2004/269/EC: Commission Decision of 18 January 2000 declaring a concentration to be compatible with the common market and the EEA Agreement (Case COMP/M.1630 — Air Liquide/BOC) (notified under document number C(2000) 62) (Text with EEA relevance)
Date: 2000-01-18
Institutions: European Commission
Subjects: economic concentration, exchange of information, gas industry, merger control

30.3.2004

EN

Official Journal of the European Union

L 92/1

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 18 January 2000

declaring a concentration to be compatible with the common market and the EEA Agreement

(Case COMP/M.1630 — Air Liquide/BOC)

(notified under document number C(2000) 62)

(Only the English text is authentic)

(Text with EEA relevance)

(2004/269/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Whereas:

Having regard to the Treaty establishing the European
Community,

(1)

Having regard to the Agreement on the European Economic
Area, and in particular Article 57(2)(a) thereof,

Having regard to Council Regulation (EEC) No 4064/89 of
21 December 1989 on the control of concentrations between
undertakings (1), as
last amended by Regulation (EC) No
1310/97 (2), and in particular Article 8(2) thereof,

On 16 August 1999,
the Commission received a
notification pursuant to Article 4 of Regulation (EEC)
No 4064/89 (the merger Regulation) of a proposed
concentration whereby the undertaking Air Liquide SA
(Air Liquide) acquires control within the meaning of
Article 3(1)(b) of the merger Regulation of parts of the
undertaking The BOC Group plc (BOC) by way of a
implemented jointly with the
public bid to be
undertaking Air Products and Chemicals
(Air
Products) and the subsequent division of the businesses
and assets of BOC.

Inc.

Having regard to the Commission's decision of 16 September
1999 to initiate proceedings in this case,

(2)

On 16 September 1999 the Commission decided in
accordance with Article 6(1)(c) of the merger Regulation
and Article 57 of
to initiate
proceedings in this case.

the EEA Agreement

Having given the undertakings concerned the opportunity to
make known their views on the objections raised by the
Commission,

(3)

The Advisory Committee discussed the draft of
Decision on 5 January 2000.

this

Having regard to the opinion of the Advisory Committee on
Concentrations (3),

I. THE PARTIES

(1) OJ L 395, 30.12.1989, p. 1; corrected version in OJ L 257,

21.9.1990, p. 13.

(2) OJ L 180, 9.7.1997, p. 1.
(3) OJ C 79, 30.3.2004.

(4)

Air Liquide is an international group active in the field
of industrial gases and related businesses, cogeneration

L 92/2

EN

Official Journal of the European Union

30.3.2004

of electricity and steam, engineering, welding and
cutting equipment and consumables, diving and medical
equipment and services related to those products. The
company supplies industrial gases to various industries
chemicals,
including
glass,
food processing,
electronics, paper pulp, metallurgy,
health care and aerospace industries. Air Liquide is the
world's largest producer and distributor of
industrial
gases in terms of turnover.

refining,

steel,

iron,

(5)

BOC is involved in the production and distribution of
industrial gases and related equipment, distribution
company
vacuum technology.
and
services
produces and markets
the main atmospheric gases
(nitrogen, oxygen and argon), hydrogen, carbon dioxide,
helium, acetylene, liquefied petroleum gas and speciality
gases. In terms of turnover, BOC is the world's second
largest producer and distributor of industrial gases.

The

II. THE OPERATION AND THE CONCENTRATION

in particular the assets located in the United Kingdom
and Ireland.

B. PREVIOUS ACQUISITIONS

(9)

In January 1999, Air Liquide acquired the industrial
the
gases businesses of BOC in France, Belgium,
Netherlands and Germany. Those acquisitions were
notified to the Bundeskartellamt (4)
(German Federal
Cartel Authority) and the Conseil de la concurrence (5)
competition
(Belgian Competition
authorities cleared the acquisition. The acquisition was
also notified to the Nederlandse Mededingsautoriteit (6)
(Dutch Competition Authority), which issued a ‘no
jurisdiction'-decision.

Service). Those

(10) Given that the transactions referred to in paragraph 9
all took place within a two-year period between the
same undertakings, they will be treated as one and the
same
the present procedure
pursuant to the second subparagraph of Article 5(2) of
the merger Regulation.

concentration under

A. THE NOTIFIED ACQUISITION OF PARTS OF BOC

III. COMMUNITY DIMENSION

(6)

(7)

On 13 July 1999, Air Liquide and Air Products
announced a joint pre-conditional recommended cash
offer under rule 2.5 of the United Kingdom Takeover
Code for all shares in BOC through Bidco, a corporate
vehicle established for the purpose of the acquisition.
including that of
Upon obtaining regulatory approval,
the European Commission, the companies are obliged to
proceed to post an offer to the shareholders.

Air Liquide and Air Products have agreed to divide the
businesses and assets of BOC after completion of the
bid (Agreement of 2 July 1999, as amended on 7 July
1999 (the Agreement)). In accordance with the agreed
plan for that division, Air Liquide will acquire BOC's
operations within the EEA (in the United Kingdom and
Ireland) as well as certain operations outside the EEA.
Air Products will acquire the remaining BOC operations.
With respect to BOC's intellectual property, consisting of
patented
including
software, Air Liquide and Air Products intend to make
arrangements to give both undertakings equal access to
that intellectual property (section 9 of the Agreement).

non-patented

technology

and

(8)

The present notification concerns only those businesses
and assets of BOC that Air Liquide proposes to acquire,

(11)

Air Liquide and BOC have a combined aggregate
worldwide turnover of more than EUR 5 000 million (7)
(EUR 6 146 million for Air Liquide (8)
in 1998 and
approximately EUR 1 949 million for BOC (9) in 1998).
The aggregate Community wide turnover of each party
exceeds EUR 250 million (EUR […](*) million for Air
Liquide (10) in 1998 and EUR […]* million for BOC in
1998) and neither of
the undertakings concerned
aggregate
than two-thirds of
achieves more
Community-wide turnover in one and the same Member
State. The notified concentration therefore has
a
Community dimension.

its

(*) Parts of

this text have been edited to ensure that confidential
information is not disclosed; those parts are enclosed in square
brackets and marked with an asterisk.

(4) Case B3-168/98 of 16.12.1998.
(5) Case 98/0050 of 12.1.1999.
(6) Case 1182/4b.84 of 29.12.1998.
(7) Turnover calculated in accordance with Article 5(1) of the merger
Regulation and the Commission Notice on the calculation of
turnover (OJ C 66, 2.3.1998, p. 25). To the extent that figures
include turnover for the period before 1 January 1999, they are
calculated on the basis of average ECU exchange rates and
translated into EUR on a one-for-one basis.

(8) The turnover figure for Air Liquide includes the turnover of the
business acquired from BOC in 1999 in France, Germany, Belgium
and the Netherlands (EUR […]* million).

(9) The turnover

figure for BOC includes turnover

for

the gases

businesses to be acquired by Air Liquide.

(10) See footnote 8.

30.3.2004

EN

Official Journal of the European Union

L 92/3

IV. ASSESSMENT UNDER ARTICLE 2 OF THE MERGER
REGULATION

A. RELEVANT PRODUCT MARKETS

industrial gases companies often buy carbon dioxide
from chemical and petrochemical companies. Acetylene
is a gaseous hydrocarbon generally produced from the
reaction of calcium carbide with water or extracted
from chemical sources.

1. INDUSTRIAL GASES

(12)

The businesses of Air Liquide and BOC mainly overlap
in the production and distribution of industrial gases.
Industrial gases are all gases used in manufacturing
processes, research, healthcare and related applications.
The parties produce and distribute atmospheric gases
(air gases) and non-atmospheric gases (gases produced
from sources other than air).

(15) Helium is obtained from natural gas with a helium
content of 0,3 % or more (helium rich natural gas). The
production process includes the extraction of crude
helium (which contains approximately 65 % helium and
35 % nitrogen) and the purification (refining) in order to
obtain pure helium (99,995 % or higher purity). The
notifying party considers that a separate market exists
for
the wholesale of helium. The Commission's
investigations have confirmed that there is a wholesale
market for the supply of refined helium to retailers for
resale.

(13) Atmospheric gases are nitrogen (around 78 % of the
air), oxygen (around 21 % of the air) and argon (around
0,9 % of the air). The rare gases Krypton, Neon, Xenon
together account for around one thousandth of the air.
The production of air gases
is mainly based on
cryogenic air separation technology, which involves a
is
multi-step and relatively complex process. Air
liquefied at very low temperatures and then separated
into its components, which are removed at different
levels
separation
processes include pressure swing adsorption (PSA) and
vacuum pressure
adsorption (VPSA). Both
processes produce either oxygen or nitrogen. Membrane
separation is used mainly for
the production of
nitrogen.

in distillation columns. Other air

swing

(14) Hydrogen is abundant in hydrocarbons (petroleum and
its by-products) and is mainly produced by steam
reformation of natural gas, or naphtha or by other
chemical means (usually hydrocracking). Hydrogen is
also manufactured by oil and chemical companies.
Carbon dioxide is mainly produced from natural wells
combustion of hydrocarbons. Thus,
or

from the

(16)

steps of

speciality gases — ESGs):

The parties to the concentration also sell so-called
speciality gases, which comprise mainly refrigeration,
electronic and lighting gases. Speciality gases contain
various chemical molecules required by the electronics
industry to manufacture semiconductors to be used in
the manufacturing process
the different
(so-called electronic
for
example Silane (SiH4) is used for deposition of a layer of
pure silicon or silicon oxide on the surface of the wafer,
Arsine (ASH3) and Phosphine (PH3) for doping (addition
of dopants on the surface of
the wafer in order to
change semiconductor properties), Nitrogentrifluoride
(NF3), Hexafluoroethane (C2F6) and Carbontetrafluoride
(CF4) for etching (in order to remove materials on the
the wafer to create the integrated circuit
surface of
pattern),
Tungstenhexafluoride
for metal
deposition
and
and
Nitrogentrifluoride as cleaning agents.

Hexafluoroethane

(WF6)

(17)

The principal uses of
table 1.

industrial gases are set out in

Table 1

Description of primary industrial gases and their use

Nitrogen

Oxygen

Purging of all types

Steel making

Argon

Welding

Oil and gas operations

Non-ferrous melting

Steel making

Heat treatments

Waste water treatment

Light tubes

Glass making

Gas welding, cutting

Metals

Insert packaging

Breathing gases

Electronics components

Silo atmospheres

Rocket fuel oxidant

Food transports

Brick making

Helium

L 92/4

EN

Official Journal of the European Union

30.3.2004

Description of primary industrial gases and their use

Steel making

Odour control

Electronic components

Tea fermentation

Tissue freezing

Artificial insemination

Food freezing

Shrink fitting

Molding deflashing

Scrap reclamation

Die cooling

Steelworks equipment cooling

Glass making

Pulp and paper

Ozone

Welding

Balloons

Leak detection

MRI

Coal gasification

Cyrogenic cooling

Electronic components

Breathing gases

Carbon Dioxide

Hydrogen

Solvent recovery

Food freezing

Furnace atmospheres

Air pollution abatement

Chemical manufacture

Beverages

Oil wells

Glass making

Chemicals manufacture

Blow mold cooling

Plant growth

Power station equipment cooling

Mine safety

Fire extinguishers

Waste treatment

Mold setting

Metals fabrication

Tobacco expansion

Rocket fuel

Margarine manufacture

Electronic components

Source: NatWest Securities, ‘Industrial Gases 2000'.

(18)

customers

The industry generally shares the view that each gas
constitutes a separate product market. Certain gases can,
in principle, be substituted by others for specific uses,
for example, carbon dioxide and argon for welding.
consider
generally
However,
substitution to be a realistic option. The replies to the
Commission inquiry received indicate that
for most
applications, price differences
and the degree of
integration of a particular gas with the customers'
exclude
specific
substitution between gases in practice.

application

processes

largely

not

do

(19)

that oxygen, nitrogen,

Therefore, for the purpose of this case, the Commission
considers
argon, hydrogen,
carbon dioxide,
acetylene, wholesale helium and
electronic speciality gases constitute separate product
markets.

2. SUPPLY METHODS

(21)

(22)

Tonnage sales take place where demand for air gases
involves
large quantities of oxygen and nitrogen.
Customers are mainly industrial users (for instance in
the petrochemical/chemical,
refining and glass
industries).

steel,

Supplies take place through dedicated production plants
installed on the customer's site (‘on-site' air separation
units) or by means of pipeline links. In the first case, air
separation units are built on or close to the site of the
customer and are dedicated to the requirements of that
customer (11). The products are delivered in gaseous
form directly from the supplying plant through a pipe
connecting the plant
the
customer. The supplier owns the on-site plants and
operates them on the basis of a long-term contract (up
It provides ongoing maintenance and
to 15 years).
support.
In geographical areas where the density of
customers makes it economically viable to link air
separation units to each other, a pipeline network may
(e.g. Northern France, Belgium and the
be built
Netherlands). Each gas (oxygen or nitrogen) is delivered
through a specific pipe. According to the notifying

to the industrial

site of

(20)

Industrial gases are supplied in different forms (gaseous
and via different distribution channels
or
(tonnage, bulk and cylinders).

liquid)

(11) In certain cases, other customers may also be served from this air

separation unit.

30.3.2004

EN

Official Journal of the European Union

L 92/5

volumes

party, these methods of supply are without alternative
for
day, or
3 000 m3/hour, and more than 2 000 tonnes per day
(tpd), or 60 000 m3/h.

between 100 tonnes per

(23) On-site air

separation plants

(mostly non-cryogenic,
sometimes also cryogenic) are also used to satisfy
demand for oxygen or nitrogen from 20 to 100 tpd,
that is to say in a range that could also be supplied in
bulk. Smaller on-site units often produce either nitrogen
or oxygen, larger units produce both together.

(24)

The quantities of gas that may be supplied in bulk are
not as large as in the tonnage business. Except
for
hydrogen, which is mainly produced and transported in
gaseous form, the gases delivered in bulk are generally
produced in liquid form. Liquefaction plants can also be
constructed on the same site as tonnage plants, thus
avoiding investment in a pipeline between the two. The
liquid gases are then transported by road or rail tanker
from the supplier's plant to the site of the customer,
where they are stored, before being used in liquid form
or
is
transported and stored in specific dedicated equipment
(air gases,
in low
temperature cryogenic trailers).

transformed into gaseous

form. Each gas

in particular,

transport

require

(25) Delivery in cylinders

is used when the quantities
requested by the customers are small, ranging from one
m3/month to 1 000 m3/month (above this quantity, the
customer's demand would best be served in bulk). All
gases are produced and filled in cylinders in gaseous
form, except carbon dioxide, which is delivered in liquid
form. Cylinders may be filled at, and distributed from,
the supplier's production plant or, alternatively,
liquid
gases may be transported in tankers to cylinder filling
centres in order to be transformed into compressed gas.
From there, cylinders in various sizes holding gas under
pressure are transported either directly to the customer,
or to depots from which the supply to retail customers
is carried out. The more important cylinder customers
will usually be served directly by the industrial gases
company, whereas smaller customers will be supplied by
the depot holder. Although the volumes of cylinder
gases are limited, their importance in terms of revenue
is considerable because of the significantly higher prices
and related charges that go with cylinder sales.

(26)

industry generally views

The
three different
distribution methods as separate product markets, and
the Commission has taken the same view in previous
cases. Prices for gases, cost of transportation and rent

these

and possible safety and other charges differ depending
on which form of delivery is used.

(27)

The Commission therefore considers that the tonnage,
bulk and cylinder supply of oxygen and nitrogen, the
bulk and cylinder supply of argon (including argon
mixtures), hydrogen, carbon dioxide and acetylene, the
wholesale supply of helium and the supply of electronic
speciality gases constitute the relevant product markets.
It should be noted, however, that those markets may
nonetheless be inter-related.
In particular, a strong
position on the tonnage market will often confer
competitive advantages on the bulk market and vice
versa.

B. RELEVANT GEOGRAPHIC MARKETS

1. TONNAGE

(28)

the relevant market
The notifying party argues that
should be qualified as worldwide. The Commission
notes that the notifying party's position is inconsistent
with its assertions throughout the procedure as well as
its own internal assessment. Throughout the procedure,
the notifying party has stressed that none of BOC's
businesses and operations in the United States and other
parts of the world, which the notifying party plans to
acquire, have any effect on competition within the EEA.
the notion of a
Those statements clearly contradict
world market.
the Commission has
reviewed an internal document in which the notifying
the
party analysed the competition law aspects of
planned
the
assesses
acquisition. That
document
in a reference area not
planned transaction's impact
wider than Europe. No mention is made of a wider
for example a world market (12). The
reference area,
Commission concludes that the position taken by the
notifying party at the oral hearing contradicts its usual
assessment of the relevant geographic market.

Furthermore,

(29) At the oral hearing, the notifying party submitted that
industrial gases
to
companies are
construct on-site separation plants anywhere in the

technically able

(12) Air Liquide document of 2 June 1999 (submitted to the Federal
Trade Commission as part of the HSR filing). The relevant text
reads: ‘Consequences of the transaction: Tonnage — on a national
basis, no overlap of parties' activities; on a European basis,
combined share would exceed 40 %'. The text goes on to assess
the transaction's impact ‘in the EU territory'.

L 92/6

EN

Official Journal of the European Union

30.3.2004

(32)

(33)

(34)

(35)

world. The notifying party infers that the market should
be seen as worldwide. However, the mere fact that a
supplier has the technological ability to provide certain
goods worldwide is not in itself sufficient to justify that
in which long-term
conclusion. Rather,
in a market
the analysis
supply contracts are put out
should focus on whether suppliers do actually compete
for such contracts in the same geographic area, and
whether
homogenous
under
compete
conditions in different geographic areas.

to tender,

suppliers

(30)

and,

limited extent,

The Commission's investigation has confirmed that a
distinct group of industrial gases companies, which are
established within the EEA, are competing for tonnage
supply contracts within the EEA on a regular basis,
namely AGA, Air Liquide, Air Products, BOC, Linde,
Messer, Praxair
smaller
to a
companies
In contrast, a
such as SIAD and SOL.
number of companies established in other regions of the
world are not active in the EEA. Firstly, the notifying
party stated that
the following companies have the
capability (technology and know-how) to construct air
separation units: Hitachi, Kobe Steel, PSI, Cryogenmash,
Kaifeng, Sechuan Air Sep, Hang Yang and Cosmodyne.
The Commission has found no indications that tonnage
customers in the EEA have requested offers from or are
supplied by those companies. Secondly, some major
industrial gas suppliers, such as Nippon Sanso and
Airgas, do not actively compete for tonnage contracts in
It cannot be argued that technological and
the EEA.
in theory, not prevent
regulatory barriers would,
non-European companies
in
Europe. The advantage conferred by an established
presence and existing customer preferences renders this
highly unlikely.

from becoming active

(31) Not only is the notifying party correct in asserting that
the ‘bidding'
for tonnage contracts takes place on a
worldwide basis. Industrial gases companies compete for
such contracts on the basis of an established presence in
the EEA. Industrial gases companies normally establish
or acquire a local subsidiary or joint venture in a region
in which they intend to become active. Such local
subsidiaries are responsible for penetrating a regional
market, compiling and submitting offers and providing
ongoing customer relations and technical support once
a contract has been concluded. Several industrial gases
companies have
they compete for
confirmed that
tonnage contracts in a given region only if they have
established a local presence in that region. AGA has
stated that it does not make offers outside the areas in
which it has an established market presence (Europe, the
Midwest of the United States and Brazil); the company
does not contemplate stand-alone activities. Linde has
indicated that it cannot compete for on-site contracts in

long term without

through a
the
subsidiary. Messer has confirmed that it usually invests
in on-site projects through a local subsidiary or joint
venture.

local presence

their

Praxair
and Air Products,
the only non-European
industrial gases companies active
in Europe, have
established European headquarters
from which they
tonnage business in Europe.
conduct most of
Praxair has stated that it has a local team of engineers in
the EEA (located in Oevel, Belgium) which is responsible
for obtaining on-site contracts, designing of on-site
projects and carrying out such contracts. Global plant
designs are usually adapted to the EEA market in order
to include as many local components as possible. Plant
maintenance, major repairs in case of plant breakdown
and plant upgrade during the contract term are carried
out by this European representation. Staff from outside
rarely involved in the negotiation of
Europe
contracts
customer
and maintenance of ongoing
relations. Air Products has confirmed that it operates its
European tonnage business in a similar fashion.

are

Customers have also confirmed that assessment. None of
the customers contacted by the Commission has a
tonnage contract with any industrial gases company
other than those companies established in Europe. Only
one customer has
it contacts other
indicated that
companies as well as the above when awarding a
tonnage contract. The Commission concludes that from
the perspective of European tonnage customers, only
suppliers with an established presence in the EEA are
eligible.

Furthermore, the Commission's investigation has shown
that while the conditions of competition in the tonnage
those
market
conditions are appreciably different in other areas of the
world. The EEA must therefore be distinguished from
other regions of the world.

are homogenous within the

EEA,

contracts

competition for

tonnage contracts

the world. Tonnage

Firstly, price
is
determined by objective factors that differ in different
establish
regions of
long-term supply relationships of up to 15 years
between a supplier and a customer. Each tonnage
contract requires the supplier to make a high capital
investment, sometimes in excess of EUR 200 million.
The expected return on the capital invested is a decisive
criterion for how an industrial gases company can
compete on price in a given region. Each supplier will
determine the expected return on capital in relation to
the perceived risk in a given region. Due to the
and the high
contracts
long-term nature of
investment
involved, currency risks, but also, more
generally, the economic and political framework in a
given region or country, are particularly important.
Industrial gases companies establish thresholds for the
expected minimum return on investment. Those

the

30.3.2004

EN

Official Journal of the European Union

L 92/7

for

compete

companies

In addition,

In regions or

thresholds differ for the various geographic regions in
which the gases
tonnage
contracts.
countries with a higher
perceived risk, companies will usually add a premium to
the expected minimum return.
smaller
industrial gases companies are often forced to finance
the initial
investment in part by seeking loans locally
through their local subsidiaries. In this case, the price
they can offer also depends on the different financing
conditions in different regions and countries. All those
elements together result in regional differences in price
setting. The notifying party has stressed that ‘Europe is
an attractive, risk-free zone' whilst acknowledging that
the relevant risks vary enormously in other parts of the
is obvious.
world. The variation of currency risks
Competitors have confirmed this assessment.

