98/455/EC: Commission Decision of 3 December 1997 relating to a proceeding pursuant to Council Regulation (EEC) No 4064/89 (Case No IV/M.942 - VEBA/Degussa) (notified under document number C(1997) 3833) (Only the German text is authentic) (Text with EEA relevance)
Date: 1997-12-03
Institutions: European Commission
Subjects: chemical industry, competition law, economic concentration, merger control

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 3 December 1997

relating to a proceeding pursuant to Council Regulation (EEC) No 4064/89

(Case No IV/M.942 (cid:190) VEBA/Degussa)

(notified under document number C(1997) 3833)

(Only the German text is authentic)

(Text with EEA relevance)

(98/455/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation (EEC) No 4064/89
of 21 December 1989 on the control of concentrations
between undertakings (‘the Merger Regulation') (1), and in
particular Article 8(2) thereof,

Having regard to the Agreement on the European
Economic Area, and in particular Article 57 thereof,

Having regard to the Commission Decision of 2
September 1997 initiating proceedings,

Having regard to the opinion of the Advisory Committee
on Concentrations (2),

Whereas:

(1)

On 2 July 1997 the Commission received noti-
fication pursuant to Article 4 of the Merger Regula-
tion of a planned transaction by which Veba AG
(‘Veba') was to acquire control of Degussa AG
(‘Degussa'). The notification failed to mention the

fact that the Veba subsidiary H(cid:129)ls was doing busi-
ness through a joint venture on one of the relevant
markets, the market in fumed silica; and on 28 July
1997 the notification was declared incomplete. The
notification was supplemented on 31 July 1997.

By Decision of 22 July 1997 the Commission,
pursuant to Article 7(2) and Article 18(2) of the
Merger Regulation, ordered the suspension of the
notified merger until such time as it had taken a
final decision.

By Decision of 2 September 1997 the Commission
initiated proceedings under Article 6(1)(c) of the
Merger Regulation.

I. THE PARTIES

Veba operates mainly in the following businesses:
electricity, chemicals, oil, distribution,
transport
and services, and telecommunications. Its chem-
icals interests are handled by its subsidiary H(cid:129)ls
and by H(cid:129)ls subsidiaries R(cid:148)hm and Servo.

(2)

(3)

(4)

(1) OJ L 395, 30. 12. 1989, p. 1 (corrigendum: OJ L 257, 21. 9.

1990, p. 13).

(2) OJ C 224, 17. 7. 1998.

(5)

Degussa operates in chemicals, health and nutri-
tion, precious metals, and banking.

(6)

(7)

(8)

(9)

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II. THE OPERATION

IV. COMMUNITY DIMENSION

Veba proposes to acquire all the shares in GFC
Gesellschaft f(cid:129)r Chemiewerte mbH (‘GFC'). GFC
owns 33 520 000 Degussa shares. Degussa has an
equity capital of DEM 460 297 500. This is divided
into 92 059 500 shares, which all have equal voting
rights. Thus GFC holds 36,41 % of the equity in
Degussa.

(12)

Veba and Degussa have a combined aggregate
worldwide turnover of over ECU 5 billion (Veba:
ECU 39,04 billion; Degussa: ECU 7,22 billion).
Each of them has an aggregate Community-wide
turnover of over ECU 250 million (Veba: ECU
32,15 billion; Degussa: ECU 3,59 billion). Degussa
does not achieve more than two-thirds of its aggre-
gate Community-wide turnover in any one Member
State. The
a
Community dimension.

concentration consequently has

III. THE CONCENTRATION

V. ASSESSMENT PURSUANT TO ARTICLE 2 OF

THE MERGER REGULATION

The plan notified constitutes a concentration
within the meaning of Article 3(1)(b) of the Merger
Regulation, since Veba proposes to acquire sole
control of Degussa.

(13)

In the last five years attendance at the general
meeting of shareholders in Degussa has been below
68 % (1993: 67,38 %; 1994: 63,49 %; 1995:
67,95 %; 1996: 66,78 %; and 1997: 67,84 %).
Possession of 36,41 % of the shares has conse-
quently meant an assured majority at general meet-
ings, and GFC has exercised control over Degussa.
By taking over GFC, therefore, Veba will acquire a
controlling interest in Degussa.

