Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE  
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel,   BELGIË  
 
Tel: +32 229 -91111. Fax: +32 229 -64301. E -mail: COMP -MERGER -REGISTRY@ec.europa.eu .   EUROPEAN COMMISSION  
Brussels, 22.02.2022  
C(2022 ) 1216  final 
PUBLIC VERSION  
  
Chevron Global Energy Inc.  
251 Little Falls Drive  
Wilmington, DE 19808  
United States  
Subject : Case M. 10526 – CHEVRON / NESTE BASE OIL  
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 18 January 2022 , the European Commission received notification of a proposed 
concentration pursuant  to Article 4 of the Merger Regulation by which  Chevron 
Global Energy Inc., controlled by Chevron Corporation (“Chevron” , US ) acquires 
within the meaning of Article 3(1)(b) of the Merger Regulation sole control of Neste 
Oyj’s base oil business (“the Target ”, Finland ) by way of purchase of shares3 (the 
“Proposed Transaction”). Chevron is designated as the “Notifying Party” and 
together with the Target as the “Parties”.   
                                                 
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 introd uced certain changes, such as the replacement of 
‘Community’ by ‘Union’ and ‘common market’ by ‘internal market’. The terminology of the TFEU will 
be used throughout this decision.  
2  OJ L 1, 3.1.1994, p. 3 (the ‘EEA Agreement’).  
3  Publication in the Offi cial Journal of the European Union No C 38I , 25.1.2022, p. 5.  
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information omitted has been replaced by 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.  
 
 
2 1. THE  PARTIE S  
(2) Chevron Global Energy Inc. is mainly active in the petroleum refining and lub ricants 
sectors. Its ultimate parent, Chevron, is an integrated energy company based in 
California (United States). Chevron produces crude oil and natural gas and 
manufactures transportation fuels, lubricants, petrochemicals and additives. Chevron 
currentl y produces and markets Group II base oil. Chevron also produces Group III 
base oil for the Target under a tolling agreement, i.e. Chevron does not currently 
market any Group III base oil.  
(3) Neste Oyj is an oil refining and marketing company based in Finland.  The Target is 
carved out from Neste Oyj’s Oil Products business segment . It consists mainly of the 
NEXBASE™ brand, associated qualifications and approvals, and sales and logistics 
contracts, as well as an offtake -agreement for Group II and Group III base oils. The 
Target primarily produces and markets Group III base oil, as well as limited 
quantities of Group II base oil.  
2. THE  CONCE NTRATIO N 
(4) The concentration consists of the acquisition of sole control by Chevron Global 
Energy Inc. over the Target through t he acquisition of shares. The Proposed 
Transaction will be implemented according to the terms of the Mas ter Sale and 
Purchase Agreement  signed on 30 September 2021. Pursuant to the Master Sale and 
Purchase Agreement, Chevron will acquire all of the shares in Neste Base Oils 
Finland Oy (which among other things holds the NEXBASE™ brand, and associated 
qualifications and approvals) and Neste NV from Neste Oyj, as well as inventory, 
and certain sales, transport and terminal contracts from Neste (Suisse) S.A. a nd 
Neste US, Inc. As part of the Proposed Transaction, an offtake agreement will be 
entered into for the production and delivery of Group II and Group III base oils 
between Neste Oyj (from the Porvoo refinery in Finland) and Chevron, to come into 
effect po st-closing of the Proposed Transaction.  
(5) In light of the above, the Proposed Transaction constitutes a concentration within the 
meaning of Article 3(1)(b) of the Merger Regulation.  
3. UNION  DIME NSION  
(6) The undertakings concerned have a combined aggregate world -wide turnover of 
more than EUR 2 500 million (Chevron: EUR 82 577 million, Target: EUR […] 
million) and a combined aggregate turnover in excess of EUR 100 million in […]. 
Each of the undertakings concerned have a turnover in excess of EUR 25 million in 
these three Member States. The notified operation therefore has an EU dimension.  
4. MARKE T DE FINITION  
(7) Base oils are produced out of the atmospheric residue of crude oil left after the 
separation of other major oil products . To produce lubricants, lubricant blenders 
combine b ase oil with additives .  
 
 
3 (8) The Parties’ activities overlap with regard to the production and supply of base oils. 
Moreover, Chevron is active in the market for crude oil (input for base oils) and the 
market for finished lubricants (for whic h base oils are an input). Chevron also 
produces additives, which are a further input for lubricants and can be considered a 
neighbouring market, as both base oils and additives are required for the production 
of finished lubricants. Therefore, this sectio n will assess the market definition of (i) 
base oils, (ii) crude oil production, (iii) finished lubricants and (iv) additives.  
4.1. Base Oils  
4.1.1.  Product market  
(9) The American Petroleum Institute (“API”) has created a classification of base oils 
that is widely used i n the oil industry as a reference. The classification divide s base 
oils into five groups, Group I, II, III, IV and V, depending on the specific physical 
characteristics. Group I, II and III oils are paraffinic base oils, Group IV oils are 
polyalphaolefines  ("PAO"), which are synthetic oils, while Group V contains all 
other synthetic and mineral base oils, including naphthenic crude oils.4 Both the 
quality and price of the base oil increase from Group I to II and from Group II to III 
because of the lower vis cosity of the base oil. For the manufacture of lubricants, 
mainly Group II and Group III base oils are used.5 
4.1.1.1.  The Commission’s previous practice  
(10) The Commission has not previously investigated the markets for Group II and Group 
III base oils specifically, b ut investigated other base oil groups in previous decisions. 
In these decisions, the Commission concluded that API Group I base oils constitute a 
separate product market, due to a lack of substitutability of API Group I base oils 
with all other types of ba se oils.6 In M.6360 – Nynas / Shell / Harburg Refinery , the 
Commission investigated Group V base oils and considered , within this group,  a 
separate product market for the production of naphthenic base and process oils, as 
opposed to pa raffinic base and pro cess oils.7 A further segmentation by end -
application (industrial vs automotive) was not considered relevant given hig h 
supply -side substitutability.8  
4.1.1.2.  The Notifying Party’s view  
(11) The Notifying Party considers that the product market definition can be left open , as 
the Proposed Transaction will not raise any competition concerns. However, the 
Notifying Party submits that the base oil market could be further segmented between 
Group II and Group III base oils. It argues that technical requirements for Group II 
and Group III base oils generally do not overlap. Group II base oils are not 
substitutable in the majority of lubricant applications that require Group III use. 
Moreover, whereas Group II base oils are primarily used for blending conventional 
engine oil and in dustrial lubricants, Group III base oils are specifically used for 
                                                 
4  M.6360 – Nynas / Shell / Harburg Refinery , paragraphs 49 -50. 
5  See minutes of a  call with a competitor of 15 December2021; see minutes of a call with a competitor of 
10 December 2021.  
6  M.9014 – PKN Orlen / Grupa Lotos , paragraph 1750; M.1383 – Exxon / Mobil , paragraph 310 et seq.  
7  M.6360 – Nynas / Shell / Harburg Refinery , paragraph 128.  
8  M.1383 – Exxon / Mobil , paragraph 310.  
 
 
4 blending premium lubricants with long drain intervals and/or other performance 
attributes. Group II cannot meet modern specifications for very lightweight motor 
oils and other very light lu bricants, which is where Group III is used.9 
(12) The Notifying Party also submit s that Group I and Group II base oils exercise 
competitive pressure on each other, as Gr oup II base oils can substitute  Group I base 
oils [>75] % of its applications.10 
(13) The Notifying  Party rejects a further sub -segmentation into “Group II+” or “Group 
III+” markets , arguing that these are  marketing terms used by certain producers to 
indicate that the product in question is at the higher end of the viscosity index range 
applicable to it s group. Moreover, Group III and Group III+ base oils are 
interchangeable and sold to the same lubricant customers and there is no official 
definition of the “+” marketing term and it is not recogni sed by API.11 
4.1.1.3.  The Commission’s assessment  
(14) The Commission’s  market investigation supported the Notifying Parties’ view that 
separate markets exist for each of Group II and Group III base oil, without a further 
segmentation within each of these groups.  
(15) From the demand -side perspective, a  majority12 of both customers  and competitors 
replied that Group III base oil is generally not substitutable with Group II base oil .13 
Respondents who gave further explanations pointed out that Group III base oils are 
more expensive and of better quality . Moreover, applications of each  Group II and 
Group III base oils differ . Notably, Group III base oils are mainly used for 
automotive applications.14 Furthermore,  replies suggest that  although Group II is 
often technically substitutable with Group III base oil, this would not be economical 
given the difference in price  between both groups of base oil .15  
(16) The supply -side picture was mixed: some competitors explained that they can and do 
switch their production from Group II to Group III (although one mentioned that  this 
was only possible for certain products and not all) and vice versa, others cannot , 
primarily because their production plants are established to produce either Group II 
or Group III base oils .16  
(17) Concerning the Notifying Party’s argument that Group I e xerts competitive pressure 
on Group II base oils, the market investigation did not support this claim. A majority 
of customers considered that Group II base oil is not substitutable with Group I base 
                                                 
9  Form CO, paragraph 137.  
10  Form CO, paragraph 138.  
11  Form CO, paragraphs 129 et seq . 
12  “Majority” in this Decision stands for more than 50% and “vast majority” stands for more than 70% of the 
participants in the market investigation who replied to the question (excluding those that replied “other”, 
or “I do  not know”).  
13  Replies to question 4 of questionnaire Q2 to customers and question 4 of Q1 to competitors.  
14  Replies to question 4.1 of questionnaire Q2 to customers and question 4.1 of Q1 to competitors. A 
customer estimates that approximately 90% of Gr oup III base oils are used for automotive lubricants. 
Minutes of call with a customer on 15 December 2021, para. 11.  
15  Replies to question 5 and 5.1 of questionnaire Q2 to customers and question 5 and 5.1 of Q1 to 
competitors.  
16  Replies to question 9 of Q1 to competitors.  
 