Secondly, the industry generally distinguishes between
developing markets and mature markets. With respect
to the tonnage market, the notifying party stated in its
notification that ‘one must distinguish between mature
markets which are highly industrialised and structured,
such as the European Union, and developing markets,
where industrial development and industrial gas usages
and applications are still in the process of expansion, for
in south-east Asia'. That distinction is also
example,
made in the parties'
internal documents which the
Commission has reviewed. At the oral hearing, BOC
stated that
is able to achieve significantly higher
returns in developing markets. Furthermore, conditions
of demand also differ in different world regions. The
notifying party stated at the hearing that the rate of self
production is 11 % in the United States, 21 % in Europe
and 78 % in Asia.

it

(38)

(39)

similar

to those of

Finally, the Commission has not, to date, qualified a
the
market with characteristics
tonnage market as worldwide. In earlier decisions, the
Commission has
certain
commodities traded mainly at commodity exchanges to
be worldwide (13). However,
in
question are supplied in a different manner, namely
through tailor-made on-site plants under
varying
conditions and in accordance with customer-specific

the industrial gases

the markets

found

for

(36)

(37)

requirements. World markets have also been accepted
for large engineered or high-tech products which are, or
can be, transported to customers around the world (14).
However, the present product market does not concern
the supply of such equipment. The tonnage supply of
long-term contracts
industrial gases on the basis of
should be distinguished from the sale of air separation
plants. The latter are one-off engineering projects that
are based on a different relationship with the customer.

Commission

the
The
geographic reference market for the tonnage supply of
industrial gases is the EEA.

concludes

therefore

that

2. BULK AND CYLINDER GASES

be

For

normally

to overlap and cover

located more
from the production facility.

The investigations in this Case and the parallel Case
COMP/M.1641 — Linde/AGA, have confirmed that,
for certain high purity and high value gases
except
(including helium and electronics speciality gases) and,
industrial gases
to a lesser extent, carbon dioxide,
cannot
to
distributed
economically
than approximately 200
customers
kilometres
an
individual production facility,
the catchment area is,
therefore, defined as a circle with that radius centred on
the facility. However, in the larger Member States those
catchment areas are normally connected in such a way
as
the whole Member State
without saps. Furthermore, suppliers often enter into
swap arrangements with each other, in order to reduce
transportation costs. The notifying party has submitted
lists of its swap agreements, which show that it has
concluded such agreements for bulk and cylinder gases
is active. The
in all EEA countries
in which it
competitive relationship, between at
the large
least
suppliers in the bulk and cylinder markets, is therefore
not limited to regional competition but is nationwide.
The geographic markets for bulk and cylinder gases are
limited to the individual Member States. There are
different distribution systems in the different Member
States. The market structure in neighbouring Member
States
in the
various markets for bulk and cylinder gases in France,

is completely different. For

instance,

(13) Platinum — Decision of 24 April 1997 in Case No IV/M.619 —
Gencor/Lonrho, OJ L 11, 14.1.1997, p. 30; primary aluminium —
Decision of 28 May 1998 in Case No IV/M.1161 — Alcoa/Alumax;
silicon — Decision of 26 January 1999 in Case No IV/M.1330 —
of
Pechiney/Samancor;
7 December 1995 in Case No IV/M.660 — RTZ/CRA.

other minerals

see Decision

for

(14) Large commercial jet aircraft — Decision of 30 July 1997 in Case
No IV/M.877 — Boeing/McDonnell Douglas, OJ L 336, 8.12.1997,
p. 16; magnet train systems — Decision of 9 March 1998 in Case
No IV/M.987 — Transrapid; electronic connectors — Decision of
8 October 1998 in Case No IV/M.1314 — Framatome/Berg
Electronics; pulp dryers — Decision of 8 February 1999 in Case
No IV/M.1379 — Valmet/Rauma.

L 92/8

EN

Official Journal of the European Union

30.3.2004

shares

its market

Air Liquide has market shares in the order of […]* to
[…]*, whilst
in Germany are
essentially around […]*. Furthermore, data submitted by
the notifying party show significant price differences
between different Member States. This has been
confirmed by third parties' data. The Commission
therefore concludes
for bulk and
cylinder gases are generally not wider than national in
scope (except for certain high purity and high value
gases).

the markets

that

3. HELIUM

(40) Helium is extracted from natural gas,

Russia

refined and
liquefied at a limited number of sites which are located
in the United States (Kansas, Oklahoma, Texas and
Wyoming), Algeria (Bethouia), Poland (Odolanov) and
western
helium is
transported from the production sites to resellers and to
retail customers, using special transportation equipment
(cryogenic transport containers). The EEA is mainly
supplied with helium from sources
located within
Europe (Poland) or close to Europe (Algeria, western
Russia).

(Orenburg).

Refined

the sources

(41) Helium is supplied to the EEA from all of the above
sources, however,
located near Europe
(Algeria, Poland, and Russia) supply other world regions
to only a very limited extent. The Commission estimates
that approximately 75 % of the helium demand in the
EEA is currently supplied from the sources located near
Europe. The imports from the United States vary over
time, given that they sometimes occur under large single
wholesale contracts. If, as the notifying party argues, a
second source for refined helium in Algeria becomes
operational in the medium term, it can be expected that
imports
reduced
from the United States will be
considerably. No helium is supplied to the United States
from Algeria, Poland and Russia.

as

and

freight

freight

forwarding

(42) While liquid helium can, technically, be transported over
long distances, a number of factors impede such long
distance transportation (beyond mere transport costs,
such
costs,
import/export costs and container rental). Helium is a
very volatile product. Very low temperatures (below
–269 °C) have to be maintained during the entire
transportation period in order to keep the gas liquid.
The greater the time involved in shipment, the more
helium gas is produced as the liquid helium warms. This
inevitably means that more product losses occur over
longer transport distances. An internal study submitted
by one industrial gases company states that a container
from Algeria or Poland can carry up to 40 % more
liquid helium than a container from the United States,
due to the shorter transportation time. Apart from the
cost of the product lost, additional cooling costs have to

increases. Such costs

leaks as the
be incurred in order to minimise heat
in
relate,
transport distance
particular, to liquid nitrogen/helium used to fill
liquid
container shields in order to keep the product cool.
Moreover,
if containers have warmed due to a longer
transportation time they have to be cooled down before
being reused (if the containers are rented, cool-down
charges are incurred).

(43)

The most important cost factor for the transport of
helium is the number of cryogenic containers needed
and the corresponding investment. The notifying party
has stated that the round trip of a helium container
from the United States to Europe takes 40 days, from
Algeria 16 days and from eastern Europe 18 days. As
the travel time increases, the number of round trips for
which a container is used each year decreases. On the
basis of those figures, the utilisation rate of a container
used for United States imports is […]* times lower than
for Algeria and […]* times lower
than for Eastern
Europe. A larger number of containers is therefore
needed for transportation from the United States and
the fixed costs increase considerably in relation to the
value of the product transported.

(44) On the demand side, wholesale customers (in particular
smaller industrial gases companies) view the availability
of
liquid helium from sources located close to the
market (that is to say the area where demand takes
place) as critical. Apart from the disadvantages resulting
from long-distance transportation, the need to maximise
security of supply and minimise the risk of disruption
must be taken into account. Helium is a key product
which industrial gases companies, even smaller ones,
consider to be an essential element of their portfolio.
On the supply side, even suppliers that have access to
refined helium in the United States none the less seek to
supply European customers with helium sourced in
Algeria, Poland and Russia, insofar as is possible, even if
they have to purchase that helium from competitors.
They import helium produced in-house in the United
States only insofar as they cannot meet demand from
sources located closer. Furthermore, if wholesalers were
able
conditions
throughout the world, most of the EEA helium demand
would be supplied from the United States helium
sources, which account
the
world capacity. That is not the case.

for more than 80 % of

homogenous

compete

under

to

(45)

In particular,

The investigation has revealed nothing to indicate that
market prices for refined helium are set at the world
level.
there are no trade flows from
Algeria, Poland or Russia to the United States (which
represents approximately 60 % of
the global helium
consumption) and limited trade flows from Algeria to
therefore,
other parts of

the world. Outside Europe,

30.3.2004

EN

Official Journal of the European Union

L 92/9

helium from those sources does not (or does so to only
a limited extent) compete with helium from the United
States. Data submitted by the main wholesalers indicate
that the helium wholesale prices in the EEA have, on
average, been more than 12 % higher than the average
world prices from 1996 to 1999.

(46)

Certain characteristics which have led the Commission
to accept world markets in previous cases are not
present in this case. World markets for commodities,
such as certain metals and minerals, have normally been
found to exist where prices are set on commodity or
metal exchanges or are linked to the trading on such
exchanges (15). As indicated, no similar price setting
mechanism exists for refined helium. Prices for helium
are set under individual wholesale contracts and not as
global market prices.

(47) While these elements suggest that there is a reference
market that comprises the wholesale of refined helium
to the EEA, the definite market delineation can be left
open since the notified operation also raises competition
concerns if the wholesale market is considered to be
worldwide.

(50)

4. ELECTRONIC SPECIALITY GASES

electronic

and filling) of

processed gases, related services and associated products
by industrial gases companies to the end-customers. The
main industrial gases companies, such as Air Products,
Praxair, Air Liquide and BOC, have one ‘transfill centre'
in the EEA from which they serve their customers
within the EEA. Customers are usually not supplied
from transfill centres outside the EEA.
‘Transfilling'
is to say purification,
describes the production (that
mixing
gases
speciality
according to detailed customer specifications in highly
specialised processes. Each individual gas specification
undergoes a certification process that can last up to two
years. Certifications relate to the specific production site
(transfill centre) from which the final gas mix is sourced.
Furthermore, electronic speciality gases have to be
delivered and handled in specialised containers (for
instance in order to maintain purity levels or handle
toxic gases). A review of Air Liquide's and BOC's
marketing publications confirms that such specialised
their product
packaging forms a constituent part of
offerings. That service is also performed at the level of
‘transfill' centres at EEA level. The value added in the
production and distribution of electronic speciality gases
is
therefore generated at EEA level where gases
companies operate their ‘transfill' activities.

and

operating

European

The importance of having a presence within the EEA, by
production
establishing
is illustrated by the fact that, until recently,
capacity,
Nippon Sanso, a significant
supplier of electronic
speciality gases in the United States, has had virtually no
activities within the EEA. The company has only
recently been able to enter the European market by
setting up a European joint venture with Messer.

(48)

by

industrial

industry is

least EEA-wide,

The notifying party claims that the relevant geographic
market for speciality gases supplied in cylinders to the
electronics
if not
at
worldwide in scope. Electronic speciality gases are
produced by chemical companies (and in some instances
also
purchased,
processed and packaged by industrial gases companies
and, finally, sold to customers in the electronics industry
(in particular producers of
semiconductors). The
notifying party argues that its activities in this field,
namely the ‘transfilling' of electronic speciality gases and
the supply of those products to the end customers, are
merely those of a distributor.

companies),

gases

(51) Although the ability to deal with a semiconductor
company globally may be an advantage,
the market
investigation conducted by the Commission has shown
that purchase decisions are currently still made by end
customers at a more local
level. The notifying party
electronic
submits
speciality gases to the semiconductor industry are often
discussed at the customer's corporate level, the actual
purchase orders
speciality gases are
decided, managed and issued at the local site, taking
account of specific factors.

for electronic

although the

supplies of

that

(49) According to the Commission's inquiries, the supply of
base gases by their producers to the industrial gases
companies should be distinguished from the supply of

(15) Platinum — Decision of 24 April 1997 in Case No IV/M.619 —
Gencor/Lonrho (OJ L 11, 14.1.1997, p. 30) primary aluminium —
Decision of 28 May 1998 in Case No IV/M.1161 — Alcoa/Alumax;
for other minerals see Decision of 7 December 1995 in Case No
IV/M.660 — RTZ/CRA.

(52)

The Commission therefore concludes that the market for
electronic speciality gases is the EEA.

L 92/10

EN

Official Journal of the European Union

30.3.2004

C. COMPETITIVE ASSESSMENT

1. TONNAGE MARKETS FOR AIR GASES

(a) Market structure

Air Liquide/BOC would have by far the highest market shares in the European tonnage
markets for air gases.

(53)

The market shares of the parties and competitors in the European tonnage market are set out in
table 2 (16):

Table 2

European tonnage market for standard air gases

Gas

Air Liquide

BOC

Combined

Air
Products

AGA

Linde

Messer

Praxair

Others

Oxygen

Nitrogen

[…]*

[…]*

[…]*

[…]*

[…]*

5-10 %

5-10 %

15-20 % 10-15 %

< 5 %

< 5 %

[…]*

10-15 %

< 5 %

15-20 %

5-10 %

5-10 %

5-10 %

(54)

The proposed concentration would create by far the largest tonnage supplier of standard air gases
in Europe. The combined entity would hold almost […]* of the market for tonnage oxygen and
nitrogen. Furthermore, all competitors are significantly weaker. In the oxygen market, the next
largest supplier, Linde, does not reach […]* of Air Liquide/BOC's sales. In the nitrogen market, the
remaining supply is even more dispersed, with no competitor reaching […]* of Air Liquide/BOC's
sales.

(55) Air Liquide/BOC's combined strength becomes even more apparent if the number of on-site supply

contracts won is taken as a criterion for their market position (17) as set out in table 3:

Table 3

On-site contracts won (last five years)

Air Liquide

BOC

Combined

AGA

Air Products

Linde

Messer

Praxair

Total

Percentage

[…]*

[…]*

[…]*

< 20

< 20

< 20

< 20

< 20

100

(16) Figures for 1998. The market share calculation is based on turnover data (value sales) provided by the suppliers of
tonnage gases. Due to the nature of tonnage contracts, value data represent the market position of suppliers more
accurately than volume data. For instance, given that take-or-pay arrangements or non-volume-related facility fees
are often used, the actual strength of a supplier in relation to its customers and competitors is better reflected by
the revenue earned than by the quantities of gases supplied. The parties' combined market share would, in any
case, not differ substantially if the calculation were based on volume figures (oxygen — […]*; nitrogen — […]*).
(17) The table lists on-site supply contracts for oxygen and nitrogen won during the last five years in the EEA, based on
data provided by the parties and by competitors. For the purpose of this comparison, contracts for more than 100
tonnes per day were counted (in line with the distinction proposed by the notifying party, p. 20 of
the
notification). If smaller volume contracts were to be included, the parties' position would be even stronger. Air
Liquide, in particular, is the leading European supplier of small on-site nitrogen facilities.

30.3.2004

EN

Official Journal of the European Union

L 92/11

(56)

(57)

It should be noted that the figures in table 3 cover only
contracts for the on-site supply of gases. Pipeline supply
contracts have not been systematically included. Given
that Air Liquide is by far the leading European pipeline
supplier, table 3 probably understates the number of
contracts it has won.

In its notification, Air Liquide submits that ‘a producer's
share of tonnage sales is simply irrelevant' for analysing
the structure of
the market because it considers the
tonnage market to be a ‘bidding market'. Instead, the
notifying party suggests relying on the number of
players as a measure for assessing competition. In the
present
are
sufficient. Firstly, unless there is specific evidence that
the pattern of the past no longer reflects the present
situation,
it is reasonable to assume that a supplier's
market share is indicative of its strength. Secondly, the
number of contracts awarded confirms the market share
analysis.

considerations

following

context,

the

As the incumbent supplier with by far the largest
number of supply relationships, the combined
entity would have an established market position
and would enjoy a clear lead over its competitors

(61)

the notion that

(58) During the procedure, the notifying party has stressed
that the ‘contestability' of the tonnage market would
the
ensure a competition. However,
contest for each tonnage contract starts ‘at zero', and
that even suppliers with no sales at all can compete on
equal terms, cannot be accepted. The investigation has
shown that the dynamics of competition for tonnage
contracts are such that the incumbent supplier is in the
best position to compete for a renewed contract. An
established market position does therefore reflect a
supplier's market power. The Commission notes that if
the combined position of Air Liquide and BOC is
measured by counting the number of contracts recently
won (in order to assess the extent to which they are
‘incumbents'), their joint position is even stronger than
in terms of sales turnover (see table 3). Judging from the
number of contracts won, no competitor enjoys a
remotely similar position.

in defining the terms of

its ongoing working relationship with the
virtue of
customer, the incumbent will also usually be the first to
learn of that customer's intention to extend or modify
an existing supply agreement. When customers plan a
new contract or a change to an existing contract, they
in most cases, seek advice from their current
will,
supplier
the new supply
(for example a new on-site plant, a
arrangement
capacity extension etc.).
Incumbent suppliers are thus
often involved at the project planning stage, and will
consequently almost always be included amongst the
industrial gases companies
is
requested. Since they have detailed knowledge of the
customer, they have an advantage in responding to such
a request and in the subsequent negotiations. All those
elements lead to the conclusion that a customer will not
change its supplier unless a competitor submits an offer
which is advantageous, rather than merely equivalent.

from which an offer

for

is not

renewal,

the case,

in most cases,

terms (discounts etc.)

If an on-site contract comes up for
the
incumbent supplier will usually be able to offer more
the
advantageous financial
its initial
follow-on contract because,
in the on-site plant will have been fully
investment
written off. Even where that
the
incumbent
can normally propose more
supplier
favourable conditions by reusing equipment already
installed in its existing facility (18). The incumbent is
also best placed to make the most economical offer if
the customer's demand evolves in such a way as to
necessitate a change to the on-site contract before
if
expiry of
additional capacity is required, the incumbent can offer
either to extend the capacity of the existing plant or,
alternatively,
the
aggregate capacity. Any competitor could only offer to
build a second additional plant on the same site, an
obviously less economical
solution. Even where a
customer's demand is so high that it requires a second
plant on the same site, it will normally prefer to use the
same supplier in order to reduce its administrative costs
and operate the two plants in a coordinated, and
therefore more economical, way.

to build a single new plant

contractual

instance,

term.

For

the

for

(59)

The incumbent contract holder's advantage is based on
the following factors.

(62) Most customers contacted by the Commission have
confirmed the incumbent's advantage. Competitors have
also confirmed that they are more likely to gain contract
extensions or renewals from existing customers. The

(60)

The supply of tonnage gases typically involves a close
working relationship between the customer and its
present supplier. The incumbent supplier knows when
the current supply contract will expire and is therefore
best placed to offer a renewal at an early stage. By

(18) For instance certain utilities such as pipes etc. Other competitors
have to charge the cost of such equipment, the incumbent does
not. Customer files reviewed during the investigation illustrate how
the
such savings lead to a procurement decision in favour of
incumbent.

L 92/12

EN

Official Journal of the European Union

30.3.2004

(63)

(64)

(65)

(66)

same conclusion can be drawn from the bidding
histories submitted by industrial gases companies. For
instance,
renewals/extensions of existing
contracts won by BOC illustrates the importance of the
incumbent's relationship with its customers.

the list of

Finally, a BOC document assessing the position of BOC
Process Systems in the on-site market confirms that
analysis. The following statements are made in that
document (19):
‘Mature strongholds can be difficult to
break into using traditional commercial approaches
where incumbency is strong. (…) Much of the potential
growth in developed countries will be difficult to access
(…)
for BOC because of
Leveraging of existing customers will generate “natural”
growth.'

incumbency

exclusion.

The proposed concentration would remove an
important competitor

By acquiring BOC, Air Liquide would remove the third
largest competitor in terms of market share from the
EEA tonnage market. The elimination of BOC as a
competitive
significant
result
deterioration of the market structure.

force would

in

It is to be noted that,

the
It can be concluded from BOC's own data that
company has been competing actively for
tonnage
supply contracts across the EEA, namely, in addition to
the United Kingdom, other key industrial regions in
Italy, France, Germany and
Belgium, the Netherlands,
Spain.
in the past, BOC has
mainly submitted offers for very large on-site plants
(some with a planned capacity of up to 120 000 m3/h).
The number of competitors able to plan and carry out
such large projects is particularly limited. The proposed
concentration would
few
competitors.

remove one of

those

is

of

credible

competitors

By removing one of the leading on-site suppliers, the
proposed concentration would reduce the potential for
competition in the European tonnage market. The
particularly
presence
important in a market where very large projects are
awarded, contracts cover long terms,
the number of
eligible suppliers is already limited and customers rely
on the contract award procedures as the only means of
ensuring reasonably competitive terms. BOC is one of
the leading tonnage suppliers worldwide and in Europe,
with strengths in all relevant areas. BOC is considered to
have competitive process
technology (cryogenic air
separation technology as well as vacuum/pressure swing
in some
adsorption technology)

and is

leader

a

(19) ‘BOC process

systems: Global

situation analysis'; document
submitted to the Federal Trade Commission as part of the HSR
filing.

to small and
technologies (for instance with respect
medium sized oxygen plant technology, that is to say
the line of ICO generators). Given that on-site supply
can be extremely capital intensive, BOC is one of the
few suppliers capable of
financing the investment
associated with large projects. Industry analysts consider
BOC to have strong capabilities with respect to large
on-site plant project execution (20). To summarise, BOC
can be considered to be one of
the industrial gases
companies with strong competitive potential. The
in an already
removal of
concentrated market, would further reduce customer
choice.

its competitive potential,

The planned transaction would combine an
entrenched position in the United Kingdom with an
entrenched position in France and strong positions
in other key regions in Europe

(67) According to figures provided by the notifying party,
which have been confirmed by the Commission's
inquiries, BOC provides […]* of tonnage oxygen and
the same proportion of tonnage nitrogen in the United
Kingdom (21).

(68) According to its own estimates, Air Liquide is currently
providing by far the largest proportion of tonnage gases
in France ([…]* of oxygen and […]* of nitrogen). Its
position in Belgium is similarly strong. Air Liquide has a
less
significant, presence in other
still
countries, in particular in Italy and Spain.

strong, but

(b) Specific strengths

(69)

The Commission accepts that,
in addition to market
share, other parameters can also be used in assessing a
tonnage supplier's market power. The investigation has
shown that, with reference to each of those additional
aspects the combined entity would be the strongest
supplier. Some of the combined entity's strengths would
be derived from Air Liquide's already strong position,
and increased by adding BOC's position. Others would
result
tonnage
suppliers in Europe, creating a supplier that would be
If all those elements are
superior to any competitor.
considered together, the notified operation would create
in
a market structure in which the strongest supplier,

from the combination of

important

(20) NatWest Securities, ‘Industrial Gases 2000', February 1997, p. 73.
(21) There is no tonnage supply in Ireland.

30.3.2004

EN

Official Journal of the European Union

L 92/13

the

terms of the parties' combined market position, would
also be
to other key
strongest with respect
competitive parameters. Confronted by the combined
entity's comprehensive strength, the remaining industrial
gases suppliers would be at a severe disadvantage in
competing for tonnage contracts.

