Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE  
Europese Commissie, DG COMP MERG ER REGISTRY, 1049 Brussel,  BELGIË 
 
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu .  EUROPEAN COMMISSION 
 
Brussels, 20.7.2018 
C(2018) 4931 final 
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has been replaced by ranges of figures or a 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 
To the notifying party 
 
Subject: Case M.8823 — Neste/Demet er Animal Fats and Proteins 
Commission decision pursuant to Article 6(1)(b) of Council 
Regulation No 139/20041 and Article 57 of the Agreement on the 
European Economic Area2 
Dear Sir or Madam, 
(1) On 15 June 2018, the European Commission received notification of a proposed 
concentration pursuant to Article 4 of the Merger Regulation by which Neste Oyj 
("Neste") intends to acquire within the meaning of Article 3(1)(b) of the Merger Regulation sole control of the whole of  Int. Handelsmaatschappij Demeter BV 
("Demeter"), which will regroup the animal  fats and proteins  sourcing and supply 
activities of the Demeter group ("the Transaction").
3 Neste and Demeter are 
collectively referred to as "the Parties", whils t the undertaking resulting from the 
Transaction is referred to as "the merged entity". 
                                                 
1  OJ L 24, 29.1.2004, p. 1 (the 'Merger Regulation' ). With effect from 1 December 2009, the Treaty 
on the Functioning of the European Union ('TFEU') has introduced certain changes, such as the replacement of 'Community' by 'Union' and 'c ommon market' by 'internal market'. The 
terminology of the TFEU will be used throughout this decision. 
2  OJ L 1, 3.1.1994, p. 3 (the 'EEA Agreement'). 
3  Publication in the Official Journal of the European Union No C 218, 22.6.2018, p. 34. 

2 1. THE PARTIES 
(2) Neste  is a refining and marketing co mpany focusing on low-emission, high-
quality traffic fuels. For its  production of renewable fuel , Neste uses a variety of 
renewable feedstock, including animal fats. 
(3) Neste shares are listed and traded  on the NASDAQ OMX Helsinki exchange. 
While, based on the information provided by the Parties, the Finnish State holds 44.75% % of Neste’s shares, the Pa rties argue that the company operates 
independently from the State, as evidenced by the following facts:  
(a) all strategic decisions relating to the commercial or business policy 
(including budget, business plan, major investments or the appointment of 
senior management) are taken by the Bo ard of Directors of Neste and the 
Neste President and CEO; 
(b) all members of the Board are inde pendent, non-executiv e directors and 
also independent of the company’s si gnificant shareholders in accordance 
with the Finnish Corporate Governance Code 2010; 
(c) the Finnish State only has the right to attend Neste’s annual General 
Meeting, whose power of decision is limited to matters belonging to the 
General Meeting by law, primarily (i) the adoption of the annual financial statements, (ii) the payment of di vidends, (iii) the discharging from 
liability of the members of the Board of Directors, President and CEO, and 
(iv) the appointment of the Board of Di rectors and of the external auditors. 
As mentioned, those Board members ar e all independent from the main 
shareholders and their independen ce is re-assessed every year, in 
accordance with the Finnish Corporate Governance Code 2010. 
(4) In any event, the competitive assessment of the Transaction would not be 
materially affected by a combination of th e activities of other Finnish state-owned 
enterprises with those of Neste, given th at there is no other Finnish state-owned 
enterprise that has any horizontal or vertical links with Demeter.  
(5) Demeter  is active in the purchase and resale  of processed animal fats and of 
processed animal proteins. Demeter is a trader: it buys processed animal fats and 
proteins from renderers
4 and sells them to differen t industries that use those 
materials as an input in their produc tion of biofuels, oleo-chemical products, 
animal feed and pet food. 
2. THE OPERATION AND CONCENTRATION 
(6) Pursuant to a Share Sale and Purc hase Agreement ("SPA"), Neste will 
acquire 51% of Demeter shares and voting ri ghts (the remaining 49% will be held 
by Demeter's current owners, the Ebeli brot hers). According to the Shareholders 
Agreement, unanimity will only be required to protect the minority shareholders’ 
                                                 
