Brussels, 06.06.2006

SG-Greffe(2005) D/202936

To the notifying party

Dear Sir/Madam,

Subject: Case No COMP/M.4141 - Linde/BOC

Notification of 6 April 2006 pursuant to Article 4 of Council Regulation No 139/2004

1. On 06/04/2006, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 [1] (“the Merger Regulation”) by which the undertaking Linde AG (“Linde”, Germany) acquires within the meaning of Article 3(1)(b) of the Council Regulation control of the whole of the undertaking The BOC Group plc (“BOC”, United Kingdom) by way of purchase of shares.

2. On 27 April 2006 the Polish Office of Competition and Consumer Protection (OCCP) has submitted a request for referral pursuant to Art. 9(2)a of the Merger Regulation as a result of which the deadline of the first phase was extended to 6 June 2006. The OCCP took the position that the concentration threatens to significantly affect competition on a number of national markets in Poland, in particular the bulk and cylinder supply of various industrial gases, helium retail supply as well as the supply of calibration mixtures and refrigerants. By letter dated 18 May 2006, the OCCP withdrew its request for referral against the background of remedies which had been submitted by the parties meanwhile and which completely removed the OCCP’s concerns.

3. On 11 May 2006, the parties to the concentration submitted undertakings. The proposed commitments were designed to eliminate the serious doubts identified by the Commission, in accordance with Article 6(2) of the Merger Regulation. After examination of the notification and in the light of these undertakings, the Commission has concluded that the operation falls within the scope of the Merger Regulation and does not raise serious doubts as to its compatibility with the common market and the EEA agreement.

I. THE PARTIES

4. Both Linde and BOC offer a broad range of gases worldwide to customers in a wide variety of different industries. The gases cover standard industrial gases, such as oxygen, nitrogen and argon; medical gases, such as oxygen for medical use and nitrous oxide; specialty gases, such as various refrigerants and calibration mixtures, and helium. Linde is moreover active in the industrial gases plant construction business and the manufacturing of forklift trucks and warehouse equipment. BOC has furthermore some activities in the logistics sector.

5. Linde is a publicly-listed company whose shares are traded on all German stock exchanges (Berlin, Düsseldorf, Frankfurt (Main), Hamburg, Munich, Stuttgart), as well as on the SWX in Zurich. No shareholder has direct or indirect control over Linde. BOC is a public limited company registered in England. BOC is the parent company of the BOC group of companies and is not controlled by any other company or person.

II. THE CONCENTRATION

6. Linde intends to acquire 100% of BOC’s shares. On 6 March 2006, the parties formally announced that they have reached agreement on the terms of a recommended cash acquisition by Linde of the entire issued share capital of BOC to be implemented by means of a court-approved scheme of arrangement under section 425 of the UK Companies Act 1985.

7. Linde will therefore acquire sole control of BOC. The notified transaction consequently constitutes a concentration within the meaning of Art. 3(1)(b) of the Merger Regulation.

III. COMMUNITY DIMENSION

8. Linde and BOC have a combined aggregate worldwide turnover of more than EUR 5,000 million (EUR 9,501.5 million for Linde in 2005 and EUR [6.5-7.5] billion for BOC in 2005). The aggregate Community wide turnover of each party exceeds EUR 250 million (EUR […] million for Linde in 2005 and EUR […] million for BOC in 2005). They do not achieve more than two-thirds of their turnover in one and the same Member State. The notified operation therefore has a Community dimension.

IV. COMPETITIVE ASSESSMENT

9. The businesses of Linde and BOC overlap in the production and distribution of industrial, medical and specialty gases. Linde is moreover active in the engineering and the construction of plants for the production of industrial gases.

A. Relevant product markets

1. Description

Industrial gases

10. Industrial gases comprise all the gases and mixtures of gases provided by gas suppliers for various industry and research applications. The most commonly used industrial gases are oxygen, nitrogen, hydrogen, argon, carbon dioxide, acetylene, carbon monoxide and helium as well as mixtures thereof, such as the so-called syngas, which is a mixture of hydrogen and carbon monoxide.

11. Industrial gases can be obtained from the air (atmospheric gases) and from synthetic processes or natural sources (non-atmospheric gases). Atmospheric gases are extracted from the air mainly by using cryogenic air separation technology. Air is composed of 20.95% oxygen, 78.09% nitrogen, 0.93% argon and 0.03% of other noble gases such as neon, krypton or xenon. Acetylene and hydrogen are produced by chemical processes. Carbon monoxide is produced in combination with hydrogen, by reforming hydrocarbons, generally natural gas. Carbon dioxide comes from natural sources or occurs as a by-product of other chemical processes. Helium is extracted from natural sources (natural gas).

12. The following table summarises the main uses of oxygen, nitrogen, argon, hydrogen, carbon dioxide, acetylene, carbon monoxide and helium.

Gas | Used in the following industries |

Oxygen | Metallurgy (steel production), chemicals, metalworking (cutting and welding), paper (bleaching), glass (melting), electronics, waste water purification, fish farming |

Nitrogen | Electronics, chemicals, food (improving shelf life by protecting from oxygen and cryogenic freezing), metalworking (pressing of aluminium parts), building (soil freezing, cooling for the setting of concrete, shielding of prestressing steels against oxidation) |

Argon | Metallurgy (steel production), metalworking (shielding of weld seams against oxidation), electronics (shielding of semiconductors against impurities), inflation of air bags |

Hydrogen | Chemicals (purification), food (edible oil production), glass (grinding) |

Carbon Monoxide | Environmental monitoring systems, industrial hygiene gas mixtures, semiconductor fabrication, manufacturing of metal carbonyls, polycarbonate, polyurethane and oxy-alcohol. |

Carbon dioxide | Metalworking (shielding of weld seams against oxidation), steel production, chemicals, drinks manufacturing, food (cryogenic freezing), dry ice, waste water purification (neutralisation of alkaline wastes) |

Acetylene | Metalworking (cutting and welding), glass (lubrication of moulds) |

Helium | Aerospace, lifting gas for balloons, health care |

Medical gases

13. Some gases used for industrial purposes are also used for medical applications. These gases are mainly oxygen, nitrogen, carbon dioxide and nitrous oxide (N2O). The market investigation shows that the demand-side substitutability with so-called industrial gases is limited since the customers concerned, for instance hospitals, can use only the gases that have the label “medical”, which ensures the quality and traceability of the gases used.

14. The parties submit that there is a high supply-side substitutability since medical gases, be they in bulk or in cylinders are produced in the same plants and from the same sources as industrial gases. According to the parties, the only difference between them is that medical gases undergo certain regulatory requirements with regard to filling, testing and labelling, e.g., for product recall purposes as well as procedures and analysis proving that they comply with the regulatory level of quality.

15. In any case, the question as to whether the medical gases constitute a distinct market can be left open for the purposes of the present decision since the competitive assessment does not differ depending on the definition retained.

Specialty gases

16. A large number of different gases and gas mixtures are generally referred to as “specialty” gases. Even though there is no clear definition of specialty gases, this group comprises all gases which are not considered to be “industrial gases”. Specialty gases and specialty gas mixtures can be distinguished from standard industrial gases on the basis of price, quantities sold, application or method of supply. Moreover, specialty gases are generally produced through specific chemical processes as opposed, for example, to atmospheric gases, which are obtained from the air. They are usually sold in much smaller quantities (and mainly supplied in cylinders) and at significantly higher prices than standard industrial gases.

17. Specialty gases comprise a large number of gases and gas mixtures. Gases companies may be active in different ways in the supply chain for specialty gases, i.e. in generating the gas, in purification of purchased low-grade gas, in transfilling of purchased high-grade gas or in mere trading.

18. The parties identified five main groups of specialty gases which capture the different specialty gases available on the market: (i) refrigeration gases, (ii) electronic specialty gases, (iii) noble gases and noble gas mixtures, (iv) gaseous chemicals (“chemicals”) and (v) calibration and other gas mixtures. All five groups of specialty gases comprise various individual gases and gas mixtures and the proposed segmentation was introduced in order to facilitate the competition analysis in this case and does not correspond to the respective relevant product markets

19. The following table summarizes the main uses of the five groups of specialty gases

Gas group | Examples of gases contained in the respective group | Main applications |

Noble gases and noble gas mixtures | Krypton, neon, radon, xenon and mixtures | Production of light bulbs (lighting industry), production of excimer lasers (electronics industry) |

ESGs | AsH3, BF 3, C2F6, HCl, HBr, SF6, Halocarbon 23, Chlorine, Nitrous Oxide, Silicone Tetrafluoride | used in the semiconductor industry for various specific applications |

Refrigerants | R 404 A, R 134a, R22, R 407 C, R 410, Hydrocarbon Refrigerants | Cooling agents |

Chemicals | Ethylene (C2H4), Ammonia (NH3), Ethylene Oxide [2] (C2H40), Sulfur Hexafluoride (SF6), Carbon monoxide (CO), Sulphur Dioxide | Various applications in the chemical, biochemical and manufacturing industry |

Calibration gas mixtures | Environmental mixtures, special application mixtures, other calibration mixtures | Calibration of instruments and other special applications |

2. Distinct relevant markets per gas

20. In its previous decisions in the cases M.1641 - Linde/AGA, M.1630 - Air Liquide/BOC and M.3314 Air Liquide/Messer, the Commission took the view that the different individual industrial, medical and specialty gases are generally not interchangeable because of their different chemical and physical properties and therefore each gas constitutes a separate relevant product market.

21. The parties agree with this market definition [3] and this view has been largely confirmed by the market investigation in this case [4]. Already in the Air Liquide/Messer case it was found that customers generally do not consider substitution to be a realistic option. In practice, price differences and the degree of integration of a particular gas with the customers’ specific application processes largely exclude substitution between gases.