A simple majority of the votes cast at the general
meeting will enable Veba to appoint the sharehol-
ders’ members of Degussa’s supervisory board. The
supervisory board can appoint or dismiss
the
members of the board of management by simple
majority. This ensures that the holder of a simple
majority at the general meeting can control the
conduct of Degussa’s business.

(10) As a result of the concentration, Veba will become
by far the biggest shareholder in Degussa; the next-
largest shareholder has a stake of only 6,8 %, and
the other shares are widely dispersed. Veba will be
the only large industrial shareholder with a know-
ledge of the markets and industries involved. The
6,8 % shareholder is an American family with no
comparable market knowledge. The many other
very small shareholders are in no position individ-
ually to exercise any decisive influence over the
conduct of Degussa’s business, and have not in the
past made any effort to do so jointly.

(11) Given the assured majority at general meetings and
in the light of the other circumstances it may be
assumed that Veba will acquire de facto control of
Degussa.

The business activities of Veba and Degussa overlap
partially in the area of chemical products. A more
detailed appraisal of the effects of the operation
needs to be made in the area of methyl methacry-
late, methacrylic acid, transparent plastics, acrylate-
based PVC process additives, organosilanes, silicon
tetrachloride,
fumed silica, diamines/polyamines
and reagents for the production of cationic starch.
In all other areas and also in other business activ-
ities there is no overlap, so that in the absence of
other indications the operation will not lead to the
strengthening of the existing market positions.

A. The relevant product markets

1. Methyl methacrylate

(14) Methyl methacrylate (MMA) is a monomer which is
the base for a major proportion of the other prod-
ucts of methacrylic chemistry. It is usually obtained
by the ACH process
from hydrocyanic acid,
methanol and acetone. MMA is a liquid that has no
direct use as an end product. As a rule it
is
processed further, being polymerised for example
into polymethyl methacrylate (PMMA), a trans-
parent plastic. According to information supplied
by customers and producers, MMA cannot be
replaced by other products. Accordingly,
the
Commission comes to the conclusion that MMA
constitutes a separate product market.

2. Methacrylic acid

(15) Methacrylic acid is likewise a basic monomer, and
is closely related to MMA. It, too, is usually made
by the ACH process, from the same raw materials
but without the addition of methanol. Like MMA,
methacrylic acid cannot be used as an end product,
but is processed into other methacrylic products.
One important use of methacrylic acid is in paint
and varnish resins and dispersions, which in turn

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are processed into paints and different kinds of
varnish. Methacrylic acid and MMA confer different
properties on the products into which they are
processed, and are not interchangeable from the
user’s point of view. This is confirmed by the
parties and by competitors and customers. Accord-
ingly, the Commission comes to the conclusion
that methacrylic acid is a separate product market.

for other applications. But

transparent plastics as described above, which make
for certain applications and
them specially apt
inapt
the question
whether each transparent plastic constitutes a sep-
arate product market can be left open, because even
on the assumption that the markets are separate no
objections arise in competition law.

(16)

(17)

(18)

(19)

3. Transparent plastics

Transparent plastics are mouldable transparent
chemical products, which resemble glass in being
transparent, but which are lighter, easier to work
and as a rule less fragile than glass. Transparent
plastics are used in a wide variety of applications,
industry
for
noise
advertising, motorway
subcontracting,
barriers, CD cases and other packaging.

lamp coverings, motor

example

The main transparent plastics are polymethyl
methacrylate or acrylic glass (PMMA), polycarbo-
nate (PC), styrene-acrylonitrile copolymers (SANS),
and polystyrene (PS). These plastics differ in prop-
erties and price. PMMA, for example, is especially
weatherproof and highly transparent, while poly-
carbonate has high impact and heat resistance.
Polystyrene is less transparent than PMMA and
polycarbonate, but
is also cheaper. PMMA is
produced by polymerisation from MMA. The other
transparent plastics are also produced by polymer-
isation, but from other raw materials.

it

The parties are of the opinion that all transparent
plastics form one product market. They point out
that extensive substitution is possible in many
applications (cid:190) either PMMA or polycarbonate can
be used in lamps, for example. Any differences in
properties can be reduced in the course of the
production process or by the use of additives, and
this can be offset
In terms of
durability, properties and price, they say, there are
no essential differences between the various trans-
parent plastics.

in the price.