Air Liquide/BOC would have an established
infrastructure throughout the EEA

(70)

In their
respective home countries (France and the
United Kingdom/Ireland), Air Liquide and BOC have
production facilities for industrial gases and extensive
infrastructures for the distribution of those gases in bulk
and cylinders (see recitals 165 and 177). Those networks
give both companies superior production capacities and
superior access to bulk and cylinder customers. The
planned transaction would combine these networks.

small

on-site

(71) Air Liquide also has an established production and
distribution infrastructure
in a number of other
European countries (the Benelux countries, Denmark,
Germany, Greece,
Italy, Portugal, Spain and Sweden).
That pan-European infrastructure comprises stand-alone
production plants (liquid gases plants), dedicated plants
(plants dedicated to one or several customers) with
the bulk or cylinder
excess production capacity for
markets,
and
cylinder-filling facilities. Table 4 sets out Air Liquide's
European production and distribution network in
countries outside France (22). In each of the countries
established
listed
cylinder-filling facilities in line with the size of
the
market concerned (the only exception being Finland
where only dedicated plants exist). In the majority of
the cylinder-filling network covers the full
countries,
range of gases, including a number of facilities capable
of filling high-value gases with a higher transportation
radius (argon, argon mixtures and other gases including
speciality gases).

production

4, Air

Liquide

plants

table

has

in

(72)

Local production and distribution infrastructures do
confer
competitive advantages. A local production
capacity for liquid gases facilitates the provision of
back-up for small and medium-sized tonnage plants.
Where such back-up can be provided out of captive
production, the supplier does not have to enter into
arrangements for the purchase of merchant liquid on
the market or otherwise have to guarantee penalty
payments to the customer. Each of those alternatives
would impose an additional cost, putting the tonnage
supplier
disadvantage. A local
distribution infrastructure allows a tonnage supplier to

competitive

at

a

(22) Only in countries to which bulk deliveries could be carried out
from French
the Netherlands,
sites
Luxembourg and to a lesser degree Germany) has a less important
local production capability been put in place.

production

(Belgium,

results

create a dedicated on-site plant required for a tonnage
contract with capacity exceeding the demand of
the
tonnage customer. The extra capacity (so-called ‘piggy
back' production) is then liquefied and sold on the bulk
or cylinder markets. The cost advantage for the tonnage
in the
from economies of
supply
investment (as well as the additional income from bulk
and cylinder sales). Those cost advantages can only be
achieved where a ‘route to the market' is ensured via a
company's own distribution network. Finally, a local
infrastructure facilitates the maintenance and support of
on-site plants as well as other aspects of customer
service.

scale

(73)

(74)

(75)

In its reply to the statement of objections, the notifying
party disputes the importance of a local production and
distribution infrastructure for back-up and excess liquid
sales. However, at the beginning of the procedure, the
notifying party stressed the importance of a local
infrastructure, allowing liquid back-up and ‘piggy back'
In a
production,
study
the
notifying party stated that liquid back-up deliveries were
relevant only for customers whose requirements amount
to 200 to 500 tpd or less. In its reply to the statement
of objections, the notifying party seems to suggest that
even for customers above 200 tpd, back-up deliveries in
bulk may become inappropriate. The Commission finds
that that claim is not credible.

for establishing a tonnage business.
the procedure,

submitted later during

is advantageous

The Commission maintains that a dense network of
liquid gas production facilities
in
providing back-up for on-site plants. Where liquid
plants are located close to on-site plants, a lower
number of tanker trailers are needed to supply a given
quantity of liquid gases. This renders emergency back-up
more feasible, even for larger quantities, and less costly.
The notifying party has,
in any case, confirmed in its
notification that a back-up and service infrastructure is
important for smaller on-site plants. The supply through
such plants is highly profitable and fast growing.

It is recognised that back-up can also be provided by
co-producing liquid gases at
the on-site plant and
storing them in a tank, a method that is open to any
competitor. However,
in its reply to the statement of
objections, the notifying party presented an alternative
way of ensuring back-up that is favourable for a supplier
with a large market presence. When production capacity
is increased or old plants are renewed,
it may be
possible to keep old plants or their parts in order to
provide spare capacity. This back-up method is suitable
for large quantities. For instance, Air Liquide's […]* tpd

L 92/14

EN

Official Journal of the European Union

30.3.2004

tonnage plant in Antwerp is backed-up by an old […]*
tpd plant which is kept in reserve. This back-up method
favours
the
combined entity, which already have a large number of
tonnage plants in place.

strong incumbent

suppliers,

such as

The combined entity could build on the position of
the leading European operator of pipelines

(78)

(76) According to the notifying party, the Commission also
overestimates the importance of simultaneous (piggy
back) production of liquid gases for sale on the bulk
market. In particular, the notifying party has indicated
that the number of its tonnage contracts which include
such simultaneous production has decreased. That
development may be explained by Air Liquide's large
existing bulk capacity in an extended production
Praxair)
infrastructure. Competitors
attribute more importance to simultaneous production
in tonnage plants than the notifying party. Although it
appears
the
importance of simultaneous liquid production may be
tonnage and liquid
decreasing,
gases still offers a significant cost advantage. According
to the notifying party, the cost of operating a combined
tonnage and liquid plant
than the
combination of a stand-alone tonnage plant and a
stand-alone liquefier.

that under current market conditions

the co-production of

[…]* lower

(AGA,

Linde,

is

(77)

the

distribution

infrastructure,

By creating a single supplier with a superior production
and
proposed
concentration would afford Air Liquide/BOC a structural
advantage in competing for tonnage contracts. On the
basis of data provided by the other competitors, it can
their production and
be
similar
distribution infrastructures would have
geographic
Liquide/BOC's
coverage. None of Air
competitors would therefore enjoy the same advantage.

concluded that none of

a

and

sites

pipelines'

customers'

distribution

Industrial gases companies pursue, to a varying degree,
linking their own production sites with
a strategy of
their
through pipelines. Such an
approach is used, in particular, in regions where clusters
of volume users of industrial gases are located, such as
steel producers, chemical companies, paper or glass
manufacturers and others (so-called ‘industrial basins').
Two kinds of pipelines can be distinguished, namely
‘interconnecting
‘local
pipelines'. Local distribution pipelines are the primary
structure. They connect an industrial gases company's
air separation plant(s) with the sites of gases users
(customers) within an ‘industrial basin'. Such local
distribution pipelines usually have a high transfer
to satisfy the demand of multiple
capacity sufficient
customers (23). Their overall
length is limited by the
region
dimensions
geographic
industrial
of
a
Interconnecting
concerned.
secondary structure. Such pipelines link local pipeline
networks in different industrial regions, sometimes over
significant distances, creating a larger regional network.
Interconnecting pipelines sometimes (but not always)
have a lower transfer capacity than local distribution
pipelines (24).

the
pipelines

constitute

(79)

The main industrial gases companies' European pipeline
networks can be summarised as set out in table 5:

Table 5

Pipelines (km)

Air
Liquide

BOC

Combined

AGA

Air
Products

Linde

Messer

Praxair

Local distribution
pipelines

Oxygen

[…]*

[…]*

[…]*

Nitrogen

[…]*

[…]*

[…]*

0

< 200

< 200

< 550

< 50

Interconnecting pipelines Oxygen

[…]*

Nitrogen

[…]*

Total

[…]*

[…]*

[…]*

0

< 200

< 200

< 550

< 50

(23) Some of Air Liquide's local distribution pipelines have a capacity
of up to […]* tpd for oxygen and […]* tpd for nitrogen. Few
pipelines have a capacity below […]* tpd.

(24) In Air

large

Liquide's

in Northern
pipeline
France/Belgium, the transfer capacity of interconnecting pipelines
ranges from […]* to […]* tpd for oxygen whereas nitrogen
pipelines are limited to […]* tpd.

network

30.3.2004

EN

Official Journal of the European Union

L 92/15

(80)

(81)

(all

In continental Europe, Air Liquide controls an extensive
network of
local distribution pipelines in important
‘industrial basins': the Antwerp region, the Liège region,
in
the Mons-Charleroi
Belgium/The
region
the Fos-sur-Mer
Netherlands),
the Dunkerque region,
in
region, the Metz region, the Le Havre region (all
France), the Limito region and the Padova region (all in
Italy). No other industrial gases company has access to
pipelines in more than one or two confined regions (Air
Products — Gent/Terneuzen; Messer — Ruhrgebiet;
Linde — Leuna/Buna and Ruhrgebiet; Praxair — Spain).
Some
in
networks
comparison to Air Liquide's. Furthermore, Air Liquide is
the only company to control extensive interconnecting
pipelines
In the United
Kingdom, BOC controls pipeline grids in important
industrial
Teeside,
regions
Grangemouth, Margham and
Southampton). No
competitor has access to pipeline grids similar to those
of Air Liquide.

(northern France/Belgium).

competitors'

Scunthorpe,

(Sheffield,

negligible

are

available

advantages which are not

The control of a pipeline network affords the owner
structural
to
competitors. Firstly, economies of scale can be achieved
by constructing larger air separation units that feed a
regional pipeline network than would be possible if
individual units had to be built
for each customer.
Indeed, Air Liquide and BOC have been able to feed
their pipeline grids from very large air separation units
(ASUs) with oxygen capacities sometimes above […]*
tpd, in Air Liquide's case even up to […]* tpd. Return
on capital, and production and operating costs are
therefore more advantageous. Secondly, the ability to
construct
larger plants allows the development of a
large production capacity in a given region. This also
improves the cost base for
the production of bulk
(liquid) gases that constitute a further source of income.
Thirdly, the additional capital investment in connecting
to an existing pipeline is limited
a new customer
compared to the construction of a dedicated plant on
the
(the only alternative open to
competitors). Pipeline coverage of an industrial region
with multiple gases users is therefore a considerable
customers.
advantage
Fourthly, the control of interconnecting pipelines allows
partial back-up in the event of plant breakdown, even if
the interconnecting pipelines' capacity is insufficient to
fully supply a local group of customers. In view of the
can be
cost of
Interconnecting pipelines also allow the
considerable.
balancing of
the various plants
the production of
feeding a pipeline system, thereby facilitating a more
even capacity utilisation.

in competing

for potential

advantage

customer

back-up,

liquid

this

site

(82)

In its reply to the statement of objections, the notifying
party states that the Commission has misunderstood the
role of pipelines in the tonnage market. The notifying
that production capacity, not pipeline
party states
is the key factor in terms of tonnage activity.
length,

However, as set out in recital 81, the specific strength of
a pipeline operator arises precisely from the fact that it
can build up a superior capacity on the basis of a
pipeline network. Air Liquide's position in the industrial
triangle Rotterdam-Mons/Charleroi-Liège demonstrates
this advantage. Air Liquide's air separation units, linked
by its regional pipeline system, account for […]* of the
entire industry capacity in this region (this rises to […]*
if Air Liquide's air separation unit in Dunkerque, which
is also linked to the pipeline system,
is added). Air
competitors
capacity exceeds
Liquide's
together, even though Air Products, Praxair and Linde
have made significant investments in that region. The
notifying party further
industrial gas
pipelines are not distribution pipelines. However, local
the primary pipeline structure,
distribution pipelines,
serve precisely
to
industrial
customers.

to distribute

that of all

argues

gases

that

(83)

BOC's internal analysis also contradicts the notifying
party's statements. A BOC document which analyses the
position of BOC Process Systems on the on-site market
ranks Air Liquide as the only industrial gases company
is ‘very high' (25). The
whose ‘pipeline grid strength'
document also states that pipeline operators ‘attempt to
lock in business via pipeline grids' and that ‘pipeline
grids remain powerful profit drivers'.

(84) A pipeline connection can have benefits for a customer,
such as the ability to meet demand peaks and easier
back-up. Under competitive conditions,
the pipeline
operator's lower costs would, in theory, be passed on to
leading to lower prices. However, there is
customers,
risk that the creation of strong and exclusive control
over pipeline networks will, in the long term, create a
situation in which competitors can and will no longer
compete for customers. This will ultimately be to the
disadvantage of customers, as the incumbent pipeline
supplier is no longer forced by competition to pass on
lower costs.

(85)

Firstly,
the strong structural advantages which result
from Air Liquide/BOC's control of a large pipeline
network could be used as leverage against competitors
to the extent that the latter could be excluded from
winning tonnage contracts in the regions concerned
(foreclosure). Any competitor without access to the
pipeline network would have to offer the customer a

(25) ‘BOC process

systems: Global

situation analysis'; document
submitted to the Federal Trade Commission as part of the HSR
filing.

L 92/16

EN

Official Journal of the European Union

30.3.2004

new dedicated on-site plant. Because of the substantially
lower investment and cost related to a pipeline link, the
incumbent pipeline supplier can undercut any such
offer. It is economically rational for the incumbent to do
so in order to prevent any other supplier from gaining a
foothold in the controlled area. Furthermore, a situation
will be created in which the pipeline supplier is no
longer forced by competition to pass on a large part of
its efficiency gains to its customers. It is constrained
only by substantially more expensive on-site offers. Cost
savings will therefore be passed on only insofar as is
necessary to meet such offers.

Secondly, once customers have taken the initial decision
in favour of a pipeline contract, they risk becoming
‘locked in'. The strong position of an incumbent pipeline
supplier will remove a large degree of choice from
seeking to renew a contract or extend
customers
capacity. While each customer could, in principle, seek
offers from alternative suppliers, pipeline customers
have indicated that,
their choice becomes
in reality,
limited. For shorter renewal periods and limited capacity
slight, alternative suppliers may simply find that their
chances of success are too reduced to warrant making
an offer. The customer's only choice is often therefore to
fall back on its existing supplier. The
customer's
negotiating position is further weakened by the fact that
any cost transparency is lost. An individual customer is
no longer in a position to monitor a dedicated on-site
plant, because it is supplied through a complex system
jointly with other companies (26).

its

competitors,

The Commission concludes that
the combined entity
would be able to rely on Air Liquide's considerable
pipeline coverage, as one element of its market power.
In this respect, the combined entity would be superior
to
of
having
distribution pipelines […]* times longer than all of its
competitors' pipelines taken together.
It would derive
that position mainly from Air Liquide's existing pipeline
network, although the proposed concentration would
add pipeline grids in industrial regions in the United
advantage, which Air
Kingdom.
Liquide/BOC would enjoy in the areas covered by their

structural

exclusive

control

The

(86)

(87)

case of one pipeline

(26) Anecdotal evidence gathered during the investigation illustrates
how a pipeline customer's position can deteriorate. For instance,
in the
various
anti-competitive clauses, such as an exclusivity clause, a duration
of more than 15 years and a so-called ‘English clause' (obligation
on the customer to submit competing offers to the incumbent
supplier) were added during extensions of a long-term contractual
relationship.

reviewed,

contract

pipelines, would allow them to concentrate on other
areas. No other supplier would be able to compete in a
similar way.

The combined entity could use its dominant
positions in the bulk markets in France, the United
Kingdom and Ireland as leverage

(88)

For the description of Air Liquide's and BOC's dominant
positions in the markets for bulk and cylinder gases in
France and the United Kingdom/Ireland, reference can
be made to recitals 152 to 183. Recitals 89 to 91
describe how those dominant positions could be used as
leverage in competing for tonnage customers.

(89) An industrial gases supplier which has an established
bulk supply relationship with a customer is normally
best placed to judge the customer's demand. At
the
borderline between the tonnage and bulk markets,
demand can be fulfilled by both on-site and liquid
supply. The parties are increasingly supplying customers
with a demand of 20 to 100 tpd through small on-site
plants (for nitrogen, Air Liquide has almost […]* such
contracts in France and BOC more than […]* in the
United Kingdom;
for oxygen, PSA, VPSA and even
cryogenic plants can also be built around or below 100
tpd). Where this is the case, or where a customer's
demand grows,
the incumbent supplier can use its
existing bulk contract as leverage in seeking an tonnage
contract. If it is foreseeable that a customer's demand
justify tonnage supply at the end of the current
will
bulk contract, the incumbent will almost always be the
first to be able to propose a tonnage solution because of
its knowledge of the customer's needs. In making and
it will be able to build on the
negotiating its offer,
customer.
established
a
customer's demand moves
into the tonnage range
during the term of a bulk contract, the incumbent will,
by definition, be the only supplier able to offer tonnage
supply.

relationship with the

If

(90)

The possibility of ‘moving' certain bulk customers to
tonnage supply gives the incumbent supplier a logistical
flexibility that represents an overall cost advantage. For
instance, when acquiring a new tonnage customer, the
incumbent may be able to build a larger on-site plant in
order to gain excess capacity for the bulk market. By
linking a new customer to a pipeline, the incumbent
may improve the capacity utilisation of that pipeline
grid. On the other hand, if the incumbent has limited
liquid gases production capacity in a given region, for

30.3.2004

EN

Official Journal of the European Union

L 92/17

instance in a growing market, moving a bulk customer
to tonnage would relieve the situation.

concentrated its worldwide plant
has
capability in the process systems line of business.

engineering

(91)

(92)

(93)

In theory it could be argued that other industrial gases
companies may also be able to build on existing bulk
supply contracts in order
to obtain tonnage orders.
However,
they have very strong (dominant)
since
positions as bulk suppliers in their respective home
markets, Air Liquide and BOC are particularly well
placed to use bulk customer relationships as leverage in
seeking tonnage contracts. In a more balanced market,
in particular large companies, may
many customers,
have more than one bulk supplier, or they may change
bulk suppliers more
frequently. A company that
dominates a national bulk market is likely to be the
only choice for many customers. By combining strong
positions in several important bulk markets, the notified
transaction would combine the advantages enjoyed by
Air Liquide and BOC as a result of their dominance.

(94) Air

have

for instance,

BOC
construction technology

comprehensive
and
Liquide
state-of-the-art plant
and,
importantly, engineering know-how. Both companies
in the production of high
are leaders,
purity gases for the electronics industry. Air Products
has confirmed that BOC is very competitive with
respect to smaller plants in the 150 to 350 tpd range.
Even though cryogenic production technology used for
large on-site plants may not change fundamentally in
the near future,
the ability to make and implement
continuous improvements is an important asset. Air
Liquide would acquire unlimited access to all of BOC's
process-technology and plant engineering know-how.
The Commission has to assume that Air Liquide would
also acquire BOC's
related R & D centre, which is
located in the United States (in addition to the BOC
Edwards research centre in the United Kingdom).

The proposed transaction would combine two
competitors with leading technology and project
execution capability

(95)

In

the

tonnage

from competitors.

factor, allowing a supplier

There is consensus in the industry that technology is an
to differentiate
important
sector,
itself
production technology (process technology)
is a key
competitive parameter. The supply of industrial gases
using large on-site facilities is highly capital-intensive
and advanced process technology can offer a supplier a
in terms of power
instance
cost
capital
consumption,
and
expenditure.
the
importance of process technology in its reply to the
statement of objections.

emissions
party

for
reduced

advantage,

confirmed

notifying

The

agreements

The strong R & D potential of Air Liquide and BOC is
illustrated by their R & D expenditure and facilities. In
1998, Air Liquide had a total R & D budget of EUR
[…]* million.
It employed […]* researchers in […]*
research centres, made […]* inventions and filed […]*
patent applications. Air Liquide has […]* industrial
partnership
international
cooperation agreements with universities. Air Liquide's
engineering division ([…]* staff worldwide) designs and
builds gases plants.
total R & D
It employs more
expenditure was EUR […]* million.
than […]* researchers in […]* main and a number of
smaller research centres, covering process systems as
well as key industries such as the electronics industry
(BOC Edwards). It has also a large number of ongoing
R & D cooperation agreements with third parties. BOC

In 1998, BOC's

[…]*

and

(96)

(97)

The capability to plan, manage and execute large on-site
projects is at least as important as a broad portfolio of
technologies. Air Liquide and BOC belong to the group
of
considered by
industry analysts to be leading in this respect. For
instance, […]* of the world's largest oxygen plants (over
[…]* tpd capacity) are built by Air Liquide.

industrial gases

companies

four

also have

Both companies
leading non-cryogenic
production technology, in particular, in advanced VPSA
generator technology. Air Liquide is the world's leading
small membrane generators which are
provider of
capable of producing nitrogen with a 99,9 % level of
purity. Those technologies make it possible to extend
the on-site business into the area of smaller-volume
users (below 100 tpd), a strategy pursued successfully by
Air Liquide in the past
[…]* small on-site
contracts).

(almost

The combined entity would be a leader in other areas,
for instance the co-generation of gases, electricity and
steam (so-called ‘expanded offer'). It would also be best
placed amongst its competitors to serve customers in
key industries, such as the electronics industry where
high volume contracts can be won. Air Liquide has
focused […]* of its R & D on this sector, and leads the
industry in offering a comprehensive ‘total gases and
chemicals management',
including logistics, detection,
monitoring, recycling and customer process integration.
BOC has gained considerable exposure to the electronics
subsidiary. Both
sector
a
industry
companies

through its BOC Edwards

electronics

offer

the

L 92/18

EN

Official Journal of the European Union

30.3.2004

covering the on-site
range
comprehensive product
production of high purity standard gases, speciality
gases and customer process equipment.

strengths (strong regional supply positions, control of
pipeline networks, and dominance in national bulk
markets).

The combined strong global presence of Air
Liquide/BOC would offer further advantages with
respect to multinational customers

(98) Air Liquide pursues a strategy of accompanying its large
tonnage customers (leading industrial companies) in the
the world. Air Liquide's
supply of gases throughout
1998 Annual Report sets out that strategy: ‘Air Liquide
pursues its global expansion to accompany and serve its
customers throughout the world.' Such partnerships are
‘made possible by Air Liquide's global presence.' BOC,
is
having operations
generally considered to have the most comprehensive
global coverage of all the industrial gases companies. Its
global
recent
reorganisation of its operations in four global ‘lines of
business'.

than 50 countries,

orientation

in more

resulted

has

the

in

(99)

Customers' replies indicate that global presence is not a
prerequisite in order to compete for tonnage supply
contracts, because most customers seek the best supply
solution in a given regional market. However, global
presence may give an industrial gases company a
to multinational
competitive advantage with respect
customers. Having established a business relationship
with a customer and proved its reliability in one region,
the industrial gases company will have a reference when
competing for a tonnage supply contract
in another
region. A gases company with global coverage is also
better placed to offer a customer concessions
(for
example discounts) in one country in exchange for a
new contract
In particular, according to
market participants, the ability to operate on a global
basis represents an advantage in dealing with customer
companies in the electronics industry. Industrial gases
companies with limited global exposure, such as Linde,
Messer and AGA, are at a disadvantage in competing for
such customers.

in another.

