# C_2008219EN.01001801.xml

| 28.8.2008 | EN | Official Journal of the European Union | C 219/18 |
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28.8.2008

EN

Official Journal of the European Union

C 219/18

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Summary of Commission Decision

of 30 January 2008

declaring a concentration compatible with the common market and the functioning of the EEA Agreement

(Case COMP/M.4734 — Ineos/Kerling)

(Only the English version is authentic)

(Text with EEA relevance)

(2008/C 219/15)

On 30 January 2008, the Commission adopted a Decision in a merger case under Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings
   (1)
  , and in particular Article 8(1) of that Regulation. A non-confidential version of the full Decision can be found in the authentic language of the case and in the working languages of the Commission on the website of the Directorate-General for Competition, at the following address:

On 30 January 2008, the Commission adopted a Decision in a merger case under Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings

1

, and in particular Article 8(1) of that Regulation. A non-confidential version of the full Decision can be found in the authentic language of the case and in the working languages of the Commission on the website of the Directorate-General for Competition, at the following address:

http://europa.eu.int/comm/competition/index_en.html

http://europa.eu.int/comm/competition/index_en.html

| 1. | On 19 July 2007, the Commission received a notification of a proposed concentration pursuant to Article 4 of Regulation (EC) No 139/2004 by which the undertaking INEOS Group Limited (United Kingdom, ‘UK’), belonging to the INEOS Group (together ‘Ineos’), acquires within the meaning of Article 3(1)(b) of the Council Regulation the whole of undertaking Kerling ASA (‘Kerling’, Norway) belonging to the Norsk Hydro Group by way of purchase of shares. |
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1.

On 19 July 2007, the Commission received a notification of a proposed concentration pursuant to Article 4 of Regulation (EC) No 139/2004 by which the undertaking INEOS Group Limited (United Kingdom, ‘UK’), belonging to the INEOS Group (together ‘Ineos’), acquires within the meaning of Article 3(1)(b) of the Council Regulation the whole of undertaking Kerling ASA (‘Kerling’, Norway) belonging to the Norsk Hydro Group by way of purchase of shares.

| 2. | Ineos is a leading global manufacturer of petrochemicals, specialty chemicals and oil products. It comprises eighteen businesses and, although it is present in seventeen countries throughout the world, it is mainly active in Europe where it achieves more than two thirds of its turnover. |
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2.

Ineos is a leading global manufacturer of petrochemicals, specialty chemicals and oil products. It comprises eighteen businesses and, although it is present in seventeen countries throughout the world, it is mainly active in Europe where it achieves more than two thirds of its turnover.

| 3. | Kerling is a subsidiary of Norsk Hydro ASA and comprises the polymer division of the Norsk Hydro group. It is mainly active in the production, marketing and sale of polyvinyl chloride (‘PVC’) and caustic soda. |
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3.

Kerling is a subsidiary of Norsk Hydro ASA and comprises the polymer division of the Norsk Hydro group. It is mainly active in the production, marketing and sale of polyvinyl chloride (‘PVC’) and caustic soda.

| 4. | The Advisory Committee on Concentrations on 16 January 2008 delivered a favourable opinion on a draft Decision granting clearance submitted to it by the Commission (2). |
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4.

The Advisory Committee on Concentrations on 16 January 2008 delivered a favourable opinion on a draft Decision granting clearance submitted to it by the Commission (2).

2

| 5. | The Hearing Officer, in a report dated 24 January 2008, took the view that the right of the parties to be heard had been respected (3). |
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5.

The Hearing Officer, in a report dated 24 January 2008, took the view that the right of the parties to be heard had been respected (3).

3

I.   THE RELEVANT MARKETS

Relevant Product Markets

| 6. | The Commission's investigation showed that the relevant product markets were the following: commodity S-PVC, liquid caustic soda, S-PVC compounds and S-PVC films. |
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6.

