2001/684/EC: Commission Decision of 3 May 2000 declaring a concentration to be compatible with the common market and the functioning of the EEA Agreement Case COMP/M.1671 — Dow Chemical/Union Carbide (Text with EEA relevance) (notified under document number C(2000)1304)
Date: 2000-05-03
Institutions: European Commission
Subjects: agreement (EU), application of EU law, chemical industry, economic concentration, merger control

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Official Journal of the European Communities

L 245/1

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 3 May 2000

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

Case COMP/M.1671 (cid:151) Dow Chemical/Union Carbide

(notified under document number C(2000)1304)

(Only the English text is authentic)

(Text with EEA relevance)

(2001/684/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,

(2)

(3)

Having regard to the Commission’s Decision of 22 December
1999 to initiate proceedings in this case,

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

On 29 October 1999,
the Commission received a
notification of a concentration pursuant to Article 4 of
Regulation (EEC) No 4064/89 (the Merger Regulation),
whereby Dow Chemical Company (Dow) acquires sole
control of
the whole of Union Carbide Corporation
(UCC).

This notification, which had been declared incomplete,
was completed on 22 November 1999.

After examination of the notification, the Commission
the notified operation fell within the
concluded that
scope of
the Merger Regulation and raised serious
doubts as to its compatibility with the common market.
the Commission
Therefore, on 22 December 1999,
decided to initiate proceedings pursuant
to Article
6(1)(c) of the Merger Regulation.

I. THE PARTIES

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

(4)

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

21.9.1990, p. 13).

(2) OJ L 180, 9.7.1997, p. 1.
(3) OJ C 256, 14.9.2001.

a

Dow is a global science- and technology-based company
and integrated producer of chemicals. It develops and
manufactures
plastics,
agricultural chemicals and other specialised products. Its
annual sales were approximately USD 18 400 million in
1998. The company has 123 manufacturing sites in 32
countries and supplies more than 3 500 products.

chemicals,

portfolio

of

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(5)

UCC is a global integrated producer of chemicals and
sales were
Its annual
advanced process
approximately USD 5 700 million in 1998.

technology.

(6)

(7)

(8)

II. THE OPERATION

The parties have concluded an Agreement and Plan of
Merger, dated 3 August 1999. The overall
financial
structure of the Agreement and Plan of Merger is a
stock-for-stock merger. Pursuant to this agreement the
effected through a vehicle,
concentration will be
Transition Sub Inc., a wholly-owned subsidiary of Dow,
created solely for the purpose of this transaction, which
will acquire shares in UCC. The vehicle will be merged
with and into UCC whereby the separate corporate
entity of Transition Sub Inc., will cease to exist. UCC
will thus become a wholly-owned subsidiary of Dow.
Each share of the common stock of the Transition Sub
Inc., will be converted into one share of the common
stock of the surviving UCC.

The parties wish to complete the transaction before the
the
end of
transaction is
authorities’
approvals.

the completion of

[(cid:133)]* (*). However,

relevant

subject

to all

surviving

Upon completion of
the transaction, UCC will, as a
wholly-owned subsidiary of Dow, continue to be a New
York corporation. The directors of Transition Sub at the
effective time of the merger will become the directors of
the
of
corporation. Dow’s
incorporation provides that its Board may not have less
than six and more than 21 members. The actual
number is determined by a majority vote of Dow’s
entire Board. Currently, the Board is comprised of 16
members. At
two
current UCC directors will be appointed as additional
members of the Board of the parent. UCC will thus be a
wholly owned subsidiary of Dow with Dow exercising
control upon completion of the transaction.

the effective time of

the merger,

certificate

IV. COMMUNITY DIMENSION

(10)

The operation has a Community dimension within the
meaning of Article 1(2) of the Merger Regulation as the
combined aggregated worldwide turnover of all
the
undertakings concerned exceeds EUR 5 000 million
(Dow: EUR 16 449 million; UCC: EUR 5 048 million).
The aggregate Community wide turnover of each of the
undertakings exceeds EUR 250 million (Dow: EUR
4 517 million; UCC: EUR 385 million). Furthermore, the
parties do not achieve more than two-thirds of their
turnover in one and the same Member State.

(11)

The operation does not constitute a cooperation case
under the EEA Agreement.

V. ASSESSMENT OF THE OPERATION

(12)

The operation concerns several markets in the chemical
sector. Eleven affected markets or categories of markets
have been identified:

(cid:151) polyethylene resins (PE resins),

(cid:151) polyethylene compounds,

(cid:151) polyethylene technology (PE Technology),

(cid:151) ethyleneamines,

(cid:151) ethanolamines,

(cid:151) alkyl alkanolamines,

(cid:151) glycol ethers, oxygenated solvents,

(cid:151) ethylene glycols,

(cid:151) polyglycols,

(cid:151) aminocarboxylates (chelants),

(cid:151) heat transfer fluids

III. CONCENTRATION

(13)

(9)

The transaction, by which Dow intends to acquire sole
control of the whole of UCC by way of purchase of
shares, is a concentration within the meaning of Article
3(1)(b) of the Merger Regulation.

(*) 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.

investigation has

The Commission’s
identified three
areas where the transaction would lead to the creation
or strengthening of a dominant position held by the
merging parties on the relevant markets. As a result,
competition would be significantly impeded within the
common market within the meaning of Article 2(3) of
the Merger Regulation. These areas are:

(cid:151) PE resins,

(cid:151) PE technology,

(cid:151) ethyleneamines.

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PE RESINS

A. RELEVANT PRODUCT MARKETS

automotive fuel tanks and large pipes). HDPE resins are
injection-moulded
also used for
articles. The parties estimate western European sales of
HDPE at between [(cid:133)]* thousand tonnes in 1998.

the production of

(i) Presentation of products

(19)

(14)

Ethylene is one of the base chemicals that belong to the
olefin group (ethylene, propylene, butadene,
etc.).
Polyethylene (PE)
is a thermoplastic belonging to a
group of polyolefins that also includes polypropylene.
PE and polypropylene are among the world’s most
widely used plastics. PE is derived from ethylene
through a process of polymerisation (4), whereby PE
resins are produced. The properties of PE are influenced
by the degree of crystallinity determined by the total
degree of branching along the PE molecule. The resins
are used in downstream manufacture of consumer
goods,
films, packaging, bottles (for example for
milk and water), plastic bags, water and gas pipes,
insulation for wire and cable, moulded products and
other end-uses.

i.e.

(15) Within PE resins,

three main families with varying
characteristic properties can be identified:
low-density
polyethylene (LDPE), high-density polyethylene (HDPE)
and linear low-density polyethylene (LLDPE). Within
each of these three families there are different grades
produced by varying the conditions of polymerisation
within the reactor (catalyst, temperature and pressure)
or by using different additives.

(16)

The different PE process technologies used to produce
PE resins are analysed elsewhere, in the section on PE
technology.

(17)

tubular

LDPE is manufactured by high-pressure processes, i.e. in
high-pressure autoclave or
reactors by free
radical polymerisation. The processes generally operate
at pressures up to 3 000 bars and temperatures in
excess of 200 (cid:176)C. The polymer is removed in molten
state and pellitised. LDPE is primarily used in film and
coating applications and is characterised by high clarity,
flexibility and good water and vapour properties. The
parties estimate western European sales of LDPE at
around [(cid:133)]* thousand tonnes in 1998.

(18) HDPE is manufactured by low-pressure processes,

i.e.
gas-phase, solution and slurry processes. It is stiffer than
LDPE, has better
lower
permeability to gases and vapours. It is mainly used for
(drums,
rigid bottles

large blow mouldings

resistance

chemical

and

and

in

and

LLDPE was developed as a low-pressure manufacturing
alternative to the high-pressure LDPE processes. The
LLDPE resins are principally used in film or packaging
or
increasingly
applications
roto-moulded articles, membranes and pipes. Within the
LLDPE family, three distinct groups can be distinguished
depending on the copolymer used in the manufacturing
process: C4 LLDPE (which use butene as copolymer), C6
LLDPE (which use hexene as copolymer) and C8 LLDPE
(which use octene as copolymer). The parties estimate
western European sales of LLDPE at around [(cid:133)]*
thousand tonnes in 1998.

injection-

(ii) Arguments of the parties

(20) According to the parties all PE resins belong to one
single relevant product market due to the high degree of
supply side substitutability between them. From the
parties’ point of view there is also a high degree of
demand side substitutability between LPDE and LLDPE
resins. The parties submit that at least LDPE and LLDPE
resins constitute one separate market.

(21)

(22)

(23)

The narrowest possible market would,
in the parties’
view, be LDPE, C4 LLDPE and C6 LLDPE due to the
high degree of demand-side substitutability between all
of
these resins and the high degree of supply-side
substitutability between C4 LLDPE and C6 LLDPE.

that

submit,

the parties

Furthermore,
current
substitutability among PE resins produced by different
PE processes is expected to increase as a result of
improvements through advanced catalyst
technology.
Catalyst technology is also explained in the section on
PE technology of this Decision.

the

(iii) HDPE constitutes a relevant market separate from

LLDPE and LDPE

earlier

In
has
distinguished between high density polyethylene (HDPE)

Commission

Decisions (5)

the

(4) A process during which monomers are reacted with each other to
repeated series of monomers, called

produce long chains of
polymers.

(5) Case IV/M.550 (cid:151) Union Carbide/Enichem, OJ C 123, 19.5.1995,
Case IV/M.708 (cid:151) Exxon/DSM, OJ C 306, 15.10.1996, p. 4, and
Case IV/M.1163 (cid:151) Borealis/IPIC/OMV/PCD, OJ C 280, 9.9.1998,
p. 3.

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and the other PE resins, low density polyethylene (LDPE)
and linear low density polyethylene (LLDPE). According
to those Decisions this distinction is based on the
production methods, performance characteristics and
differences
in end uses. HDPE, which has good
resistance to chemicals and is more impervious to gases,
is used primarily for making rigid products, bottles,
drums, automotive fuel tanks and large diameter pipes
while LDPE and LLDPE are used primarily for making
film for the packaging industries. These findings have
been confirmed in the present investigation. Therefore,
HDPE constitutes a relevant market
separate from
LLDPE and LDPE.

(iv) C8 LLDPE constitutes a relevant product market

separate from other LLDPEs and LDPE

In a previous Decision (6) the Commission found that
C8 LLDPE was to be considered as belonging to a
product market separate from LDPE and the other
LLDPEs. This conclusion was reached on the basis that
C8 LLDPE has particular properties allowing its use for
the manufacture of stretch films and the fact that its
production was
limited to certain processes. The
Commission also considered whether C6 LLDPE and C8
LLDPE formed part of the same market. However, the
Commission left open whether C6 LLDPE belonged to
the same market as C8 LLDPE.

specific high performance

In the present case the Commission’s
investigation
confirms that C8 LLDPE has unique properties necessary
for
applications. These
properties are necessary for specific applications like
stretch film (power stretch), multi layer food packaging
and laminated films. Other products cannot normally be
substituted without
for
significant
example increased thickness.

disadvantages,

Some competitors have explained that C8 LLDPE offers
in terms of mechanical
the highest performance
properties (puncture and tear resistance), elongation at
break, mechanical/optical property balance, heat sealing
properties (hot tack), cling effect for stretch film etc.
they argue that all C8 LLDPE is made
Moreover,
commercially in the solution process.

to

regard

supply-side

With
only
producers operating solution processes would be able to
produce C8 LLDPE. Only DSM and Polimeri, both of
whom already produce C8, operate solution processes
in western Europe.

substitutability,

(28)

The parties anticipated that
the Commission might
consider C8 LLDPE as a separate relevant market. In this
context, the parties argued that C6 and C8 LLDPE do
not form part of the same market but that C6 LLDPE
should be viewed together with C4 LLDPE and LDPE
resins. Moreover, the parties have stated that there is no
supply-side substitutability and only limited demand-side
substitutability between C6 and C8 LLDPE. These
statements also tend to confirm the Commission’s view
that C8 LLDPE constitutes a market separate from LDPE,
C4 and C6 LLDPE.