The Commission’s enquiries have shown that while
substitution is possible in certain uses the extent of
substitution varies greatly from one application to
another (see the Commission Decision of 28 July
1992 in Case No IV/M.160 Elf Atochem/
Rohm & Haas). Competitors and customers have
confirmed that transparent plastics are not inter-
changeable in all applications. This is in particular
the result of the different characteristics of different

(20) On that assumption, only PMMA would be a rele-
vant market. Veba/H(cid:129)ls and Degussa do both
operate in the polycarbonate field, but
their
combined share of that market is no more than
involved in polystyrene,
15 %. Only Veba is
through H(cid:129)ls, which has a market share of less
than 15 %, and neither of the parties is active in
the SAN business.

(21)

(22)

Transparent plastics are also sold onward, in the
form of moulding powder or extruded or cast sheet.
Moulding powder is a granulate which is processed
and formed by heating and extrusion or by some
other process. It is thus an intermediate product in
the production of extruded sheet. Cast sheet, on the
other hand,
is cast direct at the polymerisation
stage, without passing through the moulding
powder stage.

The parties are of
the opinion that moulding
powder and extruded or cast sheet constitute one
market. They argue that extrusion or injection
moulding do not involve any further substantial
chemical change. Nor is there any difference in
properties or price, for example, between extruded
and cast sheet. They are fully interchangeable.

(23) According to the Commission’s enquiries, sheet is
considerably dearer than moulding powder, and the
buying publics are different too. But the question
whether there is one or several markets can be left
open, as the conditions of competition are not
fundamentally different for moulding powder and
for sheet (see the Commission Decision of 28 July
1992 in Case No IV/M.160 Elf Atochem/
Rohm & Haas).

4. Acrylate-based PVC process additives

(24)

These are products which make the processing of
PVC possible. They take the form of powders;
when PVC is being formed they ensure that it
passes the extruder feed screw without damage to
the equipment, and improve the surface structure
of the end product. They are used in the processing
of both rigid and plasticised PVC, especially in the

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production of film, bottles and sections. The func-
tions of acrylate-based PVC processing additives
cannot be performed by other materials, and they
constitute one product market.

the initial product, silicon metal, and returned to
the producers of silicon tetrachloride. This form of
integration results in a closed circuit. Because of
the danger it presents, the transport of silicon tetra-
chloride is possible only to a limited extent.

5. Organosilanes

(25) Organosilanes are essentially used as binders and
cross-linking agents in a very wide variety of
applications, such as glass cloths, adhesives and
sealants, tyres, paints, varnishes and coatings for the
preservation of structures. Three separate markets
in organosilanes have to be distinguished.

(30)

(26) Organofunctional

silanes

are used as binders
between inorganic materials such as glass, minerals
and metals and organic polymers such as thermo-
plastics, as surfactants for inorganic and organic
materials, and as cross-linking agents for polymers.
Organofunctional silanes are divided into those for
‘rubber' applications, such as tyre repairs, and those
for ‘non-rubber' applications. Silanes for ‘rubber
applications' and silanes for ‘non-rubber applica-
tions' are produced in different installations and
according to different procedures. The Commis-
sion’s enquiries have confirmed that organofunc-
tional silanes for rubber applications cannot be
replaced by organofunctional
for non-
rubber applications. These are therefore separate
markets.

silanes

(27)

(28)

(29)

The third group of organosilanes is the alkyl
silanes, which are used mainly for the preservation
of structures on account of their water-repellent
qualities. Alkylsilanes are produced in different
installations to organofunctional silanes. Because of
their special properties they too form a separate
market.

6. Silicon tetrachloride

Silicon tetrachloride is a chemical used as a raw
material for the production of fumed silica, fumed
silica esters, fibre optic cables, synthetic silica glass
and other products. Silicon tetrachloride and
trichlorsilane, a raw material for organosilanes, are
products of the hydrochlorination of silicon metal.

The production and sale of silicon tetrachloride is
closely linked to the next market stage. According
to information supplied by the parties, silicon tetra-
chloride is produced by downstream firms them-
selves, or kept for further processing by the produ-
cers who carried out
the hydrochlorination of
from which it results. When the
silicon metal
silicon tetrachloride is processed into fumed silica,
large quantities of hydrochloric acid are obtained,
which are then needed for the hydrochlorination of

7. Fumed silica

Fumed silica is produced from silicon tetrachloride
together with oxygen and hydrogen. The product is
used as an additive in a variety of different prod-
ucts. The main areas of use are elastomers
(improvement of the mechanical properties of sili-
cone rubber, for example in sealants), thermoset-
ting materials (improving the properties of unsat-
urated polyesters, epoxy resins and acrylates), and
paints and varnishes. Fumed silica cannot be
replaced in its function by other materials, and
forms a separate product market.

