4) This Transaction forms part of Takata's restructuring plan following its financial
difficulties related to the Phase-Stabilized Ammonium Nitrate ("PSAN") inflators
incident. Over the past several years, certain PSAN inflators manufactured by
Takata have ruptured upon deployment of the airbag, causing injury and in some
cases death. As a result, important recalls were initiated by automotive original
equipment manufacturers ("OEMs") customers resulting in billions of dollars in
reimbursement claims against Takata. Takata is currently in the midst of several
bankruptcy proceedings in various jurisdictions. On 25 June 2017, Takata and
some of its subsidiaries and affiliates commenced voluntary cases under Chapter
11 of the United States Code before the USA Bankruptcy Court for the District of
Delaware. Bankruptcy proceedings are also ongoing in Japan and Canada.4
(5) Despite the occurred incident, Takata is still considered a technically capable
supplier that possesses the necessary know-how and experience, and as such still
has credibility vis-à-vis the customers on the technical level. […].5 […] KSS'
acquisition, is considered necessary as the current management allegedly covered
up test results, […].6
(6) Following this and taking into account Takata's financial situation, as described in
paragraph (4), absent the Transaction, Takata would likely remain a significantly
weaker supplier in the markets for seatbelts, steering wheels and airbags.
(7) Pursuant to the Asset Purchase Agreements, dated 16 November 2017, KSS will
acquire substantially all assets of Takata.7 Therefore, the Transaction consists of
the acquisition of sole control by KSS over Takata within the meaning of Article
3(1)(b) of the Merger Regulation.
2. EU DIMENSION
(8) The undertakings concerned have a combined aggregate world-wide turnover of
more than EUR 5 000 million8 (KSS: EUR [turnover data]; Takata:
EUR [turnover data]). Each of them has an EU-wide turnover in excess of
EUR 250 million (KSS: EUR [turnover data]; Takata: EUR [turnover data]), but
they do not achieve more than two-thirds of their aggregate EU-wide turnover
within one and the same Member State.
4 Information on the PSAN incident and resulting Takata liabilities based on Form CO, paragraphs 202-
213. 5 See, e.g. Minutes of Conference Call of 10 January 2018 with customer, paragraph 21; Supplemental
Submission on the specificities of the Proposed Transaction from the Notifying Party, dated 22
January 2018. 6 See Annex 5.4 […]; "Takata execs ordered technicians to erase airbag test results, report says",
Automotive News, http://www.autonews.com/article/20141106/OEM11/141109871/takata-execs-
ordered-technicians-to-erase-airbag-test-results-report. 7 This is with the exclusion of certain assets and operations that relate to Takata's manufacturing of
PSAN inflators. […]. 8 Turnover calculated in accordance with Article 5 of the Merger Regulation.
3
(9) The Transaction therefore has an EU dimension within the meaning of Article
1(2) of the Merger Regulation.
3. RELEVANT MARKETS
(10) The Transaction will give rise to horizontal overlaps and a vertical relationship
between the Parties' activities.
The activities of KSS and Takata overlap as regards the manufacturing
and the supply of airbags, seat belts and steering wheels.
An affected vertical link also arises pursuant to the Transaction, between
Takata's sales of flat airbag fabric (upstream) and KSS' activities in airbag
modules (downstream).
(11) The relevant markets will be further discussed below.
3.1. Product market definition
3.1.1. Manufacture and supply of airbags
(12) Airbags are safety devices installed in vehicles that inflate very quickly in case of
a rapid and sudden deceleration of the vehicle, generally following a collision or
impact, in order to prevent or reduce the occupants from suffering impact-related
injuries.
