Facts

On January 31 2018 the Belgian Competition Authority (BCA) approved Volvo Group Belgium's acquisition of various companies belonging to the Kant group, an official Volvo distributor and service provider. The transaction resulted in various horizontal overlaps and vertical relations which, according to the BCA Investigation and Prosecution Service, were problematic only for local markets for the repair and maintenance of commercial Volvo vehicles (including heavy trucks, semi-heavy trucks and buses).

The notifying party argued that the market must be defined more broadly (ie, as a system market which includes both the sale of commercial vehicles and spare parts and repair and maintenance services). The prosecutor disagreed, concluding that there is a separate market for repair and maintenance services and that each brand constitutes a separate market. The prosecutor then calculated local market shares, finding combined estimated market shares of up to 80%. It concluded that the transaction was likely to result in competition issues and therefore proposed that the Competition College initiate a Phase II investigation.

Decision

The Competition College agreed that the relevant product market concerned the repair and maintenance of commercial Volvo vehicles. However, contrary to the prosecutor, it held that the market also included services provided by non-official service providers. The Competition College upheld the prosecutor's definition of the local geographic market and considered that the small but significant and non-transitory increase in price test was only an optional method to delineate the relevant geographic market.

Highlighting that none of the respondents in the market test had objected to the transaction, the Competition College noted that, despite the high market shares, the combined entity would be under competitive constraints.

After the hearing, the notifying party submitted two remedies to the Competition College. The party committed to appointing an additional official Volvo service centre in the area where the parties had a combined market share of 70% to 80%. It also committed:

  • to close the Volvo garage in Sint-Niklaas (where the parties had a combined market share of 50% to 60%);
  • not to initiate new repair and maintenance activities in that area; and
  • not to oppose companies commencing competing activities on the premises of the closed Volvo garage.

The prosecutor found these remedies insufficient to alleviate its concerns and therefore reiterated its request for a Phase II investigation. However, the Competition College considered that the remedies, in addition to the existing competitive constraints, would put sufficient competitive pressure on the combined entity post-transaction. It therefore approved the transaction, subject to the proposed remedies.

Comment

This case further illustrates the Competition College's pragmatic approach to merger control cases, even where high market shares are involved. It demonstrates that a hearing before the Competition College is not just a formality and that parties can successfully contest a prosecutor's findings.

For further information on this topic please contact Koen Platteau or Mathieu Vancaillie at Simmons & Simmons by telephone (+32 2 542 0960) or email (koen.platteau@simmons-simmons.com or mathieu.vancaillie@simmons-simmons.com). The Simmons & Simmons website can be accessed at www.simmons-simmons.com.

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