2005/839/EC: Commission Decision of  13 July 2005  declaring a concentration compatible with the common market and the functioning of the EEA Agreement — Case No COMP/M.3625 — Blackstone/Acetex  (notified under document number C(2005) 2672)
Date: 2005-07-13
Institutions: European Commission
Subjects: chemical product, economic concentration, merger control

L 312/60

EN

Official Journal of the European Union

29.11.2005

COMMISSION

COMMISSION DECISION

of 13 July 2005

declaring a concentration compatible with the common market and the functioning of the EEA
Agreement — Case No COMP/M.3625 — Blackstone/Acetex

(notified under document number C(2005) 2672)

(Only the English text is authentic)

(2005/839/EC)

On 13 July 2005 the Commission adopted a Decision in a merger case under Council Regulation (EC)
No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (1), and in
particular Article 8(1) of that Regulation. A non-confidential version of the full Decision can be found
in the authentic language of the case and in the working languages of the Commission on the website of
the Directorate-General
following address: http://europa.eu.int/comm/
the
competition/index_en.html

for Competition, at

(1)

(2)

(3)

On 20 January 2005, the Commission received a notifi-
cation of a proposed concentration pursuant to Article 4
of Regulation (EC) No 139/2004 by which the under-
taking Celanese Corporation (‘Celanese’, US) controlled
by
Partners
(‘Blackstone’, Cayman Islands)
acquires within the
meaning of Article 3(1)(b) of that Regulation the whole
of the undertaking Acetex Corporation (‘Acetex’, Canada)
by way of purchase of shares.

Blackstone Crystal Holdings Capital

Blackstone is a private merchant-banking company based
in the U.S., active mainly in financial advisory services,
private equity investment and property investment. As
described below, one of the companies controlled by
Blackstone,
is active on the same product
markets as Acetex.

‘Celanese’,

and

food

chemical products,

Celanese is a chemicals company active globally in four
acetate products,
main sectors:
technical polymers
In the
chemical products sector, Celanese manufactures basic
chemicals
such as acetic acid, acetic anhydride and
vinyl acetate monomer (‘VAM’); performance chemicals
such as polyvinyl alcohol (‘PVOH’) and emulsions; and
specialty chemicals including carboxylic acids, alcohols,
amines and esters.

ingredients.

(4)

Acetex is active in the acetyls and plastic business. The
principal products of Acetex’s acetyls business are acetic
acid and VAM, which together represented more than

(5)

(6)

(7)

(8)

70 % of Acetex’s acetyls sales of 2003. Acetex’s acetyls
products also include the following acetic acid deri-
vatives: acetic anhydride, PVOH and polyvinyl acetate
(‘PVAc’).

The Advisory Committee on Concentrations, at
its
132nd meeting on 22 June 2005, delivered a favourable
opinion on a draft Decision granting clearance submitted
to it by the Commission (2).

The Hearing Officer,
in a report dated 29 June 2005,
took the view that the right of the parties to be heard
had been respected (2).

I. THE RELEVANT MARKETS

Relevant product markets

The Commission’s investigation showed that the relevant
product markets were the following: acetic acid, VAM,
acetic anhydride and PVOH.

Acetic acid is an intermediate chemical product used in
the production of various other chemicals including
VAM, PVOH, acetic anhydride, acetate esters and mono-
investigation
chloroacetic
showed that acetic acid constitutes a separate product
market as there are no substitutable products available
on the market.

The Commission’s

acid.

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

(2) OJ C 297, 29.11.2005.

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Official Journal of the European Union

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(9)

VAM is a commodity chemical derived from acetic acid.
VAM can be produced in several ways:
(i) by adding
acetic acid to acetylene;
(ii) by adding acetic acid to
ethylene; (iii) by reaction of acetic anhydride with acet-
aldehyde. The Commission’s investigation showed that
VAM constitutes a separate product market that does
not need to be further fragmented.