(29)

In conclusion, C8 LLDPE is a relevant product market
separate from LDPE, and C4 and C6 LLDPE.

(v) Superhexenes

(30)

The results of previous investigations (7) indicated that
new variants of C6 LLDPE, particularly (cid:145)superhexene(cid:146) C6
LLDPE, have properties more in common with C8
LLDPE. Therefore there may be grounds for considering
C6 and C8 LLDPE or at least superhexene C6 and C8 as
the relevant product market.

(31) At present the production of superhexenes appears to
be very limited with UCC’s joint venture Polimeri the
sole supplier of C6 superhexenes in western Europe.
Their sales of C6 superhexene account
for less than
[< 5 %]* of the sales of C8 LLDPE in volume terms. The
customers who purchase C8 LLDPE only have, until
now, generally not regarded the new variants of C6
LLDPEs (including superhexenes) as being important for
the end use applications of their companies. Some of
these customers find the development of superhexene
interesting due to its higher quality level in comparison
these
with standard C6 LLDPE. However, at present
customers
testing
in
superhexene to find out whether it would work for their
end user applications and whether their end users would
accept the products using superhexene.

process

only

the

are

of

The Commission has asked customers how they would
react if the prices of C8 LLDPE were increased by 5 %
to 10 %. In the opinion of the customers who purchase
only C8 LLDPE, they would generally continue to buy
C8 LLDPE. They explained that this would be due to
technical reasons (they would not be able to switch to
other LLDPEs) or due to economic reasons (a switch
would incur high development and application costs).

(32)

that

hexene
has
recognise
super
Competitors
significantly
performance
improved mechanical
compared to standard C6 LLDPE but its processability
and opticals are still
less than those of C8 LLDPE.
Therefore, superhexene appears to be used for some
film applications where standard C6 cannot be used.
super hexene has
Some

competitors

argue

that

(24)

(25)

(26)

(27)

(6) Case IV/M.708 (cid:151) Exxon/DSM, OJ C 306, 15.10.1996, p. 4.

(7) Case IV/M.708 (cid:151) Exxon/DSM, OJ C 306, 15.10.1996, p. 4.

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improved properties compared to standard C6 but that
its extra cost is not matched by a price premium in the
market place. One respondent replied that (cid:145)some resin
producers may use the term (cid:147)superhexene(cid:148) to underline
that there might be a slight performance difference for
film producers compared to C6 LLDPE(cid:146).

(33)

For all these reasons superhexene is not regarded as
forming part of the same market as C8 LLDPE.

mix of properties the customer requires. While LDPE
and LLDPE may be used in the same applications they
are not necessarily fully or even largely substitutable.
LLDPE is directly replacing LDPE in some applications
where in the past only LDPE could be used due to its
above
better mechanical
(down-gauging, improved tear, puncture, heat resistance
and sealability). As a result LLDPE is being used in
applications either by itself or in blends that were
previously the domain of LDPE.

properties mentioned

(vi) It can be left open whether LDPE, C4 LLDPE and
C6 LLDPE taken together are a single product
market or whether LDPE is separate from C4
LLDPE and C6 LLDPE.

(34)

In the most recent Decisions it was left open whether
LDPE or LLDPE form part of
the same market or
constitute separate relevant markets (8). However, it was
recognised that LDPE and LLDPE are to a certain extent
substitutable, at least for commodity products. On the
other hand it was also acknowledged that for specific
applications one of
the resin families may be more
instance LLDPE offers
suitable than the other. For
significant advantages over LDPE, including the ability
to downgauge film and improve tear, puncture and heat
resistance and stiffness for injection moulded parts. On
the other side, traditionally LLDPE grades have not been
able to achieve the clarity and processability of LDPE,
which considerably limited the penetration of LLDPE
into certain sectors of the market, like flexible film for
food packaging.

(35)

The Commission also considered that the relative ease
with which manufacturers can switch production from
one grade to another gives rise to a high degree of
supply-side substitutability.

(36) Additional

appeared with

new applications

the
development of LLDPE (for example stretch films). The
investigation indicates that LLDPE is absorbing a major
part of growth in PE and is growing significantly faster
than LDPE. Some estimates forecast average growth
rates in LLDPE of more than 5 % per annum, compared
to 0 to 1 % per annum for LDPE in the next few years.
LLDPE takes the majority of the market growth in new
applications but LDPE is still used in the film market
where its specific properties are required.

(37)

The Commission’s investigation has shown that LDPE
and LLDPE are often used in blends to achieve the exact

(8) Case IV/M. 1287 (cid:151) Elenac/Hoechst, OJ C 405, 24.12.1998, p. 15,
Case IV/M.1041 (cid:151) BASF/Shell (II), OJ C 81, 17.3.1988, p. 5, and
Case IV/M.550 (cid:151) Union Carbide/Enichem, OJ C 123, 19.5.1995.

(38)

(39)

required for

characteristics

The uses of blends are largely determined by the
physical
end use
(customers’ specifications) and strongly influenced by
differences
and processing equipment of
customers (9). Third parties conform that LLDPE or
blends of LLDPE/LDPE to some extent exert competitive
pressure on LDPE.

in cost

the

Further penetration by LLDPE of the LDPE market and a
concentration of customers and suppliers are expected.
Some old equipment
is less suitable for processing
less processable than LDPE and
LLDPE (LLDPE is
therefore requires more powerful equipment to achieve
the same results). Some customers are investing in more
powerful conversion equipment
to enable them to
process blends with higher levels of LLDPE.

(40) As mentioned in recital 21,

the narrowest possible
market definition in the view of the parties would be
LDPE, C4 LLDPE and C6 LLDPE. According to the
parties this is due to the high degree of demand-side
substitutability between all of these resins and a high
degree of supply-side substitutability between C4 LLDPE
and C6 LLDPE, particularly in gas phase plants.

(41)

In the earlier Decision where the Commission concluded
that C8 LLDPE was a separate market (10) it argued that
due to the volatility of the copolymer (octene), it can
only be produced in the solution process (11) rather
than the high pressure and gas phase processes used for
the manufacture of LDPE and C4 and C6 LLDPE
respectively. The customers who can use LDPE, C4
LLDPE or C6 LLDPE for their end use application would
normally not use C8 LLDPE due to its higher costs.

(9) The most common blends LDPE/LLDPE ratios are between 90/10
and 60/40, although in certain cases up to 100 % LLDPE can be
used (in stretch applications).

(10) Case IV/M.708 (cid:151) Exxon/DSM OJ C 306, 15.10.1996, p. 4.
(11) C8 LLDPE can be made by a solution process or a slurry process.
However, economically the slurry process is not viable for C8
LLDPE. Case IV/M.708 (cid:151) Exxon/DSM, OJ C 306, 15.10.1996, p.
4, point 11.

(42)

(43)

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It remains to be decided whether C4, C6 and LDPE
constitute a single market or a number of markets. C4
and C6 have similar characteristics and are used for
many of the same applications. In addition, there is a
high degree of supply-side substitutability. Therefore
these two products must be considered as the same
relevant product market.

(47) However, significant custom duties (9,5 %) are imposed
In
on all non-European production of PE resins.
addition, there is a low level of imports into western
Europe, i.e. for LDPE and LLDPEs the import share is
much less than 5 % measured by volume.

LDPE is also used in many of the applications as C4
LLDPE and C6 LLDPE. It might therefore be considered
on the basis of the demand-side considerations, as being
in the same market relevant product market as C4
LLDPE and C6 LLDPE. However, there is no supply-side
substitutability between C4 LLDPE and C6 LLDPE, on
the one hand and LDPE, on the other. This is due to the
fact that C4 LLDPE and C6 LLDPE are produced by low
pressure
by
high-pressure processes.

produced

processes

LDPE

but

is

(44) However,

it is not necessary to decide on the exact
market definition for these products as no competition
problem would arise irrespective of whether there is a
single market for LDPE, C4 LLDPE and C6 LLDPE taken
together or LDPE is separate from C4 LLDPE and C6
LLDPE.

(45)

In conclusion the Commission will assess the following
product markets:

(cid:151) HDPE individually,

(cid:151) C8 LLDPE individually, and either

(cid:151) C4 LLDPE, C6 LLDPE and LDPE together, or

(cid:151) C4 LLDPE and C6 LLDPE together, and

(cid:151) LDPE individually.

B. GEOGRAPHIC MARKET DEFINITION

(48) A few third parties argue that a number of factors imply
a shift towards a world market in PE resins. The factors
include reduction of tariff barriers, decline of transport
costs, more customers operating on a worldwide basis
and consolidation of both producers and customers on
a worldwide basis. The Commission acknowledges that
these factors could be of importance in the future. Tariff
duties will, for example, be reduced to 6,5 % by the
beginning of 2004 and further consolidation of both
producers and customers may take place. However, the
investigation has also confirmed that at present three
major geographical markets exist: western Europe, USA
and the Far East. Only western Europe is relevant for
the purposes of the present assessment.

C. COMPETITIVE ASSESSMENT

(49)

The parties’ overall strategy is to become (cid:145)the world’s
range
leading producer of polyolefins with a full
product mix and to be a low cost provider in all major
markets of PE resins(cid:146). The merger also enables Dow to
place UCC’s low cost global products into its own
distribution channels worldwide. UCC’s total sales in
western Europe were [(cid:133)]* million in 1998.

(50) Dow sells LDPE, C8 LLDPE and HDPE in EEA from
three production facilities in Europe. Dow does not sell
C4 LLDPE and C6 LLDPE. Dow’s total sales of PE resins
in western Europe were [(cid:133)]* million in 1998.

(46)

confirmed the

conclusion
The
investigations have
reached in previous cases (12)
in this sector that the
relevant geographic market is western Europe (13). PE
resins are easily transported. Transport costs for PE
resins are relatively low (about 6 % to 7 % for a distance
of 1 000 km) when compared to the value of
the
products and there are substantial trade flows between
the European countries. Non-tariff barriers do not affect
imports of PE resins from outside the EEA.

(12) Case IV/M.550 (cid:151) Union Carbide/Enichem, OJ C 123, 19.5.1995,
Case IV/M. 708 (cid:151) Exxon/DSM, OJ C 306, 15.10.1996, p. 4, Case
IV/M.1041 (cid:151) BASF/Shell, OJ C 81, 17.3.1998, p. 4, Case
IV/M.1163 (cid:151) Borealis/IPIC/OMV/PCD, OJ C 280, 9.9.1998, p. 3,
and Case IV/M.1287 (cid:151) Elenac Hoechst, OJ C 405, 24.12.1998,
p.15.

(13) Defined as the EEA area and Switzerland.

(51)

In 1995 UCC and Enichem (14) entered into a joint
venture agreement which resulted in Polimeri (15), a
jointly (50 %/50 %) controlled producer and supplier of
PE resins. Polimeri was established for the development,
production, marketing and sale of polyethylene and
olefins to the European market.
It produces ethylene
(the basic monomer for production of polyethylene) and
has a total annual product manufacturing capacity of
[(cid:133)]* tonnes.
It has subsidiaries in Europe, namely
Polimeri Europa France SA and Polimeri Europa GmbH,
Germany.

(14) Enichem is the leading chemical and petrochemical manufacturer

in Italy.

(15) The creation of Polimeri was cleared by the Commission. See Case

IV/M.550 (cid:151) UCC/Enichem (cid:151) 13 March 1995.