8. Diamines/polyamines

(31) According to information supplied by the parties,
diamines/polyamines are used mainly as hardeners
for epoxy resin systems. Epoxy resin systems are
used in varnishes, steel and concrete coatings in
building
shipbuilding,
are
construction,
produced on the basis of
chemical
substances. The parties, who have isophoron avail-
able to them, produce isophoron diamines, while
other chemical companies produce ethylene or
aniline diamines for example.

engineering
adhesives. Diamines

civil
and

various

and

(32) According to information supplied by the parties,
all diamines/polyamines have the same basic func-
tion, which is to act as a cross-linking agent in
epoxy resin chains. Evidently the properties of
particular diamines may differ
somewhat. The
parties state that diamines are almost always used
in compounds, and that identical properties can be
achieved by different diamine compounds. The
compounds are made by customers, so that the
customers possess wide-ranging know-how, and
would certainly be in a position to switch to other
diamine compounds rapidly and at no significant
cost. In the parties’ opinion, therefore, diamines
and polyamines form one product market. The
Commission’s enquiries and information supplied
by customers and competitors essentially confirm
this assessment.

(33) According

to

the Commission’s

enquiries,
isophoron diamines too are a part of the market for
diamines and do not constitute a separate product
market. Isophoron diamines make up 25 % of the

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the properties of

Some users have

volume and 30 % of the value of the total market
for diamines.
stated that
isophoron diamines cannot be substituted at will
for all applications. According to those users, the
the end
diamines used affect
product (epoxy resin systems), so that in existing
products isophoron diamines can be replaced only
after fresh testing. In some cases the composition
of the end product is subject to official author-
isation (in the case of products for use in building,
for example), or to the agreement of the purchaser
of the final product. The users argue that in these
cases the substitution of isophoron diamines will
take some time (up to two years) and will require
some expenditure, as the development of a new
compound and new testing are necessary. However,
this is only valid for existing compounds, not for
newly developed mixtures, as users have a free
in the main
choice of diamines. Already even,
applications isophorondiamines can be replaced by
other diamines at short notice. Only up to 20 % of
the presently used isophoron diamines are limited
in their substitutability. This reason is not sufficient
for considering isophoron diamines as a separate
market and therefore the Commission has come to
the conclusion that diamines constitute one rele-
vant product market.

reagent' has to be converted into the finished
reagent by means of a reaction with sodium
hydroxide. Most producers offer only the pre-
reagent, which unlike the finished reagent can be
stored and transported without difficulty. For this
reason the pre-reagent and finished reagent consti-
tute separate product markets.

B. Geographic markets

(36) With the exception of silicon tetrachloride, all the
product markets described above are at least EEA-
wide. The Commission’s enquiries have found no
evidence of smaller geographic markets. In the case
of silicon tetrachloride, account has to be taken of
the special features described in recital 29, namely
the need for proximity between producer and
customer. For fumed silica,
the Commission is
satisfied that the market is EEA-wide. As fumed
silica is a voluminous material, transport costs are
considerable (up to 8 %). Imports of fumed silica
produced outside Europe are insignificant
(less
than 1 %). Hence all customers have stated that
they only use European suppliers, a choice which is
also influenced by the need to guarantee quality. A
small but significant price increase would not cause
customers to switch to non-European suppliers.

9. Reagents for the production of cationic starch

(34) Untransformed starch from potatoes, maize and
wheat is converted into cationic starch with the use
of reagents. Cationic starch is used in the paper
industry for the pulp and surface treatment of fine
paper, wrapping paper and corrugated board.

(37)

(35) According to information supplied by the parties,
starch reagents are produced in two stages. In the
first place, a reagent is obtained which will not
initiate the cationisation process by itself. This ‘pre-

C. Assessment

1. MMA

The bulk of MMA is produced for the producer’s
own use. The non-captive market for MMA in the
EEA is not very big. According to the Commis-
sion’s enquiries, the market volume in the EEA in
1996 was about 85 000 to 90 000 tonnes. On the
basis of sales figures supplied by the parties and
their competitors, the breakdown of market shares
is as follows (1):

Veba/
R(cid:148)hm

Degussa

Veba
and
Degussa

ICI

Atochem

Repsol

BASF

Imports

Market share
EEA 1996 by
volume

[5 to
10] %

[10 to
15] %

[15 to
25 %

[30 to
50] %

[15 to
20] %

[10 to
20] %

[5 to
10] %

Ca. 5 %

(1) In the published version of this Decision, some information
has been omitted or replaced by ranges, pursuant to Article
17(2) of Regulation (EEC) No 4064/89 concerning non-dis-
closure of business secrets.

