Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE  
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel,   BELGIË  
 
Tel: +32 229 -91111. Fax: +32 229 -64301. E -mail: COMP -MERGER -REGISTRY@ec.europa.eu .  EUROPEAN COMMISSION  
Brussels,  05.02.2021  
C(2021)  890 final  
PUBLIC VERSION  
 
Covestro AG  
Kaiser -Wilhelm -Allee 60  
51373 Leverkusen  
Germany  
 
Subject : Case M.10006 – COVESTRO / KONINKLIJKE DSM (RESINS & 
FUNCTIONAL MATERIALS BUSINESS AND OTHER ASSETS)  
Commission decision pursuant to Article 6(1)(b) of Council Regulation 
No 139/20041 2 and Article 57 of the Agreement on the European 
Economic Area3 
Dear Sir or Madam,  
(1) On 23 December 2020 , the European Commission received notification of a 
proposed concentration pursuant to Article 4 of the Merger Regulation by which 
                                                 
1  OJ L 24, 29.1.2004, p. 1 (the ’Merger Regulation ’). With effect from 1 December 2009,  the Treaty on the 
Functioning of the European Union ( ‘TFEU ’) has introduced certain changes, such as the replacement of  
‘Community ’ by ‘Union ’ and ‘common market ’ by ‘internal market ’. The terminology of the TFEU will 
be used throughout this decision.  
2  For the purposes of this Decision, although the United Kingdom withdrew from the European Union as of 
1 February 2020, according to Article 92 of the Agreement on the withdrawal of the United Kingdom of 
Great Britain and Northern Ireland from the European Unio n and the European Atomic Energy 
Community (OJ L 29, 31.1.2020, p. 7), the Commission continues to be competent to apply Union law as 
regards the United Kingdom for administrative procedures which were initiated before the end of the 
transition period.  
3  OJ L 1, 3.1.1994, p. 3 (the ‘EEA Agreement’).  
In the published version of this decision, 
some information has been omitted 
pursuant to Article 17(2) of Council 
Regulation (EC) No 139/2004 concerning 
non-disclosure of business secrets and other  
confidential information. The omissions are 
shown thus […] . Where possible the 
information omitted has been replaced by 
ranges of figures or a general description.  
 
 
2 Covestro AG (“Covestro”, Germany) acquires within the meaning of Article 3(1)(b) 
of the Merger Regulation control of the Resi ns & Functional Materials businesses (“  
the Target”) of Koninklijke DSM N.V (“DSM”, Netherlands)  (“the proposed 
Transaction”)4. The concentration is to be accomplished by way of purchase of shares  
and assets5. Covestro (“the Notifying Party”) and the Targe t are designated 
hereinafter as the “ Parties” or “ Parties to the proposed transaction”.  
1. THE PARTIES  
(2) Covestro focuses on the supply of high -performance polymers and components for 
such polymers. Covestro operates three segments: Polyurethanes (“ […]”*), 
Polycarbonates, and Coatings, Adhesives, Specialties.  
(3) The Target is primarily active in the supply of resins for the use in coatings , the 
supply of glass fibre coatings.  The Target is also active in anti -reflective coatings 
used in particular for solar glass panels, 3D -printing materials and adhesives , 
although these products only constitute a minor part of the Target’s activities 
compared to the supply of resins for the use in coatings and the supply of glass fibre 
coatings . Covestro is not present in these last three areas.  
2. THE OPERATION  AND THE CONCERTATIO N 
(4) Pursuant to a sale and purchase agreement, Covestro will acquire through its wholly -
owned subsidiary Covestro Deut schland AG , and MS Holding B.V. , a wholly -owned 
subsidiary of Covestro Deutschland AG , all the shares in several companies (and, 
indirectly, their respective subsidiaries) which carry out the Target’s activities , 
including DSM Niaga®6, DSM Additive Manufac turing7 and the coatings activities 
of DSM Advanced Solar  8. 
(5) After the completion of the concentration, the Target will thus be (indirectly) 
wholly -owned and solely controlled by Covestro. As Covestro will (indirectly) 
acquire and, post -transaction, hold 100% of the shares of the Target9, the latter will 
be solely controlled by Covestro.  
                                                 
4  Publication in the Official Jou rnal of the European Union No C 5 , 07.01.2021,  p. 20. 
5  See Form CO paragraphs 36 – 38 
* Should read: “PUR”.  
6  DSM Niaga is active in the manufacture of carpets, matresses an d panels, see : https://www.dsm -
niaga.com  
7  DSM Additive Manufacturing is a line of business of the Target, active in 3D printing, see 
https://www.dsm.com/additive -manufacturing/en_US/home.html  
8  Covestro AG will in particular acquire all the shares in D SM R esins  Holding  (Nederland ) B.V., DSM 
Neoresins  Holdings  B.V., DSM C oating  Resins  INC., DSM D esotech Inc.,  Healthy Nest Inc., DSM 
Coating  Resins  Spain, S.L.U., DSM K unstharze  GMBH, DSM Coating  Resins International Holding  B.V. 
and DSM M aterial  Science  & Technology  (Shangai ) CO. LTD.  
9  Including a limited number of assets relating to the T arget’s sales agency activities, see Form CO, 
paragraph 38.  
 
 
3 3. UNION  DIMENSION  
(6) Covestro and the Target have a  combined aggregate world wide turnover of more 
than EUR 5 000 million ( Combined: EUR […], Covestro: EUR 12 412 million, 
Target: EUR […]). Each of the Parties has an EU -wide turnover in excess of EUR 
250 million (Covestro: EUR […], Target: EUR […]). 
(7) Covestro and the Target do not achieve more than two -thirds of their aggregate EU-
wide turnover  within one and the same Member State.  
(8) The notified operation therefore has a Union dimension.  
4. COMPETITIVE ASSESSMEN T 
4.1. Analytical framework  
(9) Under Articles 2(2) and 2(3) of the Merger Regulation, the Commission must assess 
whether a proposed concentration w ould significantly impede effective competition 
in the internal market or in a substantial part of it, in particular through the creation 
or strengthening of a dominant position.  
(10) A concentration can entail horizontal effects. In this respect, in addition t o the 
creation or strengthening of a dominant position, the Commission Guidelines on the 
assessment of horizontal mergers under the Merger Regulation10 (“the Horizontal 
Merger Guidelines”) distinguish between two main ways in which mergers between 
actual or  potential competitors on the same relevant market may significantly impede 
effective competition,11 namely (a) by eliminating important competitive constraints 
on one or more firms, which consequently would have increased market power, 
without resorting to  coordinated behaviour (non - coordinated effects); and (b) by 
changing the nature of competition in such a way that firms that previously were not 
coordinating their behaviour are now significantly more likely to coordinate and 
raise prices or otherwise ha rm effective competition. A merger may also make 
coordination easier, more stable or more effective for firms, which were coordinating 
prior to the merger (coordinated effects).  Concentrations which, by reason of the 
limited market share of the undertaking s concerned are not liable to impede effective 
competition may be presumed to be compatible with the internal market. An 
indication to this effect exists, in particular, where the market share of the 
undertakings concerned does not exceed 25 % either in th e internal market or in a 
substantial part of it.12 
(11) Furthermore, a concentration can entail vertical effects. The Commission Guidelines 
on the assessment of non -horizontal mergers under the Merger Regulation13 (the 
“Non - Horizontal Merger Guidelines”) also d istinguish between two main ways in 
which non -horizontal mergers may significantly impede effective competition: (a) 
                                                 
10  Commission Guidelines on the assessment of horizontal mergers under the Merger Regulation, OJ C 31, 5 
February 2004, p aragraph  5–18.  
11  ibid, paragraph 22.  
12  ibid, paragraph 18.  
13   Commission Guidelines on the assessment of non -horizontal mergers under the Merger Regulation , OJ C  
265, 18  October 2008, p aragraphs  6–25.  
 
