|EUROPEAN COMMISSION |

Brussels , 01.06.2011

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 Where possible the information omitted has been replaced by ranges of figures or a general description.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 C(2011) 3977 final

MERGER PROCEDURE

To the notifying parties: |

Dear Sir/Madam,

Subject: Case No COMP/M.6093 – BASF/ INEOS/ STYRENE/ JV Commission decision pursuant to Article 6(1)(b) in conjunction with Article 6(2) of Council Regulation No 139/2004 [1]

1. On 7 April 2011, the European Commission received notification of a proposed concentration pursuant to Article 4 of the Merger Regulation by which the undertakings BASF SE ("BASF", Germany) and INEOS Industry Holdings Limited ("INEOS", Switzerland), ultimately controlled by INEOS Group, acquire within the meaning of Article 3(1)(b) of the Merger Regulation joint control of the undertaking Styrolution (Germany) by way of purchase of shares in a newly created company constituting a joint venture [2] .

I. THE PARTIES

2. BASF SE ("BASF") is the world's largest chemical company and is headquartered in Ludwigshafen, Germany. Its activities range from chemicals to crude oil and natural gas, including specialty chemicals, plastics, performance products, functional solutions and agricultural solutions, among others. BASF has production sites in 41 countries.

3. INEOS Industries Holdings Limited is part of the INEOS group of companies ("INEOS"), a privately owned conglomerate that produces a range of chemicals including petrochemicals, specialty chemicals and oil products.

4. Styrolution will combine the existing styrene monomer ("SM"), polystyrene ("PS") and acrylonitrile–butadiene-styrene ("ABS") businesses of BASF and INEOS, together with certain minor related products.

5. BASF and INEOS are designated hereinafter as the "notifying Parties" or "Parties to the proposed transaction".

II. THE OPERATION AND THE CONCENTRATION

6. The shares in the JV will be held as to 50% by BASF and 50% by INEOS (together “the Parites”). BASF and INEOS will have joint control over the JV, Styrolution.

7. The proposed joint venture ("JV") will be full-function within the meaning of Article 3(4) of the Merger Regulation. The JV will comprise all business functions including manufacturing, sales and marketing. Furthermore, it will operate in the market independently from its parent companies, performing the full range of activities normally performed by companies in the chemical industry.

8. The operation constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

III. EU DIMENSION

9. BASF's turnover is approximately EUR […] million in the EEA and 63 873 million worldwide. INEOS' turnover is approximately EUR […] million in the EEA and 28 421 million worldwide. Therefore, the undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million [3] , and each of them has an EU-wide turnover in excess of EUR 250 million, but they do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State. The notified operation therefore has an EU dimension.

IV. COMPETITIVE ASSESSMENT

A. HORIZONTAL OVERLAPS

Polysterene (PS)

10. Both BASF and Ineos produce PS and both will contribute their PS production to the proposed Joint Venture. [4]

Relevant product market

11. The Commission has considered the market for PS on several occasions, but ultimately left the product market definition open. [5] In particular, a number of different delineations have been considered: (i) a wider market for engineering thermoplastics [6] , (ii) a market for transparent engineering thermoplastics [7] (iii) a market for PS and (iv) separate sub-markets for General Purpose PS (“GPPS”) and High Impact PS (“HIPS”).

12. The Parties consider that the various grades of PS are demand- and/or supply-side substitutable and therefore that the relevant product market should be defined at least as widely as all PS.

13. The Parties argue that, within PS, the principal sub-segmentation which can be identified is between GPPS and HIPS. [8] HIPS is GPPS with around 5-10% rubber incorporated through a grafting process prior to polymerisation. GPPS is transparent and rigid. HIPS is translucent and breakage resistant. Nonetheless, as explained below, it is the Parties’ view that both products should be considered to be in the same market.

14. On the demand-side there is some scope for customers to substitute between HIPS and GPPS – many customers use HIPS and GPPS in a blend and have some flexibility to change the respective proportions in the blend if relative prices change and provided that the mechanical properties of the blend meet their requirements. From the supply side, all major producers have both GPPS and HIPS production, with broadly similar shares in each segment. Moreover most plants have both GPPS and HIPS lines and producers can vary the production between the two products depending on relative demand. As HIPS is obtained by incorporating rubber into GPPS, GPPS can therefore be made on any HIPS line (by not adding rubber and tuning the temperature and residence time). There are also some lines which routinely “swing” from GPPS to HIPS (as well as vice versa). On swing lines production of the two products is optimised based on contribution margin and demand. Therefore any change in relative prices should result in a further swing.

15. The Parties further argue that there is a trend for direct customers and end users to switch away from PS and to use other polymers, in particular PP and PET (and recycled PET), as well as other materials such as PLA and paper. This inter-polymer substitution has had, and is continuing to have, a major impact on the PS industry.

16. The market investigation was inconclusive as to whether HIPS and GPPS belong to the same product market. While responding customers agreed that GPPS and HIPS are not interchangeable, responding competitors agreed that the production lines for both types are similar and that it is possible to produce GPPS on a HIPS line but not vice-versa.

17. As far as inter-polymer competition is concerned, the market investigation revealed that there appears to be a certain degree of interchangeability between PS and other polymers.

18. For the purposes of the present case, however, it is not necessary to conclude on whether (i) PS, along other polymers or (ii) all PS constitute different product markets, or whether a further segmentation between (iii) GPPS and (iv) HIPS should be considered, as no competition concerns arise with any market definition.

Relevant geographic market

19. The Commission has previously considered the relevant geographic market for PS as at least EEA-wide, however the geographic market definition was ultimately left open. [9] The Parties consider that the geographic market for PS is at least EEA+Switzerland, or the EEA.

20. The market investigation in this case has not revealed anything that would suggest a different approach to the geographic market.

21. For the purposes of the present decision, it is not necessary to further define the geographic market as no competition concerns arise if the market is defined as comprising the EEA and Switzerland and the combined market shares would be lower on wider markets.

Competitive assessment

22. The Parties overlap in the production of PS, GPPS and HIPS. The Parties also overlap in the production of other thermoplastic polymers. Nonetheless, if a wider market for transparent engineering thermoplastics (or all engineering thermoplastics) were to be considered, the Parties overlap would be below [10-20]%.

ALL PS

23. The Parties submit the following data on market shares of PS:

EEA + Switzerland Production and Merchant Market Sales of all PS, 2010 [10]

|Production |Merchant market sales |

|2009 |2010 |2009 |2010 |

|Vol. (kt) |Share (%) |Vol. (kt) |Share (%) |Vol. (kt) |Share (%) |Vol. (kt) |Share (%) |

BASF |[…] |[20-30]% |[…] |[20-30]% |[…] |[10-20]% |[…] |[10-20]% |

INEOS |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |

Combined |[…] |[40-50]% |[…] |[40-50]% |[…] |[30-40]% |[…] |[30-40]% |

Polimeri |[…] |[20-30]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |

Total |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |

Styron |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |

Synthos |[…] |[5-10]% |[…] |[5-10]% |[…] |[5-10]% |[…] |[5-10]% |

Imports |[…] |[0-5]% |[…] |[0-5]% |[…] |[5-10]% |[…] |[0-5]% |

Total |[…] |100% |[…] |100% |[…] |100% |[…] |100% |

24. According to the Parties, PS production and sales market shares in the EEA would be very similar to their market shares in the EEA + Switzerland, with only a de minimis difference of not more than 1% [11] . As a result, the competitive assessment would be the same regardless of the geographic scope retained (i.e. EEA or EEA+Switzerland).

25. As shown in the above table, the Parties' combined market shares in the market for PS will be [30-40]% in the EEA+CH merchant market, and much lower on a global market

26. The Parties consider that there is no realistic prospect that the merger would impede effective competition for the following reasons: (i) the JV will continue to face intense competition from the other European suppliers of PS; (ii) importers from outside the EEA could also readily increase their supplies to European customers; and (iii) the JV will also be constrained by the threat by customers of switching to other polymers.

27. As to the first point, the Parties submit that the JV will continue to face intense competition from the three other major European suppliers of PS – Polimeri, Total and Styron - as well as a smaller EEA producer, Synthos. Each of these producers supplies throughout the EEA. These alternative European suppliers could all significantly increase supplies to customers in Europe in response to any hypothetical withholding strategy by the merged firm. Despite recent capacity rationalisation these third Parties are still believed to have spare capacity, and they also currently make substantial exports outside the EEA (i.e. use capacity which could be used instead to supply European customers). Secondly, the Parties submit that importers from outside the EEA could also increase their supplies to European customers.

28. With respect to inter-polymer substitution, the Parties submit that converters are very aware of the options available to them, regularly evaluating the price/performance features of PS against other polymers. This has had, and is continuing to have, a detrimental impact on PS demand. The JV will thus also be constrained by the threat of customers switching to other polymers and other materials.

29. Further, the Parties submit that they are not particularly close competitors and therefore that no unilateral effects concerns should arise on this basis either. The Parties submit the following reasoning: (i) there are only […] customers in common among each of INEOS and BASF’s top 20 customers in the EEA in the period 2008 to 2010; (ii) of INEOS’ top 20 customers, only […] appear in BASF’s top 70 customers; (iii) of BASF’s top 20 customers only […] appear in INEOS’ top 70 customers. Additionally, there are many examples of the Parties’ customers both multi-sourcing from and switching or threatening to switch volumes to other suppliers, including Total, Styron, Polimeri, Synthos and non-European suppliers.

30. The respondents to the market investigation did not express major concerns as regards the market for PS. Additionally the market investigation widely confirmed that PS can be substituted by a range of competing polymers in almost all end applications. Moreover, customers usually have from 2 to 5 qualified suppliers and, thus, they can easily switch from one supplier to another. Finally, the majority of the respondents believed that there would be sufficient suppliers in the PS market post-merger.

31. Given the competitive constraint exercised by other polymers, the presence of important players in the EEA and global markets, as well as the lack of competition concerns arising from the market investigation, the Commission considers that the proposed transaction does not raise serious doubts as to the compatibility of the proposed transaction with the internal market as regards the market for PS.

GPPS

EEA + Switzerland Production and Merchant Market Sales of GPPS, 2010

|Production |Merchant market sales |

|2009 |2010 |2009 |2010 |

|Vol. (kt) |Share (%) |Vol. (kt) |Share (%) |Vol. (kt) |Share (%) |Vol. (kt) |Share (%) |

BASF |[…] |[20-30]% |[…] |[20-30]% |[…] |[10-20]% |[…] |[10-20]% |

INEOS |[…] |[10-20]% |[…] |[10-20]% |[…] |[20-30]% |[…] |[20-30]% |

Combined |[…] |[40-50]% |[…] |[40-50]% |[…] |[30-40]% |[…] |[30-40]% |

Styron |[…] |[20-30]% |[…] |[20-30]% |[…] |[20-30]% |[…] |[20-30]% |

Total |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |

Polimeri |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |

Synthos |[…] |[0-5]% |[…] |[0-5]% |[…] |[0-5]% |[…] |[0-5]% |

Imports |[…] |[0-5]% |[…] |[0-5]% |[…] |[5-10]% |[…] |[0-5]% |

Total |[…] |100% |[…] |100% |[…] |100% |[…] |100% |

Source: Form CO

32. If the alternative market for GPPS were to be considered, the Parties' combined market shares would be very similar ([30-40]%), and substantially lower on a global basis. In addition, other strong competitors will remain in the GPPS markets, with substantial market shares such as Styron ([20-30]%, Total ([10-20]%) and Polimeri ([10-20]%), inter alia.

