SUMMARY OF COMMISSION DECISION

of 18 February 2021

ordering measures to restore the situation prior to the concentration pursuant to Article 8(4)(b) of Council Regulation No 139/2004

(Case M.9076 – Novelis/Aleris)

(notified under document C(2021) 1013)

(Only the English version is authentic)

(Text with EEA relevance)

(2022/C 283/05)

On 18 February 2021, the Commission adopted a Decision in a merger case under Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (1) , and in particular Article 8(4)(b) of that Regulation. A non-confidential version of the full Decision can be found in English on the website of the Directorate-General for Competition, at the following address: http://ec.europa.eu/competition/elojade/isef/index.cfm?clear=1&policy_area_id=2

1. INTRODUCTIVE SUMMARY

(1) The Decision adopts final measures pursuant to Article 8(4)b of the Merger Regulation to restore the situation prevailing before the implementation of the acquisition of Aleris Corporation (‘Aleris’) by Novelis Inc. (‘Novelis’) (the ‘Transaction’) as far as possible.

(2) Novelis and former Aleris manufacture and supply various aluminium flat-rolled products (‘FRPs’) in the EEA, including aluminium automotive body sheets (‘Aluminium ABS’). Aluminium ABS are used in the automotive industry to manufacture vehicle bodies.

(3) By decision dated 1 October 2019 (the ‘Clearance Decision’), adopted in application of Article 8(2) of the Merger Regulation, the Commission declared the Transaction compatible with the internal market and with the EEA Agreement, subject to full compliance with the commitments submitted by Novelis and annexed to the Clearance Decision (the ‘Commitments’). The Commitments included the divestment within a certain deadline of Aleris’ entire EEA ABS business, conducted from a plant in Duffel (Belgium). Although the Commission granted several extensions on the closing deadline set in the Commitments, Novelis failed to close the sale of Aleris’ plant in Duffel within the extended closing deadline, thus failing to implement the Commitments in a timely fashion.

(4) On 1 September 2020, the Commission adopted a decision ordering interim measures to restore or maintain conditions of effective competition pursuant to Article 8(5) of the Merger Regulation.

(5) With the decision of 18 February 2021, the Commission adopted final restorative measures pursuant to Article 8(4) of the Merger Regulation. These measures are necessary to protect the future viability and competitiveness of the Duffel plant, which Novelis eventually divested to Liberty, and to preserve the divestiture, similarly to the safeguards usually put in place when a divestiture takes places under a normal commitment process.

2. PROCEDURE

(6) In the Clearance Decision, the Commission found that following the Transaction Novelis would have had very high market shares and controlled a very significant proportion of the manufacturing capacity for aluminium automotive body sheets in the EEA. In addition, the limited number of smaller remaining competitors active in the market would not have been able to defeat a price increase, also due to their limited spare capacity. The Transaction was also found to reduce the incentives of the merged entity to invest in additional manufacturing capacity. The Commission therefore had concerns that the Transaction, absent the Commitments, would have resulted in higher prices for European customers for aluminium automotive body sheets.

(7) Under the Commitments, Novelis committed to divest or procure the divestiture of (i) Aleris’ Aluminium ABS business and (ii) other aluminium FRPs business located in Aleris’ plant in Duffel, Belgium, (the ‘Divestment Business’), and to find a purchaser and enter into a final binding sale and purchase agreement for the Divestment Business within a certain number of months from the date of adoption of the Clearance Decision (the ‘First Divestiture Period’). The First Divestiture Period was set to expire on a certain date.

(8) Under Section B of the Commitments, Novelis further committed to close the sale of the Divestment Business within the period of a certain number of months from (i) the approval of the purchaser and the terms of sale by the Commission or (ii) the date that all of the approvals, clearances or waiting periods applicable to the Transaction under the HSR Act and the Hart-Scott-Rodino Antitrust Improvements Act of 1976 of the United States and the antimonopoly law of China, have been obtained, expired or terminated; whichever is the later, but ending in all instances the latest a certain number of months from the approval of the purchaser and the terms of sale by the Commission (the ‘Closing Period’).

(9) On 22 November 2019, Novelis entered into a binding sale and purchase agreement (‘SPA’) for the sale of the Divestment Business to Liberty House Group (‘Liberty’). On 7 April 2020, the Commission approved Liberty as a suitable purchaser for the Divestment Business. On 14 April 2020, Novelis implemented its acquisition of Aleris.