4  'Rendering' refers to the processing of animal by-products, mainly obtained from slaughterhouses 
and meat packing plants, to produce animal fats and protein meals as final products. This is done 
by cooking, grinding and drying the material in order to separate the fat from the protein. 
3 financial interests.5 Demeter will therefore be solely controlled by Neste within 
the meaning of Article 3(1)(b) of the Merger Regulation. 
(7) The notified operation therefore cons itutes a concentration pursuant to 
Article 3(1)(b) of the Merger Regulation. 
3. UNION  DIMENSION 
(8) The undertakings concerned have a combin ed aggregate world-wide turnover of 
more than EUR 5 000 million6 (Neste: EUR 13 216 million; 
Demeter: 328.8 million). Each of them has a Union-wide turnover in excess of EUR 250 million (Neste: […] million; De meter […] million), but they do not 
achieve more than two-thirds of their aggregate Union-wide turnover within one 
and the same Member State. The no tified operation therefore has a Union 
dimension within the meaning of […]
∗. 
4. COMPETITIVE ASSESSMENT 
4.1. Relevant product market definition 
(9) Neste's and Demeter’s activities overlap in the purchase of category 3 animal fats. 
In addition, there is a verti cal link due to the fact that  Neste is active downstream 
in the production of diesel-compatible biofuel for which it purchases category 3 
animal fats7. 
4.1.1.  Purchase of Category 3 animal fats 
(10) The Parties present a narro w product market for just Category 3 animal fats, 
noting however that animal fats may be  replaced by other feedstocks in many 
applications. They claim that Category 1, 2, and 3 animal fats, used cooking oil, 
and vegetable oils are all substitutable feedstocks fo r the production of biofuels. 
They contend that, in any case, no competitive concerns arise even under the narrowest market definition, which is Cate gory 3 animal fats, for which they have 
provided market shares and sales figures. In addition, the Parties consider that 
food grade Category 3 animal fats should be  included in Category 3 animal fats.  
                                                 
5  For example: the approval or changes of constitutional documents (e.g. Articles of Association); 
any issue of shares, option rights or other rights entitling to any kind of shares or options related to the shares in the capital; any decision on liquidation, winding up, dissolving, bankruptcy, 
restructuring or other insolvency proceedings; and approval or amendment of a commercial 
contract between Neste and Demeter whereby Nest e commits to buy Demeter's animal fats at 
arm's length (and not purchase price) in order not to destroy value for the minority shareholders. It 
will be Neste and not the minority shareholders who will decide from whom and at what price 
feedstock shall be purchased from the renderers . Moreover, Neste has no obligation under the 
Commercial Contract to purchase any defined quantity. 
6  Turnover calculated in accordance with Article 5 of the Merger Regulation and the Commission 
Consolidated Jurisdictional Notice (OJ C 95, 16.4.2008, p. 1).  
∗  Should read: Article 1(2) of the Merger Regulation. 
7  Neste also purchases category 2 animal fats in  Finland, where Demeter is not present. Demeter 
also purchases small amounts of used cooking oil. In 2017 100% of its purchases were sold to Neste. Neste buys used cooking oil from Demeter and third parties. However, the combined share 
of Demeter and Neste’s purchases of used cooking oil in the EEA are below 5 %. 
4 (11) Purchasers of Category 3 fats from renderers use these fats for animal feed and 
pet food production, in the oleo-chemical industry or for the production of 
biofuels (as the Neste group does). Purcha sers can also be traders, such as 
Demeter, who then sell the fats to the said users. 
(12) In its previous decisional practice, the Commission has distinguished three 
categories of animal by-products according to the risk that they pose to public and 
animal health: Category 1 (highest risk),  Category 2 (high risk) and Category 3 
(low risk) by-products8. Furthermore, the Commission has considered the 
existence of a separate market for animal  fats, with a possible further distinction 
between Category 3 fats and food grade fats.9 
(13) The Commission has also distinguishe d between the upstream market for 
(i) sourcing Category 3 animal by-products  from slaughterhouses, the so-called 
“collection” of animal by-products from  slaughterhouses and its processing, 
which is done by renderers; and (ii) th e downstream market for the sale of 
processed animal by-products, such as possibly the sale of Category 3 fats. 
(14) The Commission's market investigati on in the present case sought more 
information as to the product dimension of the relevant markets for the purchase of animal fats. 
 Category 3 animal fats vs Category 1 and 2 animal fats 
4.1.1.1.
(15) A majority of biofuel competitors, animal fat customers and animal fat 
competitors indicated that Category 3 animal fats are not substitutable with Category 1 or Category 2 animal fats fo r the production of diesel compatible 
biofuel. Respondents pointe d to quality and regulator y differences. A biofuel 
competitor commented: " Category 3 is a better feedstoc k but as it is not a waste it 
cannot be considered as su ch in the sustainability  documentation delivered with 
the biodiesel produced. "
10  
(16) Several respondents cited differences in  government incentives based on EU 
legislation. Unlike Category 1 and Category 2 animal fats, Category 3 animal fats 
are not listed in Annex 9 to the Renewable Energy Directive, which identifies the feedstocks and fuels which can be counted towards national quotas for the use of renewable energy sources.
11 A biofuel competitor commented: " Biofuels from 
animal fats of Category 1 and 2 are includ ed in Annex IX Part B of Directive 
2009/28/EC. Consequently, these biofuels  can be counted twice towards the 
renewable transport target of 10 % in 2020 laid down in Article 3 (4) of the afore-mentioned Directive. Consequently, th e use of biofuels of these feedstocks 
are additionally incentivized in  several EU member states."
12 
                                                 