33. The Parties argue that no competition concerns could arise from the transaction regarding GPPS, as significant competitors remain in the EEA, importers can easily increase their presence in the EEA and customers can switch to other polymers if the JV attempted to increase GPPS prices.

34. The market investigation confirmed that there are numerous polymers that could substitute GPPS in almost all end applications. Moreover, it appears that GPPS is a commodity product that does not require special equipment. In fact, virtually all manufacturers produce GPPS. Additionally, most of the customers' multi source, and have from 2 to 5 qualified suppliers. Therefore, they can easily switch from one supplier to another. Finally, the respondents did not express major concerns regarding GPPS.

35. It follows from the above that the Commission considers that the proposed transaction does not raise serious doubts as to the compatibility of the proposed transaction with the internal market as regards the market for GPPS.

HIPS

EEA + Switzerland Production and Merchant Market Sales of HIPS

|Production |Merchant Market Sales |

|2008 |2009 |2010 |2008 |2009 |2010 |

|Vol. (kt) |Share (%) |Vol. (kt) |Share (%) |Vol. (kt) |Share (%) |Vol. (kt) |Share (%) |Vol. (kt) |Share (%) |Vol. (kt) |Share (%) |

BASF |[…] |[20-30]% |[…] |[20-30]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |

INEOS |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |

Combined |[…] |[30-40]% |[…] |[30-40]% |[…] |[30-40]% |[…] |[30-40]% |[…] |[30-40]% |[…] |[30-40]% |

Polimeri |[…] |[20-30]% |[…] |[20-30]% |[…] |[20-30]% |[…] |[20-30]% |[…] |[20-30]% |[…] |[20-30]% |

Total |[…] |[20-30]% |[…] |[20-30]% |[…] |[20-30]% |[…] |[20-30]% |[…] |[10-20]% |[…] |[20-30]% |

Styron |[…] |[10-20]% |[…] |[10-20]% |[…] |[5-10]% |[…] |[5-10]% |[…] |[5-10]% |[…] |[5-10]% |

Synthos |[…] |[5-10]% |[…] |[5-10]% |[…] |[5-10]% |[…] |[5-10]% |[…] |[5-10]% |[…] |[5-10]% |

Imports |[…] |[0-5]% |[…] |[0-5]% |[…] |[0-5]% |[…] |[5-10]% |[…] |[5-10]% |[…] |[5-10]% |

Total |[…] |100% |[…] |100% |[…] |100% |[…] |100% |[…] |100% |[…] |100% |

36. As derived from the above table, the Parties' market shares in the market for HIPS are lower than in the market for all PS or GPPS. In turn, on a global basis the Parties' combined market shares are significantly smaller. Moreover, other strong players are active in this market, such as Polimeri ([20-30]%) and Total ([20-30]%).

37. Furthermore, the market investigation revealed that in the case of HIPS there are also a number of polymers that could be used as substitutes. The majority of the customers have from 2 to 5 qualified suppliers, and thus can easily switch from one supplier to another. Finally, the respondents did not express competition concerns regarding HIPS.

38. Given the above, the Commission considers that the proposed transaction does not raise serious doubts as to the compatibility of the proposed transaction with the internal market as regards the market for HIPS.

Acrylonitrile – Butadiene - Styrene (ABS)

39. Both INEOS and BASF produce and sell ABS in the EEA and will contribute their EEA ABS businesses to the JV. [12]

Product market definition

40. ABS is a thermoplastic resin produced from three monomers: acrylonitrile, butadiene and styrene. ABS typically contains at least 50% styrene, with varying proportions of acrylonitrile and butadiene. ABS is a tough, scratch-resistant material with high impact resistance, which can be readily processed by most thermoplastic fabrication techniques, including injection moulding and extrusion. The main applications of ABS include:

i. Electrical appliances, which account for ca. 50% of total demand and include refrigerator door caps, vacuum cleaner components, washing machine panels and control devices.

ii. Information technology, including keyboards, computer and printer housings, etc.

iii. Automotive applications, such as dashboard components, centre consoles, rear view mirror housings, steering wheel covers, profiles and roof consoles, inter alia; and

iv. Construction: electrical switch covers, “chrome-plated” shower and bath components.

41. In INEOS/LANXESS [13] the Commission considered various delineations of the ABS market: a wider market for ABS, modified PP, HIPS, PVC and PC, an alternative market encompassing ABS and modified PP, and a narrower market for ABS. In INEOS/BASF Assets [14] , the Commission noted that ABS could belong to the overall market of thermoplastic resins, although a distinct market for ABS was also considered.

Inter-polymer substitution

42. The Parties argue that in many of ABS end applications a range of plastic materials can be used. [15] In particular, in many lower-end applications ABS is being replaced by other, cheaper materials (e.g. PP). Similarly, in higher-end applications, ABS may be replaced by more technical – and more expensive – plastics like PC or PA. ABS is regarded as a “bridge” polymer between commodity plastics (such as PS, PP and PET) and higher performing engineering thermoplastics (such as nylon/polyamide (“PA”) or polycarbonate (“PC”) resins). [16]

43. However, from a demand side perspective, the market investigation indicates that there are only limited possibilities for ABS to be substituted by other polymers or materials in most of its end applications. ABS's mechanical and aesthetic characteristics, as well as its price, make substitution especially difficult. As a result, customers do not often switch from ABS to other polymers or materials. From a supply side, there is no substitutability possible, as ABS is produced in dedicated equipment in which other polymers are not manufactured.

Pre-coloured ABS

44. The Parties consider that a distinction should be drawn between natural and pre-coloured (compounded) ABS. During the compounding stage pigments/colours and additives are added to the natural ABS. This colouring step is a straightforward compounding process that can be undertaken either by integrated resin producers, such as BASF or INEOS, by independent compounders or by the customers themselves. The market investigation fully corroborated the parties' views. Virtually all respondents considered that natural and pre-coloured ABS are neither supply nor demand side substitutable. First because compounding facilities are needed to produce pre-coloured ABS. Second because customers that need coloured ABS and have no in-house self-colouring facilities, cannot use natural ABS as a substitute.

45. The Parties estimate that approximately [40-50]% of EEA demand for ABS is from customers which have in-house self-colouring capabilities. For the customers without self-colouring facilities, buying natural ABS is not an option. They therefore have to buy pre-coloured ABS either from integrated ABS manufacturers or from compounders, which buy natural ABS on the market and produce pre-coloured ABS in their compounding facilities by adding pigments and additives to natural ABS. The Parties believe that the market for pre-coloured ABS should include both vertically integrated manufacturers and compounders.

46. The market investigation did not clarify this point. On one hand, nearly all competitors and customers indicated compounders do not have production capacity to supply large volumes. They target small/medium customers, supply smaller volumes of ABS, at a higher price (+10-15%), and often specialize in special ABS grades. On the other hand, half of the compounders consider themselves as competing at the same level as producers (i.e. supplying the same volumes at the same prices). As a result, it is inconclusive whether the market for pre-coloured ABS should include both integrated manufacturers and compounders.

ABS grades

47. The Parties contend that no special grades of ABS could be defined as a separate product market. All manufacturers produce their different ABS grades using the same equipment. Furthermore, minor alterations in particular in the mix of feedstock used, and in the use of additives, allow considerable versatility in the tailoring of ABS properties to meet specific customer requirements. From a demand perspective, customers can use varying ABS grades for most if not all end uses. The Parties underline that there is one possible exception where the scope for demand-side switching by customers may be more limited: medical grade ABS.

48. Medical grade ABS is used in medical applications (e.g. in making inhalers). The ABS used in these applications is functionally indistinguishable from other types of ABS and there are no particular manufacturing requirements as medical ABS is produced on the same lines as other ABS. However, there are regulatory (e.g. FDA) requirements which set out the standards for raw materials and recipes to ensure quality control for medical applications. Additional cleaning, testing and documenting may be required. Customers may also require some time to “qualify” a new supplier.

49. The market investigation confirmed the Parties' approach. A number of special ABS grades were mentioned by some respondents, but they were not considered as distinct product markets by the majority. First, because all grades could be produced in the same equipment, and, second because switching from the production or usage of a particular ABS grade to another does not involve significant switching costs. The only exception was medical grade ABS. Most of the respondents considered it difficult to switch, since a long qualification process is required in this case (from 12 to 18 months).

50. For the purposes of this decision, the exact delineation of the product market can be left open as no competition concerns arise under any conceivable market definition.

Geographic market definition

51. The Commission has previously considered the geographic market for ABS as at least EEA-wide, [17] however the geographic definition was ultimately left open.

52. The Parties argue that the market should be defined as worldwide for the following reasons: (i) ABS is a stable and easily transportable product which is widely traded and shipped across continents; (ii) transport costs do not hinder trade flows. International shipping costs and tariffs represent less than 5% of the EEA product price, and around 10% including duty; and (iii) imports are significant ([20-30]% for natural ABS and [10-20]% for pre-coloured in 2009). In particular, imports from Asia will further increase, since Asian producers have substantial spare capacity and significantly lower costs and prices. Moreover, on 6 October 2010, the European Commission signed a Free Trade Agreement with South Korea which will remove virtually all tariffs between the two economies, as well as many non-tariff barriers. Finally, imports from Middle East will play an important role as new capacity will build up in this region.

53. The market investigation, however, did not fully corroborate the parties' views. As regards natural ABS, it appears that price differences between Asia and EEA do not seem to be as large as in previous years (it is currently estimated by the respondents as between 5 and 15%). As a result, transport costs (which are estimated between 9 and 16%) are often higher than price differences. Furthermore, EEA imports have declined over the last 3 years and most of the customers source on an EEA basis. It is worth noting, nonetheless, that there are a number of elements pointing towards a global market, such as the significant role of ABS imports and exports in the EEA market and the considerable percentage of EEA demand covered by imports. The Parties' estimates include a proportion of imports that is used captively by producers and, thus, not sold into the EEA merchant market.

54. Concerning pre-coloured ABS and medical grade ABS, the majority of the respondents considered the market to be EEA-wide. Most customers source their pre-coloured ABS on an EEA level and imports are low (15% of the EEA demand). In the case of medical grade ABS, some respondents indicated the testing standards in foreign laboratories could not be in line with EU requirements.

55. For the purposes of this decision, the market for ABS and its further delineations can be defined as at least EEA-wide in scope.

Competitive Assessment

56. The proposed transaction gives rise to the following horizontal overlaps: (i) overall market for ABS, (ii) natural ABS, (iii) pre-coloured ABS, and (iv) medical grade ABS. The Parties also overlap in the production of other competing polymers. Nonetheless, if wider markets were to be considered (i.e. ABS and PP, or a broader market encompassing ABS, modified PP, HIPS, PVC and PC) the Parties overlap would be below [10-20]%.