 
5 oil. Competitors’ replies were inconclusive, their expla nations however indicate that 
in some industrial applications, Group II can indeed be used to substitute Group I 
base oils. In automotive applications, Group I could not be used, however (“ Group I 
base oil properties are not compatible with automotive appl ications requiring 
compatibility with modern  emissions control devices for compliance with EU 
Regulation .”).17 In any case, given the price difference s (see paragraph (9)), 
substituting Group I with Group II would not be economic al. The Commission will 
therefore maintain its practice and consider Group I and Group II as separate product 
markets.  
(18) The Commission also investigated whether the markets for Group II and Group III 
base oils should be further sub -segmented by grade of base oil. In this respect, a 
majority of customers replied that  generally, different grades of Group II base oil are 
substitutable with other Group II base oil grades.18 This subst itutability is however 
limited for base oils used in automotive applications. This is due to a specificity of 
the base oil and lubricants industries: automotive original equipment manufacturers 
(“OEMs”) are closely involved in the production value chain, s pecifying technical 
requirements with base oil producers, additive suppliers and blenders. Therefore, f or 
the production of automotive lubricants in particular, OEMs typically require the use 
of certain base oils that have received prior approval/qualifica tion. The lubricant 
manufacturer will therefore be obliged to continue using the qualified base oil, for 
the lifetime of the lubricant. However, n o specific grades or types within each base 
oil group appear to constitut e sub-segments of these markets. Alth ough some of the 
Parties’ internal documents mention categories like Group III and Group III+, the se 
are no t commonly used industry -wide terms . Even where two competitors each 
produce a base oil they label “Group III+”, the quality and properties might var y 
between the two products. The Commission therefore considers that a further sub -
segmentation of the markets for Group II and Group III oils is not warranted.  
(19) Overall, the market investigation thus confirm ed that Group II and Group III 
constitute separate  markets. In conclusion, the Commission will analyse the effects 
of the Proposed Transaction on (i) a market for Group II and (iii) a market for Group 
III base oils .   
4.1.2.  Geographic market  
4.1.2.1.  The Commission’s previous practice  
(20) The Commission has not previously i nvestigated the geographic scope of the 
markets for Group II and Group III specifically, but has done so for other base oil 
groups. In these previous decisions, t he Commission considered the Group I base 
oils market to be EEA -wide19 or at least EEA -wide,20 and the market for naphthenic 
base and process oils for industrial application to be EEA -wide in scope.21 
                                                 
17  Replies to question 6 and 6.1 of questionnaire Q2 to customers and question 6 and 6.1 of Q1 to 
competitors.  
18  Replies to question 7 of questionnaire Q2 to customers.  
19  M.9014 – PKN Orlen / Grupa Lotos , paragraph 1757 et seq . 
20  M.1383 – Exxon / Mobil , paragraphs 322 et seq . 
21  M.6360 – Nynas / Shell / Harburg Refinery , paragraph 231.  
 
 
6 4.1.2.2.  The Notifying Party’s view  
(21) The Notifying Party considers the relevant market for base oils to be global in scope. 
On the one hand, various suppliers ( e.g. Chevron, Saudi Aramco) sell base oils into 
the EEA without any local production capacities and, on the other hand, many 
suppliers with local production sites in the EEA export base oils ( e.g. ExxonMobil 
and ILBOC. Moreover, the Notifying Party estimate s that a substantial portion of 
base oil supply in the EEA is imported and mentions that base oil prices in the 
United States and the EEA tend to move in parallel and in the same direction.22 
However, in the Notifying Party’s view, the relevant geographic m arket can be left 
open, as the Proposed Transaction will not raise any concerns irrespective of the 
market segmentation.  
4.1.2.3.  The Commission’s assessment  
(22) The Commission’s market investigation did not provide clear evidence as to whether 
the markets for Group II and Group III base oils are EEA -wide or global.  A majority 
of customers indicated that their suppliers are located worldwide and a vast majority 
of competitors indicated that their customers are located worldwide, regardless of 
where the respondents’ re spective  production facilities are.23 However, less than 
40% of customers indicated that their suppliers are mainly located in the regio n 
where their  production facilities are located24 and  many of these  customers also  
indicated that they prefer suppliers whose production facilities are located in the 
same region, for reasons of supply security, logistics costs and potential tariffs. 
These factors are however less important than quality and approvals.25 A majority of 
customers hence considered geographic closeness of their base oil suppliers to be 
“somewhat important”.26 When asked whether prices for base oil produced in the 
EEA differ from those for imported base oil, customers’ replies were inconclusive , 
with about one h alf finding that prices for base oil produced in the EEA are different 
than for imports (for instance where tariffs are in place) and another half finding no 
differences in price . A customer explained: “ The value of a product is mainly 
determined by techni cal performance and underlying approvals. Hence, different 
pricing is possible for different products, however mainly driven by the technical 
performance and the underlying approvals of the specific base stock. Production 
locations and imposition of potent ial tariffs can though be cost relevant and 
therefore play a role ”.27 However, a  majority of competitors indicated that prices 
differ depending on the region.28  
(23) In any case, for the purpose of this decision the exact geographic market definition 
can be left  open , as the Proposed Transaction  does not raise serious doubts as to its 
compatibility with the internal market or the functioning of the EEA Agreement 
under any plausible market definition.  
                                                 
22  Form CO, paragraphs 141 et seq . 
23  Replies to question 11 of questionnaire Q2 to customers and question 15 of questionnaire Q1 to 
competitors.  
24  Replies to question 11 of questionnaire Q2 to customers.  
25  Replies to question 13.1 of questionnaire Q2 to customers.  
26  Replies to question 13 of questionnaire Q2 to customers.  
27  Replies to question 12 of questionnaire Q2 to customers.  
28  Replies to qu estion 16 of questionnaire Q1 to competitors.  
 
 
7 (24) In conclusion, the Commission will analyse the effects of the Proposed Transaction 
on the market for base oils at EEA and worldwide level.   
4.2. Crude Oil Production  
4.2.1.  Product market  
4.2.1.1.  The Commission’s previous practice  
(25) In previous decisions, the Commission considered a separate market for the 
production and wholesale of crude oil.29 
4.2.1.2.  The Notifying Party’s view  
(26) The Notifying Party does not contest the Commission’s previous practice.30 
4.2.1.3.  The Commission’s assessment  
(27) The Commission will retain the product market definition provided in its past 
decisional practice as described in p aragraph (25). The market investigation did not 
produce any evidence indicating that the Commission’s case practice is no longer 
valid.  The Commission will therefore analyse the effects of the Proposed 
Transaction on the market for the production and wholesale of crude oil.  
4.2.2.  Geographic market  
4.2.2.1.  The Commission’s previous practice  
(28) Previously, the Commission considered the relevant market for the production and 
wholesale of crude oil to be global in scope.31 
4.2.2.2.  The No tifying Party’s view  
(29) The Notifying Party does not contest the Commission’s previous practice and 
considers that the relevant market can be left open , as the Proposed Transaction will 
not raise any concerns irrespective of the market segmentation.32 
4.2.2.3.  The Comm ission’s assessment  
(30) The Commission will retain the geographic market definition provided in its past 
decisional practice as described in paragraph (28). The market investigation did not 
produce any evidence indicating that the Commission’s case practice is no longer 
valid.  The Commission will therefore analyse the effects of the Proposed 
Transaction on a global market for the production and wholesale of  crude oil.  
                                                 
29  M.7318 – Rosneft / Morgan Stanley Global Oil Merchanting Unit , paragraph 11 and cases cited therein.  
30  Form CO, paragraph 146.  
31  M.7318 – Rosneft / Morgan Stanley Global Oil Merchanting Unit , paragraph 11 and cases cited therein.  
32  Form CO, paragraph 148.  
 