8  Commission Decision of 7.10.2016 in Case M.7930 - ABP Group/Fane Valley Group/Slaney 
Foods, para. 188. 
9  Ibid, at para. 190. 
10  Responses to Question 11 of Q1 to Biofuel competitors. 
11  Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the 
promotion of the use of energy from renewable sources and amending and subsequently repealing 
Directives 2001/77/EC and 2003/30/EC, OJ L 140, 5.6.2009, p. 16–62. 
12  Responses to Question 11.1 of Q1 to Biofuel competitors. 
5 (17) Another biofuel competitor responding to the market investigation underscored 
the difficulty for customers to switch to other categories of animal fats: " Once a 
HVO plant is set up and has received th e corresponding regulatory approvals, it 
is almost impossible in practice to change the process and switch to other 
categories of Animal Fats. "13 
 Category 3 animal fats vs vegetable oils 4.1.1.2.
(18) A majority of biofuel competitors indicated  that animal fats are not substitutable 
with vegetable oils for the production of diesel compatible biofuel. A biofuel 
competitor commented: " Unlike vegetal oils, animal fats require pre-treatment 
facilities and processes; lead to a d ifferent output (from a regulatory/tax 
standpoint); have a different greenhouse gas footprint due to government 
incentives and tax regulations "14  
(19) Nonetheless, some replies to the market investigation indicated that there is some 
substitutability between animal fats, in particular Category 3 animal fats, and vegetable oils in the production of biof uel. A competitor noted that additional 
regulatory incentives apply only to Category 1 and 2 fa ts, and not to Category 3 
fats and vegetable oils: " Both biofuels from vegetable oils and animal fats can be 
counted towards blending obligations to in crease the use of renewable energies 
in transport. However, in contrast to veg etable oil-based biofuels, biofuels of 
animal fats of Cat. 1 and 2 are additionally incentivized by double counting 
schemes and/or a beneficial GHG accounting methodology. "
15 
 Category 3 animal fats vs used cooking oil 4.1.1.3.
(20) A majority of biofuel competitors indicated  that animal fats are not substitutable 
with used cooking oil for the production of  diesel compatible biofuel. A biofuel 
competitor highlighted the price difference: " UCO16 are much more expensive 
than animal fat, less traceable and c ontain a high level of variability of 
contaminants components. They are s ubject to two different types of 
regulation/tax. "17 
(21) In any event, for the purpose of this Decision, the exact delineation of the market 
for purchase of Category 3 animal fats can  be left open as the outcome of the 
competitive assessment remains the same under any plausible product market definition. 
4.1.2.  Sale of Category 3 animal fats 
(22) Demeter is a trader and is thus active as a seller of Category 3 fats. The Parties do 
not see this selling activity as different fr om the selling activities of renderers on 
the grounds that users of Category 3 fats can  purchase indifferently either directly 
from renderers and/or from traders. Moreover, the Parties claim that most purchases, whether from rende rers or from traders, ar e, to their knowledge, spot-
based and that they do not know what quant ities transit or not through traders and 
                                                 
13  Responses to Question 11 of Q1 to Biofuel competitors. 
14  Responses to Question 12 of Q1 to Biofuel competitors. 
15  Responses to Question 12 of Q1 to Biofuel competitors. 
16  Used Cooking Oil. 
17  Responses to Question 13 of Q1 to Biofuel competitors. 
6 whether the traders act as agents or inde pendent sellers for the end-users. Finally, 
if there were to be a separate market for the sale by traders of processed Category 3 fats, the Parties submit that only Demeter would be active on this market and that Demeter would already t oday sell close to all of its Category 3 
fats to Neste.  
(23) The market investigation confirmed that sales of animal fats by renderers and 
sales of such fats by traders are part of the same market. Biofuel competitors and other purchasers of anim al fats source animal fats from both traders and 
renderers, while pointing out certain adva ntages of one supply channel over the 
other.
18 Some respondents mention that traders are able to blend animal fats from 
different sources to meet the final quali ty standard required by the customer, 
while others comment that renderers offe r superior control of the supply chain 
and consistent supply of the feedstock st ructure. A biofuel competitor concluded: 
"Therefore, often the chain is the comb ination of smaller and spread operators 
with specific know-how for managing from  rendering point to a terminal, and 
different operators with sp ecific know-how in trading. "19 
(24) In addition, the Commission found that  the blending operations conducted by 
traders are not very cost-intensive. The blending process involves the discharging 
of fats from different origins into stor age tanks which have a heating system to 
prevent the animal fat from solidifying in  the tanks. Such ta nk capacities can be 
easily rented by any third party on th e market. Demeter's storage costs 
(rental/handling/cleaning) required for bl ending came to EUR […] in 2017, out of 
EUR […] in total costs of sales (i.e. approximately [0-5]%).20 
(25) In the light of the results of the mark et investigation and taking account of all 
evidence available to it the Commission considers, for the purpose of this Decision, that the sale of Category 3 animal fats should not be further segmented 
into sales by renderers and sales by traders.  
4.1.3.  Production of diesel-c ompatible biofuel 
(26) As mentioned in recital 2, Neste is active downstream in the production and (ex-
refinery) sale of dies el-compatible biofuels
21. Neste uses all Category 3 fats (and 
other feedstock) internally for the pr oduction of renewable fuels used in the 
transport sector mainly by the fossil fuel suppliers (the major oil companies), and to some extent also by fl eet operators and airlines. 
(27) The Parties submit that the different types of biofuel (ethanol, FAME
22 and 
HVO23) all compete with fossil fuels and no segmentation is warranted. However, 
since Category 3 fats are only used in bi ofuels, and since Neste's market share on 
a broader biofuel + fossil fuel market is lower than on a market limited to biofuels 
only, the Parties focus on the market for biofuels alone. 
                                                 