Commission's decision making practice
(13) First, in previous decisions, the Commission has considered that an airbag system
consists of two major modules that each constitute a separate market, namely (i)
the airbag control electronics module with the crash sensor, and (ii) the airbag
module encompassing the casing, airbag cushion and airbag inflator.9 As regards
a possible distinct market per components, the Commission later noted that airbag
components were increasingly and usually manufactured internally by the airbag
supplier so as to sell it as a whole. The Commission eventually left open whether
the airbag market could be further sub-segmented per components.10
(14) Second, in previous decisions, the Commission has also considered a potential
segmentation depending on the location of the airbag in the vehicle, between (i)
driver airbag, (ii) passenger airbag, (iii) curtain airbag and (iv) side airbag. The
market definition was ultimately left open.11
View of the Notifying Party
(15) First, with regard to airbag components, the Notifying Party submits that both
Parties manufacture the main airbag components, but do not sell them on a
standalone basis in the EEA. Further, in line with the Commission's decision
making practice, the Notifying Party submits that automotive OEMs almost
always purchase the airbag components together and most airbag suppliers
9 Case No COMP/M.3972 – TRW Automotive / Dalphi Metal España, paragraph 7. 10 Case No COMP/M.3972 – TRW Automotive / Dalphi Metal España, paragraph 7. 11 Case No COMP/M.3972 – TRW Automotive / Dalphi Metal España, paragraph 8.
4
manufacture the inflator in-house, their demand therefore being addressed
through captive sales.12 As such, the Notifying Party submits that the relevant
product market for the purpose of the present Transaction is the market for the
supply of airbags as a whole.
(16) Second, with regard to a possible market segmentation according to types of
airbags, the Notifying Party agrees with the Commission's decision making
practice.13
(17) Adding to the Commission's decision making practice as regards a potential
location-determined segmentation, the Notifying Party submits that knee airbags
could potentially constitute another market segment. Both Parties offer knee
airbags.14
Commission's assessment
(18) First, with regard to a possible market segmentation for airbag components, the
Parties do not sell the airbag's main components on a standalone basis in the EEA.
The Parties' competitors also manufacture and sell together the complete airbag
module in the EEA. On their side, automotive OEMs source the airbag module as
a whole. Consequently, the competitive landscape and market conditions will be
the same irrespective of the market definition retained.
(19) Second, with regard to a possible market segmentation according to types of
airbags, the results of the market investigation confirm the market segmentation
as submitted by the Notifying Party, in driver, passenger, curtain, side and knee
airbags.
(20) From a demand-side perspective, some customers consider the various categories
of airbags as not directly substitutable, mainly because of the different sizes and
forms of the airbags. However, automotive OEMs explained that the main
components are basically similar for all airbags.15
(21) From a supply-side perspective, it seems that all main suppliers, namely Autoliv,
ZF, Toyoda Gosei, KSS and Takata, are able to provide the complete range of
airbag products.16
Conclusion
(22) In light of the above and for the purpose of the present decision, the Commission
therefore concludes that there is a relevant market for the manufacture and supply
of airbags as a whole. On the other hand, it can be left open whether the market
12 Form CO, paragraph 73. 13 Form CO, paragraph 71. 14 Knee airbags are located under the steering wheel and glove compartment and aim to protect a driver
or passenger from suffering knee injuries. 15 Minutes of Conference Call of 16 January 2018 with customer, paragraph 5; Minutes of Conference
Call of 10 January 2018 with customer, paragraphs 10-11; Minutes of Conference Call of 10 January
2018 with supplier, paragraph 6. 16 Minutes of Conference Call of 9 January 2018 with competitor, paragraph 8-9; Minutes of Conference
Call of 12 January 2018 with competitor, paragraph 13; Minutes of Conference Call of 11 January
2018 with customer, paragraph 8; Minutes of Conference Call of 16 January 2018 with customer,
paragraph 8.
5
for the manufacture and sale of airbags should be considered as a whole or should
be further segmented into (i) driver airbags, (ii) passenger airbags, (iii) curtain
airbags, (iv) side airbags and (v) knee airbags as serious doubts as to the
compatibility of the Transaction with the internal market do not arise under any
plausible market definition.17
3.1.2. Manufacture and supply of seat belts
(23) Seat belts are harnesses installed on seats to protect occupants in case of accidents
or abrupt changes in the motion of the vehicle.