 
8 4.3. Finished lubricants  
4.3.1.  Product market  
4.3.1.1.  The Commission’s previous practice  
(31) In previous decisions, the Commission segmented the finished lubricants market into 
mineral , semi -synthetic  and synthetic lubricants, or alternatively  by application into 
automotive, industrial, marine and aviation lubricants.33 Moreover, in M.8492 – 
Quaker / Global Houghton , the Commission defined further sub -segments of  the 
industrial lubricant market.34 
4.3.1.2.  The Notifying Party’s view  
(32) The Notifying Party considers that the releva nt product market definition can be left 
open , as the Proposed Transaction will not raise competition concerns irrespective of 
the market segmentation.35 
4.3.1.3.  The Commission’s assessment  
(33) In the market investigation, a majority of customers and competitors repli ed that 
automotive, industrial, marine and aviation lubricants should be considered as 
separate product markets.36 Respondents who gave an explanation for the distinction 
replied that formulations, characteristics, quality and components differ between 
these categories.37 
(34) For the purpose of this decision, the exact product market definition can be left open 
between an overall market for lubricants and separate markets for automotive, 
industrial, marine and aviation lubricants, as the Proposed Transaction  does not raise 
serious doubts as to its compatibility with the internal market or the functioning of 
the EEA Agreement under any plausible market definition.  
(35) In conclusion, the Commission will analyse the effects of the Proposed Transaction 
for (i) an overall market for lubricants  and (ii) separate markets for automotive, 
industrial, marine and aviation lubricants . 
4.3.2.  Geographic market  
4.3.2.1.  The Commission’s previous practice  
(36) The Commission has previously considered the market for lubricants and its various 
sub-segments to be national,38 at least national ,39 and EEA-wide or global in scope.40 
                                                 
33  M.9014 – PKN Orlen / Grupa Lotos, paragraph 1770 et seq.; M. 8261 – Lanxess / Chemtura , paragraph 
23; M.5927 – BASF / Cognis , paragraphs 54 -58. 
34  M.8492 – Quaker / Global Houghton , paragraphs 16 et seq. 
35  Form CO, paragraphs 154 -155. 
36  Replies to question 9 of questionnaire Q2 to customers and question 13 of questionnaire Q1 to 
competitors.  
37  Replies to question 9.1 of questionnaire Q2 to customers.  
38  M.9014 – PKN Orlen / Grupa Lotos , paragraph 1 801 et seq . 
39  M.1891 – BP Amoco/Castrol , paragraphs 18 -22; M.5927 - BASF/Cognis , paragraphs 59 and 62.  
 
 
9 4.3.2.2.  The Notifying Party’s view  
(37) The Notifying Party considers that the relevant geographic market definition can be 
left open as the Proposed Transaction will not raise competition concerns 
irrespective of the market segmentation.41 
4.3.2.3.  The Commission’s assessment  
(38) The Commission’s market investigation did not provide clear evidence as to whether 
the markets for lubricants are EEA -wide or global. A majority of customers 
considers the mark ets EEA -wide whereas a majority of competitors considers them 
as worldwide. In any case, only a minority of each of customers and competitors 
considered the markets as national.42 
(39) For the purpose of this decision the exact geographic market definition can b e left 
open , as the Proposed Transaction does not raise serious doubts as to its 
compatibility with the internal market or the functioning of the EEA Agreement 
under any plausible market definition.  
(40) In conclusion, the Commission will analyse the effects o f the Proposed Transaction 
on the market for lubricants at national, EEA and worldwide level.  
4.4. Additives  
4.4.1.  Product market  
4.4.1.1.  The Commission’s previous practice  
(41) In previous decisions, the Commission has left open whether  the two principal 
categories of additives,  viscosity index improvers (“VI improvers”) and detergent 
inhibitors (“DIs”) , constitute separate markets .43 The Commission explained that 
both are essential components of an oil lubricant, but are not substitutable with one 
another. Their functions differ : DI packages suspend oil contaminants and 
combustion by -products and prevent oxidation of the oil with the resultant formation 
of varnish and sludge deposits. VI improvers modify the viscometric characteristics 
of lubricants by reducing the rate of thinnin g with increasing temperature and the 
rate of thickening with low temperatures.44  
(42) The Commission also left open whether all DI packages constitute one product 
market or whether there are separate product markets for the individual additive 
components.45  
                                                                                                                                                      
40  M.8492 – Quaker / Global Houghton , paragraphs 106, 109 and 112; M.8261 – Lanxess / Chemtura , 
paragraph 59.  
41  Form CO, paragraphs 154 -155. 
42  Replies  to question 14 of questionnaire Q2 to customers and question 17 of questionnaire Q1 to 
competitors.  
43  M.8261 – Lanxess / Chemtura , paragraph 10; M.1383 – Exxon / Mobil , paragraph 286; M.7691 – Apollo / 
OMG , paragraphs 30 –32. 
44  M.7691 – Apollo / OMG , par agraph 30.  
45  M.8261 – Lanxess / Chemtura , paragraph 10 et seq . 
 
 
10 4.4.1.2.  The Notifying Party’s view  
(43) The Notifying Party considers that the relevant product market definition can be left 
open , as the Proposed Transaction will not raise any competition concerns.46 
4.4.1.3.  The Commission’s assessment  
(44) In the market investigation, a majority of customers and competitors agreed that 
viscosity index improvers and detergent inhibitors should be considered as separate 
product markets.47 Many of the respondents who gave an explanation for the 
distinction replied that the components and producers are  different.48 
(45) For the purpose of this decision,  the exact product market definition can be left open 
between an overall market for additives and separate markets for viscosity index 
improvers and detergent inhibitors, as the Proposed Transaction does not ra ise 
serious doubts as to its compatibility with the internal market or the functioning of 
the EEA Agreement under any plausible market definition.  
(46) In conclusion, the Commission will analyse the effects of the Proposed Transaction 
for an overall market for  additives.49   
4.4.2.  Geographic market  
4.4.2.1.  The Commission’s previous practice  
(47) The Commission has previously considered the market for lubricant additives and its 
potential sub -segments to be at least EEA -wide in scope, and possibly global.50 
4.4.2.2.  The Notifying Party’s view 
(48) The Notifying Party considers that the relevant geographic market definition can be 
left open , as the Proposed Transaction will not raise any concerns irrespective of the 
market segmentation even if it was national in scope.51 
4.4.2.3.  The Commission’s assessme nt  
(49) The Commission’s market investigation did not provide clear evidence as to whether 
the markets for additives are EEA -wide or global.  Most competitors replied that 
geographic markets for the different additives i.e. viscosity index improvers and 
deterge nt inhibitors are worldwide in scope, whereas customers’ replies were divided 
                                                 
46  Form CO, paragraphs 151, 155.  
47  Replies to question 10 of questionnaire Q2 to customers and question 14 of questionnaire Q1 to 
competitors.  
48  Replies to question 10.1 of questionnaire Q2 to customers.  
49  The Target does not produce any additives. The Notifying Party has confirmed that its market shares do 
not exceed 30% under any plausible product and geographic market definition. (Form CO, paragraph 
151).  
50  M.8261 – Lanxess / Chemtura , paragraph 45; M.1383 – Exxon / Mobil , paragraph 331; M.1137 – Exxon / 
Shell , paragraphs 17 -18. 
51  Form CO, paragraphs 151, 155.  
 
 
11 between EEA -wide and global. In any case, only a minority of each of customers 
and competitors considered the markets as national.52 
(50) In any case, for the purpose of this decision the exact geographic market definition 
can be left open , as the Proposed Transaction does not raise serious doubts as to its 
compatibility with the internal market or the functioning of the EEA Agreement 
under any plausible market definition.  
(51) In conclusio n, the Commission will analyse the effects of the Proposed Transaction 
on the market for additives at EEA and worldwide level.  
5. COMPE TITIVE ASSE SSME N T 
(52) The concentration gives rise to two horizontally affected markets , (i) for Group II 
and (ii) Group III bas e oils, as well as several vertically affected markets: (i) Group 
III base oils upstream and lubricants downstream, (ii) Group II base oils upstream 
and lubricants downstream and (iii) crude oil upstream and Group II  and Group III 
base oils downstream. Fur thermore, this Decision will investigate conglomerate 
effects resulting from the Parties activities in neighbouring markets (i) Group II and 
Group III base oils and (ii) base oils and additives.  
(53) Some market participants voiced concerns about potential inpu t foreclosure for 
Group III base oils in the EEA, given Chevron’s presence in the downstream 
lubricants markets. Another market participant voiced concerns about foreclosure 
resulting from  tying or  bundling of Group II and Group III base oils and/or of base 
oils and additives.  The Commission has investigated these theories of harm and has 
concluded  that the concerns are not substantiated, as will be outlined below.  
5.1. Horizontally affected markets  
5.1.1.  Legal framework  
(54) The Commission Guidelines on the assessment of horizontal mergers under the 
Merger Regulation (the “Horizontal Merger Guidelines ”) distinguish between two 
main ways in which mergers between actual or potential competitors on the same 
relevant market may si gnificantly impede effective competition, namely non -
coordinated effects and coordinated effects.  
(55) Non-coordinated effects may significantly impede effective competition by 
eliminating the competitive constraint imposed by each merging party on the other, 
as a result of which the merged entity  would have increased market power without 
resorting to coordinated behaviour. The Horizontal Merger Guidelines list a number 
of factors53 which may influence whether or not significant non -coordinated effects 
are likely to result from a merger. These include  the large market shares of the 
merging firms, the fact that the merging firms are close competitors, the limited 
possibilities for customers to switch suppliers, or the fact that the merger would 
eliminate an import ant competitive force. Not all of these factors need to be present 
                                                 
52  Replies to question 14 of questionnaire Q2 to customers and question 17 of questionnaire Q1 to 
competitors.  
53  Horizontal Mer ger Guidelines, paras 24 et seq .  
 