18  Responses to Question 23 of Q1 to Biofuel competitors and Question 6 of Q3 to animal fat 
customers. 
19  Responses to Question 23 of Q1 to Biofuel competitors. 
20  Response to Question 2 of RFI No 1. 
21  Neste also produces small quantities of gasoline-compatible biofuels. 
22  Fatty Acid Methyl Ester. 
23  Hydrotreated Vegetable Oil. 
7 (28) Neste also provide details on the narrower  market for the production and sale of 
diesel-compatible biofuels, to include both HVO and FAME, as well as the market for only HVO diesel-compatible biofuels. 
(29) In its previous decisional practice, the Commission has considered biodiesel to be 
part of the fuel market. The Commi ssion has left open both the distinction 
between diesel fuel and biodiesel, and the distinction by application.
24 
 FAME vs HVO diesel-compatible biofuels  4.1.3.1.
(30) The main types of diesel-compatible biof uels currently produced on a commercial 
scale are HVO fuels and FAME fuels, wh ich are also known under various other 
names and acronyms, such as biodiesel, RME25, SME26 or PME27). 
(31) The market investigation was inconclusive  as regards the substitutability between 
FAME diesel-compatible biofuel and HVO diesel-compatible biofuel: a majority of biofuel competitors
28 considered those types of bi ofuel to be interchangeable, 
while a majority of biofuel customers di d not consider that this is the case. 
(32) Competitors pointed to si milarities of use between FAME and HVO, as both 
products can be used towards biofuel mandates, but cited differences with regard to price and blending limitations. A competitor commented: " Economically, HVO 
is more expensive than FAME on the mar ket. From this point of view, FAME and 
HVO are not interchangeable. Technically, FAME and HVO are interchangeable; both match biodiesel m andate. But there is a maximum spec 
content for FAME into diesel. So, when  the mandate requires additional biofuel 
blending than FAME, HVO becomes the only feasible alternative ."
29 
(33) Customers cited differences in product  characteristics be tween HVO and FAME, 
in particular with regard to cold properties. A customer commented: " FAME 
needs special engines/vehicles and cannot be used during the winter period in 
Sweden. "30 The same customer suggested that, in contrast to FAME, HVO is fully 
substitutable with fossil diesel: " HVO diesel is fully interchangeable with 
standard diesel. It has the same or highe r specifications regarding temperature 
and cfpp31 etc."32 
(34) In any event, for the purpose of this Deci sion, the exact product market definition 
for the production of diesel-compatible bi ofuels can be left open as the outcome 
of the competitive assessment would re main the same under any plausible product 
market definition. 
                                                 
24  Commission Decision of 04.02.2009  in Case M.5388 - Diester Industrie/Oleon, para.13. 
25  Rape Seed Methyl Ester. 
26  Soybean Methyl Ester. 
27  Palm Oil Methyl Ester. 
28    Responses to Question 18 of Q1 to Biof uel competitors and Question 6 of Q2 to Biofuel 
Customers. 
29  Responses to Question 18 of Q1 to Biofuel competitors. 
30  Responses to Question 7 of Q2 to Biofuel customers. 
31  CFPP stands for Cold Filter Plugging Point, whic h is the lowest temperature, expressed in degrees 
Celsius (°C), at which a given volume of diesel type of fuel still passes through a standardized 
filtration device in a specified time when cooled under certain conditions. 
32  Responses to Question 7 of Q2 to Biofuel customers. 
8 4.2. Relevant geographic market definition 
4.2.1.  Purchase and sale of Category 3 animal fats 
(35) With regard to the geographic market and based on the Commission precedent in 
SARIA/Danish Crown/Daka JV33, Neste distinguishes th ree regions in which 
Category 3 fats are traded: North of Europe (comprising Austria, Benelux, 
Germany, France, Ireland, UK and the No rdic countries); South of Europe 
(comprising Croatia, Greece, Italy, Port ugal, Slovenia and Spain); and Eastern 
Europe (comprising Bulgaria, Czech Republic, Estonia, Hungary, Latvia, 
Lithuania, Poland, Romania and Slovaki a). However, Southern Europe and 
Eastern Europe are not affected markets since the Parties have minimal purchases 
and sales in those areas. With regard to the North of Europe, the Parties have also 
provided information at national level. 
(36) In SARIA/Danish Crown/Daka JV  the Commission left the exact geographic 
market definition open, while considering the market for the purchase of Category 3 animal fats to be broader than national, particularly in view of cross-
border sales. The Commission considered that the market investigation had 
suggested the market to be regional, in  particular covering  certain Northern 
European Member States, namely  Denmark, the Netherlands, Poland 
and Germany.
34 
(37) The market investigation in the present case has confirmed that customers source 
Category 3 animal fats at least on a regional basis, if not wider.35 A customer 
commented: " Considering economical, sustainabl e and technical constraints, we 
prefer to source from neighbouring countries. "36 
(38) In any event, for the purpose of this Decision, the question as to the scope of the 
geographic market for the purchase and sale of Category 3 animal fats may ultimately 
be left open as the outcome of the competitive assessment would remain the same 
under any plausible geographic market definition.  
4.2.2.  Production of diesel-c ompatible biofuel 
(39) As regards the geographical market, Neste submits that the relevant market for 
biofuels is at least EEA-wide. Nonetheless, it also provides data for the possible narrowest definition – national – in the countries where it is active.  
(40) In its previous decisional practice, the Commission has considered markets for 
biofuel that were at least regional
37 or at least EEA-wide38 in scope, but ultimately 
left the exact geographical market definition open. 
                                                 