(10) Following requests from Novelis due to difficulties in closing the sale of the Divestment Business, the Commission extended the Closing Period pursuant to paragraph 49 of the Commitments on 7 July 2020 (the ‘First Extension’), 14 July 2020 (the ‘Second Extension’), 22 July 2020 (the ‘Third Extension’) and 31 July 2020 (the ‘Fourth Extension’). Following the Fourth Extension, the Closing Period was set to expire on 31 August 2020.

(11) By letter of 28 August 2020, one working day before the expiry of the Closing Period as extended by the Fourth Extension, Novelis requested a further extension of the Closing Period until 30 September 2020 (the ‘Fourth Extension Request’). At a state of play meeting held on 31 August 2020 following the submission of the reasoned opinion of the Monitoring Trustee (the ‘Reasoned Opinion’), and later by a reasoned letter (the ‘Extension Rejection Letter’), Novelis was informed that the Commission would not grant the Fourth Extension Request.

(12) On 31 August 2020, the Closing Period as extended by the Fourth Extension expired.

(13) On 1 September 2020, the Commission considered that, by implementing the acquisition of Aleris and not closing the sale of the divestment business within the Closing Period, Novelis had implemented the Transaction in contravention of a condition attached to the Clearance Decision. The Commission therefore imposed provisional interim measures on Novelis, which mostly reproduced Novelis’ obligations under the Commitments, pursuant to Articles 8(5)(b) and 18(2) of the Merger Regulation.

(14) By letters of 2 and 14 September 2020 to Novelis and Novelis’ counsel, respectively, the Commission confirmed to Novelis that any action that Novelis would take to mitigate the situation resulting from the failure to implement the sale of the Divestment Business to Liberty by the expiry of the Closing Period would be welcomed by the Commission and taken into consideration in determining the further steps it would need to take.

(15) On 18 September 2020, the Commission adopted a statement of objections (the ‘Statement of Objections’) pursuant to Article 8(4) of the Merger Regulation stating its intention to order either the dissolution of the Transaction or any other appropriate measures to restore the situation prevailing before its implementation as far as possible.

(16) On 30 September 2020, Novelis informed the Commission that the sale of the divestment business to Liberty had closed on that day.

(17) On 16 October 2020, Novelis submitted its reply to the Statement of Objections (the ‘Reply to the Statement of Objections’).

(18) On 23 November 2020, the Commission sent a letter to Novelis, in which it explained that in light of the closing of the sale of the Divestment Business, which occurred with the express encouragement of the Commission, and of the circumstances set out by Novelis in the Reply to the Statement of Objections, it no longer appeared possible to restore the situation prevailing prior to the implementation of the Transaction through its dissolution (the ‘Letter of 23 November’). In the Letter of 23 November, the Commission also stated its intention to order only those measures that are still necessary to ensure and maintain the structural effect of the transfer of the Divestment Business and to protect its viability and competitiveness.

(19) On 14 December 2020, Novelis submitted its reply to the Letter of 23 November (the ‘Reply to the Letter of 23 November’).

(20) In light of the foregoing, the Commission has adopted the Decision pursuant to Article 8(4)(b) of the Merger Regulation.

(21) Prior to its adoption, the Member States were consulted on the draft Decision during the Advisory Committee on Concentrations meeting on 9 February, which provided a favourable opinion. The Hearing Officer provided its favourable opinion on the proceedings in his report, which was submitted on 27 January 2021.

3. LEGAL FRAMEWORK

(22) Where a concentration raises concerns as to its compatibility with the internal market, the notifying party(ies) can offer to modify the concentration to remedy those concerns. Pursuant to paragraph (19) of the Remedies Notice, whilst commitments have to be offered by the parties, the Commission will ensure the enforceability of commitments by making the authorisation of the merger subject to compliance with the commitments.

(23) A distinction must be made between conditions and obligations. The achievement of the structural change of the market is a condition — for example, that a business is to be divested. The implementing steps which are necessary to achieve this result are generally obligations on the parties, e.g. such as the appointment of a trustee with an irrevocable mandate to sell the business. Paragraph (20) of the Remedies Notice states that when a condition is breached, e.g. a business is not divested in the time-frame foreseen in the commitments or afterwards re-acquired, the compatibility decision is no longer applicable.