 
12 for significant non -coordinated effects to be likely. The list of factors, any one of 
which is not necessarily decisive, is also not an exhaustive list.   
5.1.2.  Group II base oil s 
5.1.2.1.  The Notifying P arty’s view  
(56) The Notifying Party submits that the Transaction will not result in horizontal 
competition concerns, given that the Parties are not close competitors (their product 
portfolio being largely complementary), their combined market shares do not 
indicate market power and multiple s trong competitors remain active . The Notifying 
Party further submits that Group II expertise  and technology is widespread and 
accessible, car manufacturers have significant countervailing buyer power and that 
excess supply on the global base oil market subjects the Parties to constant 
downward pricing pressure.54 
(57) Within Group II, the Parties target different applications . Chevron’s focus is on 
motor oil applications whereas the Target’s focus is  on industrial lubricants and 
applications such as brake & shock absorber fluids. In the EEA, Chevron sells one of 
its Group II base oils for non -lubricant applications (e.g. transformer oils, process 
oils and shock absorber fluids), but not to the same customers as the Target.55 
(58) Moreover, Chevron’s EEA Group II base oils shares and revenues have been 
dropping consecutively since 2018, mainly resulting from strong competition from 
ExxonMobil’s new Group II production facility in Rotterdam.56 […] the quota for 
U.S. Group II base oil imports will expire and 3.7% duties will apply for Group II 
base oils produced in the US as of H2 2022.57  
5.1.2.2.  The Commission’s assessment  
(59) On the basis of the information available to it and in light of the results of the market 
investigation, the Commission co nsiders that the Transaction is unlikely to raise 
competition concerns for the following reasons.  
(60) First, the Parties have a moderate combined share  and the increment resulting from 
the Proposed Transaction is small . In the EEA market for Group II base oils, 
Chevron ha d a market share of [30-40]% and the Target of [0-5]% in terms of 
volume sold  in 2020 , resulting in a combined market share of [30-40]%. In terms of 
production capacity at global level, Chevron’s production capacity in Group II base 
oils in  2020 represented [10-20]% of total global production capacity, while the 
Target’s production capacity represented only [0-5]%58 (and only [0-5]% of total 
production capacity in the EEA, where Chevron has no production capacity at all).59  
                                                 
54  Form CO, paragraph 158 et seq . 
55  Form CO, paragraph 161.  
56  Form CO, paragraph 165.  
57  Form CO, paragraph 165.  
58  The Notifying Party submits that a global overview of competitors’ volumes sold is not available. In the  
absence of global market shares based on volumes sold, global capacity figures were submitted as the best 
proxy for global volume sold figures (Form CO, footnote 10).  
59  Form CO, Confidential Annex 6.1.  
 
 
13 (61) Second, neither th e Parties themselves, nor market participants , appear to consider 
the Parties close competitors. In the Commission’s market investigation, none of the 
respondents mentioned the other party, when asked who the five closest competitors 
of Chevron and the Tar get are. A majority of respondents named ExxonMobil as 
Chevron’s closest competitor and SK Lubricants as the Target ’s closest competitor.60 
The decisive difference many respondents pointed out is that Chevron focuses on 
production of Group II base oil (like  ExxonMobil) whereas the Target  focuses on 
production of Group III base oil.61 The Parties’ internal documents about their 
respective main competitors also do not mention the other Party.  
(62) Third, a number of credible alternatives to the Parties will remain active on the 
market post -transaction , notably market leader ExxonMobil  with [40-50]% of Group 
II base oil sales in the EEA in 2020 and [10-20]% of global production capacity  for 
Group II base oils and [60-70]% of EEA production capacity. Other competitors  
with production capacity in the EEA are  SK Lubricants with [5-10]% and Repsol 
with [0-5] % in 2020 (and similar market shares in terms of volumes sold in the 
EEA, [5-10]% and [0-5]% respectively ).62  
(63) Fourth , in the market investigation a majority of both c ustomers and competitors 
replied that they expect that the Proposed Transaction will not have an impact on the 
prices63 and quality64 of Group II base oils.   For example, one customer noted: “ We 
do not expect a significant impact as from our perspective the product portfolios 
from Chevron and Neste are different due to the aspect that Chevron’s Group II base 
oils showing different technical properties compared to Neste’s high quality Group 
II base oils. Thus, we do not expect a change in approach in general a nd on the 
price side specifically .”65 
(64) Finally, it should be noted that different Group II base oils need to be approved by 
OEMs in terms of the particular specifications needed for its end use. In this context, 
customers in the market investigation pointed out that only those competitors with 
the required OEM approvals are potential alternatives to their current supplier.66 A 
minority of the customers indicated in the market investigation to have switched 
their Group II supplier in the last 5 years.67  
(65) On bala nce, given the limited increment and the fact that the Parties are not close 
competitors , the  Commission concludes that the P roposed Transaction does not raise 
serious doubts as to its compatibility with the internal market and the functioning of 
the EEA A greement in relation to the supply of Group II base oil in the EEA.  
                                                 
60  Replies to question 16 and 17 of questionnaire Q2  to customers and question 19 and 20 of questionnaire 
Q1 to competitors.  
61  Replies to question 18 of questionnaire Q2 to customers and question 21 of questionnaire Q1 to 
competitors.  
62  Form CO, Confidential Annex 6.1.  
63  Replies to question 36 of questio nnaire Q2 to customers and question 36 of questionnaire Q1 to 
competitors.  
64  Replies to question 38 of questionnaire Q2 to customers and question 38 of questionnaire Q1 to 
competitors.  
65  Reply to question 36 of questionnaire Q2 to customers.  
66  Replies to question 26.1 of questionnaire Q2 to customers.  
67  Replies to question 25 of questionnaire Q2 to customers.  
 
 
14 5.1.3.  Group III base oils  
5.1.3.1.  The Notifying Party’s view  
(66) With respect to Group III base oils, the Notifying Party argued that it  does not 
currently market Group III base oil, [details on Chevron’s s upply] . The Notifying 
Party argues that therefore, Chevron is thus  not a competitor to the Target f rom the 
customers’ perspective,  and hence no  alternative source of supply of  Group III base 
oils which the Proposed Transaction would remove.68 
(67) Moreover, the combined entity will have a global production capacity of [5-10]% 
with an increment of less than [0-5]%, much less than the main competitors SK 
Lubricants ( [20-30]%), Shell ( [10-20]%), Saudi Aramco ( [5-10]%) and ADNOC ( [5-
10]%).69 As Chevron has no Group III base oil production in the EEA, the Proposed 
Transaction would not result in an increment.70 
(68) In any event, the Notifying Party argues that the Parties’ combined market shares do 
not indicate market power and multiple strong comp etitors remain active. The 
Notifying Party further submits that Group III expertise  and technology is 
widespread and accessible, car manufacturers have significant countervailing buyer 
power and that excess supply on the global base oil market subjects the  Parties to 
constant downward pricing pressure.71 
5.1.3.2.  The Commission’s assessment  
(69) On the basis of the information available to it and in light of the results of the market 
investigation, the Commission considers that the Transaction is unlikely to raise 
competi tion concerns for the following reasons.  
(70) First, the Parties have a moderate combined share and the increment resulting from 
the Proposed Transaction is small. If Chevron’s Group III volumes are allocated to 
Chevron [details on Chevron’s supply] , Chevron he ld a market share of [0-5]% in 
2020 and the Target  of [10-20]% in terms of volumes sold, resulting in a combined 
market share of [20-30]% at EEA -level. Although the Target has the second highest 
production capacity in the EEA, with [30-40]% in 2020, this c orresponds to only [5-
10]% of total global production capacity for Group III base oils. Chevron does not 
have production capacity in the EEA and [0-5]% of global production capacity for 
Group III base oils.72 
(71) Second, as outlined in paragraph (61), neither the Parties themselves, nor market 
participants, appear to consider the Parties close competitors.  
(72) Third, s trong competitors remain in the market, notably market leader SK Lubricants 
with [20-30]% of Group III volumes sold in the EEA in 2020 and [30-40]% in terms 
of EEA production capacity (and [20-30]% of global production capacity). Also 
Repsol has production  capacity in the EEA ( [10-20]%). However, Repsol  does not 
                                                 
68  Form CO, paragraph 150.  
69  Form CO, paragraph 166.  
70  Form CO, paragraph 167.  
71  Form CO, paragraph 158 et seq . 
72  Form CO, Confidential Annex  6.1. 
 