(c) Position of competitors

The merged entity's power would be a disincentive
for any vigorous activity by the remaining
competitors

(101) None

of

the

remaining

competitors

share Air
Liquide/BOC's overall strengths. Because the competitors
lag behind in those general areas, they would also have
inroads
less incentive to attempt to make substantial
into Air Liquide/BOC's regional strongholds, where they
would
The
combination of regional strengths with general strengths
in one entity could therefore lead to the de
facto
into a single large
the EEA market
partitioning of
western European area
controlled entirely by Air
Liquide/BOC, on the one hand, and the rest of the EEA,
on the other.

particularly

resistance.

strong

face

(102) Multi-market contacts between Air Liquide/BOC and its
competitors serve to further discourage competition.
Each of the remaining competitors competes against Air
Liquide/BOC in national bulk and/or cylinder markets in
which Air Liquide/BOC are
for
instance, table 9). Each competitor would therefore have
an incentive to defer aggressive competition in order to
by Air
to
avoid
Liquide/BOC.

also strong (see,

counter-action

exposing

itself

Most remaining tonnage suppliers are considered by
market participants to be ‘second tier' competitors

(103) For a general assessment of the competitive strength of
the remaining tonnage suppliers, it is useful to consider
the views of the industrial gases companies themselves.
In an internal study prepared by Air Products, which
does not only relate to the tonnage market (27), a
distinction is made between ‘first tier' and ‘second tier'
industrial gases companies. Air Liquide, BOC, Air
Products and Praxair belong to the first group; Linde,
AGA and Messer to the second. It should be noted that
in that analysis, Linde, AGA and Messer lag behind with
respect
execution
Industry analysts
capabilities', amongst other
share this assessment (28).

to ‘large, on-site plant project

things.

(104) None

of

the

remaining

competitors

share Air
Liquide/BOC's specific strengths in the tonnage market
(Europe-wide infrastructure, control of a large pipeline
network, strong regional positions, and strong position
in national bulk markets) to a similar extent.

(100) Air Liquide/BOC would be

the

tonnage
supplier in all relevant respects. Some of its strengths
are of a general nature (technology, project execution
capability and multi-country infrastructure). In addition,
regional
the combined entity would have particular

strongest

(27) ‘Industrial Gas Industry Overview', May 1999, submitted to the
United States Federal Trade Commission as part of Air Product's
HSR filing.

(28) NatWest Securities, ‘Industrial Gases 2000', February 1997, p. 73.

30.3.2004

EN

Official Journal of the European Union

L 92/19

The links created between Air Liquide and Air
Products by the joint acquisition and division of
BOC would further reduce the incentive to
compete

(105) Air Products has a limited market share in Europe (5 to
10 % for oxygen and 10 to 15 % for nitrogen), although
it can be considered as one of the leading companies in
terms of production technology and on-site plant
project execution (29).

(106) The links between Air Liquide and Air Products that
would be created by the joint acquisition and division of
BOC make it likely that Air Products would not pursue
aggressive competition against Air Liquide/BOC (see
recitals 223 to 243).

(110)

The Linde/AGA merger, if completed, would not
reduce the anti-competitive effects of the proposed
concentration

(107)

In terms of market share, Linde is the next most
important competitor (15 to 20 % for oxygen and 15 to
20 % for nitrogen). If it acquires AGA, its market share
will increase to 25 to 30 % for oxygen and 15 to 20 %
for nitrogen. However, the gap between its market share
and that of Air Liquide/BOC will still be considerable,
namely […]* for oxygen and […]* for nitrogen.

is a
Technische Gase), which, since November 1999,
separate
subsidiary of Linde AG, but by Linde's
engineering and construction department (Werksgruppe
Anlagenbau). Linde's Werksgruppe Anlagenbau also
carries out engineering projects in a range of sectors
unrelated to technical gases. It has, in the past, provided
cryogenic air
to the Werksgruppe
Technische Gase as well as to other industrial gases
companies.
Linde's Werksgruppe
respect
Anlagenbau acts like any other engineering company.
Linde stated at the oral hearing that it sees no reason
why its plant sale activities should strengthen its gases
supply activities.

separation units

In that

that

Linde's

appear,

supplier

to other

It would
plant
therefore,
construction and plant sale activities do nothing more
than ensure that its cryogenic technology is generally
available to other industrial gases companies. By acting
as an equipment
industrial gases
companies, Linde will not enhance its own chances of
winning tonnage supply contracts directly. The supply
of equipment, through engineering contracts, and the
supply of gases, under long-term supply relationships,
belong to different product markets in which different
competitive strengths are required. For instance, Linde
does not have access to any large pipeline network. This
limits its chances of winning new tonnage customers in
key industrial regions where other competitors have
pipeline
strategic
disadvantage.

constitutes

networks

and

a

in some areas

(108) Linde is generally considered to be one of the leading
companies with regard to production technology
(process technology) for cryogenic air separation plants.
in-house engineering capability.
Linde has significant
However,
technology. For
instance, it has no competitive membrane air separation
technology for nitrogen production, a profitable and
growing sector. The merger with AGA will add nothing
to Linde's technological competence because AGA does
not have any genuine plant engineering expertise.
In
technology under
fact, AGA currently uses Linde
licence.

lacks

it

(109)

In its reply to the statement of objections, the notifying
party stressed Linde's plant construction capability and
plant sale activities,
in particular with respect to large
cryogenic air separation units. Linde AG is a diversified
corporation which operates its industrial gases business
as one of
(Werksgruppen).
On-site air separation units are not constructed by
(Werksgruppe
Linde's

four business divisions

department

industrial

gases

(29) See footnote 28.

(111)

(112)

for

fact

supply

tonnage

least as

contracts,

important as

is at
Industry analysts consider

In competing
the
capability to plan, execute and manage large on-site
technological
projects
expertise.
that Linde falls
behind the ‘first tier' industrial gases companies in that
respect (30). The
Linde has won and
that
implemented a comparatively small number of
large
on-site contracts during the last five years (see table 3)
appears to confirm that assessment (31). In the past it
preferred to license its technology to other industrial
gases companies, or to build plants as a subcontractor
for other companies. That
that Linde has
adopted a rather cautious policy with respect to directly
implementing projects.

suggests

In assessing the competitive force that Linde/AGA would
exercise, the fact that Linde/AGA would have certain
regional strengths should be taken into account. Like
scale,
Air
Linde/AGA would have a strong position in certain

Liquide/BOC,

although

smaller

on

a

(30) See footnote 29.
(31) Linde has, however, won a larger number of

small on-site

contracts (under 100 tpd).

L 92/20

EN

Official Journal of the European Union

30.3.2004

territories

(Austria, Scandinavia and certain
‘home'
regions within Germany). There
that
Linde/AGA would concentrate on those regions where it
enjoys specific competitive advantages and lower risk,
thereby reducing the overall level of competition.

risk

is

a

(d) Position of customers and award of contracts

Messer and Praxair are unlikely to present effective
competition

(113) Neither Messer nor Praxair share Air Liquide/BOC's

specific strengths to the same extent.

Highly concentrated supply faces a much less
concentrated demand

(117) Customers in the European tonnage market already face
a highly concentrated supply structure. Few (not more
than seven) suppliers of
tonnage gases are currently
present in the market. Their number could be reduced
to five. Of those, some are clearly less qualified than
others.

strategic

disadvantages
it

(114) Messer falls significantly behind in terms of market
share (10 to 15 % for oxygen and 5 to 10 % for
nitrogen) and number of contracts won (see table 3).
Although it has plant construction expertise, Messer
faces
to Air
is considerably smaller
Liquide/BOC. The fact that
than the industry leaders Air Liquide/BOC and other
major players (for example Air Products) is an additional
disadvantage, particularly
large
projects which require
investments.
large
Having increased its level of debt significantly in recent
years, Messer may lack the financial strength to invest in
on-site supply projects on a significant scale in the
future. Messer also lacks global exposure.

in competing

compared

financial

for

(115) Praxair's position in Europe is limited (market share less
than 5 % for oxygen and 5 to 10 % for nitrogen). The
company's
are mainly in the American
markets.

strengths

(116)

in spite of

the oral hearing that,

In assessing future competition by Praxair in the EEA
is necessary to assess Praxair's
tonnage market,
it
to compete vigorously. Praxair
economic incentives
stated at
its
technological capabilities, it has not been able to acquire
a significant market share in Europe. The company
perceives its chances of winning contracts as small
against the competition of large incumbent suppliers. It
stated that it is not likely to make major investments in
order to expand its European presence in the future. It
appears
technological
capability it considers it to be economically rational to
give preference to investments in other regions of the
world in which it perceives a higher potential
for
growth. On that basis, it is not likely that Praxair would
challenge the parties' combined position in the EEA
tonnage market to such an extent as to remove their
dominance.

although

Praxair

that

has

(118) The proposed concentration would further

choice. The

elimination of BOC as

reduce
customer
an
independent competitive force would further narrow the
supply structure, not only because of the reduction in
the number of competitors but, more importantly,
because one of the few leading tonnage suppliers would
be removed. BOC is one of the few ‘first-tier' industrial
gases
strong
investment capability and project execution expertise.

companies with leading

technology,

(119) The

is

and non-ferrous),

demand side, on the other hand,

less
concentrated. A range of industries require oxygen and
nitrogen in tonnage form, for instance the steel, metal
chemical, petrochemical,
(ferrous
In each of
refining, electronics and glass industries.
those industries a significant number of
(potential)
customers exist. More than 100 different customers have
made requests for large on-site plant offers (above 100
tpd capacity) during the last few years in Europe. If the
demand for smaller (but still significant) on-site plants at
the borderline between bulk and tonnage supply (20 to
100 tpd capacity) were to be included, the number of
customers would be even higher.

(120)

In the steel and chemical/petrochemical industries large
customers exist. The notifying party argues that some of
those customer companies are larger than Air Liquide. It
is not clear, however, how the size of a customer can
increase its bargaining power. Purchaser power is not a
function of the size of a company but of the respective
degrees of concentration of supply and demand. No
single customer accounts for an important share of the
supply in the EEA and the degree of
tonnage
side is significantly
concentration on the purchaser
lower than on the supply side.

30.3.2004

EN

Official Journal of the European Union

L 92/21

Not all customers concentrate their procurement at
headquarter level or can exercise bargaining power
by using the volumes purchased as leverage

comprehensive utility supply has more in common with
a joint venture than a traditional supply agreement.
While the customer may benefit from the outsourcing
it will find it more difficult to sever the
of utilities,
symbiotic
gases
the
relationship with
company once the contract expires. The customer's
bargaining power will eventually be diminished.

industrial

(121)

a

are

essentially

tonnage
that
In its notification, Air Liquide states
customers
few large worldwide
companies (steel, chemicals and refining) and generally
have centralised purchasing functions. It also states that
the customers' gas requirements are for high volumes
and that those customers are therefore able to exercise
very strong bargaining power vis-à-vis gas suppliers.

(122) However,

inquiries

the Commission's

not
confirmed that tonnage customers are limited to a few
large multinational
even
companies which have centralised procurement have
expressed the view that they face an uphill battle in
matching the power of their gases suppliers.

companies. Moreover,

have

(123)

the

cost of

instance,

industries

industrial
the

than in others. For

gases
In some
customers'
constitutes a higher proportion of
production costs
the
quantities of oxygen and argon supplied to a steel mill
will be very large and will also be a significant part of
the steel mill's variable costs. However, the quantities of
oxygen and nitrogen supplied to the production site of a
chemical company may still be large in absolute terms,
but constitute only a relatively small part of
the
customer's costs. According to the notifying party,
oxygen and nitrogen typically represent approximately
3 % of the cost of the products they are necessary to
produce. In most cases, the customer's operations are
dependent on the supply of a fixed quantity of gases
and the cost of any interruption of the supply may be
very high. Those elements indicate that demand tends to
be price-inelastic. Therefore,
the
large quantities does not mean that
purchase of
customers will be able to exercise bargaining power
vis-à-vis gas suppliers.

the mere fact

that

(124) The introduction of the ‘expanded offer' or ‘utility island'
concept which mainly involves the co-generation of
electricity and steam will result in lower costs for both
the industrial gases supplier and the customer, but will
also reduce the customer's bargaining power. By not
only supplying gases, but also co-generating electricity
and steam, the industrial gases company can satisfy its
own need for electricity (in order to run the on-site
plant), as well as
steam
(typically required by chemical companies). Air Liquide
pioneered this method and has so far had the greatest
such a
in implementing it. The nature of
success

the customer's need for

The existing contract award procedures are
insufficient to constrain the parties' strength

(125)

In its notification, Air Liquide submits that the tonnage
market is a ‘bidding market' and that presence of any
co-bidder (even just one) is therefore sufficient to ensure
a competitive outcome. However, the notifying party's
definition of a ‘bidding market' is not clear. If this term
is meant to characterise a formal bidding process, the
usual award procedure in the tonnage market clearly
falls short of such a process.
In a typical bidding
situation, for instance in the area of public procurement,
invitations to bid are published in such a way that all
competitors are informed. Competitors are able to
submit bids on the basis of the same information under
the same conditions, and the award decision is taken
after evaluation of those bids.

(126) The Commission's investigation has shown that a more
the award procedure for large
differentiated view of
should be taken. No standardised
on-site contracts
tender procedure exists. The elements set out in recitals
127, 128 and 129 have been raised as typical by
customers and competitors.

(the potential

(127) Planning of an on-site plant and design of the terms of
reference. Air Liquide itself has stated that
industrial
suppliers) are often
gases companies
involved in a dialogue with their (potential) customers at
the project design stage. A customer company will often
seek the advice of
in
planning a tonnage solution. This will often be the case
when large, customised onsite plants are needed, given
the complexity of such projects in terms of technology
as well as project planning and management (32).
In
such cases most customers rely on the advice of a
competent industrial gases company in order to identify
and specify the best technical solution for the required
the alternatives and
capacity, purity and flow rate,

industrial gases

companies

(32) Where smaller on-site plants, based on standard technology (PSA,
VPSA, small cryogenic), are needed, the customer may be more
able to specify the terms of reference without advice from an
industrial gases
large multinational
companies may be able to draw on their experience with other
such plants at different sites, particularly if those plants are not
customised to meet specific needs.

In particular,

company.

L 92/22

EN

Official Journal of the European Union

30.3.2004

parameters for the plant design, appropriate back-up
solutions, environmental considerations etc. This initial
dialogue can last for a prolonged period of time, up to
18 months, during which meetings
are held at
expert/engineer level and detailed technical discussions
take place. The process results in a customized solution
for the specific customer site. At least one potential
supplier will
in
defining the terms of reference for a large on-site plant.
This process comes close to joint project development.

therefore make a significant

input

(128) Requests for offers. Customers have confirmed that calls
for tender for on-site supply are not normally published.
Most customers contact one or several industrial gases
companies (mainly in writing, but also orally) and
request an offer. The terms of reference vary from a
broad description to full details.

(129) Decision-making and additional negotiations. Once
offers have been received, additional negotiations will
often take place with the incumbent supplier (on the
basis of the terms of other offers submitted) or with
other competitors that have responded (on the basis of
the incumbent's and other offers). On that basis, the
customer will take the procurement decision.

(130) On the basis of

the Commission's
those elements,
assessment of whether the contract award procedures
could constrain the parties' market power is set out in
recitals 131 to 144 :

(131)

It must first be noted that the tendering procedures used
by tonnage customers are with few exceptions not
tendering procedures, with objective and
objective
clearly laid down criteria to award a contract
(e.g.
lowest price), but simply negotiation procedures which
are conducted to a varying degree with different
suppliers.

(132)

conditions

In most negotiation procedures competitors have the
and offering
possibility of modifying their offers
different
the
of
during
negotiations. The examples provided by the notifying
party confirm this view. According to the notifying
party, this allows customers to play off suppliers against
each other in order to obtain a better deal. However,
various elements of the negotiation procedure limit that
possibility.

course

the

(133) Firstly,

it will often be the incumbent whom the
customer will select for advice on the specifications of
the new plant and the terms of reference, since the
incumbent has an established working relationship with
that customer (33). Therefore, the usual award process
often involves the incumbent at an earlier stage than
competitors. The proposed on-site solution is often one
which the
co-designed and which
incumbent has
corresponds to its capabilities.

(134) The incumbent is able to make the most economical
offer by benefiting from its existing supply relationship
and the initial investment made. That is the case both
where an on-site arrangement comes up for renewal
and where extensions or modifications
to existing
agreements are required (for details recitals 58 to 61).
This bias against outside competitors may limit
the
incentive for other suppliers to compete as fiercely as
they would do in a bidding process in which they could
bid on equal terms (or to bid at all), as confirmed by
responses from some customers (34).

(135)

Indeed, most customers contacted replied that
the
incumbent enjoys an advantage in bidding for an on-site
supply contract, in particular where extensions have to
be made to an existing supply arrangement.

(136)

In some situations, the bias towards the incumbent may
be so pronounced that a customer will find it difficult
to obtain competing offers. This tends to be the case if
the contract to be awarded is not attractive enough and
the chances of success are too limited to warrant the
investment in making an offer. Such a situation arises
where a customer seeks to add limited capacity to an
existing supply arrangement (for instance, the customer
has one on-site supply contract with the incumbent for
1 200 tpd oxygen and needs additional supply of 350
tpd). Where a customer has a pipeline supply contract,
the chances of outside competitors are also reduced (for
In such situations,
details see recitals 85 and 86).
competitors may simply find it unattractive to bid

(33) In principle,

it is conceivable that a customer seeks alternative
advice on the project design from several potential suppliers.
However, it can be assumed that only very large companies would
resort to such a strategy. During the investigation, no case was
found in which that approach was used.

(34) There may, of course, be exceptions, such as large ‘prestige'
projects, which several gases companies will be eager to win. This
assessment reflects the general tendency.

30.3.2004

EN

Official Journal of the European Union

L 92/23

against the odds and the customer will have little choice
but
Individual
customers have confirmed this concern.

to fall back on its current supplier.

(141) The notifying party has quoted several Commission
decisions in merger cases in support of its opinion that
the use of
tendering procedures would reduce the
competition concerns normally arising from high
market shares.

(137) Secondly, while calls for tender for large on-site projects
may become known to all suppliers capable of making
an offer, that is not always the case with respect to the
larger number of medium-sized or smaller contract
opportunities. In those cases, only a limited number of
competitors
an offer because
customers typically do not publish calls for tender and
often do not contact the entire spectrum of potential
suppliers. However,
normally
the
requested to make an offer.

incumbent

to make

able

are

is

(138) Thirdly,

in order

customer

significant

suppliers need

amount of
a
information about the customers, their operations and
to prepare their offers. The
requirements
notifying party has stressed that tonnage contracts are
normally tailored to the customer's specific needs. That
knowledge puts the supplier in a good position to assess
the options open to the
example,
replacement, refurbishment or deferral of the contract)
and the customer's costs associated with each option. In
the course of the negotiations that follow, the supplier
can gather further information. The possession of such
information enables the supplier to evaluate the risk
that a given project will be abandoned, deferred or
scaled down or that the customer will switch to an
instead of extending the existing
entirely new plant
arrangement. That knowledge enables a supplier
to
its price accordingly. Customers can therefore
adjust
have bargaining power only for marginal projects.

(for

distinguishes

(139) This degree of transparency of the customers' options
and the suppliers' ability to adjust to the customers'
behaviour
negotiation
procedure in the tonnage market from classical bidding
procedures. The latter are designed to avoid this kind of
to strengthen the customers'
transparency in order
position and ensure
competition between
effective
suppliers on a level playing field.

the prevailing

(142)

(143)

in

1996

In its reply to the statement of objections the notifying
to the Commission's Decision of 12
party refers
December
IV/M.692 —
No
Case
Electrowatt/Landis. However, the relevant statements in
that decision related to small markets which were
characterised by the entry of new competitors and by a
(electronic
degree
components) that would make market share variations
likely. None of those elements are present here.

technological

innovation

of

factors

In the same context,
the notifying party quotes the
Commission's Decision of 23 October 1998 in Case No
IV/M.1298 — Kodak/Imation. However, in that decision,
the existence of tendering procedures was only one of
in determining
several
taken into account
single or
whether
the operation would create
collective dominant position. A more relevant
factor
was that any increase in prices was likely to accelerate
in
the customers' switch to a different
particular to digital systems. In the present case, there
are no competing technologies that could constrain the
parties in a similar way.

technology,

a

(144) The Commission concludes that the prevailing contract
award procedures are not in themselves sufficient to
ensure that each potential supplier can bid on equal
terms and receive equal treatment during the procedure.
The result of such procedures depends on different
factors such as the strength of
the suppliers in the
market. Where one supplier, such as the combined
entity after the proposed concentration, has a much
stronger position than others, such a procedure allows
the dominant supplier to benefit from its position in
order to adapt its offer to those of its competitors and,
therefore, further weaken their position. The increased
imbalance
combined entity Air
Liquide/BOC would further diminish the effectiveness of
the existing award procedures. On the basis of those
considerations, the Commission considers the prevailing
to constrain the
award procedures to be insufficient
parties' market power.

in favour of

the

(140) Fourthly, the history of the tonnage market suggests that
it is not easy for customers to switch between suppliers.
There is no evidence that the parties' market shares have
been subject to wide variations. The existence of strong
regional positions also contradicts the notifying party's
view. Both Air Liquide and BOC have consistently held
very large parts of the tonnage supply in their ‘home'
territories (see recitals 67 and 68). If the outcome of
each contract award procedure was entirely open, one
would expect the parties' market positions to be much
less stable. This has not been the case.

Customers have limited cost transparency and will
not normally resort to self-production

(145) The notifying party argues that customers always have
investing in the purchase of an air
the option of
separation plant and operating it themselves. Purchasing

L 92/24

EN

Official Journal of the European Union

30.3.2004

gases and purchasing air separation plants are therefore
two equal and substitutable ways for the customer to
satisfy its needs. According to the notifying party, most
customers have, at one time or another, owned and
operated air
customers are
separation plants. The
therefore in an excellent position to calculate costs of
production, to benchmark gas prices and to insist on
and obtain the lowest possible gas prices.

they

viable

asked whether

(146) The Commission's investigation has not confirmed those
consider
statements. When
self-production to be
alternative, most
a
customers replied negatively. There are plausible reasons
for this. Firstly, companies in most customer industries
pursue a policy of outsourcing non-core tasks. To make
investment for the production of one
a major capital
raw material would go against that trend (35). Secondly,
to
few customers have the expertise and personnel
operate and maintain large air separation units,
in
particular as
technology is constantly
evolving. Customers are not normally able to operate
on-site plants
industrial gases
economically as
companies because they do not benefit from the sale of
excess liquid production. Thirdly, customers would not
be able to control the subsequent implications of their
initial
investment decision. Each time the customer
required a capacity extension, a purity upgrade or any
other modification to the existing plant, it would have
to make additional investments. In view of those factors,
a customer's threat to switch to self-production, if made
during contract negotiations, is hardly credible.

the relevant

as

to

be

cannot

considered

be
self-production
representative. A BOC market analysis states that captive
production may be decreasing by up to 2 % per year
and the acquisition of captive plants by industrial gases
companies may account for one third of the market
growth (36). Air Liquide's 1998 Annual Report confirms
that development by stating: ‘The iron and steel industry
provides a good illustration of
trend in
outsourcing oxygen production.' Overall, the tendency is
for self-production to decrease rather than increase.

the current

(149) Most

that

customers

replied that

they did not have
self-production of industrial gases so far, that they had
no detailed knowledge of their supplier's cost structure
and that they were not or were only partly able to
recalculate the price offered by a tonnage supplier. It
may be
establish benchmarks of
industrial gas prices in contract negotiations, but their
ability to verify the supplier's costs in each individual
case remains limited. Where a customer has operated an
air separation unit in the past, the knowledge derived is
probably of
the relevant
limited value given that
technology evolves and each large on-site plant is a
customised solution.

customers

(147)

In particular, there is no justification for stating that
plant purchase and tonnage supply of gases are ‘equal
and substitutable' ways for a customer to satisfy its
needs. In its reply to the statement of objections, the
notifying party describes how, in a tonnage contract, the
risk associated with the large investment
is shared
(‘underwritten') by the customer and the supplier. If a
customer opted to purchase a plant, it would have to
bear that risk alone.