33  Commission Decision of 29.6.2012 in Case M.6285 - SARIA/Danish Crown/Daka JV, 
para. 48-51. 
34  Commission Decision of 29.6.2012 in Case M.6285 - SARIA/Danish Crown /Daka JV, para. 51. 
35  Responses to Question 16 of Q1 to Biofuel competitors, Questions 7 and 8 of Q3 to Animal Fat 
Customers and Questions 8 and 9 of Q4 to Animal Fat Competitors. 
36  Responses to Question 16 of Q1 to Biofuel competitors. 
37  Commission Decision of 08.01.2009 in Case M.3876 - Diester/Bunge and Commission Decision 
of 30.01.2003 in Case M.3039 - Soprol/Cereol-Lesieur.  
38  Commission Decision of 04.02.2009  in Case M.5388 - Diester Industrie/Oleon. 
9 (41) The market investigation in the present case  has been inconclusive with regard to 
the definition of the geographic market for biofuels as opinions  diverged between 
competitors and customers. A majority of biofuel competitors stated that there is no maximum distance beyond which transpor t of diesel-compatible biofuel is 
economically non-viable. A competitor explained: " Diesel compatible biofuel can 
be transported all around the world as it c an be stored easily and shipped in big 
vessels to be delivered where the demand is . This is already the case and we can 
consider that biodiesel and HVO markets are already global."
39  
(42) By contrast, a majority of biofuel custom ers considered that there is a maximum 
distance beyond which transport of diesel -compatible biofue l is economically 
non-viable. Several replies seemed to sugge st that the relevant  market would be 
regional. A biofuel customer explained: "There is no technical maximum distance 
but economically, the cost of transportati on can be significant versus that of the 
product and effectively render some source locations uneconomical."40 
(43) In any case, the question as to the scope  of the geographic market for the supply 
of diesel-compatible biofuels can ultimately be left open as the outcome of the competitive assessment would remain th e same under any plausible geographic 
market definition. 
5. COMPETITIVE ASSESSMENT 
5.1. Introduction 
(44) Under Article 2(2) and (3) of the Merger Regulation, the Commission must assess 
whether a proposed concentration w ould significantly impede effective 
competition in the internal ma rket or in a substantial pa rt of it, in particular 
through the creation or strengthen ing of a dominant position. 
(45) In this respect, a merger can entail ho rizontal and/or non-horizontal effects.  
5.1.1.  Horizontally affected markets: pur chase of Category 3 animal fats 
(46) As regards horizontal effects, the Comm ission guidelines on the assessment of 
horizontal mergers under the Merger Re gulation (“the Horizontal Mergers 
Guidelines”)
41 distinguish between two main ways in which mergers between 
actual or potential competitors on the same relevant market may significantly impede competition, namely non-coordi nated or coordinated effects. Non-
coordinated effects may significantly impede competition by eliminating important competitive constraints on one or more firms, which consequently would have increased market power, wit hout resorting to co ordinated behaviour. 
(47) The Horizontal Merger Guidelines list a number of factors which may influence 
whether or not significant non-coordinated effects are likely to result from a 
merger, such as the large market shares of the merging firms, the fact that the 
merging firms are close competitors, the limited possibilities for customers to 
                                                 