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(38)

The market leader in MMA is ICI, and there are other strong competitors alongside
Veba/Degussa. Thus the concentration will not create a dominant position here.

2. Methacrylic acid

(39) Methacrylic acid too is produced mainly for the producer’s own use. According to the
Commission’s enquiries, the volume of the open market for methacrylic acid in the EEA is
only about 20 000 tonnes. On the basis of sales figures supplied by the parties and their
competitors, the breakdown of market shares is as follows:

Veba/
R(cid:148)hm

Degussa

Veba
and
Degussa

ICI

Atochem

BASF

Imports

Market share
EEA 1996 by
volume

[5 to
10] %

[10 to
15] %

[15 to
25] %

[40 to
60] %

[10 to
15] %

[10 to
20] %

Ca. 4 %

(40)

The market leader in methacrylic acid is ICI, and there are strong competitors alongside
Veba/Degussa. Thus the concentration will not create a dominant position here.

3. Transparent plastics

(41) According to the information supplied by the parties, the Community market in trans-
parent plastics as a whole amounts to about 330 000 tonnes, or ECU 1 billion. Veba/
R(cid:148)hm’s market share is about [15 to 25] % by volume and by value, and Degussa’s share is
about [5 to 15] %, giving a combined share of some [20 to 35] %. The Commission’s
enquiries have confirmed these figures. The major competitors are BASF (market share of
about 15 to 25 %), Dow (about 10 to 15 %) and Elf Atochem (about 10 to 15 %).

(42)

If PMMA were to be considered as a separate market, the Community-wide market volume
would be about 220 000 tonnes, or ECU 600 to 650 million. In this case, the market shares
would be as follows:

Veba/R(cid:148)hm

Degussa

Veba
and
Degussa

AtoHaas

ICI

BASF

Others

Market share
EEA 1996

[20 to
30] %

[7 to
15] %

[30 to
40] %

[25 to
35] %

[10 to
15] %

[5 to
10] %

10-20 %

(43)

The concentration would make Veba/Degussa the
market leader in PMMA in the Community. Along-
side the parties there are several competitors which
are comparable to Veba/Degussa as regards their
backward integration and their financial strength.
The present market leader, AtoHaas, also has a
market share which is not much lower than that of
the parties’. Furthermore, PMMA can be replaced
by other transparent plastics in some uses at least,
which also generates a measure of competitive
pressure. Thus the concentration, even assuming an
independent market for PMMA, would not create a
dominant position here.

(44)

The concentration would not lead, either, to the
creation of an oligopoly by Veba/Degussa and Ato/
Haas on the market for PMMA. The combined
market share of Veba/Degussa and Ato/Haas would
be above 55 %. However, the market is not very
transparent. PMMA is produced and sold in

the quality of

different
forms and qualities. According to the
Commission’s enquiries, many customers have
stated that
the product and the
service are as important as the price. The barriers to
market entry are low. This is confirmed by the
successful market entry of east European and East
Asian producers in the last five years (in particular,
Agrobiochem, Bulgaria and Chimei Corp., Taiwan
and Lucky, South Korea). For these reasons, the
concentration is not expected to lead to a dominant
oligopoly on the market for PMMA.

4. Acrylate-based PVC processing additives

(45)

The market in acrylate-based PVC processing addi-
tives has a volume of only about 30 000 tonnes in
the EEA as a whole, and a value of well below ECU
100 million. According to the Commission’s
enquiries, the parties will have a joint market share

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17. 7. 98

of about [15 to 30] % after the merger (Veba [0 to
10] %, Degussa ca. [15 to 25] %. The clear market
leader is Rohm & Haas, with a market share of [55
to 70] %. The only other competitor with a market
share of over 10 % is Kaneka (about [10 to 15] %.
Thus the concentration would not confer a domi-
nant position on the parties. In view of the fact that
market structure would be changed very little, there
is no reason to expect that the concentration would
create or strengthen a dominant position held
jointly by the parties and Rohm & Haas.

