CASE STUDIES – Mergers

1. Commission clears Volvo's acquisition of Renault's truck business subject to significant

undertakings

The European Commission has decided not to oppose the acquisition by Volvo of Renault
Vehicule Industriels ("RVI"). Volvo is a Swedish manufacturer of trucks, buses and engines.
RVI has until now been a wholly owned subsidiary of Renault SA. The decision follows a
careful investigation of the affected markets, in the course of which the parties have made
significant undertakings that will remove the competition concerns resulting from the
acquisition of RVI.

On 14 March 2000, the Commission declared the proposed merger between Volvo and Scania
incompatible with the Common market (Case No. COMP/M.1672 Volvo/Scania, decision
published on the Internet. See also press release IP/00/257). Following this decision Volvo has
remained a significant shareholder in Scania. Similarly, RVI has, through the Irisbus joint
venture(1), been linked to Iveco (of the Fiat group) in the production and sales of buses. However,
in the context of the RVI acquisition, the parties have committed vis-à-vis the Commission to
remove these links to Scania and Iveco within a specific timeframe. In addition, the parties have
also undertaken to eliminate the overlap in bus activities in France created by the operation.

These undertakings will ensure that the present concentration will not lead to negative effects on
competition on the markets considered in the Volvo/Scania case or, through the additional link
with the Fiat group, on the bus markets. They have also enabled the Commission to focus its
investigation on the relatively limited number of markets where both Volvo and RVI have
significant activities.

In heavy trucks (>16 tonnes), the merger will only create significant overlaps in three European
countries, namely in Finland (combined market share of 55%), France (49%) and in Portugal
(43%). In medium heavy trucks (7-16 tonnes), the parties will achieve their highest combined
market shares in France (44%) and in Denmark (39%). In all other EU countries the combined
Volvo/RVI share would be around 30% or below.

In Finland, Volvo has a market share of 37% for heavy trucks, while RVI has a share of 18%.
However, RVI is primarily active through an extensive co-operation with Oy Sisu AB ("Sisu"), a
national truck producer. In 1997 RVI and Sisu established a joint venture company RS Hansa
Auto OY ("Hansa") to handle distribution of RVI and Sisu trucks, parts and accessories in Finland
and the Baltic area. Following a commitment, RVI's share of Hansa will be sold within a specific
timeframe. TheThis undertaking solves the competition concerns on the Finnish market for heavy
trucks.

The merged entity will remain subject to effective competition from several well-established
competitors in all other markets. For example, in France, RVI has been loosing market share since
1994. The main beneficiary of this has been DAF, which has tripled its market share in that
period. At present all the other European truck producers are present in France and achieve
substantial sales ranging from 6-16%. Finally, the investigation has confirmed that Volvo and RVI
are not seen as particularly close substitutes in any market. Therefore, the concerns relating to the
acquisition of a close competitor, which was one of the objections raised in the Volvo/Scania
case, does not arise in the present concentration.

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Commenting on the decision, Mr. Monti, the Commissioner responsible for competition policy,
made the following statement. "Today's decision to clear the merger between Volvo and RVI
concludes in a satisfactory manner a process that for the Commission started almost a year ago
with the notification of the Volvo/Scania deal". He added: "We can now see the final results of the
Commission's prohibition decision. Since then not only Volvo has teamed up successfully with
RVI. Also Scania has found an alternative strategic partner in Volkswagen, which was not
previously active in the production of heavy trucks and buses. These transactions will hopefully
contribute to the development of a more competitive situation in the European markets for heavy
vehicles."

2. Mergers: Commission clears acquisition of Reebok by adidas

The European Commission has cleared under the EU Merger Regulation the proposed € 3.1
billion acquisition of US based Reebok International Ltd (“Reebok”) by adidas-Salomon AG
(“adidas”) of Germany. The Commission concluded that the transaction would not
significantly impede effective competition in the EEA or any substantial part of it.

