Communication made pursuant to Article 19(3) of Council Regulation No 17 concerning request for negative clearance or for exemption pursuant to Article 81(3) of the EC Treaty (Case No IV/E-2/36.732 - Solvay-Sisecam)(Text with EEA relevance)
Date: 1999-09-25
Institutions: European Commission
Subjects: Belgium, Türkiye, chemical industry, chemical salt, inter-company agreement, joint venture

C 272/14

EN

Official Journal of the European Communities

25.9.1999

Communication made pursuant to Article 19(3) of Council Regulation No 17 concerning request
for negative clearance or for exemption pursuant to Article 81(3) of the EC Treaty (Case No
IV/E-2/36.732 (cid:151) Solvay-Sisecam)

(1999/C 272/10)

(Text with EEA relevance)

A. Summary

1. On 28 October 1997, the Commission received from the
groups Solvay (Belgium) and Sisecam (Turkey) a request for
negativ clearance on the application of Article 81(1) or of
Article 82 or, failing this, exemption under Article 81(3) of
(the
the EC Treaty
Agreements) creating a joint venture for soda production
in the form of
the Bulgarian company SODI SPJCo.,
Devnya.

a number of

agreements

for

2. The creation of

the joint venture consisted of

the
acquisition by Sisecam of a minority shareholding in the
holding company controlling SODI, whose majority is held
by Solvay. The latter acquired 60 % of SODI in April 1997,
when it was privatised by the Bulgarian Government, and
corresponding shares were transferred to a wholly owned
holding company under Austrian law. As a consequence of
the abovementioned operation, the holding company is
(cid:145)Solvay-Sisecam Holding AG(cid:146). The
now designated
present
agreements
concerning on the one hand the acquisition of an
indirect shareholding by Sisecam in SODI and on the
other hand the management methods of the thus created
joint venture.

notification

concerns

only

the

3. The preliminary acquisition of SODI by Solvay was not
notified to the Commission because the concentration did
not fall within the scope of Regulation (EEC) No 4064/89.
The operation was however notified to the Belgian, French,
Spanish, Greek, Austrian and Italian national competition
authorities. These have all given their approval
to the
Italian
the
acquisition,
authority was conditional on Solvay giving certain under-
takings aimed at preserving effective competition on the
Italian market.

agreement of

although the

4. The EBRD, as a financial partner, acquired 24 % of Solvay-
Sisecam Holding AG, of which Solvay and Sisecam hold
57 % and 19 % respectively. The removal of the Bank is
guaranteed by a system for the repurchasing of its shares
by the two industrial shareholders.
In December 1997,
Solvay-Sisecam Holding AG increased its participation in
SODI
increase. The rights
between the notifying parties have remained unchanged
as a result.

from 60 to 67 % by capital

5. For the use of the joint venture, the two industrial share-
holders concluded an (cid:145)off-take agreement(cid:146) organising the
distribution of production in proportion to their relative
participation in the capital of the company. The quantities
of soda distributed between the notifying parties have to
be marketed via their own distribution network and in a

perfectly autonomous manner. The Agreements therefore
create a joint venture for production of a cooperative
nature, Sisecam having a right of veto concerning the
principal decisions.

B. The Parties

6. Solvay SA is the largest Belgian chemical group. It is active
in the fields of chemicals, plastics, plastics processing and
Its world turnover amounted in 1996 to
pharmacy.
BEF 286 000 million.
the
subject of the notification, Solvay SA acts via its German
companies
subsidiary
H&C
in addition to via an Austrian company:
Verwaltung,
(cid:145)Sovlay-SODI Holding AG(cid:146). SODI, now controlled by
Solvay, is one of the largest units of soda production in
the world (1,2 million tonnes).

In the operation which is

Deutschland,

Solvay

7. T(cid:252)rkiye Sise ve Cam Fabrikalari AS (Sisecam) is a Turkish
group active in the fields of glass, chemistry, packing,
machines and industrial minerals. Its world-wide turnover
amounted in 1996 to TRL 89 201 000 million. The
private joint stock company, Sisecam AS is controlled by
the Turkish bank T(cid:252)rkiye Is Bankasi AS (TIBAS). For this
operation, Sisecam acts in particular via its subsidiary
company Soda Sanayii AS.