22. From the supply-side point of view, and with respect to atmospheric gases, the production capacity of a plant [5] is normally given in tons per day of oxygen and nitrogen that the plant can produce. Although there may be some flexibility, the proportions of the different atmospheric gases produced are determined (the separation of oxygen implies necessarily the separation of nitrogen) and therefore the possibility of supply-side substitution is limited. The same holds true with respect to the other industrial non-atmospheric gases such as hydrogen, carbon monoxide, carbon dioxide or acetylene, which are produced with different processes and from different sources.

23. In line with its previous decisions [6] and on the basis of its investigations in the present case [7], the Commission takes the view that there is no general interchangeability between the various industrial and specialty gases either from the demand or from the supply side and therefore, for the purposes of this decision, the individual gases constitute separate product markets.

3. Distinct relevant markets according to the forms of supply

24. Industrial, medical and specialty gases are supplied in different forms (gaseous or liquid) and via different distribution channels (tonnage, bulk and cylinders). The distribution in tonnage and cylinders is generally made in gaseous form while bulk distribution generally means supply in liquid form [8].

25. Tonnage distribution most commonly concerns oxygen, nitrogen and hydrogen, but also carbon monoxide, i.e., gases that are required in high volumes. The two industrial gases that are most commonly supplied in bulk are liquid nitrogen and liquid oxygen. Argon, carbon dioxide and hydrogen can also be delivered in liquid form as well as some specialty gases. Bulk quantities of hydrogen are delivered both in liquid form and in gaseous form (in trailers). All industrial, medical and specialty gases can be delivered in cylinders (the most common volume for a cylinder is 50 litres). Acetylene and nitrous oxide are only delivered in cylinders.

3.1 Tonnage

26. Tonnage sales relate to the delivery of large quantities exceeding 100 tpd. The gases are supplied to customers in gaseous form through pipelines or from dedicated plants that are located on-site or nearby the customer’s production facility. Customers are mainly industrial users (for instance in the petrochemical/chemical, steel, refining and glass industries). For such customers, the gases are an essential element of their production process and they value foremost the reliability of supply.

27. While the atmospheric gases oxygen, nitrogen and argon are produced in so-called Air Separation Units (ASUs), fundamentally different technology is used for hydrogen and carbon monoxide, which are not produced from air but from raw materials, such as natural gas, propane and naphtha in so-called HCS plants.

28. The industrial gas supplier normally owns the on-site plants, operates them on the basis of a long-term contract (up to 15 years) and provides on-going maintenance and support. In geographical areas where the density of customers makes it economically viable to link air separation units to each other, a pipeline network may be built. Each gas is delivered through a specific pipe. In such a case, gases delivered by an incumbent pipeline benefit from a cost and reliability advantage as compared to on-site plants since they profit from synergies in terms of back-up supply provided by different plants connected to the pipeline and from larger sizes of the plants which supply several customers.

29. According to the Commission’s findings in its decisions in the cases M.1641 - Linde/AGA, M.1630 - Air Liquide/BOC and M.3314 Air Liquide/Messer, these two methods of supply – on-site plants and pipeline supply - compete with each other and are without alternative for volumes greater than 100 tons per day (tpd). Even though confirming the advantages of pipeline supply, the market investigation in this case has not shown indications which would justify a different view [9].

3.2 Bulk

30. Bulk mainly covers the supply of gases in liquid form to customers, whose demand is between 20 to 100 tpd. Gases delivered in gaseous form from either stand-alone ASUs (which are exclusively dedicated to the production of gases to be distributed in bulk) or tonnage plants (so-called “piggy-back plants”) are liquefied in liquefaction plants. The liquefied gases are transported by road or rail tanker from the supplier’s plant to the site of the customer. On the customer’s premises, the gases are stored, before being used in liquid form or transformed again into gaseous form. Each gas is transported and stored separately in specific dedicated equipment.

31. In its previous decisions, the Commission has found that small on-site air separation plants, which are used to satisfy the customer’s demand for gas in a range that could also be supplied in bulk, should be regarded as being part of the bulk market. These findings have been confirmed by the market investigation in the present case [10].

3.3 Cylinders

32. Cylinders are used when the quantities requested by the customers are small, ranging from 1 m3/month to 1 000 m3/month. Cylinders may be filled at, and distributed from, the suppliers’ production plant or, alternatively, liquid gases may be transported in tankers (bulk supplies) to cylinder filling centres in order to be transformed into compressed gas. From there, they are transported either directly to the customer or to depots (also called “hubs”), from which the supply to retail customers is carried out.

3.4 Conclusion of the forms of supply

33. In line with the Commission’s findings in its decisions in the cases M.1641 - Linde/AGA, M.1630 - Air Liquide/BOC and M.3314 Air Liquide/Messer, the three methods of supply - tonnage, bulk and cylinders – constitute separate relevant product markets. This market definition has been confirmed by the present market investigation. Therefore, for the purposes of this decision, each of the three ways in which a gas can be distributed constitutes a separate relevant product market.

4. Distinct market levels for helium

34. Helium takes a particular position in the range of the different gases. It is supplied on a wholesale and on a retail level. It is sourced and produced in various places all over the world and is transported by wholesalers from the respective production site either to own transfill centres or to the transfill centres of other retailers in the areas of consumption. Wholesale helium is transported in liquid form in special low temperature containers (“cryogenic containers”).

35. The supply of end-customers is made from the transfill centres either by helium wholesalers who are vertically integrated into the retail level or by independent retailers who buy helium on the wholesale market. At a transfill centre the liquid helium is removed from the cryogenic container and either transferred into small containers specifically used for helium, so-called cryogenic “dewars” for liquid deliveries to end-users or into high-pressure cylinders or tube trailers for supplies in compressed gaseous form. Retail sales in liquid and gaseous form are made in various quantities. Dewars for liquid supplies may have capacities of 30, 50, 60, 100, 250, 450 or 1000 litres. High-pressure cylinders may have a helium content of 0.9, 1.8. 3.6, 5.6, 9.1, 10.9 (bundle) m³, while tube trailers can have a capacity of as high as 3,700 m³.

36. In previous decisions, the Commission has distinguished between a helium wholesale market and a helium retail market. This view is confirmed by the fact that on these two levels a different circle of customers exists, as well as different contractual conditions and prices to which much higher quantities are sold.

37. So far, no distinction has been made by the Commission between the different supply forms on retail level, i.e. dewars (liquid helium), cylinders and tube trailers (both gaseous helium). Customers’ needs clearly differ with respect to the different supply forms. Customers of liquid helium almost exclusively use helium because of its unique low temperature (-269°C), which is required for high-field magnets needed for Magnetic Resonance Image (“MRI”) applications. Customers of gaseous helium mainly use helium due to its inertness (e.g., welding shield gas, carrier gas), its light molecular weight (party balloons, dirigibles), its high thermal productivity (optical fiber manufacturing) its low boiling point (purging rocket engines) or the small size of a helium molecule (leak detection). Moreover, due to the highly different quantities supplied with cylinders and tube trailers, exchangeability of these two forms of gaseous supply is very limited.

38. However, supply-side substitutability is comparably large. Unlike industrial gases, helium supplies to the end-customers are regularly made from a transfill centre. In the case of industrial gases, bulk is supplied directly from the production site to the end-customer or is transported to the filling centres in order to be transferred into cylinders. A company active in industrial gases bulk supplies is therefore not automatically able to also supply industrial gases in cylinders if it does not own the necessary filling centres.

39. In the case of helium, all retail supplies in dewars, cylinders and tube trailers are made via the transfill centre where the large cryogenic containers arrive from the helium sources worldwide. While there are no helium retailers that only supply liquid product, there are some niche players that only supply gaseous helium from their filling centres. However, the helium transfill centers of all major helium retailers are used for both vaporizing, compressing and filling helium into tube trailers and cylinders for gaseous supplies and the “re-packaging” of liquid helium into dewars for liquid supplies. Consequently, most companies active on the helium retail level have transfill centres which allow filling helium into any vessel required by the customer.

40. While the customers are not able to switch to a large extent between the different supply forms and clearly represent different market segments, there appears to be a sufficient degree of supply-side substitutability which does not support a further subdivision of the retail market. It can, however, be left open whether cylinder, dewar and tube trailer supplies constitute separate markets since the market analysis does not change under either market definition.

5. Sale of plants

41. The Commission has indicated in its decision M.1630 Air Liquide/BOC that the tonnage supply of industrial gases on the basis of long-term contracts needs to be distinguished from the sale of plants to other gas companies or to industrial customers that operate the plant on their own [11]. This view is also reflected in the decision M.3314 Air Liquide/Messer. Due to the differences in technology and the differing circle of suppliers, it appears appropriate to distinguish between the market for the sale of ASUs and the one for sales of HCS plants. However, the exact market definition can be left open, since the competition analysis does not change under either alternative market definition.

6. Conclusion

42. The Commission therefore considers that the following relevant product markets per individual gas have to be distinguished for the purpose of this decision:

- tonnage supplies of oxygen, nitrogen, hydrogen and carbon monoxide

- bulk supplies of industrial and (if applicable) medical oxygen, nitrogen, argon, carbon dioxide, hydrogen

- cylinder supplies of industrial and (if applicable) medical oxygen, nitrogen, argon, carbon dioxide, hydrogen, acetylene, nitrous oxide as well as all affected individual specialty gases (from the group of noble gases and mixtures: krypton, inert noble gas mixtures, and brominated compound gas mixtures; ESGs including AsH3, BF 3, C2F6, HCl, HBr, SF6, Halocarbon 23, Chlorine, Nitrous Oxide, Silicone Tetrafluoride; refrigerants; R 404 A, R 134a, R22, R 407 C, R 410, Hydrocarbon Refrigerants; for chemicals: SF6, C2H4, NH3, CO, Sulphur Dioxide and Ethylene Oxide and calibration gas mixtures including environmental gas mixtures, other calibration gases and special application mixtures)

- helium wholesale supply

- helium retail supply

43. It can be left open whether the sale of ASUs and the sale of HCS plants for the production of industrial and medical gases constitute two separate markets.

