2007/164/EC: Commission Decision of 19 July 2006 declaring a concentration compatible with the common market and the functioning of the EEA Agreement (Case COMP/M.3796 — OMYA/J.M. HUBER PCC) (notified under document number C(2006) 3163) (Text with EEA relevance )
Date: 2006-07-19
Institutions: European Commission
Subjects: economic concentration, merger control, mineral compound, pulp and paper industry

L 72/24

EN

Official Journal of the European Union

13.3.2007

COMMISSION DECISION

of 19 July 2006

declaring a concentration compatible with the common market and the functioning of the EEA
Agreement
(Case COMP/M.3796 — OMYA/J.M. HUBER PCC)

(notified under document number C(2006) 3163)

(Only the English version is authentic)

(Text with EEA relevance)

(2007/164/EC)

On 19 July 2006 the Commission adopted a Decision in a merger case pursuant to Council Regulation
(EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (1),
and in particular Article 8(2) of that Regulation. A non-confidential version of the full Decision can be
found in the authentic language of the on the website of the Directorate-General for Competition, at the
following address: http://ec.europa.eu/comm/competiton/index_en.html

(1)

(2)

(3)

I. SUMMARY

On 4 April 2005, the Commission received a request for
referral pursuant to Article 22(1) of Regulation (EC) No
139/2004 (the Merger Regulation)
from the Finnish
subsequently joined by the
Competition Authority,
competent authorities of Sweden on 22 April 2005,
Austria on 26 April 2005, and France on 28 April
2005, to examine the transaction.

of

the requirements

the Merger Regulation.

The Commission found that
the proposed operation
constitutes a concentration within the meaning of
Article 3(1)(b) of the Merger Regulation and that the
laid down in Article
request met
22(3)
the
Therefore,
Commission decided to examine the concentration and,
on 18 May 2005, adopted decisions pursuant to Article
22(3) of the Merger Regulation addressed to Finland,
Sweden, Austria and France to that effect. The referring
Member States submitted to the Commission the docu-
mentation at
information was
completed by Omya submitting a notification on 4
August 2005.

their disposal. This

The Commission opened proceedings in this case on 23
September 2005. The Commission’s
statement of
objections was sent to the notifying party on 2 May
2006. Omya submitted a reply on 16 May 2006. A
non-confidential version of the Commission’s statement
of objections was made available to two interested
parties,
and Imerys, who submitted written
comments.

SMI

(4)

An oral hearing in the present case was held on 18 May
2006.

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

(5)

(6)

(7)

For the purpose of affording sufficient time for Omya to
consider remedies an Article 10(3) decision addressed to
the notifying party was adopted on 17 May 2006, which
extended the deadline for submission of remedies by two
working days.

Following an in-depth investigation,
the Commission
concluded that the notified operation raises concerns as
to its compatibility with the common market.

In order to remove horizontal competition concerns in
the market for coating calcium carbonates, Omya and
J.M. Huber Corporation submitted on 23 May 2006
(improved on 3 July 2006), a package of commitments
to the Commission which was considered sufficient to
address the competition concerns raised by this concen-
tration.

(8)

Therefore,
action subject
to Article 8(2) of the Merger Regulation.

it was proposed to clear the notified trans-
to conditions and obligations pursuant

II. THE PARTIES AND THE OPERATION

(9)

in the production and

Omya AG (Omya)
active
minerals (2),
variety of
glass, and agriculture. Sales
account for a large proportion of Omya’s revenues.

is a Swiss family-owned company
industrial
including calcium carbonates (3), used in a
i.e. paper, paints, plastic, steel,
industries,
industry
to the paper

sale of

(2) Industrial minerals include PCC (precipitated calcium carbonate),

GCC (ground calcium carbonate), kaolin talc and dolomite.

(3) The term ‘carbonates’ encompasses both PCC and GCC.

13.3.2007

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Official Journal of the European Union

L 72/25

(10)

this

In the EEA, the US company J.M. Huber Corporation is
active in the supply of kaolin, PCC, precipitated silicas
and silicates (PSS). The Huber subsidiaries which are the
subject of
transaction comprise the worldwide
business of J.M. Huber Corporation (Huber PCC) in the
field of production and supply of on-site filler PCC to the
paper industry. The acquired business consists of 12 PCC
on-site plants world-wide, six of which are located in the
EEA. Huber’s PCC plants in the EEA are situated in
Finland (three plants) and in Sweden, France and
Portugal (each with one plant).

III. RELEVANT MARKET

A. Relevant product market

(11)

The proposed transaction affects the supply of:

(i) merchant filling GCC;

(ii) merchant coating GCC;

(iii) merchant filling PCC;

(iv) on-site filling PCC; and

(v) merchant coating PCC.