The Commission's investigation showed that the relevant product markets were the following: commodity S-PVC, liquid caustic soda, S-PVC compounds and S-PVC films.

| 7. | The main product market discussed in the decision is the market for commodity S-PVC. There are two types of PVC depending on the production process used: suspension (or commodity) PVC (‘S-PVC’) accounting for about 90 % of all the PVC produced in the EEA, and emulsion PVC (‘E-PVC’) which accounts for the remaining 10 % of the EEA production. The parties' activities overlap only with respect to commodity S-PVC and, following the results of the market investigation, the Commission has concluded that for the purposes of this decision the relevant product market is the one for commodity S-PVC. |
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7.

The main product market discussed in the decision is the market for commodity S-PVC. There are two types of PVC depending on the production process used: suspension (or commodity) PVC (‘S-PVC’) accounting for about 90 % of all the PVC produced in the EEA, and emulsion PVC (‘E-PVC’) which accounts for the remaining 10 % of the EEA production. The parties' activities overlap only with respect to commodity S-PVC and, following the results of the market investigation, the Commission has concluded that for the purposes of this decision the relevant product market is the one for commodity S-PVC.

| 8. | The parties' activities also overlap on the market for liquid caustic soda. Although the market investigation suggested that solid and liquid caustic soda constitute two separate markets, the precise market definition has been left open. |
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8.

The parties' activities also overlap on the market for liquid caustic soda. Although the market investigation suggested that solid and liquid caustic soda constitute two separate markets, the precise market definition has been left open.

| 9. | The Commission's in-depth investigation has shown that S-PVC compounds constitute a separate product market from S-PVC given that the two products are not substitutable in the production process used by the vast majority of the compounds customers. However, a further segmentation into different types of compounds (i.e. dry blend and gelled compounds) did not seem necessary. |
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9.

The Commission's in-depth investigation has shown that S-PVC compounds constitute a separate product market from S-PVC given that the two products are not substitutable in the production process used by the vast majority of the compounds customers. However, a further segmentation into different types of compounds (i.e. dry blend and gelled compounds) did not seem necessary.

| 10. | Only Ineos is active on the market for S-PVC films, which is downstream from S-PVC. While it would be possible to sub-segment the S-PVC films market based on the types of different end-uses of rigid PVC films, the precise product market definition has been left open for the purposes of this decision. |
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10.

Only Ineos is active on the market for S-PVC films, which is downstream from S-PVC. While it would be possible to sub-segment the S-PVC films market based on the types of different end-uses of rigid PVC films, the precise product market definition has been left open for the purposes of this decision.

Relevant Geographic Markets

| 11. | The key issue of the second phase market investigation was to define the relevant geographic scope for commodity S-PVC, in particular with respect to certain trade areas for which the first phase market investigation had given some indications pointing towards a national or regional dimension, namely Great Britain, and the Nordic Region comprised of Norway and Sweden. |
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11.

The key issue of the second phase market investigation was to define the relevant geographic scope for commodity S-PVC, in particular with respect to certain trade areas for which the first phase market investigation had given some indications pointing towards a national or regional dimension, namely Great Britain, and the Nordic Region comprised of Norway and Sweden.

| 12. | The parties submitted that the geographic scope of the market for S-PVC is EEA-wide given that S-PVC is a commodity product readily and safely transportable, there exists considerable intra-community trade and transport costs are relatively low. During the market investigation, the majority of customers considered the market to be either regional or EEA-wide and in some cases even wider whilst all competitors confirmed that they view the market as being EEA-wide. Moreover, the data collected during the investigation showed that S-PVC, despite transport costs ranging from 5 % to 15 % depending on the distance, is subject to substantial trade flows throughout the EEA, sometimes over very long distances. |
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12.