5. Organosilanes

(46)

(47)

In organofunctional silanes, H(cid:129)ls operates only in
the ‘non-rubber' branch, where it has a share of the
EEA market of [40 to 50] %, while Degussa, with a
market share of less than 1 %, does practically no
business.

In the ‘rubber' applications, Degussa is very strong.
Until 1990, it had a patent on the sulphur-func-
tional silanes used here, and still holds the market
share of [>75] % that it had before. H(cid:129)ls does no
business in this area. According to information
supplied by the parties, which is confirmed by
customers, the main competitor in rubber applica-
tions is Witco/Osi, with a market share of about
18 %. Witco has been offering sulphur-functional
silanes only since 1996.

(48) As the parties operate on only one market each, the
concentration would not lead to any addition of
the
shares. And, given the fact
market
customers are different, there is no need to fear a
portfolio effect.

that

(49) On the market

silanes,

in alkyl

the parties’
combined market share is less than 15 %. The
clear market leader is Wacker, with a market share
of about
[50 to 60] %. Thus the concentration
would not create a dominant position here.

6. Silicon tetrachloride

(50) Degussa uses its entire output of silicon tetra-
chloride in Antwerp as a raw material for fumed
silica. Veba/H(cid:129)ls supplies mainly to Cabot H(cid:129)ls
and Degussa in an integrated operation for the
production of fumed silica. Other producers are
Wacker, which processes it into fumed silica, and
in an integrated fumed silica operation.
Dow,
the
Because of
is
geographic market
confined to the place of production, so that the
concentration will not
lead to any addition of
market shares.

transporting it,
in silicon tetrachloride

the difficulty of

7. Fumed Silica

(51)

(52)

Fumed silica is generally produced in a closed
circuit, in which the supplier of the raw material,
silicon tetrachloride or trichlorsilane, recycles the
hydrochloric acid resulting from the production of
fumed silica. The supplier of
the raw material
needs the hydrochloric acid for the production of
the raw material, that is to say in the hydrochlor-
ination of silicon metal. This means that the fumed
silica producer must either cooperate closely with
another firm or integrate the upstream stage into
his operation.

In the EEA and throughout the world, the market
in fumed silica is highly concentrated. There are
three producers in Europe: Degussa, Cabot and
Wacker. In the United States of America fumed
silica is produced by Cabot and Degussa, in Japan
by Tokuyama Soda and Nippon Aerosil, which is a
Degussa and Mitsubishi joint venture. Other produ-
cers, such as Oriana in Ukraine, are of no great
importance. Sales of
fumed silica in the EEA
amount to about ECU 160 million. According to
the Commission’s enquiries, Degussa has a market
share of about [50 to 60] % in the Community,
Wacker has [15 to 25] %, and Cabot [25 to 35] %.

(53) Degussa has production facilities in Rheinfelden
and Antwerp. Production of the raw material
is
integrated into the Antwerp operation, and, after
the take-over by H(cid:129)ls, Degussa’s Rheinfelden
operation will be integrated too. Wacker has
production facilities in Burghausen and Kempten,
and is likewise integrated with respect to the raw
material. Cabot has a production plant in Barry,
Wales, where the raw material is supplied by Dow
Corning.

(54)

In Rheinfelden, Cabot produces fumed silica in a
joint venture with H(cid:129)ls, Cabot H(cid:129)ls GmbH. The
raw materials are supplied by H(cid:129)ls, and H(cid:129)ls takes
the hydrochloric acid by-product from the joint
venture. H(cid:129)ls also supplies a variety of services
such as waste disposal, works protection and fire-
fighting. Under the joint venture agreement Cabot
and H(cid:129)ls have equal voting rights. The general
meeting of shareholders takes decisions by unani-
mous vote on real property,
longer-term lease
agreements, cooperation with other enterprises,
agreements on industrial property rights,
the
budget, borrowing, and agreements on the supply
or sale of the products produced by Cabot/H(cid:129)ls.
H(cid:129)ls and Cabot each appoint a manager. The two
managers are responsible for different areas. That
to the manager
appointed by H(cid:129)ls

reports

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L 201/109

(55)

appointed by Cabot. Profits and losses of the joint
venture are shared between Cabot and H(cid:129)ls.
According to a supply contract between Cabot H(cid:129)ls
and Cabot, Cabot/H(cid:129)ls is obliged to supply certain
the
minimum quantities to Cabot;
entire production of Cabot/H(cid:129)ls is sold to Cabot.
The purchase price is linked to Cabot’s average
selling price for fumed silica.