(10) Acetic anhydride is a basic chemical used primarily
(approximately 75 %)
for the production of cellulose
acetate flake, which in turn is used as raw material for
acetate tow (used to make cigarette filters, yarn and some
engineering plastics). Other uses of acetic anhydride
include
and
detergents. The Commission’s investigation showed that
acetic anhydride should be considered as a separate
there are no
product market given the
substitutes for acetic anhydride.

the manufacture

pharmaceuticals

that

fact

of

(11)

PVOH is a water-soluble synthetic polymer belonging to
a broader group of High Barrier Polymers. PVOH is
obtained from polymerized VAM. The Commission’s
investigation has shown that there are no substitutable
this
products available. Therefore,
decision, PVOH constitutes a separate relevant product
market.

for the purpose of

Relevant geographic markets

(12)

The key issue in this case was to define the relevant
geographic scope for acetic acid, VAM and acetic
anhydride. The parties submitted that
the geographic
markets were global and based their view on five main
points:

— Imports satisfy more than 20 % of Western European

demand.

— Prices

appear

to be highly

correlated

across

geographic regions worldwide.

(13) During the market investigation, the parties’ arguments
were verified and generally confirmed. In particular, the
Commission analysed the trade flows of acetic acid, VAM
and acetic anhydride between the different world regions,
the average price charged in the different regions, the
structure of the price, and the importance of production
and transaction (transport, storage and duties) costs as
well as capacity developments. Furthermore, the majority
of respondents to the investigation indicated that they
considered the relevant geographic markets to be global
for all three products.

(14)

To support their claims concerning the definition of the
geographic markets for acetic acid and VAM, the parties
also submitted a number of econometric studies (price
correlation analysis and analysis of the impact of unex-
pected plant outages on trade flows), which in their view
point towards global markets. The Commission carefully
reviewed and replicated these studies.
furthermore
conducted its own study with more accurate data.
According to its results, the geographic market of both
acetic acid and VAM includes at least the EEA and North
America wide but might also be global.

It

(15)

For the reasons set above, the decision concludes that for
the purpose of this case, the relevant geographic markets
for acetic acid, VAM and acetic anhydride are global.

(16)

In a past decision (1), the Commission considered that the
relevant geographic market for all types of High Barrier
Polymers,
including PVOH, was worldwide. This has
broadly been confirmed by the Commission’s market
investigation. Therefore, the decision concludes that the
relevant geographic market for PVOH is global.

II. ASSESSMENT

— Neither

transport

import duties nor
costs, nor
national regulations inhibit the worldwide trade of
the products concerned.

(17)

— Major global producers supply Western Europe solely

through imports.

[0-5] %)

[15-25] %; Acetex,

In the global market for acetic acid, the market shares of
the new entity will amount to [20-30] (*) % (Celanese,
in terms of capacity and
[20-30] %; Acetex,
[20-30] % (Celanese,
in
terms of merchant sales. The combined entity will face
competition from the current
largest player on the
sales
market,
[25-35] %) and other strong players such as Millennium
(capacity [1-10] %; merchant sales [1-10] %) and Daicel
(capacity [1-10] %; merchant sales [1-10] %).

[20-30] %; merchant

[5-10] %)

(capacity

BP

— The global trade flows seem to shift freely among
Asia, Eastern Europe, Western Europe and North
America in response to changes in local supply and
demand.

(1) Commission Decision of 2 June 1999 declaring a concentration to
be compatible with the common market (Case No IV/M.1469 —
Solvay/BASF) according to Council Regulation (EEC) No 4069/89
(OJ C 197, 14.7.1999, p. 2).

(*) Parts of this text have been edited to ensure that confidential infor-
mation is not disclosed; those parts are enclosed in square brackets.