(148) The data submitted by the notifying party contradict its
statement that customers are generally likely to purchase
air separation units and switch to self-production. Of
[…]* offers submitted by Air Liquide in Europe during
the last five years, self-production was considered by the
customers in only […]* cases. Furthermore, out of […]*
requests for plant sale offers, the customers decided to
actually acquire a plant in only […]* cases whereas they
concluded a conventional gases supply contract in […]*
cases. In the light of those data, anecdotal examples of

(35) That view is shared by industry analysts, see for instance NatWest

Securities, ‘Industrial Gases 2000', February 1997, p. 79.

(e) Conclusion on the tonnage market

the EEA tonnage market.

(150) The proposed concentration would change the structure
It would significantly
of
increase Air Liquide's market share, creating by far the
largest tonnage supplier and enhancing its lead over its
competitors. The competitive potential of a large and
competent industrial gases company would be removed.
The new entity would have a stronger regional presence
throughout Europe that could be use as leverage in
competing for new contracts. It would be able to rely
on additional strengths not available to its competitors.
The notified operation would combine the know how
and technology of two leading competitors, as well as
their R & D capabilities. Because of its size, the new
entity would be better positioned to compete in a
capital intensive market that requires large investments.
The fact that it would be much larger than most of its
competitors would discourage vigorous competition.

(36) ‘BOC process

systems: Global

situation analysis'; document
submitted to the Federal Trade Commission as part of the HSR
filing.

30.3.2004

EN

Official Journal of the European Union

L 92/25

(151) The Commission therefore concludes that the proposed
concentration would create a dominant position on the
market for the tonnage supply of oxygen and nitrogen
in the EEA.

(153)

In addition, the proposed concentration would create
significant disincentives for Air Products, as the main
competitor of Air Liquide/BOC, to compete vigorously
with Air Liquide/BOC in these markets.

2. BULK AND CYLINDER MARKETS

(152) The proposed concentration would raise significant
it would combine
in different national markets,

competition concerns because
dominant positions
resulting in:

— the increased ability of

the combined entity to
eliminate or reduce actual and potential competition
from third parties, and

— the elimination of actual and potential competition

between the parties.

(a) Dominant position of BOC in the United Kingdom

and Ireland

BOC has, for most gases, by far the highest market shares in
the bulk and cylinder markets in the United Kingdom and
Ireland

(154) The market shares of BOC and its main competitors on
the markets for bulk and cylinder gases in the United
Kingdom and Ireland are set out in tables 6 and 7
respectively (37).

Table 6

United Kingdom

BOC

Air Products

Messer

Linde

Others

Oxygen

Nitrogen

Argon

CO2

[…]*

[…]*

[…]*

[…]*

Bulk

25-30 %

35-40 %

15-20 %

< 5 %

< 5 %

< 5 %

< 5 %

< 5 %

< 5 %

< 5 %

50-55 %

35-40 %
(Hydrogas)

Hydrogen

[…]*

55-60 %

< 5 %

Oxygen

Nitrogen

Argon/Argon mixtures

Acetylene

CO2

Hydrogen

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

Cylinders

10-15 %

< 5 %

< 5 %

25-30 %

5-10 %

5-10 %

< 5 %

20-25 %

15-20 %

< 5 %

< 5 %

5-10 %

< 5 %

< 5 % (AGA)

5-10 %

35-40 %

< 5 %

30-35 %

< 5 %

5-10 %

(37) Figures for 1998, based on the companies'

turnover for

the

products in question.

L 92/26

EN

Official Journal of the European Union

30.3.2004

Table 7

Ireland

BOC

Air Products

Oxygen

Nitrogen

Argon

CO2

Hydrogen

Oxygen

Nitrogen

Argon/Argon mixtures

Acetylene

CO2

Hydrogen

Bulk

[…]*

[…]*

[…]*

[…]*

[…]*

Cylinders

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

< 5 %

< 5 %

40-45 %

25-30 %

15-20 %

25-30 %

25-30 %

10-15 %

< 5 %

15-20 %

(155)

In Ireland, BOC has high market shares for all gases. In
the United Kingdom, BOC has high market shares in
particular
(oxygen,
nitrogen and argon) and all cylinder gases.

the atmospheric bulk gases

for

and

large

Linde).

(156) BOC has a limited number of competitors. In the United
industrial gases
Kingdom, only three other
two of which have limited
companies are present,
Ireland,
(Messer
shares
market
competition is limited to Air Products. Air Products, as
the only significant competitor
in both countries,
occupies a much weaker position in terms of market
share in most segments. The gap between BOC and Air
Products in Ireland is pronounced for every relevant gas
except argon, which is a low-volume and high-value gas.
Air Product's market share is equal to that of BOC only
with respect to bulk hydrogen in the United Kingdom, a
product that is traded.

In

(157)

In its reply to the Commission's statement of objections,
the notifying party argues that BOC's market shares for
bulk and cylinder atmospheric gases and for acetylene
have undergone a continued decline during the last
years.

(158) While the Commission acknowledges that BOC may
have experienced some losses of market share in the
past, it finds the arguments presented are not sufficient

to rebut
cylinder markets in the United Kingdom and Ireland.

its finding of dominance in the bulk and

(159) Firstly, in the past BOC held very high market shares in
the bulk and cylinder markets in the United Kingdom
and Ireland, amounting to near monopoly positions in
some markets in the United Kingdom and in most
markets in Ireland. Even in a market dominated by one
supplier that has captured a very large part of
the
supply, market share can be lost to some degree over an
extended period of time. That fact alone does not rule
out continuing dominance.

some newcomers

(160) Secondly, despite the loss of market share following the
into the market, BOC's
entry of
market share has consistently remained high.
In the
United Kingdom, BOC's share of the market for bulk
oxygen, nitrogen and argon as well as oxygen, nitrogen,
argon/argon mixtures, acetylene, carbon dioxide and
hydrogen supplied in cylinders has been consistently
high ([…]*). BOC's share of the market for bulk and
cylinder gases in Ireland has consistently been even
higher ([…]*). There have been no large market share
variations in the past that would suggest that BOC's
high market shares might decrease substantially in the
foreseeable future.

(161) The supplemental market share data presented by BOC
at a late stage in the procedure is inconsistent with the
data provided in the notification which, according to the
notifying party, represented best estimates based on
actual BOC data. The Commission does not have
sufficient knowledge of the basis for calculating those
market shares and the methodology used. In any case,
even if the assessment were based on the market share
they would not
estimates provided at a later stage,
refute the Commission's finding of dominance in the
markets concerned.

(162) The notifying party also challenges the Commission's
findings on dominance on the United Kingdom bulk
market by reference to declining prices. It submits that,
since 1985, the price for bulk oxygen, nitrogen and
argon in the United Kingdom has continuously declined.
The notifying party has not provided any further
information as to the basis for the figures underlying
that conclusion.

(163) However, the notifying party stated in its reply to the
technical developments
that
statement of objections
have brought about a reduction in the investment
required for
in
separation units
15 years) and a reduction in the average power
consumption (about […]* in 15 years), so that the cost
of production of liquid oxygen and liquid nitrogen has

(about

[…]*

air

30.3.2004

EN

Official Journal of the European Union

L 92/27

decreased (by […]* in 15 years, also due to a decrease in
the cost of power). Such a decrease in production and
energy costs has also been reported in industry analyses
concerning this
sector. The Commission therefore
considers that the price development largely reflects the
reduction in production and energy costs. Although
transport costs may have increased,
the Commission
notes, however, that the transport costs for the largest
incumbent supplier, BOC, must be lower than for any
competitor. BOC can rely on the densest production and
distribution network in the United Kingdom and Ireland.
It
less distance between
production sites and filling stations and between filling
stations and customers. Calculations submitted by the
notifying party confirm that assessment (38).

therefore has

to cover

BOC has a very strong presence in the tonnage sector in the
United Kingdom

(166) BOC controls by far the largest part of the supply of
atmospheric gases in large quantities in the United
Kingdom (tonnage supply) (39). According to figures
provided by the notifying party, which have been
confirmed by the Commission's inquiries, BOC provides
[…]* of tonnage oxygen and the same proportion of
Its strong position in the tonnage
tonnage nitrogen.
segment
the most
extensive pipeline grids in the United Kingdom.

reinforced by its control of

is

(164) The Commission therefore finds that the consistently
high market shares held by BOC in the bulk and
cylinder markets for atmospheric gases and acetylene in
the United Kingdom and Ireland,
in particular when
compared with the competitors' much lower market
shares, are in themselves indicative of dominance in
these markets.

BOC has the most extensive production and distribution
network in the United Kingdom/Ireland

(165) BOC has the most extensive infrastructure for

the
production and distribution of atmospheric gases in the
United Kingdom and Ireland. The company has […]*
merchant air separation units in Great Britain and […]*
in Ireland. Each of these production facilities also serve
as a distribution point for bulk gases, but BOC has […]*
additional bulk gas distribution facilities in Great Britain.
BOC also has an acetylene plant in Great Britain. BOC
therefore has
the densest and most well balanced
network of bulk gases production and distribution
locations. Furthermore, BOC has an extended cylinder
distribution infrastructure in Ireland ([…]* cylinder
filling facilities compared to one for its competitors). It
should also be noted that BOC has been able to place a
significant number of
small nitrogen on-site plants
(more than […]*) with customers that would otherwise
require liquid nitrogen supply. On the basis of data
provided by competitors,
the Commission concludes
that no competitor has a similarly extensive production
and distribution infrastructure in Great Britain and
Ireland. Therefore, BOC's overall
logistical position is
such that it allows the company to maintain, if not to
reinforce, its dominance.

constantly

(167) BOC's strong position in the tonnage segment entails
additional advantages in the bulk market because each
time BOC wins a tonnage contract it can, in principle,
decide to use the new on-site plant for the simultaneous
(so-called ‘piggy back'
production of
liquid gases
production). BOC can thus
renew its
production capacity. Furthermore, liquid gases produced
lower
tonnage
simultaneously with
production costs because of
the economies of scale
achieved in a larger plant. In its reply to the statement
of objections and at the oral hearing, the notifying party
disputed such an advantage and considered that ‘piggy
back' production does not reflect the present tendencies
in bulk production. That view is not, however,
supported by all competitors, some of which claim that
over-sizing an on-site plant still affords an additional
advantage to a gas supplier in the bulk market.

gases

have

(168) The control of pipeline networks confers additional
structural advantages, which are not available to other
competitors, not only in the tonnage market, but also in
the market for bulk gases. The Commission investigation
has confirmed that there is, in principle, no obstacle to
the use of a pipeline for supplying the quantities of
unlike
gases
competitors without access to pipeline networks, BOC
can substitute high-cost bulk supply by granting suitable
customers access to its pipelines. This is confirmed by
examples submitted by BOC.

bulk. Thus,

normally

provided

in

(b) Dominant position of Air Liquide in France

Air Liquide has by far the highest market shares in the
French bulk and cylinder markets

(169) The market shares of Air Liquide and its competitors in
the bulk and cylinder markets in France are set out in
table 8:

(38) Annex A.11 to the reply to the statement of objections.

(39) There is no tonnage supply in Ireland.

L 92/28

EN

Official Journal of the European Union

30.3.2004

Table 8

France

Air Liquide

AGA

Air Products

Praxair

Messer

Linde

Others

Bulk

Oxygen

[…]*

15-20 %

10-15 %

5-10 %

< 5 %

< 5 %

Nitrogen

Argon

Carbon
dioxide

[…]*

[…]*

[…]*

5-10 %

10-15 %

< 5 %

5-10 %

< 5 %

10-15 %

10-15 %

5-10 %

5-10 %

5-10 %

5-10 %

< 5 %

25-30 %

<5 %

Hydrogen

[…]*

15-20 %

< 5 %

Cylinders

Oxygen

[…]*

20-25 %

< 5 %

< 5 %

< 5 %

Nitrogen

[…]*

15-20 %

5-10 %

5-10 %

< 5 %

Argon/Argon
mixtures

Acetylene

Carbon diox-
ide

[…]*

15-20 %

5-10 %

5-10 %

< 5 %

[…]*

[…]*

10-15 %

<5 %

< 5 %

< 5 %

10-15 %

10-15 %

< 5 %

10-15 %

< 5 %

Hydrogen

[…]*

10-15 %

< 5 %

5-10 %

(170) Table 8 shows that Air Liquide holds by far the highest
shares in all markets. Competition is fragmented, with
no competitor reaching […]* of Air Liquide's market
share in any segment and most being significantly
weaker in the remaining markets. AGA, as the strongest
competitor, exceeds 20 % only with respect to oxygen in
cylinders (where Air Liquide has a market share of
[…]*).

seems to be increasing. Prices for these cylinder gases
have increased relatively constantly over the last 10
years by […]*.

(173) The evidence put

forward by the notifying party to
challenge the Commission's findings on dominance in
the bulk and cylinder markets
is not
convincing.

in France

(171)

In its reply to the Commission's statement of objections
and at the oral hearing, the notifying party submitted
that the Commission's analysis did not take account of
its declining market shares for bulk and cylinder gases
in France over the past 20 years. Secondly,
it argued
that prices for bulk oxygen, nitrogen and argon/argon
mixtures have decreased and costs of bulk production
increased.

(174)

Firstly, with regard to market
shares, Air Liquide
enjoyed a near monopoly position in the French bulk
and cylinder markets in the past (for instance […]* for
liquid oxygen and nitrogen together in 1975). Despite
some market share losses, Air Liquide's market shares
have constantly remained high (approximately […]*) for
both bulk and cylinder gases. There have been no
sudden large losses of market share in the past that
would suggest
that Air Liquide's high market shares
might be reduced substantially in the foreseeable future.

(172) With regard to the cylinder market, the data provided
by the notifying party following the hearing suggests
that the market shares for cylinder oxygen and acetylene
have declined only slightly during the last 10 years and
have remained relatively constant during the last three
years, whereas the market share for argon shows even

(175) Secondly, with respect to costs, the basis on which the
alleged increases have been calculated is not clear. The
notifying party stated in its reply to the statement of
objections that technical developments, during the past
15 years, have contributed to considerable cost savings

30.3.2004

EN

Official Journal of the European Union

L 92/29

[…]*

in the production of

liquid oxygen and
of
nitrogen. The Commission therefore considers that the
price development
the reduction in
largely reflects
production and energy costs. Even if transport costs for
a
dense
infrastructure and distribution network in France have
than those of a
risen,
competitor with a
and
distribution network.

these costs would be lower

Liquide with a

such as Air

infrastructure

less dense

supplier

(176) The Commission concludes

the repartition of
market shares described in recitals 169 to 175 is in itself
indicative of dominance by Air Liquide in the bulk and
cylinder markets in France.

that

Air Liquide has the most extensive production and
distribution network in France

(177) Air Liquide operates […]* air separation units producing
liquid oxygen and nitrogen and […]* air separation
units producing liquid argon in France. Air Liquide also
operates […]* hydrogen and carbon dioxide plants and
[…]* acetylene plants in France. In terms of cylinder
distribution infrastructure, Air Liquide has […]* cylinder
filling facilities, of which […]* are capable of
filling
standard air gases, […]* acetylene, […]* carbon dioxide,
[…]* hydrogen and at least […]* speciality gases. Air
Liquide has a comprehensive network of more than
[…]* resellers covering all regions.

(178) On the basis of data provided by competitors,

that

extensive

that no competitor has
and

the
a
Commission concludes
similarly
distribution
production
infrastructure in France. In its reply to the Commission's
its
statement of objections Air Liquide argues
production capacity of Air Liquide of bulk oxygen and
nitrogen currently barely exceeds
its
competitors taken together. The Commission is not
convinced by this argument. Although the figures
provided by the notifying party suggest that in 1983 the
overall production capacity of the competitors of bulk
oxygen and nitrogen was considerably lower than that
of Air Liquide, there has been no further increase in the
production capacity of the competitors in relation to the
production capacity of Air Liquide over the last five
years.

that of

all

Air Liquide has a very strong presence in the tonnage sector
in France

(180) According to its own estimates, Air Liquide is currently
providing by far the largest proportion of tonnage gases
in France ([…]* of oxygen and […]* of nitrogen).
Furthermore, Air Liquide operates unique networks of
pipelines in key industrial regions of France, Belgium
and the Netherlands (40).

(181)

reflect

tendencies

the present

In its reply to the statement of objections and at the
oral hearing the notifying party disputed such an
advantage and considered that ‘piggy back' production
does not
in bulk
production. This view is not, however, supported by all
competitors, some of which claim that
‘piggy back'
production still affords an additional advantage to a gas
supplier in the bulk market.
Indeed, Air Liquide has
confirmed that […]* of its plants in Europe ([…]* out of
[…]) have over-capacity for liquid oxygen and nitrogen
to be sold in the bulk market. The notifying party
estimates that the proportion of Air Liquide's and BOC's
total bulk sales
supplied by on-site plants with
over-capacity has remained constant over the last five
years: […]* (1998), […]* (1997) and […]* (1994 to
1996).

(182) The Commission concludes that a very strong position
in the adjacent tonnage segment further strengthens Air
Liquide's position in the bulk market.

(c) Strengthening of dominant positions

(aa) Combination of dominant positions

The proposed concentration would combine dominant
positions in three national markets

(183)

In France and the United Kingdom/Ireland, the proposed
transaction would bring
two incumbent
suppliers which, prior to the transaction:

together

— provide the full range of industrial gases products,

(179)

In addition, Air Liquide has […]* small on-site facilities
for the production of nitrogen and can be considered to
have a unique position in this segment. Overall, Air
Liquide has superior access to customers in France, a
factor that reinforces its dominance.

— have very high market shares in the markets for

bulk and cylinder gases,

(40) Oxygen pipelines — […]** km; nitrogen pipelines — […]** km.

L 92/30

EN

Official Journal of the European Union

30.3.2004

— have extensive national production capacities and
distribution networks as well as the best cost basis,

The proposed concentration would combine the parties'
dominant position with strong positions in other countries

— have

a well-established
preferential access to customers, and

customer

base

and

(185)

— have historically established,

respective

their
‘home' markets
countries), amounting to dominance.

strong positions

in
(and adjacent

(184)

If the proposed concentration were allowed to go ahead
as notified, the result would be dominance by one single
supplier in the second and third largest industrial gases
markets in Europe (France and the United Kingdom).
The combined entity would be dominant in an area that
the European
accounts
demand for industrial gases (41).

for approximately […]* of

competitors

In addition to its dominance in an extended geographic
area covering large markets in western Europe,
the
combined entity would have access to markets in a
number of other countries in which its actual and
potential
in
are
multi-market contacts. The combined entity would have
high market
shares notably in Belgium, Denmark,
Greece, Italy, Portugal, Spain and Sweden. In Germany,
the
the
largest European industrial gases market,
combined entity's market position would be less strong,
but still significant.

resulting

active,

(186) The market shares of Air Liquide/BOC in some other

countries are set out in table 9:

Table 9

Air Liquide/BOC market shares in other countries

Belgium

Denmark

Germany

Greece

Italy

Portugal

Spain

Sweden

Bulk

Oxygen

Nitrogen

Argon

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

Carbon dioxide

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

Hydrogen

[…]*

[…]*

[…]*

[…]*

[…]*

Cylinders

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

Oxygen

Nitrogen

Argon/Argon mixtures

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

Acetylene

Carbon dioxide

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

Hydrogen

(41) Overall, the combined entity would supply approximately […]** of

the European demand for industrial gases.

30.3.2004

EN

Official Journal of the European Union

L 92/31

(187) Air

a

has
for

distribution
production
Liquide
infrastructure
the
industrial gases
countries in table 9, even those where its market share
does not
indicate dominance. For further details see
table 4.

and
in each of

(188)

In its reply to the statement of objections the notifying
party contests the relevance of the market shares for
bulk and cylinders in other European countries for the
assessment of
its position on the bulk and cylinder
markets in France, the United Kingdom and Ireland. The
Commission finds, however,
the market shares
presented in table 9 give an indication of the position of
Air Liquide and BOC in various European bulk and
cylinder markets, and are thus useful for the overall
assessment of the present transaction.

that

(bb) Increased ability to eliminate or substantially
reduce actual and potential competition from
third parties

By combining their respective dominant positions, Air
Liquide/BOC would become even less vulnerable to
competition in France, the United Kingdom and Ireland

(189) The proposed transaction would bring a much larger
area under the control of one player rather than two,
leverage
thus giving the combined entity additional
against
the United Kingdom and
Ireland.

in France,

rivals

businesses would

(190) Firstly, the two dominant incumbents would no longer
be actual and potential competitors. The combination of
their
parties'
technological and financial resources in their respective
home markets. Those factors alone act as a deterrent to
foreign competitors and would increase barriers
to
entry.

strengthen

the

(191) Secondly, each of the parties would benefit from the
anti-competitive effects of the strategies pursued in the
territory of
for
the other. Before the transaction,
if BOC had countered entry into the United
instance,
Kingdom market by a competitor (for instance, Linde), it
would have reduced its profitability and therefore
become more
to (actual or potential)
competition by other parties (for instance, Messer or
Praxair). Thus, before the transaction, any entry into the
United Kingdom market would have improved the
competitive
the
transaction, a third party establishing a presence in the
United Kingdom would have a substantially smaller
impact on the market structure.

that market. After

structure of

vulnerable

(192) Thirdly,

in

sunk

costs

investing

substantial

the proposed transaction would increase the
ability of the combined entity to increase competitors'
risks and costs
in entering the bulk and cylinder
markets in France, the United Kingdom and Ireland. Any
entrant into another incumbent's stronghold normally
in
incurs
infrastructure which are not necessarily recoverable due
to the incumbent's
strong incentive to engage in
marginal or sub-marginal price competition in order to
prevent the entrant from establishing a foothold. Before
for
the transaction, entrants to the United Kingdom,
example, would have faced the financial risk of entering
into the United Kingdom market only. After
the
transaction, most entrants would face a more powerful
incumbent in the United Kingdom and their investments
in France could consequently face greater risks. The
same applies for new entrants in France and their
possible investments in the United Kingdom.
Indeed,
after the proposed concentration, the combined entity
would be capable of singling out entrants for concerted
counter-action in either France, the United Kingdom or
Ireland.