 
4 when they give rise to input and/or customer foreclosure (non -coordinated effects); 
and (b) when the merger changes the nature of competiti on in such a way that firms 
that previously were not coordinating their behaviour, are now more likely to 
coordinate to raise prices or otherwise harm effective competition (coordinated 
effects).14 The Non -Horizontal Merger Guidelines distinguish two types of 
foreclosure: (a) where the merger is likely to raise the costs of downstream rivals by 
restricting their access to an important input (input foreclosure) and (b) where the 
merger is likely to foreclose upstream rivals by restricting their access to a su fficient 
customer base (customer foreclosure)15. According to the Non -Horizontal Merger 
Guidelines, the Commission is unlikely to find concern in non -horizontal mergers, 
where the market share post -merger of the new entity in each of the markets 
concerned i s below 30%.16 
4.2. Relevant markets  
4.2.1.  Coating resins  
(12) A coating can be any preparation which is used to provide a film with decorative, 
protective or other  functional  effect  on  a  surface. Resins are essential elements of 
the coating formulation. They bind the  various components of a coating together into 
a film and bond the film to the substrate e.g., a car door, a piece of wooden furniture 
or the exterior of a fridge. Also , they determine the performance characteristics of 
the coatings, such as gloss, durabil ity, smoothness, flexibility, weatherability and 
resistance.  Both Covestro and the Target produce coating resins . 
4.2.1.1.    Product market definition  
(A) Past decisions of the Commission  
(13) The Commission has previously considered a segmentation of the relevant product 
market for the supply of coating resins by (i) delivery technology, (ii) chemistry and 
(iii) industrial application.17  
(14) A segmentation by delivery  technology distinguishes between the following 
categories of coating resins: (i) liquid resins that can be fur ther segmented into 
solventborne (“SB”) and waterborne (“WB”) resins, (ii) radiation curable resins 
(“UV”) and (iii) powder resins. The Commission considered that l iquid  (WB and 
SB), radiation curable and powder resins differ from one another in terms of 
production process, the way they are applied to the substrate, the curing time, the 
residue they leave behind and their environmental friendliness  and are not 
substitutable with one another  and constitute separate markets . 18 
(15) A segmentation by chemistry  distinguishes coating resins by reference to the base 
chemical compound of the resin. Common chemistries of coating resins include 
                                                 
14  ibid, para graph s 17-19. 
15  ibid, para graph  30.  
16  ibid, para graph  25.  
17  M.8019 – Advent International / Nuplex Industries, paragraph s 12 et seq.; M.9353 – Advent International 
Corporation / Evonik Methacrylates Business Division, paragraph s 42 - 51.   
18  M.8019 – Advent International / Nup lex Industries, paragraph 15; M.9353 – Advent International 
Corporation / Evonik Methacrylates Business Division, paragraph s 51. 
 
 
5 acrylics, alkyds, epoxies, polyurethanes and polyesters – or hybrids thereof, 
comprising two or more such chemistries. Different base chemicals impart different 
performance characteristics to the coating, and the chemistry that a resin 
manufacturer and its customers choose is generally driven by the requirements of the 
coating’s intended industrial application. The Commission has th erefore considered 
that resins based on different chemistries are not substitutable with one another  and 
constitute separate markets . 19 In addition, the Commission has examined separate 
product markets for hybrid resins, which are obtained where two resins  are reacted 
together through a chemical process (referred to as “hot blend” process), meaning 
these are not simple blends of different products (simple blending is also referred to 
as “cold blend” process) , but has left the market open .  20 
(16) By reference to  the industrial application21, the Commission has previously 
considered segmenting coating resins into: (i) Automotive OEM (including car and 
light commercial vehicle and SUV, automotive OEM plastic and metal parts); (ii) 
Automotive refinish; (iii) Industri al Wood; (iv) Coil and pre -coated metals (“PCM”) , 
including coil, pre -coated sheet (including powder for appliances) - strips and 
aluminium extrusions; (v) Other Industrial (including agriculture, construction, 
aerospace, heavy duty trucks, buses, other la nd transportation, electrical, plastic, 
general metal and other non -wood and non -coil products); (vi) Marine; (vii) Special 
Purpose (including protective, industrial maintenance, traffic paint, and other 
performance air -drying applications); (viii) Packagi ng; (ix) Architectural (including 
decorative and protective paint coatings); and (x) Adjacent coating and non -coating 
applications (including resins not assigned to specific coating applications (such as 
textile or inks), and/or resins used for non -coating  applications such as rubber and 
tires or adhesives) . While considering it appropriate to segment the market for 
coating applications by industrial applications as well, the Commission left the 
market open.  
(B) The view of the Notifying Party  
(17)  In line with th e Commission’s decisional practice, the Notifying Party suggest s to 
analyse coating resins by distinguishing between different delivery technologies and 
chemistries, and, in addition, by potentially distinguishing between industrial 
applications.22 
(C) Results of the market investigation  
(18) The market investigation strongly indicated the respondents’ support for the 
Commission’s precedents regarding the product market definition for coating 
resins.23 
                                                 
19  M.8019 – Advent International / Nuplex Industries, paragraph 30; M.9353 – Advent International 
Corporation / Evonik Methacry lates Business Division, paragraph 51.  
20  M.4071 – Apollo / Akzo Nobel LAR, paragraph 34.  
21  M.8019 – Advent International / Nuplex Industries, paragraphs 30 -31; M .9353 – Advent International 
Corporation / Evonik Methacrylates Business Division, paragraph 51. 
22  See Paragraph 101 Form CO.  
23  See replies to questions 3 – 5, Q3 - Questionnaire to Downstream Customers  and questions 7 – 9 Q2 – 
Questionnaire to Downstream Competitors (Coating components manufacturers) . 
 
 
6 (D) Commission’s conclusions  
(19) In the present case and taking into acco unt the results of the market investigation , the 
Commission will analyse coating resins on the basis of a segmentation by  chemistry  
as well as a segmentation by  delivery technology and then by potentially  
distinguishing between  industrial  application s, since a distinction by industrial 
application  does in any event not impact the outcome of the competitive assessment  
of the transaction .  
4.2.1.2.    Geographic market definition  
(A)  Past decisions of the Commission  
(20) In past decisions , the Commission considered that the  geographic market for the 
supply of coating resins is likely EEA -wide in scope24, but has also examined a 
worldwide market25.    
(B) The view of the Notifying Party  
(21) The Notifying Party submits that the geographic scope of each of the coating resins’ 
markets/se gments is at least EEA -wide, but also submits data for world wide 
markets.26 
(C) Results of the market investigation  
(22) The market investigation results indicated that the majority of the respondents 
support an EEA -wide geographic market definition for the supply of coating resins. 
There were however  some respondents who indicated that the geographic market 
definition is worldwide.27 
(D) Commission’s conclusions  
(23) In the present case ,  taking into account the results of the market investigation , the 
Commission does not fi nd any reason to depart from the approach adopted in past 
cases28,  since the exact geographic market definition for coating resins (EEA -wide 
or worldwide)  does not impact on the outcome of the competitive assessment of the 
transaction.  
4.2.1.3.  Overall conclusion on the market definition for coating resins  
(24) For the purposes of this Decision, the Commission will discuss coating resins on the 
basis of chemistry and delivery technology and then potentially  distinguish between 
industrial applications for either an EEA -wide or worldwide geographic market 
definition .  
                                                 
24  M.9353 – Advent International Corporatio n / Evonik Methacrylates Business Division, paragraph 5 8;  
25  M.8019 – Advent International / Nuplex Industries, paragraph 3 8. 
26  See Paragraph s 103 & 104  Form CO  
27  See replies to questions 6.1 – 6.4, Q3 - Questionnaire to Downstream Customers  and question 13 Q2 – 
Questionnaire to Downstream Competitors (Coating components manufacturers) . 
28  M.9353 – Advent International Corporation / Evonik Methacrylates Business Division ; M.8019 – Advent 
International / Nuplex Industries . 
 
 
7 4.2.2.  Crosslinkers  
4.2.2.1.    Product market definition  
(25) Crosslinkers are hardeners that are frequently used in coating formulations to create 
bonds between the resin molecule chains to solidify a coating and enhance its 
performance. Crosslinkers are mixed with coating resins and other coating 
components in a coating formulation. After application of the coating and 
evaporation of the solvent, the cross -linking reaction takes place at ambient or 
increased temperature . Both  Covestro and the Parties produce crosslinkers.  
(A) Past decisions of the Commission  
(26) The Commission has  on the basis of chemistry , previously identified two types of 
crosslinkers: (i) crosslinkers -amino resins, and (ii) crosslinkers -phenolic resins.29 
Regarding  crosslinkers -phenolic resins, a further distinction has been made between 
liquid phenolics (resols) and solid phenolics (novolacs).30 The Commission also 
examined a separate product market specifically for oligomers produced on the basis 
of hexamethylene diisocyanate (“HDI”  oligomers ).31 The Commission found that 
HDI oligomers belong to the chemical class of polyisocyanates , which can be used 
as crosslinkers in coating formulations (polyisocyanate crosslinkers).32 
(27) For crosslinkers -amino resins and crosslinker s-phenolic resins, the Commission has 
previously considered a further  possible  segmentation distinguishing between the 
same industrial applications as for coating resins  (see paragraph (16) above) .33 
(28) For polyisocyanate crosslinkers, the Commission found that it would not be 
appropriate to further segment HDI oligomers into industrial applications because 
the same HDI oligomers can  be used in any coating application without any quality 
or functional differences.34 
(B) The view of the Notifying Party  
(29) The Notifying Party does not contest35 the Commission precedents and further 
submits36 that there exist two additional distinct chemical clas ses on which 
crosslinkers can be based, namely aziridines (where only the Target is active) and 
carbodiimides (where both Parties have some limited activities). The Notifying Party 
submits that crosslinkers -amino resins, crosslinkers -phenolic resins, aziri dines 
crosslinkers and carbodiimide crosslinkers should also be potentially analysed on the 
basis of industrial application , while polyisocyanate crosslinkers should not. 
                                                 
29  M.8019 – Advent I nternational / Nuplex Industries para graph 16  . 
30  M.8019 – Advent International / Nuplex Industries paragraph 16.  
31  M.8674 – BASF / Solvay’s Polyamide Business, paragraphs 362 et seq.  
32  M.8674 – BASF / Solvay’s Polyamide Business, paragraphs 362 et seq.   
33  M.8019 – Advent International / Nuplex Industries, paragraph s 16 - 30. 
34  M.8674 – BASF / Solvay’s Polyamide Business, paragraphs 365 -367. 
35  See Form CO, paragraph 114.  
36  See Form CO, paragraph 1 09. 
 