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(i) Overall PE

(52) According to the parties, their market share by value in
is [20 % to 30 %]* in
the sales of

the overall PE resins market
western Europe. This

figure includes

Polimeri. The concentration,
the parties submit, does
not lead to the creation or strengthening of a dominant
position in PE resins. The table shows the market shares
on the various product markets discussed above.

Product

Dow

UCC (*)

Parties

Competitors

C8 LLDPE

[70 % to 80 %]*

[0 % to 10 %]*

[75 % to 85 %]*

DSM [10 % to 20 %]*

C4, C6 LLDPE and
LDPE

[5 % to 15 %]*

[10 % to 20 %]*

[20 % to 30 %]*

C4 and C6 LLDPE (16)

0 %

[20 % to 30 %]

[25 % to 35 %]*

LDPE (17)

[5 % to 15 %]

[5 % to 15 %]

[15 % to 25 %]*

HDPE

[0 % to 10 %]

[5 % to 15 %]

[5 % to 15 %]*

Others [0 % to 10 %]*

Borealis [10 % to
20 %]*

Elenac [5 % to 15 %]*
Exxon [5 % to 15 %]*
Others [<10 %]* each

BP Amoco+jv [5 % to
20 %]*

Exxon [5 % to 15 %]*
Elenac [5 % to 15 %]*
Others [<10 %]* each

Borealis [10 % to
20 %]*

Elenac [10 % to 20 %]*
Exxon [5 % to 15 %]*
Others [<10 %]* each

Borealis [15 % to
25 %]*

Elenac [15 % to 25 %]*
BP [5 % to 15 %]*
Others [<10 %]* each

(*) Through its 50 % share in Polimeri.

(ii) HDPE

(53)

The operation does not raise competition concerns in
low combined markets
HDPE because of the parties’
shares
strong
of
the
and
competitors.

sufficiently

presence

there are sufficiently strong competitors. Therefore, the
assessment would be the same whether LDPE, C4
LLDPE and C6 LLDPE constitute one single market or
LDPE constitutes a market separate from C4 LLDPE and
C6 LLDPE taken together. The operation does not give
rise to competition problems on any of these possible
market definitions.

(iii) LDPE, C4 LLDPE, C6 LLDPE

(iv) C8 LLDPE

(54) Dow does not sell C4 LLDPE or C6 LLDPE in western
Europe and neither of these products can be produced
by Dow’s solution process. Therefore,
if C4 and C6
LLDPE constitute a separate market, there would not be
any horizontal overlap between the parties on this
market where they would have a market share of [20 %
to 30 %]*. The parties’ market share would be about
[20 % to 30 %]* if LDPE, C4 LLDPE and C6 LLDPE
constitute one single market.
If LDPE constitutes a
separate market
the parties’ combined market share
would be [15 % to 25 %]*. On each of these markets

(16) Volume shares but the parties assess the value share to be of

approximately the same size.

(17) Volume shares but the parties assess the value share to be of

approximately the same size.

(55) UCC adds [< 10 %]* through its joint venture Polimeri
to Dow’s market share. Dow’s market share of [70 % to
80 %]* is already extremely high.

(56)

The parties submit that there are strong competitors in
the PE resins market in general. According to the parties
these competitors
include DSM, Elenac, Exxon, BP,
Petrofina and Solvay. The parties also stress that the PE
resins market
is characterised by price
competition, large multinational customers, low barriers
to entry and production technologies readily available
through licensing. New capacity and expansion of
existing production are expected in the near future.

in general

L 245/8

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14.9.2001

larger

(57) Dow is one of the major producers of C8 LLDPE and
has an estimated market share by value of [70 % to
80 %]*
in western Europe. Polimeri also produces
C8-LLDPE resins, with a share of [< 10 %]* (18). The
parties’ combined share is [75 % to 85 %]* or [at least
significant
four]* times
competitor, DSM.
In 1998 the parties’ combined C8
LLDPE capacity (19) was more than [at least six]* times
higher than the C8 LLDPE capacity of DSM and the
parties’ actual production of C8 LLDPE was about [at
least five]* times higher than the production of DSM.
Imports of C8 LLDPE were not significant since they
accounted for [(cid:133)]* thousand tonnes, i.e. less than 1 %
of the total western European market for C8 LLDPE.

than the only other

(58)

C8 LLDPE is produced in a solution process
in
combination with either a Zeigler-Natta or a single site
catalyst. Dow owns its own solution process (Dowlex)
and has developed catalysts (both conventional and
single site) to work with this process. As mentioned
only DSM and Polimeri operate solution processes in
western Europe, in which they can produce C8 LLDPE.

(v) Potential competition

(59) With regard to potential competition the parties have
referred to PE capacity being built in the Middle East.
According to the parties this capacity is large and a
significant portion of the output of these new plants is
expected to be exported to Europe. In the view of the
parties, competition in the western European market
would thereby effectively be increased and the parties’
LLDPEs
some
competitors argue that the current imports from the
Middle East are mainly C4 LLDPE-based. This has not
been contested by the parties in their reply to the
Statement of Objections. At any rate,
imports of C8
LLDPE into western Europe were not significant since
they accounted for [(cid:133)]* tonnes, i.e. less than 1 % of the
total western European market for C8 LLDPE.

reduced. However,

share would be

(60) As regards the future developments in the LLDPE resins
market segments, the parties refer to planned capacity
increases based on gas-phase processes by two of their
western European competitors, DSM and BP Amoco. In
the view of
increase in
gas-phase capacity will especially impact on the position
of UCC (and Polimeri) in C4 and C6 LLDPE. However,
in the Commission’s view, such a capacity increase will
not affect the parties’ position in the market for C8

the competitors’

the parties,

(18) Equate Petroleum Company KSC,

is a joint venture in Kuwait
between UCC and the State-owned Kuwait oil company; UCC has
a [... %]* interest in Equate. Equate does not produce C8 LLDPE.
(19) Dow’s plant in Schkopau, Germany, started producing PE resins in
to ...] thousand

1999, whereby Dow’s capacity rose from [...
tonnes.

(61)

(62)

(63)

(64)

(65)

LLDPE, because C8 LLDPE can only be produced in the
solution process.

The parties have argued that the PE resins market in
general is characterised by low barriers to entry. In the
Commission’s view this is not
true for C8 LLDPE.
Potential competitors who are not already LLDPE resins
producers will not only have to fund the significant
capital expenditure necessary but, to varying degrees,
depending upon their situation in the petrochemical
markets, will also have to secure raw materials and find
outlets for their production. Apart from Dow, Polimeri
and DSM very few producers (representing a very small
solution
share of LLDPE production) operate
process. This is the only process capable, at present, of
producing C8 LLDPE. The other potential competitors
would have to make significant capital expenditure and
would experience substantial delays before they could
produce C8 LLDPE competitively.

the

The general expectation in the industry is that resins
produced with metallocene
very
important
section on PE
in the
technology). This is due to the fact that metallocene
catalysts offer
the supplier enhanced possibilities to
broaden and customise the properties of resins.

catalyst will be

future,

(see

the

Commission

phase
understands
The
metallocene products (C4 mLLDPE and C6 mLLDPE) do
not provide the same unique performance in stretch
applications as Dow’s solution-based C8 LLDPE (or its
metallocene C8 LLDPE).

that

gas

In recent years the development of C6 LLDPE has,
according to some competitors, enabled C6 mLLDPE
resins to be produced which have similar characteristics
to standard C8 LLDPE. Those competitors believe that
in two to three years, C6 mLLDPE might challenge
standard C8 LLDPE in markets such as stretch film.
However, at present, C6 mLLDPE is commercially
produced only in very limited quantities.
In this
situation C6 mLLDPE cannot be
regarded in a
reasonable forecast as a significant constraint on the
combined entity’s position in C8 LLDPE.

(vi) Buying power

suppliers

Very large customers do press
for price
reductions to reduce cost per square metre of film. This
applies to packaging producers which themselves are
under pressure from end-users of packaging materials.
In addition, thickness reduction of packaging film is one
of
the
this,
environmental taxes which are levied on a per gram
the key to thickness
basis on packaging. However,

their key goals as

in turn,

reduces

14.9.2001

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Official Journal of the European Communities

L 245/9

reduction is as mentioned above to use enhanced
C8
like
LLDPEs
performance
LLDPE-based products.

superhexene

or

rights of
licensor and licensee to improvements the
other has made to processes, and extensions to capacity
and/or product ranges of the licensee.

(66)

these large customers have some
Therefore, even if
bargaining power in relation to the parties, they are also
pulling the market towards the high performance LLDPE
resins where the merger will strengthen a dominant
position.

(71)

The process technologies for the manufacture of PE can
be divided into high-pressure processes, which are used
almost exclusively for the manufacture of LDPE, and
low-pressure processes, which are used for LLDPE and
HDPE.

D. CONCLUSION ON PE RESINS

(67) On the basis of the foregoing, the operation as notified
will strengthen a dominant position on the western
European market for sales of C8 LLDPE. Dow is already
a dominant player in the market for sales of C8 LLDPE
and this position will be strengthened by the addition of
the C8 LLDPE activities of Polimeri.

(68)

In conclusion, the notified operation will strengthen a
dominant position on the market for sales of C8 LLDPE.

PE TECHNOLOGY

A. INTRODUCTION

(69)

to exploit

the greater

things being equal

The production of PE resins requires a combination of
both process and catalyst (or initiator) technology. A
producer or potential producer for PE resins has the
choice of developing its own technology or licensing it
from a company that owns a suitable technology. Not
all successful technologies are licensed as their owners
technology themselves.
their
may prefer
Other
the potential
licensor’s share of the market for the products made
using the technology,
the
technology owner will prefer to exploit the technology
a
himself. Customers of PE technology purchase
package, which enables them to build and operate a
production unit using the
and
proprietary know how. The package also includes the
right
certain catalysts with the process
technology, where appropriate (20), and may include
catalyst supply agreements or a licence to manufacture
the catalyst. The licensor generally gives performance
guarantees.

the more likely it

licensor’s patents

to use

is that

(70)

Licences are usually granted for a plant of a fixed size
and for a fixed period and/or for the production of a
given tonnage. They require the payment of a fixed
lump sum and/or a royalty based on production. All
licences contain further provisions setting out the rights
the parties. These provisions often deal with the
of

(20) High-pressure processes do not use catalysts.

(72) High-pressure processes can be further subdivided into
tubular
In high-pressure
processes no catalysts are used but initiators (peroxides,
etc.) are used to start the polymerisation reaction.

and autoclave processes.

(73)

(74)

and

sometimes more

Low-pressure technologies are divided into the solution,
slurry and gas phase processes. In addition there are a
number of hybrid processes, using more than one
reactor
than one process.
According to the parties all of these processes can be
used for the production of both HDPE and LLDPE.
solution processes are normally used to
However
produce LLDPE and are the only processes capable of
producing C8 LLDPE. Slurry processes are normally
used to produce HDPE and gas phase processes to
produce both HDPE and C4 and C6 LLDPE. New
process and catalyst developments are allowing wider
ranges of densities to be produced by both the slurry
and the solution processes. For low pressure processes
the catalysts used can be divided into conventional
catalysts (Ziegler/Natta and chromium) and single-site
catalysts (including metallocene).