The parties submitted that the geographic scope of the market for S-PVC is EEA-wide given that S-PVC is a commodity product readily and safely transportable, there exists considerable intra-community trade and transport costs are relatively low. During the market investigation, the majority of customers considered the market to be either regional or EEA-wide and in some cases even wider whilst all competitors confirmed that they view the market as being EEA-wide. Moreover, the data collected during the investigation showed that S-PVC, despite transport costs ranging from 5 % to 15 % depending on the distance, is subject to substantial trade flows throughout the EEA, sometimes over very long distances.

| 13. | Regarding the Nordic Region, given the substantial trade flows of S-PVC from and into this region, the fact that Kerling's (the only local producer) sales from its plants in Sweden and Norway are evenly spread throughout the EEA, the fact that customers located in these countries consider the market to be at least Northern or North-Western Europe wide whilst some suggesting that the market may be even EEA-wide, the Commission concluded that the geographical scope of the S-PVC market is wider than national with respect to these two countries. |
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13.

Regarding the Nordic Region, given the substantial trade flows of S-PVC from and into this region, the fact that Kerling's (the only local producer) sales from its plants in Sweden and Norway are evenly spread throughout the EEA, the fact that customers located in these countries consider the market to be at least Northern or North-Western Europe wide whilst some suggesting that the market may be even EEA-wide, the Commission concluded that the geographical scope of the S-PVC market is wider than national with respect to these two countries.

| 14. | Regarding the United Kingdom, the majority of the UK-located customers consider that suppliers from Continent would not be in a position to provide them with the same degree of reliability of supply as local producers. In order to determine the geographic scope of the S-PVC market, the Commission has assessed British customers' sourcing and switching patterns (demand side) and, from the supply side perspective, analysed the extent to which S-PVC producers located in continental Europe would have the ability (and incentive) to expand their presence in the UK market. To this end, the Commission conducted a detailed qualitative and quantitative analysis and assessed the level and role of imports, transport costs, barriers to expansion and spare capacity in continental Europe. In that respect the Commission found out that:






  — | the majority of UK customers multi-source and are not completely dependent on local suppliers, |
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14.

Regarding the United Kingdom, the majority of the UK-located customers consider that suppliers from Continent would not be in a position to provide them with the same degree of reliability of supply as local producers. In order to determine the geographic scope of the S-PVC market, the Commission has assessed British customers' sourcing and switching patterns (demand side) and, from the supply side perspective, analysed the extent to which S-PVC producers located in continental Europe would have the ability (and incentive) to expand their presence in the UK market. To this end, the Commission conducted a detailed qualitative and quantitative analysis and assessed the level and role of imports, transport costs, barriers to expansion and spare capacity in continental Europe. In that respect the Commission found out that:

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the majority of UK customers multi-source and are not completely dependent on local suppliers,

| — | over the last five years imports made by continental suppliers satisfied from 34 % to 40 % of the UK demand, |
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over the last five years imports made by continental suppliers satisfied from 34 % to 40 % of the UK demand,

| — | by setting up local storage facilities, continental suppliers can overcome disadvantages caused by distance, |
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by setting up local storage facilities, continental suppliers can overcome disadvantages caused by distance,

| — | transport costs do not constitute a barrier to supply the UK, |
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transport costs do not constitute a barrier to supply the UK,

| — | there is sufficient spare capacity in the Continent in order to counteract any attempt to price increase by the new entity in the UK, |
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there is sufficient spare capacity in the Continent in order to counteract any attempt to price increase by the new entity in the UK,

| — | during an outage in one of Ineos' UK plants importers were capable to increase supply which indicates that both Ineos and Kerling are constrained by importers. |
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during an outage in one of Ineos' UK plants importers were capable to increase supply which indicates that both Ineos and Kerling are constrained by importers.

| 15. | Based on above, the Commission has come to the conclusion that the Nordic Region and the United Kingdom do not present characteristics that should lead the Commission to treat these areas differently from other areas within the EEA. It concluded in particular, that the scope of the geographic market for commodity S-PVC is wider than the UK and wider than the Nordic countries (Norway and Sweden) and is at least North-Western Europe. |
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15.

Based on above, the Commission has come to the conclusion that the Nordic Region and the United Kingdom do not present characteristics that should lead the Commission to treat these areas differently from other areas within the EEA. It concluded in particular, that the scope of the geographic market for commodity S-PVC is wider than the UK and wider than the Nordic countries (Norway and Sweden) and is at least North-Western Europe.

| 16. | The notifying party submitted that the geographic scope for the liquid caustic soda market is at least EEA-wide given the significant inter-Community trade and even inter-continental trade. However, many customers suggested that the market may be regional due to relatively high transportation costs or even national in the case of the UK. The exact scope of the geographic market for caustic soda has been left open. |
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16.