 
15 appear to be considered an alternative supplier of Group III base oils, as it does not 
generally have the required approvals.73 This is also the case for several competitors 
that export Group III to the EEA (Shell with [5-10]% and ADNOC, Saudi Aramco, 
Sinopec and S -Oil with market shares of [0-5]%). The options for switching are 
therefore relatively limited.74 However, some market participants referred to new 
entrant ADNOC as credible alternative suppl ier,75 even more so in future 
(“ADNOC’s Group III is relatively new to the market, so it has fewer approvals. This 
is expected to change over the coming years as more approvals are generated by 
both ADNOC and users of ADNOC base stocks. ”76). Some market part icipants also 
expect new entries in the Group III base oil market.77 
(73) Fourth, although options for switching are relatively limited, customers do switch 
suppliers, as confirmed by the market investigation. A bout half of the customers 
indicated in the market investigation to have switched their Group III supplier in the 
last 5 years.78  
(74) Finally, in the market investigation a majority of both customers and competitors 
expect that the Proposed Transaction will not have an impact on the prices79 and 
quality80 of Group III base oils.  
(75) On balance, given the limited increment and the fact that the Parties are not close 
competitors , the Commission concludes that the Proposed Transaction does not raise 
serious doubts as to its compatibility with the internal market and the functioning of 
the EEA Agreement in relation to the supply of Group II I base oil in the EEA.  
5.2. Vertically affected markets  
(76) Chevron is active in the production of crude oil, upstream of the base oils market, 
and finished lubricants, downstream. The Pr oposed Transaction therefore gives rise 
to four vertically affected markets: (i) Group III base oils upstream and lubricants 
downstream, (ii) Group II base oils upstream and lubricants downstream and (iii) 
crude oil upstream and Group II  and Group III base  oils81 downstream.  
5.2.1.  Legal framework  
(77) According to the Commission’s Guidelines on the assessment of non -horizontal 
mergers under the Council Regulation on the control of concentrations between 
undertakings (“Non -horizontal Merger Guidelines”), foreclosure ef fects may occur 
where actual or potential rivals' access to supplies or markets is hampered or 
                                                 
73  Replies to question 17 of questionnaire Q2 to customers and question 20 of questionnaire Q1 to 
competitors. Minutes of call with a customer on 2 December 2021, para. 10.  
74  Replies to question 27.1 of questionnaire Q2 to customers.  
75  Replies to q uestions 17, 20 and 27 of questionnaire Q2 to customers.  
76  Minutes of a call with a customer on 15 December 2021, footnote 1.  
77  Replies to question 28.1 of questionnaire Q1 to competitors.  
78  Replies to question 25 of questionnaire Q2 to customers.  
79  Replies to question 37 of questionnaire Q2 to customers and question 37 of questionnaire Q1 to 
competitors.  
80  Replies to question 39 of questionnaire Q2 to customers and question 39 of questionnaire Q1 to 
competitors.  
81  These two vertically affected mark ets will be discussed together.  
 
 
16 eliminated as a result of the merger, thereby reducing these companies' ability and/or 
incentive to compete.82 
(78) In assessing the likelihood of an anticompetitive input foreclosure scenario, the 
Commission examines, first, whether the merged entity would have, post -merger, the 
ability to substantially foreclose access to inputs, second, whether it would have the 
incentive to do so, and third, whether a foreclosure st rategy would have a significant 
detrimental effect on competition downstream.83 These three conditions are 
cumulative so that the absence of any of them is sufficient to rule out the likelihood 
of anti -competitive input foreclosure.84 
(79) In assessing the likeli hood of an anticompetitive customer  foreclosure scenario, the 
Commission examines, first, whether the merged entity would have the ability to 
foreclose access to downstream markets by reducing its purchases from its upstream 
rivals, second, whether it woul d have the incentive to reduce its purchases upstream, 
and third, whether a foreclosure strategy would have a significant detrimental effect 
on consumers in the downstream market.85 
5.2.2.  Group III Base oil (upstream) – finished lubricants (downstream)  
(80) The Target ’s production capacity for Group III base oil in the EEA exceeds 30% 
([30-40]% in 2020). Chevron’s market share in finished lubricants is [0-5]% in the 
EEA and below 30% in the markets for automotive, industrial, and aviation 
lubricants .86 Chevron’s market shares also remain below 30% at national level under 
any plausible segmentation. Other than the Target, only SK Lubricants ( [30-40]%) 
and Repsol ( [10-20]%) have production capacity for Group III base oil in the EEA.  
(81) The Commission received  comments by some customers that Chevron might cover 
its own demand for Group III base oil by supply from the Target, leaving limited 
volumes for competitors. The se customers argued that this would allow Chevron to 
sell the Target’s remaining output of Gro up III base oil produced in Europe at higher 
prices, resulting in the two remaining competitors to adjust their prices upwards in 
response.  
5.2.2.1.  The Notifying Party’s view  
(82) The Notifying Party claims that no foreclosure concerns arise, given that Chevron is 
already vertically integrated, the level of which will not significantly change as a 
                                                 
82  Non-horizontal Merger Guidelines, paragraph 18.  
83  Non-horizontal Merger Guidelines, paragraph 32.  
84    Case T – 370/17 KPN v Commission, EU:T:2019:354, para 119.  
85  Non-horizontal Merger Guidelines, paragraph 59.  
86  The Target does not produce any lubricants. The Notifying Party has confirmed that its market shares do 
not exceed 30% (with the exception of marine lubricants) under any plausible product and geographic 
market definition. (Form CO, paragraph 154). Chevron’s m arket share in marine lubricants in the EEA is 
approximately [40 -50]% (Form CO, paragraph 70). However, marine lubricants generally require Group I 
base oils and never Group III base oils as inputs. Whereas some 20% of marine lubricants are produced 
with G roup II base oils, t he Group II type of products that the Target produces are not used with additives 
targeting marine application (Form CO, paragraph 71). In consequence, there is no vertical relationship 
between marine lubricants and any market where the  Target is active. Therefore this sub -segment will not 
be further discussed in this Decision.  
 
 
17 result of  the Proposed Transaction .87 Given Chevron’s limited finished lubricant 
presence and the current and expected growth of demand for Group  III, Chevron has 
no intention or incentive to internalise the Target’s Group III base oil production, nor 
to reduce or cease its supply to existing and future third party base oils customers.88 
In any event, numerous strong competitors remain active both in the upstream and in 
the downs tream markets.89 
(83) Moreover, the Notifying Party submits that t he Proposed Transaction will not affect  
the market structure in the EEA, as Chevron’s lubricant business is currently already 
sourcing approximately [>50] % of its g lobal procured Group III and [>50]% of its 
EEA procured Group III base oil needs from the Target.90 
(84) Finally, the Notifying Party argues that OEMs , which play an important role in the 
lubricants supply chain,  as well as  additive suppliers usually qualify their lubricant 
products with various base oil suppliers in order to have the ability to multisource or 
switch suppliers.91 
5.2.2.2.  The Commission’s assessment  
(A) Input foreclosure   
(85) The Commission considers that Chevron post -transaction will not have the ability or 
incentive to engage in  input foreclosure strategies  for Group III base oils , for the 
reasons stated below.  
(86) Chevron  does not have the ability  to foreclose access to Group III base oils . First , 
this would require a significant degree of market power in the upstream market.92 As 
outlined in Section 5.1.3.2 , the Target’s Group III production capacity is moderate 
and strong competitors, notably market leader SK remains active in the upstrea m 
market for Group III base oils.  
(87) Second, in the EEA Chevron’s only lubricant blending facility already sources 
Group III [>50%] from the Target, so that the Proposed Transaction would not have 
an impact on supply structures in the EEA. Outside of the EEA , Chevron’s lubricant 
business already covers [>50%]  of its internal Group III demand with supplies from 
the Target. Chevron’s 2022 Group III Procurement Commitments indicate  the Target 
as [>50%]  supplier of Chevron’s North America lubricant blending facil ities,93 as 
was also the case in 2020.94 Even if Chevron further increased its sourcing  outside of 
the EEA  the effect on supply structures would be limited . 
(88) Third, Chevron’s lubricant blending facilities operate [details on capacity] .95 If 
Chevron increased i ts sourcing of Group III base oils from the Target even further 
                                                 
87  Form CO, paragraph 190.  
88  Form CO, paragraph 202.  
89  Form CO, paragraph 204.  
90  Form CO, paragraph 8.  
91  Form CO, paragraph 8.  
92  Non-horizontal Merger Guidel ines, paragraph 61.  
93  Form CO, Table 22.  
94  Form CO, Tables 21 and 24.  
95  Form CO, table 32.  
 
 
18 post-transaction, its lubricant blending facilities would absorb even less Group III 
base oils from competitors. These additional volumes would be available for other 
customers. In consequence , Chevron would not be able to foreclose access to Group 
III base oils even if it further increased its sourcing  outside of the EEA , or sourced 
exclusively  from the Target.  
(89) Chevron does not have the incentive  to foreclose access to Group III base oils.   First, 
Chevron’s market share in lubricants is small, suggesting that benefits from a n input 
foreclosure strategy would be limited. In 2020, Chevron’s market share in finished 
lubricants in the EEA was [0-5]%, compared to [10-20]% held by each of Shell and 
TotalEnergies, and [10-20]% by each of BP and ExxonMobil.96 At global level, 
Chevron’s market share is only slightly higher ( [0-5]% in 2018).97  
(90) Second, Chevron ’s purchases of the Target’s Group III base oils only 
constitute [<10] % of the Target’s total production capacity .98 Therefore, Chevron 
would forego [>90] % of the profits from Group III sales if it tried to foreclose access 
to Group III inputs.  Given that Chevron’s profit margins for the sale of Group III 
base oil far exceed i ts margins for the sale of any type of lubricants ,99 Chevron is 
therefore likely to continue selling to third parties.  For this reason, Chevron also 
does not have an incentive to invest to increase the capacity of its lubricant blending 
facilities, which wo uld be necessary in order to absorb a higher share of total global 
Group III output.  
(91) Third, in the short to medium term, customers are locked into their supply contracts 
with suppliers that offer base oils with the respective OEM approvals (see paragraph 
(18)). This also goes for Chevron as a buyer of Group III base oils: it will have to 
continue sourcing from its current suppliers (the Target and third  parties  approved by 
OEMs ), so that sufficient quantities of the Target’s output will remain available for 
the sale to third parties.  
(92) Fourth, current industry practice suggests that vertical integration does not have a 
significant impact on supply structur es.  There is no evidence of exclusive internal 
sourcing in the industry, although many players in the industry are active in both 
base oils and lubricants , such as Shell, ExxonMobil, Total, Petronas and Repsol.100 
In the words of a customer: “ Many competito rs are active in both base oils and 
lubricants, but this was never a problem and the industry practice is to run these 
businesses independently .”101 Such vertically integrated companies could hence 
cover their needs internally, but continue to supply/source from third parties. The 
results of the market investigation indicate that a vast majority of customers source 
Group III base oil from at  least two or more, a majority from three or more 
suppliers.102 Moreover, several market participants also indicated that up- and 
                                                 
96  Reply to Request for Information 5 of 20 January 2022.  
97  Form CO, Table 28.  
98  Form CO, paragraph 8.  
99  Reply to Request for information 5 of 20 January 2022.  
100  Minutes of a call with a customer of 15 December 2021, paragraph 18.  
101  Idem.  
102  Replies to question 20 of questionnaire Q2 to customers.  
 