B. RELEVANT PRODUCT MARKET

(i) The

distinction between PE resins

and PE

technology

Previous Decisions (21) have differentiated between the
supply of PE resins and the supply of PE technology. A
clear distinction can be made between the provision of
a concrete product, PE resins, and the largely intangible
PE technology which includes the intellectual property,
catalysts and know how necessary for the production of
current
PE. Approximately
licence,
polyethylene
for PE
indicating that
technology. This market is estimated to be worth in

there is a substantial market

[60 % to 70 %]*

of
under

operated

capacity

is

(21) Case IV/M.269 (cid:151) Shell/Montecatini, OJ L 332, 22.12.1994, Case
M.550 (cid:151) Union Carbide/Enichem, OJ C 123, 19.5.1995, and
Case M.1287 (cid:151) Elenac/Hoechst, OJ C 405, 24.12.1998, p. 15.

L 245/10

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14.9.2001

excess of EUR [(cid:133)]* million a year. The table below
gives details of the global and licensed capacities by
process, worldwide.

Process

Capacity (*)

(million tonnes)

Licensed capac-
ity (*)

(million tonnes)

Licensed (*)

(%)

Solution

[(cid:133)]*

[(cid:133)]*

Slurry

[(cid:133)]*

[(cid:133)]*

Gas-phase

[(cid:133)]*

[(cid:133)]*

Total low-pressure

[(cid:133)]*

[(cid:133)]*

High-pressure

[(cid:133)]*

[(cid:133)]*

Total all processes

[(cid:133)]*

[(cid:133)]*

[30 % to
40 %]*

[60 % to
70 %]*

[75 % to
85 %]*

[65 % to
75 %]*

[55 % to
65 %]*

[60 % to
70 %]*

one catalyst
nearly always supplied by the process licensor.

the additional-catalyst

technologies are

(77) As the life of the plant is usually considerably longer
than the original catalyst supply agreements there may
be a market
for the subsequent supply of catalysts.
However catalysts develop over time and a prudent
licensee will wish to ensure that its new catalyst will
work in its existing plant and will therefore seek its new
supplies from the original licensor. It is not necessary to
decide whether there is a single or separate market for
the subsequent supply of catalyst as the strength of the
various operators on such a separate market would not
from their strengths on the
be significantly different
market for the initial packages.

(iii) Separate markets

for

high-pressure

and

low-pressure technology

(*) Total may not add up due to rounding.

(78)

(ii) Package or

separate markets

for process and

catalyst technology

low-pressure

high-pressure

In an earlier Decision (23) the Commission distinguished
process
between
and
technologies. High-pressure processes are
the only
processes capable of producing LDPE. The equipment
operates at extremely high pressure (up to 3 000
atmospheres) and at temperatures above 200 (cid:176)C. On the
other hand low-pressure processes cannot produce
LDPE and operate at low pressures and temperatures.
They may also be differentiated by the fact
that no
catalyst is used in the high-pressure technologies, where
the polymerisation is started by an initiator, whereas for
low-pressure technologies catalysts are essential and
the resins
have a bearing on the characteristics of
produced.
the
overwhelming majority
respondents to the Commission’s enquiry agree that a
distinction can be made between high-pressure and
low-pressure processes.

The

of

(79)

The parties argue that
the relevant product market
should include both high pressure and low pressure
process technology packages for the following reasons:

(cid:151) all PE resins manufactured by any process compete

to a large extent in most end use applications,

(cid:151) in choosing a technology licensees will consider end
use trends in different applications together with the
advantages offered by the various
technologies
available. This is facilitated by the fact that all resins
require the same raw material, ethylene,

(cid:151) although low pressure technologies have grown
these technologies
faster
compete and the preferences could be reversed by
future developments in technology or end uses,

than high pressure, all

(23) Case IV/M.550 (cid:151) Union Carbide/Enichem, OJ C 123, 19.5.1995.

(75)

survey has

shown that process
The Commission’s
technology is almost always
licensed for use with
certain nominated catalysts. One of the main reasons
why companies license PE technology is to have the
assurance that when the plant is built it is actually going
to produce the PE resins required in the appropriate
qualities and quantities. An optimum-sized PE plant
would, according to the parties, cost between EUR [(cid:133)]*
million and EUR [(cid:133)]* million. To produce PE resins
satisfactorily it
the process and the
catalyst are compatible. PE technology suppliers provide
guarantees of the performance of plant built using their
know-how and other intellectual property. However no
PE technology supplier will give open-ended warranties
that the process will work satisfactorily with any catalyst
or indeed that a given catalyst will work in any plant.

is essential

that

(76)

This situation has been reflected in earlier Decisions (22)
where the Commission has considered that the relevant
product market
for PE technology comprises process
plus catalyst. It is certainly true that at the beginning of
the process a licensee will take both process technology
and catalyst from the same supplier. Although a single
process may be licensed for operation with more than

(22) Case IV/M.550 (cid:151) Union Carbide/Enichem, OJ C 123, 19.5.1995,
and Case IV/M.1287 (cid:151) Elenac/Hoechst, OJ C 405, 24.12.1998, p.
15.

14.9.2001

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L 245/11

(cid:151) there are geographic differences

in the market
penetration of low pressure processes. Low pressure
is more prevalent in North America than in other
geographic regions,

(cid:151) the substitutability between resins produced by
different processes is expected to increase as a result
of improvements offered by advanced catalysts.

in this Decision the question of

Elsewhere
the
substitutability of the various resin types is discussed in
detail. The Commission considers that although the
different resins, HDPE, LDPE and LLDPE, may be used in
the same or similar types of applications they are not
necessarily complete substitutes. The Commission has
identified a separate product market for C8 LLDPE. As
C8 LLDPE cannot be made by a high-pressure process
this
and
low-pressure processes. Furthermore the different types
of resin have their own range of specific properties, for
example LDPE has good processability, HDPE is
particularly
rigid
components and C8 LLDPE is used for the production
that all PE resins
of
therefore be
compete
supported.

the distinction between high-

stretch films. The argument

for mouldings

reinforces

suitable

cannot

extent

to a

large

and

The parties appear to suggest that because all processes
for the production of PE resins rely on the conversion
of ethylene the various technologies should be regarded
as being in the same market. This would only be
conceivable if the plants, their costs and the resulting
products were identical, or at least if the differences
between them were largely irrelevant to the choice of
process technology. A potential
licensee will consider
in end-user needs which have to be
developments
measured in terms of potential requirements for the
individual resins. Having made its decisions it must then
consider which of
are
appropriate. If it has identified a need for LDPE then it
will necessarily have to choose a high-pressure process
technology as LDPE cannot be made by a low-pressure
route. Similarly if
its business
opportunities lie in the production of HDPE or LLDPE
then he must use a low-pressure technology.

it has decided that

the process

technologies

the different process
The different growth rates of
technologies reflect the demand for the different resins.
Demand for LDPE, the product made by high-pressure
processes, has been stagnant while
the
low-pressure products, HDPE and LLDPE, has grown in
for possible future developments,
recent years. As
high-pressure processes (which are used for making
LDPE) are mature and are unlikely to be the subject of
further major technical developments. It therefore seems
there will be any major resurgence in
unlikely that
In
demand for high-pressure process

technology.

that

for

(80)

(81)

(82)

relation to end use applications the signs are that
customers are installing more powerful equipment that
will enable them to use LLDPE with lower processability
high-pressure
LDPE made
rather
the
technologies. This
trends
again indicates
observed until now will not be reversed.

than

that

the

by

(83) Geographical differences in the penetration of different
processes
regions do not
in different geographical
indicate that all process technologies are in the same
product market. Chemical plants have long lives, some
of the plants have been operating for over 30 years.
There is therefore a substantial stock of serviceable
production equipment. As the major developments in
PE low-pressure technology have been made by North
American companies, notable UCC, Dow and Phillips, it
is natural that there should be some time lag in these
technologies penetrating other regions. A technology is
first introduced by its developer in its own plants. Only
after it has been shown to work is it normally possible
to license it to third parties. High-pressure processes
to be developed,
were the first practical processes
therefore,
of
the
expect
one may
high-pressure processes by low-pressure processes to
follow the pattern seen in North America but with some
time
to the
Commission’s enquiries which show that respondents
expect the proportion of LLDPE, a resin produced using
low pressure technology, to increase at the expense of
LDPE which is produced in a high pressure process.
Respondents to the Commission’s questionnaire have
also indicated that they do not foresee any additional
the present
demand for LDPE. This
geographical variations
the
various processes should disappear or at least become
much less pronounced over time.

is borne out by replies

in the penetrations of

replacement

lag. This

indicates

that

(84) Advanced

catalysts

to improve

the
seem likely
characteristics and extend the range of applications of
existing PE resins. This does not mean that they will
become more substitutable amongst themselves. In fact,
on the basis of the current limited experience of the use
they will
of advanced catalysts it seems likely that
produce
combinations of
resins with new unique
properties.

(85)

The Commission therefore concludes that a distinction
can be made between the high-pressure technology
packages and low-pressure technology packages.

High-pressure processes

(86) Whether or not

tubular-
technologies constitute one single or

and autoclave-based
two

the

process

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14.9.2001

relevant markets need not be considered here as,
the operation
whichever market definition is chosen,
will not give rise to competition concerns.

(94)

(87)

The transaction does not appear to raise competition
concerns in relation to the market for initiators used in
high-pressure processes, the associated technology or,
indeed,
technologies
themselves.

high-pressure

process

on

Low-pressure processes

(88) A distinction can be made

three
low-pressure processes. The physical characteristics of
the equipment are quite different and each process has
its own specificities.

between the

(89)

(90)

The solution process is generally used to make LLDPE. It
is the only process for the production of C8 LLDPE. The
polymerisation process takes place in solution, so that
as the resin is produced it is dissolved in an organic
solvent.
In a second stage the resin is reclaimed by
boiling off the solvent. There are therefore two stages in
the production of PE resins by solution processes.

The slurry process is used primarily to make HDPE,
though it is also used for LLDPE. In this process the
polymerisation takes place in an inert liquid (that is one
which takes no part in the reaction and which does not
formed as a
dissolve the resin). The PE resin is
dispersion in the liquid and has
to be physically
separated from the liquid medium in a second stage. It
is comparatively quick, easy and inexpensive to change
the grade or type of resin when using a slurry process.

is

(91) Gas-phase processes can be used to make both HDPE
and C4 and C6 LLDPE. Polymerisation takes place in an
enclosed vessel
continuously
and the polymer
extracted from a fluidised bed in the reactor. No second
stage is required. The production of gas-phase plants
i.e.
can be
gas-phase plants can be designed so as to provide swing
capacity. Gas-phase plants operate best under steady
conditions and high throughputs of bulk products. The
largest PE production facilities are gas-phase plants
which can have capacities of up to 700 000 tonnes a
year.

switched between LLDPE and HDPE,

Each of the processes has its specific advantages and
disadvantages. Gas phase is particularly suited to the
production of large volumes of bulk products (HDPE
and C4 and C6 LLDPE) and has low capital costs. Slurry
offers a high level of flexibility between the production
of HDPE on the one hand and the various C4 and C6
LLDPE on the other hand, solution offers the only
possibility of producing C8 LLDPE. Thus once a
potential licensee has identified the market or markets it
intends to serve,
technology is already
made to a large degree. This is particularly true for gas-
phase plants.

its choice of

there are
There are thus prima facie indications that
three separate low-pressure technology package markets
for gas phase,
for slurry and for solution. This is
supported, as far as gas phase is concerned, by the
tendencies observed in the market (see below). However
it is not necessary to decide whether there are three
individual markets or a single combined market as the
operation will give
to competition problems
whichever definition is chosen.

rise

C. RELEVANT GEOGRAPHIC MARKET

It

global.

reached

In its previous Decisions (24) dealing with polyolefin
technology the Commission concluded that the relevant
geographic market was
this
conclusion on the basis that most polyolefin technology
has been developed in North America, western Europe,
or
their
in these
technology in these areas and in the rest of the world.
There are no geographical constraints on a potential
there are no tariff
technology,
licensee’s choice of
barriers and transport costs play no part. Licensors are
active worldwide.