(12)

For the purposes of assessing the present transaction, the
Commission has come to the conclusion that, within the
production and supply of industrial minerals to the paper
industry, calcium carbonates for filling applications (PCC,
GCC and GCC/PCC blends) and calcium carbonates for
coating applications (PCC, GCC and GCC/PCC blends)
constitute two distinct relevant product markets.

(13)

B. Relevant geographic markets

The Commission concluded that
for the purposes of
assessing the present transaction, the relevant geographic
markets are defined by identifying paper mills with
similar realistic sets of supply alternatives. Production
plants are considered as being realistic supply alternatives
for a paper mill depending on their logistics and how far
they are located from this paper mill. The distance
cannot be
beyond which a
considered as a realistic supply alternative depends on
the past shipments experience of each plant, on the
available modes of transportation (road, rail, ship or a
combination thereof) and on the type of calcium
carbonate produced (PCC, GCC).

given mineral plant

(14)

The relevant geographic markets are as follows:

(a)

for merchant filling calcium carbonates, the relevant
geographic market
is determined by the distance
between the mineral plant and the location of the
customer served, which will vary between 400 km
and up to a maximum of 2 000 km depending on
the plant, the product, the mode of transport;

(b) for merchant coating calcium carbonates, the relevant
is determined using the same
fillers, with distances

geographic market
methodology
between 400 km and 3 000 km; and

the

for

as

(c)

for customers that have the possibility of an on-site
calcium carbonate solutions, the geographic scope is
at least EEA wide.

IV. COMPETITIVE ASSESSMENT

1. Calcium carbonates for filling applications

(15)

The Commission considers that competitive pricing of
carbonates for paper filling applications hinges upon
the location of each customer’s next best alternative.

(16) When the merging parties have competing plants with
overlapping sales areas, the merger may cause prices to
rise. When one of the merging parties’ customers’ next-
the other merging party’s
best alternative is one of
mineral plant, the merging parties will have the ability
and the incentive to raise prices. However, when a rival
plant to the merging parties is sufficiently close to the
customer location,
this alternative is
the presence of
likely to provide sufficient competitive constraint such
the price effect will not materialise. For some
that
paper mills, the competitive analysis is affected by the
possibility of hosting an on-site filling PCC plant.
However, in the present case the competitive impact is
the
not materially
Commission considers
filling PCC is
another realistic alternative that constrains the merchant
supplies of filling PCC or GCC.

by whether or not

that on-site

affected

(17)

The Commission identified two broad categories of
customers. The first category consisted of paper mills
that are currently supplied by an on-site filling PCC
plant. The second category consisted of paper mills
that are supplied on a merchant basis. The Commission
focused its
actual
customers of the merging parties.

assessment on the

competitive

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Official Journal of the European Union

13.3.2007

(18)

by

established

The Commission identified for each customer a set of
realistic alternative mineral plants based on maximum
transport distances each production plant can ship.
These distances were derived from the
extensive
the Commission. Using
database
shipment data for PCC and GCC for the year 2004 (1),
the Commission also conducted an econometric study
(discrete choice model) to predict the probability that a
customer would select another mineral plant should its
current supplier raise its prices. The results allowed the
Commission to determine
substitution patterns
between the various producers of calcium carbonate for
the paper industry.

the

On-site customers

(19) As regards the current on-site supply of filling PCC, irre-
spective of whether the provider is Huber or Omya, the
transaction was found not to have any immediate effect.
On-site filling PCC suppliers have exclusive long term
for
contracts with the host paper mills (in general
seven to 10 years), which guarantee
a minimum
volume for the PCC plant. A price formula with a base
the beginning of each contract
price negotiated at
determines the annual price change over
the entire
contract duration. The formula usually depends on cost
factors, such as the costs of limestone, electricity, wages
and inflation, which are not affected by the transaction.
At issue was whether the transaction would have an
adverse effect on these customers when the long term
contract expires. The investigation showed that the trans-
action is very unlikely to have a significant impact on the
renewal of current on-site filling PCC contracts.

(20)

For future on-site customers, the transaction removes one
supplier with a proven ability to manage and run
projects for the on-site supply of
filling PCC in the
EEA. Nevertheless, the investigation indicated that the
transaction would not
lead to significant changes in
prices for these customers, as the number of credible
suppliers of on-site filling PCC solutions would be
sufficient to exert competitive pressure. This also holds
for coating on-site solutions.