Overall ABS market

57. The table below shows the Parties and competitors' market shares in terms of production and production capacity in the EEA+CH in 2010:

Production and capacity market shares in the EEA+CH, 2010:

2010 |Capacity in the EEA+CH |Production in the EEA+CH |

|Volume (kt) |Share (%) |Volume (kt) |Share (%) |

INEOS |[…] |[20-30]% |[…] |[20-30]% |

BASF |[…] |[40-50]% |[…] |[40-50]% |

Combined |[…] |[70-80]% |[…] |[70-80]% |

Styron |[…] |[20-30]% |[…] |[20-30]% |

Polimeri |[…] |[5-10]% |[…] |[5-10]% |

TOTAL |[…] |100% |[…] |100% |

Source: FORM CO

58. Following the transaction, the Parties will control more than 2/3 of the current EEA+CH production and production capacity of ABS, with a combined market share of [70-80]%. Only 3 ABS producers will remain in the EEA+CH, resulting in a very concentrated market at this level. In terms of global production, the Parties' market shares will be much lower ([10-20]% in production capacity and [10-20]% in production). However, the merged entity will continue to be a significant player on a global basis, being the second largest producer in terms of capacity and the third in terms of production.

Merchant market (at end supplier level) in the EEA+CH, 2010 [18] :

2010 |EEA + CH |

|Kt |% |

BASF |[…] |[20-30]% |

INEOS |[…] |[10-20]% |

Combined |[…] |[40-50]% |

Styron |[…] |[10-20]% |

Sabic |[…] |[5-10]% |

Schulman |[…] |[5-10]% |

Polimeri |[…] |[5-10]% |

LG |[…] |[5-10]% |

Ravago |[…] |[0-5]% |

Chimei |[…] |[0-5]% |

Cheil Samsung | […] |[0-5]% |

Nord Color |[…] |[0-5]% |

Other compounders |[…] |[10-20]% |

Others |[…] |[5-10]% |

TOTAL |[…] |100% |

Source: FORM CO

59. Post transaction the Parties' combined market shares in the EEA+CH merchant market for all ABS at end supplier level (i.e. including compounders) will be [40-50]%, with an increment of [10-20]%. The merged entity will be the clear market leader in the EEA+CH, followed by much smaller competitors ([10-20]% Styron and [5-10]% Sabic, LG and Polimeri, respectively). In turn, in a narrower market excluding compounders, the combined market shares would be even higher ([50-60]%).

60. If a worldwide market were to be considered, the JV presence will be moderate: less than [10-20]% either at producer or at end supplier level, however, it will continue to be one of the market leaders at end supplier level.

61. The Parties consider that the JV will compete with large producers of ABS active in the EEA+CH, including Styron, Polimeri and Samsung/Cheil. The JV will also face competition from importers, including Chi Mei, and LG. These suppliers have significant spare capacity and the ability to produce more ABS for sale in Europe. The Parties also claim that BASF and INEOS focus on different products (BASF focuses on natural ABS whilst INEOS focuses on pre-coloured ABS). Therefore they could not be considered as close competitors.

62. The market investigation broadly confirmed the above concerns. The majority of respondents indicated that the transaction will lead to price increases and a dominant position of the merged entity in the EEA market. Moreover, numerous customers expressed concerns about the reduction in the number of suppliers remaining in the market.

63. It follows from above that the merged entity will have a dominant position in the EEA merchant market for ABS, as well as a super dominant position in terms of production and production capacity, with only two other producers remaining in the EEA market. Moreover, respondents from the market investigation raised concerns as regards the ABS market. The Commission considers therefore that the transaction raises serious doubts as to its compatibility with the internal market in relation to ABS in the EEA.

Natural ABS

64. The combined entity’s shares of the merchant market for natural ABS in the EEA+CH in 2010 is the following:

Merchant market for natural ABS, 2010:

|2009 |2010 |

|Global |EEA+CH |Global |EEA+CH |

|Kt |% |€m |% |Kt |% |€m |% |Kt |% |€m |% |Kt |% |€m |% |

BASF |[…] |[10-20]% |[…] |[10-20]% |[…] |[40-50]% |[…] |[40-50]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[40-50]% |[…] |[40-50]% |

INEOS |[…] |[0-5]% |[…] |[0-5]% |[…] |[5-10]% |[…] |[5-10]% |[…] |[0-5]% |[…] |[0-5]% |[…] |[5-10]% |[…] |[5-10]% |

Combined |[…] |[10-20]% |[…] |[10-20]% |[…] |[40-50]% |[…] |[40-50]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[50-60]% |[…] |[50-60]% |

Styron |[…] |[0-5]% |[…] |[0-5]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[0-5]% |[…] |[0-5]% |[…] |[10-20]% |[…] |[10-20]% |

Chi Mei |[…] |[20-30]% |[…] |[20-30]% |[…] |[10-20]% |[…] |[10-20]% | […] |[20-30]% |[…] |[20-30]% |[…] |[10-20]% |[…] |[5-10]% |

Polimeri |[…] |[0-5]% |[…] |[0-5]% |[…] |[5-10]% |[…] |[5-10]% |[…] |[0-5]% |[…] |[0-5]% |[…] |[5-10]% |[…] |[5-10]% |

LG |[…] |[10-20]% |[…] |[10-20]% |[…] |[5-10]% |[…] |[5-10]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[5-10]% |[…] |[5-10]% |

Cheil (Samsung) |[…] |[0-5]% |[…] |[0-5]% |[…] |[0-5]% |[…] |[0-5]% |[…] |[0-5]% |[…] |[0-5]% |[…] |[0-5]% |[…] |[0-5]% |

Others |[…] |[40-50]% |[…] |[30-40]% |[…] |[5-10]% |[…] |[5-10]% |[…] |[30-40]% |[…] |[30-40]% |[…] |[5-10]% |[…] |[5-10]% |

TOTAL |[…] |100% |[…] |100% |[…] |100% |[…] |100% |[…] |100% |[…] |100% |[…] |100% |[…] |100% |

Source: FORM CO

65. The combined entity will have large market shares at all levels: [50-60]% in the EEA+CH merchant market, both in terms of volume (kt) and in terms of sales (EUR), and [70-80]% in terms of total capacity and production in the EEA+CH [19] . Although the increment in the merchant market is moderate ([5-10]%), only a limited number of players with considerably lower market shares will remain active in the market. On a global level, however, the Parties' combined market shares would not be significant ([10-20]% in terms of value and [10-20]% in terms of volume). Moreover, other significant suppliers will remain in the market, such as Chi Mei ([20-30]%) or LG ([10-20]%).

66. The Parties consider that the JV will continue to face intense competition from the other producers of ABS with European assets, such as Styron, Polimeri and Samsung/Cheil. The JV will also face intense competition from importers, including Chi Mei, and LG. The Parties also argue that BASF and INEOS have fundamentally different business models and only a few overlapping customers, with BASF focusing on natural ABS whilst INEOS focuses on pre-coloured product and only makes limited sales of natural ABS. Moreover, ABS customers are sophisticated purchasers who can and do source from a variety of suppliers.

67. The market investigation revealed that significant entry barriers exist in this market, resulting not only from the sunk costs involved given the infrastructure needed to start natural ABS production (a facility with polymerization capacity), but also from the know how required to enter this market. Nearly all respondents indicated that no newcomers have entered the market in the last 3 years or are likely to enter in the following 3 years, and none of the EEA producers are expected to add any production capacity. Customers, in turn, argued that the natural ABS produced by both parties is identical or very similar, and considered ABS producers as having more bargaining power than their clients.

68. Finally, most of the customers that responded to the Commission's market investigation considered that the transaction (i) would create a dominant player in the market, (ii) the prices would increase and (iii) there would not be sufficient suppliers remaining in the market for natural ABS.

69. It follows from the above that serious doubts as to the compatibility of the proposed transaction with the internal market cannot be excluded for natural ABS.

Pre-coloured ABS

70. Market shares in the merchant market for pre-coloured ABS in the EEA+CH in 2010, excluding compounders and including compounders, are the following tables:

Merchant market for pre-coloured ABS (at producer level, i.e. excluding compounders), 2010:

|2009 |2010 |

|Global |EEA+CH |Global |EEA+CH |

|Kt |% |€m |% |Kt |% |€m |% |Kt |% |€m |% |Kt |% |€m |% |

INEOS |[…] |[10-20]% |[…] |[10-20]% | […] |[30-40]% |[…] |[30-40]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[30-40]% |[…] |[30-40]% |

BASF |[…] |[0-5]% |[…] |[0-5]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[0-5]% |[…] |[0-5]% |[…] |[10-20]% |[…] |[10-20]% |

Combined |[…] |[10-20]% |[…] |[10-20]% |[…] |[50-60]% |[…] |[50-60]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[50-60]% |[…] |]50-60]% |

Styron |[…] |[0-5]% |[…] |[0-5]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[0-5]% |[…] |[0-5]% |[…] |[10-20]% |[…] |[10-20]% |

SABIC |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |

LG |[…] |[10-20]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[5-10]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[5-10]% |[…] |[5-10]% |

Cheil (Samsung) |[…] |[10-20]% |[…] |[10-20]% |[…] |[0-5]% |[…] |[0-5]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[0-5]% |[…] |[0-5]% |

Others |[…] |[40-50]% |[…] |[30-40]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[40-50]% |[…] |[40-50]% |[…] |[5-10]% |[…] |[5-10]% |

TOTAL |[…] |100% |[…] |100% |[…] |100% |[…] |100% |[…] |100% |[…] |100% |[…] |100% |[…] |100% |

Source: FORM CO

Merchant market for pre-coloured ABS (including compounders) in the EEA+CH, 2010:

End-supplier level (including compounders) |Market shares in value (%) |

BASF |[5-10]% |

INEOS |[20-30]% |

Combined |[30-40]% |

Styron |[10-20]% |

Sabic |[5-10]% |

Schulman |[5-10]% |

LG |[5-10]% |

Ravago |[0-5]% |

Samsung |[0-5]% |

Nord Color |[0-5]% |

Source: FORM CO

71. After the proposed transaction the Parties' combined market shares will be high: [30-40]% at producer level and [50-60]% excluding compounders. Moreover, the parties' market shares in terms of total capacity and production of ABS in the EEA+CH (both natural and pre-coloured) are large ([70-80]%). Additionally, only a few market players with substantially lower market shares will remain in the market post-merger. On a worldwide basis, the Parties' combined market shares will be much lower ([10-20]% in volume and [10-20]% in value, with an increment of only [0-5]%).

72. The Parties claim that the merged entity will continue to face strong competition from European producers, as well as from importers, such as Chimei, LG or Formosa. The JV will also continue to compete with compounders who produce pre-coloured ABS using either European or imported natural resin. Finally the Parties argue that BASF and INEOS are not close competitors

73. The majority of respondents considered that the proposed transaction will create a dominant player in the market for pre-coloured ABS and raised concerns about the limited number of suppliers remaining in the market. Furthermore, numerous customers fear an impact on prices. This situation may be aggravated by the fact that nearly all respondents indicated that no newcomers have entered the market in the last 3 years or are expected to enter it in the following 3 years.