The notifying party submitted that the geographic scope for the liquid caustic soda market is at least EEA-wide given the significant inter-Community trade and even inter-continental trade. However, many customers suggested that the market may be regional due to relatively high transportation costs or even national in the case of the UK. The exact scope of the geographic market for caustic soda has been left open.

| 17. | The Commission's market investigation indicated that given the low transport costs the market for S-PVC compounds is at least EEA-wide. The Commission has concluded that the scope of the geographic market is wider than national and that it is not necessary to take a final decision on the exact scope of the geographic market for S-PVC compounds. |
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17.

The Commission's market investigation indicated that given the low transport costs the market for S-PVC compounds is at least EEA-wide. The Commission has concluded that the scope of the geographic market is wider than national and that it is not necessary to take a final decision on the exact scope of the geographic market for S-PVC compounds.

| 18. | The market investigation confirmed that the geographic scope for the rigid PVC films market is at least EEA wide and, for certain end-products, even global, as it was concluded by the Commission with regard to flexible packaging. However, the exact scope of the geographic market for PVC films has been left open. |
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18.

The market investigation confirmed that the geographic scope for the rigid PVC films market is at least EEA wide and, for certain end-products, even global, as it was concluded by the Commission with regard to flexible packaging. However, the exact scope of the geographic market for PVC films has been left open.

II.   ASSESSMENT

| 19. | On the market for commodity S-PVC, the parties combined market share in the EEA will amount to [20-30] %. On a North-Western Europe basis parties' combined market share would be below [30-40] %. |
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19.

On the market for commodity S-PVC, the parties combined market share in the EEA will amount to [20-30] %. On a North-Western Europe basis parties' combined market share would be below [30-40] %.

| 20. | Given the relatively low parties' combined market share, the current spare production capacity and the fact that customers multi-source and conclude short-term contracts (one year on average) it is unlikely that Ineos would be able to unilaterally exercise market power on an EEA-wide or even a North-Western European market. |
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20.

Given the relatively low parties' combined market share, the current spare production capacity and the fact that customers multi-source and conclude short-term contracts (one year on average) it is unlikely that Ineos would be able to unilaterally exercise market power on an EEA-wide or even a North-Western European market.

| 21. | The possibility that this transaction could facilitate a coordinated conduct is also remote given the number of players (six significant competitors) that will remain in the market post-merger. Moreover, most customers negotiate or seek price offers from many competing suppliers on a monthly basis, which makes it all the more difficult to adhere and stick to a common pattern. In light of the above, the Commission concluded that the proposed transaction is not likely to give rise to any coordinated anti-competitive concerns. |
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21.

The possibility that this transaction could facilitate a coordinated conduct is also remote given the number of players (six significant competitors) that will remain in the market post-merger. Moreover, most customers negotiate or seek price offers from many competing suppliers on a monthly basis, which makes it all the more difficult to adhere and stick to a common pattern. In light of the above, the Commission concluded that the proposed transaction is not likely to give rise to any coordinated anti-competitive concerns.

| 22. | The parties' combined market share in liquid caustic soda would be approximately [10-20] % on an EEA-wide basis which is the most likely geographic market. Although the parties' combined shares are higher on some national markets, (ranging from [40-50] %, [40-50] % and [50-60] % in Norway, Sweden and Denmark respectively and up to [50-60] % in the UK), given the relatively small overlaps and number of significant competitors present in the market, it is unlikely that the present transaction would raise competitive concerns under any alternative market definition. |
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22.