44. It should be noted that some markets may be inter-related since a large part of bulk industrial gases are produced from tonnage plants (via so-called piggy-back plants) and the industrial gases filled in the cylinders are derived from bulk.

B. Relevant geographic markets

1. Tonnage

45. In its previous decisions [12], the Commission reached the conclusion that the markets for tonnage were EEA-wide in scope. In the most recent case dealing with this industry M.3314 Air Liquide / Messer, the Commission rejected a market definition wider than the EEA and even found elements that pointed towards the existence of national markets. Moreover, in that case the question was raised whether the Eastern European countries which were at that time in the accession process, exhibited already sufficiently similar competitive conditions as the Member States in order to be included into the EEA-wide market. The parties agree in principle with the Commission’s previous findings but stress the national aspects of the tonnage markets. In the present case, the Commission follows the results of the Air Liquide/Messer investigation and assumes an EEA-wide market which however shows important regional aspects. [13]

2. Bulk and cylinder gases (Industrial gases / Medical gases)

46. The Commission has defined in previous decisions [14] the markets for bulk and cylinder supply of industrial gases as national, and the parties consider that this definition is still appropriate.

47. With respect to the bulk markets, transport costs (estimated by the parties in [10-20]% of the selling price) depend on the distance between the production plant and the customer as well as on other factors such as the number of customers served per transport. Thus, bulk gases can be transported economically only within a limited area. Bulk oxygen, nitrogen and carbon dioxide can be distributed economically over distances of approximately 200 km from the production plant. Bulk hydrogen and argon are more expensive products and can profitably be distributed over longer distances up to 300 km – 400 km for hydrogen and up to 800 km for argon. Despite the fact that in many instances the above mentioned shipping distances do not cover an entire Member State, the overlapping catchment areas of the various production plants and the existence of swap agreements between suppliers to reduce transportation costs makes competition in the bulk and cylinder markets for standard industrial gases to take place at the national level.

48. This conclusion is also confirmed by the data submitted by the notifying party on average sales prices for typical bulk customers in various EEA countries, which indicate that price levels in Europe differ across countries.

49. Regarding the cylinders markets, the parties state that the maximum shipping distances of cylinders are mainly determined by the ratio between production costs and end-customer prices. Given the significant transportation costs compared to the relatively small quantities supplied in cylinders, it does not normally make economic sense to ship cylinder standard industrial gases over long distances. In addition, cylinder customers often attach significance to a supplier being located in their relative proximity.

50. However, as with bulk supplies, the Commission found in previous decisions [15] that due to the overlapping catchment areas of the cylinder filling centres and the existence of swap agreements between suppliers to reduce transportation costs, competition in the cylinder markets takes place also at national level.

51. The notifying party has also in this case submitted average sales prices for typical cylinder customers in various EEA countries which confirm that price levels in Europe may differ across countries.

52. The market investigation has confirmed the above statements, and therefore, for the purposes of this decision, the bulk and cylinders markets are considered as national markets. [16]

3. Helium

3.1 Overview

53. Helium is extracted, refined and liquefied at a limited number of sites worldwide which are located in the United States, Algeria, Qatar, Poland and Russia. It is a by-product of the production of natural gas and the production of liquid natural gas (“LNG”). While the “historic” sources in the US, Poland and Russia are connected to natural gas production facilities, the newer helium sources in Algeria and Qatar typically extract helium in the process of producing LNG. [17]

54. So far, there are only 14 sources in the world where the right conditions exist to justify helium recovery. Helium extraction facilities are located close to the sources of natural gas that are suitable for the extraction of helium. In the natural gas / LNG production process, helium producers receive crude helium which is then refined and purified to generate pure helium (in the following “refined helium”).

55. Deliveries from the helium refineries are usually made in large quantities. The refined helium is normally delivered in liquid form from the helium production facility to a transfilling plant in the area of consumption which may belong to a vertically integrated wholesaler also active on the retail level or to another gas company, such as an independent retailer. Special low temperature logistics, in particular vacuum-insulated tank containers (“cryogenic containers”), are required for the shipment from the source to the filling facility in order to prevent evaporation losses resulting from warming of the gas during transportation. This transport of helium to the transfill centres is therefore done by gas companies that have access to these cryogenic containers. [18]

56. Helium producers are consequently natural gas/LNG producers, such as Krio (Poland), Cryor (Russia), Sonatrach (Algeria) and Exxon (US). They themselves, however, are normally not active in the wholesale business. They either enter into long-term supply contracts (up to 20 years) with the industrial gas companies or create joint-ventures with the industrial gas companies in order to jointly produce helium.

57. Moreover, some of the wholesalers are vertically integrated into the production of helium: BOC has a large production facility in Otis, Kansas; Air Products and Praxair also have own production sites in the US. Air Liquide has entered into a joint venture with Air Products and the Algerian state-owned gas company Sonatrach to exploit the Algerian source in Arzew. Linde has only recently entered into a joint-venture with Sonatrach to produce helium at Skikda, Algeria, which, however, has not yet started its production. All the mentioned wholesalers moreover have long-term agreements with independent helium producers.

3.2 Helium wholesale

58. In the case M.1630 Air Liquide/BOC, the Commission considered the possibility of an EEA-wide market for helium wholesale supply. The market definition was, however, left open. The parties submit that the market is EEA-wide and refer to the above mentioned decision.

59. As will be explained in the following, the market investigation in the current case has shown indications that the market for wholesale helium should be regarded as global even though it exhibits some important regional aspects, mainly with respect to the US, the EEA and Asia.

60. The EEA is to a large extent supplied with helium from the sources located within Europe (Poland, Russia) or close to Europe, i.e. Algeria and to some extent Qatar which is, however, a source commonly also used for the supply of the Asian markets. Sources located close to the area of consumption have an advantage in terms of costs, reliability of supply and transport time as compared to sources which are located in far distance. In the case M.1630 Air Liquide/BOC, these proximity advantages have led the Commission to consider that the helium wholesale market might be EEA-wide in scope, covering all sources in and around the EEA. At the time of the Air Liquide/BOC case in the year 2000, imports from the US into the EEA were estimated at 25% of the total helium demand in the EEA. The assumption of a potential EEA-wide market was made against the background that these imports were expected to decrease in the near future.

61. Imports from the US into the EEA have, however, meanwhile grown to a considerable size which militates against the assumption of a distinct EEA-wide market. According to the parties’ estimates, the rate of imports from the US into the EEA has reached a level of 32% in the year 2005. A quantity of round-about 11.2 million m3 of helium was shipped from the US into the EEA. The total demand in the EEA amounts according to estimates by the parties to approximately 35 million m3. [19] In 2004 the imports from the US into the EEA had even covered a larger quantity (approximately 12.6 million m3).

62. The market investigation has shown that a number of market participants expect US-imports to decrease to some extent in the near future with the (complete) start-up of the new sources in Qatar and Algeria. [20] However, it was also indicated that US-imports will in the long-run continue to play an important role in the EEA. The US has the by far largest production of helium in the world. In the EEA, however, demand significantly exceeds the supply which can be generated from the sources in and close to Europe. This explains why there are helium shipments from the US to Europe but not the other way around.

63. The fact that no helium is exported from the sources in and around the EEA to the US does, however, not exclude the assumption of a worldwide market. From the perspective of independent helium retailers in the EEA, US imports are a feasible alternative of supply and therefore constitute a real competitive constraint which cannot be ignored. Negotiations between helium retailers and helium wholesale suppliers are usually conducted at headquarter level, although some small contracts may be negotiated by local sales businesses. Equally, contracts of helium wholesalers with helium producers are typically negotiated at headquarters level at the place of the helium source. Given the location of the players in the helium business, cross-border and transatlantic negotiations are a common pattern for both contracts with helium producers and helium wholesalers.

64. The market investigation has, moreover, shown indications that the wholesalers use swap agreements on the basis of which they may shift quantities across world-regions without the need for physical transport. [21] Quantities being produced in one region can therefore to some extent be “moved” by individual players while at the same time avoiding lengthy and costly transports. This means that the location of a source not necessarily indicates the location of where this supply has an impact on competition.

65. In the case M.1630 Air Liquide/BOC, the Commission has found that market prices for refined helium are not set at worldwide level. Price setting mechanisms as they exist for commodities traded on world markets, such as certain metals and minerals, were not found to be in place for refined helium. However, the market investigation in the present case has shown indications that helium prices in all world regions are influenced by demand and supply in the US due to the large quantities which are produced there. A change in supply in the US inevitably has price effects on the rest of the world.

66. Moreover, prices for crude helium are significantly influenced by the prices which are set by the US Bureau for Land Management (BLM). The BLM is an agency of the U.S. Department of the Interior and manages public land in the US in 12 Western states, including Alaska. The BLM owns and operates a helium pipeline and storage system [22] which is the only storage facility for crude helium in the world. [23]

67. The BLM manages a large quantity of crude helium (approximately five times the current world demand) in its storage system which was accumulated mainly in the 1960s and 1970s when the US-government purchased and stored crude helium for strategically important space, defense, and energy programs. The BLM now sells crude helium in defined quantities and at prices which are set in advance for the next few years. 94.5% of the total quantity offered by the BLM are reserved for the refiners connected to the BLM pipeline (among them BOC, Air Products and Praxair). The rest is offered to non-refiners.

68. The prices for crude helium on the market are sometimes linked to the BLM-prices which in turn are indexed to the consumer price index. According to BOC internal documents, the “[…]”. Due to the high importance of the US-quantities which can be shipped anywhere in the world, wholesalers will generally take into account the prices for crude helium in the US for the calculation of prices for refined helium to be offered in the EEA or in other regions. It can therefore be assumed that the BLM prices in the US have an effect on the price levels for crude and refined helium on other continents and therefore create a global price level which mainly differs in specific regions due to transport costs. A number of market participants have referred in their responses to a worldwide helium wholesale market or to a global price level. [24]

69. The companies currently acting as wholesalers are Praxair, Air Products, BOC, Air Liquide and to a small extent Linde. The four main suppliers have mostly access to sources located in the US as well as sources in or around Europe in order to pursue a balanced sourcing strategy for reliable supply. They mostly sell helium in all parts of the world and compete on a global level against each other. Independent retailers in the EEA have indicated during the market investigation that they also receive helium from the US. In some cases, the transport costs have to be paid extra. In some cases, however, helium is delivered to a fixed negotiated price and the buyer cannot distinguish from which source this helium is provided.