 
19 downstream businesses tend to be operated with Chinese walls.103 The Parties 
confirmed that this is the case for Chevron.104 
(93) Finally, in the market investigation , most customers consider that the Proposed 
Transaction will have no impact, followed by a considerable number of customers 
who expect a positive impact,105 including more investment and interest in base oil 
development, more competition and lower prices.106  
(94) In view of the above, the Commission considers that Chevron will likely have no 
ability or incentive to foreclose access to Group III base oil  post-transaction.  
(B) Customer foreclosure  
(95) The Commission considers that Chevron post -transaction will also not have the 
ability or incentive to engage in customer foreclosure strategies, for the reasons 
stated below.  
(96) First, Chevron do es not have the ability  to foreclose access to suppliers of Group III 
base oils  to customers , as this would require a significant degree of market power in 
the downstream market.107 In 2020, Chevron’s market share in finished l ubricants in 
the EEA was [0-5]%, compared to [10-20]% held by each of Shell and 
Total Energies , and [10-20]% by each of BP and ExxonMobil.108 At global level, 
Chevron’s market share is only slightly higher  ([0-5]% in 2018 ).109 Chevron is 
therefore not a suffici ently important buyer to be able to prevent suppliers from 
selling Group III base oils. Even if Chevron sourced exclusively from the Target, 
suppliers would still have access to customers representing more than [90-100]% of 
EEA and global demand respective ly. 
(97) Second, the Proposed Transaction will not have a significant effect on supply 
structures of Group III base oils, as explained in paragraph (87). As Chevron already 
sources [>90%]  of its Group III needs from the Target, its importance as a customer 
for third parties is even lower than its market share in the lubricants market suggests.  
(98) Third, Chevron does not have the incentive  to source Group III base oils exclusively 
from the Target. A s explained in paragraph (91), the Commission considers that the 
role of approvals in ba se oils would prevent Chevron from switching to sou rcing 
entirely from the Target . In order to maintain its lubricants sales, Chevron will have 
to continue buying from suppliers other than the Target post -transacti on. 
(99) Fourth, as explained in paragraph (92), experience suggests that vertical integration 
has no significant impact on Group III supply structures for base oil s. 
                                                 
103  Minutes of call with a customer on 9 December 2021, para . 18. Minutes of call with a customer on 15 
December 2021, para 18.  
104  Form CO, footnote 137.  
105  Replies to question 35 of questionnaire Q2 to customers.  
106  Replies to question 35.1 of questionnaire Q2 to customers.  
107  Non-horizontal Merger Guidelines, paragraph 61.  
108  Reply to Request for Information 5 of 20 January 2022.  
109  Form CO, Table 28.  
 
 
20 (100)  Finally, a vast majority of c ompetitors replied that they expect that the Proposed 
Transaction will have no impact.110  
(101)  In view of the above, the Commission considers that Chevron will likely have no 
ability or incentive to foreclose access to customers of Group III base oils  post-
transaction.  
(C) Conclusion on input and customer foreclosure  
(102)  Based on the considerations above, the  Commission considers that the Proposed 
Transaction does not raise serious doubts as to its compatibility with the internal 
market and the EEA Agreement in relation to the vertical link between the market 
for Group III base oils and the market s for finished lubricants.  
5.2.3.  Group II Base oil (upstream) – finished lubricants (downstream)  
(103)  In the market for Group II base oils, the Parties’ market share is [30-40]%. 
Chevron’s EEA market shares in lubricants overall are [0-5]% and below 30% for 
automotive, industrial, marine and aviation lubricants . Chevron’s market shares also 
remain below 30% at national level under any plausible segmentation.  
5.2.3.1.  The Notifying Party’s view 
(104)  The Notifying Party claims no foreclosure concerns arise, given the very low market 
share and the presence of strong competitors in the downstream market . Moreover, 
Chevron  does not source the type of Group II base oils that the Target produces.111 
5.2.3.2.  The Commission’s assessment  
(A) Input foreclosure   
(105)  The Commission considers that Chevron post -transaction will not have the ability or 
incentive to engage in input foreclosure strategies for Group II base oils, for the 
reasons stated below.  
(106)  First, Chevron do es not have the ability  to foreclose access to Group II base oils, as 
this would require a significant degree of market power in the upstream market.112 
As outlined in  Section  5.1.2.2 , this is not the case. T he Parties’ combined Group II 
production capacity is moderate and strong competitors, notably market leader 
ExxonMobil , remain active in the upstream market for Group II base oils.  
(107)  Second, Chevron does not have the incentive  to foreclose access to Group II base 
oils. Chevron is already active in Group II base oils and the increment resulting from 
the Proposed Transaction is only [0-5]% (in terms of volume sold; and even smaller 
in te rms of production capacity) , so that its incentives are unlikely to change. 
Chevron currently only uses a third of its Group II base oil production for its own 
production of lubricants.113 Chevron also sources a third of its needs of Group II 
                                                 
110  Replies to question 35 of questionnaire Q1 to competitors.  
111  Form CO, paragraphs 228 et seq . 
112  Non-horizontal Merger Guidelines, paragraph 35.  
113  Form CO, Ta ble 18.  
 
 
21 base oils from third parties.114 This suggests that Chevron does not have an incentive 
to stop or significantly limit supply to third parties pre - or post -transaction.  
(108)  Third, although approvals do not play as strong a role as in Group III base oils, they 
also pose a signi ficant constraint to changing suppliers in Group II base oils (see 
paragraph (18)). Chevron will have to continue sourcing Group II base oils from its  
current suppliers , so that sufficient quantities of the Parties’ Group II output  will 
remain available for the sale to third parties.  
(109)  Fourth, current industry practice suggests that vertical integration does not have a 
significant impact on supply structu res. There is no evidence of exclusive internal 
sourcing in the industry, although many players in the industry are active in both 
base oils and lubricants. They could hence cover their needs internally, but continue 
to supply/source from third parties. Th e results of the market investigation indicate 
that a majority of customers source Group II base oil from two or more suppliers.115 
This indicates that vertically integrated companies do not have an incentive to cover 
their needs with internal production. Mo reover, several market participants also 
indicated that up - and downstream businesses tend to be operated with Chinese 
walls.116 The Parties confirmed that this is the case for Chevron.117 
(110)  Finally, in the market investigation, most customers consider that the Proposed 
Transaction will have no impact, followed by a considerable number of customers 
who expect a positive impact,118 including more investment and interest in base oil 
development, more competition and lower prices.119  
(111)  In view of the above, the Commission considers that Chevron will likely have no 
ability or incentive to foreclose access to Group II base oil post -transaction.  
(B) Customer foreclosure  
(112)  The Commission considers that Chevron post -transaction will also not have the 
ability or incentive to  engage in customer foreclosure strategies, for the reasons 
stated below.  
(113)  First, Chevron does not have the ability  to foreclose access for suppliers of Group II 
base oils to customers, as this would require a significant degree of market power in 
the downs tream market.120 In 2020, Chevron’s market share in finished lubricants in 
the EEA was [0-5]%, compared to [10-20]% held by each of Shell and 
Total Energies , and [10-20]% by each of BP and ExxonMobil.121 At global level, 
Chevron’s market share is only slightly higher  ([0-5]% in 2018 ).122 Chevron is 
therefore not a sufficiently important buyer to be able to prevent suppliers from 
selling  Group II base oils. Even in the hypothetical scenario in which  Chevron 
                                                 
114  Form CO, Table 19.  
115  Replies to question 19 of questionnaire Q2 to customers.  
116  Call with a customer on 9 December 2021, para. 18.  
117  Form CO, footnote 137.  
118  Replies to question 35 of questionnaire Q2 to customers.  
119  Replies to question 35.1 of questionnaire Q2 to customers.  
120  Non-horizontal Merger Guidelines, paragraph 61.  
121  Reply to Request for Information 5 of 20 January 2022.  
122  Form CO, Table 28.  
 