39  Responses to Question 19 of Q1 to Biofuel competitors. 
40  Responses to Question 7 of Q2 to Biofuel competitors. 
41  Guidelines on the assessment of horizontal mergers under the Council Regulation on the control 
of concentrations between undertakings, OJ C 31, 5.2.2004 p. 5. 
10 switch supplies, or the fact that a merger would eliminate an important 
competitive force. That list of factors a pplies equally if a merger would create or 
strengthen a dominant position, or would ot herwise significantly impede effective 
competition due to non-c oordinated effects. 
(48) This Decision will analyse whether the Transaction is likely to raise serious 
doubts as to its compatibility with the internal market by the creation of non-
coordinated effects in those markets on which the Parties’ activities lead to horizontal overlaps. 
(49) The only horizontal overlap be tween the activities of the Parties in the EEA is in 
the procurement of processed Category 3 fa ts. Demeter is a trader and is thus 
active as purchaser and sell er of Category 3 fats. The Neste group is not active in 
selling, as it uses the Category 3 fats it pur chases as an input for its production of 
renewable fuels. 
(50) Given that there is no overlap in the s upply of Category 3 fats, and even Demeter 
itself does not produce or process this material, the only anti-competitive effect the Transaction could potentially bring to the markets in the purchase and sale of 
Category 3 animal fats due to horizont al overlaps would be excessive buying 
power that would harm s uppliers and other customer s of Category 3 fats.  
(51) For the following reasons, the Commission cons iders that it is not  likely that post-
merger Neste could exert significant ba rgaining power towards suppliers of 
Category 3 animal fats (renderers), who would still have a vast customer base. 
(52) First, the Parties' combined market share in the purchase of Category 3 animal 
fats amounted to [10-20]% (Demeter [10- 20]%, with a low increment from Neste 
at [0-5]%) in the EEA and [20-30]% (Dem eter [20-30]%, with a low increment 
from Neste at [5-10]%) in Northern Europe  in 2017. At Northern European level, 
other purchasers of Category 3 animal fats include oleo-chemical producers 
Oleon ([5-10]%), KLK Emmerich ([5- 10]%), Baerlocher ([0-5]%); AAK, a 
producer of high-value added vegetable o ils and fats ([0-5]%); and animal fat 
traders MW Beer, Van Wijk & Olthuis, and Harris Tobias (each at [0-5]%). 
Within Northern Europe, the Parties' co mbined purchase shares would amount to 
circa [30-40]% of procurement for Ca tegory 3 animal fats in [countries] 
(Demeter [10-20]%, with a low incremen t from Neste at [10-20]%) and [country] 
(Demeter [20-30]%, with a low increm ent from Neste at [5-10]%) and circa 
[60-70]% in [countries] (Demeter [50-60] %, with a low increment from Neste 
at [5-10]%).  
(53) Second, given that Category 3 animal fats are sourced for different applications, 
there are many other customers in the mark et who will continue to compete with 
the merged entity. Industry data show  that biodiesel represents only 
approximately 20% by volume of the end uses  of edible and Category 3 fats in the 
EU.
42 In, addition, there are also other trad ers who have been identified by the 
market investigation respondents as close competitors to Demeter in the purchase 
                                                 
42  Based on the figure 'Destination of edible and category 3 fat', page 85 of the Form CO, taken from 
"Presentation material in EFPRA annual confer ence 2017 (Hamburg), Dirk Dobbelaere, 
"Statistical overview of the Animal By-Products Industry in the EU in 2016 ”. The edible fats 
included in this statistical figure refer to edible tallow and lard, which make up about 5% of the 
'edible and category 3 fats' category.  
11 of animal fats: Van Wijk en Olthuis, Robie/Noba, Saria, Soleval, Leo Group, 
Darling, and Sapi.43  
(54) Third, purchases are made on a spot basi s, without long term supply agreements. 
As suppliers are free to sell to any cust omers there is no risk of being locked in. 
An animal fat supplier commented: " The market will keep selling the material 
there where it brings the best money. Like it has always been ".44  
(55) Fourth, none of the animal fat suppliers responding to the market investigation 
identified any impact from the Transaction on their business or the market.45 For 
example, an animal fat supplier described the potential impact of the Transaction 
as follows: " none. Market remains the same, the function of Demeter remains the 
same towards the market and Neste. "46 
(56) For the reasons set out in re citals (49) to (55) the Commission concludes that the 
Transaction does not raise serious doubts as to its compatibility with the internal 
market as regards the market for th e purchase of Category 3 animal fats. 
5.1.2.  Vertically affected market s 
 Introduction 5.1.2.1.
(57) A vertical merger may result in anti-competitive effects due to foreclosure. 
Foreclosure concerns a situation where actual or potential rivals' access to supplies or markets is hampered or elimin ated as a result of the merger, thereby 
reducing these companies' ability and/or incentive to compete.
47 
(58) Two forms of foreclosure can be distinguish ed in a vertical relationship: input and 
customer foreclosure. The first is where th e merger is likely to raise the costs of 
downstream rivals by restricting thei r access to an important input (input 
foreclosure). The second is where the merger  is likely to foreclose upstream rivals 
by restricting their access to  a sufficient customer base (customer foreclosure).48 
(59) Input foreclosure arises where, post-me rger, the new entity would be likely to 
restrict access to the products or services  that it would have otherwise supplied 
absent the merger, thereby raising its dow nstream rivals' costs by making it harder 
for them to obtain supplies of the input under similar prices and conditions as absent the merger.
49  
(60) Customer foreclosure may occur when a supplier integrates with an important 
customer in the downstream market. Becau se of this downstream presence, the 
merged entity may foreclose access to a su fficient customer base to its actual or 
potential rivals in the upstream market (the input market) an d reduce their ability 
                                                 