Commission's decision making practice
(24) The Commission has not yet investigated a potential market for the supply of seat
belts.
View of the Notifying Party
(25) The Notifying Party submits that seat belts as a whole constitute a single relevant
market, as all components of a seat belt are sold to automotive OEMs as an
integrated product.
Commission's assessment
(26) The results of the market investigation confirm that seat belts are generally sold
as a whole integrated product and not component by component.
(27) From a demand-side perspective, respondents consider that the components of a
seat belt are almost all the time sourced by OEMs as a single integrated product
so that there is no market for the sale of standalone seat belt components.18
(28) From a supply-side perspective, all main seat belt suppliers are able to provide all
various seat belts according to the customer's technical requirements, which are
overall the same but with slight variations for each vehicle project.19
Conclusion
(29) In light of the above and for the purpose of the present decision, the Commission
considers that the relevant market is the manufacture and sale of seat belts as a
whole.
17 The competitive assessment is conducted in Section 4. 18 Minutes of Conference Call of 11 January 2018 with customer, paragraph 7; Minutes of Conference
Call of 16 January 2018 with customer, paragraphs 7-8; Minutes of Conference Call of 10 January
2018 with customer, paragraph 10; Minutes of Conference Call of 10 January 2018 with customer,
paragraphs 4 and 6. 19 Minutes of Conference call of 12 January 2018 with competitor, paragraph 10 and 13; Minutes of
Conference Call of 9 January 2018 with competitor, paragraphs 5, 8-9; Minutes of Conference Call of
10 January 2018 with customer, paragraphs 4 and 6; Minutes of Conference call of 11 January 2018
with customer, paragraph 8.
6
3.1.3. Manufacture and supply of steering wheels
(30) A steering wheel is a tool to control the steering of the vehicle that sits on top of
the steering column module. They can be constructed with plastic, leather and/or
wood, and often include remote commands through switches.
Commission's previous decision making practice
(31) In previous decisions, the Commission considered that there is a distinct market
for steering wheels and that no further segmentation is appropriate.20
View of the Notifying Party
(32) The Notifying Party agrees with this market delineation.
Commission's assessment
(33) The market investigation confirmed that steering wheels constitute a distinct
product market.
(34) From a demand-side perspective, automotive OEMs consider that all suppliers
can slightly adapt their products to meet any sorts of differences that a car model
or specific customer could require.21
(35) From a supply-side perspective, respondents confirmed that there can be small
differences depending on the car type, but that all major suppliers can provide the
whole range of steering wheels.22
Conclusion
(36) In light of the above and for the purpose of the present decision, the Commission
considers that the relevant market is the market for manufacture and sale of
steering wheels as a whole.
3.1.4. Manufacture and supply of flat fabric
(37) Flat fabric is the woven yarn used to produce airbag cushions.23 Airbag suppliers
source flat fabric externally to then integrate it to the airbag module that is sold as
a whole to automotive OEMs.
20 Case No COMP/M.3972 – TRW Automotive / Dalphi Metal Espana, paragraph 9. 21 Minutes of Conference Call of 16 January 2018 with customer, paragraph 8-9; Minutes of Conference
call of 11 January 2018 with customer, paragraph 8. 22 Minutes of Conference call of 12 January 2018 with competitor, paragraph 10 and 13; Minutes of
Conference Call of 9 January 2018 with competitor, paragraphs 5, 8-9; Minutes of Conference Call of
10 January 2018 with customer, paragraphs 4 and 6; Minutes of Conference Call of 16 January 2018
with customer, paragraph 8-9; Minutes of Conference call of 11 January 2018 with customer,
paragraph 8. 23 In previous decisions, the Commission has further divided airbag cushions into three distinct product
segments: (See M.4389 – WRL / BST, paragraph 9). In the present case, as the vertical relationship
only exists as regards flat airbag fabric, any other segment will not be further discussed.