C. The products and the relevant markets

8. Sodium carbonats (soda)

is an alkaline chemical mainly
used in the production of glass, of which it represents
an important share of
It is
also used in the chemical
industry for a number of
applications (mainly the manufacture of detergents), as
well as in metallurgy.

the cost of raw materials.

9. Soda can be of synthetic or natural origin. Synthetic soda
is primarily produced in Europe (East and West) and in
Asia (China, India), via the method called soda-ammonia,
while so-called natural soda is produced from trona ore
which is present in certain third countries, in particular in
the United States. Soda can be light or dense but both
forms of
and
are
substitutable.

chemically identical

the product

10. Though several products (e.g. recycled glass, caustic soda)
could serve as
substitutability is
however real only for specific uses and concerns particular
sectors of industry. The product market in question for this
business is therefore that of soda.

substitutes

soda,

for

25.9.1999

EN

Official Journal of the European Communities

C 272/15

11. The delimination of the geographical market in question is
particulary complex. The importance of the role played by
soda in the manufacture of glass forces manufacturers to
ensure almost daily supplies in major quantities. Moreover,
transportation costs are relatively high compared to the
the product. Lastly, a great cost
commercial value of
difference between maritime transport and the inland
transport, which is far more expensive, must be noted.

12. The conjunction of

these characteristics

illustrates a
contrasting situation. Client companies, at least the glass
producers, prefer in general
to be supplied by plants
located near their production sites. On the other hand,
the sites of
the transport cost differential,
in view of
soda produciton allowing the routing by boat are, being
of a similar distance, in a superior competitive position in
relation to a site located inland.

The homogeneous competition areas are therefore difficult
to delimit and depart largely in any event from national
borders. The production sites located inland delimit areas
of homogeneous competition to a specific radius, while the
sites accessible by sea are open to intensive competition.
The competitive position of the companies in relation to a
given area largely depends therefore on their geographical
situation.

13. The tariff barriers at the entry on the European market are
either non-existent, or reduced with regard to the United
States, following the Uruguay Round and especially the
lifting, on 13 October 1997, of the antidumping duties
in force since 1995. That should enable the American
exporters to enter easily the European market
the
economic conditions are favourable. Soda is moreover a
world-wide product the specifications of which are almost
non-existent and satisfied by all the producers. It must be
noted, however, that the rather mediocre quality of the
soda produced in certain countries weakens the competi-
tiveness of the producers concerned.

if

14. The precise scope of the geographical market can be left
open in this case. Although the division in national
markets has obviously been eroded, several contingent
markets result from the comparison of economic factors.
is characterised by a strong
The geographical market
presence of the traditional domestic suppliers present on
the spot and by potential access to the large market on the
part of companies located near seaports. For any demand
exceeding the supply immediately available on the spot, it
becomes necessary to be supplied by sea, which can,
moreover, constitute an alternative in the event of a
local price rise.

D. The agreement

15. The object of the joint venture is the production of dense
and light soda. Such production is expected to increase as
a result of
investments agreed by Solvay, Sisecam and
EBRD. This production is not new since SODI already
primarily produces soda. Moreover, Solvay and Sisecam
are already producing soda themselves in their respective
factories.

16. The two industrial shareholders concluded an off-take
agreement which defines the methods of distribution of
soda production. Solvay and Sisecam have a right and
an off-take obligation on all production by SODI,
in
proportion to their level of capital contribution to the
company (outside of the contribution of the EBRD). The
scale of reference for the production of
the factory is
therefore currently the following: 75 % for Solvay and
25 % for Sisecam (hereafter: (cid:145)reference percentage(s)(cid:146)).