(193) Fourthly,

the proposed transaction would give the
combined entity increased potential for retaliation in its
competitors' home markets. Before the transaction, at
least BOC's ability to counter market entry in the United
Kingdom or Ireland by retaliating in the entrant's home
market, was limited by the fact that it lacked a suitable
production and distribution infrastructure in many
Continental European markets. After the transaction, the
combined entity would have an increased capability of
countering entry into the United Kingdom bulk and
cylinder markets using Air Liquide's strong position and
established infrastructure in continental Europe. For
instance, the combined entity, unlike BOC previously,
would be in a position to use its presence in Germany
in order to deter the recent entrants, Linde and Messer,
from pursuing aggressive competition in the United
Kingdom.

The combination of dominant positions would enable the
merged entity to use a secure captive home market as leverage
against its competitors

(194) By combining dominant positions in an extended area,
the combined entity would be in a unique position to
compete for customers within that area. Because the
area controlled by the combined entity would include
two large markets (France and the United Kingdom), it
is more likely that multinational customers would have
businesses, and therefore industrial gases demand,
in
both markets.
for example, a United Kingdom
customer had demand for industrial gases at another of
its plants in France, the combined entity would be able

If,

L 92/32

EN

Official Journal of the European Union

30.3.2004

types of
to offer discounted rates, or make other
concessions in the United Kingdom market in exchange
for that customer's business in France. The combined
entity would thus be in a position to use its position in
the United Kingdom as leverage in order to strengthen
its position in France, and vice versa. While such
practices may not always be unlawful, the possibility of
engaging in such conduct raises competition concerns
where a supplier is dominant. By creating a situation in
which the combined entity Air Liquide/BOC could
compete on the basis of dominant positions in two
countries, the proposed transaction would enable it to
use a dominant position in one country in order to
strengthen a dominant position in another.

supplied customers

atmospheric gases in Belgium and the Netherlands,
having established a tonnage plant at Terneuzen, which
produced liquid oxygen, nitrogen and argon for the bulk
market and a cylinder
filling plant at Herenthout,
capable of filling a wide range of industrial gases. Both
in Belgium and the
facilities
Netherlands using BOC-owned delivery vehicles. Both
facilities also supplied BOC's cylinder gases business in
Germany, based at Bopfingen. In Belgium, a country in
which Air Liquide has a strong position, BOC evolved
into a significant entrant for certain gases (bulk argon
— […]; bulk carbon dioxide — less than […]*; cylinder
oxygen — less than […]*; cylinder argon — […]*) until
the operations were sold to Air Liquide late last year.

(195) The combined entity would be well placed to use its
strongholds in its home markets as a base to attack
other markets, either its competitors' home markets or
smaller geographic markets in which a number of
industrial gases companies are competing. It would be
able to increase its market shares in those markets by
undercutting its competitors, because of its strengthened
financial position resulting from profits generated on its
strong home markets, namely the difficult-to-enter
French, United Kingdom and Irish markets. At present,
the two parties individually are more constrained from
engaging in such conduct than they would be after the
transaction. In theory, either BOC or Air Liquide could
use its respective home markets as a base to compete in
other countries. However, that possibility is currently
potential
limited
competition by the other party (reciprocal moderation).
For instance, BOC is currently constrained in using its
control of the United Kingdom and Irish markets in
order to extract higher prices from customers because it
would face the risk of Air Liquide entering its home
countries. Air Liquide is better placed than other
competitors to enter the United Kingdom market. The
proposed
existing
constraints, and the combined entity would have more
freedom in this respect.

transaction would

the moderating

remove

effect

the

by

of

(cc) Elimination of actual and potential competition

between Air Liquide and BOC

By acquiring BOC's bulk and cylinder operations in
continental Europe, Air Liquide would eliminate BOC as an
actual and potential competitor in its home market

(196) Prior to the proposed concentration as notified, BOC
had entered the bulk and cylinder markets for certain

(197) The geographic reference market for certain high-value
gases such as bulk argon and, possibly, cylinder argon,
which can be transported over larger distances than
standard air gases, appears not to be limited to Belgium
but to cover an area comprising some parts of Northern
France. The fact that Air Liquide imports liquid argon
from France would support that view. The acquisition of
BOC's Continental
therefore
European
strengthens Air Liquide's dominant position in France
not only by removing an actual competitor, but also by
adding that competitor's market share to Air Liquide's
own dominant position.

operations

(198)

(199)

in

its

the

France

position

dominant

Insofar as Belgium is a market distinct from France,
namely for those gases that can be transported less
economically over large distances, Air Liquide would
strengthen
by
eliminating potential competition in the French market
and actual competition in an adjacent market. Firstly,
BOC must be seen to be a potential competitor in
France, having demonstrated that it can establish a bulk
and cylinder gases business
in continental Europe.
elimination of BOC's position in
Secondly,
continental Europe would relieve Air Liquide of
the
competitive pressure arising from BOC's presence in a
market adjacent to its home base. Thirdly, by removing
a competitor in the Belgium market and acquiring that
competitor's additional market share, Air Liquide would
become an even stronger player in Belgium, where it
has already captured a large part of the market. Air
Liquide would thus be able to counter other potential
entrants into its home market more effectively in a
neighbouring country from which entry into the French
market could easily be attempted,
instance by
supplying the industrial regions of Northern France.

for

In its reply to the Commission's statement of objections
the notifying party argues that BOC's operations in
Belgium and the Netherlands were limited in scope and
that their acquisition by Air Liquide did not therefore
competitive
lead to any relevant

change of

the

30.3.2004

EN

Official Journal of the European Union

L 92/33

conditions on the French bulk and cylinder markets.
However, upon examination of the business data for
those operations, that argument must be rejected. BOC's
tonnage business was secured by long-term contracts
continuing until at least […]* and […]* respectively.
BOC's bulk business has been benefiting from strong
volume growth in liquid sales. Profitability has improved
each year (42) and in the financial year 1998/1999 an
operating profit was achieved. The business generates
substantial cash flows. BOC's cylinder business has
grown at healthy annual rates and has reduced its
operating losses continuously over the past years (43).
When comparing the financial data provided by BOC
with data provided by competitors for market entries
attempted under similar circumstances, the turnover and
is to be
profitability evolution is in line with what
is therefore
expected during the start-up period.
legitimate to argue that BOC's businesses
in these
markets were viable. BOC has stated that it planned to
dispose of its Continental European businesses following
a review of its global operations.

It

in the United Kingdom. However,

effect
customers have indicated a different view.

individual

(203) Air Liquide argues that its qualification as a potential
competitor is purely theoretical because it has never
tried to penetrate the United Kingdom market and is
less likely to do so now that others have entered the
market. However, a project study submitted to the
Commission shows that Air Liquide has contemplated
supplying bulk and cylinder gases
in the United
Kingdom when consulted by a customer (45). Moreover,
Air Liquide concedes that Messer has been able to
overcome the entry barriers to the United Kingdom
bulk and cylinder markets, without however offering
reasons why Air Liquide should not realistically be able
to enter the United Kingdom market itself. Indeed, Air
Liquide has the most successful history in entering other
European markets of all industrial gases companies. By
stating at the oral hearing that its absence from the
United Kingdom is a business decision, Air Liquide has
acknowledged that no objective factors would have
prevented it from entering the United Kingdom market.

(200) The present transaction would strengthen Air Liquide's
dominant position in France because it would eliminate
BOC as an actual and potential competitor in France. It
is this permanent and structural change in the market,
and not a business decision by one competitor, that
raises the competition concern.

The proposed concentration would eliminate Air Liquide as
the most credible potential competitor in the United Kingdom
and Ireland

should be

(204) Finally, the notifying party stated at the oral hearing
that, as a similarly large industrial gases company,
Praxair
considered an equally credible
potential competitor in the United Kingdom. However,
the notifying party has not explained why a company
its operations on the American
that has most of
continent and a limited presence in Europe should be as
credible
strongest
industrial gases supplier in Europe.

an entrant as Air Liquide,

the

(201) Air Liquide represents one of the strongest potential
entrants in BOC's national home markets. Competitors
have stressed that Air Liquide would have been best
placed amongst all industrial gases companies to make
inroads into the United Kingdom market (44). Once the
parties have merged, this competitive pressure would be
lost. This would be true irrespective of whether or not
Air Liquide was already active in BOC's home market.

The examples of Linde and Messer have shown that
competitors based in continental Europe can enter the United
Kingdom market

(205) Green-field market entry is possible in the cylinder and
bulk markets and has been accomplished in the United
Kingdom. In principle, a number of ways to enter a
foreign market exist:

(202)

In its reply to the statement of objections, the notifying
party admits that a dominant supplier can be restrained
in the exercise of
its market power by potential
competition from other undertakings which could
realistically enter
the market. The notifying party
disputes that any potential entrant has had any such

— exporting industrial gases to the target country,

— establishing an own production capacity in the
target country, for instance by acquiring customers
for large on-site production plants,

(42) During the financial years 1994/1995 to 1998/1999 (tonnage and

bulk business accounted for together).

(43) During the financial years 1994/1995 to 1998/1999.
(44) […]*.

(45) Note for Air Liquide's Comité des Projets Europe of 28 January
1997 concerning a call for tender by an electronics company for
bulk gases (nitrogen, oxygen and argon), cylinder gases (helium
and hydrogen) and equipment in which Air Liquide participated.

L 92/34

EN

Official Journal of the European Union

30.3.2004

— initially establishing a distribution infrastructure and
sourcing industrial gases on the merchant market
before setting up an own production capacity,

Messer has market shares of less than 5 % for oxygen,
less than 5 % for nitrogen and less than 5 % for argon.

— acquiring a small local supplier and expanding the
and

distribution

supplier's

network

acquired
customer base.

(209)

(210)

(206) Market entry can be effected without importing the full
range of industrial gases where such importation would
not be not possible or economically viable. In this case,
a market entrant will normally proceed as follows.
Initially, the entrant will set up one or several cylinder
depots and distribution points. Standard atmospheric
gases will be purchased from, and filled into cylinders
by local suppliers. High value gases, such as acetylene,
gases mixtures, pure and speciality gases and liquid
argon will be imported. Competitors have confirmed
that such imports have taken place in order to sustain
market entry in the United Kingdom. As a second step,
once a certain number of customers have been acquired,
the entrant will set up a facility to fill standard gases
(oxygen, nitrogen, argon, argon mixtures and carbon
dioxide) into cylinders. The liquid gases required will be
purchased on the merchant market. High value gases
will either continue to be imported or be purchased
from local suppliers. On the basis of
this extended
distribution structure, the entrant will, as a third step
construct an air separation unit of a limited size (for
example 15 to 40 million m3/year for oxygen/nitrogen)
and additional transfill facilities in the target country.
This will enable the entrant to acquire and supply bulk
customers.

(207) Alternatively, an industrial gases company can enter a
foreign market by acquiring a small
local supplier,
adding other products and expanding its infrastructure
and customer base. Once this initial step has been
taken, the entrant is in a position to establish or extend
its own production and distribution capacity by
proceeding as described in paragraph 206.

(208) The examples of Linde and Messer confirm that it is
possible to enter the cylinder and bulk markets in the
United Kingdom and acquire limited market shares.
Linde entered the United Kingdom market in 1992, and
has since gained market shares in the cylinder segment
of less than 5 % of oxygen, 5 to 10 % for nitrogen, less
than 5 % for acetylene, 5 to 10 % for argon and argon
mixtures and 5 to 10 % for hydrogen. Messer entered
the United Kingdom market by acquiring a small
supplier of carbon dioxide and extending the acquired
distribution infrastructure. The company subsequently
built a stand-alone air separation plant at Eggsborough
(initially jointly with AGA).
In the cylinder gases
segment, it has gained market shares of 5 to 10 % for
less than 5 % for argon/argon mixtures and
nitrogen,
35 to 40 % for carbon dioxide. In the bulk segment,

Air Liquide, as the number one in Europe and the world, is
the most credible potential entrant to the United Kingdom
market

expenses

In the markets for cylinder and bulk gases, the main
barriers to entry consist of the capital investment and
operating
and
involved
sustaining a production and distribution infrastructure,
in the acquisition of a sufficient customer base to justify
that expenditure, and in the financing of operative
losses during a
the newly
established business becomes profitable.

start-up period until

establishing

in

excess

capacity

resources

to bulk or

Investment and operating costs vary depending on
which method of market entry is chosen.
If a new
entrant chooses to bid for on-site tonnage contracts,
with the intention of over-sizing the production facility
and selling
cylinder
customers, a substantial up-front investment is required.
In most cases, the cost incurred will be recovered over
the duration of the contract, given that on-site supply
contracts typically run for a period of 10 to 15 years.
However, only a limited number of large industrial gases
companies have the financial
(and more
generally, the project management capability) to launch
such large projects.
the entrant chooses to first
and
establish a
subsequently extend its business into the bulk market,
the initial capital investment (establishment of a cylinder
depot and a filling facility) will be in the range of EUR 2
the construction of an air
to 3 million. However,
separation unit and related further transfill centres will
require a substantially higher investment, in the order of
EUR 50 to 60 million. In addition, operating costs and
transport costs for gases that have to be imported will
be incurred on a continuous basis. In principle, similar
costs will be incurred in the long term if an entrant
acquires a small local supplier and tries to expand the
acquired infrastructure.

cylinder distribution infrastructure

If

(211) A newly established industrial gases business often takes
a certain period of time to become profitable. The need
to sustain operative losses during this start-up period
constitutes an additional barrier to entry. If market entry
occurs, incumbent suppliers may attempt to prevent the
entrant from establishing a significant foothold in their
home market by seeking to undercut the entrant's prices
in the area in which the entry takes place. Competitors
have provided examples of how BOC has pursued this
strategy in order to deny them entry to the United
Kingdom market. This means that the entrant will have
to be able to finance an operative loss during a start-up
period.

30.3.2004

EN

Official Journal of the European Union

L 92/35

(212) Large industrial gases companies are therefore better
able to enter a market already dominated by an
incumbent than smaller suppliers. Large companies are
more likely to have the financial strength, the logistical
and technological resources and the strategic planning
ability to make the necessary investments and sustain
market entry against aggressive counter-action by a
locally dominant incumbent. In the case of the United
Kingdom,
the
observation that two large competitors based abroad,
Linde and Messer, have been more successful in gaining
market share than small start-up entrants, even though
the latter were operating from within the United
Kingdom (for instance Energas and Medigas).

is borne out by

assessment

this

(213) Against

this background, Air Liquide, as the leading
industrial gas company in Europe, possesses specific
strengths making it the foreign competitor most suited
and most likely to enter the United Kingdom market.

(214) Air Liquide has a strong capability to establish a
production and distribution infrastructure in foreign
that Air
markets. This is demonstrated by the fact
Liquide has successfully established a production and
distribution network for industrial gases in a range of
European countries, comprising stand-alone production
plants
(plants
(bulk gases plants), dedicated plants
dedicated to one or several customers) with excess
production capacity for the bulk market, small on-site
production plants and cylinder filling facilities. Table 4
sets out Air
Liquide's European production and
distribution network in countries outside France. The
following conclusions can be drawn:

— in markets remote from its home base (France) to
which bulk deliveries are not economical, Air
Liquide has established its own production capacity,
either by constructing stand-alone plants or by
building excess capacity into dedicated tonnage
plants. Only in countries to which bulk deliveries
could be carried out from French production sites
(Belgium,
the Netherlands, Luxembourg and, to a
lesser degree, Germany) has a less important local
production capability been put in place,

— in all of

the countries in which a stand-alone
production capacity was installed, Air Liquide has
established cylinder filling facilities in line with the
size of the market concerned (the only exception
being Finland, where only dedicated plants exist). In
filling
the majority of
network covers the full range of gases, including a
number of
filling high-value
gases with a higher transportation radius (argon,
argon mixtures, acetylene and other gases including
speciality gases),

facilities capable of

countries,

cylinder

the

— in addition, Air Liquide has been able to make
substantial inroads into foreign markets by offering
and installing small on-site production facilities for
standard gases (oxygen and nitrogen). It should be
noted that customers in countries remote from Air
Liquide's home base can be, and have been, supplied
using this technology.

(215) Air Liquide is generally recognised by competitors and
industry analysts as the leading supplier of industrial
gases through dedicated on-site (tonnage) plants.
Its
strong Europe-wide position in the tonnage market
increases Air Liquide's ability to enter foreign bulk and
cylinder markets, unrivalled by any competitor. Air
Liquide has previously pursued a policy of over-sizing
such dedicated tonnage plants, with the aim of selling
excess capacity on the bulk and cylinder markets.
Indeed, this type of simultaneous gaseous and liquid
production represented […]* of Air Liquide's total liquid
oxygen and nitrogen production in the EEA in 1998.

in

other

(216) Air Liquide has considerable financial strength enabling
it to sustain start-up losses. It is the industry leader in
terms of turnover as well as capital expenditure. Air
Liquide's history of entry into the cylinder and bulk
markets
(Belgium,
European
Denmark, Germany, Greece, Italy, Netherlands, Portugal,
Spain and Sweden) confirms that the company is able to
bear the financial burden of market entry. It has been
able to do so,
in those countries where
local suppliers present strong competition (for instance
in Germany, Italy and Sweden). Air Liquide is the only
European competitor able to rely on a very strong
position, amounting to dominance, in a home market
for bulk and cylinder gases of considerable size (France).

in particular,

countries

(217) Air Liquide has leading technological expertise allowing
it to enter foreign markets more effectively. There is
consensus in the industry that technology, in particular
application technology,
is one of the main drivers of
competition in the bulk and cylinder gases markets,
given that the products are largely homogenous and
new customers can be acquired by offering new or
more economical application solutions, thereby reducing
the customer's costs and increasing productivity.
If
the ability to offer new
market entry is attempted,
application solutions becomes even more important.
Any entrant
to acquiring
customers by offering low prices, since the entrant's
production cost base will initially be less advantageous
than that of an incumbent, and the incumbent may try

limits with respect

faces

L 92/36

EN

Official Journal of the European Union

30.3.2004

an

ability

entrant (46).
to match the prices offered by the
Therefore,
on
entrant's
applications technology is often vital in order to extend
its customer base.
is generally accepted that Air
Liquide possesses advanced technological expertise and
to application
enjoys a leading position with respect
technologies (47).

compete

to

It

(218)

Furthermore, Air Liquide is a leading provider of
specific technologies that can be offered to customers
remote from the entrant's home base (for example small
on-site production facilities for oxygen and nitrogen
based on VPSA and membrane technology). Air Liquide
has demonstrated how this technology can be marketed
successfully, by placing approximately […]*
small
on-site contracts with customers in the Community
outside France (48). Given that the quantities of gases
supplied using small on-site facilities often correspond
to a demand that would otherwise be fulfilled through
bulk deliveries, the ability to offer this technology gives
an entrant an additional advantage in acquiring bulk
customers.

(219) The

specific

analysis of Air Liquide's

competitive
strengths confirms that Air Liquide is well placed to
enter the United Kingdom cylinder and bulk markets.
Furthermore Air Liquide is better placed than any other
competitor to successfully sustain such market entry.
While Linde and Messer have established a limited
presence in the United Kingdom cylinder and bulk
markets, their competitive strength, especially if weighed
against BOC's market power, is much more limited than
the competition Air Liquide could mount in the United
Kingdom and Ireland.
those two
companies has, in the past, been able to establish itself
in other European countries to the same extent as Air
Liquide. Other
are
significantly smaller in terms of size, overall market
share
distribution
infrastructure in Europe (49). Neither company is as well
placed as Air Liquide to enter the United Kingdom and
Irish markets. No other large industrial gases companies

Indeed, neither of

(Praxair, AGA),

competitors

production

as well

and

as

(46) According to competitors who have entered the United Kingdom
indeed pursued the strategy of

in the past,
market, BOC has,
matching their prices by reciprocal price reductions.

(47) Air Liquide has gained leading expertise in key, high technology
application areas such as the electronics and chemical industries
(NatWest Securities, ‘Industrial Gases 2000', February 1997, pp. 45
and 73). […]* of Air Liquide's R & D expenditure are focused on
improving the technologies associated with the application of
industrial gases
example,
customers'
applications in the field of […]* account for […]* of Air Liquide's
R&D (figures provided by the notifying party).'

industries.

in the

For

(48) Figures provided by the notifying party, until end 1998.
(49) AGA has sold its limited operations in the United Kingdom.

exist that could enter the United Kingdom and Irish
markets. Air Liquide is
therefore the only credible
potential competitor.

(220)

In conclusion, potential competition in the markets for
cylinder and bulk gases in the United Kingdom and
Ireland largely depends on Air Liquide's continuing
presence as an independent competitor. Once the
(BOC) and the strongest potential entrant
incumbent
(Air Liquide) were merged,
this competitive pressure
would be lost.