in practice,

Veba, through its stake in the joint venture Cabot/
H(cid:129)ls, has an interest in one of the two production
plants operated by Degussa’s biggest competitor in
Europe, so that if Veba takes over Degussa the
concentration will confer a dominant position on
Veba/Degussa on the market
in fumed silica.
Degussa is the clear market leader in Europe with a
market share of 50 to 60 %. As a result of the joint
venture operated by Cabot and Veba there will be a
structural link between them which would signifi-
cantly weaken the position of Cabot as an indepen-
dent competitor. As a result of the contractual rela-
tions between Veba and Cabot/H(cid:129)ls, Veba/Degussa
would always be informed about the pricing behav-
iour of Cabot on the market for fumed silica and
could adapt its pricing behaviour accordingly. The
already existing level of transparency of the market
resulting from the homogeneity of
the product
would therefore be considerably increased by the
concentration. The fact
through the
Cabot-H(cid:129)ls joint venture profits transfer arrange-
ment, will benefit directly from a higher price level
for the fumed silica sold by Cabot would also
obstruct price competition between Cabot and
Veba/Degussa. The market position of
the
remaining competitor, Wacker, would no longer be
sufficient to generate effective competitive pressure
and to prevent Veba/Degussa from acting indepen-
dently of customers and competitors on the
market. Buyers of fumed silica have therefore for
the most part been critical of the merger between
Veba and Degussa, assuming that Veba is to main-
tain its links in a joint venture with an important
competitor. In addition, there are major barriers to
the entry of new competitors onto the market, as
the investment required to set up a new fumed
silica plant is very heavy, and the specific process
requires a supply of raw materials and an outlet for
hydrochloric acid. No new competitor has entered
the market in the last five years.

that Veba,

(57)

(58)

management rights to a neutral and independent
trustee. The appointment of the trustee must be
approved by the Commission. The trustee will be
given an irrevocable mandate to dispose of Veba’s
to a buyer
shares by [ . . . . . . . . . . ] at
which does not belong either to the Veba group or
to the Degussa group, which has no holding in
either Veba or Degussa, and with which there is no
relevant cross-tenure of directorships.

the latest

The Commission takes the view that the promise
of a legal separation between Veba and the joint
venture Cabot H(cid:129)ls prevents the creation of a
by Veba/Degussa. Cabot
dominant
continues to be an independent competitor with
Veba/Degussa. This assessment is shared by the
buyers who expressed criticism of the concentra-
tion.

position

justify the conclusion that

The fact that H(cid:129)ls will go on supplying Cabot with
raw materials (silicon tetrachloride and trichlorsi-
lane) and that Cabot will go on supplying H(cid:129)ls
with hydrochloric acid resulting from the produc-
tion does not
the
companies will not behave as competitors on the
market. The mutual supply results from the closed
loop situation which is specific to the production
as it has been described by the parties. It will also
be necessary in the future in order to allow Cabot
to remain as an independent competitor on the
market. Therefore, the Commission assumes that
H(cid:129)ls will supply Cabot with raw materials in the
future. The Commission has been informed of a
supply agreement to be entered into which will
maintain the continuing competitiveness of
the
plants. The fact that H(cid:129)ls has in the past supplied
both the joint venture Cabot H(cid:129)ls and Degussa
with raw materials has according to the Commis-
sion’s enquiries not prevented Cabot and H(cid:129)ls
from behaving independently on the market.
Furthermore, Cabot is not unilaterally dependent
on H(cid:129)ls, as H(cid:129)ls is at the same time dependent on
supplies of hydrochloric acid by Cabot. Further-
more, Cabot is supplied independently from H(cid:129)ls
in its works in Barry.

(59)

To enable the Commission to verify that
this
undertaking is complied with, Veba should be
required to report to the Commission at the begin-
ning of every month on the steps it has taken to
give effect to the undertaking.