74. As a consequence, serious doubts as to the compatibility of the proposed transaction with the internal market cannot be excluded for pre-coloured ABS. In order to render the concentration compatible with the internal market, BASF and INEOS have modified the notified concentration by entering into commitments, which are annexed to this decision and form an integral part of it. (See Section V below).

Medical-grade ABS

75. Market shares in the merchant market for Medical-grade ABS in the EEA+CH in 2010 are the following:

|Medical Grade |

BASF |[5-10]% |

Ineos |[70-80]% |

Combined |[80-90]% |

Sabic |[10-20]% |

Others |[0-5]% |

Source: Parties

76. The combined entity will have a very high market share ([80-90]%) in the market for medical grade. However, the Medical-grade market accounts for only around […] kT in volume, which is less than [0-5]% of total EEA ABS demand.

77. There is only one other fully certified supplier of Medical-grade ABS currently active in the EEA market: SABIC, which could easily increase its supplies. There are also several compounders with FDA certification; however they cannot produce to the most demanding medical specifications. A re-qualification of such compounders will take from 3 to 12 additional months. Consequently, entering into the medical grade market will take from 12 to 18 months for newcomers and from 3 to 12 months for compounders already certified for lower forms of medical grade.

78. The Parties argue that competitors – in particular SABIC which has a strong global position in plastics for medical applications overall – is already estimated to have larger sales of medical grade ABS (over […]kt) than BASF (less than […]kt). Any further growth in SABIC’s medical grade sales therefore has the ability to substantially alter the Parties' combined share of the market. Additionally, a number of compounders also supply ABS for use in medical applications globally - they could also start sales in Europe. Finally, the Parties insist on the small dimension of this market segment ([…] kt), as well as on the fact that medical grade is exactly the same in terms of product specification as standard grades of ABS.

79. The market investigation confirmed that no special requirements or equipment is needed to produce medical grade ABS, the only entry barrier is to obtain an FDA approval, which can take from 12 to 18 months. Furthermore, none of the respondents in the market investigation complained about competition issues related to Medical-grade ABS.

80. For the purposes of this case, it is not necessary to conclude as to the compatibility of the proposed transaction with the internal market as regards the market for medical grade ABS, since the proposed commitments will more than remove the existing overlap between the Parties (INEOS' plant at Tarragona accounts for ca. [50-60]% of the medical grade market share in the EEA merchant market).

B. VERTICAL RELATIONSHIPS

1. Natural ABS (upstream) – Pre-coloured ABS (downstream)

81. The transaction gives rise to a vertical link between natural ABS and pre-coloured ABS. As stated above, natural ABS is the main input for the production of pre-coloured ABS.

Product and geographic market definitions

82. The product and geographic markets for ABS have been discussed in recital 40-55.

Competitive Assessment

83. Following the transaction the Parties will have high market shares in both markets: [50-60]% in the market for natural ABS and [50-60]% in the market for pre-coloured ABS at producer level ([30-40]% if compounders were to be included) on an EEA+CH basis. Moreover, the parties' market shares in terms of total capacity and production of ABS (both natural and pre-coloured) are also large ([70-80]%) in the EEA+CH. In addition, the market investigation confirmed that few players will remain in the EEA+CH merchant market post-merger and no newcomers or expansion plans are foreseen on an EEA+CH level.

84. Given that the merged entity will have substantial market shares at either level, there is a risk of input foreclosure with respect to compounders (or price increase) who compete with the Parties in the downstream pre-coloured ABS market. In this sense, a number of respondents have expressed their concerns regarding the dominant position of the JV in the upstream market for natural ABS and the downstream market for pre-coloured ABS. As well, many respondents indicated a risk of price increase of natural ABS after the transaction. The Parties do not consider that the JV would have either the ability or the incentive to engage in such a vertical foreclosure strategy.

85. In any case, and for the purposes of the present case, there is no need to conclude as to the compatibility of the proposed transaction with the internal market as regards this vertical relationship, as the divestment of Tarragona site would address any vertical concerns arising from the combination of the Parties’ upstream natural ABS business with the Parties’ downstream pre-coloured ABS business.

2. Styrene Monomer catalysts (upstream) – Styrene Monomer (SM) (downstream)

86. The production of SM via the ethylbenzene dehydrogenation process involves passing a mixture of evaporated ethylbenzene and steam over a solid bed of catalyst material (“SM catalyst”). The basis of most SM catalysts used in the ethylbenzene dehydrogenation process is iron oxide extrudate.

87. BASF produces SM catalysts which can be used by both BASF and INEOS for their SM production.

Product and geographic market definitions

Styrene Monomer

88. In previous cases, the Commission has identified SM as the relevant product market, “as there is no substitute for styrene in the manufacture of polystyrene and expanded polystyrene and other styrene derivatives.” [20] The Parties agree with this approach.

89. In previous cases, the Commission has recognised that the relevant geographic market for SM could be either global or EEA-wide. [21] The Parties consider the market to be global because, in their view, SM is a stable commodity product; transport costs are low (generally less than 10% of delivered price from Asia to Europe, and less from other regions to Europe); the Parties estimate that around half of imports are for merchant market sale, and therefore imports for merchant market sale accounted for around [10-20]% of estimated European merchant demand in 2010, and [10-20]% in 2009.

90. For the purposes of this decision, the exact delineation of the product and geographic market can be left open as no competition concerns arise under any conceivable market definition.

SM catalysts

91. There is no previous Commission practice regarding this product. The Parties submit that SM catalyst is generally not demand-side substitutable with catalysts for the production of other chemicals or plastics and that SM catalyst is generally not sold bundled with a technology licence to produce SM. Therefore the Parties consider that SM catalysts should be considered a distinct market from licensing of technology to produce SM.

92. The Parties submit that the relevant geographic market for SM catalyst is global as it is readily transportable (it is actively traded between Europe, Asia and America) and there are no significant barriers to trade.

93. For the purposes of this decision, the exact delineation of the product and geographic market can be left open as no competition concerns arise under any conceivable market definition.

Competitive assessment

94. The Parties submit the following market shares for SM catalysts:

SM catalyst merchant market shares, global

Producer |2007 |2008 |2009 |2010 |

|Sales (kt) |Share (%) |Sales (kt) |Share (%) |Sales (kt) |Share (%) |Sales (kt) |Share (%) |

BASF |[…] |40-50% |[…] |[40-50]% |[…] |[40-50]% |[…] |[60-70]% |

INEOS |[…] |0% |[…] |0% |[…] |0% |[…] |0% |

Süd-Chemie |[…] |45-55% |[…] |[40-50]% |[…] |[50-60]% |[…] |[30-40]% |

Sinopec |[…] |0-5% |[…] |[0-5]% |[…] |[0-5]% |[…] |[0-5]% |

Yaroslavl |[…] |0-5% |[…] |[0-5]% |[…] |[0-5]% |[…] |[0-5]% |

Total |[…] |100% |[…] |100% |[…] |100% |[…] |100% |

Source: Form CO

SM catalyst production shares, global

Producer |2009 |2010 |

|Production (kt) |Share (%) |Production (kt) |Share (%) |

BASF |[…] |[30-40]% |[…] |[60-70]% |

INEOS |[…] |0% |[…] |0% |

Süd-Chemie |[…] |[50-60]% |[…] |[30-40]% |

Sinopec |[…] |[5-10]% |[…] |[5-10]% |

Yaroslavl |[…] |[0-5]% |[…] |[0-5]% |

Total |[…] |100% | |100% |

Source: Form CO

Input foreclosure

95. The Parties submit they will have no ability to foreclose other SM producers because BASF’s customers can and do purchase SM catalysts from other suppliers, such as Total, Synthos , or Polimeri. These producers of SM catalyst are not capacity constrained and can readily increase supplies. In fact, spare capacity in third party hands in 2010 was at least […]kt [22] which represents over [70-80]% of BASF’s sales in 2010. [23] Moreover, customers can easily switch between different SM catalysts, as different SM catalysts can be used in a given production plant. Finally, SM catalysts account for less than [0-5]% of the costs of production of SM, and therefore do not represent a significant proportion of SM rivals’ costs.

Customer foreclosure

96. As regards customer foreclosure, the proposed JV will not materially change the existing position. INEOS already uses a BASF SM catalyst in its Sarnia plant, and has recently agreed to use a BASF SM catalyst in its Bayport plant. Even if the JV were to buy 100% of its requirements from BASF, this would represent only around [5-10]% [24] of total demand for SM catalyst. Other suppliers of SM catalysts would therefore not be foreclosed as numerous other SM producers would remain.

97. Given the above, the Commission considers that the proposed transaction does not raise competition concerns as regards this vertical relationship.

3. Styrene Monomer (SM) (upstream) – PS, ABS, SAN, SBC, SMMA, ASA and EPS (downstream)

98. The proposed JV will give rise to a number of vertical links regarding styrene monomer (SM) (upstream) and a number of vertically related downstream markets:

(i) SM (upstream) – Polysterene – PS (downstream)

(ii) SM (upstream) – Acrylonitrile Budadiene Styrene - ABS (downstream)

(iii) SM (upstream) – Styrene Acrylonitrile - SAN(downstream)

(iv) SM (upstream) – Styrene butadiene copolymers - SBC (downstream)

(v) SM (upstream) – Styrene methylmethacrylate - SMMA (downstream)

(vi) SM (upstream) – Acrylonitrile styrene acrylate - ASA (downstream)

(vii) SM (upstream) – Expanded Polystyrene - EPS (downstream)

Product and geographic market definitions

99. The product and geographic market for SM has been discussed in recital 88-93.

100. The product and geographic market for PS has been discussed in recital 11-21.

101. The product and geographic market for ABS has been discussed in recital 40-55.

SAN

102. Styrene-Acrylonitrile ("SAN") is a rigid and transparent polymer made from SM ([70-80]% volume, […]% value) and ACN ([20-30]% volume, […]% value). SAN is used principally in the production of ABS, but may also be used for compounding with other plastics ("industrial SAN"). In addition, it has some commercial end uses as translucent polymer in its own right, including kitchenware, computer products, packaging material, battery cases and plastic optical fibres ("commercial SAN").

103. The Parties submit that from a demand-side perspective, there is a distinction between industrial and commercial SAN. Industrial SAN is principally used in the ABS production process and for compounding with other plastics, while commercial SAN is used in the products listed above. According to the Parties it is not used in ABS or for compounding, as it is more expensive than industrial SAN and is tinted. Commercial SAN differs from industrial SAN mainly as a result of additives, colorants and a lower residual monomer content. Furthermore according to the Parties, from a supply-side perspective some additional equipment is required to produce commercial SAN, namely a strain degasser to remove the residual monomers and a simple extruder to allow incorporation of additives.