The absence of Air Liquide in the United Kingdom market to
date has to be seen as a strategic decision, which could be
reversed at any time

that

(221) There is consensus in the industry that an industrial gas
is a
company's decision to enter a foreign market
strategic business decision. Any industrial gas company
that wishes to grow in the long term cannot do so
without expanding its geographic market coverage. This
is best demonstrated by Air Liquide's history of
in particular in
expansion in Europe and worldwide,
from its home base.
countries
are
Competitors have unanimously
each
stressed that
industrial gas company,
in pursuing its expansion
strategy, will weigh the investments required and the
risks involved. Given that Air Liquide would have been
best placed to expand its operations into the United
Kingdom and Ireland, it has to be concluded that the
decision not to do so to date is one that could have
Indeed, Air Liquide has considered
been reversed.
becoming active in the United Kingdom market in the
past (see recital 203).

remote

(222)

(yet)

Irrespective of whether

It should be stressed that the Commission's objections
are not directed against Air Liquide's business strategy
launch
to date which may have been to not
substantial activities in the United Kingdom and Ireland.
Rather, the specific competition concerns arising from
the proposed concentration relate to the elimination of
the most credible potential competitor in the markets
competitor
concerned.
concerned has previously been willing to launch
effective competition, the proposed concentration would
permanently remove the possibility of such competition
taking place. The proposed concentration would thus
and
permanently
thereby strengthen BOC's existing dominant position in
the markets concerned. The likely result would be that
the combined entity (Air Liquide/BOC) would be able to
perpetually dominate the markets for cylinder and bulk
gases in the United Kingdom and Ireland.

competition

eliminate

potential

the

30.3.2004

EN

Official Journal of the European Union

L 92/37

(d) Disincentives for Air Products to compete

vigorously with Air Liquide/BOC in the bulk and
cylinder markets in the United Kingdom, Ireland
and France

property

intellectual

(223) This section concerns the structure of the planned joint
takeover and division of BOC, as
foreseen in the
Agreement between Air Liquide and Air Products of
2 July 1999 (incorporating amendments made on 7 July
in terms of the allocation of
1999 (the Agreement)),
BOC's R & D facilities,
and
know-how as well as the links created between Air
Liquide and its main competitor in the United Kingdom
and Ireland, Air Products, as a result of that allocation.
The creation of significant ongoing links between Air
Liquide and Air Products would be a major incentive for
Air Products not
to compete vigorously with Air
Liquide/BOC. This would, in particular, have an impact
on the market position of Air Liquide/BOC on the bulk
and cylinder markets
in the United Kingdom and
Ireland. In the United Kingdom, apart from Air Products
the only competitors of BOC in nearly all of
those
markets are Messer and Linde. The position of those
two competitors
in most
United Kingdom bulk and cylinder markets. A reduced
intensity of competition by Air Products, resulting from
links with Air
further
Liquide, would
strengthen Air Liquide/BOC's dominant position. The
same is true of the Irish markets where Air Products is
BOC's only competitor.

is, however,

insignificant

therefore

(224) The links created by the planned transaction between
Air Liquide and Air Products are, however, not only
relevant for assessing the market power of Air Liquide
in the bulk and cylinder markets following the proposed
acquisition but are also relevant for the assessment of
Air Liquide's market power in the tonnage market and
the possibility of joint dominance by Air Liquide and
Air Products in the markets for helium and electronic
speciality gases.

(aa) Technology of BOC

in particular,

(225) BOC is one of the major producers of industrial gases in
technical
the world and has developed significant
in the field of application
knowledge,
technology for electronics, glass, environmental,
food,
cryogenics, chemical and petroleum, metals, pulp and
paper and medical industries, which is developed close
to and often together with the customer. Research and
development
in the field of application technology
includes resolving technological problems relating to the
customers' production costs, product quality, operational
productivity and environmental performance.

a

supplier

Industry

cost of

can offer

the plant.

generators, and the company has subsequently focused
its research and development efforts more and more on
the production of
large on-site cryogenic plants. The
supply of industrial gases using large on-site facilities is
intensive, and an advanced process
highly capital
competitive
the
technology
advantage in terms of the required power consumption
and capital
analysts
estimate (50) that due to advanced process technology
cryogenic air separation costs (per unit output) have
fallen in excess of 25 % and non-cryogenic technology
eliminating delivery costs
for medium volume gas
consumers has resulted in an overall cost reduction of
28 to 50 % over the past 20 years. The research and
development of on-site plants carried out by BOC has
concentrated on reducing the plants' consumption of
electricity and improving and simplifying the systems
for cooling,
liquefying and separating the air in the
production process. BOC has also developed advanced
technology relating to the production of high purity
gases and systems for the electronics industry, including
the introduction of several ultra-high purity grades of
gases, new dry pumps, exhaust management systems
and temperature systems introduced for semiconductor
applications.

(227) BOC employs more than […]* researchers in […]* main
research centres a number of smaller research centres,
covering process systems as well as key industries such
as the electronics industry (BOC Edwards). BOC has a
large number of ongoing R & D cooperation agreements
with third parties worldwide, in particular in the field of
electronics, food and the environment. Most of BOC's
research and development work relating to industrial
gases is undertaken in the United States, and some in
the North Pacific, Australia and South Africa. The
technical centre at Murray Hill in the United States is
the primary gases technology facility supporting the
gases businesses. To some extent, development work is
also conducted at
sites. Research and
customer
development work by BOC Edwards focusing on the
semiconductor
industry is conducted in the United
Kingdom.

(228) The Commission's investigation has confirmed that BOC
possesses a wide range of patents,
trademarks and
know-how relating to both process and application
technologies.

(bb) Allocation of BOC's intellectual property and
know-how between Air Liquide and Air
Products

(229) The effect of the planned joint takeover and division of
BOC would be that the intellectual property (IP) of BOC

(226) The position of BOC has been relatively strong in the
supply of smaller non-cryogenic nitrogen and oxygen

(50) NatWest Securities, ‘Industrial Gases 2000', February 1997, p. 57.

L 92/38

EN

Official Journal of the European Union

30.3.2004

would be shared by Air Liquide and Air Products on
equal terms. IP refers in this context to patents, patent
applications,
(including
operational
copyrights,
software, trademarks, trade names and other intellectual
property owned by BOC or its affiliates.

know-how
secrets,

know-how),

technology,

trade

(230) The Agreement sets out

the procedure according to
which the assets, business and IP of BOC are to be
Products
allocated between Air
(together the ‘Parties'). […]*

and Air

Liquide

(231)

[…]*.

(232)

[…]*.

(233)

[…]*.

(cc) Links between Air Liquide and Air Products

the structure of

(234) The planned transaction, as provided for the Agreement,
presents some specific characteristics in so far as it
involves two competitors making a joint bid to acquire
parts of a further competitor. From a competition point
of view,
joint bid is
problematic as it is evident that, in order to be able to
bid for, and subsequently split up BOC, both Air Liquide
extensive
and Air Products may have
extensive
knowledge of BOC's activities
the
contact with each other. This may endanger
confidentiality of information relating to each other's
operations, and thus effective competition between the
companies.

to acquire
and have

the present

(235)

[…]*.

(236)

[…]*.

(237)

[…]*.

(238)

[…]*.

(239)

[…]*.

(240)

[…]*.

(241)

[…]*.

(242)

[…]*.

(dd) Conclusion on the links created by the

proposed transaction

(243)

[…]*.

(e) Conclusion on the bulk and cylinder markets

(244) The Commission therefore concludes that the notified
operation and the transactions considered together with
the notified operation would strengthen Air Liquide's
dominant position in the bulk markets for oxygen,
nitrogen and argon and in the cylinder markets for
acetylene,
oxygen, nitrogen,
carbon dioxide and hydrogen in France, as a result of
which effective
significantly
impeded in the common market or in a substantial part
of it.

competition would be

argon/argon mixtures,

(245) The notified operation would also strengthen BOC's
dominant position in the bulk markets for oxygen,
nitrogen and argon in the United Kingdom, the cylinder
markets for oxygen, nitrogen, argon/argon mixtures,
acetylene, carbon dioxide and hydrogen in the United
Kingdom, the bulk markets for oxygen, nitrogen, argon,
carbon dioxide and hydrogen in Ireland, and the
for oxygen, nitrogen, argon/argon
cylinder markets
mixtures, acetylene, carbon dioxide and hydrogen in
Ireland, as a result of which effective competition would
be significantly impeded in the common market or in a
substantial part of it.

3. FUTURE DEVELOPMENT AND POTENTIAL COMPETITION

The proposed operation would increase the barriers
to entry to the tonnage markets in the EEA and the
bulk and cylinder markets in France, the United
Kingdom and Ireland

(246) The tonnage markets in the EEA, as well as the bulk and
cylinder markets in France, the United Kingdom and
Ireland, are already characterised by high entry barriers
due to the high investments and the expertise required.
Cryogenic gas production plants and more recently
intensive.
non-cryogenic on-site equipment are capital
According to the notifying Party, capital
intensity
usually ranges from […]* to […]* for an industrial gases
business based on air separation plants. For both the
tonnage markets in the EEA and the bulk and cylinder
markets in France, the United Kingdom and Ireland, the
currently high degree of concentration is an additional
barrier to market entry.

30.3.2004

EN

Official Journal of the European Union

L 92/39

five years. As a result of

(247) There have been no significant market entries into the
tonnage markets in the EEA and into the bulk and
cylinder markets in France, the United Kingdom and
Ireland in the last
the
operation,
the level of concentration in the tonnage
markets in the EEA would be further increased by a
considerable degree. The combined market position of
Air Liquide and BOC and their specific strengths would
make it even more difficult for newcomers to enter the
EEA tonnage markets in the future. As regards the bulk
and cylinder markets, the proposed concentration would
lead to the elimination of the most credible potential
competitor in the markets in the United Kingdom and
Ireland,
strengthening BOC's already dominant
position in the markets concerned. The proposed
strengthen Air
concentration would
Liquide's existing dominant position in the bulk and
cylinder markets in France.

also further

thus

(251)

(252)

(248) Therefore,

it

cannot

anticipated

that Air
be
Liquide/BOC's room for manoeuvre would be restricted
by potential competition either in the tonnage markets
in the EEA or in the bulk and cylinder markets in
France, the United Kingdom and Ireland. By combining
existing dominant positions in the bulk and cylinder
markets, the notified operation raises the concern that
an extended area would be perpetually dominated by
one single entity.

[…]*

the helium
In Russia, approximately […]* mmcf of
refining capacity at Orenburg is committed to BOC and
Messer
[…]*
capacity
mmcf/yr). The helium refining capacity in Poland is
entirely
[…]*
mmcf/yr). Air Liquide would acquire BOC's rights under
these contracts.

to BOC (approximately

approximately

committed

(total

refining

In the United States, the following companies extract
crude helium from natural gas but do not have a
captive
Field Services,
capability: Coastal
Amoco, Crescendo Resources, Duke Energy, Enron
Corp., KN Energy Inc., Mobil, Phillips Gas Corporation,
Pioneer Natural Resources Co., Williams Field Services.
The Commission's inquiries have shown that
those
companies, with one minor exception, have committed
their crude helium to BOC, Air Products and Praxair
under long-term supply contracts. BOC, Air Products
and Praxair refine this crude helium. The crude helium
production
to
approximately 3 220 mmcf in 1998, and the amounts
supplied, to approximately 2 400 mmcf. Approximately
the United States crude helium production
65 % of
capacity (4 800 mmcf) were thus committed to BOC,
Air Products and Praxair.

committed

amounted

capacity

4. HELIUM

(a) Market structure

Access to refined helium is limited to four
industrial gases companies which also act as
wholesalers

(249) Helium-rich natural gases (51) are the only source from
which helium can be extracted economically. The
number of helium-rich natural gas deposits is limited.
Known reserves are located in the United States (Kansas,
Oklahoma, Texas and Wyoming), Algeria (Bethouia),
Poland (Odolanov) and western Russia (Orenburg). Only
a small number of facilities exist for the extraction of
crude helium and production of pure helium (refining).

(250)

In Algeria, Air Liquide and Air Products, through their
jointly-owned subsidiary Helap SA, have a production
joint venture (Helios) with Sonatrach, a company owned
by the Algerian state. The helium refining capacity of
Helios amounts to up to […]* mmcf/yr. The entire
production of
refined helium is committed to Air
Liquide and Air Products under a long-term contract
(total production in 1998 — approximately […]* mmcf;
to Air Liquide — approximately […]* mmcf; to Air
Products — approximately […]* mmcf).

(51) Defined as those containing at least 0,3 % helium.

(253) BOC, Air Products and Praxair are the only industrial
gases companies to have a captive helium refining
capacity in the United States. BOC owns and operates
the world's third largest refining plant at Otis, Kansas
(estimated capacity […]* mmcf/yr), which would be
acquired by Air Liquide. Air Products refines helium at
Liberal, Kansas and Sherman, Texas (estimated capacity
< 1 000 mmcf
to 1 500 mmcf
in 1998, upgrade
expected in 2000). Praxair has plants at Bushton, Kansas
and Ulysses,
1 500
mmcf/yr) (52). Those companies together have a total
refining capacity of […]* mmcf/yr.

(estimated

capacity

Kansas

(254) The remainder of

for

the

the United States crude helium is
extracted and refined by the following companies: CIG
Resources, Exxon, Keyes Helium Company, Nitrotec
Energy Corporation, Union Pacific Resources Inc. and
Unocal Corporation. In 1998, the crude helium capacity
of those companies was up to 1 580 mmcf, and their
refining capacity up to 1 640 mmcf, with Exxon
accounting
to 1 200
largest
mmcf/yr) (53). The Commission's inquiries have shown
that almost all of those companies, in particular Exxon,
have committed their refined helium to Air Liquide,
BOC, Air Products and Praxair on the basis of
long-term supply contracts (with the exception of two
companies whose refining capacity does not exceed 165
mmcf). Approximately 1310 mmcf of refined helium
were supplied under
in 1998. Air
Liquide, BOC, Air Products and Praxair distribute and
market this refined helium.

those contracts

part

(up

(52) Source: Chemical Economics Handbook, Helium Data Summary,

1998.

(53) Source: Chemical Economics Handbook, Helium Data Summary,

1998.

L 92/40

EN

Official Journal of the European Union

30.3.2004

(255) The Commission concludes that only four industrial
gases companies, namely Air Liquide, BOC, Air Products
and Praxair, refine helium or participate in the refining
of helium. In addition, practically all the helium refined
by other companies is committed to the same four
industrial gases companies under long-term contracts.
Air Liquide, BOC, Air Products and Praxair control
access to almost the entire production of refined helium.
Those companies provide helium at the wholesale level
to retailers,
gases
companies, using their own distribution infrastructure.

all other

industrial

including

Air Liquide/BOC and Air Products would control
most helium sources located close to Europe and
most of the European refining capacity

(256) As indicated above, Air Liquide and Air Products jointly
control the supply of helium from Algeria. According to
the notifying Party, […]* of Algerian helium is shipped
to the EEA. The Commission estimates
that Air
Liquide's/Air Products' Algerian joint venture supplies
approximately […]* of
the helium consumed in the
EEA. By acquiring BOC's helium operations, Air Liquide
would gain control over the helium supply from Poland
and […]* of
the helium supply from Russia ([…]*).
BOC, from its sources in Poland and Russia, supplies

the EEA consumption.
approximately 15 to 20 % of
After the transaction, two companies (Air Liquide and
Air Products) would control the access to almost all
helium sources
located close to Europe. The two
companies would control, in approximately equal parts,
the refining capacity located near
almost
Europe.

[…]* of

(257) The fact that all helium wholesalers seek to gain access
to the helium sources near Europe illustrates their
significance for supplying the EEA. Even companies
with a large captive production capacity in the United
States (Air Products, Praxair, BOC)
import only those
quantities from the United States which they cannot
[…]* purchases helium
source locally. For
produced in Algeria from Air Liquide.

instance,

Air Liquide/BOC and Air Products would have high
combined market shares

(258) Helium is sold at

the wholesale level

to distributors
(including most other industrial gases companies). The
Commission's estimate of
the market shares in the
wholesale market are set out in table 10 (54).

Table 10

Market shares in the wholesale market for helium

EEA

World

Air Liquide

[…]*

[…]*

BOC

[…]*

[…]*

Air Products

Praxair

25-30 %

15-20 %

15-20 %

25-30 %

Messer

< 5 %

< 1 %

Linde

Others

—

—

—

—

(259) At

the wholesale level, Air Liquide/BOC and Air
Products would have a combined market share of […]*
for
the supply of helium to the EEA and […]*
worldwide.

Liquide

(260) Air Liquide has stated that it is not a helium wholesaler.
this statement contradicts the information
However,
provided
the procedure.
during
by Air
According to that information, Air Liquide had sales to
wholesale customers in the EEA of […]* mmcf in 1998
([…]* mmcf excluding a back-to-back agreement) and of
[…]* mmcf worldwide. Even if the quantities supplied
the back-to-back agreement are excluded, Air
under
Liquide's wholesale market share still amounted to […]*
in the EEA in 1998. Air Liquide/BOC's and Air Product's
combined market share would still be […]*.

further competitor, Praxair would have little incentive to
challenge Air Liquide and Air Products. For the supply
to the EEA, […]* sources Algerian helium from Air
Liquide under a back-to-back agreement and, therefore,
at a similar or higher cost. That arrangement does not
favour vigorous competition. It is unlikely that Praxair
would use helium from its captive United States
production in order to compete with Air Liquide or Air
Products on price, due to higher investment costs (if
own containers are used) and transport costs. At the
world level, it is fair to consider that Praxair also has
few incentives to present vigorous competition. Praxair,
like the other helium wholesalers, benefits from the
flexibility of its captive helium production in the United
States. Its refining plants are linked to a pipeline and
States
storage
Government's Bureau of Land Management (BLM). This
system offers the possibility of storing excess crude

system operated

the United

by

(261) The proposed concentration would leave Praxair as the
only remaining competitor at the wholesale level. The
Commission considers that, in the absence of BOC as a

(54) Figures for 1998 on the basis of volumes.

30.3.2004

EN

Official Journal of the European Union

L 92/41

refined
helium and cutting back the production of
helium. Thus, Praxair would not be prevented from
adapting its production and distribution of
refined
helium to reductions in demand and price rises. Messer
is active as a wholesaler only to a very limited degree.
All other competitors are only retailers and depend
entirely on the other industrial gases companies for
their supply of helium.

Conclusion on the market structure

(264) The Commission considers the control of access to
refined helium to be indicative of Air Liquide/BOC's and
Air Product's market power. The Commission estimates
that Air Liquide/BOC and Air Products together control
the access to approximately […]* of the helium refining
capacity worldwide. They would control the access to all
helium sources near Europe. Their high combined
market shares confirm their strong position.

a

the

relevant

indication of

(262) Air Liquide has further stated that those market shares
are not
competitive
conditions in the helium business because it considers
‘independent refiners' of helium to be more important
wholesalers. However,
the Commission does not
consider it to be correct to qualify the companies which
have a refining business but no distribution capability
(see recital 254) as wholesalers. These companies supply
wholesalers under
long-term contracts but do not
themselves act as wholesalers. The question whether
such refiners are likely to enter the helium wholesale
business would also have to be answered in the
those
negative. As the notifying Party rightly states,
companies produce helium only as a by-product of their
natural gas business. They are not
involved in the
industrial gases business, and have no distribution
capability and no existing customer relations. In order
to build up a container fleet comparable to that of Air
Liquide,
such a company would have to make an
investment of EUR 45 to 50 million (for […]* transport
containers).
refined
helium, such as Exxon, have not, in the past, acted as
wholesale distributors of helium.

Indeed, even large producers of

The proposed concentration would reduce the
number of vertically integrated helium suppliers
with a full distribution infrastructure to three

(263) After the planned transaction, only three companies (Air
Liquide/BOC, Air Products and Praxair) would have
in-house production of helium and be fully vertically
integrated. Moreover, only those three companies would
have an extensive helium distribution infrastructure in
Europe and worldwide. Within Europe, Air Liquide/BOC
and Air Products would also have the largest number of
transport containers (both above […]*) and transfill
centres (above […]*). According to the Commission's
inquiries, Messer and Linde have a smaller but still
significant
other
industrial gases companies fall behind. Worldwide, Air
Liquide/BOC would have a fleet of more than […]*
large cryogenic transport containers (11 000 gallons or
larger). According to the Commission's inquiries, only
Air
similar worldwide
have
distribution capacity. Praxair has a significant but
transport containers worldwide.
smaller number of
in
Messer's
comparison.

Products would

infrastructure.

insignificant

distribution

distribution

capacity

The

is

a

(b) Position of other industrial gases companies

The position of other industrial gases companies is
weak because they depend on Air Liquide/BOC and
Air Products for the supply of helium

four

(265) None of the other industrial gases companies in Europe
or worldwide have
captive helium production
a
capability or contractual access to refined helium (55).
They depend entirely on the supply of refined helium by
the
competitors
depend largely on Air Liquide/BOC and Air Products
which together control […]* of helium imports to the
EEA. This situation creates the risk that other industrial
gases companies could be prevented from competing in
Indeed, most companies
the helium retail market.
contacted by the Commission have raised this concern.

In Europe,

companies.

large

(266) The potential threat of market foreclosure must be seen
as a serious obstacle to competition.
Industrial gases
companies have stressed that helium is a strategic
product that each supplier must offer in its portfolio.
This is true irrespective of whether the gas supplier is
large or relatively minor in terms of size. Indeed, even
smaller, regionally active gas suppliers purchase helium
for resale.

The high investment in the necessary production
and distribution facilities further reduces the
likelihood of a competitive challenge

(267) The investment necessary to establish helium extraction
and refining capability is considerable. A crude helium
extraction plant
is normally linked to natural gas
processing. Competitors have estimated the cost of such

(55) The only exception is Messer's rights in the Orenburg source.

L 92/42

EN

Official Journal of the European Union

30.3.2004

a plant to be EUR 50 to 100 million (on a stand-alone
basis). The investment in a refining plant can be up to
EUR […]* million for a large plant ([…]*) and can be
estimated to be EUR 10 to 30 million for
a
medium-sized facility (up to 350 mmcf/yr). Moreover,
investments are required to establish a
substantial
helium storage, transport and distribution infrastructure.
Standard 30 000 gallons (3 mmcf) storage tanks, as
installed at most liquefaction facilities, cost up to EUR
0,9 million (purchase and installation). Standard 11 000
gallon transport containers cost up to EUR 0,75 million.
In order to create a container fleet comparable in size
to that of
(Air
Liquide/BOC, Air Products and Praxair), any competitor
[…]* (additional)
would have to purchase at
containers. The cost of a helium transfill centre (used to
transfer helium from large containers into smaller ones
used for retailing) has been estimated at EUR 1 to 1,5
million. Any competitor would have to build new
transfill centres.

the three leading helium suppliers

least

(268)

incumbents. The companies

Irrespective of whether a competitor can afford to make
those substantial investments, it is unlikely that it will
gain access to sufficient quantities of helium in order to
justify the necessary expenditure. Crude helium is
typically committed to the four large companies under
long-term and exclusive contracts. It is highly unlikely
that any newcomer would be able to displace one of the
that already have
four
(Air
in place
extensive distribution infrastructures
Liquide/BOC, Air Products and to a lesser degree
Praxair) would remain the most
likely purchasers of
refined helium from independent producers. Even if an
independent helium refiner, for instance Exxon, decided
to commit part of its refined helium production to a
newcomer, the quantities concerned would be limited. It
is unlikely that the purchase of such limited quantities
alone, without
sufficient
quantities, would allow a newcomer to constrain the
joint market power of Air Liquide/BOC and Air
Products.

in-house production of

Air Products controls the only supplier of
cryogenic helium transport containers

(269) The only producer and supplier of large (11 000 gallon)
cryogenic transport containers for helium is Gardner
Cryogenics, a United States-based subsidiary of Air
Products. Cryogenic containers manufactured by this
company keep liquid helium at
the necessary low
temperature to allow long-distance transport. They are
the only containers used for the overseas transport of
that no other
helium. The Commission assumes
company can currently produce such containers. Large

industrial gases companies (including Air Liquide) have
confirmed that
they do not have the manufacturing
capability to produce such tanks.