7
Commission's previous decision making practice
(38) In a previous decision, the Commission has concluded that flat airbag fabric
constitutes a separate relevant product market.24
View of the Notifying Party
(39) The Notifying Party agrees with this market definition. KSS does not manufacture
flat fabric, while Takata does even though its share on the merchant market is
marginal.
Commission's assessment
(40) The market investigation confirmed that flat fabric can be considered the relevant
product market. Most of the suppliers of airbags do not manufacture flat fabric
but source it from market players, such as Milliken, Toray or Hyosung-Global
Safety Textile ("GST"), UTT, NCV etc.
Conclusion
(41) In light of the above and for the purpose of the present decision, the Commission
considers that the relevant product market is the market for manufacture and
supply of flat fabric.
3.1.5. No other segmentation
By type of vehicle
(42) For seatbelts, airbags and steering wheels markets, in accordance with the
Notifying Parties' view,25 and the Commission's decision making practice,26 a
further segmentation by type of vehicle (passenger cars and light/heavy
commercial vehicles) is not relevant for the present decision. As the Parties only
overlap on the passenger car segment, the competitive assessment will only
concern this.
OEMs/aftermarket
(43) For each of the seatbelts, airbags and steering wheels markets, in accordance with
the Notifying Party's view,27 the Commission's decision making practice28 and
the results of the market investigation,29 a further sub-segmentation between
components manufactured for OEMs, original equipment services ("OESs") or
independent aftermarket ("IAM") players is not warranted.
24 Case No COMP/M.4389 – WLR / BST, paragraph 17. 25 See Form CO, paragraphs 64-66: the Parties and their competitors generate the majority of their
revenue from the sale of automotive safety products used in passenger cars. 26 Case No COMP/M.3972 – TRW Automotive / Dalphi Metal Espana, paragraph 11. 27 See Form CO, paragraph 63: airbag replacement products must necessarily be of the same brand and
type as the replaced product. For seat belts and steering wheels, the supply of replacement products is
limited to non-existent. 28 Case No COMP/M.3972 – TRW Automotive / Dalphi Metal Espana, paragraph 12. 29 Minutes of Conference call of 12 January 2018 with competitor, paragraph 12; Minutes of Conference
Call of 10 January 2018 with customer, paragraph 4; Minutes of Conference Call of 10 January 2018
with customer, paragraph 12.
8
3.2. Geographic market definition
3.2.1. Manufacture and supply of airbags, steering wheels and seat belts
(44) As the geographic conditions of purchase of the three automotive safety products
are similar, they will be treated together below.
Commission's previous decision making practice
(45) In previous decisions, the Commission has considered that airbags, steering
wheels and seat belts markets are at least EEA-wide, if not wider.30
View of the Notifying Party
(46) The Notifying Party agrees with this market delineation, and submits that these
markets are at least EEA-wide in scope.31
Commission's assessment
(47) The market investigation confirmed that automotive safety systems are purchased
at EEA-level, while in a minority of cases OEMs will send a request for quotation
("RFQ") covering a wider scope.
(48) From a demand-side perspective, automotive OEMs explained that components
incorporated in cars sold in EEA are generally manufactured in EEA and
definitely not at a national level.32
(49) From a supply-side perspective, suppliers consider that they can provide
automotive safety systems at a global level, but observe that EEA-based
automotive OEMs generally purchase from manufacturing plants located in the
EEA. Moreover, homologation and testing systems are uniform in the EEA.33
Conclusion
(50) In light of the above and for the purpose of the present decision, the Commission
considers that the relevant geographic scope of the markets for manufacture and
supply of airbags, seat belts and steering wheels is at least EEA wide. The
competitive assessment will be conducted at the narrowest market level; the EEA
level.
