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EUROPEAN COMMISSION DG Competition
Case M.8315 - SIEMENS / MENTOR GRAPHICS
Only the English text is available and authentic.
REGULATION (EC) No 139/2004
MERGER PROCEDURE
Article 6(1)(b) NON-OPPOSITION
Date: 27/02/2017
In electronic form on the EUR-Lex website under
document number 32017M8315
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: COMP-MERGER-REGISTRY@ec.europa.eu.
EUROPEAN COMMISSION
Brussels, 27.2.2017
C(2017) 1477 final
To the Notifying party:
Subject: Case M.8315 - SIEMENS / MENTOR GRAPHICS
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 23 January 2017, the European Commission received notification of a
proposed concentration pursuant to Article 4 of the Merger Regulation by which
Siemens AG ("Siemens", Germany) acquires within the meaning of Article
3(1)(b) of the Merger Regulation sole control of Mentor Graphics Corporation
("Mentor", United States) by way of purchase of shares (the "Proposed
Transaction"). Siemens is referred to as the "Notifying Party" and Siemens and
Mentor are collectively referred to as the "Parties".
1. THE PARTIES
(2) Siemens is a German stock corporation headquartered in […] Munich, focusing
on electrification, automation and digitalisation. Through its business division
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").
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omitted has been replaced by ranges of figures or a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
Digital Factory, Siemens offers a comprehensive portfolio of seamlessly
integrated hardware, software and technology-based services in order to support
manufacturing companies worldwide in enhancing the flexibility and efficiency
of their manufacturing processes and reducing the time to market of their
products. Product Lifecycle Management ("PLM") software, for example, allows
companies to develop and optimize new products (from product design and
simulation, to manufacturing and maintenance service) on an entirely virtual
basis.
(3) Mentor is a publicly held company headquartered in Wilsonville, Oregon, US. It
is active in the PLM business and provides electronic hardware and software
design solutions, i.e. software, consulting services to support electronic,
semiconductor and systems companies.
2. THE OPERATION
(4) The Proposed Transaction consists in the acquisition of sole control by Siemens
over Mentor. Pursuant to the Merger Agreement entered into between the Parties
and dated 12 November 2016, Siemens Industry, Inc. (US), a Siemens US
subsidiary will acquire 100% ownership of Mentor through a merger of a
transaction vehicle wholly-owned by Siemens Industry, Inc with Mentor. As a
result, all outstanding shares of stock in Mentor will be cancelled, and will be
converted into a right to receive merger consideration from Siemens by Mentor's
shareholders. The Proposed Transaction will result in Siemens holding 100% of
the shares in Mentor and acquiring sole control.
(5) Therefore, the Proposed Transaction constitutes a concentration within the
meaning of Article 3(1)(b) of the Merger Regulation.
3. EU DIMENSION
(6) The undertakings concerned have a combined aggregate world-wide turnover of
more than EUR 2 500 million3 (Siemens: EUR 79 644 million; Mentor: EUR
1 071 million) and a combined aggregate turnover of more than EUR 100 million
in three Member states, namely France (Siemens: EUR […]; Mentor: EUR […]),
Germany (Siemens: EUR […] million, Mentor: EUR […]) and the United
Kingdom (Siemens: EUR […], Mentor: EUR […]). In each of these three
Member States, the aggregate turnover of each of Siemens and Mentor is more
than EUR 25 million. Finally, each of them has an aggregate Community-wide
turnover in excess of EUR 100 million (Siemens: EUR […]; Mentor: EUR […]),
but neither of them achieves more than two-thirds of its aggregate Community-
wide turnover within one and the same Member State.
(7) The Proposed Transaction therefore has an EU dimension pursuant to Article 1(3)
of the Merger Regulation.
3 Turnover calculated in accordance with Article 5 of the Merger Regulation and the Commission
Consolidated Jurisdictional Notice (OJ C 95, 16.4.2008, p. 1).
3
4. RELEVANT MARKETS
(8) The Proposed Transaction concerns the market for the supply of PLM software
services. PLM software covers the supply of a wide range of software products
and solutions that allow a business to digitally, efficiently and cost-effectively
manage information throughout the entire lifecycle of a product. PLM software
creates a virtual world for the design, simulation, testing, manufacturing and
production of a product and the management of the resulting data at each step of
the process.