 
8 (C) Results of the market investigation  
(30) Responses in the market investigation supported the Parties ’ suggestion  regarding 
the product market definition for crosslinkers. 37 
(D) Commission’s conclusions  
(31) In the present case, the Commission will discuss crosslinkers on the basis of 
chemistry .  For  crosslinkers -amino resins , crosslinkers -phenolic res ins, aziridines 
crosslinkers and carbodiimide crosslinkers , the Commission will also potentially 
distinguish  between industrial application s, while for polyisocyanate crosslinkers 
not. 
4.2.2.2.    Geographic market definition  
(A)  Past decisions of the Commission  
(32) The Commission has previously left open the question of whether the relevant 
geographic market is worldwide or EEA -wide in scope, and examined the potential 
effects of the proposed concentration both on a worldwide and on an EEA -wide 
level.38 
(B) The view of th e Notifying Party  
(33) The Notifying Party submits that the geographic scope for crosslinkers is at least 
EEA -wide, but also submits data for world wide markets.39 
(C)  Results of the market investigation  
(34) Responses in the market investigation do not provide  a clear  picture as to whether  
the geographic market definition for crosslinker s should be EEA -wide, or 
worldwide.  40  
(D) Commission’s conclusions  
(35) In the present case , taking into account the results of the market investigation, the 
Commission does not find any reason  to depart from the approach adopted in past 
cases41 since the exact geographic market definition (EEA -wide or worldwide) for 
crosslinkers  does not impact on the outcome of the competitive assessment of the 
transaction.  
4.2.2.3.   Overall conclusion on the market de finition for crosslinkers  
(36) For the purposes of this Decision, the Commission will discuss crosslinkers on the 
basis of chemistry . For crosslinkers -amino resins , crosslinkers -phenolic resins, 
                                                 
37  See replies to Q3 - Questionnaire to Downstream  Customers and Q2 – Questionnaire to Downstream 
Competitors (Coating components manufacturers).  
38  M.8019 – Advent International / Nuplex Industries, paragraphs 32 -38. 
39  See Paragraph s 103 & 104  Form CO . 
40  See replies to Q3 - Questionnaire to Downstream Customers and Q2 – Questionnaire to Downstream 
Competitors (Coating components manufacturers).  
41  M.8019 – Advent International / Nuplex Industries, paragraphs 32 -38. 
 
 
9 aziridines crosslinkers and carbodiimide crosslinkers , the Commiss ion will also 
potentially distinguish between industrial applications, while for polyisocyanate 
crosslinkers not . The Commission will discuss these markets for either an EEA -wide 
or worldwide geographic market definition.  
4.2.3.   Diisocyanates  
4.2.3.1.  Product market definition  
(37) Diisocyanates are used in the production of coating components, more specifically, 
in the production of  polyurethane resins  (“PU Resins ”) and in the production of 
polyisocyanates  (also referred to as polyisocyanate crosslinkers). Only Covestro 
produces diisocyan ates. Different compounds of diisocyanates include:  
(a) toluene diisocyanate (“TDI”)  
(b) methylene diphenyl diisocyanate MDI and monomeric MDI (“mMDI”)  
(c) hexamethylene diisocyanate (“HDI”)  
(d) isophorone diisocyanate (“IPDI”)  
(e) 4,4′-Dicyclohexylmethane  diisocyanate (“H 12MDI”)  
(A) Past decisions of the Commission  
(38) The Commission has previously considered a segmentation of diisocyanates by 
compound, and has found that TDI and MDI constituted distinct product markets.42 
The Commission has also considered that HDI is a distinct product market  without 
further segmentations .43 Finally, the Commission has previously considered a 
segmentation of isocyanate compounds between diisocyanates and polyisocyanates 
and has assessed HDI  separately from HDI Oligomers ( or HDI 
polyisocyanates).44The Commission concluded that HDI is an aliphatic 
diisocyanate,45 as opposed to aromatic diisocyanate.  
(B) The view of the Notifying Party  
(39) The Notifying Party does not contest the Commission precedent s and further 
explains that diisocyanates  overall  can be segmented into aromatic diisocyanates, 
which are used predominantly for the production of foams, and aliphatic 
diisocyanates, which are used predominantly for coatings applications, due to their 
superior light stability. Each category includ es a number of different diisocyanate 
compounds. Aromatic diisocyanates include TDI , MDI  and mMDI, whereas 
aliphatic diisoc ynates include HDI, IPDI, and H 12MDI. The Notifying Party submits 
that the possible sub -segmentation by compound (i.e. MDI, TDI) can be left open, as 
the Transaction does not raise competitive concerns under any plausible market 
definition . 
                                                 
42  M.2355 – The Dow Chemical Company / EniChem S.p.A.  
43  M.8674 – BASF SE / Solvay S.A.  
44  M.8674 – BASF SE / Solvay S.A.  
45  M.8674 – BASF SE / Solvay S.A., paragr aph 362.  
 
 
10 (C) Results of the market investigation  
(40) The majority of the respondents to the  market investigation took the view that each 
of HDI, IPDI, H 12MDI, TDI, MDI and mMDI could be viewed as separate 
markets .46 
(D) Commission’s conclusion  
(41) In the present case and on the basis of paragraph (39) above, the Commissio n will 
separately assess  in line with the Commission precedents each of HDI, IPDI, 
H12MDI, TDI, MDI and mMDI . 
4.2.3.2.  Geographic market definition  
(A) Past decisions of the Commission  
(42) In previous decisions in the sector, the Commission has considered the geographic 
markets for the supply of diisocyanates to be at least EEA -wide in scope.47 
(B) The view of the Notifying Party  
(43) The Notifying Party does not contest the Commission precedent.  
(C) Results of the market investigation  
(44) The market investigation confirmed that the geogr aphic market for diisocyanates and 
the sub -segments thereof is at least EEA -wide in scope and possibly worldwide.48 
(D) Commission’s conclusion  
(45) In the present case and taking into account the results of the market investigation , the 
Commission considers the exact geographic market definition for diisocyanate 
compounds  can be left open, since the exact geographic market definition (EEA -
wide or worldwide) for crosslinkers does not impact on the outcome of the 
competitive assessment of the transaction .  
4.2.3.3.  Overall conclusion on the market definition for diisocyanates  
(46) For the purposes of this Decision, the Commission concludes that  the market for 
diisocyanates can be segmented by compound (i.e. HDI, IPDI, H 12MDI, TDI, MDI 
and mMDI ) without furt her segmentation  and without a need to de cide whether the 
geographic market is  EEA -wide or worldwide in scope  as it would not impact the 
competitive assessement . 
                                                 
46  See replies to que stions 3 – 20 Q1 - Questionnaire to Upstream Competitors  and questions 4 - 6.3 Q2 – 
Questionnaire to Downstream Competitors (Coating components manufac turers) . 
47  M.8674 – BASF SE / Solvay S.A., paragra ph 376; M.2355 – The Dow Chemical Company / EniChem 
S.p.A, paragraph  17; M.4177 – BASF Aktiengesellschaft / Degussa AG, paragraph  33, M.3125 – 
Huntsman Holdings LLC / Vantico Group S.A., paragraph   15. 
48  See replies to questions 34 – 36 Q1 - Questionnaire to Upstream Competitors and questions  10 - 12 Q2 – 
Questionnaire to Downstream Competitors (Coating components manufacturers) . 
 
 
11 4.2.4.  Linear polyols  
4.2.4.1.  Product market definition  
(47) Linear polyols are versatile intermediate chemicals with a wide range of uses such as 
components in the production of polyurethanes. Linear polyols can be used as inputs 
in the production of  thermoplastic urethanes  (“TPUs ”), elastomers and PU Resins. 
The principal use of linear polyols is the fabrication of  polyurethane foam. In the 
production of PU Resins, the linear polyols that are most commonly used are 
polyether and polyester diols. Polycarbonate diols , another linear polyol,  are also 
used for the production of PU Resins, but in much smaller volumes.  Only Covestro 
produces linear polyols.  
(A) Past decisions of the Commission  
(48) The Commission has previously distinguished between polyether and polyester 
polyols  (or diols)  as a result of their different physical properties and applications, 
finding that these con stitute two distinct product markets.49. The Commission has 
not previously defined a relevant product market for polycarbonate diols.  
(B) The view of the Notifying Party  
(49) The Notifying Party does not contest the Commission precedent.  
(C) Results of the market inve stigation  
(50) The majority of the respondents to the market investigation took the view that 
separate product markets should be considered for polyester, polyether and 
polycarbonate diols.50 
(D) Commission’s conclusion  
(51) In the present case and on the basis of paragraph (48) above, the Commission in line 
with the Commission precedents, will assess separately each of p olyester, polyether 
and polycarbonate diols . 
4.2.4.2.  Geographic market definition  
(A) Past Decisions of the Commission  
(52) In previous decisions, the Commission has considered the geographic markets for 
the supply of polyols to be at least EEA -wide in scope.51 
(B) The view of the Notifying Party  
(53) The Notifying Party does not contest the Commission precedent s.  
                                                 
49  M.1796 – Bayer Aktiengesellschaft / Lyondell Chemical Company, paragraph   9; M.2355 – The Dow 
Chemical Company / EniChem S.p.A, paragraph  9; M.3125 Huntsman Holdings LLC / Vantico Group 
S.A. 
50  See replies to questions 22 - 32 Q1 - Questionnaire to Upstream Competitors and  Q2 – Questionnaire to 
Downstream Competitors (Coating c omponents manufacturers) . 
51  M.1796 – Bayer Aktiengesellschaft / Lyondell Chemical Company, paragraph  13; M.3125 – Huntsman 
Holdings LLC / Vantico Group S.A. paragraph  15. 
 