 
22 sourced exclusively from the Target  suppliers would still have access to customers 
representing more than [90-100]% of EEA and global demand respectively.  
(114)  Second, the Proposed Transaction does not change Chevron’s incentives  to 
foreclose, as the vertical relationship between Chevron’s upstream and downstream 
activities is pre -existing and the increment in the upstream market for Group II base 
oils is very small, as outlined in paragraph (107) .  
(115)  Third, as expl ained in paragraph (91), the Commission considers that the role of 
approvals in base oils would prevent Chevron from sourcing entirely from the 
Target. In order to maintain its lubricants sales, Chevron will have to continue 
buying from third party suppliers post -transaction.  
(116)  Fourth, as explained in paragraph (92), experience suggests that vertical integration 
has no significant impact on supply structures for base oil s. 
(117)  Finally, a vast majority of competitors replied that they expect that the Proposed 
Transaction will have no impact.123  
(118)  In view  of the above, the Commission considers that Chevron will likely have no 
ability or incentive to foreclose access to customers of Group II base oils post -
transaction.  
(C) Conclusion on input and customer foreclosure  
(119)  Based on the considerations above, the Commi ssion considers that the Proposed 
Transaction does not raise serious doubts as to its compatibility with the internal 
market and the EEA Agreement in relation to the vertical link between the market 
for Group II base oils and the market s for finished lubri cants.  
5.2.4.  Crude oil (upstream) – Group II  and Group II I base oils (downstream)  
5.2.4.1.  The Notifying Party’s view  
(120)  The Notifying Party claims that the merged entity has neither the ability nor the 
incentive for  foreclosure , given the very low market share in the upstr eam market 
([0-5]% on a global market in 2020) and low market shares in the downstream 
market .  
(121)  Although market shares on the downstream market exceed 30% under certain market 
definitions, no customer foreclosure concerns arise, as c rude oil suppliers would 
maintain sufficient alternative base oil manufacturers such as SK Lubricants ( [20-
30]%) and Repsol ( [10-20]%).124  
(122)  The Notifying Party also explains that the merged entity is unlikely to rely solely on 
crude oil supply from Chevron for technical reason s. In particular, b ase oil 
manufacturers generally look for specific crude oil properties to optimize their 
refinery operations , regardless whether produced internally or by third parties . 
                                                 
123  Replies to question 35 of questionnaire Q1 to competitors.  
124  Form CO, paragraphs 2 34 et seq.  
 
 
23 Therefore, integrated oil companies  generally  buy and sell crude oi l across the 
commodities markets.125 
5.2.4.2.  The Commission’s assessment  
(A) Input foreclosure   
(123)  The Commission considers that Chevron post -transaction will not have the ability or 
incentive to engage in input foreclosure strategies for crude oil, for the reasons stated 
below.  
(124)  First, Chevron do es not have the ability to foreclose access to crude oil, as this 
would require a significant degree of market power in the upstream market.126 
Chevron’s market share in the upstream market is very low, with [0-5]% on a global 
market in 2020 .127 In light of its very low market share upstream, the Commission 
also considers that Chevron  would also have no incentive to pursue an input 
foreclosure strategy  as it is unlikely to obtain higher profits downstream to 
compensate the potential loss es upstream from increasing prices or interrupting  
supply .  
(125)  Second, numerous strong competi tors, such as Saudi Aramco ( [10-20]%), Gazprom 
([5-10]% ) and the Nation al Iranian Oil Co. ( [5-10]%) remain active in the crude oil 
market post -transaction. Further competitors include CNPC ( [5-10]%), Rosneft ( [5-
10]%), ExxonMobil ( [0-5]%), BP, Shell, KPC , ADNOC, TotalEnergies (each with a 
share of [0-5]%), and several other large oil companies.128 Customers still have 
access to these alternative suppliers, so that Chev ron would not be able to foreclose 
access to crude oil.  
(126)  Finally, none of the participants in the market investigation mentioned any concerns 
related to input foreclosure for crude oil arising as a result of the Proposed 
Transaction.  
(127)  In view of the above, t he Commission considers that Chevron will likely have no 
ability or incentive to foreclose access to crude oil  post-transaction.  
(B) Customer foreclosure  
(128)  The Commission considers that Chevron post -transaction will also not have the 
ability or incentive to enga ge in customer foreclosure strategies, for the reasons 
stated below.  
(129)  First, Chevron does not have the ability , or incentive,  to foreclose access for 
suppliers of crude oil to customers, as this would require a significant degree of 
market power in the down stream market.129 As outlined in paragraph (60), Chevron 
had a market share of [30-40]% and the Target of [0-5]% in terms of volume sold in 
2020, resulting in a combined market share of [30-40]% for Group II base oil sales 
                                                 
125  Form CO, paragraph 238.  
126  Non-horizontal Merger Guidelines, paragraph 35.  
127  Form CO, Table 29.  
128  Form CO, Table 29.  
129  Non-horizontal Merger Guidelines, paragraph 61.  
 
 
24 in the EEA. As for Group III base oils, the Target’s market share only slightly 
exceeds 30% (see paragraph (70)) in terms of EEA production capacity . Therefore, 
even in the hypothetical scenario that Chevron post -transaction stopped sourcing 
crude oil from third parties, these suppliers would still have access to customers 
representing at least [60-70]% of the demand for Group II base oil and 
approximately [70-80]% of the demand for Group III base oils at EEA level. At 
global level, competitors have access to an even larger share of the downstr eam 
market, as the Parties’ market shares at global level remain below 30% for each of 
Group II and Group III base oils.  
(130)  Finally, none of the participants in the market investigation mentioned any concerns 
related to customer foreclosure for crude oil aris ing as a result of the Proposed 
Transaction.  
(131)  In view of the above, the Commission considers that Chevron will likely have no 
ability  or incentive  to foreclose access to customers of crude oil  post-transaction.  
(C) Conclusion on input and customer foreclosure  
(132)  Based on the considerations above, the Commission considers that the Proposed 
Transaction does not raise serious doubts as to its compatibility with the internal 
market and the EEA Agreement in relation to the vertical link between the market 
for crude oil and the markets for base oils.  
5.3. Conglomerate effects  
5.3.1.  Legal framework  
(133)  Pursuant to the Non -Horizontal Merger Guidelines, in most circumstances, 
conglomerate mergers do not lead to any competition problems.130 However, 
foreclosure effects may arise in conglomerate mergers when the combination of 
products in related markets may confer on the merged entity  the ability and incentive 
to leverage a strong market position from one market to another closely related 
market by means of tying or bundling or other exclusionary practices. 131  
(134)  The Non -Horizontal Merger Guidelines distinguish between bundling, which usually 
refers to the way products are offered and priced by the merged entity  and tying, 
usually referring to s ituations where customers that purchase one good (the tying 
good) are required to also purchase another good from the producer (the tied good). 
132  
(135)  Within bundling practices, a distinction is also made between pure bundling and 
mixed bundling.133 In the case of pure bundling, the products are only sold jointly in 
fixed proportions. With mixed bundling, the products are also available separately, 
but the sum of the stand -alone prices is higher than the bundled price. 134 Tying can 
take place on a technical or con tractual basis. For instance, technical tying occurs 
                                                 
130  Non-Horizontal Merger Guidelines, paragraph 92.   
131  Non-horizontal Merger Guidelines, paragraph 93.   
132  Non-horizontal Merger Guidelines, paragraph 95 et seq .   
133  Non-horizontal Merger Guidelines, paragraph 95.   
134  Non-horizontal Merger Guidelines, paragraph 96.   
 
 
25 when the tying product is designed in such a way that it only works with the tied 
product (and not with the alternatives offered by competitors).135  
(136)  While tying and bundling have often no anticompetitive consequences, in certain 
circumstances such practices may lead to a reduction in actual or potential 
competitors’ ability or incentive to compete. This may reduce the competitive 
pressure on the merged entity  allowing it to increase prices or deteriorate s upply 
conditions in other ways.136   
(137)  In assessing the likelihood of such a scenario of conglomerate effects, the 
Commission examines, first, whether the merged firm would have the ability to 
foreclose its rivals, second, whether it would have the economic in centive to do so 
and, third, whether a foreclosure strategy would have a significant detrimental effect 
on competition, thus causing harm to consumers. In practice, these factors are often 
examined together as they are closely intertwined.137  
5.3.2.  Group II and Group III base oils  
(138)  Chevron is active in Group II base oils and , post-transaction, in Group III base oils. 
Both products are in principle purchased by the same customers, namely lubricant 
blenders.  
(139)  Based on the concerns expressed by a market participant, t he Commission has 
assessed a potential competition concern whereby Chevron would leverage its 
position in either Group II or Group III base oils into the other market and thereby 
foreclose competitors, causing harm to consumers.  
(140)  The Commission has assessed  in particular the ability and the incentive of Chevron 
to engage in (i) technical tying, (ii) contractual tying/pure bundling (imposing the 
joint purchase of both Group II and Group III base oils) and (iii) mixed bundling 
(incentivising the joint purchase  of both Group II and Group III base oils).  
5.3.2.1.  The Notifying Party’s view  
(141)  The Notifying Party argues  that its limited Group II capacity share ( [10-20]% 
globally) speaks against any potential foreclosure effects in the event of bundled 
sales of Group II and Gr oup III. In any event, several of Chevron’s competitors such 
as Shell, SK Lubricants and Saudi Aramco can match Chevron Group II and Group 
III product offering following the Proposed Transaction.138 
(142)  Moreover, companies such as Saudi Aramco, ExxonMobil, SK Lu bricants, Repsol, 
Sinopec, Petro -Canada and ADNOC already have the ability to offer both Group II 
and Group III and are not known to bundle their products.139  
(143)  Chevron does not expect that engaging in such practices would enable them to 
obtain a premium, but  rather that customers would switch to alternative suppliers.140 
                                                 
135  Non-horizontal Merger Guidelines, paragraph 97.   
136  Non-horizontal Merger Guidelines, paragraph 92 -93.   
137  Non-horizontal Merger Guidelines, paragraph 94.   
138 Form CO, paragraph 214.  
139  Form CO, paragraph 217.  
 