70. It cannot be excluded, that the importance of US-sources will shrink in the future for some time with the increased capacities available around the EEA and that the market will then tend towards an EEA-wide scope. However, against the background of the past and current significance of the US-imports and the existing strong influence of the US market, the geographic market for wholesale helium will for the purposes of this case be considered as worldwide. [25]

3.3 Helium retail

71. Refined helium is transported by the wholesalers from the sources to transfill centres in the area of consumption. These are owned either by wholesalers who are vertically integrated into the retail level or by independent retailers who buy helium from the wholesalers. Apart from this, wholesalers also trade helium among each other and may transport helium from the sources to transfill centres of other wholesalers who are also active in the retail business.

72. At a transfill centre the liquid helium is removed from the cryogenic container and transferred into dewars, cylinders or tube trailers for supplies to end customers. Deliveries of helium are either made from the transfill centre directly to the end-customer or through local distribution networks via industrial or local hubs.

73. The parties submit that while the conditions of competition for helium retail are homogenous at a national level, they significantly differ between the EEA Member States. They therefore suggest a national market definition for helium supplies on retail level. In the decision M.3314 Air Liquide / Messer, the Commission has defined a national market for retail helium in Germany.

74. The market investigation has broadly confirmed that the market for helium retail supply in cylinders, dewars and tube-trailers is national in scope. Helium is more valuable than many standard industrial gases which would militate for a larger radius of supply than for the cylinder and bulk supply of industrial gases. Nevertheless, a transportation of helium across the whole of the EEA is generally not feasible.

75. Liquid helium can only be transported and stored for a limited period of time in special very low temperature equipment. But also for gaseous helium, no long transportation times are possible since customers require a quick supply. In the market investigation, several customers pointed out that not the exact distance but the fast availability of the product is of relevance. Some customers specified that the delivery time should not exceed 24 to 48 hours. Consequently, helium end customers have indicated that they source from suppliers located in a distance between 50 and 500 km.

76. This corresponds to the radius within which 80% of the customers of the parties’ transfill centres are located, which is a range up to 200 and 400 km. The market investigation has confirmed similar radiuses for competing helium retailers, who indicated distances of up to between 200 and 500 km. Since large quantities of helium can be transported more cost-efficiently than small quantities in cylinders, the distances that were indicated for cylinders were as a tendency slightly lower than the ones for tube-trailers.

77. Most helium retailers (including most large integrated gases companies) are active only in one or a selected number of EEA countries. The parties have, moreover, provided price information for retail helium per Member State which shows that the price levels may differ considerably. A large number of respondents confirmed that sourcing is possible on a national basis. [26]

78. Therefore, the helium retail markets are assumed to be national in scope, which goes in line with the Commission’s findings in previous cases.

4. Specialty gases

79. The parties take the view that the respective relevant geographic markets for all noble gases and noble gas mixtures are at least EEA-wide. In particular, it is submitted that noble gases and noble gas mixtures have a high value compared to industrial gases. Moreover, transportation costs are relatively low compare to total costs and account for less than 5% of the total sales price. There are furthermore no regulatory or other barriers to purchase noble gases and noble gas mixtures abroad. This view has been largely confirmed by the market investigation. [27] Therefore, the relevant geographic markets for noble gases and noble gas mixtures seem to be at least EEA wide.

80. The parties submit that the respective relevant geographic markets for all ESGs are at least EEA-wide. In particular, it is submitted that ESGs have a high value compared to industrial gases. Moreover, transportation costs are relatively low and account for less than 5% of the total sales price. There are furthermore no regulatory or other barriers to purchase ESGs abroad. This is in line with previous Commission’s decisions [28]. Therefore, the relevant geographic markets for ESGs seem to be at least EEA wide.

81. Ultimately, the definition of the relevant geographic markets for noble gases and noble gas mixtures as well as for ESGs can be left open, since, regardless of the precise market definition, the transaction will not give rise to competition concerns.

82. The parties take the view that the respective relevant geographic markets for all refrigerants are at least national, irrespective of the form of supply. Supply of refrigerants had traditionally been organized at a national or regional level. This is particularly the case with respect to BOC, which only sells refrigerants in the UK, Ireland and Poland. This view has been largely confirmed by the market investigation, where a majority of the customers indicated to source refrigerants on the national basis and stressed the importance of the distribution network [29]. On the other hand, some suppliers are active on a regional basis (for example Linde has transfilling sites for refrigerants in […]) and price levels tend to converge in the EEA according to the parties’ data. Therefore, the relevant geographic markets for refrigerants still seem to be national with a growing tendency towards wider, either regional or EEA-wide markets

83. The parties take the view that the respective relevant geographic markets for all chemicals are at least national, irrespective of the form of supply. Supply of chemicals had traditionally been organized at a national or regional level. This is particularly the case with respect to BOC, which only sells chemicals in the UK, Ireland and Poland. Moreover, transport costs play a significant role for certain low value chemicals (for example ammonia, sulphur dioxide). However, some suppliers are active on a wider than national basis, for example Linde has […] filling sites for chemicals within the EEA. The parties submit that for certain high value products such as sulfur hexafluoride and ethylene oxide sold in cylinders for mainly medical applications [30], transportation costs are of minor importance. Ethylene oxide is transfilled centrally by each gas company and distributed in cylinders from one or two filling sites throughout the EEA. Therefore, the relevant geographic markets for chemicals seem to be national with a clear development towards broader markets, in particular for certain high value chemicals like ethylene oxide sold in cylinders for mainly medical applications.

84. The parties take the view that the respective relevant geographic markets for all calibration mixtures are at least national. Supply of calibration gas mixtures had traditionally been organized at a national or regional level. This is particularly the case with respect to BOC, which only sells calibration mixtures in the UK, Ireland and Poland. Filling stations are primarily used to supply customers in the country in which they are located. This view has been largely confirmed by the market investigation. Therefore, the relevant geographic markets for calibration gas mixtures seem to be national.

5. Sale of plants

85. The parties submit that the relevant geographic markets for the sale of plants (both ASU and HCS) are global in scope. These gas production plants are expensive capital goods that are manufactured by a number of major suppliers worldwide. These suppliers all have the ability to set up gas production plants all over the world.

86. It can, however, be left open, whether the relevant geographic market is worldwide or EEA-wide since the analysis does not change under either market definition.

C. Competition Analysis

1. Industrial gases / Medical gases

87. Within the wide group of industrial/medical gases, the only markets in which the transaction gives rise to affected markets are the bulk and the cylinders markets in Poland and the UK. The assessment is therefore focussed on these markets. The transaction moreover affects the EEA-wide tonnage market as well as the cylinder and bulk business on a European scale.

1.1 Bulk markets

a. Poland

Market structure

88. The table below shows, for 2005, a summary of the market shares of the parties and of the main competitors in Poland for following relevant markets: oxygen, nitrogen, argon (including argon mixtures), hydrogen and carbon dioxide:

Bulk industrial gases: market shares for 2005 in Poland

Products | Oxygen | Nitrogen | Argon | Hydrogen | CO2 |

Market size (M €) | […] | […] | […] | […] | […] |

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

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

Linde + BOC | [60-70]% | [80-90]% | [40-50]% | [40-50]% | [40-50]% |

Air Liquide | [10-20]% | [0-10]% | [20-30]% | [10-20]% | [0-10]% |

Air Prod. | [<5]% | [<5]% | [0-10]% | [0-10]% | [0-10]% |

Messer | [10-20]% | [0-10]% | [20-30]% | [10-20]% | [20-30]% |

Praxair | 0% | 0% | 0% | 0% | 0% |

ZAP | 0% | 0% | 0% | [20-30]% | [10-20]% |

ACP | 0% | 0% | 0% | 0% | [10-20]% |

Others | [<5]% | [<5]% | [<5]% | 0% | [<5]% |

89. As the data above shows, BOC has a strong position in Poland, achieved following the acquisition of parts of the privatized PolGaz. As it will be indicated further below, BOC has also a very strong position in the UK. This situation is a consequence of the strategy followed by BOC in the EEA by which it has concentrated, with the exception of Poland, on its home countries.

90. After the merger, Linde’s current leading position in oxygen, nitrogen, argon and CO2 and the strong position in hydrogen will be significantly enhanced by the addition of the BOC activities. Linde would achieve the highest market shares in all the markets. In particular with respect to oxygen and nitrogen, the high market shares would indicate that after the merger Linde may enjoy a single dominant position for these markets.

91. If medical gases are assessed separately, the transaction would also give rise to significant overlaps with respect to bulk oxygen. After the merger, Linde would have a market share of [80-90]% ([50-60]% from Linde and [30-40]% from BOC). The only two alternatives would be Air Liquide ([0-10]%) and Messer ([10-20]%). The transaction therefore eliminates the most important alternative competitor to Linde in Poland.

Production capacities

92. Linde has bulk production for oxygen, nitrogen and argon while BOC also produces CO2.

93. Linde has […] bulk production plants in Poland: one plant supplying both the tonnage and the bulk markets (a piggy-back plant) and […] small ASUs which supply […].

94. BOC’s presence is, however, more significant in terms of production plants. It has two piggy-back plants at Kedzierzyn and Czestochowa, one stand-alone plant dedicated to the bulk market at Oswiecim, and […] small ASUs located in […], which supply […]. BOC’s facilities for the production of CO2 are located in Janikowo.