43  Responses to Question 11 of Q3 to animal fa t customers and Question 13 of Q4 to animal fat 
competitors. 
44  Responses to Question 12 of Q4 to animal fat suppliers. 
45  Responses to Question 14, 15 and 16 of Q4 to animal fat suppliers. 
46  Responses to Question 14 of Q4 to animal fat competitors. 
47  Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the 
control of concentrations between undertakings, OJ C 265, 18.10.2008, p. 6 (‘Non-Horizontal 
Guidelines’), paragraphs 29–30. 
48  Non-Horizontal Guidelines, paragraphs 29–30. 
49  Non-Horizontal Guidelines, paragraph 31. 
12 or incentive to compete. In turn, this may raise downstream rivals' costs by 
making it harder for them to obtain supplie s of the input under similar prices and 
conditions as absent the merger.50 
(61) For an input or customer foreclosure scen ario to raise competition concerns, three 
cumulative factors need to be taken into  account: (i) the abili ty of the merged 
entity to engage in foreclosure; (ii) th e incentives of the merged entity to do so; 
and (iii) whether a foreclosure strategy woul d have a significant detrimental effect 
on competition in the downstream market.51 
(62) The Transaction gives rise to vertically a ffected markets as a result of Demeter's 
position in the supply of Category 3 animal fats in the Benelux, Germany, the UK and Ireland (upstream), and Neste's activities in the production of HVO biofuel, 
where it has market shares above 30% in  a number of countries (downstream).  
 Input foreclosure 
5.1.2.2.
(63) Three market participants expressed concer ns that Neste could use the acquisition 
of Demeter to foreclose competing biof uel producers from access to Category 3 
animal fats. Among them, a biofuel customer argued that the acquisition of Demeter could create an entry or expans ion barrier to actual  or potential HVO 
competitors and ultimately enable Nest e to increase its prices of HVO.  
(64) However, on the basis of the results of th e market investigation, the Commission 
considers that such input foreclosure is unlikely to arise, mainly since the merged entity will lack the ability to forecl ose competing biofuel producers from access 
to Category 3 fats. Accordingly, the Commission also considers that the acquisition of Demeter will not create a barrier to entry or expansion. 
Ability to foreclose 
(65) Post-merger, Neste will not have the ability to foreclose access to Category 3 
animal fats. First, Demeter had a market share in the sale of Category 3 animal 
fats of [20-30]% in the North of Europe , (Austria, Benelux, France, Germany, 
Ireland, Nordic countries, and the UK) in 2017. While its market share was high in Finland ([…]%) and the Netherlands ([…]%), this is where Neste has its refineries and where already t oday Demeter only sells to Neste.
52  
(66) Second, already today [90-100]% of Demete r's Category 3 fats are sold to Neste 
and already today Demeter does not sell to  any other biofuel producer. Therefore 
none of Neste’s competitors in biofuel production currently re lies on purchases of 
Category 3 Animal Fats from Demeter. 
(67) Third, Demeter is a trader and not a rende rer; therefore the nu mber of available 
producers of Category 3 animal fats will  not change post-Transaction. Some 
market participants, and in particular those who voiced concerns, referred to the competitive advantages that Demeter has over its competitors, namely its 
                                                 
50  Non-Horizontal Guidelines, paragraph 58. 
51  Non-Horizontal Guidelines, paragraphs 32, 59. 
52  Demeter does not have material sales in other countries. For instance, in 2017, its only other sales 
of Category 3 fats were in […] (for about EUR […]), […] (for about EUR […]) and […] (for 
about EUR […]). 
13 blending capabilities and its vast network of contacts with renderers. However, as 
mentioned above, the cost of Demeter's blending operations is in the region of [0-5]% of its overall sales costs.
53 Moreover, even though blending is important, 
Category 3 animal fat still needs to go through a pre-treatment process to make it suitable as a feedstock for HVO. This pre- treatment is always carried out by the 
HVO manufacturer and not by the s upplier of the animal fat. 
(68) Fourth, the market investigation and data  provided by the Parties bear out the 
presence of various alternative suppliers of  animal fats that meet the requirements 
of a producer like Neste or its competitors. Asked to identify close competitors to Demeter, able to supply very similar products and services in terms of characteristics, functionality and quali ty, an animal fat supplier replied: " There 
are various direct sellers to Neste, like Leo Group, Darling, Van Wijk en Olthuis. 
Besides that everybody is free to sell to Neste. "
54 The Commission contacted three 
suppliers of animal fats, who currently do not supply Neste, to enquire whether 
they would have the capacity, knowledge  and know-how to serve any current or 
future producers of HVO biofuel with Ca tegory 3 animal fats in the EEA. All 
three indicated that they w ould be able to supply Category 3 animal fats to other 
HVO producers or increase their su pplies to current HVO customers.55 
(69) Fifth, Category 3 fats are just one of the possible feedstocks for both FAME and 
HVO processes. The ability and extent to which fats of any category can be used as feedstock depend on the technical set-up of a plant, and the preference of end 
markets for certain materials based on double counting towards biofuel mandates. 
This technical ability comb ined with end-market preferences differs for each 
producer, therefore affecting its choice of optimal feedstocks.  
(70) Industry data shows that waste-based feed stocks, including animal fats, made up 
51% of feedstocks used in the overall production of HVO in Europe in 2017, with 
the remaining 49% coming from vegetable oils.
56 The market investigation has 
shown that Neste's competitors use a combination of feedstocks, while one competitor does not use Category 3 animal fats in its production at all. A competitor stated that it " only uses crude tall oil (res idue from chemical pulp 
process) as feedstock for its HVO production, and it has no plans to use animal 
fats or UCO in the future ".
57 Among the three companies who voiced concerns, 
two also recognised that Category 3 animal fats are not, or will not be, their main 
feedstock for HVO production. This even app lies to those who i ndicated that they 
required, or were interested in, the use of  Category 3 animal fats as a feedstock.58  
(71) A potential entrant into the HVO market  who is not currently a customer of 
Demeter claimed that the Transaction would discourage it fro m starting a supply 
relationship with Demeter. The company contended that following the Transaction, even if Demeter was willing to supply it, Demeter could provide less good quality animal fat. In addition, Deme ter would gain access to commercially 
                                                 