4.1. Relevant product markets
4.1.1. Introduction
(9) In previous merger decisions4 the Commission left the product market definition
for PLM software supplies open but indicated that: (i) PLM software is a distinct
market within the overall category of Enterprise Application Software ("EAS");
and (ii) it may be appropriate to segment the broader PLM market into specific
market segments for individual applications, in particular:
Digital Product Development ("DPD") which comprises:
o Computer-Aided Design ("CAD");
o Computer-Aided Engineering ("CAE"); and
o Computer-Aided Manufacturing ("CAM");
Digital Manufacturing ("DM"); and
Product Data Management ("PDM").
(10) The Commission's previous decisions considered that PLM software included
only the supply of software for the design of mechanical products. Since then, the
PLM industry has developed considerably, for example to include software for
the design of electronics and embedded software.5 Against this background, it
seems appropriate to consider a sub-division of the overall PLM software
activities into the following categories:
Software for the design and verification of products:
Mechanical PLM ("MPLM") (including certain computational fluid
dynamics ("CFD") software related to MPLM, referred to as MPLM
CFD);
4 Commission decision of 27 April 2007 in Case M.4608 – Siemens/UGS Corporation, paragraph 10;
Commission decision of 29 March 2010 in Case M.5763 – Dassault Systèmes/IBM DS PLM
Software Business, paragraph 16.
5 In addition, the reach of PLM software has extended beyond the design of the manufacturing
process to the actual execution of the manufacturing process. Further, what was at the time of the
Commission’s previous decisions considered to be DPD would now appear to include software for
the design of all types of products i.e. mechanical, electronic, software, as well as architecture and
construction software and embedded software incorporated into the design of products.
4
Electronic Design Automation ("EDA") (including certain related CFD
software, referred to as EDA CFD);
Architecture, Engineering and Construction ("AEC");
Embedded Software Engineering ("ESE");
Application Lifecycle Management ("ALM");
Software for the design of the manufacturing process:
Digital Manufacturing ("DM");
Software for the execution of the manufacturing process:
Manufacturing Execution Systems ("MES"); and
Software related to the entire PLM process:
Collaborative Product Data Management ("CPDM").
(11) The results of the market investigation show indeed that both customers6 and
competitors7 consider these segments of supply software products as
complementary rather than substitutable to each other since they support different
business processes, provide different functionalities and satisfy different customer
needs. One customer notes that each software product focuses on a different
aspect of the product manufacturing process. MPLM tracks use of tangible,
mechanical parts; EDA is used to design electrical parts like integrated circuit
boards; ESE allows companies to manage what firmware they burn onto ICs used
on circuit boards; DM manages bills of material and assembly planning while
MES manages production execution.8
(12) The market investigation provides inconclusive responses as to whether the two
markets for the supply of high end and low end PLM software should be
considered separate.9 While in relation to potential segmentation by industry,
most of the respondents indicate that PLM software products for different
industries could be considered as substitutes or alternatives due to their similar
functionalities and technical requirements.10
(13) While the market investigation indicates that MPLM, EDA, AEC, ESE, ALM,
DM, MES and CPDM may constitute separate product markets, for the purpose of
this decision, the exact product market definition can be left open, since the
Proposed Transaction does not raise serious doubts as to its compatibility with the
6 See responses to Question 6 of Q2 – Questionnaire to customers.
7 See responses to Question 6 of Q1 – Questionnaire to competitors.
8 See Microsoft's responses to Question 6 of Q2 – Questionnaire to customers.
9 See responses to Question 8 of Q1 – Questionnaire to competitors and Q2 – Questionnaire to
customers.
10 See responses to Question 7 of Q1 – Questionnaire to competitors and Q2 – Questionnaire to
customers.
5
internal market under any plausible market definitions for the development and
supply of the said products.
4.1.2. MPLM
(14) MPLM is the category within the overall PLM industry that supplies software for
the digital design, simulation and testing and manufacture of mechanical
products. Mechanical design software differs from software for the design of
electronic components because of the different component types’ characteristics,
in particular size. Subject to the limited exception of CFD software, software used
for MPLM purposes is not suitable for EDA purposes or vice versa.
(15) For the purpose of this decision, the exact product market definition can be left
open, since the Proposed Transaction does not raise serious doubts as to its
compatibility with the internal market under any plausible market definition for
the supply of MPLM software.