The parties' combined market share in liquid caustic soda would be approximately [10-20] % on an EEA-wide basis which is the most likely geographic market. Although the parties' combined shares are higher on some national markets, (ranging from [40-50] %, [40-50] % and [50-60] % in Norway, Sweden and Denmark respectively and up to [50-60] % in the UK), given the relatively small overlaps and number of significant competitors present in the market, it is unlikely that the present transaction would raise competitive concerns under any alternative market definition.

| 23. | The parties estimate their combined market share on the overall S-PVC compounds market on an EEA-wide basis to be less than [20-30] %. The market shares would be [10-20] % and [20-30] % on a Western European and a North-Western European basis respectively. |
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23.

The parties estimate their combined market share on the overall S-PVC compounds market on an EEA-wide basis to be less than [20-30] %. The market shares would be [10-20] % and [20-30] % on a Western European and a North-Western European basis respectively.

| 24. | With respect to possible vertical issues, it is unlikely that Ineos will be in a position to curtail supplies of S-PVC to non-integrated compounders as it will not enjoy market power on the S-PVC market where it will continue to be constrained post-merger by a number of competitors active throughout the EEA. |
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24.

With respect to possible vertical issues, it is unlikely that Ineos will be in a position to curtail supplies of S-PVC to non-integrated compounders as it will not enjoy market power on the S-PVC market where it will continue to be constrained post-merger by a number of competitors active throughout the EEA.

| 25. | In light of the above and in view of the limited horizontal overlap and the absence of substantial vertical issues, it is unlikely that the present transaction will have anticompetitive effects on the S-PVC compounds market. |
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25.

In light of the above and in view of the limited horizontal overlap and the absence of substantial vertical issues, it is unlikely that the present transaction will have anticompetitive effects on the S-PVC compounds market.

| 26. | On a broad product market for rigid films (including inter alia PVC, PET, polypropylene and polyethylene films), Ineos enjoys a market share of [5-10] % in the EEA. Should narrower segments for rigid S-PVC films be considered, Ineos market shares are below [20-30] % in all segments except for the pharma-mono and pharma-duplex films segments where Ineos' market shares amount to [30-40] % and [30-40] % respectively. |
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26.

On a broad product market for rigid films (including inter alia PVC, PET, polypropylene and polyethylene films), Ineos enjoys a market share of [5-10] % in the EEA. Should narrower segments for rigid S-PVC films be considered, Ineos market shares are below [20-30] % in all segments except for the pharma-mono and pharma-duplex films segments where Ineos' market shares amount to [30-40] % and [30-40] % respectively.

inter alia

| 27. | Given that the Commission has concluded that the proposed concentration will not impede effective competition in the provision of S-PVC, it follows that Ineos' competitors in the downstream market of rigid PVC films would continue to have the ability to source S-PVC at competitive conditions and remain effective competitors in the provision of rigid film products. Accordingly, it is unlikely that the present transaction would raise competitive concerns on the market for S-PVC films. |
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27.

Given that the Commission has concluded that the proposed concentration will not impede effective competition in the provision of S-PVC, it follows that Ineos' competitors in the downstream market of rigid PVC films would continue to have the ability to source S-PVC at competitive conditions and remain effective competitors in the provision of rigid film products. Accordingly, it is unlikely that the present transaction would raise competitive concerns on the market for S-PVC films.

III.   CONCLUSION

| 28. | For the reasons set out above, the Commission concluded that the proposed concentration does not significantly impede effective competition in the common market or a substantial part of it, in particular as a result of the creation or strengthening of a dominant position. The concentration is therefore to be declared compatible with the common market and the EEA Agreement, in accordance with Article 8(1) of the Merger Regulation and Article 57 of the EEA Agreement. |
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28.

For the reasons set out above, the Commission concluded that the proposed concentration does not significantly impede effective competition in the common market or a substantial part of it, in particular as a result of the creation or strengthening of a dominant position. The concentration is therefore to be declared compatible with the common market and the EEA Agreement, in accordance with Article 8(1) of the Merger Regulation and Article 57 of the EEA Agreement.

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(1)  OJ L 24, 29.1.2004, p. 1.

1

(2)  OJ C 219, 28.8.2008, p. 16.

2

(3)  OJ C 219, 28.8.2008, p. 17.

3

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