95. The table below shows the market size (in tons per day) and an estimate of the bulk production capacities for each producer. This capacity data excludes the small ASUs as they are dedicated to single customers and therefore do not exert the same competitive constrain on the market as the piggy-back or the stand-alone plants.

Capacities in Poland (tpd) - 2005

| Oxygen | Nitrogen | Argon |

Gas Producer | tpd | % | tpd | % | tpd | % |

Linde | […] | [10-20]% | […] | [10-20]% | […] | [0-10]% |

BOC | […] | [50-60]% | […] | [60-70]% | […] | [50-60]% |

Linde + BOC | […] | [60-70]% | […] | [70-80]% | […] | [60-70]% |

Air Liquide | […] | [30-40]% | […] | [20-30]% | […] | 30-40]% |

Air Products | 0 | 0% | 0 | 0% | 0 | 0% |

Messer | 0 | 0% | 0 | 0% | 0 | 0% |

Total (tpd) | […] | […] | […] |

96. As it is clear from the data above, post-transaction the oxygen, nitrogen and argon markets will not only be highly concentrated in terms of sales, but also in terms of production capacity, for which the combined entity will hold more than 60% in each relevant market.

97. Moreover, it appears that, with the exception of BOC, the rest of the players in the Polish market are either highly capacity constrained or dependent on competitors’ production (via swap agreements or other supply agreements) to serve their customers. The parties themselves recognise [31] […].

98. The dependence of other competitor’s on BOC can be observed by analysing the purchases made from BOC’s plants. The table below shows, for each of the three gases the percentage of each competitor’s sales dependent on supplies from BOC.

Estimate of the % of purchases from BOC made by each market participant with respect to their total sales in Poland in 2005 |

Gas Producer | Oxygen | Nitrogen | Argon |

Messer | […]% | […]% | […]% |

Air Products | […]% | […]% | […]% |

Linde | […]% | […]% | […]% |

99. In essence, the Polish oxygen, nitrogen and argon bulk markets are characterised by few producers with considerable capacity limitations (except for BOC). Thus, some competitors have to rely on imports from neighbouring countries […] or on purchases from other competitors, in particular from BOC.

100. In these circumstances, the acquisition of BOC would confer Linde the ability to foreclose those current competitors in the oxygen, nitrogen and argon markets who are currently highly dependent on BOC to source their gas needs and thereby it would likely achieve a single dominant position in these markets.

Hydrogen and CO2

101. With respect to CO2 and hydrogen, the market positions after the transaction will also be fairly high. Although in these markets there is no overlap in terms of production capacities as only BOC has facilities for the production of CO2 (Janikowo, with a capacity of […]), this has not prevented the parties from achieving strong positions on the Polish market. Linde covers its hydrogen and CO2 needs either through imports from its own facilities in the surrounding countries or from third parties within Poland [32]. […].

Results of the market investigation

102. The market investigation has given indications that post transaction, the competitive situation in the Polish market is likely to be significantly worsened. In particular, some customers have indicated that the limited number of suppliers that will remain after the operation is likely to affect the negotiation of prices to the detriment of customers, and that price increases are likely to happen [33].

103. The above mentioned concerns have also been expressed by the competitors [34]. The strong positions that Linde will have in the industrial gases will significantly affect competition and will make the expansion of the current competitors more difficult. Furthermore, given that Linde would become more independent in terms of availability of industrial gases, it will no longer swap or supply agreements with other players. Consequently smaller competitors will have more difficulties to get access to industrial gases and to expand their geographical coverage, becoming therefore less strong competitors.

Conclusion

104. In the light of the above, the Commission considers that, given the high market shares that Linde would get after the acquisition of BOC in Poland and the especially strong position that Linde will enjoy in terms of production capacities, the transaction is likely to create competition concerns with respect to the oxygen, nitrogen and argon markets and raises serious doubts as to its compatibility with the common market in Poland.

b. The UK

Market structure

105. The following table below summarizes, for 2005, the market shares of the parties and of the main competitors in the UK for the relevant markets oxygen, nitrogen, argon (including argon mixtures), hydrogen and CO2.

Bulk industrial gases: market shares for 2005 in the UK

Products | Oxygen | Nitrogen | Argon | Hydrogen | CO2 |

Market size (M €) | […] | […] | […] | […] | […] |

Linde | [<5]% | [<5]% | [<5]% | [20-30]% | [<5]% |

BOC | [60-70]% | [60-70]% | [70-80]% | [30-40]% | [20-30]% |

Linde + BOC | [60-70]% | [60-70]% | [70-80]% | [60-70]% | [20-30]% |

Air Liquide | [0-10]% | [0-10]% | [<5]% | [0-10]% | [30-40]% |

Air Products | [30-40]% | [30-40]% | [20-30]% | [30-40]% | [<5]% |

Messer | 0% | 0% | 0% | 0% | 0% |

Praxair | 0% | 0% | 0% | 0% | 0% |

Yara | 0% | 0% | 0% | 0% | [40-50]% |

Others | 0% | 0% | 0% | 0% | [<5]% |

106. With respect to oxygen, nitrogen and argon, the situation in the UK is quite different compared to Poland. In the UK, BOC has already significant high market positions for these three markets, well above 50%. After the merger, the initial modest position of Linde for nitrogen and argon will therefore be strongly reinforced. Regarding hydrogen, both Linde and BOC have strong market positions and the combined share will be above 60% after the merger.

107. If medical gases are assessed separately, the transaction does not give rise to combination of market shares as Linde is not currently active in these markets. However, the position of BOC is very strong, with a market share of [80-90]%, the only alternative competitor being Air Products with the remaining [20-30]%.

Production facilities

108. BOC’s strong position in the UK mirrors its position at the level of production facilities. BOC has five piggy-back plants (located at Scunthorpe, Middlesbrough, Margam, Brinsworth and Fawley), two stand-alone merchant plants for the bulk markets (located at Thame and Motherwell) and a large number of small ASUs.

109. BOC sources CO2 from […]. It sources hydrogen from its three production plants (Dalry, St Helens and Margam) and from […].

110. Linde has neither piggy-back nor stand-alone merchant plants, and its presence in the UK is therefore rather based on […] small ASUs, sourcing the rest of its needs of the various gases from third parties and from companies within the Linde group. Thus, Linde sources liquid oxygen and liquid nitrogen from […] in the UK.

111. With regard to the liquid argon activities, Linde sources liquid argon from a Linde Group’s company in [Business Secret: source of argon outside the UK and description of the distribution process in the UK]. However, this situation has not prevented Linde from entering the UK market becoming a real alternative to many customers.

112. With regard to bulk hydrogen, Linde has facilities in the UK at [Business Secret: source of hydrogen and description of the production process].

Results of the market investigation

113. The market investigation has shown concerns because of the reduction in the number of players and the elimination of an important source of competition, in particular with respect to hydrogen, leading to a drastic reduction of competition in prices [35].

114. Moreover, it has also been pointed out that, given the reduction in the number of potential gas suppliers and the significant strong position of Linde/BOC, the combined entity may drive other competitors out of the UK market [36].

115. Also the main competitors have raised concerns with respect to the transaction [37]. These concerns relate not only to the existing high market shares in oxygen, nitrogen and argon currently held by BOC, but in particular to the new strong position gained in the hydrogen market.

Conclusion

116. With respect to oxygen, nitrogen and argon, Linde’s position is modest. However, the removal of this small market constraint, which is potentially a future stronger competitor (as it has happened with respect to argon, where Linde has been able to gain [0-10]% market share without having a local presence in terms of production), would reinforce the present very strong market position enjoyed by BOC in these markets..

117. With respect to the hydrogen market only two players will remain, giving Linde the leading position with a market share above 60%, followed by Air Product with about [30-40]%. The very high market share gained by Linde through the elimination of one of the main sources of competition in the market (market share of [30-40]%) is likely to give rise to anticompetitive effects derived from the unilateral behaviour of Linde resulting in price increases.

118. In the light of the above, the Commission considers that the transaction is likely to create competition concerns with respect to the bulk markets for oxygen, nitrogen, argon and hydrogen and raises serious doubts as to its compatibility with the common market in the UK.

1.2 Cylinder markets

a. Poland

Market structure

119. As in the case of the bulk industrial gases markets, the transaction leads to important overlaps (except for nitrous oxide) in the cylinders gases markets in Poland. The market position of the parties and of the main competitors are shown below:

Cylinder industrial gases: market shares for 2005 in Poland

Products | Oxygen | Nitrogen | Argon | Hydrogen | CO2 | Acetylene |

Market size (M€) | […] | […] | […] | […] | […] | […] |

Linde | [40-50]% | [50-60]% | [30-40]% | [20-30]% | [50-60]% | [40-50]% |

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

Linde + BOC | [60-70]% | [60-70]% | [60-70]% | [60-70]% | [70-80]% | [70-80]% |

Air Liquide | [<5]% | [<5]% | [<5]% | [0-10]% | [<5]% | [<5]% |

Air Prod. | [0-10]% | [0-10]% | [0-10]% | [0-10]% | [<5]% | [<5]% |

Messer | [10-20]% | [10-20]% | [10-20]% | [20-30]% | [10-20]% | [10-20]% |

ZA Chorz. | 0% | 0% | 0% | 0% | 0% | 0% |

Others | [0-10]% | [10-20]% | [10-20]% | [0-10]% | [0-10]% | [0-10]% |

120. The combined entity will have a leading position with market shares above 70% for CO2 and acetylene, and above 60% for oxygen, nitrogen, argon and hydrogen. With respect to nitrous oxide the transaction does not give rise to a significant change in the market structure.

121. The main competitor in these markets is Messer with market shares ranging between [10-20]% and [20-30]% in the different gases.