Japan and firms

license

areas

Respondents to the Commission’s PE technology survey,
actual
and
independents and the parties supported this conclusion
unanimously.

licensees,

potential

licensors

and

(95)

(96)

(97)

(98)

The relevant geographic market for PE technology is
worldwide.

D. ASSESSMENT

(92)

Capital costs per tonne of capacity for gas-phase plants
for the production of both HDPE and LLDPE are lower
than those for other processes according to the replies
to the Commissions enquiries.

(93) All of the respondents to the Commission’s enquiries,
except the parties, agreed that a distinction could be
made between the three processes, solution, slurry and
gas-phase.

(99)

In the assessment that follows the capacity of licenses
granted to third parties are considered in the calculation
of market shares. Decisions to license subsidiaries or
joint-venture companies are not made on a competitive
basis.

(24) Case IV/M.269 (cid:151) Shell/Montecatini, OJ L 332, 22.12.1994, and
Case IV/M.550 (cid:151) Union Carbide/Enichem, OJ C 123, 19.5.1995.

14.9.2001

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High-pressure process technology

(100) UCC is a licensor of high-pressure technology. Dow
does not license its high pressure technology to third
parties. There is therefore no overlap. UCC’s market
(that is for both autoclave and tubular
share overall
processes)
is [5 % to 15 %]*, well below that of the
largest competitor ICI with between 20 % and 30 %.
Two other competitors have shares of between 5 % and
15 % of the capacity licensed between 1979 and 1999.

(101) UCC is active only in the licensing of high-pressure,
tubular-process technology, where its market share will
be well below [20 % to 30 %]*.

(102) The proposed operation will not create or strengthen a
for high-pressure
high-pressure,

dominant position in the market
technology
tubular-process technology.

a market

nor

for

in

Solution and slurry low-pressure technology

(103) Neither Dow nor UCC license solution or

slurry
low-pressure technology packages to third parties. The
operation will not
therefore lead to the creation or
strengthening of a dominant position in either of these
markets.

Gas-phase low-pressure technology

(104) UCC is a global

licensed

licensor of a gas-phase technology,
Unipol, which is
through
commercially
Univation acting as its exclusive agent. Univation is a
joint venture between UCC and Exxon and was
established to research, develop, market and license
process and catalyst systems that can be used in gas
phase and slurry plants. Exxon has contributed its
metallocene catalysts technology and the developments
technology (the
it has made in gas-phase process
supercondensing mode
to Univation
technology)
through exclusive licences. In addition the joint venture
will manufacture, market and sell advanced catalysts for
the manufacture of PE resins. The joint venture will seek
to grant PE technology licences for both new plants and
the retrofitting of existing plants.

(105) UCC has taken a share of

the
capacity of PE technology licensed to third parties over

[60 % to 70 %]* of

technology competitors

the 15 years between 1984 and 1998. During this
period there were only two successfully licensed gas
phase
in this market: BP
Amoco, which has less than half the market share of
UCC, and Montell, about one sixth of the size. The
operation will not result in any aggregation of these
market shares as Dow has not, until now, been an
active licensor and does not have a gas-phase process
technology. More recently Borealis has signed a licence
hybrid
with
an
has
slurry/gas-phase
announced its interest in granting licences for its series
reactors
these
companies have yet licensed gas-phase technology to
independent third parties.

for
and Mitsui

technology. Neither

company
process

associated

gas-phase

Borstar

its

of

Company

Gas-phase

UCC

BP Amoco

Montell

[60 % to 70 %]*

20 % to 30 %

5 % to 15 %

resins using metallocene

(106) One of the key factors that potential licensees will take
into account is the position of each of the potential
suppliers of gas-phase process technology packages in
relation to the use of advanced catalysts and in
particular for metallocene catalysts, which are the most
developed and which appear
to offer considerable
advantages in improving the characteristics of the resins
produced and extending the range of products that can
licensees do not wish to
be made. Even if potential
in the
produce
catalysts
immediate future,
the
package they are acquiring will enable them to use
metallocene catalysts in the future. PE resin plants have
lives of over thirty years and the capital cost of an
optimum size gas-phase plant
is between EUR [(cid:133)]*
million and EUR [(cid:133)]* million. In such situations it is
important for the resin producer to be certain not only
that the package it is acquiring has the capability of
using advanced, and particularly metallocene catalysts
but
technology available from the
licensor will allow it freedom to operate and to sell his
resin.

they will wish to ensure that

the catalyst

that

(107) Dow will obtain joint control, through its 50 % share in
Univation, of
the most successful gas-phase process
technology, Unipol, which may in the future be used
with Exxon’s metallocene catalyst. Most PE producers
replying to the Commission’s questionnaires consider
that
is
already owned by Dow. They further consider that the
two catalysts are protected by the leading patents in the
field. This position has not been challenged by the
the
parties.

leading metallocene catalyst

the only other

Following

operation

proposed

the

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exploitation of these two catalysts will be under the
its own
control of Dow, directly in the case of
metallocene catalysts and indirectly, through Univation,
in relation to the Exxon catalysts.

metallocene catalyst
technology and is therefore less able to compete.

to market with its gas phase

(108) The

relating

property

situation

to
intellectual
metallocene catalysts
is complex with over 2 300
individual patents to be considered. A majority of those
replying to the Commission’s questionnaires considered
that the combination of Dow, UCC and Univation will
severely reduce the options for companies wishing to
have gas-phase process technology with metallocene
capability.

If

the licensor

licensee expects

(109) As one respondent to the Commission’s enquiries put it
(cid:145)A potential
to make
available proven technology free of third-party patent
rights. The licensee would take a licence from the
technology best meeting its
licensor offering the
requirements.
these
cannot meet
licensor
requirements due to intellectual property constraints the
licensee would turn to another licensor that could or if
no such licensor is available, amend its requirements or
refrain from taking a licence.(cid:146) Another producer has
the combination of Dow and Union
stated that
Carbide will not
competition in the
single-site catalyst technology.(cid:146) (The reference to Union
Carbide has to be understood as meaning Univation).

serious

face

(cid:145)...

a

indirect control of

(110) Following the concentration, and in particular following
the acquisition by Dow of
the
exploitation of Exxon’s metallocene catalyst through its
acquisition of UCC’s 50 % share of Univation, the new
entity will be, at least for several years, the only licensor
able to offer both metallocene catalyst capability, that is
to offer a package including the possibility of using
such a catalyst
later, and legal certainty as to the
intellectual property rights. Under these circumstances
potential licensees will have a natural preference for the
combined entity’s combination of process and catalysts.
Details of the competitors are given below.

(111) BP, the most important competitor of Univation in the
supply of both gas-phase and low-pressure process
technology packages, had been working with Dow in a
joint research and development agreement to use Dow’s
metallocene catalysts with BP’s gas-phase technology. A
memorandum of understanding provided for the joint
commercial exploitation of
the developed technology
and if successful for the establishment of a joint venture
similar to Univation. After five years’ work, the parties
reached a stage where the commercialisation of
the
jointly-developed technology was possible. However,
Dow terminated the Joint Development Agreement at
one of its regular Decision Points and the agreement has
therefore left without a credible
now lapsed. BP is,

(112) BP has

to

the

and

license

practice

sub-license

rights under

certain residual

Joint
Development Agreement. According to the parties BP is
free
the
in gas-phase processes. The
jointly-developed catalyst
In the
agreement, at point [(cid:133)]*, provides that [(cid:133)]*.
absence of any provision for submitting these issues
between BP and Dow to pendulum arbitration Dow will
thus have a de facto veto over BP’s ability to license,
sub-license or use the jointly developed technology. In
any case the said clause does not extend to Dow’s
background patents.

in development but

(113) The second and only other competitor to successfully
grant licences to third parties in the last 15 years is
Montell with its Spherilene process. Montell has a
metallocene catalyst
the position
regarding the intellectual property rights is unclear as it
is for any other potential licensor. The parties correctly
state that after the realisation of Project Nicole (the
creation of a joint venture combining Shell and BASF’s
polyethylene
activities (cid:151) Case
COMP/M.1751) Montell will have access to the BASF
metallocene
been
developed with a view to their use in polypropylene
production.

and polypropylene

patents. However

these

have

(114) Furthermore while

two

there were

competing
metallocene catalyst systems for gas-phase processes
there was an incentive for each catalyst owner to seek
partners to exploit its product. Once the two catalysts
are under the control of single group this incentive will
be considerably reduced. This is particularly true when
the group also has the dominant gas-phase process
technology. The parties’ natural behaviour will be to
develop either one or both catalysts for use with the
Unipol process technology. They would have no interest
in granting licences to or collaborating with a potential
competitor.

Barriers to entry

(115) This is not a market

has

very

to make

that can be easily entered. A
licensee
capital
considerable
investments, up to EUR [(cid:133)]* million to install the PE
technology they have purchased. The plant has a life of
perhaps 30 years. Potential licensees will therefore take
all steps possible to ensure that they make the correct
decision in choosing a PE technology package. It is not
enough that the licensor should give guarantees that the
technology will produce the required quantities and
qualities of resins or that the licensor undertakes to pay
a penalty if the agreed levels are not met. In the case of

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L 245/15

failure, or even partial failure, the licensee’s credibility
with its customers would be reduced if it were to be
unable to meet their requirements in terms of volume
or quality.
In addition the financial effects of even
comparatively small divergences in terms of production
costs or output can be very serious in a low-margin
business such as PE resin production.

(116) PE technology is

constantly evolving. A potential
licensee will require assurance that its licensor has the
facilities to improve and
research and development
upgrade the licensed technology over the life of the
plant. A track record in this
therefore
indispensable.

area

is

(117) The field of PE technology is covered by a multitude of
patents covering the process technology, all aspects of
the catalysts used and the resins made by the various
processes. A potential licensee will need assurances that
the licensor has the right to grant licenses and that it
will act vigorously to protect these rights and thus the
ability of
the licensee to continue to operate its
production plant and sell its output.

(118) A licensor must be able to show that its PE technology
package works, preferably on an industrial scale. The
ideal way to do this would be to demonstrate the
operation of the process to produce the clients’ desired
volume and range of PE resins in a full-scale plant or at
least in a large-scale pilot plant. Secondly it must be
able to demonstrate its commitment to research and
development. This will require considerable investment
in both laboratories and pilot plants. It should also be
able to demonstrate that
it has protected intellectual
property rights and will continue to do so with regard
to future developments.

(119) The parties set out the requirements for a successful
licensor as follows (cid:145)In order to compete in the PE
technology market, a prospective licensor must possess
or acquire the infrastructure required for a licensing
support,
engineering,
business,
marketing,
supply and training
capability.(cid:146) Dow, which has a very successful solution
process which it does not license at present,
(cid:145)perceives
it would be a costly investment with poor
that
the
prospects

including
legal,

return to create

sales, catalyst

an adequate

technical

for

infrastructure
necessary
PE
(cid:145)Prospective
technology.(cid:146) The parties also note that
licensees prefer licensors with an established record of
successful licenses(cid:146).

solution

license

to

(120) The

a

licensors

established

therefore have

very
considerable advantage in that their achievements and
record are already in the public domain. Newcomers
find themselves in a difficult situation of not being able
to demonstrate a successful track record in licensing and
the various associated activities and therefore being
unable to find the customers that would enable them to
gain the necessary experience.