30 Case No COMP/M.3972 – TRW Automotive / Dalphi Metal Espana, paragraph 13. 31 See Form CO, paragraph 84: the Notifying Party refers to the Commission's precedent that found that:
(i) testing and approval methodologies are uniform across Europe; (ii) production activities are
centralized within the EEA; (iii) the buying policy of OEMs is European-wide; (iv) prices are
homogenous within the EEA; and (v) transport costs are relatively limited (less than 5% of the product
costs). 32 Minutes of Conference Call of 16 January 2018 with customer, paragraph 10; Minutes of Conference
Call of 10 January 2018 with customer, paragraph 7; Minutes of Conference Call of 9 January 2018
with competitor, paragraph 11. 33 Minutes of Conference Call of 9 January 2018 with competitor, paragraphs 10, 11 and 13; Minutes of
Conference Call of 17 January 2018 with competitor, paragraph 11; Minutes of Conference Call of 12
January 2018 with competitor, paragraph 18.
9
3.2.2. Manufacture and supply of flat fabric
Commission's previous decision making practice
(51) As regards the upstream market for flat fabric, the Commission has in previous
decisions concluded that this market is EEA-wide in scope.34
View of the Notifying Party
(52) The Notifying Party agrees with this delineation and considers that the
competitive conditions are homogeneous within the EEA, and practically all
customers and competitors of flat fabric have production facilities in the EEA.35
Commission's assessment
(53) The market investigation confirmed that the market for the manufacture and
supply of flat fabric is at-least EEA wide in scope, but could potentially be wider.
Some respondents indicated that generally, facilities located within the EEA will
supply flat fabric to EEA customers, but a minority has mentioned that the supply
chain could be global.36
Conclusion
(54) In light of the above and for the purpose of the present decision, the Commission
considers that the relevant geographic scope for the market for manufacture and
supply of flat fabric is at least EEA-wide. The assessment will be conducted at the
narrowest geographic market level; the EEA level.37
4. COMPETITIVE ASSESSMENT
(55) The Transaction will give rise to horizontal overlaps and a vertical relationship
between the Parties' activities.
(56) The activities of KSS and Takata overlap as regards the manufacturing and the
supply of airbags, seat belts and steering wheels. The overlaps between the
Parties' activities give rise to a limited number of affected markets, namely (i)
airbags, (ii) driver airbags, (iii) passenger airbags, (iv) curtain airbags, (v) seat
belts and (vi) steering wheels.
(57) An affected vertical link also arises pursuant to the Transaction, between Takata's
merchant sales of flat airbag fabric (upstream) and KSS' sales of driver airbags
(downstream).
34 Case No COMP/M.4389 – WRL / BST, paragraph 19. 35 See Form CO, paragraphs 85-86. 36 Minutes of Conference Call of 17 January 2018 with competitor, paragraph 10. 37 The Notifying Party submitted that the Parties' market shares are broadly similar on a global level, See
Submission by the Notifying Party of 16 February 2018. This statement is in accordance with Annex
5.4; [...]. Also, a larger number of competitors is active on the global level than on the EEA level.
12
specialised in curtain airbags and while it currently does not supply other types of
airbags, iSi estimates that there is a growing demand for them to develop such
products.41
(64) Consequently, there will remain sufficient competition post-Transaction on these
markets.
Takata's declining position
(65) The results of the market investigation show that neither competitors nor
customers of the Parties foresee any negative impact resulting from the
Transaction. In line with the Parties' internal documents, respondents perceive the
Transaction as necessary for Takata's production, technology and know-how to
remain in the market.42 Respondents overall do not expect Takata to survive as a
standalone company.43
(66) As explained in paragraph (5), following the PSAN incidents, Takata's position as
a third supplier in the EEA has on the one hand been greatly impaired. On the
other hand, KSS is a smaller player that is predominantly active in the US and
Japan rather than in the EEA. As the relatively small increment brought about by
the Transaction illustrates, KSS is considered a more distant fourth player
compared to the historical EEA-players ZF, Autoliv and Takata. Therefore, the
combination of the declining Takata with the rather small KSS is unlikely to have
a negative impact on the affected markets.