4.1.3. EDA
(16) EDA software is used for the design, verification and physical implementation of
electronic systems and electronic components (including sensors, displays, wire
harnesses, and integrated circuits ("ICs"), and printed circuit boards ("PCBs")).
(17) EDA could be further segmented by software for: (i) PCBs; (ii) ICs and (iii) CAE;
as customer demand is different in each segment and different technologies and
expertise are involved. For example, PCB are designed, verified and physically
implemented with a set of EDA tools specifically designed for those PCB related
design tasks.
(18) In response to the market investigation, a majority of customers consider EDA
software for PCBs, ICs and CAE as complimentary and not alternatives to each
other. In particular, one respondent highlights that EDA software for PCBs, ICs
and CAE have different functions. IC software helps managing the design and
manufacturing process governing a specific integrated circuit, which is often a
component of a larger PCB. PCB software helps managing the design and
manufacture of the PCB as a whole, which may have several ICs. CAE software
is used by manufacturers to analyse and test the functionality of the finished PCB,
incorporating any relevant ICs.11 Most of the competitors responding to the
market investigation also consider those software products as mainly
complementary. Only one competitor considers the software products as
potentially alternatives, and notes that investment in both time and capital can be
significant.12
(19) The market investigation further indicates that CAE software solutions include
the complementary products CFD and Finite Element Analysis ("FEA")
software.13
11 See responses to Question 9 of Q2 – Questionnaire to customers.
12 See responses to Question 9 of Q1 – Questionnaire to competitors.
13 See responses to Question 10 of Q1 – Questionnaire to competitors and Q2 – Questionnaire to
customers.
6
(20) For the purpose of this decision, the exact product market definition can be left
open, since the Proposed Transaction does not raise serious doubts as to its
compatibility with the internal market under any plausible market definition for
the supply of EDA software.
4.1.4. CFD
(21) CFD includes PLM software which helps end-users analyse the flow, turbulence
and pressure distribution of liquids and gases and their interaction with objects in
order to prevent errors before proceeding to production. CFD software is used
either as part of MPLM or EDA.
(22) The Commission has previously considered that CFD could be further segmented
by type: high-end vs low-end and/or by sub-application type: 1 dimensional
("1D") or 3 dimensional ("3D") applications14 but ultimately left the market
definition open.
(23) The Notifying Party submits that the product market definition can be left open,
since no competition concerns arise under any potential market definition.
(24) Most of the respondents to the market investigation indicate that 1D and 3D CFD
are mainly complementary and not alternative to each other. Customers may use
both 1D and 3D CFD but at different stages of the design process and to solve
different problems with different algorithms. In particular, 3D CFD is necessary
when analysing fluid flows in more than one dimension.15
(25) For the purpose of this decision, the exact product market definition can be left
open, since the Proposed Transaction does not raise serious doubts as to its
compatibility with the internal market under any plausible market definition for
the supply of CFD software.
4.1.5. Overall MPLM and EDA software for CWH
(26) MPLM and EDA can be complementary products, for the supply of cable wire
harness (“CWH”) applications.16
(27) The Notifying Party submits that it is not appropriate to look at a potential market
comprising MPLM and EDA software for CWH applications since EDA CWH
and MPLM CWH are mainly complementary and address different customers'
needs.
14 Commission decision of 29 March 2010 in case M.5763 – Dassault Systèmes/IBM DS PLM
Software Business, paragraphs 17 - 19.
15 See responses to Q 10.2.1 of Q1 – Questionnaire to competitors and Q2 – Questionnaire to
customers.
16 MPLM software for CWH determines where wires need to physically pass through a product and
where the necessary holes and fixtures need to be located and installed. EDA software for CWH on
the other hand determines which devices are interconnected with each other and how the necessary
signals are passed through the CWH. Data from EDA software systems for CWH and data from
MPLM software for CWH is exchanged during the design process.
7
(28) Respondents to the market investigation indicate that PLM software for CWH
system applications are not substitutable with PLM software for non-CWH
applications since the use cases are different and they serve different purposes.17
(29) The market investigation further indicates that there could be separate sub-
segments for EDA CWH and MPLM CWH software given that the two tools are
used together to complete the CWH design process. Despite interdependencies
between the two types of software, they represent pretty unique functionalities
since MPLM CWH software has a more material/assembly function while EDA
CWH software is used for electrical definition.18
(30) For the purpose of this decision, the exact product market definition can be left
open, since the Proposed Transaction does not raise serious doubts as to its
compatibility with the internal market under any plausible market definition for
the supply of MPLM and EDA software for the supply of CWH applications.