122. The high combined market shares that Linde would achieve remain also high if gases for medical applications are assessed separately. The table below indicates the market shares of the various competitors in these markets:

Medical gases in cylinders - Poland 2005

Products | Medical Oxygen | Medical Nitrous Oxide |

Market size (M€) | […] | […] |

Linde | [40-50]% | [40-50]% |

BOC | [30-40]% | [0-10]% |

Linde + BOC | [70-80]% | [40-50]% |

Air Liquide | [0-10]% | [0-10]% |

Messer | [10-20]% | [10-20]% |

ZA Chorz. | [<5]% | [40-50]% |

Filling facilities

123. Linde has […] filling plants spread all around Poland. Nitrous oxide and hydrogen are filled in […].

124. BOC has […] filling plants located in […]. It has in addition […] acetylene production plants. As in Linde’s case, hydrogen is filled in […].

125. In terms of cylinder filling capacities, neither Linde nor BOC appear to be capacity constrained. […] In the case of BOC, it is running at a capacity utilization rate of around […]% in […] of the […] plants […] and at around […] in […]. On average, its capacity utilization rate is around […]%. With respect to Linde, and although the situation can be different depending on the type of gas and location, […] with utilization rates ranging from […]% to […]% with only higher values for […] in […] and for […] in […]. Given the vertical relationships between the bulk and the cylinder markets (see below), this situation […] would therefore facilitate Linde’s ability to serve additional demand in the cylinder markets in case of foreclosure of its competitors in the bulk market.

Results of the market investigation

126. The market investigation has revealed concerns regarding the transaction [38]. The reduced number of players and the significantly high market shares that the merged entity will achieve will lead, according to some respondents, to an increased likelihood of price increases.

127. Also competitors have raised concerns with respect to the transaction and the high market shares that Linde will gain [39]. In particular, some concerns indicate that, given the large geographic coverage that Linde will get in Poland as a result of the combination of the two cylinder distribution networks, it will be more difficult for the rest of the players to compete efficiently.

Vertical relationships between the bulk and the cylinders markets

128. The situation in the cylinders’ market would in addition be aggravated by the strength that Linde would have post-transaction in the upstream markets. As indicated above in the bulk section, there is a risk of creation of single dominance in the bulk oxygen and nitrogen markets, together with very high market positions for argon and hydrogen. Given the production capacity limitations that the Polish bulk markets appear to have and hence the other competitors’ dependence on Linde, the latter would have the ability to leverage its dominant positions in the bulk markets to become even stronger in the cylinders’ markets.

Conclusion

129. In the light of the above, the Commission considers that the proposed transaction raises serious doubts as to its compatibility with the common market in Poland with respect to oxygen, nitrogen, argon, hydrogen, CO2 and acetylene cylinder markets.

b. The UK

Market structure

130. The main impact of the transaction regarding cylinder gases distribution in the UK would be with respect to oxygen, hydrogen and nitrous oxide, and to a limited extent also for argon. The table below shows a summary of the market shares of the main players in the UK market:

Cylinder industrial gases: market shares for 2005 in the UK

Products | Oxygen | Nitrogen | Argon | Hydrogen | CO2 | Acetylene |

Market size (M€) | […] | […] | […] | […] | […] | […] |

Linde | [10-20]% | 0% | [<5]% | [0-10]% | [0-10]% | [<5]% |

BOC | [70-80]% | [50-60]% | [50-60]% | [50-60]% | [40-50]% | [60-70]% |

Linde + BOC | [80-90]% | [50-60]% | [60-70]% | [60-70]% | [40-50]% | [70-80]% |

Air Liquide | [0-10]% | [0-10]% | [0-10]% | [0-10]% | [10-20]% | [<5]% |

Air Products | [10-20]% | [20-30]% | [20-30]% | [20-30]% | [10-20]% | [20-30]% |

Energas | 0% | [0-10]% | 0% | 0% | [0-10]% | 0% |

Cryo-services | 0% | 0% | 0% | 0% | [10-20]% | 0% |

Others | [<5]% | [0-10]% | [0-10]% | [0-10]% | [0-10]% | [<5]% |

131. While the impact of the transaction on nitrogen and CO2 will be negligible, Linde’s small positions in argon and acetylene and to a larger extent in oxygen will add to the already significantly high market shares of BOC in these markets, with combined market shares of [60-70]% (argon), [70-80]% (acetylene) and [80-90]% (oxygen). The main change of the transaction in terms of addition of market shares would be on the hydrogen market ([0-10]%+[50-60]%).

132. With the exception of the CO2 market, in the rest of the markets practically only one significant competitor would remain: Air Products. The third player would be Air Liquide with modest market shares of around [0-10]%.

133. The high combined market shares that Linde would achieve for gases for industrial applications remain also high if gases for medical applications are assessed separately. The table below indicates the market shares of the various competitors in these markets:

Medical gases in cylinders UK - 2005

Products | Medical Oxygen | Medical Nitrous Oxide | Entonox (50% O2 + 50% N2O) | Heliox (Helium + O2 mixtures) |

Market size (M€) | […] | […] | […] | […] |

Linde | [<5]% | [10-20]% | [10-20]% | [0-10]% |

BOC | [70-80]% | [60-70]% | [60-70]% | [90-100]% |

Linde + BOC | [80-90]% | [70-80]% | [80-90]% | [90-100]% |

Air Products | [10-20]% | [20-30]% | [10-20]% | 0% |

Others | [0-10]% | [<5]% | [<5]% | 0% |

Filling facilities

134. In the UK, Linde has […] filling stations for cylinder standard industrial gases located at […]. It has also […] filling station for specialty gases at […]. Linde covers the whole of the UK from these filling stations (which also serve as depots) and from additional depots […] and facilities […].

135. As it is the case in Poland, Linde’s filling capacities in the UK are [Business Secrets: description of the lack of filling capacity constraints in the UK].

136. BOC’s presence is far much stronger and it owns […] filling plants with a very large geographic coverage. In terms of capacity utilisation, BOC appears to have higher utilisation rates of […] for all its filling plants. However, as in the case of Poland, and in particular with respect to the new Linde’s strong market position in the bulk hydrogen market, the situation of [Business Secrets: description of Linde’s lack of capacity constraints] may facilitate the leverage of its position upstream ([60-70]%), acting as a deterrent for the expansion of smaller players in the cylinder market and therefore reinforcing its already strong position in this market ([60-70]%).

Results of the market investigation

137. The market investigation has shown concerns expressed by customers because of the reduction in the number of players which would render the UK into a very concentrated market for most of the industrial gases with adverse effects on competition. Competition between Linde and BOC would disappear and therefore, given the new market structure, prices would be likely to rise.

138. Competitors have also claimed that, as in the case of Poland, the enlarged cylinder’s distribution network together with the high market positions that Linde will have in many markets would prevent the rest of the players to compete efficiently.

Conclusion

139. In the light of the high market shares that Linde would have post-transaction and the significant structural change that it would bring about, Linde would be post-transaction in a position to behave independently of its competitors and customers and to increase prices in the markets for oxygen, argon, hydrogen, acetylene and nitrous oxide distributed in cylinders above the competitive level absent the merger. Therefore the Commission considers that the transaction raises serious doubts as to its compatibility with the common market in the UK.

1.3 Industrial gases on EEA-level (tonnage, bulk, cylinders)

140. In addition to the concerns set out above, the Commission is of the view that the merger would be likely to lead to coordinated effects on the overall industrial gas market in the EEA through a geographic division of the industrial gas markets between Air Liquide and Linde and through the creation of structural links between the two companies.

141. On the bulk and cylinder markets, the transaction will to a large extent complete the division of the EEA between Linde and Air Liquide, with one of them having a dominant or leading position in virtually every EEA country. With the acquisition of BOC’s strong position in Poland, Linde will cover the whole of Eastern Europe and will lead this whole area without any strong competitor within this region, thereby mirroring the strong position and coverage of Air Liquide in the West. The same holds true for the tonnage market in which the two leading players have symmetric market positions both in terms of market shares [40] and geographic positioning.

142. Several market participants indeed raised the concern, that the European market would be divided between the two leading players. Post-merger Linde would become an unequivocal leader in all North-Eastern European countries, whereas Air Liquide would be far the strongest in Western Europe [41]. Moreover the two companies would keep small market shares in each other’s respective territories which makes an effective retaliation more credible. As a result of these symmetric positions both companies would thus be likely to have a common incentive not to compete effectively, by allocating geographic markets through the adoption of a chacun chez soi approach in Europe. [42] As already underlined in the Air Liquide/Messer case, evidence of past collusion between these firms on the bulk and cylinder markets constitutes an important indication in this respect. [43]

143. The markets show a high degree of transparency which allows for a coordinated behaviour and in particular for the monitoring of any deviations. As already shown in the Air Liquide/Messer case, the bulk and cylinder markets are transparent insofar as it is fairly easy for suppliers to know the identity of each others’ main customers. It would therefore be easy for either Air Liquide or Linde to monitor whether one of them enters or expands into each others’ respective territories. The same holds true for the tonnage market, where the bidders usually know well each others’ identity and can easily find out about the winners in a request for quotation [44].

144. Against that background, the Commission is of the view that coordinated effects would become likely through the merger as a result of the creation of significant structural links between Linde and Air Liquide. BOC currently operates a number of joint ventures in Asia together with Air Liquide. After the merger, Linde would replace BOC in these joint ventures, which represent an important part of their parent companies’ worldwide sales (up to [0-20]%).

145. First, the structural links between Air Liquide and the new Linde/BOC entity in Asia resulting from the transaction will increase considerably the transparency between the two European industrial gas suppliers as partners in the joint ventures, in particular in view of the implications of the head offices in the decision process, the frequency of the contacts between executives and the types of information that is exchanged. As the joint venture agreements show, group executives and senior managers have to meet at several occasions, in particular in the board meetings of […] joint venture. They moreover have joint […]. In addition, senior commercial and marketing people, finance managers and technical experts from the two groups have to meet with joint venture team members to […]. Strategic initiatives are often common. [45]

146. Second, apart from helping to align incentives [46], the creation of structural links between the duopolists supports credible retaliation mechanisms that could be activated, in particular in view of the implication of Air Liquide and the new Linde/BOC entity head offices in the management of the joint ventures. In the case at hand, one of the credible retaliation mechanisms would be the threat of future retaliations on the functioning on the Asian joint ventures, which as already emphasized, are of high strategic importance for industrial gas suppliers. In particular, each party could refuse to reach any agreement on strategic decisions for the business in Asia should one of them depart from the terms of coordination. Indeed, the Commission has also found previously that the effective retaliation need not necessarily take place in the same market as the deviation [47].