104. The parties further contend that as INEOS does not produce commercial SAN in the EEA and BASF mainly produces commercial SAN, and given that industrial SAN can be produced on any commercial SAN line without investment, it would be more appropriate to consider the overall SAN market.

105. In its previous decisions the Commission left the product market definition open [25] .

106. BASF submits that the potential relevant geographic market for SAN is global in scope for the following reasons: non-captive imports of SAN into the EEA + Switzerland were estimated to be around […] kt for 2010 and thus accounted for [10-20]% of merchant industrial SAN demand and [10-20]% of merchant commercial SAN demand; SAN may be transported over large distances by barge, rail, truck and ship with transport costs of around 5-10% of delivered price; price levels are comparable across regions globally and there are no differences in prices between individual countries or sub-regions within the EEA.

107. Given that the transaction would not lead to competition concerns under any alternative product or geographic market definition, the question whether industrial and commercial SAN belong to the same product market can be left open.

Styrene-butadiene block copolymers (SBC)

108. The BASF SBC business will be contributed to the JV. INEOS does not produce SBCs.

109. SBCs are high transparency, high capability, high surface gloss products which exhibit rigidity and high flexibility, are easy to dye or print and can be compounded with other materials. It is easy to dye or print and is used in a broad range of industries.

110. The Commission has not previously considered the SBC product market separately, but has held that the relevant product market may comprise all types of engineering thermoplastic resins which are considered substitutable with ABS resins. [26]

111. The Parties do not contest the above delineation, but underline that a range of transparent engineering thermoplastics are generally demand-side substitutable, including GPPS, SAN, SBC, MABS, PC, PET and PMMA.

112. In a recent decision the Commission considered the relevant market for engineering thermoplastic resins as global or EEA-wide, but did not conclude on the geographical scope of the market. [27] The Parties submit that the relevant geographic market is global as transparent thermoplastic resins are actively traded between Europe, Asia and America and there are no significant barriers to trade.

113. However, for the purpose of the present case, it is not necessary to define the ultimate scope of the relevant product and geographic markets, since the transaction will not give rise to competition concerns irrespective of the product market definition retained.

Styrene methylmethacrylate (SMMA)

114. SMMA resins are clear, impact-resistant resins, which can be used in homeware, packaging, office, medical and electronic applications.

115. In previous decisions [28] the Commission considered different markets for the different thermoplastic resins, but ultimately left the market definition open. The Commission has also indicated that the relevant market for engineering thermoplastic resins may be EEA-wide or global. [29]

116. For the purpose of the present case, it is not necessary to define the ultimate scope of the relevant product and geographic markets, since the transaction will not give rise to competition concerns irrespective of the product market definition retained.

Expanded polystyrene (EPS)

117. EPS is a closed-cell, thermal plastic material produced from styrene monomer and a blowing agent such as pentane. It is supplied by producers to converters in the form of an EPS bead. When the beads are exposed to dry, saturated steam, they expand up to 50 times their original volume, to create a low density foam material. EPS is used mainly for building and insulation applications, and to a lesser extent packaging.

118. In a prior decision [30] , the Commission regarded the market of all EPS as a distinct market. However, more recently the Commission [31] has considered the market for “very low lambda EPS” (grey EPS) as separate from the market from white EPS, but did not conclude on the product market definition. The Parties, in turn, submit that the market should be defined at least as wide as all EPS, but it could also include other insulation materials (polyurethane foam, mineral wool, etc.). As regards the geographic scope, the Commission previously defined the relevant geographic market for EPS as at least EEA-wide. [32] The Parties agree with this approach.

119. For the purpose of the present case, it is not necessary to conclude on the product and geographic market definitions, as the transaction will not give rise to competition concerns under any plausible market delineation.

Acrylonitrile styrene acrylate (ASA)

120. ASA is produced by introducing a grafted acrylic ester elastomer during the copolymerization reaction between SM and acrylonytrile. ASA has good toughness and rigidity, chemical resistance and thermal stability, resistance to weather, ageing and yellowing, and high gloss. End uses include automotive components, sports and leisure equipment, sheet applications, telecoms, and appliances.

121. ASA has not been previously defined by the Commission. The Parties consider that ASA is substitutable by a range of other weather-resistant polymers including UV stabilized ABS and weather-resistant PP. Regarding the geographic market, the Parties submit that the market for ASA is at least EEA wide in scope and note that suppliers such as SABIC, LG and Cheil make sales into the EEA from North America and Asia.

122. For the purpose of the present case, the product and geographic market definitions for ASA can be left open, as no competition concerns would arise under any possible market definition following the transaction.

Competitive assessment

Merchant Market Sales of SM in EEA+CH, 2010 [33]

Producer | Merchant sales (kt) |Share of merchant market sales (%) |

BASF[1] |[…] |[5-10]% |

INEOS[2] |[…] |[5-10]% |

Combined |[…] |[10-20]% |

Lyondell/Bayer |[…] |[30-40]% |

Shell |[…] |[20-30]% |

Repsol |[…] |[10-20]% |

Net merchant market imports |[…] |[10-20]% |

Total |[…] |100% |

Source:Parties’ estimates based on various sources.

Notes: [1] Includes capacity, production and sales from BASF plants that are out of scope of the JV

[…]

Merchant sales in the downstream markets in EEA+CH, 2010 [34]

Downstream product |BASF (in %) (kt) |INEOS (in %) (kt) |Combined (in %) (kt) |

PS |[10-20]% |[10-20]% |[30-40]% |

GPPS |[10-20]% |[20-30]% |[30-40]% |

HIPS |[10-20]% |[10-20]% |[30-40]% |

EPS EPS will not be contributed to the JV. EPS will not be contributed to the JV. |[20-30]% |[10-20]% |[40-50]% |

White EPS |[10-20]% |[10-20]% |[30-40]% |

Grey EPS |[60-70]% |[10-20]% |[70-80]% |

ABS |[20-30]% |[10-20]% |[40-50]% |

Natural ABS |[40-50]% |[5-10]% |[50-60]% |

Pre-coloured ABS |[5-10]% |[20-30]% |[30-40]% |

HH ABS |[10-20]% |[10-20]% |[30-40]% |

Medical Grade ABS |[70-80]% |[5-10]% |[80-90]% |

SAN |[30-40]% |[0-5]% |[40-50]% |

Industrial SAN |[30-40]% |[10-20]% |[40-50]% |

Commercial SAN |[30-40]% |[-] |[30-40]% |

ASA |[70-80]% |[-] |[70-80]% |

SBC |[60-70]% |[-] |[60-70]% |

SMMA |[-] |[50-60]% |[50-60]% |

Source: the parties' best estimates

SM Consumption by each of the vertically affected downstream markets, 2010

Downstream product |% of SM capacity |

PS |[30-40]% |

EPS |[10-20]% |

ABS |[10-20]% |

SAN |[0-5]% |

ASA |[0-5]% |

SBC |[0-5]% |

SMMA |[0-5]% |

TOTAL |[80-90]% |

Source: CMAI and INEOS (SM consumption), Parties' estimates (typical product recipes), ICIS (raw material prices).

123. On a structural basis, there is no merchant market overlap in the EEA+CH for SM since INEOS is short of SM in Europe and does not have surplus production available in the EEA to supply the merchant market. INEOS is substantially short of SM, with capacity of […]kt and production of […]kt in 2010, compared with internal SM use of […]kt. INEOS is therefore reliant on third party supplies of SM in the EEA On the other side, BASF is only slightly long in SM, with capacity of[…]kt and production of […]kt in 2010 compared with internal SM use of […]kt.

124. The combination of BASF and INEOS will therefore remain dependent on third party SM. SM produced by the JV will therefore primarily be used captively by the JV, with surplus (if any) sold to the merchant market.

Input foreclosure

125. As derived from the above tables, input foreclosure could not arise after the transaction as the parties’ combined merchant market share in SM would be well below 25% ([10-20]%) in the EEA+CH, and much lower on a worldwide level. Moreover, there are a number of alternative suppliers active in the supply of SM both in the EEA+CH and globally, such as LyondellBasell ([30-40]%), Shell ([20-30]%) and Repsol ([10-20]%) in the EEA+CH, and SABIC, Pars PC, Asahi Kasei Chem, Idemitsu Kosan, Honam PC, TKSC, Secco, Repsol or Tianjin Dagu, on a global basis (with market shares ranging from [0-5]% to [5-10]%). The parties, in addition, underline that there is substantial spare capacity available in the market.

Customer foreclosure

126. As shown in the above tables, SM could be used in a range of products. The parties are active in the markets for PS, ABS, SAN, SBC, SMMA, ASA and EPS, which use SM as an input. However, there are other downstream markets where SM is used as an input but in which the parties are not active (such as unsaturated polyester resins, styrene butadiene rubber, thermoplastics elastomers or MBS copolymers). These markets represent [20-30]% of the SM production capacity.

127. Regardless of the high market shares in some of the downstream markets, the proposed JV will not be an important purchaser of SM in the EEA+CH. According to the parties, the JV will require, for all its downstream activities in the EEA+CH only […] kt, which represents around [20-30]% of 2010 EEA+CH merchant market demand, and a much lower proportion of global demand. Even if the products that are not contributed to the JV (i.e. EPS and SBL – styrene butadiene latex) are taken into account, the percentage will still be moderate. Thus, the Parties' competitors in the upstream market for SM will be able to supply ca. [80-90]% of the SM demand in the downstream markets. As a consequence, it appears very unlikely that customer foreclosure could arise after the transaction.

128. Given the low market share in the upstream market for SM, and the moderate consumption of the JV in the related downstream markets, the Commission considers that the proposed transaction does not raise serious doubts as to its compatibility with the internal market as regards this vertical relationship.

4. PS technology licencing (upstream) – PS (downstream)

Product and geographic market definition

129. The product and geographic market for PS has been discussed in recital 11-21.

PS technology licencing

130. INEOS licenses PS technology to producers of PS, all outside the EEA+CH. INEOS’ PS technology licensing business will be contributed to the JV, but existing licences will remain with INEOS outside the JV. BASF does not actively license its PS technology [36] .

131. PS technology (i.e. the technology to make PS) can be licensed as a package of intellectual property and know how to third parties to allow the development of production facilities. Licensing comprises a bundle of technology and supporting services provided by the licensor or its contractor to the developer of the new facility [37] .

132. The Commission has previously considered PS technology licencing as a separate market and that the relevant geographic market for PS technology licencing is worldwide. [38] The Parties submit that they agree with this view.

133. For the purpose of the present case, it is not necessary to define the ultimate scope of the relevant product and geographic markets, since the transaction will not give rise to competition concerns irrespective of the product market definition retained.

Competitive assessment

Input foreclosure

134. The parties submit that this vertical relationship does not give rise to foreclosure concerns, as INEOS’ licensed PS technology will be used in around […]kt of PS capacity by the end of 2011, [39] which it estimates corresponds to a market share of around [5-10]% (total global PS capacity in 2009 was […]kt) [40] .