 
12 (C) Results of the market investigation  
(54) The market investigation indicated that the geographic market for polyols and the 
sub-segments thereof is possibly worldwide in scope .52 
(D) Commission’s conclusion  
(55) In the present case, the Commission considers the exact geographic market 
definition can be left open as it does not impact the outcome of the competitive 
assessment regardless of whether it is EEA -wide or worldwide in scope . 
4.2.4.3.  Overall conclusion on the market definition for linear polyols  
(56) For the purposes of this Decision, the Commission  considers that in line with the 
Commission precedents, each of polyester, polyether and polycarbonate diols 
constitute separate markets,  without a  need to define whether the geographic market 
is EEA -wide or worldwide in scope  as it would not impact the competitive 
assessment . 
4.2.5.  Solar coatings  
4.2.5.1.  Product market definition  
(57) Solar coatings are the coatings used for solar panels and photovoltaic applications,  
and belong to the broader group of industrial coatings. The term industrial coating 
refers to products that are applied to industrial products in order to improve their 
surface properties, such as appearance, adhesion, wettability, corrosion resistance, 
wear resistance and scratch resistance. Only the Target is active in the production of 
solar coatings. Covestro does not have any waterborne acrylic resins in its offering 
corresponding to the resins the Target uses as an input for its solar coatings, nor d oes 
Covestro supply any other coating resins for solar coating applications.  
(A) Past Decisions of the Commission  
(58) The Commission previously53 distinguished various industrial coatings categories 
which were typically defined by reference to specific applications , such as coil 
coatings, wood finishes, protective and marine coatings, powder coatings, metal 
coating, packaging coatings, automotive refinish coatings, and other industrial 
coatings.  Solar coatings have not been separately assessed  by the Commission . 
(B) The view of the Notifying Party  
(59) In light of the fact that Covestro does not have any waterborne acrylic resins in its 
offering corresponding to the resins the Target uses as an input for its solar coatings, 
nor does Covestro supply any other coating resins for solar coating applications, the 
Notifying Party submits that whether the Target’s solar coatings form part of a 
separate market for solar coatings or belong to a broader market including also other 
glass coatings or even industrial coatings for non -glass applications can remain open 
                                                 
52  See replies to questions 37 - 39 Q1 - Questionnaire to Upstream Competitors and  Q2 – Questionnaire to 
Downstream Competitors (Coating components manufacturers).  
53  M.4853 – PPG / SigmaKalon, paragraphs 7 et seq.; M.1182 – Akzo / Nobel Courtaulds, paragraph 9.  
 
 
13 for the purpose of this Transaction, given that no issues arise whatever approach is 
taken.  
(C) Results of the market investigation  
(60) The market investigation did not point to a need to define a separate market for solar 
coatings .  
(D) Commission’s conclusion  
(61) In the present case, the Commission considers that the exact product market 
definition regarding solar coatings  does not impact the competitive assessment given 
the lack of any actual vertical relationships . 
4.2.5.2.  Geographic Market Def inition  
(A) Past Decisions of the Commission  
(62) For the coatings mentioned above in paragraph (58) the Commission left the 
geographic market open.  
(B) The view of the Notifying Party  
(63) The Notifying Party submits that the geographic market comprising the Target’s 
solar coating activities is global or at least EEA -wide. The transportation costs 
represent a small proportio n of the average sales value ([0 -5]% for overseas sales). 
Customers, typically glass companies without in -house coating production 
capabilities, tend to source coatings on a global basis. By way of example, […]. As 
far as the Target is concerned, […]. Among others, DSM exports solar coating s to 
[…].  
(C) Results of the market investigation  
(64) The market investigation was not conclusive as to whether the possible market for 
solar coatings is EEA -wide or worldwide in scope.  
(D) Commission’s conclusion  
(65) In the present case , the Commission considers that the exact geogra phic market 
definition regarding solar coatings  does not impact the competitive assessment give 
the lack of actual vertical relationships . 
4.2.5.3.  Overall conclusion on the market definition for solar coatings  
(66) For the purposes of this Decision, the Commission considers that the exact market 
definition regarding solar coatings does not impact the competitive assessment given 
the lack of any actual vertical relationships .54 
                                                 
54  This theoretic only vert ical relationship arises between Covestro’s coating resins activities (upstream) and 
the Target’s solar coating activities (downstream), if a broader market for waterborne acrylic resins across 
all applications is considered. However, Covestro does not hav e any waterborne acrylic resins in its 
offering corresponding to the resins the Target uses as an input for its solar coatings, nor does Covestro 
 
 
 
14 4.3. Assessment  
4.3.1.  Horizontally affected markets  
(67) The Transaction gives rise to a very large number of horizontal links between 
Covestro and the Target with regard to coating resins and crosslinkers  (“coating 
components”).  The Commission has examined all these links under all the possible 
market definitions, as set out in Section 4.2 above and has identified a number of 
affected markets.  
(68) For coating resins, the following horizontally affected markets arise : :  
a. Horizontally affected markets with an  EEA -wide scope : (i) waterborne acrylics for 
industrial wood uses, (ii) waterborne acrylics for special purpose uses, (iii) 
waterborne polyurethanes overall, (iv) waterborne polyurethanes for adjacent coating 
and non -coating applications, (i v) waterborne polyurethanes for architectural uses, 
(v) waterborne polyurethanes for automotive OEM uses, (vi) waterborne 
polyurethanes for other industrial uses, (vii) solventborne saturated polyesters for 
adjacent coating and non -coating applications, (v iii) solventborne saturated 
polyesters for automotive refinish uses, (ix) solventborne saturated polyesters for 
coil and PCM uses, (x) radiation curable polyurethanes overall, (xi) radiation curable 
polyurethanes for architectural uses, (xii) radiation cur able polyurethanes for 
industrial wood uses  and (xiii) radiation curable polyurethanes for other industrial 
uses.  
b. Horizontally affected markets with a worldwide -scope : (i) waterborne polyurethanes 
for industrial wood uses, (ii) waterborne acrylics for spec ial purpose uses, (iii) 
waterborne polyurethanes overall, (iv)  waterborne polyurethanes for adjacent 
coating and non -coating applications, (v) waterborne polyurethanes for architectural 
uses, (vi) waterborne   polyurethanes for automotive OEM uses, (vii) w aterborne 
polyurethanes for special purposes, (viii) radiation curable polyurethanes overall, 
(ix) radiation curable polyurethanes for architectural uses, (x) radiation curable 
polyurethanes for industrial wood uses  and (xi) radiation curable polyurethanes  for 
other uses . 
(69) For crosslinkers, the following horizontally affected markets arise:  
a. Horizontally affected markets with an EEA -wide scope : (i) polyisocyanate 
crosslinkers overall and (ii) polyisocyanate crosslinkers for HDI oligomers;  
b. Horizontally affecte d markets with a worldwide -wide scope : (i) polyisocyanate 
crosslinkers overall and (ii) polyisocyanate crosslinkers for HDI oligomers.  
(70) The horizontal overlaps do not lead to any other affected markets under any of the 
possible market definitions  set out in  section 4.2 above, either at an EEA -wide or 
                                                                                                                                                      
supply any other coating resins for solar coating applications. Thus, any input and customer foreclosure 
post-Transaction is unlikely. In light of this, this vertical relationship will not be further discussed in this 
Decision . 
 