(67) For completeness, there is no major specific innovation expected on the airbags,
steering wheels and seat belts markets. Therefore, the Transaction will not result
in innovative harm on these markets.44
(68) Consequently, the Transaction does not eliminate a long-term viable supplier. It
rather allows a distant fourth player to increase its production strengths and
credibility in the EEA.
Strong automotive OEMs as customers
(69) The automotive OEMs purchasing passive safety products are large, well-
established buyers that have a high level of expertise. The results of the market
investigation indicate that OEMs are confident that, for the products concerned,
they would be able to counter any price increases brought about by the
Transaction.45
41 Minutes of Conference Call of 17 January 2018 with competitor, paragraph 7. 42 Annex 5.4, […]. 43 Minutes of Conference Call of 10 January 2018 with supplier, paragraph 17; Minutes of Conference
Call of 11 January 2018 with customer, paragraphs 21-23; Minutes of Conference Call of 10 January
2018 with customer, paragraph 21; See also the Supplemental Submission on the specificities of the
Proposed Transaction from the Notifying Party, dated 22 January 2018. 44 See Reply to RFI to Notifying Party dated 1 February 2018. 45 Minutes of Conference call of 9 January 2018 with competitor, paragraph 29; Minutes of Conference
call of 10 January 2018 with customer, paragraph 17.
13
Conclusion
(70) In conclusion, the Commission considers that horizontal unilateral effects are
unlikely to materialise post-Transaction. Therefore, the Transaction does not raise
serious doubts as to its compatibility with the internal market in this regard.
4.2. Vertical relationships
4.2.1. Manufacture and supply of flat fabric – Manufacture and supply of
airbags
(71) An affected vertical link arises pursuant to the Transaction, between Takata's
merchant sales of flat airbag fabric (upstream) and KSS' sales of driver airbags
(downstream).
(72) The Commission considers that any vertical foreclosure attempt following the
Transaction is unlikely to materialise for the below developed reasons.
(73) First, with regard to the upstream market for the manufacture and supply of flat
fabric, Takata's manufacture of flat fabric is targeted to its own in-house
production of integrated airbags. Takata only sells less than [0-5]% of its overall
flat airbag fabric production to third parties. Strong suppliers competing with
Takata on the market for the manufacture and supply of flat fabric are for
example Global Safety Textiles ("GST") and Milliken.46
(74) Second, Takata does not have the ability to expand on the upstream market so as
to engage in a foreclosure attempt. Indeed, [business secret – information on
Takata's production capacity]. Therefore, unless the merged entity engages in a
significant development of its flat fabric activity (which would take significant
time and efforts), it would not be able to cover all of KSS' demand in flat fabric,
in addition to its own.47
(75) Third, with regard to the downstream markets for the manufacture and supply of
airbags only the sub-market for driver airbags is affected with a combined market
share of the Parties of [30-40]%. On all other markets, the Parties have a
combined market share of less than [20-30]%. In addition, none of the above
mentioned suppliers of flat fabric are dependent on sales to KSS.48 Therefore,
even if Takata were to supply KSS internally post-Transaction, effects on the
merged entity's rivals would be limited.
(76) In conclusion, the Commission considers that vertical foreclosure effects are
unlikely to materialise post-Transaction. Therefore, the Transaction does not raise
serious doubts as to its compatibility with the internal market as a result of
vertical effects.
46 Some of these independent suppliers can provide various products, from flat fabric, to cut-and-sewn
airbag cushions ("CSC"), to the complete airbag, depending on the level of vertical integration of its
customer. 47 See Reply to question 5(b) of RFI 2 of 10 January 2018: […]. 48 Minutes of Conference Call of 10 January 2018 with supplier, paragraph 17; Minutes of Conference
Call of 11 January 2018 with supplier, paragraph 11.
14
4.3. Coordinated effects
(77) The Commission considers that any coordinated effects following the Transaction
are unlikely to materialise for the below developed reasons.
(78) First, the market for passive safety systems in the EEA is not transparent. In this
industry, prices are discussed bilaterally with customers and generally in the
context of tenders, and RFQs are negotiated in confidentiality. Also, not all
suppliers receive every RFQ,49 so that there is asymmetrical information between
suppliers.