4.1.6. DM
(31) DM software designs the manufacturing process. The use of these software tools
allows manufacturing engineers to create the complete definition of the
manufacturing process in a virtual environment, including tooling, assembly lines,
work centres, facility layout, ergonomics and resources.
(32) The Notifying Party submits that within DM, a distinction should be made
between: (i) DM for PCBs; and (ii) DM excluding PCBs; but that the product
market definition can be left open, since no competition concerns arise under any
potential market definition.
(33) For the purpose of this decision, the exact product market definition can be left
open, since the Proposed Transaction does not raise serious doubts as to its
compatibility with the internal market under any plausible market definition for
the supply of DM software.
4.1.7. CPDM
(34) CPDM is the use of software to manage product data and process-related
information in a single, central system. At its core, a CPDM system provides
solutions for secure data management, process enablement, and configuration
management. CPDM can be divided into data management in relation to a
particular domain (e.g. IC, PCB, or CWH) or across a whole company or factory
floor based on data feeds from different domains (i.e. enterprise level). CPDM at
an enterprise level can apply to both mechanical and electronic applications.
(35) For the purpose of this decision, the exact product market definition can be left
open, since the Proposed Transaction does not raise serious doubts as to its
compatibility with the internal market under any plausible market definition for
the supply of CPDM software.
17 See responses to Questions 11 and 11.1 of Q1 – Questionnaire to competitors and Q2 –
Questionnaire to customers.
18 See responses to Question 11.2 of Q1 – Questionnaire to competitors and Q2 – Questionnaire to
customers.
8
4.2. Relevant geographic market
(36) In previous decisions19 the Commission has considered that the geographic scope
of the market for the supply of PLM software could be global or at least EEA
wide but has ultimately left the definition open.
(37) The Notifying Party submits that the market for PLM software and any potential
sub-categories are worldwide since the product, the suppliers and the large
customers are the same throughout the world.
(38) The market investigation supports this argument with the vast majority of
respondents replying that there are no significant differences in sourcing patterns
or product requirements between the EEA and the rest of the world20 and that they
are equally able to procure/source PLM software in the EEA as in the rest of the
world. 21
(39) For the purpose of this decision, the exact geographic market definition can be
left open, since the Proposed Transaction does not raise serious doubts as to its
compatibility with the internal market under any plausible market definition for
the supply PLM software.
5. COMPETITIVE ASSESSMENT
(40) As noted above, Siemens and Mentor are both active in the provision of PLM
software but are mainly focused in different sub-segments. While the Parties'
activities overlap with regard to DM and CPDM products, as well as in the supply
of (i) MPLM and EDA; (ii) MPLM CWH and EDA CWH; and (iii) MPLM CFD
and EDA CFD, should these be considered together to be markets, the Proposed
Transaction gives rise to only two horizontally affected markets:
a. Supply of software services for DM (section 5.1.1); and
b. Supply of software services for 3D CFD, a sub-segment of the MPLM
CFD and EDA CFD segments (section 5.1.2).
(41) The Commission has also considered, in section 5.2 below, the question of
whether the Proposed Transaction would raise conglomerate concerns as certain
customers need both MPLM software (where Siemens is active) and EDA
software (where Mentor is active) since a degree of interoperability is required
between these two types of PLM software.
(42) Finally, the Proposed Transaction also gives rise to a vertically affected market
with regard to EDA software for PCBs which is discussed in section 5.3 below.
19 Commission decision of 29 March 2010 in case M.5763 – Dassault Systèmes/IBM DS PLM
Software Business, paragraph 21; and Commission decision of 27 April 2007 in Case M.4608 –
Siemens/UGS, paragraph 11.
20 See responses to Question 12 of Q1 – Questionnaire to competitors and Q2 – Questionnaire to
customers.
21 See responses to Question 13 of Q1 – Questionnaire to competitors and Q2 – Questionnaire to
customers.
9
5.1. Horizontal unilateral effects
5.1.1. DM
(43) Both Siemens and Mentor are active with regard to the supply of DM software.