135. Issues of input foreclosure will not arise as there are a significant number of alternative providers of PS technology licensing, with no capacity limitations. There are at least four other licensors of PS technology: GE, Polimeri, Nippon Steel (Toyo Styrene) and Total Fina. INEOS considers that their technologies are substitutable for its technology at a comparable cost to a customer. INEOS assumes that each of the licensor’s prices are in the same range, on the basis that licence fees are relatively low for PS (i.e. there is little room for discounts) and contracts are awarded by tender.

136. INEOS’ PS technology licensing would also therefore fall below 25% on this basis. Existing licenses granted by the Parties will be unaffected, as licensees already have a full licence for the lifetime of the plant at fixed royalty rates (if any).

Customer foreclosure

137. As regards customer foreclosure, there are many other potential customers globally, including additional new plants which will likely be built in Asia and the Middle East

138. Given the above, the Commission considers that the proposed transaction does not raise competition concerns as regards this vertical relationship.

5. PS (upstream) - Extruded polystyrene (XPS) (downstream)

139. BASF manufactures XPS in the EEA+CH under the trade name Styrodur. However, BASF’s XPS business will not be contributed to the JV and INEOS is not active in XPS.

Product and geographic market definition

140. The product and geographic market for PS has been discussed in recital 11-21.

Extruded plystyrene (XPS)

141. Extruded polystyrene (“XPS”) is a thermoplastic material used to produce polystyrene foam board and extruded foam sheet, which are used in thermal insulation, sheathing, roofing and construction applications.

142. The Commission has previously considered XPS as part of a wider market for insulation materials but left open whether this market could be subdivided into further categories of insulation materials produced by foam (XPS, expanded polystyrene and polyurethane foam) or mineral wools (stone wools or glass wools) [41] . In addition to XPS (where only BASF is active), BASF and INEOS are both active in EPS and BASF is active in PU foam.

143. The geographic market for EPS, which is an alternative insulation material, has previously been found to be at least at least EEA-wide [42] . The competitive supply range is estimated to be about 500 km around a plant and given this wide supply radius, there is likely to be a chain of substitution across Europe.

144. However, for the purpose of the present case, it is not necessary to define the ultimate scope of the relevant product and geographic markets, since the transaction will not give rise to competition concerns irrespective of the product market definition retained

Competitive assessment

145. There are approximately 30 XPS producers (including Dow, Ursa, CRH, Knauf, Fibran and Decem) in the EEA + Switzerland, and purchasers can and do switch easily between the different suppliers and alternative materials.

146. The Parties estimate that BASF’s share of the XPS market is [10-20]%, therefore it is very unlikely that input or customer foreclosure could arise due to this vertical relationship.

All insulation materials and foam insulation materials markets, EEA + Switzerland, 2009

|All insulation materials |Foam insulation materials |

|Volume(kt) |Share (%) |Volume(kt) |Share (%) |

BASF |[…] |[5-10]% |[…] |[10-20]% |

INEOS |[…] |[5-10]% |[…] |[10-20]% |

Others |[…] |[80-90]% |[…] |[60-70]% |

Total market |[…] |100% |[…] |100% |

Source: Parties

147. Additionally, where PS is used in the manufacture of XPS for insulation (customers including Decem, Finnfoam, Uralita and Fibran), alternative insulation materials such as mineral wool or polyurethane (“PUR”) are substitutes from the final customer’s perspective. Furthermore, a number of converters are also putting themselves in a position to be able to switch between the manufacture of XPS and other insulating materials.

148. Given the above, the Commission considers that the proposed transaction does not raise competition concerns as regards this vertical relationship.

6. ACN (upstream) – ABS, SAN, AMSAN and ASA(downstream)

149. ACN is produced by INEOS and serves as an input for the joint venture’s production of ABS, SAN, AMSAN and ASA.

Product and geographic market definitions

ACN

150. Acrylonitrile (“ACN") is used in the production of SAN, ABS, ASA and AMSAN, as well as acrylic fibre, acrylonitrile butadiene rubber, acrylamide and adiponitrile (a nylon intermediate). The Commission has previously found that ACN is a separate product market. [43] The Parties agree with this approach.

151. The Commission has previously considered that the relevant geographic market for ACN is at least European (with or without Turkey) and may be global. [44] The Parties consider that the relevant market is global because of low transport costs, extensive trading on a global basis, in particular from the USA, and import of ACN to the EEA by both end-customers and traders. The Parties also submit that, should the market be considered narrower than global, Turkey should be included in the European market for the same reasons as noted before.

152. As no competition concerns arise with any market definition, the exact delineation of the product and geographic markets can be left open.

Alpha-methylstyrene acrylonitrile (AMSAN)

153. AMSAN has not been previously looked at by the Commission. It is one of several additives which may be used for the manufacture of high heat resistant ABS (“HH-ABS”). Other additives include using N-Phenylmaleimide (“NPMI”) or polycarbonate (“PC”). AMSAN is also used to a much lesser extent as an additive in the production of high heat grades of other polymers such as ASA and PVC.

154. The Parties submit that the geographic market for either high heat additives or AMSAN is at least EEA+Switzerland and may be wider as there are no technical reasons as to why it could not be transported over wider distances.

155. For the purpose of the present case, it is not necessary to define the ultimate scope of the relevant product and geographic markets, since the transaction will not give rise to competition concerns irrespective of the product market definition retained.

156. The product and geographic market for ABS has been discussed in recital 40-55.

157. The product and geographic market for SAN has been discussed in recital 102-107.

158. The product and geographic market for ASA has been discussed in recital 120-122.

Competitive assessment

Input foreclosure

159. The Parties submit that issues of input foreclosure will not arise from the vertical link between ACN and ABS, SAN, AMSAN and ASA, as INEOS' market share in ACN is not significant ([30-40]% in the EEA+CH but much lower at a global level). The Parties estimate that around [10-20]% of ACN demand in the EEA+CH in 2010 was used for the production of ABS and SAN, whereas AMSAN and ASA, together, accounted for less than [0-5]% of ACN demand in the EEA+CH. Therefore, ca. [80-90]% of the EEA+CH demand for ACN came from other related downstream markets. Given the latter, the Parties submit that they will not have the ability to foreclose other producers of ABS, SAN, AMSAN and ASA from access to ACN. In particular, these producers could source ACN from the other European suppliers of ACN - DSM, Petkim and Neftochim - or purchase from non-European suppliers (including from traders). The Parties also expect that imports would increase (in particular from the USA) in response to any hypothetical withholding strategy by INEOS.

160. It should also be observed that the parties committed to sell the Industrial SAN production at the Tarragona plant which amounts to [5-10]% of the EEA+CH and [0-5]% of the worldwide SAN production, thereby limiting the parties’ activities in SAN.

161. The Parties moreover submit that ACN is a commodity chemical and that customers could easily switch to alternative sources of supply, thus undermining any foreclosure strategy.

Customer foreclosure

162. As far as customer foreclosure is concerned, the Parties submit that the JV will not be an important customer of ACN on the merchant market. In 2009, the Parties' combined purchases of ACN on the merchant market were […]kt (ca. [5-10]% of the total EEA+CH merchant market).

163. Given the moderate JV's requirements from the upstream market for ACN, input or customer foreclosure concerns will not arise after the transaction. The Commission considers that the proposed transaction does not raise serious doubts as to its compatibility with the internal market as regards this vertical relationship.

7. Butadiene (upstream) – ABS and SBC (downstream)

Product and geographic market definitions

Butadiene

164. Butadiene is an input to a number of products [45] and a key component in synthetic rubbers used in car tyres and in synthetic latices used in the paper industry.

165. In line with the Commission’s previous decisions [46] , the Parties consider that the supply of butadiene constitutes a relevant product market due to its physical characteristics and the absence of substitutes for its specific uses.

166. The Commission has previously envisaged that the geographic scope for butadiene could be Western Europe+, which includes Western Europe, Poland and the Czech Republic [47] . The Parties consider that there are also strong arguments to support a wider market definition, given that butadiene is a commodity which is widely traded across borders, by barge, rail, pipe, truck and refrigerated ship.

167. For the purpose of the present case, it is not necessary to define the ultimate scope of the relevant product and geographic markets, since the transaction will not give rise to competition concerns irrespective of the product market definition retained.

168. The product market definitions of ABS is discussed in recital 40-55

169. The product market definitions of SBC is discussed in recital 109-113

Competitive assessment

170. BASF and INEOS are active in the production of butadiene but will not be contributing their butadiene businesses to the JV [48] . The JV therefore does not give rise to a horizontal overlap in relation to the production and sale of butadiene.

Input foreclosure

171. Issues of input foreclosure will not arise as the Parties’ combined merchant sales market share in butadiene is well below 30%. The Parties estimate their share of the merchant market in the EEA+CH at [10-20]%, and contend that the top 5 suppliers globally only account for around [20-30]% of global capacity, suggesting there are multiple alternative suppliers worldwide for butadiene.

Customer foreclosure

172. Concerning customer foreclosure, the proposed JV will be a small customer of butadiene on the merchant market. In 2010, the Parties’ combined purchases of butadiene on the merchant market were just [0-5]% of merchant market demand.

173. In light of the above, the Commission considers that the proposed transaction does not raise serious doubts as to its compatibility with the internal market with regard to this vertical relationship.

8. Additives (upstream) - ABS, SAN, ASA, PS and PA/ABS (downstream)

174. BASF produces additives which can be used as an input for the joint venture’s ABS (both natural and pre-coloured ABS), SAN, ASA, PS and PA/ABS production. BASF supplies in particular light stabilisers, UV absorbers and antioxidants. INEOS is not active in additives.

Product and geographic market definitions

Additives

175. In its most recent decision in the segment [49] the Commission distinguished different types of additives (including hindered amine light stabilisers and primary antioxidants) as separate markets with possible sub-segmentations in certain cases according to their application (plastics/coatings). To be conservative, the parties consider the narrowest definition – i.e. sub-segmented by type of additive and by application (in plastics).

176. In BASF/CIBA [50] , the Commission concluded that the geographic market for light stabilisers and for antioxidants was at least EEA wide. The Parties agree with the Commission precedent.

177. For the purpose of the present case, it is not necessary to define the ultimate scope of the relevant product and geographic markets, since the transaction will not give rise to competition concerns irrespective of the product market definition retained.

PA / ABS

178. PA/ABS is a blend of polyamide (PA) and ABS. It is a relatively new product which could potentially be used in applications such as automotives, housings for power tools, garden equipment and sports goods. PA/ABS is tougher and more durable than either PA or ABS separately but also has a high quality finish.

179. The Commission has not previously considered the product and geographic market for PA/ABS. According to the Parties, from a demand-side PA/ABS may be substituted by a range of other polymers including, PP, HIPS, PVC, PC, PC/ABS and MABS. From a supply-side perspective, the technology required to compound the two together to form PA/ABS is simple and the same equipment is used to compound other polymers. Regarding the geographic scope, the Parties consider that the market for PA/ABS is at least EEA wide, and may be global.

180. For the purpose of the present case, the product and geographic market definitions can be left open, as no competition concerns will arise due to the transaction regardless of the market definition considered.