147. Finally, competitors already active in the EEA such as Air Products and Praxair would not have the ability to disrupt significantly the stability of the coordinated duopoly. None of them has a similar geographic coverage and they would remain to an appreciable extent from both members of the duopoly since when contracting with new customers where they are not present, they would also need to conclude swap and supply agreements either with Air Liquide or with Linde in order to extend their geographic reach and secure back-up for these new supplies.

148. It is not expected either that industrial gas customers would be in a position to jeopardize the competitive outcome of coordination. Customers are highly reluctant to switch supplier at the end of the contract, although they will often seek competitive offers before renewal. Incumbency most frequently confers an advantage through the relationship with the customer and an understanding of his process and related gas equipment. Moreover, demand is dispersed which excludes any significant countervailing power from the customers’ side.

149. As a result, in the absence of remedies aimed at removing both the overlaps in the UK and in Poland as well as preventing substantial structural links between Air Liquide and Linde the operation would raise serious doubts as to its compatibility with the common market.

2. Helium

150. The notified transaction leads to horizontally affected markets on wholesale and on retail level, as well as to vertically affected markets on these two levels. The merger raises serious doubts with respect to the global helium wholesale market as well as with respect to the helium retail markets in Poland and in the UK.

2.1 Helium wholesale

Market shares

151. Traditionally, Air Products, Praxair and BOC have had relatively symmetric leading positions on the helium wholesale markets worldwide, based on their historic access to US sources (which at one time were the only sources available in the Western world). All three companies have worldwide activities in the helium wholesale business and supply retailers in Europe, North America and Asia/Pacific.

152. This market structure of three companies remained largely unchanged until the mid-1980s, when Air Liquide entered into the wholesale business by gaining access to helium sources. Air Liquide is now active in the helium business on a worldwide basis, with access to sources in the Algeria, Qatar, Russia and the US, and with wholesale activities in the US, the EEA and Asia. Linde has only recently entered into the production of helium with the acquisition of its share in the joint venture with Sonatrach in Algeria. Currently, it has an only minor position in this market.

153. The positions of the helium wholesale companies are reflected in the following market shares which were calculated on the basis of sales figures provided by the market participants. Depending on whether the volumes traded between the wholesalers are included or not, the market participants have slightly different positions:

Worldwide helium wholesale market shares - 2005

| Linde | BOC | combined | Air Products | Praxair | Air Liquide |

Sales to helium retailers | [<5]% | [30-40]% | [30-40]% | [25-35]% | [25-35]% | [0-10]% |

Sales to helium retailers and to other wholesalers | [<5]% | [40-50]% | [40-50]% | [25-35]% | [20-30]% | [0-10]% |

154. The parties submitted market shares for the helium wholesale market which were based on the approach to qualify all those sales as wholesale sales that are made before the final sale to the end-customer. This would, according to the parties, also include independent producers, such as Cryor and Krio, into the circle of wholesalers since they sell to vertically integrated industrial gas companies who are also active as retailers.

155. This view does not reflect the real market situation. The market shows complex supply relationships between the different companies active in the helium business who are vertically integrated to differing extents. This makes it difficult to draw the lines between the market levels. The market investigation has, however, shown that only those companies who have access to the helium sources (by long-term agreement with the independent producers or by ownership of sources) and who transport helium in large quantities and over long distances to the transfill centres of the retailers can be regarded as wholesalers. [48] Only BOC, Air Products, Air Liquide, Praxair and to a lesser extent Linde are currently able to qualify as wholesalers. They are the only companies who are perceived as wholesalers by the market.

156. There are some independent retailers who own a number of helium containers necessary to transport wholesale helium. These retailers, however, generally do not have direct access to helium sources and mostly give these containers to their supplying wholesaler for their own supplies. They consequently do not act as wholesalers themselves. It can moreover not be excluded that in a few instances direct sales between independent producers and independent retailers occur. The parties have reported one such case. However, this seems to be exceptional and only relates to very small quantities in total.

Capacity shares

157. In order to become active on the helium wholesale market access to helium sources is crucial, either by long-term contracts with the producers, by having shares in joint ventures with the helium producers or by having own helium production sites.

158. In the market investigation, some market participants referred to “access to helium sources” in order to estimate the parties’ and their competitors’ market position. [49] The parties have provided data concerning the wholesalers’ access to helium sources which broadly comply with the results of the market investigation. The following capacity shares (shares of the wholesalers in access to sources) can be derived:

Worldwide helium capacity shares - 2005

| Linde | BOC | combined | Air Products | Praxair | Air Liquide |

Access to helium | [<5]% | [20-30]% | [20-30]% | [30-40]% | [20-30]% | [10-20]% |

159. These capacity shares take into account the currently available capacity. [50] The capacity that will in the future be provided by the joint venture between Linde and Sonatrach in Skikda, Algeria is not considered. If Skikda’s full capacity was taken into account, Linde’s capacity share would increase from [<5]% to [0-10]%. The worldwide capacity shares (calculated on the basis of the currently existing long-term agreements) would be the following:

Worldwide helium capacity shares (forecast)

| Linde | BOC | combined | Air Products | Praxair | Air Liquide |

Access to helium | [0-10]% | [20-30]% | [30-40]% | [20-30]% | [20-30]% | [10-20]% |

Non-coordinated effects of the transaction

160. Linde has recently acquired an own access to helium sources both by long-term agreements and more importantly by its own significant production in the joint venture with Sonatrach. It has thereby entered the market for helium wholesale supply and would have exerted considerable competitive pressure in the next years with the new quantities from the Skikda source. It can be expected, that Linde’s incentives to compete on this market will decrease after the merger. This raises serious doubts as to the compatibility of the merger with the common market.

Linde has aggressively competed before the merger

161. Linde has only recently entered into the production of helium with its participation in the joint venture with Sonatrach for the production and marketing of helium produced at the source in Skikda, Algeria. The joint venture agreements with Sonatrach were entered into in 2002. However, due to an explosion which destroyed […] of the production facility, the start of the plant was delayed. The production facility at Skikda is currently expected to start production with approximately […]% of its capacity […]. According to the parties, the restoration of the full capacity might take another […]. The planned total capacity of the production facility at Skikda in the long run is [10-20] million m3.

162. During the market investigation several market participants indicated that Linde has recently competed aggressively in the market in order to sell the quantities from its long-term contracts as well as those which would be generated from the Skikda source. It was also indicated that this had caused significant price pressure. Linde’s contracts with Sonatrach foresee that […]. In both cases, new capacities would become available on the wholesale market.

163. The impact of Skikda would be significant against the background that total demand in the EEA is estimated at approximately 35 million m3 and worldwide at approximately 160 million m3 whereas Skikda has a total capacity of [10-20] million m3. Internal documents provided by Linde show that Linde had planned to achieve […]. [51] Market participants have indicated that they had expected prices to fall due to Linde’s activities and its entry into the wholesale market. Also according to internal documents of BOC, BOC expected […]. [52]

Linde’s incentives to compete will change due to the transaction

164. It is likely that after the transaction, Linde will not compete to the same extent as it would have done absent the merger.

165. After the transaction, Linde will not anymore have the role of a newcomer who has to gain market shares from the large established wholesalers in order to achieve an own significant position. Linde acquires BOC’s access to sources and wholesale business in the market. It will therefore have a strong and independent position on the wholesale level as well as with respect to access to sources. Its previous need for independence and its strategy to develop an own position on the wholesale market will not anymore give rise to the incentive to aggressively compete.

166. The market structure after the merger is therefore likely to result in less intensive competition, higher prices and a smaller total quantity if compared to a market structure with a newcomer who is ready to accept a lower price in order to enter the market. Generally, a price decrease resulting from an increase in total supply often does not affect the newcomer in the same way as the large incumbents. Any company bringing new quantities into the market has to take into account the losses that occur due to the resulting decrease in price affecting not only the new sales made on the basis of the additional quantities but also (maybe after some delay) the already existing supply relationships. With a higher existing market share, this trade-off is likely to occur at a smaller additional quantity than with a lower market share. This is all the more true against the background that the newcomer might be ready to “invest” into lower margins in order to establish a stronger market position.

167. With the acquisition of BOC, Linde will have a much higher market share on the wholesale level ([30-40]% instead of [<5]%) and will also gain new retail businesses. The total global sales in the helium market will increase from previously roundabout […] million Euro to […] million Euro (and from […] million m3 to approximately […] million m3). Linde will therefore after the merger be much more affected by a price decrease than in its newcomer role on the wholesale market where the price decrease would have been an investment in order to enter the market and gain market shares. This will likely lead to an incentive to limit the expansionary effect which will result from the Skikda-source as well as from any other future expansion in access to helium.

Linde will gain the possibility to reduce supply

168. After the merger, Linde will not only have an incentive but also a direct possibility to control its supply and influence it in the way described above. The parties have argued that it is generally impossible to “turn off the tap” in helium production. Since helium is a by-product of the production of natural gas / LNG, it is always “automatically” produced when natural gas is generated.

169. This technical connection between the helium and the natural gas production does, however, not mean that the economic supply would be equally inelastic. It is true that the producers of helium are often bound by long-term take-or-pay agreements or investments which will limit their possibility to reduce the purchased/produced output. However, at least the helium wholesalers with an own production facility may control their output. This is in particular possible if the production facility is connected to the BLM pipeline and storage system, where helium producers are in essence refineries producing pure helium from crude helium stored in the BLM system. Moreover, crude helium may be stored and its marketing can thereby at least to some extent be shifted over time.

