Summary of Commission Decision of 30 January 2008 declaring a concentration compatible with the common market and the functioning of the EEA Agreement (Case COMP/M.4734 — Ineos/Kerling) (Text with EEA relevance)
Date: 2008-01-30
Institutions: European Commission
Subjects: chemical product, economic concentration, merger control, petroleum product, plastics industry, restriction on competition

C 219/18

EN

Official Journal of the European Union

28.8.2008

Summary of Commission Decision

of 30 January 2008

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

(Case COMP/M.4734 — Ineos/Kerling)

(Only the English version is authentic)

(Text with EEA relevance)

(2008/C 219/15)

On 30 January 2008,
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 for Competition,
at the following address:

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

1. On 19 July 2007, the Commission received a notification
of a proposed concentration pursuant to Article 4 of Regu-
lation (EC) No 139/2004 by which the undertaking INEOS
Group Limited (United Kingdom,
‘UK’), belonging to the
acquires within the
‘Ineos’),
INEOS Group (together
meaning of Article 3(1)(b) of the Council Regulation the
whole of undertaking Kerling ASA (‘Kerling’, Norway)
belonging to the Norsk Hydro Group by way of purchase
of shares.

2.

Ineos is a leading global manufacturer of petrochemicals,
specialty chemicals and oil products. It comprises eighteen
businesses and, although it is present in seventeen countries
throughout the world, it is mainly active in Europe where it
achieves more than two thirds of its turnover.

3. Kerling is a subsidiary of Norsk Hydro ASA and comprises
the polymer division of
is
mainly active in the production, marketing and sale of poly-
vinyl chloride (‘PVC’) and caustic soda.

the Norsk Hydro group.

It

4. The Advisory Committee on Concentrations on 16 January
2008 delivered a favourable opinion on a draft Decision
granting clearance submitted to it by the Commission (2).

5. The Hearing Officer, in a report dated 24 January 2008,
took the view that the right of the parties to be heard had
been respected (3).

I. THE RELEVANT MARKETS

Relevant Product Markets

6. The Commission's investigation showed that the relevant
product markets were the following: commodity S-PVC,
liquid caustic soda, S-PVC compounds and S-PVC films.

7. The main product market discussed in the decision is the
market for commodity S-PVC. There are two types of PVC

(1) OJ L 24, 29.1.2004, p. 1.
(2) OJ C 219, 28.8.2008, p. 16.
(3) OJ C 219, 28.8.2008, p. 17.

depending on the production process used: suspension (or
commodity) PVC (‘S-PVC’) accounting for about 90 % of all
the PVC produced in the EEA, and emulsion PVC (‘E-PVC’)
which accounts for the remaining 10 % of the EEA produc-
tion. The parties' activities overlap only with respect to
commodity S-PVC and, following the results of the market
investigation, the Commission has concluded that for the
purposes of this decision the relevant product market is the
one for commodity S-PVC.

8. The parties' activities also overlap on the market for liquid
caustic soda. Although the market investigation suggested
that solid and liquid caustic soda constitute two separate
markets, the precise market definition has been left open.

9. The Commission's in-depth investigation has shown that
S-PVC compounds constitute a separate product market
from S-PVC given that the two products are not substitu-
table in the production process used by the vast majority of
the compounds customers. However, a further segmenta-
tion into different types of compounds (i.e. dry blend and
gelled compounds) did not seem necessary.

10. Only Ineos is active on the market for S-PVC films, which
is downstream from S-PVC. While it would be possible to
sub-segment the S-PVC films market based on the types of
different end-uses of rigid PVC films, the precise product
market definition has been left open for the purposes of
this decision.

Relevant Geographic Markets

11. The key issue of the second phase market investigation was
to define the relevant geographic scope for commodity
S-PVC, in particular with respect to certain trade areas for
which the first phase market investigation had given some

28.8.2008

EN

Official Journal of the European Union

C 219/19

indications pointing towards a national or regional dimen-
sion, namely Great Britain,
and the Nordic Region
comprised of Norway and Sweden.

— there is sufficient spare capacity in the Continent in
order to counteract any attempt to price increase by the
new entity in the UK,

12. The parties submitted that the geographic scope of

the
for S-PVC is EEA-wide given that S-PVC is a
market
commodity product readily and safely transportable, there
exists considerable intra-community trade and transport
costs are relatively low. During the market investigation, the
majority of customers considered the market to be either
regional or EEA-wide and in some cases even wider whilst
all competitors confirmed that they view the market as
being EEA-wide. Moreover, the data collected during the
investigation showed that S-PVC, despite transport costs
ranging from 5 % to 15 % depending on the distance, is
the EEA,
subject
sometimes over very long distances.

trade flows throughout

to substantial

— during an outage in one of Ineos' UK plants importers
were capable to increase supply which indicates that
both Ineos and Kerling are constrained by importers.

15. Based on above, the Commission has come to the conclu-
sion that the Nordic Region and the United Kingdom do
not present characteristics that should lead the Commission
to treat these areas differently from other areas within the
EEA.
the
geographic market for commodity S-PVC is wider than the
UK and wider than the Nordic countries (Norway and
Sweden) and is at least North-Western Europe.