 
15 world -wide level , and these non -affected markets will not be further discussed in the 
present decision .55. 
(71) The Parties have provided market shares both on volume and value terms. The 
present assessment is conducted on a volume basis since no substantial differences 
arise for an assessment on a value basis , since on a value basis there are less affected 
market s and combined market shares do not vary much .  
4.3.1.1.  Market shares  
(72) The tables below provide the Parties’ combined market shares, as well as the post -
merger concentration levels and the HHI deltas for all affected markets for (a) 
coating resins, and (b) crosslinkers . 
 Table 1.  Parties’ market shares in the EEA (2019) in volume  (kt) 
Coatings  
Delivery  Chemistry  Segment  Covestro  Target  Combined  Post-
merger 
HHI  HHI 
delta  Category  
waterborne  acrylics  Industrial 
Wood  <[0-5]% [30-40]%  [30-40]%  […] […] B 
waterborne  acrylics  Special 
Purpose  <[0-5]% [20-30]%  [20-30]%  […] […] B 
waterborne  polyurethane
s Overall  [20-30]% [5-10]% [20-30]%  […] […] C 
waterborne  polyurethane
s Adjacent 
coating and 
non-coating 
applications  [30-40]%  [0-5]% [30-40]%  […] […] B 
waterborne  polyurethane
s Architectural  [0-5]% [20-30]%  [20-30]%  […] […] A 
waterborne  polyurethane
s Automotive 
OEM  [30-40]%  <[0-5]% [30-40]%  […] […] B 
waterborne  polyurethane
s Other 
Industrial  [10-20]%  [10-20]%  [20-30]%  […] […] C 
solventborne  saturated 
polyesters  Adjacent 
coating and 
non-coating 
applications  [10-20]%  [10-20]%  [20-30]%  […] […] A 
solventborne  saturated 
polyesters  Automotive 
Refinish  [10-20]%  [10-20]%  [20-30]%  […] […] A 
                                                 
55  See Table 4 Form CO and Annex 3 to the Supplementary Letter to the Form CO (updated Annex 7 to the 
Form CO) , submitted on 11/01/2021 . 
 
 
16 Coatings  
solventborne  saturated 
polyesters  Coil and 
PCM  <[0-5]% [20-30]%  [20-30]%  […] […] A 
radiation 
curable  polyurethane
s Overall  [5-10]%  [10-20]%  [20-30]%  […] […] C 
radiation 
curable  polyurethane
s Architectural  [10-20]%  [5-10]%  [20-30]%  […] […] A 
radiation 
curable  polyurethane
s Industrial 
Wood  [5-10]%  [20-30]%  [30-40]%  […] […] C 
radiation 
curable  polyurethane
s Other 
Industrial  [5-10]%  [20-30]%  [30-40]%  […] […] C 
Crosslinkers  
Delivery 2 Chemistry  Segment  Covestro  Target  Combined  Post-
merger 
HHI  HHI 
delta  Category  
 polyisocyanat
e crosslinkers  Overall 
Oligomers  [20-30]%  <[0-5]% [20-30]%  […] […] B 
 polyisocyanat
e crosslinkers  HDI 
oligomers  [20-30]%  <[0-5]% [20-30]%  […] […] B 
Source: Form CO  
Table 2.   Parties’ market shares in the worldwide (2019) in volume  (kt) 
Coatings  
Delivery  Chemistry  Segment  Covestro  Target  Combined  Post 
Merge
r HHI  HHI 
delta  Category  
waterbor
ne acrylics  Industrial Wood  <[0-5]% [10-20]%  [20-30]%  […] […] A 
waterbor
ne acrylics  Special Purpose  <[0-5]% [20-30]%  [20-30]%  […] […] A 
waterbor
ne polyurethan
es Overall  [10-20]%  [5-10]%  [20-30]%  […] […] A 
waterbor
ne polyurethan
es Adjacent coating and 
non-coating 
applications  [20-30]%  <[0-5]% [20-30]%  […] […] A 
waterbor
ne polyurethan
es Architectural  [0-5]% [20-30]%  [20-30]%  […] […] B 
waterbor
ne polyurethan
es Automotive OEM  [20-30]%  [0-5]% [20-30]%  […] […] B 
 
 
17 Coatings  
waterbor
ne polyurethan
es Special Purpose  [5-10]%  [10-20]%  [20-30]%  […] […] A 
radiation 
curable  polyurethan
es Overall  [5-10]%  [10-20]%  [20-30]%  […] […] A 
radiation 
curable  polyurethan
es Architectural  [10-20]%  [5-10]%  [20-30]%  […] […] A 
radiation 
curable  polyurethan
es Industrial Wood  [10-20]%  [20-30]%  [30-40]%  […] […] C 
radiation 
curable  polyurethan
es Other Industrial  [10-20]%  [10-20]%  [20-30]%  […] […] C 
Crosslinkers  
 Chemistry  Segment  Covestro  Target  Combined  Post Merge r 
HHI  HHI 
delta  Category  
polyisocyanate 
crosslinkers  Overall 
oligomers  [20-30]%  <[0-5]% [20-30]%  […] […] B 
polyisocyanate 
crosslinkers  HDI 
oligomers  [30-40]%  <[0-5]% [30-40]%  […] […] B 
Source: Form CO  
(73) For the purposes of assessing this case, the Commission grouped the affected 
markets in three large categories :  
 The first category is composed of markets which fall under the conditions 
discussed in paragraph (10) above and outlined in paragraph 18 of the 
Horizontal Merger Guidelines, that is, the combined market share of the 
undertakings concerned does not exceed 25% either in the Internal Market or 
in a substantial part of it , (“Category A” markets);  
 The second category  is composed of markets which fall under the under the 
conditions outlined in Paragraph 20 of the Horizontal Mergers Guidelines 
that is, either the post -merger HHI is between 1 000 and  2 000 and the delta 
is below 250, or the post -merger HHI is above 2 000 and the delta is below 
150 (“category B” markets);  
 The third category is composed of affected markets that do not fall under 
either of the two above categories (the “Other Affected Ma rkets”).  
(74) The Category A markets are:  
a. in the EEA: (i) waterborne polyurethanes for architectural uses, (ii) solventborne 
saturated polyesters for adjacent coating and non -coating applications; (iii) 
solventborne saturated polyesters for automotive refinish  uses, (iv) solventborne 
saturated polyesters for coil and PCM uses and (v) radiation curable 
polyurethanes for architectural uses ; 
 
 
18 b. Worldwide:  (i) waterborne acrylics for industrial wood uses, (ii) waterborne 
acrylics for special purpose uses, (iii) water borne polyurethanes overall, (iv) 
waterborne polyurethanes for adjacent coating and non -coating applications, (v) 
waterborne polyurethanes for special purpose uses, (vi) radiation curable 
polyurethanes overall and (vii) radiation curable polyurethanes for architectural 
uses.  
(75) The Category B markets are : 
a. In the EEA: (i) waterborne acrylics for industrial wood uses, (ii) waterborne 
acrylics for special purpose uses, (iii) waterborne polyurethanes for adjacent 
coating and non -coating applications, (iv) waterbor ne polyurethanes for 
automotive OEM uses, (v) polyisocyanate crosslinkers overall, and (vi) 
polyisocyanate crosslinkers for HDI oligomers;  
b. Worldwide : (i) waterborne polyurethanes for architectural uses, (ii) waterborne 
polyurethanes for automotive OEM use s (iii) polyisocyanate crosslinkers overall, 
and (iv) polyisocyanate crosslinkers for HDI oligomers.  
(76) The Category C markets are : 
a. For the EEA: (i), waterborne polyurethanes overall,  (ii) waterborne polyurethanes  
for other industrial uses, (iii) radiation c urable polyurethanes overall; (iv) radiation 
curable polyurethanes for industrial wood and (v) radiation curable polyurethanes 
for other industrial uses;  
 
b. Worldwide: (i) radiation curable polyurethanes for industrial wood and (ii) radiation 
curable polyure thanes for other industrial uses.  
4.3.1.2.  The Notifying Party’s view  
(77) The Notifying Party firstly submits that the combined shares resulting from the 
transaction are moderate; increments are small and numerous alternative suppliers 
are present and will continue to  constrain the merged entity post transaction, in all 
instances where horizontally affected markets / segments arise. 56 
(78) According to the Notifying Party, these competitors often have a supply share that is 
larger than (or at least comparable to) the increm ent brought over by the transaction 
in several markets / segments. Competitors will generally have spare capacity and 
would be able to increase their capacity at relatively short notice without incurring 
prohibitive costs. These competitors could increase their production and easily 
absorb any increase of demand created from customers switching.  
(79) Secondly57, the Notifying Party submits that the Parties are not close competitors as 
they have different product and application focus.  
(80) Thirdly, the Notifying Part y submits that merged entity will continue to be 
constrained by rivals’ entry and expansion58 and it will face significant buyer power.  
                                                 