181. The product and geographic market for ABS has been discussed in recital 40-55.

182. The product and geographic market for SAN has been discussed in recital 102-107.

183. The product and geographic market for ASA has been discussed in recital 120-122.

184. The product and geographic market for PS has been discussed in recital 11-21.

Competitive assessment

185. The Parties submit the following market shares for the relevant types of additives:

Additive type |Global |EEA |

|BASF share of plastics applications |Other notable suppliers (% share of plastics applications) |BASF share of plastics applications |Other notable suppliers (% share of plastics applications) |

HALS (Hindered Amine Light Stabilisers possibly segmented between Low (LMW) and High (HMW) molecular weight) |LMW HALS: [30-40]% HMW HALS: [40-50]% |LMW HALS:- Sabo (20-30%)- Cytec (10-20%)- Chemtura (10-20%) HMW HALS: - Cytec (10-20%)- Chemtura (<10%)- Sabo (<10%) |LMW HALS: [30-40]% HMW HALS: [40-50]% |LMW HALS: - Sabo (20-30%)- Cytec (10-20%)- Chemtura (10-20%) HMW HALS: - Chemtura (10-20%)- Cytec (10-20%)- Sabo (10-20%) |

UV absorbers (sub-segmented to- benzophenones (BPO)- benzotriazoles (BTZ)- other UVA and HPT) |BPO: 10-20% BTZ: 30-40% Other UVA and HPT: 10-20% |BPO:- Cytec (15-25%)- Chemtura (5-15%)- Adeka (<10%)- Clariant (<10%)- 3V Sigma (<10%)- Everlight (<5%) BTZ:- Cytec (5-15%)- Adeka (5-15%)- Chemtura (5-15%)- Everlight (5-15%) Other UVA&HPT:- Cytec (5-15%)- Clariant (5-15%) |BPO: 20-30% BTZ: 30-40% Other UVA and HPT: 10-20% |BPO:- Cytec (10-20%)- Chemtura (5-15%)- Adeka (5-10%)- Clariant (<10%)- 3V Sigma (<10%)- Everlight (<10%) BTZ:- Cytec (5-15%)- Adeka (<10%)- Chemtura (10-20%)- Everlight (5-15%) Other UVA&HPT:- Cytec (5-15%)- Clariant (5-15%) |

Antioxidants |30-40% |- Songwon (20-25%)- Chemtura (10-15%)- Everspring (5-10%)- Albemarle (5-10%) |40-50% |- Songwon (20-25%)- Chemtura (10-15%)- Everspring (5-10%) |

Source: Form CO

Input foreclosure

186. Despite the significant market shares in the markets for additives shown in the table, the JV's requirements will be negligible. The production of ABS (including PA/ABS) and PS together account for 5-10% of total global and EEA demand for HALS; for 10-20% of total global and EEA demand for UV absorbers; and for 5-15% of total global and EEA demand for antioxidants. Each of SAN and ASA account for under 5% of total additives demand.

187. The parties submit that ABS and PS together account for between 5-20% of total demand for each of the relevant additives. In aggregate, PS, ABS, SAN, PA/ABS and ASA therefore account for 20-35% of total demand for these additives.

188. The Parties further submit that other suppliers of additives are not capacity constrained and are well-placed to increase supplies in the event of a hypothetical price increase/refusal to supply additives by BASF.

189. The Parties further argue that a large proportion of BASF’s sales for plastics applications of HALS and UV absorbers and to some extent also its equivalent sales of antioxidants, are to masterbatch producers who act as quasi distributors of additives. They are therefore an alternative source of additives for suppliers of ABS.

Customer foreclosure

190. The parties submit that INEOS’ JV businesses currently purchase up to [90-100]% of its total requirements for particular types of additive from BASF. The SAN sold by INEOS has not been modified by the addition of additives. INEOS therefore makes no purchases of additives from BASF (or any other supplier) for use in the production of SAN. INEOS does not produce ASA and therefore makes no purchases of additives from BASF (or any other supplier) for use in the production of ASA.

191. If INEOS were to buy 100% of its requirements for all additives from BASF, the incremental volume would represent only a de minimis portion of total additives demand.

192. Given the above, the Commission considers that the proposed transaction does not raise serious doubts as to its compatibility with the internal market as regards this vertical relationship.

9. Dyes and additives (upstream) - ABS, SAN, ASA and PA/ABS (downstream)

193. BASF produces dyes which can be used as an input for the joint venture’s pre-coloured ABS, SAN, ASA and PA/ABS production. INEOS is not active in dyes.

Product and geographic market definitions

Dyes

194. In BASF/CIBA [51] , the Commission suggested that dyes could be also segmented by chemical class and by application, but ultimately left the market definition open. [52] The parties underline that majority of BASF dyes are sourced for plastics applications, thus, a market for plastic applications will be considered in this case. As per the geographic market definition, in BASF/CIBA the Commission held that the market for each class of dye was at least EEA.

195. For the purpose of the present case, the product and geographic market definitions for dyes can be left open, as no competition concerns will arise post- transaction under any possible market definition.

196. The product and geographic market for SAN has been discussed in recital 102-107.

197. The product and geographic market for ASA has been discussed in recital 120-122.

198. The product and geographic market for PA/ABS has been discussed in recital 178-180.

Competitive assessment

Input foreclosure

199. The Parties submit that they will have no ability to foreclose other customers of dyes as they will continue to have a variety of alternative sources of dyes (including Clariant, Huntsman, Dystar, Albion and Kemira) who can and will continue supplying them.

200. Furthermore, they submit that BASF is active in the supply of a limited range of dyes. BASF’s share of dyes for plastics is approximately [10-20]% in the EEA [53] and approx. [10-20]% globally [54] . Third party suppliers therefore account, according to the Parties, for at least [80-90]% of supply to plastics applications whichever the geographic market is defined.

201. The Parties also note that plastics (including ABS, SAN, ASA and PA/ABS) account for under [5-10]% of total demand for dyes. It is therefore not plausible that any input foreclosure concerns could arise with respect to dyes.

Customer foreclosure

202. Regarding customer foreclosure, the Parties submit that even if the JV were to buy 100% of its requirements from BASF, the incremental volumes represent only a de minimis portion of total dye demand. According to the Parties, each of SAN, PA/ABS and ASA account for under [0-5]% of total dyes demand. In aggregate, ABS, SAN, PA/ABS and ASA therefore account for under [0-5]% of total dyes demand. Other suppliers of dyes could therefore not be foreclosed as numerous other outlets both in other plastics applications and more generally would remain.

203. The parties also submit that INEOS does not use dyes in the production of PA/ABS and ASA and therefore makes no purchases of dyes from BASF (or any other supplier). Also, INEOS does not sell pre-coloured SAN and therefore makes no purchases of dyes from BASF (or any other supplier) for use in the production of SAN.

204. Given the above, the Commission considers that the proposed transaction does not raise serious doubts as to its compatibility with the internal market as regards this vertical relationship.

10. Pigments(upstream) – ABS, SAN, ASA and PA/ABS (downstream)

205. BASF produces pigments which can be used as an input for the joint venture’s pre-coloured ABS, SAN, ASA and PA/ABS production. Ineos is not active in pigments.

Product and geographic market definitions

Pigments

206. In its most recent decision related to pigments [55] , the Commission drew a first distinction between organic and inorganic pigments and further sub-segmented the supply of pigments according to class [56] . The Commission also considered possible product delineations by application [57] , however did not further sub-divided the market as the assessment of the transaction did not change significantly. In the case at hand, and to be conservative, the Parties consider the market by class and by application (i.e. for plastics). [58]

207. In BASF/CIBA [59] the Commission considered the market for pigments as at least EEA wide. The parties agree with this approach.

208. For the purpose of the present case, it is not necessary to conclude on the product and geographic market definitions, as the transaction will not give rise to competition concerns under any plausible market delineation.

209. The product and geographic market for ABS has been discussed in recital 40-55.

210. The product and geographic market for SAN has been discussed in recital 102-107.

211. The product and geographic market for ASA has been discussed in recital 120-122.

212. The product and geographic market for PA/ABS has been discussed in recital 178-180.

Competitive assessment

Merchant Market Sales of pigments globally and in EEA, 2010 [60]

Pigment class |Global |EEA |

|BASF share of plastics applications |Other notable suppliers (% share of plastics applications) |BASF share of plastics applications |Other notable suppliers (% share of plastics applications) |

Titanate |[30-40]% |- Ferro (25-35%)- Heubach (10-20%)- Tomatech (10-20%) |[40-50]% |- Ferro (15-25%)- Heubach (20-30%)- Tomatech (5-15%) |

PCN Green |[20-30]% |- Heubach (20-30%)- Asian suppliers (inc Meghmani and Jeco) (45-55%) |[20-30]% |- Heubach (15-25%)- Asian suppliers (inc Meghmani and Jeco) (35-45%) |

PCN Blue |[20-30]% |- Toyo (25-35%)- Clariant (5-15%) |[30-40]% |- Toyo (15-25%)- Clariant (10-20%) |

Azo-salts |[30-40]% |- Clariant (20-30%)- DIC (5-15%) |[30-40]% |- Clariant (25-35%)- DIC (0-10%) |

Source: FORM CO

Input foreclosure

213. BASF produce and sell a number of pigments which are used for plastic applications. In particular, the following pigments are used as an input for the production of pre-coloured ABS: Titanate, PCN Green, PCN Blue, Azo-salts. In these pigments classes, BASF has significant market shares ([40-50]%, [30-40]%, [30-40]% and [30-40]%, respectively).

214. Nonetheless, in the classes of pigments in which BASF is active, plastics represent approximately [20-30]% of total pigment demand, [61] of which ABS accounts for only about [5-10]% of that plastics demand (i.e. [0-5]% of total demand). Even considering each of the classes of pigments above mentioned individually, BASF estimates that ABS accounts for approximately [5-10]% of total plastics demand for each of titanate, PCN Blue, PCN Green and Azo-salts, whether globally or in the EEA. The parties submit that ABS accounts for only [0-5]% of total pigments demand. In aggregate, ABS, SAN, PA/ABS and ASA account for under [5-10]% of total pigments demand.

Customer foreclosure

215. Regardless of the high market shares in some of the downstream markets, the proposed JV will be an insignificant purchaser of pigments in the EEA or worldwide (less than [0-5]% under any potential market segmentation). Even if the JV were to buy 100% of its requirements from BASF, the incremental volumes represent only a de minimis portion of total pigment demand. Other suppliers of pigments could therefore not be foreclosed as [90-100]% of the total demand will source from other suppliers.

216. The parties submit that total sales of pigments by BASF to INEOS’ ABS business amounted to approx. […] in 2010. This includes purchases by INEOS for use in pre-coloured ABS and in PA/ABS. INEOS ABS (including PA/ABS) currently purchases under [0-5]% of its total pigment requirements from BASF and between 0% and 10% of any particular pigment class. They further submit that INEOS makes no purchases of pigments from BASF (or any other supplier) for use in the production of SAN or ASA.

217. Given the above, the Commission considers that the proposed transaction does not raise serious doubts as to its compatibility with the internal market as regards this vertical relationship.