(121) As a minimum a potential

licensor would have to be
able to demonstrate that its combination of process and
technology worked in its own production
catalyst
facilities. It follows that only existing gas-phase PE resin
producers could enter
the gas-phase PE technology
licensing market. The number of potential competitors
is therefore limited, at least in the medium term, to
those
process
technologies.

gas-phase

operating

their

own

(122) There are only a limited number of owners of gas-phase
process technology who would be able to enter the
market. Even if they were prepared to take the risk they
would be
faced with well-established incumbents,
Univation, BP Amoco and Montell with established track
records. It should be noted that of the nine companies
listed in Tecnon study on licensing as being licensors of
gas-phase technology only three have granted licences
to independent third parties in the last 15 years, the
others have only licensed subsidiaries or joint ventures
in which they are involved.

(123) Any competitors (whether existing licensors or merely
owners of competing gas-phase process technologies)
in relation to
would face
similar problems
metallocene catalyst capability. The most
important
intellectual property rights are held by Dow and Exxon.

the

Potential competition from other
processes

low pressure

technology,

(124) Gas-phase is not only the most important low pressure
important
the
the licensed

process
technology overall accounting for nearly half of
total
low-pressure capacity.

licensed PE capacity and 65 % of

is also the most

it

(125) Gas-phase process

regarded by the
technology is
majority of respondents to the Commission’s enquiries
as being the most likely production process for new
capacity for the production of bulk LLDPE and HDPE.

L 245/16

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Official Journal of the European Communities

14.9.2001

The replies also indicate that the respondents consider
likely
that gas-phase process technology is the most
technology to be used for new developments in LLDPE
production.

(126)

the respondents

In relation to LLDPE, all
to the
Commission’s questionnaires on the future development
of the ratio between LDPE and LLDPE indicated that
they thought the proportion of LLDPE would increase.
This indicates that a considerable proportion of the new
PE capacity will be for the production of LLDPE.

(127) The parties estimate that an additional

[5 to 15]*
million tonnes of gas-phase capacity will be required by
2004 and that [3 to 8]* million tonnes of this capacity
will be licensed. Considering that in the past over [75 %
to 85 %]* of gas-phase capacity has been licensed this
may be an underestimate. However, it represents over
[65 % to 75 %]* of their estimate of the total market for
low-pressure process technology by volume.

(128) All the indications are that licensees will continue to
seek gas-phase PE technology packages
and that
gas-phase will remain the most important low-pressure
PE technology. Other processes are less suited to the
future requirements of a large part of the industry and
will not therefore be able to constrain the behaviour of
gas-phase PE process licensors in general and the parties
in particular.

Arguments of the parties

(129)

the Commission’s

In refuting
conclusion in the
Statement of Objections that the operation would result
in the strengthening of a dominant position in the
(or
markets
for gas-phase PE technology packages
low-pressure PE technology packages, see below)
the
parties have presented several arguments. The main
arguments are:

(cid:151) market

share alone is not

sufficient

to show

dominance,

(cid:151) the market for PE technology packages is a bidding
in which all competitors have an equal

market
chance of winning the next licence, and

(cid:151) the variation in market shares over time indicates a

competitive market.

the mere fact

(130) The first two arguments can be treated together. The
Commission does not claim that
that
UCC, through its sales of Unipol PE technology, has a
high market share is sufficient to demonstrate that UCC
It is however an important indicator of
is dominant.
dominance. UCC’s share of [60 % to 70 %]* has been
calculated on the basis of capacity licensed to third
parties over a very long period, 15 years. If this overall
period is broken down into five-year periods
(i.e.
sufficiently long to eliminate the abnormal
periods

effects that one or two licences can produce in shorter
remained
time periods) UCC’s market
uniformly high (above [45 % to 55 %]*). In addition the
Commission
into
consideration including the fact that UCC has a very
large installed base, an effective licensing organisation,
and a proven track record.

share has

factors

taken

other

also

has

(131) To regard the PE technology licensing market as a
bidding market is too simplistic. Potential licensees look
for a successful track record both in the production of
resins using a given technology and in the licensing of
to enter into a
that technology. A licensee is about
long-term relationship with its licensor.
It needs to
obtain the maximum reassurance that the process it is
going to license is going to produce the anticipated
results, that its licensor has the research development
and technical back-up resources to ensure that its plant
remains effective and competitive and that its licensor
can ensure his freedom to operate and sell the resins
produced and that it will act to protect the licensed
intellectual property rights. The new entity would be in
a far better position to offer all of these elements than
its competitors.

(132) According to the parties a closer examination of the
year-by-year variations in market share show that the
market is competitive. It is true that there are significant
variations in market shares between individual years.
This is due to the large size and comparative rarity of
licences. However even the figures produced by the
the
parties in support of
parties had shares of between [50 %]* and [100 %]* of
the number of licences granted in six of the last eight
years. The method chosen by the Commission, which
examined the capacity licensed over a 15-year period,
provides a more prudent measure in a situation in
which the date on which a single licence is signed may
make an important difference to the figures for a single
year.

their argument show that

(133) UCC has, over

the years, established an unrivalled
position in the gas-phase technology business based on
its ability to meet the needs of licensees. This situation
is reflected in its continuing high market share. This
continuing high market
its
position since it
serves as a track record. Other
competitors, particularly those with no record of
licensing to third parties, are at a severe disadvantage in
that they have a less impressive or no track record.

share also consolidates

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L 245/17

(134) Other arguments put forward by the parties are:

(cid:151) Dow has no access to Exxon’s metallocene catalyst,

(cid:151) Dow does not own or have access to a gas-phase

process technology,

(cid:151) Dow’s metallocene

catalyst

is not proven in

gas-phase.

(135) The parties have argued that Dow does not have access
to Exxon’s Exxpol metallocene catalyst. This is true but
irrelevant. What Dow will acquire as a result of the
proposed operation is joint control over the way in
which the Exxpol metallocene catalyst is exploited by
Univation. Dow will of course retain sole control over
its own Insite metallocene catalyst.

(cid:151) the new entity would combine

two formerly
independent licensing opportunities (Univation and
Dow) for others wishing to develop and/or market
metallocene catalysts.

event

In the
that BP and Dow would consider
recommencing their cooperation as previously envisaged
in order to jointly offer gas-phase technology packages
on the market, there would also be a strengthening of a
dominant position.
Indeed this would allow Dow to
control or co-control both the dominant gas-phase
process technology and the largest competing gas-phase
process technology, as well as the licensing of the two
leading metallocene catalysts.

Low-pressure PE process technology packages

(136) According to the parties Dow does not own or have
access to a gas-phase process technology. This is true.
The Commission’s argument
is not based upon a
overlap in relation gas-phase process technology. The
Commission considers that by acquiring UCC Dow will
acquire
process
be
this
technology
strengthened by the combination of Unipol and the
metallocene catalysts of Univation and Dow.

gas-phase
dominance will

dominant Unipol

that

and

the

(137) The parties claim in their response to the Statement of
is not
that Dow’s metallocene
Objections
proven in gas-phase. However
the same response
reports the success of the jointly developed technology
in a commercial trail.

catalyst

(138) The Commission therefore considers that the proposed
operation would strengthen the dominant position
previously held by Univation in relation to the supply of
packages for the supply of gas-phase PE technology.

Conclusion in relation to gas-phase PE process
technology packages

(139) UCC is dominant on the market
process

for the supply of
gas-phase
this
technology
dominance would be strengthened by the combination
of the Dow and Univation metallocene catalysts. The
strengthening arises from three distinct effects:

packages

and

(140) The operation would also give rise to competition
problems if the relevant product market were to be the
supply low-pressure PE technology packages. The
parties’ market shares are given in the table below in
relation to capacity licensed in the period 1984 to
1998.

Company

Process

Market share

UCC

Gas-phase

[40 % to 50 %]*

BP Amoco

Gas-phase

[15 % to 25 %]*

Montell

Phillips

Mitsui

Nova

Gas-phase

[0 % to 10 %]*

Slurry

Slurry

[0 % to 10 %]*

[5 % to 15 %]*

Solution

[5 % to 15 %]*

(141) Although UCC’s market share was [40 % to 50 %]* over
the
the 15-year period between 1984 and 1998,
increase in the importance of gas-phase processes over
the most recent 10 years means that UCC’s share was
higher, at around [45 % to 55 %]*, in this period. The
replies to the Commission’s enquiries, including those of
that gas-phase processes will
the parties,
continue to make a majority of the licensed capacity in
the future.

indicate

(cid:151) the new entity would control directly or indirectly
both the leading metallocene catalyst technologies,

(cid:151) the position of BP would be significantly weakened
as it would have no access to a proven metallocene
catalyst technology, and the position of third parties
will be made more difficult by the combination of
the parties’ suites of patents,

(142) UCC would still be very much larger than its next
competitor, which would still be BP. In addition to BP
and Montell which license gas-phase
technologies,
(slurry) and Nova (solution) have
Phillips and Mitsui
successfully licensed their low pressure technologies in
the last 15 years. All competitors, would suffer the
difficulties in competing in this wider market that have
been described in relation to the market for gas-phase
PE technology packages. One respondent has gone so

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Official Journal of the European Communities

14.9.2001

far as to suggest that (cid:145)In the medium term there is every
possibility that the only process capable of competing
with Unipol will disappear(cid:146).

of

for

the

low-pressure

(143) The difficulties faced by potential new entrants into the
process
market
supply
technology packages are considerable and it is extremely
unlikely that any company not already involved in the
production of PE resins would be able successfully to
license low-pressure technology package. Even current
producers would find it difficult
the
advantages of the incumbents.

to combat

Conclusion in relation to low pressure technology

(144) UCC is dominant on the market for the supply of low
pressure
this
dominance would be strengthened by the combination
of the Dow and Univation metallocene catalysts. The
strengthening arises from three distinct effects:

technology

packages

process

and

(cid:151) the new entity would control directly or indirectly
both the leading metallocene catalyst technologies,

(cid:151) the position of BP would be significantly weakened
as it would have no access to a proven metallocene
catalyst technology,

(cid:151) the new entity would combine

two formerly
independent licensing opportunities (Univation and
Dow) for others wishing to develop and/or market
metallocene catalysts.

considerations

possible
The
recommencing of the cooperation between BP and Dow
(see recital 139) also apply in the present context.

concerning

the

E. OVERALL CONCLUSION ON PE TECHNOLOGY

(145) The operation will strengthen the dominant position of
UCC on the market for the supply of gas-phase process
low-pressure
technology packages or
process technology packages. The same would apply to
the possible market for catalyst technology, supplied in
order to upgrade existing plants.

the supply of

ETHYLENEAMINES

A. RELEVANT PRODUCT MARKETS

(146) Ethyleneamines are commodity chemical
products which are derived from ethylene.

intermediate

(147) There are two distinct production processes to obtain
ethyleneamines. The EDC process (reaction of ethylene
dichloride and ammonia) produces ethyleneamines by
the reaction of ethylene dichloride and ammonia. This
process produces the entire range of ethyleneamines,

except Aminoethylethanolamine (AEEA). The reductive
amination (RA) process produces ethyleneamines by the
reaction of ethanolamines (MEA) with ammonia and
hydrogen. This process produces a higher
ratio of
ethylenediamine (EDA), it does not produce a number
of ethyleneamines obtainable with the EDC process, but
produces AEEA. In order to produce the entire range of
ethyleneamines access to both production processes is
necessary.

(148) Competitors

in

of Dow and UCC

producing
ethyleneamines are BASF, Akzo, which also controls
Bayer’s production site
in Germany, Tosoh and
Delamine. The latter is a joint venture between Akzo
and Tosoh. The companies Dow, Akzo (in the Bayer
Leverkusen site, on the basis of a tolling agreement),
Delamine and Tosoh use the EDC process. Akzo (on its
Swedish production site) and BASF use the RA process.
UCC uses both the EDC and the RA process.