56  See Form CO paragraphs 196 -203. 
57  See Form CO paragraphs 204 – 209. 
 
 
19 4.3.1.3.  Results of the market investigation and Commission’s assessment  
(A) Category A and Category B markets  
(81) Category A markets, bo th at the EEA and worldwide levels , do not give rise to 
competition concerns  as they satisfy the criteria set out  in paragraph 18 of the 
Horizontal Mergers Guidelines. Additionally, the Commission notes that the 
majority of the responses of customers59 and of competitors60 of the Parties for each 
of the products of Category A markets did not indicate any concern.  
(82) For Category B markets, the Commission notes that for five out of six markets61 at 
the EEA level and two out of four markets62 at the worldwide level, the increments 
brought by the transaction are below [0-5]% and the HHI deltas are low (below 
100),. For two63 of the remaining markets, the increment brought by the transaction 
is just [0-5]% and the HHI deltas are also below 100. F or the remaining market  64 the 
combined market share is of only [20-30]%, the increment [0-5]%, the HHI delta is 
[…] and there are seven competitors of the Parties with market shares higher than 
the increment brought by the transaction. Additionally, the Co mmission notes that , 
as was the case for Category A markets, the majority of the responses of customers 
and of competitors of the Parties for each of the products of the Category B markets 
did not indicate any concern.  
(83) On the basis of paragraphs (81) and (82) the Commission considers that the 
Tran saction does not raise serious doubts as to its compatibility with the internal 
market as a result of horizontal non -coordinated effects on any of the Category A 
and Category B  Markets.  
(B) Category C markets  
(84) On an EEA -wide market for  waterborne polyurethanes overall , the combined market 
share of the Parties is [20-30]% . Covestro is already market leader pre -transaction. 
The increment brought over by the Target is relatively small ( [5-10]%) and t here are 
four competitors with market sh ares higher than this increment (Stahl [10-20]%, 
Allnex [10-20]% ; BASF [5-10]%, A&B [5-10]%). 
(85) On an EEA -wide market for  or waterborne polyurethanes for other industrial uses , 
the combined market share of the Parties is [20-30]% . Covestro is the second bigg est 
supplier behind Allnex and the merged entity will remain so post -transaction. The 
increment brought over by the Target  is [10-20]%. There are two competitors with 
higher or equal market shares (Allnex [30-40]%, Stahl [10-20]%). 
                                                                                                                                                      
58  See Form CO paragraphs 209 – 213. 
59  See replies to Q3 - Questionnaire to Downstream Customers.  
60  See replies to Q2 – Questionnaire to Downstream Competitors (Coating components man ufacturers) . 
61  (i) waterborne acrylics for industrial wood uses, (ii) waterborne acrylics for special purpose uses, (iii) 
waterborne polyurethanes for automotive OEM uses, (iv) polyisocyanate crosslinkers overall, and (v) 
polyisocyanate crosslinkers for H DI oligomers.  
62  (i) polyisocyanate crosslinkers overall, and (ii) polyisocyanate crosslinkers for HDI oligomers.  
63  Waterborne polyurethanes for adjacent coating and non -coating applications  in the EEA and waterborne 
polyurethanes for automotive OEM uses  worldwide.  
64  Waterborne polyurethanes for architectural uses worldwide.  
 
 
20 (86) On an EEA -wide market fo r or radiation curable polyurethanes overall , the 
combined market share of the Parties is [20-30]%. The Target  is the second bigge st 
supplier, together with Arkema, behind Allnex. The merged entity will become 
market leader post -transaction and the merged entity will remain so . The increment 
brought over by Covestro  is [5-10]%. There are four competitors with market shares 
higher than this increment (Allnex [20-30]% , Arkema [10-20]%, Alberdingk Boley 
(“A&B”) [10-20]% ) and BASF [10-20]% ). 
(87) On an EEA -wide market for or radiation curable polyurethanes for industrial wood 
combined market share of the Parties is [30-40]%. The Target  is the second bigger 
supplier behind Allnex. The merged entity will become market leader post -
transaction. The inc rement brought over by Covestro  is [5-10]% . There are three 
competitors with market shares higher than this increment (Allnex [20-30]% , 
Arkema [20-30]%  and A&B [10-20]% ).  
(88) On a  worldwide market definition  for radiation curable polyurethanes for industrial 
wood , the combined market share of the Parties is [30-40]% . The Target is the 
second bigge st supplier behind Allnex. The merged entity will become market leader 
post-transaction , but its market share will remain moderate . The second biggest 
player post -transaction has a market share close to the one of the merged entity. 
Moreover , the increment brought over by the Covestro is [10-20]%  and t here are 
three competitors with market shares higher than this increment (Allnex [20-30]% , 
Arkema [20-30]%  and A&B [10-20]% ). 
(89) On an EEA -wide market for or radiation curable polyurethanes for other industrial 
uses, the combined market share of the Parties is [30-40]% . The Target  is already 
market leader pre -transaction , but its market share remains moderate . The increment 
brought over by Covestro  is [5-10]% . There are four competitors with higher or 
equal market shares than this increment  (Allnex [10-20]% , Arkema [10-20]% , BASF 
[10-20]%  and A&B [5-10]% ).  
(90) On a worldwide market definition for radiation curable polyurethanes for other 
industrial uses , the combined market share of the Parties is [20-30]% . The Target is 
already market leader pre -transaction , but its market share remains moderate .  The 
increment brought over by Covestro is [10-20]% . There are two competitors with  
market shares higher than this increment (Allnex [10-20]%  and Arkema [10-20]% ). 
(91) The Commission notes that the combined market shares of the Parties for the 
Category C markets  are moderate and in any case never above [30-40]% . Post -
merger HHIs and HHI delt as remain moderate as well. Furthermore , for each of 
these markets there are between two and four competitors with market shares equal 
or higher than the increment brought over by the transaction.  The Commission notes 
that for all of these markets, either under an EEA, or a  worldwide market definition 
the main competitors are the same  well established mu ltinational chemical 
companies such as A&B, Allnex, Arkema  and BASF.  
(92) On the demand side, the Commission notes that for each of the products of the  
Category C markets , the majority of the customers responding in the market 
 
 
21 investigation indicated that they did not foresee the transaction to result either in 
price increase, or reduction of choice of the products in question.65 
(93) In the same v ein, for each of the p roducts of the Category C markets,  the majority of 
the customers responding in the market investigation and who are actually procuring 
these products  from the Parties  indicated that they have a good or very good 
negotiating power vis à vis the merged entity .66 Moreover, t hey expect that there will 
be a sufficient number of credible suppliers from which they will be able to procure 
the volumes they would need post -transa ction.67 Overall , the majority of the 
customers having replied does not foresee any negative consequences stemming for 
the Transaction, for any of the products under consideration.68 
(94) On the supply side, the majority of competitors of the Parties believes tha t for most 
of the products of the Category C markets, the transaction will not have a negative 
impact either on the price, or on the availability of volumes , given also the generally 
available spare production capacities .69  
(95) The Commission notes that for tw o of these products, namely (i) the overall market 
for waterborne polyurethanes, and (ii) the market for waterborne  polyurethanes for 
other industrial uses, the majority of responding competitors of the Parties indicated 
that an increase in prices and/or r eduction of choice might result from the 
transaction. 70 Nevertheless, these negative views are not particularly substantiated.71  
(96) Moreover, the Commission recalls that customers of the Parties did not raise any 
concerns in this respect . Furthermore, the Com mission  notes that for the overall 
market for waterborne polyurethanes there are four competitors with market shares 
above the increment brought by the Transaction, while for the market for waterborne 
polyurethanes for other industrial uses there are two,  one of which has a market 
share bigger th an the merged entity . 
(97) On the basis of the paragraphs (84) to (96) above , the Commission considers that the 
Transaction does not raise serious do ubts as to its compatibility with the internal 
market as a result of horizontal non -coordinated effects on any of the Category C  
Markets.  
4.3.1.4.  Overall c onclusion  on horizontally affected markets  
(98) In conclusion, for the reasons set out above , in paragraphs  (81) to (97), the 
Commission considers that the T ransaction does not raise serious doubts as to its 
compatibility with the internal market as a result of horizontal non -coordinated 
effects concerning (a) coating resins and (b) crosslinkers.  
                                                 
65  See replies to question s 12 - 16, Q3 - Questionnaire to Downstream Customers.  
66  See replies to question 11, Q3 - Questionnaire to Downstream Customers.  
67  See replies to question 11, Q3 - Questionnaire to Downstream Customers . 
68  See replies to question 11, Q3 - Questionnaire to Downstream Customers.  
69  See replies to question s 66, 68, 69, 75, 76 and 77,  Q2 – Questionnaire to Downstream Competitors 
(Coating components manufacturers) . 
70  See replies to questions 66, 69 and 77, Q2 – Questionnaire to Downstream Competitors (Coating 
components manufacturers).  
71  See replies to questions 66 .1, 69.1 and 77 .1, Q2 – Questionnaire to Downstream Competitors (Coating 
components manufacturers).  
 
 
22 4.3.2.  Vertically affected markets  
4.3.2.1.  Introduction  
(99) The Transaction gives rise to a large number of vertical relationships as a result of 
Covestro’s presence on the upstream markets concerning certain input products 
(e.g. polyols and isocyanates) that are used for the production of coating 
components (“input  materials for coating components”).   
(100)  Vertical relationships arise between, on the one hand, the upstream activities of 
Covestro relating to:  
(a) the supply of several diisocyanate compounds, in particular:  
– the aromatic diisocyanate compounds: TDI and mMDI;  
– the aliphatic diisocyanate compounds: HDI, IPDI, H 12MDI; and  
(b) the supply of linear polyols for use in PU Resins, in particular:  
– polyether diols;  
– polyester diols; and  
– polycarbonate diols;  
and on the other hand, the combined downstream activities of Covestro and of the 
Target relating to the supply of PU Resins , namely   
– PUDs ;  
– Radiation Curable PUDs ;  
– polyurethane -acrylic hybrids (“ PUD -PAC hybrids ”);  
– polyurethane -acrylic -alkyd hybrids (“ PUD -PAC -alkyd hybrids ”);  
– SB poly -urethanes ; and  
– Radiation curable ureth ane acrylates .  
(101)  The above listed vertical relationships give rise to several vertically affected markets 
at EEA and worldwide level, which are summarised in a schematic format in Tables  
3 and 4 below.   
  