(44) The Notifying Party submits that no competition concerns can be expected to
arise in this market post-Transaction given that: (1) the Parties combined share is
limited, with a small increment; (2) a large number of competitors would remain
in the market, and in each of its sub-segments, leaving customers ample
opportunity to switch; (3) the Parties' products do not compete as Siemens’ DM
software is not considered by customers as a substitute for the Mentor suite of
DM software for the electronics industry and that the market for DM software
should in fact be segmented according to DM for PCBs and DM excluding PCBs;
and (4) purchasers of DM software include large corporations which have strong
buyer power and the ability to play suppliers off against each other.
(45) The Commission considers that for the reasons set out below, the Proposed
Transaction does not raise serious doubts as to its compatibility with the internal
market with respect to DM software, regardless of any possible segmentation of
the market for the supply of DM software.
(46) First, the Parties’ combined market share in 2015 is [20-30]% at worldwide and
[10-20]% at EEA level and the increment brought by the Proposed Transaction,
which corresponds to Mentor's market share, is approximately [5-10]%
worldwide and only [0-5]% at EEA level. When responding to the market
investigation, only one customer and no competitors consider Mentor to be a top
5 provider of DM software.22
(47) Second, there are a large number of competitors that will remain in the market
post-Transaction including Machine Vendor Solutions, Dassault, and SAP. The
market shares of the Parties and their competitors can be seen in Table 1. Most of
the respondents to the market investigation consider that there will be a sufficient
number of players remaining the market post-Transaction.23
22 See responses to Question 17.3 of Q1 – Questionnaire to competitors and Q2 – Questionnaire to
customers.
23 See responses to Question 15 of Q1 – Questionnaire to competitors and Q2 – Questionnaire to
customers.
11
manufacturing.28 In this regard, the Commission notes that several alternative
operators would remain active in the market.29
(50) Accordingly, the Commission considers that the Proposed Transaction does not
raise serious doubts as to its compatibility with the internal market.
5.1.2. 3D CFD
(51) Both Siemens and Mentor are active with regard to the supply of 3D CFD
software.30
(52) The Notifying Party argues that no competition concerns can be expected to arise
in this potential market post-merger for the following reasons: (1) the Parties have
a low combined market share; (2) ANSYS will continue to be the leading supplier
of 3D CFD software and a number of other players will also remain post-
Transaction; and (3) the Parties are not close competitors for CFD.
(53) The Commission considers that for the reasons set out below, the Proposed
Transaction does not raise serious doubts as to its compatibility with the internal
market with respect to 3D CFD software, regardless of any possible
segmentation.
(54) First, the Parties do not have a significant share of the market. When considering
all CFD software, the Parties have a combined market share in 2015 worldwide of
[10-20]% (Siemens: [10-20]%; Mentor: [0-5]%) and in the EEA of [10-20]%
(Siemens: [10-20]%; Mentor: [0-5]%). When considering the market for just 3D
CFD software, the Parties have a combined market share in 2015 both worldwide
and at EEA level of [20-30]% (Siemens: [10-20]%; Mentor: [0-5]%).
(55) Second, the Parties have a combined market share of [20-30]% with a very
limited increment brought by the Proposed Transaction attributable to Mentor
(Siemens: [10-20]%; Mentor [0-5]%).
(56) Third, the Parties will continue to be constrained by other players in the market.
In particular, ANSYS will continue to be the leading supplier with 3D CFD
segment share of more than 30% and a large number of competitors will remain
in the market post-Transaction including Exa, and ESI Group. The market shares
of the Parties and their competitors can be seen in Table 2.
28 See responses to Question 26.1 of Q1 – Questionnaire to competitors and Q2 – Questionnaire to
customers.
29 See responses to Question 15 of Q1 – Questionnaire to competitors.
30 No affected market arises when considering a market for 1D CFD software alone as the Parties have
a combined market share of [5-10]%.
13
remain important due to the increasing relevance of mechatronics35 and the need
to integrate mechanical and electrical design.
(61) The Notifying Party will be the first company to offer a broad range of both EDA
and MPLM products. The Commission has therefore assessed the extent to which,
post-Transaction, Siemens could foreclose MPLM-only or EDA-only rivals by
hampering interoperability with its products.
(62) The Notifying Party submits that the merged entity will have neither the ability
nor the incentive to foreclose competition in any neighbouring market, including
the EDA and MPLM segment for the following reasons: (1) the PLM software
products offered by Siemens and by Mentor are open systems and interoperable
with applications provided by other companies; (2) customer bargaining power is
such that providers of PLM software are generally required to offer
interoperability between PLM solutions; (3) Siemens intends to maintain its open
architecture policy post-merger, as it has following all previous acquisitions in the
PLM space; and (4) Siemens would not have market power on any relevant
market to raise prices for integrated mechanical and electronic services.