(149) The information provided to the Commission by the
enquiries by the
parties
Commission shows that each ethyleneamine constitutes
a different product market.

and gathered in market

(150) The said information shows

that each variety of
ethyleneamines has
is not
and
substitutable with other products. There is therefore no
demand-side
different
varieties of ethyleneamines.

substitutability

different use

between

the

a

(151) Ethyleneamines

a

large

additives

TEPA, AEEA), Asphalt
resins

variety of
are used for
(EDA),
applications. These include bleach activators
fungicides (EDA), epoxy hardeners (EDA, DETA, TETA,
TEPA, piperazine, E100/HPA-X, AEP), lube oil additives
(TETA, TEPA, E100/HPA-X), fuel additives (EDA, DETA,
TETA,
(TEPA,
(DETA), detergents
E100/HPA-X, AEP), paper
(EDA, DETA, AEEA),
chelants
(AEEA, DETA),
pharmaceuticals
to name a few. Some
(piperazine)
ethyleneamines can be used for the same applications.
However,
indicate their substitutability,
since the different varieties are being used in those
applications for different purposes. The ethyleneamines
are not substitutable one for the other. In such marginal
cases where substitutability between different varieties of
ethyleneamines would technically be a possibility this
can only be
and time
consuming testing and reformulating.

achieved after

this does not

expensive

(152) Other factors are in line with the foregoing demand-side
analysis. The different varieties of ethyleneamines are
sold at different prices and United States import duties
on ethyleneamines vary according to the different
ethyleneamine varieties.

(153) According to the information provided by the parties
of
is a homogeneous product, without

and
ethyleneamines

the market

enquiries,

variety

each

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L 245/19

specific grades. For example, EDA from any supplier can
be used for any application suitable for EDA. The same
is true for all other ethyleneamines. The parties do
produce specific blends of ethyleneamines for certain
customers,
customers’
according
proprietary specifications.

usually

the

to

between

drew the conclusion that there is a close supply-side
of
the
relationship
ethyleneamines. This argument does not, however,
support the case for a single market of ethyleneamines
based on supply side substitutability.

various

types

(154) The notifying parties claim that there is one relevant
product market for all ethyleneamines. The parties claim
that
there is supply-side substitutability between the
various types of ethyleneamines.

(155) The parties first invoked, in the form CO, as reasons for
this view that ethyleneamines are produced in a fixed
ratio in the production process. From this the parties

(156) The information provided by the parties at a later stage
shows that producers could vary production ratios to a
certain extent. In their production the different varieties
of ethyleneamines are produced in a given split, which
can be varied within limits by altering process and
reactor conditions and by recycling finished homologues
to the reactor. The parties have indicated that they can
produce ethyleneamines within the following ratios:

Product

Production range

EDC

RA

Ethylenediamine (EDA)

[0 % to 10 %]* (cid:151) [45 % to 55 %]*

[55 % to 65 %]* (cid:151) [80 % to 90 %]*

Diethylenetriamine (DETA)

[15 % to 25 %]* (cid:151) [30 % to 40 %]*

[0 % to 10 %]* (cid:151) [10 % to 20 %]*

Piperazine

AEEA

[< 5 %]* (cid:151) [< 5 %]*

[0 % to 10 %]* (cid:151) [10 % to 20 %]*

[< 5 %]*

[0 % to 10 %]* (cid:151) [5 % to 15 %]*

Triethylenetetramine (TETA)

[5 % to 15 %]* (cid:151) [15 % to 25 %]*

Tetraethylenepentamine (TEPA)

[0 % to 10 %]* (cid:151) [5 % to 15 %]*

0

0

AEP

E100/HPA-X

[< 5 %]* (cid:151) [0 % to 10 %]*

[0 % to 10 %]* (cid:151) [0 % to 10 %]*

[0 % to 10 %]* (cid:151) [25 % to 35 %]*

0

(157) The possibility of modifying production ratios within
certain limits (cid:151) which vary according to production
process and may vary according to producer (cid:151) has
been confirmed by the Commission’s market enquiry.
These adaptations can only be made to a limited extent
and involve a complex operation to change the output
ratios, maintain quality and ensure stable operation of
the plant. While it may be possible to increase the
a given product by changing the
proportion of
conditions in the reactor, the changed conditions may
also lead to an unwanted increase or decrease in other
homologues. There
therefore only limited and
conditional supply substitutability and this cannot justify
a single relevant product market.

is

(158) The parties also claim that the market shares of the
parties do not differ significantly from one variety to the
other in order to support their argument in favour of
one product market for all ethyleneamines. However,
the market shares provided by the parties show a
variation in market shares for individual ethyleneamines
of between [20 % to 30 %]* and [45 % to 55 %]* for
Dow and between [25 % to 35 %]* and more than
[40 % to 50 %]* for UCC.

(159) On the basis of these elements the product market has
to be defined as one market for each ethyleneamine.
The assessment therefore has to be based on separate
markets for EDA, DETA, TETA, TEPA, AEEP, piperazine,
AEP and E100/HPA-X. However, even if the relevant
product market were to be all ethyleneamines,
the
assessment would not change.

B. RELEVANT GEOGRAPHIC MARKET

(160) According to the parties the geographic market

for

ethyleneamines is at least European, if not worldwide.

(161) The market

is characterised by five producers who
supply the entire world demand. Except for Dow, which
has production sites
in both the United States of
America and in Europe, all producers supply the rest of
the world from a single production site in Europe, or in
Japan or in the United States of America. UCC for
instance supplies its entire European demand from the
United States of America without a production site in
Europe. In order to compete in a particular region of
the world, in particular in Europe, it is not necessary to
have a production site there. 20 % of the Community’s
requirements are imported.

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(162) According to the parties transportation costs do not
play a role. Furthermore there are no safety or other
restrictions to transportation. The Commission enquiry
has confirmed this view. Duties do not appear to be
significant impediments to trade.

(163) On the basis of these elements the relevant geographic

market for ethyleneamines is to be seen as worldwide.

C. ASSESSMENT

(164) Dow, UCC, Akzo (including its production at Bayer
Leverkusen), BASF and Tosoh are currently active on
the market
for ethyleneamines. The sixth producer,
Delamine, is a joint venture controlled jointly by Akzo
and Tosoh. After the proposed concentration the market
would thus effectively be left with Dow/UCC, BASF as
well as Akzo and Tosoh with their
joint venture
Delamine.

(165) The volume of total world sales for ethyleneamines in
1998 is estimated by the parties at
[(cid:133)]* thousand
tonnes and valued at EUR [(cid:133)]* million. The biggest
product, EDA, accounts for [(cid:133)]* thousand tonnes and
followed by DETA with [(cid:133)]*
EUR [(cid:133)]* million,
thousand tonnes and EUR [(cid:133)]* million, TETA with
[(cid:133)]* thousand tonnes and EUR [(cid:133)]* million. The
details are contained in the table below:

Product

Value in EUR
million

Volume in thousand
tonnes

All ethyleneamines

AEEA

AEP

DETA

EDA

TEPA

TETA

Piperazine

E100/HPA-X

[(cid:133)]*

[(cid:133)]*

[(cid:133)]*

[(cid:133)]*

[(cid:133)]*

[(cid:133)]*

[(cid:133)]*

[(cid:133)]*

[(cid:133)]*

[(cid:133)]*

[(cid:133)]*

[(cid:133)]*

[(cid:133)]*

[(cid:133)]*

[(cid:133)]*

[(cid:133)]*

[(cid:133)]*

[(cid:133)]*

(166) On the basis of

these figures for all ethyleneamines
together, Dow/UCC would have a world market share of
[60 % to 70 %]* and the next largest competitor, the
less than [15 % to
Akzo Group (including Delamine),
25 %]*. BASF, Tosoh and others all have below 10 %.
The table below gives the parties’ market shares for the
major different ethyleneamines.

(in %)

Product

DOW

UCC

Total

Largest competitor

All ethyleneamines

[25 to 35]*

[30 to 40]*

[60 to 70]*

[15 to 25]*

AEEA

AEP

DETA

EDA

TEPA

TETA

Piperazine

E100/HPA-X

[25 to 35]*

[30 to 40]*

[60 to 70]*

[5 to 15]*

[45 to 55]*

[35 to 45]*

[85 to 95]*

[5 to 15]*

[25 to 35]*

[35 to 45]*

[65 to 75]*

[10 to 20]*

[20 to 30]*

[30 to 40]*

[55 to 65]*

[20 to 30]*

[35 to 45]*

[30 to 40]*

[75 to 85]*

[10 to 20]*

[30 to 40]*

[25 to 35]*

[60 to 70]*

[10 to 20]*

0

[35 to 45]*

[35 to 45]*

[30 to 40]*

[25 to 35]*

> [35 to 45]*

> [65 to 75]*

[< 10 to 20]*

is

varieties

for most

(167) The table shows that the market share situation for all
of
similar
ethyleneamines
ethyleneamines. For EDA Dow/UCC will have a world
market share of around [55 % to 65 %]*. For DETA,
TETA and AEEA the combined market shares of the
parties are well over [55 % to 65 %]*. The market shares
of the parties for TEPA are above [70 % to 80 %]* and
for AEP nearly [85 % to 95 %]*. The combined market
share of the parties for E100/HPA-X is above [65 % to
75 %]*. For Piperazine,
share
addition, because Dow does not sell refined Piperazine.

there is no market

and the

result of

the parties

provided by
the
investigation show however, that [35 % to 45 %]* of
this spare capacity has to be attributed to the parties,
whilst nearly [45 % to 55 %]* is attributable to Tosoh.
As the parties indicate, Tosoh has recently (1996 and
1998)
in a
tripled its capacity and is therefore still
start-up phase. However, even if Tosoh were to be able
to put all its spare capacity on the market immediately,
this capacity would not be of a magnitude that could
put the dominant market position of Dow/UCC into
question.

(168) The parties claim that there are what they describe as
(cid:145)huge overcapacities(cid:146) of about [(cid:133)]* thousand tonnes
equalling [10 % to 20 %]* of global capacity. The figures

(169) The market has been characterised as a mature market
with a tendency to decline by the parties. Entry has not

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L 245/21

in 1994,

five years. Until Akzo
taken place during the last
through its acquisition of Berol
entered the market
it had only been present through its
Nobel
joint venture with the
Japanese producer Tosoh.
Through its arrangement with Bayer, Akzo gained
access to an EDC production facility. The establishment
of a green field production facility entry would require a
long-term multimillion dollar investment. In the light of
these elements and the abovementioned overcapacity, it
has to be concluded that entry barriers for potential
competitors are high.

(170) The parties

they are subject

further claim that

to
increasing buying power
from strong multinational
long-term
customers manifested in globally-negotiated,
contracts and intense price competition. The replies to
the Commission investigation indicate that even the
largest multinational customers do not feel that they
would be able to exercise countervailing buying power.
Furthermore price competition in relation to the large
customers takes place to a considerable degree between
Dow and UCC, who by virtue of their large production
capabilities are particularly well placed to supply the
requirements of such customers. The combination of
Dow and UCC would therefore be highly detrimental to
this price competition. Big customers have indicated
that they expect price increases after the merger.

D. CONCLUSION ON ETHYLENEAMINES

(171)

In view of the market position of the parties to the
concentration, the notified operation creates a dominant
position of
the following
the parties in the area of
ethyleneamines: EDA, DETA, TETA, TEPA, AEEA, AEP
and
all
If one were
ethyleneamines as one product market, a dominant
position would be created on that market.

E100/HPA-X.

to consider

which would
resin
production plant at Priolo in Italy, or (b) to divest UCC’s
50 % interest in Polimeri.