(c) Creation of a joint dominant position

Significant links exist between Air Liquide/BOC and
Air Products

(270)

[…]*.

(271)

[…]*.

(272)

[…]*.

The proposed concentration would remove an
important competitor

(273) BOC has considerable helium wholesales in the EEA
([…]* market share) and worldwide ([…]* market share).
In terms of revenue, BOC is the second largest helium
supplier worldwide (56). It controls approximately […]*
of
the world's refining
capacity and has one of the most extensive distribution
infrastructures in terms of
transport containers and
transfill centres.

the European and […]* of

(274) BOC currently supplies approximately […]* of the EEA
helium demand from its sources in Poland and Russia.
The notified operation would eliminate the competitive
pressure that results from BOC's independent access to
refining capacity in Poland and Russia. The fact that
BOC also has a production capacity in the United States
at its Otis, Kansas plant means that BOC's competitive
potential as a helium wholesaler does not depend
entirely on its continued access
to the Polish and
Russian sources. The removal of BOC as an independent
competitor would therefore significantly reduce the
competitive constraints on Air Liquide and Air Products.

After the proposed concentration, Air Liquide/BOC
and Air Products would have similar cost structures

extraction

(275) Crude helium is extracted from natural gas using
cryogenic
Pressure-swing
adsorption is mainly used for the purification (refining)
of the crude helium. The pure helium is subsequently
liquefied, filled into large cryogenic containers (11 000
to 30 000 gallons) and either stored for a limited period
of time or shipped immediately.

processes.

(56) Source: Competitor's estimates.

30.3.2004

EN

Official Journal of the European Union

L 92/43

(276)

Insofar as Air Liquide and Air Products source helium in
Algeria, both companies have identical cost structures.
In the United States, Air Liquide/BOC would operate
BOC's Otis, Kansas helium refining plant (capacity up to
[…]* mmcf/yr). Air Products operates refining plants at
(total capacity
Liberal, Kansas and Sherman, Texas
currently less than 1 000 mmcf/yr) (57). These facilities
have a similar capacity and are supplied with natural
gas from a cluster of fields located in Kansas, Oklahoma
and Texas. The Commission considers
that Air
Liquide/BOC and Air Products have similar production
costs (58).

are produced

by only one

(277) Distribution costs are also similar. Cryogenic transport
containers
company
worldwide (Gardner Cryogenics) and are provided to all
gases companies at the same cost. The costs of transfill
centres are also similar. On the basis of
the data
provided by the companies concerned, Air Liquide/BOC
and Air Products would have similarly extensive transfill
and container networks worldwide and in Europe.

their sources,
its competitors at each of
of each of
whether those sources are captive production or third
Party supply.

Wholesale customers have limited countervailing
purchasing power

(280) The customers in the wholesale market, that is to say
retailers,
in general other industrial gases companies,
usually have a limited ability to counterbalance Air
joint supplier power.
Liquide/BOC's and Air Products'
They rely on helium as a key product for their own
retail offering. The fact
they compete with Air
that
Liquide/BOC and Air Products in retail markets for
industrial
constraint. Other
industrial gases companies face not only the possibility
of market foreclosure but also disadvantages in other
markets. It should also be noted that many customers
are smaller regional retailers. Even larger companies
have voiced concern.

aggravates

gases

this

Helium is a homogenous product that is offered in
a highly transparent market

(d) Conclusion

(278) Refined helium is a homogenous product which is
produced in accordance with an international quality
standard (grade A helium of 99,995 % or higher purity).
Industrial
a
commodity-type product
amongst
themselves and with other
retailers. They purchase
helium from each other and are therefore well informed
about prices.

view helium as
traded

companies

gases

that

is

the

same or

(279) A number of factors ensure that the market is highly
transparent. The number of vertically integrated helium
wholesalers is small (only three after the transaction).
Air Liquide/BOC and Air Products mainly source helium
at
similar
similar
evolving
conditions. Production technology is not
rapidly as installed plants may be upgraded, but are not
frequently
is
standardised and largely identical. The transparency of
the production process is illustrated by the internal
study of an industrial gases company reviewed by the
Commission (59).
the industrial gases
company concerned analyses precisely the cost position

Distribution

and under

equipment

replaced.

In that

study,

sites

(57) Source: Chemical Economics Handbook, Helium Data Summary,

1998.

(58) This is confirmed by a BOC analysis ‘Global Helium Strategy',
29 August 1997 (provided to the Federal Trade Commission as
part of the HSR filing).

(59) See footnote 58.

(281) The Commission concludes that the notified operation
would create a joint dominant position in the market
for the wholesale supply of helium to the EEA. The
Commission considers that the same conclusion would
have to be drawn should the wholesale market be
qualified as worldwide.

5. ELECTRONIC SPECIALITY GASES

(a) Current market structure

The European market for electronic speciality gases
is already highly concentrated with Air Liquide, Air
Products and BOC as the leading suppliers

(282) Electronic speciality gases are essentially produced by
chemical companies in the United States and in Asia.
Industrial gases companies produce these gases only to a
limited extent,
in particular where they also have
chemical activities, for instance Air Products. However,
the chemical companies do not distribute the gases to
the
semiconductor
manufacturers. The distribution is carried out by the
chemical
industrial
companies are not considered to be equivalent suppliers

end users, which are mainly

companies. By

contrast,

gases

L 92/44

EN

Official Journal of the European Union

30.3.2004

because they not normally have the know-how and
facilities
electronic
speciality gases including the treatment of cylinders.

transfilling

analysing

and

for

(283) At

is

gases

essential

companies.

the oral hearing,

the notifying Party argued that
industrial gases companies are merely distributors of
electronic speciality gases without real market power.
industrial gases companies which distribute
However,
electronic speciality gases, such as Air Products, Praxair,
Air Liquide and BOC, provide key services and goods
which cannot be supplied by the gases' producers. Their
role
and goes beyond that of mere
distributors. Firstly, the purification, mixing and filling
of electronic speciality gases, according to detailed
customer specifications, are highly specialised processes
that are performed in ‘transfill centres' operated by the
gas
industrial
specification undergoes a certification process that can
last up to two years. The producers of electronic
speciality gases, such as chemical companies, do not
have such ‘transfill' capabilities. Secondly, electronic
transported and delivered in
speciality
specialised containers which are also offered only by
gases companies. Thirdly, semiconductor manufacturers
also require high purity atmospheric gases and helium,
for
for oxidation and
reduction processes. They increasingly source those
gases together with electronic speciality gases. Fourthly,
industrial gases companies often design,
install and
certify equipment
(gas systems), such as piping, gas
cabinets (for the handling of toxic gases) and so forth.
Air Liquide's and BOC's offerings cover a range of such
products.

instance as plasma gases or

individual

gases

Each

are

(284) On the

the

figures

basis of

in the
Commission's investigation, the value of the market for
electronic speciality gases in the EEA was approximately
EUR 80 million in 1998. The partition of market shares
in terms of value was as follows:

collected

Air Liquide

between […]* % and […]* %

Air Products

between 20 % and 30 %

BOC

Praxair

Messer

Linde

AGA

between […]* % and […]* %

between 10 % and 20 %

less than 10 %

less than 10 %

less than 10 %.

(285) The three leading suppliers Air Liquide, Air Products
and BOC accounted together for more than […]* of the
market. There was a clear gap between BOC as the third
largest supplier and Praxair as the fourth. The other
remaining suppliers played only a minor role.

Their global presence and technological competence
confer a strong competitive advantage on the
leading suppliers

(286) Air Liquide, Air Products, BOC and Praxair are the
for electronic speciality
global players in the market
gases. Unlike the other competitors, each of
these
companies operates production sites (transfill centres) in
the EEA, the United States and the Far East. However,
the global presence of Air Liquide, Air Products and
BOC is more important than that of Praxair.

(287)

It is estimated that in terms of total gas sales for the
electronic sector (also including, for example, bulk air
gases) Air Products' global market share is between 22
and 25 %, Air Liquide's share, between […]* and […]*,
and BOC's
share, between […]* and […]* whilst
Praxair's share is only between 7 and 9 % (60). The
strong global presence of the three leading suppliers
gives them a significant competitive advantage on the
European market. Although, according to the notifying
Party, the actual purchase orders for electronic speciality
gases are decided, managed and issued by the local site
of the customer taking into consideration specific local
factors, account should be taken of the fact that the
large semiconductor manufacturers operate on a global
basis. Where a supplier of electronic speciality gases has
can offer global
a strong worldwide presence,
consistency in the quality of the gases supplied to the
semiconductor manufacturers worldwide.

it

(288) Air Liquide, Air Products and BOC are also considered
to be the leading competitors with respect to technology
for electronic speciality gases. Air Liquide and Air
Products are, furthermore, leading in providing so called
‘Total Gas and Chemicals Management (TGCM) services'
which include safety environment management, on-site
maintenance,
and
quality monitoring,
supervision, electronic speciality gases cylinder changes,
point of use analysis and inventory management. Air
Liquide has approximately […]* TGCM' service centres
worldwide and the Air Products Megasys teams manage
[…]* facilities for […]* different customers in […]*
countries.

control

(289) More generally,

it can be concluded that Air Products
and Air Liquide and, to a significant extent, BOC, focus
on the electronics sector. Air Products achieves 17 % of
its total sales in this sector and Air Liquide, […]* BOC
achieves […]* of its sales in electronics whilst this sector
accounts for only 5 % of Praxair's sales.

(60) These market share figures concerning the electronic speciality
gases are presented in a number of articles published in specialised
periodicals concerning the gas and chemical industry.

30.3.2004

EN

Official Journal of the European Union

L 92/45

(b) Situation after the concentration

It is unlikely that new competitors would enter the
market

Two competitors, Air Liquide and Air Products,
would account for more than […]* of the market

(290) Since the European activities of BOC would be taken
over by Air Liquide, Air Liquide would become the clear
market leader for electronic speciality gases in the EEA,
with a market share of between […]* and […]*. Air
Liquide and Air Products would together have a market
share of more than […]*. The remaining market would
be fragmented.

(291) On a global basis, Air Liquide and Air Products would
probably be on a more or less equal footing, […]*.

the specific requirements of

(295) There are considerable barriers to entry to the market
for electronic speciality gases. A supplier of gases must
meet
the semiconductor
industry resulting from the complex production process
for computer chips and the characteristics of the gases.
Suppliers must guarantee a particularly high degree of
purity, which requires,
the handling of
equipment under clean room conditions. They must be
able to offer the full range of products. Furthermore, it
should be noted that a number of electronic speciality
gases are highly poisonous. The transfilling, storage and
transport of these gases therefore requires specific safety
procedures. For those reasons, a supplier of electronic
speciality gases needs experience in handling those gases
as well as specific know-how and technology.

inter alia,

(292)

(293)

In addition to the narrow market structure, the
pooling of technology resulting from the
concentration would be a further disincentive for
competition between Air Liquide and Air Products

that

It is true that there are some 30 different electronic
speciality gases used in the production process of
semiconductor
the different
components. However,
gases themselves are homogenous products. To the
the industrial gases companies do not
extent
produce the gases themselves, they purchase them from
the same chemical companies. Therefore, and because of
the very limited number of competitors, the market is
In those circumstances, a market
also transparent.
structure where two suppliers have a combined market
share of […]** is already a strong incentive for parallel
behaviour.

In addition to the very narrow market structure, the
takeover and division of BOC would
planned joint
create significant
links between Air Liquide and Air
Products. In particular the pooling of BOC's technology
could lead to permanent cooperation, which would be a
further disincentive for competition between the two
companies.
to be
anticipated that there would be no effective competition
between Air Liquide and Air Products in the market for
electronic
proposed
gases
concentration.

circumstances,

In these

speciality

it has

after

the

Conclusion on the market position of Air
Liquide/BOC and Air Products

(294) Given their high combined market share, their global
presence and their leadership in technology, it must be
concluded that Air Liquide/BOC and Air Products would
extent
together be
independently of their competitors and their customers.

significant

to act

to a

able

V. COMMITMENTS SUBMITTED BY THE NOTIFYING
PARTY AND MODIFICATIONS TO THE OPERATION

(296) On 21 December 1999 the notifying Party submitted
commitments
to remove the competition
concerns identified by the Commission. In summary, the
commitments comprise the following elements:

in order

(a) divestiture

of

and

assets

tonnage

businesses
including on-site plant facilities, pipelines, all related
tonnage
customer contracts and the operating,
maintenance and support personnel related to such
facilities. The following tonnage plants will be
divested: Runcorn, Sheerness, Cardiff, Brinsworth,
Fawley (all United Kingdom), Pardies, Tarnos (both
France),
Terneuzen
(Belgium)
(Netherlands). The total tonnage divestitures (United
Kingdom and continental Europe) represent annual
sales of approximately […]* tpd and EUR […]*
million of oxygen and nitrogen;

Mons

and

(b) divestiture of bulk facilities and businesses associated
with certain of the tonnage facilities (Brinsworth,
Fawley, Pardies, Mons and Terneuzen). The assets
and businesses to be divested include the bulk
production and storage facilities, the associated bulk
distribution equipment (road tankers), the bulk tanks
located on the customers' premises as well as the
personnel for sales, technical support, distribution
in addition to the customer
and customer service,
bulk
Kingdom bulk
The United
contracts.
divestitures represent a total of approximately […]*
tpd of liquid oxygen, nitrogen and argon sold and
total annual sales of
liquid oxygen, nitrogen and
argon of approximately EUR […]* million. The
represent
bulk
Continental
liquid oxygen and
approximately […]*

divestitures

tpd of

L 92/46

EN

Official Journal of the European Union

30.3.2004

liquid
nitrogen sold and total annual
oxygen, nitrogen and argon of
approximately
EUR […]* million and together with the bulk
business of Carboxique (a 100 % subsidiary of Air
Liquide) of approximately EUR […]* million;

sales of

and

assets

fill plant

of
cylinder
certain cylinder

businesses
(c) divestiture
including
facilities,
associated cylinders, distribution equipment (trucks)
as well as production and distribution personnel, in
addition to contracts with customers. In particular,
the following cylinder fill plants will be divested:
acetylene
Brinsworth,
production plant) and Ipswich (all United Kingdom),
Bobigny and Hauconcourt (both France). Cylinder
divestitures in the United Kingdom represent sales of
Cylinder
approximately
of
divestitures
approximately EUR […]** million, coming from the
divestiture of cylinder gases business of Carboxique;

[…]** million.

(including

represent

France

Bristol

sales

EUR

an

in

(d) divestiture of the contracts for liquid helium supply
that BOC currently has
in Russia and Poland,
together with appropriate distribution infrastructure
(transport containers). The total divested contracts
represent approximately […]* mmcf per year. For
liquid helium that Air Liquide/BOC purchase in the
United States access will be granted to other
industrial gases companies (including existing BOC
wholesale customers) under resale agreements which
in all material conditions,
including price and
duration, are identical to the purchasing agreements
to which Air Liquide/BOC are Parties (back-to-back
agreements). The back-to-back agreements will be
up to a total amount of […]* mmcf per year. For
the helium sourced from Algeria, Air Liquide will
appoint an independent third Party to manage Air
Liquide's 50 % holding in the joint venture with Air
there are no
Products,
ongoing links with Air Products. Air Products has
undertaken to use its rights in the joint venture to
formalise Air
this
commitment;

compliance with

to ensure that

in order

Liquide's

(e) divestiture of

the transfill

facility for electronic
speciality gases owned and operated by Air Liquide
in France together with a licence of the technology
necessary to operate the transfill plant, all relevant
customer information and current purchase orders.
Air Liquide undertakes to ensure, within the scope
its existing sourcing agreements, continuity of
of
sourcing electronic speciality gases from existing
manufacturers to that transfill facility for a period of
two years following the divestment;

(f)

licensing of all of BOC's patented technology
(process
to third
such licensed rights under
Parties who request
reasonable and non-discriminatory conditions.

and applications

technology)

(297) The divestiture of

tonnage oxygen and nitrogen
businesses will reduce Air Liquide/BOC's market share
in the EEA to approximately […]*. The divestiture
accounts for approximately […]* of the market share
that Air Liquide would otherwise have acquired. The
to be divested in the United Kingdom
business
comprises five tonnage plants, two with associtated bulk
businesses. The business
to be divested in France,
Belgium and the Netherlands comprises four tonnage
plants,
three with associated bulk businesses. The
divestments will limit the market power accruing to Air
Liquide. Given that substantial pipelines will be divested
together with one of the plants, the combined entity's
position as a pipeline operator will be less strong than
before the transaction. Air Liquide will acquire a less
strong regional position in the United Kingdom that is
less liable to be used as leverage against competitors,
not only because of the tonnage divestments but also
because of the bulk divestments which will weaken its
position in the United Kingdom bulk markets. The
to license patented BOC technology to
commitment
third Parties will
lessen the concerns arising from the
combination of technologies. Moreover, the Commission
considers that an acquirer will be able to present
additional competition in the EEA tonnage market. The
divestment of bulk, cylinder and distribution facilities
will give the acquirer(s) access to a related bulk and
cylinder infrastructure and will create the possibility of
operating the divested tonnage assets as part of an
integrated gases business.

(298)

In view of these elements the Commission considers
that the proposed commitments remove the fear that a
dominant position in the EEA tonnage market will be
created.

(299) The divestiture package for

the bulk gases oxygen,
nitrogen and argon in the United Kingdom represents
approximately […]* of the markets for these three gases.
The liquefiers in Brinsworth and Fawley can supply
customers in most regions in Southern and Northern
England. The Commission considers that these facilities,
together with related customer contracts, personnel and
equipment, will enable a new entrant or a smaller
existing competitor to present effective competition in
the United Kingdom bulk market.

(300) The divestiture package for the cylinder gases in the
United Kingdom represents approximately […]* of the
relevant markets for oxygen, argon/argon mixtures and
acetylene and covers other cylinder gases. Besides the
the divestment of
reduction of actual market share,
three production facilities will give the acquirer
the
flexibility to fill
those or other gases depending on
demand. The three cylinder-filling centres are located so
the United
as
the bulk gases
Kingdom market. The divestiture of

to allow a significant coverage of

30.3.2004

EN

Official Journal of the European Union

L 92/47

production facilities in Brinsworth and Fawley is also
necessary to supply those filling centres. Acetylene is
produced at a plant
in Bristol, which will also be
divested. The distribution infrastructure to be divested
comprises personnel, collect centres, agents' contracts
and equipment. It is reasonable to suppose that these
divestments will enable a new entrant
to compete
effectively in the United Kingdom cylinders markets.

electronic speciality gases transfilling, continued product
supplies and ongoing customer orders, the divestiture
company
will
to
industrial gases
compete effectively in the EEA-market
for electronic
speciality gases.

another

enable

(301) The

It

is

the

the

will

that

that

likely

remove

considers

competitor.

Commission

proposed
commitments
operation's
anti-competitive effects in the United Kingdom bulk and
cylinder markets concerned, by substantially reducing
the acquired market position and allowing the entry of a
significant
the new
competitor's market position (approximately […]* for
bulk gases and approximately […]* for cylinder gases)
will be more significant than that which Air Liquide
could have acquired initially had it entered the United
Kingdom market. The Commission also considers that
the presence of one or several new competitors in the
United Kingdom will enhance the chances of
those
competitors also becoming active
in Ireland. This
outweighs the effect of the removal of Air Liquide as a
potential competitor in Ireland.

(302) The size of the divestments relating to the bulk and
cylinder markets in France exceeds the BOC businesses
to the notified
which Air Liquide acquired prior
that
operation.
the
divestments
concentration's
anti-competitive effects in the French bulk and cylinder
markets concerned.

Commission
remove

considers
the

The

will

(305) The Commission therefore considers that the proposed
commitments will
collective
remove
dominant positions would be created on the markets for
wholesale helium and electronic speciality gases.

that

fear

the

(306) Furthermore, Air

Liquide's
December 1999 comprise the following elements:

commitments

of

21

(a) […]*.

(b) […]*.

(c) […]*.

(d) […]*.

(e)

[…]*.

[…]*.

(303) The divestiture package relating to the helium wholesale
market ensures that Air Liquide will not acquire access
to the supply of refined helium from Russia and Poland.
In order to enable a new wholesale supplier to replace
BOC's competitive potential to a comparable extent, it is
also necessary for
to obtain access to
that entrant
refined helium supplied from a further source, namely
in the United States. The ability to spread supply risks
over different, unrelated sources ensures competitivity in
the wholesale market. This commitment is thus intended
to re-establish the competitive potential
that existed
before the operation. Furthermore, the link between Air
Liquide and Air Products that currently exists through
their joint venture in Algeria will be removed.

(307) The Commission considers that the commitments of 21
December 1999 (as amended on 7 January 2000) will, if
acted upon in their entirety, eliminate the risk that
ongoing links between Air Liquide and Air Products will
contribute to the creation or strengthening of dominant
positions by Air Liquide/BOC in the tonnage, bulk and
cylinder markets and the creation of collective dominant
positions by Air Liquide/BOC and Air Products in the
markets for wholesale helium and electronic speciality
gases.

VI. FINAL CONCLUSION

for electronic speciality
(304) With respect
one
of Air
gases,
in the EEA.
Liquide/BOC's
Together with the personnel and technologies relating to

to the market
divestiture will
two transfill

cover
facilities

the

(308)

the foregoing,

In view of
the notified concentration
should be declared compatible with the common market
pursuant to Article 8(2) of the merger Regulation and
with the functioning of the EEA Agreement pursuant to
Article 57 thereof, subject
full
compliance with the commitments given by Air Liquide
to the Commission on 21 December 1999 (as amended
on 7 January 2000) which are set out in the Annex,

to the condition of

L 92/48

EN

Official Journal of the European Union

30.3.2004

HAS ADOPTED THIS DECISION:

Article 2

Article 1

The operation notified to the Commission on 16 August 1999
whereby Air Liquide SA will acquire sole control of parts of
The BOC Group plc by way of a public bid to be implemented
jointly with Air Products and Chemicals Inc. is hereby declared
compatible with the common market and the functioning of
the EEA Agreement,
full
compliance with the commitments given by Air Liquide SA to
the Commission on 21 December 1999 (as amended on 7
January 2000) which are set out in the Annex.

condition of

to the

subject

This Decision is addressed to:

Air Liquide SA
75, Quai d'Orsay
F-75321 Paris Cedex 07

Done at Brussels, 18 January 2000.

For the Commission

Mario MONTI

Member of the Commission

30.3.2004

EN

Official Journal of the European Union

L 92/49

[…]*.

ANNEX