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(18)

(19)

(20)

(21)

and whether

The Commission has analysed whether competitors have
enough capacity to restrain an anti-competitive price
increase
can easily switch
suppliers in the event of a price increase. Given the
it was also
level of concentration in the market,
necessary to examine the possibility that the proposed
operation could give rise to coordinated effects.

customers

The decision concludes that unilateral effects are unlikely
because the capacity will
increase faster than projected
demand and there will therefore be sufficient capacity to
defeat a potential price increase. Furthermore, it appears
to be easy for customers to change their suppliers, parti-
cularly as a large majority of the customers obtain their
supplies from multiple sources. With regards to coor-
the decision also concludes that such
dinated effects,
effects
are unlikely, having carefully examined the
market structure, the market transparency, the credible
retaliation mechanisms, and the reaction of customers
and current and potential competitors.

In the global market for VAM, the market shares of
to [25-35] % (Celanese
the new entity will amount
in terms of capacity and
[20-30] %; Acetex [0-5] %)
[35-45] % (Celanese [30-40] %; Acetex [5-10] %)
in
terms of merchant sales. The parties will face compe-
tition from several large players such as Dow (capacity
[5-15] %), Millennium (capacity
[5-15] %; merchant,
[10-20] %), DuPont
[5-15] %; merchant
(capacity
[10-20] %), Dairen
[1-10] %; merchant
(capacity
[1-10] %) and BP (capacity [1-10] %; merchant [5-15] %).

are

effects

unlikely. The

For similar reasons as those set out for the acid acetic
market, and after a careful examination of the character-
istics of the VAM market, the decision concludes that
unilateral
decision also
concludes that coordinated anticompetitive effects are
unlikely on the VAM market mainly because of
the
substantial gap between the parties’ merchant market
shares and those of the largest competitor. In addition,
the different levels of integration and the use of different
technologies give rise to different cost structures and
incentives
the various producers, which further
reduce the likelihood of successful co-ordination.

for

(22)

In the global market for acetic anhydride, the market
to [15-25] %
shares of
in terms of
(Celanese
capacity and [30-40] % (Celanese [25-35] %; Acetex

the new entity will amount
[15-25] %; Acetex [0-5] %)

[10-20] %,

in terms of merchant sales. The parties will
[5-10] %)
face competition from BP, Eastman,
Jilin and Daicel
with market shares on the merchant sales market of
[5-15] % and [1-10] % respec-
[15-25] %,
the
tively. Considering the strong competition that
competitors,
combined entity will
face
which currently produce
the
decision concludes that the notified operation will not
significantly impede effective competition on the global
for acetic anhydride. The likelihood of coor-
market
dinated effects is also examined in the decision, which
concludes that such effects are excluded.

from these

competitive

cost,

at

(23)

(24)

(25)

[5-10] %; Acetex

In the global market for PVOH, the market shares of the
new entity will amount to [5-15] % (Celanese [5-10] %;
in terms of capacity and [5-15] %
Acetex [0-5] %)
(Celanese
in terms of
merchant sales. This combined market share would not
allow the parties to exercise market power; therefore the
decision concludes that the operation will not signifi-
cantly impede
competition on the global
PVOH market.

effective

[0-5] %)

Finally, the Commission has assessed the potential effects
of
the transaction on vertically related markets. Both
Celanese and Acetex are downstream vertically integrated
companies in the sense that
they use acetic acid to
produce both acetic anhydride and VAM, and VAM to
produce PVOH. Celanese is active on the downstream
markets for emulsions and emulsion powders, cellulose
acetate and acetate esters. Acetex is a consumer of
and PVAc
ethylene vinyl acetate
resins. However, given the low market shares of
the
parties and the
increment brought
relatively small
about by the transaction on the relevant markets, the
decision concludes that
the transaction is unlikely to
affect the vertically related markets.

resin copolymers

III. CONCLUSION

above,

impede

reasons

set out

the Commission
For
the
the proposed concentration does not
concluded that
significantly
the
effective
common market or a substantial part of it, in particular
as a result of the creation or strengthening of a dominant
position. The concentration is therefore to be declared
compatible with the common market and the EEA
the
Agreement,
Merger Regulation and Article 57 of the EEA Agreement.

in accordance with Article 8(1) of

competition

in