11. SAN (upstream) - ABS and MABS (downstream)

218. Both BASF and INEOS produce SAN which serves as an input for the joint venture’s ABS production as well as BASF’s MABS production.

Relevant product market

MABS

219. MABS, a thermoplastic resin, is a tough, transparent plastic, with high surface brilliancy and finish. MABS is produced by compounding SAN with PMMA and polymethacrylate butadiene styrene rubber. It is used in applications in areas including medical technology and diagnostics, cosmetics and hygiene, sports and leisure, inter alia.

220. In INEOS/Lanxess the Commission held that the relevant product market may comprise all types of engineering thermoplastic resins [62] which are considered substitutable with ABS resins, but ultimately left the market definition open. [63]

221. The Parties consider that their transparent engineering thermoplastics are generally demand-side substitutable with a wide range of transparent engineering thermoplastics including GPPS, SAN, SBC, MABS, PC, PET and PMMA.

222. In INEOS/Lanxess, the Commission indicated that the relevant market for engineering thermoplastic resins may be global or EEA-wide. [64] The Parties submit that the relevant geographic market is global as transparent thermoplastic resins are readily transportable (they are actively traded between Europe, Asia and America) and there are no significant barriers to trade.

223. Given that the transaction would not lead to competition concerns under any product or geographic market definition, the exact scope of the market can be left open.

224. The product market for SAN has been discussed in recital 102-107.

225. The geographic market for ABS has been discussed in recital 40-55.

Competitive assessment

226. The Parties submit the following market shares for SAN:

SAN merchant market - industrial and commercial SAN, 2010

|Industrial |Commercial |

|Global |EEA + Switzerland |Global |EEA + Switzerland |

|Volume (kt) |Share (%) |Volume (kt) |Share (%) |Volume (kt) |Share (%) |Volume (kt) |Share (%) |

BASF |[…] |[5-10]% |[…] |[30-40]% |[…] |[10-20]% |[…] |[30-40]% |

INEOS |[…] |[5-10]% |[…] |[10-20]% |[…] |[10-20]% |[…] |[0]% |

Combined |[…] |[10-20]% |[…] |[40-50]% |[…] |[20-30]% |[…] |[30-40]% |

Styron |[…] |[5-10]% |[…] |[20-30]% |[…] |[0-5]% |[…] |[20-30]% |

Polimeri |[…] |[5-10]% |[…] |[20-30]% |[…] |[0-5]% |[…] |[20-30]% |

Others |[…] |[70-80]% |[…] |[10-20]% |[…] |[60-70]% |[…] |[10-20]% |

Total |[…] |100% |[…] |100% |[…] |100% |[…] |100% |

Source: Form CO

All SAN merchant market, 2010

|Global |EEA + Switzerland |

|Volume (kt) |Share (%) |Volume (kt) |Share (%) |

BASF |[…] |[10-20]% |[…] |[30-40]% |

INEOS |[…] |[10-20]% |[…] |[0-5]% |

Combined |[…] |[20-30]% |[…] |[40-50]% |

Styron |[…] |[0-5]% |[…] |[20-30]% |

Polimeri |[…] |[0-5]% |[…] |[20-30]% |

Others/imports |[…] |[60-70]% |[…] |[10-20]% |

Total |[…] |100% |[…] |100% |

Source: Form CO

Input foreclosure

227. As regards input foreclosure, the Parties submit that neither BASF nor INEOS, nor the JV post-transaction, would have the ability to foreclose downstream competitors who are also customers for industrial SAN for the following reasons: (i) industrial SAN is a commodity product that is produced by all major ABS producers and can also be produced on all commercial SAN lines. This means that the JV would not have a significant degree of market power since customers can switch easily to competitors, (ii) a significant number of competing producers are active on the worldwide market, including Cheil, LG, Chi Mei, Kumho, Styron, Daicel and Enichem, (iii) there are two alternative SAN suppliers in Europe, namely Styron and Polimeri, (iv) there is considerable spare capacity on the market both in Asia and the EEA. In fact, in recent years numerous suppliers have begun producing SAN, including Asahi Kasei Chemical, Chemtura, Daicel Polymer, Forma Chemicals and Fibre, Ginar Technology and Kumho Petrochemical.

Customer foreclosure

228. BASF submits further that no customer foreclosure concerns arise, as BASF and INEOS already source all of their SAN requirements either internally or from each other.

229. It should also be observed that the parties committed to sell the SAN production at the Tarragona plant which amounts to [5-10]% of the EEA+CH and [0-5]% of the worldwide SAN production, thereby limiting the parties’ activities in SAN.

230. In light of the above, the Commission considers that the proposed transaction does not raise serious doubts as to its compatibility with the internal market with regard to this vertical relationship.

12. ABS (upstream)- Polyamide/ABS (PA/ABS) (downstream)

Product and geographic market definition

231. The product and geographic market for ABS has been discussed in recital 40-55.

232. The product and geographic market for PA/ABS has been discussed in recital 178-180.

Competitive assessment

233. PA/ABS is a relatively new product, demand for PA/ABS is currently very limited (estimated at around […]kt in the EEA+CH by the parties). INEOS’ presence on this market is solely through a toll manufacturing agreement with the compounder […] and it does not have any production capacity for PA/ABS. BASF produces PA/ABS at its Schwarzheide and Ulsan plants and produced […]kt in 2010 [65] .

234. The market for PA/ABS is very small when compared with the sizes of the merchant markets for PA for industrial applications ([…]kt in the EEA+CH in 2010) and ABS ([…]kt for the merchant ABS market at the end supplier level). Therefore, given the very small size of this market in the EEA+CH ([…]kt) and the size of the respective upstream markets, it is unlikely that input or customer foreclosure may arise with respect to PA/ABS as a result of the merger.

235. In light of the above, the Commission considers that the proposed transaction does not raise serious doubts as to its compatibility with the internal market with regard to this vertical relationship.

13. Polyamide (upstream) - Polyamide/ABS (“PA/ABS”) (downstream)

236. The parties sell small (largely trial) volumes of PA/ABS. […]. BASF produces PA/ABS in two of its plants.

Product and geographic market definition

Polyamide (PA)

237. PA (also known as “nylon”) is commonly used in textiles, carpets and a range of industrial applications due to its durability and strength. There are a number of different variants of PA (with differing chemical compositions and properties), including PA 6, PA 6.6, PA 11 and PA 12.

238. In a number of previous cases [66] , the Commission considered PA as a relevant market and distinguished between its main applications, namely: carpets, textiles and industrial applications (i.e. for engineering plastics). In addition, in Rhone-Poulenc/Caffaro [67] the Commission suggested that PA 6 and PA 6.6 could be two separate markets due to differences in heat resistance, price and production processes. However, the Commission has never concluded on the product market definition for PA. The Parties also believe the product market definition can be left open

239. The Commission, in a preceding decision [68] , defined the market for PA for industrial applications as EEA-wide. The Parties note that there exist significant trade flows on the market for PA for industrial applications.

240. For the purpose of the present case, it is not necessary to conclude on the product and geographic market definitions, as the transaction will not give rise to competition concerns under any plausible market delineation.

241. The product and geographic market for PA/ABS has been discussed in recital 178-180.

Competitive assessment

242. See recitals 233 to 235.

14. AMS (upstream) - Alpha-methylstyrene acrylonitrile (AMSAN) (downstream)

243. INEOS produces AMS in a plant which is not part of the INEOS styrenics businesses which are being contributed to the JV. BASF does not produce AMS. BASF produces AMSAN, most of which it consumes internally but supplies some to third parties. The BASF AMSAN business will be contributed to the JV. INEOS does not produce AMSAN.

Product and geographic market definitions

Alpha-methylstyrene (AMS)

244. AMS is an intermediate chemical used in manufacturing plasticisers and resins and in polymerisation processes. Its commercial applications include floor tiles, adhesives, floor polishers and plastics. AMS is also used in the manufacture of AMSAN, which is an additive which may be added to ABS to increase heat resistance.

245. The Commission has not previously considered the product market for AMS. The parties submit that the market for AMS is at least EEA wide but may be wider as AMS can be easily transported.

246. For the purpose of the present case, it is not necessary to define the ultimate scope of the relevant product and geographic markets, since the transaction will not give rise to competition concerns irrespective of the product market definition retained.

Competitive assessment

247. INEOS is the largest supplier of AMS in the EEA, with other smaller suppliers including Cepsa, Polimeri, Novapex and Domo. At a global level, INEOS accounts for about [20-30]% of merchant market sales.

AMS merchant market, 2010

|EEA + Switzerland |Global |

Supplier |Sales Volume (kt) |Share (%) |Supplier |Sales Volume (kt) |Share (%) |

INEOS |[…] |[70-80]% |INEOS |[…] |[20-30]% |

Cepsa |[…] |[10-20]% |Others |[…] |[70-80]% |

Polimeri |[…] |[5-10]% | | | |

Others (inc. Novapex and Domo) |[…] |[0-5]% | | | |

Imports |[…] |[5-10]% |Imports |[…] | |

Total |[…] |100% |Total |[…] |100% |

Source: INEOS estimates

Input foreclosure

248. BASF is the only producer of AMSAN in the EEA+CH and estimates that imports of AMSAN for merchant market sales are small. On a global basis there are a few other AMSAN producers. However, when considering the wider additives market used in the production of HH-ABS, the parties argue that BASF will face competition from a number of NPMI and PC suppliers.

249. Input foreclosure should not arise as BASF is currently INEOS’ only customer for AMS (for the production of AMSAN) and as INEOS’ AMS business will not be contributed to the JV. The JV will therefore have no impact on INEOS’ ability or incentive to continue to sell to third parties which are active in other sectors.

Customer foreclosure

250. Customer foreclosure concerns should also not arise since BASF already supplies INEOS with [90-100%] of its European AMSAN requirements. As a result, the combination of BASF’s AMSAN business in the same JV as INEOS’ downstream HH-ABS business simply internalises the current supply arrangements. In addition, even if the JV decided to purchase all of its AMS requirements from INEOS Phenol, AMSAN is only one use of AMS. There are many alternative markets for AMS suppliers such as perfumes, adhesives and coatings, paracumylphenol, antioxydants and oils.

251. In light of the above, the Commission considers that the proposed transaction does not raise serious doubts as to its compatibility with the internal market with regard to this vertical relationship.

15. AMSAN (upstream) – ABS (downstream)

252. BASF produces AMSAN which serves as an input for the JV’s ABS production. It is one of several additives which may be used for the manufacture of high heat resistant ABS

Product and geographic market definitions

253. The product and geographic markets definition for AMSAN has been discussed in recital 153-155.

254. The product and geographic markets definition for ABS has been discussed in recital 40-55.

Competitive Assessment

Input foreclosure

255. The parties submit that issues of input foreclosure will not arise as BASF currently only makes very limited supplies of AMSAN to third parties other than INEOS: less than […]kt or under [20-30]% of its total third party sales in 2010. According to the parties, its ability and incentive to continue to do so will not be affected by the JV, particularly given that INEOS’ demands are already being [90-100]% met by BASF, which is nonetheless