(79) Second, the Commission's Guidelines on the assessment of horizontal mergers
mention that past behaviour of firms can be used as evidence to predict a risk of
coordinated effects.50 The Commission has recently fined automotive safety
system suppliers for breaching EU antitrust rules. In this context, Takata had
cooperated with the Commission and received full immunity.51 KSS was not part
of the cartel and, as explained in paragraph (5), one aspect of the Transaction is
that […].52 Especially in light of the latter fact, the risk of the past conduct of
Takata leading to coordinated effect post-Transaction is limited.
(80) Third, structural links exist between Takata and ZF, as Takata owns a non-
controlling minority shares in certain ZF subsidiaries (the "Subsidiaries") active
in the manufacturing of steering wheels and airbags.53 These links have been
previously investigated by the Commission, and at the time it was concluded that
such structural links did not entail a risk of coordinated effects.54
(81) The Notifying Party submits that market conditions have since then not changed
and that Takata's non-controlling shares will not provide the merged entity with
the ability or incentive to increase the flow of information between ZF and the
merged entity so as to allow them to reach terms of coordination.55
(82) In addition, […].56 […].57
49 Reply to question 3(b) of RFI 4 of 10 January. 50 See paragraph 43 of the Guidelines on the assessment of horizontal mergers under the Council
Regulation on the control of concentrations between undertakings, OJ C 31, 5.2.2004, p. 5-18. 51 See European Commission, Press release of 22 November 2017, IP-17-4844:
http://europa.eu/rapid/press-release IP-17-4844 en.htm (Accessed on 06.02.2018). 52 See Annex 5.4; […]. 53 See Form CO, paragraph 50: Takata owns a […] stake in Dalphi Metal Espana S.A. ("DME"), a
company that is currently controlled by ZF. […] Takata has a non-controlling interest in three
subsidiaries of DMG ([…]). The remaining […] of the shares are held by DME. 54 Case No COMP/M.3972 – TRW Automotive / Dalphi Metal España, paragraphs 24 and seq. 55 The Notifying Party argues that (a) Takata's minority share does not provide ZF and Takata with the
ability or incentive to reach terms of coordination as Takata does not hold influence on the companies'
daily business or on its strategic orientation or organization. Takata has no influence or control over
the Subsidiaries production output, distribution agreements, technology sharing or other arrangements,
nor does Takata receive any information about such agreements or arrangements with the Subsidiaries.
Moreover, [business secret – corporate structure of the subsidiaries]. Takata's interest is strictly
financial. [business secret – corporate structure of the subsidiaries]. (d) DME has not been involved in
any illicit conduct with Takata. There is no evidence that DME played a role in any exchange of
confidential information between its shareholders. See Reply to RFI 4 of 30 January 2018 and Reply to
Follow-Up Question on the impact of JV between Takata and ZF on the competitive assessment on
coordinated effects of 12 February 2018. 56 See submission of competitor of 2 February 2018.
15
(83) In any case, the links between ZF and Takata are pre-existing to the Transaction.
There is no tangible evidence that post-Transaction the Parties and ZF would
engage in coordinated behaviour on the safety systems products in the EEA.
(84) Finally, as developed in paragraph (69) the market investigation revealed that, in
the present case, automotive OEMs would likely be able to counter attempts of
airbags, steering wheels and seat belts manufacturers to increase prices through
coordinated behaviour.
(85) In conclusion, the Commission considers that coordinated effects are unlikely to
materialise post-Transaction. Therefore, the Transaction does not raise serious
doubts as to its compatibility with the internal market as a result of coordinated
effects.
5. CONCLUSION
(86) 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.
(Signed)
For the Commission
Margrethe VESTAGER
Member of the Commission
57 See Reply to Supplemental Question submitted by the Notifying Party on 9 February 2018, and Reply
to Follow-Up Question by the Notifying Party of 13 February 2018.