17. The off-take agreement sets up a mechanism aiming to
penalise the party whose volume of orders is short of its
reference percentage. The system functions as follows:

the beginning of

The production targets of the factory are regularly laid
down by cooperation between SODI and the parties.
Before
each party
communicates to SODI the volumes of soda required for
this period. Monthly, each party provides the joint venture
with an updated forecast of the needs for the next three
months.

each quarter,

For a finally produced overall Q quantity, the reference
percentages are calculated and fictitious distribution is
compared with real distribution, which has resulted from
the production orders passed through each party.

Having ordered a percentage of the overall quantity Q
higher than its reference percentage,
the party ((cid:145)excess
buyer(cid:146)) benefits from a rebate (off-balance premium) for
the quantity corresponding to this difference (so called
off-balance quantity). The amount of this rebate on the
other hand is invoiced by SODI to the party which has
ordered a volume lower than that corresponding to its
reference percentage (shortfall buyer).

When one of the parties wishes to take a quantity of soda
higher than its reference percentage of the maximum level
of production of SODI, negotiations take place between
the two parties and the transaction price is fixed freely
by the two parties.

initially foresaw that

18. SODI’s transfer of soda to both shareholders gives rise to a
commercial transaction. In order to establish the price, the
agreement
the price invoiced by
SODI, calculated quarterly, corresponds to the weighted
average price (ex works) of
the total of sales of Sodi
soda from Solvay and Sisecam to third parties, reduced
by a commercial
the
amount of the transfer price was to be calculated by an
independent auditor on the basis of the statistical data
concerning the sales provided by each party. During the
quarter t, transactions were to be based on the transfer
price defined for the t-1 quarter and an adjustment was to
be carried out at the end of each quarter.

rebate. For a given quarter

(cid:145)t(cid:146),

19. The parties envisaged in their agreement that Solvay would
not actively market soda produced by SODI on the Italian
market, except
technical
difficulties affecting the level of
soda production by
Solvay’s Rosignano factory.

in the event of shortage or

C 272/16

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Official Journal of the European Communities

25.9.1999

E. Comments of the Commission

the product

is being carried out

20. The joint venture is only aimed at soda production. As the
marketing of
in an
autonomous way by Solvay and Sisecam, the creation of
the joint venture as such should not restrict competition.
Moreover, it must be emphasised that by the agreement in
question, Sisecam gains access to a market on which
hitherto it was scarcely present and on which Solvay has
a very strong position.
the mechanism of
to
off-balance
maximise the respectively taken quantities. Both the
creation of
the joint venture and the mechanism in
question must be deemed to have a pro-competitive effect.

Finally,
a

incentive

quantity

creates

strong

21. The clause providing not to actively market soda produced
in Bulgaria on the Italian market (see point 19) constituted
restriction of
on the other hand
the
after
competition. However,
Commission, the parties agreed to suppress the clause.
This restriction of competition was therefore eliminated.

discussion with

an appreciable

the previous quarter. Consequently, a variation on sale by
one of the competitors would result in varying mecha-
nically the transfer price in a similar manner. After
discussion with the Commission,
the parties agreed to
modify the way in which the price of SODI’s products
instead be
will be established. The reference price will
linked to an index based on export statistics, notably the
prices invoiced by US exporter of soda ash to Europe, as
calculated by an independent expert. The commercial
remain
rebate
unchanged.

reference price will

applied to the

23. The Commission proposes

consequently to adopt a
favourable attitude with regard to the agreements the
basis of which are outlined above. Before doing so,
it
however
their
comments within a month as from the publication of
the
this communication, by forwarding them under
to the
reference
following address:

invites the interested parties to submit

(cid:145)IV/E-2/36.732 (cid:151) Solvay-Sisecam(cid:146),

22. The abovementioned price mechanism raised concern with
the Commission, as the fixing of the transfer price would
have led to having the purchase price of the product of
SODI mechanically connected with its resale weighted
average price on the market by both competitors during

European Commission
Directorate-General for Competition
(DG IV (E/2))
Rue de la Loi/Wetstraat 200
B-1049 Brussels
Fax: (32-2) 299 24 64