It concluded in particular,

the scope of

that

13. Regarding the Nordic Region, given the substantial trade
flows of S-PVC from and into this region, the fact that
Kerling's (the only local producer) sales from its plants in
Sweden and Norway are evenly spread throughout the EEA,
the fact that customers located in these countries consider
the market
least Northern or North-Western
Europe wide whilst some suggesting that the market may
be even EEA-wide,
the
geographical scope of
is wider than
the S-PVC market
national with respect to these two countries.

the Commission concluded that

to be at

14. Regarding the United Kingdom, the majority of the UK-lo-
cated customers consider that suppliers from Continent
would not be in a position to provide them with the same
degree of reliability of supply as local producers. In order to
determine the geographic scope of the S-PVC market, the
Commission has assessed British customers' sourcing and
switching patterns (demand side) and, from the supply side
perspective, analysed the extent to which S-PVC producers
located in continental Europe would have the ability (and
incentive) to expand their presence in the UK market. To
this end, the Commission conducted a detailed qualitative
and quantitative analysis and assessed the level and role of
imports, transport costs, barriers to expansion and spare
capacity in continental Europe. In that respect the Commis-
sion found out that:

16. The notifying party submitted that the geographic scope for
the liquid caustic soda market is at least EEA-wide given the
significant
inter-Community trade and even inter-conti-
nental trade. However, many customers suggested that the
market may be regional due to relatively high transporta-
tion costs or even national in the case of the UK. The exact
scope of the geographic market for caustic soda has been
left open.

17. The Commission's market investigation indicated that given
the low transport costs the market for S-PVC compounds is
at least EEA-wide. The Commission has concluded that the
scope of the geographic market is wider than national and
that it is not necessary to take a final decision on the exact
scope of the geographic market for S-PVC compounds.

18. The market

for certain end-products, even global, as

investigation confirmed that the geographic
scope for the rigid PVC films market is at least EEA wide
and,
it was
concluded by the Commission with regard to flexible
packaging. However,
the geographic
market for PVC films has been left open.

the exact scope of

— the majority of UK customers multi-source and are not

completely dependent on local suppliers,

II. ASSESSMENT

— over the last five years imports made by continental
the UK

suppliers satisfied from 34 % to 40 % of
demand,

19. On the market for commodity S-PVC, the parties combined
market share in the EEA will amount to [20-30] %. On a
North-Western Europe basis parties' combined market
share would be below [30-40] %.

— by setting up local

facilities,
can overcome disadvantages

storage

continental
caused by

suppliers
distance,

— transport costs do not constitute a barrier to supply

the UK,

20. Given the relatively low parties' combined market share, the
current spare production capacity and the fact that custo-
mers multi-source and conclude short-term contracts (one
year on average) it is unlikely that Ineos would be able to
unilaterally exercise market power on an EEA-wide or even
a North-Western European market.

C 219/20

EN

Official Journal of the European Union

28.8.2008

21. The possibility that this transaction could facilitate a coordi-
nated conduct is also remote given the number of players
(six significant competitors) that will remain in the market
post-merger. Moreover, most customers negotiate or seek
price offers from many competing suppliers on a monthly
basis, which makes it all the more difficult to adhere and
stick to a common pattern.
the
Commission concluded that the proposed transaction is not
likely to give rise to any coordinated anti-competitive
concerns.

In light of

the above,

(ranging

22. The parties' combined market share in liquid caustic soda
would be approximately [10-20] % on an EEA-wide basis
which is the most likely geographic market. Although the
parties' combined shares are higher on some national
markets,
[40-50] % and
[50-60] % in Norway, Sweden and Denmark respectively
and up to [50-60] % in the UK), given the relatively small
overlaps and number of significant competitors present in
the market, it is unlikely that the present transaction would
raise competitive concerns under any alternative market
definition.

from [40-50] %,

25. In light of the above and in view of the limited horizontal
overlap and the absence of substantial vertical issues, it is
unlikely that the present transaction will have anticompeti-
tive effects on the S-PVC compounds market.

26. On a broad product market for rigid films (including inter
alia PVC, PET, polypropylene and polyethylene films), Ineos
enjoys a market share of [5-10] % in the EEA. Should
narrower segments for rigid S-PVC films be considered,
Ineos market shares are below [20-30] % in all segments
except
the pharma-mono and pharma-duplex films
segments where Ineos' market shares amount to [30-40] %
and [30-40] % respectively.

for

27. Given that

concluded that

the Commission has

the
proposed concentration will not impede effective competi-
tion in the provision of S-PVC, it follows that Ineos' compe-
titors in the downstream market of rigid PVC films would
continue to have the ability to source S-PVC at competitive
conditions and remain effective competitors in the provi-
sion of rigid film products. Accordingly, it is unlikely that
the present transaction would raise competitive concerns
on the market for S-PVC films.

23. The parties estimate their combined market share on the
overall S-PVC compounds market on an EEA-wide basis to
be less than [20-30] %. The market shares would be
[10-20] % and [20-30] % on a Western European and a
North-Western European basis respectively.

24. With respect to possible vertical issues, it is unlikely that
Ineos will be in a position to curtail supplies of S-PVC to
non-integrated compounders as it will not enjoy market
power on the S-PVC market where it will continue to be
constrained post-merger by a number of competitors active
throughout the EEA.

III. CONCLUSION

28. For the reasons set out above, the Commission concluded
that
the proposed concentration does not significantly
impede effective competition in the 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
in accordance with
market and the EEA Agreement,
Article 8(1) of the Merger Regulation and Article 57 of the
EEA Agreement.