(63) The Commission considers that for the reasons set out below, the Proposed
Transaction does not raise serious doubts as to its compatibility with the internal
market with respect to conglomerate effects as the merged entity would have
neither the ability, nor it is likely to have the incentive, to foreclose competitor by
reducing interoperability between its products and the PLM solutions of its rivals.
(64) First, neither Party has a strong position in EDA or MPLM software. With regard
to MPLM, Siemens has a market share of [10-20]% at both the worldwide and
EEA level whereas Mentor36 is not active.37 With regard to EDA software,
Mentor has a market share of [10-20]% at the worldwide level and [10-20]% at an
EEA-wide level whereas Siemens is not active. The Notifying Party submits that
the only potential sub-segment of the EDA market where Mentor has a market
share of 30% or more is EDA for PCB applications.
(65) Second, in each market (MPLM and EDA) customers will have alternatives to
switch to which will act as a constraint on the merged entity post-Transaction.
Both competitors and customers responding to the market investigation confirm
that post-Transaction there would remain a sufficient number of competitors in
both the MPLM and EDA markets.38 Moreover, the market shares of the Parties
and their competitors in the EDA and MPLM markets, presented in Table 3 and
35 Mechatronics is as “a multidisciplinary field of science that includes a combination of mechanical
engineering, electronics, computer engineering, telecommunications engineering, systems
engineering and control engineering.
36 Mentor’s revenues in relation to CFD are allocated to its EDA revenues. However even if Mentor's
CFD sales (with the exception of its CFD software which is suitable for electronics only) were
allocated to MPLM, Mentor’s share of total MPLM sales in 2015 would be approx. [0-5]%.
37 When considering a combined market for MPLM and EDA software together, the Parties have a
combined market share of [10-20]% worldwide (Siemens: [5-10]%; Mentor [5-10]%); and [10-
20]% in the EEA (Siemens: [5-10]%; Mentor [5-10]%).
38 See responses to Question 15.1 of Q1 – Questionnaire to competitors and Q2 – Questionnaire to
customers. The only exception to this is one customer that responded that it did not know whether
there would be a sufficient number of competitors remaining in the EDA market.
15
Only one customer highlighted that switching EDA provider could be difficult in
the short term.41
(67) Fourth, the market investigation is supportive of the Parties argument that the
merged entity would have no incentive post-Transaction to reduce the levels of
interoperability with products from other suppliers.42 The views of competitors
were mixed with some respondents, such as SAP, considering that the merged
entity would have the incentive to reduce interoperability and cross-sell their
software solutions among their combined installed bases and others, such as PTC
noting that this would not be a practical strategy because customers would
strongly oppose such efforts.43 The latter view is confirmed by the market
investigation since most of the customers did not consider that Siemens would
have the incentive to degrade or exclude the interoperability of its PLM software
solutions with the PLM software solutions of other providers, either for Mentor's
EDA competitors or Siemens MPLM competitors. Fiat Chrysler Automobiles
("FCA") notes that either degrading or excluding integration would put Siemens
at risk to loose PLM customers. Ericsson further considers that such a strategy
would only shrink Siemens' addressable market. By excluding interoperability
with other suppliers, Siemens would be able to sell only to those customers
already using Mentor's EDA software.44
(68) Moreover, both Siemens and Mentor appear to have a business strategy of
fostering interoperability. In particular, both Siemens and Mentor currently have
long term bilateral interoperability agreements with other players in the PLM
market in order to be able to provide solutions for customers. Siemens has in
recent years undertaken multiple accretive acquisitions in the PLM industry and
has maintained interoperability following each of these acquisitions. Moreover,
both Siemens and Mentor participate in industry initiatives to support
interoperability.45 There is no evidence on the Commission's file that would
indicate that Siemens would alter this strategy post-Transaction.
(69) Finally, most of the respondents to the market investigation do not expect that the
Proposed Transaction would have any impact on the PLM software market and in
any other potential segment.46 Few respondents indicate that the Proposed
Transaction may have a negative impact on the PLM software market. Two
competitors note that the Proposed Transaction may have a negative impact on
the market arguing that the merged entity will increase its financial power and
market presence, and that the merged entity could foreclosure Mentor's
competitors from supplying to Siemens (the second concern related to vertical
41 See responses to Question 24.1 of Q2 – Questionnaire to customers.
42 See responses to Question 21 of Q1 – Questionnaire to competitors and Q2 – Questionnaire to
customers.