Reebok and adidas are global players active in the supply of sports and leisure footwear, clothing
and equipment. The merger will create one of the leading groups in the European and world
markets. The Commission’s investigation focused on the market for athletic footwear in Europe,
where both adidas and Reebok are strong players. The investigation showed that there are
horizontal overlaps between the activities of adidas and Reebok.

However, the market investigation revealed that adidas and Reebok have slightly different brand
and pricing positions. adidas is perceived as a professional, technically oriented brand with strong
European roots. Reebok predominantly targets young people and women, is more a “leisure”
brand and has a stronger presence in American sports that are not excessively popular in Europe.
Partly due to its different heritage, Reebok’s image on the European markets is weaker than those
of adidas or the worldwide leader Nike. Also in terms of pricing, adidas is positioned in the
medium to high price points, while Reebok is stronger in the low to medium price points.

In those sport shoes categories and price points where both adidas and Reebok are strongest, i.e.
medium price points in tennis, basket-ball and workout shoes, the Commission did not find any
evidence that the merged entity would be able to increase prices. This is due to the intense
competition coming from several players with significant market shares and strong brands.

In an unrelated case, on 12th October.2005 the Commission approved, subject to conditions, the
sale of adidas’ Salomon business segment to the Amer Sports Corporation

3. Mergers: Commission clears planned acquisition of control over Eurowings by

Lufthansa, subject to conditions

The European Commission has cleared under the EU Merger Regulation the proposed
acquisition of control by German airline Deutsche Lufthansa AG over the German airline
Eurowings Luftverkehrs AG and its subsidiary, the low cost airline Germanwings. The
Commission's clearance is conditional upon the parties surrendering slots at Vienna and
Stuttgart airports and other concessions. In light of these commitments, the Commission has
concluded that the transaction would not significantly impede effective competition in the
European Economic Area (EEA) or a substantial part of it.

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Competition Commissioner Neelie Kroes commented " the Commission has ensured that other
carriers will be able to offer services in competition with the merged company. This was essential
because, with this transaction, Lufthansa will acquire control over a low cost airline for the first
time, and low cost airlines provide important competition on some routes",

Lufthansa is the principal airline in Germany and provides air transport of persons, cargo and
related services. It is a member of the Star Alliance of airlines. Lufthansa recently acquired the
airline Swiss (see IP/05/837). Eurowings currently offers scheduled low cost air services and
related services through its 100% subsidiary Germanwings. It operates from Cologne/Bonn,
Stuttgart and Berlin-Schönefeld airports and, as of the beginning of the winter season 2005/2006,
from Hamburg.

Lufthansa already owns a 49% shareholding in Eurowings but currently Lufthansa is not able to
determine the strategic commercial behaviour of Eurowings and Germanwings. Lufthansa and
Eurowings intend to sign an agreement whereby Lufthansa will acquire the majority of the voting
rights in, and sole control of, Eurowings and Germanwings.

Lufthansa, as a network carrier, and Germanwings, as a low cost airline, operate with different
business strategies. Nevertheless, they are perceived as competitors by time-sensitive and non-
time sensitive passengers alike. The Commission's investigation showed that the proposed
acquisition by Lufthansa of Eurowings would eliminate competition on three intra-European
routes, i.e. Cologne/Bonn-Vienna, Stuttgart-Vienna and Stuttgart-Dresden. In reaching this
conclusion the Commission also took into account the impact of Lufthansa's close co-operation
with Austrian Airlines, which is also a member of the Star Alliance.

To address the Commission’s concerns, the parties have committed to surrender slots at the
airports of Vienna and Stuttgart. This creates the conditions for competing airlines to emerge on
the affected routes. Furthermore, the parties are offering additional commitments, such as for
example allowing competitors to participate with their flights on the affected routes in
Lufthansa’s Frequent Flyer Programme with the aim of making entry more attractive.