 
26 5.3.2.2.  The Commission’s assessment  
(144)  The Commission considers that Chevron will not have the ability or incentive to 
foreclose competitors in the markets for Group II or Group III base oils by engaging 
in tying or bundling for the following reasons.  
(145)  First, Chevron does not have the ability  to foreclose access to customers by engaging 
in tying or bundling of Group II and Group III base oils, as this would require a 
significant degree of market power in one of these markets .141 Post-transaction, 
Chevron will neither have a significant degree of market power in Group II (see 
section 5.1.2.2 ) nor in Grou p III base oils (see section 5.1.3.2 ). 
(146)  Second, in the short to medium term, customers are bound to certain suppliers that 
have approvals for the resp ective lubricants they produce. They are therefore likely 
to  base  their choice of a bundled offer  primarily on existing OEM approvals of base 
oils (see paragraph (18)) and not purely on price. Not all customers would therefore 
be willing to buy a bundle from Chevron. In consequence, foreclosure attempts via 
any type of bundling would be unsuccessful. The results of the market investigation 
support this  view: only a small minority of customers indicated that they would 
choose a supplier who offers a discount and purchase both Gr oup II and III base oils 
from them.142 Many respondents explained that their choice would depend  on a 
number of factors, notably including OEM approvals.143  
(147)  Third, as explained in paragraph 103 of the Non-horizontal Merger Guidelines , 
ability to foreclose is unlikely to exist if counterstrategies by rivals exist. Indeed, 
competitors could employ a counter -strategy.  In the market investigation, a 
competitor replied that it could offer a bundle as well, whereas another competitor 
suggest ed it could lower its price.144  
(148)  Fourth, Chevron does not have the incentive  to foreclose competitors by offering a 
tied or b undled product. As indicated in paragraph (146) , many customers are not 
interested in a bundle, so Chevron would risk losing these customers. The mark et 
investigation also showed that, g enerally , competitors do not see bundling strat egies 
as a profitable .145 The current practice seems to confirm this: a majority of customers 
do not buy Group II and Group III base oils in a bundle and a majority of 
competi tors do not offer such a bundle.146  
(149)  In view of the above, the Commission considers that Chevron will likely have no 
ability or incentive to foreclose access to customers of Group II or Group III base 
oils post -transaction  by offering  Group II and Group III base oils in a bundle.  
(150)  Based on the considerations above, the Commission considers that the Proposed 
Transaction does not raise serious doubts as to its compatibility with the internal 
                                                                                                                                                      
140  Form CO, paragraph 222.  
141  Non-horizontal  Merger Guidelines, paragraph 99.  
142  Replies to question 31 of questionnaire Q2 to customers.  
143  Replies to question 31.1 of questionnaire Q2 to customers.  
144  Replies to question 32 of questionnaire Q1 to competitors.  
145  Replies to question 32 of questionn aire Q1 to competitors.  
146  Replies to question 31 of questionnaire Q2 to customers and replies to question 31 of questionnaire Q1 to 
competitors.  
 
 
27 market and the EEA Agreement in relation to the  market for Group II and Group III 
for base oils.  
5.3.3.  Base oils and additives  
(151)  Chevron is active in base oils and additives. Both products are in principle purchased 
by the same customers, namely lubricant blenders.  
(152)  Based on the concerns expressed by a market p articipant, the Commission has 
assessed a potential competition concern whereby Chevron would leverage its 
position in either Group II or Group III base oils into the market for additives and 
thereby foreclose competitors, causing harm to consumers.  
(153)  The Co mmission has assessed in particular the ability and the incentive of Chevron 
to engage in (i) technical tying, (ii) contractual tying/pure bundling (imposing the 
joint purchase of base oils and additives) and (iii) mixed bundling (incentivising the 
joint p urchase of base oils and additives).  
5.3.3.1.  The Notifying Party’s view  
(154)  The Notifying Party considers that Chevron post -transaction  will not have the ability 
to foreclose access to customers or inputs, as their market shares are modest and 
strong competitors remai n active across the entire value chain.147  
(155)  The Notifying Party argues  that it will also not have an incentive to engage in 
bundling, as additive suppliers typically qualify their products with multiple base oil 
suppliers, as end customers value the supply security this offers. If Chevron would 
limit its additives sales to bundles with its own base oil, end customers are likely to 
look for alternatives to ensure security of supply.148 Blenders do not generally buy 
additives and base oils as a bundle.149  
(156)  Moreove r, the Notifying Party submits that Chevron’s additives business operates on 
an arms -length basis and with strict information firewalls between Chevron’s base 
oils, finished lubricants and lubricant additives businesses. Therefore, Chevron 
cannot use any s ensitive information outside of the receiving business unit for 
purposes of bundling/tying.150 
5.3.3.2.  The Commission’s assessment  
(157)  The Commission considers that Chevron will not have the ability or incentive to 
foreclose competitors in the markets for base oils and additives by engaging in tying 
or bundling for the following reasons.  
(158)  First, Chevron does not have the ability  to foreclose access to customers by engaging 
in tying or bundling of base oils and additives, as this would require a significant 
degree of marke t power in one of these markets.151 Post-transaction, Chevron will 
                                                 
147  Form CO, paragraph 223 et seq . 
148  Form CO, paragraph 227.  
149  Form CO, paragraph 223.  
150  Form CO, paragraph 233. 
151  Non-horizontal Merger Guidelines, paragraph 99.  
 
 
28 neither have a significant degree of market power in Group II (see section 5.1.2 ) nor 
in Group III base oils (see section 5.1.3 ). Chevron’s  market share in additives was 
[10-20]% at global level in 2020, behind market leader Lubrizol with [20-30]% and 
Infineum with [20-30]%.152  
(159)  Second, in the short to medium term, customers are bound to certain suppliers that 
have approvals for the respective lubricants they produce. They are therefore likely 
to  base their choice of a bundled offer primarily on existing OEM approvals of base 
oils (see paragraph (18)) and not purely on price . Not all customers would therefore 
be willing to buy a bundle from Chevron. In consequence, foreclosure attempts via 
any type of bundling would be unsuccessful. The results of the market investigation 
support this view: many respondents explained that their choice would depend on a 
number of factors, including OEM approvals.153  
(160)  Third, even if a bundle of Chevron’s additives and base oils is successful on the 
market, customers are unlikely to source exclusively from Chevron, but to continue 
to multi-source from dif ferent suppliers.  In the market investigation, a majority of 
respondents replied that they multi -source additives from more than four 
suppliers.154 Some respondents suggested that even in case they decided to purchase 
a bundle of base oi ls and additives from Chevron , they would not rely exclusively on 
Chevron, but would continue to multi -source.155  
(161)  Fourth , as explained in paragraph 103 of the Non-horizontal Merger Guidelines , 
ability to foreclose is unlikely to exist if counterstrategies b y rivals exist. In the 
market investigation, a competitor replied that it could offer a bundle as well, 
whereas two competitors suggested they could lower their prices.156 Notably, the 
market leaders in Group II and Group III base oils, as well as in additiv es, remain 
active post-transaction . According to the Non-horizontal Merger Guidelines , 
competition is unlikely to deteriorate following a conglomerate concentration if there 
remain effective single -product players in either market.157 
(162)  Finally , Chevron does n ot have the incentive  to foreclose competitors by offering a 
tied or bundled product. As indicated in paragraph (146) , many customers are not 
interest ed in a bundle, so Chevron would risk losing these customers. The market 
investigation also showed that, generally, competitors do not seems to see bundling 
strategies a s a profitable strategy .158 The current practice seems to confirm this: a 
vast majority of customers do not buy base oils and additives in a bundle and none of 
the competitors currently  offer such a bundle.159 Chevron is already active in Group 
II base oils and additives, but the  respective  business units operate with Chinese 
walls, as the Parties and several market participants confirmed.160 
                                                 
152  Form CO, Table 27.  
153  Replies to question 34.1 of questionnaire Q2 to customers.  
154  Replies to question 21 of questionnaire Q2 to customers.  
155  Replies to question 34.1 of questionnaire Q2 to customers.  
156  Replies to question 34 of questionnaire Q1 to competitors.  
157  Non-horizontal Merger Guidelines, paragraph 113.  
158  Replies to question 34 of questionnaire Q1 to competitors.  
159  Replies to question 33 of questionnaire Q2 to customers and replie s to question 33 of questionnaire Q1 to 
competitors.  
160  Form CO, footnote 137.  
 
 
29 (163)  In view of the above, the Commission considers that Chevron will likely have no 
ability or incentive to foreclose access to customers of base oils and additives post-
transaction by offering base oils and additives in a bundle.  
(164)  Based on the considerations above, the Commission considers that the Proposed 
Transaction does not raise serious doubts as to its compatibility with the internal 
market and the  EEA Agreement in relation to the market for additives and base oils.  
6. CONCLUSION  
(165)  For the above reasons, the European Commission has decided not to oppose the 
notified operation and to declare it compatible with the internal market and with the 
EEA Agreemen t. 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  
Executive Vice -President