53  Response to Question 2 of RFI No 1. 
54  Responses to Question 13 of Q4 to animal fat suppliers. 
55  Responses to request for information sent to three animal fat suppliers on 4 July 2018. 
56  Form CO, p. 36. 
57  Non-confidential minutes of a ca ll with a competitor of 30 May 2018. 
58  Non-confidential minutes of a call with a competitor of 12 June 2018 and non-confidential 
minutes of a call with a competitor of 7 June 2018. 
14 sensitive information regarding its anim al category 3 fat requirements and could 
pass it on to Neste.  
(72) This company has publicly announced its entry into the HVO market. Based on 
the available evidence, the Commission cons iders that the Transaction is unlikely 
to stop that company from entering the market. When asked to substantiate their 
claim on how important Demeter was for th em as a supplier of Category 3 animal 
fat, the company did not provide such evidence.59 In addition, in the country 
where the potential entrant’s new refinery is based, Demeter's share of purchases is below 10% and the combined share of purchases of Demeter and Neste is below 15%. Moreover, the number of produ cers of Category 3 animal fats will 
not be reduced and there are close competitors of Demeter who are capable of providing similar offerings of Category 3 animal fat. 
(73) In the light of the results of the market i nvestigation, it can be  concluded that the 
merged entity is unlikely to have the abil ity to foreclose Neste's competitors from 
access to the sourcing of Category 3 animal fats. 
 Customer foreclosure 
5.1.2.3.
(74) With regard to ability, first, Neste al ready today sources more than [70-80]% of 
its total sourcing of Category 3 fats from Demeter. Second, there is no shifting to in-house supplies post-merger as Deme ter has no production activities of 
Category 3 fats and all Category 3 fats will continue to be purchased from 
renderers by both traders and users of Category 3 fats. Thir d, there is a wide base 
of companies interested in the purchase of animal fats, not only biofuel producers but also producers of animal feed and pet food and oleo-chemical companies. As 
mentioned in recital 53, biodiesel repr esents only approximately 20% by volume 
of the applications of edible and category 3 fats in the EU. 
(75) With regard to incentive, already today Ne ste sources [20-30]% of its needs from 
other Category 3 fat suppliers. Even if Neste were to expand Demeter's activities, 
as Demeter is a trader (and not a produce r), Neste, directly or through Demeter 
would still be active in purchasing Categor y 3 animal fats. It  has no incentive not 
to purchase animal fat that it  needs for its HVO production.  
(76) This was confirmed by the market investig ation, in which no animal fat suppliers 
raised any concerns on customer forecl osure, as none of them identified any 
impact from the Transaction on the market or their business.
60 
(77) In the light of the results of the market investigation and taking account of all the 
evidence available to it, the Commission considers that the merged entity is unlikely to have the ability or incentive to foreclose Demeter's competitors from 
access to a sufficient customer base. 
(78) For the reasons set out in recitals (63) to (77), the Commission concludes that the 
Transaction does not raise serious doubts as to its compatibility with the internal 
market as regards the markets vertic ally affected by the Transaction. 
                                                 
59  The company did inform the Commission that it plans to have 30% to 40% of its feedstock from 
waste and residues, and that it plans to have at least 15% of its total feedstock from Category 3 
animal fats. 
60  Responses to Questions 14,15 and 16 of Q4 to animal fat suppliers. 
15 6. CONCLUSION 
(79) For the above reasons, the European Co mmission has decided not to oppose the 
notified operation and to declare it compatib le with the internal market and with 
the EEA Agreement. This Decision is adopted  in application of Article 6(1)(b) of 
the Merger Regulation and Article  57 of the EEA Agreement. 
For the Commission 
 (Signed) Margrethe VESTAGER Member of the Commission