(1) The Commission constructed an extensive mineral

shipment
database which included all major competitors’ annual shipments
of PCC and GCC for paper filling and coating purposes for the
EEA for the years 2002, 2003 and 2004 (data by mineral type,
originating mineral plant, destination paper mill, paper
type,
distance shipped, shipment volumes, price per dry metric tonne,
transportation mode and cost).

(21)

(22)

(23)

Current merchant customers

For customers who are supplied on a merchant basis, and
even if they have the option of relying upon on-site
filling PCC, the Commission considered that a mineral
plant located within a certain distance of a paper mill
constitutes a realistic option for either filling PCC or
filling GCC. Having examined the options of
the
current merchant filling PCC customers of Omya, the
these
Commission has come to the conclusion that
customers are unlikely to be adversely affected by the
in each case, these customers had
transaction because,
other realistic PCC alternatives. Therefore,
it is unlikely
that the removal of Huber as a competitor would signif-
icantly impede competition for Omya’s
filling PCC
customers.

appear

to have

In addition, for filling GCC customers of Omya, it is not
likely that Huber constitutes the next-best alternative.
These customers have either an alternative filling GCC
option and/or other filling PCC alternatives which do
not
any competitive disadvantage
compared to Huber’s filling PCC plants. Moreover, the
results of the econometric study show that Huber is,
on average, not the next-best alternative. Therefore, it is
unlikely that
the removal of Huber as a competitor
would significantly impede competition for Omya’s
filling GCC customers.

Imerys is present

filling PCC, at Husum, and of

For Huber’s merchant PCC customers, different Omya
filling GCC plants appear to be realistic alternatives.
in Sweden, both in the
However,
production of
filling
GCC, at Tunadal. Moreover, SMI's filling PCC plants are
present
in Finland, at Lappeenranta, Myllykoski and
Äänekoski. All these alternative solutions do not appear
to hold any competitive disadvantages when compared
to Huber's filling PCC on-site plants located at in Sweden
and in Finland. Moreover, the econometric study shows
the competitive constraint exerted by merchant
that
filling GCC suppliers is likely to be less than that
filling PCC suppliers on other
exerted by merchant
merchant filling suppliers. Therefore,
it is unlikely that
the removal of Omya as a competitor would significantly
impede competition for Huber's filling PCC customers.

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2. Calcium carbonates for coating applications

(24)

the market

In the notification of the proposed transaction Omya
for paper coating
took the position that
transaction because
would not be affected by this
in this market.
Huber was
Commission’s market
However,
investigation
revealed that Huber has been developing a suitable PCC
for use in GCC/PCC coating blends and had made offers
to supply PCC coating products.

currently not

active

the

competitor

the Commission considers Huber as a
(25) Consequently,
potential
calcium
carbonates for paper coating applications, who, absent
the transaction, would very likely become an effective
for coating calcium
competitive force on the market
carbonates.

in the market

for

(26)

Therefore, the Commission concludes that the proposed
transaction would significantly impede competition,
in
of Omya’s
particular
dominant position in the markets for coating calcium
carbonates for affected customers in the south of Finland.

strengthening

through

the

(27)

The Commission’s conclusion is based on the following
arguments.

(28)

Firstly, Omya is already the dominant supplier of coating
grade calcium carbonates for most customers in Europe
and Finland. Omya supplied a very large proportion of
all coating calcium carbonates to the paper industry in
the EEA in 2004. It owns or controls the access to a very
large portion of the EEA reserves of the raw materials
necessary for the production of coating grade GCC and
can supply paper mills all over the EEA. Given its
dominant position and its control on raw material
supplies, Omya is an unavoidable trading partner for
paper mills which need to purchase coating calcium
carbonates in Europe, and in particular in Finland.

to enter the market.
Kuusankoski on-site PCC plant
The Commission’s analysis also considered (iv) Huber’s
sunk costs to enter the market
for calcium coating
carbonates. The Commission took the view, that prior
to engaging in merger negotiations with Omya, Huber
was planning to enter the paper coating market in a
significant way and would have done so with its
coating PCC Additives technology in a timely manner.

located in the

the Kuusankoski plant would enable
The location of
to also supply a number of other Omya
Huber
customers
south of Finland. These
customers, who currently source their coating calcium
carbonate supply from Omya, may consider arranging
at least part of their supply from Huber’s Kuusankoski
plant. The Commission identified a number of customers
for which Huber’s Kuusankoski plant would be signifi-
cantly closer than the next plant of SMI or Imerys
(affected customers).

that

the market

structure of

Thirdly, Huber would be an effective competitive force
is very likely to significantly constrain Omya’s
that
for paper coating calcium
behaviour on the market
in
carbonates. Given the
the only other competitor,
Finland and the fact
in terms of market share and has
SMI, remains small
locational disadvantages,
the Commission considers it
to be very likely that Huber’s capacity at Kuusankoski
would significantly constrain Omya’s calcium carbonates
coating offering for the identified Finnish customers. The
Commission also finds that there are no other potential
competitors that could maintain sufficient competitive
pressure in the south of Finland.