(56)

In order to overcome the Commission’s concerns,
Veba has given an undertaking to dispose of its
stake in Cabot H(cid:129)ls GmbH by [ . . . . . . . . . . ] at the
latest to a competitor which does not belong either
to the Veba group or to the Degussa group, or in
which Veba and/or Degussa have no interest, and
with which there is no relevant interlocking of
directorships. If there has been no such disposal by
its voting and
that date, Veba will

transfer all

8. Diamines/polyamines

(60) According to information supplied by the parties,
the total volume of the market in diamines and
polyamines in the Community is about 31 800
tonnes, or about ECU 116 million. The market
shares break down roughly as follows:

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Official Journal of the European Communities

17. 7. 98

Veba/H(cid:129)ls

Degussa

Veba
and
Degussa

BASF

Bayer

Others

Market share
EEA 1996

[20 to 30] % [5 to 10] % [25 to 35] % [20 to 30] % [15 to 25] % 20 to 30 %

(61)

Therefore, the concentration will not create a dominant position in the market for
diamines/polyamines. Alongside the strong competitors BASF and Bayer there are other
smaller suppliers. There is no evidence to suggest a dominant oligopoly consisting of the
parties, BASF and Bayer. Diamines are not homogeneous products; each of the leading
producers offers its own range, using different chemical bases. Therefore the prices of
different types of diamine differ, too.

9. Reagents for the production of cationic starch

(62)

This market is small: the market volume in the EEA, including captive use and finished
reagents, is between 25 000 and 30 000 tonnes, and excluding captive use and finished
reagents it is about 10 000 to 15 000 tonnes. The market shares break down roughly as
follows:

Veba/Servo

Degussa

Veba
and
Degussa

CFZ

Others

Market share
EEA 1996

[15 to 20] %

[17 to 23] %

[35 to 40] %

[25 to 35] %

[30 to 40] %

(63)

for

There are other smaller suppliers of starch reagents
too. Two producers, Raisio and Roquette, make
the production of cationic starch
reagents
mainly or entirely for their own use. But
is
conceivable that
increase or begin
they might
production for sales to outsiders if market condi-
tions are attractive enough. Since 1995 the US
company Dow has entered the market, with a
market share that is still low, but rising. Thus the
concentration would neither create a dominant
position nor would it lead to oligopolistic dom-
inance.

it

(64)

In the case of finished reagents there is no addition
of market shares, and consequently no strength-
ening of Degussa’s market position, as H(cid:129)ls/Servo
does not operate in this area.

VI. CONCLUSION

(65)

competition would

For these reasons, then, it can be concluded that,
provided the undertaking given by Veba (see recital
56) is fulfilled, the concentration will not create or
strengthen a dominant position as a result of which
effective
significantly
impeded in the common market or in a substantial
part of it. In order to enable the Commission to
verify the fulfilment of the condition, Veba should
be required to report
to the Commission on
compliance with the condition. The concentration
should accordingly be declared compatible with the

be

common market pursuant to Article 2(2) of the
Merger Regulation and pursuant to Article 57 of
the EEA Agreement,

HAS ADOPTED THIS DECISION:

Article 1

The concentration between Veba and Degussa is hereby
declared compatible with the common market and with
the EEA Agreement, subject
to compliance with the
condition set out in Article 2.

Article 2

This decision is subject
complies with the following undertakings:

to the condition that Veba

(a) Veba’s stake in Cabot H(cid:129)ls GmbH shall be sold by
[ . . . . . . . . . . ] at the latest to a buyer which does not
belong either to the Veba group or to the Degussa
group, or in which Veba and/or Degussa have no
interest, and with which there is no relevant cross-
tenure of directorships.

(b) If there has been no such disposal as referred to in
point (a) by the date given there, Veba shall transfer all
its voting and management rights to a neutral and
independent trustee. The appointment of the trustee
shall be approved by the Commission.

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Official Journal of the European Communities

L 201/111

(c) The trustee shall be given an irrevocable mandate to
dispose of Veba’s shares by [ . . . . . . . . . . ] at the latest
to a buyer which does not belong either to the Veba
group or to the Degussa group, which has no capital
holding in either Veba or Degussa, and with which
there is no relevant cross-tenure of directorships.

Article 4

This Decision is addressed to:

Veba AG
Bennigsenplatz 1
D-40474 D(cid:129)sseldorf.

Article 3

Done at Brussels, 3 December 1997.

Veba is hereby instructed to report to the Commission at
the beginning of every month on the steps taken to give
effect to the undertaking described in Article 2.

For the Commission

Karel VAN MIERT

Member of the Commission