Polimeri’s

include

entire

PE

PE TECHNOLOGY

OPEN LICENCES

the

affect

owned

patents

scope of

background metallocene

Dow undertakes to grant to any interested third party a
non-exclusive licence (with right to sub-license) under
the
and
controlled by Dow for use in gas phase and slurry. In
some rare cases, a Dow patent may be subject to prior
rights under a pre-existing contract, for example where
the patent was the result of research collaboration with
a university or other third party. These cases do not
materially
the open license
commitment and Dow has committed to use its best
efforts to resolve such situations or permit the licensee
to directly negotiate to with the third party. The open
licence will extend also to Dow’s rights under
the
patents of ExxonMobil and Univation as a result of the
settlement agreements among them, to the extent that
Dow is free to convey such rights. This extension will
have the effect of granting immunity, to the extent that
Dow can convey
from suit under
such rights,
ExxonMobil’s and Univation’s patents. Third parties will
not be able to pass on this immunity, nor will they be
able to offer sublicenses of the Dow background patents
to Univation.

VI. COMMITMENTS

DIVESTITURE OF DEDICATED GAS-PHASE AND
BACKGROUND METALLOCENE TECHNOLOGY TO BP
AMOCO

(172) The

parties

formally

commitments
presented
(undertakings), on 23 March 2000,
to resolve the
competition concerns identified by the Commission.
Those commitments were subsequently sent to members
tested. The
of
the
results
some
commitments
modifications
the
competition problems were eliminated. The parties later
submitted adjustments to the commitments.

the Advisory Committee and market
indicated

the market
required

test
clarification

to ensure that

it was clear

that

that

and

of

(173) The commitments deal with the three problem areas
identified by the Commission, C8 LLDPE resins, PE
technology
be
ethyleneamines,
summarised as follows:

and may

and

C8 LLDPE RESINS

The parties undertake to either
(Polimeri)
Europa Srl

(a) cause Polimeri
its C8 LLDPE business,

to sell

Dow undertakes to sell to BP all of its assets which are
dedicated to gas-phase metallocene PE technology,
including Dow’s ownership rights to the technology
jointly developed with BP under the Joint Development
Agreement and Dow’s dedicated gas-phase metallocene
resin patents. BP will also be granted non-exclusive
rights under Dow’s background patents and under the
settlements and agreements made between Dow on the
one hand and Exxon, Univation, Mitsui and Asahi on
the other to the extent that Dow can convey or procure
such rights.

KNOW-HOW TRANSFER

Dow is prepared to enter into a R&D service agreement
with BP for up to [(cid:133)]* years to enable the transfer of

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14.9.2001

metallocene gas-phase know-how from Dow to BP. BP
may also offer, without opposition from Dow, to extend
job offers to those Dow employees involved in work
under either the Joint Development Agreement or under
the proposed service agreement.

SEGREGATION OF DOW’S INSITE TECHNOLOGY

Dow undertakes not to grant licences to Univation for
the use of its background metallocene catalyst patents
or to assign these patents to Univation,
for use in
gas-phase or slurry processes (other than pursuant to
the Settlement Agreement between Univation and Dow).
The effect of
third
parties
from sublicensing Dow’s
background metallocene patents to Univation means
that Univation can only obtain these licences from BP.

this provision and the fact
prohibited

that

are

ETHYLENEAMINES

to

its

contracts, management

Dow undertakes
entire worldwide
divest
ethyleneamines business which is an integrated stand
alone business unit consisting of production plants in
Freeport, Texas, dedicated intellectual property rights,
staff
sales
including marketing sales manufacturing, R&D and
technical services. Dow will keep its manufacturing unit
in Terneuzen, Netherlands, but will, if requested, supply
business with
the
ethyleneamines from this plant up to 50 % of its name
plate capacity.

ethyleneamines

operating

buyer

and

the

of

(174) The full

text of

the commitments is set out

in the

Annex.

VII. ASSESSMENT OF THE COMMITMENTS

C8 LLDPE RESINS

(175) The divestment of the Priolo production facility (part of
Polimeri) which is the only plant making C8 LLDPE
under UCC’s control will completely eliminate the
overlap that would arise from the combination of Dow
and UCC’s C8 LLDPE operations.
the
divestment of UCC’s 50 % shareholding in Polimeri
would also remove
the overlap arising from the
operation completely.

Similarly

PE TECHNOLOGY

OPEN LICENCES

(176) The commitment to grant open licences under Dow’s
to interested third parties will

background patents

eliminate the anti-competitive effects resulting from the
the suites of patents owned by
bringing together of
Exxon (licensed by Univation) and by Dow. In effect any
third party can now obtain a patent licence that will
enable it to practice its own metallocene technology to
in gas-phase and slurry
make and sell PE resins
processes without fear of litigation by Dow and, to the
extent covered by the settlement agreements,
from
Exxon and Univation. The settlement agreements are
intended to cover the use of metallocene catalysts in
gas-phase processes.

they have a right

(177) Third parties are thus in a much improved position, in
to obtain protection from
that
litigation from Dow and to a certain extent
from
Univation and Exxon. This should encourage the use of
the
metallocene
development of new licensors.

and may

encourage

catalysts

(178) The open licence will

remove the adverse effects
resulting from the addition of the patent suites held by
Dow and Exxon and will increase the opportunities for
third parties wishing to develop metallocene catalysts.

DIVESTITURE
BACKGROUND METALLOCENE TECHNOLOGY TO BP

DEDICATED

GAS-PHASE

OF

AND

it

license

technology to BP, grant

(179) Dow will divest its dedicated gas-phase PE metallocene
a worldwide
catalyst
non-exclusive
under Dow’s metallocene
background patents, the Exxon and Univation patents
and as far as possible transfer rights to it under the
Mitsui and Asahi agreements. These measures, together
with the know-how transfer discussed below, will enable
BP to provide effective competition to the merged entity
in the market
for gas-phase technology packages,
including the ability to offer metallocene catalysts.

KNOW-HOW TRANSFER

(180) Dow’s offer to BP of a research and development service
agreement for a period of up to [(cid:133)]* years will enable
BP to continue the research initiated under the Joint
Development Agreement while
its own
metallocene catalyst research operation. Furthermore the
fact that Dow will not oppose the transfer of research
personnel with a significant involvement in the Joint
Development Agreement or the proposed R&D service
agreement will enable BP,
to recruit
those people best able to forward metallocene research

it so wishes,

it builds

if

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Official Journal of the European Communities

L 245/23

in relation to gas phase operations and in particular to
marry the Insite metallocene catalyst with BP’s Innove
gas-phase process technology.

provisions will contribute to the effectiveness of
remedial measures concerned.

the

CONCLUSION ON PE TECHNOLOGY

(181) This will counteract the loss of this expertise to BP as a
the Joint Development

result of
Agreement and enable BP to develop its own expertise.

the termination of

(182) These measures contribute to eliminating the weakening

of BP as a result of the operation.

(187)

In summary the proposed commitments in relation to
PE technology address all concerns identified by the
Commission in this area.

SEGREGATION OF DOW’S INSITE TECHNOLOGY

ETHYLENEAMINES

(183) The commitment by Dow not to licence its background
metallocene patents or assign these patents to Univation
will ensure that the overlap arising from the addition of
the two metallocene patent suites as a result of the
proposed operation will be removed.

(188) The proposed divestment of Dow’s entire world wide
ethyleneamines business will effectively eliminate the
overlap arising from the proposed operation in relation
to sales to the free market. The resulting free market
shares for the combined Dow/UCC business will be
the individual
between [25 %]* and [45 %]* for all
ethyleneamines and [30 % to 40 %]* overall.

(184)

In addition to this direct measure, open licences to the
Dow background patents will contain a prohibition to
prevent the licensee from sub-licensing the technology
to Univation, thereby circumventing the main purpose
of the commitments. In addition Dow has agreed to be
bound by the non-compete covenants in the Univation
Formation Agreements not to compete with Univation
in the field of gas-phase and slurry PE technology
packages.
licence its background
technology to others, except for the purposes of the
commitments given to the Commission (in particular
the
contractual
obligations to third parties. Finally Dow has undertaken
not to consent to any change to the non-competition
clause in the Univation Formation Agreement without
the agreement of the Commission.

It cannot, therefore,

pre-existing

licence)

open

and

(185) These measures will ensure that there is an effective
separation between the Exxon and the Dow metallocene
catalyst technologies which will be maintained to the
same extent as before the concentration.

ARBITRATION

the

licence

gas-phase

technology,

(186) The granting of open licences, the divestiture to BP of
dedicated
of
background patents and the service agreement with BP
are subject to payment. The commitments provide for
to
an arbitration mechanism (pendulum arbitration)
regarding the
resolve
the
any disputes
necessary agreements.
In particular, either party may
initiate the arbitration procedure at any time. Upon
request by the prospective licensee under the open
license, that licence will take immediate effect. These

terms of

(189) Dow used a considerable part of its production in its
own downstream activities. It is not therefore necessary
to divest all of Dow’s production facilities to enable the
new owner to supply all of Dow’s existing customers.
However the facility for the new buyer, at its discretion,
to take up to 50 % of the Terneuzen plant’s nameplate
capacity provides the new buyer with flexible additional
capacity that will enable it to increase its market share
and thereby make it a more effective competitor. The
new buyer will be able to vary the tonnage it takes from
the Terneuzen plant in the short term as it will only be
required to indicate its needs [(cid:133)]* months in advance.

(190) The divestment package

all

includes

factors
necessary for the new owner to compete effectively,
including production facilities, dedicated intellectual
property rights and sales contracts. Also included are
technical
management, operations,
support and R&D personnel.

sales, marketing,

the

(191) The fact that the divestment includes the EDC plant and
an EEA production facility both at Freeport, United
States of America, will allow the new owner to produce
and therefore
the
compete
individual
the
homologues.

ethyleneamines
in

effectively

range of

entire

each

of

(192) The Freeport site can be made independent of Dow
(apart from utilities typically shared on chemical sites)
and in particular has facilities that will allow the new
owner to obtain supplies of raw materials from sources
other than Dow and thus ensure that Dow has no
undue influence on the costs of the divested operation.
In relation to the new owner’s share of the output from

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Official Journal of the European Communities

14.9.2001

the Terneuzen plant this will be charged at cost so that
Dow will not be able to disadvantage the new owner.

HAS ADOPTED THIS DECISION:

Article 1

(193) The fact that the new owner will have the bulk of its
production facilities in the United States of America will
not be a handicap as, not only does this represent little
situation, but most
change
current
companies,
successfully
compete
including UCC,
worldwide with only a single production facility.

from Dow’s

On condition that the undertakings submitted by the parties
and set out in the Annex to this Decision are fully complied
with the concentration by which the Dow Chemical Company
acquires control of
the undertaking Union
Carbide Corporation is declared compatible with the common
market and with the functioning of the EEA Agreement.

the whole of

than the RA process

(194) Finally it should be noted that while the EDC process
(that is operated at Freeport and Terneuzen) has higher
this has not prevented
costs
companies such as Dow, Delamine and Tosoh from
competing effectively to date. In fact the additional costs
are compensated by the product range available using
the EDC process.

VIII. CONCLUSION

Article 2

This Decision is addressed to:

The Dow Chemical Company
Scott R. Pennock, Esq. Counsel
2030 Dow Center
Midland, Michigan 48674
United States of America.

Done at Brussels, 3 May 2000

(195) For the above reasons, the Commission has concluded
the commitments are fully
the operation is compatible with the
the EEA

that, on condition that
complied with,
common market and the functioning of
Agreement,

For the Commission

Mario MONTI

Member of the Commission

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L 245/25

ANNEX

The full English text of the undertakings referred to in Article 1 may be consulted on the following Commission
website:

http://europa.eu.int/comm/competition/index_en.html