(30)

(31)

(32)

For the above reasons, the Commission has come to the
conclusion that the proposed transaction would signifi-
cantly impede competition,
in particular through the
strengthening of Omya’s dominant position in the
markets
for affected
customers in the south of Finland.

for coating calcium carbonates

(29)

Secondly, Huber has the ability to enter the paper coating
market with its coating PCC Additives technology. The
Commission assessed in particular to what extent
(i)
Huber’s PCC additives technology was ready for commer-
cialisation, (ii) Huber believed in the commercial viability
of its proposition on a larger scale, and (iii) Huber could
the
make sufficient production capacity available at

3. No coordinated or conglomerate effects

(33)

Finally, the Commission concludes that the present trans-
action is unlikely to give rise to conglomerate concerns
or increase the likelihood that firms are able to coor-
dinate their behaviour with the effect of raising prices
above competitive levels.

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advantage of an incumbent supplier who will not need
to build a new facility in the event it is successful
in
bidding for a renewal contract. Therefore, this alternative
would best ensure the viability of the divestiture and the
launch of a credible competing product in the market for
coating calcium carbonates.

(38)

The Commission further considered that in assessing the
the Kuusankoski on-site PCC
ability and incentive of
plant and the divested technology to continue to act as
a competitive force and restore competition on the
market in competition with Omya and other competitors
the purchaser.
largely depends on the
Therefore, a suitable purchaser
in the present case
would be an industrial purchaser that already has the
financial resources and proven expertise.

identity of

(39) Consequently,

the Commission concludes

that
the
proposed first alternative commitment,
the divestiture
of the Kuusankoski on-site PCC plant together with the
divestiture of Huber’s coating technology (given the
improvements proposed by the parties on 3 July 2006)
would restore effective competition in the market for
coating calcium carbonates for the affected customers
in the south of Finland by re-establishing the competitive
constraint to Omya’s coating calcium carbonates coming
from Huber’s PCC additive technology which would
otherwise be lost due to the concentration, as originally
notified.

VI. CONCLUSION

(40)

For above mentioned reasons, considered individually or
together, the Commission has come to the conclusion
the commitments submitted by Omya and J.M.
that
Huber
competition
to address
sufficient
concerns raised by this concentration.

the

are

(41)

The Commission’s decision therefore declares the notified
transaction compatible with the common market and the
functioning of the EEA Agreement pursuant to Article
8(2) of the Merger Regulation.

(34)

(35)

V. COMMITMENTS

To remove the abovementioned horizontal competition
concerns on the market for coating calcium carbonates,
Omya and J.M. Huber Corporation submitted on 23 May
2006 a package of commitments to the Commission.
The package contained two alternative proposals for
commitments, the first comprising of the divestiture of
the Kuusankoski PCC on-site plant and the coating and
additive technology and the second only the divestiture
of the technology.

The Commission decided to market test the first alter-
native commitment proposal (divestment of the on-site
PCC plant in Kuusankoski, Finland and the PCC coating
and additive technology of Huber). The market test was
sent to a total of 11 customers and four competitors that
have been involved in investigation of this transaction
and a response was received from all of them (1). The
response
test was mixed. Whereas
customers largely considered the commitment as being
able to remove the competition concerns identified by
the Commission, competitors expressed reservations as to
the proposed remedy and suggested
the scope of
to sufficiently
improvements
for
resolve
the
by
Commission (2).

competition concerns

to the market

commitment

raised

the

the

(36) With regard to the first alternative commitment,
Commission evaluated whether the divestiture of
on-site PCC filler plant at Kuusankoski
the
purchaser of
potential of
PCC coating carbonates comparable
Huber would have had absent the present transaction.

the
the
together with
suitable
the divestiture package to acquire the
for
to that which

the competitive force in the market

offered would

technology

enable

a

(37)

(divestiture of

The Commission concluded that
the first alternative
the Kuusankoski on-site
commitment
PCC plant and the technology) whereby the suitable
purchaser has access to both spare production capacity,
the necessary technology and the close cooperation with
the host mill, places the purchaser in a similar position
including the
to that which Huber currently possess,

(1) In addition,
response.

the Finnish Competition Authority submitted a

(2) As regards the second alternative commitment containing only the
divestiture of the technology, the Commission assessed the proposed
remedy and considered that it does not address the competition
concerns raised by the Commission and therefore it was not made
subject to a market test.