170. Storage of helium is very difficult due to its high volatility. As mentioned above, there is only one significant storage facility in the world which provides for a possibility to store crude helium: the BLM Pipeline and Storage System (Cliffside-System). Linde indicated to in principle be able to access the storage facilities at the Cliffside Field. However, the parties explained that since Linde does not have any own helium production facilities at the BLM pipeline, it does not have any incentive to store large amounts of crude helium. After the merger, Linde will own the BOC plant connected to this pipeline and will therefore have a direct possibility and incentive to use this storage facility.

171. The parties have moreover explained that helium is supplied to the helium wholesalers mostly in long-term take-or-pay agreements which do not allow for a reduction of supply in an economic way. Also in the joint ventures, supplies are often linked to take-or-pay obligations. Moreover, the helium wholesalers are “bound” by their investments into own production facilities which need to be amortized – an aim which would be impeded by running the facilities at lower capacities.

172. However, this does not mean that no reduction of supply is possible. BOC is able to reduce or increase the production of its own plant at Otis, Kansas which is connected to the BLM gas field. The parties have explained that […]

173. In can therefore be assumed, that in a situation of perceived oversupply, the production of the Otis plant can be stored in the BLM pipeline system or be reduced to some extent without incurring large losses. This is probably due to the fact that the plant is already operating since 40 years and will be largely depreciated even though some investments into the plant were made in the recent years.

New entry is difficult

174. It can therefore be expected that after the merger, Linde will not as aggressively put new quantities on the market as absent the merger and that the resulting pressure on prices will be removed. This expectation is supported by the fact that barriers to entry into the wholesale market are high and new entry is very difficult.

175. Developing an own source is difficult for a small non-integrated retailer due to the large investments (up to approx. US-$ 100 million for a helium liquefier) and a lead time of several years. New sources are developed only rarely. There are not many natural gas fields in the world which are eligible for the production of helium. The decision to produce helium from these fields depends on the often state-owned natural gas producers who are not always interested in this business since helium is only a marginal portion of their total production and correspondingly of their total turnover.

176. Producers of helium usually enter with their customers into long-term contracts which have durations of up to 20 years. This strongly limits any newcomer’s chance to achieve direct access to the existing sources. These contracts moreover often cover quantities which are too large for smaller players. Even large industrial gas companies have indicated in the market investigation that it might become difficult to enter into new contracts after the merger because Linde/BOC will purchase large quantities and might thereby have better access to the producers.

177. A fleet of cryogenic containers for helium (at a price of approximately [up to US-$ 800,000] per container) can only be established in the medium- to long-term The only well-established commercial supplier of large cryogenic helium containers worldwide is Gardner Cryogenics which is a wholly-owned Air Products subsidiary. There are therefore limited production capacities which may sometimes result in significant lead times of up to one year.

178. The past has shown that the market structure has remained stable throughout many years. Historically, only three players were active in the market for a long time. Only in the mid-1980s Air Liquide entered. (Messer was a very small player for some time.) Linde would therefore have been the first significant new entrant after Air Liquide in many years.

Conclusion on non-coordinated effects

179. The removal of Linde as a newcomer would, therefore, with high probability lead to non-coordinated effects and would have a dampening effect on the price decrease which was expected absent the merger. The transaction therefore raises serious doubts in the helium wholesale market.

Coordinated effects of the transaction

180. Furthermore, the Commission has serious doubts that the proposed merger may even lead to a weakening of competitive pressure as a result of coordinated effects. These coordinated effects would result in a smaller total quantity and prices on the market higher than if they were dictated only by the individual, non-coordinated, profit-maximising behaviour of each individual competitor. The helium wholesale market is prone to coordination. The removal of Linde as an aggressive “maverick” increases the risk of tacit collusion in this market and thereby raises serious doubts as to the compatibility of the merger with the common market.

The conditions on the helium wholesale market make coordination likely

181. The helium wholesale market shows characteristics which make coordination likely. Helium is a homogeneous good. The market structure on the wholesale market is very tight with four established players, three of them having combined more than 80% of the available access to sources. This market structure has shown a high stability in the past with the major change being Air Liquide’s entry in the mid 1980’s and has largely remained stable since then.

182. It can be assumed, that at least the three large global players would have an interest in reducing supply below the level of their independent profit maximizing quantities in order to jointly profit from the resulting price increase. The three leading helium wholesalers are likely to have very comparable incentives due to their equal vertical integration, extent of access to sources and market positions. Due to their similar market shares, they would profit from such a strategy to a similar extent. Their market positions are not only similar on the capacity and wholesale level, but also in their worldwide sales to end customers (without independent retailers: BOC: [20-30]%, Air Products: [20–30]%, Praxair: [20–30]%).

183. These similar incentives are supported by remarks found in internal documents: Internal documents from BOC indicate, for example, considerations that “[…]” [53]. Further, it is considered: “[…]” [54].

184. Tacit coordination and the resulting higher price would, however, create an incentive for the individual oligopolists to deviate by increasing the quantity individually in order to profit from the increased price more than the others. This means, that the individual players would have an incentive to store less of the new capacity brought on the market than the others or to turn down their production to a lower extent than the others. This deviation could be prevented within the oligopoly if such behaviour could be detected and retaliated by the others oligopolists.

185. It is likely that the market shows a sufficient degree of transparency to allow for such a mechanism. Already in the decision M.1630 Air Liquide/BOC, the Commission had come to the conclusion, that the helium market is highly transparent. [55] The market participants generally know both about the aggregate supplies of helium as well as the capacities available to the different market participants. The BLM publishes on its website monthly statistics which provide aggregate inventory data and its periodic sales of crude helium showing the quantity purchased by each company. Moreover, the market players are interrelated by joint ventures, such as the Air Liquide/Air Products/Sonatrach helium joint venture in Arzew, Algeria, as well as via various agreements, such as wholesale contracts provided to each other, tolling agreements (for the refining of crude helium), back-to-back-supply agreements, and swap agreements, which increase the transparency about the quantities available to the market players.

186. A back-to-back contract is a secondary supply contract generally entered into at the same time as (or shortly after) the primary supply contract. From a commercial point of view, the secondary supply contract shifts the commitments of the primary supply contract to the secondary purchaser. An example for a back-to-back arrangement is the source in Qatar which is in its start-up phase and therefore currently operates […]% of its capacity. This source is operated by a joint venture of Qatargas and Rasgas. Its output is committed to BOC and Air Liquide […]. After having gained this access to the Qatar source, BOC and Air Liquide entered into back-to-back agreements with […]. BOC sells […] of its quantity in a long-term back-to-back agreement to […]; Air Liquide entered into a similar agreement to sell […] of the own quantity in a back-to-back agreement to […].

187. Swap agreements are used for logistic optimisation in order to “shift” individual supply between different regions as well as for allocating storage capacity to players who need (additional) storage in the BLM system. By swaps, helium can be “shifted” by individual players from their original source to other regions or to the plants in the BLM system.

188. All these contracts together do not only provide for an increased transparency concerning quantities and cost positions in the market but also enhance the mutual dependency of the market players which could allow for a retaliation mechanism on the basis of rejected short- and long-term supplies (for example in case of technical problems and production outages) as well as swaps.

The merger removes a maverick

189. The transaction raises serious doubts as to the elimination of Linde as an aggressive newcomer which increases the risk of coordination among the established players. This is supported by an internal BOC document which states that “[…]” and “[…]”. [56]

190. Linde has therefore emerged as an aggressive player potentially disturbing coordinated behaviour of the incumbents. Also Air Liquide is apparently perceived as an aggressive player. However, Air Liquide’s possibilities to expand and aggressively compete also appear to be limited due to the general difficulty of getting access to sources. The quoted “aggressive” impact is limited to the increase in quantities from the Qatar source which – as explained above –is, however, largely shared among the four established players and therefore only to a small extent in Air Liquide’s hands. It is worth noting that the three largest wholesalers apparently were not perceived as competing aggressively even though they had equal or even higher new supplies from Qatar than Air Liquide.

191. It appears that Linde has been a significant risk. First, it had the larger future quantities as compared to Air Liquide. Second, Linde had the aim of increasing its market share in order to achieve an own position in the wholesale business and was therefore particularly ready to make aggressive moves in the market.

Conclusion on coordinated effects

192. The removal of Linde as a maverick and the combination of Linde’s and BOC’s sources after to the merger would therefore be likely to result in coordinated effects by eliminating Linde as a maverick being ready to enter aggressively and to increase total supply by its newly available quantities.

2.2 Helium retail (horizontal effects)

193. The parties’ activities in the national retail helium markets overlap in the UK and in Poland and will have very high market shares after the merger. The transaction raises serious doubts as to the creation of a dominant position in the Polish helium retail market. In the UK, the merger raises serious doubts as to the strengthening of a dominant position.

a. Poland

Market shares

194. On an overall helium retail market (not divided according to cylinder, dewar and tube trailer supply), the parties reach a combined market share of [60-70]% with an overlap of [10-20]% as the following table indicates:

Helium retail market shares – Poland 2005

| Linde | BOC | combined | Air Liquide | Air Products | Messer | Praxair |

Poland | [10-20]% | [50-60]% | [60-70]% | [0-10]% | [0-10]% | [10-20]% | 0% |

195. Only one competitor follows with a medium-sized position of [10-20]% market share which is Messer. The other competitors are very small.

196. The Polish helium retail market predominantly comprises gaseous sales in cylinders. According to the parties, only approximately 10-15% of the helium retail sales to Polish customers (115,000 m³ in total) are accounted for by liquid helium sales in dewars and sales in tube trailers are according to the parties not existent. The market shares of the parties and their competitors in the separate helium cylinder and dewar markets are estimated as not being significantly different from those in the overall market.

Non-coordinated effects and creation/strengthenin