(24) In such circumstances, the Commission may, first, adopt interim measures appropriate to maintain or restore conditions of effective competition pursuant to Article 8(5)(b) of the Merger Regulation. Second, pursuant to Article 8(4)(b) of the Merger Regulation, the Commission may, where it has already found in a decision taken pursuant to Article 8(2) of the Merger Regulation that in the absence of the condition, the concentration would be incompatible with the internal market, order the dissolution of the concentration. Where the restoration of the situation prevailing before the implementation of the concentration is not possible through such a dissolution, pursuant to Article 8(4)(b) of the Merger Regulation, the Commission may take any other appropriate measure to achieve such restoration as far as possible.

4. IMPLEMENTATION OF THE TRANSACTION IN CONTRAVENTION OF A CONDITION ATTACHED TO THE CLEARANCE DECISION

(25) Under the Commitments, Novelis committed to close the sale of the Divestment Business within the Closing Period. On 14 April 2020, Novelis implemented its acquisition of Aleris. However, by the last day of the Closing Period as extended by the Fourth Extension, the sale of the Divestment Business to Liberty had not closed.

(26) As a result, the Clearance Decision became inapplicable and Novelis had ipso facto implemented the Transaction but failing to fulfil a condition attached to the Clearance Decision pursuant to which, in the absence of the condition, the Transaction would significantly impede effective competition in the common market or in a substantial part of it.

(27) Therefore, the conditions of Article 8(4)(b) of the Merger Regulation were met in the present case and the Commission was entitled to order measures in view of restoring the situation prevailing prior to the implementation of the Transaction as far as possible. None of the arguments put forward by Novelis in the Reply to the Statement of Objections or the Reply to the Letter of 23 November called into question that conclusion.

5. NO DISSOLUTION OF THE TRANSACTION

(28) Under Article 8(4)(b) of the Merger Regulation, the Commission’s primary means to restore the situation prevailing prior to the implementation of a concentration is ordering the dissolution of said concentration. In circumstances where it is impossible to achieve such restoration through dissolution of the concentration, the Commission can order alternative restorative measures.

(29) Novelis closed the sale of the Divestment Business after the end of the Closing Period as extended by the Fourth Extension. The Commission expressly encouraged Novelis to proceed with the closing, even though the Closing Period had lapsed.

(30) A different part of the former Aleris business was the object of a divestiture trustee-led selling process by orders of the US Department of Justice (‘DOJ’), after Novelis failed to sell the relevant business within the timeframe allotted by the DOJ in the context of the conditions to its clearance decision on the main transaction.

(31) Under these circumstances, in line with Article 8(4)(b) of the Merger Regulation, the Commission does not order the dissolution of the Transaction and instead orders other measures to restore the situation prevailing before the implementation of the Transaction as far as possible as described in the following section.

6. OTHER MEASURES ARE NECESSARY TO RESTORE THE SITUATION PREVAILING PRIOR TO IMPLEMENTATION OF THE CONCENTRATION SO FAR AS POSSIBLE

(32) The Commission considers that in the specific circumstances of this case, Novelis must comply with a number of final restorative measures, which are necessary to ensure that the sale of the Divestment Business to Liberty remains effective and that the viability and competitiveness of the Divestment Business are preserved, in order to restore the situation prevailing before the implementation of the Transaction as far as possible, within the meaning of Article 8(4)(b) of the Merger Regulation (the ‘Final Restorative Measures’).

(33) More specifically, the Commission has ordered a non-reacquisition measure, a non-solicitation measure, a measure on the provision of information to the Commission, a measure on transitional supply agreements, a measure on other ancillary agreements, measures on CAPEX funding for the benefit of the Divestment Business, and measures regarding the appointment of a divestiture trustee to oversee Novelis’ compliance with the Final Restorative Measures, under the supervision of the Commission.

7. CONCLUSION

(34) For the reasons mentioned above, the decision concludes that the Transaction, a concentration which as notified gives rise to a significant impediment to effective competition within the meaning of Article 2(3) of the Merger Regulation and Article 57 of the EEA Agreement in relation to the EEA market for the production and supply of Aluminium ABS, has been implemented in contravention of a condition attached to the Clearance Decision.

(35) Pursuant to Article 8(4)(b) of the Merger Regulation, the Commission has ordered the measures described above.

(36) Pursuant to Article 15(1)(d) of the Merger Regulation, if Novelis were to fail to comply with any of the measures set out in this Decision, Novelis shall incur a periodic penalty of up to a specified percentage of Novelis’ average daily aggregate turnover of the business year preceding such failure to comply for each working day in which it is in breach until it complies.

(1) OJ L 24, 29.1.2004, p. 1.