43 See responses to Question 21 of Q1 – Questionnaire to competitors.
44 See responses to Question 21 of Q2 – Questionnaire to customers.
45 See for example: (1) Siemens public declaration of its commitment to interoperability:
http://www.plm.automation.siemens.com/en us/about us/facts philosophy/open.shtm; (2) Siemens
support of the worldwide initiative "Code of Openness -http://www.prostep.org/en/cpo.html; and (3)
Mentor's Opendoor program which provides access to Mentor's software and includes over 100
partners.
46 See responses to Question 26 of Q1 – Questionnaire to competitors and Q2 – Questionnaire to
customers.
16
relationships between Siemens and Mentor will be discussed in Section 5.3
below).47 Moreover, one customer considers that its terms of agreement with
Mentor would become less favourable after the Proposed Transaction.48 A
number of respondents also consider that the Proposed Transaction may have a
positive impact by enhancing software functionalities and push other MPLM and
EDA competitors to improve their software interoperability.49
(70) Accordingly, the Commission considers that the Proposed Transaction does not
raise serious doubts as to its compatibility with the internal market.
5.3. Vertical effects
(71) Mentor is active on the market with regard to the supply of EDA software for
PCBs where it has a market share above 30%. Siemens is a customer in this
market since it purchases EDA software.
(72) The Notifying Party submits that no competition concerns can be expected to
arise given the limited vertical relationship.
(73) The Commission considers that for the reasons set out below, the Proposed
Transaction does not raise serious doubts as to its compatibility with the internal
market with respect to potential foreclosure of Mentor's EDA software for PCBs,
regardless of any possible segmentation.
(74) As regards potential concerns related to customer foreclosure, in 2015 Siemens'
EDA software purchases worldwide from all software providers accounted for
approximately EUR […] million50 which corresponds to [0-5]% of the EDA
software market. Therefore, in the event that post-merger Siemens were to source
all its EDA software from Mentor, it would not materially change the competitive
dynamics on the EDA market. Moreover, Siemens has entered in long-term
agreements with a number of Mentor's competitors which cannot be terminated in
the short-term.
(75) As regards potential concerns related to input foreclosure, the merged entity
would not have any incentive to foreclose access to Mentor's EDA software. As
described in paragraph (74) above, Siemens' EDA software purchases are limited
while Mentor's revenue in the market are approximately USD […] million
worldwide and USD […] million per year in Europe. By foreclosing access to
Mentor's EDA, Siemens would not be able to compensate the reduction of sales in
the EDA market.
(76) Finally, as discussed at paragraph (69) above, most of the respondent to the
market investigation do not expect the Proposed Transaction to have any impact
on the EDA market.51 Only one respondent notes that the merged entity may have
the incentive to foreclose competing Mentor's ESE suppliers from providing their
47 See responses to Question 26.1 of Q1 – Questionnaire to competitors.
48 See responses to Question 26.1 of Q2 – Questionnaire to customers.
49 See responses to Question 26.1 of Q2 – Questionnaire to customers.
50 See Notifying Party's response to question 4 of RFI N.1 of 8 February 2017.
51 See responses to Question 26 of Q1 – Questionnaire to competitors and Q2 – Questionnaire to
customers.
17
software to Siemens. On this regard, the Commission notes that, first, Siemens
does not have significant market power in the upstream market under any
potential market definition52; second, in 2015 Siemens' ESE software purchases
worldwide from all software providers accounted for EUR […] million53 which
corresponds to [0-5]% of the ESE software market. Therefore, in the event that
post-merger Siemens were to source all its ESE software from Mentor, it would
not materially change the competitive dynamics on the ESE market.
(77) Accordingly, the Commission considers that the Proposed Transaction does not
raise serious doubts as to its compatibility with the internal market.
6. CONCLUSION
(78) For the above reasons, the European Commission has decided not to oppose the
Proposed Transaction 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
52 See Notifying Party's response to question 1 of RFI N.2 of 10 February 2017.
53 See Notifying Party's response to question 4 of RFI N.1 of 8 February 2017.
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