 
 
25 Table 5. EEA supply share on coating resins markets (volume in mt 2019)  
Resin chemistry  Application  Covestro  Target  Combined 
Market share  
Waterborne 
Polyurethanes  
 Adjacent coating 
and non -coating 
applications  [30-40]%  [0-5]% [30-40]%  
Automotive OEM  [30-40]%  <[0-5]% [30-40]%  
Radiation Curable 
Polyurethanes  
 Industrial Wood  [5-10]%  [20-30]%  [30-40]%  
Packaging    [30-40]%  
Other industrial  [5-10]%  [20-30]%  [30-40]%  
Waterborne 
polyurethane - 
alkyd acrylic 
hybrids74  Architectural  [0-5]% [30-40]%  [30-40]%  
Waterborne 
polyurethane 
acrylic 
hybrids75  Packaging  [0-5]% [30-40]%  [30-40]%  
Source: Form CO  
Table 6. Worldwide supply share on coating resins markets (volume in mt 
2019)  
Resin 
chemistry  Application  Covestro  Target  Combined 
Market share  
Radiation 
Curable PUDs  Industrial Wood  [10-20]%  [20-30]%  [30-40]%  
Source: Form CO  
(105)  Therefore, for the EEA three  categories of vertically affected markets can be 
distinguished:  
a. Those where the merged entity’s market shares will be above 30% both 
upstream (because of Covestro’s market share in HDI  (at EEA level  [30-
40]% ), H12MDI  (at worldwide level  [30-40]% ), and IPDI  (at worldwide level  
[30-40]% )) and downstream because of the Parties’ combined EEA -wide 
                                                 
74  Only the Target is active in this segment . 
75  Only the Target is active in this segment . 
 
 
26 supply share in certain PU Resin markets/segments76. As regards this 
category of vertically affected markets, the Commission assesses the risk of 
input and customer  foreclosure ;  
b. Those where the merged entity’s market shares downstream are below 30% 
(all remaining PU Resins segments) but which are affected because of 
Covestro’s market share in HDI (at EEA level [30-40]% ), H 12MDI (at 
worldwide level [30-40]% ), and IPD I (at worldwide level [30-40]%)   at the 
upstream level. As regards this category of markets, the Commission’s 
assessment focusses on possible input foreclosure ;  and  
c. Those w here the merged entity’s upstream market shares would remain 
below 30%77, but  which  are affected because the Parties’ combined 
downstream shares in certain PU Resin markets/segments are above 30% or 
more  as shown above in Tables 5 and 6 . As regards this category of markets, 
the Commission’s assessment will focus on possible customer fore closure.  
4.3.2.3.  The Notifying Party’s view   
(106)  The Notifying Party submits that  there are no foreclosure risks.  
(107)  With regard to input foreclosure,78 the merged entity would not have the ability to 
engage in an input foreclosure strategy with respect to the supply of  any 
diisocyanates or linear polyols vis -à-vis the downstream PU Resin markets in light 
of Covestro’s limited position in the merchant market supply. In particular , with 
regard to HDI, the Notifying Party submits that HDI is not an important input for PU 
Resins. In addition, the merged entity would not have the ability to pursue an input 
foreclosure strategy because it could not affect the overall availability of HDI  for 
downstream suppliers of PU Resins. The supply of HDI in the EEA is currently 
“long”, with capacity materially outstripping demand. The merged entity would also 
lack the incentive to foreclose downstream competitors as (i) it would not be 
profitable to  engage in an input foreclosure strategy and (ii) given that the Parties’ 
combined supply share in each of the downstream PU Resin markets is limited, the 
merged entity would, if at all, only capture a small portion of any diverted demand.  
(108)  With regard to c ustomer foreclosure  on any of the vertically affected markets for PU 
Resins ,79 the Notifying Party submits that the merged entity will not have the ability 
to foreclose upstream suppliers of each of the input products, given that PU Resins 
represent only on e of a range of downstream uses for the relevant products, and thus 
PU Resins customers are generally not a critical or even a particularly important 
customer base for upstream suppliers. In addition, there are numerous downstream 
competitors and thus alte rnative customers for upstream suppliers. The Target’s 
                                                 
76  Radiation curable PUD for industrial wood and other industrial applications; waterborne polyurethanes for 
for adjacent coating and non -coating applications, architectural, and automotive OEM applications; and 
waterborne urethane acrylic hybrids for packagi ng applications.  
77  EEA: H12MDI ([20 -30]%), IPDI ([20 -30]%), Polycarbonate diols ([10 -20]%), Polyester diols ([5 -10]%), 
Polyether diols ([20 -30]%), TDI ([20 -30]%), and mMDI ([10 -20]%); worldwide: HDI ([20 -30]%), 
Polycarbonate diols ([5 -10]%), Polyester dio ls ([0 -5]%), Polyether diols ([10 -20]%), TDI ([20 -30]%), and 
mMDI ([10 -20]%).  
78  See Form CO, paragraphs 416 – 431. 
79  See Form CO, paragraphs 4 32 – 436. 
 
 
27 demand for the relevant input products does not represent a material proportion of 
either EEA or global demand for the relevant products, and indeed in many cases 
represents only a negligible share.  
4.3.2.4.  Results of the market investigation and Commission’s assessment  
(A) Results of the market investigation  
(109)  As regards input foreclosure, the majority of the respond ing downstream competitors 
in  resins who purchase HDI, IPDI and H 12MDI from the Parties as inputs  confirmed 
that the merged entity will not have the ability to foreclose  them of  the supply with 
HDI, IPDI and H 12MDI as inputs for PU resins.80 The majority of the  upstream 
competitors  that is to say other producers of HDI, IPDI and H 12MDI confirmed that 
they would be in a position to increase their sales should the demand increase.81 
Similarly, the majority of both the inputs ’ customers and  of the  input’s producers  
took the view that there will remain alternative suppliers of HDI, IPDI, and H 12MDI 
in case the merged entity ceased the supply  that the merger entity will lack the 
incentive to stop supplying inputs for PU resins.82  
(110)  With regard to customer foreclosure and the ability of the merged entity to stop 
sourcing inputs from third parties, the vast major ity of upstream competitors  
confirmed there will remain sufficient alternative customers to purchase inputs for 
resins . Furthermore, the vast majority of upstream competitors considered that the 
merged entity would lack the incentive to engage in customer foreclosure. However, 
a couple of respondents explained that the Target could start post -transaction 
sourcing internally its needs for PU Resins inputs.  
(B) Commission’s assessment of i nput foreclosure  
(111)  The Commission considers that the Transaction will not le ad to input foreclosure 
with regard to (i) the upstream  activities of Covestro relating to the supply of the 
aliphatic diisocyanate compounds: HDI, IPDI, H 12MDI; and (ii) the combined 
downstream  activities of Covestro and of the Target relating to the supp ly of PU 
Resins  (categories of affected markets listed under (a) and (b) in paragraph (105)  
above) .  
(112)  As regards the ability of the merged entity to en gage in input foreclosure, the 
Commission first notes that Covestro  does not hold a very significant position  
(below 40%)  in the merchant market for: 
 HDI: [30-40]% in the EEA  
 IPDI: [30-40]%  worldwide  
 H12MDI: [30-40]%  worldwide  
                                                 
80  See Replies to questions 55, 58, and 61 of  Q2 Questionnaire to Downstream Competitors (Coating 
components manufacturers) . 
81  See Replies to questions 41, 48, and 56 of  Q1 - Questionnaire to Upstream Competitors . 
82  See Replies to questions 42, 49 and 57 of  Q1 - Questionnaire to Upstream Competitors , and Replies to 
questions 54, 57, and 60 of Q2 Question naire to Downstream Competitors (Coating components 
manufacturers) . 
 
 
28 (113)  Second, there are several alternative suppliers of each of the inputs from which non -
vertically integrated coating resin suppliers could source, in the event that the 
merged entity were to deteriorate supply conditions to competing suppliers of PU 
Resins. The merged entity would therefore not be able to engage in an input 
foreclosure strategy as it could not affect the overall availability of these inputs on 
the market.     
(a) HDI - in the EEA  : Vencorex [20-30]%, Wanhua [10-20]%, BASF
 [10-20]%, Evonik  <[0-5]% 
(b) IPDI - worldwide: Evonik ( [50-60]%), Vencorex ( [5-10]%), BASF ( [5-
10]%).  
(c) H12MDI  - worldwide : Wanhua ( [30-40]%), Evonik ([20-30]%). 
(114)  Third , the merged entity would not have the ability to pursue an input foreclosure 
strategy because it could not affect the  overall availability of HDI for downstream 
suppliers of PU Resins. The supply of HDI in the EEA is currently “long”, with 
capacity materially outstripping demand. In the last five years, Vencorex ( [20-30]% 
market share by volume) has expanded HDI capacity  significantly through the 
conversion of its TDI production plant in Pont -de-Claix (France) into an HDI 
production plant and would immediately seize the opportunity to increase supply in 
response to any deterioration of supply by the Merged Entity. As less  than [0-5]% of 
the production of HDI is used for PU Resins, any attempt by the merged entity to 
reduce the availability of HDI for use in PU Resins would only require a limited 
supply response from Vencorex relative to its overall HDI capacity.  
(115)  Fourth , the above is also confirmed by the market investigation as explained in 
paragraph (109) . 
(116)  As regards the incentive of the merged entity to engage in input foreclosure, the 
Commission first notes that the overall demand that potentially could be diverted 
from downstream competitors  to the merged entity is small. The proportion of 
PUDs/PU Resins supplied in the EEA that are produced using HDI as an input is 
very small. Therefore, any hypothetical input foreclosure strategy could only affect a 
very low percentage of the downstream PU Resin activities of competitors.  
(117)  Second, given that the Parties’ combined supply share in each of the downstream PU 
Resin markets is limited, the merged entity would only capture a small portion of 
any diverted demand. The overall downstream gain in market  share would thus be 
negligible. On a n overall  resin chemistry level, the Parties’ combined market shares 
never exceed 30%83 
 either in the  EEA: [20-30]% in waterborne polyurethanes, [10-20]% in 
waterborne polyurethane acrylic hybrids, [20-30]% in waterborne  
polyurethane alkyd acrylic hybrids,  [10-20]% in solventborne polyurethanes 
and [0-5]% in radiation curable urethane acrylates,   
                                                 
83 See revised Table 25  of the Form CO, Vertically affected markets / segments – EEA (2019 – volume)  
submitted on 11 January 2021.  
 
 
29  or world wide, [20-30]% in waterborne polyurethanes, [5-10]% in waterborne 
polyurethane acrylic hybrids, [10-20]% in waterborn e polyurethane alkyd 
acrylic hybrids, below [0-5]% in solventborne polyurethanes and [0-5]% in 
radiation curable urethane acrylates,  
(118)  Third, the lack of incentive to engage in an input foreclosure strategy is also 
demonstrated by the fact that Covestro curr ently supplies […] in PU Resins and that 
there has never been any attempt by Covestro to foreclose competing resin 
producers.  
(119)  Fourth, the above is also confirmed by the market investigation as explained in 
paragraph (109) . 
(B.i) No impact on effective competition between downstream competitors  
(120)  Regardless of whether the merged entity would have the ability or the incentive to 
engage in an input foreclosure strategy, such strategy would have no impact on 
effective competition given the number of available suppliers who are in a position 
to increas e supply if necessary.    
(C) Customer foreclosure  
(121)  With regard to the merged entity’s ability to engage in customer foreclosure  
(affected markets listed under (a) and (c) of paragraph (105) ), the Commission first 
notes that PU Resins represent only one of a range of downstream uses for the 
relevant input products, and thus PU Resins customers are generally not a critical 
customer  base for upstream suppliers. In particular:  
(a) TDI: the predominant use of TDI is the production of flexible polyurethane 
foams. This accounts for more than [80-90]% of TDI production in the EEA 
and worldwide. In contrast, the use of TDI in coatings accounts  for an 
estimated [5-10]% of TDI production.  
(b) MDI: the predominant use of MDI is the production of rigid polyurethane 
foams. This accounts for more than [60-70]% of global MDI demand. The 
use of MDI in coatings accounts for only approximately [0-5]% of glo bal 
MDI demand.  
(c) HDI: the predominant use of HDI is the production of polyisocyanate 
crosslinkers. Covestro estimates that polyisocyanates account for more than 
[90-100]% of HDI production in the EEA and worldwide with less than [0-
5]% of HDI going into th e production of PU Resins.  
(d) IPDI: In addition to the production of PU Resins, IPDI is also used in the 
production of polyisocyanate crosslinkers. Covestro estimates that 
polyisocyanate crosslinkers account for between 20 -30% of IPDI production 
in the EEA a nd worldwide.  
(e) H12MDI: In addition to the production of PU Resins, H 12MDI is also used in 
the production of TPUs/elastomers. Covestro estimates that TPUs/elastomers 
account for between 20 -30% of H 12MDI production in the EEA and 
worldwide.  
 
 
30 (f) Polyether diols: p olyether polyols are used predominantly for the production 
of foams. This accounts for approximately [80-90]% of global polyether 
polyol demand. The use of linear polyether polyols in coatings accounts for 
only approximately [5-10]% of global polyether pol yol demand.  
(g) Polyester diols: polyester polyols are used predominantly for the production 
of foams and to a lesser extent, elastomers. The use of polyester diols in 
coatings accounts for only approximately [10-20]% of global polyester 
demand.  
(h) Polycarbonat e diols: Polycarbonate diols are used for the production of TPUs 
and elastomers (an estimated [20-30]% of global demand), as well as 
coatings and adhesives (an estimated [80-90]% of global demand).  
(122)  Second, post -transaction there will remain sufficient dow nstream competitors and 
thus alternative customers for upstream suppliers. The Target’s demand for the 
relevant input products does not represent a material proportion of either EEA or 
global demand for the relevant product. Therefore, any switch of the Ta rget’s 
merchant demand to internal supply represents a small part of the overall demand 
that would not foreclose upstream competitors.84 In particular:  
(a) TDI: The Target’s demand for TDI accounts for less than [0-5]% of the 
merchant market for TDI both on an EEA and a global basis.  
(b) mMDI: The Target’s demand for MDI accounts for less than [0-5]% of the 
merchant market for mMDI on both an EEA and a global basis.  
(c) HDI: The Target’s demand for HDI accounts for less than [0-5]% of the 
merchant market for HDI on bo th an EEA and a global basis.  
(d) IPDI: The Target’s demand for IPDI accounts for less than [5-10]% of the 
merchant market for IPDI on both an EEA and global basis. Already today, 
the Target sources […] of its global demand for IPDI from Covestro and […] 
on an EEA basis.  
(e) H12MDI: The Target’s demand for H 12MDI accounts for roughly [10-20]%  of 
the merchant market for H 12MDI on an EEA and roughly [5-10]%  on a 
global basis. Already today, the Target sources […] of its global demand for 
H12MDI from Covestro and […] on an EEA basis.  
(f) Polyether diols: The Target’s demand for polyether diols accounts for less 
than [0-5]% of the merchant market for polyether diols on both an EEA and 
global basis.  
(g) Polyester diols: in the EEA, the Target relies on its own captive produc tion 
for more than […] of its polyester diol requirements. The Target’s merchant 
market demand for polyester diols accounts for less than [0-5]% of the 
merchant market for polyester diols on both an EEA and a global basis.  
                                                 
84  As Covestro produces and sources internally inputs for PU resins, the customer foreclosure analysis is 
relevant only for the volumes of the Target post -transaction that are not already supplied by Covestro.  
 
 
31 (h) Polycarbonate diols: The Target’s  demand for polycarbonate diols accounts 
for less than [0-5]% of the merchant market for polycarbonate diols on both 
an EEA and a global basis.  
(123)  Third, the above is also confirmed by the market investigation as explained in 
paragraph (110) . 
(124)  As regards the incentive of the merged entity to foreclose upstream competitors, the 
Commission first considers that such as strategy would have a negligible effect on 
upstream markets because there will remain a sufficient number of customers on the 
market that would keep acquiring inputs for PU Resins  (indicatively, Axalta, BAsf, 
Dow, Evonik, Lubrizol, V encorex and more) .85  
(125)  Second, as mentioned above these inputs al so serve for a number of other production 
streams. Therefore, upstream competitors supplying these inputs are not exclusively 
dependent to coating resins producers.  
(126)  Third, the above is also confirmed by the market investigation as explained in 
paragraph (110) . 
(C.i) No impact on effective competition between upstream competitors  
(127)  Regardless of whether the merged entity would have the ability or the incentive to 
engage in a customer foreclosure strategy, such strategy would have no impact on 
effective competition given the number of available alternative customers that will 
continue purchasing inputs for PU resins . 
4.3.2.5.  Overall c onclusion on vertically affected markets  
(128)  In conclusion, for the reasons set out above, in paragraphs (99) to 4.3.2.4(C.i)  the 
Commission considers that the Transaction does not raise serious doubts as to its 
compatibility with the internal market as a result of non -horizontal effects 
concerning (i) the upstream market s for diisocy anates  (i.e. the markets for HDI, 
H12MDI and IPDI)  and linear polyols  (i.e. polyether, polyester, and polycarbonate 
diols)  and (ii) the downstream market for PU resins.  
  
                                                 
85  As explained above, the customer foreclosure analysis is focused on the volumes of the Target not alr eady 
purchased from Covestro. Covestro was already  fully vertically integrated pre -transaction, which means 
the transaction does not create any foreclosure concerns vis -à-vis Covestro’s volumes.  
 
 
32 5. CONCLUSION  
(129)  For the above reasons, the European Commission has decided not to oppose t he 
notified operation and to declare it compatible with the internal market and with the 
EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the 
Merger Regulation and Article 57 of the EEA Agreement.   
For the Commission  
 
 
(Signed)  
Margrethe VESTAGER  
Executive Vice -President